1 Managing Utility Price Risk and Preserving Capital Budgets in Today’s Volatile Energy Market Presented By: Larry Myers, PE, CEM * Mike Mumper, CPMM * Sherri Crawford Sales Representatives - TAC Energy Solutions 4431 North Front Street, Suite 100 Harrisburg, PA 17110 Office: (717) 232-8182 May 2, 2006 1 2 Agenda Volatility in Today’s Utility Market • Natural Gas & Electricity • Transitioning Away From Rate Caps Within Semi- Deregulated Energy Markets • PA PUC’s Implementation of an Electric Market Portfolio Standard • Energy Rate Escalations / Locking in Today’s Rate Minimizing Risk Exposure via Conservation • Typical Approaches to Implementing Utility Conservation Measures • Pros / Cons of Each Approach Questions and Answers Agenda 3
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Managing Utility Price Risk Preserving Capital Budgets in Today
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1
Managing Utility Price Riskand
Preserving Capital Budgets in Today’s Volatile Energy Market
Presented By:
Larry Myers, PE, CEM ∗ Mike Mumper, CPMM ∗ Sherri Crawford
Sales Representatives - TAC Energy Solutions4431 North Front Street, Suite 100
Harrisburg, PA 17110Office: (717) 232-8182
May 2, 2006
1
2Agen
da
Volatility in Today’s Utility Market• Natural Gas & Electricity• Transitioning Away From Rate Caps Within Semi-
Deregulated Energy Markets• PA PUC’s Implementation of an Electric Market Portfolio
Standard• Energy Rate Escalations / Locking in Today’s Rate
Minimizing Risk Exposure via Conservation• Typical Approaches to Implementing Utility
Conservation Measures• Pros / Cons of Each Approach
Many suppliers can provide natural gas commodity to Many suppliers can provide natural gas commodity to meet your facilities needs. meet your facilities needs.
Large Commercial AccountsLarge Commercial Accounts: Daily reconciliation : Daily reconciliation General Commercial AccountsGeneral Commercial Accounts: Monthly reconciliation: Monthly reconciliation
Volatile Energy Markets Cause Headaches
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What Happened To Predictability?
Variability In Weather Conditionshttp://www.ferc.gov/legal/staff-reports/eng-mkt-update.pdf
Katrina
Rita
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Variability In Substitute Fuel Costshttp://www.ferc.gov/legal/staff-reports/eng-mkt-update.pdf
Variability In External Conditionshttp://www.ferc.gov/legal/staff-reports/eng-mkt-update.pdf
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Variability In Market Expectationshttp://www.ferc.gov/legal/staff-reports/eng-mkt-update.pdf
Volatility in Today’s Utility Market
ElectricityElectricity
Semi Semi ––DeregulatedDeregulatedRate Caps in PlaceRate Caps in Place
1998: Deregulation initiated by PA Legislature & PUC 1998: Deregulation initiated by PA Legislature & PUC 2000: Wholesale prices exceed Price 2000: Wholesale prices exceed Price –– to to –– CompareCompare2002: Practically no retail shopping of accounts2002: Practically no retail shopping of accounts2004: Alternative Energy Portfolio Standard2004: Alternative Energy Portfolio Standard
Electric Utilities begin phase out of rate capsElectric Utilities begin phase out of rate caps2012: Full Deregulation of all Electric Utility Companies2012: Full Deregulation of all Electric Utility Companies
Total Energy Costs Industrial Users in Pennsylvania