1. Sixth Power Plan A Public Utility Point of View Bill Gaines, Director, Tacoma Public Utilities Craig Smith, Assistant General Manager, Snohomish PUD Northwest Power and Conservation Council Meeting June 11, 2009

2. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 2

3. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 3

4. Conservation Philosophy 4  Public power utilities are committed to acquiring all cost-effective energy efficiency for the benefit of the region and our customers  Increasing marginal costs and State requirements (e.g., I-937)provide additional incentive to pursue energy efficiency  Many utilities, Tacoma and Snohomish included, are increasing internal savings targets and expanding delivery capabilities

5. Draft Sixth Plan Economic Potential 5

6. Draft Sixth Plan Five Year Target aMW 6

7. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 7

8.  Technology Readiness (Full/Partial/Low)  Full = no technical or product related issues  Partially = some questions about technology or application in the NW  Low = product needs major work to validate performance or modify technology for NW  Verified Savings Readiness (Full/Partial/Low  Full = robust savings assessments (deemed savings or savings calculation methodology defined) completed in region  Partial = transferrable savings assessments outside of the region or preliminary assessments within the region  Low = little or no savings verification conducted to date  Market Readiness (Full/Partial/Low)  Full = all elements of the supply side channel are fully capable of delivering and can be scaled up easily  Partial = missing pieces of delivery chain or difficulties with scaling  Low = significant work required for delivery chain and scaling  Program Readiness (Full/Partial/Low)  Full = successful program experience in region  Partial = pilot experience in region or transferrable program experience outside of region  Low = Little or no program experience Measure Readiness Work Group Assessment of Individual Measures Developed by Utility, Bonneville and NEEA Staff 8

9. aMW 9

10. Measure Readiness Work Group Assessment of Individual Measures Developed by Utility, Bonneville and NEEA Staff 10 aMW

11. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 11

12. Regional Cumulative Conservation Achievement  According to the Council, only about half of the conservation achievements recorded since 1980 have been achieved via BPA/Utility Programs  The other half are reported to have been achieved via alliance programs, state codes and federal standards Source: NWPCC 12

13. Annual Conservation Achievement: Utility vs. Alliance Programs  Over the last 10 or so years, Alliance Programs such as NEEA sponsored programs have been responsible for a significant portion of reported acquisitions  This is expected to continue to be the case in the future Source: NWPCC 13

14. Potential Alternative Treatment of Emerging Measures Energy Trust of OR Resource Assessment Example 14

15. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 15

16. 5th Plan vs. Draft 6th Plan: Annual Targets 16

17. 17 Historical Accomplishments vs. Draft 6th Plan Annual Targets 2007-2008 CFL are estimates Note: CFL Accomplishments based on BPA/Public acquisitions extrapolated to region

18. Accomplishments vs. 5th Plan Targets  Council staff states that targets provide both a floor and ceiling for achievement  Recent experience shows that utilities and others in the region are willing to exceed regional targets if conservation is available, achievable, reliable and cost-effective  Measures should meet threshold criteria before inclusion in targets  Plan can address R&D, market development, evaluation needs Note: CFL Accomplishments based on BPA/Public acquisitions extrapolated to region 18

19. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 19

20. Effect of Increased Targets  With the phasing out of CFLs, savings will come from higher cost/higher touch measures  To meet aggressive goals may require  Increased share of the measure borne by utility vs. by customers  Administrative costs may increase for marketing, R&D, evaluation, etc.  EE budgets requirements will increase by 200% to 250% (more than the increase in savings)  Staffing and infrastructure will need to grow to support higher targets 20

21. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 21

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23. Conservation Target Sensitivity to Carbon Cost Assumptions?  Council has run some sensitivity analyses on Carbon Variable (i.e. no Carbon Cost run)  Results suggest only minor decrease in conservation acquisition target (about 5400+ in no Carbon Cost scenario vs. 5800+ in Base case)  However, it is uncertain whether this is a meaningful result since RPS requirements were not included in the no Carbon Cost run, but were included in the Base Case run (i.e. apples to oranges comparison)  Recommendation: Run new Sensitivity case only modifying Carbon Costs (leave other variables same as base) 23

24. Topics 1.Draft 6 th Plan Potential and Targets 2.New and Revised Measure Readiness 3.Targets Outside of Utility Control 4.Acquisition Ramp Concerns 5.Revenue Requirement Impacts 6.Carbon Cost Assumptions 7.Conservation Ramps - Council & I-937 24

25. 25 WA RPS (I-937) Further Acceleration of Utility Targets

26. Summary  Significant efforts are underway to assess the Conservation Supply Curves and associated targets – for understanding and to prepare for implementation  The action plan should set aggressive, but achievable, targets for the region – the targets recommended by the Council staff are unrealistically high  Strong incentives exist for utilities to adopt measures that meet the cost and reliability thresholds as they come available  Establishing a range for acquisition targets could address uncertainty  In addition to acquisition targets, the action plan should include plan to develop new and emerging technologies to ensure sustained potential – before they become targets 26