PG&E s RPS Portfolio and 33% RPS Implementation issues

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1 PG&E s RPS Portfolio and 33% RPS Implementation issues Aaron J. Johnson Director, Renewable Energy Policy and Strategy March 29, 2012 California Municipal Utilities Conference Monterey, CA

2 Pacific Gas and Electric Company (PG&E) Company Facts Fortune 200 company located in San Francisco, CA $14B in operating revenues in ,000 employees Energy Supply Services to 15M people: 5.2M Electric accounts 4.3M Natural Gas accounts Peak electricity demand: 20,000 MW Over 50% of PG&E s electric supply comes from non-greenhouse gas emitting facilities Service Territory 70,000 sq. miles with diverse topography 160,000 circuit miles of electric transmission and distribution lines 49,000 miles of natural gas transmission and distribution pipelines 1

3 PG&E s 2010 Electric Generation Portfolio Mix Market Purchases Large Hydro Figures represent % of PG&E s total bundled retail sales Bioenergy 18% 17% 4% Natural Gas/Fossil Fuels 25% Nuclear 24% Eligible Renewable 16% Geothermal 5% Small Hydro 3% Solar PV <1% Wind 4% Unspecified Sources is non-auditable electricity purchased from the market and generally reflects energy mix of the Western United States Sources: and PG&E s August 2011 Compliance Report 2

4 Executed RPS Contracts 113 RPS contracts totaling over 9,900 MWs, since the program began in 2002 Technology # Expected MWs Geothermal Wind 38 3,629 Bioenergy Solar PV 26 2,536 Solar Thermal 14 2,735 Small Hydro 6 80 Wave 1 2 Total 113 9,994 Data as of February 1 st,

5 Renewable Portfolio: Past, Present, and Future 2002 Actual 10.6% of total bundled retail sales 2011 Preliminary Actual 19.4% of total bundled retail sales 2020 Projected 33% of total bundled retail sales Geothermal 26% Wind 20% Bioenergy 7% Geothermal 12% Small Hydro 7% Bioenergy 41% Geothermal 15% Small Hydro 31% Bioenergy 23% Small Hydro 19% Solar Thermal 19% Wind 13% Wind 31% Solar PV 1% Solar PV 35% Total RPS-Eligible Procurement 7,504 GWh Total RPS-Eligible Procurement 14,487 GWh Projected RPS-Eligible Procurement ~27,000 GWh Source: PG&E s 2002 Corporate Environmental Report and PG&E s March 2012 RPS Compliance Report 4

6 Bundled System Average Electric Rates ( /kwh) Projected Bundled System Average Electric Rates CAGRs + RPS Relative to New CC and Incremental Transmission 1.1% + All Other Supply Costs and CTC 1.5% + Non-Generation Capital % + Other -0.5% 5.0 = Total CAGR 3.3% Other Non-Generation Capital All Other Supply Costs RPS Relative to New CC and Incremental Transmission CPI CPI CAGR 3.1% 5

7 /kwh Residential Electric Rates by Tier (without Customer Charge) Historic and Projected Residential Electric Rates From 2011 Integrated Energy Policy Report Tier 5 (> 301% of Baseline) Tier 4 ( % of Baseline) Tier 3 ( % of Baseline) Tier 2 ( % of Baseline) Baseline (Tier 1) CARE Tier 3 CARE Tier 2 CARE Tier 1 Rate Revolt in Kern County Summer Rate Relief GRC Ph. 2 rates implemented 6/20/ Assumes CARE Tier 3 charge implemented on 11/1/

8 Guiding Principles for 33% RPS Implementation Expand Eligibility of Renewable Resources Access to a wide array of procurement options for each product content category allows for best portfolio fit and reduces customer costs Maintain Flexible Compliance Mechanisms Flexibility in program design recognizes that renewable development is lumpy rather than linear and that all renewable purchases by customers should count toward RPS compliance Contain Costs for Customers Meaningful limits on the cost of procuring RPS-eligible power to achieve 33% will protect customers from unreasonable RPS costs Apply RPS Rules Universally All retail sellers of energy investor-owned utilities, publicly-owned utilities, energy service providers, and community choice aggregators should have the same opportunities and obligations to achieve state goals 7

9 RPS Implementation Challenges Public Policy Issue Policy is moving faster than implementation Action PG&E supports letting existing RPS programs mature and succeed Renewable Integration Additional resources needed for operational flexibility, likely increasing customer cost PG&E is working with the CAISO and other stakeholders to determine integration requirements and costs Cost Impacts Manage the above-market costs required to achieve a 33% RPS PG&E supports the development of a meaningful RPS cost limitation and tiered rate reform Banking of Surplus Procurement SB 2 (1x) restricts the banking of RPS procurement associated with contracts of less than 10 years duration PG&E supports SMUD-sponsored legislation to enable banking of RPS contracts of shorter duration Accounting Rules and Bucket Restrictions SB 2 (1x) does not address consequences if incremental procurement exceeds bucket limitations PG&E supports processes to track surplus procurement so customer value of renewables is not lost 8

10 Implementation Challenge Restrictions on Categories of Incremental Procurement Restrictions on procurement by product category vary over the three compliance periods, with Bucket 3 being the most restrictive compliance category RPS Requirement: Avg. 20%/year RPS Goal: 25% by 2016 RPS Goal: 33% by 2020 Bucket 1 Bucket 2 Bucket 3 Bucket 1 Bucket 2 Bucket 3 Bucket 1 Bucket 2 Bucket 3 Min. 50% Max. 25% 25% Min. 65% Max. 15% 20% Min. 75% Max. 10% 15% BUCKET 1 BUCKET 2 BUCKET 3 Majority of deliveries from incremental (post June 2010) contracts must sourced from resources located in California or directly connected to the State through a California Balancing Authority Remaining incremental deliveries may come entirely from firming & shaping (F/S) contracts, or A mixture of F/S and other resources ineligible for Bucket 1 or Bucket 2 9