Basic Generation Service Commercial and Industrial Energy Pricing Overview 1
Agenda Review the hourly Basic Generation Service option (BGS-CIEP). Explain the Retail Margin for Large BGS-FP and BGS-CIEP customers. Explain electric supply shopping options and processes. Provide a customer perspective of BGS-CIEP and shopping Provide you with opportunities to meet and discuss your electric supply with Third Party Suppliers, BPU staff, PJM and the Office of Clean Energy. 2
Electric Power Supply and Delivery Charges Electric Supply includes the costs for the generation of the electric power and any Transmission costs. Electric Delivery includes the costs for transporting the electricity within Conectiv s service territory. Electric Delivery Costs remain fully regulated. Today we will be discussing BGS (Electric Delivery Company (EDC) provided Electric Supply). 3
Basic Generation Service is the Electric Supply Product of the EDCs BGS is a regulated, default electric supply service available from the EDC. BGS is available for customers who do not choose a third party supplier. BGS is a completely optional service. Customers who choose a third-party supplier will still receive the same high level of service from Conectiv or any other EDC. Prices for BGS were obtained through an on-line auction and truly reflect a market-based rate. 4
Conectiv s Basic Generation Service Effective Beginning June 1 st 2005 The new BGS rates will be in effect from 6/1/05 through 5/31/06. The BGS products are: A fixed-price product, Basic Generation Service Fixed Price (BGS-FP). This rate is for residential and smaller industrial and commercial customers (less than 1250 kw peak load); and A variable priced product, Basic Generation Service Commercial and Industrial Energy Pricing (BGS-CIEP). This rate is for larger industrial and commercial customers. Industrial and commercial customers with a peak load of greater than 750 kw who remain on BGS will also pay a retail margin charge of 0.5 per kwh. The remainder of the presentation will focus on the details of the variable, or hourly-priced product (BGS-CIEP). 5
EDC Distribution Rate Classes with BGS-CIEP Default Supply Service EDC BGS-CIEP Rate Classes Customers Included PSE&G JCP&L ACECO RECO High-Tension Service Transmission (HTS-HV) High-Tension Service Subtransmission (HTS-S) Large Power and Light Primary (LPL-P) Large Power and Light Secondary (LPL-S) General Service Primary (GP) General Service Transmission (GT) General Service Secondary (GS) General Service Secondary Time-of-Day (GST) Transmission General Service (TGS) Annual General Service Primary (AGS-Primary) Annual General Service Secondary (AGS-Secondary) Monthly General Service Primary (MGS-Primary) Monthly General Service Secondary (MGS-Secondary) Service Classification No. 7 Primary TOU Service and Separately Metered Space Heating Service Service Classification No. 2 General Service All All All Greater than 1250 kw All All Greater than 1250 kw Greater than 1250 kw All Greater than 1250 kw Greater than 1250 kw Greater than 1250 kw Greater than 1250 kw All Greater than 1250 kw 6
Overview of Supply Components of the Basic Generation Service- Commercial and Industrial Energy Pricing (BGS-CIEP) Rate 7
BGS-CIEP Rate Components Terms *Prices through 5/05. Prices do not include NJ Sales Use Tax (SUT) or Losses where applicable. BGS Supply PJM Locational Marginal Price (LMP) in EDC zone (hourly charge is posted under Real Time LMP for Conectiv zone on www.pjm.com) Retail Margin (charge set by NJ BPU) Ancillary Services (charge based on PJM tariff) Generation Capacity (charge from BGS Auction) Reconciliation Default Supply Service Availability Charge Customer will be billed the PJM price multiplied by the customer s kwh usage in the concurrent hour. Price ranges from $0.00 per MWh to $1000 per MWh ($1.00 per kwh). $0.005 per kwh Per kwh charge - varies by voltage $0.03976 per kw- day based on Generation Obligation Varies biannually (expected to be small) $0.00 per kwh paid by all BSG-CIEP eligible customers 8
BGS-CIEP Rate - Energy Components Real-Time Energy Market or PJM LMP Price The PJM load weighted zonal average locational marginal price (LMP) is a real-time spot market price. The LMP is calculated at five-minute intervals. Customers on the BGS-CIEP rate will be billed the load-weighted hourly average price in the Conectiv zone, as posted by PJM multiplied by that customers kwh usage in the concurrent hour. Price ranges from $0.00 per MWh to $1000 per MWh ($1.00 per kwhr). Price is capped at $1000 per FERC rules (losses and sales tax are on top of this cap). Retail Margin ($0.005 per kwh) Set by the Board of Public Utilities in NJ for all BGS-CIEP customers. Rate is the same for all EDCs. Part of BGS-CIEP rate, so it is only charged to customers that stay on BGS-CIEP. 9
BGS-CIEP Rate - Energy Components (Continued) Ancillary Services Charge For PJM administrative charges and; Other generation-related items necessary for electric grid stability. Charge is from a PJM Tariff. BGS Reconciliation Charges Expected to be small. Recovers the difference between monthly amount paid to BGS suppliers and the total revenue received from BGS customers for the preceding months for the applicable BGS supply. Charge changes twice a year (June & October), and can be a positive or negative (e.g. a charge or a credit). BGS System Control Charge (SCC) Recovers costs associated with Demand Response Programs. All Charges include sales and use tax (SUT). 10
BGS-CIEP Rate Capacity Components BGS Capacity Charges (Generation) Charges per kilowatt of Generation Obligation. The charge recovers customer s allocated share of overall summer peak load on PJM system. Rate obtained through BGS Auction. It is the only component BGS suppliers bid on. Generation Obligation The total generation obligation is the amount of generation all PJM suppliers must have available to provide service to all customers on any day. It is based on the average of five (5) highest hours of PJM system load on 5 different days, as determined by PJM. Customers are allocated a pro-rata share that is based on their kw usage in those 5 hours. 11
Overview of Hourly Pricing 12
What are some effects of hourly pricing for Customers on BGS-CIEP? Customers will need to understand their usage patterns. Customers will see more hour-to-hour volatility in energy price. Daily price variability (usually higher in day than night). Seasonal price variability (usually higher in summer than spring and fall). Price changes can occur quickly on days with limited supply (e.g. hot summer days). Accrual accounting using historical costs or prior monthly averages becomes less reliable. 13
Average Monthly PJM Spot Price for Electric Power in Conectiv Transmission Zone Monthly Average Energy Price (LMP) in PJM for AE Transmission Zone January 2000 - December 2002 120 100 80 60 40 20 0 14 Nov-02 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Average LMP ($/MWH) Dec-02 On Peak Off Peak Avg Notes: The Peak Period is 7:00 am 11:00 pm Monday Friday. Historical data is presented for informational purposes and may or may not be reflective of future energy prices
Seasonal Energy Prices Typical Spring or Autumn and Hot Summer Day Profiles PJM AE Zone LMP Variability Summer versus Spring and Fall 900.00 800.00 700.00 600.00 LMP ($/MWH) 500.00 400.00 300.00 200.00 100.00 0.00 12:00 AM 2:00 AM 4:00 AM 6:00 AM 8:00 AM 10:00 AM 12:00 PM 2:00 PM 4:00 PM 6:00 PM 8:00 PM 10:00 PM PJM Price - Hot Summer Day (July 29, 2002) PJM Price - Typical Spring/Autumn Day (October 3, 2001) Note: Historical data is presented for informational purposes and may or may not be reflective of future energy prices 15
Customer Data Sources 16
Data Sources Historical Interval Data Customers can access their historical interval data on line free of charge through Conectiv s Energy Profiler Online system. Registered Third Party Suppliers can also access historical customer data free of charge through Energy Profiler. However, Third Party Suppliers must have customer authorization to obtain historical data. 17
Data Sources Energy Profiler Online Information is available five days after meter reading View demand and energy consumption Information can be viewed graphically, in tabular form or downloaded into a spreadsheet 18
Data Sources Energy Profiler Online Graphical Tabular Download 19
Data Sources Energy Profiler Online - some of the details. Information is retained On-Line for 2 years Data is not bill-ready Service is provided free of charge For more information see your Account Manager Another option. Data Pulses from your meter - see your Account Manager 20
Data Sources PJM data http://www.pjm.com > Energy Pricing> Daily Real Time LMP Data Prices Scroll in Real time here. 21
Data Sources PJM data Look for prior days data here 22
Data Sources PJM data Each day of data here 23
Data Sources PJM data Highlighted: PJM LMP Zonal Average for Conectiv Zone for 2/20/04 Note: Conectiv is listed as AECO 24
Energy Shopping Procedures Conectiv Enrollment Process 25
Conectiv Process for Enrolling with a Third-Party Supplier General rules and processes for Choice Enrollment, switching, & drops Billing/Payments Customer inquiries Responsibilities of Customers Responsibilities of Third Party Suppliers (TPS) TPSs must be EDI certified & licensed with BPU 26
Customer Enrollment Enrollment packet TPS list & monthly historic usage - Can be obtained by calling 1-800-967-6800. Customer contracts with certified TPS TPS retains contract TPS sends in an EDI enrollment transaction at least 20 days prior the meter reading date Account level, all meters related to each account number 27
Customer Enrollment Verification is based on active account number invalid account number will cause rejection of the enrollment A confirmation letter is sent to customer Letter sent to account mailing address. If none, then it is sent to the service address 28
Customer Switching/Drop Switching between suppliers requires new enrollments to be received 20 days prior to the meter reading date All switching restrictions removed Drops require a minimum of 15 days notice prior to the meter reading date 29
Customer Billing Two customer billing options (Consolidated and Dual). TPS might not offer both Consolidated Account must pass initial creditworthiness test. One bill from Conectiv with both TPS and Conectiv Delivery charges included. TPS has 48 hours to return their charge to Conectiv. TPS name, phone number, current charge, adjustments, & total charge indicated. Rolling page/logo option for TPS. 30
Customer Payments Consolidated billing Conectiv pays the TPS their total charge on the bill Disputed charges must be discussed with the respective party Customer must maintain a current payment history. Any arrears of 60 days will force the account to dual billing for minimum of 12 months 31
Customer Billing/Payment Dual billing Conectiv sends monthly usage data to TPS kw, kwhr, hourly data, etc. TPS calculates and mails their bill to the customer for their charges only Customer pays TPS Disputes between TPS and EDC resolved by BPU. Inquiries regarding TPS charges will be referred to the TPS 32
Third Party Supplier Introductions 33
Customer Perspectives on Third Party Supply John F. Kinkela - Lenox 34
How to Shop for Energy BPU BGS-CIEP Customer Education Seminar 2005-2006 35
Choosing the Right Electricity Product Your Operational Objectives Understand Your Electricity Cost Drivers Understand your BGS rate Risk Profile Integral to your business (direct expense) General business expense (overhead) Load shifting ability Budget certainty Savings Conservation CIEP FP Term Product complexity 36
Electricity Products Available From The Utility BGS is the Only Product Option Available from the Utility (Business Customers Can Choose to Switch from FP to CIEP) For BGS-CIEP Tariff Accounts: Energy: variable PJM hourly LMP Generation Capacity: fixed by auction Transmission Capacity: fixed by tariff Ancillary Services: fixed by tariff Retail Adder: fixed by BPU (0.5 cent/kwh) For BGS-FP Tariff Accounts: Per kwh price charges set once-a-year For 750 KW+ accounts, includes 0.5 cent/kwh Retail Adder 37
For BGS-CIEP Accounts it is Never a Bad Time to Shop Shopping means that you are seeking competing offers from third party suppliers. You are not obligated to accept any offers or to switch off the utility tariff. Because of the current structure of the BGS-CIEP tariff, there is a very good likelihood that you will be able to achieve savings from a third party supplier as compared to the tariff price, regardless of market conditions. It is very much worth the effort at any time. Market conditions at the time of the bid can be very important, however, in deciding on the type of product you contract for and potentially the term of the contract. 38
A Third Party Supplier Can Offer a Variety of Product Options That Suit Your Needs Fixed Price Price / Budget Certainty TPS bears market risk Look Back analysis vs. Floating Product. No assurance of savings vs. tariff Floating (Index) Price Price / Budget Uncertainty Customer bears market risk Assured Savings vs. Utility BGS Block and Index Product or Other Combination Product Combination Fixed and Floating 39
Benchmarks to Evaluate Offers Floating Price Product Energy would float and be a pass-through, like the BGS-CIEP tariff Compare supplier s fixed charges to BGS-CIEP fixed components to determine savings Fixed Price Product Historical Basis Customer Load Recent PJM LMP Hourly Data Value: Useful Tool / Not Basis for Decision Trigger Prices (subjective) View of Market Using Forward Market Prices and Other Indices Do NOT Assure Savings 40
Some Considerations In Choosing A Product FIXED PRICE BLOCK & INDEX TOTAL INDEX Offers price certainty, but customer risks being out of the market Customer chooses how much of their load is in the market Customer is in the market, but has no price certainty Fixed Price Provides electricity supply at a fixed price per kwh throughout the term of the contract Designed for customers who have a predictable load profile and prefer price certainty Total Index Offers a rate structure based on the hourly energy market, enabling customers to lower energy costs by managing energy usage in response to market price movements Designed for customers with variable loads, operational flexibility and the ability to benefit from the option value of being in the market 41
$65.00 Calendar Year 2006 Forward Electric Price Strip July 1, 2003 - March 14, 2005 $60.00 $55.00 Year 6 BGS Auction $/Mwh $50.00 Year 7 BGS Auction $45.00 $40.00 $35.00 7/1/03 1/24/04 8/18/04 3/13/05 Date 42
Pre-bid Planning 1. Nature of Operations (Usage Patterns)? Seasonal or daily peaks vs. constant usage 2. On-site generation? 3. Plans for Expansion/Shut Down of facilities? Timing Extent of change in usage 43
Prebid Planning (2) 4. Credit History/Financial Security Issues 5. Budget/Cash Flow Issues 6. Management Tolerance for Risk 7. Management Decisionmaking Infrastructure 44
Logistical Steps Obtain and compile historical usage information for account(s) in electronic format for distribution with bid specifications Determine target switch /contract start date, work back using 20-day minimum lead and some contingency time to target a date for accepting bids Set a date prior to acceptance of price bids for submission of proposed form of contract. Allow time for review of contract terms prior to acceptance/evaluation of bids. Final negotiation of terms and conditions can be left to post-bid. 45
Logistical Steps (2) Develop a list of suppliers to receive bid specifications. Provide for healthy competition, yet keep to manageable number for evaluation and negotiation. Consider taking price offers from suppliers for more than one product, so you can compare what product fits best with your business philosophy. Put internal review/decision-making infrastructure in place ahead of time. Market prices are volatile and change rapidly; must be able to make timely decisions once bids are accepted. 46
Logistical Steps (3) Provide for up-front legal review of standard terms and conditions to avoid protracted negotiations at back-end and/or to assure fair evaluation of bids and proper identification of optimal bids Review electric supplier worksheet in your packet. Develop bid specs and questions before taking bids. 47
Evaluating Supplier Contracts Contracts & allocation of risks Generally, is the contract clearly and fairly drafted taking into account the interests of both parties? How are the key risks allocated? Changes in electricity prices Material changes in facility operations Facility closures / expansions Excess or deficient usage What are the remedies in the event of a default? 48
Summary Points BGS is a default service. Customers can choose to be supplied by a TPS. The BGS-CIEP rate varies from hour to hour in each day. Conectiv and the other EDCs will continue to provide the same high level of service. We are here to help make this next step in the transition to Energy Choice a success. 49
Thank you for Attending Please Fill out your questionnaires. Conectiv Representatives will be available in the front of the room to answer any additional questions you may have. TPS Representatives are available to discuss their services with you. 50
Additional Detailed Information on BGS-CIEP Rate 51
Calculation of the Monthly Electric Power Supply Charge for Customers on BGS-CIEP BGS-CIEP Charge = N i=1 ( PJM LMPi kwhi losses) + (( Anc losses) + Rm + Rcon) kwh SUT [( CapChg CapObl Days) ] SUT + Where: PJM-LMP i = PJM-LMP Zonal price in given hr CapChg = Capacity Charge kwh i = Customer usage in given hour CapObl = Cust Capacity Obl losses = EDC specific Loss Factors SUT = Sales Tax Factor (1.06) Anc = EDC specific Ancillary Services Charge Days = # of days in month Rm = retail margin (0.5 cents)/kwh N = Number of hours in Billing Period Rcon = Reconciliation Charge kwh = Monthly energy consumption 52
Table of BGS-CIEP Charges for Conectiv Energy Charge Ancillary Services Capacity Charge Hourly PJM Energy Price in Conectiv Zone Transmission $0.003401/kWh Subtransmission $0.003414/kWh Primary $0.003479/kWh Secondary $0.003585/kWh $0.0424/kW-day Loss Factors Transmission 1.02951 Subtransmission 1.03381 Primary 1.05345 Secondary 1.08544 Reconciliation ChargeVaries during the year Retail Margin $0.005327/kWh Prices include BPU Assessment & SUT 53
BGS-CIEP Rate Additional Information on Capacity Components BGS Capacity Charges Charges per kilowatt of Generation Obligation Rate obtained through BGS Auction. It is the only component BGS suppliers bid on. The charge recovers customer s allocated share of overall summer peak load on PJM system. Effective January 1 st each year with PJM scaling factor adjustment in May Generation Obligation The total generation obligation is the amount of electric generation all PJM suppliers must have available to provide service to all customers on any day. It is based on the average of Five (5) highest hours of PJM system load on 5 different days, as determined by PJM Customers are allocated a pro-rata share that is based on their kw usage on those 5 hours Actual hourly data kw demand used for BGS-CIEP customers 54