Zambia Partnership: Monitoring of the Electricity Sector Lusaka, Zambia March 20-24, Chairman Wendell F. Holland

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1 Zambia Partnership: Monitoring of the Electricity Sector Lusaka, Zambia March 20-24, 2006 Chairman Wendell F. Holland

2 Objective of Monitoring The primary objective of monitoring activities is to provide the necessary information and support for the Regulatory Commission to perform both its regulatory and enforcement functions. SUPPORT MONITORING FUNCTIONS REGULATION ENFORCEMENT Jan-Feb 2006 Wendell F. Holland, PAPUC 2

3 Filings and Reports Quarterly financial statements are filed by companies Annual Rate Comparison Report all rate elements from all gas and electric companies the Commission and the State Legislature get reports Annual reports, compliance tariffs, quarterly revenues, utility operations, supplier bonding monitored and forwarded to Law Bureau for prosecution when deficiencies occur or violations detected Jan-Feb 2006 Wendell F. Holland, PAPUC 3

4 Contents in a Report Summary of Equity Returns Summary of Returns Definitions and Explanations Summary of Company Adjustments Allowed Rates of Return on Common Equity Market Based Returns on Equity Formulas Used in DCF Calculations Formulas Used in CAPM Calculations Formula Used in Risk Premium Calculations Secretarial Letter to All Parties of Record Jan-Feb 2006 Wendell F. Holland, PAPUC 4

5 Contents in a Report Follow-up Recommendation Number Staff s Follow-up Finding And Conclusion Staff s Follow-up Recommendation Recommendation Status Implementation Status Implementation Date Action Responsible Person (in the utility) Jan-Feb 2006 Wendell F. Holland, PAPUC 5

6 Contents in a Report Introduction Summary of Management Effectiveness and Operating Efficiency Executive Management Customer Services Management Information Services Materials Management Diversity Affiliate Relations Corporate Governance Acknowledgements Jan-Feb 2006 Wendell F. Holland, PAPUC 6

7 Market Monitoring Report Average Electric Wholesale Prices at Major Hubs NYMEX prices PJM Daily and Monthly Capacity Market Proposed Generation Summary Generation Air Permit applications Power Plant Outages Quarterly Average Retail Price comparisons for state, region, and country Jan-Feb 2006 Wendell F. Holland, PAPUC 7

8 Market Monitoring Report Electric Customer activity Coal spot prices Wholesale Natural Gas, Crude Oil, Propane, and Fuel Oil prices Natural Gas Storage & Futures Natural Gas Customer Activity EIA Natural Gas and Crude Oil Short Term Forecast Gulf of Mexico storm recovery Jan-Feb 2006 Wendell F. Holland, PAPUC 8

9 Resources Electric Market Hubs MID C MAPP N MAPP S MAIN NY zone G COB Com Ed NE POOL NP 15 PJM-ISO ECAR SP 15 Palo Verde Cinergy FOUR C TVA ERCOT ENTERGY Jan-Feb 2006 Wendell F. Holland, PAPUC 9

10 Resources Wholesale Fuel Prices by Heat Content Data from EIA Weekly Gas Report and EIA Weekly Petroleum Status Report (unweighted average) Contact Bill Hall , docs Natural Gas Henry Hub Spot Price No. 2 Fuel Oil NY Spot Price Crude Oil W. Texas intermediate Spot price Propane Mont Belvieu, Texas $16.00 $14.00 $12.00 Hurricane damage in the gulf of Mexico pushed natural gas prices and crude oil prices to new highs in September. September gas averaged $12.57/ mmbtu at the Henry hub. October natural prices are above $ Gas storage on October 21 was 2.8 % above the 5-year average. $10.00 $/mmbtu $8.00 $6.00 $4.00 Natural gas $2.00 $0.00 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Jan-Feb 2006 Wendell F. Holland, PAPUC 10

11 Resources GAS WHOLESALE PRICES AT SELECTED HUBS Data from Enerfax Daily. Additional charts available in DOCS , Contact Bill Hall Dominion SP Henry Hub Niagara TETCO M-3 PA Transco Z-6 NY Jan. 15, 2004 Z6 NY $47.15 M3 Phila $41.25 Sept.2005 Henry hub prices range from $10.59 to $ August 2005 Henry hub prices range from $8.01 to $ $/Mcf /26/03 Transco Z-6 NY $36.16 Jan. 21, 2005 Z6 NY $28.70 M3 Phila $18.36 Expanded on next page /1/03 2/1/03 3/1/03 4/1/03 5/1/03 6/1/03 7/1/03 8/1/03 9/1/03 1/1/04 2/1/04 3/1/04 4/1/04 5/1/04 6/1/04 7/1/04 8/1/04 9/1/04 1/1/05 2/1/05 3/1/05 4/1/05 5/1/05 6/1/05 7/1/05 8/1/05 9/1/ /1/03 11/1/03 12/1/03 Jan-Feb 2006 Wendell F. Holland, PAPUC 11 10/1/04 11/1/04 12/1/04

12 Examples of data resources (please note the following resources are NOT endorsed by the presenter and are for information purposes only) Wall Street journal Jan-Feb 2006 Wendell F. Holland, PAPUC 12

13 Reliability Performance Measures Benchmarks and standards established by PUC Based on 4 indices adopted by the Institute of Electrical and Electronic Engineers (IEEE) 1. Customer Average Interruption Duration Index (CAIDI) 2. System Average Interruption Frequency Index (SAIFI) 3. System Average Interruption Duration Index (SAIDI) 4. Momentary Average Interruption Frequency Index (MAIFI) Submitted by EDCs on quarterly and annual basis EDCs required to report on analysis of outage causes Provide analysis of worst performing 5% of circuits Jan-Feb 2006 Wendell F. Holland, PAPUC 13

14 Major Events To analyze and set measurable goals, major events are excluded from calculation Major events are defined as: Interruption beyond control of EDC which affects at 10% of customers for 5 minutes or more Unscheduled interruption by an EDC to maintain adequacy and security of system In 2004, 24 requests for exclusion of major events Commission approved 21 Jan-Feb 2006 Wendell F. Holland, PAPUC 14