IEP Annual Conference 2012

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Renewable Portfolio Standards in the West

UT 20% by 2025*

NM 20% by 2020 (IOUs)10% by 2020 (co-ops)

AZ 15% by 2025

CO 30% by 2020 (IOUs)10% by 2020 (co-ops and large munis)

WY

MT 15% by 2015

ID

NV 25% by 2025

CA 33% by 2020

OR 25% by 2025 (large utilities)5-10% by 2025 (smaller utilities)

WA 15% by 2020

Source: Energy Strategies adapted from information from DSIRE, www.dsireusa.org

State RPS

State RPS Goal

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Renewable Procurement Trends

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Arizona◦ APS exceeded its 2011 RES requirement of 3%. APS projects a need for 518 MW of new

renewable resources by 2020 to meet its RES and terms of its 2009 Settlement Agreement.

◦ TEP exceeded its 2011 RES requirement of 3%. TEP’s 2012 IRP projects a need for 296 MW of renewable energy by 2020.

◦ SRP has a goal for 20% of their resources to come from “sustainable resources” by 2020. To meet its goals, SRP projects a need for 470 MW of new renewable energy by 2020.

Nevada ◦ NV Energy was compliant with the 2011 RPS requirement of 15%.

◦ NV Energy’s (South) most recent IRP anticipates procuring 250 MW of renewable resources through RFP(s) in 2014 and/or 2015.

New Mexico◦ SPS (Xcel) expects to meet the required RPS MWh through at least 2014, though it has

not satisfied the “other” (non-wind, non-solar) diversity component.

◦ PNM is unlikely to meet the 10% RPS target in 2012, projecting only 7.3% renewables (cost threshold issue). If PNM’s Renewables Plan is approved, it should achieve the 10% target in 2013 and 2014, and will meet the diversity requirements in 2014.

◦ EPE expects to meet the 10% RPS requirement in 2012-2014, and will meet the diversity requirements.

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Oregon◦ PacifiCorp OR and PGE will meet the 5% RPS target through 2014 with owned/contracted

generation. Without further resource acquisition, the utilities would need to rely on banked RECs in 2015, when the RPS increases to 10%.

Washington◦ Avista is forecast to exceed the 3% RES target in 2012, as well as the 9% RES target in

2016.

◦ PacifiCorp WA expects to meet the 3% RES target through 2016 with generation from eligible renewable facilities and a small quantity of unbundled RECs. Beginning in 2016, compliance will be achieved with banked bundled RECs.

◦ Puget Sound Energy is forecast to exceed the 3% RES target in 2012, and the 9% RES target in 2016.

Montana ◦ Montana’s largest electric utility, NorthWestern Energy, projects that based on currently

contracted resources the utility will meet its RPS obligations through 2016.

Colorado◦ Public Service Company of CO (Xcel) expects to exceed the RES requirements through at

least 2013, and compliance through 2021.

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TOP FIFTEEN OWNERS OF WECC REGION (U.S.) COAL ASSETS (2011)Owner Owned Operating Capacity (MW)

PacifiCorp 6,102.1

Public Service Company of Colorado 3,063.7

Salt River Project 2,209.3

Tri-State Generation & Transmission Association, Inc. 1,871.9

Arizona Public Service Company 1,747.1

Intermountain Power Agency (LADWP/SCPPA) 1,800.0

Tucson Electric Power Company 1,374.5

Idaho Power Co. 1,025.1

Basin Electric Power Cooperative 1,085.1

Public Service Company of New Mexico 963.1

Southern California Edison Co. 739.2

Puget Sound Energy, Inc. 677.0

Nevada Power Company 667.0

Portland General Electric Company 676.3

Deseret Generation & Transmission Cooperative 548.8

Total MW 24,550.3

1. Does not take into account planned coal plant divestitures, shutdowns, or natural gas conversions. 2. Comprises 77% of all coal plants in WECC (operating MW). 3. Merchant plant owners not included are TransAlta(Centralia-1,376MW) and PPL Montana Holdings, LLC.(764 MW).

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Age Operating Capacity (MW) % of Total

>50 Years 3,008.5 9%

>40 Years 4,037.6 13%

>30 Years 18,914.0 59%

Subtotal > 30 Years 25,960.1 81%

<30 Years 5,969.0 19%

Total 31,929.1 100%

WECC REGION COAL PLANTS BY AGE

Environmental Catalysts = Economic Impact◦ Regional Haze – Mandated NOX reductions via

Best Available Retrofit Technology (BART) BART can range from LNB/OFA to SCR

◦ Coal Combustion Residuals (ash handling)

◦ CO2 (California SB 1368) –places limits on additional plant investment.

◦ CO2 federal – possible future regulation of GHGs.

◦ Plant owners exiting coal plants: SCE, LADWP, TransAlta, PGE & players to be named later…

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Coal versus Gas: Who’s “Marginal” Now?◦ Long-term low gas prices paint good picture for

servicing new load AND replacing some coal.

◦ 3,000 MW of coal-to-gas conversions being seriously considered prior to 2020.

◦ 3,200 MW of coal plants being retired.

◦ Ratepayers tired of endless rate increases for emissions upgrades on older plants.

◦ Election… Election…Election & Federal CO2 - wildcard

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o There are 12,700 MW of coal fired generation in the Desert Southwest States [AZ, NM, NV] serving utilities located in AZ, CA, NM, CO, and UT. These plants are located in EPA Region 6 [NM] and 8.

o Under the Clean Air Act’s Regional Haze Rule, states are required to make reasonable progress toward improving visibility at national parks and wilderness areas by reducing emissions of dioxide and nitrogen oxides.

o The rule requires major stationary emissions sources built between 1962 and 1977 to operate the best available retrofit technology.

o The Four Corners coal complex will shut down units 1-3 as per final rules issued by EPA in August 2012. APS is in the process of buying SCE’s 739 MW share [48%] of 4C units 4 & 5.

o Major coal plants potentially challenged by EPA rules in the future include San Juan and Navajo.

1SNL 2011 operating capacity data

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o There are 17,080 MW of coal-fired generation in the Rocky Mt. States [CO, UT, WY] serving utilities located in AZ, CA, CO, MT, UT, and WY.

o These plants are located in EPA Region 8.o EPA Regional Haze Rule and locations of numerous

national parks and wilderness areas present challenges for many coal plants in this region.

o Intermountain Power Plant (1,900 MW in UT) with LADWP and SCPPA as primary customers considering conversion to gas.

1SNL 2011 operating capacity data

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o In 2011 the Washington Senate approved a bill that will result in the shutdown of one of two Centralia coal units by 2020 and end all coal burning at the plant by 2025.

o Centralia plant produces 688 MW in two units for a total of 1,376 MW. TransAlta recently announced it has signed an 11-year power purchase agreement with Puget Sound Energy.

o The Oregon Environmental Quality Commission on Dec. 10, 2010, adopted a proposal to close Portland General Electric Co.’s 585 MW Boardman plant by 2020.

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Currently over 3,000 MW of coal plants have committed to convert or are evaluating conversion to natural gas before 2020.

Committed retirements in WECC total 3,200 MW prior to 2020.

Numerous other utilities evaluating long-term alternatives and costs of adding controls, gas conversion and retirement.

Gas conversion and retirements comprise 6,200 MW, or 20%, of current coal generation in WECC.

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WECC Problem Statement:◦ WECC’s current structure, a Regional Entity (regulatory) with

Registered Function (regulated) creates a duality of purposes that precludes WECC from fully delivering its reliability mission.

◦ The common compliance and Reliability Coordinator functions of WECC are the issue.

Why Consider Restructuring?◦ A restructured WECC will benefit the Western Interconnection

by: Bringing more independence, oversight and analysis

Clarifying roles and responsibilities

Allowing participation in all aspects of reliability

Bringing focus on reliability improvement rather than compliance risk

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At its September 6-7 Strategic Planning Session the WECC Board passed four resolutions:◦ Pursue bifurcation into two separate and distinct companies –

one Regional Entity and one Non-Regional Entity

◦ Complete work on a governance model for the Regional Entity based on an Independent Board with a strong Member Advisory Committee.

The Regional Entity will focus on compliance.

◦ Complete work on a governance model for the Non-Regional Entity based on a Hybrid Board.

The Non-Regional Entity will focus on Reliability Coordinator functions, Planning, EIM(?), WREGIS & other activities

◦ Continue funding of the Regional Entity under current FERC Section 215 mechanism and develop a regional tariff to fund Non-Regional Entity.

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PUC-EIM Group has embarked on a cost-benefit analysis of an Energy Imbalance Market in the West.◦ Received cost proposal from SPP & CAISO:

SPP - $64M start-up, $28M ongoing annual costs

CAISO - $0.19/MWh of EIM energy, plus a one time cost of $0.03/MWh of annual energy use

◦ NREL performed a benefit analysis In 2020, total benefits for the region are estimated to

be $146M compared to the Business-As-Usual (10-minute dispatch) case.

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