Seattle City Light – AMI Business Case Results March 29, 2012

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Introductions

SAIC TeamBob Kinsella – Smart Grid Program Manager

Steve Hadden – Principal ConsultantTony Summerlin – Principal Consultant

Seattle TeamPhil West

Kelly EnrightBrian Brumfield

Garry CraneJean Becker

Ward MacKenzie

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Briefing Outline

• State of the AMI Industry• AMI Business Case Overview• City Light 2012 AMI Business Case Results

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State of the AMI Industry

• Technology: Maturity, Capabilities, Limits• Established communication technologies• New communication technologies• Standards• Cyber security

• Supplier profile• Technical capabilities

• Meter communication• Data management and integration

• Corporate profile• Market position, existing customer base• Technology legacy: strengths, liabilities• Technical team strength

• Risks• Technical• Business

Many factors guideAMI selection.

Weighting variesby utility.

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AMI Technologies

• Selection usually driven by communication• Metering requirements generally (not

always) met by all suppliers• Most suppliers abreast of standards for

cybersec and interop• Communication choice drivers

• Technical requirements• Established by business case

• Supplier requirements• Utility risk approach/tolerance• Price• Subjective relationship factors

• IT issues can be substantialAMI = Advanced metering infrastructure

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AMI Communication Alternatives

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AMI Market Status - AMI is mainstream.

• AMI* deployment rate reached steady state in 2003• U.S. AMI electric meter population is now > 30 million • Current AMI deployment rate = 12 million to 16 million per year• Most U.S. electric meters will be AMI by 2020

*AMI = Advanced metering infrastructure capable of gathering hourly data.

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AMI Business Case Overview

• When done well, the AMI business case …• Establishes the value of the AMI investment• Validates the vision by documenting how available AMI can

fulfill the vision• With sufficient capability and performance• At acceptable cost• With acceptable risk

• Guides the AMI project in extracting the predicted benefits

AMI = Advanced Metering Infrastructure

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Business Case Key Inputs

• Meter infrastructure costs/growth• Comm. infrastructure costs/growth• IT infrastructure costs/growth• System load data

• Operations and maintenance variables• Wholesale related costs• Staff labor and vehicle costs• Financial variables

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Business Case Key Outputs

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• Net present value• Internal rate of return• Annual net cash flow• Breakeven point• Model comparison of solutions

• AMI/MDMS technologies• Traditional Own-and-Operate to

Smart Grid as a Service

• Benefits chart breakdown by department

• Benefits breakdown by meter• Costs chart breakdown by department• Costs breakdown by meter• Capital and O&M costs

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

($60,000,000)

($40,000,000)

($20,000,000)

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

Annual Net Cash Flow Cumulative PV

Annual Net Cash Flow and Cumulative NPV

2024

NA 4.7% 12.3% 14.8%$71.8 M$37.4 M$1.60 M($36.2 M)

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Business Case Analysis

Smart Grid Benefits • Meter Accuracy• Meter Reading Efficiency• Billing Exceptions• Billing Complaints• Unbilled/Uncollectible Accounts• Group Accounts• Cash Flow• Connects, Disconnects, and Account Transfers• Outage Restoration• Phase Balance• Transformer Overloads and Sizing• Vegetation Management• Avoided CO2 Emissions• Pre-Pay• Demand Response• Voltage Optimization• Distribution Automation• Distributed Energy Resources

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Costs Multi-million dollar implementation over a

relatively small customer base– Meter Infrastructure– Communication Infrastructure– IT Infrastructure– Program Management

• Project Management Office (PMO)• Customer Education• Business Process and Organizational

Change• Cyber Security Audit

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Business Case Benefits

2

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City Light 2012 AMI Business Case Results

Line Item

Acquisition + Deployment

Cost

Annual Operation + Maintenance

AMI Meters $60,715 $184Communication Infrastructure 5,108 549Master Station & IT Integration 2,739 153Program Management 1,657Operations 1,034Totals ($ thousands) $70,220 $1,921Overall acquisition + deployment cost per meter served = $171.00

($ thousands)

Estimated AMI Costs for City Light

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AMI Benefit Categories

Benefit Category Benefit Examples

Role in City Light AMI Business Case

Traditional Utility Operations

Meter reading, customer service, service on/off, system planning,service restoration management

Included

Distribution Management Voltage optimization, automated feeder sectionalizing

Omitted

Customer Programs Demand response, load management, electric vehicles

Omitted

Societal – Economic Improved regional business climate Omitted

Societal – Environmental Long term energy use reductions Omitted

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Estimated City Light AMI Benefits in Traditional Operations

Meter ReadingMeter AccuracyCash Flow on Standard BillingBilling QA/QC Exceptions - BackofficeMeter Replacement & SalvageAvoided Transformer OverloadsConnects, Disconnects, & Acct Transfers - Office ProcessRight-of-Way MaintenanceConnects, Disconnects, & Acct Transfers - Field ProcessUncollectible Accounts on Standard BillingUnbilled AccountsBilling QA/QC Exceptions - FieldMeter Data - MiscellaneousTransformer Loading & SizingOutage RestorationGroup AccountsBilling QA/QC Exceptions - Meter TestingBill Complaints & Questions

Notes:- Benefits are shown for the year following deployment completion, after which inflation may affect some more than others.- Includes benefits in traditional utility operations only- Benefits of new customer programs and distribution management excluded

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AMI Investment Results for City Light

Investment Life: 10 Years 15 Years 20 YearsNet Present Value (NPV) $1,590,434 $37,422,988 $71,758,123

Internal Rate of Return (IRR) 4.7% 12.3% 14.8%

Cumulative NPV Breakeven Year 2024  Notes:- Deployment interval = 3 years- Includes benefits in traditional utility operations only- Benefits of new customer programs and distribution management are additional- Straight line 15-year depreciation of AMI assets- Weighted average cost of capital = 4.1%- Annual labor cost inflation = 3%- Annual meter population growth = 1%

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AMI Investment Cash Flow for City Light

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

($60,000,000)

($40,000,000)

($20,000,000)

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

Annual Net Cash Flow Cumulative PV

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Questions/Comments