Peninsula Clean Energy
Board of Directors Regular Meeting
6:30 p.m.
June 22, 2023
Peninsula Clean Energy
Agenda
• Call to Order / Roll Call
• Public Comment (for items not on the Agenda)
o Please note, send any chats to Board Clerk, Nelly Wogberg • Action to set the Agenda and Approve Consent Items 1-2 o Consent - Public Comment
• Regular Agenda
• Adjournment
Chair Report (Discussion)
CEO Report (Discussion)
Peninsula Clean Energy
Topics to be Covered Tonight
• Staffing Update
• Credit Ratings Update
• Legislative Update
• EV Ready Updates
• Annual NEM Payouts
• Upcoming Meetings
• Some words from Jan
Peninsula Clean Energy
Staffing Updates: New Hires
• Lauren Mathisen, Power Resources
Specialist, who started on June 16
Peninsula Clean Energy
Staffing Updates: Summer Interns
• Carlos Capell, Load Forecasting
• Zachary Meyer, Buildings Electrification
• Sophia Young, Electric Vehicles
• Hubert Nguyen, Data Analysis
• Jasper Liu, Data Analysis
• Emilia Groupp, Energy Equity
• Lauren Dineen, Power Supply Contracts
Peninsula Clean Energy
Staffing Updates
Currently posted on PCE website:
• Power Resources Analyst/Specialist
• Account Services Specialist
• Senior Program Manager, Local Power Resources
• Chief Financial Officer / Director of Finance and
Administration
Peninsula Clean Energy
Credit Ratings Update
• PCE has earned a credit rating of A- from S&P
Peninsula Clean Energy
Legislative Update
• SB 537 (Becker) to
amend Brown Act – PCE
is sponsor
• State Budget
Peninsula Clean Energy
EV Ready Updates
• 433 EV charging ports have been installed
• 91 projects have secured rebate funding from PCE and are actively in progress now
• 200+ properties are receiving technical assistance
• ~2/3 of our technical assistance sites are at apartment/condo properties
• Average cost to install a charger in our program is ~$4,000, a fraction of the cost of other state and IOU programs
11 Peninsula Clean Energy
A recent EV Ready example from a rental apartment
property project in San Mateo
• 10 Level 2 chargers installed, with
power management
• Total installation cost was $3,000 per
charger
• Installed by Metro Electric (IBEW
member, FYI)
• The project received both technical
assistance and rebate funding from
PCE
12 Peninsula Clean Energy
Annual NEM Payouts 2023
13 Peninsula Clean Energy
Average and Total Annual NEM Payouts 2023
14 Customer Class Average Payout Amount Total
Commercial $2,095.13 $129,897.85
Residential $292.72 $1,302,884.06
Total NEM Payouts in 2023: $1,432,781.91
Peninsula Clean Energy
Upcoming Meetings
•
• Executive Committee:
o July 10 at 10:00 a.m. (In-person and zoom)
• Citizens Advisory Committee:
o July 13 at 6:30 p.m. (In-person and zoom)
• Board of Directors:
o July 27 at 6:30 p.m. (In-person and zoom)
Peninsula Clean Energy
And now some words from Jan …
. . . to the Peninsula Clean Energy Board of Directors. And thank you for this wonderful opportunity and for your support these 7 years!
CAC Report
Recognition of Chief Executive Officer,
Jan Pepper Upon Retirement
FY 2023-2024
(July 1, 2023 – June 30, 2024)
Budget Review
Revised Draft
Peninsula Clean Energy
Recommendation/Resolution
RESOLUTION THAT THE BOARD OF DIRECTORS APPROVE THE
FISCAL YEAR 2023-2024 BUDGET WITH TOTAL OPERATING
EXPENSES NOT TO EXCEED $350,657,317
20 Peninsula Clean Energy
Schedule – Budget Review and Approval
21 • May 16, 2023 – Review Initial Draft Budget with Audit & Finance Committee • May 25, 2023 – Review Initial Draft Budget with Board of Directors • June 12, 2023 – Review Revised Draft Budget with Audit & Finance Committee • June 12, 2023 – Review Revised Draft Budget with Executive Committee • June 22, 2023 – Approve Final Budget by Board of Directors Peninsula Clean Energy
Revisions Since Initial Draft Budget
• Update to year-end FY23 forecast reflecting April 2023 financial results
• Minor adjustments to Programs Budget
• Modification to assumptions of Gov PV prepayment for
conservatism
• Minor modifications to Days Cash on Hand calculation
22 Peninsula Clean Energy
Draft Budget FY2023-2024 – Key Assumptions (Page 1 of 2) 23 Revenues
o PG&E Generation Rates – Slight decline in rates for next 4 years o January 1, 2024 – Increase 1%
o PCIA Rates – Continuing decrease in rates as of January 1, 2024 o January 1, 2024
o San Mateo – Drop to $0.00 from already low rate
o Los Banos – Drop to $0.00 from already low rate
o After 2024
o Significant increases for next 4 years, near to rates of 2022, but still not approaching rates of 2021
o Customer Rates to PCE – Relatively flat for next 3 years, then lower in 2027 and 2028 (but still well above low year of 2021)
Peninsula Clean Energy
Draft Budget FY2023-2024 – Key Assumptions (Page 2 of 2) 24 Cost of Energy –
o Budgeted at $311 million - Increase of $39 million (14%) over FY23 forecast o Overall budget includes 2 conservatism contingencies
o Energy Cost Volatility = $15 million/year
o 100% Renewable on 99% Time-Coincidence Basis Project Delays = $56 million over 5 years; $770K in FY24
o Total cost is 9% higher than FY23 forecast without conservatism adders Non-expense Capital Outflows/Inflows
• Solar and Storage on Public Buildings
o Capital Outlay and Investment Tax Credit
o Phase 1 - $7.4 million outflow in FY24; $2.2 million ITC inflow in FY26 o Phase 2 - $43.0 million in FY25; $15.0 million ITC inflow in FY27 o Repayment based on usage over 20-year period
• Ongoing On-Bill Finance Programs
Peninsula Clean Energy
Revised Draft Budget (FY23 Forecast and FY24 Budget)
Summary View
25 FY24 Budget Approval: Total
Operating Expenses
2023 2023 2023 2024
Budget Forecast Variance - Fav/(Unf) Revised Draft Budget Total Operating Revenues 367,783,691 432,684,817 64,901,127 474,624,034 Total Operating Expenses 294,429,488 297,075,405 (2,645,917) 350,657,317 Operating Income (Loss) 73,354,203 135,609,412 62,255,209 123,966,717 NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) 600,000 3,033,812 2,433,812 645,192 CHANGE IN NET POSITION 73,954,203 138,643,224 64,689,022 124,611,909 Net Position at the beginning of period 174,211,272 167,670,734 (6,540,538) 300,430,872 Net Position at the end of period 248,165,475 306,313,958 58,148,484 425,042,781 Total Cash & Cash Equivalents (after Net Program Outflows) 262,859,728 377,161,637 Unrestricted Cash Days on Hand 323 393
Fiscal Year Fiscal Year
Peninsula Clean Energy
Revised Draft Budget (FY23 Forecast and FY24 Budget)
Detailed View
26 FY24 Budget
Approval: Total
Operating Expenses
2023 2023 2023 2024
Budget Forecast Variance - Fav/(Unf) Revised Draft Budget
OPERATING REVENUES
Electricity Sales, net 364,961,141 429,685,416 64,724,275 471,670,872 Green electricity premium 2,822,550 2,999,401 176,851 2,953,162 Total Operating Revenues 367,783,691 432,684,817 64,901,127 474,624,034
OPERATING EXPENSES
Cost of energy 264,208,440 270,221,267 (6,012,827) 311,261,389 Staff compensation 8,583,221 7,939,828 643,393 10,922,801 Data Manager 3,600,000 3,583,331 16,669 3,871,152
Service Fees - PG&E 1,350,000 1,309,818 40,182 1,400,000 Consultants & Professional Services 1,431,813 1,001,289 430,524 1,788,491 Legal 1,474,000 1,299,487 174,513 1,574,558
Communications and Noticing 2,686,208 1,409,113 1,277,095 2,850,940 General and Administrative 2,359,806 2,286,167 73,639 4,027,236 Community Energy Programs 8,640,000 7,946,237 693,763 12,726,000 Depreciation 96,000 78,870 17,130 234,750
Total Operating Expenses 294,429,488 297,075,405 (2,645,917) 350,657,317 Operating Income (Loss) 73,354,203 135,609,412 62,255,209 123,966,717 NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) 600,000 3,033,812 2,433,812 645,192 CHANGE IN NET POSITION 73,954,203 138,643,224 64,689,022 124,611,909 Net Position at the beginning of period 174,211,272 167,670,734 (6,540,538) 300,430,872 Net Position at the end of period 248,165,475 306,313,958 58,148,484 425,042,781 Total Cash & Cash Equivalents (after Net Program Outflows) 262,859,728 377,161,637 Unrestricted Cash Days on Hand 323 393
Fiscal Year Fiscal Year
Peninsula Clean Energy
Revised Draft Budget FY2024-2028 – 5-year Outlook
Summary View - Impact of Gov PV Programs on Cash Position 2024 2025 2026 2027 2028
Revised Draft Budget Forecast (FY) Forecast (FY) Forecast (FY) Forecast (FY) Total Operating Revenues 474,624,034 487,194,674 485,715,240 455,048,558 405,882,856 Total Operating Expenses 350,657,317 433,407,562 438,723,088 406,769,676 396,572,285 Operating Income (Loss) 123,966,717 53,787,112 46,992,152 48,278,882 9,310,571 Total Nonoperating Income/(Expense) 645,192 673,580 703,218 734,160 766,463 CHANGE IN NET POSITION 124,611,909 54,460,692 47,695,370 49,013,041 10,077,033 Total Cash & Cash Equivalents (before Net Program Outflows) 387,561,637 431,717,729 433,514,223 481,834,456 503,275,113 Net Program Outflows (10,400,000) (46,000,000) (800,000) 12,000,000 (2,250,000) Total Cash & Cash Equivalents (after Net Program Outflows) 377,161,637 385,717,729 432,714,223 493,834,456 501,025,113 Unrestricted Cash Days on Hand 393 326 362 446 464
Fiscal Year
Peninsula Clean Energy
Revised Draft Budget FY2024-2028 – 5-year Outlook
Summary View
2024 2025 2026 2027 2028
Revised Draft Budget Forecast (FY) Forecast (FY) Forecast (FY) Forecast (FY)
OPERATING REVENUES
Electricity Sales, net 471,670,872 484,233,036 482,737,236 452,054,000 402,863,671 Green electricity premium 2,953,162 2,961,637 2,978,004 2,994,557 3,019,185 Total Operating Revenues 474,624,034 487,194,674 485,715,240 455,048,558 405,882,856
OPERATING EXPENSES
Cost of energy 311,261,389 383,611,464 382,474,223 344,299,885 329,946,422 Staff compensation 10,922,801 11,578,169 12,272,859 13,009,231 13,789,784 Data Manager 3,871,152 4,103,421 4,349,626 4,610,604 4,887,240 Service Fees - PG&E 1,400,000 1,484,000 1,573,040 1,667,422 1,767,468 Consultants & Professional Services 1,788,491 1,091,949 1,119,665 1,168,642 1,199,674 Legal 1,574,558 1,633,099 1,707,767 1,786,843 1,870,626 Communications and Noticing 2,850,940 2,964,912 3,048,580 3,134,757 3,223,520 General and Administrative 4,027,236 3,748,298 3,929,634 4,121,293 4,336,551 Community Energy Programs 12,726,000 22,130,000 25,781,000 30,355,000 32,935,000 Depreciation 234,750 1,062,250 2,466,694 2,616,000 2,616,000 Total Operating Expenses 350,657,317 433,407,562 438,723,088 406,769,676 396,572,285 Operating Income (Loss) 123,966,717 53,787,112 46,992,152 48,278,882 9,310,571 Total Nonoperating Income/(Expense) 645,192 673,580 703,218 734,160 766,463 CHANGE IN NET POSITION 124,611,909 54,460,692 47,695,370 49,013,041 10,077,033 Net Position at the beginning of period 300,430,872 425,132,781 479,688,873 527,485,368 576,605,600 Net Position at the end of period 425,042,781 479,593,473 527,384,244 576,498,409 586,682,634 Total Cash & Cash Equivalents (after Net Program Outflows) 377,161,637 385,717,729 432,714,223 493,834,456 501,025,113 Unrestricted Cash Days on Hand 393 326 362 446 464
Peninsula Clean Energy
Recommendation/Resolution
RESOLUTION THAT THE BOARD OF DIRECTORS APPROVE THE
FISCAL YEAR 2023-2024 BUDGET WITH TOTAL OPERATING
EXPENSES NOT TO EXCEED $350,657,317
29 24/7 Renewable Energy
Achieving 99% Time-coincident Renewable Target by
2027
June 22, 2023
Peninsula Clean Energy
Presentation Outline
• Background
• Timing of the 24/7 Goal
• Recommendation
31 Background
Peninsula Clean Energy
Background: 24/7 Renewable by 2025
• In November 2022, the Board of Directors
adopted staff’s recommendation* on
delivering 100% renewable energy
annually on a 99% time-coincident basis
by 2025.
*This recommendation was based on mid-2022
market conditions.
33 Peninsula Clean Energy
Current Status • We currently purchase enough
renewable and carbon-free
supplies to meet 100% of our
customers' demand in the
same year
• This annual framework: o Is the current industry standard o Does not show whether supply and demand matched on an
hourly basis
34 Peninsula Clean Energy
Annual v. Hourly Matching
• Our goal is to match our electricity supply to customer load on an hourly basis o We will not be relying on system power (gas plants) and can maximally reduce GHG emissions from our electricity supply
o We will not credit ourselves for oversupply in some hours 35 2021 Peninsula Clean Energy 24/7 Emissions Footprint Peninsula Clean Energy
Benefits of 24/7
• Time-coincident renewable procurement strategy could reduce the risk exposure to volatile market prices
• Procuring time-coincident renewable energy results in several benefits to society:
o Reduce emissions on the grid
o Improve grid operations
36 Peninsula Clean Energy
Renewable v. Carbon-Free
• Large Hydro is carbon-free but:
o Not considered renewable under
California RPS due to its other
environmental impacts
o No new (additional) capacity available
o No long-term contracting opportunities
o Delivery subject to hydro conditions &
operational constraints (i.e. Use-Limited Resource)
o Not dependable to meet the time-coincident goal
37 Supply Resource Renewable* Carbon-free**
Solar PV X X
Wind X X
Geothermal X Certain types
Small Hydro (<30MW) X X
Biomass X
Large Hydro X
Nuclear X
*Renewable: electricity generated from a resource that
is naturally replenished as it is used
**Carbon-free: electricity generated without emitting
carbon dioxide or other greenhouse gases into the
atmosphere
Timing of the 24/7 Goal
Peninsula Clean Energy
Challenges in Achieving the 2025 Target
• Delays in resource development have resulted in fewer resources available to deliver renewable energy to PCE by 2025.
Contributing Factors:
• Global Supply Chain Disruption
• Labor Shortage
• Rising Financing Costs
• Interconnection Delays
• Short-term contracts with existing renewable
resources are unavailable.
Achieving the goal in 2025 or 2026, given the
limited resources that are expected to be
available and online, would be infeasible.
39 Peninsula Clean Energy
Resources Available in 2027
• Staff has been updating the 24/7 modeling with information from the 2023 RFOs and bilateral reach-outs to counterparties and focused on studying the possibility of achieving the 24/7 goal by 2027. 40 Potential Resources Available in 2027
New Mexico
Wind
Wyoming
Wind
Shaped
Renewable
New
Geothermal
New
Storage
Peninsula Clean Energy
Benefits for Shifting the Goal
• Shifting the 24/7 goal target year from 2025 to 2027 has the following benefits:
o Opportunity to contract a more diverse set of resources o Opportunity to avoid excessive over-procurement
o Opportunity to reduce long-term cost and risk exposure o Opportunity to build a more optimal resource portfolio 41 Recommendation
Peninsula Clean Energy
Recommendation to Board of Directors
Update Peninsula Clean Energy's Strategic Plan Priority to:
1. Deliver 100% renewable energy annually by 2025, and
2. Deliver 100% renewable energy annually on a 99% time-coincident basis by 2027.
* Staff will continue to monitor and evaluate the opportunity of achieving the 99% time-coincident goal by 2027, and promptly communicate any changes to the Board of Directors.
43 Peninsula Clean Energy
Thank you!
A sustainable world with
clean energy for everyone.
44 Item 8: Authorize Power
Purchase Agreement with
SunZia Wind PowerCo LLC
June 22, 2023
Peninsula Clean Energy
Recommendation
Approve Resolution Delegating Authority to Chief Executive Officer to Execute Power Purchase Agreement, and any necessary ancillary documents, including potential Replacement PPA(s) with the same terms and conditions as the agreement presented to the Board except for any necessary administrative changes, with SunZia Wind PowerCo LLC or an affiliate of SunZia Wind PowerCo LLC, with a Power Delivery Term of 15 years starting at the Commercial Operation Date on or about September 30, 2026, in an amount not to exceed $858 million. 46 Peninsula Clean Energy
Agenda
1. Project Overview
2. Expected Operations and Fit in Portfolio
3. Fit with Strategic Plan
4. Recommendations
47 Project Overview
Peninsula Clean Energy
SunZia Wind – Project Overview
Project Owner SunZia Wind PowerCo LLC
Developer Pattern Energy Group LP
Location Lincoln, Torrance, and Guadalupe Counties,
New Mexico
Technology Wind
Capacity 3,515 MW (Total Project)
PCE Share 220 MW
Annual
Generation
694,477 MWh (36% capacity factor)
(Represents 13% of PCE’s load)
Term 15 years
Commercial
Operation Date
September 30, 2026
Project Site >1,000 sq mi of private and state-owned land SunZia Wind Project Vicinity Map
Peninsula Clean Energy
SunZia Wind – Transmission to CAISO
Delivery Point Palo Verde, AZ (considered to
be “in-CAISO”)
Interconnection
Provider
SunZia Transmission (to be
built by Pattern)
Other
Transmission
Providers
(3rd Party
Transmission)
Existing infrastructure owned
by Salt River Project, Tucson
Electric Power, Western Area
Power Administration, Arizona
Public Service
SunZia Wind Transmission to CAISO
Peninsula Clean Energy
Contract Structure
• Pay for all energy produced by our 220 MW share at a fixed $/MWh rate, no escalation
• Contract term: 15 years
• Peninsula Clean Energy will receive energy and RECs from our share of the facility
• Peninsula Clean Energy can receive Resource Adequacy (RA) from SunZia if we obtain sufficient Import Allocation Rights (IARs) from CAISO o There is a standard process for PCE to apply for IARs, and we are confident we will be able to acquire at least a moderate amount
• Pattern will be the Scheduling Coordinator
51 Peninsula Clean Energy
Replacement PPA
• In order to facilitate the financing of the project, Pattern requires the ability to bifurcate or transition the project to an Affiliate. • This would be implemented via a Replacement PPA, which would update the Seller to be an Affiliate of SunZia Wind PowerCo LLC. • The Replacement PPA would have the same terms and conditions as those in the original agreement presented tonight, except for those administrative changes necessary to effectuate the separation or transition. • The Replacement PPA needs to be pre-approved by the Board during the approval of the original PPA.
• Staff will immediately inform the Board if a Replacement PPA has been requested by Pattern.
52 Peninsula Clean Energy
Workforce
• Pattern will pay New Mexico prevailing wage;
• Pattern's contractors are required to provide health and other applicable benefits to labor performing work on the project; • Pattern and its EPC contractor are currently finalizing the overall labor plan with International Brotherhood of Electrical Workers (IBEW) on the SunZia Transmission project, and once completed,
approximately 350 IBEW jobs will be created during peak construction periods.
53 Peninsula Clean Energy
Community Support for SunZia Transmission
• The following organizations have issued public letters of support for the SunZia Transmission Project:
54 New Mexico Building and Construction
Trades Council
BluRok Farm New Mexico Social Justice and Equity
Institute
International Brotherhood of Electrical
Workers
CommunityShare New Mexico Office of Military Base planning and Support
Santa Fe Chamber of Commerce El Pasto Electric Company Rural Education Advancement Program Albuquerque Charter Academy Estancia Valley Economic Development Association
Roswell-Chaves Economic Development
Corporation
Project Roots Arizona Indigenous Lifeways Southwest Black Ranchers Arizona Solar Energy Industries Association Prosperity Works New Mexico and El Paso Region Interfaith Power and Light
Arizona Technology Council Middle Rio Grande Economic Development Association
Valencia Renewables
Peninsula Clean Energy
Environmental Review Process
• Staff worked with environmental non-profits to develop a system for evaluating the environmental impact of projects.
• Staff studied the geospatial footprint of the project to evaluate whether the project is located in a restricted or high conflict area for renewable energy development:
o Protected areas at the federal, state, regional, local level (e.g. County-designated conservation areas, BLM Areas of Critical Environmental Concern, critical habitat for listed species, national, state, county parks, etc.). o Identified and mapped important habitat and habitat linkages, especially for threatened and endangered species (either state or federally listed). 55 USGS PAD-US: https://www.usgs.gov/core-science-systems/science-analytics-and-synthesis/gap/science/protected-areas RETI: https://reti.databasin.org/
Peninsula Clean Energy
Environmental Review Results
• The SunZia project is not located in a protected area based on the USGS Protected Areas Database (PAD-US)
• Bureau of Land Management land use approval for the project (Record of Decision) was issued in May 2023
56 Expected Operations and
Fit In Portfolio
Peninsula Clean Energy
Expected Month-Hour Profiles (2027)
58 5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
5 10 15 20
20 40
60 80
100
Hou r Hou r Hou r Hou r
MWh MWh MWh
Mo nth=Se p Mo nth=Oct Mo nth=Nov Mo nth=De c
Mo nth=Ma y Mo nth=Ju n Mo nth=Jul Mo nth=Au g
Mo nth=Ja n Mo nth=Fe b Mo nth=Ma r Mo nth=Ap r
Peninsula Clean Energy
Contribution to Portfolio - Annual (2027)
59 5 10 15 20 0
100
200
300
400
500
600
700
800
Existing Contracts
SunZia Wind
Load
MWh
Peninsula Clean Energy
Contribution to Portfolio - Seasonal (2027)
60 0
100
200
300
400
500
600
700
800
5 10 15 20 0
100
200
300
400
500
600
700
800
5 10 15 20
Existing Contracts
SunZia Wind
Load
Hour Hour
MWh MWh
Spring Summer
Fall Winter
Fit with Strategic Plan
Peninsula Clean Energy
Fit with Strategic Plan
• Priority 1: Design a power portfolio that is sourced by 100% renewable energy by 2025 and that aligns supply and consumer demand on a 24x7 basis by 2027 • Power Resources Goal 2: Secure sufficient, low-cost, clean sources of electricity that achieve Peninsula Clean Energy's priorities while ensuring reliability and meeting regulatory mandates
o Objective B: Procure power resources to meet regulatory mandates and internal priorities at affordable cost
62 Peninsula Clean Energy
Value of Out-of-state Wind to our 24/7 Goal
• Out-of-state wind has become increasingly important to meeting our 100% renewable target with diminishing availability of in-state wind resources;
• Including out-of-state wind in our portfolio significantly reduces the cost and overprocurement of implementing our 24/7 goal; • Out-of-state wind provides an excellent complement to California solar, by providing higher amounts of energy in winter and overnight periods;
• Very few out-of-state wind projects are available to Peninsula Clean Energy, and most come online later than SunZia Wind and are more expensive.
63 Recommendation
Peninsula Clean Energy
Recommendation
Approve Resolution Delegating Authority to Chief Executive Officer to Execute Power Purchase Agreement, and any necessary ancillary documents, including potential Replacement PPA(s) with the same terms and conditions as the agreement presented to the Board except for any necessary administrative changes, with SunZia Wind PowerCo LLC or an affiliate of SunZia Wind PowerCo LLC, with a Power Delivery Term of 15 years starting at the Commercial Operation Date on or about September 30, 2026, in an amount not to exceed $858 million. 65 Approval of Appointment of Shawn E.
Marshall as Chief Executive Officer (CEO)
and an Agreement for her Service as CEO
for the Term of July 1, 2023 to June 30, 2026
in an Amount Not-to-Exceed $400,000
annually
Electricity Grid
Regionalization and AB 538
June 12, 2023
Peninsula Clean Energy
Summary
• The California Legislature is considering a
bill that would enable the State’s grid
operator (CAISO) to expand to other states
• This is a significant policy question that the
State has previously considered
• Key stakeholders are split on how the State
should approach this issue
• Staff is seeking feedback from the Board on
how PCE should approach this issue
68 Peninsula Clean Energy
The U.S. Power Grid and California
• The U.S. power grid consists of the
bulk power system, high-voltage
transmission equipment, and the
lower-voltage distribution system.
• It is broken into 3 independent grids.
o The Western Interconnect, which
includes 38 separate balancing
authorities, including CAISO.
o The Eastern Interconnect, which
includes 36 balancing authorities
o The Electric Reliability Council of Texas
(ERCOT)
• The Western Interconnect is
overseen by the Western Electric
Coordinating Council (WECC)
69 1. https://www.tanc.us/understanding-transmission/the-western-us-power-system/ Peninsula Clean Energy
Electric System Operations • The actual operations of the electric system are managed by balancing
authorities (BA), which manage the
supply and demand of energy across their
territory, and transfer of electricity with
other BAs.
• There are 38 BAs within the WECC,
representing about 20% of all generation
capacity in the U.S. and Canada.
• BAs are regulated by both the Federal
Energy Regulatory Commission (FERC)
and the North American Electric
Reliability Corporation (NERC).Operations
70 Peninsula Clean Energy
CAISO Today
71 • Overview: The CAISO is both a BA and regional transmission operator that manages the flow of electricity across the high-voltage bulk power system that makes up 80% of California’s and a small part of Nevada’s electric grid.
• Governance: CAISO is regulated by both the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC). o Unlike other RTOs, the CAISO’s 5-person governing board is appointed by the California Governor and confirmed by the Senate
• Interstate Markets: CAISO operates 2 markets that involve multiple states and participants:
o WEIM: The Western Energy Imbalance Market (WEIM), a real-time bulk power trading market that involves 19 voluntary participants (and more coming) across 10 western states o EDAM: Building on the success of WEIM, the extended day-ahead market (EDAM) is a voluntary day-ahead electricity market that CAISO will launch in early 2024 • Both market programs are designed to deliver economic, environmental, and reliability benefits to participants by increasing regional coordination
Peninsula Clean Energy
The Need to Revisit Regionalization
• California has set ambitious climate goals to
reach 100% clean energy by 2045. CPUC’s
integrated resource planning analysis shows that
the grid would need an additional 86 GWs, more
than double what is currently on the grid.
• California needs to import electricity to meet its
Resource Adequacy requirements, and to meet
the demand of extreme summer heat events.
• There are doubts as to whether California can
build the new 86 GW of resources it needs fast
enough inside California to both meet climate
goals and reliability needs if the supply of imports
begins to decline.
72 Peninsula Clean Energy
The Need to Revisit Regionalization, continued
• An existing RTO, the Southwest Power Pool (SPP), is asking Western States to join their new market, called Markets+, similar to CAISO’s WEIM and EDAM. Unlike WEIM and EDAM, Markets+ will be operated by a governance board that is not appointed by a specific state or participant. • Many WEIM participants have already made commitments to leave WEIM for Markets+, jeopardizing resources available to WEIM and CAISO.
• Supporters of regionalization have raised concerns that if California doesn’t expand to an RTO, resources across Western states will become less and less available to California.
Peninsula Clean Energy
How Could Regionalization Be Structured?
Peninsula Clean Energy
Arguments in Support of Regionalization
75 • Improved reliability: Better coordination on Resource Adequacy by pooling generation resources across a larger region
• Accelerated decarbonization: Easier to match variable demand and renewable generation across the region; less curtailment of wind and solar resources • Improved transmission planning: Streamlining the process of long-term resource planning
• Cost reduction: Reduce transmission congestion costs, streamlining the cost of RA/operating reserve to maintain reliability, more efficient use of renewables are estimated to save $379 Million to $574 million annually for California electricity customers, approx. 4.5% of total annual costs
Peninsula Clean Energy
Key Supporters
76 Environmental
Peninsula Clean Energy
Arguments Against Regionalization
77 • Loss of state control: A regional board of directors will likely be less accountable to California ratepayers and California’s environmental and energy policy goals. California will likely only have one vote whereas California’s load is much larger than other Western states
• Federal oversight: FERC may have greater oversight over California policies that express preferences for renewable or carbon-free resources and is more subject to national politics and policies
• Job Creation: More projects may be built outside of California and California LSEs may purchase more of those resources
• State-level decarbonization: While more states have adopted renewable/carbon-free electricity goals, fossil fuel resources will still be more abundant across the west and therefore may be imported into California more easily
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Key Opponents
78 Environmental
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• Introduced by Asm. Holden, it is possibly a 2-year bill • CAISO develops and submits a governance proposal to the CEC to meet specific governance requirements (next slide)
• CEC, in consultation with CPUC and CARB, reviews the governance proposal and holds at least 5 public hearings (plus additional verification between agencies) • Legislature reviews and provides feedback on the structure • CAISO implements a governance structure, if there is intention from non-participating transmission owners to join and the FERC has approved any changes to CAISO tariff that are necessary. Open to transmission owners, retails sellers, POUs • Additional checks and balances to ensure compliance with FERC requirements, CEC, CAISO, and the Secretary of State
AB 538: Regionalization Process
79 Enable the transition of the CAISO to a regional transmission operator with independent governance. Process:
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• Governance by a western states’ committee with an equal number of representatives from each state. California rep is appointed by Governor and confirmed by Senate • Open meeting standards consistent with Bagley-Keene Act plus public access to records • Maintaining state authority over state matters related to procurement policy, resource planning, and resource or transmission siting within the state, including setting resource adequacy standards, and prohibiting the operation of a centralized capacity market • Ensuring the dispatch of resources appropriately reflects the costs for resources to comply with California’s climate policies
• Establishing a clear structure for state regulators to provide guidance to the organization • Enabling participation of demand response, storage, and distributed energy resources • Maintaining California’s renewable portfolio standard compliance requirements that favor in-state renewable energy development over out-of-state development AB 538: Regionalization Process
80 Governance requirements include:
Questions and Discussion
Adjournment
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