Power Association of Northern California 2010 Annual Seminar April 19 2010 Outline of Topics The Initial Reopening Remaining Issues Associated with SB 695 Implementation Bond requirements for Electric Service Providers ID: 386716
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Slide1
California Direct Access – Remaining Issues
Power Association of Northern California
2010 Annual Seminar
April 19, 2010Slide2
Outline of Topics
The Initial Reopening
Remaining Issues Associated with SB 695 Implementation
Bond requirements for Electric Service Providers (
ESPs
)
Switching Restrictions
Review of Resource Adequacy (RA), Renewable Portfolio Standard (RPS), and Greenhouse Gas (GHG) Emissions to ensure equivalent requirements for utilities and
ESPs
Phase 3 of CPUC Proceeding
Market design issues
Rate making issues
Legislative Action to Increase the CapSlide3
The Initial Reopening
Presentation prepared before initial reopening on April 16, 2010Slide4
Remaining SB 695 Issues
Bond Requirements for
ESPs
Financial Posting to the utilities by
ESPs
to cover costs if customers are returned to utility service.Review of Switching RulesCurrent rules require:
Six month notice to switch to Direct Access (Note: has been waived during initial reopening phase)
Three year stay on utility service upon return to utility service from Direct Access (Note: has been waived for customers in the midst of their three year stay so that they can request space under the cap during the reopening)
Proceeding will consider whether these rules remain necessary and/or should be modified:
Are existing protections through exit fees adequate?
In a capped market, are switching restrictions necessary at all?
Slide5
Remaining SB 695 Issues
Review of RA, RPS and GHG
Section 365.1 of SB 695 says:
(
c
) Once the commission has authorized additional direct transactions pursuant to subdivision (b), it shall do both of the following:Ensure that other providers are subject to the same requirements that are applicable to the state’s three largest electrical corporations under any programs or rules adopted by the commission to implement the resource adequacy provisions of Section 380, the
renewables
portfolio standard provisions of Article 16 (commencing with Section 399.11), and the requirements for the electricity sector adopted by the State Air Resources Board pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code). This requirement applies notwithstanding any prior decision of the commission to the contrary.
CPUC Ruling says this will be addressed in subject matter proceedings
First “challenge” appears to be recent CPUC TREC decision and imposition of limitation on the use of tradable renewable energy credits by utilities
Does SB 695 require that such limitations must also be imposed on all ESPs? Slide6
Phase 3 of the Direct Access Rulemaking
Market Design and Ratemaking Issues
Impact of Exit Fees on the Direct Access value proposition
Exit fee:
Ensures that direct access customers pay their share of utility stranded costs each year
Compares utility generation portfolio costs to a Market Benchmark.
Market benchmark = (wholesale power + Resource adequacy adder) x loss factor
As Market prices go up, Exit Fee goes down
Fixed for the year
Exit fee is
vintaged
based on when a customer leaves utility serviceSlide7
Exit Fee
-
examples
Utility
Rate Class
Approximate Generation Only Rate ($/MWh)PCIA Vintage 2009 ($/
MWh
)
PGE
E19
$81.37 (58% LF)
$11.61
PGE
E20
$79.01 (69% LF)$10.29SCETOU-GS$72.90 (48% LF)$4.16SCETOU-8$69.58 (79% LF)$4.82SDGEAL-TOU$80.45 (70% LF)$10.12
Notes:
UDC Generation Rates are based on currently published Tariff rates, excludes non-
bypassable
charges that would be paid whether DA or Non-DA
UDC Generation rates do not take into account Critical Peak Pricing (CPP) programs
SCE Generation rate assumes 73% URG and 27% supplied by DWR ($0.03763/kWh)
SDGE Generation rate assumes 90% URG and 10% supplied by DWR ($0.06105/kWh)
Rate classes shown are assumed to be primary voltageSlide8
Phase 3 of the Direct Access Rulemaking
Potential Elements of Exit Fee Reform
Account for Load Migration in developing utility procurement plans
Address inequities associated with utility investments in renewable resources
Market benchmark – Does not include benchmark for renewable energy
Utility banking of renewable purchases – Customers who depart for Direct Access reduce utility RPS obligation, but utility investment is not stranded because they bank the renewable energy for future use.
Other potential reforms to utility procurement practices that lead to more active risk management in utility procurement
Utilities sell all or portions of their load in wholesale
RFPs
or auctions
Wholesale market provides fixed price for specified time period.
Customer attrition, market price risk, portfolio risk, capacity risk are managedSlide9
Confidential
9
Consumers
Benefits of getting it right: Market stability, Managed Risks, Utility Investment focus on Transmission, Meaningful Retail Choice
Risk is allocated to suppliers and retailers, who are in the best position to manage that risk. Utilities focus investment in transmission.
Competitive wholesale suppliers
Wholesale
market
Utilities
Retailers
Utility-owned and affiliate generation
Portfolio risk
Capacity risk
Attrition risk
Price risk
Wholesale Risk Management Activities
Retail Risk Management ActivitiesSlide10
Legislative Action
SB 695 provides that any further DA expansion requires legislative authorization
Results from initial reopening will be considered to determine whether to pursue further legislative expansion of the cap
Slide11
Constellation Energy Group, Inc.
is
a Fortune 500 company (#125 on the 2009 list
)
Over 14,000 MWs 2008 peak load served to retail and wholesale customers
7,100 megawatts of owned generating capacity (includes diverse portfolio of nuclear, coal, natural gas, oil, renewable) 400 billion cubic feet of natural gas delivered in open retail markets (2008)
Revenues: $19.8
billion
(
2008)
Assets: More than $22 billion (2008)
Ticker symbol: (NYSE)
CEG
Constellation Energy Key Facts
11Slide12
Constellation
NewEnergy Power
A leading competitive electricity supplier to U.S. commercial, industrial & institutional customers
Provides energy supply, risk management and sustainable energy solutions to help customers effectively manage costs, usage and risk
Serves customers from Main Street to Wall Street, including more than 2/3 of the Fortune 100
Served more than 14,000 megawatts of retail peak load in 2008
Headquartered in Baltimore, MD, with local expertise across all U.S. competitive markets
Division of
Constellation Energy Group, Inc. and
a sister company to both Constellation NewEnergy Gas and Constellation Energy Projects and Services Group
12Slide13
Legal Disclaimer
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This presentation represents the views of the presenter AND IS based upon market information available at the time of the presentation, and those views may change at any time. It does not necessarily represent the views of Constellation Energy Group, INC. or any of its affiliates.
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