Transmission Access Charges (TAC) Katie Ramsey Staff Attorney Clean Coalition 202-709-8063 mobile katie@clean-coalition.org Making Clean Local Energy Accessible Now November 2016
Distributed Generation (DG) = Wholesale DG and Retail DG export (often referred to as NEM export) Project Size 50+ MW Central Genera9on Serves Remote Loads Wholesale DG Serves Local Loads 500 kw Retail DG Serves Onsite Loads 5 kw Behind the Meter Distribution Grid Transmission Grid Making Clean Local Energy Accessible Now 2
Examining the Cost of Energy in California PG&E Residen7al Services Rates (Sept. 2016) 0.3 Cost ($/kwh) 0.25 0.2 0.15 0.1 0.05 Other Charges Public Purpose Programs Conserva9on Incen9ve Adjustment Transmission Costs Distribu9on Genera9on 0 CA Residen9al Rate (kwh) Making Clean Local Energy Accessible Now 3
TAC are growing fast to ~4.5 cents/kwh over 20 years Forecasted PG&E Total TAC Rate $0.045 $/kwh $0.040 $0.035 $0.03/kWh when levelized over 20 years Business As Usual (BAU) $0.030 $0.025 $0.020 The 20-year levelized TAC is about 3 cents/kwh, which is roughly 50% of the current wholesale cost of new energy contracts in California! $0.015 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2016-2035 Making Clean Local Energy Accessible Now 4
Key TAC-related definitions Transmission Access Charges (TAC) Per kwh fees for using the CAISO-controlled transmission grid. There are Low Voltage (LV) and High Voltage (HV) TAC. Customer Energy Downflow (CED) Energy that flows across customer meters from the distribution grid. Incorrect metering basis for assessing TAC. Transmission Energy Downflow (TED) Energy that downflows across defined transmission interfaces points Two existing points: HV-to-LV and LV-to-distribution. Third potential point would result from CAISO expansion: Super HV-to-HV. Correct metering basis for assessing TAC. Participating Transmission Owner (PTO) Entity that owns part of the CAISO-controlled Transmission grid. TAC correction is needed in PTO utility service territories (IOUs). Non-PTO utilities (municipal utilities) are already handled correctly for TAC. Making Clean Local Energy Accessible Now 5
Overview Problem: In PTO u9lity service territories, distributed genera9on (DG) energy is subject to Transmission Access Charges (TAC) despite not being delivered through transmission. This distorts the value of DG, disadvantages DG in procurement decisions, shi^s costs from transmission-sourced energy to DG, and leads to excess demand for new transmission capacity that lead to billions of dollars in unnecessary investment. Solu7on: Align the TAC treatment for PTO u9li9es with the Usage Pays principle u9lized in non-pto u9li9es TAC system by changing the TAC wholesale billing determinant from Customer Energy Downflow (CED) to Transmission Energy Downflow (TED). Expected Effect: Correc9ng the TAC market distor9on on local renewables would: Provide value to DG through avoided TAC, making them more compe99ve in procurement decisions Increase the deployment of distributed energy resources (DER) and slow the growth of (or even decrease) TAC rates over 9me Save billions of dollars in delayed or avoided transmission investments Increase consistency, transparency, fairness, and alignment with FERC Order 1000 Making Clean Local Energy Accessible Now 6
TAC metering fix is needed Current interface for metering TAC in PTO u7lity service territories (at customer meters based on Customer Energy Downflow) Making Clean Local Energy Accessible Now 7
TAC metering fix is needed Proper interface for metering all High Voltage TAC (based on TED, as is already done in non-pto u9lity service territories) Proper interface for metering all Low Voltage TAC (based on TED as is already done in non-pto u9lity service territories) Current interface for metering TAC in PTO u7lity service territories (at customer meters based on Customer Energy Downflow) Making Clean Local Energy Accessible Now 8
The TAC fix corrects Least Cost Best Fit (LCBF) distortion LCBF under Distorted TAC Assessment System LCBF under Corrected TAC Assessment System Cost in $/MWh $120 $100 $80 $60 $40 $20 TAC Costs Genera9on Cost Winning contract price Cost in $/MWh $120 $100 $80 $60 $40 $20 TAC Costs Genera9on Cost Winning contract price $0 Central Genera9on Project DG Project serving local loads $0 Central Genera9on Project DG Project serving local loads Current TAC assessment unfairly increases the cost of local distributed genera9on (DG) even though it almost never uses the transmission system Fixing the TAC market distor9on makes local genera9on more compe99ve Over 9me, more local genera9on will be built, making transmission upgrades less necessary, and decreasing overall system costs Making Clean Local Energy Accessible Now 9
TAC fix unleashes local renewables Forecasted PG&E Total TAC Rate $/kwh $0.045 $0.040 $0.035 $0.030 $0.025 $0.03/kWh when levelized over 20 years Total TAC rate reduc9on rela9ve to BAU by Year 2, 3 or 4 based on DG growth rate 11.0% 15.2% 19.5% 27.6% Year 20 share of total CED served by DG Notes & Assump7ons All 3 scenarios assume genera9on from new DG never exceeds new CED Business As Usual (BAU) Post-TAC fix Scenario 1: Total DG added per year 1.5x of BAU $0.020 Post-TAC fix Scenario 2: Total DG added per year 2x of BAU $0.015 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Post-TAC fix Scenario 3: Total DG added per year 3x of BAU Year A^er TAC Fix Making Clean Local Energy Accessible Now 10
TAC fix provides savings for all ratepayers $0.045 Forecasted PG&E Total TAC Rate $0.040 $0.03/kWh when levelized over 20 years $6.7 billion savings vs. BAU $13.5 billion savings vs. BAU $/kwh $0.035 $0.030 $26.3 billion savings vs. BAU $0.025 $0.020 $0.015 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Year A^er TAC Fix Ratepayer avoided TAC costs over 20-year period in the 1.5x, 2x, and 3x BAU DG scenarios Making Clean Local Energy Accessible Now 11
Cost effect example: immediate 2016 Scenario IOU CCA ESP Total Notes LSE Customer Energy Downflow (CED, in GWh) 70 30 10 110 Current TAC wholesale billing determinant % of Total CED 64% 27% 9% 100% Share of total TAC basis (now) TRR (in thousands) NA NA NA $1,650 Total Transmission Revenue Required TAC Rate per kwh (now) $0.0150 $0.0150 $0.0150 $0.0150 TRR/CED TAC payment (in thousands) $1,050 $450 $150 $1,650 TAC Rate x CED DG (GWh) 1.4 0.6 0 2 2% is the highest percentage of DG in any PTO uhlity service territory today Share of total LSE CED served by DG 2% 2% 0% 2% TED (GWh) 68.6 29.4 10 108 Proposed TAC basis % of TED 64% 27% 9% 100% Share of total TAC basis (proposed) TRR (in thousands) NA NA NA $1,650 Remains unchanged TED-based TAC Rate (per kwh) $0.0153 $0.0153 $0.0153 $0.0153 TRR/TED TED-based TAC payments (in thousands) $1,048 (-$2) $449 (-$1) Making Clean Local Energy Accessible Now 12 $153 (+$3) $1,650 New TAC Rate x TED
Cost effect example: long term (2 x BAU DG) 2035 Scenario IOU CCA ESP Total Notes LSE Customer Energy Downflow 70 30 10 110 Current CED and TAC basis (CED; in GWh) % of Total CED 64% 27% 9% 100% Share of total TAC basis (now) TRR (projected 2035, in thousands) NA NA NA $5,740 Total Transmission Revenue Requirement TAC Rate per kwh (projected 2035) $0.052 $0.052 $0.052 $0.052 TRR/CED TAC payment (in thousands) $3,653 $1,565 $522 $5,740 TAC Rate x CED DG (GWh) 8.00 12.00 0.00 20.00 18% energy sourced below T-D interface Share of total LSE CED served by DG 11% 40% 0% 18% Increased to 2 x BAU case TED (GWh) 62.00 18.00 10.00 90.00 Proposed TAC basis % of TED 68.9% 20.0% 11.1% 100.0% Share of total TAC basis (proposed) TRR (in thousands) NA NA NA $4,470 Reduced (due to deferred need for new capacity) TED-based TAC Rate per kwh (projected 2035) $0.0497 $0.0497 $0.0497 $0.0497 TRR/TED; TRR is reduced to DG mee9ng share of load growth TED-based TAC payments (in thousands) Savings $3,079 $894 $497 (-$573) (-$671) (-$25) $4,470 New TAC Rate x TED (and change from business-as-usual) Making Clean Local Energy Accessible Now 13
TAC stakeholder cash flows for ratepayers in non-pto utility service territories CAISO TAC $ Pro rata of CAISO TRR (based on Transmission Energy Downflow) Non-PTO U7lity LSEs (Municipal u9li9es) TAC $ Pro rata share of Transmission Energy Downflow Ratepayers in Non-PTO U9lity Service Territories PTO TRR $ PTO U7li7es Making Clean Local Energy Accessible Now 14
TAC stakeholder cash flows for ratepayers in PTO Utility Service Territories TAC $ LSEs (ex: CCA, ESP) TAC $ CAISO TAC $ PTO U7lity LSE and Distribu7on Provider (ex: IOUs) TAC $ Ratepayers in PTO U9lity Service Territories PTOs PTO TRR $ Poten9al conflict of interest NOTES: (i) TAC $, or TAC payments, are based on pro rata share of Customer Energy Downflow (ii) TAC (Rate) is based on CAISO TRR Customer Energy Downflow Making Clean Local Energy Accessible Now 15
CAISO 2015 load peaked Sep 10, 5pm 50,000 Peak Sep 10 5pm 47,252 MW 45,000 40,000 35,000 MW 30,000 25,000 20,000 Load 15,000 10,000 5,000 0 Jan 1-1 Jan 9-4 Jan 17-7 Jan 25-10 Feb 2-13 Feb 10-16 Feb 18-19 Feb 26-22 Mar 7-1 Mar 15-5 Mar 23-8 Mar 31-11 Apr 8-14 Apr 16-17 Apr 24-20 May 2-23 May 11-2 May 19-5 May 27-8 Jun 4-11 Jun 12-14 Jun 20-17 Jun 28-20 Jul 6-23 Jul 15-2 Jul 23-5 Jul 31-8 Aug 8-11 Aug 16-14 Aug 24-17 Sep 1-20 Sep 9-23 Sep 18-2 Sep 26-5 Oct 4-8 Oct 12-11 Oct 20-14 Oct 28-17 Nov 5-19 Nov 13-22 Nov 22-1 Nov 30-4 Dec 8-7 Dec 16-10 Dec 24-13 Making Clean Local Energy Accessible Now 16
Solar does reduce CAISO peak load MW 50,000 45,000 40,000 35,000 Peak load Sept. 10 th at 5pm: 47,252 MW Assumes 10,000 MW solar in Los Angeles facing SW, fixed. On Sept. 10th at 5pm, solar generates at 46% of maximum daily capacity. 30,000 25,000 Peak Net Load Sept. 10 th at 6pm 45,700 MW (-3%) Net Load (Load - DG) Load Making Clean Local Energy Accessible Now 17
The TAC Fix is backed by a broad range of organizations Making Clean Local Energy Accessible Now 18
Solving the market distortion Educa9ng CAISO and stakeholders on the issue Building a coali9on of supporters Finding the right forum (delay from CAISO) and gelng 9mely amen9on for this issue Overcoming conflic9ng interests Legisla9ve alterna9ves Image source: CAISO Making Clean Local Energy Accessible Now 19
Getting involved For more informa9on on the TAC Campaign, visit www.clean-coali9on.org/tac or email ka9e@clean-coali9on.org Endorse the TAC Campaign Contact Daryl Michalik, Execu9ve Director of the Dynamic Grid Council daryl@dynamicgridcouncil.com Add your voice directly by filing your own comments to CAISO and key influencers Making Clean Local Energy Accessible Now 20