all forecast information reflects planning assumptions as of december 2005. entergy system strategic...

All forecast information reflects planning assumptions as of December 2005.

Entergy System Strategic Supply Resource PlanPlan Description

(For the planning period 2006 – 2015)

Appendix H

The statements contained in this Appendix are made subject to the Reservation of Rights set forth in the RFP and subject to the terms and acknowledgements set forth in the Proposal Submission Agreement.

2006 LONG-TERM RFP - April 17, 2006

2


Overview

1. Planning Framework

2. Strategic Overview

3. Current Portfolio

4. Load Forecast

5. Retirement Strategy

6. Overview of Plan for 2006 – 2015

Contents

This document describes the Entergy System’s (utility) Strategic Supply Resource Plan (SSRP). As described in this document, the SSRP is based on principles and planning objectives adopted by the Operating Committee and provides a long-term resource strategy that will transform the Entergy System’s generation portfolio.



3


Supply Objectives

Part 1 – Planning Framework

Risk Mitigation – Supply Diversity – Mitigate the exposure to major supply disruptions that could occur from concentrated or systematic risks, for example outages of a single generation facility.

The supply needs that determine the resource requirements of the Operating Companies are driven by six basic resource supply objectives:

Provide adequate resources to meet customer peak demands with adequate reliability.

Provide low cost base load resources to serve base load requirements (the firm load level that is expected to be exceeded for at least 85% of all hours per year).

Reliability

Provide efficient, dispatchable load following resources to serve the time varying load shape levels that are above the base load requirement load levels.

Provide a generation portfolio that is more efficient and avoids an over-reliance on aging resources.

Mitigate the exposure to price volatility associated with uncertainties in fuel and purchased power costs.

Production Cost – Base Load Supply Requirements

Risk Mitigation – Supply Diversity

Production Cost – Load Following Supply

Requirements

Generation Portfolio Enhancement

Risk Mitigation – Price Stability



4


Planning Horizon

The SSRP addresses a long-term planning horizon. Other processes address tactical and annual planning supply needs.


Identifies resources needed and expected operating roles for the upcoming (or current) operating year.

Annual Planning Process

Addresses long-term planning horizon. Provides indicative direction for needs over a ten year horizon. Specific resource timing and resource participation will be determined at the time of resource commitment.SSRP

Identifies resources needed and expected operating roles for each resource for the forthcoming three year business planning period.

Tactical Planning Process



5


Steps in Determining Supply Resource Needs


Determine the type of generation needed by the System to serve load shapes at the lowest reasonable cost given current expectations and supply options.

MIX

TYPE

2.

– Total resource requirements for 2006 exceed long-term controlled resources by over 2000 MWs. Needs are increasing with load growth.

– To solely address peak period reliability, resource needs could be met by annual or seasonal purchases of peaking/reserve capacity.

Determine portfolio mix of generation resources that is consistent with planning objectives and practical constraints.

Determine the amount of capacity needed by the System to meet peak period reliability.

– CCGT or solid fuel resources needed to address base load supply requirements.

– Additional CCGT and CT resources are needed to serve load-following requirements.

– Power Purchase Strategy guides amount of power purchase and mix of power purchase products

– Long-term LOU resource decisions (timing, fuel type, location, OPCO participation)

AMOUNT

3.

1.



6


Load shape determines functional requirements.

≥ 50 % of hours< 85% of hours

≥ 85% of hours

Load Shape

Generation Capacity Requirements

Hours

MW

Reserve

High Capacity Factor Load-Following

BaseLoad

Low Capacity Factor Load-Following

Load-following represents 50% of capacity, but only approximately 20% of energy.

Baseload energy is 80% of total system supply.

> 0% of hours< 50% of hours

Resource plans consider load shapes in determining the generation requirements needed for each generation supply role.




7


Principles and Process for Participation Decisions

– Resource acquisitions during the operating year are generally for system reliability or production cost benefits.

– Because the Annual Plan provides for adequate resources to meet the expected system needs, additional resources acquired during the operational year generally will be shared based on responsibility ratio.


Process

Overall Guiding Principles

Participation in Purchased Power in Annual Supply Plan

Participation in Power for System Needs Acquired During Operating Year

Long-term Resource Participation Decisions

Each operating company should support a sufficient amount of generation for each supply role used to serve its load shape.

Resource participation decisions for new resources should consider whether each operating company is supporting capability that can be expected to be available for coordinated economic dispatch sufficient to meet its peak load plus provide a reserve of at least 10% (capability does not include MSS-1 reserves).

– Resource participation decisions are made at time of the commitment to the resource.

– Preliminary (for planning purposes and subject to change) projected resource participation for future resources that are included in the SSRP are made at the time the resource plan is approved.

– The Operating Committee determines participation in new resources considering each Operating Company’s need for the new resource’s expected supply role.

– Resource participation decisions are made at the time of the commitment to the resource.

– The Operating Committee can specifically assign resources to address the specific needs of the operating companies.

– After specific resource participation decisions are made, additional resources are allocated based on factors established by the Operating Committee.



8


Factors in Operating Company Participation


Supply Risks

Relative Total

Production CostPeak Load

+10% Reserve Capacity

Deficit

Baseload Capacity

Deficit

Load-Following Resource Capacity

Deficit

Responsibility Ratio

Resource participation also will consider supply resource diversity, seeking to reduce the reliability and price risks resulting from and Operating Company’s exposure to single contingency generation outages or from its exposure to generation supplied by one fuel type.

Long-term total production cost trends for each Operating Company considering both the overall production costs and the component production costs for each major supply role.

Each Operating Company’s resource capability position with regard to a standard seeking to assure that each Operating Company supports its proportionate share of the resources that are expected to be used in the coordinated dispatch in the System’s annual operating plan. The standard seeks to determine participation in new resources by considering those companies who have a “Peak Load +10% Reserve Capacity Deficit,” based upon the Operating Company’s aggregate existing resources (excluding MSS-1 purchases) that are less than its peak load plus a minimum reserve level of 10%.

In determining the participation in new base load resources, each Operating Company’s resource position with regard to having a sufficient base load generation resources to serve its base load requirements. Participation in new base load resources would consider the “Baseload Capacity Deficit” defined as the shortfall in base load generation required to serve the firm load level that is expected for greater than 85% of annual hours.

In determining the participation in new load-following resources, each Operating Company’s resource position with regard to having sufficient load-following resources to serve its load requirements. Participation in new load-following resources would consider the amount of each Operating Company’s CCGT equivalent load-following resources or other load-following resources that are expected to be regularly utilized in the system’s coordinated dispatch to serve the System’s load following requirements.

After each Operating Company has attained its proportionate share of the System’s total resources and its appropriate share of each type of generation resource required for the various supply roles, participation in any additional resources acquired for System purposes will be allocated on responsibility ratio.

Operating company participation decisions consider the following factors.



9


Part 2 – Strategic Overview

Long-Term

Resource Strategy

Strategic Initiatives

Long-term Controlled Resource Strategy

Purchased Power

Strategy

Dependence on purchased power required to meet reliability requirements should not exceed amounts that could practically be built and financed within a three to five year periods.

Purchases for economic reasons are not limited. Implement a “portfolio approach” limited-term purchase power

procurement program.– “Laddering” of contract expiration dates.– Mix of supply roles.

CCGT resources are anticipated for all OPCOs and each planning region to address load following needs.

Several OPCOs will require additional CCGT or solid fuel LOU resources to address long-term base load supply needs.

Near term LOU resources are expected to be provided primarily from resources that are already operational or nearly complete

Develop self-supply “options” that could be implemented within normal construction periods, if necessary, to limit exposure to power purchases or address potential long-term reliability issues within particular locations such as Amite South or WOTAB.

The SSRP calls for transforming the Entergy System’s generation portfolio over the upcoming ten-year planning period through two broad initiatives:



10


Purchase Power Strategy Overview

Dependence on purchased power required to meet reliability requirements should not exceed amounts that could practically be built and financed within a three to five year period.

─ Excludes long-term controlled (LOU) capacity.─ Purchases for economic reasons are not limited.

Implement a “portfolio approach” limited-term purchase power procurement program.

─ Mix of short-term products with varying contract durations resulting in a “laddering” of contract expiration dates (multi-year contracts expire at various times over three year period.)

─ Mix of products that support needs for base load and load following supply roles.


Strategic Objectives

The System’s purchase power strategy seeks to accomplish the following strategic objectives:

Maintain a diversified portfolio of purchased power contracts.

Provide a “self controlled” alternative supply strategy for the provision of the life-of-unit resources that can be readily compared to other opportunities to acquire long-term resources.

Maintain an on-going RFP process to identify potential supply alternatives for each generation supply role.

Limit exposure to short and mid-term purchased power price uncertainty.

Strategy



11


Anticipated Reliance on Purchase Power

A significant portion of the resources in the plan will be provided by short-term purchases. Depending on the particular year in the SSRP, the System expects to acquire approximately 800 to 1600 megawatts (MW) of resources from short-term power purchases consisting of a variety of products. Each year the System expects to purchase several hundred MW of dispatchable load-following generation unit capacity from combined cycle gas turbine (“CCGT”) or combustion turbine (“CT”) generators, pursuant to multi-year unit capacity purchase agreements (“MUCPAs” or “MUCCOs”) with terms of one to three years. In addition to multi-year unit capacity purchases, the System expects to make seasonal and annual power purchases utilizing products such as call options, firm block-energy or liquidated damages products, or other purchased power resources through the use of multiple procurement processes including formal Requests for Proposals (“RFPs”).


Purchase Power Products Include

• Long-term (life-of-unit) resources including PPAs and acquisitions

• Limited-term products (one to three years)

• Seasonal products

• Monthly RFP purchases

• Weekly RFP purchases

• Daily purchases



12


Energy Mix reflects reliance on purchase power.

Reliance on purchased power is reflected

in the changing energy mix over recent years.

2005 Supply Mix (% of total energy)

Nuclear33%

Coal12%

Gas/Oil20%

Purchases35%

Hydro0%



Nuclear31%

Coal12%

Gas/Oil37%

Purchases20%

Hydro0%

GWH 2000 2005Nuclear 37,059 38,432 Coal 14,799 13,502 Gas/Oil 43,073 23,049 Purchases 24,188 39,718 Hydro 133 97 Total 119,252 114,799



13


Changing Energy Sources

6 Year TrendGeneration by Source and Purchased Pow er

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2000 2001 2002 2003 2004 2005

Year

GW

H

Nuclear

Coal

Gas/Oil

Purchases


GWH 2000 2001 2002 2003 2004 2005Nuclear 37,059 41,038 40,917 40,628 41,710 38,432 Coal 14,799 14,586 13,743 14,057 15,359 13,502 Gas/Oil 43,073 38,873 35,195 22,797 22,619 23,049 Purchases 24,188 19,466 27,318 37,687 37,967 39,718 Hydro 133 154 164 115 151 97 Total 119,252 114,117 117,337 115,284 117,806 114,799



14


Self-supply Options

In order to mitigate the exposure of the Operating Companies to purchase power supply risks and cost volatility, the System plans to identify and evaluate real executable resource proposals that would allow for the possibility to construct , if needed and economically justified, new capacity through self-build options

– Such self-supply options would be executable within a three to five year window.

– These self-build options include participation in new CCGT/cogeneration capacity, unit repowering and/or upgrades at existing generation sites.

Self-supply options will be compared against market alternatives that provide comparable functionality.




15


Portfolio Mix for Long-term Resource Additions

The life-of-unit (LOU) resources, whether PPA or acquisition, that will be added over the ten-year planning horizon are expected to consist primarily of CCGT and solid fuel resources.

– CCGT resources are anticipated for all OPCOs and each planning region to address load-following needs.

– Several OPCOs will require additional CCGT or solid fuel LOU resources to address long-term base load supply needs.

– Near term LOU resources are expected to be provided primarily from resources that are already operational or nearly complete

– The System will develop self-supply projects to provide “options” that could be implemented within normal construction periods, if necessary, to limit exposure to power purchases or address potential long-term reliability issues within particular locations such as Amite South or WOTAB.




16


Overview of Major Resource Additions


Purchased Power

Continue reliance on a diversified purchase power portfolio consisting of 2000 – 5000 MW of short and longer term purchase power products.

Load Following

Acquire or build a minimum of 2-4 additional CCGT/CT plants to provide “core” load following capability

– System has daily load swings of 5000-9000 MW; a minimum of 2000-3000 MW CCGTs needed for operational flexibility and to limit exposure to purchase power prices

– Need to replace current 35+ year old conventional gas units currently providing this role– Need to provide each OPCO with at least 1 long-term CCGT in long-term portfolio– New capacity to be located primarily in Southern portion of the System (Amite South, WOTAB)– Likely to include some self-supply projects in transmission critical regions (Western WOTAB, Amite

South) to reduce production costs associated with minimum run levels for units whose commitment is required for RMR and load following

Build or acquire a minimum of 2000 MW of new base load generation – presumably solid fuel given current gas price expectations

– Needed in both Amite South and WOTAB regions– Multiple projects over 2010 – 2015 period– Need a portfolio of projects diversifying generation technology and fuel type– Diversify carbon based technology to consider eastern coal and coke as alternatives to western coal

and rail transport exposure– Clean conventional pulverized coal expected to be part of the mix at new large (800 – 1600) MW sites

but will take 5 – 7 years to develop– Coal and IGCC are longer-term options (2013 – 2015+)– 300 – 500 MW CFB projects provide earlier COD and opportunity to diversify fuel sources and get

resources in multiple regions maximizing use of early capital

Base Load

Self-supply Create self-supply options that can be executed if needed



17


Strategy for Stable Fuel Resources

The SSRP seeks to provide each Entergy Operating Company with long-term controllable stable fuel price capacity resources that should move each Entergy Operating Company toward the objective of having resources that could provide its base load firm energy requirements from resources with highly predictable fuel prices. Stable fuel price capacity resources are expected to include solid fuel (i.e. coal or nuclear) capacity, renewable generation resources, or highly efficient gas-fired generation with fixed price gas price contracts with a term of at least ten years.




18


Entergy System 2006 Resource Requirements and Capability

Part 3 – Current Portfolio

Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for the Entergy System with long-term controlled resources.

0

5,000

10,000

15,000

20,000

25,000

0% 20% 40% 60% 80% 100%

10,328

7,452

1,735

1,042

3,541 10,469

5,006

3,681

3,4731,439

0

5,000

10,000

15,000

20,000

25,000

Resources (MW) 7,452 1,042 10,469 3,681 22,644Requirement (MW) 10,328 1,735 3,541 8,479 24,083Excess / (Deficit) (MW) (2,877) (693) 6,928 (4,798) (1,439)

TotalBase Load HCFLF Intermediate Peaking Plus Reserve

Load Shape Requirements (MWs) Capacity (MWs)

Requirements Existing Portfolio



19


Entergy Arkansas, Inc. 2006 Resource Requirements and Capability


Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for EAI with long-term controlled resources.

0

1,000

2,000

3,000

4,000

5,000

6,000

0% 20% 40% 60% 80% 100%

2,299

3,068

440

715547

1,581 1,124

504800

0

1,000

2,000

3,000

4,000

5,000

6,000

Resources (MW) 3,068 0 547 1,124 4,739Requirement (MW) 2,299 440 715 2,085 5,539Excess / (Deficit) (MW) 769 (440) (168) (961) (800)






20


Entergy Gulf States, Inc. 2006 Resource Requirements and Capability


Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for EGSI with long-term controlled resources.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0% 20% 40% 60% 80% 100%

3,779

1,408

590

422

1,091

3,035

1,3891,972

685 696

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Resources (MW) 1,408 422 3,035 1,972 6,836Requirement (MW) 3,779 590 1,091 2,073 7,532Excess / (Deficit) (MW) (2,371) (168) 1,944 (101) (696)






21


Entergy Louisiana, LLC 2006 Resource Requirements and Capability


Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for ELL with long-term controlled resources.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0% 20% 40% 60% 80% 100%

2,597

1,672

391

141

9343,879

1,130

306

505

441

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Resources (MW) 1,672 141 3,879 306 5,998Requirement (MW) 2,597 391 934 1,635 5,557Excess / (Deficit) (MW) (924) (250) 2,945 (1,329) 441






22


Entergy Mississippi, Inc. 2006 Resource Requirements and Capability


Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for EMI with long-term controlled resources.

0

1,000

2,000

3,000

4,000

5,000

0% 20% 40% 60% 80% 100%

1,279852

332

480

619

2,253

1,152

214338

79

0

1,000

2,000

3,000

4,000

5,000

Resources (MW) 852 480 2,253 214 3,799Requirement (MW) 1,279 332 619 1,491 3,720Excess / (Deficit) (MW) (427) 148 1,634 (1,277) 79






23


Entergy New Orleans, Inc. 2006 Resource Requirements and Capability


Intermediate

Peaking

Base

Reserves

Purchases

High CF LF

The following chart compares 2006 functional requirements for ENO with long-term controlled resources.

0

200

400

600

800

1,000

1,200

1,400

1,600

0% 20% 40% 60% 80% 100%

281

452

105

142

755

187

65

71

486

0

200

400

600

800

1,000

1,200

1,400

1,600

Resources (MW) 452 0 755 65 1,272Requirement (MW) 281 105 142 258 786Excess / (Deficit) (MW) 171 (105) 613 (193) 486






24


Gas Correlation

Gas Correlation in terms of Capacity

Coal10%

Hydro3%

Nuclear22%

Gas & Oil65%


*Capacity based in 2005 Summer Ratings


Nuclear33%

Coal12%

Gas/Oil20%

Purchases35%

Hydro0%



25


Age of Fleet


Age & Efficiency of ETR Gas / Oil Generation

Gas & Oil Units (MW) Completing Years of Service

24-3015%

30-3539%

>3546%

Gas & Oil Units (MW) By Heat Rate (Btu/kWh) (Billing)

10,000-11,00031%

11,000-12,00033%

>12,00036%

Gas & Oil Units (MW) By Heat Rate (Btu/kWh) (IHR)

9,000-10,00045%

10,000-11,00039%

11,000-12,0009%

>12,0007%



26


Annual Peak Load Forecast

Part 4 – Load Forecast

The peak load forecast establishes system reliability requirements.

Post Katrina

20,000

21,000

22,000

23,000

24,000

25,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

MW

Annual Peaks

Firm Peaks

Forecast Year Annual Peak Firm Peak 2006 21,103 20,6102007 21,478 21,0072008 21,921 21,4382009 22,197 21,7212010 22,661 22,1742011 22,902 22,4312012 23,373 22,8952013 23,894 23,4052014 24,360 23,8682015 24,643 24,167

2006 Business Plan Annual and Firm Peaks (MW)



27


Retirement Strategy

The operating companies have evaluated and continue to evaluate potential unit retirements on an on-going basis. The decision whether to retire an existing unit is an economic one that requires comparison of the forward cost of the existing unit with the forward cost of alternatives.

Many of the System’s older gas and oil-fired units run at low capacity factors. At the same time these units require relatively low forward spending to keep available. Consequently, these units serve the peaking / reserve role in an economic manner. They provide economic sources of capacity.

Part 5 – Retirement Strategy



28


Overview of Plan

Plan identifies preliminary expectations regarding timing and location (planning region) for new long-term resources, and expected participation in each resource (to be finalized by the Operating Committee at the time commitment to resource is made).

Amounts and timing reflect the Entergy System needs.

Preliminary resource participation based upon consideration of Operating Company supply requirements to meet load shape and expected business risks and conditions.

Part 6 – Overview of Plan 2006 - 2015



29


Summary of Plan Resources

Part 6 – Overview of Plan 2006 - 2015

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015DEMAND & OWNED RESOURCES

Total Reliability Needs 24,476 24,956 25,472 25,917 26,449 26,760 27,313 27,919 28,466 28,820

Controlled ResourcesNuclear 4,561 4,526 4,526 4,449 4,449 4,449 4,449 4,449 4,449 4,449Coal 2,228 2,219 2,219 2,188 2,188 2,188 2,188 2,188 2,188 2,188Gas/Oil 13,729 13,917 13,917 13,943 13,943 13,398 13,398 13,398 13,398 13,398Hydro 229 229 229 229 229 229 229 229 229 229

Total Provision for Resources 20,747 20,891 20,890 20,809 20,809 20,264 20,264 20,264 20,264 20,264

Total Expected Procurement 3,729 4,065 4,581 5,108 5,641 6,496 7,050 7,656 8,202 8,557

SUPPLY PLANLong-Term Resources

Definitive Acquisitions 1,198 1,198 1,198 1,198 1,198 1,198 1,198 1,198 1,198 1,198Definitive PPAs 613 613 613 613 633 633 633 633 633 633Planned Long-Term Additions

Load Following 0 480 480 830 830 1,180 1,660 2,140 2,620 2,620Solid Fuel 156 200 200 308 308 824 1,324 1,324 1,324 1,324

TOTAL LONG-TERM 1,967 2,491 2,491 2,949 2,969 3,835 4,815 5,295 5,775 5,775

Limited -Term ResourcesDefinitive Limited-Term Resources

Load Following 1,209 479 300 0 0 0 0 0 0 0Peaking 460 210 210 0 0 0 0 0 0 0Annual Block / Call Options 50 100 100 100 100 100 100 100 100 100

Planned Limited-Term ResourcesLoad Following 480 0 50 450 950 950 550 650 700 1,100Peaking 0 0 0 500 500 500 500 500 500 500Annual Block / Call Options 700 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

TOTAL LIMITED-TERM 2,899 1,789 1,660 2,050 2,550 2,550 2,150 2,250 2,300 2,700

TOTAL RESOURCES 4,866 4,280 4,151 4,999 5,519 6,385 6,965 7,545 8,075 8,475

all forecast information reflects planning assumptions as of december 2005. entergy system strategic...

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