Economic Analysis Proposed Scope

ERCOT RPG MeetingSeptember 17, 2010

Economic Analysis Process Review

• Pattern’s proposed Economic Analysis Modeling Approach Description distributed to RPG on 8/30

• 21-day stakeholder comment period ends 9/20

• Pattern reviews comments and provides responses back to RPG

• Pattern finalizes economic analysis scope definition with ERCOT assistance as needed

• Economic Study completion expected 6 to 8 weeks after finalization of study scope

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Overview of Modeling Process

• Use UPLAN platform

• Full nodal SCUC SCED processes

• 8760-hour simulation for single study year, 2015

• Base Case and two Change Cases

• Base Case = markets with expected development and average conditions

• Change Case = Base Case + Southern Cross

• Change Case A: ERCOT-expected 2015 wind build out assumptions (~10,500 MW of total ERCOT wind)

• Change Case B: ERCOT-assumed wind and 3000 MW additional wind development stimulated by the Southern Cross project

• Comparison of the Base Case with each Change Case will yield economic impacts

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Input Assumptions

• Use ERCOT input assumptions (publicly available from ERCOT) where possible

• Use alternative sources when ERCOT assumptions are not made publicly available, such as:

• Information used by ERCOT but not released:

• ERCOT’s generator heat rate characteristics

• Fuel forecasts

• Certain ERCOT information where modifications will allow more direct comparison of of two markets, e.g.:

• ERCOT’s weather-normalized load will not be used for ERCOT given that similarly normalized load data is not available for SERC. Will instead use comparable load data from NERC and FERC filings

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Input Assumptions – SERC detail

• SERC input assumptions from either:

• Publicly available sources

• Topology

• Load

• Generating units: location, capacity, type

• Operating reserve requirements and regions

• Emissions costs

• Wheeling rates

• LCG Proprietary Sources

• Fuel forecast

• Generator heat rates

• External regional supply

• Capacity additions (total capacity values provided in RPG document)

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Detailed Modeling Assumptions:Provided in RPG Document

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ERCOT - Model SERC - ModelTransmission Topology SERC, File 2015SUM_2009series_MMWG_Final.RAW

Transmission constraint limitsBranch ratings from 2015SUM_2009series_MMWG_Final.RAW; SPP/Entergy Interfaces from SPP Book of Flowgates; Southern/TVA interfaces to be determined

Contingency list SPP/Entergy Contingencies from the SPP/Entergy CBALoad peak & Energy NERC Electricity Supply and Demand (ES&D) database NERC Electricity Supply and Demand (ES&D) databaseLoad shape FERC Form 714 FERC Form 714External regional supply Proxy price-responsive generator formulated to emulate historical tie line flows. LCG Proprietary data emulating historical flows.Coal price forecastOil price forecast

Gas forecast ERCOT single region-wide price, File 2010_5YTP_Gas_Prices.xlsUsing ERCOT's commodity price for both markets but applying LCG proprietary forecast of basis price. Will publish regional average SERC price.

Geneartion units location ERCOT File 10DSB_Generation_Dispatch_Update_07162010.xls SERC, File 2015SUM_2009series_MMWG_Final.RAW

Generation capacity ERCOT File 10DSB_Generation_Dispatch_Update_07162010.xlsGeneration fuel type ERCOT File 10DSB_Generation_Dispatch_Update_07162010.xlsGenerating operating characteristics (e.g., heat rate) LCG Proprietary data LCG Proprietary data

New Generation Additions and Retirements ERCOT File 10DSB_Generation_Dispatch_Update_07162010.xls

LCG Proprietary data including interconnection agreements for new generation. (Attachment 2 shows the total SERC capacity with additions assumed for the 2015 simulation.)

Regulation requirements LCG Proprietary

Operating reserve requirementsSERC RELIABILITY CORPORATION CONTINGENCY RESERVE POLICY - December 8, 2008

Operating reserve sharing arrangementsMidwest Contingency Reserve Sharing Group, SPP Reserve Sharing Group, VACAR Reserve Sharing Group

Regulation regionsOperating reserve regionsAllowance prices

CO2SO2NOX

Dispatchable demand quantity and priceERCOT incorproates demand response in load forecast and Operating Reserves. No additional demand response assumed.

Demand response assumed to be included in load forecast data. No additional demand response assumed

Wheeling rates: Southern Cross Export from ERCOT Based on PUC-approved tariff rates.

Wheeling rates: ERCOT to SPPWheeling rates: SPP to ERCOTWheeling rates: Within SERC/SPPLosses Average Lossess

Source of data

EIALCG Proprietary Algorithm based on NYMEX and EIA data

historical & http://www.ercot.com/content/mktinfo/services/kd/2010%20Methodologies%20for

%20Determining%20AS%20Requirements.pdf

Only ERCOT (1 region) Control Areas (Source: 2015SUM_2009series_MMWG_Final.RAW)

Publicly available sources such as EIA, NERC Electricity, Supply and Demand database and LCG proprietary data

Based on ERCOT-assumed values as available and other publicly available values otherwise.

Consistent with publicly available allowance values and applicable allowance regions.

Consistent with ERCOT Economic modeling, non are applied. Rather embedded in assumptions about Tie line flows.

From SPP/Entergy public cost-benefit analysis assumptions, "FERC SPP-Entergy CBA Meeting Materials July 1, 2010, " GE MAPS Input Assumptions

Draft for Discussion Purposes, June 23, 2010 (Draft Update), Table 3 (http://www.spp.org/section.asp?group=1784&pageID=27).

ERCOT File 2010 5YTP 2015 Economic Case 08122010.xls

Metrics

• ERCOT metrics consistent with RPG charter and procedures

• Societal Benefits/Production cost impacts for ERCOT and by Load Zone

• Consumer Benefits/Energy cost savings

• LMP * consumption at each load node

• Producer Savings

• Over ERCOT and by Load Zone

• “Export Charges” that will reduce the transmission revenue requirement and other charges paid by loads

• Emissions Impacts

• Changes in CO2, NOx, and SOx

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Questions?

Contact Information

Chris Shugart, Project Developer(713) 308-4241Chris.Shugart@patternenergy.com

David Parquet, Executive Sponsor(415) 713-3301David.Parquet@patternenergy.com

Matt Dallas, Media Relations(917) 363-1333media@patternenergy.com

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