HomeMy WebLinkAboutAEA - REF PCE REFAC_12.18.14REF <-> PCE
Interactions –Incentives –Illustrations
Renewable Energy Fund Advisory Committee Meeting
Photo credit: TDX
Presentation overview
PCE program and characteristics of eligible communities
What happens when an RE project is introduced
Distribution of RE benefits
Excess RE heat sales
Questions
2
3
Residential PCE
eligible 21%
Residential
NOT eligible
9%
Community
facility PCE
eligible 7%
Community
facility NOT
eligible 2%
Other NOT
eligible 61%
Electric sales in PCE communities
188 PCE communities
$40 million annual disbursement
Percent of community kWhs that are PCE
eligible is variable by community
•Overall 28.5% of all kWhs sold are
eligible for PCE
•Communities range from 5% to 72% of
total sales being PCE eligible
•The un-weighted community average
is 40% eligible kWhs
Statewide Power Cost Equalization
4
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Population -% kWh PCE eligible
All communities
Population % of Total KWH, PCE Eligible
Statewide
Residential sales
•69% PCE covered
•31% not covered
Community facility sales
•83% PCE covered
•17% not covered
Other ineligible sales
•81% commercial
•19% government
Communities with small populations have higher % of eligible kWhs
Calculating PCE level and effective rates
5
Cost/kWh = total
cost/total kWh sales
Base rate = $0.1482
PCE level = (cost/kWh –
base rate) x 95%
Effective rate =
cost/kWh –PCE level
PCE vocabulary
Base rate: The weighted average cost per kWh in Anchorage, Fairbanks and Juneau
PCE level: The state subsidy per eligible kWh calculated for each community
Effective rate: The cost per kWh that customers will pay for a PCE eligible kWh
Example;
Total
cost
Total
kWhs
Cost
/kWh
Base
rate
PCE level
(cost/kWh-base rate) x 95%
Effective
rate
(cost/kWh-
PCE level)
$1 M $2 M $1M/$2M
= $0.50
$0.1482 ($0.50-$0.1482) x 95% = $0.3342 $0.50-
$0.3342 =
$0.1658
6
PCE impacts on rates
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Cost/kWhAxis Title
PCE Level
Effective Rate
How do RE projects impact PCE?
When a renewable energy project comes
online there will be decreases in fuel costs
and there may be increases in non-fuel costs
(e.g. O&M).
We should expect the PCE level for that
community to change because their costs
have changed
The distribution of savings from that change
depends most on the % of community kWhs
that are PCE eligible
7
Sharing RE savings
Assume:
Cost based rates means
that savings are passed
through to ineligible
PCE kWh customers
The RE project reduces
fuel costs and has zero
impact on non-fuel cost
8Community B: 60% eligible kwhs/40% ineligible kWhs2%3%
60%
40%
38%
57%Community A: 40% eligible kWhs/60 ineligible kWhsDistribution of RE benefits -2 community profiles
PCE program
Ineligible kWhs
Eligible kWhs
Community benefitCommunity benefit
9
Community example: Kotzebue
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Wind generation kWd/yr Effective rate Fuel cost/diesel generated kWh
Fuel
component
cost has
increased 166%
over 10 years
Effective rate is
lower despite
increased fuel
cost
Wind
generation,
appropriate
rate setting and
proper use of
the PCE
program result
in stable costs
to ratepayers.
10
There are 40 REF
funded currently
generating energy
projects in PCE
communities
25 electric projects
15 heat projects
5 are projects that use
excess RE generation
for heat
11
$16.8 million
$10.8
$0.6 million$28.2 Million Savings from REF electric projectsState PCE program
Community –Not PCE eligible
Community -PCE eligible
12
Saving from RE Heat Projects
100% of savings from heat projects stay the community
•REF funded heat projects saved $1.3 million last year in displaced
heating fuel in addition to creating local jobs
•This year there will be 22 operating REF heat projects
•Heat projects include biomass, heat pumps and heat recovery
13
Excess RE for electric heat
If all kWh sales are included in PCE level
formula
•Total cost per kWh goes down
•PCE level goes down
•PCE customers pay more
•Excess RE for heat cannot be sold at a
cost greater than the heating fuel it is
displacing, most communities sell at
$0.10/kWh
If net heat sales revenue are deducted
from cost
•Total cost per kWh goes down
•PCE level goes down
•PCE customers pay more
•However, if net heat sales revenue
are used to offset electric generation
costs the impacts to PCE customers
are nearly zero and the impacts to
ineligible customers are positive.
14
AKEnergyAuthority.org
RE project pic