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California Direct Access – Remaining Issues Power Association of Northern California 2010 Annual Seminar April 19, 2010.

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Presentation on theme: "California Direct Access – Remaining Issues Power Association of Northern California 2010 Annual Seminar April 19, 2010."— Presentation transcript:

1 California Direct Access – Remaining Issues Power Association of Northern California 2010 Annual Seminar April 19, 2010

2 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 Cap

3 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. The Initial Reopening Presentation prepared before initial reopening on April 16, 2010

4 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 Rules Current 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?

5 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Remaining SB 695 Issues Review of RA, RPS and GHG Section of SB 695 says: (c) Once the commission has authorized additional direct transactions pursuant to subdivision (b), it shall do both of the following: (1)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 ), 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?

6 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 service

7 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Exit Fee - examples UtilityRate Class Approximate Generation Only Rate ($/MWh) PCIA Vintage 2009 ($/MWh) PGEE19$81.37 (58% LF)$11.61 PGEE20$79.01 (69% LF)$10.29 SCETOU-GS$72.90 (48% LF)$4.16 SCETOU-8$69.58 (79% LF)$4.82 SDGEAL-TOU$80.45 (70% LF)$10.12 Notes: UDC Generation Rates are based on currently published Tariff rates, excludes non-bypassable charges that would be paid whether DA or Non-DA UDC Generation rates do not take into account Critical Peak Pricing (CPP) programs SCE Generation rate assumes 73% URG and 27% supplied by DWR ($ /kWh) SDGE Generation rate assumes 90% URG and 10% supplied by DWR ($ /kWh) Rate classes shown are assumed to be primary voltage

8 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 managed

9 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 UtilitiesRetailers Utility-owned and affiliate generation Portfolio risk Capacity riskAttrition risk Price risk Wholesale Risk Management Activities Retail Risk Management Activities

10 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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

11 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 11

12 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 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 12

13 © Constellation Energy Group, Inc. The materials provided and any offerings described herein are those of Constellation Energy Group, Inc. or its subsidiaries. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Legal Disclaimer © CONSTELLATION ENERGY GROUP, INC. THE OFFERING DESCRIBED IN THIS PRESENTATION IS SOLD AND CONTRACTED BY CONSTELLATION NEWENERGY, INC., A SUBSIDIARY OF CONSTELLATION ENERGY GROUP, INC. 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. BRAND NAMES AND PRODUCT NAMES ARE TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE HOLDERS. ALL RIGHTS RESERVED. ERRORS AND OMISSIONS EXCEPTED.


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