BALANCING CONSERVATION, RENEWABLE ENERGY, AND FINANCIAL STRENGTH Presentation to the Gainesville City Commission November 1, 2004
Executive Summary 2
Here’s What We Hear From Our Community Outreach: • Our Community Expects: - A Clean Environment - Reliable Electric Supplies - Affordable Electric Rates - A Financially Strong Utility • Our Community Wants To Use Energy Conservation* And Renewable Energy Resources To Help Meet These Expectations. * Short-hand for Demand Side Management (DSM) 3
Why Is The Financial Strength Of The Utility Important To Gainesville Residents? • Gainesville Is Not A Wealthy Community, And Needs Us To Provide Energy At Affordable Costs. • Competitive And Affordable Electrical Rates Factor Heavily In Bond Ratings • Good Bond Ratings Reduce Interest Rates For: – Utility Debt – General Government Debt • Interest Costs Are A Significant Portion Of Electric Costs 4
Finding The Balance Customer Needs Customer Needs For Electricity For Electricity Affordability Environmental and Quality Reliable Supply Conservation and Renewable Energy 5
The Fundamental Questions For Tonight: 1. Are we using all possible DSM opportunities available to avoid the need for the addition of electric generation capacity in the 2011 time frame? 2. Are we using all possible Renewable Energy Sources available to maximize the displacement of additional fossil fuel fired electric generating capacity in 2011 time frame? 6
Here’s What We Did To Answer The Questions: • Benchmarked – Conservation and Renewable Energy Leaders – Financially Strong “AA” Rated – Other Florida Utilities • Compared The Results Of Implementing Very Aggressive Conservation Goals* To The Staff Proposed Plan *Similar to Austin Energy’s 7
We Selected Exceptional Utilities As Benchmark Partners • Conservation and Renewable Leaders – Identified as national leaders at the April 19, 2004 City Commission Workshop • Financially Strong Utilities – “AA” Bond Rated Municipal Utilities – Only 13 out of more than 2,000 Municipal Utilities have this rating • GRU has an “AA” bond rating 8
Utility Benchmarking Partners Conservation and Renewable Energy Leaders Financially Strong • JEA (Jacksonville) • Austin Energy • Orlando Utilities • Portland General Commission (OUC) Electric (PGE) • San Antonio City • Sacramento Municipal Public Service Utility District (SMUD) • City Utilities of • Seattle City Light Springfield, Missouri 9
Important Attributes Of These Organizations 10
We Are Much Smaller Than Most Benchmarking Partners 700,000 GRU Energy Conservation Leader 600,000 Financially Strong Number of Residential Customers 500,000 400,000 300,000 200,000 100,000 0 PGE San SMUD JEA Seattle Austin OUC Springfield GRU Antonio 11
We Are Financially Stronger Than Most Benchmarking Partners Financial Rankings Company Moody's S&P Rank San Antonio Aa1 AA+ 1 OUC Aa1 AA 1 GRU Aa2 AA 1 JEA Aa3 AA 2 Springfield NR AA 2 Seattle Aa3 NR 2 SMUD A1 A 3 Austin A2 A 3 PGE Baa2 BBB+ 3 GRU Energy Conservation Leader Financially Strong 12
We Have “Fewer” Financial Resources Than Most Benchmarking Partners $1,200,000 GRU Total Electric System Operating Revenue ($000) Energy Conservation Leader $1,000,000 Financially Strong $800,000 $600,000 $400,000 $200,000 $0 San SMUD JEA Austin Seattle Portland OUC GRU Springfield Antonio (PGE) 13
Our Customers Have Less Disposable Income To Commit To Paying Energy Costs $30,000 GRU Energy Conservation Leader Per Capita Income Adjusted for Cost of Living Index Financially Strong $25,000 $20,000 $15,000 $10,000 $5,000 $0 Austin Seattle Portland JEA OUC Springfield San SMUD GRU 14 (PGE) Antonio
Our Community Depends More Heavily On Revenues From Our Utility Than Any Other Benchmarking Partners 12.0% GRU Energy Conservation Leader Financially Strong 10.0% GFT as % of Gross Electric Revenue 8.0% 6.0% 4.0% 2.0% 0.0 0.0% GRU JEA Austin Seattle OUC PGE Springfield San SMUD 15 Antonio
Gainesville Has Much Less Access To Low Cost Energy Supply Resources Than All Conservation Leaders 100% 90% G R 80% U 70% 2002 MWh by Fuel Source 60% 50% 40% 30% * Conservation Leader 20% 10% 0% Seattle* SMUD* PGE* San Austin* OUC GRU JEA Springfield Antonio Renewable Fossil Fuel Nuclear Hydro 15 a
We Deliver Energy To Our Customers At A Lower Relative Price Than Most Benchmarking Partners 120% GRU Energy Conservation Leader Financially Strong 100% Ratio of Utility $/kWh to State Average $/kWh 80% 60% 40% 20% 0% Springfield SMUD JEA GRU OUC San Seattle Austin PGE Antonio 16
Answers To The Two Key Questions For Tonight 17
Answer To Question #1: Are We Using All The Possible Conservation To Avoid The Addition Of Generation Capacity? a. No, we are not using all possible conservation. b. We are proposing to use “cost effective” conservation - Rate Impact Measure (RIM) Test c. The implementation of additional conservation programs, even at levels consistent with very aggressive programs observed nation-wide, will not eliminate the need for additional base load electric generating capacity in the 2011 time frame. 18
Answer To Question #2: Are We Using All Possible Renewable Energy Sources To Displace Fossil Fuel Generating Capacity? a. No, we are not proposing to use all possible renewable energy resources that may be available for this purpose. b. We are proposing the use of substantial amounts of biomass (waste wood) c. We are proposing the use of the only regionally available renewable energy resource (waste wood) that can be implemented on a large scale in a cost effective manner. d. The use of biomass as proposed by staff will increase the “actual” use of renewable energy resources in Gainesville to a level comparable to the “goals” of the Renewable Resource Leaders nationwide. 19
A Brief Review 20
We Need Base Load Capacity 800 History Forecast 700 Peaking Capacity Intermediate Capacity Base Capacity 600 Summer Peak + 15% reserve margin Annual Median Load 500 MEGA-WATTS 400 300 200 100 0 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 21
Generators Will Be Retired Unit Retirement Schedules 22
Generators Will Be Retired* Planned Cumulative Primary Retirement Retirement Retirements Unit Fuel Type Date Age MW SW1 Landfill Gas 2009 6 1 Kelly FS07 Nat. Gas 2011 50 24 SW2 Landfill Gas 2015 12 25 Kelly GT01 Nat. Gas 2018 50 39 Kelly GT02 Nat. Gas 2018 50 53 SW3 Landfill Gas 2018 15 53 Kelly GT03 Nat. Gas 2019 50 67 Deerhaven FS01 Nat. Gas 2023 51 150 *Unit Retirements During Planning Horizon 23
USA Oil And Gas Production Has Peaked Years of Reserve Fuel % Imported Oil 16 52% Gas 52 18% Coal 480 0 Source: U.S. DOE Energy Information Administration 24
We Are Concerned About The Cost Of Fuels (Commodity Only) $10 Natural Gas $9 Residual (No. 6) Oil $8 Coal Commodity Price ($/MMBtu) $7 $6 $5 $4 $3 $2 $1 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 25
We Evaluated Many Renewable And Fossil Based Energy Supply Alternatives Monthly Electric Bill for Selected Options (1,000 KiloWatt-hours) $375 Photovoltaic (solar) Generation Alternatives $142 Gas Turbine $99 Combined-Cycle (gas) $98 Biomass $89 Coal Gasifier $75 Fluidized Bed (coal) $74 Pulverized Coal $68 Nuclear (U238) $0 $100 $200 $300 $400 2003 Dollars ($) 26
Our Proposed Plan – A Balance Customer Needs Customer Needs For Electricity For Electricity Additional Solid Fuel & Emission Renewable Reductions Resource (Biomass) Additional Capacity Conservation Programs and Proposed Plan 27
Our Conservation Program And Plan 28
History Of Conservation Programs In Florida 1978: Public Utility Regulatory Policy Act (PURPA) - Mandated Residential Energy Audits 1980: Florida Energy Efficiency And Conservation Act (FEECA) - Mandated Florida Public Service Commission (FPSC) set energy and demand goals - RIM Test Required 1990: FPSC 10-Year Goals submitted by GRU and approved 1992: National Energy Policy Act - Era of electric competition begins 1995: GRU submitted New 10-Year Goals (to begin 1996) 1996: FEECA changed, GRU goals no longer mandated 1996-Present: Industry Role in Conservation Changing - Public Benefit Funds 29
We Adjust For the Useful Life of Conservation Measures 150,000 Total Program Results 100,000 Annual Net Energy for Load (MegaWatt-hours) 50,000 History Forecast Net Conservation After Vintaging 0 -50,000 End of Life Vintaging -100,000 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 30
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