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PENNVEST Webinar Outreach Slides

Join Paul Marchetti, Executive Director of PENNVEST, as he presents an overview of PENNVEST’s clearinghouse services tailored for stakeholders in the nutrient credit market. Learn about the objectives of the mock auction, upcoming dates, and the process for participating. Discover how PENNVEST aims to reduce transaction costs, enhance flexibility, and mitigate risks for market participants. Engage in the mock auction to familiarize yourself with the process and gain insights into market operations.

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PENNVEST Webinar Outreach Slides

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  1. PENNVEST Webinar Outreach Slides Paul Marchetti Executive Director, PENNVEST August 5, 2010

  2. Objectives of Presentation • Background description of PENNVEST’s clearinghouse services • Introduce rulebook • Mock auction description • Announce upcoming dates and initiation process of PENNVEST’s clearinghouse services

  3. Overview • PENNVEST will provide stakeholders the option to use its “clearinghouse” services to participate in the state’s nutrient credit market • PENNVEST has spent the past year, through iteration and multiple outreach sessions with stakeholders, designing the structure of the clearinghouse • Goal of PENNVEST services: • Reduce transaction costs and risks to market participants • Be customizable to reflect different needs • Require risk-mitigating assurances so that transaction risk to both PENNVEST and market participants is reduced

  4. Basic Clearinghouse Functions • PENNVEST will host the following types of market events, with the schedule and frequency based on stakeholder interest: • Provide auctions and clearing for multi-year forward contracts • Provide auctions and clearing for “spot” contracts at the end of the compliance year • Clearing of bilaterally negotiated prices and credit quantities between self-identified counterparties • Option contracts to accommodate property developers’ multi-step regulatory approval process

  5. Rulebook • PENNVEST’s services and the process for entering into contracts are described further in a rulebook available on PENNVEST’s website • The rulebook is a formal description of how PENNVEST’s clearinghouse will operate, which is consistent with descriptions presented over previous year, and describes the process by which participants can enter into contracts with PENNVEST • PENNVEST is accepting comments on the rulebook

  6. Mock Auction • PENNVEST and CCX will be administering a mock nutrient credit auction Friday, August 27, 2010 to: • Engage in outreach to potential market participants • Become accustomed with the process of administering auctions • PENNVEST has created a document that provides background detail about the mock auction and is available on PENNVEST’s website

  7. Structure of Mock Auction • Step 1: Participants notify PENNVEST of interest in participation by Wednesday August 25 by submitting provided form • Step 2: PENNVEST confirms registration • Step 3: Submit mock bid/offer to CCX on Friday August 27 • Step 4: CCX announces results week of August 30 • Step 5: Debriefing session on Wednesday September 15

  8. Format of Mock Auction • Participation is voluntary as mock auction is purely for educational and informational objectives • Nutrient contracts will be specified in advance: spot and five-year strips for each pollutant in each basin (8 contracts in total) • Bid / offer limits: each participant can submit one bid to buy or one offer to sell for each contract • Auction will be sealed-bid single-round • Auction will be uniform price for each specified contract • PENNVEST will be a counterparty to all market participants (i.e., will effectively be two simultaneous auctions: regular auction for buyers and reverse auction for sellers)

  9. Contract Types in Mock Auction

  10. Sample Auction Bid Form(offer form is analogous)

  11. Auction Example: Bids/Offers(Basin “A”, nitrogen, spot contract)

  12. Results from Example • All bids “all/none”; all offers “partial” • 160,000 credits purchased and sold at $4.77/lb • Bids #1, #2, and #3 each have bids completely filled • Offer #1 sells 25,000 credits and offer #2 sells 135,000 credits • $4.77 is calculated as weighted average of: • last successful offer: $3.75 weighted by 150,000 / 275,000 • last successful bid: $6.00 weighted by 125,000 / 275,000

  13. Upcoming Dates • Wednesday August 18: in-person meeting with PENNVEST, DEP, and CCX staff in Harrisburg • Wednesday August 25: last date to notify PENNVEST of interest in participating in mock auction • Friday August 27: mock auction administered by CCX • August 30: mock auction results announced this week • Wednesday September 15: debriefing session for mock auction participants

  14. Webinar Participants • All webinar participants are requested to send an email to Paul Marchetti (pmarchetti@state.pa.us) to indicate their presence on the webinar • Please indicate in the email if you intend to participate in the mock auction

  15. Background Information • Background information about PENNVEST’s clearinghouse role: http://www.portal.state.pa.us/portal/server.pt/community/pennvest/9242 • Background information about Nutrient Trading Program: http://www.dep.state.pa.us/river/Nutrient%20trading.htm

  16. Contact Information • Please feel free to contact me for additional questions: Paul Marchetti PENNVEST Executive Director 717-783-4496 pmarchetti@state.pa.us

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