Tools, Knowledge, and Expertise
for Successful Energy Transactions




A presentation on World Energy by
RUSS Consulting G...
Contents

 Why RUSS Consulting Group partners with World
  Energy
 Overview of World Energy
  – Background
  – Procureme...
Why RUSS Consulting Group
Partners with World Energy

 Deliver a Best of Breed Solution
  – Deliver the best price with r...
World Energy Solutions

Bringing together intelligence and tools – enabling energy
buyers to obtain the best price and mee...
Our Clients:
    Leader in Online Procurement
Wholesale Utilities, Industrial, and Commercial




Government


           ...
‘Reverse Auction’ Process




Auction RFPs                                                           Energy
are posted    ...
‘Post & Respond’ Process
• Market visibility to your unique load
• Track the market over time
• Automated notifications wh...
RFP Architecting Enables
Price Testing

                                                Running multiple
                ...
Product and Feature Breadth
Commodities            Pricing Products                               Auction Features
Electri...
Documentation and Reporting

                            Tariff Models                 Contract Management
Accounts & Usag...
What is the Process?


Needs Planning          Pre Auction          Auction or P&R                Contract           Suppo...
Benefits to the Customer

World Energy Exchange’s unique process:
 Creates transparency, promoting competition and
  driv...
Benefits to the Customer

World Energy Exchange’s unique process:
 Speeds up award times, minimizing risk premiums
 Prov...
Never Beaten by a Traditional RFP

 Auction Design Optimizes Result for
  Buyer                                          ...
Power Supplier Margin by
  Procurement Method
World Energy’s unique methodology typically cuts supplier margins by
30-80 p...
Natural Gas Supplier Margin
  by Procurement Method
Margins typically charged by suppliers when buyers use conventional
me...
Case Studies
Case Study:
Multi-Site Fortune 400 Industrial

      Situation                                                Results
 In...
Case Study:
   Hospital Saves $3 Million

      Situation                                                Results
 A Texas...
Case Study:
   Ford Motor Company

      Situation                                                Results
 Ford Motor Com...
Case Study:
   Aggregation Group Member

                                                              Results
     Situat...
Case Study:
    Ethicus Healthcare Management LLC.
       Situation                                              Results
 ...
Case Study:
   Vesuvius

     Situation                                                Results
 Vesuvius had been purchas...
Next Steps

 Perform Initial Evaluation of Requirements to Ensure Fit
 Execution of World Energy Exchange Agreement
 Co...
Thank You




   RUSS Consulting Group LLC
   Michael A. Russell
   President/CEO
   877-250-1905



                Copyr...
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Save on energy cost with a energy procurement reverse auction

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Save on energy cost with a energy procurement reverse auction

  1. 1. Tools, Knowledge, and Expertise for Successful Energy Transactions A presentation on World Energy by RUSS Consulting Group LLC Copyright © 2008 World Energy Solutions Inc.
  2. 2. Contents  Why RUSS Consulting Group partners with World Energy  Overview of World Energy – Background – Procurement Platforms – Benefits  Case Studies  Next Steps 2 Copyright © 2008 World Energy Solutions Inc.
  3. 3. Why RUSS Consulting Group Partners with World Energy  Deliver a Best of Breed Solution – Deliver the best price with reverse auction technology – typical savings are 2 to 10% from “traditional” paper RFP – Enhance traditional energy procurement with a transparent bidding process  Deliver a Compliant Procurement Approach – The transparent reverse auction platform helps organizations address Sarbanes-Oxley Section 404 requirements  Deliver Greater Customer Value – World Energy’s platform complements our existing services 3 Copyright © 2008 World Energy Solutions Inc.
  4. 4. World Energy Solutions Bringing together intelligence and tools – enabling energy buyers to obtain the best price and meet compliance requirements over $10B Electricity, natural gas, financial instruments, and green credit transactions over 50M Megawatt hours transacted over the Exchange Never beaten by 1 TCF Volume of natural gas transacted over the Exchange paper-based RFP process on apples-to-apples basis over $600M Customer savings EVEN NET OF OUR FEE! 16x Volume of nearest competitor over 12,000 Auction events conducted CONFIDENCE over 300 Registered suppliers ENERGY 2 – 10% Typical customer discounts vs. traditional RFP COSTS 3–7 Suppliers per auction 5 – 15 Bids from each supplier per auction event 20% Frequency winning supplier outbids itself last minute to ensure a win 4 Copyright © 2008 World Energy Solutions Inc.
  5. 5. Our Clients: Leader in Online Procurement Wholesale Utilities, Industrial, and Commercial Government Social General Services Dept of Veterans United Nations District of Columbia Massachusetts Pennsylvania Maryland Security Administration Justice EPA Affairs New Jersey Delaware Connecticut Wholesale Utilities, Commercial & Industrial Clients, and Government Agencies trust World Energy with their energy procurements 5 Copyright © 2008 World Energy Solutions Inc.
  6. 6. ‘Reverse Auction’ Process Auction RFPs Energy are posted Suppliers Bid for Energy Competitively Consumers for Contracts Benchmark Price 6 Copyright © 2008 World Energy Solutions Inc.
  7. 7. ‘Post & Respond’ Process • Market visibility to your unique load • Track the market over time • Automated notifications when pricing approaches target • Lock in a price when results match goal Source: New York Mercantile Exchange For demonstration purposes only. Prices are the average of 12-month seasonal forward pricing on date of prompt month’s NYMEX contract expiration. 7 Copyright © 2008 World Energy Solutions Inc.
  8. 8. RFP Architecting Enables Price Testing  Running multiple Auctions or running multiple scenarios through the Post & Respond enables discovering the costs of various parameters Green Power Mix – Pricing Product – Term Length – Credit Terms – Special Conditions – 8 Copyright © 2008 World Energy Solutions Inc.
  9. 9. Product and Feature Breadth Commodities Pricing Products Auction Features Electricity Fixed (commodity/basis) Proactive Procurement Natural Gas Index Structured Event with Fixed End Time Green Credits Heat Rate Unique Hybrid – Renewable Energy Capacity Anglo/Dutch Design Credits Block – GHG Emissions Final Blind Bid Feature Baseload, no capacity Credits % of the system On-peak, Off-Peak Financial or Physical Event Type Procurement Type Reverse Auction Retail Forward Auction Wholesale Post and Respond 9 Copyright © 2008 World Energy Solutions Inc.
  10. 10. Documentation and Reporting Tariff Models Contract Management Accounts & Usage Management Reporting and Data Services Process RFP Audit Trail Bid History Due Diligence and Audit Book 10 Copyright © 2008 World Energy Solutions Inc.
  11. 11. What is the Process? Needs Planning Pre Auction Auction or P&R Contract Support • Provide • Review market • Review full • Summarize Results • Upload Preliminary price drivers analysis based contracts, • Product Information on inputs & sites & usage • Price to Compare • Term needs • Bills & Usage Data Analysis • Set renewal • Supplier • Understand trigger goals • Site Information • Terms • Results meet Factors • Monitor • Current Energy • Products expectations • Agree to take Contracts • Draft RFP • Review and away price • Review Data • RFP Approval finalize contract • Information and Contracts Opportunity Submit RFP to Run Event Sign Contract Renew Contract Assessment suppliers 11 Copyright © 2008 World Energy Solutions Inc.
  12. 12. Benefits to the Customer World Energy Exchange’s unique process:  Creates transparency, promoting competition and driving down prices – Instant feedback forces suppliers to sharpen their pencils  Allows price discovery – you can test the market with a variety of scenarios to determine the pricing sweet spot  Simplifies bidding, reducing administrative costs for suppliers and creating lower prices for large buyers – All qualified suppliers have an equal opportunity to win the business – No protests have ever been filed regarding one of our events 12 Copyright © 2008 World Energy Solutions Inc.
  13. 13. Benefits to the Customer World Energy Exchange’s unique process:  Speeds up award times, minimizing risk premiums  Provides data management – All procurement information is captured on the platform – Secure access to data for various stakeholders (hierarchy) – The Customer can run reports on contracts and bid history – Complete auction and process documentation book supplied for audit purposes (Regulators, SOX)  Helps you achieve your objectives such as budget certainty, cost savings, and fulfillment of green energy requirements at the least cost 13 Copyright © 2008 World Energy Solutions Inc.
  14. 14. Never Beaten by a Traditional RFP  Auction Design Optimizes Result for Buyer “The auction saves between 7 and 9% – Auction drives bidding activity versus the paper-based RFP process we – Transparency forces hyper competition formerly used with our clients.” amongst suppliers as end of auction nears Eric Hoegger, Cargill Energy Management Services – No auction gimmicks to create risk and uncertainty  Significant Market Liquidity – Supplier network of over 300 players – Online nature attracts market entrants “The World Energy Exchange is brutally by lowering their cost to acquire efficient at driving margins to the bare  Automation Enables Testing of minimum.” Multiple Consumer-Defined Contract Andrew Owens, Parameters Entergy Solutions – Pre Qualified suppliers compete on price alone – Customer can test different parameters to optimize price Better Pricing Through  Time Efficient Technology – Contracts usually awarded within hours of auction ending, enabling suppliers to minimize risk premiums in pricing 14 Copyright © 2008 World Energy Solutions Inc.
  15. 15. Power Supplier Margin by Procurement Method World Energy’s unique methodology typically cuts supplier margins by 30-80 percent. 10 $4-8/MWh 8 6 $3-5/MWh 4 $0.25-2/MWh 2 0 Sole Source Traditional RFP World Energy $/MWh Supplier and Consultants Exchange Sources: Restructuring Today, Supplier Annual Reports, and World Energy Supplier Survey 15 Copyright © 2008 World Energy Solutions Inc.
  16. 16. Natural Gas Supplier Margin by Procurement Method Margins typically charged by suppliers when buyers use conventional methods of procurement as compared to supplier margins for buyers who use World Energy’s unique platforms. $0.12 $.05-.10/Dth $0.10 $0.08 $0.06 $.02-.05/Dth $0.04 $.005-.02/Dth $0.02 $0.00 Sole Source Traditional RFP World Energy $/Dth Supplier and Consultants Exchange Sources: Restructuring Today, Supplier Annual Reports, and World Energy Supplier Survey 16 Copyright © 2008 World Energy Solutions Inc.
  17. 17. Case Studies
  18. 18. Case Study: Multi-Site Fortune 400 Industrial Situation Results  Integrated producer of steel products  Jointly designed a 2007 risk with plants located across 4 states management program that and multiple utilities commenced in August 2005  Historically managed financial and  World Energy facilitated over physical risks separately through 50 proactive procurement different processes events for customer  Had proactively managed physical  Supply is now diversified risk for over 5 years through the Post across 11 individual suppliers and Respond system  Savings to date against  Established goal of 5% year-on-year budgeted targets have savings from 2006 to 2007 and amounted to approximately solicited World Energy’s help $2M Produced 27% savings to date 18 Copyright © 2008 World Energy Solutions, Inc.
  19. 19. Case Study: Hospital Saves $3 Million Situation Results  A Texas hospital had sole-sourced  Over 40 bids were generated with one supplier in the auction  In cost cutting effort, they decided  Faced with stiff competition not to automatically renew the the incumbent was forced to contract, choosing instead to hold a reduce its price competitive auction with World  Supplier cut their bid by $3 Energy million in a multi-year  Incumbent supplier was invited to bid contract in order to keep the and spoke out against the auction customer process stating that they had already offered the lowest price available  The hospital’s energy buyer proceeded with the auction, inviting the supplier to submit their best bid in a competitive environment Hospital saved $3 million by using the competitive auction process 19 Copyright © 2008 World Energy Solutions Inc.
  20. 20. Case Study: Ford Motor Company Situation Results  Ford Motor Company desired to re-bid  Visible, real time bidding its natural gas supply drove price down  Their procurement consultant sent  Suppliers, confident that with out RFPs to their top 5 suppliers WE contract would be  World Energy tapped its network of awarded to winning bid suppliers to participate in an auction promptly, cut their risk event premiums  Online auction was conducted on the  Ford got a lower price from day pricing from the RFPs was due the auction event than from the consultant’s RFPs Going head-to-head, World Energy beat the paper RFP process by 18% 20 Copyright © 2008 World Energy Solutions, Inc. Copyright © 2008 World Energy Solutions Inc.
  21. 21. Case Study: Aggregation Group Member Results Situation  Mass High Tech Council selected supplier  Online auction event of choice generated 39 bids  VP of a member firm felt pricing too  Incumbent bid below its high, contacted World Energy to conduct current rate, showing the an auction competitive power of the auction  World Energy sent out invitations to bid to supplier network  Another supplier beat the incumbent, saving the  Council official contacted member’s CEO company nearly 11% of to advise against “wasting money” on an previous price auction when they already had the lowest price  Member went on with auction, asking incumbent to bid with others Aggregation group member saved $90K 21 Copyright © 2008 World Energy Solutions, Inc.
  22. 22. Case Study: Ethicus Healthcare Management LLC. Situation Results  Online auction event A new, privately-held specialty  generated 88 bids over six hospital was in search of its first tranches from five suppliers energy supply contract  Tested 12, 24 and 36 month Ethicus entertained a default  products, both 100% quote from the incumbent supplier traditional and 5% green The hospital’s design engineer  36 month fixed product w/o  green offered the best value referred Ethicus to World Energy but Ethicus was concerned Ethicus engaged World Energy to  with their usage forecasts secure the best possible price for a  World Energy Market Director defined usage was able to secure 100% Ethicus proceeded with the swing at no premium for the  36 month term reverse auction process, however only desired a fixed-priced, 12-  World Energy helped provide budget certainty, savings and month term due to usage usage protection with a 100% forecasts swing Compared to quote from incumbent supplier, Ethicus saved 27.5% 22 Copyright © 2008 World Energy Solutions Inc.
  23. 23. Case Study: Vesuvius Situation Results  Vesuvius had been purchasing  Eight suppliers responded to electricity the same way they posting with initial or refreshed purchased all materials – paper-based offers RFPs  Vesuvius filtered out non-  Vesuvius’ goal in using World Energy competitive suppliers over a 2- was to save time and gain more week process control over electricity procurement  The ability to shop the market over  Process was judged to be time and evaluate alternatives was “seamless, quick and efficient” important to them by Vesuvius management  Vesuvius selected World Energy’s Post  Posted electricity and natural & Respond platform gas forward procurement as a result of initial auction success Post & Respond experience resulted in a new efficient approach to energy procurement 23 Copyright © 2008 World Energy Solutions, Inc. Copyright © 2008 World Energy Solutions Inc.
  24. 24. Next Steps  Perform Initial Evaluation of Requirements to Ensure Fit  Execution of World Energy Exchange Agreement  Collect Required Data for Analysis – Letter of Authorization for Historical Load Information – Copy of current contract – Copy of most recent bills  Refinement of your Specific Product Requirements  Development of Electronic RFP  Finalize All Terms and Conditions During the Pre-Event Conference Call  Perform Final Verification of Supplier Participation  Conduct Auction Event or post to Post & Respond  Execute Transaction 24 Copyright © 2008 World Energy Solutions Inc.
  25. 25. Thank You RUSS Consulting Group LLC Michael A. Russell President/CEO 877-250-1905 Copyright © 2008 World Energy Solutions Inc.

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