PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

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PacifiCorp – 2007 IRPChapter 7 – Modeling andprovisions. The coal resource replacement resulted in a $687 million increase in stochastic meanPVRR and a $411 million increase in risk exposure. The risk exposure increase is due to the twopercentlower availability of the IGCC relative to the Wyoming SCPC resource.Replace a Base Load Resource with CHP and Dispatchable Customer Standby GenerationUsing portfolio RA1 as the starting point, PacifiCorp replaced the small Utah pulverized coalresource with 280 megawatts of gas-fired CHP resources and 60 megawatts of west-side customerstandby generation. (This sensitivity addresses an analysis requirement in the Oregon PublicUtility Commission’s 2004 Integrated Resource Plan acknowledgement order.) Table 7.45reports the sizes, locations, and number of units used for the study.Table 7.45 – Combined Heat and Power Replacement ResourcesCHP Resource Type East Location West Location System TotalLarge industrial – 25 MW 75 MW (3 units) 150 MW (6 units) 225 MW (9 units)Small industrial/commercial – 5 MW 35 MW (7 units) 20 MW (4 units) 55 MW (11 Units)Total 110 MW 170 MW 280 MWComparing against portfolio RA1, the new portfolio with CHP and customer standby generationresources had a $168 million higher stochastic mean PVRR. Risk exposure was higher by $2.4billion, while Energy Not Served was higher by about 7 percent.PREFERRED PORTFOLIO SELECTION AND JUSTIFICATIONBased on the stochastic analysis results for the Group 2 risk analysis portfolios, the company haschosen RA14 as the preferred portfolio. Table 7.46 shows the resulting load and resource balancewith preferred portfolio resources and east-west transfers included.This portfolio reflects a robust resource strategy that accounts for the major resource risk factors(specifically the form and cost impact of CO 2 regulations, and price volatility for natural gasplants and market purchases) as well as evolving state resource policies that are currently notcoordinated with respect to PacifiCorp’s system-wide integrated resource planning mandate.Portfolio RA14 is viewed as the least-cost and least economically risky proposition for reliablymeeting PacifiCorp’s load obligation while accommodating different state policies and interests.In assessing the overall merits of this portfolio, PacifiCorp also concentrated on the value of thedifferent resource types for managing portfolio risks in the short term, mid term, and long term.For the short term, the acquisition of renewables, DSM and CHP increases portfolio diversityand lays the groundwork for a resource base that can comply with early RPS and CO 2 complianceschedules. For the mid term—2012 through 2014, which is a period marked by significantresource need and escalating regulatory risks—the preferred portfolio is constituted with a mixof proxy long-term assets with complementary risk profiles (supercritical pulverized coal andCCCT resources), supplemented by new front office transactions to increase planning flexibility.For the long term, the preferred portfolio includes flexible long-term assets with a small emissionsfootprint and a moderate reliance on front office transactions. This resource mix is most inline with the company strategy to reduce its long-term reliance on the market, which is discussedin more detail later in this chapter.202
PacifiCorp – 2007 IRPChapter 7 – Modeling andPlanning Reserve Margin SelectionWhile Portfolio RA14 is based on a target planning reserve margin of 12 percent, PacifiCorp istargeting a reserve margin range of 12 to 15 percent to increase planning flexibility given a timeof rapid public policy evolution and wide uncertainty over the resulting down-stream cost impacts.While the portfolio analysis indicates that lowering the planning reserve margin increasesportfolio stochastic risk and reduces reliability, the decision on what margin to adopt is a subjectiveone that depends on balancing portfolio risk against cost. Given the expected pressure oncustomer rates due to state resource constraints, as well as the rapid pace of construction costincreases for all resource types, near-term affordability of a resource plan is a consideration guidingthe planning margin decision.PacifiCorp’s choice to adopt a 12 percent planning reserve margin is intended to keep the portfoliocost down while retaining the flexibility to adjust the margin upwards and acquire appropriateincremental resources. Market conditions, revised load growth projections, or new regional adequacystandards may prompt the company to increase the margin in response. Based on theGroup 2 portfolio analysis and the resource outlook developed for this IRP, a higher planningreserve margin would be met with a combination of gas generation and front office transactions,as can be seen in Portfolio RA16.An issue raised by public stakeholders is the impact of the planning reserve margin decision onsupply reliability. PacifiCorp’s view is that supply reliability is not materially impacted by aswing in the margin from 15 to 12 percent. The supply reliability analyses (Energy Not Servedand Loss of Load Probability) indicate that, with the exception of “all coal” portfolios such asRA13, there are no significant differences among the portfolios with respect to reliability. Asadditional evidence of this finding, comparing portfolio pairs intended to test the impact of a 15percent margin against a 12 percent margin (RA1 versus RA8, RA10 versus RA9, RA11 versusRA12, and RA16 versus RA14) yields small differences in average annual ENS of between 1.2MWa to 3.9 MWa.203
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PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

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