Kentucky Public Service Commission Energy Review and Outlook
The Kentucky Public Service Commission, an independent regulatory agency, oversees various jurisdictional utilities including water, natural gas, electric, and telecommunications services. The primary focus since 1934 has been on regulating rates and ensuring fair and reasonable service. The energy profile in 2022 experienced significant fluctuations due to global events such as the war in Ukraine impacting natural gas prices in Europe. The rise in fuel prices led to changes in power generation sources, highlighting the economic dynamics within the energy sector.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
Public Service Commission Energy Review and Outlook Kent Chandler, Chairman Kentucky Public Service Commission June 2024 Any views expressed in this presentation are those of the presenter and do not reflect official positions of the PSC.
Public Service Commission Independent Regulatory Agency Three-member Commission Quasi-judicial function Regulates rates and service provided by jurisdictional utilities: 1,100 jurisdictional utilities Water and sewer utilities (small systems comprise the bulk of regulated utilities) Natural gas distribution systems and intrastate pipelines Electric utilities (investor-owned and jurisdictional cooperatives) Telecommunications (small number) Does not regulate municipal utilities except for gas pipeline safety. Does not regulate cooperatives served by TVA. 2
Service and Rates Since 1934, the primary statutory directive of utility regulation in Kentucky revolves around: Rates Fair, just and reasonable Service Adequate, efficient and reasonable Most everything in retail utility regulation comes back to one or both of these principles. 3
2022- Energy Profile in Review 2022 saw a massive increase in wholesale power prices over 2021 This increase was driven largely by an increase in fuel prices (coal and gas) Gas prices were driven higher by the war in Ukraine Concern for natural gas availability drove European gas prices higher US Natural gas prices rose modestly, as they get closer to parity with global prices as a result of increased LNG export capability in the US As gas prices rose, fuel switching occurred, increasing demand for coal, and thus increasing coal prices Coal and natural gas generation are economic alternatives 4
2022- Energy Profile in Review War in Ukraine drove up natural gas prices in Europe 5
2022- Energy Profile in Review Given export of LNG and increasing parity of global natural gas prices, domestic natural gas prices rose Henry Hub Spot Price ($) 10 9 8 7 6 5 4 3 2 1 0 Jul-2019 Jul-2020 Jul-2021 Jul-2022 Jul-2023 May-2019 Nov-2019 May-2020 Nov-2020 May-2021 Nov-2021 May-2022 Nov-2022 May-2023 Nov-2023 Jan-2019 Mar-2019 Jan-2020 Mar-2020 Jan-2021 Mar-2021 Jan-2022 Mar-2022 Jan-2023 Mar-2023 Jan-2024 Mar-2024 Sep-2019 Sep-2020 Sep-2021 Sep-2022 Sep-2023 EIA, 2024 6
2022- Energy Profile in Review Given the transportation constraint, global natural gas prices have been significant higher than US prices since increases in Shale production 7
2022- Energy Profile in Review Transportation constraint is being reduced, as evidenced by the material increase in the amount of US LNG exports 8
2022- Energy Profile in Review Increase in input costs drove higher electricity prices in 2022 By way of example, in PJM, the price of energy rose from a weighted average of less than $40 MWh in 2021, to more than $80 MWh, with more than half of that increase driven by consumables (fuel) PJM IMM 2022 Annual Report 9
2022- Energy Profile in Review Decrease in input costs drove lower electricity prices in 2023 By way of further example, in PJM, the price of energy dropped from a weighted average of more than $80 MWh in 2022, to almost $31 MWh in 2023, with nearly 65% of the reduction attributable to fuel and consumables PJM IMM 2023 Annual Report 10
2024-2025 What to look forward to? Gas Prices are way down, domestically and abroad post- 22 11
2024-2025 What to look forward to? Gas Prices are way down, domestically and abroad post- 22 12
2024-2025 What to look forward to? Coal production is expected to be consistent through 25 13
2024-2025 What to look forward to? Power prices are down S&P Global, US Power Tracker: PJM forward power prices remain lower on year with gas prices down 14
Current Generation in Kentucky February 2024 EIA, 2024 15
Current Generation and Load in Kentucky No expected material changes in generation capacity through 2025 Modest generation retirements Unknown amount of new solar (could be minimal or up to a few thousand megawatts No unplanned additions of significant load No material changes to the transmission or fuel delivery systems representing constraints 16
Current Generation and Load in Kentucky Forecasted load growth in Kentucky, example 2023 PJM RTEP 17
Electricity Risks I ve previously expressed my personal concern with our ability to reliably and cost-effectively replace the energy that is lost from retirements of current resources Pending or proposed environmental rules pose cost (making compliance investments) and reliability (retiring due to cost of environmental compliance, without convenient replacements) concerns Transmission Cost of inefficiently planning the transmission system Allocation of transmission costs 18
Transmission costs, example AMP, 2024, Docket No. RM21-17-000 19
