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South Carolina Association of Municipal Power Systems 2016 Annual Meeting
Lisa M. Vedder, MPA, CIA, CCSAPrincipal ConsultantJune 20, 2016
Counting Down to 2020:The Five Things Every Electric Utility Should Be
Doing Now
2Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
About Willdan
Willdan FinancialServices is one of
four operating units ofWilldan Group Inc.
3Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Timeline of the US Electric Power Industry
2020
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4Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Timeline of the US Electric Power Industry
2020
1882Edison Pearl Streetstation, the first modernelectricity generationstation
1879Thomas Edison
demonstrates the electriclight bulb and generator &
First commercial powerstation opens in SF
5Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Timeline of the US Electric Power Industry
2020
1895First successful long-
distance transmission ofelectricity in the south in
Anderson SC—TheElectric City
1934South Carolina PublicService Authority(Santee Cooper) created
6Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Timeline of the US Electric Power Industry
20202020
What should we expect asthe industry turns 140?
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7Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
1. Decline of Coal Power
2. Natural Gas PowerExpansion
3. Renewables ReachingGrid Parity
4. Growing Utility LoadDefection
5. Utilities Entering theSolar Game
6. Rate Reforms
7. Grid Modernization
8. Expansion of Storage
9. Customer Focus
10. Evolving UtilityBusiness Model
8Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
1. Decline of Coal Power
• Driven by:
• Mercury and AirToxics Standards(MATS)
• Natural GasPrices
• 2015 CleanPower Plan
Source: 2016 EIA/Sierra Club
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
2. Natural Gas Power Expansion
Source: NERC April 2015
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
3. Renewables Reaching Grid Parity
Source: EIA
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
3. Renewables Reaching Grid Parity—Solar Projections
• 20 states in 2016
• 42 states by 2020 under business-as-usual conditions
Year 1 Bill Impact from Solar(2016)
Source: GTMResearch February 2016
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
3. Renewables Reaching Grid Parity—Wind Projections
Source: DOE/Lawrence Berkely National Laboratory August 2015
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13Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
4. Growing Utility Load Defection• Rocky Mountain Institute (RMI) study:
• Competitive grid-connected solar-plus-battery systems 10–15 years• By 2030, $15.4 billion per year Northeast residential defection
• “Other” Death Spiral—Bypass• 60 INSTITUTIONAL Wind Buyers:
Microsoft, Walmart, Yahoo,Amazon Web Services,U.S. General ServicesAdministration, Cornell University,Google, Apple, Oklahoma StateUniversity, Ohio State University,and the U.S. Air Force
• Corporate Solar Purchases ofnearly 570 MW (2014):Walmart, Apple, Kohls,IKEA, Costco Source: Rocky Mountain Institute Study, April 2015
14Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
4. Growing Utility Load Defection• SolarCity small- and medium-size business initiative
• Apple June 6 FERC application to sell excess solar atmarket-based rates
• Amazon Web Services NCcontract for 208 MWIberdrola Renewableswind project
• Hewlett Packard contractfor 112 MW SunEdison windfor Texas data center
• Almost 100 millionhouseholds worldwide may bepowered by solar panels by 2020(Boomberg New Energy Finance) Source: Techonomy and the World Bank 2016
15Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
5. Utilities Entering the Solar Game
• Georgia Power offering rooftop solar through anunregulated subsidiary
• Arizona Public Service and Tucson Electric Power havepilot programs forutility-owned solar
• CPS Energy solarhosting program
• Community Solar
Source: GTMResearch, April 2016
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16Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
6. Rate Reforms
Source: GTMResearch February 2016
17Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
7. Grid Modernization
• Current infrastructure aged over useful life
• 7,000 miles of transmission lines to comply with theClean Power Plan (NERC estimate)
• Deployment of smartgrid technologiesrequired to supportfuture grid(IEA estimates $2.1Tinvestment by 2035)
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
8. Expansion of Storage
• Game changer• Stem and PG&E aggregation of customer-sited storage systems
and bid them into the real-time energy market in the CAISO• Kauai Island Utility Cooperative’s 52 MWh SolarCity battery deal• Duke Energy’s nearly 15% percent
of the US grid-connected,battery-based energy storage
• $100/MWH cost goal by 2020• Tesla Power Wall• New market entrants
• SolarCity turnkey batterybackup service includes TeslaPowerwall
Source: GTMResearch
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19Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
Source: APPA 2016 National
9. Customer Focus• Only one in five public
power customers underthe age of55 know that they gettheirelectricity from a publicpower utility
• Customers think moreabout their utilitywhen the power is OFFthan when it is ON.(Michael Vigeant, CEO,Great Blue Research)
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The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
9. Customer Focus
• Technology driven changesto the traditionalrelationship
• Competition is not just otherenergy service providers
• Marketing and Branding
• Two-way communication
• New channels ofcommunication
21Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
10. Evolving Utility Business Model
• Led by states with high electricity prices and largeamounts of distributed generation—Hawaii,California, Arizona, Texas
• Southern Company via unregulated subs• Increasing investments in utility-scale renewables
• Entering the rooftop solar industry in Georgia
• NRG/Comcast Energy Rewards program inPennsylvania—free HBO
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22Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Top 10 Electric Utility Trends for 2020
10. Evolving Utility Business Model
Source: Rocky Mountain Institute Study, April 2015
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The Five Things Every Electric Utility Should be Doing Now
Timeline of the US Electric Power Industry
20162020
What should we be doingtoday?2010
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Number 1: Kick the Tires
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25Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Kick the tires—Assess Your Infrastructure
• Current Inventory of Assets
• Enterprise Asset Management• Optimize asset utilization
• Increase operational efficiency• Achieve sustainable performance
improvements• Reduce operating costs• Increase flexibility and
responsiveness
• Update Capital ImprovementPlan (CIP)
• 5, 10, 20 year planning horizons• Incorporate resiliency considerations
• Evaluate Potential for Storm Impacts/Emergency Response• Coordination and Communication• GIS• Staffing
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Number 2: Transition Your Workforce
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The Five Things Every Electric Utility Should be Doing Now
Transition Your Workforce—Succession Plan
Employees are your most important assets!• 78 million baby boomers in the US
• 28% of the US population• 68% of the existing work force
• 40 % of work force at America’s electric and natural gasutilities eligible for retirement in the next five yearsabout 20% eligible now
• The challenges associated with replacing the technicaland institutional knowledge of these professionals willbe significant
• Hard decisions must be made soon to preserveintellectual property for the future
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28Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Transition Your Workforce—Succession Plan
• Consider creatinga Heat Map
• Rethink approachto retention & recruitment
• Steps to reduceincreasing turnoverof newer and highperformers
• Document,document, documentto avoid “brain drain”
• Keep in touch withretired workers
• Consider internships
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Number 3: Formulate Your Financial Plan
30Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Formulate Your Financial Plan—COS/Rates/CIP
Update your financial plan
• Forward looking numerical representation of a utility’s businessplan and corporate strategy
• Identifies and forecasts key drivers impacting financialperformance
• Integrates with other utility planning tools:• Load Research Study• Smart Grid (AMI) Data• Feeder Data• System Losses Study• Resource Planning Study• Distributed Generation Data• Minimum System Study• Lighting Study• Accounting for Direct Assignment• Load Forecasting
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31Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Formulate Your Financial Plan—COS/Rates/CIP
Conduct aCost ofService Study& ReviewRate Design
STEP 1Establish RevenueRequirement
STEP 2Allocate Costs
• Functionally UnbundleProduction, Transmission,Distribution, Customer
• ClassifyFixed, Variable, Customer
• Allocate to CustomerClasses
Step 3DesignRates
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The Five Things Every Electric Utility Should be Doing Now
Formulate Your Financial Plan—COS/Rates/CIP
Operation and
Expense
Operation andMaintenance
Expense
Total RevenueRequirements
Capital & OtherExpenditures
Debt Service
Rate DesignOther
Revenues
Customer Accounts
Revenues UnderExisting Rates
Billing Frequency & Revenue Reconciliation Analysis
Usage/Consumption
CSS/RD Methodology
Properlydesignedrates willgeneratesufficient
revenues toequal therevenue
requirement
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The Five Things Every Electric Utility Should be Doing Now
Formulate Your Financial Plan—COS/Rates/CIP
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Number 4: Engage Your Stakeholders
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The Five Things Every Electric Utility Should be Doing Now
Engage Your Stakeholders—Two-wayCommunication
Utilize new tools
• Customer Journey Maps• diagram customer interactions with utility
• prioritize competing needs
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The Five Things Every Electric Utility Should be Doing Now
Engage Your Stakeholders—Two-wayCommunication
• Short attention spans
• Visuals are important
• Be proactive, consistent, and clear
• Speak theirlanguage
• Use multiplemedia
• Cover thebreadth ofyour clientbase
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Number 5: Set Your Strategic Course
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The Five Things Every Electric Utility Should be Doing Now
Set Your Strategic Course—Prepare/Update StrategicBusiness Plan
• A Strategic Business Plan is created through aninteractive, stakeholder process
• Prioritizes resources & challenges/opportunities• Markets• Succession• Environmental• Sustainability• Security• Stakeholders• Workforce
• Creates a roadmap for success• Milestones• Resources• Owner
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The Five Things Every Electric Utility Should be Doing Now
Set Your Strategic Course—Prepare/Update StrategicBusiness Plan
EXAMPLE UTILITY SUPPLY SITING SALES
CONTRACT PROGRAMS
SOLAR AGGREGATION
PILOT PROJECT
Orlando Utilities
Commission (FL)
PPA between OUC and PV
developers on participating
commercial customer sites
Participating
customers
Contract between OUC and
participating commercial
customers for PV supply
FORT CARLSON SOLAR
ARRAY
Western Area Power
Administration, Colorado
Springs Utility (CO)
PPA with WAPA to purchase
the unbundled solar electricity.
Xcel Energy purchases the RECs
Customer (Fort
Carson)
Contract between Colorado
Springs and Fort Carson for solar
electricity sales
LUKE AIR FORCE BASE Arizona Public Service (AZ) APS would own and operate 14
MW PV system on Luke AFB
Customer
(Luke AFB)
Contract between APS and Luke
AFB for output
RATE PROGRAMS
COMMUNITY SOLAR
PROGRAM
Salt River Project (AZ) PPA between SRP and PV
developer for 20 MW PV
system
Third Party Optional green tariff for business,
industrial and education
institutions
BRIGHT TUCSON
COMMUNITY SOLAR
PROGRAM
Tucson Electric Power (AZ) PPAs between TEP and various
PV installations
Third Party Customer purchase energy
blocks with fixed-rate 20-year
contracts
GREEN SOURCE RIDER Duke Energy Carolinas (NC) Any Various Customer pays for the renewable
energy and receives a credit form
Duke at its avoided cost rate
RATE SCHEDULE RG Dominion Virginia Power
(VA)
PPA between Dominion and
renewable energy installations
on behalf of participating
customers
Third Party Optional Rate Schedule RG for
participating customers
SUMMARY OF UTILITY KEY ACCOUNT OFFERING EXAMPLES
• New solutions are constantly emerging
Source: SEPA
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40Counting Down to 2020
The Five Things Every Electric Utility Should be Doing Now
Counting Down to 2020—The Five Things EveryElectric Utility Should be Doing Now
Keeping The Flow of Energy Stable• Kick the tires—Assess your infrastructure• Transition your workforce—Succession
plan• Formulate your financial plan—
COS/Rates/CIP• Engage your stakeholders—Two-way
Communication• Set your strategic course—
Prepare/Update Strategic Business Plan
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The Five Things Every Electric Utility Should be Doing Now
One Last Thought
One of the advantages of being disorderly is that oneis constantly making exciting discoveries.
—A. A. Milne
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Contact Information
Lisa M. Vedder, MPA, CIA, CCSA200 S. Orange Ave. | Suite 1550 | Orlando, FL 32801o: 407-982-2756 | c: 407.793.7036e-mail: [email protected]