2013/14 Cold Weather Operations

1. May 15, 2014 NYPSC Technical Conference 2013/14 Cold Weather Operations

2. One of the Nation’s Largest and Most Diverse Generation Portfolios Oil 23% Renewables Gas 31% Solar 8% Wind 3% East West Coal 45% Gas 90% Coal 31% Gas 54% Nuclear 7% Represents net capacity ownership Totals may not sum to 100% due to rounding EME acquisition included NRG Yield: Conventional 1033 MW (included) Renewable 414 MW (included) Thermal 1,346 MWt (not included) Renewables Wind 8% Gulf Coast National Footprint with Diverse Fuel & Merit Order Units

3. New York Generation • NRG has over 4000 MWs in New York. • Both in-city, Lower Hudson Valley, and rest-of-state units. • Arthur Kill – Station Island – 850+ MW Natural Gas • Astoria – Queens – 525 MW Natural Gas and Oil • Bowline – Haverstraw – 750+ MW Natural Gas and Oil • Dunkirk – Dunkirk – 75 MW Coal • Huntley – Tonawanda – 380 MW Coal • Oswego – Oswego – 1628 MW Oil • The units are comprised of a diverse fuel mix: • Over 2000 MWs of natural gas; • Close to 2500 MWs of oil; and • Over 400 MWs of coal. • Of the gas and oil plants, two are dual-fuel unit and one is oil (1628 MW).

4. Cold Weather Operations • Overall, the system worked very well. • Spikes in gas prices have revealed a few cracks in our energy markets, but the foundation remains strong. • Cold snap reflected a desire for a higher level of reliability than the established targets upon which the markets are operating. • The market is working to attract more efficient least cost generation but there are other needs for fuel diversity and storage to address the risks of just-in-time delivery of an all gas system that are not being addressed. • Fuel diversity was critical to keeping the lights on. • Oil units had record runs and were critical to system reliability.  • Natural gas curtailments and high natural gas costs led to unprecedented run times for oil units during NRG’s ownership. • Recommended changes: • Incent Dual-Fuel Units to retain and enhance oil firing capability. • Break up weekend natural gas packages.

5. NRG’s Winter Preparations Worked • Fleet-Wide Comprehensive Response Contributed to Reliable Operations • Pre-winter: NRG built up on-site liquid fuel. • Plant Operations were stressed as cold weather operations persisted into multiple weeks: • Employees from less affected areas outside the region were sent East to provide additional coverage and rapid response to any issues. • Senior Plant Operations were deployed on-site during cold snap. • Plants implemented “Conservative Operation & Maintenance Alerts.” • None of NRG’s New York units ran out of natural gas or liquid fuel. • NRG experienced one curtailment in New York due to challenges faced by the gas system, but there was natural gas at the plant.

6. Cold Weather Observations: Oil & Other Liquid Fuels Critical to Keeping the Lights on in Winter 2014: • Burned over 1.1 million barrels of liquid fuel in January 2014. • Compared to ~800,000 barrels in all of 2013. • Burned approx. 8.5 million gallons of liquid fuel at Astoria, Bowline and Oswego in January 2014 as compared to 7.5 million gallons for all of 2013. • From January 1, 2014 to April 17, 2014, NRG delivered 168 trucks of liquid fuel to Astoria compared to 92 trucks in all of 2013. • Collectively referring to ULSK, No. 2, No. 6 and kerosene.

7. Cold Weather Observations: Oil & Other Liquid Fuels (Cont’d) • Oil was priced out of the market as a power plant fuel in the 2000s, and the infrastructure is gradually fading away. • Infrastructure for delivery of liquid fuel is limited. • Barges diverted to other uses due to lack of demand; • Limited trucking capacity and availability of drivers; • Sought emergency waivers of trucking regulations to allow additional fuel deliveries. • Out-of-town truck drivers were positioned close to delivery points. • Frozen rivers and lack of dredging (outside –NY) hampers barge deliveries;and • Less power plant spec liquids in refining of U.S. domestic crude oil.

8. Cold Weather Observations: Oil & Other Liquid Fuels (Cont’d) Future is Grim for Oil-Fired Units: • “Carrying costs” of oil is extremely high. • Delivered fuel cost is high and inventory turnover is low • Difficult to predict necessary inventory levels. Utilization of oil-fired capacity is typically extremely high during narrow windows or extremely low for most of the year, or for a number of years as has been the case recently. • By way of example, NRG’s Bowline facility burned circa 2007 oil this winter. • Not all dual-fuel units are created equal: • Modern dual-fuel units are permitted with tight run hour limitations and as a result, their ability to operate on back-up fuel is limited by permits. • On-site liquid storage is sized accordingly and disproportionately small compared to cold weather demand. • Not well suited to support a persistent weather event. • Older dual-fuel and oil units typically do not have run time restrictions in their permits, have numerous, very large tanks on site, and historically have had significant storage capability. • But they have become extreme peaking units with very low capacity factors so suppliers and shippers have turned to other markets. • Power plant spec fuels are less available and the infrastructure for rapid-resupply is no longer in place.

9. Recommendation # 1 – Incent Oil Inventory • Create market approach to incent liquid fuel inventory. • Current wholesale electric markets do not support the large capital investment necessary to develop or retain large quantities of storage that exceed reasonable expectations of demand. • Newly permitted dual fuel units have extremely limited operating hours on fuel oil and often even smaller on site liquid storage. • Fuel diversity is needed and the infrastructure for rapid resupply of liquid fuels is no longer in place. • ISO-NE fuel inventory program worked as a stop gap but not ideal from a integrated market design standpoint. • Need market mechanism to allow cost recovery. • Create a market-product to encourage dual-fuel units to continue operation. • New dual-fuel units will have limited operations and limited storage due to permitting requirements. Winter cold-snap highlighted the need to retain existing oil-fired units. • New ancillary service under which dual fuel units would receive additional payments. • Market design changes that penalize oil and dual-fuel units (i.e., NYISO fuel redundancy proposal and ISO-NE Performance Incentive Proposal) will work counter to incenting the oil and dual-fuel units to remain in the market.

10. Recommendation #2: Split Weekend Packages • Natural gas trades on Friday for Saturday, Sunday and Monday (and Tuesday on long weekends). • Single price, even though the value and volume requirements of Monday gas is far higher. • Solutions: • Require separate indexes for Sat/Sun and Monday packages: • Each would trade on Friday. Ensures that prices reflect higher load on Monday and lower loads over the weekend. • NYISO can provide Advisory DA Reliability Unit Designations when an OFO situation occurs going into the weekend.