Fn?s MUNICIPAL POWER New Initiatives in Distributed Energy Resources Joint Action Agency Conference Jan.7,2019 31 Municipals Are Members of FMPA Mission: Low-Cost, Clean and Reliable Power Alachua Bartow Blountstown Bushnell Chattahoochee Clewiston Fort Meade Fort Pierce Gainesville Green Cove Springs Town of Havana Homestead Jacksonville Beach Key West Kissimmee Lake Worth Lakeland Leesburg Moore Haven Mount Dora New Smyrna Beach Newberry Ocala Orlando Quincy St. Cloud Starke Tallahassee Serving 2.3 million, or 11%, of Floridians Wauchula Williston Winter Park 2 FMPA Controls 1,670 MW of Generation Nearly 80% of Energy from Natural Gas Renewables 1% Nuclear 5% Coal 15% Natural Gas 79% Fiscal 2017 ARP Energy Sources Ownership in 20 units • 10 natural gas-fired • 2 coal-fired • 1 nuclear • 7 oil-fired (Key West) • Plus renewable energy and power purchases Own & Operate Minority Ownership Power Purchase 3 Nearly 1 in 3 Floridians, 10% of disposable income goes to the electric bill Customers Support Solar Power But Most Customers Don’t Want to Pay More Most Customers Not Likely to Pay More 72% of residential customers believe there is a need in their community to investigate solar 45% 13% 25% 7% Very likely Somewhat Somewhat Not at all likely unlikely likely 9% Don't know SOURCE: 2017 FMPA Solar Energy Survey Market Assessment Study 5 FMPA Has Excess Capacity, For Now Embrace New Initiatives to Maintain Sales • 100+ MW of excess capacity forecast through 2025 • Existing combined cycle operating cost at $20-25/MWh • Large-scale solar cost at ~$40/MWh • Allow member cities who want, to pay more for solar Treasure Coast Energy Center Unit 1 6 Florida Municipal Solar Project One of Largest Municipal Solar Projects in the U.S. • 12 FMPA members participating • Three 74.5 MW sites, 223.5 MW project • Equal to 37,250 rooftop systems • Cost is one-third that of a typical, rooftop system • Construction start January 2020 • Operation expected June 2020 7 Utility-Scale Solar: Lowest Cost Solution Market Utility Through Community Solar • Market subscriptions (or slices) of utility-scale solar • Customers only pay a small adder to their billed rate • Ideal for multi-family units • Great for utility branding – sign in yard “Solar power from ___ Utility” 2-Part Strategy: Raising Fixed Charge + Offering Cheaper PV Alternative Cents per kWh Cost for Solar 18 16 14 12 10 8 6 4 2 0 Utility SOURCE: Roof (w/ITC) Roof (w/o ITC) NREL, FMPA 8 anf?s MUNICIPAL POWER Rate Structure Changes Rates Should Align with Costs Majority of Costs for Service Are Fixed • Variable costs limited to fuel (2-3 cents per kWh) • Traditional residential rates ignore cost to serve for social reasons and collect most money in a variable manner  Residential solar takes advantage of cost misalignment, harming customers without solar • Actions nationwide focused on increasing fixed charges for alignment  Raising customer fixed charge is appropriate to prevent consumers with solar from being “subsidized” by lower income consumers 10 Majority of Power Delivery Costs Fixed Traditional Cost of Service Not Aligned Wholesale Power Cost Transmission 7% Fuel Transport 7% Other 3% Variable O&M 3% Fuel 30% Non-Fuel O&M 10% Debt 40% 60%+ of costs are fixed, and distribution is almost entirely fixed Residential Security 2% Cons. 3% Enviro. 1% Customer 7% Capacity 12% Fuel 32% Energy 43% Over 90% of recovery is variable Source: Duke March 2018 rates for 1,000 kWh 11 Residential Solar Reduces Energy Costs Other Aspects of Utility Costs Unaffected Distribution Transmission Staff Power Plants Value generally found in energy + losses that would otherwise have to be served 12 Rooftop Solar a Loss for Utilities Reduced Revenue, Fixed Costs Remain Example: 50% of Residential Customers Get Rooftop Solar Approximate Customers Avg. kW-AC Installed kW @50% Adoption Annual Energy Loss (MWh) 12,000 4.0 24,000 52,560 If half of residential customers adopted rooftop solar, city could lose 52,000 MWh annually. Assuming a revenue base of $100/MWh (10 cents/kWh) Customer charge increase of around $33/month per customer Revenue reduction of ~$5.3M a year, or ~$400,000 per month 13 Charges at Co-ops & IOUs Moving Up Forward Looking Municipals Also Increasing • Florida co-op customer charges range from $15-45 • IOUs customer charges moving from $5.25-10 in 2005 to $7.94-19.50 in 2018 • Gulf Power has requested a $48/month customer charge • Municipals starting to increase fixed charges 14 Customer Charge Increase Appropriate Gradual Increase Sends Right Market Message • Increasing (gradually) customer charge per month sends appropriate price signal and better aligns costs • If solar net metering credit remains at full retail rate, adjust toward energy-only cost to eliminate cost burden for non-solar customers • Group customer charge based on lower (e.g. <800 kWh/mo.) versus higher consumption levels to limit impact on lower consumption (multi-unit apartment and lower income) customers 15 MUNICIPAL POWER Tiered (Varying) Customer Charges Precedent Exists for Tiered Charges Primarily Low Income Programs • In Florida, customer (base) charges generally the same and not tiered by kWh • Tiers (or implied tiers) exist across the country, primarily discounts for low income customers • Possible tiering involves:  Less than 600-800 kWh/month  100 or 200 amp service  Demand vs. non-demand customers 17 anf?s MUNICIPAL POWER Communication is Key Messaging Can Overcome Objections Anticipate and Plan for Public Reaction Stakeholder Opinion Communication Strategy Higher fixed charges will punish customers who don’t use as much energy in favor of larger users. Create tiers of fixed charges based on usage levels to limit impact on lower income customers. Rooftop solar provides incremental energy and is on during the peak, so why can’t you credit me for capacity (demand) benefit? Solar is not a consistent source of power. It is not reliable during the winter peak, and generation is needed in summer and winter. Solar does not reduce the need for existing generation. My rooftop system means you can save money on all of those poles and wires – I should actually see a lower customer charge. Rooftop customers use the distribution system during non-solar hours, so they need and use poles and wires. Solar in small increments doesn’t defers costs. You’re not doing the valuation right, because you aren’t counting the social cost of pollution. We can lower emissions even further using economic, utility-scale solar that can be allocated to customers at a fraction of the cost of rooftop installations. 19 MUNICIPAL POWER /F oridaMunicipalPowerAgency [company/fmpa