Natural Gas from the Utility Regulators Perspective

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Natural Gas from the Utility Regulators
Perspective

• 3rd Annual
• Rockies Gas and Oil
• Comments of
• Ron Binz, Chairman
• Colorado Public Utilities Commission
• April 16, 2009

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Outline of this presentation

• Brief introduction to the Colorado PUC
• The role of gas-fired electric generation in the
  new energy economy
• base load applications
• peak load applications
• connection to renewable generation
• CAES
• Environmental considerations
• concerns about global warming
• implications for water use and quality
• impacts on air quality
• Economic considerations
• residential uses
• supply adequacy
• price levels and volatility
• Natural gas and energy efficiency

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Caveat

• I am one of three equal commissioners
• My positions are my own
• I am confused by many things and have not made up
  my mind on much at all
• I dont even agree with some of the things I say
• Good advice

dont believe everything you think
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The Colorado PUC
The Public Utilities Commission's mission is to
achieve a flexible regulatory environment that
provides safe, reliable and quality services to
utility customers on just and reasonable terms,
while managing the transition to effective
competition where appropriate.

• Independent agency, created in the constitution
• Three Commissioners, appointed by the Governor
• Four year terms
• Partly judicial, partly legislative
• Ninety-member staff is an agency within the
  Department of Regulatory Agencies

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Colorado Commissioners
Matt Baker
Ron Binz
Jim Tarpey
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What do we regulate?
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• Investor-owned electric utilities
• Investor-owned natural gas utilities
• Intrastate natural gas pipelines-----------------
  ------------------------------
• Some telecommunications carriers services
• Passenger transportation
• Railroad crossings
• Investor-owned water utilities
• Pipeline safety
• Colorado Relay for the hearing impaired

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How Colorado Uses Natural Gas
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Outline of this presentation

• Brief introduction to the Colorado PUC
• The role of gas-fired electric generation in the
  new energy economy
• base load applications
• peak load applications
• connection to renewable generation
• CAES
• Environmental considerations
• concerns about global warming
• implications for water use and quality
• impacts on air quality
• Economic considerations
• residential uses
• supply adequacy
• price levels and volatility
• Natural gas and energy efficiency

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Electricity Generation Fuels in Colorado (2008)
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Generation Fuels in Colorado
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Colorado Regulatory Process
-- Resource Planning --
New Rule
Prior Rule

• Least Cost Planning

• Resource Planning

• Fuel Neutrality

• Clean Energy Preference

• Utility models new portfolio

• Independent Evaluator

• Utility selects bid resources

• Optional Post-bid Review

• New DSM emphasis

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PUCs ERP Decision for Public Service Company of
Colorado

• Major Decision Items
• Closure of two coal plants
• 50 CCS requirement for new coal plant
• CO2 price assumed in modeling (20/ton 7
  growth)
• Continued growth of wind
• Likely approval of large solar projects (200 -
  600 MW)
• Competitive bidding for new resources

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Integrating Gas Generation with Wind
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Compressed Air Energy Storage (CAES)
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CAES Characteristics

• CAES turbine has heat rate that is only about 50
  of conventional gas turbine (4000 BTU/kWh)
• CAES has a relatively high round-trip efficiency
• Eastern Colorado appears to have suitable sites
• EPRI studies underway

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Outline of this presentation

• Brief introduction to the Colorado PUC
• The role of gas-fired electric generation in the
  new energy economy
• base load applications
• peak load applications
• connection to renewable generation
• CAES
• Environmental considerations
• concerns about global warming
• implications for water use and quality
• impacts on air quality
• Economic considerations
• residential uses
• supply adequacy
• price levels and volatility
• Natural gas and energy efficiency

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EPRI Prism Analysis (2008)
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Federal Legislative Proposals
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What about China, India?
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Outline of this presentation

• Brief introduction to the Colorado PUC
• The role of gas-fired electric generation in the
  new energy economy
• base load applications
• peak load applications
• connection to renewable generation
• CAES
• Environmental considerations
• concerns about global warming
• implications for water use and quality
• impacts on air quality
• Economic considerations
• residential uses
• supply adequacy
• price levels and volatility
• Natural gas and energy efficiency

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Residential Gas Use

• For Public Service Company of Colorado,
  residential gas use per capita has been dropping
  at 2.8 per year for ten years
• Factors affecting residential gas use
• Retrofit weatherization
• Utility DSM programs
• Building codes for new construction
• Hot water in-line tankless, solar thermal

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Supply Adequacy
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Price Levels and Volatility
4.9 to 1.0
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Outline of this presentation

• Brief introduction to the Colorado PUC
• The role of gas-fired electric generation in the
  new energy economy
• base load applications
• peak load applications
• connection to renewable generation
• CAES
• Environmental considerations
• concerns about global warming
• implications for water use and quality
• impacts on air quality
• Economic considerations
• residential uses
• supply adequacy
• price levels and volatility
• Natural gas and energy efficiency

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Colorados Energy Efficiency Commitment

• DSM goals in legislation (HB 1037)
• Commission rules
• Expedited cost recovery
• Bonus mechanism
• Tie-in to utility electric resource planning
• Requirement of a recent CPCN for gas turbines
• Demand response solicitation
• Expanding residential AC program
• Significant weatherizaton and EE activity
  expected from ARRA funding

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Conclusions

• NG appears to have a secure future in Colorados
  energy economy
• Direct use residential demand
• Generation climate concerns
• System renewable integration, CAES
• Possible fly in the ointment price levels and
  continued price volatility

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Thanks for the invitation.
I look forward to your questions.