south carolina association of municipal power … associations... · south carolina association of...

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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.



Timeline of the US Electric Power Industry

2020

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2020

1882Edison Pearl Streetstation, the first modernelectricity generationstation

1879Thomas Edison

demonstrates the electriclight bulb and generator &

First commercial powerstation opens in SF




2020

1895First successful long-

distance transmission ofelectricity in the south in

Anderson SC—TheElectric City

1934South Carolina PublicService Authority(Santee Cooper) created




20202020

What should we expect asthe industry turns 140?

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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




1. Decline of Coal Power

• Driven by:

• Mercury and AirToxics Standards(MATS)

• Natural GasPrices

• 2015 CleanPower Plan

Source: 2016 EIA/Sierra Club




2. Natural Gas Power Expansion

Source: NERC April 2015

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3. Renewables Reaching Grid Parity

Source: EIA




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




3. Renewables Reaching Grid Parity—Wind Projections

Source: DOE/Lawrence Berkely National Laboratory August 2015

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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




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




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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6. Rate Reforms

Source: GTMResearch February 2016




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)




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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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)




9. Customer Focus

• Technology driven changesto the traditionalrelationship

• Competition is not just otherenergy service providers

• Marketing and Branding

• Two-way communication

• New channels ofcommunication




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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10. Evolving Utility Business Model

Source: Rocky Mountain Institute Study, April 2015




20162020

What should we be doingtoday?2010

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Number 1: Kick the Tires

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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



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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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



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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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




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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Number 4: Engage Your Stakeholders



Engage Your Stakeholders—Two-wayCommunication

Utilize new tools

• Customer Journey Maps• diagram customer interactions with utility

• prioritize competing needs



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



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



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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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



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]

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