20150501Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER RAPER
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: MAY 1, 2015

SUBJECT: PACIFICORP’S 2015 ELECTRIC INTEGRATED RESOURCE PLAN
(IRP), CASE NO. PAC-E-15-04

On May 4, 2015, PacifiCorp dba Rocky Mountain Power (“Rocky Mountain” or
“Company”) filed its three-volume 2015 Integrated Resource Plan (“IRP”) with the Commission
pursuant to the Commission’s rules and in compliance with the biennial IRP filing requirements
mandated in Order No. 22299.
ROCKY MOUNTAIN’S INTEGRATED RESOURCE PLAN
Rocky Mountain states that its 2015 IRP represents its 13th comprehensive plan
submitted to state regulatory commissions. Rocky Mountain 2015 IRP at 1. The Company says
that its IRP Application was developed with participation from numerous public stakeholders,
including regulatory staff, advocacy groups, and other interested parties. Id. The 2015 IRP
focuses on a 10-year period, 2015-2024 (hereinafter “planning horizon”).
The Company’s projected load forecast is “down beyond 2019 in relation to projected
loads used in the [Company’s] 2013 IRP and 2013 IRP Update.” Id. at 2. The Company cites
“reduced residential class load forecast due to increased energy efficiency, including continued
phase in of the Energy Independence and Security Act federal lighting standards, [and] lower
energy response to economic growth” as the main drivers of lower forecasted load. Id.
The Company remarked that “Class 2 DSM, or energy efficiency, savings in the 2015
IRP preferred portfolio exceed energy efficiency savings from the 2013 IRP preferred portfolio
by 59 percent by 2024.” Id. at 3. In fact, the Company claims that “acquisition of incremental
DECISION MEMORANDUM 2
energy efficiency resources” increases by 59 percent over its estimate in its 2013 IRP and “meets
86 percent of [the Company’s] forecast load growth from 2015 through 2024.” Id.
Once again, Rocky Mountain’s base case wholesale power and natural gas price
estimates are significantly lower than the estimates found in its previous (2013) IRP. Id. The
Company says that the estimates in its 2013 IRP Update are more closely aligned to its 2015 IRP
estimates. Id. According to Rocky Mountain, “growth in natural gas supplies, primarily from
prolific shale plays in North America, have continued to outpace expectations” and exert
downward pressure on natural gas prices. Id. Rocky Mountain believes that while the market
for front office transactions is “favorable, growth in energy efficiency savings mitigate the need
for FOTs through the front ten years of the planning horizon.” Id. at 4. “On average 2015 IRP
preferred portfolio FOTs are down 16% from the 2013 IRP Update and down 29% when
compared to the 2013 IRP preferred portfolio.” Id.
Rocky Mountain’s 2015 IRP preferred portfolio includes the addition of 816 MW of
energy emanating from power purchase agreements for 36 qualifying wind and solar projects
coming on-line by the end of 2016. Id. The Company says that these projects are necessary in
order to “mitigate the cost of state renewable portfolio standard (RPS) compliance” in its
California, Oregon, and Washington service areas. Id. Rocky Mountain states that its preferred
portfolio “meets the Utah 2025 state target of 20%, and has a significant bank to sustain
continued future compliance in Utah.” Id.
Additionally, Rocky Mountain states that its analysis of “near-term Regional Haze
compliance requirements” led the Company to convert some of its coal plants to natural gas by
2018 and install emissions control equipment at its Wyodak, Dave Johnston Unit 3, and Cholla
Unit 4 units, potentially “saving PacifiCorp customers hundreds of millions of dollars.” Id. at 5-
6.
Rocky Mountain also noted the impact of the U.S. Environmental Protection
Agency’s (EPA) issuing Rule § 111(d) of the Clean Air Act establishing state emission rate
targets for existing resources. Id. at 6. According to the Company, “the 2015 IRP preferred
portfolio meets PacifiCorp’s share of state emission rate targets among those states in which
PacifiCorp serves retail customers and owns existing fossil generation potentially affected by the
proposed rule.” Id. The Company “continues to support transmission permitting efforts for
Energy Gateway West (Segments D and E), Energy Gateway South (Segment F), Boardman to
DECISION MEMORANDUM 3
Hemingway (Segment H), and a line from Walla Walla to McNary.” Id. The Company expects
to “complete construction of the Walla Walla to McNary project by 2017. Id.
Rocky Mountain described several “supplemental studies” the Company relied upon
in order to develop its 2015 IRP. Id. Regarding potential future resource acquisition, Rocky
Mountain claims that it will “exceed its 13% target planning reserve margin through 2019 and
falls just short of its target planning reserve margin in 2020.” Id. at 8. The Company believes
that the expiration of an existing exchange contract will increase system capacity and allow the
Company to exceed its 13% target planning reserve margin in 2021 and 2022. Id. Rocky
Mountain estimates that it will be at least “82 MW and 165 MW below its target planning
reserve margin in 2023 and 2024, respectively.” Id.
Rocky Mountain expressed its commitment to assess current market conditions and
dispatch or sell its system resources in an economic manner to the benefit of customers. The
Company believes that “the economic dispatch of system resources is critical to how the
Company manages net power costs.” Id. The Company estimates that its first on-peak energy
shortfall will occur in July 2020, totaling 5 GWh. Id. at 9. In July 2024, the Company remarks
that the on-peak monthly load deficit will increase to 189 GWh. Id. Rocky Mountain does not
forecast any energy shortfalls during off-peak periods through the 2024 IRP planning horizon.
Id.
The Company’s 2015 IRP Action Plan includes the following:
1. Renewable Resource Actions
- Pursue unbundled REC request for proposals (RFP) to meet its state
RPS compliance requirements.

- Issue annual RFPs seeking current-year or forward-year vintage
unbundled RECs to meet Washington and California renewable
portfolio standard targets through 2017.

- Defer issuance of RFPs seeking unbundled RECs that will qualify in
meeting Oregon renewable portfolio standard targets until states begin
to develop implementation plans under EPA’s draft 111(d) rule. The
Company asserts that it has a projected bank balance extending out
through 2027.

- Issue quarterly reverse RFPs through 2016 to sell 2016 vintage or
older RECs that are not required to meet state RPS compliance
obligations.
DECISION MEMORANDUM 4
- Secure bids from 2013 Request for Proposals (RFP) seeking up to 7
MW of capacity from qualifying solar systems to meet Oregon’s 2020
solar capacity standard.

2. Firm Market Purchase Actions
- Acquire short-term on-peak firm market purchase deliveries from 2015
through 2017.

- Balance month and day-ahead competitive price brokered transactions.

- Balance month, day-ahead, and hour-ahead transactions executed
through an exchange, such as Intercontinental Exchange (ICE).

- Prompt month forward, balance of month, day-ahead, and hour-ahead
non-brokered transactions.

3. DSM Actions
- Class 1 DSM: Pursue a west-side irrigation load control pilot
beginning 2016. Class 2 DSM: Acquire the following cost effective
Class 2 DSM resources targeting annual system energy and capacity
selections from the preferred portfolio: 2015- 551 MW of Annual
Incremental Energy (GWh) and 133 MW of Annual Incremental
Capacity; 2016- 584 MW of Annual Incremental Energy and 139 MW
of Annual Incremental Capacity; 2017- 616 MW of Annual
Incremental Energy and 146 MW of Annual Incremental Capacity;
2018 634 MW of Annual Incremental Energy and 146 MW of Annual
Incremental Capacity.

4. Coal Resource Actions
- Naughton Unit 3: Issue RFP to procure gas transportation and resume
engineering, procurement, and construction (EPC) contract
procurement activities for the Naughton Unit 3 natural gas conversion
in the first quarter of 2016. Possibly update its economic analysis of
natural gas conversion in conjunction with the RFP processes to align
gas transportation and EPC cost assumptions with market bids.

- Dave Johnston Unit 3: Wyoming currently appealing 10 Circuit ruling
the portion of EPA’s final Regional Haze Federal Implementation Plan
(FIP) requiring the installation of selective catalytic reduction (SCR) at
Dave Johnston Unit 3, or a commitment to shut down Dave Johnston
Unit 3 by the end of 2027. If EPA’s final FIP is upheld, the Company
is committed to shutting down Dave Johnston Unit 3 by the end of
2027. If EPA’s final FIP is or will be modified, the Company will
evaluate alternative compliance strategies.
DECISION MEMORANDUM 5
- Wyodak: Continue appeal of the portion of EPA’s final Regional
Haze FIP that requires the installation of SCR at Wyodak.
Compliance deadline for SCR under the FIP is currently stayed by the
court. If EPA’s final FIP is upheld (with a modified schedule that
reflects the final stay duration), the Company will update its evaluation
of alternative compliance strategies that will meet Regional Haze
compliance obligations.

- Cholla Unit 4: Continue permitting efforts in support of an alternative
Regional Haze compliance approach that avoids installation of SCR
with a commitment to cease operating Cholla Unit 4 as a coal-fueled
resource by April 2025.

5. Transmission Actions
- Continue permitting for the Energy Gateway transmission plan. Near
term targets for Segments D, E, and F include the continue funding of
the required federal agency permitting environmental consultant;
continue to support the federal permitting process by providing
information and participating in public outreach. For Segment H
(Boardman to Hemingway), continue to support the project under the
conditions of the Boardman to Hemingway Transmission Project Joint
Permit Funding Agreement.

- Complete to follow Walla Walla to McNary project construction plan
with 2017 expected in-service date. Continue to support permitting
process.

COMMISSION DECISION
Does the Commission wish to process Rocky Mountain’s 2015 IRP filing through
Modified Procedure with a 90-day comment period and a 14-day intervention deadline?

Neil Price
Neil Price
Deputy Attorney General

M:PAC-E-15-04_np