Review of EDC Solar Long- term Financing Program Analysis Updated - - PowerPoint PPT Presentation

Review of EDC Solar Long- term Financing Program Analysis

Updated – February 16, 2012 Center for Energy, Economic, and Environmental Policy DRAFT

Summary of Changes & Additions

• Solicitation manager costs, auction manager costs, and

internal utility administration costs were recalculated.

• Auction manager costs were updated from actual PSE&G

invoices from NERA.

• Total outstanding obligations were calculated for PSE&G

Solar Loan programs.

• Solar For All draft analysis added.

DRAFT 2

Review Assumptions and Caveats

• Center for Energy, Economic and Environmental Policy

(CEEEP) asked to review the EDC Solar Long term Financing Programs.

• Current analysis includes ACE, JCP&L, RE, and PSE&G’s Solar

Loan programs.

• This analysis:

– Is NOT answering the question of whether the programs should be continued in the future. – Is NOT a review of New Jersey solar programs, the New Jersey SREC program, or the SREC short term market. – Does not include the environmental benefits of solar, the impacts on the transmission and distribution system, or any

• ther costs or benefits of solar other than those directly related

to the EDC Solar Long term Financing Program.

• Assumed Capacity Factor from 2010 to 2012 is 14% ac (1,226

MWh/yr for a 1 MW facility) - the program caps SRECs at 1300 per MW per year.

• Assumes that the capacity contracted in any given year is

installed in that same year and 100% of the SRECs are created.

3 DRAFT

Goals of EDC Solar Financing Program

• On December 6, 2007 (I/M/O the Renewable Energy

Portfolio Standards, Alternative Compliance Payments and Solar Alternative Compliance Payments, Docket No. E006100744), the Board also directed the OCE to “initiate a proceeding to explore whether additional mechanisms could be established to support the financing of solar generation projects by providing greater assurances about the cash flow to be expected from such projects, noting that such financing depends not only upon certainty about long-term maximum prices for SRECs, as provided by the established rolling eight-year SACP schedule, but also requires greater certainty about the minimum cash flow from such projects”

4 DRAFT

Data Collection Issues

• CEEEP staff reviewed a “Solar Review Matrix” (matrix)

developed by the BPU and completed by the EDC’s.

• Matrix included program goals, number of megawatts

solicited, awarded, contracted and installed, the number

• f SRECs produced and auctioned and the revenues

generated by that auction, as well as the various costs of each utility’s program – only through June 2011.

• CEEEP met individually with staff from each utility and

received more detailed information about each solicitation and auction from NERA Economic Consulting (NERA), the solicitation and auction manager.

• Due to significant differences in how each utility

completed the matrix and additional data needs, CEEEP drafted an updated matrix for the utilities to complete.

• Updated matrices were completed by utilities in late

November/early December, with data through October 2011.

5 DRAFT

Solicitation Program Approximate Timeline (ACE, JCP&L, RE) Last Loan Application Approximate Timeline (PSE&G Solar Loan I and II)

6 DRAFT Oct 2012 Feb 2012 Approximately 8 months 30-45 days Dec 2011 45 days Approximately 1 year Sept 2011 Nov 2012 Nov 2011 ~ July 2011 Timelines not drawn to scale

ACE JCP&L RE Solicitation Date Awarded Contracted Installed Awarded Contracted Installed Awarded Contracted Installed #1 August 2009 0.00 0.00 0.00 1.59 1.59 1.14 0.00 0.00 0.00 #2 December 2009 2.20 2.00 1.74 4.18 2.87 2.86 0.15 0.09 0.09 #3 March 2010 0.11 0.11 0.11 9.22 6.49 5.33 0.00 0.00 0.00 #4 June 2010 0.39 0.39 0.39 3.54 3.44 2.34 0.00 0.00 0.00 #5 October 2010 0.36 0.35 0.35 8.61 8.13 2.06 0.54 0.54 0.17 #6 February 2011 10.50 7.64 0.00 6.76 4.63 1.20 0.80 0.80 0.30 #7 June 2011 3.92 3.03 0.00 6.02 6.02 0.05 2.34 2.18 0.00 #8 September 2011 5.98 6.00 0.00 10.96 0.00 0.00 0.28 0.00 0.00 Total 23.47 19.52 2.60 50.86 33.17 14.98 4.11 3.61 0.56

ACE, JCP&L, and RECO Awarded, Contracted, and Installed Capacity (MW)

Awarded is capacity selected at solicitations, contracted is capacity that signs contract and pays deposit, and installed is capacity that is installed. 7 DRAFT

PSE&G Awarded, Contracted, and Installed Capacity (MW)

Solar Loan I (SL I) Solar Loan II (SL II) Solar for All Energy Year Awarded Contracted Installed Awarded Contracted Installed Awarded Contracted Installed 2008 3.87 2009 13.38 2.77 2.77 2010 4.90 11.24 11.24 1.42 0.01 0.01 29.90 5.60 5.60 2011 6.05 6.05 27.98 4.63 4.63 16.90 35.30 35.30 2012 1.32 1.32 2.58 3.64 3.64 4.00 5.10 5.10 Total 22.15 21.38 21.38 31.98 8.28 8.28 50.80 46.00 46.00 Awarded is capacity approved for loan, contracted is capacity that signs contract, and installed is capacity that is installed . 8 DRAFT

DRAFT 9

Pipeline Success Rates

• There are still projects moving through the pipeline.
• Project contract to install takes about one year.
• The overall pipeline success rate is difficult to ascertain until all of

data for the program is available.

• Because projects are still in the pipeline, ongoing project data will

be needed from the EDCs to complete the analysis.

• Data is through October 2011, and will be revised as additional

project data is received from the EDCs.

Energy Year SLI SLII S4A Total SLI SLII S4A Total SLI SLII S4A Total 2008 0% 0% 0% 0% 2009 21% 21% 100% 100% 21% 21% 2010 229% 1% 19% 47% 100% 100% 100% 100% 229% 1% 19% 47% 2011 17% 209% 102% 100% 100% 100% 17% 209% 102% 2012 141% 128% 153% 100% 100% 100% 141% 128% 153% Total 97% 26% 91% 72% 100% 100% 100% 100% 97% 26% 91% 72% Contracted/Awarded Installed/Awarded Installed/Contracted

Pipeline Success Rates

Solicitation Date ACE JCP&L RE Total ACE JCP&L RE Total ACE JCP&L RE Total #1 Aug 2009 100% 100% 72% 72% 72% 72% #2 Dec 2009 91% 69% 60% 76% 87% 100% 100% 95% 79% 68% 60% 72% #3 March 2010 100% 70% 71% 99% 82% 82% 99% 58% 58% #4 June 2010 100% 97% 98% 100% 68% 71% 100% 66% 69% #5 Oct 2010 97% 94% 100% 95% 100% 25% 32% 29% 97% 24% 32% 27% #6 Feb 2011 73% 69% 100% 72% 0% 26% 37% 11% 0% 18% 37% 8% #7 June 2011 77% 100% 93% 92% 0% 1% 0% 0% 0% 1% 0% 0% #8 Sep 2011 100% 0% 0% 35% 0% 0% 0% 0% 0% 0% 83% 65% 88% 72% 13% 45% 16% 32% 11% 29% 14% 23% 93% 78% 60% 79% 90% 81% 100% 82% 83% 63% 60% 66% Total Total (#1-#4) Contracted/Awarded Installed/Awarded Installed/Contracted

10 DRAFT

Solicitation Results

MW Solicited Number of Bids Received Number of Projects Awarded Solicitation ACE JCP&L RE ACE JCP&L RE ACE JCP&L RE #1 (August 2009) 5.0 11.0 8 7 #2 (December 2009) 5.0 12.0 2.3 11 31 2 10 27 2 #3 (March 2010) 7.8 17.2 2.1 1 62 1 58 #4 (June 2010) 6.8 9.3 1.5 7 16 5 15 #5 (October 2010) 5.8 8.7 1.5 2 51 4 2 49 4 #6 (February 2011) 11.9 5.9 2.4 67 119 5 60 41 5 #7 (June 2011) 3.5 5.5 2.3 60 152 15 17 35 11 #8 (September 2011) 3.4 10.0 0.2 101 185 2 19 60 1 Total 49.3 79.6 12.1 249 624 28 114 292 23 11 DRAFT

MW Awarded MW Contracted Weighted Average Awarded Bid Price ($/SREC) Solicitation ACE JCP&L RE ACE JCP&L RE ACE JCP&L RE #1 (August 2009) 0.0 1.6 0.0 0.0 1.6 0.0 N/A $384 N/A #2 (December 2009) 2.2 4.2 0.1 2.0 2.9 0.1 $372 $382 $460 #3 (March 2010) 0.1 9.2 0.0 0.1 6.5 0.0 $422 N/A #4 (June 2010) 0.4 3.5 0.0 0.4 3.4 0.0 $431 $449 N/A #5 (October 2010) 0.4 8.6 0.5 0.4 8.1 0.5 $463 $452 $456 #6 (February 2011) 10.5 6.8 0.8 7.6 4.6 0.8 $424 $379 $454 #7 (June 2011) 3.5 6.0 2.3 3.0 6.0 2.2 $322 $264 $335 #8 (September 2011) 6.0 11.0 0.3 6.0 0.0 0.3 $213 $215 Total 23.1 50.9 4.1 19.5 33.1 3.6 $372 $368 $382

Solicitation Results

The ACE reported awarded capacity was 3.916 MW for solicitation #7 (June 2011), but NERA records show the capacity as 3.516 MW. The NERA value is used. As of the date the data was requested, the 45-day waiting period for the September 2011 solicitation had not expired yet. CEEEP has requested updated data from the utilities. The total weighted average awarded bid price is the weighted average of all awarded projects The weighted average awarded bid price has been redacted when there is only one project due to confidentiality concerns.

12 DRAFT

Weighted Average Awarded Bid Price

Vertical axis of graph does not start at zero. Some data has been redacted due to confidentiality concerns. $200 $250 $300 $350 $400 $450 $500 $/SREC Solicitation

ACE JCP&L RE

13 DRAFT

EDC Weighted Average Awarded Bid Price vs PSE&G Floor Price

Small Non-Res <=150 kW, Large Non-Res = 150 -500 kW

14 DRAFT

$200 $250 $300 $350 $400 $450 $500 2010 2011 2012

$/MWh

SLI SLII - Residential SLII - Small Non-Res SLII - Large Non-Res SLII - 500kW-2000 kW Avg Solicitation Weighted Awarded Bid Price

Auction Results

Number of SRECs Auctioned Auction ACE JCP&L RE PSEG* (Solar Loan Programs) Weighted Average SREC Auction Price #1 (February 2010)

N/A N/A N/A 2,800 $685.06

#2 (July 2010)

N/A N/A N/A 5,750 $688.03

#3 (October 2010)

N/A N/A N/A 5,841 $665.12

#4 (April 2011)

189 580 15 5,427 $669.69

#5 (July 2011)

404 1,528 23 5,710 $475.00

#6 (August 2011)

331 791 8 2,110 $479.75

#7 (October 2011)

915 3,140 102 10,747 $227.03

Total

1,839 6,039 148 38,385

ACE JCP&L RE PSE&G

Overall Weighted Average Auction Price $372.48 $366.17 $324.09 $515.65

*Solar Loan I and Solar Loan II PSE&G auctioned 1,352 SRECs in August 2009

15 DRAFT

Auction Prices and Auction Proceeds

Auctioned SRECs Auction Proceeds Energy Year ACE JCP&L RE PSEG ACE JCP&L RE PSEG 2010 4,152 $0 $0 $0 $2,849,048 2011 189 580 15 17,018 $126,571 $388,420 $10,045 $12,378,247 2012 1,650 5,459 133 18,657 $558,430 $1,822,889 $37,920 $20,960,918 Total 1,839 6,039 148 81,545 $685,001 $2,211,309 $47,965 $36,188,213 Auction SREC Auction Price Flett Exchange Monthly Average Price #1 (February 2010) $685 $663 #2 (July 2010) $688 $677 #3 (October 2010) $665 $647 #4 (April 2011) $670 $655 #5 (July 2011) $475 (EY11) $480 (EY10) $561 (EY11) $546 (EY10) #6 (August 2011) $480 (EY11) $501 #7 (October 2011) $227 (EY12) $669 (EY11) $216 (EY12) $623 (EY11)

Auction Proceeds are determined using the auction bid clearing prices from each round

Auction results from: http://www.solarrec- auction.com/index.cfm?s=background&p=previousR esults Flett Exchange Monthly Average prices were calculated based on data from http://markets.flettexchange.com/new-jersey-srec/

16 DRAFT

Auction Prices vs Flett Exchange SREC Market Prices

Flett Exchange does not report the volume of transactions and, when no transactions occur, the offered price is reported. 17 DRAFT

Solicitation Manager Costs

• The Solicitation Manager Costs are the cost associated with NERA

running the solicitation program. PSE&G has no solicitation manager costs since it does not participate in the solicitations.

• The Solicitation Manager Costs were divided by the total SRECs

contracted over the term of the contracts. All projects in the solicitation program were assumed to have 10 year terms.

18 DRAFT Energy Year ACE JCPL RE SL I SL II 2009 Not applicable 2010 $237,220 $584,014 $47,642 2011 $164,680 $542,345 $46,134 2012 $222,226 $390,863 $35,078 Total $624,126 $1,517,222 $128,854 Energy Year ACE JCPL RE SL I SL II 2009 Not applicable 2010 $9.17 $4.37 $42.77 2011 $1.60 $2.73 $2.80 2012 $2.01 $1.87 $1.16 Total $2.61 $2.81 $2.70

Auction Manager Costs

• The Auction Manager Costs are the cost associated with NERA

running the auction. The costs were taken from PSE&G’s NERA auction invoices, which had the total NERA invoiced for each auction and PSE&G’s portion of the bill.

19 DRAFT Energy Year ACE, JCPL, RE Combined PSE&G 2009 2010 $190,051 2011 $13,751 $365,180 2012 $37,102 $255,398 Total $50,853 $810,629 Energy Year ACE JCPL RE SL I SL II 2009 $9.62 2010 $9.62 $9.62 $9.62 $9.62 $9.62 2011 $9.62 $9.62 $9.62 $9.62 $9.62 2012 $9.62 $9.62 $9.62 $9.62 $9.62 Total $9.62 $9.62 $9.62 $9.62 $9.62

• The total Auction Manager Costs were divided by the total auctioned

SRECs in each energy year. It is assumed that it costs the same price per SREC to hold the auction regardless of EDC.

Energy Year ACE JCPL RE SL I SL II 2009 $21.37 2010 $1.21 $0.49 $0.35 $4.15 $3,095.59 2011 $0.54 $0.42 $0.78 $2.68 $14.12 2012 $0.22 $0.28 $0.32 $4.87 $11.34 Total $0.47 $0.38 $0.48 $6.04 $15.55

• The Internal Utility Administration Costs are the cost associated with the

utilities running the solar long-term financing programs.

• The Internal Utility Administration Costs were divided by the total SRECs

contracted over the term of the contracts. All projects in the solicitation program were assumed to have 10 year terms. PSE&G loans are 10 years for Residential loans and 15 years for Commercial loans.

Please note that the internal utility admin. costs that are presented here were provided by the EDCs. Other costs associated with the Solar Long-term contracting program may be provided in rate base. 20 DRAFT Energy Year ACE JCPL RE SL I SL II 2009 1087816 2010 $31,356 $65,954 $393 $849,020 $380,757 2011 $55,120 $82,995 $12,886 $290,794 $1,125,605 2012 $24,881 $58,063 $9,631 $117,558 $713,710 Total $111,357 $207,012 $22,910 $2,345,188 $2,220,072

Internal Utility Administration Costs

“SREC Transaction Fee”

• As defined in the Program Stipulations, the EDC’s “will

collect a fee, referred to as an "SREC Transaction Fee", for each SREC that is procured and subsequently sold pursuant to the Program.”

• PSE&G Solar Loan Programs do not have “SREC Transaction

Fee”.*

21 DRAFT Energy Year ACE JCPL RE SL I SL II 2009 Not applicable 2010 $22.59 $31.21 $39.11 2011 $22.59 $31.21 $39.11 2012 $22.59 $31.21 $39.11 Total $22.59 $31.21 $39.11 *While ACE, RE, and JCP&L have an “SREC Transaction Fee”, PSE&G Administration Costs may contain a return on capital component.

• Total Combined Costs is the summation of the solicitation

manager costs, auction manager costs, internal utility administration costs and the “SREC Transaction Fees”.

• PSE&G’s total cost is lowest; PSE&G does not have an

“SREC Transaction Fee” that is charged to ratepayers.

• It is important to remember that not all of the data is

available on the programs since there are still projects in the pipeline.

Total Costs per Contracted SREC Compared

22 DRAFT

Energy Year ACE JCPL RE SL I SL II Total PSE&G 2009 $30.99 $30.99 2010 $42.59 $45.69 $91.85 $13.77 $3,105.20* $15.63 2011 $34.35 $43.98 $52.31 $12.30 $23.74 $17.14 2012 $34.44 $42.98 $50.21 $14.48 $20.96 $19.16 Total $35.28 $44.02 $51.91 $15.66 $25.17 $18.22 *Due to start up costs

DRAFT 23

Percentage of Various Cost Components to Total Cost

Energy Year ACE JCPL RE PSE&G Solicitation Manager 7% 6% 5% 0% Auction Manager 27% 22% 19% 53% Internal Admin 1% 1% 1% 47% Transaction Fee 64% 71% 75% 0% Total 100% 100% 100% 100%

SREC Auction Proceeds are uncertain due to unknown future SREC prices.

Does not include any environmental benefits

• f solar, the impacts on

the transmission and distribution system, or any other costs or benefits of solar other than those directly related to the EDC Solar Long term Contract Program.

Ratepayer Exposure for Long-term Financing Programs Only

Ratepayer Exposure is not for the overall SREC Program, but

• nly for the Long-term financing

Program.

24 DRAFT

Ratepayer Exposure for Long-term Financing Programs Only

• A: Solicitation Obligations are the summation of total

SRECs contracted over the contract term multiplied by the SREC price awarded.

• B: Various Program Costs including NERA’s solicitation

and auction management costs, internal utility administrative costs, “other costs” (PJM-GATS registration fees), and “SREC Transaction Fees.”

• C: SREC auction proceeds are difficult to estimate into

the future because of the uncertainty of SREC costs in the future.

• If the solicitation obligations and program costs exceed

the auction proceeds then the ratepayer will make a payment.

• If the solicitation obligations and program costs are

less than the auction proceeds then the ratepayer will receive a refund.

25 DRAFT

Solicitation Obligations for ACE, JCP&L, and RE

Total Contracted SRECs Solicitation Obligations Energy Year ACE JCP&L RE ACE JCP&L RE 2010 2,588 13,368 111 $964,176 $5,435,400 $51,224 2011 12,865 33,235 4,433 $5,336,812 $13,832,566 $1,696,076 2012 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2013 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2014 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2015 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2016 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2017 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2018 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2019 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253 2020 21,352 40,716 4,659 $7,174,345 $13,227,666 $1,773,029 2021 11,074 20,849 337 $2,801,709 $4,830,501 $128,177 Total 239,393 540,842 47,704 $81,385,210 $186,630,666 $18,242,530

Total values are not net present values. 26 DRAFT

Note that not all contracted SRECs will be installed. To accurately calculate the obligations, It is necessary to know both the number of contracts that are installed and the specific projects installed.

Solicitation Obligations

• The total solicitation obligations are estimated by

multiplying the incremental SRECs for each year by the weighted average awarded solicitation price for that year and summing them up.

• The incremental SRECs are Total SRECs – Auctioned

SRECs

• The weighted average bid prices are:

Weighted Awarded Average Bid Price ($/SREC) Energy Year ACE JCP&L RE 2010 $373 $407 $460 2011 $425 $423 $381 2012 $253 $232 $380 27 DRAFT

Note: Contracted average bid price may be different than awarded average bid price due to projects dropping out.

DRAFT 28

PSE&G Solar Loan Outstanding Obligations

• Solar Loan Outstanding Obligations are the

summation of total SRECs contracted over the loan term multiplied by the floor price.

• Floor price varies by program and by segment.

Solar Loan I Solar Loan II Segment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Residential $475 $475 $475 $475 $475 $450 $428 $400 <150 kW $475 $475 $475 $475 $475 $410 $388 $360 150-500 kW $475 $475 $475 $475 $475 $380 $358 $330 500-2000 kW $475 $475 $475 $475 $475 $380 $345 $325

Total Contracted SRECs Outstanding Obligations* Energy Year Solar Loan I Solar Loan II Solar Loan I + II

2008 $0 2009 3,397 $1,613,636 2010 17,182 12 $8,166,904 2011 24,614 5,690 $13,777,224 2012 26,233 10,155 $16,078,993 2013 26,233 10,155 $16,078,993 2014 26,233 10,155 $16,078,993 2015 26,233 10,155 $16,078,993 2016 26,233 10,155 $16,078,993 2017 26,233 10,155 $16,078,993 2018 26,233 10,155 $16,078,993 2019 26,220 10,155 $16,073,168 2020 25,742 10,142 $15,840,458 2021 25,153 9,051 $15,094,225 2022 25,129 8,241 $14,758,804 2023 25,129 8,241 $14,758,804 2024 21,744 8,241 $13,150,994 2025 8,438 8,241 $6,830,435 2026 1,594 3,655 $1,966,348 Total 387,972 142,753 $234,583,952

DRAFT 29

PSE&G Solar Loan Outstanding Obligations

Total values are not net present values. * Before Auction Proceeds

Net Ratepayer Refund or Payment for Long-term Financing Programs Only

• Net Ratepayer Exposure is not for the overall SREC

Program , but only for the Long-term financing Programs.

• Net Ratepayer Refund or Payment = (Proceeds of

Remaining SRECs)-(Auction Proceeds)-(Solicitation Obligations)

• Proceeds of Remaining SRECs = (Total SRECs) -

(Auctioned SRECs) X (Value of Remaining SRECs)

• The value of remaining SRECs were determined under

three price scenarios: $200, $400, and SACP.

• For Solicitation #8, it was assumed that 100% of the

awarded capacity would be contracted. This assumption will need to revised at a later date as more project information is available.

30 DRAFT

Results/Conclusions for ACE, JCP&L, and RE

• Due to projects still being in the pipeline, ongoing data will

be needed from EDCs to update results in future.

• If all remaining SRECs are valued at $200, ratepayers have

a total payment of over $125 million.

• If all remaining SRECs are valued at $400, ratepayers will

receive a total refund of over $38 million.

• If all remaining SRECs are valued at the SACP, ratepayers

will receive a total refund of over $167 million.

• The breakeven SREC price, or the price where the

solicitation obligations will be equal to the SREC and auction proceeds, ranges from $345 to $384, depending on the utility.

• This analysis is only one small part of how SREC prices

affect ratepayers and is not meant to suggest that SREC prices should be higher

• Conclusion: Ratepayer refunds or payments as a

result of the program depend almost exclusively on the SREC price that is obtained over the term of the program.

Total values are not net present values. 31 DRAFT

Scenario 1: SREC Price = $200

Energy Year ACE JCP&L RE 2010 ($446,635) ($2,761,848) ($28,953) 2011 ($2,928,197) ($7,689,898) ($822,510) 2012 ($4,239,085) ($10,760,908) ($934,700) 2013 ($3,350,655) ($7,846,219) ($870,180) 2014 ($3,350,655) ($7,846,219) ($870,180) 2015 ($3,350,655) ($7,846,219) ($870,180) 2016 ($3,350,655) ($7,846,219) ($870,180) 2017 ($3,350,655) ($7,846,219) ($870,180) 2018 ($3,350,655) ($7,846,219) ($870,180) 2019 ($3,350,655) ($7,846,219) ($870,180) 2020 ($2,904,020) ($5,084,370) ($841,227) 2021 ($586,830) ($660,741) ($60,716) Total ($34,559,355) ($81,881,296) ($8,779,366)

Net Ratepayer Refund or Payment under Four SREC Price Scenarios

Total values are not net present values. 32 DRAFT

Scenario 2: SREC Price = $400 Scenario 3: SREC Price = SACP

Energy Year ACE JCP&L RE ACE JCP&L RE 2010 $70,906 ($88,296)

($6,681)

$829,103 $3,828,457

$25,946

2011 ($393,009) ($1,158,810)

$61,101

$3,092,873 $7,821,436

$1,276,067

2012 $218,780 ($1,035,860)

($7,227)

$5,969,427 $11,509,452

$1,189,213

2013 $1,437,210 $2,970,629

$83,893

$7,206,588 $16,004,931

$1,233,551

2014 $1,437,210 $2,970,629

$83,893

$6,823,559 $15,139,583

$1,157,225

2015 $1,437,210 $2,970,629

$83,893

$6,440,530 $14,274,236

$1,080,899

2016 $1,437,210 $2,970,629

$83,893

$6,081,440 $13,462,972

$1,009,344

2017 $1,437,210 $2,970,629

$83,893

$3,232,660 $7,026,947

$441,670

2018 $1,437,210 $2,970,629

$83,893

$2,945,388 $6,377,937

$384,426

2019 $1,437,210 $2,970,629

$83,893

$2,658,116 $5,728,926

$327,182

2020 $1,366,305 $3,058,926

$90,574

$2,220,370 $4,687,585

$276,935

2021 $1,628,048 $3,509,019

$6,746

$1,949,206 $4,113,634

$16,528

Total $12,951,501 $25,079,384 $731,764 $49,449,258 $109,976,096 $8,418,986

Net Ratepayer Refund or Payment under Four SREC Price Scenarios

Total values are not net present values. 33 DRAFT

Breakeven Price ($/MWh) ACE $345 JCP&L $353 RE $383 Solar Loan I $475 Solar Loan II $356

DRAFT 34

Breakeven Prices for the EDC Programs

• The total loans paid out under the Solar Loan

Programs are $107,473,432

– Solar Loan I - $79,650,076 – Solar Loan II - $27,823,356

• The total principal paid on these loans is $10,972,858

and the total interest paid is $14,128,737

• Loan recipients owe $85,527,717 in principal*

– Solar Loan I - $70,100,664 – Solar Loan II - $26,399,911

• Ratepayers are on the hook for the outstanding loan

balances if the customers holding the loans default.

DRAFT 35

Results/Conclusions for PSE&G Solar Loan Programs

* Does not include interest accrued or residential interest differential

• The weighted average floor price for:

– Solar Loan I is $475 – Solar Loan II is $356 – Both loan programs combined is $442

• If the loans are paid off before the loan period expires, PSE&G

can exercise the call option.

• The call option allows PSE&G to purchase SRECs from

customer at 75% of the market price for remainder of loan agreement.

• The difference between auction price and purchase price is

either a credit or loss for ratepayers.

• To accurately calculate this, CEEEP would need to develop

assumptions on % of loans paid off early and future auction prices.

DRAFT 36

Results/Conclusions for PSE&G Solar Loan Programs

• If SRECs production is less than expected the loan recipients

will need to make additional payments which are calculated during a “true-up”.

• To determine the full impact, CEEEP would need to develop

assumptions on loan default rates and future auction prices and how the two are associated.

• As of October 2011, there has been a net gain of $908,199 on

the sale of SRECs to ratepayers

– Solar Loan I has a net gain of $1,051,233 – Solar Loan II has a net loss of $143,034

DRAFT 37

Results/Conclusions for PSE&G Solar Loan Programs

Solar For All (S4A) Description

Segment Name Description Total MWs 1a PSE&G Owned Sites 34.56 1b 3rd Party Owned Sites 1c UEZ Sites, including Publicly Owned 5.4 2 Pole Top 40.0 S4A Revenues:

• Wholesale energy ($/MWh)
• Wholesale capacity ($/MW-

day)

• SRECs ($/SREC)

S4A Costs:

• Capital Costs (after tax benefits)
• Cost of Capital (11.8%)
• Operations & Maintenance

(O&M)

• Lease payments, if applicable

38 DRAFT

=> Ratepayer exposure = Revenues - Costs

Levelized Revenue Cost of Electricity (LRCOE)

Low Cost High Cost Average Description Segement 1a + 1b $ 424.90 $ 478.65 $ 451.77 PSE&G and 3rd Party Sites Segment 1c $ 549.51 $ 620.11 $ 584.81 UEZ Sites Segement 2 $ 563.41 $ 699.27 $ 631.34 Pole Top

DRAFT 39

PSE&G provided two costs scenarios: Low and High These LRCOE do NOT include revenues from the sale of wholesale energy, capacity and SRECs (see next slide) The LRCOE is based upon PSE&Gs revenue requirement model, i.e., what is the revenue stream over time does PSE&G need to receive to recover all of its costs, including their cost of capital

LRCOE After Subtracting 2011 CY Revenues (Energy, Capacity & SRECs)

Low Cost (Decrease) High Cost Average Description Segment 1a + 1b $ 410.10 (14.80) $ 463.86 $ 436.98 PSE&G and 3rd Party Sites Segment 1c $ 515.14 (34.37) $ 585.74 $ 550.44 UEZ Sites Segment 2 $ 530.91 (32.50) $ 666.77 $ 598.84 Pole Top

DRAFT 40

Going forward, the above numbers are the breakeven values: If revenues exceed them, ratepayers receive a refund If revenues are below them, ratepayers pay the difference KEY QUESTION: What is the sum of future energy, capacity and SREC revenues?

50 100 150 200 250 300 350 400 450 1 1001 2001 3001 4001 5001 6001 7001 8001

2007 LW LMP Price 2008 LW LMP Price 2009 LW LMP Price 2010 LW LMP Price 2011 LW LMP Price

New Jersey LMP Price Duration Curve

Note: LMPs are load weighted values for the four New Jersey based zones (AE, RECO, JC and PS).

LMP ($/MWh)

Historical NJ Wholesale Energy Prices (Not Weather Normalized)

Calendar Year Load Weighted Average of Highest 1300 Hours ($/MWh) 2008 141.73 2009 72.45 2010 94.46 2011 103.65

DRAFT 42

Future NJ Wholesale Energy Prices?

Depends on (among other reasons)

• Price of natural gas
• Transmission additions
• EPA environmental policies that affect coal
• New NJ generation including off-shore wind and LCAPP
• NJ solar policies

NJ Capacity (RPM) Prices

• Forecasts of $150/MW-day (through

2015/16) to $375/MW-day (through 2022/23) are publicly available

– UBA Investment Research, Feb. 2, 2012 – Long-Term Capacity Agreement Pilot Program, March 21, 2011, p. 61

• Solar is rated at 38% for RPM purposes,

i.e., 1 MW of solar is the equivalent of 0.38 MW of capacity in PJM’s RPM market

DRAFT 43

Translating Capacity Prices into Equivalent $/MWh

DRAFT 44

Capacity Price ($/MW-day) Equivalent $/MWh 100 11.31 150 16.96 200 22.62 250 28.27 300 33.93 350 39.58 400 45.24 Solar RPM Capacity Credit 38% Assumed Solar Capacity Factor (ac) 14%

Some Stylized Scenarios Revenues – Costs (In $/MWh)

DRAFT 45

Low Cost High Cost Average Description Segment 1a + 1b $ 410.10 $ 463.86 $ 436.98 PSE&G and 3rd Party Sites Segment 1c $ 515.14 $ 585.74 $ 550.44 UEZ Sites Segment 2 $ 530.91 $ 666.77 $ 598.84 Pole Top $/MWh Scenario 1 Today’s Prices Scenario 2 Historically High Prices Scenario 3 High Wholesale/ Low SRECs Energy (avg. price during solar producing hours) 100 150 150 Capacity 20 50 50 SRECs 200 400 200 Cost 500 500 500 Residual

• 180

100

• 100

Some Remarks

• The overwhelming uncertainty is the sum of wholesale

revenue (energy + capacity) and SREC revenue

• Future programs may be designed differently from

current ones

• Reporting and evaluation requirements should be built

into future programs from the start

DRAFT 46