Summary of May 11, 2021 Resource Adequacy Meeting

Summary

A July 8, 2021 letter to Jay Inslee, Governor of Washington, and the Washington State Legislature, from Dave Danner of the Washington Utilities and Transportation Commission and Lisa Brown of the Washington Department of Commerce, transmitting a summary of the first annual electricity Resource Adequacy meeting, convened pursuant to RCW 19.280.065 on May 11, 2021. The summary reports presentations from the Western Electricity Coordinating Council, California Independent System Operator, Northwest Power and Conservation Council, Northwest Power Pool, NorthernGrid, Pacific Northwest Utilities Conference Committee and Bonneville Power Administration. It states that an estimated 135 people took part in the six-hour virtual meeting.

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July 8, 2021


Honorable Jay Inslee, Governor of Washington
Brad Hendrickson, Secretary of the Senate
Bernard Dean, Chief Clerk of the House
Olympia, WA 98504


Dear Governor Inslee and Members of the Washington State Legislature,

It is our pleasure to submit to you the attached summary of the first annual electricity Resource
Adequacy meeting held on May 11, 2021. We convened the meeting and submit this summary pursuant
to RCW 19.280.065.

In addition to this summary, the Department of Commerce and the Utilities and Transportation
Commission have posted the meeting agenda, a recording of the meeting, and presentation materials
here: Resource Adequacy - Washington State Department of Commerce and here:
www.utc.wa.gov/casedocket/2021/210096/docsets.

While the summary demonstrates that electric utilities, transmission system operators, regulators, and
regional organizations are all working to improve resource adequacy, it is also clear that there is much
work to do. The effort to develop a regional resource adequacy program, in which most meeting
participants are engaged, shows promise. Participants at the May 11 meeting recognized that more
electric generation will be needed in the western region, both to meet load growth and replace retiring
fossil fuel generating plants. Meeting participants made clear that Washington utilities must be able to
freely import and export available power to and from other regions to benefit from differences in peak
loads, generation mixes, and weather patterns. Transmission improvements will be required to ensure
that power can move from generation to load.

Our agencies will convene another forum in 2022 to address electric resource adequacy, as required by
statute. In the meantime, know that we are continuing our important work in overseeing utility resource
planning to ensure our region has adequate power to fuel our economy, heat our homes, and maintain
our quality of life.




 Dave Danner                                               Lisa Brown
 Chair                                                     Director
 Washington Utilities and Transportation Commission        Washington Department of Commerce
       Summary of May 11, 2021 Resource Adequacy Meeting

Introduction
On May 11, 2021, the Washington Utilities and Transportation Commission (UTC) and the
Washington Department of Commerce (Commerce) convened a meeting of electric industry
representatives and other stakeholders to review the adequacy of energy resources to serve
the state’s electricity needs. This meeting was held, and this summary of the meeting is being
submitted to the Governor and the Legislature, pursuant to RCW 19.280.065(1), which reads:

        At least once every twelve months, the department and the commission shall jointly
        convene a meeting of representatives of the investor-owned utilities and consumer-
        owned utilities, regional planning organizations, transmission operators, and other
        stakeholders to discuss the current, short-term, and long-term adequacy of energy
        resources to serve the state's electric needs, and address specific steps the utilities can
        take to coordinate planning in light of the significant changes to the Northwest's power
        system including, but not limited to, technological developments, retirements of legacy
        baseload power generation resources, and changes in laws and regulations affecting
        power supply options. The department and commission shall provide a summary of
        these meetings, including any specific action items, to the governor and legislature
        within sixty days of the meeting.
Maintaining an adequate supply of electricity is a core obligation of the utilities that provide
electric service to the residents and businesses of Washington. State policy reinforces this
obligation as Washington transforms its electric power system and economy, reducing and
eventually eliminating emissions from fossil fuels combustion for electricity generation.1 The
state’s 100% clean electricity law, the Clean Energy Transformation Act,2 includes requirements
for utilities to establish specific standards for resource adequacy and incorporate those
standards in their planning and compliance.3 As utilities reduce reliance on coal-fired and gas-
fired power plants and add renewable resources such as wind and solar, new approaches and
resources will be required to maintain resource adequacy to ensure reliable service to
customers.
While resource adequacy is an obligation of each electric utility serving end use customers in
the state, it also is a shared responsibility of the overall electric power system and the entities
that operate, plan, regulate, design, and fund the generation, transmission, and delivery of that
system. The breadth of responsibility is reflected in the list of organizations and stakeholders
identified in RCW 19.280.065 and in the number of participants in the May 11, 2021 meeting.
An estimated 135 people participated in the six-hour virtual meeting.


1
  Washington 2021 State Energy Strategy, page 119-120. https://commerce.wa.gov/energystrategy
2
  Chapter 19.405 RCW.
3
  RCW 19.280.030. This resource planning statute was amended by the CETA legislation to add explicit resource
adequacy provisions.
In addition to this Summary, Commerce and the UTC have posted the meeting agenda, a
recording of the meeting and presentation materials here: Resource Adequacy - Washington
State Department of Commerce and here:
https://www.utc.wa.gov/casedocket/2021/210096/docsets.
The following summarizes the presentations and discussion at the May 11, 2021 meeting.
Western Electricity Coordinating Council (WECC)
WECC is a non-profit corporation that exists to assure a reliable bulk electric system in the
geographic area known as the Western Interconnection, consisting of 14 western states, two
Canadian provinces, and northern Baja California.4
The WECC presentation described the organization’s authority, purpose, and long-term strategy
and presented the findings of its Western Assessment of Resource Adequacy (WARA) report.5
The WARA study approach reported the Western Interconnection in five sub-regions and ran
two scenarios covering 2021-2030. In Scenario 1 each sub-region was constrained to meeting
its electric load without imports from the other sub-regions. In Scenario 2 the sub-regions were
allowed to meet their electric load with the addition of imports from other sub-regions. For
both scenarios, the study included three variations that constrained the resources considered in
the study to:

       existing resources only,
       resources under construction that were planned to be in service by the specific study
        year, and
       resources currently in the licensing and siting process.
The WARA study included Washington in its Northwest Power Pool (NWPP) Northwest sub-
region. The sub-region is a winter-peaking area that also includes British Columbia, Oregon, and
parts of Montana, Idaho, and California.6
The WARA report concludes that without imports (Scenario 1) the NWPP Northwest sub-region
would experience hours with insufficient resources to meet its electric load obligation and
maintain its planning reserve margin.7 With the ability to import and export electricity (Scenario
2) the NWPP Northwest sub-region would be able to meet its electric load obligation and
maintain its planning reserve margin. Exchange of resources among sub-regions enables
utilities to take advantage of diversity in loads and resources, increasing resource adequacy.




4
  https://www.wecc.org/Pages/home.aspx
5
  https://www.wecc.org/ResourceAdequacy/Pages/default.aspx#WesternAssessment
6
  https://www.wecc.org/Administrative/Western%20Assessment_Northwest%20Power%20Pool-
Northwest%20Report%2020210226.pdf
7
  Planning reserve margin is additional generation, beyond that being used to generation electricity to match load,
necessary to replace generation outages.

Summary of 2021 Resource Adequacy Meeting                                                                 Page | 2
The WARA report recommends greater coordination between sub-regions to assure that they
are not relying on the same resources at the same time. The report also recommends that
planning reserve margins account for the variability of different resources available at different
times of the year.
California Independent System Operator (CAISO)
CAISO manages the flow of electricity for about 80% of California and a small part of Nevada. It
is the largest of the 38 balancing authorities in the Western Interconnection, handling an
estimated 35% of the electric load in the West.8 In addition to being the system operator of its
balancing area, CAISO designs and operates a wholesale electricity market. Several Washington
utilities routinely buy and sell bulk power from and to markets operated by CAISO.
CAISO provided an overview of the organization’s forward planning for, and measurement of,
resource adequacy. The presentation also described CAISO’s mechanism for enforcement of
resource adequacy and the provision of capacity to the CAISO system operators during real-
time operations to assure system reliability. The presentation concluded with an overview of
the actions CAISO is taking to prepare to meet load in the summer of 2021.

Increasingly reliant on solar generation in California, CAISO described a shift in peak demand on
the electric grid, from 4 p.m. to 7 p.m. when the output from solar generation decreases as the
sun goes down, but there is a continued demand for air conditioning. Focusing on the “net
peak” evening hours, the CAISO Board of Governors has taken actions to assure batteries are
charged and ready at the time of net peak demand and that there is backup generation to
replace generation capacity that must go off-line for maintenance during those critical hours.
CAISO has also enhanced its market rules governing priorities for exports and load scheduling,
as well as the dispatch of demand response resources. In addition, CAISO noted that the
California Public Utility Commission has taken action to effectively increase the planning
reserve margin in California from 15% to 17.5%.
Northwest Power and Conservation Council (NWPCC or Council)
NWPCC prepares an annual resource adequacy assessment for the Pacific Northwest region,
which includes all or parts of the states of Washington, Oregon, and Idaho, and Western
Montana. The assessment uses a loss of load probability (LOLP) metric, measuring the
likelihood of at least one shortfall occurring in a future year.9

NWPCC described this assessment as an early warning on resource adequacy in the Pacific
Northwest. The Council’s resource adequacy modeling examines the load and generation
balance five years in the future based on sited and licensed generation and certain import
assumptions. The resource adequacy model uses an hourly dispatch, probabilistic analysis to



8
    http://www.caiso.com/about/Pages/default.aspx
9
    https://www.nwcouncil.org/energy/energy-topics/resource-adequacy

Summary of 2021 Resource Adequacy Meeting                                                  Page | 3
calculate the effective LOLP and planning reserve margin, first measuring the resource gap, if
any, and then adding generation as necessary to reach a normative value of 5% LOLP.
The Council described recent and significant improvements in its resource adequacy study
capability with the use of a new model that, among other things, incorporates the effects of
climate change on temperature, which affects load and hydroelectric generation. However, it
was also noted that the new model is still being tested.

The Council’s preliminary resource adequacy assessment for 2023 shows a 16% LOLP and the
need for approximately 1,600 MW of additional capacity to reach a 5% LOLP. However, this
result reflects an assumption that fossil fuel generating facilities in the region would not be
used to serve Northwest loads, due to expected low market prices for electricity. The Council’s
LOLP for the region in 2025 is expected to be well below the 5% threshold if existing fossil fuel
generation in the Northwest is added to the region’s reserves. The expected addition of
generating resources in the Western Interconnection between now and 2025 also reduces LOLP
by enabling additional imports of power into the Northwest.
Northwest Power Pool (NWPP)

The Northwest Power Pool is a voluntary organization composed of major generating utilities
serving the western United States, British Columbia and Alberta.10 Its membership includes 11
Washington utilities and the Bonneville Power Administration (BPA).

NWPP reported on the status of an effort to design a resource adequacy program that began
development in 2019. The NWPP provided information on the program’s membership,
objectives, design, timeline and proposed governance. NWPP expects the design phase to
conclude in July 2021 upon approval by participating members.
NWPP members plan to launch the resource adequacy program as a capacity program. The
program will not address energy constraints. It is envisioned as a dynamic program that can
evolve over time, with the goal of creating a common resource adequacy standard across much
of the Western Interconnection, as each utility and balancing authority in the region applies a
different resource adequacy standard. The program is designed to improve reliability, create
cost savings, improve system visibility, and create greater coordination among balancing
authority areas.
The NWPP resource adequacy program will establish a uniform method for calculating capacity,
allowing the pooling of generation resources. The program will be operated by a central
administrator. To determine the delivery of generation capacity within two seasons — summer
and winter — the resource adequacy program will use a zonal approach to model transmission
constraints. The evaluation and enforcement of capacity obligations would begin seven months
before the operational day, and it would continue through the operational day. Throughout this


10
     https://www.nwpp.org/about/purpose/

Summary of 2021 Resource Adequacy Meeting                                                Page | 4
period, the program administrator would calculate a certified rating of the utility’s resource
capacity position and the capacity contribution of each resource to enable trading of capacity.
As currently proposed, the governance of NWPP’s resource adequacy program would include a
participants’ committee with certain control including the ability to approve or reject
amendments to the program and to approve or reject program rules. The program would
ultimately be governed by an independent board that would have the final decision-making
authority over all aspects of the program (including overruling the participants’ committee).
Load serving entities will be the point of compliance with the program. Participation in the
resource adequacy program is voluntary absent any contractual or other regulatory
requirement for a utility to participate. The proposed governance structure includes a
Regulators’ Committee that, during the non-binding Stage 1 phase, would have an advisory
role. The proposal provides that the ultimate role of states and provinces in the governance
structure will be determined after discussions during this phase.
NorthernGrid
NorthernGrid is a transmission planning entity. Members include investor-owned and
consumer-owned utilities located in California, Idaho, Montana, Oregon, Utah, Washington,
and Wyoming, as well as BPA.11 NorthernGrid performs transmission studies for projects that
cross multiple transmission operators’ footprints. For certain qualified transmission projects, it
has authority subject to Federal Energy Regulatory Commission review to allocate the cost of
transmission projects to utilities that would otherwise not choose to participate in the
transmission project. NorthernGrid’s transmission plan is not a transmission construction plan
but only a planning document.

NorthernGrid presented the organization’s mission, scope, structure, and planning process as
well as forward looking results from the work developing the 2021 Transmission Plan. The
presentation discussed several of the power flow maps that its study produces, showing the
projected changes in power flows from 2020 to 2030 for selected critical hours. NorthernGrid’s
initial conclusions are that transmission flows in 2030 would be generally similar to 2020, but
that California will supply more midday power to the Northwest, and Montana and Wyoming
will supply more power to the Northwest during nighttime hours.
Pacific Northwest Utilities Conference Committee (PNUCC)
PNUCC is a membership organization of consumer-owned and investor-owned electric utilities
in Washington, Oregon, Idaho, and Montana west of the Continental Divide. The organization
produces an annual Northwest Regional Forecast (NRF), representing the utilities’ perspective
of loads, resources, and future power supply.12



11
     https://www.northerngrid.net/northerngrid/purpose/
12
     https://www.pnucc.org/system-planning/northwest-regional-forecast/

Summary of 2021 Resource Adequacy Meeting                                                  Page | 5
PNUCC presented the methods and results of its 2021 NRF. The NRF uses conservative planning
assumptions based on the lowest 8th percentile of historical hydropower conditions. For other
resources, the NRF includes owned or contracted resources with no short-term market activity
and new resources that utilities have committed to acquiring, while excluding resources that
are planned but not committed. Under these assumptions, the 2021 NRF study shows a
projected 6,500 MW capacity gap in winter and a 5,900 MW capacity gap in summer for the
operating year 2031. This represents a narrowing in the size of the resource gap between
summer and winter over the last six years. However, meeting summer load may be more
challenging due to the higher rate of growth of summer peaks and the summer-peaking
character of the overall Western Interconnection.
Utility Panelists
Every electric utility serving end-use customers is responsible for resource adequacy. As it was
impractical to hear from the more than 60 utilities serving Washington customers at the May
11 meeting, Commerce and the UTC invited the three Washington investor-owned utilities and,
in consultation with the Public Generating Pool members, invited two consumer-owned utilities
and the BPA. All of BPA’s load-following customer utilities have contracted with BPA for
resource adequacy services.
All of the utility panelists expressed support for the development of the NWPP resource
adequacy program. All but Benton Public Utility District are participating in development of the
program.
PacifiCorp

PacifiCorp discussed its perceived shortage of capacity and intended actions to address that
shortage. PacifiCorp believes that development of a day-ahead wholesale electricity market will
assist it in acquiring capacity across a multi-regional footprint, and it is hopeful that as more
entities join the CAISO energy imbalance market, the likelihood of creating a day-ahead market
will increase. As part of an effort to develop a clean resource portfolio, PacifiCorp’s integrated
resource plan calls for large additions of wind and solar generation and storage capacity.
PacifiCorp also described added and planned transmission capacity to meet the utility’s need
for clean energy.
PacifiCorp sees transmission additions as essential to connecting wind, solar, and storage
resources that are spread across the Western Interconnection to load centers.
Avista

Avista described its resource position and its concerns with resource adequacy in the
Northwest. Avista is resource sufficient through 2025 with a 16% planning reserve margin. After
2025 Avista projects resource insufficiency due to several thermal plants reaching their end of
life. Compared to other utilities, Avista’s load is small relative to the size of its largest single
generating unit, resulting in a higher planning reserve margin to be prepared for the forced


Summary of 2021 Resource Adequacy Meeting                                                   Page | 6
outage of that unit. Avista has concluded that, in addition to probabilistic analysis, utilities need
to engage in scenario planning to operate in worst case conditions such as extreme heat or cold
conditions.

Avista described the region as short of the resources needed to ensure reliable service. Avista
encouraged focus on the aging natural gas plants in an era of coal divestiture. Avista also
stressed the importance of planning for the risk and length of time it takes to develop
transmission to deliver wind and solar to load centers.
Puget Sound Energy (PSE)

PSE’s presentation expressed the importance of balancing the objectives of affordability,
sustainability, and reliability while working toward compliance with CETA. PSE concluded that
moving toward a clean grid requires additional attention to reliability needs. PSE’s integrated
resource plan removes coal from its baseload resources by 2025, adds renewables, accelerates
demand response and leverages the use of distributed energy resources, mainly in the form of
energy efficiency. PSE is moving to reduce its reliance on short-term market purchases and to
use biodiesel to back its natural gas-fired generation facilities. Over the next 24 years PSE’s IRP
forecasts 3,200 MW of distributed energy resource within its system, the addition of 1,500 MW
of renewables by 2031, and an incremental addition of 2,500 MW of renewables by 2045. PSE
emphasizes that new dispatchable resources beyond batteries will be necessary to maintain
system reliability and integrate renewables, and that new transmission will be needed to reach
diverse wind resources. PSE discussed its partnership with Mitsubishi to develop renewable
hydrogen as a source of fuel for thermal dispatchable plants.
Benton Public Utility District
Benton PUD presented information on its situation as a summer-peaking utility with irrigation
loads. As a BPA slice customer, Benton PUD is responsible for its own resource sufficiency.
Benton PUD noted that even though it is a net energy seller on an annual basis, in 90% of the
summer days (June through August) it has significant summer capacity and energy deficiencies.
To cover part of these deficiencies, Benton PUD currently has a 50 MW call option on the
Frederickson combined cycle gas fired power plant and relies on market purchases.

In determining its ability to rely on market purchases, Benton PUD pays close attention to the
NWPCC’s resource adequacy work and PNUCC’s assessments. These inform a determination of
whether an adequate inventory of physical resources are available in the market to help fill the
utility’s persistent summer resource needs and periodic winter capacity deficits. Benton PUD
also emphasized that planners must understand that the retirement of coal plants without the
addition of dependable and dispatchable resources is likely to cause resource capacity
shortages. As evidence in support of this observation, Benton PUD cited the 2019 winter price
spikes in the wholesale power markets during which coal-fired power plants were providing
more than 3,000 megawatts of much-needed capacity.



Summary of 2021 Resource Adequacy Meeting                                                    Page | 7
In response to the chilling effect CETA has had on investments in new natural gas plants to
replace retiring coal, Benton PUD issued two requests for proposals, one in October 2019 and
another in September 2020, with the ultimate goal to cover capacity deficits of 150 MW in the
summer and 50 MW in the winter. After receiving only four combined responses to their RFP,
Benton PUD ultimately acquired resources for roughly half these amounts over a term from
December 2022 through August 2025. With the capacity retirements and relatively low
qualified capacity factors of wind and solar, Benton PUD anticipates there will be a need for
new natural gas generation during the transition to a CETA-compliant clean energy portfolio.
Tacoma Power
Tacoma Power described the current power system as capacity short and the importance of the
NWPP resource adequacy program in addressing that shortfall. To illustrate the capacity
shortage, Tacoma Power pointed to California’s rolling blackouts of summer 2020 and the
number of other utilities that were under emergency conditions. It also warned of the
possibility that the Western Interconnection will experience additional outages as additional
resources are retired and that the size and duration of those outages may increase.
Tacoma Power observed that capacity resource options are limited in that they are dependent
on developing technologies or are very expensive. Price signals are not present to create the
incentive for the development of new capacity or assure that clean capacity resources such as
hydroelectric resources are kept online. Tacoma Power believes the NWPP resource adequacy
program will direct and coordinate capacity development to meet the region’s needs. The
program will also support needed investment in emerging technologies and storage resources,
and lower costs for ratepayers while assuring reliability.
Bonneville Power Administration
BPA explained its role in resource adequacy, how the organization fulfills its resource
obligations to its utility customers, and the value of the NWPP resource adequacy program.
Even though BPA is not a load serving entity, BPA has obligations to meet the full power needs
of its load following utilities. Those obligations are satisfied through 20-year contracts that are
up for renewal in 2028. Utilities that elect slice or block contracts retain responsibility for their
own resource adequacy.
BPA maintains its resource adequacy obligations using its annual white book,13 projecting retail
loads, contract obligations, contract purchases, and resource capabilities over a 10-year study
horizon. From that analysis, BPA develops its budget and conducts rate cases to set rates. In
near-term operations, BPA optimizes resources by considering water conditions, weather,
loads, and resource availability as well as market conditions. The long-term outlook to
operational optimization is an iterative process that BPA has been practicing for decades to
assure resource adequacy in the region.


13
     https://www.bpa.gov/p/Generation/White-Book/Pages/White-Book.aspx

Summary of 2021 Resource Adequacy Meeting                                                     Page | 8
However, BPA noted a real possibility that the supply of capacity in the spot market will not be
sufficient in the near future to meet the region’s needs. Consequently, BPA is participating in
the NWPP resource adequacy program and believes that there is much value in developing a
resource adequacy program that establishes a consistent and transparent measure of whether
a utility is resource adequate. BPA also noted that the program will give utilities an incentive
and clear signal to be resource sufficient. BPA supports a decision by NWPP to add transmission
deliverability to the analysis that will be conducted under the resource adequacy program.




Summary of 2021 Resource Adequacy Meeting                                               Page | 9


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