California Energy Commission Natural Gas Price Forecast Retrospective IEPR Commissioner Workshop on Preliminary Natural Gas Outlook California Energy Commission 1516 Ninth Street First floor, Art Rosenfeld Hearing Room Sacramento, CA Thursday, May 21, 2015 Anthony Dixon Supply Analysis Office Energy Assessments Division / (916)

California Energy Commission “Prediction is very difficult, especially if it’s about the future.” –Nils Bohr, Nobel laureate in Physics Using Error Bands The forecasting of natural gas prices depends on many factors The error bands allow for comparison of IEPR common cases to historical estimates Help ensure that IEPR common case are reasonable assumptions

California Energy Commission 1998 Natural Gas Market Outlook 1997 Fuels Report 1999 Fuels Report 2003 IEPR Natural Gas Price Forecast 2005 IEPR Natural Gas Price Forecast 2007 IEPR Natural Gas Price Forecast 2011 IEPR Natural Gas Price Forecast 2012 IEPR Natural Gas Price Forecast 2013 IEPR Natural Gas Price Forecast Past Energy Commission Forecasts Used

California Energy Commission Mean Absolute Percent Error MAPE Statistical method for determining the goodness of fit of past predictions to actual prices.

California Energy Commission MAPE Results Absolute Percent Error Years ForecastedYR 1YR 2YR 3YR 4YR 5YR 6YR 7YR 8YR 9YR Natural Gas Market Outlook 47%68%70%60%75%78%83%81%78%83% 1997 Fuels Report47%68%70%60%75%78%83%81%78%83% 1999 Fuels Report50%70%72%62%77%79%84%82%79%84% 2003 IEPR NG Price Forecast78%80%85%83%80%85%65%69%63%44% 2005 IEPR NG Price Forecast33%43%9%51%40%30%62%143%76% 2007 IEPR NG Price Forecast19%36%44%32%67%164%90% 2011 IEPR NG Price Forecast2%115%69% 2012 IEPR NG Price Forecast1%118%72% 2013 IEPR NG Price Forecast 6% 3% Mean Absolute Percentage Error (MAPE) 31%67%61%58%69%86%78%91%75%73%

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