POWER COSTS RISING: WHAT YOU CAN DO Nora Sheriff Western Plastics - - PowerPoint PPT Presentation

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POWER COSTS RISING: WHAT YOU CAN DO Nora Sheriff Western Plastics Association March 18, 2014 March 18, 2014 2 Rates & Forecasts Californias Key Energy Agencies and Actors Key Energy Policies Loading Order Demand

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POWER COSTS RISING: WHAT YOU CAN DO

Nora Sheriff Western Plastics Association March 18, 2014

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SLIDE 2
  • Rates & Forecasts
  • California’s Key Energy Agencies and Actors
  • Key Energy Policies
  • Loading Order
  • Demand Response
  • 33% Renewable Portfolio Standard
  • GHG Emissions Regulation (C/T, Utility Allowances)
  • Low Income Subsidies
  • Rate Impacts

March 18, 2014

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SLIDE 3

March 18, 2014

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2014 Rate Forecasts***

SCE PG&E

  • System Average Rate
  • 1/1

16.313 ¢/kWh (1.3%)

  • 5/1

17.03 ¢/kWh (4.4%)

  • 12/31

↑

  • E20-T
  • 1/1

10.232 ¢/kWh (3.6%)

  • 5/1

11.043 ¢/kWh (7.9 %)

  • 12/31

↑

March 18, 2014

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  • System Average Rate
  • 1/1 15.7 ¢/kWh
  • 4/1

16.1 ¢/kWh (2.5%)

  • 6/1 17.1 ¢/kWh (9.0%)
  • 12/31 ??
  • TOU-8 Sub
  • 1/1

8.6 ¢/kWh

  • 4/1 9.1 ¢/kWh (6.3%)
  • 6/1 9.8 ¢/kWh (14.2%)
  • 12/31 ??

***caveats: actual rates will differ; forecast, subject to change

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SLIDE 5

Longer Term Rate Outlook

E3 Study: Investigating a Higher RPS

  • Foundation at 33% RPS assumes a 47%

increase in system average retail rates

  • 14.4¢/kWh in 2012 to 21.1¢/kWh in 2030 ($2012)
  • Achieving a 40% RPS could add another 0.7¢/kWh
  • Achieving a 50% RPS could increase rates 9-23% relative

to a 33% RPS

March 18, 2014

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KEY AGENCIES & ACTORS

Overview CPUC & Legislature

March 18, 2014

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Overview (1): Key Agencies & Actors

March 18, 2014

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Overview (2): Who Does What

  • FERC: Transmission planning and project approval;

transmission rates; regulates RTOs and ISOs, e.g., CAISO

  • CEC: Future energy need forecasting; 50 MW+ thermal

power plant siting; energy efficiency building standards; transportation fuels; “public interest” research

  • AQMD: county or regional agencies with primary duty of

controlling air pollution from stationary sources

  • ARB: regulation of “air pollutants while recognizing and

considering the effects on the economy of the state”

  • Legislature: drafts and votes on bills
  • Governor: signs or vetoes bills; issues executive orders

March 18, 2014

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CPUC (1): Scope of Regulation

  • Regulates only “public utilities” unless given express

statutory authority (e.g., ESPs)

  • Regulates utility-owned infrastructure, services and rates

in several areas:

  • Electricity generation, transmission* and

distribution infrastructure

  • Natural gas distribution and storage
  • Telecommunications services
  • Water services
  • Limited railroad oversight (safety and haz mat)

*Transmission revenue requirement and rates set by FERC, but CPUC is lead CEQA agency for siting Transmission lines

March 18, 2014

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CPUC (2): Commissioners

  • 5 commissioners appointed by Governor for 6 year terms
  • Governor appoints one of 5 commissioners as President
  • Current commission
  • Michael Peevey (President, Dec. 2014)
  • Carla Peterman (Dec. 2018)
  • Michael Picker (Jan. 2019)
  • Mike Florio (Jan. 2017)
  • Catherine Sandoval (Jan. 2017)

March 18, 2014

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CPUC: (3) Divisions

  • Advisors
  • Energy Division
  • Policy & Planning
  • Legal Division
  • Executive Office
  • Administrative Law Judges
  • Division of Ratepayer Advocates

March 18, 2014

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CPUC (4): Successful Navigation

  • Know your Commissioners
  • Know your Staff
  • Know when (and when not) to speak up
  • Know the rules and procedures
  • Be cautious with alliances
  • Be aware of landmines

March 18, 2014

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Legislature: New Leaders, New Bills

  • Turnover on key energy committees
  • Senate Energy: Jerry Hill?
  • Assembly Utilities and Commerce
  • 2-3 members vying for chair
  • Key energy bills on post 2020 carbon emission goals
  • Quirk Bill (AB 2050)
  • Requires CARB evaluation of post-2020 targets based on scalable

technologies (to infinity and beyond) “that ensure cost effectiveness and maintenance of local and system wide electricity and fuel reliability”

  • Pavley Bill (SB 1125)
  • Requires a CARB recommendation by 1/1/2016 to Governor and legislature

for timetable for post-2020 emissions targets with focus on “short-lived climate pollutants with high global warming potentials”

  • What can you do?
  • Grass-roots engagement through WPA & Laurie Hansen Sheets

March 18 2014

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KEY ENERGY POLICIES

Loading Order Energy Efficiency Demand Response 33% Renewable Portfolio Standard GHG Emissions Regulation (C/T, Utility Allowances) Low Income Subsidies

March 18, 2014

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Loading Order

  • Prioritizes resources as follows:
  • Energy Efficiency (EE) and Demand Response (DR)
  • Renewables and Distributed Generation (DG) (including Waste

Heat Recovery Combined Heat and Power)

  • Conventional Fossil Generation
  • Goals for preferred resources:
  • EE: 10% savings over 10 years
  • DR: 5% system peak load reduction from price-responsive DR
  • RPS: 33% by 2020
  • CHP: Gov. Brown goal 6,500 MW of new CHP by 2030

March 18, 2014

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Energy Efficiency: State of Flux

  • 2013-2014 Incentive Budgets
  • Industrial: SCE $85 million; PG&E $84 million
  • Commercial: SCE $210 million; PG&E $209 million
  • Longer program cycle (10 years) being considered in new

rulemaking, R.13-11-005

  • Policy goal: Avoid additional generation
  • Rulemaking Purposes
  • Fund current portfolios
  • Implement rolling portfolio
  • Avoid disruptions to the program, reduce burdens, and facilitate a

focus on longer term projects

March 18, 2014

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EE Rulemaking

  • Phase 1:
  • Extend funding for the administration of existing energy efficiency

portfolio

  • Limited Changes
  • Explicitly within scope: pilot project for unfired “bottoming cycle” CHP
  • Raise net export customer eligibility (i.e., exception to savings

measurement)

  • Phase 1 expected to conclude May 2014
  • Phase 2: Rolling portfolio
  • Phase 3: All other issues including custom projects
  • What can you do?
  • EE audits, incentives, Energy Management Plans
  • Grass-roots/interested party engagement at CPUC

March 18, 2014

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DR (1): Key Programs DBP and BIP

Demand Bidding Program

  • Year-round bidding program
  • Minimum 2-hour period with Day-Ahead price incentives

($0.50/kWh) to reduce usage during an event

  • Event triggers:
  • CAISO DA load forecast exceeds 43,000 MW
  • CAISO issues Alert Notice or
  • IOU determines resources may be inadequate

Base Interruptible Program

  • 180 hours annual limit; max 6 hour events; max 10 events/month
  • CAISO or IOU can trigger
  • Monthly demand credit on utility bill
  • 4 MW load drop can be credited between $390,000 - $435,000 annually

March 18, 2014

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Demand Response (2): State of Flux

  • Continuation of existing programs for 2015-2016 bridge

funding, but…

  • CPUC focus on full integration of price-responsive

demand response into CAISO market and expansion of non-utility demand response programs

  • February 6, 2014: BIP events in northern and southern

California due to natural gas supply constraints

  • Critical Future Unknowns
  • Costs
  • Operational Expectations

March 18, 2014

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33% RPS (1): RPS Rules & IOU Progress

  • On target to meet compliance requirements

March 18, 2014

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33 % RPS (2): Actual Average Costs

  • March 18, 2014

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33 % RPS (3): Cost Containment

  • 33% RPS by 2020 and maintained thereafter
  • RPS contract costs have risen and fallen
  • 5.4 ¢/kWh average in 2003
  • 13.3 ¢/kWh average for contracts executed in 2011
  • 7.5 ¢/kWh average for contracts executed in 2013
  • 8.4 ¢/kWh for bundled
  • Recent RPS bids are lower, but a bid ≠ delivered energy
  • Trajectory of actual average RPS costs is up
  • Bottom line:
  • E3 January 2014 Report estimated that reaching the 33%

RPS will increase rates significantly

March 18, 2014

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RPS Costs: What can you do?

  • Support Joint Revised Alternate Proposal for Procurement

Expenditure Limitation of SCE and Large Users (CLECA/CMTA/EPUC)

  • In comments by April 3, 2014
  • Ex parte grass-roots letters to Commissioners
  • Grass roots letters to legislators
  • Raising cost concerns and warning against going beyond 33%

May 4, 2012

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GHG (1): CARB C/T

  • “a hard cap on about 85% of total statewide GHG emissions”
  • AB 32
  • Economy-wide cap on GHG emissions levels with a goal of

reduction to 1990 levels by 2020

  • Focus of regulation is on wholesale level
  • 25% of GHG emissions attributable to electricity sector
  • CARB & CPUC are implementing AB 32 for electricity sector
  • CARB Tools to achieve emissions reduction goal
  • C/T
  • EE
  • RPS
  • CHP

March 18, 2014

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GHG (2): CARB C/T cont’d

  • First compliance period (2 yrs) started Jan. 1, 2013;

company allowances to be turned in Nov. 2014

  • 2013 to 2020, IOUs to get ~470 M allowances under C/T
  • C/T regulations force IOUs to submit all allowances to

auction

  • 2015: transportation, fuel (including natural gas) sectors

will be included

March 18, 2014

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IOU 2013 Allowance Sales

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Auction and Utility Results

Total Auction Proceeds $ 972,857,413 Utility Auction Proceeds $ 776,142,780 Sales Weighted Average Price (MT) $ 12.00 Average IOU Price (MT) $ 11.87

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CARE

  • Cost of CARE Subsidy
  • SCE 2013: $450 million
  • PG&E 2013: $710 million
  • Average Effective Discount to be 30-35%
  • SCE 2013: 31%
  • PG&E 2013: 48%
  • Non-residential classes pay ~2/3 of CARE costs
  • Impact on Large Power
  • SCE: ~6.1 mills/kwh
  • PG&E: ~9 mills/kWh

March 18, /2014

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IMPACTS ON RATES

March 18, 2014

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SCE Large Power v. System Average

March 18, 2014

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General Rate Cases

  • GRC Phase I sets Base Revenue Requirement (RR)

(minus Transmission RR, which is set at FERC)

  • GRC Phase II sets:
  • Marginal Costs
  • Allocation of RR to Rate Classes in TY and interim years
  • Rates

New “Safety” Overlay will only increase pressure on rates

March 18, 2014

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SCE PG&E 2003: $2.814 B 2003: $3.405 B 2006: $3.749 B 2007: $3.880 B 2009: $4.829 B 2011: $4.846 B 2012: $5.399 B 2014: $7.815 B? (pending) 2015: $6.462 B? (pending) 2017: TBD

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SCE ERRAS

Year SCE Forecast Amount Status 2014 ERRA Forecast $5.844 billion, reduced by $466 million for deferral of net SONGS costs from 2013 u/c Pending PD; anticipated implementation in rates 6/1/2014 2013 ERRA Forecast $3.797 billion Approved 10/31/13; implemented 11/2013; defers $321 million in SONGS costs and $321 million in GHG costs

May 4, 2012

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Bottom Line: Expect Higher Rates

  • Energy policies put pressure on generation costs, require

infrastructure investments and result in cost shifts

  • SCE forecast “for 2012-14… it will invest an additional

$12 billion in utility capital projects”

March 18, 2014

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What Can You Do?

  • Energy Efficiency
  • Audit
  • Key Measures
  • Energy Management Program
  • Demand Response
  • BIP and DBP
  • Engage on RPS Cost Containment at CPUC and

Legislature on grass roots level and as interested parties

  • Engage on key energy bills with Legislature on grass

roots level and as interested parties

  • Consider Self-Generation
  • Waste heat recovery combined heat and power

May 4, 2012

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Self Generation (Multiple Types)

  • Industrial facilities may have self-generation potential
  • Issues to Consider:
  • Availability of Incentives
  • Interconnection
  • Exit Fees
  • $13.89/MWh for SCE TOU-8-Sub departing for waste heat recovery CHP
  • $15.11/MWh for PG&E E-20T departing for waste heat recovery CHP
  • Standby Service

March 18, 2014

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QUESTIONS?

Nora Sheriff Alcantar & Kahl nes@a-klaw.com 415-421-4143

March 18, 2014

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