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Presentation ofSharyland Utilities 150 MW Back-to-Back HVDC Tie in
Mission-ReynosaOpportunities for power transactions on both sides
of the border
May 2008
ASDFG
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Miguel, Ca – Tijuana 230 KV 800 MW
Imperial Valley, Ca – La Rosita 230 KV
El Paso, Tx. – Cd. Juárez (2) 115 KV 200 MW total
Current Interconnections betweenMexico-US
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Current Interconnections betweenMexico-Texas
Eagle Pass– Piedras Negras 230 KV HVDC 36 MW
Laredo – Nuevo Laredo 230 KV VFT 100 MW
Falcon (Zapata)– Guerrero 138 KV 80 MW
Mission – Reynosa 138 KV HVDC 150 MW
Brownsville – Matamoros (2) 138 KV 120 MW
TEXAS
CFE - CREERCOT
MéxicoTexasGrid Operators
ERCOT = Electric Reliability Council of Texas
CFE = Comisión Federal de Electricidad
CRE = Comisión Reguladora de Energía
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Sharyland DC Tie
• Black start capability provides start up capacity to either sidein case of system collapse
• First of its kind to support commercial transactions between Texas and Mexico
• Commissioned in October 2007 – entire project went from concept to operational within five years.
• 150 MW High Voltage Direct Current (HVDC) Interconnection
• Links Electric Reliability Council of Texas (ERCOT) with the Mexican national grid operated by the Comisión Federal de Electricidad (CFE)
• Back to back technology allows two way flow of electricity, while acting as firewall to isolate disturbances
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Texas
Tamps.
N.L.
Coah.
Energy Flows(Northeast Mexico Customers)
MéxicoGulf of Mexico
Resource
Electricity Sales
Dispatch and wheeling (virtual)
Energy Service
Cust
Cust
Cust
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• Sharyland DC Tie is operational since October 2007. It has already been used for at least one emergency situation along the border
• 7 US-based entities obtained export permits from DOE that included Sharyland DC Tie as a possible cross-over point (refer to Appendix for names)
• FERC has waived its jurisdiction over to ERCOT for this service
• CRE and CFE are modifying the Interconnection Agreement template to accommodate the use of the DC Ties for commercial purposes. It is expected to have a final document ready by Summer 2008
• ERCOT & CFE are finalizing modifications to operating procedures and guidelines. It is expected that this is finished on or before Summer 2008
FERC = Federal Energy Regulatory Commission
ERCOT = Electric Reliability Council of Texas
DOE = Department of Energy
CFE = Comisión Federal de Electricidad
CRE = Comisión Reguladora de Energía
Current status of the Sharyland DC Tie
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How is it expected that the bilateral electricity trade will occur?
RecursosResources
Venta de ElectricidadElectricity Sellers
Servicios de Energía
Load Serving Entities
Compra de ElectricidadElectricity Buyers
Transacciones privadas y bilaterales
Private bilateral energy Transactions
Enlace Entidades para
despachoScheduling Entities
ClientesRetail CustomersBalancea la oferta y
demanda de energíaBalanced schedules of load and
resources
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Major requisites to use the DC Tie
* Published in Mexico Diario Oficial 3/17/2006
** Refer to annex for some cost examples
*** Customer has to pay all charges involved
2) CRE :Import permit• Use format CRE-
DGE-005* File for wheeling analysis **• Total demand
(MW)• Estimated annual
consumption (MWh)
3) CFE : 3) CFE : Sign back-up contract withSign interconnection contractInstall smart meter with remote comm. ports ***
1) Customer :1) Customer :Be an established legal entity in MexicoOr, via an established energy broker
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Steps for setting up to import electricity for ERCOT
• Find a energy procurement or wholesaler in Texas° Understand and negotiate Power Purchase Agreement
• Exporter is responsible to file for DOE export permit° Be it the end user that is filing it’s own permit, ° or use a wholesaler or broker with one (refer to the
appendix)• File for CRE import permit
° Site and load specific; must be done by Mexican entity° Understand wheeling and interconnection fees
• Sign interconnection agreement with CFE° CRE and CFE will determine feasibility of best route,
wheeling costs, terms of wheeling, back up conditions.° Function of specific Texas-based agreement with supplier
• ERCOT and CFE are the operators° All communications occur between QSE and ERCOT, and
ERCOT and CFE
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How the process works?
Purchasing and Selling Entity
Qualifying Scheduling Entity
QSE
CENACE/CFE
Electricity ImporterMexico
US
Mexico
Bila
tera
l Contr
act
Inte
rconnec
tion
Agre
emen
t
ERCOT
Aggregator or Broker
Com
mis
sion
Sal
es O
rder
Consu
ltin
g F
ee
DC Tie
1
4
3
2
5
1
6
7
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Summary of scheduling processacross the Sharyland DC Tie
(refer to figure in previous slide)
1. PSE generates a bilateral transaction within ERCOT or CFE2. PSE creates and submits an Electronic Tag (E-Tag) for
approval.3. CFE validates that there is indeed a contract in place with
PSE, validates information, and checks available capacityon Sharyland DC Tie
4. PSE arranges a market schedule in ERCOT to be sent tothe PSE’s QSE
5. QSE submits an obligation schedule to ERCOT6. ERCOT approves the E-Tag if it complies with its
scheduling requirements and if there is enough capacityacross the Sharyland DC-Tie
7. In the Day-Ahead, ERCOT matches the obligationschedule with the Non-ERCOT (or Mexico) E-Tags
Source: ERCOT DC-Tie Operations. ERCOT/CFE could change at any time and without prior notice the operating procedures, so this slide and the following are depicted for ilustration of how a typical commercial operation would occur. Please refer toERCOT and CFE website for most current information on the use of DC Ties.
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How is transmission reservedacross the Sharyland DC Tie?
• ERCOT requires:° Purchasing-Selling Entity (PSE) that wants to
schedule power into or out of ERCOT must be registered as a Qualified Scheduling Entity (QSE)1 orhave an agreement with a QSE
° The QSE can submit a bilateral schedule to use theSharyland DC Tie declaring the export as a QSE obligation as per ERCOT Protocols and OperatingGuides
• CFE requires:° A PSE wanting to schedule power into Mexico must
have an interconnection agreement with CFE, andmust have a valid import permit with the CRE
1 http://www.ercot.com/services/rq/qse/index.html
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What happens in emergencies?• ERCOT follows NERC specifications when:
° There is loss of generation or load° Reduction of Available Transfer Capacity° Mitigation of a system contingency
• ERCOT will use Last In, First Out (LIFO) forpriorizing curtailment
• IF CFE initiates curtailment:° They will contact Sharyland DC tie operator° They will also use LIFO to program curtailment
schedule
• ERCOT will not approve overbooking across theSharyland DC Tie
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Advantages of using the Sharyland DC Tie
• The Sharyland DC Tie is an open access facility
• It will enhance the power flows amongst the two regions, and will enable markets to take advantages of market asymmetries and regional price signals
• It is expected that power flows will be North to South during Mexico’s peak hours and South to North during ERCOT’s peak hours, particularly if margin reserves continue to be challenged by demand growth
• Because it is the first time this type of facility is available, there are tangible arbitrage opportunities that will be available for first movers. Eventually, though, the markets will become efficient
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The State of ERCOT• Markets are deregulated• Markets prefer trading with structured blocks,
example:° 7x24 or 5x4, etc° Unique load shapes or blocks are harder to price
• Typical price structure (US$/Mwh):° Energy: $75° + Ancillary: $4° + Line Losses:$2° = Total energy at Point of Delivery (POD) $81/Mwh
(not including wheeling, which typically varies around$1.5-2.5 Mwh)
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Pricing structure in ERCOT• Fixed Price
° Locks in ancillary, capacity & fuel components
• Heat Rate° Locks in ancillary & capacity, floats fuel costs
• MCPE° Locks in ancillary, floats capacity and fuel
costs
• Others° Would be based on unique load shapes
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Case Study
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North East Mexico Case Study
Facts:
• High end industrial customer with a CFE HS-L rate• Located within Monterrey, Mexico area• 38.5 MW of load• Peak hour consumption estimated at 27 GWh
Assumptions:
• Load factor of 0.9• Used March 2008 CFE Northeast region energy costs (published in
CFE website)• Estimated wheeling costs $ 1.7 USD / mwh *• 100% of total demand is considered as back up demand
* As per CRE wheeling simulator
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All-In peak hour price comparison
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
J F M A M J J A S O N D
ERCOTCFE
14.4% Reduction of Total Cost
45.4% of Peak Energy Cost Reduction
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• DC Tie service is an efficient, reliable and accepted way to reduce peak hour energy costs in the Northeast region (further wheeling analysis would have to be used to show how much savings accrue further south)
• Because it is the first time this type of facility is available, there are tangible arbitrage opportunities that will be available for first movers. Eventually, the markets will become efficient
• Texas energy supply is deregulated and there are a myriad of supply and structuring options that a customer has to choose from
Conclusions
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Contact Information:
Enrique J. MarroquinHunt Transmission Services, L.L.C.
1900 North Akard StreetDallas, Texas 75201
www.hunttransmission.com
ASDFG
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• Analysis and filing costs with CRE for import permits are a function of the load size:
MXN$ USD$ (approx)a) Up to 10 MW $69,620 $6,000b) Between 10 and 50 MW $90,853 $8,000c) Between 50 and 200 MW $134,343 $12,000d) Over 200 MW $568,229 $50,000
• An annual fee of $7,337 ($US 650) will be assessed every year to each permit holder as a means to cover CRE costs related to managing the permits
Annex:Filing costs with CRE (updated Feb. 08)
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DOE Export Permits• The following entities are shown to have a current DOE permit to
export electricity to Mexico. Please refer to DOE website forchanges to the names listed herein.
° AEP Energy Partners° CSW Power Marketing° Tex Mex Energy° Coral Power° Edison Mission Marketing & Trading, Inc (EMMT)° BP Energy Company° Duke Energy Trading and Marketing, LLC
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Annex:Screen shot of CRE wheeling cost simulator