1. 1 Modeling Work Group WECC - TEPPC Technical Advisory Subcommittee Meeting August 20, 2009 Tom Miller Pacific Gas & Electric Status and Outlook

2. Todays Topics Inter-Regional Wheeling Cost Modeling Approval Item Hydro Modeling Task Force Update Review of Data-Set Enhancements for 2009 Study Cycle Modeling Needs for 2010 Study Cycle 2

3. Inter-Regional Wheeling Cost Modeling Approval Item

4. Background: Variable Wheeling Costs Proposal MWG presented investigative studies results at TAS Meeting May 27th Posted discussion paper and study results Received supporting comments and those opposing now take neutral position MWG recommends implementation of proposed Variable Inter-Regional Transmission Wheeling Cost Modeling 4

5. Highlights: Inter-regional Wheeling Costs THE PROBLEM: Inter-regional variable wheeling costs are currently modeled as zero cost in the TEPPC data set. From production simulation results performed for the 2008 Study Plan there is concern that Northwest imports into California may have been too high, which zero wheeling costs may have been a contributing factor. ECONOMIC MARGINAL HURDLE RATE: Wheeling costs act as a marginal hurdle rate between regions to mimic economic realities of transporting economy power form region to region or across multiple regions. IMPLEMENTATION: will be performed on the 2019 and 2029 cases currently being prepared for the 2009 Study Cycle MODELING: Inter-regional Wheeling Costs Modeling: PROMOD models 11 pools across WECC Wheeling costs are fully incorporated into PROMODs economic dispatch algorithm 5

6. Proposed Inter-regional Wheeling Costs Modeling 6 Wheeling rates derived from SSG-WI 2008 Base Case (2% Escalation) Further calibration work is expected as simulations are performed

7. Motion to Approve Variable Inter-regional Wheeling Costs are expected to improve economic dispatch and resulting power transfers between regions from PROMOD production simulations Questions? Motion: TAS approves implementation of variable inter-regional transmission wheeling costs using the methodology proposed by MWG starting with the 2019 and 2029 cases in the 2009 study program 7

8. Hydro Modeling Task Force Update

9. Hydro Generation Modeling Methods Historical Data Peak Shaving – shapes energy to peak loads Constant Generation – good for run of river Proportional Load Following – shapes monthly energy proportional to load Hydro Thermal Coordination – adjusts PLF results so more generation during high prices.

10. Canada All plants modeled using PLF except Peace River which used peak shaving. Converting Peace River to HTC for 2019 case. ~4000 MW capacity. W A C Bennett Dam across the Peace River

11. Northwest Methods in use. 7 % nonflexible 26 % historical 67 % PLF The 2019 study may model 3 formerly PLF plants (11,859 MW capacity) using HTC to facilitate wind integration Grand Coulee Dam across the Columbia River

12. California Most plants are modeled using historical data aggregated to preserve confidentiality then disaggregated to plant level (Irina Green). 23% of 2003 generation uses PLF We experimented with HTC for Big Creek with limited success. Will revisit HTC but most likely not for 2019 case. O'Shaughnessy Dam across the Tuolumne River

13. Western-Lower Colorado Historical data for all plants. Plants dont follow load (except Hoover) so we expect to stay with this approach. Hoover Dam across the Colorado River

14. Review of Data-Set Enhancements for 2009 Study Cycle

15. Expanding Needs Existing process: Transmission congestion Variable costs Limited Scenarios Expanding Process: Capital, On-going Fixed and Variable costs Renewable Integration Requirements and Costs Transmission and Distribution costs Transmission congestion and system reliability Data set for comprehensive load, resource and policy scenarios 15

16. 16 Modeling Efforts

17. Highlights of Modeling Hydro and Thermal Modeling enhancements improve operational flexibility attributes Combined-cycle mid-range dispatch Hydro PLF allows shaping to load HTC allows market response to marginal costs, which helps mitigate congestion Fuel and Hydro sensitivities reveal impacts to system across a range of conditions Demand Response Programs provide peak shaving Variable Wheeling Costs create hurdle rate for more plausible inter-regional power transfer 17 Collectively, these modeling improvements are expected to improve production simulations with better estimates of variable costs, congestion and CO-2 emissions

18. Modeling Needs for 2010 Study Cycle and Beyond

19. 19 Modeling Frontiers GHG Hydro Dispatch Renewables Transmission Congestion Demand TEPPC- CONGESTION AND ECONOMIC SCREENING STUDIES Dynamic Hydro Modeling? Hydro-Thermal Optimization? How do we forecast congestion? Improve Modeling to support congestion metrics Load-Wind-Hydro Correlation? Intermittency? Ancillary Services Modeling? Energy efficiency? Plug-in Hybrids? Price Responsive DRP? CHP? GHG Adders?

20. Potential Modeling Frontiers 20 Anticipate need for close coordination between TAS Work Groups, Sub- regional Planning Groups and PCC to strive for consistent data and modeling assumptions

21. 21 Comments & Questions? Please send any comments, concerns and/or questions to Tom Miller

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23. Reference Slides 23

24. Wheeling Costs do Impact to Economic Dispatch 24 California Native Generation Increases and Imports Decrease NWPP and AZNWNV Generation Decreases

25. Southern California Imports 25 Wheeling Cost Impacts: Imports into Southern California decrease closer to historical levels Note: Scale much larger than COI and PDCI

26. Wheeling Costs Impacts Imports Flows PDCI 26

27. Wheeling Costs Impacts Imports Flows PACI 27

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30. How Hurdle Rate Works PROMOD Economic Dispatch PROMOD optimizes in two steps: First with each pool meeting its own load and then with pool-to-pool interchange available This two step algorithm is only for purposes of being able to measure which generators ramp up to provide exports and which generators back down to receive imports, within each area and pool. The price used in solving the interchange is internal to the optimization (not a clearing price from the first step), basically the pool reference price. If pool A has a reference price of 60 $/MWh and pool B has a reference price of 50 $/MWh, and interchange is enabled between the pools, pool-to-pool interchange will occur up to: the point where the reference prices balance, the point where the reference price difference is equal to the hurdle rate. Since the pool-to-pool interchange is being solved within the security constrained economic dispatch, transmission constraints will also restrict the amount of pool-to- pool energy 30

31. Proposal for DRP Modeling Objective: to model DRP as supply resources based on forecasts reported to LRS for 2019 and 2029. Proposed Modeling Methodology: high cost combustion turbine as proxy for DRP Limit dispatch to 100 hours per year WECC Wide DRP amounts to be derived & consistent with sub-regional DRP programs reported to LRS 31

32. Hydro Sensitivities 32

33. HOLD SLIDES 33

34. 34 Our Challenge Provide Economic intelligence needed by project developers: – demand side services, new resources, or new transmission Key drivers & Uncertainties Purpose: Inform decision-making about feasibility of economic transmission expansion Transmission Expansions Require Long-lead times (8-10 years) Assess benefits and costs of transmission expansion Expansion Plans run to Investigate effectiveness of transmission expansions for reducing congestion costs Analytical objectives Identify the critical few variables that really matter Identify potential interactions that drive results Scope full range of possible conditions

35. 2009 Study 1. Near-term (2012) to investigate congestion sensitivity to gas prices and hydro conditions 2. Medium-term (2019) to investigate potential congestions under different incremental resource portfolios 3. Long-term (2029) to investigate transmission overlay options. 35

36. 36 Renewables Re-Dispatch shared by thermal and hydro dispatchable resources Deeper penetration of intermittent resources may require additional ancillary services Regulation Load Following Back-up reserves Correlation between load and wind production important in peak periods

37. 37 Water Conditions

38. 38 Future Work Focus: MWG efforts aligned to WECC Expansion Transmissions Studies Tool Assessment for Future Congestion and Economic Metrics Alignment of SWG and DWG efforts Study Planning Cycle Advance Modeling Techniques Advance Data Requirements Advance Studies