1. Power Purchase Agreements Alex Sifford Ecos Consulting Portland, Oregon www.ecosconsulting.com

2. 2 Nomenclature Power PURCHASE = utility view Power SALES = developer view Since good marketing looks for customer perspective, Purchase it is

3. 3 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

4. 4 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

5. 5 Value to the Purchaser Cost compared to other new resources Risk factored into cost e.g., levelized costs provide rate stability. Credit stability of the Seller = rate stability Baseload allows utility to back off other resources

6. 6 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

7. 7 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

8. 8 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

9. 9 Example Long-Term PPA (cont’d.) CHOICE OF LAW PARTIAL INVALIDITY WAIVER GOVERNMENTAL JURISDICTION AND AUTHORIZATIONS SUCCESSORS AND ASSIGNS ENTIRE AGREEMENT NOTICES CONFIDENTIALITY DISAGREEMENTS -------------

10. 10 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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12. 12 BPA 2004 Transmission & Ancillary Services  NT-04 Network Integration Rates  Base 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.

13. 13 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.

14. 14 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

15. 15 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

16. 16 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)

17. 17 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

18. Thank you Thanks to George Darr, retired BPA, and Joe Taffe, Power Manager, Clatskanie PUD for their help.