Control Number : Item Number : 9. Addendum StartPage: 0

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1 Control Number : Item Number : 9 Addendum StartPage: 0

2 PROJECT NO PUC PROCEEDING RELATING TO PUBLIC UTILITy/^OI^IMISSIO^ RESOURCE AND RESERVE ^CL_^ ADEQUACY AND SHORTAGE OF TEXAS PRICING COMMENTS OF CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC On May 11, 2011, the Electric Reliability Council of Texas ("ERCOT") issued a report entitled "Review of the Potential Impacts of Proposed Environmental Regulations on the ERCOT System" ("the Study"). The Study analyzed the impact of four potential regulations that could be imposed on electric generation facilities. The system topology used for the Study included all transmission improvements that have been endorsed by the ERCOT Board of Directors, which would include the Fayetteville to Zenith 345 kv transmission project proposed by CenterPoint Energy Houston Electric, LLC ("CenterPoint Energy" or "the Company"). On May 20, 2011, the Public Utility Commission of Texas ("the Commission") published a public notice of a workshop in this project and requested input on two issues. Comments are due by June 6, CenterPoint Energy submits the following comments in response to the Commission's published notice. 1. Please provide any comments on the Review of the Potential Impacts of Proposed Environmental Regulations on the ERCOT System. CenterPoint Energy is a transmission service provider ("TSP") providing service within the ERCOT Region with its service territory including Houston and surrounding communities. As set forth below, the findings contained in the Study are of significant concern to CenterPoint Energy. The Study determined that "[t]he retirement of intra-urban generation resources would result in the need to import more power to serve load, leading to potential overloads and increased reactive power requirements." It also determined "the two areas of specific concern for transmission reliability are the Dallas/Fort Worth region and the Houston region." The section that addressed concerns with the Houston region stated "it is likely that at least two new import pathways into the Houston region would be required to maintain system reliability.", ^

3 CenterPoint Energy has been diligently working to increase import capacity into the greater Houston area since import constraints into the Houston area were first identified by ERCOT in During the intervening years, the Company has completed a number of improvements that have increased import capacity into the Houston area. In 2007, CenterPoint Energy constructed a new Hi11je Substation and 345 kv double circuit transmission line from Hillje to W. A. Parish as well as other related projects. The Singleton 345 kv Substation was completed in May In April 2011, the Zenith 345 KV Substation was constructed increasing the North to Houston transfer capacity to the extent possible without building new transmission lines. Most recently, the ERCOT Board of Directors approved the Fayetteville to Zenith transmission project that is being developed. The additional import pathways discussed in the Study would be in addition to these improvements. The need for additional import transmission pathways into the Houston area, in addition to the currently planned Fayetteville to Zenith transmission project, has not been definitively established. However, in order to meet a potential need for transmission projects in 2017, costeffective solutions would need to be developed at this time. Therefore, CenterPoint Energy is concerned about the potential impacts upon the Houston area identified in the Study. As reflected in the Study, the proposed environmental regulations have potential impacts upon generation capacity reserve margins. Setting aside the potential effects of the proposed environmental regulations, preliminary results from ERCOT's Long Term Study effort also indicates the current ERCOT market design (i.e. energy only versus capacity) may not support sufficient generation capacity investment to maintain an acceptable generation capacity reserve margin within the ERCOT Region. Preliminary analyses for the Long Term Study effort likewise indicates that additional import paths, in addition to the currently planned Fayetteville to Zenith transmission project, may be needed into the Houston area regardless of the proposed environmental regulations. However, the time frame for the potential necessary transmission capacity is much longer without the proposed environmental regulations than it is with the proposed regulations. 2

4 In addition to evaluating sufficiency of generation capacity within the entirety of the ERCOT Region, it is suggested that it would be beneficial for ERCOT and the Commission to evaluate generation capacity adequacy within significant, potentially transmission-constrained load areas. The value of evaluating sufficiency of generation capacity in such a manner would be to identify potential need for additional transmission capacity in sufficient time to allow necessary additional facilities to be constructed or, alternatively, to allow the Commission to identify and implement alternative means to incent new generation capacity or demand response in the transmission-constrained areas to avoid or delay the need for additional transmission capacity, if the Commission determines it is practical and cost-effective to do so. The significant, potentially transmission-constrained load areas used by ERCOT in preliminary Long Term Study analyses are Houston, Dallas-Fort Worth, and the Rio Grande Valley. CenterPoint Energy believes these are reasonable load areas for ERCOT and the Commission to evaluate. The additional evaluation CenterPoint Energy proposes would be a capacity demand reserve calculation for each of these three load areas that account for import capacity into the load area. To illustrate the concept, the following hypothetical example is provided. The load area is assumed to have a peak load of 10,000 MW, generation within the load area of 7,000 MW, and import capacity of 5,000 MW. In this hypothetical example, the capacity available to serve the 10,000 MW of peak demand in this load area is 12,000 MW (7,000 MW of local generation plus 5,000 MW of generation that potentially can be imported), so the "local" reserve margin is 20% (2,000 MW/10,000 MW). The capacity demand reserve for a local area may necessarily need to be higher than the region-wide capacity demand reserve margin due to a smaller generation fleet available to serve the localized area and transmission limitations due to outages or other network conditions that limit import capacity below the maximum potential import capacity with all transmission facilities in-service. 3

5 2. What reserve margin levels can be reasonably expected within the ERCOT system with the proposed changes in environmental regulations? CenterPoint Energy does not have any comments at this time. Respectfully submitted, h ^C GrIJ^ ^p$th'1/ss^^h SCOTT E. ROZZE L Executive Vice President and General otfns State Bar No DEANN T. WALKER State Bar No Congress, Suite 650 Austin, Texas (512) (512) (fax) ATTORNEYS FOR CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC 4