REGULATORY INNOVATION IN THE HEARTLAND Electricity for the 21 st Century Mike Bull, Director Policy and Communications
Research Programs Policy Pg. 2 Financing
practical innovation Research Programs Policy Pg. 3 Financing
Assist Regulators & Utilities To Adapt CEE Regulatory Innovation Initiative Focus on customers Encourage innovation and efficiency Integrate new and more effective technologies Provide new services and products, more quickly Manage disruption & costs Pg. 4
Current Business Model Designed to electrify the whole nation: 1. Massive Investments in Centralized, Bulk Power 2. Exclusive Service Territories to reduce risk 3. Keep Rates Low by Encouraging Sales Pg. 5
Responding to Disruptive Challenges Pg. 6
Not just a problem for utilities Regulators Traditional rate and resource planning measures increasingly ineffective in protecting the public interest Consumer Advocates Consumers that aren t able to make choices about their energy supply may be stuck with increasing bills Environmental Advocates Opportunities for significant advances in clean energy may be opposed as a result of business model uncertainty Pg. 7
Electricity for the Twenty First Century A regulatory framework that better aligns how utilities earn revenue with customer demands and public policy goals. Pg. 8
Project Team Pg. 9
PNNL/Gridwise Gridwise Architecture 2020 e21 Great Plains Institute, CEE, Xcel Energy, MN Power et al., Michigan State Univ. State of MA: Grid Modernization Working Group CalCEF Clean Energy and Utility of the Future AEE/MIT- IPC: Utility 2.0 CA PUC AB 327 MN 1 of 5 States Leading Ceres: 21 st Century Electric Utility NY REV proceeding Resnick Institute Grid2020 State of NJ Grid Resiliency Task Force Energy Future Coalition: Utility 2.0 Pilot ASU Utility of the Future RMI elab C2es: Power 2030 HI Power Supply Improvement Plan Binz/Lehr Utility 2020 NREL/Colorado State Univ. FSU SUNGRIN Edison Electric Institute: Focus on the Future Pg. 10 According to GreenTech Media
Broad Stakeholder Involvement NGOs Local Gov t Renewable Developers Regulators Utilities Customers Academics Pg. 11
Pg. 12
e21 Initiative Phase I Report Dec 2014 After a year s worth of effort Pg. 13
Customer-Centric Framework 1 BEFORE 2 Build More, Sell More Few customer choices 3 AFTER Revenue tied to performance More customer options 1 2 3 Pg. 14
Utility Business Model Shift Today Tomorrow Return on Capital Invested Return on Value Provided Volumetric Sales Multiple (sales, fees, incentives) Pg. 15
Regulatory Framework Shift Cost Did we pay the right amount for what we got? Value What do we want and how do we pay for it? Pg. 16
Innovation Requires Risk CEE Regulatory Innovation Initiative Pg. 17
Mike Bull CEE Policy & Communications Director
Additional Slides Pg. 19
Utility Business Model Initiatives MN e21 NY REV Stakeholders Drivers Regulators Consensus Outcomes Commission Order Fully Regulated Average Rates Winter is Coming Preparation Primarily Utilities Regulatory Model Rates relative to US Average Urgency of Action Public Policy Outcomes Deregulated High Rates Urgent Response to Sandy and deferred maintenance Primarily Markets Pg. 20
Resource Planning to Integrated System Planning Build on current process for identifying resource needs to: Reduce costs and improve system efficiency Better align planning decisions with rates Distribution planning for growth in distributed energy resources Pg. 21
Resource Planning to Integrated System Planning New Utility Revenue Model Multi-year Business that aligns revenue recovery with Public Policy System Needs Customer Demands Utility performance Pg. 22
Resource Planning to Integrated System Planning New Utility Revenue Model New Customer Rates and Services MORE CHOICES Ability to choose generation type and to manage energy use Rates reflect value of DER and the Grid Fair and just allocation of costs Pg. 23
Since Phase I e21-related Legislation Performance based multi-year rate authorization Distribution Planning requirement Rate Adjustments for Energy Intensive Trade Exposed Customers Regulatory MN PUC to initiate distribution planning process in Fall 2015 MN PUC ordered 6 months review of alternative rate design to encourage energy efficiency or peak demand reduction E21 Phase II Planning RMI elab Accelerator Focus on System Planning, Performance Metrics, Rate Alternatives Pg. 24
From Blueprint to Building the House Broader & deeper outreach, esp. regulatory staff e21 roll-out events & regular communication w/regulators, esp. staff. Organize general educational/training on Performance-Based Reg. Integrated System Planning Host dialogue on how current IRP process works (Pros & Cons). Changes & additions needed (e.g., how to incorporate distribution plans). Performance Metrics w/in New Revenue Model Summarize current incentives/disincentives + existing performance reqs. Develop Guiding Principles + I.D. best practices for performance metrics. Rate / Pricing Reform Catalogue innovate rates in MN and elsewhere (e.g., Time of Use, VOS). I.D. & prioritize challenges + goals/principles for rate reform. Grid Modernization Clearly outline how distribution planning is done now. SWOT of current distribution planning process to inform PUC process. Pg. 25
What Does e21 Mean for Efficiency? Utility still the primary implementer of state energy policy Efficiency remains the preferred energy resource Utility becomes more agnostic as to energy sales Efficiency as a potential profit-center Efficiency as Gateway to Customer Pg. 26