REQ/RGQ Consolidation Proposal

1
REQ/RGQ Consolidation Proposal

• Consolidate the two retail quadrants into one
  combined retail quadrant called Combined Retail
  Quadrant (CRQ)
• Why?
• Falling Membership
• State of the Retail Choice Market

2
REQ/RGQ Consolidation Proposal

• Falling Membership
• REQ/RGQ started with approximately 80 members but
  numbers never increased.
• Current REQ/RGQ membership is 58.
• NAESB Bylaws require a minimum of 40 members per
  quadrant.

3
REQ/RGQ Consolidation Proposal

• State of the Retail Choice Market
• Approximately 20 states provide for retail
  competition. This number has not increased since
  the inception of REQ/RGQ.
• While retail choice is very active in some
  states, many others have slowed their efforts to
  open markets to competition.
• Because current markets function more or less
  within state or utility boundaries, the national
  market has not evolved as expected.

4
REQ/RGQ Consolidation Proposal

• Retail Structure Review Committee (RSRC)
• At the June 2005 NAESB Board of Directors meeting
  the Board requested volunteer board members to
  form a committee to address the retail quadrant
  membership issues and make recommendations to
  board of directors by the end of 2005.

5
REQ/RGQ Consolidation Proposal

• RSRC Mission Statement
• The Retail Structure Review Committee functions
  solely at the pleasure of the NAESB Board of
  Directors and reports to the NAESB Board of
  Directors through the NAESB Board Managing
  Committee. The Committee will make
  recommendations to the full board to address the
  membership levels in the retail electric and
  retail gas quadrants through possible changes to
  NAESB By-laws, structural changes to the
  quadrants or their segments including merger of
  the two quadrants.

6
REQ/RGQ Consolidation Proposal

• Other Board Committees working to promote
  REQ/RGQ
• Retail Awareness Committee
• Resources Committee
• Efforts to expand the scope of the REQ/RGQ have
  been made and should continue.

7
REQ/RGQ Consolidation Proposal

• The CRQ would have 4 segments of 7 members each.
• 28 seats is a workable number between the size of
  the WGQ (25) and WEQ(35).
• Based upon the current (pre-election) Board
  roster and EC roster, no one would lose a seat.

8
REQ/RGQ Consolidation Proposal

• For the Board in the transition, CRQ would
  include the following
• 7 Distributors 4 RGQ, 3 REQ, 0 Open
• 3 Suppliers 1 RGQ, 2 REQ, 4 Open
• 6 Services 4 RGQ, 2 REQ, 1 Open
• 2 End Users 1 RGQ, 1 REQ, 5 Open

9
REQ/RGQ Consolidation Proposal

• For the Executive Committee in the transition,
  CRQ would include the following
• 7 Distributors 3 RGQ, 4 REQ, 0 Open
• 5 Suppliers 3 RGQ, 2 REQ, 2 Open
• 6 Services 4 RGQ, 2 REQ, 1 Open
• 2 End Users 1 RGQ, 1 REQ, 5 Open

10
REQ/RGQ Consolidation Proposal

• While the two retail quadrants would be combined
  into one retail quadrant, efforts would be made
  to
• Preserve individual commodity identity, e.g. the
  CRQ would still develop and maintain distinct REQ
  and RGQ Model Business Practices.
• Prevent one commodity from dominating the other.
• Build off the cooperation REQ and RGQ have had to
  date.

11
REQ/RGQ Consolidation Proposal

• During a transition period, a company would be
  allowed to hold two seats in a segment, if
• The member has two memberships today and
  maintains those memberships.
• The member is willing to separate their electric
  interests and gas interests.
• This approach might help mitigate a membership
  reduction from 58 to 51 from companies that have
  both REQ and RGQ memberships.

12
REQ/RGQ Consolidation Proposal

• To help preserve a gas/electric balance
• Within each segment, one seat (maybe two) could
  be reserved for sole commodity companies (gas or
  electric only).
• Unlike WEQ, these reserve spots should not be
  left unfilled if no sole commodity company is
  interested.
• In such cases a combination company could fill
  the slot.

13
REQ/RGQ Consolidation Proposal

• What if the retail choice market experiences
  sudden growth?
• It may be appropriate to include a reserve
  clause that says if membership of CRQ reaches 85
  or 90 and with 2/3rds vote of the CRQ members,
  gas and electric quadrants could be separated.

14
REQ/RGQ Consolidation Proposal

• Next Steps
• Presentation to NAESB Board of Directors at its
  December 13, 2005 meeting.
• If approval is given, formation of committees to
  modify bylaws and adjust segment procedures.
• Timeline
• 6 to 9 months
• Questions?