Long-Term Power Procurement Request for Offers Bidders Conference April 21, 2008
Agenda 1. Introduction 2. Commercial Overview 3. Evaluation of Offers 4. Gas Interconnection 5. Electric Transmission & Interconnection 6. Power Purchase Agreement 7. Purchase & Sale Agreement (Ownership) 8. Credit Requirements 9. Solicitation Documents 10. Q&A 1
Commercial Overview Participant Conference April 21, 2008
Commercial Overview • All Source Long-term Request for Offers – New Renewable Generation – New Distributed Generation – Existing or New Qualifying Facilities (“QFs”) – Repowering an existing Facility – New Conventional Generation • 800 – 1, 200 MWs – Preference for dispatchable and operationally flexible resources • On-line dates no later than May 2015 – Preference for earlier • Delivery Point: NP 15 or if QF to ZP 26 • Minimum size of 25 MWs except QF minimum size of 20 MWs – 10 MW site minimum for DG to be aggregated to >25 MW 3
Commercial Overview • Power Purchase Agreement (“PPA”) – Contract term cannot exceed 10 years • Purchase and Sale Agreement (“PSA”) – Fully permitted and constructed resource sold at commercial operation • Bidders may bid both PPA and PSA • Independent Evaluator for all bids 4
GHG Performance Standard • SB 1368 (and the CPUC) sets the GHG Emissions Performance Standard (EPS) for baseload (at least 60% CF) resources • New contracts (5+ years) must have a net CO 2 emissions rate no higher than 1, 100 lbs/MWh – CO 2 emissions limit applies to each individual generating unit supplying power under contract – Existing CCGT baseload powerplants (or those holding a CEC final permit as of 7/30/07) are pre-approved as EPS compliant** – Renewable technologies (solar thermal, wind, geothermal, and biomass) are pre-approved as EPS compliant • Appendix J – Question 6(c) should refer to SB 1368 ** Any deemed-compliant CCGT plant that has added units resulting in an increase of 50+ MW to the plants capacity must again prove eligibility. 5
2008 Schedule April 1 PG&E Issues RFO April 21 Bidder’s Conference April 25 Notice of Intent due April 28 Deadline to submit Gas Interconnection May 9 Distribution of Form Agreements End May/Early June Bidders Workshop July 21 – 1: 00 pm Offers Due October 20 Short List Notification October 27 Deadline to submit Interconnection to CAISO 6
Evaluation of Offers Bidders Conference April 21, 2008
Evaluation of Offers Evaluation Criteria • Quantitative Criterion – Market Valuation • Qualitative Criteria – Portfolio Fit – Credit – Participant Qualifications – Project Viability – Technical Reliability – Environmental Leadership – Conformance with PG&E’s non-price terms and conditions 8
Evaluation of Offers Market Valuation • Focus is not an Offer’s cost, but cost compared to benefits – Market value = benefits – costs – Benefits include energy, capacity, and ancillary services • Real option model is used to value dispatchability • Transmission impact and costs to be included • Cost of green house gas (GHG) emissions included • Market valuation is independent of other PG&E positions 9
Evaluation of Offers Portfolio Fit • Portfolio Fit is dependent on other PG&E positions • Compare an Offer’s features to PG&E portfolio needs • Several criteria considered: – Flexibility of energy delivered – Firmness of energy delivered – Geographical diversity of source – Qualification for local resource adequacy of capacity 10
Evaluation of Offers Credit • Participant’s capability to perform all of its financial and other obligations • To be discussed in more detail later today 11
Evaluation of Offers Participant Qualifications • Experience in developing (licensing & permitting) similar type power plants of: – Developer – EPC contractor – Prime subcontractor – O&M Operator (for PPA) • Particular experience in California 12
Evaluation of Offers Project Viability • Probability that the project can be financed and completed per Agreement • Considers: – Construction – Project Financing – Permitting 13
Evaluation of Offers Technical Reliability • Type of Technology and Equipment • Will the Offer be available to provide capacity, energy, and/or ancillary services when called upon? – Tried & proven with historical evidence of high availability – R&D or pilot project 14
Evaluation of Offers Support for PG&E’s Environmental Leadership • PG&E seeks opportunities to exceed current standards of environmental protection • Quantity and potential cost to PG&E and to society associated with Offer’s environmental characteristics • Cumulative pollution exposure to a community • Participant’s local community outreach plans 15
Evaluation of Offers Conformance with PG&E Non-price Terms and Conditions • Prefer no markups • Extent of comments • Imputed additional costs or risks 16
Gas Interconnection Bidders Conference April 21, 2008
Gas Interconnection Discussion • Typical gas connection process • Revised process for LTRFO • Discussion of revised application process 18
Gas Transmission Interconnection Process Standard gas connection process has 4 steps: 1) Preliminary Request for Information Review (PRIR) (7 days) 2) Preliminary Application for Gas Service (PAGS) (10 weeks) 3) Formal Application for Gas Service 4) Contracts, Construction, and Release to Service To expedite response we will modify the gas connection process 19
Gas Transmission Interconnection Process Revised process: 1) Eliminate the PRIR 2) “Expedite” Preliminary Application for Gas Service 3) Complete Preliminary Application (once short-listed) 4) Formal Application for Gas Service (once selected) 5) Contracts, Construction, and Release to Service June 27 target response for complete applications submitted by April 28 20
Expedited PAGS • System Impact Study • System capabilities • Size gas service pipeline • Expected pressure • Preliminary Facilities Study • Tap location • Service pipeline alternatives & routes • Standard or Special Facilities Designs • Estimated costs 21
Overview of Sequence • April 1 Receive bid package • April 28 Deadline for Gas Application to be deemed complete • June 27 Target PG&E response date • July 21 Offers due 22
Bid Package – Appendix M Application for Gas Transmission Service Agreement to Perform Tariff Scheduled Related Work Instructions 23
Application for Gas Service Study to PG&E by April 28 Application deemed complete and in queue: • Cover letter • Completed Application for Gas Transmission Service • Meter site location map • Gas usage (annual and monthly) • $15, 000 cash advance • 2 signed copies of Agreement to Perform Tariff Scheduled Related Work 24
Application for Gas Service Study to PG&E by April 28 Cover Letter should request • PG&E to by-pass PAIR • Perform an Expedited PAGS • Response by June 27 • Can request SIS when complete • Release for CT&D to share info with LTRFO Team Engineering priority established upon receipt date of complete application packed Requests after April 28 are at risk 25
Include in Offer – July 21 • Copy of all documents submitted for gas study – Application for Gas Transmission Service – Cover letter requesting gas service study – Agreement to Perform Tariff Scheduled Related Work • PG&E’s Expedited PAGS response • Gas service configuration requested • Transportation tariff for service 26
Gas Interconnection PAGS Submittal Application is available electronically http: //www. pge. com/b 2 b/newgenerator/gasinterconnections/ To discuss details of the process, contact Michael O’Brien (415) 973 -5652 mdo 1@pge. com 27
Electric Transmission and Interconnection Bidders Conference April 21, 2008
Electric Transmission and Interconnection • Interconnection process must be complete in order for generator to deliver power to the grid and meet obligations of LT RFO contract • Generator responsible for all generation interconnection costs • Generator responsible for timely applications with CAISO and timely completion of the process – Not part of the LT RFO Solicitation – Process should be started early 29
Electric Transmission and Interconnection Assessing Transmission Impacts • ALL Facilities MUST meet requirements of: – North American Electric Reliability Council (NERC) – Western Electricity Coordinating Council (WECC) – PG&E Interconnection Handbook (PIH) • Have sufficient transmission at the Point of Interconnection to interconnect the generation project and to achieve full project deliverability – Insufficient Transmission Capacity results in need for Network Upgrades 30
Electric Transmission and Interconnection Funding of Electric Transmission Facilities • Interconnection Facilities (Direct Assignment Facilities) – Participant advances funds to PG&E for any Interconnection facilities to be constructed by PG&E – Advance includes ITCC (Income Tax Contribution Component) • Federal and State • Network Upgrades – Participant advances funds to PG&E for Network Upgrades – ITCC is not included in advance for Network Upgrades – After generating facility is operative, cost advance is refunded to Participant in accordance with GSFA • Quarterly payments with interest (as established by FERC) over 5 -year period 31
CAISO Interconnection Queue • Large Generation Interconnection Process – High Level Transmission Assessment >>> Feasibility Study (FES) – Specific Network Upgrades >>> System Impact Study (SIS) – Specific Network Upgrade Costs >>> Facility Study (FS) • Reformed Process – Queue Clusters >>> Single Study to Determine Network Upgrade Cost Allocation – Transmission Planning Process >>> Determine Specific Transmission Upgrades to Address New Generation and Grid Reliability Needs 32
CAISO Generation Interconnection Process Reform • CAISO Interconnection Process is currently being reformed to address a backlog in the interconnection queue • Current queue will be closed at the end of May. New queue will open on June 2 and will not close until November 28 at the earliest. – Projects applying for interconnection before the current cluster closes will be studied this year as part of a queue clearing study – Projects that apply for interconnection after the end of May will not see completed transmission studies until mid-2009 33
Electric Transmission and Interconnection Transmission Impact Costs • Due to the proposed Generation Interconnection Process Reform, PG&E is not requiring bidders to apply for CAISO interconnection along with their bid. – However bidder will need to assess the potential impacts on the on-line date of its proposed project if it postpones its interconnection application • For initial valuation, PG&E will use cost estimates based on ONE of the following: – One or more CAISO LGIP interconnection studies complete • Use cost estimates from CAISO interconnection studies (FES/SIS/FS) – SIS/FS started, but NOT completed: use any available preliminary results of the SIS/FS for cost estimates – No SIS/FS: use Transmission Proxy Costs (TPC) • PG&E is seeking the ability to request “optional studies” to provide FES level transmission cost information to use in bid evaluation – Would apply to short listed projects without a transmission study under the existing LGIP • PG&E is requiring bidders to apply for interconnection within a week of short listing if they have not already done so 34
Electric Transmission and Interconnection Resources • ISO Website has application form and complete description of the process. – http: //www 1. caiso. com/docs/2002/06/11/2002061110300427214. html • PG&E Wholesale Generator Website has contact information – http: //www. pge. com/mybusiness/customerservice/nonpgeutility/generateownpower/ wholesaleinterconn/ 35
Power Purchase Agreement Bidders Conference April 21, 2008
Power Purchase Agreement • Term Sheet provided as Appendix F – Form is structured as natural gas-fired tolling (default structure) – Alternative structures should adjust form accordingly • Contract forms to be posted May 9 • Term 5 – 10 years – Renewables Term may vary 37
Power Purchase Agreement • Contract Pricing to consist of several components – Capacity Payment Rate ($/k. Wyr) – Fixed O&M ($/k. Wyr) – Variable O&M ($/MWhr) – Variable Energy Rate (if applicable -- $/MWhr) – Fired Hour Charge (if applicable -- $/hour) • Seller may apply GDP Implicit Price Deflator as Index – Capacity Payment Rate can only be indexed from date of Agreement to construction financing milestone (Seller defined) • May apply index to a portion of Capacity Payment Rate – Other Pricing components may be indexed from date of Agreement over contract term 38
Power Purchase Agreement • Maintenance Scheduling – Seller required to notify and schedule with PG&E – No maintenance outages during summer (June – Sept) and Dec – Jan On-Peak without prior consent • Heat Rate (if applicable) – Testing – Summer and Non-Summer – Heat Rate Guarantee • Full load and partial load – 1% deadband • Payment to PG&E if heat rate is greater than guarantee • Bonus to Seller if heat rate is lower than guarantee 39
Power Purchase Agreement • Availability – Calculated as equivalent availability on a monthly basis after approved maintenance outages • Summer months (June-Sept. ) at 98% – 2% reduction in capacity and fixed O&M payments for each 1% below 98% when monthly availability falls below 97% for summer • Non-summer months at 94% – 2% reduction in capacity and fixed O&M payments for each 1% below 94% when monthly availability falls below 93% for nonsummer – No Payment of Capacity and Fixed O&M will result if availability • is below 70% in any Summer month • is below 60% in any non Summer month – Bonus • Available during summer months – 102% of capacity payment with availability of 99% or greater 40
Power Purchase Agreement • Seller to provide information on: – Compensation – Appendix H 1 – Technical – Appendix I • Heat Rate – At 100%, 90%, 75%, 50%, and 25% if applicable – At ISO and peak summer conditions • Capacity by Month and Year • Ancillary Service Amounts by Year • Maintenance • Start-up time, shutdown time, ramp rate, etc. – Project Description – Appendix J 41
Purchase & Sale Agreement Bidders Conference April 21, 2008
Purchase & Sales Agreement • Term Sheet provided as Appendix G – Form is structured as a turn-key – Alternative structures should adjust form accordingly • Contract forms to be posted May 9 43
Purchase & Sale Agreement • Resources: – Peaking – Shaping or Load Following Generation • Seller will develop, permit, design, finance and construct a power plant on a turn-key basis • Seller will prepare plant for commercial operation, then sell to PG&E • Sale must include PG&E option to purchase Long-term Service Agreement 44
Purchase & Sale Agreement • Seller can submit fixed price or index priced offers – GDP Implicit Price Deflator applies from date of Agreement to construction financing milestone (Seller defined) – Seller identifies portion where index price applies • Payment – 95% at Closing – 5% as much as 15 months after Closing • Offers must include milestone and performance guarantees 45
Purchase & Sale Agreement • Guaranteed Commercial Operation Date • Guaranteed Base Electrical Output • Base Reliability Guarantee • Guaranteed Peak Electrical Output (if applicable) • Guaranteed Emissions Limits • Guaranteed Net Heat Rate • Other tests 46
Purchase & Sale Agreement • Peaking Generation Operating Characteristics – Air emission limits at least 4, 000 operating hours per year – One hour shutdown to re-start – Three start-stop cycles per day – 15 minute (or less) minimum run time – Local and remote start and stop – NERC and CAISO compliant 47
Purchase & Sale Agreement • Shaping or Load Following Generation Operating Characteristics – Turndown to 55% (or lower) – AGC and load following from 55% - 100% – Hot-start time <= 90 minutes – Minimum down time <= 60 minutes – Minimum ramp rate of 7% guaranteed capacity rate – Hot shut-down to hot re-start <= 3 hours – 300 annual starts / 25 cold starts – Minimum run-time <= 4 hours – NERC and CAISO compliant 48
Credit Requirements Bidders Conference April 21, 2008
Credit Requirements Developer/Seller must demonstrate capability to perform all of its financial and other obligations • Offer Deposit* – $5/k. W (maximum monthly Capacity) with Initial Offer – No later than July 21, 2008 • Cumulative Security Posting Requirements* – Additional $10/k. W (maximum monthly Capacity) at time executed contracted/selected offers submission for Regulatory Approval – Additional $85/k. W (maximum monthly Capacity) at time of CPUC approval *In the form of cash via wire transfer or Letter of Credit acceptable to PG&E; and, to remain in place through Initial Delivery Date (PPA) or Closing Date (PSA) 50
Credit Requirements Developer/Seller must demonstrate capability to perform all of its financial and other obligations • Weekly Collateral Requirements (Power Purchase Agreement) – After Initial Delivery Date, Collateral Requirements will be calculated weekly based on rolling three (3) or five (5) year mark to market valuation, calculated by PG&E in accordance with Attachment 2 to Appendix F – At no point in time shall Collateral Requirements for either Party exceed $125, 000/MW when a rolling 3 year calculation is used or $250, 000/MW when a rolling 5 year calculation is used 51
Solicitation Documents Bidders Conference April 21, 2008
Solicitation Documents Initial Offers: • Provide Required Information set forth in Section VI B • Offer Cover Sheet (Appendix A) • Signed Long Term RFO Agreement (Appendix B) • Cash Deposit or a Letter of Credit in the form of Appendix C • FERC Order 2004 Waiver (Appendix E) • Signed PPA (Appendix F) or PSA (Appendix G) • Offer Data Form (Appendix H) • A completed Generation Facility Information Form (Appendix I) • Project Description (Appendix J) • Credit and Finance Information (Appendix K – Table A and B) • Electric Transmission Data Information Form (Appendix L) • Copy of documents submitted for gas study (Application for Gas Transmission Service, Cover letter requesting gas service study, Agreement to Perform Tariff Scheduled Related Work), PG&E’s Study, Service configuration and tariff selected • Generating Operating Characteristics (Appendix N 3) • Start-up and Testing Protocols (Appendix N 4) 53
Solicitation Documents • Proposals are binding • Bids due July 21, 2008 at 1: 00 pm Pacific Time – Five bound hard copies plus One unbound copy – Three compact discs or two USB removable flash drives (preferred) • Microsoft Word 2003 SP 2 • Microsoft Excel 2003 SP 2 • Questions e-mailed to: LTRFO@exchange. pge. com 54
Questions & Answers
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