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Energy Policy Update How Might Pending Policies Affect Electric Rates

Scott J. Anders Energy Policy Initiatives Center

University of San Diego School of Law

San Diego Chapter of IEEE September 24, 2009

www.sandiego.edu/epic

Presentation Overview

EPIC Overview

Greenhouse Gas Emissions

Key Energy Policy Issues

San Diego Rates Project and Results


About EPIC

Academic and Research Center •  University of San Diego School of Law

EPIC Mission

ON-ROAD TRANSPORTATION

46%

ELECTRICITY 25%

NATURAL GAS END USES

9%

CIVIL AVIATION 5%

INDUSTRIAL PROCESSES AND

PRODUCTS 5%

OTHER FUELS/OTHER

4%

OFF-ROAD EQUIPMENT AND

VEHICLES 4% WASTE

2%

AGRICULTURE/FORESTRY/LAND

USE 2% RAIL

1% WATER-BORNE NAVIGATION

0.4%


GHG Emissions in San Diego County 2006

GHG Emissions in San Diego County 2006

The Vast Majority of GHGs in SD County are from…

Buildings

Car & Trucks

#1 #2

GHG Inventory Project Results

Greenhouse Gas Reduction Policies in California •  AB 32 – Global Warming Solutions Act of 2006

-  Goal: 1990 levels by 2020 •  Executive Order S-3-05

-  Goal: 80% below 1990 levels by 2050 •  SB 375 (2008)

-  GHG reductions from transportation and land use


GHG Reduction Targets

- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E

Theoretical GHG Reduction Targets for San Diego County

Business-as-Usual Projection


- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E


Business-as-Usual Projection AB 32 Reduction Targets


- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E


Business-as-Usual Projection AB 32 Reduction Targets Executive Order S-3-05 Reduction Targets


- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E



12 MT/person


- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E



12 MT/person

8 MT/person


- 5

10 15 20 25 30 35 40 45 50

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

MM

T CO

2E



12 MT/person

8 MT/person

1.5 MT/person

GHG Reduction Options

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CA Energy Policy Overview

Renewable Portfolio Standards •  Current Law

-  20% renewable content by 2010 -  SDG&E at ~8% in 2009

•  Pending Legislation -  SB 14

–  33% by 2020 •  Implementation Issues

-  Regulatory Process -  Transmission -  Contract Failure

•  Potential Solution -  Feed-in tariff

–  SB 32 pending Governor’s Actions



Renewable Portfolio Standards •  Implications for Rates

-  Cost of generation -  Cost of transmission -  Need for firming -  Reduced GHG exposure



Energy Efficiency •  California’s Long Term Energy Efficiency Strategic Plan

-  25% of existing homes reduce energy 70% below 2008 levels -  75% of existing homes reduce energy 30% below 2008 levels -  100% of multifamily reduce energy use by 40% below 2008 levels -  All new homes net zero energy by 2020 -  All new commercial buildings net zero energy by 2030

•  CPUC Efficiency Funding -  $3.1 billion over 3 years -  Residential retrofit program

–  20% in 130,000 homes by 2012

•  CPUC Efficiency Goals for Utilities




SDG&E Electric Efficiency Target: 6% Reduction by 2020

SDG&E Nat. Gas Efficiency Target: 9% Reduction by 2020


Energy Efficiency (Electric and Natural Gas)


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Energy Efficiency •  Implications for Rates

-  Cost of efficiency programs -  Reduced consumption (kWh), demand (kW) -  Inexpensive GHG reduction -  Fewer kWh to spread costs



California Solar Initiative


CA Public Utilities

CommissionCA Energy

CommissionMunicipal

Utilities Total

ProgramCA Solar Initiative

New Solar Homes Partnership

Budget ($million) $2,167 $400 $784 $3,351

Capacity Target (MW) 1940 360 700 3,000

San Diego MW 220 31 0 251


California Solar Initiative •  Implications for Rates

-  Cost of solar incentives -  Cost of net metering (cost shift?) -  Potential positive system benefits -  Capacity factor of generation -  Reduced consumption (kWh), demand (kW)



Smart Grid •  2007 Energy Independence and Security Act

-  Title XIII

•  CPUC Rulemaking on Smart Grid (ongoing)

•  CPUC Rulemaking on Electric Vehicle Rates (new)

•  American Recovery and Reinvestment Act (Stimulus)



Smart Grid •  Potential Impact on Rates

-  Infrastructure costs -  Increased reliability -  Lower operations and maintenance costs -  Higher load factor -  Electric vehicle penetration: smart charging?


San Diego Rate Projection Model

How will reducing GHGs affect electric rates?


Project Background •  California is currently considering a range of policies to reduce greenhouse gas emissions in the electricity sector

•  Costs of individual programs are known, but it is difficult to evaluate the combined impact on utility customers

•  Each utility produces a rate forecast, but the analysis and modeling is not available for public review

•  USD hired 3 well-known consultants (E3, MRW, and JBS) to develop a publicly available, transparent rate forecast tool to better inform the public process and decision-making on the range of policies being considered


Inputs and Levers

Module 1

Base Forecasts

Energy

Demand # Customers

Fuel Costs

Demand Side

EE, DR, CSI PHEV

CHP

Supply Side

Contracts Ownership

Retirements

RPS Share

Revenue Requirement

Module 2

Revenue Req.

Generation Utility owned

Market purchases

Contract / QF

DWR

Non-Generation

Distribution

Transmission

Nuclear Decom.

CTC PPP

Rates by Class

Module 3

Allocations to Class

Marginal cost basis

Calibrated to current

Retail Rates

Residential

Res w/ Care

Small Com. <20kW Medium/Large C/I

Ag

StLt

Sensitivity Assumptions

Policy ‘Levers’ Change

Assumptions


Sensitivity Assumptions •  Energy Sales •  Demand •  Number of Customers •  Fuel Costs



Policy Levers •  Energy Efficiency •  Plug-in Hybrid Electric Vehicles •  CA Solar Initiative •  Combined Heat and Power •  Demand Response •  Carbon Market •  Renewable Portfolio Standard •  Plant Retirement



Base Case Assumptions •  Load Growth

-  Residential – 1.6%/yr -  Small comm. – 1.5% -  Med/Large Comm & ind – 1.2%

•  Achieve recently filed energy efficiency and demand response goals •  20% RPS •  CA Solar Initiative through 2016 at current pace •  Electric vehicle forecast based on TIAX study (~30K vehicles by 2020) •  No new CHP incentives; SGIP expires in 2011 •  CO2 $25/tonne •  Retirement of key contracts

-  SONGS – 2022 -  Encina – 2015 -  South Bay - 2012

•  Revenue Requirement escalates at recent historical rates

Sales Forecast by Customer Class

Demand Forecast by Class

Rates

Rates

Monthly Bills

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Thank You


Contact Info: Scott Anders 619-260-4589 [email protected]

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