Sixth Northwest Conservation & Electric Power Plan Proposed Combined-cycle Power Plant Capital Cost Assumptions Jeff King Northwest Power and Conservation Council Generating Resources Advisory Committee Portland, OR September 25, 2008

2 Combined-cycle cost elements Capital cost Plant development and construction ($/kW) Operating costs Fixed operation and maintenance ($/kW/yr) Variable operation and maintenance ($/MWh) Fixed fuel (capacity payments) (zone-specific) ($/kW/yr) Variable fuel (commodity payments) (zone-specific) ($/MMBtu) Transmission from point of interconnection to LSE wholesale delivery point (BPA Point to Point tariff as proxy) ($/kW/yr) Emission costs - Cost of CO2 allowances ($/tonCO2)

September 25, Assessing combined-cycle capital costs Problems: Rapid escalation of plant capital costs in recent years Variety of plant configurations and features Sensitivity of output to elevation, ambient temperature and certain features Several recently reported costs are for completions of suspended projects Reported costs are poorly documented more often than not. Sources: Primary: Reported costs for actual and proposed plants Supplementary: Other surveys and estimates

September 25, Establishing comparability I Initial screen to identify representative projects Omit completions of suspended projects Limit to "F, G & H" technology Omit unusually large (3 & 4 plant) projects Omit unusual configurations (e.g., 3x1) Focus on post-2004 completions; closely focus on 2006 & later Adjust costs to baseload technology w/evaporative cooling Deduct for dry cooling costs (-6% total cost) Deduct for fired HSRG (duct firing MW ~ 30% cost of baseload MW)

September 25, Establishing comparability II Normalize capacity to lifecycle ISO conditions at the point of interconnection Problem - reported capacity may be site-rated or nominal, winter or summer, typically not reported Use OEM reference plant ISO ratings from GTW (new & clean nominal capacity, unfired HSRG, wet cooling, adjusted for auxiliary loads) Reduce capacity 0.5% for main transformer losses (post-analysis) Reduce capacity 2.7% for lifecycle aging losses (post-analysis) Normalize to "overnight" cost in 2006 dollar values IPP projects: Assume reported costs are EPC costs, add owner's cost allowance (5%); development cost allowance (1.4%); financing costs (2% of debt); back-calculate overnight cost for service year using MICROFIN Utility projects: Assume reported costs are "all-in", back-calculate overnight cost for service year using MICROFIN

September 25, Assign a vintage to the samples Problem: Environment w/significant annual escalation Objective: Cost of project w/2010 service Reported all-in costs - MICROFIN yields a comparable constant dollar overnight cost for constructing a project for service in year x. Cost estimates - generally, costs at time of estimate plus an contingency for anticipated escalation to a future expenditure date - and allowance which may not prove accurate. Vintage is time of cost estimate release. Plot all-in and estimates separately - will illustrate changing perception of escalation.

September 25, Useable reported costs ProjectServiceStateConfigurationRaw $/kW Type of Est Arlington Valley (Maricopa) IAug-02AZ2x1 GE7FA$439Preconstruction announcement Coyote Springs 2Jun-02OR1x1 GE7FA$641Preconstruction announcement Otay Mesa (Original estimate)P2002CA2x1 Unannounced$539Preconstruction announcement Grays Harbor (Original est.)P2003WA2x1 GE7FA$462Preconstruction announcement Goldendale Energy CenterSep-04WA1x1 GE7FA$531Preconstruction announcement Rocky Mountain Energy CenterJun-04CO2x1 SW 501F$580Preconstruction announcement Blythe Energy Project IIP2004CA2x1 SWV84.3a$481Preconstruction announcement Silver BowP2004MT2x1 SW 501F$680Preconstruction announcement Blythe Energy Project IJan-04CA2x1 SWV84.3a$673As-built Arlington Valley (Maricopa) IIDec-05AZ2x1 GE7FA$333Preconstruction announcement Chuck Lenzie (ex Moapa) IJan-06NV2x1 GE7FA$481Preconst comp. est + acquisition Chuck Lenzie (ex Moapa) IIMay-06NV2x1 GE7FA$481Preconst comp. est + acquisition Cosumnes Phase IMar-06CA2x1 GE7FA$870Projected at 95% complete. Current CreekApr-06UT2x1 GE7FA$684Ratebase capitalization Lake SideJul-07UT2x1 SW SCC6 5000F$650Ratebase capitalization Port WestwardJun-07OR1x1 MHI 501G$657As-built Tracy CCP2008NV2x1 GE7FA$778Nevada Power SEC 10-K San Gabrial (Low)P2010CA2x1 SW SCC6 5000F$762Preconstruction announcement San Gabrial (High)P2010CA2x1 SW SCC6 5000F$776Preconstruction announcement Colusa (Low)P2010CA2x1 GE7FA$685Preconstruction announcement Colusa (High)P2010CA2x1 GE7FA$761Preconstruction announcement Avenal Energy ProjectP2012CA2x1 GE7FA$833Preconstruction announcement

September 25, Normalized combined-cycle project cost

September 25, Other surveys and estimates EIA 2008 Annual Energy Outlook (Jun 2008) NETL Cost & Performance Baseline for Fossil Energy Plants (Aug 2007) CEC Comparative costs of California Central Station Electricity Generation Technologies (Jun 2007) Lazard Levelized Cost of Energy Analysis (Jan 2008)

September 25, Comparison to other surveys & estimates CEC based on survey of projects constructed between 2001 & 06

September 25, Proposed Sixth Plan costs

September 25, Adjustments to model input values Overnight (2006$) Derate 0.5% to Station Busbar (2006) Derate 2.7% for Lifecycle Aging (2006$) All-in, 2010 service b (Nominal$) 5 th Plan, 2x1 540MW Base + 70 MW DF $591$657 Proposed 6 th Plan, 2x1 540MW Base, no DF $850$854$877$976 Proposed 6 th Plan, 2x1 540MW Base + 70 MW DF $782 a $786$807$897 a.540 $850/MW /MW b.IOU financing

September 25, Cost of baseload energy (Point of interconnection) IOU financing 2010 service Westside NG, 2007 NPCC forecast CapFac ~ 90% of baseload rating

September 25, Where things stand 2010 service Point of interconnection (wind incl. R & LF) 2008 Federal production tax credits Baseload operation Bingaman/Specter CO2 capping cost