Developing an Developing an Idaho Energy PlanIdaho Energy Plan

Dr. Ren Orans, Managing PartnerArne Olson, Senior Consultant

Energy & Environmental Economics, Inc. (E3)

Presented To:Presented To:

Idaho Legislative Council Interim Committee on Energy, Idaho Legislative Council Interim Committee on Energy, Environment and TechnologyEnvironment and Technology

Boise, IdahoBoise, IdahoMay 17, 2006May 17, 2006 353 Sacramento Street, Suite 1700

San Francisco, CA 94111Telephone: (415) 391-5100

http://www.ethree.com

May 17, 2006 2

About E3About E3

E3 is a San Francisco-based partnership serving the needs of E3 is a San Francisco-based partnership serving the needs of electric and gas utilities, end-users, and government agencieselectric and gas utilities, end-users, and government agencies

E3 has substantial experience in energy planning and E3 has substantial experience in energy planning and recently prepared an energy resource plan for PNGC Power, recently prepared an energy resource plan for PNGC Power, a Portland-based group of cooperatives including six Idaho a Portland-based group of cooperatives including six Idaho utilitiesutilities

E3 has considerable experience in state-level energy policy E3 has considerable experience in state-level energy policy analysis analysis

E3 has an active practice in the Pacific Northwest and E3 has an active practice in the Pacific Northwest and understands the unique nature of the Northwest hydro-based understands the unique nature of the Northwest hydro-based power systempower system

Arne Olson worked for six years as an energy policy specialist Arne Olson worked for six years as an energy policy specialist for Washington state tracking energy planning and for Washington state tracking energy planning and infrastructure issuesinfrastructure issues

May 17, 2006 3

Developing an Idaho Energy Developing an Idaho Energy Plan: What Really Matters?Plan: What Really Matters? Who are the players?Who are the players?

Electric and gas utilitiesElectric and gas utilities Gas pipeline companiesGas pipeline companies Petroleum suppliers & refinersPetroleum suppliers & refiners Idaho PUC/other state agenciesIdaho PUC/other state agencies Energy consumersEnergy consumers

Role of legislature is to establish statutory Role of legislature is to establish statutory framework that guides the actions of the framework that guides the actions of the players, i.e., the rules of the gameplayers, i.e., the rules of the game

May 17, 2006 4

Developing an Idaho Energy Developing an Idaho Energy Plan: What Really Matters?Plan: What Really Matters? Players need economic analysis, modeling, Players need economic analysis, modeling,

etc. to support investment decisionsetc. to support investment decisions Legislature does not need detailed Legislature does not need detailed

quantitative modeling of energy options to quantitative modeling of energy options to support policy decisionssupport policy decisions

Instead, legislature needs a good Instead, legislature needs a good understanding of the playing field: understanding of the playing field: Who the players areWho the players are Current infrastructureCurrent infrastructure Technology developmentsTechnology developments Current Idaho statuteCurrent Idaho statute Current and new federal statuteCurrent and new federal statute

May 17, 2006 5

Project Scope and Project Scope and DeliverablesDeliverables

Review legislative participation in State energy processes from

other jurisdictions

Task 1

Committee will define Idaho objectives and constraintsTask 2

Tasks 3-5E3 will develop loads and

resources descriptions, tables and forecasts

E3 will develop and Committee will choose from

menu of policy optionsTask 6

E3 will prepare initial and near-final draft of report

Task 7

Assist in legislative and public process if needed

Optional

June August November February

Chapter 5

Chapter 1

Chapters 2-4

Executive Summary and Conclusion

Final Report Producedfrom Chapters

May 17, 2006 6

Current Industry Current Industry Landscape: ElectricityLandscape: Electricity

Idaho electricity supply still under control Idaho electricity supply still under control of regulated utilities (Avista, Idaho Power, of regulated utilities (Avista, Idaho Power, PacifiCorp) or BPAPacifiCorp) or BPA

Single regional grid means some of Idaho’s Single regional grid means some of Idaho’s energy comes from surrounding statesenergy comes from surrounding states

Deregulation pressure has largely fizzledDeregulation pressure has largely fizzled Future developments: Future developments:

Utility integrated resource plansUtility integrated resource plans Newer technologies such as wind, geothermal, Newer technologies such as wind, geothermal,

coal gasificationcoal gasification

May 17, 2006 7

Current Industry Current Industry Landscape:Landscape:Natural GasNatural Gas

Idaho served by Canadian and Rocky Mountain Idaho served by Canadian and Rocky Mountain gas via two interstate pipelines: GTN Pipeline gas via two interstate pipelines: GTN Pipeline (northern Idaho) and NW Pipeline (southern (northern Idaho) and NW Pipeline (southern Idaho)Idaho)

Idaho gas companies (Avista, Intermountain Gas) Idaho gas companies (Avista, Intermountain Gas) pass through to ratepayers cost of gas pass through to ratepayers cost of gas commodity purchasescommodity purchases

Recent price pressures caused by increasing Recent price pressures caused by increasing resource scarcity in traditional producing areasresource scarcity in traditional producing areas

Future developments:Future developments: LNG terminals on Pacific CoastLNG terminals on Pacific Coast ““Frontier Gas” from Alaska, Northern CanadaFrontier Gas” from Alaska, Northern Canada

May 17, 2006 8

Energy Challenges Facing Energy Challenges Facing Idaho TodayIdaho Today

Meeting energy needs of growing Meeting energy needs of growing populationpopulation

Merchant power plantsMerchant power plants State vs. local siting authorityState vs. local siting authority Centrally vs. locally assessedCentrally vs. locally assessed

Best use of water: hydropower or Best use of water: hydropower or aquifer rechargeaquifer recharge

PURPA contracts vs. IRPs: How PURPA contracts vs. IRPs: How should utilities procure renewables should utilities procure renewables

May 17, 2006 9

What Are Other States What Are Other States Doing? Doing?

We will find a variety of state positions in our We will find a variety of state positions in our reviewreview

Some of the state energy-related functions Some of the state energy-related functions include:include: Energy Facility SitingEnergy Facility Siting State Energy/Building CodesState Energy/Building Codes Integrated Resource Planning StandardsIntegrated Resource Planning Standards Ratemaking StandardsRatemaking Standards Renewables Portfolio StandardsRenewables Portfolio Standards Public Purpose or “Systems Benefit” ChargesPublic Purpose or “Systems Benefit” Charges State Power AuthoritiesState Power Authorities

Outline of E3 Outline of E3 ProposalProposal

May 17, 2006 11

E3 ApproachE3 Approach

There does not appear to be momentum There does not appear to be momentum behind major restructuring initiativesbehind major restructuring initiatives

Not enough time before January to do Not enough time before January to do big, grass-roots processbig, grass-roots process

Instead, focus process on key leverage Instead, focus process on key leverage pointspoints What are the most important issues for the What are the most important issues for the

legislature to tackle?legislature to tackle? Where can state action can be most Where can state action can be most

effective?effective?

May 17, 2006 12

What Is E3 Proposing to What Is E3 Proposing to Do?Do?

1.1. Facilitate a discussion of Idaho Facilitate a discussion of Idaho policy objectivespolicy objectives

2.2. Develop a set of basic information Develop a set of basic information about Idaho energy sectorabout Idaho energy sector

Profile of Idaho energy usesProfile of Idaho energy uses Profile of energy supply infrastructureProfile of energy supply infrastructure Context of current eventsContext of current events

3.3. Develop menu of policy options for Develop menu of policy options for the Committee to considerthe Committee to consider

4.4. Other items as necessaryOther items as necessary

May 17, 2006 13

Task 1: Review of Other Task 1: Review of Other States’ Energy PlansStates’ Energy Plans

E3 will prepare written report and E3 will prepare written report and presentation summarizing energy presentation summarizing energy plans from other statesplans from other states Washington, Oregon, Montana, Washington, Oregon, Montana,

Wyoming, Utah, Nevada, othersWyoming, Utah, Nevada, others Policy goals identified in enabling Policy goals identified in enabling

documentationdocumentation Policy options the states are Policy options the states are

considering or already doingconsidering or already doingJune August November February

May 17, 2006 14

Task 2: Facilitated Task 2: Facilitated Discussion of Policy Goals Discussion of Policy Goals

for Idahofor Idaho Develop broad list of high-level policy Develop broad list of high-level policy

principlesprinciples Non-partisan, non-idealogical:Non-partisan, non-idealogical:

““Maintain Idaho’s low-cost energy advantage”Maintain Idaho’s low-cost energy advantage” ““Conserve Idaho’s natural resources”Conserve Idaho’s natural resources” ““Preserve Idaho’s clean air and water”Preserve Idaho’s clean air and water” ““Provide affordable energy services to all Provide affordable energy services to all

Idahoans”Idahoans” Later, E3 will use these policy principles to Later, E3 will use these policy principles to

“score” policy options“score” policy options

June August November FebruaryJune August November February

May 17, 2006 15

Task 3: Current and Task 3: Current and Projected Energy DemandProjected Energy Demand

E3 will prepare written report and E3 will prepare written report and presentation on Idaho’s current and projected presentation on Idaho’s current and projected energy use:energy use: By fuel (electricity, natural gas, petroleum By fuel (electricity, natural gas, petroleum

products)products) By sector (residential, commercial, industrial)By sector (residential, commercial, industrial) Large energy users in IdahoLarge energy users in Idaho Idaho energy prices compared to neighboring Idaho energy prices compared to neighboring

states and U.S. averagestates and U.S. average Idaho energy intensity compared to neighboring Idaho energy intensity compared to neighboring

states and U.S. averagestates and U.S. average Projected growthProjected growth

June August November February

May 17, 2006 16

Task 4: Energy Supply Task 4: Energy Supply Infrastructure DescriptionInfrastructure Description

E3 will prepare written report and E3 will prepare written report and presentation on Idaho’s energy infrastructurepresentation on Idaho’s energy infrastructure

Describe major infrastructure and who owns Describe major infrastructure and who owns and operates itand operates it Power plants & transmission linesPower plants & transmission lines Oil and gas supply basins, pipelines, and refineriesOil and gas supply basins, pipelines, and refineries

Statutory and regulatory frameworkStatutory and regulatory framework Rate regulationRate regulation State roles in facility sitingState roles in facility siting

June August November February

May 17, 2006 17

Task 4: Energy Supply Task 4: Energy Supply Infrastructure Description Infrastructure Description

(2)(2) How are infrastructure improvements How are infrastructure improvements

planned, permitted, built and paid for?planned, permitted, built and paid for? Utility integrated resource plansUtility integrated resource plans Gas pipeline open seasonsGas pipeline open seasons

New energy supply optionsNew energy supply options Coal, gas, wind, geothermal, nuclearCoal, gas, wind, geothermal, nuclear LNG, frontier gas, coalbed methaneLNG, frontier gas, coalbed methane

How are energy efficiency and demand-side How are energy efficiency and demand-side management incorporated into resource management incorporated into resource plans?plans?

June August November February

May 17, 2006 18

Task 5: Current Events Task 5: Current Events Affecting Idaho Energy Affecting Idaho Energy

Sector Sector E3 will prepare written report and presentation E3 will prepare written report and presentation

on current events affecting Idaho energy on current events affecting Idaho energy companiescompanies Electricity deregulationElectricity deregulation FERC policy and regional efforts to form transmission FERC policy and regional efforts to form transmission

entityentity EPACT 2005 and repeal of PUHCAEPACT 2005 and repeal of PUHCA Supply and price pressures in natural gas and oil Supply and price pressures in natural gas and oil

sectorssectors Merchant power plants/energy facility sitingMerchant power plants/energy facility siting IPUC decisions regarding PURPA generatorsIPUC decisions regarding PURPA generators Proposed transmission lines linking Wyoming coal or Proposed transmission lines linking Wyoming coal or

Alberta oil sands with loads in the SouthwestAlberta oil sands with loads in the Southwest Others…Others… June August November February

May 17, 2006 19

Task 6: Menu of Policy Task 6: Menu of Policy OptionsOptions

E3 will develop a broad list of possible E3 will develop a broad list of possible policy options derived from a variety of policy options derived from a variety of sources:sources: Recent Idaho legislationRecent Idaho legislation Other state energy plansOther state energy plans Committee and stakeholder ideasCommittee and stakeholder ideas E3 pet ideasE3 pet ideas

E3 will score the policy options for how E3 will score the policy options for how well they meet the policy goals established well they meet the policy goals established early on by the Interim Committeeearly on by the Interim Committee

June August November February

May 17, 2006 20

Tasks 7 and 8: Draft Final Tasks 7 and 8: Draft Final Report and Present Results Report and Present Results

to Committeesto Committees E3 will prepare a near-final draft of E3 will prepare a near-final draft of

the report to the legislaturethe report to the legislature E3 will be available to make E3 will be available to make

presentations to Energy Committeespresentations to Energy Committees

June August November February

May 17, 2006 21

E3 ProposalE3 Proposal

Time and materials basis with a not-Time and materials basis with a not-to-exceed budget of $190,860 for to-exceed budget of $190,860 for Tasks 1-8Tasks 1-8

Special research projects as directed Special research projects as directed by the Interim Committee on a time by the Interim Committee on a time and materials basisand materials basis

E3 is willing to work with any other E3 is willing to work with any other consultants the committee may selectconsultants the committee may select

Why Choose E3?Why Choose E3?

May 17, 2006 23

Why Choose E3?Why Choose E3?

Industry planning experience.Industry planning experience. E3 E3 is trusted by utilities to do economic is trusted by utilities to do economic analysis and strategic planning analysis and strategic planning supporting major investments.supporting major investments.

Regulatory knowledge.Regulatory knowledge. E3 E3 consultants regularly provide expert consultants regularly provide expert testimony in front of state and testimony in front of state and provincial regulatory authorities.provincial regulatory authorities.

May 17, 2006 24

Why Choose E3?Why Choose E3?

Supply-side and demand-side Supply-side and demand-side expertise.expertise. E3 is trusted by E3 is trusted by advocates of both supply-side and advocates of both supply-side and demand-side resource options.demand-side resource options.

State-level policy experience.State-level policy experience. E3 E3 supports state initiatives in supports state initiatives in California, and E3 consultants have California, and E3 consultants have considerable experience with state-considerable experience with state-level energy policy issues.level energy policy issues.

May 17, 2006 25

Why Choose E3?Why Choose E3?

Understanding of consultant’s Understanding of consultant’s role.role. E3 will help frame the issues E3 will help frame the issues for the committee to consider, but for the committee to consider, but will not bring its own agenda. E3 is will not bring its own agenda. E3 is trusted by a broad range of trusted by a broad range of stakeholders for its unbiased analysis.stakeholders for its unbiased analysis.

Client focus.Client focus. E3’s projects always E3’s projects always benefit from the experience and benefit from the experience and personal attention of its partners. personal attention of its partners.

May 17, 2006 26

Recent E3 Energy Plans Recent E3 Energy Plans

Generation

Transmission

Distribution

Reliability

Cost

Risk

Supply-Side

Demand-Side

Renewables

RESOURCESATTRIBUTESSCOPECity/Area

Manhattan (Con Ed) X X X XChicago (Com Ed) X X X X X X XToronto (Ontario Hydro) X X X X X XSan Francisco (PG&E) X X X X XSan Francisco, City of X X X XPalo Alto, City of X X XAlameda, City of X X XNashville (TVA) X X X X XMemphis (TVA) X X X X XGreater Seattle (BPA) X X X X XOlympic Peninsula (BPA) X X X X XJackson/Afton, Wyoming X X X X XSouthern Oregon Coast X X X X XFort Collins/Longmont, CO X X X X X X XPNGC Power X X X X X

RESOURCESATTRIBUTESSCOPE