Ohio Energy. Workshop N

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Ohio Energy Workshop N Duke Energy - Ohio: ESP

Efficiency & Peak Reduction Mandates Update/

1 Ohio Energy Workshop N Duke Energy - Ohio: ESP III Electric Rates & Tariffs, Shopping Opportunities, CBP and PJM Capacity Auctions Update, Demand Response, and Ohio Energy Efficiency & Peak Reduction Mandates Update/ Opportunities Tuesday, February 21, :45 p.m. to 3 p.m.

2 Biographical Information Wyatt Elbin, Energy Supply Specialist Marathon Petroleum Corporation, 539 S. Main St. Findlay, OH Wyatt works in the Energy Supply group at Marathon Petroleum. The group is responsibility for procuring all of Marathon s electric needs and tracking energy policy and legislation. Wyatt has been with Marathon for four years and previously worked for Marathon as a project engineer. Wyatt is a graduate of the University of Dayton with a B.S. in Civil Engineering and a M.S. in Renewable and Clean Energy. Joseph G. Bowser, Technical Specialist, McNees Wallace & Nurick LLC 21 East State Street 17 th Floor, Columbus, Ohio jbowser@mwncmh.com Joe Bowser is a Technical Specialist in the Columbus, Ohio office of McNees Wallace & Nurick LLC. In this role he focuses on helping clients address issues that affect the price and availability of utility services. As part of his responsibilities, he also provides clients with assistance in evaluating and acting upon opportunities to secure value for their demand response and other capabilities in the base residual auction ( BRA ) and incremental auctions conducted by PJM Interconnection LLC ( PJM ) as part of the Reliability Pricing Model ( RPM ). Prior to joining McNees Wallace & Nurick LLC, Joe worked with the Ohio Consumers Counsel as Director of Analytical Services. There he managed the analysis of financial, accounting, and ratemaking issues associated with utility regulatory filings, and assisted in policy development and strategy. Joe also spent ten years at Northeast Utilities, where he held positions in the Regulatory Planning and Accounting departments of the company. He provided litigation support in regulatory hearings and assisted in the preparation of the financial/technical documents filed with state and federal regulatory commissions. Joe began his career with the Federal Energy Regulatory Commission (FERC), where he lead and conducted audits of gas and electric utilities in the Eastern and Midwestern regions of the United States. Joe is a member of the American Institute of Certified Public Accountants, and received a Bachelor of Science degree in Accounting from Clarion State College. He also obtained a Master of Science degree in Finance from Rensselaer Polytechnic Institute. James E. Ziolkowski, P.E., Director, Rates and Regulatory Planning, Duke Energy 139 East Fourth Street, Room 1102-M, P.O. Box 960, Cincinnati, OH Fax: Jim.Ziolkowski@duke-energy.com Jim Ziolkowski has worked in the Rates area at Duke Energy for nineteen years. He participated in the unbundling and design of the Company s electric rates, develops and administers electric and gas base rates, prepares various rider filings and regulatory reports, and testifies before the Ohio and Kentucky Commissions on rate-related matters. His responsibilities include occasionally meeting with Duke Energy s large customers and Account Representatives to interpret and apply rates to various situations. Jim frequently gives rate-related presentations at industry conferences and seminars, and he conducts training for internal and external groups. In his twenty-seven years at Duke Energy / Cinergy, he also has worked as an Industrial Account Engineer and program manager for various Demand Side Management Programs. Before Duke Energy, Jim worked for Mobil Oil Corporation in New York and was an officer in the U.S. Navy. In the Navy, he specialized in nuclear propulsion. Jim received a B.S. in mechanical engineering from the U.S. Naval Academy and an MBA from Miami University. He is a registered Professional Engineer in the State of Ohio and was designated as a Chartered Industrial Gas Consultant by the Institute of Gas Technology.

3 Duke Energy-Ohio (DEO or Duke) ESP III Electric Rates & Tariffs, Shopping Opportunities, PJM Capacity Auction Update, Demand Response, and Ohio Energy Efficiency & Peak Reduction Mandates Update 21 ST Annual Ohio Energy Management Conference February 21, 2017 Joe Bowser Technical Specialist 1

4 Outline Electric Security Plan (ESP) III for the period June 1, 2015 through May 31, 2018 Customer Shopping Opportunities Generation Supply Auctions (CBP) Significant Regulatory Proceedings Update PJM Capacity Auctions and Demand Response Opportunities Energy Efficiency/Senate Bill 310 2

5 3 ESP III Case No EL-SSO Filing made May 29, 2014 ESP to run from June 1, 2015 thru May 31, 2018 Proposed two new distribution riders - Rider DSR storm cost recovery and Rider DCI for incremental distribution investment recovery Proposed Price Stabilization Rider (Rider PSR) non-bypassable rider that would operate as a charge or credit based on the difference between what Duke was charged for the costs of its interest in OVEC and the wholesale revenues it recovered from liquidating the power and capacity in PJM markets Retail Capacity Rider (Rider RC) would be modified to have no more demand charges charges would be per kwh charges with load factor steps (i.e. first 150 kwh per kw, next 150 kwh per kw, etc.) Load Factor Adjustment Rider (Rider LFA) would terminate Briefs were filed in the case in December 2014

6 ESP III continued PUCO Order issued April 2, 2015 PUCO found Rider PSR is permitted under Ohio law Duke allowed to establish a placeholder Rider PSR at a rate of zero, pending consideration of future proposals to the PUCO SSO generation to continue to be sourced through competitive generation auctions Rider LFA (Load factor adjustment rider) was ordered to be phased out over a three year period Duke is maintaining an interruptible rider that is available to shopping and non-shopping transmission voltage customers with load greater than 10 MW Distribution Capital Improvement Rider was approved assessed as a percentage of a customer s base distribution charges Distribution Storm Rider was approved, at an initial rate of zero 4

7 Duke Energy Ohio (Percent of Load Shopping) Sept. 30, 2013 Sept. 30, 2014 Sept. 30, 2015 Sept. 30, 2016 Residential 51.2% 50.2% 51.2% 50.9% Sales Commercial 84.4% 82.5% 82.4% 84.5% Sales Industrial 97.5% 95.2% 95.7% 97.2% Sales Total Sales 76.1% 75.1% 75.6% 80.8% 5

8 DEO s CBP Auction to Establish SSO Prices Thru the ESP II (Case No ) Total of 5 auctions were conducted First auction conducted in December 2011 Last auction conducted in November 2013 To procure energy, capacity, and market based transmission and transmission ancillary services Three delivery periods are covered: Blended Price January 2012 thru May 2013 $56.26/MWH June 2013 thru May 2014 $53.22 June 2014 thru May 2015 $

9 DEO s CBP Auction to Establish SSO Prices For the ESP III (Case No ) First auction for ESP III conducted in May 2015 Most recent auction conducted in November 2016 To procure energy, capacity, and market based transmission and transmission ancillary services Three delivery periods are covered: Blended Price % June 2015 thru May 2016 $58.51/MWH 100 June 2016 thru May 2017 $ June 2017 thru May 2018 $

10 Generation Supply Options The first steps to assessing competitive generation supply options are: Understanding your bills and usage, billing demand, kwh, kvar etc. Larger accounts should have 12 to 24 months of hourly usage (interval data). Smaller accounts should have 12 to 24 months of historical usage. 8

11 Contract Options Before soliciting competitive supply offers, customers should understand typical pricing structures that may be available and which are most suitable for their load profile and business risk tolerance. Options can include: Fixed price Block and Index Time differentiated rates (on-peak and off-peak) Hourly pricing 9

12 Shopping for your Electric Generation Supply? Price to Compare (PTC) your avoidable charges if you shop, typically expressed in cents/kwh PTC includes: Retail Energy Rider (Rider RE) Alternative Energy Recovery Rider (Rider AER-R) Retail Capacity Rider (Rider RC) Supplier Cost Reconciliation Rider, per kwh (Rider SCR) 10

13 Potential Suppliers The PUCO is required to certify a competitive retail electric supplier ( CRES ) before it is permitted to serve retail customers. Duke Energy-Ohio maintains a CRES list registered to serve within the DEO service area as well as an identification of whether the CRES supplier is actively soliciting customers. energy.com/home/products/ohio customerchoice/electric/certified electric suppliers 11

14 PJM Demand Response Programs PJM permits demand resources to be counted like a capacity resource Customers may commit their interruptible load into PJM s emergency program In PJM s emergency program, customers receive payments for committing to reduce load if called upon by PJM to do so (because PJM is capacity short) Through the PJM delivery year, the current demand response products will continue these products are: 1) Limited DR Program, customer commits to being interrupted up to 60 hours max. per year, during as many as 10 separate events, with 2 hours advance notice 12

15 New Capacity DR Programs Implemented by PJM 2) Extended Summer Demand Resource - available June thru October, and the following May. Provides for unlimited interruptions of up to 10 hours each, between the hours of 10:00 a.m. and 10:00 p.m. 3) Annual Demand Resource - available any day of the year for unlimited interruptions of up to 10 hours each; between the hours of 10:00 a.m. and 10:00 p.m. for June thru October, and the following May; and between the hours of 6:00 a.m. and 9:00 p.m. for November thru April For the and delivery year there is also a capacity performance (CP) demand response product available 13

16 PJM Demand Response Programs Continued... Beginning with the delivery year, demand response will be either CP or BC Base Residual Auction clearing prices (August 2015): CP $164.77/MW-day BC $149.98/MW-day The current plan is that beginning with the delivery year, all demand response must be CP, pending approval of PJM proposal to introduce a new summer DR product PJM also has Economic Load Reduction Programs (ELRP), that provide for compensation based on load reductions scheduled a day-ahead, or when dispatched by PJM Demand resources may participate in PJM DR programs by utilizing a Curtailment Service Provider (CSP) 14

17 PJM Capacity/Demand Response Continued... May 2016 The Base Residual Auction: Clearing Prices: ( ) Load $96.77/MW-day CP $100.00/MW-day BC $80.00/MW-day Next Base Residual Auction ( ) will be held in May 2017) No more BC (Base Capacity) in auction as things presently stand 15

18 BRA Auction PJM has proposed a new summer period DR product Product availability June thru Oct. and May DR would receive 6 months of capacity revenue Product similar to the Extended Summer DR product except the penalty structure would be like CP product and the product only clears if there are other winter resources/capability that are offered. 16

19 Peak Shaving Customers may be able to reduce their capacity costs by managing their Peak Load Contribution (PLC) PLC is determined between June 1 and Sept. 30 of the prior delivery year, based on customer loads during the PJM 5 CP hours PJM s MW load on the 5 CP hours in the summer of 2016: 8/11/2016 HE ,945 7/25/2016 HE ,931 8/12/2016 HE ,889 7/27/2016 HE ,543 8/10/2016 HE ,357 17

20 Energy Efficiency/Peak Demand Response (EE/PDR) and Renewable Resources EE/PDR SB 221: scope of programs and opt out SB 310: expansion of opt out opportunities Energy Mandates Study Committee recommendations Renewable energy opportunities McNees Wallace & Nurick LLC

21 Rider EE-PDRR (Energy Efficiency and Peak Demand Response Recovery Rider) Portfolio requirements for EE/PDR under SB 221 DEO recovers costs it incurs to comply with Ohio s energy efficiency and peak demand portfolio requirements through Rider EE-PDRR. Current Rider EE-PDRR rate for Rates DS, DP, and TS is $ /kWh as of December

22 Senate Bill 310 Changes to Renewable Energy, Peak Demand, and Energy Efficiency Mandates Senate Bill 310 was signed into law on June 13, 2014 and became effective on September 12, 2014 Legislation revised the energy mandates for energy efficiency/peak demand reduction and renewable energy that were established in SB 221 SB 310 paused the compliance requirements for 2015 and 2016, at 2014 levels The impacts of the mandates were to be studied by the Energy Mandates Study Committee created in SB 310, which was required to submit a report to the Ohio General Assembly by September 30, 2015 Legislation was prompted by changes in the energy and economic landscape 20

23 Senate Bill 310 Continued... If the Ohio General Assembly does nothing further to modify Ohio s electricity mandates, the escalation in compliance requirements will resume toward existing targets with full implementation required by 2027 An EDU had two options regarding its current energy efficiency mandate compliance plans Continue to implement plan with no amendments through the end of 2016 Amend plan by submitting an amendment to the PUCO no later than 30 days after the effective date of SB 310 Streamlined opt-out of EE/PDR benefits and costs available to eligible customers Eligible customers are defined as those that receive service above primary voltage or a commercial or industrial customer that receives more than 45 million KWh at a single location and have made a written request to self-assess the KWh tax The streamlined opt-out is available January 1,

24 Energy Mandates Study Committee Report Report issued on Sept. 30, recommendations: 1) Continue the current freeze on the escalation of the mandates indefinitely 2) Provide for an expedited review of EDU portfolio plans and expand the industrial streamlined opt-out to all mercantile customers 3) Expand the counting of all energy efficiency (EE) projects back to 2008 to reduce costs 4) Enact legislation that would allow EDUs to offer voluntary EE programs rather than mandated EE programs 5) Declare that the Ohio General Assembly retains statutory authority with respect to Energy Policy and Dispatch Protocols 22

25 Senate Bill 310 and Duke s EE/PDR Plan Duke EE/PDR plan Effective until 12/31/16, but cost recovery and incentive mechanism ends 12/31/15 Duke filed on 9/9/14 for approval to continue its current cost recovery and incentive mechanism for energy efficiency programs as structured during 2012 through 2015, through /16/16 Duke files for permission to delay filing its EE program portfolio until 10/15/16. PUCO allows waiver until 6/15/16. 23

26 Senate Bill 310 and Duke s EE/PDR Plan Continued Duke EE/PDR plan continued Duke files on 6/15/16 for programs for the period A stipulation in the case was filed with PUCO on 12/22/16, recommending approval of a 3-year EE/PDR portfolio plan. Stipulation is supported by several parties. 12/27/16 PUCO sets the stipulation for hearing on February 21,

27 Takeaways Opportunities exist to reduce your electric bills by obtaining service from competitive suppliers of generation service There are additional opportunities to reduce your bill by implementing energy efficiency measures Current ability to participate in PJM demand response programs for customers with curtailable load the programs may, and usually do change from year to year Peak shaving is another option for reducing electric bills Reducing your electric bill requires customers to be proactive To learn more, contact: Joe Bowser 25

28 Questions? Helpful Web Sites Duke Energy PUCO PJM IEU-Ohio FERC

29 Duke Energy Ohio Rates Update - February 2017 Jim Ziolkowski, Director Rates & Regulatory Planning

30 Agenda Duke Energy Ohio Electric Security Plan Overview of ESP and Auction Schedule Provisions Relating to Distribution Service Rider Tables Price To Compare Duke Energy Ohio Distribution Base Rates Duke Energy Ohio Gas Rates Questions 28

31 DUKE ENERGY OHIO ELECTRIC SECURITY PLAN 29

32 Overview On April 2, 2015, the PUCO approved Duke Energy Ohio s Electric Security Plan for a term of three years that: Continued the auction process for procuring supply for non-shopping load; Addressed rate design issues for Riders RC and RE; and Included provisions for improving reliability through a more aggressive capital expenditure program. The Commission has yet to issue its Order on Rehearing to address appeals made by the Company and a number of intervenors. Current ESP is effective from June 1, 2015, through May 31, The Commission s order requires Duke Energy Ohio to file its next ESP by June 1, 2017, which will set the regulatory model for the period beginning after May 31,

33 Auction Schedule June 2015 through May 2018 Duke Energy Ohio, Inc. Competitive Bid Process Schedule Auction Product June 2015 thru May Month 34 Auction June 2015 thru May Month June 2015 thru May Month 32 Auction June 2016 thru May Month Auction June 2016 thru May Month Auction June 2017 thru May Month Auction June 2017 thru May Month Total # Tranches * As of the current date, only one auction remains to procure 17% of the capacity and energy requirements for the period June 1, 2017, through May 31,

34 Distribution Service Distribution Capital Investment Rider (Rider DCI) Rider DCI provides a recovery mechanism for the significant investments Duke Energy Ohio is making to modernize its electric distribution grid. Recovers incremental return, property taxes, and depreciation over amounts currently in rates. Modeled after similar riders approved for the FirstEnergy operating companies and for AEP Ohio. DP&L has a pending request for a similar tracker. Quarterly update filings and subject to annual audit by PUCO Staff. Current rate is 9.183% of the base distribution charges (i.e., customer charge plus base distribution kwh or kw charge). Distribution Storm Recovery Rider (Rider DSR) Tracks storm costs above/below baseline amount from rate case. Cost recovery begins if accumulated above baseline exceeds $4.4 million; otherwise, factor above/below baseline into next rate case. 32

35 Other Provisions Load Factor Adjustment Rider LFA continues, but it was reduced by 33 percent in the first year, 33 percent in the second year, and 34 percent in the third year. The current credit is $ per kwh (periodically trued-up). June 2015 May 2016 June 2016 May 2017 June 2017 May 2018 Tariff Sheet LFA Charge LFA Charge LFA Charge (per kw/kva) (per kw/kva) (per kw/kva) Rate DS, Service at Secondary Distribution Voltage All kw $5.36 $2.72 $0.00 Rate DP, Service at Primary Distribution Voltage All kw $5.36 $2.72 $0.00 Rate TS, Service at Transmission Voltage All kva $5.36 $2.72 $

Electric Security Plan Rate Structure RC and RE Retail Capacity and Energy Derived from auction SCR Supplier Cost Reconciliation AERR (RECs) Alternative Energy Recovery Rider RTO Various RTO costs

36 Electric Security Plan Rate Structure RC and RE Retail Capacity and Energy Derived from auction SCR Supplier Cost Reconciliation AERR (RECs) Alternative Energy Recovery Rider RTO Various RTO costs BTR Base transmission incl. NITS UE-GEN Generation Uncollectibles Legend Fully Bypassable Non-Bypassable LFA Load Factor Adjustment DCI Distribution Capital Investment DSR Distribution Storm Rider Distribution rates and riders 34

37 New Riders ESP III Table 1 New Riders Rider Name Tariff Note Distribution Capital Improvement Rider Rider DCI Return, depreciation, property taxes on incremental distribution rate base Distribution Storm Rider Rider DSR Tracks major storm costs above or below base amount in last distribution rate case. 35

38 Riders Continuing With Modifications ESP III Table 3 Riders Continuing with Modifications Rider Name Tariff Note Retail Capacity Rider Rider RC Eliminate demand charges so that all SSO rates are energy-based while still recognizing differences in load factor. Retail Energy Rider Rider RE Migrate toward uniform rates for all residential customers. Net Metering Rider Rider NM Added text that clarifies billing determinants. Load Factor Adjustment Rider Rider LFA Phase-out beginning June 1, 2015, going to $0 beginning June 1,

39 Riders Continuing Without Modifications ESP III Table 4 Riders Continuing with No Modifications Rider Name Tariff Note Supplier Cost Reconciliation Rider Rider SCR Trues up SSO revenue with invoiced cost from suppliers and recovers auction-related costs. Base Transmission Rider Rider BTR Recovers non-market based transmission costs Alternative Energy Recovery Rider Rider AER-R Recovers cost of REC purchases to comply with alternative energy standards Distribution Decoupling Rider Rider DDR Trues up weather-normalized base distribution revenue for customers not billed based on demand Uncollectible Expense Riders Rider UE-GEN, UE-D Recovers bad debt charges related to generation and distribution services SmartGrid Rider Rider DR-IM Recovers incremental costs related to SmartGrid deployment Economic Competitiveness Fund Rider Rider ECF Recovers cost of large customer interruptible demand program. 37

40 Price To Compare 38

41 How Do I Calculate My Price to Compare? Compare: DE OH s Rider RC Charge + Rider RE Charge + Rider SCR Charge + Rider AERR Charge vs. The CRES Provider s price for electricity Note: For Large C&I Customers, Price To Compare varies based on load factor 39

42 Annual Price To Compare (Example) Load Price To kw kwh Factor AERR, RTO, SCR RC, RE Total Compare ( ) 1, , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , , , % , , ,691,227 6, , ,

43 DUKE ENERGY OHIO DISTRIBUTION BASE RATES 41

44 Duke Energy Ohio Distribution Base Rates Distribution Base Rate Case Duke Energy Ohio filed a PFN (Pre-Filing Notice) on January 31, Application to be filed on March 2, Approximately $15 million increase (<1% of total customers rates). Rider DR-IM will terminate when new base rates are implemented. Rider DCI to be reset using new base amount set in this case, once approved. 42

45 DUKE ENERGY OHIO GAS RATES 43

46 Duke Energy Ohio Gas Rates Gas Base Rates Last base rate case was filed in 2012 with rates effective in 2013 Major Riders Rider AMRP (Accelerated Main Replacement Program) Program began in 2001 and completed on budget and on time in 2015 (only Ohio LDC to have completed this project). Replaced more than 1,100 miles of cast iron and bare steel mains. Replaced about 120,000 main-to-curb service lines. Rider MGP (Manufactured Gas Plant) Recovers costs of two manufactured gas plants that operated from the mid-1800s until the mid-1900s. Supreme Court appeal by intervenors is pending. GCR (Gas Cost Recovery) bypassable for shoppers Unlike other major Ohio LDCs, DEO does not auction off its default load. 44

47 Duke Energy Ohio Gas Cost Recovery (Jan 2001 Jan 2017) 45 Jan-01 Jun-01 Nov-01 Apr-02 Sep-02 Feb-03 Jul-03 Dec-03 May-04 Oct-04 Mar-05 Aug-05 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 DUKE ENERGY OHIO GAS COST RECOVERY (GCR) $ / MCF

48 Duke Energy Ohio Tariffs Duke Energy s tariffs can be found online at: 46

49 47

Workshop I. Duke Energy Ohio: Significant Development Impacting Electric Rates. Tuesday, February 19, :45 p.m. to 3 p.m.

Workshop I. Duke Energy Ohio: Significant Development Impacting Electric Rates. Tuesday, February 19, :45 p.m. to 3 p.m. Workshop I Duke Energy Ohio: Significant Development Impacting Electric Rates Tuesday, February 19, 2019 1:45 p.m. to 3 p.m. Biographical Information Wyatt Elbin, Energy Supply Specialist Marathon Petroleum