Paenergypresentation11 17final 091118100127 Phpapp02
- 1. PA's Electricity Deregulation: How to Save Money with Electric ChoicePresenter: Richard J. Costello, PE, MSEM, BSME, CEMPresident, Acela Energy GroupLive Webinar Sponsored by CrunchEnergy, November 17, 2009
- 2. GoToWebinar Attendee Interface1. Viewer Window2. Control Panel
- 4. Presenter: Richard CostelloPresident of Acela Energy GroupFormer Power Supply Manager for the Massachusetts Bay Transportation Authority Senior Engineer in the Load Management Department of Boston EdisonPast National President of the Association of Energy Engineers (2000)2003 Energy Professional of the Year Award 2006 Inductee, Energy Managers Hall of FameM.S. in Engineering Management from Western New England College; B.S. in Mechanical Engineering from Northeastern University Certifications:Certified Energy Manager - Association of Energy Engineers (Instructor)Certified Lighting Efficiency Professional - Association of Energy EngineersCertified Demand Side Management Professional - Association of Energy EngineersCertified Energy Procurement Professional - Association of Energy Engineers (Instructor)Certified Green Building Engineer – Association of Energy EngineersCertified Business Energy Professional - - Association of Energy Engineers ( Instructor)Qualified Energy Analyst – Association of Energy Engineers
- 5. AgendaThe Electrical SystemPennsylvania RulesEnergy Procurement ProcessMarketers & BrokersConclusionQuestions
- 6. Electric Power System: An OverviewSource: Duquesne Light
- 7. The Regional Grid: PJMThe Pennsylvania-Jersey-Maryland Independent System Operator (PJM)is the Regional Transmission Organization (RTO) that operates the regionaltransmission system and runs the associated energy markets
- 8. Average Retail Prices8 of the 10 states with the highest (cents/kWh) average retail electric rates are located in the Northeast, with Connecticut ranking highest as of Sept. 2008.
- 9. Northeast Commercial Power Marketers
- 10. Electric ChoiceGives customers access to alternative electric generation suppliers (EGSs)Utilities referred to as Electric Distribution, or “EDCs”Utility bills unbundled into generation, transmission and distributionDistribution charges billed to customers by utility regardless of supplierSupplier remitted charges for generation and transmission charges (Price to Compare)Distribution and transmission continue to be regulated charges (FERC and PUC)Source: GDF Suez
- 11. Electric ChoiceSource: Duquesne Light
- 12. PPL’s Competitive Bridge Plan, 2010Large C&I CustomersSmall/Mid-sized CustomersLarge Customers Small Customers
- 13. PPL’s Default Service PlanLarge Customers (Rate Schedules GS-3 >500kW & LP-4 with >=500kW, LP-5, ISP, LP-6, LPEP, IST, ISM & Standby Service) will be on Real Time hourly PJM Locational Margin Price (LMP)Real Time Hourly LMPs plus admin costs, transmission, ancillaries and capacityProposal is pending to create a Monthly Fixed Price product, bid on a quarterly basis (price may vary each month, but prices will be set based on a quarterly procurement) Additional details to followSmall customers (Rate Schedules GS-1, GS-3 <=500kW & LP-4 >500kW, GH-1, GH-2, IS-1, BL, SA, SM, SHS, SE, TS, SI-1, and standby service) will have a Fixed PriceFixed pricing set via 8 procurementsSet by blending procurements of spot market, 12-month, and 24-month supply contracts starting in 2009
- 14. PPL’s Small / Mid-sized Customers – RSP & RMPTwo options:Rate Stabilization Plan (RSP)* - Covers 1/1/2010 – 12/31/2011Rate Mitigation Plan (RMP) – Covers 1/1/2010 – 12/31/2011
- 15. 2009 Timeline for PPL’s Power Purchase Option (1- year 2010 opt-in Plan for Large Industrial UsersJuly 27, 2009 – Deadline for customers to express interest in the one-year fixed-price optionAugust 24, 2009 – Request for proposals issued to suppliersOctober 5, 2009 – Supplier bids dueOctober 8, 2009 – PA PUC approves resultsOctober 8-9, 2009 – PPL Electric Utilities announces results, provides pricing information to customersNovember 9, 2009 – Deadline for large customers to accept one-year, fixed-price optionSource: PPL Electric Utilities www.pplelectric.com/Commercial+and+Industrial/rate+options/Power+Purchase+Options.htm
- 16. Electricity Cost ComponentsEnergyOutput of generator + losses & congestionMajority of total energy costVolatile yet liquidDetermined by market forcesDeliveryCost of moving energy from generator to meterSmaller portion of total energy costLow volatility; tariff-basedDetermined predominantly by regulatory bodies and ISOs
- 17. Electricity Cost Components - PJMSource: GDF Suez
- 18. PJM – Capacity, Transmission, AncillariesCapacity cost – PLC demand * Reliability Pricing Model (RPM)
- 19. PLC is each customer’s Peak Load Contribution
- 20. You have some control over your PLC
- 22. Transmission
- 23. Ancillaries
- 24. Line Losses (Distribution & Transmission)
- 25. Taxes (Gross Receipts)Product StructuresEnergy StructureFixedIndex + AdderReal-TimeDay-AheadFixed BlocksHeat RateVolumes: full swing v. bandsInclude or Pass-through AddersAny or all of the adders can be combined into or excluded from the energy pricing structure. Know what you’re buying!
- 27. Who decides the path taken?The Facility ManagerThe Energy ManagerThe Purchasing DepartmentThe VP of OperationsThe CEOThe Accounts Payable Clerk
- 28. Time and Resource Allocation IssuesTime to carry out the procurement processSufficient knowledge to comfortably carry out the processInternal support of other departments within the institutionFunding available to acquire outside assistance if desired
- 29. Competitive ProcessCreate an Energy TeamFacilitiesAccountingLegalPurchasingExperienced consultant, if desired
- 30. Assembling the Necessary InformationNon-Energy Related InformationFacilities physical information (maps, plant descriptions, etc....)Financial information (annual report-type info)Corporate general information (public relations- type material)Gathered energy information and bills (very time consuming)
- 31. Assembling the Necessary InformationEnergy Related Data1 or 2 years worth of electric billsInformation from electrical time-of-day meters15 minute data
- 32. Hourly data
- 33. Load profilesAny other data available from the LDCSome utilities charge for interval data, some do not
- 35. How many power marketers will you solicit?Are they licensed in the state?National, regional, and/or local financial capabilitiesESP’s relationship to Local Distribution Company (LDC) & othersWhich Energy Service Providers Do I Solicit?
- 36. IntroductionGeneral conditions (typical)Questions relative to Power Marketers (financial, existing clients, etc...)Detailed questions on energy servicesPricing - methods to present pricingLegal language - general corporate purchasing language along with specific power purchase agreement language desiredEnergy Data - Properly presented in hard copy or preferably electronicallyWriting the Request for Proposal
- 37. Issuing the Request for ProposalReceive faxed or emailed confidentiality statementsMail/email all request for proposals at the same timeVerification of receiptWritten questions received and answers distributedMost power procurements are done via email
- 38. Reviewing the ProposalsNon EconomicESP retail experienceESP financial positionStrength in answering the RFP, referencesEconomicTerms and Conditions of contract
- 39. Major Areas of Concern in Electric Purchasing ContractElectric usage upper & lower limits - BandwidthEarly termination and results, +/-What are you actually buying? - DefinedForce MajeureWhat does the term “Firm, All Requirements” mean?Selling or buying a facilityWhat does “Reciprocal” mean? – Indemnification, liquidationsExact term of the contractEvergreen clausesCredit requirements
- 40. The Power Purchase AgreementNegotiate a contract with advantageous terms and conditions tailored to your particular load profile.The proper terms & conditions are extremely important, oftentimes more important than price differences.Once you are comfortable with several contracts, then begin to ask for prices.Also keep in mind: The quicker you can make a decision, the less risk premium will be built in by the Power Marketer.
- 41. Selecting the Energy Service ProviderNotify the primary contender(s)Notify the non-contendersProvide appropriate feedback to allYou may end up soliciting these Power Marketers again
- 42. Power Marketers and Power BrokersA Power Marketer generally has title to the power and is financially responsible to the customer for billing at the agreed-upon rate and contract terms and conditionsA Power Broker generally assists the customer on selecting the optimal Power Marketer with whom the customer should sign a Power Purchase Agreement
- 43. Caution When Using an Energy BrokerThere are Energy Brokers that provide excellent services at fair prices.However:Many Brokers receive payments from the Power or Gas Marketer that they select for you, and they receive payments based on the number of kWh’s or Therm’s your company uses, not how much time they actually spent on the procurement process.With this payment process set up, it is easy to see why many Brokers will suggest you sign on for the longest term, for they receive money for the entire length of the contract.
- 44. Caution When Using an Energy BrokerThis type of payment method can lead to disastrous results such as:Paying 10 to 50 times too much for the Energy Procurement Process!Oftentimes, the Energy Broker is making more money than the Energy MarketerBeing told to sign long-term deals, when your company should absolutely not be signing a long-term dealBrokers recommending the Marketer who gives them the most money, even though the energy purchasing contract may be terrible
- 45. If You Choose to Work with an Energy Broker…Ask to see a copy of the complete and up-to-date Broker/Marketer Contract, for each and ever Power Marketer that the Broker is dealing with. If they don’t provided these contracts to you to review, do not use that broker, for they obviously don’t want you to see it.And don’t let them tell you it is confidential, for that simply means they are terrified to let you see how much they are making!Once you do get copies of these Broker/Vendor agreements, check for the total compensation the Broker is going to receive from the Marketer.Also be aware of Brokers who sell through other Brokers who have agreements with Marketers, i.e., two middlemen! If this is the case, you need to see both contracts, Broker to Broker, and Broker to Marketer, to determine just how much you are paying for the energy procurement services.
- 46. If you do choose a broker…You must insure the following in the contract you sign with the Broker:You must get an electronic copy of the complete RFP sent to the Marketers.You must get the name and contact information as to what Marketers were given an RFP for your company.You must receive a copy of any and all documentation received from the Marketers to your broker, including response, energy purchasing agreements before and after negotiated by the Broker, and of course, pricing given.
- 47. Typical Pricing Example for a Supermarket
- 48. Review of Energy Procurement ProcessDevelop and facilitate client energy teamsSelect qualifying energy service providersObtain the proper utility usage and demand dataIssue Request for Proposals to Energy Service ProvidersEvaluate proposals –economical and non-economicalNegotiate Energy Purchase Agreements
- 49. Check LDC rules
- 50. Monitor energy service providers
- 52. Evaluate Prices; Fixed, variable or NYMEX based, ie timing
- 53. Analyze risk
- 54. Attention to LDCThings to RememberAlways investigate all your energy usage alternatives.Begin gathering your energy information now.Start or complete selection of Energy Team Members.Don’t forget about existing and future opportunities with the various LDCs.Windows of Opportunities
- 55. Things to RememberThe competitive process has a successful history of generally providing the best results.Treat the energy procurement process in a similar manner to other types of purchasing processes, yet understand the differences and risks associated with energy pricing.Concentrate on the procurement process, and keep a good record of the process and the results.
- 56. CrunchEnergy: A few words CrunchEnergy provides Power Broker (procurement) services – but we’re good guys!We also provide energy auditsThat’s just the beginning – we’ll work with you to find other ways your company could be saving on energy Low-hanging fruitLonger-term strategies
- 57. Thank you.Richard E. Costello, Acela Energy: richard.costello@acelaenergy.comScott Goldthwaite: info@crunchenergy.com -973.233.4862Rosanne Kinder, Bluebird University: rkinder@bluebirdu.com – 908.500.4732
Editor's Notes
- #4: CrunchEnergy provides energy management and efficiency solutions to help businesses like yours save money – while reducing your carbon footprint. CrunchEnergy provides energy brokerage services and audits, as well as leveraging innovative technologies and processes to enable companies in all industries to profit from energy efficiency.
- #8: Markets include – Energy, Capacity, and Ancillary Services• RTO – An establishment coordinating the movement of wholesale electricity, acting neutrally and independently, operating the wholesaleelectricity market and ensuring reliability by managing the regional transmission system and wholesale electricity market.
- #9: Key drivers of NE’s historically high rates include:Fuel mix that relies heavily on natural gasPeak demand historically has exceeded supplyTransmission congestionDefault procurement strategies
- #12: • Gives customers direct access to alternative electric generation suppliers (EGSs)• Utilities referred to as Electric Distribution Companies, or “EDCs”• Utility Bills unbundled into generation, transmission and distribution• Distribution charges billed to customers by utility regardless of supplier• Supplier remitted charges for generation and transmission charges (Price To Compare)• Distribution and transmission continue to be regulated charges (FERC and PUC)
- #13: • Large C&I Customers – (Rate Schedules LP-4, LP-5, ISP, LP-6, LPEP, IST, ISM & Standby Service) – Opt-in Only– One-time, one-year fixed price option for 2010 only– Express interest prior to July 27, 2009; choose to opt-in after October 2009 procurement, but before November 9, 2009; not binding – customers are free to shop at any time, but once they leave they cannot return to the product– October 2009 - single procurement to occur for all 2010 service; November 2009, price to be published• Small / Mid-Sized Customers (Rate Schedules GS-1, GS-3, GH-1, GH-2, IS-1, BL, SA, SM, SHS, SE, TS, SI-1, and standby service) – Automatic enrollment– Fixed price for 2010 only– Based off 6 procurements over the last 2 years– Default service for small & medium sized customers for 1 year; free to shop at any time– Final price won’t be known until October 2009– Link to latest PPL publication on the results of the 5th of the 6 procurements• Large Customers (Rate Schedules GS-3 >500kW & LP-4 with >=500kW, LP-5, ISP, LP-6, LPEP, IST, ISM & Standby Service) will be on Real Time hourly PJM Locational Margin Price (LMP)– Real Time Hourly LMPs plus admin costs, transmission, ancillaries and capacity– Proposal is pending to create a Monthly Fixed Price product, bid on a quarterly basis (price may vary each month, but prices will be set based on a quarterly procurement).Additional details to follow.• Small customers (Rate Schedules GS-1, GS-3 <=500kW & LP-4 >500kW, GH-1, GH-2, IS-1, BL, SA, SM, SHS, SE, TS, SI-1, and standby service) will have a Fixed Price– Fixed pricing set via 8 procurements– Set by blending procurements of spot market, 12-month, and 24-month supply contracts starting in 2009
- #15: • Rate Stabilization Plan (RSP)* - (Covers 1/1/2010 – 12/31/2011)– Opt-in program for Residential and Small & Mid-Sized C&I customers– PPL collects an RSP charge through 12/31/09– Will be applied as a credit on monthly bills starting 1/1/2010 through 12/31/2011– Not available to Large Commercial & Industrial customers.• Rate Mitigation Plan (RMP)* - (Covers 1/1/2010 – 12/31/2011) – not yet approved– Once rate caps expire January 2010, there will be a cap for eligible consumer forecasted rate increases at no more than 25% in 2010 and 25% in 2011– Beginning January 2012, charge consumers actual rate increases for that year plus any deferred amounts above the 25% rate increase cap for 2010 and 2011 plus 6% interest on the deferred amounts– GS-1 not included as increases not expected to exceed 25%* Customer would have to choose between RSP and RMP
- #19: CapacityCost for generation installedPJM sets capcity costs 4 years in advance through an auction process known as Reliability Pricing Model (RPM)Capacity cost = PLC demand * the RPM costPLC is each customer’s Peak Load ContributionYou have some control over your PLCPPL RPM costs: (see table)TransmissionCost for transporting power over the interstate transmission gridRegulated by FERC under the Network Integrated Transmission Service tariff for each transmission owner (utility)NITS in PPL: $17,487/MW-yearEquates to $0.0036/kWhAncillariesAdditional products and services provided by PJM to ensure safe and reliable operation of the regional electricty systemOperation products & services – Voltage Control, Frequency Regulation, Operating ReservesAdministrative Services – System control & Dispatch, market administration