Washington Utilities and Transportation Commission

1. Washington Utilities and Transportation Commission Mission Statement The WUTC protects consumers by ensuring that utility and transportation services are fairly priced, available, reliable, and safe. Natural Gas Conservationand Planning Patrick Oshie, Commissioner November 7, 2003

2. Introduction:Who Is the WUTC? • Three Commissioners • appointed by the Governor • confirmed by the Senate • staggered 6-year terms • law requires political balance • Governor appoints Chair • 165 FTE Staff • accountants, attorneys, economists, engineers, investigators, auditors

3. The “U” in WUTC • 600+ telecommunications companies • 23 “traditional” telephone companies • 3 electric companies • 4 natural gas companies • 68 water companies

4. The “T” in WUTC • 79 solid & medical waste collectors • 224 moving companies • 23 bus and airporter operations • 17 commercial ferries • 77 non-profit special needs carriers • 171 charter & excursion busses • 7,789 trucking firms • 21 railroads

5. The WUTC’s Role • Economic Regulation • entry in industry • rates, terms & conditions • competitive rules • Consumer Protection • service standards • notice & disclosures • complaint mediation • Public Safety • hiring & training standards • design standards • minimum equipment standards • maintenance and insurance

6. The WUTC’s Legislative Decision-Making • Open Meetings • public presentation on decision items • commission deliberation • opportunity for public comment • items may be decided at the open meeting or suspended for hearing • Rulemaking • process specified by the state Administrative Procedures Act

7. The WUTC’s Judicial Decision-Making • Commissioners sit as a tribunal • Administrative Law Judge presides • Regulatory staff acts as an independent party before the WUTC • Intervenors may include AG’s Public Counsel, customer groups, competitor companies • Ex Parte rules dictate no contact between Commissioners and intervenors or staff • WUTC Orders may be appealed de novo to superior court

8. IRP History • Utilities bear an obligation to meet load • 1988 WUTC adopted rules to require investor-owned utilities to prepare least-cost plans • IRPs require substantial judgment in matters that affect, and are affected by, the public interest.

9. What is an IRP • A tool utilized by natural gas utilities to determine the most economical and reliable mix of resources to meet its forecast demand. • Goal is to find a portfolio of resources and financial arrangements that balances price and volatility risk. • IRP projections about the future and require a great deal of judgment

10. Key Issues • Key issues Natural Gas utilities must address in their IRPs • Natural gas supply and prices • Natural gas demand trends and volatility • Hydro generation • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

11. Key IssuesNG supply and prices • Must consider regional developments and changes to existing markets • Asset location and transmission cost • Opening of new pipelines or expanding of pipeline capacity. • Storage v. Supply contracts • Financial hedges to shield utilities from market price volatility risks

12. Key Issuesprice trends and volatility

13. Key Issues • What are the key issues Natural Gas utilities must address in their IRPs? • Natural gas supply and prices • Natural gas demand trends and volatility • Hydro generation • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

14. Key Issuesdemand trends and volatility Natural Gas use in Washington Energy Information Agency http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_swa_a_d.htm

15. Key Issues • What are the key issues Natural Gas utilities must address in their IRPs? • Natural gas supply and prices • Natural gas demand volatility • Hydro generation • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

16. Key Issues Hydro generation: weather/climate Variation in Hydro Generation High Average Low

17. Key Issues • What are the key issues Natural Gas utilities must address in their IRPs? • Natural gas supply and prices • Natural gas demand volatility • Hydro generation: weather/climate • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

18. Key IssuesRenewable Resources • How much reliance on renewable resources? • Physical hedge against high natural gas prices and/or low water levels • How do renewables compare on cost/reliability? • Mandated renewable portfolio standards?

19. Key Issues • What are the key issues Natural Gas utilities must address in their IRPs? • Natural gas supply and prices • Natural gas demand volatility • Hydro generation: weather/climate • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

20. Key IssuesEnvironmental concerns • How to incorporate environmental costs? • known costs: NOX • unknown costs: CO2

21. Key Issues • What are the key issues Natural Gas utilities must address in their IRPs? • Natural gas supply and prices • Natural gas demand volatility • Hydro generation • Renewable resources • Environmental concerns • Efficiency • Residential • Commercial/Industrial

22. Key IssuesEfficiency - Residential • Have cost-effective demand side resources been exploited to fullest potential? • asdf • asdf • demand side resources outside the control of the utility: energy efficiency standards

23. Key IssuesEfficiency – Commercial/Industrial • Have cost-effective demand side resources been exploited to fullest potential? • Asdf • asdf • asdf

24. Risk – TheOverarching Issue • What price risk is acceptable to the utility and regulators? • risk of breach if prices swing beyond the assumed range • cost to replace the gas if a supplier fails to deliver • How significant are the security risks? • Political Risks • IRP’s do not guarantee the lowest tariffs • pressure to make specific resource decisions

25. IRP Development Process • Collect data on customer demand • current usage patterns by customer class • project demand looking forward 10-15 years • Develop a family of “most likely” demand scenarios

26. IRP Development Process • Assess available conventional resources • include environmental and other costs • Assess available unconventional resources • energy efficiency and load reduction opportunities – weatherization, appliances • Develop a family of “most likely” supply scenarios

27. IRP Development Process • Determine the resource portfolio that best “marries” the range of demand and supply scenarios to control cost, reliability and other risks • considers direct costs (e.g., fuel) AND indirect costs (e.g., environmental impacts) of conventional and unconventional resources • the least-cost resource portfolio must also comply with all regulatory requirements

28. Revising the IRP Regulations The WUTC has begun a thorough review the current planning requirements contained in WAC 480-90-238 and WAC 480-100-238 (Docket Nos. UE-030311 and UG‑030312). WUTC staff member Graciela Etchart is leading this effort (360‑664-1310). The WUTC invites the public to join our effort to review our planning requirements. We are specifically interested in changes to improve the usefulness or reduce the cost of developing least-cost plans.