REQRGQ Consolidation Proposal Consolidate the two retail quadrants

REQ/RGQ Consolidation Proposal Consolidate the two retail quadrants into one combined retail quadrant called Combined Retail Quadrant (CRQ) n Why? u Falling Membership u State of the Retail Choice Market n M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 1

REQ/RGQ Consolidation Proposal n Falling Membership u REQ/RGQ started with approximately 80 members but numbers never increased. t Current REQ/RGQ membership is 58. t NAESB Bylaws require a minimum of 40 members per quadrant. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 2

REQ/RGQ Consolidation Proposal n State of the Retail Choice Market u Approximately 20 states provide for retail competition. This number has not increased since the inception of REQ/RGQ. u While retail choice is very active in some states, many others have slowed their efforts to open markets to competition. u Because current markets function more or less within state or utility boundaries, the national market has not evolved as expected. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 3

REQ/RGQ Consolidation Proposal n Retail Structure Review Committee (RSRC) u At the June 2005 NAESB Board of Directors meeting the Board requested volunteer board members to form a committee to address the retail quadrant membership issues and make recommendations to board of directors by the end of 2005. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 4

REQ/RGQ Consolidation Proposal n RSRC Mission Statement u M. Novak 11/30/05 The Retail Structure Review Committee functions solely at the pleasure of the NAESB Board of Directors and reports to the NAESB Board of Directors through the NAESB Board Managing Committee. The Committee will make recommendations to the full board to address the membership levels in the retail electric and retail gas quadrants through possible changes to NAESB Bylaws, structural changes to the quadrants or their segments including merger of the two quadrants. DRAFT Presentation to Joint REQ/RGQ Executive Committee 5

REQ/RGQ Consolidation Proposal n Other Board Committees working to promote REQ/RGQ: u Retail Awareness Committee u Resources Committee Efforts to expand the scope of the REQ/RGQ have been made and should continue. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 6

REQ/RGQ Consolidation Proposal n The CRQ would have 4 segments of 7 members each. 28 seats is a workable number between the size of the WGQ (25) and WEQ(35). u Based upon the current (pre-election) Board roster and EC roster, no one would lose a seat. u M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 7

REQ/RGQ Consolidation Proposal u For the Board in the transition, CRQ would include the following: 7 Distributors [ 4 RGQ, 3 REQ, 0 Open ] t 3 Suppliers [ 1 RGQ, 2 REQ, 4 Open ] t 6 Services [ 4 RGQ, 2 REQ, 1 Open ] t 2 End Users [1 RGQ, 1 REQ, 5 Open ] t M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 8

REQ/RGQ Consolidation Proposal u For the Executive Committee in the transition, CRQ would include the following: 7 Distributors [ 3 RGQ, 4 REQ, 0 Open ] t 5 Suppliers [ 3 RGQ, 2 REQ, 2 Open ] t 6 Services [ 4 RGQ, 2 REQ, 1 Open ] t 2 End Users [1 RGQ, 1 REQ, 5 Open ] t M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 9

REQ/RGQ Consolidation Proposal n While the two retail quadrants would be combined into one retail quadrant, efforts would be made to: Preserve individual commodity identity, e. g. the CRQ would still develop and maintain distinct REQ and RGQ Model Business Practices. u Prevent one commodity from dominating the other. u Build off the cooperation REQ and RGQ have had to date. u M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 10

REQ/RGQ Consolidation Proposal n During a transition period, a company would be allowed to hold two seats in a segment, if u u The member has two memberships today and maintains those memberships. The member is willing to separate their electric interests and gas interests. This approach might help mitigate a membership reduction from 58 to 51 from companies that have both REQ and RGQ memberships. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 11

REQ/RGQ Consolidation Proposal n To help preserve a gas/electric balance: Within each segment, one seat (maybe two) could be reserved for sole commodity companies (gas or electric only). u Unlike WEQ, these reserve spots should not be left unfilled if no sole commodity company is interested. t In such cases a combination company could fill the slot. u M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 12

REQ/RGQ Consolidation Proposal n What if the retail choice market experiences sudden growth? It may be appropriate to include a reserve clause that says if membership of CRQ reaches 85 or 90 and with 2/3 rds vote of the CRQ members, gas and electric quadrants could be separated. M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 13

REQ/RGQ Consolidation Proposal n Next Steps Presentation to NAESB Board of Directors at it’s December 13, 2005 meeting. u If approval is given, formation of committees to modify bylaws and adjust segment procedures. u n Timeline u n 6 to 9 months Questions? M. Novak 11/30/05 DRAFT Presentation to Joint REQ/RGQ Executive Committee 14