The California Business Case Framework for Advanced Metering Roger Levy Levy Associates 2805 Huntington Road Sacramento, CA 95864 Phone: 916-487-0227 Email: RogerL47@aol.com Levy Associates
My Presentation � The Conclusion � Why the interest in Advanced Metering � What is Advanced Metering � A Business Case Economic Framework � California’s Regulatory Perspective � The Future Levy Associates
The Conclusion Evidence suggests that utility operating savings alone justify the investment in advanced metering. Levy Associates
Why the interest in Advanced Metering ? Levy Associates
California Energy Crisis 2000-2001 California Energy Costs ($Billions) $70 � $20-$50 Billion in customer outage costs � $20 Billion in added long- $32.5 term energy costs � One Major utility $7 bankruptcy 1999 2000 2001 Levy Associates
Need for Better Pricing “Ultimately price is the most effective means of reducing demand.” * “..if ….. rates were linked to actual energy costs, and floated based on input prices, residents would tend to conserve most when prices were highest (in other words, demand would respond to tight supply conditions).” * Demand Metering Pricing Response * The Bay Area – A Knowledge Economy Needs Power, A Report on California’s Energy Crisis and its Impact on the Bay Area Economy, April 2001. Levy Associates
Demand Response Results - AutoDR Setup Avg kW Avg % Company Savings Savings Cost Large Commercial Customers ACWD 52 20% $12,824 � Customer automates B of A 111 $1,614 2% response. Chabot 18 5% $4,510 � Internet-based price and 50 Douglas 61 21% $2,000 reliability signals. 2530 Arnold 61 16% $2,000 Echelon 78 25% $3,620 � Linked into the facility Gilead 71 10% $7,500 EMS control systems. IKEA 219 12% $5,050 � Strategies ‘optimize’ load Oracle 45 10% $375 reduction, economics and Target 33 10% $3,312 customer acceptance. USPS 202 15% $12,000 $57.62 / kW * Summary 951 kw 13.4% Levy Associates
Demand Response Results - SPP Hottest Critical Average Critical Peak Day – Year 1 Peak Day * 47.4% 50% Peak Load Reduction 40% 34.5% Critical 30% Peak Critical Variable Peak With Variable 20% Automated With 12.5% Controls Automated Controls 10% Critical 4.1% Peak Fixed 0% Time of Use CPP-F CPP-V CPP-V TOU Source: Statewide Pricing Pilot Summer 2003 Impact Analysis, Charles Rivers Associates, August 9, 2004, Table 1-3, 1-4,. Levy Associates
What is Advanced Metering ? Levy Associates
Advanced Metering – Is Information Traditional Automatic Meter Advanced Metering Features Accumulating Reading (AMR) Infrastructure (AMI) Meter Hybrid or Electromechanical Meters Hybrid or solid-state or digital solid-state Remote access Data Manual, monthly Drive-by, monthly collection cycle cycle daily or more often Data Total Total Time-based intervals recording consumption consumption � Pricing options � Customer options Reduce Reading Reduce Reading Justification Cost Costs � Utility operations � Demand response � Smart thermostats Enables Other None None � In-home displays Technology � Appliance controllers Levy Associates
Advanced Metering – Is AMI AMR Functions AMI 10 $125 kWh Usage $107 kW Interval Data Unit Installed Cost $92 8 $100 6.5 Dispatchable Rates 6.5 Payback (yrs) 6 $75 Tamper Detection Outage Monitoring $50 4 Read on Demand Selectable Billing Dates 2 $25 Customer Usage Profiles Dynamic Load Research NO YES Functions Supported Source: Private communication, California municipal AMI business case completed February 2005. Levy Associates
A Business Case Economic Framework Levy Associates
The Business Case Purpose Establish a framework to evaluate the economic, customer service and value of overall system opportunities provided by advanced metering infrastructure (AMI). Levy Associates
The Business Case Framework Conventional Framework Expanded Framework Net Present Value of Net Present Value of Costs Methodology Costs and Benefits. and Benefits Scope of Focus on utility revenue Focus on system wide net Benefits requirement. benefits. Metering assumed Metering considered part of Functional independent of other an integrated suite of utility Focus systems and applications. applications. Customer Customer impacts not Customer impacts included. considered. Impacts Demand response, innovative Demand Demand response not pricing and customer considered. Response education included as options. Levy Associates
Utility AMI Deployment Drivers WE Ameren KCPL NSP PSE IPL Exelon UI JEA IPC PPL Energies Operational Efficiency Operating Costs Improved Accuracy Theft Detection Distribution Service Demand Response Customer Service Rate Options Billing Options Internet Access Outage Response Service Quality Levy Associates
What are the Benefits? FIELD SERVICE BENEFITS CUSTOMER SERVICE BENEFITS Eliminates estimated bills Reduced Meter Reading Cost Eliminates meter reader Reduced Call Center Inquiries Energy information Reduced Problem Investigations Remote reads and monitoring Support billing inquiries Improved Meter Accuracy Digital over electro-mechanical Improved Capacity More timely T&D and system Management information Reduced Meter Testing One-time improvements System Value of Demand Eliminate Meter Locks Theft / Diversion detection function Value of demand reductions Side Management Logical Connects / Disconnects Remote read at connect/disconnect BACK OFFICE ADMINISTRATIVE BENEFITS SYSTEM OPERATING BENEFITS Reduced Estimated Bills Remote reads eliminate estimates Outage Reporting Automatic outage reporting Reduced Theft / Diversion Meters detection capability Improved Outage Detect / dispatch more Management efficiently / effectively Improved Read to bill time Reduced read to bill prep. Reduction in Lost Outage Reduced outage duration Sales Improved Bill to pay time Further automate bill process Reduced uncollectibles Flexible billing cycle option Improved Accounting Streamlined data collection Levy Associates
California’s Regulatory Perspective Levy Associates
California Policy Initiatives Policy Purpose 1. Facilitate pricing. Advance Metering 1 2. Support customer education. System wide 1. Integrate efficiency and demand Critical Peak Pricing response – common economics. 2 as the default tariff 2. Demand response - a condition of service for all customers. Revised Outage 1. ‘Partial outages’ in lieu of full 3 rotating outages. Management 2. Demand response - a condition of service for all customers. Levy Associates
A Business Case Framework CPUC Ruling July 28, 2004 AMI Business Case Framework Adopts Business Case Cost benefit analysis � � Analysis Framework for Utility operations and customer � Advanced Metering service. Infrastructure. Quantifiable and non- � Requires California IOU’s to � quantifiable impacts file by October 15, 2004. Full vs. targeted implementation. � Demand response / tariff � scenario analysis. Source: CPUC, CEC, CPA Joint Proceeding (CPUC R.02-06-001, CEC DR-01) Levy Associates
PG&E Business Case - Reasonableness CPUC – DRA Reasonableness Review “… AMI appears cost-effective relying on operational savings alone, without the need to rely on relatively uncertain demand response benefits”. � System meets the CPUC functional requirements. � System meets the CPUC functional requirements. � Technology choice one of several that are reasonable. � Technology choice one of several that are reasonable. � System provides functionality to justify ratepayer investment. � System provides functionality to justify ratepayer investment. � Costs are comparable with other similar utility projects. � Costs are comparable with other similar utility projects. � Operational and customer benefits not recognized or quantified � Operational and customer benefits not recognized or quantified would bridge the benefit-cost gap. would bridge the benefit-cost gap. � Interests of ratepayers are not well served by delaying � Interests of ratepayers are not well served by delaying implementation. implementation. Source: Testimony on PG&E’s Application No. 05-06-028, January 18, 2006, Chapter 1, Executive Summary, page 1-2, line 5-7. Levy Associates
PG&E Business Case - Evaluation PG&E Testimony CPUC DRA Testimony $3,416 $2,984 $3,000 DR Benefits PVRR ( $ millions ) $2,764 $2,675 $2,265 $2,209 $2,024 $1,999 $2,000 Operational Benefits Operational Benefits System Costs System Costs $1,000 Low High Low High Scenario Scenario Scenario Scenario Levy Associates
PG&E AMI Business Case - Decision CPUC Unanimous Decision July 20, 2006 PG&E Approved Costs PG&E Approved Benefits (millions) (millions) Meter System $2,024.2 Deployment $1,968.2 Demand Response 338.0 O&M 290.1 Total Costs Total Benefits $2,258.3 $2,362.2 (PVRR) (PVRR) Levy Associates
The Future Levy Associates
Three Key Issues � System Integration � Standards and interoperability � Network security and privacy Levy Associates
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