EWEB 2011 RPS Compliance Report Page 1 

## Eugene Water Electric Board Oregon Renewable Portfolio Standard 2012 Compliance Report and 2013 – 2030 Implementation Plan

June 1, 2013EWEB 2011 RPS Compliance Report Page 2 

## Introduction In 2007 Oregon enacted Senate Bill 838, the Oregon Renewable Energy Act, which created a Renewable Portfolio Standard (RPS) that all Oregon electric utilities must follow. The purpose of the RPS is to decrease Oregon utilities reliance on fossil fuels for electric generation and increase their use of renewable energy sources. The Act established standards for Oregon’s electric utilities requiring that a percentage of their annual sales must come from qualifying renewable resources beginning in 2012. The exact percentage requirement and the year the requirement begins differs for large and small electric utilities, which are shown in Figure 1. The size of the utility is a percentage of Oregon’s total retail electric sales in the year. EWEB is the only Consumer Owned Utility (COU) classified as a large electric utility, along with PacifiCorp and Portland General Electric. All of Oregon’s other COUs are classified as small electric utilit ies, which under the Act do not have compliance obligations until 2025. Figure 1. Annual percentage target of qualifying electricity by year Utility Size 2012 2015 2020 2025 Large Utilities 3% or more 5% 15% 20% 25% Smaller Utilities From 1.5% to 3% 10% Smallest Utilities Under 1.5% 5% The Act also defines which types of renewable generation are considered qualifying electricity. In general, qualifying renewable resources must have an on-line date of January 1, 1995 or later, with some exceptions. 1 There are four exemptions in the Act that allow utilities to reduce the annual compliance target:

x Would cause the utility to spend over 4% of annual costs to comply with RPS.

x Force Consumer Owned Utilities (COU) to replace BPA Tier 1 power with new renewable electricity.

x Force a utility to acquire resources in excess of their load requirement.

x Force a utility to replace older renewable or nonfossil fuel generation (i.e. legacy hydro projects) with new renewable generation. These exemptions are very significant to EWEB, because the vast majority of our resources are from BPA Tier 1 resources and EWEB owned or contracted for legacy hydro. In addition to the above exemptions, there are mechanisms written into the Act that are designed to put a cap on the cost of complying with the RPS. The Act also requires Oregon utilities to offer customers the option of purchasing renewable energy. EWEB’s Greenpower program, implemented prior to the passage of the Act, is an example of such a voluntary retail renewable purchase program.

1 See Attachment 1, Table 2 for a list of conditions under which pre-1995 resources that eligible to produce qualifying electricity. A later amendment to the RPS allows for pre-1995 woody biomass to qualify, but the RECs will not be eligible for use in compliance until 2026.EWEB 2011 RPS Compliance Report Page 3 The Oregon Public Utilities Commission (PUC) oversees Investor Owned Utilities (IOU) reporting and compliance with the RPS. Because the PUC does not generally regulate Oregon COUs, the statute governing compliance reports, ORS 469A.170, states “A consumer-owned utility shall make the report to the members or customers of the utility.” This report is EWEB’s report to our Board and customers. 2 

## RPS Compliance rules The RPS requires that utilities include in their portfolio of power sold to retail customers a percentage of electricity generated from qualifyi ng renewable energy sources. Measurement of compliance is based on annual MWh of retail sales and qualifying generation. Retail sales are based on EWEB’s audited retail sales. Per rules adopted by the Oregon Department of Energy, qualifying generation volumes are based on values recorded and reported by the Western Renewable Energy Generation Information System (WREGIS). WREGIS is a large database that receives monthly generation volumes of renewable generation. Each MWh of renewable generation equals one Renewable Energy Certificate (REC). Each REC has a unique identification number that indicates the generation project and the month the electricity was generated. The purpose of this system is to insure that renewable generation and its associated REC are not used to meet the requirements of more than one program. WREGIS stores RECs from EWEB generation and long-term renewable power purchases as well as any short-term unbundled REC purchases. The compliance target for EWEB in 2012 is 5% of retail sales, subject to the four exemptions that can reduce the compliance target. Compliance is demonstrated by retiring a quantity of WREGIS RECs equal to the compliance target. Once a REC is retired in WREGIS it is no longer available to be used in any other program. But, as long as a REC has not been retired it can be retained for future compliance use or sold to another entity. Two exemptions significantly reduce EWEB’s current and projected compliance targets. The first exemption releases EWEB from reducing purch ases of BPA Tier 1 energy in order to take in qualifying electricity. The second exemption releases EWEB from replacing energy produced by non-fossil resources (such as our legacy hydro) with qualifying electricity. The policy rationale for these exemptions is that the intent of the RPS is to displace fossil fuels, not to require EWEB to replace renewable energy from our existing legacy hydro projects with renewable energy from new projects. The Act strikes a balance in doing no harm to the many legacy hydro projects in the Northwest while disqualifying them from creating RECs, in order to promote the deployment of new renewable generation projects to displace fossil fuels and spur economic development. Exempt resources cannot be used to meet RPS compliance, used for our Greenpower program, or sold, but they will not be equated with fossil fuel resources either. EWEB’s generation portfolio is overwhelmingly supplied from BPA Tier 1 power and our legacy hydro generation. Under Oregon’s RPS rules, if exempt generation in 2012 exceeds 95% of total retail sales then EWEB can reduce the 5% compliance target by the amount the exempt generation exceeds 95%. If exempt generation exceeds 100% of total retail sales then EWEB can reduce its compliance target to zero.

2 For additional information on the Oregon RPS see http://www.oregon.gov/energy/RENEW/Pages/RPS_home.aspxEWEB 2011 RPS Compliance Report Page 4 

## 2012 RPS Compliance Information RPS compliance is measured in annual MWh. Figure 2 contains annual MWh information used to calculate EWEB’s RPS compliance. Figure 2. EWEB 2012 RPS Compliance Obligation Calculations

MWh Retail Sales 2,375,070 RPS Target 5% RPS obligation BEFORE exempt 118,734
Exempt resources BPA Tier 1 purchases 2,601,050 Mid-C hydro (contract) 17,137 EWEB hydro (owned) 605,433 Total exempt resources 3,223,620

Fraction of EWEB sales from exempt resources 136% RPS obligations AFTER exempt 0 Although EWEB does not have any compliance obligation in 2012 due to exempt hydro generation, Figure 3 lists those qualifying renewable generation volumes that would have been available to meet compliance had there been a demonstrated need. Figure 3. EWEB 2012 WREGIS RECs and Banked Inventory

MWh State Line Wind 54,398 Klondike III Wind 63,956 Harvest Wind (owners share) 48,574 Foote Creek Rim I Wind 16,968 Metro Wastewater biogas 5,108 Seneca Cogen 110,104 Solar PV 1,982
Total RECs generated in 2012 303,115 Total RECs purchased in 2012 26,381 Total banked REC inventory as of Dec 31, 2011 823,514 Total RECs available in 2012 1,153,010EWEB 2011 RPS Compliance Report Page 5 EWEB acquired renewable resources ahead of need, and under Oregon’s RPS rules surplus RECs can be banked indefinitely for future compliance. Therefore, EWEB is well positioned to meet future RPS compliance, as will be discussed in the section 2013 – 2030 Implementation Plan below.


## Other uses of RECs in 2012 Greenpower sales The Greenpower program allows customers the choice to voluntarily pay an additional one cent per kWh towards new renewable generation. Just as RECs are retired to satisfy any obligations under the mandatory RPS, RECs are also retired to match the volume of sales under EWEB’s voluntary retail Greenpower program, with one REC retired for every MWh of program sales. In 2012 sales to EWEB customers under the Greenpower totaled 31,797 MWh. EWEB has retired this amount of RECs from our available portfolio of renewable generation. For additional information on EWEB’s Greenpower program please see http://www.eweb.org/greenpower

. Wholesale REC sales One of the justifications for creating the WREGIS system to track RECs was to facilitate the purchase and sales of RECs between those with generation and those that need RECs for compliance. Renewable generation from hydro, wind, and solar is variable, so it is likely that utilities will either have too little or too much generation in any year. The WREGIS system facilitates the trading of these REC imbalances across the western electric interconnect. This reduces the cost of RPS compliance because utilities can purchase the last increment of need instead of building resources that are unneeded most years. EWEB has acquired several renewable resources over the last decade that are surplus to the projected needs of our customers. We sell the power into wholesale markets as it is generated. EWEB sells some of our surplus RECs to other businesses and utilities in the wholesale market when the offered price is attractive. The remainder of EWEB’s surplus RECs are banked and available for future RPS compliance needs. In 2012 EWEB sold a total of 244,341 RECs bringing in revenue of over $1.7 million that helped to offset cost increases in other parts of EWEB’s budget. Figure 4 shows EWEB’s REC portfolio balance at the end of 2012 after including these two additional uses. Figure 4. EWEB Ending 2012 Banked Inventory

MWh Total RECs available in 2012 1,153,010 less Greenpower retirements 31,797 Wholesale sales 244,341 Total banked REC inventory as of Dec 31, 2012 876,872EWEB 2011 RPS Compliance Report Page 6 

## 2013 – 2030 Implementation Plan Since the mid-1990s EWEB built or purchased the output of portions of four wind projects, two biomass cogeneration projects, one biogas cogeneration project, and numerous small local solar PV projects that can create RECs. These pr ojects were acquired as part of a long-term vision for a diverse future resource portfolio. EWEB’s resource portfolio without these new resources consists of our BPA Tier 1 contract and EWEB’s legacy hydro projects constructed prior to 1995. As explained above, these resources do not create RECs, but their generation is exem pt from displacement in the RPS compliance target. Due to the closure of the Hynix semiconductor plant in Eugene and other economic factors, forecast retail sales for EWEB have fallen to a level that can be served by our exempt resources in even the driest years. In the 2012 Integrated Electric Resource Plan EWEB adopted a strategy of acquiring conservation sufficient to keep EWEB loads from growing in the future. Therefore, as long as EWEB’s retail sales do not increase significantly above the forecast, our exempt resources will continue to equal or exceed retail sales. Coupled with the renewable resources acquired in the last decade EWEB is well positioned to meet forecast future RPS compliance and Greenpower sales. Figure 5 shows the forecast supply and uses of RECs between 2013 and 2030. The black line represents forecast annual REC supply from EWEB generation. It declines late in the forecast due to the termination of three long-term power purchases of wind and biomass generation. The chart shows both forecasts for Greenpower sales and existing wholesale sales. The figure shows no RPS obligations because under a moderately dry water year, 90% of normal hydro, EWEB’s exempt resources exceed our forecast load throughout the planning horizon. Even under extreme drought conditions EWEB still has sufficient exempt resources to avoid any RPS compliance obligations assuming the current load and resource mix.EWEB 2011 RPS Compliance Report Page 7 Figure 5. EWEB REC Obligations under budget hydro assumptions and better

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000MWh per year EWEB Forecast REC Por tfolio Supply and Demand

Wholesale Sales Green-Power Sales RPS Obligation AFTER Exempt Resources (None) Annual REC Supply Based on 90% of normal exempt hydro generation all years.

Only in the event that the Hynix facility reopens or a similarly sized facility locates in Eugene would EWEB experience a sustained annual RPS obligation. For this reason EWEB will continue to maintain an inventory of stored RECs to allow for time to adapt should a new customer arrive. REC inventories above this level will be treated as surplus, and staff will seek to maximize their value with future sales. It would take an extremely large facility locating in Eugene to increase EWEB’s RPS REC obligation above the capability of EWEB’s existing portfolio.EWEB 2011 RPS Compliance Report Page 8 

## Attachment 1 Summary of Oregon’s Renewable Portfolio Standard