EWEB Board of Commissioners — July 27, 2022

0:01 um for those of you don't know me my name is john brown i'm the board president this year and i'd like to welcome you and thank you and i love it when we have chips in the 1500s and my billfold's still here so that's great i have no idea what this is going to be like but it's going to be fun i'm sure and informative um that said officially i need to call the meeting to order it that's a work session for july 27th 2022 the youtube channel reporting nothing else megan all yours thank you yes thank you so much for coming tonight we are going to have fun uh and then learn something along the way i have the honor of introducing uh the team that put this together tonight i first of all want to thank ann paul and holly uh who uh obviously you know nothing happens without them and then the designer here

0:47 we have john hart who is the designer of the game and then who supported him ben ulrich from the power planning team and then you all have somebody at each of your tables uh from the power planting team or a part of the power planting team you have aaron bush marciana's roles you have then you're at that one right you have aaron from communication and then tim holden from powerrisk so it's all you ben so welcome everybody um so we can go to the timeline slide here so today there's a bit of a lag on the computer but today we're uh we've been meeting with the board periodically to kind of engage

1:32 on key topics in this irp and so today you can kind of see that highlighted we're doing the portfolio game and just in april we we talked to the board about customer load characteristics and then we had some small group meetings in june and so tonight we were thinking this would be more informal process to engage with the irp if you want to go to the next slide um so right now we are in the strategic plan mid game uh we're building a foundational the foundational pieces that will facilitate future flexibility a lot of f's there sorry part of the mid game strategy is the development of an integrated resource plan an integrated resource plan serves as a road map to guide the decisions of how

2:17 the utility will meet our ener our energy needs the next two decades and identifies action items that we can take in the next few years the 2022 irp is the first in an iterative process where evil will begin looking at our future energy supply options and we'll adjust our assumptions and analysis over time as the industry is changing rapidly for this 2022 foundational irp we want to better understand how much power we could need in the future when those needs will happen and start analyzing what resources might be a best fit for eweb part of that is working to define best fit in quantitative and qualitative analysis and so today by playing the portfolio game we hope that as a group we can start exploring this concept of

3:02 best fit in a more fun and interactive way so let's go to the next slide on the left side of this chart there's the energy output from our existing resources on an average megawatt basis so you can see the 2022 there where we have about 375 megawatts of average resources and the main components of that are block and slice at the bottom and then eweb hydro up owned hydros in that blue area and then wind resources with and then thermal at the top which is ipe and seneca but as you can see there's a slow decline in those resources as our contracts expire and then of course a big decline in 2028 when the bpa contract comes to an end

3:49 and so in the game today your teams will fill in energy resource gap your team's ideal mix of new resources just like our current portfolio you'll need to consider energy fit carbon and costs as you go about building your portfolios so with that i'll pass it on to john who's going to kick off the game commissioners and uf staff thank you for your participation tonight in this game um tonight we're going to do a little bit of live-action role we're going to play a simple game where we pretend to be energy planners must build resources uh that meet the needs or requirements of our customers my name is

4:35 john hart and my role here tonight is to run the mechanics of this game which will play out over three rounds being a little harder than the last this is an experiential learning and as we progress through the game we should learn a little bit more about the process of resource planning without light the general goal for today's work session is to reinforce your understanding of the irp through a little bit of hands-on experience we hope this activity will give you another perspective increase your understanding when it comes time to talk about the real irp but before we get started before we get started i have one big caveat

5:20 so while the purpose of the game is to educate it is still just a game meaning the data inputs are really simplified and they do not perfectly reflect reality um we're playing as a utility that looks a lot like e-web but is not ewing right so kind of keep that mentality in your mind i ask that you don't worry too much about the numeric details try to keep your focus on the process of energy planning itself there are no right answers uh and though we are playing as teams there will be no declared winner so hopefully we can relax a little bit and acknowledge that we're a mountain game these are fun so let's have fun there's poker chips right we're playing with

6:06 with you know fake money here this is an exercise it should be fun so we play working as teams we're going to build energy portfolios by interpreting some customer requirements thinking about which resources meet those requirements and how much you'll need your resources and once you know what you're going to build you'll need to enter your resource information into a spreadsheet via computer at each table the results of your efforts will be displayed on the screen and then each round there are staff helpers at your table that will help with the data entry stuff they're the ones with the computers uh but they're also there to

6:51 help keep the conversation moving as we have limited time to play today there are some kind of technical fidgety bits of this game you may have questions they're your first line of defense for how to answer them on your table you'll also find blank sheets of paper where you can record resource selections for yourself and make other sorts of notes right some people from tactically this is a place where you can scribble stuff down these are just for you there are some resource menus also at your table that look like this and with that we're going to take a quick look at which resources are available for you during today's game

7:37 so on the left we have a graphic with some potential resources that most of you are just getting familiar with on some level that's great but i want to point out that applicable areas where we have energy efficiency which today will be treated like an information resource we also have batteries uh which can help you serve your uh peak energy needs they don't create energy in fact you need a little bit of energy that's kind of fun that's a new resource that we got this time finally we have the market which uh below batteries there which is not a specific resource but a collection of things left over from all other resources right so there may be some value utilizing the market or not

8:24 there is some risk too if you choose to use the market to serve your portfolio needs you probably want to be strategic about that the menus on your table will tell you a little more about each of these resources on the right of the screen i've included an example resource menu block that shows you the type of information that you'll see in the resource if you have questions about the menus just ask the helpers at your tables and just a final thought before we we we take this off all resources have trade-offs and to be successful today you're going to want to consider how those trade-offs impact your portfolio in line with your customers requirements and i just said customer requirements so i think it's

9:09 time that we play the first round of this game so our first round is going to focus on building portfolios that are reliable this is job one you gotta keep the lights on there's lots of ways to define what reliable uh what reliable means but for today's exercise just assume that it means building enough resource capacity to meet the energy needs of your customers for a single hour out of the year this is a single hour loan test so for round one goal is simple build a reliable portfolio you have one energy requirement which is displayed on the screen

9:59 to meet this requirement you will select capacity quantities for each resource that you are interested in building if you want to build 100 megawatts of capacity for natural gas what is the number that you should put in your natural gas resource selection box 100 it's just that hard right 100 megawatts of capacity use 100 megawatts in that little resource box build 550 megawatts of the capacity to be successful in this and all subsequent rounds you'll be thinking about other energy issues as well but we're always building for capacity right you always want at least 550 megawatts of capacity in the ground if

10:44 you don't build enough resource capacity the game will backfill the market uh with market-based energy you literally cannot miss this requirement but just know that the market will fill in uh any gaps that you believe uh that you leave um in just a couple of notes we're working together right we want you to build portfolios as a team that excite you uh you have 10 minutes for this round so we kind of have to move quickly because you all have to meet each other um don't forget we're having fun this is a game holly will start a clock to keep track of time uh and uh people who are helping that table will also remind you in the last minute that we've made final resource selections and for those of you who are watching remotely you will see and hear the room while

11:30 teams discuss their resource selections and when we're done we'll all look at the results together and with that let's begin again

12:40 that's my code contribution that i'm done

13:35 megawatts we're going to get 74. okay so we're going to have you get so much from here that will be an interesting thing after round one

14:41 yeah so for example if you build 500 megawatts of fuel oh i thought everybody was saying only 100 i'm going to try to push this number

18:00 um should we perform ready

19:23 so we've got left that we can talk about um energy efficiency i was thinking if they said it was so expensive so we one again that's awfully high

21:02 obviously [Music]

22:17 so hey let's see how our portfolio has been during round one we're gonna uh not do that so this is what we built let me get the thing out we have five different portfolios here let's first acknowledge uh uh the amazing names that were chosen uh commish table uh rule number two [Laughter] it is just ours i don't even know what this is the american electorate and we're changing ours to team quarrel and uh and let's see you know it looks like you know we have biomass we have energy efficiency hydro you can see the types of resources that were built along

23:02 the bottom thematically some things i'm seeing here we have some teams that definitely built hydro right that's a thing that we're familiar with uh i'm so excited about what lieberg electric is doing here how long you're clear that's very exciting um it's on the market it could be a could be a good thing uh i can definitely see we have some teams who pick some solar and some teams would pick some wind exciting also some batteries so yeah uh solar batteries win with batteries this is a good combination i'm very excited about these portfolios guys um so this chart that i just showed you know uh shows how all of our portfolios were construction constructed first observation all of our portfolios met our

23:48 reliability requirements so we were all successful in the first place not all portfolios are the same in fact we appear to have some real variety and outcomes here so proving once again there's no one single way to meet all of our requirements um our portfolios didn't just meet our capacity needs though they did some other stuff too that i didn't tell you about this next chart here unhide to the sophisticated moving of the opaque box shows how much energy each portfolio created and i just realized i should probably just refresh

24:34 because it's a slightly complicated spreadsheet the numbers don't look like they're changing so maybe those are the real ones okay so again a lot of variety here you'll notice this uh solid yellow line here um that's around 275 average megawatts in this game that's how much energy our customers use on an average annual basis so anything above that line is considered surplus to your portfolio's need in this game that energy gets sold back to the market but generally at less than what it costs to build a couple of our portfolios seem to have made a lot of extra energy um how about all of them and possibly we

25:20 can find out maybe thematically why um i'm gonna pick on uh bmac here bmac at uh 565 average megawatts any guesses as to why you built so much uh surplus energy solar and wind baby built a lot of solar and wind 100 right so if we're trying to meet our capacity needs remember we're building to meet our capacities because we're using a variable resource like solar one where we don't have a lot of direct control we will be building a lot of that in order to meet you know that one hour winter peak that we've been talking about um uh and and unfortunately here's the side effect of that be you know having to build all that extra resource just to need that uh that kind

26:06 of nighttime capacity lean uh costs something impactful to our customers um so there's another chart i'd like to show you uh but first remember that this is the chart i just showed you about this is the energy chart but right next to that is our forecasted retail rates so in this chart we have this solid uh orange line here which indicates kind of a a baseline for what the customers in our game are used to paying on a per kilowatt-hour basis for electricity and uh and again any portfolios that poke above that line will be more expensive uh then the base conditions felt by the

26:53 game's customers today right so um we're going to have to work in this next round to maybe control these costs a little bit because um lieberg electric here has come in at 16 cents a kilowatt hour that's a that's a big jump leeberg electric you only built 441 uh average megawatts worth of energy that's not so much surplus any any guesses as to why your costs are 16 cents per kilowatt hour you so yeah you've chosen some slightly more expensive technologies some people chose uh technologies that are relatively cheap but maybe they're a bad fit for the portfolio at least the capacity

27:39 piece of the portable some uh portfolios chose resources that were maybe a little bit more expensive better fit resources absolutely you have uh less energy that you've created but you ended up with a pretty expensive result so next round we're gonna work to control our costs a little bit so um before we move on i want you all to write down for your own purposes how much energy you produce and what your rate funds because we're going to track these things as we go through the other rounds

28:35 for round two we're going to add a second requirement affordability we saw in round one everyone met their peak requirement different resource mix has resulted in different amounts of surplus energy and potential cost in this round we're going to try to lower those costs by either building less surplus or choosing cheaper resources okay i'm getting down um so for this next round the goal is to build a more important more more affordable portfolio we're iterating on our first portfolio to make it better this is continuous improvement there are now two energy requirements which are on the screen and some new building notes the emphasis here is on cost control

29:20 so look at your menus of resources which have lower average energy factors and fewer dollar signs those are the things that you're shooting for and does everyone understand how to use the average energy factor piece i'll explain it look at natural gas the average energy factor is 74 so let's say you build 100 megawatts of natural gas capacity for your portfolio how much average energy would you expect to get 74 megawatts that's exactly what you would get in this game so you're going to want to find things with lower average energy capacity factors and things with fewer dollar signs we have 10 more minutes for this round

30:05 and that time starts now you're definitely taking on some kindness but

31:27 yeah no i'm just saying like just relatively like three so much

32:43 you just want to sit with me there we go

36:30 [Music] okay

38:35 what do you think about going from 50 to 300. 45 seconds

39:32 okay so uh things have changed a little bit all right a lot of same same you guys learned fast um okay so looking at first uh peak capacity uh everyone has still successfully uh become reliable hooray okay we kind of we had a change at 10 seconds before the clock went so i think that's 4488 judges will you accept that [Laughter] if we're on starting blocks early we wouldn't go with it there are 550 megawatts of capacity requirements so we are still reliable

40:17 that's great don i see some market up there i think some great it does look like team now forum is leaning into the market those are commissioners [Laughter] and then looking over here at the energy side of things a lot less surplus going on energy stars is still poking up a little bit with their surplus um you know it looks like uh they've built a pretty uh you know a fairly sized amount of uh wind capacity um and maybe that's responsible for that but you know otherwise uh people are really reigning it in uh lieberg electric is uh has really dialed it really in nicely uh within my compliance for uh length so thank you

41:03 for doing that makes my um let's uh let's take a look at what happened down here in uh cosplay um costs are more controlled now bloomberg electric is still still the outlier but they really brought it down good job on the second floor we bring a good product the electrons are shinier better but look at look at table number two uh table number two is uh as practical is down below ten cents that's gotta mean something single digit land that's that's amazing what did team number two uh team number two build here well they built a lot of hydro okay um who was able to get their uh surplus energy down

41:49 in this round let's see a raise about a show of hands everybody everybody got their surplus energy down this round all right who always able to get their costs down in this round that was that was the purpose of this round was to get your costs under control you made different resource decisions right you kept your reliability thing intact and uh and you got your costs yeah that's that's great congratulations on running for two everybody um i have a couple more uh charts to show you though um and uh and uh your portfolios weren't just reliable and they didn't just create energy but they um also had some impact on the

42:34 environment and so the next couple of charts are really going to focus on the environmental impact of our portfolios this first chart here shows how much co2 was produced by each portfolio compared to a historical baseline year of 75 000 metric tons per year if your team column is above that line you are now producing more carbon than the current baseline that your customers experience um and you'll likely need to build new more carbon free resources in the next round looking at you the number electric stop you have like friends over here in mac

43:19 hold the as it be mac um so that's that's a lot um the chart over on the right hand side shows uh renewable resources that you've generated relative to the state's renewable portfolio standard requirement if you haven't met your rps target which is these clever little dots that move we'll talk about that in a second um you will need to build more uh renewable resources in the next round and with that we are going to move on please write down your energy costs your energy numbers right your average uh average energy production that's the number of all of them uh your cost values and whether you were above or below that

44:06 million ps the final round we're going to be adding constraints for carbon emissions and renewable generation we already talked about this but i have a special note here for rps you need 20 of your

44:52 portfolio to be served by green renewable resources plus 80 percent of your portfolio hydro above 80 the more hydro you build the less other renewable resources you need and you can buy those down to zero if you can build enough hydro looking at your resource sheets you'll notice that each resource either does or does not have carbon emissions and dowser does not help meet renewable portfolio standards so make sure that you're looking at those lincoln um by the way reducing carbon can also reduce your portfolio costs in this game carbon cost 60 dollars a metric ton which is not insignificant so

45:38 for round three um we want you to build your best portfolio right we have some requirements that we've already talked about and just for fun i'm adding a couple of more your portfolio can have no more than 400 megawatts worth of hydro so all y'all that got addicted to hydro it's a scarce resource that may over time uh go away in some capacity so you're going to have to deal with some of that constraint here today also you can have no more than 25 megawatts worth of energy efficiency capacity this rule is officially called the janine parisi rule because she once tried to build too much energy efficiency no more than 25 megawatts um

46:26 so this round is going to be a little bit harder so we're going to give you a little bit more time you have 15 minutes to get everything dialed in i'm going to set the timer and let's get going okay

47:45 so the requirements are moving targets so

49:53 right so those are two very different numbers yeah uh 275 unless you build more than eighty percent higher uh yeah there's a lot more than that there's still forty percent of a two seven five yes because we're not going to hit

52:19 buying the phone extreme braces

54:32 yeah so that's a great question future periods don't change the questions

55:21 so my thinking is that because [Music] elsewhere aside from your house yeah that's why it's like rps

59:47 okay just quickly checking do the numbers that you see on the screen generally reflect what you think you put it all right there's been a late entrance to the game here it is the completely and utterly unmanaged portfolio so we'll get to see how that one plays alongside the rest of our client very well it's the line right on the dock okay so is everyone still reliable yes and it looks like uh we we have a little healthy uh usage of market here we have some wind that's lovely very little solar we've discovered solar in the northwest is maybe not a good fit we got some nuke back on the table exciting lots of hydro both hands who took all the hydra they

1:00:32 could get um hey some biomass is this biomass or natural gas biomass right and some energy efficiency all right very similar looking portfolios some variants but uh but kind of exciting overall that we're kind of landing in the same place and with things that are kind of thematically familiar to e-web right we're very familiar with hydro all the joys and pains that come with owning hydro uh we are uh familiar with wind there's still some battery in here uh energy stars are trying to stand out to be revolutionary here i like it um and we are kind of familiar with uh being exposed to the market on some level generally on the other side of the

1:01:18 equation but it's a thing that exists okay so are there out there we kind of talked about how portfolios were constructed if we look at um at the amount of energy um everybody kind of came in about the same amount of energy which is a little shocking especially given that energy stars kind of diverge from everybody else leeburg electric too still kept your thermal in there um uh unmanaged portfolio it got exactly what it needed it went exactly to the market and bought one for one all the things that it needed very efficient just trading with the commodities market it's a lot of work for those traders but they can nail it right on the dot um let's look at rate impacts um everybody's kind of ended in the same

1:02:04 place right so we have pretty equal amount of energy that is being produced and we know that we're producing roughly with the same types of resources and would you be surprised to see that our rates are generally kind of the same as well there's a there's still quite a variance here this this team here energy stars they took some riskier bets and therefore it costs a little bit more final word who's the final word i like that you guys keep the page very nice three rounds the commissioners have changed their names three times i love it um so uh so this is this is really nice it's a nice low number i really like how these

1:02:49 things are uh coming together let's take a look and see what happened uh with our uh emissions and environmental impacts oh this is where the market really falls on its face it's a lot of carbon we don't know where all those resources are coming from remember it's the place where all the other things go when they're surplus to your need everyone is looking to get rid of their surplus thermal assets um uh lieberg electric oh you didn't get under the line but you got a lot closer to the line i think you were like 500 and something before and you're getting much closer uh lieberg electric just to remind ourselves uh still held on to some of their uh natural gas capacity so maybe with a little less natural gas capacity or maybe

1:03:34 less market exposure you uh you might find yourself kind of in line on the carbon goal and hey everybody met their rps goals except unmanaged portfolio here really good at dialing in the exact amount of energy that's pretty much as good as you can get from the market their market's not going to help you serve your rps it's going to have carbon associated with it some things that the market can do well not everything this last chart does anybody have any questions about these charts by the way just right now because i'm going to show you one more maybe like a little bit of a stretch so this last chart i'm going to explain while i push this little button that says generate scenarios

1:04:20 that's working now so um now that i've done that my computer will not great so this last chart talks shows us or illustrates a little bit about a different aspect of our portfolios two forms of cost risk are two forms of cost we have the total cost of our portfolio but something i'm going to call portfolio cost risk when i say portfolio cost risk what i mean is generally the amount that we can expect our costs to vary in a given year right the more risk the greater the variability in your portfolio costs or ultimately the costs to your customers

1:05:07 in a year it might move around a little bit and too much of that is kind of a thing that we don't want to have we want to kind of control that a little bit if we map these two metrics i wonder if we can learn anything else about these portfolios that we've constructed so this is a scatter chart which shows where each portfolio performed in terms of total portfolio cost on the vertical axis and total and portfolio cost risk on horizontal access so i clicked a little button and it generated 100 different little scenarios with our portfolios in mind and this is how all of our portfolios fared so if we take a look we see that there are some portfolios like cluster does this show up that's

1:05:53 terrible there's a cluster of portfolios here around the let's call it 140 to 150 million dollars per year um and uh and these resources and these portfolios are probably largely very similar mostly hydro based a little bit of wind does this sound familiar for the for your portfolio and how it fits in here right um we have energy stars they took some riskier bets right they bought more biomass they bought some batteries and overall their portfolio is more expensive on a total annual basis this out of the way we can also see along the again the

1:06:39 x-axis here one standard deviation annual portfolio costs right so how much your portfolio might swing around in terms of cost and we can see here that the portfolio costs for these are pretty low right so in terms of how much they might move because we didn't build a lot of surplus energy in these portfolios and they're not relying too much on the market there's something here one standard deviation they're gonna move a couple of million dollars two standard deviations i think it's more likely to happen more than that for sure um but that's pretty controlled um energy stars is both more expensive also a little bit further to the right here in terms of this risk element

1:07:24 so when we think about building these portfolios again we want to think about not only the total cost but how those costs might change over time a portfolio that is completely unmanaged and is subject to market risk a lot of risk associated with it on average it looks like it's about 150 million dollars uh remember it's got a lot of carbon in that portfolio and that's going to make it a little bit more expensive and uh it has a one standard deviation uh portfolio cost movement uh roughly 26 million dollars two standard deviations 50 million dollars your portfolio costs swinging by roughly a third under two standard deviations in some years this will be the cheapest portfolio in the northwest

1:08:09 other years will be really terrible so um this unmanaged portfolio again really good at getting your energy and capacity needs 100 what you'll pay for that who knows and it can't really help you with those environmental pieces so again market is a tool but it shouldn't be the only tool you rely on something that is a blend of different things is probably a better place to land observations about this chart that are interesting to you excellent do we understand this chart because this is this is an important concept that does come up in the irp not just what do our portfolios cost but how much risk we're exposed to

1:08:59 i want to know how final word got their portfolio costs so low oh okay so there's no declared winner but if you think about it if all these portfolios were meeting all their requirements they didn't um um you would have probably choose the portfolios that the ch that is the cheapest and least risky right so final word is kind of in that position right now not officially declared a winner but interesting let's uh take a look at what they built uh they built mostly hydro they had some energy efficiency a tiny sliver of um a biomass they used the market for what it was worth it worked for them

1:09:45 which is interesting is that going to work in reality that's kind of the thing we're figuring out with the real irp again what is the best mix of these resources and how long you want to be in a market where energy and capacity prices are likely to change in the future um and with that we are going to as a group we have 20 more minutes and it's discussion time so if i were to go back to powerpoint slide this is the slide that says let's discuss a question yes why the constraint of 25 megawatt average megawatts of energy efficiency

1:10:32 if it includes demand management so that's a good question and there are a lot of things about this game that would really just like need to fix something and so the game worked mechanically and that was kind of a mechanical choice that we made but in reality when we think about energy efficiency as a resource there's probably energy efficiency that is cost effective and can be reached to and there's probably a launch of energy efficiency that is more expensive and will be less likely to be select the same is too true for demand response so both both demand response and energy efficiency have finite quality quantities in our community that we can go after do you think is that 25 like a random number or do you think that that just kind of like the 400 for hydro

1:11:19 is or was it targeted towards it it's going to be somewhere in this general vicinity i'm just curious it's in the right order of magnitude uh but it's not a pro it's just for the game it's game mechanic definitely simplify the number but the the magnitude is in the right ballpark the other thing about both of those is over time there's a significant diminishing return on your cost so there may be things that you can do in the first few years that are cheap and efficient and gets you a certain place but if you're doing an irp over a 20 or 30 year window that the cost of that will will change dramatically as the building stock and opportunities change so it's it's not a it's not a

1:12:04 straight line in the case of of well and all these resources actually but but those in particular so this is a key observation okay so this is a key observation uh to come out of like this sort of exercise here is that this is different than the irp and the real world and that this is a static kind of window in time and that over time which is how we kind of have to think when we do the irp are our opportunities are going to change regulations and policies will change and as we build resources we'll find that the value or efficacy of those resources diminishes so we kind of have to think with a broader time horizon and

1:12:49 this kind of snapshot that we've worked on here um i see that there's this question mission a question from commissioner mcrae so uh so i have a question here from commissioner mccray um you could not find us tonight um when you calculate the final cost of the electricity does that incorporate the cost of carbon as a part of the price or is that just kept on a separate carbon ledger in this game commissioner mccray carbon is included in the total cost of the portfolio so yes that is in there as well any other observations i'm now looking at the commissioners who so adroitly changed their names so as to make it hard to find them

1:13:35 how did that feel right and anything about that game that you found interesting for me i found it very interesting because it's easy to just go okay here's my cost here's my carbon here's this the hard part for me is is figuring out what my customers are willing and able to afford both environmentally and economically and being able to tap into what they want because it'd be very easy for me to say let's lean really heavy into low carbon and knowing that that's going to cost

1:14:20 right it's going to add a significant cost and so that's going to be the hardest part for me is feeling what the threshold of cost is as opposed to the environmental goals that i think our community leans into fairly heavily and so what is that breaking point where it's like yeah i want to i want to do all i can for to reduce carbon and to do environmental things but i also want to be able to pay my bill and buy my groceries and pay my rent so that's going to be the hardest thing for me in this it's it's not figuring

1:15:05 out okay well carbon boom but it's going to cost you an extra 200 a month to get there where where's that line that's the that's what i have to grapple with at this table well maybe to kind of counter you a little bit um our final our final thing that was supposed to take creation of all those things the cost was lower than we're just looking at a facility during that exercise so that is super interesting to me i don't know if it's just because like we were learning as we went along and were able to correct the ground but i would have expected [Music]

1:16:01 so i think the idea that we really have to um i mean obviously we need to be mindful of of costs looking at all these options but it's really not as much of a as limiting a factor as i thought it would be i i kind of have a question before commenting the question is are the costs burdened because if we do nuclear or hydro and you know the re-licensing costs are though factored into this because i want to adopt a portfolio that benefits today and burdens tomorrow uh kind of like lever you know all of us have benefited from that to mock today but when i'm in the box on the shelf the future people are gonna have to pay for just you know that couple hundred

1:16:46 million bucks and they didn't benefit any from it and i just want to make sure that we don't burn in the future with uh you know nuclear and you know look at the wind farms that we sold things such as that because it's not financially feasible to be cool so i can tell you very briefly what the game does but then i'm throwing it straight to bed so in this game you're using essentially like a levelized cost assumption for each of these resources the hydro cost assumption is based on essentially legacy costs to operate not necessarily future costs to license or repair that all of these other resources are new resources and they're based on what would cost to build a new non-fully depreciated asset their cost profiles may be different and

1:17:31 how do we treat that in the ira yeah this is well it's perfect because the in the board pack the fund we're going to be back on tuesday to talk more specifics about our new resource options real numbers these are just the kind of play numbers though in your board packet there's a matrix showing levelized cost but also costs of capacity and other attributes so it can kind of give you a sense of how each of these resources compare to one another from a typical cost to home so like a nuclear we're getting rid of the spent fuel or are we going to fund depreciation like in any of these like you know we have the wind has a 20-year life and it's 100 million bucks do the math how much more that cost has to be absorbed on an annual basis to retool in 20 years are we going to is that

1:18:16 factored into the cost are we funding depreciation and the cost i'm not that's a very detailed question on that we're using um publicly available uh information about new resource development costs like total all-in costs so i'm not really sure how far like upstream and total cost ownership because it includes operating and maintenance costs and capital investment costs are all baked into that levelized cost analysis so but i'm not sure about depreciation schedules and things like that like batteries you know they have a totally different life you know in what five to ten years they're going to have to replace the entire portfolio if we buy so many megawatts of battery storage and versus a 20-year wind farm and things such as that and i just wonder if

1:19:02 those factors are considered into the process yeah the useful life of the facility is absolutely factored into that levelized cost of energy number so when you look at those numbers in the in the board packet i think that's a useful number to look at to kind of get a sense of all in cost of the energy so i think it's a helpful metric yeah well overall i've been here for a while and this is very one of the most learning you know great things we've done in a long time you know short of the picnic but anyhow this seriously this has really really been helpful for me to understand this and to kind of you know turn these dials and figure how much fun this is going to be squeezing the balloon and i'm so glad that we have so many good people here that that are participating and helping us out so thank you very much to all of us so john

1:19:48 on your question um typically an irp because an irp has a pretty long planning window so in our case you know 20 30 years out there's going to naturally be lumps and bumps in the cost right so the 15-year assets going to be different the licensing is going to be going to be expensive and some of those resources and a levelized cost model indirectly takes that lumpiness out and sort of levelizes over the life of that asset so so well now what it doesn't account for is if you have a premature failure so for example we're in the middle of leeburg and you know we're in the middle of a license and if we would have planned for

1:20:33 that for 40 years and all of a sudden it's operating for 20 then that throws your your modeling off but for for new resources it takes the lumps and bumps out of it and so it's it's there indirectly in in that model thank you aaron did you have something to add to this yeah um for when you're reading your packet i just wanted to call out that as anything in this kind of long-term planning process involves kind of thinking about the broad strokes of things and so the resource options and the levelized costs that you see in there another a broad representation of like a specific type of resource and so it's kind of going forward that we want to say like this is a type of

1:21:18 resource that we might be interested in and that's when we get into more details about like what is the specific resource cost what are the actual operations or transmission or any of those things going to be voided and so the goal of the information in the packet is to say like here's a broad category you can compare in general during relative costs to other things it's going to be at a ballpark and if we want to get more specific that's where the outcome of the irp comes into play i would say the other piece to focus on is we've talked a lot about average energy in this game and on the peaking energy and both of those numbers and kind of the relative cost for different resources for those two attributes are included and so i think that's an area that we

1:22:04 really wanted to call attention to is thinking about the cost to meet these two different types of booths that you would pass the trade-offs for different resources that i heard like john b mentioned um is is around interpreting essentially customer affordability and stuff like that so that is understanding and interpreting your requirements right so here in this game we gave you requirements that were easy to know it's this um but but in the real world that is absolutely something that we have to wrestle with

1:22:49 as staff and as a board to understand okay so how do we interpret a policy or how do we interpret a customer need into something that we can build or plan a portfolio around um and there have been many comments on kind of like simplifying assumptions that you know we made in the game and like the broad strokes that we're working with and you know we we say like wind we're talking about very basic generic wind here but in the real world lots of different choices for wins some of them have some big transmission costs that are not you know in this game so making sure that we're bringing to you the right number of resources to reasonably build from and in the right level of granularity not hyper granular but not way too vague that's that's you

1:23:34 know the balance we're trying to strike in this next conversation with you and john we we did in our most recent survey and this would be something that we would want to continue over time because again even customer attitudes change right over time as well we did ask relative to the irp what at least our survey respondents what they would prioritize whether it's cost stability and risk whether it's price whether it's environmental attributes we ask them to rank those and so we're going through that and digesting that and that'll that'll be something we'll share with the board in september when that's teed up um but there's there's some interesting um aspects to

1:24:20 the feedback we got relative to the irp and those priorities so you know to try to help with you know how my customers feeling about this what's where does affordability fit versus some of these other things who want to be able to to be knowledgeable on that and continue to be knowledgeable and and the thing about a lot of this is that it is very dynamic you know when we when we talk about marginal cost marginal cost the challenge of this industry because we are so asset intensive marginal cost can be very small so it doesn't take much cost at all to generate another megabot right up to the point until you have to build a new plant

1:25:06 and then your all of a sudden your costs can be very incremental and nice easy to manage marginally up until this point when you need a bunch of capacity and then it goes from oh it's real easy that's that's what makes it hard to price and incentivize things like energy efficiency the cost of an incremental amount of electrons is pretty small up to the point when you have to build a new plant and then it becomes incredibly expensive and so we're trying to levelize that we're trying to model that over a number of years when you think about these capacities they're seasonal well different resources react differently during different times of the year so there's just you know i'm i'm at bin and i'm i just know that at 10

1:25:51 harrison these guys are just like cranking things in their in their models because um what we're trying to do is pull that back into some something that is forecastable and simple and things that we can start to take action on and also eventually um you know we'll have this draft this year that will go out to the public we we intentionally want to have a public comment period hey here's what our board is directing us and guiding us on here's what some of our data is telling us what do you think is the public so that we can iterate the process lots of trade-offs i've got one more question are we looking backwards as well to find out in the past irps and where we

1:26:38 guessed the boat big i mean obviously one of them that we couldn't have foreseen was the drop in natural gas prices right you know if you if you were 10 years ago if you had said national gas prices are gonna are going to plummet see that so i mean are we looking backwards as well to see where we may have missed the boat before so we don't miss that same boat again yeah i think we will as part of the decision process and guidance process the the irp modeling itself tends to be now what we do to to help compensate for that is to run sensitivities

1:27:23 and to take a look and see what happens to a portfolio if gas prices go down or if they go up by by some percent or standard deviation or however you want so we can we could run sensitivities you're absolutely right i think a portfolio strategy that that we as an organization had in the mid 2000s range as much would have been much different if we would have known what would have happened to the natural gas prices and its effect on the wholesale market because we were long so you think about how long we are you you all are in in this imagine if what you were your length uh the prices were cut in half

1:28:09 and what that would do to the effect of your retail prices then and that's what happened we we were significantly long we were buying plants and and parts of wind farms and all kinds of things because the market was strong the more we bought the more we could sold the more money we could make we could offset retail rates it was great right up till the wholesale market had a significant shift we want to avoid that going forward we want to be able to model sensitivities and understand risk a little bit i'll just add to that the laws back then we're not very sophisticated they're very much more sophisticated now they're based more on probability now they're based on scenarios and sensitivities and um we just have

1:28:55 much better um tools that we get back then the other big piece of this then i hate to just throw on this complexity fire here more fuel one of the the areas that that we have to really understand as well is the impact of transmission um there's a there's a big difference between in the performance i think you'll see it in even this next report between a wind farm on the columbia river and a wind farm in montana they they perform better or worse at different times of the year but you have to pay for transmission to get the energy from where it's produced to where you need it and the energy and the transmission cost and the scarcity and the capacity of the

1:29:41 transmission system is becoming more and more limited as renewables become more prevalent on the system the advantage of having a whole portfolio and a and a large territory to work with across the west is you can leverage the diversity of those resources as long as you can transmit from one point to another and that's the and you if you think going through a hydro license is difficult try building a new transmission line um it takes decades to build transmission lines and that's that's one of the biggest challenges i think we have as an industry is that we can come up with a great portfolio and we have to keep in mind transmission is going to play a piece on cost and reliability and availability

1:30:27 and seasonality just as much as the resources are so i just want to acknowledge that we're at time we have two slides to wrap up now it's time to do that let's definitely get there and one more piece of context john if you can go back to the people's portfolios i want to point out something about the market yeah so one of the things we've been talking to the board about is resource adequacy so as frank said there's more challenges to layer on to this so if you look at people's portfolios one thing to think about is if we systematically i don't know if you could scroll up to the composition to show people um so if we lean on the market to meet our capacity numbers

1:31:13 and every other utility in the pacific northwest does the same exact thing then we run the risk of not having adequacy in the northwest and so one of the other things we're trying to make sure is that e-web has enough power to meet our needs so that we are not reliant on a market and we're trying to participate in regional programs so that everyone raises the bar so that as a as a network we are not all looking to the market during that big cold front and and keeping our grid stable so when you look at texas and places like that that's a way that the northwest is working to try and improve reliability and adequacy so anyway just wanted to point that out okay so go back to bringing this home to the irp so

1:31:59 modeling is complex right electricity supply planning is complex excuse me sorry we hope everyone had fun today and you found this useful just like settlers of catan or other complex board games there's a lot of rules there's a lot of constraints but that really impacts your strategy when you play the game and as john mentioned earlier we made simplifications to this game to make it easier to play and our modeling work is actually somewhat similar where we're trying to simplify the real world so that we can form a strategy and we're using a software called aurora to do our modeling work work which does simulations looking at the electricity supply and demand in different scenarios and it helps us analyze different

1:32:44 realities it has hundreds of variables lots of assumptions and inputs but that added complexity will help us mimic the real world challenges of electricity supply planning so the iop document will summarize the findings of our modeling work and analysis and we plan to publish a first draft by the end of this year next slide and then this timeline slide just reminds us of when that process is so at the board meeting next week we're going to be presenting about resource characteristics so we're going to talk in more detail about these new resource options providing more cost statistics statistics and hopefully shedding more or light kind of stepping one step beyond the game and getting into some real numbers and and trying to wrestle

1:33:29 with that and then in november we'll be back to share our portfolio alternative some of our modeling results and then in december we're going to be trying to publish the first draft of the irp which will then kick off this public engagement process where people can read it and start having real conversations about the options that are in front of us and the potential action plans that we can take with that um we're done thank you everyone for coming out thank you to the helpers at each table who get people on task if you have questions let us know