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Presentation. NYS Public Service Commission – May 15, 2014 Technical Conference . Retail Energy Supply Association Winter 2013/2014 – Polar Vortex Summary Chris Wentlent, Chair – NY RESA . About RESA.

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  1. Presentation NYS Public Service Commission – May 15, 2014 Technical Conference Retail Energy Supply Association Winter 2013/2014 – Polar Vortex Summary Chris Wentlent, Chair – NY RESA

  2. About RESA The Retail Energy Supply Association is the nation’s leading organization representing competitive suppliers of electricity and natural gas. RESA’s broad and diverse group of retail energy suppliers share the common vision that competitive retail energy markets deliver a more efficient, customer-oriented outcome than a rate-regulated utility structure. 

  3. NY Electric Market - Companies

  4. Winter 2013/2014 - Overview Record electric demand • Five major “Cold Snaps” • January 7, 2014 New Record Winter Demand – 25,738 MWs • NYISO has approximately 40,000 MWs of resources, so the issue was not generation supply High Natural Gas Demand – Competing Interests • Residential Heating • Industrial Consumption • Electric Generation in NYISO and other markets Wholesale Market Consequences • Natural Gas Transportation Rates increased dramatically due to pipeline constraints • Electric Transmission System experienced congestion – especially in Zone F • Oil-fired generation was more economic than natural gas generation on many days • Fuel diversity mix including nuclear, hydro, coal, oil, natural gas, and renewables was critical • NYISO requested a waiver on generator $1000 bid cap due to natural gas price impact on generator dispatch prices.

  5. Seasonal Gas Weighted Heating Degree Days • Gas weighted heating degree days (GWHDDs), which is a measurement of energy intensity, outpaced the historical normal. • This heating season wasone of the coldest in past 20 years.

  6. Retail Market Customer Type – Market Share Summary Source – NYS Public Service Commission April 25, 2014 REV Order

  7. Market Product Offerings Energy Supply Company Utility Default Rate (combination of specific utility hedging & spot market purchases); with a true-up over a 60-90 day true-up period: Customers exposed to spot market for usage over utility hedges. • Fixed Price Contract: provides customer price certainty. ESCO exposed to spot market (if supply is unhedged). • Partially Hedged Contract: customers partially exposed to spot market. • Variable Price Contract: full customer exposure to spot market

  8. Wholesale/Retail Market Price Impacts – Tale of Two Winter Seasons Source – NYISO Monthly Market Report, March 2014

  9. History – provides lessons for the future but can not predict the future! History is not always an indicator of the future! • In 2012, we had an unseasonably warm winter which resulted in low energy prices; consumers on a variable rate contract experienced additional energy savings vs. a fixed rate contract during that calendar year. • In 2014, price volatility was high due to extreme cold weather conditions and infrastructure constraints; consumers on a variable rate contract experienced higher energy costs vs. a fixed rate contract during that calendar year. • A fixed price contract provides consumer value – price certainty in any year and protection from high price volatility during extreme conditions. • Wholesale markets are impacted by a host of issues including weather, infrastructure additions/retirements, high energy demand, infrastructure congestion and regulatory changes. • Real time wholesale market outcomes drive price volatility of both retail default rate and/or variable rate contracts because both are subject to real time wholesale spot energy prices.

  10. ESCO Customer Assistance Actions – Winter 2013/2014 • Deferred payment plans • Alternative product offerings to absorb pass-through of variable costs and spread them out over future months • Customer education programs to outline what did happen in winter 2013/2014 • Assisting customers with development of an energy strategy for summer 2014 and winter 2014/2015 (i.e. value of fixed price hedges or partial hedges going forward)

  11. Key Recommendations • Better educate consumers about price volatility risk that is associated with both default and variable rate pricing structures. • Educate small commercial and residential consumers about how default rates are established including percent of hedging, and improved transparency to assist in future energy decisions. • New York must remain diligent in its stated efforts to expand both natural gas transportation and electric transmission to provide greater infrastructure capability during high demand periods. • What level of fuel diversity must be maintained to manage natural gas and energy price volatility especially during higher demand periods? • Continue NYISO, NYSPSC, and FERC initiative to improve operational coordination between the natural gas and electric industries to ensure maximum utilization of assets during high demand periods. • Ensure NYISO is able to allocate high costs associated with shortage periods into the NYISO market clearing price to avoid uplift payments to market participants that have already hedged their energy needs.

  12. Questions and Discussion

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