Retail Choice In Electricity Markets

Transcription

1 Retail Choice In Electricity Markets Keeping Competitive Retailers Competitive Presented to MIT Center for Energy and Environmental Policy Research Jim Galvin, Director ISO and Power Settlement Luminant Energy Introduction Introduction Background What this presentation is A discussion of issues facing Texas Retailers What this presentation is not A discussion on the success of Retail Choice 1

2 Outline of Topics Background and Statistics- Retail Choice in Texas Concerns for the End Use Customer Competitive Retailers Challenges Managing COGs, bridging the gap between wholesale power costs and retail contracts Expanding beyond the monthly rate product Retail Choice in Texas The Electric Reliability Council of Texas 2013 Fact Sheet Reports: 73% of load able to choose their Electric Provider, approximately 6.7M meters 61% of the competitive residential load has switched 80% of small/large commercial load has switched 181 certified Retail Electric Providers 2

3 Q Activity YTD 2013 March 12 v. 13 Transac2on Type Mar- 13 Mar- 12 Mar- 13 Mar- 12 Switches 176, ,187 60,457 62,510 Acquisi2on Move - Ins 532, , , ,721 Move - Outs 258, ,847 89,676 83,955 Con2nuous Service Agreements (CSA) 111, ,208 38,296 50,107 Mass Transi2ons Total 1,079,779 1,123, , ,293 Total since June 1, ,971,305 Source: ERCOT Monthly Operational Overview Apr-2013 Retail Choice in Texas Switching activity is reported as robust, but what are the drivers: The Good: New programs, marketing campaigns, niche market offers The Bad: Customer transparency on terms and billing, customer satisfaction, fees and penalties The Ugly: Retail Providers exiting the market 3

4 Concerns for the End Use Customer Products and options require research Case study for Downtown Dallas area Search for specific zip code returned over 50 providers providing 214 Fixed Price short term contract options sorted by Fixed Price Lowest Fixed Price contract indicated $0.071/ KWh; however, other terms included monthly surcharge and Energy Fee of $0.03/KWh Fixed Price option at $0.083/KWh with no Energy Fee and smaller surcharge a better option, however, Fixed Price is at $0.105 KWh for monthly usage <1000 KWh Concerns for the End Use Customer Higher historic electricity prices have created a trust issue with deregulation Customers need to be educated Terms of service, any surcharges, termination fees and price change conditions Demand response programs must cater to larger population of end use customer 4

5 Concerns for the Retail Provider Customer acquisition and retention Data acquisition and aggregation Transition to interval meters versus scalar meters Wholesale billing cycles based on estimates Managing Cost of Goods Sold Commodity Ancillary Products Fees and Losses Managing COGs- Commodity Commodity Cost critical strategies Product types (block, shape, profiles, index) Sources- long term, short term bilateral contracts, Day Ahead Energy Market Forecasting demand Risk premium- avoiding spot market pricing Retail Providers need to manage or engage wholesaler in managing daily, monthly and annual positions 5

6 Managing COGs- Commodity DAM Short Term Fwd Long Term Fwd Actual Load Managing COGs- Ancillary Products Products that are allocated on load share Some products may be more market or contract based Other products socialized and more difficult to hedge Products offered to Retailers by wholesalers: Fixed Price Ancillaries Pass Through of actual costs Options for self supply or self provision 6

7 Managing COGs- Ancillary Products Case Study: four monthly periods of Ancillary costs ($/MWh of Load): Cost to Serve Load $7.34 Cost to Serve Load $2.03 Cong Basis AS 1 AS 2 AS 3 AS 4 Uplift Cong Basis AS 1 AS 2 AS 3 AS 4 Uplift On- Peak $1.92 $0.20 $0.67 $2.82 $0.10 On- Peak $0.45 $0.06 $0.25 $ $0.10 Off- Peak $0.92 $0.24 $0.33 $1.51 $0.15 Off- Peak $0.07 $0.09 $0.10 $0.62 $0.06 Average $1.40 $0.22 $0.49 $2.14 $0.13 $2.97 Average $0.25 $0.08 $0.17 $ $0.02 $0.50 Cost to Serve Load $7.31 Cong Cost to Serve Load $0.84 AS 1 AS 2 AS 3 AS 4 Uplift Basis Cong On- Peak $2.47 $0.15 $1.82 $ $0.62 AS 1 AS 2 AS 3 AS 4 Uplift Basis Off- Peak $0.21 $0.08 $0.32 $ $0.07 On- Peak $0.08 $0.07 $0.11 $ $0.07 Average $1.29 $0.11 $1.04 $ $0.33 Off- Peak $0.80 $0.02 $0.08 $0.09 $0.38 $0.21 Average $0.05 $0.07 $0.10 $0.49 $0.07 $0.04 Going Beyond Contract Rates Smart meter technology- interval meters replacing scalar meters Better accuracy at settlement, less reliance on estimates and profiles Technology that allows for control at the Retailer or customer level Technology opens the door to more Time of Use and Demand Response programs 7

8 Going Beyond Contract Rates Challenges: Complex billing- no longer period usage x Rate Customer education and buy-in Aggregation programs Solving the wholesale operational and settlement dilemma Texas Demand Response programs started out at LCI level Wholesale products now at aggregate contract level can we get to the meter level? Summary For Retailers to remain competitive Educate, acquire and retain customers Track and follow commodity and market trends Manage Cost of Goods Sold with thorough understanding of expense drivers Expand product lines and make use of technology 8