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Long Range Financial Forecast Review Energy and Capacity Demand Bob Millard

Long Range Financial Forecast Review Energy and Capacity Demand Bob Millard System Planning, RPSF, Load Forecasting January 14, 2008. December 2007 Long Range Plan System Planning, RPSF, Load Forecasting. Key Forecast Inputs/Drivers

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Long Range Financial Forecast Review Energy and Capacity Demand Bob Millard

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  1. Long Range Financial Forecast Review Energy and Capacity Demand Bob Millard System Planning, RPSF, Load Forecasting January 14, 2008

  2. December 2007 Long Range Plan System Planning, RPSF, Load Forecasting Key Forecast Inputs/Drivers • Economic Drivers: Gross Regional Product (GRP), Employment, Population/Residential Customer Count • Prices: Retail Electric and Natural Gas Prices • USEC: monthly forecasts decreases by 50% over same month previous year beginning in June 2012; 30 MW maintenance load all hours beginning in June 2015. • Departing Distributors: removed based on their dates of notice, Princeton is removed Nov08, Paducah is removed Dec09, and Monticello is removed Jan10, 207 MW and 991 GWh in 2012. • Demand Side Management (DSM): 30 MW in 2008 growing to 520 MW by 2012, sum of 9 programs Changes from the June 2007 PSP • GRP growth has decreased from 3.0% in the Jun07 forecast to 2.5% in the Dec07 forecast for CY08. • TVA service area employment growth has decreased from 1.4% to 0.9% for CY08. • Long-term, the regional economy is expected to grow at a slightly slower rate than previously forecast, with healthy income, population, and employment growth over the next 20 years. • Retail electric prices are increased and the Dec07 forecast includes both a 7% firm rate increase beginning in April 2008 and recent impacts of FCAs. • Retail natural gas prices are slightly increased because of the retail margin used to mark-up the wholesale Henry-Hub price. Risks & Outcomes • Potential risks to the forecast include non-normal or extreme weather, deviations from the economic forecast (possible recession in FY08), and changes in the usage patterns or levels of large industrial customers.

  3. December 2007 Long Range Plan System Planning, RPSF, Load Forecasting Changes to Plan: • Economic outlook for CY08 was revised downward between the Jun07 and Dec07 forecasts with slightly lower growth rates for GRP and TVA area employment. • Dec07 retail electric prices increased to include the impacts of a 7% firm rate increase in April 2008. • Dec07 M&C forecast was reduced because of weaker than expected sales in FY07. After adjusting for the record setting summer temperatures and other weather, FY07 sales were 2.1% below budget. • Most of the downward revision in the forecast amounts to an adjustment to a starting point more consistent with actual sales as FY07 ended and the revised economic outlook. • Assumptions for USEC, departing distributors, and DSM are unchanged. • Lower long-term forecast is mainly due to the lower starting point in the short-term forecast. Annual TVA System Peak & Energy Dec07 start from lower initial year (FY08), then follows path similar to Jun07 PSP over the next 4-5 years.

  4. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting Forecast Uncertainty • Long-term uncertainty does not include weather. Estimated seasonal weather uncertainty range is • Winter: +/- 1970 GWH Energy, +/- 2299 MW Peak • Summer: +/- 2786 GWH Energy, +902/-1421 MW Peak • High and Low forecast ranges are developed based on modeled effects of high and low major inputs: Economic forecast, Electricity Prices, Natural Gas Prices, and Direct Served Sales • Final High and Low forecasts are estimates of 90th and 10th percentile uncertainty cases from combinations of factors above • High and Low forecasts continue to use normal weather, and show load uncertainty caused only by these major structural causes • Seasonal weather uncertainty for the same 10-90 range is more nearly uniform in any given year, with some trend expected over longer time periods.

  5. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting

  6. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting

  7. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting

  8. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting

  9. FY 2008 Contracting Plan System Planning, RPSF, Load Forecasting Economic Inputs: June vs. December 2007 Change (December-June 2007) Electric & Gas Prices Population, GRP, & Employment

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