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• (~) 2015 , San - Diego· - G--as & Electric Company. All copy ri g ht and t rademark r ights reserved.

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soa~ ••_,/f ),

A ~Sempra Energy utility"

Advanced Rate Design Workshop

July 15, 2019

Cyndee Fang, Manager of Energy Research & Analysis

- -

• Public Policy • Reliability Requirements to meet

System Peak nterconnect new generators

Transmission:Generation/Commodity: • Safety, repair, relocation, • To serve customer energy

- -SOLAR

needs (energy) • To serve System Reliability

needs (generation capacity)

STEP UP TRANSFORMER

communication, grid visibility and control

• Economic Efficiency

,_ . ... . ·■· .

TRANSMISSION SUBSTATION

TOWER

Distribution Grid: WIND • Safety, repair, relocation, communication, grid visibility and ontrol

• Maintain the delivery of safe and reliable service.at the loc level

DISTRIBUTION LINES

FINAL LINE TRANSFORMER DISTRIBUTION SUBSTATION

• To ensure customers are ready to . .

receive energy services

SERVICE DROP

HOME

Customer Set-up:

sott ' _ /E r:.J

A Q,, Sempra Energy utility® The Utility System

Advanced Rate Design Workshop - July 2019 2

r:.JA Q,, Sempra Energy utility®

Rate Design Tools

Advanced Rate Design Workshop - July 2019

CPP Hourly Adders applied to the top 150 System Load Hours for the Illustrative Hourly Dynamic Rate recovery of generation capacity costs to serve

CPP Adder applied to the top system peak load 200 Circuit Load Hours for the recovery of distribution circuit peak capacity costs

CAISO day-Ahead Hourly energy price to better approach real­time cost of electricity

Flat base energy rate for the recovery of all other utility costs

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

■ Base Energy Rate ■ CAISO Day-ahead Energy Circuit Adder ■ System Adder

CPP is an energy rate option that provides a "capacity" price signal

Circuit-level CPP provides a locational price signal while preserving customer equity by still charging all customers the samepnce

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A Q,, Sempra Energy utility® Design of an Hourly Dynamic Rate

Advanced technologies partnered with more complex and granular rate design can create more opportunities for low cost hours

Advanced Rate Design Workshop - July 2019 4

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A Q,, Sempra Energy utility® Comparison of System and Circuit Peaks

The timing of circuit peaks may not align with system peak

V'l :!: :::, u L..

u ro .....

Distribution of SDG&E's Circuit Peaks 2016-2018

I ON-PEAK 4PM - 9PM I

20 lI ' 18

15

~ 10-0 ..... C: a., ~ a., a..

5

0 -- -1 2 3 4 ---5 6 7

2

••1 8 9 10 11 12 13 14 15

Hour Ending Clock Time

16 17 18 19 20 21 ■--22 23 24

, 2 3 & 5 e 1 e t ,o 11 12: 13 ,. 1s 1e 11 ,a 1, 20 2 1 22 2:1 2:•

1- A most.aJway,5 ~ System I

I 2 3 , t:1 7 0 9 10 11 12 ll t• I ~ 16 17 16 19 20 2 1 Z2 D 2 4

1- ~ll'l'l+.t c::::::::::a syt;,.ffl J

..-- - ----:

- ; "" -

- ---

- - :=

-- -- --- - --- -.---1 2 :, • :; ti 1 o 9 to 11 12 D " 1:; 10 17 10 19 2 0 2 1 u 2 :1 z•

1- Af'tlMltl- c:::::::J $~♦1111 I

Advanced Rate Design Workshop - July 2019 s

4e- 4e-(@

TraditionalCCA ResidentialResidential

Residential

Commercial:

Commercial:

r:.JA Q,, Sempra Energy utility®

The Myth of the Average Customer

A holistic approach to rate architecture is needed to treat each customer fairly and avoid cost-shifting as customer needs continue to diversify

Advanced Rate Design Workshop - July 2019 6

C> LO C> ~

C> C) C> ~

C> LO en

..c. $ ~C>

C) en

C) LO co

C> C> co

1Average Consumption Before and After Solar

Customers with increased consumption increased by a larger percentage (19.1 % in Year 1, 18.2% in Year 2) than those who decreased consumption (14.6% in Year 1, 10.8% in Year 2)

On average, overall consumption of solar customers decreased in Year 1 (-0.8%) but increased after two years (1.1% )

On average, customers with decreased consumption in Year 1, increased consumption in Year 2

n = 14,592

Pre-Install Year1 Year 2

1• Reduced co,ns,umption (B.29,9 1 • Ave r,age (14 592 ) • ln cr e,ased co,nsumptio,n (6,2913. )

sott ' _ /E r:.J

A Q,, Sempra Energy utility®

Residential Customer Before and After Solar Net Energy Consumption after Solar Installation

One year after the installation of solar, 56.9% of customers decreased consumption and 43.1% increased consumption

Advanced Rate Design Workshop - July 2019 7

Residential Before and After Solar Max Hourly Demand Change 35%

30%

~ 25% G>

.., ~ 20%

"'::::s U 15% ~

0 '#. 10%

5%

52% of customers saw a decrease in max demand the

year after installing solar

48% of customers saw a increase in max demand the

year after installing solar

--------------

Max Hourly kW Demand Change (Post Solar - Pre Solar}

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A Q,, Sempra Energy utility®

Residential Customer Before and After Solar Demand - 1 Year after Solar Installation

52% of residential customer with solar decreased maximum hourly demand by an average of 14% 1 year after installation, while 48% increased their maximum hourly

demand by an average of 17%

Advanced Rate Design Workshop - July 2019 8

Residential Before and After Solar Max Hourly Demand Change 35% ~---------------------------------

30% -+-------- 33% of customers saw a 67% of customers saw a

decrease in max demand the increase in max demand the 2-f 25% ----­ 2-years after installing solar years after installing sol.ar QI

~ 20% -+----------------...., V, a 1s% ----------------~

0 '#. 10% -+----------------

5% -+--------------

Max Hourly kW Demand Change (Post Solar - Pre Solar)

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A Q,, Sempra Energy utility®

Residential Customer Before and After Solar Demand - 2 Years after Solar Installation

33% of residential customer with solar decrease maximum hourly demand by an average of 14% 2 years after installation, while 67% increased their maximum hourly

demand by an average of 22%

Advanced Rate Design Workshop - July 2019 9

4

2018 Average Residential Customer including Average Residential Solar and Average Residential Solar+ EV

Peak Hour Ending 20 1.55 kWh

Peak Hour Ending 1 2.83 kWh

3 Peak Hour Ending 20

0.86kWh

2

1

0

1 2 3 4 5 6

-1

-2

7 8 12 13 7 18 19 20 21 22 23 24

-3

- AVG RES CUSTOMER - AVG RES SOLAR CUSTOMER - AVG RES SOLAR+ EV CUSTOMER

The average

residential customer has a peak of 0.86

kWh at 8 pm

The average

residential solar customer has a peak of 1.55 kWh at 8pm

The average

residential solar+ EV customer has a peak

of 2.83 kWh at lam

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A Q,, Sempra Energy utility®

Customer adoption is transforming customer energy needs

While the adoption of solar results in lower net consumption, the average residential customer with solar has significantly higher demand, over 80%, than the average residential customer. Customers with solar

and EV have an average demand over 3 times the average residential customers.

Advanced Rate Design Workshop - July 2019 10

- -

Sales increase absent EE and self­ Including EE causes sales to be Self-generation results in EV adoption mitigates decline or

generation relatively flat declining future sales increases sales

24,000 Illustrative Sales Trend ....

0 Base Consumption __ -~ 22,000 0 Base Sales with Energy Efficiency - _ ­

- -_--- (EE) .(9

Cl)

a.> 20,000 cu Total sales Cl)

dependent on 0 Base Sales with EE, Self-Gen, and EVcu ....... EV adoption

~ 18,000 ~ l 0 Base Sales with EE and Self­

....,___________________________________________......,Gen16,000

2018 2019 2020 2021 2022 2023 2024 202s 2026 2021 2028 2029 2030I I I I I I I I I I I I

sott ' /E r:.J

A Q,, Sempra Energy utility®

Customer Adoption is a key driver behind SDG&E's Sales Forecast

Customer adoption of energy efficiency (EE), solar (PV) and electric vehicles (EV) are primary

drivers behind SDG&E's sales forecast

Advanced Rate Design Workshop - July 2019 11

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A Q,, Sempra Energy utility® Competing Priorities Put Pressure on Rate Design

Policy goals, customer engagement, and technology trends have encouraged the emergence of an increasingly decentralized landscape of consumers, retailers, and suppliers who engage with the electricity system in divergent ways, expect different levels of service and find value in distinct products and services

Rellablllty

Innovation

Choice

Mandates

Advanced Rate Design Workshop - July 2019 12

sott ' _ /E A Q,, Sempra Energy utility®r:.J Key MRA Principles Informing Rate Design

Transparency Costs are clearly

allocated to products and services

Subsidies are clear and measurable

Moder1n Rate Architecture

Key Pr,inciples

Equity Maintain affordable

ave rage rates Sustainability Rates are fair and Rates represent cost

minimize cost shifts of service

Customers are Customer pay for credited costs incurred on

appropriately for their behalf providing value

Access Customer have

options to manage their energy services

Customers have equal access to

options

Advanced Rate Design Workshop - July 2019 13

Value of Utility Services Policy Premium

r • Meter installation

• Metering and billing services

• Customer service

• Emergency response ~

• Distribution and transmission of

energy

• Level access to energy

• Conveyance of energy from

customer-owned DER

r ""' • Competitive generation or CCA

• IOU energy supply

~

~ "" • Policies for socio-economic justice

(CARE)

• Payments for explicit CA subsidies

to support policy goals (NEM)

"'-. ~

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A Q,, Sempra Energy utility® New Rate Architecture Needed

A new rate architecture is needed to address technology evolution and customer choice in a way that clearly identifies the value of utility services distinct from the costs and

benefits of policy mandates

Advanced Rate Design Workshop - July 2019 14

CSI Incentives Declined as the Program Progressed

lncenhve Type PBl

$060

SO 45

S-0 40

$030

S0.25

SO 15

$005

S0.00

EPBS

$3 50

MWln• ...... ....... S300 ... Gover rn nt

.... ..., -pro 1 m 11• ... ... .... .......... ... ...... ... ...... $2 50 ... ...... ... ... , • ... ... ... ., $2 00 ... ' ' .... Comn tdal ',,...I

Step

R sklet\1 Iince11t, ' ... ....$1 50 ...

MW Installed' •' '

•$1 00 • $050

- .. $000

1 2 3 4 5 6 7 8 9 10

Incentive Step Level l'Yl PtlfotJNnce ~ lnct'f • ~ldattf 5 ilf\.~ 1 / ~. 'ill U>8B L•pteh.'Cl f>cffonnanc• 8.uod IJuyd<Mn ~~ror,t, In SI \

MW

1800

1600

1400

1200

1000

800

600

400

200

0

sott ' /E r:.J

A Q,, Sempra Energy utility®Case Study: California Solar Initiative

A sustainable policy subsidy is direct and transparent and declines as policy objectives are achieved

Advanced Rate Design Workshop - July 2019 15