Data Work Group(DWG)TEPPC 2026 Common Case - Fuel Prices

November 17, 2015

Jamie Austin, PacifiCorp

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Overview

• Updating Fuel Prices for the TEPPC 2026 Common Case– Approved Methodology For Natural Gas Prices– Coal and Other Fuel Prices

TEPPC 2024CC - TAS Approved• Transitioning from the Council based Burner-Tip

price to Hybrid California Energy Commission (CEC) /Northwest Power & Conservation Council (NPCC)– Use CEC Major and Minor Hub Prices*– Use Council monthly shapes– Use CEC local transport fee*

*Note: CEC NAMGas Reference Case June 24, 2013

NG: Compare ModelsNPCC CEC (NAM Gas Model)

A regression model based on historic data: • Market based Henry Hub• Market based Major Hubs• Burner-Tip price (EIA-923 data)

Based on the World Gas Trade Model (WGTM) with the following changes: • Use only North America• Reconfigure for a California focus

Relationship between Hubs and Burner-Tip is derived econometrically

A equilibrium model; Key Drivers: • Supply cost curves• Price elasticity• Producer price• Natural gas demand

NPCC is a public domain model CEC can distribute results but not the model

NG: Pipeline System & HubsHenry HubMajor Hubs

AECOSumasRockiesSan JuanPermian

Minor HubsStanfieldMalinTopockSoCalGasPG&E CG

Burner-Tip:= Henry Hub + Basis to Hub + Local Transport Fee

Major Hub Prices:

Compare Burner-Tip

TEPPC 2024CC Burner-Tip PriceUnits: $/MMBtu, in 2014 Dollars

2014 2024

Henry Hub ~4.07 ~5.38

San Juan 3.65 4.83

Permian 3.75 4.90

Rockies 3.77 4.95

Sumas 3.75 4.66

AECO 3.73 4.67

Area 2022 Common

Case

Common Case Incr.

Price

Proposed Price

Proposed Incr. Price

PNM 6.88 5.47

APS 6.23 -0.65 5.94 0.47

SCE 5.86 -0.37 6.67 0.73

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TEPPC 2026 Common Case – Natural Gas Prices

• Gas and power markets are undergoing revolutionary change– Tremendous growth in natural gas production– Major restructuring of gas transmission systems in

Canada, Eastern US, Mexico– Increasingly severe regulation of emissions, including,

for the first time, CO2– Large increases in renewable energy and gas-fired

generation with increasing coal-fired plant shut-downs

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Total Energy Supply, Disposition and PricesOutlook For Coal 2015

(dollars per million Btu)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Natural Gas Price atHenry Hub 2.79 3.73 4.37 3.69 3.70 3.80 4.21 4.55 4.88 5.02 5.09 5.25 5.35 5.46 5.67

Coal PriceDelivered 2.63 2.50 2.41 2.41 2.42 2.44 2.47 2.50 2.54 2.58 2.61 2.65 2.68 2.71 2.73

Prices (2013 dollars per unit)

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Coal & Other Fuel Prices

Coal Prices($/MMBtu)

EIA (923)2013 Forecast

Ventyx Forecast2013 Forecast

NPCC2013 Forecast

Coal Plants Revised Name 2014 2024 2014 2024 2014 2024

Cholla, Springerville, Coronado, Apache & Navajo

AZ2.14 2.07 2.38 1.98 2.03

Pawnee, Comanche, Arapahoe, Valmont, Cherokee, Rawhide, Noxon & Drake

CO - East

1.90 1.79 2.15 1.62 1.70Craig, Hayden, Bonanza & Cameo

CO - West1.90 1.96 2.14 1.62 1.73

Colstrip, & Corrette MT 1.02 1.33 1.34 1.45Four Corners, San Juan & Escalante

NM2.41 2.34 2.20 1.92 2.10

Reid Gardner & North Valmy NV 2.88 2.51 3.11 2.32 2.57Boardman & Centralia PNW 2.31 2.14 2.61 1.53 1.75Hunter, Huntington, Carbon UT 1.91 1.65 1.91 1.53 1.77Dave Johnston & Laramie River WY - E 1.47 1.02 1.49 1.06 1.26Wyodak, Wygen & Simpson WY - PRB 0.7 0.95 1.06 1.28Bridger & Naughton WY - SW 1.96 2.07 1.06 1.30

PAC 2013 IRP has $1.70/MMBtu for Medium-Average-System Coal Fuel Cost (2014 nominal $), compared inequivalent to: $1.33 Ventyx , $1.69 eia and $ 1.18 NPCC).

Other Fuel PricesTEPPC 2024CC - Coal Prices(2014 Dollars)

TEPPC 2024CC – Other Fuel PricesNPCC Forecast (2014 Dollars)

Fuel ID Fuel Name Fuel Type Fuel Units 2014 2024 2025 2030 2035

BMAS Woody Residue BIO 2014 $/MMBtu 2.97 2.68 2.66 2.55 2.55

UDFO Utility distillate fuel oil FO 2014 $/MMBtu 20.33 20.96 21.06 21.52 21.61

UDFO Utility distillate fuel oil FO 2014 $/MMBtu 25.11 27.95 28.16 29.19 29.31

UDFO Utility distillate fuel oil FO 2014 $/MMBtu 16.27 13.21 13.05 12.29 12.33

PetCoke Petroleum Coke PC 2014 $/MMBtu 1.28 1.31 1.31 1.33 1.33

REFU Refuse REF 2014 $/MMBtu -1.05 -1.05 -1.05 -1.05 -1.05

URAN Uranium UR 2014 $/MMBtu 0.72 0.81 0.81 0.79 0.79

LandfillGas Landfill gas LFG 2014 $/MMBtu 2.10 2.10 2.10 2.10 2.10

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Forecasting Delivered Coal & Other Fuel Prices

• Data sources for delivered coal prices– Energy Information Administration (EIA) publishes

delivered coal prices per mmBtu for regulated power plants

• EIA delivered coal prices are not a good basis for forecasting future prices– Current delivered coal prices reflect contract price for

coal and freight, not market price– Power companies dispatch coal plants based upon

market price

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Range of Delivered Coal PricesEI A – Outlook For Coal 2015, 2013 Dollars

• 2015 average coal price by state ranges from $13.70 to $39.30 per MWh – 11 states have delivered coal prices below $2.00 per mmBtu – $20 per MWh – 10 states have delivered coal prices above $2.80 per mmBtu - $28 per MWh

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US Coal Market Price have been FallingOutlook For Coal 2015

• Since mid-2014, all regional prices are down 15% - 25%– CAPP 12,500 Btu rail below $45; PRB 8,800 Btu down to $10 per ton

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Markets Expect Continued Gas Supply GrowthOutlook For Coal 2015

• Balanced market price used to be about $4.00 per mmBtu at Henry Hub – Above-normal storage would push prices down; below-normal would cause spike

• Growing gas supply has changed the balanced-market price – Long-term gas futures have fallen below $3.50 per mmBtu – Is $3.00 the new normal gas price?

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