16-A-1 CAPP Report - Laserfiche WebLink

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Clarification Of Quantification Of Economic Benefit Under retail electric deregulation effective January 1, 2002 there are two basic types of electric accounts, those that are covered by price to beat (PTB)~ and those that are not. A retail electric provider affiliated with the incumbent utility company can only offer service to PTB eligible accounts at the price to beat rate, adjusted for fuel costs. Non-PTB accounts may be charged whatever the supplier and customer agree upon. However, the retail electric provider (REP) must recover non-bypassable charges that will be imposed by the transmission and distribution utility pursuant to Commission Order if the competitive REP intends to make a profit. A specific price quote may be economically beneficial to some PTB accounts and not others dependent upon what tariff the Commission requires for se~Mce to a particular account and what non-bypassable charges a REP will have to pay to provide se~ice to customers on that tariff Each city has a unique combination of accounts and a unique combination of PTB and non-PTB load. The evaluation of economic benefit involves analyzing future PTB rates and projected non-PTB rates of the incumbent provider (affiliated REP) against rates to be applied under aggregation. It is CAPP's goal to confirm that cities are economically better off under the aggregation project than they would be if they did nothing and remained under the PTB rates and the standard offer for non-PTB rates. While CAPP is unique among aggregation projects in that regard, CAPP consukants intend to take the analysis a step further. Not content that aggregation of CAPP's entire load produces total savings or even savings for each city when compared to doing nothing, CAPP's consultants w'dl attempt to isolate specific accounts that individually produce negative savings (despite overall positive savings) and to negotiate with the winning bidder to remove those accounts from the aggregated load, so that those accounts can remain under PTB. Furthermore, CAPP had secured bids that permit separate evaluation of PTB and non-PTB load so that even if economic analysis provides that it is best for an individual city to leave some or all its PTB eligible accounts with the affiliated provider of the incumbent utility, that city will still have an aggregation option for its non-PTB accounts. The CAPP load in the initial request for proposal exceeds 700 million kWh annually. It involves approximately 7000 electric accounts. Thorough economic analysis requires an understanding of where existing accounts will be consolidated under new rate designations, as well as an understanding of how price to beat will be calculated. Based upon existing information, CAPP consultants have confirmed that several bids will produce total savings when measured against the current understanding of the price to beat. The challenge now is to increase the savings by removing accounts that would be better off under PTB and to protect and hopefully increase savings by maintaining flexibility to react to changing market conditions and Commission Orders. CAPP appreciates your patience and cooperation. Under SB 7 passed in 1999, PTB is to be a 6 percent reduction to the bundled (fuel and base rates) price in effect in January 1999, adjusted for fuel costs. Because fuel costs increased significantly in 2000- 2001, it is unlikely any PTB customer will realize a savings from 1999 rates.