The challenges facing Municipal & Cooperative Utilities

With the advent of ISO's, managing their energy supply has become much more difficult and risky for municipal and cooperative utilities. They must now forecast and schedule power on a daily basis as well as refine their long term forecasting to better manage their positions. In many ways these utilities look like a large retailer.

Many munis and co-ops are purchasing wholesale power in the open market and have begun to use supply-side management tools to address their supply-side risk issues, but they are generally less far along in implementing tools to manage their demand-side volumes and risks. To properly understand and manage their risk, these entities must understand and manage both sides of the supply/demand equation.

REBO specializes in the demand-side of the equation by addressing the volume volatility risk.

Understanding Load

Today's electric environment requires a much better understanding of your load profile and the uses that drive it. Knowing about and forecasting for changes in advance allows for better supply management and scheduling. To better forecast your load profile, you must implement a bottom-up forecasting technique, where customers are segmented into "like use" groups and key customers are monitored and modeled separately.

How does your overall profile perform daily/seasonally? What are the implications to the supply portfolio?

Understanding your overall load profile and the key drivers of its daily, seasonal and annual changes will allow you to better forecast your supply requirements.

What impact does weather have on your overall profile performance - daily/seasonally? What are the implications to your supply portfolio?

Understanding your load's weather sensitivity helps you understand not only how sensitive your load is to weather, but also when the effects will occur. While heating and air conditioning are the two big contributors, the type of heating and customer occupancy rate will also affect use patterns.

Which end users have non-weather driven seasonal loads? Which have significant variability in daily loads? Are operations subject to planned outages? Are large users planning expansions or reductions in operation?

Some business types have seasonally sensitivity processes (e.g., agriculture and tourism), while others have process loads that differ day-to-day (e.g., asphalt plants).

Changes in number of shifts, for retooling or for model changes will not only change total use, but also the facility's use pattern. Also understanding the customer's annual operating plan and being advised of ad-hoc operating changes.

It is not uncommon for process expansions to increase a facility's energy use by 20%.

REBO has over 20 years experience in customer segmentation and profiling by both business type and key processes. We can help you better understand your load and manage your supply portfolio.

Is your data clean?

Managing the demand side of the energy equation begins with good clean data. Most wholesale energy buyers have large amounts of interval data, but may be unaware of data quality issues. We've seen cases where 10% of the data available for forecasting has been incomplete or incorrect. Our first step in working the demand side of the equation is data validation by assuring the 4C's are met:

Current	Is all of the data up to date?
Complete	Are there missing hours or days?
Correct	Is the usage what is expected and appropriate for the customer mix? Are there duplications or overlapping data?
Consistent	Is the usage consistent with the mix of end users? Is the data consistent month-to-month? Year-to-year?

REBO has developed rules-based systems to identify and correct 4C issues.

Is data acquisition and processing delaying reporting of critical information? Is manual processing introducing errors?

When managing large amounts of data, automation of collection, processing and reporting is critical to timeliness and accuracy. Both are critical to minimizing the time to knowing actual usage. Any human intervention in the processes not only slows them, but also increases the likelihood of errors. REBO has nearly 10 years experience in automating data collection and processing.

Forecasting, Backcasting and Settlement

Forecasting produces both short-term and long-term load views for scheduling and portfolio management. Backcasting applies actual weather data to the forecasting model to help reduce potential variance between schedule and ISO settlement. Settlement compares actual interval data to the backcast to monitor how well the forecasting equations are working. The objectives of these three steps are to assure that: there is minimum variance between schedule and settlement, and causes of increased variances are identified and addressed quickly. Managing these processes well will reduce both volatility and VAR. REBO can help:

Are the requirements of scheduling with your ISO taxing your forecasting capabilities? Do you need a new system but don't have the resources to review, select and implement a new system?

Acquire - We have worked with retailers to identify commercially available forecasting systems, to select the system that best meets their needs, and to assist in system implementation.

Deploy - Once a forecasting system has been chosen or developed, the daunting task of deployment begins. Frequently the wholesaler implementing the new system has insufficient staff to continue day-to-day operations and implement a new forecasting system. REBO has experience in setting up testing programs and testing systems to assure that the wholesaler knows the strengths and weaknesses of his forecasting system and has confidence in its results.

Develop - REBO has experience developing custom forecasting systems that utilize its data cleaning and management system. We use a modular approach that allows ease of integration with customer information systems, scheduling, settlement, etc.

How well do you understand the retail loads you are following for your wholesale-to-retail customers?

Accurate assessment and forecasting of hourly retail electric loads is often outside of the muni's or co-op's core competency, and this is why our services are valuable to energy companies managing bulk supplies to energy retailers.

REBO understands retail load forecasting, and we have successfully worked with a number of bulk power suppliers to improve their ability to manage wholesale-to-retail electric loads. In particular, our temperature correction equation sets will significantly improve the accuracy of most and load forecasting system. What's more, we can provide top-to-bottom load forecasting system development and improvement services for those providers that lack these capabilities.

Can you accurately model how your customers load varies with temperature?

REBO has the experience and the resources to review your load forecasting system top-to-bottom and to optimize that system. We will look at all components of your load forecasting system and find further opportunities for improvement through systems and process improvements.

Have you optimized your load forecasting system? What kinds of gains could you realize from improvements to load forecasting?

Having a more accurate understanding of your load can help you avoid making portfolio management decisions too loose – conservative "slop" that results in unnecessary cost, or too tight – over aggressive portfolio management that exposes you to significant risks. Also, we can help you avoid costly imbalance penalties, generator uplift charges, etc.

Could you reduce your supply scheduling imbalance expense? Could you benefit by tightening up your near term portfolio management efforts?

We can improve forecasting precision for many clients through the development of advanced equation sets that provide better simulation of the effects of temperature on electric load.