Climate Change and Colorados Regulatory Strategies Colorado Sierra Club Energy Committees Presentation of Ron Binz, Chairman Colorado Public Utilities Commission November 6, 2008

Tis a privilege to live in Colorado

Outline of this presentation Introduction to the Colorado PUC The challenge we face with climate change Implications of proposed federal GHG policies Our states strategies –Renewable energy –Energy efficiency Discussion

Caveat I am one of three equal commissioners My positions are my own I am confused by many things and have not made up my mind on much at all I dont even agree with some of the things I say Good advice: dont believe everything you think

The Colorado PUC Independent agency, created in the constitution Three Commissioners, appointed by the Governor Four year terms Partly judicial, partly legislative Ninety-member staff is an agency within the Department of Regulatory Agencies The Public Utilities Commission's mission is to achieve a flexible regulatory environment that provides safe, reliable and quality services to utility customers on just and reasonable terms, while managing the transition to effective competition where appropriate.

Colorado Commissioners Matt BakerRon BinzJim Tarpey

The Challenge We Face Energy Supply, Energy Efficiency, Consumer Prices and Climate Change

Colorado Electric Generation by Fuel

Generation Fuels in Colorado

Projected Colorado Electric Energy Growth

The Take-Aways Colorados demand for electric energy services is projected to grow 60% in the next seventeen years. Think of this curve as demand for energy services denominated in kilowatt-hours Projection does not include transportation applications for electricity (plug-in hybrids).

Sources of US Carbon Emissions (2002) Source: Oak Ridge National Laboratory

EPRI Prism Analysis

ASES Wedge Analysis

EPA Analysis of S. 2191, the Lieberman Warner Bill

EPAs Modeled Impact of S on electricity prices

Key (Sensitive) EPA Assumptions Growth of nuclear generation Efficacy of CCS for new coal generation Stability in natural gas prices delivered for electric generation ($6 to $7 in $2005)

Potential Alternate Assumptions for EPA Reference Case Nuclear growth is modest CCS is substantially more costly for new coal generation Natural gas prices stabilize at higher level PHEV development impacts transportation emissions Energy efficiency gains are greater

EIA Analysis of Electricity Prices under S. 2191

Dingell-Boucher Discussion Draft Sets GHG goals that equal L-W in 2050, are less aggressive in earlier years Preempts any state or regional GHG cap and trade schemes Allocates larger number of free allowances to LSEs Significantly larger use of offsets Draft contains many options

Colorados Balanced Approach Coal producing state (8 th in US) Gas producing state (7 th in US) Substantial wind and solar resources Moderate electric rates Popular governor with a focus on the New Energy Economy

Reduce Colorados carbon emissions by 20% below 2005 levels by 2020 Reduce Colorados carbon emissions by 80% below 2005 levels by 2050

Elements Of A State Energy Strategy Boost Energy Efficiency –Customer: education –Utility: engagement –Rate structure changes –Smart grid test bed in Boulder, Colorado Stress renewable resources –Regulators and utilities with a commitment to addressing climate change –State RPS –Progressive resource planning at Commission –Healthy renewables industry Advanced generation development –Research and demonstration for carbon sequestration –CAES and other storage strategies

Colorado Regulatory Response Least Cost Planning Fuel Neutrality Utility models new portfolio Utility selects bid resources Resource Planning Clean Energy Preference Independent Evaluator Optional Post-bid Review Prior Rule New Rule New DSM emphasis -- Resource Planning --

Major Issues in PSCos ERP Filing Closure of Arapahoe and Cameo coal plants Level of utility-owned incremental resources Proposed debt equivalence adder for IPP bids Financial impacts of capital leases and consolidation How to measure PSCos carbon reductions What model inputs to assume: –Load growth forecast (with ranges) –Planning reserve margin –Natural gas price forecast (with ranges) –Coal price forecast –CO2 costs –Assumed DSM levels –Section 123 resource levels Which scenarios to model using STRATEGIST

PUCs ERP Decision for Public Service Company of Colorado Major Decision Items Closure of two coal plants Likely approval of large solar projects ( MW) Continued growth of wind CO2 price assumed in modeling ($20/ton + 7% growth) Explicit move away from least cost planning Consideration of significant utility ownership Decision not to include debt equivalence adder

Renewable Energy: Focus on Solar

Concentrating solar w/storage Other baseload (coal w CCS; nuclear) $ Concentrating Solar in Colorado

San Luis Valley

Solar Thermal Electric Density Use: 100 MW(ac)/mile 2 Colorado Peak Integrated Demand: 11GW Result: 110 mile 2 required land area

2 San Luis Valley

Are those alien crop circles...? Joes, Colorado Rate Structure Issues

126 acres 5.8 acres ½ mile

Electric Rate Structures Net metering rules apply in this situation –meter spins backwards Commercial rate (up to 25 kW demand) –$8.98 Service and Facility Charge –9.3¢ per kWh A 50 horsepower pump has a 40 kW demand Secondary General (above 25 kW demand) –$25.00 Service and Facility Charge –$14.77/Monthly Peak KW –3.0¢ per kWh

Energy Efficiency

ACEEEs 2008 State Rankings

ACEEE State Rankings

EE Strategies Get regulation right: secure utility engagement Promote EE in building codes –Role of new buildings Rethink customer education Investigate 3 rd party provision of EE Tie EE (and RE) to rate structure changes

Utility Engagement DSM goals in legislation Focus: utility should make efficiency a business Recent Commission rules establishing: –bonus mechanism –expedited cost recovery Tie-in to utility resource planning Conditions on a recent generator approval –Demand response solicitation –Expanding residential AC program

NREL Research of Ron Judkoff

Customer Education Two 75-watt Compact Fluorescent Lights will reduce CO 2 emissions by One Metric Ton over their lifetime

Some thoughts about energy efficiency This is no time for small ideas. Most states energy efficiency activities are too small, probably by an order of magnitude. We need transformation opportunities. Demand reductions and demand response are important to pursue in addition to energy reductions. Leadership and political will are needed. We are the leaders weve been waiting for

Thanks for the invitation. I look forward to your questions.