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House Public Utilities Committee Briefing September 29, 2011 Presented by Staff of the Public Utilities Commission of Oh PowerPoint Presentation
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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 Beth Trombold, Director, Economic Development and Public Affairs Kim Wissman, Director, Energy and Environment. Overview of Electric Grid.

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slide1

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

initiating a rate case
Initiating a Rate Case

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
rate case steps
Rate Case Steps
  • Staff investigates the company’s 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)
rate case procedure
Rate Case Procedure
  • 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
the parties to a rate case
The Parties to a Rate Case
  • The Attorney General’s office represents the PUCO Staff in the hearing and /or negotiations
  • Office of Consumer’s Counsel (state agency representing residential consumers)
  • Commercial customers
  • Industrial customers
  • Cities
rate case hearings
Rate Case Hearings
  • Publish notice of upcoming hearings
  • Two types of hearings:
    • PublicHearing: 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. EvidentiaryHearing: 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.

after the hearings
After the Hearings
  • 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
appeal of commission order
Appeal of Commission Order
  • 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
rate case timeline
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
why regulation
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.
ferc order 888 1996 and order 2000 1999
FERC Order 888 (1996) andOrder 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
history of electric restructuring in ohio
History of Electric Restructuringin Ohio

Senate Bill 3

A 1999 law effective January 2001 restructured Ohio’s 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
issues under restructuring
Issues Under Restructuring
  • Unbundling
  • Market Power
  • Transitional Issues
  • Independent System Operation
  • Social Issues
  • Environmental Issues
  • Taxes
unbundling
Unbundling

Generation (“or supply”)

Shop for this

Transmission

Remains regulated by FERC

Distribution

Remains regulated by PUCO and provided by your local utility

bundled rates
“Bundled” Rates
  • Rates were previously a “bundle” of costs for different services.
    • Generation
    • Transmission
    • Distribution
    • Ancillary Services
    • Specific Surcharges

Specific Surcharges

Ancillary Services

Total Rates

Generation

Transmission

Distribution

unbundled rates
“Unbundled” 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.

Generation

Total Rates

Specific Surcharges

Ancillary Services

Transmission

Distribution

slide22

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
slide23

Social Issues

  • Universal Service
  • Provider of Last Resort
  • Low Income Programs
  • Consumer Education
  • Metering & Billing
  • Unfair & Deceptive Practices
    • Price Disclosure
    • Slamming
    • Cramming
slide24

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.
slide25

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
suppliers must be certified for consumer protection
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
governmental aggregation the power of group buying
Governmental Aggregation: the power of group buying

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 don’t want to participate

Ohio Electric Choice allowed for local governments to join all of the customers in a community into a single buying group.

what happened during the market development period
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.
slide29

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
ohio electric choice the move to rate stabilization plans
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 Ohio’s electric utilities and stakeholders to develop Rate Stabilization Plans (RSPs).
  • Most Rate Stabilization Plans lasted through 2008.
slide31

“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.
slide32

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 Ohio’s energy future.
  • PUCO can set rates and allow utilities to recoup the cost for new generation and modernization of the electric system.
s b 221 policy principles
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

reasonable arrangements section 4905 31
Reasonable ArrangementsSection 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
infrastructure investment
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
ohio alternative energy portfolio standard
Ohio Alternative Energy Portfolio Standard

25% by 2025

25% of retail electricity sold by:

Ohio’s 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

sb 221
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
slide38

RPS Policies

www.dsireusa.org / September 2011

UT: 20% by 202*

DC

29 states + DC and PR have an RPS

(8 states have goals)

Renewable portfolio standard

Minimum solar or customer-sited requirement

*

Renewable portfolio goal

Extra credit for solar or customer-sited renewables

Solar water heating eligible

Includes non-renewable alternative resources

slide39

RPS Policies with Solar/DG Provisions

www.dsireusa.org / September 2011

DC

TX: double credit for non-wind(non-wind goal: 500 MW)

16 states + DC have an RPS with solar/DG provisions

Renewable portfolio standard with solar / distributed generation (DG) provision

Renewable portfolio goal with solar / DG provision

Delaware allows certain fuel cell systems to qualify for the PV carve-out

Solar water heating counts toward solar / DG provision

qualified renewable resources
BiomassQualified Renewable Resources

Solar

Wind

Hydroelectric

Geothermal

FuelCells

Storage

slide42

Alternative Energy Benchmarks

(including advanced)

renewable energy credits
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

penalties
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

certification application
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

wind momentum
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
slide49
Wind farms in Ohio can help provide renewable resources to meet Ohio’s Alternative Energy Portfolio Standards

But Also:

A small wind generator owned by a retail customermay 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.

qualified biomass resources
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

slide53
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 RFP’s have been issued for biomass fuel

Ohio Solid Biofuel Working Group to promote fuel supply development

advanced energy resources
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

energy efficiency and demand reduction benchmarks sb 221 oac 4901 1 39
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.
slide57

Energy Efficiency Resource Standards

www.dsireusa.org / September 2011

MA, RI

DE

20 states have an EERS

(5 states have goals)

Energy efficiency resource standard

Energy efficiency resource goal

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.

slide58

Electricity Consumption in Investor-Owned

Electric Utility Service Areas in Ohio

October 2008 – December 2009

slide59

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
peak demand reduction and energy efficiency benchmarks
Peak Demand Reduction and Energy Efficiency Benchmarks
  • 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 15th, 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.
mercantile customer applications to commit energy efficiency and peak demand reduction
Mercantile Customer Applicationsto 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 customer’s existing demand reduction, demand response, and energy efficiency programs for integration with the utility’s 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
40 electric suppliers in ohio
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
things that haven t changed
Things that haven’t 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.
slide69
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 state’s economic interests, and protecting the environment and land use.

Ohio Power Siting BoardMission Statement

ohio power siting board member agencies
Ohio Power Siting BoardMember 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
opsb jurisdiction
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
hb 562 2008
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   
opsb process
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)

opsb decision
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

opsb summary
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 Ohio’s statute