Northwest Public Power Association

1. Northwest Public Power Association Building an Integrated Resource Plan (IRP)

2. Introduction to IRP Why Develop an IRP? Used to be very common, but restructuring & reliance on the market eliminated the perceived need for IRPs The 2000/2001 crises demonstrated the need for continued resource planning BPA will no longer cover all load requirements at rates significantly below market (tiered rates/allocation) Renewable portfolio standards will impact resource choices

3. Introduction to IRP (cont�d) Integrated Resource Planning is also Known as: Least cost planning Long term procurements planning Portfolio management Resource planning 10- year plans IRP is the Dominant Form of Resource Planning in the US and Canada Plans are Generally Updated Every 2-5 Years Planning Horizons Range from 10 � 40 Years, Although 20 Years is Common

4. Introduction to IRP (cont�d) IRP Interacts with Other Utility Planning Horizons

5. IRP Process Define Management Objectives and Philosophy Load/Resource Balance (Forecast) Identify Options�Demand Side Management, Supply Side Resources and Purchases Screening and Portfolio Analysis Analysis of Environmental Externalities Selection of Preferred and Alternative Options Risk Analysis Public Input Action Plan Implement IRP Update Considerations

6. IRP Policy Considerations Determining Goals and Objectives Reliability Minimum cost Manage risk Minimize environmental impact Goals Often Compete Against Each Other Management Objectives and Philosophy Risk taker or risk averse Least costly Environmentally benign Diversification

7. IRP Policy Considerations (cont�d) Load Forecast Which customers can make a big impact on resource choice and risk? What happens if they leave? What happens if a new large load comes to town? How are customers consumption pattern going to change? New technologies Benefit Cost From whose perspective is the IRP developed (society, utility, customer/member) Risks Rigorous assessment � best if possible Directional approximation � good enough in many cases Don�t ignore something just because you can�t measure it

8. IRP Policy Considerations (cont�d) Some Common Risks Faced by Utilities Fuel price Fuel availability Capital markets Transmission Credit/rating agency Changed public policy Environmental Power plant operation Power plant construction Trading/market Weather Regulatory/political Partners

9. IRP Policy Considerations (cont�d) Solutions Diversification Size Fuel Technology �Quiz� the market (i.e. RFP) Avoid growth Energy efficiency Split risk with others Wholesale sellers Retail buyers (pricing i.e. rates) Targeting Know your customers need For new load or risky load � initiate discussions and plan appropriately

10. IRP Policy Considerations (cont�d) Goal of IRP is to Reduce Cost/Adverse Environmental Impacts Competition Among Resources is a Means to Get There IRP is Needed to tell You which Options Win The More Diverse a Resource Mix you Have, the More you Need an IRP Judgment is Inevitable � by Customers, Stakeholders, Policy Makers, Staff

11. Public Involvement Process Two Major Opportunities for Public Input on IRP During plan development Appointed advisory group Utility sponsored workshops Collaborate process During regulatory (Board, Council, Commission) acceptance process Public Comment period Formal or informal hearings Adjudicated hearings

12. Public Involvement Process (cont�d) Options MAC/CAC Town hall meetings TV/radio Newsletters Comments on Advisory Committees Clear scope and schedule Allocate $ Staff resources Facilitator

13. Public Involvement Process (cont�d) Role of the Public Ask questions Express priority Check work Important for Utility to Accept Inputs and Keep Soliciting Make Convenient Places for Public to Look Inside the �Planning Process� Easier to Get �Buy � In� During the Process Rather than Having to sell a Plan Once Done

14. Developing an Action Plan What to Do? Diversify power supply Gas/cogen Existing hydro Renewables (RPS requirements) DSM Market Purchases Build for only �core� load, purchase for �at risk� customers Keep rates cost-based and plan on making margins on T&D wheeling Keep internal overheads at a minimum Ensure staff is available to deal with increased complexity

15. Developing an Action Plan (cont�d) Don�t Rely on Existing Institutional Safeguards in the Future Preference to cheap power Tax-exempt financing Exclusive franchise area Customer loyalty Subsidies � RP&SA, irrigation discounts, billing credits, conservation %, etc. Local Board level regulation, decision-making EPA05 and RPS impact most utilities, not just IOU�s

16. Summary and Conclusions IRP Cornerstone of Prudent Utility Planning Process Need to Update Periodically as Options Change Over Time Need Buy-In from All Key Stakeholders New BPA Contracts/Statutory Requirements Increase Need for IRP Give All Options a Fair Shake Don�t Forget Your Customers/Members

17. Grandpa Salebaisms Better to Have No Business than Bad Business If You Don�t Do It, Someone Else Will Better to be Roughly Right than Precisely Wrong