Basic Generation Service Commercial and Industrial Energy Pricing Overview 1

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
2
Energy.
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 1st 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
PSE&G High-Tension Service – Transmission (HTS-HV)
JCP&L
High-Tension Service – Subtransmission (HTS-S)
Large Power and Light – Primary (LPL-P)
Large Power and Light – Secondary (LPL-S)
All
All
All
Greater than 1250 kW
General Service Primary (GP)
General Service Transmission (GT)
General Service Secondary (GS)
General Service Secondary Time-of-Day (GST)
All
All
Greater than 1250 kW
Greater than 1250 kW
ACECO 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)
RECO
Customers
Included
Service Classification No. 7 – Primary TOU Service
and Separately Metered Space Heating Service
Service Classification No. 2 – General Service
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 ServiceCommercial 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.
PJM Locational
Marginal Price
(LMP) in EDC zone
(hourly charge is posted
under “Real Time LMP”
for Conectiv zone on
www.PJM.com)
BGS Supply
Retail Margin
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
(charge set by NJ BPU)
Ancillary Services
(charge based on PJM tariff)
Generation Capacity
(charge from BGS Auction)
Reconciliation
Default Supply
Service Availability
Charge
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
Average LMP ($/MWH)
100
80
60
40
On Peak
Off Peak
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
Sep-01
Aug-01
Jul-01
Jun-01
May-01
Apr-01
Mar-01
Jan-01
Feb-01
Dec-00
Oct-00
Sep-00
Jul-00
Aug-00
Jun-00
May-00
Apr-00
Mar-00
Jan-00
Feb-00
0
Nov-00
20
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
14
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
LMP ($/MWH)
600.00
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
PJM Price - Hot Summer Day (July 29, 2002)
12:00
PM
2:00
PM
4:00
PM
6:00
PM
8:00
PM
10:00
PM
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 1-800-9676800.
• 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
• Integral to your
business
(direct expense)
• General
business
expense
(overhead)
• Load shifting
ability
Understand
Your
Electricity
Cost Drivers
• Budget
certainty
• Savings
Understand
your BGS
rate
• CIEP
• FP
Risk Profile
• Term
• Product
complexity
• Conservation
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
Offers price certainty,
but customer risks
being out of the market
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
BLOCK & INDEX
Customer chooses how
much of their load is in
the market
TOTAL INDEX
Customer is in the
market, but has no
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
$ /M w h
$55.00
Year 6 BGS Auction
$50.00
Year 7 BGS Auction
$45.00
$40.00
$35.00
7/1/03
1/24/04
8/18/04
Date
3/13/05
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
⎤
−
×
×
+
×
+
+
×
(
)
((
)
)
PJM
LMP
kWh
losses
Anc
losses
Rm
Rcon
kWh
i
i
⎢∑
⎥ × SUT +
⎣ i =1
⎦
[(CapChg × CapObl × Days)]× SUT
Where:
PJM-LMPi = PJM-LMP Zonal price in given hr
kwhi = Customer usage in given hour
losses = EDC specific Loss Factors
Anc = EDC specific Ancillary Services Charge
Rm = retail margin (0.5 cents)/kWh
Rcon = Reconciliation Charge
kWh = Monthly energy consumption
CapChg = Capacity Charge
CapObl = Cust Capacity Obl
SUT = Sales Tax Factor (1.06)
Days = # of days in month
N = Number of hours in Billing Period
52
Table of BGS-CIEP Charges for Conectiv
Energy Charge
Hourly PJM Energy Price in Conectiv
Zone
Ancillary Services
Transmission $0.003401/kWh
Subtransmission $0.003414/kWh
Primary $0.003479/kWh
Secondary $0.003585/kWh
Capacity Charge
$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 1st 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