maryland utilities' request for proposals for

Maryland Utilities’Request For Proposals for

Full Requirements Wholesale Electric Power

Pre-Bid ConferenceSeptember 24, 2008Hyatt Regency HotelBaltimore, Maryland

Maryland Utilities' Pre-Bid Conference September 24, 2008

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Utility Panel

Allegheny PowerBob Reeping – General Manager, Electric SupplyHelen Taylor – Specialist, Electric Supply

Baltimore Gas & ElectricBill Pino - Director, Electric Supply and ForecastingMarek Kaczanowski – Principal, Electric Supply

Potomac Electric Power Company and Delmarva Power & LightPeter Schaub - General Manager, Energy SupplyCompton Ferrier - Manager, Energy Arrangements

Joe DeNavas – Lead Analyst, Energy Arrangements


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Conference Objectives

We are here to:

• Gain a better understanding of the context in which the Request for Proposals (RFPs) are being conducted

• Inform interested wholesale electric suppliers of the power supply process for Maryland’s investor-owned utilities

• Review the bid structure within each utility’s RFP

• Review the Full Requirements Service Agreement (FSA) which will govern the terms and conditions of all transactions resulting from these RFPs

• Highlight substantive changes to the RFP and FSA from the process conducted last year

• Answer questions on all of the above topics


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Conference Objectives

We are not here to:

• Negotiate changes to any of the documents, including the Model RFP, Model FSA and Utility Compliance Plans

• Discuss rationale of parties’ positions


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Conference Disclaimer

This presentation is not meant to be a fully comprehensive description of every aspect related to all of the Maryland Public Service Commission (PSC) orders and settlements related to the RFP process, but rather a summary of the key features. No statements made in this presentation, or made orally by any utility representative, are intended to be binding in any way. In all cases, the RFP, FSA, settlement documents and Compliance Plans, as approved by the PSC, and all PSC orders, control and supercede all other statements.


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Summary Agenda

• Background of Maryland SOS Structure

• Request for Proposals

• Utility Bid Plans

• Full Requirements Service Agreement


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Background of Maryland PSC SOS Structure


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Background• The PSC has conducted Case Nos. 8908, 9037, 9056 and 9064 to establish how

Standard Offer Service will be provided.– Currently a new review is also underway in Case No. 9117

• Stakeholder process has led to settlements and/or orders of:– policy for initial implementation (8908 Phase I)– initial implementation details (8908 Phase II)– subsequent improvements (through the annual Procurement Improvement

Process) to the RFP and FSA documents– policy regarding the continuation of Type II SOS from June 1, 2006 to May

31, 2007 (9037)– policy regarding the continuation of Type II SOS beginning June 1, 2007

(9056)– policy regarding the continuation of Residential and Type I SOS beginning

June 1, 2007 (9064) • Stakeholders have included customer representatives, public policy

representatives, retail suppliers, wholesale suppliers and utilities• See utility RFP websites for settlements, orders and procurement improvement

documents


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Background

Summary of prevailing changes prescribed in CN 9056 Order

• Service for Type II load is procured using 3-month contracts, bidding 100% of the SOS load four times per year

• Type II service volume risk mitigation mechanism was eliminated


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Background

Summary of CN 9064 Order

• Procurement for Residential and Type I services uses 2-year contracts with bidding approximately 25% of the load twice per year.

– AP Residential load was excluded from this Order, however through interim bid plan proposals and subsequent letter orders, Allegheny has solicited for contracts of 5-months, 12-months, 17-months and 29-months to date and has approval to continue Residential procurement for an additional 13 bid blocks with terms ranging from 5-months to 29-months in the 2009 procurement cycle.

• Transition from the legacy contract construct for the Residential and Type I service to the new 2-year laddering construct was implemented by each utility.

• The customer demarcation of Type I and Type II services was redefined. Legacy Type I customers, small commercial class customers, that have exceeded one of the following thresholds were reclassified as a Type II customer.– Metered 30-minute demand of 25kW– Energy consumption of 6,000 kWh in any two consecutive winter months– Energy consumption of 7,500 kWh in any summer month


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Background

Summary of CN 9064 Order (continued)

• Implementation of the same Volume Risk Mitigation (VRM) mechanism for Residential and Type I service has been effective since June 1, 2008:

1. Incremental load is defined as load above the base load per bid block plus 5 MW, therefore excluding the load up to the 5 MW threshold; and

2. Decrement of a contract Base Block Size is made if the daily adjusted PLC obligation is lower than 3MW from the Base Block Size. Decrement is made in 3MW steps with multiple steps possible on single day.

3. The utility is responsible for procuring the incremental load in the PJM spot market.

• An example of VRM mechanism is provided in the FSA portion of this presentation. Increment Load and Decrement, VRM method, are also described in FSA 6.2 and illustrated by the example in FSA Exhibit H.


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Background

Summary of CN 9064 Order (continued)

• Implementation of the Price Anomaly Threshold (PAT) procedure in the evaluation of Type I service bids became effective in solicitations for contracts with delivery beginning on or after June 1, 2008


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Background

2009 Procurement Improvement Process (PIP)• Information Sharing – two (2) weeks prior to the beginning of the

Delivery Period, on each Business Day until the Delivery Period, Buyer shall post on its website the estimated Capacity PLC (FSA 3.3)

• FSA 4.7 was added to specify PJM Pnodes at which contracted energy delivery takes place for each utility.

• Renewable Energy Obligation – Renewable Energy Portfolio Standards apply to retail metered sales (FSA Exhibit B). Obligation for year 2011 was added.

• Sample PJM Bill – Line items updated to reflect the most current ‘Customer Guide To PJM Billing (FSA Exhibit D). Please note that Transmission Enhancement charges may also be included in the credit section of the bill. Both charges and credits for Transmission Enhancement are attributed to a buyer.

• Reliability Guidelines and Compliance Requirements – Language was updated to reflect NERC Reliability Standards status shift from voluntary guidelines to enforced compliance (FSA 4.8)


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Background

2009 Procurement Improvement Process (Continued)• Language describing parties obligations to support and account for the Load

Response Programs was modified to provide more details about the process built by BGE using PJM Load Response settlement and billing structures. In this process used by BGE for the last few years:

– Buyer must register and Seller shall approve or allow registration to be automatically approved within the PJM Load Response Participation System. Registration takes place in spring before each delivery year and may be modified at any time during delivery year if there is a substantial change in supply or load response.

– Seller is also obligated to approve impact data of emergency and economic load reduction events.

• Advantage of using PJM settlement and billing systems for the Load Response settlement:

• Assures full PJM scrutiny of the Buyer’s Load Response program,

• Provides for single PJM bill accounting for measured and curtailed loads.


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2009 Procurement Improvement Process (Continued)

At the August 27, 2008 hearing in Case 9064, the Commission accepted Allegheny Power’s proposed residential bid plan as part of the 2009 Standard Offer Service bid plan. When and how the balance of AP’s Residential SOS load will be procured will be dependent on future filings and/or the timing and substance of the Commission’s final order in Case No. 9117.

Background


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Background

Important Procurement Qualification Notes

• In order to be qualified to bid for Type II load

– Those qualified in the auction for Delivery Year 2008/2009 are still qualified to bid for Type II load with delivery starts on December 1, 2008 and March 1, 2009.

– If you were not previously qualified you would have to become qualified under the 2008 RFP/FSA documents

• In order to be qualified to bid for Residential, Type I load and any Type II load delivery period not listed above

– Suppliers must qualify under the 2009 RFP/FSA documents, even if already qualified under the 2008 RFP/FSA documents


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2009 Request for Proposals

(RFP)


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Request for Proposals (RFP)

Supply Requirement Overview

• Full requirements service, including energy, capacity, ancillary services, losses and renewables; excluding network transmission

• Supplier’s obligation will be in terms of a fixed percentage of a utility’s total SOS load for a specific service type

• Wholesale supply will be at fixed prices, for the Base Load only. The Incremental Load will be supplied by buyer at a variable price (PJM spot market). Base and Incremental loads are defined by Volume Risk Mitigation (VRM) mechanism (FSA 6.2)


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Request for Proposals

Procurement Process Overview

• Scope of the RFP includes all supply contracts with delivery starting anytime within the June 1, 2009 to May 31, 2010 planning year.

• Suppliers will have to qualify only once for this multi-procurement process, however if changes occur that materially affect supplier’s financial condition or its status with PJM or FERC, supplier is responsible for notifying utilities– Credit ratings

– PJM membership in good standing

– FERC authorization for market based rates


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Procurement Process Overview (continued)

• For BGE and PHI Residential and Type I supply, 25% of the load will be procured in October for June 1 delivery and another 25% in April for October delivery

• For AP, bidding for Residential supply will occur in four procurements – October 2008, January, April, and June 2009, and the contract terms will range from five to twenty-nine months.

• 100% of the Type II supply will be procured every 3 months with delivery starting December, March, June and September (December and March under the 2008 RFP)

• A reserve procurement will be scheduled for each solicitation in the event that conforming bids are insufficient to meet supply requirements


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Procurement Process Overview (continued)• The typical bid week will look like the following

– Monday: Bids due by 4:30 pm– Monday: Bids awarded by 8:30 pm– Tuesday: Utility forwards partially executed contracts to supplier– Wednesday: Supplier forwards fully executed contracts to utility by

2:00 pm– Wednesday: Utility files executed contracts with Commission– Thursday: Public hearing for Commission to review results– Friday: Commission approval of contracts

• Bids expire the earlier of rejection notice or midnight of bid award day

• Retail prices will be posted about two-and-a-half weeks after Commission approves all contracts with common delivery start date


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Schedule Overview• Oct. 6, 2008 - Eligibility requirements due• Oct. 13 – Issue eligibility status• Oct. 20 – Procurement for Type II December 2008 contracts, Residential, and

Type I June 2009 contracts• Jan 12, 2009 - Procurement for Type II March 2009 contracts and AP Residential

contracts• Apr 20, 2009 - Procurement for Type II June 2009 contracts, Residential,

& Type I October 2009 contracts• Jun 8, 2009 - Procurement for Type II September 2009 contracts and AP

Residential contracts• Oct 19, 2009 - Procurement for Type II December 2009 contracts• Jan 11, 2010 - Procurement for Type II March 2010 contracts


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Supplier Eligibility Criteria

• Submittal of the Expression of Interest Form• Execution of the Confidentiality Agreement • Submittal of PJM qualification and FERC authorization

– Qualified market buyer and seller in good standing with PJM– FERC authorization to make sales of energy, capacity and

ancillary services at market based rates• Submittal of Credit Application & related financial information

– For supplier or financial guarantor– Unsecured credit requires a rating of unsecured senior long-term

debt by S&P, Moody’s or Fitch– Bankruptcy status will not disqualify an applicant from bidding;

however, FSA establishes additional requirements pursuant to PSC Order 79452

• Submittal of Binding Bid Agreement


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Supplier Eligibility Criteria (continued)

• Suppliers not receiving eligibility status for the first procurement on October 20 may participate in subsequent procurements if they cure any deficiency in their eligibility no later than two weeks prior to the due date of proposals for such procurement

• New applicants entering the procurement process after the initial eligibility deadline must submit eligibility documents at least two weeks prior to the due date of proposals for the procurement in which they intend to participate


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Bid Assurance Collateral

• $300,000 per bid block is required from the supplier with each bid

• Form of collateral must be either cash or Letter of Credit (LC)

• A Bid Assurance LC form acceptable to the utilities has been provided as Appendix 6 in the RFP

• Bid assurance collateral will be returned to the supplier upon execution of contract(s) or rejection of bid(s)

• Bid assurance collateral will be forfeited in the event that the supplier does not execute contract(s) on its awarded bid(s); and such supplier will be ineligible to participate in subsequent procurements pursuant to this RFP


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Alternate Forms of Bid Assurance Letter of Credit

• Suppliers that wish to propose an alternative Bid Assurance LC form or some other form of security may do so by the October 6 eligibility requirements due date

• Acceptance of such alternative forms of collateral is at the utility’s discretion, and will be communicated to the supplier by the October 13 eligibility notification due date


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Bid Form Spreadsheets

• All bids must be submitted using the appropriate Bid Form Spreadsheet

• Bid Form Spreadsheets are unique for: each utility, each service type, each contract term, and each procurement

• The format of a bid is specified within each Bid Form Spreadsheet


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Bid Form Spreadsheets (continued)

• Contained within the Bid Form Spreadsheet, and fully transparent to the supplier, is the transformation of the supplier’s price offer into a “Discounted Average Term Price” to be used as the only parameter to rank bids

• All of the fields within the Bid Form Spreadsheet that require the supplier’s input must be completed in order for the bid to be conforming; e.g., if it is the supplier’s intent to submit a zero price for any component of the pricing structure, the supplier must enter the numeric value of zero, rather than leaving the field blank


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Bid Form SpreadsheetSample

BGE Request For Proposals UPDATED: 9/10/2007

SAMPLE Bid Form Spreadsheet

October 2007 ProcurementProposal Due Date: October 22, 2007, 4:30 pm EPT

Service Type: Residential SOS - R, ES & RL Classes24-Month Term: June 1, 2008 - May 31, 2010

Bidder InformationCompany Name 1

Contact NamePhone NumberFax Number

Bid Block InformationMaximum Blocks To Be Awarded 18Block Size - R&ES Class (% of R&ES Class Load) 1.388889%Block Size - RL Class (% of RL Class Load) 1.388889%Approximate Block Size (MW-Generator) 50.6

Volume BidNumber of Bid Blocks Offered

Price Periods Within Contract Term 06/01/08-05/31/09 06/01/09-05/31/10

Price Quote for Bid Blocks Offered R&ES Class RL Class R&ES Class RL ClassSummer Price ($/MWh-Premise)Non-Summer Price ($/MWh-Premise)Summer PJM On-Peak Price ($/MWh-Premise)Summer PJM Off-Peak Price ($/MWh-Premise)Non-Summer PJM On-Peak Price ($/MWh-Premise)Non-Summer PJM Off-Peak Price ($/MWh-Premise)

Volume Weighting FactorsSummer Energy(%) 33.3% 33.3%Non-Summer Energy (%) 56.3% 56.3%Summer PJM On-Peak Energy (%) 1.9% 1.9%Summer PJM Off-Peak Energy (%) 1.8% 1.8%Non-Summer PJM On-Peak Energy (%) 3.2% 3.2%Non-Summer PJM Off-Peak Energy (%) 3.5% 3.5%

Discount FactorsDiscount Rate (%) 10.25% 10.25%Mid-Year Discount Factor 0.9524 0.8638

Load Weighted PricesLoad Weighted Average Energy Price ($/MWh-Premise) -$ -$ Discounted Average Price ($/MWh-Premise) -$ -$

Discounted Price for Evaluation Purposes

Discounted Average Term Price ($/MWh-Premise) -$

Tag Number

Bid Assurance Collateral Amount -$

Complete / Incomplete Incomplete

1 Entity's legal name that will define "Seller" in the Full Requirements Service Agreement.



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Bid Validation

Conforming Bids Must Be:

• Accompanied by the appropriate amount of bid assurance collateral

• Submitted using the Bid Form Spreadsheet(s), completed in full and without modification

• Submitted by the due date and due time

• Submitted by an eligible supplier


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Evaluation of Bids

• Discounted Average Term Price calculated on each Bid Form Spreadsheet will be the single parameter used to compare all offers within the same service type and the same contract term

• Winning suppliers will be paid their offer prices, not the Discounted Average Term Price

• Bids to supply Residential and Type I load will be subject to the Price Anomaly Threshold Procedure


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Price Anomaly Procedure

• On the bid due date in each procurement, a Price Anomaly Threshold (PAT) will be developed for each utility soliciting for Residential and/or Type I supply. Each Residential and Type I service type and each contract term will have a PAT developed.

• The PATs will be developed by the PSC’s consultant, with input from the PSC Staff

• The suppliers will not be informed of the PATs

• Each PAT will be compared to the load weighted average price of all of the winning bids applicable to that PAT, i.e., the PAT will not be used as a threshold for individual bids


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Price Anomaly Procedure (continued)

• If the average price of the portfolio of winning bids exceeds the PAT, the highest priced bids will be removed until the average price is at or less than the PAT

• If bids are rejected due to the application of a PAT, such deficiency in supply will be bid in either the next procurement (if available) or in the reserve procurement

• A supplier will not be notified that its bid was rejected due to a PAT, but simply that its bid was rejected


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Utility Bid Plans


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Utility Bid Plans

In total, Maryland utilities are requesting electric supply proposals totaling approximately 5,009 MW of Standard Offer Service load

AP 918 www.alleghenypower.com/rfp BGE 2,566 rfp.bge.com

Delmarva 353 www.delmarva.com/mdrfp Pepco 1,172 www.pepco.com/mdrfp

Total 5,009 MW

The load figures will be updated prior to the bid due dates


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AP Bid Plan

AP’s SOS Load Overview Preliminary Capacity PLC, MW

Service Type Eligible SOS

• Type II Non-Residential SOS 350 166

PH (< 600 kW PLC)C, C-A,

CSH, G ( ≥ 25 kW)

• Residential 752 752


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AP Bid Plan

Type II Non-Residential SOS PH (< 600 kW PLC)

C, C-A, CSH, G (≥ 25 kW) 3-Month 3-Month 3-Month 3-Month 3-Month 3-Month

Delivery Start Date 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10

Approximate Total PLC, MW 166 166 166 166 166 166

*Block Size, % 33.33% 33.33% 33.33% 33.33% 33.33% 33.33%

Approximate Block Size, MW 55.3 55.3 55.3 55.3 55.3 55.3

Total # of Blocks 3 3 3 3 3 3

Oct 20, 2008 Procurement** 3

Jan 12, 2009 Procurement** 3

Apr 20, 2009 Procurement 3

Jun 8, 2009 Procurement 3

Oct 19, 2009 Procurement 3

Jan 11, 2010 Procurement 3

*Two (2) bid blocks will have a weighting of 33.33%, and one (1) bid block will have a weighting of 33.34%. The one (1) bid block with a weighting of 33.34% will be awarded first.

** Type II Dec 2008-Feb 2009 contracts and Mar 2009-May 2009 contracts will be governed by the 2008 Model FSA.


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AP Bid Plan

• Allegheny Power Residential Load– Commission August 27, 2008 letter order

• Directs Allegheny to procure a total of thirteen blocks of Residential Load during the 2009 procurement cycle as reflected in the chart below .

• Contract terms range from 5- to 29-months

Bid Date Blocks to be Bid Contract Duration

• October 20th 1 5- month block 1/1/09 - 5/31/09

• 2 29- month blocks 1/1/09 - 5/31/11

• 2 12- month blocks 6/1/09 - 5/31/10

• January 12th 1 12- month block 6/1/10 - 5/31/11

• 2 12- month blocks 6/1/09 - 5/31/10

• 1 24- month block 6/1/10 - 5/31/12

• April 20th 1 12 -month block 6/1/10 - 5/31/11

• 1 24- month block 6/1/10 - 5/31/12

• June 8th 1 12- month block 6/1/10 - 5/31/11

• 1 24- month block 6/1/10 - 5/31/12

When and how the balance of AP’s Residential SOS load will be procured will be dependent on future filings and/or the timing and substance of the Commission’s final order in Case No. 9117.


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AP Bid Plan

Service Type 5-Month1/1/09-5/31/09

12-month6/1/09-5/31/10

12-month6/1/10-5/31/11

24-month6/1/10-5/31/12

29-month1/1/09-5/31/11

Residential SOS

Approximate Total PLC MW 752 752 752 752 752

*Block Size % 6.2% 6.7% 6.7% 6.7% 6.7%

Approximate Block Size MW 50.1 50.1 50.1 50.1 50.1

Total # of Blocks 15 15 15 15 15

October 20, 2008 Procurement 1 2 2

January 12, 2009 Procurement 2 1 1

April 20, 2009 Procurement 1 1

June 8, 2009 Procurement 1 1


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AP Website Update

Allegheny has expanded its website www.alleghenypower.com/rfp

- Three separate links on the main webpage– Link “2008 Procurement”

» Type II Dec 2008-Feb 2009 and Mar 2009-May 2009 contracts will be governed by the 2008 RFP and Model FSA

– Link “2009 Procurement”

» Residential and Type II (June 2009-August 2009 and Sept-Nov 2009) contracts will be governed by 2009 RFP and Model FSA

– Link “Previous Solicitation Results”

» This site will contain the posted results from previous solicitations pursuant to Section 7-510(c)(4)(ii)(5) of the Maryland Public Utilities Code.


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BGE Bid Plan

BGE’s SOS Load Overview

Preliminary Capacity PLC, MWService Type Eligible SOS RFPResidential 3,510 3,412 1,706Type I 345 286 143Type II 1,851 717 717


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BGE Bid Plan

Residential SOS 24-Month 24-Month

Delivery Start Date 1-Jun-09 1-Oct-09Approximate Total SOS PLC, MW 853.0 853.0 Block Size

% of R & ES Class 1.47% 1.47%% of RL Class 1.47% 1.47%

Approximate Block Size, MW 50.2 50.2 Total # of Blocks 17 17

October 20, 2008 Procurement 17 April 20, 2009 Procurement 17

Type I Non-Residential SOS 24-Month 24-Month

Delivery Start Date 1-Jun-09 1-Oct-09Approximate Total SOS PLC, MW 71.4 71.4 Block Size, % 25.00% 25.00%Approximate Block Size, MW 71.4 71.4 Total # of Blocks 1 1


G & GS < 25 kW & SL & PL Class

R, ES & RL Class

Contract Term

Contract Term


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BGE Bid Plan

Type II Non-Residential SOS 3-Month* 3-Month* 3-Month 3-Month 3-Month 3-Month

Delivery Start Date 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10Approximate Total SOS PLC, MW 716.5 716.5 716.5 716.5 716.5 716.5 Block Size, % 7.14% 7.14% 7.14% 7.14% 7.14% 7.14%Approximate Block Size, MW 51.2 51.2 51.2 51.2 51.2 51.2 Total # of Blocks 14 14 14 14 14 14

October 20, 2008 Procurement* 14 January 12, 2009 Procurement* 14 April 20, 2009 Procurement 14 June 8, 2009 Procurement 14 October 19, 2009 Procurement 14 January 11, 2010 Procurement 14

G & GS >= 25 kW and GL&P < 600 kW

Contract Term


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Delmarva Bid Plan

Delmarva’s SOS Load Overview

Preliminary Capacity PLC, MWService Type Eligible SOS RFPResidential 535 529 265Type I 65 50 25Type II1 173 63 63Type II2 173 63 63

1Type II contract periods beginning December 1, 2008 and March 1, 20092Type II contract periods beginning June 1, 2009 and September 1, 2009


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Delmarva Bid Plan

Residential & Small Commercial SOS 24 - Month 24 - MonthR & R-TOU-ND ClassesGS-SH, GS-WH, SGS-S <25kW PLC,OL & ORL Classes

Delivery Start Date 1-Jun-09 1-Oct-09Approximate Total SOS PLC, MW 144.7 144.7Block Size % 8.3333% 8.3333%Approx. Block Size, MW 48.2 48.2Total # of Blocks 3 3


Contract Term


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Delmarva Bid Plan

Type II Non-Residential SOS 3 - Month 3 - Month 3 - Month 3 - Month 3 - Month 3 - MonthSGS-S 25kW <600 kW PLC,LGS-S <600 kW PLC, & GS-P <600 kW PLC

Delivery Start Date 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10Approximate Total PLC, MW 63.3 63.3 63.3 63.3 63.3 63.3Block Size % 100.0000% 100.0000% 100.0000% 100.0000% 100.0000% 100.0000%Approx. Block Size, MW 63.3 63.3 63.3 63.3 63.3 63.3Total # of Blocks 1 1 1 1 1 1

Oct 20, 2008 Procurement* 1

Jan 12, 2009 Procurement* 1 Apr 20, 2009 Procurement 1 Jun 8, 2009 Procurement 1 Oct 19, 2009 Procurement 1 Jan 11, 2010 Procurement 1

* Type II Dec 2008-Feb 2009 contracts and Mar 2009-May 2009 contracts will be governed by the 2008 Model FSA.

Contract Term


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PHI Website

www.delmarva.com/mdrfp

Bid information for Delmarva’s current Type II procurement contracts with start dates of Dec. 1, 2008 and March 1, 2009 can be found on the RFP website under

2008 Delmarva Power Maryland SOS RFP (Type II 3rd & 4th Quarter)

- Estimated Load data for new Type II- Pre-Bid Qualification documents for those not

qualified

Bid information for Residential, Type I and Type II procurements with contract start dates of June 1, 2009 can be found on the RFP website under

2009 Delmarva Power Maryland SOS RFP- Estimated Load data for the new Type I and Type II

- Pre-Bid Qualification documents


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Pepco Bid Plan

Pepco’s SOS Load Overview

Preliminary Capacity PLC, MWService Type Eligible SOS RFPResidential 1,658 1,540 770Type I 123 90 45Type II1 997 357 357

Type II2 997 357 357

1Type II contract periods beginning December 1, 2008 and March 1, 20092Type II contract periods beginning June 1, 2009 and September 1, 2009


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Pepco Bid Plan

Residential & Small Commercial 24 - Month 24 - MonthR & R-TM Classes GS, T, TN, EV, OL & SL Classes <25kW

Delivery Start Date 1-Jun-09 1-Oct-09Approximate Total PLC, MW 407.6 407.6Block Size % 3.1250% 3.1250%Approx. Block Size, MW 51.0 51.0Total # of Blocks 8 8

Oct 20, 2008 Procurement 8 Apr 20, 2009 Procurement 8

Contract Term


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Pepco Bid Plan

Type II Non-Residential SOS 3 - Month 3 - Month 3 - Month 3 - Month 3 - Month 3 - Month

MGT-LV <600 kW &MGT-3A <600 kW Classes

Delivery Start Date 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10Approximate Total PLC, MW 356.6 356.6 356.6 356.6 356.6 356.6Block Size % 14.2857% 14.2857% 14.2857% 14.2857% 14.2857% 14.2857%Approx. Block Size, MW 50.9 50.9 50.9 50.9 50.9 50.9Total # of Blocks 7 7 7 7 7 7

Oct 20, 2008 Procurement* 7

Jan 12, 2009 Procurement* 7 Apr 20, 2009 Procurement 7 Jun 8, 2009 Procurement 7 Oct 19, 2009 Procurement 7 Jan 11, 2010 Procurement 7

* Type II Dec 2008-Feb 2009 contracts and Mar 2009-May 2009 contracts will be governed by the 2008 Model FSA.

Contract Term


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PHI Website

www.pepco.com/mdrfp

Bid information for Pepco’s current Type II procurement contracts with start dates of Dec. 1, 2008 and March 1, 2009 can be found on the RFP website under

2008 Pepco Maryland SOS RFP (Type II 3rd & 4th Quarter)- Load data- Pre-Bid Qualification documents for those not

qualified

Bid information for Residential, Type I and Type II procurements with contract start dates of June 1, 2009 can be found on the RFP websiteunder

2009 Pepco Maryland SOS RFP- Load data- Pre-Bid Qualification documents


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Full Requirements Service Agreement

(FSA)


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Full Requirements Service Agreement (FSA)

• Master FSA over Multiple Transactions• Full Requirements Service Obligations• PJM Declaration of Authority• Scheduling & Forecasting• Determination of Delivered Quantities• Risk Mitigation Measures• Billing & Settlement• Performance Assurance• Default & Termination


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Transaction Confirmation• Master FSA will be executed under which multiple transactions will

be executed• Each awarded bid for a specific service type and contract term will

be a transaction• A transaction confirmation will specify, among other details, the

following:– service type– delivery period– number of bid blocks– percentage of load equivalent to each bid block– base PLC per bid block to be used in determining increment load – prices– monthly on-peak and off-peak energy quantities to be used in

determining the MtM exposure


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Sample Transaction Confirmation

Exhibit ATransaction Confirmation

EXAMPLE

This Transaction Confirmation letter is being provided pursuant to and in accordance with the “Full Requirements Service Agreement”

dated _____________ (the "Agreement") between Buyer and Seller. Terms used but not defined herein shall have the meanings ascribed to them in the Agreement.

This Transaction Confirmation shall confirm the following terms of the transaction (“Transaction”) agreed to on _________ ("Transaction Date").

Seller: ABC Electric

Buyer: BGE

Product: Full Requirements Service

Service Type: Type I Non-Residential SOS

Delivery Point: PJM Control Area

Delivery Period: July 1, 2004 through May 31, 2006

Bid Blocks: 4

Specified Percentage: 25.064%

Base PLC Per Bid Block: (Used for determination of Monthly Settlement Increment Load)

Residential Service n/a

Type I Non-Residential Service To be determined July 1, 2004

Type II Non-Residential Service n/a

Type III Large Customer Service n/a

Price Period 1 Price Period 2

Price Periods Within Delivery Period: July 1, 2004 - May 31, 2005 June 1, 2005 - May 31, 2006

Customer Classes: G GS SL class 4 class 5 G GS SL

Monthly Settlement Base Price:

Annual Energy, $/MWh-Premise n/a n/a 30.00 n/a n/a n/a n/a 32.00

Summer Energy, $/MWh-Premise 50.00 n/a n/a n/a n/a 52.00 n/a n/a

Non-Summer Energy, $/MWh-Premise 35.00 n/a n/a n/a n/a 37.00 n/a n/a

Summer On-Peak Energy, $/MWh-Premise n/a 65.00 n/a n/a n/a n/a 67.00 n/a

Summer Intermediate-Peak Energy, $/MWh-Premise n/a 40.00 n/a n/a n/a n/a 42.00 n/a

Summer Off-Peak Energy, $/MWh-Premise n/a 25.00 n/a n/a n/a n/a 27.00 n/a

Non-Summer On-Peak Energy, $/MWh-Premise n/a 45.00 n/a n/a n/a n/a 47.00 n/a

Non-Summer Intermediate-Peak Energy, $/MWh-Premise n/a 30.00 n/a n/a n/a n/a 32.00 n/a

Non-Summer Off-Peak Energy, $/MWh-Premise n/a 20.00 n/a n/a n/a n/a 22.00 n/a

Summer Demand, $/MW-Premise n/a n/a n/a n/a n/a n/a n/a n/a

Non-Summer Demand, $/MW-Premise n/a n/a n/a n/a n/a n/a n/a n/a

Monthly Settlement Increment Price: As specified in Agreement

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

On-Peak Estimated Quantity Per 50 MW Capacity PLC, MWh 11,800 13,000 9,100 7,200 8,800 12,900 15,200 16,000 9,500 8,300 9,800 10,900

Off-Peak Estimated Quantity Per 50 MW Capacity PLC, MWh 8,300 9,100 6,400 5,000 6,200 9,000 10,600 11,200 6,700 5,800 6,900 7,600

Please confirm that the terms stated herein accurately reflect the agreement reached on the date above between Seller and Buyer by returning an executed copy

of this Transaction Confirmation by facsimile to Buyer at [Buyer’s Fax Number] in accordane with Section 2.8 - Transaction Confirmation of the Agreement. The signatories

to this Transaction must have the authority to enter into this Transaction.

[SELLER] [BUYER]By: By:Name: Name:Title: Title:



56


Full Requirements Service Obligations

• Seller must provide all services (other than network transmission) to meet its share of the load obligation at the wholesale level, as accounted for by PJM.

• Seller’s obligations include, but are not limited to the following: – Energy– Capacity– Transmission other than network transmission– Ancillary services– Renewable energy resource requirements– Transmission & distribution energy losses– Congestion management costs– New PJM charges, other than charges assessed to network

Transmission customer


57


Full Requirements Service Obligations (continued)

• Buyer’s obligations include the following:– Accept service from Seller for resale to retail customers, i.e.,

Buyer is the Load Serving Entity– Network integration transmission service– Future PJM charges assessed to network transmission customers– Distribution service


58


PJM Declaration of Authority

• An agreement between Buyer and Seller for the benefit of PJM to appropriately account for the respective obligations contained within the FSA

• Required by PJM

• Executed by both Buyer and Seller at the time of FSA execution

• Copy of Declaration has been provided as Exhibit I in the FSA


59

Full Requirements Service AgreementEXHIBIT D

SAMPLE PJM INVOICE

FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY

OPERATING AGREEMENT OF PJM INTERCONNECTION, L.L.C.:

Day-ahead

Balancing Total

Charges: Spot Market Energy Seller Seller Seller Transmission Congestion Seller Seller Seller Transmission Losses Seller Seller Seller Regulation Seller Inadvertent Interchange Seller Synchronized Reserve Seller Operating Reserves Seller Seller Seller Synchronous Condensing Seller PJM Customer Payment Defaults Seller Reconciliation for Spot Market Seller Reconciliation for Regulation Seller Reconciliation for Transmission Congestion Seller Reconciliation for Transmission Losses Seller Reconciliation for Synchronized Reserve Seller Financial Transmission Rights Auction Seller Meter Correction Seller Load Response Program Seller

Credits: Transmission Losses Seller Reconciliation for Transmission Losses Seller Auction Revenue Rights Seller

PJM Invoice Sample


60

PJM Invoice Sample (continued)


FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY

PJM OPEN ACCESS TRANSMISSION TARIFF:

Total

Charges: PJM Scheduling, System Control and Dispatch Service Seller Transmission Owner Scheduling, System Control and Dispatch Service Seller Reactive Supply and Voltage Control from Generation Sources Service Seller Black Start Service Seller Network Integration Transmission Service Buyer North American Electric Reliability Corporation (NERC) Seller Network Transmission Service Offset Charges Buyer Firm Point-to-Point Transmission Service Seller Non-Firm Point-to-Point Transmission Service Seller Reliability First Corporation (RFC) Seller Expansion Cost Recovery Buyer Transmission Enhancement Buyer Reconciliation for PJM Scheduling, System Control and Dispatch Service Seller Reconciliation for Transmission Owner Scheduling, System Control and Dispatch Service

Seller

Locational Reliability Seller

Credits: Non-Firm Point-to-Point Transmission Service Buyer


61


Scheduling & Forecasting• Utilities’ load settlement processes will establish the daily load

obligations for Sellers and post such obligations to the Sellers’ PJM accounts

• Seller is responsible for all scheduling with PJM to meet the obligation

• Seller is responsible for monthly settlements with PJM pertaining to their obligations

• Buyer will provide to the Seller on a reasonable efforts basis:– On each business day after execution, Buyer’s estimation of Seller’s

capacity PLC for the seventh following day for each service type– On each business day of the delivery period, Buyer’s estimation of

Seller’s energy and capacity obligation as is provided to PJM for settlement purposes for each service type, transaction, voltage level and customer class.


62


Congestion Management

• Seller is responsible for all congestion management costs

• Buyer will transfer to Seller its congestion revenue rights in proportion to the Seller’s share of the load, i.e., revenue rights will follow the load

• The nominations for congestion revenue rights for the upcoming PJM planning year will be made by the entity recognized by PJM as having the right to make such nominations, i.e., the supplier who has the load obligation effective June 1, the first day of the planning period


63


Buyer’s Load Response Programs• Buyer will manage all aspects of its programs• Buyer will retain all benefits associated with its programs• In real-time market, Seller’s load obligation will reflect the

load reduction due to activation of programs


64


Renewable Energy Obligation

Seller’s obligation effective January 1, 2008

Renewable Sources _______________________

Solar Component

Tier 1 of Tier 1 Tier 2 2008 2.005% 0.005% 2.5% 2009 2.010% 0.010% 2.5% 2010 3.025% 0.025% 2.5% 2011 3.040% 0.040% 2.5%


65


Determination of Delivered Quantities

• Delivered quantities on an energy (MWh) basis will be as reported by Buyer to PJM for Seller’s obligation, reduced for losses to reflect load at the retail meter– Includes unaccounted-for-energy

– In accordance with PJM’s initial (day-after) settlement, and 60-day (AP 90-day) settlement


66


Risk Mitigation Measures for Sellers

• Elimination of Network Transmission obligation

• Increment/Decrement provisions for mitigation of volume risk due to customer migration

• New Renewable Resource Requirements– If requirements are changed by law, Buyer will pay Seller’s

incremental cost, subject to PSC approval, for the balance of the contract year in which the change took place

– In subsequent years of a multi-year transaction, seller is not obligated, but may continue to provide any incremental renewable requirement

– Subsequent RFPs will pick up the new requirements


67


Base Load and Increment Load

• An “increment/decrement” concept to mitigate volume risk associated with customer migration for Type I and Residential service:– The Base Bid Block Size is established on the first day of power

flow– Thresholds for the difference between the daily block size and Base

Bid Block Size: inc = +5MW, dec = -3MW– Upon trigger of an inc, inc load = load above Base Bid Block Size +

5MW– Upon trigger of a dec, Base Bid Block Size is ratcheted down in

increments of 3MW with more then one reduction per day allowed.

• Buyer has the increment load obligation


68


Condition Seller’s Price• Load anywhere All load @ bid price within dead band

• Load above 55 MW @ bid price dead band 2 MW @ Buyer’s obligation (e.g. 57 MW)

• Load reaches All load @ bid price lower band (e.g. 47 MW)

dead band50 MW base load

47 MW

55 MW

52 MW

47 MW base load

44 MW

Bid Block

Bid Block

dead band

• Base load adjusted down to 47 MW and new dead band established

Base Load and Increment Load Example


69


Billing and Settlement

• Buyer will develop and deliver the invoice to the Seller on or before the 6th business day of each month for base load quantities delivered in the previous month

• Buyer will pay Seller by electronic funds transfer by 12:00 p.m. on the day PJM settles

• Seller is responsible for its settlements with PJM for base load obligations only

• Buyer is responsible for settlements with PJM for incremental load obligations


70


Performance Assurance• Security against Seller’s default• Nominally represents Buyer’s exposure above Seller’s unsecured

credit limit• Formulaic and transparent methodology for determining Buyer’s

exposure • A Buyer’s call on performance assurance cannot be disputed by Seller• Forms of performance assurance are cash and LC• Calculation done daily:

– Each transaction with a Seller is marked to market & the exposures are summed

– If Buyer is exposed, the exposure is reduced by the value of the amount delivered but not yet paid

– If Buyer is still exposed the exposure is compared to the Seller’s unsecured credit amount

– If the exposure exceeds the unsecured credit amount by at least $500k, a call is made on performance assurance


71


Performance Assurance (continued)• The MtM exposure will equal the change in the PJM

western hub forward energy prices relative to initial forward prices for each forward month times the estimated forward monthly energy quantities

• Estimated forward energy quantities will be derived from the quantities stated on each Transaction Confirmation associated with 50 MWs of PLC. The quantities will be scaled for the current size of each contract.

• The forward prices used at the western hub will be the on-peak prices

• The forward off-peak prices will be derived using an historic ratio of the day-ahead off-peak and on-peak prices

• An independent pricing agent will be retained by the Buyers to provide the forward prices


72


Unsecured Credit • Initially determined from financial data provided by supplier

in the pre-bid qualification process• Reviewed daily for changes in credit rating• Based on Seller’s financial parameters, or Seller’s

guarantor’s financial parameters– Form of guaranty is non-negotiable and can be found as

Exhibit F in the FSA• Seller’s unsecured credit will be the lower of:

– Seller’s (or Seller’s guarantor) unsecured credit cap– Seller’s (or Seller’s guarantor) relevant tangible net worth– Guaranty amount from Seller’s guarantor


73


Unsecured Credit (continued)• Seller’s unsecured credit cap will based on seller’s lowest

credit ratingCredit Rating

S&P Fitch Moody’s TNWPercentage

UnsecuredCredit Cap

A or above A or above A2 orabove

15% $125,000,000

A- A- A3 10% $100,000,000

BBB+ BBB+ Baa1 8% $75,000,000

BBB BBB Baa2 6% $50,000,000

BBB- BBB- Baa3 4% $25,000,000

BB+ BB+ Ba1 2% $15,000,000

BB BB Ba2 1% $10,000,000

BB- BB- Ba3 0.5% $5,000,000

Below

BB-

Below

BB-

Below

Ba3 0% $0.00


74

Foreign Entities

• A Seller or Seller’s guarantor that have not been incorporated in the United States or District of Columbia to have a predefined way to participate in the Maryland Auction

• See section 14.6 for details



75


Default & Termination• Default conditions provided in FSA Section 12.1• Remedies

– If Seller defaults but continues to perform, Buyer may create a special remedy subject to PSC approval

– Non-defaulting party may suspend performance up to 10 days– Non-defaulting party may terminate by setting an Early

Termination Date

• In the event of an early termination of a FSA, all other wholesale suppliers will have the option to take a full or partial pro-rata share of the terminated contract without change to pricing, terms and conditions


76


Settlement Upon Early Termination• For any part of a terminated contract that is not covered by suppliers

exercising their step-up rights, a termination payment will be determined

• Non-defaulting party will determine default damages and settlement amount in a commercially reasonable manner– Default damages include costs from event of default up to the termination

date– Settlement amount includes costs at and beyond the termination date– Option provided to Seller regarding determination of settlement amount to

accommodate either mark-to-market accounting or accrual accounting• If Buyer is the non-defaulting party, Buyer will conduct a competitive

solicitation to replace the terminated contract under identical price, terms and conditions– Until the delivery period starts with the new seller, Buyer will procure from

the PJM spot market – The net spot market costs, along with the cost or proceeds from the

solicitation, will define the settlement amount

maryland utilities' request for proposals for

Business

year type

sos load

continuation of type

legacy type

base load

rfp process

order service

incremental load