AESO 2017 Business Plan and Budget Review Process. Stakeholder Consultation Summary Presentation October 13, 2016

Transcription

1 AESO 2017 Business Plan and Budget Review Process Stakeholder Consultation Summary Presentation October 13, 2016

2 2017 Budget Review Process Amended process for 2017 Own Costs and Capital budgets Preparation and approval by December 2016 of 6-month budget for January to June 2017 Allows for additional time for more details on the government s policy initiatives to become available Followed by efficient stakeholder consultation in near term incorporating any AESO impacts Consultation will begin in March 2017 for a detailed 18-month budget for the period from July 2017 to December 2018 AESO Board approval by June 2017 Standard process for 2017 Transmission Operating Cost forecasts Preparation and approval by December 2016 of a 12-month forecast for

3 2017 and 2018 Budget Review Process Summary Stakeholder Consultation Process Business Plan and Budget Proposal Business Initiatives Transmission Operating Costs Own Costs and Capital Q Consultation Written process given limited new information Abbreviated document Continuation of existing initiatives Prepare and approval for 12- month forecast for 2017 Jan to Jun 2017 budget based on 2016 approved budget Q1/Q Consultation Consistent with prior years process for full stakeholder engagement and technical meetings Comprehensive document Detailed review and consultation with stakeholders Prepare and approval for 12- month forecast for 2018 Detailed review and consultation with stakeholders for the period from Jul 2017 to Dec

4 Presentation of 2017 Information Additional information to the following PowerPoint presentation is provided in the Word document titled Supplementary 2017 Forecast and Budget Information In the absence of in-person stakeholder meetings, this information provides the details that would have otherwise been disclosed through verbal discussion The Word document has been cross-referenced to the slide numbers in this presentation for ease of reading 4

5 2017 Business Initiatives

6 Business Initiatives Summary Presentation of the major strategies and initiatives (i.e. AESO s business priorities) For the period from January to June 2017, these are the carryforward initiatives presented to stakeholders in prior consultation processes Additional information on 2016 achievements and 2017 plans is provided in the following slides 6

7 Business Initiatives Supporting Strategic Objective 1 Framework Business Initiative Expected Achievement 2016 Plans 2017 Market Evolution Ongoing assessment of market design, structural elements and implementation of related changes Design, Consult, Implementation Design, Consult (rules development), Implementation Climate Change Program Renewable Electricity Program (REP) Government of Alberta (GoA) endorsed; AESO positioned to open first competition in Q4 or in line with revised GoA timelines; Commencement (first stage) of first competition Framework monitoring, assessment of proposed changes and related recommendations Implement first REP competition (Round 1) and identify winning bidders Framework monitoring, assessment of proposed changes and related recommendations Market Initiatives Consult, Design and Implement Determine the integration plan for new products and/or technologies (e.g. operating reserve amendments, technical standards and tariff provisions); Implement plan - Storage, Mothballing and Intertie Restoration inflight Implementation Tariff provisions for storage to be filed as part of the next General Tariff Application (GTA) in 2017 Other new products/technologies to continue Market Systems Replacement - Replacement and/or reengineering of market systems determined to have reached endof-life Implementation Implementation (future sustainment iterations) Market Systems Replacement and Reengineering (MSR) Complete MSR System reliability components (short-term sustainment) Continuation of future sustainment initiative 7

8 Business Initiatives Supporting Strategic Objective 1 continued Business Initiative Expected Achievement 2016 Plans 2017 Tariff and Technical Standards Enhancements Consult and Design Implementation 2017 General Tariff Application (GTA) Technical Standards and Rules Major components include how energy storage will be managed in the tariff, Section 8 (customer contributions) changes and cost/causation study Consult, Design and Implement Prioritization and Advancement of Loss Factor rule; Alberta Reliability Standards (80 new standards and revisions required); and Technical Rules (Customer Connection, Substation, Transmission Line and Metering Rules) File GTA with AUC Consult, Design and Implement Continue to advance Loss Factor rule, Alberta Reliability Standards and Technical Rules Major Projects Design, development and deployment activities for projects having notable industry impact Advancement of the Fort McMurray West (FMW) Project Design, Implementation Implementation (Formerly referred to as CP Integration) AESO regulatory proceedings involvement where applicable; Continued Project integration; Preparation for Debt Funding Competition (DFC) Develop programs to manage the FMW Project post energization; Implementation of DFC 8

9 Business Initiatives Supporting Strategic Objective 2 Value Business Initiative Expected Achievement 2016 Plans 2017 Reliability Program Facility, process and technology enhancements to improve grid reliability Implementation Implementation Energy Management System (EMS) Upgrade System Control Centre (SCC) Facility Expansion Replacement infrastructure procurement and configuration; Factory Acceptance Testing complete Implementation Complete definition phase including all preliminary approvals; Subject to Board approval, commence implementation phase and develop schedule Production implementation by July 2017 Implementation Continue implementation phase RFP, permit applications, other as required Security Critical Infrastructure Protection (CIP), Information Technology (IT) and cyber security enhancements Implementation Implementation Alberta Reliability Standards CIP Implementation IT and Cyber Security Advancements Develop internal CIP process and procedure requirements; Establish compliance approach for monitoring market participants and guidance on preparing compliance evidence Implementation IT and Cyber Security advanced in accordance with AESO business plan Complete internal compliance requirements and related audits; Set up market participant compliance program Implementation Continue to advance IT and Cyber Security program 9

10 Business Initiatives Supporting Strategic Objective 3 People Business Initiative Expected Achievement 2016 Plans 2017 Advance maturity level of our Human Resources processes Design, Implementation Design, Implementation Workforce capabilities - expanded Increase workforce capabilities by broadening knowledge (AESO and industry) across the organization; Program development of cross functional practice and learning opportunities realized; Enhance learning and development programs to meet future needs as identified in strategic plan; Establish broader exposure and a comprehensive understanding of corporate skills and competencies required in the future ( HR strategy and roadmap roll out) continued from

11 2017 Transmission Operating Cost Forecast

12 AESO Disclaimer The information contained in this document is published in accordance with the AESO s legislative obligations and is for information purposes only. As such, the AESO makes no warranties or representations as to the accuracy, completeness or fitness for any particular purpose with respect to the information contained herein, whether expressed or implied. While the AESO has made every attempt to ensure the information contained herein is timely and represents a reasonable forecast, the AESO is not responsible for any errors or omissions. Consequently, any reliance placed on the information contained herein is at the reader s sole risk. 12

13 Operating Cost Forecast Summary ($ millions) 2017 Forecast 2016 Projected 2016 Forecast 2015 Actual Wires Costs 1, , , ,596.0 Ancillary Services Transmission Line Losses Other Industry Costs* TOTAL 2, , , ,865.7 Pool Price (per MWh) $32 $21 $41 $33 * Includes transmission and energy market costs Forecast current estimate of future costs Projected current estimate of current year costs based on actual costs as of August 2016 combined with a forecast for the remaining four months of the year 13

14 2017 Pool Price Forecast

15 Price Forecast for 2017 Hourly pool price forecast is an integral input into calculating the forecast costs for ancillary services and transmission line losses AESO in-house generated hourly pool price forecasts from 2013 to 2016 for BRP forecasting purposes For 2017 BRP, the 2017 hourly pool price forecast is obtained from the EDC Associates Q Update Report Decision to use the EDC forecast was due to competing AESO priorities for staff resources EDC hourly pool prices were used in 2012 and prior BRP forecasts; they are considered as a reliable industry information source 15

16 Price Forecast for 2017 (continued) The EDC Associates Q Update Report pool price forecast includes the following: A trend for more generators to run closer to variable cost No impact to 2017 from the accelerated coal retirement plan Carbon price increases As of September 29, 2016, the 2017 forward market price* aligns to the EDC forecast at $32/MWh EDC Forecast 2017 Forward Market * 2017 Projected 2016 Average Hourly Pool Price (per MWh) $31.82 $31.50 $20.82 AECO-C Natural Gas Price (per GJ) $2.73 $2.71 $1.92 * Source: NGX (Sept 29, 2016) 16

17 Actual and Forecast Prices and Heat Rate $ Heat Rate, Gas Price $43.93 $3.84 $62.99 $54.59 $6.30 $6.19 $70.36 $8.27 $80.79 $66.95 $6.17 $6.10 $7.73 $80.19 $76.22 $64.32 $47.81 $50.88 $49.42 $3.76 $3.79 $4.25 $3.44 $2.27 $3.01 $33.34 $31.82 $20.82 $2.56 $1.92 $ Pool Price E 2017E Market Heat Rate (GJ/MWh) Gas Price ($/GJ) Pool Price ($/MWh) 0 17

18 Price Duration Curve Year-to-Date September 2016 $60 $17.02 as of 30 Sep 2016 $16.42 excluding highest 10 days This graph indicates the impact of high daily pool prices on the annual average. In past years, a few days of high prices had a material impact on the annual average pool price. This is not the case for 2016, which has not had any high pool price days. 20 Daily Price ($/MWh) $45 $30 $ Average Price ($/MWh) $ Day of Year Daily Price ($/MWh) Annual Average Price ($/MWh) 18

19 2017 Load Forecast

20 Load Forecast Assumptions The 2017 load forecast was prepared by the AESO for the purpose of the BRP and has considered: Alberta GDP, population and labor predictions from the Conference Board of Canada Outlook (June 2016) Historic weather patterns (40-year average temperatures) 2017 load is forecast to increase by 2% from 2016 projected values, which would be consistent with 2015 volumes 20

21 Load Forecast 2016: i) Lower actual volumes in May and June 2016 are associated with the Fort McMurray fires; ii) decreases in other months when comparing 2016 to 2015 relate to economic impacts and temperature variances. 2017: Based on the outlook for 2017 for Alberta s GDP and key indicators from the Conference Board of Canada, it is expected that load volumes will return to the 2015 levels during

22 2017 Wires Cost Forecast

23 Wires Costs Summary ($ millions) 2017 Forecast 2016 Projected 2016 Forecast 2015 Actual 2015 Forecast Wires 1, , , , ,367.7 Invitation to Bid on Credit (IBOC) Location Based Credit Standing Offer (LBC SO) TOTAL 1, , , , ,373.7 Wires costs are the amounts paid to TFOs in accordance with their AUCapproved tariffs and are not controllable costs of the AESO IBOC and LBC SO programs are long-term contracts that were initiated in 2001 and 2002 as incentives for generation to locate closer to major load centres IBOC costs are forecast to increase in 2016 and 2017 relative to previous years due to anticipated facility operating operating conditions LBC SO costs are forecast to be lower than 2015 due to reduced dispatches 23

24 2017 Ancillary Services Cost Forecast

25 Ancillary Services Costs Summary Refer to the Word document for additional details ($ millions) 2017 Forecast 2016 Projected 2016 Forecast 2015 Actual 2015 Forecast Operating Reserve (OR) Load Shed Service for Imports (LSSi) Contracted Transmission Must-run 2.8 n/a n/a n/a n/a (TMR) Conscripted Services (OR and TMR) Reliability Service Poplar Hill Blackstart Transmission Constraint Rebalancing (TCR) n/a TOTAL Pool Price (per MWh) $31.82 $20.82 $40.99 $33.34 $41.49 Gas Price (per GJ) $2.73 $1.92 $3.29 $2.56 $

26 Forecast Methodology Operating Reserves (OR) Forecast OR costs is the sum of forecast hourly volumes multiplied by the hourly OR price, Volumes: set by Alberta Reliability Standard requirements and dependent on forecast generation OR Price: hourly price of operating reserves determined for each product type There are no changes to the methodology in preparing the 2017 forecast 26

27 2017 Transmission Line Losses Cost Forecast

28 Transmission Line Loss Costs Summary 2017 Forecast 2016 Projected 2016 Forecast 2015 Actual 2014 Actual Cost ($ million) $74.1 $44.4 $111.9 $75.8 $119.5 Volume (GWh) 2,291 2,235 2,577 2,325 2,472 Pool Price ($/MWh) $31.82 $20.82 $40.99 $33.34 $

29 Forecast Methodology Line Losses Forecast transmission line losses costs is the sum of hourly volumes multiplied by hourly pool prices Volumes: 5-year historical actual losses volumes as a percentage of demand and forecast load volumes Pool Price: hourly pool price provided by EDC There are no changes to the methodology in preparing the 2017 forecast 29

30 2017 Other Industry Forecast

31 Other Industry Costs Summary ($ millions) 2017 Forecast 2016 Projected 2016 Budget 2015 Actual 2015 Budget AUC Fees Transmission AUC Fees Energy Market Regulatory Process Costs WECC/NWPP* Costs TOTAL * Western Electricity Coordinating Council / Northwest Power Pool 31

32 2017 Own Costs

33 Jan to June 2017 Own Cost Budget Amended process for 2017 Own Cost budgets Preparation of January to June 2017 for approval by December 2016 Allows for additional time for more details on the government s policy initiatives to become available Followed by efficient stakeholder consultation in near term incorporating any AESO impacts Subsequent BRP for the remaining 6 months of 2017 For simplicity, 6-month budget proposed equal to half of 2016 approved G&A, interest and amortization budgets This approach will allow for continued focus on current initiatives with no material changes to occur prior to subsequent budget approval for July 2017 onward 33

34 Own Costs Summary ($ millions) 2017 Budget (6 months) 2016 Projected YTD August Budget 2015 Actual 2015 Budget General & Administration Interest Amortization TOTAL

35 2017 Capital Budget

36 Jan to June 2017 Capital Budget Proposed budget for 6 months of $15.4 million Current assessment for the full year of 2017 would be a capital budget requirement of $31.5 million, however 6-month funding will be requested with further assessment to occur during the July 2017 to December 2018 BRP No major projects that have not previously been discussed with stakeholders have been included Jan to Jun 2017 funding will enable continued progression on the inflight projects and maintenance of base load initiatives Proposed budget is based on an allocation model applied to the current assessment for the full year of

37 Capital Budget Summary * Budget Budget Projected Budget Actual (6 months) (Estimate) Key Capital Initiatives Other Capital Initiatives Life Cycle Funding Sub total Special - MSR Special - EMS Special - SCC Sub total General capital costs in 2016 projected to be $4.2 million lower than budget mainly due to an Oracle environment refresh that was deferred Total *Aug 31, 2016 Definitions: Key Capital Initiatives Most critical projects that the AESO believes must be completed within the timeframe identified Other Capital Initiatives Other projects that have more flexibility in planning or delivery so timing is not as critical Life Cycle Funding Hardware replacements (end of useful life) and recurring software upgrades and leasehold improvements 37

38 2017 Capital Budget Estimate Capital Expenditures ($ million) Estimate Projected 1 Budget Actual Key Capital Initiatives 1. Reliability (EMS 2 elements) Reliability (other - non EMS elements) Critical Infrastructure Protection IT & Cyber Security MSR 3 - Sustainment Market Evolution Intertie Framework Cost Accountability Technology Review (website refresh) Facilities Total Key Capital Initiatives Other Capital Initiatives Life Cycle Funding SubTotal Capital Major - EMS Major - MSR Major - SCC Total Capital Differences are due to rounding 1 August 31, Spent plus estimate to complete for current year. 3 Market System Replacement & Reegineering (sustainment activities only) 2 Energy Management System 4 System Coordination Centre Expansion 38

39 2017 Energy Market Trading Charge

40 Proposed Energy Market Trading Charge Proposing to continue with the current AESO portion of the energy market trading charge until July 1, 2017 January 1, 2017 trading charge may change due to the Market Surveillance Administrator (MSA) component which will be communicated to the AESO in the latter part of 2016; there was no MSA charge (or refund) in 2016 Trading Charge Components ( per MWh) Jan to Jun 2017 Proposed 2016 Actual AESO Costs Energy Market Deficit / (Surplus) - - AESO Component AUC s Portion of Energy Market Administration Fee Total