Nick Clark de Utilitynet Canadá Aporta a Dialogo Generativo

Dear Nick,

You are welcome [see letter below]. I see your paper as a contribution towards the End-State of the power industry.

I also read what you posted on EnergyPulse today and find it very useful confirmation of the model I suggested earlier. You can find the additional comment on EnergyPulse.

I will be glad to post this more detail email message response in the GMH blog, but there is a confidential note at the bottom of the message.

Regards,

José Antonio

P.D.: 1) Nick says: “Hi Jose – I have removed the confidential note – Thanks for taking note.”

2) The additional comment promised to Nick is in the post Let's Get Out of Back Rooms to a Generative Dialogue Part 6.

3) Let's Get Out of Back Rooms to a Generative Dialogue Part 5 is a comment to the article The Power Will Be There But Will It Get to Market?, by Michael Morrison, National Energy and Infrastructure Industry Group Manager, Gowlings Lafleur Henderson LLP.

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From: Nick Clark [mailto:Nick.Clark@Utilitynet.net]
Sent: Tuesday, November 28, 2006 5:12 PM
To: javs@ieee.org
Subject: comments

Dear Jose

Thanks for your comments on my article. I attempted to post the following on the EC web – but it was bounced back as a Data Base Error - at any rate – below are a few further comments regarding our thoughts on AMI / Deregulation.

Often the debate regarding deregulation does not necessarily reflect the gains being made in C & I or Retail market sector. As a note of interest: the issue of metering communication infrastructure, which sparked this article was based on REAs in Alberta (Farming Co-operatives) wanting to take greater control over all aspects of their business in an attempt to drive down prices and increase services offered to their customers (members).

Under deregulation, the REAs faced two options. 1. Do nothing and continue to accept whatever the IOU Retailers provided them in term of services and RRO prices; or, 2. Take advantage of the opportunities, as the government unbundled various aspects of the value chain. Today, in Alberta you will find REAs and C & I market participants far more knowledgeable then ever before and respectfully profiting for Alberta’s open and competitive market. As such, many are starting to aggregate their load, hedging their demand by buying financial instruments such as heat rates as well as on-peak, off-peak and load following contracts. These are the innovators. As a co-operative, some REAs are capitalize on the objectives and promise of deregulation; first by being able to lower the price of electricity to their co-op REA membership and secondly, accruing profits that historically benefited the previous incumbent utility. Is deregulation working? For some the answer is yes. But, it doesn’t automatically happen.

Some businesses have profited in our deregulated market; in particular are those that have learned how to manage their energy. They have focused on understanding the business drivers, the nature of their load, profiles and mining their energy data. It starts with asking the right questions. Given that every enterprise requires energy to produce products and profits; how can you accurately determine your energy consumption for each business units or cost center? How much electrical power do they use each month? Can you control it, and/or; more importantly reduce the costs?

For large commercial enterprises, electricity is one of those critical line items that can impact the bottom line, especially given the high volatility of the spot market. Only with increased insight over financial reporting can an organization identify the fixed costs and manage those costs that are variable. In today's business climate, knowing actual costs per business unit is needed to help to drive internal accountability in determining the true profitability of each unit. Given the unbundling of charges – variable costs are more transparent. To profit from deregulation requires the customer to seriously take the time to understand all aspects of managing the purchase and consumption of electricity as they would any other commodity. But to do so, requires systems and data mining services to help manage the complexity of the various aspects of overall value chain.

Market participants in today’s deregulated market will not profit from it, unless they are willing to invest in learning how to manage all aspects of it.

At UTILITYnet we have focused on providing our customers (C & I plus REA clients) with energy management software and reporting system designed to collect, interpret, monitor and display metered, billing consumption and demand data for use by our client’s management team to help them achieve the lowest possible cost in buying power and/or in the management of the consumption of electricity.

Effectively, we have re-assembled all the data streams that the government unbundled into a consolidated information bank.

All meter reads and customer invoices undergo a detailed exception reporting validation review. All exceptions are then researched and resolved by our staff. Our reviews include but are not limited to areas such as meter changes, route planning, work-order management, high-low thresholds, meter read validations, load factor validations, usage/cost per hour/day/month and demand levels. Again, the unbundling of fees has made this process much more complicated – but at the same time, it has put more control in the hands of the customer to make informed decisions. As an ASP business provider, our systems are used to not only help our clients manage their corporate procurement strategies and risk but also validate the accuracy of all (site by site) invoices plus reports on how each of their business and processes consume electricity power. Most importantly, the information is used to help promote accountability, boost efficiency and improve productivity.

Customers can profit from deregulation, but only if they opt to proactively focus on managing their energy requirements (from the meter to cash). Unquestionably, some REAs in Alberta have been able to reduce their costs and offer lower prices to their members. As such, deregulation works – if your work at it. In the final analysis, all the government in Alberta has done in deregulating the market; is given those that want to take advantage of the promise, the opportunity and business climate to do so.

Next on the horizon is AMI. Control over the meter needs to be removed from the IOUs. We are in favor of privatization of the MDM function. With the decline in costs it now becomes far more affordable to take advantage of the benefits of an integrated business solution. It will allow the Retailer to link his wholesale purchasing and retail pricing strategies together. One day in the not to distant future, an REA co-operative in Alberta will be able to read the meter, invoice his customer, automatically deposit members payment, reconcile the wholesale power contract – and do so, prior to paying for the settled load. This will mitigate financing charges and under the concept of a co-operative, the savings will be passed onto the members (the ultimate consumer benefit of deregulation).

Regards,

Nick