CCAP Presentation August 6, Dhaval Dagli Principal Manager, Regulatory Policy, Southern California Edison

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1 CCAP Presentation August 6, 2015 Dhaval Dagli Principal Manager, Regulatory Policy, Southern California Edison

2 Southern California Edison Highlights One of the nation s largest electric utilities Subsidiary of Edison International, a Fortune 500 company Investor-owned utility regulated by the California Public Utilities Commission (CPUC) Nearly 14 million residents in service territory 5 million customer accounts 50,000 square-mile service area Approx. 23,000 MW area peak load Approx. 89 billion kwh annual energy sales Significant infrastructure investments 1.4 million power poles 700,000 transformers 103,000 miles of distribution and transmission lines 3,100 MW owned generation

3 Edison Intl. is Responding to Industry Change Long-Term Industry Trends Public policy prioritizing environmental sustainability Innovation facilitating conservation and self-generation Regulation supporting new forms of competition Flattening domestic demand for electricity Grid of the future will be more complex and sophisticated to support increasing use of distributed resources and transportation electrification SCE Strategy Strategy Invest in, build, and operate the next generation electric grid Operational and service excellence Enable California public policies Edison Intl. Competitive Strategy Targeted investments in emerging technologies and markets to follow changes in the industry and better exploit opportunities as they arise Commercial and industrial distributed generation Energy optimization Energy efficiency and software Residential solar industry financial services and software Electric transportation

4 SCE s Guiding Principles 1. Promoting customer choice and customer engagement are key objectives 2. The distribution grid can play a key role in reducing carbon in California 3. Safety, reliability, and resiliency must remain paramount objectives 4. Costs of electric service must remain affordable and equitablyapportioned to customers 5. Competitive processes for the selection of resources should be utilized to the greatest extent possible 3

5 SCE s Decoupled Regulatory Model Regulatory Model Decoupling of Regulated Revenues from Sales Major Balancing Accounts Fuel Purchased power Energy efficiency Pension-related contributions Advanced Long-Term Procurement Planning Key Benefits SCE earnings are not affected by changes in retail electricity sales Differences between amounts collected and authorized levels are either billed or refunded to customers Promotes energy conservation Stabilizes revenues during economic cycles Trigger mechanism for fuel and purchased power adjustments at 5% variance level Utility cost-recovery via balancing accounts represented more than 55% of 2014 costs Sets prudent upfront standards allowing greater certainty of cost recovery (subject to reasonableness review) Forward-looking Ratemaking Three-year rate case cycle Separate multi-year cost of capital proceeding

6 California s Renewables Procurement Standard On April 12, 2011, Governor Brown signed into law a 33% Renewables Portfolio Standard (RPS) for California by 2020 Allows use of Renewable Energy Credits (RECs) for up to 25% of target with decreasing percentages over time Applies similar RPS rules to all electricity providers (investor- and publicly-owned utilities, as well as Electric Service Providers) In order to meet the 33% RPS requirement by 2020, SCE will need to increase its renewable purchases by 7.4 billion kwh per year, or 42% Biomass 2% Wind 42% Actual 2014 Renewable Resources: 23.4% of SCE s portfolio Solar 15% Small Hydro 2% Geothermal 39% Legislative efforts are underway to increase the renewable requirement to 50% by 2030 SCE is on track to meet the 33% renewables target by 2020

7 Distribution Grid of the Future Current State Future State One-Way Electricity Flow System designed to generate electricity from large central plant Very few distributed energy resources Voltage relatively simple to maintain Limited situational awareness and visualization tools for grid operators Renewable Generation Mandates Subsidized Residential Solar Lack of Electric Vehicle Charging Infrastructure Variable, Two-Way Electricity Flow Distribution system at the center of the grid System designed to serve variable resources and customer demand Digital monitoring and control devices and advanced communications systems to manage two-way flows Improved data management and grid operations with cyber mitigation Maximize Distributed Resources and Electric Vehicle Adoption Distribution grid infrastructure design supports customer choice and greater resiliency

8 SCE Distribution Resources Plan (DRP) Objectives: Modernize the distribution system to accommodate customer choice Enable new technologies and services that reduce emissions and improve reliability Animate opportunities for Distributed Energy Resources (DERs) to realize benefits by providing grid services Key Elements: Tools for identifying optimal locations for DERs (includes Distributed Generation, energy storage, Electric Vehicle charging, Energy Efficiency, and Demand Response ) Modernization of system planning tools, design and operations Technology recommendations (information technology, communications, system planning, voltage and frequency controls, etc.) Demonstration projects to test distribution models and technologies Investment plans for grid modernization

9 New Technology Grid Impacts Future state based on evolving energy landscape More automated and digital, with more sophisticated voltage control and protection schemes Facilitates increasing renewables & twoway power flow Cyber mitigation must be included

10 Grid Modernization Requirements Capabilities Expedient Interconnectio n Processing Investments Increased Situational Awareness Accurate Forecasting and Planning Greater Interaction with and Control of DERs Distribution and Substation Automation Communications & Interoperability Technology Platforms and Applications Grid Reinforcement Enabled By People Strategy Increased manpower New skill sets Training process Workforce Evolution Business Processes Work Management & logistics Evaluation of processes for suitability Design Standards moving forward Procurement & Planning Integration Construction and operational procedures 9

11 Expected Result People and Process Technology GRC Cycle SCE s Grid Modernization Road Map Implement foundational information technology, communication systems, and system planning tools; begin grid reinforcement work Expand automation and improve communications and control with Distributed Energy Resources; continue grid reinforcement work Continue grid modernization, maximize benefits of Distributed Energy Resources and continue integrating into planning and operations Prepare organization and workforce to execute incremental work Ramp up resources and develop talent pipeline Compliance, safety, and reliability; preparation for future grid state New business opportunities enabled; full deployment of grid modernization Prepare grid management systems to handle increased DER and support more grid transactions

12 /kwh /kwh Residential Rate Design CPUC recently completed a comprehensive review of residential rate structure including a future transition to time of use rates July 2015 CPUC Decision includes: - Transition to 2 tiered rates by Super User Electric Surcharge for usage 400% above baseline (~4% of current residential load) - Continue fixed charge at $0.94/month; allows for consideration of increased fixed charges in future - Minimum bills up to $10/month which applies to delivery revenue only Fixed Charge: $0.94/month Minimum Bill: $1.79/month Current Rates July 2015 Fixed Charge: $0.94/month Minimum Bill: $10.00/month Future Rates % % % Usage Level (% of Baseline) % >400% 100% % >400% Usage Level (% of Baseline) Note: Graphs not to scale rate levels are based on current revenue requirements

13 How Current NEM Program Works Net Energy Metering (NEM) is an optional tariff for customer-generators who install a renewable generating facility to get a full retail rate credit for energy exported to the grid Graphic Source: Pell Solar 1 SCE meter 2 SCE meter records records the energy supplied by SCE from the grid energy produced by the customer that is exported to the grid (not energy instantly consumed) 3 Monthly Netting Every month, SCE bills the customer for net usage based on the difference between 1 and 2 4 Annual Relevant Period Within 12 months, customer-generators can use these monthly net energy credits ($) to offset SCE charges for electricity usage. Therefore, customer-generators receive full retail credit for their exported energy within the 12-month period.* 12 NEM Program Eligibility: Technologies up to 1MW, sized to annual onsite load Program ends July 1, 2017 NEM customers still pay: Residential / Small Commercial o Non-energy charges monthly (minimal) o Energy charges annually Commercial o All charges monthly (energy, nonenergy, demand) NEM customers do not pay: T&D costs billed volumetrically Interconnection application fees Study fees Distribution upgrade costs Standby charges Departing load charges

14 /kwh SCE Residential NEM Rate Structure 30 Solar Subsidies (Illustrative) SCE s NEM Developments: On August 3 rd, SCE filed a proposal with the CPUC that is more reflective of solar systems total costs and benefits Residential customers can consume their self-gen without any charge They purchase electricity from the utility at otherwise 20 applicable rates They get paid for exported electricity at a fixed rate 15 representing utility s avoided costs They pay a monthly grid-access charge based on the size of their system SCE 2014 Net Energy Metering Statistics: 103,900 combined residential and non-residential projects Avoided Generation Subsidy Paid by Other Ratepayers Equivalent Solar Offset MW installed (of 2,240 MW cap) 99.5% solar 100,300 residential 500 MW 3,600 non-residential 380 MW Approximately 1,270,000 kwh / year generated Current NEM structure results in residential solar customers receiving a subsidy funded by all other non-solar customers

15 Key Take-Aways SCE is committed to fully embracing and implementing California s environmental sustainability, emissions reduction, and technology innovation vision, as well as meeting the changing customer expectations SCE will continue to transform distribution system planning and operations to meet current and future distributed energy resources goals SCE intends to partner with others to facilitate the deployment of low-carbon technologies and encourage customer value creation Utility grid modernization investments must keep pace with DER technology innovation SCE s recently submitted DRP is an important step towards a fully integrated, low-carbon electricity system 14

16 Thank you. To access SCE s Distribution Resources Plan (DRP), SCE s Distributed Energy Resources Interconnection Map (DERiM), and additional information, please visit the CPUC s DRP website at: 15