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							Dallas/Fort Worth International Airport

Energy Procurement – A Texas Perspective

DFW National Institute of Governmental Purchasing
2006 3rd Quarter Meeting & Educational Event
Irving, Texas

August 17, 2006
Jerry R. Dennis, CEM, CEP
Energy Manager
Dallas/Fort Worth International Airport
                  Energy Procurement – A Texas Perspective
                  Presentation Outline


                     Industry Background (before 1-1-02)
                     Electric Utility Deregulation
                     Market Factors
                     Request for Proposal (RFP)
                     Summary


    DFW NIGP
August 17, 2006




                                                             2
                  Energy Procurement – A Texas Perspective
                  Industry Background (before 1-1-02)


                  Three Major Types of Electric Utilities
                   Municipal Owned
                      Rates set by governmental body
                   Electric Cooperatives
                      Rates are set by co-op board
                   Investor Owned
                      Rates regulated by the Public Utility
                       Commission of Texas (PUCT)
    DFW NIGP
                      Vertically Integrated – Owns everything from
August 17, 2006        the generator to the meter.


                                                                      3
                  Energy Procurement – A Texas Perspective
                  Industry Background (before 1-1-02)




    DFW NIGP
August 17, 2006




                          Investor Owned Utility (IOU)       4
                  Energy Procurement – A Texas Perspective
                  Electric Utility Deregulation


                  Electric Utility Deregulation in Texas
                   June 1999 – SB7 was signed into law
                    introducing retail competition it the
                    electric utility industry of Texas
                      Does not include Co-ops & Munis
                   June 2001 – Start of the Pilot Program
                   January 2002 – Start of retail choice
    DFW NIGP
August 17, 2006




                                                             5
                  Energy Procurement – A Texas Perspective
                  Electric Utility Deregulation


                  Key Factors of Electric Deregulation
                   Establishes Price-To-Beat rate for all
                    incumbent utilities
                      Customers over 1MW fall to default rate
                   Prohibits any company from owning more
                    than 20% of the State’s generation
                    capacity
    DFW NIGP
                   Establishes ERCOT as the Independent
August 17, 2006
                    System Operator (ISO) of the grid

                                                                 6
                  Energy Procurement – A Texas Perspective
                  Electric Utility Deregulation




    DFW NIGP
August 17, 2006




                                                             7
                  Energy Procurement – A Texas Perspective
                  Electric Utility Deregulation


                  Key Factors of Electric Deregulation (con’t)
                   Restructured the utility industry into 3
                    distinct functions
                      Generation (IPP) – Unregulated
                      Transmission & Distribution (TDSP) –
                       Regulated
                      Retail Electric Providers (REP) – Unregulated

    DFW NIGP
August 17, 2006




                                                                       8
                        Energy Procurement – A Texas Perspective
                        Electric Utility Deregulation

                                                                        Generation
                                                                          (IPP)

Transmission & Distribution
          (TDSP)



                                       Regulated   Deregulated




          DFW NIGP                                       Retail Electric Provider
      August 17, 2006
                                                                  (REP)


                                                                              9
                  Energy Procurement – A Texas Perspective
                  Market Factors


                  The Price of Electricity
                   The Price of Natural Gas
                      Over 50% of Texas’ electric generation is
                       fueled by natural gas
                      Natural gas prices are extremely volatile




    DFW NIGP
August 17, 2006




                                                                   10
                  Energy Procurement – A Texas Perspective
                  Market Factors


                  The Price of Electricity (con’t)
                   Generation Efficiency
                      Heat Rate (energy in vs. energy out)
                   Volume of energy consumed
                      How much you consume
                   Load Profile
                      When you consume it
    DFW NIGP       Profit
August 17, 2006




                                                              11
                              Energy Procurement – A Texas Perspective
                              Market Factors


                                                                                                                Energy Plaza Load Profile
                              25,000                                                                                                                                                                                                                                                                     105
                                                  335,161 kWh Consumed                                                                                                        100°F                                                 20,477 kW
                                                                                                                                                                                                                                                                                                         100




                                                                                                                                                                                                                                                                                                               Degrees Fahrenheit
                              20,000                                                                                                                                                                                                                                                                     95
                                                                                                                                                                                                                                                                                                         90
                  Kilowatts




                              15,000                                                                                                                                                                 85% Reduction                                                                                       85
                                                                                                                                                                                                       in On-Peak
                                                                                                                                                                                                         Demand
                                                                                                                                                                                                                                                                                                         80
                              10,000
                                                                                                                                                                                                                                                                                                         75
                                                                                                                                      77°F
                               5,000                                     kW Demand                                                                                                                                                                                                                       70
                                                                       Outside Air Temperature                                                                                                                                                     3,094 kW                                              65
                                  0                                                                                                                                                                                                                                                                      60
                                                  1:00 AM
                                                            2:00 AM
                                                                      3:00 AM
                                                                                4:00 AM
                                                                                          5:00 AM
                                                                                                    6:00 AM
                                                                                                              7:00 AM
                                                                                                                        8:00 AM
                                                                                                                                  9:00 AM




                                                                                                                                                                             1:00 PM
                                                                                                                                                                                       2:00 PM
                                                                                                                                                                                                 3:00 PM
                                                                                                                                                                                                           4:00 PM
                                                                                                                                                                                                                     5:00 PM
                                                                                                                                                                                                                               6:00 PM
                                                                                                                                                                                                                                         7:00 PM
                                                                                                                                                                                                                                                    8:00 PM
                                                                                                                                                                                                                                                              9:00 PM
                                       12:00 AM




                                                                                                                                            10:00 AM
                                                                                                                                                       11:00 AM
                                                                                                                                                                  12:00 PM




                                                                                                                                                                                                                                                                        10:00 PM
                                                                                                                                                                                                                                                                                   11:00 PM
                                                                                                                                                                                                                                                                                              12:00 AM
                                                                                                                                  Saturday, June 10, 2006


    DFW NIGP
August 17, 2006
                                                                                             Load Profile Example

                                                                                                                                                                                                                                                                                                          12
                  Energy Procurement – A Texas Perspective
                  Request for Proposal (RFP)


                  Components of a Successful RFP
                   Introduce Yourself
                      Make them want your business
                   Provide an Energy Overview
                      How many accounts do you have
                      How much energy do you consume annually
                   Identify Desired REP Qualifications
    DFW NIGP
                      Experience
August 17, 2006
                      Customer care approach
                      Billing expectations
                                                                 13
                  Energy Procurement – A Texas Perspective
                  Request for Proposal (RFP)


                  Components of a Successful RFP (con’t)
                   Identify the Term of the Contract
                      Meter reading date to meter reading date
                   Describe Desired Misc. Components
                      Renewable energy
                      M/WBE participation
                   Offer to Provide a Letter of Authorization
    DFW NIGP
                      Allows the TDSP to release account
August 17, 2006        information

                                                                  14
                  Energy Procurement – A Texas Perspective
                  Request for Proposal (RFP)


                  Components of a Successful RFP (con’t)
                   Describe Desired Pricing Options
                      Fixed, Indexed, Flat, Seasonal, Time-of-Use
                   Describe Bid Price Procedures
                      When the bid price should be calculated
                      Ask that they provide the formula used to
                       generate the bid price (confidential)
                      Identify the preferred bandwidth
    DFW NIGP
August 17, 2006       What if you are outside the bandwidth


                                                                     15
                  Energy Procurement – A Texas Perspective
                  Request for Proposal (RFP)


                  Components of a Successful RFP (con’t)
                   Provide a list of accounts including
                    account numbers
                   Ask that they describe the procedure for
                    adding and removing accounts
                   Ask that they provide the account list and
                    the monthly benchmark quantities used to
    DFW NIGP
                    develop the bid price
August 17, 2006




                                                             16
                  Energy Procurement – A Texas Perspective
                  Summary


                  Successful Energy Procurement
                   Understand the utility industry structure
                   Understand the energy market and what
                    drives it
                   Develop an RFP which will compare
                    apples to apples and minimize response
                    variances
    DFW NIGP       As soon as you completed one
                    procurement cycle, begin preparing for
August 17, 2006



                    the next
                                                                17
                  Energy Procurement – A Texas Perspective
                  Presenter's Biography
                                 Jerry R. Dennis, CEM, CEP
                  Mr. Dennis, a Tarrant County College graduate, holds both the
                  Energy Manager (CEM) and Energy Procurement (CEP)
                  certifications from the Association of Energy Engineers (AEE).
                  He has worked in the electric and natural gas utility industry for
                  twenty (20) years, and has served as Dallas/Fort Worth
                  International Airport’s Energy Manager since October 2000.

                  His current responsibilities include; negotiating electric, natural
                  gas and water system contracts; developing operational plans for
                  the Airport’s thermal energy plants and water utility system; and
                  assisting in the development and implementation of the Airport’s
                  energy and water conservation strategies.
    DFW NIGP
August 17, 2006
                  Jerry is a frequent speaker on issues related to energy
                  management and procurement. He can be reached by email at
                  jdennis@dfwairport.com, or by phone at 972-574-2412.
                                                                                    18
Dallas/Fort Worth International Airport

Energy Procurement – A Texas Perspective

DFW National Institute of Governmental Purchasing
2006 3rd Quarter Meeting & Educational Event
Irving, Texas

August 17, 2006
Jerry R. Dennis, CEM, CEP
Energy Manager
Dallas/Fort Worth International Airport