Gulf Coast Power Asso

Spring Conferenc

Brad Jones

Vice President - Developme

April 6, 2006
The Texas Electric Market Is One Of The LaIn The World...

Source: EIA

Electricity consumption02; TWh

United States

Japan Canada Brazil 

Germany Te

Texas is the 11th biggest market in the 

Texas is the 11th biggest market in the 

3,600

1,457

971

780

513 510 487 415 352 344 3

China Russia India France United 

Kingdom
200,000240,000280,000320,000360,000

99 00 01 02 03 04 05 06E 07E 

Source: ERCOT (11-8-05)

...and Texas Economic Development Is Str

Historical Fo

2.1% A

Annual energy usage99-11E; GWh
Electric Competition Encouraged Massive New Generation ...

Capacity additions 90-04; GW1

1.7

0.2 0.6 0.8 0.4 0.5 0.2 0.7

5.5

1.1 1.0

90 91 92 93 94 95 96 97 98 99 00 

PURA 95(wholesale competition) 

90-97 Additions= 6 GW 98-04 Ad

1 GW = 1000 MW (1 MW serves approximately 1000 homes)

Source: Energy Velocity; NERC, ERCOT 2005 Report On Electric System Constraints / Needs and Planning Activities

SB7(retail 

competition) 

Competition is good: Generation companies ha

financial risks for new power plants sinc

Competition is good: Generation companies hav

financial risks for new power plants sinc
...And A Significant Increase In Market Effi

Texas market 99-05; MMBtu

The efficiency improvement would be similar to im

automobile gas mileage from 20 mpg to 

The efficiency improvement would be similar to im

automobile gas mileage from 20 mpg to 3

1 Heat rate is a measure of the efficiency of converting a unit of fuel (MMBtu) into a unit of electricity (MWh); l

Based on comparison of 7X24 ERCOT market heat rates

Source: Energy Velocity; NERC

Capacity additions not in rate base90-04; $ billions

2

16

90-97 98-04

770000%% 14

99 
Implied 2005 wholesale electricity prices; $ per MWh

44%44%

99 efficiency 

at 05 gas

05 efficiency at 

05 gas

99 efficiency at initial 

fuel-factor gas

1 Based on initial PTB fuel factor as of 1/1/022 Based on TXU Energy PTB underlying natural gas price as of filing approved on 10/28/053 Assumes heat rate = 14 MMBtu/MWh (99 ERCOT heat rate)4 Assumes heat rate = 7.8 MMBtu/MWh (05 actual heat rate)

Sources: Bloomberg, MegaWatt Daily

...Contributing To A Dramatic Impact On WPower Prices

44

161

90

Natural Gas $3.11/MMBtu1 $11.5342 $11.5342 

Efficiency (HR) 143 143 7.84 

Analogy: Annual cost to drive car (12,000 miles); dollars

750

1,758

1,005

Gasoline $1.25/gallon $2.93 $2.93 Efficiency (mpg) 20 20 35 

43%43%
37

51

9 21

Wind and 

Other Renewables

Coal

Natural Gas

18

20

9 

Natural Gas

Nuclear

Hydro and Other

Renewables 

Electric fuel mix – Texas Percent; MWh

*Source: Energy Information Administration, Annual Energy Review 2002

Electric fuel mix – UPercent; MWh

Nuclear

Other 

Texas Is Highly Dependent On Natural Gas Commodity...

Like assets in a 401K fund, fuel supply should have an 

Like assets in a 401K fund, fuel supply should have an 
... and No New Coal Plants Have Been Buil1992

0

5,000

10,00015,00020,00025,00030,00035,000

Natural Gas Wind 

Installed Generation (MW) Installed

Proposed
16.0 16.3

30.4

35.6

26.7 25.2

16.9

13.6 1

99 00 01 02 03 04 05 06E 0

ERCOT Reserve Margins Are Falling And WFuture Minimum Reserve Margins Without 

Falling below the minimum reserve margin puts 

Falling below the minimum reserve margin puts r

Minimum Reserve Margin = 12.5%

Source: “Report on Existing and Potential Electric System Constraints and Needs” – ERCOT, October 1, 2005

Forecasted reserve margins99-10; Percent
Coal Creates An Opportunity To Diversity TThough Builders Must Invest Large AmounWith Uncertain Returns 

Texas and Coal:

 5th largest coal-producing state in 

the US 

 200 years of lignite reserves $10 billion annually in total 

expenditures

 $300 million annually in state and 

local revenues as well as royalties to landowners

 Provides over 33,000 permanent jobs
To become the 

leader In

clean coal 

power

To become the 

leader In

clean coal 

power

Utilize TXU’s

structurally 

advantaged assets

for low cost/ 

quick entry

Utilize TXU’s

structurally 

advantaged assets

for low cost/ 

quick entry

Expand 

existing sites

through a

standardized

reference plant 

Expand 

existing sites

through a

standardized

reference plant 

1 2 

TXU Is Exploring Multiple Strategies For ClExpansion

Objective:Strategies:

 Difficult to tailor to all 

existing opportunities

 Limited assets

Challenges

 Significant potential 

cost and time savings (learning curve)

 Shared infrastructure

 Expedited access to 

existing equipment and resources 

Advantages
TXU Has Announced Two Texas New Build 

Sandow Unit 5Rockdale, Texas

Oak Grove Steam Robertson Count

TXU has announced the potential for large sca

TXU has announced the potential for large scal

Air permit status Primary fuel Resume constructCommercial operaInstalled capacity Key statistic

Air permit status CompletePrimary fuel TX LigniteResume construction date April 06Commercial operation date Oct 08Installed capacity (MW) 600

Key statistic
0.00.20.40.60.8

SD OH MD KY DE SC IL LA VT ME

TXU’s New Plants Will Be Among The CleaPlants In The US In One Of The US’ Cleanes

Oak Grove and Sandow 5 will operate with the bes

technology, reinforcing Texas’ proven environme

Oak Grove and Sandow 5 will operate with the best 

technology, reinforcing Texas’ proven environmen

Source: EPA Acid Rain database and EIA

0.8

4.4

0.3

1.1

Average emission 70-15; Lbs/MMBtu

SO2NOX

US Avg

1970

US Avg

2004

SO2NOX 

Texas has the 6th cleanest emissions rate and the cleanest of all states that use coal

National Average

Average emission rates 04; Lbs/MMBtu
Oak Grove’s Impact on the Brazos Valley a

Gross Product $2.78B $3.26B $299M 

$1.93B $2.23B $170M 

PersonalIncome

Retail Sales $793M $853M $67M 

$5.61B $6.72B $859M 

Total Expenditures

3,062

Permanen

48,092

Person Years

42,934

Person Years Employment

Brazos Valley Texas Brazos V

Construction Phase O

Economic Impact of Construction, Development an

Texas’ coal industry contributes ...

$10.5B in annual total expenditures $3.5B in annu$2.1B in annual personal income 33,197 perma
Oak Grove Has a Long History in Central T

Oak Grove was originally named the Twin Oak project and was authorized 

planned commercial operation date in 1978 (Unit 1) and 1979 (Unit 2). 

Major events

May 1973 Joint memorandum of agreement with Alcoa to jointly con

plant.

Nov. 1976 Project delayed two years (first of several delays)

Feb. 1978 Engineering re-startedSept. 1977 EPA issued air construction permit (PSD)Feb. 1979 Plant construction beganOct. 1984 TXU purchased Alcoa’s lignite properties and interest in th

Sept. 1987 Construction and engineering halted due to multi-year pro

complete, Unit 1 construction 20% complete)

Sept. 1989 Engineering re-startedNov. 1992 Construction and engineering halted, project delayed inde

Dec. 1994 Air permit application withdrawnJuly 2005 Project was re-initiated under the new name Oak Grove ut

equipment and the former Forest Grove Unit 1 equipment

July 2005 TXU applied to TCEQ for new air permit

1970 1980 1990 20
Oak Grove Site Summary

Site – Located 40 miles southeast of Waco, Texas in Robertson, 

Limestone and Falls Counties. Approximately 4,230 acres (1,900 acres for the plant and ancillary facilities, and 2,330 acres for the cooling reservoir.

Rail Access – Rail spur connection to Union Pacific Railroad is 

installed and operational.

Cooling Reservoir – 30,300 acre-ft., normal pool level is 401 ft 

elevation, current pool level is maintained at 389 ft. elevation, 12 feet below normal. Make-up water provided from Lake Limestone via 12 miles of 42” concrete pressure pipe.

Lignite Leases – A total of 4 different deposits covering 33,000 

surface acres. Estimated quantity of lignite is 485,000,000 tons with delivered heat contents ranging from 6,700 to 7,000 Btu/pound.

Water Rights Permits – Permit (

construction of the dam, the usconsumptive use of 13,100 acre08-74 and amended 07-14-81) a25,000 acre-ft. per year from Lawith the Brazos River Authority from Lake Limestone and the B

Plant Design – Two 860 MW lign

generating units with wet flue g

Equipment Available* - Boilers 

boiler feed pump turbines (4), bheaters (8), miscellaneous equiswitchgear, make-up water pumpiping. All turbine-generator eqand turbine equipment are in st
Oak Grove Is A Structurally Advantaged As

Previous site construction includes partial erection of unit 1 boiler structure and cooling lake.

Existing equturbine sets, 

equipment.

345 KV Transmission switching station located within plant property.

Approximateincludes lignfuel the plan
Oak Grove Will Utilize The Best Available CTechnology...

NH3 Injection

FD Fans Fly Ash by-product

Fabric Filters Fabric Filters SO2

Reduction

Wet-FGD

....

Air Heater

SCR

FG

ID Fans

NO

X

The boiler is designed to minimize the formation of nitrogen oxides (NOx) with low NOx burners and overfire air Also, combustion gases will be treated for the first time on a lignite unit with selective catalytic reduction (SCR) technology. Combustion exhaust passes through a catalyst material where NOx is converted to inert nitrogen SCR removal efficiency will be about 75% removal with the SCR (after about a 50% reduction with the low NOX burners).

Particulate

After the SCR, flue gas passes through a fabric filter baghouse that catches over 99.9% of particles (coal ash) The fabric filters consist of tens of thousands of 30 foot long bags

Scrubb

After the baghouses, fthrough a wet limestotower that removes ovsulfur dioxide. This is called the wet fdesulfurization unit (F

Mercury

Oak Grove will be the first lignite unit to remove mercury with carbon injection. Carbon is injected into t

Carbon covers the filter and absorbs the mercury.Over 75% of the trace mercury in the fuel will be removed 
...to Achieve Today’s Improved Air Quality 

0

5,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

SO2 NOx 

Twin Oak (Then) Oak 

Tons per Year
Oak Grove Enjoys the Support of the Comm• Local community support for Oak Grove project – reso

– Robertson Co. Commissioner’s Court– Franklin Chamber of Commerce– Franklin ISD– City of Franklin– Bremond Chamber of Commerce– City of Bremond– Hearne Chamber of Commerce– Hearne Economic Development Corp.– City of Calvert

• Held Positive public meetings in Franklin

– TXU Power Town Hall meeting on September 1, 2005

– TCEQ Public Meeting on November 15, 2005

• Hired local community representatives • Office space opened in downtown Franklin• Developed the public web site www.reliabletexaspower