Data Work Group(DWG) TEPPC 2026 Common Case - Fuel Prices November 17, 2015 Jamie Austin, PacifiCorp

Overview Updating Fuel Prices for the TEPPC 2026 Common Case – Approved Methodology For Natural Gas Prices – Coal and Other Fuel Prices 2

TEPPC 2024CC - TAS Approved Transitioning from the Council based Burner-Tip price to Hybrid California Energy Commission (CEC) /Northwest Power & Conservation Council (NPCC) – Use CEC Major and Minor Hub Prices* – Use Council monthly shapes – Use CEC local transport fee* *Note: CEC NAMGas Reference Case June 24, 2013

NG: Compare Models NPCCCEC (NAM Gas Model) A regression model based on historic data: Market based Henry Hub Market based Major Hubs Burner-Tip price (EIA-923 data) Based on the World Gas Trade Model (WGTM) with the following changes: Use only North America Reconfigure for a California focus Relationship between Hubs and Burner- Tip is derived econometrically A equilibrium model; Key Drivers: Supply cost curves Price elasticity Producer price Natural gas demand NPCC is a public domain modelCEC can distribute results but not the model

NG: Pipeline System & Hubs Henry Hub Major Hubs AECO Sumas Rockies San Juan Permian Minor Hubs Stanfield Malin Topock SoCalGas PG&E CG Burner-Tip:= Henry Hub + Basis to Hub + Local Transport Fee

Major Hub Prices: Compare Burner-Tip TEPPC 2024CC Burner-Tip Price Units: $/MMBtu, in 2014 Dollars Henry Hub~4.07~5.38 San Juan Permian Rockies Sumas AECO Area2022 Common Case Common Case Incr. Price Proposed Price Proposed Incr. Price PNM APS SCE

TEPPC 2026 Common Case – Natural Gas Prices Gas and power markets are undergoing revolutionary change – Tremendous growth in natural gas production – Major restructuring of gas transmission systems in Canada, Eastern US, Mexico – Increasingly severe regulation of emissions, including, for the first time, CO2 – Large increases in renewable energy and gas-fired generation with increasing coal-fired plant shut- downs 7

Total Energy Supply, Disposition and Prices Outlook For Coal (dollars per million Btu) Natural Gas Price at Henry Hub Coal Price Delivered Prices (2013 dollars per unit)

Coal & Other Fuel Prices 9

Coal Prices ($/MMBtu) EIA (923) 2013 Forecast Ventyx Forecast 2013 Forecast NPCC 2013 Forecast Coal Plants Revised Name Cholla, Springerville, Coronado, Apache & Navajo AZ Pawnee, Comanche, Arapahoe, Valmont, Cherokee, Rawhide, Noxon & Drake CO - East Craig, Hayden, Bonanza & Cameo CO - West Colstrip, & Corrette MT Four Corners, San Juan & Escalante NM Reid Gardner & North Valmy NV Boardman & Centralia PNW Hunter, Huntington, Carbon UT Dave Johnston & Laramie River WY - E Wyodak, Wygen & Simpson WY - PRB Bridger & Naughton WY - SW PAC 2013 IRP has $1.70/MMBtu for Medium-Average-System Coal Fuel Cost (2014 nominal $), compared inequivalent to: $1.33 Ventyx, $1.69 eia and $ 1.18 NPCC). Other Fuel Prices TEPPC 2024CC - Coal Prices (2014 Dollars)

TEPPC 2024CC – Other Fuel Prices NPCC Forecast (2014 Dollars) Fuel IDFuel NameFuel TypeFuel Units BMASWoody ResidueBIO2014 $/MMBtu UDFOUtility distillate fuel oilFO2014 $/MMBtu UDFOUtility distillate fuel oilFO2014 $/MMBtu UDFOUtility distillate fuel oilFO2014 $/MMBtu PetCokePetroleum CokePC2014 $/MMBtu REFURefuseREF2014 $/MMBtu-1.05 URANUraniumUR2014 $/MMBtu LandfillGasLandfill gasLFG2014 $/MMBtu2.10

Forecasting Delivered Coal & Other Fuel Prices Data sources for delivered coal prices – Energy Information Administration (EIA) publishes delivered coal prices per mmBtu for regulated power plants EIA delivered coal prices are not a good basis for forecasting future prices – Current delivered coal prices reflect contract price for coal and freight, not market price – Power companies dispatch coal plants based upon market price 12

Range of Delivered Coal Prices EI A – Outlook For Coal 2015, 2013 Dollars 2015 average coal price by state ranges from $13.70 to $39.30 per MWh – 11 states have delivered coal prices below $2.00 per mmBtu – $20 per MWh – 10 states have delivered coal prices above $2.80 per mmBtu - $28 per MWh 13

US Coal Market Price have been Falling Outlook For Coal 2015 Since mid-2014, all regional prices are down 15% - 25% – CAPP 12,500 Btu rail below $45; PRB 8,800 Btu down to $10 per ton 14

Markets Expect Continued Gas Supply Growth Outlook For Coal 2015 Balanced market price used to be about $4.00 per mmBtu at Henry Hub – Above-normal storage would push prices down; below-normal would cause spike Growing gas supply has changed the balanced-market price – Long-term gas futures have fallen below $3.50 per mmBtu – Is $3.00 the new normal gas price? 15

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