ERCOT Settlements and the Smart Grid


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On December 10, 2009, a sea change began in the Texas electric market. ERCOT began wholesale settlements using smart meter data on Dec. 7, 2009.

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  • Welcome to The Texas Smart Meter Revolution – a Joint Webinar of UtiliPoint International and Pariveda SolutionsMy name is Mark Burlingame and I’ll be the moderator for today’s webinar.We have almost 150 participants in several countries, so we have made arrangements to facilitate your participation:If you are having problems viewing the presentation or logging to the website, please send an email to and we’ll work with you to resolve any problems.
  • I am an international utility professional with experience in multiple jurisdictions in the US and the UK. I have been in the industry for almost 20 years. Before that I was with Coopers & Lybrand’s management consulting practice. I am an experienced project manager and analyst and I am a CPA.
  • Before we go any further, a large number of us are from outside Texas, so let’s take a quick look at the Texas marketplace.
  • ERCOT system operations area covers most of Texas as shown on this map. (Then go into the stats)
  • Qualified Scheduling Entity is responsible for matching generation resources and uses and REPs on a daily basis.
  • We want to set the overall stage so as not to assume others are intimately familiar with AMIT or SMTSome Interesting Things to Note About this Timeline:HAN midyear this year. Google and Microsoft among are marketing applications directly to customers who will be able to start using at this point in time!ERCOT’s new market trading rules will take effect at the end of 2011. At this point in time, 2.2 million smart meters will have been installed!Then go the last two dates and talk about the numbers…
  • Based Austin Energy’s Phase 1 estimates of data storage. 400 MB per meterTexas will require 2.5 petabytes of storage by the year 2014 Just For Reads. This doesn’t included processing! This is a 10-Fold Increase from This Year!
  • The Texas Public Utilities Commission set up “Smart Meter Texas”. This gives customers access to their interval data, so that they can better manage usage, react to prices, Home Depot will be begin offering Home Area Network devices this summer. These devices will access SMT files. ALSO Expect Google and Microsoft to compete using this portal’s data as well!WILL EVENTUALLY LEAD TO BETTER RETAIL PRICE ELASTICITY
  • Looking at the value chain of the utility industry … all parts interact with each other, BUTToday we will focus on the retail portion of the industry.
  • The Utility Industry Will HAVE To Move Away from our current ways of viewing the customer, the market, wholesale purchasing and much more!Please keep these Issue in Mind as we go forward in the presentation…Customer Adoption and EducationIt’s really all about cost, comfort and simplicity in order for mass adoptionConsumer BehaviorUnlocking a more advanced profile to a consumer such that it creates additional value (new product, service, etc.)Customer segmentation must be changed from residential, commercial, and industrial to something more like consumer segmentation in order to better understand what the customer wants.Disruptive TechnologyWest coast companies aiming to bring in disruptive technologies such as Bloom $3,000 fuel cellNew Competition – gaining an understanding that Retail is an information technology playWal-Mart, Google, MicrosoftSystems Portfolio and IntegrationWith the changing game, Retail needs to keep upNEXT WE WILL BEGIN INVESTIGATING IN MORE DETAIL HOW RETAIL ORGANIZATIONS CAN BENEFIT FROM THE COMING CHANGES
  • ERCOT Settlements and the Smart Grid

    1. 1. The Texas Smart Meter Revolution<br />How Can Your Company Benefit?<br />Opportunities to Take Advantage Of Right Now!<br />May 25, 2010<br />
    2. 2. Agenda<br /><ul><li>Introduction
    3. 3. Latest Progress On Smart Meter Texas Initiatives
    4. 4. Market Opportunities</li></ul>2<br />
    5. 5. Mark Burlingame, CPASenior Director, UtiliPoint Analytics,<br />UtiliPoint International, Inc. <br />Mr. Burlingame is an international utility expert with 19 years in the utility industry including research and development, business case modeling, financial resource budgeting, business planning, system development, pricing administration, market forecasting and marketing. Prior to entering the utility industry, he was a Senior Management Consultant with Coopers & Lybrand. Mr. Burlingame's hands-on experience in several jurisdictions and markets includes the UK, Massachusetts, Pennsylvania, California, Washington, Florida, Texas and Oklahoma. <br />3<br />
    6. 6. Agenda<br /><ul><li>Introduction
    7. 7. Latest Progress On Smart Meter Texas Initiatives
    8. 8. Market Opportunities</li></li></ul><li>The Texas Market<br /><ul><li>Deregulated January 1, 2002
    9. 9. The Electric Reliability Council of Texas (ERCOT) operates the electric grid and manages the deregulated market for 75 percent of the state.
    10. 10. 6.5 million customers have choice of electric suppliers
    11. 11. 1,130 kWh/mo. average residential usage</li></ul>5<br />
    12. 12. Texas and ERCOT<br /><ul><li>Generating units: 566
    13. 13. Installed capacity: 80,076 megawatts
    14. 14. High-voltage transmission monitored: 40,327 miles
    15. 15. 828 entities generate, move, buy, or sell electricity</li></ul>6<br />
    16. 16. Some Texas Terms<br />There are 4 Transmission and Distribution Service Providers (TDSPs)<br />There are over 40 Retail Electric Providers (REPs)<br />QSE is a Qualified Scheduling Entity responsible for submitting REPs’ next day’s schedule of expected power requirements.<br />7<br />Load Serving Entity (LSE) is an organization serving end-use customers. For our purposes today, this is usually a REP.<br />
    17. 17. Texas Meter Conversion<br />Source:<br />8<br />
    18. 18. 9<br />Almost 3 Petabytes of Storage Needed by 2014<br />Source: UtiliPoint proprietary database <br />
    19. 19. Smart Meter Texas (SMT) Facts<br /><br /><ul><li>Website launched on March 23, 2010 that gives Texas LSEs & electric customers (with smart meters) online access to the information.
    20. 20. 1,034,711 AMS meters
    21. 21. 1,985 residential users have created accounts
    22. 22. 31 REP entities created and registered successfully on SMT portal3 TDSP entities created and registered successfully on SMT portal
    23. 23. 61 TDSP users created
    24. 24. 71 HAN devices successfully provisioned </li></ul>Source:<br />10<br />
    25. 25. Texas Meter Data Flow<br />TDSP<br />Meter Read<br />Enrollment<br />Historical Consumption<br />Meter Reads<br />Customer<br />Wire Charges / Payments<br />Enrollment<br />Invoicing<br />Settlement Transactions<br />Remittance<br />Retailer<br />QSE<br />11<br />
    26. 26. Texas Smart Meter Data Flow<br />TDSP<br />Load Control<br />15 min Interval Meter Reads<br />HAN Events<br />HAN<br />Texas Portal & Data Repository<br />Account Data<br />Enrollment<br />Fuel Cells<br />Customer<br />Historical Consumption<br />Enrollment<br />Meter Reads<br />PHEV<br />Invoicing<br />Wire Charges / Payments<br />HAN Services<br />Retailer<br />QSE<br />Remittance<br />Settlement Transactions<br />Customer Account Data<br />Pricing<br />Solar / Dist. Gen<br />12<br />
    27. 27. The Value Chain<br />© 2010 Pariveda Solutions, Inc. <br />13<br />
    28. 28. The Retail Challenges<br />Customer Adoption and Education<br />Consumer Behavior<br />Disruptive Technology<br />New Competition<br />Systems Portfolio and Integration<br />14<br />
    29. 29. Agenda<br /><ul><li>Housekeeping
    30. 30. Introductions
    31. 31. Latest Progress On Smart Meter Texas Initiatives
    32. 32. Market Opportunities
    33. 33. Systems Impact</li></ul><br />
    34. 34. Pricing Product Differentiation<br />Current Retail Market<br />After Smart Meters<br />Month to month<br />Term –plus 6, 12, 18, 24 month<br />Signing Incentives<br />Single price ($/kWh) with or without monthly base charge<br />Seasonal<br />Price guarantee <br />Limited Prepay and TOU Plans<br />MCPE plus mark up<br />Heat Rate plus NYMEX gas<br />Indexed plans<br />All Current Products and:<br />More robust Prepay and TOU plans<br />Contract-for-differences (RTP using MCPE and prearranged block or load shape<br />Creative “Fixed Bill” plans<br />Interruptible/curtailable plans<br />16<br />
    35. 35. Pricing Plan Value Positioning<br />Value of Branding<br />Fixed Bill -simple and secure - a fixed monthly bill<br />Fixed price– secure and simple <br />TOU- secure, some choice and control, and customized bundled service options<br />CFD - control and access to wholesale prices<br />Point of Sale Support<br /># Subscribers<br />Size of Subscriber Load<br />Simple<br />Choice (Value Added)<br />Price Security<br />Price Risk<br /> CFD<br />TOU<br />Fixed & Indexed<br />Fixed Bill<br />17<br />
    36. 36. Match Product to Value<br />Sales volume certainty<br />Lower risks on high volumes, hedging value<br />High<br />CFD<br />TOU<br />Season<br />Blocks<br />Price Variability<br />High margin potential<br />Fixed<br />Plans<br />Low<br />Access to a big, but reluctant to change, market share<br />Low<br />High<br />Degree of Involvement<br />18<br />
    37. 37. Customer Portfolio of Choices<br />High<br />CFD<br />Some years are easier to predict than others<br />I don’t like the current market price outlook<br />TOU<br />Season<br />Blocks<br />Fixed<br />Plans<br />Low<br />Low<br />High<br />I’d like to give load management a try<br />19<br />
    38. 38. TOU Pricing Plans<br />20<br />
    39. 39. TOU Benefits<br />Why Offer TOU?<br />Commodity costs vary with time of day and season<br />Consumers will change behavior if properly incented<br />Consumer response to prices offers an offset to expanded usage by other customers on other programs<br />Improve earnings by better managing risk <br />21<br />
    40. 40. TOU Failures<br />Selling program based on peak load reduction or bill savings alone<br />Many programs aren’t “marketed” to customers<br />Poor design (ratio of on/off-peak price, length of on-peak window)<br />Solutions: <br />Achieve success by selling TOU to customers premised on access to lower prices during low cost times.<br />Design product with customer behavior in mind<br />22<br />
    41. 41. A Better TOU Product<br />Features that Improve Customer Acceptance<br />Shorter Peak Period<br />Limited Peak Season<br />Better Prices<br />High Peak to Off-Peak Price Ratio (Shifters)<br />Lower relative Off-Peak Prices (Growers)<br />Demonstrable Savings<br />Term Flexibility<br />Choice and Control<br />23<br />
    42. 42. Type of TOU Plans<br />Fixed TOU Plan – prices and time periods fixed for term<br />Flex TOU plan – a platform of plans with varying price levels and peak period duration<br />Variable Peak Period Price – would use Nodal Day ahead market MCPE to establish next day peak price level<br />TOU combined with price overcall plan – TOU and Critical Peak Price <br />24<br />
    43. 43. Flex Choice TOU Service Plans<br />Plan 1<br />Plan 2<br />Peak 3:00 - 7:00<br />Peak 3:00 - 7:00<br />Prices<br />Peak $.36 <br />Off $. 10<br />Prices<br />Peak $.34<br />Off $.11<br />Choices<br />Plan 4<br />Plan 3<br />Peak 1:00 - 9:00<br />Peak 1:00 - 9:00<br />Prices<br />Peak $.36 <br />Off $.09<br />Prices<br />Peak $.34<br />Off $.095<br />25<br />
    44. 44. Variable Peak Price TOU<br /><ul><li>Fixed off peak price
    45. 45. On peak price based on Day Ahead Market MCPE averaged for the peak duration
    46. 46. Fixed On Peak duration (2 PM – 7 PM)</li></ul>26<br />
    47. 47. Critical Peak Pricing Features<br /><ul><li>A high fixed price used in place of the standard TOU peak period price
    48. 48. Limited number of days and hours CPP events can be called
    49. 49. Day ahead or 4 hour advance notice of CPP event
    50. 50. CPP event can be called for any day of the week
    51. 51. An option to allow customers to participate if CPP events are called in the off peak season
    52. 52. Incentive For Participation – either a reduced peak period price or in the form of a payment for performance</li></ul>27<br />
    53. 53. Prepaid Plans<br />28<br />
    54. 54. Prepaid Plans<br />Current Retail Market<br />After Smart Meters<br />Term – month to month and may include discount for staying longer than one month<br />No deposit, credit check or I.D.<br />Might include a monthly service charge and a fixed rate<br />Smart Meter can provide daily usage, turnoff meter when prepaid limit reached<br />Greater customer satisfaction as they have greater control over managing usage –daily info provided by email or phone<br />An in-house monitor might be installed to provide near real time usage and bill amount to date<br />Term – month to month but may require activation fee that requires 6 month service<br />No credit check<br />No deposit<br />No I.D. check<br />Monthly Service charge plus high fixed rate <br />Problems determining when prepaid limit reached – turn off complaints<br />29<br />
    55. 55. Contract for Differences Plans<br />30<br />
    56. 56. Contract for Differences<br />31<br />
    57. 57. Fixed Bill Plans<br />32<br />
    58. 58. Why offer Fixed Bill?<br /><ul><li>To differentiate yourself in the market place
    59. 59. To increase Brand presence – even customers that do not sign up will talk to others about your offering
    60. 60. To increase profits from the residential and small commercial customer markets - Customers are willing to pay a premium for convenience and stability </li></ul>33<br />
    61. 61. Fixed Bill Process<br />Weather Adjustment Historical kWh<br />MAY<br />BILL<br />Target Market<br />Adjust for Price Response<br />ESTIMATED kWh<br />JUN 1,007<br />JUL 1,234<br />AUG 1,333<br />SEP 999<br />OCT 888<br />NOV 650<br />DEC <br />Fixed<br /> BILL<br />“Make me an offer.”<br />ADJUSTED kWh<br />JUN 1,177<br />JUL 1,345<br />AUG 1,444<br />SEP 1,100<br />OCT 959<br />NOV 770<br />DEC <br />Apply<br />Forward Price <br />Curve <br />YES<br />Calculate <br />monthly FB amount<br />Add Risk Premium<br />Make Offer<br />Add Base Charge<br />$<br />%<br />34<br />
    62. 62. Pricing Plans After Smart Meters<br />Remember:<br /> Smart Meters should unlock access to niche markets that increase your bottom line! <br />35<br />
    63. 63. Points to Consider<br /><ul><li>Launch something - don’t stand on the sideline
    64. 64. Market, Market, Market! Promotion is key!
    65. 65. Allow for process improvement</li></ul>Don’t expect to get it perfect the first time <br />Don’t quit on the concept if there are problems<br /><ul><li>Address back office requirements – IT needs for billing, risk management, price development, sales and recruitment
    66. 66. Rewards: properly designed programs can</li></ul>Increase earnings and market share<br />Reduce costs<br />Mitigate risks <br /><ul><li>Smart Meters should allow for opening niche market segments</li></ul>36<br />
    67. 67. Pricing Plans System Interface<br /><ul><li>Achieving Program Success – What to do with what the Pricing guys gave you…?
    68. 68. Metering, Billing, Risk Management, Customer Accounting, and Product Accounting are all necessary for program success.</li></ul> Risk <br />Management<br />Prices<br />CIS<br />Offers<br />Reports<br />Subscription<br />Sales<br />Billing<br />37<br />37<br />
    69. 69. Contact Information<br />6000 Uptown Blvd. NESuite 314<br />Albuquerque, NM 87110<br /> <br />Direct: 214.821.8099<br />Cell: 214.684.6888<br /><br /><br />Mark Burlingame, CPA<br />Senior Director, <br />UtiliPoint Analytics<br />38<br />
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