Loading...
HomeMy WebLinkAbout20060413Load growth report.pdf~~~!fJ ~9 ~ I , ,- '~' c" C, I' :'! ; u h. : .' !..; Pacific Power I Utah Power Rocky Mountain Power 825 NE Multnomah Portland, Oregon 97232 April 13 2006 , .. . ... "::' :c,::1;:;;' ,.." : \ ,,-, i ; ,"- ~ . ~ VIA OVERNIGHT DELIVERY Idaho Public Utilities Commission 472 West Washington Boise, ID 83702-5983 Attn: Jean D. Jewell Commission Secretary Re:Case No. PAC-O2- PacifiCorp s Petition to Initiate Investigation of Inter-Jurisdictional Issues Addendum 1 to PacifiCorp s Load Growth Report - Compliance Filing PacifiCorp submits for filing an original and seven (7) copies of Addendum 1 to PacifiCorp Load Growth Report, which was previously filed as a compliance filing with the Commission on October 20, 2005, Addendum 1 provides detailed discussion of two cost shift structural protection mechanisms. At the request ofthe MSP Standing Committee, the MSP Load Growth Workgroup continued to meet to further develop two of the structural protection mechanisms overviewed in Section 5.4. Page 21 (ECD Alternative 1) and Section 5.4.2 Page 21 (ECD Alternative 2) ofPacifiCorp Load Growth Report. These activities are intended to fulfill Section XIII.B.5 ofthe Revised Protocol that directs the MSP Standing Committee to develop: ... one or more mechanisms that could be implemented in a timely manner in the event that load growth studies show a material and sustained harm to particular States from the implementation of the IRP.. Addendum 1 is filed with the Commission as an informational filing only. For each mechanism Addendum 1 contains the mechanism description, process, implementation and examples. The filing of this addendum is not intended to portray any definitive agreement among the MSP participants as to a chosen structural protection mechanism, nor suggest that a structural protection is required to be implemented at this time. As concluded in PacifiCorp s Load Growth Report, it is recommended that these structural protection mechanisms (or an alternative ECD-based approach) be re-evaluated if and when future analysis shows there may be inappropriate cost shifts due to load growth. It is respectfully requested that all formal correspondence and staff requests regarding this matter be addressed to: By E-mail (preferred):datarequest~pacifi corp. com By Fax:(503) 813 6060 By Regular Mail:Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 300 Portland, OR 97232 Informal inquiries may also be directed to Greg Duvall (503 813 7069) or Cathie Allen (503 813 6019). Very truly yours ~J~~ (p." Andrea Kelly V ice-President, Regulation Enclosures cc: Service List 02-035- CERTIFICATE OF SERVICE I hereby certify that on this 12th day of April, 2006 I caused to be served, via First Class U.S. Mail, a true and correct copy of Addendum 1 to PacifiCorp s Load Growth Report. Eric L. Olsen Racine, Olson, Nye, Budge & Bailey 201 E. Center O. Box 1391 Pocatello, ill 83204-1391 Randall Budge Racine, Olson, Nye, Budge & Bailey 201 E. Center O. Box 1391 Pocatello, ill 83204-1391 James R. Smith Monsanto Company Highway 34 North Soda Springs, ill 83276 Anthony Yankel 29814 Lake Road Bay Village, OR 44140 Sue Farmer MSP Administrative Coordinator 825 NE Multnomah, Suite 600 Portland, OR 97232 Katherine McDowell Stoel Rives LLP 900 SW 5th Ave Portland, OR 97204 Andrea Kelly Director Regulation PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 Dw~ D~s- Debbie DePetris Regulatory Analyst , .' ", \~; (, ': '? ". ,j,\_ ::C, :,,; " Multi-State Process Addendum PacifiCorp Load Growth Report Apri I 11 , 2006 MS P L o a d G r o w t h W o r k g r o u p EC D A l t e r n a t i v e 1 a n d E C D A l t e r n a t i v e 2 Em b e d d e d C o s t D i f f e r e n t i a l A l t e r n a t i v e s M a t r i x Ap r i l 1 1 , 20 0 6 Au t h o r EC D A l t e r n a t i v e 1 EC D A l t e r n a t i v e 2 Pr o p o s a l Im p l e m e n t a t i o n o f a n E m b e d d e d C o s t D i f f e r e n t i a l S t r u c t u r a l Im p l e m e n t a t i o n o f a n E m b e d d e d C o s t D i f f e r e n t i a l S t r u c t u r a l Pr o t e c t i o n M e c h a n i s m . Pr o t e c t i o n M e c h a n i s m . St u d y P e r i o d 10 - Y e a r F o r e c a s t e d . Us e d a t a u p t o s e v e n y e a r s , w i t h t h e l a t e s t d a t e r e f l e c t i n g t h e e n d da t e o f t h e t i m e p e r i o d o v e r w h i c h r a t e s w o u l d b e i n e f f e c t pu r s u a n t t o a g e n e r a l r a t e f i l i n g , a n d g o i n g b a c k i n t i m e u p t o s i x ye a r s , b u t i n n o e v e n t e a r l i e r t h a n J a n u a r y 1 , 2 0 0 5 . St u d y Lo a d G r o w t h S t u d y d e f i n e d b y R e v i s e d P r o t o c o l ( p a g e 7 Lo a d G r o w t h S t u d y d e f i n e d b y R e v i s e d P r o t o c o l ( p a g e 7 fo o t n o t e 2 ) . fo o t n o t e 2 ) . Re q u i r e s c o m p a r a t i v e G R I D a n d R F M r u n s . Re q u i r e s c o m p a r a t i v e G R I D a n d R F M r u n s . Av e r a g e l o a d g r o w t h s t u d y d e f e r s o r r e m o v e s I R P p l a n n e d Av e r a g e l o a d g r o w t h s t u d y d e f e r s o r r e m o v e s I R P p l a n n e d re s o u r c e s t o m a i n t a i n I R P p l a n n i n g m a r g i n . re s o u r c e s t o m a i n t a i n I R P p l a n n i n g m a r g i n . Fr e q u e n c y o f S t u d y An n u a l l y t h r o u g h 2 0 0 8 t h e n b i e n n i a l ( i n c o n c e r t w i t h t h e I R P ) An n u a l l y t h r o u g h 2 0 0 8 t h e n b i e n n i a l ( i n c o n c e r t w i t h t h e I R P ) Up d a t e s wh e n t h e M S P S t a n d i n g C o m m i t t e e r e q u e s t s . wh e n t h e M S P S t a n d i n g C o m m i t t e e r e q u e s t s . Tr i g g e r ( s ) ua l i t a t i v e T r i er - ua l i t a t i v e T r i er - Fa s t G r o w i n g S t a t e P a y s 8 5 % - 1 1 5 % o n a N P V b a s i s , n o Fa s t G r o w i n g S t a t e P a y s 8 5 % - 1 1 5 % o n a N P V b a s i s , n o ma t e r i a l h a r m a n d n o a c t i o n r e q u i r e d . T r i g g e r o c c u r s : ma t e r i a l h a r m a n d n o a c t i o n r e q u i r e d . T r i g g e r o c c u r s : Be l o w 8 0 % i n a n y o n e s t u d y Be l o w 8 0 % i n a n y o n e s t u d y Be l o w 8 5 % f o r t w o c o n s e c u t i v e t e n y e a r s t u d i e s Be l o w 8 5 % f o r t w o c o n s e c u t i v e s t u d i e s Be l o w 9 0 % f o r t h r e e c o n s e c u t i v e t e n y e a r s t u d i e s Be l o w 9 0 % f o r t h r e e c o n s e c u t i v e s t u d i e s Ab o v e 1 1 5 % f o r t w o c o n s e c u t i v e t e n y e a r s t u d i e s Ab o v e 1 1 5 % f o r t w o c o n s e c u t i v e s t u d i e s Ab o v e 1 1 0 % f o r t h r e e c o n s e c u t i v e t e n y e a r s t u d i e s Ab o v e 1 1 0 % f o r t h r e e c o n s e c u t i v e s t u d i e s Ab o v e 1 2 0 % i n a n y o n e s t u d y Ab o v e 1 2 0 % i n a n y o n e s t u d y MS P L o a d G r o w t h W o r k g r o u p Ap r i l 1 1 20 0 6 lo f 3 EC D A l t e m a t i v e s M a t r i x Im p l e m e n t a t i o n On g o i n g : Im p l e m e n t i n t h e s t a t e c o i n c i d e n t w i t h e f f e c t i v e d a t e o f n e w 1) T r a c k k e y f a c t o r s a n d p r o v i d e t o M S P S t a n d i n g C o m m i t t e e ra t e s a s a r e s u l t o f t h e s t a t e s g e n e r a l r a t e c a s e . ( T h i s i s n o t fo r r e v i e w a t a n n u a l m e e t i n g . im p l e m e n t e d a t t h e s a m e t i m e i n e v e r y s t a t e , b u t a c c o r d i n g t o Pa c i f i C o r p s t a t e - by - s t a t e g e n e r a l r a t e f i l i n g s a n d s t a t e - by - s t a t e 2) C o n d u c t l o a d g r o w t h s t u d y i f M S P S t a n d i n g C o m m i t t e e de t e r m i n a t i o n s ) . ex p e c t s c h a n g e s i n k e y f a c t o r s i n d i c a t e p o t e n t i a l f o r o v e r o r un d e r a l l o c a t i o n o f c o s t s . Up o n t r i g g e r : Co n d u c t f u r t h e r a n a l y s i s w h e r e U t a h l o a d i n c r e a s e s b y 10 0 a M W m a t c h e d b y t h e a d d i t i o n o f a 1 5 0 M W re s o u r c e ( C o a l , G a s , a n d M a r k e t P u r c h a s e s ) . I f a n a l y s i s id e n t i f i e s a p o t e n t i a l l y p r o b l e m a t i c r e s o u r c e , t h e r e s o u r c e is " ea r m a r k e d " f o r f u r t h e r s t u d y w h e n i t e n t e r s r a t e b a s e in a r a t e c a s e . Wh e n t h e " ea r m a r k e d " r e s o u r c e i s i n a r a t e c a s e , u p d a t e th e l o a d g r o w t h s t u d i e s b a s e d o n c u r r e n t l o a d a n d m a r k e t fo r e c a s t s a n d d e t e r m i n e i f r e s o u r c e r e m a i n s a p r o b l e m . Re s u l t s r e p o r t e d t o M S P S t a n d i n g C o m m i t t e e . MS P S t a n d i n g C o m m i t t e e d e c i d e s o n e o f t h r e e a c t i o n s : Do n o t h i n g . Re c o m m e n d P a c i f i C o r p , i n e a c h o f i t s s u b s e q u e n t ge n e r a l r a t e c a s e f i l i n g s , i n c l u d e s t r u c t u r a l p r o t e c t i o n me c h a n i s m . Co n s i d e r r e c o m m e n d i n g c h a n g e s t o t h e R e v i s e d Pr o t o c o l . Re s o u r c e C o s t Ne w r e s o u r c e E C D - N e w l y c o n s t r u c t e d c o s t o f o w n e d Ne w l y c o n s t r u c t e d c o s t o f o w n e d r e s o u r c e s i n c l u d e d i n r a t e s Ad j u s t m e n t re s o u r c e s i n c l u d e d i n r a t e s . ra n k e d f r o m h i g h e s t c o s t ( f i r s t ) t o l o w e s t c o s t ( l a s t ) p e r a M W . Tr a n s f e r p a y m e n t i s d e t e r m i n e d b y s t a r t i n g w i t h h i g h e s t c o s t co m p a n y a c q u i r e d r e s o u r c e d u r i n g s t u d y p e r i o d , u p t h r o u g h t h e ye a r t h a t n e w r a t e s w o u l d b e i n e f f e c t . R e s o u r c e s a c q u i r e d a n d on l i n e n o l a t e r t h a n J a n u a r y 1 20 0 5 , a r e e x e m p t . Ex c l u d e h y d r o - e l e c t r i c r e s o u r c e s g i v e n R e v i s e d P r o t o c o l E C D tr e a t m e n t . MS P L o a d G r o w t h W o r k g r o u p Ap r i l ! ! 20 0 6 2 o f 3 EC D A l t e r n a t i v e s M a t r i x Al l o c a t i o n F a c t o r s Ne w r e s o u r c e c o s t s b u i l t a n d i n o p e r a t i o n i n e x c e s s o f t h e a l l Ob j e c t i v e t o c r e a t e t r a n s f e r p a y m e n t s s o t h a t 9 0 % o r 1 1 0 % c o s t ot h e r r e s o u r c e c o s t . re c o v e r y , a s a p p l i c a b l e , o f l o a d g r o w t h o n a N P V b a s i s w o u l d be a s s i g n e d t o h i g h e s t g r o w t h s t a t e o v e r T s t u d y p e r i o d . S t a r t Pr o j e c t e d l o a d s t w o y e a r s b e y o n d t h e t e s t p e r i o d d u r i n g 15 1 wi t h a s s i g n i n g h i g h e s t c o s t n e w r e s o u r c e s ( o v e r l a s t s i x y e a r s ye a r o f n e w r e s o u r c e a d d i t i o n , a n d p r o j e c t e d l o a d s o n e y e a r hi s t o r i c a l ) a n d c o n t i n u e , a s n e c e s s a r y , u n t i l t r a n s f e r p a y m e n t be y o n d t e s t p e r i o d d u r i n g s e c o n d y e a r . th r e s h o l d i s m e t . In v e r s e S O f o r f a c t o r f o r t e s t p e r i o d . Ap p r o a c h s i m i l a r t o Q F e x i s t i n g m e t h o d o l o g y i n E C D . In v e r s e S O f a c t o r . Du r a t i o n Te m p o r a r y - T w o y e a r s . EC D c o n t i n u e s u n t i l t h e t r i g g e r i s t r i g g e r e d a g a i n . MS P L o a d G r o w t h W o r k g r o u p Ap r i l I I , 2 0 0 6 30 0 EC D A l t e r n a t i v e s M a t r i x MSP Load Growth Workgroup ECD Alternative 1 Process, Proposal, and Illustrative Example April 11, 2006 Table of Contents Attachment I Proposed Process for ECD Alternative Attachment 2 Description ofECD Alternative Attachment 3 Illustrative Example ofthe New Resource ECD 3a - Calculation of the ECD Year 3 b - Calculation of the ECD Year 2 3c - Allocation of the ECD MSP Load Growth Workgroup April 11 2006 lof)ECD Altemarive 1 Table of Con tents ATTACHMENT 1 . MSP Load Growth Workgroup ECD Alternative 1 Proposed Process and Implementation April 11,2006 The following outlines the process to be followed for potential implementation of the structural protection mechanism referred to as ECD Alternative 1. It should be noted that nothing in this proposed process is intended to circumvent the authority and decision- making ability of each State Commission. Any amendment to the Revised Protocol would require the approval of each State Commission that previously ratified the Revised Protocol. It should also be noted that the Utah Commission MSP Order requires the Company to file with the Commission regarding the materiality of possible harm to other states from a fast growing jurisdiction before taking a position before the MSP Standing Committee. This document should be reviewed in conjunction with the documents entitled Embedded Cost Differential Alternatives Matrix" (the "Matrix ) and "Description of ECD Alternative 1" which is included in this packet as Attachment 2. For additional background materials, also refer to the MSP Load Growth Workgroup meeting materials (this workgroup met from March 2005 to February 2006). ECD Alternative 1 , and its associated documents attached herewith, is based on what is known at the time of developing the mechanism and compiling the associated documents. It is recommended that this proposal be re-evaluated if and when future analysis shows there may be inappropriate cost shifts due to load growth and a structural protection mechanism is considered for implementation. PROCESS The MSP Standing Committee will track the key factors outlined in Section 4 of the MSP Load Growth Report dated October 20, 2005. The MSP Standing Committee will evaluate whether changes in key factors indicate the potential for over or under allocation of costs. Based on their evaluation, the MSP Standing Committee decides whether to direct further study. Based on direction from the MSP Standing Committee, the Company will perform and analyze the "Study" as defined in the Revised Protocol (page 7 footnote 2) and also stated in the Matrix. The study period includes ten years forecasted data that covers the same time period as the Company s most recent IRP. MSP Load Growth Workgroup April 11 2006 lof4 ECD Altemarive I Anachment I The Utah Commission MSP Order requires the Company to file with the Commission regarding the materiality of possible harm to other states ITom a fast growing jurisdiction before taking a position before the MSP Standing Committee. If the Company makes such a filing in Utah, a copy of the filing will be provided to the MSP participants. The results of the study will be provided to the MSP Standing Committee, and they will analyze the results against the triggers as defined in the Matrix and listed below. If the fastest growing State is paying between 85% - 115% (on an NPV basis) in any ten-year study, it has been agreed that there is no material harm and no action is required. A trigger occurs if any of the following conditions apply:- The fastest growing State is paying below 80% in any ten year study (on an NPV basis) The fastest growing State is paying below 85% for two consecutive ten year studies (on an NPV basis) The fastest growing State is paying below 90% for three consecutive ten year studies (on an NPV basis) The fastest growing State is paying above 110% for three consecutive ten year studies (on an NPV basis) The fastest growing State is paying above 115% for two consecutive ten year studies (on an NPV basis) The fastest growing State is paying above 120% in any ten year study (on an NPV basis) If a trigger has not been reached, no further action is necessary. If a trigger is reached, the Company will conduct further analysis, similar to the earlier MSP Load Growth Workgroup studies in which the fastest growing State load was increased by 100 aMW while retaining its load shape and matched by 150 MW of resource (note: for the MSP studies carried out to-date, Utah has been the fastest growing State). These studies are designed to isolate the effect of the divergence in incremental and embedded cost from the effect ora load and resource imbalance. If, through these additional study processes, a thermal resource (for instance) is identified as potentially problematic (i., is causing the under or over allocation of costs based upon an agreed to threshold), that resource will be earmarked for further analysis to be performed as that resource enters a rate case for inclusion into rate base. MSP Load Growth Workgroup April 11 2006 2of4 ECD Altemillive I Attaclunent I As the costs of the earmarked resource (or the costs of a resource similar to the earmarked resource) appear in a rate case, the load growth analysis will be updated with current load-growth statistics and market conditions. The results of all the associated studies are provided to the MSP Standing Committee. Based upon the results, the MSP Standing Committee may decide on one of the following three actions (or other actions that are deemed appropriate and within the scope of the MSP Standing Committee, and as established in Section XIII B of the Revised Protocol and the MSP Standing Committee Guidelines):- Do nothing, If the earmarked resource continues to reach the established triggers, recommend that a "New Resource ECD" for the earmarked resource should be applied for two years. The "New Resource ECD" will apply only to those resources that reach the triggers and will be applied symmetrically for over allocation as well as under allocation Recommend potential changes to the Revised Protocol that are considered to address a material and/or sustained harm on a more permanent basis (see Item 1 0 below). 10.It should be noted that changes such as a New Resource ECD and/or potential changes to the Revised Protocol can only be implemented upon the approval each State Commission that previously adopted the Revised Protocol. Refer to Section XIII C of the Revised Protocol for further clarification. IMPLEMENTATION The implementation ofECD Alternative 1 using a "New Resource ECD" requires the following steps to be performed:- Create a "New Resource ECD" category. Compare the cost of the new "earmarked" resource ($/MWh) to the cost ofthe Annual Embedded Cost - All Other . The difference represents the embedded cost differential associated with the new "earmarked" resource. The newly constructed "earmarked" resource is included in the ECD for two years. A separate calculation is applied for each new "earmarked" resource. In the first year, the ECD is allocated using the SG factor with projected loads two years beyond the test year. MSP Load Grow1h Workgroup April 11 2006 3 of4 ECD Altemarive I Attaclunent I In the second year, the ECD is allocated using an SG factor calculated with projected loads one year beyond the test year. The inverse amount of the ECD is backed out from the states using the test year SG factor. MSP Load Growth Workgroup April II, 2006 4of4 ECD Altemanve I Attachment I A TT ACHMENT 2 MSP Load Growth Workgroup ECD Alternative 1 Description of ECD Alternative 1 April 11, 2006 OVERVIEW ECD Alternative 1 is based on the temporary assignment of new resources to the fastest growing State. This alternative proposes that the MSP Standing Committee track key factors that have been identified as early identifiers of potential inappropriate costs shifts due toa faster growing State. A list ofthe Key Tracking Factors can be found in PacifiCorp s Load Growth Report dated October 20, 2005, (Section 4). The MSP Standing Committee will review these factors each year and detennine whether changes indicate the potential for under or over allocation costs due to load growth. If changes in key factors do indicate the potential for under or over allocation of the costs ofload growth, the MSP Standing Committee will decide whether further study is required. Should the MSP Standing Committee request further study, the Company will perfonn the two load growth studies as defined in the Revised Protocol (page 7 footnote 2) and restated in PacifiCorp s Load Growth Report dated October 20, 2005 (Section 3). Study 1 -includes the current IRP load forecast and preferred resource portfolio. Study 2 - modifies the forecasted load growth so that the fastest growing State is growing the average growth projected for the other States. In addition, the IRP Preferred Portfolio is adjusted by removing planned resources, as needed, in order to maintain a consistent planning margin. The two studies cover a ten-year forecasted period, consistent with the Company s most recent IRP. The results ofthe two studies are compared to detennine the incremental costs due to load growth and each State s share ofthe incremental costs. Ifthe fastest growing State is paying between 85% - 115% (on an NPV basis) in any ten-year study, it has been agreed that there is no material hanD and no action is required. A trigger occurs if any of the following conditions apply:- The fastest growing State is paying below 80% in any ten year study (on an NPV basis) The fastest growing State is paying below 85% for two consecutive ten year studies (on an NPV basis) The fastest growing State is paying below 90% for three consecutive ten year studies (on. an NPV basis) MSP Load Growth Workgroup April 11 2006 lofS ECD Alternative J Attachment 2 The fastest growing State is paying above 110% for three consecutive ten year studies (on an NPV basis) The fastest growing State is paying above 115% for two consecutive ten year studies (on an NPV basis) The fastest growing State is paying above 120% in any ten year study (on an NPV basis) If a trigger is reached, the Company will conduct further analysis, similar to the earlier MSP Load Growth Workgroup studies in which the fastest growing State s load was increased by 100 aMW while retaining its load shape and matched by ISO MW of resource (note: for the MSP studies carried out to-date, Utah has been the fastest growing State). These studies are designed to isolate the effect of the divergence in incremental and embedded cost from the effect ofa load and resource imbalance. If, through these additional study processes, a thermal resource is identified as potentially problematic (i., is causing the under or over allocation of costs based upon an agreed to threshold), that resource will be earmarked for further analysis to be performed as that resource enters a rate case for inclusion into rate base. As the costs of an earmarked resource (or the costs of a resource similar to the earmarked resource) appear in a rate case, the load-growth analysis for the resource will be updated with current load-growth statistics and market conditions. Ifthe updated study results continue to meet the established triggers, a New Resource ECD calculation will be created and applied for two years. The New Resource ECD will apply only to those thermal resources that exceed agreed upon thresholds and will be applied symmetrically for over allocation as well as under allocation. The hypothetical examples below may help illustrate when the trigger occurs: Example #1 No Triggers Reached No New Resource ECD Required 1st 10-2nd 100Yr 3rd 10- Yr 4th 100Yr 5th 10-6th 100Yr Study Study Study Study Study Study 10-Yr NPV 84%90%83%95%102%95% Trigger Not Triggered Not Triggered Not Triggered Not Triggered Not Triggered Not Triggered Status New Resource ECD Required? MSP Load Growth Workgroup April 11 2006 2ofS ECD Alternative I Attachment 2 Illustrative Years lO-Yr NPV Trigger Status Earmark Study Re uired Identify Problem Thermal Resource Update Earmark Study Problem Resource Confirmed New Resource ECD Re uired Explanation Example #2 Triggers Reached in Consecutive Studies and Solitary Study New Resource ECD Required lS'IO-Yr Stud 2nd lO- Stud 2010 2011 95% Not Triggered Not Triggered Two consecutive IO-Yr Studies -:::::85% One lO- study -::::: 80% *This is for illustrative purposes only to illustrate the lag from when a resource is earmarked until it enters into rates. This is not meant to imply that studies will be performed annually. MSP Load Growth Workgroup April 11 2006 3 of 5 ECD Alternative I Anaclunent 2 NEW RESOURCE ECD The New Resource ECD operates very much like the Hydro, Mid-C and Existing QFECD calculations in the current Revised Protocol. In the New Resource ECD calculation, a New Resource category would be created. This category would contain the costs of each newly constructed owned and "earmarked" resource for a period of two years. As with other ECD adjustments, the amount by which the costs ofthe "earmarked" resource differs from the costs of the "Annual Embedded Cost - All Other" would be allocated to States using a forward looking SG factor calculated with projected loads from a future period. Projected loads two years beyond the test period would be used during the first year of the ECD assignment and one year beyond the test period during the second year. The inverse amount would then be allocated back to States using the SG factor from the test period. There may be times when there are both first and .second year "earmarked" resources in the New Resource category. Because a different allocation factor is applied during the first and second years that a resource is included in the New Resource ECD, a separate calculation would be made for each resource. The costs of all resources continue to be allocated on system load based allocation factors. one State grows faster than the other States, that State is allocated a larger portion of the cost of all resources. The faster growing State will already be allocated an increased share, a share that reflects differential load growth, ofthe average embedded cost of the portfolio. The New Resource ECD only needs to provide a supplemental allocation of the amount by which the earmarked" resource costs differs from average embedded costs. The Company s studies on the impact of differential load growth show that the largest potential for cost shifts occur during the first two years after a new resource comes on line. This is driven by front revenue requirement loading of owned resources. The impact of front end loading is mostly offset by the third year as the allocation of all generation, transmission and common overhead costs to the faster growing State has increased enough to absorb the incremental costs difference. SUMMARY NEW RESOURCE EMBEDDED COST DIFFERENTIAL ADJUSTMENT Create New Resource ECD category. Compare costs of new "earmarked" resource ($/MWh) to cost of "Annual Embedded Cost- All Other" ($/MWh). The difference represents the embedded cost differential associated with the new "earmarked" resource. Newly constructed "earmarked" resources are included in the ECD for two years. . A separate calculation is applied for each new "earmarked" resource. In the first year, the ECD is allocated using the SG factor calculated with projected loads two years beyond the test year. MSP Load Growth Workgroup April 11 2006 4ofS ECD Alternative J Auachm...t 2 In the second year, the ECD is allocated using the SG factor calculated with projected loads one year beyond the test year. The inverse amount of the ECD is backed out from the States using the test year SG factor. MSP Load Growth Workgroup Aprill!20O6 5of5 ECD Allemative I Anachment 2 ATTACHIoE.n."'.""'""_o'Eoo""",,,,, CaI",I.Uo. 0' Em""" eo" DIft............- A......... ....,No,., -~"""""""""M'onIy -................. w... Ace...., S35 ' 545CHP,"",P 330 . 336 302,_P 111IP154 Mldceonbad. ""0"'" 55S Qu."" .RI,... A...,.I 55S 55S55S55S55S55S55S Do....""...,.. OpoI.'b.. M.......... "po-...,.. Do,.-tion Expo'M ...,........"...--",. T""Wo""""'_""""'" """"""".....InS...... """.."'- ",""Accum""todD...-tionA.M". ..."" ......,"," -... A.M".M""'~."'S,_.w." "....... A"."'"P""',A.1um"",."'" A....... Aoq"'-Fo....".""'" .......... A.,.."" .",,"me"An,""'Embo_eo,,w.., "......- .......... Do.. """"., M~.c 00.,..... Coale"'"" .n....'" Po"" T.~I Mid-C "...... to MC ._, Do.. UlahA..... Ouol""."'.. 00... "-. An..., Duo"" ....... Coole...",......'D..""""'..OO'" WY An An...., Duo"" ....... ComWYP AMoa' D'."" F_. Com Co"'m~ Am.., D.."" ...... 00".Wuhloot..Am'.' Duo"'" .-.. Coole Tolol D...... ...- eo... """""Gone..""A......... (Ezcl Weal """', M~ C,"" DF) Ace...., 500,514S35 ' 545 ... . SS4 55S 4118 "'35P oOJ3Hp 4O3OP oIO3MP,"",P "'" 310,318 330 ' 336 302 340 . 348 399 ID8SP""P 1000P 108"P 111IP 114liS151253.'8,253. 253. 154 154 ....., Slum ape..IIo.. M"""""" E'po...Eo"""'" D....'Ion' MoI.Io.."", expo'"COhol Go.....1Ion --lion . """ton..... Expo...COhol """"'M' -, C..,.....S02E"""',"""""".Slum Do....."'. Ex..... .." ...... Do,....tion Expo... COhol Go....",. Do""',", _... M"'... Do,.."",. Expo...E......... ......"",,_. _.""b..1 PI... ,,""""". eo...T...'A""",D ~=::~...-., I!Mwh 01........ 214,78310,871,'80407""41UI7 497,871,682 311123 (238,8'7 708) (12,098429) 1290'81317"'7~" 11.3I,a7~1145,878~ "9,117,4'0 027,412 30.(39,438342) Mwh IIMwh 01......... ""', 385 18.(33,373424) (9910348)43 283 773 Mwh I!Mwh 01"'""" ,"", 851 89.11,201914 254,'54.29,083 85,760 54.102,395 Amau., 301872 (9910,348)17391~4 Amau.1 798108 339092 649,983 $/- SI...........P."""""""E,"",""EIod""" In-E."...""..""""DIh., EJod.. P."" S...... """" SI..m _m""" Do"""b. A...... COhol Go....... _m,.'" Do"",IIo. A.M'" COhol -....,.. Do"""'" .......E," H"'" "........tod Do,.."",. A.M'"""""".."'."""_m""'..",,.EI""""""_"luoIme.'_m""'" ........A"""oIb.",ju""'" FuelSI....10"""'" we Do.."" S02 ........ AI_- ""'........-. .." ..."" M.....,.. S,_.T..aI."""."'MP..-Ia, ...... "",..... Aevenue Roqul- . . ::a:~~f~~;;' OIl,DO2, :h\'!~~7l': ":'.~~" 1!2' 318021,343 123355029 11,003,643 223,598""418,989"" (3,117"'~71) (79559,910) (209,538,807) 154,090,474) (2,851,807) 157193780 (97850,325) 5285&2 (2,80'000) 04,937,189 "', "0"" "..... 413"""'5 T"~ "on".1 Em""" Coots ":':;"~~~.~'~~~;'\:; ii': ,;: ""c.~." ,: ' ':;:. ..""" ",,\.:..~~: :,:i::f:. :.. '3IAs: Fo......" vaM .ow.... A""..me.' AnACHME.".RIu__"""" 01 ECD AI"""" 1 Cole....... 01 E""'." eo.. O"'............ow R_.... V..., Not., """"""""".-"""" Compony OWned Hydro. w... Account 535 . ...4O3HP4D4IP 330 . 338 302 IDOHP I1I1P '54 _C- Account 555 Qu.""F- Ace"" 555 555 555555555555 555 De......,... HyoOo O..,,'~.. M.'."",- Ex.....Hy'" 0.,,_.... Expo...Hy............-....T""W."Hyd..._....n.. Hydro.IocI"'PIa""'- Hydro .....n... HyoOo A.......... De,,-"n R...... HyoOo ..-... """"""" R......M._.... .......W." H_."""""" ....... ..... Rol. .... R...... ............'"Fo"ca... Hy'" R._.. Rm... R_"'" Annua' E"""" eo.. W." H""""- _.... Amount Mwh SIMwh ........... 598"" 4&0,279 "', 144 """. 17' 810508 00,310,123(2",DT7~) (13504,372)(20016131'~1I~1711."~"~0456,555. "', II7~lI "'03,37&33.(31,684,592) Mwh SlMwh DI......... 162,417 1&.(27405,1") "4317&2&' 41&02&24 Mwh SlMwh ........... 386051 69, "', 24&,488 159.948555 65,7'"5421 073427 De- Ann.., M~-e eo.",... eo... Goo.. '..,0..'" P,"'.Tola,...-e_..MCF..... Amounl 2O,B7U70 ,,4317B26\ &"',345 ....- Utah A....' 0..,... F."'.. eo.. 0..00' An..., 0..,... F.d... Cool. Ide... An..., 0..- Foci'.. CootsWt An Ann.., 0..,... F...... eo...WtP A....., 0...... F_. eo...Ca"""" A....' Q...... F._. eo..-""on Anno.' Q""" F......eo...Tola' Q...... F."'" eo... AmDUnl 27,001,344 30,225103 ""'" AJI.................._....(Ex" Wool Hydro,'" C,... QF) A......, SOD. 5..535 . ... ... ' ... 555 411&""'P 4O3HP 4O3OP 4O3MP 4D4IP 40& 310,31& 330 . 336 302 340,34& 399 1000P 1000P lOOMP lDOHP I1I1P114115151 253.1&.253.10 253. 154 '54 .... 51..m Ope""" ....,....- Ex.....Ea.","", 0......... M""'.... Ex....."""', Go....... ........ . .........- Ex....."""".........._,C-.02 Em,.... A_'-.St..m Do""""" Ex..... Ea. Hyd.. De..-"'. Expo..."""', Go....... Do""""" Expo... Min'.. Do"""'~' Ex..... Ea. Hyd.. .-.. Am_. --... 01 PIa'" A""_' eo...ToI"A'~ AmDUn' 104,730,22210,113,345~'m~(5&5,037) 21&,0&4,27& 022,913 03&702 3&&3795...9 SlMwhMwh St..m_'Ia""""'1ce .... Hy...EIodric PIa..,.""1ceEa" Hy'" ..-.. """"_PIa.,,,..-M.... St..m _la'.. -,~. R......"""', Go....... ....-,.. De...""'. ...."'."""', -""'..,.. De"""", R...",. Ea" Hydro Accum""" De......... ...."'. Ea" Hy'" '.""'" _mula'" ...."'......"'PIa..A.........A"!......................,....A_A_'"F..,St""Jo"" ....., we Depo"'02 _. A"""'. .......... ..""... Ex"Hy...M.........._.ToI...I1 ........ P,,"'. ..... Ro' 49674&00312&,&20,01&11 ,003&43120,1122425,5984&7 338,00&549) (","", 702) (235,159,877)(57,1133&7) (3,2109B&)1571037&0 (103355290) &2&5&2 (2,000) 04,037169 Fo"""" VOM ........ '","...n'Fo"ca"" CAUC02 'm.... ....."..... ~~J !~ Dd8.~(3S,703,150,&2&302 YoI"A...., Em""'.. eo... AT T A C H M E N T 3 c Il l u s t r a t i v e E x a m p l e o f E C D A l t e r n a t i v e 1 Al l o c a t i o n o f E m b e d d e d C o s t D i f f e r e n t i a l f o r N e w R e s o u r c e s No t e : T h i s i s f o r i l l u s t r a t i v e p u r p o s e s o n l y Ye a r 1 E C D A d j u s t m e n t Al l o c a t e Y e a r 1 E C D Ba c k o u t t h e I n v e r s e o f t h e E C D To t a l N e t E C D A d u s t m e n t SG - Ye a r 3 SG . Ye a r 1 To t a l Ca l i f o r n i a Or e g o n Wa s h i n g t o n Wy o m i n g Ut a h Id a h o 55 , 4 3 3 14 2 9 5 0 86 9 1 4 32 1 95 6 4 , 4 2 5 97 5 6 , 4 9 1 42 0 2 6 30 8 40 2 2 93 4 (5 5 , 4 3 3 2) ( 9 6 6 18 8 ) ( 1 4 76 7 20 4 ) ( 4 , 4 7 6 75 6 ) ( 6 74 4 02 9 ) ( 2 5 48 5 , 04 8 ) ( 2 , 99 3 91 7 ) 0 ( 1 5 31 9 ) (4 4 5 24 8 ) ( 5 0 78 2 ) ( 2 5 2 60 8 ) 8 2 3 35 4 ( 5 9 39 8 ) Ye a r 2 E C D A d j u s t m e n t Al l o c a t e Y e a r 2 E C D Ba c k o u t t h e I n v e r s e o f t h e E C D To t a l N e t E C D A d u s t m e n t SG - Ye a r 3 SG - Ye a r 2 15 6 51 2 8 7 7 51 0 1 3 21 7 02 7 4 08 4 51 4 5 99 0 61 2 2 4 27 8 72 7 2 70 8 , 12 3 (5 . 1 , 1 5 51 2 ) ( 8 8 5 , 45 1 ) ( 1 3 47 9 58 1 ) ( 4 11 8 27 6 ) ( 6 03 4 32 2 ) ( 2 3 , 91 0 , 77 5 ) ( 2 72 8 10 8 ) ~4 1 ) (2 6 2 , 55 4 ) ( 3 3 76 2 ) ( 4 3 71 1 ) 3 6 7 95 2 ( 1 9 , 98 5 ) SG F a c t o r To t a l Ca l i f o r n i a Or e g o n Wa s h i n g t o n Wy o m i n g Ut a h Id a h o Ye a r 1 10 0 , 00 0 0 % 74 3 0 % 26 . 63 9 7 % 07 6 0 % 12 , 16 6 1 % 45 . 97 4 4 % 5. 4 0 1 0 % Ye a r 2 10 0 , 00 0 0 % 73 0 9 % 26 . 34 9 7 % 05 0 3 % 11 , 79 5 8 % 46 . 74 0 4 % 33 2 9 % Ye a r 3 10 0 , 00 0 0 % 71 5 3 % 25 . 83 6 5 % 98 4 3 % 11 , 71 0 4 % 47 . 4 5 9 7 % 29 3 8 % Ye a r 4 10 0 , 00 0 0 % 69 2 6 % 25 . 62 8 0 % 91 4 5 % 11 , 68 3 2 % 47 . 91 1 1 % 17 0 6 % MSP Load Growth Workgroup ECD Alternative 2 Process, Proposal, and Illustrative Example April 11 2006 Table of Contents Attachment 1 Proposed Process for ECD Alternative 2 Attachment 2 Description ofECD Alternative 2 Attachment 3 Illustrative Example of Transfer Payment for Alternative 2 3a - Calculation ofthe Transfer Payment and Ranking of New Resources 3b - Calculation of the ECD for New Resources 3c - Assignment! Allocation of the Transfer Payment MSP Load Growth Workgroup April 11 2006 I of I ECD Alternative 2 Table ofc"ntents A TT A CHMENT 1 MSP Load Growth Workgroup ECD Alternative 2 Proposed Process and Implementation April 11, 2006 The following outlines the process to be followed for potential implementation ofECD Alternative 2. It should be noted that nothing in this proposed process is intended to circumvent the authority and decision-making ability of each State Commission. Any amendments to the Revised Protocol would require the approval of each State Commission that previously ratified the Revised Protocol. It should also be noted that the Utah Commission MSP Order requires the Company to file with the Commission regarding the materiality of possible harm to other states from a fast growing jurisdiction before taking a position before the MSP Standing Committee. This document should be reviewed in conjunction with the documents entitled "Embedded Cost Differential Alternatives Matrix" (the "Matrix ) and "Description ofECD Alternative 2" which is included in this packet as Attachment 2. For additional background materials, also refer to the MSP Load Growth Workgroup meeting materials (this workgroup met from March 2005 to February 2006). ECD Alternative 2, and its associated documents attached herewith, is based on what is known' at the time of developing the mechanism and compiling the associated documents. It is recommended that this proposal be re-evaluated if and when future analysis shows there may be inappropriate cost shifts due to load growth and a structural protection mechanism is considered for implementation. PROCESS 1. The MSP Standing Committee will track the key factors outlined in Section 4 of the MSP Load Growth Report dated October 20, 2005. 2. The MSP Standing Committee will evaluate whether changes in key factors indicate the potential for over or under allocation of power-related costs to any ofPacifiCorp s State jurisdictions. Based on their evaluation, the MSP Standing Committee will decide whether to direct further study. 3. Based on direction from the MSP Standing Committee, the Company will perform and analyze the "Study" as defined in the Revised Protocol (page 7 footnote 2) and also stated in the Matrix. The study period includes up to six years historical data and one year forecasted data, but in no event will the study go back further than January 1 2005. 4. The Utah Commission MSP Order requires the Company to file with the Commission regarding the materiality of possible harm to other states from a fast growing jurisdiction before taking a position before the MSP Standing Committee. If the Company makes such a filing in Utah, a copy of the filing will be provided to the MSP participants. MSP Load Growth Workgroup April 11 2006 Ion ECD Alternative 2 Attachment I 5. The results of the study will be provided to the MSP Standing Committee where they will be analyzed against the "Triggers" as defined in the Matrix and listed below. If the fastest growing State is paying between 85% - 115% (on an NPV basis), in any seven-year study, it has been agreed that there is no material harm and no action is required. A trigger occurs if cost recovery for the fastest growing State falls within the following ranges:- The fastest growing State is paying below 80% in any study (on an NPV basis). The fastest growing State is paying below 85% for two consecutive studies (on an NPV basis). The fastest growing State is paying below 90% for three consecutive studies (on an NPV basis). The fastest growing State is paying above 110% for three consecutive studies (on an NPV basis). The fastest growing State is paying above 115% for two consecutive studies (on an NPV basis). The fastest growing State is paying above 120% in any study (on an NPV basis). 6. If a trigger has not been reached, no further action is necessary at this time. 7. If a trigger is reached, the results are provided to the MSP Standing Committee for furtheraction. 8. Based upon the results, the MSP Standing Committee may decide to recommend to each signatory state one of following four actions (or other actions that are deemed appropriate and within the scope of the MSP Standing Committee, and as established in Section XIII B of the Revised Protocol and the MSP Standing Committee Guidelines):- . Do nothing. Recommend the implementation ofECD Alternative 2 - which incorporates a transfer payment for over/under allocation of costs attributed to load growth. Consider recommending amendments to the Revised Protocol that are considered to address a material and/or sustained harm on a more permanently basis. Consider new studies to determine whether or not the cost shift actually occurred or if there are offsetting benefits which make compensation unnecessary. MSP Load Growth Workgroup April 11 2006 20f3 ECD Alternative 2 Attachmen' I 9. It should be noted that the approval of each State Commission, through the established regulatory processes in each State, is required before an amendment to the Revised Protocol is adopted. Any State can choose to independently implement a New Resource ECD and/or potential changes to the Revised Protocol; however, the Company or other States can claim the deviating state is no longer a signatory to the Revised Protocol and as such the Revised Protocol may no longer exist. Also refer to Section XIII C of the Revised Protocol for further clarification of the intent of the original adoption of the Revised Protocol by each the adopting State Commissions. IMPLEMENTATION The implementation ofECD Alternative 2 using a transfer payment requires the following steps to be performed:- 1. Recommendation to and approval by each State Commission. 2. Determine amount of transfer payment. If triggers indicate that the fastest growing State is not paying enough of the incremental revenue requirement due to load growth, the transfer payment should be sufficient such that the fastest growing State is assigned 90% of the ' incremental revenue requirement. If triggers indicate that the fastest growing State is paying more than the incremental revenue requirement due to load growth, the transfer payment to the fastest growing State should be sufficient such that the fastest growing State is assigned 110% of incremental revenue requirement. 3. On a $IMWh basis, rank new resources acquired during the seven year study period from highest cost (first) to lowest cost (last). Renewable or hydro-electric resources are to be excluded. 4. Calculate the embedded cost differential of the highest $IMWh new resource ranked in Step 2 to the embedded cost of the remaining new resources. 5. Compare the ECD calculated in Step 4 to the amount ofthe transfer payment calculated in Step 2. 'lithe amount calculated in Step 2 exceeds the amount calculated in Step 4, repeat Step 4 using the next highest cost resource identified in Step 3. Repeat process until the differential is sufficient to cover the amount ofthe transfer payment calculated in Step 2. 6. The amount ofthe transfer payment is assigned situs to the fastest growing state and reversed from the remaining states using a five-state SG factor. The payment is then amortized over a seven year period at a discount rate of 5%. The payment will continue for seven years or until another trigger event occurs. 7. Each study is evaluated against the triggers to determine whether the trigger is triggered again. Iftriggered again, this process is repeated. MSPLoad Growth Workgroup April 11 2006 3 of3 ECD Altemlllive 2 Attadunenl I TT A CHMENT 2 MSP Load Growth Workgroup ECD Alternative 2 Description of ECD Alternative 2 April 11, 2006 This straw proposal (known as "ECD Alternative 2") presents a structural protection for excessive cost shifts. The proposal uses concepts embodied in the Revised Protocol relating to the treatment of hydroelectric resources. A key component of this proposal is the annual use of comparative grid runs, each with the same study period. The study period includes up to six years of historical data along with a projected one-year term. Note that historical analysis will not be further back in time than January 1 2005. For any study conducted before December 31 2010, the time period of cost-shift analysis will include less than seven years of data. Studies conducted subsequent to December 31,2010, will use a seven-year period, comprised of the most recent six-year history along with a projected one-year term. The analysis will use the actual costs of new resources as available. For the study period, two Grid runs would be used. The first would be based on Grid and the Revised Protocol for the relevant time period as defined above, using existing resources during the historic time period and IRP identified resources as needed for the projected future one-year period. As such, the first Grid run would also include the new resources and contracts acquired during the historic years of the study period. The second modeling exercise would-have two complementary adjustments. First, the highest growth state (in terms of aMW) would have its loads revised to equal the average growth rate (in percentage terms) ofthe remaining states. For the start of the study period, the highest growth state would begin with the actual loads for the initial year of the study period. (Loads could be normalized for weather if that is the standard practice.) The subsequent years (up to six years) would be adjusted so that high growth state loads grow at the average percentage growth rate equal to that of the remaining jurisdictional states. Resources, including purchases, would be adjusted downwards reflecting the reduction in loads and reserves consistent with standard business practices. The removal of resources and purchases would be consistent with the IRPs and knowledge available at the time, over the study period to reflect the revised load levels. So adjustments would be made to resources and contracts for both the historic years as well as the one-year projected period of the study period. Only new resources and longer-term purchases added over the unadjusted study period may be dropped from the analysis should the adjusted load levels no longer warrant the power purchase reserves, or new resource coming on line as scheduled. New resources, as the last sentence suggests, could have on-line dates changed so that they remain in the analysis, but come on line later in the study period. The two studies would be compared to calculate what percentage of the increase in costs from the higher load levels was being allocated to the highest growth state. If the highest growth state pays between 85% and 115% on an NPV basis over the study period, there is deemed to be no material harm and no action is required-there is not the presence of an "excessive" cost shift. MSP Load Growth Workgroup April 11 2006 lof6 ECD Alternative 2 Attachment 2 A trigger occurs ifany of the following conditions apply:- The fastest growing State is paying below 80% in any study (on an NPV basis) The fastest growing State is paying below 85% for two consecutive studies (on an NPV basis) The fastest growing State is paying below 90% for three consecutive studies (on an NPV basis) The fastest growing State is paying above 110% for three consecutive studies (on an NPV basis) The fastest growing State is paying above 115% for two consecutive studies (on an NPV basis) The fastest growing State is paying above 120% in any study (on an NPV basis) The hypothetical examples below may help illustrate when the trigger occurs: Example #1 No Triggers Reached No Transfer Payments Necessary 1st Stud 2" Stud Yr NPV 84%90%83%95%102%95% Trigger Status New Transfer Payment Re uired? MSP Load GroWlh Workgroup April 11 2006 2of6 ECD Alrem.live 2 Atraclunenl 2 Example #2 Triggers Reached In Consecutive Studies and a Solitary Study Transfer Payments Required Explanation 3rd Study 4th Study 6th Study Yr NPV 91%*95%*95%* Restated 7 yr NPV based on Transfer payment Trigger Status New Transfer Payment Required? '" = The transfer payments continue for a maximum of seven years or until another nigger event occurs (whichever occurs sooner), The percentage values after the transfer payments begin include the effect of the transfer payments. MSP Load Growth Workgroup April 11 2006 3of6 ECD Allemative 2 Attachment 2 Example #3 Triggers Reached In a Solitary Study and Consecutive Studies Transfer Payments Required Explanation 6th Stud 7 Yr NPV 102%*95%* Restated 7-Yr NPV based on Transfer a ment Tri er Status New Transfer Payment Required? . = The transfer payments continue each following year until a new trigger event occurs, The percentage values after the transfer payments begin include the effect of the transfer payments. Once the trigger thresholds are met establishing the implementation of the structural protection mechanism, the resources that came on line during the study period would be ranked for possible use in the structural protection mechanism. New resources that are renewable or hydroelectric- based would be excluded from the candidates considered for disparate treatment. (See Revised Protocol, Section IV.C.2) The remaining new resources would be ranked first by identifying the resources added within the historic period, or planned to come on line in the projected year, with the highest cost per $/MWh being first and lowest cost per $/MWh last. Next transfer payments would be established similar to the treatment of existing qualified facilities. In conceptual tenDS the highest growth state bears the differential in cost between the resource added during the study period and the average cost of the remaining PacifiCorp thermal resources. The objective is to establish a set oftransfer payments such that 90% of the costs of new resources needed to meet the differential in load growth are assigned to the highest growth state. Repeating the text of a few pages ago will help illustrate how the amount of dollars is calculated under this mechanism. 1. The fastest growing State is paying below 80% in any study (on an NPV basis) 2. The fastest growing State is paying below 85% for two consecutive studies (on an NPV basis) MSP Load Growth Workgroup April 11 2006 40f6 ECD Ahemative 2 Attachment 2 3. The fastest growing State is paying below 90% for three consecutive studies (on an NPV basis) 4. The fastest growing State is paying above 110% for three consecutive studies (on an NPV basis) 5. The fastest growing State is paying above 115% for two consecutive studies (on an NPV basis) 6. The fastest growing State is paying above 120% in any study (on an NPV basis) In cases 2 and 5, the amount of dollars is calculated by identifying the highest growth state share of costs over the study period amounts over both studies and calculating the annual increase in an ECD-type cost assignment in order for the studies to have the highest growth state reflect the 90%, or 110%, cost level, whichever is applicable. For purposes of calculation, the annual amounts for the two studies would be treated as ifit were a study of 14 years so as to get an annualized number. In cases 3 and 4, the amount of dollars is calculated by identifying the three studies and calculating the annual increase in an ECD-type cost assignment in order for the studies to have the highest growth state reflect the 90%, or 110%, cost level, whichever is applicable. For purposes of calculation, the annual amounts for the three studies would be treated as if it were a study of21 years so as to get an annualized number. In cases 1 and 6, the single study is used and the annual amount reflects that needed each year in order to bring cost assignment to the designated level of 90% or 110%. Once the amount of ECD transfer is calculated using the method above, the ECD transfer is established as a nominal payment, equal in present valued dollars, such that a seven-year stream of annualized dollars is assumed to begin in unison with new rates established in a general rate filing. The general rate filing would likely be the one ongoing and treated as the seventh year the seven year study period. (So the forecasted seventh year is in essence the first year of the seven-year ECD payment period. For subsequent studies, coincident with the eligibility/validity for transfer payments, the transfer payments would be included in the analysis. Again, the difference in costs of the new resource would be compared to all other thermal resources, with the higher than average costs being assigned to the highest growth state to the extent necessary to achieve the 90% target. For example, if assigning all of the capacity ofthe highest cost resource differential is insufficient with respect to the highest new thermal resource then the next highest cost resource would be used for transfer payment purposes. These steps would be repeated until the 90% target is met. Once the 90% target is met, the Revised Protocol with the structural protection transfer payments would be used for PacifiCorp general rate filings on a going forward basis until the trigger is triggered again. Similar actions would hold ifthe 110% target was the applicable outcome. MSP Load Growth Workgroup April 11 2006 5 of6 ECD Alternative 2 Attachment 2 The transfer payment from the high growth state equals the amount of money that is necessary to bring the entire "trigger period" back to 90% or 110%, whichever is relevant and continue until a new trigger event occurs. Payments to the slower growing states would be made on the basis of relative SG factors. Transfer payments would include costs of resources or purchases projected to come on line in the test period to the extent the state Commission finds that they are used and useful, and as such would be included in rates. MSP Load Growth Workgroup April 11 2006 6of6 ECD Alternative 2 Attachment 2 A1 T A C H M E N T 3 a il l u s t r a t i v e E x a m p l e o f E C D A l t e r n a t i v e 2 Ca l c u l a t i o n o f T r a n s f e r P a y m e n t a n d R a n k i n g o f N e w R e s o u r c e s EC D A l t e r n a t i v e 2 . E x a m p l e 11 2 No t e , T h i s i s f o r i l l u s t r a t i v e p u r p o s e s o n l y Eu m p l e 0 2 1 s ' S t u d y Eu m p l e " 2 n d S t u d y Ex a m p l e 0 2 S t h S t u d y As s u . . . As s u . . . As s u m e 's ' S l u d y lI b o h M e ' " 2n d S t u d y Uta h M e " . 5t h S t u d y Tr e " ' e r P m l Am o u n l " Tr u s l e r P m l Am o u n l ' " lIb o h M e ' " Am o u n l 0 1 T. . . . l e r As s u m e NP V w l ,. A r r i v e e ' Tr a n s ' e r P m l NP V w f to A r " v e a l T. . . s l e r P m l NP V w f T. . . _ P m l Pm l Vr N P V Uta h a 1 l 4 " DO " $( 0 0 0 ' Uta h a U ' " $(0 0 0 ' 'rd S t u d y 4I h S t u d y Ut a ' u l 7 7 % to A n I v e . . - $( 0 0 0 ' VE A R S I N C L U D E D IN S E V E N Y E A R ST U D Y P E R I O D V1 - Y 7 Y2 - Y3 - V4 . V1 0 V4 . VI 1 Re v i . e d P r o l o c o l - U T L o e d G r o " " , , , ! . S'h , R e m o v e S e l " " e d E . . ' I R P R e s o u r . . . 20 , 16 2 , 99 6 To t e l Re ~ s e d P r o t o c o l - U T F o , e c a s ' L . a d G r o " " " , , A d d I R P R e s o u r . . . 20 , 65 5 , 35 7 Co m p a n y D i n e r e n c e f r o m Ad d e d E a " Re s o u - v e r e u s Ut a h a v o L d G r o " " , , , $ 49 2 , 36 1 Dl n e r e n c e f r o m A d d e d E e s t Re . o u , . . . v e r e . . U t e h a v o L d G r o Y o l h " 2. 4 4 ' h Re v i s e d P r o t o c o l - U T L o a d G r o " " , , , 1 , , R e m o v e S o I e d e d E a e t I R P R e s o u r c e e Re ~ s e d P r o l o c o l - U T F o r e c a " L o e d G r o w t h , A d d I R P R e s o u r c e . Ca I ~ o r r i s Di n e r e n c e n o m A d d e d E a s t R e s o u r c e e v e r e u s U t a h a v o L d G r o " " , , , $ Din e r e n c e n o m A d d . d E s s l Re . o u r . . . v e r e u s U t a h s v g Ld G r o " " , , , " Re v i s e d P r o t o c o l - U T L . e d G r o w t h 1 . , R e m o v . S o I e c t e d e a . , I R P R e s o u r c . s Re v i s e d P r o t o c o l - U T F o r e c a e t L o a d Gr o " " " , , A d d I R P R e s o u r c e s Ore g o n Din e r e n c e n o m A d d e d E a . . Re s o u - v e r e . . Ut a h a v o L d G r o Y o l h Din e r e n c e n o m A d d e d E a e t Re s o u r . . . v e r e u s U t a h a v o L d Gro w t h " Re ~ s e d P r o l o c o l - U T L o a d G r o " " , , , ! , S'h , R e m o v . S e l e c t e d E . . ' I R P R e s o u r . . . Re ~ s e d P r o t o c o l - U T F o r e c a s t L o a d G r o w t h , A d d I R P R e s o u r c e s Wa e h l n g t o n D i f f e r e n c e f r o m A d d e d E a a t R e e o u " e s v e r e u . l I b o h a v O L d G r o w t h $ Din . r e n c e n o m A d d . d E a . . R e s o u , c e e v e r e u s U t a h a v o L d G r o w t h " R. ~ s e d P , o l o c o l - U T L o e d Gr o " " , , , 1 . 5" , R . m o v e S o I . " e d E e s l I R P R. . o u r . . . We . . Re v l s . d P r o l " , , 0 1 - U T F o r e c a s t L o a d G r o " " " , , A d d IR P R e s o u r c e . To t a l Din e r e n c e n o m A d d e d E a , t R e s o u r c e e v e r e . . U t a h a v O L d G r o " " , , , $ Din e r e n c e n o m A d d e d E a , t R.. o u " . . v . r e u . Ut a h a v o L d G r o " " , , , Re ~ l e d P r o l " , , 0 1 - U T L o a d G r o " " , , , 1 , , R e m o v e S e l e c t e d E e . I I R P R. . o u r . . . R, v l s e d P r o l o c o l - U T F o r e c a s t L o e d G r o " " " , , A d d I R P R e s o u r c e s Uta h Din e r e n c e n o m A d d e d e a , t Re s o u r . . . v e r e u . U t a h a v o L d Gr o " " , , , $ Din . r e n c . n o m A d d . d E . . t R. . o u r . . . v e r e . . U t a h av o L d G r o w t h " Re v i l e d P . . I " , , 0 1 - U T L o e d G r o " " , , , 1 . , R . m o v . S e l e c t e d E . . t I R P R e o o u " e o Re v i " d P r o t o c o l - U T F o r e c a e t L o a d G r o " " " , , A d d I R P R e s o u r . . . Id , h o Din e r e n c e n o m A d d e d E ' " Re s o u r . . . v , r e u , U t a h a v O Ld G r o w t h $ Din " e n c e f r o m A d d e d E a e l R e l o u " e s V" ' " U t a h av O L d G r o " " , , , Re v i " d P r o t o c o l - U T L o , d G r o " " , , , I , , R e m o v e S e l e d , d E , , ' I R P R e l o u r c e . Re v i s e d P r o t o c o l - U T Fo " " a . . L o a d G r o Y o l h , A d d I R P R e o o u r c e l Wio m l n . DI! f " e n c e f r o m A d d , d E e s t R. s o u , . . . v e r e u s U t a h a v O Ld G r o w t h $ Din " . n c e f r o m A d d , d E e s t R.. o u " . . v . r e . . U t , h av o L d G r o w t h ' h Re ~ l e d P r o t o c o l - U T L o , d G r o " " , , , ! . S'h , R e m o v e S e l e c t e d E " t I R P Re o o u r e . . Ea . . Re v i l e d P r o l o c o l - U T Fo " . . . t Lo a d G r o " " " , , A d d I R P R e s o u r c e l To t a l Din e r e n c e n o m A d d e d E . . t R.. o u r " , v e r e u , Uta h a v o L d G r o w t h $ Din e r e n c e n o m A d d e d E a . . R. . o u r e . . v e r e u , U t a h o v g L d Gro " " , , , ' h In c r e m e n t a l R o v e n u e R e q u r e . . . n t % _. n e d 1 0 Uta h 10 1 . 7 % 84 , 90 . 93 % 90 % 91 % 95 % 77 % 90 % Ra n ~ n g 0 1 n e w r e s o u r . . . : Bio I 5 I n o Bi o I 5 I n o Ad d e d I n V 2 CC C T 65 . 84 . 46 N A R _ " " _ ' . " v , s " " , , - Ad d e d l n V 3 Co a l 49 , 49 . 4 4 NA R _ . . . . . _ . , . v , _ P " . . Ad d e d i n V S CC C T 75 . 73 . AnACHMEHT 2.III........ E_pIe or ECD _m.'" 2C.I..,.... or Em""" Coot DIfIo,........ Now Ro....... ECD AI..m",. 2 . Ex.mple"No.., .... Is for _M ""PO". "" Compo., OWn" Hyd... - Wn' A....... 4O3HP 4O4IP , 230 - 336 302I08H' I1I1P 154 MIdCCo."'." Ace....' 0...... f"'-' A......t555 555 555555555 555 555 110"""- Hy"'" Opono". . M.......... Ex- Hydm Do,.....". Ex.... Hydro R._-. T- W..."",... 0....... Expen.. HydmEIodricPls"""-H",no R."'"", H",no """'mule'" Do"""". R..,.. "",no R.""- -... R...... .....riols ond s.-. W... Hydro N.' Ro"- P""" R.....R... 8... R...... ........... Fo....- ""'no R_"'" R....... R..."....A..." Em"'." eo.tW... HydrH;_O Res....... De.ertp- An.ue' MOH: eo...... Coa...... R......'" Po"'.ToIo"'OH: AppI.....MC f_. Do""p'" Uteh ........1 auelffi" Fe_. eoots Q,ooo.""'" a...... F._. eoots'do"""'" a..- Fea"", Coots Wf AI' Am.., auo- f._. eootsWfP ......, auo"'" f._. eootsC,"'rnio""'" Quo"" F.",... eootsWa"_""'" auo"" Fe_. CoaTo'" auo"'" f.a- C- Amou.'M'"DIfIonn... 598,955 11,460,279 407, 27,417.17' 511810508"8,123 (248077,884) (13504,372) 211,111,,"7 11.56" 56,555,1138 157"'1 902271 33.(31884,502) Mwh DIfIonn'" 162,417 18.(27,485,199) (14 317,828, 41 802 824 M...$1M'"DIfIonn'. 386,851 69,10,888,284 246488 159.28,048, 85,780 54.073,427 048 48.78, 33,794 118'"632.327 14013 148.1470284 779,052 -..:ss 072.083 Amou.t 20,978,9704317828) 681345 Amou.t 27;00134439~,183 048,983 591, 041289 2 0S4 502 552,769 All ""'OF Go....- R."""" (Exd. Wa" Hydm, M~ C, .nd OF) A....... 5OO:si4 535 - S45 S48 - 5S4 5554118 4O3SP 4O3HP4O30P 4O3MP 4O4'P 408 310-318 230 - 336 302 340 - 346 399 IOBSP 1080P I08MP I08HPI1I1P 115 151 253,18,253. 253. 154 154 De.ert.- 5"am 0........ M.""""" Ex"..,.. E." Hydm 0....... . M."'..... Ex..... ""'Of Gone..'" 0pe..1io. . M....".... Expo... Other """"'.... Powe. Conbo'" 502 E-. _....S...m Do"""'" Expo...... H""" Do"""Iio. Ex.... Other Gonono'" Do"",,1ion Ex....M- _Iio.- E... Hydm R."""'.. _liD._"",Iio. of P,...Acq'-. eootsTo" o.'!,t1 Amou.t 194,730,222 10,893,345 37,077,'" 708,888,101 (595,037) 218064278 022,913 838,782 368,378 Mwh 11M... Tolal A..." Em"'." Cools 488,746902 128,620,018 003,943 224,120,922 425,598, (3,336,008,549,(68498,702) (235,159,977) (57,113,387) (3,218,988) IS7 183780 (103,355,280) 53,S28562 (2,801000) 837,188 435.462,012 ;i;:X~!~!~' "o:";:~t1J,4l!. 5".mE_PIs............E...H,dmEIo....P........-E...HydroR.""""Qtho.EIoc1ricP'a.""'- ";"'. 5".m Accumu..... Do,..",.o. R...... Qtho. Go....... """'.."",.. D."";.... R......Qtho,_uls...Do_R......Ex.. H,... -...... a_.Iio. R...... Eoot H"'no R."""'" _...... R...,.. Electric PIs., Acq."". Ad_""""'m."'" Pnovdion Ad".....t f..1 Stock_taw-we Do.."5O2E-.AIIows.........rio.. . Eo" Hydro M.-' S.-. Tolal Not Ro.. .... P...... R.....Ra" 8.. ~~:r;t' AT T A C H M E N T 3 c il l u s t r a t i v e E x a m p l e o f E C D A l t e r n a t i v e 2 As s i g n m e n t o f T r a n s f e r P a y m e n t EC D A l t e r n a t i v e 2 - E x a m p l e # 2 No t e : T h i s i s f o r i l l u s t r a t i v e p u r p o s e s o n l y 2n d 7 - Vr S t u d y P e r i o d ( V 2 . V B ) Am o u n t o f t r a n s f e r p a y m e n t ( a v e r a g e o f a m o u n t to g e t t o 9 0 % I n t w o s e v e n y e a r s t u d y p e r i o d s ) Ne w R e s o u r c e E C D Re v e r s e I n i t i a l A l l o c a t i o n - l i m i t e d t o t r a n s f e r p m t Si t u s a s s i g n m e n t o f t r a n s f e r p a y m e n t Tr a n s f e r p a y m e n t a n d a d j u s t m e n t An n u a l s t a t e - by - s t a t e t r a n s f e r p a y m e n t Fi v e S l a l e 5 G F a c l o r . Y 8 Pr e s e n l v a l u e d l s c o u n l n l e 5 5 1 e l e 5 G F a c l o r 51 1 u a To t a l 32 , 00 3 , 45 3 57 , 46 0 , 63 5 (3 2 , 00 3 , 45 3 ) 32 , 00 3 45 3 c. a U f o r n l a 04 0 42 3 . 93 ) Qr j l l l O I l Wa s h i n g t WY o m i n g Ut a h Id a h o (1 5 83 7 , 35 7 , 71 ) 83 9 38 5 , 23 ) (7 , 08 3 33 2 , 18 ) (3 , 20 2 , 95 4 , 07 ) 32 , 00 3 , 45 3 (1 5 , 83 7 , 35 8 ) 83 9 , 38 5 ) (7 , 08 3 , 33 2 ) 32 , 00 3 , 45 3 20 2 , 95 4 ) 73 7 00 9 83 6 34 2 22 4 14 0 53 0 83 1 ) 55 3 , 53 4 49 , 48 6 4 % 15 , 12 1 4 % 22 , 13 3 0 % 10 . 01 % .0 4 0 , 42 4 ) pa y m e n l o v e r 7 y r s (u s i n g d l s c o u n l ra t e ) 10 0 . 0 0 0 0 % 25 1 0 % 00 %