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SEPTEMBER/OCTOBER 2014

FIRSTENERGY’S TONY ALEXANDER:

Reaching New Heights32

54

BUILDING A STRONGER GRID

STREAMLINING THE RESTORATION PROCESS

SAFER, SMARTER, GREENER

EXPERIENCE MATTERS

DNV GL delivers a unique customer experience by uniting the strengths of DNV, KEMA , PWR Solutions and GL. Our energy experts around the world take a broad view to support your business, and to enable a safe, reliable, effi cient and sustainable energy supply. From KEMA Type Test Certifi cation to power systems planning, regulatory compliance, renewables integration and sustainable use, we have you covered. When experience matters, trust DNV GL’s 150-year heritage of integrity, impartiality and innovation.

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DNV GL is the gold sponsor of the Gulf Coast Power Association’s annual meeting on September 30th, in Austin Texas. Join us to explore “The Expanding Focus of Competitive Retail Services”. Learn more at www.dnvgl.com/GCPA2014.

View our Energy Video here.

SEPTEMBER | OCTOBER 2014 3

www.eei.org

features SEPTEM B ER/OCTOB ER 2 014 • VOLUME 39 , N UMB ER 5

20 Reaching New HeightsGrid enhancement and effective policymaking are essential ingredients to a sustainable 21st-century electric system.

B Y TO NY A L E X A N D E R

32 Building a Stronger GridUtilities are investing billions in the nation’s transmission system to improve reliability, relieve congestion, facilitate competition, and support a diverse and changing generation portfolio.

B Y E L I S A W O O D

20

32 For more content, visiteei.org/EPRead the digital interactive edition

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On the cover: Tony Alexander, president and CEO of FirstEnergy Corp., on meeting customers’ need for safe, reliable, and affordable energy.

6 powering changeEmpowerment through engagement.

8news + trendsUtility fleets lead electrification charge… and more.

19 energycareers@workGetting into energy.

51 credit ratingsIndustry’s average credit rating improves.

54 operationsStreamlining the service restoration process.

58 the edgeGetting solar pricing right.

60 plugging innovationDiversifying renewable energy in Michigan.

departmentsSEPTEMBER/O CTO BER 2 014 • VOLUME 39, NUMBER 5

E L E C T R I C P E R S P E C T I V E S

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Navigant’s energy industry expertise delivers insightful guidance to assist utilities in overcoming obstacles, maximizing strengths, and creating innovative solutions.We assist utilities with:

» Transmission and electricity markets

»

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E lectric companies around the country have been transforming how they communicate and engage with customers, and for good reason.

According to Accenture’s energy consumer research, customers in the United States spend less than seven minutes each year interacting with their electric

companies. Studies show, however, that engaged customers are those who are happier with their service and more actively participate in utility innovations. Disengaged cus-tomers, says market research company J.D. Power, are less satisfied and most likely to resist new utility initiatives, ranging from smart grid infrastructure updates to rate increases.

In short, the future belongs to companies that actively engage their customers and empower them to drive change—and that engagement is happening digitally. J.D. Power’s research shows that customers prefer—and recall—email and website updates over traditional brochures and other print media. And with modern technology, companies

can personalize those updates based on customer demographics and meet the needs of individual consumers who crave added value and a personal connection that aligns with their lifestyles.

In this evolving energy consumer landscape, another key takeaway is that customer satisfaction increases when utilities communicate more frequently and tell their own story—and our industry has quite a story to tell. Electricity does more than just power our homes and businesses. It allows us to connect to each other in new ways, creates local jobs to strengthen our economy, enables us to push the boundaries of technological innovation in nearly every industry, and is helping to secure a bright future for all Americans.

Edison Electric Institute’s We Stand For Energy campaign helps us tell this story. From the importance of fuel diversity to the security of the grid, We Stand For Energy reinforces that electricity is fundamental to our ev-eryday lives, and all electricity consumers deserve a greater voice in the

energy policies that affect how reliable, affordable, and sustainable electricity is. As the campaign gets underway, we are inviting consumers and other key stakeholders

to get involved. In the weeks and months ahead, we’ll focus on specific energy policies that impact the industry and affect the communities and customers our companies serve: maintaining and transforming our nation’s electric grid—the backbone of our

energy supply; promoting accessibility and fairness for all electricity customers; achieving balance by using all sources of energy and developing new technologies;

and helping Americans use energy wisely.

Driving world-class customer engagement requires dedicated leaders, great managers, and committed employees. Working together, we can build this community and make a difference while helping secure a bright energy future for all Americans. EP

The future belongs to companies that actively engage their customers and empower them to drive change—and that engagement is happening digitally.

Empowerment Through Engagement By Brian L. Wolff, executive vice president, public policy and external affairs, Edison Electric Institute.

powering change THO UGHTS O N THE EVO LVI NG ELECTRI CITY

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news + trends

T he Edison Electric Institute (EEI) recently released a white paper, “Transportation Electrifi cation: Utility Fleets Leading the Charge,” that focuses on the electric power industry’s effort to acceler-

ate the expansion of electric transportation in commercial and retail markets, beginning with electric utility fl eets. The paper encourages investor-owned electric utilities to meet an industry-wide goal to spend at least 5 percent of annual fl eet acquisition budgets on plug-in electric vehicles (PEVs) and technologies.

“The electric power industry is a tremendous leader in supporting electric transportation, but we must continue to strengthen our efforts and lead by example. One way we can do that is by leverag-ing our industry’s buying power to purchase more PEVs for our fl eets,” said EEI President Tom Kuhn. “The white paper released today is a road map for a long-term, coordinated effort to further spur the development of electric vehicle technologies in the electric transportation market.”

To help guide the effort, investor-owned electric utility CEOs designated Tony Earley, chairman, CEO, and president of PG&E Corporation, and Jim Piro, CEO and president of Portland General Electric (PGE), as co-chairs of the EEI Electric Transporta-tion Task Force. The mission of the task force is to increase the awareness, opportunities, and activities related to electrifi cation within the utility industry; collaborate with automakers and other stakeholders; and educate the public at large about the benefi ts of electric vehicles and technologies.

“Plug-in cars and trucks can make good business sense whether you’re a utility or any other business that operates a fl eet of vehicles,” said Piro. “At PGE, we’ve been working hard to support electric vehicle policy and infrastructure in Oregon, but we’ve also done the internal analysis and piloting needed to confi rm it’s time to build fl eet electrifi cation into our own budget. We encourage other utilities to do the same.”

According to the paper, electrifi cation of the transportation sector is a potential “quadruple win” for electric utilities and society, and it will enable electric utilities to support environmental goals, build customer satisfaction, reduce operating costs, and assure the future value of existing assets.

“Expanding the use of plug-in technologies is one of the most important opportunities we have as a country to continue diversifying our energy usage and to achieve our clean energy goals,” said Earley. “Electrifying our fl eets is about showing consumers that plug-in technology is thriving and delivers real benefi ts that make sense for us and our customers.”

The expansion of electric-based vehicles in utility fl eets will help utilities:reduce operating costs for fuel and maintenance;extend the useful life of the units based on their mechanical simplicity;improve crew safety through noise reduction (such as the ability to operate a bucket truck at height and still communicate with crew members on the ground);extend work hours of crews performing non-emergency work in communities with noise restrictions;reduce carbon emissions; and provide another avenue to engage customers about the products and services electric utilities provide.The white paper is part of an effort to accelerate the adoption of

PEVs and plug-in technologies by utilities and was written by a steering committee comprised of utility fl eet directors from across the country.

To download the full report, visit www.eei.org/issuesandpolicy/electrictransportation/FleetVehicles.

THE LATEST UPDATES AND EVENTS I MPACTI NG

TO DAY ’S ELECTRI C POWER I NDUSTRY.

Utility Fleets Lead Electrifi cation Charge

Plug-in cars and trucks can make

good business sense

whether you’re a utility or any other business that operates a fl eet of vehicles.

–Jim Piro, CEO and president Portland General Electric Corporation


POWER SUPPLY DIVERSITY

Free to EEI Utility Members

Free electronic access for EEI Utility Members. Subscriptions also available.

EEI Daily Energy News

Free electronic access for EEI Utility Members. Print copies available for additional cost.

Statistical Yearbook of the Electric Power Industry - Full Year 2012 Data

and Year 2013 Data as Available

Access online at: www.eei.org

Adiversifi ed portfolio is the most cost-effective tool avail-able to manage the inherent production cost risk involved

in transforming primary energy fuels into electricity, according to a recent study by IHS Energy.

“The Value of U.S. Power Supply Diversity” fi nds that a combination of factors—including chronically depressed wholesale power prices and proposed environmental regulations—is currently moving the United States toward a signifi cant reduction in power supply diversity.

“The new IHS study further reinforces the critical importance to the U.S. economy and to electricity customers of a diverse portfolio of fuel sources for the production of reliable and affordable electricity,” said David Owens, the Edison Electric Institute’s executive vice president of business operations and regulatory affairs. “The study fi nds that a less diverse U.S. power supply would increase electricity prices, lead to roughly one million fewer jobs, and decrease the typical household’s annual disposable income by around $2,100. We look forward to continuing to work with policymakers at all levels to preserve fuel diversity and fl exibility to enable the industry to deliver

reliable, affordable, and increasingly clean electricity to all customers.”

The study noted that incidents during last winter’s polar vortex demonstrated the value of diversity. Greater demand for natural gas and electricity to heat homes and businesses in the

Northeast strained the capability of pipeline systems, which led to localized price spikes.

At some points for brief periods, additional natural gas was not available at any price.

Oil-fi red power generation—although accounting for only 0.35 percent of generation in the Northeast in 2012—

provided a critical alternate supplement to the over-strained natural gas supply system

during the polar vortex, generating power that would have required delivery of 140 million cubic

feet per day of additional natural gas supplies if gas generation had been the only generating source available, the study said. In the Midwest, the increased utilization of coal-fi red power plants played a similar role by providing a necessary substitute for constrained natural gas-fi red power plants during the cold snap.

To download the full report, visit www.ihs.com/powerdiversity.

news + trends


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ICEBOX DERBY

Thirty-one aspiring female inventors competed over the summer to build and race electric cars created from old refrigerators as part of a new

initiative launched by ComEd. Co-sponsored by Girls4Science, Girl Scouts of Greater Chicago and Northwest Indiana, and the Chicago Urban League, the Icebox Derby was designed to educate and empower young women to explore opportunities in science, technology, engineering, and math (STEM).

The six-week-long Icebox Derby project challenged six teams of girls, aged 13-18, to build electric race cars out of recycled refrigerators. The girls relied on teamwork and ingenuity to complete the assignment but also had the support of mentors from ComEd and its community partners, as well as STEM experts, to guide them. This exciting educational competition provided the girls real-world experience and an understanding of the practical applications of STEM education.

“We are excited to launch this year’s inaugural Icebox Derby, which under-scores our commitment to STEM education, and look forward to providing a creative platform for these young women to develop their skills, while showcas-ing their tenacity, ingenuity, and talent,” said Anne Pramaggiore, president and CEO of ComEd, when the initiative was launched in mid-July. “As the local elec-tric utility in Northern Illinois, we understand that it is our responsibility to help power the communities we serve, not just today, but in the future. In addition to our commitment to advancing the reliability and sustainability of the services we provide, we are invested in helping to cultivate the young people who will become the nation’s next generation of innovators.”

The initiative began with a series of challenges each week that allowed the teams to put their STEM skills to the test as they built their Icebox Derby cars and ended with Race Day at The Field Museum in late August. Fans followed each team’s progress as the race cars came together and showed their support for individuals and teams along the way at www.theiceboxderby.com.

The Icebox Derby also leverages ComEd’s Fridge & Freezer Recycling program aimed at driving energy effi ciency. The Fridge & Freezer Recycling program is among a wide variety of tools and resources ComEd offers through its Smart Ideas® energy effi ciency programs to help its customers stay en-vironmentally conscious, conserve energy, and save money. ComEd recently announced that it achieved a milestone of recycling its 200,000th unit through the program.


UNDERSTANDING POVERTY IN AMERICA

Entergy Corporation’s Linda Barnes, Rep. Chris Gibson (R-NY), and Rep. Jim McGovern (D-MA) encourage attendees to take action to combat poverty.

What we need to

look at is how you

lift people out of poverty...America is the

greatest country in

the world because

of the opportunity.

–Rep. Richard Hudson (R-NC)

Representatives Barbara Lee (D-CA), Chris Gibson (R-NY), Richard Hudson (R-NC), and James McGovern (D-MA) hosted a poverty simulation for members

of Congress and their staffs on Capitol Hill in mid-July. Coordinated and run by Entergy Corporation and Catholic Charities USA, this simulation provided a way for policymakers and their staffs to experience the harsh realities of living in poverty in America.

Rep. Steny Hoyer (D-MD), in his opening remarks, encouraged attendees to participate, engage, and advocate to make sure America is growing its middle class. “This is not a partisan issue,” Hoyer said.

Rep. Hudson agreed. “What we need to look at is how you lift people out of poverty… America is the greatest country in the world because of the opportunity,” he said.

During the simulation, participants assumed the role of a low-income family member living with a shortage of money and an abundance of stress. Participants interacted with volunteers playing the roles of school administrators, service providers, bill collectors, and other people and institutions low-income Americans interact with in daily life.

“Being poor in America is hard work,” said Rep. McGovern. “The working poor don’t know what to do...We all should make sure that people can get out of poverty in this country.”

Originally developed by the Missouri Community Action Agency, this training module has been used by non-profits, government service agencies, and business leaders to increase knowledge and understanding of the dynamics of poverty and the hard choices and barriers that stand in the way of achieving self-sufficiency. Entergy has hosted more than 100 simulations with 8,000 participants in Arkansas, Louisiana, Mississippi, and Texas.

In 2012, 46.5 million people were living in poverty in the United States—the largest number in the 54 years the Census has measured poverty. The poverty rate (the percentage of all people in the United States who are poor) also remains high: 15 percent for all Americans and 21.8 percent for children under age 18.

UNITED STATES POVERTY RATE

ALL AMERICANS15%

CHILDREN UNDER 1821.8%

news + trends


ELECTRIC HOG

Harley-Davidson revealed Project LiveWire—the fi rst Harley-Davidson electric motorcycle—in late June.

The Project LiveWire Experience invites customers to test ride, provide feedback, and learn more about the story of the motorcycle. Even those who don’t yet ride will have the opportunity to feel the power of Project LiveWire through Jumpstart—a simulated riding experience.

A 2014 U.S. tour—kicking off with a journey down Route 66—will visit more than 30 Harley-Davidson dealerships through the end of the year. In 2015, the Project LiveWire Experience will continue in the United States and expand into Canada and Europe.

The bike offers a visceral riding experience with tire-shredding acceleration and an unmistakable new sound. “The sound is a distinct part of the thrill,” said Harley-Davidson’s Mark-Hans Richer. “Think fi ghter jet on an aircraft carrier. Project LiveWire’s unique sound was designed to differen-tiate it from internal combustion and other electric motorcycles on the market.”

Long-term plans for retail availability of Project LiveWire will be infl uenced by feedback from riders along the tour. Fans can learn more about Project LiveWire, as well as specifi c dates and locations for stops, at www.projectlivewire.com.

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news + trends


KID GRID

The United States might be lagging behind other countries in science and math, but some companies are taking unique steps to encourage future engineers. ABB and the Marbles Kids Museum in Raleigh, NC, recently launched a one-of-

a-kind, play-based power grid exhibit to generate children’s interest in science, technology, engineering, and math (STEM).Kid Grid introduces young children to electricity and power grid technology through hands-on, minds-on play. Kids learn how

to make smart energy choices and explore a pretend power grid complete with play versions of cables, control systems, motors, towers, and transformers, as well as real equipment provided by ABB. The exhibit promotes early learning in STEM education,

inspiring the next generation of great minds through interaction and energy stimulation to power up a bright future.

Companies have a vested interest in maintaining an educated work-force and breaking through traditional gender stereotypes. A shortage of American engineering graduates leaves many high-tech companies struggling to fi ll jobs. Projects such as Kid Grid are designed to give children positive encouragement in STEM education at an early age.

According to STEM Advantage, a non-profi t coalition, STEM-related jobs are anticipated to increase by nearly 17 percent over the next decade. Of the jobs currently fi lled across the United States, more than 20 percent will require STEM education by 2018. According to the Department of Commerce’s Economics and Statistics Administration, individuals employed in STEM jobs consistently earn wages up to 26 percent higher than their non-STEM counterparts. In fact, eight of the top 10 college degrees, as ranked by income, are in STEM fi elds.

SMART GRID BATTERY STORAGE

AvistaAvista’s installation will include 10 single-level battery units such as these on display at UniEnergy Technologies’ manufacturing plant in Mukilteo, WA.

A $3.2 million grant from Washington Governor Jay Inslee and the state Department of Commerce

will help three Washington utilities invest in research to address one of the biggest challenges facing the energy industry—how to integrate power generated from variable renewable sources, such as wind and solar, into the electric grid.

Inslee recently announced more than $14 million in smart grid matching grants from the governor’s Clean Energy Fund that will be used by Avista, Puget Sound Energy (PSE), and Snohomish Public Utility District to better understand how to capture, store, and distribute renewable energy.

“PSE is the Pacifi c Northwest’s largest owner and operator of wind power. We know from experience that storage is critical, and we applaud the state for making this investment,” said Kimberly Harris, PSE’s president and CEO.

The utility-led projects will develop and validate “use cases” combining energy storage and information technology solu-tions. The goal is to promote widespread deployment of these technologies and create a power grid that is more effi cient, fl exible, resilient, greener from generation to consumer, and better able to withstand the consequences of climate change.

“Today’s investment in the exciting possibilities of battery storage technology represents a signifi cant step forward in helping create our energy future,” said Don Kopczynski, Avista’s vice president of energy delivery. “The challenge with energy is that as soon as it’s produced, it must be used immediately. That makes it diffi cult to plan ahead to supply

the energy our customers need with renewable energy if the wind isn’t blowing or the sun isn’t shining. We believe that bat-tery storage could be the missing piece in this puzzle.”

Avista will use the grant money to install a large-scale energy storage battery system in a substation in Pullman, WA. These batteries will store power when it’s abundant, such as when the wind is blowing. The battery power then can be distributed when it’s needed, regardless of wind speed or weather patterns.

Power from battery storage is available almost instanta-neously—within 50 milliseconds. This rapid response time provides the fl exibility required to quickly react to a sudden drop in power supply or increase in demand.

ABB

Kid Grid introduces young children to electricity and power grid technology.

Too hot. Too cold. Too dry. Too windy. The volatility of the weather can impact the fortunes of a whole range of industries from food production to tourism. And none more so than the power and gas sector. At Swiss Re Corporate Solutions, we combine our fi nancial strength and expertise with your industry know-how to create tailor-made insurance and derivative-based solutions that will help protect your earnings. Whatever your business. Whatever the weather. We’re smarter together.

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Check out the digital interactive edition!MARCH/APRIL 2014

XCEL ENERGY’S BEN FOWKE:

The Intersection of Innovation and Communication30

36

VIEWS FROM THE HILL

THE SPECTRUM CRUNCH

MAY/JUNE 2014

NV ENERGY’S MICHAEL YACKIRA:

The Value of Electricity30

44

BUILDING A RESILIENT POWER GRID

SUPPLIER DIVERSITY: NEW OPPORTUNITIES FOR GROWTH

JULY/AUGUST 2014

NEXTERA ENERGY’S JIM ROBO

New Opportunities For Innovation28

32

EEI 2014 ANNUAL CONVENTION HIGHLIGHTS

SAFETY IN NUMBERS

SEPTEMBER/OCTOBER 2014

FIRSTENERGY’S TONY ALEXANDER:

Reaching New Heights32

54

BUILDING A STRONGER GRID

STREAMLINING THE RESTORATION PROCESS

The Industry’s

#1 Magazine

Visit eei.org/EP

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ENERGY INNOVATION AT HOME

More than half of global energy consumers would consider installing

connected-home solutions in the next fi ve years, or purchasing an electric vehicle in the next 10 years, according to a recent survey by Accenture.

Interest in connected-home products and services is projected to rise from 7 percent to 57 percent in the next fi ve years. These energy management and other monitoring and control solutions are expected to help reduce energy bills, increase comfort and convenience, and enable remote control of home devices.

“In these nascent, rapidly expanding, and converging markets, the opportunity to capture market share is a wide-open fi eld,” said Greg Guthridge, managing director in Accenture’s utilities industry group. “Success will come down to those providers who perfect the digital cus-tomer experience.”

The latest installment of Accenture’s annual New Energy Consumer research, “Architecting for the Future,” surveyed more than 13,000 individuals in 26 countries and found that a majority of consumers are interested in a range of next-generation home and energy solu-tions from their energy provider, including advice on energy effi ciency.

Connected-home and alternative energy technologies appeal to consum-ers concerned about their energy spend-ing. In fact, 71 percent of consumers believe that their energy provider could do more to help them reduce their energy bills, and only 21 percent said that they were comfortable with the rea-sons provided for recent price increases.

A signifi cant majority (more than 80 percent) of customers said that they

expect the same or better digital service from

their energy pro-viders as they

do from online retailers, banks, phone and ca-ble companies, and govern-ment agencies.

“The digital revolution is causing in-dustry lines to blur and barriers to entry to all but disappear,” Guthridge con-cluded. “This is creating opportunities to provide new, interconnected platforms for innovation that bring the connected-home, electric vehicles, and alternative energy sources together. The battle for

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the home has become a cross-industry one. With traditional business models at risk, leading energy providers will need to move quickly to differentiate from new entrants.”

Today’s electric power industry is focused on the future. As our customers change how they think about and use energy in their everyday lives, utility companies are transforming and evolving as well.

Today’s industry is about advanced technologies, energy efficiency, and new opportunities. Most of all, however, it is about the people who work to create this new era of innovation.

Our electric power industry depends on a smart, skilled, and diverse and talented workforce, and energy jobs offer promising opportunities to both experienced workers and those starting their careers. These jobs are active, hands-on, re-warding, and available in every state.

To celebrate these op-portunities and inspire the youth of A merica, October 13-19, 2014, is Careers in Energy Week. States a nd compa nies across the United States are working with high school and college students who are thinking about their future job prospects. Others are holding events to get military veterans and transi-tioning adults into skilled utility and engineering pro-grams. Many companies are hosting summer camps for children to teach them about the value of science, technology, engineering, and math (STEM) education. Across the country, energy companies are eager and en-thusiastic to open their doors to their communities and to workers who may be unaware of the promising careers available in the energy utility industry.

CREATI NG THE NEXT

GENERATION OF ENERGY

WORKERS.energycareers@work


Getting Into Energy By Thomas H. Graham, CEWD chair and vice president, people strategy and human resources, Pepco Holdings, Inc.

Formed in March 2006, the Center for Energy Workforce Development (CEWD) is a non-profit consortium of electric, natural gas and nuclear utilities and their

associations: the Edison Electric Institute (EEI), American Gas Association (AGA), Nuclear Energy Institute (NEI), and National Rural Electric Cooperative Association (NRECA).

Careers in Energy Week is part of an annual, nation-wide effort by the Center for Energy Workforce Develop-ment (CEWD) to increase awareness of the innovative, future-focused workforce that provides a vital service to our nation. From line workers to customer service repre-sentatives and electrical engineers, the men and women who work in energy careers ensure that businesses and homes across the country always have the safe and reli-able energy they need.

For 2013’s Careers in Energy Week, Ameren Illinois partnered with Illinois State University and the Illi-

nois Learning Exchange to boost h ig h school teachers’ STEM teach-ing skills. Participating teachers took a trip to one of Ameren’s substations to learn about power sys-tems. In addition, Ameren hosted career fairs at high schools, col leges, a nd even grade schools. The utility knows that as it

makes investments in technology, smart meters, and other grid enhancements to meet customers’ expecta-tions, their workforce needs will grow.

San Diego Gas & Electric (SDG&E) joined other California utilities last year to target student outreach to educational institutions in the state, including high schools, community colleges, and universities, to reinforce the opportunities around STEM curric-ulum within the energy industry. SDG&E awarded prizes to students who developed videos and apps describing why a career in the energy utility industry is exciting, innovative, and engaging.

I encourage companies to get involved in this exciting and growing effort this year. Talk to students about the great, well-paying careers available in the energy field. Host an open house so that community members can have a “behind-the-scenes” look at how the local utility operates. Use bill stuffers to encourage customers to ex-plore Careers in Energy Week. The CEWD website at www.cewd.org has a full portfolio of materials and resources for states and companies and for all levels of education.

Working together, we can connect our communities to these valuable, rewarding jobs and develop the next generation of electric utility leaders.

Careers in Energy Week is part of an annual, nationwide effort to increase awareness of the innovative, future-focused workforce.


FirstEnergy

A helicopter guides high-voltage transmission lines onto towers in Ohio.



Heights


It’s fascinating to consider the stark contrast between the complex-ities of our industry and the relatively basic needs of our customers. The vast majority of

electric customers want two things—for the lights to come on at the fl ip of a switch, and to be billed a reasonable amount for that service each month. While this basic value proposition has evolved to some extent—with a greater emphasis on cleaner, more-effi cient energy; higher power quality; and increased reliability—the intrinsic demands of

our customers have remained relatively unchanged over the years. Yet, these basic demands are fulfi lled by an incredibly com-plex industry guided by a dynamic set of rules largely unseen

by the customer. Maintaining the world’s most reli-able, affordable electric system—often considered the most sophisticated, complex machine on the planet—requires us to continuously evolve and in-novate and navigate an ever-changing set of rules and regulations that can impact the reliability and affordability of our product. At FirstEnergy, we are taking ambitious steps to meet our customers’ need for safe, reliable, and affordable energy in environmentally sound ways. With one of the nation’s largest investor-owned electric systems and a diverse generating fl eet with a total capacity of nearly 18,000 megawatts, our employees maintain and operate a vast infrastruc-ture to keep our customers connected 24 hours a day, seven days a week.

By Tony Alexander

G r i d e n h a n c e m e n t a n d effective policymaking are essential ingredients to a sustainable 21st-century electric system.

New

continue


Tony Alexander is president and CEO of FirstEnergy Corp., one

of the nation’s largest electric utilities that owns and operates

generating facilities serving more than six million customers

in six states.

When storms and other factors occasionally interrupt service, we mobilize crews from across our ser-vice area to restore service as quickly and safely as possible. We are also leveraging digital technologies and social media tools to keep our cus-tomers informed about our resto-ration efforts and safe during storms.

FirstEnergy is aggressively advocat-ing for an energy policy that fosters economic growth and affordability while supporting environmental sus-tainability. It’s a policy goal we pur-sue with great enthusiasm, and one we believe is necessary to sustain our economy in a competitive global marketplace and protect our national security.

A BETTER GRIDFirstEnergy’s commitment to service reliability starts with the transmis-sion grid—the backbone of our elec-tric system—extending across seven states and linking more than six million customers. Our “Energizing the Future” initiative, a $4.2-billion

investment through 2017, involves upgrading and strengthening our transmission system to meet the fu-ture demands of our customers and communities. Three key factors are driving this major investment in our electric system: replacing existing equipment with advanced technolo-gies designed to enhance system reli-ability; meeting expected load growth primarily from shale gas-related ac-tivity in our region; and reinforcing the current system in light of power plant deactivations related to the Environmental Protection Agency’s (EPA’s) Mercury and Air Toxics Stan-dards (MATS) and other regulations.

Initial efforts focus on evaluating thousands of circuit miles of transmis-sion lines and renovating substations serving FirstEnergy’s Ohio Edison, The Illuminating Company, Toledo Edison, and Penn Power utilities. The program is expected to expand east-ward over time as FirstEnergy contin-ues to strengthen one of the nation’s largest transmission systems—com-prising 24,000 miles of wires and approximately 2,700 substations. “En-ergizing the Future” projects include replacing equipment with advanced technology that can be operated re-motely to help prevent or minimize

the duration of outages, reinforcing substation facilities with surveillance and security technologies, and re-building transmission lines. This year alone, we are on course to complete $1.3 billion in investments spanning more than 1,300 projects, and we have completed more than one-third of the nearly 100 projects associated with coal-fired plant deactivations.

Nearly 1,500 workers are actively engaged to support this effort that is expected to bring enhanced ser-vice reliability to our customers, with minimal disruption to homeowners and communities affected by these construction projects.

Controlling the upgraded trans-mission system are FirstEnergy’s ad-vanced control centers, which play a vital role in operating and monitoring the company’s bulk transmission sys-tem from the Ohio-Indiana border to the Jersey Shore. These facilities are considered among the most ad-vanced transmission control centers in the country.

KEEPING CUSTOMERS PLUGGED INMore than ever, today’s customers rely on electricity to stay connected and to power their everyday lives, so

Maintaining the world’s most reliable, affordable electric system requires us to continuously evolve and innovate and navigate an ever-changing set of rules and regulations.

FirstEnergy

they experience an even greater in-convenience when there is a power outage. Thanks to new digital tools, we have the ability to more effectively engage with our customers, sharing vital information using websites, apps, text alerts, and email messages.

We use Facebook and Twitter to keep our customers connected, with tips for staying safe around electricity and using energy wisely; storm preparation information when ma-jor weather events are forecast; resto-ration updates during large outages; and dedicated assistance for custom-ers who contact us via Facebook. Last spring, we launched a new outage

reporting app on our Facebook pages.

LEADING THE CHARGE FOR VITAL REFORMDespite these investments in cus-tomer service and our interconnected system of poles and wires, we remain very concerned about market issues and policy decisions that pose risks to the nation’s electricity system.

Last winter, a mass of frigid arctic air that came to be known as the po-lar vortex descended over much of the country, shutting down schools, locking communities in a deep freeze, and costing the U.S. economy billions of dollars in just a few days.

This event revealed power supply weaknesses and a dependency on less reliable resources, culminating in en-ergy shortages and severe spikes in wholesale power prices, particularly in competitive markets.

The overriding reason that states in competitive markets are facing these issues, while regulated states generally have not, is because com-petitive markets currently do not rec-ognize the value of a diverse supply or differing types of generation. All generation in competitive markets is treated equally—whether the genera-tion is baseload or peaking, has fi rm fuel supplies, is intermittent, is a hard

FirstEnergy

FirstEnergy’s Akron Control Center in Ohio monitors the transmission system serving the company’s electric utility operating companies.

FirstEnergy’s commitment to service reliability starts with the transmission grid—the backbone of our electric system.



asset, or even whether it is in a re-gional transmission organization’s control. In fact, parties can propose to build anything, needed or not, and regardless of whether or not they build it, it is treated the same as as-sets that are already relied upon to assure service. In regulated states, these issues are managed to produce the best long-term results for the customer, recognizing that electric-ity is an essential service and that a balance must be reached to support the substantial investments needed—and that have to be made—to assure reliable service.

Utilities in regulated states located within or close to competitive mar-kets also have an advantage since they can sell their reserves into com-petitive markets to lower the costs of otherwise maintaining reliable service. As a result, not only are the reliability and stability of competitive markets placed at greater risk, but

the prices for capacity and energy are suppressed and inadequate to support the significant capital in-vestments required to meet environ-mental mandates or to maintain the reliability of the competitive fl eet.

According to the Edison Electric Institute, more than 450 coal-based units in 38 states—or about 20 per-cent of the U.S. coal fl eet’s capacity—

are already expected to close or cease burning coal by the end of the decade, due to a number of factors, including the costs associated with meeting EPA rules. In states with competitive energy markets, additional units may be shut down, including some nu-clear units, as regulatory compliance costs climb and ever-changing rules and unreasonable pricing persist.

While we are beginning to see signs of progress in the capacity market construct, more work is required. The most recent capacity auction, which is supposed to ensure that an ade-quate supply of generating capacity will be available for electric custom-ers, included less participation by non-physical sources due to limits imposed on imports and demand response. Even so, these resources cleared while some nuclear plants and super-critical coal plants did not. And while capacity prices climbed somewhat, the clearing prices were

Coal deliveries maintain on-site fuel inventories at the Fort Martin Power Station in Maidsville, WV.FirstEnergy

More than ever, today’s customers rely on electricity to stay connected

and to power their everyday

lives.

Locating transmission line faults can be costly and time-consuming. Since 1984, when SEL introduced the first digital relay with fault location, we have continued innovation of this important feature. With the introduction of the SEL-411L Advanced Line Differential Protection, Automation, and Control System, we created the only relay with traveling wave fault location to make it easier than ever to accurately pinpoint faults. Save time and money by sending maintenance crews to the tower nearest the fault, and get the line back in service faster.

To learn how SEL relays can help make your power system safer, more reliable, and more economical, visit www.selinc.com/9ep.

IT’S GOOD TO KNOW WHERE THE FAULT IS

A monopole is constructed to replace a steel structure in East Hanover, NJ, as part of FirstEnergy’s $4.2 billion “Energizing the Future” initiative.FirstEnergy

still inadequate to cover the true cost of operating baseload generating fa-cilities, and more plants may be shut down unless market rules change.

ALL GENERATION SOURCES ARE NOT CREATED EQUALOne of the key factors driving non-functioning markets is the increased reliance on non-physical resources, such as demand response, which compensate customers to vol-untarily stop using electricity upon request when demand is highest.

For example, in the 2016-2017 Reliability Pricing Model auc-tion, about 81 percent of the PJM reserves came from demand re-sponse, energy efficiency, and im-port sources. When renewables are included, which may or may not be available when needed, the per-centage climbs to about 85 percent.

These products are displacing criti-cal baseload generators, particularly those in competitive states that rely solely on the market to cover their operating costs. No regulated market that I am aware of relies so heavily on these types of products to assure reliability and stable pricing.

Policymakers must recognize that all generation sources are not created equal, and that electric service is not a commodity. In fact, unlike any other utility service, electric service is es-sentially provided to all customers in all areas, and the system is designed and operated to benefi t all customers. More important, our energy security and quality of life depend on it, and nothing works without it. Yet, all too often, investor-owned utility balance sheets, income statements, and billing systems are used to implement social policy and support products without consideration of their impact on our

ability to provide all customers with reasonable prices and reliable service.

In many respects, these policies and products are taking advantage of the universal network service we provide by forcing the vast majority of customers to pay for the benefi ts that are only provided to a select few. The fact is, many customers simply don’t or can’t benefi t or won’t be selected to participate because of their usage or income, where they live, or whether they rent or own.

As an industry, we must contin-ually evolve and innovate to meet customers’ increasing demands for higher levels of service. At the same time, we must be diligent in our efforts to protect all customers from schemes that single out a select few customers for benefits—at a con-siderable cost to the vast majority of customers not selected or unable to participate.



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FirstEnergy

New low-pressure turbine rotors were installed to improve the reliability and effi ciency of Unit 1 at FirstEnergy’s Beaver Valley Power Station in Shippingport, PA.


STRIKING A BALANCE FirstEnergy will continue to make im-portant investments in its transmis-sion grid, distribution system, and communications technologies to as-sure we meet customers’ desire for safe, reliable, and affordable electric service.

At the same time, as an industry, we must focus on resolving market and policy issues impacting critical base-load generation facilities, as well as our ability to treat all customers fairly. (See the sidebar on page 30, “The True Value of Baseload Generation.”) Last winter’s brutal weather was a chilling reminder that we need to maintain a diverse fl eet that includes generating assets such as coal and nuclear units, as well as natural gas plants with fi rm contracted fuel supply, so we can ensure reliable, affordable service to customers over the long term.

There are no easy choices, but the time is right for action. Electricity continues to be the foundation for our quality of life, economic vitality, competitiveness, and security. It is the cleanest end-use source of en-ergy, and as a nation and an industry we must never jeopardize this truly essential service. Energy policy needs to strike the right balance to ensure affordable, reliable, and environmen-tally sound electric service for all cus-tomers while supporting economic expansion and national security.

Electricity continues to be the foundation for our quality of life, economic vitality, competitiveness, and security.

ast spring, FirstEnergy’s 900-mega-watt Davis-Besse Nuclear Power Station in Oak Harbor, OH, ac-

complished a signifi cant milestone: we replaced two massive steam genera-tors—470-ton components that produce the superheated steam used to drive the turbine generator and produce electricity.

The $600-million replacement project is a major investment in Ohio’s energy future, ensuring that Davis-Besse continues to drive the state’s economy by providing safe, reliable, and clean energy for de-cades to come.

Baseload facilities like Davis-Besse pro-vide unmatched reliability and stability to our country’s electric system. Yet, current market rules are failing to compensate these vital facilities for their true opera-tional costs. Necessary investment in these baseload facilities will be jeopardized if their value is not recognized and refl ected in the market.

Reliability does not just depend on the condition of the substations, poles, wires, and other grid equipment but also on the availability of predictable, effi cient gen-eration. The need for reliable baseload generation became apparent during last January’s polar vortex, when the system was dangerously close to depleting re-serves. Davis-Besse operated at full capac-ity that week, continuously providing the around-the-clock power customers needed. Since restarting in May (after the steam generator replacement), the plant has con-tinued to operate at 100-percent power.

Baseload plants like Davis-Besse also are key drivers of the economy in the com-munities in which they reside. With about 700 full-time employees and an annual

payroll of approximately $65 million, Davis-Besse is one of the largest employ-ers in Ottawa County. The plant contrib-utes about $9 million each year in local and state taxes; and sales and income tax paid by Davis-Besse employees is es-timated at more than $5 million per year.

Additionally, Davis-Besse spends more than $25 million locally each year and about $71 million statewide. Local ven-dors, along with the many stores, restau-rants, and other consumer facilities patronized by Davis-Besse employees, provide an additional 1,200 jobs in the area. Many of these are small businesses that surround the plant and rely on plant employees for their success.

As the country considers the best ap-proach for reducing greenhouse gas emissions, baseload nuclear generating facilities such as Davis-Besse must be an integral part of the solution. Nuclear facilities are by far the largest emis-sion-free sources of electricity and the only non-emitting sources that can pro-duce large amounts of electricity around the clock. In fact, according to the Energy Information Administration, Davis-Besse, along with our company’s Perry Nuclear Power Station located east of Cleveland, generate 92 percent of the carbon-free electricity produced in Ohio.

Baseload generation powers the econ-omy through affordable, reliable, and environmentally sound electric service that will drive our country forward. We must adopt a national energy policy that encourages reliability and economic ex-pansion, and enact market reforms to pre-serve these essential generating assets and ensure a bright future.

FirstEnergy

Two new steam generators were installed at the Davis-Besse Nuclear Power Station in 2014 to support the safe continued operation of the facility for decades to come.


The True Value of Baseload Generation

Baseload facilities like Davis-Besse provide unmatched reliability and stability to our country’s electric system.

L

32 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep32 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep


Utilities are investing billions of dollars in the nation’s transmission system to improve reliability, relieve congestion, facilitate competition, and support a

diverse and changing generation portfolio.

By Elisa Wood

The U.S. electric grid is the cornerstone of one of the world’s most technologically sophisticated economies. This engineering feat includes more than 200,000 miles of high-voltage transmission lines, supports more

than 1,100 gigawatts (GW) of generating capacity, and serves 314 million people.

While the grid has served the country reliably for decades, society is increasing its demands on the system, and the electric utility industry is responding. With an estimated $17.2 billion in transmission investment this year (and $60.6 billion through 2024), Edison Electric Institute (EEI) members are maintaining the grid’s characteristic high reliability, as well as strengthening, expanding, and enhancing the transmission system. (See Figure 1.)

Several of these projects offer benefits of size and scale by spanning hundreds, if not thousands, of miles. Some reduce congestion and lower costs. Others bring new sources of supply to load centers, reduce line losses, and improve reliability. About 13,000 miles use 345-kilovolt (kV) wire or above—a particularly effi cient way to bring additional capacity to the system.

STRONGERGRID

BUILDING A

CONTINUE


Th e expansion of the country’s

renewable generating capacity

creates even greater demand for

long-distance transmission.

Investment in large transmission is especially important in light of the Clean Power Plan under review by the Environmental Protection Agency. The plan currently being considered would hasten coal-fi red plant retire-ments and encourage greater integra-tion of renewables, natural gas-fi red generation, and energy effi ciency.

The Clean Power Plan and other environmental trends play a key role in spurring today’s transmission ex-pansions and improvements, accord-ing to Jim Fama, EEI’s vice president of energy delivery.

“We’re going through a transitional period where the resource mix is changing, and our ability to transi-tion to a new mix relies on our ability to build new transmission,” he said.

To remain cost-effective and re-liable, the industry must be able to deliver the optimal mix of supply at the right time along the most effi cient path. With older plants closing and new plants being sited in different areas, alternate transmission routes must sometimes be established to move generation from where it is pro-duced to where it is used.

“To the extent that coal plants will be closed in the future, part of the way to deal with that is to enhance the transmission system to be able to move generation within regions or from one region to another,” Fama continued. “Transmission is key. It gives you fl exibility.”

The expansion of the country’s renewable generating capacity cre-ates even greater demand for long-distance transmission. Utility-scale wind farms and solar installations of-ten are built in remote areas, far from cities. Transmission provides a link between the two.

This article will examine fi ve major transmission projects stretching from

Elisa Wood is a Virginia-based writer who has specialized in

energy reporting for more than two decades.

the East Coast to the West Coast that are strengthening and securing the grid. America’s investor-owned elec-tric utilities are meeting the chang-ing needs of their customers through these efficient and cost-effective transmission projects, ranging from 45 miles to 2,000 miles in length.

A CRITICAL COMPONENTCalifornia has one of the nation’s most aggressive renewable portfo-lio standards, requiring that 33 per-cent of the power from electricity providers come from renewables by 2020. Fortunately, the state also has signifi cant wind and solar resources. But as is often the case, the cities that


Partner with a leader — like the largest utility in the nation, with more than

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Th e $3.2-billion

project spans

an area of

approximately

173 miles and

includes new

and upgraded

infrastructure

between Kern

County and

San Bernardino

County.

Wind Resource Area, about 75 miles north of downtown Los Angeles. The $3.2-billion project spans an area of approximately 173 miles and includes new and upgraded infrastructure between Kern County and San Ber-nardino County.

“This line is a critical component for our meeting the state’s renewable portfolio standard’s goals,” said Les Starck, SCE’s senior vice president, regulatory policy and affairs. “Right

Southern C

alifornia Edison

F I G U R E 1

ACTUAL AND PLANNED TRANSMISSION INVESTMENT BY INVESTOR-OWNED UTILITIES (2007-2016)

* Planned total industry expenditures are preliminary and estimated from data obtained from the EEI Trans mission Capital Budget & Forecast Survey, supplemented with data obtained from company 10-K reports and investor presentations. Actual expenditures are from EEI’s Annual Property & Plant Capital Investment Survey and from the FERC Form 1 reports.

r = revisedSource: Edison Electric Institute, Business Information Group.

2010

($ Millions [Real $2012])

2008 20092007 201320122011r 2014 2015 20160

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

8,902

17,201

10,71110,34411,953

14,768

9,488

17,46415,780

15,083

Actual Planned*

use the power are far from the open land where large wind and solar farms can be built.

Southern California Edison (SCE) is connecting the two—the renewables and the people of Los Angeles—with the Tehachapi Renewable Transmis-sion Project. When completed in 2016, the 220 kV/500 kV line will serve as conduit for 4,500 megawatts (MW) of wind, solar, and other forms of generation from the barren Tehachapi

SCE utilizes a sky crane to build transmission towers.


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The eighth annual publication of Edison Electric Institute’s (EEI’s) “Transmission Projects: At A Glance” showcases a cross-section of major transmission projects that EEI members completed in 2013 or have planned for the next 10 years, and highlights EEI members’ continuing focus on making needed

transmission investments.

To download the full report, visitwww.eei.org/issuesandpolicy/

transmission.


Th e National Renewable Energy

Laboratory estimates Kansas’

onshore wind potential at

952,371 MW—more than 90 times

the state’s current electricity needs.

now the company is at about 22 percent from renewables. The law in California says that we have to be at 33 percent by 2020. Tehachapi is really going to help us meet that 33-percent goal.”

As with many other transmission projects, Tehachapi offers multiple benefits. In addition to connecting renewables to the grid, the 500-kV double-circuit upgrade will expand transfer capability on Path 26, a major north-south power corridor in Cal-ifornia. The line also will help ease transmission constraints in the Los Angeles Basin.

“The Tehachapi Wind Resource Area is outside the Los Angeles Ba-sin,” Starck continued. “All of this wind energy is going to be deliv-ered at the Vincent Substation, then brought over the mountains into the Los Angeles Basin. This transmission line is another pathway to get to the Basin, which helps us relieve trans-mission congestion in other parts of our system. So that’s also a reliability/resiliency benefi t.”

SCE also is tackling an engineering challenge not yet accomplished by any other utility in the United States: Tehachapi will be the fi rst 500-kV line to run underground. The California Public Utilities Commission ordered SCE to bury a 3.5-mile section that goes through Chino Hills after the community protested the overhead line in a dispute that lasted several years. SCE currently is working on design of the underground portion of the project and plans to begin con-struction later in 2014.

Although, it will be challenging to construct due to the terrain, the un-derground line will cost $372 million more than an overhead line. “We are fully dedicated to constructing this underground portion of the line so that it is safe and reliable,” Starck said. “We hope and expect people from around the world will benchmark against this project.”

IMMEDIATE ECONOMIC BENEFITSKansas has the second-highest wind energy potential in the United States. It added 254 MW of new wind capacity in 2013, and currently ranks eighth in the country for installed wind capacity—about 3,000 MW, according to the American Wind Energy Association. In fact, the National Renewable En-ergy Laboratory estimates Kansas’ onshore wind potential at 952,371 MW—more than 90 times the state’s current electricity needs.

Two major projects in Kansas that make up the Y-Plan—Prairie Wind Transmission’s portion and ITC Great Plains’ portion—are helping to trans-mit this wind power and other forms

of generation more efficiently over long distances, while easing conges-tion and improving the resiliency of the grid. These two projects, like the other large transmission projects in the state and the Southwest Power Pool (SPP) nine-state region, were identifi ed by the SPP in its long-term planning process as needed invest-ments.

Prairie Wind Transmission’s project is being constructed by Kansas’ larg-est electric utility, Westar Energy, in partnership with Electric Transmis-sion America, a joint venture of sub-sidiaries of American Electric Power and Berkshire Hathaway Energy.

A 345-kV double-circuit project that runs across the majority of

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Kansas, Prairie Wind Transmission will create a strong transmission backbone for the state. The 109-mile line links an existing 345-kV substa-tion near Wichita to the new 345-kV Thistle substation northeast of Med-icine Lodge, near the Flat Ridge 1 Wind Farm. It then travels south to the Oklahoma border. The line tra-verses a variety of terrain, from the garden area of Kansas with its wheat fi elds and farmland, to the hilly west-ern region with its cattle farms, said David Peck, Westar’s project manager.

The estimated $170-million cost of the project is being borne equally by the two partners. They broke ground in August 2012, and about 78 miles went into service last June. The rest is expected to be completed on time in late 2014 at a cost that is about 25 per-cent less than the original estimate of $225 million.

Kansas has seen immediate eco-nomic benefi ts from the portion of the line already built, particularly when

it comes to effi cient operation of the Flat Ridge 1 Wind Farm. Lack of trans-mission in the area had been forcing the wind farm operators (BP Wind Energy) to curtail generation. Even on some days when the wind was plenti-ful, the wind farm shut down some or all of the turbines because of inade-quate transmission capacity.

“They built the wind farm so that they can make power, and if they can’t make power, they can’t pay for the wind farm,” Peck said. “Now that our line is in service, those curtailments have been lifted. Once a portion of our line was placed in service, there was an immediate impact on the system.”

The next leg of the transmission project will create a connection from eastern Kansas to western Oklahoma, offering more opportunity for power generation in the area. The line also will enhance the state’s ability to export power to areas of the country that have strong demand for renewables but lack open land to build wind farms.

“This is a big transmission line, double-circuit 345. It can transport power to the eastern part of the state where there are more high voltage lines feeding the major urban areas. From this point, there are more po-tential routes to export power from Kansas likely toward the East Coast,” Peck continued.

The line also is expected to increase reliability; its long expanse includes only three substations, one located 60 miles into Oklahoma. “One hun-dred sixty-nine miles with three sub-stations; you have really long hauls,” he concluded. “It’s like an interstate highway—the fewer exits you have, the less chance you have for accidents.”

ENSURING AFFORDABLE ENERGY The 200-mile Kansas V-Plan, an-other 345-kV double-circuit line, is under construction to connect central and western Kansas. In cooperation with Sunfl ower Electric

The Prairie Wind project is expected to be completed on time in late 2014 at a cost that is about 25 percent less than the original estimate of $225 million.

Westar Energy

JULY | AUGUST 2014 41


Power and Mid-Kansas Electric, ITC Great Plains designed and is constructing two segments of the V-Plan—or approximately 120 miles. The line runs from Spearville south to the new Clark County substation, then east to the Thistle substation. From there, it connects to the Prairie Wind project.

ITC Great Plains is investing about $300 million in its portion of the proj-ect, which began construction in No-vember 2012. The line is expected to be in service by late 2014—on time and on budget.

The project was necessary to con-nect western and eastern Kansas for reliability and to improve the re-siliency within that area of the SPP, according to Kristine Schmidt, presi-dent of ITC Great Plains, a subsidiary of ITC Holdings.

The V-Plan also complements ITC’s Kansas Electric Transmission Authority (KETA) project, a 345-kV line energized in late 2012. KETA spans a 227-mile north-south route from Spearville, KS, to Axtell, NE. ITC Great Plains built the 174-mile Kansas portion of KETA and the Nebraska

Public Power District constructed the Nebraska portion.

Both KETA and the V-Plan are in-tended to move power long distances so that wind farms can connect into the grid—but moving wind power is only one reason for the project.

Schmidt said the line is meant to relieve grid congestion, improve reli-ability in the region, deliver power on a broader scale across the SPP foot-print, and export to other SPP states from Kansas, as necessary.

The line will allow delivery not only of wind energy but also natural gas- and coal-fired generation. ITC sees the new transmission lines as a way to enhance the competitive power market so that not only Kansas consumers but all consumers in the SPP footprint can access more cost-effective supplies.

Without the V-Plan and KETA, SPP had “a signifi cant void of transmission in western Kansas,” Schmidt contin-ued. “If you lose transmission lines or power plants in other parts of the sys-tem, you can’t just re-dispatch power very effi ciently if you don’t have this type of infrastructure in place.”

The project is in line with ITC’s business model to invest in the grid to improve reliability, expand access to markets, and lower the overall cost of delivered energy. “Through a com-bination of efforts we were able to identify a longer-term need,” Schmidt added.

Generation capacity quickly pop-ulated the KETA line; and Schmidt expects the same demand to manifest itself for the V-Plan in early 2015.

The bottom line is that Kansas and the SPP region need new transmis-sion to maximize power supplies such as wind—and much more. Long-distance transmission lines are pro-viding a conduit for all forms of power to fl ow most effi ciently, whether for local use or export, creating greater access for power plant developers, and ultimately a more favorable mar-ket for energy users.

IMPROVING RELIABILITYThe Energy Information Administra-tion forecasts that 60 GW of coal-fi red generation will retire by 2020. Eco-nomics drive much of the deactiva-tion. It is becoming more expensive

FirstEnergy

FirstEnergy has embarked on an ambitious transmission expansion and improvement plan that improves reliability with new 138-kV and 345-kV lines, substations, and other system reinforcements.

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to operate coal-fired plants because of environmental restrictions, par-ticularly the Environmental Protec-tion Agency’s Mercury and Air Toxics Standards (MATS). The new rules, which take effect in April 2015, limit emissions of mercury, acid gases, and toxic metals.

To ready its system for the retire-ments, FirstEnergy has embarked on an ambitious transmission expansion and improvement plan. The com-pany, which operates 10 utilities in six states, plans to invest $1.8 billion in transmission projects related to its “Energizing the Future” strategy. The plan improves reliability with new 138-kV and 345-kV lines, substations, and other system reinforcements.

The 114.5-mile Glenwillow-Bruce Mansfield line is one of the first under development. The single-circuit 345-kV transmission line will run from FirstEnergy’s Bruce Mansfield Plant in Pennsylvania to the Glenwillow Substation near Cleveland, OH.

Most of the $151.2-million line will be built within existing rights of way. Still, as is often the case with long- distance lines, the project has faced development challenges. FirstEnergy has managed them through careful communication with affected parties and by going the extra mile to mini-mize impacts.

“As the project approaches its final destination, the proposed Glenwillow Substation, the line route crosses densely populated communities in suburban Cleve-land,” said FirstEnergy spokes-man Doug Colafella. “FirstEnergy proactively reached out to communi-ties and property owners early on in the process to inform them about the project and to set expectations about the nature of upcoming construction work. The line route in northeast Ohio also crosses significant wetland areas, and the construction teams are using helicopters to string the conductors from the air to reduce our impact on sensitive environmental habitats.”

FirstEnergy expects the project to significantly reinforce the electric

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system in northeast Ohio, including the Cleveland metropolitan area. It is scheduled to begin service in June 2015.

INNOVATIVE CONSTRUCTION METHODS The Susquehanna-Roseland 500-kV Transmission Line Project, which in-cludes a 45-mile line in New Jersey and a 101-mile line in Pennsylvania, is being built in response to reliability violations within the 13-state PJM Interconnection. With demand grow-ing in the area, PJM was concerned that without improvements, regional lines would overload during peak periods and possibly cause outages.

Public Service Electric and Gas (PSE&G) is constructing the New Jersey portion of the line, and PPL

Electric Utilities is building the Penn-sylvania segment. Susquehanna-Roseland will extend from the Ber-wick area in Pennsylvania to the Roseland area in northern New Jersey.The project also includes two new 500-kV switching stations in New Jersey; one in Hopatcong and one in Roseland. The Roseland to Hopat-cong portion of the project went into service in April 2014, and the remain-der is on schedule to be completed by June 2015. PSE&G will contribute $790 million of the project’s $1.33-billion total cost, according to John Ribardo, PSE&G’s director of trans-mission projects.

“There were numerous reliabil-ity criteria violations that existed when PJM analyzed this project back in 2007,” Ribardo said. “The best

PS

E&

G


Th e project

off ers a good

example of how

utilities can fi nd

ways to ease

the concerns of

stakeholders—

whether they

are nature

enthusiasts or

homeowners.

PS

E&

G

The Susquehanna-Roseland Transmission Line Project, which includes a 45-mile line in New Jersey and a 101-mile line in Pennsylvania, is being built in response to reliability concerns.

To minimize environmental impacts on certain sensitive areas of the project, PSE&G used helicopter construction.


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of how utilities can find ways to ease the concerns of stakeholders—whether they are nature enthusiasts or homeowners—as they build new infrastructure to replace an aging system and prepare for the new de-mands of an increasingly connected and electrifi ed society.

INVESTMENT INCENTIVESWhile EEI members have reported plans to invest $17.2 billion in transmission projects for 2014, utilities tend to forecast conservatively, according to EEI’s Fama. This year’s investments could exceed 2013’s record $17.5 billion.

solution was a new 500-kV line. It relieves congestion in northern New Jersey.”

In addition to new shield wire and fi ber optics that will create better line monitoring and communications between stations, the project swaps out aging infrastructure with newer construction. The line has a new 500-kV line on one side of the towers and a rebuilt 230-kV line on the other side.

However, the project presented special challenges for PSE&G. The line had to traverse rugged terrain in northern New Jersey, through the Delaware Water Gap National Rec-reation Area (requiring an extensive federal Environmental Impact State-ment review that took more than three years), across the Appalachian Trail, and through a sensitive wetland in Morris County.

The company helped mitigate environmental impact in sensitive areas and tackle the difficult-to-access terrain by using innovative helicopter construction. That meant not only transporting concrete, struc-tural steel, equipment, and materials by helicopter, but also doing tower assembly at the location by air.

“It requires a lot of planning, but it lessens the environmental impact of building large roads to get there,” Ribardo continued.

The project also uses a new type of lighting system required by the Fed-eral Aviation Administration that is triggered by plane entry into the area. The lighting was a concern because there are multiple airports in the area and part of the line runs through residential neighborhoods. The trig-ger system, which PSE&G pioneered and is still working on, creates less imposition on homeowners, since the lights will not be shining constantly at night.

“We met early on with many of the stakeholders, which included a lot of residents, and tried to listen to and accommodate their concerns,” Ribardo concluded.

The project offers a good example

Federal Energy

Regulatory

Commission

decisions on

allowed returns

on equity will

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in determining

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for large

transmission

projects going

forward.

Strengthening the transmission grid offers a tremendous boost to an economy that is increasingly depen-dent on electricity for its communi-cations, transactions, comfort, and transportation. However, utilities can make large investments in transmis-sion only if policymakers maintain a level playing field. Transmission and other electricity resources must have the opportunity to compete against each other fairly.

“We want the most cost-effective mix,” Fama said.

Federal Energy Regulatory Com-mission (FERC) decisions on allowed returns on equity (ROE) will play a key role in determining utilities’ ap-petite for large transmission projects going forward. EEI is watching closely as FERC prepares to make a series of ROE decisions. The commission in June issued an order on a new meth-odology for determining ROE for New

England investor-owned utilities. The commission suggested lowering their ROE from 11.14 to 10.57 percent sub-ject to application of the new method-ology. At the same time, FERC moved forward with proceedings on five pending challenges to utility ROEs. The commission expects the New England decision to guide evidence and analyses presented by stakeholders in the pending challenges.

But for now, transmission is clearly booming. The grid is changing, strengthening, and reconfiguring to accommodate more renewables and other forms of supply. The ex-panded system will offer greater ac-cess and create more resilient and reliable power. The information economy demands nothing less. Elec-tricity service must be of the high-est quality, and utilities are planning and investing to make sure the grid can deliver.


Rely on superior experience and expertise.

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visit www.eei.org/meetings-asianconf

28-29 October 2014 • Marina Bay Sands Convention Center • Singapore International Energy Week

JOIN ASIA’S ENERGY AND FINANCIAL LEADERS:EEI’S ASIAN ENERGY FINANCIAL AND INVESTMENT CONFERENCE

On October 28th and 29th, Asia’s energy leaders and fi nancial decision-makers, including Kim Yin Wong of Singapore Power, Neil McGregor from Temasek, and Anthony Jude from Asian Development Bank, will gather in Singapore at the launch of the Asian Energy Financial and Investment Conference, organized by Edison Electric Institute (EEI), during Singapore International Energy Week (SIEW).

SIEW brings together the world’s leading conferences, exhibitions, workshops, and networking events from across the energy spectrum in one week and one location. It is the foremost platform for top policymakers, energy practitioners, and commentators to discuss energy issues, strategies, and solutions. Please visit www.siew.sg for further information.

EEI’s Conference is the only venue where investors and analysts can meet with a full range of Asian and international CEOs, CFOs, and executives from the energy industry.

Conference attendees also are invited to the prestigious Platts Top 250 Asia Awards Dinner on October 28th at The Fullerton Hotel. The 2014 Platts Top 250 Global Energy Company Rankings® will be unveiled at this time, offering networking opportunities with over 300 top global energy executives.

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Industry’s Average Credit Rating ImprovesBY AARON TRENT

credit ratings

The industry’s average credit rating improved to BBB+ by mid-year 2014 after holding

steady at BBB for more than 10 years. Total ratings activity, at 95 changes through June 30, was much higher than in the first half of 2013, reflecting Moody’s decision in late January to upgrade most regulated utilities by one notch. (See Figure 1.) As a result, the year’s actions so far have been largely positive, with 92 upgrades far outnum-bering three downgrades. (See Figures 2 and 3.) The Edison Electric Institute (EEI) records upgrades and down-grades at the subsidiary level; therefore, multiple actions within a single parent holding company are included in upgrade/downgrade totals.

During 2014’s first half, parent- level ratings were impacted by three upgrades and no downgrades. The upgrades centered on companies’ continued focus on regulated operations and effective management

of regulatory risk, as well as company-specific factors. As of July 1, approximately 82 percent of companies’ ratings outlooks were stable, 11 percent were positive or watch-positive, and 7 percent were negative or watch-negative.

The industry’s revised rating of BBB+ reflects a rounding-up of EEI’s calcu-lated average. Following is a summary of 2014’s parent-level ratings actions through June 30, all of which occurred in the second quarter.

Edison InternationalOn April 8, S&P raised its corporate credit rating on Edison International (EIX) by two notches, to BBB+ from BBB-, on the emergence from bank-ruptcy of the company’s former unregu-lated subsidiary, Edison Mission Energy (EME). At the same time, S&P affirmed its rating on EIX’s primary subsidiary, regulated utility Southern California Edison (SCE), at BBB+. S&P observed that SCE “represents virtually all” of

EIX’s credit profile and has business fundamentals that are “slightly better” than most of its integrated electric utility peers. S&P noted that SCE’s service territory is “improving but still struggling,” its financial health is protected by “strict and restrictive” oversight by the

California Public Utilities Commission, the company’s earned returns are “normally healthy,” and cash flow is supported by various rate mecha-nisms. S&P also commented that SCE’s operating

risk is worse than average, as was highlighted by the problems it faced at the San Onofre nuclear plant.

Regarding EIX’s financial metrics, S&P commented that it expects the utility’s leverage to increase modestly with rising capital spending. The agency forecasts funds from operations (FFO) to debt of about 21 percent to 23 percent in the near term and debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) of more than three times over the next several years.

While S&P’s upgrade of EIX was driven largely by the successful reso-lution of EME’s bankruptcy, the agency also noted that management’s “stated plans to focus mainly on regulated activities,” as well as its commitment to maintaining a stable financial profile, were important considerations.

Aaron Trent is manager of financial analysis at Edison Electric

Institute.

F I G U R E 1TOTAL RATINGS ACTIONSU.S. Investor-Owned Electric Utilities

Note: Full year, except where noted./*Through June 30. Source: SNL Financial and EEI Finance Department.

2008 2009 2010 2011 2012 2013 2014*

Fitch 17 14 24 25 26 23 10

Moody's 6 23 20 11 20 17 80

Standard & Poor's 27 20 36 24 30 40 5

Total 50 57 80 60 76 80 95

The year’s actions so far have been largely positive,

with 92 upgrades far outnumbering three

downgrades.


credit ratings

to recover its costs.S&P forecast

Westar’s FFO to debt at 18 percent to 20 percent over the next three years and cash flow from operations (CFO) to debt at 17.5 percent. The agency noted it expects capital expenditures to decline following completion of the LaCygne plant’s emissions-control pro-gram and discretionary cash flow therefore to be “much less negative,” reducing the need for new debt and equity capital.

Great Plains EnergyOn May 1, S&P raised its corporate ratings

on Great Plains Energy (GPE) and subsidiary Kansas City Power & Light to BBB+ from BBB. The agency’s ratio-nale was largely the same as for Westar and Kansas Gas & Electric: manage-ment’s continuing focus on regulated operations,

effective management of regulatory risk, and improving cost recovery within the regulatory process. Each of these developments improved the companies’ business risk profiles. As with Westar, S&P stated that Great Plains Energy’s capital spending program likely will benefit from timely recovery through base rates and rate surcharges, thereby strengthening cash flow.

S&P forecast GPE’s FFO to total debt at 18 percent over the next three years and CFO to debt at 16 percent. Similar to the case with Westar, as capital spending declines following completion of the LaCygne plant’s emissions con-trols, S&P expects GPE’s discretionary cash flow to strengthen.

Looking Ahead: A More Regulated Business While 2013 marked the tenth consecu-tive year of a BBB rating for the industry

Westar EnergyOn April 29, S&P raised its corporate ratings on Westar Energy and utility subsidiary Kansas Gas & Electric to BBB+ from BBB. The up-grade reflected S&P’s assessment of the parent company’s improved business risk profile as a result of manage-ment’s continuing focus on regulated operations, effective management of regulatory risk, and “strengthening cost recovery through the regulatory process.”

S&P stated that Westar’s reduced business risk had led to stable profits and stronger financial metrics. The agency commented that the company’s ongoing capital spending would require timely recovery through “various rate mechanisms including base rates and rate surcharges” that were likely to improve cash flow. Furthermore, S&P noted that Westar’s investment in emissions-control equipment at the LaCygne coal plant, which it jointly owns with Great Plains Energy’s Kansas City Power & Light, does not benefit from rider recovery, meaning that Westar would need to seek base rate changes

S&P stated that Westar’s reduced business

risk had led to stable profits and stronger financial metrics.

F I G U R E 2DIRECTION OF RATINGS ACTIONSU.S. Investor-Owned Electric Utilities

Note: Full year, except where noted. Source: SNL Financial and EEI Finance Department.

0%

25%

50%

75%

100%

6 Mo.

2014

20132012201120102009200820072006

50

150

100

0

200

250

300

Upgrade % Total Actions

AS OF JULY1, 2014

companies’ ratingsOUTLOOKS

stable82%

positive orwatch-positive11%

negative orwatch-negative7%


When company leaders are committed to and focused on safety, it will trickle down through each level of management to all employees.

a “suite of transparent and timely cost and investment recovery mechanisms.” Moody’s said it expects the overall regulatory environment will remain “supportive and constructive” for at least the next three to five years.

In a February 19 report, “Regulation Will Keep Cash Flow Stable as Major Tax Break Ends,” Moody’s said the end of bonus depreciation in 2013 would cause many utilities’ financial metrics to weaken, but the improved regulatory framework—featuring both cost-recovery mechanisms and annual base-rate increases—would play a significant offsetting role. Moody’s offered several examples of positive rate case outcomes that are driving its industry outlook, such as Puget Sound Energy’s case in Washington and Westar Energy’s in Kansas. Moody’s also said improved regulation is helping utilities manage the effects of sluggish customer demand. Moody’s commented that “a more contentious regulatory environment” or a “widespread adoption” of more aggressive financial strategies could lead to a negative outlook, while a “marked increase” in allowed returns on equity or steps to scale back dividends and stock repurchases might lead to a positive outlook.

In a January 22 report, S&P dis-cussed various factors behind its assessment of the industry’s stability, such as improving economic conditions, sustained demand for a “very critical” commodity, the “generally supportive” posture of regulators toward cost recovery for capital expenditures, and continued demand by investors for utility equity and debt securities. S&P stated that “we see little alteration in the sector’s business and financial risk profiles during periods of economic change” because of the essential nature of electricity, the regulated character of the business, and the constructive regulatory environment. The agency also suggested that if the economy grows faster than it is expecting, there could be “some modest improvement” in the industry’s credit profile.

Throughout these reports, neither S&P nor Moody’s raised major concerns about risks to the sector’s credit profile in the near to medium term.

more fully in its report, “U.S. Utility Sector Upgrades Driven by Stable and Transparent Regulatory Frameworks,” released on February 3. The report discussed reasons behind the agency’s November 2013 move to place most regulated utilities on review for upgrade and its January 2014 upgrade of most companies by one notch. Moody’s describes how state-level regulation has evolved over the past several years for the better, including implementation of

(based on EEI’s unweighted average of S&P ratings at the parent-company level), it also saw the highest percentage of positive ratings actions in at least as many years. That trend persisted during the first half of 2014, moving the industry’s average rating to BBB+ by mid year.

Early in 2014, both S&P and Moody’s published industry-level outlooks de-scribing why they expect U.S. regulated utilities to maintain stable credit profiles over the remainder of the year. And while both agencies described positive factors that included the de-risking of utility business models through continued focus on regulated activities, Moody’s emphasized that improving industry regulation was the “most important” driver of its outlook.

Moody’s detailed its view of an improving regulatory environment

Moody’s said it expects the overall regulatory

environment will remain “supportive and constructive”

for at least the next three to five years.

Below BBB-4% A or higher

4%

A-23%

BBB+ 28%

BBB 34%

Below BBB-9% A or higher

5%

A-14%

BBB+ 23%

BBB 29%

BBB-20%

BBB-8%

2014At 6/30

2012At 12/31

F I G U R E 3S&P UTILITY CREDIT RATINGS DISTRIBUTIONU.S. Investor-Owned Electric Utilities

Note: Rating applies to utility holding company entity. Source: SNL Financial and EEI Finance Department.


energy storage

L ike many utilities, ComEd, an Exelon company, has made numerous recent enhancements

to its storm restoration process, such as installing GPS and mobile dispatch technology to more effi ciently manage crews to expedite restoration; dispatch-ing mobile operations centers; and utilizing more effi cient management of contractor crews. New areas of focus this year include an enhanced damage assessment process, better coordina-tion of vegetation management crews, and improved material staging to ensure readiness during severe weather. Over the past two years, process improve-ments already in place have resulted in a 30-percent improvement in resto-ration time.

One new tool ComEd has just begun using is a cloud-based system that enables supervi-sors to tap a “virtual board” for tracking crews in real time by job classifi ca-tion, staging area, elapsed-time worked, and status. With this software, supervisors can direct contrac-tors and other utility crews, and show their precise status during a major event—speeding resto-ration times. Developing this software took time and required the collaborative efforts of multiple utilities.

A More Centralized Approach Whether a utility relies on spreadsheets, whiteboards, or an in-house storm-management system to assemble and track crews, the process isn’t always centralized. For example, at Iberdrola USA’s operating companies in New York, groups of supervisors used to manually piece together crews at local service centers and then handed these data over to dispatchers to match to their daily reporting location and avail-ability for work.

“Keeping count of crews could take more than 500 spreadsheets at times,” said Kerri Foster, manager of transmis-sion and distribution support, programs and projects, for Central Maine Power Company, part of Iberdrola USA.

“Whether in Maine or New York, providing crew deployment reports to regulators and executives during a major event was a major burden for

personnel engaged in managing the storm restoration effort.”

Like Central Maine Power, ComEd’s old crew management process couldn’t track how it was building crews. ComEd has had a fully automated callout system since 2002, which identifi es in minutes who is available for work. But ComEd lacked the other piece—automatically putting two-, three-, and four-person crews together—so the company did its “crew building” on a magnetic board by hand.

An 11-Step ProcessAt the onset of each event, 19 local ComEd offi ces and fi rst-line supervisors reviewed a spreadsheet, notated crew assignments on magnetic boards, and entered those data into a computer spreadsheet. Supervisors sent and received updated crew data via email. ComEd relied on its resource coordi-nators to assign crews to storm shifts. If the number of customers affected by an event exceeded 50,000 accounts, or the risk of a severe forecast was great enough, ComEd opened each of its four regional storm centers.

As the storm work passed, resource coordinators began releasing crews from storm shifts as crew data were passed back and forth among local of-fi ces, crews, and the storm center. In all, it took 11 steps to manage up to 800 crews (including ComEd’s, and those of contractors, contractor affi liates, and

Streamlining the Service Restoration ProcessBY CHERYL MALETICH

operations

Cheryl Maletich is vice president of distribution system

operations for ComEd, where she is responsible for the safe

operation of the electric distribution system for the entire

ComEd service territory in Northern Illinois.

One new tool ComEd has just begun using is a cloud-based system that enables supervisors to tap a “virtual board” for tracking crews in

real time by job classifi cation, staging area, elapsed-time

worked, and status.

With this software, supervisors can direct contractors and other utility crews and show their precise status during a major event.


during normal business hours, as well as during major events, to increase its acceptance. ComEd launched the software on May 30, 2014.

ComEd had an open conference line all day when the system went live, but operators didn’t get many questions from the fi eld. When weather reports showed a storm front forecast, ComEd asked managers to use Crew Manager to do some extra staffi ng. The fi rst storm test of the system went off with minimal issues.

Managing Crews VirtuallyThe application includes color-coded icons designating different classes of employees, contact information, shift start and end times, accommodation needs, etc. The automated system

management processes as far back as 2011. In fact, in the wake of any major event, ComEd supervisors’ number-one complaint was about fi lling out the spreadsheets tied to the 11-step process.

Automated Crew ManagementIn 2013, ComEd presented the idea of automating the crew management pro-cess to senior management. Making the process faster and effi cient was a key selling point, but ensuring that front-line supervisors would use the application widely was just as important. To imple-ment the automated system, ComEd trained certain supervisors as ambas-sadors who then trained others in their territory to become experts. Additionally, ComEd decided to use the new system

other utility resources). Once manag-ers opened the storm center, it could take ComEd up to 12 hours to get an understanding of the hardest-hit areas of its service territory and decide where to deploy crews.

ComEd’s experience with crew management refl ects the challenges facing many other utilities across North America. As a result, Iberdrola USA began collaborating with NSTAR (an operating company of Northeast Utilities), Pepco Holdings, Inc. (PHI), and a software developer called ARCOS in the spring of 2012 to develop a system to automate the management of crews. The system generates virtual boards to replace spreadsheets, whiteboards, and other in-house systems. The virtual boards provide supervisors and execu-tives a centralized, web-based database to assess the makeup of crews during blue-sky days and to manage employee, contractor, and other utility crews during major events. As ARCOS wrote the code, the utilities jointly tested the early versions and gave feedback.

Iberdrola USA, NSTAR, and PHI subsidiary Delmarva Power piloted the fi nished product during the fall of 2013. The new system, named “Crew Manager,” helps managers visually organize and mobilize crews required during large power restoration events and normal working hours.

ComEd had been discussing the possibility of streamlining its crew

ComEd

The virtual boards provide

supervisors and executives

a centralized, web-based database to assess the makeup of

crews during blue-sky days and

to manage employee, contractor, and

other utility crews during major events.

ComEd currently has 800 full-time equivalents in its automated crew management and callout systems along with another 200 overhead electricians and several groups from the utility’s transmission and substation team.


operations

also tracks the cumulative hours a crew has worked and provides a minute-by-minute account of how long each crew member has been on the clock. Working shifts, rest time, emergency callouts, and work exceptions appear as movable icons, so utility supervisors can forecast potential needs. ComEd reorganizes its crews with a click to address the constant infl ow of questions and information that comes with restoration work. This information is then automatically sent to front-line supervisors via tablets and laptops.

“With four electric operating compa-nies at Northeast Utilities, we share line crews, support personnel, and supervi-sors to restore service to customers,” said Steve Gilkey, vice president of electric fi eld operations for Connecticut Light & Power, a subsidiary of Northeast Utilities. “Using one centralized database system across NU will enhance the effectiveness of our restoration teams.”

“Our magnetic boards listed our crew leaders’ names, and our fi rst-line supervisors would manually match people with one another based on their schedule. The new automated crew management system eliminates that manual process, so that everyone sees how a crew is being built,” said Kimberly A. Smith, director of emergency

preparedness for ComEd.

It’s one thing to automate a callout. But when a utility has to pair or build crews (such as matching a crew leader with an electrician), there’s another layer of complexity involved.

Being able to simulate different staffi ng scenarios and react in real time to com-plex and changing conditions improves the effi ciency of the crew management process by an order of magnitude.

There’s still much work to be done with the automated crew management system at ComEd. As ComEd and other utilities learn more about automating crew management, they are working closely with ARCOS to develop new features. The utility has experienced one storm, but future events will surely test assumptions and help ComEd develop best practices. ComEd currently has 800 full-time equivalents (FTEs) in its automated crew management and callout systems along with another 200 overhead electricians and several groups from the utility’s transmission and substation team. (Crew is defi ned in many different ways across the industry, so for consistency purposes, the mutual assistance discussions are based on FTE counts.) This new system will enable ComEd to utilize these resourc-es more effi ciently—and provide better customer service at the same time.

Save the Date for These Upcoming

Meetings September 15-17, 2014

AGA/EEI Accounting for Energy Derivatives

Workshop & Seminar Chicago, IL

September 28 - October 1, 2014Fall Occupational Safety and Health Committee

Conference Big Sky, MT

October 5-8, 2014Fall Transmission,

Distribution and Metering Conference St. Louis, MO

October 8-9, 2014Fall Mutual Assistance

ConferenceSt. Louis, MO

October 12-15, 2014EEI/NRECA Utility Siting

WorkshopAlbuquerque, NM

October 12-15, 2014Fall National Key Accounts

WorkshopSan Diego, CA

October 23-24, 2014Cybersecurity Networking

Reception and Law Conference

New York, NY

For a more detailed list of EEI meetings,

visit www.eei.org/meetings

Being able to simulate different staffi ng scenarios and react in real time to complex and

changing conditions improves the effi ciency of the crew

management process by an order of magnitude.

Iberdrola USA

Iberdrola USA, NSTAR, and PHI subsidiary Delmarva Power piloted the crew management system during the fall of 2013.

49th FINANCIAL CONFERENCENovember 11-14, 2014 • Hilton Anatole • Dallas, TX

Register now at www.eei.org/meetings-finconfFor more information, contact Debra Henry at

(202) 508-5496 or [email protected]

Chief executives, chief financial officers, treasurers and investor relations executives from the electric power industry come together with the financial community at the 49th EEI Financial Conference.

Conference highlights include:

• Industry leaders discussing the challenges and opportunities of distributed generation and how the industry is addressing cyber and physical security.

• An address by bestselling author and political satirist P. J. O’Rourke.

• Formal financial presentations and company visits that provide utility executives and members of the financial community an opportunity to discuss business and financial strategies.

Join us in Dallas for the premier industry conference of the year.

REGISTER TODAY!

© 2014 by the Edison Electric Institute. All rights reserved.

WHERE INNOVATI O N AND

EFFIC IENT TECHNO LO GI ES

MEET.


WHERE INNOVATI O N

AND EFFIC IENT

TEC HNOLOGIES MEET.the edge

Getting Solar Pricing Right By Lisa V. Wood, executive director of the Institute for Electric Innovation and vice president of The Edison Foundation.

The integration of distributed resources and renew-able energy is well underway. Distributed genera-tion (DG) resources, such as rooftop solar systems, are growing and comprise a larger share of the

energy resources on the nation’s power grid. As the costs of DG decline, it is critical that these resources are priced appropriately and that the subsidies that support DG are transparent to all parties—customers, regulators, legisla-tors, solar providers, and DG advocates.

The Institute for Electric Innovation’s (IEI’s) recent issue brief, “Net Energy Metering: Subsidy Issues and Regulatory Solutions,” illustrates the subsidy created by current net energy metering (NEM) practices based on a typical residential customer in Southern California with a rooftop solar photovoltaic (PV) system. The re-sults show that the size of the NEM subsidy in California today is overly generous and not transparent; most of the NEM subsidies go to affl uent households (and are largely paid by less affl uent households through their electric bills); and when a customer chooses to lease—rather than own—rooftop solar, most of the NEM subsidy is transferred to the leasing company. These are unin-tended consequences and need to be modifi ed.

When a DG customer produces onsite energy, this

The Institute for Electric Innovation focuses on advancing the adoption and application of new technologies that will strengthen and transform the power grid. The Institute’s

members are investor-owned electric utilities that represent about 70 percent of the U.S. electric power industry and are committed to an affordable, reliable, secure, and

clean energy future.

reduces the amount of energy the customer purchases from the local utility. The customer avoids paying the portion of the energy rate that is designed to recover that customer’s share of the utility’s fi xed costs for grid services. Hence, the source of the NEM subsidy is that DG customers do not fully pay for the grid services that they use. In addition, this NEM subsidy is mostly paid by non-DG customers. While the IEI issue brief looks specif-ically at the size of the NEM subsidy using California as an example, the lessons learned can be applied to other states with NEM policies.

Undo the Unintended Consequences The legitimate purpose of a subsidy is to provide an in-centive to pursue a desirable public policy. Subsidies should not be overly generous; the amount of the subsi-dy should be transparent; and the recipient of the sub-sidy should be clearly identifi ed. The issue brief demon-strates that the current NEM approach in California fails all three tests.

DG customers who lease rooftop solar or enter into power purchase agreements (PPAs) with solar leasing companies accounted for about 75 percent of all new residential rooftop solar PV in California in 2013. Unfor-

tunately, these customers receive only a small frac-tion of the NEM subsidy; the bulk of the subsidy goes to rooftop solar leas-ing companies.

According to the is-sue brief, the NEM sub-sidy alone is more than $20,000 for a 4-kilowatt (K W ) rooftop solar PV facility that costs about $14,500 in Ca li fornia. This far exceeds what is necessary to incent roof-top solar PV. Combining both the NEM subsidy in California and the fed-eral tax credit of roughly $4,300 (about 30 percent of the purchase cost),


when a DG customer pur-chases rooftop solar, that customer receives more than $24,000 in subsidies for that rooftop solar PV facility.

It is important not just to understand the mag-nitude of the subsidy, but also to clearly identify the subsidy recipients. When a customer leases that same 4-KW rooftop solar PV facil-ity, the entire federal tax credit of roughly $4,300 goes to the leasing company, and the NEM subsidy is distributed between the customer and the solar leasing company. Of the $24,000 in combined subsidies, the solar leasing company receives more than $17,000 (from both the NEM subsidy and the federal tax credit) and the cus-tomer receives about $7,000 (from the NEM subsidy).

Use Available Regulatory ToolsRegulatory tools are available today, and in use in some jurisdictions, to reduce the unintended and excessive NEM subsidies to both customers and solar leasing companies, while also reducing the cost shifting onto non-DG customers. The most straightforward regulatory approach is to

require DG customers to pay for more of the grid ser v ices t hey use t h roug h a h ig her mont h ly customer charge and to sim-plify the tiered-rate structure in Califor-nia. Increasing the mont h ly customer charge significantly reduces t he N EM subsidy.

A “buy-sell” approach where DG customers purchase all of the power they use onsite at the utility’s retail rate and sell all of the solar power produced onsite at the utility’s avoided costs could eliminate the NEM subsidy and the cost shifting. However, the subsidy and cost shifting would be eliminated only if the prices paid for the solar energy produced by the DG facility were truly equal to the utility’s avoided costs.The issue brief provides estimates of how much

the NEM subsidy would be reduced by using available regulatory tools, such as increasing the monthly cus-tomer charge (coupled with replacing the tiered-rate

structure in California with a single energy rate) or implementing a buy-sell approach for DG customers.

The time to change net metering is now, and reg-ulatory tools are available to do so. In fact, several states across the United States are now considering “value of rooftop solar”

(VOS) approaches to DG; the VOS approach is a version of the buy-sell approach.

Moving from NEM to VOS The VOS approach has two parts. First, the DG customer purchases all of the energy he or she consumes onsite from the utility at the utility’s retail rate. This ensures that the DG customer fully pays for the grid services he or she utilizes. Second, the utility purchases all of the solar energy produced onsite by the DG facility at the VOS rate (which hopefully represents the utility’s avoid-ed costs). As indicated earlier, the subsidy and cost shift-ing are eliminated only if the prices paid for the solar energy produced by the DG facility are truly equal to the utility’s avoided costs.

Both the components of avoided costs and how to value each of them are highly controversial issues. In

terms of the compo-nents of avoided costs, most would agree that avoided costs include: energy costs; transmis-sion and distribution energy losses; and gen-erating capacity costs. However, controversy typically arises over how to compute avoided transmission and dis-tribution capacity costs and whether avoided environmental costs are appropriate to include.

The components of avoided costs, the value of each cost component, and using consistent valuation approaches are equally important for a fair analysis.

VOS may be one approach for addressing the unin-tended consequences associated with NEM. However, the devil is in the details. To date, many of the proposed VOS approaches have resulted in simply swapping the NEM subsidy for the VOS subsidy. If the goal is to make progress toward pricing solar right, creating a new set of subsidies under VOS is not the answer.

Subsidies should not be overly generous; the amount of the subsidy should be transparent; and the recipient of the subsidy should be clearly identified.


INNOVATIVE UTILITY PROJECTS

REVO LUTI O NI ZE THE FUTURE O F ELECTRICITY.plugging innovation

Diversifying Renewable Energy in Michigan

Consumers Energy recently announced that it is diversifying its energy supply and helping the environment by selecting four Michigan farms to produce renewable energy with anaerobic

digesters. The farms will be offered the opportunity to generate electricity under long-term contracts that collec-tively provide 2.6 megawatts of electric capacity.

Consumers Energy developed the new anaerobic digester program along with Michigan State University and the state’s agri-cultural community. Anaerobic digesters generate electricity from biodegradable m at er i a l — i n t h i s case from four Mich-igan farms: Beaver Creek Farms in Coo-persville, Brook View Dair y in Freeport, Green Meadow Farms in Elsie, and Scenic View Dairy in Fen-nville. The program a lso reduces sol id and l iquid wastes, improves water run-off quality, and provides building heating.

The process begins with organic materials that are fed into the digester system, such as animal waste, food scraps, agricultural residue, or wastewater solids. (See Figure 1.) The anaerobic digester breaks down the organic materials into digested material and biogas using natural biological processes. The digested material is processed into fertilizer, compost, and a variety of other agricultural products that can be marketed to agricultural, commercial, and residential customers. The raw biogas is processed and can be used in the same way as natural gas—it can produce heat, electricity, or vehicle fuel, or can be injected into natural gas pipelines.

“We are excited to move forward with this new pro-gram to develop dependable, renewable energy pro-duced here in our state for the Michigan homes and businesses we serve,” said Timothy Sparks, vice presi-dent of energy supply operations for Consumers Energy. “The addition of anaerobic digestion brings more diver-sity to our existing renewable energy supply from wind, solar, biomass, and hydroelectric dams.”

The United States currently has about 2,000 sites pro-ducing biogas: 293 a naerobic d ige st-ers on farms, 1,241 w a ste w ater t reat-ment plants (approx-imately 860 use the biogas they produce), and 636 landfill gas projects, according to the American Biogas Council.

In July, Consumers Energy was ranked the top “environmen-tal champion” among providers of electric-ity and natural gas in the Midwest by an

independent national survey. Cogent Reports, a division of Market Strategies International, surveyed 19,000 cus-tomers of 125 natural gas, electric, and combined pro-viders throughout the United States. The 2014 “Utility Trusted Brand and Customer Engagement” study also ranked Consumers Energy as the second-most-trusted electric and natural gas provider in the Midwest and third in the country. The anaerobic digester program is a key part of the company’s environmental commitment.

Consumers Energy, Michigan’s largest utility, is the principal subsidiary of CMS Energy, providing natural gas and electricity to 6.5 million of the state’s 10 million residents in all 68 Lower Peninsula counties.

F I G U R E 1

HOW IT WORKS: ANAEROBIC DIGESTER

Source: Consumers Energy

Consumers Energy

An anaerobic digester at Michigan State University. Consumers Energy selected four Michigan farms to generate electricity using anaerobic digesters.

Waste Gas

Animal Waste Digester Reactor

SeparationProcess

ElectricityGenerator

Electricity

Fertilizer

Methane

Heat/Electricity

BiogasCleanup

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Electric utility returns are increasingly at risk in the face of flattening load growth, rising system upgrade and expansion requirements, exposure to consumer-focused technology and dis-intermediation, and a more challenging, competitive, and regulatory landscape. Utilities that meet these challenges will structure their capital allocation processes to effectively address market and regulatory risk and projected returns in a consistent, risk-integrated manner across the organization.

Pace Global assists utilities in addressing these challenges by evaluating risks and projected performance in a probabilistic framework, utilizing consistent metrics across the parent, regulated, and un-regulated units.

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To learn more, contact Gary Vicinus or Bo Poats at 703.818.9100.

Capital Allocation Under Uncertainty– Are You Up to the Challenge? Making informed capital allocation decisions under uncertainty is an increasingly challenging proposition in today’s regulated and de-regulated power market.

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