2018 INTEGRATED RESOURCE PLAN PROJECT UPDATE APRIL 10, 2018 - PowerPoint PPT Presentation

2018 INTEGRATED RESOURCE PLAN PROJECT UPDATE APRIL 10, 2018 Commission Presentation August 9, 2016

Presentation Outline 2  What is an Integrated Resource Plan (IRP)?  Key Takeaways from 2016 IRP  Preview 2018 IRP Information  2018 IRP Considerations  Summary

3 What is an IRP?

What is an IRP? 4  Washington State RCW 19.280 mandate  10 year strategy to meet energy, capacity, and renewables  Evaluates generation resources, conservation and Renewable Energy Credits (REC)  Provides strategies for reliable, low cost electricity at reasonable risk  Creates action plan over two to four years

IRP Inputs/ Modeling 5

6 Key Takeaways from 2016 IRP

Key Takeaways From 2016 IRP 7  District long on resources with seasonal capacity deficit  District relying on market  Energy needs  Capacity needs  Renewable Energy Credits (REC) needs  Regional summer capacity constraints growing post 2019  PNUCC Northwest Regional Forecast  Power Council Resources Adequacy Studies  BPA White Book (2015 Pacific NW Loads & Resources Study)  Regional uncertainty of future legislation

8 Preview 2018 IRP Information

2018 IRP Project Charter 9

2018 Assumptions & Modeling 10 Load Growth Assumption Carbon Assumption Low Natural Gas Price Modeling Stochastic Modeling

Load/Resource Balance – DRAFT Annual – Critical Water 11 300 Renewables 275 250 Frederickson 225 Market 200 175 Slice aMW 150 125 100 75 Block 50 25 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Block Critical Slice Renewables Market Frederickson Resource Requirement* * Retail Load Forecast plus distribution & transmission losses

Load/Resource Balance – DRAFT Annual – Average Water 12 300 Average Water 275 Renewables Slice Adder Frederickson 250 225 200 175 Slice aMW 150 125 100 75 Block 50 25 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Block Critical Slice Average Slice Adder Renewables Frederickson Resource Requirement* * Retail Load Forecast plus distribution & transmission losses

2018 Monthly Forecasted Loads Block and Critical/Average Slice over time 13 Average Slice Rely on Frederickson 350 needed to serve Slice surplus & Market to meet load sold to market load 300 250 200 aMW 150 100 50 - January February March April May June July August September October November December Block Critical Slice Average Slice Renewables Frederickson 2018 Resource Requirement Block/Slice Generation observed over the last 3 years Frederickson available as energy call option through August 2022

Example of Hourly Market Purchases How hourly loads are met on a extreme hot summer day 14 Load/Resource Balance (2015 Peak Day) 450 Temperature 400 Observed 1 : 105 ° F 350 300 250 MW 200 150 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour Ending Block To Load Slice To Load Nine Canyon Wind - To Load White Creek - To Load Packwood - To Load Fredrickson - To Load District Market Purchases Actual Load 1 – As observed by the Hanford Meteorological Station

Capacity Deficits Without Frederickson With Frederickson 15

16 2018 IRP Considerations

2018 IRP Considerations 17  Energy & Capacity Uncertainties  Resource Adequacy Studies (PNUCC, NWPCC & BPA)  Market availability? Who and when will build?  Frederickson CT contract retires in 2022  Legislation Uncertainty  EIA requirements  Carbon Policy  Customer Preferences Changing?  Customer Green Rate options  BPA Post 2028

Summary 18  Key Draft Takeaways  Regional seasonal capacity constraints growing  Winter constrained  Summer constraints growing  District continues to be annually long on resources  Critical water- short after 2022  Frederickson expires in 2022  Average water- long thru 2028  District seasonal deficits continue to be met by RMC hedging  2018 Considerations/Uncertainties  Market, Legislation, Customer Preference, BPA 2028  Commission updates throughout summer  Adopt 2018 IRP by August 28th

Questions 19

What is an IRP? 40  Washington State RCW 19.280 mandates all electric utilities with more than 25,000 customers to develop an IRP  A strategy for meeting energy needs, capacity demand, and Washington State Renewable Portfolio Standard (RPS) obligations over a 10 year planning horizon  Provides framework for evaluating wide array of supply resources, conservation and Renewable Energy Credits (REC)  Provides guidance towards strategies that will provide reliable, low cost electricity at reasonable level of risk  Creates an action plan identifying the steps to be taken during the next two to four years to implement the plan

2018 IRP Considerations 45  Market purchases availabile?  Energy/Capacity/REC’s  Resource Adequacy/LOLP improving ? (PNUCC & NWPCC)  5 years out inadequate but conservative modeling…  Not including all available California imports  Not in including IRPs planned DR programs  Frederickson CT contract retires in 2022  Explore long term PPAs (market purchase short or long term, or build resource)

Summary 46  Integrated Resource Plan Required every 2 years  Key Takeaways from 2016  Rely on market for Energy, Capacity, RECs  Market available through 2019  2018 Assumptions and Modeling  Market availability appears extended to 2023  Load reduction paper mills & Alcoa  Conservation & gas lowering load growth  Further if include all California available imports  Commission updates throughout summer  Adopt 2018 IRP by August 28th

Public Utility District No. 1 of Benton County Final Audit Communication with Those Charged with Governance April 10, 2018

AGENDA 4 Questions and Answers on the Audit Process Question 1 – What does an audit of the District entail? Question 2 – Are the financial statements a fair representation of transactions and ending balances for the year? 2 Question 3 – Did the District comply with applicable laws? Question 4 – What procedures were performed to identify fraud?

Question #1 – What does an audit of the District entail? • Inspection of source documents Independent • Verification with third parties verification of transactions • Analytical review and inquiry procedures and balances • Perform substantive test procedures Evaluation of • Review key controls in all significant account the cycles effectiveness • Testing for operational effectiveness 3 of internal • Reporting of control weaknesses controls Testing compliance • Tests in accordance with Governmental with Federal Auditing Standards and State laws

Question #1 – What does an audit of the District entail? • Balances and transactions verified against audited amounts and documentation Technical • Financial statements meet all applicable GAAP, review of the financial State and legal requirements statements • Supplementary information presented accurately 4 • Daily and weekly updates with Finance staff Reporting of audit results • Reporting to Board of Directors

Question #2 – Are the financial statements accurate? • Perform risk assessment to identify significant risk Moss Adams areas Audit • Perform substantive test procedures Procedures • Perform technical review of financial statements • Unmodified (clean) opinion provided to the District for its financial statements. Results 5 • Financial statements are presented fairly in accordance with US GAAP. • Issued our communication to those charged with Additional Audit governance to discuss any audit adjustments noted Comments during the process

Audit Adjustments Audit Adjustments Amount Slice True up reclassification $533,000 Passed Adjustments Amounts None noted N/A 6

Question #3 – Did the District comply with applicable laws and regulations? • Perform risk assessment to identify significant Moss Adams compliance risk areas Audit • Perform compliance testing over several areas Procedures including contracting Results • No compliance issues noted 7 • Management is aware of the compliance Additional Audit requirements that are subject to our audit procedures Comments and monitor compliance throughout the year.

Question #4 – What procedures were performed to identify fraud? • Evaluation of key controls for all significant balances and transaction cycles Moss Adams • Brainstorm session to identify fraud risk areas Audit Procedures • Interview individuals throughout the District • Perform ‘surprise’ procedures • Controls found to be effective Results 8 • No instances of fraud were identified throughout the audit Additional • Overall, management is able to design and implement Audit controls that are appropriate and help protect the District’s resources. Comments

Items to Note NISC Conversion • Testing approach • District IT involvement No internal control issues identified. Best practice recommendations provided to management. 9