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Seven Questions with SMUD CEO Arlen Orchard

The Sacramento Municipal Utility District (SMUD) has been Sacramento County’s publicly owned, not-for-profit electric service since 1946. We recently sat down with Valley Vision board member Arlen Orchard, the CEO and General Manager of SMUD, to talk Cap-and-Trade, cannabis legalization, and cultivating a clean and sustainable economy in the Sacramento region.

 

1. Why is the extension of the Cap-and-Trade program important to SMUD?

SMUD has been committed to environmental stewardship for many years and has invested significantly to reduce greenhouse emissions for its customers and California. The extension of the Cap-and-Trade program over the next decade is the cornerstone of reducing greenhouse gas emissions in California and allows California to continue to play a leading role in addressing climate change. The extension includes continued allocation of allowances to utilities, a known and stable market structure, and important allowance price control mechanisms that will collectively provide a reasonable cost approach to deeper greenhouse reductions while providing the State with needed funds for greenhouse reduction investments. The extension of Cap-and-Trade program will help SMUD provide clean, reliable power at affordable prices and support our goals of electrifying transportation while significantly reducing greenhouse gas emissions in our region and throughout the state.

SMUD sees a surplus of Cap-and-Trade allowances at times, particularly during high hydro years, and has sold those allowances in quarterly auctions. The revenue helped fund several greenhouse-gas reducing projects in SMUD’s service area to benefit SMUD’s customers, including disadvantaged communities and customers. For example, SMUD funded three programs that delivered deep energy efficiency retrofits to low-income customers; a program to train high school students in underserved communities in energy audit techniques, leading to energy efficiency retrofits at the students’ seven schools and potential career paths for the students; and a program to fund and demonstrate deep energy efficiency retrofits at local non-profits and small businesses.

2. Washington State saw energy use increase by an unanticipated 20% rate after legalizing cannabis. What is SMUD doing to prepare for the high energy demands and other aspects of the emergent cannabis industry?

SMUD is taking a multi-pronged approach to serving new indoor cultivation loads. SMUD is working with these new customers to understand their facilities and loads while providing assistance with energy efficiency programs, like lighting and HVAC, to reduce the load as much as feasible. SMUD is also planning capacity additions to meet the new loads quickly and evaluating alternative ways of providing service to the customer as reliably and cost effectively as possible when standard distribution service may be costly or delay new service. SMUD is reaching out to various business partners to encourage new indoor cultivation in areas that meet their permitting requirements but also have utility system capacity available to serve this new load. This proactive approach ensures we can meet the needs of this growing industry efficiently and cost effectively.

3. Why is broadband deployment important to meeting greenhouse gas reduction goals?

While SMUD does not provide broadband or communication services to our customers, we recognize the important role that broadband plays in supporting economic development, access to information, and opportunity to disadvantaged communities. Along with ensuring the sustainable energy practices and investments that support disadvantaged communities, access to broadband can play an important role in creating sustainable communities. Specific to our business, widespread deployment of broadband allows SMUD to collect real-time data on customer behavior and energy usage, which can be used to design programs targeted to achieve various objectives. This includes design of programs and rebates that help reduce overall customer usage, especially during peak periods when higher pollution generating resources are needed to help meet customer loads.

4. Valley Vision’s Green Communities project has helped San Joaquin Valley households save over 13 million kilowatt hours. What opportunities do businesses and nonprofits have to conserve energy in their communities?

SMUD spends over $35 million a year and offers a comprehensive set of energy efficiency solutions to our business and non-profit customers. These include offerings addressing lighting, HVAC, refrigeration, data centers, and custom energy efficiency solutions. We offer convenient direct install services as well as financing that can make conserving energy easy for our customers. We also partner with our customers to test innovative new technologies that can help create savings in the future. Recent additions to our customer offerings focus on the use of efficient heat pump technologies to reduce natural gas use for heating and water heating and thereby help the state achieve its carbon reduction goals. The online enhancements we’ve added to smud.org include bill alerts; “My Energy Tools” for residential and business customers that help them save energy; “My Account” charts that show customers how their usage compares to previous months and years; expanded payment options; an online rebate center; and other easy-to-use tools that give customers more choices and options regarding their energy use. These options have been very well received. SMUD also redesigned its low-income assistance rate to provide discounts to the customers who need it the most.

5. How will SMUD’s agreement to help Japanese power companies with technology adoption benefit customers in Sacramento County?

SMUD’s new partnership provides several direct and indirect benefits to our customers. The continuing deployment of rooftop photovoltaic (PV) and successful energy efficiency programs has resulted in flat to negative load growth from SMUD. Yet, costs to serve customers with services, and operate and maintain distribution, transmission and generation facilities, continue to rise predictably. Revenue diversification will allow SMUD to fund new investments in grid modernization and new technologies to benefit our customers without asking our customers to foot the entire cost. Indirectly, SMUD is gaining valuable global knowledge about emerging technologies in the Smart Grid arena that NEC and Japanese utilities are deploying to meet their needs – knowledge that will help SMUD shape the products, services and options to our customers in the future. The emerging technologies include better utility asset management and operational tools to reduce costs and improve reliability of electric service, as well as customer sited technologies such as storage and electric vehicles to name a few. Additionally, as Japan continues its deregulation of its electricity system, SMUD gets to glean valuable information about how this may affect SMUD customers should California consider deregulation of retail energy again in California.

6. Taking into account the devastation caused by tropical storm Harvey, have lessons learned from this disaster caused SMUD to modify its business resiliency plans?

The impacts from tropical storm Harvey re-emphasize the significance of our maintenance, asset replacement and grid modernization strategies in ensuring a safe and resilient grid. Our journey towards a modern and more resilient grid began in 2009 with the SmartSacramento® project. With the assistance of a $127.5 million Smart Grid Infrastructure Grant from the U.S. Department of Energy, SMUD invested a total of $308 million in our SmartSacramento® project. SmartSacramento’s scope ranged from the installation of 617,000 smart meters and distribution automation systems to a digital operations wall map and an improved outage management system. These investments equip our operations staff with tools to be able to quickly determine which customers have lost service, allow them to remotely operate equipment to quickly isolate areas affected by outages, and inform restoration strategies.

Since the completion of SmartSacramento®, we’re continuing to invest in the deployment of additional line automation switches and retrofitting existing distribution substations with remote data acquisition and control functionalities. These functionalities provide our distribution operators visibility at more granular levels to keep outages times low, protect equipment and maintain the grid without compromising reliability. These projects, as well as implementation of an Advanced Distribution Management System and upgrade of our communications network, round out the investments SMUD is making to ensure that we continue on the path to a modern and more resilient grid.

7. What is one bold prediction for what the electric utility industry will look like in five years, and what does that mean for the Sacramento region?

The electric utility industry is undergoing tremendous change. The disruption of our traditional business model is driven by the 3Ds – digitization, decentralization, and decarbonization. In addition, increasingly sophisticated customer expectations are requiring utilities to focus on customer engagement and providing customers with more information, tools, and choices. Nowhere is this more evident than in the growth of distributed energy resources and services which are allowing customers to take control of their energy supply and cost. With a proliferation of distributed services, new devices and technologies promise to radically change energy use and control. The next 5 years will see an immense innovation which will redefine our customer relationships, force us to become more efficient and effective at what we do, and provide new opportunities to create new products and services that will benefit our customers and community. We will need to make major investments in new and developing technologies to provide the visibility into our distribution grid to allow us to optimize the proliferation of distributed energy resources to maximize the economic value of a decentralized grid for our customers, third party providers and SMUD. The utility of the future will be the glue that binds all of these new technologies and services together to ensure reliability, access to all segments of society, and the fair allocation of the economic benefits.

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Arlen Orchard is a Valley Vision board member and CEO and General Manager of the Sacramento Municipal Utility District (SMUD), Sacramento County’s publicly owned, not-for-profit electric service.

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