1 meeting california policy goals, affordable rates and why i volunteered for this job? mark ferron...

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Meeting California Policy Goals, Affordable Rates and Why I Volunteered for this Job?

Mark FerronCalifornia Public Utilities Commission

October 4, 2011

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Presentation Overview

• Quick biographical sketch

• How do I see my role at the Commission

• Personal observations of key issues

• Questions and Discussion

My resume

• Degrees in Mathematics and Economics

• 25 years in Banking & Finance

• 8 years as COO at DB Global Markets

• Brown for Governor 2010

• Appointed to CPUC on 22 March

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• Geek

• Show me the money!

• Foster innovation while controlling risk

• ??

• Assigned Commissioner for RPS, RA, EE, RRIM, QF/CHP and others

What it says What it means

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My initial view of the Commission’s work

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Quite a lot Not so much

• Quality and enthusiasm of the people

• Nature of the work

• Potential for high impact

• Brain-drain and demographic time bomb

• Missing context

• If I talk to you, then you can’t talk to him

Things I like about the CPUC so far

The evolving mission of this Office

1. Safety and Reliability cannot be compromised

2. Encourage new innovation and attract new capital

3. Demand Value for Money

4. Promote a healthy environment and economy

5. Look out for the underdog across all stakeholders

6. Expose entrenched, anti-competitive players to market forces Important but

not Urgent

Urgent but not Important

My observations on some key issues

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Safety

Renewables

Costs Reliability

Generation Ownership

Energy Efficiency

Role of Financing

Feed-in Tariffs & DG

San Bruno is a game changer

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Safety

Is Electricity “Sticker Shock” inevitable?

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Growth in Revenue requirement

Costs

Increase = 50%

CAGR = 6%

Increase = 58%

CAGR = 4.7%

Actual and Projected Electricity CostsTotal Statewide Expenditure ($bn)

Renewables

We have added much renewable generation

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California should get to 33% RPS by 2020

Source: California Public Utilities Commission, 2nd Quarter 2011

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10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

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MWh (000s)

Viability > 70%to 80%

Viability > 80%to 90%

Viability > 90%"

ExpiringContracts

Online

2020 33% RPS Mandate

20% RPS Mandate

IOU RPS Procurement ForecastWith risk weightings based on viability calculator

Renewables

A Feed-in Tariff is a powerful tool....

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PV installed in Germany has skyrocketed……

Feed-in Tariffs & DG

California

.. But a Feed-in Tariff is not a magic wand

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The levels of European FiT subsidies are unsustainable

EstimatedCost to German

Ratepayers: $8 billion per year

Feed-in Tariff range

Annual MW installed

Source: DB Climate Change Advisors “The German Feed-in Tariff for PV” May 2011

Feed-in Tariffs & DG

EurosMW

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California Interconnection Requests have Increased Exponentially

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4113 18

2 11 1

586

11 7 9 1 5 10

100

200

300

400

500

600

700

Solar PV Biogas Biomass Small hydro Solar thermal Wind Geothermal

Nu

mb

er

of

Pro

jec

ts

Executed RPS Contracts Interconnection Requests Since 2008

Source: California Public Utilities Commission, 1st Quarter 2011

Feed-in Tariffs & DG

Independently produced power is essential

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Generation Ownership

Source: CPUC 2010 Electric & Gas Utility Cost Report

Reliability and long-term capacity: avoiding the cobweb

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Reliability

Source: California ISO 2011 Summer Assessment

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Challenges to California’s EE Programs

2010-2012 Funding Source(prior to Gas PPP sweep)

3 yr total= $3.1 Billion

ProcurementFunds

2.16

2.67

1.141.47 1.36

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0.5

1

1.5

2

2.5

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2002-2003 (Reported) *

2004-2005 (Reported)

2006-2008 (Evaluated)

2009 (Evaluated)

2010-2012 (Forecast)

IOU EE Portfolio Cost-effectiveness

Ben

efi

t /

Co

st (

TR

C)

Portfolio Cycle

Declining IOU Portfolio Cost Effectiveness over time

(excluding Low Income EE Programs)

PublicGoodsCharge

Energy Efficiency

What we gonna do when the money runs out?

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DOE ARRA Funds Granted in California ($m)

Role of Financing

Source: US Department of Energy

Questions and Discussion

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• Mark Ferron, Commissioner mark.ferron@cpuc.ca.gov • Charlotte Terkeurst: Chief of Staff

charlotte.terkeurst@cpuc.ca.gov • Sarah Thomas, Legal and Energy Advisor

sarah.thomas@cpuc.ca.gov• Sara Kamins, Energy Advisor

sara.kamins@cpuc.ca.gov • Michael Colvin, Energy and Water Advisor

michael.colvin@cpuc.ca.gov