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Managing Energy Price Risk in PA

Managing Energy Price Risk in PA. AFCOM Mid-Atlantic. December 10, 2010. Agenda. Regulatory Overview Market Conditions Product Options PLC Update Q&A. Background – Deregulation. Pennsylvania is a Deregulating Electricity Market.

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Managing Energy Price Risk in PA

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  1. Managing Energy Price Risk in PA AFCOM Mid-Atlantic December 10, 2010

  2. Agenda Regulatory Overview Market Conditions Product Options PLC Update Q&A

  3. Background – Deregulation Pennsylvania is a Deregulating Electricity Market • Market previously served only by utility is now opening to competition • Generating and selling energy are separated from the businesses of transmitting energy and operating grids • Customers now have the option of purchasing electricity from a supplier other than their utility • Financial product that alters the rate per kWh • Utility will continue to be responsible for Transmission & Delivery 3

  4. Reg Conditions Placeholder

  5. Managing Price Risk – Purchasing Options Fixed Price –For budget certainty and limited exposure to volatile energy markets. Competitive suppliers or the utility can provide this product. The utilities are prevented from offering longer terms. HighSavings Potential Low HighRiskLow $/kWh 1 Hour 24 Fixed Price Energy w/ Pass-Thru –For a slightly better energy price, budget certainty and limited exposure to volatile energy markets. $/kWh 1 Hour 24 Hybrids – (e.g., “block & index"). Many options exist to combine a fixed product with an indexed product that gives the customer flexibility to lock in price certainty or take advantage of market swings kW Demand Price Floats on “Index” Fixed Price “Block” 1 Hour 24 Indexed –Customers can choose to pay the market Day-Ahead or Real-Time price for all energy consumed. $/kWh 1 Hour 24 7

  6. Background - The Impact of Capacity & PLC Every customer’s supply cost includes charges for unforced capacity (UCAP) and transmission capacity (Trans CAP). In competitive supply markets, the capacity charges are very visible on the supplier’s energy bills. In regulated territories*, the capacity charges are generally embedded in the generation charges (*note: Pennsylvania markets opening in 2010 or 2011 are impacted, too) 2010 PJM Hours--UCAP 7/7/10 Hour Ending 17                       7/6/10 Hour Ending 17        7/23/10 Hour Ending 17 8/10/10 Hour Ending 17 8/11/10 Hour Ending 17 Estimated Value of PLC 2011-2012 approximately $46,000/MW 2012-2013  approximately $56,000/MW

  7. Conclusions – Key Take Aways! • Rate caps are expiring as early as January, 2011 and new rates will reflect market conditions. • Market currently at historic lows based upon economic crisis. • Determine if you have the time, resources and expertise to manage process on your own. • Buy forward to capture market conditions and gain control of costs. • Manage Capacity charges during the summer of 2011 can save your facility ~$56,000 per MW on your 2012/2013 bill • Properly structure electric supply agreement to capture avoided PLC costs 10

  8. Brian PowerSenior Manager, SupplySMART68 Southfield Ave, Suite 215Stamford, CT 06902 (203) 517-2824 bpower@enernoc.com

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