Status Report and Vision: Retail Access Programs in New York State

1. Status Report and Vision:Retail Access Programs in New York State Ronald M. Cerniglia Director New York State Public Service Commission Office of Retail Market Development (518) 474-1540 Ronald_Cerniglia@dps.state.ny.us Massachusetts Electric Restructuring Roundtable January 28, 2005 Boston, Massachusetts

2. Why Competitive Energy Markets? • Choice / Freedom • Rational Economic Decisions • Innovation in Products and Services • Technology Deployment • Environment

3. Retail Access OverviewChallenges and Opportunities • California • ENRON / Downturn of financial markets • NYISO maturation • Natural Gas Volatility • Consumer Reports • August 2003 Blackout • Approximately 18 states / districts are actively implementing retail choice, 7 have delayed or suspended implementation, and 26 that are not presently active • In 2003, ESCOs served > 52,000 MWs, 7% of total demand, a 30% increase as compared to 2002 • One third of electricity load in the United States has the ability to choose a provider other than their local utility

4. New York by the Numbers There are approximately 6.5 million electric accounts in New York State with a peak demand of 31,000 mWs

5. New York by the Numbers There are approximately 4.5 million gas customers in New York State with 510,000 MDTs

6. Retail Access in NY is Continuing to Make Steady Progress (continued) • There have been a number of positive benefits as a result of the restructuring of the energy industry in New York • $8 billion in rate savings throughout the state since 1996 • Nearly 100% of the state's largest gas customers and 65% of the large time-of-use commercial and industrial electricity load being supplied by ESCOs. • Success in the small customer market, highlighted by Orange and Rockland's territory which has achieved migration levels of approximately 33% for electric and 37% for natural gas residential and small business customers.

7. Retail Access in NY is Continuing to Make Steady Progress (continued) • ESCO Community is growing…There are approximately 60 ESCOs providing electricity and/or gas to customers • There are at least three ESCOs serving electricity and five ESCOs serving gas in every major service territory in NY. Most service territories have many more • The Commission has approved competitive metering for commercial and industrial customers over 50 kW and there are several pilots serving residential customers. There are 13 competitive metering providers (MSPs & MDSPs) thus far in New York. • A coordinated $290 million commitment to renewable energy, energy efficiency and demand reduction programs.

8. Retail Access in NY is Continuing to Make Steady Progress (continued) • Electric pricing offers range from fixed prices to variable (hourly) • Larger electric loads can participate in the NYISO Demand Response programs • The Commission has approved voluntary RTP rates for customers over 100 kW • Value added services are beginning to be provided by ESCOs (e.g., green power, bundled electric/gas/oil service, energy efficiency, demand reduction, appliance service contracts)

9. Retail Access in NY is Continuing to Make Steady Progress (Electric) • As of December 2004, the following percentage of electric customers have migrated to an ESCO: • 46% of large commercial / industrial customers (65% of load) • 13% of small commercial / industrial customers (36% of load) • 5% of residential customers (7% of load) • Number and Percent of Migrated Customer Accounts by Utility • NumberPercent • Orange & Rockland 66,100 31 • RG&E 72,000* 21 • NYSEG 82,000* 9 • NMPC 115,000 7 • Con Edison 111,000 4 • CHG&E 2,000 1

10. Retail Access in NY is Continuing to Make Steady Progress (Gas) • As of November 2004, the following percentage of gas customers have migrated to a marketer: • 100% of large non-residential customers • 16% of small non-residential customers (35% of load) • 7% of residential customers (14% of load) • Number and Percent of Migrated Customer Accounts by Utility • NumberPercent • O&R 44,350 37 • Corning 3,290 23 • RG&E 42,937 15 • NMPC 78,401 14 • NFG 53,907 10 • KeySpan (NY) 76,078 7 • KeySpan (LI) 31,191 6 • Con Edison 25,658 2 • NYSEG 5,147 2 • CHG&E 1,235 2

11. The Path to Our Vision for the Future • Policy Statement issued August 25, 2004 outlined the Commission's end state vision of electric and gas retail markets and contained the following: • Vision • “The provision of safe, adequate, and reliable gas and electric service at just and reasonable prices is the primary goal. Competitive markets, where feasible, are the preferred means of promoting efficient services, and are well suited to deliver just and reasonable prices, while also providing customers with the benefit of greater choice, value, and innovation. Regulatory involvement will be tailored to reflect the competitiveness of the market”

12. The Path to Our Vision for the Future (continued) • Policy Statement issued August 25, 2004 outlined the Commission's end state vision of retail markets and contained the following recommendations: • Statewide use of O&R Switch & Save (Power Switch) Program • Utility purchase of ESCO accounts receivable • Retail Auctions • Market Match/Market Expo • Aggregation Pilot Programs • Coordinated Utility/ESCO/PSC Education and Marketing Campaigns • Utility Portfolio Management and Pricing • Monitoring the Market for Anti-Competitive Behavior

13. Competitive Markets: Methods to Foster Migration • Switch and Save Program • ESCO provides guaranteed savings (7%) for two months for customers that sign up for the program. • Utility customers contact utility call center; representatives offer program. Customer is either assigned at random to a participating ESCO or can choose a participating ESCO directly. • Utility handles enrollment and switching • Easy way for ESCOs to acquire customers, but requires supportive utility mindset and call center readiness • Has shown success – mass market switching of almost 40% • Recommended state-wide implementation

14. Competitive Markets: Methods to Foster Migration (continued) • Utility Purchase of ESCO Accounts Receivable • Critical element of Switch and Save Program, but may also be used on its own • Utility purchases receivables at a discount agreed to by the parties • Utility bills customer for ESCO • ESCO receives payment from utility, minus discount • ESCO avoids revised HEFPA requirements re: shutoffs • Reduces ESCO back office (customer care) and overhead costs

15. Competitive Markets: Methods to Foster Migration (continued) • Retail Auctions • Customer or Load • In blocks – winning ESCOs provide a fixed price for one year; at any time customer can return to IOU or go to another ESCO; at year end, ESCO can make further arrangements with customer; • Pilots encouraged • Companies must file detailed auction plan with Commission

16. Competitive Markets: Methods to Foster Migration (continued) • Market Match – assists small commercial and industrial customers in receiving ESCO offers. • Web-based system provides for the exchange of customer data (historical consumption, service class, NYISO zone) for customers interested in obtaining a commodity price solicitation from ESCOS; • Customer participation is voluntary and anonymous; • Market Expo - designed to bring ESCOs, business customers and the utility together in a physical setting to exchange customer data for those interested in obtaining a commodity price solicitation. • Customer participation is voluntary; • Programs have shown success in fostering migration

17. Competitive Markets: Methods to Foster Migration (continued) • Aggregation Pilot Programs • Affinity Groups • Business Councils / Chambers of Commerce • AARP • Government Groups • State Government Facilities • County • Local • Low Income Customers

18. Competitive Markets: Methods to Foster Migration (continued) • Coordinated Utility/ESCO/DPS Education and Marketing Campaign • NYPSC Competition Update Page(www.AskPSC.com) • Slated for February 15 • Centralizes current PSC data in one place, including information on: • how to become an ESCO in NYS • competition initiatives by service territory • Migration statistics • Links to utilities • Power to Choose ESCO Comparison Chart • Launched November 2004 • Provides electric and gas customers with comparison of utility vs. ESCO offerings • ESCO participation is voluntary • Updated Monthly

19. New York State Consumer Education Efforts on Competition and Green Power

20. Competitive Markets: Methods to Foster Migration (continued) • Utility Portfolio Management and Pricing • More exposure to market-based rates through declining hedges • Long term contracts only on a case by case basis • No future fixed price commodity offers through utility • Utility economic development rate discounts only on delivery portion of bill

21. Competitive Markets: Methods to Foster Migration (continued) • Monitoring the Market for Anti-CompetitiveBehavior • Reduce anti-competitive barriers / level playing field • IOUs/LDCs out of commodity market • Market Monitoring via the Office of Retail Market Development • Marketer Satisfaction Surveys (marketers rate utility) • ESCO Ombudsman at each utility • EDI, POR, HEFPA, pro-ration • Align utility’s interests with the Commission’s • Migration incentives ($20 - $50 per customer) • Customer awareness of competitive markets incentives

22. Retail Access Plan Filingsto Accelerate Competition • Central Hudson Gas and Electric Corporation • Niagara Mohawk Power Corporation • Orange and Rockland Utilities, Inc • Plans will be reviewed by parties participating in a collaborative process; • Plans submitted thus far to be approved by the Commission in time to go into effect this Summer • Remaining utility plans will be submitted by March