1. Weyerhaeuser CHP Project NWPPC CHP Roundtable June 24, 2003

2. Project Profile Located at Weyerhaeuser mill, Kamloops 30 MW hog-fuelled turbo-generator Annual turbo-generator output : 200 GW.h Annual pulp mill displacement : 155 GW.h Excess 45 GW.h annually available for market sales Will become electrically self-sufficient

3. Project Profile (cont) Start-up scheduled for Spring 2004 Backup power and ancillary services available from BC Hydro

4. Project Profile (cont) Project cost : $28 million CDN Power Smart Incentive : $18 million CDN Incentive deal announced Jan 2003

5. What made Weyerhaeuser a Willing Partner ?? Interested in the project … a decade of effort to get the project advanced, but the financial hurdles had not been met Operates similar projects at this and other sites … technical basis well proven Positive economic spin-offs (construction jobs, permanent trucking jobs) Excess of hog fuel in the region

6. What made BC Hydro a Willing Partner ?? Open to non-utility options for generation Two options to acquire CHP projects --- Customer Based Generation (CBG) and Load Displacement (Power Smart) –CBG, establishment of 15-20 year Electricity Purchase Agreements, payments over the life of the agreement –Power Smart, establishment of 10-15 year Incentive Fund Agreements, payments provided as upfront capital to assist construction

7. What made BC Hydro a Willing Partner ?? (cont) Projects present a reasonable risk profile (technical, financial, credit, performance) Resource stack prioritization –DSM, Resource Smart, Private Sector (green & alternate, independent power)

8. How Did Government Policy Support This Project ?? Recent provincial Energy Plan promotes conservation, energy efficiency and low rates –#9, Electricity distributors will acquire new supply on a least-cost basis, with regulatory oversight by the BC Utilities Commission –#13, The private sector will develop new electricity generation, with BC Hydro restricted to improvements at existing sites

9. How Did Government Policy Support This Project ?? (cont) –#20, Electricity distributors will pursue a voluntary goal to acquire 50% of new supply from BC Clean Electricity of the next 10 years –#21, New rate structures will provide better price signals to large electricity consumers for conservation and energy efficiency –#23, The Utilities Commission Act will be amended to remove a disincentive for energy distributors to invest in conservation and energy efficiency

10. How Did Government Policy Support This Project ?? (cont) www.gov.bc.ca/em/

11. How Did the Regulatory Regime Support This Project ?? DSM treated like generation projects for rate basing and rate of return Investments judged on Total Resource Cost (project cost being less than alternate resources) BC Utilities Commission historically supportive of DSM, alternate energies, net metering

12. Win-Win Project Weyerhaeuser –Receives staged payments totalling $18 million –Alleviates capital requirements –Utilization of hog fuel to generate electricity rather than beehive burner disposal BC Hydro –Receives 155 GW.h of load displacement for 1.5 ¢/kW.h –Avoids new generation at 5.5 ¢/kW.h –Supporting environmentally beneficial projects –Reduced transmission loadings