Discussion ofDiscussion ofResource PlansResource Plans

Michael Schilmoellerfor the

Council Power CommitteeTuesday, June 9, 2009

2

OverviewOverview Comparison of least risk and least cost

plans Similarities Differences in

Wholesale power market exposure Power cost and rate volatility

Interpreting the resource strategy Resource build out Decision milestones

Choosing a plan

3

Filtering Out PlansFiltering Out Plans

Efficient Frontier Finding the best plans Discovering the successful and less

unsuccessful strategies Looking at the distributions of

cost associated with plans on the efficient frontier

4

Efficient FrontierEfficient Frontier

Source: Analysis of Optimization Run_L811 090510 2101.xls

155000

155500

156000

156500

157000

157500

158000

104000 104500 105000 105500 106000

Cost (NPV $2006 M)

Ris

k (

NP

V $

20

06

M)

Feasibility Space

Efficient Frontier

A

D

5

Examining Annual Examining Annual DifferencesDifferences

Market Exposure Cost and rate variation Changes within a particular future

6

Comparison of Average Comparison of Average Exports for the Least-Risk Exports for the Least-Risk

and Least-Cost Plansand Least-Cost Plans

0.0

100.0

200.0

300.0

400.0

500.0

600.0

Sep

-09

Sep

-10

Sep

-11

Sep

-12

Sep

-13

Sep

-14

Sep

-15

Sep

-16

Sep

-17

Sep

-18

Sep

-19

Sep

-20

Sep

-21

Sep

-22

Sep

-23

Sep

-24

Sep

-25

Sep

-26

Sep

-27

Sep

-28

Hydro Quater (ending Aug)

Exp

ort

s ($

M 2

006

per

Qtr

)

Least-Risk Plan Least-Cost Plan

Source: Comp.xls, worksheet “DATA (2) LR”

7

Exposure to Market Exposure to Market ImportsImports

0

20

40

60

80

100

120

-3700.0

-3500.0

-3300.0

-3100.0

-2900.0

-2700.0

-2500.0

-2300.0

-2100.0

-1900.0

-1700.0

-1500.0

-1300.0

-1100.0

-900.0

-700.0

-500.0

-300.0

-100.0

100.0

300.0

500.0

700.0

900.0

1100.0

1300.0

1500.0

1700.0

1900.0

2100.0

2300.0

2500.0

Cost of Imports ($M/Qtr)

Coun

t

Source: Comp.xls, workbook “Comp 02.xls”, worksheet

Average

8

Likelihood the Least-Risk Likelihood the Least-Risk PlanPlan

Would Reduce Market Would Reduce Market Exposure By At Least $300 M Exposure By At Least $300 M

In A Hydro QuarterIn A Hydro Quarter

Source: Comp.xls, worksheet “LR-LC qtr future”

0%

1%

2%

3%

4%

5%

6%

7%S

ep

-09

Se

p-1

1

Se

p-1

3

Se

p-1

5

Se

p-1

7

Se

p-1

9

Se

p-2

1

Se

p-2

3

Se

p-2

5

Se

p-2

7

Hydro Quarter (ending Aug)

Pe

rce

nt

of

Fu

ture

s

9

Likelihood of Likelihood of ImprovementsImprovements

Likelihood that LR Plan saves money over LC Plan

0%

10%

20%

30%

40%

50%

60%

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

Sep-24

Sep-25

Sep-26

Sep-27

Sep-28

Like

lihoo

d

10

Expected AdvantageExpected Advantageof Least Risk over Least Costof Least Risk over Least Cost

Market Purchase ExpenseMarket Purchase Expense

0

50

100

150

200

250

30020

10

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Mar

ket P

urch

ase

Savi

ngs

($M

200

6 pe

r yea

r)

11

Likelihood of Annual Rate Likelihood of Annual Rate IncreasesIncreases

0

100

200

300

400

500

600

700

-43

%

-39

%

-35

%

-31

%

-27

%

-23

%

-19

%

-15

%

-11

%

-7%

-3%

1%

5%

9%

13

%

17

%

21

%

25

%

29

%

33

%

37

%

41

%

Annual Rate Increase or Decrease

Re

lati

ve

Lik

elih

oo

d

Least Cst

Least Risk

12

Difference in Likelihood ofDifference in Likelihood ofAnnual Rate IncreasesAnnual Rate Increases

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

-43%

-38%

-33%

-28%

-23%

-18%

-13% -8

%-3

% 2% 7% 12%

17%

22%

27%

32%

37%

42%

Dif

fere

nce

in

Rel

ativ

e L

ikel

iho

od

13

Changes in System CostChanges in System CostFuture 1

-200

0

200

400

600

800

1000

1200

1400

Sep

-09

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

Sep

-23

Sep

-25

Sep

-27

$M

20

06

pe

r Q

ua

rte

r

Least Risk

Least Cost

14

Changes in System CostChanges in System CostFuture 67

-500

0

500

1000

1500

2000

2500

3000

3500S

ep-0

9

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

Sep

-23

Sep

-25

Sep

-27

$M 2

006

per

Qu

arte

r

Least Risk

Least Cost

15

OverviewOverview Comparison of least risk and least cost

plans Similarities Differences in

Wholesale power market exposure Power cost and rate volatility

Interpreting the resource strategy Resource build out Decision milestones

Choosing a plan

16

Plan DPlan D

Source: Schedules for plan resources 090519.xls

Plan D Discretionary demand response: none50 Lost opportunity conservation cost-effectiveness threshold, premium over market ($2006/MWh)

3253 Lost opportunity conservation by end of study (MWa)*10 Discretionary conservation cost-effectiveness threshold, premium over market ($2006/MWh)

2573 Discretionary conservation by end of study (MWa) assuming 160MWa/year limit5827 Total conservation (MWa)

Cumulative MW, by earliest date to begin constructionDec-10 Dec-13 Dec-15 Dec-17 Dec-19 Dec-23 Dec-25

CCCT 0 0 0 415 830 830 830SCCT 0 0 170 170 170 170 170

Geothermal 0 0 0 52 104 156 169and the larger of

Wind 0 0 1200 1200 3000 3000 3000RPS* req 0 317 1182 1968 2825 3959 4229

17

RPS DevelopmentRPS Development

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

MW

a R

PS

Wind Energy Other Energy Leastg Risk Plan Wind

18

Build Out of ResourcesBuild Out of ResourcesWindWind

Wind (no RECs) On-Line MW Capability

0100200300400500600700800900

1,000S

ep

-09

Se

p-1

1

Se

p-1

3

Se

p-1

5

Se

p-1

7

Se

p-1

9

Se

p-2

1

Se

p-2

3

Se

p-2

5

Se

p-2

7

MW

a

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

average

Source: workbook “L811 LR plan buildout 080604.xls”

19

Build Out of ResourcesBuild Out of ResourcesGeothermalGeothermal

Source: workbook “L811 LR plan buildout 080604.xls”

Geothermal On-Line MW Capability

0

20

40

60

80

100

120

140

160S

ep-0

9

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

Sep

-23

Sep

-25

Sep

-27

MW

a

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

average

20

Build Out of ResourcesBuild Out of Resources Combined-Cycle Combustion Turbine Combined-Cycle Combustion Turbine

Source: workbook “L811 LR plan buildout 080604.xls”

CCCT On-Line MW Capability

0.050.0

100.0150.0200.0

250.0300.0

350.0400.0

Se

p-0

9

Se

p-1

1

Se

p-1

3

Se

p-1

5

Se

p-1

7

Se

p-1

9

Se

p-2

1

Se

p-2

3

Se

p-2

5

Se

p-2

7

MW

a

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

average

21

Build Out of ResourcesBuild Out of ResourcesSimple-Cycle Combustion TurbineSimple-Cycle Combustion Turbine

Source: workbook “L811 LR plan buildout 080604.xls”

SCCT On-Line MW Capability

0.0020.0040.0060.0080.00

100.00120.00140.00160.00180.00

Sep

-09

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

Sep

-23

Sep

-25

Sep

-27

MW

a

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

average

22

Schedule of DecisionSchedule of DecisionLeast-Risk PlanLeast-Risk Plan

23

The ChoiceThe Choice A plan with more resources reduces

dependence on the power market and increases power price and rate stability

A plan with resources provides guidance to the region regarding the resources that promote an efficient and reliable system

Very little difference exists between least-cost and least-risk plans in the five-year Action Plan time period.

The least-risk plan preserves decision milestones

EndEnd

25

Plan APlan A

Source: Schedules for plan resources 090519.xls

Plan A Discretionary demand response: none10 Lost opportunity conservation cost-effectiveness threshold, premium over market ($2006/MWh)

2941 Lost opportunity conservation by end of study (MWa)*10 Discretionary conservation cost-effectiveness threshold, premium over market ($2006/MWh)

2585 Discretionary conservation by end of study (MWa) assuming 160MWa/year limit5527 Total conservation (MWa)

Cumulative MW, by earliest date to begin constructionDec-10 Dec-13 Dec-15 Dec-17 Dec-19 Dec-23 Dec-25

CCCT 0 0 0 0 0 0 0SCCT 0 0 0 0 0 0 0

Geothermal 0 0 0 0 0 0 0and the larger of

Wind 0 0 0 0 0 0 0RPS* req 0 321 1193 2007 3061 4930 5363

26

Difference in Cost Difference in Cost DistributionsDistributions

1 of 31 of 3

0

5

10

15

20

25

30

35

5203

6

6291

1

7378

6

8466

1

9553

6

1064

11

1172

86

1281

61

1390

36

1499

11

1607

86

1716

61

1825

36

1934

11

2042

86

2151

60

2260

35

NPV $2006 M

Co

un

t

Least Risk

Least cost

Source: LR&LC_distributions.xls, worksheet “LR and LC”

27

Difference in Cost Difference in Cost DistributionsDistributions

2 of 32 of 3

0

2

4

6

8

10

12

14

16

1390

36

1462

86

1535

36

1607

86

1680

36

1752

86

1825

36

1897

86

1970

36

2042

86

2115

35

2187

85

2260

35

2332

85

NPV $2006 M

Co

un

t

Least Risk

Least cost

Source: LR&LC_distributions.xls, worksheet “LR and LC”

28

Difference in Cost Difference in Cost DistributionsDistributions

3 of 33 of 3

Source: LR&LC_distributions.xls, worksheet “LR less LC”

Least Risk less Least Cost by FutureSorted by the NPV Study Cost Difference

-15000

-10000

-5000

0

5000

10000

15000

20000

25000

1 44 87 130173216259302345388431474517560603646689732

M $

2006

Dif

fere

nce

in

co

st

0

50000

100000

150000

200000

250000

M $

2006

lea

st-c

ost

pla

n c

ost

Diff LR-LC corresponding LC plan cost Linear (corresponding LC plan cost)