XN000022-1983-08-18 — Page 3

THURSDAY, AUGUST 18, 1983

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SUMMARY OF CONSULTANTS' CONCLUSIONS AND RECOMMENDATIONS ****

THE FOLLOWING IS A SUMMARY OF THE CONCLUSIONS AND

RECOMMENDATIONS REACHED BY BURNS AND ROE, INC IN THEIR FIRST REPORT ON THE TECHNICAL OPERATIONS OF THE TWO POWER COMPANIES.

THE

CONSULTANTS' TERMS OF REFERENCE ARE SET OUT IN APPENDIX A OF THE EXECUTIVE SUMMARY.

1. METHODS USED TO ESTIMATE GENERATING CAPACITY AND RESERVE

REQUIREMENTS

CONCLUSIONS

(A) THE TECHNICAL AND ECONOMIC FORMULAE USED BY THE COMPANIES

TO ESTABLISH TARGET LEVELS OF SYSTEM RELIABILITY AND ADEQUACY, AND HENCE NECESSARY RESERVE CAPACITY, ARE COMPATIBLE WITH EACH OTHER AND IN GENERAL CONFORM TO THE FORMULAE USED BY EQUIVALENT UTILITY COMPANIES IN OTHER INDUSTRIALISED COUNTRIES;

(B) THE GENERATION EXPANSION PLANS OF BOTH COMPANIES ARE FOUNDED

ON GOOD ENGINEERING PRACTICES AND SOUND ECONOMIC JUDGEMENT AND ARE SUFFICIENTLY FLEXIBLE TO ALLOW FOR FUTURE CHANGES IN ECONOMIC CONDITIONS WITHOUT THE RISK OF OVER-PROVISION OF

GENERATING CAPACITY;

(C) THE RELATIVELY HIGH LEVEL OF HEC RESERVE CAPACITY IN THE PAST WAS LARGELY DUE TO THE SMALL AND ISOLATED NATURE OF HEC'S SYSTEM. SINCE THE INTRODUCTION OF INTERCONNECTION BETWEEN THE HEC AND CLP SYSTEMS IN 1981, HEC'S RESERVE CAPACITY HAS BEEN REDUCED TO INTERNATIONALLY ACCEPTED LEVELS AND

(D) HEC USES RELATIVELY HIGH FORCED OUTAGE RATES (1) * IN FORMULATING ITS GENERATION EXPANSION PLANS (ALTHOUGH THESE PLANS ARE, IN GENERAL JUSTIFIED).

RECOMMENDATIONS

(A) THE COMPANIES REVIEW THE IR TARGET LOSS OF LOAD PROBABILITY

(LOLP) INDICES (2)*, UPON WHICH THEIR EXPANSION PLANS ARE PRIMARILY BASED, AFTER GAINING EXPERIENCE WITH THE IR COAL-FIRED UNITS; AND

(B) HEC REVIEW ITS ASSUMED FORCED OUTAGE RATES, ALSO AFTER

GAINING EXPERIENCE WITH ITS COAL-FIRED UNITS.

* (1) FORCED OUTAGE RATES ASSUMED UNSCHEDULED PERIODS OF

UNAVAILABILITY OF GENERATING UNITS

* (2) LOLP INDEX: THE NUMBER OF DAYS PER YEAR OR NUMBER OF HOURS

PER YEAR WHEN CUSTOMERS' DEMAND WILL EXCEED GENERATING

CAPACITY

/2. IMPROVEMENT TO