Electric

Update

Workshop

Michael GarveyChairman

September 14, 2000

Agenda8:30 – 8:45 Check-in and refreshments Vina Maharaj

8:45 – 8:50 Welcome Michael Garvey, Chairman

8:50 – 9:00 Program Overview Eugene Leong, ABAG

9:00 – 10:15 What’s Happening in the ElectricMarkets ISO/PX, Price History Energy Markets Program Strategies

Michael Garvey, Moderator

Bob Grow, CECGary Hunt, HenwoodTom Green, NCPA

10:15 – 10:30 BREAK

10:30 – 11:30 Electric Program Review Renewable program Power purchases, prices, cash flow The Future, Calpine Contract

Dave Finigan, ABAG POWERJerry Lahr, ABAG POWERBill Ross, Calpine

11:30 – 12:00 Questions & Answers

12:00 Adjourn

Executive Committeefor FY 1999 - 2000

• Ken Blackman, City of Santa Rosa• Kathy Brown, County of Contra Costa• Robert Fugle, Gold Gate Bridge

District• Michael Garvey, City of San Carlos• Wayne Green, City of Salinas• John Lisenko, City of Foster City• Mark Lewis, City of Union City• Alan Nadritch, City of Benicia

Annual Board Meeting

October 19, 20009:00 a.m.

Metro Center

Program Overview

Eugene LeongPresidentABAG POWER

September 14, 2000

Program Overview

• ABAG POWER Objectives– Aggregate power purchases --> savings– Provide economical green power option– Take control of deregulated electric future

• What a Difference a Year Makes !!– April ‘98-April ‘00 --> Business as usual– June-August ‘00 --> The quarter from hell– Sept. ‘00-Dec. ‘01 --> Hedging the future

The Big Picture “The overriding lesson of history is the need to

balance market power. History shows that balance cannot be created by regulatory rules alone--it must be in the market structure…a strong consumer presence is essential to help balance the influence of suppliers and make competition work….The coalitions formed…with public power systems, rural cooperatives, municipal associationsmunicipal associations, consumer advocacy and environmental groups, and labor organizations--provide a valuable example of combined interests that might help to balance market power in both state and regional structures”

-- Scott Ridley, “Profile of Power” (1996)

Executive Summary “California is experiencing major problems with electricity

supply and pricing caused by policies and procedures adopted over the past ten years. This summer, California has seen both electricity price volatility – exemplified by huge increases in wholesale electric prices and increases in retail prices in San Diego – and supply and delivery system instability – culminating in unprecedented black-outs in the Bay Area. These serious, but thus far isolated, examples represent a precursor of what lies ahead for examples represent a precursor of what lies ahead for California’s economy over the next 30 monthsCalifornia’s economy over the next 30 months. California’s reliability deficits and retail price volatility may not improve in that time without a mid-course correction.”

--PUC Report to the Governor on Utility Deregulation (Aug. 2, 2000)

C R I S I S

Danger Opportunity

What’s Happening in the Electrical Markets

Bob Grow, CEC

Gary Hunt, Henwood

Tom Green, NCPA

September 14, 2000

State Renewable Energy Program

DAVE FINIGAN

September 14, 2000

TOTAL RENEWABLE ENERGY REBATE

COLLECTED FOR FY 1999 - 2000

$1,474,636

FEBRUARY, 2000 REBATE

TO ELECTRIC PROGRAM MEMBERS

$749,087

REMAINING REBATE TO BE

DISTRIBUTED TO MEMBERS

$725,549

Program Savings

Total Rebate $1,474,636Program Administration -737,000 (Budget) Net Remaining for Program Savings $ 737,686

Total 1999 – 2000 Energy Cost $17,000,000 (Estimate)

% of Energy Cost 4.3%

Electric

Program

Review

Jerry LahrProgram Manager

September 14, 2000

ABAG POWER Avg. Monthly Electricity Cost

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$/M

Wh

ABAG POWER Monthly Energy Cost

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

($ m

illi

on

s)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

MW

h

Monthly Cost Monthly Usage

Theoretical Cash Position(Energy Payments in Advance)

(14.00)

(12.00)

(10.00)

(8.00)

(6.00)

(4.00)

(2.00)

-

2.00

4.00

Jul-9

8

Sep-9

8

Nov-9

8

Jan-

99

Mar

-99

May

-99

Jul-9

9

Sep-9

9

Nov-9

9

Jan-

00

Mar

-00

May

-00

Jul-0

0

Sep-0

0

Nov-0

0

Jan-

01

Mar

-01

May

-01

$ m

illi

on

s

Theoretical Cash Position(Energy Payments in Arrears)

(2.00)

(1.00)

-

1.00

2.00

3.00

4.00

5.00

6.00

$ m

illio

ns

Electricity Cost Breakdown$/kWh

Transmission 0.010$ Distribution 0.030 Public Purpose Prog. 0.005 Nuclear Decom. 0.005 TTA 0.010 Generation 0.070 = PX Credit + CTC

Total 0.130$

• PX Credit: amount PG&E would have incurred to purchase electricity on your behalf

• PX Credit and Competitive Transition Charge (CTC) vary month-to-month, but must total to equal the generation charge

Example 1: Price Freeze - PX Rate(Spring)

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.030 + 0.040

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC 0.040 (0.030) (PX credit)

Total 0.100$ 0.100$

Paid to NCPAEnergy (PX Credit) 0.030

Total - Billed to member 0.130$

Example 2: Price Freeze - PX Rate(Early Summer)

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.090 + (0.020)

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC (0.020) (0.090) (PX credit)

Total 0.040$ 0.040$

Paid to NCPAEnergy (PX Credit) 0.090

Total - Billed to member 0.130$

Example 3: Price Freeze - PX Rate(Summer)

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.145 + (0.075)

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC (0.075) (0.145) (PX credit)

Total (0.015)$ (0.015)$

Paid to NCPAEnergy (PX Credit) 0.145

Total - Billed to member 0.130$

Price Freeze - PX Rate

-$0.1000

-$0.0500

$0.0000

$0.0500

$0.1000

$0.1500

$0.2000

$0.2500$/

kWh

Gen -CTC $0.0400 $0.0200 -$0.0740 -$0.0250

Gen - PX Credit $0.0300 $0.0500 $0.1440 $0.0950

TTA $0.0100 $0.0100 $0.0100 $0.0100

Nuc Dec $0.0050 $0.0050 $0.0050 $0.0050

PPP $0.0050 $0.0050 $0.0050 $0.0050

Distrib $0.0300 $0.0300 $0.0300 $0.0300

Trans $0.0100 $0.0100 $0.0100 $0.0100

Apr May Jun Jul

$0.13 $0.13

$0.13

$0.13

Key Points

• Cash flow (working capital) increased due to :– skyrocketing energy prices– energy payments in advance

• ABAG POWER must now recover money owed by PG&E

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.050 + 0.020

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC 0.020 (0.050) (PX credit)

Total 0.080$ 0.080$

Paid to Power SupplierEnergy (Calpine) 0.087

Total - Billed to member 0.167$

Example 4: Price Freeze - Fixed Price

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.087 + (0.017)

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC (0.017) (0.087) (PX credit)

Total 0.043$ 0.043$

Paid to Power SupplierEnergy (Calpine) 0.087

Total - Billed to member 0.130$

Example 5: Price Freeze - Fixed Price

$/kWhTrans/Distr/PPP/ND/TTA 0.060 PX Credit CTCGeneration 0.070 = 0.145 + (0.075)

Total 0.130$

Paid to PG&E orTrans/Distr/PPP/ND/TTA 0.060$ 0.130$ (total)CTC (0.075) (0.145) (PX credit)

Total (0.015)$ (0.015)$

Paid to Power SupplierEnergy (Calpine) 0.087

Total - Billed to member 0.072$

Example 6: Price Freeze - Fixed Price

$/kWhTrans/Distr/PPP/ND/TTA 0.060 Generation 0.145

Total 0.205$

Paid to PG&ETrans/Distr/PPP/ND/TTA 0.060$

Paid to Power SupplierEnergy (PX Credit) 0.145

Total - Billed to member 0.205$

Example 7: Freeze Removed - PX Rate

$/kWhTrans/Distr/PPP/ND/TTA 0.060 Generation 0.145

Total 0.205$

Paid to PG&ETrans/Distr/PPP/ND/TTA 0.060$

Paid to Power SupplierEnergy (Calpine) 0.087

Total - Billed to member 0.147$

Example 8: Freeze Removed - Fixed Rate

Energy Prices

0

20

40

60

80

100

120

140

160

180

$/M

Wh

Futures Prices (Prebon Energy)

Fixed-Rate Contract (Calpine)

Estimated 10% savings onenergy costs (Sep '00 - Dec '01)

Staff Recommendations

• Continue electric program w/ fixed price contract through 2001

• Explore different hedging and risk management strategies

• Expand Membership

• Strive for 100% renewable energy

The Future,

Calpine Contract

Bill RossCalpine

September 14, 2000

Reminder:

Annual Board Meeting

October 19, 2000

Questions

&

Answers