1. Developing an Idaho Energy Plan Dr. Ren Orans, Managing Partner Arne Olson, Senior Consultant Energy & Environmental Economics, Inc. (E3) Presented To: Idaho Legislative Council Interim Committee on Energy, Environment and Technology Boise, Idaho May 17, 2006 353 Sacramento Street, Suite 1700 San Francisco, CA 94111 Telephone: (415) 391-5100 http://www.ethree.com

2. May 17, 2006 2 About E3 E3 is a San Francisco-based partnership serving the needs of electric and gas utilities, end-users, and government agencies E3 is a San Francisco-based partnership serving the needs of electric and gas utilities, end-users, and government agencies E3 has substantial experience in energy planning and recently prepared an energy resource plan for PNGC Power, a Portland- based group of cooperatives including six Idaho utilities E3 has substantial experience in energy planning and recently prepared an energy resource plan for PNGC Power, a Portland- based group of cooperatives including six Idaho utilities E3 has considerable experience in state-level energy policy analysis E3 has considerable experience in state-level energy policy analysis E3 has an active practice in the Pacific Northwest and understands the unique nature of the Northwest hydro-based power system E3 has an active practice in the Pacific Northwest and understands the unique nature of the Northwest hydro-based power system Arne Olson worked for six years as an energy policy specialist for Washington state tracking energy planning and infrastructure issues Arne Olson worked for six years as an energy policy specialist for Washington state tracking energy planning and infrastructure issues

3. May 17, 2006 3 Developing an Idaho Energy Plan: What Really Matters? Who are the players? Who are the players? Electric and gas utilities Electric and gas utilities Gas pipeline companies Gas pipeline companies Petroleum suppliers & refiners Petroleum suppliers & refiners Idaho PUC/other state agencies Idaho PUC/other state agencies Energy consumers Energy consumers Role of legislature is to establish statutory framework that guides the actions of the players, i.e., the rules of the game Role of legislature is to establish statutory framework that guides the actions of the players, i.e., the rules of the game

4. May 17, 2006 4 Developing an Idaho Energy Plan: What Really Matters? Players need economic analysis, modeling, etc. to support investment decisions Players need economic analysis, modeling, etc. to support investment decisions Legislature does not need detailed quantitative modeling of energy options to support policy decisions Legislature does not need detailed quantitative modeling of energy options to support policy decisions Instead, legislature needs a good understanding of the playing field: Instead, legislature needs a good understanding of the playing field: Who the players are Who the players are Current infrastructure Current infrastructure Technology developments Technology developments Current Idaho statute Current Idaho statute Current and new federal statute Current and new federal statute

5. May 17, 2006 5 Project Scope and Deliverables Review legislative participation in State energy processes from other jurisdictions Task 1 Committee will define Idaho objectives and constraints Task 2 Tasks 3-5 E3 will develop loads and resources descriptions, tables and forecasts E3 will develop and Committee will choose from menu of policy options Task 6 E3 will prepare initial and near-final draft of report Task 7 Assist in legislative and public process if needed Optional June August November February Chapter 5 Chapter 1 Chapters 2-4 Executive Summary and Conclusion Final Report Produced from Chapters

6. May 17, 2006 6 Current Industry Landscape: Electricity Idaho electricity supply still under control of regulated utilities (Avista, Idaho Power, PacifiCorp) or BPA Idaho electricity supply still under control of regulated utilities (Avista, Idaho Power, PacifiCorp) or BPA Single regional grid means some of Idaho’s energy comes from surrounding states Single regional grid means some of Idaho’s energy comes from surrounding states Deregulation pressure has largely fizzled Deregulation pressure has largely fizzled Future developments: Future developments: Utility integrated resource plans Utility integrated resource plans Newer technologies such as wind, geothermal, coal gasification Newer technologies such as wind, geothermal, coal gasification

7. May 17, 2006 7 Current Industry Landscape: Natural Gas Idaho served by Canadian and Rocky Mountain gas via two interstate pipelines: GTN Pipeline (northern Idaho) and NW Pipeline (southern Idaho) Idaho served by Canadian and Rocky Mountain gas via two interstate pipelines: GTN Pipeline (northern Idaho) and NW Pipeline (southern Idaho) Idaho gas companies (Avista, Intermountain Gas) pass through to ratepayers cost of gas commodity purchases Idaho gas companies (Avista, Intermountain Gas) pass through to ratepayers cost of gas commodity purchases Recent price pressures caused by increasing resource scarcity in traditional producing areas Recent price pressures caused by increasing resource scarcity in traditional producing areas Future developments: Future developments: LNG terminals on Pacific Coast LNG terminals on Pacific Coast “Frontier Gas” from Alaska, Northern Canada “Frontier Gas” from Alaska, Northern Canada

8. May 17, 2006 8 Energy Challenges Facing Idaho Today Meeting energy needs of growing population Meeting energy needs of growing population Merchant power plants Merchant power plants State vs. local siting authority State vs. local siting authority Centrally vs. locally assessed Centrally vs. locally assessed Best use of water: hydropower or aquifer recharge Best use of water: hydropower or aquifer recharge PURPA contracts vs. IRPs: How should utilities procure renewables PURPA contracts vs. IRPs: How should utilities procure renewables

9. May 17, 2006 9 What Are Other States Doing? We will find a variety of state positions in our review We will find a variety of state positions in our review Some of the state energy-related functions include: Some of the state energy-related functions include: Energy Facility Siting Energy Facility Siting State Energy/Building Codes State Energy/Building Codes Integrated Resource Planning Standards Integrated Resource Planning Standards Ratemaking Standards Ratemaking Standards Renewables Portfolio Standards Renewables Portfolio Standards Public Purpose or “Systems Benefit” Charges Public Purpose or “Systems Benefit” Charges State Power Authorities State Power Authorities

10. Outline of E3 Proposal

11. May 17, 2006 11 E3 Approach There does not appear to be momentum behind major restructuring initiatives There does not appear to be momentum behind major restructuring initiatives Not enough time before January to do big, grass-roots process Not enough time before January to do big, grass-roots process Instead, focus process on key leverage points Instead, focus process on key leverage points What are the most important issues for the legislature to tackle? What are the most important issues for the legislature to tackle? Where can state action can be most effective? Where can state action can be most effective?

12. May 17, 2006 12 What Is E3 Proposing to Do? 1. Facilitate a discussion of Idaho policy objectives 2. Develop a set of basic information about Idaho energy sector Profile of Idaho energy uses Profile of Idaho energy uses Profile of energy supply infrastructure Profile of energy supply infrastructure Context of current events Context of current events 3. Develop menu of policy options for the Committee to consider 4. Other items as necessary

13. May 17, 2006 13 Task 1: Review of Other States’ Energy Plans E3 will prepare written report and presentation summarizing energy plans from other states E3 will prepare written report and presentation summarizing energy plans from other states Washington, Oregon, Montana, Wyoming, Utah, Nevada, others Washington, Oregon, Montana, Wyoming, Utah, Nevada, others Policy goals identified in enabling documentation Policy goals identified in enabling documentation Policy options the states are considering or already doing Policy options the states are considering or already doing June August November February

14. May 17, 2006 14 Task 2: Facilitated Discussion of Policy Goals for Idaho Develop broad list of high-level policy principles Develop broad list of high-level policy principles Non-partisan, non-idealogical: Non-partisan, non-idealogical: “Maintain Idaho’s low-cost energy advantage” “Maintain Idaho’s low-cost energy advantage” “Conserve Idaho’s natural resources” “Conserve Idaho’s natural resources” “Preserve Idaho’s clean air and water” “Preserve Idaho’s clean air and water” “Provide affordable energy services to all Idahoans” “Provide affordable energy services to all Idahoans” Later, E3 will use these policy principles to “score” policy options Later, E3 will use these policy principles to “score” policy options June August November February June August November February

15. May 17, 2006 15 Task 3: Current and Projected Energy Demand E3 will prepare written report and presentation on Idaho’s current and projected energy use: E3 will prepare written report and presentation on Idaho’s current and projected energy use: By fuel (electricity, natural gas, petroleum products) By fuel (electricity, natural gas, petroleum products) By sector (residential, commercial, industrial) By sector (residential, commercial, industrial) Large energy users in Idaho Large energy users in Idaho Idaho energy prices compared to neighboring states and U.S. average Idaho energy prices compared to neighboring states and U.S. average Idaho energy intensity compared to neighboring states and U.S. average Idaho energy intensity compared to neighboring states and U.S. average Projected growth Projected growth June August November February

16. May 17, 2006 16 Task 4: Energy Supply Infrastructure Description E3 will prepare written report and presentation on Idaho’s energy infrastructure E3 will prepare written report and presentation on Idaho’s energy infrastructure Describe major infrastructure and who owns and operates it Describe major infrastructure and who owns and operates it Power plants & transmission lines Power plants & transmission lines Oil and gas supply basins, pipelines, and refineries Oil and gas supply basins, pipelines, and refineries Statutory and regulatory framework Statutory and regulatory framework Rate regulation Rate regulation State roles in facility siting State roles in facility siting June August November February

17. May 17, 2006 17 Task 4: Energy Supply Infrastructure Description (2) How are infrastructure improvements planned, permitted, built and paid for? How are infrastructure improvements planned, permitted, built and paid for? Utility integrated resource plans Utility integrated resource plans Gas pipeline open seasons Gas pipeline open seasons New energy supply options New energy supply options Coal, gas, wind, geothermal, nuclear Coal, gas, wind, geothermal, nuclear LNG, frontier gas, coalbed methane LNG, frontier gas, coalbed methane How are energy efficiency and demand-side management incorporated into resource plans? How are energy efficiency and demand-side management incorporated into resource plans? June August November February

18. May 17, 2006 18 Task 5: Current Events Affecting Idaho Energy Sector E3 will prepare written report and presentation on current events affecting Idaho energy companies E3 will prepare written report and presentation on current events affecting Idaho energy companies Electricity deregulation Electricity deregulation FERC policy and regional efforts to form transmission entity FERC policy and regional efforts to form transmission entity EPACT 2005 and repeal of PUHCA EPACT 2005 and repeal of PUHCA Supply and price pressures in natural gas and oil sectors Supply and price pressures in natural gas and oil sectors Merchant power plants/energy facility siting Merchant power plants/energy facility siting IPUC decisions regarding PURPA generators IPUC decisions regarding PURPA generators Proposed transmission lines linking Wyoming coal or Alberta oil sands with loads in the Southwest Proposed transmission lines linking Wyoming coal or Alberta oil sands with loads in the Southwest Others… Others… June August November February

19. May 17, 2006 19 Task 6: Menu of Policy Options E3 will develop a broad list of possible policy options derived from a variety of sources: E3 will develop a broad list of possible policy options derived from a variety of sources: Recent Idaho legislation Recent Idaho legislation Other state energy plans Other state energy plans Committee and stakeholder ideas Committee and stakeholder ideas E3 pet ideas E3 pet ideas E3 will score the policy options for how well they meet the policy goals established early on by the Interim Committee E3 will score the policy options for how well they meet the policy goals established early on by the Interim Committee June August November February

20. May 17, 2006 20 Tasks 7 and 8: Draft Final Report and Present Results to Committees E3 will prepare a near-final draft of the report to the legislature E3 will prepare a near-final draft of the report to the legislature E3 will be available to make presentations to Energy Committees E3 will be available to make presentations to Energy Committees June August November February

21. May 17, 2006 21 E3 Proposal Time and materials basis with a not-to-exceed budget of $190,860 for Tasks 1-8 Time and materials basis with a not-to-exceed budget of $190,860 for Tasks 1-8 Special research projects as directed by the Interim Committee on a time and materials basis Special research projects as directed by the Interim Committee on a time and materials basis E3 is willing to work with any other consultants the committee may select E3 is willing to work with any other consultants the committee may select

22. Why Choose E3?

23. May 17, 2006 23 Why Choose E3? Industry planning experience. E3 is trusted by utilities to do economic analysis and strategic planning supporting major investments. Industry planning experience. E3 is trusted by utilities to do economic analysis and strategic planning supporting major investments. Regulatory knowledge. E3 consultants regularly provide expert testimony in front of state and provincial regulatory authorities. Regulatory knowledge. E3 consultants regularly provide expert testimony in front of state and provincial regulatory authorities.

24. May 17, 2006 24 Why Choose E3? Supply-side and demand-side expertise. E3 is trusted by advocates of both supply-side and demand-side resource options. Supply-side and demand-side expertise. E3 is trusted by advocates of both supply-side and demand-side resource options. State-level policy experience. E3 supports state initiatives in California, and E3 consultants have considerable experience with state-level energy policy issues. State-level policy experience. E3 supports state initiatives in California, and E3 consultants have considerable experience with state-level energy policy issues.

25. May 17, 2006 25 Why Choose E3? Understanding of consultant’s role. E3 will help frame the issues for the committee to consider, but will not bring its own agenda. E3 is trusted by a broad range of stakeholders for its unbiased analysis. Understanding of consultant’s role. E3 will help frame the issues for the committee to consider, but will not bring its own agenda. E3 is trusted by a broad range of stakeholders for its unbiased analysis. Client focus. E3’s projects always benefit from the experience and personal attention of its partners. Client focus. E3’s projects always benefit from the experience and personal attention of its partners.

26. May 17, 2006 26 Recent E3 Energy Plans