The workshop on integrated resource planning called for in the initial meeting of the Adequacy Forum was held on May 28.  A report on the workshop prepared by Mary Johannis of Bonneville is attached for your information along with the list of attendees.

Subsequent to the meeting, representatives of the original convening group (Bonneville, PacifiCorp, the Northwest Power Pool and the Council) as well as the Executive Director of PNUCC met to discuss next steps.  The report of the first meeting of the Forum concluded by noting that the specific action items identified (Improving the accuracy and consistency of resource adequacy information reported to the Power Pool and subsequently to the WECC; and the IRP Workshop) were important but possibly not sufficient steps.  It went on to say that there was the need for further conversation on the need for a consistent adequacy standard, the form of that standard, and whether some kind of compliance mechanism was required.

However, as we review the developments of the intervening months, we decided to hold off on any further discussions of an adequacy standard at this time.  Our reasons were:

·        Significant progress is being made in improving consistency and accuracy of the reporting of load and resource information through the Power Pool and ultimately through the WECC.  It is critical to have reliable west-wide load and resource information and the WECC is now making an effort to improve the reporting of adequacy information throughout the West.  There was concern that putting too much focus on an adequacy standard might have a chilling effect on the efforts to improve the base adequacy information.

·        The IRP Workshop indicated that treatment of risk and the tradeoffs between supply adequacy, costs and risk were being addressed in IRP to a much greater extent than in the past.  This should have the effect of utilities and their regulators/boards being more conscious of resource adequacy issues and better able to make informed decisions. 

·        The FERC White Paper and Congressional response to the Standard Market Design give greater deference to state and regional efforts to assure resource adequacy and would allow more time for these efforts to evolve. 

On the basis of the foregoing, we did not think that additional discussion of an adequacy standard would be productive at this time.  However, we would like to poll the participants in the Adequacy Forum to see if this view is widely shared.  If you disagree with that conclusion, please let me know.  (dwatson@nwcouncil.org)

We do intend to proceed with the technical follow up meetings on some of the issues identified during the IRP workshop (see the attachment).

Thank you for your interest and participation. 

attachment

 

 

 

Synopsis of Power Supply Adequacy Forum’s

Integrated Resource Planning (IRP) Workshop

Hosted by Northwest Power Planning Council

On May 28, 2003

 

The second meeting of the Northwest Power Planning Council’s (Council) Resource Adequacy Forum was well-attended by representatives of investor-owned and public Load Serving Entities (LSEs), regulators and northwest electricity industry stakeholders.  The attendance list is Attachment 2.

 

After introductions, Idaho Council Member Jim Kempton explained the purpose of this meeting in the context of the Resource Adequacy Forum. He noted that this workshop was one of the action items coming out of the first meeting of the Resource Adequacy Forum.  The goals of the Council’s Resource Adequacy Forum are:

 

 

He described the workshop as an opportunity to exchange information on how IRPs are formulated by the utilities and viewed by the regulators.  The hope is that common themes will emerge from the IRP process to help the Region address resource adequacy issues. 

The agenda for the workshop is Attachment 1.  Following is a synopsis of the key topics discussed at this workshop.

Western Resource Assessment Team (WRAT) REPORT:

A number of entities have recently become concerned with the lack of a credible interconnection-wide resource adequacy assessment process.  The Committee on Regional Electric Power Cooperation (CREPC), a group of state regulators and state energy office representatives from the 11 Western states and provinces that comprise the Western Interconnection, recently created the WRAT to look into this issue.  Wally Gibson, a Council staff member who is a member of that group reported:

·        After investigating the issue and developing a cursory assessment process, WRAT recommends the following:

o       A comprehensive annual assessment that captures critical capacity and energy information is needed to provide a clear resource adequacy picture.

o       This assessment should integrate generation and transmission parameters.

o       It should use a scenario analysis approach.

o       It should incorporate standardized definitions for such parameters as adverse hydro, peak and coincident peak load and committed resources.

·        WRAT concluded that such outstanding issues as the lack of quality information due to perceived market sensitivities needs to be addressed.

·        WRAT proposes to work with the Western Electricity Coordination Committee’s (WECC’s) Reliability Subcommittee to modify WECC’s assessments to incorporate the above recommendations for west-side assessments; WRAT will also coordinate with the Northwest Power Pool’s (NPWPP) proposed Load and Resource Adequacy Group on the same issues for Northwest assessments.  The NWPP is the entity that provides WECC’s Reliability Subcommittee with Northwest information for these resource assessments.

INTEGRATED RESOURCE PLANNING (IRP) ROUNDTABLE DISCUSSION:

The following link to the Council’s website on the Resource Adequacy Forum--http://www.nwcouncil.org/energy/powersupply/adequacyforum/Default.htm contains copies of the formal IRP presentations given and discussed during this part of the meeting.  A number of IRP discussions did not include visual aids. Some of the main points that emerged from the discussion included:

·        Given the wide variability of the Northwest’s hydro resources, resource additions based on adverse hydro may not be used that much during the majority of years.

·        Risk is a key consideration in the preparation of IRPs.  In addition, to load and resource risks, a risk that needs to be considered is how long, or short the electricity market is.  The following slide from Charlie Black’s (Puget Sound Energy) presentation does a good job of depicting this risk. 

·        Since most state regulators do not specify a standard for resource adequacy, the regulated utilities used various approaches for determining what constitutes sufficiency of resources.  For example, PacifiCorp (PAC) based their assessment on average hydro (since only 10% of their resources are hydro) and assumed a 15% planning capacity margin, based on the direction FERC provided in their Standard Market Design Notice of Proposed Rule-making.  However, the much less specific direction regarding resource adequacy in FERC’s White Paper is causing PAC to re-evaluate their planning capacity margin assumption.  Most hydro-dominated utilities based their assessment on one, or more, scenarios involving adverse hydro conditions.

·        Most of the public utilities that attended this workshop indicated that they are in various stages of developing IRPs.  Some indicated that their goal in attending the workshop was to glean information regarding best IRP practices.  Others, such as Tacoma Power, are in the advanced stages of IRP preparation.  These utilities examine many of the same risk, load and resource parameters as do the regulated utilities.  Although they are not required to seek Public Utility Commission approval for their plans, the larger utilities are required to hold public meetings and seek approval of their boards.  At least, one of these utilities indicated that the IRP is a helpful tool in communicating with their board.

·        The IRP practitioners shared their scenarios and policies regarding resource acquisitions versus contract purchases.  Some indicated a more, or less, formal renewable portfolio standard.  Others indicated they are working with their customer classes to understand their important issues to help these utilities make IRP decisions.  The issue of how much to rely on the short-term, or long-term electricity market was discussed by some of the IRP practitioners.  Since the merchant market is not performing as well as expected, the risk of relying on the market has increased.

Council staff prepared a comparison of responses by IRP practitioners to a number of IRP questions.  This comparison is also found at the Council’s website.

NEW COUNCIL TOOL TO ASSESS REGIONAL RISK MANAGEMENT:

Michael Schilmoeller of the Council’s staff gave a brief presentation on OLIVIA, a risk management tool the Council is currently developing to assist the Council in assessing risks and how to prevent severe outcomes.  Michael indicated the goal is to eventually to have this model scalable to the utility level; utilities could then modify this data base driven tool for their own purposes.  The tool examines independent and interdependent uncertainties in determining risk and evaluating risk-reducing strategies.  A number of workshop participant stated their enthusiasm for the continuing development of this model.

REGULATORS’ PERSPECTIVE ON RESOURCE ADEQUACY AND REGULATORY UNCERTAINTY:

In the afternoon, the regulators and some of the stakeholders in attendance provided their perspectives on the purpose of IRPs and the regulators’ purpose in the IRP process.  Some of the important points included:

·        With the exception of the regulators from the state of Montana, none of the regulators view approval of an IRP as pre-approval for cost-recovery.  Most view the approval of the IRP as an important part of that process and very important for information exchange.

·        Some of the regulators view their role as balancing the risk of potentially excessive costs to the consumers with the Rate of Return risk of the utilities.  Decisions become difficult when the prudency review once a plant is built indicates changed conditions from when an IRP was approved.  This, of course, is a source of regulatory uncertainty.

·        Some of the regulators indicated that utilities can improve their chances for regulatory certainty in terms of cost recovery if their IRP process includes a good public process with outreach to diverse stakeholders.  Consensus achieved in such a process is very meaningful.  Key parameters to consider include:

o       Transmission considerations

o       Resource mix including demand-side management and renewables

o       Balancing risk of adequacy versus cost

NEXT STEPS:

The IRP workshop concluded with Dick Watson of the Council staff indicating:

·        There appears to be a desire for a follow-up technical meeting of resource planners to further exchange information on risk management methodologies and other IRP best practices and specific issues like treatment of intermittent resources like wind (e.g. integration costs and capacity credit) and treatment of transmission constraints in IRP.

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