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Transmission in the Pacific NW Power Purchase Agreement Guidelines

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Transmission in the Pacific NW Power Purchase Agreement Guidelines

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    1. Transmission in the Pacific NW & Power Purchase Agreement Guidelines Utility Geothermal Working Group - UGWG Geothermal Power Production Webcast John Pease PE, MBA Project Manager Bonneville Power Administration January 24, 2006

    2. BPA Transmission BPA Transmission – 75% of high voltage in the Pacific NW BPA building 770 miles of 500 kV circuits – Largest transmission building program in North America Yet, transmission system is over subscribed and underutilized. What does this mean? Song “You can’t get there from here” – Lee Roy Parnel – 1978 Country Classic

    4. BPA (FERC) Generation Interconnection Process (>20 MW) Interconnection initiated by: Letter requesting generating interconnection to BPA transmission (TBL) – see TBL website Completed Interconnection Study Request Identify service requested – Network or Energy Refundable deposit of $10k Once complete, generator is now in the “Queue” TBL transmission A/E’s will help you

    5. Once Interconnection Request Completed, Other Studies Follow Interconnection generator now responsible for: Interconnection Feasibility Study - $10k deposit Interconnection System Impact Study - $50k deposit Interconnection Facilities Study - $100k deposit Standard Large Generator Agreement (>20 MW) is signed if transmission is available Process is now taking 1 ˝ + Years

    6. Once Interconnection Request - Continued Studies may indicate Interconnecting generator may be “blocked” by someone higher in the Queue who needs, but does not have, transmission capacity Consequently, upgrades then paid by pro rata need for the transmission, if the generators agree to “Paid back” by transmission credits after construction – approximately five years Unfortunately, this process has never worked in eight years since FERC Order 888 & 889 created Open Access Transmission Tariff system (OATT)

    7. Conditional Firm – New (at least a little) Hope On the Horizon Access to transmission determined by Firm and non-Firm rights Firm transmission – guaranteed on all hours – most expensive, curtailed last (usually in an emergency) Non-Firm – firm rights not used or unallocated transmission made available daily, weekly, monthly or annually (higher chance of curtailment – daily goes first, then weekly, monthly etc.) Conditional firm – Firm except in months when curtailment may occur, then non-Firm, but curtailed last (non-firm curtailment order)

    8. Conditional Firm – A Little Hope - continued Presented by BPA to FERC March 16th, 2005 in Portland Conditional firm holder knows maximum curtailment exposure – 100’s hours/month If not told in preschedule (24 hour notice) that a curtailment may occur, then considered firm Uses additional Available Transmission Capacity (ATC) that currently goes unused Bounds transmission availability risk to enable project financing!

    9. Economic Redispatch – A Little More Hope Presented by BPA to FERC March 16th, 2005 in Portland Transmission provider will adjust generation within the hour (TBL – hydro) to alleviate a transmission curtailment, increasing available ATC Currently being priced by BPA Other generators may participate if an economic incentive is provided BPA currently only redispatches to meet load

    10. Fundamentals of a Power Purchase Agreement A good contract provides value to each party Definition of terms in the language used must be well understood by both parties Legal protections are fairly standard Valuation - benefits vs. cost and risk to develop must be well understood and monetized Conditions and terms are where the negotiations take place

    11. Fundamentals of a PPA Cont. Contract Definitions Term of the agreement Project permitting and construction Purchase and sale of energy Environmental attributes Scheduling of energy & measurement Purchase price Defaults & remedies

    12. Fundamentals of a PPA Cont. Transmission and interconnection Warrantees – seller and purchaser Dispute resolution Defaults and remedies

    13. Valuation – The Heart of a Project Valuation of the project – risk adjusted avoided cost, npv Impacts on typical utility planning and operations NEPA, environmental permitting Transmission availability and alternatives Distribution of benefits and risk mitigation

    14. Risk Mitigation & Valuation Someone Else’s Problem? Developers face a multitude of risks (ORMAT, 4/2005) Exploration Resource capacity Regulatory Drilling Plant construction Financing Risk eventually shows up in the PPA power price Potentially jeopardizing project development

    15. Risk Mitigation & Valuation - Solutions Least Cost Marginal Power for base load resources in the Pacific NW - $50+ MWh – and not going away Risk Adjusted Avoided Cost methodology or “How would you value a CCCT today?” Energy, capacity credit, green tags, fuel risk, environmental and societal cost/benefits compared to natural gas A great example – Idaho Power 2004 IRP – please see link http://www.idahopower.com/energycenter/irp/2004/2004IRParchive.htm BPA helps support environmental permitting, transmission acquisition, scheduling and operations Partnership lowers the cost for everyone.

    16. Questions and Comments?

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