Market Knowledge & Pricing Alternatives

In deregulated electricity markets such as currently exist in the Northeast, commercial, industrial, and institutional consumers have the opportunity to manage their energy costs by purchasing their electricity requirements from a supplier such as Entergy Solutions. This opportunity, however, is often confounded by marketplace complexity, confusing pricing structures, and price trend volatility.

Entergy Solutions can offer proven energy strategies for reducing or stabilizing your energy costs to simplify your budget management. Here's how we do it:

• We are the retail provider arm of Entergy Nuclear, which generates and owns the electricity we sell.
• Nuclear power is a relatively price-stable electricity source.
• We provide exceptional service and technical expertise.
• We offer a number of pricing alternatives, including guaranteed fixed energy pricing for the length of your contract.

Choosing Entergy Solutions as your electricity provider can add predictability and value to your bottom line—including the option of locking in a competitive price for the duration of your contract.

Other pricing alternatives include:

• Market-Based Pricing (or Index Pricing)
• Block and Index Pricing

With the backing of one of the nation's best-established electric utilities, Entergy Solutions brings expertise in devising custom procurement strategies and flexible pricing models for high-volume energy users. We are experienced in helping customers manage multi-site commercial and industrial operations with a focus on efficiencies and economies of scale.

Pricing Glossary

Energy Price — the cost of the electricity usually stated in either $ / kilowatt hour
or $ / megawatt hour.

Megawatt Hour = 1,000 Kilowatt Hours
(Example $70 per mwhr = $.07 per kwh)

Capacity Price — sometimes referred to as ICAP or UCAP. A cost imposed by the local operating network to ensure that enough generating capacity is obtained to enable the supplier to meet some additional percentage of the peak requirement of the consumer.

Ancillary Services — certain costs associated with the provision of service from the local operating network. These provide for system reliability and maintain the operating integrity of the system.

Transmission and Distribution — certain costs associated with the movement and delivery of the customer's energy requirements.

Losses — costs associated with the physical loss of electricity as it passes over the wires and other system facilities en route to the customer's meter. For example, in order for a customer to receive all the electricity it requires for its operation, some additional amount will need to be delivered into the operating system by the supplier.

Retail Adder — an additional charge, which, together with the energy charge, in most cases comprises the entire bill to the customer. Typically, the retail adder is made up of capacity, ancillary services, losses, and margin. In some cases, a price advantage can be gained by separately stating cost items such as losses. In most cases, the retail adder does not include taxes.

Delivery Point — the point at which the electricity is delivered into the local operating network and at which the delivery obligation of the supplier is satisfied. In most cases, this is the point at which ownership of the energy is transferred.

Fixed Pricing

For commercial, industrial, and institutional customers looking to avoid the risks of price spikes that might occur with market-based pricing and with most utility tariff rates, Entergy Solutions offers a Fixed Price per Kilowatt-hour (kWh) for an agreed-upon contract term. This option allows energy customers to lock in a price for an extended period, manage budgets with certainty and take advantage of price stability. The Fixed Pricing includes all of the costs associated with providing the electricity and following the usage pattern of the customer's facility. In addition, ENTERGY SOLUTIONS manages and eliminates the market price risks over the contract term.

Market-Based Pricing (index pricing)

Certain consumers may prefer the price movements associated with the market pricing approach. Many factors can affect the monthly price for energy; they include weather and regional and national economic or global political issues. However, purchases can be made at prices that represent the market. In most cases, this approach will compare with large volume utility rates and can provide the additional capability to convert to a fixed price at any time, with no additional cost to the customer. This pricing is based on published indices from each operating area plus a retail price adder. The adder includes all other costs associated with providing the electric energy to the delivery point

Block and Index Pricing

This methodology combines the price certainty of fixed energy pricing with the market movements associated with an index-based price. A customer can customize this approach to match the risk preference of its business.

Here's how the methodology works: Entergy Solutions and the customer review the expected usage profile. The analysis attempts to identify the opportunity that may exist to purchase a block volume, or base-load, amount of power. The following chart shows an example of the results of such an analysis.

The total usage is separated into a block, or non-fluctuating amount, and the remainder is priced at market prices. In this way, a portion of any potential price volatility is eliminated. With the remainder priced at market, the customer gains two advantages.

(1) The market-priced purchases may reduce on a weighted average, or dollar cost average basis, the costs of the power supply.

And

(2) Entergy Solutions will give the customer the opportunity to convert the market or index based portion of the power supply to a fixed price purchase at any time.

The following chart shows how the block pricing and the index pricing would appear. The graph is very similar to the chart of the usage, because a portion of the usage is purchased at a fixed price, while the remainder, or load-following portion, is purchased at market prices.

For any or all of the market priced purchases, Entergy Solutions and customer could agree on programmed or pre-agreed price points, at which additional quantities would be purchased. In so doing, the customer and Entergy Solutions will work together to effectively manage the energy costs to the facilities.