Rate Design in the Future

Transcription

1 JUNE 7, 2018 Rate Design in the Future Electric Utility Ratemaking Education and Engagement Workshop Regulatory Assistance Project

2 What does this rate design say? $1.50 $2.25 $2.75 Regulatory Assistance Project (RAP) 2

3 Outline 75 minute session Smart Rate Design for a Smart Future Grid Modernization and Its Implications for Ratemaking Storage and Electric Vehicles and Their Implications for Ratemaking Regulatory Assistance Project (RAP) 3

4 1 Smart Rate Design for a Smart Future

5 Rate design should make the choices the customer makes to minimize their own bill consistent with the choices they would make to minimize system costs. Regulatory Assistance Project (RAP) 5

6 Regulatory Assistance Project (RAP) 6

7 Principle #1 A customer should be allowed to connect to the grid for no more than the cost of connecting to the grid. Regulatory Assistance Project (RAP) 7

8 Principle #2 Customers should pay for the grid in proportion to how much they use the grid, and when they use the grid. Regulatory Assistance Project (RAP) 8

9 Principle #2 Customers should pay for the grid in proportion to how much they use the grid, and when they use the grid. Regulatory Assistance Project (RAP) 9

10 Principle #3 Customers delivering power to the grid should receive full and fair value no more and no less. Regulatory Assistance Project (RAP) 10

11 A Simple Cost-Based Residential Rate Design Cost to Connect to the Grid Billing $/mo $ 4.00 Line Transformer $/kva/mo $ 1.00 Bi-Directional Grid and Power Supply Off-Peak $/kwh $ 0.07 Mid-Peak $/kwh $ 0.09 On-Peak $/kwh $ 0.14 Critical Peak $/kwh $ 0.74 Regulatory Assistance Project (RAP) 11

12 How Do Other Industries Recover Fixed Costs? Regulatory Assistance Project (RAP) 12

13 We Pay For Other Grids In Volumetric Prices Regulatory Assistance Project (RAP) 13

14 How Did High Fixed Charges Work Out for Landline Phone Companies? ILEC Access Lines (FCC Form 477) Regulatory Assistance Project (RAP) 14

15 Residential Demand Charges 15

16 Residential Demand Charges Monthly fee based on the single highest rate of usage (1 hour or even 15 minutes) in a month. Common for larger commercial and industrial consumers. Seldom used for residential or small commercial. Being sought as a way to get distribution cost recovery from solar customers under netmetering. Regulatory Assistance Project (RAP) 16

17 Example Residential NCP Demand Charge Rate: Georgia Power Summer Winter Customer Charge $ $ Demand Charge: $ 6.53 $ 6.53 Energy Charge: On-Peak: $ $ Off-Peak $ $ Regulatory Assistance Project (RAP) 17

18 The Basic Issue: Very Few Costs Are Related To Customer-Specific Demand Most of the distribution system is shared, and sized to the group coincident demand. Only the connection to the system is sized based on customer noncoincident demand. Regulatory Assistance Project (RAP) 18

19 Lower Load-Factor Customers Can Share Capacity Morning loads Evening loads 24/7 loads Both CP and NCP rates unfair to shared demand customers Regulatory Assistance Project (RAP) 19

20 High School Stadium Lighting: The Caricature of the Problem CP: None NCP: 1% Load Factor Regulatory Assistance Project (RAP) 20

21 Demand Charges Shift Costs to Occasional Users With $10/kW Demand Charge: Use 5 kw for 1 hour in month: $50 Use 5 kw for 720 hours in month: $50 Regulatory Assistance Project (RAP) 21

22 Residential Diversity Issues Early and late risers Early and late returners Customer peaks system peaks Apartments Few people / meter Many customers / transformer Electric water heaters common Utility sees only the combined load Regulatory Assistance Project (RAP) 22

23 Individual Load Shapes Vary Customer 3: 38% Load Factor Cus t om er 3 Regulatory Assistance Project (RAP) 23

24 The Utility Sees the Combined Load of Multiple Customers With Different Shapes Regulatory Assistance Project (RAP) 24

25 Example TOU Rate: City of Tallahassee, Florida Fixed Charge $/Month $ 7.59 Off-Peak $/kwh $ 0.06 On-Peak $/kwh $ Regulatory Assistance Project (RAP) 25

26 Sacramento, California TOU Rate Regulatory Assistance Project (RAP) 26

27 Apartments: The Achilles Heel of Bad Cost Allocation and Rate Design Regulatory Assistance Project (RAP) 27

28 What s Different? Small users Close together Utility serves only the combined load. Individual bills after PURPA Frequent turnover Regulatory Assistance Project (RAP) 28

29 Demand Charges Particularly Unfair to Apartments Little diversity behind the meter. Lots of diversity at the point of interconnection Utility only serves the combined load Indiv idual Dema nd Tota l Grouped Dema nd Tota l Regulatory Assistance Project (RAP) 29

30 Minimum System Method Forces Apartments to Subsidize Single-Family Rural ranchettes Suburban single Apartments Regulatory Assistance Project (RAP) 30

31 Solutions for Multi-Family Separate rate class w/ lower rates (Illinois; Nevada) Lower fixed charges (Burbank, Manitoba) Inclining block rates (California) Urban / Rural Rates Master metering / submetering (RV Parks; Marinas) Regulatory Assistance Project (RAP) 31

32 Nevada Energy Multi-Family Tariff Single-Family Rate RS Fixed Charge $ All kwh $ Multi-Family Rate RM Fixed Charge $ 8.75 All kwh $ Regulatory Assistance Project (RAP) 32

33 Particularly an Issue with Solar Condos ideal for community solar. Single point of interconnection. Separate meters Power seldom leaves the premises. Regulatory Assistance Project (RAP) 33

34 Non-Residential (NR) Rate Design 34

35 Examples of Large NR Customers Regulatory Assistance Project (RAP) 35

36 Problems & Solutions Problem #1: Most non-residential rates do not align customer rates with system costs Problem #2: Technological change and the emergence of DERs make improvement necessary Solution #1: Non-Coincident Peak Demand Charges should be lower Solution #2: Time-of-Use Rate Design reflects system costs better than coincident peak demand charges Regulatory Assistance Project (RAP) 36

37 A Typical Rate for Large NR Customers Customer Charge: Demand Charge: Energy Charge: $100/month $10/kW $0.10/kWh Regulatory Assistance Project (RAP) 37

38 What s The Problem? Customer Charge: $100/month Demand Charge: $10/kW Not Linked To System Peak Energy Charge: $0.10/kWh Not Time-Differentiated Regulatory Assistance Project (RAP) 38

39 Load Diversity Between School and Church Hours TOU Period Church School Combined Weekday 4-8 PM On-Peak Weekday 9-4 Mid-Peak Nights Off-Peak Weekend Day Off-Peak Church and School Demands Are Low During System Peak Regulatory Assistance Project (RAP) 39

40 NCP Demand Charges Fail to Reward Load Diversity Limit NCP Peak demand charges to site infrastructure. All shared generation and transmission capacity costs should be reflected in system-wide timevarying rates so that diversity benefits are equitably rewarded. Regulatory Assistance Project (RAP) 40

41 Three Actual Large Commercial Customers None of the customers peak at the time of the system peak Regulatory Assistance Project (RAP) 41

42 Rate Designs That Address Peak Demand Well-designed Time of Use Prices (TOU) Critical Peak Price (CPP) Peak Time Rebates Transparent Real Time Prices (RTP) Weak: Coincident Peak Demand Charges Regulatory Assistance Project (RAP) 42

43 Antiquated Example Rate #1 (a real utility in the U.S.) Customer Charge $/Month $ Demand Charge $/kw $ Energy Charge $/kwh $ Demand charge is based on NCP demand. Energy Charge is not time-differentiated Regulatory Assistance Project (RAP) 43

44 Better: Example Rate #2 Georgia Power TOU-GS-10 Customer Charge $/Month $ Demand Charge On-Peak $/kw $ Maximum Peak $/kw $ 5.23 Energy Charge On-Peak $/kwh $ Shoulder Peak $/kwh $ Off-Peak $/kwh $ Higher coincidentpeak demand charge. 5 hour window Steep TOU energy rate. Regulatory Assistance Project (RAP) 44

45 Sacramento Rate Design: NR Best of Class Summer weekdays 2-7 PM Regulatory Assistance Project (RAP) 45

46 Sacramento Rate Design: NR Best of Class We made two changes: 1) Convert the super-peak demand charge to a critical peak energy charge, applied to specific hours of system stress; 2) Add a super-off-peak rate, to encourage consumption when energy is unusually abundant and market prices are near zero. Regulatory Assistance Project (RAP) 46

47 2 Grid Modernization and Implications for Ratemaking

48 What Are The Costs of Smart Grid? Capital Costs: Smart meters Data collection network Distribution system controls Meter data management system (hardware and software) Regulatory Assistance Project (RAP) 48

49 What Are The Costs of Smart Grid? Operating Costs: Software development, implementation and training Hardware maintenance (meters, wifi) Customer service (education) Regulatory Assistance Project (RAP) 49

50 What Are The Benefits of Smart Grid? Reduced operations & maintenance (O&M) expense for meter reading Remote shut-off and turn-on Reliability Improvement Distribution Automation Peak load reduction through Time of Use and Critical Peak Pricing Loss reduction: Voltage Control and Power Factor Correction Loss Reduction: Phase balancing on the fly Regulatory Assistance Project (RAP) 50

51 How Would Costs of This Type Be Recovered Normally? Functionalized: Production (Generation), Transmission, Distribution, Common Classified: Demand, Energy, Customer Allocated: Residential, Commercial, Industrial ELECTRIC COST OF SERVICE STUDY FLOWCHART Production Energy / Commodity Related Direct Assignment Generation Level mwh's Customer Level mwh's Transmission Pro Forma Results of Operations Functionalization Classification Demand / Capacity Related Allocation Direct Assignment Coincident Peak Non-Coincident Peak Distribution and Customer Relations Common Customer Related Direct Assignment Number of Customers Weighted Number of Customers Residential Small General Large General Extra Large General Pumping Street & Area Lights Pro Forma Results of Operations by Customer Group Regulatory Assistance Project (RAP) 51

52 Should Functionalization and Classification Track Benefits? Smart Meters do more than conventional meters. The system works together to provide system benefits. Capital (smart meters) is substituting for operating (meter readers, station meters, load research meters, and more) Investment in computers and software are up sharply. Distribution system controls reduce peak capacity requirements and reduce energy losses. Regulatory Assistance Project (RAP) 52

53 Treating Smart Grid Grants Smart grid grants have been used for both capital investment in hardware, investment in software, and staffing costs during the transition. Net the grants out of the amount of plant booked to plant in service Net the amount spent from grants on training and startup from O&M expense Regulatory Assistance Project (RAP) 53

54 Benefits: O&M Expense Cost savings in meter operations and transportation expense are significant. These are offset by higher capital costs and data management costs Source: USDOE, 2012 Regulatory Assistance Project (RAP) 54

55 Benefits: Peak Demand Source: USDOE, 2012 Regulatory Assistance Project (RAP) 55

56 Benefits: Reliability Source: USDOE, 2012 Regulatory Assistance Project (RAP) 56

57 Benefits: Voltage Control Multiple elements Lower peak demand Lower losses Lower O&M costs Less expensive distribution upgrades Regulatory Assistance Project (RAP) 57

58 SmartSaver: Transformer Sizing for Reliability and Line Loss Reduction 50,000 Customer Municipal Utility Integrated geographic information system (GIS) data with meter data management system (MDMS) data Regulatory Assistance Project (RAP) 58

59 Heat Map for Each Transformer Regulatory Assistance Project (RAP) 59

60 51 Seriously Undersized Transformers Regulatory Assistance Project (RAP) 60

61 ~500 Oversized Transformers Regulatory Assistance Project (RAP) 61

62 Line Losses Increase Sharply When Capacity Limits are Reached Regulatory Assistance Project (RAP) 62

63 Value of SmartSaver Annual Power Supply Cost: $100 million Peak Load Reduction: ~2% Total kwh Reduction: ~1% Value: $1 million/year in loss reduction = $20 million over 20 years. Value: 10,000 tons/year carbon avoidance = $3 million over 20 years. Value: 51 emergency transformer replacements at $50,000 = $2.5 million Value: ~$25 million Smart Grid Cost: $50 million (with 50% paid by federal government grant). Regulatory Assistance Project (RAP) 63

64 Other Smart Grid Benefits Phase balancing on the fly Reduced meter reading costs Fewer outages Ability to offer time-varying rates Faster reconnection after disconnection Reduced billing cost No Rate Increase for Smart Grid Wi-Fi mesh for reading meters opened to free citywide Wi-Fi. Regulatory Assistance Project (RAP) 64

65 So, What s the Problem? Traditional metering, meter reading, and billing costs are treated as 100% customer-related in cost of service studies. Traditional distribution system components are often treated as 100% demand-related in cost of service studies. Regulatory Assistance Project (RAP) 65

66 Should Cost Allocation and Rate Design Methods Adapt? Now we have new categories of equipment performing multiple functions to manage peak demand, reduce line losses, improve reliability, and provide metering functions. System may be cost-effective on an all-class basis, but NOT cost-effective for small users. Regulatory Assistance Project (RAP) 66

67 Possible Methods For Classification and Allocation Smart Grid Element Pre-Smart Grid Element "Traditional" FERC Account Traditional Classification Smart Grid Classification Smart Meters Meters 370 Customer Distribution Control Devices Station Equipment 362 Demand Data Collection System Meter Readers 902 Customer Meter Data Management Syste General Plant Subtotal PTDC Smart Grid Managers Energy Storage Devices (Batteries; Ice Bear) Customer Accounts Supervision 901 Customer Installations on Customer Premises 371 Customer Demand / Energy / Customer Demand / Energy Demand / Energy / Customer Demand / Energy / Customer Demand / Energy Demand / Energy Regulatory Assistance Project (RAP) 67

68 Including Costs In Rate Design If benefits are > costs, then all rate elements can be moderated by smart grid investments. Apportion savings between customer charges, demand charges, and energy charges. If the end-result is an increase in customer charges, and decreases in other rate elements, then not all customers will benefit from smart grid investments. There are probably some customers (very small users) for whom smart meter investments are uneconomic, but there is a benefit to system uniformity. Regulatory Assistance Project (RAP) 68

69 Summary of Smart Grid Cost Allocation Traditional allocation, or cost follows benefits? If the system is cost-effective, then all customers should derive some benefit. Classification, particularly of meters, meter reading hardware, and computer systems should recognize the peak demand and line loss benefits. Regulatory Assistance Project (RAP) 69

70 3 Storage and Electric Vehicles and Their Implications for Ratemaking

71 Technologies Affect What is Possible and Necessary Smart Grid Makes Better Rate Design Possible Distributed Energy Resources (DERs) Make Better Rate Designs Necessary: Wind and Solar Storage Technologies EVs Regulatory Assistance Project (RAP) 71

72 Storage 72

73 There Are Many Kinds of Storage Capital cost per unit energy - $/kwh output H.P. capacitors H 2O heaters H.P. flywheels EV Lead-acid L.D. capacitors CAES Chilled Water / Ice Thermal Ni-Cd PSH Na-S Metal-air Li-ion Flow Zinc-air L.D. flywheels Distributed / demand-side Battery Grid-scale Flywheel / capacitor Capital cost per unit power - $/kw Regulatory Assistance Project (RAP) 73

74 Storage is NOT Just Batteries Regulatory Assistance Project (RAP) 74

75 Ice Storage For Residential Air Conditioning Ice-Energy Ice Cub 2.5 ton capacity 18 SEER compressor 3 hours storage, to get through high-cost hours Regulatory Assistance Project (RAP) 75

76 District Cooling Is a Huge Storage Opportunity Regulatory Assistance Project (RAP) 76

77 Water Heaters Are Probably the Cheapest Source of Storage High concentration in multi-family Unlikely to run out of hot water Can provide ancillary services to grid Water heater controls widely used in France, Australia, and in rural Minnesota Regulatory Assistance Project (RAP) 77

78 How Many Electric Water Heaters in the Southeast? Region Millions of Electric Water Heaters Total Residences % Electric VA % GA % FL % NC SC % TN % AL, KY MS % Total % Regulatory Assistance Project (RAP) 78

79 Multi-Family Daily Use is Within Capacity of a 52 Gallon Tank Daily Usage: 5.33 kwh 52 Gallon Tank Capacity: Max & 75 inlet water temp. Daily Usage Unused Storage Regulatory Assistance Project (RAP) 79

80 Reduce Charging: 6-10 AM; 4-10 PM Increase Charging at Other Hours Regulatory Assistance Project (RAP) 80

81 Charging Occurs Mid-Day and Mid-Night Regulatory Assistance Project (RAP) 81

82 We Only Use Half the Available Storage Regulatory Assistance Project (RAP) 82

83 Grid-Integrated Water Heating also Provides Ancillary Services Regulatory Assistance Project (RAP) 83

84 Ancillary Service Value May Exceed Water Heating Energy Cost Regulatory Assistance Project (RAP) 84

85 Green Mountain Power Tesla Battery Tariff Customer Ownership Option: Direct Purchase Shared Access Option: $1.25/day Utility: Diurnal Storage, Ancillary Services Customer: Emergency backup power Regulatory Assistance Project (RAP) 85

86 Electric Vehicles (EVs)

87 Electric Vehicles Regulatory Assistance Project (RAP) 87

88 How Much Power Does an EV Use? Nissan Leaf: 4 miles/kwh Tesla S: 3 miles/kwh Energy: 1,000 miles/month = kwh/month Demand: Level 2 Charging: 3.3 kw 6.6 kw Two-thirds of a water heater Regulatory Assistance Project (RAP) 88

89 Upgrade a Water Heater: Fuel Your EV With the Savings Regulatory Assistance Project (RAP) 89

90 Price Can Influence When EVs Are Charged Copied from: M.J. Bradley, 2017 Regulatory Assistance Project (RAP) 90 90

91 Potential Grid Savings are Huge Regulatory Assistance Project (RAP) 91

92 Workplace Charging and the Duck Curve Home Charging w/o TOU Workplace Charging Regulatory Assistance Project (RAP) 92

93 Comparison of Three Rates: Consequences for Commercial EV Adoption Antiquated Rate Coincident Peak Demand Charge Smart Rate Demand Charge Demand Measurement Energy Energy Measurement $10/kW NCP $0.12/kWh No TOU $10/kW 4 PM - 8 PM $0.12/kWh No TOU $2/kW Site Infrastructure $.05 - $.75/kWh TOU Regulatory Assistance Project (RAP) 93

94 Smart Rate => Workplace EV Charging Antiquated Rate Coincident Peak Demand Charge Smart Rate Demand Charge Demand Measurement Energy Energy Measurement $10/kW NCP $0.12/kWh No TOU $10/kW 4 PM - 8 PM $0.12/kWh No TOU $2/kW Site Infrastructure $.05 - $.75/kWh TOU Electric Vehicle Charging Cost Per Month 6.6 kw 250 kwh NCP Demand $ CP Demand Energy $ Total $ Average $/kwh $ $ $ $ $ $ $ $ $ Regulatory Assistance Project (RAP) 94

95 TOU & Critical Peak Pricing Work Approximate Peak Savings from Demand Charge Rate Regulatory Assistance Project (RAP) 95

96 Technology Can Help Regulatory Assistance Project (RAP) 96

97 Technology Can Help Regulatory Assistance Project (RAP) 97

98 Issues with TOU and Critical Peak Rates Customer understanding Customer impact Cost of advanced metering and billing Shadow Billing First year guarantee Start with large customers Regulatory Assistance Project (RAP) 98

99 Cost Shifting Urban vs. Suburban vs. Rural Multi-family vs. Single Family Overhead vs. Underground And now Non-solar vs. Solar Regulatory Assistance Project (RAP) 99

100 Smart Rate Design for DERs: Residential TOU Rates: Arizona Public Service Time Advantage Plan Winter (November-April) $/kwh on-peak kwh $ off-peak kwh $ Summer (May-October) on-peak kwh $ off-peak kwh $ Regulatory Assistance Project (RAP) 100

101 Smart Rate Design for DERs: Small Commercial TOU rates Burbank Water and Power Fixed Charge $ Energy Charges Nights and Weekends $ Mid-Peak $ Summer 4-7 PM $ Regulatory Assistance Project (RAP) 101

102 Smart Rate Design for DERs: Large General Service Sacramento Municipal Utility District Fixed Charge $/month $ Demand Charges Summer Winter Distribution Capacity $/kw $ 2.82 $ PM - 8 PM Surcharge $/kw $ 6.91 $ - Energy Charges Super-Peak 2-8 PM $/kwh $ n/a On-Peak $/kwh $ $ Off-Peak $/kwh $ $ Regulatory Assistance Project (RAP) 102

103 About RAP The Regulatory Assistance Project (RAP) is an independent, non-partisan, non-governmental organization dedicated to accelerating the transition to a clean, reliable, and efficient energy future. Learn more about our work at raponline.org Contact us at: jlazar@raponline.org jshenot@raponline.org jshipley@raponline.org

104 Key Terms for NR Rate Design: Non-Coincident Peak (NCP) Demand: A customer s highest usage during the month. Coincident Peak (CP) Demand: A customer s usage at the time of the system maximum usage. Regulatory Assistance Project (RAP) 10 4

105 Storage Many kinds of storage Ice-storage air-conditioning Controlled water heating Batteries, flywheels, capacitors Regulatory Assistance Project (RAP) 105

106 Green Mountain Power: A Little Different Regulatory Assistance Project (RAP) 10 6