House Public Utilities Committee Briefing September 29, 2011 Presented by Staff of the Public...
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House Public Utilities Committee Briefing September 29, 2011 Presented by Staff of the Public Utilities Commission of Ohio Jodi Bair, Director, Utilities
House Public Utilities Committee Briefing September 29, 2011
Presented by Staff of the Public Utilities Commission of Ohio Jodi
Bair, Director, Utilities Beth Trombold, Director, Economic
Development and Public Affairs Kim Wissman, Director, Energy and
Environment
Slide 2
Slide 3
Overview of Electric Grid
Slide 4
Slide 5
Ohios Electric Generation Resource Mix
Slide 6
Initiating a Rate Case 6 Why? By a company to obtain more
revenue; by a customer through a complaint case; or by the PUCO
through a Commission Ordered Investigation (COI) How? Company makes
a Pre-Filing Notice (PFN) and informs mayors and legislative bodies
30 days before filing the full application at the Commission
Application filed no earlier than 30 days after the PFN Company has
the burden of proof in the request for an increase in rates Company
files work papers, testimony and a set of proposed rates Company
publishes notice once a week for 2 weeks in newspapers
Slide 7
Rate Case Steps 7 Staff investigates the companys expenses,
revenues and investment Revenue Requirement the amount of money
that allows the company to cover expenses and earn a fair return on
investment Rate Design how the revenue be collected from the
various classes (residential, commercial, industrial) and based
upon cost- of-service (i.e. the charge levied against a customer is
proportional to the expense of service to the customer)
Slide 8
Rate Case Procedure 8 Staff Report is filed - usually within 5
months of the application. (not a statutory timeline) Objections to
the Staff report must be filed within 30 days. (supported by
testimony) Objections & Testimony frame the issues if not
objected to, then Staff report carries the burden
Slide 9
The Parties to a Rate Case 9 The Attorney Generals office
represents the PUCO Staff in the hearing and /or negotiations
Office of Consumers Counsel (state agency representing residential
consumers) Commercial customers Industrial customers Cities
Slide 10
Rate Case Hearings 10 Publish notice of upcoming hearings Two
types of hearings: 1.Public Hearing: the public gets to hear about
the proposed rate change an make comments. Public hearings are held
in the communities affected by the application. 2.Evidentiary
Hearing: an attorney examiner presides and witnesses testify to
support their positions and are subject to cross-examination from
other parties. PUCO staff testify at the evidentiary hearing in
support of the staff report.
Slide 11
After the Hearings 11 Parties file briefs with the Commission
within a time established by the PUCO attorney examiner. Usually
file initial briefs and reply briefs. PUCO attorney examiner writes
an order and circulates it to the Commissioners. The Commissioners
provide input and vote on the order at a commission meeting. PUCO
Order is issued within 275 days of the application filing otherwise
the company can put requested rates into effect subject to refund.
Applications for Rehearing must be filed within 30 days. Any issue
appealed to the Ohio Supreme Court must be raised in the
application for rehearing
Slide 12
Appeal of Commission Order 12 Appealing party must file a
notice of appeal with the Ohio Supreme Court within 60 days of the
date of denial of the application for rehearing by the Commission.
No deadline in which the Court must act; however, the Court must
hear PUCO appeals. Most appeals to the Ohio Supreme Court are
discretionary the court chooses what it will hear. Court can
affirm/agree with the Commission order. Court can reverse the PUCO
decision. Court can reverse and remand to the Commission
Slide 13
Rate Case Timeline Month 1 Commission accepts the
filing/application within 30 days, establishes test year &
Staff investigation begins Month 5 Staff Report filed Month 6
Objections to Staff report filed within 30 days (with supporting
testimony) Months 7 & 8 Local public hearing & evidentiary
hearing completed Briefs filed Month 9 Commission issues decision
(275 days) Applications for Rehearing before Commission Appeal to
Ohio Supreme Court 13
Slide 14
Slide 15
Why Regulation? Electricity has historically been considered a
natural monopoly. Entry into this market required huge investments
in infrastructure. Electricity was considered a public good. Very
few people could make the investment to get into the electric
business and those who did could take advantage of the
monopoly.
Slide 16
FERC Order 888 (1996) and Order 2000 (1999) Determined the
public interest would be best served by a competitive wholesale
market Provided for non-discriminatory and open-access on the
transmission system Required transmission owners to join an
Independent System Operator
Slide 17
History of Electric Restructuring in Ohio Senate Bill 3 A 1999
law effective January 2001 restructured Ohios electric industry
allowed customers to shop for electricity provided a five-year
market development period Turn of the Century System Unbundling of
vertically integrated system Customers served by generator of
choice Transmission and distribution remain regulated For
generation, the rate of return system of regulation replaced by
competition
Slide 18
Issues Under Restructuring Unbundling Market Power Transitional
Issues Independent System Operation Social Issues Environmental
Issues Taxes
Slide 19
Generation (or supply) Shop for this Transmission Remains
regulated by FERC Distribution Remains regulated by PUCO and
provided by your local utility Unbundling
Slide 20
Bundled Rates Rates were previously a bundle of costs for
different services. Generation Transmission Distribution Ancillary
Services Specific Surcharges Total Rates Specific Surcharges
Generation Transmission Distribution Ancillary Services
Slide 21
Unbundled Rates Ancillary Services Generation Transmission
Distribution Specific Surcharges Total Rates Electric Restructuring
would unbundle the rates so the generation component could be
shopped for, and priced at market. The bill anticipated that market
rates would be lower than regulated rates.
Slide 22
Transitional Issues Temporary issues pertaining only to the
period of transition from a regulated to a competitive industry.
Timing How soon full competition can begin Stranded Costs
Production Regulatory
Slide 23
Social Issues Universal Service Provider of Last Resort Low
Income Programs Consumer Education Metering & Billing Unfair
& Deceptive Practices Price Disclosure Slamming Cramming
Slide 24
Focus Regulatory Shift to Market Monitoring & Development
The ability to control prices and product quality Vertical A
vertically integrated company favors its own or an affiliates
generation over alternatives through non-price barriers. A single
supplier or group of suppliers has a strategic advantage in terms
of access to customers relative to other suppliers. Horizontal A
single supplier or group of suppliers has undue influence on the
price of the product due to concentration of market share that can
be used strategically.
Slide 25
Market Development Period 5 year market development period
during which time rates are frozen Local utility delivers
electricity and maintains infrastructure Utility is default
supplier
Slide 26
Suppliers must be certified for consumer protection PUCO
certifies all electric suppliers Suppliers are reviewed for:
technical capabilities financial capabilities managerial
capabilities Ensures these companies are qualified to do business
in Ohio
Slide 27
Governmental Aggregation: the power of group buying Ohio
Electric Choice allowed for local governments to join all of the
customers in a community into a single buying group. Most cases
opt-out is used Community passes a ballot issue Everyone in
community automatically enrolled and a supplier is chosen for the
group Everyone given a chance to opt- out or say you dont want to
participate
Slide 28
What happened during the Market Development Period? Initial
results early during the period showed significant switching in
some service territories primarily due to high costs in the
northern part of Ohio. Governmental aggregation was the success
story in Ohio. The moderate-to-low priced utilities experienced
little, if any, customer switching. The success of government
aggregation aside, it was apparent that a fully competitive market
had not developed as quickly as envisioned by lawmakers in Senate
Bill 3.
Slide 29
PLUS... Many other things happened during the 5-year Market
Development Period The California crisis and Enron scandals Extreme
volatility and upward movement of market prices (due to rising gas
prices, rising coal prices, and construction facilities not
matching the projected increases in demand) And the slower than
expected development of Independent System Operators for the
transmission systems
Slide 30
Ohio Electric Choice The move to Rate Stabilization Plans As
the end of the market development period neared, there were a
limited number of competitive electric suppliers and low degree of
market activity. Therefore, there was concern that an immediate
shift to market-based rates in 2006 would not be in the best
interest of customers. To avoid rate sticker shock and gradually
transition customers to market-based rates, the PUCO worked with
Ohios electric utilities and stakeholders to develop Rate
Stabilization Plans (RSPs). Most Rate Stabilization Plans lasted
through 2008.
Slide 31
Energy, Jobs and Progress Plan September 2007 The plan was a
comprehensive, long-term approach to the challenges of supplying
reliable and affordable power. It also had to address the
approaching expiration of the Rate Stabilization Plans. Attract
energy jobs of the future through an Ohio advanced energy portfolio
standard. Ensure affordable and stable energy prices to protect
Ohio consumers and existing Ohio jobs.
Slide 32
Middle-ground Approach to Electricity Regulation Evidence
demonstrated few competitive options existed at the retail level.
Did not close the door on market pricing, but required a
demonstration that competition is effective. Action was necessary
to secure Ohios energy future. PUCO can set rates and allow
utilities to recoup the cost for new generation and modernization
of the electric system.
Slide 33
S.B. 221 Policy Principles Availability of adequate, reliable,
safe, efficient, nondiscriminatory and reasonably priced retail
electric service Diversity of electricity supplies and suppliers
Encourage innovation and market access for cost-effective supply-
and demand-side retail electric service Transmission and
distribution availability Recognize continuing emergence of
competitive electricity market through development and
implementation of flexible regulatory treatment Provide coherent,
transparent means of giving appropriate incentives to technologies
that can adapt successfully to potential environmental
mandates
Slide 34
Reasonable Arrangements Section 4905.31 To facilitate the
state's effectiveness in the global economy, promote job growth and
retention in the state, ensure the availability of reasonably
priced electric service, promote energy efficiency and provide a
means of giving appropriate incentives to technologies that can
adapt successfully to environmental mandates. Filed by: company, OR
mercantile customer Provides Flexibility Cost recovery for:
economic development/job retention revenue foregone from peak
demand reduction/energy efficiency programs advanced metering/meter
replacement
Slide 35
Infrastructure Investment Independent power producer can build
ORC Section 4928.143 -- Allows distribution utility to get rate
recovery for building/owning generation dedicated to Ohio
consumers
Slide 36
Ohio Alternative Energy Portfolio Standard 25% by 2025 25% of
retail electricity sold by: Ohios electric distribution utilities
American Electric Power, Dayton Power & Light, Duke Energy, and
First Energy, or; Competitive electric service companies Must be
generated from alternative sources: Renewable energy sources
Advanced energy technology
Slide 37
SB 221 25% (of total kWh) by 2025 Half may be from advanced
energy resources At least half from renewable,.5% solar At least
half of renewable through facilities located in the state,
remainder deliverable Compliance payments/forfeitures Cost of
compliance not to exceed three percent of otherwise acquired
Slide 38
RPS Policies Renewable portfolio standard Renewable portfolio
goal www.dsireusa.orgwww.dsireusa.org / September 2011 Solar water
heating eligible * Extra credit for solar or customer-sited
renewables Includes non-renewable alternative resources Minimum
solar or customer-sited requirement UT: 20% by 202* DC 29 states +
DC and PR have an RPS (8 states have goals) 29 states + DC and PR
have an RPS (8 states have goals)
Slide 39
RPS Policies with Solar/DG Provisions Renewable portfolio
standard with solar / distributed generation (DG) provision
Renewable portfolio goal with solar / DG provision
www.dsireusa.orgwww.dsireusa.org / September 2011 Solar water
heating counts toward solar / DG provision TX: double credit for
non-wind (non-wind goal: 500 MW) DC Delaware allows certain fuel
cell systems to qualify for the PV carve-out 16 states + DC have an
RPS with solar/DG provisions
By end of year Renewable Energy Solar Energy 20090.25%0.004%
20100.5%0.01% 20111%0.03% 20121.5%0.06% 20132%0.09% 20142.5%0.12%
20153.5%0.15% 20164.5%0.18% 20175.5%0.22% 20186.5%0.26%
20197.5%0.3% 20208.5%0.34% 20219.5%0.38% 202210.5%0.42%
202311.5%0.46% 2024 +12.5%0.5% Benchmarks
Slide 42
Alternative Energy Benchmarks (including advanced)
Slide 43
Renewable Energy Credits New Ohio Renewable Energy Credit (REC)
trading market created by new law in 2009 1 REC = 1 mWh of
electricity generated Utilities may own renewable facilities or
purchase RECs to meet the renewable portion of the standard PUCO
certifies resources; established tracking systems will issue and
track RECs RECs have a 5-year lifetime following their acquisition
Energy and RECs may be sold as separate commodities
Slide 44
Penalties Utilities and electric service companies subject to
compliance payments if annual renewable and solar benchmarks are
not met. Non Solar: Started at $45/mWh in 2009 2011 penalty payment
is $45.93 Solar: $450/mWh in 2009 and declines over time 2011
penalty payment is $400/mWH for solar Exceptions: force majeure; 3%
cost cap
Slide 45
Certification Application REN certification is not mandatory
for any renewable project, but necessary to create RECs eligible
for Ohio utility compliance No fee to apply May certify facilities
prior to commercial operation Application will focus on:
Resource/technology utilized Placed in-service date Deliverability
to the state One-time review (unless significant change to facility
in future) Interested person may seek intervention and request
hearing on certification Certification status will be conveyed to
applicable attribute tracking system
Slide 46
YEARFILINGS 2009 186 2010 1,072 2011 (as of 9/23) 2,608 TOTAL:
3,866 REN Applications Received
Wind Momentum Federal PTC (Production Tax Credit) State
Renewable Portfolio Standards (RPS) Technological Improvements
Price Volatility for Other Fuels (i.e., Natural Gas) Interest in
Green Power / Clean Energy Sources Climate Change / Energy
Independence
Slide 49
Wind farms in Ohio can help provide renewable resources to meet
Ohios Alternative Energy Portfolio Standards But Also: A small wind
generator owned by a retail customer may enable the customer to use
a renewable resource to offset his electrical demand and
potentially earn a credit for net metering on his electric
bill.
Slide 50
Slide 51
Slide 52
Qualified Biomass Resources Biogas: landfill methane gas or
anaerobic digestion of organic materials such as animal waste, bio-
solids, food waste, agricultural crops and residues, solid waste
Agricultural crops, tree crops, crop by-products and residues Wood
and paper manufacturing waste Forestry or vegetation waste
Algae
Slide 53
Utility-scale biomass projects 9 utility applications filed for
plants using biomass or biomass co-fired with coal or pet coke 1
private 200 MW (2012) plant certified Utility RFPs have been issued
for biomass fuel Ohio Solid Biofuel Working Group to promote fuel
supply development
Slide 54
Slide 55
Advanced Energy Resources Clean coal Nuclear Fuel cells
Customer Co-generation Advanced solid waste conversion Utility
generation plant or demand-side management efficiency measures RECs
not created from advanced resources
Slide 56
Energy Efficiency and Demand Reduction Benchmarks - SB 221 (OAC
4901:1-39) Establishes requirements and processes to determine
specific benchmarks for energy efficiency and peak reduction
programs Establishes energy usage and demand baselines for
measuring annual energy savings and demand reductions Provides
mechanisms by which investments achieve energy savings and demand
reductions by mercantile customers in their own facilities and can
be recognized in electric utility programs as contributing to
specific levels of energy savings and demand reductions.
Slide 57
Energy Efficiency Resource Standards www.dsireusa.org /
September 2011 Energy efficiency resource goal Energy efficiency
resource standard DE Policy includes natural gas savings
requirements or goals Note: See following slide for a brief summary
of policy details. For more details on EERS policies, see
www.dsireusa.org and www.aceee.org/topics/eers.www.dsireusa.org
www.aceee.org/topics/eers 20 states have an EERS (5 states have
goals) 20 states have an EERS (5 states have goals) MA, RI
Slide 58
Electricity Consumption in Investor-Owned Electric Utility
Service Areas in Ohio October 2008 December 2009
Slide 59
Energy Efficiency Requirement 22% + Reduction by 2025 Could
result in annual usage at 13.8 million mWh below 2007 Peak Demand
Reduction Standard 7.75% by 2018 Tariffs and special contracts
available to commit the demand reduction Customers enrolled in RTO
demand response programs are counted if customer commits the peak
demand reduction
Slide 60
Peak Demand Reduction and Energy Efficiency Benchmarks
Slide 61
Each Electric Distribution Utility filed a report identifying
the 2009 baselines and benchmarks Each Electric Distribution
Utility filed a program portfolio plan for energy efficiency and
peak reduction programs Upon approval of the program portfolio
plan, an Electric distribution utility may seek cost recovery Each
year, on April 15 th, the Electric Distribution utility must file a
portfolio status report that demonstrates its compliance status
with its benchmarks and provides an assessment of its
performance.
Slide 62
Mercantile Customer Applications to commit Energy Efficiency
and Peak Demand Reduction Ohio Administrative Code 4901:1-39-05(F)
Permits a mercantile customer to file individually or jointly with
an electric utility, an application to commit the customers
existing demand reduction, demand response, and energy efficiency
programs for integration with the utilitys program Expectation the
mercantile customers were to be exempt from the EE/PDR Rider of the
tariff they are taking service Pilot Program adopted by the
Commission for ease of application and administration
Slide 63
* As of 9/28/2011
Slide 64
Slide 65
40+ Electric Suppliers in Ohio AEP Retail Energy AK Electric
Supply LLC Algonquin Energy Services, Inc. American PowerNet
Management LP APN StarFirst LP ARCELORMITTAL USA LLC Blue Pilot
Energy, LLC BlueStar Energy Solutions Border Energy Electric
Services, Inc. Champion Energy Services, LLC CINCINNATI BELL ENERGY
PA LLC Commerce Energy Inc. Constellation NewEnergy, Inc. Direct
Energy Business, LLC Direct Energy Services, LLC DOMINION RETAIL
INC DPL Energy Resources, Inc. Duke Energy Retail Sales, LLC Eagle
Energy, LLC Energy Plus Holdings, LLC Exelon Energy Company
FirstEnergy Solutions Corp. Gateway Energy Services Corporation GDF
Suez Energy Resources NA, Inc. GearyEnergy, LLC Glacial Energy of
Ohio, Inc. Hess Corporation Integrys Energy Services, Inc. Liberty
Power Delaware, LLC Liberty Power Holdings, LLC Linde Energy
Services, Inc. MC SQUARED ENERGY SERVICES LLC MidAmerican Energy
Company NextEra Energy Services Ohio, LLC Noble Americas Energy
Solutions LLC NOPEC, Inc. Palmco Energy OH, LLC SMART Papers
Holdings, LLC Spark Energy, L.P. STARION ENERGY PA INC TEXAS RETAIL
ENERGY LLC Vectren Retail, LLC
Slide 66
INSERT Switching STATS
Slide 67
Things that havent changed: Same safe, reliable service. Local
utility still delivers the electricity. Local utility still
maintains the poles and wires. Still call your local utility in
case of a power outage. Still get service even if choose not to
change. Low income programs like PIPP continue.
Slide 68
Ohio Power Siting Board
Slide 69
To support sound energy policies that provide for the
installation of energy capacity and transmission infrastructure for
the benefit of the Ohio citizens, promoting the states economic
interests, and protecting the environment and land use. Ohio Power
Siting Board Mission Statement
Slide 70
Ohio Power Siting Board Member Agencies Public Utilities
Commission of Ohio - Chairman Ohio Environmental Protection Agency
Ohio Department of Development Ohio Department of Health Ohio
Department of Natural Resources Ohio Department of Agriculture
Public Member Four Legislative Members 2 from Ohio House of
Representatives 2 from the Ohio Senate
Slide 71
OPSB Jurisdiction Definition of Major Utility Facility: A
generating plant of 50 megawatts or more An electric transmission
line of 125 kilovolts or greater A gas or natural gas transmission
line capable of transporting gas at or greater than 125 pounds per
square inch of pressure
Slide 72
HB 562 (2008) More recently, the passage of in 2008, gave the
Board additional oversight regarding commercial wind farms Wind
facilities greater than 5 MW This bill also directed the Board to
adopt certification rules for the construction, operation and
maintenance of wind-powered electric generation facilities The
rules outline requirements for aesthetics, setback, noise levels,
ice throw, blade sheer and shadow flicker
Slide 73
OPSB Process Pre-Application meetings Pre-Application Public
Informational meeting Application submitted Completeness Review (no
more than 60 days) Letter of Completeness Proof of Service Board
Entry establishing Filing Date & Hearing schedule Public Notice
published by Applicant Staff Report (15 days prior to public
hearing) Public Hearing (no less than 60 nor more than 90 days from
filing) Adjudicatory Hearing (within days of public hearing) Board
Decision Appeal Process (30 days for rehearing filing from Board
decision, 30 days for Board decision on rehearing, 60 days for any
Appeal to Ohio Supreme Court)
Slide 74
Slide 75
OPSB Decision The need for the (transmission) facility The
probable environmental impact Whether the facility represents the
minimum adverse environmental impact considering the technology
that is available and the nature and economics of the various
alternatives Compliance with all air and water pollution control
and solid waste disposal laws and regulations Consistent with
regional plans for expansion of the electric power grid, and the
interests of electric system economy and reliability Public
interest, convenience and necessity Impact on agricultural lands
Water conservation practices
Slide 76
OPSB Summary One-Stop Siting Process Timely action:
Approximately 6 to 12 months for applications, with statutory time
mandates; even more expedited schedules may be an option under
certain circumstances Regulatory certainty: process is known and
well practiced Sole jurisdiction: local and public participation
welcome in the process, but sole decision rests with the state
(OPSB) Our siting process is fair and efficient and has been put
forth as an example for others to follow Having seen our success,
several states and countries have adopted new siting legislation
modeled after Ohios statute
Slide 77
OPSB TRANSMISSION APPLICATIONS (1998-2011) ELECTRIC
TRANSMISSION SUMMARY Number Of CasesMilesEstimated Costs Certified
- Operational 11 71.7 $40,825,000 Certified - Not Yet Online 6 36.0
$58,200,000 Certification Pending 4 66.9 $8,558,400 TRANSMISSION
LINE TOTALS: 21 174.6 $107,583,400 VOLTAGE LEVEL STATS (kV) Number
Of CasesMilesEstimated Costs ACTIVE 138 17 133.2 $83,712,400 345 4
41.4 $23,871,000 765 - - - GAS TRANSMISSION SUMMARY Number Of
CasesMilesEstimated Costs Certified - Operational 13 109.4
$125,095,623 Certified - Not Yet Online - - - Certification Pending
3 241.5 $559,944,714 TRANSMISSION LINE TOTALS: 16 350.85
$685,040,337
Slide 78
OPSB CONSTRUCTION NOTICES/LETTERs OF NOTIFICATIONS (1998-2011)
ELECTRIC LETTER OF NOTIFICATIONS Number Of CasesMilesEstimated
Costs Operational, Completed 170 138.1 $124,332,728 Not Yet
Completed 19 27.6 $30,170,096 TOTALS: 189 165.7 $154,502,824
ELECTRIC CONSTRUCTION NOTICES Number Of CasesEstimated Costs
Operational, Completed 74 $71,748,886 Not Yet Completed 9
$71,748,886 TOTALS: 83 $143,497,772 GAS LETTER OF NOTIFICATIONS
Number Of CasesMilesEstimated Costs Operational, Completed 13 156.7
$125,095,623 Not Yet Completed 5 6.0 - TOTALS: 18 162.7
$125,095,623 GAS CONSTRUCTION NOTICES Number Of CasesEstimated
Costs Operational, Completed 69 $56,779,585 Not Yet Completed 15
$19,886,000 TOTALS: 84 $76,665,585
Slide 79
OPSB ELECTRIC GENERATION APPLICATIONS (1998-2011) GENERATION
SUMMARY Number Of CasesCapacity (MW)Estimated Costs Certified -
Operational 167,460 $2,951,633,700 Certified - Not Yet Online
187,229 $8,223,870,497 Certification Pending 91,653 $1,195,000,000
GENERATION TOTALS: 4316,342 $12,370,504,197 GENERATION CASES BY
FACILITY TYPE Number Of Active Cases Capacity (MW)Estimated Costs
Coal (i.e. IGCC) 4 2,169 $3,974,400,000 Cogeneration-Waste Heat 4
405 $524,831,197 Combined-Cycle 6 4,797 $1,571,000,000 Compressed
Air 1 2,700 $1,650,000,000 Simple-Cycle 11 4,525 $1,537,190,000
Wind 17 1,746 $3,113,083,000 FACILITY TOTALS: 43 16,342
$12,370,504,197