Sustainability: SRP Sustainable Energy

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On May 23rd, Salt River Project’s Board of Directors is scheduled to vote on a plan to increase the amount of renewable energy it produces and reduce its energy load through energy efficiencies. Discussing the plan are Salt River Project officials Debbie Kimberly and John Coggins; Jeff Schlegel of the Southwest Energy Efficiency Project; and Amanda Ormond, a clean energy consultant who is also an SRP customer.

Ted Simons: "Horizon's" ongoing coverage of issues related to sustainability continues tonight with a look at sustainable energy. Investor-owned utilities like APS and Tucson electric power are required to meet standards adopted by the Arizona corporation commission for energy efficiency and renewable energy. They must get 15% of the power they sell from renewable sources by 2025 and by helping customers conserve energy, they have to cut their energy demand 22% by 2020. But salt river project doesn't have to meet the same requirements. Instead it adopt its own guidelines and on Monday SRP's board is scheduled to vote on a set of revisions. Here to talk about SRP's sustainable portfolio principles is Debbie Kimberly, manager of energy efficiency and policy for SRP. Amanda Ormond, an SRP customer, clean energy consultant, and former director of Arizona's energy office. John Coggins, SRP's manager of resource planning and development, and Jeff Schlegel, Arizona representative for the southwest energy efficiency project. Good to have you all here. Thanks for joining us. Debbie, what are we talking about, sustainable principles. Define the term for us.

Debbie Kimberly: Sustainable principles really refers to our sustainable portfolio. SRP has targets that originally were set in 2004. Our publicly elected board who regulates -- we're not regulated by the Arizona corporation commission, our board of directors regulates SRP, they emamended those in 2006 and they are now looking to amend them again come Monday. Sustainable resources we define to include conventional renewable generation, hydroelectric generation, both large and small hydro, energy efficiency programs, pricing programs, and one thing that we would like to include is the ability to have purchased renewable energy credits known as RECs count toward meeting our standards. Currently we have a standard that requires that we get 5% of our retail requirements from those sustainable resources, right now escalating to 15% by 2025. Management has recommended to our board that we significantly increase the target and as well accelerate the time frame for meeting our target.

Ted Simons: The idea of these revisions now, good idea?

Amanda Ormond: It is. We're really pleased to see that SRP is looking at what do we do to further clean energy. But when looking at it compared to other electric utilities both in Arizona and then outside the state, their goals are not as aggressive as they could be. And from my perspective, the construction of how they put together this standard is kind of convoluted and really hard to understand how much renewable energy will actually be procured as a result of this standard.

Ted Simons: And I want to get to that in a second, but before we get any further, we mention add couple of times here that SRP does not have to do the same kind of things other utilities have to do. Why?

John Coggins: Well, SRP is a political subdivision of the state of Arizona. And so as such we're not regulated by the Arizona corporation commission as Debbie mentioned. We have an elected board of directors and they serve as our regulatory body.

Ted Simons: OK. The idea that these revisions may be convoluted, respond to that.

John Coggins: Well, I think they're fairly straightforward from my perspective. What we've done is combined energy efficiency and renewable resources into one goal. And one of the big drivers for that is to maintain flexibility to choose options that represent the lowest cost for SRP customers or to allow for flexibility in terms of technologies that may be evolving that we don't anticipate currently. And we want to be able to move between those technologies and achieve our goals with the lowest reasonable cost.

Ted Simons: And we're seek a graphic right now that shows the ideas and the goal that you are talk about. But Jeff, the idea of combining energy efficiency and renewable energy is that a good idea?

Jeff Schlegel: I don't think it's a good idea. I think it's good to have -- the things SRP has been doing recently, we've seen lots of progress, we have applauded SRP for progress it's made both in renewable energy and energy efficiency, but the SRP customers would benefit even more from higher goals and separate goals. The commission, the Arizona Corporation Commission regulating the investor owned utilities, they have separate goals for energy efficiency and renewable energy. Those -- in 2020 they would sum to 22% or 20% energy savings, plus about 10% renewable energy, they'd sum to about 30% goal. SRP's goal is roughly 20% by that same year. I understand that combined standard provides flexibility for SRP and for management, but it makes it a little harder to know how much efficiency and how much renewables you're getting.

Ted Simons: The idea of flexibility on one side, but a lack of vision to see what exactly is going on on the other, talk to us about that.

Debbie Kimberly: Sure. One of the things I think is important to understand is that SRP's purpose is to serve its customers at the lowest possible cost. While at the same time trying to reduce emissions. And when you combine energy efficiency with supply side resources, you're putting energy efficiency on an equal footing and, we all know, I don't think we'd get any disagreement from Amanda and Jeff, energy efficiency is the lowest cost resource. We want to have the flexibility as john said to be able to make trade-offs. I would note that when you compare as Jeff said the additive standards from the year 2006 to the year 2014, SRP's standards is actually higher than the additive standard for the Arizona Corporation Commission. It's in 2014 that you begin to see the divergence. We have pledged to increase our education, we've put out a sustainable portfolio annual report, we're working very hard at putting more information online for our customers and stakeholders. I think we engaged in a very productive process starting in January with three stakeholder meetings, individual meetings with Amanda, Jeff, and other stakeholders, countless hours of dialogue, and I view Monday's meeting not as the finish line, but as a milestone in continuing that dialogue with stakeholders. But we want to have the flexibility to be able to pursue different options, frankly as technologies change.

Ted Simons: How do you -- talk about that dynamic. Again, you've got the market forces to consider, you've got money to consider, and costs. And you've also got companies trying to also do its job as far as renewables. How do you work the dynamic.

Amanda Ormond: Let me try to paint the big picture. SRP gets 59% of all their energy from coal-fire power plants. Another 9% from gas. So that's 68% of all the energy they sell to customers is fossil fuels. Most customers I think from most polling and the polling that SRP has done, want to see a reduction in carbon and in fossil fuels and a move towards clean energy. 20 years from now according to their charts, they're going to be at 64% fossil generation. So in 10 years they're only going to move from 68% to 64%. That's not a very big shift. We want to see more clean energy because clean energy is stable in price. It's the number one benefit. Renewable energy, when you put it in the ground today, it will be that same price or a known price for 30 years. So for customers, that's really good. The big picture is, you've got all these carbon-based resource and we're not really shifting away from them if you look at the big picture.

Ted Simons: I'm hearing not aggressive enough on your end. Talk to us about that.

John Coggins: I would say our resource portfolio is very similar to a lot of other utilities, Frankly. Coal is one of the major sources of energy throughout the United States, approximately 40-50% of all generation in the U.S. is coal-based today. So we're all moving towards cleaner energy and that is a goal of ours. I think it's important to do that in a way where we balance the cost of these new resources and the goals to reduce emissions, and we have to find that right now.

Jeff Schlegel: To that end, I think SRP -- it's a good process, an open process many of us have thanked SRP for that and I think we've seen some significant progress. I think we're looking for more good things N terms of energy efficiency, SRP did meet us partway. Though did increase commitment to energy efficiency, they increased their goals, they set a goal within a goal that ramps up over time and to us we see that as progress. I think if SRP ran this same process two or three years from now you'd see SRP committing to increase goals again. That's where we want to go.

Ted Simons: We're looking right now at the incremental energy efficiency savings and the proposal that you've got going here. What are we looking at?

Debbie Kimberly: One of the things stakeholders told us was that they wanted to see a separate energy efficiency goal. So we compromised. We listened to stake holders and all of these meeting and surveys and within the goal, as Jeff Said, we decided that we would set a goal for each and every year out through the time horizon ending in 2020. So that in -- for the next three years starting with the current fiscal year, savings from energy efficiency amount to 1.5% of retail sales, it ramps up for the follow three years to 1.75% and the final three years ending in 2020, to 2%. We've compared that on this graph with the annual incremental savings goal set by the corporation commission. So the graph shows you that in the first year our goal is higher, and thereafter we're a little bit under. And I would like to compliment Jeff for his involvement in helping us reach some of these decisions. The fact of the matter is, this is not the finish line, we look to do this periodically and I can definitely see that in the next three years we'll be sitting down again and engaging stakeholders in a process that is transparent and involves two-way communication.

Ted Simons: When you saw that graph and saw the red line, going up with the ACC requirement and such, but not too far away was SRP's proposals, what did you see?

Amanda Gorman: That was just efficiency component. On the renewable side, it's not quite as clear. The efficiency side has specific goals. But the renewables doesn't, and one of the provisions that's in the proposal right now is to buy these renewable energy credits or certificates, and the way that SRP has structured that project -- that provision is that up to a quarter of the entire standard can be met by these RECs, and SRP can go buy renewability energy from all over the country and from Eastern Canada and sometime in the future maybe from Mexico. Because they've chosen a region to buy from. In most utilities, if they're going to use -- if they're going to buy a REC the energy has to be physically delivered or able to be delivered to the SRP service territory. SRP is not doing that, so essentially what they're doing is they're saying, we're going to go out and buy pieces of paper that represent that energies being built somewhere in the United States. But we're not actually buying the energy. I think that's one of the reasons you don't see the big shift in the fossil fuel numbers, because they're not buying the energy.

John Coggins: Just to put some context around Amanda's comments, when we look at the states across the country that have renewable portfolio standards, which are approximately 29 states have those standards, 25 of those 29 states allow for RECs to be included in the -- in meeting the compliance associated with the portfolio. So this is really not a new concept, and in fact, SRP believes it may be a way to enhance the development of renewable resources. Renewables are specific to geographic regions. So, for example, Arizona has a lot of sunshine and is a good state for solar resources. But maybe the Midwest has wind, and is a better for that type of resource and biomass in the Southeast. So one difficulty we have with renewables today is moving that energy from the regions that can best produce it to where the customers are.

Jim Small: The idea of mix and match and doing the best with what you've got, as opposed to let's get some jobs here, some benefits here, we've got two different ideas here. What do you see?

Jeff Schlegle: I think on the efficiency side, it's clearer. I think the addition of the individual goal the year by year annual savings goals in the graph that you showed previously, the way I look at that graph, on the plus side you can see SRP's commitment and continued commitment in terms much the savings goals ramp up over time. To us that's a good thing. At the same time I see a remaining gap between the red and blue line between the commission standard and SRP, and that gap has closed and gotten very close over time. It overlapped in the first year where SRP is higher. And that's a sign of SRP committing more resources to energy efficiency which provide energy resources to customers but also reduce customer energy bills. So to me that's a good balance that SRP is trying to achieve, let's get resources that help customers and let's do it in a way that lowers their bill. I think what we'd like to see over time is SRP take that bottom line and continue to slope it up. Again, I believe as Debbie knows we'll be doing that again over the next few years and right back at it the next time this is looked at.

Ted Simons: Last question for all of you, a couple minutes left. What do you want your customers, the public, to learn from this discussion? To understand from what we're talking about here?

Debbie Kimberly: What I would like our customers to know is that SRP is doing everything we can to ensure that we're undertaking emissions control in the most cost effective way possible. We've listened to our customers, we want to be flexible in terms of the options that we pursue. But SRP doesn't have shareholders per se. Our business, our mission is to provide reliable, low-cost, water and power. So that's what this process has been about. How can we achieve these very ambitious goals but in the most cost effective way possible. And I think the process has been strengthened because of the involvement of people like Amanda, Jeff, and all of the other stake holders.

Ted Simons: Very quickly, what have you got?

Amanda Ormond: I'd like people to know energy prices are going to rise over time F we stop doing clean energy now, they're still going to go up in price. So we have a choice. What do you want to spend your money on? For my money, I want SRP to be doing more clean energy because it means stable prices in the future, jobs and economic development, air quality benefits here.

Ted Simons: Quickly, please.

John Coggins: I think we're all looking for the same thing here. We're trying to clean up emissions and reduce emission and do it at a reasonable cost. And again, I think that's what our program is all about that's what we're trying to achieve.

Jeff Schlegel: Efficiencies, lowest cost to customers, reduce energy bills, doing more is a good thing, it would reduce the emission and provide benefits to customers as well as jobs in our local economy. It's a win-win-win all around.

Ted Simons: Great discussion. Thank you all for joining on us "Horizon."

All: Thank you.

Debbie Kimberly:SRP;John Coggins:SRP;Jeff Schlegel:Southwest Energy Efficiency Project;Amanda Ormond:Clean Energy Consultant;

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