Energy Commodity Purchasing: Program Overview

1
Energy Commodity Purchasing Program Overview

• Report by the Energy Resources Center

2
The Energy Resources Center

• A non-profit energy policy research group
  established in 1973 as an IBHE accredited
  Research Center.
• Special expertise in the following areas
• Energy efficient technologies and practices
• Administer USDOE Industrial Assessment Center
• Combined Heat and Power
• Administer USDOE Regional CHP Center
• Economic Benefits Analysis
• Federal Reserve Bank Regional Forecast
• Indoor Environmental Quality
• Partner with School of Public Health
• Energy Commodity Procurement
• Program Manager for the State of Illinois Bulk
  Natural Gas Procurement Program.
• Manage procurement and delivery of natural gas to
  facilities from 12 State of Illinois Agencies and
  9 local municipalities.

3
Context of ERC Commodity Program

• 1998 State of Illinois requests ERC to
  temporarily facilitate natural gas delivery to
  primary state facilities after supplier declares
  bankruptcy.
• 1999 State enters into intergovernmental
  agreement with ERC to provide ongoing program
  management support for natural gas procurement
  and delivery services.
• 2003 State requests that ERC provide oversight
  of electricity procurement for State facilities
  covered by lottery process.
• 2005 State expands natural gas program to
  include electricity procurement services. ERC
  named Primary State Energy Consultant
• 2006 ERC develops comprehensive electricity
  supply contract for all state facilities in
  advance of 1/2/2007 full electricity deregulation.

4
ERC Energy Commodity Program Scope

• Procurement
• Solicitation drafting
• Vendor Outreach
• Response scoring
• Contract negotiations

• Commodity Billing
• Invoice receiving
• Invoice auditing
• Client billing
• Vendor payment

• Hedging Advisory
• Market monitoring
• Physical asset leveraging
• Price lock scheduling
• Risk modeling
• Strategy development and assessment

• Data Management
• Program reporting
• Market condition assessment
• Consumption modeling
• Weather normalizing
• Cost projections

5
Goals for Energy Purchasing Program

• Capture Lower Commodity Prices
• Use large volume and other assets to negotiate
  cost components in natural gas delivery stream
• Basis
• Storage
• Tariffs
• Transaction Fees
• Taxes and Assigned Fees
• Manage and Pool Risk
• Investigate finance options (pre-payment)
• Provide Necessary Services
• Financial Services
• Technical Services

6
Energy Commodity Program Model

• Description
• Coordinate a unified procurement program.
• Operates under the supervision of CMS and UI
• Meet operational goals while maintaining
  flexibility for individual Agencies.
• Aggregated energy commodity volumes and leverage
  assets to negotiate preferential common
  contracts.
• Facilitate and manage communications and
  transactions between Users and Vendors.

7
Utilities
Market
Pipelines

• Load Balancing
• Nominations
• Payments
• Storage
• Rates

• Reports
• Invoices
• Regulations

• Reports
• Bids
• Invoices

• Load Balancing
• Nominations
• Payments

• Reports
• Bids
• Invoices

• Orders
• Solicitations
• Payments

Energy Resources Center Program Manager

• Review Nominations
• Solicit bids
• Execute Purchases
• Develop Hedging Strategies

• Audit Invoices
• Perform Rate Reviews
• Issue Cost Projections
• Develop Collective Strategies

• Issue individual invoices
• Receive Payments
• Manage pooled volumes
• Respond to Delivery Agents

• Monthly Invoices
• Reports
• Technical Support

• Payments

Agency
Agency
Agency
Agency
Energy Commodity Program Model
8
Energy Program Financial Model
State Agencies
Energy Commodities
Disaggregated Invoices
Payments
Commodity Supplier
Aggregated Payments
UIC/ERC
Aggregated Invoices
9
Energy Commodity Program Benefits

• Lower Internal Administrative Costs
• Control Commodity Costs
• Lower Transportation Costs
• Leverage Storage Assets
• Lower Transaction Costs
• Comprehensive Risk Management Strateg
• Advocate for collective interests

10
Final Items

• Please forward corrections and comments regarding
  the survey to
• Mark Pruitt
• Energy Resources Center
• 851 South Morgan Street (M/C 156)
• Chicago, Illinois 60607-7054
• Mpruitt_at_uic.edu