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SUBMITTER 9 Confirmation Item Issue Recommendation Referenced Document Appendix K Changes Definition of Notional Definition should reference Insert “actual metered” Confirmation Compliant Quantity does not the data which supports the before “net output” p.1, Notional Quantity reference measurable values derived production data Floating Price at ComEd The basis differential Allow Sellers whose Confirmation Compliant Zone between Seller’s resource is physically within p.2, Floating Price interconnection point and the ComEd Zone to set the the ComEd Zone is volatile Floating Price equal to the and cannot be hedged. Real-Time LMP at Seller’s Sellers will be forced to point of interconnection include a risk premium, inflating the Fixed Price. This is unnecessary in the case where the Seller’s interconnection point is within the ComEd Zone. Settlement Calculation PJM often will retroactively Insert language to the Confirmation Compliant contains no provision for revise settlement prices. calculation of Floating Price p.2, Settlement Calculation later revision of hourly Settlement Calculation to address the situation in settlement prices by PJM language under the swap which PJM revises past should contain language to settlement LMPs. address this eventuality. IPA verification of It is unnecessarily Delete first reference to IPA Confirmation Compliant Settlement Calculations burdensome to require that verification in Settlement p.2, Settlement Calculation the IPA verify settlement Calculation. calculations that have already been verified by Buyer. However, it is reasonable to submit such data to the IPA for review at their discretion. [SUBMITTER 9] Comments and Explanation of Recommended Changes ComEd Long-Term Renewable Procurement ISDA Master Agreement, Confirmation, Schedule, Credit Annex and Related Documents Performance Guarantee at A large body of statistical “Annual Contract Quantity” Confirmation Compliant 90% of Annual Contract and operational evidence should be defined as the p.5-6, Part B, Performance Quantity in any given from many years now exists actual amount of production Guarantee delivery year for energy demonstrating the potential from the facility, provided and RECs from a wind annual variability of output the actual amount is greater facility. from wind facilities due the 75% and less than 100% solely to meteorological of the forecast P50 variability. production amount specified by a qualified wind analysis report. Buyer will not pay Seller By guaranteeing to make up Buyer should pay Seller the Confirmation: Compliant for replacement RECs, and any REC or energy difference between the Fixed p.6, 4(a), Short-Fall – will not pay Seller the production shortfall, Seller Price for energy and the Energy difference between the is assuring Buyer of receipt Floating Price for energy, if Fixed Price for energy and of the expected RECs and positive, and Seller should the Floating Price for energy. Buyer should pay pay Buyer the absolute value energy, if positive, for for all expected RECs and of this difference, if negative, replacement Energy. energy, whether delivered for all replacement energy monthly, or as a make-up produced. Since this due to low wind speeds payment compensates Seller during the preceding year. for delivery of both energy If Seller cannot receive and RECs together, Buyer payment for all expected does not have to separately RECs and energy delivered, pay Seller for the associated construction and term replacement RECs delivered. financing may not be available for the project, or will be priced and limited to a degree that substantially increases the Fixed Price. Lack of offset between Inequitable exposure netting Redefine Exposure as: Confirmation: Compliant exposure of Buyer under impairs project’s ability to the net of REC Exposure p.6, Credit Support Energy Swap and REC secure term financing, and Amount, either Party’s Obligations, C delivery, and exposure of inflates the Fixed Price Accounts Receivable and Seller under Energy Swap, without actually improving Energy Exposure Amount, REC delivery and Buyer’s Buyer’s loss exposure allowing ECR to be negative [SUBMITTER 9] Comments and Explanation of Recommended Changes ComEd Long-Term Renewable Procurement ISDA Master Agreement, Confirmation, Schedule, Credit Annex and Related Documents cash settlement delay profile. for the purposes of the rights. Exposure calculation. No cap on Seller’s Credit Open-ended collateral Replace open-ended Confirmation: Compliant Support Obligation. liability prevents Seller collateral liability with p.6, Credit Support from obtaining construction standard approach used by Obligations, C or term finance. Without banks providing financial debt finance, new projects energy swaps to wind also see - are uneconomic at any facilities: maximum $25 Schedule 2 to the Credit reasonable Fixed Price million collateral amount Support Annex: level. combined with Buyer p.1, Definition of ECR holding a second lien (behind only lenders’ first lien) on facility assets. Paragraph 13 of the Credit Support Annex Item Issue Recommendation Referenced Document Appendix K Changes Lack of investment-grade Requiring well-rated Add investment-grade Paragraph 13 to the Credit Compliant Corporate Guarantee as project owners to post cash Corporate Guarantee as Support Annex to the Other Eligible Support. or Letters of Credit adds Eligible Support, insert Master Agreement: unnecessary expense and “Schedule 3” as form of p.2, (b)(iii), Other Eligible inflates the Fixed Price guarantee Support without improving Buyer’s p.5,(j)(i), Value loss exposure profile. p.6, (n), Secured Party Rights and Remedies p.8, (o) Additional Definitions p.9, (p) Other Provisions Schedule 2 to the Credit Support Annex Item Issue Recommendation Referenced Document Appendix K Changes [SUBMITTER 9] Comments and Explanation of Recommended Changes ComEd Long-Term Renewable Procurement ISDA Master Agreement, Confirmation, Schedule, Credit Annex and Related Documents ECR, as defined, cannot The transaction sets a single ECR, must be allowed to Schedule 2 to the Credit Compliant fall below zero Fixed Price for both energy assume negative values, and Support Annex: and RECs, and their in so doing, offset the p.1, Definition of ECR delivery is part of an contribution of the REC economic whole. The credit requirement to Buyer’s Buyer’s exposures to non- Exposure delivery of energy or RECs are physically linked by the requirement that all RECs created by virtue of energy production from Seller’s facility must be delivered as part of the transaction. It is appropriate to separately calculate the value contributed by energy and by RECs to Buyer’s Exposure under the transaction. However, it is inappropriate to separately fund the exposure values when posting collateral, as there is no scenario in which Buyer’s actual Exposure is driven by one value element and not the other. The two value elements are inextricably linked by theory, operational reality and the termination provisions of the documents. Requiring separate funding of Energy and REC credit requirements is inequitable, [SUBMITTER 9] Comments and Explanation of Recommended Changes ComEd Long-Term Renewable Procurement ISDA Master Agreement, Confirmation, Schedule, Credit Annex and Related Documents and inflates the Fixed Price without improving Buyer’s loss exposure profile.
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