Regional Regulatory Policy The View From Washington Buying & Selling Electric Power in the West January 14 & 15, 2008 Mark Sidran, Chairman Washington Utilities & Transportation Commission 1 Bad News and Good News Upward Pressure on Rates - New infrastructure (reliability & load growth) - Rising raw material and fuel costs Emerging New Policies and Regulations Renewable portfolio standards Greenhouse gas emission limits Increased Risks Increased Opportunities 2 1
Need for Infrastructure 3 US DOE And NERC National Forecasts - Utilities Need More Than 100,000 MW of New Power Plants and 13,000 Miles of New Transmission by 2015. WA Demand Forecasted to Grow 12 % or 11 Billion kwh by 2015 (About 1.5 X Seattle) PSE, Avista and PacifiCorp Forecast About 1700 amw of New Resources to Meet Load Growth and Replace Expiring Resources. Region s Transmission Grid Needs Expansion to Maintain Reliability and Integrate Renewables. Rising Raw Material and Fuel Costs Since 2003, Steel Up 60%, Copper Up Nearly 400%,Cement Up Over 30%. Wind Turbines Up 60% Since 2002. Since 2001 The Dollar Has Declined 20% On Average Against Foreign Currencies and 46% Against the Euro. Between 2001 and 2006 Inflation Increased 16%, A New Gas- Fired Plant Nearly Doubled, A Wind-Powered Generator Increased By 50 70%. The Average Natural Gas Price for Electric Generation Increased 54 Percent over the Same Period. 4 2
New Policies & Regulations Washington s Renewable Portfolio Standard (I-937 - (RCW 19.285): 15% By 2020. SB 6001 Caps Greenhouse Gas Emissions From New Power Plants And Long-Term Contracts Nine Other Western States Have An RPS, Greenhouse Gas Cap, Or Both. Green Rush For Renewable Resources Creating A Sellers Market. Probable Federal Regulation Preemption? 5 Cautious Optimism: Past as Prologue Northwest Power & Conservation Council 20 Years of Regional Planning, Conservation and Efficiency = 3000 amw WA IOUs Perfecting IRPs For 20 Years Ramping Up Conservation: PSE 40%, Avista 25% Pacific Power More than 50%. WA IOUs Well On The Way To 9% RPS By 2015. WPPS A Cautionary Tale? 6 3
What s Up at the WUTC: WA Legislation & EPACT 2005 7 Interconnection Rules WAC 480-108 Customer-owned facilities to 20 MW Facilitates Renewable Production Payment Program with utility incentive payments of up to 54 cents/kwh in return for tax credits under RCW 82.16.130. Some interconnection cost can be recovered in rates if network benefits are demonstrated. Policy Statement Favoring Advanced Metering & Time-Of-Use Rates If Cost-Effective. Previous programs (PSE) not cost-effective, but changing circumstances and new technologies could change result. What s Up At The WUTC RPS/GHG Rules Energy Independence Act (I-937/RCW 19.285) WAC 480-109 governs IOU compliance with RPS. Senate Bill 6001 Working with Department of Ecology to write rules defining the greenhouse gas emission performance standard (EPS) by June 30, 2008 (WAC 173-407). Working on own rules to determine compliance by IOUs to be adopted by December 2008. 8 4
What s Up At The WUTC - Ratemaking Tools Conservation Performance Incentive for PSE (RCW 80.28.260(2)). Sliding scale incentive for performance above target penalty for poor performance. Incentive includes a bonus for cost-efficiency. Docket UE-060266 order No. 8, January 5, 2007. Revenue Decoupling Pilot Programs For Cascade and Avista. Fixed-cost per customer true-ups if conservation program targets met or exceeded. Earnings caps. Docket UG-060518 order No. 4, February 1, 2007. (Avista) Docket UG-060256 order No. 5, January 12, 2007. (Cascade) 9 What s Up At The WUTC - Ratemaking Tools 10 Review Of PSE Power Cost Only Rate Case Mechanism. Docket UE-070565 order No. 7, August 2, 2007 directing collaborative process. New Design Considerations For Power Cost Adjustment Mechanisms. Consider asymmetry of power cost variation around base levels when designing dead bands. Docket UE-061546 order No. 8, June 21, 2007. More Frequent General Rate Cases Four Likely in 2008. Consideration of PSE Sale. 5
The Year(s) Ahead Everybody Talks About the Weather, but Cap & Trade vs. Carbon Tax Good Politics vs. Good Policy? Designing a new commodity market (cap and trade) likely to be complex and risky: - Allocate or auction credits? - Based on generation or load? Color-coded electrons vs. Interstate Commerce Clause Preserving the Northwest s fair advantage - hydro 11 The Future is Now No Place to Hide New Technologies Apollo Projects Allocating risks and benefits: Private capital Taxpayers Ratepayers R & D tariffs, prudence preapproval, IRP s Old Ideas New Relevance: Fuel Switching End-use fuel switching from electricity to natural gas saves estimated 20-30% in total gas energy needed for spaceheating and hot water. Implications for carbon emissions and RPS. WUTC plans a workshop in early 2008. 12 6
When Confronted with Two Paths Take the Third Path. Talaxian Philosopher 13 Talaxian Commissioners from Planet Talax in Delta Quadrant seen meeting with Oregon and Idaho counterparts. 7