BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA

Application of Nevada Power Company d/b/a NV Energy

Seeking Acceptance of the First Amendment to its 2013-

2032 integrated resource plan and its Energy Supply Plan Docket No. 14-05___Update for 2015, which include an emissions reduction and

capacity replacement plan filed pursuant to NRS 704.7311

et seq.

VOLUME 4 OF 15

EMISSIONS REDUCTION AND CAPACITY REPLACEMENT PLAN

NARRATIVES

DESCRIPTION PAGE NUMBER

NARRATIVES

Load Forecast, Market Fundamentals, Fuel and Purchase Power

Price Forecasts and Demand Side Programs REDACTED 2

Supply Side Plan, Transmission Plan, Economic Analysis, And

Financial Plan REDACTED 128

NARRATIVE

LOAD FORECAST, MARKET FUNDAMENTALS, FUEL

AND PURCHASE POWER PRICE FORECASTS & DEMAND

SIDE PROGRAMS

Page 2 of 327

NEVADA POWER COMPANY d/b/a NV ENERGY 2014

EMISSIONS REDUCTION AND CAPACITY

REPLACEMENT PLAN

LOAD FORECAST, MARKET FUNDAMENTALS, FUEL

AND PURCHASE POWER PRICE FORECASTS &

DEMAND SIDE PROGRAMS

SECTION 1. LOAD FORECAST ....................................................................................6

A. FORECAST SUMMARY ........................................................................... 6 B. LOAD FORECAST METHODOLOGY .................................................. 10 C. COMPARISON WITH THE 2014 ESP UPDATE FORECAST .............. 11 D. FORECAST MODEL DEVELOPMENT ................................................. 17

1. Forecast Drivers ............................................................................17 2. Forecast Models.............................................................................32 3. Customer Class Sales and Customer Forecasts ............................40 4. System Energy, Sales and Peak Forecasts.....................................47

E. FORECAST SCENARIOS ....................................................................... 49 F. DSM/DR USED IN THE FORECASTS VS. FINAL DSM-DR ............... 50 G. EXTREME WEATHER TRANSMISSION PEAK FORECAST ............ 51

SECTION 2. MARKET FUNDAMENTALS................................................................52

A. POWER FUNDAMENTALS ................................................................... 52 1. WECC Capacity and Energy .........................................................52 2. Future Generation Additions .........................................................57 3. Renewable Energy in the Western States.......................................58 4. Challenges in Meeting RPS Targets ..............................................59 5. Resource Adequacy........................................................................60 6. Regional Power Price Trends........................................................61 7. Future Price Drivers......................................................................64

B. NATURAL GAS FUNDAMENTALS ..................................................... 66 1. Demand ..........................................................................................68 2. Supply.............................................................................................73 3. Transport and Storage ...................................................................89 4. Price Trends ...................................................................................95

C. COAL FUNDAMENTALS ...................................................................... 97

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1. Supply.............................................................................................97 2. U.S. Coal and Consumption.........................................................104 3. Coal Transportaion ......................................................................105

SECTION 3. FUEL AND PURCHASED POWER PRICE FORECASTS ..............107

A. BASE GAS PRICE FORECAST ............................................................ 107 B. BASE MARKET IMPLIED HEAT RATE FORECAST ........................ 109 C. BASE POWER PRICE FORECAST ...................................................... 110 D. HIGH AND LOW GAS PRICE FORECASTS ....................................... 111 E. HIGH AND LOW POWER PRICES ...................................................... 113 F. CAPACITY PRICE FORECAST FOR MARKET PURCHASES ......... 114 G. COAL PRICE FORECAST .................................................................... 115 H. FORECASTS & MODELING OF POTENTIAL CARBON COSTS .... 116

SECTION 4. DEMAND SIDE PLAN ..........................................................................123

A. ENERGY EFFICIENCY AND DEMAND RESPONSE ........................ 123

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Table of Figures Figure LF-1: Historical (Weather Normalized) and Forecasted Sales (GWH) .............................. 7 Figure LF-2: Historical and Forecasted Customer Counts and Average Use Per Customer.......... 8 Figure LF-3: Historical (Weather Normalized) and Forecasted Energy and Demand ................... 9 Figure LF-4: Forecast Process ...................................................................................................... 10 Figure LF-5: Nevada Power System Peak Forecasts .................................................................... 14 Figure LF-6: Nevada Power System Energy Forecasts ................................................................ 14 Figure LF-7: Population Growth Rate Forecast Comparison ....................................................... 15 Figure LF-8: Real Household Income Growth Rate Forecast Comparison.................................. 16 Figure LF-9: Real Gross Metro Product (GMP) Growth Rate Forecasts ................................. 16 Figure LF-10: Non-Manufacturing Employment Growth Rate Forecasts.................................... 17 Figure LF-11: Historical Class Sales Trends ................................................................................ 18 Figure LF-12: Residential Customers (2003 to 2013) .................................................................. 19 Figure LF-13: Weather Normalized Residential Average Use (2003 to 2013) ............................ 20 Figure LF-14: Small C&I Customers (2003 to 2013) ................................................................... 21 Figure LF-15: Small C&I Average Use (2003 to 2013) ............................................................... 22 Figure LF-16: Large C&I Sales (2003 to 2013) ........................................................................... 22 Figure LF-17: Average Annual Hotel/Motel Rooms (2003 to 2013) ........................................... 23 Figure LF-18: Clark County Population (2003 to 2023) .............................................................. 24 Figure LF-19: Real per Household Income (2003 to 2023) ......................................................... 25 Figure LF-20: Employment (2003 to 2023).................................................................................. 26 Figure LF-21: Real Output (2003 to 2023) ................................................................................... 26 Figure LF-22: Prices (2003 to 2023) ............................................................................................ 27 Figure LF-23: Total Residential Energy Intensity (2003 to 2013) ............................................... 28 Figure LF-24: Total Commercial Energy Intensity (2003 to 2023) ............................................. 29 Figure LF-25: Annual Calendar CDD (Las Vegas, 2003 to 2023)............................................... 30 Figure LF-26: Annual Calendar HDD (Las Vegas, 2003 to 2023)............................................... 30 Figure LF-27: Annual DSM Savings Estimates (2005 to 2023)................................................... 31 Figure LF-28: Residential Average Use Model Results ............................................................... 33 Figure LF-29: Residential Customer Forecast Model .................................................................. 34 Figure LF-30: Small C&I Average Use Model ............................................................................ 35 Figure LF-31: Small C&I Customer Forecast Model ................................................................... 36 Figure LF-32: Large C&I Sales Forecast Model .......................................................................... 37 Figure LF-33: Public Authority Sales History and Forecast (MWh) ........................................... 38 Figure LF-37: Indexed Monthly Large C&I Sales, Real GMP, Hotel/Motel Rooms Employment

and the Large C&I Economic Variable ........................................................................................ 42 Figure MF-1: NERC Regions ....................................................................................................... 52 Figure MF-2: WECC Sub-Regions............................................................................................... 53 Figure MF-3: WECC Capacity by Fuel Type (2013) ................................................................... 54 Figure MF-4: 2013 Generation by Fuel Type (U.S. WECC) ....................................................... 55

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Figure MF-5: U.S. Natural Gas Consuption for Electric Generation ........................................... 56 Figure MF-6: WECC Generation Under Construction (MW) ...................................................... 57 Figure MF-7: WECC Natural Gas-Fired Under Construction (MW)........................................... 58 Figure MF-8: Renewable Standards in Western States ..........................