Workshop A. 11:15 a.m. to 12:30 p.m.

Transcription

1 Workshop A FirstEnergy: Electric Rates & Tariffs, Recent Changes to ESP Shopping Opportunities, PJM Capacity Auctions Update, Demand Response, and Ohio Energy Efficiency & Peak Reduction Mandates Update/Opportunities and Significant Factors Driving Rates 11:15 a.m. to 12:30 p.m.

2 Biographical Information Sonny Fanelli, Director, Rates & Regulatory Affairs FirstEnergy Corp. 76 S. Main Street, Akron, OH Throughout his professional career at FirstEnergy, Sonny has worked in several areas across the organization. He joined FirstEnergy Service Company as an analyst and spent time early in his career in Rates and Regulatory Affairs, the Controller s Department, Internal Auditing, Treasury, Investor Relations, and Customer Support. The majority of Sonny s career has been spent in Rates and Regulatory Affairs, working in both Akron and Morristown, NJ, and he has taken on increased responsibilities over the years. In Sonny s current role, he is responsible for analyzing financial data of Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company for various projects, preparing state regulatory filings and associated rate case materials, and working with the Staff of the Public Utilities Commission of Ohio. Sonny has experience in a number of matters that have come before the Commission, including base rate cases, Electric Security Plans, Market Rate Offers, SEET filings, and numerous rider cases and audits. He also provides support to the Companies customer service representatives on issues related to the Companies rates and tariffs. Matthew R. Pritchard, Attorney, McNees Wallace & Nurick LLC 21 East State Street; 17th Floor Columbus, OH mpritchard@mwncmh.com (614) (Direct Dial) / (614) (Fax) Matt started his energy career as an electrical engineering student at The Ohio State University. During his undergraduate studies, Matt spent several years interning as a co-op student in the transmission department of American Electric Power Co. Matt took a slight detour from the energy field, graduating with a B.A. in political science from Ohio State on his way to law school. Matt graduated from Capital University Law School, magna cum laude, in Upon graduation, Matt joined McNees Wallace & Nurick LLC (MWN) as an associate in its Energy and Environment practice group where he focuses his practice on representing large consumers of energy in regulatory litigation before the Public Utilities Commission of Ohio (PUCO) and in appeals of the PUCO s decisions at the Ohio Supreme Court. Matt also serves as chair of the Columbus Bar Association Energy Law Committee and serves on the leadership board at First English Lutheran Church.

3 FirstEnergy: Rate Update and Customer Savings Opportunities Workshop A Manufacturers Education Council 12 th Annual Northern Ohio Energy Management Conference Akron, Ohio September 19, 2017 Matt Pritchard Attorney, McNees Wallace & Nurick LLC

4 Presentation Topics 2 FirstEnergy ESP IV Update Capacity and Transmission Obligations and Opportunities Energy Efficiency Cost Avoidance and Incentives

5 ESP IV Update 3 Significant items of interest Financial Support Distribution Modernization Rider (Rider DMR) ($204M/year) Transmission Non-Market Based Services Rider (Rider NMB) ($563M/year) Distribution Delivery Capital Recovery Rider (Rider DCR) (~$2.6B over ESP) Other Items Smart Grid Plan (costs TBD) Government Directives Recovery Rider (costs TBD) Rate GT: Phase-out of high load factor credit

6 $1,200 $1,000 $800 $600 $400 $200 $- ESP IV Update Distribution Modernization Rider $204 DMR Cost (millions) $204 $204 $204 $204 Year 1 Year 2 Year 3 Potential Year 4 Potential Year 5 Annual 4 50% of rider cost allocated to customer classes based on energy usage, 50% allocated on basis of demand DMR rates include both energy and demand charges PUCO found that FirstEnergy EDUs faced a serious risk of credit downgrade that would result in adverse effects on the companies and their customers PUCO determined that the rider would assist the companies in accessing capital markets to make investments in distribution system, including grid modernization initiatives

7 ESP IV Update Distribution Modernization Rider 5 Rider DMR Rates OE CEI TE RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GS (all kwhs, per kwh) GP (per kw of Billing Demand) $ GP (all kwhs, per kwh) GSU (per kva of Billing Demand) $ GSU (all kwhs, per kwh) GT (per kva of Billing Demand) $ GT (all kwhs, per kwh) STL (all kwhs, per kwh) TRF (all kwhs, per kwh) POL (all kwhs, per kwh) RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GS (all kwhs, per kwh) GP (per kw of Billing Demand) $ GP (all kwhs, per kwh) GSU (per kw of Billing Demand) $ GSU (all kwhs, per kwh) GT (per kva of Billing Demand) $ GT (all kwhs, per kwh) STL (all kwhs, per kwh) TRF (all kwhs, per kwh) POL (all kwhs, per kwh)

8 ESP IV Update Non-Market Based Services 6 ATSI Annual NITS Revenue Requirement Rider NMB Revenue Requirement $600 $39 $500 $78 $400 $300 85% $200 $100 $ $458M 2016 $536M 2017 $575M Majority of ATSI zone revenue requirement assigned to OE, CEI, & TE Annual Increase NITS Other Rider NMB Costs

9 ESP IV Update Non-Market Based Services 7 Rider NMB Rates OE TE CEI RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ GT (per kva of Billing Demand) $ STL (all kwhs, per kwh) TRF (all kwhs, per kwh) POL (all kwhs, per kwh) RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ GT (per kva of Billing Demand) $ STL (all kwhs, per kwh) TRF (all kwhs, per kwh) POL (all kwhs, per kwh) RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kw of Billing Demand) $ GT (per kva of Billing Demand) $ STL (all kwhs, per kwh) TRF (all kwhs, per kwh) POL (all kwhs, per kwh) * Separately metered outdoor recreation facilities owned by non-profit, governmental and educational institutions, such as athletic fields, served under Rate GS or GP, primarily for lighting purposes, will be charged per the NMB charge applicable to Rate Schedule POL.

10 Demand During Eclipse ATSI PJM

11 2017 Peak Days Capacity Obligation 5 CPs PJM System Peaks Capacity Obligation (not final until October) 7/19/2017 HE , ,638 7/20/2017 HE , ,331 7/21/2017 HE , ,871 6/12/2017 HE , ,953 6/13/2017 HE , ,617 7/18/2017 HE , ,615 ATSI Zone Transmission Obligation (not final until October) 7/19/2017 HE ,106 12,061 6/13/2017 HE ,087 12,037 7/21/2017 HE ,007 11,978 8/21/2017 HE ,915 11,904 7/20/2017 HE ,864 11,844 6/16/2017 HE ,778 11,763 Prelim. Metered Prelim. Metered Transmission Obligation 5 CPs 2016 Peak Days Capacity Obligation 5 CPs PJM System Peaks Capacity Obligation 8/11/2016 HE ,945 7/25/2016 HE ,931 8/12/2016 HE ,889 7/27/2016 HE ,543 8/10/2016 HE ,357 ATSI Zone Transmission Obligation 8/11/2016 HE ,752 8/25/2016 HE ,701 9/7/2016 HE ,627 8/12/2016 HE ,578 7/13/2016 HE ,539 Transmission Obligation 5 CPs HE = Hour Ending

12 ESP IV Update Non-Market Based Services

13 Emergency Demand Response Capacity Market Source: PJM,

14 ESP IV Update Delivery Capital Recovery 12 Rider DCR recovers incremental capital distribution investment subject to the following annual revenue caps o June 1, 2016 May 31, 2017: $240M o June 1, 2017 May 31, 2018: $270M o June 1, 2018 May 31, 2019: $300M o June 1, 2019 May 31, 2020: $320M o June 1, 2020 May 31, 2021: $340M o June 1, 2021 May 31, 2022: $360M o June 1, 2022 May 31, 2023: $375M o June 1, 2023 May 31, 2024: $390M Calendar Year 2016 DCR revenue projected to be $221M

15 ESP IV Update Delivery Capital Recovery 13 OE TE CEI RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kw of Billing Demand) $

16 ESP IV Update Rate GT High Load Factor Credit 14 Charges June 1, 2016 May 31, 2017: $8.00/kVa June 1, 2017 May 31, 2018: $6.00/kVa June 1, 2018 May 31, 2019: $4.00/kVa Demand charges returned through energy credit Current Credit: $ /kWh

17 ESP IV Update Grid Modernization 15 Filed Plan on 2/26/2016 No activity in docket since PowerForward PUCO has convened a series of technical workshops Focusing on various smart grid initiatives The 3 rd phase of workshops is scheduled for Q

18 Other Cost Savings Opportunities Streamlined Opt-Out Service above primary or use 45M kwh at single location and self-assess kwh tax Initial and ongoing reporting Indefinite exemption Mercantile Customer Rider Exemption Commit savings from self-directed EE/PDR projects to FirstEnergy Standardized form to file Duration of exemption equal to percent of benchmark achieved

19 17 Questions?

20 Contact Information Matt Pritchard McNees Wallace & Nurick LLC 21 East State Street, 17th Floor Columbus, OH Direct Telephone: Fax: *The information in this presentation represents the personal views of Mr. Pritchard and are not necessarily the views of his firm, colleagues, or clients

21 Sonny Fanelli Director, Rates and Regulatory Affairs Ohio Energy Management Conference September 19, 2017

22 Disclaimer The information contained in this presentation material is intended to provide generally descriptive and summary information. Any conflict between the information contained in this material, or conveyed orally during the presentation, and the information provided in any of the Companies public filings, as part of Public Utilities Commission of Ohio Entries or Orders, or the Companies tariffs, or Ohio Statutes and Rules, is unintentional and the docketed material controls. The information contained herein is subject to change during the regulatory process. Ohio Energy Management Conference September 19,

23 Agenda Regulatory Background Generation Transmission Distribution Grid Modernization Energy Efficiency Ohio Energy Management Conference September 19,

24 Regulatory Background Distribution rate case effective in 2009 changed our base distribution rate structure into eight voltage-based schedules Timeline of Effective Rates Jan 09 Jun 09 Jan 10 Jun 10 Jan 11 Jun 11 Jan 12 Jun 12 Jan 13 Jun 13 Jan 14 Jun 14 Jan 15 Jun 15 Jan 16 Jun 16 Jan 17 Jun 17 Jan 18 Jun 18 Jan 19 Jun 19 Base D Rates for TE and OE* Base D Rates for CE* ESP I ESP II ESP III ESP IV* * The Companies fourth Electric Security Plan was originally approved on March 31, 2016, and modified by Entry on Rehearing October 12, Ohio Energy Management Conference September 19,

25 Generation Generation Service Rider (Rider GEN) Power for all SSO customers is procured through a competitive bidding process Seasonally differentiated rider that recovers generation costs from non-shopping Standard Service Offer (SSO) customers Summer months June-August Winter months October-May Ohio Energy Management Conference September 19,

26 Generation Auction Schedule Auction Date Number of Tranches Procured Delivery Periods June 2016 May 2017 June 2017 May 2018 June 2018 May 2019 June 2019 May 2020 April 13, 2016 April 26, months June 2016 through May months June 2016 through May months June 2016 through May months June 2016 through May months June 2016 through May months June 2016 through May 2019 Oct Jan months June 2017 through May months June 2017 through May 2018 Oct-17 Jan-18 Oct Jan Months June 2018 through May Months June 2018 through May Months June 2018 through May Months June 2018 through May Months June 2019 through May Months June 2019 through May 2020 Blended Result = Blended Result = Blended Result = Blended Result = $50.05 / MWh $50.62 / MWh To Be Determined To Be Determined Ohio Energy Management Conference September 19,

27 Generation Auction Clearing Prices Blended Competitive Bid Price is the result of the weighted average of the Companies SSO auctions Capacity pricing is established through an annual competitive auction conducted by PJM Ohio Energy Management Conference September 19,

28 Generation Shopping Update Shopping has increased from 15% of kwh to 85% since 2008 FirstEnergy Ohio Operating Companies continue to have highest shopping levels in the state The savings Commercial and Industrial customers achieve through shopping could be invested into the economy Shopping Percentages for FirstEnergy's Ohio Operating Companies CEI OE TE TOTAL Year Q Q Q Q 2017 Residential 8% 75% 15% 63% 10% 60% 12% 66% Commercial 17% 93% 24% 87% 34% 86% 24% 89% Industrial 12% 95% 16% 98% 3% 99% 11% 97% Total 12% 89% 18% 81% 13% 88% 15% 85% Source: Public Utilities Commission of Ohio website. Ohio Energy Management Conference September 19,

29 Generation Time-of-Use Time-of-Use Pricing Options for Non-Shopping Customers Generation Service Rider (Rider GEN) Time-of-Day Option Experimental Critical Peak Pricing Rider (Rider CPP) Experimental Real Time Pricing Rider (Rider RTP) Opportunity to shift load from higher-price to lower-price periods or add new load during lower-price periods Ohio Energy Management Conference September 19,

30 Transmission Non-Marketed Based Transmission Costs are through nonbypassable Rider NMB Includes charges incurred from PJM such as NITS, Operating Reserves, Generation Deactivation Majority of charges recovered under Rider NMB are allocated by PJM using NSPL Rider updated annually on March 1 Ohio Energy Management Conference September 19,

31 Transmission Rider NMB Pilot Introduced in June 2016 as a result of ESP IV Case Pilot is limited to member customers of IEU and OEG, 7 additional Rate GT Customers Allows eligible customers to shop for the services they would have normally obtained through Rider NMB Customers who participate in the Pilot must take both their NMB service and generation service from a Retail Supplier participating in the Pilot Participation in the Pilot does not guarantee that a customer will save Ohio Energy Management Conference September 19,

32 Distribution Base distribution rate freeze through May 2024 Continuation of Delivery Capital Recovery Rider (Rider DCR) Charges based on monthly peak demand Ohio Energy Management Conference September 19,

33 PowerForward PowerForward is PUCO s review of the latest in technological and regulatory innovation that could serve to enhance the consumer electricity experience. Through this series, we intend to chart a clear path forward for future grid modernization projects, innovative regulations and forward-thinking policies. Phase 1: A Glimpse of the Future (April 2017) Phase 2: Exploring Technologies (July 2017) Phase 3: Ratemaking and Regulation (Q1 2018) Ohio Energy Management Conference September 19,

34 Grid Modernization Pilot program in CEI Advanced Meter Infrastructure (AMI) Distribution Automation (DA) Integrated Volt Var Control (IVVC) Distribution Modernization Rider (Rider DMR) Implemented Jan. 1, 2017; 3-yr term; possible 2-yr extension Enables the Companies to jump-start grid modernization initiatives by providing credit support Grid Modernization Business Plan filed Feb. 29, 2016 Plan is pending before the Commission to be addressed following PowerForward Ohio Energy Management Conference September 19,

35 Distribution Automation Fewer Outages Quicker Restoration Sub A A1 Fault R1 A2 R3 R9 R2 R4 R5 Sub B R7 B1 R8 R6 B2 Our CEI SmartGrid has reduced the number of sustained outages by 12% and reduced outage duration by 26% Ohio Energy Management Conference September 19,

36 Grid Modernization Moving Forward Safe, reliable operation of distribution system is responsibility of the utilities with Commission oversight Additional, balanced capital investment is needed Distribution platform enhancements can begin A collaborative approach to smart grid investment, consistent with PowerForward Deployment of a smart grid for our Ohio utilities will benefit customers by meeting their evolving energy needs and ensuring they benefit from a safe, flexible, resilient and reliable grid in the years ahead. Ohio Energy Management Conference September 19,

37 Energy Efficiency Portfolio Plan for Reactivating EE/PDR Programs from previous plan with additional offerings Pending Commission decision Costs recovered through Rider DSE Mercantile customers with self-directed projects may apply to either avoid Rider DSE2 charges or get a cash rebate Mercantile = nonresidential customer who consumes more than 700,000 KWH per year or is part of a national account involving multiple facilities in one or more states Ohio Energy Management Conference September 19,

38 Energy Efficiency SB 310 Opt-Out Process Qualifying customers may develop and implement their own EE Programs, rather than participating in and paying for the Companies EE/PDR Programs Customers must be served above primary voltage, or a registered Self-Assessing Purchaser with more than 45 million kwh annually Customer must remain opted out for three years before opting back in Qualified accounts will not be subject to Rider DSE, nor be eligible to participate in EE/PDR Programs during the Opt-Out period Subject to certain PUCO reporting requirements Customers served above primary can opt out for any and all accounts on or adjacent to their property Ohio Energy Management Conference September 19,

39 Energy Efficiency Information Further information, including program incentives and eligibility can be found at Ohio Energy Management Conference September 19,

40 Ohio Energy Management Conference September 19,