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					Provincial Meeting #3
Technical Sessions


Demand-Side Management
March 8, 2005
Welcome to the
Demand-Side Management Session

Today’s Objective
To gain a common understanding of DSM and its role in integrated
electricity planning, and to gather participants' ideas for
technologies, tools, programs and rate options that could reduce
energy use and demands on our system.


Rick Knowlan
    Agenda


1:00 – 1:15   Welcome & IEP Overview                    Rick Knowlan

1:15 – 1:45   DSM Overview                              Richard Marchant
              1. What is DSM?

1:45 – 2:15   Achievements to Date & the Current Plan   Steve Hobson
              2. What has been achieved to date?
              3. What is the current plan?

2:15 – 2:30   Break

2:30 – 3:50   Beyond the Current Plan                   Derek Henriques, Gifford Jung, Murray Bond
2:30 – 2:45   4. Peak Capacity Reduction
2:45 – 3:15   5. Rates
3:15 – 3:50   6. Energy Efficiency Future

3:50 – 4:00   Break

4:00 – 4:30   Breakout Session Discussions              Rick Knowlan
              7. Participant ideas and suggestions

4:30 – 5:00   Breakout Session Results                  Rick Knowlan
              8. Presentation of results

5:00          Wrap-up                                   Richard Marchant



                                                     Slide 3
          IEP Overview
          2005 Integrated Electricity Plan (IEP)


•   Long-term plan - how customers’ demand for electricity will be
    met
•   Obligation to provide low-cost reliable electricity for generations
    while factoring in social and environmental considerations




                                      Slide 4
          IEP Overview
          2005 IEP Objectives


•   Solicit additional stakeholder input
•   Meet regulatory requirements
•   Preferred portfolio of new resources




                                      Slide 5
          IEP Overview
          Long Term Electricity Planning


       Long Term
                                                                Resource
        Electricity
        Planning                                             Expenditure and
                                                             Acquistion Plan




                                          Stakeholder
     Stakeholder
                                        Engagement on
    Engagement on                                            Resource Calls
                                       Portfolio Selection
   Resource Options
                                            / Analysis




                                                                Revenue
     File Resource
                                        IEP / Action Plan     Requirements
     Options Report
                                                               Application




Denote a process that is filed with the BCUC for approval.
                                                Slide 6
                 IEP Overview
                 Stakeholder Engagement

                                          2005 IEP
                                         Stakeholder
                                         Engagement



                                                                                Resource Options
Survey/ Website          Regional        First Nations          Provincial
                                                                                   Workshops


  Broad Public            Regional          Input as             Selected       Open session to
      Input             Information        requested          Committee to       provide broad
                            and                                 undertake       review of inputs
                         Facilitated                            facilitated        to the IEP
                         Sessions      Resource Options         decisions            process
                                            Report           analysis process




Survey/ Website          Regional        First Nations          Provincial




                                          2005 IEP /
                                          Action Plan




                                                   Slide 7
Welcome to the
Demand-Side Management Session



Murray Bond
John Duffy
Jennifer Gin
Derek Henriques
Steve Hobson
Gifford Jung
Richard Marchant
Lyle McClelland
          Demand-Side Management
          What are we going to cover today?


•   What is demand-side management?
•   What has been achieved to date?
•   What is the current demand-side management plan?
•   What options are there beyond the current plan?




                                   Slide 9
DSM Overview



Richard Marchant
          DSM Overview
          What is DSM?


•   What is the definition of demand-side management (DSM)?
•   Why should a utility pursue DSM?
•   What are the barriers to DSM?
•   What types of DSM is BC Hydro pursuing?
•   What is the definition of energy efficiency, load displacement
    and peak reduction?
•   How does BC Hydro evaluate the cost-effectiveness of DSM?




                                    Slide 11
          DSM Overview
          What is DSM?


•   How does BC Hydro evaluate the equity impact of DSM?
•   What risks are associated with DSM?
•   How does BC Hydro confirm DSM electricity savings?
•   What do customers value?
•   What does the BC Government Energy Plan say about DSM?
•   Which of BC Hydro’s long-term goals are related to DSM?




                                 Slide 12
           DSM Overview
           What is the definition of DSM?


•   The BCUC Resource Planning Guidelines (RPG) define DSM
    as “a deliberate effort to decrease, shift or increase electricity
    demand”.
•   BC Hydro’s current DSM activities focus on decreasing the
    electricity that the utility plans for, or provides to, its domestic
    customers using supply side resources.
•   DSM is a cost-effective form of resource acquisition that, in
    combination with supply side resources, allows a utility to meet
    rising electricity demand in a cost-effective and environmentally
    responsible manner.



                                       Slide 13
          DSM Overview
          What is the definition of DSM?


•   Demand side resources differ from supply side resources in
    that the former have a revenue impact on the utility.
    – i.e. the reduced demand equates to reduced sales of electricity as
      the reduction is on the other side of the meter.




                                     Slide 14
          DSM Overview
          Why should a utility pursue DSM?


•   Saves money
•   Avoids environmental impacts
•   Creates jobs
•   Makes economy more competitive




                                   Slide 15
          DSM Overview
          What are the barriers to DSM?


•   Availability of more efficient products and processes
•   Awareness that more efficient products or processes exist
•   Accessibility to the products or processes where the end user
    needs it
•   Affordability relative to the competing but less efficient options
•   Acceptability of the performance by the end user




                                     Slide 16
        DSM Overview
        What tools exist to overcome barriers?

Tools                       Examples

• Legislation, Regulation   government policy, energy efficiency legislation,
  and Standards             appliance standards, building codes

• Education, Information    publications, advertising, outreach teams, information
  and Awareness             line, recognition programs (e.g. Power Smart
                            Excellence Awards)

• Incentives                partner programs, funding for energy studies, energy
                            managers or recommisioning, financing, incentives

• Retail Promotion and      product incentive programs, product endorsement
  Partnering                program, new home certification and new construction
                            programs, trade allies,

• Rates                     inclining block or stepped rates, time of use rates,
                            peak shaving or shifting rates

• Technology                demonstration projects


                                         Slide 17
          DSM Overview
          What types of DSM is BCH pursuing?


•   Energy Efficiency
•   Load Displacement
•   Peak Reduction




                         Slide 18
          DSM Overview
          Definition of Energy Efficiency


•   Energy efficiency includes both being more efficient with
    electricity used (i.e. producing the same, equivalent or greater
    result using less electricity) and using less electricity (i.e.
    conservation).
•   BC Hydro’s efforts focus on electricity acquisition, enabling
    initiatives and market transformation.
•   These can take the form of project or product incentive
    programs, rate offerings, support for introduction of legislation,
    regulations or standards, education programs and awareness
    campaigns.



                                     Slide 19
          DSM Overview
          Definition of Load Displacement


•   Load displacement projects are those that result in the
    installation of new self-generation facilities at customer sites,
    with the electricity generated being used on-site by the
    customer, with a resultant decrease in the consumption of
    electricity purchased from BC Hydro.
•   These projects are generally large, and displace a substantial
    portion of the customer’s existing load, even to the extent of
    total self-sufficiency and the availability of surplus generation.
•   Under the Stepped Rate structure, this surplus generation will
    be available for effective utilization at the customer’s other sites
    through the load aggregation mechanism.


                                     Slide 20
          DSM Overview
          Definition of Peak Reduction


•   Peak reduction involves programs or initiatives aimed at a
    sustained, long-term reduction in the peak capacity requirement.
•   Whereas electricity reduction is system based, peak reduction
    programs are generally targeted at specific regions or locations.
•   This does not include short-term demand management efforts
    such as curtailment programs, which are used for operational
    contingencies.
•   Energy efficiency and load displacement programs are
    implemented primarily to reduce electricity sales throughout the
    year. They do however have associated peak reduction
    benefits due to their associated reduction of the annual peak
    load.
                                    Slide 21
           DSM Overview
           How does BCH evaluate the
           cost-effectiveness of DSM?

•   Utility Cost test
     – Measures the net cost or benefit of a DSM program from the
       utility's perspective.
     – Costs are those incurred by the utility.
     – Benefits include the utility's avoided costs.

•   Total Resource Cost test
     – Measures the net cost or benefit of a DSM program from the
       perspective of the utility and its customers.
     – Costs include utility and net participant costs.
     – Benefits include the utility's avoided costs and the participant’s non-
       electricity benefits.
     – Indicates the economic efficiency of a DSM program as a resource
       option.
                                        Slide 22
          DSM Overview
          How does BCH evaluate the
          equity impact of DSM?

•   Rate Impact Measure (RIM)
    – Measures the impact of a demand-side management program on
      the utility's rates.
    – Costs include utility costs and lost revenues.
    – Benefits include the utility's avoided costs.
    – Indicates the impacts of a DSM program on non-participants.




                                       Slide 23
     DSM Overview
     Comparison of Cost Effectiveness Tests

               UTILITY             TRC             RIM
                                 Participant
                               Non-Electricity
                                  Benefits

                 Avoided         Avoided           Avoided
               Generation &    Generation &      Generation &
BENEFITS       Capital Costs   Capital Costs     Capital Costs




                               Net Participant
COSTS                               Costs


                  Utility          Utility          Utility
                 Program          Program          Program
                  Costs            Costs            Costs



                Incentives       Incentives       Incentives



                                                   Revenue
                                                     Loss


                               Slide 24
           DSM Overview
           What risks are associated with DSM?


•   Project Completion Risk
     – risk that projects which have received a BC Hydro commitment fail to be
       completed by the customer

•   Performance Risk
     – risk that the DSM project does not deliver savings as expected over the life
       of the measures

•   Awareness Risk
     – risk that customers are not aware of energy savings opportunities

•   Participation Risk
     – risk that future program uptake rates are low due to customers not finding
       offers attractive and motivating


                                           Slide 25
          DSM Overview
          How does BCH confirm DSM
          electricity savings?

•   Conducts baseline studies to determine state of market before
    program begins.
•   Surveys samples of program participants and non-participants
    while the DSM program is operating and after it’s finished, to
    determine the electricity savings that are attributable to the
    program.
•   Collects data on sales of energy efficient products targeted by
    the DSM program.




                                    Slide 26
           DSM Overview
           How does BCH confirm DSM
           electricity savings? (cont’d)

•   In addition, for programs that include larger individual projects
    (e.g. > 0.3 GWh/yr):
     – Conducts a technical and financial review of each project prior to
       awarding DSM incentive.
     – Visits selected facilities before and after project to inspect
       operation and equipment.
     – Carries out engineering calculations, physical measurements,
       utility bill analysis and computer modelling to quantify electricity
       savings.
     – Undertakes formal evaluations to assess the energy saved and the
       cost-effectiveness of all DSM programs.


                                         Slide 27
          DSM Overview
          What do customers value?


•   Power Smart is recognized by over 95% of BC Hydro’s
    customers
•   Overall satisfaction with Power Smart is ~ 80%
•   Needs include:
    – providing information about products and programs
    – showing how you can reduce your bill
    – providing programs that meet the needs of your business




                                    Slide 28
          DSM Overview
          What does the BC Government
          Energy Plan say about DSM?

•   Under new rates, large electricity consumers will be able to
    choose a supplier other than the local distributor
•   New rate structures will provide better price signals to large
    electricity consumers for conservation and energy efficiency
•   The Province will update and expand its Energy Efficiency Act,
    and will work with the building industry, governments and
    others to improve energy efficiency in new and existing
    buildings
•   The Utilities Commission Act will be amended to remove a
    disincentive for energy distributors to invest in conservation and
    energy efficiency

                                    Slide 29
          DSM Overview
          Why is DSM relevant to
          BC Hydro’s long term goals?

                         BC Hydro Purpose
            “Reliable power, at low cost, for generations.”


•   Electricity Conservation & Efficiency
     – Develop and foster a conservation culture in BC that leads to
       customers choosing to make a dramatic and permanent reduction
       in electricity intensity.

•   Environmental Impact
     – No net incremental environmental impact.




                                     Slide 30
           DSM Overview
           Why is DSM relevant to
           BC Hydro’s long term goals?(cont’d)

•   Financial Targets
     – Maintain existing position of having costs among the lowest in
       North America.

•   Reliability (Supply)
     – Electricity self-sufficiency (energy and capacity) in B.C. for meeting
       all domestic needs.

•   Customer Satisfaction
     – To lead other companies in offering extraordinary value and service




                                        Slide 31
Achievements to Date
& the Current Plan


Steve Hobson
          Achievements to Date
          What has been achieved to date?


•   Since 1989
    – Saved British Columbia residents and businesses over $1.4 billion
      on their electricity bills
    – Grown to offset about 600 megawatts of electric generation
      annually (making it the 6th largest “generator” in the BC Hydro
      system)
    – Collected and recycled over 200,000 inefficient second operating
      fridges
    – Made British Columbia a world leader in energy efficiency




                                     Slide 33
          Achievements to Date
          What has been achieved to date?


•   In the Past Year Alone
    – Worked directly with over 8,500 businesses (ranging from pulp and
      paper mills to educational and healthcare institutions to property
      management firms to small retailers) to identify and implement
      energy efficiency projects
    – Distributed over 1.6 million compact fluorescent light bulbs to over
      530,000 customers - in partnership with 7 international
      manufacturers, and 15 retailers at over 180 locations
    – Reached over 250,000 BC students (K-12) in 900 schools




                                      Slide 34
           Achievements to Date
           What has been achieved to date? (cont’d)


•   In the Past Year Alone (cont’d)
     – Facilitated the introduction of LED holiday lights in British
       Columbia - with total sales of over 1,000,000 strings
     – Signed over 200 large BC businesses to Power Smart Partner
       agreements
     – Recognized six customers as Power Smart Certified Partners - for
       their leadership in energy efficiency and sustainability




                                        Slide 35
          Current Plan
          What are we going to cover?


•   What is the current DSM plan?
•   Why did BC Hydro choose to pursue a plan of this scale?
•   How does BC Hydro’s DSM plan compare to other utilities?
•   What has been achieved to date?
•   What residential DSM programs are included in the plan?
•   Why did BC Hydro choose these programs?
•   How do the Compact Fluorescent Lighting and Refrigerator Buy-
    Back programs work?



                                    Slide 36
          Current Plan
          What are we going to cover? (cont’d)


•   What business DSM programs are included in the plan?
•   Why did BC Hydro choose these programs?
•   How does the Power Smart Partners and Product Incentive
    programs work?
•   What is BC Hydro doing to support these programs and build
    an energy efficiency ethic?
•   Why did BC Hydro choose these initiatives?
•   How do the Education and Power Smart Alliance initiatives
    work?


                                  Slide 37
           Current Plan
           What is the current DSM plan?


•   Save 3,600 GWh per year by 2012 through a suite of DSM
    programs targeting residential and business customers
     – represents roughly one third of forecast growth in electricity
       demand

•   Projected cost of $1.3 billion over 10 years, split 50:50 between
    BC Hydro and participating customers
•   Approaching end of year 3 of 10




                                        Slide 38
          Current Plan
          Why did BCH choose to pursue
          a plan of this scale?

•   Wanted a plan that would:
    – be more cost-effective than new supply; and
    – capture a considerable portion of the estimated electricity
      conservation potential in BC; yet
    – not constitute an over-reliance on DSM to meet load growth

•   BC Hydro’s current plan includes:
    – Residential - approximately 700 GWh per year in lighting,
      appliances, and weatherization
    – Commercial and institutional - approximately 600 GWh per year in
      lighting, building retrofits and new buildings
    – Industrial - approximately 2300 GWh per year in pump
      improvements, mechanical pulping improvements and load
      displacement

                                     Slide 39
          Current Plan
          How does BCH’s DSM plan
          compare to other utilities?


Utility                F2006         % of         F2006       % of
                    Investment     Revenue      Electricity   Sales
                     ($ million)                 Savings
                                                 (GWh)
BC Hydro                 73         2.8%           288        0.6%
Manitoba Hydro           37         3.7%           118        0.6%
Hydro Quebec             127        1.3%           346        0.3%




                                     Slide 40
                   Current Plan
                   What has been achieved to date?


                               Demand Side Management

                 3000
                 2500
Gigawatt Hours




                 2000
                 1500
                 1000
                  500
                    0
                         F03         F04         F05          F06          F07
                                             Fiscal Ye ar

        Plan Target       Actual (F03, F04), Forecast (F05) or Committed (F06, F07)




                                               Slide 41
          Current Plan
          What residential DSM programs are
          included in the current plan?

•   New Home Program
•   Renovation Rebate Program
•   Variable Speed Motors Program
•   Fuel Substitution Program
•   Refrigerator Buy-Back Program
•   Seasonal Light Emitting Diode Program
•   Compact Fluorescent Lighting Program




                                    Slide 42
          Current Plan
          Why did BCH choose these programs?


•   They target the largest and most cost-effective sources of
    residential electricity conservation potential.
     – Lighting:
         • Compact Fluorescent Lighting & Seasonal Light Emitting Diode
           programs
     – Weatherization:
         • New Home & Renovation Rebate programs
     – Appliances:
         • Refrigerator Buy-Back & Variable Speed Motors programs

•   They target region-specific trends in fuel choice.
     – Fuel Substitution program targets space heating on Vancouver
       Island


                                        Slide 43
          Current Plan
          How does the Compact Fluorescent
          Lighting program work?

•   CFLs use roughly 75% less electricity than incandescent bulbs
    and last up to 8 times longer.
•   Program’s objective is to transform the CFL market to a higher
    level of sustained sales and market penetration.
•   First stage offered 2 free CFLs to each residential customer,
    coupled with discount coupons for additional CFLs
     – distributed 1.6 million CFLs to 530,000 residential customers

•   Second stage will maintain heightened level of awareness
    through discount coupons and promotional advertising



                                      Slide 44
          Current Plan
          How does the Refrigerator Buy-Back
          program work?

•   24% of BC households operate two refrigerators
•   Today’s refrigerators are considerably more efficient than older
    models
     – 33% change from 1990 to 2000

•   Many used refrigerators are resold to other consumers
•   Program’s objective is to permanently remove older models
    from the market
•   BC Hydro takes the second refrigerator away for free, disposes
    of it in an environmentally responsible manner and rebates the
    owner $30
     – have removed over 60,000 refrigerators since 2001

                                     Slide 45
          Current Plan
          What business DSM programs are
          included in the plan?

•   Power Smart Partners Program
•   Product Incentive Program
•   Lighting Redesign Program
•   Small Business Compact Fluorescent Lighting Program
•   High Performance Buildings Program
•   Load Displacement Program




                                   Slide 46
          Current Plan
          Why did BCH choose these programs?


•   They target the largest and most cost-effective sources of
    business electricity conservation potential:
     – Lighting: Product Incentive, Lighting Redesign and Small Business
       Compact Fluorescent Lighting programs
     – Building retrofits: Power Smart Partners program
     – New buildings: High Performance Buildings program
     – Industrial process improvements: Power Smart Partners program
     – Load displacement




                                     Slide 47
         Current Plan
         Why did BCH choose these programs? (cont’d)


•   They match program offerings with customer needs
    – Large business customers need a flexible program that suits their
      unique circumstances: Power Smart Partners, Load Displacement
      and High Performance Buildings.
    – Smaller customers need a simple, easy to use program: Product
      Incentive Program and Small Business Compact Fluorescent
      Lighting




                                     Slide 48
           Current Plan
           How does the Power Smart Partners
           program work?

•   Targets BC Hydro’s largest customers, namely those spending
    over $50,000 per year on electricity
•   Addresses financial and non-financial barriers preventing these
    customers from capturing cost-effective energy efficiency
    opportunities
     – typically, electricity is a small proportion of their total costs and
       management is unaware of cost-effective energy efficiency
       opportunities




                                          Slide 49
          Current Plan
          How does the Power Smart Partners
          program work? (cont’d)

•   Program provides financial assistance to identify energy saving
    opportunities and to implement projects, as well as information
    and recognition of customers’ achievements
•   Customers identify an energy saving opportunity and apply for
    financial financial assistance from BC Hydro.
•   Program supports retrofit projects that meet minimum BC Hydro
    technical and financial criteria. This flexibility is important to
    these customers, each of whom has unique project needs.




                                    Slide 50
          Current Plan
          How does the Product Incentive
          program work?

•   Targets all business customers, but especially those with
    projects that are too small to participate in the Power Smart
    Partners program
•   Addresses financial and awareness barriers
•   Offers a financial incentive for one-to-one replacements of
    standard efficiency equipment with high efficiency equipment
    and for add-one energy saving technologies like controls
•   Customers submit an online application prior to product
    purchase.




                                    Slide 51
          Current Plan
          How does the Product Incentive
          program work? (cont’d)

•   BC Hydro gives the customer the go-ahead to purchase and
    begin installation.
•   Customer installs pre-approved products and submits invoices
    to receive their incentive.
•   Random pre- and post-installation inspections are conducted.




                                  Slide 52
          Current Plan
          What is BCH doing to support these programs and
          build the energy efficiency ethic?


•   Public Awareness and Communication
•   Power Smart Alliance
•   e.Catalog
•   Information Gateway
•   Home Energy Profile
•   Legislative, regulatory & standards Involvement




                                   Slide 53
          Current Plan
          Why did BCH choose these initiatives?


•   To increase broad energy efficiency awareness
     – Public Awareness and Communication

•   To give customers the information they need to act
     – e.Catalog
     – Home Energy Profile

•   To ensure high quality consulting and contractor services are
    available to business customers wanting to take action
     – Power Smart Alliance

•   To ensure the legislative and regulatory framework advances
    with BC Hydro’s DSM achievements
     – Legislative, regulatory and standards involvement

                                      Slide 54
          Current Plan
          How does the Education initiative work?


•   Targets K-12 students in 55 districts and 900 schools
•   Reinforces Power Smart messages to school age children, BC
    Hydro’s customers of tomorrow
•   A team of trained staff travel the province to deliver:
     – in-class presentations, plays and games
     – behaviour change campaigns, and
     – school energy audits

•   The initiative also provides teacher’s kits with energy efficiency
    modules and curricula


                                     Slide 55
          Current Plan
          How does the Power Smart Alliance
          initiative work?

•   Objective is to ensure that business customers wanting to take
    action can access high quality consulting and contractor
    services
•   Alliance members meet minimum eligibility criteria around staff
    qualifications and ongoing training, satisfactory references,
    financial stability and others.
•   BC Hydro refers participating customers to Alliance members
    when they are seeking consulting or contractor services.




                                   Slide 56
Beyond the Current Plan



Peak Capacity Reduction
Rates
Energy Efficiency Future
Peak Capacity Reduction



Derek Henriques
          Peak Capacity Reduction
          What are we going to cover?


•   Why is peak capacity important to BC Hydro?
•   What drives the peak capacity on the electric system?
•   What are DSM peak capacity reduction initiatives?
•   What has BC Hydro done to explore DSM peak capacity
    reduction measures?
•   What is BC Hydro’s approach to addressing peak capacity
    constraints with DSM?




                                    Slide 59
         Peak Capacity Reduction
         Why is peak capacity important
         to BC Hydro?

                 Peak Day Electric Load Profile BC Hydro
                             Electric System

     10000
     8000
     6000
MW




     4000
     2000
        0
             1
                 3

                     5
                         7
                             9
                                 11
                                      13
                                           15
                                                  17
                                                       19
                                                            21
                                                                 23
                             Hours of the Day


                                       Slide 60
          Peak Capacity Reduction
          What drives the peak capacity
          on the electric system?

•   Residential loads in the winter on the coldest day
     – Space Heating & Ventilation
     – Water Heating
     – Cooking
     – Lighting
     – Entertainment Equipment




                                     Slide 61
      Peak Capacity Reduction
      What are DSM peak capacity
      reduction initiatives?

Peak reduction involves programs or initiatives aimed at sustained,
long-term reduction in peak capacity requirements. There are three
types of DSM peak load management as demonstrated here:




   Peak Clipping         Valley Filling        Load Shifting




                                   Slide 62
         Peak Capacity Reduction
         What are DSM peak capacity
         reduction initiatives?

•   Here are some examples of measures that reduce peak:




                                   Slide 63
          Peak Capacity Reduction
          What has BC Hydro done to explore DSM
          peak capacity reduction measures?

•   CPR 2002
•   CPR 2002 Industrial Peak Capacity Reduction Potential
•   Rocky Mountain Institute Workshop in July 2003
•   CPR 2004 Residential and Commercial Potential for peak
    capacity reduction




                                    Slide 64
          Peak Capacity Reduction
          What is BC Hydro’s approach to addressing peak
          capacity constraints with DSM?


•   Update and maintain an inventory of DSM capacity reduction
    measures
•   Establish areas with distribution constraints that have sufficient
    lead time for DSM to be an option
•   Undertake pilots to demonstrate the acceptance and viability of
    DSM capacity reduction initiatives
•   Develop and implement DSM options to address peak capacity
    constraints when cost-effective and appropriate




                                     Slide 65
Rates



Gifford Jung
         Rates
         Regulation of BC Hydro


•   ROR, REAP (Section 45 of UCA)
    – The forecasted capital expenditures, energy purchase
      agreements, demand-side management expenditures, and other
      planning expenditures required to support the utility’s plan to
      provide service to its ratepayers.
    – Actual costs are recovered from ratepayers through a revenue
      requirement application.




                                    Slide 67
          Rates
          Regulation of BC Hydro


•   Revenue Requirement (Section 59(5) of UCA)
    – The forecast accounting costs to provide service (both quality and
      quantity) to ratepayers plus a fair and reasonable return on equity
      to the utility.
    – The accounting costs include energy costs, operating,
      maintenance, and administration expenses, finance costs,
      depreciation and amortization expenses, and other service costs.




                                      Slide 68
          Rates
          Regulation of BC Hydro


•   Rate Design (Section 60 of the UCA)
    – Rates levels are set to recover from each class of ratepayers the
      revenue requirement to serve those ratepayers.
    – Rate structure is how the revenue requirement is collected from
      individual customers.
    – Commission considers rates as fair, just and reasonable if they
        • have no undue discrimination, preference or prejudice; and
        • provide reasonable compensation to the utility.




                                         Slide 69
           Rates
           General Rate Design


•   Rate Design Principles for rate structure:
     – Fairness;
     – Efficiency; and
     – Simplicity.

•   Rate level:
     – Rate levels will recover approved revenue requirement.




                                     Slide 70
          Rates
          General Rate Design


•   Fairness
    – Rates are set for each rate class to recover the costs to provide
      service.
        • Revenue requirement is allocated to rate classes based on cost
          causation principles.
        • Ideally rates are set to recover 100% of the costs. In practice, rates are
          considered fair if they recover between 90 and 110% of the costs.




                                          Slide 71
          Rates
          General Rate Design


•   Efficiency
     – Rates are set so that the customer’s run-out block of energy
       appropriately reflects the utility’s marginal cost.
         • Good rate design would see the marginal rate the customer sees as
           approximately equal to the marginal cost the utility sees.
         • The balance of costs to serve customers would be recovered through
           fixed charges or demand charges.




                                        Slide 72
          Rates
          General Rate Design


•   Simplicity
     – Rates are simple and easy to understand.
         • To the extent possible, a utility’s rates should be simple and easy for
           customers to understand.
         • If rates are designed simply and efficiently, customers will make
           economically efficient tradeoffs to decide on their level of consumption.




                                           Slide 73
          Rates
          General Rate Design


•   Other Considerations/Limitations
    – Bill Impacts
        • The commission has in the past ruled that rate rebalancing or
          redesigns that end up with individual bill impacts of greater than 10%
          are not fair, just, and reasonable.




                                         Slide 74
          Rates
          Residential Tariff


•   Residential Rate Class (2004 data)
    – No. of Customers: 1.5 million
    – Total Sales:
        • Revenue: $960M
        • Electricity Sold: 15,646 GWh
        • Average Revenue: 6.1 ¢/kWh

    – Yearly Average per Customer:
        • Revenue: $640
        • Electricity Sold: 10,500 kWh




                                         Slide 75
          Rates
          Residential Tariff


•   Residential Rate:
    – Fixed Charge per month: $3.62
    – Energy Charge: 6.05 ¢/kWh

•   Rate Design Features:
    – Simple, easy to understand.
    – Energy charge is slightly higher than long-run acquisition cost of
      energy (5.5 ¢/kWh).
    – Reasonably efficient across all consumption levels with a mild
      incentive to conserve.



                                      Slide 76
          Rates
          Residential Case Study


•   Residential Stepped Rate
    – Reset the energy rate at the margin to recover average embedded
      costs of the wires system and to recover incremental energy costs




                                    Slide 77
      Rates
      Residential Case Study



                                                Current Rate   Option
Fixed Charge per month                          $3.62          $3.62
Tier One Price (Est.)                           6.05 c/kWh     3.7 c/kWh
Tier Two Price                                                 8.0 c/kWh
Tier One Volume per month
• Summer                                                       750 kWh
•   Winter                                                     1,000 kWh
% of Customers Seeing Tier 2 Price (Est.)                      40%
% of Consumption at Tier 2 Price (Est)                         55%




                                     Slide 78
             Rates
             Residential Case Study

                                                        Residential Histogram

   250000




    200000
Nu
mb
er
of
Cu
sto150000
me
rs                                                                                                                            Winter
(Sa                                                                                                                           Summer
mp
le)                                                                                                                           Annual

   100000
                                               Option 2 : 40% of
                                               Customers Impacted



    50000




         0
             0 to 1000   1000 to   2000 to   3000 to   4000 to   5000 to    6000 to   7000 to   8000 to   9000 to   > 10000
                          2000      3000      4000      5000      6000       7000      8000      9000     10000
                                                        Bimonthly Consumption




                                                                           Slide 79
          Rates
          Residential Case Study


•   Impact of Rate Design
     – 40% of customers will have some load exposed to the Tier 2 price
     – 55% of energy would be re-priced at Tier 2

•   Bill Impacts
     – 60% of customers would see about a 40% reduction in their bill
     – 30% of customers would see 10 to 15% reduction in their bill
     – 10% of customers would see bill increases of 5 to 10% with the
       highest users seeing a >30% increase




                                      Slide 80
           Rates
           Residential Case Study


•   Price Elasticity
     – Typical long-run price elasticity's for electricity are 0.1 to 0.3 (i.e.,
       1% change in bills leads to a 0.1% to 0.3% change in electricity
       consumption)

•   Price Response Over Time
     – 60% of customers would increase their consumption by 8%
     – 30% of customers would increase their consumption by 2%
     – 10% of customers would decrease their consumption by 1 to 3%
     – Net impact would be total residential electricity sales would
       increase by 5% and residential rates would have to go up 2 to 3%.


                                          Slide 81
          Rates
          Residential Case Study


•   General Observations
    – Rate design is a blunt instrument with limitations
    – Efficient rates provide the right price signal at the margin to
      customers
    – Targeted programs are more effective than rates




                                       Slide 82
Energy Efficiency Future



Murray Bond
           Energy Efficiency Future
           What are we going to cover?


•   Conservation Potential Review (CPR) 2002
    –   Study Objectives
    –   Study Scope
    –   Study Approach
    –   Study Findings

•   Energy Efficiency 3
•   Energy Efficiency 4
•   Energy Efficiency 5
•   Treatment of DSM in IEP



                                      Slide 84
          Energy Efficiency Future
          CPR 2002 Study Objectives


•   Provide an assessment of the remaining hard-wired electricity
    efficiency potential in BC as a basis for designing new energy
    efficiency initiatives.
•   Estimate the potential contribution of energy efficiency
    programs to the reduction of BC Hydro’s peak capacity
    requirements.
•   Identify additional technologies that could become available
    during the study period.




                                     Slide 85
         Energy Efficiency Future
         CPR 2002 Study Scope


•   Timeframe
•   Sector Coverage
•   Geographical Coverage
•   Technologies
•   Line Losses




                                    Slide 86
          Energy Efficiency Future
          CPR 2002 Timeframe


•   15-year study period.
•   Base Year is 2000/01.
•   Milestone periods at 5-year increments.
    – 2005/06
    – 2010/11
    – 2015/16

•   The base year of 2000/01 was selected because it was the
    most recent 12-month period for which complete data was
    available.


                                     Slide 87
          Energy Efficiency Future
          CPR 2002 Sector Coverage


•   The study addresses three sectors.
    – Residential
    – Commercial/Institutional
    – Industrial




                                     Slide 88
           Energy Efficiency Future
           CPR 2002 Geographical Coverage


•   The report studies the total BC Hydro service area, but
    excludes areas that are not integrated into BC Hydro’s grid
    system.
•   It also excludes the (former) West Kootenay Power service
    area.
•   The study provides the results for three regions.
     – Vancouver Island
     – Lower Mainland
     – Interior



                                      Slide 89
           Energy Efficiency Future
           CPR 2002 Technologies


•   The study focuses on estimating the Economic and Achievable
    potentials of technologies.
•   Technologies considered must
     – increase electricity efficiency
     – be commercially viable by 2005

•   Technologies not considered
     – control or shift of electrical demand
     – alternative sources of supply

•   The study also identifies and describes other technologies that
    are likely to become available within the remainder of the study
    period (to 2015/16).
                                         Slide 90
           Energy Efficiency Future
           CPR 2002 Line Losses


•   All electricity savings are measured at the customer’s meter,
    which is consistent with the calibration of base year
    consumption.
•   Line losses were only used twice in the study.
     – In the calculation of the cost of energy saved, because the cost of
       energy saved is measured as the avoided cost of new supply at
       the regional distribution point.
     – In the calculation of the demand impact of customer savings on the
       BC Hydro system.




                                       Slide 91
Energy Efficiency Future
CPR 2002 Study Approach



                 Major Analytical Steps




                             Slide 92
Energy Efficiency Future
CPR 2002 Study Findings


     Forecast Summary – Total BC Hydro Service Area
            Potential Annual Savings (GWh/yr)




                             Slide 93
Energy Efficiency Future
CPR 2002 Study Findings


     Forecast Summary – Total BC Hydro Service Area
             Annual Electricity Consumption




                             Slide 94
Energy Efficiency Future
CPR 2002 Study Findings


     Forecast Summary – Total BC Hydro Service Area
Demand Implications (MW) of Economic & Achievable Forecasts




                              Slide 95
Energy Efficiency Future
CPR 2002 Study Findings


     Forecast Summary – Total BC Hydro Service Area
Demand Implications (MW) of Economic & Achievable Forecasts




                              Slide 96
          Energy Efficiency Future
          Energy Efficiency 3


•   Extension of previous programs from 2012 to 2017.
•   Conceptual stage.
•   Will add new programs and potentially new technologies to EE2
    inventory.
•   In 2017, savings are at the CPR 2002 “Likely Achievable” level
    for 2016.




                                     Slide 97
          Energy Efficiency Future
          Energy Efficiency 4


•   A more aggressive version of EE programs.
•   Starts in 2010, but flexible.
•   Conceptual stage.
•   New programs and technologies.
•   In 2024, savings are at the CPR 2002 “Upper Achievable” level
    for 2016.
•   Achieving EE4, depends on our ability to influence the actions
    of allies and governments.




                                     Slide 98
          Energy Efficiency Future
          Energy Efficiency 5


•   A very aggressive version of EE programs.
•   Can start in 2008 at the earliest, most likely later.
•   Conceptual stage.
•   New programs and technologies.
•   In 2024, savings are at the CPR 2002 mid-point between
    “Upper Achievable” and “Economic” for 2016.
•   Achieving EE5, depends significantly on our ability to influence
    the actions of allies and governments.




                                      Slide 99
Energy Efficiency Future
DSM Annual Energy Savings




                           Slide 100
          Energy Efficiency Future
          Treatment of DSM in the IEP


•   Committed resources, EE2 and Load Displacement, are netted
    out of the load forecast.
•   For EE options, future savings are held constant when netting
    out of the load forecast.
•   When treating EE options as a resource and when calculating
    cost tests, savings are only included until their persistence (as
    per the 10-Year Plan) ends.




                                     Slide 101
Energy Efficiency Future
Supply Curve




                           Slide 102
Breakout Session Discussions



Rick Knowlan
         Breakout Session Discussions
         Your ideas and comments
         for the future of energy efficiency...

1. To reduce energy use and demands on our system,
   what would you suggest in terms of...
    – technologies
    – programs
    – tools

2. Are there any rate options that you think may be useful to
   consider further in a General Rate Design application?




                                  Slide 104
Wrap-up



Richard Marchant
Thank You



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