PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

PacifiCorp – 2007 IRPChapter 6 – Modeling and Risk Analysis ApproachThe PVRR measure captures the total resource cost for each portfolio. Total resource cost includesall the costs to the utility and customer for the variable portion of total system operationsand the capital requirements for new supply and Class 1 demand-side resources as evaluated inthis IRP. In addition, the PVRR accounts for emissions adders used for costing environmentalexternalities.Customer Rate ImpactIn addition to PVRR measures, PacifiCorp calculates the per-megawatt-hour customer rate impactassociated with each of the risk analysis portfolios.The rate impact measure is the change in the customer dollar-per-megawatt-hour price for theperiod 2012 through 2026, expressed on a levelized net present value basis. This approach differsfrom the one used for the 2004 IRP in two respects. First, the rates represent stochastic meanvalues from the Monte Carlo simulations rather than deterministic values. Second, the rate is asingle summary change measure. In contrast, the 2004 IRP reported just the year-to-year impacts.The dollars in the rate numerator consist of the stochastic mean system operating cost (fuel cost,cap-and–trade environmental cost, and variable O&M costs of all resources), combined with thefixed O&M and capital costs of the new supply-side and transmission resources. 48 The rate denominatoris the retail load. The present value calculations use a 7.1% discount rate.It should be noted that this measure provides an indication of the comparative rate impacts acrossrisk analysis portfolios, but is not intended to accurately capture projected total system revenuerequirements. For example, planned upgrades for current stations such as pollution controlsadded under PacifiCorp’s Clean Air Initiative, as well as hydro relicensing costs, are not includedin the calculations. Likewise, the IRP impacts assume immediate ratemaking treatmentand make no distinction between current or proposed multi-jurisdictional allocation methodologies.Environmental Externality CostFor this IRP, PacifiCorp quantified environmental externalities by using externality cost addersfor air emissions impacts—an approach that is consistent with prior company IRPs. The quantificationof air emissions impacts through cost adders is generally recognized as the leastambiguous and least subjective approach to assessing externalities. A full range of other potentialimpacts, such as those on water supplies, traffic and land use patterns, and visual or aestheticqualities, critically depend on the specifics of any particular project. The DSM potentials study tobe completed in June 2007 addresses environmental externalities not currently included in thisIRP.48 New IRP resource capital costs are represented in 2006 dollars and grow with inflation, and start in the year theresource added. This method is used so resources having different lives can be evaluated on a comparable basis. Thecustomer rate impacts will be lower in the early years and higher in the later years when compared to customer rateimpacts computed under a rate-making formula.132