1. business and industrial
2. energy
3. renewable energy

Ohio Energy
Workshop K
Ohio’s New Power Marketplace …
Most Popular Electric Power
Options Today
Tuesday, February 19, 2013
1:45 p.m. to 3 p.m.
Biographical Information
Tom Schmuhl, Director, Sales
FirstEnergy Solutions Corp., 341 White Pond Dr. Bldg. B-3, Akron, OH 44320-1119
330-315-6878
[email protected]
Tom Schmuhl was recently the Product Manager for Electric Commodity, FirstEnergy
Solutions with responsibilities for Product Development and Product Deployment within
the Midwest ISO and PJM. Tom has worked in various capacities in the Sales and
Marketing areas at FirstEnergy Solutions throughout his seventeen year career in the
energy field.
Tom is now Director of Sales. With primary responsibilities surrounding support of
electric deregulation initiatives he has helped FirstEnergy Solutions become the largest
retail supplier behind PJM. With lead share positions in several markets and innovative
product offerings the firm has become recognized as one of the top energy companies
in the Midwest and mid-Atlantic regions.
During the years prior to electric deregulation Tom worked in various selling capacities
including the energy management arena working with large multi-state firms with energy
spends in excess of $10M.
Prior to joining FirstEnergy Solutions Tom was the Vice President of Sales & Marketing
for a national firm serving the mortgage industry. He resides in Norwalk, OH.
Stephanie Schneider, Director, Product Development
FirstEnergy Solutions Corp., 341 White Pond Dr. Bldg. B-3, Akron, OH 44320-1119
330-436-2635
[email protected]
Stephanie Schneider is Director of Product Development for FirstEnergy Solutions in
Akron, the competitive subsidiary of FirstEnergy Corp. Stephanie joined the company
in 2011, responsible for directing the ideation, screening, testing, evaluation and
launch of new products that meet consumers’ needs in a dynamic .marketplace.
Prior to joining FirstEnergy Solutions, Stephanie gained considerable experience with
various Consumer Products companies and brands, including Pantene®, Rubbermaid®
and PURELL®. Stephanie’s product management and development experience began
when she joined Procter and Gamble in 1994 as a product researcher, studying
consumer behavior and uncovering insights that led to the development of new hair
care products. In 2001, Stephanie led the product category management of the Outdoor
Storage and Insulated Cooler businesses at Newell Rubbermaid, managing product line
revenue and profit, innovation and new product development. While at GOJO
Industries, from 2007 to 2011, Stephanie led cross functional teams responsible for
developing and commercializing new product innovation for hospitals, businesses, and
at home use. She earned a Bachelor of Science degree in Biology from Indiana
University in Bloomington, Indiana.
Ohio’s New Power
Marketplace
Tom Schmuhl
Director, Sales
Stephanie Schneider
Director, Product Development
FirstEnergy Solutions
Ohio Energy Management Conference
Columbus, Ohio • February 19-20, 2013
Workshop K
Objective
To provide our Ohio customers
and prospective customers with
useful information about Ohio’s
changing market for electric power
and how to buy today to succeed
tomorrow.
Ohio Energy Management Conference
February 19, 2013
2
Agenda
I
Who is FirstEnergy Solutions
I
Market Update for Ohio Customers
I
Finding Energy Products that Work for You
I
Product Options
I
Q&A
Ohio Energy Management Conference
February 19, 2013
3
FirstEnergy Solutions Corp. (FES)
I
Retail subsidiary of FirstEnergy Corp. and
headquartered in Akron, Ohio
I
FirstEnergy Solutions’ family of companies owns
approximately 18,000 megawatts of unregulated
generating capacity
I
Second largest retail supplier of electricity in US
to C&I accounts
– Second largest retail supplier to residential
electric account
I
Parent company ranked 160 among Fortune 200
companies
– One of the nation’s largest investor-owned
electric systems
Ohio Energy Management Conference
February 19, 2013
4
FirstEnergy Solutions Operates in Six States
Providing valuable products and services to millions of customers in all customer
classes
I
Competitive supplier of FirstEnergy Corp. since 1997
I
A leading supplier in targeted markets
I
Ranked by KEMA** as “easiest to do business with”
I
Primary provider of community purchasing/
governmental aggregation programs
MI
PA
IL
OH
NJ
MD
Generation Plants
**2012 Channel Partner Survey, DNV KEMA
Ohio Energy Management Conference
February 19, 2013
5
FirstEnergy Solutions Strengths
I
I
I
I
Customer focused: Various choices and cost-saving
options to meet customer’s specific needs
Knowledgeable: Industry knowledge and experience to
help customers navigate changing markets with ease
Well established: Long-standing presence in OH, PA and
NJ through affiliate companies
Asset backed: Stability and competitive pricing needed in
an electric generation supplier
Ohio Energy Management Conference
February 19, 2013
6
Market Update for Ohio
Customers
Tom Schmuhl
Ohio Energy Management Conference
February 19, 2013
7
Current Market Situation Summary
Historically
low energy
prices
Capacity
prices
trending
higher in
2014 – 2016
Ohio Energy Management Conference
February 19, 2013
8
Components of a Generation Price
Ancillary Services
Other
(supplier, agent, credit,
admin, tax)
Transmission
Capacity
Energy
Portion
(energy, basis,
renewable)
Ohio Energy Management Conference
February 19, 2013
9
Energy Market Update
Energy
$/MW hour
AEP Dayton Hub Settle and Futures Prices
Ten-Year Low in Energy
Ohio Energy Management Conference
February 19, 2013
10
Energy Market Update
Energy
$/MW hour
AEP Dayton Hub Settle and Futures Prices
Ohio Energy Management Conference
February 19, 2013
11
Natural Gas Market Update
Energy
Henry Hub Settle and Futures Prices
Ohio Energy Management Conference
February 19, 2013
12
Natural Gas Market Update
Ohio Energy Management Conference
Energy
February 19, 2013
13
Components of a Generation Price
Ancillary Services
Other
(supplier, agent, credit,
admin, tax)
Transmission
Capacity
Energy Portion
(energy, basis,
renewable)
Ohio Energy Management Conference
February 19, 2013
14
Capacity and its Importance
Reserves
Peak
Demand
Electricity Demand (MW)
PJM procures
capacity prior to
start of each
delivery year
using Reliability
Pricing Model
(RPM)
Peak Demand
Load Shape
Area Under Curve
= Energy Requirements (MWh)
Time (Hours)
PJM is focused on reliability. Capacity ensures reliability.
Capacity = Peak Demand + Reserves
Ohio Energy Management Conference
February 19, 2013
15
Determining Capacity Rates
I
PJM Reliability Price Model (RPM)
– Auctions occur three years in advance (2012 auction set prices for 2015-16)
– PJM is separated by several, nested Local Deliverability Areas (LDAs)
ROP/RTO
ATSI
MAAC
ROP / RTO: Rest of Pool / Regional Transmission Organization
Map represents Planning Year 2015 View
ATSI and MAAC: constrained LDAs
Auction results send a price signal to potential developers of generation,
demand response, and/or transmission to locate their resources in that region
Ohio Energy Management Conference
February 19, 2013
16
PJM Capacity Charges in Ohio
Energy
Note: Several plant retirements in the ATSI LDA were announced in 2012. The ATSI LDA was considered constrained and as a result, import capability plus
remaining resources were not deemed sufficient to maintain reliability within the ATSI LDA.
Ohio Energy Management Conference
February 19, 2013
17
Capacity in ATSI 2015-16
Capacity will be a larger portion of the generation price
starting in PY 2015: ~30% versus ~5% today
100%
Other
Ancillaries
Energy
Capacity
0%
PY 2012
PY 2013
PY 2014
PY 2015
PY 2016
PY 2017
PY 2018
Forecast
* Illustrative for an average LC&I customer
Ohio Energy Management Conference
February 19, 2013
18
Why are capacity prices going up?
Environmental Regulations
I
EPA Mercury and Air Toxics Standards (MATS)
– Command & Control
– Starts in 2015
I
EPA Clean Air Interstate Rule / Cross State Air Pollution
Requirements (CAIR / CSAPR)
– Cap & Trade
– CSAPR vacated, pending changes/legal action
– CAIR currently in place
I
Future: regulations expected addressing cooling water, ash
disposal, CO2 emissions, etc.
– Could be either Command & Control or Cap & Trade
For some units (particularly smaller, older coal units), it is not economical to
make necessary investments for continued operation − i.e., some coal plant
retirements are eminent
Ohio Energy Management Conference
February 19, 2013
19
Coal Plants Serving PJM in 2010
Ohio Energy Management Conference
February 19, 2013
20
Coal Plants Retiring 2010-2016
Ohio Energy Management Conference
February 19, 2013
21
Energy
&
Capacity
What You Can Expect
I
Expect rising prices for energy and capacity
I
Prepare and protect yourself by blending volatility of capacity
with low energy prices
I
Take longest term possible for longer term price certainty
$/MW hour
AEP Dayton Hub Settle and Futures Prices
Ohio Energy Management Conference
February 19, 2013
22
Finding Energy Products That
Work for You
Stephanie Schneider
Ohio Energy Management Conference
February 19, 2013
23
Agenda
1 Savvy Buyer Know-How
2 Options
3 A Look to the Future
Ohio Energy Management Conference
February 19, 2013
24
Business Context for Shopping and Evaluation
Savvy buyers ask ...
I
I
I
What am I trying to achieve with my purchase?
What is my company’s strategic objectives now and in the
future?
What are my resource capabilities in the purchase decision
and ongoing energy management?
– Would an agent, broker or consultant add value?
I
I
Have my business needs changed since the last time I
shopped?
Who are the key decision makers in my business? How
might their objectives influence my decision criteria?
Ohio Energy Management Conference
February 19, 2013
25
Product and Service Context
Savvy buyers ask ...
I
What type of products are available? Do they deliver on my
business objectives?
– Budget certainty, risk tolerance, flexibility, etc.
I
What are my must have and nice to have requirements?
– Product, service, supply agreement, bill payment options
– Ability and experience to supply
– Well-established, reputable company
I
Do I have energy efficiency goals or metrics?
– Is ENERGY STAR® relevant to my business? Is there equity for my
customers?
I
What are my needs for energy information?
– How does it inform my business decisions?
Ohio Energy Management Conference
February 19, 2013
26
Risks, Rewards and Resources
I
Determine your appetite for market risk
– Market risk = budget uncertainty
– Who will be responsible for monitoring market prices?
– Do you have access to data for monitoring market prices?
I
In competitive markets, most customers choose fixed price /
full requirements generation service from their supplier
– When consumption varies from plan, supplier must purchase or sell
power at market (market risk)
– Suppliers quantify market risk and add it into fixed prices
– Customers looking to lower electric generation prices may seek to
assume some or all of this market risk
Ohio Energy Management Conference
February 19, 2013
27
Lessening the Impact of Volatile Energy Markets
I
I
I
I
Watch the market daily
Evaluate company appetite for added risk
(variable pricing)
Establish a trigger price and be prepared to act when within
range (fixed pricing)
Evaluate hedge options to offset market risk
Ohio Energy Management Conference
February 19, 2013
28
Electric Products and Services
Products
Capacity Management
Fixed Price with Options
- Full Requirements
or Pass-Through
- On / Off Peak
- Priceless
- Layering
Shaped Fixed and LMP
Hourly Index
Green
Services
Efficiency Solutions
Rebate Resource
Ohio Energy Management Conference
February 19, 2013
29
Cap the Cap – Capacity Management
I
Fixed price product, longer term
product
I
Customer’s peak load contribution
(PLC) – key multiplier setting your
capacity price – cannot increase for
the life of the term
I
FES actively works with you to
manage your PLC through peakday notifications
I
FES analyzes results of you PLC
management annually
I
Earn returned capacity savings if
your PLC is reduced
Ohio Energy Management Conference
February 19, 2013
30
Fixed Price, Full Requirements
I
Price remains fixed for all energy consumed
I
Typically priced “per kilowatt-hour”
I
Comparable to the utility’s generation rate
I
I
Some minor price variances are possible due to regulatory
change
Avoid waiting until the
last 60 days to shop
Shop year-round to
find a price that meets
your budget
Fixed Price from FirstEnergy Solutions
$.090
$.085
$.080
Price per KWH
I
$.069/KWH FES
Fixed Price
$.075
$.070
$.065
$.076 Avg
Sixty Days
Before Renewal
$.072/KWH Avg. For the
Previous Year
$.060
$.055
$.050
3/6
4/6
5/6
6/6
7/6
8/6
9/6
10/6
Ohio Energy Management Conference
11/6
12/6
1/6
February 19, 2013
2/6
31
Fixed Price – alternative features
I
Fixed Price with Pass Thru option
– Fix price for energy portion, but pay for capacity and transmission
as a separate line item each month
I
Fixed Price with On / Off peak option
– On-Peak and Off-Peak are two different fixed prices
– Provides budget certainty but with benefit of moving load from
higher priced on-peak hours (7 am - 11 pm) to lower priced offpeak hours
Ohio Energy Management Conference
February 19, 2013
32
Fixed Price Pricelesssm
I
Fix your price, but have the option to get a lower
price if the market moves down prior to power flow
I
Option available for a small fee added on top of your
Fixed Price per kilowatt-hour
I
Review daily e-mail to find potentially lower price
I
Select a new lower price before power flow or be
guaranteed lowest price by opting
for Perfect Strike feature
I
Enjoy shopping certainty and
additional savings
Ohio Energy Management Conference
February 19, 2013
33
Layering Fixed Price
I
Start as early as possible to lengthen the
window and limit exposure to market volatility
I
Provides ten opportunities to layer in total consumption (five onpeak and five off-peak)
I
Layering window as long as 24 months
I
Results in a weighted
average fixed price by
combining layers
Measure results against
the rest of market
$.085
$.068/KWH achieved
through Layering
$.080
Price per KWH
I
Layering Option from FirstEnergy Solutions
$.090
$.075
$.070
$.065
$.072
KWH
$.060
Layer1
$.055
$.072/KWH
Avg. For the
Previous
Year
30%
$.050
3/6
4/6
5/6
6/6
7/6
8/6
$.066
KWH
$.069
KWH
Layer2
Layer3
50%
20%
9/6
10/6
11/6
12/6
1/6
2/6
Layering period
Ohio Energy Management Conference
February 19, 2013
34
Shaped Fixed and LMP
I
Set a fixed-price percentage of your usage, with the
remainder at the day-ahead LMP price
I
Fixed price shape patterned on your actual usage
I
No penalty fees for failing to hit a specific
volume (unlike a block-style product)
I
Exposure to index market is fixed
I
Lock in additional shaped
layer at any time before
or during your contract
term
Shaped Fixed & LMP
20,000
16,000
14,000
LMP Price
12,000
10,000
8,000
6,000
Shaped Fixed
Price
4,000
2,000
:0
22
20
:0
0
0
0
:0
18
16
:0
0
0
14
12
:0
:0
0
0
:0
10
8:
00
6:
00
4:
00
2:
00
0
0:
00
MWh Consumed
18,000
Hours
Ohio Energy Management Conference
February 19, 2013
35
Hourly Price
I
Different price every hour of the month
I
Generally can be converted to Fixed Price
I
Establish mechanism to monitor hourly prices
I
Approximately half of your annual budget will be spent in June, July
and August
Hourly plus Retail Adder with Conversion
Must be vigilant –
prices can rise
unexpectedly
$.095
$.085
Price per KWH
I
$.075
$.065
conversion
to fixed
$.055
$.045
$.035
$.025
Customer Price
Calendar Year
Ohio Energy Management Conference
February 19, 2013
36
Green Products
I
First Greens™
– Green-E Certified
– Renewable Energy Certificates (RECs) produced by wind farms
– Benefit – Meets building certification guidelines for Leadership in Energy
and Environmental Design (LEED)
I
Mixed Greens
– Produced by a combination of affordable renewable energy resources
– Customers choose mix that meets their renewable energy
goals or the overall price for their budget
– Benefit – Achieves customers’ green energy objectives
and benefits the environment
Ohio Energy Management Conference
February 19, 2013
37
Efficiency Solutions
I
Efficiency consulting services
to help you manage your
usage more efficiently
I
Benchmarking, facility audit
and labeling services
I
Consult your account
executive to get started
Ohio Energy Management Conference
February 19, 2013
38
Rebate Resource
I
Resource for navigating the
rebate process available to
customers and partners
– Fast, accurate explanation of
rebate options
– Project guidance
I
How it works
– Customer sends rebate-oriented
question to
[email protected]
– FirstEnergy Solutions internal
experts reply with helpful
guidance
– Customer saves time and money
Ohio Energy Management Conference
February 19, 2013
39
Ohio Energy Management Conference
February 19, 2013
40