Title: WEST PENN POWER COMPANY dba ALLEGHENY POWER REQUEST FOR PROPOSALS FOR FULL REQUIREMENTS WHOLESALE EL
1WEST PENN POWER COMPANY(dba ALLEGHENY
POWER)REQUEST FOR PROPOSALS FORFULL
REQUIREMENTS WHOLESALE ELECTRIC POWER
SUPPLYPRE-BID INFORMATIONAL WEBINAR
2Welcome
- Bob Reeping
- General Manager, Electric Supply
- Helen Taylor
- Specialist, Electric Supply
- RFP Coordinator
- Frank Mossburg
- Boston Pacific
- Independent Monitor / Technical Consultant
3GoToWebinar Attendee Interface
1. Viewer Window
2. Control Panel
West Penn Power Company RFP Pennsylvania Default
Service - Pre-bid Webinar
4Conference Objectives
- Gain a better understanding of the context in
which the Request for Proposal (RFP) is being
conducted - Inform interested wholesale electric suppliers of
the power supply process for West Penn Power - Review the bid structure
- Review aspects of the Supply Master Agreement
(SMA) which will govern the terms and
conditions of all transactions resulting from the
RFP - Answer questions on all of the above topics
5Background
- In accordance with the Electricity Generation
Customer Choice and Competition Act and with a
series of Commission Orders extending a majority
of West Penn Powers (WPP or Company)
generation rate caps, the Companys generation
rate caps are scheduled to expire on December 31,
2010 - In October 2007, in accordance with Commission
regulations WPP filed with the Commission its
Default Service and Competitive Procurement Plan
(DSP) at Commission Docket P-00072342. The DSP
contained the Companys plans to procure
generation service for its default service
customers who do not subscribe for generation
service from a third-party supplier
6Background
- Approximately 16 parties participated in the
proceeding - Hearings and briefing were conducted in the
Spring of 2008 with the Commission entering its
Order approving the DSP on July 25, 2008 - On September 23, 2008, WPP filed its compliance
filing to update the DSP documents to comport
with the Commissions July 25th Order - In January 2009 WPP filed updated RFP pages
associated with the procurement schedule per the
Commissions December 22, 2008 Order
7Background
- On February 6, 2009, WPP filed a request with the
Commission to advance the initial procurement for
residential service from June 2009 to April 2009 - At the March 12, 2009 Public Meeting, the
Commission approved the Companys request - On March 20, 2009 the Commission issued its Order
- On March 23, 2009, WPP filed its updated
compliance filing based upon the issuance of the
Commissions March 20th Order
8RFP Supply Requirements Overview
- The RFP we will be discussing today is for the
procurement of full requirements supply to serve
WPPs Pennsylvania default service customers for
the 29-month term from January 1, 2011 through
May 31, 2013 - The full requirements service herein will be made
available to those retail customers who - Do not affirmatively select an alternative
supplier - Are unable to obtain service from an alternative
supplier or - Have contracted with an alternative supplier who
fails to perform
9RFP Supply Requirements Overview
- Full requirements service generally includes
energy, capacity, ancillary services, losses and
renewable portfolio requirements excludes
network transmission - Suppliers obligation will be in terms of a fixed
percentage for a specific service type of retail
load - Wholesale supply will be at fixed prices based
upon the awarded winning bids for the Base Load.
The Incremental Load, if applicable, will be
supplied by buyer at a variable price (PJM spot
market). Base and Incremental loads are defined
by Volume Risk Mitigation (VRM) mechanism (SMA
6.2)
10RFP Supply Requirements Overview
- Suppliers will have to qualify only once for this
multi-procurement process, however if changes
occur that materially affect suppliers financial
condition or its status with PJM or FERC,
supplier is responsible for notifying WPP - Credit ratings
- PJM membership in good standing
- FERC authorization for market based rates
- Suppliers are eligible to qualify throughout the
multi-procurement process
11RFP Load Overview
12RFP Load Overview
13RFP Load Overview
- Service Type 10
- 50 17 and 12-month agreements
- 30 29-month agreements
- 20 spot
- 17-month term 1/1/11 to 5/31/12
- 12-month term 6/1/12 to 5/31/13
14RFP Load Overview
- Service Type 20
- 64 17 and 12-month agreements
- 27 29-month agreements
- 9 spot
- 17-month term 1/1/11 to 5/31/12
- 12-month term 6/1/12 to 5/31/13
15RFP Load Overview
- Service Type 30
- 88 17 and 12-month agreements
- 12 spot
- 17-month term 1/1/11 to 5/31/12
- 12-month term 6/1/12 to 5/31/13
16RFP Load Overview
- Service Type 40 has approximately 1,139 MW of
eligible load - ST40 customers are required to express an
interest in the fixed price option prior to the
solicitation (9/17/2010) - WPP will then conduct a single solicitation for
the fixed price service (10/18/2010) - ST40 customers who expressed an interest in the
fixed price option will be advised of the
resulting price and given thirty-one (31) days
after the PUCs acceptance of the ST 40 bids to
opt-in to the fixed price option for the term
January 1, 2011 through December 31, 2011 - Customers that do not affirmatively elect the
fixed price option shall receive hourly price
service
17RFP - Supplier Eligibility Criteria
- Submittal of the Expression of Interest Form
- Execution of the Confidentiality Agreement
- Submittal of PJM qualification and FERC
authorization - Qualified market buyer and seller in good
standing with PJM - FERC authorization to make sales of energy,
capacity and ancillary services at market based
rates - Submittal of Credit Application related
financial information - For supplier or financial guarantor
- Unsecured credit requires a rating of unsecured
senior long-term debt by SP, Moodys or Fitch - Submittal of Binding Bid Agreement
18RFP - Eligibility Overview
- Confidentiality Agreement April 1
- Credit Application and financial
information April 1 - Alternative Letter of Credit Form(s) April 1
- Alternative Form of Performance Assurance April 1
- PJM and FERC qualifications April 1
- Executed Binding Bid Agreement April 1
- Issue applicants' eligibility status April 8
19RFP - Bid Assurance Collateral
- 300,000 per bid block is required from the
supplier with each bid - Form of collateral must be either cash or Letter
of Credit (LC) - A Bid Assurance LC form acceptable to AP has been
provided as Appendix 6 in the RFP - Bid assurance collateral will be returned to the
supplier upon execution of contract(s) or
rejection of bid(s) - Bid assurance collateral will be forfeited in the
event that the supplier does not execute
contract(s) on its awarded bid(s)
20RFP - Alternate Forms of Bid Assurance Letter of
Credit
- Suppliers that wish to propose an alternative Bid
Assurance LC form or some other form of security
may do so by the April 1st eligibility
requirements due date - Acceptance of such alternative forms of
collateral is at APs discretion, and will be
communicated to the supplier by the April 8th
eligibility notification due date
21RFP - Bid Form Spreadsheets
- All bids must be submitted using the appropriate
Bid Form Spreadsheet - Contained within the Bid Form Spreadsheet, and
fully transparent to the supplier, is the
transformation of the suppliers price offer into
a Discounted Average Term Price to be used as
the only parameter to rank bids - All of the fields within the Bid Form Spreadsheet
that require the suppliers input must be
completed in order for the bid to be conforming
e.g., if it is the suppliers intent to submit a
zero price for any component of the pricing
structure, the supplier must enter the numeric
value of zero, rather than leaving the field
blank
22RFP - Bid Submission Validation
- Conforming Bids Must Be
- Submitted by the due date and due time
- Accompanied by the appropriate amount of bid
assurance collateral - Submitted using the Bid Form Spreadsheet(s),
completed in full and without modification - Submitted by an eligible supplier
- Submitted by fax to 724-830-7805
- Electronic submissions by email are
non-conforming - Faxes sent to other company machines are
non-conforming
23RFP - Evaluation of Bids
- Discounted Average Term Price calculated on each
Bid Form Spreadsheet will be the single parameter
used to compare all offers - Each Service Type and term will be evaluated
independently - Winning suppliers will be paid their offer
prices, not the Discounted Average Term Price
24RFP Bid-Week Outline
- The typical bid week will look like the
following - Monday Bids due by 430 pm
- Monday Bids awarded by midnight (award as early
as possible) - Tuesday WPP forwards partially executed
contracts to supplier - Wednesday Supplier forwards fully executed
contracts to WPP by 200 pm - Wednesday WPP files executed contracts with PUC
- Friday Commission rules on contracts
- Bids expire the earlier of rejection notice or
midnight of bid award day - Awarded transactions are contingent upon the
Pennsylvania PUC and any necessary FERC approvals
(SMA 16.13)
25SMA - Transaction Confirmation
- One SMA will be executed under which multiple
transactions can be executed - Should the SMA need to be updated during the
procurement cycle the new SMA will be executed
with winning bidders from that point forward - Prior executed SMAs will be unaffected by future
SMA changes (prospective only) - Each awarded bid will be a transaction
26SMA - Transaction Confirmation
- A transaction confirmation will specify, among
other details, the following - delivery period
- number of bid blocks
- percentage of load equivalent to each bid block
- monthly on-peak and off-peak energy quantities to
be used in determining the MtM exposure
27SMA- Full Requirements Service Obligations
- Seller must provide all services (other than
network transmission) to meet its share of the
load obligation as accounted for by PJM - Sellers obligations include, but are not limited
to the following - Energy
- Capacity
- Transmission other than network transmission
- Ancillary services
- Renewable energy resource requirements
- Transmission distribution energy losses
- Congestion management costs
- New PJM charges, other than the Regional
Transmission Expansion Plan (RTEP) and Transition
Market Expansion Charges (TMEC) exceptions
28SMA - Full Requirements Service Obligations
(continued)
- Buyers obligations include the following
- Network integration transmission service
- Future PJM charges assessed to network
transmission customers for PJM-required
transmission system enhancements pursuant to the
PJM Regional Transmission Expansion Plan (RTEP) - Future PJM charges assessed to network
transmission customers for the transition costs
related to the elimination of through-and-out
transmission rates (TMEC) - Distribution service
29SMA - PJM Declaration of Authority
- An agreement between Buyer and Seller for the
benefit of PJM to appropriately account for the
respective obligations contained within the SMA - Required by PJM
- Executed by both Buyer and Seller at the time of
SMA execution - Copy of Declaration has been provided as Exhibit
I in the SMA
30SMA - Scheduling Forecasting
- Seller is responsible for all scheduling with PJM
to meet the obligation - Seller is responsible for monthly settlements
with PJM pertaining to their obligations - Buyer will provide to the Seller on a reasonable
efforts basis - On each business day after execution, Buyers
estimation of Sellers capacity PLC for the
seventh following day for each service type - On each business day of the delivery period,
Buyers estimation of Sellers energy and
capacity obligation as is provided to PJM for
settlement purposes for each service type
31SMA - Determination of Delivered Quantities
- All historical load profile data provided for
this RFP is at the generation level, i.e.
includes distribution and transmission losses,
unadjusted for marginal losses - Daily load responsibilities will be determined at
the generation level and posted on a day-ahead
basis to our web-site respective to each awarded
Supplier - WPP will pay Suppliers for load as quantified at
the generation level
32SMA - Billing and Settlement
- Buyer will develop and deliver the invoice to the
Seller on or before the 6th business day of each
month for load quantities delivered in the
previous month - Buyer will pay Seller by electronic funds
transfer by 1200 p.m. on the day PJM settles - Seller is responsible for its settlements with
PJM for its awarded load obligations - Should PJM change to weekly billings, as
anticipated, the billing and payment provisions
hereunder will be adjusted accordingly
33SMA - Congestion Management
- Seller is responsible for all congestion
management costs - Buyer will transfer to Seller its congestion
revenue rights in proportion to the Sellers
share of the load, i.e., revenue rights will
follow the load - The nominations for congestion revenue rights for
the PJM planning year will be made by the entity
recognized by PJM as having the right to make
such nominations, i.e., the supplier who has the
load obligation effective June 1, the first day
of the planning period
34SMA Alternative Energy Portfolio Standard
Obligation
35SMA Volumetric Risk Mechanism
- An increment/decrement concept to mitigate
volume risk associated with customer migration - The Base Bid Block Size is established on the
first day of power flow - Thresholds for the difference between the daily
block size and Base Bid Block Size inc 5MW,
dec -3MW - Upon trigger of an inc, inc load load above
Base Bid Block Size 5MW - Upon trigger of a dec, Base Bid Block Size is
ratcheted down in increments of 3MW with more
then one reduction per day allowed. - Buyer has the increment load obligation
36Base Load and Increment Load Example
Condition Sellers Price Load anywhere All
load _at_ bid price within dead band Load
above 55 MW _at_ bid price dead band 2 MW _at_
Buyers obligation (e.g. 57 MW) Load
reaches All load _at_ bid price lower band
(e.g. 47 MW)
55 MW
dead band
50 MW base load
47 MW
Bid Block
52 MW
dead band
47 MW base load
Base load adjusted down to 47 MW and new
dead band established
44 MW
Bid Block
37SMA - Performance Assurance
- Security against Sellers default
- Nominally represents Buyers exposure above
Sellers unsecured credit limit - Formulaic and transparent methodology for
determining Buyers exposure - Forms of performance assurance are cash and LC
- Calculation done daily
- Each transaction with a Seller is marked to
market the exposures are netted - If Buyer is exposed, the exposure is reduced by
the value of the amount delivered but not yet
paid - If Buyer is still exposed the exposure is
compared to the Sellers unsecured credit amount - If the exposure exceeds the unsecured credit
amount by at least 500k, a call is made on
performance assurance - In the event of a Buyers Downgrade Event the
Seller may request weekly payments
38SMA - Performance Assurance
- The MtM exposure will equal the change in the PJM
western hub forward energy prices relative to
initial forward prices for each forward month
times the estimated forward monthly energy
quantities - Estimated forward energy quantities will be
derived from the quantities stated on each
Transaction Confirmation associated with 50 MWs
of PLC. The quantities will be scaled for the
current size of each contract - The forward prices used at the western hub will
be the on-peak prices - The forward off-peak prices will be derived using
an historic ratio of the day-ahead off-peak and
on-peak prices - An independent pricing agent will be retained by
AP to provide the forward prices
39SMA - Unsecured Credit
- Initially determined from financial data provided
by supplier in the pre-bid qualification process - Reviewed daily for changes in credit rating
- Based on Sellers financial parameters, or
Sellers guarantors financial parameters - Form of guaranty is non-negotiable and can be
found as Exhibit F in the SMA - Sellers unsecured credit will be the lower of
- Sellers (or Sellers guarantor) unsecured credit
cap - Sellers (or Sellers guarantor) relevant
tangible net worth - Guaranty amount from Sellers guarantor
- Sellers unsecured credit cap will based on
Sellers lowest credit rating (see chart on page
27 of the SMA)
40Important Upcoming Dates
- Confidentiality Agreement April 1
- Credit Application and financial
information April 1 - Alternative Letter of Credit Form(s) April 1
- Alternative Form of Performance Assurance April 1
- PJM and FERC qualifications April 1
- Executed Binding Bid Agreement April 1
- Issue applicants' eligibility status April 8
- Bid Assurance Collateral April 13
- Bid Form Spreadsheets April 13
41RFP Website
- All materials associated with the RFP can be
found on the Companys website at
www.alleghenypower.com/rfp - RFP and exhibits
- PUC Orders
- QA forum
- Historic load profiles
- PLC and NSPL data
- Customer counts
- Loss factors
- RFP coordinator contact information
42Independent Monitor
- Boston Pacific Company (BP) has been selected
as the independent monitor and technical
consultant for the solicitation - BPs activities hereunder will include
- The monitoring and review of all pre-bid
activities between WPP and the bidders - Monitoring the bid day processes to assure
conformance with the bid plan - Evaluation of bid results
- Present bid results to the PUC as part of their
evaluation
43