Moving toward a Final Resource Adequacy Standard Resource Adequacy Forum Steering Committee Meeting September 27, 2007

September 27, Outline Review current standard Changes that will not alter the standard Changes that will alter the standard Future considerations for the Forum A look at curtailment events

September 27, PNW Resource Adequacy Standard Based on the assumption that the region will tolerate a 1-in-20 year likelihood of a significant curtailment due to lack of supply The underlying standard is a 5 percent loss-of- load-probability (LOLP) The LOLP standard is “translated” into an annual load/resource balance target to gauge the energy supply And into a peak period surplus reserve margin target to gauge the capacity supply

September 27, Metrics for the NW Standard The choice of metrics is almost arbitrary. The metric must show some relationship between resources and loads. The adequacy target for the metric is derived from a scenario with a 5-percent LOLP.

September 27, Metrics for the NW Standard The metric can be the annual, monthly or even hourly difference between loads and resources, calculated from the 5% LOLP scenario. It can be portrayed in terms of absolute megawatts or in terms of percent.

September 27, Metrics for the NW Standard The metric can include a line item for market supplies in the tally of resources, but it doesn’t have to. The load is usually based on normal weather, but it doesn’t have to be. It can be based on critical hydro, but it doesn’t have to be.

September 27, Caveat Whatever assumptions are used to define the metric must also be used when evaluating the status of the power supply. When one or more of the assumptions in the definition of the metric changes, the underlying standard does not change. Updating resource and load data or improving the simulation program does not change the standard. Under any of these cases, real life resource acquisition decisions will not be altered.

September 27, What can change the Standard? Any change in assumptions that alters the underlying 5 percent LOLP will change the standard. Examples include: The definition for a significant energy event. The definition for a significant capacity event. The months over which events are counted. Adding or subtracting random variables to the simulation. Directly changing the 5 percent target to something else.

September 27, Adequacy Forum’s Charge The Forum is charged with reevaluating the energy and capacity targets each year. As conditions change, the targets may change but the underlying standard remains intact. The Forum is also charged with reviewing the underlying 5 percent LOLP standard and altering it if appropriate. Altering the LOLP standard will change resource acquisition actions.

September 27, Future Considerations that may change the Standard The definition for a significant energy event. The definition for a significant capacity event. Consider using all months of the year. Consider calculating a single LOLP instead of a separate energy and capacity LOLP. Should only “bad” years be counted or should the LOLP be based on bad events? Review the 5 percent LOLP target.

September 27, Cold Hydro Limited GENESYS SimulationIllustrative Example Only

September 27, Curtailment Events (Peaking problems and energy shortages) Each event has a peak and duration.

September 27, Curtailment Events L/R Bal approximately -1,500 aMW This is a scenario that is just adequate for energy needs.

September 27, Curtailment Events L/R Bal approximately -2,000 aMW Or, 500 aMW higher load target

September 27, Additional Slides

September 27, Energy Metric Assumptions Averaged over all hours of the year Load is based on normal weather and includes net interregional firm contracts Resources include In-region spot market (uncommitted IPPs) Critical-year hydroelectric generation A 1500 MWa planning adjustment (derived from the LOLP analysis) accounting for out-of-region spot markets and non-firm hydro generation

September 27, Capacity Metric Assumptions Averaged over the peak load duration hours Load is based on normal weather and includes net interregional firm contracts Resources include In-region spot market (uncommitted IPPs) Critical-year hydroelectric generation A planning adjustment accounting for out-of-region spot markets and non-firm hydro generation

September 27, Resource Assumptions In-region spot market (uncommitted IPPs) Nov-May full IPP capability Jun-Oct 1,000 MW only Out-of-region spot market Nov-May 3,000 MW Jun-Oct 0 MW Non-firm hydro and hydro flex Nov-May 2,000 MW Jun-Oct 1,000 MW

September 27, Targets for the NW Standard Targets are set so that the resulting Loss-of- Load Probability (LOLP) is 5 percent Energy – zero, that is, annual average loads and resources should be in balance Capacity 25 percent for winter months 19 percent for summer months