Providing Resource Planning Guidance to Individual Utilities PNW Resource Adequacy Technical Committee Meeting June 20, 2007

Resource Adequacy Technical Committee Meeting 2 Objectives Use the regional standard to provide non-binding guidance to individual utilities to aid them in their resource planning processes. Must not “trample on the jurisdiction of states or prerogatives of individual utilities in planning and acquiring resources to meet load.”

June 20, 2007Resource Adequacy Technical 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 20, 2007Resource Adequacy Technical Committee Meeting 4 Regional Energy 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 20, 2007Resource Adequacy Technical Committee Meeting 5 Regional Capacity 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 20, 2007Resource Adequacy Technical Committee Meeting 6 WECC Single-Hour Capacity Reserve Margin

June 20, 2007Resource Adequacy Technical Committee Meeting 7 WECC Single Hour Reserve Margin Targets 1/ 1/ Approval Item at June 2007 WECC PCC Meeting

June 20, 2007Resource Adequacy Technical Committee Meeting 8 Developing a Rule-of-Thumb Process Need to take into account dependence on Non-firm hydro and hydro flexibility Out-of-region spot market supply In-region market supply A utility will be energy or capacity constrained depending on its resource mix

June 20, 2007Resource Adequacy Technical Committee Meeting 9 Binding ConstraintEnergyEnergy???????Capacity Hydro/Thermal Mix 100% Hydro 100% Thermal Region Binding Constraint as a function of Resource Mix

June 20, 2007Resource Adequacy Technical Committee Meeting 10 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 20, 2007Resource Adequacy Technical Committee Meeting 11 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 20, 2007Resource Adequacy Technical Committee Meeting 12 Form for a “Rule-of-Thumb” Method Determine reliance on non-firm resources Non-firm hydro and hydro flexibility In-region and out-of-region market supplies Energy guidance: Resources = annual average load Capacity guidance: Resources = avg peak load + reserve margin

June 20, 2007Resource Adequacy Technical Committee Meeting 13 Non-firm Resources for the Region Capacity Out-of-region market 3,000 MW winter None in summer Hydro flexibility 2,000 MW winter 1,000 MW summer In-region IPP market 3,000 MW winter 1,000 MW summer 1,500 MWa (from LOLP) 2,500 MWa (revised) Energy

June 20, 2007Resource Adequacy Technical Committee Meeting 14 Current Assumptions for the Regional Energy Standard Existing uncontracted in-region IPP generation (2,500 MWa, revised) Other non-firm resources (1,500 MWa, derived from the LOLP analysis): –Out-of-region spot market –Hydro flexibility & non-firm hydro Non-firm resources = 4,000 MWa or about 18% of the regional load Sum of regional firm resources ≥ 82% firm load

June 20, 2007Resource Adequacy Technical Committee Meeting 15 Non-firm Resources for Utility Planning Utility will decide on % of non-firm resources based on its risk mitigation strategy, or other methods Rule-of-thumb guidance – Option 1: In-region Spot Market = Regional total * Load share Out-of-Region Spot Market = Regional total * Load share Non-firm hydro = Regional total * Hydro share

June 20, 2007Resource Adequacy Technical Committee Meeting 16 Non-firm Resources for Utility Planning Rule-of-thumb guidance – Option 2 (Energy) : Half of region’s utilities are hydro utilities 1/, thus Hydro utility, ∑ FIRM resources ≥ 70% of its load Thermal utility, ∑ FIRM resources ≥ 90% of its load Rule-of-thumb guidance – Option 2 ( Capacity): Possible sliding scale of reserve margin targets with thermal utilities having lower targets and hydro utilities having higher targets due to hydro volatility as well as flexibility 1/ Hydro utilities secure 25% or more of their firm resources from hydro

June 20, 2007Resource Adequacy Technical Committee Meeting 17 Non-firm Resources for Utility Planning Rule-of-thumb guidance – Option 3: In-region spot market, out-of-region spot market and non- firm hydro reliance is derived from utility-level LOLP studies with a target of 5% or less