Laserfiche WebLink
Attachment 2 to the Resource Planning Coalition Participation Agreement dated May 1, 2010 <br />A PRA would use probabilistic methods which allow for more detailed and complete analysis <br />than simple sensitivities. It would use portfolio diversification strategies which balance the risk <br />exposure to carbon, gas, and market price risk. A PRA would precisely determine what the cost <br />premium should be to reduce exposure to high and extreme portfolio prices, as well as provide <br />"tiebreakers' between portfolios that would appear closely comparable without a risk analysis. <br />A PRA would provide market intelligence useful for evaluating all resources (including wind), <br />updates to Phase I forecasts, and possibly could consider non-fuel and non-emissions risks such <br />as capital cost risk. Non-physical means of risk reduction (such as changes to the structure of <br />gas supply contracts) would also be analyzed, so that we might verify whether an apparently <br />risky proposal had another means of reducing risk or cost. <br />A possible PRA is being treated differently from the other stages because it may not prove to be <br />necessary. That is, a qualitative screening of RFP responses may find a relatively limited <br />number of viable candidate portfolio proposals. This outcome is not expected, so if a PRA is <br />budgeted but not approved at the start of Phase 2 and it later is determined that it is not <br />necessary, no funds will have changed hands and budgets may be reduced accordingly. <br />Approval can be delayed until after a qualitative screening confirms that a PRA is necessary. <br />This qualitative screening is expected to be complete on December 15, 2010. <br />The referenced Phase 2 B -Portfolio Risk Analysis is therefore not approved as part of this <br />agreement. It is intended that there will be a colleMive decision to approve Phase 2 B. An <br />Attachment 2 B will be developed to define its scope, deliverables, and funding, and will be <br />approved separately. Approval of the PRA and any change in the cost allocation will require <br />consensus approval. The estimated additional cost for such an analysis is tentatively expected <br />to be $75,000, and the group envisions that a cost allocation similar to Phase 1 and Phase 2 <br />would be used in Phase 2 B. <br />(Signatures to follow.] <br />Page 4 of 10 <br />