Electricity Retail Wheeling Handbook

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Electricity Retail Wheeling Handbook Second Edition

This Page Intentionally Left Blank

Electricity

Handbook

John M. Studebaker

Published by THE

INC. 700 Indian Trail Lilburn, GA 30047

Studebaker, Eleclnclty retad wheeling handbook/ byJohn M. St~debaker.-2~.

HD9685.US S794 2000

333.7793’24~21 00-031698

by M. Studefaker.. All ri ts reserve& No publication be reproduqd m any E l r by any means,electromc or mechamcal, mcluding photocoy, recording, a y storage and retrieval system,withoufpemissionm wntmg from the publisher. 700

GA 30047 of

l 0 9 8 7 6 5 4 3 2 1

to

NJ 07458

(UK) of

Toronto of of

New

Dedication


Acknowledgments

xi

Introduction

x111

Section IUnderstanding

ElectricUtilityBasics

1

Chapter 1

Electricity.AnOverview

3

Chapter 2

Regulation of Electricity

7

Chapter

Developing

Section I1

Electricity Retail Wheeling-The

Chapter 4

Electricity Retail Wheeling Process

45

Chapter 5

The Retail Wheeling Transaction

65

Chapter

The Retail Wheeling Contract Process

83

Section 111

Electricity Retail Wheeling in Action

157

Chapter

Where Do We Go From Here

159

Strategy for Reducing Electricity Costs Process Involved

25 43

Appendix A Listing of For-Profit Utility Regulatory Agencies

171

Appendix

181

Listing of For-Profit Utilities

Appendix C Miscellaneous Utility Regulation Information

211

Appendix D Glossaries of Electricity Terms

219

Appendix

271

Miscellaneous Electricity Conversion Factors

Index

281

vii


This publication is divided into four basic sections: Section 1, Understanding Electric Utility Basics (Chapters 1-3); Section 2, Electricity Retail Wheeling-The Processes Involved (Chapters 4-6); Section 3, Electricity Retail Wheeling in Action (Chapter 7); and Section Appendices A-E, important background data to assist in reducing electric utility costs.

RETAIL WHEELING OF ELECTRICITY-AN OVERVIEW As with any undertaking, logical procedure must be established. In this publication, the discussion of retail wheeling of electricity is the predominate theme. However, before we discuss and analyze the retail wheeling process, we must understand the basics of electricity it relates to generation, transmission and delivery to the retail customer. To accomplish this end, basic overview of regulation processes and electricity tariff schedule provisions is included in the following section. Please read this section with great care it provides the foundation upon which will be built the understanding of retail wheeling of electricity. Remember that successful retail wheeling strategy will require an understanding how the electricity process functions.


I wish to express my thanks to the many individuals whose information, insight and comments have assisted in making this publication possible. Every effort has been made to provide dependable and accurate information. However, changes occur almost on daily basis due to the very active environment that encompasses electricity retail wheeling. This publication will address the issues they currently exist well provide insight for the future so that the electricity purchaser can be assured that their electricity costs remain competitive regardless of what the future brings.


Introduction The purpose of this publication, from an electricity purchaser’s viewpoint, is to sort out all of the potential pitfalls and opportunities that both currently well in the future may reduce or increase electricity costs. accurately assess electricity costs, purchaser must have atleast minimal understanding of how electricity flows from where it originates to where the purchaser is located, and how costs are accumulated in the process. There are many publications that currently address specific areas of retail wheeling of electricity in one manner or another. There are also many seminars that address various aspects of retail wheeling of electricity. So why add one more publication to what appears to be an already cluttered field? Most publications well seminars address specific areas of the retail wheeling process but may not tie all of the loose ends together. Also it seems that assumption exists that everyone knows all of the basics, and therefore this allows publications and seminars to concentrate on only one or two specific areas of information. This publication is intended to be of value to an electricity purchaser that needs to know the best and least costly method of obtaining electricity at their facility based upon their usage characteristics for now well in the future. It will also address how to determine the best source of electricity pre- or post-deregulation that insures reliability well cost competitiveness.


Understanding Electric UtiLiv Basics


Many changes have occurred in the electric utility industry since the last edition (1995) of this publication. Deregulation of the electricity industry has progressed on rather ununified state-by-state basis in the last 5 years. Since deregulation of electricity at this time is entirely state-by-state procedure, there sometimes seems to be no rationale for particular state‘s position on deregulation. If the current pace of deregulation is maintained, it could conceivably be many years before some states will ever allow their electricity users the opportunity of choice in electricity commodity providers. Electric utilities must become market responsive if they want to remain viable in their industries. Failure to do so may subject them to federally mandated regulatory imposition of retail wheeling of electricity. The long-term outlook for electrical power alternatives is good and for many companies the savings realized through these various alternatives will be great. To be able to understand how changes occur in electric utilities, knowledge of what they are and how they regulated must be available. Probably one the most discussed, least understood area in electricity today is retail wheeling. This is the process whereby the customer purchases the generation portion of their electricity usage from supplier other than their own serving utility. This procedure, from the customer’s viewpoint, is very similar to customer transportation natural where the customer purchases the actual natural commodity themselves and through the services of marketer utilizes the serving utility only to transport the natural to the point-of-use. While this process works well in natural and causes no real supply or cost problems, the same is not true for electric utilities where

retail wheeling of electricity takes place. The reason for this is that most natural utilities do not actually have the natural they sell, but purchase their system supplies on the open market. In electricity, the serving utility may generate all or at least portion of the electricity they sell the customer. When customer elects not to use the serving utility’s generated the utility’s generation utilization is reduced, theoretically at least, causing increased incremental costs to occur for the utility. In electricity utility service, the commodity being sold generally is produced, at least partially, by the utility that serves the customer. In this case, if the customer obtains their electricity from source other than the local serving electric company (retail wheeling,) the electric utility suffers real loss-potentially not having sale for the electricity being produced. Retail wheeling can have very real impact on the existence of electric utility. How the origination points of the commodity (electricity/ natural vary are shown on Figure 1.1. Figure 1.1shows that while electric utility usually generates its commodity (electricity), natural utility usually purchases its commodity (natural While this difference may seem to be of no particular concern to the customer, it is of great importance to electric utility. Since the electric utility generates its commodity, it relies, at least in part, upon its retail customers to purchase the electricity it generates. If customers have the choice to not purchase the generated electricity, the utility has to find other customers or reduce its generation output, which affects its overall system efficiency. Another electric utility worry is customer self/cogeneration of electricity. In this scenario, the customer installs generation system that provides both electrical well thermal (heat) outputs to supplement and reduce dependence upon utility supplied electricity. Although cogeneration is not new process, its use has become more common utility-supplied electricity has become more costly. Many electricity customers currently, or in the near future, will have options to typical utility-supplied electricity. The question an electricity user will have to answer will be-which method of electricity purchasing is most reliable and cost effective? answer this question, it is important to know what is available and how tomost effectively utilize the best options. This publication will provide information needed by customer to utilize the least expensive electricity available while assuring that supply integrity is maintained.

NATURALGAS

Utility Generation Electricity

Interstate Transmission Grid

Utility Purchase Of Natural Gas

Interstate Transportation

Intrastate Distribution Grid

1 Meter

Meter

User

REGULATION IN GENERAL Utilities, generally speaking, are considered to be regulated monopolies. A regulated monopoly is an entity that has protected service territory and has virtually no competition since no other provider of the same commodity can compete for the protected service territory’s customer. Since position of no competition can lead to abuse in both cost and service, check and balance system is in place that requires utilities to be held accountable for costs, services, etc. Utilities are regulated in at least two areas, ’interstate’ (between states) and ’intrastate’ (within state).

INTERSTATE REGULATION (Between States) Interstate regulation in electricity isthe responsibility of the Federal Energy Regulatory Commission (FERC).This agency was created in 1977 and hasthe responsibility for oversight and regulation of interstate transportation policies and rates concerning electricity. Since this agency has these responsibilities, it would be well to understand its impact on rates and transportation conditions. Since electricity distribution from one state to and for use in another state is always interstate (between states), FERC has jurisdiction over the rules and regulations applying to it. The Commission is composed of five members who are appointed by the President, with the advice and consent of the Senate. More and more the rulings of FERC meet with something less than enthusiasm on the part of the electric utilities it regulates, due primarily to its increas7

For-Profit. Municipal, Rural Cooperative Electric Utilities INTERSTATE

I FERC

I INTRASTATE

(Indmdual

Federal Power Electric APencies

INTRASTATE

ingly open access policies with relationship to electricity. Know what is happening at the Federal Regulatory level so that changes in electricity occur,you will have strategy in mind. The following is the current address and numbers of FERC. Federal Energy Regulatory Commission Attn.: Chief, Public Reference Files Maintenance Branch 888 First Street, NE, Room 2-A

Washington DC 20426 Telephone 202-208-2356 202-208-2320 http://www.ferc.fed.us

SOME OF THE AREAS REGULATED BY FERC Establishes and enforces rates and charges for electric energy transmission and sales for resale. (Very important to retail wheeling of electricity.) 2.

Establishes and enforces operational characteristics, rates charges for electric energy interconnections.

3.

Certifies small power production and cogeneration facilities.

4.

Issues and enforces licenses for nonfederal hydroelectric power facilities.

5.

Issues and enforces certificates for construction and abandonment of interstate electricity transmission facilities.

and

Establishes and enforces rates and charges for distribution and sale of natural Establishes and enforces oil pipeline rates, charges and valuation. 8.

Establishes and enforces oil pipeline common carrier duties. Hears appeals from Department of Energy remedial orders and denials of adjustments.

FERC ORDER #888-(FINAL

RULE 04-24-96)

FERC Order #888 was enacted forthepurpose of promoting wholesale competition of electricity through open access servicesby public utilities. Although its scope is for wholesale and not retail competition, it is a necessary precursor for retail competition in electricity. A complete copy of this ruling (75 FERC 61,080, Order #888, Final Rule

04-24-96) can be obtained fromFERC. Of particular interest in this ruling are the following excerpted provisions.

Introduction/Summary On April 24, 1996 the Commission issues three final, interrelated rules designed to remove impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower cost power to electricity consumers. 1 n h e legal and policy cornerstone of these rules is to remedy undue discriminationin access to the monopoly owned transmission wires that control whether and to whom electricity can be transported in interstate commerce. A second critical aspect of the rules is to address recovery of the transition costs of moving from a monopoly-regulated regime to one in which all sellers can compete on a fair basis and in which electricity is more competitively priced. In the years since the proposed rules were issued, 2/the pace of competitive changes in the electric utility industry has accelerated. Currently the majority of electric public utilities have filed wholesale open access transmission tariffs with the Commission. Prodded by such competitive changes and encouraged by the proposed rules, the majority of public utilities that own, control, or operate 3/transmission facilities used in interstate commerce have filed some form of wholesale open access tariff. In addition, since the time the proposed rules were issued, numerous state regulatory commissions have adopted or are actively evaluating retail customer choice programs or other utility restructuring alternatives. These events have been spurred by continuing pressures in the marketplace for changes in the way electricity is bought, sold and transported. Increasingly, customers are demanding the benefits of competition (retail wheeling) in the growing electricity commodity market. The Commission estimates the potential quantitative benefits from the Final Rule will be approximately $3.8 to $5.4 billion per year of cost savings, in addition to thenon-quantifiablebenefits that includebetter use of existing assets and institutions, new market mechanisms, technicalinnovation,andlessratedistortion.Thecontinuingcompetitive changes in the industry and the prospect of these benefits to customers make it imperative that this Commission take the necessary steps within its jurisdiction to ensure that all wholesale buyers and sellers of electric energy can obtain non-discriminatory transmissionaccess, that the transition to competition is orderly and fair, and that the integrity and reliabil1.

ity of our electricity infrastructure is maintained. In this Rule, the Commission seeks to remedy both existing and future undue discrimination in the industry and realize thesignificant customer benefits that will come with open access. Indeed, it is the statutory obligation under sections 205 and 206 of the Federal Power Act (FPA) to remedy undue discrimination. To do so, the Commission must eliminate the remaining patchwork of closed and open jurisdictional transmission systems and ensure that all these systems, including those that already provide some form of open access, cannot use monopoly power over transmission to unduly discriminate against others. If the Commission does not take this step now, the result will be benefits to some customers at the expense of others. The Commission has learned from its experience in the natural gas area the importance of addressing competitive transition issues early and with as much certainty to market participants as possible. Accordingly, in this proceeding and in the accompanying proceeding on OASIS, the Commission, pursuant to its authorities under sections 205 and 206 of the FPA: requires all public utilities that own, control or operate facilities used for transmitting electric energy in interstate commerce; to file open access non-discriminatory transmission tariffs that contain minimum terms and conditions of non-discriminatory service; to take transmission service (including ancillary services) for their own new wholesale sales and purchases of electric energy under the open access tariffs; (very important to retail wheeling)

to develop and maintain a same-time information system that will give existing and potential transmission users the same access to transmission information that the public utility enjoys, and further requires public utilities to separate transmission from generation marketing functions and communications; (very important to retail wheeling) clarifies Federalktate jurisdiction over transmission in interstate commerce and local distribution and provides for deference to certain state recommendations, and permits public utilities and transmitting utilities to seek recovery of legitimate, prudent and verifiable stranded costs associated with providing open access and FPA section 211 transmission services.

Open The Final Rule requires public utilities to file a single open access tariff thatoffersnetwork,load-basedserviceandpoint-to-point,contract-basedservice.TheRulecontainsaproforma tariff that reflects modifications to the proposedtermsandconditions and also permits variations for regional practices. All public utilities subject to the Rule,includingthosethatalreadyhave tariffs on file, will berequired to make section 206 compliance filings to meet the new pro forma tariff non-priceminimumtermsandconditions of non-discriminatorytransmission. Utilities may propose their own rates in a section 205 compliance filing. The rule provides that public utilities may seek a waiver of some or all of therequirements of theFinalRule. In addition,non-public utilities may seek a waiver of thetariff reciprocity provisions. The Final Rule does not generically abrogate existing requirement contracts, but will permitcustomersandpublic utilities to seekmodification,ortermination, of certainexistingrequirementscontractsona case-by-case basis. As to coordination arrangements and contracts, the Rulefindsthatthesearrangementsandcontracts may need to be modified to removeundulydiscriminatorytransmissionaccessand/or pricingprovisions.Sucharrangementsandagreementsincludepower poolagreements,public utility holdingcompanyagreements,andcertain bilateral coordination agreements. The Rule provides guidance and timelines for modifying unduly discriminatory coordination arrangements and contracts, and specifies when the members of such arrangements mustbegin to conducttrade with eachotherusingthesameopen access tariff offered to others. The Rule also provides guidance regardingtheformation of independentsystemoperators (ISOs). The Rule does not require any form of corporate restructuring, but will accommodatevoluntaryrestructuringthat is consistentwiththe policies. As discussed in the NOPR, not all owners or controllers of interstate transmission facilities are subject to jurisdiction under sections 205 and 206 of the FPA and therefore are not subject to retains the proposed reciprocity provision in the pro forma tariff. Without such a provision, non-open access utilities could take advantage of the competitive opportunities of open access, while at the same time offering inferior access, or no access at all, over their own facilities. Thus,

openaccess utilities would be unfairly burdened. We notethatsome non-jurisdictional utilities have expressedan interest in amechanism for obtaining a Commission determination that their transmission tariffs satisfy the reciprocity provisions in the pro forma tariffs, and we provide suchamechanism in theRule. The Final Rule does not generically provide for market-based generation rates. prior decision that there is no generation dominance in new generating capacity, intervenors in cases may raise generation dominance issues related to new capacity. In addition, to obtain market-based rates for existing generation, public utilities will continue to be required to show, on a caseby-case basis, that there is no generation dominance in existing capacity.Further, in all market-based rate cases,theCommission will continue to look at whether an applicant and its affiliates could erect other barriers to entryand whethertheremay beproblemsdue to affiliate abuseorreciprocaldealing. Finally, contemporaneously with this Rule the Commission issues a NOPR on capacity reservation tariffs as an alternative, and perhaps superior,means of remedying undue discrimination. Transmission/Local Distribution The Rule clarifies of the Federal/ state jurisdictional boundaries over transmissionand local distribution. While the Commission continues to reaffirm their conclusion that they have exclusive jurisdiction over the rates, terms, and conditions of unbundled retail transmission in interstatecommerce by public utilities, they nevertheless recognize the very legitimate concerns of state regulatory authorities as they contemplate direct retail access or other state restructuringprograms. Accordingly, theCommissionspecifiescircumstances under whichthey will givedeference to staterecommendations. Although jurisdictional boundaries may shift as a result of restructuring programs in wholesale and retail markets, the Commission does not believe this will change fundamental state regulatory authorities, including authority to regulate the vast majority of generation asset costs, the siting of generationandtransmission facilities, anddecisions regarding retail service territories. The commission intends to be respectful of state objectives so long as they do not balkanize interstate transmission of poweror conflict withtheinterstateopenaccess policies.

3.

4.

Withregardtostrandedcosts,theFinalRuleadoptsthe Commission's supplemental proposal. will permit utilities to seek extracontractual recovery of stranded costs associated with a limited set of existing (executed on or before July 11, 1994) wholesale requirements contracts and provides that the Commission will be the primary forum for utilities to seek recovery of stranded costs associated with retail-turnedwholesale transmission customers. It also will allow utilities to seek recovery of stranded costs caused by retail wheeling only in circumstances in which the state regulatory authority does not have authority to address retail stranded costs at the time the retail wheeling is required. The Rule retains the revenues lost approach for calculating stranded costs and provides a formula for calculating such costs.

Obviously, there is much more detail and discussion in the complete context of Rule #888 but even in this extracted small portion, the basic requirements which are critical for deregulated electricity environment are at least discussedOpen access. 2. Transmission/local distribution. 3. Stranded Costs. Before retail deregulation of electricity could become reality, the wholesale structure/operation of the transmission/distribution electricity system had to be addressed by the regulatory body responsible for its operation/oversight (FERC). Anunderstanding of Rule #888 is beneficial to anyone participating in the retail wheeling of electricity.

INTRASTATE REGULATION (Within the State) Intrastate regulation occurs within the borders of state and is the responsibility of one of at least three types of regulatory bodies. The type of electric utility that serves customer determines "who" regulates "what."

For-profit electric utilities are regulated on statewide basis by commission or group of individuals appointed or elected at the state level. This commission or group of individuals regulates all for-profit electric utilities, regardless of their geographic location within given state. city or Municipal electric utilities (utilities owned/operated by county) generally are self-regulated. Also, they are generally autonomous and structure their rates they see necessary with minimal or no state supervision or legislation. Cooperative electric utilities are similar to municipal electric utilities in that they are generally self-regulated with little state oversight. Cooperative utilities often come into being when for-profit utility does not provide service to given area, generally because of lack of sufficient profit making opportunity. cooperative utility is usually created when group of potential users form their own utility to provide commodity (electricity, natural water/sewer) for themselves that otherwise would not be available. Both municipal and cooperative utilities are generally self-governing with little state intervention except with relation to rate case procedures and public notification guidelines. Ordinarily the state will require that affected customers (intervenor groups) follow normal rate case protocol with relation to due process and input. It is very important to know what is happening at the state regulatory level because of the impact of rate case decisions on customer costs. At the federal (FERC) (interstate) level, electricity is more deregulated than at the state (intrastate) level. Since regulation at the intrastate level is generally more restrictive and in many instances results in tariff provisions that cause customer rates to be more costly than they could be, it is important to always be aware of pending rate cases in the state where the user’s electricity serving utility is located so that strategy based upon fact and not hope can be developed.

AREAS REGULATED BY INTRASTATE AGENCIES

Structures In the case of electricity, the following areas are very important to the customer.

Retail Wkeelinp

Types of Service that are/should be available when deregulation is complete:

2.

3. (Rates that compete with alternate sources of electricity) 4.

(Transportation of the retail customer’s electricity through the serving utility’s distribution system on firm basis.) 5.

(Transportation of the retail customer’s electricity through the serving utility’s distribution system on an interruptible basis.)

(Acts

customer’s agent for wheeled electricity)

A ’full service’ electricutility would offer all of the options shown. At the time of this publication, many electric utilities offer only options (1)-Firm and (2)-Interruptible. It does no good to have deregulation at the interstate lever (FERC) if at the intrastate level the advantages cannot be utilized because of restrictive tariff schedule provisions. There remains much to be done at the intrastate level before many customers will recognize the true value of interstate deregulation.

THREE TYPES OF UTILITY REGULATION ON AN INTRASTATE BASIS I.

For-Profit (Investor-Owned Companies) Regulation-All for-profit investor-owned utilities that operate within state boundaries. since intrastate regulation of utilities concerns the activities of utility within that particular state. State agencies regulate the intrastate transportation and operation of electric utilities. Since electricity may be distributed from location outside of the boundaries of the state in which the customer is situated, there are both

federal and state regulations that apply. The state regulatory agencies usually take the form of Public Service Commissions (PSC) or Public UtilityCommissions (PUC). The functions of these entities are to regulate the intrastate distribution and operation of utilities. These agencies also determine and approve individual utility rates of return, grant franchises to utilities for specific areas of operation, and in general, regulate the operation of utilities which are within given state. Although PSC or PUC structures are the most common forms of state regulation, other methods are used. In some states, these commissions regulate utilities only outside the incorporation limits of municipality or city such in the states of Georgia, Texas, etc. Also, there are some strange situations that occur in few states. For instance in the State of Texas, the Public Utility Commission regulates electricity outside of municipalities; however, outside of these same municipalities is an entity called the 'Railroad Commission of Texas' regulates natural Generally, retail customer will have more contact with the state regulatory agency than with the federal agencies. Since state agencies determine rate of return and approve or disallow rate increase requests of utilities, the likelihood of involvement with these agencies will be greater. To remain informed on utility matters, knowledge of the operation and function of the state agencies is required. To follow state regulatory matters can be very time-consuming and costly if done on an individual basis. One alternative to this is to become member of state energy users group commonly called State Intervenor Groups. These groups are comprised numerous individuals that have common concerns, typically electricity and natural costs and regulations. Collectively these groups can accomplish much at the state regulatory level. All user or intervenor groups are required to register with the appropriate State Regulatory Agency. Therefore to determine whether state has intervenor groups, contact the appropriate State Regulatory Agency, and also check the Internet for intervenor groups with websites.

PUBLIC UTILITY COMMISSION PERIODIC REPORTS Periodically, all public utility commissions that regulate for-profit utilities are required to issue status reports. These reports are generally

issued on weekly basis and provide data on all currently pending rate cases within their jurisdictions. Copies of these reports are available to anyone who request them in either mailed hard copies or via the Internet. If public utility commission regulates the customer’s utility, it is important to keep updated on what is going on at the commission level. Typically the following information is detailed in these reports: A docket or case number of the proceeding being discussed. A brief report concerning the status of the proceeding.

3.

Identification of the parties in the proceeding.

4.

Timetable and place of next commission meeting Concerning the proceeding.

For further information on how to receive commission reports, contact the commission involved. (See Appendix A)

For-Profit Utilitv Regulation Svnotxis (Investor-owned Utilities) State regulatory agency. Any utility that isin business for the stated purpose of making profit and is owned by investors through the purchase shares of stock. 3.

Any rate changes may include at least the following items: A. A public notification of intent to change rate. B. Adequate notification period prior to actual rate case presentation (this period defined by state law) to allow interested parties to study the merits of the change request. C. Presentation of rate requests at hearing open to the public before the appropriate regulatory agency. D. Allow input from interested customer groups (intervenors) relating to rate change requests. The state regulatory body, based

upon testimony presented at rate case hearings, approves actual rates that will be put into effect. There are approximately individual for-profit electric utilities in the United States at this time. In terms of total energy supplied (electricity) in the United States, these utilities generate over of the total electricity utilized.

When municipalities regulate utilities they are, rule, self-governing-that is, they are not subject to state regulatory rulings. Generally when municipalities undertake the providing and regulation of utilities, they are purchasing the commodities at wholesale rates from for-profit or federally regulated utility, and then retailing these utilities to the public. This is especially true with electricity and natural In the case of water and sewage, the municipality usually has control or jurisdiction over the entire process. Municipal utilities are generally presided over by utility commission or board of appointed or elected members. As in the case with all utility regulatory agencies, ‘due process’ must occur before changes can be made with respect to rates and conditions under which utilities are provided. This means that public notice must be given and adequate time allowed for public input prior to change being instituted. Typically, municipal utilities do not have many rate classes or options do for-profit investor-owned utilities since they generally do not have diverse class of customers. There are approximately municipal utilities in the United States, but in terms of total energy supplied (electricity), they constitute minority when compared to for-profit investor-owned utilities. Municiml Utilitv Regulation Svnotxis Generally self-regulated bythebody or agency selected by the municipality to oversee utility matters. Can be separate for each utility regulated.

municipality on

Any utility operatedand regulated by not-for-profit basis.

A. B. C. D.

Similar to for-profit investor-owned utilities. Public notification. Adequate notification period. Presentation of rate request. Allow input from interested customer groups.

Rural Electric Cooperative Utilities Cooperative utilities are formed generally when for-profit investor-owned utility elects not to serve geographic area or customer base. Cooperative utilities usually serve rural areas where there is not large customer load base. Generally, power is purchased at wholesale from for-profit utility and distributed by the cooperatives’ lines and/or pipes to the individual customers’ locations. Cooperative utilities are like municipal utilities in that they are selfregulated but also are required to provide ‘dueprocess’ before instituting changes in the utility rate base. They are also very different from any other type of utility since they are classified ’cooperative’entity. The term ’cooperative,’ far utilities are concerned, literally means that each customer is part owner of the utility to the extent of their utility usage percentage to the total and such, at least in theory, has their proportionate say in how the utility is operated. They are similar to all other types of utilities in rate change cases. They propose rate changes, hear customer input and all other ‘due process’ practices before actually instituting rate changes. Cooperative utilities are smaller in terms of total energy supplied than are municipal utilities and in general are located in rural types of service areas. CooDerative Utilitv Reeulation Svnopsis Generally self-regulated. All customers are part owners of the utility and such have their proportionate say or vote based upon their usage in relation to other customers. In practice many times, board of overseers is appointed to represent customer interests with respect to the utility operation. Any utility defined cooperative and that is owned and operated by the customer served. Similar to other types of utilities and includes: A.Public notification. B. Adequate notification. C. Presentation of rate request. D. Allow input from customers.

of

There are approximately 1,100+ cooperative utilities in the United States. But in terms of total energy supplied (electricity), they constitute minority when compared to for-profit investor-owned utilities.

FEDERAL ENTITIES These types of utilities are of Federal origin and regulation. Generally, intrastate regulation is not applicable since these types of utilities are operated on an interstatebasis. The Federal Government has the overall responsibility of regulation and operating procedures. As rule, these utilities wholesale the majority of their power to for-profit investorowned companies, municipalities and cooperatives who in turnare regulated by their respective regulatory bodies. When direct sales are made to customers, regulation parameters are by Federal guidelines. The following areas are under the control of Federal regulations and supervision: Power Administration Juneau, AK 586-7405 (907) 2.

3.

Bonneville Power Administration Portland, (503) 230-3000 International Boundary

Water Commission

U S and Mexico

El

TX

(915) 534-6700

4.

Southeastern Power Administration Elberton,(706) GA 283-9911

5.

Southwestern Power Administration 595-6600 (918)

6.

Tennessee Valley Authority Knoxville, TN (423) 632-2101

7.

US Army Corps. Of Engineers Washington, DC (202) 272-0001

8.

U.S. Bureau of Indian Affairs Mission Valley Power Polson, 883-5361 (406) MT

US.Bureau of Indian Affairs San Carlos Irrigation Project Coolidge, (602) 723-5439 10. US. Bureau of Reclamation Washington, DC (202) 208-4662 11

Western Area Power Administration Golden, CO (303) 275-1234

THE INFLUENCE INTRASTATE REGULATION HAS ON UTILITY COSTS State agencies regulate the intrastate distribution of electricity. An electric utility uses combination of 'inter' (between states) and 'intra' (within state) components and therefore both federal and state regulation occurs. Since state agencies provide the predominate day-to-day regulatory functions concerning electricity, it is important to know that they function in manner that benefits the customer. One of the most discouraging factors in intrastate regulation is the number of regulatory agencies that allow the utilities they regulate to not offer truly 'cost-of-service' tariff schedule rates. It does customer no good to have interstate access to retail wheeling of electricity if the intrastate utility does not allow retail wheeling of that electricity through their distribution system.To be better able to visualize the flow of electricity through electric utilities, Figure 2.2 is shown following:

THE FLOW OF ELECTRICITY

Generation of

Transmission of Electricitv

Distribution of Electricitv

l Retail Customers


The first step in this undertaking is the obtaining of accurate information relating to the subject being investigated. In the case of electricity, the first step in understanding begins with the obtaining of data that relates to the pricing on unit basis of the commodity (electricity) being purchased. Since all utilities are regulated in one way or another, written records of usage and pricing data it relates to customers must be available to any interested party that requires it.

ITEMS NEEDED FROM THE UTILITY AND STATE REGULATORY AGENCY Listed following are the mandatory basic informational items that must be obtained before any understanding of electricity rates will be realized. All of these items are matter of public record and must be made available to any one who requests them. They are typically available from at least three sources-(l) the utility itself, (2) regulatory agencies, and (3) university libraries. Generally, the most logical place to obtain this information is from theutility or the utility regulatory agency themselves. If request is received from customer of the utility, there generally is no problem or cost involved. But if there should be charge, then it should be reasonable and reflect the time and material required furnishing the information. However, if request is received from a noncustomer, some problems may arise both with respect to availability 25

well

the potential for cost being assessed for the material. Remember, all utility rate information that is approved by regulatory body for use in determining rates and conditions to which customer is subject,must be matter of public record, and such, available for public inspection. Typically, the utility service representative responsible for the customer involved is contacted and request is made for the information needed. It is always more beneficial for the customer to obtain this information in person, but if not possible, then by telephone or e-mail. The importance of obtaining the information following cannot be overstated since these items are basic to understanding utility costs. With relation to information that is required from the state, the best way to proceed is to contact the state agency involved directly. As rule, there should be no problem in obtaining either sales tax or economic development/enterprise zone information from the state. It is always best to contact the proper state agency directly by telephone since letters seem to get lost or misplaced rather frequently. In Figures 3.1 and following is shown the various items needed prior to analyzing any electricity billing. Figure 3.1 lists the items that are normally obtained from the service representative of the utility involved. Figure 3.5 lists the items that are obtained from the state where the customer is located. If all of the items described in these two figures are obtained, thorough comprehensive analysis of the specific utility involved can be done.

RECAP OF FIGURE 3.1-UTILITY DATA NEEDED 1. COMPLETE TARIFF OR RATESCHEDULE (UTILITY SERVICE REPRESENTATIVE) A complete tariff or rate schedule covers all rates, terms and conditions that are approved in rate case. All classes of customers are addressed-residential,commercial and industrial. Thesetariffsor schedules can range from several sheets to several hundred sheets in length. Contained in this information will be all data relating to customer rates, costs, terms for service, etc. The importance of this source document cannot be overemphasized since it is absolutely mandatory for an understanding of utility costs. Make certain that the request is made for complete tariff or rate schedule since utilities tend to provide only the particular schedule that currently applies to the customer making the request. The availability of complete schedule cannot be over empha-

i

Obtain from the Utility Service Representative

Complete Tariff Or Rate Schedule

Obtain from the State RegulatoryBody

Experimental Rates

Off-Tariff Schedules

Unregulated Marketing Affiliate Programs Lrc

sized since only then can comparisons be made between different rates and options. A typical complete tariff or rate schedule will contain the following items: 1.

Complete list and explanation of all customer rates available. Complete list of all items or riders that modify or change rate costs. Alternativeratesthat may be available on basis for certain customer classes.

'customer request'

4.

Information on 'special' rates that may be available in certain circumstances.

5.

Complete explanation to how all cost components of utility usage are measured and applied. Complete tariff or rate schedules remain in effect until new rate case is filed and approved by the appropriate regulatory agency. Only one complete schedule is required for given utility since all customer classes are addressed therein.

2. EXPERIMENTAL RATES(REGULATORY BODY) Experimental rates are not normally contained in complete tariff or rate schedules since they are developed an experimental basis by utilities and are not mandated for any particular customer. These types of rates are not available from all utilities, but if they are, they can be source of cost reduction potential. These rates are developed by the utility and approved on an experimental basis by the applicable regulatory agency. The experimental category allows the utility to evaluate the potential for different type of rate structure. Since these rates are never mandated, they are used only on customer voluntary basis. If the customer chooses an experimental rate and it results in an increased cost, then utility may not assess any charge higher than what would have resulted from the regular schedule of rates. If an experimental rate proves successful, the typical next step is to include it an optional rate in the base tariff/rate schedule and not mandatory for any customer class. Since the final step is to change the 'optional' classification to 'mandatory' category in the base tariff/rate schedule, it remains important to keep up-to-date on experimental rates since long term they have way of becoming mandatory for some customer classes. The most common experimental rate structure currently being used in electricity seems to be the 'real time pricing' structure. Determine whether experimental rates are available; and if they are, obtain copy and determine the immediate applicability well the long-term implications in case they are later included in the base tariff/rate schedules mandatory for your customer class. An example of what an experimental real time pricing electric could look like is shown in Figure 3.2.

Strategy

Costs

ANALYSIS OF FIGURE 3.2 This experimental rate allows customer to purchase electricity on an hour-by-hour basis based upon (kwh) usage only. The problem with rate of this type is that usage (kwh) charges will probably be more expensive at times when the customer usage will be the greatest. For example, in the experimental rate shown in Figure 3.2, the maximum charge in the example of daily usage cost printout occurs from 1O:OO a.m. through p.m. on normal workdays (Monday-Friday). In this example, very costly electricity will be consumed during most customers’ largest usage periods. Generally, this type of rate will be of benefit only to the customer that can shift electrical usage to the utility’s normal off-peak periods, which would usually be during the evening, night, early morning, weekends and holidays. Most electricity users do not have the flexibility to shift usages to the extent needed to benefit from this type of rate. However, if the customer can alter the usage patterns on daily/hourly basis, rate of this type can be very cost effective. An item-by-item analysis of this rate follows:

This schedule number (EX-RPT-3) designates the rate case tariff schedule identification number assigned to this rate by the utility/ regulatory agency result of the utility’s case concerning this rate. If customer wanted to examine all pertinent data presented in this rate case filing, this could be accomplished by requesting the data from either the utility or the regulatory agency by schedule number (EX-RPT-3).

This section addresses the type of customer that can be served on

Experimental Tariff Schedule Schedule: EX-RPT-3 (Experimental Real Time Pricing) Applicability: Applicable to any general service customer with service delivered at a voltage level of 4,160 or greater. To qualify for this rate, the customer must have maintained a monthly billing demand level of at least 500 kW for the last 12-month period. This rate is available on an experimental basis and the minimum term is for a one-year period. Base Monthly Rates: A. Customer Charge B. Demand Charge-per incremental kW C. Energy Charge: Base Energy Charge-per k w h (Fuel Cost) (2) Energy Charge-per kwh (Variable)

$500.00 (None) $.0067 ($.0175-$.4325)

Cost Data: Cost data shall be calculated on an hourly basis every day. No later than a.m. every day the next hourly rates beginning at 12:Ol a.m. will be provided to the customer via a telecommunication link with the customer mandatory dedicated telephone line. This data will provide the (24) hourly variable energy charge components for the next billing period. This data will be provided every day of the year. The energy charge components will reflect the actual costs as detailed in the Public UtilityCommissionapprovedrate filing 21 1 dated 12-01,pages126 through 131. 5.

Variable Energy Charges: Variable energy charges will range from a minimum of $.0175/kWh to a maximum of $.4325/kWh per hourly measurement period. Minimum billing: The minimum monthly billing shall consist of the following item: A. Customer charge $500.00 Miscellaneous Provisions: A. There shall beno demand (kW) charges applied to this rate. B. The utility will provide and maintain the appropriate metering and related equipment to accurately measure the k w h consumption on an hourly basis, at no cost to the customer. C. The utility retains the right to limit the number of customers on this rate. D. The utility retains the right to withdraw this rate upon one notice.

this rate. In this particular rate, the customer must be served at primary voltage level of 4,160 or greater. Also, the customer must have maintained minimum billing demand level of 500 W monthly for the last 12 months. Generally, applicability provisions are instituted because the utility has determined that this minimum voltage/demand threshold would be required by customer to benefit from the rate. Also sometimes, especially on rate of this type (experimental), the utility may want to test the rate's validity or applicability only to certain type or class of customers.

A.CustomerCharge-($500.00) This is the minimum monthly charge that an individual customer would have to pay to be served on this rate. This charge covers the utility's cost of maintaining and reading the meter and miscellaneous other monthly billing cost items.

B. Demand Charge-(NonelkW) This particular type of rate has no demand charge such. Nevertheless, demand costs are calculated and included in the energy charges associated with this rate. Although rate with no demand (kW) charge may seem to be very 'cost effective' type of rate, the truth of the matter is that demand costs are calculated and included in the energy charge portion of this rate. In fact, rate of this type actually would probably be more expensive for most customers that could not shift usage patterns on daily/hourly basis, which i s very difficult to do. Just because demand is not included specific billing item does not mean that its impact on the utility's costs has not been considered. It has, and in this particular type of rate, is included in the variable energy charge portion of the billing. C.

Charge: Base Enerev Charge-per kwh (Fuel Cost) This energy charge of $.0067/kWh represents the utility's fuel cost to operate their generation equipment. This charge is sometimes called fuel cost adjustment and it is always applied to the energy (usage, kwh) portion of the billing. All customers of utility are assessed the

same charge on each kwh used. All these charges are approved by the appropriate regulatory agency. Energy Charge-per kwh-(Variable) This charge represents the variable usage (kwh) charges by the utility on daily/hourly basis. The extremely wide range variability, over per kwh is due to the cost of electricity that is experienced by the utility based upon its generation load/utilization at various times of the day. Since this rate is variable and is priced by the day and hour, it actually can change on daily basis. see what daily usage cost printout from the utility might look like, the following example is given.

Example of a Daily Usage Cost Printout Rate-EX-RPT-3

Data for: Wednesday

kWh

In this hourly kWh data is the cost of electricity during the (24) hours of this particular day (Wednesday), the kwh cost ranges from $0216 (2:Ol a.m./3:00 a.m.) to $.l910 (1:Ol p.m./2:00 p.m.) with the higher costs being between 6:Ol and 1O:OO p.m. If customer uses the majority of the electricity during these hours, then the cost for the electricity will be very high. If however, customer has the majority of the usage between the hours of11:Olp.m.-7:00 a.m., then the cost per kwh would range from $.0312(12:Ol am/l:OOam) to $.0476 (6:Olaml 7:OOam).This amount could result in savings when compared to a typical tariff schedule rate for this same type of usage pattern. Basically real time pricing rate is generally only cost effective if customer can vary their electrical loads on daily time related basis, or if they ordinarily operate during periods of low utility load demand intervals of time-typically evening, night, early morning and weekends. If customer were served on this rate, they would receive daily printout of data similar to the one shown here for every day of the month, including weekends and holidays.

4.

Cost Data This section explains how the hourly kwh charges will be calculated.

5.

Variable Energy Charges This section simply restates the information shown in Item 3.C. (2) previously. Minimum Billing This section details what will constitute minimum monthly CUStomer bill. Basically the minimum charge will consist of the customer charge ($500).

7.

Miscellaneous Provisions This section enumerates miscellaneous provisions associated with this tariff schedule rate. As can be seen from analyzing the provisions of this example of real time pricing rate, it is not rate for all customers. Generally, rate of this type will not be cost effective for customers who operate on one-shift basis during normal firstshift work. However, if customer operates hours other than these, or can shift their usage on daily and hourly basis, or can work many hours on weekends (Saturday and Sunday), then rate of

this type may prove to be very cost effective. Before changing to rate of this type, always have the utility do an analysis of the past year for the facility/operation in question to determine the cost effectiveness of change.

Off-tariff schedules differ from both base tariff well experimental rates in the way they are developed and applied. Off-tariff schedules are rates that are negotiated generally between utility and specific customer. Initially, they are generally discriminatory in nature and typically apply to larger customers. Rates of this type are negotiated and must be approved by the appropriate regulatory agency. As rule, off-tariff rates are developed for large user customers that have either extremely large loads or unusual use characteristics that are not addressed adequately in base tariff structures. Most off-tariff schedules occur in larger utilities with diverse customer bases. establish an off-tariff schedule is at best drawn out procedure. First, the utility well the regulatory agency has to be convinced of the need for rate of this type-no easy task in itself. Second, other utility customers may argue that this is discriminatory rate since it could impact their utility costs unfavorable, and that someone could have to pay for lost revenue that generally results from an off-tariff schedule. Off-tariff schedules in the past havenot been widely used or applicable to large user base, but this is changing with the potential of electricity retail wheeling becoming reality. Evaluate the base tariff schedule in terms of usage characteristics and if large differences appear between actual usage patterns and those specified in the base schedule, the potential for an off-tariff schedule may exist. To determine whether off-tariff schedules are available, contact the appropriate utility regulatory agency and request copy of any off-tariff schedules that are currently available. example of what off-tariff schedule might look like is shown in Figure 3.3 following:

ANALYSIS OF FIGURE 3.3 This example of competitive service rider represents an electric utility’s means to reduce specific customer’s electricity costs when re-

Availability: Available at discretion to Commercial and Industrial customers that have electric service requirements which are subject to effective competition. Effective competition exists if a customer is located in service territoty and has the abilitv to obtain its enerav reauirements from an enerav supplier not rate reaulated bv the State Reaulatorv Aaency. Rate: Standard service rate provisions apply except the level of the demand and/or energy charges may be decreased for a customer based on a consideration of load characteristics and lowest cost competitive energy supply. Terms and Conditions of Service: 1.

Customer must provide Company with information which documents that customer is not likely to take service provided by any other electric tariff available from Company.

2.

Minimum load served under this Rider is 500

3.

Customer must execute an electric service agreement with Company that will include: A. The minimum rate, which will recover at least the incremental of Drovidina service, including the cost of incremental capacity that is to be added while the rate is in effect. B. The maximum possible rate reduction which will not exceed the difference between the standard tariff and the cost to the customer of the lowest cost competitive energy supply. C. The term of service which must be no less than three (3) years. D. The size of the load served which must be 500 at a minimum. E.An annual minimum charae which will fullv recover distribution

quired to preserve or retain their load. This type of rate is becoming more common with the introduction of retail wheeling of electricity. A serving utility could utilize rate of this type to effectively retain customer that could leave the serving utility’s generation base which could increase the serving utility’s incremental base generation costs. When rate of this type is utilized, any cost reduction related rev-

36

Electricity Retail Wheeling

enue shortfall cannot be passed through to any other customer in any subsequent rate case proceeding. In the case of for-profit utilities, any revenue shortfall must be absorbed either through operational efficiencies or by the shareholders.

Availability A rate of this type is inherently discriminatory since the utility can, within this rider’s written boundaries, choose which, if any, individual customers it will offer this ratemaking process to. Since any utility shortfalls caused by revenue discounts offered through this type of rate making process normally cannot be passed through to any other customer, the discrimination factor is minimized. Also, the offering of this type of discount can preserve generation base load which can positively impact other customer classes by potentially reducing utility base generation costs which ultimately effects overall utility costs. Rate This provision defines the rate or cost considerations applicable to this rate rider. Note that there are no definitive numbers in this section since the actual costs are determined with relation to each customer’s worth to the utility. Terms and Conditions of Service This section of the rider defines the terms and conditions under which the customer will be served. (1) to This rider stipulates that the customer must verify, to the utility’s satisfaction, that the customer will actively seek alternative suppliers if discount is not provided. In this case, the minimum load that the utility will consider for discount is 500 kW. If customer did not have single meter point demand of 500 kW, but instead had several meter points with each lessthan 500 kW; and, that these points in the aggregate totaled more than 500 kW, then rider of this type might be utilized if the utility could be convinced that it was in their best interest. Potential customers that might fall in this type of situation could be fast food restaurants, small

rants, small commercial multiple location establishments, or any multimeter customer with an aggregate total of over 500 kW for all meter points in the serving utility’s service territory. (3)

In order to take advantage of this rate rider, the customer must execute (sign) an agreement with the utility that sufficiently addresses the following (5) categories: A. Minimum rate. In rate riders like this, the utility is going to limit their ’lost’ revenue exposure by establishing limits on the rate discount that could be available to any customer. This particular provision states that after any discounting to the customer, the utility will at least receive revenue, sufficient to cover the basic cost of providing service including the incremental capacity charge related to the rate. What this provision and following address is the fact that, generally no utility will sell electricity at cost lower than their base cost of providing that electricity. The incremental capacity addressed here and distribution costs dressed in (E) following are those basic utility costs that represent the minimum values that the utility must recover on any rate discount they offer. If they were to discount further, the revenue they would receive would be less than their actual costs. The costs addressed in this and section following are generally on record at either or both state and federal regulatory agencies. B. Maximumratereduction.Notwithstandingsection (A) previously or section following, the utility is not going to offer any customer a discount larger than they have to order to retain that customer. This section states that the customer will probably have to demonstrate or document what competitive offers they have received in order for the utility to make competing offer. This type of provision can cause problems for the utility customer in confidentiality agreements they may have with potential non-utility providers. Sometimes utility customer can simply execute an RFP (request for proposal) to alternative electricity providers [marketers other utility ESCOs (energy service

38


companies)] to convince the serving utility that the customer is serious about reducing their electricity costs. As electricity is deregulated, more opportunity for arrangements like this will be available. Remember, trying strategy like this has little downside but not trying can result in more expensive electricity costs result of not taking advantage of potential discounts in given market area.

C. Term of service. The minimum term for an arrangement negotiated under the terms of this agreement will not be less than (3) years. Terms for agreements of this type generally range between 3-10 years in length. A shorter, rather than longer term is better since changes can and will occur with both the customer well the utility that could make any long-term agreement look not so good when viewed in retrospect. Generally, any contract terms longer than (5) years should be avoided, if possible.

D. Size of load (kW) served. The minimum load (kW) that the utility will consider for discounts in this rider is 500 kW, but there is no maximum kW limit. Items that should be considered by the customer when considering this section are follows: (1) Is the 500 kW minimum through (1) meter or can meters of less than 500 kW each be combined to accumulate the 500 kW minimum? (2) During the contract term, can the customer add to or take away from the kW quantity that was present at contract inception?

E. Annual minimum charge. This section and section (A) relate to the minimum revenue the utility must receive to at least attain break-even status on the rate negotiation. utility under the right conditions for the right customer might consider negotiated rate that allows them to recover the costs being preferable to losing revenue ciated with the customer choosing another provider at least for the electricity commodity portion of the rate.

AFFILIATE Some electric utilities currently have peak power demand (kVA/ kW) deficits. This means that even though utility may not have base load (kwh) problem, they may experience generation capacity shortfall during some periods of 24-hour day. The utility can do several things to compensate for this generation capacity shortfall. They can construct new generation plants (supply side planning) that are very expensive or they can offer their customers financial incentives to reduce demand during the utility’s generation shortfall periods (demand side planning). Many utilities, through their unregulated marketing affiliate (ESCO), offer programs that encourage customers to reduce their demand needs by paying for or providing incentives for the particular items that favorably impact the utility’s demand shortfall problems. These programs range from, ‘not worth much’ to ’extremely beneficial.’ These programs change frequently and sometimes specific amount of money is allocated for program which means that when the money is gone, the program is ended. If the marketing affiliate has program, they will also generally have in-house specialist that can be utilized for on-site evaluation of facility to determine the applicability of the program to particular situation. The utility service representative can provide program information well arrange for an on-site evaluation by the appropriate specialist. These programs typically include the following items/processes although not all items are included in all programs. Utility audits for rebate applicability Fluorescent lighting. High Intensity Discharge lamping. Electronic ballasts. Efficient magnetic hybrid ballasts. 6. Reflectors. 7. Occupancy sensors. 8. Miscellaneous lighting controls. 9. Rooftop air conditioning. 10. Window air conditioning. 11.Electric chillers. 12. Gas-fired air conditioning. 13. Heat pumps. 14. Boiler/water heaters. 1. 2. 3. 4.

40

15. 16. 17. 18. 19. 20.

Cool storage-thermal storage. Energy management systems (EMS). Energy efficient motor drives. Power factor correction capacitors. Thermal insulation and window film. Custom programs structured to individual customer requirements. (These programs are individually negotiated on customer/utility basis.)

WHY IS REDUCING ELECTRICITY COSTS SO COMPLICATED? As with anythingnew, unfamiliarity makes the process or procedure seem more difficult than it really is. The basedata collection portion of reducing yourelectricity costs is probablythe most important part of the mdertaking. Once you beginthe process of getting theinformation outlined in this chapter, youwill realize that basically you only havetwo sources that you have to contact-the utility and the stateregulatory agency. To assist you in obtaining utility information, Figure 3.4 is shown. With relation to getting state regulatory information, I would suggest (from experience) that data be requested by telephone, noting the day, hour, and person’s name with whom you spoke. Dear (Service Representative of Utility Company): part of an ongoing program in our company to reduce operating costs, we are evaluating areas for investigation. One of these areas is (insertcommodity name-electricity, natural gas, water orsewer). Please provide the following information as soon as possible: Complete tariff schedule including riders, attachments, etc. 2. Experimental rates, if applicable. 3. Off-tariff schedules, if applicable. 4. Unregulated marketing programs, if applicable. We appreciate your attention in this matter and thank you in advance for your help. Sincerely, (Utility Customer)

Strategy

Figure 3.4 shows sample of utility data request form. This sample, if utilized, may help in the obtaining of utility data that will be needed to analyze utility costs. This form is presented only sample but does contain the basic elements that should be present in any request. The request should be submitted by the customer of the utility company to the customer’s own utility service representative.

WHO IS ULTIMATELY RESPONSIBLE FOR UTILITY COSTS? The Federal Regulatory Commission, together with all state regulatory agencies, agree thatThe customer is ultimately responsible for being on the most costeffective rate. 2.

There are no statestatutes that require utility to ensurethat customer is served under the most economical or least costly rate available. Neither are there are requirements that utility refund any excess monies paid by customer if they are on correct rate even if it is not the most cost effective. It is the customer’s responsibility to select the least costly rate schedule.

Due to the vast number of customers most utilities serve, and the changes and revisions their customers are constantly experiencing, it would be impossible to assure that any customer is at all times on the most economical rate available. Unfortunately, many utility customers are unaware of the rate that forms the basis of their utility billing. Through information provided in this publication, the correct approach to reducing electricity costs can be understood. With this knowledge, the customer can determine the steps needed to be assured their electricity costs are what they should be.


Electricity Retail WheelingThe Process IitvOlved


Electricity Retail Wheeling Basics

i

RETAIL WHEELING OF ELECTRICITY Retail wheeling of electricity is simply the purchase of the electricity commodity by retail customer from source other than their own serving utility. The process is verysimilar to retail customer purchase of natural however, the effect on the electric utility is very different from that on the natural provider. In the purchase of electricity from utility, the commodity (electricity) being purchased is typically considered to be originated or generated by the electric utility. Even though electricity is generally considered to be generated by the utility that sends the monthly bill to the customer, no one really knows what actual electrons flow to the customer's meter point. All electric utilities that generate electricity actually flow that electricity into power pool for ultimate distribution to the customer. Currently there are power pools that cover all of the contiguous United States and parts of Canada. No one can identify or track the actual flow of electrons from the point-of-generation to the point-of-use by customer. Unless there is specific physical single line that connects electricity generation with the user of that electricity, (there are thousands of electricity generation units flowing electrons into the power pools in the United States) it is impossible to identify the location where any particular electron was generated. Electricity flows based upon the path of least resistance, not just where any particular utility wants it to go. There are no "good" or "bad" electrons; however, there are various levels of delivery classifications. Whether electricity commodity is purchased from the utility or through the wheeling process, the actual electrons being delivered to the 45

tomer will be the same quality and be distributed through the same transmission/distribution wires p d meters that are used by the utility that serves the customer. In the purchase of natural in the majority of instances, the commodity (natural does not originate within the provider’s service territory but is simply purchased by the provider and resold to the retail customer. Although these differences between electricity and natural may seem to be of little importance to retail electricity customer, they actually are critical to the utilities/providers and their differing attitudes towards the customer’s direct purchase of the commodities that they sell. Since most natural providers purchase the commodity they sell from someone else, it does not disrupt their operation or profitability to any great extent whether their customers purchase ’provider’ natural or arrange for their own natural and simply utilize provider pipes, meters, and services. If the provider charges are based upon true cost of service principles, most natural providers would probably rather retail customers obtain their own natural since it would result in less headaches for the provider. electric utility, however, takes very different view of direct purchase of electricity by its retail customers since generally the serving electric utility, in theory at least, generates quantity of electricity equal to what it sells to retail customers. When retail electricity customer purchases the electricity commodity from some source other than the serving utility, the potential lost electricity generation sales for the serving utility result in lost revenue. The lost generation revenue may not be capable of being replaced by the serving utility. If this is true, retail customers choose to purchase their electricity commodity from sources other than the serving utility, the utility will be required to increase electricity incremental rates to offset the reduced electricity commodity sales. As this happens, more and more retail customers might opt to obtain their electricity commodity from other than the servingutility. Thisscenario has name called the ’death spiral.’ This means that less and less electricity generation is sold to retail customers by their serving utilities, the incremental electricity cost will continue to rise. Ultimately, the serving electric utility’s incremental rates will become prohibitively expensive, resulting in financial losses for the utility involved. Will wide-spread electric utility bankruptcies result retail wheel-

ing becomes more common? Possibly, but has happened in many industries when competition has presented itself, the affected entities will find ways to compete. The question at this point might be-what happens if my electric utility company declares bankruptcy? If utility bankruptcy occurs, an interim administrator would be appointed by the courts until purchaser for the utility assets could be located. Utility bankruptcies, while not common occurrence, have happened with the results being that the utilities declaring bankruptcy have been purchased and continue to operate. Retail wheeling of electricity isinherently neither good nor bad, but depending upon your view, valid case can be made both for and against the process. From customer’s viewpoint, due to the large variation in electric utility rates caused by lack, in part, of true competition, retail wheeling of electricity would seem to be welcomed option. From an electric utility viewpoint, someone has to pay for its investment in materials and generation capacity; and, if customers can purchase their electricity anywhere on the power pool, the utility may have no way to recoup its costs. Both of these views have some validity, but what will ultimately determine the reality of the process will be retail customers causing it to happen. If retail electricity customers take ‘wait and see’ attitude, then retail wheeling will probably never be widely available since electric utilities, especially high generation cost utilities, are not going to push for process that could ultimately force them to lose customer base. Retail wheeling of electricity is not something that is technologically impossible to do since almost all electric utilities currently ’wholesale’ wheel electricity between themselves on daily basis. The real problem electric utilities have with retail or customer wheeling of electricity is that it will require them to obtain and keep their retail customer base through competition, not through regulatory commission mandated service territory boundaries. It is best to keep the lines of communication open between the retail customer and the electric utility-seeking the utility’s opinion regarding retail wheeling of electricity and asking your electricity utility’s service representative questions, such Does the utility think that retail wheeling willeffect how it operates; and if so, how?

When and how does the utility think retail wheeling of electricity will effect them and the way they market electricity? Will retail wheeling increase or reduce the utility customer base? What customer retention strategies has the utility developed to cope with or to utilize retail wheeling of electricity? Does the utility currently have any experimental or off-tariff schedules that have been developed to address retail wheeling? If any of these types of rates are currently available, ask the service representative for copies of them. Retail wheeling will effect each electriccustomer whether they ever wheel electricity themselves or not. Know what is going on in this area of electricity retail sales.

HOW WILL RETAIL WHEELING EVOLVE? One of the real questions concerning retail wheeling of electricity is how will the wheeled electricity get from the point of generation to the point of use over various transmission grids? The stated problem is one of logistics-how to get the electricity from the point of generation to an individual specific retail customer that is perhaps located on distribution grid different from the one on which the electricity is generated. A good overview of some of the potential problems relating to retail wheeled electricity is found in the publication ”Overview of Issues Relating to the Retail Wheeling of Electricity,” published by The National Regulatory Research Institute-http://www.nrri.

OVERVIEW OF ISSUES RELATING TO THE RETAIL WHEELING OF ELECTRICITY Parallel Path and Flow Problems The actual path taken by electric power wheeled across transmission systems is difficult to predict and impossible to measure. Electric current moves according to Kirchoff’s Laws and essentially flows on the

Wheeling

path of least electrical resistance. As a result of these physical laws, power moves across many parallel lines in often circuitous routes. For example, assume that four utilities (A,B, and D)are interconnected to eachother through tie-line between each of them. If utility A plans to wheel power to utility D,one might assume that the power will flow over transmission line A D which connects utility A to utility D. Realistically, the current may flow from utility A over line AB to utility and then line BD to utility Alternatively, the current may flow from utility A over line AB to utility B, then down to line BC to utility C and then over CD to utility D. In actuality, the current has numerous possible paths it can take depending on the loads on the individual transmission lines at the time. Most likely though, portion of the wheeled current traveling over each transmission line would hinge upon transmission loads on those lines at the time. In sum, the actual flow of power may, and typically does, diverge widely from the contract path. As a result the supposed economics of the contract path frequently have little to do with the actual costs of the power transfer. Furthermore, these loop flows can affect third parties distant from the intended power flows, and these third parties may, and often do, incur costs without compensation. Most utilities, however, consider the parallel path problem cost of interconnection and generally prevent other utilities from wheeling only if the additional transmission system loads cause capacity overload problems on portions of their transmission grid.

Network Congestion and Line Capacity If the transmission network is heavily loaded, bottlenecks may lead to congestion that will prevent full use of the cheapest plants. Often referred to ’out-of-merit’ dispatch, the constrained use of the plants frequently can create significant opportunity cost that can be assigned to consumers causing the congestion. The congestion limitations arise in two principal forms. The first is the on the flow of power on an individual line. The thermal capacity of transmission line sets an upper limit on the flow of power on that line. Through the interactions of Kirchoff’s laws, line limitation affects every other flow in the network. A change in generation or load at any buss will have some effect on the flow on the constrained line; hence, the constraint can affect the loading profile at each buss. A second major source of congestion in power network arises from voltage magnitude constraints atbusses. In normal operations or an approximation of the

more complicated worst-contingency analysis, voltage constraints define transmission lines. Even when power flows do not approach the thermal limits of the system and the transmission lines appear to have excess capacity, voltage limits can constrain the transfer capacity. Voltage constraints inevitably require attention to both thereal and reactive power loads and transfers in the alternative current (AC) transmission system. Recall that real power (the power that lights out lamps) is measured in watts or megawatts (MWs) and reactive power (power factor) is measured in voltage-reactive or VARS and megaVARS (MVARS). Power generation, load, and flow in an AC system are divided into both real and reactive power components. Without voltage constraints, the only matter of concern is the real power flow; it is common practice to ignore the associated reactive power analysis. But voltage can be affected by both real and reactive power loads, and the interaction between the two is critical in determining the induced limits on real power flows. In reality, voltage limitations and the associated reactive-power compensation are prevalent. For example, recent power shortages in New England and New York were largely attributed to voltage and reactive power problems. Consequently, accounting for the congestion limits created by thermal limitations on transmission lines may not by itself prevent losses of real power flows. Any new regime for transmission access must address the congestion problem created by reactive power and voltage constraints. The most direct method is to account for both real and reactive power when designing wheeling prices. Existing transmission and distribution lines are capable of providing electrical service to all electric customers currently with utility’s service territory. Today’s transmission and distribution system was primarily designed and constructed to transmit electricity from utility’s on-system generators at specific locations to its customers within its territory, and secondarily to transmit electricity from interconnection points for reliability and economy power transactions. This same transmission system may therefore be incapable of transmitting large quantities of power from outside sources to its retail customers or to other utilities. Additionally, every transmission line is designed to carry certain maximum amount of electric current. If this maximum current is exceeded, then the transmission line will be damaged. Consequently, wheeling transaction may overload and damage the line.

Line Losses Even if wheeling transaction does not cause transmission line damage, it can increase transmission line power losses. Transmission line power loss can be defined the loss of power, in the form of wasted heat, associated with transmitting electrical current over transmission line. Line loss is generally unavoidable and is directly proportional to the mathematical square of the current. Therefore, doubling the current on transmission line would cause quadrupled line losses. Line losses also are directly proportional to transmission distance-the greater the distance of electrical transmission over the same size transmission line, the greater the line losses associated with the flow of power. Wheeling transactions can increase transmission line losses substantially. Metering Problems The electricity requirements of system constantly fluctuate. The actual power supplied to the system is dependent upon its load requirements at any given time. Thus, the party selling power must be sensitive to these load fluctuations. Two different methods are commonly used to handle this problem. The first and most efficient method focuses on the use of meters at the purchaser’s delivery point(s). The amount of power delivered to the delivery points is instantaneously summed and telemetered to the generation dispatch center of the utility selling the power. In this way, the seller is constantly aware of the purchaser’s instantaneous power requirements. In the second method, the seller of power provides schedules allocations of power to the purchaser on day-to-day basis. The party wheeling the power is responsible for providing the actual power requirements to the purchaser and for load fluctuations on the purchaser’s system. Since metered delivery points are requirement of any party purchasing off-system power, the exact amount of power supplied to the purchaser is known. The meters are read on periodic basis (usually monthly) and the actual power supplied to the party purchasing offsystem power is determined. The amount of actual power supplied is compared to the amount of scheduled power provided and the difference is calculated. If more power was actually supplied during the period than was schedules, the seller would reimburse the party wheeling the off-system power for the previous month” deficiency in its following month” schedule power.

The metering problems associated with retail wheeling could be complex and cumbersome. In order to accurately track customer’s load, network of meters and telemetering would have to be installed from retail customers to the parties generating and supplying their power. Since the system load is adjusted automatically, the computer would instantaneously sum the demands of the retail customers and automatically adjust for the increase or decrease in load. Distribution System Concerns Certain technical problems associated with wheeling of electricity are intertwined with legal issues. If consumer decided to purchase offsystem power, he would have to purchase the distribution grid. If he purchases the service, the wheeled power would in most cases be distributed to him easily long it is within the distribution system limits. If he opts to construct his own grid, whole host of legal issues would likely arise.

Generation and Transmission Planning If a customer in utility’s service area contracts for off-system power and wheeling, does that utility still have the responsibility to plan for generation and transmission capacity to serve that customer? Must the utility stand ready to service former customer during system emergencies experienced by this customer’s current supplier? Must the utility resume service to former customer who wishes to become that utility’s customer at some future time? These are questions that will require answers before capacity planning can be done efficiently. Retail wheeling could certainly harm utility’s ability to forecast future generating capacity requirements. A utility’s load would now depend, among other things, upon the difference between the utility’s own retail rates and the market price of electricity. Retail wheeling would also create transmission planning problems for utilities. Utilities wishing to provide service to off-system retail customers could require costly transmission line and system improvements. As utility added and lost different off-system retail customers, changes in that utility’s transmission system could be required. Construction of New Lines Although utility’s transmission and distribution systems are ca-

Retail

pable of serving customers within its service area, existing transmission systems were not built with wheeling in mind. In particular, the points of interconnection between utilities were not designed for retail wheeling. Thus, in order to make retail wheeling possible, in some instances improvements to the current transmission systems may be necessary. Construction of new transmission lines presents large obstacle for retail wheeling. Utilities face many barriers in constructing new transmission lines. Construction of transmission line is lengthy and expensive project. Before construction of the transmission line begins, the required land must be purchased. Transmission lines are restricted to certain areas. Consequently, the proposed transmission-line construction must meet the requirements and obtain the approval of different federal and state agencies. The next section briefly illustrates how to improve the capabilities of the transmission and distribution network. Technical Measures to Correct for Wheeling Impediments To make wheeling and competition possible, the previously discussed technical impediments have to be carefully handled. Legal, administrative, and pricing policies could correct for loop flow, metering, planning, and distribution problems. Line limitations and losses represent physical problems that could be solved only by either expanding or improving the networks physical capabilities. Because of environmental concerns and regulatory delays, electric utilities are now seeking practical alternatives to constructing high-voltage and ultra-high-voltage transmission lines. A recent utility trend is to more effectively use existing transmission lines and rights-of-way. For example, the power transfer capability of lines not operating at their thermal limits can be increased by the addition of series, shunt compensation, or the use of phase shifting transformers. Rights-of-way also can be made to carry more power by (1)raising the voltage on existing lower voltage lines, (2) converting AC lines to DC (direct current), (3) using hybrid lines where AC and DC lines occupy the same tower or the same right-of-way, or (4) by compacting the lines where more circuits are permitted in given space. High-phase order transmission is one promising form of compaction that has been investigated. High-voltage DC (HVDC) transmission is area of particular importance. Thyristor converters rated 500 kV, 2,000 have been developed using both air and liquid cooling. Several areas of development have made HVDC systems more cost effective over time and have

greatly improved their performance. They include direct light firing of thyristors, the development of higher voltage cells that lead to lower losses, greater control flexibility through the use of micro-processors and sophisticated new control functions (for example, multiterminal operation, real and reactive power control, and damping of subsynchronous oscillations), the reduction of converter transformer losses, and better protection of equipment against over-voltages with the development of zinc oxide arresters. HVDC should play an increasingly important role in enhancing the capability of the transmission network to accommodate increased wheeling and competitive activities. An economical way to increase the power transfer capability of an AC line is to install capacitors in series with the line to reduce its electrical impedance. Using zinc oxide discs with high-energy handling capability, series capacitors can be reliably protected against over-voltage by connecting series-parallel arrays of discs directly across the capacitors. The protection of turbine generators against subsynchronous oscillations, which may arise when series capacitors are used, has been accomplished using either passive filters or active thyristor dampers. Another means of increasing the power transfer capability of existing transmission lines is the addition of shunt compensation of the form of switched capacitor banks or static VAR controls. Static VAR controls were initially applied to control the voltage flicker produced by electric arc furnaces. More recently, static VAR controls were applied to control rapid voltage fluctuations power transmission systems and to improve the stability of large networks. Static VAR controls consist of thyristor switches, sometimes in conjunction with mechanical switches, to regulate the amount of inductance or capacitance connected to the transmission line for purposes of voltage regulation and increased power transfer. These measures should significantly enhance the overall reliability and capability of electric power systems to comply with the new competitive regime. They have limitations and costs, however. In recent study, the enhancement potential and installation costs of five options of different technical measures were compared. These options, proposed to enhance the network transfer capabilities, are (1)fixed series capacitors, static VAR compensators (SVCs); (3) adjustable series and SVCs, plus (4) parallel paths controlled; and (5) the rapid response generation. The study concludes that power transfer could be increased by 35 percent, 50 percent, 60 percent, 70 percent, and 90 percent with the adoption of

options 1 through 5, respectively. Assuming option 1 is the bench mark, the study found that the installation of option 2, 3, 4, and 5 are approximately percent, 150 percent, 500 percent, and 800 percent more expensive that the installation cost of option 1. The savings that would result from the transfer of cheap power by the enhanced network should be accounted for when conducting cost/benefit analysis. The question remains whether utilities would be willing to invest in such measures if the economic benefits and rewards accrue mainly to consumers.

FINAL COMMENTS Society has limited tolerance for actions which may disrupt electric service over wide area. If numerous players are encouraged to engage in any sort of competition in the electric network, some workable enforcement procedure should be established to ensure that variances from the rigorous and unforgiving nature of operations on the grid are not compromised because of competitive pressure. Unlike natural transmission, electric wheeling can affect the reliability and stability of service over wide area. Because electricutilities are interconnected and operate in parallel, the actions of one utility affect other utilities.

ECONOMIC/POLICY CONSIDERATION

Retail wheeling would undoubtedly advance the competition that is evolving in the electric power industry. Along with EPAct and emerging market pressures, retail wheeling would move the future path of the industry toward more balanced mix of market factors and regulation in determining performance and structure. Allowing retail customers the right to purchase power from competing generators would affect the electric power industry in five major ways. First, by weakening utility’s monopoly power, it would directly enhance competition in retail markets. Second, it would eventually cause change in the ratemaking practices of state regulators. Third, it would stimulate vertical disintegration of the industry where some utilities may decide to exit the generation business. Fourth, it would reshape the ’regulatory compact’ by changing the service obligations of utilities and

their status the sole supplier of power within their franchise areas. Fifth, it would cause the industry to become more cost conscious and accommodating to the needs of individual customers.

Another good evaluation of retail wheeling of electricity is found in the publication "Retail Competition in the United States Electricity Industry,'' published by the Electricity Consumers Resource Councilhttp:/ /www.elcon. This publication outlines eight principles for achieving competitive, efficient and equitable retail electricity markets-they are follows:

No. Market forces can do better than any government or regulatory agency in determining prices for commodity such electricity.

Laws and regulations that restrict the development of competitive electricity markets should be rescinded or amended. The need for burdensome regulation will be reduced where competitive electricity markets are allowed to flourish.

The benefits from competition will never fully materialize unless and until there is competition in both wholesale and retail electricity markets. But not all retail electric services are natural monopolies and therefore they should not be regulated such.

The owners andoperators of transmission and distributionfacilities, and the providers of coordination and system control services, should be required to provide access to those facilities and services to any buyer or seller on nondiscriminatory, common-carrier basis.

Rates for the use of transmission and distribution facilities should reflect the actual cost of providing the service. If the facility is natural monopoly, those rates should be based on actual costs and the services provided on nondiscriminatory and comparable basis to all users.

Principle 6 Resource planning is not natural monopoly. The types and market shares of generation and end-user technologies that will be supplied in wholesale and retail markets should be decided in the marketplace. Principle 7 Legitimate and verifiable transition costs that develop result of competition should be recovered by equitable split amount ratepayers, shareholders and taxpayers. The costs of assets that were uneconomical in the existing regulatory regime are not transition costs. Principle 8 The potential for transition costs should not be used excuse to prevent or delay the onset of competitive electricity market.

As can be seen, there are both obstacles to and advantages in retail wheeling of electricity. How quickly retail wheeling occurs to any great extent will depend upon howinvolved potential retail wheeling customers become involved in the process. Although there are many questions follows: for practicality reasons, the process is evolving 1.

Retail wheeling of electricity will, at least initially, occur internally on each of the current 10 North American Electric ReliabilityCouncil Regions (NERC) (power pools) in the contiguous United States. Following, in Figure 4.1, are the geographic areas served by each of these regions together with each region’s name.

It is this writer’s experience that in actuality intra-NERC region retail wheeling competition is evolving the first step in retail wheeling of electricity. Thismakes sense both with respect to transmission distribution (intra-region only) and variations in specific utility production costs and retail rates. This type of competition is already taking place in various parts of the United States where retail wheeling is in effect. 2.

A large portion of retail customers that could retail wheel electricity will never do so because their serving utility will negotiate dis-

REGION NAME (POWER POOLS) 1.

wscc

GEOGRAPHIC AREA SERVED Arizona California Colorado Idaho Montana (partial) Wyoming New Mexico (partial)

Nevada Oregon

2. MAPP Mid Continent Area Power Pool

Iowa Minnesota Montana (partial)

Nebraska North Dakota South Dakota

3. SPP Southwest Power Pool

Arkansas Mississippi (partial) Missouri (partial) Kansas New Mexico (partial) Texas (partial)

Louisiana Oklahoma

Western Systems Coordinating Council Utah

4. ERCOT Electric Reliability Council of Texas

Texas (partial)

5. MAIN Mid American Interpool Network

Illinois Missouri (partial) Wisconsin

Washington

6. ECAR Kentucky (partial) East Central Area Reliability Maryland (partial) Coordination Agreement Michigan (partial) Pennsylvania (partial) Virginia (partial)

Indiana Ohio West Virginia

7. SERC Southeastern Electric Reliability Council

Alabama District of Columbia Kentucky (partial) Missouri (partial) Virginia (partial)

Delaware Georgia North Carolina South Carolina Tennessee

8. FRCC Florida Reliability Coordinating Council

Florida

Basics

9. NPCC Northeast Power Coordinating Council

10. MAAC Mid Atlantic Area Council

Connecticut Maine Massachusetts New Hampshire Maryland (partial) Michigan (partial) New Jersey Pennsylvania (partial)

New York Rhode Island Vermont

the

NERC Regions

Pools)

*Electric Generation (typical) (GWh)

Production costs (typical) (c/kWh) (@/kwh)

Retail Rates (typical)

1.9c/kWh

7.1@/kWh

wscc MAPP SPP ERCOT MAIN ECAR SERC FRCC NPCC MAAC Total Generation Average Costs

GWh

Note: Electric generation/production costs/and retail rates for each of the NERC regions varies each hour, day, week and month. The figures shown are typical and are not intended to represent any actual month. This data is presented only to provide insight to differencesbetween the regions in actual generation amounts, production costs and retail rates. Production Costs include fuel prices and non-fuel costs.

count rate withthe customer to retain their base load. It must beremembered thatin utility that generates electricity, their good retail base load customers are critical to the profitability of that utility. in Based upon actual negotiations with electric utilities client’s behalf, there have been instances where utility was willing to negotiate rates, project cost concessions and various other cost reductions with client even where there was no opportunity for the client to leave the serving utility. Why do these types of nego-

tiations occur? Because the serving utility really does want to keep their good electricity load profile retail customers satisfied, if possible.

3.

There are many misconceptions about what the advent of wheeling will mean to retail customers. Based upon actual experience, following are some of the most frequently asked questions by potential retail wheeling customers concerning their fears or discomfort with their entering into the retail wheeling arena. A. Question: What about power quality? Answer:Power quality will be what The first thing that has to be determined is what is power quality. Power quality means many things to many different people. Power quality can mean that if the power is available it is good quality. others, it can refer to variation in hertz (cycles), variation in voltage, harmonic levels, and electric line transmitted spikes, etc. The thing that has to be understood is that power quality, whatever this means, will remain consistent both before, well after retail wheeling. The quality of power is a function of the power pool in which the retail customer is located. It must be remembered that generally, retail customers are not directly connected to any single serving utility’s generation sources. Retail customers are directly connected to their serving utility’s distribution system, but the actual electrons that enter their serving utility’s distribution system can be generated anywhere on the power pool of which they are part. In fact, the origination point of the electrons may even be from different power pool than the one which directly serves the retail customer. The truth is-the wheeled electricity is the same what retail customer is currently receiving from their current electricity supplier. one can track the actual path electrons take from the point-of-generation to given electricity customer unless there is direct individual physical connection between the point-of-generation and the point-of-use, which is not the case between generators and users today. Should particular quality level be required by an individual user? The best and most effective way of obtaining that

quality level is to ’condition’ the electricity on the user’s side of the electricity delivery meter point. Quality of power should not be reason for not investigating retail wheeling electricity savings potentials. B. Question: How do I know that I will have the electricity I need? Answer: The electricity you need will beavailable if have opted for firm commodity, transmission, and distribution. The real question is will you be able to afford the electricity you receive if your provider defaults (does not deliver) your electricity needs? Generally there is no accurate way to track specific customer’s wheeled electrons from point-of-generation, transmission, and distribution to the customer’s individual meter point on real time basis. The ’truing up’ of specific customer’s actual meter point usage on monthly basis, with what the electricity provider actually delivered for that specific customer, is accomplished by comparing the serving utility receipt point quantities from the provider in the customer’s behalf for the same period is the meter point reading period. At this point in time it is difficult, if not impossible, to compare actual specific customer serving utility receipts with usages on real time basis. In practice, the total deliveries by the retail customer’s electricity provider and the usage quantity registered on the retail customer’s use point meter are reconciled on monthly basis. If there are discrepancies, especially deficits, the retail customer has to pay penalty to the serving utility for system-supply electricity that was required to make up for the electricity provider’s shortfall. The question is not will electricity be available, but rather who will pay for any electricity-provider caused problems. In actuality, the retail customer is responsible to the serving utility for any electricity provider problems including, potential penalties for shortfalls, overages, balancing problems, etc. The way to minimize these potential cost problems is to structure the provider contract in such way as to shield or protect the retail customer from the serving utility cost penalties.

Electricity Retail Wheeling Basics

63

C. Question: How will I know if I am getting the best deal? Answer: It depends upon whatyou define as the ’best deal.‘ If the best deal is absolutely the ’cheapest’ electricity commodity cost available, probably you will never be satisfied that what you are paying is the ’cheapest’ that could be had, since the ’cheapest’ cost changes every day or even more frequently. However, if your definition of ‘the best deal’ is reasonable cost with assured delivery from provider that can supply all of the assurances that you require, then you can quantify the ‘best deal’ for your requirements. Many times the ’cheapest’ initial cost does not translate to the best long-term value. Comfort with the providerselected well comprehensive contract that covers all of the variables that can occur, is the only way to assure reasonably cost and satisfactory assurance that the electricity commodity will be available when needed. Reasonable cost and satisfactory contract terms are result of knowledge and negotiation with the potential provider. Luck not the venue to accomplish either of these D. Question: Who maintains the user’s meters, and other electricity generation, transmission, and distribution intrastructure when the user wheels electricity? Answer: The same entities that currently do. All areas of generation, transmission, and distribution of electricity continue to operate with thesame federal/state oversight with retail wheeling is currently required. Retail wheeling of electricity only allows retail electricity customer the option of selecting electricity commodity suppliers, other than their serving utility. Federal/state regulatory oversight of maintenance, quality, and other electricity generation and delivery characteristics will remain much the same they are today.


THE CURRENT STATUS OF RETAIL WHEELING OF ELECTRICITY Any list of states that currently allow retail wheeling of electricity would be seriously out of date by the time this publication is available to the general public. With the advent of the Internet, there are much more efficient ways to remain informed on the status of electricity retail wheeling on state-by-state basis. There are at least (50) web sites that address various aspects of electricity retail wheeling but the following (4) Internet web sites are the ones I use most frequently:

www.ferc.fed.us/electric/order888.htm This site contains FERC Order titled-”Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities.” Although the title of this order seems somewhat cumbersome, it is well worth investigating especially if you want to be aware if the legislation that was enacted prior to but was instrumental in retail wheeling occurring. (See general discussion of this ruling in Chapter of this publication.) www.serve.com/commonpurpose/dereg.html www.EIA,DOE.gov/cneaf/electricity/chgstr/tab5rev.html These two sites provide state-by-state retail wheeling information on very timely basis. It is the best to utilize both web sites since they each provide retail wheeling information in slightly different manner that seems to compliment rather than repeat each other.

4.

www.me3.org/projects/dereg/stranded.html This site presents an in-depth analysis of stranded investment/cost recovery strategies used by electric utilities and the related potential problems of the issues that surround the recovery methodologies utilized.

ELECTRICITY COSTS ON A TRUE ENERGY COST BASIS Probably one of the most misunderstood facts about electricity is its true cost in comparison to other energy sources. Whether electricity, natural gas, propane, fuel oil, coal, or any other fuel source is utilized to provide operational energy to process, cost of the fuel on comparable basis should be known. Electricity on kwh basis must be compared to other types of energy on common dominator basis. How do you compare kWh to dekatherm (Dth)(1,000,000 Btu) of natural or gallon of propane, gallon fuel oil, or ton of coal? compare these seemingly dissimilar entities, there must be some common measurement criteria common to each of the fuels. The common thread in each of these fuels is that they all are measured and quantified on an energy basis. This common basis is British Thermal Units or Btu. Because the measurement unit in electricity is kilowatt-hours (kwh), the unit cost seems relatively small when compared to other potential fuel sources. For example, which of the following fuel sources is least expensive energy (Btu) basis?

1. 2. 3. 4. 5.

Electricity Propane Fuel Oil #6 Natural Coal

.060/kWh .50/gal .50/gal 3.00/dth 25.00/ton (2,000 lb.)

The true energy costs for thesefuel sources (Btu) basis are follows:

Electricity

$.O6/kWh

comparable energy

17.58/dth

67

Propane $.50/gal 3.Fuel Oil #6 $.50/gal 4. NaturalGas $3.00/dth 5. $25.00/ton

5.46/dth 3.34/dth 3.00/dth 1.05/dth

Energy Btu Comparisons

Electricity Propane Fuel Oil Natural Gas Coal

(1)Kilowatt-hour ( k m )

Gallon (Gal.) (1) Gallon (Gal.)

Dekatherm (Dth) (1)Ton (2,000 lb.)

3,412 91,500 150,000 1,000,000

24,000,000

By using the information shown in Figure 5.1, the true cost of electricity per the Btu standard of measure of(1,000,000 Btu) is as follows:

Number

(1) k w h 3,412 Btu k w h in 1,000,000 Btu (1,000,000 Btu 3,412 Btu) 293.08 k w h There are 293.08 k w h per 1,000,000 Btu

Calculation of Fuel Costs Shown Previously 1. $.06/kWh 1,000,000 Btu 3412Btu 1,000,000 Btu 293.08 kWh $.O6/kWh $17.58/1,000,000 Btu

293.08 k W /

$.50/gal. 1,000,000 Btu 91,500 Btu/@. lon/ 1,000,000 Btu 10.93 gal. $.50/gal. $5.47/1,000,000 Btu 3.

$.50/gal. 1,000,000 Btu 150,000 Btu/@. 1,000,000 Btu 6.7 gal. $.50/gal. $3.35/1,000,000 Btu

10.93 gal-

6.7 gal./

68

Btu

Electricity (Cost per kwh)

$.01 (293 k w h .02 .03 .04 .05 .06

Cost per 1,000,000

$.01)

$2.93

5.86 8.79 11.72 14.6 17.5

.07 .08 .09

20.51 23.44

.l0

29.30 32.23 35.16

26.37

.l1 .l2 .l3 (293 38.09 $.13)

4.

$S.OO/Dth

5.

$25.00/ton Btu .042

$25/ton

$3.00/1,000,000Btu

1,000,000 Btu

24,000,000

.042ton/1,000,000

$1.05/1,000,000 Btu

On true Btu cost, even though electricity at $.O6/kWh seems much less expensive than coal at $24/ton, coal is in reality far less expensive ($1.05/1,000,000 Btu) versus electricity at $.06/kWh ($17.58/ 1,000,000 Btu) on energy basis. It must be recognized that raw fuel costs are not the only cost that determines true fuel efficiency. Since equipment that utilizes electricity, propane, fuel oil, natural coal is generally not efficient, raw fuel costs must be factored the equipment efficiency in which they are utilized. Examples of how these efficiencies could affect true energy costs follow: 200% efficiency withan electricity cost of

Wheeling

$.O6/kWh would result in true electricity cost of $8.79/1,000,000 Btu. (293.08/kWh/l,000,000/Bt~ $.06/kWh 200% $8.79/1,000,000 Btu) 2. $.50/gallon would result in Btu. (10.93 gallon/1,000,000 Btu Btu)

70% efficiency with propane cost of true propane cost of $7.81/1,000,000 $.50/gallon

70%

$7.81/1,000,000

3.

50% efficiency with fuel oil #6 cost $.50/gallon would result in true fuel oil #6 cost $6.70/ 1,000,000 Btu. (6.7 gallon/1,000,000 Btu $.50/gallon 50% $6.70/1,000,000 Btu)

4.

65% efficiency with natural cost of $3.00 Dth would result in true natural cost $4.62/ 1,000,000 Btu. (1Dth/1,000,000 Btu $3.00/1,000,000 Btu 65% $4.62/1,000,000 Btu)

5.

35% efficiency with coal cost of $25/ton would result in true coal cost of $2.98/1,000,000 Btu. (.042 ton/1,000,000 Btu $25/ton 35% $2.98/1,000,000 Btu)

The primary thing to remember when trying to structure an arrangement with an electricity commodity provider is that relatively small savings on electricity costs result in relatively large savings in energy costs. For example: $.001 (1/10@)electricity savings per k w h $.293 savings per 1,000,000 Btu. (1,000,000 Btu 3,412 Btu/kWh .001 $.293) Also, if the electricity savings requiresno up-front or investment cost, the entire savings will go directly to the bottom line. If retail wheeling of electricity arrangement could save$10,000 year and require no

70


cost to implement the savings, the actual effect on what would haveto be generated in new sales at various profit margins would be as follows: 1.

To generate $10,000 bottom line savings with 10% profit margin$100,000 would have to be generated in new sales. ($10,000 10% $100,000) TO generate $10,000 bottom line savings with 7% profit margin$142,857 would have to be generated in new sales. ($10,000 7% $142,857)

It is important to understand these facts because many times the savings in the wheeled electricity process may seem small but in reality are quite large in their bottom line impact on profitability. CATEGORIES OF RETAIL WHEELED ELECTRICITY This section addresses the two classes of retail wheeled electricity that are currently the most frequently utilized. An understanding of these classes of wheeled electricity is necessary to be able to cost effectively retail wheel electricity from other than the serving utility sources. Firm Service Electricity that is purchased under this category is the type that is typically purchased from the serving utility and has the highest priority of delivery. If any electricity is available, it will flow to firm service customers. Generally firm service customers have no back-up generation capability and result, pay the highest tariff rate applicable. Depending upon the serving utility’s tariff schedules, firm category customers may or may not be eligible for other than firm service electricity. Probably retail wheeling customer, if they require an uninterrupted flow of electricity, will purchase firm distribution capacity from the serving utility or back up their operations with on-site generation capacity utilize interruptible service. Interruptible Service This category of service is the type that is the most cost effective to retail wheeling customers. Those retail wheeling customers who can accommodate interruption of electric service on short notice, generally in peak load seasons or situations, will benefit from this class of service.

Process

71

This category of service is less expensive than firm service. A customer who chooses this type of service will probably either have type of business than can withstand interruption or will have back-up generation source to supplement disruption of electricity service. Many times the cost differential between firm and interruptible service is such that back-up generation supply can be obtained with the savings realized. If this can be done, the end result is increased customer flexibility with respect to electricity supply sources. Interruptible service is becoming more widely available from serving electric utilities even prior to the advent of retail wheeling in their service territories. Investigate your serving utility’s tariff schedules to determine the availability and applicability of interruptible electric service to particular situation. Which Customers are Utilizing the Retail Wheeling Process? Are There Other Options Available? Most ’first’ customers for retail wheeling are large electricity users where electricity costs have considerable impact on their product/processes. Since true retail wheeling of electricity can negatively effect the serving utility’s profitability, there is much pressure on the customer to not wheel or at least to consider other options that will cause them to remain with the serving electric utility. As has happened in natural electric utilities are inclined to be responsive to the customers’ needs to keep them satisfied users of the serving utility electricity. These utility efforts are taking many forms to help their customers reduce their electricity cost-e.g. negotiated incremental rates and/or financial assistance to customers. Serving electric utilities are beginning to operate more on competitive rather protected monopolistic basis. This change does not come easily since competition is not something any company likes to have to contend with. Many negative things are said about retail wheeling with relation to overall electricity system reliability and utility ’stranded’ investment costs if currently captive customers leave their serving utility. But the fact is that competition in the electricity industry is here to stay and grow. Electric utilities will either ’adapt and grow’ or ’resist and fail’-there will be no middle ground. Change is not easy but resistance is fatal. Not all potential retail customers are choosing to or financially finding it prudent to wheel their own electricity. However, these customers are finding in many cases, that they are able to negotiate less costly electricity rates with their serving utility. As with any situation that involves

competition, even those not directly affected in many cases find that they too can benefit from the process. One thing that electric utilities say will happen if retail wheeling becomes widely available, is that some customer’s rates will increase result of lost utility revenue. This would only be true if the utilities were to continue to operate in the same method that they currently do. What is happening is the electric utilities are taking either one of two possible positions-to view retail wheeling new opportunity for growth, or resist and fight the process see their market share continue to erode. Those that see it as an opportunity will grow and all of their customers will benefit from the process. Those that resist will ultimately fail, go bankrupt, or be purchased by company that through vision sees opportunities rather than disaster. Retail wheeling is here regardless of what electric utilities want, there are problems and failures but once the transitional period is over, electricity will become commodity rather than protected monopolistic service regardless of individual feelings about the process. In flow chart form, Figure 5.3 shows the various steps that are present in the retail wheeled electricity process. Remember that the process shown here is typical and may not be completely accurate with what may occur in given circumstance. Utilize this data only guide to the incremental steps that are present in retail wheeling transaction.

EXPLANATION OF FIGURE WHEELED ELECTRICITY FLOW CHART 1. Wheeled Electricity Generation Point-Price

Point 1 This is the generation facility that is supplying the retail customer wheeled electricity. This generation facility to be physically connected to the electricity transmission grid that the customer’s serving utility utilizes. The wheeling generator may be adjacent to the customer’s serving utility or it may be in different state so long both the wheeling and wheeled-to parties have access to common transmission grid. The costs accumulated at this point include the actual wheeling generator charges for the electricity. These costs generally are structured in MWh (1,000,000 watt-hours). Also, the wheeled to customer normally has choice of either firm or interruptible electricity generation service.

< T I f

Wheeled Electricity Supply Transmission Serving Utility (Interstate)

Serving Utility Distribution System

Grid This is the transmission grid that links the wheeling generator to the wheeled customer’s utility. This grid is governed by the Federal Energy Regulatory Commission. Generally, the wheeled to customer has choice of firm or interruptible transmission service.

This point is where the wheeled to customer’s utility receives, meters, and takes title to the wheeled electricity. The costs at this point include the wheeled electricity costs accumulated in Price Point No. 1, the agent fees and the transmission grid costs to deliver the wheeled electricity to the wheeled to customer’s utility. Included in the transmission costs is line loss factors due to the resistance of flow of electrons through the transmission grid.

This portion of the system is intrastate and is part of the customer’s serving utility grid. It isregulated on intrastate basis by the appropriate regulatory agency. Inthe retail wheeling of electricity transaction, the intrastate portion of the wheeling transaction is subjectto the most regulatory change or (deregulation). Both the utilities well the regulatory agencies have to perceive real customer desire for retail wheeling before major deregulation occurs. Line lossfactors effect this portion of the transaction much the same occurred in the transmission grid between the wheeled electricity supply andthe serving utility receipt point.

This is the point at which the wheeled electricity passes through the retail customer’s on-site electricity meter. Remember, the electricity the retail customer actually receives may never include any of the actual wheeled electrons that were generated for the retail customer. The reason for this is that the retail customer’s wheeled electricity is co-mingled with all other electricity that is present in the transmission grid, both between the wheeled electricity supply and the serving utility receipt point, well between the serving utility receipt point and the retail customer’s meter point. There is no problem with this since actual electrons of electricity are the same.The actual electrons of electricity that the customer receives in the retail wheeling transaction are the same prior to the wheeling arrangement, much like the natural transportation process. The wheeled electricity received and metered at the serving utility receipt point is recorded and credited to the retail wheeling customer much like deposit in bank savings account. During the billing month, the retail wheeling customer has these deposits available to utilize determined by the retail wheeling agree-

ment. The exact electrons deposited in the wheeling customer’s account may not be the same electrons that are utilized by the wheeling customer, but so long there are not more withdrawals than deposits, the overall system will remain in equilibrium. This may sound inordinately complicated, but basically this same process goes on daily where utilities wheel among themselves on wholesale basis. It would be very difficult to trace given electron from generation point to use point, but the system works and remains in balance long the same quantity of deposits of electricity are available there are withdrawals made. Since electricity cannot be practically stored, this electricity generation/use system must be essentially balanced all of the time-no small feat given the complexities of electricity generation/distribution in the United States. Physically, retail wheeling works. The problem is all of the metering and related billing calculations concerning, for example-line losses (under or over), usage of electricity by the customer, and many other cost items that need to be addressed by all of the entities involved. The total retail wheeled electricity cost to the using customer will be the sum of the costs accumulated in Price Points Nos. 1 and 2 and totaled in Price Point No. 3. In some scenarios, the retail wheeling customer utilizes interruptible electricity generation and transmission up to the serving utility receipt point because of the differentials between firm and interruptible electricity costs to these points. If retail wheeling customer requires firm or non-interruptible electricity, it may be possible to negotiate back-up arrangement with the serving utility for supplemental electricity in the event of interruption of the customer’s wheeled electricity. Although retail wheeling of electricity is nothing like customer transportation of natural in technical and operation characteristics, it is similar in the process to the natural transportation transaction. In Figure 5.4 following, is typical retail wheeling cost flow chart that will help to explain the various costs.

EXPLANATION OF FIGURE 5.4RETAIL WHEELED ELECTRICITY COST FLOW CHART Wheeled Electricity Supply-Price Point Costs included in this area include the actual commodity (electricity) cost. This cost is calculated in MWh (megawatt-hours-1,000,000

1. Wheeled Electricity Supply

Price

No. 1Point

2. Agent Charge

3. Interstate Transmission Grid

I

4. Serving Utility Receipt Meter Point 5. Serving Utility Intrastate Distribution Grid Loss

Fees

6. Wheeling Customer Meter Point Charge

for

#l,

The Retail Wheeling

77

watt-hours). This unit of measure (MM) is the standard utilized in all (10) power pools for all transactions between utility generators on wholesale basis. One of the most readily accessible electricity price indices is the ”D. J. Electricity Price Index” which is found daily in The Wall Street Journal in the ”Money and Investment” Section. This electricity price data is generally located adjacent to the Futures Price sheets. The electricity prices in this index represent actual weighted average prices for electricitytraded at various delivery points in the 10 power pool regions. Prices are quoted in dollars per megawatt-hour (MWh) and are-firm delivery, on- and off-peak; and non-firm (interruptible) delivery, on- and off-peak. Although not all delivery points on all 10 power pools are currently listed in this index, retail wheeling becomes more widely available more delivery points will be developed. Remember, if any index is utilized, it will only include the commodity (electricity) delivered to common transmission power pool point. the costs shown in an index will have to be added transmission costs to the wheeling customer’s serving utility receipt point, plus serving utility distribution costs. The various types of electricity that can be purchased at power pool delivery point are follows: This class of electricity generation service is most expensive, but it is the only type of generation that is available 24 hours day, 7 days week with no interruption other than conditions. A customer that cannot be interrupted would opt for this class of service. This class of electricity generation service is subject to curtailment based upon the stipulations contained in the contract between the generator and the customer. This class of service is generally less expensive since it can becurtailed, but it can be very viable option for customers that can interrupt their electricity needs. Generally, interruptions will occur during periods of high electricity usage in the applicable power pool. In most areas of the country, high electricity usage periods occur in the summer months due, at least partially, to air conditioner usage. This class of electricity generation generally can be either firm or

interruptible. Generation in this class would occur during the highest usage of generation on the power pool. Normally, generation on-peak will continue for period of-from 12 to 16 hours daily, Monday through Friday. Typically, Saturdays and Sundays and holidays are considered to be off-peak periods, 24 hours day.

This class electricity generation can be either ”firm” or ”interruptible.” Off-peak generation occupies hours not considered to be ”on-peak.” Electricity generation purchased during off-peak periods is expensive than electricity generation purchased “onpeak.” The least expensive electricity generation that can generally be purchased would be off-peak and interruptible.

This charge represents the retail customers cost for the agent (marketer) utilized to acquire the electricity generation needed. Most wheeling customers utilize the services of third party (agent) to initiate and follow-up on the wheeling process much is generally done in customer transportation of natural These third parties, whether brokers, marketers or producers, are technically know agents since they act in the customer’s behalf and can legally bind them to contractual agreement. These entities will perform at least the following functions for the retail wheeling customer: Select an appropriate wheeled electricity supply source. Select an appropriate interstate transmission grid to move the customer’s wheeled electricity from its origination point to the customer’s serving utility meter/receipt point. Negotiate the least expensive wheeled electricity and transmission rates for the customer. Assist the wheeling customer in the contractual agreements that will be required. There are at least three distinctly different contracts required-(l) between the wheeled electricity supplier and the wheeling customer; (2) between the transmission grid utilized between the wheeled electricity supply and the serving utility

The

Wheeling Process

meter/receipt point, and the wheeling customer; and (3) between the customer’s serving electric utility for the transmission other services that they provide to the wheeling customer. These contracts in flow chart form will look follows:

Contract

Wheeled Electricity Commodity Supply

Transmission Grid Contract of

Serving Electric Utility Contract of

In addition to these (3) contracts, there will be fourth contract between the wheeling customer and the agent utilized by the wheeling customer to facilitate the wheeling process. Generally, the agent charge is percentage of the actual electricity generation cost. At the time of the writing of this publication, to 2% of the actual agent agent charges range in the area of acquisition cost of the electricity generation required by the retail customer. The functions that agent should provide will be addressed in the RFP and “Contract” sections of this publication.

These charges represent the power pool’s transmission fees to move the electricity generated, through the applicable power pool’s transmission grid, to the retail customer’s serving electric utility receipt or metering point. These costs represent rental or fees collected by the various power pool transmission line owners. These fees are subject to FERC approval and generally include “line loss” fees to account for electricity generation losses due to the resistance of flow of electrons through the

Electricity Handbook Retail Wheeling

80

transmission system. The loss factors are subject to FERC approval. To minimize loss, electricity generation voltage levels in this portion of the transaction are generally between +100,000 volts to volts. These high voltage levels are generally reduced to more usable levels on the serving utility’s distribution system. Also, included in this portion of the transaction would be any miscellaneous FERC fees and/ or applicable taxes. 4. Serving Utility Charges-Price Point No. This is the point at which the agent exits the wheeled electricity transaction. This is also the point at which the agent costs are accumulated and billed to the retail customer. The billing from the agent will include the following items:

Electricity generation cost per M W . (Item

onflow chart.)

B.

Agent charge. (Item

C.

Interstate transmission of electricity. (Item #3 on flow chart.) Total cost for items MWh.

on flow chart.)

2, and 3 expressed generally in dollars per

5. Serving Utility Intrastate Distribution Charge-Price Point #3 This charge represents the serving utility cost to move the electricity received at price point #2 (item on flow chart) through their distribution system to the retail customer meter point. This portion of the wheeling transaction is under the jurisdiction of the appropriate state utility regulatory authority. Included in this portion of the transaction will be included miscellaneous costs follows:

(See interstate transmission charges, item #3 for an explanation of line loss.) These costs are the result of the serving utility’s need to reduce the electricity voltage level supplied from the transmission’s power pool at serving utility receipt point. (Item on the flow chart.) These costs may be included in the distribution charge or it may be listed separately.

81

if These costs compensate the serving utility for the meter, its usage and maintenance. This cost may be included in with other items or it may be listed separately. costs. These costs represent the utility’s investment in generation infrastructure that may not be utilized by the retail customer when they retail wheel electricity through an agent. These costs are considered to be ”stranded” since the serving utility, in theory at least, may have no other customer to utilize this infrastructure. These costs are approved on utility-by-utility basis by the appropriate state utility regulatory agency. These types of costs will generally be different for each utility and may even be different for different customer classes served by the same utility based upon usage characteristic variations. Also, included in this portion of the transaction would be and state regulatory agency fees and/or any applicable taxes.

This price point includes all of the serving utility costs lows: A. Intrastate distribution cost. (Item

on flow chart.)

B. Distribution line losses, if applicable. (Item

C. Transformation costs, if applicable. (Item D. Customer meter costs, if applicable. (Item Stranded investment recovery. (Item

fol-

on flow chart.) on flow chart.) on flow chart.)

on flow chart.)

Any miscellaneous fees and/or costs, if applicable. (Item flow chart.)

on

All of these costs will be billed to the wheeling retail customer by the serving utility. This billing,together with the agent billing (item on flow chart), will be the total electricity cost to the customer for the entire wheeling transaction (item on flow chart).

Total Wheeling Costs. This total includes all wheeling costs from wheeled electricity supply point (item #l on the flow chart) through the serving utility distribution costs (item #5 on the flow chart) are follows:

A.

Wheeled electricity supply cost. (Item

B.

Agent charge. (Item

C. D.

Interstate transmission grid costs. (Item #3 on the flow chart.)

on the flow chart.)

on theflow chart.)

Serving utility distribution grid costs. (Item #5 on the flow chart.)

The total cost at this point would be compared to the total cost the retail customer had been paying to their serving utility prior to retail wheeling.

6

The Retail Wheeling Contract Process THE AGENTS THAT ARE USED FOR OTHER THAN SERVING UTILITY SUPPLIED ELECTRICITY The section details the various agents for retail wheeled electricity. This information provides the background necessary to be able to intelligefftly determine the type of agent that should be used to provide the electricity needed at the reliability required. The information given herein provides the foundation for doing retail wheeling transactions.

RETAIL WHEELING INFORMATION Generally, retail wheeling (direct purchase) is provided by at least three different entities-(l) brokers, (2) marketers, and (3) producers. The three entities are explained following:

Most retail wheeled electricity that is available to customers is not obtained from the serving utility. Other parties (agents) actively market electricity to retail customers. The main and most important distinction between brokers and producers is the fact that brokers do not take or assume title to the electricity they market. Brokers act only third party facilitators. In effect, they sell for someone else. Brokers act agents, but do not actually take title to the electricity they sell. Brokersare paid fee for their services by either or both the buyer and/or seller. This is not to say broker retail wheeled electricity is unreliable or in anyway different from purchasing from titled source. 83

The thing to remember is that since title does not pass to the brokers, their warranty to availability is no better than their source provides. In general, the fewer steps required to arrive at the actual electricity generation source, the more reliable the supply. Do not necessarily disregard broker-supplied electricity but remember brokers are able to provide no better title to the electricity they market than what they have-which is none. If broker is used, make sure"(1) their source is identified, (2) the supply is assured for the duration of the contract, and (3) their source does have title to the electricity that they provide to you. In general, it is probably better, both on long-term cost and reliability, if you contract with either marketer or an electricity producer. Marketers Marketers differ from brokers in that they take title to the electricity they sell the wheeling customer. A marketer takes title to the electricity but does not have or own the generation facilities. Marketers, or marketing affiliates, are also known in the electric industry "traders." While all of this may seem confusing, remember the difference between this category and the broker category is that title to the electricity does pass with the marketer where it does not pass with the broker. The difference between marketers and producers is that producers own electricity generation facilities and marketers do not. The marketer category is the largest supplier of retail wheeled electricity. As with any group of individual entities, there are good and bad available. So be certain that any contracts to be negotiated conform in general to the one that is described in this section. Producers Producers have title to and own electricity generation facilities. They are the original owners of the electricity and are responsible for its generation and distribution to an interstate transmission grid receipt point. Some producers market their own electricity directly to retail wheeling customers. Sometimes, several generators join together to form quasi-cooperative that in turn markets the electricity to retail wheeling customers. Producers, such, probably are not the major force in the retail wheeling market. In general, they sell their electricity production to either transmission grid, serving utility, or marketer, who in turn supplies the retail wheeling customer.

Basic Differences Between Brokers, Marketers and Producers Brokers-Do not taketitletoor do not own generation facilities. 2. Marketers-Take title to but probably do not own generation facilities. 3. Producers-Havetitleto and own generation facilities. Synopsis Generally, there will be no reason to limit the choice of your supplier strictly on the basis of the category (broker, marketer, or producer). The criteria for selecting supplier will be based upon data such 1. Reliability of supply. 2. Price. 3. Transmission distribution routing. 4. Contract language. 5. Retail wheeling customer service. 6. Congeniality between buyer and seller. Making these evaluations is no simple matter. It is possible sometimes to rely upon the broker, marketer, or producer for help. However, the motivation of these three entities might be primarily from desire to sell their services, not necessarily to satisfy the needs of the customer. The surest method to follow is to have set of guidelines like the ones previously described, and evaluate any potential supplier in terms of these guidelines.

TYPES OF CONTRACT REQUEST FOR PROPOSAL (RFP) TO UTILIZE FOR VARIOUS TYPES OF WHEELED ELECTRICITY CONTRACTS At this point, we have discussed and illustrated how the retail wheeling of electricity works. Now it is necessary to point out how the retail wheeling market is evolving. Most retail wheeling contracts include more than the purchase of the electricity commodity. The reason for this is that there is very little margin on the electricity commodity to provider to This means that if provider sells the electricity commodity to retail customer for $.0300/kWh and has margin of their total revenue per kwh is ($.0300 .02 per kwh)

86

Wheeling

For retail customer that uses 1,000,000 month, the gross margin to the provider would be $600. 1,000,000 $600) On top of this, large users would normally negotiate quantity discounts. For this gross margin per kwh) the provider must secure the electricity commodity, arrange for the transmission of the electricity to the retail customer’s serving utility receipt point, guarantee delivery, nominate and balance electricity deliveries, and send out monthly billings to the retail customer. Since the gross margins on electricity commodity deliveries are so slim, the trend is toward the providing of more than one service by the provider to the retail customer. Generally the services offered together will be electricity, natural and engineering services for one orall of the retail customer’s facilities. These types of transactions are referred to ”Energy Partnerships.” By the grouping together of various services, both the provider well the retail customer can benefit. help understand how different types of arrangements between users and suppliers are structured, following are three different types of sample RFPs (Request for Proposal) which precede contractual agreement between the user and supplier. Figure 6.1 RFP for Electricity Commodity Only. Figure 6.2 RFP for Electricity Commodity Only, With (3) Pricing Options. A. Fixed Discount. B. Minimum Guaranteed Savings. C. Shared Savings. Figure 6.3 RFP for Electricity, Natural Gas, and Energy Services. These RFP samples, while for informational purposes only, are typical of actual materials being utilized in transactions between providers and retail customers.

RFP

Electricity Commodity Only TABLE OF CONTENTS

I. OVERVIEW

2 2 2 2

1. Explanation 2. Scope of Services 3. Process

BIDDING PROCEDURE Phase l-Bidding Requirements Phase 2-Proposal Return Phase 3-Evaluation of Proposal Phase &Final Negotiations

2 3 3 3

PROPRIETARYINFORMATION

3

IV. GENERAL CONDITIONS 1. Independent Contractors 2. Equal Employment Opportunity Requirements 3. Insurance Indemnity V. QUALITYSPECIFICATIONS 1. Performance 2. Response VI. PROPOSAL SPECIFICATIONS 1. Proposal Requirements 2. Evaluation Criteria VII. REQUIRED SERVICES 1. Agreement Term 2. Structure of Electricity Commodity Discount 3. Billing

6

VIII. SPECIAL PROVISIONS Changes: Non-Assignment: Successors 2. Force Majeure

7 7 7

ELECTRICITY COMMODITY COST REDUCTION CONTRACTUAL AGREEMENT 1

7

7

Wheeling

88

Retail

Electricity

REQUEST FOR PROPOSAL

OVERVIEW Explanation. This Request for Proposal (RFP) will be used to evaluate proposals for the reduction of electricity commodity costs at the properties. 1.

Under this Request for Proposal, energy cost reduction will include the price of the electricity commodity only. Information submitted by bidders will provide the basis for consideration of a contract with the customer. In addition to being cost competitive, the successful bidder must have the ability to work effectively with the personnel and management. Scope of Services. The Customer is soliciting proposals for electricity commodity cost reduction for all facilities included in this RFP. Process. This RFP contains four phases, as follows: Phase Bidding Requirements Phase Proposal Return and Initial Review Phase 3- Evaluation of Proposals and Interviews with Selected Bidders Phase Final Negotiation and Award of Contract

II. BIDDING PROCEDURE All bidders will receive relevant materials about the current consumption of electricity and costs at facilities and will also be provided a copy of the RFP describing the services being sought by the Customer. Each bidder will receive the terms and conditions under which their bid should be made, and upon which a contract may be awarded. PHASE l-Bidding

Requirements:

A Pre-Bid Conference is scheduled for (time) (date) Attendance is (location) Page 2

Wheeling

PHASE 2-Proposal

Return and Initial Review:

All bids must be received on or before (date) Failure to meet the deadline for submission will be grounds for disqualification of the bidder. The Customer will review all bids for compliance with RFP requests.

PHASE 3-Evaluation Bidders:

Proposal andInterviewswithSelected

The Customer will conduct a detailed review of the proposals submitted. Interviews, in person or via telephone, will be set up for those bidders whose proposals most closely meet the objectives of the Customer. Interviews will focus on the proposal, the schedule for delivery of benefits and the pricing of electricity commodity supply.

PHASE 4-Final

Negotiation and Award of Contract:

The Customer retains sole discretion to determine whether contracts will be awarded. Upon that decision, the Customer will notify the successful bidder and will enter into final negotiations for contracts for electricity commodity cost reduction services.

PROPRIETARY INFORMATION All information related to the RFP will be considered “confidential information.” “Confidential Information” means the contents of this RFP and any and all other information provided at any time by the Customer, its agents, or any Serving Utility. The terms and conditions of the Nondisclosure Agreement executed and delivered to the customer by all bidders, is required. By its acceptance of and retention of the RFP, the recipient agrees to hold all confidential information in strictest confidence. The recipient may disclose confidential information to its responsible employees, but only to the extent necessary to facilitate its response to this RFP. If the recipient of this RFP is unwilling to abide by the terms of this Section, then the recipient should immediately return this document to the Customer at the address shown on the cover of the RFP.

Commodity

v. GENERAL CONDITIONS This RFP is not intended to constitute an offer or binding agreement, nor does it impose any obligation or liability on the Customer or on any bidder. The Customer reserves the right to refuse any or all offers made hereunder, in its sole discretion. All proposals become the property of the Customer upon receipt and will not be returned. All proposed services and materials to be delivered hereunder are subject to the applicable laws and regulations of federal, state, county and local governments, and any applicable city or municipal laws or ordinances. The successful bidder, at its own expense shall procure all necessary licenses, certificates, permits or other authorizations which may be required to perform the proposed services in accordance with all applicable laws.

Independent Contractors. The Customer and successful bidder shall not be subject to direction by the other in the performing of their respective work under any agreement reached pursuant to this RFP process. Each shall do such work as an independent contractor. 1.

Equal Employment Opportunity Requirements. The Customer complies with Equal Employment Opportunity laws, orders and regulations in the conduct of its activities. In so doing, the Customer is required to be assured that those with whom it has business dealings involving the furnishing of any services or products are also in compliance with these requirements. All bidders responding to this must agree to be in compliance with the same standards.

2.

Insurance Indemnity. The successful bidder,when entering into an agreement for services with the Customer, agrees and promises: a) To perform the work diligently, so as to complete the same as scheduled and agreed upon.

4

b) indemnify and hold harmless the Customer from and against any claims, suits and judgments for property damage, bodily injuries and deaths caused by any act or omission of the successful bidder, its agents and employees. c) To carry and maintain such insurance as will protect the successful bidder and the Customer from claims by employees of the successful bidder under any Compensation or similar acts, and also from any other claims for personal injury or property damages.

V. QUALITY SPECIFICATIONS It is the

intent of thecontract for services to ensurethat the facilities shall continue to receive electric utility services at the same or at an improved level of quality, delivery and reliability as was available prior to the issuance of such contract.

Performance. Services will continue to be provided through wires, transformers, meters and other facilities as provided prior to the initiation of any service contract. No risk of interruption of delivery of a commodity, except under conditions specifically noted and offered as an option to the base proposal, and no change in the quality of the commodity delivered will be allowed.

1.

Response. The successful bidder, upon execution of an agreement for services, shall immediately respond to any and all service problems presented by the Customer including problems associated with delivery to the serving utility receipt point. 2.

VI. PROPOSAL SPECIFICATIONS

1. Proposal Requirements. All bids received must meet the following minimum requirements for consideration by the Customer: A. facilities included in this must be included in proposed arrangements. A one-year minimum term agreement.

Evaluation Criteria. All submitted proposals will be evaluated based upon the level of the proposed electricity commodity savings. The following information details the required services to be furnished in response to the Customer's Request for Proposal.

VII. REQUIRED SERVICES 1.

Agreement Term. (Minimum Period-l2months) The successful bidder will provide the Customer a discounted electricity commodity rate for a period of months beginning (date)

Structure of Electricity Commodity Discount. The discountforCustomer'sfacilities will be based upon the Customer'smeterpointelectricitycommoditycostsas of (date) and will include, but not be limited to the following: 2.

A.

Electricity generation costs.

B.

Fuel costs, as applicable.

C.

Interstate transmission costs.

D. FERC fees, as applicable. E. Interstate transmission line losses, as applicable. Provider's gross margin. G. Miscellaneous interstate charges and fees. H. Intrastate distribution costs. I. Intrastate distribution line losses, as applicable. J. Miscellaneous state fees and charges, as applicable. Customer's equipment fees and costs, as applicable. L.

Stranded investment recovery costs.

M. Total Customer use-point meter cost (items A-L). The discount will be applied and calculated monthly by the successful bidder for the affected Customer facilities beginning at contract signing and continuing for months.

6

93

Billing. The discount amount will be clearly identified each individual monthly invoice. The successful bidder will provide a billing summary for all facilities included in this RFP a monthly basis. The successful bidder will provide each individual facility with a monthly accounting of the cost savings generated by the discount and will institute an open book accounting policy for the Customer to audit actual costs.

3.

VIII. SPECIAL PROVISIONS Changes:Non-Assignment:Successors. Any contract entered into between the successful bidder and the Customer pursuant to this RFP process shall represent the entire agreement between the parties with respect to the subject matter hereof. Any such agreement shall not be assignable by either party without the prior written consent of the other. Any inconsistencies between the representations contained in this RFP and any other agreement between these two parties shall be resolved in favor of the RFP contract. 1.

Force Majeure. Failure or delays in the performance of the work contemplated hereunder, as more specifically described in a contract between the parties, by either party, shall excuse both parties from performance of their respective obligations hereunder if, and so long as, caused by acts of God or the elements, law or governmental restrictions, labor disturbances, war or the results thereof, or any other causes like those enumerated, which are beyond the reasonable control of the party whose performance is affected. If either party anticipates that circumstances beyond its control may occur, that party shall promptly furnish written notice of such circumstances to the other party, and shall take all responsible steps to carry out the terms of this RFP and the contract as soon as reasonably practicable, subject to delays as may be caused by such an event. In the event delaying circumstances occur andshall continue for a period of thirty (30) continuous days, the party entitled to such performance shall have the right to terminate the unperformed portion of the contract. 2.

ELECTRICITY COMMODITY COST REDUCTION CONTRACTUAL AGREEMENT The acceptance of any bid will not constitute a contractual agreement between the Customer and the successful bidder. Such an agreement will not exist until such time as all terms and conditions are reduced to writing and executed by all parties.

Page

Notice that this RFP is for electricity commodity only. (See VII”Required Services” in RFP) In this type ofRFP, for electricity commodity only, customer savings in the range of to 4% of their total electricity expenditures are reasonable. An electricity-commodity-only arrangement is not what most potential providers prefer. Since the typical margin for providers on electricity commodity is very small, there generally is not much interest for this type of arrangement there would be for an electricity commodity and engineering services structure. Most of potential provider’s margin will be in the providing of engineering services, not in the providing of the electricity commodity.

EXPLANATION OF FIGURE 6.1-RFP FOR ELECTRICITY COMMODITY ONLY Overview Provides the purpose and expectations of the RFP.

Describes the item (electricity commodity) that is to be the focus of this RFP.

Describes the RFP steps involved. Bidding Procedure This is very key part of the bidding procedure. All interested bidders must attend pre-bid meeting so that they can ask questions about any partof the RFP. Attendance at this meeting allows all potential bidders to voice, not only any questions they may have, but to also hear questions other potential bidders may have. From personal experience, this meeting will do more to impact favorable outcome to the RFP process than any other single item in the process. Misunderstanding of what is really wanted in an RFP of this type is one of the most troublesome aspects of the process. To not mandate attendance at pre-bid conference by all interested potential bidders is to ask for problems. All bid results will be directly proportional

to the bidders understanding of what is wanted by the customer. Information and data are the keys to successful experience in this process.

This section outlines the required bid receipt date mandated by the RFP. Generally the time period from receipt of the RFP by potential bidder to its completion and return to the Customer should be 4 to 6 weeks at minimum. Do not shorten this period to unrealistic time because to do so can very negatively impact the quality the bids received. The types of described here, are for the most part, rather new to the industry andwill require time by bidders for them to understand and respond to.

Here is described the evaluation process in detail. Always respond to all bids, and to the extent possible, let all non-selected bidders know why their bid was not further evaluated. You may want to utilize them in subsequent proposals so be honest and forthright with them. Remember, even non-qualified bidders have invested considerable amount of time and money in responding to the RFP.

This explains the process for award of

contract by the Customer.

111. Proprietary Information This section explains the confidential nature of the information between the Customer and RFP recipients.

IV. General Here respondents to the RFP are told that they are not employees of the Customer but independent contractors.

Outlined here are the EEOs with which any bidder must comply.

Here is explained the various insurance coverages that are required by the selected bidder when contracting with the Customer.

Outlined here is the fact that delivery of services (electricity) will continue to be performed in the same or at an improved quality level the Customer is currently receiving. This section is put in to assure that electricity commodity cost reductions are not the result of reduced reliability, delivery quality or any other physically altered characteristic of electricity to the Customer. This RFP is for the cost reduction of the electricity commodity only with its physical characteristics remaining consistent with whatwas being delivered prior to the contract between the successful bidder and the Customer.

This addresses the response requirement of the successful bidder in the event of problems experienced by the Customer result of their contracting with the successful bidder.

Bid minimum requirements are enumerated in this section.

How bids will be evaluated is explained here.

Here the minimum agreement term limits are set forth. Generally, the minimum term for contract for electricity commodity pricing would be for at least year. Terms shorter than (1)year are more difficult to structure with potential providers because of their limited profit potential.

This section is the most important part of the RFP.In it are listed the components to be considered in the discount. As can be seen there are at least 12 different items to be considered (Items A-L). The main thing to remember here is that any discount for electricity commodity (Item A) must be represented at (Item M) which is the total Customer use-point meter cost.

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Process

These costs are result of the generation of the electricity commodity at either the point-of-generation or at common power pool delivery point. This is the only item in this type of RFP where discount will be available. Typically the electricity generation component of Customer’s bill will be of the total bill cost. Be careful of potential provider discount percent numbers. For example, if potential provider were to offer 10%discount-what would it mean to the total use-point electricity cost? For the purpose of illustration, let us assume total Customer use-point meter cost (Item M) of $.06/kWh. Let us further assume that the electricity commodity cost (Item A) is $.02/kWh. What does 10% discount on $.02/kWh amount to on total cost of $.06/ kwh? 10%)-$.002 cost reduction ($.06 $.002) $.058/kWh; or total cost reduction of 3.5% ($.058/kWh $.06/kWh). The perceived 10% discount, applicable to electricity commodity cost only (Item A), will really amount to 3.5% on the total Customer use-point meter cost (Item M). ($.O6/kWh vs. kwh) When discount numbers are discussed, make certain that all discussions are referring to use-point costs (Item M) not just commodity costs (Item A).

These charges represent the costs of fuels to turn the turbines that generate the electricity. Theymay be included in the electricity generation costs (Item A) or may be separately listed. These types of costs, if separately listed, are not generally discounted.

These costs represent the cost of the moving of the electricity commodity across the applicable power pool transmission lines to the Customer’s serving utility receipt point (between Items G and H). The potential provider may be able to receive some discounts this item in some instances, so always ask the potential provider about discounts on this item; and, if they are available, they should


to the Customer. FERC approves the various costs relating to transmission.

These fees, if separately identifiable, are not discountable and represent the FERC regulatory agency‘s fees tousers for regulatory oversight of the interstate transmission grid system.

As These costs, if present, represent the actual reduction in electricity it travels across the transmission grid system. This loss is result of resistance to flow of electrons in an electrical system. These losses are stated averages and are under the jurisdiction of FERC. Typically they can be of total flow of electricity. There is no discounting of these loss factors.

This figure will represent the provider’s gross charge to the Customer for serving marketer or facilitator in this transaction. This fee will not be all profit for the provider since they incur expenses in serving the Customer’s agent. Typically, this fee will be in the area of of the electricity commodity cost. Remember, that any provider to realize profit on the service they offer to the Customer so be careful in trying to negotiate this figure down to an unreasonable level. You tend to get what you pay for!

These costs vary by power pool and may include many items, taxes, system maintenance, expense recovery items, etc. They are not negotiable. FERC approves these types costs. H.

These costs are basically the same those described in Item C previously, except that they occur within the Customer’s state of electricity usage. Discounts on this intrastate distribution system are typically not available. The state regulatory agency approves the various costs relating to distribution.

These costs are basically the same

those discussed Item

previously, except that they occur within the Customer’s state of electricity usage. Typically these losses can be of total flow of electricity. There is no discounting of these costs. The state regulatory agency approves loss factors.

1. These costs are basically the same those discussed in Item G previously, except that they occur within the Customer’s state of electricity usage. They are not negotiable. The state regulatory agency approves these types of fees and charges. K.

Sometimes this item is referred to competitive transition cost. Either description means the same to the Customer-extra electricity costs. These costs are supposed to compensate the Customer’s serving electric utility for the potential losses sustained when the Customer elects not to purchase the electricity commodity from the serving utility’s generation. Since, in practice, no one knows where any specific electricity commodity generation output is going, it is difficult to understand how any serving utility knows whose electrons were used by any given Customer at any given time. However, in this case, perception is good reality, and serving utilities are being granted relief from these perceived problems every day. These costs are under the jurisdiction of the state regulatory agency and are not negotiable by an individual electric utility Customer.

These costs would be billed by the serving utility and could include such items equipment rental and special service fees, specifically agreed-to by the serving utility and Customer. These costs may or may not be under the jurisdiction of the state regulatory agency. These costs can be negotiable item between the serving utility and the Customer if they are not regulated by the state agency.

This is the total of all cost Items A-L and represents the actual use-point cost to the Customer. Any and all discounts Items A-

L have their ultimate impact on this use-point cost. Always calculate total discounts against the current cost at this point to determine the actual overall value of any contract agreements with potential provider.

This item defines how billing is to be handled. VIII.

Provisions

This section addresses the legal structure between the successful bidder, and the Customer with relation to assignment by either party.

Events over which neither party has control are covered in this section. Electric Commodity Cost Reduction Agreement This section defines when an actual contractual agreement exists between the parties. A contract for electricity commodity pricing can be structured in many ways depending upon the customer’s requirements but the items covered in this sample RFP must be addressed in some manner. A particular customer’s legal council can be real asset in formulating an actual RFP that provides realistic cost reduction well as including the safeguards needed to be assured that the Customer is contracting with reputable provider.

RFP for Electricity Commodity

I.

Only With (3) Pricing Options

TABLE OF CONTENTS PREFACE A. Definitions Customer 2. Services 3. Bidder Candidate 4. RFP 5. Bidder 6. Facilities 7. Supplier(s) B. Overview C. Explanation 1. Evaluation and Qualification Process 2. Proprietary Information GENERAL REQUIREMENTS 1. Introduction Equal Employment Opportunity Requirements 3. Legal Documents, Laws and Regulations 4. Insurance Requirements 5. Substitutions

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QUALITYSPECIFICATIONS A. Performance Specification Electricity 2. Response Specification

7 7

IV. PROPOSAL SPECIFICATIONS A. Proposal Options 1. Option #l-Fixed Discount Standard from Serving Utility Retail Tariff Rate 2. Option #2--Shared Savings with a Minimum Guarantee Discount 3. Option #3-Shared Savings OnlyNo Guaranteed Savings 4. Bidder Conditions-Applicable to All Pricing Options V.

2 2 2 2 2 2 2 2 2 3 3 3 4

SPECIAL PROVISIONS Type of Contract(s) 2. Proposed Contract(s) Term

VI.AWARD OF CONTRACT 1.Award of Contract

4

9

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1. PREFACE

DEFINITIONS Customer Legal Name Legal name of customer. Services SERVICES refer to all work associated with electricity energy cost reduction, as defined in this document. Bidder Candidate BIDDER(S) refers to the company(s) that participate in the RFP process. 4.

RFP RFP refers to “Request for Proposal.”

5. Bidder BIDDER(S) are companies in the business of providing MATERIALS and/or SERVICES of the type requested in this RFP for a profit to other companies. Facilities The term FACILITIES incorporates any Customer facilities included in this document. Supplier(s) SUPPLIER(S) are those BIDDER(S) under contract with Cusmutually tomer to provide“goods”and/orSERVICES agreed-upon terms for a specified time period in accordance with the Terms and Conditions specified in a Contract between the parties.

(3)

B. OVERVIEW This RFP will be used to evaluate BIDDER(S) who wish to establish a long-term contractual arrangement with Customer. In addition to being cost competitive, the selected BIDDER@) must have the ability to work within the corporate environment. Only BIDDER(S) who meet these criteria will be considered

C. EXPLANATION Customer is soliciting proposals for electric cost reduction SERVICES for its FACILITIES as detailed in the RFP attachment. It is the intention to identify the best match between needs and capabilities. 1.

Evaluation and Qualification Process The participation and information requested by the attached documents are intended to facilitate the evaluation and qualification process. This process serves as the means for selectingthe BIDDER@) who appear best suited to meetingthe needs of Customer. Phase l. Responses will be evaluated by Customer to identify those BIDDERS whose proposals appear “most likely to satisfy” the needs. BIDDERS who satisfactorily complete this phase of the selection process will be eligible for the next phase of the process. Phase

Customer willconductfinalinterviewswiththe staff who will be handling this account, examining pricing information and asking any questions necessary to make the decision for the final award of a contract.

Phase Customer will finalize pricing and contract terms, and will determine if the contract will be awarded.

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2.

Proprietary Information Any specifications (technical or business data) which in any way represents “information” furnished to BIDDER(S) under this RFPor in contemplation hereof, will remain property; and all copies thereof, will be returned to Customer if BIDDER(S) decline to participate, is eliminated in the evaluation at the end of Phase IV, orat any time upon request. BIDDER@) agrees to keep information confidential associated with this RFP and not use same for any other purpose except upon such terms as may be agreed upon by BIDDER@) and Customer in writing.

This is the RFP document originated by the Customer. This RFP is not intended to constitute an offer or binding agreement between the parties, nor does it consummate a contract between Customer and any BIDDER. The only legal obligations between the parties shall be those set forth in an executed contract. Customer reserves the right to refuse any offer made to it at its sole discretion. In the event a contract is not consummated, Customer shall not be obligated for any expenses of any BIDDER or for any charges whatsoever relating to this RFP. Customer does not seek to obtain any of the proprietary or confidential information. Please do not include any such information as pari of the proposal. Customer does not intend, and will use all reasonable efforts not to disclose, any information from the proposal to those submitting competing proposals. All proposals become the property of Customer upon receipt and will not be returned. Customer reserves the right to reject any or all proposals received if such action is considered to be in the best interest of Customer. This RFP is contingent upon compliance with all provisions contained herein. Consideration will be given only to those companies that respond to all requirements.

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All potential SERVICES to be executed and MATERIALS delivered under this RFP are subject to applicable laws and regulations of federal, state, county, and local governments and any/all city or municipal laws or ordinances.

No BIDDER(S) shall disclose to others that Customer has tendered this RFP to them, except as may be required to complete the requirements of this RFP and Proposal Information Package. If such a disclosure is required by the BIDDER(S), in order to prepare a proposal response, the BIDDER(S) will require any party to whom it does disclose such information to sign a Non-Disclosure Agreement. B.

EQUAL EMPLOYMENT OPPORTUNITY REQUIREMENTS Customer complies with Equal Employment Opportunity Laws, orders and regulations in the conduct of its activities. In so doing, Customer is required tobe assured that those with whom it has business dealings involving the furnishing of any SERVICES or products arealso in compliance withtheserequirements.All BIDDER(S) responding to this RFP must agree to be in compliance with the same standards.

C.

LEGAL DOCUMENTS, LAWS AND REGULATIONS The successful BIDDER(S) shall observe and comply with the provisions of any present and future federal, state and municipal laws, rules, regulations, requirements, ordinances, orders and directives which apply to its operations, except where stricter requirements are contained in this The successful BIDDER(S) shall procure all necessary licenses, certificates, permits orother authorizations from all governmental and other authorities having jurisdiction over its operations. The successful BIDDER(S) shall give all notices, pay all fees and take all other actions that may be necessary to ensure that its SERVICES are delivered in accordance with applicable law.

INSURANCE REQUIREMENTS The successful BIDDER shall be required, at a minimum, to carry the types of insurance coverage in the amounts required by the Customer including Workman's Compensation, employee liability, bodily injury and property damage.

E. SUBSTITUTIONS Whenever any subcontractor is specified by name, all BIDDER(S) shall base their quotations only on that specific subcontractors costs. In order not to limit competition, and so that Customer may consider alternatives which may be of benefit, the bidders may propose substitutions which they consider equivalent to, or better than, the specified items contained in the RFP All proposed substitutions must be submitted in writing as part of the bid submission. After the bids are received, no alternative products or subcontractors will be considered by Customer.

All subcontractors' names, specified and alternatives (if used) must be submitted as part of the bid along with their proposed prices.

QUALITY SPECIFICATIONS It is the intent of the proposed contract to ensure that the included facilities of Customer shall, after the issuance of the contract, continue to receive utility (electricity) services at the same or improved level of quality, deliverability and reliability as was available prior to the issuance of the contract.

A.

PERFORMANCE SPECIFICATIONS 1.

Electricity. Electricity services will continue to be provided through wires, transformers, meters, etc., as is currently provided prior to issuance of the contract. No change in quality of the electricity commodity will be allowed.

2.

Response Specification The BIDDER@) shall respond to problems presented by designated Customer representatives upon notification. This would include, but not be limited to, delivery reliability to serving utility receipt point.

Iv. PROPOSAL SPECIFICATIONS A.

PROPOSALOPTIONS Option #l-Fixed Discount from Serving Utility Retail Tariff Rate. BIDDER(S)willofferCustomeradiscountfromthetotal monthly bill that Customer would have otherwise paid if it had taken service from the Serving Utility. In any month, the standard retail tariff schedule rate applicable to Customer plus any taxes that would be applicable and included in the total Serving bill to Customer shall serve asthe baseline against which this fixed discount is calculated.

CHART 1 FIXED DISCOUNT (Cost/kWh) Fixed Discount

Customer Current Rate Class

2.Option #P-Shared Discount.

SavingswithaMinimumGuaranteed

BIDDER(S) will offer Customera minimum guaranteed discount from the total monthly bill that Customer would have otherwise paid to the Serving Utility against which this minimum guaranteed discount is calculated is the same as described in Option

#l. CHART 2-A MINIMUM GUARANTEED DISCOUNT (Shared Savings) (CosVkWh) Minimum Guaranteed Discount

Customer Current Rate Class

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Actual total discount will consist of theminimum guaranteed discount plus a shared savings discount on any savings greater than the minimum guaranteed discount. Savings greater than the minimum guaranteed discount will be shared between the BIDDER(S) and Customer.

(in [Yo] of total savings) (Minimum Guaranteed Discount) Customer’s share of savings in excess of minimum guaranteed savings by current rate class.

3.

Option#3“Shared

l-

BIDDER’S(S’) share of savings in excess of minimum guaranteed savings by current rate class.

l

Savings

GuaranteedSavings.

This option is entirely a shared savings arrangement whereby Customer and the BIDDER(S) split any savings on a predetermined percentage basis. These savings would be the difference in any month between the total amount Customer would have paid during such month, including all applicable taxes as a retail tariff rate customer of Serving Utility, and the total cost Customer actually pays to the BIDDER@) including all applicable taxes for such month.

(in of total savings) (No Guaranteed Savings) Customer’s share of savings

BIDDER’S(S’) share of saving

by current rate class.

by current rate class

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2

4.

BIDDER Conditions Applicable to All Pricing Options a.

Agreement terms and start date?

b.Warranty

that sets forth terms and conditions that guarantee cost of electricity at meter point will never exceed what Customer would have paid to Serving Utility in a standard retail tariff schedule rate.

c.

Warranty that sets forth terms and conditions that protect Customer for all electricity purchased from bidder during the term of the Agreement as follows: 1)

responsibility for all electricity on a firm delivery basis for both base and peaking quantities.

2)

responsibility for all nominations andrequired balancing.

3)

responsibility for any/all Serving Utility penalties that could result from incorrect nomination and/or balancing procedures.

d.

Define responsibility (if applicable) for coordination, meter reading and billing procedures.

e.

Define responsibility (if applicable) for any required new/different meters including installation and maintenance charges.

NOTE: BIDDER(S) can provide pricing information on any or all of the pricing structures, fixed discount, shared savings with a minimum guaranteed discount and shared savings only with no guaranteed savings. Evaluation of proposals will include both electricity cost savings, as well as evaluation of BIDDER(S) safeguards against non-delivery/penalty situations for Customer.


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OF Customer contemplates that this qualification process will result in the award of either a fixed or variable cost Contract(s). Customer reserves the right toacceptor reject any andallproposalsreceived, at its sole discretion.

B. The resulting Contract(s) will be for a one-year minimum term or other term(s) that will be mutually agreeable to the other parties.

An award of a Contract will not be made until the necessary investigations have been made of proposals provided pursuant to this RFP and other requirements of evaluation process. Award of any Contract will be made in a period as may be decided by Customer. Customer reserves the sole right to decline to award any Contract resulting from this evaluation process.

Notice that this RFP is for electricity commodity only. (See IV-A, Proposal Options in RFP.) However, it allows the flexibility forthe potential vendors to select from one of three pricing options for the electricity commodity-Fixed Discount, Shared Savings with Minimum Guaranteed Discount, and Shared Savings Only. (See IV-A, 2, and 3, Proposal Options in RFP.)

EXPLANATION OF FIGURE 6.2-RFP FOR ELECTRICITY COMMODITY ONLY WITH

(3) PRICING OPTIONS.

NOTE: Portions of this figure are very similar to Figure 6.1 (RFP for Electricity Only). Items I,11,111,IV, V, VI,VI11 and IX in Figure 6.1 are similar to Items I, 11,111, V, VI in Figure 6.2. Item VI1 in Figure 6.1 and Item IV in Figure 6.2 are where the real differences between these two figures occur. These two figures are structured slightly differently from each other in the areas described for purpose. The purpose is to make the reader of this publication aware of different structures that can be utilized in documents of this type without impacting the viability of the RFP. Generally individual customers and/ or their legal representatives will have standard contract provisions with which they are familiar and feel comfortable. In these instances the questions may arise to what “standard” contract provisions can be utilized in “utility services” RFP. The answer is that many of the generic stipulations and requirements that customer may typically utilize in contract can be used in “utility services” RFP. The major thing that has to be specific in each ”utility services” RFP is the portion of the RFP that relates to the “utility services” being requested. This portion of the RFP is generally relatively small, but very critical, part of the total RFP. Structuring ”utility services” RFP is simply seeking provider of ”utility services” much other services might be solicited. Do not make the RFP process more difficult than is required, but do recognize that the portion of the RFP relating to the specific ”utility services being solicited” is critical to successful contract with provider.

A. Customer. The legal name of the Customer.

Services. A brief description of the services being requested. 3. Bidder Candidate. Definesthe term ”bidder candidate.” 4. RFP. Defines what ”RFP” means. 5. Bidder.Defines the word ”bidder.” 6. Facilities. Defines what ”facilities” means in relation to this RFI? Supplier(s). Defines what ”supplier(s)” means. B. Overview. Describes the required qualifications that bidders must possess. C. Explanation. Explains the purpose of the RFP. 1. Evaluation and Qualification Process. Explains the evaluation and qualification process. Phase 1. Explains the bidder selection process. Phase 2. Explains bidder interview process. Phase 3. Explains method of contract awarding process. 2. Proprietary Information. Defines propriety information utilized in this RFP. 11.

GENERAL REQUIREMENTSA. Introduction. Defines the legal obligations of both the customer and the bidders. B. Equal Employment Opportunity requirements. Outlined here are the EEO requirements with which any bidder must comply. C.Legal Documents, Laws and Regulations. Describes the various legal documents that any successful bidder must comply with together with the various laws and regulations that may be referenced in the RFP. Insurance. Describes the various insurance requirements with which the bidder must comply. E. Substitutions. Addressed here is the question of substitutions of products and/or subcontractors by the bidder.

111. QUALITY SPECIFICATIONSA. Performance Specifications. 1. Electricity. Outlined here is the fact that all services (electricity) will physically be delivered after any contracts between the customer and bidder the same before the contract. Discounting of electricity commodity should in no way erode the quality level of the physical delivery of the electricity commodity to the customer’s use-point electric

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meter. Make certain that any RFP submitted to bidders specifically addresses the delivery quality level expected by the customer. 2. Response Specification. Here is addressed the ”response to problems,” expected by the customer from provider.

ODtion #l-Fixed Discount from Serving Utility Retail Tariff Rate. This discount structure is different from the previexample (Figure 6.1). In the previous example an incremental approach to the total electricity cost (See VII, 1 and A-M) was detailed since the discount applied only to the electricity commodity cost.

In this example, the incremental electricity costbreakdown is not required since any discount is calculated on thetotal retail tariff rate. In this option fixed discount is calculatedfrom the total utility retail tariff rate. The calculation by the provider will be essentially the same for this option in this sample it was in the previous sample but the total cost paid by thecustomer is the basis for the discount, not theelectricity commodity cost only was in the previous example. 2.ODtion #2”Shared Savings with Minimum Guaranteed Discount. In this option the savings opportunity for the customer comes in the form of guaranteed minimum discount with the potential for extra savings if the provider can actually reduce the overall electricity cost to greater extent than the guarantee provides. Generally, the guarantee portion of savings will be less than in Option but the opportunity for greater savings exists where in Option #l, it did not. This method can result in larger savings for the customer if method can be developed and agreed-to by both the customer and the provider where the customer can determine if savings in excess of the guarantee are occurring in the successful bidders cost structure. This requires that the provider allow the customer to inspect the provider’s ac-

tual cost data on what is generally referred to an "open b o o k arrangement. a customer is not adverse to some margin of risk or uncertainty in their savings structure, this option is probably better choice than Option #l. this option is utilized, the customer will have to be satisfied that the provider is allowing the customer to have an unrestricted look at the provider's books so that the shared portion the savings truly reflect what they should be. A typical share ratio excess savings over the guaranteed base savings between the customer and the provider would be 50/50 split between the parties. Other share splits can be negotiated but generally the 50/50 split is fair and agreeable to both parties. 3. Option#3"Shared Savings Onlv-No Guaranteed SavIn this option, there is no guarantee of any savings but the opportunity for greater savings than either Option #l or does exist. The key tousing this type of agreement is the ability of the customer to have access to and understand the providers actual cost data so that an accurate determination can be made what savings are actually available. The savings split is typically 50/50 split between the parties.

4.

V.

Bidder Conditions Amlicable toAll Pricing Options. This section outlines the various terms and conditions that apply to this RFP. Also required in this section i s specific bidder responses to the itemization of various terms and conditions.

SPECIAL PROVISIONSA. Type of Contract(s). Outlined here are the types of contracts that will be considered by the customer. B. Proposed Contract(s) Terms. This section describes the contract lengths or time periods that will be considered by the customer.

VI. AWARD OF CONTRACTA. Award of Contract. This section details the terms under which contract will be awarded.

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3FP for Electricity, Natural Gas, Water/Sewer and Engineering Services TABLE OF CONTENTS PREFACE A. Definitions Services 2. Bidder Candidate 3. RFP 4. Bidder 5. Facilities 6. Supplies B. Overview of Bidders C. Explanation Evaluation and Qualification Process 2. Proprietary Information GENERAL REQUIREMENTS A. Introduction Equal Employment Opportunity Requirements 2. Permits, Laws, and Regulations 3. Insurance Requirements 4. Substitutions QUALITY SPECIFICATIONS A. Performance Specifications Electricity 2. Natural Gas 3. WaterISewer 4. Response Specifications 5. Energy Service Projects

5 5

7 7 7 7

IV. PROPOSAL SPECIFICATIONS A. General AgreementTerms Required Services 2. Energy Service Structure 3. Detailed Energy Services Analysis

8 8 8

V.

9 9

SPECIAL PROVISIONS A. Type of Contracts B. Proposed Contract Terms C. References

VI. AWARD OF CONTRACT A. List of Attachments

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Electricity

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PREFACE A.

Definitions Services SERVICES refers to all tasks, procedures, activities and workassociated with electricity, natural gas and waterlsewer energy cost reduction, as defined in this document.

2. Bidder Candidate BIDDER@) refers to the single or multiple companies selected as candidates to participate in the RFP Process. RFP RFP refers to “Request for Proposal.” 4.

Bidder BIDDER(S) is qualified company(s) in the business of providing integrated energy and facility management services includinggas and electric commodities, engineering and construction capabilities,and energy equipment management and/or SERVICES.

5.

Facilities The term FACILITIES incorporates any real estate utilized by Customer included in this RFP. Supplier(s) SUPPLIER(S) are those BIDDER(S) under contract with Customer to provide Goods and/or SERVICES at mutually agreedupon prices, standards and intervals for a specified term in accordance with the Terms and Conditions specified in a contract between the parties.

B.

OverviewofBidders This RFP will be used to evaluate selected BIDDER(S) who wish to establish a long-term contractual alliance with Customer. In addition to being cost competitive, the selected BIDDER(S) must have the ability to excel in the quality of SERVICES delivered.

Only a BIDDER, who has an established strategy, structure and management process for providing the highest level of professional service, will be considered. C.

Explanation This Customer is soliciting proposals for utility cost reduction SERVICES for its FACILITIES as outlined in this RFP. is this intention to identifythebestmatchbetweentheirneedsand capabilities. 1.

Evaluation and Qualification Process The participation and information requested by the RFP are intended to facilitate the evaluation and qualification process. This process serves as the means for selecting the B I D D E W ) who appears best suited to meeting the needs of Customer. PHASE A description of the services required, the key FACILITY statistics and the various terms and conditions under which a contract agreementmay bereachedwiththesuccessful BIDDER(S) will be provided. Any questions will be answered at the mandatory RFP Conference. At that time, additional documents and forms will be distributed for your use in the proposal process. Companies who successfully complete the Phase 1 requirements will be evaluated under the next phase of the process. PHASE Responses will be evaluated by Customer to identify those BIDDERS whose proposals appear “most likely” to satisfy the needs. The evaluation will also include an investigation of ability to perform and related experience. BIDDER(S) who satisfactorily complete this phase of the selection process will be eligible for the next phase of the process. PHASE

Customer willconductfinalinterviewswiththe and ask any questions necessary to make the decision for the final award of a contract.

PHASE 4. Customer/BIDDER will finalize pricing and contract terms. Awarding of the contract will be at the sole discretion of Customer.

2.

Proprietary Information Any specifications, drawings, models, samples,technical or business information which represents “information,” furnished to BIDDER(S) in this RFP, will remain property; and will be returned to Customer if BIDDER@) declines to participate, are eliminated in the evaluation, or at any time upon request by Customer. BIDDER@) agrees to keep information confidential associated with this RFP and not use same for any other purpose except upon such terms as may be agreed upon by BIDDER@) and Customer in writing.

GENERAL REQUIREMENTS

A.

Introduction This document is part of a RFP from the Customer. This RFP is not intended to constitute an offer or binding agreement between the parties, nor does it consummate a contract between Customer and any BIDDER(S). The only legal obligations between the parties shall be those set forth in an executed contract subsequent to the RFP. The Customer reserves the right to refuse any offer made to it at its sole discretion. In the event a contract is not consummated, the Customer shall not be obligated for any expenses of any BIDDER(S) or for any charges or claims whatsoever arising out of this The Customer does not seek to obtain any of proprietary or confidential information. All information and data contained in the submitted proposal must be and will be treated as material Customer may use or distribute without restriction. However, Customer does not intend, and will use all reasonable efforts not to disclose, any information from proposal to those submitting competing proposals. All proposals become the property of Customer upon receipt and will not be returned. Customer reserves the right to reject any or all proposals received if such action is considered to be in the best interest of Customer. This RFP is contingent upon compliance with all provisions contained herein. Consideration will be given only to BIDDER(S) that respond to all requirements.

4

3-RFP

All potential SERVICES to be executed and MATERIALS delivered under this RFP are subject to applicable laws and regulations of federal, state, county and local governments and and/all city or municipal laws or ordinances.

No BIDDER(S) shall disclose to others that Customer has tendered this RFP to them, except as may be required to complete the requirements of this RFP and Proposal Information Package. 1.

Equal Employment Opportunity Requirements Customer complies with Equal Employment Opportunity laws, orders and regulations in the conduct of its activities. Customer requires that those with whom it has business dealings involving the furnishing of any SERVICES or products, be in compliance withEqualEmploymentOpportunityrequirements.All BIDDER@) responding to this RFP must agree to be in compliance with all applicable laws, orders, and regulations relating to Equal Employment Opportunity requirements.

2.

Permits, Laws and Regulations The successful BIDDER(S) shall observe and comply with the provisions of any present and future federal, state and municipal laws, rules, regulations, requirements, ordinances, orders and directives which apply to its operations, except where stricter requirementsarecontainedinthis RFP. Thesuccessful BIDDER@) shall procure all necessary licenses, certificates, permits or other authorizations from all governmental and other authorities having jurisdiction over its operations. The successful BIDDER(S) shall give all notices, pay all fees and take all other actions that may be necessary to ensure that its SERVICES are delivered in accordance with applicable law.

3.

Insurance Requirements The successful BIDDER(S) shall be required, at a minimum, to carry Workman's Compensation, employee liability, public liability, bodily injury, and property damage insurances as required by law.


120

4.

Substitutions Whenever any product or subcontractor is specified by reference to name, trade name, make, model or catalog number of any supplier, all bidders shall base their bids only on those specified products or subcontractors. In order not to limit competition, and so that the Customer may consider alternatives that may be of benefit, the bidders may propose substitutions that they consider equivalent to the specified products, manufacturers andlor subcontractors. All proposed substitutions must be submitted in writing as part of the bid submission. After thebids are received, engineering project alternative products or subcontractors will be considered by Customer based upon the specific engineering project being undertaken. All subcontractors' names and alternatives (if used) must be submitted as part of the bid along with proposed prices.

It is the intent of this RFP to ensure that the facilities of Customer shall, after the issuance of the contract, continue to receive utility services at the same or improved level of quality, deliverability and reliability as was available prior to the issuance of the contract.

PerformanceSpecificationUtilityServices(Electricity,Natural Gas, Water/Sewer) Electricity Electricity services will continue to be provided through wires, formers, meters, etc., as is currently provided prior to issuance of a contract. No greater risk of interruption except as agreed-to by the parties on a specific facility-by-facility basis will be considered in the delivery of the commodity (electricity); no change in quality of the commodity (electricity) volts, hertz, interruptions; etc., will be allowed.

Wheeling

NOTE: Nothing in this section will preclude the utilization of cogeneration, peak saving or other strategies as may be mutually agreed-to by Customer/Successful BIDDER in an energy services arrangement.

Natural Gas Natural gas will continue to be provided through pipes, meters, etc. as is currently provided prior to issuance of this contract. No greater risk of interruption except as agreed-to by the parties on a specific facility-by-facility bases than is currently allowed will be considered in the delivery of the commodity (natural gas), no change in the quality of the commodity (natural gas) will be allowed.

WaterISewer Water/Sewer will continue to be provided through pipesand meters as is currently provided prior to issuance of this contract. No change in the quality of the commodity (watedsewer) will be allowed. 4.

Response Specification The BIDDER(S) shall respond to all problems presented by designated Customer representatives upon notification. This would include, but not be limited to, delivery reliability to serving utility (electricity, natural gas, and watedsewer) receipt point.

5.

Energy Service Projects The selected BIDDER(S) will secure required funds to invest in energy services projects with pay-back terms applicable to for the proposed contract term and may include any of the following projects as applicable; upgrading, replacing and/or combining meters for the benefit of demand diversity, reduced customer service charges, real-time data for demand load shedding and hourlypricing,step rate benefits,peakshaving equipment, HVAC upgrades, lighting retrofits, motor replacement, capacitors for power factor corrections, compressed air renovations, backup generators, dual fuel arrangements for interruptible service, cogeneration orother energy reduction items as agreed-to by the parties.

IV. PROPOSAL SPECIFICATIONS

A.

General Agreement Terms 1.

Required Services Guaranteeslminimum annual savings stated as a percent of annual electric, natural gas and waterkewer costs adjusted annually. Savings can be a result of electricity, natural gas, waterlsewer and/or energy services savings or any combination of these items. Savings above guaranteed minimum annual savings percentage will be shared ona predetermined split between Customer and BIDDER. At the signing of the Agreement between Customer and BIDDER, Customer will receive 1/12 of the first guaranteed annual minimum savings with monthly payments to continue thereafter.

2.

Energy Services Structure a.

All savings will benet of investment required.

b.

Pay-back periods will not extend longer than the contractual agreement between the parties on a project specific basis.

c. Customer personnel will approve all energy service projects prior to their inception. d.

3.

Rationale for substantiating savings from energy projects will be determined during negotiations prior to Agreement completion.

Detailed Energy Services Analysis This type of analysis will require a considerable amount of selected time and resources, and a method of compensation must be considered. To this end, the following strategy will be utilized:

‘d.) l

Detailed analysis of facilities will be mutually agreed-to by Customer and selected BIDDER. The mutually agreed-to analyses will be performed by selected BIDDER at no cost to Customer, except as outlined in 3.b.2., following: If Customer agrees-to enter into an agreement with selected BIDDER, there will be no charge to Customer. If Customer does not enter into an agreement with the selectedBIDDER,andallanalyses criteria wassatisfied, Customer will reimburse selected BIDDER up to a “not-tooexceed” amount to be determined by both parties prior to the actual analyses taking place.

V. SPECIAL PROVISIONS A.

Type of Contracts Customer contemplates that this qualification process will result in the award of a “FixedDiscountNariable Energy Services Cost Contract(s).” Customer reserves the right to accept a proposal other than the lowest cost proposal submitted and to reject any and all proposals received, at its sole discretion.

B.

Proposed Contract(s) Term The resulting Contract(s) will be for a term not to exceed ten (10) years from date of initial signing by both parties (Customer/selected BIDDER).

C. References-Case

History Requirements

References and documentation of comparable project examples will be required by Customer to verify selected ability to provide the services required.

9

‘d.)

OF An award of a Contract will not be made until the necessary investigations have been made of proposals and other requirements in evaluation process. Award of any Contract will be made in a period of time as may be decided by Customer. Customer reserves the sole right to decline to award any Contract resulting from this evaluation process.

EXPLANATION OF FIGURE 6.3-RFP FOR ELECTRICITY, NATURAL GAS, WATER/SEWER AND ENGINEERING SERVICES NOTE: The provisions of this RFP that relate to commodity items (electricity, natural water/sewer) are structured in the same manner in Figures 6.1 and 6.2, and the explanations will not be repeated here. This RFP is the only one of the (3) detailed here that part of its structure-energy services. This type of RFP for both electricity, natural and water/sewer commodity, well engineering services, is the most frequently utilized structure in use at this time. The key to satisfactory agreement of this type is that the customer understands the energy services savings structure in detail. The most important aspects to understand, well the most confusing, are the energy services structure and savings calculations. Before energy service projects are instituted, the customer has to understand and approve the specific projects well their structure and impact potentially on employees, products, services provided, quality, length of pay-back and/or other customer specific criteria. Energyservicesagreementsstartwith evaluation of customer’s facilities for potential energy savings opportunities. Generally these evaluations start with simple walk-through analysis the customer’s facilities. If opportunities are found andagreed upon by both the customer well the potential energy services provider, at least to the viability of the opportunities, more detailed analysis is required. Generally there will be no cost to the customer for the simple walk-

through analysis. As potential energy savings opportunities are agreedto by both parties, much more detailed evaluations will be required. These evaluations, because of their complexity and time requirements, will incur cost to someone. The best way to structure the cost for the comprehensive evaluations is to attempt to structure an agreement similar to the following example that is fair to both the customer as well to the potential provider.

There will be mutual agreement between customer and potential provider on customer’s facilities to be evaluated and items to be considered. Agreement between the customer and the potential provider that there will be no out-of-pocket cost for evaluations detailed in item except follows in 4.B following. Evaluation expectations parameters and not-to-exceed costs will be mutually agreed-to by the customer and the potential provider prior to the actual evaluation being performed. 4.

If evaluation expectation and parameters are accomplished, then of the following (2) events will take place: A. If customer and potential provider enter into contractual arrangement for the performance of energy services, there will be no out-of-pocket cost to the customer. B. If customer does not enter into contractual arrangement with the potential provider, customer will pay all costsup to the notto-exceed maximum established in item previously. Although this is

very abbreviated explanation of the energy sav-

ings determinations procedure, it should provide enough insight to start the process. Once energy projects have been determined, the next item that needs to be addressed is the savings pay-back rationale. There is no specific procedure for verifying savings related to energy projects. Most companies have their own financial protocol for determining pay back periods, which with some modification can be used for energy projects. There are some things that are peculiar to energy projects that should be included in any savings analysis follows:

Are savings tied to current utility rates? If so, how are utility rate changes factored into actual vs. projected savings? How are changes in utility usage levels factored into projected savings levels? What if usage is increased? What if usage is reduced? What if utility usage characteristics change-first shift vs. second and third shifts, 5 days week vs. 6 or 7 days week? Are savings pay-back periods realistic when compared to projected facility life? 4.

happens if the facility is disposed of prior to the back period being completed?

5.

Are there provisions early buy-out options? If so, are they realistic insofar penalties are concerned?

pay-

What happens if projected savings do not materialize? Is the provider’s portion of the projected savings reduced proportionally to the reduction in savings? 7.

What happens if the energy usage reduction associated with project causes the applicable tariff rate to change to one that has higher incremental cost? Will monthly reports be available from the provider that documents actual savings both on monthly well on accumulated basis?

After reading of these questions relating to energy projects, it may seem there are more problems than benefits. This is only true if you do not ask the appropriate questions before entering into project. Energy projectsare neither good nor bad in and of themselves, their success is strictly function of preparation, planning, execution and follow-up. Any project has thesame opportunity and/or problem potential. Energy projects only seem somewhat more complicated if there is lack of knowledge to what they are and how they work.

Wheeling

HOW TO STRUCTURE AN ELECTRICITY COMMODITY PURCHASE (RETAIL WHEELING) CONTRACT Now that the various forms of RFPs have been analyzed, the next step in the process is contract with the selected provider. Following in Figure 6.4 is outlined typical contract that can be altered in three separate configurations. 1.

Option l-A-Electricity

Commodity Only-FixedPrice.

2.

Option l-B-Electricity

Commodity Only-Spot

3.

ElectricityMeter Point Cost Reduction in A. Option l-C-Meter

4.

Market Pricing.

variations:

Point Pricing with Fixed Discount.

B. Option l-D-Meter Shared Savings.

Point Pricing with Fixed Discountwith

C. Option l-E-Meter Fixed Discount.

Point Pricing with Shared Savings with No

Option l-F-Electricity

Commodity and Energy Services.

The Contract Process Figure 6.4 outlines the contract process and the items that contract should contain that will be fair to both parties buyer and seller). The outline shown here can be used guide in any retail wheeling transaction; and, its provisions should cause no problems to either the seller or buyer. The contract is simple and straightforward.

Wheelinx

128

Retail

Electricity

Figure 6.4-Retail Wheeling Sale Agreement

Retail Wheeling (Electricity) Sale Agreement

Between

Date

Contract No.

7

Wheeling Sale l

Cover Sheet Index Definitions 2. Purchase and Sale 3. Term of Agreement

4.A Option l - A : Electricity Commodity Only-Fixed Price 4.8 Option l-B: Electricity Commodity Only-Spot Market 4.C Option 1-C: Electricity Commodity Only-Meter Point Pricing-Fixed Discount 4.D Option l-D: Electricity Commodity Only-Meter Point

5

6

Pricing-Fixed Discount With Shared Savings 4.E Option l-E: Electricity Commodity Only-Meter Point Pricing-Shared Savings With No Fixed Discount 4.F Option l - F : Electricity, Natural Gas, Water/Sewer and Energy Services 5. Deliveries 6. Billing and Payment

8 9

9 9-10

7. Transmission Agreements 8. Title to Wheeled Electricity

11

9. Force Majeure

11

Notices 11. Miscellaneous Signatory Page Acknowledgments Exhibit “ A (Point of Usage) Exhibit “B” (Point of Delivery) Exhibit “ C Fee)

12 13 14 14 15 15 15

Retailed Wheeled Electricity Sale Agreement

THIS AGREEMENT, made and entered into this (year).of (month),

(day)

By and Between: With principle offices at:

[Hereinafter referred to as “BUYER” (Customer).] Who agree as follows: Definitions. 1.1 “Usage” will be in MWhor kwh.

1.2 “Expiration Date” refersto 8:OO a.m. on the date, whichis electricity (date) after delivered first byis SELLER to BUYER hereunder. 1.3

serving electric utility. 1.4 “Point of Usage” is the location at which BUYER will consume or otherwise use said wheeled electricity.

2.

Purchaseand

Sale.

2.1 SELLER agrees to sell to retail wheeling BUYER (Customer), and BUYER agrees to purchase from SELLER to the quantity of electricity used each month during the term of this Agreement. Said wheeled electricity will be provided to the BUYER as provided for in this Section. Delivery and acceptance shall be atPointof Delivery (as defined hereinafter.)

BUYER may use any volume for any specific month or months. SELLER agrees to nominate, balance, and pay any serving utilitypenaltiesrelating to electricitydeliveryerrorson during the term of this Agreement. 2.4 If in any month SELLER fails to tender an amount of wheeled may atis sole electricity equal to option elect to terminate this Agreement.

2.5 SELLER warrants that it has permanent title to wheeled electricity for the entire term of this Agreement hereunder and the right to sell same. 3.

Term of Agreement.

This Agreement shall become effective upon execution and shall remain in effect for an initial term of (months) after wheeled electricity is first delivered hereunder.

OPTION l - A ELECTRICITY COMMODITY ONLY-FIXED 4-A.

PRICE

Price of Wheeled Electricity-Fixed Price for Month Period. 4-A.lThe purchase price shall be per MW/kWh the initial delivered at Point of Delivery during month period. 4-A.2SELLER shall provide to BUYER a new purchase price at leastforty-five(45)daysprior to expiration of the initial month periodany of (or extended period). Any such new price shall be evidenced by a written amendment to this Agreement executed by both parties. Failure to agree upon a price shall permit either party to cancel this Agreementeffective at theend of thethencurrent month period.

4

Wheelin2

will (in addition to paying the prices established in 4-A.2 above) pay state and local sales, use and public utility taxes (associated with the sale contemplated by this Agreement) and all other costs associated with the transportation, handing, ownership, sale, distribution and use of wheeled electricity after acceptance by at Point of Title Transfer as set forth herein. shall have no responsibility to pay generation or other taxes, or to make royalty or other payments due out of generation revenue. The prices established in 4-A.l above, shall apply to all wheeled electricity delivered pursuant to this Agreement.

HOW TO ESTABLISH A FIXED PRICE FOR WHEELED ELECTRICITY Generally, the fixed price method is more costly than the spot market method because the supplier has to speculate on what the cost of wheeled electricity will be at some point in the future. Fixed price contracts are generally for or 12 months. The longer the term, the more uncertain is the cost of wheeled electricity. Unless for some reason, known wheeled electricity cost is required on month-by-month basis for some future period of time, it is less costly to utilize the spot market or monthly pricing scenario for wheeled electricity purchases. If fixed wheeled electricity price is required, then it is best to utilize some benchmark to at least make the process logical and not pure speculation. One of the most readily accessible electricity price indices is the ”D. J. Electricity Price Index” which is found daily in The Wall Street Journal in the Money and Investment Section. This electricity price data is generally located adjacent to the Futures price sheets. The electricity prices in this index represent actual weighted average prices for electricity traded atvarious delivery points in the power

pool regions. Prices are quoted in dollars per megawatt and are for Firm Delivery-on- and off-peak, and for Non-Firm Delivery (interruptible)on- and off- peak. Although not all delivery points on all power pools are currently listed in this index, retail wheeling becomes more widely available, more delivery points will be developed. Remember, if any index is utilized, it will only include the comcommon modity (electricity) at point of generation or delivered to transmission power pool point. Added to the costs shown in an index will be the agent’s fee, the transmission costs to the wheeling customer’s serving utility receipt point, and the serving utility’s specific costs including distribution, transformation and miscellaneous customer fees.

OPTION l - B ELECTRICITY COMMODITY ONLYSPOT MARKET PRICING 4-B. Price of Wheeled Electricity with Spot Market Pricing. 4-8.1 The purchase price shall be determined by the Spot Market Pricing Guide chosen, per MW/kWh in effect on date of nomination. 4-B.2

Not used with spot market pricing.

4-8.3 BUYER will (in addition to paying the prices established in 4-B.l above) pay all state and local sales, use and public utility taxes (associated with the sale contemplated by this Agreement); and, all other costs associated with the transportation, handling, ownership, sale, distribution and use of wheeled electricity after acceptance by BUYER at Point of Title Transfer as set forth herein. 4-B.4

BUYER shall have no responsibility to pay generation or other taxes or to make royalty or other payments due out of generation revenue.

4-8.5 Theprices established in4-8.1 above shall apply toall wheeled electricity delivered pursuant to this Agreement.

6

Retail

OPTION l - C Electricity Commodity Only METER POINT PRICING-FIXED DISCOUNT 4-C. Meter Point Pricing with Fixed Discount. 4-C. 1 Thefixeddiscountshallbecalculatedbasedupon total use point meter electricity cost at time of contract signing and will be adjusted monthly during the term of this contract to reflect any changes that would occur in the use point electricity meter cost if this fixed discount contract were not in effect. 4-C.2 Not used with Fixed Discount Pricing. 4-c.3 BUYER will (in addition to paying the prices established in 4-C.1 above) pay all state and local sales, use and public utility taxes (associated with the sale contemplated by this Agreement); and, all other costs associated with the transportation, handling, ownership, sale, distribution and use of wheeled electricity after acceptance by BUYER at Point of Title Transfer as set forth herein. 442.4 BUYER shall have no responsibility to pay generation or other taxes or to make royalty or other payments due out of generation revenue. applytoall 4-c.5 The prices established in4-Caboveshall wheeled electricity delivered pursuant to this Agreement

OPTION l - D Electricity Commodity Only METER POINT PRICINGFIXED DISCOUNT WITH SHARED SAVINGS 4-D

Meter Point Pricing, Fixed Discount with Shared Savings. 4-D.l The fixed discount and shared savings shall be calculated based upon total use point meter electricity cost

7

at time of contract signing, and will be adjusted monthly during the term of this contract to reflect any changes that would occur in point meter electricity cost if this fixed discount with shared savings contract were not in effect. 4-D.2BUYER shall have no responsibility to pay generation or other taxes or to make royalty or other payments due out of generation revenue. 4-D.3 The prices established in 4-D.1 above shall apply to all wheeled electricity delivered pursuant to this Agreement.

OPTION l - E Electricity Commodity Only METER POINT PRICINGSHARED SAVINGS WITH NO FIXED DISCOUNT 4-E. Meter Point Pricing, Shared Savings with No Fixed Discount. 4-E.l

The shared savings with no fixed discount shall be calculated based upon total use point meter electricity cost at time of contract signing and will be adjusted monthly during the term of this contract to reflect any changes that would occur in the use point meter electricity cost if this shared savings with no fixed discount contract were not in effect.

4-E.2 BUYER shall have no responsibility to pay generation or other taxes or to make royalty or other payments due out of generation revenue. 4-E.3. The prices established in 4-E.l above shall apply to all wheeled electricity delivered pursuant to this Agreement.

Page

Retail

136

Electricity

Wheeling

Sale

OPTION l-F Electricity, Natural Gas, WaterlSewer and Energy Services 4-F

Electricity, Natural Gas, WaterlSewer and Energy Services.

4-F.1 The electricity, natural gas, watertsewer and energy savings amounts and methodology shall be determined between the parties in a separate “Letter of Understanding.” Savings will be based upon the total electricity, natural gas, and waterkewer costs at use point meter location less any incrementally detailed taxes that are required to be paid by the BUYER. 4-F.2

5.

BUYER shall have no responsibility to pay generation or other taxes or to make royalty or other payments due out of generation revenue.

Deliveries. Deliveries shall commence by no later than fifteen (15) days after execution of this Agreement. If deliveries do not so commence, BUYER may terminate this Agreement.

6.

Billing and Payment. 6.1 Billings shall be rendered monthly. The monthly billing period (‘Billing Period” hereinafter) shall end on the last day of each calendar month. The first Billing Period will end on the last day of the month in which deliveries commence, whether or not a full month of deliveries is involved. BUYER will be required to accept and to pay each month for the delivered monthly volume, pursuant to Section 2 above, (prorated for billing periods of less than one month) and for all additional quantities of wheeled electricity delivered by mutual agreement of the parties pursuant to Item 2.3 above.

6.2 Monthly billings will be made based on the monthly quantities ordered by BUYER pursuant to Section 2 and corrections to billings (if any) will be reflected in the next billing rendered after the need for correction is discovered. Payment (or credit) for corrected monthly billings will be made or reflected in the next due payment. Corrections will not be made more than one (1) year after the original billing date. 6.3 BUYER shall pay all amounts due less any penalties incurred by incorrect order quantities which would result in serving utility company penalties, surcharges and/or supplying of tariff electricity, natural gas, waterkewer at a cost in excess of what could have been purchased under provisions of this contract.

Payments shall be made by electronic transfer, within five days after receipt of a billing from SELLER or by the fifteenth (15th) day following the month of delivery, whichever shall last occur. billing may be submitted in writing, by fax, or electronically. Payments will be made into an Escrow Account at (any bank selected by SELLER). BUYER agrees to execute any necessary instructions to the Escrow Bank (as directed by SELLER) so long as said instructions do not changeor enlarge any obligation of BUYER under this Agreement. 6.4 The interest equal to prime rate at the Escrow Bank plus two percent (2%) per annum shall be paid on all late payments. BUYER shall, in addition, be responsible for paying for collection costs and reasonable attorney fees incurred by SELLER in its efforts to collect delinquent payments. 6.5 If failure to pay shall continue for ten days after receipt of a billing by BUYER, SELLERmay, in addition to any other remedies available, suspend further deliveries to BUYER until all amounts due are paid.

6.6 It is contemplated that credit circumstances and requirements of the BUYER will be determined after execution of this Agreement. Item 6.6 is reserved for any mutually satisfactory provisions which may result from said determination. In the event no

Page 10

mutually satisfactory credit arrangements are made, SELLER may terminate this Agreement without further obligation hereunder.

Transmission Agreements. Point of Usage is identified in Exhibit “ A hereto. SELLER,as directed by BUYER, will negotiate and arrange all transportation and delivery contracts for transmission of electricity to the serving utility companies. BUYER recognizes it may be called upon to aid and assist SELLER in the negotiation of said transmission serving utility Agreements. BUYER recognizes that it will be a required signatory party to such transportation and/or delivery agreements and agrees to execute same. 8.

Title to Wheeled Electricity, Natural Gas, Water/Sewer. 8.1 Title to wheeled electricity, natural gas, waterkewer sold pursuant to this Agreement will pass to BUYER at Point of Delivery. Point of Delivery is identified in Exhibit “ B hereto, which is incorporated herein by reference.

9.

Force Majeure. 9.1 All obligations of the parties to this Agreement (except for the payment of money for wheeled electricity, natural gas, water/ sewer delivered) shall be suspended while and for so long as compliance is prevented in whole or in part by an act of God, strike, lockout, war, civil disturbance, explosion, breakage, accident, federal, state or local law, inability to secure materials or right-of-way, or permits or approvals or licenses, binding order of a Court or Governmental Agency, the failure, inability or refusal of any or serving utility to accept wheeled electricity, natural gas, watedsewer for delivery, or otherwise transport, the default of any part to Other Contracts (other than BUYER or SELLER), or by any other cause beyond the reasonable control of BUYER or SELLER.

The

9.2 No part of this Force Majeure clause shall be construed to provide for the discontinuance of wheeled electricity, natural gas, waterkewer delivery by the SELLER due to wheeled electricity, natural gas, waterhewer not being available at a favorable cost to the SELLER. The SELLER shall be obligated to providewheeledelectricity to the BUYER, subjecttoother provisions of the Agreement, at the agreed-to price. Ability of the SELLER to realize a profit on the transaction shall not be considered as a Force Majeure condition providing for suspension of the obligation of the SELLER to provide wheeled electricity, natural gas, waterhewer to the BUYER.

Any notice or other communication required or desired to be given to any party under this Agreement shall be in writing and shall be deemed given when: (a) delivered personally to thatparty,or (b) delivered by the United States mail, certified postage prepaid, return receipt requested, or delivered by overnight delivery,fax,or courierreturn receipt requested, addressedtothatparty at the address specified for that party earlier in this Agreement or at any other address hereafter designated by that party by written notice.

BUYER

SELLER Payments

Payments

Name

Name

Address

Address

Attention

Attention

Correspondences

Correspondences

140

Sale

11.l

If any provisions this Agreement is found to be invalid or unenforceable (other than the requirement concerning payment for wheeled electricity, natural gas, waterkewer delivered), it is intended that the balance of this Agreement remain in force and effect.

11.2

This Agreement is intended for the exclusive benefit of the parties to this Agreement and their respective heirs, successors, and assigns and may not be assigned without written approval of the non-assigning party. Nothing contained in this Agreement shall be construed as creating any rights or benefits in or for any third party. The obligation of BUYER(S), if more than one (l), shall be joint and several.

11.4

This document (including Exhibits and Addenda, if any) containstheentire Agreement between the parties and supersedes all entire Agreements between the parties and supersedes all prior or contemporaneous discussions, negotiations, representations, or agreements relating to the subject matter this Agreement. No change to this Agreement shall be made orbebinding on any party, unless made in writing and signed by each party of this Agreement.

11.5

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, there respective heirs, successors and assigns. This contract is expressly made subject to all present or future valid rules, orders or regulations of duly constituted governmental authorities having jurisdiction over the subject matter hereof. The failure, by either party hereto, to act in the event of default shall not constitute a waiver of the right to so act unless otherwise provided herein.

13

EXECUTED

SELLER

BY Title BUYER

BY Title ACKNOWLEDGMENTS SELLER

of

STATE Executed and acknowledged by and deed of Before the undersigned Notary Public this (year)

as the act (day)

(month)

Notary Public In and For County State My Commission Expires BUYER

STATE of

of

Executed and acknowledged by deed of dersigned Notary Public this

COUNTY

(day)

as the act and Before the un(month) (year)

Notary Public In and For County State My Commission Expires

EXHIBIT “A” POINT OF USAGE Company Name: Facility Address to Receive Wheeled Electricity:

Serving

Utility:

EXHIBIT “B” POINT OF DELIVERY (To be completed by SELLER)

Receiving TranIsmission Grid: Transmission Grid Point of Delivery: All interconnect points on: Transmission Grid

EXHIBIT “C” AGENT’S FEE (Used with Options 4-A and 4-B only.) fees per unit of wheeled electricity delivered under terms enumerated in this contract shall be as follows: Fee per unit delivered from generation point to serving utility receipt point will beper MW/kWh

Page 15

EXPLANATION

FIGURE 6.4 CONTRACT TERMS

Retail Wheeled Electricity Sale Agreement This Retail Wheeled Electricity SaleAgreement outlines the parties to the Agreement, the effective dates, and the addresses of both the SELLER (agent) and the BUYER (customer). Definitions 1.1 “Demand” This item identifies the measurement criteria to be used for delivery of the electricity. Demand is measured in kVA/kW. 1.2 “Usage” This item identifies the measurement of megawatt-hours/ kilowatt-hours and is function of connected electrical load, times hours in use. Usage is measured in MW/kWh.

1.3 ”Expiration Date” This determines the date upon which this contract becomes null and void. 1.4

”Serving Utility” This refers to the BUYERS (customer’s) serving utility that is delivering the wheeled electricity.

1.5 “Point of Usage” This identifies the end location of the actual consumption of the wheeled electricity. Purchase and SaleThe six paragraphs contained in this section constitute the Agreement between the SELLER and BUYER (customer) in its entirety. It outlines the conditions for acceptance of wheeled electricity and limits the BUYERS responsibility to the SELLER. 2.1

“Agreement setting forthquantities of wheeled electricity the SELLER is obligated to provide.” This does not obligate the BUYER to any specific volume purchases.

2.2

“Agreement setting forth the BUYERS optionsrelating to wheeled electricity volumes delivered.” The BUYER has the right to purchase all electricity used set forth in 2.1 above.

2.3

”Nomination balancing andpayment of penalties.” This section defines the responsibility of the SELLER regarding nomination, balancing, and payment of penalties in behalf of the customer. ”SELLER’S failure to tender (deliver) wheeled electricity.” This item allows the BUYER to terminate the contract if the SELLER cannot or does not deliver the quantity of wheeled electricity used. (Always have this provision in the contract.) “Titleto wheeled electricity.” Title to wheeled electricity is important since actually taking title is the only way to assure that the specified quantities are available when needed. NOTE: The descriptive words ”Permanent” and “For the Entire Term of This Agreement.” These are important since the term ”Title to Wheeled Electricity”may not extend to the entire length of the Agreement. Permanent title does not guarantee deliverability of wheeled electricity, but it does assure that interruption will not occur for other than actual physical supply or transmission constraints. (Always have this provision in the contract.)

Term of AgreementThis section defines the Agreement time boundaries both beginning and ending. 4.A Electricity CommodityOnly

Two pricing methods are provided: “Fixed Price” and ”Spot Market Price.” The Fixed Price Method is detailed following:

4A.1

“Wheeledelectricitypriceperspecified quantity(MW/ kwh).” This item sets the agreed-upon price for the wheeled electricity during the term of the Agreement.

*4A.2 ”Newpurchase price notification by SELLER to BUYER” (used only with Fixed Price Method). This item sets forth the details of negotiating of new purchase price at the end of the agreed-to period. NOTE: That either the SELLER or BUYER can cancel the contract if Agreement cannot be reached on new price. Do not sign contract if clause such the following is included-”SELLER fo BUYER What this says is that the current SELLER has the right to match any wheeled electricity prices you might receive. If SELLER cannot arrive at competitive price on their own, then you, in all probability, do not want them supplier. (Always have this provision in the contract.) 4A.3

”BUYER assumed taxes and other costs.” Since the SELLER is selling only wheeled electricity, it is not their responsibility to pay for any transmission handling or distribution charges after transfer of title to the BUYER occurs. (Title transfer is detailed in 8.1.)

4A.4”SELLER assumed taxes and other costs.” The SELLER assumes responsibility for all taxes and other costs so long they have title to the wheeled electricity. Simply put, the information in 4A.3 and 4A.4 means that whoever has title to the wheeled electricity assumes thecosts related to that wheeled electricity whether they are in the form of taxes or other expenses. *4A.5 ”Applicability of wheeled electricity priceestablishedin 4A.1.”

The price established in 4A.1 applies to all wheeled electricity delivered by the SELLER. This clause is important since its utilization means that the SELLER cannot change the wheeled electricity costs because of monthly usage variations. (Always have this provision in the contract.)

4B. Electricity CommodityOnly 4B.1

l-B-Spot “’Wheeled’ electricity price per month per specified quantity (MW/kWh).” This item names the agreed-upon spotprice for the wheeled electricity during the month of delivery. When the “spot pricing guide” method is utilized for wheeled electricity, the wheeled electricity cost will probably vary every month. There will probably be several spot pricing guides from which to choose there are currently in natural

This method of wheeled electricity purchasing is probably the lowest cost of electricity for the BUYER. The primary reason for this is that it is difficult for either the SELLER or the BUYER to determine accurately that the price of wheeled electricity will be or months in the future. This uncertainty can possibly lead to higher priced wheeled electricity. realize the lowest cost wheeled electricity figure on monthly basis, the spot price guide method is the best system to utilize. The only advantage to the fixed price method is that known wheeled electricity cost can be determined to some point into the future. If retail wheeling customer must know the wheeled electricity incremental costs for some future period of time, the fixed price method will have to be utilized. In any other situation, if true lowest cost electricity is the goal, the spot pricing guide method should be utilized. Not used with spot market pricing. ”BUYER assumed taxes and other costs.” Since the SELLER is selling only wheeled electricity, it is not

the SELLERS responsibility to pay any sales, local, utility or other taxes. Also, it is not their responsibility to pay for any transmission handling or distribution charges after transfer of title to the BUYER occurs. (Title transfer is detailed in 8.1) *4B.4”SELLER assumed taxes and other costs.” The monthly price established in 4B.1 applies to all wheeled electricity delivered by the SELLER including those taxes that are in the wheeled electricity commodity cost. *4B.5 “Applicability of wheeledelectricitypriceestablishedin 4B.1.“ The price established in 4B.1 applies to all wheeled electricity delivered by the SELLER. This clause is important since its utilization means that the SELLER cannot change the wheeled electricity costs because of monthly usage variations. (Always have this provision in the contract.) 4-C Electricity Commodity

Meter Point Pricing with Fixed Discount “Fixed Discount.” This option is different from either 4-A or 4-B in that it is addressing fixed discount from the entire use point meter cost not just the electricity commodity cost. This type of discount and 4-D, 4-E and 4-F following consider the entire electricity cost so that the commodity cost becomes simply part of the total overall cost reduction process. In options 4-D, 4-E and 4-F, provider is given more latitude in how to structure total electricity discount which has potential advantages for the provider. In these types of discounting arrangements, it is important to understand that the discount percentages could appear smaller than in options 4-A or 4-B, but actually result in larger savings bottom line. The reason for this is that in options 4-A and 4-B, only the electricity commodity cost is involved. But in options 4D and 4-E and to some extent in 4-F, the entire electricity cost at use meter point is included. The following example will help explain this difference.

Assume situation where the total meter point cost of electricity is $.OG/kWh and the electricity commodity portion of this total cost is $.02/kWh. In this scenario, would 10% discount on electricity commodity cost be better than discount on the entire meter point cost? (Electricity commodity cost-$.02/kWh savings)

$.002/kWh

(Total meter point cost of electricity-$.06/kWh $.0024/kWh savings) In this example, discount on the total meter point electricity cost-($.0024/kWh) was worth more than discount on the electricity commodity cost-($.002/kWh). When trying to determine total bottom line savings potential, always remember to consider the portion of the total to which discount would apply, part of the total cost (electricity commodity) or the total cost (meter point cost). The types of discounting illustrated in options and especially are those that are most frequently utilized in retail wheeling transactions. "Not used with this option." "Buyer will pay all state and local sales, use and public utility taxes, etc." Buyer will be required to pay any/all sales, local and/or utility taxes the same they do on their bundled tariff rate schedule through their serving utility. The discount established in applies to the total meter point electricity cost including those taxes that are in the wheeled electricity commodity cost portion of the total transaction. The price established in applies to all electricity delivered to Buyer's usage meter point by the Seller. This clause is important since its utilization means that the seller cannot

change the electricity costs because of monthly usage variations. (Always have this provision in the contract.)

4-D Electric Commodity OnlyMeter Point Pricing-Fixed Discount with Shared Savings 4D.1 ”Fixed/Shared Savings Discount.” This option is the same option 4-C except that it includes combination of fixed/shared savings components. In this arrangement there i s more potential for bottom line savings than in 4-C, but all of the savings potential is not guaranteed. As with most transactions, generally the more the risk (not all savings guaranteed) the more the opportunity for reward (shared savings potential). Neither 4-C or 4-D are best-they are just different in their structure. Which to utilize depends upon customer’s wants or needs-(a guaranteed known value, 4-C) or guaranteed minimum with the potential for increased savings, 4-D). 4-D.2 Not used with this option. 4-D.3 Buyer will be required to pay any/all sales, local and/or utility taxes the same they do on their bundled tariff rate schedule through their serving utility. 4-D.4 The discount established in 4-D.l applies to the total meter point electricity cost including those taxes that are in the wheeled electricity commodity cost portion of the total transaction. 4-D.5 The price established in 4-D.l applies to all electricity delivered to Buyer‘s usage meter point by the Seller. This clause is important since its utilization means that electricity costs cannot be changed because of monthly usage variations. (Always have this provision in the contract.)

4-E Electricity Commodity OnlyMeter Point Pricing-Shared Savings with 4-E.l ”Shared Savings Discount.”

Fixed Discount

This option is the same Option 4-C except there are no fixed or guaranteed savings associated with it. Again, if more risk is acceptable,this option has the potential to result in greater bottom line savings than either Option 4-A, 4-B, 4C or 4-D. 4-E.2 Not used with this option. 4-E.3Buyer will be required to pay any/all sales, local and/or utility taxes the same they do on their bundled tariff rate schedule through their saving utility. 4-E.4 The discount established in 4-E.l applies to the total meter point electricity cost including those taxes that are in the wheeled electricity commodity cost portion of the total transaction. 4-E.5 The price established 4-E.l applies to all electricity delivered to customer’s usage meter point by the seller. This clause is important since its utilization means that they cannot change the electricity charges because of monthly usage variations. (Always have this provision in the contract.) Electricity, Natural Gas, WatedSewer and Energy Services

l-F 4-F.l ”Electricity, Natural Water/Sewerand Energy Services.” This option is probably utilized more than any of the other options because it allows greater flexibility in where savings can be generated. In this type of arrangement, the customer and provider agree together those electricity, natural water/sewer and energy services projects that are most beneficial to both of them. Also, this option generally results in the largest bottom line savings for the customer. Typically savings in the range of 5% to of the customer’s total electricity, natural and water/sewer costs will be realized with the customer not investing any capital up-front.

The contractual agreement for this type of arrangement is highly individualized depending upon both the customer’s, well the provider’s needs. There is no ”standard” contract language for these types of arrangements, but there are some generally items that should be considered by the customer they develop the contract guidelines. A. Pay-back periods for energy service projects and methods to quantify savings. B. Guideline qualifications for energy service projects. C. Rationalization criteria for energy service projects. D. Maximumcontracttermbetweentheparties (6-10 years typically). Contract language with respectto: Increased/decreased electricity, natural and water/sewer usages. 2. Added/deleted customer facilities. 3. Change in electricity, natural and water/sewer usage patterns. 4. Individual customer facility input into approving/ rejecting energy service projects. Contracts of this type are only successful if both parties want to establish long-term partnership with each other. No matter what contract does or does not address, it is no better than the parties good faith in wanting to have honest arrangement that is beneficial to each of them. 4-F.2 Not used 4-F.3 Not used 4-F.4 Not used 4-E5 Not used

with with with with

this this this this

option. option. option. option.

This section outlines the responsibilities for beginning initial deliveries and the BUYERS remedies if delivery does not begin outlined.

6.1

”Billing periods.”

6.2

“6.3

6.6

This item sets forth the billing periods, in this case and normally-monthly. “Monthly billing amount computation.” This item details what shall constitute monthly billing amount. ”Payments of amounts due by BUYER. This item outlines the time parameters agreed-to by both the SELLER and BUYER for payment of monthly billings by the SELLER. Also, identified are those items that the BUYER may deduct from the payment due, caused by the SELLERS incorrect nomination procedures. (Always have this provision in its contract.) “Delinquent payment charges.” The interest penalty amount and the SELLER’S legal recourse in the case of delinquent payments by theBUYER are outlined here. ”Suspension of delivery for delinquent payments.” Detailed here is the SELLERS recourse in the event of nonpayment in excess of specified period of time by the BUYER. ”Determination of credit worthiness ofBUYER.” This item covers any special provisions that might be necessitated due to an unusual credit circumstance of BUYER. Before any provisions can be attached to this item, they must be mutually agreeable to by both parties.

This section covers where the BUYER wants the wheeled electricity delivered and outlines the BUYER’S responsibility in assisting the SELLER in obtaining the transmission Agreement. *8

*8.1

“When title passes to BUYER.” This item defines when title passes to the BUYER. Also, when the BUYER becomes responsible for taxes and other costs (when title passes from SELLER to BUYER). Title passes at 3 distinct locations-(l) electricity generation meter point, natural wellhead point, (2) serving utility receipt meter point, and BUYER’S electricity usage meter point.

Generally, the best place for title to pass from the BUYER’S viewpoint is at the electricity/natural serving utility receipt point. This is because state sales tax normally is not charged on the portion of the transaction from the electricity generation to the serving utility receipt meter point if title passes to the BUYER at the electricity generation location. For BUYERS in states that levy sales tax on electricity purchases, title pass point is an important consideration. (Always have this provision in the contract.) *9.

Force Majeure(Superior or Irresistible Force)9.1 “Responsibility limits.” This item limits the responsibility of both parties for circumstances over which neither of them have control-acts of God, war, accident, etc. If the SELLER cannot deliver or the BUYER cannot accept wheeled electricity due to one of the reasons outlined in this item, neither of them have legal responsibility to do so. “Non-Force Majeure items.” This item limits the SELLERS ability to not deliver wheeled electricity due simply to the SELLERS not being able to obtain wheeled electricity at cost which will allow profit to be realized. Force Majeure applies only to circumstances over which neither party has any control, detailed in 9.1. (Always have this provision in the contract.)

Notices by or to Either Seller BuyerThis section outlines the acceptable methods and forms of communication between the SELLER and BUYER. The information would only be used if either party wanted to amend or change provisions in the contract during its term. Specific addresses and names of individuals are designated in the section to be used correspondence by either party. 10.

11. Miscellaneous Provisions11.1 “Unenforceability of contract provisions.” If any section of the contract is or becomes legally invalid or unenforceable, it does not negate the remainder of the Agreement. This is common contract clause and protects both parties against unenforceable conditions.

“Benefit of this contract.” This details the intended beneficiaries of the Agreement “Joint and several obligations of the BUYER(S).” All BUYERS who are party to the Agreement are equally liable. For example, if more than one company were to purchase and use wheeled electricity under this Agreement, either would be liable in the event of non-performance (nonpayment) by the other. ”Entirety of Agreement.” This item states that the Agreement signed by the SELLER and BUYER is complete written with unattached side clauses or agreements. ”Binding of parties to the Agreement.” This item protects both SELLER and BUYER in the event there is sold absorbed by another company. If this happens, then the successor company is obligated by the terms of the Agreement to the same extent were the original party. ”Contract validity clause.” This states that the Agreement was made subject to current rules by governmental bodies having jurisdiction over agreements of this type. If governmental body would enact legislation that changed or restricted provisions in the Agreement, then the legislated changes would supersede the Agreement provisions. “Failure to act clause.” If either party would violate provisions of the Agreement and the other party fails to act, that failure will not constitute waiver of the right to do so. Acknowledgments PageBoth parties are identified by company and name and the signatures of the responsible parties are notarized in the SELLER’S and BUYERS individual locations. When both parties properly sign this page and notarized it, the Agreement becomes binding upon both parties.

Exhibit "A"This exhibit identifies the point-of-use of the wheeled electricity contracted for and the serving utility who will deliver the wheeled electricity to the BUYER. Exhibit "B"This exhibit identifies the points-of-delivery by the SELLER to the transporting transmission grid. It also identifies the receiving transmission grid that would deliver the wheeled electricity to the serving utility. *Exhibit "C"This exhibit requires the SELLER to list their fees per unit of electricity delivered to the BUYER. This is an important exhibit to the BUYER since the SELLERS charge effects the overall cost of the wheeled electricity to BUYER. Many wheeled electricity SELLERS do not like this provision but should provide the required information if the BUYER is insistent. (Always have this exhibit part of the contract.)

NOTE: Items indicated with an asterisk are critical to the retail wheeled electricity BUYER. Always have these items in any contract that is utilized for retail wheeling of electricity. HOW TO BE ASSUREDTHATTHECONTRACTWILLSERVETHE NEEDS OF THE WHEELED ELECTRICITY BUYER

Questions to ask a potential wheeled electricity seller and points to consider prior to the signing of a contract. Is title to the wheeled electricity for the entire term of the agreement? How many electricity generation entry points to the interstate transmission grid are available? 3.

Has non-delivery of wheeled electricity by this seller ever occurred? If so, why?

4.

Always have seller quote not only the wheeled electricity cost but also the total point-of-use cost. This point-of-use (commonly called "customer meter point") cost is what will be paid in total for the

wheeled electricity delivered. It includes-(l) electricity, (2) interstate transmission grid transportation and line loss, and (3) serving utility intrastate distribution grid transportation and line loss. This is the buyer use point meter cost and will be the one to use in determining savings. Always obtain quotes and terms from more than one seller and compare them to see if one is more favorable than the other.

Do not be afraid to negotiate on agreement terms wheeled electricity cost since most sellers, if not all are probably willing to do this. After doing the other six steps in this questioning exercise, do what is probably the most important step-find seller you will feel comfortable working with and one that will sincerely wants your business. If the right seller is selected, they will be able to provide much insight and assistance in all steps of this wheeled electricity process.


Cbupter

Where Do We Go Here? Now that we have discussed retail wheeling of electricity and how to structure agreements for wheeled electricity-what do we do next? The next thing to consider is how to structure agreement with provider that is fair for both the provider well the customer. We have shown in this publication what typical RFDs and contracts look like, but now we need to address underlying needs and strategies that will shape the actual agreements themselves. We have to know what we are expecting prior to the actual signing of any contract. In the following items we will learn what needs to be considered prior to the actual signing of any contractual agreement with any provider. These items are more related to customer characteristics than toelectricity characteristics. WHAT LENGTH OF TIME AM I WILLING TO AGREE-TO TO PARTNER WITH A PROVIDER.

Commodity only agreements are generally for time period from 1year to more than 5 years, depending upon the customer’s tolerance for risk. There is trade-off between agreement length and cost protection. Generally the longer the length of the agreement, the greater is the commodity cost assuredness. The downside is that long-term cost assuredness doesnot necessarily translate into long-term cost minimization. Many things can change in both electricity commodity pricing well customer needs and/or usage characteristics. Most customers will tend to negotiate 1- to 2-year agreement when they initially start retail wheeling of electricity, especially in electricity commodity only types of arrangements.

Electricity Commodity and Engineering Services Agreements Electricity commodity and engineering services agreements will require customer commitments that are longer than for electricity commodity only. Because of engineering services pay-back periods, agreements for electricity commodity and engineering services will typically years. be for time period from 5 to Since electricity commodity and engineering services do extend for many years, make certain that you will feelcomfortable with the selected provider over period of years. Also make certain, to the extent possible, that the contract language adequately addresses any questions that could effect the long-term benefits of the agreement.

DETERMINE, WITHIN LIMITS, THE COST REDUCTION THAT SHOULD RESULT FROM THE SPECIFIC TYPE OF CONTRACT THAT IS BEING UTILIZED. Electricity Commodity Only Agreements Contracts of this type will generally result in cost reductions of between 2% to 4% of the total customer meter point electricity cost, excluding taxes. Electricity Commodity and Engineering Services Agreement years in length will generally Contracts for periods from 5 to result in cost reductions of from 6% to 10% of the total customer meter point electricity cost, excluding taxes. Actual cost reductions can vary greatly depending upon the energy efficiency of the customer’s facilities prior to the inception of the contract. It is not unusual, but not typical, for quantifiable cost reductions in electricity commodity and energy service arrangements to reach to of the total customer meter point electricity cost, excluding taxes.

RECOGNIZE THAT YOU, AS THE CUSTOMER, HAVE THE ULTIMATE RESPONSIBILITY FOR THE VALUE OF ANY CUSTOMER/PROVIDER AGREEMENT. This statement may seem unfair especially since it will probably seem that everyone more insight and information about the agree-

ment process and content than do you the customer. Whether this is true or not, the fact remains that generally the customer will get what they ask or negotiate for. No more and no less! Following are the steps that should be considered by any customer that expects to have satisfactory relationship with provider over time:

Recognize that you the customer must set the agenda for any potential provider meetings. Potential providers will be willing to discuss many options and strategies but the customer will be the primary mover in the process. It will also be the customer’s responsibility to document, schedule and follow-up on the process. It is best to have definite method of action planned before ever entering into dialogue with any potential provider. A structure follows in Figure 7.1 could be utilized if appropriate. The total time that typically elapses between Items l.A. and 3.C. is from 9 to months. While this may seem to be an inordinately long period of time, there are many things to determine and people to be involved. Since the time period is lengthy, it is critical to the success of the process to keep all of the involved parties updated on at least monthly basis. this responsibility falls to the customer, not the follows in Figure 7.2. provider. A time period might be A successful arrangement between customer and provider whether for an Electricity Commodity Only Contract or for Electricity Commodity and Engineering Services Contract is to great extent dependent upon the customer’s input to the process. To assist customer they try to figure out what to do to make the process valuable possible, the list following in Figure 7.3 is given. This list is intended to serve general guide to things that any customer should at least consider before doing anything with potential provider of wheeled electricity commodity/services. This list will not answer all questions, but it can raise the right questions that might otherwise have been overlooked. After reading this chapter, you may feel that the effort required to achieve cost reductions through retail wheeling processes is more trouble than it is worth.If this is your feeling, you are not alone, but with any new endeavor, there is uncertainty and misunderstanding initially. The thing to remember is that time passes, there will be more and more requirements for individual participation in electricity procure-

CUSTOMER RESPONSIBILITIES

POTENTIAL PROVIDER RESPONSIBILITIES

1. RFPProcess

A. Develop RFP scope and language. B. Select list of potential providers to contact. C. Send out RFP materials and pre-RFP meeting data. D. Hold pre-RFP meeting. E. Determine RFP response period with input from potential providers. F. Evaluate RFP proposals. G. Contact and discuss RFP specifics with selected RFP respondents. H. Select specific RFP respondent to work with.

A.NIA B.NIA C. Receivelevaluate materials. D. Mandatory attendance. E. Work with customer to determine response period. F. N/A G. Work with customer to arrive at a satisfactory RFP scope of work. H. Develop scope of work and begin process.

2. Post RFPlContract Process

A. Set goals and time parameters B. Establish periodic follow-up meetings and progress reports. C. Complete post-RFP work prior to the negotiation of a contract with the preferred provider.

A. Work with customer to develop satisfactory goals/time parameters. B.Be responsive to customer needs. C. Work with customer to arrive at a mutually agreeable process that can be quantified in a contract.

Contract/Post-Contract Process A. Evaluatehign provider contract. B. Begin work as defined in the contract. C. On a periodic basis, hold progress meetings to evaluate progress.

A. Sign contract. B. Begin work as defined in the contract. C.Be responsive to and active in periodic progress meetings.

DevelopRFPScopeandLanguage 1-3 Months

Select List of Potential Providers 1 Month

Send Out RFP Materials and 1-2 Months

Pre-RFP Meeting

RFP Response Period 1-2 Months

Evaluate RFP Responses and Select Provider 1-2 Months

Post RFPIContract Process 2-4 Months

Begin Work as Defined in the Contract 2-4 Months

CUSTOMER CHECKLIST 1. Can you adequately describe what you want in written form? 2. Do you have a project time period defined?

3.

your immediate supervisor aware of and in agreement with the goals and requirements of the project?

4. Is top management of your company in agreement with and supportive of the project-CEO, CFO, Legal, etc.? 5. Do the appropriate support people in your company realize what will be expected of them in this project? 6. When a potential provider presents a cost reduction strategy, how will you determine if it is realistic?

7. Is “cheapest” least expensive in the long run? How do you decide this? 8. How long is the proposed potential period realistic in terms of cost reductions?

contract period? Is the

9. When do actual quantifiable savings start? If savings do not start at

contract signing, why not; and,

can the start date be changed?

10. Is what the potential provider receives in the contract realistic in terms of what you receive? Can you measure this? If not, why not?

11. What happens if your utility usage changes-Up? Days used? Characteristics of use?

Down? Hours used?

12. Are cost reduction guarantees in the contract? If so, can you quantify them? Do your financial people agree with the quantification rationale? 13. Are there early contract opt-outs and if so, are they fair to both parties?

14. What happens if guaranteed savings are not achieved? Who makes up the deficit? Is contract cancelable if guaranteed savings do not materialize? 15. Have your company financial and legal entities been involved in all aspects of the RFP contract process? Do they understand its financial and legal implications? 16. Have all people that will be involved/affected been included during the entire RFP/contract process so they buy into the process? 17. Have you developed an accurate, easily understood tracking process to keep everyone updated on how the project cost reductions are progressing?

18. Are you,or is someone in your company, responsible on an ongoing basis for coordinating and substantiating cost reductions as they occur? 19. Is this project, coordination, and follow-up consuming an inordinate amount of your time? If so, something wrong with the process.

ment and pricing. There may be time, not to distant in the future, where an electricity customer will have choice except to select their own provider or have some third party do it for them. If you learn the process correctly now, you will be much better prepared for the deregulated future that awaits all electricity users, even residential customers.

ENERGY /ENGINEERING SERVICES COMPANIES (ESCOS) We have detailed the ways to do agreements with providers, now we need to find companies that may have an interest in partnering with us. Who are these entities? Generally the parties that will have interest in retail wheeling of electricity and/or engineering services partnerships will be that type of company called an ESCO (Energy/Engineering Service Company).

These companies may be unregulated affiliates of for-profit electric utilities or they may be independent non-utility affiliated companies. These companies sometimes are regional in their scope of activity and sometimes are national in scope. The first place to investigate is your serving electric utility. Find out whether they have an unregulated services group (ESCO) that might have an interest in partnering with you in your effort to reduce your electricity costs. Many times these (ESCO) groups will have real interest in working with you to reduce your electricity well general energy costs. Even if your local utility (ESCO) has an interest in working with you, it is good to investigate more than one supplier. To help you in this, Figure 7.4 is following with the names and telephone numbers of 70 different (ESCO) type companies. The companies in this list are both utility and non-utility affiliated. There are large and small companies represented. There are no "best" or "worst" companies in this list, but these are ones that may be better for specific purpose, location or financial consideration. I do not purport that this is complete or comprehensive list or isevery "good" company listed. This list is simply included place to start your investigation for potential providers. Most of these companies provide the following services: Construction management. Electricity commodity marketing. 3.

Design engineering.

4.

Shared savings/performance arrangements. New construction services.

6.

Retrofit services. Project financing.

Custom Energy LLC Aguila Energy

-DAlliant Industrial Services DTE Energy AllEnergy Marketing Co., LLG DukeSolutions

BGE Energy Project

Service Edison Source

Bosek, Gibson

Association

EMCOR Energy Services Energis Resources

-C-

Cenerprise Inc.

The Energy Group

Central Hudson Enterprises

Energy Masters Int.

CESNVay

Energy Pacific

CMS Marketing, Service

Trading

Energy Systems Solutions

Coneco Corp.

Energy USA

Connectiv

Energy Vision

Constellation Energy Source

Engage Energy

ER1 Services

-J-

Johnson Controls EUA Cogenex Corporation

Evantage

-KKapadia Energy Services

Exelon Energy Services Keyspan Energy Management

-FFPL Energy Services Inc.

-LLandis

Staefa

-GGPU Advanced Resources Madison Gas

HL&P Energy Services

Honeywell, Inc.

Electric

Montana Power Trading

Marketing

-NNESl Solutions, Inc.

Ida-West Energy Company

NORESCO

lllinova Energy Partners

IllurnElex Corporation

Onsite SYCOM Enterprises

SCANA Energy Marketing Palisdes Energy Services Strategic Energy Ltd. Pepco Services Inc. Syska

Hennessy CEM

PG&E Energy Services System Solutions of GA

Plum Street Enterprises Unicorn Energy Services PNM Energy Partners -V-

ProSolutions

Viron Energy Services

-QQST

Westar

Quad Three Group, Inc.

Quality Energy Services

WPS

-R/S-

-WIZ-

Siebe Environmental Controls

Xenergy


Appendix A

This listing includes United States Federal and State Regulatory agencies. This information was obtained from the National Association of Regulatory Utility Commissioners (NARUC), 1101 Vermont Avenue, Suite 200, Washington DC 20005. Mailing Address: PO Box 684, Washington DC 20044-0684. Telephone: 202-898-2200; Fax: 202-898-2213; http:/ www.naruc.org. REGULATORY AGENCIES

888 First Street, NE Washington, DC20426 Tel.202-208-1088 Fax. 202-208-2106 http://www.ferc.fed.us 11555 Rockville Pike Rockville, MD 20852 Tel.301-415-7000 Fax. 301-415-1672 http://www.nrc.gov/

1400 Independence Avenue SW Washington, 20250 Tel.202-720-9540 Fax 202-720-1725 http://www.rus.usda.gov

1000 Independence Avenue, SW Washington DC 20585 Tel.202-586-6210 Fax. 202-586-8134, 202-586-4403 http://www.doe.gov

100 North Union Street Montgomery, AL 36104 Tel. 334-242-5218, http://www.psc.state.al.us

1016 West Sixth Avenue Anchorage, AK 99501 Tel. 907-276-6222, http://www.state.ak.us/apuc/

1200 West Washington Street Phoenix, AZ 85007 Tel. 602-542-2237, http:/ /www.cc.state.az.us

1000 Center Building Little Rock, AR 72201 Tel. 501-682-2051, http://www.state.ar.us/psc

A

505 Ness Avenue San Francisco, CA 94102 Tel. 415-703-2782, http:/ /www.cpuc.ca.gov

1516 9th Street Sacramento, CA 95814 Tel. 916-654-4420, http://www.energy.ca.gov

1580 Logan Street Denver, CO 80203 Tel. 303-894-2000, http:/ /www.puc.state.co.us

10 Franklin Square New Britain, CT 06051 Tel. 860-827-1553,

861 Silver Lake Boulevard Dover, DE 19904 Tel.302-739-4247 http://www.state.de.us/delpsc

717 14th Street, NW Washington, DC 20005 Tel.202-626-5100

2540 Shumard Oak Boulevard Tallahassee, FL 32399 850-413-6344, http:/ /www2.scri.net/psc

47 Trinity Avenue Atlanta, GA 30334 Tel. 404-656-4501, http://www.psc.state.ga.us

465 South King Street Honolulu, HI 96813 Tel.808-586-2020

472 West Washington Street Boise, ID 83702 Tel. 208-334-0300, http:/ /www.puc.state.id.us

160 North LaSalle Street Chicago, IL 60601 Tel. 312-814-2850, http://www.ice.state.il.us

302 West Washington Street Indianapolis, IN 46204 http://www.state.in.us/iurc/index.html

350 Maple Street Des Moines, IA 50319 Tel. 515-281-5979, http:/ /www.state.ia.us/iub

1500 SW Arrowhead Road Topeka, KS 66604 Tel. 785-271-3100, http://www.kcc.state.ks.us

730 Schenkel Lane Frankfort, KY 40602 Tel. 502-564-3940, http://www.state.ky.us/agencies/psc.pschome

One American Place Baton Rouge, LA 70825 Tel.225-342-4404

http://www.state.me.us/mpuc/

MD http://www.psc.state.md.us/psc/

http://www.magnet.state.ma.us/dpu/

MI http://ermisweb.cis.state.mi.us/mpsc

MN Tel.

19th

MS http://www.mslawyer.com/mpsc/mpsc.html.

Truman State Office Building Jefferson City, MO 65102 Tel. 572-751-3234, http://www.ecodeve.state.mo.us/psc/

1701 Prospect Avenue Helena, MT 59620 Tel. 406-444-7618, http:/ /www.psc.mt.gov

1200 N Street NE 68509 Tel. 402-471-3101 http://www.nol.org/home/npsc

1150 East William Street Carson City, NV 89701 Tel.775-687-6007

Suncook Concord, NH 03301, Tel.603-271-2442

http://www.state.nh.us/puc/puc.html

Two Gateway Center Newark, NJ 07102 Tel. 972-648-2026, http:/ /www.njin.net/njbpu

PO Box 1269 Santa Fe, NM 87504 Tel. 505-827-4500

A

3 Empire State Plaza Albany, NY 12223 Tel. 518-474-7080, http://www.dps.state.ny.us.

430 North Salisbury Street Raleigh, 27603 Tel. 919-733-4249, http://www.ncuc.commerce.state.nc.us/.

600 East Boulevard Bismarck, 58505 Tel.701-328-2400, http://www. pc6,psc.state.nd.us/

180 East Broad Street Columbus, OH 43215 Tel. 614-466-3016, http://www. puc.ohio.gov/

Jim Thorpe Office Building Oklahoma City, 73152 Tel. 405-521-2211, http://www.occ.state.ok.us

550 Capitol Street, NE Salem, 97310 Tel. 503-378-6611, http://www.puc.state.or.us/

PO Box 3265 Harrisburg, PA 17105 Tel.717-783-1740, http: /www.state.pa.us/PA-Exec/Public-Utility, Puc.paonline.com

177

Wheelina

Rhode Island Public Utilities Commission Dl00 Orange Street Providence, RI 02903 Tel. 401-222-3500, http:/ /www.ripuc.org. South Carolina Public Service Commission 101 Executive Center Drive Columbia, SC29210 Tel.803-896-5100 South Dakota Public Utilities Commission 500 East Capitol Pierre, SD 57501 Tel.605-773-3201, http://www.state.sd.us/state/executive/puc.htm. Tennessee Regulatory Authority 460 James Robertson Parkway Nashville, TN 37243 Tel. 615-741-2904, http://www.state.tn.us/tra Tennessee Valley Authority 400 West Summit Hill Drive Knoxville, TN 37902 Tel. 423-751-0011, http://www.tva.gov. Texas Public Utility Commission 1701 North Congress Avenue Austin, TX 78701 Tel. 512-936-7000, http://www.puc.state.tx.us Texas Railroad Commission 1701 North Congress Avenue Austin, TX 78711 Tel. 512-463-7288, http://www.rrc.state.tx.us. Utah Public Service Commission 160 East 300 South Salt Lake City, UT 84145 Tel. 801-530-6716, http:/ /www.psc.state.ut.us

Appendix A

112 State Street Montpelier, VT 05620 Tel. 802-828-2358, http://www.state.vt.us/psb

Tyler Building kchmond, VA 23218 Tel. 804-371-9967, http://www.state,va.us/scc

Chandler Plaza Building Olympia, WA 98504 Tel. 360-664-1160, http://www. wutc.wa.gov

201 Brooks Street Charleston, WV25323 Tel. 304-340-0300

610 North Whitney Way Madison, W1 53705 Tel. 608-266-5481, http://www.psc.state.wi.us

2515 Warren Avenue Cheyenne, WY 82002 Tel. 307-777-7427, http://www.psc.state.wy.us

179


B

Listing o f For-Profit Utilities Listed in this section are the for-profit electric utilities or investor owned utilities (IOU’s). These electric utilities, listed state-by-state, generate in excess 75% of all electricityused in the United States. Included in this listing are the utility companies’ telephone numbers and the web site numbers, when available.

ALABAMA Alabama Power Company Tel.205-247-1000 http://www.alapower.com

ALASKA Alaska Electric Light Power Company Tel. 907-486-2222 http://www.olympus.net Alaska Power Telephone Company Tel.360-385-1853 http://www.olympus.net Aniak Light Power Company Tel. 907-675-4334

181

787

Bethel Utilities Corporation Tel.907-562-2500 Haines Light Power Company, Inc. Tel.907-766-2331 http://www.olympus.net Hughes Power Light Company Tel. 907-889-2239 McGrath Light Tel.907-524-3009

Power Company

Northway Power Light Company Tel.360-385-1853 http: www.olympus.net Pelican Utility Company Tel. 907-735-2204

ARIZONA Arizona Public Service Company Tel.602-250-1000 http: www.apsc.com Citizens Utilities Company (Arizona Division) http://www.czn.net Morenci Water Tel.520-865-368

Electric Company

Tucson Electric Power Company Tel.520-571-4000 http://www.tucsonelectric.com

B

Tel. 501-377-4000 http:/ /www.entergy.com

Tel. 501-954-5000 http://www.entergy.com

Tel. 405-553-3000 http://www.oge.com

Tel.318-673-3000 http://www.csw.com/ele/swep/swep.html

Tel. 415-973-7000 http: www.pge.com

Tel.503-464-5000 http://www.pacificorp.com

Tel.619-696-2000 http://www.sdge.com

Tel.626-302-1212 http://www.sce.com

183


284

COLORADO Public Service Company Colorado Tel.303-571-7511 http://www.ncenergies.com UtiliCorp United, Inc. Tel.816-421-6600 http:/ /www.utilicorp.com

CONNECTICUT Citizens Utilities Company Tel.203-614-5600 http: www.czn.net Connecticut Light Power Company Tel. 860-665-5000 http://www.nu.com United Illuminating Company Tel.203-499-2000 http://www.uinet.com

DELAWARE Delmarva Power Light Company Tel.302-429-3011 http:/ /www.delmarva.com

DISTRICT OF COLUMBIA Potomac Electric Power Company Tel.202-872-2000 http: www.pepco.com

B

185

FLORIDA Florida Power Light Company Tel. 561-694-4000 http://www.fpl.com Florida Power Corporation Tel.816-866-5151 http://www.fpc.com Florida Public Utilities Company Tel. 561-832-2461 Gulf Power Company Tel.850-444-6111 http://www.gulfpower.com Tampa Electric Company Tel. 813-228-4111 http://www.teconet.com

GEORGIA Georgia Power Company Tel. 404-506-6526 http:/ /www.georgiapowerco.com Savannah Electric Power Company Tel. 912-644-7171 http://www,southernco.com/sec.htm

HAWAII Citizens Utilities Company (Kauai Electric) Tel. 808-246-4300 http://www.czn.net

Hawaii Electric Light Company Tel.808-935-1171 http://www.hei.com/heco/heco.html Hawaiian Electric Company, Inc. Tel. 808-543-7771 http://www.hei.com/heco/heco.html Maui Electric Company, Ltd. Tel. 808-871-8461

http://www.hei.com/heco/heco.html

IDAHO Avista Corporation Tel. 509-489-0500 http://www.avistacorp.com Idaho Power Company Tel.208-388-2200 http://www.idahopower.com PacificCorp Tel. 503-464-5000 http://www.pacificorp.com

ILLINOIS AmerenCIPS Tel.217-523-3600 http://www.ameren.com AmerenUE Tel.314-621-3222 http:/ /www.ameren.com

B

187

Central Illinois Light Company Tel.309-672-5271 http://www.cilco.com Commonwealth Edison Company, IL Tel. 312-394-4321 http:/ /www.ucm.com Illinois Power Company Tel.217-424-6600 http://www.illinova.com/illpower/illpw.htm Interstate Power Company Tel.319-582-5421 http: /www.interstate-power.com MidAmerican Energy Company Tel. 515-281-4300 http://www.midamerican.com Mount Carmel Public Utility Company Tel.618-262-5151

INDIANA Indiana Michigan Power Company Tel.219-425-2111 http://www.aep.com Indianapolis Power Light Company Tel. 317-261-8261 http://www.ipalco.com Northern Indiana Public Tel. 219-853-5200 http://www.nipsco.com

Retail

188

Electricity

PSI Energy, Inc.

Tel.317-839-9611 http:/ /www.cinergy.com/indiana/partners/ Southern Indiana Gas

Electric Company

Tel.812-465-5300 http://www.sigcorpinc.com West Harrison Gas Electric Company Tel.513-381-2000 http://www.cinergy.com IOWA Amana Society Service Company

Tel.319-622-3052 Interstate Power Company Tel. 319-582-5421 http: /www.interstate-power.com MidAmerican Energy Company Tel.515-281-4300 http://www.midamerican.com

KANSAS Empire District Electric Company Tel.417-625-5100 http://www.empiredistrict.com Kansas City Power

Light

Tel.816-556-2200 http://www.kcpl.com Kansas Gas

Electric Company

Tel.316-383-8600 http://www.wstnres.com

Wheeling

189

Southwestern Public Service Company Tel.806-378-2121 http://www.ncenergies.com UtiliCorp United, Inc. Tel.816-421-6600 http://www.utilicorp.com Western Resources, Inc. Tel.786-575-6300 http://www.wr.com KENTUCKY Berea College Utilities Tel.606-986-3451 http:/ /[email protected] Kentucky Power Company Tel. 800-572-1141 http: /www.aep.com Kentucky Utilities Company Tel.606-255-2100 http://www.lgeenergy.com Louisville Gas Electric Company (KY) Tel. 502-627-2000 http://www.lgeenergy.com Union Light Heat Power Company (KY) Tel. 513-421-9500 http:/ /www.cinergy.com LOUISIANA Cleco Corporation Tel.318-484-7400 http://www.cleco.com

Entergy Gulf States, Inc. Tel.409-838-6631 http://www.entergy.com Entergy Louisiana, Inc. Tel. 504-569-4000 http://www.entergy.com Entergy New Orleans, Inc. Tel.504-529-5262 http://www.entergy.com Southwestern Electric Power Company (LA) Tel.318-673-3000

http://www.csw.com/ele/swep/swep.html

MAINE Bangor Hydro-Electric Company (ME) Tel.207-945-5621 http://www.bhe.com Central Maine Power Company Tel. 207-623-3521 http://www.cmpco.com Maine Electric Power Company Tel.207-623-3521 http://www.cmpco.com Maine Public Service Company Tel.207-768-5811

http://www.mainerec.com/mpsco.html MARYLAND Baltimore Gas Electric Company Tel.410-234-5000 http://www.bge.com

B

Tel. 302-429-3011 http://www.delmarva.com

Tel.301-790-3400 http: www.alleghenypower.com

Tel.202-872-2000 /www.pepco.com

Tel.888-423-2364 http://www.eua.com

Tel.617-424-2000 http: www.bedison.com

Tel.617-225-4000 http:/ /www.cornenergy.com

Tel. 508-291-0950 http://www.comelectric.com

Tel.617-357-9590 http://www.eua.com

Tel.888-301-7700

http://www.unitil.com/Profile/fitchbrg.htm

Wheeling

Tel. 508-389-2000 http://www.nees.com

Tel. 508-389-2000 http://www.nees.com

Tel. 617-357-9590 http://www.eua.com

Tel. 413-785-5871 http: /www.nu.com

Tel.517-357-2293

Tel.517-788-0550 http://www.cpco.com

Tel. 313-235-8000 http:/ /www.detroitedison.com

Tel. 906-632-2221 http://www.eselco.com

Tel.219-425-2111 http://www.aep.com

Tel.906-487-5000 http://www.wpsr.com

B

Tel. 414-221-2345 http://www.wisconsinelectric.com

Tel.920-433-1598 http://www.wpsr.com

Tel.319-582-5421 http: wwwinterstate-power.com

Tel.218-722-2641 http://www.mnpower.com

Tel.612-330-5500 http://www.nspco.com

Tel.218-739-8200 http://www.otpco.com

Tel.601-969-2311 http://www.entergy.com

Tel.228-864-1211 http://www.mispower.com

MISSOURI AmerenUE Tel.314-621-3222 http://www.ameren.com Empire District Electric Company (MO) Tel. 417-625-5100

http://www.empiredistrict.com Kansas City Power Light Company Tel.816-556-2200 http://www.kcpl.com Saint Joseph Light Power Company Tel.816-233-8888 http://www.sjlp.com UtiliCorp United, Inc. Tel.816-421-6600 http://www.utilicorp.com

MONTANA Avista Corporation Tel. 509-489-0500 http://www.avistacorp.com Black Hills Corporation Tel.605-342-3200 http:/ /www.blackhillscorp.com Montana Power Company Tel.406-723-5421 http: www.mtpower.com Montana-Dakota Utilities Company Tel.701-222-7900 http://www.mdures.com

B

Tel. 503-464-5000 http://www.pacificorp.com

Tel.702-367-5000 http: www.nevadapower.com

702-728-4422

Tel.775-834-3600 http:/ /www.sierrapacific.com

Tel. 802-773-2711 http://www.cvps.com

Tel. 800-852-3339 http://www.unitil.com/Profiles/concord.htm

Tel.603-543-3188 http:/ /www.cvx.com

Tel. 800-582-7276 http:/ /www.unitil.com/Profile/exeter.htm

195

Granite State Electric Company Tel.603-448-0363 http:/ /www.nees.com New England Power Company Tel. 408-389-2000 http: www.nees.com Public Service Company Tel. 603-669-4000 http://www.psnh.com

New Hampshire

NEW JERSEY Atlantic City Electric Company Tel.609-645-4100 http://www.publicsector.com/states/nj/trade/a/atlanOlO.htm Jersey Central Power Tel.610-929-3601 http://www.gpu.com

Light Company

Public Service Electric Gas Company Tel.973-430-7000 http://www.psegcorp.com Rockland Electric Company http://www.oru.com

(NJ)

NEWMEXICO

El Paso Electric Company Tel. 915-543-5711 http://www.whc.net/epec/ Public Service Company Tel. 505-848-2700 http://www.pnm.com

New Mexico

197

Southwestern Public Service Company Tel.806-378-2121 http://www.ncenergies.com Texas-New Mexico Power Company Tel. 817-731-0099 http://www.tnpe.com

NEW YORK

Central Hudson Gas Electric Corporation Tel.914-452-2000 http://www.cenhud.com Consolidated Edison Company of New York, Inc. Tel.212-460-4600 http://www.coned.com Fishers Island Electric Corporation Tel. 516-788-7543 New York State Electric Tel.607-729-2551 http://www.nyseg.com

Gas Corporation

Niagara Mohawk Power Corporation Tel.315-474-1511 http://www.nimo.com Orange Rockland Utilities, Inc. Tel. 914-352-6000 http://www.oru.com Rochester Gas Electric Corporation Tel.716-546-2700 http://www.rge.com

NORTH CAROLINA Carolina Power Light Company Tel. 919-546-6111 http: /www.cpic.com Duke Energy Corporation Tel. 704-594-6200 http://www.duke-energy.com Nantahala Power Light Company Tel.828-369-4500 http:/ www.duke-energy.com Virginia Electric Power Company Tel. 804-771-3000 http://www.vapower.com

NORTH DAKOTA Montana-Dakota Utilities Company Tel.701-222-7900 http://www.mdures.com Northern States Power Company Tel.612-330-5500 http://www.nspco.com Otter Tail Power Company Tel.218-739-8200 http://www.otpco.com

OHIO Cincinnati Gas Electric Company Tel.513-421-9500 http://www.cinergy.com

Tel.216-622-9800 http://www.illuminatingco.com

Tel.614-223-1000 http://www.aep.com

Tel. 937-224-6000 http://www.waytogo.com

Tel.330-384-5100 http://www.ohioedison.com

Tel. 330-456-8173 http://www.aep.com

Tel. 419-249-5000 http:/ /www.firstenergy.corp.com

Tel.417-625-5100 http://www.empiredistrict.com

Tel. 405-553-3000 http://www.oge.com

Tel.918-599-2000 http://www.csw.com/ele/pso/pso.html

Southwestern Public Service Company Tel. http://www.ncenergies.com OREGON Idaho Power Company Tel. http://www.idahopower.com PacificCorp Tel. http: www.pacificorp.com Portland General Electric Company Tel. http://www.pge-online.com/ PENNSYLVANIA Citizens Electric Company (PA) Tel. http://www.citizenselectric.com Duquesne Light Company Tel. http://www.dqe.com Jersey Central Power Tel. http://www.gpu.com

Light Company

Metropolitan Edison Company Tel. http://www.gpu.com PECO Energy Company Tel. http:/ /www.peco.com

Pennsylvania Electric Company Tel. 610-929-3601 http://www.gpu.com Pennsylvania Power Company Tel. 412-652-5531 http://www,firstenergycorp.com Pike County Light Power Company Tel.717-296-7323 http://www.oru.com PP&L, Inc. Tel.610-774-5151 http: www.papl.com UGI Utilities, Inc. Tel. 717-830-1190 http://www.ugicorp.com

Waverly Electric Light Power Company (PA) Tel.610-929-3601 http://www.gpu.com Wellsboro Electric Company Tel.570-724-3516 http:/ /www.wellsboroelectric.com West Penn Power Company Tel.724-837-3000 http:/ /www.alleghenypower.com

RHODE ISLAND Blackstone Valley Electric Company Tel.617-357-9590 http://www.eua.com

Block Island Power Company Tel. 401-466-5851 Narragansett Electric Company Tel. 401-784-7000 http://www.ici.net/custpages/bobb/neco.htm Newport Electric Corporation Tel.617-357-9590 http: www.eua.com

SOUTH CAROLINA Carolina Power Light Company Tel. 919-546-6111 http:/ /www.cplc.com Duke Energy Corporation Tel.704-594-6200 http://www.duke-energy.com Lockhart Power Company (SC) Tel.864-545-2211 South Carolina Electric Tel.803-748-3000 http://www.scana.com

Gas Company

SOUTH DAKOTA Black Hills Corporation Tel.605-342-3200 http://www.blackhillscorp.com Black Hills Power Light Company Tel.605-342-3200 http://www.blackhillspower.com

MidAmerican Energy Company Tel. 515-281-4300 http://www.midamerican.com Montana-Dakota Utilities Company Tel.701-222-7900 http://www.mdures.com Northern States Power Company Tel.612-330-5500 http://www.nspco.com Northwestern Public Service Company (SDI Tel.605-352-8411 http:/ /www.northwestern.com Otter Tail Power Company Tel. 218-739-8200 http://www.otpco.com

TENNESSEE Kentucky Utilities Company Tel.606-255-2100 http://www.lgeenergy.com Kingsport Power Company Tel.615-378-5000 http://www.aep.com

TEXAS Central Power Light Company (TX) Tel. 512-881-5300 http://www,cse.com/ele/cpl/cil.html

El Paso Electric Company Tel. 915-543-5711 http://www.whc.net/epec/ Entergy Gulf States, Inc. Tel. 409-838-6631 http://www.entergy.com PacifiCorp Tel. 503-464-5000 http://www.pacificorp.com Reliant Energy HL&P/Entex Metro Tel.713-228-9211 http://www.hlp.com Southwestern Electric Power Company (LA) Tel.318-673-3000 tml http://www.csw.com/ele/swep/swep.hi Southwestern Electric Service Company Tel.214-812-4887 http: /www.tu.com

(TX)

Southwestern Public Service Company Tel. 806-378-2121 http:/ www.ncenergies.com Texas Utilities Electric Company Tel.214-812-4600 http://www.tu.com Texas-New Mexico Power Company Tel.817-731-0099 http://www.tnpe.com West Texas Utilities Company Tel.915-674-7000 http://www.csw.com/ele/wtu/wtu.html

05

UTAH PacifiCorp Tel.503-464-5000 http://www.pacificorp.com

VERMONT Allied Power

Light company

Central Vermont Public Service Corporation Tel.802-773-2711 http://www.cvps.com Citizens Utilities Company (Vermont Division) Tel.802-334-6538 http://www.czn.net Franklin Electric Light Company Tel. 802-285-2912 Green Mountain Power Corporation Tel.802-864-5731 http://www.gmpvt.com Rochester Electric Light Tel.802-767-4291

Power (VT)

Vermont Marble Power Tel.802-770-7168

VIRGINIA Appalachian Power Company (VA) Tel. 540-985-2300 http://www.aep.com

Delmarva Power Light Company Tel.302-429-3011 http://www.delmarva.com Kentucky Utilities Company Tel.606-255-2100 http://www.lgeenergy.com Potomac Edison Company Tel.301-790-3400 http: www.alleghenypower.com Virginia Electric Power Company Tel. 804-771-3000 http://www.vapower.com

WASHINGTON Avista Corporation Tel. 509-489-0500 http://www.avistacorp.com PacifiCorp Tel. 503-464-5000 http:/ /www.pacificorp.com Puget Sound Energy Tel.425-454-6363

WEST VIRGINIA Appalachian Power Company (VA) Tel.540-985-2300 http://www.aep.com Black Diamond Power Company Tel. 304-342-2721

Monongahela Power Company Tel.301-790-1766 http:/ /www.alleghenypower.com Ohio Power Company Tel.330-456-8173 http://www.aep.com Union Power Company (WV) Tel.304-342-2721 United Light Power (WV) Tel. 304-342-2721 UtiliCorp United, Inc. Tel.816-421-6600 http://www.utilicorp.com War Light Power Tel 304-342-2721 Wheeling Power Company Tel.304-234-3000 http: /www.aep.com WISCONSIN Consolidated Water Power Company Tel.715-422-2582 Dahlberg Light Tel.715-378-2205

Power Company

Madison Gas Electric Company (W11 Tel.608-252-7000 http: www.mge.com Northern States Power Company Tel.612-330-5500 http://www.nspco.com

http://www.wpl.com/wplh/subs/sbwgl.html

/www.wisconsinelectric.com

http://www.wpsc.wpsr.com

/www.blackhillspower.com

B Cheyenne Light Fuel Tel.307-638-3361 http://www.psco.com

Power Company

Montana Power Company Tel. 406-723-5421 http://www.mtpower.com Montana-Dakota Utilities Company Tel.701-222-7900 http://www.mdures.com PacifiCorp Tel. 503-464-5000 http://www.pacificorp.com


Appendix

Listed in the section is the miscellaneous information relating to the regulation of electric utilities. This information was obtained from the National Association of Regulatory Utility Commissioners (NARUC), 1101 Vermont Avenue, Suite 200, Washington, DC 20005; telephone-202898-2200; fax-202-898-2213; http:/ /www.naruc.org. For more detailed insight into utility regulatory matters, obtain copy of “Utility Regulatory Policy in the United States and Canada Compilation” from NARUC address. Table 1

State Regulatory Agencies That Regulate Rates On Retail Sales to EndUsers

Table 2

State Agencies/Authorities That Regulate Standards For Meter Accuracy And Voltage Levels

Table 3

State Regulatory Agencies That Require Uniform Practices For Electric Billing Format

Table 4

State Regulatory Agencies That Do Not Require Uniform Practices For Electric Billing Format

Table 5

State Regulatory Agencies That Allow Electric Utilities To Offer Tariffs Designed To Promote Sales Of Electricity For Specific End-Users

Table 6

State Regulatory Agencies That Do Not Approve Or Allow Electric Utility Companies To Offer Tariffs Designed To Promote Sales Of Electricity For Specific End-Users

Table 7

State Regulatory Agencies that have the Authority to Determine Rate of Return for For-Profit Electric Utilities

the

Table 8

StateRegulatory Agencies That Allow Interruptible Rate Tariffs For Commercial Electricity Customers

Table 9

State Regulatory Agencies That Do Not Allow Interruptible Rate Tariffs For Commercial Electricity Customers

Table

StateRegulatory Agencies That Allow Interruptible Rate Tariffs For Industrial Electricity Customers

Table

State Regulatory Agencies That Do Not Allow Interruptible Rate Tariffs For Industrial Electricity Customers

FOR-PROFIT I. ELECTRIC UTILITIES All states, exceptNebraska PUC which has 11.

for-profit utilities

MUNICIPAL ELECTRIC UTILITIES PUC Connecticut DPUC (limited) Washington DC PSC Florida PSC Indiana URC Kansas SCC Maine PUC Maryland PS Mississippi PSC

New Hampshire PUC New York PSC Pennsylvania PUC Rhode Island PUC Texas PUC West Virginia PSC Wisconsin PSC Wyoming PSC

111. COOPERATIVEELECTRICUTILITIES Alaska PUC Arizona CC Arkansas PSC Delaware PSC Washington DC PSC

Mississippi PSC New Hampshire PUC New Jersey BPU New Mexico PUC New York PSC

C

Florida PSC Indiana URC Kansas SCC Kentucky PSC Louisiana PSC Maine PUC Maryland PSC Michigan PSC

Oklahoma CC Rhode Island PUC Texas PUC Utah PSC Vermont PSB Virginia SCC West Virginia PSC Wyoming PSC

FOR-PROFIT I. ELECTRIC UTILITIES All states, exceptNebraska PSC New Mexico SCC 11.

MUNICIPAL ELECTRIC UTILITIES Alaska PUC Iowa PUC Kansas SCC Kentucky PSC Maine PUC Maryland PSC Massachusetts DPU Montana PSC New Hampshire PUC

New Jersey BPU New York PSC North PSC Rhode Island PUC Utah PSC Vermont PSB West Virginia PSC Wisconsin PSC Wyoming PSC

111. COOPERATIVEELECTRICUTILITIES Alaska PUC Arizona CC Arkansas PSC California PUC

Colorado PUC Delaware PSC Indiana URC Iowa UB

Kansas SCC Kentucky PSC Louisiana PSC Maine PUC Maryland PSC Michigan PSC Minnesota PUC Mississippi PSC Nevada PSC New Hampshire PUC

New Mexico PUC North Dakota PSC Oklahoma CC Texas PUC Utah PSC Vermont PSB Virginia SCC West Virginia PSC Wyoming PSC

Washington DC PSC Florida PSC Illinois CC Nevada PSC Ohio PUC Tennessee PSC

Alaska PUC Arkansas PSC Connecticut DPUC Delaware PSC Georgia PSC Hawaii PUC Idaho PUC Indiana URC Iowa UB Kansas SCC Kentucky PSC Maine PUC Massachusetts DPU Michigan PSC

Missouri PSC Montana PSC New Hampshire PUC North Carolina UC North Dakota PSC Oregon PUC Pennsylvania PUC South Carolina PSC South Dakota PUC Texas PUC Utah PSC Virginia SCC Washington UTC

Alabama PSC Arizona CC Arkansas PSC Delaware PSC Washington DC PSC Florida PSC Illinois CC Indiana URC Kansas SCC Kentucky PSC Louisiana PSC Maine PUC Maryland PSC Massachusetts DPU

Minnesota PUC Mississippi PSC Missouri PSC New Hampshire PUC New Jersey BPU New Mexico PUC Ohio PUC Oklahoma CC Pennsylvania PUC South Dakota PUC Tennessee PSC Virginia SCC Wyoming PSC

Alaska PUC California PUC Colorado PUC Connecticut DPUC Georgia PSC Hawaii PUC Idaho PUC Iowa UB Michigan PSC Montana PSC Nevada PSC

New York PSC North Carolina UC North Dakota PSC Oregon PUC Rhode Island PUC South Carolina PSC Utah PSC Washington UTC West Virginia PSC Wisconsin PSC

Alabama PSC

Missouri PSC

Alaska PUC

Montana PSC

Arizona CC

Nevada PSC

Arkansas PSC

New Hampshire PUC

California PUC

New Jersey BPU

Colorado PUC

New Mexico PUC

Connecticut DPUC

New York PSC

Delaware PSC

New Carolina UC

Washington DC PSC

North Dakota PSC

Florida PSC

Ohio PUC

Georgia PSC

Oklahoma CC

Hawaii PUC Idaho PUC

Oregon PUC Pennsylvania PUC

Illinois CC

Rhode Island PUC

Indiana URC

South Carolina PSC

Iowa UB

South Dakota PUC

Kansas SCC

Tennessee PSC

Kentucky PSC Louisiana PSC

Texas PUC

Maine PUC

Vermont PSB

Maryland PSC Massachusetts DPU

Virginia SCC Washington UTC

Michigan

West Virginia PSC

Minnesota PUC

Wisconsin PSC

Mississippi PSC

Wyoming PSC

Utah PSC

Arizona CC California PUC Colorado PUC Connecticut DPUC Delaware PSC Washington DC PSC Florida PSC Georgia PSC Hawaii PUC Illinois CC Iowa UB Kansas SCC Maine PUC Massachusetts DPU Michigan PSC Minnesota PUC Missouri PSC Montana PSC

Alabama PSC PUC Alaska Arkansas PSC PSC Tennessee Idaho PUC Indiana URC Kentucky PSC Virginia WestPSC Louisiana PSC

Nevada PSC New Hampshire PUC New Jersey BPU New Mexico PUC New York PSC North Carolina UC North Dakota PSC Ohio PUC Oklahoma CC Pennsylvania PUC Rhode Island PUC South Carolina PSC South Dakota PUC Virginia SCC Washington UTC Wisconsin PSC Wyoming PSC

Maryland PSC Mississippi PSC PUCOregon Utah PSC

For

Alabama PSC Alaska PUC Arizona CC Arkansas PSC California PUC Colorado PUC Connecticut DPUC Delaware PSC Florida PSC Georgia PSC Hawaii PUC Idaho PUC Illinois CC Indiana URC Iowa UB Kansas SCC Kentucky PSC Louisiana PSC Maine PUC Maryland PSC Massachusetts DPU Michigan PSC Minnesota PUC

Mississippi PSC Missouri PSC Montana PSC Nevada PSC New Hampshire PUC New Jersey BPU New Mexico PUC New York PSC North Carolina UC North Dakota PSC Ohio PUC Oklahoma CC Oregon PUC Pennsylvania PUC Rhode Island PUC South Carolina PSC South Dakota PUC Utah PSC Virginia SCC Washington UTC West Virginia PSC Wisconsin PSC Wyoming PSC

Not

For

Washington DC PSC Tennessee PSC

Appendix

D

The following are terms associated with the electric utility industry. These are excerpted from the following: 1. ”ElectricSales and Revenue” (United States Department of Energy-USDOE) 2.

“Energy Information Administration Electric Power Monthly” (United States Department of Energy-USDOE) ”Utility Regulatory Policy in the United States and Canada” (National Association Regulatory Utility CommissionersNARUC)

4.

“Glossary for the (American

Industry” Association-AGA)

Abandonment. Abandonment of facilities-retirement of utility plant on the books without its physical removal from its installed location. Abandonment of service-ceasing to provide service. Above-the-Line.Expensesincurredin operating utilitythatare charged to the ratepayer (utility customer), by being allowed in utility’s rate base. The term originated because they are written above line drawn on the income statement separating them from costs paid by investors (shareholders).

Accelerated Depreciation. Accounting methodallowingcompanyto write-off more quickly in early years, with progressively smaller increments in later years. Access. Ability of user to enter

given network.

Access Charge. A charge levied on power supplier, or its customer, for access to utility’s transmission or distributionsystem. It is charge for the right to send electricity over another’s wires. Accrued Depreciation. Monetary difference between the original cost of article and its remaining value. Accumulated Deferred Income Taxes. Income taxes collected by utilities through their rates in advance of the time they are actually owed to the government. Acquisition Adjustment. The difference between the price paid to acquire an operating unit or system of utility and the rate base of the acquired property Administrative Law Judge (ALJ). A Commission staff member who serves hearing officer at formal PUC proceedings. He/she may conduct public hearings, issue subpoenas, question witnesses, and prepare draft decisions and orders for the Commission’s consideration. See also Hearing Examiner. Advice Letter. A filing by letter made by utility to change rate or services. An advice letter filing usually does not require public hearings. Aggregator. entity that puts together customers into buying group for the purchase of commodity service. The vertically integrated investor owned utility, municipal utilities and rural electric cooperativesperform this function in today’s powermarket.Other entities such buyer cooperatives or brokers could perform this function in restructured power market. This is opposed to marketer who will be defined an entity that represents different suppliers.

Allocation of Costs. See Cost Allocation. Allowance for Funds Used During Construction. See AFUDC. Alternate Current (AC). An electric current that reverses its direction of flow periodically contrasted to direct current. Alternate Energy Production. Means of producing energy other than those in common use by large companies. Generally include solar, wind, water, photovoltaics and other technologies. Alternative Delivery Procedure (ADP). A provision in futures contract that allows buyers and sellers to make and take delivery commodity under terms or conditions that differ from those specified in the standard contract. Alternative Regulatory Scheme (or Framework). A means of regulating utility other than by the traditional rate base, rate of return method. AM/FM. Automated Mapping/Facilities Management. American Public Power Association (APPA). Represents the interests of publicly owned electric power utilities. Amortization. Similar to depreciation. Amethodby which costs for non-tangible assets, such patent, are charged to ratepayers over number years until the costs have been recovered by the utility. Amp (Ampere). Unit of measurement electric current; proportional to the quantity of electrons flowing through conductor past given point in one second. Appellate Authority. The authority to hear and decide an appeal to decision. See also Original Authority. ASCII (American Standard Code of Information Interchange). Computer language recognized by many different software packages.

Automated Mapping/Facilities Management (AM/FM). Digitized geographic maps on which is shown the infrastructure of interest (such location and type of utility poles, transmission lines, substations, generating plant, etc.) Automatic Adjustment Clause. Allows utility to increase or decrease its rates to cover costs of specific items without formal hearing before Commission. Utility can automatically raise its rates only when the price it pays for those specified items goes up. Changing fuel costs are the primary example of such clauses. Average Cost. The revenuerequirement of utilitydivided by the utility’s sales. Average cost typically includes the costs of existing power plants, transmission, and distribution lines, and other facilities used by utility to serve its customers. It also include operating and maintenance, tax, and fuel expenses. Average Demand. The demand on, or power output of, an electric system over any interval of time, determined by dividing the total number of kilowatt-hours by the number of units of time in the interval. Average Rate Base. Rate base determined on average investment during the test year. Average Service Life.Used in determining depreciation, theaverage expected life of all the units in group of assets. Avoided Cost. The cost an electric utility would otherwise incur to generate power if it did not purchase electricity from another source. Also the basis of the rate required to be paid to QFs (Qualifying Facilities) for purchased power under PURPA (Public Utility Regulatory Policy Act of 1978).

Backup Power. Electric energy supplied by utility to replace power and energy lost during an unscheduled equipment outage.

D Base Bill. A charge calculated by taking the rate from the appropriate electric rate schedule and applying it to the level of consumption. Base Load Capacity. Generating capacity which serves the base load, usually the utility’s largest, most efficient facilities with the lowest operating cost. Base Load. The minimum quantity of electric power or delivered over given period of time; minimum demand on the system. Excludes peak usages. Base Load Plant. A plant, usually housing high-efficiency steam-electric units, which is normally operated to take all or part of the minimum load of system, and which consequently produces electricity at an essentially constant rate and runs continuously. These units are operated to maximize system mechanical and thermal efficiency and minimize system operating costs. Base Rate. A fixed per kilowatt-hour charge for electricity consumed that is independent of other charges and/or adjustments. Below-the-Line. Expensesincurredinoperation of utilitythatare charged to the investor, not the ratepayer. These expenses are not allowed in rate base. Bilateral Contract. A direct contract between the power producer and user or broker outside of centralized power pool. Blanket Certificate. Board approval by the FERCof particular type of energy transaction, allowing qualifying transactions to take place without case-by-case litigation and approval. Block Rate Schedule. An electric rate schedule with provision for charging different unit cost for various increasing blocks of demand or energy. Usually reduced price is charged on succeeding blocks. Boiler. A device for generating steam for power, processing, or heating purposes or for producing hot water supply. Heat from an external

combustion source is transmitted to fluid contained within the tubes in the boiler shell. This fluid is delivered to an end-user at desired pressure, temperature, and quality. Bonneville PowerAdministration (BPA). One of five federalpower marketing administrations that sell low-cost electric power produced by federal hydroelectric dams to agricultural and municipal users. Bottleneck Facility. A point on the system such transmission line, through which all electricity must pass to get to its intended buyers. If there is limited capacity at this point, some priorities must be developed to decide whose power gets through. It also must be decided if the owner of the bottleneck may, or must, build additional facilities to relieve the constraint. British Thermal Unit (Btu). The standard unit for measuring quantity of heat energy. The amount of heat energy needed to raise the temperature of one pound of water one degree Fahrenheit. Broker. A retail agent who buys and sells power. The agent may also aggregate customers and arrange for transmission, firming and other ancillary services as needed. Brownout. A reduction or cutback in electric power, especially of shortage.

result

Bulk Power Supply. Often this term is used interchangeable with wholesale power supply. In broader terms, it refers to the aggregate of electric generating plants, transmission lines, and related-equipment. The term may refer to those facilities within one electric utility, or within a group of utilities in which the transmission lines are interconnected. Bundled Rate. Several serviced combined into one tariff offering for single charge. See also Unbundled Rate and Vertical Service. Bus Bar. A conducting bar that carries heavy currents to supply several electric circuits.

D Buyback Rates. Rates paid to an electric utility’s customer who produces his own electricity in excess of his needs. Buy Through. An agreement between utility and customer to import power when the customer’s service would otherwise be interrupted. Bypass. Use of transmission facilities which avoid local utility company network. -C-

Call. An option to buy (or “call”) share of stock at specified price within specified period of time. Capacity Costs. Fixed costs of facilities required for the utility to provide service. Capacity Purchased. The amount of energy and capacity available for purchase from outside the system. Capacity Release. A secondary market for capacity that is contracted by customer which is not using all of its capacity. Capital Asset Pricing Model. A method of estimating cost of equity in determining rate of return. Capital Structure. The permanent long-term financing of firm represented by relative proportions of long-term debt, preferred stock and net worth. Capitalized Costs. Costs are capitalized when they are expected to provide benefits over period longer than one year. Capitalized costs are considered investments and are included in rate base to be recovered from customers over number of years. Captive Customer. customer who does not have realistic alternatives to buyingpower from the local utility,even if that customer had the legal right to buy from competitors.

Census Divisions. The ten geographic divisions of the United States established by the Bureau of the Census, U S Department of Commerce for statistical analysis. The boundaries of Census divisions coincide with State boundaries. Circuit. A configuration of electrically or electromagnetically connected devises or components. Circuit Breaker. automatic switch that stops the flow electric current in an overloaded or otherwise abnormally stressed electric circuit. Classification of Service. A group of customers with similar characteristics (i.e., residential, commercial, etc.) which are identified for the purpose of setting rate for utility service. Class Rate Schedule. An electric rate schedule applicable to one or more specified classes of service, groups of businesses, or customer uses. Cogeneration. Production of electricity from steam, heat, or other forms of energy produced by-product of another process. Cogeneration Deferral Rates. Special discount rates offered to large users who may have the potential capacity to generate their own power via cogeneration. Coincidental Demand. The sum of two or more demands that occur in the same time interval. CoincidentalPeak.Anydemand for electricity that occurs simultaneously with any other demand for electricity on the same system. Coincidental Peak Load. The same of two or more peak loads that occur in the same time interval. Collocation of Facilities. Generally the requirement that an embedded utility allows access to its network by others on non-discriminatory basis.

D Combined Cycle. The increased thermal efficiency produced by steam electric generating system when otherwise waste-heat is converted into electricity rather than discharged into the atmosphere. One of the technologies of cogeneration in which electricity is sequentially produced from two or more generating technologies. An electricity generating technology in which hot gases turn turbine and then heat boiler, which makes steam to turn another turbine. CombinedPumped-StoragePlant. A pumped-storagehydroelectric power plant that uses both pumped water and natural streamflow to produce electricity. Commercialization. Programs or activities that increase the value decrease the cost of integrating new products or services into the electricity sector. Commercial Operation. Commercial operation begins when control of the loading of the generator is turned over to the system dispatcher. Commercial Sector. The commercial sector is generally defined nonmanufacturing business establishments, including hotels, motels, restaurants, wholesale businesses, retail stores, and health, social and educational institutions. Electric utilities may classify commercial service that includes all consumers whose demand and annual use exceeds some specified limit. The limit may be set by theutility based on the rate schedule of the utility. Consumers (i.e., farms and irrigation) that the utility has nosystem for separating intoresidential, commercial, and industrial classifications, should be classified based on the schedule they most closely resemble. If there is no rate schedule distinction, utilities may define commercial consumers those having demand of less than 1,000 kilowatts. Commodity Charge. Charge for each unit of service actually received. Common Costs. Costs incurred jointly for two more types of operations that must be allocated among the operations. Compressor. A pump or other type of machine using press a gas by reducing the volume.

turbine to com-

Consumer Charge. An amount charged periodically to consumer for such utility costs billing and meter reading, without regard to demand or energy consumption. Consumption (Fuel). The amount of fuelused for gross generation, providing standby service, start-up and/or flame stabilization. Contract Path. The most direct physical transmission tie between two interconnected entities. When utility systems interchange power, the transfer is presumed to take place across the ”contract path,” notwithstanding the electrical fact that power flow in the network will distribute in accordance with network flow conditions. This term can also mean to arrange for power transfer between systems. Contract Receipts. Purchases based on negotiated agreement that generally covers period of one or more years. Contracts for Differences (CD). A type of bilateral contract where the electric generation seller is paid fixed amount over time which is combination of the short-term market price and an adjustment with the purchaser for the difference. For example, generator may sell distribution company power for ten years at 6/kWh. That power is bid into Poolco at some low/kWh value (to ensure it is always taken). The seller then gets the market clearing price from the pool and the purchaser pays the producer the difference between the Poolco selling price and 6/kWh (or vice versa if the pool price should go above the contract price). Contributions inAid of Construction (CIAC). Non-refundable donations or contributions in cash or properties from individuals to pay for construction of facilities. Cooperative (Co-op). A group of persons organized in joint venture to supply services to specified area. Cooperative ElectricUtility. A group organized under the law into utility company that will generate, transmit, and/or distribute supplies of electric energy to specified area not being serviced by another utility. Such ventures are generally exempt from the Fed-

D era1 income tax laws. Most electric cooperatives have initially been financed by the Rural Electrification Administration, US Department of Agriculture. Costs. The amount paid to acquire resources, such ment, fuel or labor services.

plant and equip-

Cost Allocations. Method of separating and assigning different costs to interstateorintrastate operations. Generally used for costsnot readily assignable or for common costs. Cost of Service. A ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the electric service at issue. These costs include operating and maintenance expenses, depreciation and amortization expenses, and income and other taxes found just and reasonable by the regulatory agency for ratemaking purposes plus, in the case of privately owned electric utilities, an allowance for return on capital (usually computed by applying rate of return to the rate base). This concept attempts to equate the cost incurred by the utility to the revenue received for the service provided to each of the consumer classes. Cost of Service Pricing. Method of pricing service strictly in accordance with the costs (expenses and allowable profit) that are attributable to it. Customers of services priced below cost are generally subsidized by customers paying above cost for their services. Cross-Subsidization. Practice of using revenues generated from one (often unregulated) product or service to support another (often regulated) one. electrical conductor. The Current (Electric). A flow of electrons in strength or rate of movement of the electricity is measured in amperes. Customer Charge. A component of electric rates designed to cover those costs (such metering and billing costs) that are related to the existence of the customer rather than to either the size and extent

of the facilities needed to be served or the quantity of electricity the customer uses.

Declining Block Rates. As more energy is consumed the unit price goes down. For example, the first 500 kilowatt-hours cost 8 cents each; the next block of 500 kwh is priced at 6 cents each; etc. Decommissioning. The process of removing eration.

nuclear facility from op-

Deferred Fuel Costs. Those fuel costs spent in one accounting period which are not reflected in billings to customers until later billing period. Deferred Tax Treatment. Actual taxes plus deferred taxes are included in the income statement. Demand. The maximum rate at which energy is delivered to specific point at given moment. Demand is createdby customer’s power consuming equipment and differs from load in that load is measurement of the amount of energy delivered. Demand/Capacity Cost. The expenses incurred by utility on behalf of an individual customer in providing sufficient capacity to meet that customer’s maximum demand on an as-needed basis. Demand Change Credit. A credit applied against the buyer’s demand charges when the delivery terms of the contract cannot be met by the seller. Demand Charge. That portion of the consumer’s bill for electric service based on the consumer’s maximum electric capacity usage and calculated based on the billing demand charges under the applicable rate schedule. Demand Factor.The ratio of the maximum demand over specified time period to the total connected load on any defined system.

Demand Interval. The time period during which the flow of electricity is measured (usually in 15-, 30-, or 60-minute increments. Demand Rate. A method of pricing under which prices vary according to differences in usage or costs. Demand-SideManagement (DMS). Generallyreferstoreducing consumer’s demand for energy through many means, including conservation, more efficient appliances, weatherization, etc. Demand and Supply Side Management are combined in Least Cost Utility Planning (LCUP). Depreciation. Accounting procedureused to set asidethe difference between the first cost of an item of plant (capital) and its estimated net salvage at the end of its expected life. This ”amount to be depreciated” is treated an expense to offset revenues for tax purposes over the years of expected life. Derivatives. A specialized security or contract that has no intrinsic overall value, but whose value is based on underlying security or factor index. A generic term that, in the energy field, may include options, futures, forwards, etc. Differential Revenue Requirement. A method of calculating utility’s avoided cost. One calculates the utility’s revenue requirement both with and without the costs that would be incurred if the utility were to obtain the power in questions from some other source, then one calculates the difference. Direct Access. The ability of retail customer to purchase commodity (electricity) directly from the wholesale market rather than through local distribution utility. Direct Load Control (DLC). When the utility has the ability to directly control customer’s devices and can turn them on or off necessary to control load. Disaggregation. The functional separation of the vertically integrated utility into smaller, individually owned business units (i.e., genera-

tion, dispatch/control, transmission, distribution). The terms ”deintegration,” ”disintegration” and ”delamination” are sometimes used to mean the same thing. Discounted Flow. Method of determining the cost of common equity capital where the cost of common equity is equal to the dividends per share divided by the market price per share plus an assumed growth rate. Distributed Generation. A distributed generation system involves small amounts of generation located on utility’s distribution system for the purpose of meeting local (substation level) peak loads and/or displacing the need to build additional (or upgrade) local distribution lines. Distribution. The delivery of electricity to the retail customer’s home or business through low voltage distribution lines. Distribution Line. For electricity, the line which carries electricity from substation to the ultimate consumer. Distribution Utility (Disco). The regulated electric utility entitythat constructs and maintains the distribution wires connecting the transmission grid to the final customer. The Disco can also perform other services such aggregating customers, purchasing power supply and transmission services for customers, billing customers and reimbursing suppliers, and offering other regulated or nonregulatedenergy services to retail customers. The ”wires” and distribution utility “customer service” functions provided by could split so that two totally separate entities are used to supply these two types of distribution services. Divestiture. The stripping offof one utility function from the others by selling (spinning-off) or in some other way changing the ownership of the assets related to that function. Most commonly associated with spinning-off generation assets so they are no longer owned by the shareholders that own the transmission and distribution assets. Docket. Formal regulatory proceeding; may also be referred to

case.

D Dual-Fuel Plant. Any plant which can operate on either of two different fuels, such coal or natural

Earnings/Price Ratio. The annual earnings per share of common stock divided by the market price per share of common stock. Economic Development Rates. Special discount rates offered to attract new businesses to the area. Economic Efficiency. term that refers to the optimal production and consumption of goods and services.This generally occurs when prices of products and services reflect their marginal costs. Economic efficiency gains can be achieved through cost reduction, but it is better to think of the concept actions that promote an increase in overall net value (which includes, but is not limited to, cost reductions). Economy of Scale.The principle that larger production facilities have lower unit costs than smaller facilities.Economies of scale exist where the industry exhibits decreasing average long-run costs with size. Electric Plant (Physical). facility containing prime movers, electric generators, and auxiliary equipment for converting mechanical, chemical, and/or fission energy into electric energy. Electric Power Industry. The privately, publicly, federally and cooperatively owned electric utilities of the United States taken whole. This includes all electric systems serving the public-regulated investor-owned electric utility companies, Federal power projects; state municipal, and other government owned systems, including electric public utility districts; electric cooperatives, including generation and transmission entities. Excluded from this definition are the special purpose electric facilities or systems that do not offer service to the public.

Electric Rate. The price set for specified amount of electricity in an electric rate schedule or sales contract. Electric RateSchedule. A statement of the electric rate and the termsand conditions governing its application, including attendant contract terms and conditions that have been accepted by regulatory body with appropriate oversight authority. Electric Utility. An enterprise that is engaged in the generation, transmission, or distribution of electric energy primarily for use by the public and that is the major power supplier within designated service area. Electric utilities includeinvestorowned,publicly owned, cooperatively owned, and government owned (municipals, federal agencies, state projects, and public power districts) systems. Electro-Magnetic Field(EMF)Effect.Effect on healthresultingfrom proximity to energized electricfacilities. Whether there are such effects and how significant they may be is still being argued by the experts. A common form radiation generated by appliances, equipment, machinery, transmission lines, distribution lines. Embedded Costs. Money already spent for investment in plant and in operating expenses. Embedded Costs Exceeding Market Prices (ECEMP). Embedded costs of utility investments exceeding market prices are: costs incurred pursuant to regulatory or contractual obligation; 2. costs that are reflected in cost-based rates; and 3. cost-based rates that exceed the price of alternatives in the marketplace. ECEMPs may become ”stranded costs” where they exceed the amount that can be recoveredthroughthe asset’s sale.Regulatoryquestionsinvolve whether such costs should be recovered by utility shareholders and if so, howtheyshould be recovered.”Transitioncosts”are stranded costs which are charged to utility customers through some type of fee or surcharge after the assets are sold or separated from the vertically-integrated utility. “Stranded assets are assets which cannot be sold for some reason. The British nuclear plants are an example of stranded assets which no one would buy.

D Emissions Trading. A company that reduces emissions beyond what is required by law at one pollution source can use the excess reduction to permit higher emissions at other sources. En Banc (Argument). An oral argument before the Regulatory Commissioners. Energy. The capacity for doing work measured by the capability of doing work (potential energy) or the conversion of this capability to motion (kinetic energy). Energy has several forms, some of which are easily convertible and can be changed to another form useful for work. Most of the world's convertible energy comes from fossil fuels that are burned to produce heat that is then used transfer medium tomechanical or other means in order toaccomplish tasks. Electrical energy is usually measured in kilowatt-hours, while heat energy is usually measured in British thermal units. Energy Charge. A component of rates which covers the cost of the energy actually used. Energy Cost Adjustment clause. The utility may adjust its rates to offset changes in the cost of fuel used to produce electricity. In some states, these adjustments may be made automatically by the utility, subject to Commission review; other states require an Adjustment Clause Hearing first. Energy Service Company (ESCO). A company that offers to reduce client's electricity consumption with the cost savings being split with the clients. Equal Life Group Method of Depreciation. Utility plant items with the same life expectancy are depreciated under common formula. Equity. The utility investment supplied by the sale of common stock. There is no fixed interest on these common stocks. ExcessCapacity.The amount energy available over and above the amount of energy needed, plus reasonable reserves, at any given period.

Excess Deferred Taxes. When utility collects from its ratepayers some portion of the income taxes it will owe in the future, the difference between the amount collected (including future tax obligation) and the amount of its current tax liability. Exempt Wholesale Generator (EWG). A wholesale power generator that is exempt from the provisions of the Public Utility Holding company Act (PUHCA). This legal class of companies was created by the Energy Policy Act of 1992 in order to allow registered public utility holding companies, other corporate entities and individuals to own wholesale generating assets that are leased or sell power to non-affiliates without subjecting the owners to regulation under PUHCA. Externality. Benefit or cost, generated buy-product of economic activity, that does not accrue to the parties involved in the activity. Must be considered to determine the true cost or benefit to society.

-FFacilities Charge. Component of rates which reimburses the utility for investment in facilities which benefit the ratepayer. Fahrenheit. A temperature scale on which the boiling point of water is at 212 degrees about zero the scale and the freezing point is at 32 degrees above zero at standard atmospheric pressure. Fair Rate of Return. The rate of return utility is entitled to have the opportunity to earn on either its rate base or its common equity. Fair implies balancing keeping rates low for ratepayers, financial integrity of the utility, and investment return for shareholders. Fair Value Method of Valuation. The value which would be ascertained by prudent purchaser making thorough inquiry relating to all circumstances affecting value. Federal Energy Regulatory Commission (FERC). Federal agency established in 1977, concurrently with the creation of the Department of

D Energy, charged with regulating sale, transportation and price of natural gas and of wholesale electric power moved in interstate commerce. Successor to the Federal Power Commission (FPC), which was established in 1930. Feebates. A feebate is revenue neutral strategy which imposes fee on polluting resources and rebates those fees to cleaner technologies. This can be accomplished directly through the revenue paid to generators by the Poolco or through incorporation of these values into the dispatch/pricing mechanism of the pool. Firm Power. Delivery of utility service on non-interruptible-alwaysavailable basis. A utility must supply its firm power customers whenever they demand it, despite conditions. Firm Wheeling. Transmission of electricity for another party that is not subject to interruption except for circumstances beyond the transmitting utility’s control. Fixed Costs. Business costs that remain unchanged regardless of tity of output traffic. Flat and Meter Rate Schedule. electric rate schedule consisting of two components, the first of which is service charge, and the second price for the energy consumed. Flat Demand Rate Schedule. An electric rate schedule based on billing demand that provides no charge for energy. Flat Rate. A rate structure in which everyone within customer class pays the same price per unit for all energy consumed. Flow-Through Tax Treatment. Only actual taxes to be paid for the period are included in the income statement and collected from ratepayers. Forecast Test Year. Use of future 12-month period projected utility financial data to evaluate proposed tariff revision. Forwards. A forward is commodity bought and sold for delivery at some specific time in the future. It is differentiated from futures

markets by the fact that forward contract is customized, non-exchange traded, and non-regulated hedging mechanism. Fossil Fuel. Any fuel, such coal, oil and natural remains of ancient plants or animals.

derived from the

Franchise. A privilege to do business which may be limited to specified period of time or geographical area and may or may not be exclusive. In electric utility, "franchise" relates to protected service territory that cannot be served by any other electricity provider. (As in franchise territory.) In retail wheeling the franchise exclusivity will not extend to electricity commodity but only to distribution of electricity commodity from utility receipt point to customer meter point. Freedom of"1nformation(Sunshine) Statutes. Any laws designed to guarantee public access to governmental actions. Fuel Adjustment Clause. See Automatic Adjustment Clause. Fuel Factor. A component of rates designed to recover changes in the cost of fuel; differs from automatic adjustment in that it requires prior Commission approval. Fully Distributed Costs (FDC). Regulatory accounting procedure that directly assigns, or arbitrarily allocates, to specific service categories the total costs of providing that service. Futures Market. Arrangement through contract for the delivery of commodity at future time and at price specified the time of purchase. The price is based on an auction or market basis. Standardized, exchange-traded, and government regulated hedging mechanism.

Generating Plant. A facility where electricity is generated.

D Generation and Transmission (G&T). Identifies utility that both generates and transmits electricity distinguished from an entity which provides transmission only. Generation Company (Genco). A regulated or non-regulated entity (depending upon the industry structure) that operates and maintains existing generating plants. The Genco may own the generation plants or interact with the short-term market on behalf of plant owners. In the context of restructuring the market for electricity, Genco is sometimes used to describe specialized ”marketer” for the generating plants formerly owned by vertically-integrated utility. Generation Dispatch and Control. Aggregating and dispatching (sending off to some location) generation from various generating facilities, providing backup and reliability services. Ancillary services include the provision of reactive power, frequency control, and load following. Generator. A machine that converts mechanical energy into electrical energy. Generator Nameplate Capacity. The full-load continuous rating of generator, prime mover, or other electric power production equipment under specific conditions designated by the manufacturer. Installed generator nameplate rating is usually indicated on nameplate physically attached to the generator. Geothermal Energy. The natural heat available in the rocks, hot water and steam of the earth’s subsurface. Geothermal energy can be used to generate electric power. Geothermal Plant. A plant in which the prime mover is steam turbine. The turbine is driven either by steam produced from hot water or by natural steam that derives its energy from heat found in rocks or fluids at various depths beneath the surface of the earth. The energy is extracted by drilling and/or pumping. Gigawatt (GW). One billion watts.

Gigawatt-hour (GWh). One billion watt-hours. Grid. A system of interconnected power lines and generators that is managed so that the generators are dispatched needed to meet the requirements of the customers connected to the grid at various points. "Gridco" is sometimes used to identify anindependent company responsible for the operation of the grid. Gross Generation. The total amount of electric energy produced by generating facility, measured at the generator terminals.

Heat Rate. A measure of efficiency of generating facilities. The number of Btus used to produce kilowatt-hour of electricity; low heat rate indicates high efficiency. Hedging. buy and sell commodity (electricity) futures protection against loss due to price fluctuation; and/or to minimize the risk of loss. Hedging Contracts. Contracts which establish future prices and quantities of electricity independent of the short-term market. Derivatives may be used for this purpose. Historical Test Year. Use of past 12-month period (usually the immediately preceding period) utility financial data to evaluate proposed tariff revision. Historical Cost. Original cost minus any expenditures deemed by Commission to be fraudulent, unwise or extravagant. Horsepower. unit for measuring the rate of work (or power) equivalent to 33,000 foot-pounds per minute 746 watts. Hydroelectric. An electric generating station driven by water power. Hydroelectric Plant. A plant in which the turbine generators are driven by falling water.

D

Incremental Costs. The additional amount of money it takes to generate or transmit energy above previously determined base amount. Incremental Pricing. A method of charging customers for energy consumption based on the incremental costs involved in energy production. Independent Power Producer (IPP). As defined by FERC under PURPA, generating entity, other than qualifying facility (QF) and not utility, that is: (1) unaffiliated with the utility purchaser and (2) lacks significant market power. The facility must not be in the utility’s rate base. Independent System Operator (ISO). A neutral operator responsible maintaining instantaneous balance of the grid system. The IS0 performs its function by controlling the dispatch of flexible plants to ensure that loads match resources available to the system. Industrial Sector. The industrial sector is generally defined including manufacturing, construction, mining, agriculture, fishing and forestry establishments under Standard Industrial Classification (SIC) Codes 01-39. The utility may classify industrial service using the SIC Codes, or based on demand or annual usage exceeding some specified limit. The limit may be set by the utility based on its own rate schedule. Sales for consumers (i.e.-farm and irrigation) that the utility has no system for separating into residential, commercial, and industrial classifications, should be classified based on the classification of their rate most closely resembles. If there is no rate schedule distinction, utilities may define industrial consumers those having demand equal to or greater than 1,000 kilowatts. Informal Complaint. Informal request for assistance from Commission where resolution is attempted without public hearing or Commission order. Instantaneous Peak Demand. The maximum demand at the instant of greatest load.

Integrated Demand. The summation of the continuously varying instantaneous demand averaged over specified interval of time. The information is usually determined by examining demand meter. Integrated Resource Planning (IRP). Apublicplanningprocess and framework within which the costs and benefits of both demandside and supply-side resources are evaluated to develop the leasttotal-cost mix of utility resource options. In many states, IRP includes means for considering environmental damages caused by electricity supply/transmission and identifying cost-effective energy efficiency and renewable energy alternatives. IRP has become formal process prescribed by law in some states and under some provisions of the Clean Air Act Amendments of 1992. Integrated Resource Planning Principles. The underlying principles of IRP can be distinguished from the formal process of developing an approved utility resource plan for utility investments in supplyside and demand-side and transmission resource costs and attributes outside of the basic provision (or reduction) of electric capacity and energy. These resources may be owned or constructed by any entity and may be acquired through contracts well as through direct investments. Another principle is the incorporation of risk and uncertainty into the planning analysis. The public participation aspects of allow public and regulatory involvement in the planning rather than the siting stage of project development. Integrated Services Digital Network (ISDN). A 128 kbps (kilobytes per second) digital telephone service available in many parts of the country though not universally available that may be able to substitute for fiber optic cable in every respect except possibly television transmission. Interim Rates. Rates that are allowed to go into effect, usually subject to refund and sometimes under bond, until the Commission issues its final order. Interim Relief Request. An application to a Commission showing that the applicant will suffer irreparable injury, immediate special hardship or inequity if relief from regulation is denied.

Internal Combustion Plant. A plant in which the prime mover is an internal combustion engine. internal combustion enginehas one or more cylinders in which the process of combustion takes place, converting energy released from the rapid burning of fuelair mixture into mechanical energy. Diesel or gas-fired engines are the principle types used in electric plants. The plant is usually operated during periods of high demand for electricity. Interruptible Rates. Special rates for energy consumers who are willing to have their energy delivery service interrupted by the utility when necessary. This is low-priority service with generally lower unit rates. Interstate. From one state to another, or across state lines. Interstate activities generally fall under the jurisdiction of the Federal government. Intervenor. A third party who receives permission from to participate in rate case.

Commission

Intrastate. Completely within the borders of single state. Intrastate activities generally fall under the jurisdiction of the State government. Inverted Rate Structure. A rate design in which the unit price increases with usage. Investor Owned Utility (IOU). A company, owned by stockholders forprofit, that provides utility services. A designation used to differentiate utility owned and operated for the benefit of shareholders from municipally owned and operated utilities and rural electric cooperatives.

Joule. The International System unit of energy, equal to the work done when current of one ampere is passed through resistance of one ohm for one second. (To convert (1)joule into watt-hours, multiply by 2.778 X 10-4.)

Jurisdictional. Within thejurisdiction,orauthority,of agency.

particular

-KKilovolt (kV). One thousand volts; measure of electromotive force. Kilowatt (kW). One thousand watts; measure of electric capacity or load. Kilowatt-hour (kwh). 1,000 watts of consumption for one hour. Electric bills are measured in kilowatt-hours.

Least-Cost Planning. See Integrated Resource Planning (IRP) Least Expectancy. Time period during which an article is expected to render efficient service. Least-Cost Utility Planning (LCUP). See Least Cost Planning. LifeExpectancy.Time period during which an article is expected to render efficient service. "Lifeline" Rates. Special local telephone rates for low-income customers. As approved by the FCC, customers meeting certain eligibility tests may apply to have an amount equal tothe Subscriber Line Charge (SLC) deducted from their monthly bills. Also used generically to designate special rate plans offering very basic utility service at low rates to eligible customers. May also be called "Baseline: rates. Load. The amount of electric power or delivered at any specified point or points system. Load originatesprimarily at the power-consuming equipment of customers. Load Centers. A geographical area where large amounts of power are drawn by end-users. Load Factor. The ratio of the average load supplied during designated period to the peak load occurring during that period.

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Load Management. Techniques designed to reduce the demand for electricity at peak times, such remote devices to temporarily turn off appliances. Long-Term Debt. Indebtedness (notes, drafts, bonds, etc.) payable over period of time longer than one year. Low-Income Home EnergyAssistance Program (LIHEAP). Federallyfunded program to help low-income customers afford basic energy utility service. Generally administered at the local, municipal or regional level, rather than by state government.

Maintenance Expenses. Part of operating expenses, including labor, materials, and other expenses, incurred for preserving the operating efficiency and/or physical condition of utility plant. Management Audit. Analysis of the management practices of company with an eye toward improving efficiency and effectiveness. Marginal Cost. In the utility context, the cost to the utility of providing the next (marginal) kilowatt-hour of electricity, irrespective of sunk costs. Market-Based Prices. Prices fixed in the free market under conditions of pure competition. Marketer. agent for generation projects who markets power on behalf of the generator. The marketer may also arrange transmission, firming or other ancillary services as needed. Though marketer may perform many of the same functions broker, the difference is that marketer represents the generator while broker acts middleman. Market Retention Rates. Special discount rates offered to large users to keep them from leaving the system.

Market-to-Book Ratio. Comparison of the market and book value of stock. A one-to-one market-to-book ratio means the stock is selling on the market at book value. Master Metering. Installation ants.

one bulk power meter for multiple ten-

Maximum Demand. The greatest of all demands of the load that has occurred within specified period of time. Megawatt (MW). One million watts of electric energy. Used to designate the capacity of an electric generating plant and/or measure demand or load. Megawatt-hour

One megawatt of power for one hour.

Metered Service. Meters record actual energy use in order to accurately bill customer. "Btu.

One million British thermal units of energy

Municipal Utility. A provider of utility services owned and operated by municipal government.

National Association of Regulatory Utility Commissioners (NARUC). Represents state regulatory agencies in Washington, DC. National Association of State UtilityConsumer Advocates (NASUCA). A national association composed of governmental agencies of the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands engaged in the regulation of utilities and carriers. The chief objective is to serve the consumer interest by seeking to improve the quality and effectiveness of public regulation in America. National Regulatory Research Institute research arm of the NARCU.

(NRRI).Established in 1976, the

D National Rural Electric Cooperative Association(NRECA). the interests of rural electric cooperatives.

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Represents

Natural Monopoly. A situation where one firm can produce given level of output at lower total cost than can any combination of multiple firms. Natural monopolies occur in industries which exhibit decreasing average long-run costs due to size (economies of scale). According to economic theory, public monopoly governed by regulation is justified when an industry exhibits natural monopoly characteristics. Negawatt. A watt of electric energy that is created by conservation rather than generation. Net Generation. Gross generation minus plant use from all electric utility owned plants. The energy required for pumping at pumpedstorage plant is regarded plant use and must be deducted from the gross generation. Net Original Cost. The original cost of utility property minus any accumulated depreciation. Net Summer Capability. The steady hourly output, which generating equipment is expected to supply to system load exclusive of auxiliary power, demonstrated by tests at the time of summer peak demand. Net Worth. Capital plus capital surplus plus retained earnings. Non-Coincident Peak. When one customer class reaches maximum energy use. This peak may or not coincide with the peak for the total system. Non-Coincidental Peak Load. The sum of two or more peak loads on individual systems that do not occur in the same time interval. Meaningful only when considering loads within limited period of time, such day, week, month, heating or cooling season, and usually for not more than one year.

Non-Discrimination. In general usage, reasonably equal treatment for all. Non-FirmPower.

See Interruptible.

Non-Interruptible Rates. SeeFirmPower. Non-Utility Generator (NUG). A generation facility owned and operated by anentity who is no defined utility in that jurisdictional area. Normalization. accounting method that allows a utility to recover from its customers’ income taxes that it must pay evenly over its years of operation. North American Electric Reliability Council (NERC). A council formed in 1968 by the electric utility industry to promote the reliability and adequacy of bulk power supply in the electric utility systems of North American. NERC consists of ten regional reliability councils and encompasses essentially all the power regional of the contiguUnited States, Canada, and Mexico. The NERC Regions are: ASCCAlaskanSystemCoordinationCouncil ECAREast Central Area Reliability Coordination Agreement FRCCFlorida Reliability Coordinating Council MAAC- Mid-Atlantic Area Council MAINMid-American Interconnected Network MAPPMid-Continent Area Power Pool NPCCNortheast Power Coordinating Council SERCSoutheastern ElectricReliabilityCouncil SPPSouthwest Power Pool WSCCWesternSystemsCoordinatingCouncil Notice of Inquiry (NOI). Public notice soliciting information and comments on specific subject. Notice of Intent (NOI). A filing of preliminary data which indicates the applicant’s intent to pursue formal proceeding. Notice of Proposed Rulemaking (NOPR). Notice to the public that an agency is proposing specific new rules.

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Nuclear Power Plant. A facility in which heat produced in reactor by the fissioning of nuclear fuel is used to drive steam turbine. Nuclear Reactor. Any of several devices in which chain reaction is initiated and controlled with the consequent production of heat typically used for power generation. Nuclear Regulatory Commission (NRC). Established in 1946 to oversee the nuclear industry.

Obligation to Serve. The obligation of utility to provide electric service to any customer who seeks that service, and is willing to pay the rates set for that service. Traditionally, utilities have assumed the obligation to serve in return for an exclusive monopoly franchise. Off-peak Period. Period of relatively low system demands. Ohm. The practical mks (meter-kilogram-second) unit of electric resistance equal to the resistance of circuit in which potential difference of one volt produces current of one ampere. On-Peak. Period of relatively high system demands. Operable Nuclear Unit. A nuclear unit is "operable" after it completes low-power testing and is granted authorization to operate at full power. This occurs when it receives its full power amendment to its operating license from the Nuclear Regulatory Commission. Operating Costs. Expenses related tomaintainingday-to-dayutility functions, including operation and maintenance expenses, taxes and depreciation and amortization costs, but not interest payments or dividends. Operating costs are recovered from customers current basis, opposed to capitalized costs. Operating Revenues. Amounts billed by the utility for utility services rendered.

Operating Unit or System. Complete and self-sustaining facility or group of facilities acquired and operated intact. Options. An option is contractual agreement that gives the holder the right to buy (call option) or sell (put option) fixed quantity of security or commodity (i.e., commodity or commodity futures contract), at fixed price, within specified period of time. May either be standardized, exchange-traded, and government regulated, or over-the-counter customized and non-regulated. Original cost Depreciated. See Net Original Cost. Original Cost Method of Valuation. The cost of the property to the person first devoting it to public service. Other Generation. Electricity originating from these sources-biomass, fuel cells, geothermal heat, solar power, waste, wind, and wood. Other Sector. Electricity supplied to public street and highway lighting, other service to public authorities, service to railroads and railways, and interdepartmental service. Other Unavailable Capability. Net capability of main generating units that are unavailable for load reasons other than full-forced outage or schedule maintenance. Legal restrictions or other causes make these units unavailable. Outage. The period during which generating unit, transmission line, or other facility, is out of service. Overall Rate of Return. The monetary allowance for shareholders and bondholders granted by Commission. It consists of the fixed rate return in thebondholders’ contracts and theCommission’s determination of fair market return to the shareholders’ investment. Overhead Expenses. Expenditures connected with the development and operation of any revenue-producing property.

-PParallel Path Flow. AS defined by NERC, this refers to the flow of electric power on electric system’s transmission facilities resulting from scheduled electric power transfers between two other electric systems. (Electric power flows on all interconnected parallel paths in amounts inversely proportional to each path’s resistance.) Partial Forecast Test Year. A 12-month period, usually comprised of the immediately preceding 6 months and the immediately following 6 months, utility financial data used to evaluate proposed tariff revisions. Party-in-Interest. An individual or group appearing in formal proceeding. Peak Demand. The maximum level of operating requirements placed on the system by customer usage during specified period of time. Peaking Capacity. Capacity of generating equipment normally reserved for operation during the hours of highest daily, weekly, or seasonal loads. Some generatingequipmentmay be operated at certain times peaking capacity and at other times to serve loads on an around-the-clock basis. Peak Load (or Peak Demand). The electric load that corresponds to maximum level of electric demand in specified time period. Peak Load Plant. A plant usually housing old, low-efficiency steam units; gas turbines, diesels; or pumped-storage hydroelectric equipment normally used during the peak-load periods. Peak Load Pricing. Pricing which reflects different prices for system peak periods or for hours of the day during which loads are normally high. Peak

Station. Generating station normally in operation only to provide power during maximum load periods; usually high operating cost facility or facility which cannot be operated for long periods of time.

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Peak Shaving. Means by which an electric utility lowers the peak demand on its system. Percent Differences. The relative change in quantity over specified time period. It is calculated follows-the current value has the previous value subtracted from it; this new number is divided by the absolute value of the previous value; then this new number is multiplied by Performance-BasedRegulation (PBR). Anyrate-settingmechanism which attempts to link rewards (generally profits) to desired results or targets. PBR sets rates, components of rates, for a period of time based on external indices rather than utility’s cost-of-service. Other definitions include light-handed regulation which is less costly and less subject todebate and litigation. A form of rate regulation which provides utilities with better incentives to reduce their costs than does cost-of-service regulation. Petitioner. Any party to proceeding who seeks to appeal Commission Decision, modify proposed decision, or intervene during Commission hearing. See also Intervenor. Photovoltaics (PV). A technology that produces electricity directly from sunlight. Plant. A facility at which are located prime movers, electric generators, and auxiliary equipment for converting mechanical, chemical, and/ or nuclear energy into electric energy. A plant may contain more than one type of prime mover. Electric utility plants exclude facilities that satisfy the definition of qualifying facility under the Public Utility Regulatory Policies Act of 1978. Plant Acquisition Adjustment. The difference between the cost to the utility of acquired plant and the original cost of the plant less the amount credited at the time of acquisition for depreciation and amortization and contributions in aid of construction. Plant in Service. Capacity provided by power pool member in order for the member to meet installed or reserve capacity obligations.

D Plant Use. The electric energy used in the operation of plant. Included in this definition is the energy required for pumping at pumpedstorage plants. Plant-Use Electricity. The electric energy used in the operation of plant. This energy total is subtracted from the gross energy production of the plant; for reporting purposes the plant energy production is then reported net figure. The energy required for pumping at pumped-storage plants is, by definition, subtracted and the energy production for these plants is then reported net figure. Pool Capacity. Capacity provided by power pool member in order for the member to meet installed or reserve capacity obligations. Poolco. A specialized, centrally dispatched spot market power pool that functions short-termmarket. It establishestheshort-term market clearing price and provides system of long-term transmission compensation contracts. It is regulated to provide open access, comparable service and cost recovery. A Poolco would make ancillary generation services, including load following, spinning reserve, backup power, and reactive power, available to all market participants on comparable terms. In addition, the Poolco provides settlement mechanisms when differences in contracted volumes exist between buyers and sellers of energy and capacity. Pooling. Different utilities share their physical plants or resources to increase their efficiency and conserve energy. Pool-to-Pool. An arrangement between power pools to provide electric services to each other. Power. The rate at which energy is transferred. Electrical energyis usually measured in Watts. Also used for measurement of capacity. Power Authorities. Quasi-governmental agencies that perform all some of the functions of public utility.

or

Power (Electrical). An electric measurementunit of powercalled voltampere (VA) is equal to the product of 1 volt (V) and 1 ampere

(A). This is equivalent to 1 watt (W) for direct current system and unit of apparent power is separated into real and reactive power. Real power is the work-producing part of apparent power that measures the rate of supply of energy and is denoted kilowatts (kW). Reactive power is the portion of apparent power that does no work and is referred to kilovars (kvar); this type of power must be supplied to most types of magnetic equipment, such motors, and is supplied by generator or by electrostatic equipment. Voltamperes are usually divided by 1,000 and called kilovoltamperes (kVA). Energy is denoted by the product of real power and the length of time utilized; this product is expressed kilowatt-hours (kwh). Power An entity established to coordinate short-term operations to maintain system stability and achieve least-cost dispatch. The dispatch provides backup supplies, short-term excess sales, reactive power support, and spinning reserve. Historically, some of these services were provided on unpriced basis part of the members’ utility franchise obligations. Coordinating short-term operations includes the aggregation and firming of power from various generators, arranging exchanges between generators, and establishing (or enforcing) the rules of conduct for wholesale transactions. The pool may own, manage and/or operate the transmission lines (”wires”) or be an independent entity that manages the transactions between entities. Often, the power pool is not meant to provide transmission access and pricing, or settlement mechanisms if differences between contracted volumes among buyers and sellers exist. Preferential Tariffs or Rates. A tariff or rate by which specified class of customers is given special treatment. For example, ”lifeline” rate to provide very basic service to low-income customers. Price. The amount of money or consideration-in-kind for which is bought, sold, or offered for sale.

service

Price Caps. Relatively recently devised means of regulating utility rates an alternative to rate of return regulation. The prices the utility charges are capped at certain level, allowing the utility to earn larger rate-of-return if it cuts expenses, increases productivity, etc.

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Price/Earnings Ratio (P/E). The market price per share of common stock divided by the annual earnings per share of common stock. Prime Mover. The motive force that drives an electric generator (e.g., steam engine, turbine, or water wheel). Production (Electric). Act or process of producing electric energy from other forms of energy; also, the amount of electric energy expressed watt-hours (M). Pro Se. On

person’s own behalf.

Public Authorities. Electricity supplied to municipalities or divisions or agencies of State and Federal governments, usually under special contracts or agreements that are applicable only to public authorities. Publicly Owned ElectricUtility. A class of utility that includes those utilities operated by municipalities, political subdivisions, utility or power districts, and State and Federal power agencies. Public Power. Electric utility owned by municipality or utility district.

government entity such

Public Utilities Holding Company Act (PUHCA). Enacted in 1935, its intent was to prevent electric and utilities from using complex corporate structure to evade regulatory oversight. Public Utility. A business or service engaged in regulatory supplying the publicwith some commodity or service. Also, utilityowned and/or operated by public authority, such municipality or district or public housing authority. Public Utility District. Publicly owned energy producer or distributor. Normally districts incorporate areas larger than single municipality and operate special government districts, independent of State regulatory agencies. Public Utility Regulatory PoliciesAct(PURPA). Part of the National Energy Act of 1978, it requires State regulatory agencies to consider

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variety of issues affecting electric and utility customers. The intent is to establish standards and policies that promote energy conservation, encourage the efficient use of facilities and resources, and provide equitable rates for consumers. Public Law 95-617, Statute 3117. Pumped-Storage Hydroelectric Plant. A plant that usually generates electric energy during peak-load periods by using water previously pumped into elevated storage reservoir during off-peak periods when excess generating capacity is available to do so. When additional generating capacity is needed, the water can be released from the reservoir through conduit to turbine generators located in power plant lower level. Pure Pumped-Storage Hydroelectric Plant. A plant that produces power only from water that has previously been pumped to upper reservoir.

Qualifying Facility (QF). This is cogenerator or small power producer that meets certain ownership, operating and efficiency criteria established by the Federal Energy Regulatory Commission (FERC) pursuant to the and has filed with the FERC for QF status or has self-certified. To become QF, the independent power supplier had to produceelectricity with specified fuel type (cogeneration or renewables), and meet certain ownership, size, and efficiency criteria established by the Federal Energy Regulatory Commission.

-RRate Base. Investment in operating plant, less depreciation, upon which regulated utility is entitled to earn profit. Rate Base Regulation. Method of regulation in which utility is limited in operations to revenue level which will recover no more than its expenses plus an allowed rate of return on its rate base.

D Rate Case. Procedures followed by regulatory authority so that ity may present and justify its need for rate change. Rate Case Audit. Audit performed in the course of

util-

rate case.

Rate of Return (ROR). Percentage allowed by the Commission fair and reasonable profit. May refer to rate of return on rate base or overall rate of return. Rate Structure. The design and organization of billing charges by customer class to distribute the revenue requirement among customer classes and rating periods. Real-Time Pricing. The instantaneous pricing of electricity based on the cost of the electricity available for use at the time the electricity is demanded by the customer. Regional Transmission Group (RTG). An organizationcomposed of volunteers from transmission owners, users, and others interested in coordinating transmission planning and expanding, the operation and use of, on regional and inter-regional basis. Such groups are subject to FERC approval. Regulatory The time elapsed between the filing of an application for rate change and the issuance of final decision. Reliability. Electric system reliability has two components-adequacy and security. Adequacy is the ability of the electric system to supply the aggregate electrical demand and energy requirements of the customers at all times, taking into account schedules and unscheduled outages of system facilities. Security is the ability of the electric system to withstand sudden disturbances such electric short circuits or unanticipated loss of system facilities. Remaining Life. The expected future service life of an asset at any given age. Removal Costs. The costs of disposing of plant, whether by demolishing, dismantling, abandoning, sale or other. Removal costs increase the amount to be recovered depreciation expense.

Renewables. Energy sources that in theory are indefinitely sustainable, such solar energy, geothermal heat, hydropower and wind. RenewableResources.Renewable energyresourcesarenaturally replenishable, but flow-limited. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Some (such geothermal and biomass) may be stocklimited in that stocks are depleted by use, but on time scale of decades, or perhaps centuries, they can probably be replenished. Renewable energy resources include: biomass, hydro, geothermal, solar and wind. In the future they could also include the use of ocean thermal, wave, and tidal action technologies. Utility renewable resource applications include bulk electricity generation, onsite electricity generation, distributed electricity generation, nongrid-connected generation, and demand-reduction (energy efficiency) technologies. Reproduction Cost. Estimated cost to reproduce existing properties in their current form and capability at current cost. Request for Proposal (RFP). Announcement of willingness to consider bids for specific project or part thereof. Reregulation. The design and implementation of regulatory practices to be applied to the remaining regulated entities after restructuring of the vertically-integrated electricutility.The remaining regulated entities would be those that continue to exhibit characteristics of natural monopoly, where imperfections in the market prevent the realization of more competitive results, and where, in light of other policy considerations, competitive results are unsatisfactory in one ore more respects. Reregulation could employ the same or different those used before restructuring. regulatory practices Research and Development (R&D). Research is the discovery of fundamental new knowledge. Development is the application of new knowledge to develop potential new service or product. Basic power sector R&D is most commonly funded ad conducted through the Department of Energy (DOE), its associated government laboratories, university laboratories, the Electric Power Research Institute (EPRI), and private sector companies.

Reseller. In general, any entity which purchases goods or services to in turn sell the same goods or services to third party. Reserve Generating Capacity. A utility’s back-up ability to insure sufficient energy supply despite occasional loss of some production capability due to mechanical failures or other problems. Reserve Margin (Operating). The amount of unused available capability of electric power system at peak load for utility system percentage of total capability. Residential Sector.The residential sector includesprivatehousehold establishments that consume energy primarily for space heating, water heating, air conditioning, lighting, refrigeration, cooking and clothes drying. The classification of an individual consumer’s account, where the use is both residential and commercial, is based on principle use. Apartment houses are included. Resource Efficiency. The use of smaller amounts of physical resources to produce the same product or service. Resource efficiency involves concern for the use of allphysical resources and materials used in the production and use cycle, not just the energy input. Retail. Sales covering electrical energy supplied for residential, commercial, and industrial end-use purposes. Other small classes, such agriculture and street lighting, also are included in this category Retail Wheeling. Transmission of electricity to customer who has purchased the electricity from another utility outside the transmitting utility’s territory. Retained Earnings. Corporate earnings that are not paid out in dividends. Return on Common StockEquity. Shareholders’earningsbased Commission’sdetermination of fairmarketreturnon shareholder’s investment. Returnon Equity (ROE).Rate Equity.

of returnallowedonCommon

on

Stock

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Revenue Requirement. Amount of return (rate base times rate of return) plus operating expenses. Right-of-way. The land on which is built public road, railroad or public utility (as for transmission line). Running and Quick-Start Capability.The net capability of generating units that carry load or have quick-start capability. In general, quick-start capability refers togenerating units thatcan be available for load within 30-minute period. Rural Electrification Administration (REA). Part of Department of Agriculture established in 1935 and authorized in 1949 to make loads for extending electric and telephone service into rural areas, by making available low cost loans. A lending agency of the US Department of Agriculture, the REA makes self-liquidation loans to qualified borrowers to finance electric and telephone service to rural areas. The REA also finances the construction and operation of generating plants, electric transmission and distribution lines, or systems for the furnishing of initial and continued adequate electric services to persons in rural areas not receiving central station service. Reorganized and renamed in 1995.

Sales. The amount of kilowatt-hours sold in given period of time; usually grouped by classes of service, such residential, commercial, industrial, and other. Other sales include public street and highway lighting, other sales to public authorities and railways, and interdepartmental sales. ScheduledOutage. The shutdown of generating unit, transmission line, or other facility, for inspection or maintenance, in accordance with advance schedule. Scrubber. A device at an electric generating plant to remove air contaminants produced by burning fossil fuels.

Seasonal Rates. Rates designed to encourage conservation during time of the year when energy consumption is high. Securities and Exchange Commission The federal agency which supervises the operation of securities exchanges and related aspects of the securities business. Securitization. An often discussed means of dealing with potential electric utility ”stranded costs” is securitization. Securitization refers to the creation of financial security or bond that is backed by revenue stream pledged to pay the principal and interest of that security. This device provides utilities an up-front, lump-sum payment from the sale of the security. Securitization requires the creation of transferable property right (through far, through legislation) to collect from the utility’s ratepayers “customer transition charge” or through some other “non-bypassable” obligation placed on ratepayers. The charge is usually, but not always, based on some portion of the utility’s “stranded” or uneconomic costs. If this option is exercised by the utility, the property right can be transferred by the utility to designated trustee, “bankruptcy remove special purpose entity”. The trustee then issues bond and pays theutility the case proceeds from the sale of the security in the financial market less transaction costs. The securitized bondholders then have the right to collect the charge from the utility’s customers that are obligated to pay it. The utility or distribution company collects the customer charge from the customers and transfers the funds to the trustee that then transfers it to the securitized bondholders. The cash proceeds the utility receives should equal the discounted present value of the customer charge revenue stream. Self-service Wheeling. Primarily an accounting policy comparableto net-billing or running the meter backwards. An entity owns generation that produces excess electricity at one site, that is used at another site(s) owned by the same entity. It is given billing credit for the excess electricity (displacing retail electricity costs minus wheeling charges) on the bills for its other sites. Separations. Process by which utility’s expenses and investment in plant are divided between interstate operations and intrastate operations.

Service Area. Territory in which utility is required or has the right to supply service to ultimate customers. Service Life. The period of time from the date unit of property is place in service until it is taken out of service. Average service life is the weighted average of the lives for all units within plant account or group. Service Value. The difference between original cost and net salvage value of utility plant. Small Power Producer. One that production capacity of no more than 80 megawatts and uses biomass, waste, or renewable resources (such wind, water, or solar energy) to produce electric power. Special Contracts. Any contract that provides utility service under terms and conditions other than those listed in the utility’s tariffs. For example, an electric utility may enter into an agreement with large customer to provide electricity at rate below the tariffed rate in order to prevent the customer from taking advantage of some other option that would result in the loss of the customer’s load. This generally allows that customer to compete more effectively in their product market. Special Contract Rate Schedule. An electric rate schedule for an electric service agreement between utility and another party in addition to, or independent of, any standard rate schedule. Special Purpose Rate Schedule. An electric rate schedule limited in its application to some particular purpose or process within one, or more than one, type of industry or business. Spot Pricing.

commodity’s market price.

Standby Facility. facility that supports utility system and is generally running under no-load. It is available to replace or supplement facility normally in service.

D Standby Service. Support service that is available, needed, to supplement consumer, utility system, or to another utility if schedule or an agreement authorizes the transaction. The service is not regulatory used. Statutory. Deriving from or ordered by state or federal legislation which has been enacted, thus is statue (law). Steam-Electric Plant (Conventional). A plant in which the prime mover is steam turbine. The steam used to drive the turbine is produced in boiler where fossil fuels are burned. Stipulation. Prior to rate increase hearing, the different parties may agree on the resolution of one or more issues. The resulting agreement (stipulation) is presented at the hearing. Straight Line Average Service Life. Principle objective is the determination for each year of the expenses of depreciation attributable to that year’s operation. Straight Line Method of Depreciation. Thecost of an asset is spread equally over the number of years the asset is estimated to beuseful. Straight Line Remaining Life. Depreciation reserve is reviewed before applying this method; only the rate is reviewed thereafter. Stranded Benefits. Public interest programs and goals which could be compromised or abandoned by restructured electric industry. These potential “stranded benefits” might include: environmental protection, fuel diversity, energy efficiency, low-income ratepayer assistance, and other types of socially beneficial programs. Stranded Investment. Investments or expenditures made byutilities that become unrecoverable when customer changes the nature of services it receives from that utility. Also called stranded assets, sunk costs, etc. Substation. An assemblage of equipment for the purpose of switching and/or changing or regulating the voltage of electricity.

Sunk Cost. A cost that has already been incurred and therefore cannot be avoided by any strategy going forward. Supply-side. Activities conducted on the utility’s side of the customer meter. Activities designed to supply electric power to customers, rather than meeting load through energy efficiency measures or onsite generation on the customer side the meter. Supply-side Management. Generally refers to the utility’s management of its generating and transmission facilities formaximum efficiency. Demand and Supply side Management techniques are combined in Integrated Resource Planning (IRP). Switching Station. Facility equipment used to tie together two more electric circuits through switches. The switches are selectively arranged to permit a circuit to be disconnected, or to change the electric connection between the circuits. System (Electric). Physically connected generation, transmission,and distribution facilities operated an integrated unit under one central management, or operating supervision. System Integration (of new technologies). The successful integration of new technology into the electric utility system by analyzing the technology’s system effects and resolving any negative impacts that might result from its broader use.

-TTail Block. The last or lowest priced block of energy in rate structure.

declining block

Take and Energy sales contract which requires payment only for energy actually delivered. Take or Pay (TOP). Energy sales contract which requires payment for given amount of energy whether the customer takes it or not.

D Tariff. A document, approved by the responsible regulatory agency, listing the terms and conditions, including schedule of prices, under which utility services will be provided. Testimony. A declaration, oral or written, given under oath at hearing and subject to cross-examination.

public

Tennessee Valley Authority (TVA). A Federal Government owned corporation established in 1933 to conduct unified program of resource development in the seven state Tennessee River Valley. Principle efforts are electric power generation, agricultural development and flood control, water supply and river navigation projects. Therm (th). Heat measurement equal to 100,000 British Thermal Units (Btus). Equivalent to about 100 cubic feet of natural Time-of-Day Rates (TOD). A rate design which prices energy consumption higher during peak usage times of the day. Used to encourage energy conservation. In telecommunications, TOD rates are used to encourage calling during off-peak times. Time-of-Use Rates (TOU). The pricing of electricity based on the estimated cost of electricity during particular time block. Time-of-use rates are usually divided into three or four time blocks per twentyfour hour period (on-peak, off-peak and sometimes supper offpeak), and by seasons of the year (summer and winter). Real-time pricing differs from TOU rates in that it is based on actual opposed to forecast) prices which may fluctuate many times day and are weather-sensitive, rather than varying with fixed schedule. Total Factor Productivity (TFP). A method of measuring utility’s overall productivity.

electric

Transformer. A devise employing the principle of mutual induction to convert variations of current in primary circuit into variations of voltage and current in secondary circuit. Transformation. The process by which electricity voltage is increased or decreased. Generally, voltage is increased before electricity enters the transmission line, and decreased before it enters the distribution line.

Transmission. The movement or transfer of electric energy over an interconnected group of lines and associated equipment between points of supply and points at which it is transformed for delivery to consumers, or is delivered to other electric systems. Transmission is considered to end when the energy is transformed for distribution to the consumer. Transmission-Dependent Utility. A utility that relies on its neighboring utilities to transmit to it the power it buys from its suppliers. utility without its own generation sources, dependent on another utility’s transmission system to get its purchased power supplies. Transmission Line.Forelectricity, the line which carries electricity at high voltage from points of supply (generating plant or interconnection with other utilities) to substation where it is reduced in voltage and handed off to distribution lines. Transmission System (Electric). An interconnectedgroup of electric transmission lines and associated equipment for moving or transferring electric energy in bulk between points of supply and points at which it is transformed for delivery over the distribution system lines to consumers, or is delivered to other electric systems. Transmitting Utility (Transco).Thisis regulated entity which owns, and may construct and maintain, wires used to transmit wholesale power. It may or may not handle the power dispatch and coordinationfunctions. It is regulated to providenon-discriminatory connections, comparable service and costrecovery. According to EPAct, any electric utility, qualifying cogeneration facility, qualifying small power production facility, or Federal power marketing agency which owns or operates electric power transmission facilities which are used for the sale of electric energy at wholesale. Turbine. A machine for generating rotary mechanical power from the energy of stream of fluid (such water, steam, or hot Turbines convert the kinetic energy of fluids to mechanical energy through the principles of impulse and reaction, or mixture of the two.

D

-UUnbundled Rate. Individual services are listed and priced separately. Historically, monopoly utilities provided all, or number of, services for single rate. With increasing competition, rates for component parts of services are being disaggregated (or unbundled) and offered separately. Unbundling. Disaggregating electric utility service into its basic components and offering each component separately for sale with separate rates for each component. For example, generation, transmission and distribution could be unbundled and offered discrete services. Universal Service. Electric service sufficient for basic needs (an evolving bundle of basic services) available to virtual all members the population regardless of income. Unmetered Service. Energy used and billed without being recorded by meter, usually where the use is constant, such light on automatic timer. Used and Useful Test. Criteria for determining the admissibility of utility plant component of rate base. Generally, plant must be in use (not under construction or standing idle awaiting abandonment) and useful (actively helping the utility provide efficient service). Utility. A regulated entity which exhibits the characteristics of natural monopoly. For thepurposes of electric industryrestructuring, ”utility” refers to the regulated, vertically-integrated electric company. ”Transmission utility” refers to the regulated owner/operator the transmission system only. ”Distribution utility” refers to the regulated owner/operator of the distribution system that serves retail customers. Utility Plant. The summation all equipment used for the purpose of generation, transmission and/or distribution of utility service. Or, recorded explanation is maintained of this equipment.

-V-

Value of Service Pricing. Method of pricing which puts more weight on the perceived value of the service, rather than the cost of the service. Variable Costs. Costs which change with the increase or decrease of output or traffic. Vertical Integration. An arrangement whereby the same company owns all the different aspects of making, selling, and delivering product or service. In the electric industry, it refers to the historically common arrangement whereby utility would own its own generating plants, transmission system, and distribution lines to provide all aspects of electric service. Vertical Service. The utility company performs all major utility services for its customers, including production, transforming, transmittal anddistribution. Monopoly utilities in thepastfrequentlyprovided vertical service; with increasing competition, rates for component parts of service are being disaggregated (or unbundled) and offered separately. Volt. The practical mks unit of electrical potential difference and electromotive force equal to the carrying constant current of one ampere when the power dissipated between these two points is equal to one watt and equivalent to the potential difference across resistance of one ohm when one ampere is flowing through it. A unit of electrical potential difference and electromotive force equal to 1.00034 times the International System unit. Voltampere (VA). A unit of electric measurement equal to the product of volt and an ampere that for direct current constitutes measure of power equivalent to watt. Volumetric Wires Charge. A type of charge for using the transmission and/or distribution system that is based on the volume of electricity that is transmitted.

Watt (W). The absolute mks unit of power equal to thework done at the rate of one absolute joule per second or to the rate of work represented by current of one ampere under pressure of one volt and taken the standard in the US; horsepower. Watt-hour electrical energy unit of measure equal to one watt of power supplied to, or taken from, an electric circuit steadily for one hour. Weatherization. Energy conservation measures, such installing insulation and storm windows, sealing holes in exterior walls, etc., intended to reduce heating and cooling. Wheeling. The transmission of electricity by an entity that does not own or directly use the power it is transmitting. Wholesale wheeling is used to indicate bulk transactions in the wholesale market, whereas retail wheeling allows power producers direct access to retail customers. This term is often used colloquially meaning transmission. Wheeling Service. The movement of electricity from one system to another over transmission facilities of intervening systems. Wheeling service contracts can be established between two or more systems. WholesaleCompetition.Asystemwhereby distributor of power would have the option to buy its power from variety of power producers, and the power producers would be able to compete to sell their power to variety of distribution companies. Wholesale PowerMarket. The purchase and sale of electricity from generators to resellers (who sell to retail customers) along with the ancillary services needed to maintain reliability and power quality at the transmission level. Wholesale Transmission Service. The transmission of electric energy sold, or to be sold at wholesale in interstate commerce (from EPAct).

Wheeling

70

Wires Charge. A broad term which refers to charges levied on power suppliers or their customers for the use of the transmission or distribution wires.

XY Recorder. An output device that sketches the relationship between two variables onto grid of plane rectangular coordinates. Ex.analogue translation of digital demand incremental pulse on XY coordinates. -Y-

Yield. Returned profit obtained from an investment. As used in relation to investor-owned utilities-the rate of return or yield is quoted in incremental units of on the stock exchange.

Zone Heat. A central heating and/or cooling system which is arranged so that different temperatures can be maintained in two or more areas of the building being heated or cooled or simultaneously heated or cooled.

Appendix E

TOCONVERT

MULTIPLY BY

6.452 10-4 0.1550 1,550.0 6.452 3,600.0 0.03731 1.257 2.540 100.0 1.257 0.3937 39.37 0.4950 0.01 0.0254 0.01257

-B10.409 1.0550 71

1O1O

TO CONVERT

INTO

MULTIPLY BY

Btu Btu Btu Btu Btu Btu Btu Btu/hr Btu/hr Btu/hr Btu/hr Btu/min Btu/min Btu/min Btu/min Btu/sq ft/min

foot-lbs gram-calories horsepower-hrs joules kilogram-calories kilogram-meters kilowatt-hrs foot-pounds/sec gram-cal/sec horsepower-hrs watts foot-lbs/sec horsepower kilowatts watts watts/sq in

778.3 252.0 3.931 1,054.8 0.2520 107.5 2,928 0.2162 0,0700 3.929 0.2931 12.96 0.02356 0.01757 17.57 0.1221

calories, gram (mean) candle sq cm candle sq inch circular mils circular mils

Btu (mean) lamberts lamberts sq cms sq mils

3.9685 X 3.142 .4870 5.067 0.7854

Dyne/cm Dyne/sq cm Dyne/sq cm Dyne/sq cm dynes dynes dynes dynes

erg/sq millimeter .01 atmospheres 9.869 inch of mercury at 0°C2.953 inch of water at 4°C4.015 grams 1.020 X 10-3 joules/cm joules/meter (Newtons) kilograms 1.020 10-6

7

dynes dynes dynes/sq cm

poundals pounds bars

7.233 2.248 10-6

10-6

-Eem, pica em, pica erg sec ergs ergs ergs ergs ergs ergs ergs ergs ergs ergs ergs ergs sec ergs/sec ergs/sec ergs sec ergs/sec

inch cm dyne-cm/sec Btu dyne-centimeters foot-pounds gram-calories gram-cms horsepower-hrs joules kg-calories kg-meters kilowatt-hrs watt-hours Btu/min ft-lbs/min horsepower kg-calories/min kilowatts

'167 .4233 1.ooo 9.480 1.0 7.367 10-8 0.2389 1.020 10-3 3.7250 10-7 2.3898 1O-I' 1.020 10-8 0.2778 0.2778 1O-lo 5,688 4.427 1.341 1.433

farads Faraday/sec faradays faradays foot-candle foot-pounds foot-po~ds

microfarads ampere (absolute) ampere-hours coulombs lumen/sq meter Btu ergs

10-6 9.6500 26.80 9.649 10.764 1.286 1.356

10-10

ONVERT

74

Wheeling

TO

INTO

foot-pounds foot-pounds foot-pounds foot-pounds foot-pounds foot-pounds foot-pounds/min foot-pounds/min foot-pounds/min foot-pounds/mm foot-pounds/min foot-pounds/sec foot-pounds/sec foot-pounds/sec foot-pounds/sec foot-pounds/sec

gram-calories hp-hrs joules kg-calories kg-meters kilowatt-hrs Btu/min foot-poundslsec horsepower kg-calories/min kilowatts Btu/hr Btu/min horsepower kg-calories/min kilowatts

0.3238 5.050 1.356 3.24 10-4 0.1383 3.766 1.286 10” 0.01667 3.030 lom5 3.24 10-4 2.260 4.6263 0.07717 1.818 10” 0.01945 1.356

gilberts gilberts/cm gilberts/cm gilberts/cm gram-calories gram-calories gram-calories gram-calories gram-calories gram-calories gram-calories/sec gram-centimeters gram-centimeters gram-centimeters gram-centimeters gram-centimeters

ampere-turns amp-tums/cm amp-turns/in amp-turns/meter Btu ergs foot-pounds horsepower-hrs kilowatt-hrs watt-hrs Btu/hr Btu Ergs joules kg-cal kg-meters

0.7958 0.7958 2.021 79.58 3.9683 4.1868 8.0880 1.5596 1,1630 1.1630 14.286 9.297 980.7 9.807 2.343 10-5

BY

MULTIPLY

5

10”

E MULTIPLY BY

-Hhorsepower horsepower horsepower horsepower (metric) ft lb/sec) horsepower ft lb/sec) horsepower horsepower horsepower horsepower (boiler) horsepower (boiler) horsepower-hrs horsepower-hrs horsepower-hrs horsepower-hrs horsepower-hrs horsepower-hrs horsepower-hrs horsepower-hrs

Btu/min foot-lbs/min foot-lbs/sec horsepower ft Ib/sec) horsepower (metric) ft lb/sec) kg-calories/min kilowatts watts Btu/hr kilowatts Btu ergs foot-lbs gram-calories joules kg-calories kg-meters kilowatt-hrs

International International International International

ampere (absolute) volts (absolute) joules (absolute) joules

joules joules joules

ampere volt volt volt

Btu ergs foot-pounds

lo6 lo6 lo5

lo4

107


2 76 TO CONVERT

INTO

joules joules joules

kg-calories kg-meters watts-hrs

kilograms-calories kilograms-calories kilograms-calories kilograms-calories kilograms-calories kilograms-calories kilograms-calories kilogram meters kilogram meters kilogram meters kilogram meters kilogram meters kilogram meters kilowatts kilowatts kilowatts kilowatts kilowatts kilowatts kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs kilowatts-hrs

Btu foot-pounds hp-hrs joules kg-meters kilojoules kilowatt-hrs Btu ergs foot-pounds jaules kg-calories kilowatt-hrs Btu/min foot-pounds/min foot-pounds/sec horsepower kg-calories/min watts Btu ergs foot-pounds gram-calories horsepower-hrs joules kg-calories kg-meters pounds of water evaporated from and at

MULTIPLY BY

10”

lo7

lo4

lo6

lo6 lo5

MULTIPLY

TO

kilowatts-hrs

pounds of water raised from 62" to 212°F. 22.75

-Llumens/sq ft Lumen .001496Lumen lumen/sq ft lux

foot-candles 1 Spherical candle power .07958 Watt Lumen/sq10.76 meter foot-candles 0.0929

megohms megohms microfarad micrograms microhms microhms microliters

microhms ohms farads grams megohms

Newton

Dynes

1

Ohm ohms ohms

Ohm (absolute) megohms microhms

1.0005 10-6 106

Planck's quantum poundals

Erg second dynes

6.624 13,826.

liters

105

TO

MULTIPLY BY

poundals poundals poundals poundals pounds pounds pounds pound-feet

joules/cm joules/meter (Newtons) kilograms pounds drams joules/cm joules/meter (Newtons) cm-dynes

1.383 10” 0.1383 0.01410 0.03108 256. 0.04448 4.448 1.356 lo7

quadrants (angle) quadrants (angle) quadrants (angle) quadrants (angle)

degrees minutes radians seconds

90.0 5,400.0 1.571 3.24 X 105

-Rradians radians radians radians radians sec radians/ sec radians/sec radians/sec/sec radians/sec/sec radians/sec/sec

degrees minutes quadrants seconds degrees/sec revolutions/min revolutions/sec revs/min/min revs/min/sec revs sec/ sec

57.30 3,438. 0.6366 2.063 lo5 57.30 9.549 0.1592 573.0 9.549 0.1592

seconds (angle) seconds (angle) seconds (angle)

degrees minutes quadrants

2.778 0.01667 3.087

Avvendix E TO CONVERT

INTO

seconds (angle)

radians

BY

-Ttemperature

absolute temperature

temperature

temperature

temperature

absolute temperature

(OF)

temperature (OF)

temperature ("C)

-V-

Volt/inch Volt (absolute)

Volt/cm Statvolts

watts watts watts watts watts watts watts watts Watts (absolute) Watts (absolute) watt-hours watt-hours watt-hours watt-hours

Btu/hr Btu/min ergs/sec foot-lbs/min foot-lbs/sec horsepower horsepower (metric) kg-calories/min Btu (mean)/min joules/sec ergs foot-pounds gram-calories

MULTIPLY

TO CONVERT

INTO

watt-hours watt-hours watt-hours watt-hours Watt (International)

horsepower-hrs kilogram-calories kilogram-meters kilowatt-hrs Watt (absolute)

MULTIPLY BY

-X-

none -Y-

yards yards yards yards yards yards

none

centimeters kilometers meters miles miles (stat.) millimeters

0.001

Index

Agents 83 Agent Charge 78 Aggregator 220 Agreement (Retail Wheeling Sale) 128 Alaska Power Administration 21 Alternative Current (AC) 50 Amperes 271 Analyzing Utility Costs 27 Avoided Cost 222

-BBalancing 144 Basic Data Needed 27 Bidders 94, 102, 103, 109, 116 Billing 93, 100, 136 Boiler/Water Heaters 39 Bonneville Power Administration 21 British Thermal Units (Btu) 66 Energy Comparisons 67 Brokers 78, 83 Bundled Rates 149 Buss 49 -C-

Capacitors 54 Categories of Retail Wheeled Electricity 70 Coal 66, 69

Cogeneration 121 Commodity 46, 160 Commodity Origination Points 5 Competitive Service k d e r 35 Complete Tariff 26, 27 Confidential Information 118 Contracts 79, 83 Electricity Commodity Only 87 Explanation 94 ElectricityCommodityOnly with (3) Pricing Options 101 Explanation 111 Electricity, Natural Gas, Water/ Sewer Engineering Services 115 Explanation 124 Conversion Factors (Appendix E) 271 Cool Storage 40 Cooperative Utilities 20 Cost-of-Service 22 Customer Check List 164 Customer Equipment Fees 92, 99 Customer Meter point 155

-DDaily Usage Cost Printout (Example) 32 Death Spiral 46 D. Electricity Price Index 77, 132 Dekatherm (Dth) 66

Deliveries 136, 151 Demand 143 Demand-Side Planning 39 Direct Current (DC) 53 Discounts 92, 96 Distribution Charge 80 Distribution Grid 74 Docket Number 18 Due Process 19 Dyne 272

(EMS) 40 Energy Partnerships 86 Energy Service Companies (ESCO) 37,39,165,167,168,169 Energy Services 121, 122, 124 Engineering Services 115, 124, 160 Ergs 273 Experimental Rates 27, Experimental Tariff Schedule 30

-E-

Facilities 102,116 Farads (faraday) 273 Federal Energy Regulatory Commission (FERC) Areas Regulated 9 Fees 92, 98 FERC Order 9 Introduction 10 Open Access 12 Transmission/Local Distribution 13 Stranded Costs 14 Federal Power Act (FPA) 11 Federal Regulatory Agencies 171 Federal Utilities 21 Final Rule 12 Firm Delivery 77, 133 Firm Distribution 16 Firm Service 16, 70 Fixed Discount 107, 123, 147 Fixed Price 132 Fixed Series Capacitors 54 Florida Reliability Coordinating Council (FRCC) 58, 59 Flow of Electricity 23 Fluorescent Lighting 39 F o o t - P o ~ d s274 Force Majeure 93, 100, 138, 153

East Central Area Reliability Coordination Agreement (ECAR) 58, 59 Efficient Magnetic Hybrid Ballasts 39 Electric Chillers 39 Electricity Commodity Only RFP 87 Electricity Commodity Only with (3) Pricing Options RFP 101 Electricity Consumers Resource Council (ELCON) 56 Electricity, Natural Gas, Water/ Sewer Engineering Services RFP 115 Electricity, Overview 3 Electricity Retail Wheeling Sale Agreement 128 ElectricReliabilityCouncil of Texas (ERCOT) 58, 59 Electronic Ballasts 39 Electronic Transfer 137 Employment Equal Opportunity (EEO) 90, 95, 105, 119 Energy Btu Comparisons 67 Energy Efficient Motor Drives 40 EnergyManagementSystems

For-Profit Utilities 16, 181 Fuel Costs 92, 97 Fuel Oil 66 Futures Price 77 -GGas-fired Air Conditioning 39 Generation 52, 80 Generator 239 Gigawatt (GW) 239 Gilberts 274 Glossary (Appendix D) 219 Gram-Calories 274 Gram-Centimeters 274 Grid 240

Harmonic Levels 61 Heat Pumps 39 Hedging Contracts 240 Hertz 61,120 High Intensity Discharge Lamping 39 High Voltage DC (HVDC) 53, 80 Horsepower 275

Independent System Operators 12 Insurance 90,95,105,119 Interconnection 53 International Boundary and Water Commission 21 Interruptible Distribution 16 Interruptible Service 16, 70, Interstate 7 Interstate Transmission Charges 79, 92, 97 Intervenor Groups 17

Intrastate 15 Distribution Line Losses 92, 98 Investor-Owned Companies 16, 181

-F Joule 243, 275 Jurisdictional 244

Kilovolt (kV) 244 l l o w a t t (kW) 244,276 Kilowatt-hour (kwh) 66 Kirchoff’s Laws 48

-LLetter of Understanding 136 Lighting Controls 39 Line Capacity 49 Line Losses 51, 74 Line Loss Fees 79, 92, 98 Loop Flow 48 Low-Income Home Energy Assistance Program (LIHEAP) 245 Lumens 277

Map of the North American Electric Reliability Council Regions 59 Marketers 78, 84 Market Service 16 MegaVARS (MVARS) 50 Megawatts 246 Meter Point 74 Meter Point Pricing 149 Metering Problems 51 Mid American Interpool Network (MAIN) 58, 59 Mid Atlantic Area Council

Wheeling

(MAAC) 59 Mid Continent Area Power Pool 58, 59 Minimum Guaranteed Discount 111 Miscellaneous fees 81 Municipalities 19 Municipal Utilities 15

-P-

Parallel Path 48 Passive Filters 54 Peak Power Demand 39 Peak Shaving 121 PerformanceSpecifications 106, 112 Periodic Reports 17 Permits 119 -NPoint-of-Usage 143 Potential Provider Partners (ESNatural Gas 115, 121 COS) 167 Negotiable Rate Poundals 277 Negotiated Incremental Rates 71 Power Factor, Correction Factors Newton 277 Nominations 144 40 Non-Firm (Interruptible) Delivery Power Pools 58, 59 Power Quality 61 77, 133 Pre-Bid Meeting 94 North American Reliability CounPricing Criteria 15 cil Regions (NERC) 57, 59 Producers 78, 84 NortheastPowercoordinating Pro Forma Tariff 12 Council 59 Not-for-Profit 19 Propane 66 Notice of Proposed Rules (NOPR) ProposalSpecifications 107, 113, 122 Proprietary Information Clauses 89,95,104,118 Provider’s Gross Margin 92, 98 OASIS 11 Public Service Commissions 17 Occupancy Sensors 39 Public Utility Commissions 17 Off-peak Generation Service 77 Off-Tariff Schedules 27,34 Ohm 277 On-Peak and Off-peak Schedules Quadrants 278 Qualification Process 117 77, 133 Quality Specifications 106, 120 Open Access 12 Quasi-Cooperative 84 Open Book Arrangements 114 Options 14 Origination Points 5 Radians 278 Out-of-Merit Dispatch 49 Railroad Commission of Texas 17 Overview of Electricity 3

Rate Schedule 26 Reactive Power 50 Real Time Pricing 28 Receipt/Meter Point 74 Reflectors 39 Regulation 8 Interstate Intrastate 14 Regulatory Agencies 171 Federal State 172 Request for Proposal (RFP) 37,85, 86,87,102,115, 116 Response Specification 106 Retail Wheeling 45 Basics Categories Contract Process 83 Electricity Sale Agreement 128 Processes 65 Rooftop Air Conditioning 39 Rural Electric Cooperative Utilities 20 Rule #S88 9

Southwestern Power Administration 21 Spot Market Pricing 146 State Fees 92, 99 State Intervenor Groups 17 State Regulatory Agencies 172 Miscellaneous Information (Appendix C) 211 Static VAR Compensation (SVCs) 54 Static VAR Controls 54 Stranded Costs 14 Stranded Investments 81 Recovery Costs 81, 99 Substitutions, (Contract) 106, 120 Subsynchronous Oscillations 54 Suppliers 102,116 Surcharges 137

Tariff15,26 Temperature 279 Tennessee Valley Authority (TVA) 21 Thermal Insulation 40 Thermal Storage 40 Sample: Utility Data Request Form Thyristor Converters 53 Letter 40 Time Tracker 163 Title 84, 138, 153 Seconds (Angle) 278 Traders 84 Self-Regulated 20 Services 116 Transformation Costs 80 Transmission Agreements 138, 152 Serving Utility 143 Transmission Grid 73 Shared Savings 107, 108 Shunt Compensation 54 Transmission/Local Distribution Southeastern Electric Reliability 13 Council (SERC) 58 Transmission Planning 52 Southeastern Power AdministraTurbine Generators 54 tion 21 True Energy Cost Basis 66, 68 Southwest Power Pool (SPP) 58 Truing Up 62

-UUnbundled 13 US Army Corps. of Engineers 21 US Bureau of Indian AffairsCoolidge, AZ 22 US Bureau of Indian AffairsPolson, MT22 US Bureau of Reclamation 22 Unregulated Marketing Affiliate Programs 27 Usage 143 Use-Point, Meter Cost 92, 99 Utility Audits 39 Utility Charges 80 Utility Services 111

Water/Sewer 115, 121 Watts (\V) 50,269 Watt-hours (Wh) 279 Web Sites 65,66 Western Area Power Administration 22 Western Systems Coordinating Council (WSCC) 58, 59 Wheeling 74,269 Window Air Conditioning 39 Window Film 40 Workman's Compensation 105,119 -XXY Recorder 270

Variable Energy Services Cost ConYards 280 tracts 123 Yield27 VARS 50 Vertical Service 268 Voltage 50 -ZZinc Oxide Arresters/Disks 54 Voltage Levels 80 Zone Heat 270 Voltampere (VA)268 Volts120,279

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