El Paso Electric Company Integrated Resource Plan for the Period 2018
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El Paso Electric Company Integrated Resource Plan For the Period 2018-2037 September 17, 2018 SAFE HARBOR STATEMENT This 2018 Integrated Resource Plan ("IRP" or alternatively, "Plan") includes statements that are forward-looking statements made pursuant to the safe harbor provisions of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding load forecasts; statements regarding expected capital expenditures; statements regarding generation facilities' expected retirement dates; and statements regarding the expected remaining useful life of resources. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those expressed in forward-looking statements is contained in El Paso Electric Company's ("EPE" or the "Company") most recently filed periodic reports and in other filings made by EPE with the U.S. Securities and Exchange Commission (the "SEC"), and include, but is not limited to: • Increased prices for fuel and purchased power and the possibility that regulators may not permit EPE to pass through all such increased costs to customers or to recover previously incurred fuel costs in rates • Full and timely recovery of capital investments and operating costs through rates in Texas and New Mexico • Uncertainties and instability in the general economy and the resulting impact on EPE's sales and profitability • Changes in customers' demand for electricity as a result of energy efficiency initiatives and emerging competing services and technologies, including distributed generation • Unanticipated increased costs associated with scheduled and unscheduled outages of generating plant • Unanticipated maintenance, repair, or replacement costs for generation, transmission, or distribution facilities and the recovery of proceeds from insurance policies providing coverage for such costs • The size of our construction program and our ability to complete construction on budget and on time • Potential delays in our construction schedule due to legal challenges or other reasons • Costs at Palo Verde Generating Station • Deregulation and competition in the electric utility industry • Possible increased costs of compliance with environmental or other laws, regulations and policies • Uncertainties and instability in the financial markets and the resulting impact on EPE's ability to access the capital and credit markets • Actions by credit rating agencies El Paso Electric Company 2018 Integrated Resource Plan • Possible physical or cyber-attacks, intrusions or other catastrophic events • Other factors of which we are currently unaware or deem immaterial EPE's filings are available from the SEC or may be obtained through EPE's website, http://www.epelectric.com. Any such forward-looking statement is qualified by reference to these risks and factors. EPE cautions that these risks and factors are not exclusive. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Forward-looking statements speak only as of the date of this presentation, and EPE does not undertake to update any forward-looking statement contained herein. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events, except to the extent the events or circumstances constitute material changes in this IRP that are required to be reported to the New Mexico Public Regulation Commission ("NMPRC" or "Commission") pursuant to its IRP Rule, 17.7.3.10 New Mexico Administrative Code ("NMAC"). El Paso Electric Company 2018 Integrated Resource Plan TABLE OF CONTENTS I. EXECUTIVE SUMMARY ................................................................................................ 1 A. 2018 IRP Four-Year Action Plan ............................................................................... 4 II. IRP PLANNING OVERVIEW........................................................................................... 4 A. Service Territory/Company Overview ....................................................................... 6 B. Summary of the 2015 IRP Action Plan and Status .................................................... 9 III. DESCRIPTION OF EXISTING RESOURCES ................................................................. 9 A. Supply Side Resources ............................................................................................... 9 1. Generating facilities and expected retirement dates ........................................... 9 2. Purchased Power Agreements .......................................................................... 12 B. Environmental Impacts of Existing Supply-Side Resources ................................... 13 1. Air Emissions ................................................................................................... 13 2. Climate Change ................................................................................................ 15 3. Modeling Carbon and Emissions Cost. ............................................................ 16 4. Water Resources ............................................................................................... 16 5. Biological resources ......................................................................................... 17 6. Cultural resources ............................................................................................. 17 C. Demand Side Resources .......................................................................................... 18 D. Storage Resources .................................................................................................... 22 E. Reliability Requirements ......................................................................................... 22 F. Existing Transmission Capabilities.......................................................................... 24 G. Back-Up Fuel Capabilities and Options .................................................................. 31 IV. CURRENT LOAD FORECAST ...................................................................................... 32 A. Forecast Summary ................................................................................................... 32 B. Load Forecast Methodology and Inputs .................................................................. 32 C. Weather Adjustment Detail...................................................................................... 34 D. Demand-Side Savings Detail ................................................................................... 35 E. Distributed Generation ............................................................................................. 35 F. Load Forecast Scenarios .......................................................................................... 36 G. Historical Forecast Accuracy and Comparison ........................................................ 38 V. LOAD AND RESOURCES TABLE ................................................................................ 40 VI. IDENTIFICATION OF RESOURCE OPTIONS (EXISTING CHARACTERISTICS AND INTERACTIONS) .................................................................................................. 43 A. Supply Side Resources ............................................................................................. 43 1. Solar Photovoltaic Resource Options ............................................................... 44 2. Solar Coupled with Battery Storage ................................................................. 44 3. Wind Resource Options .................................................................................... 45 4. Biomass Resource Option ................................................................................ 45 5. Geothermal Resource Option ........................................................................... 45 6. Combined Cycle Resource Option ................................................................... 46 7. Combustion Turbine Resource Option ............................................................. 46 8. Gas Reciprocating Resource Options ............................................................... 46 B. Energy Storage ......................................................................................................... 46 C. Demand Side Resources .......................................................................................... 47 VII. DESCRIPTION OF THE RESOURCE AND FUEL DIVERSITY ................................. 55 El Paso Electric Company Page i 2018 Integrated Resource Plan VIII. IDENTIFICATION OF CRITICAL FACILITIES SUSCEPTIBLE TO SUPPLY- SOURCE OR OTHER FAILURES .................................................................................. 56 IX. DETERMINATION OF THE MOST COST EFFECTIVE RESOURCE PORTFOLIO AND ALTERNATIVE PORTFOLIOS ............................................................................. 57 A. Most cost-effective portfolio (Base Case) ............................................................... 61 B. Considerations – Reliability ....................................................................................