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Ohio’s Hybrid Electric System

Ohio’s Hybrid Electric System. A review of opportunities to purchase power, Distributive Power Renewable Power Conservation Howard Petricoff Vorys , Sater , Seymour & Pease LLP. Background on Ohio Electric Market.

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Ohio’s Hybrid Electric System

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  1. Ohio’s Hybrid Electric System A review of opportunities to purchase power, Distributive Power Renewable Power Conservation Howard Petricoff Vorys, Sater, Seymour & Pease LLP

  2. Background on Ohio Electric Market Prior to 1999 – all electric service – generation, transmission and distribution was a monopoly service. State of Ohio awarded a monopoly to an electric utility to serve everyone in their service area and in exchange the utility had to pledge to provide service to anyone in the service area at rates approved by the Public Utilities Commission Senate Bill 3 – Introduced Retail Competition Started in 2000 but was phased in Utilities that had above market generation rates got transition payments spread out over up to ten years Most shopping in FirstEnergy (FE) service territory because generation rates were highest there Proprietary and Confidential

  3. Major Legislative Debate Began in Fall 2007 and Concluded in Spring 2008 – Senate Bill (SB) 221 SB 221 Became Effective on July 31, 2008 – Created a Hybrid Market Structure Utilities remained responsible for supplying generation as the provider of last resort (POLR). Prices for the POLR generation set by the Commission, but not on strict cost of service basis Utilities can elect to outsource the POLR obligation by using a public auction – Market Rate Option (MRO)

  4. Senate Bill 221 – Hybrid Market Structure • Ability of utilities to pass on environmental compliance costs • Renewable portfolio standards • Energy Efficiency Targets • Enhancements to large scale government aggregation programs • Creation of a Federal Energy Advocate Proprietary and Confidential

  5. SB 221 - Innovations • SB 221 established renewable and alternative Credits • Incentive program for renewables • Incentive program for solar • Requirements that suppliers – must buy renewable energy credits • competitive retail electric suppliers • Electric distribution utilities • Liberalized the right of a customer to make use of distributive power. • Waste heat generation • Solar panels • Wind turbines • Biomass and waste generation • Provided for net metering

  6. Alternative Energy Portfolio Standards • Alternative Energy Portfolio Standard effects all Ohio electric utilities and all competitive retail electric service (CRES) providers serving Ohio retail customers • Compliance started 1/1/09, 1st Compliance Plans Due April 15, 2010 • By 2024, at least 25% of retail sales must be supplied with energy from alternative energy resources • Up to ½ of this may come from “advanced energy resources” • Modification that increases generation output without additional CO2 emissions, Distributed generation/cogeneration, Clean coal, Advanced nuclear energy, Fuel cell, Advanced solid waste, and Demand side mgmt and energy efficiency • At least ½ shall come from renewable energy resources • Solar PV or solar thermal, Wind, Hydro, Geothermal, Solid waste, Biomass, Fuel cell with feedstock, storage facility if pumped by renewable resource • Other Aspects • ½ of the renewable energy resources (inc solar) must be generated by facilities in Ohio • Any out of state resource (inc solar) must be shown to be deliverable into Ohio • RECs must be registered in PJM GATS or MISO’s M-RETS or other credible tracking system. • REC may be used any time in the 5 calendar years after date of initial purchase. • Alternative Energy will be scaled back if it raises the cost of power by more than 3%

  7. Energy Efficiency & Demand Reduction Programs • Energy Efficiency Standards effects all Ohio electric utilities • Each Utility Has a Variety of Programs to Achieve Targets • Each Utility must reduce both its peak demand and MWh usage • An 18-month pilot program was recently approved by the PUCO designed to streamline the process for mercantile customers to enroll in utility energy efficiency programs. • Single application for all utility service territories • Automatic approval process for customers who agree to a cash rebate reasonable arrangement in lieu of exemption from the utility energy efficiency rider (requires monetary investment by the customer) • Simplification of incentive programs

  8. Duke Energy Ohio – ESP II • Based on an ESP model • Competitive bid for capacity and energy for the standard service requirement • State Compensation Mechanism set at RPM Price • Dropping to $20 MW-day+ June 2012 PY • Increase to $27+ MW-day +June 2014 PY • Increase to $125+ MW-day

  9. Other Relevant Duke Energy Issues • SB 315 changes in RECs for CHP • Revolution in Gas Pricing • Current Shopping Figures • Market for RECs Proprietary and Confidential

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