MEMORANDUM. TSS/ejv attachment. State of Michigan Jennifer M. Granholm, Governor

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1 State of Michigan Jennifer M. Granholm, Governor Michigan Public Service Commission J. Peter Lark, Chair Robert B. Nelson, Commissioner Laura Chappelle, Commissioner MEMORANDUM Date: /9/200 To: All Parties of Case U From: Thomas S Stanton, Technical Assistant, Competitive Energy Division Subject: Corrected Testimony & Exhibit Attached are corrections to my original Testimony and Exhibit TSS_3 ( pages). I have included only the pages that have been corrected. The exhibit was a correction due to a conversion to PDF that left off some of the page in the original exhibit. TSS/ejv attachment

2 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) THE DETROIT EDISON COMPANY ) to increase rates, amend its rate ) Case No. U schedules governing the distribution and ) supply of electric energy, implement ) Power Supply Cost Recovery plans, ) factors and reconciliations in its rate ) schedules for jurisdictional sales of ) electricity and for miscellaneous ) accounting and regulatory asset recovery. ) ) QUALIFICATIONS AND CORRECTED DIRECT TESTIMONY OF THOMAS S. STANTON MICHIGAN PUBLIC SERVICE COMMISSION April 9, 200

3 DIRECT TESTIMONY OF THOMAS S. STANTON CASE NUMBER U PART II 1 Q. What is the purpose of your testimony in this case? 2 A. I am presenting the Michigan Public Service Commission Staff s position 3 5 regarding three issues: (1) Michigan s Low-Income and Energy Efficiency Fund; (2) an appropriate renewable energy program for Detroit Edison; and (3) policies related to Detroit Edison s Retail Access Service Tariffs. 6 Q. Please summarize your testimony regarding Michigan s Low-Income and Energy 7 Efficiency Fund ( LIEEF or Fund ). 8 A. Staff supports continuation of LIEEF funding. Staff has five recommendations 9 10 for Michigan s LIEEF program that are important to providing greater protection for and assistance to Michigan s low-income customers. 11 Q. Please summarize your testimony regarding Staff s recommendations for a 12 renewable energy program for Detroit Edison. 13 A. Staff s position is that the time has come for Detroit Edison ( Edison or the Company ) to embark on a significant renewable energy program. Appropriate steps should be taken in Case No. U to provide assurance that Edison shall undertake a renewable energy program consistent with recommendations included in the Commission s Orders in Case No. U and Staff s November 18, 2003, first annual report to the Commission on the Michigan Renewables Energy Program (MREP). Acquisition of renewable energy resources by Edison could significantly reduce costs the Company will otherwise have to expended expend to meet current, impending, and future air pollution standards. Q. Please summarize Staff s position regarding Edison s Retail Access Service Tariff. 8

4 DIRECT TESTIMONY OF THOMAS S. STANTON CASE NUMBER U PART II 1 2 customers participating; and (d) the smallest price premium charged for new renewable power. 3 The longest running green pricing programs have been operating for 5 6 five years or more. Thus, there is a large and growing base of knowledge about utility green pricing programs, from which utility program managers and industry experts have developed a set of best practices. 7 Q. Please describe those best practices for green pricing programs. 8 A. The best practices are comprised of eight general principles. A utility will design its program to: (1) seek out the best renewable energy resources available and include at least some new renewable energy projects; (2) create specific private values for participating customers, and invite participation by both residential and non-residential customers; (3) reduce the price premium as much as practical and drive the premium lower over time; and () make program information readily available and participation easy. In program education, promotion, advertising, and marketing, the utility will: (5) cooperate with supportive environmental and community groups; (6) seek out business and civic champions who will support and help advertise the program and enhance its visibility; (7) take advantage of free advertising opportunities; and (8) track and communicate with green power customers. Q. Please discuss each of these eight principles in more detail. A. The first is for the utility to seek out the best renewable energy resources available and include at least some new renewable energy projects, based on a thorough survey of locally available renewable resources. The utility s assessment 27

5 DIRECT TESTIMONY OF THOMAS S. STANTON CASE NUMBER U PART II A. SolarCurrents was one of the first green pricing programs in the U.S. It encouraged new, high-quality renewable energy resources in Michigan, funded in part through a federal grant. It demonstrated Michigan-manufactured solar photovoltaic equipment, from Ovonics/Uni-Solar, in Troy, Michigan. Edison used the SolarCurrents facility as a research and demonstration site, and collected and reported useful data on the performance of the system. Edison offered variable rate options for customers to participate by purchasing one or more units of power in 100 kw W increments, and Edison made it quite easy for customers to join in the program. These are all characteristics of good green power programs as indicated by research and publications about how to design and implement public utility green power programs and green rates. Q. Were there other important characteristics of Edison s SolarCurrents program that were not recommended, or were missing? 1 A. Yes. Perhaps the most important indicator was that SolarCurrents attracted such small numbers of customers. Only about 200 customers subscribed, out of a total of about 1.7 million; for a penetration rate of less than 0.01 percent (one hundredth of a percent). 18 Q. Does Staff have an opinion why there were not higher numbers of SolarCurrents subscribers? A. Yes. As Staff has explored differences between Edison s program versus those incorporating the best design and implementation principles, one reason for the very low penetration rate appeared to be Edison s extraordinarily high price premium about 55 to 60 cents per kilowatt hour. Staff understands this was 31

6 DIRECT TESTIMONY OF THOMAS S. STANTON CASE NUMBER U PART II A. Staff s recommendation is that Edison should be authorized now to recover all of its implementation costs that have been audited and approved by the Commission, thus far, subject to the conditions discussed above. See Exhibit [TSS-9]. 8]. The total amount of implementation charges Staff supports for cost recovery at this time is $79,386,377. Staff Witness, Mr. Aldrich, is presenting in his testimony an appropriate surcharge to recover this amount. Staff s position is that cost recovery should not begin until January 1, 2006, when the rate freeze has ended for all customers. Staff recommends that the Commission condition Edison s recovery of implementation costs upon the satisfactory resolution of ongoing problems with Edison s enrollment process, and the Company s demonstrated assurance that ongoing operations for the electric choice program will continue to work correctly. 13 Staff s position is that Edison has generally done a satisfactory job implementing electric customer choice, but problems meeting its obligations for the larger number of enrollments from last September through February 200 are an indication to Staff that Edison still has some significant work to do before it can be said that Edison has met the test established by the Commission; for the Commission to grant its final approval for cost recovery of implementation costs. Staff believes there is ample time between now and January 1, 2006, for Edison to resolve the remaining problems with electric choice implementation and demonstrate that it has met all the requirements in order to receive the Commission s final approval for cost recovery. Staff is prepared to work 7

7 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of THE DETROIT EDISON COMPANY ) to increase rates, amend its rate ) Case No. U schedules governing the distribution ) and supply of electric energy, implement ) Power Supply Cost Recovery plan, ) factors and reconciliations in its rate ) schedules for jurisdictional sales of ) electricity and for miscellaneous ) accounting and regulatory asset recovery. ) ) CORRECTED EXHIBITS OF THOMAS S STANTON MICHIGAN PUBLIC SERVICE COMMISSION April 9, 200

8 Case No. U Witness: Stanton, Thomas Exhibit No: [TSS-3]Corrected Page 1 of Top Ten Utility Green Pricing Programs (As of December 2002) Introduction Buying Green Power National Conference Capacity Estimates International Library Links Utility Programs Utility List Top Ten Lists Green Pricing Map Retail Products Marketer List Large Purchasers State Activities Green Marketing Map Have you ever wondered which utilities are having the most success with their green pricing programs? What are the key measures of "success?" NREL has compiled extensive data on utility green pricing programs and produced the following "Top Ten" lists of program characteristics and results: total number of customer participants; customer participation rates; amount of new renewables development fostered by the program; and the premium charged to support new renewables development. Download Information Release: NREL Highlights Leading Utility Green Power Programs (PDF: 100 KB) Previous Top Ten Lists - December 2001, June 2001, November 2000, April 2000 Green Pricing Program Renewable Energy Sales (as of December 2002) Certificate Products Certificate Marketers Rank Utility Resources Sales (kwh/year) Sales (Avg. MW) 1 Green Power Policies Disclosure Policies Net Metering Policies Restructuring Status Restructuring News State News 1 Austin Energy Wind, landfill gas, solar 2 Sacramento Municipal Utility District Landfill gas, wind, solar 251,520, ,3, Xcel Energy Wind and solar 103,739, Los Angeles Department of Power and Water 5 Portland General Electric 5 Wind and landfill gas Wind and geothermal 66,666, ,989, PacifiCorp 5 Wind and geothermal 55,615, Tennessee Valley Authority Wind, biomass, landfill gas, solar 35,955, We Energies Landfill gas, wind, hydro 35,161, Puget Sound Energy 10 Madison Gas and Electric Wind and solar 20,33, Wind 15,593, Source: NREL Notes: March 3, 200

9 Case No. U Witness: Stanton, Thomas Exhibit No: [TSS-3]Corrected Page 2 of An "average megawatt" is a consistent measure of capacity equivalent that assumes the capacity operates continuously. 2 Includes an estimated 3 million kwh of generation from the 1.9 MW of PV installed through the PV Pioneers program. 3 Includes an estimated 175,000 kwh of generation from the 100 kw of PV installed through the Renewable Energy Trust program. Data for 2001 from program audit conducted by the Los Angeles City Controller, August Marketed in partnership with Green Mountain Energy Company. Total Number of Customer Participants (as of December 2002) Rank Utility Program Name(s) Participants 1 Los Angeles Department of Water and Power Green Power for a Green L.A. 72, Xcel Energy WindSource Renewable Energy Trust 3 PacifiCorp 3 Blue Sky Renewable Usage Salmon-Friendly 32, ,028 Portland General Electric Company 3 5 Sacramento Municipal Utility District Clean Wind Power Renewable Usage Salmon-Friendly Greenergy PV Pioneers 19,623 19,172 6 We Energies Energy for Tomorrow 11,01 7 Alliant Energy Second Nature 7,280 8 Austin Energy GreenChoice 6,725 9 Tennessee Valley Authority Green Power Switch 6,87 10 Wisconsin Public Service SolarWise for Schools NatureWise 5,6 5 Source: NREL Notes: 1 Includes 1,833 lifeline/low-income customers that have signed up for green power but do not pay a premium. 2 There were 9,20 participants in the Renewable Energy Trust program as of December About 20% of these customers also participate in the Windsource program. 3 Marketed in partnership with Green Mountain Energy Company. About 800 customers participate in the PV Pioneers program. 5 A total of 1,08 customers participate in the NatureWise program. There are 20 customers that participate in both of the utility's green power programs. March 3, 200

10 Customer Participation Rate (as of December 2002) Case No. U Witness: Stanton, Thomas Exhibit No: [TSS-3]Corrected Page 3 of Rank Utility Program Name(s) Participation Rate Start Date 1 Moorhead Public Service Capture the Wind 5.8% Orcas Power & Light Green Power 5.5% Los Angeles Department of Water and Power Green Power for a Green L.A. 5.2% Holy Cross Energy Wind Power Pioneers Local Renewable Energy Pool.9% Central Electric Cooperative 2 6 Madison Gas and Electric Green Power 3.7% 1999 Wind Power Program 3.6% Sacramento Municipal Utility District Greenergy PV Pioneers 3.6% Preston Public Utilities 3 9 Cass County Electric Cooperative Wind Power 3.% 2000 Infinity Wind Energy 3.1% Cedar Falls Utilities Wind Energy Electric Project 3.0% Eugene Water and Electric Board EWEB Wind Power 3.0% 1999 Source: NREL 1 Includes lifeline/low-income customers that have signed up for green power but do not pay a premium. 2 Supplied by the Pacific Northwest Generating Cooperative. 3 Supplied by Southern Minnesota Municipal Power Agency. Supplied by Minnkota Power Cooperative. Price Premium Charged for New, Customer-Driven Renewable Power 1 (as of December 2002) Rank Utility Resources Used Premium 1 Clallam County Public Utility District Landfill gas 0.70 /kwh 2 Roseville Electric Reinjected geothermal, solar 1.00 /kwh 2 Sacramento Municipal Utility District Pacific County Public Utility District Landfill gas, hydro, wind Wind, hydro 1.00 /kwh 1.05 /kwh 5 Austin Energy 2 Wind, solar, landfill gas 1.08 /kwh 6 Eugene Water and Electric Board Wind 1.30 /kwh March 3, 200

11 Case No. U Witness: Stanton, Thomas Exhibit No: [TSS-3]Corrected Page of 7 City of Bowling Green (Ohio) Small hydro, solar 1.35 /kwh 7 Dakota Electric Association Wind 1.35 /kwh 9 Clark Public Utilities Wind, solar 1.50 /kwh 9 Great River Energy 3 Wind 1.50 /kwh 9 Moorhead Public Service Wind 1.50 /kwh 9 Oregon Trail Electric Cooperative Source: NREL Notes: Wind 1.50 /kwh 1 Includes only programs that have installed or announced firm plans to install or purchase power from new renewable resources. 2 Price premium for customers who signed up for phase two of program. Customers are exempt from fuel charges. 3 Suggested retail price for member distribution cooperatives. Adjusted to reflect the cost of 100% new wind power. For More Information - Utility Green Pricing Programs: What Defines Success? (PDF Report: 1.1 MB) NREL/TP , August Questions? Contact the Green Power Webmaster This Site Most Recently Updated March 9, 200 DOE EERE NREL March 3, 200

12 P R O O F O F S E R V I C E STATE OF MICHIGAN ) ) Case No. U County of Ingham ) Erika Vallance, being duly sworn, deposes and says that on April 9, 200, A.D. she served a copy of the attached Corrected Exhibits, by mailing copies thereof by first class mail, postage prepaid, interdepartmental mail, or by electronic mail to the persons as shown on the attached service list. Subscribed and sworn to before me on this 8 th day of April, A.D., 200. Erika Vallance Notary Public Ingham County, Michigan My Commission expires August 16, 200

S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * *

S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) UPPER PENINSULA POWER COMPANY ) Case No. U- 666 for authority to increase its retail