Portfolio Analysis Mike Hopkins Senior Manager, Price Risk & Resource Planning

What is Portfolio Analysis? Evaluation of different groupings of demand-side and supply-side resources to meet load forecast Considers both energy and capacity requirements Enables assessment of tradeoffs between different portfolios How do the different portfolios perform under changing conditions? Enables selection of preferred portfolio to meet the objectives FBC directed to do portfolio analysis in BCUC acceptance of 2012 LTRP

Portfolio Analysis Process 1. Load-Resource Balance Energy Gaps Capacity Gaps 2. Develop Feasible Resource Options 3. Identify Uncertainties & Risks (Load, DSM, Market, Resources) 4a. Develop Base Portfolio 5. Evaluate Portfolios A portfolio is a set of resources that specifies: Which resources to acquire? When each resource is acquired? Portfolio analysis is a process to develop portfolios, analyze their performance, and select the preferred portfolio The process uses both Quantitative modeling techniques (mathematical programming, probabilistic analysis, excel-based tools developed in-house for cost saving and transparency purposes) and Qualitative judgments Base Portfolio would be determined by lowest cost NPV Alternative portfolios would be based on consideration of cost, environmental or other factors For example, one portfolio could include nat gas while another might just include clean or renewable resources -In step 1, we consider LRB before any DSM -In step 2, we pre-screen resource options and include both demand and supply-side resources (cost-effective DSM is usually a preferred resource for meeting the objectives and is almost like a default resource) – e.g. we may not need large capacity resources like PHS or large hydro dam projects -In step 3, we examine uncertainty/risks with both existing (e.g. our generation and water mgmt) and future resources (e.g. solar costs or gas prices for gas gen) -Step 4 and 5 assumes expected forecast -Step 5 includes evaluation based on objectives – e.g. cost-effective, environmental, technical/size/flexibility – also includes PRM to see if the portfolios meet the PRM criteria (e.g. some gas-fired gen with forced outage rates may not meet PRM requirements) – -we will also evaluate rate impacts on customers of the different portfolios -Step 6 includes contingency risk analysis for the preferred portfolio – e.g. “what if” scenarios 4b. Develop Alternative Portfolios 6. Preferred Portfolio 2

Portfolio Analysis Technical Financial Environmental Social/Economic Consideration of Resource attributes: Technical Financial Environmental Technical – baseload, peaking, intermittent, how resources fit our load requirements Financial – e.g. capital and operating costs, avoided transmission cost Environmental – e.g. GHG emissions – we may rank resource options using high, med, low Social/Economic – i.e. contribution to economy (e.g. GDP, employment, government revenue) – this may be more qualitative than quantitative Social/Economic

Portfolio Analysis – Base Portfolio Assumptions of the base portfolio: Base case load forecast (before DSM & Other Savings) Base case DSM & Other Savings Current carbon tax Mid electricity price Mid gas price Continued access to market purchases 93% clean or renewable resources CEA objective relating to 93% clean or renewable applies to BC Hydro or a prescribed utility CEA self-sufficiency objective is specific to BC Hydro (BC Hydro to be self-sufficient by 2016) and states that other public utilities should consider self-sufficiency - FBC considers this more of a LT objective - while there is currently low-cost market electricity supply, there may be risks with LT reliance on market supply as noted in FBC 2012 LTRP

Portfolio Analysis – Alternative Portfolios Possible alternative portfolios: Self-sufficiency (no market supply) 100% market reliance More conservative DSM No 93% clean or renewable requirement Flexible termination of BCH PPA More aggressive DSM 100% clean or renewable resources

Portfolio Analysis Criteria to evaluate portfolios: Economics (cost, rate impacts) Self-sufficiency Environment (e.g. GHG emissions) Clean or renewable Resource adequacy (LOLE target) Portfolio evaluation: Score or ranking Sensitivity analysis: e.g. high/low electricity/gas/carbon prices Contingency analysis on the preferred portfolio: e.g. high/low gaps

Questions?