The following questions were received in connection with the webcast/seminar hosted by Southern Company on Feb. 13, 2009. While an attempt was made to answer each question in its original form, some questions have been edited to enhance readability and eliminate overlap. Similarly, questions largely duplicative of existing FAQs were not re-posted.
The operation of the Southern Company Energy Auction is governed by the Rules of the Bid Based Energy Auction set forth in tariff sheets on file with the Federal Energy Regulatory Commission (FERC), as such sheets may be revised from time to time. Any party interested in participating in the Southern Company Energy Auction should independently consult the Auction Rules, which may be accessed both at this website and at http://www.ferc.gov/docs-filing/elibrary.asp. In the event of any inconsistency or conflict between the information provided herein and the Auction Rules, the Auction Rules shall control.
Under FERC's Dec. 18, 2008 order, Southern Company Services will have 30 days from the date FERC issues an order on Southern Company Services' Jan. 21, 2009 compliance filing (as supplemented on Feb. 2, 2009) to initiate the auction.
The Firm-LD Energy product is a standard commodity product traded in the non-auction bilateral markets that requires firm delivery and provides for liquidated damages for failure to deliver. As provided in the Rules of the Bid-Based Energy Auction, the Recallable Energy product can be recalled for a supply-side disruption. It will be the responsibility of the buyer to determine whether or under what circumstances these products can be used for capacity reporting purposes.
The Rules of the Energy Auction do not specify a minimum or maximum bid price. The auction software requires the entry of a positive value. Since a bidder will not be permitted to submit a bid that contravenes governing credit requirements, each bidder's available credit establishes the limit on its maximum bid price.
Two independent, but simultaneous, Day-Ahead energy auctions will be administered — one for Recallable Energy and one for Firm-LD Energy. A bidder may choose to participate in either or both at their discretion.
If there is no available capacity, there will be no offers in the auction to clear. Therefore, there will be no market clearing price.
If all bid blocks are awarded in an auction, the market clearing price will be the seller offer price of the last megawatt sold.
Available credit is based on the financial strength of a bidder, any collateral posted by or on behalf of a bidder (and the financial strength of any guarantor, if applicable), and the terms of the service agreement between Southern Company Services and the bidder. Any existing exposure (including accounts receivable, potential receivables through the next payment date and mark-to-market values) will reduce available credit.
Under the Hour-Ahead Energy Auction, Southern Company Services is prohibited from selling the next-hour product for a given hour inside the Southern Balancing Authority Area until after the close of the bid period for that hour. Southern Company Services may continue to sell intra-day, multi-hour products inside the Southern Balancing Authority Area at any time.
The $21.43 demand charge is the same as that reflected in Southern Company's cost-based rate tariff, as accepted by FERC in Docket No. ER09-92-000. This charge was determined using a methodology that had previously been approved by FERC for use by a number of other utilities.
Revisions and redlined changes to the Participation Agreement are not contemplated.
The Hour-Ahead Energy Auction will occur in every hour of every day, including off-peak hours, holidays and weekends. As provided in Section 3.3 of the Rules of the Bid-Based Energy Auction, Southern Company Services from time to time may direct the Auction Administrator to administer the Day-Ahead Energy Auction for off-peak, holiday or weekend periods. While Southern Company Services is amenable to discussing future expansion of the energy auction, there are currently no plans to expand the auction to include other products.
The bid period for Monday will open at 12:00 Noon CPT on the prior Thursday and close at 6:30 a.m. CPT on the prior Friday. The bid period for Tuesday will open at 12:00 Noon CPT on the prior Friday and close at 6:30 am CPT on the prior Monday. All of the foregoing assumes the absence of holidays.
Winning bidders will be notified virtually immediately after the close of the bid period. For non-winning bidders and the general public, market clearing prices will be made available no later than one hour after the Day-Ahead Energy Auction closes and no later than 45 minutes after the Hour-Ahead Energy Auction closes. In addition, Southern Company Services will report all transactions executed pursuant to the auction to an index developer or a data hub, as well as in Electric Quarterly Reports filed with the FERC.
As contemplated in Section 2.24 of the Rules of the Bid-Based Energy Auction, Southern Company Services will use the Henry Hub midpoint gas price on the flow date ($/MMBtu). In this regard, Southern Company Services has recently discovered that Section 2.24 contains an erroneous reference to â€œPlatts Megawatt Dailyâ€ as the public source for the Henry Hub Midpoint gas price. As market participants are no doubt aware, no gas prices are reported in that publication. Southern Company Services has informed FERC that, consistent with standard industry practice, the intended reference is "Platts Gas Daily."
Should the Henry Hub be closed, Southern Company Services intends to follow standard business practices regarding the gas price used for settlement. This typically involves the use of the most recently published value.
On Feb. 18, 2009, Southern Company Services filed a response to the comments of Energy Consulting Group. Reference is made to that filing.
Only the Auction Administrator and Independent Auction Monitor will be able to see all bids and offers. Individual participants will only be able to see the bids that they submit into the auction. Southern Company Services' traders will only be able to see their offers. Six months following the close of an auction, the Auction Administrator will make all bids and offers available upon request, subject to redaction for confidentiality purposes.
Reference is made to Section 2.3.4 of the Rules of the Bid-Based Energy Auction, which sets forth the definition of the "Into Southern" product. The buyer's point of receipt likely will be a generator bus within the Southern Balancing Authority Area, but may also be an interface on the Southern Balancing Authority Area.
All sales that require physical delivery after the standard scheduling process is complete will receive a specific source. Consistent with the current scheduling practices, a winning bidder who books out a purchase will not be provided with a source because that transaction will not require physical delivery.
Southern Company Services will provide a scheduling source from which transmission is available for all sales that require physical delivery after the standard scheduling process is complete. As provided in Sections 5.5.3 and 6.5.3 of the Rules of the Bid-Based Energy Auction, it is the obligation of the buyer to take delivery at that point, which entails all requisite transmission reservations and scheduling arrangements (including NERC e-tagging requirements).
The formulas set forth in the Rules of the Bid-Based Energy Auction for determining the Seller Offer Price caps are based upon a projection of the unit(s) expected to be committed and/or dispatched as a result of the sale. The offers and bids may lead to commodity purchase(s) of energy at a clearing price established through the auction process. The energy that is actually delivered will thereafter be produced pursuant to the real-time economic dispatch of system resources.
The demand charge is included in the implied heat rate, as developed by Southern Company Services in the Seller Offer Price for the Day-Ahead Energy Auction.
This information will not be made available.
As provided in the Rules of the Bid-Based Energy Auction Energy, Southern Companies are committing to offer excess energy to the short-term markets from all of their available capacity. Southern Companies have no plans to build capacity for the purpose of serving such short-term markets (or the energy auction). However, any new capacity that does come online will be reflected in the determination of available capacity in accordance with the Auction Rules that are in place at that time.
Load forecast uncertainty will vary depending on the timeframes being evaluated and the associated system conditions at that time.
The Auction Administrator will be available to address questions that reasonably relate to the operation of the Southern Company Energy Auction, the requirements and process for participating, and the like.