DRAFT

IRP 2016

RESOURCE NEEDS AND DRAFT

PORTFOLIO CONCEPTS

NOVEMBER 4, 2015

| 2

AGENDA

• Introductions

• Demand Outlook 2016

• Resource Adequacy

• Draft Portfolio Concepts

• Conservation Potential Assessment (CPA) 2016

DEMAND FORECAST

2016

| 4

ASSUMPTIONS OVERVIEW

• National economic outlook from IHS Economics

• Rates set to Seattle City Light’s 2014 Strategic

Plan through 2020 and 3% thereafter

• Forecast based on “normal weather”

• Forecast of tunnel boring machine not included

• Approved by ROC in July 2015

| 5

SEATTLE CITY LIGHT RETAIL LOAD HISTORY

8,000

8,500

9,000

9,500

10,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GW

h

dot.com recession

&

>30% real rate increase

record

warmth

housing goes

busthousing goes

boom

2014 Retail Load

≈0.4% LESS THAN

1999 Retail Load

| 6

“NEW NORMAL” OF MODERATE ECONOMIC

GROWTH?

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

An

nu

al G

row

th R

ate

Real GDP Average Real GDP (Post-War)

| 7

LOAD, EMPLOYMENT, AND HOUSEHOLDS

200

300

400

500

600

700

800

900

1000

1100

1200

200

300

400

500

600

700

800

900

1000

1100

1200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Em

plo

ym

en

t &

Ho

use

ho

lds

(00

0's

)

Avera

ge M

eg

aw

att

s

Weather-Adjusted System Load (aMW) Wage & Salary Employment Households

| 8

ENERGY EFFICIENCY, CODES, & CONSERVATION

0

2

4

6

8

10

12

14

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

Residential MWh Per Household

| 9

LOAD HISTORY & FORECAST BY CUSTOMER

CLASS

Forecasted 20-year Average Growth Rates

Total Retail: 0.4% Commercial: 0.6%

Residential: -0.1% Industrial: 0.5%

0

2000

4000

6000

8000

10000

120001

99

9

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

Gig

aw

att

-Ho

urs

Total Retail Commercial Residential Industrial

| 10

SUMMARY

• Economic growth expected to continue, yet it

does so below the historical trend line

• Load demand growth expected to continue its

lower-than-historical trend due to various

factors

• 20-year average annual growth rate ≈ 0.4%

RESOURCE ADEQUACY

PROBABILISTIC ANALYSIS

| 12

WHAT IS RESOURCE ADEQUACY?

• The ability of the City Light Portfolio to supply

the energy requirements of the customers under

all probable conditions including high and low

temperatures and lower water supply conditions

effecting demand and supply respectively

| 13

ASSUMPTIONS

• Portfolio Contracts:

o Bonneville Power Administration monthly shaped

Block and Slice contract extends to the end of IRP

study period

o Bonneville Power Administration monthly shaped

Block and Slice contract expires in September,

2028

| 14

ASSUMPTIONS (CONTINUED)

•Northern California Power Agency exchange

contract expires in 2017

• Stateline Wind contract expires in 2021

• Lucky Peak Exchange contract will expire in 2016

• Priest Rapids contract expires in 2052

• Burlington Biomass contract expires in 2017

| 15

ASSUMPTIONS CONTINUED

• Portfolio Resources:

o Additional 64 MW of hydro efficiency gains from

Boundary project upgrades by fall 2017

| 16

AN OVERVIEW OF THE METHODOLOGY

• 4,000 supply and demand scenarios

o Based upon detailed studies of historical hourly

supply and demand conditions in winter

• Scenarios are ranked by resource need

o 𝐷𝑒𝑓𝑖𝑐𝑖𝑡𝑇,ℎ = 𝑆𝑢𝑝𝑝𝑙𝑦𝑇,ℎ - 𝐷𝑒𝑚𝑎𝑛𝑑𝑇,ℎ , T = Month

(December and January) and h = Hour (1488

hours)

| 17

AN OVERVIEW OF THE METHODOLOGY

• Majority of scenarios are surplus

o The 95th, 90th, 85th, 80th, and 75th percentiles are

identified

o Deficits are adjusted for short-term firm market

purchases 200 aMW

| 18

RISK ANALYSIS

• Risk is applied to supply and demand independently

o Supply risk is determined by uncertainties in water

conditions and forced outages

o Demand risk is determined by uncertainties in

system load

| 19

SUPPLY (HYDRO) UNCERTAINTIES

• More than 90% of City Light resource portfolio

is from hydropower generation assets

• Impact of water conditions across City Light’s

hydro resources are interdependent

• “Time-Series” and “Cross-Sectional”

correlations are incorporated into the

probability distribution analysis

| 20

DEMAND UNCERTAINTIES

• Demand is strongly related to temperature

o Demand and hydro generation capabilities have

no correlation

• The temperature for a given hour has no

correlation with the temperature of an hour

in another month

| 21

DEMAND UNCERTAINTIES (CONTINUED)

• Historical demand variation for December and

January are incorporated into the probability

distribution analysis

| 22

DEVELOPING RISK METRICS: SIMULATION OF

OBJECTIVE FUNCTION

• Resource Adequacy Objective Function:

o R.A. = Resource Adequacy

o D = Demand

o BN = BOUNDARY

o SK = SKAGIT (ROSS, DIABLO, and GORGE)

o SL = Bonneville Power Administration Slice Product

(City Light share of BPA hydro projects)

)SL,SLBNBN ,SK,SK,D,D ( FR.A.hhhhhhhh JANDEC,JAN,DECJANDECJANDEC

| 23

DEVELOPING RISK METRICS: SIMULATION OF

OBJECTIVE FUNCTION

• Normal distributions are assigned to both

demand and hydro generation inputs

| 24

RISK ANALYSIS OF SUPPLY AND DEMAND

S0

S1

S2

D0

D1

D2

Time

Meg

aw

att

| 25

WINTER SEASON ONE HOUR PEAK: 5%, 10%,

15%, 20%, 25% CHANCE OF EXCEEDENCE

0

50

100

150

200

250

300

350

400

450

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

Meg

aw

att

YEAR

5%

10%

15%

20%

25%

| 26

RESOURCE ADEQUACY AT 95% WITH BPA

CONTRACT EXPIRATION IN 2028

0

200

400

600

800

1000

1200

1400

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

Meg

aw

att

YEAR

5% 5% BPA Contract Expires

DRAFT PORTFOLIO

CONCEPTS

| 28

DRAFT PORTFOLIO DEVELOPMENT

• Resource Adequacy Requirement

• Renewable Portfolio Standard (RPS) Requirement

• Characteristics of supply resources

o Evaluation Criteria

• Reliability

o Availability and Deliverability

• Cost and Financial Risk

• Environmental Impact

| 29

DRAFT PORTFOLIOS DEVELOPMENT

(CONTINUED)

• Conservationo Base and High Conservation

• Market Purchase Availability

• Bonneville Power Administration Contract

Expiration in 2028

| 30

WIND & HYDRO WITH 200 MARKET PURCHASE

FLEXIBILITY

0

100

200

300

400

500

600

700

800

900

aMW

Wind & Hydro with 200 Market Purchase Flexibility

RECs market purchase

Wind2

Wind1

HYDRO

Conservation

Resource Adequacy (RA) Requirement with BaseCons. & 200 Mkt. Flexibility

| 31

NO RENEWABLES WITH RENEWABLE ENERGY

CERTIFICATES & 200 MARKET PURCHASE

FLEXIBILITY

0

100

200

300

400

500

600

700

800

900

aMW

No Renewables with RECS & 200 Market Purchase Flexibility

RECs market purchase

CCT

HYDRO 2

HYDRO

Conservation

Resource Adequacy (RA) Requirement with BaseCons. & 200 Mkt. Flexibility

| 32

EXISTING BONNEVILLE POWER

ADMINISTRATION & MARKET PURCHASE

PORTFOLIO

0

50

100

150

200

250

aMW

Existing BPA-Hydro with 200 Market Purchase Flexibility

RECs market purchase

Wind1

Convservation

Resource Adequacy (RA) Requirement with BaseCons. & 200 Mkt. Flexibility

| 33

PORTFOLIOS WITH MARKET PURCHASE

AVAILABILITY

1. Wind & Hydro

o Wind & BPA Hydro

2. No Renewables

o RECs Market Purchase, Gas, BPA Hydro

& Non-BPA Hydro

3. High Conservation & Wind

o Wind & BPA Hydro

4. Renewables with no Wind

o Biomass, Solar PV & BPA Hydro

| 34

PORTFOLIOS WITH MARKET PURCHASE

UNAVAILABILITY

5. Hydro, Renewables & Gas

o Gas, Wind, Biomass, Solar PV, BPA Hydro, &

Non-BPA Hydro

6. Diversity with no Market Purchase

o Gas, Biomass, Solar PV, Solar Thermal,

Geothermal, BPA Hydro, & Non-BPA Hydro

7. Renewables with no Market Purchase & Gas

o Wind, Biomass, Solar PV, BPA Hydro, & Non-BPA

Hydro

| 35

CURRENT BONNEVILLE POWER

ADMINISTRATION CONTRACT EXTENSION

8. Existing BPA with Market Purchase

o Wind & Market Purchase

9. Existing BPA with no Market Purchase

o Gas, Wind, Biomass, & Solar PV

CANDIDATE PORTFOLIOS

SELECTION METHODOLOGY

| 37

SENARIOS FOR SENSITIVITY ANALYSIS

• Demand Forecast

o High and Low Demand

• Hydro Conditions

o High and Low Water Conditions

•Natural Gas Prices:

o High and Low Natural Gas Prices

• CO2 Price Forecast

o High and Low CO2 Prices

| 38

EVALUATION CRITERIA FOR CANDIDATE

PORTFOLIOS

• Reliability

• Cost

• Financial Risk

• Environmental Performance

CONSERVATION

POTENTIAL

ASSESSMENT 2016

| 40

CONSERVATION CONTEXT

• Energy conservation is SCL’s first priority

resource, and has been since 1976

o Low cost

o Low environmental impact

o Low risk

• Longest continually operated energy

conservation program in the country

• 189 (aMW) of conservation in place

o 10%+ of City Light’s retail load

| 41

STUDY OBJECTIVES - CPA

Estimate 20-year technical, economic, and

achievable potential

Satisfy requirements of WAC 194-37

Develop conservation supply curve for the IRP

Provide reports and presentations that

thoroughly document methodology, data

sources, and results

| 42

OVERVIEW OF METHODOLOGY

| 43

WHAT’S NEW FOR THE 2016 CPA?

• New Load forecast

• 7th Power Plan measures

• Updates to RTF measures

• Residential and industrial program accomplishments

• CBSA Data

• Updated SCL non-residential database

• Federal standards and energy codes

oNew measures

• Enterprise data centers

• Indoor agriculture

| 44

SUMMARY OF RESULTS

Sector

Achievable Economic Potential – aMW

2 Year 10 Year 20 Year

2014 CPA 23.7 118.4 250.6

2016 CPA 25.6 128.1 204.8

% Change8% 8% -18%

• Residential, commercial, and industrial sectors

account for 24%, 70%, and 5% of 20-year

achievable potential

| 45

IMPACT OF RAMP RATES

| 46

RESIDENTIAL – ECONOMIC POTENTIAL BY END USE

Cooling

0%

Heating

17%

Water Heating

23%

Interior Lighting

46%

Exterior Lighting

5%

Appliances

1%

Electronics

7%

Miscellaneous

1%

2015 CPA

Cooling

0%

Heating

23%

Water Heating

29%

Interior Lighting

20%

Exterior Lighting

2%

Appliances

3% Electronics

22%

Miscellaneous

1%

2013 CPA

| 47

COMMERCIAL ECONOMIC POTENTIAL BY END USE

Cool Central

6%

Heat Central

3%

Heat Pump

0%

Ventilation

7%

Lighting

67%

Office Equipment

12%

Water Heating

2%

Refrigeration

3%Other

0%

2015 CPA

Cool Central

4%

Heat Central

5%

Heat Pump

0%Ventilation

10%

Lighting

57%

Office Equipment

4%Water Heating

11%

Refrigeration

3%

Other

6%

2013 CPA

| 48

IRP SCENARIOS

0.0

50.0

100.0

150.0

200.0

250.0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

aMW

Base

Low

High