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E3 has worked with many clients on the development
of their Requests for Proposals (RFPs) for energy and related products
or services. These have ranged from large generation RFPs in the
Pacific Northwest to monthly RFPs for non-firm energy via an on-line
auction system (GenEnergy). The company's experience is substantial,
particularly for structured transactions in illiquid markets. Our
approach is to follow a clear step-by-step process that is well
documented as the client proceeds. This ensures these transactions
can withstand external scrutiny (from regulators, boards, and/or
internal risk management committees) while documenting the ability
to obtain the best available price. Many clients and regulators
have reviewed E3's approach to RFPs, and consider it an industry
best practice. E3 expertise has been developed through continuing
field refinement of the RFP methodology over the last 6 years.
We have issued many RFPs and conducted numerous Internet-based
auctions with North America's largest power marketing organizations
as participants, including Morgan Stanley, Bruce Nuclear Power,
Constellation Power, Ontario Power Generation, BC Hydro/Powerex,
Sempra Energy Solutions, Mirant, and many others.
Approach
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Initially, E3 collaborates with clients to acquire data, define
procurement strategy and explore potential options.
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Next, E3 works with the client to tailor the process and the
competitive solution structure (on-line auction, sealed bid,
multi-round RFP) to meet the situation's special needs.
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E3 then reviews any existing portfolio contracts and information
(e.g. product preferences and forecasts for long-term forward
curve) and integrates this info into the RFP or evaluation process.
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E3 together with the client then develops and issues the RFP
and a list of client-specific supplier auction participants.
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Finally, the RFP procurement process is jointly administered
with the client.
E3 at Work
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Mr. Warrington, along with his colleagues, developed E3's
structured approach to the development and issuance of RFPs,
along with the company's proprietary auction process.
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Mr. Warrington and Mr. Price designed and developed E3's on-line
real-time auction software for procuring energy. World-renowned
theorists on the auction theory have independently validated
the multi-round Anglo-Dutch approach through several articles
published with Mr. Woo, et al.
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Dr. Orans and Mr. Horii designed most of the models and evaluation
processes for BC Hydro's ongoing call for tenders for 150-300
MW of new generation on Vancouver Island.
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Falconbridge Ltd., the 3rd largest nickel-mining conglomerate
in the world, retained Mr. Warrington to develop a portfolio
approach to manage the price and budget risk associated with
the procurement of wholesale energy in the Ontario electricity
market. The structured development of standard energy contracts
and wholesale products were integrated into a portfolio that
allowed for predictability of budget within the risk management
committee's policies. The client claims first year benefits resulting
from the program of over $25 million.
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Dr. Woo assisted Ontario Hydro in evaluating the expected
return of alternative pricing strategies in anticipation of
wholesale deregulation. These strategies were developed using
the Strategic Planning Model, E3's proprietary software that
considers transmission constraints, capacity and load projections,
and behavior of buyers and sellers.
Selected E3 Publications
- Lloyd, D., C.K. Woo, M. Borden, R. Warrington and C. Baskette (2004) “Competitive Procurement and Internet-based Auction: Electricity Capacity Option,” Electricity Journal, 17:4, 74-78.
- Woo,
C.K., D. Lloyd, M. Borden, R. Warrington and C. Baskette(2004) A
Robust Internet-Based Auction to Procure Electricity Forwards, Energy
- The International Journal, 29:1, 1-11.
- Woo, C.K., M. Borden, R.
Warrington and W. Cheng (2003) Avoiding
Overpriced Risk Management: Exploring the Cyber Auction Alternative, Public
Utilities Fortnightly, 141:2, 30-37.
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