City Council Briefing - Council Briefing. ... Chesapeake Energy, Hunt Oil ... Defense Council, State Energy Conservation Office and

Download City Council Briefing -   Council Briefing. ... Chesapeake Energy, Hunt Oil ... Defense Council, State Energy Conservation Office and

Post on 03-Apr-2018

213 views

Category:

Documents

0 download

TRANSCRIPT

  • CityCouncilBriefingJune16,2010

    1

  • ReviewtheCityselectricityprocurement programandupcomingcontractforthe

    periodbeginningJanuary1,2011.HowwebuyelectricityHowwellwedidonourlastprocurementWhatweareproposingandwhyWhatareplansbeyondthiscontractperiodRecommendations

    2

  • HowWeBuyElectricity

    3

  • Nuclear,7%

    Wind,11%

    Coal,22%

    NaturalGas,59%

    GenerationGeneration(Competitive)(Competitive)

    %InstalledCapacity

    54%ofCost54%ofCost

    CustomerCustomer

    CityofDallas

    100%ofCost100%ofCost

    CustomerServiceBilling

    Scheduling

    WholesaleSupply

    Contracts

    9%ofCost9%ofCost

    RetailElectricProviderRetailElectricProvider(Competitive)(Competitive)

    RegulatedDeliveryRegulatedDelivery((PassThroughatCostPassThroughatCost))

    Transmission

    Distribution

    Substation

    35%ofCost35%ofCost

    4

    TaxesTaxes2%of2%ofCostCost

  • Fourcountiestotal

    48%ofloadinERCOT:

    1.Harris2.Dallas3.Tarrant4.Bexar

    CityofDallasis

    approximately 192MW,or2%of

    DallasCounty.Source: ERCOT Electric System Constraints and Needs Assessment Report, December 2009)

    5

  • *Energyusageisestimatedonly.

    6

  • 2,600accounts(includes800+buildings,1500trafficsignals,

    outdoorlights,etc.)and752millionkWh/Yr (enoughtopower41,000singlefamilyhouseholds)

    ConsumptionbyDepartment(percentagesbyvolumes)

    Water

    55%

    PublicWorks(Includesstreetlightsandtrafficsignals)

    12%

    Parks

    6%

    OfficeofCulturalAffairs

    5%

    Aviation

    5%

    EquipmentandBuildingServices(includesmultiuse

    5%buildings,e.g.CityHall,OCMC,Courts)

    PoliceandFire

    4%

    ConventionCenter

    4%

    Library

    2%

    Other

    2%

    7

  • RequestforQualificationsadvertisedAugust2009

    10Firmssubmittedproposalswith5firmsshortlisted

    QualificationsandExperience

    Projectunderstandingandapproach

    PastPerformance

    MWBE

    RequestedcostproposalsinOctober2009

    PriorityPowerManagement,LLC

    R.W.Beck

    ContractwithPriorityPowerManagement,LLCapprovedby

    CouncilonDec.9,2009(Resolution#092943)

    9

  • PriorityPowerManagement,LLCQualifications

    Staffhasover250yearsofcombinedexperienceinenergy

    markets

    Procurementandmanagementofanestimated$1billionin

    annualenergyspending

    Managingpowerrequirementsfor32ofTop100Texas

    independentoilandgasproducers

    Notableclientsinclude:ChesapeakeEnergy,HuntOil

    Company,DevonEnergy,TexasHealthResources,Universityof TexasSystemandCityofMidland

    10

  • Useindependentconsultantforspecialized

    expertise

    Analyzedataanddevelopspecification

    UseacompetitiveRFPprocesswithBusiness

    Development&Procurement

    972totalcontactsincluding:

    138RetailElectricityProviders(AllREPs

    inTexas)

    104MWBEs

    11

  • Evaluateproposalsandshortlistfirmsbasedon:

    Financialstability

    25%

    Invoicingcapabilityincludingelectronicinvoicing 20%

    MWBEparticipation 15%

    Agreementtocontractterms 10%

    Levelofexperience

    10%

    Productexperience

    10%

    Abilitytoproviderenewableenergycredits 5%

    Customerservice 5%

    Preparecontractdocumentsforshortlistedfirms.

    12

  • CityCouncilauthorizestheCityManagertoenterinto contract

    Acceptbestandfinaloffers

    DeterminemostadvantageousoffertotheCity

    Totaldeliveredcostofpower 70%

    Finalcontractterms

    20%

    Invoicingrequirements 10%

    Executethecontract(Completedondayofofferwhile

    commoditymarketisopen)

    REPentersintothirdpartyagreementstosecure wholesaleelectricitysupplytoserveCityload.

    13

  • Howwellwedidonour lastprocurement

    14

  • NaturalGasPricesarethePrimaryDriverofthetrendsinelectricityprices.

    1

    1.

    Monthlyaveragegenerationpriceisderivedbytheactualsimple

    averageoftheERCOTnorthzonemarketclearingpriceofenergy

    (MCPE)multipliedbyaCityofDallasloadshapingfactorof1.035.

    15

    Deregulated

    Regulated

  • OnAugust27,2008,Councilapproved

    strategyandauthorizedCityManagertoenter intocontract

    CityManageracceptedBestandFinalOffers

    andexecutedthecontractonSeptember26, 2008

    Currentcontractfor2009,2010withGDF

    SUEZEnergyResources

    16

  • ContractwasaLoadFollowingHeatRate

    Supplierprovidesapricethatfluctuateswiththe priceofnaturalgas(untillocked)fortheentire

    estimatedloadwithinabandwidthof+/10%

    StrategyapprovedbyCouncilonAugust27,2008

    providedguidelinesforlockingnaturalgasprices

    Fixedtriggerpointswere+15%and30%

    Limitsallowedustotakeadvantageofdeclining priceswhilelimitingexposuretoincreasingprices

    17

  • 18

  • 19

    Index100%ofLoadCompletelysubjecttomarket

    pricevariations

    Retainabilitytolockfixedprice

    forallorportionsoftheload.

    Index100%ofLoadIndex100%ofLoadCompletelysubjecttomarketCompletelysubjecttomarket

    pricevariationspricevariationsRetainabilitytolockfixedpriceRetainabilitytolockfixedprice

    forallorportionsoftheload.forallorportionsoftheload.

    ActiveTradingActivelytryingtobeatthe

    market

    VeryresourceIntensive

    ActiveTradingActiveTradingActivelytryingtobeattheActivelytryingtobeatthe

    marketmarketVeryresourceIntensiveVeryresourceIntensive

    FixedPriceNotexposedtomarketvariations.Budgetcertainty.Priceis100%dependenton

    marketconditionsattimeof

    purchase.

    FixedPriceFixedPriceNotexposedtomarketvariations.Notexposedtomarketvariations.Budgetcertainty.Budgetcertainty.Priceis100%dependentonPriceis100%dependenton

    marketconditionsattimeofmarketconditionsattimeof

    purchase.purchase.

    DefinedLockStrategyDefinespecificobjectivesDevelopquantifiableplanStrictlyadheretoplan

    DefinedLockStrategyDefinedLockStrategyDefinespecificobjectivesDefinespecificobjectivesDevelopquantifiableplanDevelopquantifiableplanStrictlyadheretoplanStrictlyadheretoplan

    LOWLOW

    HIGHHIGH

    HIGHHIGHProactiveness

    Risk

    Tolerance

    RiskTolerance&ProcurementStrategies

  • 20

    FIXED

    Block&

    IndexINDEX

    HeatRate abilitytolockgasprice

    FIXED

    HYBRID

    FLOAT

    RANGEOFCO

    ST

    OUTC

    OMES

    (+)

    ()

    RANGEOFCO

    ST

    OUTC

    OMES

    (+)

    ()

    RiskPremium

  • $7.9M GasPriceatCouncilAuthorization

    Avg

    GasLockPrice

    21

    $2.49(27%)=Differential$21.3MOver2Yrs

    AverageGasLockPrice

    CouncilAuthorizationAugust27,2008

    ContractStartJanuary1,2009

    $2.3M

    GasPriceonJan1,2009Differential=$3.2MOver2Yrs

    RESULTS:

    AchievedBudget

    Certainty.

    Executedgaslockstrategy

    resultedinlowerprice.

    RESULTS:

    AchievedBudget

    Certainty.

    Executedgaslockstrategy

    resultedinlowerprice.

  • 54%54%

    9%9%

    35%35%

    TotalEstimatedCostComponents EstimatedRetailCostComponents

    3%3%

    2%2%

    3%3%

    1%1%

    22

  • Anticipatedratesbasedon

    indicativepricing.Actual

    resultswillvary.

    23

  • Whatweareproposing andwhy

    24

  • LowestPrice=$5.20

    CurrentPrice,Jan11Start=$5.83(5.5%arelower)

    HighestPrice=$12.03

    Reason#1:Pricesareneara6YearLowNYMEXNG3YearRollingAverageStripPrice

    25

  • Reason#2:ERCOTReserveMarginCapacityisUncertain2014

    Eventhoughthereisasignificantamountofplanned

    generationinthe

    future,uncertaintyexistsaboutERCOTs

    reservemarginsin2014andbeyond.

    26

  • Reason#3:WTXWindPowerBeginstoFlowintoNTXin2014PUCTapproved$5+billionCREZProjecttobuildtransmissionlinestoconnectwestTexaswind

    farmsintohigherdemandareassuchasDallas/FortWorthwithexpectedcompletioninDec2013.

    Source:ERCOTandthePublicUtilityCommissionofTexas

    27

  • Accountsdefinedintwogroupsto

    facilitatepricing

    Group1

    LargeuserssuchasDWU,City Hall,ConventionCenter(75%volume)on

    15minuteprofilemeters

    Group2 Mostbuildings,streetlights, trafficsignals(25%volume)onmonthly

    metersorunmetered

    28

  • FixedPriceBlock

    supplierprovidesafixedpriceforpredeterminedblocksof

    power.Blocksaresizedatapproximately96%oftotalloadwith

    excessandor

    deficienciesboughtandsoldatmarketspotprice.

    29

  • LoadFollowingFixedPrice

    supplierprovidesafixedpricefortheentire

    estimatedloadwithinabandwidthof+/10%.Anyusageoutsideofthe

    bandwidthisboughtandorsoldatthemarketspotprice.

  • Optionof20,40or60percentofload

    Dallasis#2onEPATop20LocalGovernmentlist:

    LocalGovt

    ListMillionkWh/Yr

    ofRECs%TotalVolume

    Houston 438 34%

    Dallas 333 40%

    Chicago 214 20%

    MontgomeryCountyClean

    EnergyBuyersGroup161 30%

    WashingtonSuburbanSanitary

    Commission70 33%

    31

  • TodaysCostat40%

    $950Kperyear

    EstimatedCostGoingForward:

    Costincrementfor20%renewableenergy

    $250Kto$550K

    peryear

    Costincrementfor40%renewableenergy

    $500Kto$1.1M

    peryear

    Costincrementfor60%renewableenergy

    $750Kto$1.6M

    peryear

    32

  • WhyBuyThem?

    Environmentalbenefitstoimproveairquality

    40%renewableenergyresultsinreductionof

    pollutants

    225,000tonreductionincarbondioxide(CO2)peryear

    250tonreductionofnitrogenoxide(NOx)peryear

    Reductioninpollutanttonnagecanbesubmittedas apotentialstrategyontheStateImplementation

    Plan(SIP)togettheregionoutofnonattainment statusontheEPAstandardforozone

    33

  • WhyBuyThem?

    Economicbenefitstofundprojectsandgrow

    taxbase

    Potentiallossofhighwayand/orgrantfundsiffail

    tomeetEPAozonestandards

    Attractbusinessrelocation

    Poorairquality

    wasonestatedreasonToyotadidnot

    locateinDallas

    Attractvisitors

    Conventionorganizersconsidergreeninitiativeswhen

    choosinglocations

    34

  • WhyBuyThem?

    Continuegreenleadershipandreceiptofnational recognition/awards

    In2006,theMayorofDallassignedU.S.MayorsClimate

    ChangeAgreementalongwithmayorsfromaroundthe countrytoreducegreenhousegasemissionsby7%

    below1990levelsbytheyear2012

    ReceivepointstowardLEEDbuildingcertifications

    BolsterDallasimagewithrecognition/awardsfrom

    EnvironmentalProtectionAgency,NationalResources DefenseCouncil,StateEnergyConservationOfficeand theTexasEnergyPartnershipforenergyefficiency

    35

  • 3yearContractTerm

    FixedPriceElectricity

    Group1 FixedPriceBlock

    Group2 LoadFollowingFixedPrice

    40%Texasrenewableenergycredits

    36

  • FixedPriceBlockforGroup1

    LoadFollowingFixedPriceforGroup2

    20,40or60percentrenewableenergy

    24or36monthterm

    30daypaymentterms

    Automatedbilling

    37

  • Noterminationforconvenience

    Terminationpayment=Costs+(ContractValue

    MarketValue)

    REPisfinanciallycommittedtothirdpartiesforload

    Adropinpriceleavesnomarkettosellourload

    Terminationcouldcostmillionsofdollars

    38

  • SevenREPs

    wereshortlistedtosubmitfinaloffers

    ConstellationNewEnergy,Inc.

    GDFSUEZEnergyResourcesNA,Inc.

    Gexa

    Energy,L.P.

    ReliantEnergyRetailServices,LLC

    SempraEnergySolutions,LLC

    TexasGeneralLandOffice

    TXUEnergyRetailCompany,LLC

    39

  • CityCouncilauthorizestheCityManagertoenter

    intocontract

    Acceptbestandfinaloffers

    DeterminemostadvantageousoffertotheCity

    Totaldeliveredcostofpower 70%

    Finalcontractterms 20%

    Invoicingrequirements

    10%

    RequestMWBEdocumentationfromselectedREP

    Executethecontract(Completedondayofofferwhile

    commoditymarketopen)

    40

  • Whatareplansbeyond thiscontractperiod

    41

  • ContinueanalysisofCitybecomingaselfservingRetailElectric

    Provider:

    Itwilltakeatleast12monthstoprepareforbecomingselfservingREP

    Annualsavingsareestimatedtobe$4.4MofwhichGFis$1.9Monce

    implemented

    Longtermconsiderationcouldexamineoptionstoenlargethe

    customerbasebeyondCityownedfacilities

    TheCitycouldconsiderexpandingitsinterestinpower

    generation:

    CurrentlyDallasWaterUtilitiesisconstructingafacilitythat

    generates

    powerfrommethanegasattheSouthsideWWTP

    Potentialinvestmentinfacilitiessuchaswindfarms

    42

  • Recommendations

    43

  • CityCouncilauthorizetheCityManagertoacceptbest andfinaloffersfromthesevenshortlistedREPs

    and

    enterintoElectricSupplyAgreement(s)determinedto bemostadvantageoustotheCity

    Group1 FixedPriceBlock

    Group2 LoadFollowingFixedPrice

    Include40%TexasRenewableEnergyCredits

    36monthterm

    44

  • Appendix

    45

  • Meters/accountsaregroupedsothatbestenergyproductistargetedfor

    eachgrouptoachievebestpriceandconservationincentives

    Group1

    84meters,75%oftotalload

    IntervalDataRecorder(IDR) recordstotaluseandrateofuseevery15

    minutes(ex.DWU,CityHall,ConventionCenter)

    Group2

    2512Meters,25%oftotalload

    DemandMeter recordstotaluseandhighestrateofuseina15minute

    periodduringbillingperiod(ex.Libraries,RecreationCenters,

    PoliceFacilities)

    NonDemandMeter recordstotaluseonlyanddoesnotprovideinformation

    onpeakuseorbreakdownofuseoverbillingperiod(ex.Traffic

    lightsand

    warningsigns)

    Unmetered electricchargesarebasedsolelyonexpecteduse(ex.

    Streetlights)

    46

  • Thereareavarietyofelectricitypricingofferingsinthe

    market

    LoadFollowingFixedPrice

    supplierprovidesafixedpriceforthe

    entireestimatedloadwithinabandwidthof+/10%

    LoadFollowingHeatRate

    supplierprovidesapricethatfluctuates

    withthepriceofnaturalgasfortheentireestimatedloadwithina

    bandwidthof+/10%

    FixedPriceBlocks

    supplierprovidesafixedpricefor

    predeterminedblocksofpower

    HeatRateBlocks

    supplierprovidesapriceforblocksofpowerthat

    fluctuatewiththepriceofnaturalgas

    Currently,DallasusesLoadFollowingHeatRatepricing

    47

  • Themaptotherightillustratesthe

    balanceofloadandgeneration

    withineachcountyintheERCOT

    Regionforthesummerof2009.

    Acountywithmoregeneration

    thanloadwillexportgenerationto

    othercounties;comparatively,a

    countywithmoreloadthan

    generationwillimportgeneration

    fromothercounties.

    Pleasenotethismapisforgeneral

    illustrativepurposesonly,however

    itclearlyshowsthatthe

    Dallas/FortWortharea,the

    Houstonarea,andthe

    Austin/RoundRockareaare

    importersanddependenton

    transmissiontoserveload. Source: ERCOT Electric System Constraints and Needs Assessment

    Report, December 2009)

    48

  • Currentinstalledgeneration

    capacityintheERCOTRegionis

    about84,000MW,whichincludes

    about3,000MWofgenerationthat

    hassuspendedoperationsorbeen

    mothballed.

    Intermsofenergyproducedwithin

    ERCOTin2008,approximately43%

    wasfueledbynaturalgas,followed

    bycoalat37%,nuclearat13%and

    windat5%.

    Themaptotherightisanindicator

    ofgeneratingfacilitiesacrossthe

    regionbyfueltype.

    Source: ERCOT Electric System Constraints and Needs Assessment Report,

    December 2009)

    49

    Electricity Procurement Cover MemoElectricity Procurement BriefingElectricity Procurement 2Electricity Procurement 3Electricity Procurement 4Electricity Procurement 5Electricity Procurement 6Electricity Procurement 7Electricity Procurement 8Electricity Procurement 9Electricity Procurement 10Electricity Procurement 11Electricity Procurement 12Electricity Procurement 13Electricity Procurement 14Electricity Procurement 15Electricity Procurement 16Electricity Procurement 17Electricity Procurement 18Electricity Procurement 19Electricity Procurement 20Electricity Procurement 21Electricity Procurement 22Electricity Procurement 23Electricity Procurement 24Electricity Procurement 25Electricity Procurement 26Electricity Procurement 27Electricity Procurement 28Electricity Procurement 29Electricity Procurement 30Electricity Procurement 31Electricity Procurement 32Electricity Procurement 33Electricity Procurement 34Electricity Procurement 35Electricity Procurement 36Electricity Procurement 37Electricity Procurement 38Electricity Procurement 39Electricity Procurement 40Electricity Procurement 41Electricity Procurement 42Electricity Procurement 43Electricity Procurement 44Electricity Procurement 45Electricity Procurement 46Electricity Procurement 47Electricity Procurement 48Slide Number 49