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Disclaimer

Disclaimer. The events depicted in this presentation were ripped from the headlines of news media from across the Pacific Northwest.

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  1. Disclaimer The events depicted in this presentation were ripped from the headlines of news media from across the Pacific Northwest. However, the views and interpretations of these events are those of the presenter and do not representthose of the Northwest Power and Conservation Council, its Members, other Council staff, the Governors of Idaho, Montana, Oregon or Washington, any of the region’s utilities, the Bonneville Power Administration, the region’s public interest groups, Native Americans, or anyone else who ought to know better.

  2. What Happened AfterLewis and Clark Left? ?

  3. A Short History of Power Planning in the Pacific Northwest With Editorial Comments on What’s Gone Wrong Why it Happened And Who’s to Blame

  4. Power Planning’s Three Simple Questions When Will We Need Resources? How Much Will We Need? What Should We Build?

  5. The Answer Is - It Depends.

  6. Evolution of Power Forecasting and Resource Planning • Six Eras • Began in mid-1930’s • Characterized by differences in • Planning “Tools” • Planning “Axioms”* *Technical word meaning “assumptions”

  7. Period I:“New Deal” Mysticism • Approximate Duration: Early 1930’s to Mid-1950’s • Principle Planning and Forecasting Tools: Chicken entrails and a crystal ball • Planning Axioms: The future is cloudy Only politicians can predict it

  8. Actions Taken in Response to “New Deal” Mysticism Forecast Salmon Take First Big Hit!

  9. Regional Electricity Use 1950 - 1970

  10. Period II: Engineering Determinism • Approximate Duration: • Late 1950’s to Mid-70’s • Principle Planning and Forecasting Tools: • Rulers and Graph Paper • Planning Axioms: • The future will be just like the past, only bigger • Only engineers can predict just how much bigger

  11. Regional Electricity “Engineering Determinist’s” Forecast – 1955 to 1980

  12. Actions Taken in Response to “Engineering Determinist’s” Forecasts • Last of the major hydroelectric facilities authorized and constructed • First “wave” of thermal generation facilities planned and built • Salmon Take Second Big Hit!

  13. “Engineering Determinist’s Forecast Underestimate “Price Effects” Retail Electric Rates Begin to Increase in Response to Thermal Plant Costs

  14. Period III: Economic Determinism • Approximate Duration: • Mid-70’s to April 27, 1983 • Principle Planning and Forecasting Tools: • Statistical models of price vs. use • Planning Axiom: • The future will be similar to the past • Only economist can predict just how similar

  15. Regional Electricity “Economic Determinist’s Forecast – 1960 to 1985

  16. Actions Taken in Response to “Engineering and Economic Determinist’s” Forecasts • Utilities planned and/or started construction on 28 power plants to be completed over a 20-year period. • Native American tribes sued the state and federal government over loss of salmon • Environmental groups sued Bonneville over plans to turn the Columbia into “Wave World” • Oregon Threaten to Establish a Statewide Public Utility to Serve “Rural and Domestic” consumers

  17. Regional Electricity “Economic Determinist’s Forecast vs. Actual Use – 1960 to 1985

  18. Impact of Actions Taken in Response to “Engineering and Economic Determinist’s Forecasts and Plans 416% Rate Increase over 5 years

  19. Impact of Actions Taken in Response to “Engineering and Economic Determinist’s Forecasts • Terminate or mothball 9 nuclear and 5 coal plants at a cost to the region’s consumers of more than $7 billion. • Motivate the region’s politicians, utilities, larger industries and public interest groups to accept the “deals” embodied in the Northwest Power Planning and Conservation Act of 1980

  20. Major Elements of the Northwest Power and Conservation Act of 1980 • Bonneville is given authority to acquire resources consistent with the Council’s Plan • Authorized States to form Council • Directed Council to develop 20-year load forecast and resource plan (“The Plan”) • Plan is to provide for the development of the least cost mix of resources • Conservation is defined as resource equivalent to generation and given a 10% cost advantage • Mandated public involvement in planning process.

  21. Period IV:Hollywood Indeterminism • Approximate Duration: • April 27, 1983 to Mid-90’s • Principle Planning and Forecasting Tools: • End-use economic and engineer “scenarios” • Planning Axioms: • The future is uncertain • No one can predict the future with precision • Stay loose

  22. Regional Electricity Use vs. “Hollywood Indeterminist’s” Forecast 1983 to 2003

  23. Impact of Actions Taken in Response to “Hollywood Indeterminist’s” Forecast • “Options” were to be developed on new large central station generating projects with long lead times • Oregon and Washington adopted “least-cost” planning requirements for investor-owned utilities • Bonneville and the region’s utilities terminate WNP 4&5, Skagit 1&2, etc.

  24. Council Adopts First Regional Conservation’s Goals 4,790 aMW 660 aMW

  25. Utility Reaction to Council’s First Plan Was “Mixed”

  26. In Fact, It Took A Decade Before Regional Utility Conservation “Ramped Up” To “Pre-Act” Levels

  27. Period V:Utility Industry “Indeterminism” • Approximate Duration: • Mid-90’s to June 2000 • Principle Planning and Forecasting Tools: • Who Needs A Plan? • Planning Axioms: • The future REALLY uncertain • The “Market” will dictate the “perfect” future (Unless politicians mess it up!)

  28. Actions Taken in Response to Utility Industry “Indeterminism” Annual conservation acquisitions were cut in half!

  29. Northwest Utility Conservation Achievements Failed to Meet Council Plan’s Targets (Again)

  30. Reaction To Utility Actions: PNW Governor’s Comprehensive Review • Recognized that increased market pressures and regulatory uncertainty had and would continue to constrain utility investments in conservation. • Recommended adoption of a “non-bypassable, competitively neutral” public benefits charge equivalent to 3% of a retail utilities annual revenues.

  31. Regional Conservation Investments Never Met the Comprehensive Review’s Goals

  32. Oregon Acted to End “Utility Indeterminism” • Passed Electric Industry Restructuring Bill (1149) • Established Public Benefits Charge to ensure continued investments in conservation, renewable resources and low income weatherization • Investor-owned utilities no longer “administer” conservation & renewable programs • Energy Trust of Oregon now administers programs • Provided “open access” for consumers • (and lots of other things)

  33. And Then Things Changed . . .

  34. Northwest Utilities Responded to New Market Conditions with Record Setting Conservation Achievements

  35. Period VI:Portfolio “Determinism” • Approximate Duration: • Began December 16, 2004 to ???? • Principle Planning and Forecasting Tools: • “Crystal Ball” – A “Monte Carlo” Simulation Tool • Planning Axioms: • The future is uncertain • No one can predict the future with precision • Let’s “option and hedge” our way through

  36. “Portfolio Analysis On Steroids” Is Used To Develop Resource Portfolios in the Face of Uncertainty FrequencyChart 1,000 Trials 1,000 Displayed .043 43 Portfolio Analysis Model .032 32.25 .022 21.5 .011 10.75 Mean = $689 .000 0 ($3,509) ($1,131) $1,247 $3,625 $6,003 Dollars NPV System Cost Efficient Frontier

  37. Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against Risk Least Cost Least Risk

  38. All Plans Along the “Efficient Frontier” Acquire Virtually the Same Amount of Energy Efficiency Least Risk Portfolios Least Cost Portfolios

  39. Portfolio Analysis On One Slide Resource potential for generic coal, gas & wind resources shown for typical unit size. Additional potential is available at comparable costs.

  40. Recommended Actions In Response to Portfolio “Determinism” *5th Plan relies on conservation and renewable resources to meet load growth.Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedule and amounts.

  41. The 5th PlanCalls for 700 aMW of Savings From 2005 - 2009

  42. We Think All Returns Have Been Counted62 Utilities88% of Regional Load Are We Meeting The Plan’s Targets?

  43. We Met the 2005 Target! (and we’ll probably meet the 2006 target)

  44. OK, Let’s Summarize the Numbers . . .

  45. Over the Last Three Decades Regional Utility Conservation Acquisitions Resulted in “Mr. Toad’s Wild Ride”* for the PNW’s Energy Efficiency Industry See: http://en.wikipedia.org/wiki/Mr._Toad's_Wild_Ride

  46. Nevertheless, the Region’s Utilities and Bonneville Acquired Almost 2000 aMW of Savings

  47. State and Local Energy Codes Have Produced Over 650 aMW of Savings

  48. Federal Appliance and Manufactured Housing Energy Efficiency Standards Have Produced Nearly 670 aMW of Savings First National Appliance Efficiency Standards Enacted

  49. Total Regional Savings Now Total Nearly 3300 aMW

  50. Since 1980 Energy Efficiency Resources Met Half of PNW Load Growth

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