STATEWIDE ADVISORY GROUP

1. STATEWIDE ADVISORY GROUP Fifth Meeting September 7, 2018 SWAG Meeting

2. SWAG Intent Why Are We Here? As outlined in its Charter, the SWAG was created to address three issues raised in the IOUs’ 2018-2019 BCPs: • Develop a report that makes a recommendation for the treatment of Alliance savings reported by NEEA.* The Commission expects the SWAG to discuss: 1. the various subsets of NEEA savings, 2. whether the EIA requires that NEEA savings are included in target calculations, 3. consistency with target setting requirements for consumer-owned utilities, and 4. the degree of control the Companies have over NEEA’s execution of its programs, and submit its findings and recommendations to the Commission. • Identify areas of improvement to UTC cost-effectiveness methodology by investigating RVT. “Staff strongly agrees that the NSPM should be followed in a collaborative process to identify areas of improvement to UTC cost-effectiveness methodology. Staff suggests that any such comprehensive process commence after the conclusion of the Commission’s current integrated resource plan (IRP) rulemaking in Docket U-161024.” • Discuss potential performance incentives. “(…) the Company suggests conducting a workshop in a statewide collaborative setting. This may be a useful exercise and Staff proposes a joint advisory group meeting halfway through the biennium to discuss this, as well as any other common issues.” * Item (1) is the only issue with a deliverable. September 7, 2018 SWAG Meeting

3. Welcome Dan Anderson Objective: Work as a group to make progress on Step 3 of the Resource Value Framework. September 7, 2018 SWAG Meeting

4. Agenda - Morning Dan Anderson September 7, 2018 SWAG Meeting

5. Agenda - Afternoon Dan Anderson September 7, 2018 SWAG Meeting

6. SAFETY MOMENT Lance Rottger September 7, 2018 SWAG Meeting

7. Slow Down: Back to School Means Sharing the Road • If You're Dropping Off • Schools often have very specific drop-off procedures for the school year. Make sure you know them for the safety of all kids. More children are hit by cars near schools than at any other location. • Sharing the Road with Young Pedestrians • Most of the children who lose their lives in bus-related incidents are 4 to 7 years old, and they're walking. They are hit by the bus, or by a motorist illegally passing a stopped bus. • Sharing the Road with School Buses • If you're driving behind a bus, allow a greater following distance than if you were driving behind a car. • Sharing the Road with Bicyclists • On most roads, bicyclists have the same rights and responsibilities as vehicles, but bikes can be hard to see.  

8. RVF – Progress Jennifer Snyder September 7, 2018 SWAG Meeting

9. RVF Steps Jennifer Snyder September 7, 2018 SWAG Meeting Step 1 - Identify and articulate the jurisdiction’s applicable policy goals. Step 2 - Include all utility system costs and benefits. Step 3 - Decide which additional non-utility system costs and benefits to include in the test, based on applicable policy goals. Step 4 - Ensure the test is symmetrical in considering both costs and benefits. Step 5 - Ensure the analysis is forward-looking, incremental, and long-term. Step 6 - Develop methodologies and inputs to account for all impacts, including hard-to-quantify impacts. Step 7 - Ensure transparency in presenting the analysis and the results.

10. SWAG activity using the RVF Jennifer Snyder September 7, 2018 SWAG Meeting Step 1 - Identify and articulate the jurisdiction’s applicable policy goals. • Staff draft sent to SWAG – June 28 • SWAG meeting # 3– June 29 • Utility comments – August 2 • Public counsel comments – August 24 Cannot reach consensus on policy goals without identifying costs and benefits implied Step 2 - Include all utility system costs and benefits. • Utilities provided AC-TRC matrix – March 29 • SWAG meeting – August 3 Only a few items require additional analysis and/or discussion.

11. Goals for today Jennifer Snyder September 7, 2018 SWAG Meeting Discuss which additional non-utility system costs and benefits should be included in the WA IOU RVT. Do not worry about accounting methodologies, we will get to that soon. UTC Staff will use today’s discussion to inform a proposal.

12. Cost-effectiveness in statute Jennifer Snyder September 7, 2018 SWAG Meeting RCW 19.285.030 as defined in RCW 80.52.030 (7)"Cost-effective" means that a project or resource is forecast: (a) To be reliable and available within the time it is needed; and (b) To meet or reduce the electric power demand of the intended consumers at an estimated incremental system cost no greater than that of the least-cost similarly reliable and available alternative project or resource, or any combination thereof. (8) "System cost" means an estimate of all direct costs of a project or resource over its effective life, including, if applicable, the costs of distribution to the consumer, and, among other factors, waste disposal costs, end-of-cycle costs, and fuel costs (including projected increases), and such quantifiable environmental costs and benefits as are directly attributable to the project or resource.

13. Cost-effectiveness in rule Jennifer Snyder September 7, 2018 SWAG Meeting WAC 480-109-100 (8) Cost-effectiveness. A utility's conservation portfolio must pass a cost-effectiveness test consistent with that used in the Northwest Conservation and Electric Power Plan. A utility must evaluate conservation using cost-effectiveness tests consistent with those used by the council, and as required by the commission, except as provided by subsection (10) of this section. WAC 480-100-238 (1) Each electric utility regulated by the commission has the responsibility to meet its system demand with a least cost mix of energy supply resources and conservation. (2)(b) "Lowest reasonable cost" means the lowest cost mix of resources determined through a detailed and consistent analysis of a wide range of commercially available sources. At a minimum, this analysis must consider resource cost, market-volatility risks, demand-side resource uncertainties, resource dispatchability, resource effect on system operation, the risks imposed on ratepayers, public policies regarding resource preference adopted by Washington state or the federal government and the cost of risks associated with environmental effects including emissions of carbon dioxide.

14. UG-121207 - Policy Statement Jennifer Snyder September 7, 2018 SWAG Meeting On The Evaluation Of The Cost-effectiveness Of Natural Gas Conservation Programs Without a rigorous technical determination of the amount at which the risk reduction value and non-energy benefits should be set, gas companies’ TRC analyses are likely incomplete. With proper quantification of these values (conservation’s risk reduction value, the downward price pressure from reduced demand, and non-energy benefits), a properly balanced TRC analysis couldbe possible. We acknowledge the appeal of a cost test that comprehensively addresses the environmental, health, and national security benefits of conservation. However, as we discuss further below, we see no need to adopt this test now because the UCT or modified TRC achieves a similar result while providing a more objective accounting of economic costs. Additionally, the SCT is more complex to administer because it requires measuring more non-energy benefits than the TRC, amplifying the challenge of quantifying difficult-to-measure benefits.

15. Non-utility costs and benefits in TRC Jennifer Snyder September 7, 2018 SWAG Meeting Non-energy impacts are included when directly quantifiable and attributable to specific measures. Values typically taken directly from the Regional Technical Forum. Environmental externalities – emissions of CO2 Full incremental measure cost (material & labor) Ongoing and periodic O&M costs (plus or minus) Non-incentive Program Costs (planning, marketing, delivery, admin, evaluation, etc.) Not included. TRC is not reduced for tax credits. Renewable resource costs are reduced for credits, creating a potential consistency issue. Efficiency credits are more difficult to calculate.

16. RVF Step 3 – Introduction Jennifer Snyder September 7, 2018 SWAG Meeting

17. RVF Steps Jennifer Snyder September 7, 2018 SWAG Meeting Step 1 - Identify and articulate the jurisdiction’s applicable policy goals. Step 2 - Include all utility system costs and benefits. Step 3 - Decide which additional non-utility system costs and benefits to include in the test, based on applicable policy goals. Step 4 - Ensure the test is symmetrical in considering both costs and benefits. Step 5 - Ensure the analysis is forward-looking, incremental, and long-term. Step 6 - Develop methodologies and inputs to account for all impacts, including hard-to-quantify impacts. Step 7 - Ensure transparency in presenting the analysis and the results.

18. RVF Step 3 Jennifer Snyder September 7, 2018 SWAG Meeting Decide which non-utility costs and benefits to include Why should customers pay for non-utility benefits? • Utility customers should pay for these benefits if called for by applicable policies in statutes, regulations, and orders. • In many cases all customers share in non-utility benefits Builds on Step 1 & 2

19. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Used & useful Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens Reduction of coal-fired electricity

20. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Used & useful Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens Reduction of coal-fired electricity

21. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Used & useful Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens Reduction of coal-fired electricity

22. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Used & useful Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens Reduction of coal-fired electricity

23. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Types of impacts and to whom Used & useful Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens Reduction of coal-fired electricity

24. Examples of non-utility costs and benefitsfrom NSPM Jennifer Snyder September 7, 2018 SWAG Meeting Participant impacts • Impacts on low-income customers • Other fuel impacts • Water impacts Societal or all customer impacts • Environmental impacts • Public health impacts • Societal low-income impacts • Economic development and jobs • Energy security

25. Low-Income Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal - Special consideration for low-income customers What impacts accrue to the participant? Are there impacts justify investment beyond avoided cost? What impacts accrue to society?

26. Senior Citizen Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal - Special consideration for senior citizens What impacts accrue to the participant? Are there impacts justify investment beyond avoided cost? What impacts accrue to society?

27. Other Fuel Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal – Industry neutrality; Environmental: Energy and non-energy impacts from emissions, water, etc

28. Water Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal - Environmental: Energy and non-energy impacts from emissions, water, etc.

29. Environmental Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal - Environmental: Energy and non-energy impacts from emissions, water, etc. Societal Cost of Carbon commission guidance from IRP acknowledgement letters

30. Public Health Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal - Environmental: Energy and non-energy impacts from emissions, water, etc.; Provide safe service; PM 2.5 - commission guidance from comments on 7th Power Plan

31. Economic Development and Job Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal – Economic development

32. Energy Security Impacts Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goal – Manage risk; Resource diversity

33. Other Impacts? Jennifer Snyder September 7, 2018 SWAG Meeting Policy Goals not addressed previously – Lowest reasonable cost; Maintain reliability Are any other policy goals not sufficiently addressed? Are there impacts to discuss that do not fit with the staff identified policy goals?

34. Applicable Policy Goals Jennifer Snyder September 7, 2018 SWAG Meeting Lowest reasonable cost Industry neutrality Manage risk Maintain reliability Provide safe service Environmental: Energy and non-energy impacts from emissions, water, etc. Resource diversity Economic development Special consideration for low-income customers Special consideration for senior citizens

35. LUNCH September 7, 2018 SWAG Meeting

36. Speaking of throwing balls Jennifer Snyder Sterling Professor Emeritus of Physics at Yale University and former Physicist to the National League. He is the first to do a comprehensive study of the subject, resulting in a popular book appropriately entitled The Physics of Baseball, originally published in 1990 and currently in its 3rd edition (2002). September 7, 2018 SWAG Meeting "But the physics of baseball is not the clean, well-defined physics of fundamental matters, but the ill-defined physics of the complex world in which we live...Hence conclusions about the physics of baseball must depend on approximations and estimates. But estimates are part of the physicist's repertoire.“ • Robert Adair

37. RVF Step 3 Workshop September 7, 2018 SWAG Meeting

38. Identify All Relevant Impacts Jennifer Snyder September 7, 2018 SWAG Meeting

39. WRAP-UP, NEXT STEPS and ADJOURN September 7, 2018 SWAG Meeting

40. Wrap-up and Adjourn Dan Anderson September 7, 2018 SWAG Meeting Next steps Next meeting– • Step 6 – Developing Methodologies to Account for All Relevant Impacts • PSE/Cadmus presentation Other Issues?