2009 RPS Solicitation Workshop 1 Highlights of PG&E’s Form of Power Purchase Agreement August 3,...

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2009 RPS Solicitation Workshop

Highlights of PG&E’s Form of Power Purchase Agreement

August 3, 2009

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Document Conflicts

• This presentation is intended to be a summary level discussion of the information and requirements established in the RFO materials (it does not include all of the detailed information in the RFO Materials)

• To the extent that there are any inconsistencies between the information provided in this presentation and the requirements in the RFO Materials, the RFO Materials shall govern

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No Modification PG&E PPA ReferenceCPUC Approval Article One Definitions, “CPUC Approval”

Green Attributes Article One Definitions, “Green Attributes,” and Section 3.2 Green Attributes

CEC Certification Section 10.2(b) and Article One Definitions, “Eligible Renewable Energy Resource”

Governing Law Section 10.12

The above terms are highlighted in the online versions of the PPAs (see www.pge.com/rfo).

Non-Modifiable Standard Terms & Conditions

Notes:• Non-modifiable STCs must appear exactly as they appear in the form PPA. No changes to punctuation or typographical errors. • Prior to execution of any PPA confirm with your transactional or regulatory attorney that the above non-modifiable STCs are correct and that the CPUC has not made further changes to the terms.•In connection with the CPUC’s decision on TRECs, further non-modifiable STCs may be applicable to RPS PPAs.

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Articles One and Two: Definitions and Governing Terms and Term

• Effective Date -- begins when Conditions Precedent are satisfied or waived in writing by both Parties

• Binding Nature– Note that certain provisions are effective and binding as of the Execution

Date, others upon Effective Date

• Conditions Precedent– Term of PPA begins when:

– (1) PPA executed;– (2) CPUC Approval obtained;– AND– (3) Seller documentation per Appendix XIII received; includes

documentation of CEC certification, site control, Seller’s articles of incorporation and financial statements

– Either Party may terminate PPA if CPUC approval not obtained within 240 days of filing Advice Letter

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Article Three: Obligations and Deliveries

• Section 3.1(a) – Product– As-Available or Baseload/Peaking/Dispatchable

As-Available: Wind, Solar, Run of River Hydro

Baseload: Biomass, Landfill gas, Geothermal

Dispatchable: Any technology for which the generator can guarantee delivery of at least 95% in each of the months of June through September with a minimum run time of eight hours per day

• Section 3.1(c) – Delivery Term– TERM: 10, 15, 20, or Other contract years

– Seller to specify delivery term in PPA mark-up

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Article Three: Obligations and Deliveries

• Section 3.1(d) – Delivery Point– The PNode designated by the CAISO for the Seller’s generating facility.

• Delivery Term beings after all of the following have been achieved:– Commercial Operation Date– Seller has posted Delivery Term Security– Seller has received and provided PG&E evidence of CEC Certification for

the facility– If the CAISO Participating Intermittent Resource Program (PIRP) is

available for the project, the facility has been PIRP-certified.• Section 3.1(e) – Contract Quantity and Guaranteed Energy Production

– Contract Quantity: Expected annual energy output; Seller to specify in PPA mark-up

– The PPA includes a “Delivery Term Contract Quantity Schedule” to account for degradation (Appendix V)

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Article Three: Obligations and Deliveries (continued)

• Guaranteed Energy Production (GEP): Minimum energy output– As-Available other than Wind: 160% of Contract Quantity over two

(2) contract year period– Wind, P-95 Value– Baseload: 90% of Contract Quantity

• GEP Shortfalls and Cure

– If Seller does not meet GEP, Seller may “Cure” energy shortfall– Cure for GEP shortfalls is the same for all technologies

• GEP: Physical Cure:

– If Seller fails to achieve GEP, the Seller must achieve 90% of Contract Quantity in the following Contract Year. Then the normal GEP calculation resumes the following Contract Year

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Article Three: Obligations and Deliveries (continued)• GEP: Financial Cure

– If seller is unable to increase production in the “cure year,” (physical cure) then Seller may pay liquidated damages to cure the GEP deficiencies.

• GEP damages based on the difference between( a) the Contract Price on a megawatt/hour (“MWh”) basis and (b) the applicable spot market price for the energy at the PNode

and $50, which is the contract proxy for the REC value for the green attribute.

• The GEP Damage calculation on a MWh basis cannot be less than $20.

• Default: Regardless of the “cure”, if Seller fails to achieve the GEP target and consequently fails to deliver a cumulative amount of MWhs over the Delivery Term in excess of the Contract Quantity amount, then PG&E will have a default right.

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• Section 3.1(f) – Contract Capacity– Seller specifies maximum capacity available for delivery

• Section 3.1(h) – Interconnection Facilities– Seller responsible for arranging interconnection and complying with interconnection

procedures

• Section 3.1(j): Greenhouse Gas Emissions Reporting

– Seller must assist PG&E in complying with future climate change tracking requirements.

• Section 3.1(k) WREGIS– Seller is responsible for registering with and using WREGIS and taking all action to

transfer WREGIS Certificates to PG&E.– Seller must register with before PG&E begins to pay for the Product being delivered to

PG&E under the PPA.

• Sections 3.1(l) - Access to Data and Installation and Maintenance of Weather Station– Equipment to be installed by Seller– Seller duty to maintain and repair


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• Section 3.1(n) Obtaining and Maintaining CEC Certification and Verification

– Facility must receive CEC pre-certification as a closing condition for execution of the PPA. See Section 2.4(a)(iv) list of closing documents.

• Section 3.2 Conveyance of Green Attributes (Non Modifiable)

• Section 3.3 Resource Adequacy (RA)– Seller commits to providing any RA capacity to PG&E as part of PPA and

complying with the CAISO’s RA protocols

• Section 3.4(b) – Eligible Intermittent Resource Protocol (EIRP) Requirements

– If available for the project type, Seller must certify project as Participating Intermittent Resource, in PIRP.

– Seller must pay all fees and take all actions required to certify the Project in PIRP and continue to keep the Project certified throughout the Delivery Term.

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Section 3.4(b) for Baseload; 3.4(c) for As-Available- Scheduling

PG&E is the Scheduling Coordinator

– PG&E will provide forecasting function

– PG&E will submit schedules

– PG&E will be responsible for imbalance charges, with exception

– PG&E will determine whether the energy will be scheduled through EIRP or not.

– Forecasting Penalties apply if Seller fails to provide data to PG&E for forecasting and resource availability.

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• Section 3.7 Outage Notification– Provides protocols for the CAISO approval of outages, planned and

prolonged outage, force majeure

• Section 3.9 New Generation Facility/Construction Milestones– Guaranteed Project Milestones: Seller specifies Guaranteed Construction

Start Date and Guaranteed Commercial Operation Date – Monthly Progress Reports to be provided by the generator on monthly basis

from the execution date of the PPA until the commercial operation date.• Attachment A to Appendix III contains Monthly Progress Report format. • Appendix III Milestone Schedule: Seller must list the key project

development milestone schedule.– Section 3.9(a)(vii): Special requirements for wind and geothermal to

establish the likely output capability of the facility.• Final Output Report from wind facilities • Geothermal Reservoir Report for geothermal

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• Section 3.9(c) Permitted Extensions prior to Construction Start Date– Delays in construction start allowed for:

• Permitting-360 days • Transmission-540 days • ITC or PTC (if applicable)-540 days• Force Majeure-360 days

– Permitting, Transmission and ITC/PTC delays may not cumulatively exceed 540 days.

– Generator must give notice of a delay and the extent of the delay

• Permitted Extensions after the Construction Start Date• Day for day delay of Guaranteed Commercial Operation Date based

upon the delays permitted for the Guaranteed Construction Start Date.• If a separate Force Majeure event occurs after the Construction Start

Date, the generator will be given up to another 360 days to cure.

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• Short Term Offer: Any offer with a term less than 10 years– Minimum term = 1 month

• Form PPA includes “adjustments” for short terms contracts with existing Eligible Renewable Resources (ERRs).

• Contracts with existing ERRs delete references to construction, commercial online date milestones, and resource adequacy requirements.

• Projects outside CAISO may substitute provisions in Attachment N as appropriate

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Article Four: Compensation; Monthly Payments

• Section 4.1 – Contract Price– Contract Price is specified by seller

• Section 4.3– Monthly TOD Payment

– Sum of each hour’s delivered Energy times the Contract Price times the TOD Factor

– Example: 3-4 pm on a Tuesday in June

• 50 MW scheduled * $246/MWh contract price * 2.21 TOD factor = $27,183

• Section 4.4 Excess Delivered Energy (as-available product)

– If Seller delivers more than 120% of annual Contract Quantity, payment for excess energy shall be at 75% of Contract Price

2009 TOD FACTORS FOR EACH TOD PERIOD

Period Super-Peak Shoulder Night

A. June – September 2.21 1.12 0.69

B. Oct. – Dec.; Jan. & Feb. 1.06 0.94 0.76

C. Mar. – May 1.15 0.85 0.64

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• Events of Default by Either Party– Failure to make a payment if not remedied within 5 Business Days after Notice – False or misleading representation or warranty

(1) When made; or

(2) during Delivery Term by Seller regarding ERR certification and RPS qualification, unless due to a change in Law and Seller uses commercially reasonable efforts to comply.

– Failure to perform any material covenant or obligation if not remedied within 30 days after Notice.

– Becoming Bankrupt– Surviving entity fails to assume all PPA obligations (see also Assignment

provision)

Article Five: Events of Default

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Article Five: Events of Default (continued)

• Events of Default by Seller

– Delivery or attempted delivery of Energy that was not generated by the Project

– Failure to meet either Guaranteed Project Milestone after expiration of Permitted Extensions and applicable cure periods

• But, no Event of Default if Force Majeure prior to CSD or COD (see "Force Majeure Development Failure" in Section 11.2(a)(ii))

• Damages capped at Project Development Security if Seller uses commercially reasonable efforts and misses:

(1) GCSD because of inability to obtain permits, interconnection agreement

(2) (2) GCOD because of inability to achieve interconnection or Electric System Upgrades

– Failure to satisfy credit/collateral requirements

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Article Five: Events of Default (continued)

• Failure to achieve Guaranteed Energy Production if:

(1) Seller fails to deliver GEP Cure or pay GEP Damages; or

(2) Cumulative amount of MWhs by which Seller missed GEP over entire Delivery Term equals or exceeds Contract Quantity

– Exclusion for major equipment failure reducing Contract Quantity by at least 60%

• Failure to meet or maintain Net Rated Output Capacity or Capacity Factor (Baseload, Peaking, Dispatchable)

• Failure to maintain Availability Factor (Dispatchable)

• Note: Prolonged FM post-COD no longer an Event of Default if "Force Majeure Project Failure" (see Section 11.2(a)(i))

– 40% of Contract Quantity for 12 consecutive months due to FM

– Buyer termination right as specified in Section 11.2(a)(i)

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Article Eleven: Force Majeure Termination

• Section 11.2: Buyer’s right to terminate PPA following prolonged event of FM– Time period and threshold for Contract Quantity– Mitigation Plan and Third Party Determination of Ability to Repair– Unilateral Right to Terminate– Buyer Right of First Offer

• Seller bound to a right of first offer to Buyer in the event that Seller is able to place the project into commercial operational within 3 years from the date of termination.

• Seller will only be allowed to increase the Contract Price to provide for incremental costs to generator in overcoming force majeure.

• If Buyer does not exercise right, Seller can sell to a third party but must provide evidence that such sale does not provide a lower rate of return to Seller than Seller would have yielded based on Contract Price and terms in PPA offered to Buyer.

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Article Five: Termination Payment

• Termination– Non-Defaulting Party sends Notice of Early Termination Date of PPA– In addition to terminating PPA, Non-Defaulting Party has the right to:

(1) collect applicable damages (liquidated or Termination Payment);(2) accelerate amounts owing between Parties and withhold any

payments due to Defaulting Party;(3) suspend performance;(4) draw on and retain Performance Assurance; and(5) exercise any other available rights and remedies.

• Termination Payment (when damages not liquidated):– Calculate "Settlement Amount" as of Early Termination Date

• The Settlement Amount = sum of the Losses, Gains and Costs that the Non-Defaulting Party incurs as a result of PPA termination

• No replacement transaction required to establish Settlement Amount• If the non-defaulting would owe a settlement amount to the defaulting party then

the settlement is deemed to be zero.

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• Article Six: Payment– Section 6.1 identifies what Seller shall provide to Buyer;

• Monthly verification reports;• Monthly invoices

– Buyer to pay the undisputed amount • If any amount disputed, Buyer to provide Notice stating basis of dispute• Payment of disputed amount not required until dispute resolved

• Any invoice dispute is waived unless Notice provided within 12 months after invoice rendered or adjustment made.

Article Six

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Article Eight: Credit and Collateral 8.4 (b)-(e)

• Initial Project Development Security – Due within 5 business days of execution

– $15/kw times project capacity

– Posting in the form of Cash or Letter of Credit only

• Project Development Security (PDS)

– Due within 30 days of CPUC approval– $100/kw times greater of 50% or project capacity factor– Posting in the form of Cash or Letter of Credit only

• Delivery Term Security (DTS)

– Due upon Commercial Operation Date

– Amount is based on expected revenues

• 12 months output @guaranteed minimum energy production (about 4% of total revenues)

– Posting in the form of cash, L/C, guarantee, or combination thereof

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Article Eleven

• Section 11.1: Production Tax Credit (“PTC”)/Investment Tax Credit (“ITC”) termination– PTC extended through December 31, 2012 (wind) and December

31, 2013 (geothermal, biomass and other qualified technologies)

– ITC extended through December 31, 2016

– Amount

• $10 or $20/MWh for PTC depending on technology, or

• 30% ITC for solar, 10% for geothermal

– Seller right to terminate PPA, if (a) Commercial Operation date will occur after the applicable “placed in service date” for the above listed federal tax benefits and (b) PTC and ITC legislation is not extended or alternate equal benefit provided to Seller.

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Other

• Article Seven: Limitation (Remedies, Liability and Damages)

• Article Nine: Governmental Charges

• Article Ten: Miscellaneous

– Confidentiality

– Audit

– Insurance

– Access to Financial Information

– Governing Law

• Article 11: Conditions Precedent

• Article 12: Dispute Resolution

• Article 13: Notices

• Appendices

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Appendix I Form of Letter of Credit

Appendix II Initial Energy Delivery Date Confirmation Letter

Appendix III Milestones Schedule and Form of Monthly Progress Report

Appendix IV Project Description Including Description of Site

Appendix V Delivery Term Contract Quantity Schedule

Appendix VI Commercial Operation Certification Procedure and Procedure for Subsequent Capacity Terms

Appendix VII GEP Damages Calculation

Appendix VIII Outage Notification Form

Appendix IX Certification of Third Party Agreement

Appendix X Resource Adequacy

Appendix XI Notices List

Appendix XII Form of Consent to Assignment

Appendix XIII Seller Documentation Condition Precedent

Appendix XIV Additional Dispatch Product Provisions and Capacity Terms (Dispatchable) or Form of Availability Report (As- Available)

Appendices

2009 RPS Solicitation Workshop 1 Highlights of PG&E’s Form of Power Purchase Agreement August 3,...

Documents

Transcript of 2009 RPS Solicitation Workshop 1 Highlights of PG&E’s Form of Power Purchase Agreement August 3,...