- BEFORE THE PUBLIC SERVICE COMMISSION OF UTAH -
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In the Matter of the Acknowledgment of
PacifiCorp’s Integrated Resource Plan 2004
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DOCKET NO. 05-2035-01
REPORT AND ORDER
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ISSUED: July 21, 2005
SYNOPSIS
PacifiCorp’s Integrated Resource Plan 2004 generally conforms to applicable
Standards and Guidelines and is therefore acknowledged. The Action Plan is not acknowledged,
but will be further considered in the approval process for PacifiCorp’s solicitation for new
significant energy resources.
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By The Commission:
INTRODUCTION
PacifiCorp ("Company") filed its eighth Integrated Resource Plan (“IRP”) on
January 20, 2005 as required by IRP Standards and Guidelines (“Guidelines”) adopted by the
Commission in its June 18, 1992 Order in Docket No. 90-2035-01, In the Matter of Analysis of
an Integrated Resource Plan for PacifiCorp. The IRP, entitled Integrated Resource Plan 2004
(“IRP 2004"), presents PacifiCorp’s plan to supply resources and manage growing demand for
electricity over a 20 year planning horizon. PacifiCorp states the purpose of its IRP is to provide
a framework of future actions to ensure the Company continues to provide reliable, least cost
service with manageable and reasonable risk to its customers. The Company states its IRP 2004
was developed in a collaborative public process with considerable involvement from customer
interest groups, regulators and other stakeholders. The Company indicates the analytical
approach used in IRP 2004 conforms to all State Standards and Guidelines. The report identifies
its least cost plan as investments in a diversified portfolio of power plants and power purchases,
coupled with customer efficiency programs and direct-control load management. The type,
timing and magnitude of resource additions are identified and an Action Plan is developed. The
Action Plan provides an action item for any decision that needs to be made in the next 2-4 years.
All policy judgements and decisions contained in the IRP are made by PacifiCorp. The
Company states the Action Plan is in full alignment with it’s corporate business plan and that it
will implement the Action Plan, while maintaining the flexibility to adjust to future changes and
opportunities.
PacifiCorp’s previous IRP, termed IRP 2003, identified the need, for the first 10
years of the 20 year planning horizon, for procurement of two natural gas supply side resources,
1,400 megawatts of economic renewable resources (wind), and both Class 1 and Class 2
Demand-Side Management (“DSM”) resources. Class 1 DSM represents load reduction that
only occurs while being actively controlled by the utility such as air conditioner load control.
Class 2 DSM represents energy and/or capacity savings achieved through a technological change
in appliances, equipment and/or structures. Since the filing of IRP 2003, the Company has
procured two natural gas resources for 2005 and 2007 respectively, received potential cost-effective bids for 1,400 megawatts of wind renewable resources, and selected three new cost-effective DSM programs for 2005. IRP 2004 builds upon the procurement foundation
established in IRP 2003.
Based on its assumptions of generation plant life, length of purchase power
contracts and load growth forecasts, PacifiCorp identifies a deficiency between existing resources
and peak system requirements plus a 15% planning margin that grows from 73 megawatts in
Fiscal Year (FY) 2009 to 2,777 megawatts in FY 2015.
PacifiCorp identifies “Portfolio E with
Class 1 DSM” as its least cost plan, or “Preferred Portfolio” to meet this deficiency. PacifiCorp
bases this selection on its analysis of the present value of future revenue requirement (“PVRR”),
load growth uncertainty, fuel and market price volatility, firm transmission transfer capability,
hydro variability, expectations of potential cost associated with meeting existing and potential
environmental regulations and lead time required for plant construction or bidding.
The IRP 2004 Preferred Portfolio proposes the addition, over the first 10 years of
the 20 year study horizon, of 177 megawatts of Class 1 DSM and 2,629 megawatts of thermal
generation capacity. In addition to the resources identified in the Preferred Portfolio, PacifiCorp
will continue to procure up to 1,200 megawatts of shaped capacity through Front Office
Transactions on a rolling forward basis, expects 100 megawatts of capacity through Qualifying
Facilities (“QF”) contracts, and will continue to procure the 1,400 megawatts of economic
renewable resources first identified in the 2003 IRP. Furthermore, PacifiCorp will procure 250
average megawatts of base Class 2 DSM and pursue an additional 200 average megawatts of cost
effective DSM for a potential total of 450 average megawatts over the ten year horizon. The
2,629 megawatts of thermal generation capacity consists of four thermal units in the east (two
fueled with coal and two with natural gas) and one natural gas unit in the west. The three natural
gas units are planned for completion in 2009, 2013 and 2014 and the two coal units in 2011 and
2015.
The recent legislation in SB 26, Utah Code 54-17-301, requires PacifiCorp to file
any Action Plan developed as part of its IRP to enable the Commission to review and provide
guidance to the Company. Under the Commission’s Guidelines, we consider whether to
“acknowledge” IRP 2004. Acknowledgment of the IRP means the filed IRP complies with
regulatory requirements with regard to the planning process, but conveys no sense of regulatory
approval of specific Company resource acquisition decisions. Instead, integrated resource
planning is an open, public process through which all relevant supply-side and demand-side
resources, and the factors influencing choice among them, are investigated in the search for the
optimal set of resources given the expected combination of costs, risks and uncertainty over the
long-run to provide electric service to customers. Clearly, management retains responsibility for
its decisions. SB 26, Utah Code 54-17-201, does however require PacifiCorp to conduct a
solicitation process, or request a waiver, for significant energy resources, that is approved by the
Commission. Further, SB 26, Utah Code 54-17-302, requires PacifiCorp to obtain Commission
approval, after a public hearing, of any significant energy resource decision before it constructs
or enters into a binding agreement to acquire the resource. These resource solicitation and
acquisition decision approval processes are separate from the IRP acknowledgment process.
Therefore, while the Commission may acknowledge the IRP and the filing by the Company of an
Action Plan as part of its IRP and provide guidance, any approval of the solicitation and
acquisition of specific resources for the implementation of that Action Plan will be conducted in
separate approval processes required under new Utah Code 54-17-201 and 54-17-302.
COMMENTS AND RECOMMENDATIONS OF THE PARTIES
On February 10, 2005, the Commission asked interested parties to submit written
comments and recommendations on IRP 2004. The Division of Public Utilities (“Division”), the
Committee of Consumer Services (“Committee”), Western Resource Advocates (“WRA”), Utah
Clean Energy (“UCE”), Mountain West Consulting, LLC (“MWC”), and the Utah Association of
Energy Users (“UAE”) filed comments on April 22-25, 2005. On May 10, 2005, PacifiCorp
filed responsive comments. On June 3, 2005 at a technical conference, PacifiCorp gave a
presentation on its IRP 2004 and responded to questions.
The Division is satisfied that the IRP 2004 adequately meets the Guidelines and
recommends the Commission acknowledge the IRP. The Committee, MWC, UAE, WRA and
UCE do not recommend acknowledgment of the IRP at this time, stating additional study and
information is needed. The Committee does not believe the Company has produced the least-cost, least-risk plan as it does not draw the same conclusions from the results of the Company’s
analysis. WRA and UCE do not believe it is possible at this time to conclude that the Company
has selected the right preferred portfolio and recommends the Company revisit certain key cost
assumptions and portfolio options before committing to supply-side investments of this
magnitude. MWC has significant concerns over several critical assumptions used and
conclusions reached in the IRP. UAE believes the Company has not complied with the
Guidelines, has serious concerns over IRP assumptions and conclusions, and urges rejection of
the proposed Action Plan. Parties raise many issues and make recommendations to improve the
IRP process. Comments are extensive and address various aspects of the IRP process.
Following is a summary of parties’ comments:
Public Process
PacifiCorp states the public input process for IRP 2004 included active
participation from Commission staff from five of the six states it operates in and representatives
of 24 other organizations, including those providing written comments in Utah. The Company
hosted eight full-day public input meetings and four public technical workshops during the year-long IRP development period. These meetings were held jointly in Salt Lake City and Portland,
using telephone and video conferencing technology.
The Division states it appreciates the efforts of PacifiCorp’s IRP Team; the
Company organized a robust, open, accessible process that included input from numerous state
agencies and stakeholder groups; and the Company has been professional and amenable to
examining most suggestions. The Committee commends PacifiCorp’s IRP Team for the conduct
of its responsive IRP process. MWC commends PacifiCorp for the significant public input
process in connection with development of the IRP. UAE recognizes PacifiCorp’s substantial
efforts in connection with the IRP and appreciates its solicitations of public input. However,
MWC and UAE express concerns about the transparency of particular areas of the analytical
process including the inability to validate modeling results. UAE recommends PacifiCorp
consider alternative modeling approaches, make arrangements for parties to have immediate and
unfettered access to any data or models used by the Company in the IRP process, and provide
funding to permit regulators and intervenors to be trained on the models. PacifiCorp, in its
responsive comments, expresses concern that parties did not always raise issues in a timely
manner during the year-long public input process.
Load Forecast
The Division and UAE believe that electric usage or demand may be more
responsive to price increases in the long run than indicated in the current IRP. The Committee,
citing the lack of a range of load forecasts and concerns about including sales for resale in load
data, states it is unable to draw a definitive conclusion regarding the reasonableness of
PacifiCorp’s load forecast. PacifiCorp states a range of load forecasts were provided using
stochastic analysis but that it is impractical to analyze the impact of each load growth forecast on
a simulated build decision. PacifiCorp also emphasizes that the IRP and Request For Proposals
(“RFP”) processes can adjust as required if the load forecast changes dramatically. PacifiCorp
states interested parties were presented the results of an elasticity study that concluded that
residential electricity usage was price inelastic. The Company indicates it will continue to
evaluate the price elasticity question as more data becomes available.
Gas Price Forecast
The Division states it is concerned about the natural gas price forecasts; that part
of the reason for choosing natural gas plants was the forecasted natural gas prices; and it is
concerned that given the current high gas prices, the wrong resource choices are being made
based upon these low gas price forecasts. The Division recommends PacifiCorp examine any
disparities between the utilized gas price forecasts and actual pricing, and determine if a better
forecasting method is available. The Committee states PacifiCorp blends its own short-term gas
price forecast with that of several independent advisory services in developing its IRP gas price
forecast. The Committee notes recent natural gas price forecasts are significantly higher than
when the Company locked down its gas price forecast nearly a year ago and it is concerned about
the affect on resource choices. MWC is concerned that the Company used the June 2004 forecast
of natural gas and electricity market prices for the base case instead of the higher December
2004 forecast. MWC says this resulted in limiting wind project and DSM opportunities and
possibly could affect the advisability of siting another combined cycle combustion turbine. UAE
states gas price forecasts have dramatic impacts on nearly every aspect of the IRP, yet the
analyses were not redone despite remarkable price increases which questions the comparisons of
resources and risks. PacifiCorp responds that IRP 2004 used a range of natural gas price
forecasts and stochastic analysis to validate the Preferred Portfolio under higher natural gas
prices, the 95th percentile gas price in the stochastic analysis is 48 percent (20 year average)
higher than the latest March 2005 gas price forecast, and this use of scenario and stochastic
analysis obviates the need to redo the IRP .
Renewables
The Division, Committee, MWC, WRA and UCE express concern about the slow
progress in finalizing contracts for the 1,400 megawatts of renewable resources anticipated by the
2003 IRP, even though PacifiCorp has finalized the plans and procurement of two natural gas
resources within the same time frame. MWC states the 20 percent capacity contribution estimate
for wind resources in IRP 2004 is too conservative, citing a Colorado study resulting in a 30
percent capacity factor; the Company’s wind integration cost estimate is too high for small wind
projects based on IRP 2003 data; and the Company did not disclose its intent with regard to green
tags. The Committee recommends PacifiCorp undertake a more rigorous analysis of the optimal
type and timing of all resources including wind. The Division agrees with the Company that
collecting more information regarding wind integration costs, contribution to peak capacity, and
other information can only lead to a more accurate modeling effort in future IRPs. WRA and
UCE believe the Company has adopted an appropriate statistical methodology for calculating
wind’s capacity credit, but that it should consider wind’s contribution to reserves during months
beyond summer. WRA recommends the Company perform a revised wind integration cost
analysis to address the issue of integrating large quantities of wind with the system.
PacifiCorp announced, on May 3, 2005, the purchase of the output of a 64.5
megawatt wind resource in Idaho. The project was originally to be larger, but was limited by
wind turbine availability. The Company states the slow wind procurement process resulted from
uncertainty about the production tax credit, increasing turbine costs, the falling dollar, and
scarcity of wind turbines.
IGCC
The Division, Committee, UAE, MWC, WRA and UCE support more
examination of Integrated Gasification Combined Cycle (“IGCC”) technology. IGCC is a clean
coal technology that utilizes a coal gasification process to produce clean fuel for use in a
combined cycle combustion turbine (“CCCT”). The Division, WRA and UCE indicate IGCC
can be used as a hedge against the long term regulatory and carbon risks associated with
conventional coal resources. MWC states IGCC technology is more mature than implied in the
IRP, has significantly lower emissions than other coal units, and questions the 75 percent
availability assumed in the IRP. WRA and UCE state the Company’s evaluation of IGCC
technology in IRP 2004 is much improved over its analysis in IRP 2003; the Company has
seriously considered IGCC technology options and project configurations from well-established
vendors; and the Company has developed a sound analytic framework for assessing the trade-offs
between increased capital costs and environmental compliance risk between IGCC and
pulverized coal. WRA and UCE believe the Company may be overstating IGCC costs since
recent IGCC developments show higher availability at 90 percent, although the new information
was not available in time for IRP modeling runs. Since the publication of IRP 2004, PacifiCorp
has contracted for a site specific study of IGCC. The Company states the IRP cost estimates for
IGCC are conservative and based on numerous studies conducted over the last few years by
various organizations, including EPRI and the US Department of Energy, as well as the operating
experience of the Polk and Wabash River IGCC plants. The Company says the availability issue,
along with innovative cost reduction techniques, will be revisited once the next generation of
IGCC plants begin operation.
Risk Analysis
The Division is unsure that the modeling of carbon risk (restrictions on carbon
dioxide emissions) is realistic given the current political climate, that this may lead to less than
optimal resource decisions, and asks the Company to thoroughly reexamine its carbon risk
assessments, including assigned probabilities and values for the next IRP. The Division is
concerned that the Company’s stated intent to file for a Power Cost Adjustment Mechanism
potentially could shift all fuel risk to ratepayers which may affect the resource choices that
stakeholders will be amenable to accepting. The Committee points out the IRP 2004 sensitivity
analysis of carbon risk shows the Preferred Portfolio costing $300 million PVRR less than
Portfolio Q at the assumed $8 per ton carbon emissions cost, however, at $0 carbon cost, the
Preferred Portfolio costs $1.3 billion more than Portfolio Q. Portfolio Q was derived from
Portfolio E (the Preferred Portfolio) and replaces a wet cool CCCT with a second Wyoming
pulverized coal plant and a transmission upgrade. The Committee is uncomfortable including
PacifiCorp’s carbon cost assumptions in the IRP base case because of the uncertain timing of any
legislation and resulting cost impacts. The Committee’s discussion of IRP risk analysis indicates
Portfolio Q had the least amount of variance in cost across the 100 simulations in the stochastic
analysis. The Committee states if price stability and protection from upper end risk exposure are
most important, then Portfolio Q is better than the IRP Preferred Portfolio. WRA and UCE
support the Company’s use of an $8 per ton imputed carbon dioxide cost as a base case
assumption in the IRP analysis as they believe this is the low end of a range of reasonable values.
They cite other western utilities that use a range of carbon cost assumptions from $5 per ton to
$12.50 per ton and with starting years from 2004 to 2010. While UAE and PacifiCorp agree it is
extremely difficult to predict the likelihood or level of potential carbon taxes, UAE disagrees
with the base case assumption of an $8 per ton carbon cost in 2012, saying the assumption is not
adequately supported, appears unreasonably conservative and designed primarily to ensure that
natural gas resources remain competitive alternatives. UAE says the risk analysis of continued
and increasing reliance on natural gas is inadequate. PacifiCorp believes that some form of
climate change policy will likely be in effect by 2010, and therefore deems it prudent to include a
carbon tax adder in the portfolio cost evaluation. The Company bases this assumption on the
influence of several recent legislative proposals (McCain-Lieberman and Carper) as well as other
market indicators such as existing markets for greenhouse gas emissions in the United Kingdom
and Denmark.
Transmission
The Committee says the Company’s modeling assumption that non-firm
transmission is not available, does not adequately capture the benefit of coal unit shoulder hour
surplus sales and results in a gas resource bias. UAE also questions this modeling assumption
and says it skews the results and supports over-construction. PacifiCorp notes IRP 2004
recognizes this is a conservative assumption, but modeling non-firm transmission is impractical
because it does not provide the long-term availability required for long-term planning purposes.
WRA and UCE object to the IRP’s modeling of the RMATS transmission expansion from
Wyoming to Utah as Portfolio Q since only coal generation and no wind is included. They cite
1,150 megawatts of wind identified in the RMATS process that could be accessed through
transmission expansion into Utah. The Committee does not believe the Company has adequately
responded to the Commission’s directive to evaluate transmission alternatives on a consistent
and comparable basis with generation alternatives. PacifiCorp responds that transmission
alternatives were included in every portfolio developed in IRP 2004, including transmission to
integrate potential resources as well as large scale transmission investments to gain access to
lower cost resource options.
Front Office Transactions
The Committee is concerned with the level of market purchases that may be tied
to the short-term spot market without adequate risk analysis. In FY 2009, the front office
transactions alone are forecast to meet 10 percent of total energy requirements. The IRP reports
meeting 21.9 percent of energy requirements, for the year ending March 31, 2004, through short
and long-term purchases. The Committee says subjecting 10 to 20 percent of the Company’s
energy requirement to market forces without stochastic risk analysis appears imprudent,
particularly with the knowledge gained in the 2000 to 2001 time period. MWC states 1,200
megawatts of front office transactions is probably excessive, does not merely reflect past practice
and may not reflect optimal planning in a rising energy market. PacifiCorp believes sufficient
risk analysis was conducted on the front office transaction proxy resource, and 1,200 megawatts
is reasonable based on the Company’s experience. The Company included an extreme scenario
where no front office transactions are available, in addition to a stochastic analysis that captured
variability in market conditions, however, it would appreciate receiving specific risk analysis
recommendations from dissatisfied parties.
DSM
The Committee states PacifiCorp has successfully implemented cost-effective
DSM programs that provide benefits to Utah ratepayers, including reduced exposure to volatile
fuel prices and environmental risks. WRA and UCE generally support the Company’s analytic
methodologies for evaluating DSM resources. However, since the stochastic and scenario risk
sensitivity analyses are performed on the supply side portfolios prior to running the DSM
analysis, WRA, UCE and MWC believe it may not fully capture the potential value of DSM .
MWC contends DSM is not evaluated on a consistent and comparable basis with supply-side
alternatives. UAE states that customer-based alternatives, including DSM, cogeneration and
interruptible contracts, are not adequately investigated, evaluated or pursued. It says the
Company must do much more than provide an avenue for these types of resources to participate
in an RFP process. UAE says Class 1 and 2 DSM analyses were performed only on the best
portfolio, instead of including DSM as a resource in all portfolios. Because of the small size,
limited market potential and number of Class 1 DSM options, PacifiCorp states it chose to
evaluate Class 1 DSM resources to lower the cost of the preferred supply side portfolio, DSM
additions have also provided the added benefit of delaying the need for supply-side resources in
three cases, and load control programs do not have the capacity factor to compete with most
supply-side resources due to limited availability. PacifiCorp says it followed the general
guidelines for decrement analysis in the 1995 Tellus report for Class 2 DSM and plans to update
the decrement analysis for the 2005 DSM RFP bids.
Planning Margin
UAE states IRP 2004 projects a $140.5 million lower PVRR cost for a 12 percent
planning margin compared to the assumed 15 percent planning margin. After considering the
risk/reward tradeoff, UAE believes the IRP should utilize a base case 12 percent planning
margin. PacifiCorp states it considered the reliability cost-risk tradeoff when determining the 15
percent planning margin, and this level of planning margin is consistent with that of neighboring
utilities and what is being proposed in recent resource adequacy initiatives. For IRP 2004,
PacifiCorp contracted for a study of planning margins which concluded that an 18 percent
planning margin would provide a one in ten year loss of load probability which is seen as an
industry standard reliability threshold. Further analysis determined that the optimal balance
between cost of expected unserved energy and additional capital investment to reduce it, lies at
the two in ten year loss of load probability or 15 percent planning margin reserve level for the
system.
Portfolios
The Division believes that perhaps insufficient credibility has been attributed to
the viability of Portfolio Q, particularly given that Portfolio Q is $1.3 billion in PVRR cheaper
than the alternatives in the event the carbon costs ends up being zero, as it is now. The Division
says, although no commitment needs to be made now with regard to the substitution of a coal-fired for a gas-fired plant, it believes that future IRPs need to be very explicit about how Portfolio
Q compares to alternatives. The Division believes PacifiCorp has evaluated both demand and
supply side resources on a reasonable basis, but is uncertain as to whether the selected portfolio
is optimal, given that the automated resource addition logic was not entirely functional when the
portfolio was chosen. The Committee believes the Company’s general portfolio building
approach is sound in concept, but difficult to successfully complete because of the time required.
The Committee says the Company, in trying to meet regulatory deadlines, took ill-conceived
short cuts and stopped before achieving the goal. The Committee cites IGCC, pumped air energy
storage and hydro storage as technologies that were screened out early in the process without
being subjected to risk analysis. The Committee says that all but two of the original sixteen
portfolios were more than 60 percent natural gas-fired and that Portfolio Q, the only portfolio
that made it into the risk analysis with less than 60 percent gas, was added at the Committee’s
request. The Committee points out the Company did not complete the development of the
Capacity Expansion Model (“CEM”) in time for use in this IRP cycle. WRA and UCE do not
believe it is possible at this time to conclude that portfolio E is the Preferred Portfolio and
recommend the Company revisit certain key cost assumptions and portfolio options before
committing to supply-side investments of this magnitude. UAE believes the Company should
have applied its risk analysis to all seventeen portfolios instead of just ten, since the difference in
PVRR between the best and worst portfolios was only 2.5 percent. UAE strongly supports
Portfolio K, which was indistinguishable from a modeling perspective as to risk and cost from
the Preferred Portfolio E. Portfolio K includes up to five 100 megawatt IC Aero SCCT units.
UAE believes the Company’s choice was based largely on its comfort with the CCCT technology
and its desire to utilize existing facilities at Currant Creek.
PacifiCorp has been working with Global Energy Decisions for the past year to
develop the CEM which incorporates the resource addition logic requested by parties in the 2003
IRP. The Company says it incorporated use of this model to the best of its ability in the IRP
2004, and received the final version of the product for use in future planning efforts in April
2005. PacifiCorp states it chose risk analysis portfolios on the basis of PVRR performance and
the composition of resources that would be of most interest in capturing differences in risk
profiles. Including all portfolios in the risk analysis would significantly increase the modeling
effort and complicate the relative evaluation process without contributing insight on risk impacts
that influence decisions. The Company says the alternative portfolios proposed by the
Committee and UAE were both proposed for the first time after the IRP was filed with the
Commission rather than during the year-long public input process. The Company expresses
disappointment that the IRP process did not work as planned, which was to allow parties to raise
changes in a meaningful way that allows discussion by all parties and provides the Company time
to consider the merits of the suggestions in the final plan.
Recommendations
UAE recommends revising the Standards and Guidelines to require annual IRP
filings, delaying issuance of an RFP for the proposed 2009 CCCT for at least one year, pursuing
customer-based and market alternatives, considering an RFP for options to procure the output of
up to five 100 megawatt Intercooled Aero Derivatives beginning in 2009, reducing emphasis on
traditional natural gas resources, increasing emphasis on IGCC, filing a new IRP by the end of
2005, improving access to IRP models, and increasing emphasis on resource options that permit
greater flexibility. The Division recommends the Company continue to file a load/resource
balance update with regulators no less than semi-annually, re-examine carbon risk, and continue
to examine and provide information regarding load and natural gas price forecasting
methodologies. The Committee recommends studying the life extension of retiring generation
plants as resource options in the IRP, not acknowledging the Action Plan until the Company
evaluates two supply-side options not previously explicitly evaluated, and analyzing the risk of
indexed market purchase contracts. WRA and UCE believe the Company should consider
adding more wind resources as alternatives in the latter years, re-evaluate wind capacity credits
and integration costs, continue to improve the IGCC analysis, and develop a long-term strategy
for managing future environmental risks. MWC recommends re-analysis of the portfolios with
the updated gas and electricity market forecast; consistent and comparable treatment of DSM; re-analysis of the wind capacity factor and IGCC; prompt completion of the renewable contracts
from the 2003 RFP; and an investigation of IRP modeling alternatives.
PacifiCorp contends the IRP meets all substantive requirements of the Utah
Standards and Guidelines and that differences in opinion over its planning assumptions, and how
it conducted certain aspects of its modeling and analysis process, do not provide sufficient
justification for denying acknowledgment of the IRP. PacifiCorp indicated it intends to file an
update to the IRP Action Plan no less frequently than annually, similar to the October 2003
update, and at a minimum will include material changes to assumptions, an updated load and
resource balance, and a progress report and changes or updates to the Action Plan. PacifiCorp
indicated it will also be hosting quarterly update meetings with participants. The RFP process
will also include flexibility to modify the procurement time-line in order to adjust to changes in
the load and resource balance. The Company states decisions regarding access to the IRP model
must weigh the benefits of increased transparency against confidentiality risks, timing constraints
and costs such as licensing fees and training. The Company says analysis of generation plant life
extensions as resources was not done since such life extensions would be outside the Action Plan
time horizon. In response to UAE’s comments regarding the risk mitigation benefits of IC Aeros
and other flexible resources, the Company states it evaluated Portfolio K which was similar to
the Preferred Portfolio, but contained six IC Aeros SCCTs for 2009. The results of that
evaluation were similar, but the Company says it chose the Preferred Portfolio because of past
operating experience with CCCTs, the ability to share facilities and parts with existing CCCTs,
and lower heat rate and emissions of the CCCTs.
CONCLUSIONS
Comments and recommendations received in response to our request are detailed
and extensive. We recognize the efforts of commenting parties and appreciate the filed
comments. PacifiCorp’s IRP was conducted in an open public process with numerous
participants representing a wide variety of perspectives. Parties recognize the Company’s
significant efforts. We have observed significant improvement in PacifiCorp’s IRP process over
the years since the 1992 Guidelines were adopted and compliment the Company on its efforts.
We reaffirm the importance of the IRP process and encourage the Company to continue its
efforts to improve and refine the process, especially given the forecasted need for significant new
resources in the future. We conclude that PacifiCorp’s IRP 2004 is generally consistent with our
Guidelines and acknowledge such. We reiterate that this acknowledgment does not convey
regulatory approval of Company resource decisions included in the Action Plan. The new Utah
law, previously cited, has specific requirements for this Commission regarding the approval
processes for the solicitation and acquisition of significant energy resources. We are concerned
the current acknowledgment process is insufficient to meet the requirements of SB 26. A process
should be put in place that goes beyond the current acknowledgment process and ensures an
adequate record is developed to comply with SB 26 requirements.
Parties that recommend no or delayed acknowledgment of the IRP do so primarily
on the basis of inadequate confidence in the type, timing and magnitude of resources PacifiCorp
identified as least cost and optimal. The parties point to a breach in the consistency with which
alternative resource costs and risks are compared and the faulty effects of outdated or disputed
assumptions. Partly because of the relatively low natural gas and electric price forecasts, parties
argue the Preferred Portfolio may overstate the need for and timing of natural gas-fired CCCT’s
and understate the magnitude and timing of the alternatives like DSM, IGCC, and wind. We find
these serious and legitimate concerns. The far reaching effects of the relatively low natural gas
price forecasts and the limited application of both natural gas/electric price risk and climate
change policy risk analysis are troublesome. However, we are not persuaded it is in the public
interest to delay the IRP acknowledgment until these issues are resolved. Most parties support
the need to consider resource additions of some type in the near future. Indeed, we find that SB
26 gives us a new opportunity to address these concerns in a meaningful and timely way through
the RFP approval process. Input assumptions, risk analysis and evaluation methods can be
debated and resolved in that process. Therefore, we decline to acknowledge the IRP 2004 Action
Plan and request parties provide comments within the context of the RFP approval process to
ensure that the concerns raised in this docket are brought forward in that docket (No. 05-035-47).
For example, which resources should be permitted to bid? How should climate change policy
risk be assessed in evaluating competing bids? How should the uncertainty of natural gas and
electricity prices be addressed? We leave for future consideration and input from parties, an
alternative way of blending the IRP process, Action Plan and implementation of SB 26.
We are concerned that some issues appear not to have been raised by parties until
after the IRP was filed, leaving little time for those issues to have an impact on the IRP results
and conclusions. We are also concerned that the Company may not have adequately explained
its reasoning for some decisions until either the IRP was filed or when it filed responsive
comments to parties. Specifically, with respect to the next IRP, we direct the Company to
structure the public input process to allow sufficient time for discussion of issues raised by
parties and to address relevant issues raised in this IRP. We encourage parties to provide timely
comments during the IRP process so other parties and the Company can discuss them and
incorporate ideas in the analysis. We believe a comprehensive annual update to the IRP between
the biennial IRP filings should continue. We find reasonable the Division’s request for semi-annual updates of the load and resource balance. We direct the Company to investigate
improving the transparency of the IRP modeling to increase confidence in the results.
ORDER
NOW, THEREFORE, IT IS HEREBY ORDERED, that
1. PacifiCorp’s Integrated Resource Plan 2004 is acknowledged.
2. The Action Plan is not acknowledged, but will be further considered in the approval
process for PacifiCorp’s solicitation for new significant energy resources.
DATED at Salt Lake City, Utah, this 21st day of July, 2005.
/s/ Ric Campbell, Chairman
/s/ Ted Boyer, Commissioner
/s/ Ron Allen, Commissioner
Attest:
/s/ Julie Orchard
Commission Secretary
G#45233