Comments on

Coal Elimination,

FiT100, and FiT50

to LA Chamber of

Commerce Frederick H. Pickel, Ph.D

Office of Public

Accountability /

Ratepayer Advocate,

City of Los Angeles

opa@LAcity.org

tel. 213-482-6814

April 26, 2013

1

Ratepayer Advocate’s Comments on IPP / Coal Elimination and

Feed-In Tariffs (FiT100 and FiT50) What is OPA’s view on the goals?

Reliable power at reasonable cost

Compliance with legal mandates, but need transparency on cost.

Leadership on carbon emission reduction

Worldwide, DWP is 0.04% of CO2 emissions.

Our impact can come from demonstrating CO2 emission reductions at an affordable cost.

What is the projected cost to Ratepayers?

Is that projected cost/benefit acceptable compared to alternatives for CO2/GHG reduction?

What does the Office of Public Accountability/Ratepayer Advocate (OPA) recommend?

Support the DWP on IPP 2nd Amendatory Power Sales Contract, but today’s plan is too

expensive, an extra $250 million/yr for $109/tonne carbon reduction.

DWP, IPP, and the City should continue exploring alternatives on the elimination of coal.

Today’s specific generation plan isn’t, and hopefully should not become, the default plan.

Different mixes of conservation, renewables, gas-fired generation sources, fuel / power

storage, and other alternatives should be explored over the next 7 years.

FiT100: $230 million extra relative to other renewables for no extra carbon reduction

FiT50: auction approach should bring Ratepayer cost close to other renewables

2

What is the cost to Ratepayers for coal elimination?

Navajo IPP

State mandate for end of

long-term contracting

2019 2027

City’s planned year 2015 2025

Cost per year for

accelerating coal

elimination

~ $50 million/year ~$250 million/year

Total cost of accelerating

coal elimination under

existing plan

$200 million $500 million

Cost per person

(4 million LA population)

$1.04 per person/month $5.21 per person/month

Uncertainties in cost

estimate

Natural gas prices

Coal plant retrofit cost

Plant sale cost

Renewables cost

Natural gas prices

Renewables cost

Coal plant retrofit cost

Source for costs: LADWP 2012 IRP, Figure 4-22

3

What is LADWP’s cost of CO2 reduction from coal elimination?

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Tota

l CO

2 E

mis

sio

n M

illio

n M

etr

ic t

on

s

Case #1 - Navajo 2019, IPP 2027

Case #2 - Navajo 2015, IPP 2027

Case #4 - Navajo 2015, IPP 2023

$26/ton

$109/ton

Source for costs and carbon reduction:

LADWP 2012 IRP, Figures 4-22 & 4-4

4

How does LADWP’s cost of CO2 reduction compare to alternatives?

Can we do this cheaper?

Accelerating phase out of Navajo, in terms of CO2 reduction at $26/metric ton, is in the range of earlier expectations for CO2 emission reduction costs from other emission sources in the 2015-2019 period.

“OK deal”

Current forecasts for accelerating phase out of IPP, in terms of CO2 reduction at $109/metric ton, are much higher than expectation for the value and cost CO2 emission reductions from other sources in the 2025-2027 period.

This estimate depends on the cost of future natural gas, coal generation, renewable sources and the cost of CO2 reductions from other emission sources

Too expensive -- as planned and forecast now, this is “Not a good deal”

Can renewables like large-scale wind and solar be expanded in the DWP mix, using the IPP location as a hub?

Cost of renewables and natural gas have both declined by huge factors over last 5 years.

Cost of integrating renewables while maintaining reliability is still very uncertain. We have about 7 years to explore alternatives before specific permitting and construction actions must be taken to meet the accelerated 2025 deadline.

5

Conclusions on LADWP’s Proposed Feed-In-Tariff 50 MW Proposal

The OPA supports the FiT50 program, especially the competitive bidding component.

When FiT50 contracts come before the DWP Board for approval prior to signature,

they should individually include:

The two price components bid and proposed for a DWP FiT50 contract;

The total Beacon site costs and preparation to date along with the percentage of

these costs allocated to the proposed DWP FiT50 contract;

Expected additional Beacon site costs and preparation along with the percentage

of these costs allocated to the proposed DWP FiT50 ;

Estimate total costs and $/MWh for the FiT50 contract, including site costs.

In contrast to the FiT50 program, the first 20 MW tier of LADWP’s FIT 100 MW

program is creating an additional $50-75 million burden on LA’s customers, a 100%

premium over current avoided costs for other renewables.

OPA recommends that DWP and the DWP Board re-visit the FiT100 pricing and

applicability, especially before opening another price tier in the FiT100 program.

6

Myths in the Policy Analysis

Jobs? Whose jobs?

Pump priming: scale of LA vs. world market in carbon, solar, etc.

It’s sunny in LA

It’s a policy choice… they add up. Shouldn’t they be traded-off?

7

SUPPORTING MATERIALS

8 Estimate for world CO2 emissions in 2011: 33,376 MM tonnes (EDGAR/ EC http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2011). DWP was 0.04% in 2011.

9

10

11

From LADWP Industrial Electricity Sales Forecast

12

Program Pricing

13

DWP FIT100, as Adopted

FIT Tier

in MW

MW

in Tier

FIT Pricing

($/kWh)

Estimated

Average

Time-of-

Day

Adjusted

FIT Pricing

Multiplier

FIT Price on

Summer pm

Peak Price

x2.25

multiplier

($/kWh)

FIT Pricing

with

Average

ToD

Multiplier

($/kWh)

Avoided

Cost

($/ kWh)

Over-

Payment

($/kWh)

MWh / yr

at 19.6%

Cap Factor

Over-Payment

per Year

Undiscounted

Over-Payment

20 yr Term

Discounted Over-

Payment 20 yr

Term at DWP

Cost of Debt 5%

0-20 20 0.170$ 1.054 0.383$ 0.179$ 0.110$ 0.069$ 34,339 2,375,586$ 47,511,717$ 29,605,051$

20-40 20 0.160$ 1.054 0.360$ 0.169$ 0.110$ 0.059$ 34,339 2,013,651$ 40,273,014$ 25,094,538$

40-60 20 0.150$ 1.054 0.338$ 0.158$ 0.110$ 0.048$ 34,339 1,651,716$ 33,034,310$ 20,584,026$

60-80 20 0.140$ 1.054 0.315$ 0.148$ 0.110$ 0.038$ 34,339 1,289,780$ 25,795,607$ 16,073,514$

80-100 20 0.130$ 1.054 0.293$ 0.137$ 0.110$ 0.027$ 34,339 927,845$ 18,556,904$ 11,563,002$

Current Scenario 0.158$ 0.110$ 0.048$ 44% 8,258,578$ 165,171,552$ 102,920,131$

Summary for FIT Base Price of $0.17/kWh, stepping down in 20 MW blocks, plus ToD adjmnts

Avg FIT

Price

Avoided

Cost

Over-

Payment,

$/kWh

Over-

Payment

%

Annual Over-

Payment

Undiscounted

20 Yr Over-

Payment

Discounted

20 Yr Over-

Payment

0.158$ 0.125$ 0.033$ 26% 5,683,138$ 113,662,752$ 70,824,456$

0.158$ 0.110$ 0.048$ 44% 8,258,578$ 165,171,552$ 102,920,131$

0.158$ 0.090$ 0.068$ 76% 11,692,498$ 233,849,952$ 145,714,365$

14

Renewable Auction Mechanism – CPUC Q1Q2 Report – 9 cents/kWh

and new 2012 Q3Q4 Report – under 9 cents/kWh

15

Renewable Auction Mechanism – SCE 2nd RAM Report