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## Resource Adequacy and Reliability in th e IPM Projections for the Transport Rule This document describes resource adequacy and reliability results in the IPM 2014 projections for the base case and Transport rule policy cases. As used here, the term Resource Adequacy means the provision of adequate generating resources to meet projected load and generating reserve requirements in each region, while Reliability inclu des the ability to deliver the resources to the loads so the overall power grid remains stable . IPM is specifically designed to ensure generation resource adequacy, either by using existing resources or through the construction of new resources. IPM addresses reliable delivery of generation resources for the delivery of electricity between regions, by setting limits to the ability to transfer power between regions using the bulk power transmission system. Within each model region, IPM assumes that adequa te transmission capacity exists to deliver any resources located in, or transferred to, the region. Summary of Changes in Operational Capacity Total operational capacity is lower in the policy scenario, primarily as a result of increases in coal retirement . Since most regions are projected to have excess capacity above their target reserve margins, most of these retirements are absorbed by a reduction in reserves that are not needed to meet the target level . Operational capacity 1 

### changes from the base case in 2014 are summarized below: Table 1. Operational Capacity Summary in 2014

Base case operational capacity (MW) 1,02 9,215 Adjusted for Changes in Policy Case: ( - ) Coal retirements -4,772 ( - ) Coal capacity derated -487 (+) New Capacity Additions + 73 (+) Lower non -coal retirements + 1, 2 88 Net Change in Policy Case - 3,8 9 8 Equals Policy Case Operational Capacity 1,025, 317 2 

### Since the model must maintain adequate reserves in each region, the reduced operational capacity of 3,898 MW in the policy case is taken from excess reserves that are not needed. In order to maintain resource adequacy in each region where coal resources retire, the model relies on this excess reserve reduction, on lower retirements of non -coal capacity and on

1 Operational capacity is any existing, new or retrofitted capacity that is not retired. 2 Numbers in this table may not sum due to independent rounding.2



### greater new capacity additions. As the table shows, the reduction in capacity (excess reserves) is the largest source of change, followed by lower non -coal retirements and new capacity ad ditions. Each of these policy case changes is discussed further below. Notably, the “retirements” examined here are IPM forecasts that could be muted by utility decisions to hold on to these generating units and make other changes for compliance, which th ey have the freedom to do under the Transport Rule. Reduction in Excess Reserves IPM uses a target reserve margin in each region 3 

### as the basis for determining how much capacity to keep operational in order to preserve resource adequacy. IPM retires capacity if it is no longer needed to provide energy for load or to provide capacity to meet reserve margin during the planning horizon of the projections. Since current regional reserves are generally higher than the target reserve margin for the region, IPM may retire reserve capacity in 2014 if it is not economic to maintain relative to alternatives such as building new capacity or transferring capacity from another region. As a result, many of the coal plants that are projected to retire in 20 14 will not need to be replaced for resource adequacy until later years when demand increases and reserves approach the target reserve margin. Table 1 above shows that operational capacity is reduced by less than one half of percent nationwide in 2014 un der the policy. This reduction will have little overall impact, since the weighted average reserve margin at the national level are projected to be approximately 25% in the base case, compared to a default NERC level of 15%. Moreover, coal retirements are distributed throughout the power grid, so there will be only small impacts at the regional level. For example, the coal generating areas in western Pennsylvania, West Virginia, Ohio and Indiana all have significant excess generation resources: these are as combined see a decreas e less than 2% in their reserve margins and the reserve margin for the combined area remains over 20%. 4 

### These excess regional reserves above the target margin can be shared among subregion to ensure adequate reserve margins within a larger reliability region. IPM permits these transfers of reserves, but limits their level to ensure the reliability of the bulk power system (see discussion below.) Although there are substantial existing regional variations in reserve margin , IPM adjusts regional capacities in 2014 to meet the specific target reserve margin in each region, through reduction in non -coal retirements, construction of new generating capacity and transfers of

3 Reserve margin targets are generally based on the NERC 2010 10 Year Assessments for the region, except in cases where there are more stringent state requirements or other exceptions. 4 See map of IPM regions and Table of target and projected reserve margi ns in the Appendix. The three regions referenced in the text are MACW, RFCO and RFCP.3



### capacity among regions to meet the specific reserve margi n in each region . Each of these adjustments in the 2014 projections is described below. Reduction in Non -coal Retirements Reducing non -coal retirements relative to these retirements in the base case is the second largest adjustment needed to balance the loss of coal capacity. Overall combined cycle, combustion turbine a nd nuclear retirements are 1,288 MW lower in the policy case compared to the base case. Lower combined cycle retirements contribute 126 MW, lower combustion turbine 307 MW, and lower nucl ear 854 MW to the total capacity made available through reduced retirements of non -coal capacity. The distribution of these retirements across IPM regions is shown in the Appendix. New Capacity Additions Very few new capacity additions are needed to accom modate coal retirements, once excess reserves and non -coal retirements relative to the bas e case are considered. Only 73 MW of new capacity are added compared to the base case, all landfill capacity5



### . Reserve Transfers In cases where it is economic to transfer reserves from a neighboring region rather that supply reserves from within a region, IPM will transfer reserves, subject to summer and winter limits that are designed to ensure that these reserves can be transferre d reliably. The transfer of reserves can occur, for example, if a region must retire a large amount of coal capacity that was used in the base case to meet reserve requirements. Although there are only a few significant differences between the base and p olicy cases in reserve transfers, some are noteworthy . For example, the net decrease in coal capacity in RFCP (838 MW in West Virginia and parts of Ohio ) is to a large extent offset by a net increase in transfer of reserves into the region ( 807 MW). Rese rve transfers by region are provided in the appendix.

5 Landfill capacity is from generation produced using capture of methane at landfills as a source for power.4



# Appendix : Tables by IPM Region A1. Projected Operational Capacity in 2014 A2. Summary of Target and Projected Reserve Margins in 2014 A3. Policy Case Retired Capacity Incremental to Base Case in 2014 A4. New Capacity in Policy Case Incremental to Base Case in 2014 A5. Capacity Transfers Region in Base and Policy Scenarios in 2014

Map of IPM Regions5



## A1. Projected Operational Capacity in 2014(MW) Non -Coal

All Generation Sources Coal Only Additional Region Base Policy Change Base Policy Change in Policy AZNM 35,544 35,560 16 9,845 9,818 - 27 43 CA- N 40,930 40,930 0 217 217 0 0 CA-S 32,676 32,676 0 213 213 0 0 COMD 24,699 25,234 535 4,238 4,229 -9 544 DSNY 9,717 9,717 0 369 366 -3 3 ENTG 40,109 40,384 275 8,397 8,397 0 275 ERCT 90,405 89,843 -562 18,456 18,401 -55 -507 FRCC 55,650 55,632 - 18 9,191 9,173 - 18 0 GWAY 31,970 31,518 -452 19,647 19,009 - 638 186 LILC 5,494 5,485 -9 -9 MACE 30,866 30,808 -58 2,438 2,379 -59 1 MACS 12,141 12,122 - 19 5,153 5,107 -46 27 MACW 31,295 30,830 -465 11,325 10,860 -465 0 MECS 27,713 27,607 - 106 10,926 10,820 - 106 0 MRO 50,193 50,249 56 20,796 20,788 -8 64 NENG 33,136 33,480 344 2,697 2,699 2 342 NWPE 19,666 19,657 -9 12,262 12,263 1 - 10 NYC 9,333 9,333 0 0 PNW 48,671 48,671 0 1,989 1,989 0 0 RFCO 48,981 48,521 -460 30,773 30,313 -460 0 RFCP 45,347 44,539 -808 33,269 32,431 -838 30 RMPA 18,464 18,417 -47 7,960 7,960 0 -47 SNV 9,196 9,196 0 2,555 2,555 0 0 SOU 62,895 62,845 -50 24,633 24,583 -50 0 SPPN 17,048 17,228 180 8,559 8,125 -434 614 SPPS 40,738 40,355 -383 12,023 12,023 0 -383 TVA 37,846 36,933 -913 13,009 12,096 -913 0 TVAK 13,352 12,997 -355 9,800 9,445 -355 0 UPNY 15,743 15,731 - 12 2,295 2,283 - 12 0 VACA 49,131 48,679 -452 18,879 18,427 -452 0 VAPW 22,259 22,251 -8 4,333 4,325 -8 0 WUMS 18,007 17,889 - 118 8,489 8,183 -306 188 Total 1,029,215 1,025,317 -3,898 314,736 309,477 -5,259 1,3616 

### A2. Summary of Target and Projected Reserve Margins in 2014 (MW) Projected Reserve Margins IPM Region Target Reserve

Margin Base Case Policy Case AZNM 13.6% 28.7% 28.6% CA- N 14.6% 17.2% 17.2% CA-S 14.8% 14.8% 14.8% COMD 15.3% 18.6% 21.3% DSNY 18.0% 18.0% 20.8% ENTG 15.0% 38.8% 37.1% ERCT 12.5% 25.6% 24.8% FRCC 19.3% 22.2% 22.2% GWAY 11.9% 61.7% 59.3% LILC 18.0% 24.6% 20.4% MACE 15.3% 15.3% 15.3% MACS 15.3% 15.3% 15.3% MACW 15.3% 55.1% 51.2% MECS 15.3% 47.8% 47.2% MRO 15.0% 15.0% 15.0% NENG 15.0% 25.7% 27.1% NWPE 12.0% 79.0% 78.9% NYC 18.0% 18.0% 18.0% PNW 20.0% 44.9% 44.9% RFCO 15.4% 25.1% 21.3% RFCP 15.3% 15.3% 15.3% RMPA 12.3% 12.3% 12.3% SNV 13.6% 46.6% 46.6% SOU 15.0% 27.8% 26.7% SPPN 13.6% 73.2% 75.2% SPPS 13.6% 20.2% 19.1% TVA 15.0% 15.5% 15.0% TVAK 15.0% 41.0% 37.2% UPNY 18.0% 21.1% 21.0% VACA 15.0% 15.0% 15.0% VAPW 15.3% 15.3% 15.3% WUMS 15.0% 33.5% 32.6%7 A3. Policy Case Retired Capacity Incremental to the Base Case in 2014 (MW) IPM Region CC Coal CT Nuclear OG Steam AZNM 0 27 0 0 0 CA- N 0 0 0 0 0 ENTG 0 0 0 0 - 275 ERCT 0 15 0 0 507 GWAY 0 621 0 0 - 186 LILC 0 0 0 0 8 MACE 0 55 0 0 0 MACS 0 45 0 0 0 MACW 0 424 0 0 0 MECS 0 82 0 0 0 NENG 0 0 0 0 -344 NWPE 0 0 0 0 0 PNW 0 0 0 0 0 RFCO 0 374 0 0 0 RFCP 0 751 0 0 0 SPPN - 126 431 -307 0 - 181 SPPS 0 0 0 0 347 TVA 0 915 0 0 0 TVAK 0 326 0 0 0 UPNY 0 0 0 0 0 VACA 0 427 0 0 0 VAPW 0 0 0 0 0 WUMS 0 279 0 -854 123 Grand Total - 126 4772 -307 -854 - 18 A4. New Capacity Policy Case Incremental to Base Case in 2014 (MW) Region CC CT Wind Other Total AZNM 0 0 43 0 43 CA- N 0 0 0 0 0 CA-S 0 0 0 0 0 COMD 0 0 0 544 544 DSNY 0 0 3 0 3 ENTG 0 0 0 0 0 ERCT 0 0 0 0 0 FRCC 0 0 0 0 0 GWAY 0 0 0 0 0 MACE 0 0 28 - 27 1 MACS 0 0 0 27 27 MACW 0 0 0 0 0 MECS 0 0 0 0 0 MRO 0 0 21 43 64 NENG 0 0 - 2 0 - 2 NWPE 0 0 - 10 0 - 10 NYC 0 0 0 0 0 PNW 0 0 0 0 0 RFCO 0 0 0 0 0 RFCP 0 0 0 30 30 RMPA 0 0 -47 0 -47 SNV 0 0 0 0 0 SOU 0 0 0 0 0 SPPN 0 0 0 0 0 SPPS 0 0 -36 0 -36 TVA 0 0 0 0 0 UPNY 0 0 0 0 0 VACA 0 0 0 0 0 VAPW 0 0 0 0 0 WUMS 0 0 0 -544 -544 Total 0 0 0 73 739



### A5. Net Capacity Transfers by IPM Region in Base and Policy Scenarios in 2014 (MW) (Net outflows are positive; net inflows negative)

Base Case Policy Case Net Change in Policy Case Region NetWinter NetSummer NetWinter NetSummer NetWinter NetSummer AZNM 0 2,307 0 2,307 0 0 CA- N 0 3,515 0 3,515 0 0 CA-S 0 - 11,014 0 - 11,014 0 0 COMD 749 321 749 321 0 0 DSNY 447 2,494 447 2,325 0 - 169 ENTG 0 142 0 902 0 760 ERCT 0 0 0 0 0 0 FRCC 0 0 0 0 0 0 GWAY 0 385 0 385 0 0 LILC 0 231 0 399 0 168 MACE 0 -4,414 0 -4,496 0 -82 MACS -899 - 2,875 -920 - 2,896 - 21 - 21 MACW 2,860 5,787 2,881 5,870 21 83 MECS 1,968 1,880 1,968 1,880 0 0 MRO 256 -3,072 256 -3,031 0 41 NENG 1,803 0 1,803 0 0 0 NWPE 0 1,966 0 1,966 0 0 NYC -437 - 2,670 -437 - 2,670 0 0 PNW 0 2,945 0 2,945 0 0 RFCO 1,832 5,944 2,656 6,767 824 823 RFCP -4,432 -6,291 -5,239 -7,098 -807 -807 RMPA 0 87 0 71 0 - 16 SNV 0 648 0 648 0 0 SOU 0 699 0 1,188 0 489 SPPN 0 570 0 570 0 0 SPPS 0 0 0 0 0 0 TVA 0 0 0 -745 0 -745 TVAK 0 166 0 166 0 0 UPNY 2,325 1,259 2,325 1,259 0 0 VACA 0 1,131 0 680 0 -451 VAPW 0 -459 0 -466 0 -7 WUMS 0 256 0 256 0 01011