1. The Nature of Risky Futures Michael Schilmoeller Thursday May 19, 2011 SAAC

2. 2 Outline Return to Future 750 Overbuilding, is it expensive? “Overbuilding is a planning blunder” Lack of foresight and the consequences The role of mid-study CCCTs Getting it wrong

3. 3 Future 750 NPV Cost: $72,351,242,187.50 C:\Backup\Plan 5\Portfolio Work\Olivia\SAAC 2010\110519 SAAC Meeting\Analysis of futures\Illustrations\Spinner_L813LR_EUCI_SAAC.xls

4. 4 Average over all futures NPV Cost: $78,868,493,989.58

5. 5 Loads

6. 6 Electricity Price

7. 7 Natural Gas Price

8. 8 Carbon Penalty

9. 9 Power Cost per kWh

10. 10 A More Useful Comparison Compare Future 750 with CCCTs against Future 750 without CCCTs Look not only at cost, but also at what the cost burden per ratepayer would be –Use (Total Cost)/(Frozen Efficiency Load), not (Total Cost)/(Frozen Efficiency Load- Conservation Energy) –We want to treat conservation as we would any other resource used to meet the frozen efficiency load

11. 11 Future 750 with no CCCT NPV Cost: $72,351,242,187.50 NPV Cost: $66,913,822,724.86 Source: C:\Backup\Plan 5\Portfolio Work\Olivia\SAAC 2010\110519 SAAC Meeting\Analysis of futures\L8133Future_750_110429_150342 no CCCT.xls

12. 12 Future 750 with no CCCT

13. 13 We Need To Get It Wrong Sometimes How much we are willing to pay for an option (to build a power plant) depends on both –The cost if we cannot build it, but turn out to need it –The cost if we build it, but turn out not to need it

14. 14 The Value of Mid-Study CCCTs The Sixth Power Plan resource portfolio included siting and licensing for nine 415 MW CCCTs, such that we could break ground in 2019 Expected load growth was virtually flat and electricity and natural gas prices were moderate The plan did not “predict” we would build the CCCTs; probability of completion was about 30 percent. The preparation for the CCCTs was driven by the carbon penalty risk

15. 15 End

16. 16 Source: workbook “L811x1_LR2.xls”, worksheet “Data (9)”