Power Purchase Agreements

							Power Purchase Agreements

        Alex Sifford
       Ecos Consulting
        Portland, Oregon
      www.ecosconsulting.com
            Nomenclature
• Power PURCHASE = utility view

• Power SALES = developer view

• Since good marketing looks for customer
  perspective, Purchase it is

                                            2
        Power Characteristics
• Typically unable to store so physical
  delivery critical: where and when
• Utilities have differing requirements e.g.,
  Supplemental or Full Requirements
• Baseload or Block Power = more
  commodity-like
• Variable or Peak Power = has most value if
  able to follow load
                                                3
   Northwest Power Rates
BPA firm power rate schedules:
• Preference Firm (PF) $29.60/MWh
• Industrial Firm Power (IP-02)
• Residential Load (RL-02)
• New Resource Firm Power (NR-02)
  $50.40/MWh



                                    4
        Value to the Purchaser
• Cost compared to other new resources
• Risk factored into cost e.g., levelized costs
  provide rate stability.
• <Natural gas price forecasts are where
  today?>
• Credit stability of the Seller = rate stability
• Baseload allows utility to back off other
  resources
                                                    5
      Example Short-Term PPA
•   One Page Term Sheet Bid
•   1 – 3 Years
•   HLH period or Baseload
•   Point of Delivery into BPA system
•   Price in $/MWh
•   Can be a starting point in L-T negotiations

                                                  6
      Example Long-Term PPA
                      • DEFINITIONS
•   24 Sections       • TERM; FACILITY
•   55 Pages            DEVELOPMENT
                      • REPRESENTATIONS
•   Comprehensive       AND WARRANTIES
                      • DELIVERIES OF
•   Current             ENERGY AND GREEN
• Compare to Lender     TAGS
                      • PURCHASE PRICE;
  requirements          COSTS

                                           7
    Example Long-Term PPA
           (cont’d.)
• OPERATION AND      • DEFAULTS AND
  CONTROL              REMEDIES
• QUALIFYING         • INDEMNIFICATION
  FACILITY STATUS      AND LIABILITY
• SECURITY           • INSURANCE
• METERING           • FORCE MAJEURE
• BILLINGS,          • SEVERAL
  COMPUTATIONS AND     OBLIGATIONS
  PAYMENTS

                                         8
       Example Long-Term PPA
              (cont’d.)
•   CHOICE OF LAW        • SUCCESSORS AND
•   PARTIAL INVALIDITY     ASSIGNS ENTIRE
•   WAIVER                 AGREEMENT
•   GOVERNMENTAL         • NOTICES
    JURISDICTION AND     • CONFIDENTIALITY
    AUTHORIZATIONS       • DISAGREEMENTS
                         • -------------


                                             9
    BPA 2004 Transmission &
       Ancillary Services
 Generation Interconnection requirements

• TBL interconnects new generating facilities
  to its transmission system. The process
  allows interconnection on a first-come,
  first-serve basis by signing up into the TBL
  queue.
                                             10
11
     BPA 2004 Transmission &
        Ancillary Services
 NT-04 Network Integration Rates
Base Rate     $1.028 $/kW-mo
• Load Shaping $0.425 $/kW-mo

• Transmission customers purchasing Open Access
  Transmission Tariff service are required to purchase
  from TBL the Ancillary Services of: 1) Scheduling,
  System Control and Dispatch, and 2) Reactive Supply
  and Voltage Control from Generation Sources.
                                                  12
    BPA 2004 Transmission &
       Ancillary Services
 Point to Point Service

• TBL provides firm and non-firm
  transmission from point(s) of receipt to
  point(s) of delivery under a tariff.



                                             13
    Power Purchase Agreement
       Issues & Examples
•   Definitions – whose practices
•   Term – option to extend
•   Project Configuration – share of output
•   Purchase of Energy
     – Net of parasitics – self supply
     – Net of transmission to Pt. Of Delivery
     – Wheeling - Line losses factored in
                                                14
     Power Purchase Agreement
         Important Issues
•   Credit Support – Parent or other backup
•   Environmental Attributes (Green Tags)
•   Milestones – environmental, transmission
•   Seller Obligations – Leases, O&M
•   Buyer Obligations – Able to take & pay


                                               15
   Power Purchase Agreement
       Important Issues
• Transmission Issues – Queue, Ancillary
  Services, Firm Products
• Project O & M – Standards
• Security – Credit changes
• Defaults & Remedies – How to cure,
  rights v. obligations (see lenders)

                                           16
      Power Purchase Agreement
          Important Issues
•   Termination – terms, of convenience
•   Dispute Resolution – meet, arbitrate, court
•   Assignment – Control over to whom
•   Confidentiality - $, promotion
•   Force Majeure – both plant & transmission


                                                  17
              Thank you


Thanks to George Darr, retired BPA,
and Joe Taffe, Power Manager, Clatskanie
PUD for their help.