BEYOND THE STANDARD BEYOND THE STANDARD OFFER- FULFILLING THE OFFER- FULFILLING THE

PROMISE OF 1997: PROMISE OF 1997: COMPETITION, RELIABILITY COMPETITION, RELIABILITY

AND STABILITY.AND STABILITY.

THE BOSLEY PLAN: THE BOSLEY PLAN: COMPETITION, STABILITY, AND COMPETITION, STABILITY, AND RELIABILITY.RELIABILITY.• This plan contemplates the peaceful co-existence of the This plan contemplates the peaceful co-existence of the

incumbent utilities and competitive retail suppliers. The incumbent utilities and competitive retail suppliers. The plan addresses residential and small business customers plan addresses residential and small business customers only. Large C+I (those above 100-200 kw) would remain on only. Large C+I (those above 100-200 kw) would remain on default or competitive supply.default or competitive supply.

• The plan would see the structural separation of the The plan would see the structural separation of the incumbent utilities’ retail and distribution functions. That is incumbent utilities’ retail and distribution functions. That is to say, the utilities would be mandated to structurally to say, the utilities would be mandated to structurally separate their wires function from their retail function. The separate their wires function from their retail function. The newly created retail affiliate would be a competitive affiliate newly created retail affiliate would be a competitive affiliate of the utility that would be required to provide last resort of the utility that would be required to provide last resort service (currently default) as well as MBIS at tarrifed rates service (currently default) as well as MBIS at tarrifed rates to competitive suppliers (until DTE resolves unbundling). to competitive suppliers (until DTE resolves unbundling). Additionally, the affiliated retail service supplier may also Additionally, the affiliated retail service supplier may also bid during the descending clock auction (see infra). bid during the descending clock auction (see infra).

THE BOSLEY PLAN: THE THE BOSLEY PLAN: THE AUCTIONAUCTION

• The proposal calls for a descending clock auction of Standard Offer and The proposal calls for a descending clock auction of Standard Offer and Default customers into a competitive retail market. It would essentially be Default customers into a competitive retail market. It would essentially be a form of opt-out aggregation. Winners of each descending clock auction a form of opt-out aggregation. Winners of each descending clock auction would provide “Basic Electric Service” (BES) for a period of three years to a would provide “Basic Electric Service” (BES) for a period of three years to a block of customers. Here are the highlights of the auction process:block of customers. Here are the highlights of the auction process:– All standard offer and default customers will be pooled together and put out to All standard offer and default customers will be pooled together and put out to

bid via an auction administered by the respective utility.bid via an auction administered by the respective utility.– The bidding will be divided into several suppliers in each service territory chosen The bidding will be divided into several suppliers in each service territory chosen

by descending clock auction. Moreover, there would be separate auctions for by descending clock auction. Moreover, there would be separate auctions for residential and small commercial customers. Contracts for BES would be for a 3 residential and small commercial customers. Contracts for BES would be for a 3 year fixed price. Each group would include approximately 250,000 residential year fixed price. Each group would include approximately 250,000 residential customers randomly drawn from standard offer and default customers.customers randomly drawn from standard offer and default customers.

– One competitive retail service provider would be prohibited from winning more One competitive retail service provider would be prohibited from winning more than 3 three of the bids, thereby ensuring that at there will be a minimum of 3 than 3 three of the bids, thereby ensuring that at there will be a minimum of 3 CRSP’s operating in the market.CRSP’s operating in the market.

– Customers will be given the opportunity to “opt-out” of the market at any time Customers will be given the opportunity to “opt-out” of the market at any time without penalty and procure their own service from another CRSP or revert back without penalty and procure their own service from another CRSP or revert back to Last Resort Service. However, those who elect to opt out of BES will be to Last Resort Service. However, those who elect to opt out of BES will be prohibited from returning during the term. This will allow for the fluidity the prohibited from returning during the term. This will allow for the fluidity the market needs to adequately develop. market needs to adequately develop.

THE BOSLEY PLAN: THE THE BOSLEY PLAN: THE AUCTION AUCTION

THE BOSLEY PLAN: THE THE BOSLEY PLAN: THE UTILITIESUTILITIES• As previously stated, there would be a structural separation of As previously stated, there would be a structural separation of

the utilities’ retail and distribution functions. The utility would the utilities’ retail and distribution functions. The utility would file a plan for structural separation with the DTE. The file a plan for structural separation with the DTE. The structurally separated entity of the utility would be structurally separated entity of the utility would be responsible for 1) LSR service (i.e., Default Service); 2) MBIS responsible for 1) LSR service (i.e., Default Service); 2) MBIS and 3) would be permitted to bid in the descending clock and 3) would be permitted to bid in the descending clock auction for its service territory. auction for its service territory. – LSR SERVICE: The utilities’ structurally separated entity would be LSR SERVICE: The utilities’ structurally separated entity would be

the Last Resort Supplier (LSR). As such, it would be responsible the Last Resort Supplier (LSR). As such, it would be responsible for providing Last Resort Service (LSR) to “new” default for providing Last Resort Service (LSR) to “new” default customers, those who opt out of the competitive bid process, and customers, those who opt out of the competitive bid process, and those whose suppliers leave the market.those whose suppliers leave the market.

• A customers ability to remain on LSR would be limited to one year. A customers ability to remain on LSR would be limited to one year. Every year, the respective utility would hold an auction of those Every year, the respective utility would hold an auction of those customers on LSR.customers on LSR.

• Need to “true-up” the cost of LSR to ensure that it does not become a Need to “true-up” the cost of LSR to ensure that it does not become a barrier to the development of a vibrant competitive retail market.barrier to the development of a vibrant competitive retail market.

• Policy Question: do we sunset LSR?Policy Question: do we sunset LSR?

THE BOSLEY PLAN: THE THE BOSLEY PLAN: THE IIOU’sIIOU’s

--MBIS: Competitive Retail Service --MBIS: Competitive Retail Service Providers would be required to purchase Providers would be required to purchase MBIS for all generation supply including MBIS for all generation supply including BES during the first term of BES at BES during the first term of BES at tarrifed rates set by the DTE.tarrifed rates set by the DTE.•Over the time period of initial contracts (3 Over the time period of initial contracts (3

years), the DTE would be required to years), the DTE would be required to conduct an unbundling procedure with conduct an unbundling procedure with respect to MBIS.respect to MBIS.

THE BOSLEY PLAN: THE THE BOSLEY PLAN: THE ADVANTAGESADVANTAGES• CRSP’s have a statewide presence.CRSP’s have a statewide presence.• Customers who “opt-out” of the initial bid could Customers who “opt-out” of the initial bid could

go to another CRSP or on to LSR for up to 1 year.go to another CRSP or on to LSR for up to 1 year.• There will be a new auction every year thereby There will be a new auction every year thereby

providing CRSP’s with the ability to augment their providing CRSP’s with the ability to augment their customer base while minimizing the amount of customer base while minimizing the amount of capital needed to do so. capital needed to do so.

• Clearing price provides for stability.Clearing price provides for stability.• Accomplish the goals of 1997.Accomplish the goals of 1997.• Consistent with out deliberative approach thus Consistent with out deliberative approach thus

far.far.

Post Basic Electric ServicePost Basic Electric Service

• At the end of the initial term of BES At the end of the initial term of BES (3 years), a new three year term (3 years), a new three year term would begin for the customers would begin for the customers remaining on BES at a price remaining on BES at a price proposed by the supplier and proposed by the supplier and approved by the DTE. Again, approved by the DTE. Again, customers would be free to opt out customers would be free to opt out at any time without penalty. at any time without penalty.