power purchase agreements alex sifford ecos consulting portland, oregon

Power Purchase Agreements

Alex Sifford

Ecos ConsultingPortland, Oregon

www.ecosconsulting.com

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Nomenclature

• Power PURCHASE = utility view

• Power SALES = developer view

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

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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

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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

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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

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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

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Example Long-Term PPA

• 24 Sections

• 55 Pages

• Comprehensive

• Current• Compare to Lender

requirements

• DEFINITIONS• TERM; FACILITY

DEVELOPMENT • REPRESENTATIONS

AND WARRANTIES • DELIVERIES OF

ENERGY AND GREEN TAGS

• PURCHASE PRICE; COSTS

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Example Long-Term PPA (cont’d.)

• OPERATION AND CONTROL

• QUALIFYING FACILITY STATUS

• SECURITY

• METERING

• BILLINGS, COMPUTATIONS AND PAYMENTS

• DEFAULTS AND REMEDIES

• INDEMNIFICATION AND LIABILITY

• INSURANCE

• FORCE MAJEURE

• SEVERAL OBLIGATIONS

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Example Long-Term PPA (cont’d.)

• CHOICE OF LAW

• PARTIAL INVALIDITY

• WAIVER

• GOVERNMENTAL JURISDICTION AND AUTHORIZATIONS

• SUCCESSORS AND ASSIGNS ENTIRE AGREEMENT

• NOTICES

• CONFIDENTIALITY

• DISAGREEMENTS • -------------

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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.

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BPA 2004 Transmission & Ancillary Services

NT-04 Network Integration RatesBase 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.

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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.

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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

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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

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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)

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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

Thank you

Thanks to George Darr, retired BPA,

and Joe Taffe, Power Manager, Clatskanie PUD for their help.