Fuel Prices TEPPC 2026 CC Data Work Group January 26, 2016 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Overview TEPPC Natural Gas Price Coal and Other Fuel Prices Heat Rate Curves 2 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Natural Gas Prices 3 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

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

TEPPC Modeled Load Areas 5 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Methodology for developing Natural Gas Price TAS – TEPPC approved a hybrid approach last round that includes using the California Energy Commission major and minor Hub Prices and the Northwest Power and Conservation Council monthly shapes. The two models differ in that the council’s model is a regression model that reflects historic usage and accounts for forward look factors exogenously (e.g., LNG development, Pipe expansions, etc.). In contrast, the CEC model, North American Market Gas-trade “NAMGas” starts with the World Gas Trade Model (WGTM) applies changes including but not limited to: – Reconfigures California portion of the model – Removes all non-North American structure – Add functional nodes to account for approved LNG – imports and exports – Add nodes needed to represent natural gas demand in the transportation sector 6 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

NAMGas NAMGas produces Supply Side Cost Curve. “Elasticity is included in the model” in that the CEC uses Plexos interchangeably to produce the supply cost curve which, in turn is used as an input parameter to NAMGas NAMGas 2016 Prices are from the October 2015 final NAMGas Model results used for the 2015 Natural Gas Outlook Draft Staff Report at: IEPR IEPR Transportation rates are from the natural gas pipeline operators' filed tariffs. Deflators are from Moody's Analytics.

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 8

Markets Expect Continued Gas Supply Growth 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 9

Major Hub Prices Minor Hub Prices CEC 2013 IEPR vs IEPR Hub Prices Units: $/MMBtu, in 2014 Dollars Forecast Year: Common Case 2026 Proposed Price Henry Hub AECO Sumas San Juan Permian Area2024 Common Case 2026 Proposed Price Seattle Malin Ehrenberg SoCal PG&E Phoenix

Council’s Monthly Shapes Steven Simmons 11 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

NWPCC – Seventh Northwest Power Plan 12 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

NWPCC – Seventh Northwest Power Plan 13 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Example – Monthly Gas Price Shaping 14

Example – Monthly Gas Price Shaping 15

Example – Monthly Gas Price Shaping 16

Other Fuel Prices 17 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Other Fuel 18 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Fuel Definition 2024 Price (2014$) Source Oil_DFO220.96NPCC Oil_DFO_H27.95NPCC Oil_DFO_L13.21NPCC Petr_Coke1.31NPCC Uranium0.81NPCC Waste_Heat0.00 Bio_Misc2.70 Agri_Res0.50 Fuel Definition 2024 Price (2014$) Source Blk_Liquor0.01 Landfill_gas2.10NPCC Refuse0.00NPCC Solid_waste0.00 Wood2.68NPCC Geothermal0.00

Coal Prices Garry O’Neil 19 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

The CEC Coal Prices Garry O’Neil For coal Burner-Tip Prices, the CEC started with the 2015 Annual Energy Outlook: EIA evaluates U.S. energy markets and uses trends to forecast coal prices For the Western US, The EIA develops estimated price projections that are aggregated over seven coal mine regions. These regions are Western Montana, Powder River Basin, Western Wyoming, Rocky Mountain, Southwest (Arizona/New Mexico), Northwest (Washington/Alaska), and Dakota (Northeast Montana/ North and South Dakota). The mine-mouth price projections also provide cost details for the different types and grades of coal mined. 20 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Regional Delivered and Commodity Prices EIA Reference Case (Nominal $/MMBtu) 21 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

EIA – Outlook 2015 CEC Garry O’Neill YEAR 2026 Nominal2014 Dollars SUB_LS_AWA BIT_LS_ANM BIT_MS_ANM SUB_MS_ANM BIT_LS_RMO SUB_LS_RMO SUB_LS_WMO BIT_LS_WMO SUB_MS_WMO SUB_LS_PRB SUB_MS_PRB SUB_LS_WWY SUB_MS_WWY WC_LS_USA Fuel Definition 2024 Price (2014$) Plants Ventyx 2024 Nominal Coal_Alberta1.53Alberta plants Coal_AZ2.44 Apache, Cholla, Coronado, Navajo, Springerville 2.94 Coal_CA_South1.79Ace cogen Coal_CO_East2.20 Arapahoe, Cherokee, Comanche, Drake, Noxon, Pawnee, Valmont 2.65 Coal_CO_West2.19Bonanza, Cameo, Craig, Hayden2.64 Coal_ID1.19Idaho small coal Coal_MT1.36Colstrip, Corrette1.64 Coal_NM2.25Escalante, Four Corners, San Juan2.72 Coal_NV3.18North Valmy, Reid Gardner3.84 Coal_PNW2.67Boardman, Centralia3.22 Coal_UT1.96Carbon, Hunter, Huntington2.36 Coal_WY_E1.52Dave Johnston, Laramie River1.84 Coal_WY_PRB0.97Wygen, Wyodak, Simpson1.17 Coal_WY_SW2.11Jim Bridger, Naughton2.55 RegionCoal GradePowder River BasinLow Sulfur Sub-Bituminous Powder River BasinMedium Sulfur Sub-Bituminous Western WyomingLow Sulfur Sub-Bituminous Western WyomingMedium Sulfur Sub-Bituminous Rocky MountainLow Sulfur Bituminous Rocky MountainLow Sulfur Sub-Bituminous SouthwestLow Sulfur Bituminous SouthwestMedium Sulfur Bituminous SouthwestMedium Sulfur Sub-Bituminous NorthwestLow Sulfur Sub-Bituminous Western MontanaLow Sulfur Bituminous Western MontanaLow Sulfur Sub-Bituminous Western MontanaMedium Sulfur Sub-Bituminous DakotaLignite US- AverageWaste Coal

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