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PowerPoint Presentation - Alberta School of Business


									BP Gas and Power

Edmonton Chamber of Commerce
“Electricity – from shocks to opportunities!”

 May 3, 2001

   BP Gas and Power – What‟s our involvement?
   Review Alberta Electricity Market
   Price Pressures in 2001 and 2002
   Choices for Industrials and Commercials
   Who can help?
Gas & Power Business
                                                    Gas &    Exploration/
BP has created a global gas and power stream        Power    Production

Opportunities created by several trends:
» solid demand growth for gas and power
                                                Chemicals    Refining &
» increasing demand for clean fuels                          Marketing

» further deregulation and liberalization of markets
» customer demand for new products and services
Gas & Power North America currently markets 9 Bcf/d,
    including 4.5 Bcf/d of proprietary production
We are a commodity and service provider to over 700 customers
BP Canada Electricity

  Operating location and 3rd Party customer loads
    totaling 280MW
  Electricity spend is a huge issue for our operations:
    1999        $ 75MM
    2000        $ 90MM
    2001        $230MM ??
Alberta Electricity Market

   Full Customer Choice 01/01/01
   All meters <250 MWh/year receive the Regulated
       Rate Option (RRO) and have their energy prices
       capped at $110/MWh (11 cents/kWh)
   ENMAX, ATCO, and EPCOR (UtiliCorp – Former
       TransAlta) are the Default Retailers
   All meter locations using more than 250 MWh/year
       will be charged the Alberta Pool Price
Alberta Electricity Market

  „New‟ Bills will unbundle Energy, Wires (regulated),
     Retail Services and Rebates.
     1. Residentials - $40/month
        All others - $36/MWh based on consumption
     2. Market Transition Credit
        *limits pool price to $111/MWh if pool less
         than $150/MWh
Alberta Electricity Market

  Lack of new generation projects has created supply tight
  Generation in Edmonton and largest power demand in
      Calgary has created high voltage wire problems
  California problems flow through to Alberta via BC Hydro
  Alberta Gas units (Cloverbar, Rossdale) set the Alberta
      Power Pool marginal price
  Energy suppliers are targeting the large electricity users.
      Government is targeting the voters. Commercial and
      Small Industrials are paying the price! Default supply is
      not a good thing!
Alberta Electricity Market

  All electricity consumption is allocated on an hourly basis
  Energy is your biggest cost (90%). When you use power is
       now more important than how much power you use.
  Sites without 15 minute interval meters will receive
       „deemed‟ net system load profile
  Site will be „deemed‟ to be using system average and not
       reflect when the power was actually consumed
  Deemed profile reflects residential characteristics (on-peak
       vs. off-peak)
Average Alberta Daily Load Profile

                                                                                                                       7780 MW
          Alberta Provincial Load

6250 MW                             1   2   3   4   5   6   7   8   9   10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Price Pressures in 2001 and 2002

  Snow pack and therefore Hydro capability at critically
      low levels
  California is a summer-peak region. What happens
      when it gets hot?
  Today‟s bills do not reflect the total cost:
  1) Utility 2000 bills of at least $700 Million must still be
      passed on to customers.
  2) Today‟s 30%+ rebates will go on for how long?
  No significant generation coming on-line until 2003
  Impact of coal plant announcements on efficient
      generation projects?
Choices for Industrials and Commercials
What Can You Do?

  Aggressive management of your power costs can produce a
      competitive advantage. You will not get back to your
      1998-1999 price levels but…..
  Steep learning curve from „paying electricity bills‟ to
      „procurement of electricity in a deregulated market‟. It is
      a commodity that can be managed!!
  Understand your current bill!
      (Who?, How much?, When? Where?)
  Investigate your profile – can you shift load to differ from
      „system‟ profile?
Who can do this for you?

 Large users have full-time Energy Management. Small users
     have the Regulated Rate Option. You have someone
     telling you that a 5 or 10 year fixed price contract is a
     good thing!!
 Extremely complicated topic – need experience in:
 Regulatory Affairs
 Contract Negotiations
 Power Development
 Operations (Demand Side Management)
 Risk Management
 Gas and Power Trading
What should you look for?

 Someone that can offer:
      Contract that reflects hourly profile usage – pay for what you use, or at
     least understand how you could use your power!
      Load aggregation
      On-site generation (steam requirements?) or 3rd party supply offer
      Retailing Services (detailed invoices that you can understand)
      Industry Updates – simplify the business for you
      Regulatory Intervention – ensure your bill reflects everything you are
     entitled to.
      Information Services - Weekly Bulletin notices / warnings
      Price Risk Management Services (Fixed pricing, ceiling, exotics – heat
     rates, spark spreads, costless collars etc.)
      Provide credit-worthy partner and synergy with your gas

  Customers that embrace deregulation can minimize the short
       term pain and maximize the long term gain!
  Energy costs will continue to be high for at least the next two
       years. Factors that will continue to influence include
       California, hydro and rain levels, gas, shortage of
       generation supply and government interference.
  If you are large enough to not qualify for the Regulated Rate
       Option, align yourself with someone that is committed to
       driving your costs down.

Jim Barker P.Eng.
BP Gas and Power
Jim Barker is the Project Manager - Electricity Origination and Energy Management
Services for BP Gas and Power. His focus is on 3rd party electricity origination
opportunities, while providing support to BP‟s internal operating locations across the

Prior to joining BP in 2000, Jim was the Energy Advisor for a large integrated Oil and
Gas company. While in this position. Jim supported the development of 390 MW of
generation projects currently on-stream or under development in Alberta.

Jim has held positions in Reservoir Engineering, Operations Engineering, Drilling and
Production, and Operating Chemicals (fuels, lubricants and catalysts).

Jim is a Director with the Industrial Power Consumers and Co-generators of Alberta.
He is a Professional Engineer and member of APEGGA. Jim graduated with a degree
in Chemical Engineering and Management from Hamilton‟s McMaster University.

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