Transcript Document

Technical Meeting
AESO’s 2015 Forecasts, Own Costs Budget
Stakeholder Meeting
October 6 and 8, 2014
Purpose
• Purpose of this presentation is to:
– Provide stakeholders with an overview of:
• AESO’s 2015 Pool Price, Ancillary Services and Transmission
Line Losses Costs Forecasts
• AESO’s 2015 draft Own Costs budget
• Update on the Market Systems Replacement project
• Update on the Energy Management System project
• Obtain preliminary feedback
– Provide stakeholders with a BRP status update and discuss
next steps
2
2015 BRP - Steps
Status Update
Step
Activity
1.0 Invitation to Stakeholders Initiate annual consultation process
2.0 AESO Business
Initiatives
Present preliminary list of business initiatives and solicit
stakeholder feedback
3.0 Develop Own, Ancillary
Service and Line Loss
Forecasts
Develop Own Costs (G&A/Capital/Other Industry) budget,
Ancillary Services and Line Loss Cost forecasts
4.0 Technical Review
Meeting
Present and solicit feedback on Own Costs budget,
Ancillary Services and Transmission Line Loss Cost
forecasts
5.0 AESO Board Decision
Draft AESO Board Decision Document
AESO Board meets with stakeholders to discuss issues
AESO Board issues final decision
6.0 Dispute Process
Available for instances where stakeholder disagrees with
the AESO Board Decision
3
2015 BRP - Steps
Calendar (revised)
3.0 Develop AESO Own Costs,
Ancillary Service and Line Loss
Forecasts (internal)
June - September
1.0 Notice to Stakeholders
2.0 Updated Business Initiatives
5.0 AESO Board Decision
November 14 – Stakeholder presentations
AESO Board
Decision
4.0 Technical Review
Meetings with Stakeholders
September 22 - Business Initiatives
October 6 (Calgary) and October 8 (Edmonton) Ancillary Service, Transmission Line Losses Costs
Forecast and Own Costs
5.0 AESO Board Decision
(continued) - finalize
4
2015 Pool Price Forecast
October 2014
The information contained in this document is published in accordance with
the AESO’s legislative obligations and is for information purposes only. As
such, the AESO makes no warranties or representations as to the accuracy,
completeness or fitness for any particular purpose with respect to the
information contained herein, whether express or implied. While the AESO
has made every attempt to ensure the information contained herein
represents a reasonable forecast, the AESO is not responsible for any
errors or omissions. Consequently, any reliance placed on the information
contained herein is at the reader’s sole risk.
6
Purpose of AESO Price Forecast
• Hourly Price Forecast is Required for the Budget Review
Process
– Forecast feeds cost calculations for Ancillary Services and
Transmission Losses
• Third year of the AESO providing a Forecast
– Price Forecasts from EDC were used prior to the 2013 BRP
7
Forecast Methodology
• Created Using the AURORAxmp Power Market Model
– Model reflects the Alberta Market Fundamentals
• Random Variables are Used to Generate Price Volatility
– Forced Outages – random times and duration
– Demand – accounts for weather impact
– Gas Prices – lognormal distribution of monthly gas prices
– potential long-term forced outages, congestion, unanticipated
load growth, wind output, and high/low hydro years are
currently not modeled using random variables
• Price Simulation
– Ran 1001 separate price simulations
– Price distributions reflect volatility seen in the Alberta Market
8
Load Forecast
9
Supply Additions
10
2015 Simulation Results
Results from 1001 Price Simulations
On-Peak
Off-Peak
Flat
Mean
$43.31
$26.68
$37.77
Pool Price ($/MWh)
Min
P5
P25 Median P75
P95
Max
$36.07 $39.39 $41.36 $43.12 $44.89 $47.85 $56.72
$24.06 $25.28 $26.17 $26.67 $27.21 $28.76 $29.90
$32.20 $34.66 $36.29 $37.64 $38.97 $41.49 $47.78
Results from the P95 Simulation and Comparables
Period
On-Peak
Off-Peak
Flat
AESO
$47.85
$28.76
$41.49
Forward Market
(as of Sep. 15, 2014)
$62.37
$19.90
$48.21
11
Actual/Forecast Price Comparison
• 2015 forecast is based on the P95 iteration
12
2014 Daily Price Duration Curve
13
2015 Ancillary Services
Cost Forecast
October 2014
Cost of Ancillary Services
Annual Comparison
All costs in
$-millions
2013
Forecast
2013
Actual
2014
Forecast
2014
Projected
2015
Forecast
$181.2
$362.1
$193.7
$219.7
$130.5
TMR *
$2.0
$2.6
-
-
-
Blackstart
$5.0
$1.0
$2.8
$1.0
$5.0
LSS/LSSi
$68.7
$21.2
$25.4
$22.5
$25.0
Other
$2.3
$2.5
$2.5
$2.7
$2.5
Total
$259.2
$389.4
$224.5
$245.9
$163.0
2013
Forecast
2013
Actual
2014
Forecast
2014
Projected
2015
Forecast
Pool Price
$60.47
$80.19
$48.48
$59.39
$41.49
Gas Price
$3.03
$3.01
$3.28
$4.37
$3.99
Operating
Reserve *
* Conscripted TMR and Operating Reserves not included in the table above
15
Forecast Methodology
Operating Reserves
• Annual cost of OR is estimated by the sum of forecasted
hourly OR volumes (governed by WECC requirements)
multiplied by the forecasted hourly price of OR
𝑐𝑜𝑠𝑡 =
𝑣𝑜𝑙𝑢𝑚𝑒 ∗ 𝑝𝑟𝑖𝑐𝑒
ℎ𝑜𝑢𝑟,
𝑝𝑟𝑜𝑑𝑢𝑐𝑡,
𝑐𝑜𝑚𝑚𝑜𝑑𝑖𝑡𝑦
• Forecasted cost of OR is evaluated once for each of the
1001 pool price simulations
All costs in
$-millions
2013
Forecast
2014
Forecast
2015
Forecast
P95
$181.2
$193.7
$130.5
Max
$271.1
$366.4
$261.5
16
Forecast Methodology
Contracted TMR and Other Ancillary Services
• Annual TMR cost forecast based on historical contract costs
• Annual LSSi cost forecast based on current monthly
averages and expected costs for 2015
• Annual blackstart cost forecast based on contract terms
governing compensation and expected new contracts in
2015
All costs in $-millions
2015 Forecast
Transmission Must Run
-
Blackstart
$5.0
LSS/LSSi
$25.0
Other
$2.5
17
2015 Transmission Line Losses
Cost Forecast
18
Cost of Transmission Line Losses
Annual Comparison
2011
Actual
2012
Actual
2013
Actual
2014
Projected
2015
Forecast
Cost
($-millions)
$183.3
$150.5
$181.7
$145.1
$105.3
Volume
(GWh)
2,384
2,255
2,321
2,361
2,472
2011
Actual
2012
Actual
2013
Actual
2014
Projected
2015
Forecast
$76.22
$64.32
$80.19
$59.39
$41.49
Pool Price
($-millions)
19
Forecast Methodology
Line Losses
• Annual cost of transmission line losses is estimated by the
sum of forecasted hourly volumes multiplied by the
forecasted pool price
𝑐𝑜𝑠𝑡 =
𝑣𝑜𝑙𝑢𝑚𝑒 ∗ 𝑝𝑟𝑖𝑐𝑒
ℎ𝑜𝑢𝑟
• Forecasted cost of line losses is evaluated once for each of
the 1001 pool price simulations
All costs in
$-millions
2013
Forecast
2014
Forecast
2015
Forecast
P95
$136.9
$117.3
$105.3
Max
$168.9
$139.0
$120.6
20
Draft 2015 Own Costs Budget
2015 Budget Overview
• 2015 G&A budget
100
98.3
$ Million
98
96.0
96
94
94.0
93.1
92
90
2012
2013
2014
2015
• 2015 capital budget excluding major projects
30
27.5
27.0
$ Million
25
19.9
20
16.0
15
10
5
0
2012
2013
2014
2015
22
General & Administrative Costs
YTD August 2014
Forecast
Year End
Variance
YTD Aug
Actual*
YTD Aug
Budget*
YTD Aug
Variance
41.1
41.2
(0.1)
61.8
Contract Services and
Consultants
8.2
8.5
(0.3)
12.6
Administration
3.3
3.6
(0.4)
5.5
Facilities
4.0
4.2
(0.2)
6.3
Computer Services and
Maintenance
5.8
5.5
0.3
8.3
Telecommunications
0.9
1.0
0.0
1.5
63.2
64.0
(0.8)
0.0
96.0
1.2
1.3
(0.1)
(0.1)
2.0
$ Million
Staff Costs
Total Costs
Market Systems
Replacement (MSR) Project
2014
Budget*
* Excludes the Market Systems Replacement Validation Project approved for $2.0 million
Differences are due to rounding
23
2015 Budget Overview
• Continued delivery for AESO and industry required initiatives
– Refer to business initiative presentation
– Most 2015 initiatives began in 2014 or prior years
• Reflects efficiencies and corporate focus
• Leverage existing work to reduce ongoing effort
• Capital development focus on major system projects
– Limited system enhancements in 2015
• Limited flexibility to incorporate unanticipated initiatives
– Consistent with prior budgets, significant changes will require
additional review and approval
24
General & Administrative Costs
2015 Preliminary Budget
2014
Budget
2015
Budget
Staff Costs
61.8
61.4
Contract Services and Consultants
12.6
9.8
Administration
5.5
4.9
Facilities
6.3
7.9
Computer Services and Maintenance
8.3
8.6
Telecommunications
1.5
1.4
96.0
96.0
94.0
1.9
2.0
0.5
$ Million
Total Costs
Market Systems Replacement (G&A)
2014
Forecast
Differences are due to rounding
25
Notable Changes in 2015
• Progression of Competitive Process
– Integration of Fort McMurray West transmission line
– Begin Fort McMurray East transmission line process
• 3.5% salary adjustment to maintain market-based
compensation
• Rent and operating cost changes on existing leased facilities
• Assignment of existing staff to major project work
– Day-to-day operational requirements for these positions
reduced during the project which eliminates need to back-fill
– Energy Management System upgrade, Market Systems
Replacement
• Net new maintenance and support costs associated with
annual capital investments
26
2015 Preliminary Budget
$ Million
2014 Approved Budget *
96.0
Staff Costs
Annual salary adjustment (3.5%)
(0.4)
2.0
Capital business resources on major projects (7 FTE )
(1.2)
Staff retention plan (last phase ends Dec 2014)
(0.7)
General staff costs
(0.6)
Contract Services
(2.9)
Administration
(0.5)
Facilities
1.5
Computer Services
0.3
2015 Preliminary Budget *
(2.0)
94.0
* Excludes Market System Replacement project
27
Competitive Process Initiative
2013
Plan
2013
Actual
2014
Plan
2015
Plan
Development of Tendering and
Commercial Documents
0.9
2.7
1.4
0.6
Evaluation Teams & Fairness
Advisor
1.2
1.4
1.0
0.4
Route Development & Owner’s
Engineer
1.7
0.7
1.2
0.4
Integration Costs (AESO internal
staff)
1.0
1.0
1.0
1.0
Communications
0.8
0.4
0.3
0.2
-
0.2
0.4
0.3
5.6
6.2
5.4
2.8
$ Million
Issues Based Outreach
Total G&A Costs
Differences are due to rounding
28
Transmission Cost Monitoring and
Oversight Initiative
Transmission Cost Monitoring
and Oversight
2013
Plan
2014
Plan
2015
Plan
4
3
3
Contract resources ($ million)
0.5
0.1
0.1
Capital investment ($ million)
0.3
0.2
-
Staff (number of staff resources)
29
Historical G&A Costs
100.0
98.3
96.2
94.3
95.0
$ Million
90.0
96.0 96.0
94.0
93.1
88.5
85.5
85.0
80.0
75.0
2011
2012
2013 *
Actual/Current Forecast
2014 *
2015
Budget
* Excludes Market System Replacement project
30
Interest and Amortization
$ Million
Interest
Amortization
YTD Aug
Actual
YTD Aug
Budget
YTD Aug
Variance
2014
Budget
2015
Budget
0.1
0.3
(0.2)
0.5
0.5
17.3
18.2
(0.9)
27.3
In Progress
31
Other Industry Costs
YTD Aug
Actual
YTD Aug
Budget
YTD Aug
Variance
2014
Budget
2015
Budget
AUC Fees – Transmission
8.7
9.1
(0.3)
13.6
14.0
AUC Fees – Energy Market
4.6
4.8
(0.2)
7.2
7.2
Regulatory Process Costs
0.7
1.2
(0.5)
1.8
In Progress
WECC/NWPP* Costs
0.7
0.9
(0.2)
1.3
1.0
14.8
15.9
(1.1)
23.9
$ Million
Total Costs
* Western Electricity Coordinating Council / Northwest Power Pool
32
Activity-based Cost Reporting
• A transparent presentation of the AESO’s operating costs
• Operations of the AESO described using five key processes
– Key processes are unchanged from 2014
• Activity reporting allows for more detailed understanding of
the resources required for process delivery
• Multi-year comparisons will identify shift in priorities/ focus
– No significant shift has occurred in 2015
33
Summary of AESO G&A Costs
Staff and Contract
Services ($61 million)
1. Electric System
Operations
2. Electric System
Development
2014 Budget by
Key Process
• Proportion of 2015
costs associated
with the five key
processes is
similar to 2014 ~
no material shift
4. Market Development
5. Corporate Services
3. Customer Access
Services
Administration ($5 million)
• Details provided in
the final document
will include IT
costs associated
with the five key
processes
Facilities ($8 million)
Information Technology
Services ~ Resources
($11 million)
1. Electric
System
Operations
2. Electric
System
4. Market Development
Computer Services and
Telecomm ($10 million)
Budget of $94 million
3. Customer
Access Services
5. Corporate
Services
not actual data
34
Capital Budget
Capital Budget - Historical
Capital Expenditures ($ million)
Key Capital Initiatives
Other Capital Initiatives
Life Cycle Funding
Sub total
Special - MSR
Total
Special - EMS Upgrade Implementation
Business case review expected Q2/3 2015
2015
2014
2014
Budget Forecast Budget
7.1
5.4
8.4
3.3
6.1
5.3
5.6
7.0
6.2
16.0
18.5
19.9
2013
Actual
8.4
7.4
6.2
2012
Actual
7.7
9.6
8.2
22.0
25.5
5.8
21.8
2.3
Definitions:
Key Capital Initiatives – Most critical projects that the AESO believes must be completed within the timeframe
identified
Other Capital Initiatives – Other projects that have more flexibility in planning or delivery so timing is not as critical
Life Cycle Funding – Hardware replacements (end of useful life) and recurring software upgrades and leasehold
improvements
36
Capital Budget – Key Messages for 2014
• 2014 forecast is $18.5M
– Decrease of $1.4M from 2014 budget of $19.9M
• Factors include
– Deferred capital requirements for Business Initiatives - Energy
Management System (EMS) deferred to 2015
– Continued improvements resulting from Portfolio Management
Process – roadmaps, change control and resource
management
37
Capital Budget - 2015 draft
Capital Expenditures ($ million)
2015
2014
2014 1
Budget Forecast Budget
2013
Actual
2012
Actual
Key Capital Initiatives
2
3.6
0.3
0.4
1.2
1.2
0.4
0.0
7.1
3.3
1.4
1.6
0.2
0.8
0.2
0.4
0.3
0.3
0.2
5.4
6.1
3.2
2.0
0.9
0.2
0.6
0.6
0.5
0.3
8.4
5.3
0.5
1.5
0.0
0.2
0.6
0.1
2.3
0.2
2.4
8.4
7.4
1.2
0.3
1.0
0.0
0.0
3.4
0.4
7.7
9.6
Life Cycle Funding
SubTotal Capital
Special - MSR
5.6
16.0
5.8
7.0
18.5
6.2
19.9
6.2
22.0
8.2
25.5
Total Capital
21.8
1. Reliability (EMS elements)
3
Reliability (primarily HVDC elements)
2. Critical Infrastructure Protection
3. Cyber Security
4. Wind Integration
4
5. FEOC Regulation Implementation
5
6. Market Evolution (Incorporates TCM )
7. Demand Response
8. Intertie Framework
9. Operating Reserve
10. Cost Accountability
6
11. BUCC Replacement
7
Total Key Capital Initiatives
Other Capital Initiatives
Special - EMS Upgrade Implementation
2.3
Business case review expected Q2/3 2015
1
August 31, 2014. Spent plus estimate to complete for current year.
4
2
Energy Management System
5
Transmission Constraints Management
3
High Voltage Direct Current
6
Back-up Control Centre
ISO Tariff/Info Mgt Reclassified - Other
7
Fair Efficient Open Competition
38
Capital Budget - Key Messages for 2015
• Initial assessment is that a $21.8M capital budget is required
– Increase of $1.9M from 2014 budget and increase of $3.3M
from 2014 forecast
• Factors include
– Critical Infrastructure Protection and Cyber Security
requirements (facilities and information technology)
– Planning considerations related to foundational systems
• Market System Replacement project (business applications and
supporting infrastructure – $5.8M)
• Energy Management System Upgrade project (advanced
applications and supporting infrastructure - $3.6M)
– Reduction in enhancement requirements as a result of
foundational system projects
39
Capital Budget - Trend
30
25.5
25
Total
Capital Budget
21.8
22.0
20
18.5
$ millions
16.0
15
10
5.8
5
0
2012 Actual
2013 Actual
Key
Other
2014 Forecast
Lifecycle
Total
2015 BRP
Special
40
Capital Budget – “Other Capital Initiatives”
for 2015 - Summary
• Other application or infrastructure upgrades
– PI Software Upgrade
– System Enhancements
– AESO website tools and content
– Human Resources Management Tool
41
Capital Budget – “Life Cycle Initiatives” for
2015 - Summary
• Investment in general infrastructure
– Communications
– Database
– End User Computing
– Enterprise Services
– Monitoring
– Network
– Non-project Capital
– Servers
– Storage
42
Special Projects
Market Systems Replacement (MSR) Project - Update
43
MSR Project - Background
• On December 11, 2013, the AESO Board approved Phase II
of the Market System Replacement and Reengineering
(MSR) project to address the long term lifecycle needs of our
market systems
In progress
Phase I –
Validation/RFI
(2013)

Phase II –
Sourcing/RFP
(2014)
Business case, plan,
and decision to
proceed to Phase II
Phase III –
Implementation
(2015 - 2017
tentative)
Business case, plan,
cost effective
solution(s) identified,
and decision to
proceed to Phase III
44
MSR Project - Overview of Phase II
Sourcing / RFP
• Implementation strategy
– Phase I research indicates that available end-to-end solutions do
not have broad flexibility to mitigate the uncertainty of future
market scenarios
– Hence, implementation strategy is to incrementally/iteratively
address highest priorities with a minimum amount of change until
we gain more certainty regarding future market scenarios
• Phase II objectives align with this strategy:
– Refine target state including clear priorities and further defined
business requirements (sufficient for RFP)
– Determine candidate vendors, execute and evaluate RFP(s)
– Establish sequencing and implementation plan for Phase III
45
MSR Project - Phase III Roadmap
Phase I –
Validation/RFI
(2013)
Phase II –
Sourcing/RFP
(2014)
Phase III –
Implementation
(2015 - 2017
tentative)
Phase III
Future Iterations
Iteration 1
Design
Build
Note: Future iterations are likely to overlap
and run in parallel at certain times
SOW (Contract for Design)
Term: Jan 1 to Sept 30, 2015
System Integrator (SI) proposal covers entire roadmap
(Evaluation criteria considers entire proposal)
Detailed/Certain
Indicative
Ballpark
Level of accuracy of estimates and other
aspects of a proposal
46
MSR Project – Phase III Preliminary
Estimates
• MSR Phase III (Implementation) expected to begin in Q1
2015 upon Board approval
• Preliminary estimates are $5.8M capital, $500K G&A in 2015
• Estimates based on following assumptions
• Able to leverage existing infrastructure
• Additional infrastructure requirements are fulfilled via the
technology lifecycle program
• Estimates include SI, internal labor and product related costs
47
Special Projects
Energy Management System (EMS) Upgrade Project - Update
48
EMS Upgrade Project - Background
• Energy Management System (EMS)
– Mission critical control system used by AESO system
controllers to manage and operate the Alberta Interconnected
Electric System
• Project Justification
– EMS components at end-of-life
– Risk avoidance, Regulatory Requirements, Vendor
Support/Costs
• Project Scope
– Includes EMS network, infrastructure and application suite
49
EMS Upgrade Project - Program Approach
• Execute in three phases
– Validation:
– Assessment of long term requirements (business/technology);
Evaluation of option risks/opportunities (replace reengineer);
Peer Reviews
– Definition:
– Define detailed business, design & implementation
requirements; Greater degree of confidence in timing and cost
estimates (given the scale of the project)
– Similar approach BCHydro (EMS 3.0 upgrade)
– Implementation
– Development/deployment of design requirements into
production
– Data conversion, skills development, commissioning, warranty
and decommissioning
50
EMS Upgrade Project – Preliminary
Estimates and Timing
In progress
Definition
(2014 - 2015)
Validation
(2011 - 2014)
Current - Decision to proceed Definition
Phase recommendation approved
Implementation
(2015 - 2017+)
Plan & Estimate for the
Implementation Phase
Implementation Phase
Out
Q3 2014
Q2 2015 Q3 2015
Warranty & Close
Q1 2017
Q4 2017
• Preliminary Estimates
•
Definition Phase is approximately $5.1million
•
Implementation Phase range is $11M - $15million
51
Thank you