BALANCING CONSERVATION, RENEWABLE ENERGY, AND FINANCIAL STRENGTH - - PowerPoint PPT Presentation

BALANCING CONSERVATION, RENEWABLE ENERGY, AND FINANCIAL STRENGTH

Presentation to the Gainesville City Commission November 1, 2004

Executive Summary

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Here’s What We Hear From Our Community Outreach:

• Our Community Expects:
• A Clean Environment
• Reliable Electric Supplies
• Affordable Electric Rates
• A Financially Strong Utility
• Our Community Wants To Use Energy

Conservation* And Renewable Energy Resources To Help Meet These Expectations.

* Short-hand for Demand Side Management (DSM)

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Why Is The Financial Strength Of The Utility Important To Gainesville Residents?

• Gainesville Is Not A Wealthy Community,

And Needs Us To Provide Energy At Affordable Costs.

• Competitive And Affordable Electrical

Rates Factor Heavily In Bond Ratings

• Good Bond Ratings Reduce Interest Rates

For:

– Utility Debt – General Government Debt

• Interest Costs Are A Significant Portion Of

Electric Costs

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Finding The Balance

Customer Needs Customer Needs For Electricity For Electricity

Conservation and Renewable Energy Affordability and Reliable Supply Environmental Quality

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The Fundamental Questions For Tonight:

1. Are we using all possible DSM opportunities available to avoid the need for the addition

• f electric generation capacity in the 2011

time frame? 2. Are we using all possible Renewable Energy Sources available to maximize the displacement of additional fossil fuel fired electric generating capacity in 2011 time frame?

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Here’s What We Did To Answer The Questions:

• Benchmarked

– Conservation and Renewable Energy Leaders – Financially Strong “AA” Rated – Other Florida Utilities

• Compared The Results Of Implementing

Very Aggressive Conservation Goals* To The Staff Proposed Plan

*Similar to Austin Energy’s

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We Selected Exceptional Utilities As Benchmark Partners

• Conservation and Renewable Leaders

– Identified as national leaders at the April 19, 2004 City Commission Workshop

• Financially Strong Utilities

– “AA” Bond Rated Municipal Utilities – Only 13 out of more than 2,000 Municipal Utilities have this rating

• GRU has an “AA” bond rating

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Utility Benchmarking Partners

• Austin Energy
• Portland General

Electric (PGE)

• Sacramento Municipal

Utility District (SMUD)

• Seattle City Light
• JEA (Jacksonville)
• Orlando Utilities

Commission (OUC)

• San Antonio City

Public Service

• City Utilities of

Springfield, Missouri Conservation and Renewable Energy Leaders Financially Strong

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Important Attributes Of These Organizations

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100,000 200,000 300,000 400,000 500,000 600,000 700,000 PGE San Antonio SMUD JEA Seattle Austin OUC Springfield GRU Number of Residential Customers

We Are Much Smaller Than Most Benchmarking Partners

GRU Energy Conservation Leader Financially Strong

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Benchmarking Partners

Financial Rankings

We Are Financially Stronger Than Most

GRU Energy Conservation Leader Financially Strong

Company Moody's S&P Rank San Antonio Aa1 AA+ 1 OUC Aa1 AA 1 GRU Aa2 AA 1 JEA Aa3 AA 2 Springfield NR AA 2 Seattle Aa3 NR 2 SMUD A1 A 3 Austin A2 A 3 PGE Baa2 BBB+ 3

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We Have “Fewer” Financial Resources Than Most Benchmarking Partners

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 San Antonio SMUD JEA Austin Seattle Portland (PGE) OUC GRU Springfield Total Electric System Operating Revenue ($000)

GRU Energy Conservation Leader Financially Strong

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$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 Austin Seattle Portland (PGE) JEA OUC Springfield San Antonio SMUD GRU Per Capita Income Adjusted for Cost of Living Index

GRU Energy Conservation Leader Financially Strong

Our Customers Have Less Disposable Income To Commit To Paying Energy Costs

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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% GRU JEA Austin Seattle OUC PGE Springfield San Antonio SMUD

GFT as % of Gross Electric Revenue

0.0

GRU Energy Conservation Leader Financially Strong

Our Community Depends More Heavily On Revenues From Our Utility Than Any Other Benchmarking Partners

Gainesville Has Much Less Access To Low Cost Energy Supply Resources Than All Conservation Leaders

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Seattle* SMUD* PGE* San Antonio Austin* OUC GRU JEA Springfield 2002 MWh by Fuel Source

Renewable Fossil Fuel Nuclear Hydro

G R U

* Conservation Leader 15a

0% 20% 40% 60% 80% 100% 120% Springfield SMUD JEA GRU OUC San Antonio Seattle Austin PGE Ratio of Utility $/kWh to State Average $/kWh

We Deliver Energy To Our Customers At A Lower Relative Price Than Most Benchmarking Partners

GRU Energy Conservation Leader Financially Strong 16

Answers To The Two Key Questions For Tonight

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a. No, we are not using all possible conservation. b. We are proposing to use “cost effective” conservation

• Rate Impact Measure (RIM) Test

c. The implementation of additional conservation programs, even at levels consistent with very aggressive programs observed nation-wide, will not eliminate the need for additional base load electric generating capacity in the 2011 time frame.

Answer To Question #1:

Are We Using All The Possible Conservation To Avoid The Addition Of Generation Capacity?

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Are We Using All Possible Renewable Energy Sources To Displace Fossil Fuel Generating Capacity?

a. No, we are not proposing to use all possible renewable energy resources that may be available for this purpose. b. We are proposing the use of substantial amounts of biomass (waste wood) c. We are proposing the use of the only regionally available renewable energy resource (waste wood) that can be implemented on a large scale in a cost effective manner. d. The use of biomass as proposed by staff will increase the “actual” use of renewable energy resources in Gainesville to a level comparable to the “goals” of the Renewable Resource Leaders nationwide.

Answer To Question #2:

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A Brief Review

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We Need Base Load Capacity

100 200 300 400 500 600 700 800 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023

MEGA-WATTS

Peaking Capacity Intermediate Capacity Base Capacity Summer Peak + 15% reserve margin Annual Median Load

Forecast History

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Generators Will Be Retired

Unit Retirement Schedules

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Generators Will Be Retired*

Unit Primary Fuel Type Planned Retirement Date Retirement Age Cumulative Retirements MW SW1 Landfill Gas 2009 6 1 Kelly FS07

• Nat. Gas

2011 50 24 SW2 Landfill Gas 2015 12 25 Kelly GT01

• Nat. Gas

2018 50 39 Kelly GT02

• Nat. Gas

2018 50 53 SW3 Landfill Gas 2018 15 53 Kelly GT03

• Nat. Gas

2019 50 67 Deerhaven FS01

• Nat. Gas

2023 51 150

*Unit Retirements During Planning Horizon

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USA Oil And Gas Production Has Peaked

Fuel Years of Reserve % Imported Oil 16 52% Gas 52 18% Coal 480

Source: U.S. DOE Energy Information Administration

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We Are Concerned About The Cost Of Fuels

(Commodity Only)

$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Commodity Price ($/MMBtu)

Natural Gas Residual (No. 6) Oil Coal 25

We Evaluated Many Renewable And Fossil Based Energy Supply Alternatives

Monthly Electric Bill for Selected Options (1,000 KiloWatt-hours) $68 $74 $75 $89 $98 $99 $142 $375

$0 $100 $200 $300 $400 Nuclear (U238) Pulverized Coal Fluidized Bed (coal) Coal Gasifier Biomass Combined-Cycle (gas) Gas Turbine Photovoltaic (solar)

Generation Alternatives

2003 Dollars ($)

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Our Proposed Plan – A Balance

Customer Needs Customer Needs For Electricity For Electricity

Additional Conservation Programs and Proposed Plan Emission Reductions Additional Solid Fuel & Renewable Resource (Biomass) Capacity

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Our Conservation Program And Plan

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History Of Conservation Programs In Florida

1978: Public Utility Regulatory Policy Act (PURPA)

• Mandated Residential Energy Audits

1980: Florida Energy Efficiency And Conservation Act (FEECA)

• Mandated Florida Public Service Commission (FPSC) set

energy and demand goals

• RIM Test Required

1990: FPSC 10-Year Goals submitted by GRU and approved 1992: National Energy Policy Act

• Era of electric competition begins

1995: GRU submitted New 10-Year Goals (to begin 1996) 1996: FEECA changed, GRU goals no longer mandated 1996-Present: Industry Role in Conservation Changing

• Public Benefit Funds

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We Adjust For the Useful Life of Conservation Measures

Annual Net Energy for Load

• 100,000
• 50,000

50,000 100,000 150,000

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

(MegaWatt-hours)

Total Program Results Net Conservation After Vintaging End of Life Vintaging

History Forecast

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Conservation Program Achievements, Plans, And Goals

Time Frame Summer Coincident Demand Reductions Winter Coincident Demand Reductions Energy Reductions Since 1980 (MW) (MW) (MWh/Year) Total Through 2003 21.1 45.4 98,000 Current Ten Year Plan 6.7 7.9 35,000 Total 2013 Goal 27.8 53.4 133,000 Conservation Program Results

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* Energy Conservation Measures are assumed to be retired at the end

• f useful life to improve forecasting accuracy.

Only Our Utility Reduces Published Conservation Goals

(By Taking Vintaging Into Account)

Time Frame Summer Coincident Demand Reductions Winter Coincident Demand Reductions Energy Reductions Since 1980 (MW) (MW) (MWh/Year) Total Through 2003 12.4 31.0 70,000 Current Ten Year Plan (2.4) (14.5) (4,000) Total 2013 Goal 10.0 16.5 66,000 Net Effects After Vintaging*

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Our Current Residential Energy Conservation Programs

• Conservation Surveys
• Self-Audit Materials
• New Construction

Consultation

• Green Builder Program
• Customer Consultation
• Low-Income

Weatherization

• Solar Water Heating

Rebates

• Solar Electric

Interconnection and Buyback

• Gas Water Heating

Rebate

• Gas Heating Rebate
• Gas Range Rebate
• Gas Dryer Rebate
• Gas New Construction

Rebate

• Customer Information

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Our Current Commercial Energy Conservation Programs

• Conservation Surveys
• Commercial Lighting Service
• Solar Water Heating Rebates
• Solar Electric Interconnection

and Buyback

• Gas Air Conditioning Rebate
• Gas Dehumidification Rebate
• Gas Water Heating Rebate
• Infra-Red Scanning Service
• Business Partners Workshops
• Customer Information

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Natural Gas is an important part of our conservation program because of its efficiency compared to electricity for heating purposes.

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Conservation Programs Coming On-Line This Year

• 1. Higher Efficiency Central A/C Rebate
• 2. Higher Efficiency Room A/C Rebate
• 3. Central A/C Maintenance Rebate
• 4. Heat Recovery Unit Rebate
• 5. Heat Pipe Enhanced A/C Rebate
• 6. Reflective Roof Coating Rebate
• 7. Duct Leakage Repair Pilot Program

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There’s No Free Lunch

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 2003 2004 2005 2006 Fiscal Year

Conservation Program Expenditures

Advertising Programs Personnel O & M

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Our Supply Side Conservation Initiatives

90,730 10,775 22 Generation Equipment Landfill Gas to Energy Solar Electricty

(MWh/Year)

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Gainesville Customers Already Use Less Electricity Than Most of The Customers Of Conservation Leaders

0% 20% 40% 60% 80% 100% 120% 140% Springfield Seattle GRU Austin OUC Portland (PGE) San Antonio JEA SMUD Ratio of kWh/Customer/month to State Average Use

GRU Energy Conservation Leader Financially Strong 39

Gainesville Customers Already Use Less Electricity Than Other Utilities In Florida

200 400 600 800 1,000 1,200 1,400 GRU OUC TAL Ocala KUA FPL PEF LAK JEA Gulf TEC Clay Residential kWh per Customer per Month

GRU Florida Utilities 40

Residential Program Findings

• Low-cost ideas to improve customer access to

information and to support local trades

• Our residential programs are comparable to

Conservation Leaders with the exception of:

– Amount of Low Income Weatherization – Direct Load Control

• Under evaluation
• We are developing a plan for an unified program

for Low Income Weatherization Assistance

– Community Energy Cooperative (Chicago) – Multi-Agency Approach

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• Our commercial programs are less

complete and should be enhanced

• Developing a plan for Commercial

HVAC Efficiency Improvements

– Local Innovation - MACTEC – Measurement and Verification Plan – Program Delivery Plan

Commercial Program Findings

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Conservation Program Planning Criteria

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• Rate Impact Measure (RIM) Test

– Passing the RIM test means the implemented programs will not increase electric rates for any customer.

• The Total Resource Cost (TRC) Test

– Programs implemented using this criteria will benefit some, but not all customers.

All The Financially Strong Utilities Use The “RIM” Test for DSM Planning

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No Energy Conservation Leaders Use The RIM Test

Company Uses the RIM Test? GRU Yes OUC Yes San Antonio Yes* JEA Yes Springfield Yes Seattle No SMUD No Austin No Portland (PGE) No

* Uses the Utility Test (similar to the RIM Test)

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Why Should GRU Use The RIM Test?

• It Is Consistent With The Goal To Deliver

Affordable Energy Prices

– Least Wealthy Community Of All Benchmark Partners

• Underlying Cost Factors Are More

Constrained In Gainesville

– Much Less Access To Low Cost Power Supplies Than Is Available To Conservation Leaders – Highest General Fund Transfer Of All Benchmarking Partners – No State Public Benefit Funds to Offset The Cost of Conservation Programs that do not meet the RIM Test

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Some States Pay For Energy Conservation Programs – Not Florida

• Public Benefits Programs as of

February 2003

California: SMUD Oregon: PGE Texas*

* Available to municipalities that opt in to the market

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Conclusion

• Staff recommends that, given the socio-

economic characteristics of our community, it is prudent to continue using the Rate Impact Measure Test

• Exceptions to the RIM Test should only

be considered for customer information programs or to address the basic human needs of low income customers

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Comparison Of Conservation Goals

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Here’s How Our Conservation Goals Compare

TEN-YEAR INCREMENTAL CONSERVATION GOALS AS PERCENT OF 2003 SALES Summer Winter Energy Peak Peak Reduction Impacts Impacts Impacts Austin1 < 15%

• < 15%

Seattle

• 4.3%

9.2% PGE2

• 5%

5% SMUD 4.3%

• 4.0%

GRU 1.7% 2.2% 1.7% JEA 0.0% 0.0% 0.0% OUC 0.0% 0.0% 0.0% San Antonio3 0.0% 0.0% 0.0% Springfield 0.0% 0.0% 0.0% Notes: 1 Incremental Goals Not Reported 2 PGE Goal is 20% of Load Growth converted to pct. 2003 sales 3 Goals Under Development

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0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% FPL GULF GRU PEF TECO JEA OUC

Percent of 2003 Summer Peak

Florida Utilities Ten-Year Summer Peak Reduction Goals, Based on RIM Test

Only Two Florida Utilities Have Higher Demand Reduction Goals Than Gainesville

0.0 0.0

GRU Florida Utilities 51

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% GRU FPL PEF TECO GULF JEA OUC

Gainesville Has The Highest Energy Conservation Goals Of All Florida Utilities

Percent of 2003 Net Generation

Florida Utilities Ten-Year Energy Conservation Goals, Based on RIM Test

0.0 0.0

GRU Florida Utilities 52

There may be additional cost- effective programs for summer peak demand reductions

Conclusions

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Testing Very Aggressive Goals On Our System

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Here’s How Our Test Scenario Compares

TEN-YEAR INCREMENTAL CONSERVATION GOALS AS PERCENT OF 2003 SALES

Summer Energy Peak Reduction Impacts Impacts TEST SCENARIO 12.0% 8.6% Austin1 < 15% <15% Seattle

• 9.2%

Portland2 5.0% 5.0% SMUD 4.3% 4.0% GRU 1.7% 1.7% JEA 0.0% 0.0% OUC 0.0% 0.0% San Antonio3 0.0% 0.0% Springfield 0.0% 0.0% Notes: 1 Incremental Goals Not Reported 2 Goal is 20% of Growth, converted to pct. 2003 Sales 3 Goals Under Development

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Goals Similar To Austin’s Will Not Change Our Need For Base Load Capacity

Amount of Capacity Additions Needed

Type of Additional Capacity Year Current Plan 12% More Peak Reduction (MW) (MW) Build Base Load Capacity 2011 220 220 Build Peaker 2022 76 Peaking Power Purchase 2022 20 40 Peaking Power Purchase 2023 20 20 Intermediate Power Purchase 2023 20 20

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Substantially more aggressive conservation goals will not eliminate the need for additional base load generating capacity.

Conclusions

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Comparison Of Renewable Energy Goals

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Renewable Resources In Florida Are Limited

• Biomass

– Waste Wood – Municipal Solid Waste - Landfill Gas

• Solar

– Photovoltaic – Thermal – Passive solar design

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Current Renewable Supply Portfolios

Biomass Wind Geothermal Solar Electric Total

SMUD 3.8% 0.98% 2% 0.18% 7.0% Austin 0.4% 3.52% 0% 0.04% 4.0% San Antonio 0.0% 2.20% 0% <0.01% 2.2% Seattle 0.0% 1.10% 0% <0.01% 1.1% GRU 0.3% 0.02% 0% <0.01% 0.3% JEA 0.2% 0.00% 0% <0.01% 0.2% OUC 0.0% 0.00% 0% <0.01% 0.0% Springfield 0.0% 0.00% 0% 0.00% 0.0% PGE 0.0% 0.00% 0% <0.01% 0.0%

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$0 $75 $150 $225 $300 $375 2000 2010 2020 Year Production Cost Targets ($/MWh)

Solar Electric Gas Turbine

Source for Solar Data: "REDUCING THE COSTS OF GRID-CONNECTED PHOTOVOLTAIC SYSTEMS" ASME Solar Forum 2001

Photovoltaic Electricity May Some Day Become A Viable Summer Peaking Option

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Biomass From Forestry Waste Is Relatively Abundant

• Post/Cunilio Biomass Resource Assessment

– Logging/Trimming/Clearing (944 tons/day) – Pine Stumps (480 tons/day)

• Black & Veatch Evaluation

– Energy Yield: 34% Lower Than Post/Cunilio Estimate – Stump Use May Not Be Practical – Forestry Waste will support our project

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We Can Make Renewable Energy Affordable

Waste Wood Alternative Cost ($/kW)

Stand Alone (Stoker Grate) $2000 to $2500 Gasification (DH2) $400 to $700 Co-firing (DH2) $300 to $400 Co-firing (220 MW CFB) $150 to $300

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Our Proposed Plan Compared To Renewable Energy Goals

Current Portfolio Renewable Goals

SMUD 7.0% 20.0% Austin 4.0% 20.0% San Antonio 2.2% 10.0% Seattle 1.1% 10.0% GRU 0.3% 8.2% JEA 0.2% 7.5% OUC 0.0% 0.0% Springfield 0.0% 0.0% Portland (PGE) 0.0% 10.0%

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The Proposed Project Will Bring Our Community To A level That Will Be Comparable To Many Renewable Energy Leaders

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0% 5% 10% 15% 20% 25% Austin SMUD San Antonio Seattle PGE GRU JEA OUC Springfield

Renewable Resource Goal as % of Generation Capacity

Utilities with Wind or Hydro Power Utilities without Wind or Hydro Power

2 2 2 1 1 2 1 2 1 1 2 1 2 2 1 5 2 1 1

a. No, we are not using all possible conservation. b. We are proposing to use “cost effective” conservation

• Rate Impact Measure (RIM) Test

c. The implementation of additional conservation programs, even at levels consistent with very aggressive programs observed nation-wide, will not eliminate the need for additional base load electric generating capacity in the 2011 time frame.

Answer To Question #1:

Are We Using All The Possible Conservation To Avoid The Addition Of Generation Capacity?

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Are We Using All Possible Renewable Energy Sources To Displace Fossil Fuel Generating Capacity?

a. No, we are not proposing to use all possible renewable energy resources that may be available for this purpose. b. We are proposing the use of substantial amounts of biomass (waste wood) c. We are proposing the use of the only regionally available renewable energy resource (waste wood) that can be implemented on a large scale in a cost effective manner. d. The use of biomass as proposed by staff will increase the “actual” use of renewable energy resources in Gainesville to a level comparable to the “goals” of the Renewable Resource Leaders nationwide.

Answer To Question #2:

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Thank You

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