State Econometric Models

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1 State Econometric Models

2 Model Development We used a similar process to last year to find models with a good fit, with an appropriate mix of explanatory variables, and that passed the tests for serial correlation and heteroskedasticity. Added another year of history (2013) Switched to the population-weighted virtual weather station For some states, changes were made to the explanatory variables or sample periods changes (if any) are shown for each state 2

3 Dependent and Explanatory Variables Variables Eviews name Units Dependent variable: Electricity sales ELECTRICITY_SALES Gwh Explanatory variables: Electricity prices REAL_ELECTRICITY_PRICE Cents/Kwh in 2009 dollars * Natural gas prices REAL_NATURAL_GAS_PRICE Dollars/Mcf in 2009 dollars * Real personal income REAL_INCOME Thousands of 2009 dollars * Population POPULATION Number of people Manufacturing employment MANUFACTURING_EMP Number of jobs Non-manufacturing employment NON_MANUFACTURING_EMP Number of jobs Non-farm employment NON_FARM_EMP Number of jobs Gross state product REAL_GSP Millions of chained 2009 dollars Cooling degree days CDD Fahrenheit Heating degree days HDD Fahrenheit * Original data was in nominal dollars. SUFG converted it to real 2009 dollars using state level CPI from IHS Global Insight. 3

4 Arkansas Sample: Included observations: (weather at means) C REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Changes: electricity price did not use a moving average previously; natural gas price was dropped 4

5 Illinois Sample: Included observations: (weather at means) C REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: per capita income and non-manufacturing employment have been replaced by GSP 5

6 Indiana Sample: Included observations: (weather at means) C REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic No changes in drivers or starting year from 2014 model 6

7 Sample: Included observations: 24 Iowa 2013 (weather at means) C REAL_ELECTRICITY_PRICE REAL_NATURAL_GAS_PRICE (-2) REAL_INCOME/POPULATION REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: natural gas price was added 7

8 Kentucky The Paducah Gaseous Diffusion Plant (PGDP) closed in mid-2013, a large (3 GW) load on the TVA system Accounted for more than 10% of the state s retail sales SUFG could not fit an econometric model with that drop in load We propose to develop a model using a load adjustment 8

9 KY Load Adjustment We propose to adjust the 2013 historical load up to what it would have been with PGDP operational, develop the econometric model, then subtract the PGDP load from the forecast We will make the same adjustments when determining the allocation factor Since the load adjustments occur to the portion of the load outside of the MISO footprint, any errors introduced by the adjustment should have less impact on the LRZ forecast 9

10 Kentucky Sample: Included observations: (weather at means) C POPULATION CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: starting year has been changed from 1990 to

11 Louisiana Sample: Included observations: (weather at means) C REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: per capita income and manufacturing employment have been replaced by GSP 11

12 Michigan Sample: Included observations: (weather at means) C REAL_ELECTRICITY_PRICE(-2) REAL_INCOME/POPULATION REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: starting year has been changed from 1992 to

13 Minnesota Sample: Included observations: (weather at means) C REAL_INCOME E CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Changes: starting year has been changed from 1990 to 1992; electricity and natural gas prices now use 4-year moving averages instead of 3-year moving averages 13

14 Mississippi Sample: Included observations: (weather at means) C REAL_INCOME(-1) E REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Changes: starting year has been changed from 1991 to 1993; electricity price now uses 2-year moving averages instead of 3-year moving averages; per capita income has been replaced by a lagged total income 14

15 Missouri Sample: Included observations: (weather at means) C POPULATION NON_MANUFACTURING_EMP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: starting year has been changed from 1997 to

16 Montana Sample: Included observations: (weather at means) C REAL_ELECTRICITY_PRICE REAL_INCOME/POPULATION MANUFACTURING_EMP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Prob(F-statistic) No changes in drivers or starting year from 2014 model 16

17 North Dakota Sample: Included observations: (weather at means) C NON_MANUFACTURING_EMP HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic No changes in drivers or starting year from 2014 model 17

18 South Dakota Sample: Included observations: (weather at means) C REAL_ELECTRICITY_PRICE(-2) REAL_NATURAL_GAS_PRICE(-2) POPULATION CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Change: electricity and natural gas prices now use 2-year lagged prices instead of 3-year moving averages 18

19 Texas Sample: Included observations: (weather at means) C REAL_ELECTRICITY_PRICE(-2) REAL_NATURAL_GAS_PRICE(-2) REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Changes: starting year has been changed from 1990 to 1996; electricity prices now uses 2-year lagged prices instead of 5-year moving averages; per capita income has been dropped; natural gas prices have been added 19

20 Wisconsin Sample: Included observations: (weather at means) C REAL_NATURAL_GAS_PRICE REAL_GSP CDD HDD R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Durbin-Watson stat F-statistic Changes: electricity price did not use a moving average previously; per capita income was dropped 20

21 Next Steps Re-calculate the allocation models to convert state-level forecasts to LRZ level forecasts Develop improved LRZ energy to peak demand conversion models Incorporate econometric model drivers Run and validate state econometric models July workshop 21

22 More Next Steps Develop confidence intervals that capture uncertainty of macroeconomic variables Determine EE/DR/DG adjustments Determine LRZ level energy and peak demand forecasts Determine MISO system energy and peak demand forecasts September workshop Develop forecast report 22

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