1. AAMDC - Expense Optimization
Energy Aggregation Program

2. Energy Aggregation Program
Why Procure Energy?
Most organizations require price stability, as electricity is the most volatile commodity in the world

3. This slide demonstrates the swings in the open market cost
This slide demonstrates the swings in the open market cost. This graphs is for an average of all hours of the month, whereby most organizations consume in the peak hours which would swing the average prices much higher

4. Energy Overview Why Procure Energy?
Most organizations require price stability for budgeting purposes, as electricity is the most volatile commodity in the world
Regulated “Default administration fees” are levied through your local regulated energy provider, representing a 22% premium paid unnecessarily

5. This slide is an example of “administration” charges being levied by a regulated supplier. This is pure margin for the regulated suppliers, and is meant to motivate the client to sign a contract agreement with a de-regulated supplier, thus participating in energy de-regulation.

6. Energy Overview
Why wouldn’t I procure my Energy requirements on my own?
Not taking advantage of the power of aggregation
Energy retailers are motivated to make as much profit as they can from their clients
Companies must remember that energy retailers are in the business of making money. Depending on the level of sophistication of the client, energy retailers will gate the client into arrangements that will make them more money. Energy salespeople are commission based.

7. Typical Retailer Model
+ 5-10% Retailer Margin
+1-2% Admin, Credit, Billing Premium
+ 2% Risk Premium
Commodity Price $
This graph demonstrates the typical charges a retail company will normally obtain, over and above the raw commodity cost. There are many other small print contract terms that may also drive up the effective cost of the commodity like over/under hedging the client, and charging a settlement fee for buying or selling back to the markets.

8. AAMDC Model
+ 2% Retailer Margin
Commodity Price $
Under the AAMDC aggregation model, it will expose retailers with the extras normally charged, and it will be eliminated.

9. Energy Overview Why wouldn’t I buy through other public groups?
They do not employ a responsible procurement Strategy (commitment is too long)
AUMA runs an aggregated energy program, although the decisions related to program are made through a board. After analyzing the recent results of their program, there are a number of items that have ended up costing its members a tremendous amount of money.
AUMA committed its members for a 5 year deal for natural gas at a rate of $8.43 per GJ. The current floating markets are around $2.00/GJ. The mistake the AUMA made was to commit their members for way too long of a period.

10. In this example, the 5 year commitment will cost this client well over 1 million dollars annually, as compared to today’s market.

11. Energy Overview Why wouldn’t I buy through other public groups?
They do not employ a responsible procurement Strategy (commitment is too long)
AUMA must recapture their costs of conducting such a program. As compared to 8760, their cost structure is obviously too heavy.
They levy high administration fees

12. 8760 will shave over 15% off of the AUMA admin fees levied
8760 will shave over 15% off of the AUMA admin fees levied. ($67,500 vs $58,300)

13. Energy Overview Why wouldn’t I buy through other public groups?
They do not employ a responsible procurement Strategy (commitment is too long)
They levy high administration fees
AUMA had mandated Green energy certificates to be part of the energy aggregation. This mandate should actually be a Federal Gov’t initiative, not the AUMA. If any client wishes to pay the premium for Green Energy, that should be their choice.
They mandate more expensive Green Energy for a “REC” (Renewable Energy Certificate)

14. In this example, it cost this client over $33,200 annually, where they didn’t even realize what this was for.

15. This was an example of the certificate that the client received for participating in the Green Energy component. Most organizations don’t even know what this is, yet they are paying for it through the AUMA.

16. AAMDC Aggregated Energy Procurement Program
Why AAMDC?
Much like the Insurance, Gasoline and Tire programs, the AAMDC aggregates members altogether to leverage out better arrangements
The AAMDC Aggregated Energy Procurement Program has been created to enable members to include their requirements into an aggregated public tender (Alberta Purchasing Connection)
Anticipated benefits are between 5-20%
Cost to participate is between 1-2%
AAMDC runs credible programs, and like insurance, it delivers better risk mitigation strategies and cost savings. The only way the savings appear is if everyone believes in the concept of aggregation and mass leverage.
Benefits are contingent upon where the member is currently with their own programs. If they are still procuring energy trough the regulated supplier, the savings will be higher. The base savings of 5% is conservative, purely driven by negotiating the right elements into a deal, and also by forcing the retailers to sharpen their pencils.
The fees to participate are 1.50 per Mwh and 15 cents per GJ.

17. AAMDC Aggregated Energy Procurement Program
How do I express my interest?
Provide recent copies of invoices for Electricity and Natural Gas
Provide signed load release forms
Provide copies of any current energy contracts
Provide AAMDC enrollment form
Execute an Energy Services Agreement - not binding until formal commitment “Appendix B” is received (definition of member requirements to be included into the public Tender )
This is necessary to gain an understanding of what retailer the member is dealing with today, and also is used to conduct a double check on the site ID’s the members have defined in the enrollment forms.

18. APPENDIX B- Future Energy Requirements
This is an example of the natural gas “APPENDIX B”

19. APPENDIX B- Future Energy Requirements
This is an example of the electricity “APPENDIX B”. Note there is a green energy box, if the member wishes to include a component of Green energy into their portfolio.

20. AAMDC Aggregated Energy Procurement Program
What are the critical dates and deadlines?
Public Tender for required energy anywhere between January 1, December 31st 2015
Submit enrollment forms, billings, load release forms, contracts October 1st 2012
Energy analysis provided back to member with AAMDC/8760 energy services agreement including “Appendix B” for approval October 31st 2012

21. This graph demonstrates the level of detail that 8760 goes to when identifying profiles and exposures for electricity.

22. AAMDC Aggregated Energy Procurement Program
What are the critical dates and deadlines?
Public Tender for required energy anywhere between January 1, December 31st 2015
Submit enrollment forms, billings, load release forms, contracts October 1st 2012
Energy analysis provided back to member with AAMDC/8760 energy services agreement including “Appendix B” for approval October 31st 2012
Return approved energy services agreement and “Appendix B” forms back to AAMDC for Public Tender Inclusion November 15th, 2012
Public Tender to energy retailers December 1st 2012

23. AAMDC - Expense Optimization
Cellular and Energy Aggregation Program