Sixth Northwest Conservation & Electric Power Plan Draft Wholesale Power Price Forecasts

1. Northwest Power and Conservation Council Sixth Northwest Conservation & Electric Power PlanDraft Wholesale Power Price Forecasts Maury Galbraith Generating Resource Advisory Committee Meeting Portland, Oregon March 19, 2009

2. Outline • Mid-Columbia Wholesale Power Price Forecast • Supply and Demand Fundamentals • WECC Resource Expansion • PNW Resource Expansion • Sensitivity Cases Forecasts

3. Historic Mid-C Average Monthly On- and Off-Peak Prices Source: IntercontinentalExchange (ICE)

4. Forecast Mid-C Average Annual Prices

5. Forecast PNW Natural Gas Prices

6. Market Fundamentals Model • Market Price Determined by Supply and Demand • Hourly Market • Price Based on Variable Cost of the Last Resource Used to Satisfy Demand

7. WECC Load & Resource Balance – EnergyEconomic Dispatch Basis Under Average Hydro Conditions Supply Equals Demand

8. WECC Incremental RPS Energy by State “Forced” Resource Additions

9. WECC Incremental RPS Energy by Technology Tend to be “Low” Variable Cost Resources

10. WECC New AURORA Resource Energy by Technology

11. Cumulative RPS and AURORA Resource Additions in 2030 Model Tends to Add NG Resources to Meet Area Reserve Margin Targets

12. WECC Load & Resource Balance – CapacityCoincident Peak (Summer) Building to each Area’s Reserve Margin Causes “Over-build”

13. PNW Load & Resource Balance – CapacityWinter Sustained Peaking Capacity and 18% Reserve Margin Model Builds to Winter Peak

14. PNW Load & Resource Balance – CapacitySummer Sustained Peaking Capacity and 35% Reserve Margin Model Does Not Build to Summer Peak

15. PNW Load & Resource Balance – EnergyEconomic Dispatch Basis Under Average Hydro Conditions Model Result: Economic to Rely on Other Zones

16. Fundamentals Summary • Incremental RPS resources primarily provide energy • Model tends to add resources with high capacity value to meet reserve margin targets • Modeling reserve margin targets for multiple zones tends to result build-out of under-utilized capacity • PNW Pool is capacity deficit later than other zones • Overall energy result is that the PNW can economically access under-utilized resources in neighboring zones • This is NOT a power plan • Considering applying reserve margin target to three pools: (1) PNW; (2) CAISO; and (3) all other zones

17. Annual CO2 Emission Prices

18. Impact of CO2 Emission Price Scenarios on Mid-C Wholesale Power Price Forecast

19. PNW Annual CO2 Emissions by Scenario

20. Conclusions Mid-Columbia wholesale power prices increase from $45/MWh in 2010 to $85/MWh in 2030 (Base Case) Significant uncertainty due to underlying fuel price and CO2 emission price uncertainty Significant reductions in PNW power system CO2 emissions with: $7/MMBtu natural gas price and $86/ton CO2 emission price; or $4/MMBtu natural gas price and $43/ton CO2 emission price