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PENNVEST Webinar Outreach Slides

PENNVEST Webinar Outreach Slides. Paul Marchetti Executive Director, PENNVEST August 5, 2010. Objectives of Presentation. Background description of PENNVEST’s clearinghouse services Introduce rulebook Mock auction description

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PENNVEST Webinar Outreach Slides

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  1. PENNVEST Webinar Outreach Slides Paul Marchetti Executive Director, PENNVEST August 5, 2010

  2. Objectives of Presentation • Background description of PENNVEST’s clearinghouse services • Introduce rulebook • Mock auction description • Announce upcoming dates and initiation process of PENNVEST’s clearinghouse services

  3. Overview • PENNVEST will provide stakeholders the option to use its “clearinghouse” services to participate in the state’s nutrient credit market • PENNVEST has spent the past year, through iteration and multiple outreach sessions with stakeholders, designing the structure of the clearinghouse • Goal of PENNVEST services: • Reduce transaction costs and risks to market participants • Be customizable to reflect different needs • Require risk-mitigating assurances so that transaction risk to both PENNVEST and market participants is reduced

  4. Basic Clearinghouse Functions • PENNVEST will host the following types of market events, with the schedule and frequency based on stakeholder interest: • Provide auctions and clearing for multi-year forward contracts • Provide auctions and clearing for “spot” contracts at the end of the compliance year • Clearing of bilaterally negotiated prices and credit quantities between self-identified counterparties • Option contracts to accommodate property developers’ multi-step regulatory approval process

  5. Rulebook • PENNVEST’s services and the process for entering into contracts are described further in a rulebook available on PENNVEST’s website • The rulebook is a formal description of how PENNVEST’s clearinghouse will operate, which is consistent with descriptions presented over previous year, and describes the process by which participants can enter into contracts with PENNVEST • PENNVEST is accepting comments on the rulebook

  6. Mock Auction • PENNVEST and CCX will be administering a mock nutrient credit auction Friday, August 27, 2010 to: • Engage in outreach to potential market participants • Become accustomed with the process of administering auctions • PENNVEST has created a document that provides background detail about the mock auction and is available on PENNVEST’s website

  7. Structure of Mock Auction • Step 1: Participants notify PENNVEST of interest in participation by Wednesday August 25 by submitting provided form • Step 2: PENNVEST confirms registration • Step 3: Submit mock bid/offer to CCX on Friday August 27 • Step 4: CCX announces results week of August 30 • Step 5: Debriefing session on Wednesday September 15

  8. Format of Mock Auction • Participation is voluntary as mock auction is purely for educational and informational objectives • Nutrient contracts will be specified in advance: spot and five-year strips for each pollutant in each basin (8 contracts in total) • Bid / offer limits: each participant can submit one bid to buy or one offer to sell for each contract • Auction will be sealed-bid single-round • Auction will be uniform price for each specified contract • PENNVEST will be a counterparty to all market participants (i.e., will effectively be two simultaneous auctions: regular auction for buyers and reverse auction for sellers)

  9. Contract Types in Mock Auction

  10. Sample Auction Bid Form(offer form is analogous)

  11. Auction Example: Bids/Offers(Basin “A”, nitrogen, spot contract)

  12. Results from Example • All bids “all/none”; all offers “partial” • 160,000 credits purchased and sold at $4.77/lb • Bids #1, #2, and #3 each have bids completely filled • Offer #1 sells 25,000 credits and offer #2 sells 135,000 credits • $4.77 is calculated as weighted average of: • last successful offer: $3.75 weighted by 150,000 / 275,000 • last successful bid: $6.00 weighted by 125,000 / 275,000

  13. Upcoming Dates • Wednesday August 18: in-person meeting with PENNVEST, DEP, and CCX staff in Harrisburg • Wednesday August 25: last date to notify PENNVEST of interest in participating in mock auction • Friday August 27: mock auction administered by CCX • August 30: mock auction results announced this week • Wednesday September 15: debriefing session for mock auction participants

  14. Webinar Participants • All webinar participants are requested to send an email to Paul Marchetti (pmarchetti@state.pa.us) to indicate their presence on the webinar • Please indicate in the email if you intend to participate in the mock auction

  15. Background Information • Background information about PENNVEST’s clearinghouse role: http://www.portal.state.pa.us/portal/server.pt/community/pennvest/9242 • Background information about Nutrient Trading Program: http://www.dep.state.pa.us/river/Nutrient%20trading.htm

  16. Contact Information • Please feel free to contact me for additional questions: Paul Marchetti PENNVEST Executive Director 717-783-4496 pmarchetti@state.pa.us

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