QF Settlement Agreement Overview QF Meeting Rosemead, CA. July 22, 2011

Transcription

1 QF Settlement Agreement Overview QF Meeting Rosemead, CA July 22, 2011

2 Welcome and introduction Mike Marelli 1

3 Agenda for the morning Continental breakfast and guest registration Welcome and introductions QF Settlement overview QF-CHP Program goals and targets Program timeline and initial activity deadlines Energy pricing and GHG cost Optional legacy QF contract amendment Settlement contract options CHP Request for Offers Break Interconnection and distribution service Questions 8:00 AM 8:15 AM 8:30 AM 9:30 AM 10:00 AM 10:15 AM 11:15 AM 2

4 Scope and Purpose Help QFs understand how they will be impacted and decide if they have to do or decide anything right now #1 FAQ so far: What if my PPA is not expiring any time soon? Does the Settlement require me to take any action? Answer: No, but it provides choices (Legacy Amendment); also, be sure to plan in advance for transition to a new PPA. Discuss next steps for the most time sensitive projects Overview all options and opportunities under the Settlement Provide resources for further questions We do not plan to discuss specific contracts or contract issues pertaining to individual QFs at this meeting. 3

5 Settlement Overview Presented By Gerry Torribio 4

6 Why a QF Settlement? In D , the California Public Utilities Commission approved the Qualifying Facility and Combined Heat and Power Program Settlement Agreement. Parties to the Settlement are SCE, PG&E, SDG&E, The Utility Reform Network, Independent Energy Producers Association, Division of Ratepayer Advocates of the CPUC, Cogeneration Association of California, California Cogeneration Council, and Energy Producers and Users Coalition. The Settlement: Would resolve numerous outstanding QF issues involving disputes in several Commission[s]; Would provide for an orderly transition from the existing QF program to a new QF/Combined Heat and Power (CHP) program: Is designed to preserve resource diversity, fuel efficiency, greenhouse gas (GHG) emissions reductions, and other benefits and contributions of CHP; Is designed to promote new, lower GHG-emitting CHP facilities and encourage the repowering, operational changes through utility prescheduling, or retirement of existing, higher GHG-emitting CHP facilities [D p. 2] 5

7 Settlement Creates Two CHP Targets for Utilities 3000 MW CHP (IOU Target) 6.7 MMT GHG Reduction From CHP* (statewide target) SCE Portion: 1402 MW SCE Portion: 1.9 MMT Target Deadline 48 mos. after Settlement Effective Date December 31, 2020 Qualifying CHP Procurement Processes CHP RFO Pro Forma PPAs QF PURPA 20 MW PPAs Optional As-Available PPAs Legacy Amendments** Transition PPAs** CHP RFO Pro Forma PPAs QF PURPA 20 MW PPAs Optional As-Available PPAs Legacy Amendments** Settlement Agreements Utility Prescheduled Facilities Utility Prescheduled Facilities Bilateral PPAs Bilateral PPAs AB 1613 PPAs AB 1613 PPAs New behind the meter CHP New behind the meter CHP IOU-owned CHP ( 10% of target) Coal, wood, and renewable CHP*** 6 *Emissions reduction relative to a Double Benchmark of 8,300 btu/kwh and 80% efficient boiler **Does not count towards the GHG goal ***Only if not used for RPS

8 QF Settlement Summary Existing QF contracts priced at SRAC energy and capacity prices will utilize the new SRAC prices set in the Settlement Fixed price contracts will continue for the duration of the fixed price period, then default to Settlement SRAC for the duration of the contract Parties can also opt-in for a Legacy Amendment Key Changes to SRAC Location Adjustment (LA) factors replaces Distribution Loss Factors (DLF) Includes GHG Charges Settlement heat rates ; Market Heat Rate Parties may qualify for the following contract options: QF PURPA Contract For Facilities 20 MW Optional As-Available Contract Transition Contract CHP RFO Pro Forma Contracts Must-Take Competitive Solicitation 7

9 Settlement Program Timeline Contracts Within 90 days: initiate 1 st RFO MW Extension QFs have 120 days to sign new PPA. QFs have 180 days to sign legacy am. Within Initial Period: 2 nd RFO MW 3rd RFO MW Regulatory/Compliance SRAC Oct. 25 Comments Received Nov. 1 Replies Due Nov. 16 PD issued Dec. 16 Commission vote approves settlement Initial Program Period Transition Period Modified SRAC with fixed heat rates Mar. 18 Filed 210m FERC has 90 days to act Settlement Effective when: CPUC approves settlement (12/16/11) Due process of law* CARB provides written support FERC approves 210m (6/16/11) Second Program Period Market SCE CHP MW Target: additional 1402 MW SCE GHG Target: 1.9 MMT incremental reduction 8 * CPUC and/or appellate hearings

10 What does this mean for my generating facility and business? Your avoided cost energy pricing calculation will change. You may choose to amend your existing PPA to better manage emerging risks. The Settlement provides new marketing opportunities when your current PPA terminates (and also for new projects). New QFs >20 MW are eligible to participate in California state programs (e.g., CHP, RPS) rather than PURPA, in addition to market sales. 9

11 Legacy Amendment All facilities with existing QF PPAs (renewable and CHP), including extension agreements in effect on the Settlement Effective Date, are eligible for a Legacy Amendment. Legacy Amendment changes pricing: Five options. Legacy Amendment allows QFs to maintain their contract end date, after which, they may participate in one of the contract options offered under the QF settlement or other market opportunities. Legacy Amendment is optional: Legacy QFs do not have to take action. 10

12 Legacy Amendment Options A B C1 C2 C3 Eligible Contracts Legacy Legacy Legacy Legacy Legacy Incremental Energy Heat Rate (IER) 2011 = 8,700 IER 2012 = 8, = 8, = 8,700 IER 2012 = 8,600 IER 2013 = 8,500 IER Negotiated bilateral tolling agreement replaces existing QF legacy contract 2011 = 8,435 IER 2012 = 8,335 IER 2013 = 8,235 IER Same as C = 8, = 8,500 IER 2014 = 8,235 IER 2015+= Market 2015+= Market 2015+= Market GHG Risk Buyer 100% (based on GHG compliance commencing by 1/1/2015) Contract term Election of seller no later than 7/1/15 Seller Negotiated Buyer up to a fixed $20/ton and ton/mwh (caps buyer s $/MWh) Duration of existing contract Duration of existing contract Duration of existing contract Buyer up to a fixed $12.5/ton and historical tons of emissions based on the avg. of 2008/2009 data (caps buyer s total $) Duration of existing contract Note 1: The payment for 3 years is the higher of: (Market Heat Rate x BTGP/1,000,000) + VOM) * TOU + LA; or (8,225 or 8,125 x [BTGP + CO2 Price x(117/2,204.6) / 1,000,000) ]+ VOM) * TOU + LA Capacity prices shall be paid as established in D (~$92/kW-year firm, ~$36/kW-year as-available) 11

13 Comparison of Settlement Contracts RFO* PURPA 20 MW As- Available Transition Legacy Amendment Not a settlement contract; not currently available AB 1613 Size Requirements > 5 MW 20 MW > 20 MW, < GWh/yr. < 20 MW Eligibility Bidders must be a CHP or Utility Prescheduled Facility Bid includes efficiency QF certified QF certified Must meet efficiency standards in Settlement QF certified Contract expiring during the transition period QF certified Continuing contract QF certified Separate efficiency standards Provide as-available capacity Price As Bid SRAC energy and capacity values as determined by the CPUC SRAC energy and asavailable capacity values as determined by the Settlement SRAC energy and as-available capacity values as determined by the Settlement Various, depending on allocation of GHG costs (see previous slide) To be determined Contract term 7 years for existing CHP or for expanded CHP that don t provide collateral; 12 years for new/repowered CHP or expanded CHP that provide collateral 7 years for existing CHP; 12 years for new CHP Up to 7 years To July 1, 2015 Duration of existing contract 10 years 12 * All contracts are must-take except for competitive RFO

14 Settlement Contract Options For CHP New CHP and existing CHP not under contract at Settlement Effective Date, that provide GHG reduction, will have an opportunity to bilaterally negotiate, bid into an RFO, or sign a must-take contract (based on their operational characteristics) Existing, contracted CHP will have, in addition to the above options, the opportunity to sell their output through a Legacy Amendment and/or a Transition Contract Current Until Settle Legacy Transition RFO 20 MW As-Available Length of existing contract 7 years 7 years 7 years End of Legacy to 2015 After contract ends, one of the below (or AB1613) may be selected only RFO, bilateral, or 20 PPAs may be selected until 2021 Today QF Settlement July 1, 2015 Dec. 31, 2020 Effective Date Options for QFs without contract Options for QFs with a contract 13

15 Simplified Options For Various QF Types SIZE 5 MW > 5 MW, 20 MW > 20 MW CONTRACT STATUS No contract; expired before settlement Current QF contract expiring after settlement effective date PURPA Legacy Amendment Transition PURPA Legacy PURPA Transition PURPA PURPA RFO Legacy Amendment Transition PURPA RFO Legacy PURPA Transition PURPA Opt. As-Available RFO Legacy Amendment Transition Opt. As-Available RFO Legacy RFO Legacy Opt. As-Available Legacy RFO Transition RFO Transition RFO 14

16 Other Contracting Alternatives Bilaterally negotiated PPAs Utility Prescheduled Facilities AB1613 Feed-in Tariff New behind the meter CHP 15

17 Questions 16

18 CHP Request for Offers (RFO) Presented By Benny Wu 17

19 CHP RFO Timeline and Process CHP RFO Within 90 days: initiate 1 st RFO MW 2 nd RFO 378 MW RFO Process RFO Process 3 rd RFO 394 MW RFO Process RFO As determined in SCE LTPP Initial Program Period Transition Period Second Program Period CHP RFO Process SCE Launch CHP RFO RFO Process (~120 days) Negotiate PPA SCE Executes PPAs SCE Shortlist Bidders for Negotiations Bidders Qualification Date SCE Submit PPA to CPUC for Approval Bidders Submit Indicative Offer Bidders Submit Final Offer SCE CHP MW Target: additional 1402 MW SCE GHG Target: 1.9 MMT incremental reduction Bidders Conference Call 18 Time-line not drawn to scale

20 RFO Product and Eligibility PRODUCT CAPACITY ($/kw-year) PRICING ENERGY (MMBtu/MW) GHG ($/TONNE) ESTIMATED EARLIEST START DATE CHP Facility As Bid As Bid As Bid 7/1/2012 Utility Prescheduled Facility As Bid (shaped) As Bid As Bid 7/1/2012 EXISTING 2 years after execution* 2 years after execution* CONTRACT DELIVERY PERIOD LATEST START DATE NEW or REPOWERED 5 years after CPUC approval* 5 years after CPUC approval* EXPANDED FACILITIES 3 years after CPUC approval* 3 years after CPUC approval* EXISTING FACILITIES and EXPANDED FACILITIES (W/O CREDIT PROVISIONS) MAXIMUM TERM NEW, REPOWERED, or EXPANDED FACILITIES (W/ CREDIT PROVISIONS) 7 years 12 years 7 years 12 years Eligibility CHP facility with nameplate greater than 5 MW and meets minimum requirements: Definition of cogeneration under California Public Utilities Code Emissions Performance Standard established by Public Utilities Code Federal definition of a qualifying cogeneration facility CHP Facilities converting to Utility Prescheduled Facilities A CHP Facility that met the PURPA efficiency requirements as of September * or earlier as specified in the PPA

21 RFO Process and Bid Evaluation Settlement requires first CHP RFO to be launched within 90 days of Settlement Effective Date Guiding principles: Compliance with terms of Settlement and equal treatment of all bidders Evaluation will be conducted according to Least Cost Best Fit ( LCBF ) principles Leverage knowledge, experience, and tools from other procurement programs (e.g., All Source and New Gen solicitations) to ensure consistency and efficiency SCE has retained Merrimack Consulting as Independent Evaluator for the CHP RFO 20

22 CHP RFO Recommendations New, Repowered, or Expanded Facilities: Begin your interconnection process with the transmission and distribution provider where your project will be interconnected Contracts on extension or end date is nearing: Consider participating in each CHP RFO for which you are eligible to increase your chances of being awarded Check contract expiration date and resolve relevant interconnection issues Review the CHP PPA early It is comprehensive and will take time to review and modify (if necessary) Offer operational flexibility to increase your chances of being awarded 21

23 BREAK Please return in 15 minutes 22

24 Interconnection & Distribution Service Presented By Michael Moore 23

25 Existing Generators: A Separate Interconnection Agreement is Required Existing generators will have to work with Grid Interconnections department to address the need for a new and separate interconnection agreement to be executed between the QF and SCE. Why? In most legacy QF PPAs, the functions of power purchase contract and interconnection agreement are combined in a single agreement, the PPA. This means that, when the PPA terminates, the QF s right to be interconnected with the SCE system is also ended. This process of conversion to a new interconnection agreement may require technical review and administrative activities that could require time and/or cost to complete. For example, telemetry is required when the nameplate of the generation system is 1 MW or larger. Further, over the last decades, the infrastructure of the grid, size of load, and new generation, along with changes in customer s configuration, may result in the need for a system impact study funded by the customer. It is advisable to start this process well in advance of the date on which you expect your legacy QF PPA to terminate. There quite likely will be costs associated with this transition and currently, SCE has a tremendous backlog of projects requiring engineering and contract review. Approximately 200 QFs will need Interconnection Agreements over the next few years. Seventeen (17) QFs need Interconnection Agreements within 120 days of Settlement Effective Date. 24

26 Interconnection Agreement for New Generators New generators must request interconnection service and potentially distribution service with the electric system, to initiate the appropriate technical review and studies. Interconnection facilities and system upgrades which may be needed to interconnect the generator will also be identified in this process, and will provide the basis of the interconnection agreement. This study process and related construction may take months or years to complete, depending on project size and location, among other factors. Therefore, parties are encouraged to understand the impacts that interconnection and transmission may have on any potential project plans and contractual commitments. 25

27 Why are Interconnection Agreements Required? Generators must have an interconnection agreement to operate connected to the electric system. Interconnection agreements are critically important to continued safe and reliable operation of the electrical grid. The primary drivers of interconnection agreements include: Safety Uncontrolled energy can be harmful to both equipment and people California Health & Safety Code requires coordination with the utility Stability and Reliability Generators impact grid operations and system planning Congestion and power flow management - Voltage regulation Equality in access for all parties Determination of cost responsibility 26

28 Which Interconnection Agreement? QFs with an interconnection at the transmission level will be referred directly to the CAISO. QFs > 20 MW will sign a WDAT agreement. A QF who sells to an entity other than SCE, or is unsure who it will be selling to, will sign a WDAT agreement. A new stand-alone Rule 21 Interconnection Agreement is being developed for customers who prefer and are eligible, per the tariff, for Rule

29 Key Steps in QF Interconnection Process Activity Submit Wholesale Distribution Service Request form and, if required, a deposit. Submit Affidavit Engineering Review / System Impact Study Prepare / Review / Execute Interconnection Agreement and Distribution Service Agreement Description Includes applicable information required to evaluate a request for Distribution Service. Stipulates that no changes in configuration have been made since the last interconnection attachment to the PPA was executed. Engineering to conduct review of facility, confirm that SCE has sufficient data, and determine if customer will be required to fund a separate system impact study. Ultimate goal is to identify any facility upgrades (e.g. telemetry) that may be required to meet current safety and/or reliability standards. Per applicable Rule 21 or WDAT agreement. Responsible Party QF Customer QF Customer SCE SCE / QF Customer 28

30 Telemetry A real time data acquisition system that provides generation data information from the generator to SCE s data servers. Consists of two parts real time data stream for SCE s Energy Supply and Marketing and a separate stream for SCE s Grid Control. Tariff prohibits comingling of data. Energy Supply and Marketing are required to deliver data to CAISO for marketing/sales purposes; Grid Control utilizes data to ensure safety and reliability. This data is then configured into the programs that SCE operators and engineers use to determine the real time power production of the generation systems connected to the SCE system. The only currently approved method of telemetry is for SCE Grid Control is to install a remote telemetry unit (RTU) at the generation site. Estimated cost: $150,000. Additional costs are incurred by customer for another component, the data processing gateway (DPG) However, customers have been, and may continue to, propose alternate methods of meeting the telemetry requirement. 29

31 QF Settlement: Next Steps 1. QFs will submit Request for Wholesale Distribution Service and Affidavit (attesting to no changes since last interconnection facilities agreement (IFA) executed). Upon receipt of the request, an GICD Project Manager will contact you. 2. If Affidavit submitted, SCE will not required a re-study; however, SCE Field Engineering will review to determine if any safety- or reliability-related upgrades are required. 3. If QF has expanded capacity and thus, will not submit an Affidavit, a re-study may be required. 4. For information on interconnection issues related to QFs, please contact Michael Moore at or Mark Hoppe at

32 Questions Please respond to our survey. We want to know the best way to get information out to you in the future. Questions are welcome see contact info on next slide. 31

33 Contacts and Information For further information on SCE s QF/CHP program, including copies of the contracts and amendment discussed above, the Settlement Agreement Term Sheet and CPUC Decision , please visit our CHP Program website at: You can also send questions or indicate your interest in executing a Legacy Amendment or other PPA to: chp@sce.com Contacts for SCE s QF/CHP contracting program are: Gerome Torribio (626) Benny Wu (626) For further information on interconnection, please send questions in writing to SCE Grid Interconnections at InterconnectionQA@sce.com. Contacts for SCE s Grid Interconnections group are: Mark Hoppe (714) Michael Moore (714)

34 Useful Links QF Settlement Documents SCE s Tariff Rule 21 CAISO Tariff SCE s WDAT and interconnection requirements for wholesale generation Interconnection Handbook, Wholesale Generators 33

35 Back Up 34

36 TOU Factors if Buyer is SCE Summer Winter On-Peak N/A Mid-Peak see below Off-Peak see below Super Off-Peak N/A Summer Mid-Peak = (Total # hours in month - ( * # of Summer On-Peak hours in month) - ( * # of Summer Off-Peak hours in month)) / # of Summer Mid-Peak hours in month Winter Off-Peak = (Total # hours in month - ( * # of Winter Mid-Peak hours in month) - ( * # of Winter Super Off-Peak hours in month)) / # of Winter Off-Peak hours in month 35

37 PURPA 20 MW Contract Must take purchase obligation will continue for QFs 20 MW and under Term: Up to 7 years for existing capacity, Up to 12 years for new capacity Eligibility: QFs 20 MW Pricing: SRAC energy pricing as determined by CPUC Capacity pricing pursuant to D Firm Capacity at $91.97 / kw-yr As-Available Capacity of $41.22 / kw-yr escalating each year Project Development Security, Performance Assurance for new facilities 36

38 Transition Contract Provides a bridge for CHP QFs with expired or expiring contracts to PPA options under the CHP Program or exit from IOU QF PPAs Term: Up to July 1, 2015 Eligibility: CHP currently selling to IOU under QF PPA Pricing: SRAC energy pricing according to values and formulas in Settlement Capacity pricing pursuant to D Firm Capacity at $91.97 / kw-yr As-Available Capacity of $41.22 / kw-yr escalating each year Updated scheduling provisions, CAISO metering Additional Dispatchable Capacity optional amendment 37

39 CHP RFO Pro Forma Contract Structured for larger baseload CHP products Term: Up to 7 years for existing or expanded capacity; Up to 12 years for new or repowered capacity; expanded facilities electing to satisfy credit/ collateral terms may also get a 12 year contract Eligibility: CHP QFs greater than 5 MW Pricing: according to offer prices agreed to by the parties Project Development Security: $20/kW, 30 days after Effective Date of contract $60/kW, 18 months after Effective Date of contract Performance Assurance for new or repowered facilities 12 months capacity payments; 5% of revenues Curtailment for system emergencies or limited economic conditions 38

40 Optional As-Available Contract Large generators with limited export Term: up to 7 years, Seller s election Eligibility: CHP > 20 MW that export <131.4 GWh per year Pricing: Energy pricing for scheduled energy: SRAC for up to 20 MW in any hour Day Ahead Pnode price for amounts greater than 20 MW Real Time Pnode price for unscheduled energy As-Available Capacity of $41.22/ kw-yr escalating annually IOUs not required to sign additional PPAs after reaching delivery cap SCE: 75 average MW PG&E: 75 average MW SDG&E: 10 average MW 39

41 SRAC Energy Price and GHG Cost Equations Energy price Higher of: and where: BTGP = Burner Tip Gas Price as set forth in E-4246 (SRAC update) VOM = Variable Operation & Maintenance as set forth in E-4246 TOU = Time of Use factor as set forth in E-4246 LA = Location Adjustment, calculated as hourly day ahead Pnode LMP Gen Hub LMP GHG charges = Government imposed fees, taxes, or charges associated with GHG emissions regulation CO2 Price = Latest GHG auction clearing price of one allowance Market Heat Rate = 12-mo. SP15 Gen Hub forwards as set forth in E-4246 Applicable HR = 8,225 Btu/kWh in 2012; 8,125 Btu/kWh in ; Actual HR in 2015 to end of Floor Test Term Energy price 2015 and beyond set to Market Heat Rate 40