RPS IMPLEMENTATION EXPERIENCE “A Developer’s Experiences” November 16, 2005 Teleconference Daniel V. Gulino, Senior Vice President and General Counsel, Ridgewood Renewable Power, LLC

2 Implementation Experience Different RPS Programs Western RPS Programs – A “PURPA” Model REC Buyers – Investor Owned Utilities Mainly IOUs Still in Generation Business RECs procured through RFP Process PUC Oversight Long-term Contracts –Bundled REC, energy and other environmental attributes

3 Implementation Experience Different RPS Programs New England RPS Programs – A “MARKET” Model REC Buyers – Power Marketers (IOUs too) IOUs out of Generation Business IOUs RPS compliance transferred to Power Marketers – Standard Offer Service No RFPs for RECs or Kwh Long-term Contracts Unlikely (Standard Offer Annual obligation) Bilateral Contracts – No PUC oversight

4 Implementation Experience Results Western States – PURPA Model – Contracts tend to go to lower priced bids – Proposed prices trend lower – may be to low to support development (e.g., Nevada, California) – REC and Energy bundled together – All environmental attributes generally transferred to Buyer – Is developer compensated? – PUC approval and oversight

5 Implementation Experience Results New England States – Market Model – Bilateral Contracts – negotiated agreement – REC prices reflect “REC market” (i.e., supply and demand) – REC can be unbundled from KWh – Developer can retain other environmental attributes or sell them for a price – No PUC approval required

6 Implementation Experience Difficulties - Financing PURPA Model may support financing if RFP prices accurately reflect costs Lenders, while still nervous, may take some comfort in Long-Term Contracts Market Model may not support project financing given short-term contracts Lenders would need RPS education and comfort

7 Implementation Experience Difficulties – Geographic Limitation Western States – Nevada/Texas: Dedicated Power Line Theoretically possible Practically impossible – AZ: In-State – CA: Delivery Standard – CO: 1.25 multipler for In -state New England – Delivery to NEPOOL – Must Join NEPOOL – GIS Tracking and Compliance

8 Implementation Experience Difficulties – Geographic Limitations Out-of-State Developers shut out Legislative Choice: In-State Economic Development Enough “In-State” resources to satisfy RPS? Can there be a REC trading or market Commerce Clause Ramifications – RPS illegal? Out-of-State Developers – Bring benefits Provided Energy is “Delivered” – Environmental benefits – Fuel diversity

9 Implementation Experience Difficulties – Delivery Energy Must be Delivered to Jurisdiction in which REC is sought Without Delivery, Jurisdiction Receives No Benefit From Renewable Energy or REC

10 Implementation Experience Difficulties – Regulatory Tinkering Legislature and Regulators May “Upset the Apple Cart” – California: The “Never Ending Proceeding” – AZ: Re-writing the RPS Rules – Nevada: Amended RPS in 2005 – MA: Biomass Eligibility Expansion – CT: DPUC Orders increased REC Supply Class I REC price fell from $38.50 in June 2005 to $3.50 in October 2005.

11 Implementation Experience Difficulties – Pricing What is the right REC Price? Who should decide? – PUC – Market Is there a middle ground for pricing? – Because of some REC market design (e.g., MA) REC prices are either very high or very low, but not in the middle What role do penalties play? – Sets an upper limit to price – Need to be enforced (e.g., Nevada)