Electricity Deregulation in Pennsylvania

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Electricity Deregulation in Pennsylvania PA
Chamber of Business Industry Energy Forum
II December 9, 2008
Kathy Kiernan Senior Vice President Affiliated
Power Purchasers Intl
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Factors that Impact Energy Prices

• Geopolitical
• Weather
• Supply/Demand
• Commodities/Raw materials
• Declining value of US Dollar

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Natural Gas Historicals
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Electricity Historicals
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Electricity Deregulation
25 Transmission delivery (TD)

• Supply separated from transmission delivery
• Transmission delivery still regulated
• Utilities still regulated

75 Electricity (kWh)
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Status of Deregulation

• Rate caps expired for
• Citizens, Duquesne, Pennsylvania Power, Pike
  County, UGI, Wellsboro 14.8 of ratepayers
• Rate caps expire December 31, 2009
• PPL Electric 24.6 of ratepayers
• Rate caps expire December 31, 2010
• Met-Ed, Pennsylvania Electric, PECO, West Penn
  Power 60.6 of ratepayers

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Develop a Strategy

• Managing operating costs improves your bottom
  line
• Budget concerns and projections
• Risk mitigation
• Include green components

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Fixed vs. Index

• Fixed Rate Advantages
• Eliminates risk
• Provides budget certainty
• Positive effects on financial performance over
  long term
• Index Advantages
• Greater flexibility
• Potential for lower average price
• Option if you believe prices may decrease

What is your risk tolerance?
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Contract TCs

• Price what is included?
• Term length
• Bandwidth constraints
• Credit issues
• Assignability
• Change in Law provision

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Contract Questions

• What is included in the price?
• What if my usage increases/decreases
  substantially?
• How does my credit rating affect my price?
• What if there is a change of law by
  legislature?
• How reliable is the supplier? Billing? Service?
• Is a premium built into the price for holding it
  for several hours/days?
• What margins are included in price?

All supplier quotes must be evaluated
validated.
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Procurement Process

• Assess risk tolerance business needs
• Track energy markets for opportunity
• Identify and evaluate reliable suppliers
• Obtain usage account info. from utility
• Develop Request for Proposal (RFP)
• Evaluate and analyze supplier offers
• Negotiate contract
• Process paperwork and transition
• Ongoing customer service

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Summary

• Electricity prices are volatile
• PA markets expected to be highly competitive
• Need business strategy to procure energy and
  control costs

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• Affiliated Power Purchasers Intl (APPI)
• 224 Phillip Morris Drive, Suite 402
• Salisbury, MD 21804
• 800-520-6685
• kkiernan_at_appienergy.com
• www.appienergy.com