Drafting the Sixth Power Plan: A Public Utility Perspective

1. Sixth Power Plan A Public Utility Point of View Bill Gaines, Director, Tacoma Public Utilities Craig Smith, Assistant General Manager, Snohomish PUD Northwest Power and Conservation Council Meeting June 11, 2009

2. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

3. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

4. Conservation Philosophy • Public power utilities are committed to acquiring all cost-effective energy efficiency for the benefit of the region and our customers • Increasing marginal costs and State requirements (e.g., I-937)provide additional incentive to pursue energy efficiency • Many utilities, Tacoma and Snohomish included, are increasing internal savings targets and expanding delivery capabilities

5. Draft Sixth Plan Economic Potential

6. Draft Sixth Plan Five Year Target aMW

7. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

8. Measure ReadinessWork Group Assessment of Individual Measures Developed by Utility, Bonneville and NEEA Staff • Technology Readiness (Full/Partial/Low) • Full = no technical or product related issues • Partially = some questions about technology or application in the NW • Low  = product needs major work to validate performance or modify technology for NW • Verified Savings Readiness (Full/Partial/Low • Full = robust savings assessments (deemed savings or savings calculation methodology defined) completed in region • Partial = transferrable savings assessments outside of the region or preliminary assessments within the region • Low = little or no savings verification conducted to date • Market Readiness (Full/Partial/Low) • Full = all elements of the supply side channel are fully capable of delivering and can be scaled up easily • Partial = missing pieces of delivery chain or difficulties with scaling • Low = significant work required for delivery chain and scaling • Program Readiness (Full/Partial/Low) • Full = successful program experience in region • Partial = pilot experience in region or transferrable  program experience outside of region • Low = Little or no program experience

9. Measure ReadinessWork Group Assessment of Individual Measures Developed by Utility, Bonneville and NEEA Staff aMW

10. Measure ReadinessWork Group Assessment of Individual Measures Developed by Utility, Bonneville and NEEA Staff aMW

11. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

12. According to the Council, only about half of the conservation achievements recorded since 1980 have been achieved via BPA/Utility Programs The other half are reported to have been achieved via alliance programs, state codes and federal standards Regional Cumulative Conservation Achievement Source: NWPCC

13. Over the last 10 or so years, Alliance Programs such as NEEA sponsored programs have been responsible for a significant portion of reported acquisitions This is expected to continue to be the case in the future Annual Conservation Achievement: Utility vs. Alliance Programs Source: NWPCC

14. Potential Alternative Treatment of Emerging Measures Energy Trust of OR Resource Assessment Example

15. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

16. 5th Plan vs. Draft 6th Plan: Annual Targets

17. Historical Accomplishments vs. Draft 6th Plan Annual Targets 2007-2008 CFL are estimates Note: CFL Accomplishments based on BPA/Public acquisitions extrapolated to region

18. Accomplishments vs. 5th Plan Targets • Council staff states that targets provide both a floor and ceiling for achievement • Recent experience shows that utilities and others in the region are willing to exceed regional targets if conservation is available, achievable, reliable and cost-effective • Measures should meet threshold criteria before inclusion in targets • Plan can address R&D, market development, evaluation needs Note: CFL Accomplishments based on BPA/Public acquisitions extrapolated to region

19. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

20. Effect of Increased Targets • With the phasing out of CFLs, savings will come from higher cost/higher touch measures • To meet aggressive goals may require • Increased share of the measure borne by utility vs. by customers • Administrative costs may increase for marketing, R&D, evaluation, etc. • EE budgets requirements will increase by 200% to 250% (more than the increase in savings) • Staffing and infrastructure will need to grow to support higher targets

21. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

23. Conservation Target Sensitivity to Carbon Cost Assumptions? • Council has run some sensitivity analyses on Carbon Variable (i.e. no Carbon Cost run) • Results suggest only minor decrease in conservation acquisition target (about 5400+ in no Carbon Cost scenario vs. 5800+ in Base case) • However, it is uncertain whether this is a meaningful result since RPS requirements were not included in the no Carbon Cost run, but were included in the Base Case run (i.e. apples to oranges comparison) • Recommendation: Run new Sensitivity case only modifying Carbon Costs (leave other variables same as base)

24. Topics • Draft 6th Plan Potential and Targets • New and Revised Measure Readiness • Targets Outside of Utility Control • Acquisition Ramp Concerns • Revenue Requirement Impacts • Carbon Cost Assumptions • Conservation Ramps - Council & I-937

25. WA RPS (I-937) Further Acceleration of Utility Targets

26. Summary • Significant efforts are underway to assess the Conservation Supply Curves and associated targets – for understanding and to prepare for implementation • The action plan should set aggressive, but achievable, targets for the region – the targets recommended by the Council staff are unrealistically high • Strong incentives exist for utilities to adopt measures that meet the cost and reliability thresholds as they come available • Establishing a range for acquisition targets could address uncertainty • In addition to acquisition targets, the action plan should include plan to develop new and emerging technologies to ensure sustained potential – before they become targets