RPS IMPLEMENTATION EXPERIENCE “A Developer’s Experiences” November 16, 2005 Teleconference

1. 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 ExperienceDifferent 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 ExperienceDifferent 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 ExperienceResults • 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 ExperienceResults • 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 ExperienceDifficulties - 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. 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 Implementation ExperienceDifficulties – Geographic Limitation

8. Implementation ExperienceDifficulties – 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 ExperienceDifficulties – 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 ExperienceDifficulties – 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 ExperienceDifficulties – 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)