Presentation Transcript

1. Dominion East OhioAuction InformationMeeting

   December 4, 2012
2. Meeting Agenda Background Information General Auction Structure Auction Process Energy Choice Supplier Options Capacity Release Process Other Considerations

3. Background Information

4. Dominion East Ohio Market DEO serves 1.2 million customers in northern and eastern Ohio with 2011 throughput of approximately 263 Bcf Two primary operating areas – East Ohio and West Ohio (Lima) East Ohio operating area served by company-owned storage, local production and interconnects with - ANR - Dominion Transmission- North Coast Transmission - Panhandle Eastern- Rockies Express - Tennessee- Texas Eastern West Ohio operating area served interconnects with: - Columbia Transmission - ANR Pipeline- KNG Energy, Inc.
5. DEO’s Commodity Market Goals Key Objectives: Foster a competitive market in which customers can make informed choices among expanded alternatives while ensuring reliable commodity service by suppliers. Address the commodity service needs of those customers that cannot or will not choose among those alternatives without disrupting the competitive marketplace.
6. Replacement of GCR Mechanism As DEO’s Energy Choice program grew, parties recognized that the GCR mechanism did not send proper price signals In 2005, DEO proposed to replace the GCR with a NYMEX-based monthly price under a Standard Service Offer (SSO) SSO = Prompt Month NYMEX + Retail Price Adjustment Retail Price Adjustment equals the difference between the $/Mcf to be billed customers over the month and the NYMEX settlement price for that month on the final day of trading Retail Price Adjustment includes all costs for: Upstream transportation to city gate Btu conversion DEO fuel retention ECPS pooling and other fees Uncertainty of aggregate load to be served Unique nature of the commodity service
7. DEO Commodity Market Transformation DEO began its commodity market transformation by conducting an SSO auction in 2006 In an SSO auction, DEO’s wholesale supply volume, not actual customers, is bid out Market to be supplied is divided into slices (tranches) Maximum share per supplier is for one-third of total available Bidders are pre-approved for creditworthiness
8. DEO Commodity Market Transformation In 2009, DEO conducted its first Standard Choice Offer (SCO) auction in which the retail supply obligation for Choice-eligible customers is bid out Promotes a direct retail relationship between customer and supplier Same general process as SSO, i.e., market divided into tranches, one-third share maximum, credit pre-approval, etc. Bidders must be certified to provide Energy Choice service Supplier name and contact info appears on the bill In 2012, DEO combined the SSO and SCO auctions into one auction. SSO and SCO pool operations and fees are nearly identical to those of the Energy Choice program
9. Auction Results Up to This Point 8/061st SSO auction ($1.44) 7/082nd SSO auction ($2.33) 2/093rd SSO auction ($1.40) 1st SCO auction ($1.40) 2/104th SSO auction ($1.20) 2nd SCO auction ($1.20) 3/115th SSO auction ($1.00) 3rd SCO auction ($1.00) 2/121st Combined auction ($0.60) (6th SSO, 4th SCO)
10. Energy Choice Enrollments
11. Energy Choice Market Shares – 7/12 Other 26 Aggregation (28%) E D A C B
12. SCO Customer Migration
13. Types of DEO Customers MVR suppliers must have a competitive MVR posted on their list of active offers available to all eligible customers on PUCO’s Apples-to-Apples Chart MVR cannot exceed any of the supplier’s competitive MVRs for the same billing period
14. Choice-Eligible Customer Default Commodity Service New customers include those establishing service for first time, relocating without portable agreement, or restoring service more than 10 days after being disconnected All of the above customers will initially be placed on SSO service for up to two months Choice-eligible customers served under SSO, SCO and MVR are eligible to be included in opt-out aggregation programs
15. Pre-SSO (9/06) to Today (10/12)
16. July 2012 Customer Composition E Energy Choice customers include those participating in Opt-in Governmental Aggregation programs Opt-outGovernmental Aggregation customers do not affirmatively elect to participate C A B
17. Potential Non-Residential Exit On June 15, 2012, DEO and the Ohio Gas Marketers Group filed a Joint Motion in Case No. 12-1842-GA-EXM seeking PUCO approval to discontinue SCO service to non-residential customers effective April 1, 2013 Under the stipulation attached to the Motion signed by DEO, OGMG and the Ohio Consumers Counsel, DEO would assign Choice-eligible non-residential customers who have not selected an Energy Choice or governmental aggregation supplier to an MVR supplier on a rotating basis Among other provisions, the stipulation limits the parties’ ability to request a similar exit for residential customers before April 1, 2015 A hearing was held on October 16 and 17, 2012, and the PUCO will rule on the motion after the filing of post-hearing briefs DEO does not have any insight into the date of a possible Opinion and Order DEO does not know how the PUCO will rule nor whether it will issue a ruling in time for an April 1, 2013 effective date The information in this presentation reflects a continuation of the current program DEO will notify parties once an Opinion and Order is issued and modify the auction information if needed

18. General Auction Structure

19. February 2013 Auction Same structure as last year: One descending clock auction for both SCO & SSO customers Winner assigned SCO accounts Winner assigned portion of SSO load
20. February 2013 Auction SSO market includes PIPP, Choice-ineligible and “Transitional” customers for up to two months (see Choice-Eligible Customer Default Commodity Service slide) All existing SCO customers as of March 2013 will be reassigned to new winning suppliers as of April 2013 MVR customers will remain with their existing supplier
21. Proposed Auction Process Timing * DEO makes no representation regarding the timing of a PUCO ruling
22. Auction Structure Internet-based descending clock auction administered by World Energy Term of commodity service obligation is April 2013 to March 2014 Round includes bidding/reporting phases - duration may change during the auction Descending clock auction process: Supplier bids # of tranches it would supply at the Going Price Going Price is reduced round-by-round until market is cleared Going Price = Fixed adder to NYMEX settlement price for prompt month Initial Going Price and decrement pricing may change during the auction Options if not enough tranches are bid upon in the first round: Increase Initial Going Price or # of tranches a bidder can win Postpone the auction or terminate it and return to GCR Sealed bid if # of tranches bid in round falls below # needed to clear market
23. Bid Review and Approval In prior auctions, PUCO Staff filed its post auction report on the same day as the auction PUCO has approved the auction results the following day DEO has executed supply agreements with suppliers later that same day PUCO has ability to reject results if it concludes there were material deficiencies in the auction process, that the final Going Price is unacceptable, or for any other reason(s) it deems appropriate Because the PUCO is not obligated to rule on the auction results within a specific timeframe, DEO cannot provide assurance that the prior timeline will be followed Within 30 days after PUCO ruling, DEO will return or cancel any security that was provided by unsuccessful bidders
24. Bidder Pre-Qualification/Certification Suppliers must submit financial statements with Bidder Application Form to facilitate creditworthiness review Collateral requirement for single tranche will based on Energy Choice creditworthiness provisions Collateral Requirement per tranche = $190,000 This does not include the Default Fee Registered bidders must provide initial capacity and supply plan with following elements (East Ohio and West Ohio areas are separate pools) Anticipated capacity portfolio by month by upstream pipeline and on-system storage Monthly supply plan to meet East Ohio and West Ohio market needs and on-system storage ratchets by source (upstream pipeline, local production and on-system storage)
25. Registered Bidder Restrictions May participate on stand-alone basis or as part of joint arrangement, but not both Joint bidders must identify all parties involved May not have controlling interest, corporate affiliation with, or > 10% stake in another bidder May not have relationship with another bidder that includes supply arrangements or provides incentives based on auction outcome Must maintain confidentiality of bidding strategy and not retain advisors/consultants used by other bidders Must maintain confidentiality of discounted rates for pipeline capacity
26. On-Line Documents All Auction documents available at: https://www.dom.com/dominion-east-ohio/customer-service/for-businesses/sso-sco-auction-phase-2-apr-1-13-mar-31-14.jsp All Dominion East Ohio tariffs available at: https://www.dom.com/dominion-east-ohio/customer-service/rates-and-tariffs/tariff-information.jsp All Public Utilities Commission of Ohio filings available at: http://dis.puc.state.oh.us/ 07-1224-GA-EXM 11-6076-GA-EXM 12-1842-GA-EXM

27. Auction Process

28. Combined SSO/SCO Auction DEO will be conducting one (1) Auction Winning bidders awarded SCO customers AND a slice of the SSO load SSO portion will be administered as a separate pool over the term Total load of ~34.7 Bcf divided over nine (9) tranches Bidders must be certified CRNGS providers to participate
29. One Auction – Default Fee One Default Fee to be posted per winning supplier Estimated at $683,000 per tranche. Will be updated when final tranche information is set. Default Fee must be in form of a Letter of Credit or Surety Bond only Fee = $0.20/Mcf for remaining months’ estimated requirements Fee may increase $0.06/Mcf for every $1.00 increase in weighted average NYMEX strip price over remaining term (as compared to average strip price day of the auction) Fee updated during winter months only
30. Auction Rules Each supplier is given only one ID for use during the actual auction Each round may start with two 10-minute phases for bidding and reporting (subject to change after consultation with PUCO Staff) Total number of tranches bid in the round is announced at the end of reporting period (no reporting of individual supplier bids) Bids can be changed or withdrawn during bidding phase, but last bid indicated is binding Once a supplier drops out, its access to auction information ceases Bidding phase can be extended once each round with suppliers given two opportunities apiece to request an extension Round duration, Initial Going Price and subsequent Price Decrements are subject to change after consultation with PUCO Staff Supplier identities are kept confidential until released by PUCO
31. End of Auction Procedure Auction stops once number of tranches bid equals the number needed If an over-supply round is followed by an under-supply round, the suppliers that participated in the last over-supplied round will be required to submit a sealed bid Bids must be submitted to the whole penny The sealed bid indicates the minimum Retail Price Adder that a supplier is willing to accept to serve a single tranche All suppliers participating in the last over-supplied round must submit a bid even if it is equal to the Going Price of the last over-supplied round (there is no minimum bid) DEO will use the minimum sealed bid price that clears the market as the final Going Price for the auction If more than nine tranches are bid at the same price, the load will be prorated among those suppliers that submitted a bid at that price
32. Nature of SSO Service Full requirements obligation to provide a portion of the daily gas supply requirements of DEO’s Choice-ineligible customers Supply volume, not actual customers, will be awarded: Aggregate load of ~14.6 Bcf Customers continue to be served under Sales tariffs SSO pool customer load will change for various reasons, including: Weather conditions / usage equation updates Participation in Energy Choice / aggregation programs Level of PIPP program participation New customer additions / termination & restoration of service Supplier default (none since 10/00 program inception) SSO commodity service is also available to certain Choice-eligible customers for up to two consecutive billing periods: Includes new customers and those whose Energy Choice or aggregation contracts expire without renewal
33. Nature of SCO Service Opportunity to serve specific customers will be awarded: Choice-eligible SSO and existing SCO customers will be assigned to one of nine tranches ~20.1 Bcf, 162,070 residential / 14,120 non-residential customers Customers will be served under Energy Choice tariffs Full requirements obligation to provide the daily gas supply needs of Choice-eligible customers assigned as a result of the: 2/13 SCO auction and Rotating assignment of customers entering SCO service after leaving SSO or MVR commodity service Suppliers not awarded SCO tranches can elect to participate in the rotating assignment provided they have an active Energy Choice pool Suppliers who made this election after last auction are required to make another election
34. Nature of SCO Service (cont.) SCO pool customer load will change for various reasons, including: Weather conditions / usage equation updates Customer enrollment with an Energy Choice supplier Customer participation in an opt-out governmental aggregation Change in customer status from Choice-eligible to Choice-ineligible Termination of service Operations and fees are identical to those of the Energy Choice program Winning suppliers required to execute SCO Letter Agreement Suppliers cannot charge any exit or termination fees to departing SCO customers Note that, in June 2013, DEO may begin providing SCO and MVR customer names on customer lists purchased by suppliers Issue to be discussed with PUCO Staff prior to the Auction and suppliers will be informed of the outcome
35. SSO Supplier Payment Supplier payment will equal (NYMEX + Retail Price Adjustment) x Burner-tip Mcfs billed Suppliers reimbursed via wire transfer on first business day following 15th for prior month’s supply Initial payment to be made on volume supplied over the calendar month After billed volumes become known, DEO performs volumetric and financial true-up to the billed volume Objective is to ensure amounts and volumes billed exactly match amounts and volumes supplied: If volume billed < volume supplied, DEO returns excess gas and reduces the next month’s remittance accordingly (and vice-versa) Volumes to be supplied and amounts remitted to suppliers can be affected by customer rebills DEO assumes receivable risk, i.e., suppliers are paid whether DEO is paid or not, with no receivable discount DEO may adjust supplier volumes and dollars owed up to 2 months after the term ends (same applies to SCO supply as well)
36. Billing Cycle Illustration Cycle 1 Cycle 2 DEO will compare calendar month supply to billing month usage to determine the monthly SSO pool imbalance Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Cycle 11 Cycle 12 Cycle 13 Cycle 14 Cycle 15 Cycle 16 Cycle 17 Cycle 18 Cycle 19 Cycle 20 Cycle 21 1st 31st
37. True-Up Example October calendar month target volume for Supplier A equals 400,000 Mcf, which it provides as requested DEO pays Supplier A for that volume on the first business day following November 15th DEO subsequently determines that the actual volume billed for the October billing month was 385,000 Mcf DEO returns the 15,000 Mcf over-supply to Supplier A prior to the October imbalance trading period that occurs in mid-November Imbalances can be traded, put in storage or cashed out DEO withholds 15,000 Mcf times the October NYMEX price plus the Retail Price Adjustment from the next payment to Supplier A
38. SCO Letter Agreement Winning Suppliers must sign letter agreement to confirm award Summarizes service to be rendered by supplier and DEO Shows resulting auction price and number of tranches won States Btu conversion and UFG percentage Describes the default fee required of all SCO suppliers Restates supplier’s performance obligation
39. Resolution of Default Risk The risk facing non-defaulting Auction suppliers has been addressed by: Requiring Default Fee financial security from Auction winners In event of default by an auction supplier, 100% of Default Fee financial security will be distributed on a weighted basis to non-defaulting suppliers Estimated Default Fee (final fees will be updated after auctions) $683,000 per tranche Limiting increase in a supplier’s SSO and/or SCO share to 50% of the load originally obtained in the auction Suppliers can voluntarily provide more DEO will conduct supplemental auction for any amounts not covered by 50% increase
40. Energy Choice Supplier Options Suppliers awarded tranches must accept customers into their SCO pool through the rotating assignment process Other CRNGS suppliers can elect to participate in the rotating assignment process, serving customers at the SCO rate Supplier must make one-time election by 3/1/13 to participate Supplier must maintain an active Energy Choice pool Supplier must agree to continue serving assigned customers at the SCO rate through March 2014 billing period Suppliers who elected to be SCO supplier last time must re-elect All CRNG suppliers can elect to accept customers at a Monthly Variable Rate (above provisions also apply) MVR customers can elect to move to SCO service MVR customers will not be included in next SCO auction Suppliers who elected to be a MVR supplier last time must re-elect Suppliers cannot charge any exit or termination fees to departing SCO or MVR customers
41. DEO’s Provider of Last Resort Role Supply sequence in event of default: Non-defaulting Energy Choice, SCO and SSO suppliers (voluntary) Storage inventory of defaulting supplier(s) Operational balancing inventory Incremental purchases DEO’s POLR obligation extends to the billing month after the one in which the default occurred Customer’s price in the month of default will be at its supplier’s price Will revert to SSO price in the month following the default After DEO’s two-month POLR obligation expires, customers of a defaulting supplier will revert to SSO service for up to two months Customers of a defaulting opt-out aggregation or SCO pool will be assigned to SCO supplier after second SSO bill Customers of a defaulting Energy Choice or MVR pool will be assigned to MVR supplier after second SSO bill
42. Operation/Supply Issues Assignment of DEO Interstate Capacity Isolated Points Delivery Point Issues Information in E-Script
43. Interstate Capacity Assignment All non-operational balancing upstream capacity will be released for the entire term of the auction (April 2013 to March 2014) Suppliers will be notified of available capacity once final tranche size is determined (1/21/2013) Winning bidders must take all TETCo capacity Pro-rated based on number of tranches won. Winning bidders and qualifying Energy Choice suppliers must take pro rata share of remaining capacity Capacity made available to Energy Choice suppliers with > 1% market share Energy Choice suppliers may initially reject assignments Become mandatory if capacity remains unreleased after the optional assignment process is complete TGP (and associated DTI ) and West Ohio associated ANR capacity may not be rejected.
44. Interstate Capacity Assignment Estimated East Ohio capacity for One Auction Tranche:
45. Interstate Capacity Assignment Estimated West Ohio capacity for One Auction Tranche:
46. Interstate Capacity Assignment Mandatory releases of: Texas Eastern (TETCo) – 100% released to winning bidders Tennessee Gas Pipeline (TGP) and upstream DTI – 100% released to winning bidders and Energy Choice suppliers ANR Pipeline ETS for West Ohio Initially optional releases of: Non-West Ohio ANR Pipeline (ANR) Dominion Transmission (DTI) (the portion not upstream of TGP) Panhandle Eastern (PEPL) and upstream Trunkline Pipeline (TRK) Columbia Transmission (TCo) and upstream Columbia Gulf (CGT) Suppliers cannot take upstream FT on TRK or CGT and/or contract storage on DTI and TCo without downstream FT capacity Release of TGP obligates shipper to serve Cochranton isolated point Certain capacity discounts apply only to volumes nominated to Energy Choice pools at the primary receipt point(s) Supplier must pay max rates if nominated elsewhere
47. Interstate Capacity Assignment Process Final estimated tranche sizes established Existing SCO suppliers have customers backed out of peak day number All suppliers and Auction customer peak days compared Pools with less then 1% peak day market share dropped Qualifying pools assigned share of capacity based on percent of total qualifying market share they hold Auction winning suppliers required to take all TETCo capacity and serve isolated TETCo points
48. Interstate Capacity Assignment ProcessExample Assume 6 suppliers, Auction pool:
49. Interstate Capacity Assignment ProcessExample Suppliers D, E and F are below 1% market share and do not get an assignment
50. Interstate Capacity Assignment ProcessExample Supplier A gets 20.41% of each type of capacity Supplier B gets 15.31% of each type of capacity Supplier C gets 13.26% of each type of capacity Auction pool gets 51.02% of each type of capacity Each supplier gets 1/9th (or number of winning tranches) of assigned capacity
51. Interstate Capacity Assignment ProcessExample ANR ETS Contract (15,000 dt/d of annual capacity)
52. Interstate Capacity Assignment ProcessExample Each winning auction supplier given the option to accept 850 (1/9th of 7,653) dt/d of ANR ETS E-mails sent to all qualified suppliers and registered bidders showing: Amount of capacity assigned Applicable discounted capacity rates Non-registered Auction bidders must execute Confidentiality Agreement to receive negotiated capacity information Suppliers with the option to elect capacity must inform DEO of capacity they do not want by date in e-mail (will be prior to auction)
53. Interstate Capacity Assignment ProcessExample Winning Auction bidders given first option to accept any capacity returned after auction Any unclaimed capacity will then be posted to all shippers on DEO’s system via DEO’s E-Script EBB Any capacity not accepted by posted deadline will then revert to original supplier who initially rejected capacity Only ANR ETS comes with corresponding Firm Receipt Space at West Ohio - Convoy All releases will be done prior to their start date If supplier wants capacity released to an agent, supplier and agent must execute Three Party Agent Agreement
54. Isolated Points DEO has three market areas that must receive specific supply Powhattan and Woodsfield (via TETCo) Cochranton (via DTI from TGP) ANR West Ohio (via ANR West Ohio ETS) If supplier receives a release of these capacities they must serve these markets Targets are posted with the daily Energy Choice/SSO targets Total target INCLUDES these volumes Refer to Attachment 5
55. Delivery Points Receipt Space assigned at TGP should be scheduled to TGP Gilmore Meter. Operational issues may require DEO to request a change to the TGP Petersburg Meter. Does not include TGP Carroll County Firm Receipt Space Receipt Space assigned for TETCo interconnect can be used to schedule deliveries from TETCo and/or Rockies Express (REX) REX deliveries subject to rules posted in E-Script Due to decrease in Firm Receipt Point Option volumes, under certain operating conditions, suppliers may be required to deliver additional volumes to Maumee above the capacity that has been released on ANR and/or Panhandle
56. Info Postings in E-Script DEO posts auction and other critical information to E-Script Make sure your E-Script users relay information to appropriate contact DEO will send information to ONE company contact only Supplier’s responsibility to distribute or use group e-mail Supplier’s E-Script users can set up Event Notification in E-Script to have all postings emailed
57. Contacts For more information contact: Tony Sanabria 216-736-5558 anthony.m.sanabria@dom.com