2547 1 THIS TRANSCRIPT CONTAINS 186 PAGES 2 NUMBERED 2547 THROUGH 2732 3 4 5 STATE OF CONNECTICUT 6 DEPARTMENT OF PUBLIC UTILITY CONTROL 7 8 9 Docket No. 05-07-14 PH02 10 DPUC Investigation of Measures to Reduce 11 Federally Mandated Congestion Charges 12 13 14 Prebid Conference held at the 15 Legislative Office Building, Capitol Avenue, 16 Hartford, Connecticut, on October 10, 2006, 17 beginning at 10:05 a.m. 18 19 20 H e l d B e f o r e: 21 The Hon. DONALD W. DOWNES, Chairperson 22 ROBERT LUYSTERBORGHS, ESQ., Legal Advisor 23 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2548 1 A p p e a r a n c e s: 2 For the Connecticut Light and Power 3 Company: 4 NORTHEAST UTILITIES 5 107 Selden Street 6 Berlin, Connecticut 06037 7 By: DANIEL P. VENORA, ESQ. 8 9 For the United Illuminating Company: 10 WIGGIN & DANA, LLP 11 One Century Tower 12 New Haven, Connecticut 06510 13 By: LINDA RANDELL, ESQ. 14 15 For Kleen Energy Systems, LLC: 16 PULLMAN & COMLEY 17 90 State House Square 18 Hartford, Connecticut 06103 19 By: FREDERIC LEE KLEIN, ESQ. 20 21 22 23 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2549 1 A p p e a r a n c e s (Cont'd.): 2 For Environment Northeast: 3 ENVIRONMENT NORTHEAST 4 15 High Street 5 Chester, Connecticut 06412 6 By: ROGER E. KOONTZ, ESQ. 7 8 For NRG Energy: 9 MURTHA, CULLINA, LLP 10 CityPlace I. 11 185 Asylum Street 12 Hartford, Connecticut 06103-3469 13 By: PAUL R. McCARY, ESQ. 14 15 DPUC Staff: 16 MARK QUINLAN 17 MIKE CHOWANIEC 18 19 For London Economics International, LLC: 20 JULIA FRAYER 21 BRIDGETT NEELY 22 DANA ZENTZ 23 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2550 1 THE CHAIRPERSON: Good morning 2 everybody. I'll start by introducing myself. 3 My name is Don Downes. I'm the Chairman of 4 the Department of Public Utility Control, and 5 I'll be presiding at today's prebid 6 conference. 7 First I want to thank you all 8 for coming. We very much appreciate the 9 turnout. We've actually been very pleased by 10 the process so far. We have some 80 proposal 11 registrations from 45 potential bidders, 12 which I think is remarkable, and so I'm 13 pleased to have you all here today. 14 The object of today's exercise 15 is to try and provide as much information as 16 we can and respond to bidders' questions on 17 the RFP process. The conference also will 18 serve as our technical meeting on contract 19 templates, so we would also be interested in 20 hearing bidder views and questions on the 21 contract templates that were issued in 22 September. 23 We'll be taking bidder views 24 into consideration in the final contract 25 template, which should be issued by the end UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2551 1 of October, and given that the redlines were 2 submitted on October 6, we'd appreciate it if 3 you would limit your comments to the 4 substantive issues. 5 There is an agenda -- well, at 6 least used to be, and we'll replenish the 7 supply of agendas over here on the corner of 8 the front riser as well as copies of the 9 slides, and so forth. We are running out of 10 some of these pieces. We're busy copying 11 more copies of the slide presentation. Those 12 will be available, again, down in the corner 13 here to the right. 14 As you notice, there is no 15 signup sheet. A number of you are already 16 known to us, and so you can't avoid that. 17 Others of you are people that we have not had 18 the pleasure of seeing before in our 19 presentations. You are welcome to identify 20 yourselves or not, as you choose. 21 We have received a substantial 22 number of questions through e-mail, and we 23 plan on addressing those. To the extent that 24 we have live questions from people here, we'd 25 encourage you to jot them down on a piece of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2552 1 paper and provide them to us. And, again, if 2 you want to identify yourself, fine; if not, 3 that's okay, too. We'll go through and read 4 out the questions and provide the answers for 5 you as best we can. 6 The agenda for the day is 7 first off to start off with a presentation. 8 We'd like to walk you through a presentation 9 that we've developed on the RFP process and 10 the related issues. We think that it will 11 probably answer a good number of questions 12 which you may already have. We'd like to try 13 and walk through this entire presentation, if 14 we can, please. So if you have questions, 15 take your copy of the Powerpoint presentation 16 and please write yourself a little note. 17 There's some more being delivered right 18 there. 19 This afternoon when we 20 reconvene after lunch -- we'll try and break 21 for about a 60-minute lunch hour, roughly 22 from noon to one. At 1:00 when we return, 23 we'll begin with questions from the slides. 24 Then we'll go to questions from the e-mail 25 bag; and then we'll go to live and in-person UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2553 1 questions. 2 The RFP coordinator is 3 available after this conference through the 4 rest of the RFP process and will be happy to 5 address whatever additional questions you may 6 have after this process through the Q and A 7 page of the website. Again, those will be 8 done on the same anonymous basis. We'll 9 simply state the question and then provide 10 the answer. 11 So let me introduce the 12 players to you, if I might here, just so 13 everybody knows who we are. 14 MS. FRAYER: Musical chairs. 15 THE CHAIRPERSON: Yes, first 16 and foremost the people who are moving around 17 the room most frequently are our very valued 18 consultants here. On your left, Julia Frayer 19 from London Economics, and on your right, 20 Bridgett Neely from London Economics. These 21 folks have been invaluable to us, along with 22 Dana Zentz, who is the person to your far 23 right on the upper riser. 24 Next, working our way down the 25 riser, DPUC's very own Mark Quinlan, the head UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2554 1 of our electric unit. I introduced myself. 2 My esteemed counsel and colleague, Rob 3 Luysterborghs, and the head of our 4 legislative and services group, Mike 5 Chowaniec. 6 So we're all here at your 7 service here. We'd like to again start with 8 the presentation through the slides. Again, 9 if you have questions as we go, please mark 10 them down. We'll return and collect those 11 first and work our way through this when we 12 finish the presentation. 13 So maybe at this point I will 14 again introduce Julia Frayer and ask her if 15 she will start the process. 16 MS. FRAYER: Thank you, 17 Chairman, and I'm actually going to hand it 18 off right away to Bridgett Neely, who will 19 start the discussion this morning on the RFP. 20 MS. NEELY: Good morning 21 everybody. Does that work? 22 So what I'm going to do this 23 morning is just walk you through the main 24 elements of the RFP just to highlight the 25 most important parts. As the Chairman noted, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2555 1 we will be answering any questions you may 2 have this afternoon, so as I go through, 3 unless there's really a specific bullet point 4 you didn't understand, let's hold the main 5 questions until the afternoon. 6 One other comment I wanted to 7 make, we really summarize the key points of 8 the RFP and the contract in this 9 presentation; however, we would direct you to 10 the exact language in the RFP and the 11 contract for purposes of writing your 12 proposal. 13 The main objective of this RFP 14 process really is to reduce the impact of 15 FMCCs for Connecticut ratepayers and, as 16 such, to develop a new or incremental 17 capacity that's located in Connecticut. 18 That's what our emphasis is, making sure that 19 any generation projects are electrically 20 located in Connecticut, which means that they 21 can serve Connecticut's locational sourcing 22 requirement for ISO New England, or for 23 demand resources that they are geographically 24 located in Connecticut. 25 This is a contract for UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2556 1 differences, as we'll discuss later this 2 morning. Therefore, the pricing in the 3 contract will settle against ISO New England 4 markets. The contract, it is mandatory that 5 we price against the forward capacity market 6 for almost all projects. We'll discuss 7 exceptions a little later. And at the bidder 8 option, it's also possible to settle against 9 the locational forward reserve market as well 10 as against the day-ahead energy market. 11 The contract term can be up to 12 15 years and will be settled -- the 13 counterparties to these contracts will be the 14 electric distribution companies in 15 Connecticut, initially based on the 16 geographic location of the project, though 17 there may be some reallocation at the end 18 just to make sure that that allocation is 19 equal based on the load basis of the electric 20 distribution companies. 21 There are two different 22 contract templates which are available on the 23 RFP website, one for generation assets and 24 one for all demand resources, and we want to 25 clarify that we've been going along the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2557 1 process of ISO New England as they have been 2 evolving their definitions of these 3 resources. We originally had three different 4 contract templates, one for generation, one 5 for demand response and one for other demand 6 resources. Now that ISO, for the purposes of 7 the forward capacity market, has changed its 8 definition to integrate those two assets into 9 one large demand resource contract, we 10 followed suit, so we now only have one 11 contract for demand resources. 12 Finally, bids in this process 13 will be evaluated using predominantly a cost 14 benefit analysis for the economic portion and 15 then applying a more qualitative assessment 16 of another factors which represent 17 Connecticut's policy priorities that we've 18 worked through. And, again, we'll discuss 19 all these issues in more detail as we go 20 through today's presentation. 21 The RFP deadline, very, very 22 important. The process going through right 23 now, obviously the first phase is finished. 24 The registrations were due last week. 25 The next important deadline is UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2558 1 November 13, by which point all of the 2 qualifications packets will be due. 3 December 13, the next most 4 important date, will be the financial bid 5 date, since that's the date the financial 6 bids are due as well as the security deposits 7 for the bids. 8 We expect that the DPUC will 9 issue a decision on selecting the projects no 10 later than April 23, 2007. That is a 11 no-later-than date. If we can make that 12 process more quick, we will, but that's sort 13 of our outer bound for that process. 14 Within two weeks of that date, 15 the electric distribution companies will have 16 executed the contracts and submit them to the 17 DPUC, and again at that point, from that date 18 onwards there is an additional six-month 19 period for DPUC approval of the contracts. 20 So our outer bound or final DPUC approval of 21 all contracts will be November 8, 2007. The 22 DPUC will do all it can to make that process 23 as quick as possible so that, again, is an 24 outer bound date for you. 25 MS. FRAYER: As some of you UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2559 1 may already know by looking at the docket, 2 the record in the docket at the Commission, 3 there's a voluminous amount of information 4 that has been presented and discussed and 5 commented upon over the last six months, so 6 the September 15 issuance of the RFP has a 7 strong foundation behind it. One of the 8 foundation pieces that were put together is 9 an investment needs analysis, which is a 10 quantitative analysis of the incremental 11 capacity needs for the state of Connecticut 12 under different market outlooks. And right 13 behind you there is a summary of that that's 14 taken as an excerpt directly from that 15 investment needs report. It was referred to 16 as the August 25 needs assessment - revised 17 in the interim decision from the Department. 18 The bottom line from that 19 investment needs is that based on four 20 different scenarios that looked at a variety 21 of supply and demand outlooks, with the 22 demand outlooks primarily composed of 23 different ISO New England forecasts for 24 demand for Connecticut, there's an 25 incremental capacity need ranging around UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2560 1 630 megawatts in the short term that rises 2 unsurprisingly in the long term to a range of 3 1,500 to approximately 2,500 megawatts by 4 2021. 5 The investment needs was done 6 geographically and was done also on a time 7 dimension covering a hypothetical 15-year 8 period starting from the near term. 9 The investment needs was also 10 done on the basis of a product or FMCC 11 perspective given that that's the objective 12 of this RFP, and therefore we analyzed which 13 ISO New England product market, either the 14 forward capacity market, which is represented 15 as FCM on the graph, or the locational 16 forward reserve market, represented by LFRM 17 in the graph above, which one of those is 18 driving that incremental capacity need over 19 time. 20 The analysis was done at this 21 point based on just the quantities of 22 incremental capacity above and beyond the 23 existing supply mix. Therefore, it's 24 important to keep in mind that on top of 25 this, there will be considerations for UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2561 1 reliability, for the effectiveness of new 2 capacity vis-a-vis existing and planned 3 transmission expansions, which is all 4 discussed in much more detail in the needs 5 assessment, so I would strongly recommend 6 that if you haven't already, to take a look 7 through that document. 8 The needs assessment also has 9 importantly been tailored to be consistent 10 with and correspond to the bid evaluation, 11 the economic portion of the bid evaluation, 12 which will also take on a scenario analysis 13 approach to looking at the expected cost and 14 expected benefits of projects as they impact 15 the ISO New England markets and therefore 16 costs to load to ratepayers of the electric 17 distribution companies. 18 The other point to keep in 19 mind, which has probably been something of a 20 well known at this point from the RFP 21 perspective, is that the Commission is using 22 this investment needs as a benchmark or point 23 of reference. However, the Department -- and 24 I'll let the Chairman speak clearly to that 25 if he wants to add on -- will be making or UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2562 1 selecting projects in light of the actual 2 financial bids because it is a cost benefit 3 analysis, and of course the financial bids 4 are a key component of that, the actual bids 5 that we receive in December as well as other 6 policy priorities, so there is no commitment 7 on behalf of the Department to procure 8 629 megawatts or 2,483 megawatts or any 9 particular number, but it is an important 10 reference point. 11 MS. NEELY: The issue of 12 eligibility in the RFP was originally driven 13 by the Energy Independence Act, which is what 14 mandated the DPUC to launch and run this RFP 15 process. As such, our original eligibility 16 criteria are defined by the terms in the EIA, 17 which is to include but not be limited to 18 generation, grid-side distributed resources 19 and customer-side distributed resources. 20 We're trying to be as open-minded and 21 flexible as possible. We want to encourage 22 all possibly eligible projects to 23 participate. 24 It is required that the 25 projects be located in Connecticut, again, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2563 1 electrically for generation assets and 2 physically for demand resources. 3 The projects that bid in must 4 be -- must represent new or incremental 5 capacity. What we're taking as new capacity 6 is any asset that's not listed in ISO's CELT 7 report. In addition to that, we will also 8 count as new capacity deactivated units, so 9 they would be listed in the CELT report as 10 deactivated as long as they are replaced or 11 refurbished within three years of the new 12 contract. 13 In addition, we'll also 14 consider as new capacity refurbished or 15 repowered projects as long as they meet 16 several conditions. Those conditions are 17 that the aggregate capacity at the site 18 increases for a fixed amount of time, which 19 must be contractually binding; that the 20 assets were originally at least 30 years or 21 more -- at least 30 years old; and that the 22 new investment increases capacity by the 23 larger of 40 megawatts or 20 percent of the 24 site's summer installed capacity -- summer 25 demonstrated capacity, sorry. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2564 1 If those conditions cannot be 2 met, then the incremental portion of new 3 capacity can be bid in. So that's an 4 important difference in terms of identifying 5 what part of your project would be bid in. 6 In addition, demand resources 7 which may currently be under existing 8 programs through either the DPUC or through 9 ISO can bid for the period of time when their 10 funding ends. So they cannot bid into the 11 project if their funding still goes through 12 2008, but as of when their funding ends, they 13 can bid for the contract period that starts 14 as of the point in time when their funding 15 period ends. 16 MS. FRAYER: One thing to keep 17 in mind with the criteria for eligibility, 18 the idea behind all of these different 19 elements is really to ensure that there are 20 tangible benefits to Connecticut ratepayers. 21 So each of these factors were designed with 22 specific objectives in mind that are, again, 23 related back to the Energy Independence Act. 24 The electrical and physical 25 location relates back to the fact that it is UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2565 1 imperative for the purposes of ratepayers and 2 therefore for policy makers that new capacity 3 is actually quote, unquote, counted by ISO 4 New England as fulfilling Connecticut's local 5 sourcing requirement, and that is one of 6 the -- one of the factors that gets 7 considered. 8 The focus on new or 9 incremental capacity is also very important 10 because the impact -- there won't be any 11 demonstrable impact in terms of FMCCs if 12 there isn't new capacity added to the supply 13 mix. 14 So in case there are comments 15 on that, we definitely want to entertain them 16 in the afternoon or after this presentation, 17 but keep in mind that the criteria have been 18 mapped against the requirements that are part 19 of the statute. 20 MS. NEELY: The next couple of 21 slides will walk you through the minimum 22 requirements in the RFP. These, again, are 23 more general statements, and we can talk 24 through them in more detail this afternoon. 25 There's four categories that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2566 1 we've come up with. The first one is just a 2 general minimum requirements in terms of 3 being -- making sure you're eligible to 4 participate and that you get through the 5 entire RFP process. 6 First of all, obviously, the 7 slide previously where we discussed 8 eligibility criteria, you need to meet those 9 or your project needs to meet those as a 10 minimum requirement, and obviously being 11 eligible to serve as Connecticut's local 12 sourcing requirement is a crucial part of 13 that. 14 Bidders must be willing to 15 sign the DPUC-approved master contracts. We 16 received a lot of comments last week. We're 17 very grateful for them. They provided some 18 useful input for us moving forward. We plan 19 on issuing revised contracts by the end of 20 the month to you, and those will represent 21 the master, but we will be taking all of your 22 comments very seriously. 23 With that said, once those 24 final contracts are issued, we will not be 25 making any major changes to them, so that the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2567 1 bidders needs to be comfortable with those 2 contracts and be willing to sign those 3 contracts, the main provisions of the 4 contracts. 5 And then sort of more general 6 administrative things, the proposal must be 7 submitted on time, must comply with 8 submission instructions. We do have sort of 9 a dual filing process where things are sent 10 to the RFP coordinator as well as to the DPUC 11 just because this is a DPUC run event as 12 well, and so filing with both entities is 13 very important. 14 In addition, when the 15 financial bids are submitted in December, the 16 proposal must be binding and must be binding 17 through November 8, 2007 due to the length of 18 the approval process. It's possible, as I 19 said earlier, that that might happen more 20 quickly, but we do need for bidders to commit 21 to that time frame in advance. 22 In addition, the project 23 security deposit must also be submitted at 24 the same time as the financial bids are 25 submitted on December 13. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2568 1 The next category of minimum 2 requirements are more technical requirements, 3 and this is what we're evaluating in the 4 forms we request detailing the experience of 5 the project team. We are -- will be looking 6 for the team to be -- to demonstrate that 7 they have the sufficient managerial, 8 technical and financial experience to 9 develop, construct and operate this project 10 and to bring it to full operations. 11 All projects, with some demand 12 resource exceptions, which we'll discuss 13 later, must meet the technical and operating 14 requirements of the forward capacity market 15 in ISO New England based on their project 16 type. So, again, if you're a generating 17 plant, if you're distributed generation or 18 you're demand resources, there are different 19 requirements, obviously, for those different 20 types of projects. 21 MS. FRAYER: And the other two 22 categories are something that we sort of 23 already talked about earlier today, about the 24 electrical and physical location of that 25 resource both for demand resources and UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2569 1 generation. We are very mindful of the fact 2 that, in effect, the supplier has to also 3 coordinate not only with ourselves but also 4 with the system operator here in New England 5 and other regulatory and siting agencies 6 within the state, and that is actually 7 another, I guess, technical requirement on 8 the project that is something that we believe 9 the supplier is taking on, but we are also 10 asking for information from the 11 qualifications submission to understand where 12 you are in the process with respect to 13 interconnection permitting, and so forth. 14 MS. NEELY: The third category 15 of minimum requirements are financial minimum 16 requirements. As we said earlier, the 17 financial bid is firm and must be binding 18 through November 8. The bidder must 19 demonstrate that it is financially able to 20 secure the project and the contract. It must 21 also demonstrate that it has a viable plan to 22 finance the project. We're asking for that 23 information about project financing 24 qualification process on November 13. By 25 December 13 we're expecting to see some firm UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2570 1 commitment letters for financing. 2 In addition, winning bidders 3 must be able to post the completion of the 4 performance security if they actually are 5 selected when the contracts are approved. 6 MS. FRAYER: The project 7 security deposit that is submitted with the 8 financial bid is refundable to all those 9 projects that are not selected. 10 MS. NEELY: Finally, a couple 11 of words about siting. The bidder is 12 responsible for meeting all federal, state, 13 local environmental siting and permitting 14 requirements, and they also must demonstrate 15 some level of site control. We're not 16 setting a specific level of site control or 17 permitting that we're requiring in advance. 18 However, these issues will be assessed as 19 part of the bid evaluation process, 20 specifically when we analyze the project 21 execution risks of the project. So the 22 further advanced the project is in terms of 23 siting control, in terms of the permitting 24 process, the higher ranked that project will 25 be. So it's more to each bidder's benefit to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2571 1 really advance that and demonstrate to us 2 that you've pushed that along. 3 MS. FRAYER: And, again, I 4 think what we're trying to do is also 5 intentionally but indirectly coordinate with 6 other processes in New England new generation 7 resources as well as demand resources. We'll 8 be showing to ISO New England over the next 9 six months a show of interest form on this, 10 and there are upcoming deadlines for ISO, 11 filings that require the same or similar 12 information, so in effect there's a kill two 13 birds with one stone concept going on here. 14 MS. NEELY: Just one thing, 15 you know, we've added. There has been a 16 lengthy stakeholder process as we've designed 17 this contract and there's been a new element 18 that's been added since the last meeting, so 19 we thought it might be useful just to talk 20 through it a little bit more for you. One of 21 the things we discussed at length with a 22 group of you, how we might settle against the 23 energy market, and this is what we've 24 ultimately decided on. We've included as an 25 option to bidders a one-way call option UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2572 1 against the day-ahead energy market, which 2 will provide a hedge against energy prices in 3 exchange for providing a fixed level of 4 revenues to bidders. 5 The call option ultimately is 6 a fixed for variable swap on a certain amount 7 of capacity. The bidder can designate the 8 call option contract quantity, which can be 9 equal to or less than the amount they 10 designate for the forward capacity 11 settlement. 12 MS. FRAYER: The bidder would 13 also submit the capacity payment that they 14 want to earn on a monthly basis -- or annual, 15 effectively, basis over the term of the call 16 option, and other parameters of the call 17 option as well, including the strike price 18 and how that strike price, if it does at all, 19 changes over the contract term. 20 So there's a lot of 21 flexibility built in here. The idea was to 22 take a lot of the proposals we had during our 23 last technical meetings on the RFP and 24 contract, including the oral arguments we've 25 heard on the draft decision, and to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2573 1 incorporate what we thought would be the 2 methodology or an instrument that would 3 actually effectively achieve almost every 4 single one of the proposals in one form or 5 another that was before us. 6 The call option, which is 7 important also to keep in mind, is a 8 financial call option consistent with the 9 financial structure of the overall contract, 10 but because it is settled against the 11 day-ahead energy price at the Connecticut 12 load zone, it is an important -- it is very 13 important for bidders to consider what the 14 risk versus reward tradeoffs are for this 15 type of product. 16 From our perspective, the 17 benefits from a ratepayer perspective is 18 really that it could be structured as a hedge 19 against or can be seen as a hedge against 20 energy prices. 21 MS. NEELY: And, again, if you 22 have questions on this, we can discuss this 23 in more detail this afternoon because we know 24 it's a new concept. 25 So the next couple of slides UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2574 1 are dedicated just to walk you through the 2 steps of the proposal. As I said, there's 3 two main deadlines for bidders that are 4 coming up. The first one is November 13, 5 which is the qualifications package, and 6 there we're looking for five different 7 documents to be submitted. 8 The first is just a very 9 cursory administrative form, the introduction 10 to the bidder team in writing, your legal 11 status, tax number, some really basic 12 administrative details, about two pages. 13 Appendix F is minimum 14 technical requirements, and that's really 15 looking for information about the bidder team 16 and your previous experience and just 17 demonstrating to us why you have the 18 technical and managerial skills to develop 19 and operate this project. 20 Likewise, Appendix G, the 21 financial questionnaire, is demonstrating the 22 bidder's financial capabilities to manage and 23 develop the project, be able to sustain the 24 project. 25 Appendix H is more detailed. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2575 1 There's both questions that are written in 2 the RFP as well as an Excel template that 3 needs to be filled out, and that's really 4 looking at the specifics of the project. We 5 issued an addendum to the RFP last week where 6 we did state -- and I just want to reiterate 7 here -- we'll be slightly amending those 8 questionnaires just to reflect some of the 9 more recent changes in the contract, so 10 please just look on the website, it will be 11 up by the end of the week, and pull down the 12 most recent versions of both the Word and the 13 Excel file for those documents. 14 If you have questions, if you 15 think that some of the questions don't apply 16 to your project, please e-mail or call us and 17 talk through that so that we're clear. We 18 would prefer not to be receiving forms that 19 have "to be determined" or "not applicable" 20 when they really are applicable or really 21 should be determined by that point. 22 Finally, Appendix I is the 23 anticipated project financing. Here we'd 24 like you to lay out what your anticipated 25 plan in terms of debt and equity are for the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2576 1 project. 2 As we say further down, some 3 of these forms can be updated later. We 4 would really like your best efforts as of 5 November 13 on this information. At the time 6 of the financial bid submission on 7 December 13, we'll expect you to fill in the 8 financial bid templates, which again will be 9 revised by the end of this week and put back 10 on the website. 11 In addition, if you need to 12 amend Appendix F, which talks about minimum 13 technical requirements, if you added somebody 14 new to your team, for example, or Appendix H, 15 which gives all the details of the project, 16 if certain small details have changed and you 17 want to amend those, or if you've changed 18 some small aspects to your project financing, 19 you can amend those forms and resubmit them. 20 We do request that you only do this if really 21 absolutely necessary and you tell us why, 22 that there is actually a compelling reason 23 for that change, when you submit those 24 amended forms. 25 On December 13 as well you'll UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2577 1 need to submit your project security deposit. 2 MS. FRAYER: And we'll post 3 more information on the website about some of 4 the dynamics for how to actually submit that 5 project security deposit because it can take 6 a number of different forms, cash and letter 7 of credit. So we will provide some more 8 information on the RFP website over the next 9 few weeks. 10 One thing also to make sure 11 everybody understands, the linkages between 12 these appendices that you're submitting on 13 the parameters of the projects and then the 14 contract terms and also, in the interim, the 15 bid evaluation, we will take all of the 16 information that's part of the submissions 17 and use that as the basis for measuring the 18 potential impact on cost to load on 19 ratepayers. So each of the questions -- each 20 of the parameters that we're asking about in 21 the technical requirements and project 22 description is very important. It's going to 23 help us evaluate project execution risk. It 24 will help us also to understand what the 25 technical description and therefore the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2578 1 economic description of the projects are. 2 Furthermore, many of these 3 appendices, as discussed in the RFP, are then 4 incorporated in full in the contract as part 5 of the contract, so effectively they're the 6 confirmation term sheets. So once they are 7 submitted -- once they are final with the 8 financial bid submission, they will be 9 incorporated almost in their entirety into 10 the contract and therefore make up the terms 11 of the contract. So it's very important that 12 careful detail is -- very careful 13 consideration by bidders is taken to these 14 submissions. 15 MS. NEELY: We ask that forms 16 be thoroughly completed for both the 17 qualification and the financial bid phase. 18 We will not accept "to be determined" on the 19 forms unless it's really absolutely 20 necessary. On some of the registration 21 forms, a lot of -- not a lot of people but 22 some bidders did put "to be determined" on 23 virtually every aspect of the form. That 24 will not be acceptable at the qualification 25 level. So if you have questions, please call UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2579 1 us, and we can talk you through it. We 2 really want these forms filled out entirely 3 for them to be considered. 4 I think the rest of the points 5 we covered here. Forms must be submitted by 6 the due date as well. So I just want to 7 reiterate those two deadlines for you, 8 November 13, December 13. Very important. 9 MS. FRAYER: What we wanted to 10 do now with -- I think this is basically the 11 end of our talking, hopefully, at this point 12 before we step into the contract templates, 13 was to go through very quickly the bid 14 evaluation process. I know that this is the 15 particular aspect of the RFP that raised a 16 lot of questions in our previous technical 17 meetings at the Department. 18 I think of the bid evaluation 19 process as consisting of three stages, and in 20 the first stage it's effectively a 21 preliminary identification for internal 22 purposes of potential winning projects 23 through a combination of economic analysis 24 where we're looking at the cost versus 25 benefit tradeoff of the projects submitted to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2580 1 us from the perspective of ratepayers. 2 There's also an analysis of other factors, 3 which are both quantitative and to some 4 degree qualitative. We will describe in a 5 few minutes the scoring metric that we've put 6 together. There's effectively a scoring 7 approach. The other factors are supposed to 8 represent 15 percent of the total score of a 9 project, while the economic analysis, the 10 cost benefit analysis is intended to 11 represent 85 percent of the total score. 12 In addition, we will do also 13 an analysis of project execution risk because 14 all of our analysis, especially since it's 15 over a multiyear time frame, is going to be 16 discounted to present value dollar terms, and 17 we are going to be using in the discount rate 18 a single discount rate across all projects. 19 Therefore, the relative execution risks and 20 market risks and technical risks of different 21 projects will be encapsulated through this 22 project execution risk component. 23 Once we have done an analysis 24 of each project individually and then ranked 25 the different projects, the next step is to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2581 1 look at the portfolio of preliminary sort of 2 winning projects to understand where there 3 are tradeoffs between projects. And then as 4 part of that, as part of the portfolio 5 analysis, we will also consider whether there 6 are any concerns or considerations for market 7 power issues, which has been raised as a 8 substantial issue by some of the policy 9 makers here in the state. And that will 10 actually then lead us to the final 11 identification of winning projects. 12 Each of these stages are 13 described in much more detail within the RFP. 14 There's a whole section in the RFP dedicated 15 to this, but we'll be happy to step through 16 them in a little bit more detail and also 17 take questions this afternoon or later this 18 morning. 19 For the economic analysis, the 20 cost benefit analysis, it's effectively, the 21 way I like to describe it, sort of an impact 22 analysis, what happens to cost to load, 23 because market prices change, due to the 24 introduction of a new project, be that a 25 demand resource project or a generation UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2582 1 project. So effectively there's two steps to 2 it. There's a development of a baseline 3 outlook of market prices and therefore cost 4 to load under a variety of future market 5 conditions. That's our benchmark scenarios. 6 And that's done without any specific projects 7 in place but with some of the generic entry 8 depending on the underlying assumptions for 9 each of the scenarios. The scenarios we are 10 using are detailed in the RFP and they are 11 consistent with the four scenarios that I 12 have highlighted originally on the screen, 13 though for the actual cost benefit analysis 14 we're doing many more than just four 15 scenarios to make sure that we are capturing 16 a lot of the potential uncertainties in the 17 market. 18 Once we've established the 19 baseline, we then move to look at each of the 20 project's incremental impact on the market 21 prices and market quantities, and that 22 basically requires us to run another 23 simulation of market prices with the 24 particular project that we're investigating 25 incorporated based on the commercial UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2583 1 operation date and all the technical 2 parameters that the project provided in their 3 qualifications package. 4 We then can compare the annual 5 costs to load between the impact scenarios 6 and baseline outlook, and that provides us 7 effectively with the benefits to ratepayers 8 from the project. 9 As I mentioned earlier, we 10 will look at the present value of those 11 benefits so that we can compare projects with 12 different commercial operation dates and 13 different contract terms on an 14 apples-to-apples basis. 15 On the cost side of the cost 16 benefit equation, what we will evaluate is 17 the cost of the contract and therefore the 18 project to ratepayers, again using the impact 19 scenarios where we incorporated the impact of 20 the project on market prices and the selected 21 settlement options that the project has 22 committed to in the financial bid submission 23 and the annual contract prices that they have 24 indicated. 25 And this will depend, again, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2584 1 if a project decides to just settle against 2 the forward capacity market, if it settles 3 against the forward capacity market and the 4 locational forward reserve market, or even a 5 third option or element thereof is if a 6 project chooses also to incorporate the call 7 option as part of its package. 8 To the extent that additional 9 ratepayer funding is known today, that will 10 also be included as a cost item, and I know 11 that in some of the questions we've received 12 to date there's been some questions about 13 what is meant by ratepayer funding, so we'll 14 talk a little bit about that this afternoon. 15 And effectively, again, 16 because the costs are going to vary by time, 17 we're going to discount all the costs using 18 the 9.8 discount rate, which we discussed in 19 the interim decision. 20 And the combination, 21 therefore, of the costs and the benefits is 22 our net benefit to Connecticut ratepayers, 23 which will be the quantitative ranking 24 element, if you will, and economic analysis 25 portion of the bid evaluation. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2585 1 There's a number of other 2 factors, as we mentioned, that are 3 incorporated. In fact, we've got five other 4 factors, as highlighted in the RFP, and we 5 are going to talk today about a number of 6 those. I wanted to start with environmental 7 emissions. 8 In effect, what we want to do 9 is understand whether or not some of the 10 projects over the term of their agreement or 11 contract reduce emissions. The major sort of 12 pollutants are sulfur dioxide, NOx and carbon 13 dioxide. In order to be able to evaluate 14 projects on an equivalent basis, what we will 15 do is out of the simulations model actually 16 measure the reduction in emissions caused by 17 the project on a ton per kW basis and 18 therefore be able to rank individual projects 19 among their peers within the bidding process. 20 And once that ranking is done, we will then 21 attribute additional points to projects based 22 on their relative ranking among other 23 projects that have submitted bids. 24 The Energy Independence Act 25 also talks about a preference for the use of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2586 1 existing infrastructure and existing 2 generation sites, and therefore we've also 3 allocated additional points to those projects 4 that propose to use existing transmission or 5 fuel supply infrastructure or existing 6 electrical generation sites, and effectively 7 demand side resources will receive the full 8 benefit of that as well because they are 9 minimizing the introduction of new electric 10 generation sites to the state. 11 The other three categories 12 that we're including is fuel diversity as 13 well as this consideration of front-loading 14 of costs. And then we have a catch-all with 15 what we call "other," which I'll discuss 16 last. 17 The fuel diversity category is 18 meant for us to provide additional points in 19 the bid evaluation process to non-oil and 20 non-gas-fired power plants or projects. 21 Therefore, renewable and demand resources 22 will be granted the maximum amount of points 23 in this category. 24 As we know, I think -- or as 25 is clear within the terms of the RFP and the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2587 1 contract, any natural gas-fired facility 2 responding to this RFP will have to commit to 3 having a secondary non-gas fuel available. 4 Leaving that aside, however, if it's 5 primarily natural gas fired or primarily oil 6 fired it still will not receive points under 7 this fuel diversity category. 8 The front-loading of costs was 9 an important issue raised because of the 10 tenure of these contracts. Based on the 11 statute, the contracts can run for as much as 12 15 years, and therefore there is a likelihood 13 that in some years there are -- although 14 there may be a positive net benefit over the 15 entire term of the contract to ratepayers, 16 some projects may have quote, unquote, front 17 loading of costs or may actually incur costs 18 that are higher than the benefits they are 19 expected to produce. 20 In order to help us evaluate 21 this consideration, which is an important one 22 from the perspective of ratepayers, rate 23 shock, we want to take into account the year 24 by year, rather than just the present value, 25 but the year-by-year stream of costs and UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2588 1 benefits, and therefore we've constructed a 2 scaling mechanism, a point system where we 3 give additional points to those projects that 4 do not have any negative net cost effectively 5 in their first five years of the contract 6 term and small amounts of points for some 7 smaller amount of increment of negative years 8 of costs. 9 The last "other" factor is one 10 that we want to sort of leave open for 11 bidders to try to provide input to us on. We 12 want to be able to grant an additional two 13 and a half points for other benefits that the 14 project can produce based on information that 15 the bidder will articulate to the DPUC as 16 part of their bid package. For example, if a 17 project sponsor believes that their project 18 improves the reliability of the transmission 19 network or produces very beneficial 20 economic -- local economic impacts or 21 provides other types of benefits to 22 Connecticut ratepayers, for example, 23 increases in tax bases, and so forth, all of 24 those are relevant, and we will definitely 25 consider them to the extent the bidder is UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2589 1 willing to supply us with information on 2 those benefits and qualify those statements. 3 MS. NEELY: We'd be looking 4 for some sort of objective information. I 5 recognize that everybody probably thinks 6 their project is great, but we would need 7 some sort of objective documentation to 8 support those claims, and please submit that. 9 MS. FRAYER: Another area on 10 the reliability of the transmission network, 11 there was definitely a lot of discussion of 12 reliability must-run costs to a special 13 projects. If a new project is reducing the 14 need for an RMR-type asset because of its 15 specific site location and attributes, those 16 are other things that we will consider as 17 well, but these are all very site specific, 18 very project specific, and therefore what we 19 want to do is get the fullest amount of input 20 from the bidder rather than rely on some sort 21 of scaling methodology. 22 MS. NEELY: Just to sort of 23 take one step back, because I know that's a 24 lot of information to throw at you, for those 25 five categories, that's worth 15 percent of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2590 1 the quantitative score. Environmental 2 emissions is worth 5 points out of that 15, 3 and the remaining four are worth 2.5 each, 4 just to give you a sense of the ranking of 5 those five elements. 6 MS. FRAYER: I thought what we 7 might want to do is keep on moving through 8 the contract. We've probably got I think 9 probably a half dozen slides left or so. So 10 if you guys will be patient with us, we'll 11 take a break after that. 12 MS. NEELY: So just to provide 13 you with an overview of the contract, it is a 14 contract for differences that settles against 15 the ISO markets as they are selected by the 16 bidder. There are three possibles. One is 17 mandatory, the forward capacity market, and 18 the other two are optional. So settling 19 against the locational forward reserve market 20 or the day-ahead energy market are both 21 optional at the bidder's selection in the RFP 22 process. That is not something you can 23 select later on in the contract term. 24 Monthly settlement is based on 25 one-twelfth of the annual contract price UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2591 1 submitted in the financial bid as compared to 2 actual market prices in that period of time. 3 The term of the contract is up 4 to 15 years, to be specified by the bidder in 5 their financial bid. We're very flexible on 6 that. 7 The Connecticut electric 8 distribution companies, Connecticut Light and 9 Power and United Illuminating, will be 10 serving as the counterparties to these 11 contracts. The recovery of their costs is 12 statutorily mandated for this contract. 13 MS. FRAYER: And one thing to 14 note on that is we intend to have one 15 counterparty per project, per contract. 16 Although there are two electric distribution 17 companies in Connecticut, the counterparty 18 will most likely be based on the geographical 19 location of the project within the service 20 territory of either company, but could also, 21 depending prior to the bid selection process, 22 could be redistributed by the Department in 23 order to ensure a fair load ratio basis so 24 there isn't substantial settlement between 25 the distribution companies during the term of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2592 1 the contract in terms of costs going back and 2 forth, the idea being that all ratepayers 3 from the two electric distribution companies 4 will equally bear the costs of these 5 contracts on a load ratio basis. 6 MS. NEELY: And, finally, just 7 one last point. We realize it's somewhat 8 unusual. The DPUC has a special role in this 9 contract. 10 MS. FRAYER: And the Chairman 11 might want to speak to it later, but an 12 effective way that I like to see it is to 13 recognize that the Department wants to see 14 these contracts reach maturity and success, 15 so it wants to be in a situation where it can 16 ensure that the contracts remain on target -- 17 the projects remain on target and also aren't 18 terminated too early because that's the only 19 way that it can ensure that the anticipated 20 benefits that were used to evaluate the 21 proposed bid and select projects are actually 22 then delivered over the term of the contract 23 to ratepayers. 24 As an example, and this is 25 just as an illustration, we have a similar UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2593 1 example as well, probably with slightly 2 different numbers in the RFP, and in fact we 3 also have what I call sort of a bid 4 evaluation prototype model so that folks can 5 actually see how we take prices in the 6 market, contract prices and calculate costs 7 to load and therefore calculate the cost 8 benefits of projects. That prototype is also 9 available with the RFP on the website. And 10 to the extent there are updates to the model 11 or updates that are necessary because of the 12 contract refinements that may take place 13 within the next few weeks, we'll update it on 14 the website as well. 15 This is just sort of an 16 example here where it lays out a project, a 17 sample project that has the following 18 contract prices under three different 19 scenarios for the different products that it 20 has selected and different contract 21 quantities because, again, within the RFP you 22 can choose the actual contract quantities 23 subject to certain restrictions for the 24 different optional features above and beyond 25 the forward capacity market. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2594 1 MS. NEELY: So the contract 2 quantity for the forward capacity market is 3 the maximum. That's the underlying basis of 4 the contract. The contract quantities that 5 you can submit for the locational forward 6 reserve market and for the call option can be 7 equal to or less than the contract quantity 8 for the forward capacity market. 9 MS. FRAYER: And what I'd like 10 to do is try to just walk you through one 11 example, and then maybe you can go through 12 the other examples on your own. 13 If you look at case one, we 14 know that this project has submitted a 15 monthly contract price of $8 per kW per month 16 for the forward capacity market for 10 17 megawatts. We know that in this particular 18 point of the contract term, the forward 19 capacity auction, the main auction, the 20 forward capacity market cleared at $7 per kW 21 per month. Because of the contract for 22 differences nature of this master agreement, 23 the buyer, which is the electric distribution 24 companies, make up the difference to the 25 contract price, so they would pay the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2595 1 supplier an additional dollar per kW per 2 month for the selected contract quantity of 3 $10 per kW per month. And that's at the 4 bottom, gets us to the $10,000 number. And, 5 again, this is simply meant to be 6 illustrative to just see how the contract for 7 differences works. 8 In this particular example, 9 also staying on case one, this project 10 selected to also settle 3 megawatts against 11 the locational forward reserve market and of 12 course bid those 3 megawatts into the 13 locational forward reserve market, and his 14 additional net locational forward reserve 15 market premium above and beyond the forward 16 capacity market price was $5 per kW per 17 month, and the actual locational forward 18 reserve market premium in the locational 19 forward reserve auction turned out to be $6 20 per kW per month. It's hard to see, but 21 hopefully on your printout it's a little 22 clearer. It's covered by the "C" in "Sample 23 Calculation." So in this instance the 24 supplier would be paying the buyer, the 25 supplier would be paying the Connecticut UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2596 1 distribution companies the difference, which 2 is $2 per kW per month times the contract 3 quantity for LFRM settlement. 4 And the last component in this 5 example is the call option, which had a call 6 option supplemental capacity payment of $4 7 per kW per month. So the supplier gets that 8 $4 per kW per month regardless of what 9 day-ahead energy prices would be, times the 10 call option quantity of 5 megawatts. 11 However, he must also then pay back or net 12 out from that payment the variable stream of 13 payments to the distribution company, which 14 revolve around the strike price that the 15 project has submitted, which is $55 per 16 megawatt hour in the case one example, and 17 the actual day-ahead energy market price, 18 which in this instance we set up to be 60. 19 So in this instance there is an amount 20 payable from the seller to the buyer, and 21 that's netted against his call option 22 capacity payment. 23 Therefore, the bottom line 24 under case one, his monthly payment is 25 composed of a $10,000 payment for the forward UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2597 1 capacity market, a deduction of $3,000 for 2 the locational forward reserve market, and 3 then an additional payment of $2,000 for the 4 call option, for a net payment of $9,000. 5 Now, this example is very 6 simple. It's meant to illustrate a situation 7 where there weren't any liquidated damages or 8 adjustments for ISO penalties or other 9 performance requirements, but it is 10 illustrating the concept of sort of the 11 contract for differences as the payment 12 stream can go both directions. 13 MS. NEELY: And, again, in the 14 example that's on the website, you can toy 15 with it. You can enter it, the formulas are 16 there, so you can play with this a little 17 more to see how it works. 18 MS. FRAYER: The values in 19 there are hypothetical, purely for 20 illustrative purposes, but the formulas are 21 intended to be accurate and correct. 22 MS. NEELY: So just to go 23 through a little bit the supplier obligation 24 under the contract, this is very synthetic, 25 so obviously please refer to the contract UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2598 1 itself. As we've said several times today, 2 it's very important to us that the facility 3 must be located in Connecticut. It must 4 qualify for Connecticut's local sourcing 5 requirement for generation and for 6 potentially some demand resources and other 7 demand resources just must be physically 8 located in Connecticut. 9 MS. FRAYER: So that they can 10 actually count for the installed capacity, 11 the demand side or the procurement side of 12 the requirement for the forward capacity 13 market. 14 MS. NEELY: It is very 15 important to us that the project comes on 16 line when it's supposed to come on line. 17 This procurement process has been launched to 18 advance the development process more quickly 19 than it would otherwise have happened under 20 market conditions. So the timing is very, 21 very important to us. As such, we have put 22 in place liquidated damages if the commercial 23 operation date is missed or if the capacity 24 of the facility is actually less than was 25 promised under the original financial bid. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2599 1 MS. FRAYER: And, in effect, 2 there's a lot of questions about what those 3 represent. They represent the fact that from 4 the perspective of ratepayers, once the 5 projects -- portfolio projects or a project 6 has been selected under this RFP, that is the 7 expectation about benefits, and there's a 8 foregone opportunity cost or lost 9 opportunities for ratepayers to the extent 10 that projects don't come on time and 11 replacement capacity needs to be bought or 12 higher prices are present across the market 13 because that capacity would have reduced 14 overall costs but hasn't because it's not in 15 the market. And that applies both for 16 commercial operation as well as sort of the 17 logic, if you will, once commercial operation 18 is reached why we have certain requirements 19 about maintaining the specified contract 20 quantity that the bidder had promised in its 21 proposal. 22 MS. NEELY: That also actually 23 speaks to the damages that we've included for 24 availability. The project is supposed to be 25 available at the level promised in the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2600 1 financial bid and as amended -- or as 2 attached to the contract. That is why there 3 are also liquidated damages for the 4 availability of the generation project that 5 is not applicable for demand resources. In 6 addition, there are certain requirements but 7 no liquidated damages on generation projects 8 to maintain their heat rate. 9 MS. FRAYER: And there's a 10 number of other sort of -- although this is a 11 financial contract from a settlement 12 perspective, we wanted, to the extent it's a 13 15-year, very long-term contract, we wanted 14 to ensure that the ratepayers were getting 15 what they had supposedly been proposed to 16 get, and therefore there are some elements of 17 the contract that are much more similar to a 18 physical contract, including some of the 19 requirements about how the supplier must 20 participate in the different ISO New England 21 markets which we are settling against. 22 Again, the intent here is that what we're 23 trying to do is ensure that the ISO New 24 England markets perform as competitively and 25 as robustly as envisioned by those that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2601 1 designed the markets and to ensure that the 2 cost to ratepayers are competitive and as 3 effective and as efficient as possible. 4 MS. NEELY: And we know some 5 of you in your comments on the contracts made 6 concerns that the bidding requirements may be 7 considered uncompetitive, both at an ISO 8 level or a federal level. We're looking into 9 that issue, and we will amend whatever needs 10 to be amended to make sure they are 11 consistent with legal requirements. The 12 intent for those bidding requirements was 13 that bidders are being paid a fixed amount 14 under the contract, and we don't particularly 15 feel that bidders should be earning rates on 16 top of that amount in the contract on the 17 capacity market. So we'll do what we can do 18 to balance our views on that issue with the 19 legal requirements. 20 MS. FRAYER: And, effectively, 21 all the requirements have been tailored to 22 the extent we can right now to the settlement 23 agreement and to the details of the proposed 24 market rules that have been issued by ISO. 25 So we have not tried to -- we've been very UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2602 1 considerate and very careful about ensuring 2 that what we are proposing is physically 3 doable and consistent with the rules that 4 have been laid out very strictly in all those 5 FERC and ISO documents. 6 MS. NEELY: And, finally, just 7 one last word about supplier obligations. 8 The project's completion and performance 9 security is required to be paid at the 10 execution date -- execution date and will be 11 required through the entire term of the 12 contract. I know we received some questions 13 on that. It is a level before the COD date, 14 and that then decreases the market strongly 15 afterwards, for generation projects that's a 16 hundred dollars a kW before COD and then 25 17 per kW afterwards. The security for demand 18 resources -- and again, now, that's all 19 demand resources, there's no distinction 20 between different categories -- will be $5 a 21 kW before COD and 15 after COD. Those 22 security requirements, whatever bidders have 23 supplied already to ISO can be netted against 24 this amount, so we're not trying to double up 25 security on you. We realize that you're UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2603 1 posting security to ISO as well, so those 2 would be netted against what you've already 3 provided to ISO. 4 MS. FRAYER: But it's 5 important to keep in mind why we need 6 additional security on top of what financial 7 assurances participants may post into the 8 organized markets. The reason being is that 9 the potential -- the performance and 10 security -- project completion and 11 performance security is not going to be used 12 unless there is effectively an early 13 termination, and so from the perspective of 14 ratepayers, it's their insurance policy or 15 security that they're going to actually 16 receive the benefits that they expect over a 17 very long term, potentially long-term 18 contract, one that exceeds the time dimension 19 of the organized market, the spot 20 transactions and monthly balances in the 21 billing statements from ISO. In effect, 22 we've got a very long-term contract here 23 potentially with a long-term payment stream, 24 and it's important for us to have some 25 security, credit security that that's going UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2604 1 to be fulfilled. 2 MS. NEELY: This next slide 3 we're just going to skip for now. This is a 4 slide that had a lot of comments that we 5 received on Friday and read over this 6 weekend. We finished the presentation last 7 week. So I think we're going to hold off on 8 commenting on this slide. We discuss some of 9 the issues that bidders had in the afternoon 10 session because all of these three topics 11 were very controversial, so rather than 12 present them, let's just deal with them in Q 13 and A. 14 MS. FRAYER: Effectively, in 15 terms of the three topics, just so we go 16 through it, it's market -- what happens to 17 the contract if there are market rules and 18 the obligations of the supplier. There were 19 requirements or terms in the contract 20 regarding change of control assignment and 21 sale provisions. Our intent here is to 22 ensure that the project execution risk that 23 we had measured in the bid evaluation process 24 is maintained through at least a short period 25 after commercial operation. Although we also UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2605 1 recognize that people are looking for 2 third-party lenders to help finance it, we've 3 tried to already incorporate that, and we're 4 very concerned with the unique nature of 5 lending institutions in helping realize these 6 types of projects. And the last aspect is 7 the governing law, which actually is not very 8 controversial, but there are very specific 9 legal requirements that are part of the 10 contract in terms of sort of jurisdiction, if 11 you will. 12 MS. NEELY: Finally, we just 13 wanted to walk through, there are two 14 different contracts, and while we generally 15 just talk about the contracts as an aggregate 16 and a lot of the clauses we've talked about 17 up until now are very similar between the 18 two, we did want to highlight some of the 19 differences. And for those of you that do 20 have demand resource projects, if you have 21 questions on the specific nature of that 22 contract, please bring them up this afternoon 23 or send questions to the RFP manager so we 24 can make sure that those are very clearly 25 highlighted to you. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2606 1 MS. FRAYER: I think the 2 differences are primarily geared towards the 3 physical nature, I think that's the best way 4 to describe it, of the resource, the 5 generation resource, and that's actually also 6 represented in the fact that there's 7 different project security deposits and 8 different completion and performance credit 9 requirements on these two different types of 10 projects. But there are specific operating 11 requirements on generation. With respect to 12 demand resources, there are specific 13 eligibility requirements based on the 14 proposed ISO rules, and we acknowledge within 15 the contract that those may change from time 16 to time as they are finalized and further 17 developed. There's different adjustments to 18 the contract quantity that take place with 19 respect to demand resources because of the 20 nature of those resources that differ from 21 the contract quantity provisions for 22 generation. 23 MS. NEELY: And specifically 24 one of the challenges we've faced and are 25 facing with demand resources is that the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2607 1 rules for their participation in the forward 2 capacity market in ISO are still being 3 designed, so we're working with a little bit 4 of a moving target in that contract, and 5 we're trying to create the contract to really 6 be fully aligned with ISO rules. So that's 7 our intent and we're still dealing a little 8 bit with that. 9 MS. FRAYER: And effectively 10 with respect to liquidated damages as they 11 may apply, those have also been, I would say, 12 they've been adjusted to be specific to the 13 requirements of generation versus demand 14 resource type contracts. But there are also 15 a lot of commonality between the two 16 contracts, and that was very explicit to the 17 direction that we took to ensure that there's 18 no bias implicit in one type of resource over 19 another, and this is really going back to the 20 initial objectives we set out for us, that we 21 want to do a single all-source RFP where 22 we're allowing different types of resources 23 to compete on an equal footing. 24 Should we take a break? 25 MR. LUSTERBORGHS: Yes, let's UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2608 1 take a 15-minute break at this point and come 2 back at 11:25. 3 (Whereupon, a recess was taken 4 from 11:10 a.m. until 11:26 a.m.) 5 THE CHAIRPERSON: So what we 6 thought we would do at this point is perhaps 7 first I'd like to go back and see if we can 8 entertain questions, if you have any, on the 9 slides in particular. I'd appreciate it if 10 you'd point out the slide or at least 11 describe it so we can then put it on the 12 screen and everybody can take a look at it at 13 the same time while your question is getting 14 asked. 15 The plan is we'll kind of walk 16 through the slides, and then we'll break. 17 We'll break for a lunch period. The 18 intention would be to return promptly at 19 1:00 and then to begin the process of walking 20 through Q and A. 21 Now, again, we have a number 22 of questions that were already asked of us by 23 e-mail, and so we'll begin by taking those up 24 and knocking them off one after the other, 25 and then we'll start on additional questions. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2609 1 Notice the white box on the 2 lower riser right next to Mr. Coretto. Keep 3 your fingers out of there, Michael. The box 4 is our elegant method for taking anonymous 5 questions. You can sneak back here at 6 lunchtime when nobody is here and drop your 7 question in the box. You are welcome to 8 identify yourself or not, as you choose. 9 However, we will not identify you when we 10 pose the question and answer it so everybody 11 has a reasonable level playing field. 12 Please, jump right in. 13 MS. FRAYER: And we will post 14 these same questions and answers on the RFP 15 website and the Q and A as well for anybody 16 who wants to sort of listen more than they 17 want to take verbatim notes. 18 THE CHAIRPERSON: So on the 19 slides, does anybody have questions on the 20 slides? 21 Come on. If I tell you 22 there's going to be a quiz, does anybody have 23 questions on the slides? 24 (No response.) 25 THE CHAIRPERSON: Really? We UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2610 1 must be getting really good at this. Oh, 2 it's just that everybody is hungry and you 3 want to be out of this room. 4 All right, in that case, let's 5 go ahead and break at this point. We need to 6 do a little caucus and get ourselves 7 together, and we will return here at 1:00 for 8 part 2. 9 Was that a question or are you 10 just looking at your watch? 11 A VOICE: No, just looking at 12 my watch. 13 THE CHAIRPERSON: Do I seem 14 overly hurt? 15 A VOICE: No. Last time I did 16 that, I won something at an art auction. 17 THE CHAIRPERSON: All right. 18 In that case, ladies and gentlemen, thank you 19 for your time and attention, and we will see 20 you back here at 1:00. We will start 21 promptly. 22 (Whereupon, a luncheon recess 23 was taken at 11:31 a.m.) 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2611 1 AFTERNOON SESSION 2 1:05 P.M. 3 4 THE CHAIRPERSON: Only one 5 person submitted a couple of questions that 6 were left in the box. I sent them off to the 7 handwriting analyst, and we'll have your name 8 shortly. But anybody who wants to submit 9 anything further is welcome to leave them in 10 the box, and we'll pick up on those as we go. 11 As I had threatened earlier, I think maybe 12 what we'll do at this stage of the game is go 13 to the questions that we received in advance 14 through the e-mails, and so forth. We 15 received a fair number of them, and so maybe 16 we'll kind of walk through these. Maybe 17 we'll just kind of read them out and then 18 provide you with the answer here. 19 The first question was, with 20 the financial bids due on December 13, 2006, 21 it's likely that entities proposing to build 22 generation projects will be relying on 23 initial cost estimates related to matters 24 such as interconnection costs and/or EPC 25 contractor work, essentially turn-key UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2612 1 generation contract. Will suppliers have an 2 opportunity to refine their bids past -- or 3 post December 13 or will their financial bids 4 be binding? 5 Do we want to start here? 6 MS. FRAYER: We acknowledge 7 that the time frame between the date on which 8 financial bids are due and the date -- the 9 latest date by which the decision approving 10 the contracts as given is quite lengthy and 11 probably outpaces the commercial terms, the 12 changing commercial terms that developers are 13 under to develop their commercial projects. 14 At the same time, there's a substantial value 15 for us to be able to have financial bids from 16 parties on December 13 that do not change 17 over time. However, I think what we'd like 18 to do is probably ask people for their 19 opinion at this point to find out if there's 20 a way that, keeping those two sort of 21 tradeoffs handy, what alternatives they could 22 suggest that would allow them to more 23 reasonably -- produce more competitive, let's 24 say, bids or proposals while at the same time 25 understanding kind of our position with the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2613 1 need to have financial firmness in the bids 2 so that we can evaluate on an 3 apples-to-apples basis. We thought we might 4 ask you all if parties are interested to 5 submit comments on it within the next five 6 business days. 7 THE CHAIRPERSON: We're 8 mindful of the fact that there are real world 9 circumstances where these numbers may, in 10 fact, legitimately change. We recognize that 11 the costs of steel and labor and construction 12 materials and equipment, and so forth, may go 13 up, may go down. We also recognize that it's 14 going to take us a little time to review the 15 bids. We recognize in the commercial world 16 that many times when people offer bids, 17 they're binding for -- offer you prices for 18 constructing these bids, they're binding for 19 30 days or 60 days or something, and we 20 recognize that doesn't match up with our time 21 frames very well. On the other hand, we also 22 need to guard against setting up a situation 23 where we wind up with people either 24 recognizing this risk and overcompensating 25 for it by adding a whole bunch of money to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2614 1 the bid by way of, in effect, a premium 2 against that risk, or, in the alternative, 3 people underbidding on the knowledge that 4 there's some sort of a mechanism for fixing 5 the problem later on and bidding it too low, 6 and, number one, they know they can't 7 sustain, in the hopes of recouping it on the 8 other end. So we appreciate the advice and 9 guidance of the participants on this. 10 Anything more on this one? 11 MS. FRAYER: The only thing I 12 would say is that Section 3.8 of the RFP does 13 describe what is already currently 14 contemplated in the RFP for adjustment of 15 bids that would take place beyond November 8, 16 2007. So to the extent that you're working 17 off of what we've already written or 18 referring to that, I would just ask that your 19 written comments are aligned with what's in 20 Section 3.8. 21 THE CHAIRPERSON: Next 22 question. If an applicant establishes by way 23 of an appraisal the value of a property, can 24 an applicant post in lieu of cash or a letter 25 of credit (the $25 per kW) and instead give a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2615 1 mortgage on a building which would be in 2 recordable form? 3 I think our view on this is 4 that the mortgage is, in effect, a lien under 5 Connecticut law, in any event, which is not 6 one of the forms of security we called out 7 under this process. 8 We think that a mortgage lien 9 in particular would probably be problematic 10 for the DSCOs because we think it probably 11 gives them a de facto interest in generation. 12 So for those reasons, we're inclined not to 13 go there. Anything else to add to this one? 14 Okay. 3. Currently no 15 mechanism exists for notification to be given 16 when facilities are delisted. How will such 17 delisting be tracked and/or accounted for in 18 connection with calculating the available 19 capacity for needs assessment purposes? 20 I think we've already 21 indicated that we're not going to rerun the 22 needs assessment. We have assembled several 23 different estimates of the needs assessment, 24 and we have tried to demonstrate that we have 25 taken all of those pieces of advice under UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2616 1 consideration, and we're looking at this in a 2 rather broad form as opposed to targeting on 3 a specific narrow magic number. 4 We think the question is quite 5 relevant for bid evaluation purposes. We're 6 tracking all the accepted plant closures as 7 they're announced by the ISO New England. 8 Those of you who are involved know at the PAC 9 meetings ISO New England announced this 10 summer that New Boston was being approved for 11 retirement. Once an announcement is made, we 12 incorporate the retirements as permanent 13 delists in our model. So that's how we kind 14 of pick them up, and we know of no other 15 mechanism on this. We recommend that the 16 players keep track of this as they go. 17 Do you want to add some more? 18 MS. FRAYER: Yes, I think 19 potential bidders can do -- have the ability 20 to monitor the same information we're 21 monitoring to make sure that they are -- they 22 are on top of all of the same market 23 information that we're planning to use in the 24 bid evaluation. 25 THE CHAIRPERSON: The next one UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2617 1 is kind of related to the same thing. 2 As part of the RFP process, is 3 the Department willing to require the 4 delisted facilities to be publicly identified 5 with the Department and to potential 6 competing bidders? 7 Again, we expect that all 8 bidders, and we, of course, will be 9 monitoring the ISO New England proceedings 10 and the public announcements. If we come 11 across a situation where the Department and 12 the coordinator both believe that it's 13 relevant and vital, we may post additional or 14 updated information about the economic 15 analysis for the bid evaluation process, for 16 example, updated fuel supply prices, and so 17 forth. But, again, we're not prepared to 18 function as the repository of delistings, and 19 so forth. We recommend, again, that the 20 players follow the ISO New England process 21 and pick this data up from there. 22 MS. FRAYER: Again, the RFP 23 website is supposed to be sort of a 24 one-source shopping, so we hope to be able to 25 maintain good communication with potential UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2618 1 bidders through that. Also, feel free at any 2 point, if anyone has questions, I think 3 there's mikes in the front, or if there's 4 something as a follow-up you'd like to ask 5 now, just feel free to jump up. 6 THE CHAIRPERSON: Yes, as long 7 as we're there. So we've knocked off three 8 or four of these. Anybody want to follow up 9 on those questions? 10 (No response.) 11 THE CHAIRPERSON: Okay, let's 12 go to the next. Section -- I didn't leave 13 very long intentionally. 14 Section 3.2(d) of the 15 generator -- sorry. Subsection (d) of 16 Section 3.2 of the generator contract 17 template references summer seasonal claimed 18 capacity. What methods or tests will be used 19 to determine summer seasonal claimed 20 capacity? What conditions will be used for 21 these tests? For example, will 22 conditions of -- and I think they meant 23 90 degrees Fahrenheit and 45 percent 24 humidity -- be used as the test conditions? 25 Maybe I'll just let you start UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2619 1 right in. 2 MS. FRAYER: And I'll let Dana 3 pop in if he wants, but the basic idea is 4 actually resurfaced in Section 2.5 of the 5 draft master agreement for generation. The 6 summer seasonal claimed capability is 7 supposed to be defined consistent with ISO 8 New England's methodology in their capability 9 audits, and that's documented in ISO New 10 England's Manual 20, so that's where I would 11 refer people to take a look at because that 12 is the level of capacity at which resources 13 are then certified to participate in the 14 forward capacity market, which is the prime 15 market off of which you want to settle. 16 If there's any more questions 17 about those, I would probably ask you to 18 contact ISO New England to find out more 19 technical parameters, but we're basically 20 utilizing their own guidelines. 21 MR. ZENTZ: I don't think I'd 22 add a lot, other than to say in the case of a 23 thermal resource, you, of course, can't 24 predict the exact conditions of your test day 25 to be 90 degrees Fahrenheit exactly and UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2620 1 45 percent humidity exactly, and so we're 2 mindful of that, and we will accept 3 corrections or calculations from existing 4 site conditions at the time of the test to a 5 theoretical point on a warrant performance 6 curve. 7 MS. FRAYER: And just sort of 8 keep in mind -- and this is actually covered 9 in the draft master agreement for 10 generation -- there's a whole process related 11 to the testing of the summer seasonal claimed 12 capability because there's also a whole 13 process at ISO to request retests or 14 additional tests, and those are represented 15 in our agreements as well because we do allow 16 for generators who have done poorly on those 17 tests to try to seek a retest from ISO New 18 England. 19 But, again, the idea is that 20 we want the capacity that ISO has certified 21 as qualified for their markets to be the 22 designated contract quantity in our contract. 23 THE CHAIRPERSON: Next 24 question. Heat rates of certain units, for 25 example, combined cycle generators, change as UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2621 1 they ramp up production. Will combined cycle 2 projects have an opportunity to be evaluated 3 at the intervals of their heat rates? 4 MS. FRAYER: I'll leave that 5 one to Dana. 6 THE CHAIRPERSON: I was going 7 to say, let's go directly to the heat rate 8 man. 9 MR. ZENTZ: I think what we're 10 trying to get at is that we need to see an 11 ASME certified test related to the final 12 performance of the unit in commercial 13 operation, and again, it gets more to the 14 compliance with the warrant performance 15 curve, not a single point or a single load 16 condition or a single atmospheric condition. 17 So we think that when you get to the point of 18 looking into these ASME test procedures, 19 you'll see that they compensate for various 20 load conditions, or, that is, it allows for 21 compensation to be made from the test point 22 versus the day of theoretical warrant curve. 23 So we'll accept those corrections. The unit 24 does not have to be tested, for example, to 25 satisfy its ability to operate on a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2622 1 theoretical curve. 2 MS. FRAYER: And those 3 guidelines are in Section 3.4(d) of the draft 4 master agreement for generation if anybody 5 wants to go back and take a look at what we 6 included there. 7 THE CHAIRPERSON: Just stand 8 up so we can hear you. 9 A VOICE: Sure. A question on 10 the heat rate issue. We were really 11 interested in during the evaluation stage, 12 you would look at a peaking unit at its heat 13 rate, but on a base or intermediate project, 14 you would look at different set points and 15 the heat rate based on the unit as it would 16 ramp up and down or be dispatched at 17 different load levels. 18 MS. FRAYER: You mean in the 19 bid evaluation? 20 A VOICE: Yes. 21 MS. FRAYER: We would, I think 22 as part of the technical requirements that 23 are due during the qualification submission, 24 we would like to have the best available 25 information that you can provide, and if you UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2623 1 can provide those curves, we would utilize 2 that in the bid evaluation. 3 MR. ZENTZ: Can you give us 4 the heat rate versus output curve? 5 A VOICE: I'm sorry? 6 MR. ZENTZ: If you can supply 7 the heat rate versus output curve for your 8 machine, then we can -- 9 A VOICE: You can use a 10 continuous curve or -- 11 MS. FRAYER: Yes, or basically 12 a point estimate version of that. 13 A VOICE: Including 14 supplemental firing? 15 MS. FRAYER: We can 16 incorporate that. 17 MR. ZENTZ: Your choice. 18 A VOICE: Thank you. 19 THE CHAIRPERSON: Okay, 20 further follow-up on heat rates? 21 Okay. Let's see, next 22 question. Will one or both utilities -- and 23 I think here they mean CL&P and United 24 Illuminating -- be countersignatories to the 25 generator contract? UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2624 1 The answer to that is there is 2 going to be only one DSCO that will be 3 serving as the counterparty per agreement. 4 MS. FRAYER: And I think there 5 was another question that came in about how 6 is that DSCO determined if there's some 7 ambiguity between electrical versus physical 8 location, and there may be a project that's 9 physically located in one service territory 10 but electrically located in another, and I 11 think the RFP did contemplate that situation, 12 but if there are additional comments that 13 interested parties have on what was already 14 contemplated in the RFP, we are willing to 15 take those comments under advisement. Again, 16 if you can get that to us by next Monday 17 close of business, that would be appreciated. 18 THE CHAIRPERSON: Okay. Next 19 question. If a facility has an outage during 20 one month, for example, for scheduled 21 maintenance, will that facility be permitted 22 to make up the outage in succeeding months? 23 Does that answer change if the outage is 24 unplanned? 25 No. If there is no UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2625 1 accommodation for typical outages, this will 2 be reflected in higher bid prices. 3 Do you want to -- 4 MS. FRAYER: Well, I think 5 what we want to do is make sure that this 6 question that the contracts -- that potential 7 bidders take a look at the contracts. We're 8 asking as part of the qualification 9 submissions describing the technical aspects 10 of the project and then those will be 11 appended to the contract for a series of 12 information. For example, there is the 13 potential for the proposed project to file 14 different contract quantities across its 15 term. A project will also have to file 16 target availability, which can change from 17 year to year across the contract term. And 18 so, in effect, the project has a capacity to 19 incorporate outages into its analysis. The 20 timing of those from the perspective of the 21 liquidated damages for availability is less 22 important because the actual task schedule 23 according to the Department is annualized. 24 It's not time specific within the year. 25 There may be other types of payments, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2626 1 reductions or penalties that the resource 2 incurs as a result of its availability in 3 real time for the commitment or capability 4 period vis-a-vis the actual forward capacity 5 market rules and ISO New England rules, but 6 that's a risk that resources have to bear 7 with or without this contract. 8 MR. ZENTZ: Yes, basically 9 part of the question was whether you can make 10 up for an outage. I don't understand how 11 that works. If you're out, you're out, and 12 being available later doesn't make up for 13 when you're out earlier. And so we won't 14 provide accommodation for that from an 15 availability standpoint, but the important 16 thing to understand is that we're not trying 17 to make this an onerous requirement. We 18 would like the bidders to tell us when you'll 19 be available, when you expect to be 20 available, and then if for whatever reason 21 you won't be available, whether you're going 22 to program in some program maintenance or 23 some level of unexpected outages, whatever 24 that is, tell us what it is and then meet it, 25 because once you stipulate to the target UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2627 1 availability, then we would like to count on 2 you being there. 3 MS. FRAYER: And we will use 4 that target availability both in the bid 5 evaluation and then once and if a project is 6 selected throughout the contract term. 7 MR. ZENTZ: Right. There's a 8 follow-up question. 9 THE CHAIRPERSON: Yes. 10 A VOICE: Target availability 11 is really based on your maintenance schedule, 12 and your maintenance schedule will vary 13 according to how many hours you operate 14 annually. So, for instance, if you ask me 15 what year we would be doing maintenance, I 16 would ask you, well, how many hours will we 17 be operating, and I could forecast out the 18 maintenance schedule. But by requiring us to 19 put in an annual availability based on 20 maintenance, then we would have to know how 21 much we're going to run, and that's an 22 unknown. So requiring an annual availability 23 number is less appropriate than using 24 maintenance based on hours or availability 25 based on hours of operation. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2628 1 MR. ZENTZ: Well, again, we're 2 not intending to require the bidders or to 3 stipulate their availability for them. We 4 would like for you to tell us how you're 5 going to perform. I understand you may not 6 know when you're going to operate. However, 7 it would seem that if this project or this 8 RFP and the subsequent contract were going to 9 cover your fixed capacity costs, you'd be 10 left with your marginal energy dispatch costs 11 into the market, and if you're a combined 12 cycle resource, I would think that would be a 13 significant amount of hours in the year that 14 you'd be running for energy, and therefore 15 you could pro form that in a way that would 16 allow you to stipulate your target 17 availability. 18 MS. FRAYER: And, actually, 19 it's important to keep in mind this is not -- 20 when we talk about how many hours am I 21 operating, this isn't a physical agreement 22 where the distribution companies are going to 23 be calling you and telling you, You have to 24 operate this hour, or this hour, or this 25 hour. Primarily the contract is geared UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2629 1 around the forward capacity market, which 2 doesn't say that you have to produce energy 3 in a given hour, but the forward capacity 4 market will say that you have to be available 5 to participate and to bid into the ISO New 6 England energy market. 7 If you choose, for example, 8 the call option aspect of it as part of your 9 proposal, that too isn't a physical 10 requirement, it's a financial requirement. 11 So we would think that the projects who are 12 being proposed to us, project sponsors could 13 take into account and make that determination 14 as part of the risks of operating in the 15 market. 16 THE CHAIRPERSON: Further 17 follow-up? 18 (No response.) 19 THE CHAIRPERSON: Okay. Next 20 question. Subsection (b) of Section 3.3 of 21 the generator contract template would require 22 suppliers to bid into the FCM for a one-year 23 contract. Based on their projected 24 commercial operation dates, some projects 25 will be able -- excuse me, will be eligible UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2630 1 to receive five-year FCM contracts. Would 2 the DPUC allow suppliers with contracts 3 awarded in this RFP to bid for a full 4 five-year FCM contract? 5 I think our answer on this is 6 no. Because the contract that's awarded 7 under this RFP is designed to support the 8 construction, and so forth, and provides 9 revenues for a period for as long as 15 10 years, we don't particularly want, nor do we 11 believe it's necessary, for a new capacity to 12 bid for the five-year option in the FCM. 13 Keep in mind that the five-year option was 14 essentially there to support the capital -- 15 the capital costs and investment, and we're 16 doing that through this process. So we're 17 basically in the mode of, no, stick to the 18 one-year contract. 19 Do we want to add something 20 more to that? 21 MS. FRAYER: Well, this is 22 sort of a tack on another question that we've 23 seen that came out related to this issue, is 24 not only the tenure, the time dimension of 25 the bidding requirements of the FCM, but also UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2631 1 the magnitude of the bidding requirements in 2 the FCM, and it's an issue that we probably 3 aren't ready to talk about today, but we 4 definitely want to take it into consideration 5 and consider it further. But I think on the 6 tenure side, we feel that the one-year 7 increments are the best alternative with 8 respect to the benefits to ratepayers. 9 THE CHAIRPERSON: Okay. Next 10 question. Does the commercial operational 11 date have to be a date certain or can it be 12 tied to meeting certain criteria, for 13 example, a commercial operation date on or 14 before a specified date, and under what 15 terms? If the date must be specified, can 16 the contract begin before the stated 17 commercial operation date if the plant comes 18 on early? (Recognizing the 15-year term 19 limit, the contract could terminate 15 years 20 from the actual commercial operation date.) 21 I think we're in the mode of 22 believing that the commercial operation date 23 does not need to be a date certain. There 24 are certain damages, certain liquidated 25 damages that are due if the commercial UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2632 1 operation is not attained before the 2 stipulated date. However, there's nothing in 3 the agreement that would bar a project from 4 starting commercial operations earlier. The 5 term of this RFP and the contracts resulting 6 from it begins after commercial operation, as 7 we noted in Section 5.2 of the draft 8 agreements. 9 Do you want to tack some more 10 on to that? 11 MS. FRAYER: So basically, as 12 an example, we do want bidders to provide as 13 part of their proposal a specific date which 14 is going to be a milestone date for COD, 15 December 12, 2010, or whatever the date may 16 be, so that is required. And if a project 17 actually reaches commercial operation prior 18 to that date, they are free to participate in 19 the ISO New England markets because 20 effectively as part of its costs of 21 commercial operation, it's already been 22 approved, tested and ready to participate in 23 the ISO New England markets. However, the 24 payments and the settlement amounts in the 25 contract will start as of the original UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2633 1 commercial operation date. 2 THE CHAIRPERSON: Okay. Next 3 question. Will the DPUC issue a revised 4 generator contract template following the 5 October 10 technical session? If so, when? 6 The answer is yes, we will 7 issue an interim decision adopting the final 8 master agreements for both the generation and 9 demand resources in October; that is, this 10 October, this month, and -- well, with the 11 time lines being what they are, you need to 12 specify. 13 As with any Department 14 decision, we'll issue a draft decision. All 15 interested parties will have an opportunity 16 to submit written exceptions and present oral 17 argument. After the oral argument and the 18 written exceptions, we may revise further the 19 master agreements, and then we'll move to a 20 vote on a final decision. 21 Fred. I'm sorry, unidentified 22 person on the right. 23 A VOICE: Thank you. I'd like 24 to go back to the previous question for just 25 a second. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2634 1 THE CHAIRPERSON: Sure. 2 A VOICE: And that has to do 3 with commercial operation date and if a plant 4 achieves its commercial operation date prior 5 to a specified outside date. I'm not sure 6 that I understood the full answer. I thought 7 I was hearing one thing from the Chairman, 8 and I thought, Julia, I think I was hearing 9 something a little bit different. 10 And the question is -- and you 11 can tell me if I'm right or if I'm wrong -- 12 the question is, if you achieve your actual 13 commercial operation date earlier than a 14 specified date -- I understand that once you 15 achieve commercial operation you can start 16 participating in the ISO markets, but the 17 question is, if you achieve your commercial 18 operation before your specified date, can you 19 also start receiving your contract payments 20 upon commercial operation date, which might 21 be before whatever the specified outside date 22 is? 23 MS. FRAYER: The intent is no 24 because, in effect, when we look at your bid 25 evaluation and take into account the benefits UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2635 1 the project produces, it's specific to the 2 time lines you provide in your milestones, 3 and so in order to make sure that we maintain 4 an apples to apples, an equal footing 5 comparison, we want the contracts to start 6 with the dates that were used to actually 7 select projects. However, we think that that 8 doesn't stop bidders, as you mentioned, to 9 participate in the markets and get the 10 benefits of their -- the fruit of their labor 11 early and get market payments for their 12 energy capacity and what other products they 13 may provide. 14 THE CHAIRPERSON: Maybe I 15 should back up and provide some clarity 16 because I now look at it and see how you 17 could arrive at this concern, so let me try 18 it with you this way. 19 We care that the plant be in 20 operation on and after a certain date. To 21 the extent that people finish early and they 22 want to begin operations earlier than that, 23 well, good for you. You don't -- you would 24 not be in a position where you would simply 25 have to sit there and have this unit fully UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2636 1 operational and not run it until the COD 2 because you have to hit that date certain. 3 So that's what I was trying to get at with 4 the non-date specific. 5 I guess a more accurate way of 6 putting it is you need to be in operation by 7 the date that you specify in this commercial 8 operation date. If you want to go earlier 9 than that, well, fine and dandy and have a 10 great time. Okay? 11 Next question. Subsection (i) 12 of Section 12 of the Energy Independence Act 13 provides for negotiation of a final contract 14 with the winning bidders, and then it goes on 15 to quote the language: An electric 16 distribution company shall negotiate in good 17 faith the final terms of the draft contract, 18 submitted under subsection (e) of this 19 section and included in a proposal approved 20 under subsection (g). Either party may 21 request the assistance of the Department to 22 resolve any outstanding issues. No such 23 contract may be effective without approval of 24 the Department. 25 The question goes on to ask: UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2637 1 The current generator contract template is 2 very prescriptive. Consistent with 3 subsection (i) of Section 12, what changes 4 will be permitted to be negotiated after the 5 final generation contract template is issued? 6 MR. LUSTERBORGHS: Would you 7 like me to take a crack at this? 8 THE CHAIRPERSON: Well, take a 9 crack at this, Counsel. 10 MR. LUSTERBORGHS: 11 Essentially the contracts that everyone is 12 going to sign and follow pursuant to Section 13 12(e) in the Department's view will be final 14 contracts, so there will be no necessity for 15 any further negotiation of the so-called 16 final terms because the contract as filed 17 under Section 12(e) will be the final 18 contract. And the rationale behind that is 19 that we've determined that the best way to 20 evaluate, compare the projects and make 21 selection is on an apples-to-apples basis, 22 and that's through a standard contract. If 23 we have different contracts that are 24 negotiated with different terms, we'll be in 25 a situation where it's difficult to make that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2638 1 comparison, and then we have all the 2 regulatory risks associated with our 3 selection amongst contracts that have 4 different final terms in them. 5 THE CHAIRPERSON: I should 6 just point out that we've made an exhaustive 7 effort to arrive at these standardized 8 contracts. We have allowed substantial 9 opportunity for people to offer their 10 suggestions, to react to what's already been 11 done, to provide comment and still more 12 comment, and our intention is essentially to 13 perfect the underlying template and then use 14 that without modification. 15 MR. LUSTERBORGHS: I guess I 16 would just add that it's our view that that 17 language regarding a 30-day negotiation 18 period is not a substantive element of the 19 statute or that section of the statute. 20 THE CHAIRPERSON: The next 21 question is the utilities -- and I think here 22 they mean CL&P and United Illuminating -- 23 have raised various objections to executing 24 RFP contracts. 25 I'd like to point out I'm UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2639 1 reading the question. This isn't my 2 language. This is what was supplied to me. 3 I can see lawyers already getting ready to 4 leap to their feet. 5 If the utility refuses to sign 6 a contract with a winning bidder, what 7 actions will the DPUC take to validate the 8 contracts? 9 MR. LUSTERBORGHS: Do you want 10 me to -- 11 THE CHAIRPERSON: Sure. 12 MR. LUSTERBORGHS: Unless the 13 electric distribution company gets a court 14 order excusing it from executing a contract, 15 the Department's position will be that it 16 will take any and all legal actions available 17 to it to enforce the execution of the 18 contracts, and that includes but not limited 19 to our ability under Section 16-10 to take 20 court action with the assistance of the 21 Attorney General seeking enforcement of our 22 order. The Department also has the ability 23 under Section 16-41 to bring civil action 24 itself or civil penalties against any 25 regulated entity that does not comply with UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2640 1 the Department's orders. And those would be 2 first and foremost, and we'll explore what 3 other legal avenues are available. 4 THE CHAIRPERSON: But we'll do 5 it in a really nice way. 6 All right. Let's see, the 7 next question -- oh, I want to be sure I 8 didn't miss a hand. 9 Okay, the next question. For 10 financing purposes, what is the process for 11 modifying an executed contract if, for 12 example, a potential lender raises unforeseen 13 issues with respect to the non-price terms of 14 the contract? 15 Want to take a pass at this? 16 MS. FRAYER: I want interested 17 parties to take a look at Section 2.1 of the 18 draft master agreements because those do 19 allow for limited modification of Exhibit A 20 to the agreements prior to commercial 21 operation, which is probably the time frame 22 where you would -- the latest point at which 23 you would be doing any type of financial 24 negotiations. 25 In addition, if market rules UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2641 1 change per Section 12.6 and the supplier is 2 completely ineligible to participate in the 3 FCM as currently drafted, then the parties 4 must also restructure their contract. We 5 don't currently anticipate nor do the master 6 agreements anticipate any modifications right 7 after execution of the contracts. 8 So with that being said, we 9 understand that lenders sometimes have to be 10 finicky, and we would ask that potential 11 interested parties, bidders do seek the input 12 of potential lenders as soon as possible so 13 that we can incorporate anything that we 14 haven't yet foreseen and take it under 15 advisement as we think about the final master 16 agreements we're going to approve later this 17 month. 18 THE CHAIRPERSON: This, again, 19 goes at base to an issue of equity. As we 20 indicated in our earlier answer with respect 21 to the standardized contracts, the idea 22 behind this is to try and get contracts that 23 as much as possible are uniform, and we are 24 doing this in part to facilitate the process 25 of evaluation, but also in part because we UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2642 1 think that it's only fitting and appropriate 2 that if we're going to have an open bidding 3 and evaluation process, that it be just that, 4 and that we have real equity problems with 5 the idea of somehow going into a further 6 negotiation once the initial bidding award 7 decisions have been made because we think it 8 may work an unfairness on people who might 9 have been willing to negotiate something 10 better if they had been chosen. 11 So part of our reason for 12 being very firm on the standard contract idea 13 is because we want people to understand that 14 this is not Burger King. We don't rewrite it 15 any way you want it. It's kind of the 16 contract we've got, and you take it or not. 17 Any further uptake on that 18 one? 19 MS. FRAYER: The one thing I 20 wanted to note is really, from our 21 perspective, time is of the essence for us, 22 so we would like, if you have any written 23 comments, again, over the next week we'd like 24 to see those as soon as possible to consider 25 those. We have tried to recognize the unique UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2643 1 position of lenders in these agreements in 2 certain areas, and if there's adjustments you 3 need to see to get lenders comfortable, we'd 4 like to see those in red line form as soon as 5 possible. 6 THE CHAIRPERSON: Okay. Next 7 question, and this one gets the award for 8 eagerness. 9 If a supplier can provide 10 capacity online before November 2007, will 11 DPUC consider either retroactive payments or 12 an expedited administrative approval 13 proceeding? Good for you. 14 No. The short answer is I'm 15 afraid not, but I do give you extra points 16 for thinking about it. 17 The contracts are all being 18 approved at the same time, so there's no real 19 possibility of an expedited approval process 20 for any one. Retroactive payments, of 21 course, don't work because the contracts 22 would not have been approved. So the bottom 23 line is sorry, but that one won't work. 24 Next question. Many of the 25 damages provisions contain liquidated damages UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2644 1 that appear to be unrelated to any actual 2 damages, yet the supplier is asked to agree 3 that the damages are reasonable and not 4 disproportionate to the buyer's actual 5 damages. Is there any data the DPUC can 6 supply that would help -- let me try that 7 again. 8 Is there any data that the 9 DPUC can supply that would help the supplier 10 satisfy itself that the damages are 11 reasonable? 12 We have strived here to try 13 and create liquidated damages that we think 14 are reasonable and yet also serve the purpose 15 of incenting people to move in their correct 16 direction. As a general proposition, the 17 standard in this industry is that where 18 somebody does not perform, then they are 19 obliged to make whole the other entity. So 20 if you don't deliver generation or capacity 21 at the time and place you say you will, then 22 you're responsible for all the costs of that 23 energy or capacity being supplied by somebody 24 else. 25 So the bottom line is we're UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2645 1 guided largely by that principle. I don't 2 think we are prepared to publish data that 3 leads you through some sort of a magic 4 financial calculation that arrives at that 5 point. 6 MS. FRAYER: I don't think 7 it's necessary, but the idea is -- and if we 8 want to kind of go through it and we'll try 9 to address it also in the draft decision -- 10 again, there's two sets of liquidated 11 damages. There's damages related prior to 12 commercial operation because we want to 13 ensure that key milestones are being met and 14 commercial operation date occurs as promised 15 because, as I mentioned earlier, the bid 16 evaluation takes those milestones very 17 seriously in being able to do an 18 apples-to-apples analysis of the different 19 projects. 20 The damages we have for 21 intermilestones are all refundable if 22 commercial operation dates are achieved, the 23 final commercial operation date is achieved, 24 and that's the major, I think, consideration. 25 In fact, probably a good example of our UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2646 1 thinking, we don't want to make an onerous 2 process for suppliers here; we just want to 3 ensure that the process actually takes place 4 as envisioned and as proposed to us and 5 promised to ratepayers. 6 If the contract quantity is 7 below the -- the actuated capacity is below 8 the contract quantity at commercial operation 9 date, there's a liquidated damages payment 10 due. That amount has been set very 11 conservatively. In effect, it's trying to 12 put a price tag, if you will, on what the 13 replacement cost of the capacity is from the 14 ratepayers' perspective. If this capacity 15 doesn't come online, there's a replacement 16 cost, an opportunity cost that's lost for 17 ratepayers, and it takes time, of course, to 18 bring new infrastructure online, and we've 19 been very considerate of what we think the 20 costs are in reality and what we think would 21 be at the minimum a reasonable number to 22 expect in the form of liquidated damages. 23 THE CHAIRPERSON: One 24 additional point I should bring up and then 25 I'll give it back to Julia for a second here. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2647 1 We found in the range of comments that people 2 are kind of all over the place. Some people 3 think that these are way too low; some people 4 think they're way too high; some people think 5 we're just about right. So I'd suggest 6 there's not a great deal of cohesiveness on 7 this issue necessarily. 8 Any further follow-up on this 9 one? 10 MS. FRAYER: What I wanted to 11 sort of mention is there are also liquidated 12 damages that are possibly due for 13 underperformance with respect to specific 14 criteria during the term of the actual 15 operation of the facility, and we actually 16 had a specific question on this that I think 17 is probably appropriate to read during this 18 period as well. 19 The question reads: Given 20 that the monthly payment adjustment ratio in 21 Section 6.3 of the agreement incorporates any 22 unavailability penalties assessed to 23 suppliers in the FCM or LFRM, doesn't 24 inclusion of additional availability 25 penalties in Section 3.1(c), Section 3.2(d), UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2648 1 3.2(e) and 3.4(c) build in more supplier risk 2 and risk premiums for the potential 3 improvement and availability? 4 One of the things that I 5 wanted to make clear is that we'd like 6 interested parties to pay attention to the 7 nuance of those different sections. Section 8 6.3 in the description of the monthly payment 9 adjustment ratio talks to ISO performance 10 requirement or penalties for poor 11 performance, and the dynamic or, again, the 12 tenure in the ISO market is very different 13 from the tenure we have in this contract. 14 For example, the ISO isn't just going to take 15 the claimed capability from 1999 and assume 16 that as their baseline for looking at the 17 penalties. The ISO allows for a seasonal 18 adjustment of those and only factors that in 19 determination of penalties, whereas from the 20 perspective of bid selection and this RFP 21 we're signing a 15-year contract with a 22 15-year commitment at the longest, and the 23 replacement costs over such a long-term 24 period are quite different and therefore the 25 opportunity costs and therefore the need for UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2649 1 additional warranty, if you will, or 2 liquidated damages for poor performance. 3 Those could be avoided if the performance is 4 satisfied by the criteria that were proposed 5 in the original proposal. 6 So in that respect we thought 7 very carefully about the overall burden we're 8 putting on suppliers and weighed that very 9 carefully against what we thought would be 10 additional costs and whether those were, I 11 guess, valuable from a ratepayer perspective. 12 THE CHAIRPERSON: Would you 13 like to add? 14 MR. ZENTZ: Just to say that, 15 as Julia stated earlier, we think that if the 16 facility is designed, constructed and 17 operated as we all think it will be, no 18 damages will apply to anyone, and so that's 19 an important thing to understand. But in the 20 opposite scenario where a unit or a facility 21 is not performing as expected or as 22 warranted, then we need to have some kind of 23 recourse because we still have to, that is, 24 through these contracts and ultimately 25 through the LDCs, the distribution companies UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2650 1 have to keep the lights on. So we're 2 sensitive to trying to double up. We don't 3 want to double up. In fact, I'm sitting here 4 today going through our contract template and 5 pulling out all the various references to 6 payments and damages, and I'm coming up to 7 page 5 of my own notes on that topic, so 8 there's the potential that we may have gotten 9 a little aggressive and we're going to look 10 at that because it's a serious issue for all 11 of you, and we know it has an annual cost in 12 the bid, and we don't want that to happen if 13 that doesn't need to, so stay tuned. 14 THE CHAIRPERSON: Last call on 15 this one. Okay. 16 A VOICE: I have some 17 follow-up. 18 THE CHAIRPERSON: Oh, I'm 19 sorry. Yes, please. 20 A VOICE: I just wanted to 21 reiterate the point I think that this 22 gentleman was making -- 23 THE CHAIRPERSON: Mr. Zentz? 24 A VOICE: -- over here, or at 25 least address it, which is that there's a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2651 1 potential here because of the number of 2 different availability penalties that are 3 written into the contract that you are 4 overincenting something at a cost, and that 5 there's only so much incentive that can be 6 responded to, and once you've incented people 7 to do the best they can do, then the 8 consequences, adverse consequences of not 9 doing that being multiplied is basically just 10 adding a cost, a risk and a potential risk 11 premium that is not benefitting the customer 12 if the objective is to incent performance. 13 And that's the point of that question. 14 MR. ZENTZ: Believe it or not, 15 I'm not necessarily different than you on my 16 West Coast life. I actually sit on your side 17 of the room and sell power plants to people, 18 so I understand exactly what you're talking 19 about, and as I say, we're trying to be as 20 reasonable as we can but understanding that 21 this contract is not an ISO contract, and it 22 does not necessarily have the same 23 objectives, nor should it have the same 24 performance or damages provisions in it 25 because that other ISO market participation UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2652 1 contract is a separate agreement on the 2 facility. So we're looking out for our 3 interests, and we'll review these sections 4 and the answers. 5 A VOICE: Right, but in terms 6 of the year-to-year incentives, even though 7 the time frame that the ISO is dealing with 8 is much shorter, they operate each year and 9 the incentive stays in place as long as 10 you're in the market. 11 MR. ZENTZ: Right, thank you. 12 MS. FRAYER: And I think just 13 one thing to add on to this, it's not just 14 about the incentives from our perspective 15 because I hope our bottom line is that none 16 of these get paid, that would be the best 17 outlet, that no liquidated damages get paid 18 because everybody is performing as they had 19 presented in their proposal. But the idea is 20 also that the ratepayers when there is poor 21 performance suffer an opportunity cost and 22 have to go out and replace the missing 23 capacity. And ISO does not really care about 24 that replacement cost process. That is a -- 25 that is a ratepayer issue, and that's UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2653 1 something that we definitely wanted to 2 consider when we thought about what type of 3 liquidated damages do you want to charge. 4 MR. ZENTZ: I guess as long as 5 this horse is dead we'll kick him one more 6 time. The other thing to think about is that 7 we have, even at the levels we're presently 8 at, tried to be, and I think have been, very 9 conservatively compared to a typical buyer's 10 demand for full replacement power cost 11 coverage as liquidated damages, and I know 12 that that's a very expensive and unlimited 13 risk that any project I've ever been familiar 14 with won't take and can't take. So we're 15 trying to balance that. 16 THE CHAIRPERSON: Okay, any 17 further comment on this one? 18 (No response.) 19 THE CHAIRPERSON: All right. 20 Next question: Is the term deliverable 21 intended to convey anything beyond qualifying 22 for the local source requirement? 23 MS. FRAYER: The local 24 sourcing requirement defined the concept of 25 deliverability for the forward capacity UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2654 1 market, but we actually use the word 2 "deliverable" in the RFP explicitly in 3 reference to electrical output, not capacity, 4 therefore energy, and also the ISO New 5 England does not currently apply a 6 deliverability standard for energy in order 7 to approve a minimum interconnection request. 8 I think the Department does want to apply 9 some sort of similar standard, the 10 deliverability of the energy in this RFP 11 because energy is one of the key FMCCs we are 12 trying to reduce from the ratepayer 13 perspective. It is one of the benefits we 14 will be attributing to the different projects 15 even if a project does not select a call 16 option feature under the settlement option in 17 the contract. 18 So we will be analyzing 19 whether a project is deliverable from an 20 energy perspective, not a capacity 21 perspective, and although ISO doesn't look 22 into this explicitly as part of its 23 interconnection standards, there is a 24 standard in the industry to look at 25 deliverability that projects look at using UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2655 1 load flow cases and base case analyses to 2 judge whether the electrical energy from the 3 plant can actually be delivered into the 4 system or injected into the system. 5 THE CHAIRPERSON: He's being 6 paid on a per-answer basis, by the way. 7 MR. ZENTZ: I think the point 8 is that ISO has not and will not, does not 9 anticipate guaranteeing or warranting 10 deliverability of a resource, only 11 interconnection of a resource. That 12 narrowly, I guess, is ISO's job, is to assure 13 interconnection of a resource, but our job 14 here is to assure reliability of the delivery 15 of energy and capacity benefits. And so we 16 intend ultimately to rely on load flow or 17 other types of network modeling studies that 18 may be separate from ISO studies to determine 19 that deliverable capability. 20 THE CHAIRPERSON: You have a 21 follow-up question? 22 A VOICE: Yes, if I may. The 23 ISO market is a financial market, as you 24 know, and there's -- to the extent that 25 there's any concept of deliverability of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2656 1 energy, it's through financial congestion, 2 and therefore there's no physical delivery in 3 this market, and to the extent that you're 4 injecting into the contract physical delivery 5 of energy, it's something that's pretty 6 foreign to this market where the companies 7 are operating -- would be operating here. 8 And we were concerned that you might be 9 requiring a resource to protect against 10 something -- a result that they have no 11 control over. They essentially don't have 12 any control of where there's congestion, and 13 therefore particularly if they are being 14 asked to prevent the congestion, take actions 15 that they can't control, then you are 16 introducing a risk that cannot be quantified. 17 MR. ZENTZ: Right. Of course. 18 However -- 19 MS. FRAYER: I don't think 20 it's actually maintaining deliverability with 21 respect to the day-ahead energy market as an 22 explicit ongoing requirement, but it is a 23 part of our bid evaluation that we want to 24 test whether projects would be deliverable 25 when we look at projects, and because it's a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2657 1 known problem in this market, for this state 2 especially, that there's projects that are 3 located so closely that they can't actually 4 deliver energy simultaneously together. 5 A VOICE: I would agree that's 6 a separate question. 7 MR. ZENTZ: But that really 8 is, I think, the question we're trying to get 9 an answer to, and we can't justify going 10 through this RFP process to acquire a project 11 whose output only flows to Massachusetts, for 12 example, because of the physics associated 13 with electricity flow. On the other hand, we 14 can't require a generator 13 years after an 15 initial interconnection to guarantee that the 16 power is still going where it did on day one. 17 And so we're trying to engage in the studies 18 necessary to at least give us the initial 19 one, that when the plants are required and 20 constructed and operating that the benefits 21 in terms of the power and the capacity flow 22 to the state of Connecticut. 23 MS. NEELY: Just, also, there 24 is a provision in the contract that the 25 supplier does not bear the risk -- it's in UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2658 1 Section 3.4(e) of changes to the ISO system 2 that are beyond the supplier's control, so I 3 think that also goes a little bit to your 4 question of other activities, and we did take 5 that up in the previous comment. 6 THE CHAIRPERSON: Would you 7 like to follow up a little further on this? 8 A VOICE: Well, I just wanted 9 to comment that in the development of the 10 forward capacity market rules that ISO is 11 putting together, they also look at the 12 qualifications of facilities that will be 13 participating as new generation, and they 14 have a time line of about seven months in 15 which to actually perform the studies that I 16 think that you're contemplating here. So 17 that won't be done until like November of 18 next year before any new participants would 19 be deemed to be qualifying in the first 20 forward capacity auction. 21 MS. FRAYER: Yes, we 22 understand that their final decision isn't 23 going to be due until late next year. We 24 also, though, understand something that I 25 sort of referred to earlier, that the show of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2659 1 interest are actually due from potential new 2 projects shortly. So, in effect, to the 3 extent that ISO needs to look at the entire 4 New England market, they probably have a much 5 bigger job than we do. 6 THE CHAIRPERSON: Further 7 follow up on this one? Okay. 8 A VOICE: Excuse me, sir. 9 THE CHAIRPERSON: Yes. 10 A VOICE: A quick comment. 11 This afternoon the interconnection working 12 group at the ISO is moving on their FCM 13 procedures and I issued notice there that 14 there needs to be greater appreciation of 15 your process in phasing in, and I issue that 16 notice to you suggesting you folks need to 17 pay more attention to what the 18 interconnection working group is doing. 19 THE CHAIRPERSON: Oh, that's 20 wonderful. Thank you. We appreciate that. 21 Okay, should we go to the 22 next? Since LFRM or locational forward 23 reserve market bidding is seasonal, will 24 projects coming on line any time other than 25 the first day of the applicable auction UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2660 1 period be deemed to be participating in the 2 relative -- relevant ISO markets during the 3 interim period after the commercial operation 4 date but before the first applicable auction 5 period? Will they receive any compensation 6 pursuant to the contract for this interim 7 period? 8 Would you like to take the 9 first pass at this? 10 MS. FRAYER: I think this is 11 actually related also to an earlier question 12 where it was focused only about start dates 13 earlier than the actual milestone commercial 14 operation date. Generally speaking, projects 15 need to have bid in and been accepted into 16 the relevant auctions, for example, the 17 forward capacity auction and the forward 18 capacity market or the locational forward 19 reserve auctions for the locational forward 20 reserve market to qualify for payment as part 21 of this -- as part of the contracts. 22 The milestone dates that -- 23 and those qualification periods in the ISO 24 New England deadlines are already known 25 concerned with rate have been established, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2661 1 for example, already and have been put into 2 place realizing the forward reserve auction, 3 so from the market perspective I think it's 4 important for bidders to choose carefully 5 their milestone dates such that they keep in 6 mind the ISO New England timeframes for the 7 auctions because our intent really is that we 8 want the projects that are getting paid under 9 this contract to be participating in those 10 ISO New England markets. 11 THE CHAIRPERSON: Okay. Let's 12 see, next question. The contract settles 13 against summer claimed capacity. How will 14 settlement work for projects with higher 15 winter claimed capacity? Excuse me, 16 capability, higher winter claimed capability. 17 MS. FRAYER: Because the 18 contracts revolve around the forward capacity 19 market, which in itself is based on the 20 summer claimed capability of the contracts, 21 we'll remunerate the contract quantity up to 22 the summer claimed capability. So our 23 natural response to this question is that for 24 projects with more capacity at any point in 25 time than the summer claimed capability, that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2662 1 they have offered to us as part of the 2 contract quantity under contract, those 3 projects or those suppliers are free to 4 participate in the ISO New England markets 5 and to sell that capacity into the ISO New 6 England markets, but it will not be covered 7 under this contract. 8 THE CHAIRPERSON: Okay. The 9 next question: Will suppliers with multiple 10 units participating in the ISO markets 11 continue to be permitted to handle settlement 12 through a single agent? If so, how will the 13 contract units specific bid information be 14 confirmed? 15 We clearly need to look a 16 little bit further into the ISO rules and so 17 forth on this. We're not entirely familiar 18 on an intimate basis with what rules provide 19 or prevent with respect to operating through 20 single agent. I guess the general comment 21 I'd offer here is we're going to try and be 22 as consistent as we can with the ISO rules. 23 MS. FRAYER: I think we'll try 24 to get some more information about billing 25 policies and procedures to make sure what we UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2663 1 are incorporating into the final sort of 2 master agreement is consistent and 3 practically doable from the perspective of 4 the suppliers. 5 THE CHAIRPERSON: All right. 6 Next question. In several places in the RFP 7 and in related documents there are references 8 to the size of projects and that projects 9 either under 5 megawatts or over 5 megawatts 10 will fall into a certain category. It is not 11 clear, however, what would be true for a 12 project that was exactly 5 megawatts. 13 I'm not making this up. I'm 14 reading this. 15 Could you please clarify? 16 Look, we take the ISO -- we 17 take the ISO division to mean that those 18 projects that are exactly 5 megawatts and 19 together with those projects which are less 20 than 5-megawatts fit into the DG, distributed 21 generation category. 22 Those projects that are 23 greater than 5-megawatts fall into the 24 generation category. 25 We realize that this may not UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2664 1 have been entirely perfect in terms of the 2 split here, but that's basically where we 3 come out, and those who have further on this, 4 if you hold on, there was another question 5 that posed another piece of this, another 6 couple of questions down here, and that may 7 clarify. 8 Next question. The FCM and 9 FCA rules would allow a new resource to 10 obtain a commitment period for up to five 11 years. As we understand it, this RFP would 12 require a new demand resource to offer a 13 price for only one year or a one-year 14 commitment period, if you will, and 15 thereafter be an existing resource. The 16 other allows you to be a multi-year price 17 setter but the contract says you may be a 18 setter for only one. 19 Which shall it be? 20 Well, again, going to the 21 point we were making a little bit earlier, 22 the object behind this RFP is to provide 23 financing for these plants for up to 15 24 years. So we don't want nor do we believe 25 it's necessary for new capacity to bid for UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2665 1 the five-year term option in the FCM. Again, 2 the five-year term option was there to 3 provide the assistance for the financing of 4 the plant and covering the capital costs. 5 We're not necessarily sure 6 that the question actually produces a 7 perfectly accurate depiction of the 8 settlement agreement. The settlement 9 agreement allows for five-year contracts 10 which are not necessarily a price setter for 11 the five years. The question, it seems to 12 us, somehow implies that you are in fact a 13 price setter and that may somehow undermine 14 our objectives here. Again, I think we're 15 trying to -- I think we're trying to 16 concentrate on the one-year FCM arrangement 17 and we don't believe that the settlement 18 agreement -- requires you to be a price 19 setter for all five years. 20 Is there any advance on this? 21 Anybody else want to throw in any more here? 22 (No response.) 23 THE CHAIRPERSON: Okay. Next 24 question. The relationship between demand 25 resource penalties and incentives at the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2666 1 ICO -- at the ISO -- I've been doing this too 2 long -- may be out of sync with the 3 opportunities in this program because the ISO 4 performance incentives and penalties for ODR 5 are only available if someone else pays 6 performance penalties. In this program under 7 the contract terms the buyer makes up the 8 difference in this program. Which is the 9 case? Want to take a pass at this, because I 10 didn't get it. 11 MS. FRAYER: I'm not sure I 12 understood the entire question, but I wanted 13 to clarify, maybe this is the answer that the 14 asker of the question was seeking. The 15 intent of our contracts is not to pay for 16 corporate capacity that ISO has effectively 17 not recognized because it's misperforming. 18 So that ISO has not recognized that capacity 19 or has derated that capacity, it means that 20 ISO will require that more capacity -- 21 replacement capacity is purchased to meet the 22 same procurement target, and therefore we 23 don't want to pay for this capacity that ISO 24 has deemed unsatisfactory. So that's how we 25 view these in general, and hopefully that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2667 1 answers the question. 2 THE CHAIRPERSON: Okay, any 3 further advance on this one? 4 (No response.) 5 THE CHAIRPERSON: Okay. Next 6 question, and this is the one that related to 7 the earlier question on the 5 megawatts. In 8 the addendum released yesterday -- and that 9 was our addendum -- it is now stated that DG 10 units are split into greater than or less 11 than 5 megawatts to follow the rules of the 12 ISO. However, the pending ISO rules actually 13 state that distributed generation shall not 14 exceed 5-megawatts or shall, quote, not 15 exceed the most recent annual noncoincident 16 peak demand of the end-use metered customer, 17 at the location where the generation resource 18 is directly connected, whichever is greater. 19 Okay? Should not the RFP be modified to 20 reflect the false statement? Well? 21 MS. FRAYER: We have sort of 22 two answers and Mark can jump in, if you'd 23 like, to this question. We want to make 24 sure, again, that any type of ISO designation 25 or rules do not somehow disqualify the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2668 1 capacity that we otherwise procure in this 2 RFP. Keeping that in mind, I think the 3 Department has, in other proceedings, taken a 4 particular approach to this question by 5 looking at what quantity capacity qualifies 6 for what type of benefit and, therefore, then 7 look at what type of contract that capacity 8 should be under. 9 As an example, if there's a 10 customer site that then proposes a project to 11 build a large baseload cogeneration unit and 12 that cogeneration unit exceeds its 13 noncoincident or its peak -- coincident peak 14 demand and it's interconnected, we would take 15 the capacity of that generation unit as the 16 maximum capacity, and we would suggest that 17 the generation contract is the appropriate 18 template to be used for this project with 19 respect to the proposal. 20 In the alternative, if a 21 resource is built that is not interconnected 22 with the -- with the grid and, therefore, we 23 will look to the coincident demand level of 24 the customer as the gauging point, and 25 because it's not interconnected it can't UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2669 1 produce benefits to other ratepayers and 2 therefore we will probably treat it under the 3 demand resource -- we would suggest that 4 treatment under the demand resource contract 5 is best. What we will try to do is play it 6 by all of these in a couple of examples of Q 7 and A. Did you have anything else you wanted 8 to add? 9 MR. QUINLAN: That's basically 10 it, only it relates back to the 5 megawatts, 11 so the peak demand would limit the size if it 12 wasn't interconnected to the grid, but if the 13 peak demand was under 5 megawatts, it would 14 be demand resource, if it was over 15 5 megawatts it would be a generation 16 resource. So I think if anyone is familiar 17 with how we did it in the DG contracts, 18 that's the way we would base the amount -- 19 the size of the projects, and then we'd look 20 at whether it's over 5 megawatts or less than 21 5 megawatts and determine whether it's a 22 generation or demand resource. 23 THE CHAIRPERSON: Yes, sir. 24 A VOICE: Anonymous question. 25 In the event that the number is larger than UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2670 1 5 megawatts based on the noncoincident peak 2 load of the facility, would you consider 3 letting 5-megawatts be a demand resource and 4 the balance being a generation resource? 5 That is under consideration at the ISO. 6 MS. FRAYER: To the extent you 7 could isolate those capacities so that you 8 can treat them individually such that you 9 can -- because as you know the generation 10 contract and the demand resource contract 11 have slightly different conditions, and we 12 would need to be able to -- well, the buyer, 13 one of the EDCs would need to be able to 14 monitor those. To the extent that they could 15 be completed isolated it's possible, just to 16 the extent also I suspect that from a demand 17 resource project you could have multiple 18 projects on the same site. 19 THE CHAIRPERSON: Want to 20 follow up on that? 21 A VOICE: Well, obviously, 22 there's a significant difference between a 23 hundred dollar per kilowatt fee and a 24 35-dollar per kilowatt fee, and obviously for 25 the first 5 megawatts if you pay a $35 dollar UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2671 1 fee instead of a hundred dollar fee, you're 2 apt to stimulate more distributed generation. 3 It's just an observation. 4 MR. QUINLAN: I think we'll -- 5 we're going to issue these answers in written 6 form, so we'll clarify that a little more. 7 MR. ZENTZ: I think what we 8 were -- your clarification is helpful. What 9 we were trying to avoid and we're still 10 pondering about is using that example, let's 11 say there's an aluminum smelter comes to 12 mind, very, very large, maybe 2 or 13 300 megawatts inside the fence. That 14 definition would allow a developer to build a 15 250-megawatt resource inside the fence and 16 for that all to be called a DR resource, and 17 that's outside the scope of what we're trying 18 to accomplish here. So if it's just the 19 difference between five and seven or eight or 20 ten, that's one thing but it's a difference 21 between five and 250 that's a whole other 22 angle. 23 A VOICE: Are you suggesting 24 that 250 is, in effect, a peaker machine 25 built on the site because there's a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2672 1 thermal -- 2 MR. ZENTZ: Well, from a 3 network impact perspective it would be a 4 generation resource and the magnitude of 5 impacts it would make in the network was in 6 an emergency condition and it tripped off 7 line would be substantial. 8 A VOICE: I understand. The 9 ISO's interconnection guidelines divide to 10 2 megawatts and divide at 20 megawatts which 11 is FERC standard at this point so it's very 12 different than 250 megawatts. 13 MR. ZENTZ: Right. 14 THE CHAIRPERSON: Okay, 15 further follow up on this one? 16 (No response.) 17 THE CHAIRPERSON: Okay. 18 With respect to the potential 19 penalties that generation projects would be 20 exposed to if they were not able to perform 21 once they had begun operation, there does not 22 appear to be any allowance possible for 23 planned outages for maintenance and the like. 24 Should not an allowance be made -- should not 25 such an allowance be made? UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2673 1 What about with respect to 2 unplanned outages? 3 Well, again, this turns on the 4 question a little bit earlier and the answers 5 we gave there, and I'll try and take one more 6 pass at this. 7 Again, we're asking the bidder 8 to set contract quantities for each contract 9 year as well as targeted availabilities. So 10 the supplier can change the -- can decrease, 11 for example, the contract quantity and/or 12 target availability in a year when a major 13 maintenance activity is anticipated so as to 14 manage the exposure to penalties from ISO and 15 FCM performance. And also liquidated damages 16 under this contract for availability 17 deficiency and payment adjustment for ISO New 18 England penalties. 19 The schedule of target 20 availabilities and contract quantities in the 21 bidder's proposal be used explicitly in the 22 bid evaluation. And if the project is 23 selected, that schedule will be appended to 24 the contract. Unplanned outages are a risk 25 that a generator bears in the market and that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2674 1 burden should not be transferred to 2 ratepayers. And I know this takes us back to 3 the line of questioning we had a little bit 4 earlier about how much maintenance you need 5 being a function of how much time you run, 6 and I'm afraid the same answer still applies 7 here. Further advance on this one? 8 (No response.) 9 THE CHAIRPERSON: Okay. Next 10 question. Does the DPUC have the right to 11 grant a contract for only a portion of a bid? 12 For example, 300 megawatts for a plant that 13 bids 400 megawatts? If so, is the bidder 14 required to sign the contract? If the bidder 15 does not sign the contract, will it lose all 16 or a portion of its security deposit? 17 We'll consider the bidder's 18 proposal in its entirety and we're not going 19 to force any bidder to sign a contract for a 20 portion of the contract quantity, although we 21 do retain the right to accept or reject the 22 call option that the bidder may elect to 23 include as part of the proposal. 24 MS. FRAYER: And the bidder 25 may themself decide that they don't want to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2675 1 bid the entire contract -- the entire rate of 2 capacity of the plant, so we accept those 3 proposals as well for contract quantities 4 that are less than the summer -- the expected 5 summer rated capacity of the plant, so 6 another thing to keep in mind. But after -- 7 we will evaluate the bid in its entirety, so 8 we won't make the statement that, oh, we want 9 only a hundred megawatts if you gave us a 200 10 megawatt offer. 11 THE CHAIRPERSON: Right. And 12 the next question follows the same line of 13 logic. To the extent that the RFP only 14 contracts for a portion of a plant's 15 capacity, can the plant enter into any type 16 of contract with another party for its 17 remaining capacity during any season? 18 Parentheses, during the term of the contract. 19 The answer is, yes, as long as 20 you meet your obligations under your contract 21 with us, have a great time. 22 MS. FRAYER: There are very 23 few performance requirements where it refers 24 to the entire facility, not just the contract 25 quantity, for example, with respect to RMRs, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2676 1 but those are only few and far between, but 2 generally speaking we always refer to the 3 contract quantity, which you may choose to as 4 part of your proposal bid below your capacity 5 and actually may be required to. We covered 6 this a little bit earlier, eligibility 7 requirements. If there's an existing plant 8 that is not being refurbished or repowered 9 but is adding incremental new capacity in 10 certain instances we will only consider that 11 incremental new capacity. So that may be a 12 necessity for some of the proposed projects 13 because of their positioning vis-a-vis those 14 eligibility requirements. 15 THE CHAIRPERSON: Okay? Next 16 question. Can bidders bid into the RFP 17 contingent upon receiving permits and/or 18 transmission rights? If so, how will the 19 amount of the security deposit be calculated? 20 Will the bidder lose its project security 21 deposit if it does not sign the contract due 22 to failure to receive the permits and/or the 23 transmission rights? 24 In this particular 25 solicitation, the bidder takes the risks of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2677 1 receiving the permits and transmission 2 rights, and will indeed forfeit its project 3 security deposit if it's unable ultimately to 4 get the project online. The exception being 5 the exceptions laid out in the force majeure 6 clauses contained in Section 9 of the 7 contract. 8 Any further amplification on 9 that one? 10 (No response.) 11 THE CHAIRPERSON: Okay. 12 MS. FRAYER: Actually, I think 13 there's a series of questions regarding 14 something similar, so can I jump in? 15 THE CHAIRPERSON: Leap right 16 in. 17 MS. FRAYER: One of the 18 questions was the contract draft template 19 give relief from liquidated damages if 20 government approvals are delayed. What if 21 the government approvals are denied or 22 appealed, are the damages payable? And a 23 second portion of that question, what if the 24 ISO interconnection application is delayed or 25 denied, are the liquidated damages assessed UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2678 1 against the project as if a government 2 approval was denied? 3 And the response is actually 4 already embedded in the contract template. 5 If -- but we will clarify this as well. If 6 the denial is due -- is not due to the fault 7 of the supplier or deficiency in its filing 8 or, for example, in its plan, the supplier 9 does not have to pay the liquidated -- 10 liquidated damages. But if the denial, 11 including the ISO interconnection, is due 12 because the supplier is deficient in certain 13 aspects or is unwilling to follow through on 14 certain requirements of interconnection 15 agreement then liquidated damages would be 16 payable by the supplier. 17 And, Rob, feel free to jump 18 in, but on the question of appeal, an appeal 19 should not result in delay unless there is a 20 stay. Any delay due to appeal is likely to 21 then be treated as a force majeure where 22 there is no liquidated damages due until 23 resolution. 24 THE CHAIRPERSON: Okay? Next 25 question. What level of EPC commitment is UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2679 1 required to submit a bid? This is -- these 2 EPC contracts are contracts where an entity 3 comes in and agrees to build a power plant 4 essentially on a turn-key basis. 5 The bidder is not required to 6 have any specific level of EPC commitment in 7 order to submit the bid. However, proof of 8 some level of EPC commitment is likely to 9 reduce the proposed project's execution risk 10 and help the project in the bid evaluation 11 process. In addition, the bidder must 12 include firm and binding milestone events and 13 dates and a COD with a financial bid. There 14 will be no negotiation of these dates once 15 the financial bid is submitted even if the 16 supplier cannot secure an EPC contract on a 17 timely basis. 18 Next question. Can parties 19 with dissimilar assets aggregate their 20 offering into one bid? For example, can two 21 bidders team up to submit one bid for a 22 baseload plant in one location and a peaker 23 in another? 24 I think our answer on this is 25 specifically that if we do, in fact, have a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2680 1 joint venture, you know, we have two entities 2 and as the example suggests one has one plant 3 and the other has the other plant and they 4 want to bid together, well, that's terrific, 5 but the bottom line on the thing is first 6 they have to hold themselves out as, in 7 effect, a joint venture, they are bidding on 8 this as one entity, if you will, proposing 9 capacity from these two facilities. We are 10 not -- we are not going to take contingent 11 bids. So this can't be a situation where 12 these two entities bid in and they say, okay, 13 here's the deal and I'm bidding this, but by 14 the way if you take my bid on this, you have 15 to take the other fellow's bid on the other 16 piece. Not doing those. We're not doing 17 contingency contracts. 18 If two entities want to get 19 together and propose a single project on a 20 joint basis, terrific, we'll review it on 21 that basis, but we will not do a situation 22 where we have two individual bids with a 23 contingency link between them. I mean, 24 anything further on that one? 25 (No response.) UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2681 1 THE CHAIRPERSON: Okay. Next 2 question. Can bids be contingent on 3 permitting that does not require material 4 modification of the proposed facility? 5 No. The bottom -- the bottom 6 line is the bidder takes this risk in 7 submitting their proposal, and I think the 8 answer is really just that simple. 9 Okay. Next question. How 10 detailed do project descriptions need to be? 11 Do we need to submit detailed customer and 12 site information or can we be more general, 13 such as 30-megawatt DR in Southwest 14 Connecticut? 15 Bottom line on this is the 16 project description form in the Excel 17 template are quite detailed and need to be 18 filled out in detail and completely. If you 19 think there are questions that don't apply to 20 your project, then please contact the RFP 21 coordinator in advance so you can talk this 22 over and be sure you don't wind up getting 23 disqualified because you submitted an 24 incomplete form. 25 Okay, next question. If an UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2682 1 emergency generator project receives funding 2 from the Connecticut Monetary Grants, can 3 that project be included in this RFP after 4 the five-year contract? And Counselor, would 5 you like to take a pass at that one? 6 MR. LUSTERBORGHS: The answer 7 is it depends what that monetary grants are 8 referring to. If they're Energy Independence 9 Act, several programs that provide aid to 10 distributed generation and basically with 11 respect to this capacity procurement, 12 Section 12(g), which is Section 16-243(m), 13 Section G, indicates that there are certain 14 types of distributed generation program 15 grants that are available and people that 16 receive those can participate and receive a 17 capacity contract with the exclusion of 18 monetary grants provided for in 16-243(i), 19 which is the one time for, and so if you're 20 going to participate in that program you're 21 not able to participate in this program. I 22 don't know if that provides a clarification. 23 THE CHAIRPERSON: Yes, sir. 24 A VOICE: I'll try to clarify 25 what all the references meant. In the UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2683 1 immediate instance you said an emergency 2 generator award under the monetary grant 3 programs is a one-time award? 4 MR. LUSTERBORGHS: There's 5 four or five different programs that the 6 Energy Independence Act provides where 7 distributed generation can receive financial 8 assistance. The one that you cannot 9 participate in and then also receive a 10 contract here is there's a one-time award of 11 between 200, $500 per kilowatt capacity, and 12 that's the one that the statute prohibits you 13 from getting if you're also going to get a 14 contract here. You can't get both. There's 15 various other forms of assistance that you 16 can get as a distributed generator and still 17 be eligible to receive a contract. 18 A VOICE: So even though in 19 the five-year period you can participate in 20 the ISO programs and keep the payment stream 21 from the ISO under your rules and under the 22 statute, after that five years you cannot 23 make that facility participate in this 24 program? 25 MR. QUINLAN: No. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2684 1 MR. LUSTERBORGHS: No, that's 2 not -- 3 MR. QUINLAN: That's the right 4 answer, they can't participate. 5 A VOICE: I'm sorry. They 6 cannot participate? 7 MR. QUINLAN: Cannot 8 participate. 9 A VOICE: In this program? 10 MR. QUINLAN: Right. 11 MR. LUSTERBORGHS: I'm not 12 sure what the linkage to the ISO program is 13 you're making. 14 A VOICE: Well in the decision 15 on that particular docket you allowed the 16 owner of that project to keep the benefits of 17 the sale of the capacity to the ISO. 18 MR. QUINLAN: Right. 19 A VOICE: For five years. And 20 so I'm just trying to clarify in the -- what 21 happens after the five years. What you're 22 saying now is they could not bid that fifth 23 to fifteenth year into this program. 24 MR. LUSTERBORGHS: Yes, the -- 25 MR. QUINLAN: The benefits UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2685 1 from that program was developed based on 15 2 years of benefits so -- of payments. The DG 3 grants are based on 15-year project life so 4 that they can't participate in this program. 5 A VOICE: Okay. So then is it 6 correct to assume that at the end of the five 7 years when they have served out their 8 five-year period -- 9 MR. QUINLAN: I don't think 10 that that's the rule on that. 11 A VOICE: I'm talking about 12 the emergency generators. 13 MR. QUINLAN: The rule in that 14 program is that you participate in the demand 15 response program always, not just for five 16 years. The five years was I thought that 17 the -- 18 A VOICE: Is that just a 19 workdown of your security requirement? 20 MR. QUINLAN: That's a 21 workdown of your security. 22 A VOICE: Okay. So you can 23 participate permanently as an existing 24 resource in the ISO programs therefore and be 25 a price receiver from whatever the FCA yields UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2686 1 up? 2 MR. QUINLAN: That's right. 3 A VOICE: But you can't 4 participate here? 5 MR. QUINLAN: Right, exactly. 6 A VOICE: Okay, thank you. 7 THE CHAIRPERSON: And as a 8 general proposition, we're mindful of a 9 couple of things. First, as counsel 10 indicated before, there are some explicit 11 places where the General Statutes either 12 recognize the ability or bar some entity some 13 entity from receiving more than one kind of 14 financial assistance, and obviously we will 15 follow those directives of the General 16 Statutes specifically and explicitly. 17 MR. QUINLAN: But we're 18 barring all ratepayer funding -- other 19 projects with ratepayer funding from 20 participating, that includes the Gap RFP 21 projects, if they continue or the years that 22 they're in the Gap RFP, Project 100, 23 conservation and load management projects and 24 the DG grant, capital grant projects. 25 A VOICE: Could you restate UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2687 1 the opening of that sentence, please? We 2 couldn't hear you. 3 MR. QUINLAN: All projects 4 that are receiving Connecticut ratepayer 5 funding from other sources are not eligible 6 to participate in this program. 7 THE CHAIRPERSON: The idea 8 behind this is that these various programs, 9 and expressly this particular program, were 10 designed to stand alone, and just as we were 11 suggesting, for example, that people not sign 12 up for the five-year FCM/FCA contracts 13 because it's, in essence, double dipping. 14 You're providing capital assistance twice. 15 So the same principle as a general 16 proposition applies here as well. We are 17 trying to get maximum benefit out of 18 ratepayers' dollars and avoid kind of the 19 lottery phenomena where we try and set up 20 projects that somehow qualify for three or 21 four or five different sources of funding all 22 at the same time. 23 MR. LUSTERBORGHS: Are you on 24 the -- 25 THE CHAIRPERSON: No, actually UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2688 1 I was going to give a chance for a qualifying 2 question here. 3 MR. LUSTERBORGHS: What I was 4 going to say though is, I guess as an 5 exception to what Mark has just said, the 6 capacity procurement part of the Energy 7 Independence Act Section 12 does allow 8 distributed generators to take advantage of 9 provisions that provide for long-term 10 financing, provide for rebates, for use of 11 natural gas and waiver of backup power. You 12 can take advantage of those programs and 13 still receive capacity contract under this 14 section. It's just the one-time grant, which 15 is a 200 to 500 per kW amount that you can't 16 do as well. 17 THE CHAIRPERSON: And my 18 comments were designed to show the general 19 underlying principle of we're going to try 20 very hard to pay for this only once, as well 21 as the specific comment that we will follow 22 directives of the General Statutes explicitly 23 and expressly. I'm sorry, I didn't want to 24 run you over. Further qualifying question? 25 I'll work my way around this way. Hold on. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2689 1 A VOICE: Again, maybe it's 2 kicking a dead horse here, but the $450 3 payments for distributed generation, to take 4 generation -- to basically take people off 5 line, right, and have their own generation 6 internally and allowing that to be used under 7 this program for capacity payments, you're 8 saying that's not permitted? 9 MR. LUSTERBORGHS: It's 10 prohibited by the statute. 11 A VOICE: It's prohibited by 12 the statute? 13 MR. LUSTERBORGHS: Yes, 14 Section 12(g) of the Public Act and it's 15 Section 16-243(m) of the General Statutes 16 where it's codified, the last sentence of G 17 lays which DG programs you can get and still 18 get a capacity contract under this section 19 and which are prohibited, and it prohibits 20 the one-time grant, you can't get a one-time 21 grant and a capacity contract. 22 THE CHAIRPERSON: So there. 23 MR. LUSTERBORGHS: It is what 24 it is. 25 THE CHAIRPERSON: I'm sorry. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2690 1 I couldn't resist that. Okay, I saw another 2 hand. 3 MR. QUINLAN: You have a 4 choice of what you want to do. There's 5 several different options available. It can 6 be in the DG program, you can go the 7 conservation funding and receive money there, 8 you can come into this. You just can't do 9 two at the same time basically. So we allow 10 the same types of projects in this program. 11 We just don't allow for the funding. 12 A VOICE: Well, the question 13 had been very specifically about the 14 emergency generators and not all the others. 15 Thank you. 16 THE CHAIRPERSON: Yes, and I 17 hope you regret asking it then. Next. 18 A VOICE: I'd like to see 19 clarification maybe by way of an example and 20 if we assume a 10-megawatt project where the 21 first 5-megawatts is applied to on-site 22 reduction, which was qualified for a 23 distributed generation grant, could not the 24 next 5 megawatts, which is different than the 25 first 5 megawatts, qualify for the RFP? UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2691 1 THE CHAIRPERSON: Do you have 2 any easier questions? 3 A VOICE: He came a long way 4 to ask that question. 5 THE CHAIRPERSON: Well, as you 6 can see, this has provoked some interesting 7 debate here, so I think I'm going to take the 8 opportunity to say that we will take your 9 question, post it on the website and as soon 10 as we find out an answer we'll -- have we 11 thought out an answer? 12 MR. QUINLAN: What's your 13 question, that they're already receiving 5 14 megawatts of the grant? 15 A VOICE: If it was a new 16 project that had a total capacity of say 17 10 megawatts and 5 megawatts were offsetting 18 onsite load qualifying for a distributed 19 generation grant, could the incremental 20 5 megawatts, which would be considered -- 21 which would not be considered distributed 22 generation, qualify for the RFP? So there's 23 5 megawatts under DG, 5 megawatts under the 24 RFP. 25 MR. QUINLAN: You're calling UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2692 1 it DG. Are they receiving a DG grant? 2 A VOICE: No, they wouldn't be 3 for the five. 4 MR. QUINLAN: So if they 5 didn't receive a DG grant we'd count ten 6 megawatts as the ten megawatts for this 7 program. 8 A VOICE: Well, no, let's say 9 they received 5 megawatts of DG grant on a 10 ten megawatt project. 11 MR. QUINLAN: If that's all 12 they asked for and that's all we gave them in 13 the other program and they built a ten 14 megawatt unit and it was interconnected to 15 the system, can their -- no, interconnected 16 to the system so they could resell power back 17 into the system, right, I think that we have 18 allowed five megawatts. 19 THE CHAIRPERSON: One of the 20 keys to this, as you can see, is the idea of 21 interconnection. We care about capacity that 22 actually is available and is ready to go to 23 support the system itself. Is that helpful 24 to you? 25 A VOICE: Yes, it is. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2693 1 THE CHAIRPERSON: Okay. 2 Further advance on this one? Okay. 3 MR. QUINLAN: Under the DG 4 program most of those projects would have 5 asked for and would have received a grant for 6 the full ten. They could have received a 7 grant for the full ten in that program. 8 THE CHAIRPERSON: I'm sorry, 9 Roger, I didn't want to -- excuse me, 10 unidentified person. 11 A VOICE: Commonly known, 12 formally known. I just have a little 13 confusion on this barring all ratepayer 14 funded projects just because of the wording 15 that wasn't my understanding. I understand 16 the DG capital grants, I understand the 17 Project 100. There is a reference on page 39 18 of the RFP that says that costs arising from 19 additional ratepayer funding, such as from 20 the Clean Energy Fund or the Conservation and 21 Load Management Fund, will be included as a 22 cost in the cost benefit analysis. It's sort 23 of implied that those projects weren't 24 barred. So you may want to -- I'm not sure 25 how you're coming out on this but you may UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2694 1 want to clarify. 2 MS. FRAYER: I think one of 3 the nuances here is that it's a question of 4 the level of ratepayer funding and for what 5 portion of the capacity or quantity of 6 capacity that's covered on it. There may be 7 some partial ratepayer funding that was never 8 meant to fully remunerate the original 9 project or resource, and so what we would 10 do -- in that way they're not barred from 11 participating in the RFP, but we want to take 12 into account the fact that they've already 13 got some ratepayer funding to get them part 14 of the way there to commercial 15 implementation, and so we want to true them 16 up. 17 The main features that the 18 Chairman had mentioned earlier about making 19 sure that we're not double counting still 20 hold. I think the caveat here is that we 21 want to make sure that we don't 22 overcompensate or double compensate. 23 MR. QUINLAN: I think it gets 24 back to what the incremental amount and not 25 double counting. Like, Roger, you know that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2695 1 a lot of the conservation, we might only pay 2 50 percent of the cost of a project to get a 3 hundred percent of the project developed. So 4 I don't think someone could then come along 5 and say, Well, we want a grant for the other 6 50 percent of the project cost because the 7 first 50 percent was intended to develop the 8 whole project. So I think that that's what 9 we're kind of watching out for, that we don't 10 double or pay twice. But if they were to add 11 another piece to the project and increase the 12 total size of the project incrementally and 13 ask for that amount, that would be 14 appropriate. 15 THE CHAIRPERSON: We're 16 mindful -- we're mindful of the fact that 17 there are a lot of balls in the air on this. 18 We recognize that there are a number of 19 different programs out there that exist that 20 provide a variety of different ways so 21 perhaps the wisest thing for us to do would 22 be to try and literally walk through little 23 bit of a catalog, look at these various 24 programs and try and say, Okay, these apply, 25 these don't, here are the general principles, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2696 1 perhaps even provide an example or two 2 because I think we could kind of pursue this 3 for some time program by program, case by 4 case, and as you see we're kind of working 5 our way through these scenarios as we go, so 6 maybe the smart move would be to provide a 7 careful comprehensive answer in writing that 8 tries to cover all the waterfront. 9 MR. LUSTERBORGHS: We 10 attempted to address as well in the contract 11 that the contract for demand resources in 12 3.6(d), basically it goes to the concept of 13 we don't want to double pay. So if you were 14 to receive funding from a ratepayer source, 15 you'd notify the Department and we'd take 16 that into account and your contract price 17 could be subject to reduction to account for 18 that, so it's not necessarily a deal breaker 19 and that's the intent. We have clarifying 20 language in the contract, the RFP, to capture 21 that. I think that's based on what everybody 22 here is saying we'll do. 23 A VOICE: I think obviously 24 clarity will lead to more accurate bidding. 25 Thank you. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2697 1 THE CHAIRPERSON: We certainly 2 hope so. Thank you, sir. Yes, sir. 3 A VOICE: Following up on 4 Roger's footnote, would the project be able 5 to claim or bid that capacity into the FCM or 6 would it be treated similar to the Class 3 7 renewables docket where if they accept the 8 incentives, they would not be eligible for 9 the capacity associated with the project? 10 MS. FRAYER: Under this RFP 11 our intent is to make sure that all 12 capacity -- or generic classes of resources 13 that ISO New England feels are eligible to 14 participate in the FCM, all those resources 15 participate in the FCM. So the intent is to 16 facilitate participation of as much 17 resources, therefore as much capacity in the 18 FCM as possible. And actually all the 19 contracts, both the demand resources and the 20 generation are built around this concept that 21 we want them to participate in the market. 22 MR. LUSTERBORGHS: So the full 23 extent of the contract capacity they 24 committed to in the contract? 25 MS. FRAYER: Yes. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2698 1 MR. LUSTERBORGHS: So it 2 doesn't preclude you from receiving ratepayer 3 funding, but you need to keep all of your 4 contract capacity available to participate as 5 you had agreed. 6 THE CHAIRPERSON: Okay, 7 further advance on this one? I'm sorry. 8 A VOICE: Now I'm confused. 9 THE CHAIRPERSON: Another 10 unidentified person, okay. 11 A VOICE: Just to clarify 12 because I think I heard I think the words in 13 the RFP as well as the contracts are a little 14 confusing. I think I've heard several 15 different answers about several different 16 instances and agree it's very confusing, and 17 I think it would be helpful if there was some 18 clarification that clearly laid out what the 19 programs were and whether or not they were 20 eligible to get funding from that program as 21 well as the RFP. 22 THE CHAIRPERSON: I think what 23 we're going to do after we finish here is 24 we're going to sit down and carefully walk 25 through these things program by program, UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2699 1 situation by situation. We'll try and 2 provide a written answer on the website that 3 covers each and every one of these situations 4 as best we can. And I'm sure we'll hear from 5 some people if we don't get there. Yes, sir. 6 A VOICE: I was just going to 7 specifically ask that you focus on the logic 8 here, that if capital funding is available 9 for demand side generation and demand side 10 generation is built and that takes the load 11 off of the grid, and then when needed that 12 generation can then be bid to the ISO, I 13 think you're accomplishing two things and not 14 double dipping -- 15 THE CHAIRPERSON: Well, 16 again -- 17 A VOICE: -- because of the 18 interconnection, which you're so well to 19 point out. 20 THE CHAIRPERSON: Right, and I 21 think in a way you've kind of touched on 22 this. Look, our object is to try and work 23 this to get greatest benefit to be gained for 24 Connecticut as a whole, Connecticut 25 ratepayers, if you will. And having said UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2700 1 that, we've had several different 2 obligations. First our good friends from the 3 legislature have written in specific language 4 that either bars people from participating in 5 some circumstances or specifically authorizes 6 them to in others. We also are mindful of 7 the basic principle which I think both the 8 Agency and the legislature have recognized at 9 the front end, which is that we are trying 10 our best to provide a specific set of 11 financial incentives to get particular things 12 built. We really weren't trying to set this 13 up like coupons in a grocery store where if 14 you collect enough of them and you get just 15 the right combination actually they wind up 16 paying you. Well, we're really not trying to 17 go there, actually. We're really trying to 18 set up these projects so that they are 19 complimentary. 20 I would to suggest again that 21 we need to walk through this and provide a 22 careful written answer on this. We're 23 mindful of the fact that there are programs 24 which do, in fact, compliment one another and 25 could provide kind of a double benefit, if UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2701 1 you will, and we'll certainly look at those 2 as well, but I think you see the underlying 3 principles here. 4 MR. QUINLAN: We basically 5 assume that all the DG units that are getting 6 capital grants were going to participate in 7 the forward -- in the capacity market. 8 That's required in that program. So there's 9 no added benefit. We're paying for that 10 already. That's the way those grants were 11 developed. That's the benefit of those 12 units. 13 THE CHAIRPERSON: Okay. I 14 think we've done really well on that one. 15 All right. 16 Next question. It is 17 indicated that demand response resources must 18 not be enrolled in other programs. Does the 19 ISO New England Connecticut supplemental DR 20 programs are slated to end in 2008, 21 parentheses, though they may be extended 22 through 2010 parentheses, can resources 23 enrolled in these programs be included in the 24 RFP after the ISO New England DR programs 25 end? UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2702 1 Yes. The answer is yes. They 2 can thus submit a bid for a contract term as 3 far as when their funding under this project 4 expires. Although they cannot submit a date 5 uncertain proposal, they must commit to a 6 date up front even if there is uncertainty on 7 the ISO New England expiration. 8 Next question. Please provide 9 clarification on the $200 per kilowatt 10 penalty, page 19 of the DR contract. 11 This particular liquidated 12 damage is a one-time payment that the 13 supplier would have to pay the buyer 14 essentially for the benefit of ratepayers if 15 the capacity was less than promised in the 16 proposal and the damages would be charged 17 based on the deficiency per kW as compared to 18 the contract quantity promised in the 19 proposal. This liquidated damage is payable 20 because Connecticut ratepayers had 21 anticipated having that capacity in place, 22 and therefore will now need to secure 23 replacement capacity for the term of the 24 contract. 25 Okay. Further advance on that UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2703 1 one? 2 (No response.) 3 THE CHAIRPERSON: Next one. 4 Since 85 percent of the bid evaluation phase 5 is based on the NPV of the project costs, 6 projects with earlier completion, that is, 7 commercial operation, dates will have a lower 8 net present value and have a higher score, 9 all other costs being equal. How will the 10 risk of failure to meet the completion date 11 be considered in the bid evaluation? 12 The project execution risk is 13 being assessed separately from the economic 14 analysis. Those projects with a higher risk 15 are being able to come on line at the COD -- 16 sorry, the completion date, commercial 17 operation date specified will be rated lower 18 than projects with a more certain COD date. 19 MS. FRAYER: And another thing 20 on this question is to note that in fact 21 because of the discount rate we're using in 22 the net present value analysis, projects with 23 an earlier completion date, commercial 24 operating date of sooner rather than later 25 should generally have higher net benefits or UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2704 1 cost benefits than other projects because the 2 discounting effect isn't as strong. So I 3 think just to clarify the question because I 4 didn't necessarily agree with the statement 5 in the question. 6 THE CHAIRPERSON: Okay? Oh, 7 I'm sorry, right in front. 8 A VOICE: Section 553 of the 9 RFP addresses execution risk, but it's very 10 general. It doesn't say how projects will be 11 assessed. There's obviously different 12 elements of project execution risk. It 13 doesn't say how it's going to be evaluated on 14 any sort of quantitative basis, nor does the 15 RFP say how project execution risk will be 16 compared to other evaluation criteria. And I 17 guess I was hoping to get a response with 18 regard to those two issues. 19 MS. FRAYER: Well, in terms of 20 the type of information that's going to be 21 evaluated, that's directly incorporated 22 already in the appendices that are part of 23 the qualification submission. We will be 24 using information that bidders provide as 25 part of the qualification submissions to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2705 1 effectively relatively compare across the 2 different projects. So those are the types 3 of items that we'll have in our checklist or 4 score card, if you will, to look at project 5 execution risk. 6 In terms of sort of based on 7 our own experience, this is not a part of 8 analysis that can be brought down to a 9 boilerplate where we say, Okay, one point for 10 this, one point for that, because it's 11 relatively -- it's easy to make the relative 12 distinction once you look at what submissions 13 you have, but it's very hard to set forward a 14 criteria that is going to be applicable and 15 on an equal footing for all projects at the 16 beginning. So we didn't try to come up with 17 a, if you will, a ranking methodology or a 18 scoring methodology up front, but we will 19 describe in more detail as part of our 20 decision in the bid selection process how 21 projects fared, winning projects against 22 those projects that didn't win and how large 23 of a component this project execution risk 24 was in the overall decision. 25 A VOICE: So in terms of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2706 1 weighing the project execution risk versus 2 other criteria, any more information with 3 regard to that? Versus net present value 4 versus -- net present value and then there's 5 15 percent for other criteria, that's pretty 6 prescriptive, pretty well quantity guide. 7 MR. ZENTZ: Well, net present 8 value will always be the primary criteria. 9 But we're making -- you can think a minute 10 and come up with all kinds of scenarios, but 11 going from trying to decide whether a 12 proposal that essentially consists of the 13 project saying, Hey, I have an idea as 14 opposed to one that says I have all my 15 permits, I have my site, I've ordered my 16 equipment, I'm ready to begin construction, 17 there's a clear difference in the actual and 18 perceived project execution risk there. 19 MS. FRAYER: I think the issue 20 is we're trying to be pragmatic in the 21 process and that part of the tradeoff that 22 we're going to have to make or the Department 23 is going to have to make in selecting 24 projects is not only a function of the 25 different or generic projects we can get and UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2707 1 their technical features and financial 2 features but it's also a function of the 3 financial bids we're going to get the actual 4 dollar amounts and how they affect the cost 5 benefits and once we have the monetary value 6 from the economic analysis, it will be easier 7 to put into context the effective value we're 8 going to put on the project execution risk. 9 THE CHAIRPERSON: Yes, sir. 10 A VOICE: Can you clarify your 11 evaluation of NPV, and that is for something 12 that's 15 years versus five years. So do I 13 just NPV the cost side of it or do I NPV the 14 benefits as well? So do I discount a 15 megawatt in year fifteen back? 16 MS. FRAYER: The monetary -- 17 the dollar values of both the costs and 18 benefits will all be discounted back to 2006 19 so that we're looking at all projects on an 20 equal footing, even if the commercial 21 operation date for one project is 2009, 22 another one is 2012 they will all be 23 discounted for purposes of that evaluation 24 and selection to the same period in both the 25 costs and the benefits. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2708 1 A VOICE: So again, the value 2 of the megawatt 15 years out is discounted 3 back at 9.8 percent? 4 MS. FRAYER: Yes. 5 THE CHAIRPERSON: Okay. Let's 6 see. Last question in this cycle. Under the 7 other factors portion of the bid evaluation 8 will projects that have fuel oil as a backup 9 fuel to natural gas be granted the 1.25 10 points as a nonnatural gas-fired plant? 11 Good try, people. No. For 12 the purposes of assessing fuel diversity, any 13 facility that is fueled primarily by natural 14 gas or by oil will not be granted points. 15 Okay. Now, here's what I'm 16 thinking about. I sense that on both sides 17 of the table there's a need for a 18 telephone/bio/general fooling around break, 19 so what we're going to do here is we're going 20 to pause for about ten minutes or so and give 21 people a chance to come back to life. 22 Following that, we're going to go through 23 some of the additional questions we've 24 received up to this point. The box is still 25 out, and so if people have anything else UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2709 1 they'd like to does in there, please do. 2 We'll return and go through the balance of 3 the questions and then close up. 4 So by my watch we've got about 5 three minutes to three. Why don't we do 6 this, return here at ten minutes past three, 7 okay? Ten minutes past three. Thank you. 8 (Whereupon, a recess was taken 9 from 2:57 p.m. until 3:15 p.m.) 10 THE CHAIRPERSON: We're going 11 to try and restart here at the moment. We're 12 now going to try and walk through the 13 questions we've been receiving over the 14 course of the day today and see if we can 15 dispose of these. 16 MS. FRAYER: The question is, 17 please elaborate on backup fuel requirements 18 for small natural gas generation less than 19 5 megawatts. There's an additional statement 20 here, may be a burden on grid-connected 21 distribution generation. 22 I take it this is a question 23 about distributed generation that would 24 qualify under the demand resource master 25 agreement, and in that agreement actually UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2710 1 we've explicitly eliminated the backup or 2 secondary non-natural gas fuel requirement. 3 It's not a requirement for a demand resource 4 project. 5 THE CHAIRPERSON: Now, I 6 should point out that the Connecticut Siting 7 Council has from time to time taken positions 8 on the question of dual-fuel requirements 9 and, as everybody is well aware, Chairman 10 Caruso just took the chair a little while 11 ago, so it is conceivable that they may 12 review those issues again. So please keep in 13 mind that our answer specifically relates to 14 the projects we're working on and we're 15 considering here, but it's conceivable that 16 the Siting Council may or may not require 17 some backup fuel for these entities. 18 MS. FRAYER: And more 19 generally speaking, for gas-fired generation 20 is backup fuel required, the answer to that 21 question is under the generation contract, 22 yes, backup fuel is required in Section 3, I 23 believe, deals with those requirements. 24 Actually, sorry, Section 2 deals with those 25 requirements in more detail because it UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2711 1 depends on the nature of the facility how 2 much and what type and what other parameters. 3 2.6(g). 4 THE CHAIRPERSON: And to the 5 best of my knowledge, again, the Connecticut 6 Siting Council has been requiring backup fuel 7 for all central side gas-fired generation for 8 some time now is my memory. 9 MS. FRAYER: There was a 10 question that goes as follows: How does DSCO 11 recover contract capacity amounts over term 12 of contract? 13 The way that I interpreted 14 this question and others, and maybe this is 15 not the right way it was -- is not what it 16 was asking, was regarding how the DSCOs 17 recover those costs from ratepayers. And to 18 the extent that there's two DSCOs and there 19 needs to be a settlement process, according 20 to statute the recovery of those costs is 21 through the nonbypassable FMCC charge on 22 ratepayers' bills, and there's also an 23 ongoing biannual settlement process for FMCC 24 trueups that the utilities participate in 25 already that would be a requirement for them UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2712 1 to true up. 2 THE CHAIRPERSON: Very good. 3 MS. FRAYER: Another series of 4 questions related to Southwest Connecticut. 5 The first question is, it would appear 6 Southwest Connecticut is where the majority 7 of the FMCCs are located. Is there no value 8 to the Department outside of this area? 9 And our response is, yes, 10 there is potential benefits to consumers for 11 new resources or incremental resources sited 12 outside of Southwest Connecticut. So we are 13 seeking resources across all of Connecticut 14 because, for example, locational forward 15 reserve market resources that qualify for 16 Southwest Connecticut also qualify for the 17 Connecticut locational forward reserve 18 auction. The forward capacity market is 19 anticipated to be Connecticut-wide at this 20 point under most demand conditions, and 21 therefore a resource that is electrically 22 located within Connecticut, generally 23 speaking, will qualify on an equal footing to 24 somebody located in Southwest Connecticut. 25 With that being said, there UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2713 1 are definitely benefits to siting in 2 Southwest Connecticut that ISO New England 3 has enumerated multiple times, reliability 4 benefits and, as a matter of fact, practical 5 benefits. Because of the ongoing 6 transmission expansion there, according to 7 ISO New England it is likely to be easier to 8 site closer to some of the transmission 9 corridors that are being operated right now. 10 THE CHAIRPERSON: And in any 11 event, I'll refer people back to the needs 12 assessment that you saw very close to the 13 beginning of today's talk. I recognize that 14 the various scenarios show that there was a 15 need in 2007 of around 629 megawatts across 16 Greater Connecticut and about 158 across 17 Southwest Connecticut. Those obviously will 18 have impact on FMCCs. So the bottom line is, 19 yes, there is value outside of Southwest. 20 MS. FRAYER: The second part 21 of this question reads: Within Southwest 22 Connecticut it would appear from ISO figures 23 that FMCCs as applied to existing generation 24 assets vary greatly from city to city. Is it 25 fair to assume that a generating facility in UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2714 1 an area where the FMCCs are highest will 2 score higher than in an area with low FMCCs? 3 I think the general answer is 4 our bid evaluation is targeting the product 5 markets that make up the majority component 6 of FMCCs. However, one thing to keep in 7 mind, which is one of -- when I first read 8 this question I wasn't sure, but we are 9 looking at reduction in FMCCs from the 10 perspective of the ratepayer, the cost to 11 load to ratepayers. Generators, according to 12 ISO New England, are remunerated on a nodal 13 basis, but ratepayers in Connecticut are 14 settled or have to pay on a zonal or 15 aggregate basis. Therefore, the FMCC costs 16 that we're measuring when we look at the cost 17 to load are not nodal in nature but zonal 18 consistent with ISO New England rules, and 19 therefore there may be some costs that are 20 different for very specific locations. For 21 example, there are differences already today 22 between Southwest Connecticut and the rest of 23 Connecticut, but from a ratepayer's 24 perspective there isn't much difference 25 within Southwest Connecticut, at least on a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2715 1 peak load ratio basis. 2 With that being said, we do 3 appreciate and we will accept as part of the 4 bid evaluation packages that bidders will 5 submit the attribution of benefits that the 6 proposer may apply to their project, for 7 example, various site specific reliability 8 improvements in the transmission system or 9 other types of benefits to the extent they 10 can quantify and prove those out in their 11 proposal. 12 THE CHAIRPERSON: As much fun 13 as we're having, we want to answer these once 14 and once only, if we can. 15 MS. FRAYER: The next question 16 we have is will a list of registered bidders 17 be published? Potentially it could help 18 teams partner to strengthen bids or provide 19 means for people with sites to contact 20 developers. 21 Although we are not officially 22 going to publish a list of registered 23 bidders, we did respond in a Q and A already 24 on the RFP website that it is public 25 information about who registered -- they're UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2716 1 not on the website? 2 It is on the DPUC website in 3 their docket on this matter all of the 4 registered bidders to the extent of those who 5 did not apply for confidential treatment, so 6 there's a public venue for those interested 7 in finding out who the registered bidders are 8 to go to that website and to download that 9 information. 10 And we also thought this would 11 be actually a very good forum for folks to 12 talk to the extent that they had partnership 13 opportunities that they wanted to explore. 14 The second question, will 15 feedback be given on bidder qualifications 16 prior to December 13? If not, why the 17 earlier deadline? 18 And the answer is we will 19 respond to bidder -- we will let those that 20 submitted qualification statements know prior 21 to financial bid submission whether or not 22 they have adequately qualified. And that's 23 described in the RFP, I believe. 24 The next question. We 25 understand that new generation built on UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2717 1 existing plant sites will receive full 2 brownfield credit. How many points will be 3 credited to new generation built on an 4 environmental brownfield but not an existing 5 generation site which has available all the 6 existing transmission and gas pipeline 7 capacity -- I take it they mean 8 infrastructure -- for the new facility? 9 As we discussed in I believe 10 Section 5 of the RFP, if there's a brownfield 11 site that has existing transmission and fuel 12 supply infrastructure but is not in itself a 13 brownfield generation site, 2 points out of a 14 total of 2.5 points will be granted to that 15 project. 16 The question, two types of 17 projects will likely be bid as new 18 generation, those being combined cycle and 19 gas turbine peakers. Since the peakers are 20 needed primarily to meet summer peak 21 conditions and not likely required for winter 22 operation, why would these peaker projects be 23 required to -- what do you call it? -- to 24 include -- sorry -- alternative fuel backup? 25 This requirement is adding to UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2718 1 the economic burden of the peaker projects, 2 reducing the number of applicable sites and 3 will require alternative fuel to be consumed, 4 leading to extra emissions that would not 5 have resulted except for this requirement for 6 the alternate fuel. 7 The backup fuel requirement, 8 as the Chairman had earlier noted, is an 9 important and integral part of this RFP, and 10 it's important to note that even if a peaker 11 is typically running in summer peak 12 conditions to the extent there is an 13 unforeseen -- an abnormal winter weather 14 situation, we do expect peakers to be able to 15 operate during those periods as well to 16 secure their reliability of the system, and 17 alternative fuel backup is specifically 18 geared at those types of cold snap weather 19 situations. 20 The second question. Will the 21 DPUC accept bids based on natural gas only 22 with no alternative fuel? 23 Under the generation contract 24 in this RFP, no. Alternative fuel is a 25 minimum requirement for any natural gas fired UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2719 1 generation other than distributed generation 2 under 5 megawatts that would qualify under 3 the demand resource contract. But we expect 4 that the costs of requiring and storing such 5 fuel be part of the financial bid that the 6 project sponsor submits to the Department in 7 the RFP. 8 Next question. Will the team 9 consider a bid from demand resource that 10 provides capacity only in the summer and is 11 unable to participate in the FCM because of 12 annual availability requirement? If so, will 13 payment be monthly, 12 months? 14 And the second question, will 15 the contract be for fixed payments or 16 differences? 17 I think that the intent, of 18 course, is that we want to have resources 19 that typically and generally participate in 20 ISO New England markets. That's really the 21 primary thing. But if this project falls 22 within the general class of resources that 23 ISO New England has recognized as qualifying 24 as a resource for the forward capacity 25 market, then it doesn't need to participate UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2720 1 in the forward capacity market under the 2 terms that ISO has, which are year round. 3 However, we can think about this a little bit 4 further and if you have any other questions 5 that clarify what the intent of this was, 6 we'll consider it. 7 And the answer to the second 8 question is because, again, we're seeking 9 resources by participating in ISO New England 10 markets, specifically, at the minimum, 11 forward capacity market, we are going to 12 structure these as contract for differences. 13 Just to clarify actually, for 14 those of you who haven't had a chance yet to 15 read in its entirety the resource contract 16 versus the generation contract, the demand 17 resource contract as we mentioned this 18 morning doesn't have the target annual 19 availability performance requirement or the 20 heat rate performance requirement or other 21 factors because, in fact, ISO New England is 22 drafting very specific rules for different 23 types of demand resources, like conservation, 24 load management, demand response, and 25 specific requirements, performance UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2721 1 requirements and testing techniques, and so 2 forth for those resources, and our contract 3 is intended to envelope those or take those 4 on. So we don't have the same types of 5 requirements that we have for physical 6 generation or more traditional conventional 7 generation. 8 So to the extent that question 9 was talking about the annual availability 10 requirement, there isn't one for the demand 11 resources. 12 MR. QUINLAN: It seems like I 13 guess a project, say like an air conditioner 14 load response program that did not provide 15 value in the winter, in the evaluation would 16 receive benefits in the winter compared to 17 projects that can provide benefits all year 18 round. We would allow them to participate 19 but depending on how the ISO does the 20 capacity value, if they gain some type of 21 capacity value we'd give it to them, but if 22 they're not, there would be no benefits 23 coming to us. 24 MS. FRAYER: Two more, I 25 promise. The next question, under Section UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2722 1 2.5(b) of the RFP, are liquidated damages for 2 not meeting the project's commercial 3 operations date ways due to delays in 4 obtaining regulatory approvals that are not 5 due to the fault of the supplier? Yes, 6 2.5(e), and I think subsequently later on in 7 the contract talks to this issue. Also, the 8 second part of the question, are commercial 9 operation liquidated damages payable if the 10 supplier does not receive interconnection 11 approval due to no fault of its own? 12 Yes, the intent of 2.5(e) is 13 to exempt suppliers from such liquidated 14 damages if it's not -- if the liquidated 15 damages are the result of -- are not the 16 result or not indirectly the result of an 17 action taken or not taken by the supplier. 18 To the extent that there's a 19 delay because the supplier is not willing to 20 do something to ensure a satisfactory 21 conclusion of an interconnection approval 22 process or other siting processes, that will 23 incur, that situation will result in 24 liquidated damages. 25 Last question so far, but UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2723 1 we'll check again. In Section 12.6(g) of the 2 contract regarding changes in the market 3 rules, why has the contract departed from the 4 more traditional change of law provision 5 which allows the parties to renegotiate 6 provisions to restore the economic balance of 7 the agreement where a change in law rule 8 might adversely impact the ability of the 9 supplier to perform or materially increases 10 its cost, such as the economic balance of the 11 agreement is disturbed? 12 I thought it was important to 13 read this question out so that interested 14 parties know that this is actually a thing 15 which we need to consider a little bit 16 further. We've gotten lots of written 17 comment on this particular issue as well from 18 participants last Friday, so something that 19 we will take up and consider in due course. 20 THE CHAIRPERSON: Okay. It 21 just never ends, does it? 22 A VOICE: I just wanted to -- 23 I was very pleased to hear your last 24 response, but I just wanted to reiterate the 25 importance of that issue on the issue of UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2724 1 finance, the ability to finance projects. 2 And since the purpose of this solicitation is 3 to get the resources that you need at the 4 prices you want, and the prices you want will 5 come when you have enough competitive -- the 6 number of bids that will make it competitive, 7 that it's I think to the interest of 8 everybody that you consider that further, and 9 I thank you. 10 THE CHAIRPERSON: Yes, we've 11 actually been wrestling with this behind the 12 scenes for some time and have not come to 13 complete rest on this, however. But the 14 consensus is slowly building, I think. 15 Okay. Oh, I'm sorry, yes, 16 sir. 17 A VOICE: One of the items you 18 just triggered in the last few minutes is 19 recognition in a way that the ISO is 20 considering composite bids which would allow, 21 in effect, a resource that's available in the 22 summertime and a resource that's available in 23 the wintertime to submit a composite bid in 24 the FCA, which would sort of balance them 25 out. Is there any way, given the two UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2725 1 contract structures you envision now, that a 2 composite bid could be provided here? In 3 other words, a generator and a demand 4 resource bidding together, for example, or an 5 air conditioning program and a winter peaking 6 generator bidding together. 7 THE CHAIRPERSON: So this 8 would be a couple of complimentary approaches 9 that would bid as a single unit, in effect? 10 A VOICE: To get you your 11 one-year static level. 12 THE CHAIRPERSON: Well, we had 13 talked about this a little bit earlier, and I 14 think we had said that as long as people bid 15 on a joint venture basis, what we're trying 16 to avoid is the contingency basis, ah well, 17 if you take my bid, you've got to take his. 18 A VOICE: I understood that 19 earlier question -- 20 THE CHAIRPERSON: Right. 21 A VOICE: -- but in effect if 22 you had a demand resource and a generator 23 resource, at the moment you would have two 24 separate contracts for that joint venture. 25 THE CHAIRPERSON: Yes. UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2726 1 A VOICE: If you could give 2 that a little thought. 3 THE CHAIRPERSON: He's saying, 4 in other words, you might have a joint 5 venture why one side would qualify under the 6 generator contract and another would qualify 7 under the DR contract, for example. Is that 8 a fair rendition? 9 A VOICE: Yes, and you don't 10 have any bridges for linkage at the moment. 11 THE CHAIRPERSON: I'm with 12 you. So I guess we ought to think about that 13 carefully. 14 MS. FRAYER: Yes, we'll think 15 about it. 16 THE CHAIRPERSON: We're 17 inventing this as fast as we can. Yes, sir. 18 You know, I'll tell you what, you all come 19 back about ten tonight and we'll have answers 20 for a couple of these. 21 A VOICE: As a continuation of 22 that thought and with the idea that we're 23 trying to conserve and not waste energy, 24 we're also trying to reduce ratepayers' 25 electric bills, my concept would run product UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2727 1 year round and use an off peak and a peak 2 rate and let the customer store energy during 3 the off peak -- 4 THE CHAIRPERSON: True. 5 A VOICE: -- and then use it 6 during the peak, or if we have to go the 7 other way, we can shut the systems off in the 8 wintertime. 9 THE CHAIRPERSON: Yes. 10 A VOICE: But you're defeating 11 the whole purpose of saving ratepayers money 12 on their electric bill. So I think that idea 13 combining the two -- 14 THE CHAIRPERSON: Other than 15 that, it seems to work fine. So -- no, no, 16 seriously, I'm with you, and as you see, 17 we're struggling with this to try to come up 18 with the best answer we can on it. So stay 19 tuned. 20 A VOICE: Okay. 21 THE CHAIRPERSON: We usually 22 wind up at the right place after a little bit 23 of hassling around here. 24 Okay. Anything further on 25 this? UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2728 1 (No response.) 2 THE CHAIRPERSON: Okay. Oh, 3 I'm sorry, yes, sir. Be patient. I 4 eventually scan the whole room. 5 A VOICE: Under the project 6 execution risk, it's kind of ambiguous, will 7 the track record of a developer, say a 8 brand-name developer who has a track record, 9 developed a number of plants over time, would 10 a bid be by them be favored more than a small 11 independent developer who maybe does not have 12 the same track record? 13 MR. ZENTZ: It comes down, 14 from our perspective, to experience more so 15 than trademark or brand name. So if a 16 developer has been able to provide evidence 17 to us which demonstrates substantial 18 experience, then sure. 19 MS. FRAYER: And also I think 20 we actually ask for individuals that are part 21 of project teams because to the extent that 22 there's, again, kind of a joint venture 23 concept, that there's maybe a financial on 24 their time who's leading on the financial 25 development side and then more of an UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2729 1 engineering entity that's dealing with the 2 commercial aspects of construction and then 3 moving to commercial operation, we want to 4 know who the members of the team are so that 5 we can make that distinction. 6 THE CHAIRPERSON: Okay. 7 Coming up on last call here: Anybody else? 8 (No response.) 9 THE CHAIRPERSON: Okay. 10 A VOICE: One last one. Do 11 you have a bias against small bids? 12 MS. FRAYER: Well, we just -- 13 THE CHAIRPERSON: Is the next 14 question how I've been treating my wife 15 recently? 16 A VOICE: I thought it was a 17 good finish. 18 MS. FRAYER: Maybe the answer 19 is there's no minimum size requirement in 20 this RFP, so in contrast to many other RFPs 21 that have been out there that have very 22 substantial minimum size requirements. 23 THE CHAIRPERSON: All right. 24 Look, I want to thank everybody. I realize 25 it's been a long day and I realize there's a UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2730 1 lot of heavy lifting here. Nonetheless, we 2 very much appreciate your attendance. We 3 especially appreciate your thoughtful, 4 insightful questions, except for the one 5 about how we treat exactly 5 megawatts. 6 Other than that, every other one was really 7 good. 8 As you see, we are working our 9 way through this process as quickly as is 10 humanly possible. We have a few loose ends 11 that we're busy closing off as quickly as we 12 can here. We will go ahead and post the 13 questions and answers on the website. As 14 everybody noticed, we have a 15 transcriptionist, so we have an opportunity 16 to have a transcription of the questions and 17 answers that were provided today, so you have 18 an opportunity to go back and take a look at 19 what was there and refresh your recollection. 20 As we've indicated, we are 21 offering a little more opportunity for 22 comment on a number of things. We would 23 encourage people who care about these issues 24 in particular to make a point of providing 25 some additional commentary. We're UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2731 1 particularly interested in issues like 2 financibility and qualification and so forth, 3 and we'll consider very closely some of the 4 things you've raised today about 5 complimentary projects and so forth. 6 So on behalf of the DPUC, I 7 want to thank you all for appearing today and 8 participating in our process. I think we 9 have done all our legal business and all of 10 our regular business, so thank you very much 11 for appearing, and we are adjourned. 12 (Whereupon, the above 13 proceedings were adjourned at 3:42 p.m.) 14 15 16 17 18 19 20 21 22 23 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free 2732 1 CERTIFICATE 2 I hereby certify that the foregoing 185 3 pages are a complete and accurate 4 computer-aided transcription of my original 5 stenotype notes taken of the Prebid 6 Conference in Re: DOCKET NO. 05-07-14 PH02, 7 DPUC INVESTIGATION OF MEASURES TO REDUCE 8 FEDERALLY MANDATED CONGESTION CHARGES, which 9 was held before the Hon. DONALD W. DOWNES, 10 Chairperson, and ROBERT LUYSTERBORGHS, ESQ., 11 Legal Advisor, at the Legislative Office 12 Building, Capitol Avenue, Hartford, 13 Connecticut, on October 10, 2006. 14 15 16 17 ______________________________ 18 Sharon L. Masse, R.M.R., C.R.R., L.S.R. 19 Court Reporter UNITED REPORTERS 20 43 Woodland Street, Suite 200 Hartford, Connecticut 06105 21 22 23 24 25 UNITED REPORTERS www.unitedreporters.com Nationwide - 866-534-3383 - Toll Free