April 2006 1

Maine’sCompetitive

ElectricityMarket Rules

April 2006 2

T&D Utilities:

• Cannot own generating assets• Cannot participate competitively in

the electric power market• Affiliate participation is limited (CMP has no affiliate. BHE and MPS have no affiliate

activity.)

April 2006 3

Competitive Electricity Providers sell electricity

T&D Utilities deliver electricity

April 2006 4

Who Sells Electricity in Maine: Competitive Electricity Providers (CEPs)

• Suppliers sell electricity to retail customers. A supplier may be a generator selling its own electricity or a marketer purchasing and reselling electricity.

• Aggregators & Brokers

intermediaries who do not sell electricity

April 2006 5

Rules and Business Processes

• Business operations generally consistent with other states

• Business operations run smoothly

• Minor tinkering with rules occur, but consistency remains

April 2006 6

Providers Licensed in Maine

• Approximately 35 licensed suppliers

• Approximately 25 licensed aggregators or brokers

• Extent of activity in Maine varies

April 2006 7

Green Power

• A green market exists, for residential and business customers.

• Green market supply includes hydro, biomass, landfill gas, wind, and solar. Supply or certificates may be purchased.

April 2006 8

Load Served by Competitive Providers in March 2006

CMP BHE MPS

Resid’l/Small C/I <1% <1% 7%

Medium 35% 33% 46%

Large 84% 66% 90%

Total 39% 27% 41%

State load served by competitive providers: 37%

April 2006 9

Migration to Standard Offer – CMP and BHE Medium and Large Customers

Migration to the Retail Electricity Market Medium and Large Commercial and Industrial

Statewide Totals

0%

20%

40%

60%

80%

100%

Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05

% o

f Loa

d

Medium C&I

Large C&I

April 2006 10

T&D Service Areas

April 2006 11

Consumer-Owned Utilities

• 6% of Maine’s load

• Do have retail access

• Rules are simpler, might be different

April 2006 12

ISO-NE• The bulk power system administrator in

New England

• To serve load within ISO-NE territory, you must:– Be an ISO-NE participant or– Contractual arrangement with ISO-NE

participant

April 2006 13

Northern Maine• Part of Maritimes Control Area• Transmission entry through New

Brunswick• Northern Maine ISA does settlement and

transmission scheduling• Must be a participant or have a

contractual arrangement with a participant in NMISA administered market

April 2006 14

Information:

Can be found on the MPUC web page,

www.maine.gov/mpuc

April 2006 15

Standard Offer

Chapter 301

April 2006 16

Standard Offer Service

• Maine’s only default service• Provided by a competitive electricity

provider(s) • At a rate determined by competitive

bid

April 2006 17

Customers in Standard Offer

Standard Offer Providers

Customer makes no choice

Customer drops provider

Provider drops customer

April 2006 18

General Model• S.O. provider does not enroll or interact with

individual customers• T&D reads meters, bills, collects for S.O. provider• T&D informs each S.O. provider of its S.O. sales • S.O. provider is paid its bid amount times its sales,

less a pre-defined percentage for uncollectibles

April 2006 19

Number of Providers

• More than one provider may provide standard offer service

• Total load for a customer class is apportioned among multiple providers based on the percentage of load won in the bid

April 2006 20

Term of SO Rates

• Terms described in RFPs issued by the PUC• Length currently 6 months for medium and

large classes. Thus the rate for these customers tracks the market.

• 1/3 of total residential and small commercial requirement purchased annually. This mitigates volatile wholesale prices.

April 2006 21

Residential & Small

Commercial( PRICE “A” )

Medium Commercial & Industrial

( PRICE “B” )

Large Commercial& Industrial( PRICE “C” )

There is one Standard Offer Price for each customer group.

Standard Offer Rate Classes

April 2006 2220

How Rate Classes are Served

•A provider may serve one or more classes. •Provider will serve in 20% increments in a rate class.

20%20%

20%

20%

20%

April 2006 23

Rate Structure

• Residential & Small C/I must be a flat per kWh rate

• Medium may have seasonal rates, demand charge

• Large C/I may have monthly or time-of-day rates, demand charge

April 2006 24

Pricing Examples

$.05 per kWh

$1.00 per kW $ .05 per kWh

Standard Offer Prices:

$ .06 Winter kWh$ .03 Summer kWh

T&D Rate

$ 10.00 Customer Charge

$ 5.00 Winter kW $ 2.00 Summer kW

$ .10 Winter kWh $ .05 Summer kWh

April 2006 25

Standard Offer Bid ProcessResidential/Small Commercial Rate Class

ABC CoBid 4.4

LMN CoBid 4.7

RST CoBid 4.8

Providers receive the price they bid$$$

The customer is billed one Standard Offer Rate: 4.6

40% 40% 20%

Exam

ple Only

Exam

ple Only

April 2006 26

Collections• T&D will bill and handle all credit

& collection for SOP

• Uncollectibles will be provided for by retaining a pre-determined percentage of revenues

• Consumer protection rules that apply to T&D will apply to Standard Offer (eg, payment arrangements, disconnect for non-payment)

April 2006 27

Treatment of UncollectiblesLet’s Say:

• Bid price: 4 cents

• Actual kWh sales: 100,000

• Pre-set uncollectibles percentage: 1%

Then: 100,000 x .04 = $ 4,000

$4,000 x .01 = $ 40

SOP receives $ 3,960

April 2006 28

Leaving Standard Offer

• Res’l and small C/I - may leave and re-enter SO as often as they like

• Medium and Large customers - opt-out fee applies if customer was in competitive market and then went onto standard offer service

• Aggregates with load >50 kW - subject to opt-out fee

April 2006 29

Opt-Out Fee

• Opt-out fee = 2 times the highest standard offer bill for the most recent period customer took standard offer

• Paid if customer leaves standard offer after less than 12 months

• No opt-out fee in Northern Maine

• PUC may waive fee

April 2006 30

Licensing

Chapter 305

April 2006 31

3 Steps to Provide Electricity Service In Maine

1 ) Obtain Maine License

2 ) Contract with T&D company for billing and metering services

3 ) EBT Training/Testing

April 2006 32

Consumer Protection – Two Groups of Customers, with different consumer

protection requirements

“Small” customers

- In T&D’s rate class that has no demand charge (<20 kW, 25 kW or 50 kW depending on T&D)

- More stringent consumer protection rules apply

Larger customers:

- All others

- Less stringent rules apply

April 2006 33

Licensing RequirementsFinancial Capability

• Most recent financial disclosures or that of corporate parent

• Additional documentation to demonstrate ability to refund customer deposits if deposits will be held

April 2006 34

Licensing Requirements Technical Capability

• Description of industry experience with electricity or natural gas markets

• Document that applicant is a participant in ISO-NE or NMISA market or has a contractual arrangement with a participant

April 2006 35

Licensing Requirements Financial Security

• Applies to CEPs serving residential and small commercial customers

• Initial amount - $100,000

• Subsequent – 10% of annual revenues from Maine sales

• Letter of credit or cash

April 2006 36

Licensing RequirementsEnforcement Proceedings and Customer

Complaints

• Disclose enforcement proceedings against applicant or associated entities within last 6 years

• Disclose customer complaints against applicant within last 12 months

April 2006 37

Licensing Requirements Miscellaneous

• Ability to satisfy portfolio requirement

• Disclosure of affiliates in retail electricity business

• Evidence of tax registration

• Contact persons

• List of jurisdictions in which applicant or affiliates engaged in electricity sales

• List of jurisdictions in which applicant or affiliates applied for license and disposition of application

April 2006 38

License Application

• Available electronically on MPUC Supplier Web Page

• Fee: $100

• MPUC will approve, deny or investigate within 30 days of application

April 2006 39

Licensing Conditions

• Comply with Maine laws and regulations• Update for substantial changes in circumstances• Reasonable efforts not to conduct business with

unlicensed entities• Submit to jurisdiction of Maine courts and MPUC• Contracts for service to residential and small

commercial customers interpreted according to Maine law and maintained in Maine courts and agencies

April 2006 40

Annual Reports

• File on or before July 1

• Average prices, revenues, sales by customer class and T&D territory

• Resource mix (ISO-NE territory use GIS certificates)

• Enforcement actions

• Compliance portfolio requirement

April 2006 41

Consumer Protection

Chapter 305

April 2006 42

Consumer Protection All Customers

• Obtain customer authorization

• No release of customer information

• Comply with Unfair Trade Practices Act

• No unreasonable collection costs

• Comply with Equal Credit Opportunity Act

• Comply with telemarketing limitations

April 2006 43

Consumer ProtectionSmall Customers – Terms of Service

• Send Terms of Service within 30 days of contracting w/customer

• Annual notification of Terms

• Include Uniform Disclosure Label with Terms

April 2006 44

Terms of Service

Price structure

Estimated bill method

Late payment terms

Deposits

Fees & penalties

Toll-free number

Contract length

Warranties

Do not call list

Rescission rights

Standard Offer

Credit agency procedures

April 2006 45

Consumer ProtectionSmall Customers - Verification of Choice

Supplier must receive verification that

customer chose supplier:

Written -- Strict Rules

Third Party Verification

April 2006 46

Consumer Protection Small Customers - Rescission Period

• Tell customers orally and in Terms

• Customer’s rescission may be oral, written or electronic

• Rescission Period

– 8 days by mail

– 5 days if sent electronically or by hand

April 2006 47

Consumer Protection Small Customers - Slamming Complaints

• Customer can file a complaint

• MPUC will investigate

• Provider must refund customer money plus expenses

• Penalties are determined by the MPUC

April 2006 48

Consumer Protection

Small Customers - Changes

• Provide customer with 30-day notice of change to Terms

• Provide customer with 30-day notice of contract termination

April 2006 49

Consumer Protection Small Customers - Generation Bill

Content

• Consumption, price, charge

• Average cent/kWh charged this month

• Itemized list of products billed

• Payments applied, arrears, late payment information

April 2006 50

Consumer Protection Small Customers - Generation Bill

Format

• Plain Language

• Separation, Definitions, Understandable

April 2006 51

Consumer ProtectionMarket Risk Disclosure

• Applies to real time products (prices vary with energy prices or indices)

• Written disclosure prior to or at time of contracting

• Separate document or in contract acknowledged by signature or initials

• Language specified by MPUC (alternative language may be allowed)

April 2006 52

Consumer ProtectionMarket Risk Disclosure

• Volatility risk

• Future performance

• Additional costs

April 2006 53

ResourcePortfolio Requirement

Chapter 311

April 2006 54

30% of annual kWhs sold to customers in Maine

(calendar year)

April 2006 55

Portfolio Requirement

EligibleOther

30% Eligible

April 2006 56

Eligible Resources• Small Power Production

• Efficient Cogeneration built before 1/1/97

• Renewable Generation < 100 MWFuel Cells Geothermal

Tidal Hydro

Solar Biomass

Wind Municipal Solid Waste

April 2006 57

Cure Period

• If 20% in one year,

can cure over next year

• MPUC may extend

April 2006 58

Compliance

• Use ISO-NE GIS system to comply with Maine’s RPS requirement for sales in ISO-NE territory

• Use settlement data or other documentation to comply with RPS for sales in northern Maine

• Verify compliance in annual report

April 2006 59

Uniform Information Disclosure

Chapter 306

April 2006 60

Label Content - Fuel & Emissions

• Resources used to meet load obligations in NE over most recent 12 month period

• Verified through NEPOOL GIS data for sales in ISO-NE territory or through settlement data or other documentation for sales in northern Maine

• Conform visually to MPUC sample label

April 2006 61

Label Content - Fuel & Emissions

• Fuel sources of resource portfolio -- biomass, MSW, fossil fuel cogen, fuel cells, geothermal, hydro, solar, tidal, wind, nuclear, gas, oil,coal

• Emissions from generation resources -- CO2, NOX, SO2

• Must compare emissions to a NE average emissions

April 2006 62

Product Offerings

• Separate label for each product offering

April 2006 63

Label must be:

• Mailed quarterly to “small” customers

• Available to all customers on request

• Sent with Terms of Service to small customers

April 2006 64

Compliance

• Provide labels and evidence of validity with annual report