Government’s Evolving Role in Resource Planning and Environmental Protection Arthur H. Rosenfeld, Commissioner California Energy Commission April 19, 2002 (916) US

2

3 Subset of units in California, ranked in order of NOx emission rate

4

5

6

7

8 Electricity Use in California 2/3 of all electricity (kWh) is used in buildings 50% of buildings in PG&E are in “Block 50” (exempted from rolling blackouts) 40% of Peak Demand is due to Air Conditioning plus Lighting

9 Top Ten Peak Energy Uses/Sectors (assumes a 50,000 MW peak) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Com AC Res AC Assembly Industry Com Light Com Misc Res Misc TCU Buildings Ag & Water Pumping Process Industry Res Refrigerator End-Use/Sector Megawatts 15% 14% 11% 7% 6% 4%

10 CEC has Two Types of Regulatory Authority Related to Demand Response Building and Efficiency Standards –Title 20 and 24 Update with adoption in 2003 and implementation in 2005 –Everything from efficient air conditioners to white roofs Load Management Powers –New buildings -- first priority –Then most existing buildings CEC feels responsible for the 23,000 interval meters installed with state funds –16,000 meters are in; 7,000 more by summer –Covers 25% of the peak load of the state –However, only Time-of-Use tariffs in widespread use Concerns regarding non-specific nature of TOU –Same price in all summer afternoons regardless of system load, system condition, or wholesale price

11 Load Management Tools Are Increasingly Cost-Effective –Interval Meters and Communication –Price Responsive Thermostats –Lighting Controls –Other Process Modifications Hourly Electric Rates Are Still in Pilot Stage –For load with new meters (> 200 kW), CPUC requires TOU rates and offers emergency load management incentives –But has yet to combine these into an hourly tariff –In other jurisdictions, hourly rates have reduced the cost to serve load and enabled firms to reduce their costs of operation Demand Response to Time-Dependent Prices

12 Critical Peak Pricing (CPP) -- My Vision based on Gulf Power tariff CPP varies empirically to reduce demand at critical locations and times Variable CPP

13 Gulf Power GoodCents Select Tariff Reduces need during critical or near critical periods (emergencies -- present or expected --, very high prices) –Summer Peak Load Reductions of 2.1 kW per house (1 st hour) –Winter Peak Load Reduction of 2.7 kW per house (1 st hour) 4-hour reduction roughly 1 kW 96% Customer Satisfaction Rating –Cost savings, greater control and better information Improves competitive position of Gulf Power in wholesale markets

14 Critical Peak Pricing (CPP) e.g. Gulf Power residential GoodCents Select tariff

15 Proposed System for Demand Response in New Homes & Small Commercial Buildings Load Data 1 Price/Proxy/ Curtailment Signal 1 Interval Meter Δ$=$100 1 Communicating Thermostat Δ$=$50 2 Cost of Avoided Load: $ per kW 1. Utility responsible for signal, communications, meter, and load data. 2. Builder responsible for communicating thermostat.

16 Georgia Power’s Voluntary 2-part RTP Program Customer bill = Part 1 + Part 2 –Part 1 based on historical load profile –Part 2 based on price responsive departures from load profile Historical load profile is from previous year –Called Customer Baseline Load (CBL) a list of hourly loads for entire year Part 1 is the CBL x TOU tariff –What you expect to pay if you don’t respond to real-time price Part 2 is the hourly departures from CBL –Enables customer to buy additional kWh when prices are low –And sell back kWh when prices are high Saves 17% at ~$1/kWh on hot afternoons

17

18 Summary of Time-of-Use (TOU), Critical Peak Pricing(CPP), and Real-Time (RTP) Prices Time-of-Use (TOU) is typically 3 time blocks published in advance for entire season –Peak, Shoulder, Off-Peak –Can’t foresee weather or equipment failures Critical Peak Pricing (CPP) is a high price imposed for a few days a year when system conditions are critical or near critical –A discount is given during off peak hours –Customer pays the critical peak price when invoked by the utility a day ahead forecast of CPP offers additional time for response Real-Time Pricing (RTP) is hourly real-time marginal cost of a kWh –Reflects hot weather, scarcity, or equipment failure a day ahead forecast of RTP offers additional time for response

19 Load Management with Time-Dependent (Dynamic) Pricing MICRO-Economic Benefits –Leads to lower costs –Lowers risk of market power –Treats supply and demand symmetrically –Independent of regulated, deregulated, or hybrid industry structure Issues –Understanding how loads will respond –Additional study regarding voluntary vs. mandatory Impact on customers –Stable industry structure; credit-worthy participants –Clear, consistent government regulation

20 My Vision of Tariff Options Residential and Small Commercial –Default = CPP –Hedge = TOU Industrial and Large Commercial –Default = CPP –Hedge = TOU –Option = RTP (voluntary)

21 4 o F Thermostat Rise for a 10-ton Rooftop A/C 4-hour average saves one-third of A/C, ~1W/sq. ft.

22 Average Hourly Data -- All AC units From: Ed Hamzawi, SMUD, Oct. 20, 2000 SMUD

23 59th. St. Building - 5 Minute Interval Loads Second Floor Lights Curtailment = 30% Reduction In Lighting Level (1 to 5 PM) :0011:1511:3011:4512:0012:1512:3012:45 1:001:151:301:452:002:152:302:453:003:153:303:454:004:154:304:455:005:155:305:456:00 Time Load (kW) Curtailment Day kWBaseline Day kW 5- Minute Data (Lights) From: Ed Hamzawi, SMUD, Oct. 20, 2000 SMUD

24