Power Systems Conference Edmund O Schweitzer III Thank You for Participating

Welcome to the SEL Modern Solutions
Power Systems Conference
June 6, 2012
Edmund O. Schweitzer, III
Schweitzer Engineering Laboratories, Inc.
Copyright © SEL 2012
Thank You for Participating
Why This New Conference?
‣ Where has our industry been?
‣ Where are we going?
‣ Are we on the right track?
‣ Combine our diverse perspectives.
‣ Business, technical, operational, utility,
manufacturer, customer.
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Thomas Alva Edison
1847 - 1931
Samuel Insull
1859 - 1938
Chicago Edison Company 1887
‣ First central station at 120 W Adams St
‣ Delivered DC to downtown for 30 years
‣ In 1892, Samuel Insull became president
‣ 30 Chicago competitors
‣ Insull led consolidation forming ComEd
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Adams St. Generating Station
The “Dynamo Room” at Adams Street
Generating Station in Chicago
3

Insull at NELA Convention,
Chicago…June 7, 1898
1. Franchises granted to public-service
corporations should secure them the same
degree of protection in their rights to their
property as is enjoyed by other
investments.
2. Public control of charge for service, based
on cost plus a reasonable profit, and
eliminating the factor of competition, is the
proper safeguard for the interests of users,
taxpayers, and investors.
114 years ago
Why?
‣ Insull recognized “Capital always gets its pay.”
‣ Our industry is capital-intensive.
‣ Load diversity, e.g., daytime industrial use plus
nighttime illumination, improved use of capital.
‣ Large central stations much more efficient than
small generators.
‣ Sort of a “natural monopoly.”
‣ In exchange for monopoly, there needs to be
regulation, like Public Utility Commissions.
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Conservation
Insull, 1911
We have heard at different times a great deal
about conservation, appealing to the imagination
by talking of making two blades of grass grow
where one grows at present. But while the cry for
conservation has been going on, we have
managed in this community to get along with half
a pound of coal in our electric generating stations
where we used to get along with a pound.
Today, a cup of oil or coal produces
about a dime of electricity.
Climate Change Science Not Done
Letter to NAE – December 2009
‣ A tremendous amount of national and world policy
is being based on the science of global warming.
‣ It has taken on a political dimension.
‣ Witnessing polarization that is not healthy for true
science.
‣ The academies need to communicate that the
science is far from certain.
I never received a response, although we confirmed they received the letter.
5

Samuel Insull, 1915:
“The greatest event that has taken
place in the last ten or fifteen years
in the local public-utility business is
the transfer of control and regulation
in most of the states from the state
legislatures to state commissions
which, besides exercising
administrative powers, are also
exercising semi-legislative and semijudicial
junctions. This change has
been of great economic significance
to the business of electricity
supply...”
“Industries grow up, usually, where power is cheap --
where coal or oil or gas is abundant or where waterpower
may be utilized economically.” -- Samuel Insull
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“Unless we can fulfill our primary duty to the public, viz.,
give absolutely continuous service, we fail in the obligation
that we have undertaken to the community in accepting a
franchise from the city to manufacture and distribute energy
in this community...” -- Samuel Insull
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Unified Electricity Supply
Insull, 1913
I often wish that I could see 50 years ahead…
I should expect to see a vast distribution system
stretching from one end of the country to the
other, wherever density of population justified it.
There will be the closest cooperation between the
man who produces his power from steam and the
man who produces his power from water, a cooperation
that will lead to a cost of energy so
low as to place it within the reach of all, and
make it possible to develop at almost any place
almost any class of industry…
“Little Bill” Jingle
Commonwealth Edison Company
Electricity costs less today you know,
Than it did many long years ago,
A little birdie told me so!
Tweet! Tweet! Little Bill!
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Cents per kWh
140
Real Price of Electricity in the U.S.
120
100
80
60
40
20
0
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Year
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The Present State of the Power System
‣ FERC 888: Wholesale Competition, Open
Access, Re-regulation.
‣ Had the loaf been sliced wrong for a century?
‣ Regional franchises for GTD, with intertie
agreements, replaced by GENCOs and
DISCOs buying and selling energy from “the
grid.” (What grid??)
‣ Did we make it all better, or worse?
‣ If it’s better, good; if worse, can we fix it?
Understanding Texas Relationships
(Thank you, Wes)
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10

Challenges
‣ Hard to build plants, lines, and subs
‣ Regulations, subsidies, mandates, CO2
‣ FERC wanting more power
‣ Fear mongering: cyber, EMP, GMD
‣ Intermittent sources, consistent loads
‣ Loads will increase as economy recovers
‣ Stability, thermal limits, age of equipment
‣ Customers less patient with outages
Our Electric Power Systems
Are Modern Marvels
‣ Reliable
‣ Economical
‣ Efficient
‣ Safe
They provide us the most versatile form of energy,
at the flick of a switch... at the speed of light...
at a fair price.
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Energy Policy
Economic Folly?
‣ $0.03 / kWh coal
‣ $0.12 / kWh wind
‣ $0.16 / kWh solar
‣ Who pays?
Ethanol Subsidies? Electric Car Kickbacks?
Solar Subsidies? Wind Mandates?
Electricity Rates: Insull Was Right!
Are we still on the right track??
‣ Rapidly decreased in early days, as
technology, markets, consolidation, and use
advanced.
‣ Continued downward, but more slowly until
recently, and now rates are going up.
‣ 1960: 14 c/kWh
‣ 2005: 9 c/kWh
‣ 2011: 12 c/kWh …inflation adjusted!
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Renewable Mandates Drive Up Price
Robert Bryce (Feb 2012)
“Power Hungry – The Real Fuels of the Future”
‣ 29 states, DC, Puerto Rico have mandates.
‣ Costs not fully calculated or understood.
‣ Regressive tax hurting least well-off.
‣ 2001-2010: 14 coal states, rate changes
7 without: 24% 7 with: 54% increase
Fair, Flat, Free, Open Markets
Government Must Defend Them
We Must Ensure It Does
‣ “Is it an issue of state?”
‣ Make it easy to start a business, build a
house.
‣ Enhance competitiveness through freedom.
‣ Reduce deficit and debt.
“If we are not to destroy individual freedom,
competition must be left to function unobstructed.”
– Friedrich Hayek, The Road to Serfdom, 1944
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Interested Sophistry of Merchants
Economic Sense
“…it is always and must be the interest of
the great body of people to buy whatever
they want of those who sell it cheapest…
[this proposition could never] have been
called in question, had not the interested
sophistry of merchants and manufacturers
confounded the common-sense of
mankind.”
– Adam Smith in The Wealth of Nations, 1776
What We Expect From Electric Power
Customers: Reliable electric
power at a fair price from a
responsible supplier.
Owners: Fair return on
investment from a
responsible supplier.
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‣ Build GTD for today
and tomorrow
‣ Optimize operation
‣ Ready to meet demand
Should the utility
ensure supply can
meet demand?
-OR-
‣ Interruptible power
‣ Time-of-use billing
‣ …by Smart Meters
Should consumer
match his demand to
utility supply?
What Do Customers Really Want?
‣ $50 meter
‣ No switch
‣ Same price 24/7
‣ Monthly bill
‣ $200 meter
‣ With radio & switch
‣ Needs network, IT
systems, more maint
‣ Your data shared
‣ $3/mo more for meter
‣ Time-of-use pricing
‣ Emails, Internet
…for a 20-cents-per-hour commodity.
15

NERC Nov 2011 Reliability Report
‣ Decrease in Reserve Margins in some areas
‣ Existing and proposed environmental
regulations may significantly affect reliability
‣ Increasing interdependency between gas and
electricity
‣ Variable generation
‣ Demand-side management
‣ Transmission growth
Cyber Warfare
‣ The US has acknowledged developing cyber
weapons, and just admitted using them (1).
‣ Cyber weapons don’t usually self-destruct.
Adversary can recover and re-use.
‣ Since the US attacked Iran’s Nuclear Program
(1), does that put our critical infrastructure at
risk of counter-attack?
‣ Most vulnerable: popular operating systems,
IP, Ethernet.
(1) New York Times, 6/1/2012
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Electricity
‣ Moves at the speed of light
vs 30 miles/hour in a pipeline or rail car; or
even less in a river
‣ Hard to store
vs linepack, coal cars, or reservoirs
‣ Production = demand, instantaneously!
Our Advantage
‣ Networks match supply and demand over
wide areas
‣ …efficiently and nearly instantaneously
‣ Governors and dispatchers adapt to
changes in load
Protection and control in seconds or minutes don’t
line up with energy transported at the speed of
light…when the wind stops, or a cloud passes.
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An Economic and Technological Marvel
‣ $0.07 / kWh, on demand, paid after I use it.
‣ Tremendous value to our society.
‣ Causing prices to “skyrocket” would be a tax
on people least able to pay.
‣ What’s the right thing to do for consumers,
shareholders, and the environment?
‣ Let’s improve it, and pass it on better than
ever to the next generation.
Executive Panel: CEO Perspectives
Challenges in the Electric Power Industry
Mark Carpenter
Senior Vice President
Transmission Grid Management
and System Operations
Oncor
Terence Donnelly
Executive Vice President
and Chief Operating Officer
Commonwealth Edison
Paul Barham
Sr. Director of Energy
Market Operations
CPS Energy
Noel Schultz
Paslay Professor ECE
Kansas State University
IEEE PES President
Trip Doggett
President and CEO
Electric Reliability Council of
Texas
(ERCOT)
Bob Yeager
President
Emerson Process
Management
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Questions
How have things changed over the years?
What do you want to happen going forward?
‣ Customer expectations and needs
‣ Public opinion
‣ The activities of management and leadership
‣ Working for a utility
‣ Educating and recruiting students
‣ Perspectives of brokers and investors
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