Comments and reflections on EEI Fall National Key Accounts Workshop October 12-15 2014 Sheraton San Diego Hotel & Marina

Jeff Martin CEO of San Diego Gas & Electric began address to attendees. Reflections started with a highlight on the significant growth in San Diego with industries focused on education, life sciences and military. To support power needs of these industries and residents, San Diego Gas & Electric is recognized on reducing greenhouse gas emissions, clean technology innovation and environmental processes. Sustainable innovation includes items such as rooftop solar and electric vehicles, with over 10,000 electric plug-in vehicles are on the road in San Diego and electric vehicle infrastructure is critical to support growth and expansion of consumers owning electric vehicles. Concerns for the utility include importance of electric rate reform with focus on simplicity and fairness so that one party does not over subsidize others costs. There is a transition to cleaner fuels to better protect the environment and support sustainable business practices. 33% of energy supplied by San Diego Gas & Electric comes from qualifying clean renewable energy with the remainder from natural gas. More rooftop solar helps to generate more power with ease of installation with a new online fast track same day connections. San Diego Gas & electric defines relationship around value with more technology based relationship. Collaboration occurs through business sustainability circles to bring together customers to support sustainability with results around value along with people, planet and profit. Key partnerships are critical and notably continued efforts to recognize and honor business customers that save energy.

Charles E Bayless, University President Emeritus and Retired Electric Utility CEO shared provoking discussions on the challenges of operating and maintaining the grid as the country’s infrastructure portfolio rapidly transitions. Charles stated the need to phase out fossil fuels and commented how free markets are the best mechanism for optimizing outcomes. As we minimize climate change and look at renewable technology and sustainable energy solutions, we have to recognize added costs. Discussions centered on planning for grid externalities (or additional costs) caused by renewable energy such as solar and wind and the need to select minimum cost paths. In many cases these costs will exceed the benefits. A large portion of the cost of the grid comes from the goal to assure reliability to minimize loss of power and blackouts. Highlights were provided on sharing the load, generated inertia, capacity reserves, ramp up, storage and maximizing reliability of the grid. In summary, Charles gave an extensive tutorial and thoughts on the right way to maintain the grid by looking at ALL externalities and the total pictures as we phase out coal and go to carbon capture storage. The market will select the optimum path. A vision was shared for an intelligent communications network that will collect data points and optimize units and sources of energy to be constantly interacting to deliver and meet consumer energy needs while achieving the overall lowest costs.

Jim Smith Chief Technology Officer, Digital Realty Trust talked about having reliable efficient datacenters and having best value for customers. Digital Realty, one of the world’s largest Mutli-site data center stays on top of its energy priorities. Digital Realty has a diversified portfolio of 130 properties and tenants with 24.5 million rentable square feet. Major tenants include Century Link, IBM, Equinix, Morgan Stanley, Facebook and AT&T. Jim commented that customers drive them to metro locations such as Seattle, Portland, Los Angeles, Dallas, New York, Philadelphia, Hong Kong Singapore, Sydney and London to name a few. Demand for development and spend of data centers is huge in the US due to the financial and economic culture created here. Financial efficiency, capital sourcing and the move to get “off balance sheet” drive strategy to improve financials for customers. A critical part of their business is stability through dividend growth with 100 percent of earnings paid out annually as a REIT. Per Jim a data center is a building with highly engineered and integrated set of building systems that ensure continuous availability of electrical, cooling, network security and fire protection services. Typical systems include diesel generators and fuel systems, medium voltage distribution; Uninterruptible Power supplies (UPS) and batteries, connection to the grid etc. Within a building, 60 to 70% of the cost is the load with the balance spread out between distribution, consumption and building+ancillary. Data centers are expensive, up to $2,000 per square foot of construction costs that vary greatly by market. There has been a trend to move away from the more expensive markets but they are everywhere. One major characteristic of Data Centers is that power efficiency is a critical competitive advantage as they fight for lower costs of occupancy for tenants. Other characteristics of Data Centers are that with run time 24/7, there are high load factors. High load factors drive good investment outcomes for the industry. Tracking and recording of usage varies by tenants as they may pay direct. Batteries for backup is a huge expense line but a necessity for Data Centers. Jim Smith CTO 1 415-738-6544

Ted Craver, Chairman, President and CEO of Edison International shared his thoughts on significant changes taking place in the overall energy industry. David K Owens, Executive Vice President EEI moderated discussions around five key areas including value of electricity, transition to natural gas, environmental issues, evolving distribution system, power restoration and resiliency.

Changes in electricity prices compared to other consumer products shows that electricity is a great value and bargain and a competitive fuel source. Gasoline has increases by 210% versus electricity 65% from 1991 to present. Save energy and use more efficiently is a constant aggressive focus.

Historically the electric industry has produced electricity based upon coal plants as the main source of power generation. This generation of coal (a solid fuel) is now moving to an increased generation based upon natural gas (a flow through pipelines). We are increasing sources of renewables such as solar and wind and nuclear has stayed consistent at about 20% of the evolving generation mix. Getting new gas pipelines is a major challenge as we increase generation through natural gas.
Utilities have substantially reduced air emissions while increasing electricity production. Substantial emission reductions have occurred with SO2 and CO2 since 2007, all while electricity usage has increased. The President has initiatives to continue to reduce CO2 as a part of his climate control and regulations for existing and new power points and how it will affect the industry:

Some key areas on Section 111 (d):

  1. Best system of emissions reduction assumptions and conclusions to address EPA concerns
  2. Compliance timeline issues (pace and timing of reductions of emission reductions is a huge issue) to reduce carbon. How we get there requires flexibility to meet requirements. EPA has targets state by state by 2020. This rapid requirement of change will require infrastructure of gas pipelines in place as we move from coal to natural gas.
  3. Renewal technologies and pricing for consumers. Net energy metering affects different groups of customer differently. Do not like to see major cost shifts between similar groups of clients. The grid and distribution system is used more dynamically used by rooftop solar customers.
  4. Evolving distribution system is a much smarter system and characteristic by monitors, sensors and automatic controls overlayed with the tradition utility system. The tradition utility system function has and will continue to change with this evolution. Power quality will continue to be a priority with the increase of computerized demands in homes and businesses along with two way dynamic management of connections with the end user.
  5. Asymmetric treatment and modeling of reliability from interpretation of EPA environmental responsibilities. There has been a great increase of solar capacity.