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Energy Procurement in Virginia

Energy Procurement in Virginia. Focus on procurement of electricity and natural gas. Department of Mines, Minerals, and Energy (DMME) role in energy procurement We are the technical specialists for all state energy contracts

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Energy Procurement in Virginia

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  1. Energy Procurement in Virginia

  2. Focus on procurement of electricity and natural gas Department of Mines, Minerals, and Energy (DMME) role in energy procurement We are the technical specialists for all state energy contracts We request Division of Purchases and Supply put contracts in place and act as the subject matter expert

  3. Focus on procurement of electricity and natural gas DMME works with agencies to determine their energy needs and works to see that the contracts meet those needs If there are technical issues with utilities/vendors we work to resolve the problem

  4. Focus on procurement of electricity and natural gas Will answer any questions on any energy . Focus on electricity and natural gas. Both are utilities which make them unique In Virginia electricity is a regulated monopoly Natural gas, in some areas, can be purchased through a marketer

  5. Focus on procurement of electricity and natural gas On a national level natural gas is de-regulated Regulated by Federal Energy and Regulatory Commission FERC Feds broke up companies and separate companies bring gas out of the ground, own transmission pipe, and own distribution pipe

  6. Focus on procurement of electricity and natural gas Local Distribution Company LDC operates distribution pipeline and is regulated by SCC Natural gas provided by an LDC is supposed to be a pass-through and not generate profit This means that LDC is not focused on getting lowest price for gas

  7. Focus on procurement of electricity and natural gas Municipal gas and electric utilities come under FERC regulation and are controlled by city council This makes for a difficult environment for state agencies being served by these entities Goodwill is the only leverage we have

  8. Focus on procurement of electricity and natural gas There are 3 components to an energy price. Generation for electricity-extraction for natural gas. Transmission for both (Big pipe or wire) Distribution for both (Small pipe or wire)

  9. What is a Energy Utility and why do we care? An energy utility deliveries a commodity using pipes or wires. A utility is a monopoly and is government regulated. Eva fees do not apply to a utility.

  10. Regulated or Deregulated Markets In Virginia electricity is a regulated market In Virginia large users and some small users can buy gas through a gas marketer instead of the serving utility Commonwealth accounts are non-jurisdictional with regard to the State Corporation Commission

  11. Because agencies are non-jurisdictional we could buy electricity on the open market At this time electricity would cost more if we did this We do monitor this situation Regulated or Deregulated Markets

  12. Market Fundamentals Procurement through a Reverse-Auction is an option this is an IFB mechanism Competing vendors bid on commodity Vendor with lowest price at end of auction wins Price on the day of bid is the only deciding factor

  13. Market Fundamentals Commodity prices vary widely day to day the best price today is not best price tomorrow Contract used by Virginia allows us to decide which day we want to lock prices Provides greater flexibility

  14. Market Fundamentals Reverse auction is used for both natural gas and electricity Appears to more successful for electricity Possibly because of less price volatility than natural gas Reverse auction does meet the basic goal of price certainity

  15. Procurement Methods Procurement goals Provide budget certainty to agencies Minimize risk both physical and financial Get the lowest possible price

  16. Procurement Methods How do you determine if you have achieved a good price? This is a question that has no good answer We have to have gas and electricity for agencies to achieve their core missions We are not “For Profit” and do not make decisions based on strictly financial basis Cannot shut buildings down

  17. Procurement Methods What we do is follow prudent industry practices Watch the news, get input from Energy Information Administration, talk with vendor, buy in 10,000 Dth blocks, and work closely with agencies

  18. Procurement Methods Virginia uses an RFP for procuring natural gas Allows consideration of factors other than price Consulting services, organizational depth, etc. Allows decision makers to wait until market price is down before locking price Provides flexibility

  19. QUESTIONS? Tommy Thompson Thomas.thompson@dmme.virginia.gov 804-692-3230

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