DOMINION EAST OHIO STANDARD SERVICE OFFER AND STANDARD CHOICE OFFER AUCTION INFORMATION PACKAGE

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1 DOMINION EAST OHIO STANDARD SERVICE OFFER AND STANDARD CHOICE OFFER AUCTION INFORMATION PACKAGE Disclaimer The information presented in this information package, at the information sessions for potential and registered bidders, or in any other Dominion East Ohio communication regarding the auction process is for the sole purpose of providing general information about the auction process in order to help potential participants determine whether they will participate in the auction. The information is subject to change, and it is not intended to be, and does not purport to constitute, a sufficient basis on which to determine whether to participate or how to structure potential bids. While Dominion East Ohio has used reasonable efforts to ensure the accuracy of the information presented herein, it does not warrant the accuracy of that information for use by any party in assessing potential participation or structuring potential bidding approaches or actual bids

2 STANDARD SERVICE OFFER (SSO) AND STANDARD CHOICE OFFER (SCO) COMBINED AUCTION TO BE CONDUCTED IN FEBRUARY BACKGROUND On June 18, 2008, the Public Utilities Commission of Ohio ( Commission ) approved a stipulation submitted by parties in Case No GA-EXM that modified certain aspects of Dominion East Ohio s ( DEO or Company ) application to implement Phase 2 of its plan to exit the regulated merchant function for natural gas commodity service and introduce Standard Choice Offer ( SCO ) commodity service. On February 14, 2012 an Opinion and Order was issued in Case No GA-EXM combining the Standard Service Offer ( SSO ) and SCO auctions into one auction. On January 9, 2013, the Commission approved a stipulation submitted by parties in Case No GA-EXM under which DEO would exit the merchant function for non-residential customers effective April 1, As of that date, non-residential customers are no longer eligible to receive SCO service. Instead, non-residential customers that do not select their own supplier or participate in a governmental aggregation program will be assigned to a supplier that will provide monthly variable rate commodity service. All of the related stipulations and Commission rulings in the aforementioned cases can be found at the Commission s online Docketing Information System web site. OBJECTIVES The objectives of Phase 2 are similar to those stated in the Phase 1 transition plan submitted in Case No GA-ATA. Both phases are intended to: (1) foster a competitive market in which customers can make informed choices among expanded alternatives while ensuring reliable commodity service by suppliers; and (2) address, without disrupting the competitive marketplace, the commodity service needs of those customers that cannot or will not choose among those alternatives. Phase 2 is intended to facilitate the process of Choice-eligible customers establishing a contractual relationship with a Competitive Retail Natural Gas Service ( CRNGS ) provider. To meet this objective, DEO has conducted auctions under Commission supervision in which suppliers compete for the right to serve the wholesale and/or retail load of specific customers. Choice-eligible customers that do not wish to receive service from their assigned supplier remain free at any time to enroll with a different Energy Choice supplier or participate in a governmental aggregation program. AUCTION OVERVIEW - 2 -

3 DEO will conduct a single auction to secure natural gas supplies for the one-year term from April 1to March 31. As further detailed in the table below, the combined auction will include the following customers based on their billing status as of the month of March from the previous auction year. : Wholesale Customers: Percentage Income Payment Plan ( PIPP ), Choiceineligible 1 and transitional 2 customers. Retail Customers: Residential Choice-eligible SSO and SCO customers. Customer Class Supplier Relationship Commodity Service Applicable Tariffs Choice- Ineligible and Transitional Wholesale Standard Service Offer (SSO) General Sales Service (GSS-R and GSS-NR) Large Volume GSS Residential Choice- Eligible Retail Standard Choice Offer (SCO) Energy Choice Transportation Service (ECTS-R) The auction will employ the general structure described in the Phase 2 Transition Plan filed with DEO s application, albeit with several changes in the nature of the service provided by suppliers to reflect that a portion of the load will be wholesale in nature (SSO) while another portion will be served on a retail basis (SCO). SCO service will be provided as Energy Choice commodity service rather than DEO-provided sales service and, as such, will be subject to applicable sales and use tax, which suppliers will remit to the State of Ohio. DEO will bill SCO customers on behalf of the supplier and remit proceeds to the supplier using the process employed in the Energy Choice program. By contrast, SSO service will continue to be provided under the Company s sales service rate schedules under which DEO acquires wholesale supply from winning bidders and resells it to customers at the same price. The auction will be conducted in a single day. Results of the auction will require Commission approval before agreements with the winning bidders to supply the tranches can be executed. TIMING AND ADMINISTRATION 1 In order to participate in the Energy Choice program, a customer must have no arrears of 30 days or more, be current on a payment plan to discharge those arrears, or not have broken a prior payment plan more than once in the preceding 12-months. 2 Transitional customers comprise Choice-eligible customers that may receive SSO commodity service for up to two consecutive billing periods. Such customers include those establishing new service and those whose Energy Choice supplier agreement or aggregation program terminates without timely enrollment with another supplier or aggregator

4 Below is a list of the key events and tentative dates that DEO has established for the auction process: Step Description Date 1 Preliminary auction information package distributed 12/4/ Information session for potential bidders 12/4/ Application deadline 12/16/ Application response and credit requirement notification 1/16/ Tranche size, initial Going Price, decrement and final rules issued 1/23/ Registration deadline 1/30/ Information session/trial auction for registered bidders 2/03/15 8 Auction conducted 2/10/ PUCO ruling on auction results (based on previous timing*) 2/11/ Gas supply agreements executed 2/24/ Gas flow starts 4/1/ Initial demonstration of comparable capacity 10/28/2015 The primary DEO contact for applications, creditworthiness documents, registration and auction procedures will be: Amanda Konkoly Dominion East Ohio 1201 East 55 th Street Cleveland, OH Phone: Gas_Energy_Choice@Dom.com - 4 -

5 AUCTION DEO will conduct one auction for both wholesale SSO and retail SCO commodity service. DEO will assign winning suppliers tranches including both types of customer load. As a result, bidders participating in the auction must be certified CRNGS providers. Individual suppliers may bid on multiple tranches up to a three-tranche limit, which would serve one-third of the available load and market. The auction will employ a descending clock format and will be used to acquire: Wholesale natural gas supplies for: o PIPP o Choice-ineligible customers o Certain transitional customers that are able to receive SSO commodity service for up to two consecutive billing periods Retail natural gas supplies for: o Residential Choice-eligible retail customers receiving SSO or SCO service as of March of previous auction year. The aggregate weather-normalized annual SSO load is approximately 17.2 Bcf. The aggregate weather-normalized annual SCO load is approximately 17.7 Bcf, comprised of approximately 179,095 residential customers. The aggregate wholesale and retail customer load will be divided into nine (9) tranches for the auction process. Winning suppliers will be obligated to serve one-ninth of the aggregate SSO load on a wholesale basis for each tranche that they win as well as one-ninth of the SCO customers, which will be served on a retail basis. The SCO portion of the tranches will be comprised of randomly assigned groups of customers designed to yield similar annual volumes in the aggregate. No one supplier will be able to acquire more than three (3) tranches. Limiting the tranches that suppliers may serve will promote a diverse supplier base that will minimize the potential impact and risk of a supplier defaulting on its supply obligations. Suppliers will indicate whether they are interested in serving load and customers at the Retail Price Adjustment ( Going Price ) established for the round, which will be specified as a fixed adder to the closing NYMEX price for each month of the one-year term. CUSTOMERS INCLUDED IN SSO PORTION OF EACH TRANCHE The wholesale customers served with supply acquired through the auction will be comprised of two groups: (1) those able to receive SSO commodity service on a continual basis; and (2) those who can obtain commodity service from the SSO pool only for a limited time

6 PIPP and Choice-ineligible customers will receive SSO service on a continual basis throughout the one-year term. Some of those customers may become Choiceeligible and leave the SSO pool during the one-year term by selecting an Energy Choice supplier or participating in an opt-out governmental aggregation program. Other SSO accounts may become inactive and leave the pool if, for example, they move or are disconnected for non-payment. Customers that have been disconnected for non-payment will remain in the SSO pool once they are reconnected until such time as they become Choice-eligible. The following Choice-eligible customers will be able to receive SSO service for up to two consecutive billing periods: Customers establishing new service that have not yet selected an Energy Choice supplier or been enrolled in an opt-out governmental aggregation program. Customers whose Energy Choice supplier agreement or aggregation program terminates without timely enrollment with another supplier or aggregator. Choice-eligible customers temporarily receiving SSO commodity service may enroll with an Energy Choice supplier or be included in an opt-out governmental aggregation program before the two-month period is complete. CUSTOMERS INCLUDED IN SCO PORTION OF EACH TRANCHE Suppliers awarded tranches in the auction will, in addition to the SSO customers outlined above, initially serve DEO s residential Choice-eligible customers receiving SSO or SCO service as of March of the previous auction year. SCO customers assigned to suppliers as of March of the previous auction year will be reallocated to those suppliers awarded tranches for the April through March upcoming auction period. Monthly Variable Rate customers will remain with their current suppliers and will not be reassigned. Following the auction, a supplier s SCO customers can change for a number of reasons such as: Enrollment with an Energy Choice supplier Participation in an opt-out governmental aggregation program Termination of service to the account due to non-payment or other reason Change in status from Choice-eligible to Choice-ineligible Suppliers should note that, by being awarded a tranche of customers, they are also obligated to take on additional Choice-eligible customers that may be assigned to suppliers on a rotating basis pursuant to the terms of the stipulation. However, as noted - 6 -

7 in the section below, not all Choice-eligible customers receiving SSO service for up to two consecutive billing periods will be assigned to an SCO supplier. POST-AUCTION COMMODITY SERVICE OPTIONS The aforementioned stipulation provided additional details regarding the commodity service options that will be available to customers after the initial movement of Choice-eligible sales customers to SCO service through the retail SCO auction. The following types of customers may receive SSO commodity service for up to two consecutive billing periods: New Choice-eligible customers 3 will receive at least one SSO bill, after which they may enroll with an Energy Choice supplier or participate in an opt-out governmental aggregation program. If they do not do so, residential customers will, after their second SSO bill, be assigned to an Energy Choice Supplier that has agreed to accept customers at the price established in the auction under the standard terms and conditions of SCO commodity service included in DEO s tariff. Suppliers awarded tranches in the auction are obligated to take on additional Choice-eligible customers that will be assigned to suppliers on a rotating basis. Other Energy Choice suppliers have the option of participating in that process and must notify DEO if they wish to do so. New non-residential customers that do not select a supplier or participate in a governmental aggregation program will, after their second SSO bill, be assigned to a monthly variable rate supplier, described further below. Choice-eligible customers whose opt-out governmental aggregation program is terminated may enroll with an Energy Choice supplier or participate in an opt-out governmental aggregation program if a subsequent one is offered. If they do not do so, residential customers will, after their second SSO bill, be assigned to an Energy Choice Supplier that has agreed to accept customers at the price established in the auction under the standard terms and conditions of SCO commodity service included in DEO s tariff. Non-residential customers in that situation will be assigned to a monthly variable rate supplier, described further below. Supplier participation will be handled in the manner described for new Choice-eligible customers. Choice-eligible customers whose Energy Choice or opt-in governmental aggregation contract expires without renewal may enroll with an Energy Choice supplier, participate in an opt-out governmental aggregation program or, in the case of residential customers, elect to be assigned to an Energy Choice Supplier that has agreed to accept customers at the price established in the auction under the standard terms and conditions of SCO commodity service included in DEO s 3 New customers include those (a) establishing service at DEO for the first time, (b) relocating within DEO s service territory and whose Energy Choice or aggregation agreement is not portable and (c) restoring service more than 10 days after being disconnected for non-payment

8 tariff. If they do not do so, such customers will, after their second SSO bill, be assigned to an Energy Choice Supplier that has agreed to accept customers at the supplier s posted monthly variable rate ( MVR ) under the standard terms and conditions of MVR service included in DEO s tariff. The MVR may differ from the SCO price but cannot be greater than any of the supplier s competitive monthly variable rates posted on the Commission s Apples-to-Apples Chart for the same billing period. All Choice-eligible SSO, SCO and MVR commodity service customers are eligible to be enrolled in opt-out governmental aggregation programs. A summary of the preceding commodity service options in matrix form is included as Appendix A. IMPLICATIONS FOR ENERGY CHOICE SUPPLIERS Energy Choice suppliers must make several elections following the auction even if they are not awarded any tranches in the auction process. In particular, they need to notify DEO if they are interested in (1) taking assignments of customers at the price established in the auction and/or (2) taking assignments of customers at a monthly variable rate that will be posted by the supplier. As noted above, Choice-eligible customers can receive SSO service for up to two consecutive billing periods, after which they will be assigned on a rotating basis to a supplier. New customers and those returning to SSO service after their opt-out governmental aggregation program is terminated will be assigned to a supplier that agrees to render commodity service at the price established in the auction. Customers returning to SSO service after their Energy Choice or opt-in governmental aggregation agreement expires can elect to receive SCO-priced service or, if they do not make that election or otherwise re-enter the Energy Choice program, they will be assigned to a supplier rendering commodity service at the supplier s posted MVR. The MVR may differ from the SCO price for the month but can be no greater than any of the supplier s competitive monthly variable rates posted on the Commission s Apples-to-Apples Chart for the same billing period. OTHER CONSIDERATIONS The SCO portion of the customers awarded via the auction will be administered using the process that is currently in place for the Energy Choice program in which suppliers serve specific customers and are identified on the customer s bill. The SSO portion of the load suppliers will be administered as a wholesale pool in which suppliers will serve a portion of the aggregate requirements of all SSO customers based on the number of tranches they were awarded in the auction. Because the term of the auction coincides with the beginning storage injection season, there is no required purchase of storage inventory in place on April

9 There are several other operational considerations that will affect the commodity service economics of suppliers regardless of whether they are awarded tranches in the auction. Due to fewer Firm Receipt Point Option elections for deliveries into DEO s Maumee receipt point, Energy Choice and other pooling service suppliers may be required to deliver volumes to the Maumee receipt point under certain operating conditions regardless of whether they hold firm transport capacity on the upstream pipelines. Due to the small volumes needed for DEO s isolated markets in Woodsfield and Powhatan Point, DEO will release the associated Texas Eastern capacity only to winning bidders. Those suppliers will be required to nominate volumes to those delivery points based on targets provided by DEO. In order to ensure adequate deliveries into DEO s much larger isolated Ashtabula market area, DEO will require Energy Choice suppliers and winning bidders to accept a release of the associated Tennessee Gas Pipeline ( Tennessee ) and corresponding downstream Dominion Transmission ( DTI ) capacity needed to serve that area on a pro rata basis. All suppliers assigned Tennessee and associated DTI capacity will be obligated to nominate volumes through those pipelines based on targets provided by DEO. Because Tennessee deliveries to the Cochranton, PA interconnection must be delivered to DEO through DTI, only the DTI portion of the release will count towards the supplier s comparable capacity requirement. In order to ensure adequate deliveries to the West Ohio market, DEO will require a minimum volume of flow to the West Ohio system via ANR Pipeline ( ANR ) capacity released to Energy Choice suppliers and winning bidders. All suppliers assigned ANR capacity will be obligated to nominate volumes based on targets provided by DEO. All other capacity will be made available to Energy Choice suppliers and winning bidders on a pro rata basis as done in previous auctions. The pro rata calculations will be performed separately for DEO s East Ohio and West Ohio systems because they are served by different upstream pipelines. Winning bidders will be required to accept pro rata releases while Energy Choice suppliers will initially have the option of rejecting the capacity, except for the West Ohio associated ANR, Tennessee and associated DTI capacity. This capacity cannot be turned back for reposting. Under the terms of the release, the supplier will not be able to change the primary receipt or delivery points stated on the contract, and DEO will retain any associated right-of-first-refusal rights upon contract expiration. If any capacity made available to suppliers is initially rejected, it will be reposted and made available to other suppliers on a non-discriminatory basis. Winning bidders will receive the option of accepting this capacity first. If no other supplier accepts the rejected capacity, Energy Choice suppliers will be required to accept a pro rata release of any capacity that remains unreleased - 9 -

10 after being reposted. Potential bidders should review the Capacity Release Information Package for additional details. Certain capacity released has discounts from maximum tariff rates that will be eliminated for any volumes delivered to non-primary, non-energy Choice receipt points. If a supplier schedules gas to an alternate point and causes DEO to be billed additional costs due to the elimination of a discount, DEO will withhold such costs from a subsequent remittance. Supplies delivered via the assigned Tennessee Receipt Space must be delivered to the Tennessee Gilmore meter. Effective April 1, DEO s fuel retention and Btu-to-Mcf conversion rates will be updated for the period from April 1through March 31. DEO will announce the new fuel retention and Btu-to-Mcf conversion rates prior to the auction. DEO will periodically review the interstate pipeline capacity assigned to suppliers and reserves the right to revise such assignments in the event of a material change in a supplier s load served under SSO, SCO or Energy Choice commodity service

11 APPENDIX A DOMINION EAST OHIO POST SCO AUCTION COMMODITY SERVICE OPTIONS Service Options Type of Choice-Eligible Customer Standard Service Offer (SSO) (1) Standard Choice Offer (SCO) (2) Monthly Variable Rate (MVR) (3) Energy Choice or Opt-Out Aggregation New Customer (4) Yes Residential Customers (5) Non-residential Customers (5) Yes, but not until an initial SSO bill is issued Customer whose opt-out governmental aggregation program is terminated Yes Residential Customers (5) Non-residential Customers (5) Yes Customer whose Energy Choice or optin governmental aggregation contract expires without renewal Yes Residential Customers, with election Residential and Non-residential Customers (5) Yes 1. SSO commodity service is available to certain Choice-eligible customers for up to two consecutive billing periods. Choice-eligible SSO customers may be enrolled in opt-out government aggregation programs. 2. SCO service is the NYMEX + offer based on the SCO auction result that is made available by Energy Choice suppliers that participate in the SCO assignment process. Such suppliers will be assigned customers on a rotating basis. SCO customers may be enrolled in opt-out government aggregation programs. 3. MVR commodity service is the monthly variable rate that is posted by Energy Choice suppliers that participate in the MVR assignment process. Such suppliers will be assigned customers on a rotating basis. MVR customers may be enrolled in opt-out government aggregation programs. 4. New customers include those (a) establishing service at DEO for the first time, (b) relocating within DEO s service territory and whose Energy Choice or aggregation agreement is not portable, and (c) restoring service more than 10 days after being disconnected for non-payment. 5. Represents the default commodity service provided to customers who have not elected another type of commodity service