Relationship of Regional Resource Adequacy Standards to Utility Planning PNW Resource Adequacy Steering Committee Meeting June 27, 2007

Resource Adequacy Steering Committee Meeting 2 Objectives Show the connection between regional resource adequacy standards and utility planning. Must not “trample on the jurisdiction of states or prerogatives of individual utilities in planning and acquiring resources to meet load.”

June 27, 2007Resource Adequacy Steering Committee Meeting 3 Steering Committee’s Charge Develop a simple “rule of thumb” process to convert regional energy and capacity targets into useful values for utilities. Utilities can use this process as a general screening tool but will continue to use their own methods to develop resource plans.

June 27, 2007Resource Adequacy Steering Committee Meeting 4 Regional Energy Adequacy Standard Based on a 5% winter energy LOLP Resources = average annual load Assuming adverse hydro conditions Out-of-region market supply and In-region market supply (uncontracted IPP, non-firm hydro)

June 27, 2007Resource Adequacy Steering Committee Meeting 5 Regional Capacity Adequacy Standard Based on a 5% capacity LOLP Resources = avg peak load + reserve margin Assuming adverse hydro conditions and In-region and out-of-region market supply Reserve margin covers Operating reserves Extreme temperature events Other contingencies

June 27, 2007Resource Adequacy Steering Committee Meeting 6 Developing a Rule-of-Thumb Process Need to take into account dependence on Non-firm hydro and hydro flexibility Out-of-region winter market supply In-region market supply A utility will be energy or capacity constrained depending on its resource mix

June 27, 2007Resource Adequacy Steering Committee Meeting 7 Binding ConstraintEnergyEnergy???????Capacity Hydro/Thermal Mix 100% Hydro 100% Thermal Region Binding Constraint as a function of Resource Mix

June 27, 2007Resource Adequacy Steering Committee Meeting 8 Simple Example: 100% Thermal Utility Annual load = 1,000 MWa Peak single-hour load = 1,600 MW Winter capacity reserve = 25% or 400 MW 7% operating reserves 15% reserves for extreme temp 3% reserves for other contingencies

June 27, 2007Resource Adequacy Steering Committee Meeting 9 Simple Example: 100% Thermal Utility Capacity target = 2,000 MW Energy target = 1,000 MWa Capacity-constrained Resource planning focuses on the capacity target

June 27, 2007Resource Adequacy Steering Committee Meeting 10 Form for a “Rule-of-Thumb” Method Determine reliance on non-firm/uncommitted resources Non-firm hydro and hydro flexibility In-region and out-of-region market supplies Energy standard: Resources = annual average load Capacity standard: Resources = avg peak load + reserve margin

June 27, 2007Resource Adequacy Steering Committee Meeting 11 Non-firm/Uncommitted Regional Resources Capacity Out-of-region market 3,000 MW winter None in summer Hydro flexibility 2,000 MW winter 1,000 MW summer Uncontracted IPPs 3,000 MW winter 1,000 MW summer 1,500 MWa (from LOLP) 2,500 MWa (revised) Energy

June 27, 2007Resource Adequacy Steering Committee Meeting 12 Current Assumptions for the Regional Energy Standard Existing uncontracted in-region IPP generation (2,500 MWa, revised) Other non-firm/uncommitted resources (1,500 MWa, derived from the LOLP analysis): –Out-of-region winter market –Hydro flexibility & non-firm hydro Non-firm/uncommitted resources = 4,000 MWa or about 18% of the regional load If sum of regional firm resources ≥ 82% firm load, then enough resources to “keep lights on”

June 27, 2007Resource Adequacy Steering Committee Meeting 13 Non-firm/Uncommitted Resources for Utility Planning Utility decides on % of non-firm/uncommitted resources based on its risk mitigation strategy, or other methods In lieu of the above, a very rough estimate: In-region Market = Regional total * Load share Out-of-Region Market = Regional total * Load share Non-firm hydro = Regional total * Hydro share Utility is “physically adequate” if: Resources = annual average load Resources = avg peak load + reserve margin

June 27, 2007Resource Adequacy Steering Committee Meeting 14 Caveats to “Rule of Thumb” Process Utilities need to make their own decisions regarding their risk tolerance for non-firm/ uncommitted resources in their portfolio mix in coordination with their regulators/ local boards The Forum process determines a minimum level of physical resource adequacy, but does not address the risk to high electricity prices

June 27, 2007Resource Adequacy Steering Committee Meeting 15 WECC Single-Hour Capacity Reserve Margin

June 27, 2007Resource Adequacy Steering Committee Meeting 16 WECC Single Hour Reserve Margin Targets 1/ 1/ Approved at June 2007 WECC PCC Meeting