XXXXXXXXXXXXXXXXXXXXXXXXXXXX TRANSMISSION/GENERATION FEASIBILITY STUDY FATAL FLAW AND FEASIBILITY ANALYSIS

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1 XXXXXXXXXXXXXXXXXXXXXXXXXXXX TRANSMISSION/GENERATION FEASIBILITY STUDY FATAL FLAW AND FEASIBILITY ANALYSIS El Paso Electric Company System Operations Department System Planning Section September 2001

2 TABLE OF CONTENTS 1.0 Executive Summary...Page Cost Estimates...Page Interconnection Costs for MW of XXXX Generation to Luna 345 kv Substation...Page Cost of Obligation of XXXX with Use of Open Bay Position at Luna 345 kv Bus...Page Task II, Scenario 1 System Modification Costs...Page Task II, Scenario 2 System Modification Costs...Page Task II, Scenario 3 System Modification Costs...Page Task II, Scenario 4 System Modification Costs...Page Introduction...Page Assumptions...Page Criteria...Page Procedure...Page Base Case Development...Page List Of Contingencies...Page Transient Stability Analysis...Page Q-V Analysis...Page Short-Circuit Analysis...Page Scenarios...Page Obligation of XXXX with Use of Open Bay Position at Luna 345 kv Bus...Page Powerflow Analysis Results...Page Task I 2003 Heavy Summer Benchmark Case...Page Task II Scenario 1 Case...Page Task II 2003 Light Load Benchmark and Scenario 1 Sensitivity # Light Load Cases...Page Task II Scenario 1 Sensitivity # 2 Case...Page Modifications and Costs for Scenario 1...Page Task II Scenario 2 Case...Page Task II Scenario 2 Sensitivity # 1 Case...Page Task II Scenario 2 Sensitivity # 2 Case...Page Modifications and Costs for Scenario 2...Page Task II Scenario 3 Case...Page Task II Scenario 3 Sensitivity # 1 Case...Page Task II Scenario 3 Sensitivity # 2 Case...Page Modifications and Costs for Scenario 3...Page Task II Scenario 4 Case...Page 51 Transmission/Generation Feasibility Study i El Paso Electric Company

3 6.15 Task II Scenario 4 Sensitivity # 1 Case...Page Task II Scenario 4 Sensitivity # 2 Case...Page Modifications and Costs for Scenario 4...Page Transient Stability Analysis Results...Page Task I 2003 Heavy Summer Benchmark Case...Page Task II 2003 Heavy Summer Scenario 1, 2, 3, and 4 Cases...Page Stability Analysis Results...Page Q-V Analysis Results...Page Short-Circuit Analysis Results...Page Disclaimer...Page Certification...Page 69 Transmission/Generation Feasibility Study ii El Paso Electric Company

4 APPENDICIES Feasibility Transmission/Generation Interconnection Study: Study Scope...Appendix 1 EPE s FERC Form 715 Filing...Appendix 2 Load and Resources Tables...Appendix 3 Powerflow Maps One-Line Diagrams...Appendix 4 XXXX Stability Models & Parameters...Appendix 5 List of Contingencies...Appendix 6 Base Case & Contingency Results Detailed Tables...Appendix 7 Base Case & Contingency Results Summary Tables...Appendix 8 Breaker Failure Contingency Tables...Appendix 9 Stability Plots... Appendix 10 Q-V Plots...Appendix 11 SHORT-CIRCUIT ANALYSIS...ATTACHMENT Transmission/Generation Feasibility Study iii El Paso Electric Company

5 1.0 EXECUTIVE SUMMARY On February 1, 2001, XXXXXXXXXXXXXXXXXXXX (XXXX) submitted to El Paso Electric Company (EPE) a request for a Fatal Flaw and Feasibility Analysis. This request was made with regard to XXXX s plans to construct and interconnect an additional MW of generating facilities at the Luna 345 kv bus in the 2003 time frame. The MW of generation is in addition to the MW of generation previously studied and posted on EPE s website. Thus, this study examined a total of MW of XXXX generation interconnected at the Luna 345 kv bus. Pursuant to the above, on April 20, 2001, EPE and XXXX signed a Feasibility Transmission/Generation Interconnection Study: Study Scope (Appendix 1). This Study Scope discussed the system studies to be conducted by EPE concerning MW (613.9 MW from study 1 and an additional MW) of XXXX generation and the XXXX interconnection. This study dealt with two combined-cycle generators. Each of the two combined-cycle generators consisted of two gas turbines and one steam turbine, for a total of four gas turbines and two steam turbines. Each gas turbine was modeled with an output of MW. Each steam turbine was modeled with an output of MW. The net continuous capability output of the two combined-cycle units was MW. The study periods analyzed in this study were the 2003 Heavy Summer and 2003 Light Load periods. With the exceptions noted within this report, EPE did not analyze any other seasons with different import levels, load levels, and/or generation patterns in this fatal flaw and feasibility analysis. The purpose of this study is to identify all Fatal Flaws on the southern New Mexico system if XXXX is to interconnect its generation at the Luna 345 kv bus. Any additional facilities needed to correct these fatal flaws are noted and a rough estimate of the costs of these facilities is provided within this study. Although the proposed interconnection point, Luna 345 kv Substation, is operated by EPE, it is jointly owned by the Southwest New Mexico Transmission (SWNMT) Project participants, EPE, Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP). Therefore, the impacts upon EPE, TNMP, PNM, and Tri-State Generation & Transmission, Coop. Inc. (TRIS), originally the Plains Electric Generation & Transmission Coop., Inc. system, were noted in this study. Also the impacts on the Arizona and the Public Service Company of Colorado (PSCO) areas were noted for some contingencies. Due to time constraints in completing the study, the above mentioned utilities were not consulted regarding the methodology used in this study. Therefore, the nature of and estimated costs of any facilities and upgrades required on the PNM, TNMP, and/or other systems are solely EPE s opinion and may be change in a future Transmission and Facilities Study by PNM and/or TNMP. The Study Scope was used as a guide by EPE to conduct its system studies, which included power flow, transient stability, Q-V reactive margin, and short-circuit analyses. Transmission/Generation Feasibility Study -1- El Paso Electric Company

6 To conduct the studies described within the Study Scope, there were four transfer scenarios requested by XXXX for the MW of net XXXX generation at Luna. All scenarios were run with and without the EPE s Arroyo Phase Shifting Transformer (the PST). In order to minimize the costs associated with Scenario 4, it was changed. All final scenarios are shown next: Scenario MW sale from XXXX to Arizona (Arizona Public Service, APS) Scenario MW sale from XXXX to Colorado (Public Service Company of Colorado, PSCO) Scenario MW sale from XXXX to Arizona (613.9 MW) and Colorado (613.9 MW). Scenario MW sale from XXXX to Arizona (727.8 MW), ComisiÓn Federal de Electricidad (CFE)(200 MW), and Southwest Power Pool (SPP)(300 MW). In addition to these scenarios, there were eight sensitivities run. These sensitivities or scenario variations dealt with 2003 light load conditions in the EPE area. Two sensitivities were done on each scenario and the costs of all modifications needed as a result of these two sensitivities were obtained for each scenario. It must be noted that this study was not meant to analyze every scenario that could occur on the EPE and SNM system with this generation interconnection since that approach would take too much time. The study was meant to analyze the primary boundaries around which the EPE and SNM systems operate, under the scenarios agreed to by EPE and XXXX. Utilizing engineering judgement, proposed system modifications, that in EPE s opinion, will correct the criteria violations and rough estimates for these proposed modifications to EPE s system are included in this Study. This study also shows that modifications will be needed on the systems of other southern New Mexico area utilities. As per the Study Scope, further evaluation of the system with the recommended modifications installed was not performed. Therefore, these modifications may not represent optimal corrections to the system. System modifications were also proposed to correct the nearby utility system impacts and rough cost estimates (using EPE s prices) are provided within this study. The requestor (XXXX) will need to follow up with these other utilities in question to mitigate those impacts and to get more detailed cost estimates of their recommended system modifications. The lists of recommended system modifications for EPE, as well as for the other southern New Mexico utilities, along with the estimated "rough" costs, are shown in the following section of this report (Section 2.0) for each of the scenarios analyzed. The study results show that numerous loading, reactive margin criteria, and stability violations or problems occur in the existing southern New Mexico system when the MW of XXXX generation is added to the system. Transmission/Generation Feasibility Study -2- El Paso Electric Company

7 2.0 COST ESTIMATES The following estimated "rough" costs are for system modifications to the EPE and other neighboring utilities systems required to correct the criteria violations that arose with the interconnection and operation of XXXX s MW of generation. The costs associated with labor and benefits, taxes, engineering, land, and project delays are not included in these estimates. The costs also do not include XXXX costs, including the cost of the two Luna-XXXX 345 kv lines. Note that every with XXXX generation scenario requires these lines. Also, all costs associated with any regulatory process are not included. These costs are rough estimates only using the information as supplied by XXXX. Project dollar amounts shown are in year 2001 U.S. dollars. Costs for system modifications to other neighboring utilities systems are also only rough estimates using EPE s prices. 2.1 Interconnection Costs for MW of XXXX Generation to Luna 345 kv Substation The following table shows the estimated costs necessary for XXXX to interconnect its generation to the Luna 345 kv Substation. This estimated cost applies to all scenarios and is in addition to the System Modification Costs estimated for each scenario. INTERCONNECTION COSTS OF XXXX GENERATION TO LUNA 345 kv SUBSTATION FACILITY MODIFICATION OWNER ESTIMATED COST (2) 345 kv Gas Circuit Breakers EPE $550,000 (4) 345 kv Motor operated disconnect switches EPE $100,000 (2) Dead End Towers EPE $40,000 (1) Buswork, Steel Structures, Insulators EPE $100,000 (2) Protection Schemes EPE $100,000 (2) Controls Equipment EPE $40,000 (2) Communication Schemes EPE $50,000 Total Interconnection Costs (Applies to all Scenarios): $980,000 Please note that the above cost is a "rough" estimate only and may change when detailed engineering and design studies are performed for the interconnection. 2.2 Cost for Obligation of XXXX with Use of Open Bay Position at Luna 345 kv Bus If XXXX utilizes the existing empty bus position on the Luna 345 kv bus, that EPE is reserving for a new transmission line, to interconnect its XXXX generation, XXXX and the SWNMT partners agree that XXXX will, at XXXX s sole expense, construct and expand the Luna 345 kv bus such that a new transmission line can be installed. The date of this expansion will be solely at the option of EPE and the other SWNMT participants. Transmission/Generation Feasibility Study -3- El Paso Electric Company

8 No actual cost will be given for this study, however, there is a cost involved with this obligation and this applies to all scenarios and is in addition to the System Modification Costs estimated for each scenario. 2.3 Task II, Scenario 1 System Modification Costs: Scenario 1 modeled the new XXXX generation interconnected at the Luna 345 kv Substation with all generation output ( MW) from the XXXX generators being sold to Arizona. This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was sold to a WSCC utility west of EPE s system in Arizona. In this Scenario, Arizona s generation at or near Palo Verde was lowered by MW. All local EPE generation remained the same as in the benchmark case. The costs shown below also reflect the modifications needed in Scenario 1 and two light load variations of Scenario 1 (see Section 6.0 for details). TASK II, SCENARIO 1 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional Luna 345/115 kv transformer PNM $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Luna transformer addition PNM $630,000 (2) ElButte-Socorro 115 kv line upgrade (85 miles) TRIS $18,700,000 Greenlee-Hidalgo 345 kv line modification EPE/PNM/TNMP (1) Hidalgo-Luna 345 kv line modification EPE/PNM/TNMP (1) Springerville-Luna 345 kv line EPE (3) DonaAna-Picacho 115 kv line upgrade (5 miles) TRIS $1,100,000 LasCruces-DonaAna 115 kv line upgrade (5 miles) TRIS $1,100,000 Change Taps on Arroyo 345 kv PST EPE $4,000,000 Hurley-Luna 115 kv line upgrade (12 Miles) TNMP $2,640,000 Central-Hurley 115 kv line upgrade (20 Miles) TNMP $4,400,000 Picacho-Airpor_T 115 kv line (10.5 Miles) PNM/TNMP $2,310,000 Airpor_T-Mimbres 115 kv line (43.7 Miles) PNM/TNMP $9,614,000 ElButte-Picacho 115 kv line upgrade (50 miles) TRIS $11,000,000 Luna-Mimbres 115 kv line upgrade (5 Miles) PNM/TNMP $1,100,000 Total Cost of Modifications for Task II, Scenario 1: $61,094,000 (1) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on wavetraps that limit the line rating. Currently, EPE is in the process of removing these wavetraps. However, the rating on this line may also be sag limited on temperature. EPE is in the process of evaluating if this line is sag limited. Transmission/Generation Feasibility Study -4- El Paso Electric Company

9 Therefore, EPE reserves the right to charge for any modification needed as a result of the XXXX generation addition ( MW) causing overloading on this line. (2) This assumes that there is room at the substation involved and no buswork or additional equipment is required. This also assumes that there is an open position and that only one breaker (per side) is required. Add $ 325,000 if an additional 345 kv gas circuit breaker is required. Add $ 210,000 if an additional 115 kv circuit breaker is required. Add $ 535,000 if both are required. (3) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on the series compensation on the S-L line. Currently, there are automatic actions in place to take the series compensation on the S-L line out of service in the event it were to actually get overloaded. The IOS conditions that cause the S-L line to overload, as shown in the previous table, do not overload this line beyond its normal conductor rating. In addition, the other costs described in Section 2.0, interconnection costs described in Section 2.1, and the obligation costs in Section 2.2 of this report apply to this scenario. 2.4 Task II, Scenario 2 System Modification Costs: Scenario 2 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and all generation output ( MW) from the XXXX generators being sold to Colorado. This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was sold to a WSCC utility north of EPE s system via Arizona. In this Scenario, Colorado s generation in the Public Service of Colorado (PSCO) area was lowered by MW. All local EPE generation remained the same as in the benchmark case. The costs shown next also reflect the modifications needed in Scenario 2 and two light load variations of Scenario 1 which were assumed to apply to Scenario 2 (see Section 6.0 for details). Transmission/Generation Feasibility Study -5- El Paso Electric Company

10 TASK II, SCENARIO 2 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional Luna 345/115 kv transformer PNM $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Luna transformer addition PNM $630,000 (2) Additional Diablo 345/115 kv transformer EPE $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Diablo transformer addition EPE $630,000 (2) Rosedale 115/ QFUNC 69 kv transformer COL $1,155,000 ElButte-Socorro 115 kv line upgrade (85 miles) TRIS $18,700,000 Greenlee-Hidalgo 345 kv line modification EPE/PNM/TNMP (1) Hidalgo-Luna 345 kv line modification EPE/PNM/TNMP (1) Springerville-Luna 345 kv line EPE (3) GrantsT-Laguna 345 kv line upgrade (20 miles) TRIS $4,400,000 Alamogcp-Alamotap 345 kv line upgrade (4.25 miles) TNMP $935,000 DonaAna-Picacho 115 kv line upgrade (5 miles) TRIS $1,100,000 LasCruces-DonaAna 115 kv line upgrade (5 miles) TRIS $1,100,000 Change Taps on Arroyo 345 kv PST EPE $4,000,000 Hurley-Luna 115 kv line upgrade (12 Miles) TNMP $2,640,000 Central-Hurley 115 kv line upgrade (20 Miles) TNMP $4,400,000 Picacho-Airpor_T 115 kv line (10.5 Miles) PNM/TNMP $2,310,000 Airpor_T-Mimbres 115 kv line (43.7 Miles) PNM/TNMP $9,614,000 Ansel-San Luis 69 kv line (5.5 Miles) COL $1,210,000 ElButte-Picacho 115 kv line upgrade (50 miles) TRIS $11,000,000 Luna-Mimbres 115 kv line upgrade (5 Miles) PNM/TNMP $1,100,000 Total Cost of Modifications for Task II, Scenario 2: $73,924,000 (1) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on wavetraps that limit the line rating. Currently, EPE is in the process of removing these wavetraps. However, the rating on this line may also be sag limited on temperature. EPE is in the process of evaluating if this line is sag limited. Therefore, EPE reserves the right to charge for any modification needed as a result of the XXXX generation addition ( MW) causing overloading on this line. (2) This assumes that there is room at the substation involved and no buswork or additional equipment is required. This also assumes that there is an open position and that only one breaker (per side) is required. Add $ 325,000 if an additional 345 kv gas circuit breaker is required. Add $ 210,000 if an additional 115 kv circuit breaker is required. Add $ 535,000 if both are required. Transmission/Generation Feasibility Study -6- El Paso Electric Company

11 (3) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on the series compensation on the S-L line. Currently, there are automatic actions in place to take the series compensation on the S-L line out of service in the event it were to actually get overloaded. The IOS conditions that cause the S-L line to overload, as shown in the previous table, do not overload this line beyond its normal conductor rating. In addition, the other costs described in Section 2.0, interconnection costs described in Section 2.1, and the obligation costs in Section 2.2 of this report apply to this scenario. 2.5 Task II, Scenario 3 System Modification Costs: Scenario 3 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and the generation output ( MW) from the XXXX generators being sold half to Arizona (613.9 MW) and half to Colorado (613.9 MW). This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was went through Arizona, with half sold to Arizona, and the other half going north Via Arizona. In this Scenario, Arizona s generation at or near Palo Verde was lowered by MW and Colorado s generation in the PSCO area was lowered by MW. All local EPE generation remained the same as in the benchmark case. The costs shown next also reflect the modifications needed in Scenario 3 and two light load variations of Scenario 1 which were assumed to apply to Scenario 3 (see Section 6.0 for details). Transmission/Generation Feasibility Study -7- El Paso Electric Company

12 TASK II, SCENARIO 3 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional Luna 345/115 kv transformer PNM $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Luna transformer addition PNM $630,000 (2) Additional Diablo 345/115 kv transformer EPE $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Diablo transformer addition EPE $630,000 (2) ElButte-Socorro 115 kv line upgrade (85 miles) TRIS $18,700,000 Greenlee-Hidalgo 345 kv line modification EPE/PNM/TNMP (1) Hidalgo-Luna 345 kv line modification EPE/PNM/TNMP (1) Springerville-Luna 345 kv line EPE (3) GrantsT-Laguna 345 kv line upgrade (20 miles) TRIS $4,400,000 DonaAna-Picacho 115 kv line upgrade (5 miles) TRIS $1,100,000 LasCruces-DonaAna 115 kv line upgrade (5 miles) TRIS $1,100,000 Change Taps on Arroyo 345 kv PST EPE $4,000,000 Hurley-Luna 115 kv line upgrade (12 Miles) TNMP $2,640,000 Central-Hurley 115 kv line upgrade (20 Miles) TNMP $4,400,000 Picacho-Airpor_T 115 kv line (10.5 Miles) PNM/TNMP $2,310,000 Airpor_T-Mimbres 115 kv line (43.7 Miles) PNM/TNMP $9,614,000 ElButte-Picacho 115 kv line upgrade (50 miles) TRIS $11,000,000 Luna-Mimbres 115 kv line upgrade (5 Miles) PNM/TNMP $1,100,000 Total Cost of Modifications for Task II, Scenario 3: $70,624,000 (1) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on wavetraps that limit the line rating. Currently, EPE is in the process of removing these wavetraps. However, the rating on this line may also be sag limited on temperature. EPE is in the process of evaluating if this line is sag limited. Therefore, EPE reserves the right to charge for any modification needed as a result of the XXXX generation addition ( MW) causing overloading on this line. (2) This assumes that there is room at the substation involved and no buswork or additional equipment is required. This also assumes that there is an open position and that only one breaker (per side) is required. Add $ 325,000 if an additional 345 kv gas circuit breaker is required. Add $ 210,000 if an additional 115 kv circuit breaker is required. Add $ 535,000 if both are required. Transmission/Generation Feasibility Study -8- El Paso Electric Company

13 (3) The rating used for this line in the study was the rating in EPE s FERC Form 715 filing which is based on the series compensation on the S-L line. Currently, there are automatic actions in place to take the series compensation on the S-L line out of service in the event it were to actually get overloaded. The IOS conditions that cause the S-L line to overload, as shown in the previous table, do not overload this line beyond its normal conductor rating. In addition, the other costs described in Section 2.0, interconnection costs described in Section 2.1, and the obligation costs in Section 2.2 of this report apply to this scenario. 2.6 Task II, Scenario 4 System Modification Costs: Scenario 4 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and the generation output ( MW) from the XXXX generators being sold in the following manner: Arizona (727.8 MW), ComisiÓn Federal de Electricidad (CFE)(200 MW), and Southwest Power Pool (SPP)(300 MW). This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was went east into or through the EPE system. In this Scenario, the schedule across the Artesia terminal was changed to be 100 MW west-to-east (from 200 MW eastto-west). Also, 200 MW of CFE load and losses was added to the case. All local EPE generation remained the same as in the benchmark case. The costs shown next also reflect the modifications needed in Scenario 4 and two light load variations of Scenario 4 (see Section 6.0 for details). Transmission/Generation Feasibility Study -9- El Paso Electric Company

14 TASK II, SCENARIO 4 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional Luna 345/115 kv transformer PNM $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Luna transformer addition PNM $630,000 (1) Additional Diablo 345/115 kv transformer (210 Normal, 240 Emergency) EPE $4,725, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Diablo transformer addition EPE $630,000 (1) Additional Newman 345/115 kv transformer EPE $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Newman transformer addition EPE $630,000 (1) Additional Arroyo 345/115 kv transformer EPE $4,500, kv Gas Circuit Breaker, kv Disconnects, 115 kv Circuit Breaker, kv Vee switches, protection, controls, and communication scheme for Arroyo transformer addition EPE $630,000 (1) Additional Dyer 115/69 kv transformer EPE $1,050, kv Circuit Breaker, kv Vee switches, 69 kv Circuit Breaker, 2 69 kv switches, protection, controls, and communication scheme for Dyer transformer addition EPE $420,000 (2) Additional Hidalgo 115/69 kv transformer TNMP $400, kv Circuit Breaker, kv Vee switches, 69 kv Circuit Breaker, 2 69 kv switches, protection, controls, and communication scheme for Hidalgo transformer addition TNMP $420,000 (2) AustinN-Chevso 115 kv line upgrade (1.18 Miles) EPE $259,600 ElButte-Picacho 115 kv line upgrade (50 miles) TRIS $11,000,000 Newman-Vista 115 kv line upgrade (20.4 miles) EPE $4,488,000 Ascarate-Copper 115 kv line (1.35 miles) EPE $297,000 Chevron-Chevso 115 kv line (1.075 miles) EPE $236,500 Grants_T-Laguna 115 kv line (23 miles) TRIS $5,060,000 ` Hurley-Luna 115 kv line upgrade (12 Miles) TNMP $2,640,000 Central-Hurley 115 kv line upgrade (20 Miles) TNMP $4,400,000 Picacho-Airpor_T 115 kv line (10.5 Miles) PNM/TNMP $2,310,000 Airpor_T-Mimbres 115 kv line (43.7 Miles) PNM/TNMP $9,614,000 Luna-Mimbres 115 kv line upgrade (5 Miles) PNM/TNMP $1,100, TO 50 Static Var Compensator EPE $8,700,000 (3) 2-30 MVAC 115 kv Shunt Capacitors EPE $600,000 (4) 1-30 MVAC 69 kv Shunt Capacitor EPE $300,000 (5) Transmission/Generation Feasibility Study -10- El Paso Electric Company

15 Total Cost of Modifications for Task II, Scenario 4: $66,229,000 (1) This assumes that there is room at the substation involved and no buswork or additional equipment is required. This also assumes that there is an open position and that only one breaker (per side) is required. Add $ 325,000 if an additional 345 kv gas circuit breaker is required. Add $ 210,000 if an additional 115 kv circuit breaker is required. Add $ 535,000 if both are required. (2) This assumes that there is room at the substation involved and no buswork or additional equipment is required. This also assumes that there is an open position and that only one breaker (per side) is required. Add $ 210,000 if an additional 115 kv circuit breaker is required. Add $ 210,000 if an additional 69 kv circuit breaker is required. Add $ 420,000 if both are required. (3) This price is based on a Static Var Compensator (SVC) recently put in service in northern New Mexico. The need for this SVC device comes from the Q-V analysis part of this study (see Section 6.0). (4) Under all lines in service, 60 MVAC had to be added to the EPE 115 kv system, in the Scenario 4 case, in order for EPE voltages and reactive support to be acceptable in this Scenario. For flows greater than 100 MW east-to-west on the Eddy terminal, additional shunt capacitors must be added to the case. (5) Under contingency conditions, it is estimated that a 30 MVAC capacitor added to EPE s 69 kv system would solve voltage problems seen on a few of EPE s 69 kv buses the Scenario 4 case. In addition, the other costs described in Section 2.0, interconnection costs described in Section 2.1, and the obligation costs in Section 2.2 of this report apply to this scenario. Transmission/Generation Feasibility Study -11- El Paso Electric Company

16 3.0 INTRODUCTION This system study is in response to a request for a Feasibility Transmission/Generation Interconnection Study by XXXXXXXXXXXXXXXXXXXXXXX (XXXX) to determine any Fatal Flaws in XXXX s plan to construct and operate generation interconnected to the Luna 345 kv Substation beginning in Pursuant to this, on April 20, 2001, EPE and XXXX signed a Feasibility Transmission/Generation Interconnection Study: Study Scope (Appendix 1). This Study Scope discussed the system studies to be conducted by EPE concerning MW (613.9 MW from study 1 and an additional MW) of XXXX generation and the XXXX interconnection. This study dealt with two combinedcycle generators. Each of the two combined-cycle generators consisted of two gas turbines and one steam turbine, for a total of four gas turbines and two steam turbines. Each gas turbine was modeled with an output of MW. Each steam turbine was modeled with an output of MW. The net continuous capability output of the two combined-cycle units was MW. Each gas turbine analyzed is connected through an 18/345 kv, 193 MVA step-up transformer and each steam turbine is connected through an 18/345 kv 308 MVA step-up transformer at XXXX s 345 kv bus. For each of the two proposed XXXX combined-cycle arrangements of net MW output in this study, each two gas-turbine, single steam turbine combined-cycle arrangement was assumed to be connected to two separate 345 XXXX buses. Each combined-cycle arrangement was interconnected from its respective 345 kv bus through a single 345 kv transmission line with a length of 3200 feet from XXXX s 345 kv substation to the Luna 345 kv Substation. This resulted in two lines connecting the two MW combined cycle arrangements ( MW total) from the two XXXX 345 kv buses to the Luna 345 kv Substation. As part of the evaluation process in studying the impact of the XXXX generation on the southern New Mexico system, EPE conducted powerflow, transient stability, Q-V reactive margin, and short-circuit analyses. The study periods analyzed in this study were the 2003 Heavy Summer and 2003 Light Load periods. With the exceptions noted within this report, EPE did not analyze any other seasons with different import levels, load levels, and/or generation patterns in this fatal flaw and feasibility analysis. It must be noted that this study was not meant to analyze every scenario that could occur on the EPE and SNM system with this generation interconnection since that approach would take too much time. The study was meant to analyze the primary boundaries around which the EPE and SNM systems operate, under the scenarios agreed to by EPE and XXXX. Therefore, the study will give the parameters in which the system, with the XXXX generation included, will operate and the required system modifications that will allow operation at those boundaries under the scenarios agreed to by EPE and XXXX. The modifications called for allow the proposed XXXX generating plant to operate without transmission constraints. Therefore, any change to these modifications will constrain the operation of the generating plant. Transmission/Generation Feasibility Study -12- El Paso Electric Company

17 Results of the analysis indicate that numerous loading and reactive margin criteria violations occur in the existing EPE system when the XXXX generation is added to the system. Utilizing engineering judgement, proposed system modifications and rough estimates for these proposed modifications have been made, which, in EPE s opinion, will correct the criteria violations. In addition, the analysis showed that system modifications will be needed to correct criteria violations in other southern New Mexico area utility systems. Criteria violations are found in the systems of Public Service Company of New Mexico (PNM), Texas-New Mexico Power Company (TNMP) and Tri-State Generation & Transmission, Coop. Inc. (Tri-State), formerly Plains Electric Generation & Transmission Coop., Inc. (PGT). System modifications are also proposed to correct the criteria violations in the southern New Mexico utilities areas and rough cost estimates (using EPE s prices) are provided. However, because EPE did not evaluate the system with these modifications installed, these modifications may not represent an optimal solution. It should be also be noted that due to time constraints in completing the study, the above mentioned utilities were not consulted regarding the methodology or power flow base case representation used in the study. Therefore, study results are based on the latest information available to EPE at the time of the analysis and some of the criteria violations revealed in the benchmark case may not really exist. The benchmark criteria violations were noted in the study and were not considered as impacts due to the addition of the XXXX generation. One thing that was not addressed in this report was the potential problem of subsynchronous resonance (SSR). Potential sub-synchronous resonance (SSR) problems affecting the proposed XXXX generation project can exist due to the series capacitor compensation on the Springerville-Luna 345 kv line. The consequences of SSR can be detrimental if torsional oscillations build up, causing loss of fatigue life on the shaft of any of the generators in this proposed project, or the worst case scenario where the shaft of any of the generators in this proposed project could break. Since this is the responsibility of the generation owner and not a transmission problem, this issue was not covered in this report. It would be in XXXX s best interest to evaluate the effect of SSR on the generators and, if required, install a SSR protection scheme. Transmission/Generation Feasibility Study -13- El Paso Electric Company

18 3.1 Assumptions The following assumptions are consistent for all study scenarios unless otherwise noted. Project dollar amounts shown are in year 2001 U.S. dollars. The cost of any XXXX generator and associated equipment is separate and is not included in this study. This study assumes that EPE substation space is available for the system modifications called for. The cost estimates are only rough estimates using EPE prices. Costs for modifications on the other utilities systems are also rough estimates using EPE prices. The recommended modifications were not re-analyzed to determine if they corrected the criteria violation. Therefore, the recommended system modifications may or may not represent an optimal solution. This study does not assume that XXXX has acquired the transmission rights needed to sell its generation. Cost estimates for the 115 kv and 69 kv line upgrades recommended in this study were determined using a cost of $220,000 per mile. 3.2 Criteria The reliability criteria standards used by EPE in performing this study are readily acceptable standards are listed on pages 3 through 5 of the Feasibility Transmission/Generation Interconnection Study: Study Scope (Appendix 1) and in Section 4 of EPE s FERC Form 715 (Appendix 2). The next few passages review what was generally examined Voltage Violation Criteria The voltage criteria used in this study is contained in Appendices 1 and 2. In general, what was being looked for were any voltages 69 kv or above that were below p.u. in all cases under ALIS and contingency conditions. Under contingency conditions, it was important that the voltage drop at any EPE 345 kv bus in any case during contingency conditions did not exceed 7 % voltage drop. For all cases, a value of 1.05 p.u. was used for a voltage rise flag during contingencies. This may or may not be a violation of an individual entity s voltage criteria during single outage conditions. It is up to each entity to determine if this violates its voltage criteria Loading Violation Criteria The loading violation criteria used in this study is contained in Appendices 1 and 2. In general, the loading criteria used in this report was twofold. For ALIS conditions, the continuous/normal rating of an element could not be exceeded. For contingency conditions, the emergency rating of an element could not be exceeded during the contingency. Transmission/Generation Feasibility Study -14- El Paso Electric Company

19 3.2.3 Voltage and Loading Violation Criteria Tables The results for overloading and voltage criteria violations, summarized on the tables in Section 6.0, also appear in two other places. In Appendices 7 and 8, the tables give all voltage or loading violations present in the benchmark cases and XXXX generation cases for the EPE, PNM, TNMP and TRIS systems (and APS and PSCO systems where applicable). In Appendix 7, the tables show detailed information for violations in all scenarios. In Appendix 8, the tables show a summary of violations on a single table for each year. Note that voltage problems involving buses below 69 kv exist but are not shown on these tables. They can be found in the results provided in electronic format. Bus voltage deviations between base case and contingency conditions were also investigated with and without XXXX generation represented. In the footnotes at the bottom of each table in Appendices 7 and 8, it is explained what rating is being used for the loading violations shown on these tables. These tables were based on the output of the program (which is in electronic format). The tables in Appendices 7 and 8 should only be used for comparing the results between the benchmark and the with XXXX generation scenarios and not for identifying the voltage and loading violations caused because of the addition of the XXXX generation project. Only the tables in Section 6.0 should be used for this purpose. It must be noted that all output for ALIS and contingency studies shows loading violations as a percent of the rating for the element in column 1 of all case files used in this study. This rating is the latest data provided to EPE by all other non-epe entities. This rating may or may not be the emergency rating for a particular element. The rating for the element in column 1 of all case files was assumed as follows. PSCO, PNM, Los Alamos County (LAC), and TNMP column 1 element ratings were considered the normal and the emergency rating. Arizona, EPE, and TRIS column 1 element ratings were considered the normal rating. Arizona and EPE column 2 element ratings were considered the emergency rating. Because the actual normal or emergency rating for any element may be different with the emergency rating that was assumed or that appears in all of the cases, XXXX should consult with the entities involved. Note that for the purpose of comparing the loading results between cases used in this study, the tables in Appendices 7 & 8 can be used. However, only the tables contained within the body of this report should be used for the purpose of identifying the elements that exceeded the loading criteria mentioned in the paragraph above. Also, only the tables contained within the body of this report should be used for the purpose of identifying the modifications needed to eliminate the loading criteria violations. Transmission/Generation Feasibility Study -15- El Paso Electric Company

20 This loading criteria was used on the loading violations shown in the tables in Section 6.0. In the tables in Section 6.0, the tables for ALIS conditions show the elements that violated the ALIS loading criteria and the continuous/normal rating assumed for these elements. In the tables in Section 6.0, the tables for contingency conditions show the elements that violated the loading criteria under contingencies and the emergency rating assumed for these elements. For these tables, this emergency rating was obtained from the rating for the element in column 2 of all case files for all elements considered loaded above their emergency rating during contingency conditions. Because the actual normal or emergency rating for any element may be different with the emergency rating that was assumed or that appears in all of the cases, XXXX should consult with the entities involved Other Violation Considerations Not all contingencies were convergent in the Benchmark or with XXXX generation cases. These non-convergent contingencies are noted throughout the report. EPE identified violations seen with the addition of the proposed XXXX generation project as a result of this project. Note that, any violations that exist in the benchmark case are considered problems that were existing prior to the addition of the XXXX generation and as a result will not penalize the XXXX generation project. For any non-epe entity, XXXX should contact the entity in which any violation found in the with XXXX generation cases occurred to resolve these violations. 3.3 Procedure As previously mentioned, the system study analyses conducted by EPE included powerflow, transient stability, Q-V reactive margin, and short-circuit analyses. Detailed discussions for each topic have been included in this report (for quick location of any topic, refer to the Table of Contents). The following procedures were used in conducting this analysis: Base Case Development A 2003 Heavy Summer base case without XXXX generation was developed in order to compare a benchmark case without XXXX generation against other scenarios which included the XXXX generation interconnected into the EPE transmission system. The Benchmark 2003 case (Task 1) was established by integrating the latest available EPE and New Mexico system representations with the existing WSCC 03HS2SA case. In the Benchmark case, Arizona, Colorado, and New Mexico utilities were flagged for criteria violations during ALIS (non-contingency) conditions and for some contingencies. Transmission/Generation Feasibility Study -16- El Paso Electric Company

21 Consequently, some of these initial system criteria violations also existed in the With XXXX Generation powerflow cases and therefore, are not a direct impact due to the new XXXX generation. It is suspected that most of these criteria violations probably do not exist and may be a result of EPE not having the latest system representations of some of the utilities. See Section 4.0 for more on base case development List of Contingencies The same contingencies were evaluated for all scenarios and sensitivities and are identified in Appendix 6. The contingencies were selected base on engineering judgement that these would be the most likely to stress the EPE and southern New Mexico systems. Any contingencies that resulted in a non-convergent system in the benchmark case were not analyzed in the scenarios/sensitivities. It was assumed that since these non-convergent problems exist in the Benchmark cases, the addition of XXXX generation will not significantly impact EPE s system for these non-convergent contingencies Transient Stability Analysis The stability data representation for the XXXX generators is based on data provided by XXXX and included generator modeling parameters, MVAR reactive curves, short circuit test curves, and a model for a typical Power System Stabilizer (PSS). XXXX supplied EPE with equivalent models for the various components of the generator voltage regulator system including modeling of the excitation system, generator, and PSS systems. The models were then represented in the WSCC master stability file for analysis using the GE Transient Stability Program. Transient stability analyses were conducted on the Task I Benchmark case, the Task II, Scenario 1, Scenario 2, Scenario 3, and Scenario 4 cases. The models and parameters for this analysis are shown in Appendix 5. See Section 7.0 for more on transient-stability analysis Q-V Analysis Reactive margin Q-V analyses were performed on the Task I Benchmark case, the Task II, Scenario 1 case, Scenario 2, Scenario 3, and Scenario 4 cases to verify that the WSCC criteria for reactive power margin will be met under the worst contingencies on the EPE system. A procedure developed by WSCC was used to determine the reactive power margin. As outlined in this procedure, load was increased by 5% and the worst contingency was analyzed to determine the reactive margin on the system. The margin is determined by identifying the critical (weakest) bus on the system during the worst contingency. The critical bus is the most reactive deficient bus. Q-V curves are developed and the minimum point on the curve is the critical point. If the minimum point Transmission/Generation Feasibility Study -17- El Paso Electric Company

22 of the Q-V curve is positive, the system is reactive power deficient. If it is negative, then the system has sufficient reactive power margin and meets the WSCC criteria. See Section 8.0 for more on Q-V analysis Short-Circuit Analysis Short-circuit studies were performed in this study. The short circuit analyses consisted of substation three phase and single phase-to-ground bus fault simulations at Luna Substation as well as those substations with direct 345 kv or 115 kv transmission line connections into it. Fault simulations were also taken at selected 345 kv and 115 kv buses on the EPE system. This was done in order to analyze the impact of the new XXXX generation when faults occur on buses considered to be critical to the EPE system. The objective was to make certain that the existing substation breakers would safely accommodate fault currents for each scenario. The analysis identified any breaker whose rating was exceeded. The complete Short-Circuit Analysis report can be found under the ATTACHMENT tab at the end of this report. Transmission/Generation Feasibility Study -18- El Paso Electric Company

23 4.0 SCENARIOS The following scenarios, and their variations, were examined in this study. Scenario 1 modeled the new XXXX generation interconnected at the Luna 345 kv Substation with all generation output ( MW) from the XXXX generators being sold to Arizona. This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was sold to a WSCC utility west of EPE s system. In this Scenario, Arizona s generation at or near Palo Verde was lowered by MW. All local EPE generation remained the same as in the benchmark case. Scenario 2 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and all generation output ( MW) from the XXXX generators being sold to Colorado. This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was sold to a WSCC utility north of EPE s system via Arizona. In this Scenario, Colorado s generation in the Public Service of Colorado (PSCO) area was lowered by MW. All local EPE generation remained the same as in the benchmark case. Scenario 3 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and the generation output ( MW) from the XXXX generators being sold half to Arizona (613.9 MW) and half to Colorado (613.9 MW). This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was went through Arizona, with half sold to Arizona, and the other half going north Via Arizona. In this Scenario, Arizona s generation at or near Palo Verde was lowered by MW and Colorado s generation in the PSCO area was lowered by MW. All local EPE generation remained the same as in the benchmark case. Scenario 4 modeled the new XXXX generation interconnected at the Luna 345 kv Substation and the generation output ( MW) from the XXXX generators being sold in the following manner: Arizona (727.8 MW), ComisiÓn Federal de Electricidad (CFE)(200 MW), and Southwest Power Pool (SPP)(300 MW). This simulated a scenario where the new XXXX generation was interconnected into the EPE system and all of its generation was went east into or through the EPE system. In this Scenario, the schedule across the Artesia terminal was changed to be 100 MW west-to-east (from 200 MW eastto-west). Also, 200 MW of CFE load and losses was added to the case. All local EPE generation remained the same as in the benchmark case. All scenarios were examined with the Arroyo Phase-Shifting transformer (the PST) inservice and out-of-service. Therefore, at least two cases were developed per scenario. Transmission/Generation Feasibility Study -19- El Paso Electric Company

24 Near the beginning of the study, it was felt that there should be two sensitivities run on at least one of the Scenarios in order to identify all fatal flaws with the proposed MW XXXX generation addition at Luna 345 kv substation. Based on engineering judgement, Scenario 1 was chosen because it was clearly the Scenario best suited for sensitivities due to the amount of Arizona generation modeled in the case and because Scenarios 1, 2, and 3 involved the XXXX generation passing through Arizona. As the study progressed, it was felt that the same two sensitivities should be run for Scenario 4. This was because scenario 4 involved sales through EPE s system. Sensitivity #1 under Task II is a variation of Scenario 1. For this sensitivity, a new benchmark case was developed such that EPE load and losses totaled to 600 MW and SNMI was held at 500 MW. To this benchmark case, another case was developed such that the new XXXX generation interconnected at the Luna 345 kv bus with all generation output ( MW) from the XXXX generators being sold to Arizona. For the case with the XXXX generation, EPE load, losses, and generation was held the same as the 600 MW benchmark case. Sensitivity #2 under Task II involved the same Sensitivity #1 with XXXX generation case except that there were six initially out-of-service cases developed from the Sensitivity #1 with XXXX generation case. Sensitivity #3 under Task II is a variation of Scenario 4. For this sensitivity, a new benchmark case was developed such that EPE load and losses totaled to 600 MW and SNMI was held at 500 MW. To this benchmark case, another case was developed such that the new XXXX generation interconnected at the Luna 345 kv bus with all generation output ( MW) from the XXXX generators being sold in the following manner: Arizona (727.8 MW), ComisiÓn Federal de Electricidad (CFE)(200 MW), and Southwest Power Pool (SPP)(300 MW). For the case with the XXXX generation, EPE load, losses, and generation was held the same as the 600 MW benchmark case. Sensitivity #4 under Task II involved the same Sensitivity #3 with XXXX generation case except that there were six initially out-of-service cases developed from the Sensitivity #3 with XXXX generation case. The purpose of this study was to determine the major problems, i.e., fatal flaws that could occur on the southern New Mexico system if the XXXX generation is interconnected to the system. The study proposes recommended solutions that, using engineering judgement, should correct the criteria violations that are determined to be impacts due to the XXXX generation. However, these recommended solutions were not re-evaluated and therefore may not represent the optimal solution to correcting these criteria violations. Load and resource information for the base cases, including transfer schedules, are included in Appendix 3. EPE powerflow maps (one-line diagrams) are located in Appendix 4. Transmission/Generation Feasibility Study -20- El Paso Electric Company