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BP Gas and Power Edmonton Chamber of Commerce “Electricity – from shocks to opportunities!” May 3, 2001 Agenda 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? Conclusions Gas & Power Business Gas & Exploration/ BP has created a global gas and power stream Power Production Opportunities created by several trends: bp » 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 “www.bpcanadapower.com” 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. 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 situation Generation in Edmonton and largest power demand in Calgary has created high voltage wire problems California problems flow through to Alberta via BC Hydro (Powerex) 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 Hrs 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 evaluation 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 Conclusions 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. “www.bpcanadapower.com” 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 country. 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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