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Request for Offers for
Natural Gas Physical and
Financial Products
RFO Instructions
April 7, 2006
Southern California Edison Page 1
RFO for Natural Gas Physical and Financial Product
April 7, 2006
TABLE OF CONTENTS
A. INTRODUCTION ..................................................................................................................... 4
B. GAS RFO SOLICITATION AND OFFER SUBMITTAL PROCESS ....................................... 5
B.1. SCE AND DWR RESPONSIBILITIES ......................................................................... 5
B.2. RFO SCHEDULE......................................................................................................... 5
B.3. GAS RFO NOTICE OF INTENT TO OFFER .............................................................. 6
B.4. OFFER SUBMISSION PROCESS .............................................................................. 6
B.5. RESERVATION OF RIGHTS ...................................................................................... 7
C. PRODUCTS SOLICITED FOR SCE ....................................................................................... 8
C.1. PRODUCT DETAILS ................................................................................................... 8
C.2. PHYSICAL GAS DELIVERY POINTS ......................................................................... 9
C.3. GAS QUALITY........................................................................................................... 10
C.4. INFRASTRUCTURE PROJECTS ............................................................................. 10
C.5. ENABLING AGREEMENT REQUIREMENTS FOR PHYSICAL OFFERS ............... 10
C.6. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS .............. 11
C.7. CREDIT TERMS........................................................................................................ 12
C.8. SCE INDICATIVE OFFER SUBMITTAL PACKAGE ................................................. 12
C.9. SCE FINAL OFFER SUBMITTAL PACKAGE ........................................................... 14
D. PRODUCTS SOLICITED FOR DWR .................................................................................... 15
D.1. PRODUCT DETAILS ................................................................................................. 15
D.2. INFRASTRUCTURE PROJECTS AND VALUATION ............................................... 16
D.3. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS .............. 16
D.4. CREDIT TERMS........................................................................................................ 17
D.5. DWR INDICATIVE OFFER SUBMITTAL PACKAGE ................................................ 18
D.6. DWR FINAL OFFER SUBMITTAL PACKAGE .......................................................... 19
E. GAS RFO CONTACT INFORMATION ................................................................................. 20
Appendix A ................................................................................................................................... 21
Southern California Edison Page 2
RFO for Natural Gas Physical and Financial Product
April 7, 2006
APPENDICES
SCE and DWR Common Appendices:
Appendix A: Definitions
Appendix B: Notice of Intent to Offer
SCE Specific Appendices:
Appendix SCE-1: Gas RFO Confidentiality Agreement
Appendix SCE-2: SCE Indicative Offer Cover Letter
Attachment 1: Respondent Information
Attachment 2: SCE Offer Submittal Spreadsheet
Attachment 3: Infrastructure Project Information
Appendix SCE-3: SCE NAESB Elections and Special Provisions
Appendix SCE-4: SCE Elections and Special Provisions to NAESB Credit Support Addendum (including
form of Letter of Credit)
Appendix SCE-5: SCE ISDA Schedule Elections
Appendix SCE-6: SCE, paragraph 13 Elections to the ISDA CSA (including form of Letter of Credit)
Appendix SCE-7: SCE Fixed Price Physical Gas Confirmation
Appendix SCE-8: SCE Indexed Price Physical Gas Confirmation
Appendix SCE-9: SCE Fixed/Floating Swap Confirmation
Appendix SCE-10: SCE Call Option Confirmation
Appendix SCE-11: SCE Call Spread Confirmation
Appendix SCE-12: SCE Final Offer Cover Letter
DWR Specific Appendices:
Appendix DWR-1: Gas RFO Confidentiality Agreement
Appendix DWR-2: DWR Indicative Offer Cover Letter
Attachment 1: Respondent Information
Attachment 2: DWR Offer Submittal Spreadsheet
Attachment 3: Infrastructure Project Information
Appendix DWR-3: Standard DWR Terms and Conditions for ISDA Agreements
Appendix DWR-4: DWR Final Offer Cover Letter
Southern California Edison Page 3
RFO for Natural Gas Physical and Financial Product
April 7, 2006
A. INTRODUCTION
This is a Request For Offers (“RFO”) by Southern California Edison Company (“SCE”)
and the California Department of Water Resources (“DWR”), for whom SCE serves as a
limited agent.
SCE is seeking Offers for physical natural gas and for financial natural gas hedging
products in order to manage the risks faced by SCE arising from the operation of SCE-
owned natural gas fired power plants, SCE tolling agreements, and from that portion of
SCE’s qualifying facility portfolio where the power purchase price is dependent upon the
price of natural gas.
DWR is seeking Offers for financial natural gas hedging products in order to hedge the
risk associated with DWR tolling contracts allocated to SCE.
These products requested by SCE and DWR are summarized in Section C and Section
D of these RFO Instructions.
As specified in Section C.4. and Section D.2. herein, SCE and DWR have a preference
for Offers that enhance the natural gas supply infrastructure.
These RFO Instructions describe the products solicited by SCE and DWR, and the RFO
process and timeline, including the documents and information that will be required for
the submittal of Offers.
This RFO is not a binding offer by SCE or DWR to purchase natural gas or any other
product.
SCE and DWR will not entertain Offers from any affiliate of SCE for this RFO.
Capitalized terms used in this RFO that are not otherwise defined herein are used with
the meanings ascribed to them in Appendix A.
Southern California Edison Page 4
RFO for Natural Gas Physical and Financial Product
April 7, 2006
B. GAS RFO SOLICITATION AND OFFER SUBMITTAL PROCESS
B.1. SCE AND DWR RESPONSIBILITIES
Although this is a single RFO, SCE and DWR will be shortlisting, negotiating and
accepting Offers separately. Respondents must submit Offers separately to SCE and to
DWR in accordance with the instructions herein. Respondents should note that SCE will
be assisting DWR in its evaluation of the Offers it receives pursuant to this RFO, and
SCE will review and evaluate DWR’s Offers on DWR’s behalf. Furthermore, SCE may
disclose to DWR, in order to provide DWR with assistance in evaluating DWR’s Offers,
certain components of the Offers SCE receives and its analysis of those Offers. DWR
and SCE can exchange information related to their respective Offers in accordance with
the terms of the confidentiality provisions contained in the Operating Order between
SCE and DWR approved by the California Public Utilities Commission in Decision 02-12-
069 on December 19, 2002.
B.2. RFO SCHEDULE
Gas RFO Timeline
April 7, 2006 Gas RFO documentation will be posted on http://www.sce.com/GASRFO
April 14, 2006 at 5:00 PM PPT Notice of Intent to Offer is due.
April 18, 2006 at 10:00 AM – Bidder’s Conference Call. Call-in number is (866) 858-1283.
11:00 AM PPT
April 21, 2006 Strike prices for Indicative Offers for financial products will be posted on SCE’s
Gas RFO website.
April 28, 2006 at 5:00 PM PPT Respondent’s complete Indicative Offer Submittal Package to SCE is due and
complete Indicative Offer Submittal Package to DWR is due.
May 12, 2006 SCE and DWR will notify Respondents whether or not they are included in SCE’s
or DWR’s shortlist.
June 30, 2006 at 5:00 PM PPT Applicable and mutually agreed Confirmations with the exception of the Final
Offer prices are due (“Lockdown Date”).
July 12, 2006 at 5:00 PM PPT Applicable, mutually agreed and executed Enabling Agreements are due.
July 14, 2006 at 12:00 PM SCE and DWR will notify Shortlisted Respondents if their Confirmations and
PPT Enabling Agreements are acceptable and they are therefore eligible to supply final
pricing for this RFO.
Eligible Respondents will be sent SCE Offer Submittal Spreadsheet or DWR Offer
Submittal Spreadsheet including final strike prices. This form must be used for
final offers.
Southern California Edison Page 5
RFO for Natural Gas Physical and Financial Product
April 7, 2006
July 17, 2006 at 12:00 PM Respondent’s complete Final Offer Submittal Package to SCE is due and
PPT complete Final Offer Submittal Package to DWR is due. Respondent shall (1)
email an executed PDF or scanned signed Final Offer Cover Letter, (2) a PDF or
scanned and Excel version of SCE Offer Submittal Spreadsheet or DWR Offer
Submittal Spreadsheet with final pricing, and (3) PDF or scanned applicable
mutually agreed Confirmations and Enabling Agreements.
July 18, 2006 prior to 11:00 Award notifications via recorded phone call to Respondent’s representative
AM PPT indicated in the applicable Final Offer Submittal Spreadsheet (“Award Date”).
B.3. GAS RFO NOTICE OF INTENT TO OFFER
Respondent must provide a non-binding Notice of Intent to Offer by emailing the form
shown in Appendix B by the date shown in Section B.2. to GasRFO@sce.com.
B.4. OFFER SUBMISSION PROCESS
Respondents must provide a complete Indicative Offer Submittal Package as described
in C.8. for SCE Offers and Section D.5. for DWR Offers. Indicative Offer prices are non-
binding. All Respondents must use the applicable Offer Submittal Spreadsheet to
submit both their Indicative and Final Offers. SCE offers must use the SCE Offer
Submittal Spreadsheet and DWR Offers must use the DWR Offer Submittal
Spreadsheet. SCE and DWR reserve the right to reject any or all Offers from a
Respondent if the Respondent has changed or tampered with any protected area within
the applicable Offer Submittal Spread Sheet. Respondents can only modify the light blue
highlighted sections of these spread sheets. Pull down menus are used where possible
to aid the bidding process.
Two weeks after receipt of Indicative Offer Submittal Packages, SCE and DWR will
notify Respondents if they are included on SCE’s or DWR’s shortlist, at which time SCE
or DWR will continue to negotiate Enabling Agreements and Confirmations with those
Shortlisted Respondents.
Approximately two weeks before Final Offers are due, all terms and conditions of the
Offer as described in the Confirmations must be finalized with the exception of the Final
Offer price. No additional changes to the Confirmation will be accepted after the
Lockdown Date.
Two months after Shortlist notification, an applicable mutually agreed Enabling
Agreement must be executed and delivered to SCE. Two days after the Enabling
Agreement due date, SCE and DWR will notify Shortlisted Respondents of their eligibility
to submit a Final Offer. At this time SCE will email a unique SCE Final Offer Submittal
Spreadsheet to each eligible Respondent. The unique SCE Final Offer Submittal
Spreadsheet will contain only the products for which the Respondent is eligible. For the
eligible Respondents, the unique SCE Final Offer Submittal Spreadsheets will contain
strike price data for call options and call spreads. The Final Offers must be received by
the date shown in Section B.2. In order for Final Offers to SCE or DWR to be eligible for
award, Respondents must deliver all requisite documents in the appropriate formats to
SCE before 12:00 PM PPT the day before the Award Date. The requisite documents and
formats are described for SCE in Sections C.5. through C.6. and for DWR in Section
D.3.
Southern California Edison Page 6
RFO for Natural Gas Physical and Financial Product
April 7, 2006
Binding Final Offer prices must remain open until 11:00am PPT on the Award Date.
SCE and DWR will award contracts to successful Respondents via a recorded telephone
call prior to 11:00am PPT.
The terms, conditions, and representations in the Indicative Offer Submittal Package
attached as Appendix SCE-2 and applicable Confirmations will serve as a basis for a
potential future agreement between SCE and/or DWR and Respondent and are not
intended to and do not constitute a binding agreement of, or establish any obligation of,
SCE or Respondent. Respondent must state on the Offer Submittal Spreadsheet all
Offer limitations and constraints including limitations on total award quantity and note to
which specific Offers Respondent’s limitations apply.
Respondents should note that SCE and DWR expect that Respondent, in submitting its
Offers, will be able to make certain representations, warranties, and covenants to SCE
or to DWR; therefore, Respondents should read the contents of the Indicative Offer
Cover Letter as applicable prior to preparing any of its Offers. It is expected that
Respondent will not engage in any communications with any other actual or potential
participant in the RFO concerning either the RFO process, price terms in Respondent’s
Offer or related matters, and Respondent has not engaged in collusion or any other
unlawful or unfair business practices in connection with the RFO.
B.5. RESERVATION OF RIGHTS
SCE and DWR reserve the right at any time, in their sole discretion, to abandon this
solicitation process, to change any dates specified in this RFO, to change the basis for
evaluation of Offers, to terminate further participation in this process by any party, to
accept any Offer or to enter into any definitive agreement, to evaluate the qualifications
of any Respondent or the terms and conditions of any Offer, to reject any or all
proposals or Offers, to change any form used in this RFO at any time during the RFO
process, or waive any irregularities, all without notice and without assigning any reasons
and without liability of Edison International, SCE, DWR or any of their respective
subsidiaries, affiliates or representatives to any Respondent. SCE and DWR shall have
no obligation to consider any Offer submitted. SCE and DWR will not reimburse any
Respondent for its expenses under any circumstances, regardless of whether the
bidding process proceeds to a successful conclusion or is abandoned. SCE and DWR
shall not be deemed to have accepted any Offer, and shall not be bound by any term
thereof, unless and until it signs applicable Confirmations and, if appropriate, any related
Enabling Agreement with the Respondent.
Southern California Edison Page 7
RFO for Natural Gas Physical and Financial Product
April 7, 2006
C. PRODUCTS SOLICITED FOR SCE
C.1. PRODUCT DETAILS
In this RFO, SCE will not consider Offers for products other than those specifically set
forth on this list. The maximum total award per Respondent under this RFO for SCE is
limited to 60,000 MMBtu/day of physical products and 60,000 MMBtu/day of financial
products. All physical or financial product Offers must quote fixed and/or indexed prices
in dollars per MMBtu.
Physical Products
SCE is seeking Firm fixed and Firm indexed physical products delivered to the
SoCalGas system with contract durations of one year, two years, three years, four years,
or 59 months. (SCE is limited by its CPUC-approved Procurement Plan to contract
durations of less than 5 years without explicit CPUC pre-approval). The earliest start
date is November 1, 2006. All contracts must start on November 1 of the offered year
and no contract shall extend beyond October 31, 2013. Offers can be submitted in any
of these quantities: 10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.
Physical products are summarized in the following table.
PHYSICAL CONTRACT TERM
TRANSACTION OFFER QUANTITY
TYPES Start Date Latest End Date Durations
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
November 1, 2007 September 30, 2012 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2008 September 30, 2013 12, 24, 36, 48 or 59 months
30,000, 40,000,
Fixed Price November 1, 2009 October 31, 2013 12, 24, 36, or 48 months
50,000 or 60,000
MMBtu/day November 1, 2010 October 31, 2013 12, 24, or 36 months
November 1, 2011 October 31, 2013 12 or 24 months
November 1, 2012 October 31, 2013 12 months
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
November 1, 2007 September 30, 2012 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2008 September 30, 2013 12, 24, 36, 48 or 59 months
30,000, 40,000,
Indexed Price November 1, 2009 October 31, 2013 12, 24, 36, or 48 months
50,000 or 60,000
MMBtu/day November 1, 2010 October 31, 2013 12, 24, or 36 months
November 1, 2011 October 31, 2013 12 or 24 months
November 1, 2012 October 31, 2013 12 months
Financial Products
For financial products, SCE is seeking Offers for fixed/floating price swaps, call options,
and call spreads. The Gas Index is the only index that can be used for settlement of
financial Offers. Requested contract durations are one year, two years, three years, four
years, or 59 months. (SCE is limited by its CPUC-approved Procurement Plan to
contract durations of less than 5 years without explicit CPUC pre-approval.) The earliest
start date is November 1, 2006. All contracts must start on November 1 of the year
offered and no contract shall extend beyond October 31, 2013. Offers can be submitted
in any of these quantities: 10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.
Southern California Edison Page 8
RFO for Natural Gas Physical and Financial Product
April 7, 2006
SCE will only consider Offers for call options and call spreads at strike prices specified
by SCE. For consideration in Indicative Offers, monthly strike prices will be provided on
www.sce.com/GasRFO on the date indicated in Section B.2. For Final Offers, monthly
strike prices will be provided to Respondents upon notification of eligibility to submit
Final Offer pricing on the date indicated in Section B.2.
For financial products, SCE is seeking products as summarized in the following table.
FINANCIAL CONTRACT TERM
OFFER
TRANSACTION
QUANTITIES Start Date Latest End Date Durations
TYPES
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
November 1, 2007 September 30, 2012 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2008 September 30, 2013 12, 24, 36, 48 or 59 months
Fixed/Floating
30,000, 40,000, 50,000 November 1, 2009 October 31, 2013 12, 24, 36, or 48 months
Price Swaps
or 60,000 MMBtu/day
November 1, 2010 October 31, 2013 12, 24, or 36 months
November 1, 2011 October 31, 2013 12 or 24 months
November 1, 2012 October 31, 2013 12 months
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
November 1, 2007 September 30, 2012 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2008 September 30, 2013 12, 24, 36, 48 or 59 months
Call Options 30,000, 40,000, 50,000 November 1, 2009 October 31, 2013 12, 24, 36, or 48 months
or 60,000 MMBtu/day November 1, 2010 October 31, 2013 12, 24, or 36 months
November 1, 2011 October 31, 2013 12 or 24 months
November 1, 2012 October 31, 2013 12 months
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
November 1, 2007 September 30, 2012 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2008 September 30, 2013 12, 24, 36, 48 or 59 months
Call Spreads 30,000, 40,000, 50,000 November 1, 2009 October 31, 2013 12, 24, 36, or 48 months
or 60,000 MMBtu/day November 1, 2010 October 31, 2013 12, 24, or 36 months
November 1, 2011 October 31, 2013 12 or 24 months
November 1, 2012 October 31, 2013 12 months
C.2. PHYSICAL GAS DELIVERY POINTS
All physical gas must be delivered into the following interconnection points on the
SoCalGas system (see applicable Confirmations for further details):
INTERCONNECTION RECEIPT POINT
El Paso Natural Gas Company South Needles/Topock
El Paso Natural Gas Company Ehrenberg
Transwestern Pipeline Company North Needles
Transwestern Pipeline Company Topock
Kern Mojave Pipeline Wheeler Ridge
Kern Mojave Pipeline Kramer Junction
Questar Pipeline Company – Southern Trails North Needles
Southern California Edison Page 9
RFO for Natural Gas Physical and Financial Product
April 7, 2006
Kern River Pipeline Company Kramer Junction
Kern River Pipeline Company Wheeler Ridge
Pacific Gas & Electric Company Transmission Kern River Station
Mojave Pipeline Company Hector Road
Occidental Petroleum Company/Elk Hills Wheeler Ridge/Gosford
California Production Line 85
California Production North Coastal
California Production Other
C.3. GAS QUALITY
Any delivered physical gas shall meet the pressure, quality and heat content
requirements of the applicable transporter.
C.4. INFRASTRUCTURE PROJECTS
SCE encourages Offers that support the development of Infrastructure Projects as
defined in Appendix A. During SCE’s evaluation of the Offers, SCE may, at its sole
discretion, assign a benefit to an Offer that supports the development of an Infrastructure
Project. Examples of Infrastructure Projects are LNG projects, new pipeline projects,
new stranded gas recovery projects, incremental increases in capacity of existing
projects, etc.
Respondents must note any Offer that is sourced from an Infrastructure Project in
Attachments 2 and 3 to the Indicative Offer Cover Letter. For all Infrastructure Projects,
Respondents must provide the following information:
Description of the Infrastructure Project including capacity, location, proposed
gas interconnection point;
Proposed timeline;
Status of environmental permits and construction applications;
Expected natural gas quality specifications;
Proposed contractual assurances that the Offer will be sourced from the
Infrastructure Project;
Financing plan for project; and
Other proposed terms and conditions.
C.5. ENABLING AGREEMENT REQUIREMENTS FOR PHYSICAL OFFERS
A mutually agreed and executed NAESB Gas Contract or Gas Annex to the EEI Master
Power Agreement with its corresponding collateral or credit support annex is one of the
requirements to be allowed to submit final pricing for physical products.
If Respondent and SCE are not already parties to a NAESB Gas Contract or Gas Annex
to the EEI Master Power Agreement, Respondent must submit as part of its Indicative
Southern California Edison Page 10
RFO for Natural Gas Physical and Financial Product
April 7, 2006
Offer Submittal Package an electronic redlined copy of all applicable Enabling
Agreements. See SCE’s RFO website or contact the Gas RFO Project Manager for
copies of our current standard Enabling Agreements. See Section B.2. for schedule
details.
If Respondent has an executed NAESB Gas Contract with SCE, then for the purposes of
a long-term transaction under this RFO, the SCE NAESB Elections and Special
Provisions in Appendix SCE-3 and the SCE Special Provisions to the NAESB Credit
Support Addendum in Appendix SCE-4 will apply, and the parties must amend their
existing NAESB Gas Contract.
If Respondent has an executed EEI Master Power Purchase and Sale Agreement with
SCE, and would like to execute a Gas Annex for physical Offers under this RFO, please
contact the Gas RFO Project Manager (see Section E) to determine if Respondent can
meet the credit requirements to use a Gas Annex.
If Respondent has an executed EEI Gas Annex with SCE, no additional Enabling
Agreements are required for physical Offers.
SCE Physical Enabling Agreement Documents
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
1. SCE Standard NAESB
including Cover sheet and Mutually acceptable executed NAESB Gas Contract.
Special Provisions
2. NAESB Credit Support Mutually acceptable executed SCE NAESB Gas
Addendum Contract Credit Support Addendum.
Mutually acceptable and executed Guaranty, if
3. Guaranty
applicable.
C.6. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS
A mutually agreed and executed ISDA Master Agreement is one of the requirements to
be allowed to submit final pricing for financial products.
If Respondent and SCE are not already parties to an ISDA Master Agreement,
Respondent must submit as part of its Indicative Offer Submittal Package an electronic
redlined copy of all applicable Enabling Agreements. See SCE’s RFO website or
contact the Gas RFO Project Manager for copies of SCE’s current standard Enabling
Agreements.
Southern California Edison Page 11
RFO for Natural Gas Physical and Financial Product
April 7, 2006
SCE Financial Enabling Agreement Documents
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
1. ISDA, Schedule to the Mutually acceptable executed ISDA Master
2002 Master Agreement Agreement and ISDA Schedule.
2. ISDA, Paragraph 13 to Mutually acceptable executed Paragraph 13 to the
the CSA ISDA CSA
Mutually acceptable and executed Guaranty, if
3. Guaranty
applicable.
C.7. CREDIT TERMS
Respondents must meet SCE’s standard credit requirements. SCE requires that
Respondents must post collateral (either cash or a letter of credit) for SCE’s exposure
above an unsecured line, if any. Only investment grade rated Respondents are eligible
for an unsecured line. Alternatively, a Respondent may be eligible for an unsecured line
by providing a guaranty from an investment grade rated corporate parent. Respondents
which are not rated or rated below investment grade must post collateral for all of SCE’s
exposure in addition to an independent amount. Respondents should note that, in
SCE’s evaluation of Offers pursuant to this RFO, SCE reserves the right to disqualify
those Respondents that are unwilling or unable to meet these credit requirements.
SCE is a California load-serving utility with investment grade Credit Ratings and
substantial tangible net worth. Unlike most other energy market participants, SCE
operates under a state legislative structure designed to minimize the negative impact
that energy market uncertainty may have on a utility's creditworthiness. Accordingly,
SCE believes that Respondent will have a lower risk to SCE relative to the risk that SCE
will have to Respondent. SCE therefore believes it should not be required to provide
collateral and encourages potential Respondents to submit Offers that conform to this
strong preference. Respondents should note that, in SCE's evaluation of Offers
submitted pursuant to this RFO, SCE will significantly devalue Offers requiring SCE to
post collateral in order to reflect the potential negative impact on SCE's liquidity and to
recognize the relative value of bids from Respondents who do not require collateral from
SCE.
C.8. SCE INDICATIVE OFFER SUBMITTAL PACKAGE
SCE will only consider Indicative Offers that contain each of the applicable items
specified in the chart below. Refer to Section B.2 for required due dates.
Southern California Edison Page 12
RFO for Natural Gas Physical and Financial Product
April 7, 2006
SCE Indicative Offer Submittal Package
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
1. Gas RFO
Must be executed and submitted in PDF format.
Confidentiality Agreement
2. SCE Indicative Offer
Must be executed and submitted in PDF format.
Cover Letter
3. SCE Indicative Offer
Must be completed and submitted in PDF or WORD
Cover Letter Attachment 1
format.
- Respondent Information
4. SCE Indicative Offer
Cover Letter Attachment 2
Must be completed and submitted in Excel format.
- SCE Offer Submittal
Spreadsheet
5. SCE Indicative Offer
Cover Letter Attachment 3 Must be completed and submitted in PDF or WORD
– Infrastructure Project format.
Information
If a NAESB Gas Contract has previously been
executed and is in effect, then the parties must
6. SCE Standard NAESB amend the existing NAESB Gas Contract to include
including Special these special provisions.
Provisions For all offers utilizing a NAESB Gas Contract
comments must be supplied and submitted in
redlined WORD format.
If a NAESB Gas Contract has previously been
executed and is in effect, then the parties must
7. SCE NAESB Credit
amend the existing NAESB Gas Contract to include
Support Addendum
this Credit Support Addendum.
including Special
For all offers utilizing a NAESB Gas Contract
Provisions
comments must be supplied and submitted in
redlined WORD format.
8. SCE ISDA Schedule to If Respondent and SCE are not parties to an ISDA
the 2002 Master Enabling Agreement, comments must be supplied
Agreement and submitted in redlined WORD format.
If Respondent and SCE are not parties to an ISDA
9. SCE Paragraph 13 to
Enabling Agreement, comments must be supplied
the ISDA CSA
and submitted in redlined WORD format.
10. Applicable SCE
Physical Gas Must be submitted in redlined WORD format.
Confirmations
11. Applicable SCE
Financial Gas Must be submitted in redlined WORD format
Confirmation
Southern California Edison Page 13
RFO for Natural Gas Physical and Financial Product
April 7, 2006
Due to the expected size and number of responses, faxed offers will not be accepted.
SCE will not consider Offers received after the submittal deadline.
C.9. SCE FINAL OFFER SUBMITTAL PACKAGE
If a Respondent is shortlisted and eligible to submit a Final Offer, Respondent must
provide to SCE the following required documents in the format requested, for
consideration of its Final Offer. Refer to Section B.2. for required due dates.
SCE Final Offer Submittal Package
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
Executed with PDF or scanned copy of Final Offer
Cover Letter and PDF or scanned copy of Offer
1. SCE Final Offer Cover
Submittal Spreadsheets containing Final Offer price.
Letter
[Enabling Agreements and Confirmations to be
attached]
2. SCE Offer Submittal Must be completed and submitted with Final Offer
Spreadsheet Submittal Package with final pricing.
3. Applicable SCE Mutually acceptable confirmation must be submitted
Physical Gas with Final Offer Submittal Package without final
Confirmations pricing.
4. Applicable SCE Mutually acceptable confirmation must be submitted
Financial Gas with Final Offer Submittal Package without final
Confirmation pricing.
Due to the expected size and number of responses, faxed Offers will not be accepted.
SCE will not consider Offers received after the submittal deadline.
Southern California Edison Page 14
RFO for Natural Gas Physical and Financial Product
April 7, 2006
D. PRODUCTS SOLICITED FOR DWR
D.1. PRODUCT DETAILS
DWR will only consider financial products in this Gas RFO. In this RFO, DWR will not
consider Offers for products other than those specifically set forth on this list. All
financial product Offers must quote in dollars per MMBtu. The maximum total financial
award under this RFO for DWR is limited to 60,000 MMBtu/day per Respondent.
Financial Products
DWR is seeking Offers for fixed/floating price swaps, call options, and call spreads. The
Gas Index is the only index that can be used for financial Offers. Requested contract
durations are noted in the table below. All contracts must start on November 1 and no
contract shall extend beyond September 30, 2011. Contract quantities are limited to
10,000, 20,000, 30,000, 40,000, 50,000 or 60,000 MMBtu/day.
DWR will only consider Offers for call options and call spreads at specific strike prices.
For consideration in Indicative Offers, monthly strike prices will be provided on
www.sce.com/GasRFO on the date indicated in Section B.2. For Final Offers, monthly
strike prices will be provided to Respondents upon notification of eligibility to submit
Final Offer pricing on the date indicated in Section B.2.
DWR is seeking financial products as summarized in the following table.
FINANCIAL CONTRACT TERM
OFFER
TRANSACTION Earliest Start
QUANTITIES Latest End Date Durations
TYPES Date
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2007 September 30, 2011 12, 24, 36, or 47 months
30,000, 40,000,
Call Options November 1, 2008 September 30, 2011 12, 24, or 35 months
50,000 or 60,000
MMBtu/day November 1, 2009 September 30, 2011 12 or 23 months
November 1, 2010 September 30, 2011 11 months
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2007 September 30, 2011 12, 24, 36, or 47 months
Fixed/Floating 30,000, 40,000,
Price Swaps 50,000 or 60,000 November 1, 2008 September 30, 2011 12, 24, or 35 months
MMBtu/day November 1, 2009 September 30, 2011 12 or 23 months
November 1, 2010 September 30, 2011 11 months
November 1, 2006 September 30, 2011 12, 24, 36, 48 or 59 months
10,000, 20,000, November 1, 2007 September 30, 2011 12, 24, 36, or 47 months
30,000, 40,000,
Call Spreads November 1, 2008 September 30, 2011 12, 24, or 35 months
50,000 or 60,000
MMBtu/day November 1, 2009 September 30, 2011 12 or 23 months
November 1, 2010 September 30, 2011 11 months
Southern California Edison Page 15
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D.2. INFRASTRUCTURE PROJECTS
DWR encourages Offers that support the development of Infrastructure Projects as
defined in Appendix A. During DWR’s evaluation of the Offers, DWR may, at its sole
discretion, assign a benefit to an Offer that supports the development of an Infrastructure
Project. Examples of Infrastructure Projects are LNG projects, new pipeline projects,
new stranded gas recovery projects, incremental increases in capacity of existing
projects, etc.
Respondents must note any Offer that is sourced from an Infrastructure Project in the
Attachments 2 and 3 to the Indicative Offer Cover Letter. For all Infrastructure Projects,
Respondents must provide the following information:
Description of the Infrastructure Project including capacity, location, proposed
gas interconnection point;
Proposed timeline;
Status of environmental permits and construction applications;
Expected natural gas quality specifications;
Proposed contractual assurances that the Offer will be sourced from the
Infrastructure Project;
Financing plan for project; and
Other proposed terms and conditions.
D.3. ENABLING AGREEMENT REQUIREMENTS FOR FINANCIAL OFFERS
A mutually agreed and executed ISDA Master Agreement is one of the requirements to
be allowed to submit final pricing for financial products.
If Respondent and DWR are not already parties to an ISDA Master Agreement,
Respondent must submit as part of its Indicative Offer Submittal Package an electronic
redlined copy of all applicable Enabling Agreements. See DWR’s RFO website or
contact the DWR Gas RFO Contact noted in Section E of this RFO for copies of DWR’s
current standard enabling agreements.
DWR Financial Enabling Agreement Documents
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
1. ISDA, Schedule to the Mutually acceptable executed ISDA Master
1992 Master Agreement Agreement and ISDA Schedule.
2. Paragraph 13 to the Mutually acceptable executed ISDA Paragraph 13 to
ISDA CSA the CSA
Mutually acceptable and executed Guaranty, if
3. Guaranty
applicable.
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If Respondent and DWR are not parties to an executed ISDA at the time of indicative
Offer, Respondent must contact the DWR Gas RFO Contact noted in Section E of this
RFO or go to http://www.cers.water.ca.gov/natural_gas.cfm.
D.4. CREDIT TERMS
For DWR’s Portfolio, Respondents will need to meet DWR’s standard credit
requirements. Respondent’s senior unsecured credit rating must be investment grade, or
Respondents must be willing to provide cash collateral, a letter of credit and/or a
parental guarantee from an investment grade rated entity. Investment grade rated
counterparties will be granted an unsecured line based on their credit rating.
Alternatively, counterparties providing a parental guaranty from an investment grade
rated entity will receive an unsecured line based on the parent’s credit rating and the
amount of the parental guaranty. Non-rated Respondents must post collateral for all of
DWR’s exposure. Respondents should note that, in DWR’s evaluation of Offers
pursuant to this RFO, DWR reserves the right to disqualify those Respondents that are
unwilling or unable to meet these credit requirements.
DWR will be the counterparty to any transaction entered into as a result of Offers made
to DWR through this RFO process. DWR administers the State of California Electric
Power Fund (the “Fund”). The Fund was established and funded through a bond offering
to the investment community and its costs and debt service are recoverable through
rates charged to a portion of the State’s electric customers. DWR operates the Fund
under a state legislative and regulatory structure with rate setting and cost recovery
processes designed to minimize the negative impact from market volatility and
uncertainty to the stability of the Fund and its ratepayers and bondholders. The Fund
has investment grade credit ratings. Due to this stable structure, DWR believes the
Respondent will have a lower risk to DWR, relative to the risk DWR will have to the
Respondent. Thus, DWR does not believe it should be required to provide collateral and
encourages potential Respondents to submit Offers that conform to this strong
preference.
Respondents should note that, in the evaluation of Offers submitted pursuant to this
RFO, there will be a devaluation of Offers requiring DWR to post collateral in order to
reflect the implied potential negative impact on DWR’s liquidity and to recognize the
relative value of bids from Respondents who do not require collateral from DWR.
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RFO for Natural Gas Physical and Financial Product
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D.5. DWR INDICATIVE OFFER SUBMITTAL PACKAGE
DWR will only consider Indicative Offers that contain each of the applicable items
specified in the chart below. Refer to Section B.2. for required due dates.
DWR Indicative Offer Submittal Package
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
1. Gas RFO
Must be executed and submitted in PDF format.
Confidentiality Agreement
2. DWR Indicative Offer
Must be executed and submitted in PDF format.
Cover Letter
3. DWR Indicative Offer
Must be completed and submitted in PDF or WORD
Cover Letter Attachment 1
format.
- Respondent Information
4. DWR Indicative Offer
Cover Letter Attachment 2
Must be completed and submitted in Excel format.
- DWR Offer Submittal
Spreadsheet
5. DWR Indicative Offer
Cover Letter Attachment 3 Must be completed and submitted in PDF or WORD
– Infrastructure Project format.
Information
6. DWR ISDA, Schedule If Respondent and DWR are not parties to an ISDA
to the 1992 Master Enabling Agreement, comments must be supplied
Agreement and submitted in redlined WORD format.
7. Applicable DWR
Financial Gas Must be submitted in redlined WORD format
Confirmation
Due to the expected size and number of responses, faxed Offers will not be accepted.
SCE and DWR will not be responsible for Offers received after the submittal deadline.
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D.6. DWR FINAL OFFER SUBMITTAL PACKAGE
If a Respondent is shortlisted and eligible to submit a Final Offer, Respondent must
provide to DWR the following required documents in the format requested, for
consideration of its Final Offer. Refer to Section B.2. for required due dates.
DWR Final Offer Submittal Package
Required Required
for for
Notes/Instructions:
Physical Financial
Offers Offers
Executed with PDF or scanned copy of Final Offer
1. DWR Final Offer Cover
Cover Letter and PDF or scanned copy of Offer
Letter
Submittal Spreadsheets containing Final Offer price.
2. DWR Offer Submittal Must be completed and submitted with Final Offer
Spreadsheet Submittal Package with final pricing.
Mutually acceptable confirmation must be submitted
3. Applicable Financial
with Final Offer Submittal Package without final
Gas Confirmations
pricing.
Due to the expected size and number of responses, faxed Offers will not be accepted.
SCE and DWR will not be responsible for Offers received after the submittal deadline.
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RFO for Natural Gas Physical and Financial Product
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E. GAS RFO CONTACT INFORMATION
Questions regarding this RFO or SCE’s Enabling Agreements and Confirmations must
be submitted to:
Gas RFO Hotline 626 302-1729
Or,
GasRFO@sce.com
SCE may, at its sole discretion, post frequently asked questions on its website
http://www.sce.com/GASRFO.
Offer submittal address is:
Project Manager, Gas RFO
Southern California Edison Company
G.O. 1, Quad 1-C
2244 Walnut Grove Avenue
Rosemead, California 91770
GasRFO@sce.com
Questions regarding DWR Enabling Agreements and Confirmations must be submitted
to:
George Baldini
baldini@water.ca.gov
Project Manager, Gas RFO
Department of Water Resources
http://www.cers.water.ca.gov/natural_gas.cfm
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RFO for Natural Gas Physical and Financial Product
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Appendix A
Definitions
“Award Date” means: the date award notifications are made.
“Confirmation” means: the documents and other confirming evidence exchanged between parties which
sets forth the terms and conditions of a transaction entered into by the parties.
“CPUC” means: California Public Utility Commission.
“CSA” means: with respect to the ISDA, ISDA Credit Support Annex to the Schedule to the ISDA 2002
Master Agreement. With respect to the NAESB, “CSA” means the model Credit Support Addendum to
the NAESB Base Contract.
“DWR” means: California Department of Water Resources.
“EEI” means: Edison Electric Institute.
“Enabling Agreement” means: an ISDA Master Agreement, NAESB Gas Contract, or Gas Annex to the
EEI Master Agreement, together with their corresponding collateral or credit support annexes.
“Final Offer” means: consist of applicable confirmations, final pricing and other support documentation
submitted to SCE as a final Offer.
“Final Offer Submittal Package” means: the complete set of applicable documentation as detailed in
Section C.9 and Section D.6 of this RFO Instructions.
“Firm” means: that either party may interrupt its performance without liability only to the extent that such
performance is prevented for reasons of force majeure or uncontrollable force (as defined in the
applicable Enabling Agreement).
“Gas Annex to the EEI Master Power Agreement“ means: the terms and conditions that are added,
modify and made part of the EEI Master Power Purchase and Sale Agreement that enable the parties to
transact for the purchase and sale of physical natural gas under the terms of the EEI Master Power
Purchase and Sale Agreement.
“Gas Index” means: the monthly index from the NGI's Bidweek Survey for the applicable month in the
table for Gas Traded for Baseload Delivery under sub-table for “California” under the listing for “Southern
California Border Average” under the listing for “Avg.”
“Indicative Offer” means: all applicable documentation indicated in Indicative Offer Submittal Package
section of this RFO submitted to SCE or DWR, as the case may be, as an indicative Offer.
“Indicative Offer Submittal Package” means: the complete set of applicable documentation as detailed
in Section C.8 and Section D.5 of this RFO Instructions.
“Infrastructure Projects” mean: New Projects that increase the gas capacity delivered into the Southern
California region.
“ISDA” means: International Swaps and Derivatives Association, Inc.
“ISDA Master Agreement” means: with respect to SCE, the 2002 ISDA Master Agreement including the
Schedule to the Master Agreement and the ISDA Credit Support Annex (1994 New York Law Version).
With respect to DWR, “ISDA Master Agreement” means: the 1992 ISDA Master Agreement and the
Credit Support Annex (1994 New York Law Version).
“Lockdown Date” means: the date applicable and mutually agreed Confirmations with the exception of
the Final Offer prices are due.
“NAESB” means: North American Energy Standards Board, Inc.
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“NAESB Gas Contract” means: Version 6.3.1 (dated 4/19/02) of the NAESB Base Contract for Sale and
Purchase of Natural Gas including its Special Provisions, and the Model Credit Support Addendum to the
NAESB Base Contract.
“NAESB Special Provisions” means: the unique terms and conditions that the parties have agreed to,
and made a part of the NAESB Gas Contract.
“New Projects” means: projects that have not started construction as of date of this RFO.
”NGI's Bidweek Survey” means: NGI’s Bidweek Survey Supplement to NGI’s Weekly Gas Price Index
published by Natural Gas Intelligence.
“Offer” means: offers submitted pursuant to this RFO.
“PDF” means: a file format developed by Adobe Systems.
“PPT” means: Pacific Daylight time when California observes Daylight Savings Time, and Pacific
Standard Time otherwise.
“Respondents” mean: bidders to this RFO.
“RFO” means: this Request for Offers for Natural Gas Physical and Financial Products.
“SCE” means: Southern California Edison Company.
“Shortlisted Respondents” means: Respondents that have been notified by SCE or DWR that they are
shortlisted for this RFO.
“SoCalGas” means: Southern California Gas Company.
“WORD” means: a word processing software developed by Microsoft.
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