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ERCOT Settlements and the Smart Grid

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On December 10, 2009, a sea change began in the Texas electric market. ERCOT began wholesale settlements using smart meter data on Dec. 7, 2009.

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ERCOT Settlements and the Smart Grid

  1. 1. The Texas Smart Meter Revolution<br />How Can Your Company Benefit?<br />Opportunities to Take Advantage Of Right Now!<br />May 25, 2010<br />
  2. 2. Agenda<br /><ul><li>Introduction
  3. 3. Latest Progress On Smart Meter Texas Initiatives
  4. 4. Market Opportunities</li></ul>2<br />
  5. 5. Mark Burlingame, CPASenior Director, UtiliPoint Analytics,<br />UtiliPoint International, Inc. <br />Mr. Burlingame is an international utility expert with 19 years in the utility industry including research and development, business case modeling, financial resource budgeting, business planning, system development, pricing administration, market forecasting and marketing. Prior to entering the utility industry, he was a Senior Management Consultant with Coopers & Lybrand. Mr. Burlingame's hands-on experience in several jurisdictions and markets includes the UK, Massachusetts, Pennsylvania, California, Washington, Florida, Texas and Oklahoma. <br />3<br />
  6. 6. Agenda<br /><ul><li>Introduction
  7. 7. Latest Progress On Smart Meter Texas Initiatives
  8. 8. Market Opportunities</li></li></ul><li>The Texas Market<br /><ul><li>Deregulated January 1, 2002
  9. 9. The Electric Reliability Council of Texas (ERCOT) operates the electric grid and manages the deregulated market for 75 percent of the state.
  10. 10. 6.5 million customers have choice of electric suppliers
  11. 11. 1,130 kWh/mo. average residential usage</li></ul>5<br />
  12. 12. Texas and ERCOT<br /><ul><li>Generating units: 566
  13. 13. Installed capacity: 80,076 megawatts
  14. 14. High-voltage transmission monitored: 40,327 miles
  15. 15. 828 entities generate, move, buy, or sell electricity</li></ul>6<br />
  16. 16. Some Texas Terms<br />There are 4 Transmission and Distribution Service Providers (TDSPs)<br />There are over 40 Retail Electric Providers (REPs)<br />QSE is a Qualified Scheduling Entity responsible for submitting REPs’ next day’s schedule of expected power requirements.<br />7<br />Load Serving Entity (LSE) is an organization serving end-use customers. For our purposes today, this is usually a REP.<br />
  17. 17. Texas Meter Conversion<br />Source: http://www.puc.state.tx.us/electric/projects/34610/AMITMtg0909/AMITBoardMtg0909.pdf<br />8<br />
  18. 18. 9<br />Almost 3 Petabytes of Storage Needed by 2014<br />Source: UtiliPoint proprietary database <br />
  19. 19. Smart Meter Texas (SMT) Facts<br />www.SmartMeterTexas.com<br /><ul><li>Website launched on March 23, 2010 that gives Texas LSEs & electric customers (with smart meters) online access to the information.
  20. 20. 1,034,711 AMS meters
  21. 21. 1,985 residential users have created accounts
  22. 22. 31 REP entities created and registered successfully on SMT portal3 TDSP entities created and registered successfully on SMT portal
  23. 23. 61 TDSP users created
  24. 24. 71 HAN devices successfully provisioned </li></ul>Source: http://www.puc.state.tx.us/electric/projects/34610/AMITMtg022410/SMT-AMIT-Status-FTPS-Integration_022410.pdf<br />10<br />
  25. 25. Texas Meter Data Flow<br />TDSP<br />Meter Read<br />Enrollment<br />Historical Consumption<br />Meter Reads<br />Customer<br />Wire Charges / Payments<br />Enrollment<br />Invoicing<br />Settlement Transactions<br />Remittance<br />Retailer<br />QSE<br />11<br />
  26. 26. Texas Smart Meter Data Flow<br />TDSP<br />Load Control<br />15 min Interval Meter Reads<br />HAN Events<br />HAN<br />Texas Portal & Data Repository<br />Account Data<br />Enrollment<br />Fuel Cells<br />Customer<br />Historical Consumption<br />Enrollment<br />Meter Reads<br />PHEV<br />Invoicing<br />Wire Charges / Payments<br />HAN Services<br />Retailer<br />QSE<br />Remittance<br />Settlement Transactions<br />Customer Account Data<br />Pricing<br />Solar / Dist. Gen<br />12<br />
  27. 27. The Value Chain<br />© 2010 Pariveda Solutions, Inc. <br />13<br />
  28. 28. The Retail Challenges<br />Customer Adoption and Education<br />Consumer Behavior<br />Disruptive Technology<br />New Competition<br />Systems Portfolio and Integration<br />14<br />
  29. 29. Agenda<br /><ul><li>Housekeeping
  30. 30. Introductions
  31. 31. Latest Progress On Smart Meter Texas Initiatives
  32. 32. Market Opportunities
  33. 33. Systems Impact</li></ul>questions@utilipoint.com<br />
  34. 34. Pricing Product Differentiation<br />Current Retail Market<br />After Smart Meters<br />Month to month<br />Term –plus 6, 12, 18, 24 month<br />Signing Incentives<br />Single price ($/kWh) with or without monthly base charge<br />Seasonal<br />Price guarantee <br />Limited Prepay and TOU Plans<br />MCPE plus mark up<br />Heat Rate plus NYMEX gas<br />Indexed plans<br />All Current Products and:<br />More robust Prepay and TOU plans<br />Contract-for-differences (RTP using MCPE and prearranged block or load shape<br />Creative “Fixed Bill” plans<br />Interruptible/curtailable plans<br />16<br />
  35. 35. Pricing Plan Value Positioning<br />Value of Branding<br />Fixed Bill -simple and secure - a fixed monthly bill<br />Fixed price– secure and simple <br />TOU- secure, some choice and control, and customized bundled service options<br />CFD - control and access to wholesale prices<br />Point of Sale Support<br /># Subscribers<br />Size of Subscriber Load<br />Simple<br />Choice (Value Added)<br />Price Security<br />Price Risk<br /> CFD<br />TOU<br />Fixed & Indexed<br />Fixed Bill<br />17<br />
  36. 36. Match Product to Value<br />Sales volume certainty<br />Lower risks on high volumes, hedging value<br />High<br />CFD<br />TOU<br />Season<br />Blocks<br />Price Variability<br />High margin potential<br />Fixed<br />Plans<br />Low<br />Access to a big, but reluctant to change, market share<br />Low<br />High<br />Degree of Involvement<br />18<br />
  37. 37. Customer Portfolio of Choices<br />High<br />CFD<br />Some years are easier to predict than others<br />I don’t like the current market price outlook<br />TOU<br />Season<br />Blocks<br />Fixed<br />Plans<br />Low<br />Low<br />High<br />I’d like to give load management a try<br />19<br />
  38. 38. TOU Pricing Plans<br />20<br />
  39. 39. TOU Benefits<br />Why Offer TOU?<br />Commodity costs vary with time of day and season<br />Consumers will change behavior if properly incented<br />Consumer response to prices offers an offset to expanded usage by other customers on other programs<br />Improve earnings by better managing risk <br />21<br />
  40. 40. TOU Failures<br />Selling program based on peak load reduction or bill savings alone<br />Many programs aren’t “marketed” to customers<br />Poor design (ratio of on/off-peak price, length of on-peak window)<br />Solutions: <br />Achieve success by selling TOU to customers premised on access to lower prices during low cost times.<br />Design product with customer behavior in mind<br />22<br />
  41. 41. A Better TOU Product<br />Features that Improve Customer Acceptance<br />Shorter Peak Period<br />Limited Peak Season<br />Better Prices<br />High Peak to Off-Peak Price Ratio (Shifters)<br />Lower relative Off-Peak Prices (Growers)<br />Demonstrable Savings<br />Term Flexibility<br />Choice and Control<br />23<br />
  42. 42. Type of TOU Plans<br />Fixed TOU Plan – prices and time periods fixed for term<br />Flex TOU plan – a platform of plans with varying price levels and peak period duration<br />Variable Peak Period Price – would use Nodal Day ahead market MCPE to establish next day peak price level<br />TOU combined with price overcall plan – TOU and Critical Peak Price <br />24<br />
  43. 43. Flex Choice TOU Service Plans<br />Plan 1<br />Plan 2<br />Peak 3:00 - 7:00<br />Peak 3:00 - 7:00<br />Prices<br />Peak $.36 <br />Off $. 10<br />Prices<br />Peak $.34<br />Off $.11<br />Choices<br />Plan 4<br />Plan 3<br />Peak 1:00 - 9:00<br />Peak 1:00 - 9:00<br />Prices<br />Peak $.36 <br />Off $.09<br />Prices<br />Peak $.34<br />Off $.095<br />25<br />
  44. 44. Variable Peak Price TOU<br /><ul><li>Fixed off peak price
  45. 45. On peak price based on Day Ahead Market MCPE averaged for the peak duration
  46. 46. Fixed On Peak duration (2 PM – 7 PM)</li></ul>26<br />
  47. 47. Critical Peak Pricing Features<br /><ul><li>A high fixed price used in place of the standard TOU peak period price
  48. 48. Limited number of days and hours CPP events can be called
  49. 49. Day ahead or 4 hour advance notice of CPP event
  50. 50. CPP event can be called for any day of the week
  51. 51. An option to allow customers to participate if CPP events are called in the off peak season
  52. 52. Incentive For Participation – either a reduced peak period price or in the form of a payment for performance</li></ul>27<br />
  53. 53. Prepaid Plans<br />28<br />
  54. 54. Prepaid Plans<br />Current Retail Market<br />After Smart Meters<br />Term – month to month and may include discount for staying longer than one month<br />No deposit, credit check or I.D.<br />Might include a monthly service charge and a fixed rate<br />Smart Meter can provide daily usage, turnoff meter when prepaid limit reached<br />Greater customer satisfaction as they have greater control over managing usage –daily info provided by email or phone<br />An in-house monitor might be installed to provide near real time usage and bill amount to date<br />Term – month to month but may require activation fee that requires 6 month service<br />No credit check<br />No deposit<br />No I.D. check<br />Monthly Service charge plus high fixed rate <br />Problems determining when prepaid limit reached – turn off complaints<br />29<br />
  55. 55. Contract for Differences Plans<br />30<br />
  56. 56. Contract for Differences<br />31<br />
  57. 57. Fixed Bill Plans<br />32<br />
  58. 58. Why offer Fixed Bill?<br /><ul><li>To differentiate yourself in the market place
  59. 59. To increase Brand presence – even customers that do not sign up will talk to others about your offering
  60. 60. To increase profits from the residential and small commercial customer markets - Customers are willing to pay a premium for convenience and stability </li></ul>33<br />
  61. 61. Fixed Bill Process<br />Weather Adjustment Historical kWh<br />MAY<br />BILL<br />Target Market<br />Adjust for Price Response<br />ESTIMATED kWh<br />JUN 1,007<br />JUL 1,234<br />AUG 1,333<br />SEP 999<br />OCT 888<br />NOV 650<br />DEC <br />Fixed<br /> BILL<br />“Make me an offer.”<br />ADJUSTED kWh<br />JUN 1,177<br />JUL 1,345<br />AUG 1,444<br />SEP 1,100<br />OCT 959<br />NOV 770<br />DEC <br />Apply<br />Forward Price <br />Curve <br />YES<br />Calculate <br />monthly FB amount<br />Add Risk Premium<br />Make Offer<br />Add Base Charge<br />$<br />%<br />34<br />
  62. 62. Pricing Plans After Smart Meters<br />Remember:<br /> Smart Meters should unlock access to niche markets that increase your bottom line! <br />35<br />
  63. 63. Points to Consider<br /><ul><li>Launch something - don’t stand on the sideline
  64. 64. Market, Market, Market! Promotion is key!
  65. 65. Allow for process improvement</li></ul>Don’t expect to get it perfect the first time <br />Don’t quit on the concept if there are problems<br /><ul><li>Address back office requirements – IT needs for billing, risk management, price development, sales and recruitment
  66. 66. Rewards: properly designed programs can</li></ul>Increase earnings and market share<br />Reduce costs<br />Mitigate risks <br /><ul><li>Smart Meters should allow for opening niche market segments</li></ul>36<br />
  67. 67. Pricing Plans System Interface<br /><ul><li>Achieving Program Success – What to do with what the Pricing guys gave you…?
  68. 68. Metering, Billing, Risk Management, Customer Accounting, and Product Accounting are all necessary for program success.</li></ul> Risk <br />Management<br />Prices<br />CIS<br />Offers<br />Reports<br />Subscription<br />Sales<br />Billing<br />37<br />37<br />
  69. 69. Contact Information<br />6000 Uptown Blvd. NESuite 314<br />Albuquerque, NM 87110<br /> <br />Direct: 214.821.8099<br />Cell: 214.684.6888<br />mburlingame@utilipoint.com<br />www.utilipoint.com<br />Mark Burlingame, CPA<br />Senior Director, <br />UtiliPoint Analytics<br />38<br />