referral #110210 october 10, 2011 · change in market and regulatory environments ... 1990 1992...
TRANSCRIPT
![Page 1: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/1.jpg)
Referral #110210October 10, 2011
![Page 2: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/2.jpg)
#110210 – Update:
At the July 7, 2011 City Commission meeting, Commissioners requested that the RUC hear an update on the changing factors affecting Gainesville Renewable Energy Center (GREC) costs and projected costs.
10/10/2011 2
![Page 3: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/3.jpg)
Balancing Policy And Business ObjectivesWhat brings us to today
Policy & business objectives Previously provided pricing analyses Change in market and regulatory environments Resulting cost considerations Strategies to manage cost of adding generation Benefits from this new generation
10/10/2011 3
![Page 4: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/4.jpg)
City Commission Policy Reduce carbon emissions (June 2005 Commission
passes resolution to enter Climate Protection Agreement)
Adopted aggressive TRC test which expanded energy efficiency programs (April 12, 2006)
Increase use of renewable fuels (June 2007)
10/10/2011 4
![Page 5: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/5.jpg)
County Commission Policy Alachua County Commission March 2007 Resolution
Energy efficiency Reduce energy consumption Renewable energy
Environmental Protection Advisory Committee (EPAC) Report adopted by the County Commission Suggested GRU build a 100 megawatt biomass generation facility Report found biomass could contribute over 20 to 30 million
dollars to the local economy in the interval 2011 to 2023
10/10/2011 5
![Page 6: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/6.jpg)
GRU Business Strategy Improve generation reliability
Deerhaven Unit 2, which provides most of the community’s around-the-clock base load power, is nearly 30 years old
Increase fuel diversity Bond rating agency recommended
Provide price stability and obtain long term cost savings for customers
Hedge against further environmental regulation
10/10/2011 6
![Page 7: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/7.jpg)
Improve Generation Reliability
10/10/2011 7
SummerUnit Unit Primary Age Net Capacity
Name Type Fuel in Years (MW)
JR Kelly Unit 7 Steam Turbine Natural Gas 50.1 23.20JR Kelly GT1 Gas Turbine Natural Gas 43.6 14.00JR Kelly GT2 Gas Turbine Natural Gas 43.0 14.00JR Kelly GT3 Gas Turbine Natural Gas 42.3 14.00Deerhaven Unit 1 Steam Turbine Natural Gas 39.1 78.00Deerhaven GT1 Gas Turbine Natural Gas 35.2 17.50Deerhaven GT2 Gas Turbine Natural Gas 35.1 17.50Crystal River Unit 3 Steam Turbine Nuclear 34.5 11.85Deerhaven Unit 2 Steam Turbine Coal 29.9 222.10Deerhaven GT3 Gas Turbine Natural Gas 15.7 75.00JR Kelly CC1 Combined Cycle Natural Gas 10.3 112.00South Energy Center GT1 Gas Turbine Natural Gas 2.3 4.10
Megawatt Weighted Average Age: 28 603.25
Current Year: 2011
![Page 8: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/8.jpg)
Increase Fuel Diversity – Portfolio Strategies Reduce Risk
10/10/2011 8
Coal61.8%
Oil0.2%
Natural Gas17.1%
Landfill Gas1.1%
Nuclear4.1%
Coal, Gas and
Nuclear Purchases
15.6%
Solar0.1%
2010
* Assumes GRU retains 50 MW of GREC
Coal57.9%
Natural Gas
15.4%
Landfill Gas1.5%
Nuclear5.1%
Biomass*18.6%
Solar1.5%
2015
![Page 9: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/9.jpg)
Out-of-State78.4%
Local21.6%
2015
Out-of-State98.8%
Local1.2%
2010
Energy Independence - Local Fuel
10/10/2011 9
![Page 10: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/10.jpg)
Price Stability – Less Market Exposure
10/10/2011 10
Variable Costs
Subject to Market Pricing73.3%
Fixed Costs
Subject to Contract
26.7%
2015
Variable Costs
Subject to Market Pricing94.7%
Fixed Costs
Subject to Contract
5.3%
2010
![Page 11: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/11.jpg)
Less Exposure To Gas Fired Generation Will Improve Price Stability
10/10/2011 11
![Page 12: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/12.jpg)
$-
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.0020
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
2620
2720
2820
2920
3020
3120
3220
3320
3420
3520
3620
3720
3820
3920
4020
4120
4220
43
$/M
Wh
Base Case Gas Alternative High Fuel Price Gas Alt. Low Fuel Price Gas Alt.
Biomass Biomass w/o Grant10/10/2011 12
Long Term Cost Savings:Biomass Compared To Gas Alternative
Source: May 7, 2009City Commission presentation
![Page 13: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/13.jpg)
10/10/2011 13
New Generation Costs Will Escalate Under EPA’s Pending Regulations
![Page 14: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/14.jpg)
Balancing Policy And Business ObjectivesWhat brings us to today
Policy & business objectives
Previously provided pricing analyses Change in market and regulatory environments Resulting cost considerations Strategies to manage cost of adding generation Benefits from this new generation
10/10/2011 14
![Page 15: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/15.jpg)
What’s Changed Since May 7, 2009*
What we said Projected price effects
Sensitivity to natural gas forecasts Potential mitigating factors
What factors have changed Update on projected price effects
10/10/2011 15
* As presented at the May 7, 2009 City Commission meeting
![Page 16: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/16.jpg)
Base Gas Forecast - $10.56/1,000 kWh
10/10/2011 16
Measured as Equivalent Effect on 1000 KWH Residential Bill
$/Month
Scenario: Base Load and Energy Price Forecast
2014 2019
ItemCumulative Effect on
Bill Item
Cumulative Effect on
Bill Direct Utility Bill Cash Flows
Net Effect After Fuel Savings $10.56 $10.56 $5.12 $5.12Effect of Prepayment Restructure -$2.25 $8.31 -$2.27 $2.85CO2 Regulation savings @ $12/MWH -$2.22 $6.10 -$2.10 $0.75
Indirect Utility Bill Benefits Avoided capacity in 2023 -$4.73 $1.37 -$4.49 -$3.75
Other Community Benefits From Off-System SalesProp Tax Revenue for County, Schools, Library -$1.35 $0.02 -$1.28 -$5.03
Other Regulatory Risk From DelayMissing ITC Grant Deadline 1/1/2014 $1.48 $1.50 $1.40 -$3.62PTC Not Extended $3.14 $4.63 $3.29 -$0.34
Parameter
Source: May 7, 2009 City Commission Presentation. Assumes 50 MW of GREC sold through 2023.
![Page 17: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/17.jpg)
Low Gas Forecast - $12.78/1,000 kWh
10/10/2011 17
Measured as Equivalent Effect on 1000 KWH Residential Bill
$/Month
Scenario: 20% Lower Energy Price Forecast
2014 2019
ItemCumulative Effect on
Bill Item
Cumulative Effect on
Bill Direct Utility Bill Cash Flows
Net Effect After Fuel Savings $12.78 $12.78 $8.50 $8.50Effect of Prepayment Restructure -$2.25 $10.53 -$2.27 $6.22CO2 Regulation savings @ $12/MWH -$2.22 $8.32 -$2.10 $4.12
Indirect Utility Bill Benefits Avoided capacity in 2023 -$4.73 $3.59 -$4.49 -$0.37
Other Community Benefits From Off-System SalesProp Tax Revenue for County, Schools, Library -$1.35 $2.24 -$1.28 -$1.65
Other Regulatory Risk From DelayMissing ITC Grant Deadline 1/1/2014 $1.48 $3.72 $1.40 -$0.25PTC Not Extended $3.14 $6.85 $3.29 $3.04
Parameter
Source: May 7, 2009 City Commission Presentation. Assumes 50 MW of GREC sold through 2023.
![Page 18: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/18.jpg)
Balancing Policy And Business Objectives
What brings us to today Policy & business objectives Previously provided pricing analyses
Change in market and regulatory environments
Resulting cost considerations Strategies to manage cost of adding generation Benefits from this new generation
10/10/2011 18
![Page 19: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/19.jpg)
Conditions Have Changed – And They Will Again
Demand for electricity Natural gas prices Environmental permitting requirements
10/10/2011 19
![Page 20: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/20.jpg)
Demand For Electricity Increased
10/10/2011 20
0
100
200
300
400
500
600
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Meg
aWat
ts
Summer Peak Demand
History2009 Forecast2011 Forecast
![Page 21: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/21.jpg)
Natural Gas Price Dropped
10/10/2011 21
$0
$5
$10
$15
$20
$2519
90
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
Nom
inal
Dol
lars
per
MM
Btu
Delivered Fuel Price Forecasts
Gas History
Coal History
High Gas '09
Gas '09
Low Gas '09
Gas '11
Coal '11
Coal '09
Biomass '11
![Page 22: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/22.jpg)
More Stringent Regulations Enacted EPA’s endangerment findings
Carbon emissions detrimental to public welfare Resulted in new automobile efficiency standards Resulted in “Tailoring Rule” for carbon accounting Carbon regulation under discussion
Florida’s Best Available Control Technology changed EPA enacted Industrial Boiler Maximum Achievable
Control Technology standards (IBMACT) Suwannee River Water Management District
imposed reclaimed water requirements
10/10/2011 22
![Page 23: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/23.jpg)
GREC’s Design Had To Change Original GREC Design
Selective Non-Catalytic NOx Reduction Calcium dry sorbent injection Baghouse for particulate reduction
Revised GREC Design Selective Catalytic reduction for NOx
Sodium dry sorbent Double baghouse size Pipeline to City of Alachua WWTP
10/10/2011 23
![Page 24: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/24.jpg)
Balancing Policy And Business ObjectivesWhat brings us to today
Policy & business objectives Previously provided pricing analyses Change in market and regulatory environments
Resulting cost considerations Strategies to manage cost of adding generation Benefits from this new generation
10/10/2011 24
![Page 25: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/25.jpg)
GREC Contract Structure
10/10/2011 25
Fixed Costs $/MWhNon Fuel Energy Charge $56.15Fixed O&M $23.74Property Taxes $8.88Subtotal $88.76
Discretionary Dispatch Costs*Variable O&M $3.56Fuel Charge $37.80Subtotal $41.36
Total $130.13 /MWh
*Only incurred if better alternatives are not available
![Page 26: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/26.jpg)
Total Annual Cost$103 M/Year
DiscretionaryDispatch Cost$33 M/Year
Fixed Cost*
$70 M/Year
Let’s Translate $/MWh to Annual Costs
10/10/2011 26
Discretionary Dispatch Cost* = $41.36/MWh x .90 CF x 100MW x 8760 hours/Year = $32,608,224 /YearFixed Cost = $88.76/MWh x .90 CF x 100MW x 8760 hours/Year = $69,978,384 /YearTotal Extended Cost = $130.13/MWh x .90 CF x 100MW x 8760 hours/Year = $102,594,492 /Year
*If GREC is available and capable of 100 MW 90% of the time (.90 CF)
![Page 27: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/27.jpg)
Balancing Policy And Business ObjectivesWhat brings us to today
Policy & business objectives Previously provided pricing analyses Change in market and regulatory environments Resulting cost considerations
Strategies to manage cost of adding generation
Benefits from this new generation
10/10/2011 27
![Page 28: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/28.jpg)
GREC’s Benefits And Strategies To Manage Fixed Costs
Immediate cost savings Power marketing and prepay opportunities Savings from policy alternatives
10/10/2011 28
![Page 29: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/29.jpg)
Immediate Cost Savings
Drop base load capacity contract costs from Progress Energy Florida (PEF)
Reduce fuel costs for power production by avoiding running higher cost units
Ability to sell Renewable Energy Credits (REC’s) Current market values
Solar: $10/MWh Landfill Gas, Wind, Biomass: $1/MWh
10/10/2011 29
![Page 30: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/30.jpg)
Immediate Cost Savings(x $1,000,000 per year)
10/10/2011 30
SavingsDrop PEF Baseload Capacity Contract $12Net Production Cost Savings $7Renewable Energy Credit Sales $1
Total Immediate Cost Savings 20$ M/Year
![Page 31: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/31.jpg)
Power Market And Prepay Opportunities
Long term contract assignment Non-recourse prepayment System power sale Federal agency contract
10/10/2011 31
![Page 32: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/32.jpg)
Long Term Contract Assignment Utilities want GREC’s long term values Favorable market conditions
Coal retirements Gas pipeline constraints Florida reserve margins
GREC’s economics are competitive with nuclear Cost per MWh Long term stable price Hedges carbon and fuel price risk No nuclear waste disposal or construction cost risk
Willing to offer 25 MW on a long term basis
10/10/2011 32
![Page 33: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/33.jpg)
Non-Recourse Prepayment
Authorized by 2005 Energy Policy Act How It Works
Tax-Exempt Power project formed under FS Chapter 163 (The “Conduit”)
Tax-Exempt Bonds issued by Conduit to prepay Producer provides discount (negotiated) Not GRU debt: Conduit’s debt
10/10/2011 33
![Page 34: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/34.jpg)
System Power Sale
GREC energy creates a very favorable incremental cost of generation for off-system sales
Blended with other GRU assets, wholesale power is available Pricing very competitive Indexed to hedge fuel risk
10/10/2011 34
![Page 35: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/35.jpg)
Federal Agency Contract
Federal agencies have renewable energy goals Energy Policy Act of 2005 Executive Order 13423 7.5% by 2013
10/10/2011 35
![Page 36: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/36.jpg)
Power Marketing And Pre-pay Strategy BenefitsX $1,000,000 Per Year
10/10/2011 36
*Reflects the effect of having only 75 MW of GREC available for retail power supply
Potential Benefit
Long Term 25 MW PPA Assignment $16Non- Recourse Pre-Pay* $15System Wholesale Power Sale* $7Federal Agency Contract $2
Total Marketing & Prepay Strategies $40 M/Year
![Page 37: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/37.jpg)
Savings From Policy Alternatives
Solar Feed In Tariff scale back
General Fund Transfer (GFT) offset
10/10/2011 37
![Page 38: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/38.jpg)
Solar FIT Scale Back
Solar FIT has upward rate pressure City Commission may terminate program for any
project not holding an executed Solar Electric Power Agreement (SEPA) at any time.
One option is to not issue additional capacity reservations after 2013.
10/10/2011 38
![Page 39: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/39.jpg)
General Fund Transfer (GFT) Offset
Tangible Property Tax estimated at $7 million per year About $1.3 million accrues to the City of Gainesville This amount could be offset from GRU’s GFT in future
years General Government would remain whole
10/10/2011 39
![Page 40: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/40.jpg)
Savings From Policy Alternativesx $1,000,000 Per Year
10/10/2011 40
Potential Benefit
No Addtional Solar FIT Commitments After 2013 2014 Cost Reduction 0.3$ Additional Reductions By 2016 0.6$ Reduce GFT By GREC Ad Valorem Taxes 1.3$
Total 2.2$ M/Year
![Page 41: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/41.jpg)
Price Mitigation Summaryx $1,000,000 Per Year
10/10/2011 41
() indicates a negative number (or cost to be recovered)
PotentialCosts and Savings
GREC Fixed Cost (70)$ Immediate Cost Savings 20$ Power Marketing and Pre-Pay Strategies 40$ Policy Alternative Options 2$
Residual Amount To Recover Through FA (8)$ M/Year
![Page 42: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/42.jpg)
Lets Translate Millions of Dollars Per Year Into Customer Prices $8 million per year of cost is equivalent to $4.00/1000
kWh
Given that savings may vary from estimates, a target of a $10.00/1000 kWh is realistic which corresponds to recovering $20 million per year
10/10/2011 42
Note: As a purchased power cost recovered through fuel adjustment, GREC’s costs are not subject to utility taxes or surcharges.
![Page 43: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/43.jpg)
Balancing Policy And Business ObjectivesWhat brings us to today
Policy & business objectives Previously provided pricing analyses Change in market and regulatory environments Resulting cost considerations Strategies to manage cost of adding generation
Benefits from this new generation
10/10/2011 43
![Page 44: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/44.jpg)
Benefits Not Quantified In This Analysis
Present value of avoided capacity in 2023 Hedge value against fossil fuel price volatility Regional economic benefits
$5.7 million per year net increase to local tax base Creates 700 jobs in the region* $31 million circulated in the regional economy instead of
being shipped out of state* Hedge value against carbon or renewable portfolio
standard regulation
* Dr. Julie Harrington, Economic Impact Analysis of Gainesville Renewable Energy Center (GREC) Proposed Biomass Power Project in Alachua County and Surrounding Counties, March 2010
10/10/2011 44
![Page 45: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/45.jpg)
-
10
20
30
40
50
60
70
80
90
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
mill
s
Historical FA FCST FA With GREC
Assumes that offsets necessary to achieve 10.56 FA impact in 2014 are achieved
Projected FA – Current Fuel Price Forecasts
10/10/2011 45
![Page 46: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/46.jpg)
Summary
The need and policy objectives for GREC have not changed.
GREC continues to have long term value for our customers.
The initial projections as presented on May 7, 2009 are still achievable.
Staff continuously pursues cost mitigation strategies for all generation resources as market conditions change on a daily basis.
10/10/2011 46
![Page 47: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/47.jpg)
Recommendation
The Regional Utilities Committee hear periodic updates on ongoing changes and strategies that positively or negatively impact GRU generation.
10/10/2011 47
![Page 48: Referral #110210 October 10, 2011 · Change in market and regulatory environments ... 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026](https://reader033.vdocuments.net/reader033/viewer/2022050210/5f5cfafbf18ab649ec239ea6/html5/thumbnails/48.jpg)
More information on GREC available at:
10/10/2011 48
www.gru.com