© 2015 Portland General Electric. All rights reserved. I NTEGRATED R ESOURCE P LAN 2016 Results of PGE’s EIM Comparative Study OPUC Public Meeting Tuesday, December 1, 2015

Slide 2 Agenda  Overview of Study and Findings  Quantitative Analyses  Overview  Key Assumptions  Results  Qualitative Analyses  Need for New Generation  Reliability  PGE’s EIM Readiness

Slide 3 Overview  PGE studied its two opportunities for participation in a sub-hourly market.  Western EIM  NWPP MC SCED  Benefits evaluated include:  Benefits of going to 5-minute dispatch.  Diversity benefits of joining an EIM.  Potential reliability benefits of participating in an EIM.  Potential benefits of deferring or eliminating the need for new generation or other flexible resources.  PGE’s EIM readiness activities now focused on Western EIM participation.  PGE anticipates participating in the Western EIM beginning in October 2017.

Slide 4 Technical Review Committee TRC PGE Study Committees and Utility Partners EIM Comparative Study with E3 Advisory Committee EIMSAC Utility/Market Operator Partners Clint KalichAvista Scott KinneyAvista Jared EllsworthIdaho Power Ron SchellbergIdaho Power Casey JohnstonNorthwestern Energy Ray BushNorthwestern Energy Bruce McAllisterPacifiCorp Jim PriceCAISO Michael Milligan National Renewable Energy Laboratory (NREL) Brendan KirbyConsultant to NREL Bart McManusBPA John Ollis Northwest Power and Conservation Council Ron ShelburgIdaho Power Company Ted BrekkenOregon State University Eduardo Cotilla- Sanchez Oregon State University Modeling Team John CriderOPUC Cameron YourkowskiRenewables Northwest Bob JenksCUB Scott DowneyPeak Reliability Michael GogginAmerican Wind Energy Assoc. Maury Galbraith Western Interstate Electric Board Mark RothlederCalifornia ISO Carl MonroeSouthwest Power Pool Scott KinneyAvista Corp. Jim ShetlerBANC Rachel DibbleBPA Tess ParkIdaho Power Company Joe LawlorPG&E Steve BeuningXcel Energy

Slide 5 Footprint Comparison of Generation Resource Capacity

Slide 6 Summary of Results  PGE would see modest positive annual savings from joining either the Western EIM or a NW SCED.*  Savings in either footprint are larger either in the presence of higher gas prices, larger renewable resource buildout, or reserve pooling.  Both the Western EIM and NW SCED would provide reliability benefits for PGE.  Given that the Western EIM does not change planning reserve requirements, PGE does not anticipate that participating in an EIM will defer the need for new generation. * Western EIM also referred to as CAISO EIM in PGE’s studies. NW SCED also referred to as NWPP MC SCED. ** Ongoing market costs represent annual market administrative charges. MarketDispatch Savings RangeOngoing Market Costs**Start-Up Costs Western EIM$ MM$ MM$0.645 MM NW SCED$ MM PGE estimates that these charges would be greater than Western EIM equivalent costs.

Slide 7 Overview of Quantitative Analysis Western EIM participants* Business As Usual (BAU) Case NW SCED participants Business As Usual (BAU) Case CAISO Avista Corporation (AVA) PacifiCorp East (PACE) British Columbia Hydro (BCH) PacifiCorp West (PACW) Bonneville Power Administration (BPA) NV Energy (NVE) Idaho Power (IPC) Puget Sound Energy (PSE) Grant County PUD & Douglas County PUD & Chelan County PUC (collectively, MIDC) Northwest Energy (NWMT) Sacramento Municipal Utilities District (SMUD) Seattle City Light (SCL) Tacoma Power (TPWR) Western Area Power Administration – Upper Great Plains West Region (WAUW)  Study Goal: Quantify benefits to PGE of joining either the Western EIM or a NW SCED.  Compare savings to PGE of two markets with same features but different footprints. *After the start of this study, Arizona Public Service (APS) also announced plans to begin participation in the Western EIM in Since PGE’s study was already in progress, APS was excluded from PGE’s study.

Slide 8 Key Base and Sensitivity Scenario Assumptions Base ScenarioSensitivity Scenario Gas price $3.5/MMBtu average for PGE generators *Based on Wood MacKenzie Q forecast High Gas Price Scenario: $4.6/MMBtu average for PGE generators Renewable Resource Buildout 33% RPS for CAISO 20% RPS for PGE 15% RPS avg for NW *Based on TEPPC 2020, with updates for CAISO & PGE High RPS Scenario: 40% RPS for CAISO 25% RPS for PGE 20% RPS avg for NW *2024 RPS target for California & 2025 target for PGE Real-time transmission capability 200 MW PACE->PACW real-time transfer capability for CAISO EIM *reflects historical level of dynamic capability through IPC Alternative Transmission Transfer Scenario: 400 MW PACE->PACW real-time transfer capability for CAISO EIM *reflected updated exchange agreement with IPC

Slide 9 Results by Scenario Base Scenario with Reserve Pooling Alternative Transmission Transfer (for CAISO EIM) $2.7 $4.6 $5.8 $6.4 $3.0 $6.1 $7.2 $3.5 $5.3 * Additional incremental savings from reserve pooling vs. base scenario: +$0.8MM for EIM +$0.7MM for NW SCED Western EIM NW SCED * *

Slide 10 Benefits from Reserve Pooling Western Western EIM Base Western EIM (With Reserve Pooling)  Reserve pooling can reduce power costs by “releasing” some flexible reserves for other dispatch uses within the hour.  Average release was 144 MW for Western EIM.*  However, each Balancing Authority must still schedule enough energy/capacity to meet their own load-resource balance requirements on an hourly basis.  PGE’s long-term planning reserve margin is not affected by joining an EIM.  PGE does not anticipate that participating in an EIM will defer the need for new generation. Average Flexible Up Reserves In Western EIM PGE’s Key Takeaways on Reserve Reductions * Equivalent NW SCED value for reduced reserves was 47 MW.

Slide 11 Both the Western EIM and NWPP MC SCED Provide Reliability Benefits for PGE  A larger operating footprint enhances reliability by increasing the ability of the system to respond to variability for two reasons:  Pooling of variable loads and wind generation increases diversity, which reduces overall per- unit variability.*  A larger pool of resources under an EIM footprint could provide more ramping capability and respond to variations and imbalances more quickly.*  While the hydroelectric generation that dominates the NWPP MC SCED footprint is recognized for its flexibility, the total size and generation diversity of the Western EIM footprint offsets this advantage.  PGE continues to work with the NWPP members on initiatives to improve regional reliability.  Regional Flow Forecasting Tool  Resource Monitoring & Deliverability Tool  Area Control Error Diversity Interchange *National Renewable Energy Laboratory. Operating Reserve Reductions from Proposed Energy Imbalance Market with Wind and Solar Generation in the Western Interconnection. May, At 25.

Slide 12 Update on EIM Readiness  Implementation Agreement between PGE and CAISO filed with FERC on November 20,  PGE presently anticipates an October 1, 2017 “Go-Live” for participating in the Western EIM.  Although PGE’s resources will be dispatched via the Western EIM, PGE will continue to participate in the NWPP MC Reliability forums.

Slide 13 Market Readiness Initiatives Produce Benefits Prior to EIM  Improved information on plant operations and outages leads to better planning and decision making.  New systems improve functionality and replace over 23 old systems and spreadsheets.  Improved knowledge of thermal and hydro unit cycling and better monitoring should enhance reliability and maintenance practices.  Port Westward II used in multiple ways, including increased intra-hour flexibility and an additional resource for morning and evening ramps.  Reduction in BPA wind integration costs captured in 2016 power costs.  Updating wind integration to 30/15 committed scheduling decreased PGE’s initial 2016 NVPC forecast by approximately $2.9 million.

Slide 14 Generation Plants Improved Cycling Capabilities Automated Generation Control (AGC) Implemented Revenue Quality Metering Generation Excellence and Reliability Monitoring Power Operations Plant Optimization System 15 Minute Scheduling & Wind Integration Upgrades to Wind Forecasting Tools Outage Management Reporting System Market Interfaces Balancing Authority Area Reliability Based Control ACE Diversity Interchange Plant Information (PI) Consolidation Market Participation Co-Chaired NWPP MC Initiative Consolidation of Regional Transmission Planning Organizations EIM Cost Benefit Analysis Participant in CAISO Stakeholder Process Improvements within Functional Areas Projects In-Flight Projects Completed Market Readiness Initiatives Completed and Underway