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Ohio Energy
Workshop T
Advanced Energy Procurement:
Beyond the Fixed Rate & Key
Issues to Understand When
Comparing Electricity Quotes
Tuesday, February 18, 2014
3:15 p.m. to 4:30 p.m.
Biographical Information
Beth M. Polk, Regional Sales Manager (Ohio & Illinois)
GDF SUEZ Energy Resources, NA,
720 North St., Independence, OH 44131
216-772-2486
Fax: 888-725-0527
[email protected]
Beth has a deep understanding of the Ohio energy market and is well-versed in procurement
strategies for large commercial and industrial consumers. Her background includes helping
customers align unique business drivers with energy usage patterns to determine appropriate
product structures. Beth started her career at AT&T in 1996, and began working as an energy
consultant in 2009. She has worked as Regional Sales Manager for GDF SUEZ Energy
Resources since 2011 and covers the Ohio and Illinois PJM markets.
Beth is a graduate of The University of Akron with a B.A. in Business & Organizational
Communication and a minor in Business Administration.
David Braun
Vice President and Chief Operating Officer
Hospital Energy LLC
232 N. Clinton Avenue, Elmhurst, IL 60126
[email protected]
Mr. Braun has over two decades of experience in the energy and utility industries, including 16
years in the deregulated electricity and natural gas markets across the United States. He
brings to Hospital Energy his expertise in energy product structuring, pricing, energy risk
management and operations. Mr. Braun frequently speaks on electricity procurement best
practices at various industry forums which have included the Association of Energy Engineers’
World Energy Congress and Globalcon, Manufacturers’ Education Council Energy
Management Conferences, and various industry and trade association conferences.
Prior to joining the company, Mr. Braun was Regional Vice President at GDF SUEZ Energy
Resources and was responsible for retail electricity sales efforts across the Mid-Atlantic and
Midwest regions. Prior to that he held management positions in sales, marketing, and
operations at Direct Energy, The NewPower Company, Exelon Energy, and Commonwealth
Edison. Mr. Braun earned a Bachelor of Science degree in mechanical engineering from
Northwestern University in Evanston, Ill., and a Master in Business Administration from the
University of Chicago.
Hospital Energy is the leading provider of energy procurement advisory services to healthcare
institutions. Through our partnerships with the nation’s leading healthcare group purchasing
organizations, Hospital Energy has created an unprecedented aggregation of healthcare energy
load that provides our customers a range of procurement options not typically available
through other sources. In particular, aggregated load enables Hospital Energy to provide our
customers access to wholesale pricing while maintaining retail contract protections. We
specialize in aligning healthcare systems with multiple hospital sites around a central
procurement strategy. We take the view that energy procurement is primarily a financial
transaction and the key to savings is a risk management approach supported by state-of-the-art
financial analytics.
Advanced Energy Procurement
Beyond the Fixed Rate
Beth Polk | Independence, OH | 216.772.2486 | [email protected]
About GDF SUEZ Energy Resources NA
(GSERNA)
A member of the GDF SUEZ group
- founded in 1822 (190+ yrs)
• Global leader in independent power production
• Over $117 billion in 2012 revenues
• Over 215,000 employees globally; over 20,000,000
customers worldwide
• GDF SUEZ ranked 17th “World’s Biggest Company” in
Forbes Global 2009; #1 largest utility*
• Highest credit rating of leading energy
providers in the U.S.  A rating by S&P
• FORTUNE Magazine Ranked #1 Most Socially
Responsible Company in the World, Top 10
Most Accountable Firms, Top 6 Most Admired
Energy Companies Globally, 2012**
• Ranked #6 on Business Week list of “The World’s
Best Companies of 2009”***
http://money.cnn.com/magazines/fortune/mostadmired/2012/best_worst/best4.html
* April 2008 Forbes Global 2009 Report
• GDF SUEZ Energy Resources serves over 60,000
commercial, industrial, and institutional accounts
• Load Served
−Total Load > 8,500 MW
−14,500 MW of power generation in U.S.
−> 500 MW of “green” power generation
−650 MW of generation in Ohio
** FORTUNE Magazine, 2008, 2009, 2012
*** Business Week, May 17, 2010
2
Agenda:
What goes into the price of Electricity…
Electricity Cost Components….
Basic building blocks of energy…
Price Risk & Reward Identification…
Product Structures… Fixed, Index, Heat Rate
Customer Examples and Comparisons….
Question & Answer…
3
PJM: Electricity Cost Components
Delivery–type costs:
Customers are price - takers:
Costs are less manageable
Energy:
Cost is Manageable
Including congestion
and line losses
4
PJM: Electricity Cost Components
Delivery Costs – Transmission
Transmission
Cost for transporting power over the interstate transmission grid…
-Regulated by FERC under the Network Integrated Transmission Service (NITS)
tariff for each transmission owner
-Transmission Calculation =
NITS price ($/MW-day) * Trans PLC * days in billing cycle
•
•
NITS in AEP: $32,035/MW-year effective July 1st; $0.0061/kWh at 60% Load Factor
NITS in ATSI, Dayton & Duke: Not a Competitive Supplier Charge
TO FIX OR NOT TO FIX:
- Transmission charges are a transparent calculation, therefore we recommend passing it
through at cost. Should a customer lower their Transmission PLC then the savings
would be passed to them instead of the supplier.
5
PJM: Electricity Cost Components
Delivery Costs – Ancillaries
Ancillaries
- Additional products and services provided by PJM to ensure safe and reliable operation of the
regional electricity system
- Reliability Must Run (RMR) charges
• Coal plant retirements due to age and potential carbon restrictions
• Some units will be required to keep operating for reliability until new generation or transmission upgrades can
be completed
• PJM may announce RMR charges in Ohio due to requested retirement of Coal Generation units
• Potential RMR charges are unknown at this time, but is likely to occur soon
• Understand how a supplier is handling it
- RMR, TECs, Reactive Supply and Voltage Control, and Transmission Owner Scheduling,
System Control, & Dispatch are not Competitive Supplier charges in FE Ohio, Duke, or
Dayton
TO FIX OR NOT TO FIX:
- Ancillary charges vary each month. Therefore, suppliers must use a forecasted charge when
fixing ancillaries. To avoid premiums, customers can pass through ancillary charges at cost
as a line item on their bill.
6
PJM: Electricity Cost Components
Delivery Costs – Capacity
CAPACITY = PLC Capacity Tag * scaling factors * RPM rate * # of days in month
Cost for generation installed…
PJM sets capacity rates 3 years in advance through an auction process known as the Reliability Pricing
Model (RPM). Rates are effective from June through May.
Customer Capacity Cost The PLC Capacity Tag is based on each customer meter’s share of the Peak
Load Contribution defined as the five peak hours of the PJM RTO during the preceding summer. Typical
CP occurrence: between 4-6 p.m. weekdays from late June through August on very hot, humid days.
RPM Clearing Prices in $/MW-Day
PY 08/09
PY 09/10
PY 10/11
ATSI
PY 11/12
PY 12/13
PY 13/14
PY 14/15
PY 15/16
PY 16/17
$108.89
$20.46
$28.45
$128.17
$294.03
$90.54
$28.45
$128.17
$134.62
$59.37
$28.45
$128.17
$134.62
$59.37
$28.45
$128.17
$134.62
$59.37
AEP
$113.22
$104.82
$182.85
$116.23
$16.74
DAY
$113.22
$104.82
$182.85
$116.23
$16.74
DEOK
You have some control over your PLC tag –
1. Avoid or reduce operations (load) in hours when grid load is expected to peak
2. Run on-site generation during those potential peak hours
3. Demand Response programs
4. Invest in energy efficiency
7
7
7
Capacity: Market in PJM
To Fix or Not to Fix?
Just like any of the supplier Delivery Costs, Capacity can be Fixed in a
price or passed through at cost.
• We recommend passing through capacity at cost if customers are enrolled in
DR programs and working to control their Peak Load Contribution (PLC) by
using less energy during the five peak hours that PJM grid peaks. Otherwise,
the savings the customer is working toward will be passed on to the supplier
instead of the customer.
8
PJM: Electricity Cost Components
Energy Costs
Hub Energy
Zonal Basis
Shape
Straddle
Imbalance
Losses
9
Hourly Pricing - Historic AD Hub Day-Ahead LMPs
$/MWh
Day Ahead Historical LMPs - AEP Dayton Hub
2008
2009
2010
2011
2012
2013
$ 53.21 $ 32.99
$ 37.57
$ 40.67
$ 31.45
$ 35.52
10
What Moves Power Prices?
Correlation Between Natural Gas & Power
Historical AEP Dayton Hub Cal 14 vs. NYMEX HH Cal 14 chart
Correlation averaging approximately 94%
94.8% Correlation
1
11
1
Considerations: Historic & Future Pricing: Power
12
Product Structure and Pricing Options
Tariffs: Not hedgeable
Risk premiums or
risk transfer (contract language)
Hedgeable
Any or all of the adders can be combined into or
excluded from the energy pricing structure –
know what you’re buying!
•Include or pass-through adders:
• Capacity
• Transmission
• Ancillaries
• Line Losses (T&D)
• Taxes
• Energy Structure
• Fixed
• Index + Adder
• Real-Time
• Day-Ahead
• Fixed Blocks
• Heat Rate
13
Product Structure and Pricing Options
Risk/Reward Spectrum
• How do you know what product to select?
Very risk tolerant:
• Index product
with full pass thru of
delivery components
Little risk tolerance:
• Fixed product
More risk tolerant:
• Block and index
• Fixed with cap and
trans pass thru
14
Product Structure and Pricing Options
Fixed
Fixed price:
Fixed price can include or pass through any or all components –
capacity, transmission, ancillaries, T&D losses
-FIXED RTC (Round the clock)
-FIXED ON PEAK
-FIXED OFF PEAK
PROS:
-Price certainty and simplicity
CONS:
-You’re betting that today is the best day to contract (less than 5% chance).
-Little Flexibility
-Premiums for load shaping, load following, and forward risk
Realize that an “All In” price does not mean that components are fixed!
• Suppliers should clearly list on quote what is included and fixed in rate, and what is
floating. For example, capacity may be included but subject to change when new PLC tags
are released. Make sure you know. Otherwise, you will not have an apples to apples
comparison.
15
Product Structure and Pricing Options
INDEX
Index Structure:
− Index to either Day Ahead or Real Time LMP at Zone or Hub
− Adder can include or pass through any or all of the following
capacity, transmission, ancillaries, T&D losses
− Option to fix (hedge) blocks
PROS:
-No forward risk premiums
-No load shaping and load following risk premiums
-Ability to take advantage of market dips fix as much/little of load at any time
CONS:
-You’re betting that today is the best day to contract (less than 5% chance).
-Little Flexibility
-Premiums for load shaping, load following, and forward risk
16
Product Structure and Pricing Options
BLOCK & INDEX
Index Pricing - Hedging with Fixed Price Blocks
Energy cost is variable
- Changes hourly
- Indexed to zonal price posted by PJM
- Choice of day ahead prices or real time
Blocks
- Fix a portion of the load
- Variety of options: Peak, off peak, min of one month
- Build a portfolio of hedges and dollar cost average – like your 401k
Benefits
- Index portion won’t pay any forward risk premium
- Avoid load shaping and load following risk premiums (lower cost)
- Not making the bet that “today” is the best day to buy power
- Take advantage of declining power prices
Risks
- Market runs up before you hedge – mitigate by having a plan and sticking to it
17
Product Structure and Pricing Options
BLOCK & INDEX
Energy Price Risks: Shaping Supply
• You can build a portfolio of hedges to manage your entire load profile
• Strike hedges opportunistically based on market conditions over time
18,000
16,000
14,000
12,000
KW
10,000
8,000
6,000
4,000
2,000
Block 3: 5 MW Peak @
$38/MWH
Block 2: 3 MW RTC @ $30/MWH
Block 1: 5 MW RTC @ $31/MWH
0
Hour Ending
18
18
Product Structure and Pricing Options
HEAT RATE
Product Design
What is Heat Rate?
• Electrical service at a price based on a highly
visible natural gas index
• Technically, heat rate is used to describe the
amount of fuel required to generate a kWh
of electricity
• Heat Rate and Retail Adder are fixed at the time
contract is signed
• The heat rate used in the energy price
formula will be market-based and not tied
specifically to a generator
• Natural Gas price is settled monthly
• Customer may have opportunity to lock in the
gas price in advance of the gas settlement date
• Customer may lock in a Fixed Price at anytime in
the future
• Customer can calculate the Energy Price before
the start of each month  no hourly volatility
during the delivery month
Energy Price $/MWh
Customer Benefit
Heat Rate Product
100
80
60
Sample Energy Price = 8.5 HR * NYMEX + $7
40
20
0
5
5.5
6
6.5
7
7.5
8
8.5
NYMEX Price $/mmbtu
(1)
Market-based heat rate
19
Product Structure and Pricing Options
HEAT RATE
What is it?
as an Efficiency Factor, Heat Rate is a factor that measures how efficiently a generator
converts thermal energy into electricity. It is the amount of fuel energy (such as natural
gas) required by a power plant to produce one kilowatt-hour of electrical output.
Heat Rate, as a Retail Electricity Product, is a product that offers consumers an
opportunity to link the price of electricity to the price of natural gas. In retail
markets, Heat Rate products are generally based off a “Market Implied” Heat Rate, derived from
dividing the forward power price by the forward gas price, as shown below.
Rather than opting for a Fixed Price contract, customers on a Heat Rate pay a
price for electricity that varies based on the settle price of the agreed upon
natural gas price index such as the New York Mercantile Exchange (NYMEX).
20
HEAT RATE: How Does It Work?
The Electricity Price for a Heat Rate product is calculated on a calendar month; by
multiplying a Heat Rate by a Gas Index, then adding the Retail Adder, as shown
below.
The Gas Index varies monthly, based on the settlement of that index. The
Electricity Price component is calculated as the Heat Rate multiplied by the
monthly settled Gas Index price.
Example: Customer ABC is on a Heat Rate product, with a HR of 9 and a Retail Adder of
$8.50. The Gas Index is NYMEX. In order to calculate the electricity price for one month,
(September 2012), take the NYMEX settle price for that month, $2.634, and perform the
following calculation:
Electricity Price = (9 x $2.634) + $8.50 = $32.21/MWh or $0.03221/KWh
21
Example of Customer on Heat Rate
CUSTOMER ON HEAT RATE IN 2012
January‐12
February‐12
March‐12
April‐12
May‐12
June‐12
July‐12
August‐12
September‐12
October‐12
November‐12
December‐12
AVERAGE PRICE
NYMEX NG SETTLE PRICE
$3.08
$2.68
$2.45
$2.19
$2.01
$2.43
$2.77
$3.01
$2.63
$3.02
$3.47
$3.70
X
HEAT RATE FACTOR
+
9
9
9
9
9
9
9
9
9
9
9
9
ALL‐IN Retail Adder ELECTRICITY /MWh
= PRICE/MWh
$8.50
$36.22
$8.50
$32.62
$8.50
$30.55
$8.50
$28.21
$8.50
$26.59
$8.50
$30.37
$8.50
$33.43
$8.50
$35.59
$8.50
$32.17
$8.50
$35.68
$8.50
$39.73
$8.50
$41.76
$33.58
ALL‐IN ELECTRICITY PRICE/kWh
$0.03622
$0.03262
$0.03055
$0.02821
$0.02659
$0.03037
$0.03343
$0.03559
$0.03217
$0.03568
$0.03973
$0.04176
$0.03358
Would you have liked to pay $0.03348/kWh??
22
HEAT RATE:
Historic Chart of Heat Rate Factors at AD HUB
23
Is Heat Rate Right for Me?
A company’s perception of whether or not Heat Rate products
are “good” for the company depends on the company’s view
of the gas market and its tolerance for risk.
Companies
- forecasting a downward trend in natural gas prices may choose a Heat Rate product,
rather than a Fixed Price, so they can take advantage of future declines in market
prices
- with resources dedicated to monitoring the gas market may also prefer a Heat Rate
product. For example, if a company already used to hedging gas, they are likely more
comfortable with a Heat Rate product. In addition, they will only need to watch the
commodity of gas instead of both electricity and gas.
- with an end-product directly related to natural gas,(e.g. refineries), may prefer a Heat
Rate product
A longer time horizon is beneficial to customer when buying a heat rate,
i.e. deal starting 12 months from today gives the customer time for gas
to fall
24
Hospital Energy
Hospital Energy is the nation’s leading energy procurement organization for healthcare with more than $1 billion in contracts under management. Our unique approach includes:
• Aggregation of national healthcare spend to drive value in all energy markets
• Establishment of centralized, finance‐driven Analytical
market procurement for health systems
• Alignment of finance, supply chain and facilities staff around a single market strategy across all campuses
Pick the Right Supply Partner
The optimum supply partner should provide: • robust risk management and hedge capability • transparent, protective contract terms and billing practices
• best‐in‐class pricing • financial strength to ensure contract fulfillment
• excellent customer support and service Potential Product Structures • Fixed all‐in: • Fixed price for term, which includes all costs: Energy, shaping/load following premiums, capacity, ancillary services, losses, and renewable portfolio standard
• Simplest product design, but highest ultimate cost
• Least flexible – makes a bet that contracting day is best day to buy power
• Doesn’t necessarily eliminate risks which enter through contract language
• Levels capacity costs over term which causes cash flow issues
• Fixed with capacity pass through
• Eliminates cash flow issues caused by known capacity fluctuations • Fixed Energy‐only
• Eliminates risk premiums paid to supplier on non‐energy components
• Percentage Fixed
• Allows for multiple opportunities to set fix price which takes advantage of dollar cost averaging effect
• Index pricing with Fixed Price Blocks
• Stripped down contracting achieves wholesale cost structure
• Allows most flexibility in fixing prices – generates lowest ultimate cost of supply
• Eliminates risk premiums paid to supplier for non‐energy components & load following
Wholesale Electricity Pricing
Heat Rate Electricity Price
Fuel Price
Example 1: Heat Rate Customer
Gas Locks for Heat Rate
• Term: February 2012 to January 2014
• Heat Rate Multiplier at 10.85
• This customer layered in gas contracts over the term of the contract to manage their electricity price risk
• Initially hedged gas worth 25% for full term; then layered in 25% for first year and 50% for first 6 months; Later added more hedges Feb‐12
Mar‐12
Apr‐12
May‐12
Jun‐12
Jul‐12
Aug‐12
Sep‐12
Oct‐12
Nov‐12
Dec‐12
Jan‐13
Feb‐13
Mar‐13
Apr‐13
May‐13
Jun‐13
Jul‐13
Aug‐13
Sep‐13
Total
NYMEX LDS
$2.678
$2.446
$2.191
$2.036
$2.429
$2.774
$3.010
$2.634
$3.023
$3.471
$3.696
$3.354
$3.226
$3.427
$3.976
$4.152
$4.148
$3.707
$3.459
3.567
Monthly Volume
1,748.23
2,086.55
1,801.99
2,260.40
2,619.13
3,049.48
2,874.03
2,384.52
2,427.44
1,873.48
2,008.99
1,929.01
1,687.49
2,071.95
1,832.56
2,260.04
2,662.67
3,002.89
2,864.30
2,384.52
Rate
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
$37.107
%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
Price Locks
Rate
%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$33.472
25.0%
$35.371
25.0%
$35.371
25.0%
$35.371
25.0%
$ 43.67
25.0%
$ 43.67
25.0%
$ 43.67
25.0%
$38.518
25.0%
$ 43.67
25.0%
Rate
$30.923
$30.923
$30.923
$30.923
$30.923
$30.923
$35.046
$35.046
$35.046
$35.046
$35.046
$35.046
$35.046
$35.046
$35.046
%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
$40.145
$ 43.67
50.0%
25.0%
Unhedged %
Initial
Total
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
50.0%
0.0%
50.0%
0.0%
50.0%
0.0%
50.0%
0.0%
50.0%
0.0%
50.0%
0.0%
75.0%
0.0%
75.0%
0.0%
75.0%
0.0%
50.0%
50.0%
50.0%
50.0%
50.0%
0.0%
50.0%
25.0%
75.0%
50.0%
Electric Budget
Initial
All
Hedges
Hedges Montly Price
$57,877
$57,877
$33.11
$69,077
$69,077
$33.11
$59,657
$59,657
$33.11
$74,833
$74,833
$33.11
$86,709
$86,709
$33.11
$100,956 $100,956
$33.11
$97,642 $101,073
$35.17
$76,148
$83,858
$35.17
$82,641
$85,367
$35.17
$68,335
$65,886
$35.17
$75,730
$70,651
$35.17
$69,136
$67,839
$35.17
$59,954
$60,146
$35.64
$77,002
$73,849
$35.64
$76,292
$65,317
$35.64
$96,546
$96,546
$42.72
$113,688 $113,688
$42.70
$121,031 $120,917
$40.27
$80,320 $112,298
$39.21
$91,335
$94,296
$39.55
$1,543,576 $1,566,544
Savings via Heat Rate Example
Program
2011 Rate (Suppler A)
Savings v. 2011 Savings v. 12‐
Rate
13 Fixed
Savings v. Index
$/kWh
$0.06300
Cost
$2,737,045
2012‐13 (Supplier B) Fixed Rate Offer
$0.04903
$ 2,130,116
2012‐13 LMP Index $0.03948
$ 1,715,215
$1,021,830 $ 414,901
Actual Rate with Supplier B HR and gas locks:
$0.03716
$ 1,614,422
$1,122,623 $ 515,694 $ 100,793
$606,929
• Energy markets fell significantly from 2010 (when 2011 rate was set) to 2012 but is up in 2013
• The Supplier B ‘12‐13 fixed offer represents a significant amount of that move
• The HE/Supplier B heat rate contract with gas locks beat the pure index because it locked in the market Heat Rate and then natural gas fell
• The electricity index didn’t fall as much because the market heat rate increased during the term
Example 2: Fixed Energy Only Contract
Summary of Current Electricity Contract
• Fixed price for energy only
•
•
•
•
•
•
Fixed price: $34.81/MWH ($0.03481/kWh)
September 1, 2012 to August 31, 2014 (ends at Sept. meter read)
Load following product
Priced at Northern IL Hub
Full requirements, no consumption bandwidths
Material Adverse Change clause – Supplier could collect addition costs if usage patterns change substantially (>25%+/‐) • Pass through of regulated non‐energy components:
•
•
•
•
•
Capacity
Transmission (NITS)
Ancillaries including IL RPS
Line losses
Congestion costs
• This product fixes what you can control and avoids paying risk premiums for regulated costs you can’t control
32
Price Performance versus Index
• Historic analysis of index v. fixed
• 100% index pricing would have saved 3.7%
Month
Actual KWH
Sep-12
2,662,800
Oct-12
2,544,496
Nov-12
2,447,731
Dec-12
2,673,846
Jan-13
2,863,605
Feb-13
2,625,241
Mar-13
2,764,301
Apr-13
2,519,253
May-13
2,648,280
Jun-13
2,712,461
Jul-13
3,022,373
Aug-13
2,984,366
Grand Total
34,613,205
33
Index Average
$
32.54
$
26.49
$
31.56
$
28.79
$
29.46
$
30.19
$
34.58
$
36.21
$
34.23
$
31.91
$
41.08
$
30.85
$
30.40
Cost or (savings)
$
2,683
$
18,568
$
5,100
$
12,869
$
11,861
$
9,096
$
(2,763)
$
(6,713)
$
(1,841)
$
4,810
$
(21,844)
$
8,298
$
40,124
3.7%
Volumetric Deviation Analysis
• Current contract has monthly volumetric protection which is a premium product
• Actual deviations averaged only 3.1%
• Deviation range of ‐7.3% to +9.6%
• Option to change to 10% bandwidth, which saves $0.10, but annual savings of $3,000 is probably not worth the additional risk
Month
Actual Meter Vol Contract Vol
Vol. Diff
Sep-12
2,454,872
2,240,690
214,182
Oct-12
2,345,806
2,200,520
145,286
Nov-12
2,256,597
2,213,660
42,937
Dec-12
2,465,056
2,658,310
(193,254)
Jan-13
2,639,997
2,743,280
(103,283)
Feb-13
2,420,246
2,311,790
108,456
Mar-13
2,548,448
2,411,010
137,438
Apr-13
2,322,534
2,190,460
132,074
May-13
2,441,486
2,293,850
147,636
Jun-13
2,500,655
2,409,310
91,345
Jul-13
2,786,368
2,724,340
62,028
Aug-13
2,751,328
2,637,690
113,638
Grand Total
29,933,394
29,034,910
898,484
9.6%
6.6%
1.9%
-7.3%
-3.8%
4.7%
5.7%
6.0%
6.4%
3.8%
2.3%
4.3%
3.1%
MAC Premium:
0.1
MAC Cost:
$ 2,993
34
Budget Analysis - 100% Index Rate
Actual customer
example –
Jan 28, ‘14
June 2014 – May 2016
35
Best Case
Expected Case
Worst Case
$30.28
$33.15
$37.54
($423,885)
$4,905,587 +$650,182
Budget Analysis - 50% Fixed Rate Hedge
June 2014 – May 2016
Actual customer
example –
Jan 28, ‘14
36
Best Case
Expected Case
Worst Case
$32.18 $33.55
$35.86
($202,927)
$4,965,601 +$341,648 Energy Budget Risk Analysis Example
24 Month Scenarios
Actual customer
example –
Jan 28, ‘14
100% Fixed
Rate
50% Fixed Rate
100% Index (Unhedged)
Worst Case
$34.01
$35.86
$37.54
Expected Case
$34.01
$33.55
$33.15
Best Case
$34.01
$32.18
$30.28
$5,033,231
$4,965,601
$4,905,587 $0
$346,248
$682,016
Expected Energy Cost
Savings
Opportunity/Risk
Budget Analysis - 100% Index Rate
Actual customer
example –
Jan 28, ‘14
February 2014 – December 2015
Best Case
Expected Case
Worst Case
$3.81
$4.30
$4.77
($138,377)
$1,211,691 +$133,765
38
Budget Analysis - 50% Fixed Rate Hedge
February 2014 – December 2015
Best Case
Expected Case
Worst Case
$4.05
$4.29
$4.54
($68,469)
$1,210,309 +$68,879 Actual customer
example –
Jan 28, ‘14
39
Budget Analysis - 75% Fixed Rate Hedge
February 2014 – December 2015
Best Case
Expected Case
Worst Case
$4.17
$4.29 $4.40 ($33,356)
$1,209,443 +$31,127 Actual customer
example –
Jan 28, ‘14
40
Energy Budget Risk Analysis Example
23 Month Scenarios
100% Fixed
Rate
75% Fixed Rate 50% Fixed Rate
Actual customer
example –
Jan 28, ‘14
100% Index (Unhedged)
Worst Case
$4.34
$4.40
$4.54
$4.77
Expected Case
$4.34
$4.29
$4.29
$4.30
Best Case
$4.34
$4.17
$4.05
$3.81
$1,223,443
$1,209,443
$1,210,309
$1,211,691 Savings
Opportunity/Risk
$0
$39,908
$84,046
$163,885
Likelihood This Rate Is Below 100% Fixed Rate
0%
70%
60%
55%
Expected Energy Cost
Summary
• Understand the contracts you are signing or work with someone that does
• Hidden pass throughs abound
• Beware of supplier offers that look too good to be true
• Understand your company’s real tolerance for budget risk – it is probably greater than you think
• Traditional fixed pricing forces you to gamble with your buy – you are laying a bet that the day you sign is the best day to buy (less than 5% chance)
• Layer‐in your fixed prices using blocks or percentage fixed products
• Take advantage of dollar cost averaging and market volatility to get the lowest cost
• Market analytics for decisions is available – not seat of pants
Why Choose Us?
• Values: We believe Ethics and business are inseparable.
• Transparency:
We are committed to transparency & accountability in all our practices.
• Financial Stability: S&P A Rating
• Strategic Support for National Accounts:
Dedicated team approach
• Wider Product Selection:
product development
Our customers help drive new
• Service:
•
•
•
•
Billing portal
Enrollment guarantee
Market monitor
PriceWatch
• History:
• Extensive history working with large commercial and industrial users
• Relationship:
We appreciate your business!
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