Transcript Slide 1

Who Will Build the
Resources for the Future?
Dan Dolan – Vice President
Electric Power Supply Association
September 2008
www.epsa.org
What is EPSA?
• The national trade association of competitive
power sector
• Nearly 40% of installed generating capacity
• Competitive sector built almost all new generation
since early 1990s
• New generation was largely at supplier’s risk,
not at ratepayer expense
• Nearly all wind generation is being built by
competitive suppliers
Wind Projects Completed in 2008
Competitive Suppliers
Rate-Base Construction
Rate-Base Construction
13%
2500
2365
2000
1500
1000
360
500
0
Competitive Suppliers
87%
Percentage of Total Capacity
Competitive Suppliers
Rate-Base Construction
Total Capacity (MW)
American Wind Energy Association, 2nd Quarter 2008 Market Report, August 5, 2008
Wind Projects Under Construction
Competitive Suppliers
Rate-Base Construction
Rate-Base Construction
6%
9000
8446
8000
7000
6000
5000
4000
3000
2000
583
1000
0
Competitive Suppliers
94%
Percentage of Total Capacity
Competitive Suppliers
Rate-Base Construction
Total Capacity (MW)
American Wind Energy Association, 2nd Quarter 2008 Market Report, August 5, 2008
Build versus Buy:
Who Bears the Risk?
•
•
•
•
Utility cost-over runs
Competitive suppliers risk management
New technologies
Large investments
Joint Federal/State Report
• The FERC and NARUC on July 20 jointly released
a report of "best practices" to ensure a fair and
objective system of encouraging robust competition
for utility resource needs.
• The report is titled Competitive Procurement of
Retail Electricity Supply: Recent Trends in State
Policies and Utility Practices and was prepared
by the Analysis Group. Available at www.naruc.org.
FERC/NARUC Report Quotes
• "...because the large capital investments necessary
for development of these types of resources pose
potentially valuable opportunities for utilities to
enter new resources into rate base, commissions
should be aware that utilities may attempt to
shield such projects from competition even in
situations where market processes are
applicable. Despite these challenges, the potential
economic gains from imposing the market discipline
of competitive procurements on development of
capital-intensive and advanced technologies may
be great." (p. 19, emphasis added)
FERC/NARUC Report Quotes
• "Because the utility's (and/or its parent's) financial interests
may not be aligned with those of its customers when the
utility selects from among the options, extra care is
needed to prevent improper self-dealing by the utility.
Best practices under these circumstances require a higher
degree of regulatory supervision and scrutiny..." (p. 12,
emphasis added)
"...as many states have determined, the benefits of
[independent monitors of competitive procurements]
seem to outweigh these costs in most instances, and
are a necessary element of a credible process where
the utility itself has a financial stake in the outcome of the
competitive procurement itself." (p. 22, emphasis added)
Change the Way We Think of
New Electricity Supplies
Credible Solicitations
• Collaborative Process
• Local utility submits recommended approach
• Multi-day, commission-facilitated collaborative meetings
• State Commission resolves outstanding issues
• Independent, Third-party Evaluator
• Performs independent evaluation of the bids
• Monitors communication between the utility, affiliate
• Benefit: Extra pair of “eyes”
Credible Solicitations (cont.)
• Fair Process Must:
• Be free from actual, apparent conflicts of interest
• Provide all bidders similar access to information
• Require full public review of the utility decision-making
process
• If the utility or affiliated entity participates, additional
protections are required
• Use of an independent evaluator - reports to commission
• Separation of utility personnel - utility’s proposal vs.
evaluating bids
• Utility winner must honor its bid prices
Dan Dolan
Vice President,
Policy Research & Analysis
Electric Power Supply Association
1401 New York Ave., NW
11th Floor
Washington, DC 20005
Telephone: (202) 628-8200
Fax: (202) 628-8260
E-mail: [email protected]
Website: www.epsa.org