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Home My WebLink About20240823PAC to PIIC 12-2 Attachment.pdf INCOMPLETE SOURCE DATA INCOMPLETE SOURCE DATA...................................................................................1 AnnualInputs Update............................................................................1 Commodity Record Management...........................................................1 Power Trading Points and Mapping...............................................2 IncompleteData........................................................................................3 Remedy.............................................................................................................4 Summary...........................................................................................................5 Annual Inputs Update Towards the start of each year, the Company prepares for the upcoming net power costs (NPC) filings by updating all inputs into the NPC forecast, including wholesale sales and purchase contracts for electricity and natural gas . During this update process it was observed from the raw source data that a portion of the executed (historical) wholesale sales and purchase contracts for electricity were absent from various input files . The Company remedied this issue by ensuring that all executed wholesale sales and purchase contracts for electricity from the raw source data were properly linked into the NPC forecast. Commodity Record Management As it concerns executed wholesale sales and purchases in the NPC forecast, the Company' s commodity management software records all wholesale sales and purchase contracts for electricity and natural gas that are executed in actual operations . This source data then flows into the NPC forecast for calculation of physical power hedges (physical power transactions) , physical gas hedges (physical gas transactions) , financial gas hedges (financial gas transactions) , market capacity limits (physical power sale transactions) , and day-ahead / real-time transactions (spot market physical power transactions) . Power Trading Points and Mapping Specific to physical power transactions in actual operations, the Company executes these transactions across many different trading points in the West (western interconnection) . These trading points can be categorized as minor trading points or major trading points . However, in the NPC forecast, for modeling convenience, only the major trading points' are modeled. Then, all transactions at minor trading points are mapped to those major trading points . For example, from an electronic tagging (E-Tag) perspective, the energy associated with a physical power hedge transacted with the Bonneville Power Administration may be received at the minor trading point known as the Bonneville/PacifiCorp transmission 'Mid-Columbia,California Oregon Border(COB),Nevada Oregon Border(NOB),Mona,Mead,Four Corners, Palo Verde. interface (BPAT . PACW) . Since the NPC forecast only models major trading hubs, this hedge would be mapped to the Mid- Columbia major trading hub. This mapping process is necessary for accuracy of the NPC forecast, since all physical power transactions must be accounted for. However, for simplicity of modeling, all trading points across the West are not accounted for in the Company' s production cost model . Therefore, all physical power transactions are mapped to one of the major trading points and all major trading points are modeled in the NPC forecast. This ensures that purchases and sales of physical power are fully accounted for in the model, across the historical and future data. Incomplete Data During the holistic input update process conducted towards the start of each year, it was observed in the raw source data that creates the NPC inputs that all physical power hedges and all market capacity limits map all physical power transactions to one of the major trading hubs . However, the day-ahead / real-time transaction mapping was incomplete and did not map portions of the Company' s physical power transactions to any of the major trading hubs . (That is to say, a portion of the Company' s executed physical power transactions were absent from the NPC forecast) . On its face, this inconsistency in the use of the raw source data indicates that either the market capacity limits are calculated on too many transactions, or the day-ahead / real-time transactions are calculated on too few transactions, since there can only be one consistent set of transaction data (raw source data) supporting the NPC forecast. Under this scenario, the Company' s commodity records for power transactions effectively reflected two separate official record sources in the same NPC forecast and therefore this created a known inaccuracy in that NPC forecast. Remedy To remedy this inaccuracy, it must be that all elements of the NPC forecast calculate from the same set of source data. Therefore, either all power transactions are mapped to major trading points, or only a defined portion of power transactions are mapped to major trading points . The immediate implication is that power hedges and market capacity limits source data should be only a portion of the Company' s power transactions, or the day-ahead / real-time transactions source data should be all the Company' s power transactions . The Company remedied this inconsistency by updating the day-ahead / real-time transaction source data to encompass all the Company' s power transactions . Summary Using all power transactions in all the NPC forecast calculations and mapping all minor trading points to the major trading points, for all calculations, is the most appropriate and accurate solution when considering that the NPC forecast simulates and attempts to replicate the actual operations of the Company' s system as if only major trading points existed and this contrasts with actual operations which has both major and minor trading points . Without mapping all power transactions to the major trading points in the NPC model, the NPC forecast would not accurately replicate the actual operation of the Company' s system. This approach is substantiated by the results of the 2020 Benchmark Study2 which shows Aurora producing 2020 NPC that is $58 . 7 million total-company (or 3 . 9 percent) less than 2020 Actual NPC . This benchmark study uses all power transactions in all the NPC forecast calculations and maps all minor trading points to the major trading points for all calculations . When the 2020 Benchmark Study uses only a 2 Exhibit No.26. portion of the Company' s power transactions in the NPC inputs, the 2020 Benchmark Study shows Aurora producing 2020 NPC that is $72 .2 million total-company (or 4 . 8 percent) less than 2020 Actual NPC. This is a worsening of the 2020 Benchmark under- forecast by $13 . 6 million and an indication that the accuracy of the NPC forecast is improved when all executed power transactions are accounted for across all elements of the NPC forecast .