Community Choice Aggregation Presentation for the Local Government Commission and the Community Environmental Council July 13, 2007 1
Community Choice Aggregation (CCA) CCA Legislation (AB117) allows cities and counties, and JPAs made up of cities and/or counties, to aggregate customers load for the purpose of procuring electricity (generation) Customers have the right to opt out of the program and continue to be served as a bundled SCE customer, or if currently Direct Access, remain with their ESP After initial opt-out period, CCA customers can return to SCE bundled service by providing 6 months notice SCE continues to provide transmission, distribution, metering, billing and customer-care services 2
Community Choice Aggregation CPUC Process The CPUC has established rules, procedures and schedules for CCA interaction with the state s investor owned utilities (IOU). The rules and schedules pertain to CCA program guidelines, service fees, information fees and cost responsibility surcharges (CRS) CCA CRS is a cost-recovery mechanism (exit fees) Ensures that state and SCE procurement costs aren t shifted to non-cca customers SCE s 2007 CCA-CRS (exit fee) approximately 1.5 cents/kwh 3
What should be done before Establishing a CCA? Conduct a detailed feasibility study that addresses all issues and costs Includes, but is not be limited to, start-up costs, power procurement, financial and economic impact analysis, clear identification of potential customers, and service and reliability standards Develop a detailed power supply plan that addresses all procurement and service issue requirements Includes, but is not be limited to, short and long-term cost to purchase energy, hedging factors, CAISO service costs, renewable portfolio standards, resource adequacy requirements, and Greenhouse Gas (GHG) emissions standards Know that establishing a CCA in a volatile natural gas market presents considerable risk Will the CCA have access to low-cost power compared to the existing electric service provider s diverse power procurement portfolio? Will the projected revenues cover all the expenses of operating a CCA? 4
Natural Gas Spot Price Trend-NYMEX NYMEX Natural Gas Futures 29-Mar-07 3 month strip $ 7.87 6 month strip $ 8.02 12 month strip $ 8.67 5 year strip $ 8.19 May-07 $ 7.73 May-08 $ 7.98 Jun-07 $ 7.87 Jun-08 $ 8.04 Jul-07 $ 8.01 Jul-08 $ 8.12 Aug-07 $ 8.11 Aug-08 $ 8.18 Sep-07 $ 8.16 Sep-08 $ 8.24 Oct-07 $ 8.27 Oct-08 $ 8.34 Nov-07 $ 8.91 Nov-08 $ 8.78 Dec-07 $ 9.56 Dec-08 $ 9.24 Jan-08 $ 9.89 Jan-09 $ 9.50 Feb-08 $ 9.87 Feb-09 $ 9.49 Mar-08 $ 9.64 Mar-09 $ 9.26 Apr-08 $ 8.10 Apr-09 $ 7.76 5
The CCA Value Equation Are CCA customer costs less than or equal to SCE s customer costs? CCA Customer Costs Energy Procurement Costs + + + < CCA Program costs CRS Non- Gen. SCE Customer Costs CCA Related Costs Cost of Generation Cost of risk mitigation and management Resource Adequacy Renewable Portfolio Standard Cost of CA-ISO ancillary services Insurance and Bonds Customer Protections Potential ESP Costs City administrative costs Consulting costs Cost of transaction services provided to CCA Cost Responsibility Surcharges Transmission Distribution Metering Billing Utility Users Tax Franchise Fees 6
CCA and IOU Responsibilities City specific rates Services Provider Responsibilities * Non- Generation Cost Responsibility Surcharge Generation CCA Program Costs** SCE CCA Distribution & Transmission Public Purpose Program Charges Other CPUC related charges Customer services Meter Installation & Reading Billing Communications on behalf of CCA Utility Users Tax Franchise Fees Energy procurement Cost Responsibility Surcharges (CRS) Energy forecasting & planning Renewable Portfolio Standard compliance Resource Adequacy CA-ISO related charges - Ancillary services - Standby & spinning reserve - Scheduling & settlement costs - Line losses & related energy costs Administrative and Program Costs Insurance and bonds * Refer to CPUC s 09-04-03, OIR to implement portions of AB 117 concerning Community Choice Aggregation **See previous slide for breakdown of Aggregator Program Costs 7
Requirements for all Load Serving Entities Load Serving Entities (LSEs) includes investor owned utilities (IOUs), energy service providers (ESPs), and community choice aggregators (CCAs). All LSEs have been directed to accelerate Resource Adequacy Requirements (D.04-10-035) and AB 380 LSEs must maintain and enhance near term electric service reliability by implementing 15-17% planning reserve margin LSEs will also have to satisfy California s Renewable Portfolio Standard (RPS) under SB 1078 and AB 380 20% renewables by 2017; possibly accelerated to 2010 Legislation being could increase the amount of renewable generation required and shorten time frames Renewable costs beyond a market price referent are paid for by Public Goods Charge (PGC) funds, if available SCE leads nation in procurement of power from renewable generation sources (16% of portfolio) Greenhouse Gas Emission Standards are now in place through: AB 32 (California Global Warming Solutions Act of 2006) SB 1368 (Greenhouse Gases Emission Performance Standard) Current legislation limits the amount of coal that municipalities can import into CA NOTE: Requirements above will affect the cost of generation for all LSEs. 8
Summary Evaluate carefully all proposals for total costs, risks and potential benefits as compared to the generation, administrative, and operational costs for the utility Seek contractual commitments that prevent CCA from having to pay more than utility generation costs Seek third party evaluations of all proposals Contact SCE for evaluation of feasibility studies and proposals, as the utility is prepared and willing to review load profile reports and other program elements to help potential CCA members make informed decisions 9