Puerto Rico Electric Power Authority

Puerto Rico Energy Challenges & PREPA

Transformation

Juan F. Alicea Executive Director January 29th 2015

2/2/2015 2

PREPA’s Highlights

• Electric System

• Renewable Energy Policy

• Challenges

Puerto Rico Energy Reform

• Act 57-2014

Transformation of PREPA

• Restructuring Process

• Integrated Resource Plan

Agenda

2/2/2015 3

PREPA is One of the Largest Public Utilities in the United States*

No. 1 in Customers

No. 1 in Revenues

No. 8 in sales of kWh

No. 7 in generated kWh * American Public Power Association Annual Directory & Statistical Report 2013-2014

PREPA’s Highlights

2/2/2015

2/2/2015 4

PREPA’s Highlights

Customers Distribution – FY 2013

Isolated Electric System

Sales Distribution – FY 2013

Isolated grid

Sole provider of electricity

1.5 Million Customers

Income comes solely from sales of energy

Rate - Fuel cost pass thru to the customers

2/2/2015 5

Ren: 223 MW

Fuel Oil: 2,072 MW

Light Oil: 1,885 MW

NG: 1,327 MW

Coal: 454 MW

Generation Capacity 5,962 MW PREPA 4,778

Cogenerators 961 Renewables 2231

Historical Peak Demand (Sep/05) 3,685 MW 1 Including 100 MW de Hydro from PREPA

Electric System Highlights PURPA was promulgated by the

US Congress in 1978 in order to promote efficiency, fuel diversification, and make more competitive electricity market

PREPA, under the provisions of the Public Utility Regulatory Policies Act (PURPA), incorporated into the generation system two cogeneration.

2000 EcoEléctrica 507 MW - NG 2002 AES 457 MW - Coal

2/2/2015 6

Renewable Energy Policy 2007 - Act 114 Established Net Metering Program in

PR, including eligibility criteria and compensation for energy exported (billing) PREPA published Net Metering Regulation in 2008

2010 - Act 82 (Public Policy in Energy Diversification by Means of Sustainable and Alternative Renewable Energy in Puerto Rico Act) established a renewable portfolio standard (RPS) 12% of total yearly energy sales, for 2015 to 2019

15% of total yearly energy sales, for 2020 to 2027

20% of total yearly energy sales by 2035

2/2/2015 7

Safe Integration of Renewable Energy Projects Renewable Energy Integration Study for PREPA’s

System 600 MW of renewable generation (utility scale) with levels of

curtailment (2.26%) Net metering projects should not exceed 65 MW

143.1 MW of utility scale projects are already integrated

443.3 MW of PPOA’s under development 41.5 MW of distributed generation are already

integrated

2/2/2015 8

PREPA Challenges: Major Impact in Energy Cost

₵/kWh

Operational Stability &

Enviromental Compliance

Natural Gas Conversion &

Cost Reduction

Fiscal Stability

Safe Integration of

Renewable Energy Projects

Major Impact in Energy Cost

9 2/2/2015 9

(Average Electricity Cost vs. Average Fuel Cost and Sales)

Puerto Rico’s Energy Reform Transformation of the Electric System

10

Why the reforms are necessary? Service quality Customer satisfaction The business is not profitable New regulation applicable Competitive preparation Infrastructure renewable New business goals New business technology

2/2/2015 11

Puerto Rico’s Energy Reform

Puerto Rico’s Energy Reform

• Act 57-2014 (Puerto Rico Energy Transformation and RELIEF Act)

– Approved for the creation and implementation of an Energy Reform consisting of multiple initiatives:

• Permanently reducing the cost of energy. • Provide the People of Puerto Rico with a reliable,

affordable, efficient, and transparent electric power service.

12

Puerto Rico’s Energy Reform • Act 57-2014 – Objectives Promotion of the public policy on energy

• Savings in energy consumption • Net metering and renewable energy

Active citizen participation • Creates the Independent Consumer Protection Office (ICPO)

Energy Regulatory Commission • Rates revision • Integrated Resource Plan • Efficiency standards

Transformation of PREPA • Energy RELIEF Plan

13

Puerto Rico’s Energy Reform Transformation of PREPA

14

Transformation of PREPA

• Restructuring Process: – Stabilizing PREPA’s operations and cash

situation – Development of a comprehensive

modernization and fuel conversion plan, including a projected capital budget for to achieve these goals

– Make PREPA self-sustaining entity that can serve the people of Puerto Rico over the long term

15

Transformation of PREPA • Restructuring Process: Actions completed Forbearance Agreements Retention of CRO (Lisa

Donahue/AlixPartners’) IRP Study - Phase I (LEIDOS) FTI Study on Billing and Collection Practices Business Plan Phase I

16

Transformation of PREPA • Recovery Plan: Next Steps Continued refinement of Business Plan

• Rate structure assessment and redesign Improvement initiatives

• Collections, fuel management, purchasing, inventories, safety improvement, etc.

Full Integrated Resource Plan • System options alternatives (generation,

transmission, fuel infrastructure, etc.) • Puerto Rico regulatory requirements • Environmental regulations and negotiation with EPA

(MATS, etc.) Capital Structure Options

17

Transformation of PREPA Integrated Resource Plan (IRP)

18

Transmission

Distribution

Generation

Financial Analysis

Load Forecast

Energy Sales

IRP

Transformation of PREPA • PREPA - Integrated Resource Plan (IRP)

– Plan that considers all reasonable supply resources for satisfying the electric energy demand in Puerto Rico over a planning period of 20 years

– Subject to the rules established by the Energy Commission

– Devised with broad participation from citizens and other interested groups

– First IRP has to be presented by July 1, 2015 and will be revised every three years

19

2/2/2015 20

“Insanity is to pretend to get

different results doing the same

thing.“

Albert Einstein

“Each electrical grid has its unique

and particular characteristics.“

Juan F. Alicea

PREPA is committed to transforming its electric system…