TEPA's Plugged In | August 2018

AUGUST 2018

SELLING solar A West Texas Story Pg. 10

ALSO INSIDe Pass Through Rates in the Northeast Markets. Pg.15 A Look at ERCOT’s recent SARA Report. Pg.20 Transparency & Resiliency: Today’s Competitive Challenges?

Pg.22 A Q&A with Regulatory & Legislative Experts. Pg.25

LIGHT

Your knowledge Your business Your network You

13th Annual TEPA Conference September 18-20th, 2018 Houston Hotel ZaZa Museum District

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ETHICS

EDUCATION

ADVOCACY

CONTRIBUTORS EDITORIAL Clay Butler, Jim Connolly, Read Comstock, Aaron Cook, David Fein, Matt Kinney, Alex Paciga, Mike Payne COPY EDITORS Andrew Barth, Scott Black, Leslie Brinson, Aaron Cook, Raheleh Folkerts, Michele Knox LAYOUT AND DESIGN, TimePiece Public Relations & Marketing NATIONAL TEPA BOARD PRESIDENT Andrew Barth, Partner - CSD Energy Advisors VICE PRESIDENT Huston Able, Vice President of Sales - Choice Energy Services SECRETARY Perry Ruthven, Managing Director - Priority Power Management TREASURER Marilyn Fox, Partner - Fox, Smolen & Associates TEPA DIRECTOR Shannon McGriff NORTHEAST REGION TEPA BOARD PRESIDENT Craig Wall, Dir. of Supplier & Prod. Mgmt - Patriot Energy VICE PRESIDENT Mike Payne, Managing Partner, APPI Energy SECRETARY Bill Cannon, Dir. Northeast Markets - Legend Energy Advisors NATIONAL AT-LARGE BOARD MEMBER Paul Ward, Director and General Manager - Schneider Electric NATIONAL PAST PRESIDENT David Roylance, Co-Founder - Prism Energy Solutions NORTHEAST REGION PAST-PRESIDENT Javier Barrios, Managing Partner - Good Energy, LLP NATIONAL COMMITTEE CHAIRS MEMBERSHIP Shannon McGriff, TEPA Director LEGISLATIVE AND REGULATORY Paul Smolen, Partner - Fox, Smolen & Associates STANDARDS AND COMPLIANCE Jeff Shoaf, Senior Vice President - Amerex Energy Services COMMUNITY OUTREACH Jared Patterson, Director of Energy Services - Rapid Power Management EDUCATION F. Michael Lewis, Vice President of Operations - Entelrgy CONFERENCE Shana Page, Business Development Manager - Source Power & Gas NORTHEAST REGION COMMITTEE CHAIRS LEGISLATIVE AND REGULATORY Matthew Kinney, Senior Counsel - Patriot Energy Group STANDARDS AND COMPLIANCE Craig Wall (Interim) EDUCATION Ray Perry, Founder and Managing Partner - NJGEC Andrew Schecter, Regional Sales Manager - Talen Energy MEMBERSHIP Stephen King - Premiere Energy Auctions ILLINOIS CHAPTER OF TEPA David C. Weirs, President - Satori Energy

THE ENERGY PROFESSIONALS ASSOCIATION WWW.TEPAUSA.ORG | FOLLOW @TEPA_USA Photography provided by Robin Benzrihem, Marcus Castro, Raw Pixel, Edgar Chapparo, Matt Power, Leo Rivas, Steve Halama, Caleb Woods, Nirzar Pangarkar and Pierre Chatel Innocenti on Unsplash CONTACT info@tepausa.org

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CONTENTS

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AUGUST 2018

SELLING solar A West Texas Story

10 - selling solar

15 - River of change

20 - sara report

22 - transparency

25 - market q&a 7

“ We believe strongly that transparency runs in tandem with competition and innovation, and that all customers must be given the “complete picture” when they negotiate their power contract.

“

LETTER FROM THE PRESIDENT

MARKET TRANSPARENCY In recent weeks, there has been a rise in media coverage addressing concerns with high residential electricity rates and the need for more transparency regarding certain competitive energy offerings by retail electric providers.

Many of the stories have focused on the frustration felt by consumers over confusing or misleading multitiered pricing offers, particularly so-called “fixed rate” offerings, which primarily target residential energy buyers.

These news stories, and other reports that have been brought to the attention of the Texas PUC, were initially motivated by concerns of lower supply margins and higher temperatures perpetuating increased prices across the region. These stories underscore the importance of consumers having access to reliable, clear, and transparent information when making choices for competitive energy.

As you know, TEPA was founded to promote a standardized code of conduct among brokers and consultants who specialize in providing market knowledge to energy consumers. Our association seeks to help consumers make the best procurement choices possible for their homes and businesses. TEPA believes these standards for transacting on behalf of energy consumers have helped support the development of a more robust competitive energy marketplace and they offer consumers better information and guidance when they are making choices regarding their energy providers.

We also believe that fair retail competition is in the best interest of consumers, and we support innovation, new products and business models that simplify the energy procurement process. Further, we believe strongly that transparency runs in tandem with competition and innovation, and that all customers must be given the “complete picture” when they negotiate their power contract.

and best practices your company is planning, or has in place, to help consumers better understand the rates and fees associated with their energy contracts.

Our goal is to incorporate your ideas into a letter that will be shared with our members, as well as policy makers.

We hope to improve transparency and accountability for marketplace participants and consumers, and to help regulators and policy makers better understand how TEPA members are providing real solutions that support fair and robust competitive choice for consumers in Texas.

Please feel free to reach out to me via email ASB@ CSDEnergy.com or phone (832) 754-4883, to discuss your thoughts on how we can help positively shape the future of this industry.

- Andrew Barth, EMP National Board President

To that end, TEPA is seeking your input on how we, as a collective body of energy professionals, can take a more proactive approach in creating greater transparency for consumers. We welcome your thoughts, suggestions and feedback as we try to better understand what initiatives

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SELLING solar A West Texas Story

by Aaron Cook

Seeking warmer temps and bluer skies this winter, I ventured out on the year’s first road trip to Marfa, Texas. Now, I’m fairly confident you haven’t heard of Marfa. I mean, why would you? This tiny town is nestled about an hour north of the US-Mexico border and boasts a population count that likely wouldn’t fill a Manhattan apartment complex.

But this remote part of Texas is packed with sun-filled, wide open sky adventure for the winter-weary. Marfa itself is known for its ghost lights (Texas’s version of the Northern Lights) and Hotel Paisano - where Hollywood legends Rock Hudson, Elizabeth Taylor and James Dean stayed while filming the silver screen movie, Giant. Venture out a little farther and you’ll discover the Terlingua ghost town, dip your toes in the Rio Grande, explore Big Bend State Park and gaze into the Milky Way from the MacDonald Observatory.

But to get to this soul-nourishing, stretch-your-arms-out-as-wide-as-youwant region of Texas, you have to be committed. Driving out of Dallas, it’ll take you just over 8-hours – a straight shot west on I-20, then south at Monahans. (Travel tip: hit the bathroom in Monahans. Just trust me on this one). But the drive, just as much as the destination, is therapeutic.

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Long known for its oil and gas exploration, the drive through West Texas is dotted with oil derricks, natural gas drills and refineries. It’s an energy professional’s Disney World. And rightfully so. According to the U.S. Energy Information Administration (EIA), Texas was the leading oil and natural gas producing state in the country in 2016 and 17.1 West Texas, however, is quickly becoming just as important for what’s above the ground, as what’s under it. Texas, for example, leads the nation in windpowered generation2. But, then there’s the sunshine. And lots of it. West Texas enjoys one of the country’s healthiest runs of days filled with sunshine each year.

According to the Solar Energy Industries Association (SEIA) Texas already has 1,973.49 MW of solar installed. That places the Lone Star State 7th in solar generation nationally3. All of that sunshine has grabbed the attention of entrepreneurs and solar developers, like Austinbased 7X Energy, Inc. (7X). A self-described innovation leader in utility-scale development, 7X Energy develops solar projects

for corporations, utilities, municipalities and cooperatives across the country. Most recently, 7X jointly developed the 315 MW Phoebe Solar facility (by far the largest solar project in Texas) and Shell Energy North America is purchasing the power. How’s that for energy yin and yang.

But 7X Energy is taking that process one step further with its new SolarBlockTM product – something the company believes will fundamentally change how customers and their brokers procure renewable energy.

I talked with Clay Butler, CEO and co-founder at 7X Energy, and the man who’s blazing the trail for solar development and its procurement.

But, first things first. I had to know, what’s the meaning behind 7X? (I had my theories, but they were all wrong.)

“When we started the company, we operated without a formal name,” said Butler. “But as we grew, it became clear that our company culture was being forged out of the desire to generate renewable, sustainable

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energy. That’s when someone brought up the ancient Iroquois philosophy, called the Seventh Generation Principle. It suggests that the decisions we make today should result in a sustainable world seven generations into the future. We not only embraced that principle as a company, but believed it aligned with how we wanted to conduct business.”

When Clay graduated in 2006 with his J.D. from St. Mary’s Law School in San Antonio, he decided it’d be better for his career to specialize. So, for nearly a decade he built and ran a law firm that specialized in renewable energy. During that time, energy deregulation in Texas wasn’t just getting off the ground, it was running full steam ahead.

“I was fortunate enough to work on the legal side of one of the first solar utility projects in Texas,” Butler added. “And after that first developer came another. After several years, when anybody wanted to start a solar project in Texas, they worked with our team. I would say 95 percent of the first solar developments came through our office.”

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Working on these projects allowed Clay to be involved with drafting the policies that were maturing in tandem with the growth of solar generation. “I think we take for granted a lot of the groundwork that had to be laid in those early stages of solar developments,” noted Butler. “We worked closely with ERCOT on the policy side of the business. In fact, my colleague helped create some of the protocols for utility-scale solar projects that still exist today.

We even helped draft some of the basic definitions associated with the growth of the solar generation industry.”

But Clay wasn’t just learning to juggle the politics of solar. He was also paying attention to the factors that make a solar business success-

ful. “By 2012, we had done a lot of early-stage development for companies. We figured out how developers were siting land for their solar projects and what they needed to consider in order to be successful – like ease of transmission, flood zones, congestion risk and injection points. But the process for procuring real estate to build a solar farm was tedious.”

Ever the entrepreneur, Clay tackled the issue head on and built a software engineering team.

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That was the birth of Smart Power MapsTM, an innovative software platform built specifically for siting and evaluating utility-scale solar development.

Clay’s engineering team eventually secured a grant from the Department of Energy and continued to build out the Smart Power Maps software that identified the best sites for solar farm development – in a matter of minutes, rather than months. By the end of 2015, Smart Power Maps had “sited” for solar developers over 3,000 MWs of projects across the country. Clay and his team quickly realized they could site and develop their own solar projects and control many of the variables that were outside their purview as consultants. In 2016,

Clay made the decision to close his law firm and launch a development company.

He partnered with Scott Pryor, a long time solar developer, to start 7X Energy with a mission to offer customers the lowest cost of electricity available through utility-scale solar. By taking an agile approach to the development process, 7X is able to minimize costs and risks for its customers.

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PLUGGEDIN “Our work spans from site acquisition and permitting to interconnection and engineering across multiple states. And the depth of our experience enables us to steer clear of pitfalls that delay projects and drive up costs,” added Butler. “And while we have a large portfolio in Texas, we have many projects across the country.”

sustainability program, or simply ‘go green’ at a cost that makes financial sense.

7X Energy’s SolarBlocks purchasing strategy is tackling solar generation variability head on.

“Historically, customers and energy brokers alike have had to accept the variable generation risks associated with adding solar energy to their portfolios,” noted Butler. “I believe our team has come up with the best solution for today’s market with our SolarBlocks purchasing strategy. And I don’t think it’s too bold to expect it “I believe our team to fundamentally change the has come up with the way customers and brokers buy solar.” best solution for

Back in May, 7X Energy announced it had finalized the contract for its Lapetus Project in Andrews County, Texas. Pronounced “luh-peat-us”, the project is named in honor of the third largest natural satellite orbiting Saturn (all of today’s market with 7X Energy’s projects are SolarBlocks enable customour SolarBlocks named after solar bodies). ers to procure contractually The 640-acre solar energy guaranteed fixed blocks of purchasing strategy.” project has a power purenergy produced from sochase agreement with Colar plants. The fixed blocks Serv Electric and Brazos of solar, which can be foreElectric Power Cooperacasted down to the 15-mintive, Inc. Brazos Electric is ute settlement interval, lock buying the energy on behalf of CoServ Electric in low energy rates during peak periods when for CoServ’s roughly 220,000 electric meters in electricity can be most expensive and remove North Texas. the intermittent variability of delivered energy associated with traditional solar farms. Solar“At 35 MWDC, the Lapetus project will be the Blocks can be purchased by not only electric largest solar project built for an electric coop- cooperatives and utilities, but also corporaerative in the state of Texas,” Butler said. “We’re tions in competitive retail electricity markets. extremely proud of this project, not just for the scale of the project, but for the opportunity it “I really do feel as though we’ve been trying to TM gives us to introduce our new SolarBlocks squeeze the proverbial square peg into a round purchasing strategy to the market.” hole,” quipped Butler. “Buying solar energy doesn’t have to be that difficult. We developed Because solar generation is largely unpredict- this procurement strategy – a block and index able it’s been difficult - if not impossible - for product – based on products that a lot of buya supplier to find a way to offer a fixed volume ers and energy brokers are already familiar product for solar energy. As a result, custom- with. Essentially, we’re putting the intermiters who want to include solar power in their tency risk of solar on us, rather than the buyer.” portfolios must be willing to assume the variable production risk. That also has put a lot Fortunately, you need only browse the comof pressure on energy brokers who are tasked pany’s website to see that the 7X Energy’s team with helping their clients meet their corporate of experienced solar experts is impressive.

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PLUGGEDIN Their knowledge of the energy market is deep, their reach expansive. So putting the risk on their shoulders feels comfortable.

“We have policy experts. We have a price team.

We have solar resource engineers. We have data scientists. We’re very methodical. We’re conservative in our projections. We deliver more than we project. And we have alternate energy in the event of shortages. In other words, we’ve

exhausted every effort to make SolarBlocks the game-changer we expect it to be.”

But if all this seems too good to be true – if you’re thinking there’s no way you can sell solar using a block and index product off the number of days the sun will shine – I’ve got a great road trip planned through West Texas you can use to discover that anything’s possible in Texas.

As CEO, Clay oversees business development, operations, and investor relations for 7X Energy, where he continuously pushes 7X to be an innovation leader in the energy industry. For almost a decade before co-founding 7X in early 2016, Clay served as a managing partner of a leading law firm for renewable energy companies. There, he provided development support and legal services for over 5,000 MW of solar projects and 3,500 MW of wind projects around the world. During this time, Clay founded a company to build a software solutions platform to utilize Big Data analytics to streamline and accelerate the utility-scale solar development process; that software functionality continues to expand and is now exclusively licensed by 7X.

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“No man ever steps into the same river twice, for it’s not the same river and he’s not the same man.”

by Aaron Cook

Mull over that quote for a minute. Don’t worry, I’ll wait.

Simple, right? Even pretty clever. Also 100% true.

And, believe it or not, it wasn’t a line from the latest Marvel movie franchise. It was a topic we focused on for a very long, very full week during my college philosophy course. And despite the fact that I felt trapped by a teacher straight out of an 80s movie economics class, there were some highlights – like talking about smart people who did a lot of their own thinking before Google or Siri started doing it for us.

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One such ahead-of-his-time thinker was the pre-Socratic Greek philosopher, Heraclitus. I was particularly fond of Herc, mainly because he was the worst kind of know-it-all; i.e. he knew he knew it all and he let everyone else know he knew it all.

Gas back in the 90s,” Connolly began. “I focused on the emerging power market, which was slowly seeing deregulation take hold in pockets across the Northeast. But it was so new that - like any budding business model – it experienced a lot of uncertainty. In retrospect, I think deregulation was a big catalyst for a lot of Besides the river analogy that got us started, mergers and acquisitions that happened in tanhe also penned (or maybe etched, or carved… dem as deregulation was rolled out. Everyone not sure) this catchy phrase that I’m sure you’ve was touched in some way, myself included, by heard before: “Change is the only constant in the consolidation of the market. I decided it was life.” Once again, a simple thought. But pro- a good time to pivot my career so I worked my foundly relevant for way back to the natuvirtually every aspect ral gas and oil marof our lives. kets. That was a critical time in my career “But this change isn’t being driven Truthfully, I haven’t when I cut my teeth by one person or company tapped in to the phion non-commodity with all of the answers. It’s largely losophy side of my products outside of a market-based evolution that’s brain much since I my native Northeast being nudged along, at least in part, turned in my final market.” by policy makers and regulation.” test decades ago. But a recent conversation Connolly’s experience kept me coming back outside the Northeast to the insight of my gave him a “fresh perlong lost buddy, Herc. spective” on indirect sales inside robust deregulated markets like ERCOT. “When natural gas It was a call I had with Jim Connolly, Vice Presi- became deregulated, it was all about variable, dent of Indirect Sales at Direct Energy. Our dis- or index pricing,” he added. “The value propcussion targeted the changing landscape of the osition was simply to get off the pricing roller Northeast market – with a particular focus on coaster, lock into a price and cross your finthe evolution of the pricing structures and pass gers that you’d see the savings show up on your through rate components. Our conversation monthly utility bill. It was certainly a risk, bekept bringing me back to Herc’s philosophy on cause if you didn’t time it just right, you’d lock change. Because change, as we all now know, is in at a high rate.” the only constant in life – even for those of us in the energy industry.

According to Connolly, however, the last several years have seen that pricing structure start Jim began our phone conversation with a little to change. “There was a time when most prodbackground about himself. ucts were built on a variable pricing structure.

But, there’s been a proliferation of reductions “A native of Massachusetts, I started my energy in recent years,” Connolly noted. “Energy costs career with AllEnergy, a subsidiary of Boston have come down. Consumption has decreased.

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Companies are changing their products to meet the needs of the customers. And suppliers are changing how they implement fixed priced products.”

But this change isn’t being driven by one person or company with all of the answers. It’s largely a market-based evolution that’s being nudged along, at least in part, by policy makers and regulation.

“Legislators are starting to get more involved with the energy market with new regulations and energy policies,” he said. “Today, more so than a decade ago, it’s more difficult to hold a supplier to a two or three year contract because policies are evolving. In New England ISO, for example, we now have a surcharge on green energy. And, we only know what those charges will be on a per annum basis.

So if a client wants to sign a long-term contract, it’s up to the supplier managing the contract, to build in the risk.

Clients and Brokers decide on risk tolerance.”

The result? Mostly confused customers who have to work through a very tedious procurement experience. On top of that, just in the last 18 months, we’ve seen the number of new policies increase across the Northeast energy market. We don’t have to go that far back either, three years according to Connolly, to see fewer policies in place.

But is the legislation bad for the energy business? “Everybody has a role in making this industry successful,” added Connolly. “Policy makers are simply trying to make the energy market stable for their constituents while trying to facilitate transformation to a low carbon footprint. And they’re doing it the best way they understand. But many of our elected officials don’t have a lot of experience in a deregulated market structure, like energy. Nor do they have access to the same information, data and research studies that we do. I think it’s up to us – the energy community – to help our elected officials understand how we’re all working together to make energy procurement a positive experience for end users and an effective way to keep energy costs reasonable.”

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For now, however, there’s a perceived instability centered on energy procurement. New (or pending) regulations and evolving pricing structures have clients teetering on the precipice of frustration and confusion. Naturally, end users are looking to energy professionals, like energy brokers and suppliers, to provide some kind of safety net for their procurements and contract negotiations. That assurance comes, per Connolly, by educating consumers.

consumer about how to be proactive in their energy consumption is a fundamental change in the whole process. More importantly, it’s a big pivot for the customers and gives them far more control over their utility costs. But, the key to the success with this change will be transparency.”

Ahh. There’s that word, again. Transparency. If you missed this year’s Northeast TEPA conference, “transparency” was the word of the day.

The regulatory and legislative panel members Direct Energy, for example, just rolled out a new talked about it. The end-user customers asked product called Fixed Energy Plus™, which ac- for more of it. And the rest of the speakers, cording to the company’s website is “the right pointed out that it’s the key to making the enbalance of minimizing risk and maximizing op- ergy system work – for the long term. portunity”. It goes on to say that it can help you (customers) reduce exposure to price volatility Connolly also explained why transparency is while having the opportunity to actually lower so important – and how it will fundamentally the total cost paid for energy. change the industry. With index pricing, customers had greater exposure to price risks. Ev“Fixed Energy Plus is really a wide departure ery month they held their breath hoping to see from the way we approached contracts just 18 if their utility bill would be in line with their months ago,” Connolly stated. “Educating the projections. The problem wasn’t in index pric-

Customers aren’t going to get the same energy deals they did even a few months ago.

That’s because change is happening across the energy industry. Customers are asking for it and policy makers are pushing it.

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ing itself – risk can pay off in dividends. The problem was that the factors that contributed to their rates came with little to no visibility to the customers. With greater transparency into what goes into energy costs, customers are better equipped to make educated decisions, and ultimately actions, regarding their energy usage.

however, is ultimately up to each customer. But the change that is coming to our industry is coming in the form of better educated buyers and contract transparency.”

Of course, one company, or one product, or one broker isn’t going to fundamentally change the world and solve all of the misconceptions about With Fixed Energy Plus, for example, customers energy procurement. But a collective change, by may be able to lower the pass-through charges regulators, brokers and suppliers, can. they pay by managing their Peak Load Contribution (PLC). Since PLC is typically calculated As we said before, no man ever steps into the on a day of peak demand on the grid, curtail- same river twice. Customers aren’t going to ing demand on that day can be a major factor in get the same energy deals they did even a few lowering your PLC. months ago. That’s because change is happening across the energy industry. Customers are “Rather than pay for higher rates during peak asking for it and policy makers are pushing it. load, a customer can be taught how to reduce But how we - as energy professionals - embrace their demand during peak time. Whether that’s the changing energy landscape, and identify the through real-time monitoring or technology, right solutions today, will largely determine the like Smart Meters, they can get all kinds of in- success of the market tomorrow. formation about their energy usage. How much advantage a customer takes of the information, Jim Connolly has been Vice President of Indirect Sales for North America since 2016.

He is responsible for natural gas & electricity sales to commercial & industrial customers throughout North America via broker channels. Prior to joining Direct Energy in 2013, Mr. Connolly has held a variety of assignments in sales and sales management working with both energy brokers and direct sale customers since the inception of the deregulated energy markets. Most recently, Mr. Connolly spent 10 years at Hess Corporation in sales leadership roles for both commodity and non-commodity offerings. Mr. Connolly earned his Bachelor of Science Degree in Technical Science from Wentworth Institute of Technology in Boston, Massachusetts. Jim resides in Central Ohio and his hobbies include hiking and coaching youth sports.

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We Need to Talk About

TEXAS

by Alex Paciga

At the end of April, ERCOT released its final SARA report, predicting record-breaking peak usage during the 2018 summer season. Forecasting a 72,756 MW peak load, the grid operator expects there to be sufficient generation to meet customer demand this summer, assuming normal conditions. This latest forecast provides some good news; the reserve margin was forecast at 11%, up from December’s 9.3% projection. This increase in reserves is due to the status of several units coming online earlier than expected. Both, however, fall below the 13.75% target.

The additional capacity helps, but customers in the region may still have cause to sweat. With reserves lower than preferred, if the anticipated hotter-than-average temperatures and drier-than-normal weather manifests, there could be extreme price spikes and emergency measures. Eyes will absolutely be on the thermometer in Texas this summer.

Either way, we can be certain that the weather risks and steady demand for power have had effects on wholesale and retail power prices. Prices are al20

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PLUGGEDIN ready significantly higher now than last summer and could jump higher still. ERCOT data for June 2018 shows futures for power to be delivered on August 1st for the region are at an astounding $188.69/MWh. That’s nearly a full three hundred percent higher than prices at the same time last year.

Additionally, the May 2018 average hub spot pricing index settled at 32.84/MWh, which is a full 46% increase month-over-month, and 27% year-over-year. May also heralded a new peak demand record for the month at 67,261 MWs, a full 8,027 MWs higher than last year’s record.

In related recent news, Texas also lost a retail energy provider at the end of May, as the Texas PUC announced that Breeze Energy had defaulted on its market participant agreement with ERCOT, pushing 9,700 ERCOT customers to month-to-month pricing with a provider of last resort. Texas has had significant year-over-year GDP and population growth, which translates to increased manufacturing and cooling demand.

Finally, it’s worth noting that May of 2018 was the hottest May on record in the contiguous United States. In Texas specifically, it was the second hottest, only beaten out by the summer of ’96. A hot May does not always a hot summer make, but it’s generally a good indicator.

Long story short, we should be prepared to tell our Texas customers to continue to expect some sizzle this summer, and with it, the associated

risks and challenges involved in managing electricity supply costs.

When talking with ERCOT customers about the implications of the SARA report, it’s important to provide other third - party data and reports as well and ask customers how much of the supply cost risk they are willing to bear. If a customer is not hedged for the summer, hedging costs for a portion of the supply for a few months might be a good approach. Seek prices from several REPs and ask each REP for its insights.

Customers currently in contracts that expire any month in 2018 probably should be contacted right away. Advise them that prices are higher than they were the past few years, and provide them ample time to consider next steps.

It may also be prudent to discuss ERCOT’s Energy Emergency Alert system, should circumstances lead to requests for conservation, or in a worst-case scenario, if unusual circumstances result in rolling blackouts for the region.

All in all, the SARA report, combined with the recent energy news coming out of Texas, is causing concern and discussions across ERCOT. Customers rely on advisors for unbiased advice and timely information. The ABC Member should be the trusted advisor who keeps the customer in the know and helps to make the customer as comfortable as possible about realistic energy cost changes and expectations.

Alex is the Communication Specialist for APPI Energy where he writes press releases, articles, and marketing material. A graduate of the Perdue School of Business at Salisbury University, most of his work can be found at AppiEnergy.com Return to Table of Contents

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By Aaron Cook

“We simply have to break through the conventional thought that solar is too complicated to add into a consumer’s portfolio.”

- Calin Brammer Mothership Energy Group

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What kind of industry do we want to be? This is certainly an important question to ask ourselves. To be of value, we must answer the question honestly and with a focus on today’s realities.

Mike Payne, TEPA’s Northeast Board Vice-President recently weighed in on this question and provided us with some thoughtful – and honest insight.

Mike is the EVP and Corporate Counsel of APPI Energy, having been in the deregulated energy markets since 1996. Mike suggested that, “Over the last ten years we’ve seen a natural evolution in the industry. It was very challenging for all participants in the beginning, the late 1990’s and early 2,000s. Suppliers and ABCs endeavored to establish ground rules and protocols for working together.

It was unchartered territory, so naturally we experienced some friction at times, and we were forced to create new ways to serve customers. For the most part, we’ve figured out how to transact; a good framework for the retail energy marketplace now exists in the Northeast and across other regions in the U.S. I believe the industry has matured to the point where we can be more deliberate in our decision-making and more focused 24

“THE INCREASED INVOLVEMENT FROM REGULATORS IS PUSHING MARKET PARTICIPANTS, INCLUDING ABCs, TO PARTICIPATE WITH INCREASED INFORMATION EXCHANGE, IMPROVED COLLABORATION AND MORE TRANSPARENCY.”

on the best ways to serve customers in supply procurement and usage management.”

According to Payne, the deregulation that opened-up across the Northeast, with the exception of Vermont, resulted in a broad range of financial capital and intellectual capital moving into the market. “Any time that happens, you’re going to attract a lot of attention and new participants who want to provide new services and transaction platforms. These dynamic changes dramatically impacted customers, utilities, suppliers, vendors, and ABCs. The relationships that existed for decades between utilities and customers were changed, and the Return to Table of Contents

number of entities impacting the utility grid systems is mushrooming. We all must support the expansion of a reliable and resilient grid system and the evolution of effective supply and data management services for customers. And when I say ‘all’, I mean all market players – utilities, generators, retailers, ABCs, regulators, legislators, and other policy makers.”

Over the last few years many state regulators have taken a more proactive role in the monitoring and guidance of the competitive electricity and natural gas markets. Much of this activity is being driven by the experiences of small business and residential customers.

The policy focus has been on creating information resources for customers designed to foster more favorable prices and transparency in the supply procurement process. While some have said that this activity by policy makers could be perceived as interference, Payne sees it as a catalyst for the next phase of growth for the industry.

“The increased involvement from regulators is pushing market participants, including ABCs, to participate with increased information exchange,

improved collaboration, and more transparency. An example is New York where in 2017 new policies were proposed, that would begin almost immediately, and that many thought would essentially create a major chilling effect, if not, a freeze, in the competitive electricity supply market for residential and small business customers. But, there was an immediate response from market participants who provided testimony, briefs, case studies, and research that combined, provided regulators a more complete understanding of how the market was working and different things that could be considered to provide more customer protections.

New York slowed down its process,

and began to modify its original position. The process is still ongoing, yet it includes a broad range of market participants and advocates for many market segments.”

Almost twenty years of competition has created a plethora of market information and data.

Its existence provides policy makers and other participants real insight into how the markets have worked and are now working. Independent surveys and studies have indicated that customers are generally pleased with their participation in the deregulated markets, and the choices created by competition.

Some customers, mostly residential and small businesses,

have expressed concerns and voiced issues with prices, supply contracts, and customer service.

“But a small fraction of customers is still too much,” said Payne.

“Regulators and customers want more transparency regarding energy prices, supply programs, and costs. Fair supply contracts and customer care after the deal is done are essential parts of the customer experience and must be continually improved. How quickly we get there, which requires working with regulators, utilities, and customers, will depend in large measure on ABCs and suppliers. Fortunately, I see a tremendous degree of willingness to collaborate among the majority of market players.”

Earlier this year, Mike Payne served as the moderator for TEPA’s Northeast conference’s Regulatory Panel. It featured a who’s who of industry experts who closely follow the policy and regulatory efforts in the Northeast and in other deregulated markets.

The following Q&As offer us some insight into the places shaping the Northeast market, as well as other deregulated markets.

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DAVID FEIN Sr. V.P., State Governmental & Regulatory Affairs, Exelon Corporation What regulatory action has made the greatest positive impact for IL, NJ and NY over the last 1-2 years?

We believe that policy in forward looking states including IL, NJ, and NY which have correctly identified the value of generation assets such as nuclear in terms of emissions / environmental benefits, grid resiliency, and supporting local communities, is being demonstrated to have been particularly insightful state leadership. The added value these assets create, which had previously not been measured adequately in regional ISO markets, is crucial to maintain adequate reliability, fuel diversity, and lower day ahead and real time energy prices across the entire region.

From a residential customer perspective, we support policies that protect customers from bad actors, support the development of innovative products, and improve the efficiency and quality of the customer experience. Examples include enhanced and well-conceived consumer protections, particularly for low income customers, supplier consolidated billing, and enroll with your wallet.

How is legislation changing the way market participants are doing business in IL, NJ and NY? Many of the states in the northeast are undertaking extensive initiatives to re-examine the entire energy market. This includes increasing renewable requirements (e.g. NY REV 50% by 2030), distributed generation and storage siting and investment, increasing access to renewables (community solar), etc. This is turn is leading to more sophisticated and comprehensive product options for customers, beyond a standard contract for energy.

What do you feel will be the next “big” legislative or policy movement in energy for IL, NJ and NY? We would like to see as a “big” policy movement an increasing number of states restructuring their electricity markets, moving from monopoly to competitive markets. There is some very good research right now, for example from Dr. Phil O’Connor, demonstrating that competitive markets have had a materially lower rate of increase in supply costs over the last 20 years, savings customers in competitive markets hundreds of millions of dollars.

What do you feel is the region’s biggest obstacle in the next 2-3 years?

Not so much an obstacle as a challenge, but with the re-examination, and it is probably fair to say reinvention, of electricity markets in states all across the region, it will be a major challenge for regulators, transmission organizations, generation, suppliers, brokers, and customers to come together on sound policy that works for the new dynamics of the electricity markets. Integrating increased renewables and storage, fairly accounting for environmental benefits that existing generation sources provide, and combining existing generation with new sources, all while maintaining the dual objectives of reliable and affordable electricity will be a challenge for the next decade and beyond.

NOTE: The views presented reflect the personal views of the pan

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What pending legislation should TEPA members be on the lookout for over the next year in the Northeast markets?

We anticipate a wide variety of policy objectives will be making news over the next few years in the northeast, including carbon emissions initiatives, storage program investment, offshore wind investment, community solar / community distributed generation, residential and low income consumer protections, and measures to improve the quality and efficiency of the customer experience.

States are already backing up policy objectives with significant investments in new programs, which is a real opportunity for channel partners and customers to take advantage of now.

How can TEPA members get involved in the Northeast market?

Because much of regional energy policy is state specific, having an open dialogue with your local state representative is an excellent way to make your voice heard. In addition, one of the great things about the electric industry is that the regulatory process is open to participation for everyone, including brokers and residential, commercial and industrial customers. Individual customers and companies can participate in the regulatory process by attending hearings, speaking with commission staff, or submitting written comments. While getting involved directly is best, indirectly you can also have conversations with your electric supplier about what is important to you or your business from a policy perspective. Established suppliers maintain direct and constant relationships with regulators and legislators, and have a clear interest in propagating the interests of their channel partners and customers.

• • • • • • • • • • • • • • • • •

NY 17-01821 - Carbon Pricing in New York Wholesale Markets MA D.P.U. 14-140-G – Door to Door marketing notifications and requirements NY 98-M-1343 – In the Matter of Retail Access Business Rules; Uniform Business Practices NJ AB 3723/S2314 – 35% renewables by 2025 and 50% by 2030 NY PSC 14-M-0101 Reforming the Energy Vision (REV); 50% renewables by 2030 NY PSC 15-E-0751 - Value of Distributed Energy Resources (VDER) NY 18-E-0071 – Offshore Wind Energy – 2,400 MW by 2030; 800 MW by 2019 NJ QX18070685 - I/M/O Clean Energy Offshore Renewable Energy; 3,500 MW OSW by 2030 NY 15-M-0127 - Eligibility Criteria for Energy Service Companies – Consumer protections NJ Q018060646 – New Jersey Community Solar Energy Pilot Program NY 15-E-0082 - Implementing a Community Net Metering Program – Community solar and Community DG NY 18-E-0130 - Energy Storage Deployment Program; 1,500 MW by 2025; $350 M in market acceleration initiatives; NY Green Bank $200 M for project developers MA DPU 17-146 - Eligibility of Energy Storage Systems to Net Meter; 200 MW storage by 2020; $20M to support MA storage companies NJ Storage AB 3723/S2314 – 2000 MW Storage by 2030 PA Docket No.: M-2018-2645254 - Hearing on Implementation of Supplier Consolidated Billing MD PC 44; Topic 3 Competitive Markets and Customer Choice; RM 62; Docket 9461 – Supplier Consolidated Billing (SCB) MD PC 44; Topic 5 Energy Storage

anel members and may not represent the views of their employer.

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MATT KINNEY Senior Counsel, Patriot Energy What regulatory action has made the greatest positive impact in the New England market over the last 1-2 years?

Generally speaking, the most positive regulatory actions are those that reaffirm the benefits of retail choice in electricity and natural gas. Often, these actions are not just those that are undertaken, but avoiding policy choices that impact ABCs and retail choice in a negative way.

How is legislation changing the way market participants are doing business in New England markets?

While legislation in New England is usually not the driver for policy change—regulatory changes by administrative agencies generally are, and especially in New England, that means different regulatory approaches in different states. Navigation of those differing, yet related, decisionmakers and policy choices (as regulators often look to geographically or demographically similar states to inform their decisions, is key to being a knowledgeable market participant.

What do you feel will be the next “big” legislative or policy movement in energy for New England markets?

The two policy movements that are and will be at the forefront of policy choices are protections for low income and other populations and the growth and role of renewable energy sources, energy storage, distributed generation, and other means that challenge the traditional model of electricity delivery and consumption.

What do you feel is the New England market’s biggest obstacle in the next 2-3 years?

It is likely that the most prominent issues will continue to be consumer protections, especially for residential customers and how to adapt to the emergence of new technologies in energy delivery, storage, monitoring, and consumption.

What pending legislation should TEPA members be on the lookout for over the next year in the Northeast markets?

Generally, as mentioned earlier, it is not legislation that is the vehicle for policy decision, but generally through regulatory agencies (PUCs) that have the most impact. Part of what TEPA-Northeast is looking to achieve is to not only make ourselves known to PUC staff and commissioners, but to be a resource to them on issues that affect TEPA Members and ABCs in general.

How can TEPA members get involved in the Northeast market?

The best way for TEPA members to be involved is to express their interest in and assist the TEPA-Northeast Regulatory committee. ABCs need to show that not only are they an important industry segment as a group, but also they are individual businesses, run by real people, in their respective states that assist their clients to be more sophisticated and knowledgeable buyers of electricity and natural gas

NOTE: The views presented reflect the personal views of the panel members and may not represent the views of their employer.

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READ COMSTOCK V.P. Regulatory Affairs, Source Power & Gas What regulatory action has made the greatest positive impact for PJM Interconnection (PJM) over the last 1-2 years?

PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Regulatory changes that occur at PJM impacts wholesale electricity prices. I think the action by PJM over the last 1-2 years that has had the greatest positive impact for end-use customers is PJM’s advocacy and support for competitive wholesale power markets as the best solution to deliver reliability and efficient prices when faced with opposition to competitive markets from various stakeholders and policymakers. Regulatory changes at PJM often cause disruption to retail contracts, but PJM’s voice in support of competition has been unwavering.

How is legislation changing the way market participants are doing business in PJM? PJM is a regional transmission organization that includes many states and is subject to federal oversight.

Therefore, decisions by state legislatures within the PJM region can impact PJM operations and federal legislation can impact PJM. Recently, action by state legislatures promoting specific types of fuel like renewable or nuclear have had the greatest impact on PJM operations. Competitive markets work very well determining the least cost outcome, but when state legislatures impact wholesale power markets by favoring certain types of power plants this impacts PJM operations. In the end, I still believe competitive markets provide the best result, but state action to change the wholesale market makes PJM’s operations more complicated.

What do you feel will be the next “big” legislative or policy movement in energy for PJM? I think PJM will need to continue its support for competitive wholesale markets because opposition to competitive markets will remain. The significant increase in renewable energy will continue to put competitive pressure on baseload generation and PJM has proposed some policy changes that PJM believes will help sustain the competitive wholesale market for the long term. One of these proposals by PJM is title, “Proposed Enhancements to Energy Price Formation.” More information about this proposal by PJM can be found online by clicking here.

What do you feel is PJM’s biggest obstacle in the next 2-3 years? OR What is the most pressing issue facing PJM today?

I think opposition to competitive wholesale power markets and potential proposals to significantly change wholesale market rules by the Trump administration for supporting baseload generation are the biggest obstacle in the next 2-3 years.

What pending legislation should TEPA members be on the lookout for over the next year in PJM? Specifically, be on the lookout to see if the Trump administration acts to support coal and nuclear power plants.

How can TEPA members get involved in PJM? TEPA members should discuss wholesale market issues with retail suppliers and retail suppliers can consider the views of TEPA members when participating in the PJM stakeholder process. TEPA members also should express support for competitive wholesale markets at every opportunity when discussing energy issues with state and federal policymakers.

NOTE: The views presented reflect the personal views of the panel members and may not represent the views of their employer.

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