HomeMy WebLinkAboutStaff Report 198-05Implementation Plan Update
Outlined below is the status update of the not-yet completed elements of the LEAP
Implementation Plan. Tasks 1 through 3 were completed as of the prior report.
4. Evaluate and Design a Pilot Customer Demand-Response Program
"Demand response" refers to short-term reductions in electricity use during times of high use
or high cost and value. CPAU's voluntary curtailment program with large key customers is in
place and is tested periodically. The most recent test in June 2004 reduced load by
approximately 4 MW.
The California Public Utilities Commission (CPUC), the regulatory oversight body for the
investor-owned utilities, has approved large commercial and industrial tariffs that could
increase prices during the highest demand hours (afternoon) to three times the usual rate
when resources start to become insufficient to meet loads. Staff is closely following these
retail rate approaches to demand management to see if such a retail rate approach results in
significant customer participation and resulting peak load reduction.
Staff conducted a customer survey of large facility managers in September to gather
feedback regarding customer readiness and barriers to implementation. The survey identified
three generic types of demand response programs:
a. Voluntary Load Curtailment: customers reduce load when the system is under
stress;
b. Time-of-Use (TOU) rates: Electric rates would contain a price differential
between different time periods, usually on and off peak, and customers
modify/shift energy use to minimize overall operating costs, and;
c. Economic Demand Response: Electric rates can change weekly, daily or even real
time, reflecting changes in cost to CP AU, and customers modify/shift energy use
in response.
Seven of the twenty attendees responded to the survey. The feedback was almost unanimous,
with all customers willing to reduce load when necessary either as good corporate citizens or
in order to avoid blackouts. The other two options were not viewed favorably.
Staff is also moving forward with the Meterlinks advanced metering program. Meterlinks is a
web-based program where Palo Alto's largest utility customers and customer representatives
. can view their utility usage profile on a website that is updated daily. Currently CPAU has 62
customer electric meters and 4 customer gas meters on the system. Staff can also view the
citywide usage with connections to Citygate electric and gas meters. The Meterlinks program
gives customers more information about their energy usage to help them make informed
decisions regarding energy efficiency at their facilities. Meterlinks can also serve as a key
customer interface that would be needed for any future demand response program designed
by the Utilities Department. This platform or one like it could serve as a means to be able to
quickly implement a demand response program and to be able to verify participation and
actual load reductions. Meterlinks is also described in the public benefits plan staff report to
the Uilities Advisory Commission (Attachment B).
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CPAU has undertaken two distributed resources studies: distributed generation valuation
methodology, and local resource integration. These applied research projects dovetail well
with the local generation alternatives feasibility study.
The distributed generation valuation methodology project is now complete. The final Palo
Alto case study report from the CEC was finalized in January 2005, and is available at
http://www.energy.ca.gov/pier/final project reports/CEC-500-2005-029.html. The results
indicate that there several potential locations in Palo Alto, particularly the Stanford Research
Park area, where small-scale supply resources could reduce system losses, enhance reliability
and effective carrying capacity of the distribution system, and avoid some operating costs.
These added benefits will be considered in comparing energy efficiency, cogeneration and
small distributed generation alternatives in formulating recomme ndations for meeting
CPAU's electric supply deficit.
The local resource integration project is underway, being conducted by the Rocky Mountain
Institute. The project includes estimating technical, economic and achievable potential for
cogeneration and small-scale distributed generation, in coordination with energy efficiency
opportunities described earlier. Staff is meeting with several large customers who have
expressed interest in the applicability of cogeneration to their facilities to estimate the
feasibility and practicality of implementing such a strategy. The RMI study will also examine
the role that gas-fired generation would play in CPAU's diversified portfolio approach to
meeting long-term electric supplies. The project is expected to be completed during the
summer of 2005. Detailed technical and economic feasibility analysis of any specific
recommended alternatives would be conducted by environmental and power engineering
professionals.
The results from the two studies will be combined in evaluating the technical and economic
potential for local resource alternatives, both demand-side and supply-side, in developing
recommendations for energy efficiency, distributed generation, and centralized gas-fired
generation.
11. New Tools to Manage Portfolio Risk
The dominant driver for electric portfolio risk is hydro uncertainty -the monthly, seasonal,
and annual variability in hydroelectric generation Staff is evaluating various approaches to
managing the cost impacts of fluctuations in hydro forecasts and generation. The Short-Term
Electric Asset Management (STEAM) guidelines set the parameters for laddered fixed-price
purchases, which currently serves as the main tool for stabilizing supply costs
(CMR:331 :04). Additionally, staff is evaluating the robustness of the electric portfolio under
various scenarios, testing how different scenarios are affected by including various quantities
of different products and strategies.
One potential tool for managing CPAU's hydro risk is an exchange of a physical volume of
uncertain quantity (equal to the Western Base Resource), for a fixed physical volume of
energy over a period of about 5 years. This type of exchange could dramatically reduce
CPAU's hydro volume risk exposure within the exchange period. Staff anticipates seeking
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Council approval, soliciting pncmg proposals and executing an agreement, if found
acceptable, by fall 2005 for energy deliveries in 2006-2010.
12. Low-Cost, High Value Prospects to Acquire Supply Related Resources
No specific, executable, high value supply opportunity has arisen to this point. The potential
to reduce transmission costs while increasing reliability of supply to the City is being
investigated. Staff continues to optimize existing available transmission and supply resources
to maintain low and stable retail rates.
13. Analytical Tools used to Manage the Electric Portfolio
Staff has implemented the use of revamped and upgraded electric portfolio computer models.
A market transaction database is now in place that allows CPAU and ASD staff to closely
track the market transactions staff is undertaking to fill the City's energy needs. Staff is also
closely working with Western and NCPA to better model hydro production variability to
better respond to cost variation caused by hydro production uncertainties. Staff is in the
process of enhancing the existing scenario analysis and developing additional multiple
scenarios and stress tests to test the portfolio's perfonnance and impact on reserves under
such scenarios.
14. Monitor and Participate in Regulatory and Legislative Initiatives
Utilities staff provided a legislative priorities report to the UAC in January 2005. The report
describes the key areas affecting Palo Alto and is included as Attachment C.
City and NCPA staff continue to actively participate in the California Independent System
Operator (CAl SO) workgroups and Federal Energy Regulatory Commission (FERC)
technical conferences to influence the proposals to redesign California's transmission
markets, expected to be in place in the 2006-07 timeframe. CAISO costs continue to
increase and the complexity of the proposed regulatory schemes continue to be unduly
complex. Staff involvement here is essential to attempt to rein in the high costs of
restructuring.
There are also a number of ongoing proceedings and initiatives relating to Bay Area
transmission planning and upgrades that staff, either directly or via the Bay Area Municipal
Transmission Group is monitoring and participating in, with the goals to maintain grid
reliability, promote a streamlined planning process, and support economic and reliability
driven transmission projects.
15. Rate Stabilization Reserves
In December 2003, Council approved revised Utility Reserves Guidelines (CMR: 483:03) to
keep up with the changing nature of the electric supply portfolio. The guidelines specifically
set aside approximately $22 million dollars to make additional energy purchases in the event
of 2 consecutive dry hydro seasons, without having to increase retail electric rates to
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customers. Since commodity budgets are set based on average hydro conditions, staff expects
to seek budget increases and draw down from reserves at mid-year if the actual hydro
production turns out to be below average. The combined generation from Western and
Calaveras for CY 2005 is projected to contribute 44% of the City's total supply (29%
Western, 15% Calaveras), which in a normal hydro year would be 52% (39% Western, 13%
Calaveras). The total supply rate stabilization rate reserve addresses numerous other risks in
addition to hydro variability, with a total guideline range of $27 to $54 million for FY 2005-
2006.
Activities in the electric supply rate stabilization reserves are detailed in the financial section
of each UAC quarterly report. Market prices have increased and therefore a review of the
financial reserves guidelines is scheduled with the UAC in April 2005.
RESOURCE IMPACTS
This report is a plan update. Resource requirements to implement elements of the plan have been
included in the Council adopted budget. Specific contracts required to implement individual
elements of the plan will be brought to Council at the appropriate times.
POLICY IMPLICATIONS
The LEAP Implementation Plan conforms to the Council approved LEAP Objectives and
Guidelines. The plan is also in accordance with the Utilities Strategic Plan, Energy Risk
Management Policies, and Comprehensive Plan Goal N-9.
ATTACHMENTS
A: LEAP Implementation Plan
B: Public Benefits Plan 2005-2007 Report (UAC, Jan 2005)
C: Legislative Priorities Report (UAC, Jan 2005)
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PREPARED BY:
Ipek Connolly, Resource Planner
Lindsay Joye, Marketing Engineer
Karl Knapp, Sr. Resource Planner
Brian Ward, Residential Acct. Rep
REVIEWED BY:
Debbie Lloyd, Resource Planner
Monica Padilla, Resource Planner
Shiva Swaminathan, Sr. Resource Planner
Tom Kabat, Sr. Resource Planner
Anthony Enerio, Manager Utilities Marketing
Girish Balachandran, Assistant Director of Utilities
Tom Auzenne, Assistant Director of Utilities
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
CMR:198:05
JOHN ULRICH
Director of Utilities
EMILY HARRISON
Assistant City Manager
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