Overview of the Electricity Marketplace

Paul GromerSEBANE/Peregrine Energy Group

Renewable Energy Leadership SummitJune 7, 2005

Customer Choice All customers can choose a competitive

supplier as of March 1, 1998 2nd state in nation

Breaks industry into 2 pieces, only 1 is competitive Supply -- competitive Delivery -- monopoly

Old model Dairy with milkman

New model L.L. Bean + Federal Express

Customers don’t have to choose

Customers do not have to choose a competitive supplier

For customers that do not choose, the utility provides generation service

Switching to date -- after 7 years 103,000 customers 4%

Customer switching

Comp.Utility

Load switching

Comp.Utility

Switching by customer class

0%

10%

20%

30%

40%

50%

60%

Res. Small Bus. Med. Bus. Lrg. Bus.

Cust.Load

Utility Generation Service I Originally, 2 forms of utility generation

service Standard Offer

For existing customers as of March 1, 1998 “Stable” prices

Default Service For new customers Market-based prices

Utility Generation Service II Standard Offer expired Feb. 28, 2005 Basic Service

New name for Default Service Procurement and pricing

Utilities procure power from wholesalers Prices to customers = prices charged by

wholesalers For medium and large businesses,

procurements and price changes every 3 months

Trend: Greater price volatility

WMECo Default Service Prices

3

4

5

6

7

8

9

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05

cents/kWh

Why switch? Lower prices More stable prices Green power Customized product

Basic Service = 1 size fits all

Opportunities for renewables Massachusetts Renewable Energy

Trust Renewable Portfolio Standard Green delivered products Green certificate-based products

Mass. Renewable Energy Trust Surcharge on electric rates

0.05 ¢/kWh Produces c. $25 million/year On-site renewables

PV, small wind, fuel cells, etc. Grid-scale renewables

Large wind, biomass, etc.

Renewable Portfolio Standard Baseline requirement All suppliers must include a

designated fraction of new renewables in their supply mix.

Green delivered products Competitive retail suppliers offer

green products Customer switches from Basic

Service to competitive supplier How does it work?

Not a straw A bathtub

Certificate-based products Customer stays on Basic Service Purchases renewable energy

certificates

Conclusions