Transforming Distribution Companies: Challenges & Strategies for Modernization

1. Distribution Companies –Where the Network Meets the Load Merlin Raab Renewable & Energy Efficiency Sr. Consultant Wisconsin Public Service Corporation October 02, 2012

2. Agenda • Overview of Distribution Company • Distribution in the Value Chain • Responsibilities of Distribution Company • A Typical Day • Challenges Distribution Companies – Where the Network Meets the Load

3. Electric Distribution Utility-1990 Distribution Companies – Where the Network Meets the Load

4. Electric Distribution Utility-2012 Distribution Companies – Where the Network Meets the Load

5. Physical Characteristics • Electric distribution company begins at the substation where the electricity is “stepped down” to distribution voltage • Lines feed out from the substation (typically in the range of 7,200 to 25,000 volts) • At customer locations, electricity is “stepped down” again to a usable voltage – 120/240 volts for residential customers Distribution Companies – Where the Network Meets the Load

6. The System Itself • System has to be designed and constructed to: • Ensure proper voltage levels • Ensure equipment such as lines and transformers do not overheat when peak flow occurs (hot summer day) • Withstand the elements – weather, lightning, etc. • Handle additional load such as new customers’ load or existing customers adding load • To do this, engineers develop computer models of the distribution system to conduct load flow analysis Distribution Companies – Where the Network Meets the Load

7. Distribution System Modeling / Analysis Output from load flow analysis is used for: • Determining system efficiencies – present and future • Determining if equipment overload conditions exist • Determining high-loss line sections • System deficiencies during emergency switching or temporary load transfers • Over-current protection plans • Feasibility of large load additions • Proper capacitor placement • Long-range planning – timing of substation reinforcements Distribution Companies – Where the Network Meets the Load

8. Distribution System Modeling / Analysis Increased emphasis on off-peak electricity usage will change the shape of our typical load curve and our computer model • Electric vehicles charging during off-peak hours • Customers shifting other appliance loads tooff-peak hours Distribution Companies – Where the Network Meets the Load

9. 150% Equipment Rating 100% 50% Actual Load 12 PM 6 AM NOON 6 PM 12 PM Load Cycle of Substation Transformer - Usually repeats every 24 hours - Load fluctuates throughout the day - Usually one peak period in the day Distribution Companies – Where the Network Meets the Load

10. Distribution in the Value Chain • Supply produced at central plant or distributed resources • Central station supply is dispatched to the “Grid” and then into one of three grids: ERCOT, WECC, and Eastern Interconnection • Transmission lines transmit energy to the market • The market matches supply offers and load bids • Control operators oversee transfer of energy to load serving distribution companies • Energy is “stepped down” to a distribution area and then further “stepped down” to a customer site Distribution Companies – Where the Network Meets the Load

11. NERC Interconnections Distribution Companies – Where the Network Meets the Load

12. NERC Regions and Balancing Authorities Distribution Companies – Where the Network Meets the Load

13. Distribution Distribution Distribution Distribution Distribution Distribution Generation Generation Generation Generation Generation Generation Generation MISO Market in General • Central bid/offer/settlement MW Schedules/Dispatch MW Schedules MISO Market Bids Offers Energy Energy Distribution Dollars Generation Prices Dollars 264 Load Zones 6,009 Generators Distribution Companies – Where the Network Meets the Load

14. Retail Functions Meter to Cash Customer/Government Relations Construction/maintenance Reliability Engineering studies Line clearance Storm restoration Power continuity/quality Safety Public Employee Economic Delivery Dispatch decisions “Cost per” Compliance PSC quality standards NERC reliability (Local Balancing Authority) FERC OSHA Environmental andCorporate Stewardship Environmental principles Hazardous waste/site run-off management Community outreach Responsibilities of DistributionCompany – “Obligation to Serve” Distribution Companies – Where the Network Meets the Load

15. A Typical Day in 1990 • Monitor system to ensure adequate amount of generation to serve load; contract for additional generation if needed • Voluntary compliance with NERC & regional reliability standards • Build new and maintain distribution system • Minimal number of customer-owned generators putting power back to the grid • Respond to power outages that are received via phone from customers Distribution Companies – Where the Network Meets the Load

16. A Typical Day in 1990 (continued) • Customers who experience outage remain without power until line electricians travel to the site to address cause • Customer’s receive information on restoration times from radio & TV • Send out meter readers who bring back reads for use by customer billing • Customers generally not concerned with the timing of use of electricity • Appliances, such as dishwashers and refrigerators, run at will • The number of customers behind on their bill is small and demographically homogeneous Distribution Companies – Where the Network Meets the Load

17. A Typical Day in 2012 • Monitor system real-time and purchase power on the MISO market to match load requirements or institute demand control • Limited customer-owned renewable generation putting power onto the system requiring the distribution company to adapt systems to handle it • Systems used to proactively determine location of outages and dispatch repair crews • Customers receive restoration information via social media • Limited use of automated switches installed on distribution system isolate faulted sections of line and automatically restore power to a large portion of customers without power Distribution Companies – Where the Network Meets the Load

18. A Typical Day in 2012 (continued) • Mandatory compliance with NERC & regional reliability standards with threat of financial penalties • Meters read from a central location automatically through communications network. Customers have access to unbilled energy consumption via web-portal • Distribution system modernization technology /smart meters allow customers to make full advantage of time sensitive rates? • The number of customers behind on their bill growing and demographically diverse Distribution Companies – Where the Network Meets the Load

19. Prices to Devices Figure 1. Dynamic Energy Management Infrastructure for a Commercial Building Source: EPRI Distribution Companies – Where the Network Meets the Load

20. Challenges Increased number of renewable source generators on the distribution system & possibly micro-grids • Changes load flow analysis (computer model) due to electricity flowing back to the system • Requires modifications to equipment on those circuits, such as over-current protection equipment and conductors • Requires modifications to operating procedures for safety • Net-metering: Who pays for maintaining the system? Distribution Companies – Where the Network Meets the Load

21. Challenges • Distribution companies will need to make significant investments in equipment to accommodate increased DG and increased off-peak usage • Limited “Smart System” benefits to rural customers • Regulatory Uncertainty regarding “Smart system investments” • Who bears the risks? • Opt out vs. Opt. in pricing options • Security & privacy issues • EMF concerns Distribution Companies – Where the Network Meets the Load

22. Challenges • Customer • Keep costs down (low rates) amid cost pressure • Help understand rate vs. bill – energy optimization • Shareholder • Maintain attractive, risk-adjusted return • Employee • Graying of industry / training / retention /cost reduction Distribution Companies – Where the Network Meets the Load

23. Questions? Distribution Companies – Where the Network Meets the Load