POWER COSTS RISING: WHAT YOU CAN DO Nora Sheriff Western Plastics Association March 18, 2014
March 18, 2014 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 3
March 18, 2014 4 2014 Rate Forecasts *** SCE PG&E • System Average Rate • System Average Rate • 1/1 15.7 ¢/kWh • 1/1 16.313 ¢/kWh (1.3%) • 4/1 16.1 ¢/kWh (2.5%) • 5/1 17.03 ¢/kWh (4.4%) ↑ • 6/1 17.1 ¢/kWh (9.0%) • 12/31 • 12/31 ?? • TOU-8 Sub • E20-T • 1/1 8.6 ¢/kWh • 1/1 10.232 ¢/kWh (3.6%) • 4/1 9.1 ¢/kWh (6.3%) • 5/1 11.043 ¢/kWh (7.9 %) ↑ • 6/1 9.8 ¢/kWh (14.2%) • 12/31 • 12/31 ?? *** caveats: actual rates will differ; forecast, subject to change
March 18, 2014 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 6 KEY AGENCIES & ACTORS Overview CPUC & Legislature
March 18, 2014 7 Overview (1): Key Agencies & Actors
March 18, 2014 8 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 9 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 10 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 11 CPUC: (3) Divisions • Advisors • Energy Division • Policy & Planning • Legal Division • Executive Office • Administrative Law Judges • Division of Ratepayer Advocates
March 18, 2014 12 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 13 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 14 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 15 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 16 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 17 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 18 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 19 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 20 33% RPS (1): RPS Rules & IOU Progress • On target to meet compliance requirements
March 18, 2014 21 33 % RPS (2): Actual Average Costs •
March 18, 2014 22 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
May 4, 2012 23 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%
March 18, 2014 24 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 25 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
26 IOU 2013 Allowance Sales
27 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
March 18, /2014 28 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 29 IMPACTS ON RATES
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