Future Jobs, Future Costs, and Future Usage: Reconciling Higher Costs And Lower Usage

Transcription

1 Illinis Institute fr Regulatry Plicy Studies Future Jbs, Future Csts, and Future Usage: Recnciling Higher Csts And Lwer Usage Susan L. Satter Public Utilities Cunsel Illinis Attrney General s Office April 27,

2 Effects f FEJA Widespread Three majr subjects addressed in the bill: 1) Zer Emissin Credits (ZECs) 2) Energy Efficiency 3) Renewable Energy/Slar Rebates Benefits, pprtunities, csts and impacts vary cnsiderably: On industrial, cmmercial, and residential cnsumer On utilities, generatrs, cmpetitrs, develpers On jbs Impacts are additive t Smart Grid investment 2

3 Zer Emissin Credits ZEC vlume Cnsumer cst tracks cnsumer cnsumptin: larger cnsumers f energy, larger cst 20 ILCS 3855/1-75(d-5)(1) ZEC price cap 1.65% f kilwatthur price 20 ILCS 3855/1-75(d-5)(3) CmEd draft tariff: /kwh all custmers CmEd, ICC N.10, Orig. Sheet N.37, eff. June 1, 2017 Price per kwh may vary amng utilities: Ameren /kwh Mid American /kwh 3

4 Bill Impact Residential Cnsumers Residential ZEC cst range: Large electric space heat custmers - $46.00/yr (75 percentile) Small Multi-family nn-space heat cust. - $4.50/yr (25 percentile) Cmparisn t Smart Grid Law Investments increases frm 2016 t 2017* Large electric space heat custmers - $47.47/yr Multi-family nn-space heat custmers - $4.61/yr Cumulative distributin bill increases fr CmEd since 2012 Large space heat custmers - $ (32%) Multi-family nn-space heat custmers - $50.81 (23%) *Surce: CmEd Smart Grid Advanced Metering Annual Implementatin Prgress Reprt, April 2017 & April

5 ZECs and Jbs Ttal revenue, r financial benefit t wner f nuclear plants: $230 millin per year, subject t adjustment based n future energy prices and capacity prices. 20 ILCS 3855/1-75(d-5)(3). Nuclear Jbs: 700 and 750 plant jbs at Clintn and Quad Cities preserved, plus seasnal emplyees. Cnsumers effectively pay Exeln a little mre than $150,000 per plant jb per year. 5

6 Energy Efficiency Substantial increase in spending n EE expected by CmEd. In 2017, EE expense = $261 millin (utilities, DCEO, IPA) * Per spending cap fund in: 220 ILCS 5/8-103B(m) Vltage Optimizatin: $500 millin Ttal spending thrugh 2030: $5.036 billin Smart Grid authrized investment (220 ILCS 5/ (b)) Year CmEd Rate Base Ttal $353 millin/year $1.412 billin $378 millin/year $1.512 billin* $403 millin/year $1.612 billin* CmEd - $2.6 billin/10 yrs Ameren - $0.625 billin/10 yrs CmEd ttal rate base fr 2016: $8.8 billin Rate base additins: $1.487 millin 2018 EE spending increases rate base additins by 23% 6

7 Effect f Amrtizatin n Energy Efficiency Incentives and Practices Shift frm pass-thrugh t amrtized cst recvery, lwer initial bills, higher bills in the lng run. EE becmes a prfit center as sharehlders receive a return n EE spending. 220 ILCS 5/8-103B. EE spending represents an increase f ~20%-30% in annual Smart Grid rate base investment driving up cnsumer rates ver time EE incentive structure can increase ROE 200 basis pints (fr example, frm 8.34% t 10.34%) 220 ILCS 5/8-103B(g)(7)/ Lw-incme EE csts mre fr less savings and effect may be t discurage spending n lw-incme custmers. In , less than 10% f ttal EE spending fr lw-incme custmers prpsed (25% f residential spending), but 47% f residential custmers qualify as lw-incme. 220 ILCS 5/8-103(f)(4). Substantial shift in spending and recvery frm residential t cmmercial and industrial classes expected. Residential prgrams: 35% (cst t resid. 45% with Misc) Cmmercial and industrial prgrams: 42% (cst t C&I 55% with Misc) Miscellaneus (VO, R&D, market transfrmatin, administratin): 23% 7

8 EE spending will steadily increase rates $800,000,000 CmEd's Energy Efficiency Revenue Requirement Effect Befre >10 MW remved $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 Industrial Custmer Charges Cmmercial Custmers Residential Custmers $200,000,000 $100,000,000 $

9 Renewable Energy - Rate Effect RPS cst cap nt changed. 20 ILCS 3855/1-75(c)(2) Slar rebates added t rate base will create a new rate base item. 220 ILCS 5/ Increased renewable energy may put dwnward pressure n supply prices. Increased distributed generatin will reduce usage levels. Illinis DG at lw levels: <1,000 rftp slar Usage levels held steady r declined despite little DG Increased DG can be expected t be anther cause f decreased usage 9

10 Delivery Charges and Usage CHARGES: ZECs, EE and slar rebates tgether will increase CmEd revenue requirement by mre than 25% frm current $2.7 billin ver the next 10 years. USAGE: EE and DG prvisins f FEJA expected t drive dwn usage Key questins: will increased charges due t greater EE spending and amrtizatin, ZECs, and ther infrastructure be ffset by decreased csts due t reduced usage? 10

11 Grwing Utility Revenue Requirement; Declining Usage Delivery utilities still mnplies prviding an essential service. If supply charges stay lw r decline further, larger prtin f energy bills will be fr expensive mnply services. Supply savings may nt ffset increased delivery charges. As use f the grid declines, fewer custmers pay fr increasingly expensive mnply services, increasing per unit cst. Key challenge is t rein in spending t crrespnd with anticipated declining usage. 11

12 Cnclusin FEJA will drive up rate base and custmer csts. FEJA will drive dwn usage. Ultimate effect f FEJA will vary by individual custmers: Custmers wh reduce usage will have lwer ttal supply charges, but savings may be diminished by lw supply prices. All custmers will see higher per unit delivery charges, which cannt be avided. Declining usage shuld be addressed by identifying practices that reduce delivery services csts t track reduced usage. The next grid must recgnize declining usage and reject extrardinary regulatry attempts: T prtect r expand utility revenues, T expand utility investments beynd the essential delivery functin, T expand nn-by-passable r fixed charges, r adpt unfair and unpredictable rate design. 12