CCAP Presentation August 6, 2015

Dhaval Dagli

Principal Manager, Regulatory Policy, Southern California Edison

One of the nation’s largest electric utilities

• Subsidiary of Edison International, a Fortune 500

company

• Investor-owned utility regulated by the California

Public Utilities Commission (CPUC)

• Nearly 14 million residents in service territory

• 5 million customer accounts

• 50,000 square-mile service area

• Approx. 23,000 MW area peak load

• Approx. 89 billion kWh annual energy sales

Significant infrastructure investments

• 1.4 million power poles

• 700,000 transformers

• 103,000 miles of distribution and transmission lines

• 3,100 MW owned generation

Southern California Edison Highlights

Edison Intl. is Responding to Industry Change

• Public policy prioritizing environmental

sustainability

• Innovation facilitating conservation and

self-generation

• Regulation supporting new forms of

competition

• Flattening domestic demand for electricity

• Grid of the future will be more complex and

sophisticated to support increasing use of

distributed resources and transportation

electrification

SCE Strategy

• Invest in, build, and operate the next

generation electric grid

• Operational and service excellence

• Enable California public policies

Edison Intl. Competitive Strategy

• Targeted investments in emerging

technologies and markets to follow

changes in the industry and better

exploit opportunities as they arise

– Commercial and industrial distributed

generation

– Energy optimization

– Energy efficiency and software

– Residential solar industry financial

services and software

– Electric transportation

Long-Term Industry Trends Strategy

SCE’s Guiding Principles

1. Promoting customer choice and customer engagement are key

objectives

2. The distribution grid can play a key role in reducing carbon in California

3. Safety, reliability, and resiliency must remain paramount objectives

4. Costs of electric service must remain affordable and equitably-

apportioned to customers

5. Competitive processes for the selection of resources should be utilized

to the greatest extent possible

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SCE’s Decoupled Regulatory Model

Decoupling of Regulated

Revenues from Sales

Major Balancing Accounts

• Fuel

• Purchased power

• Energy efficiency

• Pension-related

contributions

Advanced Long-Term

Procurement Planning

Forward-looking Ratemaking

• SCE earnings are not affected by changes in retail electricity

sales

• Differences between amounts collected and authorized

levels are either billed or refunded to customers

• Promotes energy conservation

• Stabilizes revenues during economic cycles

• Trigger mechanism for fuel and purchased power

adjustments at 5% variance level

• Utility cost-recovery via balancing accounts represented

more than 55% of 2014 costs

• Sets prudent upfront standards allowing greater certainty of

cost recovery (subject to reasonableness review)

• Three-year rate case cycle

• Separate multi-year cost of capital proceeding

Regulatory Model Key Benefits

California’s Renewables Procurement Standard • On April 12, 2011, Governor Brown signed

into law a 33% Renewables Portfolio Standard (RPS) for California by 2020

– Allows use of Renewable Energy Credits

(RECs) for up to 25% of target with

decreasing percentages over time

– Applies similar RPS rules to all electricity

providers (investor- and publicly-owned

utilities, as well as Electric Service

Providers)

• In order to meet the 33% RPS requirement by 2020, SCE will need to increase its renewable purchases by 7.4 billion kWh per year, or 42%

• Legislative efforts are underway to increase the renewable requirement to 50% by 2030

SCE is on track to meet the 33% renewables target by 2020

Solar 15%

Small Hydro 2%

Geothermal 39% Biomass 2%

Wind 42%

Actual 2014 Renewable Resources:

23.4% of SCE’s portfolio

Distribution Grid of the Future

One-Way Electricity Flow

• System designed to generate

electricity from large central plant

• Very few distributed energy

resources

• Voltage relatively simple to maintain

• Limited situational awareness and

visualization tools for grid operators

Renewable Generation Mandates

Subsidized Residential Solar

Lack of Electric Vehicle Charging

Infrastructure

Variable, Two-Way Electricity Flow

• Distribution system at the center of

the grid

• System designed to serve variable

resources and customer demand

• Digital monitoring and control

devices and advanced

communications systems to manage

two-way flows

• Improved data management and

grid operations with cyber

mitigation

Maximize Distributed Resources and

Electric Vehicle Adoption

• Distribution grid infrastructure

design supports customer choice

and greater resiliency

Current State Future State

Objectives:

• Modernize the distribution system to accommodate customer choice

• Enable new technologies and services that reduce emissions and improve reliability

• Animate opportunities for Distributed Energy Resources (DERs) to realize benefits by providing grid

services

Key Elements:

• Tools for identifying optimal locations for DERs (includes Distributed Generation, energy storage,

Electric Vehicle charging, Energy Efficiency, and Demand Response )

• Modernization of system planning tools, design and operations

• Technology recommendations (information technology, communications, system planning, voltage

and frequency controls, etc.)

• Demonstration projects to test distribution models and technologies

• Investment plans for grid modernization

SCE Distribution Resources Plan (DRP)

New Technology Grid Impacts

2

1

3

1

1

1

2

2

Future state based

on evolving energy

landscape

More automated

and digital, with

more sophisticated

voltage control and

protection schemes

Facilitates

increasing

renewables & two-

way power flow

Cyber mitigation

must be included

1

2

3

1

Capabilities

Expedient Interconnection Processing

Increased Situational Awareness

Accurate Forecasting and

Planning

Investments

Distribution and Substation

Automation

Communications & Interoperability

Technology Platforms and Applications

Enabled By People Strategy Business Processes

• Increased

manpower

• New skill sets

• Training process

• Workforce

Evolution

• Work Management & logistics

• Evaluation of processes for

suitability

• Design Standards moving

forward

• Procurement & Planning

Integration

• Construction and operational

procedures Greater Interaction with and Control of

DERs

Grid Reinforcement

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Grid Modernization Requirements

2015 - 2017 2018 - 2020 2021 +

Implement foundational

information technology,

communication systems, and

system planning tools; begin

grid reinforcement work

Expand automation and

improve communications and

control with Distributed Energy

Resources; continue grid

reinforcement work

Continue grid modernization,

maximize benefits of Distributed

Energy Resources and continue

integrating into planning and

operations Tech

no

log

y

Exp

ect

ed

Resu

lt

GR

C

Cycl

e

Prepare organization

and workforce to

execute incremental

work

Ramp up resources and develop talent pipeline

Compliance, safety, and

reliability; preparation for future

grid state

New business opportunities

enabled; full deployment of grid

modernization

Prepare grid management

systems to handle increased DER

and support more grid

transactions

Peo

ple

an

d

Pro

cess

SCE’s Grid Modernization Road Map

Residential Rate Design • CPUC recently completed a comprehensive review of residential rate structure including a future

transition to time of use rates

• July 2015 CPUC Decision includes:

- Transition to 2 tiered rates by 2019

- “Super User Electric Surcharge” for usage 400% above baseline (~4% of current residential load)

- Continue fixed charge at $0.94/month; allows for consideration of increased fixed charges in

future

- Minimum bills up to $10/month which applies to delivery revenue only

Current Rates – July 2015

17.8¢

39.9¢

100% 101-400% >400%

22.8¢

Usage Level (% of Baseline)

¢/k

Wh

Future Rates - 2019

Usage Level (% of Baseline)

14.9¢

25.4¢ 30.9¢

100% 101- 130%

131- 200%

200-400% >400%

19.3¢ ¢/k

Wh

Fixed Charge: $0.94/month

Minimum Bill: $1.79/month Fixed Charge: $0.94/month

Minimum Bill: $10.00/month

Note: Graphs not to scale. 2019 rate levels are based on current revenue requirements

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NEM Program Eligibility: • Technologies up to 1MW, sized to

annual onsite load • Program ends July 1, 2017

NEM customers still pay: • Residential / Small Commercial

o Non-energy charges monthly (minimal)

o Energy charges annually • Commercial

o All charges monthly (energy, non-energy, demand)

NEM customers do not pay: • T&D costs billed volumetrically • Interconnection application fees • Study fees • Distribution upgrade costs • Standby charges • Departing load charges

SCE meter records the

energy supplied by SCE from the

grid

SCE meter records energy produced by the customer that is exported to the grid (not energy instantly

consumed)

Monthly “Netting” Every month, SCE bills the customer for

“net” usage based on the difference between and

1 2

3

Graphic Source: Pell Solar

Net Energy Metering (NEM) is an optional tariff for customer-generators who install a renewable generating facility to get a full retail rate credit for energy exported to the grid

Annual “Relevant Period” Within 12 months, customer-generators can use these “monthly net”

energy credits ($) to offset SCE charges for electricity usage. Therefore, customer-generators receive full retail credit for their

exported energy within the 12-month period.*

4

1 2

How Current NEM Program Works

SCE Residential NEM Rate Structure

7¢

24¢ 17¢

0

5

10

15

20

25

30

¢/kW

h

Solar Subsidies

(Illustrative)

Avoided

Generation Subsidy Paid by

Other Ratepayers Equivalent

Solar Offset

Current NEM structure results in residential solar customers receiving

a subsidy funded by all other non-solar customers

SCE’s NEM Developments:

• On August 3rd, SCE filed a proposal with the CPUC that is more

reflective of solar systems’ total costs and benefits

Residential customers can consume their self-gen without any

charge

They purchase electricity from the utility at otherwise

applicable rates

They get paid for exported electricity at a fixed rate

representing utility’s avoided costs

They pay a monthly grid-access charge based on the size of

their system

SCE 2014 Net Energy Metering Statistics:

• 103,900 combined residential and non-residential projects – 880

MW installed (of 2,240 MW cap)

– 99.5% solar

– 100,300 residential – 500 MW

– 3,600 non-residential – 380 MW

• Approximately 1,270,000 kWh / year generated

Key Take-Aways

• SCE is committed to fully embracing and implementing California’s environmental sustainability, emissions reduction, and technology innovation vision, as well as meeting the changing customer expectations

• SCE will continue to transform distribution system planning and operations to meet current and future distributed energy resources goals

• SCE intends to partner with others to facilitate the deployment of low-carbon technologies and encourage customer value creation

• Utility grid modernization investments must keep pace with DER technology innovation

• SCE’s recently submitted DRP is an important step towards a fully integrated, low-carbon electricity system

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Thank you. To access SCE’s Distribution Resources Plan (DRP), SCE’s Distributed Energy Resources Interconnection Map (DERiM), and additional information, please visit the CPUC’s DRP website at: http://www.cpuc.ca.gov/PUC/energy/drp/

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