Dominion East OhioDominion East OhioEnergy Choice Update/Energy Choice Update/Merchant Function IssuesMerchant Function Issues

March 4, 2004

Energy Choice EnrollmentEnergy Choice Enrollment

0

100

200

300

400

500

600

700

Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Jan-04

Tho

usan

d C

usto

mer

s

Residential Nonresidential Aggregation

Residential 56% Nonresidential 55%

Participation Rates

1/04 Energy Choice Market Shares (*)1/04 Energy Choice Market Shares (*)

28%

28%

26%

8%

10%

A

BC

D

Other 11

(*) Includes supplier’s aggregation customers

The largest Choice pool is 39% as big as DEO’s remaining GCR customer base

FRPS Pool 2003 Market SharesFRPS Pool 2003 Market Shares

23%

15%

10%9%

5%

38% A

C

B

Other 35

DD

Merchant Function Exit DiscussionsMerchant Function Exit Discussions

Goal Develop detailed transition plan under which DEO

could exit merchant function Does not have to include proposed date certain by

which DEO exits

Process Hold several (2-4) meetings at which stakeholders

could voice opinions on key issues Assume that DEO exits merchant function (i.e., do not

debate merits up front) DEO develops comprehensive plan for further review

or filing (with or without timetable)

Fundamental ObjectivesFundamental Objectives

Adequate Reliability– System must remain reliable for default service

and Energy Choice customers Acceptable Pricing

– Prices for default commodity and related services must be properly set

Appropriate Oversight– Commission must retain sufficient oversight to

avoid unacceptable outcomes

Any exit of the merchant function must be METHODICAL

Perceived Stakeholder InterestsPerceived Stakeholder Interests

Customers Getting reliable service at reasonable prices Understanding the options that are available

Commission Avoiding problems experienced elsewhere Retaining oversight to avoid market abuses

Marketers/ Producers

Eliminating non-market based price to beat Expanding pool of potential customers

Company Maintaining system reliability Recovering costs needed to operate system

OCC Ensuring that residential customers are not disadvantaged relative to current state

Provider-of-Last-Resort TimelineProvider-of-Last-Resort Timeline

Hourly Daily <1 Cycle Monthly >1 Cycle Seasonal

• Intra-Day Balancing

• Daily Balancing

• Multi-Day Underdelivery

• Single-Day Underdelivery

• Supplier Default

(1 Cycle)

• Monthly Balancing

• Standard Offer Service

Potential Discussion Topics Potential Discussion Topics

General IssuesOperational IssuesCustomer IssuesProcess Issues

Should we move forward and, if so, when?

General IssuesGeneral Issues

What other models are worth reviewing? What exactly does default service entail? What are the default supplier’s

responsibilities? What is DEO’s role after exiting the

merchant function? What oversight does the Commission have

of the default supplier? What steps do we take to minimize the

possibility of default by a default supplier?

Operational IssuesOperational Issues

How do we maintain system reliability with DEO no longer in the GCR business?

What capacity does DEO need to retain in its role as system operator?

Is a reserve margin needed? How do we deal with buying/selling storage

in place and cash-out gas? How do we respond to end use market

changes (i.e., declining baseload usage)? Does anything change in Energy Choice?

Customer IssuesCustomer Issues

Who “provides” the default service from the customer’s perspective?

How is the price for default service set and how frequently does it change?

How is the hand-off from GCR to default service handled?

Who is eligible for “standard” default service?

How do we inform customers? How do we deal with credit and collections?

Process IssuesProcess Issues

What is the optimal time of year to make the transition?

Should default service be subjected to an RFP process and, if so, who makes the final selection?

How is default service billed to customers and how does the supplier get paid?

How does DEO recover the costs it incurs as system operator?– Operational balancing capacity, Storage inventory,

UFG, Unrecovered gas costs

Suggestions?Suggestions?