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HomeMy WebLinkAboutStaff Report 299-07Mana er e or¢ TO:HONO1L’~BLE CITY COUNCIL FROM: DATE: SUBJECT: CITY MANAGER DEPARTMENT: UTILITIES JULY 16, 2007 CMR: 299:07 AS REQUIRED BY THE ENERGY POLICY ACT OF 2005, A PUBLIC HEAI~NG TO CONSIDER A RECOMMENDATION TO NOT IMPLEMENT THE ELECTRIC TIME-BASED METERING AND PRICING OPTIONS RECOMMENDATION In order to meet the reporting requirements of the Energy Policy Act of 2005 (EPACT), staff recommends that the CiD’ Council hold a public hearing and find that it is not appropriate to implement the electric time-based metering and pricing options required by the EPACT, and direct staff to evaluate the future teclmical feasibility, customer interest, and cost-effectiveness of providing time-based rate options to each customer class and report back to Council by June 30, 2009. BACKGROUND To meet the EPACT requirements, the City of Palo Alto Utilities (CPAU) must offer time-based metering and pricing options to all customer classes by August 2007, or issue a decision as to the appropriateness of implementing the standards. This report addresses those requirements. Time-based metering and pricing options provide incentives for customers to respond to electric supply costs and constraints. Modifying behavior in response to time-based prices can result in lower costs, reduced enviromnemal impacts and increased system reliability. Electric supply is more costly during periods of high usage, and therefore, reduced use or shifting use to less costly time periods can reduce utility costs and save money for customers. Because high-price periods coincide with lower power generation efficiency and greater transmission system congestion, time-based pricing also realizes enviromaaental and reliability benefits. The specified time-based rate options to be considered under EPACT are: 1) time-of-use pricing; 2) critical-peak pricing; 3) real-time pricing; mad!or 4) peak load reduction credits. t)Time-of-use (TOU) pricing provides an electric rate to customers based upon the time of day, or for pre-determined blocks of hours during the day, that electric energy is consumed. TOU rates are usually seasonal in nature, apply to pre-determined blocks of hours, and are CMR:299:07 Page 1 of 3 published in advance. Presently, TOU rates in Palo Alto are offered only to large conm~ercial customers on a voluntary basis. Critical-peak pricing (CPP) goes a step ful~her than TOU pricing by adjusting prices more frequently and with shorter notice, with an increase of prices for peak usage hours during days of unusually high electric system demand to directly reflect actual wholesale market price spikes. Real-time pricing (RTP) retail rates change on an hourly, or possibly more Kequent, basis. Rates are usually announced to customers on a~ advanced, or fox, yard, basis. Peak load reduction credits (PLRC} are provided to large load customers who enter into pre- established a~eements to reduce load during peak hours. At the current time, CPAU offers TOU rates to commercial and industrial customers (rates E-4- TOU and E-7-TOU). Also, CPAU’s existing volunta’y toad curtaihnent prodam has successfully demonstrated demand reduction results that help to ensure reliable system operation and minimal overhead cost. DISCUSSION TMough prior studies and economic evaluations, staff has determined that implementation of time-based metering and-pricing options are not cunently practical or effective for some Palo Alto electric customer classes, and it is therefore not appropriate to implement the EPACT time- based metering standards for all customer classes at this time. This is due primarily to utility billing system limitations, insufficient metering capability, and uncertain and expected low customer participation at current time-based cost differences. Limitario~zs of the current customer it~formatio~ and billing s)’s~ems. The cmrent Utilities billing system camot readily accept the necessary pro~amming modifications required to generate customer bills on a TOU rate option. Manual billing would be required to implement these rate options, and the cm-rent staffing level is insufficient to support manual billing. The CPP, RTP and PLRC time-based rate options are not available under the cunent billing system either. The cunent billing system version is no longer being supported by the software vendor, which has resulted in the business decision to migrate to a new Utility Customer Information System in conjunction with the city-wide SAP upgade. b~suffcien~ meteri~g capabilio’. The only Palo Alto meters capable of time-based pricing are demand meters currently installed in convnercial and industrial applications. The majority of cunent meter installations are not capable of being pro~ammed for TOU, CPP or RTP options. A new policy would need to be established to replace existing residential and commercial single- phase electric meters with meters capable of recording consumption by time. Staff’s review of options for residential and commercial metering for the FY 2008/09 will include meter purchasing, calibration standards, communication capabilities, meter maintenance budgets, staffing, and Capital Improvement Program impacts. CMR:299:07 Page 2 of 3 U~certai~ a~d low customer garticigatio~z. Palo Alto has offered voluntary TOU rates to commercial demand-metered electric customers since 3anuary 2002, but has not had any customers choose service under the commercial TOU rate schedules. Furthermore, consultant studies to evaluate the customer potential for a demand response prodam, whereby customers receive financial incentives to reduce demand during high demand on-peak hours based on the Ufility’s avoided cost, have determined that such pro~ams require ~eater differences between on- peak and off-peak prices than is currently available to attract significant customer participation. Low participation may require charging pa-ticipating customers for their time-based meter (common to other electric utilities), which would make the program even less attractive. For these reasons, staff has determined that it is not appropriate to implement the electric time- based metering and pricing options required by the EPACT at the current time. RESOURCE IMPACT The costs associated with the recommended evaluations will be included in the various Utilities Department operating budgets. POLICY IMPLICATIONS These recommendations do not represent a change in current City policies. ENVIRONMENTAL REVIEW The adoption of the resolution does not constitute a project under the California Environmental Quality Act. Therefore, no enviromnental assessment is required. ATTACHMENTS A: Energy Policy Act of 2005, Smart Metering, SEC. 1252 PREPARED BY:Lucie Hirmina, Utilities Rates Manager REVIEWED BY: DEPARTMENT HEAD: Tomm Marshall, Asst. Dir. of Utilities, Resource Management Tom Auzem~e, Asst. Director of Utilities, Customer Support Services Director of Utilities CITY MANAGER APPROVAL: EMILY HARRISON Assistant City Manager CMR:299:07 Page 3 of 3 (a) In General- Section ! 1 l(d) of the Public Uti]ity Regulatory Policies Act of" 1978 (l 6 U.S.C. 262t(d)) is amended by adding at the end the followhag: (14) TIME-BASED METERinG AND COMMUNICATIONS- (A) Not later than 18 months after the date of enactment of this paragraph, each elecUic utility shal! offer each of its customer c]asses, m~d pro vine individual customers upon customer ~ ~ the ~ " ~’request, a time-based rate schedule under vh~cn rate c~argca by the electric utility v" -’~ ’ " ~a~ ourm~ different time periods and reflects the vaqance, if any, in the utility’s costs o£ generating and purchasing electcic~ty at the wholesale level. The time-based rate ~chemfle shall enable the electric consumer to manage energy use and cost through advm~ced metering and communications tec!~ology. (B) The t}:?es of time-based rate schedules that may be offered under the schedrde referred to in subparagaph (A) include. among others-- (i) time-oLuse pricing whereby electrici"U p~fices are set for a specific time period on an advance or for~vard basis, t3?ically not changing more often tha~ twice a year, based on the utility’s cost of generating and/or purchasing such elecU@ity at the wholesaie level for the benefit of the consumer. Prices paid for energy consumed during these periods sha!l be pre-established :~d known to consumers in advance of such consumption, allowing them to vary their demand and usage in response to sud~ prices and manage their energy costs by shifting usage to a lower cost period or reducing their consumption overall; (ii) critical peal< pricing a,:hereby time-of-use prices are in effect except for certain peak days, when prices may reflect the costs of generating an@’or purchasing electricity at the wholesale tevel and when consumers may receive additional discounts for reducing peak period energy consumption; (iii) real-time pricing whereby electricity prices are set for a specific time period on an advanced or forward basis, reflecting the utility’s cost of generating and/or purchasing electricity at the wholesale level, and may change as often as hourly; and Page l of 5 ENERGY POL!CY ACT 2005, 5"ub~itle ff--Atnendme~:~s to PURPA, Secffon t252 (iv) credits for consumers with large loads who enter into pre-established peal{ load reduction agreements that reduce a utility’s planned capacity obligations. (C) Each electric utility subject to subparagraph (A) s!~all provide each cusiomer requesting a time-based rate with a time- based meter capable of enabling the ulilily and c~tstomer to o~er and receive such rate, respectively. (D) For purposes of implementing ttais paragraph, any reference contained in this section to the date of enactment of~he Public Utility Regulatory Policies Act of t 97.8 shall be deemed to be a reference ~o the date of enactment of this paragraph. (E) In a State that permits third-party martceters to sell electric energy to retail electric consumers, such consumers shal! be entitled to receive the same time-based metering and communications device and service as a retail electric consumer of the electric utility. (F) No>vithstmnding subsections (b) and (c) og section ! 12, each State regulatory authority shal!, not later than ] 8 months after the date of enactment of this paraN:aph conduct an investigation in accordance with section 115(i) and issue a decision whether it is appropriate to implement the stm~dards set out in subparagraphs (A) ea~d (C). (b) State h~vestigation of Demand Response and Time-Based Metering- Section i15 of the Public Utility Regulatory Policies Act of 1978 (t6 U.S.C. 2625)is amended as follows: (1) By inserting in subsection (b) after tt~e phrase the stm~dmd for time- of-day rates established by section 11 !(d)(3) the following: and the standard for time-based metering and comn~unications established by section ! 11 (d)(14). (2) By inserting in subsection (b) after the phrase me likely to exceed the metering the following: and comrnm~ications. (3) By adding the at the end the %ltowing: (i) Time-Based Metering and Communications-In making a devermination with respect to the standard established by section 111(d)(.14), the investigation requirement of section 111(d)(14)(F) shall be as follows: Each State regulatory authority shall conduct an investigation and issue a decision whether or not it is appropriate for electric utilities to provide and install time-based meters and communications devices for each of their customers which enable such customers to participate in time-based pricing rate schedules and ott~er demand response progrmns. Page 2 of 5 (c) Federal Assistance on Demand Response- Section 132(a) oi:the Public Uti!ity Regulatory Policies Act of 1978 (16 U.S.C. 2642(a)) is amended by ~ ~,no a~ the end oF ~arao~-aph ~ s~riking the period a* the end paragraph (4) and inserting "and", and by adding ~he following a~ the end thereo~ (5) ~echnologies, ~ecl~niques, and rate-n~aking methods related ~o advanced metering and commttnications and the use o~:Vhese ~ec~no]ogies, techniques and methods in demand response p~og~ams. (d) Federal Guidance- Section 132 of the Public Utility Regulatory Policies Act oi’! 978 (i6 U.S.C. 2642) is m~ended by adding the tb!lowing at the end the1 eo~. (d) Demand Response- The Secretary sha]l be responsible For-- (1) educating consttmers on the availability, advantages, and benefits of advanced metering and communications technologies, including the l-~unding o~~ demonstration or pilot projects; (2) ~ o~king with Sta~es, utilities, other energy providers and advanced metering and con~munications experts to iden~i,,’ and address bar’ciers to the adoption of" demand response pro~Ta~:ns~ and (3) not later than t 80 days after the date of" enactment of the Energy Policy Act o~2005, providing Con~-ess with a report that identifies and quantifles the national benefits of demand ~-esponse and makes a recommendation on achieving specie% levels ofsuc]~ benefits by January I. 2007. (el Demand Response and Regional Coordination- (!) IN" GENERAL- It is the policy.’ of the United States to encourage SVa~es to coordinate, on a regional basis, State energy policies to p~ovide reliab]e m~d afTordable demand response services to the public. (2) TECHNICAL ASSISTANCE- The Secretary of Energy shall provide technical assistance to Stales and regional organizations tom~ed by 2 o~- more Sta~es to assist them in-- (A) iden, if’y:q~.g the areas with the greatest demand response potenvial; (By identif’ying and resolving problen~s in transn~ission and distribution networks, including tt=-ough the use of" den~and response; (C) developing plans and programs to use demand response to respond to peak demand or emergency needs; and (D) identii3.ing specific measures consumers can take to participate in tt~ese demand response prog~’ams. Page 3 of 5 (3) REPORT- Not later than I; year after the date o.t ~ ~nactment o " ¯ of the Energy Policy Act of 2005, the Commission shall prepare and publish an annual report, by appropriate region, that assesses demmad response resources, including those available from ali consmner classes., which identifies a~d reviews-- (A) saturation and penetration rate of advanced meters and communications technologies, devices and systems; (B) existing demand response pro~ams and time-based rate pro~ams; (C) the mmual resource contribution of demand resources; (D) the potential %r demand response as a quantifiable, reliable resource for regional plmming purposes; (E) steps taken to ensure that, in regional transmission planning and operations, demand resources ca-e provided equitable treatment as a quantifiable, reliable resource relative to the resource obligations of any load-serwing entity, nm~smission provider, or transmitting party; and (F) regulatory bm’riers to improved customer participation in demm~d response, peak reduction m~d critical period pricing pro~’ams. (0 Federal Encouragement of Demm~d Response Devices- It is the policy of the United Steaes that time-based pcicing and other fbnns of demand response. whereby electricity customers are provided with electricity price signals and the ability to benefit by responding to them, shall be encouraged, the depioyment of such technology and devices that enable electricity customers to participate in such pricing mad demand response systems shall be facilitated, and mmecessary ba~-iers to demand response participation in energy, capacity and ancillary service markets shall be eliminated. It is further the policy of the United States tha’t the benefits of such demand response that accrue to those not deploying such tectmology and devices, but who are part of the same regiona] electricity entity, shall be recogqfized. (g) Time Limitations- Section 1 !2(b) of the Public Utili*y Regulatory Policies Act of i978 (16 U.S.C. 2622(b)) is amended by adding -at the end the following: (4)(A) Not later than ] year aRer the enactment of riffs paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority) and each nonregulated electric utility shall commence the consideration referred to in section 11 !, or set a hearing date for such consideration, with respect to the standard established by paragrq)h (14) of section ! 1 t (d). Page 4 of 5 POLtCY ACT 2005,, St~,btitle E--.41,,etzdt;,e1"~ts to PURPA, Sectio~ 1252 (B) Not later thm~ 2 years after the date of the enacu,ment of this paragraph, each State regulatory authority (with respec~ vo each electric utility %r which it has ratemaking attthority), and each nonregulated electric utility, shall complete the consideration, and shall mad,:e the determination, refe~q:ed to in sectio~a 11 ] with respect to the staqdard established by paragraph (14) of section 11 ] (d). (h) Failure to Comply- Section 112(c) of the Public Utility Regulmory Policies -~ .~,~(c))is amended by adding at t!~e end ~he Fol!owing:Ac~ of 1978 (i6 E.S.C. ~r:’~° In the case of the standard established by paragraph (14) of section i1 l(d)~ the reference contained in this subsection to the date of enactment of this Act sha!l be deemed to be a ret’erence to the date of enactmem of such paragraph (!4). (i) Prior State Actions Regarding Stoat Metering Standards- (!) IN GENERAL- Section tl 2 of the P@~lic Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended by adding at the end the folio_wing: (e) Prior State Actions- Subsections (b) an~d (c) of this section shall not apply to the standard established by para~’aph (14) of section 11 l(d) in the case of any elecvl-ic utility in a State if, before the enactment of this subsection-- ( t ) the State has implemented %r such utility the standard concerned (or a comparable standard); (2) the State regulatory attthority for such State or relevam nonregulated electric utility has conducted a proceeding to consider implementation oi’the standard concerned (or a comparable standard) :[’or such u~ility within the previous 3 years; or (3) the State legislature has voted on the implementation o17 such standard (or a comparable standard) for such utility within the previous 3 years. (2) CROSS REFERENCE- Section 124 of such Act (16 U.S.C. 2634) is amended by adding the following at the end thereof: In the case of the standm’d established by paraNaph (14) of section 111(d), the reference contained in this subsection to the date o:f enactment of this Act shal! be deemed to be a reference to the date of enactment of such paragraph (14). Page 5 of 5