thomas p. meissner jr. senior vice president, chief operating officer unitil corporation

Thomas P. Meissner Jr.Thomas P. Meissner Jr.Senior Vice President, Chief Operating Officer

Unitil Corporation

New York City ~ July 17, 2007NARUC Committee on Energy Resources and the Environment

What Utilities Can Do With

Renewable Energy

2

Committee on Energy Resources and the EnvironmentJuly 17, 2007

Small, investor-owned utility

Three territories – NH and MA

Gas and electric operations

Fully restructured

“Distribution only”

Not allowed to own or invest in generation of any kind, except through unregulated affiliate.

About UnitilAbout Unitil

3


Centralized Generation Hydroelectric Wind farms Biomass Solar concentrators Landfill gas Etc.

Renewable GenerationRenewable GenerationDistributed Generation

Small wind turbines

Photovoltaics

Fuel cells

Net metered installations

Etc.

Load serving resources Displacement resources

More closely aligned with distribution/deliveryCompetitive markets

4


Displacement Options

1. Eliminate unnecessary consumption; remove load from the system

2. Better manage load between time periods

3. Produce electricity directly at the point of utilization

Displacement ResourcesDisplacement Resources

Technology Options

Energy Efficiency

Fuel substitution

Demand Response

Energy Storage

Distributed Generation

Distributed Energy Resources = Displacement Resources

5


Typically do not have the ability to vary output in response to electric demand.

Need the ability to disassociate generation from consumption.

A connection to the utility grid provides this functionality without the need for energy storage or other expensive alternatives.

Best example – net metering.

Small Renewable GeneratorsSmall Renewable Generators

Connection to the utility grid provides the functional equivalent of energy storage, supplemental service, and back up and standby.

Customer Load vs. Generator OutputTypical Photovoltaic Installation

0

0.2

0.4

0.6

0.8

1

1.2

1.4

12:00 AM 6:00 AM 12:00 PM 6:00 PM 12:00 AM

PV Output

Electricity Consumption

6


Will no longer be planned exclusively around centralized generation.

Will no longer be a strictly radial load-serving system.

A hybrid system will emerge in which load is served from a combination of centralized and distributed resources

Integrates load, generation and displacement resources.

Two-way power flow at the local network.

Will evolve to a network topology with more sophisticated protection, com-munication, metering, and intelligence.

Utilities will provide energy services and grid integration; not just delivery.

2121stst Century Grid Century Grid

Grid Modernization Characteristics*

1. Self-healing.

2. Motivates and includes the consumer.

3. Resists attack.

4. Provides power quality for 21st century needs.

5. Accommodates a wide variety of generation options.

6. Enables markets.

7. Optimizes assets and operates efficiently.

* U.S. National Energy Technology Laboratory

7


ENABLER: Provide the services to help consumers reduce energy consumption and shift to renewable energy alternatives.

Role of Distribution UtilitiesRole of Distribution Utilities

Grid Integration Services Painless interconnection

Energy storage functionality

Supplemental service

Backup & standby

Integration of load and displacement resources

Time differentiated pricing

Energy Services Subsidies/grants

Tax credits

Financing

REC’s

Forward Capacity Markets

Value streams

8


Conceptual Regulatory FrameworkConceptual Regulatory FrameworkThe Evolving Utility Distribution Grid

Customer Behavior

Infrastructure Investment

Pricing of Energy

Services

• DER/DG/renewable energy

• Proper price signals

• Demand Response

• Energy Efficiency

• Lower customer bills

• Environmental objectives

• Enable displacement resources

• Empower & incorporate consumers

• Enable competitive markets

• Enhance reliability, power quality

• Optimize assets

• Modernize the grid

• Achieve environmental/energy policy objectives

• More efficient use of system

• Potential for lower unit costs

• Increased capital requirements• Decline in use per customer

• Increased use of renewable DER

• Migrate away from volumetric pricing of delivery

• Remove utility disincentives to energy displacement

• Align incentives to achieve desired outcomes

• Pricing: energy services vs. energy delivery

9


Completing Advanced Metering Infrastructure (AMI) installation for all customers.

Evaluating new regulatory models and ratemaking methods to achieve desired energy policy objectives.

Experimenting with small renewable technologies.

Seeking legislative authority to invest directly in small renewable generation.

What Are We Doing?What Are We Doing?

It is our belief that rapid adoption and penetration of renewable DER technologies will not occur without the direct, active involvement of the local distribution utilities as determined and motivated partners.

10


Thank YouThank You

Utility Ownership of Renewable Energy Facilities

Brent E. GaleSr. Vice President, Regulation and LegislationMidAmerican Energy Holdings CompanyJuly 2007

12

PacifiCorp Net Plant Capability Capacity Mix

Resource Type 2007 2013

Pulverized Coal 6,097.0 48% 6,437.0 43%

Existing Purchases 1,835.8 14% 628.2 4%

Gas-CCCT 1,697.7 13% 2,654.7 18%

Hydroelectric 1,556.4 12% 1,384.1 9%

Renewable 799.0 6% 2,143.0 14%

Gas-SCCT 384.8 3% 384.8 3%

Interruptible 233.0 2% 308.0 2%

Class-1 DSM 153.2 1% 267.6 2%

Front Office Transactions 0.0 0% 660.0 4%

Gas-CHP 0.0 0% 100.0 1%

Nuclear 0.0 0% 0.0 0%

Oil 0.0 0% 0.0 0%

Total 12,756.9 14,967.4

13

PacifiCorp Net Energy Mix (GWh)


Pulverized Coal 47,200.5 65% 37,259.9 45%

Purchases 9,571.7 13% 17,871.1 22%

Hydroelectric 6,989.4 10% 5,822.2 7%

Gas-CCCT 6,214.5 9% 10,930.9 13%

Renewable 2,631.8 4% 7,248.2 9%

Gas-SCCT 162.8 0% 441.2 1%


Class-1 DSM 22.8 0% 6.8 0%

Front Office Transactions 0.0 0% 2,465.5 3%

Gas-CHP 0.0 0% 143.1 0%

Nuclear 0.0 0% 0.0 0%

Oil 0.0 0% 0.0 0%

Total 72,882.3 82,267.7

14

MidAmerican Energy Company Net Capacity Mix


Pulverized Coal 3,574.8 53% 3,574.8 47%

Gas-SCCT 921.9 14% 921.9 12%

Gas-CCCT 576.3 9% 576.3 8%

Renewable 459.5 7% 1,122.5 15%

Nuclear 456.0 7% 456.0 6%

Existing Purchases 364.0 5% 107.0 1%


Oil 56.0 1% 56.0 1%

Class-1 DSM 51.0 1% 56.0 1%

Hydroelectric 3.6 0% 3.6 0%


Gas-CHP 0.0 0% 0.0 0%

Total 6,735.1 7,626.1

15

MidAmerican Energy Company Net Energy Mix (GWh)


Pulverized Coal 20,625.6 69% 22,904.8 70%

Nuclear 3,631.1 12% 3,568.2 11%

Purchases 2,868.7 10% 482.7 1%

Renewable 1,541.0 5% 3,616.6 11%

Gas-CCCT 1,054.4 4% 1,345.2 4%

Gas-SCCT 75.1 0% 445.6 1%

Hydroelectric 25.5 0% 26.0 0%

Class-1 DSM 0.2 0% 0.2 0%



Gas-CHP 0.0 0% 0.0 0%

Oil 0.0 0% 0.0 0%

Total 29,821.8 32,623.4

16

Why develop a renewable energy portfolio?• Diversify fuel risk• Diversify environmental risk• Utilize available tax benefits • Positive customer response• Economic benefits

17

Why should utilities consider owning renewables?

• Right to assets and production after typical PPA contract term

• Terminal value• Control over maintenance• Ownership of renewable energy credits and any

associated revenues• Ability to pass tax credit saving to customers• Near zero dispatch cost• Revenues from incremental wholesale energy sales• Gain expertise and reliable cost information regarding the

technology

18

Issues to Consider for the Wind Energy Power Purchase Alternative

• Debt leverage risk• Developer business risk• Operational risk• Terminal value• Managing unneeded deliveries during minimum

load• Class cost allocation• Ownership of renewable and environmental

credits• Contract renewal or replacement at end of PPA

term will likely be more expensive

19

Issues for Wind Energy Ownership or Purchase• Transmission Availability and Cost

– Our Iowa projects provide an instructive example. The first 460 MW required about $7 million in transmission upgrades or about $15.25/kW installed. The next 75 MW will require about $12 to $14 million in upgrades or about $160 or more/kW.

• Tower & Turbine Availability and Cost– 2004 - $1050/kW total project cost– 2005 - $1250/kW total project cost– 2006 - $1800/kW total project cost– 2007 - $2000/kW total project cost

– Tower & turbine cost is roughly 75% of total project cost• Each $100/kW change in cost equates to about 0.3

cents/kWh change in all-in cost at 40% capacity factor and 0.4 cents/kWh at a 30% capacity factor.

20

Issues for Wind Energy Ownership or Purchase• Locational Economics

– Annual Capacity Factors• Oregon/Washington – 30 to 34%• Iowa – 34 to 40%• Wyoming & Dakotas – 38 to >40%• Each 1 percentage point change in capacity factor equates to roughly

0.2 cents/kWh change in all-in cost.– Peak Availability

• Impact on Planning Reserves– Non-dispatchability & low summer peak availability of wind

facilities will require greater nameplate capacity reserves– 12% to 20% summer peak availability if multiple sites; individual

sites are often much less– Geographic diversity can mitigate but will not eliminate.

21

What Is Needed to Spur Development of Renewables?

• Reconciliation of state least cost standards with renewable energy costs

• Flexible and expedited federal and state permitting processes

• Matching of benefits and cost recovery• Continuation of the federal production tax credit

at some level until the credit trading market is robust

• A national renewable credit trading program

22

State Renewable Production Standard mandates are NOT required and can be counterproductive

• Inconsistent definitions of qualified renewables• Lack of sound economic basis for targets• Limits on qualified renewables (e.g., must be in

state)• Limits on use of renewable energy credits

Integrating Renewable EnergyIntegrating Renewable Energy

NARUC NARUC

July 17, 2007July 17, 2007

David M. SparbyDavid M. Sparby

Xcel Energy Service TerritoryXcel Energy Service Territory

Northern States Power

Company- Minnesota

Public Service

Company of Colorado

Southwestern Public Service

Northern States Power

Company- Wisconsin

3.3 Million Combined Electric and Gas Customers

in 8 States

3.3 Million Combined Electric and Gas Customers

in 8 States

Largest provider of retail wind energy in U.S.

Context: Strong Commitment to Context: Strong Commitment to DSM and Renewables (NSPMN)DSM and Renewables (NSPMN)

Peak Load (without CL):Peak Load (without CL): 10,000 MWs10,000 MWs

Wind:Wind: 800 MWs800 MWs

Biomass:Biomass: 150 MWs150 MWs

Controllable Load:Controllable Load: 932 MWs932 MWs

Electric Conservation:Electric Conservation: 256 GWh256 GWh

Gas Conservation:Gas Conservation: 900,000 MCF900,000 MCF

Renewable Development Fund:Renewable Development Fund:$20M/Year $20M/Year

AverageAverage

WindWind and Xcel Energy and Xcel EnergyWindWind and Xcel Energy and Xcel Energy

Biomass and Northern States Power Co.Biomass and Northern States Power Co.

2007 Minnesota Legislative Session2007 Minnesota Legislative Session

Renewable Portfolio Standard (MN and ND)Renewable Portfolio Standard (MN and ND)

Community Based Wind DevelopmentCommunity Based Wind Development

Carbon Emissions Reduction ObjectiveCarbon Emissions Reduction Objective

DSM and Conservation GoalsDSM and Conservation Goals

NSP 2020NSP 2020Energy MixEnergy Mix

2005 NSP Energy Mix

Coal

46%

Purchase

6%

Bio

2%Hydro +

Hydro PPA13%

Wind

3%

CT

1%

Nuclear

28%

CC

1%

2020 NSP Energy Mix

Coal

30%

Purchase

2%

Bio

2%Hydro +

Hydro PPA5%

Wind

21%

CT

1%

Nuclear

29%

CC

10%

NSP Load Duration Curve in 2020NSP Load Duration Curve in 2020

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

4

27

3

54

1

80

7

1,0

73

1,3

38

1,6

04

1,8

67

2,1

25

2,3

87

2,6

51

2,9

18

3,1

85

3,4

50

3,7

16

3,9

81

4,2

45

4,5

09

4,7

75

5,0

38

5,3

03

5,5

68

5,8

33

6,0

99

6,3

65

6,6

30

6,8

93

7,1

59

7,4

22

7,6

88

7,9

53

8,2

19

8,4

87

8,7

51

Non Dispatchable (Wind&Hydro)ST PurchGas PeakerGas CC

Coal NUGBioNuke

Midwest Transmission EffortMidwest Transmission EffortMidwest Transmission EffortMidwest Transmission Effort

South DakotaSouth Dakota

IowaIowa

MinnesotaMinnesota

WisconsinWisconsin

North DakotaNorth Dakota

Post- Group Post- Group I projectsI projects

Group IGroup I

Group I – four projectsGroup I – four projects

600 + miles of600 + miles oftransmission linestransmission lines

$700 million over 7 years$700 million over 7 years

Group I – four projectsGroup I – four projects

600 + miles of600 + miles oftransmission linestransmission lines

$700 million over 7 years$700 million over 7 years

Other Wind Integration IssuesOther Wind Integration Issues

ReliabilityReliability

OperationsOperations

CostsCosts

Wind Assisting Assets and PracticesWind Assisting Assets and Practices

MN Summer System Peak DayMN Summer System Peak Day

Actual System Load vs. Expected System Load

6000

6500

7000

7500

8000

8500

9000

9500

10000

10500

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour Ending

MW

Expected SystemLoad

System Load

Conclusion: Opportunities and ChallengesConclusion: Opportunities and Challenges

2007 legislative goals set a high 2007 legislative goals set a high benchmark benchmark

The necessary technology and The necessary technology and delivery mechanisms are available delivery mechanisms are available to meet these objectivesto meet these objectives

Constructive regulation will be Constructive regulation will be required to insure successfully required to insure successfully adding these resourcesadding these resources

What Utilities Can Do With Renewable

Energy

What Utilities Can Do With Renewable

EnergyRalph LaRossa

President and Chief Operating Officer PSEG

Ralph LaRossaPresident and Chief Operating

Officer PSEG

NARUC Committee on Energy Resources and the Environment

New York City – July 17, 2007

NARUC Committee on Energy Resources and the Environment

New York City – July 17, 2007

PSE&GPSE&G 6,400 employees 2.1 M electric customers 1.7 M gas customers 24/7 operation 2,600 sq miles service

territory Serving 6 major cities

and 300 communities 150,000 miles of wire 15,000 miles of pipe

0 10ml1 2 3 4 5 6 7 8 9

Warren Co.

Hunterdon Co.

Morr is Co.

Bergen Co.

Essex Co.

Hudson Co.

Union Co.

Middlesex Co.

Mercer Co.

Monmouth Co.

Ocean Co.

Burlington Co.

Camden Co.

Sussex Co.

Passaic Co.

Somerset Co.

STATEN ISLAND

Gloucester Co.

COMBINED ELECTRIC & GAS TERRITORIES

ELECTRIC TERRITORY

GAS TERRITORY

KEY:

N

EW

S

PSE&GPSE&G Named the America’s Most Reliable Electric

Utility for the last two years

Awarded the Mid-Atlantic reliability award for the past five years

Electric Customers: 2.1M

Gas Customers: 1.7MNuclear Capacity: 3,500 MW

Total Capacity: 15,000 MW*

Traditional T&D

Leveraged Leases

Domestic/Int’l Energy

Regional Wholesale Energy

* 13,000MW in NJ, NY, CT and PA. 2,000MW in Texas

PSEG Family of CompaniesPSEG Family of Companies

Convergence of Energy and the EnvironmentConvergence of Energy and the Environment Convergence of energy and the environment

creates the need to address:

• Critical infrastructure requirements

• Environmental requirements

• Capacity requirements in constrained markets

CO2 Reductions – Multiple Strategies RequiredCO2 Reductions – Multiple Strategies Required

PSEG’s Multi-Pronged ApproachPSEG’s Multi-Pronged Approach

Conservation through energy efficiency improvements

Development of renewable energy resources

Clean, zero- and low-carbon central station electric generating capacity.

NJ’s Energy Master Plan & Global Climate Change LegislationNJ’s Energy Master Plan & Global Climate Change Legislation PSE&G is a strong supporter of global climate change

legislation and NJ’s Energy Master Plan.

Global climate change legislation is a blueprint for other states to follow in reducing carbon emissions and promoting sustainable energy systems.

Legislation and Master Plan’s goals:• Reduce projected energy use by 20% by 2020 and

meet 20% of the State’s electricity needs with renewable energy sources by 2020.

Solar and Wind in New JerseySolar and Wind in New Jersey Renewables can contribute to our total energy mix, but won’t meet our

total energy needs:• Intermittent generation for solar -12%; Wind - 30%.

• Land availability and weather are key considerations for both sources.

• Estimated 12,820 wind turbines would be necessary to replace electric power input of all NJ’s nuclear power plants.

Solar energy holds greater promise than wind energy for New Jersey.

Economics of solar energy require participation from both the public and private sectors – along with significant financial incentives through regulated incentive rates of return, rebates and federal investment tax credits.

PSE&G supports extension of the Solar ITC to allow direct utility investment in solar.

PSE&G currently has a solar proposal designed to maximize ratepayer benefits while leveraging the long-term support of the utility.

Creating Solutions with Solar PowerCreating Solutions with Solar Power PSE&G proposed in April 2007 to invest $100 million in a solar

energy initiative.

Program will help meet the aggressive goals of the Energy Master Plan and the NJ Board of Public Utilities’ renewable portfolio standards (RPS) requirements.

The utility will provide financing to solar photovoltaic developers or end-use customers over a 15-year period, covering about 40-50 percent of a project’s cost.

Program will fund installation of 30 megawatts of solar power; about one half of the RPS requirements in PSE&G’s service territory in the years 2008 through 2010.

If successful, the program may be expanded to support additional solar development.

Energy efficiency and conservation is another key component to combating climate change...

Conservation through Energy Efficiency ImprovementsConservation through Energy Efficiency ImprovementsEnergy Efficiency Investments in our Plant and Systems: Usage of more energy efficient primary and secondary wires for new

overhead installations. Installation of energy efficient transformers. Replacement of aging transformer banks with state-of-the-art units.

The Bottom “Green” Line:

Cumulative impact through 2020: • Reduction of approximately 100 million kilowatt hours and

approximately 60,000 tons of CO2.• Carbon reduction equivalent to removing the emissions of

14,000 cars

Investments in Hybrid Vehicles: PSE&G currently replacing 1,300 vehicles with hybrid cars, light trucks

and hybrid bucket truck prototypes. PSE&G will become the first utility in the nation to use hybrid aerial lifts

on bucket trucks. Since 2003, PSE&G has used bio-diesel as fuel for its diesel-powered

vehicles.

The Bottom “Green” Line:

Cumulative impact through 2020: • 8,500 tons of CO2 and 850,000 gallons of gasoline

Bio-Diesel contributions since 2003:• 7,700 tons of CO2

Conservation through Energy Efficiency ImprovementsConservation through Energy Efficiency Improvements

• Examine regulatory reform options to give utilities incentives to invest in efficiency:

• Take away disincentives• Provide utilities with direct incentives to invest in

energy efficiency

• With systems in place, new investments can be made in efficient lighting, heating or cooling for residential and commercial and industrial customers.

• With proper incentives, utilities can be the catalysts for large scale efficiency gains.

Next Steps for PSE&GNext Steps for PSE&G

Working together for a green and bright futureWorking together for a green and bright future Working with our government and regulators, environmental

groups, academic institutions and industry we can:• Apply our experience• Leverage our customer relationships• Utilize our resources

Dramatic actions to make renewable and conservation work as part of the solution.

Thank You

thomas p. meissner jr. senior vice president, chief operating officer unitil corporation

Documents

energy consumption

renewable energy alternatives

distributed resources

radial load

displacement resourcestime

utility grid

combination of centralized

power quality