ML20023C697

Affidavit of DB Goldstein Supporting NRDC Motion for Summary Disposition of Contention 1 Re Need for Power.Four Forecasts for Energy Needs Refute Need for Power Justification Developed by Util.Prof Qualifications Encl

ML20023C697
Person / Time
Site:	Skagit
Issue date:	05/12/1983
From:	Goldstein D National Resources Defense Council
To:
References
NUDOCS 8305170557
Download: ML20023C697 (81)

Text

{{#Wiki_filter:. UNITED STATES 08 RICA 6 NUCLEAR REGULAT 'Y,COMMISSlON Vf ss ~J , e., o BEFORE THE ATOMIC SAFETY' AND,%,}CE ING ARD l G. i'.b %, G 1.f \\ %fyg, 9k In the Matter of ) ;- "s? )' OC xNds. STN 50-522 PUGET SOUND POWER & LIGHT COMPANY, ) ~1tj$i 50-523 et al. ) ) (Skagit/Hanford Nuclear Project) ) DATE: May 12, 1983 AFFIDAVIT OF DAVID B. GOLDSTEIN IN SUPPORT OF INTERVENORS' MOTION FOR

SUMMARY

DISPOSITION OF CONTENTION 1 1. My name is David B. Goldstein. I am a Senior Staff Scientist for the San Francisco Office of the Natural Resources Defense Council (NRDC). My business address is 25 Kearny Street, San Francisco, California, 94108. I am responsible for technical and policy analysis of energy supply strategies for California and the Pacific Northwest. My professional training and experience are summarized in the resume that is attached as Exhibit 1 to this affidavit. I have personal knowledge of all matters set forth herein. 2. This affidavit is submitted in support of Intervenors' Motion for Summary Disposition of Contention 1 in this proceeding. As approv'ed by the Board's Memorandum and Order dated January 18, 1982, Contention 1 states as follows: The Applicants have relied upon an inflated calculation of demand for electrical energy; teliable regional energy forecasts demonstrate no need for the Skagit/HNP. kD 0 6

3. Applicants characterize the Skagit/Hanford Nuclear Project as a " regional resource," which "will be operated as a baseload facility." (Application for Site Certification / Environmental Report, p. 1.0-2). It follows that assessments of need for the facility must be based on long-term, regional forecasts of firm energy requirements in the Pacific Northwest Region.* Four such forecasts, prepared independently of Applicants, are currently available; each is substantially lower l than those upon which applicants rely, and each refutas the need for power justification that Applicants have developed. The remainder of this affidavit will review relevant findings of there studies; excerpts from the documents themselves are annexed as Exhibits 2, 3, 4, and 5. 4. REGIONAL COUNCIL'S TWENTY-YEAR RESOURCE PLAN [Nortnwest Power Planning Council, Northwest Conservation and Electric Power Plan ( April 1983) ] : Under authorities established in the Pacific Northwest Electric Power Planning and Conservation Act of 1980, 16 U.S.C. S 839 et seq., the Northwest Power Planning Council has completed its " initial two-year effort to outline how the region will meet its electric power needs through the year 2002." Northwest Power Planning Council, Summary: Northwest Conservation l and Electric Power Plan, p. 1 (April 26, 1983) (attached as

• Since the Northwest lacks displaceable baseload oil or gas-fired generation, Applicants cannot demonstrate a need for power by invoking fuel diversity, conservation of oil, or operating cost l

savings. I

. Exhibit 2 to this affidavit). The Council consists of two representatives from each Northwest state, appointed by the Governors of Idaho, Montana, Oregon, and Washington, respectively. The Council's plan presents a range of forecasts and accompanying resource portfolios. "In the high-growth forecast, total employment would increase by more than 3.4 million between -1980 and 2000, compared to 1.5 million additional jobs between 1960 and 1980." Id. pp. 1-2. Even under these unlikely and extreme circumstances, the Council has determined that the region will require no contribution from the Skagit/Hanford nuclear project. The region will rely primarily on conservation to meet load growth, supplemented by power system efficiency improvements, hydropower, industrial cogeneration, and (possibly) coal-fired power plants. See id., p. 5 (description of " resource portfolio" for high growth forecast). The first new coal-fired plant, which would be needed "only if the region grows very l rapidly over the next 20 years," would not be added until 1998. l Id., p. 6. The Council's plan assumes construction of no nuclear units except WPPSS Units 1, 2, and 3, each of which is already more than 60% complete. Id., p. 7. 5. WASHINGTON STATE FORECAST OF REGIONAL ELECTRICITY NEEDS [ Washington Energy Research Center, Washington State Universit,y/ University of Washington, Final Report to the State Legislature: Independent Review of Washington Public Power Supply System Nuclear Plants 4 and 5 (March 1982) ] : In April of 1981, the Washington State Legislature directed the joint Washington Energy

-4 Research. Center of the University of Washington and Washington State University to determine, inter alia, long-term electricity needs in the Pacific Northwest Region (S 2, Senate Bill No. 3972, passed by the House and Senate on April 28, 1981). The Steering Committee and Liaison Representatives for the study included distinguished representatives of the Northwest utility, industrial, and academic communities (see Exhibit 3, pp. xiii-xv). The Washington forecast " indicate [s] that the most likely rate of load growth, as measured by total regional electricity sales, over the period 1980 to 2000 is about 1.5 percent / year." (p. 4). Under this "most likely" scenario, no new resources or any kind beyond six plants now uncer construction (WPPSS Units 1, l 2, and 3, Colstrip Units 3 and 4, Valmy Unit 2) would be needed before 1995, assuming " moderate levels of conservation" (pp. 4-5; see also pp. 85-86). The need for additional baseload generation is delayed "beyond the end of this century" if " moderate levels of conservation savings" are supplemented by " moderate levels of renewable resource development" plus !'more use of combustion turbines and/or imports" (p. 4). These findings contemplate deferral or cancellation not only of the Skagit/Hanford Nuclear Project, but also of two other nuclear plants and four coal plants now clated to come on line at the same time or sooner (WPPSS Units 4 and 5; Creston Units 1, 2, 3, and 4). These six plants have a total capacity in excess of 4500 Megawatts. 1 .,---.~ . -_... -.. _,. _ - ~..,, -., _ _ _ - _ - - - - - - - - - - _,. - - - _...,, _ _,, Since its publication in March of 1982, the Washington forecast has been revised downward. The final report, which reduced demand projections for future years by 250-650 MW, urged "that more emphasis should be given" to the document's initial recommendation, "which cal 1[s] for reducing plans for new power plants." Walter R. Butcher, Deputy Project Director, " Independent Review of WNP-4 and WNP-5: Adjustment to Load Forecasts ano the Need for Power" (attached as part of Exhibit 3 to this af fidavit). 6. BPA REGIONAL FORECAST, AND RELATED BPA DOCUMENTS [Bonneville Power Administration, Forecasts of Electricity Consumption in the Pacific Northwest (July 1982)] : In July 1982, the Bonneville Power Administration published, in final form, "a long-range baseline forecast of electricity consumption in the Pacific Northwest" (p. 1). That forecast's " baseline case" shows regional loads growing at an average rate of 1.7% from 1980-1990, and 1.5% from 1990-20r sp. 5). These figures are comparable to those in the Washington State forecast, discussed above. The BPA forecast does not include " savings which mignt be achieved through future conservation programs budgeted by BPA, by local and state governments, or by utilities. This conservation potential is to be analyzed outside the framework of these forecasts in a separate conservation assessment" (p. 3). Also excluded are the effects of building and appliance efficisncy " standards which may be proposed by the Northwest Power Planning

Council, Federal, state or local government, or by public and private utilities" (p. 35). In reliance upon this forecast, Bonneville Administrator Peter Johnson has recommended -- and the Washington Public Power Supply System has imposed -- a suspension of construction for up to five years on WPPSS Unit 1, which had been scheduled to commence operations in 1986. See Bonneville Power Administration, Analysis of Resource Alternatives (April 19, 1982). Since the publication of the final 1982 forecast, BPA has been developing a cost-minimizing inventory of resources for meeting the region's anticipated electricity needs. The most recent available summary of that analysis is included as part of Exhibit 4 to this Affidavit (" Alternative Resource Mix"); it shows no need for any new large thermal plants until 2001. Even in 2003, the total projected contribution of such units is only 421 average megawatts, about one-third of the rated capacity of one Skagit/Hanford unit. Resources tnat could be used to meet this modest requirement include WPPSS Unit 4, WPPSS Unit 5, or any one of the four plannea coal-fired units at Creston, Washington. 1 7. NRDC FORECAST [A Model Electric Power and Conservation Plan for the Pacific Northwest (1982) ] : NRDC prepared this document at the request of the Northwest Conservation Act Coalition, whose membership includes 41 citizens', labor, and i environmental organizations from all four Northwest states. The "Model Plan" projects the results of the implementation of the Pacific Northwest Electric Power Planning and Conservation Act. One of the Model Plan's objectives was to determine whether new nuclear or coal-fired power plants would be required to meet the Northwest's energy needs over-the next two decades, if -- as the Act expressly contemplates -- vigorous efforts were made to increase the efficiency of electricity use and utilize cost-effective renewable energy reources. The Model Plan develops "high demand" and " low demand" estimates through the year 2005; the "high" scenario assumes somewhat smaller efficiency increases, less rapid " penetration" of conservation measures, and higher industrial growth than the " low" scenario. Even under the Model Plan's high demand scenario, generous i surpluses result from 1985-2000, assuming indefinite deferral of the Skagit/Hanford Nuclear Project plus the following plants, most of which precede Skagit/Hanford in the region's construction pipeline: Colstrip Unit 4; Creston Units 1, 2, 3, and 4; WPPSS Units 1, 3, 4, and 5; and Pebble Springs Units 1 and 2. These surpluses were calculated without assuming any reliance on the following resource options: wind-generated electricity; increases in transmission efficiency; electricity surcharges or " curtailment purchases" in times of threatened supply insufficiency; environmentally acceptable small-scale hydropower projects; geothermal resources; or financial incentives to prevent net growth in irrigated agriculture (and accompanying

losses in hydropower generation). The only new generating resources needed to meet the Model Plan's "high demand" loads are Valmy Unit 2, WPPSS Unit 2, and Colstrip Unit 3. 8. The studies reviewed in items 1-7 above constitute reliable regional energy forecasts, which demonstrate no need fo the Skagit/HNP. I am aware of no other regional forecasts published during the last two years by any agency that is independent of Applicants. i 9.X 6. Ak4 i DAVID B. GOLDSTEIN Senior Staff Scientist Natural Resources Defense Council 25 Kearny Street San Francisco CA 94108 (415) 421-6561 O l' y e c 7-. m ---9 +m

State of California ) ) City and County of ) San Francisco ) I, David B. Goldstein, hereby swear and affirm that the foregoing affidavit is true and correct to the best of my knowledge, information, and belief, hE D W Davio' B. Gdldstein Senior Staff Scientist Natural Resources Defense Council, Inc. 25 Kearny Street San Francisco CA 94108 Subscribed and sworn to before me this /2 day of May, 1983, w e = =~ NOTARY PUBLIC, STATE OF CALIFORNIA, COUNTY OF SAN FRANCISCO grare rn: re:::::r::::..,...r:....-.... r...,,,,.2,, = f :: /?Cf.\\ I, sr,Ai, E f. *..! L DCLOT'ES BACON i g %,;.ya 5 r.or.:v r. c c a.,,,.,,, vg e, c,.a 4. c.."..,. - .,o m..m.,_,m..,,,,, = S $ $ $ ISIIIIIISI,j.e g,4..),g J,,g;;, ., _ ),g g,

EXHIBIT 1 TO AFFIDAVIT OF DAVID B. GOLDSTEIN 'SUme of David B. GoldStein l l 0 I l

DAVID B. GOLDSTEIN 1240 Washington Street San Francisco, California 94108 (415)771-7959 EDUCATION A.B., Physics, 1973, University of California, Berkeley Ph.D., Physics, 1978, University of California, Berkeley PROFESSIONAL EXPERIENCE Currently: Senior Staff Scientist, Natural Resources Defense Council, Inc. Responsibilities include: Technical and policy analysis of energy conser-vation strategies for California and the Pacific Northwest. Concentrations involve: (1) Research to determine the engineering and economic feasibility of efficiency improve-ments in appliances and buildings (2) Design of appropriate economic incentives for implementation of cost-effective conservation measures (3) Administrative and legislative proceedings on energy forecasting and planning; state and federal efficiency regulations; design of utility conservation programs (4) Public education on the role of energy conservation in environmental and economic policy 11/78-8/80 Staff Scientist (Physics) at Lawrence Berkeley Laboratory. Major projects were: 1) Technical manager for a project which provided analysis for the derivation of I residential building energy performance standards for the U.S. Department of Energy. This project involved the development of methodology and assumptions to compute most equitably energy budgets which represent minima in life-cycle cost for houses in different climates of the U.S. and the communication of assumptions and results to ' DOE and its contractors. Supervised a programmer in the use of the DOE-2 and TWOZONE computerizea buiding energy analysis models. Project was under the direction of Mark Levine.

David B. Goldstein Page 2 2) Research on the theoretical aspects of i building energy modelling, with emphasis on analytic approaches to passive solar building modelling. Developed hand-calculator routines l for design-day temperature prediction in passive solar buildings, and simplified methods of describing building parameters. Project was under the direction of Sam Berman. 3) Construction of a scenario for reducing U.S. energy consumption in residential buidings over the period 1980-2000, based on conservation measure; which minimize life cycle cost. The report addresses both the technical conservation measures and the policy changes needed to approach the projections in the scenario. The project was part of a study on national energy policy, directed by Denis Hayes at SERI for John Sawhill at the Department of Energy. The Buildings sector report was directed by Art Rosenfeld at LBL. 10/78 Consultant for the Natural Resources Defense council, Inc., San Francisco office. Worked on a scenario for high energy conservation in California; modelled results of a conservation program for residential and commercial building energy use for 1985 and 1995. 4/75-9/78 Research Assistant at Lawrence Berkeley Laboratory. Work spanned a wide variety of topics concerning efficient use of energy in buildings. Major work included: coordination of a data collection effort describing the end uses of electricity in California, and co-authorship of the residential energy use section of the report; studies on the applicability of various conser-vation measures for residential buildings including a tabulation of the cost and energy savings of several dozen measures; work on implementation schemes for conservation measures, including energy extension and inspection services, incentives, and standards; studies of long-range conservation strategies; deriving analytic models of passive solar building performance, and comparisons of the results with test cell data and computer simulation methodologies.

t David B. Goldstein page 3 Work was performed under the direction of Professor A. H. Rosenfeld and Professor S. M. Berman. ~ 5/76-3/77 Chairman of the Building Envelope Subcommittee of the California Energy Commission's Residential Standards Advisory Committee. The Committee worked on changes in energy conserving construction standards for residential buildings in California. Presented testimony on behalf of the Energy I Commission staff and also represented the majority of the committee; recomendations on double-glazing, passive solar, and efficient heating systems were followed in adopted standard. 4/75-7/75 Consultant for the Environmental Defense Fund, Berkeley, California office. Worked on conservation strategies for electric energy in California; testified for EDF before the California Energy Resources Conservation and i Development Commission. 6/74-9/74 Research Assistant at the Foundation for Ocean Research, 11696 Sorrento Valley Road, San Diego, California. Worked with Professor John Isaacs of Scripps Institute of Oceanography on the plausibility of a hypothesis connecting anthropogenic atmospheric vorticity with the triggering of tornadoes in the U.S. j. 6/73-9/73 Research Assistant at the Institute of Urban and Regional Development, University of California, Berkeley, California. Worked with a group of twelve under the direction of Professor D.B. Lee to develop an analysis of the costs of the different forms of surface transportation in the San Francisco Bay Area; wrote the working paper "AC Transit: A Cost Model for Different Types of Service," which attempted to separate costs into peak and base service. l ,y-4 p s er-

David B. Goldstein Page 4 PUBLICATIONS " Refrigerator Reform: Guidelines f or Energy Glutton s," Technology Review, February March 1983. A Model Electric Power _and Conservation Plan for the Pacific Northwest, Northwest Conservation Act Coalition, 1982. " Appliance Efficiency Standards: A Key to Economic Health in California," Testimony of the Natural Resources Defense Council Before the California Legislature Joint Committee on the State's Economy, September 20, 1982. " Efficient Refrigerators: Market Availability and Potential Savings," Proceedings of the Second ACEEE Conference on Energy Efficient Buildings, Santa Cruz, California, August 1982. " Application of DOE-2 to Residential Buiding Energy Performance Standards," M. Lokmanhekim, D.B. Goldstein, et al. Presented at the International Congress on Building Energy Management, Povoa de Varzim, Portugal, 12-16 May 1980. j " Evaluation of Residential Building Energy Performance 1 Standards," M.D.

Levine, D.B.

Goldstein, et al. Presented at the DOE /ASHRAE Conference on 1hermal Performance of Exterior Envelopes of Buildings, Orlando, Florida, 3-5 December 1979. "A Simple Method for Computing the Dynamic Response of Passive Solar Buildings to Design Weather Condition," D.B. Goldstein and M. Lokmanhekim. Presented at the Second Miami Conference on Alternative Energy, December, 1979. [ Some Analytic Models of Passive Solar Building Performance, D.B. Goldstein, LBL-7811, 1978. l " Des,ign Calculations for Passive Solar Buildings by Programmable Hand-Calculator," D.B. Goldstein and M. Lokmanhekim. Presented at the Izmir International Symposium-II on Solar Energy Fundamentals and Applications, 6-8 August 1979. LBL-9371, EEB-W-79-09. l l "A Heating and Cooling Loads Comparison of Three Building Simulation Models for Residences: TWOZONE, DOE-2, and NBSLD." l A.

Gadgil, D.

Goldstein, J. Mass. Proceedings of the International Conference on Energy Use Management-II, Los Angeles, California, 22-26 October 1979. LBL-9359. i l

David B. Goldstein Page 5 " Residential Building Simulation Model Comparison Using Several Building Energy Analysis Programs." A. Gadgil, D. Goldstein, R.

Kammerud, J. Mass.

Proceedings of the Fourth National Passive Solar Conference, Kansas City, Missouri, October 1979. LBL-9293. "Modelling Passive Solar Buildings With Hand Calculations." D.B. Goldstein, in Proceedings of the Third National Passive Solar Conference, San Jose, California, 11-13 January 1979. Saving Half of California's Energy and Peak Power in Buildings and Appliances Via Long-Range Standards and Other Legislation, A.H. Rosenfeld, D.B. Goldstein, A.J. Lichtenberg, P.P. Craig. To be published in the " California Policy Seminar" by the Institute of Government Studies, University of California, and in Energy, 1980. "Some Potentials for Energy and Peak Power Conservation in California," A.H. Rosenfeld and D.B. Goldstein, Proceedings of the International Conference on Energy Use Management, Tucson, Arizona, 1977. LBL-5926. " Effects of Vorticity Pollution by Motor Vehicles on Tornadoes," J.D.

Isaacs, J.W.

Stork, D.B. Goldstein, G.L. Wick, Nature 253, 5489, pp. 254-255 (1975).

Reports Projecting an Energy-Efficient California, D.B. Goldstein and A.H. Rosenfeld, LBL-3274, December 1975, draft. Conservation and Peak Power - Cost and Demand, D.B. Goldstein and A.H. Rosenfeld, LBL-4428, December 1975, draft. " Energy Conservation Thr9 ugh Control of Attic Ventilation," D.B. Goldstein and A.H. Rosenfeld, LBL-4401, 1975. Electrical Energy Consumption in California: Data Collection and Analysis, S.M. Berman and D.B. Goldstein, et al., UCID 3847, 1976. Preliminary Report on the Assessment of Energy conservation Strategies and Measures, S.M.

Berman, D.B.

Goldstein, et al. Report to the California Energy Resources Conservation and Development Commission.

=- David B. Goldstein Page 6 4 i Testimony Before California Energy Resources Conservation and Development Commission on Proposed Regulations for Minimum Levels of Operating Efficiency for Refrigerator-Freezers and Air Conditioners, D.B. Goldstein. Docket No. 75-CON-3, 22 June 1976. Energy Extention for California: Context and Potential

Impact, P.P.

Craig, D.B. Goldstein, R.W. Kukulka, A.H. Rosenfeld. UCID-3911 in " Proceedings of the 1976 Berkeley 1 Workshop on Energy Extension Services," LBL-5236, 1977. 1 i Energy Conservation in Home Appliances Through Comparison Shopping: Facts and Fact Sheets, D.B. Goldstein and A.H. Rosenfeld, LBL-5910, 1978. Testimony Before California Public Utilities Commission on Miscellaneous Appliances, Phantom Appliances, and Space Heating Loads, R.D. Clear and D.B. Goldstein, Applications No. 55509 and 55510, 1977. " Economic Analysis of Proposed Building Energy Performance Standards." Chapter 4 and Appendix A on Residential Building Energy Performance Standards, M.D. Levine and D.B. Goldstein, Battelle Pacific Northwest Laboratory, PNL-3044, September 1979. " Energy Budgets and Masonry Houses: A Preliminary Analysis of the Comparative Energy Performance of Masonry and Wood-Frame Houses," D.B. Goldstein, M.D.

Levine, J. Mass, LBL-10440.

Testimony before the Utilities and Transportation I Commission of the State of Washington, Case No. U-80-10 on behalf of People's Organization for Washington Energy. Resources, 12 September 1980. Comments of the Natural Resources Defense Council on the Department of Energy's Proposed Energy Efficiency Standards / for Consumer Products, Docket No. CAS-RM-78-110, 12 September 1980. ) "The Need for Federal Appliance Efficiency Standards," i presented before the Subcommittee on Energy Conservation and Power of the Committee on Energy and Commerce,-U.S. House of Representatives, 27 February 1981. I . -. _ ~ _. --, -,,, _.,. _..... _ _ -,, _,,_, - -.., ~ - - _ _ _

l l David B. Goldstein Page 7 Preliminary Comments of the Natural Resources Defense Council on a Cost-Effective Regional Energy Conservation Program for the Pacific Northwest, March 1981. Comments of the Natural Resources Defense Council before the Building Standards Cormittee of the California Energy Commission on Staff Engineering and Economic Assumptions, March 1981. r i I Y f f / / W* .9 s

• 'A Y

m \\ D ^ ~ ^ j

. _ = i i EXHIBIT 2 TO AFFIDAVIT OF DAVID B. GOLDSTEIN I i Official Summary of Regional Council's Twenty-Year Resource Plan [ Northwest Power Planning Council, Northwest Conservation and Electric Power Plan (April 1983)] 1-i )- t ) r i 1

NORTHWEST POWER PLANNING COUNCIL y ,= %~se SUITE 200

• 700 S.W TAYLOR STREET cewan cou.m w u,,, we,
• "s*

PORTI.AND, OREGON 97205 * (503) 222-5161

• h"s$~**

rue cow c me c,,, a,,, Toll free number for Idaho, Montana & Washington: 1-800-222-3355 aorggs~r a Toll free number for Oregon: 1-800-452-2324

SUMMARY

Northwest Conservation and Electric Power Plan On April 27, 1983, the Northwest Power Planning Council adopted the first Northwest Conservation and Electric Power Plan. The vote came as Council representatives from Idaho, Montana, Oregon and Washington completed their initial two-year effort to outline how the region will meet its electric power needs through the year 2002. The plan is the result of an extensive process of research, analysis, and discussion with the public, the Bonneville Power Administration, utilities, and industry. The plan's goal is straightforward: to supply the power the region needs at the lowest possible cost. The plan includes a forecast of regional electricity demand, a portfolio of energy resources to meet the projected demand over the 20-year planning period, and a two-year action plan describing the steps for Bonneville and otners to take to implement the plan. FORECAST Recognizing the uncertainties of future electricity demand, the Council adop:ed a " range" forecast. Rather than attempting to project electricity demand grcwth to a single "most likely" figure, the Council's forecast lays down the plausible but u,likely bounds of regional growth. The forecast ranges from a high of 2.5 percent annual growth in electricity demand to a low of 0.7 percent growth, with intermediate steps of 1.5 and 2.1 percent. Responding to public comment on the Council's draf t power plan, the Council changed some assumptions about the regional economy and made a l number of technical improvements in demand forecasting models. The changes include: indefinite postponement of the Alumax aluminum plant; assuming slower recovery from the recession; and assuming lower economic growth in the low case. These changes and improvements resulted in a slightly lower forecast range. The Council's electricity demand forecast is based on a range of projected regional economic growth. The high-growth forecast assumes that regional employrrent will grow more than twice as fast as the nation over the next 20 years -- a ratio that is even greater than the Northwest's most rapid five-year growth period from 1974 to 1979. In the high-growth forecast, l l 4/26/83

total employment would increase by more than 3.4 million between 1980 and 2000, compared to 1.5 million additional jobs between 1%0 and 1980. In' the low-growth forecast, total employment in the region would increase by 700,000 employees between 1980 and 2000. This rate is con-sistent with low-range national forecasts but assumes the Pacific Northwest would grow as fast as the rest of the nation. Energy demand in these forecasts grows slower than historical rates, even in the high forecast. This occurs even though the economy is projected to grow more rapidly. There are several reasons for these changing patterns. Homes and buildings have become more energy efficient in response to higher electricity prices and recently adopted energy codes. Regional industrial growth is projected to occur mostly in less electricity-intensive industries such as high technology. And rising electricity prices will affect energy use and energy efficiency in the future. In terms of energy resources, the region would have to add anywhere between 250 megawatts in the low forecast and 11,500 megawatts in the high forecast (excluding resources under construction) over the next 20 years. For comparison, the City of Seattle uses about 1,000 megawatts. RESOURCE FLEXIBILITY The Council's planning strategy e.mphasizes resources that are flerible. Risk and uncertainty can be reduced by choosing smaller resources, with sho: ter lead times for planning and construction. For example, sorne resources, like conservation programs, can be developed and implemented in [ncrements as the need for power grows. Other resources require much more time from inception to completion. New arrangements, called " options," could make their scheduling more flex-ible. An option would allow a resource to be taken through the time-consuming but relatively inexpensive siting and design stages and placed in a " ready" condition. In that condition, the project could be accelerated or delayed depending on the need for power. Options are an insurance policy that would allow the region to plan to meet even the strongest rate without making immediate, and perhaps unnecessary, commitments to building new resources. MAJOR ISSUES The Council faced numerous issues in developing its regional power plan. Several of these issues are outlined below. Cost of the Plan The Council has selected the lowest-cost mix of resources to meet future energy needs and developed a planning strategy designed to minimize the risk of overbuilding or underbuilding resources. The actual cost of the plan will depend on how much electricity the region needs over the next 20 4/26/83

years. In the Council's high growth forecast, many new resources would be needed, including expensive new thermal plants. Retail electricity rates, adjusted for inflation, could increase by 40 percent. In the low-growth forecast, increased electricity needs could be met by developing less than a third of potential low-cost conservation. Rates, adjusted for inflation, could drop by 20 percent. In the short term, given the regional power surplus, the plan calls for slow, gradual development of conservation programs that won't add unnecessarily to the surplus. The cost of the Council's conservation programs will be about 3/100 of a cent per kilowatt-hour over the next two years. Current Wplus of Firm Energy The region's current electricity surplus is expected to last from 5 to 20 years, depending on electrical demand growth. The Council will work with the California Energy Commission, Bonneville, and Northwest utilities to secure an agreement for the sale of firm surplus energy to California utilities. If a sales agreement is concluded, the Council may modify its resource schedule. The Council decided to proceed with new, more energy-efficient building codes so that long-term conservation savings are not lost. Other conservation activities follow the need for energy: programs are to be developed and tested now, and accelerated when the demand for new power grows. Marketing Interruptible Energy in the Northwest During the sprir.g runoff each year, large amounts of water must be either spilled or used to generate electricity. Typically, excess pawer has been sold cheaply to California utilities and has been used to shut dcwn more costly Northwest thermal plants. The Council's plan calls for making better use cf the spring runoff by seeking more customers in the region for this low-price power. For exaraple, electric boilers could to installed in Northwest industrial plants and operated on an interruptible basis. Quantity and Cost of Conservation Af ter detailed analysis, consultation, and public comment, the Council decided that 5,100 megawatts of conservation in the high forecast at.an average cost of i.8 cents per kilowatt-hour was appropriate. Because the Northwest Power Act provided that incentives, regulations, and rate designs can be used to achieve conservation, the Council has chosen very high participation rates for conservation programs. These measures, used as appropriate, should allow the region to achieve high participation rates over the next 20 years. The Council decided, after extensive public comment, to include in its conservation programs: 1) a low-income program that pays 100 percent of ~ the cost of residential weatherization measures, and 2) weatherization of renter-occupied and low-income households in proportion to their total share of electrically-heated households. 4/26/83

Quantity and Cost of New Hydropower The Council selected hydropower projects that are expected to be low-cost, tha' generate most of their energy in the fall and winter when needed, and that would not have adverse effects on fish and wildlife or the environ-ment. This resulted in a target of 920 megawatts of new hydro in the high for ecast. In the next two years, the plan calls for options to be acquired on six new hydro sites in order to test the options concept. Use of Combustion Turbines The Council selected combustion turbines as insurance against un-certain, rapid increases in the demand for electricity. Combustion turbines have short lead times and can be built at very low cost. Af ter discussion and analysis, the Council selected 1,050 megawatts of combustion turbines in the high forecast as a planning reserve for unexpected load growth. WPPSS 4 and 5 Compared With Coal Plants Even in the high forecast, the region will need nc new large thermal resources until 1993, and sometimes af ter the end of the current planning period in the low forecast. The region is very unlikely to achieve the growth rates of the high forecast. The Council has concluded that if, the region needed a new thermal resource now, coa! plants would be preferable to WPPSS 4 and 5. These nuclear piants would take longer to build than a coal plant -- 7 versus 4 years -- thus posing higher risks of overbuilding. The higher risk would be justified only if the plants were significantly cheaper. Af ter detailed analysis, the Council fcund no significant cost differences between coal plants and WPPSS 4 and 5. ( in the next revision of the plan, the Council will re-examine iuture energy needs and the perfermance of existing conservation programs, to see if additional resources are needed in the late 1990s. The Council will also re-evaluate resource alternatives, including coal and nuclear plants, additional conservation and renewable resources, ar.d new technologies. The Council also recognizes that model conservation standards and regulatory changes to support the options concept depend on federal, state and local governments. If they fail to act, then additional energy options would be needed. RESOURCE PORTFOLIO The Northwest Power Act gave the Council two primary guidelines for selecting energy resources to meet energy demand growth: 1) get the power the region needs; 2) buy the cheapest resource first. All acquisitions must be consistent with the Council's Fish and Wildlife Program and environmental, considerations. . 4/26/83

The proposed portfolio reflects these priorities. In the high growth forecast, the resource portfolio is composed of: conservation 5,100 MW; new hydropower 920 MW; cogeneration 500 MW; coal plants 3,300 MW; and, combustion turbines 1,050 MW (included as a planning reserve). In' the low growth forecast, the region would need only 660 megawatts of conservation. CONSERVATION All savings are based on the high load growth forecast. All costs are based on 1980 dollars. Residential In 1981, the region's residential sector consumed an estimated 5,323 average megawatts of electricity, about 34 percent of the region's total con-sumption. Significant conservation savings are possible in the residential sector. More efficient space heating in new homes could save 855 megawatts by the year 2002. Weatherization of existing homes could save 520 megawatts by the year 2002. More efficient water heating could save 510 rr.egawatts, and more efficient appliances could save 355 megawatts by the year 2002. The average cost of these savings is less than 2 cents per kilowatt-hour. These programs would total 2,240 megawatts of savings in the high growth forecast by the year 2002 -- overall, a 21 percent improvement in electricity use. Commercial In 1981, the commercial / governmental sector accounted for about 18 percent of BPA's firm sales, or 2,713 megawatts. The council proposes pro-grams targeted to conserve 1,350 megawatts of power by the year 2002 -- 720 megawatts through upgrading existing structures and 615 megawatts through building more energy-efficient new structures. The average cost of these savings is 1.7 cents per kilowatt-hour. These programs would achieve a 20 percent improvement in energy efficiency in the commercial sector. Industrial in 1981, the region's industries buying electricity from utilities con-sumed 4,020 megawatts. BPA's direct service industrial customers used 3,131 megawatts, of which 2,405 was firm load. Preliminary estimates suggest this sector could generate about 545 megawatts of conservation power by 2002 at an average cost of 1.5 cents per kilowatt-hour. 4/26/83

These programs represent a 6 percent improvement in energy use by the industrial sector. Irrigated Agriculture 4 In 1981, irrigation in the region consumed 770 megawatts of power. Irrigated agriculture could save 385 megawatts by the year 2002 through improvements in scheduling of water application and more efficient irrigation systems. The average cost of these savings is 1.9 cents per kilowatt-hour. j This represents a 30 percent improvement in efficiency. l Power System Efficiency Improvements Improvements in the operations of hydropower dams and transmission and distribution systems could save significant amounts of electricity. BPA and the Corps of Engineers estimate that efficiency improvements at existing dams could yield up to 350 megawatts of savings. Planning conservatively, the Council calls for achieving 270 megawatts of savings from power system efficiency improvements over the next 20 years. The Council will work to identify other system efficiency savings over the next two years. Hydropower For planning purposes, the Council chose a target of 920 megawatts of new hydroelectric power throughout the region, at a cost between 1 and 4 cents per kilowatt-hour. This represents less than 10 percent of the region's new hydropower potential. The Council chose its target figure after assessing the cost, environmental and fish and wildlife constraints, and - seasonal generation characteristics of the region's hydropower system. In the high forecast, the first hydro project would be needed in 1990. j Industrial Cogeneration l Industrial cogeneration, producing both electricity and heat for industrial processes from the same fuel source, could provide up to' 500 mega-watts of new electricity in the Council's projected high ' growth scenario. The 500 megawatts of planned cogeneration include 400 megawatts from biomass and 100 megawatts from gas, oil, or coal. Coal Plants Council projections call for the addition of new coal-fired generation only if the region grows very rapidly over the next 20 years. In the high forecast, 3,300 megawatts of coal would be added, with the first unit beginning in 1993. New coal resources are estimated to cost between 4.0 and 4.7 cents per kilowatt-hour. l The Council assumed that three coal plants currently under construc-tion, Colstrip 3 and 4 and Valmy 2, will be completed. I l 1 j 4/26/83 } l

Nuclear Plants The Council also assumed that WPPSS 1, 2, and 3 would be completed. The Bonneville Power Administration has already purchased the power from plants I and 2 and 709' of plant 3. Combustion Turbines Combustion turbines, fueled by either oil or natural gas, have been in-cluded in the plan as a reserve for unexpected rapid load growth. Combustion turbines would not be used to provide electricity on a regular basis. They would, however, perform a valuable planning role when electricity demand is highly uncertain. Combustion turbines have short lead times (18 months) compared with coal plants (48 months) or WPPSS 4 (84 months). If options were held on both combustion turbines and a coal plant, the decision to begin construction of the coal plant could be delayed to see if uncertain electricity demand materialized. If demand did materialize, combustion turbines could be built quickly to provide power while the coal plant was being built. Once the coal plant was on line, combustion turbines could provide standby power for future unexpected load growth. Tha Council included 1,050 megawatts of combustion turbines in the plan in the high case co be built only in the event of rapid load growth. FUTURE ROLE OF THE COUNCIL Adoption of the power plan marks just the beginning of the Northwest power and conservation planning process, not its end. The Council wil! continue to work with Bonneville and other federal agencies, utilities, state and local governments, businesses, and citizens to ensure the successful l implementation of this plan. l Because electric power planning is an on-going process, the Council adopted a process for monitoring electric power events in the region. The purpose of this monitoring role for the Council is to make sure the elements in its plan are adapted to future power needs. Therefore, the Council intends to update its plan every two years. The data in the plan (forecasts, assump-tions, programs and their effectiveness) will be monitored. If necessary, the plan will be changed to address changing patterns of power usage. l l l l i l l l 4/26/83 c=y w w --v r 7 r y 7-y

NORTHWEST POWER PLANNING COUNCIL m._s - s_. cumn vwcr*~n wasniegion Ww SUITE 200

• 700 5.W TAYLOR STREET cuaes co.uns w u, w,,,
  • "8'"

PORTLAND, OREGON 97205. (503) 222-5161 mem c.oo ^* ^ Hamo'oa

mono, o<eson Toll free number for Idah a. Montana & Washington: 1-800-222-3355

% "*m~r c,,u m.,e. e, ~ Toll free number for Oregon: 1-800-452-2324

SUMMARY

The Two-Year Action Plan The Northwest Power Planning Council designed its two-year action plan to serve both short-term and long-term goals. Because the reglen will have a surplus of electricity for 5 to 20 years, o-ionger, depending upon the pace of economic growth, the Council authorized a series of steps to make sure the Northwest has an adequate supply of power when it is needed. The two-year action plan is an integral part of the Northwest Conserva-tion and Electric Power Plan, adopted by the Council on April 27,1983. The items in the two-year plan involve work by the Bonneville Power Administra-tion, utilities, state and local governments, and the Council. These actions are the first steps in implementing the 20-year regional power plan. Emphasis in the action plan is on conservation. Taken all together, the con-servation programs in the two-year plan will cost the average Northwest t ratepayer only about 3/100 of a cent per kilowatt-hour over the next two years. In the short term, the two-year action plan responds to the surplus by calling for only a minimum of new resources, mostly from conservation. For the long term, the action plan lays the groundwork for meeting future power needs in the most cost-effective manner. The two-year action plan focuse's upon building the region's capability l to: a) implement energy conservation programs, l l b) develop smaller, more dispersed renewable resources, and l c) shorten the lead time for the siting, licensing and construction of generating plants. CONSERVATION The general aim of the Council's conservation program is to build the region's capability to generate power through conservation. The action plan calls for development and testing of new conservation programs for all end-use sectors. ind it includes modifications to existing conservation programs to improve their effectiveness. These steps are designed to ensure that the region develops the knowledge and experience necessary to acquire cost-effective conservation in the future. 4/26/83 1

During the next two years, the primary focus for conservatior. work is on developing the best systems for delivering conservation when it is needed. BPA's basic role in the overall scheme is to provide financial assistance for conservation improvements. The Council's programs encourage the develop-ment of decentralized methods to deliver conservation through ut:lities, state and local governments, and private contractors. The Council included a number of requirements in its programs to ensure that conservation improvements will be done efficiently and effec-tively. For example, all cost-effective conservation measures must be installed at the same time so that repeated visits to a home or building can be avoided. Audits and inspections are required to ensure quality control. Research and demonstration projects and training programs are also included. To ensure conservation benefits are distributed equitably, the Council has included in its conservation programs: 1) a low-income prograni that pays 100 percent of the cost of residential conservation measures and 2) weatherization of renter-occupied and low-income households in proportion to their total share of electrically-heated households. New buildings are an important source of long-term conservation. Con-servation measures are easiest and cheapest to install during construction, and the savings will last 50 years or more. The Council calls for the adoption during the next two years of new, more energy-efficient building codes for residential and commercial buildings. These codes can reduce household energy use by about 60 percent. If the new codes are not adopted, utilities may adopt alternative measures that conserve an equivalent amount of power. If they do neither, utilities would be subject to a surcharge on BPA electricity rates. The two-year action plan calls for modifying BPA's current residential conservation programs and for developing new programs in business, govern-ment, industry, and agriculture. The total savings from all of these sectors is 150 megawatts over the next two years: residential 75 MW -- modified BPA weatherization programs; commercial 35 MW -- build BPA capability to offer programs; governmental 10 MW --continue BPA institutional programs; industrial 15 MW -- develop technical information to begin programs;'and, agricultural 15 MW -- develop technical information to begin programs. Only those measures costing less than 4 cents per kilowatt-hour would be purchased. HYDROPOWER AND OPTIONS Beyond conservatica, the Council's two-year action plan calls for steps to broaden and diversify the Northwest's electric energy resource potential. Several planning projects, studies and research efforts are included. 4/26/83 \\

Key among these is the testing of the " options" concept. An option would allow a resource to be taken through the time-consuming b.it relatively inexpensive siting and design stages and placed in a " ready" condition until needed. In the next two years, the Council calls for testing the options concept by acquiring options on six potential hydropower sites. BPA's efforts to acquire options should help to identify changes in regulatory processes that may be required to make options work. The Council will also work with other agencies to rank potential hydro sites according to their impacts on fish and wildlife. MARKETS FOR SURPLUS ELECTRICITY The two-year action plan calls for development of additiona! mr_rkets for surplus interruptible power in the region in order to retain for the North-west the economic benefits of low-cost non-firm power. This could include as much as 1,400 megawatts in the industrial sector and some irrigation loads. The Council will work to help secure an agreement for the sale of firm surplus power to the Southwest. In consultation with Bonneville and North-west utilities, the Council will open discussions with the California Energy Commission on a potential power sale to benefit both regions. OTHER RESOURCES The Council intends to use combustion turbines as a planning reserve for unexpected high electricity growth. In order to test this use of combus-tion turbines, the two-year plan calls for BPA to acquire the output of an existing turbine and seek exemptions from the Fuel Use Act. The Council will also conduct various studies on the regulation and operation of combus-tion turbines. Research and demonstration projects are included for renewable energy resources: geothermal, wind, biomass, and solar. Bonneville would also assist potential cogenerators in developing and marketing cogeneration. OTHER ACTIONS The Council will work with BPA, utilities, and state and local govern-ments to monitor changes that may affect the plan's schedule and imple-mentation. The Council will continue to update information on forecasting and resource planning. It will conduct studies on a number of major energy issues. And it will continue its public information and involvement efforts. . 4/26/83

EXHIBIT 3 TO AFFIDAVIT OF DAVID B. GOLDSTEIN Excerpts from Washington State Forecast of Regional Electricity Needs [ Washington Energy Research Center, Washington State University / University of Washington, Final Report to the State Legislature: Independent Review of Washington Public Power Supply System Nuclear Plants 4 and l (March 1982)) I 4 i 0 P =- -

2.g 5

1s B i INDEPENDENT REVIEW OF WASHINGTON PUBLIC POWER SUPPLY SYSTEM NUCLEAR PLANTS 4 AND 5 t e 9 -z 3 6 FINAL REPORT TO THE %f WASHINGTON STATE LEGISLATURE .'d,. [ O jf 1a .'st 'r Submitted by 5 Office of Applied Energy Studies 2 Washington Energy Research Center y Washington State University / University of Washington 3 -k .4s 3 ,.g ~ FN + f' l 6 t t = ~~j s " ~ ~~ .j i '4hs -K_ / . _~~:~. M B u ~- @hR ME6dK'~&FM .Q T?% 4quaPL:;*;;e.*gghf ww gggg gagg f gjhm m mw m

u. _ r.m amerad "w?scsswiibygg

= = " - t, A = seas M Mi t } A t.s %+z g& w w& w,y g & rc: rg moi.w ' q %3d v y &2_ ,;t < e ~. t

nh uE pi

" : iw

s

q :.c@,m@;;

i$h

&gp51 v

t n-

ORGANIZATION OF THE INDEPENDENT REVIEW 0F WNP-4 AND 5 Special Legislative Subcommittee Senator Susan Gould, Co-Chair Representative Richard Barnes, Co-Chair Senator Richard Hemstad Representative Rick Bencer Senator Margeret Hurley Representative Robert Eberle Senator Al Williams Reoresentative Richard Nelson Steerina Committee l Jack B. Robertson, Chairman Petired, former Director, 0.5. Department of Energy, Region X Office William N. Appel, Vice Chairrian Attorney Ray Foleen Corsultant to the Participar:ts 9: WnP-4 and 5 Dr. Kai N. Lee Associate Professor, Political Science and Ir.stitute for Environmental Studies, University cf Washington Harold M. Mozer P.E., Division Manager, Energy anc Economics, CH M-Hill 2 Robert Nathane Retired Financial Executive; Treasurer, University of Washington Board of Regents Dr. Belinda Pearson Chief Economist and Vice President, Seattle-First National Bank Dr. Peter Shen Technical Director, Washington Public Power Supply System Robert Smith Vice President, Pacific Power and Light Company Project Staff - Washington State University l George W. Hinman Project Director Walter Butcher Deputy Project Director Robert Berney Professor of Economics William Covington Contract Administrator Charles Culver Research Associate l Jill Findeis Research Associate David Flaherty Editor Mary Grady Research Assistant Kenneth Hassenmiller Research Associate Norman Whittlesey Professor of Agricultural Economics Contract Officer Project Staff - University of Was,hington Larry Schwartz Acting Director, Washington Energy Research Center and University of Washington Project Coordinator Jared Hazelton Dean, Graduate School of Public Affairs Henry E. Lippek Research Attorney Larry A. Meyer Research Staff Eugene Woodruff 3rofessor, Nuclear Engineering xiii 1 _]

3., i Project Consultants i Special consultant and contract monitor coordinator: Robert C. Lewis, Portland, Oregon Module IA. Load Forecasting and Load-Resource Balancing 1 Contractor: Charles River Associates Boston, Massachusetts l Project Manager: William Hughes Principal Investigator: Robert Mellman 1 Individual Consultant: Jerry Jackson, Atlanta, Georgia q Module IB. Electricity Supply and Cost i Contractor: Synergic Resources Corporation Seattle, Washington Project Manage.r: Dilip Limaye Principal Investigator: Craig Mcdonald j 3 9 Module II. Financing WNP-4 and 5 and Alternatives )j Contractor: Price Waterhouse and Company j Washington, D.C. j Project Manager: Steven Berkowitz 1 s$ Individual Consultants: Micaela Brostrcm, Seattle, Washincton ii John Petersen, Municipal Financial Officers Association i Washington, D.C. 1, Eric Sorensen, Department of Economics j University of Arizona Tempe, Arizona .i Module III. Costs and Sch'edules for WNP-4 and 5 5 9 Construction Management renel: 3 3

0. G. Beam, Charlotte, North Carolina John Borcherding,~ Austin, Texas 3

3 Wallace Chadwick, Pasadena, California, Panel Chairman floyd Lacy, Knoxville, Tennessee i Donald W. Shupp, San Diego, California y 1 Sydney Steinborn, Seattle, Washington k E. E. Wilhoyt, Washington, D.C. w j Panel Staff furnished by Donald W. Shupp Company 7 Phil Shupp da Tim Topping tl Consultant on Regulatory Issues o J Edward Fuller, S. Levy Inc., San Francisco, California 3 1 1 3 xiv h .e. .d U

i Module IV. Markets for Import and Export of Electricity Contractor: Dames and Moore, Inc. Washington, D.C. Project Manager: Frank Haines Subcontractor: Alan Pasternak, Sacramento, California Individual Consultant: { Russell L. Mitchell, Manhattan Beach, Ca;ifornia Module V. Economic Impacts of Rate Increases, Construction Activity and Deficits 3 I Centrecter: Northwest Economic Associates Vancouver, Weshington I aj Project Manager: James Youdc q. J d ,tiaison Representatives 3 3 Robert Marritt, Seattle, Washingten j Pacific Northwest Utilities Conference Committee ~ Eric Redman, Seattle, Washington ll Direct Service Industries 1 1 Peter Shen, Richland, Washington e Washington Public Power Supply System Robert Smith, Portland, Oregon ~ Investor Owned Utilities i i l k 1 i! i 1 ' 1 1 b!:ik f a XV ] i-o

i 1 {...R y f ; h.; - *$' l1. *[',-:;<.Y h i WWf.Q' l.* ) 1 3 q,; u.- i

3.

a ki. ;,,,,g '&,4.. f^ s '. ;.',n; ,r.i ",;' )';.. 4s; s' .,'Q,' '. ;;, a - !

, ~4-$,.

.{

g-

^ ; ;. t Yg-c. jg

• W::y '.

{, [ki ., 3,,. , '.?. :.. { m .y, g jg ..1-g 9-p [Ep[3.h,. I l %g. 7 - :.,='--- ' [1 e. } 2 i EXECUTIVE

SUMMARY

v.n. j [ .l. ;&

.. }

g ?. e., Od L., , i ! l.' ': '... 'D.'h The 1981 session of the Washington jfj e f .3 ; Pf. K'i i.. b bp. i t i... d,.J,'rQ~-i..i.i.,?./g Energy Research Center of the University ...c M.t', ,9 W State Legislature directec the joint y ~ l .3 G U/C of Washirgton and 'Jashington 5t 3te l h 1.nf 3,3- [j;.y [ ' fi m :.i

n u; #., W'.i.

University to perfor.a "an independent I 'j- ~ Mp'J. study of the feasibility of ( i ' % g '. ;/ ' M.~ 1 : J': 4.- completica and operation of Washington J l-[ . [) g. -' 'M.: yJ Mj.[Y@. Public P o.ve r Suoply System (WPPSS) (? g:L J : ? Nuclear Projects Nos. 4 and 5". l 7, 3, g t -5;rJei~A.. u / ;. J~ The " Independent Review of WNF-1 acd ~ ~ ? g4 f.$['. g,A.%-y'~ 1S. WNP-5" was rubsequently organized i 1 ' .t l M ,t into six study mocules tc ad fress eight d ' '. '.. r W i ; : g;-[,,, specific questions, or areas of concern, U', g .r u u... g L. - that are enumerated in the authorizing ,.... M 3 ;1r* %a D9h leg isl at f on. The study modules are: i r-6 l ( {, f y ' O w,.,. 7j m, rs. >5 I u a~ c' Y,.. m' Module IA: Load Forecasting and . i }....%E: E q ,g. :.hlN ).2I 3 y%e, P_'~ 2 i (d : 'li C O Load-Resource Balancing t i ~.

m.,2.w flodule 18:

Electricity Supply and ~ 'h Module II: nancing WNP-4 and 5 7 ,k I f. e s-and Alternatives e _,.. '., ~- .y et Module III: Costs and Schedules for j 3 P m%. s 4 ;.pg*w WNP-4 and 5 . j Module IV: Markets for Import and .S, E2 -' m. u.- %e Export of Electricity i 0 ~

% '? f c g.w f.s Module V:

Economic Impacts of. Rate s h ~== ; h.@?.g fg Increases, Construction -N6.r.e

Activity, and Deficits

.'.%.$W1 :lktliCh' I ' s.,. 3 + - e "i ~ % b.@ E Analyses for each study module were i 4 %..j 7; & r,i 1 y. conducted by independent consultants who I W% F' ' g prepared final reports of their work. l ' M :. 8 v The Independent Review staff prepared

1. "M M

} this final report which summarizes the i .g j . e "_9 contractor analyses and presents find-g ings, conclusions, and reco,=end at ion s, i 3 The Executive Summary is organized according to topics covered in the study [ t modules. The first section of the main f body of the report, on the other hand, i >" ' y i 5 4 answers explicitly the eight cuestions, or areas of concern, specified in the j . I$ h M r4 authorizing legislation. 1 1 I t i i

Construction Costs and Schedules A more detailed analysis of the budgets and schedules for WNP-c An examination of the Supply System's and 5 appears in the beginning of FY 82 buoget found that if the con-Chapter 11. struction of WHP-4 and 5 had not been haltea, the two plants could have been completed within the budgeted costs and schedule if 1) the most diligent effort Financing WNP-4 and 5 had continuously been made to keep all The estimated costs of financinc engineering and procurement activity i ahead of the needs of the on-site construction of kNP-4 and 5, up to the date of completion or termination, construction forces, 2) design changes are had been limited to those necessary to also shown in Figure ES-1. These costs include interest expense assuming all correct mistakes and assure the safe interest during construction is cap-functioning of the plants 3) all un-italized at projected rates for Supply necessary proceoural and methnds restraints on constructicn work had been System borrowings for WNP-4 and 5. It i was assumed that the interett rate for removed and 4) no major strikes hac occurred. financing any further construction will v move from about 3 per cent above the general market The estimated cocts to complete or rates in 1982 oradually cownward until it reaches the market terminate WNp-4 and 5 are shcwn in rate by 1991. This ccavergence presumes figure 1. i.% c:irec t construttion that present uncertainties s2rrounding costs of completing after a delay will WNP-4 and 5 saturities will have been te significantly grecter than the costs rectifie3 as they, in fact, must be to complete as originally planned. In before any new bands could be sold. 1 tte case of a two-year deferral, the cc.sts of "moinniling" ar.d tt e increase The construction financing costs for of costs (dt.e mostly to general price the different alternatives are generally ir fiation) which occurs daring the aeferral perico contribute about equally sligntly less than eqe-half of the total j 1 cost at completion or termination. to the 23 per cent incruse in direct The total cost construction cost. For the ten-year at completion, including !jl deNrral, most cf a prcjected 90 per financing costs, ranges from $12.5 l - i cent increase in construction costs is billion for coapletion in 1987 upward to i i due simply to general price inflation a projected S23.6 billion for completion 1 in 1997-38, after a ten-year deferral. during the ten-year deferral period. i i However, when costs for completion at l the later dates are adjusted for general inflation they are all roughly equal in l i Direct costs of $2,064 million wou d value. Total costs.at termination are i 4 have been incurred if the plants had ' approximately one-half the costs of 'i i been terminated July 1, 1981. Term-completion, when both are expressed in ination after a two-year deferral was inflation-corrected values. il estimated to cost about $145 million l4 more, partly due to inflation durino the A more detailed discussion of the j deferral period. Direct termination cost of financing WNP-4 and 5 is ~ 'l costs, including the sunk costs of work contained in the latter portion already completed, are almost one-third of Chaoter II. as large as the direct construction costs necessary to complete the plant as The cost of power from WNP-4 and 5, i; ' ~ originally planned. If the costs at if completed in the early 1990's after a completion are adjusted for inflation, two-year deferral, was estimated to be l their real value is only about twice the 109 mills /kWh (51 mills /kWh in 1980 value of the costs that must be paid if dollars) and 121 mills /kWh (56 mills /kWh the plants are terminated. in 1980 dollars) respectively. The 2 1 i

3 2 Figure

1. Costs of WNP-4 and 5 5

12 ~ l1 4 ~ -~ Construction S Cost 10 m Financing Cost i _j 9 - (assumes ait interes; 2 y is capitalized ) o 8 5 i s 4 2 z 7 l w 45 ~ 1w e y m <t 5 H LO o 4 o j 3 '~ 4 5 5 ? 2 ~ 4 O \\ NN mo sm ro ro mm wm mm mm wm w$ $d UN SS SS COMPLETION OR TERMINATION DATE 3 'l'

value in 1990 of the cost of power from growth rates, based on low growth in WNP-4 and 5, levelized in constant 1980 population, income and employment result dollars, was estimated to be al mills / in load growth f.orecasts of about 1.2 kWh for WNP-4 and 44 mills /kWh for percent / year. These forecasts are lower WNP-5. These costs are substantially than many others that have been oreparec less than the combined costs of term-for the region principally because the inating WNP-4 and 5 and building coal-Independent Review's forecasts take firea generation instead. explicit ar. count of the relationship between loads and retail rates. The A more thorough analysis of the total demana damoening effect is projected to cost of WNP-4 and 5 appears in the first half of Chapter II. be particularly strong during the early to mia 1980's as the costs of WNP-1, 2, and 3, Colstrip 3 and 4, and Valmy 1 and There are several conditions that would have increased investor confidence 2 are aaaea to regional rates. in new issues of WNP-4 and 5 securities A detailed explanatior, of the load and pernaps permitted financing to be resource balancing methodology aopears resumed had termination not taken in the latter portion of Chapter 'l place. Some of the following conditions III.

i would have oeen required

In spite of the expectation t.h a t i 1) Load forecasting studies in the region to snow the need for the growth rates will be icw, new additions 't to the region's elec t s-i c i ty supply output from WNP-4 and 5; (beyond those plants currently under ~ L 2) The participants in WNP-4 and 5 to begin paying interest during construction), or else large amounts of conservation sevings, will be recuired construction on borrcwed funds: to tsalance the region's loads and 3) Some method to spread the risk resources in the 1990's. The table beyond the 88 participants; below summarizes tne situction. With c r.a j

4) The Supply System management moderate economic and demogrt.phic growth little additional conservation, new and

jl to demonstrate its ability to generating resources would be needed in control construction costs and the early 1990's.

Uncer high economic I schedules and successfully com-i and cemographic growth new generating plete similar projects. resources would be needed two to three years earlier, while low economic and i A more detailed analysis of the budgets and schedules for WNP-4 and 5 demographic growth would delay the need for new generating resources for several appears in the beginning of Chapter II. . years. Adoption of moderate levels of conservation would delay the need for new generation for two to four years. The Region's Need for Power ]. The All Options scenarios shown in the table consist of the moderate levels of I Load forecasts prepared for the conservation savings together with ! Incependent Review indicate that the moderate levels of renewable resource i most likely rate of load growth, as development expectations plus more use

I measured by total regional electricity of ccmbustion turbines and/or imports.

retail sales, over the period 1980 to For these scenarios the need for new 2000 is about 1.5 percent / year. Pro-baseloaa generation is delayed until L jections based on high growth in late in the 1990's in the high demand } population and regional economic act-growth case and beyond the end of the ivity suggest that electricity loads century in the moderate and low growth i could grow at up to 2 percent / year. Low cases. 't i 4 L

l l TABLE ES-1. Year When Additional A more detailed aiscussion of the neeo Resources Are Needed for power analysis is presented in Under Alternative Supply / Chapter IV. Demand Scenarios. Year Needed Exports Hioh Demand If WNP-4 and 5 were completed and the a Conventional Supply 1990 output of the plar.ts was not needed to Moderate Conservation 1992 serve the Pacific Northwest loads, some All Options 1996 of the two plants' output could be Moderate Demand exported under the following conditions: l. Conventional Supply 1991 Moderate Conservation 1995 1) Up to 2 billion kWhs per year All Options 2000+ (one-fourth of the annual Low Demand output of either WNP-4 or 4 Conventional Supply 1996 WNP-5) could be sold on the '3 Mocerate Conservation 2000+ spct market at 15-20 mills All Options 2000+ per kWh (1980 collars) in those years when the spot market is not overwhelmed by Pacific Northwest hydre surplus. ~ Three means of meeting the electrical 1 energy neeas of the region were iden-2) If short term contract sales cf tifieo: from one to itir.e years were ,[ arranged af ter WhP-4 and 5 are 1) Completion of WNP-4 and 5. placed in service, part of the output could probably be i J ~ 2) Completion of new coal-fired exported for up to 50 mills per units (in adaition to Colstrip kkh (1980 dellars). 3 and 4) l^ i' 3) If long-term sales contracts of

4 3)

Reliance on additional conser-from ten to tweaty years were 1, vation programs, renewable arranged after the two plants sources of electricity (mostly were plicec in scrvice, aetween i small hydro-power units and 4.4 arid 0.1 bi? lion kWhs per 1 some smali amounts of wino year could probably te exported l: generation), and increased use at up to 70 mills per khh (1980 l of ccmbustion turbines and/or dollars). Six billion kWh is l. imports to firm more hydro approximately 80 percent of the power. annual output of either WNP-4 or WNP-5. If the contracts In terms of overall costs to the were arranged before the plants j region, increased conservation savings were placed in service but l coupled with new renewable resources and contingent upon their success-i- the combustion turbine / import combin-ful operation, the sales price ation (alternative 3) is slightly less would probably be in the range i expensive than producing power by of 50 to 60 mills /kWh. ccmpleting WNP-4 and 5 (alternative 1). i Ine option of terminating WNP-4 and 5, 4) If the third 500 kV AC Line to and adding coal-fired resources in the California were completed, the 1990's to replace their output (altern-amount of.long term exports l. ative 2), is significantly more expen-(described in 3 above) could l-s've than either of the other two probably be increased to 8.8 to alternatives. 10.5 billion kWh per year. 5

l imports Future Rates for Individual Utilities It is possible that the Pacific The carticipants in WNP-4 Northwest could find itself snort of and 5 will, experience increased costs in the future i regional power resources if, for ex-ample, WNP-4 and 5 are irrevocably because of continuing expenses, debt service on the two plants, and especial- ! terminated anc no other resources are ly increasec BPA wholesale power rates. added to meet load growth or if loads To pay these acaea costs the partici-grow more rapidly than expected. pants will have to raise their retail However, the Independent Review's investication of western spot markets The rate increases will be small rates. for a few utilities with relatively fcr power indicates that up to 7 billion small cwnershios in WNP-4 and 5 large kWh could be purchased, if needed, at prices ranging from 35 up to 50 mills / amounts of their own resources an,d small kWh. Since the Northwest's very cheap purchases from BPA. On the other hand, tne increase will be relatively large secondary '1ycropower would be available for utilities that have large ownership to cover deficits in about three years in WNP a ano 5 and buy a large fraction out of four, the average cost with of their power from BPA. The BPA in-imports utilized only one year cut of four would not be prohibitive. An creases actually contribute most of the alternative to spct market ourchases accec revenue requirements for the uti)itjes, woulo be capacity-energy exchange arrangements in St i ch the Pacific Northwert wculd export a fixec amount of A more cetailed ciscussion of in-electrical energy each year ano then ;,e cividual utility rates appear! in Chacter IV. entitled to draw a larger amount c.f return pcwer in one year cut of five. A more complete discussion of imports comendadons and exports appears in Chapte-III. The Indepe'ident Review makes :everal reccmmer.c ation s based on the findings,, Deficit Impacts and cenclusions of the study. These{ are discussed more fully in the " Find 'i A power deficit is very unlikely in ings, Conclusions, and Recommendations" the Pacific Northwest.

However, section of the report.

even a six-month shortfall of 1100 MW above amounts provided by reserves

• emergency sources and voluntary con 5er-Recommendation 7:

That utilities and i vation would have only a small impact on responsiole pohlic agencies begin as l the economy of the State of Wasnington ,soon as possible to adjust utility I IT_ a decision were made to allocate th*!

policies, plans and construction deficit to the aluminum industry so as p,gg7g,, gg ggg p,o,pggg g( mygg

,jg,g, to minimize the economic loss, statewide growen in electricity sales than they employment and income would be reduced have been expecting. i l by only a fraction of one percent. If f the deficit were spread equally to all Recommendation 2: That the dashington l customers, the impacts would be several state Legislature, 3ashington Utilities times as large, but still not above one s and Transpo r ta t ion Commission and # ash-( percent of state income. ington State Energy office take appro-p ri a t e action directly and through regulation of the s t a te 's utilities to encourage customer adop ti on o f cos t-A more complete analysis of ceficit effective conservation that nould not impacts is given in Chapter IV. otherwise be adopted. t O )b, u 7 L SL

P l Recommendation .3 : Th a t the region 's utilities be encouraged to develop small t hydroponer resources and to change .>lanning criteria to permit increased g 1 Jacific Northwest' utilization af secon-f } b jdry hydroponer in Combination hith ~ N combustion turbines, imports, and/or anchange agreements. 1 ,je Recommendation 4: Tha t the State of \\

• i fashington and regional poner entitles h

.} ake every effort to avoid irrevocable 'W / \\ 1

ermination at this time and preserve p

l { zhe option of restarting construction and completing the plants at a later j -} i ate. l / j / I s l .g

ecommendation 5:

That regional poner ,/ l f alans continue to include QNP-4 and

head of more e> p ensi ve new start

\\ - l\\ ? \\ 1 i rojects in the region 's therm.1 power / n lan:: construction schedaie as long as

• j

/ s q / i

ne p o t e., t i a l exists for restarting 3

g an:: t. uc t ion. l i P } t 3 h comme nda t ion 6: That al1 relevant l I g ' ate and teslonal entities assist and

n,ourage the cwners o v' fMP-4 and 5 to l

,: u.'s u e cotions for the sal? Of the ( .s >l ants or the advar*ce s 31e cf their 1 ( l Jutp ut to other regional and/or Cali - ? 1rold utilities, ) i } j l'Acb I l u_.-_. g j,' decomme.n da t ion 7: Tha t the Washington 7 L l 4 1

tate Legislature a u t t. c ri z e a state m

"~" a gent. y to monitor the key fac tors that ll enter into future decisions to ~~ d f .y

Cmplete or irrevocably terminate WHP-4

-^ " : r,.,. l.g 'l \\\\; a .,nd 5. y_;,,,, ... r 4.,,.. ; ; - a m .~ '"commenda tion 8: Tha t the Hashington ~ .. f.-- ;., 1 y

• ate Legislature provide for the

., 4~. 'm r - n., ~ oversight of the state 's public]y owned e s ~ ,.y..~~,'M*yy._.,. ^ ? 'J C i i i t l e s in those areas where their Q' t-lOint activities and other actions have ~33'%.pkA,_ ^l-'. [ ', '.oroad implications beyond their service WhN & Y G' h N, k% 1 7 n ""*===.

[ 'l I the region's needs when it goes on category since construction has been l gf

line, terminated, but could potentially be resumed.

In addition to plants that ' i h The existing turbine plants in the have already been identified, such r. region fall into two categories. Most Creston and Skagit, "gener ic" plants r" h have equivalent energy availability included as available, if required to f actors well above the 50% values used meet loaas. a } l for them in Table 3.5. The rest are strictly peaking units and have availa-3.3.4. Conservation 3 D il ity f actors of 10*.'. The high cost of < ] cower produced by turbine units arises Conservation is an important source of { primarily as a result of the high fuel meeting electricity demands that is just f cost. beginning to ce exploited in the Pacific 1 tierthwest. The Indeoendent Review has s' f4et firm imports into the region are defined conservation to be any action M the difference between imports (1566 MW that reduces electricity purchases by I ave in 1982) and experts (238 MW ave in ultimate consumers. Fiaure 3.3 shows S. exports involve intra company transfers available to the region. N 1982). Most of the regional imports and the amounts of conserv'ation savinas d of Pacific Power and Light, Montana Power, and Utah Power and Light across Several conservation procrams are h the bounoaries of the Pacific fiorth-already underway in th e r e'n i o n, and Ij west. The rest arises largely from other conservation measures are likely I kh menange agreements wi th California, to be iy:lemented in response to rate increases. In order to avoia douole-counting conservation savings as 3.3.2 Resources Under Construction a result of ir.cluding both t% explir it , l savings from these programs and the i The plant availability factors used were Module IB contractor. Savings whicn -ly The resources under construction, savingt arising from increasing rates, 3 snown in the Table 3.6, inc2ude ccal-careful assessment of forecasted elec-u fireo, nocicar, and wood firei pl ants tricity end-uses was undertaken ny the .7 for all steam plants and.5 for the were forecasted to occur in reponse to L ! turoine units. WPPSS 4 and 5 were not rate increases were riot also included in 1! included as Resou-ces Under Construction any of the con se rv at ion 'a rog ram s. ]l since construction on these two plants Table 3.0 shows estimated cost of his been halted. electricity saved and estimated savings for conservation programs which are assumed to be included in the price response and therefore not available 2.3.3 Potential Additional Thermal to be included as pror;rammatic conserva-i Resources tion savings. The cost of saving j electricity throuch these programs is Therd are, in addition to resources typically in tne '2 - 35 mills' per kWh j

urrently under construction, several rance.

The potential savings crow ~ titernatise resources that could be gradually to 7.5 billion kWh (860 ~ ~ I .onstructed to serve loads during the average MW) by the year 2000. . ate 1980's or the 1990 's. The re-sources t n.3 t were considered to be potentially available to serve loads in " Conservation is an important source of Iuture years are detai1ed in Iab1e meeting electricity demands that is just 4 3.7. beginning to be exploited in the Pacific Northwest." the plan:s t hat are :he it ect of this study, WriP-4 and 5, are listed in this 85

TABLE 3.7 POTENTIAL ADDITIONAL THERMAL RESOURCES Firm Averace Earliest Critical Year i Resource Capacity _ Cost I/ Availability _ Generation 3/ (mills /kWh) (1980 S) (billioni of kWh) WNP-4, nuc., WA 1250 33 2/ L WNP-5, nuc., WA 1240 34Il 7.8 1990 4 1990 7.7 Skagit, nur., WA 1280 31 1991 Creston-1, coal, WA 500 45 1988 l 7.3 Creston-2, coal, WA 500 46 1989 3.1 Creston-3, coal, WA 500 46 1991 3.1 Creston-4, coar, WA 500 46 1992 3.1 3.1 Coal 1 & 2, coal, IC 25C 50 1991 1.5 Turbines, gas, ID 217 119 1983 1.0 Generic, coal 250 50 1991 1.5 Fluidized bed, coal 400 41 1996 2.1 Fluidized ced, soal 800 41 1396 4.2 Turbines, gas 96 92 1985 .4 } Combined cycle, gas 440 63 1985 2.0 1. Average cost in first year of operation. 2. Costs for WNP-4 and 5 include only costs to complete. 3. At point of generation. In the _ Conventional Supply Scenario, conservation response to rising rates. The first is, measures wnich are not included in the price a reduction in transmission and distri-response are ,;rojected to save an additional .4 bution line losses which is accomplished billion kWh per year by 1985, rising to by upgrading and thereby increasing the 7.? hillion kWh por ye a r in 2000. system. efficiency of / the electricity delivery / Ih.".r- .sv ings a r i.- attributable to two save This ac t ivity is projected to I,* i.on serv ing activities which it was BPA has afroady budgeted funds for 1.8 hiilion kWh per ymtr by ?000, assumed sould not otherwise occur in transmission nograding necessary to save i t l 86 I*

it l[,\\ s2 tion of construction at the sites as L

ne Supply System's financial crisis

,orsened during the summer of 1981. On ,,The s.imilarity of each plant

1y 23, 1981, Washington Governor John to its twin still affords o i,

ellman and Oregon Governor Victor distinct advantage

[ -;1yeh asked John A. Elorriaga, U.S. for a potentiol restart lancorp Chairman; George H. Weyer- .Teuser, Weyerhaeuser Corporation iP8sident; and Edward E.

Carlson, in a secured state.

The similarity of .nairman of UAL, Inc., to " invest-each plant to its twin still affords a l late the economic consequences to the distinct advantage for a potential i egion of the future construction or restart because of the applicability of i {

sposition" of WNP-4 and 5.7/

In the engineering and the existence of the j -otember, this panel presented the mobilizeo wo r'k forces at the twins. ? esults of their investigation, con-i' j 'Joing that the Supply System could r.o 'l i j 'nger finance construction of these

1. 5 Desian and Conduct of the Indepen-to nuclear plants during the "most cent Review 3

.. erst municipal bord market in mem-1 I The scope of work defined for the II 3 Indepenoent Review of WNP-4 and 5 was Jothbaning strengly advocated divided into five study modules, for operational and contractual puc-j 2n the other hand, the canal warned poses: ? I E

nat project ter.-ination "could threaten 6

g g f

nd nolders' trust acccunts and other

!. sets of projects 1, 2 and 3.

The ano Load-Resource (l .,dId'CiU9 D cane; strcngly advocated that the _,r tects be mothballed fer a period of Module IB. Electricity Supplv r.co to two and a half years. This would

llow time for regioral energy planners and Cost

'o reassess project needs and for the uccly System to improve its financial e II. Fimig 'APJ W .ositicn.4/ 5 and Alternates i During the f all and early winter of Module III. Costs ar.o Schedules l .;81 an attempt was trade to develop and for N -4 and 5 yolement a plan to aothball WNP-4 and le 1 Meu fu Mn i , but the plan was ultimately rejected ano Export of Elect-t, cy Participants owtiing over 30 percent of the shares in the project.

Finally, r1 city cn January 22, 1982, the Supply System's Module V.

Economic Impacts of b{' loard of Directors voted to terminate Rate Increases, AP-4 and 5. Construction Activity Q i and Deficits. O j It is too soon to assess the full consequences of the termination action The five modules cover the eight tasks j of the Board. Presumably the principal specified in Senate Substitute Bill No. lt and interest p aynen t s on the existing 3972, the legislation authorizing the [ debt will begin af ter January 22, 1983, Independent Review. .The analysis, and, f urthemore, existing construction findings and conclusions, developed by l and procurement contracts will be these efforts were integrated to terminated. However, the physical produce this final report. The broad structures will remain and can be lef t objectives of eacn of the study modules l 39

/ c. are briefly summarized as follows: rangements. The financing cost es U imates were then utili:ed by the IB Study Modules IA: Load Forecastin9 contractor to estimate the total costs' Load-Resource Balancing; and IS: associated witn WNP-4 and 5 completion / and Electricity'lectric powerSupply and Cost reviewed the deferral / termination optioEs. The need for e in the Pacific contractor for Module !! was Price' Northwest through the balance of the century under various assumptions of Waterhouse ano Company of WashingtonL 0.C. economic growth. Alternative resource { plans that could be used to balance Study ModuleIll: Costs and Schedules i i supply demand were developed and for WNP-4 and 5 was organized so as to ! investigated.. The dynamic responses of determine the ultimate construction cost I-the various end-users to the rising and completion date_for WNP-4 and! rates were modeled in detail. Specific-5 for each of the following scenarios: ally, the contractors hired to perform work under Module IA were required to a) completion according to oricinal I: develop and coerate a workable computer-plan; ized system for producing a series of b) comDietion after defer-{ balanced regional electricity load ral; ' two year p forecasts for the Pacific Northwest. [' The Mooule 18 contractcr was required to c) termination af ter. ti.o year defer-l ral; develop a series of electrictty supply o) comaletion after ten year defer-I alternatives availaole to the Facific ral; i Northwest for the remainder of the e) immeciate termination; cer.tury. This data base was requireo to include the costs of suoplying elect-Because of the enormous complexities ricity either from existing or planned associatec with nuclear power plant [. conventional generatino resources, costs ano schedules, the Independent I renewable generating r'e s ou r c e s, or Review used a panel of individual j reduced end-use electricity demand consultants with power piant con- } associated with conservation programs. struction experience to review Supply [ 'l System materials. Many members of the 1 l{ Because of the interactive nature of panel were already familiar with WNP-4 l

)

electricity supply and demand, the and 5 through a previous assignment with { 5 I I Project Staff and the IA and 13 con-the Supply System's Administrative 4 tractors worked together closely in Auditor. The panel was chaired by a

f developing the supply-demand balancing.

Mr. Wallace Chadwick; Donald W. ShJpp The contractor for Module IA was Charles Company proviced staff to the.oanel. 4 River Associates of Boston, MA; the Members of the panel are shown on the g contractor for Module IB was Synergic fcilowing page. 1 y Resources Corporat ion's Seattle, WA, d office. Study Module IV: Market for Import 5 and Export of Electricity investigated j Study Module II: Financing WNP-4 ana

5. and Alternatives was charged with the the electricity markets in intercon-J l

nected regions adjacent to the Pacific responsibility to assess financing Northwest. The purpose of this analysis i support to WNP-4 and 5; evaluate whether money can be made available as needed to was to determine when, where, how much, I under what terms and at what price or l support plant construction; and evaluate cost electricity could be imported to or financing factors--including interest and inflation rates between 1980 and the exported from the Pacific Northwest over j the 1980-2000 study period. The In-expected completion of the plants, dependent Stuay used three consultants naticnal monetary po licy through this to accomplish this work: Russell L. j period and financial market reaction to Mitchell and Associates of Manhattan the Supply System's financing i ar-Beach, CA; Dames and Moore of Washing-I a0 1, h

l )h ~ l .L I un, D.C.; and Dr. Alar"Pasternak of struction activity, and temporary Mcramento, CA. power surpluses anc deficits that could result from alternative decisions. Study Module V:. E'conomic Impacts of Impacts evaluatea include employment, ate Increases, Construction Activity ' income, Washington 5 tate revenues, .nd Deficits' investigated the economic he av i l y-impac t ed industries, product

nsecuences for Washington State and

. substitution in consumption, long-run J r.e Pac,ific Northwest region of alter-economic, growth ano oil-gas imports. i 3 7. i v e completion / deferral / termination Northwe st Econcmic Associates of Van-2ecisians. Specifically the study ~couver, WA were retained by the In-E

1. ccused on the effects of power costs dependent Review for this study module.

? I 7nd rate changes;-changes ~in con-t j I ~ t f "00ULE III PANEL a A NAME GUALIFICATION I L G. Seam, Independent consultant, former construction manager for l Cbsrlotte, N.C. Duke Power Company at Oconee and Catawba nuclear p' ants. !,y

ohn D. Borcnerding, Faculty member at University of Texas, consultent on iP n

Austin, TX construction labor productivity. W. l.. Chadwick, Independent consultant, former chief engineer for Southern F Pasauena, CA California Edison Company, panel chairman. lIf loyd Lacy, . Independent consultant, former chief civil engineer at Knoxville, TN Tennessee Valley Authority. t Conald W. Shupp, Donald W. Shupp, Co., a company specializing in con-(\\ San Diego, CA struction management consultir.g, panel deputy chairman. / i Eydney Steinborn, Independent consultant,' former chief engineer, Seattle Seattle, WA District U.S. Army Corps of Engineers. E. E. Wilhoyt, Jr., Independent consultant, retirec general. U.S. Amy Corps l '4ashington', D.C. of Engineers. j l I 1 d I' l 200TNOTES System, Testimony Before the State ~ 0]k or Washinoton Inermal Power Plant Site Evaluation Council, October 8, l 1; Joint Committee on Nuclear Energy, 1975, Application No. 73-2, Vol. 24, Report to the' Legislature (Olympia, a553-4554; Washington Public Power Wasnington: Wasnington State Supply System, Application for Site

i Legislature, 1968),6-7.

Certification Before the State of l Washington Thermal Power Plant Site .l 21 Mr. J. J. Stein, Managing Director Evaluation Council, Application No. l l Washington Public Power Supply 73-2 [Recort Statement, Sec. 100 l i i 41 i h

WASHINGTON STATE UNIVERSITY PULLMAN, WASHINGTON 99164 OFFICE OF APPLIED ENERGY STUDIES s MEM0RANDUM TO: Recipients of Final Report Independent Review of WNP-4 and 5 FROM: Walter R. Butcher, 8 g4 W f Deputy Project Director The attached sheet explains a correction to our demand forecasts. It should be inserted in your copy of the final report. b kN N h I

EXHIBIT 4 TO AFFIDAVIT OF DAVID B. GOLDSTEIN Excerpts from BPA Regional Forecast, and Related BPA Documents (Bonneville Power Administration, Forecasts of Electricity Consumption in the Pacific Northwest (July 1982)]

-.g g 3 3, ym.y . ~... g'\\Wo. 4 o a v.s % h . j; f i . '1 s

c,

wa m m., y;s e 4

m v.

r.2:

t ~ }Q).y* Q.T# l lt ~ y } MQ L* u me w,4.%. * .w<.. n e,.. 3<%: m... n I,..O r 9 mi' n ll .e. p a ,Ag ~ p.. 3 ;;.< ,. x t [ .E l. a.c.. r_i c i l i

a

..3 7 (. 1r g \\ .$p., ..y I =

9.-

e 1 } l 9

s 6

i i

1e Q Y L I i

y J +:. .u. p_ . y-1 i W 1 h ![. l 1 v%t < e v. . m g ~g h* ~ ei. 1 r -? =. \\ s. ;. ..,._ g ~~ f", b f t - ~ ,a W 4., AV v W

• ?

v. a r. m Tt%yL., y 4 jG * $x.- it-v 1 gn. . -% %. - - - *[xtua.mg) .m ,34;d:. a s. m -e. e. k 4 k l 4 t, -f , W w' 4:{e'8 h hy%N. W 2g %a,; %. t b e gA My n h &m,, w g g J ' t 'w = ~ p %m..st w m p " M. m "n* W' w w w m M PP. a gg&-'IMdQt.- M u,i,3.-)w.@*.fvs.va m tw5 ams.4..4:- 2 2 a - -..= c,, :..# .~,.w. .,~,..e,,'w,,. _* -%. e' - - ^ ' - ' " - -. yg," g M g h y$'QVikg..~,,- ..m .m.m w. & &g .? ,,y, m..u.v. n p y y y $ % , u, m

.;,. ;g S$$;1;;e?#6.W.er;w/ps

gD:ivision of Po YGW-4*MW E99W

-~s m.ower.Administra. tion y.c.m= 2 PAW:n.M.g.4:.t. 4 . c.x - 1 w. <; n xs ~we n.n.w. -,w h.6+ p d. m # w s.' f$hY$:. & _'$% **, n.:&. An;m WW.gt:we 1 5.yXq'n&.%c. :n. .g c ... ~.w n e;;,- -n.hISy*f'*}i)sl$ : & W N >ll % u w:h a,b.k'h. m>f,,{$m.s,,.. I,7. ~. 0: ,, s. m... 3 h h.h .;-Q hMJ{+[:f.r.,j;.5,,iln:'fv:f;?.Qw 1AIb Y 3 >..i..mq;,y[a.m'QGib *-$},ti;i?&.c.'.. I* '. : ~ m,Q '.

• 6Ns 7

L -.+ , e. .w m%W ):m'M~ ~39%k': -M*,%e;%w>:;,% n it<'s. -

1.

Pf. qu < *..u.. h h lty"L E.. ?I. ,Y,. c m

.s.-M'

'>r +.dy.n.. ;'W.u. .1 i %. f 3 .2.::M, <Ci::v

• -f T W

~ ~; q ' - y.ag; y - ~-r a.:.v.w

• n --rs-~

-2'

1. e.@,l..h;. '.ff/2' m M B.%,~; m' 5 f.

f l Y:. . m :.,,. ~ W..... %,; %,!,'J '.:.; ;w } 9 .e b

c gn.c. l;;;&m <.

aw m.

.;;-12l S..::.:% y..,-: Q,. M: :~ o. c.> :.; w.

. 5...

~ ..e .L,. , "c,G * : o~ r. .t..,.,a-Q,. '~.N. / +.- L: N. ., a_ ,. ~ ~ - ), c i <~ s :e. _v %,C. ' h* " * , i %v%<: %,. [W.;$%:;.s@:?:i. 4 m a:% '.R 3. %[ % 9 /) , ~ ' ~ ~ g. f 3.

,M_C._ m_._.f_;G__i J.u. l,J &._ w_a _.n 1_A.w_ h_ _% :n ;,, y y J_ % 1.E w i 4.

2.,.c. L. 5:;.. 9 c. ' :f.4i'L:.n_ _q. : 1 1 gi_ _ M-.c_ Atw,i. a. - - - - - - .2 M M -.a- - -

~'!ND2 PENDENT REV22M OF WNP-4 AND WNP-5 ' " "" ~ ~ ~ ~ ~ ^ ~ ~~~ ~ ADJUSTMENT TO LOAD FORECASTS AND THE NEED FOR POWER i After the Independent Review of WNP-4 and 5 had been completed and the Final Report printed, it was discovered that there was an error in calculating actual 1980 regional power sales for use in calibrating the demand forecasting model. The error was to assume that all 139 billion kilowatt hours of 1980 power consumption was firm power, since the Calendar Year 1980 Generation and Sales Statistics, reported by the Bonneville Pc.wer Administration reported only a negligible amount of non-firm sales. Actually, about 5 billion kWh (570 average megawatts) of the total was non-firm power, which was acquired from outside the region and,- therefore, not included in the BPA statistics. As a result of this error, the Independent Review's demand model was calibrated to yield a 1980 " forecast" of firm power demand that was too high, by about 570 MW, after adjusting to what demand would have been with a normally robust economy. Our Demand Module contractor, Charles River' Associates, has determined that the overforecasting in 1980 occured in the industrial sectors portion of the model. It appears that the industrial sectors have made a permanent reduction in their rate of firm power consumption. Thus, their forecasted demand should be reduced from 1980 to the end of the forecast period. Wnen the adjustment to industrial demand is inserted in the supply / demand balancing model, firm power demand forecasts are re-duced by about 600 MW in 1980, declining gradually to only a 250 MW adjustment in 2000. The adjustment has the effect of delaying by about one year, the forecasted need for major generating resource additions during the 1990's. The conclusions and recommendations of the Independent Review are not changed by this correction. At most, it indicates that more emphasis should be given to recommendation ~s 1, 6, and 7 which call for reducing plans for new power plants, attempting to sell the out-put of WNP-4 and 5 and monitoring the conditions for a restart of the projects. O I

EXECUTIVE

SUMMARY

OVERVIEW This document presents a final long-range baseline forecast of electricity consumption in the Pacific Northwest, as the region is defined by the Pacific Northwest Electric Power Planning and Conservation Act of 1980 (Public Law 96-501), for the years 1980-2000. The purpose of the forecast, and its various sub-forecasts, is to assist in power planning. Hence, projections are expressed as a baseline, to which are added alternative cases representing situations of high and low electricity consumption in relation to the base forecast. The forecast is designed as an aid in planning, not a final simulation of the most probable consumption of electrical energy to the year 2000. It focuses on concerns of Bonneville Power Administration (BPA) management, particularly regarding future electricity use as influenced by conservation, and it helps serve the needs of resource planning. Both of these considerations are l l emphasized in Public Law 96-501. The forecast's primary role is to provide l assistance for decisionmaking until the publication of the Pacific Northwest Power Planning and Conservation Council's official 20-year electrical energy forecast and plan in April, 1983. Thereafter, the Northwest Power Planning l Council documents will be utilized in the planning and acquisition of appropriate resources by BPA. l t l 1 I

FORECASTING ( In April 1982, BPA released a draft of this document and invited comments on its forecast. ?!any detailed and thcughtful comments were received during the 60-day comment period. Appendix D at the back of this report contains e i summary of those comments and the BPA staff's evaluation of them. ?!any of the j comments suggested changes that have been incorporated in this final forecast. ?!any other comments were made that would require longer-term research projects so that improvements could be made in future BPA load } forecasts. Updates of this forecast in the future will doubtless contain the results of such research. { f The forecast presented in this document is, like any forecast, dependent upon I the assumptions and inputs which go into it. Because of the disaggregated 6 nature of the forecasting models, there is a large number of assumptions and inputs which must be specified. The major ones are concerned with the economy and population grcwth, conservation programs and practices, fuel and electricity prices, and technical-engineering factors. l I The regional economy is expected to exceed the growth of the national economy as projected by Data Resources, Incorporated (DRI), a national economic consulting firm whose forecasting services are used by BPA. In the baseline case, regional employment is expected to grow by an average annual rate of 2.1 percent, from under 3.5 million in 1980, a recession year, to over 5.2 l million in the year 2000. This supports a population growth of 1.4 percent annually, to a total of almost 10.6 million people by 2000. The Bureau of 4 Census projects the U.S. population to grow at a rate of.8 annually during 2

~ the same period. Real personal income, which is often used as a proxy for comparingbrossNationalProducttoregionaloutput, has been projected to increase at a 3.2% annual rate for the region. DRI is currently forecasting a 2.4% annual rate of increase for the nation during the next two decades. Two types of conservation are includco within these forecasts: conservation which is achieved by consumers on their own in response to increasing energy costs, and conservation attributable to existing government, BPA, and utility conservation programs. Care has been taken to avoid double-counting the savings from those separate categories. A third type of conservation is not included in these forecasts: savings which might be achieved through future conservation programs budgeted by BPA, by local and state governments, or by utilities. This ccuservation potential is to be analyzed outside the framework of these forecasts in a separate conservation assessment. Competing fuel prices are important determinants of energy consumption. BPA has developed a model to project retail electricity rates incorporating the major features of the Northwest Electric Power Planning and Conservation Act (P.L. 96-501). Overall, regional electric rates in real terms (adjusted for inflation) are projected to increase dramatically by 1984 (a total real increase of about 40 percent bett.een 1980 and 1984) and then stay relatively constant through 2000. The 20-year annual rate of growth for real electricity prices averages about 1.8 percent for all consumer sectors and will vary according to utility. Real natural gas prices increase at rates of 2.6 to 3.9 percent annually over the forecast period, depending on the consuming sector, with slower increases expected in the first five to ten years than in the later years. Fuel oil prices increase at a somewhat slower rate than natural gas, from 1.9 to 2.9 percent per year. 2

o t For all of these assumptions and inputs, analysts have developed a reasonable range of high and low values around the baseline for each variable; this range was used consistently to produce high and low forecasts. High and low values are an important expression of the uncertainty inherent in this forecast, and are used to permit contingency planning and risk analysis. l l THE FORECASTS The overall baseline forecast of regional electricity load for 1980-2000 is shown below by consuming sector; losses are represented separately. FIGURE 1 i i PACIFIC NORTINEST REGIONAL FIRM ELECTRICITY LOAD l PROJECTED TO YEAR 2000 (In Average Megawatts) AERA5E MEGAWAITS 25^00 1 ] LCSSES l [ IRRIGATION ,,3.. c.n,n. _ .7 l f l l '(, N ',s INOUSTRIAL 15.'0 - '[ 1 l \\ / / f \\. l g.,,,,- i; N cCs9ERc:AL ky'a_-----'y ~ p w /

/r n y?

4 m 4 w' ,n x / 1 ,b [2 h. ,3 x, 1m

ees

ee:

1m 2:;0 h ? 4 i.}u

1. The total average megawatt loads projected on the graph are tabulated below; also included are average annual rates of growth for 10-year intervals and for the entire forecast period. TABLE 1 BASE CASE PACIFIC NORTHWEST REGIONAL FIRM ELECTRICITY LOADS AND ANNUAL RATES OF GROWTH, 1980-2000 h (In Average Megawatts) 1980-1990 1990-2000 1980-2000 SECTOR 1980 1990 2000 AARG*(%) AARG(%) AARG(%) Residential 5,813 6,745 7,728 1.5 1.4 1.4 Commercial 2,762 3,508 4,326 2.4 2.1 2.3 Industrial 6,130 7,182 8,090 1.6 1.2 1.4 Irrigation 752 903 1,048 1.8 1.5 1.7 Total Sales 15,457 18,339 21,191 1.7 1.5 1.6 Losses 1,159 1,375 1,589 1.7 1.5 1.6 Total Loads 16,616 19,714 22,781 1.7 1.5 1.6 Average Annual Rates of Growth Total regional electricity load is represented as a baseline. Forecasting uncertainty is expressed by reasonable high and low ranges of input values, which result in a high load growth projection of 2.4 percent annually from 1980-2000, and a low growth projection of 0.9 percent per year. These ranges are shown in the figure on the following page: l t f 5

n. L..n.., aise.. _,,.. ,-,w., FIGURE 2 FORECASTS OF FIR >i ELECTRICITY LOADS FOR THE PACIFIC NORThEST PROJECTED TO YEAR 2000 (In Average !!egawatts) AVERAGE HEGAWATTS 30000 HISTORICAL / 5000 / c s s L0d / f 20000 ,.s ". / / ~ BASE 1.,.. 0 HIGH 10000 5000 0 1970 1975 1930 1955 1990 1995 2000 YEAR l l Although a rigorous analysis of the probabilities of high and low cases has not been done (and probably is not even possible), judgment was exercised in assigning values and assuming conditions that would result in a reasonable ange of loads. While the baseline forecast represents a "best guess" as to 1 what the future will hold, we know that it is unlikely to be confirmed by what ca'/ actually occur. The following table provides an assessment of the probabilities, derived through informed judgment, of the four possible outcomes which the future could reveal. I 6 i I t

e T TABLE 2 UNCERTAINTY ASSESSMEST Occurrence Probability of Occurrence a) Actual loads exceed the high case 15% b) Actual loads fall between the baseline and high case 40% c) Actual loads fall between the baseline and low case 35% d) Actual loads fall below the low case 10% Forecast results by sector are presented below. For consistency with later i treatments, these are expressed in terms of electricity sales, or loads minus system losses. The first, the residential sector, is projected to grew at an annual rate of 1.4 percent over the 20-year period of the forecast, with a range from a high of 2.4 percent to a low of 0.7 percent. FIGURE 3 PL' RESIDENTIAL SECTOR ELECTRICITY SALES FORECASTS PROJECTED TO YEAR 2000 (In Average Megawatts) AVERAGE BEEAllATTS 10000 E y / HIGH LDI g 3 I + 0 1980 1985 12 12 7

The commercial sector is projected to grow at an annual rate of 2.4 percent over the 20-year period of the forecast, with a range from 3.6 percent for the high case to 1.3 percent for the low case. The commercial sector forecasts are shown as sales, or load minus system losses. FIGURE 4 PhV CO.'!.'!ERCIAL SECTOR

• ELECTRICITY SALES FORECASTS PROJECTED TO YEAR 2000 (In Average Megawatts)

AVERASE EEAWATTS 10000 BASE N ~ HIGH W m ms 2500 0 1500 1985 1990 1995 2000 t i The commercial sector includes highway and street lighting and most ~ ij Federal agency customers of BPA. 5 d 1 i 8 LyI

5 I I 1 1 l Electricity sales to the industrial sector are projected to grow at l : an annual I rate of 1.4 percent over the 20 years of the forecast, with a range from i 1.7 percent for the high case to 0.7 percent for the low case. The industrial f sector includes Direct Service Industries. i i FIGURE 5 PhV INDUSTRIAL SECTOR SALES FORECASTS PROJECTED TO YEAR 2000 (In Average Megawatts) i 7 10000 sise 1 ~, ~ HIliH um h I 2500 4 0 1980 1985 1990 15 M Electricity sales for irrigation are projected to grew at an annual rate of 1.7 percent over the period of the forecast, with a range from 2.0 percent for i j the high case to 0.8 percent for the low case. (Irrigation is treated as a l i separate sector because it ict only consumes electricity for pumping, but also 4 affects stream flows and, hence, generation.) l 9

~ l l l FIGURE 6 l l PL' IRRIGATION ELECTRICITY SALES FORECASTS PROJECTED TO YEAR 2000 (In Average Megawatts) AYERAGE lEEAMATTS 1200 Bass i 1000 HIGH 800 LOW B00 400 I i 200 l 0 1990 1995 1990 1995 2000 1 l A peak load forecast is also provided, and in the concluding section of this i document baseline, high, and low forecasts of regional electricity loads are j l' broken down by sector and individual years, 1980 through 2000. j. f 1 j 1 s l 3 \\ !l p'.j a l l 10

CONTEXT Historical Framework Historically, the Pacific Northwest has had an abundance of inexpensive electrical power; moreover, through the 1960's growth of demand for electricity was fairly constant and predictable. Under these conditions, planning to meet load demand was relatively uncomplicated. In the 1970's, however, planning was made far more uncertain by conditions which profoundly affected the region's electric power supply system. Large scale hydroelectric sites had already been developed to capacity, so that new generating facilities, such as thermal plants, were needed. More expensive than the major dams built between the 1930's and 1960's, these facilities contributed to the rising cost of electricity and, in addition, required considerable lead time for their construction. Further, the oil embargo of 1973-1974 stimulated l consumers to switch from fusi oil to natural gas or electricity, increasing i demand and further affecting price. Finally, policy emphasis on, and consumer response to, conservation added still another element of unpredictability in the growth rate of demand for electricity. Immediate Context J ( Electricity demand forecasting for the region has been done by a number of agencies and groups, chiefly the Pacific Northwest Utilities Conference Committee (PSUCC). The PSUCC forecasts have been and are prepared by summing I up the individual forecasts of its 125 member utilities, several Federal f: agencies, and 17 Direct Service Industries within the planning area known as q l 12 l i (

.,,..n the West Group of the Pacific Northwest Power Pool. BPA staff has provided techziical assistance in this forecasting, but BPA itself was never called upon to produce, nor has it produced, an independent regional load forecast. With passage of the Pacific Northwest Electric Pcwer Planning and Conservation Act (P.L. 90-501) in December, 1980, however, new responsibilities were laid upon the agency which necessitated developing a separate forecarting capability. Congress gave BPA the responsibility of meeting the loads of those utilities which sign net requirements centracts, so the agency must have independent means of forecasting what these requirements are likely to be. In addition, the Act directs BPA to plan for the purchase of as many conservation, renewable energy, and generating projects as are needed to prevent electrical shortages. In fact, BPA is to fund cost-effective conservation projects even if there is a surplus of supply. For these reasons, and more particularly because of the long lead time in utility planning to bring large-scale generating facilities on line, BPA decided to develop a long-term electricity load forecast broken dcwn by sector and end-use. I This electricity load forecast will be used principally to assist BPA in j making decisions concerning the acquisition of renewable resources and in conservation planning and assessment. It may also be useful in determining policies relating to wholesale power rates, hydrcelectric and short-term power { planning, and internal operaticas. The relationship between this forecast and 1 I associated efforts in power planning is shown in Figure 7. The official regional electrical energy forecast guiding BPA's acquisition of major resources will be developed by the Pacific Northwest Power Planning and 13

Conservation Council as part of its regional electric power and conservation plan pursuant to P.L. 96-501. This internal BPA forecast will be used as a partial basis for BPA decision making until the Council's plan is adopted in i April, 1983, at which time the plan will be incorporated into and used to guide BPA's planning process for acquisition of major resources *. There has been considerable preliminary work leacing up to this forecast. Its energy use forecasting models were subjected not only to thorough assessment i by BPA staff but also to public review and comment by concerned groups and economists. Similarly, Appendix I to this document. Economic /Demograohic Projections of the Pacific Northwest (BPA, 1982), underwent thorough BPA review and received public input. A draft of this document was published in i April and was subjected to a 60-day comment period. Many detailed and thoughtful comments were received, and this final forecast reflects many changes as a result of some of these comments. FIGURE 7 i POWER PLANNING PROCESS ELECTRIC LOAD = l FORECAST i b i { V A ~ [i Resource Plan e Conservation Programs Electncity ff

• RenewaD!e Resources Pnce
• Conventional Resources Forecast For a full statement of the Council's forecasting and resource acquisition responsibilities, see Appendix B.

L

w Conservation It is important to understand what role conservation plays in this forecast, since two types of conservation are included (price-induced conservation savings; and savings from existing government, utility, and BPA conservation programs) while another type is excluded (conservation programs which have yet to be initiated or budgeted by BPA, utilities, or government agencies). Programs, new technologies, etc., not included here will be part of a separate conservation assessment that will be used in the overall policy decisions of BPA; these include new conservation programs or standards which may be proposed by the Northwest Power Planning Council, Federal, state or local governments, or by public and private utilities. The baseline, high, and low forecasts incorporate only existing utility and government programs, and already budgeted BPA programs, i.e., Home Energy Efficiency Improvement Commercial Energy Efficiency Improvement Street and Area Lighting Efficiency Institutional Building Efficiency Improvement Utility Customer Service System Efficiency Support of Direct Application Renewable Resource Projects In addition, the forecasts include responses by consumers to increased prices affecting the purchase, use, and efficiency o'f energy-consuming appliances or devices. Some technological change, spurred by increased energy costs, is also implicitly included as part of consumer price response. I l l 35 l L

i i .v ., -. -.r p i k AL T EF.H A T IVE F.EI'URCE ttIf i,

e. *..: 7. [ 7. 9

.r. :.-.-.-s..e-~.. j INCLUDING BUDGETED 1 CONSERVATION EtlERGY ! ?! 'J AU3 l FEC If f E !~'4 .??5 .?36 liS7 liS9 1989 19?O 1991 1772 1: 33 19;4 1995 g;96 1797 177'S 1 r. 7 :.. ?. ?. ...t ...s.- ..,0 3 ) i 7 " r pi 9 -..__...__...__ _____ _____ _____ _____ ____~, '~~~~ ~~E, ~ ~~~743 'm ~~ ~~~~~ ~~~~~ ~~~~~ ~~~~~ '-~~~ - --- ----* - --- ..- r. g,. s. ~36 3 9 c' .. o 9 'a r.

3 3

1111 1;70 til! ; 5.i ' : sta, gg g l *'

• 1C q

1 LARCE THERNAL 3 O O 0 0 0 0 0 0 0 0 LARCE THERMAL 3 0 J 0 0 0 0 0 0 } C 3 421 6 c.- } } O L 0 3 0 5 0 O t I i ? O 0 0 0 0 0 0 0 O O 0 3 3 !l ^ 7;3EJ O O C C 0 'e 0 0 C 0 0 0 ) T '. '..9 d 3 O 3 0 0 0 2 0 3 0 3 0 3 0 0 t ..c>..

3 L,

n. ) e .s .a a. ?s ~ 1.~ n 1.- .~.1,, .7 .t) ~. .1

s.,. _i

. ~.,. ..A-di . :2 150 236 312 376 139 575 . 3 '- 7'3 216 1111 1 7E 1411 '. : 5 7 A_a-

r.. _

v. i.,

, a., . r.. 2. t'... . 1 *., :.

.. e. 3..._. :

.3 o 9 _t, .g7 3., . g,. 7 ~ i.. 2 M cu O 3 C 0 C C ) 9 ? 3: ,I le . m. ~*.1 w.I 31,J ..J .u e.,. .b ........,,,, I.. ,c.- J e f. J &4=V ...e # 6

• J

.s a ..=...u. .s I RECEIVED MAY 111983 i NRDC CALIF. BPA projections of Northwest electrical energy resource needs, 1984-2003: Released to NRDC by BPA Office of 1 Power and Resources Management L G

EXIIIBIT 5 TO AFFIDAVIT OF DAVID B. GOLDSTEIN Excerpts from NRDC Forecast [A Model Electric Power and Conservation Plan for the Pacific Northwest (1982)] i t l

MODEL ELECTRIC POWER AND CONSERVATION PLAN for the PACIFIC XORTHWEST i >i -g\\ e V*'.: I ^- '-(Q" \\f y 3 /. : 74 , V

%)

\\ Ca yc \\ \\ $h } l6 ) / N,,_,- ~ ',s NM w e d' i }s V f i g 1 i i I NORTHWEST CONSERVATION ACT COALITION I NOVEM BER,1982 i l 1: l

Y NORTHWEST COMSERVATICU ACT COALITION Member Organizations Alternative Energy Resources Organization, Montana Audubon Society, Washingten Center for Renewable Resources Citizens for a Solar Washington ClT:.rk County PUD Owner's Association, Washington Columbia River Citi:cns Compact h Communication Workers of America, #9103, Washington ' Environmental Information Center, Montana pg M Eugene Future Power Committee, Oregon Fair Electric Rates Now, Washington Fair Use of Snohomish Energy, Washington Friends of the Earth ../ Human Resources Council, Montana i Idaho Conservation League j h Idaho Wildlife Federation International Longshoremen's and Warehousemen's Union, #21, Washington 4 League of Women Voters, Idaho League of Women Voters, Montana League of Women Voters, Oregon 'I League of Women Voters, Washington Light Brigade, Washington Natural Resources Defense Council 1 Northern Plains Resource Council, Montana Oregon Environmental Council Oregon Fair Share Oregon Federation of Teachers Oregon Solar Energy Industries Associatien Peoples' Organization for Washington's Energy Resources Rose City Ratepayers Association, Oregon Service Employees International Union, Northwest States Council g Sierra Club Solar Energy Association of Oregon l Solar Oregon Lobby Southwest Orergon Community Action Committee United Food and Commercial Workers, #1092, Oregon -g United Food and Commercial Workers, #1001, Washington l Washington Environmental Council Whatcom County Opportunity Council, Washington

e i A MODEL ELECTRIC POWER AND CONSERVATION PLAN k FOR THE PACIFIC NORTHWEST By j Ralph Cavanagh Margie Gardner David Goldstein fl With Bill Arthur Bernard Black Janice Cornwell Scott Cummings Betsy Gardiner James Lazar o Jcy Luboff [ Mark Reis Michael Shuman l Peter Willing g and the members of the Northwest Conservation Act Coalition 1 -- November 1982 -- 1 i l )

l 20 4 i II. The Model Plan Forecast of E: lect ricity Needs: Summarv of Methodoloav and Results The Model Plan includes an analysis of each major "end d' use" of electricity in the residential, commercial, industrial, and irrigation sectors. This approach affords the most direct i means of projecting long-term trends in consumption, and of evaluating opportunities for increasing the efficiency with 4 which electricity is used throughout the region. By developing a comprehensive inventory of electricity-consuming devices and buildings, an end-use analysis allows consideration of the effects of, e.o., regulation and efficiency incentives, and roots the forecast firmly in the instrumentalities that, cumulatively, produce the Northwest's electricity demand. The E most important assumptions in such a forecast involve policy choices that are within the control of the region's citizens, g businesses, and institutions: e.a., what performance standards should be set for new residential and commercial buildings? S How many existing houses can we weatherize in five, ten, or twenty years? How rapidly can we upgrade efficiencies of lighting in existing commercial buildings? How much can the region's major industrial groups improve production efficiencies cost-effectively? This methodology also helps ensure that efficiency improvements are not double-counted; this is a frequently cited a problem with forecasts that first assume an overall system-wide Ea

21 2 E growth rate (which may incorporate some conservation) and then } reduce the resulting demand projections to account for the impact of conservation programs. Our forecasting approach h varies in some significant ways from that generally used by utilities, for reasons that are described below. But in one E important respect we do not differ from the utiities. The Model Plan is not a prescription for a "no growth" era of diminished expectations; our forecast incorporates the highest ) economic and population growth assumptions that are now being used by Northwest utility forecasters. The Model Plan is not an agenda for sacrifices, but a series of prescriptions for E Y-A. Utility Demand Forecasts Until recently, Northwest electricity forecasting w'as widely regarded as the exclusive province of the Pacific Northwest Utilities Conference Committee (PimCC), whose membership includes all the region's retail utilities. Over j the last decade, however, PNUCC's annual forecasts have been unable either to project actual regional loads accurately or to produce a consistent yardstick of future needs. On the former point, as a recent Washington State study notes: [T]he difference between the February 15, 1969 [PNUCC] forecast for the 1979-80 water year energy load and the .] actual 1979-80 energy load is larger than the energy output of three 1200 megawatt nuclear power plants. The difference between the February 5, 1979 forecast for the 1 3

22 ~ b 1979-80 water year energy load and the actual load is about 1979-80 water year megawatt nuclear power plant.*the same as the output of a 1200 Projections of future loads have exhibited still greater variance. Between 1974 and 1981, PNUCC's annual estimates of g regional loads in 1990 droceed seven consecutive times, by a total of more than 8700 average megawatts -- the reliable output of more than twelve 1200 megawatt nuclear plants rt operating at 60% capacity. Between 1980 and 1981 alone, the 5 decline in projected 1990 loeds equalled the reliable output of three such plants (2127 average megawatts.)** There are obvious grounds for questioning construction plans based on so T l volatile an index. These concerns increase when the underlying g. methodologies are investigated more closely. b Until the mid-1970s, utility forecasts in the Northwest were based on the assumption that the steady and high rates of demand growth observed in the past would continue indefinitely in the future. When the rate of growth decelerated markedly after 1975, utilities shifted to more complex "econometric forecasts," which nonetheless retain marked similarities to g their more simplistic predecessors. Both techniques assume B

• Washington Energy Research Center, Final Report to the Washino-ton State Lecislature-Independent Review of Washincton Public Power Sucolv System Nuclear Plants 4 and S 76-78 (March 1982).
  • Public Power Council, Power Plannino Primer: An Introduction to Pacific Northwest Electric Power Plannina Issues and the Role of Public Power 26 (1981).

an

23 that certain relationships, observed in the past, will continue without significant change in the decades ahead. An cconometric forecast pulls in numerous variables besides just the passage of time -- e.o., population, employment, personal income, electricity prices. But in determining how these ' variables interact, forecasters simply extend historic trends into the future. Real world developments refute assumptions of constancy in t' e structural conditions that determined electricity demand in the past. Reactions to rapid escalation in power plant I i costs are only now beginning to be reflected in Northwest l electricity consumption. Far more efficient appliances, now l l for the most part in the design stage, will be on the market i l'F coon. Ef ficiency standards for applianca 3, buildings, and i possibly electric motors will exert increasing influence upon what was formerly an unregulated market attuned to a now-vanished era of cheap electricity. New financial incentives l l for conservation, renewable energy, and cogeneration investment are beginning to work. All these developments will have a marked effect on electricity consumption in the future, but since they had no effect in the past, an econometric forecast t r cannot predict them. I i Even disregarding all these problems, uncertainties L attack econometric forecasts from numerous angles. Only if technicians can predict trends in, for example, per capita I l i l

24 E income and energy costs, is there any hope that utility computer models can anticipate consumption in future decades. But the preconditions are daunting; they are as, if not more, difficult than predicting electricity consumption itself. Reasonable forecasts of 1995 per capita income differ by at least 50%; for energy prices, the margin widens to 450%.* The seemingly precise numbers in the annual utility forecasts mask an immense range in possible outcomes, which the authors have ignored or chosen not to display. h Moreover, such forecasts incorporate an underlying philosophy that we do not accept: increases in electrical energy demand are seen as inevitable developments, not unlike forces of nature, that somehow must be accommodated regardless of cost. Econometric analyses omit inauiries that cre central to the design of the Model Plan. To what extent is electricity demand subject to management and planning within the region, N f and not merely an outgrowth of uncontrollable events? Would an inventory of structures and devices built to live within . existing generating resources cost more than the less efficient F]!4 inventory the utilities implicitly foresee plus the new power

• For personal income, the difference represents the range between PNUCC's estimate of a 2% annual real increase and a 1%

annual real decline, which is more in line with recent trends. r For electricity prices, the relevant spectrum is spanned by the assumption that thermal power cost escalation will cease altogether and the (more plausible) prediction that costs will continue to escalate at the 1970-1978 average rate of 10.5% per E year. "p O' t

25 I plants needc.d to serve it? The next subsection summarizes the Model Plan's answers to these and related questions about long-term regional electricity needs. I B. Summarv of the Model Plan Forecast 0 As noted earlier, the Model Plan evaluates each end use in terms of its total energy needs, after taking into account r i cost-effective improvements in efficiency and changes in population, employment, technology, appliance saturation, etc. The result is a forecast of what regional electrical energy i requirements will be in 1985, 1990, 1995, 2000, and 2005 if the Model Plan is implemented. We have not attempted to fix a single demand " point" for [ future years; such a procedure would both gloss over residual uncertainties and mask the array of policy choices that the Model Plan reveals. Accordingly, the forecast is expressed as a range, bounded by "high demand" and " low demand" estimates. 1 The "high" scenario assumes somewhat smaller efficiency i increases, less rapid " penetration" of conservation measures, and higher industrial growth than the " low" scenario. All i measures included in the two scenarios are cost-effective. j Following the practice of the Pacific Northwest Utilities i Conference Committee, we have expressed energy requirements in units of " average megawatts." An average megawatt is i equivalent to the generation of 8766 megawatt-hours in a year. 1e 1

h 28 B ig Use of the average megawatt allows relatively simple comparisons between requirements (" loads") and central generating stations (" resources"). For example, a 1000-megawatt nuclear plant operating at the industry-average h capacity factor of 55 percent will produce 550 average megawatts of electrical energy; the City of Seattle represents a total load of about 1000 average megawatts. Regional electrical energy requirements under the Model Plan are shown by end-use sector in Table 1. Table 2 compares the totals to those predicted in three other recent studies: the official forecast of the Pacific Northwest Utilities Conference Committee (PNUCC) ; the Washington State University (WSU) forecast, which was commissioned by the state legislature in 1981; and the forecast published in July 1982 by the g Bonneville Power Administration (BPA). The "high demand" scenario in the Model Plan projects electricity needs for 1990 that are 14%, 19%, and 33% below the lowest WSU estimate, the B BPA estimate, and the PNUCC estimate, respectively. Comparable figures for the " low demand" scenario are 23%, 28%, and 40%. g The discrepancies are attributable primarily to the Model Plan's greater emphasis on cost-effective ways to reduce electricity needs.*

• Thus, for example, the BPA forecast does not include " savings which might be achieved through future conservation programs budgeted by BPA, by local and state governments, or by utilities"; also excluded are the effects of building and appliance efficiency " standards which may be proposed by the g

Northwest Power Planning Council, federal, state or local government, or by public and private utilities."

27 Table 3 compares energy requirements under the Model Plan's "high demand" forecast with energy resources availabla I to the Northwest now and in the future. Generous margins of i safety result, despite the following assumptions-o the Hanford N-Reactor is retired immediately; lj r every year of the forecast is part of a " critical vater" o period in which droughts drastically reduce hydropower availability; j i o only three of the eight large-scale plants now under construction in the region are completed (Valmy Unit 2, Colstrip Unit 3, and WPPSS Unit 2) ; the two nuclear plants in operation during most of the o forecast period, Trojan and WPPSS Unit 2, produce only 55% of their rated capacity (PNUCC assumes 71% and 75% capacity factors, respectively) o Colstrip Unit 3 operates at only 54% of its rated capacity I (PNGCC assumes a 73% capacity f actor) ; and l o PNUCC's assumptions regarding the future energy I i contribution of the hydropower system are reduced to allow i increased fish protection (with a net loss of 600 average r l megawatts in 1985 and 900 average megawatts from 1990-2005, as explained in section VIII below). I' o Increases in irrigated acreage are assumed to reduce hydropower production by up to 200 average megawatts, as explained in section III.B.6. t i l i J

N 28 ) In other words, under the Model Plan, the following thermal plants could be deferred indefinitely without creating a danger of electricity shortages: 1. Colstrip Unit 4 (Coal, Montana) 2. Creston Unit 1 (Coal, Washington) 3. Creston Unit 2 (Coal, Washington) 4. Creston Unit 3 (Coal, Washington) 5. Creston Unit 4 (Coal, Washington) 6. WPPSS Unit 1 (Nuclear, Washington) 7. WPPSS Unit 3 (Nuclear, Washington) 8. WPPSS Unit 4 (Nuclear, Washington) 9. WPPSS Unit 5 (Nuclear, Washington)

10. Pebble Springs Unit 1 (Nuclear, Oregon)

11. Pebble Springs Unit 2 (Nuclear, Oregon)

12. Skagit Unit 1 (Nuclear, Washington)

13. Skagit Unit 2 (Nuclear, Washington)

We in no way suggest that our forecast exhausts the potential for cost-effective conservation and solar measures; indeed, the reverse clearly is true. The Model Plan projects only the likely impact of widespread adoption of some -- not all -- readily available and well-understood measures. Without E doubt, many options not discussed specifically in the Plan will prove cost-effective compared with new coal and nuclear plants, g and will be entitled to priority over such plants under the 'm

1 as l Regional Act. We had eliminated any justification for new 5 thermal power plants long before we had "used up" the spectrum i. of preferable alternatives. To illustrate, but not exhaust, the range of " unused" options, we present in section IV below a list of additional measures that (1) are preferable to thermal power plants on cost, reliability, and flexibility grounds and (2) provide an additional margin of safety in case demand growth outstrips expectations or the region must prematurely retire some of its existing coal, nuclear, or hydro plants.

l 1

1 !1 J a 1 J Is

30 E Table 1: Future Electricity Needs Under High and Low Demand Scenarios (Average Megawatts) High Demand Scenario Sector 1980 1985 1990 1995 2000 2005 Residential 5486 5848 5392 5174 5193 5117 Commercial 2658 3093 2924 3060 3334 3545 Industrial"/ 6130 6413 5479 5570 5858 6201 ] Irrigation 724 736 718 711 698 685 Street Lighting 91 70 63 60 56 57 Other 191 191 191 191 191 191 Losses 1255 1203 1111 1113 1151 1184 TOTAL 16535 17554 15878 15879 16481 16980 l E 1 l l .R Low Demand Scenario l Sector 1980 1985 1990 1995 2000 2005 l Residential 5486 5360 4685 4329 4197 4046 Commercial 2658 3049 2790 2879 2983 3053 Industrial"! 6130 5200 4757 4582 4496 4448 h Irrigation 724 681 689 658 626 595 Street Lighting 91 70 63 60 56 57 g Other 191 191 191 191 191 191 Losses 1255 1096 996 959 944 930 l TOTAL 16535 15647 14171 13658 13493 13320 (

a. Firm energy sales only.

4 31 Table 2: Comparison of PNUCC, BPA, WSU, and Model Plan Forecasts 24 - e PNUCC 23 - 22 - "o 21 - WSU 20 - Li M y 19 - 18 - 2 / 17 - Model Plan 16 - 4 .1 emand 15 - M del Plan 14 - 1 Low Demand 13 - l 1 I I i 1980 1985 1990 1995 2000 Model Plan: Model Plan: High Demand Low Demand l i PNUCC" BPA WSU Scenario Scenario 1985 20,707 17,898 17,120 17,600 15,600 \\ 1990 23,797 19,714 18,410 15,900 14,200 1995 not available 21,101 19,510 15,900 13,700 t 2000 not available 22,781 20,490 16,500 13,500 i a. Frcm Pacific Northwest Utilities Conference Committee, Northwest Reaional Forecast of Power Loads and Resources: July 1982-June 1993.

b. From Bonneville Power Administration, Forecasts of Electricity Consumption in the Pacific Northwest (July 1982).

c. From Washington Energy Research Center / Washington State University, Final

,j Report to the Washington State Legislature, Independent Review of 9P-4 and 5 (1982) (Table A-15) (Projected loads, assuming termination of WPPSS Units 4 and 5, " moderate demand growth," and " moderate conservation and renewables"). 1

k k J j Table 3: Comparison of Projected Loads and Resources Under the Model Plan (In Average Megawatts) (All resource estimates are taken from Pacific Northwest Utilities conference Committee, Northwest Regional Forecast of Power Loads and Resources (1982).) 1985 1990 1995 2000 2005 Loads Resources Loads Resources Loads Resources Loads Resources Loads Resources 15600 18100" 14200 17000 13700 16800 13500 16700 13300 17200 to to to to to 17600 15900 15900 16500 17000 Reserve in future years under the liigh Demand Scenario: 23 500 ."Q 1100 900 200 200 Reflects resources available in a critical water (drought) year; assumes retirement of Hanford M-Reactor and a. operation of Valmy Unit 2, Colstrip Unit 3, and WPPSS Unit 2. Ilydropower contributions have been reduced for fish protcction and irrigation, as explained in Sections III.B.6 and VIII of the text. b. Same assumptions as note a. except that contributions from combustion turbines are eliminated, and hydropower reductions are increased, as explained in Sections III.B.6 and VIII of the text. Assumes introduction of 500 average MW from renewable resources from categories listed and described in c. Section IV of the text. .}}