XXXXXXXXXXXXXXXXXXXXXXXXX TRANSMISSION/GENERATION FEASIBILITY STUDY FATAL FLAW AND FEASIBILITY ANALYSIS

XXXXXXXXXXXXXXXXXXXXXXXXX TRANSMISSION/GENERATION FEASIBILITY STUDY FATAL FLAW AND FEASIBILITY ANALYSIS System Operations Department System Planning Section June 2001

TABLE OF CONTENTS 1.0 Executive Summary...Page 1 2.0 Cost Estimates...Page 3 2.1 Interconnection Costs of XXXX Generation to Hidalgo Substation...Page 3 2.2 Task II, Scenario 1 System Modification Costs...Page 3 2.3 Task II, Scenario 2 System Modification Costs...Page 4 2.4 Task II, Sensitivity #1 System Modification Costs...Page 4 2.5 Task II, Sensitivity #2 System Modification Costs...Page 5 3.0 Introduction...Page 7 3.1 Assumptions...Page 8 3.2 Criteria...Page 8 3.3 Procedure...Page 8 3.3.1 Base Case Development...Page 8 3.3.2 List Of Contingencies...Page 10 3.3.3 Transient Stability Analysis...Page 10 3.3.4 Q-V Analysis...Page 10 3.3.5 Short-Circuit Analysis...Page 11 4.0 Powerflow Analysis Results...Page 12 4.1 Task I (Benchmark) Case...Page 12 4.2 Task II Scenario 1 Case...Page 13 4.3 Task II Scenario 2 Case...Page 15 4.4 Task II Sensitivity #1 Case...Page 18 4.5 Task II Sensitivity #2 Case...Page 20 4.6 Comparison of Task II Sensitivity #2 Case and Sensitivity #1 Case...Page 21 5.0 Transient Stability Analysis Results...Page 23 5.1 Task I Benchmark Case...Page 23 5.2 Task II Scenario 1 Case...Page 23 5.3 Task II Scenario 2 Case...Page 23 6.0 Q-V Analysis Results...Page 25 7.0 Short-Circuit Analysis Results...Page 28 8.0 Disclaimer...Page 29 9.0 Certification...Page 30 Transmission/Generation Feasibility Study i El Paso Electric Company For XXXXXXXXXXXXXXXXXXX June 2001

APPENDICIES Feasibility Transmission/Generation Interconnection Study: Study Scope...Appendix 1 EPE FERC Form 715...Appendix 2 Load and Resources Tables...Appendix 3 Powerflow Maps One-Line Diagrams...Appendix 4 List of Contingencies...Appendix 5 XXXX Stability Models & Parameters...Appendix 6 Base Case & Contingency Criteria Violation Tables...Appendix 7 Stability Plots...Appendix 8 Q-V Plots...Appendix 9 SHORT-CIRCUIT ANALYSIS...ATTACHMENT Transmission/Generation Feasibility Study ii El Paso Electric Company For XXXXXXXXXXXXXXXXXXX June 2001

1.0 EXECUTIVE SUMMARY On January 26, 2001, XXXXXXXXXXXXXXX (XXXX) submitted to El Paso Electric Company (EPE) a request for a Transmission and Facilities Study with the intention of requesting a Fatal Flaw and Feasibility Analysis. This request was made concerning XXXX s plans to construct and interconnect generating facilities at the Hidalgo 345 kv bus in the 2003 time frame. Subsequently, on March 19, 2001, EPE and XXXX signed an Agreement for a Feasibility Transmission Interconnection Study. Pursuant to the above Agreement, on April 9, 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 the proposed XXXX generation and the XXXX interconnection. The generating units studied included two 234 MVA gas turbines and a 323 MVA steam turbine, with a net summer continuous capability output of 505 MW. The study period analyzed is the 2003 Heavy Summer time period. EPE did not analyze in this fatal flaw and feasibility analysis any other seasons with different import levels, load levels, and/or generation patterns. Therefore, this analysis only identified problems found in a 2003 Heavy Summer scenario. 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 Hidalgo 345 kv bus. Any additional facilities needed to correct these fatal flaws are noted and a rough estimates of the costs of these facilities are provided in the study. It should be noted that the requested interconnection location (Hidalgo Substation) is a jointly owned substation between EPE, Public Service of New Mexico (PNM), and Texas-New Mexico Power Company (TNMP). Due to time constraints in completing the study, the above mentioned utilities were not consulted regarding the methodology used in the study. Therefore, the nature of and estimated costs of any facilities and upgrades required on the PNM and/or TNMP 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 Agreement 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. Results of the system study with the interconnection of the XXXX generation show that numerous overloads and reactive margin criteria violations occur in the existing southern New Mexico system when the XXXX generation is added to the system. Utilizing engineering judgement, proposed system modifications are included in the Study, which, in EPE s opinion, will correct the criteria violations and rough estimates for these proposed modifications to EPE s system. The study also shows that modifications will be needed to other southern New Mexico area utility s systems. These included PNM, TNMP, and Tri-State Generation & Transmission, Coop. Inc. (Tri-State), formerly Plains Electric Generation & Transmission Coop., Inc (PGT). As per the Study Scope, further evaluation of the system with the recommended modifications installed has not been performed. Therefore, these modifications may not represent optimal corrections to the Transmission/Generation Feasibility Study -1- El Paso Electric Company

system. System modifications are also proposed to correct the nearby utility system impacts and rough cost estimates (using EPE s prices) are provided. 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. Additionally, although double contingency scenarios were not analyzed in this study, it should be noted that a problem can occur with the proposed generation interconnected at the Hidalgo 345 kv bus when either the Greenlee-Hidalgo (GH) 345 kv line or the Hidalgo-Luna (HL) 345 kv line is initially out of service (IOS). Under this scenario, with either line in an IOS condition, a forced outage of the other line will result with the only path for the 505 MW of XXXX generation being through the underlying 115 kv system connected at Hidalgo through two 200 MVA transformers. This would immediately load both the 345/115 kv transformers beyond their emergency ratings with 505 MW of XXXX generation. In addition, some of the 115 kv lines in the vicinity of Hidalgo Substation would also overload beyond their emergency ratings. Using engineering judgement, a preliminary recommendation that requires no system modifications would be to curtail or turn off the XXXX generation to prevent overloading of the transformers and/or the underlying 115 kv system. In a full Facilities Study, a detailed analysis to determine a safe level of generation for XXXX to operate during an IOS condition of either the GH or HL line will need to be performed. Transmission/Generation Feasibility Study -2- El Paso Electric Company

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 505 MW of generation. The generation is interconnected at the Hidalgo 345 kv bus and a 2003 heavy summer system is analyzed. 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 of XXXX Generation to Hidalgo Substation: The following table shows the estimated costs necessary for XXXX to interconnect its generation to the Hidalgo 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 HIDALGO 345 KV SUBSTATION FACILITY MODIFICATION OWNER ESTIMATED COST (1) 345 kv Gas Circuit Breaker EPE $275,000 (2) 345 kv Motor operated disconnect switches EPE $50,000 (1) Dead End Tower EPE $20,000 (1) Protection Scheme EPE $50,000 (1) Controls Equipment EPE $20,000 (1) Communication Scheme EPE $25,000 Total Interconnection Costs (Applies to all Scenarios): $440,000 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 Task II, Scenario 1 System Modification Costs: XXXX generation totaling 505 MW is interconnected to the Hidalgo 345 kv bus and sold to California, i.e. simulating a sale to an entity outside the southern New Mexico area. California area generation is reduced by 505 MW in order to purchase the XXXX generation. Local EPE generation remains unchanged from the benchmark case. This scenario simulates a case where XXXX sells its entire generation output to California. Transmission/Generation Feasibility Study -3- El Paso Electric Company

TASK II, SCENARIO 1 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional 24 MVA Hidalgo 115/69 kv XFMR TNMP $300,000 Total Cost of Modifications for Task II, Scenario 1: $300,000 2.3 Task II, Scenario 2 System Modification Costs: XXXX generation totaling 505 MW is interconnected to the Hidalgo 345 kv bus and sold to EPE. Local EPE generation is reduced to one unit (Newman 3) with an output of 55 MW. This scenario simulates a case where EPE purchases XXXX s entire generation output with a corresponding reduction of its local generation. TASK II, SCENARIO 2 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST 200 MVAC of Capacitors on EPE 115 kv System EPE $2,100,000 510 MVAC of SVC s on EPE s 115 kv System EPE $25,500,000 Additional 200 MVA Newman 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Diablo 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Caliente 345/115 kv XFMR EPE $4,500,000 Caliente-Vista 115 kv line upgrade (5.9 miles) EPE $1,200,000 Mesa-Rio Grande 115 kv line upgrade (2.17 miles) EPE $500,000 Central-Turquois 115 kv line upgrade (12 miles) TNMP $2,640,000 Silver City-Tyrone 69 kv line upgrade (11 miles) TNMP $2,420,000 Additional 24 MVA Hidalgo 115/69 kv XFMR TNMP $300,000 Belen-Bernardo 115 kv line upgrade (19 miles) Tri-State $4,180,000 Elephant Butte-Picacho 115 kv line upgrade (50 miles) Tri-State $11,000,000 Grants Tap-Laguna 115 kv line upgrade (20 miles) Tri-State $4,400,000 Bernardo-Socorro 115 kv line upgrade (28 miles) Tri-State $6,160,000 Luna-Mimbres 115 kv line upgrade (5 miles) PNM $1,100,000 Total Cost of Modifications for Task II, Scenario 2: $75,000,000 2.4 Task II, Sensitivity #1 System Modification Costs: XXXX generation totaling 505 MW is interconnected to the Hidalgo 345 kv bus and sold to California. In addition to the XXXX generation, 1,235 MW of generation from other companies who may potentially desire to interconnect into the EPE/southern New Mexico system were also modeled as a sale to California. This generation included the following: 500 MW interconnected to the EPE system at the Newman 345 kv bus; 135 MW interconnected to the EPE system between the Luna-Newman and Luna-Diablo 345 kv lines; 600 MW interconnected to the EPE system at the Luna 345 kv bus. Transmission/Generation Feasibility Study -4- El Paso Electric Company

In this sensitivity, California generation is reduced by 1,740 MW in order to purchase the XXXX and other potential generation. Local EPE generation is unchanged from the benchmark case. This scenario simulated a case where all generation that may potentially be interconnected to the EPE system (including XXXX) is sold to California. TASK II, SENSITIVITY # 1 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Change Taps on Arroyo 345 kv PST EPE $4,000,000 Additional 200 MVA Arroyo 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Caliente 345/115 kv XFMR EPE $4,500,000 Greenlee-Hidalgo 345 kv line upgrade (59.95 miles) EPE $13,800,000 Elephant Butte-Socorro 115 kv line upgrade (85 miles) Tri-State $18,700,000 Hurley-Luna 115 kv line upgrade (12 miles) TNMP $2,640,000 Alamogordo-Alamo Tap 115 kv line upgrade (4 miles) TNMP $880,000 Additional 500/345 kv XFMR at Coronado Substation Arizona * * An estimate for this project was not provided because EPE does not own any similar facilities and cannot make a reasonable cost estimate. XXXX is still responsible for this project and will need to mitigate costs with the Arizona utility owning the facility. Total Cost of Modifications for Task II, Sensitivity #1: $49,020,000 2.5 Task II, Sensitivity #2 System Modification Costs: This scenario is the same as Sensitivity #1 (Section 2.4) except that the XXXX generation has been excluded. Generation from other companies who may potentially desire to interconnect into the EPE system, however, is modeled as a sale to California. California generation is reduced by 1,235 MW in order to purchase the other potential generation. Local EPE generation is unchanged from the benchmark case. This scenario was requested by XXXX in order to determine which impacts from Sensitivity #1 are due to the XXXX generation and which impacts are a result of the XXXX generation being installed after the other generation is already interconnected. TASK II, SENSITIVITY # 2 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional 200 MVA Arroyo 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Caliente 345/115 kv XFMR EPE $4,500,000 Hurley-Luna 115 kv line upgrade (12 miles) TNMP $2,640,000 Alamogordo-Alamo Tap 115 kv line upgrade (4 miles) TNMP $880,000 Total Cost of Modifications for Task II, Sensitivity #2: $12,520,000 Transmission/Generation Feasibility Study -5- El Paso Electric Company

Note: System modification costs shown in Sensitivity #2 are the responsibility of the other potential generators, since they also appear in the Sensitivity #1 costs. XXXX would be responsible for the difference between Sensitivity #1 and Sensitivity #2, or $36,500,000 ($49,020,000 - $12,520,000) in system modifications if the other generators were already on-line before the XXXX generation is interconnected into the EPE system. In addition, XXXX is responsible for the cost of an additional 500/345 kv transformer at the Coronado Substation in Arizona. Estimated cost for this project is not included. Transmission/Generation Feasibility Study -6- El Paso Electric Company

3.0 INTRODUCTION This system study is in response to a request for a Feasibility Transmission/Generation Interconnection Study by XXXXXXXXXXXXXXXXXXX (XXXX) to determine any Fatal Flaws in XXXX s plan to construct and operate generation interconnected to the Hidalgo 345 kv Substation beginning in 2003. The proposed generating units studied include two 234 MVA gas turbines and a 323 MVA steam turbine, with a net summer continuous capability output of 505 MW. Each gas turbine analyzed is connected through an 18/345 kv, 270 MVA step-up transformer and the steam turbine is connected through an 18/345 kv 333 MVA step-up transformer at XXXX s 345 kv bus. The XXXX interconnection is through a short 345 kv transmission connection to the Hidalgo 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. Results of the analysis indicate that numerous overloads 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 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. Transmission/Generation Feasibility Study -7- El Paso Electric Company

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). 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: 3.3.1 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, New Mexico and Arizona utilities were flagged for criteria violations. Consequently, these initial system criteria violations also existed in the With XXXX Generation powerflow cases and therefore, are not a direct impact Transmission/Generation Feasibility Study -8- El Paso Electric Company

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 the utilities in question. In an effort to cover the agreed upon range of operating scenarios, Scenario 1, Scenario 2, Sensitivity 1 and Sensitivity 2 powerflow representations were developed and analyzed under Task II. This was done by taking the beginning benchmark base cases from Task I and making appropriate changes to XXXX sales, Southern New Mexico Import (SNMI) levels, EPE generation patterns, and area transfer levels. Scenario 1 modeled the new XXXX generation interconnected at the Hidalgo 345 kv Substation and all generation output (505 MW) from the XXXX generators being sold to California. This simulates a scenario where the new XXXX generation is interconnected into the EPE system and all of its generation was sold to a WSCC utility west of EPE s system. All local EPE generation remains the same as in the benchmark case. Scenario 2 modeled the new XXXX generation interconnected at the Hidalgo 345 kv Substation and all generation output (505 MW) from the XXXX generators being sold to EPE. This simulates a scenario where the new XXXX generation is interconnected into the EPE system and EPE s local generation is reduced in order to purchase 505 MW from XXXX. Sensitivity #1 under Task II is a variation of Scenario 1. This Sensitivity models the new XXXX generation interconnected at the Hidalgo 345 kv bus as well as other potential generation interconnected into the southern New Mexico system. The other potential generation includes 500 MW interconnected at EPE s Newman 345 kv bus, 135 MW interconnected to EPE s Luna-Diablo and Luna-Newman 345 kv lines, and 600 MW interconnected at the Luna 345 kv bus. This scenario was requested by XXXX to determine the impact of the XXXX generation if this additional potential generation is already interconnected into the EPE system when the XXXX generation is installed. Sensitivity #2 under Task II is the same scenario as Sensitivity #1 except that XXXX generation is excluded. This scenario was requested by XXXX to determine if any system impacts to EPE s system revealed in Sensitivity #1 are due to XXXX s generation or to the other potential generation. 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. Transmission/Generation Feasibility Study -9- El Paso Electric Company

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. 3.3.2 List of Contingencies The same contingencies are evaluated for all scenarios and sensitivities and are identified in Appendix 5. 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 nonconvergent system in the benchmark case were not analyzed in the scenarios/sensitivities. It is 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. 3.3.3 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 case, and the Task II, Scenario 2 case. The models and parameters for this analysis are shown in Appendix 6. 3.3.4 Q-V Analysis Reactive margin Q-V analyses were performed on the Task I Benchmark case, the Task II, Scenario 1 case, and the Task II, Scenario 2 case 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 of the Q-V curve is positive, the system is reactive power Transmission/Generation Feasibility Study -10- El Paso Electric Company

deficient. If it is negative, then the system has sufficient reactive power margin and meets the WSCC criteria. Prior experience has shown that the worst contingencies impacting reactive power margin are the Springerville-Luna, Luna-Diablo, and Greenlee-Hidalgo 345 kv lines and the buses most impacted are the 345 kv buses at Luna, Hidalgo, Arroyo, Caliente, Newman, and Diablo. A Q-V analysis of these three 345 kv line contingencies on the Benchmark Case determined that the Luna-Diablo contingency was the worst contingency impacting the system reactive power margin. Therefore this contingency was used to evaluate reactive power margins for all cases. Q-V plots were created showing the margins available at the 345 kv buses listed above. 3.3.5 Short-Circuit Analysis Short-circuit studies were performed on four scenarios/sensitivities in this study. These scenarios/sensitivities include the following: Existing EPE system(no new generation) Existing EPE system with new XXXX generation included Existing EPE system with all potential new generation on (500 MW at the Newman 345 kv bus, 135 MW between the Luna-Diablo and Luna- Newman 345 kv lines, 600 MW at the Luna 345 kv bus) and including the new XXXX generation Existing EPE system with all potential generation on (500 MW at the Newman 345 kv bus, 135 Mw between the Luna-Diablo and Luna- Newman 345 kv lines, 600 MW at the Luna 345 kv bus) but excluding the new XXXX generation The short circuit analyses consisted of substation three phase and single phase-to-ground bus fault simulations at Hidalgo Substation as well as those substations with direct 345 kv or 115 kv transmission line connections into it. Fault simulations were also taken at the Newman 115 kv bus, Rio Grande 115 kv bus, and selected 345 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 -11- El Paso Electric Company

4.0 POWERFLOW ANALYSIS RESULTS Powerflow analyses were performed for the Benchmark; Task II, Scenario 1; Task II, Scenario 2; and Task II Sensitivity #1 and Sensitivity #2 cases. A 2003 HS base case was developed to compare against each scenario, simulating the system with all lines in service. Voltage and/or loading criteria violations in the base case were noted for EPE as well as other New Mexico and Arizona utilities. These violations are shown in the Base Case and Contingencies Tables listed in Appendix 7. Contingency (N-1) powerflow analyses were then performed for all cases. A list of the contingencies analyzed is shown in Appendix 5. For the contingency analyses, criteria violations were noted and modifications were recommended using engineering judgement. However, the recommended modifications were not analyzed and therefore may not represent the optimal solutions in correcting these criteria violations. Contingencies that resulted in voltage and loading problems for non-epe utilities were also noted in the tables (Appendix 7) and potential solutions were recommended using engineering judgement. Again, these solutions were not re-analyzed and may not represent the optimal solution to correcting the criteria violations for the non-epe utilities. Additionally, although double contingency scenarios were not analyzed in this study, it should be noted that a problem can occur with the proposed generation interconnected at the Hidalgo 345 kv bus when either the Greenlee-Hidalgo (GH) 345 kv line or the Hidalgo-Luna (HL) 345 kv line is initially out of service (IOS). Under this scenario, with either line in an IOS condition, a forced outage of the other line will result with the only path for the 505 MW of XXXX generation being through the underlying 115 kv system connected at Hidalgo through two 200 MVA transformers. This would immediately load both the 345/115 kv transformers beyond their emergency ratings with 505 MW of XXXX generation. In addition, some of the 115 kv lines in the vicinity of Hidalgo Substation would also overload beyond their emergency ratings. Using engineering judgement, a preliminary recommendation that requires no system modifications would be to curtail or turn off the XXXX generation to prevent overloading of the transformers and/or the underlying 115 kv system. In a full Facilities Study, a detailed analysis to determine a safe level of generation for XXXX to operate during an IOS condition of either the GH or HL line will need to be performed. Results of the powerflow analyses are listed below. 4.1 Task I (Benchmark) Case A 2003 Heavy Summer (HS) benchmark case was developed and analyzed in this study and a contingency powerflow analysis was performed on the case. The EPE system was represented with 2003 HS loads and without XXXX generation. This case simulated the EPE system, as it will exist in the summer of 2003 without XXXX generation. There were no criteria violations involving EPE facilities in the base case or during contingencies for the benchmark case. However, there were Transmission/Generation Feasibility Study -12- El Paso Electric Company

some overload and overvoltage criteria violations during the base case condition (all lines in service) in the Arizona, PNM, and Tri-State areas. The table below shows the overload criteria violations with all lines in service: Overload Criteria Violations for Task I (Benchmark) Case With All Lines In Service LINE AREA / OWNER RATING (MVA) FLOW (MVA) % LOADING LINCSTRT-WPHX 230 kv line Arizona 372.5 669.7 179.8 CTRYCLUB-LINCSTRT 230 kv line Arizona 350.5 472.8 134.9 CTRYCLUB-MEADOWBK 230 kv line Arizona 324.0 422.9 130.5 HERNANDZ-NORTON_2 115 kv line PNM 83.4 90.6 108.6 BLUEWATR-GRANTS_T 115 kv line Tri-State 54.3 58.4 107.6 These violations are noted in Appendix 7. It is suspected, however, that these violations may not exist and are due to not having the latest system representations from the above utilities. In any event, these violations are not due to the addition of the new XXXX generation. There were also some criteria violations during contingency conditions in the Tri- State, PNM and TNMP areas. The table below shows the overload criteria violations for the benchmark case during contingency conditions: Overload Criteria Violations for Task I (Benchmark) Case During Contingency Conditions CONTINGENCY OVERLOADED LINE / TRANSFORMER AREA / OWNER % LOADING McKinley-Springerville 345 kv line GRANTS_T-LAGUNA 115 kv line Tri-State 106.2 Newman-Luna 345 kv line PICACHO-MIMBRES 115 kv line PNM 100.2 Arroyo 345/115 kv transformer PICACHO-MIMBRES 115 kv line PNM 107.2 Luna 345/115 kv transformer HIDALGO-TURQUOIS 115 line TNMP 122.0 For a detailed listing of all the criteria violations in the Task I benchmark case, please refer to the 2003 HS Task I Case Table in Appendix 7. 4.2 Task II, Scenario 1 Case The 2003 HS case for Task II, Scenario 1 was developed and analyzed in this study and compared to the Benchmark case. A contingency powerflow analysis was then performed on this case. The EPE system is represented as in the Benchmark cases except that XXXX generation is now included. Two gas turbines generators and one steam turbine generator are modeled with generation output set to 505 MW and all generation output sold to California. Generation in California was reduced by the amount of the XXXX generation output. Local EPE generation remained the same as in the Task I benchmark case. This scenario simulated a case where XXXX will sell all of its 505 MW generation output to a utility in California. Transmission/Generation Feasibility Study -13- El Paso Electric Company

The addition of 505 MW of XXXX generation did not cause any major impacts to EPE s system under base case (all lines in service) conditions. There were some overload criteria violations in the Arizona, PNM, and Tri-State areas, but these were the same violations reported in the Task I benchmark case. Therefore, these violations are not a direct impact of the new XXXX generation. There was also one criteria violation during contingency conditions in the TNMP area. The table below shows the overload criteria violation for the Task II, Scenario 1 Case during contingency conditions: Overload Criteria Violations for Task II, Scenario 1 Case During Contingency Conditions CONTINGENCY OVERLOADED LINE / TRANSFORMER AREA / OWNER % LOADING Luna-Hidalgo 345 kv line HIDALGO 69/115 kv XFMR TNMP 100.1 Luna 345/115 kv transformer HIDALGO 69/115 kv XFMR TNMP 101.4 As can be seen in the above table, the only impact due to the addition of the new XXXX generation in Scenario 1 is an overload of TNMP s Hidalgo 69/115 kv transformer during a Luna-Hidalgo 345 kv line or a Luna 345/115 kv transformer contingency. Since the above criteria violation is on the TNMP system, a rough cost estimate for the system modification recommended to correct the violation was provided using EPE prices. The proposed solution to correct the criteria violation listed above, with a rough cost estimate, is listed below: TASK II, SCENARIO 1 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Additional 24 MVA Hidalgo 115/69 kv XFMR TNMP $300,000 Total Cost of Modifications for Task II, Scenario 1: $300,000 Again it must be noted that although this scenario required only one system modification, it is also recommended that XXXX be required to curtail or turn off its entire generation to prevent overloading of the underlying 115 kv system during an IOS condition of either the GH or HL lines. In addition, the interconnection costs described in Section 2.1 of this report apply to this, as well as all scenarios. For a detailed listing of all the criteria violations in the Task II Scenario 1 Case, please refer to the 2003 HS Task II Scenario 1 Case Table in Appendix 7. Transmission/Generation Feasibility Study -14- El Paso Electric Company

4.3 Task II, Scenario 2 Case The 2003 HS case for Scenario 2 was developed and analyzed in this study and compared to the Benchmark case. A contingency powerflow analysis was then performed on this case. The EPE system is represented as in the Benchmark cases except that XXXX generation is now included and sold to EPE. Two gas turbines generators and one steam turbine generator are modeled with generation output set to 505 MW. Local EPE generation is reduced to one unit (Newman 3) with a generation output of 55 MW. This scenario simulated a sale of XXXX generation to EPE and a corresponding reduction of EPE local generation to accommodate the sale. The reduction in EPE local generation to accommodate the purchase of 505 MW of XXXX generation resulted in some impacts to the EPE and PNM systems under base case (all lines in service) conditions. The initial case was non-convergent due to a lack of reactive (MVAR) support on the EPE system. Therefore, 200 MVAR s of shunt capacitors were needed on EPE s 115 kv system in order to increase voltages to acceptable levels. The addition of these capacitors allowed the case to converge under base case conditions. However, there were some overload criteria violations in the EPE, Arizona, PNM, and Tri-State areas. Some of the violations were the same violations reported in the Task I benchmark case, but others were a result of EPE reducing its local generation to accommodate the new XXXX generation. The table below shows the overload criteria violations that are a result of EPE reducing its local generation in order to purchase the total XXXX generation output, with all lines in service: Overload Criteria Violations for Task II, Scenario 2 Case With All Lines In Service LINE AREA / OWNER RATING (MVA) FLOW (MVA) % LOADING PICACHO-MIMBRES 115 kv line PNM 48.0 54.6 113.7 NEWMAN 115/345 kv transformer EPE 184.0 199.3 108.3 DIABLO 115/345 kv transformer #1 EPE 200.0 206.5 103.3 DIABLO 115/345 kv transformer #2 EPE 200.0 206.5 103.3 There were also numerous problems in the Scenario 2 case during contingency conditions in the EPE, Tri-State, PNM and TNMP areas. There were five (5) contingencies that were non-convergent in the Task II, Scenario 2 case. Again, the lack of MVAR support on the EPE 115 kv system as a result of EPE reducing its local generation to accommodate the purchase of XXXX generation caused the criteria violations. Voltage collapse during contingencies of the Amrad-Artesia 345 kv line, Arroyo-WestMesa 345 kv line, Caliente-Newman 345 kv line, Luna- Hidalgo 345 kv line, and the Amrad 115/345 kv autotransformer caused these contingencies to be non-convergent. The proposed solution to correcting these voltage collapses is to install Static Var Compensator (SVC) device(s) on EPE s 115 kv system. Previous studies have determined that the Diablo 115 kv bus is the best location for installing a SVC. A quick analysis determined that 310 MVAC of Transmission/Generation Feasibility Study -15- El Paso Electric Company

SVC support on the EPE 115 kv system will be required in order to eliminate the voltage collapse under the worst contingency in the powerflow analysis for this scenario. However, in the Q-V analysis (Section 6.0), it was determined that 510 MVAC support is needed on EPE s 115 kv system in order to meet the Western Systems Coordinating Council s (WSCC) voltage stability criteria. Another analysis will have to be performed to determine the optimal size and location(s) of the SVC(s) on EPE s 115 kv system. There were also various overload criteria violations during contingency conditions for Scenario 2. A few of the criteria violations flagged in this scenario also appear in the benchmark case. Those violations that appear in both this scenario and the benchmark are not due to the addition of the new XXXX generation, and therefore it is not XXXX s responsibility to correct these violations. However, there were many other criteria violations in this scenario that do not appear in the benchmark scenario. These violations are also a result of the addition of the new XXXX generation at the Hidalgo 345 kv bus. Therefore, it is XXXX s responsibility for any modification that is a required to correct these criteria violations. The table below shows the overload criteria violations for the Task II, Scenario 2 Case during contingency conditions that are due to the addition of the new XXXX generation: Overload Criteria Violations Task II, Scenario 2 Case During Contingency Conditions CONTINGENCY OVERLOADED LINE / TRANSFORMER AREA / OWNER % LOADING Hidalgo-Greenlee 345 kv line EL_BUTTE-PICACHO 115 kv line Tri-State 104.7 Luna-Hidalgo 345 kv line HIDALGO 69/115 kv XFMR TNMP 110.8 (With SVG in) EL_BUTTE-PICACHO 115 kv line Tri-State 139.0 CENTRAL-TURQUOIS 115 kv line TNMP 121.1 SILVER_C-TYRONE 69 kv line TNMP 108.6 BELEN_PG-BERNARDO 115 kv line Tri-State 105.8 BERNARDO-SOCORROP 115 kv line Tri-State 102.7 NEWMAN 115/345 kv XFMR EPE 100.7 Luna-Diablo 345 kv line NEWMAN 115/345 kv XFMR EPE 151.0 EL_BUTTE-PICACHO 115 kv line Tri-State 139.0 LUNA-MIMBRES 115 kv line PNM 113.5 CALIENTE 115/345 kv XFMR #1 EPE 106.5 CALIENTE 115/345 kv XFMR #2 EPE 106.5 CALIENTE-VISTA_# 115 kv line EPE 102.9 Newman-Luna 345 kv line EL_BUTTE-PICACHO 115 kv line Tri-State 156.9 DIABLO 115/345 115 kv XFMR #1 EPE 143.9 DIABLO 115/345 115 kv XFMR #2 EPE 143.9 LUNA-MIMBRES 115 kv line PNM 113.5 MESA_#-RIO_GRAN 115 kv line EPE 112.8 Arroyo 115/345 kv transformer NEWMAN 115/345 kv XFMR EPE 107.5 Caliente 115/345 kv transformer #1 CALIENTE 115/345 kv XFMR #2 EPE 118.5 Diablo 115/345 kv transformer #1 DIABLO 115/345 115 kv XFMR #2 EPE 156.1 EL_BUTTE-PICACHO 115 kv line Tri-State 104.1 Luna 345/115 kv transformer HIDALGO 69/115 kv XFMR TNMP 110.8 Newman 115/345 kv transformer DIABLO 115/345 115 kv XFMR #1 EPE 102.4 DIABLO 115/345 115 kv XFMR #2 EPE 102.4 Transmission/Generation Feasibility Study -16- El Paso Electric Company

As can be seen in the table above, there are numerous impacts due to the addition of the new XXXX generation in this scenario during contingency conditions. Some of the criteria violations flagged in this scenario also appear in the benchmark case and are not shown here. Those violations that appeared in both the benchmark and this scenario are not due to the new XXXX generation, and therefore are not XXXX s responsibility to correct. However, the criteria violations listed above are a direct result of the new XXXX generation at the Hidalgo 345 kv bus. Therefore, it is XXXX s responsibility for any modifications necessary to correct these criteria violations. For a detailed listing of all the criteria violations in the Task II Scenario 2 Case, please refer to the 2003 HS Task II Scenario 1 Case Table in Appendix 7. The proposed solutions for correcting the criteria violations in Task II, Scenario 2, with rough cost estimates, are listed below: TASK II, SCENARIO 2 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST 200 MVAC of Capacitors on EPE 115 kv System EPE $2,100,000 510 MVAC of SVC s on EPE s 115 kv System EPE $25,500,000 Additional 200 MVA Newman 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Diablo 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Caliente 345/115 kv XFMR EPE $4,500,000 Caliente-Vista 115 kv line upgrade (5.9 miles) EPE $1,200,000 Mesa-Rio Grande 115 kv line upgrade (2.17 miles) EPE $500,000 Central-Turquois 115 kv line upgrade (12 miles) TNMP $2,640,000 Silver City-Tyrone 69 kv line upgrade (11 miles) TNMP $2,420,000 Additional 24 MVA Hidalgo 115/69 kv XFMR TNMP $300,000 Belen-Bernardo 115 kv line upgrade (19 miles) Tri-State $4,180,000 Elephant Butte-Picacho 115 kv line upgrade (50 miles) Tri-State $11,000,000 Grants Tap-Laguna 115 kv line upgrade (20 miles) Tri-State $4,400,000 Bernardo-Socorro 115 kv line upgrade (28 miles) Tri-State $6,160,000 Luna-Mimbres 115 kv line upgrade (5 miles) PNM $1,100,000 Total Cost of Modifications for Task II, Scenario 2: $75,000,000 For a detailed listing of all the criteria violations in the Task II, Scenario 2 Case, please refer to the 2003 HS Task II Scenario 2 Case Table in Appendix 7. Transmission/Generation Feasibility Study -17- El Paso Electric Company

4.4 Task II Sensitivity #1 Case The 2003 HS Sensitivity #1 case was developed and analyzed in this study as requested by XXXX. This sensitivity modeled 505 MW of XXXX generation interconnected at the Hidalgo 345 kv Substation along with the following additional generation resources: 500 MW of generation interconnected at EPE s Newman 345 kv Substation; 135 MW of generation interconnected to EPE s Luna-Diablo 345 KV and Luna- Newman 345 kv lines; and, 600 MW of generation interconnected at the Luna 345 kv Substation. This additional generation represents the proposed generation to be interconnected to the EPE system by other entities and which are ahead of XXXX in EPE interconnection request queue. All of the generation output was modeled as a sale to California. This simulated a scenario where the new XXXX generation as well as other potential generation was all interconnected into the EPE system and all generation was sold to California. This sensitivity was performed in order to see the impacts that will occur on EPE s and other neighboring utilities systems if other potential generation is already interconnected into the EPE grid when the XXXX generation is installed. The addition of 505 MW of XXXX generation along with all the other potential interconnected generation resulted in some impacts to the southern New Mexico system under base case (all lines in service) conditions. First, the addition of all of the proposed generation, XXXX as well as others, and being sold to the west (California) causes a problem on the flow of the Arroyo Phase Shifting Transformer (PST). By contract, the PST is set to hold the flow on the WestMesa Arroyo (EP) 345 kv line to 186 MW from northern New Mexico to southern New Mexico in order to reduce impacts in the PNM area. The taps on the PST have an angle range of ± 34. With the additional proposed generation in southern New Mexico and being sold to California, the -34 limit is reached on the PST with the flow on the EP line at only 121 MW. This 65 MW reduction in flow on the EP line violates the contractual agreements between EPE and other southern New Mexico parties. In order to eliminate this impact and restore the ability of the PST to regulate up to at least 186 MW north to south, the PST taps would need to be changed to allow for an angle range of ± 45. Additionally, there were a few overload criteria violations in the EPE area with all lines in service that were a direct impact of the new generation. The table below shows the overload criteria violations for the Task II, Sensitivity #1 case with all lines in service: Transmission/Generation Feasibility Study -18- El Paso Electric Company

Overload Criteria Violations for Task II Sensitivity #1 Case With All Lines In Service LINE AREA / OWNER RATING (MVA) FLOW (MVA) % LOADING GREENLEE-HIDALGO 345 kv line EPE 717 720 100.5 ARROYO 345/115 kv transformer EPE 200 201.0 100.5 As can be seen in the table above, there were two impacts due to the addition of the new XXXX and other entity generation in this scenario with all lines in service. The Greenlee-Hidalgo 345 kv line and the Arroyo 345/115 kv transformer are both overloaded to 100.5% of their normal ratings with all lines in service. There were also criteria violations during contingency conditions in the EPE, Arizona, Tri-State, PNM and TNMP areas. The table below shows the overload criteria violations for the Task II, Sensitivity #1 case during contingency conditions: Overload Criteria Violations for Task II, Sensitivity #1 Case During Contingency Conditions CONTINGENCY OVERLOADED LINE / TRANSFORMER AREA / OWNER % LOADING Caliente-Newman 345 kv line ARROYO 115/345 KV XFMR EPE 105.4 Hidalgo-Greenlee 345 kv line EL_BUTTE-SOCORROP 115 kv line Tri-State 140.2 Luna-Hidalgo 345 kv line EL_BUTTE-SOCORROP 115 kv line Tri-State 106.5 HURLEY_#-LUNA 115 kv line TNMP 101.8 Springerville-Luna 345 kv line GREENLEE-HIDALGO 345 kv line EPE 119.2 EL_BUTTE-SOCORROP 115 kv line Tri-State 109.4 Springerville-Greenlee 345 kv line GREENLEE-HIDALGO 345 kv line EPE 101.2 Greenlee-Vail 345 kv line EL_BUTTE-SOCORROP 115 kv line Tri-State 109.4 CORONADO 500/345 kv XFMR Arizona 100.7 Amrad 115/345 kv transformer ARROYO 115/345 KV XFMR EPE 102.4 Arroyo 345/115 kv transformer ALAMOGCP-ALAMOTAP 115 kv line TNMP 102.6 Caliente 115/345 kv transformer #1 CALIENTE 115/345 kv XFMR #2 EPE 102.4 Luna 345/115 kv transformer ARROYO 115/345 KV XFMR EPE 108.8 As can be seen in the table above, there were some impacts due to the addition of the new proposed generation in this scenario during contingency conditions. The proposed solutions to correcting the criteria violations on EPE s system listed above are the following: Transmission/Generation Feasibility Study -19- El Paso Electric Company

TASK II, SENSITIVITY # 1 SYSTEM MODIFICATION COSTS FACILITY MODIFICATION AREA/OWNER ESTIMATED COST Change Taps on Arroyo 345 kv PST EPE $4,000,000 Additional 200 MVA Arroyo 345/115 kv XFMR EPE $4,500,000 Additional 200 MVA Caliente 345/115 kv XFMR EPE $4,500,000 Greenlee-Hidalgo 345 kv line upgrade (59.95 miles) EPE $13,800,000 Elephant Butte-Socorro 115 kv line upgrade (85 miles) Tri-State $18,700,000 Hurley-Luna 115 kv line upgrade (12 miles) TNMP $2,640,000 Alamogordo-Alamo Tap 115 kv line upgrade (4 miles) TNMP $880,000 Additional 500/345 kv XFMR at Coronado Substation Arizona * * An estimate for this project is not provided because EPE does not own any similar facilities and cannot make a reasonable cost estimate. XXXX is still responsible for this project and will need to mitigate costs with the Arizona utility owning the facility. Total Cost of Modifications for Task II, Sensitivity #1: $49,020,000 For a detailed listing of all the criteria violations in the Task II, Sensitivity #1 Case, please refer to the 2003 HS Task II, Sensitivity #1 Case Table in Appendix 7. 4.5 Task II Sensitivity #2 Case The 2003 HS Sensitivity #2 case was developed and analyzed in this study as requested by XXXX. In this sensitivity, XXXX requested that if there were any criteria violations in the Sensitivity #1 case, a Sensitivity #2 case be developed. This sensitivity case is the same as the Sensitivity #1 case, except that the XXXX generation is excluded, i.e., not modeled. All generation output from the other potential generators is modeled as a sale to California. The purpose of this scenario is to determine if the impacts seen in Sensitivity #1 are due to the other potential generation being interconnected into the EPE system or to the new XXXX generation being interconnected after the other generation is already interconnected. In other words, the sensitivity is performed to determine the impact to the system of the XXXX generation with the other generation already in-service. Without the XXXX generation in, there were no major impacts to EPE s system under base case (all lines in service) conditions. There were some overload criteria violations in the Arizona, PNM, and Tri-State areas, but these were the same violations reported in the Task I benchmark case. Therefore, these violations are not a direct result of the new potential generation and are not listed here. There were various criteria violations during contingency conditions in the EPE, Tri-State, PNM and TNMP areas. The table below shows the overload criteria violations for the Task II, Sensitivity #2 Case during contingency conditions: Transmission/Generation Feasibility Study -20- El Paso Electric Company