A: It is about 110 MW.

A:  AE gets about 600 MW from Fayette. There are around 1100 MW of electricity generated at the Decker and Sand Hill power plants.  AE also receives around 400 MW from the [South Texas] Nuclear Project.

A:  We plan to add additional renewables to replace the capacity at Fayette.  AE would use its basic dispatch model on an hourly basis and plug in and the deficit with renewables and maybe nuclear.

A:  It is a model that shows and depicts energy demand at a particular moment.  AE uses the model to determine the levels of electricity that are needed and then identify which electric energy generation option to add, based cost.

A:  Yes and the LCRA has used PACE as consultants as well.

A: Yes, in the models, we used the dispatch analysis. This is an industry approach.  The basic assumptions being used by AE are used by LCRA as well. Net preset values are used to the model.  When you use net present values, prices don’t very (sic) much.

A:  That’s correct.

A:  It is in 2007 dollars.

A:  This is about right. 

A:  Fuel costs are not included in these projected increases.

A:  Agricultural waste, tree trimming waste, and cleans (sic) construction waste.

A:  Yes, but it will be after October15 [2009] but probably before the end of the year. There is not a deadline or a major issue that requires AE to make a final decision right away.

A:  We need to address business model issues.  There also maybe a need to address climate change next year.

A: AE is examining the various options. One option is the AMI (Automated Metering Infrastructure) meter that has two-way communication capabilities and can read meters remotely.  The smart grid may be used by utility operators to achieve increased levels of efficiencies throughout the system.  Smart meters also may be used by customers to control appliances when they are away and for other electric use choices.  The smart grid and smart meters may also play a useful role regarding the transportation system as the use of electric vehicles is expanded.

A:  We are optimistic about energy efficiency for several reasons: 1) the building codes we have and will put in place are very effective, 2) we have significant experience in this area, 3) there are constantly improving technologies, and 4) energy efficiency measures will remain the most cost effective option.

We have one major decision coming up.  AE may need to replace the wind contract in 2011.  Every decision goes to the [City] Council for approval.  I believe isolated decisions will be made, which will be provided by the necessary analysis.  Decisions regarding some renewables may be made quickly.  It takes longer, for example, to build a power plant rather than a solar project.  AE may have to make a decision on combined cycle in 2012.  AE also will be looking at Purchase Power Agreements relative to nuclear.  There is nothing in the plan that precludes AE from looking at various opportunities over time.

A:  Yes it will be. We do have to set the plan in action.  As the plan is executed, AE has to make good decisions on behalf of customers

A:  [City] Council action is required on all decisions.  There is precedent for delaying decisions relative to renewables.  This (sic) is done earlier in connection with solar.

A: They are asking what if the cost assumptions regarding different aspects of the plan turn out to be different.  They are very cautious to see if the plan is laid in stone but may be less concerned if they see the plan being implemented incrementally.  Reliability will not be affected by the plan.

A:  We are working with PEC [Pedernales Electric Coop] and Bluebonnet on issues relative to smart grid and energy efficiency.  We are collaborating with LCRA on conservation.  AE’s experience also is being constantly accessed by others.

A:  Tom Mason: LCRA is not in the retail business. Our customers want conservation.  The question is how to pay for it.  There is a need for an industry benchmark regarding the cost of conservation. If that could be done and demonstrated by AE, the LCRA’s customers will embrace conservation.

Carl Richie:  AE is the model on energy efficiency and renewables.  My company is privately held.  At the retail level, smart meters is a way to reduce demand.  Smart grid developments are good for customers.  AE has a good plan with flexibility.

A:  There a big energy savings resulting from Water Treatment Plant 4.  Those savings there are a big part of the 800 MW [energy efficiency] goals.

A:  If there is an ability to mitigate, the mechanism can affect the shape of the distribution graphic presented.  If not, you may have to monitor very close, and put in hedging tools and other approaches. This will be discussed later in the presentation.

A:  The fact that this is a scenario means these forecasts will not ever occur as described; the model is designed to give a relative measure of the scenarios.

A:  The draft plan, which also replaces 40 percent of AE’s capacity with renewables.

A:  It is assumed that the purchase of electric power in the open market by AE will go up over time and the source of that power will have a CO2 component.

A:  Because of the market purchase through Electric Reliability Council of Texas (ERCOT) and that, natural gas still has CO2 value.

A:  The LSE is meant to mitigate costs, the other graphic shows CO2 exposure. Current litigation eliminates cost pass through to customers. The model presents relative differences.

A:  Yes, sequestration and carbon capture were examined but are not cost effective at this time.

A: No, because it does not come online in 2020. Also, the levelized cost line assumes a 30-40 life amortization of costs, not just a ten-year amortization.  Therefore, it is only a slice of the overall cost of generation for that ten-year period and not full life cost.

• Staff recommendation and the lowest bill impact option achieve the lowest cost and the lowest risk. The targeted CO2 emission reductions are achieved quicker with staff recommendation. 
• Staff recommendation achieves high and early levels of environmental stewardship at a cost less than 2.5 percent higher than lowest bill impact.  It replaces 40 percent of Fayette Power Plant’s (FPP) capacity with renewables.

A:  Risk is more of price risk vs. ability to make the sale because of the design of the ERCOT competitive market.  That is reflected in the scenarios.  A Nodal market could limit the ability to take power from some units due to their location.

A:  Additional costs not included because FPP is now finishing controls, and should be adequate.  Additional SCRs [silicon-controlled rectifiers] would be less than a 1 percent impact on cost.

A:  The answer would be about the same. There would be additional capital investments required, but that was not looked at for AE.

A:  All costs relating to emission reductions are embedded in the analysis.  The analysis did not track all emission levels because it was not in scope.

A:  Typically, they are not included in a utility resource plan because that is not controllable nor reflected in utility rates.  This is a very complex analysis.

A:  Yes, 40 percent reductions are embedded in the models.

A:  Yes, they have been accounted for.

A:  All portfolio cost starts with 2009 including market fuel prices. The baseline cost is (average generation cost) $96. This includes fuel, O&M and debt.  The production cost that is included is in the low $50’s.

A:  This is strictly a price risk analysis, what was referenced in the article. The key is for AE to acquire and build the renewable resources and achieve the energy efficiencies included in the plan.

A: PACE Global is putting together that information and on May 27 [2009] will have a stakeholder meeting where we are going to provide the information for the cost of the base plan and some other scenarios like lowest cost and other options. They have come up with an estimate on the bill side, and it’s really the generation cost levelized; and assuming everything else stays the same. We are about two weeks away and those pricing scenarios which will be made public and at that point AE will hold public forums to present the cost data.

A: That is part of the data PACE will begin to present [sic] on May 27th.

A: You are right. Austin Energy has been very successful in conserving energy.

A: We’re saying that particular option is outlined in the scenarios that will be presented.  

A: We would not have additional costs associated with biomass. We only pay when production of energy begins. With regard to nuclear, we would have to upfront funding to construct.

A: Over a 20-year period there is 27 percent increase overall. That’s assuming that nothing changes. [There is no rate impact planned for next year. Estimated bill impact of “Straw Man” (generation & fuel) is 27 percent by 2020.]

A: In general terms you are accurate. The part not resolved is what we do with the waste. We know a lot about the plant and when examining with regard to reservoirs, there are more issues there than with renewables. We have not ruled out purchased power relative to nuclear energy. It may be in the mix and it may be cheaper than wind, coal, gas. We will get the comparison to Brooke to give it to you. Let me encourage you to check out the website www.austinsmartenergy.com. On the web site, you will see detailed presentation on [the proposed] STP [South Texas Project] complex. Both presentations [30 MW Solar Project and the STP Expansion Units 3 & 4] are on the web site as well as a link to the game [Change Your Generation] to change energy mix and make a recommendation on what you think it should be.

A: The state plays a major role.  It has already made the decision to build new transmission line from West Texas to bring wind to population centers.  The solar project has a transmission line appropriate to make it possible. We are a part of that process and are included in part of that scenario.

A: We include efficiencies. We set our rebate levels to provide the option to include resources while looking at new technology and smart meters … and we have a way to go to Council [for more authorization if we] spend the rebate money faster than anticipated. There is definitely a commitment to keeping the program viable.

A: Yes.

A: We are exploring consumer behavior and pricing.

A: I don’t know if we have had those conversations and it was part of the feedback when we looked at the POS [Point of Sale Ordinance, adopted as the Energy Conservation Audit and Disclosure] ordinance. At some point the consumer will be more familiar with the benefits of conservation. Council is not mandating changes through the POS [Energy Conservation Audit and Disclosure] ordinance but we believe it will promote consumer changes. We have to go beyond new houses and also focus on the existing housing market. It is a progression.

A: Where Austin doesn’t have some of the most affordable housing, the rebates are helpful. We have to balance against the cost.

A: We need this kind of feedback. This is good feedback. The financing issue is very important idea.

A: We recognize there is a balance with affordability. We are trying to match it with projects to keep from building another plant. If we can get another 500 MW through conservation, it prevents us from constructing new plants. It can take care of the ebb and flow of energy needs as well as the baseload where we must have opportunity to add more capacity. So the cost will come to homeowners over a period of time to keep the lights on. We agree there is a balance to get all industries and economic sectors involved in conservation.

A: We haven’t changed base rates for 14 years. When putting it all together, we may have to look at the overall rates.

A: We have state housing trust fund dollars that haven’t all been spent.

A: Maybe, we have assembled a team to look at other options. $7 mil will help.

A: Yes. We will take as a note and see if the research team can look into and how to reach those funds.

A: 2011-2013 includes specific plant expansions expected with existing Austin data centers.

A: Yes it is a lower projection.

A: Yes

A: The goal was 30 percent. I didn’t think it was a max. It’s the goal. If they want more, it’s their decision.

A: Thursday

A: It includes everything. It assumed a gas price through 2020—the same natural gas price. Carbon cost is the same in all scenarios. The scenarios will use same price for gas and carbon to be able to compare.

A: Yes

A: No, but have scenarios planned for that.

A: Our load forecast assumes no load growth from the residential and commercial sectors from 2015 forward. All is from industry – 85 percent more efficiency in commercial.

A: We are in a new time and will be in a normal market. But beyond that it is a concern. We could put in the more MW purchase power which is planned to drop off.

A: PACE’s tool, which is a proprietary tool.

A: Yes.

A:  It came from the EPA [Environmental Protection Agency]. The EPA uses it for a standard through 2020. We just ran straight 25 and there are numbers all over the place. It seems to be where everyone is projecting numbers.

A: Yes, that is what they are saying.

A: Yes

A: Error bars from last year were a lot.

A: Yes. We welcome input challenging the data. What we would ask is that you provide some documentation with any suggestions you have. We will look at whatever you send in.

A: No

A: Yes, though there are no tax breaks included. The only regulatory input was the cost of carbon.  All scenarios include existing commitments.

A: Yes

A: Yes

A: No. We generate all needs internally.

A: If you go to page 12, there is a reserve margin. After 2012, if you don’t build anything else, you get close to just meeting demand. You get real close to meeting the load without doing anything else. If load exceeds you buy on the market.

A: We just take it out of the mix. We don’t address what to do with it.

A: It is not just the UT [University of Texas at Austin] guy. If you look at public participation poll and you look at nuke, those who want more nuke is equal to those who don’t want it.

A: Both, but short ramp up time.

A: The bottom line is there is another focus group who wants us to run Option nine. This is a public participation process and we must include this scenario.

A: I have scenarios for several focus groups we are putting in.

A:  I will ask PACE to consider it. It may not be easy to do.

A:  No purchase power agreements are included. Their modeling works includes a set of resources with pricing for assumptions. If there is a resource that meets the market, it will pull it; but it is dispatching those as a part of the resource plan. It is a broad strategy. The model will satisfy demand with spot purchasing.

A: No, because Council has not adopted a goal for this project. There is real potential for Pecan Street but it would be premature to include it. We will let Council know that Pecan Street is not included.

A:  Yes we have to go to Council with scenarios and options.

A: DSM isn’t specified. Pecan Street could show up as a demand-side.

A: It could show up in other places where we are trying to meet the Waxman-Markey bill or in the least cost options. I believe we have included all of the options proposed by this group. We will go back and check.

A: Going back to the original ten, there was one that had to do with Fayette. If it is off the list, we will put it back in. There is interest in Austin in getting out of coal before 2020.

A: That is correct and the Council has not adopted this as a goal. We have no specific direction that way.

A: We will give this presentation to Council on April 30th. We will have more town hall meetings and at next meeting will bring back all scenario analyses and then we will try over the next 60 to 90 days to wrap it to a few scenarios. Then we will go through the board and commission process and take to Council in late summer. Don’t see Council action until after the budget. We will be presenting more than one option to Council but will be making one recommendation.

A: We can call additional town hall meetings and we have put everything on the web site. The commission meetings are open to the public and there will be public hearings at Council.

A: We have surveys and an online generation game. We will not have a voter referendum on it.

A: We can add in low carbon/ low cost. Some people want an idea of what happens if Fayette shuts down. We can do that.

A: At the time they approved Webberville [30 MW Solar Project], they added into the motion a council appointed taskforce to review all renewable projects.

A: Yes.

A: Yes, it was part of motion to approve Webberville.

A: The motion just says to create a taskforce.

A:  I keep getting asked about it, but it is Council appointed.

A: We haven’t done anything. We are awaiting Council action.

A: We are not involved.

A: No. The Council will adopt a generation and CO2 plan. You may have a taskforce that has some degree of oversight over renewable energy. We really don’t know.

A: Yes it could change. All that is filed and available now is what is in the bill.

A: That gets beyond the generation plan and we will not address that as a part of this process.

A: Yes. We will make the survey available to you at the end of the meeting. You also may go to our website to complete the survey.

A: We are very interested in receiving input from this group and all of our customers. That is the reason we have had all of the meetings we’ve completed. The strawman is consistent with the Council’s goals.

A: Yes. We have briefed Council as we have proceeded.

A: We can combine the data. We do not track who responded to the survey. Our consultants will compile the survey results. [John Hall Public Affairs was hired to compile all Stakeholder input into a report to be given to Austin Energy. Fox, Smolen was hired to compile all Public and Employee input into a report to be given to Austin Energy.]

A: The straw man is based upon Council’s goals only.

A: The surveys and all of the input may affect Council’s actions.

A: The responders have been primarily the public and the environmental groups [and AE employees]. We also will send the survey to our large customers [as a follow up to this meeting].

A: I agree, we will survey the key account customers and ensure we clearly stipulate to Council the source of the survey.

A: Fuel will go down but other fixed costs will not; layoffs maybe forthcoming.

A: Not now. As a part of a five-year period, it may be possible.

A: We update forecasts each year for fuel prices, load forecasts and budget processes. This is a load process reflecting big changes with the economy. Typically we see upward trends, but this is different...

A: Current revenues are on track. We are ahead on sales in the residential sector because there are people still moving to Austin. Austin has added 16,000 new residents. We are seeing additions to the system. This offsets decreases seen in the industrial sector.

A: There isn’t a good number for that.  It is based on debt, O&M (operations & maintenance), fixed transportation network, payroll, and interest – there just aren’t a lot of variables.  We don’t have a good number now.  But AE is a large fixed cost organization.

A: We put that in 2011 or 2012...

A: No, it doesn’t, it includes revenue from electric sales. We haven’t seen big decreases in commodity costs.

There is a 135 MW drop in load, but resource has not dropped because of 30 percent renewable goals and more capacity provided by 200 MW of combined cycle.

A: Yes, all renewables planned meets the goals.

A: There is no direction about that.  It was established for the Pecan Street exercise. An actual proposal is being taken to Council later this year.

A: I don’t know. Council will decide.

A: I hope it is short-term since it is due to the economic downturn.  Price declines are not due to shale production.

A: Because of the cash required to construct it. That is not possible with the $160 million drop in revenues.

A: I am not sure we can construct a gas plant without a rate increase.

A: No. This project is not engineering ready.  AE is far from that on the combine cycle project. It may work for the Webberville project.  AE is looking to see if there are opportunities here. No one has stimulus money right now. It is not clear when or where that money will be available.

A: That’s not a bad idea.

A: We are contractually obligated for energy resources in place now.

A: No, we care about cost. The biomass project is $ 250 million over 20 years.

A: We can do it if Council allows. The straw man is based upon Council’s energy goals. All options are being looked at. We do not have them today. We may be able to get to 2020 without new additions.

A: Everything has changed due to the load forecast. We do have a series of scenarios with variations on carbon mix available for discussion today.

A: We do have them, but they are based upon the last straw man with different renewable and other resource additions.

A: The cheapest thing is not to do anything. I am not sure that option can be pursued.

A: We have that data. PACE will provide it.

A: It is 2.2 percent over time.

A: Yes, we can get you that, but don’t have [it] today.

A: We are working as fast as we can to provide you that data. PACE has made a lot of progress in getting costs analyses done on the straw man. They now have to consider the load changes include in the new forecast.   

A: We apologize; we are working as fast as we can and will get you the cost as quickly as we can.

A: We are on this path but want to make sure we provide new numbers to you based upon the new updated forecast.

A:  Every energy option increases in cost in the future unless the economic downturn continues over the long-term. AE has already backloaded renewables. We cannot delay further due to contractual obligations. AE will take the straw man to Council. Also, you are welcome to talk with Council Members individually.

A: I don’t have that information. It is not available anymore and is not shared under the regulated market. In terms of renewables, CPS has a goal of 20 percent by 2020. AE’s goal is 30 percent. The Legislature is passing bills to increase renewables. There are other public power entities that are setting higher levels of renewable.

Comment: If the 27 percent increase is true, it is cost competitive and less than inflation. That would make it a good plan.

A: No. I have not heard anything since the resolution. It doesn’t say that. We did not get any direction to stop our work.

A: We will continue the public input process. If Council appoints a task force in the future, AE will respond at that time.

A: Council defined AE’s role. AE will do the same thing with the task force if Council directs.

---

A: Lots of data changed when the load forecast changed. We also have to consider ERCOT [Electric Reliability Council of Texas] pricing. The price of power in the market affects the overall cost. There are many considerations when evaluating scenarios, cost, CO2 constraints, reserve margins, etc.

A: No. These plants are to be built in the future. Both are included in the straw man’s costs.

A: To some degree, but hedging only covers a few years.

A: Some costs will go up anyway existing resources are escalating. You have to consider incremental costs and what the optimal approach of the portfolio without going too far. If you have other suggestions we can look at it.

A: Most costs will go up over time, except solar and some energy costs will remain flat. Clean coal is cheaper now and solar is cheaper. However, in future clean coal without sequestration will be what’s needed and it is still more expensive.

A: It is being built and there are a number of plants permitted under construction. But they will also have to deal with sequestration.

A: It is included in existing costs overall.

A: Yes. In fact, many locked in at $9-10 are having problems. However, there are many risks associated with going 100 percent hedging. Some elements can be hedged to reduce uncertainty. This is just a price forecast.

A: Yes, it is to build to meet peak demand. Typically we don’t want to carry reserve margins anymore. We are modeling to meet load shape as close as possible.

A: Sometimes it is cheaper to purchase power in some instances than use your own. When dispatching power, you dispatch in the most efficient manner. This is where you purchase in the market. But the market dictates. You could build to meet peak but you could also purchase to achieve greater cost effectiveness.

A: Scenarios came from this group and environmental stakeholders.

A: Perhaps a subgroup of large customers can help to develop different scenarios to consider. AE is already looking at various options.

A: We would need to get the group together quickly if we do this.  Marnie [Cervenka, Key Accounts Manager] will send an email to participants and depends on who comes back to get together this time next week.  [Target is next meeting.] We are working on the scenarios now.  Four or five are already completed.

A: They define the corners. Low costs without emissions, low cost with emissions, lowest cost overall.

A: There are two types of programs that contractors can take advantage of.

[1] Regular contractor training meetings will be held [soon] for three-hour working sessions where the City goes over current rebate programs and there are no certifications required [for performing] the work.

Debra Keith-Thompson [Outreach Coordinator with Austin Energy, Energy Efficiency Services] is helping to conduct community outreach regarding how to create contracting opportunities. Debra Keith-Thompson did research before the meeting and has information to be passed out to everyone.

[2] The only program that is different is the free weatherization. This goes through a bidding process. You will need to apply for the program as a contractor through purchasing. This is actually advantageous because purchasing will notify contractors of what to bid on. But you have to be on the list to get the notices. Here is a major opportunity. We can also do special mailings to make sure you are informed.

A: Since this is a specific issue, it would be best to discuss that offline, but let’s be sure to discuss it.

A: There is $800,000 [budgeted] annually to weatherize 600-700 homes.

A: There are three contractors. One is Travis County, one is a HUB [historically underutilized business] but there is not an M/WBE [minority-owned and women-owned business enterprise]. Travis County only works on areas specific to its contract.

A: Yes, there are packets available regarding these opportunities. Work is assigned by Austin Energy (AE).  

A: We do not have that right now, but we can get that for you.

A: Homes to be weatherized are assigned as customers sign up for the program.

A: Yes.   If one is not working and the others are, the jobs are spread equally between them so those not working can continue working.

A: It is best competitive bids for the lowest cost. We may have to get back to specialized bidding like for solar screens.  

A: We can get information to Carol [Hadnot} about our processes.

A: Jan [Director Business Development and Contract Compliance] is the appropriate contact. But you can contact the City of Austin’s Purchasing Department about the Free Weatherization program. The telephone number is 512-974-2500. They can provide the commodity code. As a clarification, you will need to be on the City’s bidders list. The commodity code needs to be included on your listing in order to be notified of this opportunity. You can receive a copy of the request for proposal (RFP) that went out last time as well.

A: It is coming up soon, but there is an option for renewal on the current contract since things are going so well.

A: Yes, the owner is responsible for performing the audit. [Clarification: the seller is responsible for having a certified energy auditor perform the energy audit.]

A: We are working with other organizations, like the Board of Realtors to create a training program. We are also working with the Workforce Development Board to maximize who can give and get the training. If anyone is interested in training, please get your information to Jan Lawson. The Workforce Board will work with Austin Energy to provide credentialing for trainers for the energy auditing training. There may be grants offered to help pay for the training as well as scholarships. We are still working on this program. Austin Community College will also be involved, but we are not limiting it to that resource. We know we will need to duplicate the training program throughout the city.

A: Yes, we agree.

A: Once the seller completes the audit, the ordinance says it must be presented to anyone interested in purchasing the home. The idea is that potential negotiations will help to promote energy efficiency upgrades to the house between the buyer and seller and hopefully they will participate in the rebate program.

A: We don’t know specifically. The company was awarded a bid but they will be entering in the contracting phase soon. We can get information to you about it and will be talking soon. Some level of clearing, concrete and conduit work will be needed.

A: We don’t know for sure yet. As Jan Lawson indicated, this is a third-party contractor. The contractor is Gemini and there are upcoming meetings to develop scope of work and milestones. There has been an estimate made that 600 jobs will be created for about a year across all trades starting in 2010. This includes steel work, assembly, conduit and cabling and solar panels.

A: I think your question is whether there is a third-party agreement for the biomass project. The answer is no. It is not being built on City-owned land. But we can see if there would be an MWBE opportunities.

A: Because it is where the waste wood exists from the wood mills. The wood we will be using is comprised of tree tops and branches left after harvesting the trees. It also includes mill residue like parts of saw dust from paper mills and other remnants left afterwards. Nothing is done locally.

Another thought is that there are a couple [of] smaller biomass plants coming to Austin sometime in 2010. Construction will begin soon. We agreed to purchase power and don’t know if we have an ability to affect the resulting jobs, but my job is to facilitate this. Since wood chipper tradesmen are attending this meeting, we will be doing some studies and other possibilities where wood is concerned. These new sites will provide 1 million tons of wood waste per year. To the extent we can, we will look at this Austin project and get information to you if opportunities arise. Who should we contact?

As a heads up, the lithium battery project is something that may offer some opportunities in the future. This is a project with San Antonio, Austin, San Marcos and others. Drusilla Saenz was recently assigned this project and will know more about it in the future. The Greater Austin Chamber of Commerce is working with UT [Austin] to facilitate manufacturing here in this area. We will see if we can contact Jack McDonald [Vice Chairman for Technology] with the Chamber to get more background and provide information to this group.

A: About 640 MW

A: Because of the high costs associated with purchasing the right projects. For example, this region isn’t ideal for large utility-size solar projects. West Texas is ideal for that type of project, but it also has problems with transmission. We will continue to see small projects in Austin like rooftop solar panels and the solar project in Webberville. There are much larger projects in Nevada and California, but they use different technologies. Austin will be using rooftop and parking garage solar projects to maximize the available sun.

Home solar installation projects offer rebates, but unfortunately those projects don’t benefit entire neighborhoods and do not generate large amounts of energy. As an example, housing solar panel projects generate three kW per house. For generating energy equal to a 30 MW facility, we would need to have 10,000 home installations (30,000 kW)  So far we have 600 houses participating in solar panel installation program.

A: Offsets are ultimately intended to reduce CO2 emissions. For example, Austin Energy (AE) would pay a certified organization that is reducing or absorbing CO2, like growing trees to help meet requirements to reduce overall CO2.

In general, right now offsets are not that expensive. However, the industry offset market will be enormous when CO2 legislative requirements are implemented. At that time, there will be a great demand for certified offsets and the challenge will be to ensure each offset is sold only once.  In that scenario, AE will purchase the rights to the offsets. This has worked in other smaller cap and trade scenarios. 

An important factor in offsets includes methods to accurately measure and track offsets. For example, stakeholders must all agree to an acceptable method for measuring absorption amounts that represent equitable CO2 emission offsets. It would include, for example, identifying the number of trees necessary to absorb an amount of CO2. Measuring forestation is the easy part, but tracking that purchased the right to use that offset and ensuring the integrity of that sole purchase will be difficult.

A: It is market driven. The concept of offsets originated for energy facilities when legislatively directed to reduce sulfur dioxide (SO2) from stack emissions. While this solution called cap and trade impacts a much smaller number of facilities than will be impacted by greenhouse gas emissions, it turned out to be a win-win situation because it helped each industry stay focused on their particular expertise.

With regard to CO2 emission offsets, AE wouldn’t have to become an expert in reforestation, it would trade with a reforestation company to purchase its absorption benefits. Hence, CO2 will be reduced or absorbed to stay within a future legislatively mandated emission cap.

A:  Yes, we want to stay within the Austin area.  CO2 is a global gas.  Compared with air pollution from soot, which is a local issue within certain distances from the stack, CO2 is not local problem. This means we can purchase offsets from other places to offset our emissions. But it will be our goal to focus on purchasing offsets within our region.

A: Well, the solutions for these problems are global and we must participate. The other option is to modify our fuel mix that could make AE’s customer’s bills increase significantly. To avoid that, we have chosen the offset option. While gas carbon offsets help keep costs down, renewables are more costly to the energy customer which will impact their energy bills. We are in the process of informing the communities about this while maintaining the goal to keep costs down.

A: Yes. The [offset] costs are significantly less however.

A: Yes, the Pecan Street project examines new technologies to avoid CO2 generation. It involves a large partnership of ten or so organizations including AE, large building associations, UT, and others to bring research together to identify new potential technologies that can help to cut costs.

A: None.

A: June 1st [2009].

A: It impacts anyone selling their single family home or duplex. Before sale, if the unit is ten years or older, the seller will be required to perform an energy audit which would have to be disclosed to the buyer. It is an effort to help identify needed energy efficiency upgrades which will ultimately result in energy reductions during peak demands. It is also an incentive for the seller to make improvements as homes are sold. However, as of June 1st the seller will not be required to make changes, just perform the audit.

Another way to reduce peak demand will be [building] code amendments for new construction.  This will make homes 70 percent more efficient or result in net zero energy home where a home will be designed and constructed to use no more energy than it generates from roof top solar installations.

An energy audit will cost between $200 and $300 for a standard 1,800 square foot home. AE is coming up with an audit method that is easy and cheap. Grant money may help cover the costs. The results of the project will be reported to Council in 2011 at which time additional efforts will be considered.  

A: Right now it appears as though the technology will not be ready for the 2020 plan. And if it is, it will be very costly. It is the cost of capturing and compressing CO2 and ultimately it will make solar seem cheap. Solar is more expensive right now. We are always comparing everything. You own AE and when you vote for the board of directors –the City Council--you choose the direction you want AE to take.

A: No one is actually implementing it anywhere right now. It is all in the experimental phases.

A: Yes, you can do that and tell your members to visit our website at www.Austinsmartenergy.com. You can put additional questions on our blog there as well. We are inviting our customers and the public to get involved.

A final comment about the Point of Sale ordinance is that this audit function has the potential for creating jobs. Auditors must be certified and AE is working with Austin Community College and the Austin Real Estate Board to develop curriculum and train job seekers to perform the audits. It is expected to create jobs similar to the weatherization program and the solar panel installation program.

The program isn’t limited there either. If the home owner wants to do a broader audit, they can. There are several other cities assessing our ordinance, like San Antonio. In addition, AE will be addressing low income family needs through paying to help weatherize their older homes.

A: Yes

A: Since the approval of the solar project by the Austin City Council has not occurred, we are only permitted to identify that the cost will be based upon a formula. This is a computed amount.

A: There has been discussion about this and because of our contract arrangement we are unable to identify the actual rate, only the formula.

A: Right now, the current GreenChoice® is at 8 cents for five years or 9.5 cents for ten years.

A: It’s much less.

A: Batch 6 has sold 1%.

A: The plan is not adopted yet. [Austin Energy will give its recommendations to City Council in fall 2009.]

A: We don’t believe anything would change from what we are considering now. Primarily because we know carbon emissions will have to be reduced. We didn’t feel it was good to wait when we had good opportunities to purchase solar and biomass.

For example, in the past when GreenChoice® first started, there were many complaints about the excessive costs associated with higher renewable energy costs; but eventually as overall energy costs increased, those who selected the GreenChoice® option realized the benefits of purchasing that option.

The first GreenChoice® rate was a fixed rate of 1.7 cents per kW instead of 1.3 cents for standard fuel. Batch 2 established a GreenChoice® renewable energy rates at 2.85 cents per kW. This compared to 2.17 cents for nonrenewable fuel energy sources. In both situations, increases in regular fuel costs over time resulted in significant savings for GreenChoice® customers who selected the fixed rate renewables. These benefits will be realized over the long term.

A: Yes, correct. Landfill gas is a renewable energy.

A: Yes, that is correct [it is policy driven]. The Council has given Austin Energy (AE) specific directions to meet 30 percent of its future energy needs from renewable and another 700 MW [megawatts] of conservation. We also have been given the mandate to bring online only carbon neutral generating facilities in the future.

A: No, it will be photovoltaic (PV), not tower.

A: If we reduce to 2005 levels, it would be a hallmark. In any event we are still a leader, but it will vary. If we compare AE to CPS [Energy in San Antonio] and Bluebonnet [Electric Cooperative], they purchase power, we own ours. The level of a utility’s CO2 emissions for size is dependent upon coal use. We depend on coal for one-third of our power.

A: We are 34 percent dependent on coal. This compares to the country as a whole, where 49 percent of energy use comes from coal. As I mentioned, we own our generation and have a minimum of purchase power.

A: Through 2014 that will be true.

A: It is anticipated that significant changes will occur after 2014 because federal legislation is likely to address carbon policy which will create offsets. This will mean that carbon offsets will no longer be voluntary but will be required. At that point, offsets will be much more expensive because all coal plants will have to purchase them; hence the demand will be higher.

A: It has been on the verge of nonattainment for a long time, but nonattainment is not related to carbon.

A: If we exceed our ozone levels and become a nonattainment area, it will be difficult to obtain any funding. The main issue of attainment is NOx. The big generators of NOx are automobiles. There are other technologies that may help bring us back into attainment like cleaner fuels (gas and diesel), vapor controls at the pump and some of the area specific activities. But some attainment issues are out of our control, because it originates from other sources outside the area. SO2 sources for coal plants like Fayette [Power Plant] already use scrubbers. But CO2 isn’t at the same level. In this scenario, however, if we do not meet attainment, bad outcomes will significantly outweigh any good outcomes. We can provide additional information for you if you like.

A: AE offers advocacy throughout the community to assist in achieving the 700 MW of conservation. There are three primary areas where AE programs can help promote community participation [the residential Power Saver™ Program, Small Business Rebates and Incentives Program and Free Home Improvements Program for income qualified.]

First, AE has $20 million in rebates for small businesses and home owners that can result in $15,000 to $17,000 per participant.

A: Yes. Small business rebates have recently doubled. An example of one of our programs is that we offer up to 70 percent discounted lighting help for small businesses.

A second service offered by AE is a part of the [Austin] Climate Protection Plan and the energy resource planning process. This is a new Austin Ordinance referred to as the Point of Sale Ordinance [Energy Audit Conservation and Disclosure Ordinance] where during the sale of any property, the owner must undergo an energy assessment audit. It will promote more green homes and energy efficient homes in Austin.

A: In June 2009. We have been working with stakeholders to gear up to help implement the ordinance.

A: Yes, the initial draft of the ordinance required upgrades to be done by the seller before the house could be sold. Now it requires an energy audit which costs around $200. The idea is that once this is done, the purchaser can budget to include any needed upgrades in the price of the house.

The third component of promoting community participation in energy efficiency efforts relate to the green jobs that will be created. Currently there are organizations relocating to Austin to get into the weatherization markets, solar installations and peripheral markets. It is creating opportunities for green jobs.

A: Yes, this will be similar to the Solar Rebate Program. At the beginning, requirements and standard procedures will be created. Nationally accepted curriculum will be used to certify and train installers as well as the energy auditors. We will be working closely with the Institute of Realtors.

A: At this stage, we wanted to make sure no one is left out. We are looking for your input into this process. In the future we may need your assistance to get the word out, identify resources, etc.

A: Yes.

A: We look forward to working with you. Please feel free to talk with Council about these issues as well.

The issues discussed at the meeting were Austin Energy’s (AE) updated forecast, the Council’s consideration of the proposed solar project again at its meeting on February 25, 2009, and the model developed by the LBJ School of Public Affairs by students under the direction of Dr. Dave Eaton, with funding from AE and Solar Austin.

A: The Council appreciates the sentiments of the community on solar. Nothing special is needed.

A: No, but Austin Energy will commit to develop a proposal in this area. GreenChoice® is actually a tariff. We will take Council the tariff for the solar project as we get closer to December 2010.

A: No, there will be no retirement of plants owned by AE. Some wind contracts that will terminate will have to be extended.

A: Yes, our [technical/financial] consultants have completed their analysis regarding the cost of the ‘straw man’ proposal and various other options. We will have another round of meetings to get this information out.

A: We are ready to put the game on the web now. It is not as thorough as the LBJ School’s [Lyndon B. Johnson School of Public Affairs] model. The game is very basic.

The LBJ model generates results that are close to what AE’s computer models produce. Anyone who wants to see the tool demonstration is welcome to see it on March 10th at the Law School. A full set of scenarios [will be evaluated using the tool]. Both the short form and the 60 page report will also be available. The full report will be 1,000 pages. Anyone can have either report. This is too sophisticated for the general public but for people like this group it works well.

A: Yes, but modeling storage is very difficult. Cost estimates are unknown and it is difficult to know how it will be used. We tried to model scenarios of storage.

The goal was to eliminate the coal plant’s use and focus on ways to combine wind and compressed air. In the model, wind is combined with compressed air storage. So we took the California model and experimented with it to combine the cost; we generalized it as a combination.  

Once we have our variables in place, we press the button and it generates the output for the standards. The main factors that influence the output are capacity factors. Taking capacity factors and multiplying by site capacity for that particular technology. As the operator uses the program, it will take the latest data from 2007.

The result provides electricity generation and carbon emissions based upon inputs. Another output is the cost of offsets for reaching carbon neutrality each year. Offset costs are low right now.

Outputs can also project costs of carbon allowances. The model examined the impacts of the [previous] Lieberman-Warner bill, [for example]. It showed the potential costs to AE through 2019 and then after selling or leasing assets, it would shift from costs to profits.

With regard to hourly load profiles, these are manual operations because you have to change capacity factors by hour. For example, storage of wind during peak hours may also require purchased power arrangements.

A: No, it is DSM [demand-side management]. It is included in the 700 MW. This is not a financial model. It is not to reconcile the flow of funds. It is based on raw costs and current prices.

In 2020, the model shows a jump in fuel cost because compressed wind will increase the expense for natural gas. It is a cost for using that source.

The model contains levelized costs of electricity. We are trying to build a simplified model of our own. But, we took the 2007 California model and remodeled it based upon new generation attributed to additions and determined the increased cost in electricity bills. It doesn’t take into account buying or selling the facilities. That could change. But the model provides the relative cost of the different scenarios.

A: I don’t know. We have not looked at any options for that. We have not had any discussions along that line and any decision would have to be coordinated with LCRA [Lower Colorado River Authority] since they are operators of the plant.

A: The one that is modeled is with sequestration and [considers] a new power plant.

A: We could set up a day. There is a student in the class that designed the model.

A: There is not a detailed Users Guide. There is a 20-page guide that shows what the user needs to do but it doesn’t cover the manual inputs. This will be worked on.

A: We modeled one with a diverse set of options like expanding nuclear power. And it seemed that nuclear showed up as the best bang for the buck. It comes at high risk however. Especially if you consider the higher capital costs estimates. In the case we modeled, it is comparable.

A: The model is based upon the premise that we have the best information from the federal government. You could say that it doesn’t cover all scenarios. For example, this table showed that $3,682 per kW [kilowatt] is the expected value. A high end would be $8,000 per kW. However, the consensus is around $5,000 per kW. There is an allowance for decommissioning. They don’t say there are different costs, just construction costs.

You can change nuclear and see when your costs are mitigated.

A: Yes, solar thermal is cheaper than PV. That’s one reason why we used the California model. Generally everyone agrees thermal is cheaper. And the model allows for modifying the price. If you change it to your preferences, you might see shifts in scenarios, but until there is enough of a gap, you will not see distinct differences.

There were comparisons of eight scenarios. If someone wants to propose levelized cost we would love to run it. In the executive summary, there are comparisons. Roger received that today and wants comments back.

A: We have data on this but it is not included in the report yet. It will become a part of the model down the road.

A: Not on water, but we can look at economic impacts on different choices, because there are different impacts on different parts of Texas. The results are not yet in the report but they will be in the future. The model generates a lot of data and we are still looking for ways to represent that.

We need to document the model because there are going to be a lot of questions. If there are any issues, we would love to hear them.

On March 10, we will be holding a public presentation on the model. There will be a set of panel discussions which will be followed by a public presentation of the project findings like this, only a little more detailed. It will be a public forum similar to the town hall meetings.

The panels will run from 1:00 pm to 6:00 pm and the public forum will be from 6:30 to 8:00. It will be at the University Law School, in the mock courtroom, the Eidmann Courtroom. The press release was approved earlier this week. It also will be on the LBJ School website. Different resource plans to reduce carbon emissions will be presented. Review Figure 30.

At a glance, Table 1 shows it would be best to implement portfolio 4. Renewables look attractive because it doesn’t look at using more of the natural gas facilities – due to powering wind turbines.

When we looked at the other options, AE’s plan offers the least carbon reductions. However, AE offers a choice – sustainability – are they willing to pay high capital costs now to reduce prices in the future? It really depends on the discount rate.

A: No. We didn’t get to into much air quality impacts. It would be very difficult because the big NOx impacts are not from local sources. Fayette is the big NOx source. [Fayette releases the most NOx (NOx can lead to ozone formation) of any of AE's generation.]

A: Yes, but that was not reflected here.

A: No, you would have to adjust the input for the cost. You have a solar amount, and if you think the rebates will lower or raise the cost, you change it.

A: It would be the cost of energy that you calculate. This is the cost to the customer. So you would have to identify that the cost of solar is $.20 per kWh, and if that rebate was included, it could be lowered to $.15 per kWh. The model is driven by levelized costs.

A: These are capital cost estimates. We don’t go into purchase power agreements. It is assumed that if purchased, it is a capital cost.

A: It’s not based upon that. The model assumes that if you purchase it would be during the peak day. So if you wanted to do that, it would have to be through levalized cost adjustments in the model.

A: Yes, this isn’t based upon the ERCOT market. The program can’t get into hourly dispatch monitoring. The model is a very basic; yet it gives an accurate picture overall, and we were comfortable it comes close to our numbers. This is predicated upon base cases and allows changing of other energy sources.

A: Nuclear costs are low. President Obama hasn’t appointed a new EIA [Energy Information Administration] head yet? I would suspect two years.

A: Because of the economic downturn, we have been recalculating our need. We don’t need new power through 2020 to keep the lights on beyond what we need now. The 220 MW gap is gone due to the new economic issues.

A: When you add the 100 MW under construction this year and 100 MW of biomass and 700 MW of conservation, the gaps are gone. 

A: Actually we haven’t bought any property there yet?

A: Yes, you can, but we are not sure how about that.  Most storage is in pipelines right now.

A: Solar cost is 18 – 20 cents and is declining. Coal will be the same as nuclear. Natural gas is volatile and goes up and down. There are no forecasts that examine this very far for natural gas. The proposed nuclear plant is expected to be cheaper than natural gas over its lifetime.

A: Yes we could do that. Austin Energy (AE) does that kind of hedging now.

A: The initial commitment just to build the nuclear project is $2 billion. All of our experience suggests there will be cost escalations. Biomass is a purchase power agreement. AE will only pay for what [energy] is delivered and the biomass project does not impact the bond rating. Any new construction is on the balance sheet.

A: No, they make their decisions based upon their own demographics and issues in their community. We believe they have not made a commitment to the project. They have committed $260 million toward feasibility analysis to learn more about the plant and have indicated they will make the go/no go decision in late fall. San Antonio utility [CPS Energy] is 2.5 times the size of AE.

Comment: I looked at it [nuclear] the other way. I believe because the decision to go with nuclear offers less risk than others [since AE’s share is only 16 percent], if something goes wrong during construction, AE will lose less. Being the smaller share will help AE to avoid being impacted in a big way.

A: That’s an interesting point.

A: Under the planned nuclear project, baseload power will be available in 2017 or 2018. It would be 2030-2040 before we could absorb all the additional generated energy considering AE’s recent flat growth. With the financial situation now, our load forecast needs to be updated because our recent reviews showed we have flat growth. We may have to change our expected additional peak need from 250 MW to zero and push back the planned combine cycle plant. In addition, we can use our combined cycle plants to address any peak needs.

A: We are thinking very serious about that issue. The coal plant has got to be addressed because of the carbon issue. Also, there are other places that will offer nuclear power. Exelon is looking at building a nuclear plant in Victoria and Luminant may expand its nuclear plants at Comanche Peak. We do not want to be the first to build a plant. If something smaller is possible, we will continue to review it. We are not saying no to nuclear forever. We may look at purchase power or buy in options in the future when more is known.

A: We do not have firm costs regarding the NRG proposal and it is very different from purchase power where the project developer takes on all the risks. [Reference is to the proposal to participate in the expansion of unit 3 & 4 at the South Texas Nuclear Project (STNP)]

Comment: We really need to look at the nuclear option in comparison to biomass and solar.

A: AE continues to look at the nuclear option. Our answer is not no forever. We have asked for a purchase power option. The proposal received from NRG was not a fixed price. They included all of the costs of constructing the plant with even less control.

A: February 13th [2009] was the deadline. It was based upon the existing contract that indicates each shareholder has 90 days to respond from the offer to construct new capacity. NRG can not go forward on its own. San Antonio and NRG have to agree and although San Antonio agreed to go forward, it is in the form of a feasibility study to determine if it is appropriate for them.

A: No.

A: Yes.

Comment: With regard to nuclear waste, the waste quantity is very small.

A: The current configuration is a swimming pool that is 30ft deep.

A: Yes, they believe it is viable and permittable with regard to the GE design; however, new certification of the Toshiba design is required.

A: Affordable power is not just the cheapest power. Community values are important AE has never made decisions on what is cheapest only. GreenChoice® is a good example. Carbon costs will drive up the cost of coal. The price of gas will go up and down in the future. There were serious gas problems in the 70s and 80s. We started diversification in the 70s and need to continue. In the 1970s AE provided power through natural gas plants. Then to cut costs, coal and nuclear came online. Both were cheaper. We diversified then. New options are now available again and we are looking at them. We do not have a crystal ball about future costs.

A: Yes [you are correct] it is not in the plan. We are looking for feedback now. If the community wants it, it could be added to the plan. Our plan has to be practical and doable. Nuclear is not an option now due to the project’s risks. We can not base our decision on nuclear plants built over 40 years ago.

Comment: Nuclear could reduce the carbon footprint more than wind and biomass.

A: Yes, if it replaces the coal and gas plants. Are you proposing that? You are right. If coal was replaced with nuclear, that would cut carbon by 70 percent.

A: We will look at this more in future meetings and as we go back to Council.

Comment: I can not buy that this country can’t build nuclear plants. [Many other countries have it] .…like the Japanese. AE has weighted [this risk] too high. Politics is the reason.

A: It would have been nice to have one to two years for the decision. We only had 90 days to discuss this and our response [to nuclear] is not no forever.

A: Yes, they have made a proposal. It did not meet full disclosure requirements. NRG did offer a purchase power agreement that included all of the cost of construction and it was not realistic. But this is not what we see as the best for AE. No one has any idea about the costs, including NRG. The purchase power agreement does not have a fixed price. We do not know the costs.

A: No. There is limited ………..

A: No, we did not ask them to look at that. We will not be able to know major cost components before the permit process is complete.

A: We will go to council mid to late summer [2009.]

A: To review how this began, Council passed a resolution in 2003, which set the goal of 20 percent renewables by 2020 and 700 MW of new load by conservation by 2020. The Council set the priority goals for new energy.

In 2007, Council adopted the [Austin] Climate Protection Plan which includes a CO2 cap and reduction plan. They also reaffirmed the 700 MW of conservation and increased the goal of renewables from 20 percent to 30 percent. At that time, we thought a large baseload plant would be required. We had to decide how to do that and needed to get input on the CO2 cap and reduction plan and additional generation. The key question was what the community would support. By the time the stakeholder process began, there was not a need for a large baseload plant. We started the process to get input and have completed the first round of town hall and stakeholder group meetings. We will take comments received back to Council.

If we discover we need to change the generation plan we will identify that. But AE continues to work on the goals that Council has already established, including conservation and renewals which are the basis of the biomass and solar projects. So, we are seeking input on the draft generation and carbon reduction plan while also implementing projects to meet Council’s goals.

A: It is not AE’s intention to continue and not receive input, but we have to [make] progress on Council’s goals. We have back loaded generation due to congestion. AE is focused on the Council’s intermediate goals. We would never move forward if we didn’t have the goals.

A: It is Council’s prerogative to change the plan since they developed the goals regarding renewables and conservation.

A: No, that’s not the role of staff.

A: That is an RFP [request for proposal] process deadline.

A: It expires March 12th.

A: We need to talk with Council before March 5th and will be happy to
take information to them.

A: AE has hired a [technical/financial] consultant to complete pricing scenarios. This consultant also is looking at the cost of the plan and the related rate impacts. The input process will not end until that work is done. We will have more stakeholder and town hall meetings to get the cost data to the public. We plan to wrap up in late spring and summer. There is no specific cut off.

Comment: Since, the solar goals were approved by the Council, it seems like the current [purchasing] deadline would be better to be deferred [sic] and then rebid.

A: It is part of the driver for 2020. If Council postpones it, there is an
assumption that the bid proposal rates may change meaning financing and the pricing proposal would be revised. There is a difference between asking the vendor to wait three weeks as opposed to three months.

A: If all stakeholders agreed, yes, I would do that, but we have lots of stakeholders. The environmental community does not agree with your position. They have a different message on carbon neutrality, the use of renewables and they want us to expedite closing Fayette [Power Plant.] We have to take all comments to Council.

A: Yes, all comments will be made available to Council. We have not formulated how we will present the results of the outreach to the Council. The form may be by categories or consensus, by stakeholder groups vs. environmental groups. It depends on the data received. We are capturing all feedback. We will make every effort to provide you the information from the meetings.

A: I don’t know yet how the information will be presented, but, we are providing information from stakeholder groups to Council as we go. Cost data to Council will include the costs of various options. It may not go into specific customers’ inputs and preferences.

A: All comments [Q&A] are being put online and will be available within a few days.

A: We received bids and Council thought it was too expensive. Instead they contracted for 1 MW and the developer couldn’t get it built and we never realized the 1 MW.

A: 23 cents. The price is now 16.5 cents

A: Due to advancements in technologies and capacity increases for the generation.

A: It could be cheaper, depending on a number of things, like the price of gas.

A: I don’t recall saying 1,100 new jobs, but construction will mean 600 new temporary jobs and there will be 200-300 full time permanent jobs in the end.

A: It is 600 green collar workers.

A: We did not include the 1,100 reference in our presentation to Council.

We presented the project to the neighborhood association near the proposed Webberville site. They liked it.

A: The City owns the site but other [City] departments are seeking to use it.

A: We will probably recycle the parts from that site later, but it is 1/1000th the size of the proposed site. It could not generate what we will expect from Webberville.

A: The risk is shifted to the vendor, we have no obligations there. If power is not produced, AE has no risks in the end.

A: Yes, but that is what we did with the first coal and gas, but we had to go with the technology that was available at the time.

A: Council may consider the price changes in their final decision.

A: No [according to the current contract] you buy the technology how it exists now. Changing out technology is useless unless they reduce the price, then maybe we would consider it. It’s like buying a house. You still have to make the payments [even though newer technology comes along] that could mean savings to you.

Comment: You can make output any size. You can make it what you want it to be.

A: I agree.

A: We have had good experience with Purchase Power Agreements and the costs for nuclear are unknown and we believe the $2 billion for nuclear is understated on the basis of our experience. The construction cost was supposed to be $200 million for the initial plants at STNP. In the end, it ended up costing $1 billion dollars.

With solar and biomass, we will take power over 20-25 year period. There are no risks up front due to construction and we only pay for the generated power. The $2 billion for the nuclear expansion is just for construction. It does not include fuel and operational costs. Also it is difficult to compare cost among solar, nuclear and biomass because of the different setups.

A: [Yes, it is a 25-year Purchase Power Agreement.]

A: We do not have a contract yet and that will be a part of the negotiated outcome. We may want to take the panels or return the panels and keep the foundations.

A: Yes.

A: No.

A: I think we would have to share the benefits and risks on that, like if
they want to increase generation we would want to use it. We will have to discuss this further.

A: It would be different and we have to be consistent with purchasing laws.

A: I don’t know. The panels are 50-60 percent of the cost. That’s the range.

Comment: I heard that the total cost of the panels was 50-60 percent of the costs in general; it is the tracking equipment that may be more expensive.

A: Based upon our experience, and the useful life of the panels and financing options, we looked at it and felt that 20 years was too short and 30 years was too much.

A: Not in this case. We have a lot of experience with solar already.

A: Yes, we are doing that now. There are two provisions that affect us in terms of low cost money and private developer benefits and the possibility of turning tax credits into a grant. We are still looking at it. There are no final answers.

A: It depends on the amount of time extension.

A: They may not hold their price for six months. The costs may not go up. I believe we would want to rebid due to possible tax credits.

A: Yes, this [solar] could be put in GreenChoice® and Council would establish a price around 17 cents per kw/h. That is twice the highest GreenChoice® offering now of 8.5 cents which is for wind. Typically it is a pass through to the customer and [the program] is for 20 years. However, it depends on the viability.

A: There are six customers that have taken advantage of Batch 6. Currently, the prices are five-cents per kWh for five years and 9.5 cents afterwards. The prospects are not good for solar at 17 cents.

Some people will buy at 17 cents but it won’t sell out at that rate.

There is no harm in setting it up, but we do not believe there will be a substantial response [interest in the program].

When we purchase renewables all customers receive a portion. When sold as a GreenChoice®, some customers receive 100 percent and it reduces the overall cost. If it is not sold it is applied to the fuel charge.

A: Yes. It always starts there. It’s already in the current rate. If substantial sales result from GreenChoice®, it would be taken out of the current rate.

A: We can get you that information. My sense is that it will take a while.

A: The City Council has directed the establishment of a CO2 cap and reduction program. AE has recommended a cap at the 2007 level now and to step it down to the 2005 level by 2005. There are two options: there is the option to run the system as we normally would and buy offsets or the option to replace coal with gas. The cost of the fuel switching option is $220 million. The offset option cost $19 million. AE is recommending the use of offsets.

A: Yes. This is a voluntary early action program. The information provided on pages 34, 35, 36 and 37 of the Resource Guide discusses the plan.

A: Yes, it was a part of the recommendation. They asked us to defer consideration until March 5th, to meet with our customers and answer any additional questions they may have, review the stimulus package and identify any opportunities for funding and to consider GreenChoice® as an option. We are doing all of those things but we will not change any of our recommendations however.

A: We do not have a way to do that. Roger [Duncan, General Manager] told him that a GreenChoice® proposal would be developed outside of the fuel charge.

A: We don’t have an answer; and will not have the GreenChoice® option finalized by March 5th.

A: Council has set environmental, renewable and conservation goals. Renewables and conservation provide carbon benefits and fuel costs. AE has to take Council proposals that meet their goals but we cannot make decisions for Council. They can change their minds but we can not suggest to them not to do it.

A: That is called straddle. Yes.

A: The Airport which is an Enterprise Fund and 100 percent of general fund departments. The only departments that are not using GreenChoice® are enterprise departments that generate their own money.

A: I don’t know.

A: There was a green ordinance that any Parmer [Palmer Event Center] event will be on GreenChoice® and all nonenterprise funds are using it. Currently, 60 percent of all City accounts are in Green Choice®.

A: TCEQ [Texas Commission on Environmental Quality] and Governor’s Mansion are on green power.

State being one customer – if lumping all together, we can give a breakdown, but there are issues of confidentiality on individual customers.

A: All Batch 5 sold. Batch 6 is 165 MW and it increased cost by 60 percent. Just 1 percent sold to date. We can provide some information for you.

A: We cannot provide such data. Some data in this area is confidential and we do not have that type forecast data at this time.

Comment: Everything impacts this. The loads dropping off and I am concerned that large customers will be saddled with expensive power not sold through GreenChoice®.

A: AE does not have such data now. We are working on it but don’t know when it will be available. We are beginning a regular cycle for load forecasts now.

A: This proposal is just 30 MW.

A: Council’s goals are tied to several variables. Expert advice from AE is not the sole basis, it is Council’s job to set policy goals. The goals are based upon clean air concerns. I can’t go back and say you made a mistake making that goal.

A: With the solar proposal, we are looking at an increment of energy that will be needed when brought on line and will be cheaper then. The bottom line is that the solar project is a peaking power unit. It is displacing gas turbines used at high peak periods. If you look at the situation, we are spending $80 million just to maintain gas plants used only for peaking purposes. That price is low now and will go up.

A: Even without carbon legislation, the cost of solar is only above gas by a small margin. There also is the option to take off line the 200 MW combine cycle, although these are not just peakers. Solar is addressing the highest part of the peak. Its price differential is the same as some of you locked in on GreenChoice® as a fossil fuel hedge.

Comment: You have told us that gas was going up but that’s not the cause.

A: We have information for five to ten years that is as good as anyone else’s [information]. We use two independent gas consultants for pricing data and NYMAX. We do not have a better way.

A: We are sharing today.

A: We clarified to Council that GreenChoice® would not absorb it all so that no one would be surprised with the outcome of going that direction.

We are reviewing the economic stimulus now. There are aspects of the stimulus where AE may not benefit if we build it ourselves; but could benefit if a developer built it. We may or may not get funding in the future.

A: We can do it before March 5th, but we do not have it now. We can also call another meeting before the council meeting for this group. Council’s question was "are there monies in the stimulus to aid these projects?”

A: Yes.

A: I believe we can extend these bids for about 30 days. I don’t think the vendor will keep the price the same if the decision is delayed for six months. It doesn’t look like prices will go up or down by then. I have made it clear to Council that this project is due to their goals for renewables, including solar.

A: I think it is a good deal.

A: Yes. I told Council prices would be going down. Prices have dropped by 25 percent. There may be additional price decreases in five years or so.

Comment: Our data suggests that prices may drop by 25 percent in two years.

A: Aggressively market it, but I won’t lie to Council. I am lying if I indicate that including it in GreenChoice® makes it a viable deal. Also, I need to make progress toward our goals established by Council.

A: We are getting lots of input from the meetings we are having. Others are urging us to shut down Fayette.

Comment: [Council Member] Martinez told AE to put solar in GreenChoice® only.

A: No, he did not and I took great care and I clarified to the Council how GreenChoice® works because I didn’t want there to be any illusions about GreenChoice®. I also told them that Batch 6 is at 1%. I don’t know how to put solar in GreenChoice® only.

A: I don’t mind looking at options. I assumed GreenChoice® would go away anyway. I never thought we could support 30 percent renewables through that program.

A: I can emphasize it again. I tried to be clear by outlining how the GreenChoice® program worked.

A: 30 percent of AE’s energy cannot be met with GreenChoice®. There cannot be any illusions that we can meet renewables this way only. When the rate hit eight cents, the saturation point was reached.

A: Nuclear is carbon neutral. By adding more nuclear plant resources to the generation mix the energy capacity would expand by 422 MW and eventually increase to 432 MW. Since nuclear power is not typically used for peak demand, 432 MW is significantly more baseload capacity than Austin Energy (AE) will need by 2020.

A: If AE were to decline participation in the nuclear proposal, AE would not forfeit its current 16 percent share. AE is interested in increasing its 16 percent share but difficulties would arise since any negotiations would mean the other partners must agree to the new terms thus reducing their shares.

A: There is the possibility that some other utilities may want to purchase unused power from AE; but thus far, no one has come forward to discuss this option.

A: AE is aware of the concept but no discussions have about nuclear waste fuel byproducts as a solution. The technology provides for the reprocessing of spent waste fuel to build new assembly parts and is commonly referred to as reconcentrated waste materials. The solution is not a common process, and to his knowledge, only one military installation uses it in the U.S. and only a few companies use this technology in Europe.

A: When examining nuclear energy costs associated with newly constructed nuclear plants, no one knows for sure. This is because there have not been any new plants authorized for construction in the U.S. within the past 30 years. Based upon estimates, the cost of nuclear is less than solar but higher than coal.

A: There is nothing in the current proposal that requires the vendor to make technology upgrades at the East Austin facility. This was not a problem since AE will be purchasing solar energy at a fixed price from Gemini for the next 20 years. While installation of new technologies might help the contractor reduce its costs, AE is only committed to paying a fixed price for the energy when it is generated. AE would benefit from technology improvements in this sector in the future as additional solar energy is added.

A: While the resource plan has not been approved, the goals for the [Austin] Climate Protection Plan provide the direction for AE to continue identifying alternative sources. Hence, as energy opportunities arise, AE will be examining their potential for inclusion into the AE portfolio when possible.

A: The life expectancy of solar panels is over 20 years; and if a panel degrades over time at the Webberville plant, it will be the responsibility of the contractor to replace the panels to assure that they may meet their contract commitment to generate power at the specified level.

A: The risks associated with construction of new nuclear plants require too much risk for the City of Austin. Based upon the contract proposal for solar, there is a guarantee that as long as the solar facility is generating electricity, AE will pay a fixed price and avoid the direct costs of construction, operation and maintenance. This is not the case with the proposal from NRG on nuclear.

A: Waiting for legislation will not prohibit AE from taking advantage of the newly codified incentives when they are available. AE is planning to take advantage of whatever incentives become available.

A: There are no upfront costs associated with the current solar project. The plan is to pay a fixed price for the power if and when it is available. If the plant does not ever begin generating, AE will not be liable or obligated for any costs associated with the plant’s construction, operations or maintenance.

A: The estimated fuel costs are a function of area growth trends and that the fuel is estimated to increase by one to two percent by 2011. However, it depends on the price of gas; for example, as gas prices decline so will demand for additional energy.

A: This is an Austin City Council policy issue where AE’s role is to respond to their directives, review options and make recommendations.

A: While AE may not necessarily incur the same types of costs used to develop rates as other private organizations, there are other financial obligations like franchise taxes and dividend expenses that would ultimately result in similar rate structures. AE would be happy to provide them [BOMA] more information on this issue.

A: AE is obligated to abide by state and federal purchasing laws that ensure open and fair bidding practices. This is to avoid liability for AE and ensure anyone qualified to bid can participate; it does not restrict bid responders to Austin area vendors. The work is expected to begin by the end of 2010, with a 3rd party contractor that has committed to meet the state HUB (Historically Underutilized Business) goals for hiring minorities. In addition, even though the contractor selected is a China-based corporation, they are being cooperative by purchasing locally.

A: While AE offers good incentives, there are current discussions underway about adding more and new ideas are always welcome.

A: There are different rates for large industrial customers primarily because many of these businesses own some of their own equipment and transmission lines. Rates are based upon the amount of service provided by AE. AE can not bill for services and equipment they do not provide. This reduces rates for larger industrial customers.

A: The decommissioned Decker solar plant closed in the 1980s due to deteriorating component.

A: The following information provided:

• Energy efficiency and conservation are cheapest with costs of two to three cents per kWh.
• Wind costs five to six cents per kWh, without congestion and 8 cents per kWh with congestion.
• Natural gas has averaged eight to ten cents per kWh although prices are now more volatile.
• Based upon future factors associated with new plant construction, nuclear is estimated at 8-12 cents per kWh; currently the cost is cheaper than this.
• Clean Coal is 10-12 cents per kWh.
• Solar is 18-23 cents per kWh; however its price is dropping rapidly due to newer technologies that are coming online (expected to drop within next 5 years).

The forthcoming carbon cap and trade programs are expected to reduce solar and wind costs in the future as well.

A: Conservation costs one to two cents per kWh and that additional savings will occur after 2015, when new building codes [in Austin] for home construction will require energy efficiencies that result in net-zero energy capable homes and buildings. While it is expected that home construction costs will increase by four to five percent, it is expected that these efficiencies will help the home owner realize a [positive] return on investment within three to five years.

A: It is too difficult to forecast energy loads beyond the 2020 timeframe; noting that there are too many variables involved to successfully address the impacts of fuel costs and/or new technologies for future assessments. In addition, there are too many problems when examining load forecast[ing] beyond 2020 for peak energy purposes.

A: Austin Energy will expand hedging for natural gas to five-year timeframes which should help stabilize prices. AE is investigating methods for 20 to 25 year natural gas contracts utilizing third-party financing from larger, well-established companies that can incorporate tax-free opportunities into their proposals. These tax savings will be passed on to the customer.

A: AE gas plants are based upon domestic fuels, but they could use Liquid Natural Gas (LNG) as well.

A: The following information provided:

• The current AE biomass project involves a Purchase Power Agreement
• (PPA), where the developer takes all the risks associated with planning, construction and ultimately managing the plant. In this scenario, AE is getting energy for a fixed price.
• The nuclear option that is currently on the table requires AE to be a partner in the construction and operation of the plant. There are big risks in this approach as AE’s cost may reach $2 billion for 400 MW. AE’s total assets are currently valued at $3.5 billion.
• AE is willing to look at nuclear in the future under a purchase power agreement. Further, nuclear will be seriously considered in the future since the carbon problem is far more serious than continuing waste disposal issues relating to nuclear.

A: To clarify, this question referred to capacity factors of different energy types. Using the presentation slide on energy capacity factors, AE showed how different energy source capacities fit into the AE energy mix. This list provided the following:

• Conservation provides the best and most consistent source of energy savings and return on the investment.
• Wind is second, but limited due to challenges relating to storage, congestion and weather, especially since the wind does not blow consistently.
• Gas and coal are stable sources, but gas prices are volatile.
• Finally, solar offers the least amount of capacity because of its limitations to daytime use until storage issues are resolved.

A: The following information provided:

• Wind will become more competitive within five to ten years.
• Solar energy costs have remained high over the past few years in spite of technologies intended to help lower prices; but in turn these technologies have also caused higher demands. For example, since solar technology uses silicon in its construction, it competes with other technologies that use the same components. This has resulted in sustaining the higher cost of solar.
• NANO technology will provide opportunities for solar and wind since it will be used as part of future storage solutions. NANO technologies will also be used in the construction of certain plastics, fuel-cell storage and other power components.

A: AE is currently getting its wind through purchase power agreements now but is looking at the future to become an owner.

A: The penetration of hybrid vehicles by 2020 will not impact AE’s capacity. AE could currently support one million vehicles if they were recharged at night; but if charging occurred during the day, it could create problems.

A: AE is closely following legislative proposals at the state and federal levels. The pending legislation will have no real impact on solar since the prices of this energy option are dependent upon research and development as well as new technologies. While more incentives are good, they do not change the supply.

A: In general, there is a 7 percent loss in energy transmission, but efforts are underway to recapture these losses. AE is investigating this problem through the current Pecan Street project which is focused on distributed generation, especially designed for solar and uses of “smart-grid” technology. The goal of the Pecan Street project is 300 MW of distributed generation by 2020.

A: Yes, it is possible that distributed power generation could reduce the need for additional [central plant] power sources. This is because future buildings would be the electricity generators where technology could redirect energy to high demand locations.

A: Yes, storage capacity opportunities will have a significant impact on energy efficiency because energy storage is vital to the entire plan. Compressed air storage is very promising. AE is working with EPRI [Electric Power Research Institute] on a project in this area. Progress also is being made in the auto industry regarding lithium ion batteries. There are various storage technologies that are being developed and improved throughout the world that will assure real progress within ten years.

A: The water utility is the second largest user of water in Austin. AE plans to include this significant consumption as one key factor for deciding the future energy mix for our City.

The Lyndon B. Johnson School of Public Affairs (LBJ), through a project co-funded by Austin Energy (AE) and Solar Austin, has developed an energy analyzing modeling tool which is fairly effective in assessing various impacts of the draft [Energy Resource] Plan.

A representative from the LBJ School provided additional information on the model as follows:

• The model was developed by a group of LBJ School students and faculty over the past several months from August to December of 2008;
• The model was developed to evaluate various scenarios including options to shut down Fayette [Power Plant] by load balancing with different levels of wind, solar, biomass and other options;
• The model provides a broad view of different cost impact scenarios. Various mixtures of energy solutions also may be assessed;
• The model will be used as an initial step to narrow the scope of options to practical energy scenarios for AE consideration and more sophisticated technical modeling later
• The model will be finalized within the next 30 days for AE to assess various energy options.

Once this introduction was completed, questions, answers and comments were discussed during the remainder of the meeting. These are outlined below:

A: What we have done is on Excel and it is a reasonably good set of inputs and outputs. It is designed as an intermediate solution to run a model quickly. General Manager Roger Duncan offered to have the LBJ School students present and demonstrate the model at the group’s next meeting on February 19th.

Comment: Mr. Duncan noted the following regarding the student’s model and in reference to a question about its use.

On the one hand, the student’s tool is not a low level energy game simply organized to examine time increments with explanations about different technologies, like the one AE has been developing to educate the public. On the other hand, it is not the sophisticated tool currently used by AE that shows how generation units may be dispatched hourly and that takes three to four days to set up and run.

The student model is an intermediate tool that provides a quick assessment of a wide variety of scenarios that 1) result in better solutions and 2) help to narrow the scope for use by AE’s sophisticated programs. For example, the [Financial and Technical] consultants will be working on seven scenarios and the students’ tool will help quickly narrow focus to two or three scenarios that use AE’s parameters for modeling on AE’s supercomputers.

A: It is no problem to plug in number variations for wind and solar.

A: Yes. The tool is flexible, but there is [sic] some sophisticated ways to determine if an option is really possible.

A: Yes, you can indicate, for example when you may want to shut down any percentage megawatt of coal production for any year.

A: No, it does not go into ownership vs. purchase power. It calculates cost but is not a financial model.

A: Yes, it is a part of it. We have a matrix of 50 technologies that we can choose from that include: combined cycle, nuclear, coal, pulverized coal, coal with carbon capture, or carbon without capture.

A: It does require someone knowledgeable about the spreadsheet to work with it. We believe the best way to proceed is to allow the students to present the scenarios. It is not something self-explanatory; however, it might be good to have more participation. But it is still a somewhat sophisticated tool to the general public.

A: It is the kind of feedback and interaction we like to get. But, you must commit to show up if you want to experiment with it.

A: Yes, it is.

A: Well, the seven scenarios provide outliers that have to do with load growth. We are not limited to how many hybrids can be included. This spreadsheet opens it up. For example, if you want to add 5,000 MW of wind next year, it could accommodate for it; but that would not be plausible. The spreadsheet allows for any combinations, but overall it gets back to what is reasonable.

We loaded the model with technologies and we included cost data for each scenario by 2020. We can run a scenario asking how it impacts the price of electricity and can it meet carbon goals. If it is something we like, then we can give it to Roger to run it on the supercomputer.

A: Well as an example, say you want 75 MW of solar by 2015 and we think that it is achievable. Then you put in the price for example, at 50 cents per/kW.

When going to Council, we have the responsibility to make professional judgments. If someone suggested something like replacing the coal plant starting in 2011, we would say that is not possible. But the model is as fine tuned as possible. When recommendations are made, we will state assumptions. Staff will not make recommendations that are not realistic in terms of time frames or costs. However, this does not limit citizens from making any recommendations to the Council.

Comment: AE has spent an enormous amount of time devising cost estimates. There is more consensus on the future technology prices than on fuel prices. That sounds odd because of how technology changes, but fuel prices also change. The further out in time, you find more support for emerging technology prices than fuel.

A: It’s an option in our model. We are not limited to anything. Geothermal is an option as well. However, it is not as realistic around here. But there is a model for anything; if you have a supported basis, great. We are not denying anything for the model even if it appears unrealistic.

A: No. This model may consider and assess load, cost, fuel, technology and carbon impacts. What you are talking about is after that in the process. You are referring to carbon sequestration which is a part of the model. But currently there are no commercial sequestration projects to go with it. Besides, the only groups saying that sequestration will be ready and available by 2020 are lawyers, not engineers. At an EPRI (Electric Power Research Institute) conference a few months ago, the experts said they believe there has been no progress on sequestration within the past two years.

A: Yes, and we can change the title of solar to “Aggressive Solar.”

A: We will have to talk with our contractor, Pace Consulting [PACE Global Energy Services]; because this would be changing from off peak to peak in capacity. We are willing to work through this.

A: We can do other approaches. It returns to how much is achievable. Examining what others are doing around the country and always having conservation people seeking additional kW is appreciated because it ties to economic development. I don’t know how we can deal with this economic slump otherwise.

A: This is from this group. We have had questions from other groups about the cheapest way to keep the lights on.  Other than that, there are no other scenarios we have been asked to run.

Comment:  I think it is time to review all environmental education programs and to look at quality control more than ever like in commercial refrigeration.

A: If you have suggestions about programs, please send them to AE.

A: I will find out for you.

One thing brought up in a previous meeting was our [Austin Energy’s] strategy on solar, including the following:

a) The solar resource in West Texas is a huge cheap resource. From California to West Texas there is a high concentration of solar. At some point in the future, we want to tie into the national grid. As far as ERCOT (Electric Reliability Council of Texas) and access to Austin is concerned, we are looking at concentrated thermal, regular PV and getting a huge number of megawatts (MW) transmitted to the City; but we still have intermittency issues.

b) Austin can be a 100 percent renewable city, but we still doubt that central Texas renewables will be sufficient for Austin. But by combining our current resources with West Texas wind, we can get there.

c) Talking about the PV strategy, we want to continue with a multitude of programs like rebates so customers can put solar on their homes. The business model needs to change for expansion of our solar policy; because the current configuration would bankrupt AE if implemented. This is because we currently pay 60 to 70 percent of the cost to install solar on residence. Then as a part of the process, the electric meter runs backwards; and finally under this model, the owner pays nothing for distribution lines or poles. Somehow the utility needs accounting for this.

d) Looking at the distributed model, we have talked with state legislators who want to give rebates in Texas for roof installations. However, sun access is different throughout the state. For example in Austin, we have a great tree count, and the fact is that most existing houses do not have solar working well on their roof because the original configuration of the subdivisions and the tree count. Most house installations can not power the whole house.

A: That includes our large flat roofs which is a part of the next strategy, (i.e., Wal-Mart, big box stores and other low hanging fruit). On this current rebate model we can not afford it. We would lose money. It would be similar to giving Wal-Mart a $2 million check for [a] $1 million project. Perhaps there may be the approval where AE leases roof space where we can install our equipment.

The other thing that could be included with solar is hot water heating. The most efficient use of solar on a rooftop is heating water. It is easier than heating electrons. We need to integrate these types of strategies. It would be great to combine this with economic development strategies.

A: We will need to look at it.

A: Most homes are gas.

Comment: Regarding the plan on the large scale rooftop, we talked to a couple industry representatives and any information released too soon stops business for this industry because people will wait for the rebates. Please be careful how these projects are developed and discussed.

A: Okay, we will be cognizant of this. To be clear, we are not offering free systems on roofs. We would be looking to local businesses to install the rooftop systems.

A: There is distinction between large solar projects now and in the future. For example, take the Webberville project which is a totally different class of power and is through a Purchase Power Agreement.

A: We certainly prefer that, but we may be limited with regard to state purchasing laws.   I am merely providing the 30,000 foot view.

We are also working with the City of Austin, UT [University of Texas at Austin], Environmental Defense [Fund] and large computer companies on a smart micro-grid. This includes working with distributed generation. For example, when using 300 MW of distributed generation (mostly solar) and managing it via the internet, the smart grid can dispatch the power from one area to another. It can also tie into appliances. All this must work together.

A: I can not give you the list of 50 technologies right now, but it is a university project where a report will become publicly available and information from the footnotes would provide some information you seek.

A: We can only retrieve another one or two MW from landfills, and there may be options for statewide plans. But we are tapping into landfills in Austin and San Antonio and are only retrieving 12 MW of energy. I don’t think methane should be released into the atmosphere, but I don’t see AE encouraging methane as a resource because there just isn’t the return on the effort.

Also, I understand there is less than 100 MW of methane in Texas. Plus, we would not be welcome to use landfills in Dallas or other parts of Texas because it is beyond our customer area. I can assure you, I don’t see any possible way to do it. This is focused on small increments of energy from landfills where this smaller scale does not fit within our current generation plan. I do not know if there will be increases in landfill methane in this generation plan, but I do not see large expansions of electricity from landfills happening.

Comment: Good. We want to get all organics out of landfills. Waste Management will come up with reasons to hold on to organics.

A: There has been no discussion of adding landfill methane. We already have 100 MW of biomass under contract but that’s not landfill methane.

A: HelioVolt Representative: The factory is just now manufacturing thin film CGS with the highest conversion factor and it is already installed on existing buildings.  They offer a glass-to-glass laminate designed for the rooftop where they could retrofit for commercial applications as well as installation on residential units.

Our focus is creating different packages for an integrated approach, like home shingles, and urban environments for skyscrapers. It is integrating with the structural façade. The solar industry is also selling sunshades that provide inside shade while generating energy on the outside. This would be considered distributed solar.

A: Yes, it is reasonable to consider it, but not within this timeframe and the tidal potentials are better on other coasts further north.

A: Yes.

A: There is some in existence now and we know about the wave energy potential in the Gulf. But this source is [a] better fit for the Pacific coast.

A: No, NOX emission controls at Fayette are as high as we can retrofit and Decker [Power Plant] is using environmental dispatch where we avoid dispatching on ozone action days. We do not have any major planned retrofits because 85 percent of emissions come from transports, (i.e., air coming in from San Antonio or Houston, not from Fayette or Decker). Hence, we are very limited in what we can do. The only thing we are talking about now is environmental dispatch by units.

Comment: There are other sources that contribute?

A: We still have a possibility of not coming into nonattainment.

A: The major issue of a credit strategy is replacement energy. At some point we have to shut down Fayette. Shutting it down isn’t related to cap and trade. One idea would be to sell it, but that doesn’t eliminate the problem. The problem to be solved is replacement energy.

A: Conservation is difficult for entities like LCRA. I would love for LCRA to include conservation, but I have some understanding about the difficulty they face because we were consulted on how they could do more conservation in their area. We were also puzzled about capturing more conservation since they operate as a wholesaler only.

A: So far everyone wants to drop the goals and go to cheaper.

A: The problem is we do not know all end costs of nuclear.

A: I challenged the premise - and they were astounded - that nuclear was not accepted as the cheapest solution. Looking at the questions, there is real opportunity for common ground here. If you read the questions closely, you will understand the industrial consumers’ positions. The first two pages of the industry letter are related to fuel costs because that reflects their increasing cost concerns, now and in the future.

It is a good question because it addresses the benefit of renewables rather than claiming they are merely a benevolent purpose; and fuel cost is fixed for some renewables. In addition, there will be federal greenhouse gas legislation that we might as well deal with now rather than waiting. Overall, there is common ground with industrials on these issues and we should be considering reaching out to them.

There is one thing I want to point out. Industrial customers are the strongest constituency, but if you look at base plan for wind and solar, Austin will be less than the national average. It just doesn’t seem to register to me that we cannot do better than that. A few industrial customers are blocking it from happening. A big part is the process and we need to organize as a common cause.

A: We can get a list of PIAC [Power Improvement Action Committee] members for you. Some of these companies are closing fabs and facing layoffs. The carbon initiative is for industrial customers using 6,000 MW/year. There is a cap and trade and those who put into cap and trade get the best outcomes. It seems to be a great opportunity.

Comment: From a revenue standpoint only 15 percent of your customer base is industry. This is disproportional and it seems like this group is a potent constituency.

A: I guess there are a couple things to point out. I realize that new things are happening, but we are not shutting down plants and we continue burning. We have to do less. And this base plan increases the burning and the renewables are pushed off to the future.

This plan calls for a net gain of 23 MW from wind and more solar as well as biomass and then there are some emissions with that. Generally, the plan is adding more projects that support burning.  We are not exclusively supporting offsets, but we are paying others to do carbon reductions and this means status quo is winning.

You can give us any scenario you want us to assess and you can promote anything to the City Council. No matter what, we are going to say this is the cost, the timeframe and the Council will decide. And if someone suggests adding 400 MW of solar next year, we are going to respond that we do not think that is possible and between those parameters we do not think it is feasible.

At the public meetings, please do not merely offer suggestions to “do more”. We need your help to identify what we can feasibly do, considering all the variables.

A: Yes, it has to happen. This is as evidenced by the Pecan Street Project. We have to change the business structure. It is important.

A: Pulverized coal plant is the lowest cost. Realistically, the lowest cost might be between wind and coal, but we can not get wind due to transmission problems, and coal is a problem because of regulation.

A:  Yes, it is for both gas and electrically powered homes.

A:  The program is based upon a standard sized house with standard roof sizes.  When mansions are concerned, there may be different standards which may be based upon the available roof size. 

A:  The program is based upon a 2,000 sq ft. house.

A:  Conservation is the cheapest option [at] two cents per kilowatt hour (kWh).  Renewables face challenges reaching greater than 700 MW and it takes a while to implement conservation.

A:  Yes, it is total cost.

Of the many renewables wind is cheap – in terms of supply side it is the cheapest.  It is within the three to six-cent range.  Current congestion cost is adding 40 percent to that cost and wind is intermittent.  Plus, it doesn’t reflect peak time like [when] the hot still summer days shut down wind.  The wind is strongest during night time and in winter months.  In other words, we may be retrieving only 10 percent of the energy we contract during non-peak.

Obviously solar is not available at night. Storage is needed to assure night time use.  We are looking at storage; primarily compressed air energy storage for wind.  This allows wind use as it blows and to be stored within a salt dome.  Stored wind power is retrieved with the use of gas.  The entire process runs a gas turbine.

A:  It is 50 percent - We do not have the calculations right now but we are doing a pilot project for this.  Preliminary calculations show that the end result is similar to a gas powered plant at 50 percent reduced activity.  It will use half gas when combining with compressed gas.

Biomass is a tenable source and can be dispatched.  The problem is that there isn’t [sic] enough sources in Texas.  We have a 20-year Purchase Power Agreement in Nacogdoches [Texas] where the biosupply exists.  We are tapping landfills and getting 12 MW of power there.  Landfill gas is good and otherwise would be escaping to the atmosphere, but we are not getting high returns.

A:  Yes, other biomass possibilities exist, such as growing things in a field to use as a fuel source.  We are reviewing the possibilities, but economics are not quite there.  Biofuels will work with blue-green algae as a liquid source. 

A:  Biomass is considered to be carbon neutral.  It balances out with its use as a fuel or it simply decomposes. 

A:  It depends on how some things decompose to methane gas and whether higher levels of CO2 results.

With regard to nuclear, I feel it needs to be considered since the GHG [greenhouse gas] problem is so big.  I would rather see nuclear plants than coal plants in China.  However, nuclear is not completely carbon free either.  We don’t know of any kind of biomass that is carbon free.

The nuclear waste issue isn’t as great an issue as before.  Storing wet rods at Matagorda Bay [Texas} is not solution though.  But considering all sources, just as there are no silver bullets, we need to pick the right solution for the right problem.  We need to take into account all the technologies.

Nuclear energy would not be a problem were it not for its water consumption.  So places without weather cannot support it.  Similar to solar [without sun, solar is not a feasible option.] China is dealing with water issues but has decided to use desalination.  Russia is working with China for floating nuclear plants that can use the sea water.  We need to look at the situation further. 

In terms of Austin, nuclear energy isn’t included in the draft plan, because new nuclear energy option is an expansion of South Texas [Nuclear Project] units 3 and 4 but they will not activate until the end of our timeframe.  Cost data regarding the nuclear option is confidential at this time, but costs are up and the schedule has slipped. We received an offer to partner in a nuclear plant. But the same issues exist, i.e., they wanted an open-ended construction contract.  This means no cap and costs will continue to rise.  The amount of debt involved compared to the size of utility we need is a significant consideration.  The charts show that 400 MW of baseload power is possible, however, it’s not needed right now.  We are trying to cover a relatively small need.   The economics of shutting down the coal plant would cause us to spend much more money.

A:  No, we use base first – peaking means it sits here and you do not run it until needed. 

A:  Well if you reduced peak first then you would have a nuclear plant that is not running because a nuclear plant is base.

A:  There will be some of that. Baseload in the City is being met by coal and the nuclear plant today.

A:  There is little difference between now and then.  The peaking chart shows a difference but not the baseload. 

A:  I guess we need to compare apples and apples, i.e., cost per megawatt per hour for the all end cost of nuclear even though it is heavy upfront, compared to all end cost to other renewables.  This is needed so that users will know the cost of the tradeoffs of environmental decisions made vs. traditional cost.

Comment: It would be good for citizens to really know what the cost is.

A:  The cost of different energy supply options are:

• Energy efficiency – 1 to 3 cents/kWh
• Wind – 3 to 6 cents/kWh
• Natural gas – 6 cents/kWh
• Nuclear and Clean coal – the EIA [Energy Information Administration] site says 2,500/kWh for nuclear.  A Bond person says that nuclear will come in at 10 to12 cents/kWh based upon a 30-year amortization.  Clean coal (IGCC)  is 10.6 cents/kWh
• Solar – 18 to 23 cents/kWh

A:  I would rank them as:

• Coal
• Nuclear
• Gas

Comment:  The story needs to be told about the transition and what the cheapest solution is.

A:  But the main difference was the price of gas at that time.  The projected price of gas was higher then.

The bottom line is that nuclear is viable with a main concern of financial risk for a utility our size.  If someone came in with a fixed price for this option, Austin Energy (AE) would seriously consider it.  Biomass is running within an 11-14 cent range, but we have a Purchase Power Agreement that stipulates if we don’t get delivery, we don’t pay.  We would be in better shape if we could do that for nuclear power.  There will be several nuclear plants built.  But let’s have some competition first.  If they can give something competitive, at a fairly well locked-in price, it would be the way to go.  For our size utility it would help avoid liability costs. 

A:  It is too early in the process.

A:  Also, there isn’t a huge shortage of fuels out there.  You can still put a gas turbine in place down in the matter of a year and there will be a gas strategy that in the next two to three decades.  Other options in terms of solar and wind, reflect that costs are dropping very fast.  We could put 300-400 MW within City limits when it falls below a $1.00 p/watt.  These are options to the nuclear.  It isn’t the last chance to meet capacity needs.  We are not looking at shortages within the next decade, but in 15 years perhaps.

A:  We aren’t having trouble achieving that. 

A:  2-3 cents per kWh.  There are studies about it.

A:  Yes, biomass is at 90 percent capacity.  All scenarios are run at that level.

A:  We use gas plants as balancing.  Currently we are not adding gas capacity except for the process of backing up wind and solar. 

A:  Yes, some in Texas, near the King Ranch.  Other parts of Texas, no, but yes in other parts of the country.  There are some concerns about noise.  But, I don’t know of any technology without a down side.

A:  In 2012, the plan includes purchase power where AE is purchasing 100 MW.

A:  It was wrong.  We are not putting up any capital costs because the biomass generation is at a fixed price.

A:  Yes, as you get into carbon cap and trade, and as a plant ages, there will be cheaper alternatives.  But we do not have plans to reduce power from that plant in a shorter time.

Comment:  One thing we should keep in mind is that we are going to pay for the congestion reduction for wind.  The state will pay $5 billion and we will pay for it in our bills.  If we are paying for it and we can get it here, we might as well use as much as we can get.

A:  The key part in the legislation is the ability to purchase international offsets, like from South America.

Comment:  The biggest risk is where credits will come from.

Comment:  We are anticipating prices to go up.

A:  But it will be lower than expected because of the recession.

A:  LCRA updated scrubbers for SO2. That doesn’t affect this.

A:  Smart grid includes two different things:  transmission and smart micro-grid which is distributed generation connected through technology.  We talk about it in terms of new power, or swapping of load. 

A:  Yes, my best guess is you will see a lot of green jobs pushed in the economic stimulus for energy efficiency in schools, production, and taxes.

Legislation carbon cap and trade has moved to 5th or 6th priority.  That means legislation is not likely this year, but perhaps next year.

A:  I am not sure what price would be.

Comment:  LCRA’s appetite for coal and the nuclear may be greater than City of Austin (COA), so there could be opportunities in trading resources since they are your partner.  Some or most people may not want to pay for this policy.  But there may be opportunities there. 

A:  Do you want to set up a meeting with Tommy? 

A:  I would love to get hydro power.

A:  NRG submitted a proposal to COA.  Some of the proposal is proprietary and some are confidential. 

A:  Yes.

A:  A little more than dozen – but we are not at liberty to discuss it.

A:  There are critical parts of the plant in certain parts of the world.  There is a lot of competition.

A:  Yes.

A:  No we are not.

A:  There are public filings and you can get to that, but not to schedules, etc.

A:  I do too, but it may not be the same then.  May be easier to permit and build and locate newer types.  For example, other types in South Africa don’t require water.  So if I said I wanted to be in nuke 20 years from now, I wouldn’t purchase ABR or ABWR now.

A:  We don’t have it yet.  It is a difficulty and there is a limitation of staff.  We are bringing in outside consultants to run numbers but we don’t have staff capacity to do it ourselves.

A:   There is always room for that, but that’s not the role of staff.  We give options for Council to consider. Council looks at the options and if they decide they are too costly where they want us to go to 15 or 20 percent then we will go with that.

A:  Council set the objectives.  We build a scenario based upon those using conservation and other options. 

A:  Yes, we did some of that especially between me and the Mayor and others.  I was vetting based upon being realistic.  I negotiated conservation and renewables down to 30 percent.  In other aspects we said there would be no way to get that done.

But I think it is achievable.  However, the other side is the cost efficiency and cost factor.  Solar and wind costs are the primary things here.  We missed the first goal for 15 MW by 2007 because of cost.  But no, we didn’t do a full analysis of all options.

A:  We will be coming back with costs for the plans.  For example, with the consultants, we will provide the cheapest way to meet the 30 percent.

A:  A simple sensitivity analysis wouldn’t do it.  Renewables and optimal mix and time would have to be included.  Energy prices will go up.  If you go 100 percent nuclear, prices also will go up.  We don’t know the magnitude, and are trying to figure that out.  With this scenario we have proposed, we will determine the impacts and will be taking that to Council.  If the impacts are too much, it will be scaled back.  If not enough, we will be more aggressive.  We will lay out the options for keeping lights on. On the other side, we will lay out what will be the impact of shutting down the coal plant.

A:  It’s a political decision. If you are a company and have multiple locations, it is political.

A:  Yes.

A:  Yes, this is something that happens all the time.

A:  We will have something in writing hopefully within the next few months and available to the public.

A:  Council decision would be summer or next fall [2009].

A:  Just participate like you are in this group.  If AARO wants to formally pass a recommendation to Council, we will pass it on to Council same as we do for other groups we are meeting with. 

A: I don’t want to leave that impression.  We are doing ok.  A lot of companies are in competition with each other.  NRG is facing a takeover from another company.

A:  It would not be worth going out to 2050 because there is so much technological change.  We couldn’t feasibly do that.  Within the last 30 or 40 years the population changes are phenomenal.

A:  We could straight line it.

A:  Diversity is important.  You have to look at long-term fuel sources when looking 30 years out and other supplies that may be at risk.  Solar is ok and there are others that might be impacted.  It is hard to put a price tag on it.

A:  IGGC is being researched adequately.  Nuclear isn’t a research issue, it is more a matter of waste management.

A:  Technical/financial consultants to provide.

A: Yes. PPA costs are removed from the fuel charge calculation for the year following expiration of a contract. If a contract expires three months into a year, the three-month costs are spread out over the year. This approach is used because the fuel charge is adjusted annually. [Yes, fuel factor is the last 3 months of the year– so that it will expire at the end of the contract.

A: It is documented through the annual adjustment made to the fuel charge. The fuel charge is a dollar-for-dollar recovery of costs resulting from fuel and purchase power costs and Austin Energy’s share of fees for ERCOT [Electric Reliability Council of Texas] support. There are no profits added to the fuel charge.

Discussion at meeting, two follow up questions.

Q: What is splitting out purchase power agreements or renewables on
fuel charge?

A: I’m not sure the current billing system will allow this. First, there is no space on the current bill forms, i.e., there is no more space available to add information.

Q: If you highlight the cost of generation, the cost will come down. Is there a way to show what GreenChoice® is?

A: Some purchase agreements come from renewable energy. Don’t equate purchase power agreements with only renewable energy. We will still know what dollars are spent where, but we don’t know if the billing system will allow that on the bill.

Discussion at meeting, seven follow up questions.

Q: What about alterative funding mechanism for fuel charge pass through?

A: Pass through fuel charge is common. The idea and basis is that Austin Energy isn’t incurring a fuel charge, this is just a substitute. Over the last 30 years, it is the way it funds. In the future we want to get away from purchase power and begin owning solutions. If we do, we will be faced with how to put fixed costs in our rates. In traditional generation there are large capitol and fuel costs. Some costs are in base rates and some in fuel charge. A large project still needs to be figured out.

Q: Is the redesign of the rate design overall part of plan?

A: No, we will not get into it until we have a rate case. At some point we will have to rate our rates and will look at rate case and design then.

Q: Is it better as a part of a restructure to buy power than fuel. I understand that’s what Question #4 was about.

A: No, it needs to have everything in the fuel charge and have a place for all the costs to start.

Q: Would that be more understandable and transparent?

A: Possibly within fuel charge there are purchase power costs and fuel. But, we don’t have a billing system allows to do that. But if we were to do something like that right now the bills are will change from simple to a utility bill that may look like phone book. Perhaps the consultants could review that.

Q: One reason for Question #4 is if you break out renewables and see the cost then it won’t be rolled into one and the city council may not be so eager to take steps. It needs to be represented so everyone can see what the costs are.

A: We understand that. I think it’s too late - by that time. We are trying to get this out now to see the level of acceptance.

Q: Along the way it doesn’t tell the story, unless you are a sophisticated purchaser. There are all new renewables as some know it’s at a discount.

A: A straight renewables charge would vary. Wind is lower than natural gas but with congestion not necessarily, but it will be lower in the future. Solar is clearly higher cost. I don’t think it’s accurate to say renewables are higher than conventional energy.

Q: The take away is it fair that a breakdown is needed for the bill.

A: Yes.

A: Technical/financial consultants to provide.

Q: What about the review of total cost of ownership generation?

A: That is underway now.

A: The transmission congestion cost calculation by ERCOT (simply put) is the difference between the market clearing prices for the amount of the generation decrease required on the supply side of the congestion point and the generation increase required on the delivery side of the congestion point—necessary to eliminate the congestion.

To clear congestion, we need to increase generation needed on the receiving side and decrease the need on the sending side. The difference is then taken on the cost of both sides, times the number of megawatt hours needed. Then it is assigned to parties responsible for creating the congestion.

If you want to see the calculation, it is very complex. But it is about reliability issues. Congestion doesn’t really occur. It would burn up the infrastructure. In reality, the congestion is cleared before it occurs.

A: Transmission congestion costs primarily affect new remote resources and are paid for through GreenChoice® or the fuel charge if the renewable supply is not sold as GreenChoice®. In the most recent GreenChoice® Batch 6 pricing nearly 30 percent of the cost was tied to transmission congestion. The contribution of these costs to future GreenChoice® or fuel charges will depend greatly on the CREZ [Competitive Renewable Energy Zones] transmission projects and future wind additions in Texas (see next question).

Wind is still the most economical and readily available renewable supply in Texas -- even with added congestion costs. However, it is currently only available in areas such as West Texas that are subject to transmission congestion. To the extent possible, Austin Energy has taken steps in its planning to avoid known areas of concern and its projects are widely distributed. The majority of wind additions in Austin Energy’s resource plan take place after the completion of the CREZ projects in 2013.

Until now congestion costs were benign. In 2008, congestion costs went up. However, they weren’t passed through because they are currently for GreenChoice® customers with fixed rates.

GreenChoice® new rates were able to see 2008 rates and forecast in transmission costs were 30% of the GreenChoice® Batch 6 rate. It is a big increase. That’s why Austin Energy offered Batch 6 for three years, because congestion costs will drop–which puts more risk on it for Austin Energy.

A: The CREZ projects, when completed, could reduce congestion cost by about 2/3 from approximately $25/Mwh to $8/Mwh. This is roughly $34M to $11M per year for the current wind portfolio shown in the plan through 2013.

Q: How much savings is expected to occur when looking at our resource?

A: The competitive renewables will reduce cost by two thirds and over time entirely.

Q: About when will it happen and in the current economic climate will it push it out?

A: Until then PUC will have to select contractors to issue permits. Construction for CREZ projects won’t occur until next year.

Q: So the profitability will go down? It is higher than the normal fuel – it increases the cost and it all becomes a pat of our fuel bill anyway, correct?

A: Yes. If we don’t sell wind energy through GreenChoice®, it becomes part of the system supply. The only part of the cost is actual congestion where there is a little bit of risk. We don’t put the 8.5 cents in the actual fuel charge it’s only the actual cost. If it continues to be a part of the supply mix, the fuel charge will track down.

Q: Why are we buying areas where congestion transmission occurs?

We are trying to get away from that by diversification – biomass, solar, and wind. We want to get away from west Texas. We are looking for wind resources in South Texas. Solar is local and will release local congestion issues and net release congestion. And we are postponing major wind investments until we get past the major cost.

A: ERCOT is in the process of hiring a consultant to address system stability issues. When and if ERCOT updates reserve requirements Austin Energy should be able to estimate impacts, if any. ERCOT expects to select a consultant in , but has not specified a study completion date. However, if additional standby generation costs are implemented at some date, those costs would be recovered through the fuel charge, which is how ERCOT standby generation costs are recovered now by Austin Energy.

Q: Will it be necessary to stabilize the grid and how will costs be recovered?

A: At this time we don’t know. ERCOT hasn’t determined the backup needed. Our contractor is being used to determine that. We probably have enough backup ourselves and it may be an additional Austin Energy market into the ERCOT market. And we will introduce a recoverable cost in the event the net increase in cost will be included in the fuel charge – similar to other situations handled today.

A: Austin Energy is working with the Electric Power Research Institute (EPRI) to assess two storage technologies: 1) Compressed Air Energy Storage (CAES) for large scale (approx 300 MW) for six-hour energy storage and 2) testing of zinc bromine batteries for substation level energy storage (2 MW, one to two-hour storage). At the conclusion of these two studies (about a year away) we will have some estimates on how their potential use would affect our system costs.

Involved in two energy storage studies – wind is the choice so far. Solar is not practical. Regarding volt storage for wind – we did a study few years ago using a salt dome. At that time it was too expensive. The results showed that it was two times the cost over benefit; $2 billion cost to get a $1 billion benefit. We will be looking at it again.

A: Discussion at meeting, one follow up question.

Q: Can resource generation plan be modified to include a cost goal?

A: The Climate Protection Plan is the Council’s plan and they need to deal with it. If that’s what you mean. A least cost option is included for the time frames we are looking at and has hedge value. However, we are concerned about the future cost of fuel. In economic slump and higher cost of fuel we don’t know the impact.

If fuel costs are going up, no fuel goal is good. There are good ways to see fuel costs if you look at hedging. Coal can’t hedge out too far; Nuclear has three to five years. Couldn’t hedge for purchase power with wind or ownership because of the construction – and costs don’t go up.

A: Other reasons for the renewable goal are risk management. We are able to secure non-fuel consuming resources like wind and solar and lock down a fixed price for10-20 years through long-term contracts. By contract, long-term fixed pricing is not available for any commodity fuel. Therefore, renewables can reduce exposure to volatile natural gas prices and price changes in other fossil fuels providing the potential for long-term cost savings on the energy itself. This is best illustrated by the pricing of early GreenChoice® batches verses recent standard fuel charges.

Another benefit will be the hedge value against carbon legislation. While the estimates of such costs are wide, even the low end could result in a ten percent increase in fuel cost.

Q: What are the reasons for 30 percent of the renewables?

A: In addition to the answer provided, another reason is for carbon legislation. As far as timing is concerned, it may not be this year or next year. We have to believe that our economy will come back and there will be new legislation that will increase the cost of the carbon. Today 70 percent of energy is carbon based between 60 – 65 percent is from fossil fuel. The goal is to shift away from the fossil fuels.

A: Discussion at Meeting.

This has not come up in a Council meeting. If that’s a suggestion from this group, we will take your question to the Council through the notes. We will do that as a part of this entire process. We will do a rate impact notice - not detailed - but it will be system wide ranges and will get to generation scenarios, i.e., increase by x percent this by y percent. It is not a full rate case study.

Q: That is the question – we understand the need for the resource plan – but that is what is being challenged. We would like to know if it can change.

We want to challenge the Austin resource plan which is the driving force why we are going through this plan itself. We want to challenge why things have to be done by 2020, and the Climate Protection Plan which was passed in 2007. If we delay it, we can get out of economic recession and technologies can improve and then can come up with some better solutions.

A: Austin Energy is the expert in power generation and we need to go back to council and say what is reasonable. And this process is designed to do that.

We are looking at practical alternatives and are back loading wind resources from past to present. That is the reason for the biomass. Once it is bought up and gone it’s gone. Once the 300 or 400 MW are committed we are shut out. We saw the opportunity there to take advantage of the situation. We will engage the Council and will modify our recommendation if we see something that is a superior plan that will help council meet their goals; if there are other technologies we would like to hear about them.

But if you think the goals are too aggressive you should contact the Council directly. If you want to contact them once the cost assessment is completed, it may be a better time to do it then - unless you just want to do it before. At that time, we will tell Council, here’s what Council requested, here’s what can be done as a result of that request, and here are the alternatives. We have to fulfill our directive.

Q: Can you recommend if you delay it five yeas with other technologies?

A: We don’t know how much confidence we have to do that. I see us going to them with the best plan that meets their goal. If there are others that don’t want this they should take it to Council. You should know that we are meeting with others, and Council will be receiving information regarding opposing positions as well.

The Council sets the goals. We are going to take the directive from them and provide to council the way to meet their goals. Decreasing or increasing the goals is their responsibility. That’s why we are recording this meeting. We have had so many town hall meetings, focus meetings where this group said this, and this group said that. We are getting pressure from both sides.

A: Still gathering data. One example: CPS Energy (San Antonio) has a goal to achieve renewable energy capacity equal to 20 percent of peak electrical demand by 2020; currently evaluating proposals for up to 100 MW of solar-generated power and developing program to reduce demand by 771 MW by 2020. Research will continue and will provide a complete list of comparable utilities at the next meeting.

Q: How does our plan compare?

A: CPS San Antonio aren’t [sic] that different. We are still gathering that data and may have it available at the next meeting.

San Antonio is much different than us, yet –they have different consumers.

A: This has been done. We did increase the self-generation of renewables. Are we considering further? No.

A: No.

Q: Will that impact what is taken to council?

A: Yes it could.

A: No.

A: Austin Energy has no plans at this time to conduct a Cost of Service study. We are not planning to a cost service study soon. We are doing a rate impact analysis at a system-wide level.

A: FPP is one of the top rated coal power plants in the United States because of consistent efforts to improve plant efficiency. Improved plant efficiency reduces greenhouse gas (GHG) emissions by reducing the amount of fuel consumed to produce the same amount of electricity. Other FPP-related evaluations underway specifically aimed at reducing GHG include:

• Co-firing biomass with coal (Evaluation of co-firing biomass is in the early stages consequently neither capital cost nor fuel costs have been established. The feasibility of co-firing up to 10 percent biomass involves many factors including but not limited to: local fuel availability, implications on fly ash sales, fuel handling requirements and necessary unit modifications).
• Austin Energy staff is monitoring closely research regarding CO2 sequestration technology development.

What is the feasibility of GHG power project – when looking at confirming biomass projects? It’s still a developing technology. Take cellulose for example: fire, palletize it and ship it and it is similar to coal without the CO2 content. Today we are reviewing those fuels and looking at their behavior in boilers and at the reality whether any new plants will actually be built. The closest one was is in Indiana. Feasibility of transportation is important.

Taking a look at it. Also tracking flue gas – today there are clean coal units. There are possibilities to retrofit existing facilities instead of building new ones. There have been some test cases at Fayette – but it’s not feasible now; and we are watching it.

Q: Solar power - it takes 15 to 20 years to obtain pay back in residential. If you consider payback in 25 years then you have to finance it up front. Is that something you’ve looked at? Are there any assistance programs for residential housing to finance solar installations? Are you looking at individual residence or other similar installations?

A: The Pecan Street Project (PSP) is a consortium of different groups – and depends on the business plan, i.e., it results in how a utility make money putting solar on the roofs of houses, etc. The feasibility of solar is known. Chances are it will pay back but we need to know what the right approach to this? It is a huge issue.

There are several aspects when reviewing solar options, like Smart micro-grid, which uses grid and technology. We are looking at another aspect of solar putting a facility in one place and have fixed costs that are able to determine overall cost. Putting solar on residential roofs varies from city to city. The vast majority of roofs can’t have it due to orientation and tree cover. I can’t put it on my house because of houses.

We need to look at flat roof space like Wal-Mart and Best Buy which where we run into a different business-model roof space. Do we lease the space? We can’t afford to pay rebate on a Wal-Mart roof. Working out the economics will be multi-faceted economics.

Solar pays back in 15 years. In response to financing - you bill them regularly and in the next 20 years it pays back. It is an idea but can be a billing system problem. Overall, Austin Energy may lose money by allowing residential installations of solar due to the rebate and adding unused power back to the grid. In addition, in residential areas, we don’t recover any cost for poles and wires. The payback is not within the 15-year time range without the rebate.

Building codes will change. What does that mean? Will there be a renewable clause in there. There are zero energy capable homes – energy efficiency measurement. If you do that you should be able to generate as much as you consume.

A: Discussion at meeting, five follow up questions.

Q: What is the cost of total cost of ownership from solar to nuke? The proposal for NRG is confidential and we can not share information from that proposal.

Q: Why not?

A: Because of trade secrets and ultimately NRG has said it is confidential. They are sensitive about these things and the data is ultimately NRG’s anyway. However, we will cost compare with other options but may have to use published data to facility the comparison. We will make it available.

Q: Is there a way to look at a percentage that will offset – can you design it so that expansion will be offset higher costs with lower costs for solar.

A: Not today.

Q: Is there a way to lock in nuke costs like through the expansion of South Texas nuke costs?

A: That’s part of the next process and we need to learn how to offset and create a plan. Until we know more about the costs and as said before the best way to do nuke is a purchase power agreement so we don’t assume the costs of construction and other liabilities.

Q: Because of all the risks involved it lets us offset higher cost renewables with lower cost nuke.

A: Existing nuclear has no bearing on this. Based upon data from other countries if listing all options we see the following costs: energy efficiency is 2-3 cents per kWh, wind is 5-6 cents per kWh, natural gas is 6-8 cents per kWh, nuke and clean coal would be 10-12 cents kWh, biomass is 15-17cents kWh, and solar is 17-23 cents kWh.

We are in a contractual arrangement with SDP and can participate in the development of new units. That’s the only thing we are looking at it with an existing plant. If we want to consider other options it will be later. A very sophisticated, very thorough cost estimate based upon existing plants is needed.

This is primarily because no new plants data is available; primarily because no one has built a new plant in a long time. There couldn’t be fixed prices that pass through their formula. But we would get all the benefits of the receiver and nothing as far as ownership. We just don’t know. Unlike conventional coal, there is still a question about the price of construction. We don’t even know if there is the labor available for construction, i.e., welding. There is more data for coal then for nuclear plant construction.

A: Austin Energy pays its load share (~4 percent) of the Nodal market implementation. Therefore, at $319M, Austin Energy’s total share is $12.8M and $26.4M at $660M. This translates to $4.2M annually currently or about 1 percent of the current fuel charge. At $660M the annual cost for Austin Energy would be about $8.5M or 2 percent of the current fuel charge.

A: Austin Energy has received two confidential consultant forecasts of natural gas prices the annual average of which are illustrated in the chart below:

Natural Gas Price Forecasts - $ MMBtu
Year	Consultant Average August 2008	EIA Dec 08	NYMEX - Jan 2009
2009	8.39	6.54	5.80
2010	7.41	6.52	6.70
2011	7.62	6.50	7.12
2012	8.02	6.68	7.21
2013	7.94	6.69	7.25
2014	8.48	6.82	7.28
2015	8.71	6.89	7.36
2016	9.14	7.02	7.56
2017	9.62	7.16	7.42
2018	10.07	7.38
2019	10.61	7.55
2020	10.97	7.43

Gas price forecast. We don’t do internal gas price forecasting. We leave it to two consultants. Because they are in the business, we can only provide an average of the gas price forecasting from the two contractors Austin Energy uses. We can not give out the information from any specific firm.

A: Discussion at meeting, three follow up questions.

Q: Is Austin Energy increasing rebates?

A: Yes, we will consider rebates for assistance. We will make more changes and have already made changes for the thermal cap rebate of $100,000. All rebates must undergo cost/benefit analysis to make sure it is feasible.

Q: Will rebates still be available through plant and climate initiative?

A: If there is capital available. We still have to look at that. When there are federal incentives like federal solar we adjust to avoid double counting. We want to avoid situations where you build for $100,000 and get $120,000 rebates.

Q: [Comment] Conservation is cheapest. One first thing is to change the incentive program and then more of us will do more. We are trying hard to do the next round of things we can and will work harder. It will be about our company strategies to do it and it is good to see some alignment there, especially if it is part of a final conclusion and if everyone has seen that it makes more sense to improve programs rather than to do a plant.

Q: Are offsets really expensive? Offsets are $30 per ton. Megawatt – it will raise coal costs considerably. Much cheaper than shutting down a plant and cost of using renewable. Once climate legislation occurs it could be different.

Purchasing offsets aren’t a guarantee that we actually obtain credits. …are markets today and we can buy offsets? Some of the offers made were 10 to 15 years in the future. If it’s a 20-year strip, we do not want to make the commitment.

Q: One thing found is that offsets are the cheapest way to do anything. Don’t do efficiency its cheater to do offsets. Is that right?

A: There is a big argument about that.

Q: My company is ethnically bound to do conservation, green energy and then offsets. So I don’t think you start there, you end up there.

A: It will be cheaper to purchase offsets until legislation occurs. It is a balance. The recommendation to Council – our strategy is to purchase offsets until 2014, which is the earliest date for effective legislation – so we can’t plan beyond that. The idea is that we are not considering offsets as the final solution. If you can do other things that have permanent benefits... Offsets are taking and taking. However, it is based upon timing. The first objective is to eliminate carbon and avoid double counting. Stack emissions are counting what the impact is and to find what is preferred – i.e., build something that doesn’t cause emissions. We will continue to look at this – in the Councils plan our target timeframe was 2020 for now.

Q: Webberville.

30 MW – This is a CB project that will be recommended to City Council on February 29. It will go to EUC [Electric Utility Commission] purchase power 20-year term, providing land east of Austin connected to 30kb system and connected to Austin. When the part of the grid is congested it will put into the correct side and will come on line in 2010, if the council approves. We will have no responsibility for the plant; it will be an off-take purchase. [We] will have the information on Monday in terms of costs and other details.

Q: A 3rd party would manage it?

A: Yes, we provide the land and they provide the long-term management.