Akbar Jazayeri Vice President, Regulatory Operations Southern California Edison Company P O Box 800 Rosemead, CA 91770

Transcription

1 STATE OF CALIFORNIA PUBLIC UTILITIES COMMISSION SAN FRANCISCO, CA Edmund G. Brown Jr. Governor July 9, 2012 Advice Letter 2696-E Akbar Jazayeri Vice President, Regulatory Operations Southern California Edison Company P O Box 800 Rosemead, CA Subject: Fixed Energy Price Agreements between SCE Company and Eight Qualifying Facilities Dear Mr. Jazayeri: Advice Letter 2696-E is effective June 21, 2012 per Resolution E Sincerely, Edward F. Randolph, Director Energy Division

2 ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION Utility Name: Southern California Edison Date Utility Notified: February 29, 2012 via: Utility No./Type: U 338-E [ x ] to: advicetariffmanager@sce.com Advice Letter No E Fax No.: (626) Date AL filed: February 1, 2012 ED Staff Contact: Noel Crisostomo Utility Contact Person: Susan Quon Utility Phone No. (626) For Internal Purposes Only: Date Calendar Clerk Notified: / / Date Commissioners/Advisors Notified: / / [X] INITIAL SUSPENSION (up to 120 DAYS) This is to notify that the above-indicated AL is suspended for up to 120 days beginning March 1, 2012 for the following reason(s) below. If the AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [ ] Section 455 Hearing is Required. A Commission resolution may be required to address the advice letter. [ ] Advice Letter Requests a Commission Order. [X] Advice Letter Requires Staff Review Expected duration of initial suspension period: 60 days. [ ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period. If you have any questions regarding this matter, please contact Noel Crisostomo at or via at Noel.Crisostomo@cpuc.ca.gov. cc: Andrew Schwartz Jennifer Kalafut Maria Salinas Honesto Gatchalian Protestants to the advice letter: N/A

3 Akbar Jazayeri Vice President of Regulatory Operations February 1, 2012 ADVICE 2696-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Fixed Energy Price Agreements Between Southern California Edison Company and Eight Qualifying Facilities I. PURPOSE Southern California Edison Company (SCE) hereby submits for filing this advice letter seeking approval by the California Public Utilities Commission (Commission or CPUC) of eight fixed energy price agreements between SCE and eight existing qualifying facilities (QFs) in its portfolio (Fixed Energy Price Agreements). SCE executed these contracts with the winning bidders selected after issuing a QF Fixed-Price Request for Offers (RFO) from respondents seeking to change the energy price within their existing QF Power Purchase Agreements from Short-Run Avoided Cost (SRAC)-based energy payments to a fixed energy price by entering into fixed energy price agreements with SCE. SCE launched the RFO on October 13, 2011, and concluded the RFO on December 8, 2011, when it signed the Fixed Energy Price Agreements that are the subject of this advice letter. SCE explained throughout the RFO process that bidders should identify a levelized price for a fixed energy price term that would represent for SCE s customers a discount on projected SRAC-based energy payments over the same period. The eight winning bidders submitted such bids and the Fixed Energy Price Agreements are expected to generate customer benefits in two primary ways: (1) SCE s customers may realize favorable energy payment rates; and (2) SCE s customers will be protected from the volatility inherent in the natural gas market during the term of the Fixed Energy Price Agreements. Concomitantly, the winning QF bidders will be protected from the volatility in the natural gas market during the term of the Fixed Energy Price Agreements. P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)

4 ADVICE 2696-E (U 338-E) February 1, 2012 II. BACKGROUND SCE has conducted three prior fixed energy price agreement programs in the past, which are summarized in this section. A. First Renewable Fixed Price Agreement The California energy crisis of led to several disputes between SCE and its QF suppliers. As part of the resolution of these disputes, SCE offered a fixed energy price agreement to the QFs in mid-2001, which became known as the First Renewable Fixed Price Agreement. The First Renewable Fixed Price Agreement resolved certain issues that arose from the energy crisis and also provided a five year fixed price period from May 1, 2002, to April 30, 2007, during which time QFs electing the First Renewable Fixed Price Agreement would be paid a fixed energy price of 5.37 cents/kwh. The First Renewable Fixed Price Agreement also provided that, in lieu of the factors that would have been applied pursuant to Decision (D.) , the Energy Loss Adjustment Factor for the projects accepting the First Renewable Fixed Price Agreement would be set at 1 for the five-year term of the fixed price agreement. Ninety QFs signed up for the First Renewable Fixed Price Agreement. In D , the Commission approved as reasonable three voluntary contract amendments available to all QFs, one of which was a fixed energy price contract amendment for five years at 5.37 cents/kwh, which SCE used as the basis for the First Renewable Fixed Price Agreement. B. Second Renewable Fixed Price Agreement In 2006, with approximately one year remaining in the term of the First Renewable Fixed Price Agreement, representatives of SCE s renewable QFs approached SCE to discuss a second five-year fixed price period to commence immediately upon the expiration of the First Renewable Fixed Price Agreement on April 30, In May 2006, SCE and the QF representatives negotiated terms and reached an agreement in principle on this second five-year fixed price agreement (Second Renewable Fixed Price Agreement). While SCE had negotiated the Second Renewable Fixed Price Agreement with a limited number of its eligible QF portfolio, SCE indicated its willingness to make the Second Renewable Fixed Price Agreement available to other QFs. Sixty-one of the 91 QFs offered the Second Renewable Fixed Price Agreement accepted the agreement, which represented 90 percent (by 2005 generation) of SCE s non-gas-fired QF portfolio The terms and conditions of the Second Renewable Fixed Price Agreement were similar to the First Renewable Fixed Price Agreement. The new

5 ADVICE 2696-E (U 338-E) February 1, 2012 five-year fixed price term extended from May 1, 2007, to April 30, The energy price during the five-year period was set at 6.15 cents/kwh, with an escalation factor of one (1) percent. The Energy Loss Adjustment Factor was again set at one (1). Further, the Second Renewable Fixed Price Agreement provided that the QF counterparty expressly conveyed the Environmental Attributes, Capacity Attributes, and Resource Adequacy Benefits to SCE. C. First QF Fixed Price RFO In 2010, SCE began fielding questions from QFs regarding its plans for another QF fixed energy price program to replace the Second Renewable Fixed Price Agreements. In response to these questions, SCE analyzed gas and power market conditions, its procurement needs, and its risk profile and determined that the most appropriate course of action with regard to QF fixed price agreements was to integrate the interest in QF fixed price agreements with its other hedging activities. SCE chose this course of action because of the manner in which SRAC energy payments are calculated. SRAC energy payments are largely based on the price of natural gas, and as a result, a QF fixed energy price agreement functions as a hedge against natural gas. Thus, the QF fixed energy price agreements are another way for SCE to manage the price risk to SCE s customers because of the volatility of the natural gas price component in the calculation of SRAC. Moreover, SCE has continued to develop and refine its short-, medium-, and long-term natural gas risk management strategy, and envisions the QF fixed energy pricing mechanism as a tool to use in conjunction with its other natural gas risk management strategy. SCE s natural gas risk management strategy is centered on a consistent, ratable hedging approach, whereby SCE s fixed positions for a given period increase as that period approaches. SCE decided to employ this same approach with respect to its QF energy payments. Given that SCE would be seeking fewer fixed energy price contracts for shorter time periods than five years, SCE determined that the most efficient method to determine the most competitive offers was to conduct a solicitation under which projects could bid a fixed energy price that meets that project s specific needs. In April 2011, with approximately one year remaining in the term of the Second Renewable Fixed Price Agreement, SCE launched its first Fixed Price RFO (2011 Spring Fixed Price RFO) to complete fixed price agreements. This RFO resulted in three fixed energy price agreements, which were approved by the Commission in Resolution E-4443, dated December 1, 2011.

6 ADVICE 2696-E (U 338-E) February 1, 2012 III. SCE S QF FIXED ENERGY PRICE RFO A. Background SCE decided to continue to offer the Fixed Price RFO concurrently with SCE s Gas RFO hedging efforts. B. RFO Process 1. RFO Summary SCE launched the 2011 Fall Fixed Price RFO on October 13, 2011, by sending an to its QF projects and by posting the following page on its website: Subsequently, SCE hosted a web conference on October 20, 2011, to review the RFO process and other details relating to the 2011 Fall Fixed Price RFO. After the web conference, SCE made the recording of the conference and written responses to questions asked of SCE during the conference available on SCE s website. Throughout the RFO process, SCE maintained a separate account (FixedPriceRFO@sce.com) for bidders to use to ask any RFO- or project-specific questions of SCE. Bidders were also instructed to reach out to their SCE QF contract managers during the RFO process. After the web conference, bidders were asked to provide a Notice of Intent to participate in the RFO by October 27, After the Notice of Intent phase, bidders were required to provide Pre-Qualification documents by November 3, After receiving the Pre-Qualification documents, SCE decided to advance the close of the RFO by two business days and notified the bidders of this advancement on November 10, This advance allowed SCE to better align the schedules of the 2011 Fall Fixed Price RFO with the Gas RFO being conducted at the same time. After the November 10, 2011, announcement, bidders supplied their Final Qualification documents on December 1, SCE selected bids concurrently with the Gas RFO on December 6, SCE notified the eight successful bidders on December 6, 2011, and executed final Fixed Energy Price Agreements on December 8, Pro Forma Fixed Energy Price Agreement The pro forma version of the fixed energy price agreement was posted to SCE s website during the RFO and is attached to this advice letter as Appendix A.

7 ADVICE 2696-E (U 338-E) February 1, Modifications in the Pro Forma Fixed Energy Price Agreement from the 2011 Spring Fixed Price RFO to the 2011 Fall Fixed Price RFO The pro forma version of the Fixed Energy Price Agreement for this RFO was an updated version of the 2011 Spring Fixed Price RFO Fixed Price Agreement. A document showing the changes from the 2011 Spring Fixed Price RFO Fixed Price Agreement to the Pro Forma Fixed Energy Price Agreement, is attached to this advice letter as Appendix B. 4. Valuation of Bids Eight winning bidders offered competitive bids for Fixed Energy Price Agreements under SCE s valuation methodology. SCE s valuation of the bids in the Fixed Energy Price RFO was based on SCE s internal forecast of the expected SRAC rates during the periods over which SCE was seeking to fix prices, from May 1, 2012, to December 31, 2012, and January 1, 2013, forward 12, 24, 36 months or until contract termination if less than 36 months. SCE sought bids that were at or below the projected SRAC energy payments SCE would make over the fixed energy price period of May 1, 2012, through December 31, 2015 (Fixed Energy Price Period). Appendix C provides a valuation process summary, and Attachment C-1 presents Excel spreadsheets showing details of SCE s internal forecast process. 5. Report of Independent Evaluator SCE retained Sedway Consulting to act as the Independent Evaluator (IE) for the RFO and to monitor: (i) SCE s development of the RFO process, schedule, and evaluation metrics; (ii) SCE s efforts to publicize the RFO and communications with the eligible QFs; (iii) the actual receipt of bids; and (iv) SCE s bid evaluation and selection process. The IE Report provides an independent assessment of the fairness, transparency, and objectivity of the RFO process and a review and evaluation of the process employed by SCE and the RFO results. Appendix D and its Attachment D-1 present the public portions of the IE Report and Appendix E presents the confidential appendix to the IE Report. IV. ANALYSIS OF CUSTOMER BENEFITS SCE s valuation approach shows customer benefits. California QF policies state that, when a legacy QF contract is amended, the utility should obtain a commensurate ratepayer benefit for the modifications provided in the amendment. SCE estimated proposed payments to each bidder based on its unique bid prices and forecasted generation for each project. These proposed payments were then compared

8 ADVICE 2696-E (U 338-E) February 1, 2012 to estimated payments based on SCE s forecast of future monthly SRAC prices. 1 The valuation reveals that SCE s customers will benefit from the execution of the eight proposed agreements, for which SCE seeks approval by the Commission in this advice letter. Appendix F summarizes SCE s analysis of customer benefits for the Fixed Energy Price Agreements for which SCE seeks approval. V. REQUEST FOR COMMISSION APPROVAL SCE requests that the Commission issue a resolution no later than May 31, 2012, approving in their entirety the Fixed Energy Price Agreements between SCE and existing QFs contained in Appendices G1 through G8 of this advice letter. Pursuant to Section 6.1 of each agreement, each agreement is subject to CPUC Approval, as that term is defined in Section 7. Appendices H1 through H8 present revision-marks of each agreement, showing the differences between the corresponding agreement in Appendices G1 through G8 and the Pro Forma Fixed Energy Price Agreement shown in Appendix A. SCE specifically requests that the Commission find that the Fixed Energy Price Agreements and SCE s entry into the Fixed Energy Price Agreements, presented in Appendices G1 through G8 of this advice letter, are reasonable and prudent for all purposes, including, but not limited to, SCE s recovery in rates of all payments made under each such agreement, subject only to Commission review of the reasonableness of SCE s administration of the agreements In addition, SCE requests any other and further relief as the Commission finds just and reasonable. VI. LIST OF APPENDICES SCE is providing the following appendices and attachments in support of this advice letter: A. Pro Forma Fixed Energy Price Agreement [PUBLIC] B. Difference Between the Pro Forma Fixed Energy Price Agreement from the 2011 Spring Fixed Price RFO to the 2011 Fall Fixed Price RFO [PUBLIC] 1 SCE assumed that SRAC energy prices would be set under the Qualifying Facility and Combined Heat and Power Program Settlement Agreement approved by the Commission in D (Settlement), effective November 23, 2011.

9 ADVICE 2696-E (U 338-E) February 1, 2012 C. Valuation Process Summary [CONFIDENTIAL] Attachment C-1 [CONFIDENTIAL] D. Independent Evaluator Report [PUBLIC] Attachment D-1 Independent Evaluator Report Appendix B [PUBLIC] E. Independent Evaluator Report Appendix A [CONFIDENTIAL] F. Analysis of Customer Benefits [CONFIDENTIAL] G1-G8. H1-H8 I J Executed Contracts [CONFIDENTIAL] Redlines Showing Changes Between Pro Forma Fixed Energy Price Agreement and Executed Contracts [CONFIDENTIAL] Designation of Confidential Information [PUBLIC] Proposed Protective Order [PUBLIC] VII. CONFIDENTIALITY SCE is requesting confidentiality of Appendix C and its Attachment C-1, Appendices E, F, G1-G8, and H1-H8 to this advice letter. The information for which SCE seeks confidential treatment is identified in Appendix I. The confidential version of this advice letter will be made available to appropriate parties (in accordance with SCE s Proposed Protective Order, as discussed below) upon execution of the required non-disclosure agreement. Parties wishing to obtain access to the confidential version of this advice letter may contact Annette Gilliam in SCE s Law Department at Annette.Gilliam@sce.com or (626) to obtain a non-disclosure agreement. In accordance with GO 96-B, a copy of SCE s Proposed Protective Order is attached to this advice letter as Appendix J. It is appropriate to accord confidential treatment to the information for which SCE requests confidential treatment in the first instance in the advice letter process because such information is entitled to confidentiality protection pursuant to D and is required to be filed by advice letter as part of the process for obtaining Commission approval of agreements between SCE and its QFs. The information in this advice letter for which SCE requests confidential treatment, the pages on which the information appears, and the length of time for which the information should remain confidential are provided in Appendix I. This information is entitled to confidentiality protection pursuant to D (as provided in the IOU Matrix). The specific provisions of the IOU Matrix that apply to the confidential information in this advice letter are identified in Appendix I.

10 ADVICE 2696-E (U 338-E) February 1, 2012 The confidential information provided in this advice letter cannot be aggregated, redacted, summarized, masked, or otherwise protected in a manner that would allow partial disclosure of the data, while still protecting confidential information. SCE would object to any disclosure of the confidential information in aggregated form. SCE is not aware of any manner in which the confidential information could be aggregated that would qualify the information for public status under the IOU Matrix of D To the best of my knowledge, SCE maintains as confidential the information contained in this advice letter for which confidentiality is sought. SCE is informed and believes that this information is maintained by SCE s Renewable and Alternative Power department and the Independent Evaluator and provided internally only to those employees who need to know the information to carry out their job duties. SCE is also informed and believes that this information has not been disclosed to any person other than employees of SCE, the Independent Evaluator or non-market participants (such as the PRG). VIII. TIER DESIGNATION Pursuant to General Order (GO) 96-B, Energy Industry Rule 5.3, this advice letter is submitted with a Tier 3 designation. IX. EFFECTIVE DATE SCE requests that the Commission issue a resolution approving the Fixed Energy Price Agreements in Appendices G1 through G8 on or before May 31, X. NOTICE Anyone wishing to protest this advice letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice letter. Protests should be mailed to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California jnj@cpuc.ca.gov and mas@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

11 ADVICE 2696-E (U 338-E) February 1, 2012 Akbar Jazayeri Vice President of Regulatory Operations Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) AdviceTariffManager@sce.com Leslie E. Starck Senior Vice President c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously. In accordance with Section 4 of GO 96-B, SCE is serving copies of this advice letter to the interested parties shown on the attached GO 96-B service list and the service list of A et al. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice letter at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at For questions, please contact John Marler at (626) or by electronic mail at john.marler@sce.com. Southern California Edison Company Enclosures AJ:jm:sq Akbar Jazayeri

12 CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/cpuc Utility No.: Southern California Edison Company (U 338-E) Utility type: Contact Person: Susan Quon ELC GAS Phone #: (626) PLC HEAT WATER Disposition Notice to: EXPLANATION OF UTILITY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 2696-e Tier Designation: 3 Subject of AL: Fixed Energy Price Agreements Between Southern California Edison Company and Eight Qualifying Facilities Keywords (choose from CPUC listing): Agreements, Qualifying Facility AL filing type: Monthly Quarterly Annual One-Time Other If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL 1 : Confidential treatment requested? Yes No If yes, specification of confidential information: See Appendix I. Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information: Annette Gilliam, Law Department, at (626) or Annette.Gilliam@sce.com Resolution Required? Yes No Requested effective date: 5/31/12 No. of tariff sheets: -0- Estimated system annual revenue effect: (%): Estimated system average rate effect (%): When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: None Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: 1 Discuss in AL if more space is needed.

13 Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Ave., San Francisco, CA and Akbar Jazayeri Vice President of Regulatory Operations Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Leslie E. Starck Senior Vice President c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415)

14 PUBLIC APPENDIX A Pro Forma Fixed Energy Price Agreement

15 FIXED ENERGY PRICE AGREEMENT Between [NAME OF SELLER] [RAP ID No.] and SOUTHERN CALIFORNIA EDISON COMPANY This Fixed Energy Price Agreement (this Agreement ) is entered into by and between [Name of Seller], a [Legal Status of Seller] ( Seller ), and Southern California Edison Company ( Edison ), a California corporation. Edison and Seller are hereinafter sometimes referred to individually as a Party and jointly as the Parties. Unless otherwise specified, capitalized terms used herein shall have the meanings set forth in Article 7. RECITALS The Parties enter into this Agreement with reference to the following facts: (A) (B) (B) Edison and Seller are parties to that certain [Title of Agreement], dated as of [Date] (as amended from time to time, the Contract ), pursuant to which, among other things, Seller sells to Edison, and Edison purchases from Seller, Energy (as defined in the Contract). Under the Contract, Edison s payments for Energy are based on SRAC. The Parties have agreed, subject to CPUC Approval, to change the price paid for Energy to the Fixed Energy Price during the Fixed Energy Price Period and upon certain other terms and conditions related to their agreement upon the Fixed Energy Price and/or to be applicable during the Fixed Energy Price Period. AGREEMENT In consideration of the promises, mutual covenants and agreements hereinafter set forth, the Parties hereby agree to the following: 1. EFFECTIVE DATE. Except for the provisions the effectiveness of which is expressly conditioned upon CPUC Approval, this Agreement shall become effective on the date that it has been executed by duly authorized representatives of each of the Parties (the Effective Date ). 2. ENERGY PRICING DURING THE FIXED ENERGY PRICE PERIOD FIXED ENERGY PRICE. Subject to CPUC Approval, notwithstanding any provision of the Contract to the contrary, commencing on [Start Date for the Fixed Energy Price Period], and terminating on [Termination Date for the Fixed Energy Price Period] ( Fixed Energy

16 Price Period ), Seller hereby elects, and Edison agrees, that the price to be paid to Seller for Energy delivered under the Contract during the Fixed Energy Price Period shall be as set forth below (the Fixed Energy Price ) in lieu of the prices resulting from application of the short run avoided cost ( SRAC ) methodology established from time to time by the CPUC for energy payments by Edison to qualifying facilities. During the Fixed Energy Price Period, the Fixed Energy Prices, shall be adjusted by Time-of-Delivery ( TOD ) factors set forth in Edison s Time-of-Use rate schedule TOU-8 or any successor thereto. The Fixed Energy Prices payable during the Fixed Energy Price Period are as follows: ENERGY DELIVERY PERIOD NEW FIXED RATE PAYABLE FOR ENERGY DELIVERIES DURING APPLICABLE ENERGY DELIVERY PERIOD [Start Date] [End Date], ([ ] $/kwh TOU) + LA Where TOU is equal to the Time-of-Use factors applicable to Seller s project under the Settlement and LA is as defined below. Definition of LA: Except as provided below, LA shall equal the hourly location adjustment, in $/kwh, for the Seller, equal to LMP(QF) LMP (Trading Hub) Where: LMP(QF) (in $/kwh) = The hourly Day-Ahead Locational Marginal Price at the point of interconnection with the CAISO Controlled Grid (as defined in the CAISO Tariff) associated with the Generating Facility; and LMP (Trading Hub) (in $/kwh) = The hourly Day-Ahead Locational Marginal Price of the trading hub where the Generating Facility is located (i.e., SP15 Existing Zone Generation Trading Hub (formerly SP15), NP15 Existing Zone Generation Trading Hub (formerly NP15), or ZP26 Existing Zone Generation Trading Hub (formerly ZP26), as applicable, or any successor thereto). If the Settlement is not in effect for some period of the Fixed Energy Price Period, then LA shall equal the Default Adjustment Factor pursuant to Section 2.2, but only for the time period during which the Settlement is not in effect. Notwithstanding anything in this Agreement to the contrary, in no event shall Edison be obligated to pay the Fixed Energy Price prior to obtaining CPUC Approval. In the event that Edison and Seller do not receive CPUC Approval prior to the commencement of the Fixed Energy Price Period, Edison shall pay 2

17 for Energy based on SRAC pursuant to the terms of the Contract for the period of time beginning with the commencement of the Fixed Energy Price Period and expiring upon the receipt by Edison and Seller of CPUC Approval (the Pre- Approval Period ). Upon receiving CPUC Approval, Edison shall commence paying the Fixed Energy Price to Seller for the remainder of the Fixed Energy Price Period. In the event that the aggregate amount of the Fixed Energy Price that would have been payable for Seller s delivery of Energy during the Pre- Approval Period had Edison and Seller received CPUC Approval exceeds the aggregate amount paid by Edison to Seller for the delivery of Energy based on SRAC during the Pre-Approval Period, Edison shall retroactively pay to Seller the amount by which such aggregate Fixed Energy Price for the Pre-Approval Period exceeds the aggregate amount paid by Edison to Seller for the delivery of Energy based on SRAC during the Pre-Approval Period. In the event that the aggregate amount paid by Edison to Seller for the delivery of Energy based on SRAC during the Pre-Approval Period exceeds the Fixed Energy Price that would have been payable for Seller s delivery of Energy during the Pre-Approval Period had Edison and Seller received CPUC Approval, Edison shall be entitled to reduce future payments under this Agreement and the Contract up to the amount by which such aggregate amounts paid by Edison to Seller for the delivery of Energy based on SRAC during the Pre-Approval Period exceeds such aggregate Fixed Energy Price payments for the Pre-Approval Period. Commencing on [ ], 20[ ], the Energy price payable to Seller shall, for any remaining term of the Contract, be established in accordance with the CPUCapproved SRAC methodology, Time-of-Use factors, and energy loss adjustment factors then in effect. Nothing in this section shall prevent Seller from electing a different SRAC price made available in the Settlement, provided, however, that in no event shall such price be payable to Seller prior to [SAME DATE ON FIRST LINE] DEFAULT ADJUSTMENT FACTOR. To the extent that the factors set forth in CPUC Decision D apply to the Seller s project, the Parties agree that for the Fixed Energy Price Period, such factors shall be set to 1 (the Default Adjustment Factor ). 3. RELATIONSHIP TO COMMISSION SRAC PROCEEDING. Effective upon CPUC Approval, the Parties forever relinquish any rights or claims to pay or to be paid for Energy during the Fixed Energy Price Period based upon terms or a rate of payment other than those set forth in this Agreement. The Parties further agree not to seek to enforce any order by the CPUC or any court or governmental agency having jurisdiction that establishes terms or a rate of payment for Energy during the Fixed Energy Price Period other than those that are set forth in this Agreement. 4. GREEN ATTRIBUTES, CAPACITY ATTRIBUTES AND RESOURCE ADEQUACY BENEFITS. 3

18 4.1. SELLER S CONVEYANCE TO EDISON OF GREEN ATTRIBUTES. Seller hereby provides and conveys all Green Attributes associated with all electricity generation from the Generating Facility to Edison during the Fixed Energy Price Period as part of the deliveries of Energy being made by Seller to Edison. Seller represents and warrants that Seller holds the rights to all Green Attributes from the Generating Facility during the Fixed Energy Price Period, and Seller agrees to convey and hereby conveys all such Green Attributes to Edison as included in the delivery of energy from the Generating Facility SELLER S CONVEYANCE TO EDISON OF CAPACITY ATTRIBUTES AND RESOURCE ADEQUACY BENEFITS. Seller shall dedicate and convey any and all Capacity Attributes and Resource Adequacy Benefits generated by, associated with or attributable to the Generating Facility throughout the Fixed Energy Price Period to Edison and Edison shall be given sole title to all such Capacity Attributes and Resource Adequacy Benefits EXCLUSIVE CONVEYANCE Seller has not and will not convey to any person or entity other than Edison any Green Attributes, Capacity Attributes or Resource Adequacy Benefits associated with the output from the Generating Facility throughout the Fixed Energy Price Period EXCLUSIVE RIGHT TO RECONVEY Seller grants Edison exclusive right, at any time or from time-to-time during the Fixed Energy Price Period, to sell, assign, convey, transfer, allocate, designate, award, report or otherwise provide any and all such Green Attributes, Capacity Attributes and Resource Adequacy Benefits to third parties FURTHER ACTION BY SELLER. Throughout the Fixed Energy Price Period, Seller shall, at its own cost, take all actions and execute all documents or instruments necessary to effectuate the use of the Green Attributes, Capacity Attributes and Resource Adequacy Benefits for Edison s sole benefit throughout the Fixed Energy Price Period. 5. NERC ELECTRIC SYSTEM RELIABILITY STANDARDS Throughout the Fixed Energy Price Period, Seller shall be: Responsible for complying with any NERC Reliability Standards applicable to its generating facility, including registration with NERC as the Generator Operator for its generating facility or other applicable category under the NERC Reliability Standards and implementation of all applicable processes and procedures required by NERC, WECC or CAISO for compliance with the NERC Reliability Standards; and Liable for all penalties assessed by NERC (through WECC or otherwise) for violations of the NERC Reliability Standards by its generating facility or Seller, as Generator Operator or other applicable category. 4

19 5.2. However, if Seller learns that NERC (through WECC or otherwise) is considering or intends to assess Seller with a penalty that Seller believes is attributable to Edison s actions or inactions as SC as described in the document entitled NERC Reliability Standards - Responsibilities of the Generator Operator, Scheduling Coordinator, CAISO, and Reliability Coordinator or other successor description or document on the CAISO website at the time of the potential assessment, Seller shall provide Edison with sufficient notice to allow Edison to take part in administrative processes, discussions or settlement negotiations with NERC, WECC or other entity arising from or related to the alleged violation or possible penalty. If the penalty is nonetheless assessed in spite of Edison s participation in the processes, discussions or settlement negotiations, or Edison waives its right to take part in the processes, discussion or settlement negotiations, Edison shall reimburse Seller for the penalty to the extent that: It was solely caused by Edison s actions or inactions as SC as described in the document entitled NERC Reliability Standards - Responsibilities of the Generator Operator, Scheduling Coordinator, CAISO, and Reliability Coordinator or other successor description or document on the CAISO website at the time of the violation; and Seller can establish to Edison s reasonable satisfaction that the penalty was actually assessed against Seller by NERC and paid by Seller to NERC. 6. OTHER TERMS AND CONDITIONS CPUC APPROVAL. Sections 2.1, 2.2, and 3 of this Agreement, or, in the alternative, of any form agreement upon which this Agreement is based if Edison submits that form instead to the CPUC, are subject to CPUC Approval as to reasonableness for purposes of rate recovery by Edison, and shall not become effective until CPUC Approval has been obtained or waived by Edison, as provided herein. Edison shall file with the CPUC the appropriate request for approval of this Agreement or the standardized form, as appropriate, and seek such approval expeditiously. Seller shall use reasonable efforts in cooperation with Edison for the purpose of obtaining CPUC Approval WAIVER OF COMMISSION APPROVAL. In its sole discretion, Edison may waive CPUC Approval as to all or any individual aspect of this Agreement requiring CPUC Approval at any time by giving notice of such waiver in writing to Seller CONFIDENTIALITY. Neither Party may disclose any Confidential Information to a third party, other than: 5

20 6.3.1.To such Party s or its upstream parents (which, in the case of Edison, is Edison International), employees, lenders, investors, attorneys, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential; To potential lenders (with the consent of Edison, which consent will not be unreasonably withheld) that have agreed to keep such terms confidential; To Edison s Procurement Review Group, as defined in D , subject to any applicable limitations and subject to a protective order applicable to Edison s Procurement Review Group; To the CPUC, the CEC or the FERC, under seal for any regulatory purpose, including policymaking, but only provided that the confidentiality protections from the CPUC under Section 583 of the California Public Utilities Code or other statute, order or rule offering comparable confidentiality protection are in place before the communication of such Confidential Information; In order to comply with any Applicable Law or any exchange, Control Area or CAISO rule, or order issued by a court or entity with competent jurisdiction over the disclosing party; In order to comply with any Applicable Law, including applicable regulation, rule, subpoena, or order of the CPUC, CEC, FERC, any court, administrative agency, legislative body or other tribunal, or any discovery or data request of the CPUC; provided, however, the disclosing Party makes reasonable efforts to limit the disclosure of such Confidential Information; and To the CAISO or as otherwise may reasonably be required in order to participate in any auction, market or other process pertaining to the allocation of priorities or rights related to the transmission of electric energy sold or to be sold to Edison under this Agreement MOBILE SIERRA Absent the agreement of all Parties to the proposed change, the standard of review for changes to any rate, charge, classification, term or condition of this Agreement, whether proposed by a Party (to the extent that any waiver in subsection (b) below is unenforceable or ineffective as to such Party), a non-party or FERC acting sua sponte, shall be the public 6

21 interest standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), and clarified by Morgan Stanley Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish 554 U.S. 527 (2008) (the Mobile Sierra doctrine) Notwithstanding any provision of Agreement, and absent the prior written agreement of the Parties, each Party, to the fullest extent permitted by Applicable Laws, for itself and its respective successors and assigns, hereby also expressly and irrevocably waives any rights it can or may have, now or in the future, whether under Sections 205, 206, or 306 of the Federal Power Act or otherwise, to seek to obtain from FERC by any means, directly or indirectly (through complaint, investigation, supporting a third party seeking to obtain or otherwise), and each hereby covenants and agrees not at any time to seek to so obtain, an order from FERC changing any Section of this Agreement specifying any rate or other material economic terms and conditions agreed to by the Parties SELLER OWNERSHIP AND CONTROL OF GENERATING FACILITY. Seller agrees, that, in accordance with FERC Order No. 697, upon request of Edison, Seller shall submit a letter of concurrence in support of any affirmative statement by Edison that the contractual arrangement set forth in this Agreement does not transfer ownership or control of generation capacity from Seller to Edison as the term ownership or control of generation capacity is used in 18 CFR Section Seller also agrees that it will not, in filings, if any, made subject to FERC Order Nos. 652 and 697, claim that the contractual arrangement set forth in this Agreement conveys ownership or control of generation capacity from Seller to Edison EFFECT ON CONTRACT AND SETTLEMENT. Except as expressly provided herein, all provisions of the Contract, including but not limited to the capacity payment provisions, shall remain in effect and unchanged and shall not be affected by the terms and conditions of this Agreement. Nothing herein shall be read to extend the term of the Contract. In addition, nothing in this Agreement shall prevent Seller from electing to enter into an amendment of the Contract made available pursuant to the Settlement (an Amendment ). In the event that Seller enters into an Amendment and any inconsistency exists between such Amendment and this Agreement other than an inconsistency arising with respect to those matters governed by Section 2 hereof, the terms of such Amendment shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement. For the avoidance of doubt, the matters addressed in Section 2 of this Agreement, including, without limitation, the length of the Fixed Energy Price Period and the amount of the Fixed Energy Prices and any adjustments thereto, shall be governed exclusively by this Agreement during the Fixed Energy Price Period NO WAIVER. None of the provisions of this Agreement, including this paragraph, shall be 7

22 considered waived by either Party unless such waiver is given in writing. The failure of either Party to insist in any one or more instances upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights for the future, but the same shall continue and remain in full force and effect FURTHER AGREEMENTS. No amendment or modification to this Agreement is enforceable unless reduced to a writing signed by all Parties ENTIRE AGREEMENT. Subject to the provisions of Section 6.6 hereof, this Agreement supersedes all prior agreements, whether written or oral, between the Parties with respect to its subject matter and constitutes the entire agreement between the Parties relating to its subject matter SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns CONSTRUCTION. This Agreement is the result of negotiation and each Party has participated in the preparation of this Agreement. Accordingly, any rules of construction to the effect that an ambiguity is to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement. Furthermore, the underlined headings used in this Agreement are for reference purposes only and do not themselves constitute any of the terms of this Agreement GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. TO THE EXTENT ENFORCEABLE AT SUCH TIME, EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT NO PRECEDENT; USE IN LITIGATION. Each Party agrees that this Agreement arises from unique facts and circumstances and, as such, the various provisions of this Agreement, such as, but not limited to, the Fixed Energy Prices shall not be used as evidence, or the basis for disputing the validity or appropriateness of such rates, or for determination of avoided costs before the CPUC, the FERC or any court or other judicial or quasi-judicial body, and nothing herein may be used as an admission against any Party. Neither Party will introduce or otherwise use this Agreement or any of its terms or conditions in any judicial or administrative proceeding or to influence any governmental action, other than for the purpose of enforcing the terms and conditions of this Agreement. 8 7

23 6.14. AUTHORIZED SIGNATURES; NOTICES. Each Party represents and warrants that the person who signs below on behalf of that Party has authority to execute this Agreement on behalf of such Party and to bind such Party to this Agreement. All notices given under this Agreement shall be in writing and shall be effective on the same day if delivered by personal delivery or facsimile transmission, one day after sending if delivered by overnight delivery service, or five days after sending if delivered by first class U.S. mail. Notices shall be directed to the individual or individuals who are designated to receive notices under the Contract TERMINATION. This Agreement shall terminate automatically on April 30December 31, 2012 if CPUC Approval, as defined in Article 7 of this Agreement, has not been obtained or waived by Edison. However, the entirety of Sections 6.3 and 6.13 shall survive any termination of this Agreement COUNTERPARTS,. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original document and which together shall constitute a single instrument. 7. DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: Applicable Laws means all constitutions, treaties, laws, ordinances, rules, regulations, interpretations, permits, judgments, decrees, injunctions, writs and orders of any Governmental Authority that apply to either or both of the Parties, the Generating Facility or the terms of this Agreement. CAISO means the California Independent System Operator Corporation or successor entity that dispatches certain generating units and loads and controls the transmission facilities of entities that (i) own, operate and maintain transmission lines and associated facilities or have entitlements to use certain transmission lines and associated facilities, and (ii) have transferred to the CAISO or its successor entity operational control of such facilities or entitlements. CAISO Tariff means the California Independent System Operator Corporation Operating Agreement and Tariff, Business Practice Manuals (BPMs), and Operating Procedures, including the rules, protocols, procedures and standards attached thereto, as the same may be amended or modified from time-to-time and approved by FERC. Capacity Attributes means any and all current or future defined characteristics, certificates, tags, credits, ancillary service attributes, or accounting constructs, howsoever entitled, including any accounting construct counted toward any resource adequacy requirements, attributed to or associated with the Generating Facility or any unit of generating capacity of the Generating Facility throughout the Fixed Energy Price Period. CEC means the California Energy Commission. 9 8

24 Confidential Information means all oral or written communications exchanged between the Parties on or after the Effective Date relating to the implementation of this Agreement, and includes this Agreement and its terms and conditions hereof. Notwithstanding the foregoing sentence, Confidential Information also includes bids and other offers made by either Party pursuant to negotiations with respect to this Agreement before the Effective Date. Confidential Information does not include information that (i) is in the public domain as of the Effective Date or which comes into the public domain after the Effective Date from a source other than from the other Party, (ii) either Party can demonstrate in writing was already known to such Party on a non-confidential basis before the Effective Date, (iii) comes to a Party from a bona fide third-party source not under an obligation of confidentiality, and (iv) is independently developed by a Party without use of or reference to Confidential Information or information containing Confidential Information. Control Area means the electric power system (or combination of electric power systems) under the operational control of the CAISO or any other electric power system under the operation control of another organization vested with authority comparable to that of the CAISO. CPUC means the California Public Utilities Commission. CPUC Approval means either (a) a final and non-appealable order of the CPUC, without conditions or modifications unacceptable to the Parties, or either of them, which contains the following terms, or (b) a final and non-appealable disposition of the CPUC s Energy Division, without conditions or modifications unacceptable to the Parties, or either of them, which contains the following terms or deems approved an advice letter requesting the following terms: (1) Approves this Agreement in its entirety, including payments to be made by Edison, subject to CPUC review of Edison s administration of the Agreement; and (2) Finds that any procurement pursuant to this Agreement is procurement from an eligible renewable energy resource for purposes of determining Edison s compliance with any obligation that it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section et seq.), Decision , or other applicable law. CPUC Approval will be deemed to have occurred on (1) the date that a CPUC decision containing such findings becomes final and non-appealable, or (2) the date that a CPUC Energy Division disposition which contains such findings or deems approved an advice letter requesting such findings becomes final and non-appealable. FERC means the Federal Energy Regulatory Commission. Generating Facility means Seller s electric generating facility as more particularly described in the Contract, together with all materials, equipment systems, structures, features and improvements necessary to produce electric energy at the facility, excluding the Site, land rights and interests in land. Generator Operator means the entity that Operates the Generating Facility and performs the functions of supplying energy and interconnected operations services as described in the NERC Reliability Standards. 10