Ohio Energy. Workshop B. FirstEnergy: Significant Developments Impacting Electric Rates. Tuesday, February 20, :45 a.m.

Transcription

1 Ohio Energy Workshop B FirstEnergy: Significant Developments Impacting Electric Rates Tuesday, February 20, :45 a.m. to Noon

2 Biographical Information Richard L. Jackson, Executive Vice President, Operations, ASHTA Chemicals Inc., 3509 Middle Rd., PO Box 858 (44005), Ashtabula, OH (440) Fax (440) Mr. Jackson has been the EVP Operations, since 1998 and responsible for all manufacturing, maintenance, EHS, quality, and engineering. Since 2000, he has managed all aspects of power for the facility, including contract negotiations including a historic special arrangement, thirdparty generation contracts, demand response contracts, and interconnect agreements for distributed supply. ASHTA Chemical is a Chlor-Alkali manufacturer specializing in potassium based chemicals. Chlor-alkali process uses an electrolytic chemical process which is very energy intensive. The single facility in Ashtabula, OH has historically been one of CEI s top customers. Matthew R. Pritchard, Attorney, McNees Wallace & Nurick LLC 21 East State Street, 17th Floor, Columbus, OH (614) (Direct Dial) / (614) (Fax) mpritchard@mwncmh.com Matt is a graduate of The Ohio State University and Capital University Law School, where he graduated magna cum laude in Upon graduation, Matt joined McNees Wallace & Nurick LLC as an associate in its Energy and Environment practice group where he focuses 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 currently serves as chair of the Columbus Bar Association Energy Law Committee. Sonny Fanelli, Director, Rates & Regulatory Affairs FirstEnergy Corp., 76 S. Main Street, Akron, OH sfanelli@firstenergycorp.com Throughout his professional career at FirstEnergy, Sonny has worked in several areas across the organization. Upon joining FirstEnergy Service Company he 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.

3 FirstEnergy: Significant Developments Impacting Electric Rates Workshop A Manufacturers Education Council 22 nd Annual Ohio Energy Management Conference Columbus, Ohio February 20-21, 2018 Matt Pritchard Attorney, McNees Wallace & Nurick LLC

4 Presentation Topics 2 Customer-Provided Financial Support Transmission Costs Capacity and Transmission Peaks Distribution Charges Smart Grid Plans & PUCO PowerForward Energy Mandate Compliance Significant Court & Legislative Developments Rate GT Phase-Out

5 3 Financial Support

6 ESP IV Update Distribution Modernization Rider ( DMR ) $1,200 DMR Cost (millions) 4 $1,000 $800 $600 $400 $200 $- $204 $204 $204 $204 $204 Year 1 Year 2 Year 3 Potential Year 4 Potential Year 5 Annual 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 electric distribution utilities ( 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) Rates reflect reduction in federal corporate income tax (21% vs. 35%) New rates for service rendered beginning 3/1/18

8 6 Transmission

9 ESP IV Update Non-Market Based Services 7 ATSI Annual NITS Revenue Requirement $700 $600 $39 $85 $500 $78 $400 $300 $200 $100 $ $458M 2016 $536M 2017 $575M 2018 $659M Majority of ATSI zone revenue requirement assigned to OE, CEI, & TE Annual Increase

10 2015 PJM NITS Rates Transmission Owner (Transmission Zone) AE (AECO) Annual Transmission Revenue Requirements and Rates Annual Transmission Revenue Requirement Network Integration Transmission Service Rate ($/MW-Year) $99,527,358 $40,731 AEP (AEP) $1,011,414,015 $41, AP (APS) $128,000,000 $17,895 ATSI (ATSI) $457,569,822 $37, BC (BGE) $168,202,789 $25,237 ComEd, Rochelle (CE) $621,842,731 $31, Dayton (DAY) $40,100,000 $13, Duke (DEOK) $86,981,677 $17,039 Duquesne (DLCO) $104,702,560 $38, Dominion (DOM) $848,778,000 $42, DPL, ODEC (DPL) $134,876,608 $34,807 East Kentucky Power $69,073,619 $19,660 Cooperative (EKPC) FE (JCPL, METED, PENELEC) $141,000,000 $15,112 PE (PECO) $151,703,000 $20,942 PPL, AECoop, UGI (PPL) $275,624,233 $34,595 PEPCO (PEPCO) $168,280,036 $26,521 PS (PSEG) $918,419,851 $96,521 Rockland (RECO) $11,785,928 $32,114 TrAILCo $209,703, n/a

11 Transmission Owner (Transmission Zone) 2018 PJM NITS Rates Annual Transmission Revenue Requirements and Rates Annual Transmission Revenue Requirement Network Integration Transmission Service Rate ($/MW-Year) AE (AECO) $136,237,027 $50,960 AEP (AEP) $1,519,535,779 $70, AP (APS) $128,000,000 $17,895 ATSI (ATSI) $659,094,666 $54, BC (BGE) $216,851,881 $32,851 ComEd, Rochelle (CE) $728,237,019 $34, Dayton (DAY) $40,100,000 $13, Duke (DEOK) $106,450,109 $20,055 Duquesne (DLCO) $133,905,125 $47, Dominion (DOM) $1,032,594,000 $52, DPL, ODEC (DPL) $135,927,090 $32,938 East Kentucky Power Cooperative (EKPC) $75,851,112 $26,424 MAIT (METED, PENELEC) $150,858,703 $26, JCPL $147,393,839 $25, PE (PECO) $163,823,746 $19,587 PPL, AECoop, UGI (PPL) $433,895,406 $61,792 PEPCO (PEPCO) $166,094,793 $25,229 PS (PSEG) $1,397,054,472 $146, Rockland (RECO) $19,661,232 $49,695 TrAILCo $272,626, n/a

12 Regulated Transmission Rate Base Growth Formula Rate Transmission Companies $M 2017F 2021F assumes capital expenditures of ~$900M per year Source: FirstEnergy Presentation at EEI Conference (11/5/2017),

13 Non-Market Based Transmission Services (Rider NMB) 11 Rider Revenue Requirement 700 $60M 600 $58.3M 500 $95.5M 400 $164.6M /1/14 $244M 7/1/15 $408M 3/1/16 $504M 3/1/16 $562M 3/1/18 $622M 0 Annual Increase

14 ESP IV Update Non-Market Based Services 12 Rider NMB Revenue Requirement 85% NITS Other Rider NMB Costs

15 Non-Market Based Transmission Services OE Rider NMB Rates 13 Rates per kw or kva /1/14 7/1/15 3/1/16 3/1/17 3/1/18 0 GS GP GSU GT

16 ESP IV Update Non-Market Based Services 14 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.

17 15 Capacity & Transmission Peaks

18 2017 Peak Days Capacity Obligation 5 CPs PJM System Peaks Capacity Obligation 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 7/19/2017 HE ,106 12,052 6/13/2017 HE ,087 12,037 7/21/2017 HE ,007 11,969 8/21/2017 HE ,915 11,894 7/20/2017 HE ,864 11,834 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

19 Demand During Eclipse ATSI PJM

20 2018 Network Service Peak Loads (Metered Demand Coincident with Zonal Peak Load Hour for Period 11/1/16-10/31/17) Zone Zonal Peak (MW) Hour Ending (Eastern Prevailing Time) AEP /19/17 17 Allegheny Power /15/16 20 Atlantic Electric /20/17 18 ATSI /19/17 17 Baltimore Gas & Electric /20/17 18 ComEd /12/17 18 Dayton /16/17 18 Delmarva /13/17 14 Dominion /9/17 08 Duke Energy OH/KY /17/17 14 Duquesne /19/17 16 EKPC /8/17 09 Jersey Central /20/17 17 Metropolitan Edison /20/17 17 PECO /20/17 19 Pennsylvania Electric /15/16 19 Potomac Electric Power /20/17 18 PPL /15/16 19 PSE&G /20/17 17 Rockland /13/17 17

21 PJM Winter Peaks

22 AE BGE DPL JCPL METED PECO PENLC PEPCO PL PS RECO UGI EASTERN MID-ATLANTIC SOUTHERN MID-ATLANTIC PJM MID-ATLANTIC AEP APS ATSI COMED DAYTON DEOK DLCO EKPC PJM WESTERN DOM PJM RTO 2.0% 1.5% 1.0% 0.5% 0.0% ( 0.5%) PJM Summer Peak Load Growth Rate % 0.6% 0.8% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.3% 0.3% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% ( 0.2%)( 0.2%) 0.0% ( 0.0%) ( 0.0%)( 0.0%)( 0.1%) ( 0.1%) PERCENT/YEAR

23 PJM Summer Peaks

24 PJM Winter Peak

25 PJM Winter Peaks

26 PJM Historic Peaks

27 PJM Historic Peaks

28 ATSI Summer Peaks

29 ATSI Winter Peaks

30 28 Distribution

31 ESP IV Update Delivery Capital Recovery 29 Delivery Capital Recovery Rider ( 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 Rates to be effective 3/1/18 designed to collect annualized revenue requirement of $276M Proposed rates based on reduced federal corporate income tax rates (21% vs. 35%)

32 ESP IV Update Delivery Capital Recovery 30 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) $0.8801

33 31 Smart Grid

34 Grid Modernization 32

35 33 Energy Mandate Compliance

36 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

37 Energy Efficiency Mandate Over Compliance (as of 12/31/16) 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Duke FE DP&L AEP EE Compliance Curve

38 Peak Demand Reduction Mandate Over Compliance (as of 12/31/16) 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% FE Duke AEP DP&L PDR Compliance Curve If PDR mandate extended beyond 2020

39 37 Significant Court & Legislative Developments

40 Customer Refunds Blocked By Supreme Court of Ohio Split decision (3-3-1) issued 1/16/18 on bypassable Alternative Energy Rider (Rider AER) (2018-Ohio-229) In 2009, PUCO approved a FirstEnergy supported settlement in ESP case that allowed PUCO to conduct prudence review of costs in rider In 2013, PUCO determined $43M incurred for compliance was imprudent Court found that PUCO could not order a refund because costs were already collected, regardless of prudency

41 Energy Mandate Reform (HB 114) Passed by House on March 30, 2017 Referred to Senate Energy and Natural Resources Committee Last hearing held in Senate on October 18, 2017 for opponent testimony

42 Zero Emission Credits (SB 128) Substitute bill accepted in Senate Public Utilities Committee on 10/24/17 Caps monthly non-bypassable charges o o Residential: $2.50/month Non-residential: lesser of $3,500 or 5% of bill/month Establishes end date of 12/31/30 Committee proponent hearing held on 1/25/18

43 Electric Utility Consumer Protection Act (HB 247) Eliminate ESP option (R.C ) for default service Default service would be secured through competitive auctions under Market Rate Offer ( MRO ) (R.C ) Authorize refunds for charges found unlawful

44 42 Rate GT

45 ESP IV Update Rate GT High Load Factor Credit 43 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

46 44 Questions?

47 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

48 Sonny Fanelli Director, Rates and Regulatory Affairs Ohio Energy Management Conference February 20, 2018

49 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 February 20,

50 Agenda Generation Transmission Distribution Grid Modernization Energy Efficiency Ohio Energy Management Conference February 20,

51 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 February 20,

52 Generation Auction Schedule Auction Date Number of Tranches Procured Delivery Periods June 2017 May 2018 June 2018 May 2019 June 2019 May 2020 June 2020 May 2021 April 13, months: June May months: June May 2019 April 28, months: June May Oct months: June May 2018 Jan months: June May months - June May 2019 Oct-17 Jan Months: June May Months: June May Months: June May Months: June May 2021 Oct Months: June May 2020 Jan Months: June May 2020 Oct-19 Jan Months: June May Months: June May months: June May months: June May 2022 Blended Result = Blended Result = Blended Result = Blended Result = $50.62/MWH To Be Determined To Be Determined To Be Determined Ohio Energy Management Conference February 20,

53 Generation Auction Clearing Prices $/MWh $70 $60 $50 $40 $30 $20 $10 $ 2013/ / / / /18 Delivery Period Blended Competitive Bid Price ($ Per MWh) Estimated Capacity Price ($ Per MWh) 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 February 20,

54 Generation Shopping Update Shopping has increased from 15% of kwh to 87% 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% 67% 10% 70% 12% 70% Commercial 17% 92% 24% 88% 34% 89% 24% 90% Industrial 12% 97% 16% 98% 3% 99% 11% 98% Total 12% 89% 18% 84% 13% 92% 15% 87% Source: Public Utilities Commission of Ohio website. Ohio Energy Management Conference February 20,

55 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 February 20,

56 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 February 20,

57 Transmission Rider NMB Pilot Introduced in June 2016 as a result of ESP IV Case 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 February 20,

58 Distribution Base distribution rate freeze through May 2024 Continuation of Delivery Capital Recovery Rider (Rider DCR) Non-residential charges based on monthly peak demand Electric Demand Hour Ohio Energy Management Conference February 20,

59 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 forwardthinking policies. Phase 1: A Glimpse of the Future (April 2017) Phase 2: Exploring Technologies (July 2017) Phase 3: Ratemaking and Regulation (March 2018) Ohio Energy Management Conference February 20,

60 Distribution Platform Modernization Plan Address customers increased reliability expectations and evolving needs, while continuing to support PowerForward Does not presuppose outcome of PowerForward Provides immediate benefits to customers Fewer and shorter power outages Prepare the system for future grid modernization More gradual rate impacts than otherwise would occur Benefits are self-sustainable Ohio Energy Management Conference February 20,

61 Distribution Platform Modernization Plan Filed December 1, 2017; pending PUCO approval Three-year project: Circuit Ties, Reconductoring, Reclosers, Data Acquisition Systems Incremental to current work to maintain safe, reliable service Costs recovered under Rider AMI Grid of the Future Distribution Automation, AMI, Integrated Volt-Var Control, Distributed Energy Resources, Consumer End Use Technology Circuit Ties, Reconductoring Reclosers Data Acquisition Systems Distribution Platform Ohio Energy Management Conference February 20,

62 Energy Efficiency Portfolio Portfolio Plan for Retains EE/PDR Programs from previous plan with additional expanded offerings Plan was approved by PUCO on 11/21/17 Companies EE Portfolio offers incentives on a range of Residential, Commercial & Industrial equipment and end uses, such as: Residential Appliance Turn-in Audits Efficient Consumer Products Efficient Lighting Energy Conservation Kits HVAC Equipment Low-Income Efficiency Assistance Commercial & Industrial Agricultural Audits Commercial Electronics Custom Buildings Custom Equipment Data Centers Efficient Lighting HVAC Equipment Retro-Commissioning Costs recovered through Rider DSE Ohio Energy Management Conference February 20,

63 Mercantile Customer Program Mercantile customers with self-directed energy efficiency or peakdemand reduction projects may apply to either avoid DSE2 charges or get a cash rebate Typically a joint application between FirstEnergy utility and customer to PUCO Who is considered mercantile? If the electricity consumed is for nonresidential use and the customer consumes more than 700,000 KWH per year or is part of a national account involving multiple facilities in one or more states (O.R.C. Sec ) Ohio Energy Management Conference February 20,

64 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 all accounts on or adjacent to their property Ohio Energy Management Conference February 20,

65 Energy Efficiency Information Further information, including program incentives and eligibility, can be found at Ohio Energy Management Conference February 20,

66 Ohio Energy Management Conference February 20,