Eric M. Markell Sr. Vice President Energy Resources Puget Sound Energy Planning to Transacting: The...
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Transcript of Eric M. Markell Sr. Vice President Energy Resources Puget Sound Energy Planning to Transacting: The...
Eric M. MarkellSr. Vice President Energy ResourcesPuget Sound Energy
Eric M. MarkellSr. Vice President Energy ResourcesPuget Sound Energy
Planning to Transacting:The Road to Getting Renewables Done
National Association of Regulatory Utility CommissionersAugust 1, 2006
Important Notice: Puget Sound Energy, Inc. has prepared the enclosed materials for illustrative purposes only and solely for the use of the attendees at today’s seminar. Certain statements contained in these materials, particularly those relating to resource acquisition, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and thus are subject to certain risks and uncertainties. The information set forth in these materials is based on numerous assumptions, which may or may not be described in the materials. No assurance can be given as to the accuracy, applicability or completeness of such assumptions or of the plans, recommendations or conclusions set forth in these materials in any particular context. These materials should not be construed as either projections or predictions or as business, legal, tax, financial or accounting advice and should not be relied upon for any such purpose. Further, and except as required by law, PSE undertakes no obligation to update any forward-looking statement contained in these materials.
Disclaimer
Presentation OutlinePresentation Outline
Intro to PSE & Its Resource NeedsIntro to PSE & Its Resource Needs Value Renewables Bring to PortfolioValue Renewables Bring to Portfolio Challenges to Acquiring RenewablesChallenges to Acquiring Renewables How Government/Regulators Can HelpHow Government/Regulators Can Help
PSE OverviewPSE Overview
PSE 2005 Revenue from Utility Customers
$1,499
$953
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000$000 Gas
Electric
$2,451
PSE 2005 Customers
1,011
683
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Avg
Cu
sto
mers
(000)
Gas
Electric
1,695
PSE’s Resource NeedPSE’s Resource Need
Energy Load-Resource Balance
Colstrip
Gas
Hydro
New Chelan Contract
Contracts
NUGs
Hopkins Ridge
Wild Horse
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Avera
ge M
eg
aw
att
s 305
1434 AMW
(1239 with EE)
December average load before reduction from new Energy Efficiency programs.
December average load net of new Energy Efficiency programs.
Estimated Cost to Fill NeedEstimated Cost to Fill Need
3.7 Billion Dollars by 20153.7 Billion Dollars by 2015
Value Renewables Bring to PortfolioValue Renewables Bring to Portfolio
Diversity--Diversity-- Mitigate fuel price riskMitigate fuel price risk Mitigate hydro riskMitigate hydro risk Reduce risk to the Reduce risk to the
environmentenvironment Mitigate future Mitigate future
environmental environmental regulation riskregulation risk
Annual Average Resource Mix 2008
Net Market / Need
4%Contracts
3%
Gas-NUGs20%
Gas-Owned11%
Coal26%
Hydro31%
Wind5%
Challenges to Acquiring Renewable ResourcesChallenges to Acquiring Renewable Resources Global Competition for Technology/TalentGlobal Competition for Technology/Talent Costs Up - A LotCosts Up - A Lot Census of doable deals appears thinCensus of doable deals appears thin Ample capital but few quality development Ample capital but few quality development
teamsteams Good development teams are not scalableGood development teams are not scalable Small projects unattractive to capital/talentSmall projects unattractive to capital/talent TransmissionTransmission IntermittencyIntermittency PermittingPermitting
Levelized Costs Are Up - A LotLevelized Costs Are Up - A Lot
$2006 $2004
Natural Natural GasGas
40
55
70
85
100
115
130
145
160
(44-62)
(60-85)
(45-65)
(42-74)
(64-67)
(76-106)
(70-129)
(71-125)
(59-100)
(61-101)
WindWind CoalCoal HydroHydro PPAs PPAs
20-y
ear
leve
lized
co
st -
$/M
Wh
20-y
ear
leve
lized
co
st -
$/M
Wh
Notes:Notes:
1) This chart compares the 20-year levelized costs each individual resource bid;1) This chart compares the 20-year levelized costs each individual resource bid;
2) 2004 levelized costs do not include transmission from Mid-C to PSE’s system;2) 2004 levelized costs do not include transmission from Mid-C to PSE’s system;
3) PPA costs represent fixed price offers and include imputed debt; 3) PPA costs represent fixed price offers and include imputed debt;
4) Impacts to the Company’s credit costs are not reflected in analysis.4) Impacts to the Company’s credit costs are not reflected in analysis.
TransmissionTransmission
How Regulators Can HelpHow Regulators Can Help
Encourage Integrated Resource Planning and Encourage Integrated Resource Planning and Acquisition.Acquisition.
Encourage active utility engagement with Encourage active utility engagement with developers and the development process.developers and the development process.
Encourage and reward renewable and Encourage and reward renewable and environmental initiatives.environmental initiatives.
Understand the deal making value chain.Understand the deal making value chain. Provide strong capital structure, fair returns, and Provide strong capital structure, fair returns, and
realistic opportunities to earn such return.realistic opportunities to earn such return.
ConclusionConclusion
Renewable targets in WECC are aggressive.Renewable targets in WECC are aggressive.
Alignment of all interests will be essential if Alignment of all interests will be essential if success is to be had.success is to be had.
It’s going to be a bumpy ride!It’s going to be a bumpy ride!