Planning Reserve Margin Dan Egolf Senior Manager, Power Supply & Planning

Resource Adequacy Requirements Planning Reserve Margin (PRM): power supply buffer that allows a utility to reliably serve customers Three primary drivers: Dependent on resource portfolio and is utility-specific Industry standard is Loss-Of-Load-Expectation (LOLE) of 1 day in 10 years Resource forced outages Increased demand due to weather Higher than expected load growth -PRM’s role is to ensure resource adequacy when dealing with unforeseen increases in demand and forced outages in the system. It serves the utilities’ ultimate goal of “keeping the lights on” over the planning horizon. -PRM is the dependable capacity above the expected peak demand and is measured in MW or percentage of the expected peak -PRM is calculated as the difference between system dependable generation capacity and peak demand, measured in either MW or percentage of peak demand -Three primary drivers for PRM: -Unavailability of supply due to unplanned generating unit or transmission outages -Unexpectedly high loads, typically due to extended extreme weather -A period of load growth that outpaces the possible installation of new supply resources System characteristics affecting reliability and reserve requirements include load shape, generating unit forced-outage rates, generating unit maintenance-outage requirements, number and size of the generating units in a region or service territory, transmission interties with neighboring utilities, and availability and effectiveness of intervention procedures PRM isn’t required if market robust enough to rely on market purchases with no risk PRM includes Operating Reserves which are required to meet NERC and WECC reliability standards and ensure real-time reliable system operation LOLE is the expected number of days in a year when the aggregate resource is insufficient to meet load. Often, monte carlo simulation analysis is used. The traditional LOLE criterion is “1 day in 10 years”, or equivalently 0.1 day/year if annual analysis is required. Caution should be exercised when comparing PRM numbers values stated by different utilities as they may differ in a number of dimensions, and would be specific to the type of resources held by each utility and the nature of their loads

What is Planning Reserve Margin (PRM)? Extra capacity Not having enough won’t get the job done Having too much is costly Shown in MW or percentage Lots of different ways of measuring it No “one size fits all” solution Are additional resources required? Our study is based on 2012 Load Forecast and information

So What’s the Problem? A basic assumption is that enough resources exist to meet the load Do we really need PRM? - Load Uncertainty A. Short-term weather-related B. Long-term load growth - Resource Uncertainty A. Generation risk B. Contract risk C. Market risk With perfect knowledge far enough in advance, PRM wouldn’t be needed Every utility’s situation is different

How do we evaluate PRM? This requires two steps: 1. Measurement Options: - Loss of Load Expectation (LOLE, in days per year) - Loss of Load Hours (LOLH, in hours per year) - Expected Unserved Energy (EUE, in MWh per year) - Loss of Load Probability (LOLP, in %) 2. Methodology Approaches: - Older rule-based - Modern probabilistic Monte Carlo based FBC is using LOLE of 1 day in 10 years, or 0.1 day per year using a Monte Carlo simulation

Risk Assumptions Load uncertainty - Long-term load uncertainty is covered as part of the load forecast - Short-term weather has a significant impact on loads and the timing of the peak load is particularly risky Generation Risk - Required operating reserves are part of PRM - Unit Forced Outage Rate (FOR) based on historical data or reasonable assumptions Contract Risk: PPA assumed to have no risk Market Risk (Short-Term) - Market access of 150 MW is assumed - Transmission Forced Outage Rate of 0.74%

Results: LOLE in the Base Case Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Winter PRM % 2014 0.000 0.002 0.001 0.004 0.005 0.016 27% 2015 0.015 0.006 0.024 26% 2016 0.009 2017 2018 25% 2019 0.003 0.007 0.020 2020 2025 0.012 0.021 24% 2030 0.014 23% 2033 0.023 0.030 LOLE 0.1 day per year met in all years PRM is about 25%

Results: Cases for Sensitivity Analysis Description Meet LOLE Target? Load Sensitivity Analysis   Case 1 1-in-10 economic drivers Case 2 Industrial self-generating demand of 40 MW Case 3 Time of seasonal peaks Resource Sensitivity Analysis Case 4 WAX FOR Case 5 Double FOR Case 6 No WAX surplus taken into account for PRM requirements Case 7 No additional capacity planned for gaps expected gaps must be met Market Sensitivity Analysis Case 8 Market sizes at the base case FOR Case 9 No market access alternative capacity needed Case 10 Market FOR at 150 MW

Next Steps We can present a detailed ½ day technical workshop on PRM if there is interest Our PRM Report will be updated and included as part of the 2016 Long Term Electric Resource Plan Questions?