2004 Long Term RFO: Questions and Answers

Please review question posting dates.

The most recent update, on 4-22-05, added Q29 to "Eligibility",

Q24, Q25, and Q26 to "Evaluation of Offers",

Q32, Q33, Q34, and Q35 to "RFO Process",

and updated Q11 in "Power Purchase - Misc. Issues".


In several questions there are references to the deadline for initiation of transmission studies, which has been changed to March 28, 2005. These questions are not marked as updated.

A number of questions previously listed in only one section have been duplicated in multiple sections in this posting. These duplicate postings are noted where applicable.

RFO Sections I & II: Introduction and Goals

No Q&A

RFO Section III: Eligibility

1) How important is the 10-minute spinning reserve requirement? How important is this criterion to PG&E? Small machines of less than 50 MW may be able to provide this, but machines larger than 180MW will not. Does PG&E have a preference for smaller, more flexible machines? (11/09/04)

Ten-minute quick start is important to us. We have a strong preference, as it provides flexibility and the ability to participate in the market for quick start ancillary services. We will accept offers that do not support this operational attribute.

2) Do you want black start capability? (updated 03/24/05)

In general, PG&E does not need black start capability except it may have value in certain locations such as Humboldt and San Francisco. PG&E has specified that it wants black start capability for the replacement of the Humboldt Bay Power Plant. Please see the functional specifications for this plant in Appendix J of the RFO.

3) Can my Offer include one unit for COD 2008 and an additional unit for COD 2009 conditional on permit approval of unit 2 by a date certain? (11/09/04)

PG&E will not accept conditional Offers. The requirements to meet on-line dates are described in Section III of the RFO documents.

4) Will we be disqualified if we do not initiate a system impact study and instead use proxy costs (before being chosen)? (11/09/04)

Yes, the gas and power interconnection studies must be initiated no later than March 28. Proxy costs can be used if SIS has not been completed prior to submittal of initial offer. Gas interconnection studies with PG&E are not required if the project is not interconnected to PG&E. Those participants without PG&E gas interconnection should refer to Section X of the RFO for the requirements.

5) What is the exact definition of NP15? (also Section IX, Q10) (11/09/04)

It is as currently defined by the CAISO. This information can be found at http://www.caiso.com/marketops/technical/index.html. For specific questions for specific projects, please contact Ben Morris of PG&E’s Transmission Planning Department at BEM8@pge.com.

6) Will PG&E evaluate baseload 7x24 offers? (11/09/04)

Yes, PG&E will evaluate baseload projects; however, please see Section IIB in the Long Term Power Purchase RFO document for the description of products that PG&E is seeking in the PPA. As described, our anticipated need and preferred offers are for peaking and shaping capacity. However, we will evaluate other offers.

7) How critical is the “new” facility requirement? Will PG&E accept PPA proposals from facilities built within the last 2 years? If not, why the exception for existing QFs? If they will be accepted, will they be considered “non-conforming” or “non-responsive”? (11/09/04)

Our goal is to bring new power into California. As an exception to our requirement of new generation, we are allowing QFs of one MW or larger to participate in the PPA RFO.

8) Will PG&E consider plants that complete construction in 2005 and are offered into the Intermediate Term RFO in the Long-Term RFO? (11-18-04)

With the exception of QFs in PG&E’s service territory as of November 2, 2004, PG&E will only accept new generating facilities in the Long Term Power Purchase RFO, which have a Commercial Operations Date for the delivery of the products (capacity, energy and ancillary services) no earlier than January 1, 2007.

9) Are projects required to have a physical interconnection (i.e. dedicated line) to an NP15 substation? If a project is located in ZP26 and is not able to construct a line to an NP15 substation, would this preclude them from being considered? (also Section IX, Q11) (11-18-04)

Projects other than QFs are required to have a firm physical interconnection to a busbar in NP15. This interconnection can be physical interconnection (dedicated line) or a firm contract path for the term of the PPA. PG&E will not consider a project connected to a bus in ZP26 unless it has a firm contract path to NP15 or is a QF that meets the criteria described in the RFO.

10) Our project is located at the California Oregon Border (COB), and project's System Impact Study (SIS) and Facility Study (FS) were recently completed by BPA. Does our project with the proposed interconnection to Captain Jack Substation need to file for any additional interconnect studies in order to comply with requirements set forth in the terms for PG&E's 2004 Long Term Power Purchase RFO? (also Section IX, Q12) (11-18-04)

Captain Jack is not a substation located in NP15. PG&E requires that firm physical deliveries are made to NP15.

11) Can renewable resource bid into the latest RFO? (11-18-04)

Yes, renewable power offers will be accepted.

12) Will non-dispatchable technology be considered? (11-18-04)

Non-dispatchable technologies will be considered, however, PG&E has a preference for dispatchable peaking and dispatchable shaping generation.

13) As a part of this long term RFO, what is the likelihood that PG&E would be willing to contract for a PPA from an asset located at SP-15? (also Section IX, Q13)(11-18-04)

As stated in the Section III, Eligibility Requirements, of the Long Term Power Purchase RFO, “the Participant must provide for firm physical delivery of its generation to a busbar at a specified delivery point (designated by Seller) within the area designated as NP15, as presently defined by the California Independent System Operator Corporation (“CAISO”)”.

14) Item #6 in the Eligibility Requirements (Section III) states that "The Participant must provide firm physical delivery ....at a specified delivery point (designated by the seller...". Can this specified delivery point be on any of the ISO controlled facilities (including 500-kV) within NP15? For example, could a seller state that the delivery point will be on the Tesla-Metcalf 500-kV line? (also Section IX, Q14) (11-18-04)

Yes, any CAISO controlled facilities in NP15 are considered eligible for interconnection. An offer for a project proposing to interconnect at the Tesla- Metcalf 500 kV line would be considered eligible.

15) Is PG&E accepting bids from existing power plants other than QFs? (11-18-04)

No, PG&E is not accepting bids from existing plants other than QFs.

16) In the RFO, PG&E states its preference for dispatchable resources. Most QFs are not dispatchable. Will a QF have to meet these criteria? (also Section III-QF, Q8) (11-18-04)

In this RFO, PG&E will consider baseload generation. However, PG&E prefers dispatchable peaking and dispatchable shaping generation.

17) What if my potential project interconnects to a line that spans NP15 and ZP26? The geographical location of the project is in ZP26. (also Section IX, Q15) (11-18-04)

If a project interconnects with a transmission line, both ends of the line must interconnect with substations that are in NP15 as currently defined by the CAISO for the project to be considered eligible.

18) Will PG&E accept an offer from an existing plant? (11-18-04)

As stated in the Section III, Eligibility Requirements, of the Long Term Power Purchase RFO, with the exception of an existing QF in PG&E’s service territory as of November 2, 2004, PG&E will only accept new generating facilities, which have a Commercial Operations Date for Power Purchases, and Guaranteed Commercial Availability Date for Facility Ownership no earlier than January 1, 2007.

19) With the Path 15 upgrade going in, would delivery to the Midway substation be eligible as physically delivered to NP15? (also Section IX, Q16) (11-24-04)

No, the Midway Substation is located in ZP26. In order to qualify, facilities other than QFs must deliver on a firm physical basis to a busbar within NP15.

20) Will PPAs from northern California locations such as SMUD’s Control Area be accepted? (11-24-04)

Yes, as long as firm physical delivery to an NP15 busbar is demonstrated.

21) Must all equipment be new? Does re-powering (new generation on existing sites) qualify? (11-24-04)

Please refer to Section III of the RFO for eligibility requirements.

22) Quote from the RFO: "Participant must agree ... (ii) to not sell, deed, grant, convey transmit, or otherwise provide any energy, capacity, ancillary services or any other related electricity product ... or capacity attributes associated with the output to an entity other than PG&E". Will it be acceptable to supply steam to the "Station Host", which is "an entity other than PG&E"? In addition, it also is common that a QF Cogeneration Facility supply electricity to the "Station Host", which may be an entity other than the Seller. Will it be acceptable to supply electricity to the "station host", which is "an entity other than PG&E"? (11-24-04)

A QF can supply steam to a station host and still eligible to bid into the Long Term PPA RFO. A QF can supply power to a station host so long as it commits for the term of the contract for the amount of power delivered to PG&E under the new arrangement.

23) We will be seeking to build plants on sites where we already have existing plants on property leased from PG&E. In the case of one of the sites we have enough property leased to build the additional generating plants without additional property. We would need to amend the lease to allow the additional units. At the other site we also have an existing lease but would probably need an additional ½ to 1 acre of property added to the existing lease. Is the process listed website the appropriate method for PG&E to determine whether we can amend existing leases or would we have to do something differently? (12-8-04)

Yes, please refer to the process described on the website, "PG&E Newsletter & Notices" for any issues regarding leasing PG&E property.

24) Since the RFO has been delayed, will new projects and or companies be allowed to enter the RFO if they had not met the previous set of criteria submittals, interconnects & NOI? (1-27-05)

Yes, new projects and/or companies will be allowed to participate in the RFO process provided they submit for gas and electric interconnections. The extension of the deadline to file for gas and electric interconnection studies is March 28. The Notice of Intent (NOI) was voluntary and not a requirement of the RFO process.

25) Does the reference “all sources” in the January 7 announcement mean that operating assets will be allowed to bid in? (1-27-05)

No, the eligibility criterion with respect to new facilities has not changed.

26) Can we offer a “staged” facility with the bid offering a Simple Cycle Combustion Turbine with an option for PG&E to upgrade to a Combined Cycle at some later time? The option would be contingent on procuring the necessary permits to construct and operate the Combined Cycle facility. (1-27-05)

PG&E will not accept conditional offers. Please see question 3 above in this “Eligibility” section of the Q&A.

27) We are proposing an aggregation of locationally specific dispatchable Distributed Generation resources in response to PG&E's current Peaking Power RFO. The proposal is to provide to PG&E a total of 25 MWs of dispatchable load reduction and energy export to be supplied by the operation of customer-owned existing standby generation. Would an offer based on this type of technology be considered in conformance with PG&E's LT RFO Power Purchase standards? (1-27-05)

No, according to Section III: Eligibility Requirements, offers must be for new generating facilities with Commercial Operations Date no earlier than January 1, 2007.

28) Our project is located in northeastern California near the Malin Substation. We believe that this location is outside of CAISO control. We intend to interconnect directly to the WAPA and Pacificorp 500kV lines running south from Malin. Since we are outside of CAISO, is our project disqualified from bidding the power supply RFO? We have had transmission and interconnect studies performed by Navigant which we would make available to PG&E. What should we do regarding the requirement to submit an application to CAISO by 11/1/04? (also Section IX, Q4) (11-24-04)

Please see Question 17 in Section III, Eligibility, of this Q&A regarding interconnecting to an existing line. To maintain eligibility, an application for the SIS must be filed by March 28, 2005. Any study that is done by a party other than PG&E Transmission Planning must be approved by the CAISO and PG&E Transmission Planning.

29) Is a potential bidder disqualified for missing the deadline for filing for initiation of gas and electric interconnection studies? I understand that there are proxy costs which could be used in the meantime. (04-22-05)

PG&E will not accept offers that did not initiated gas and electric interconnection studies by the deadline of March 28th 2005.

RFO Section III QF: QF Issues

1) What are the requirements, if any, for transmission interconnection of existing QF projects in order to Offer? (also Section IX, Q 17) (11/09/04)

Information the requirements for transmission and interconnection studies on existing QFs can be found on PG&E's website, www.pge.com or http://www.pge.com/suppliers_purchasing/new_generator/converting/. This web page explains the process an existing QF would follow to interconnect to the CAISO grid.

2) Can a QF with a current contract with PG&E submit a bid into the RFO if the QF contract expires AFTER 2010? Would the bid be considered compliant? If so, are there any ramifications for the QF such as buying PG&E out of the remainder of the QF contract? (11-18-04)

Yes, a QF with a current contract with PG&E with an expiration date after 2010 can submit a bid into the RFO. Assuming all other eligibility requirements are met, the bid would be considered compliant. The bid should incorporate a proposed termination of the remaining portion of the existing QF contract at the Initial Delivery Date of the Power Purchase Agreement should a new contract be executed. We would expect that the new contract would start in the 2008 to 2010 time frame and would have a life of at least five years.

3) With upgrades into the Midway Substation, would a QF tied into PG&E through the Midway Substation be considered for the bid? also Section IX, Q 18) (11-24-04)

Yes, a QF interconnected at the Midway Substation is eligible.

4) We have an existing QF that has been interconnected to a substation within NP15 for a number of years and we are contemplating bidding into the RFO. Do we need to file for a SIS and get a FS? (also Section IX, Q 19) (11-24-04)

Please refer to this web site for information regarding existing generation and the need for an SIS/FS: http://www2.caiso.com/docs/2002/06/11/2002061110300427214.html. Please contact via e-mail if you have any further questions.

5) I have several potential QF projects which may interconnect near to what I believe is “Path 15.” I’m not sure if these are located in the CAISO ZP 26 or NP15 zones. Can I sell power to you from either, or both of these sites? (also Section IX, Q 20) (12-2-04)

QFs in ZP26 or NP15 or which can provide firm physical deliveries to NP15 are eligible to bid into the PPA RFO.

6) We are an operating QF. Therefore, pre-construction and construction milestones are inapplicable and delays that would give rise to Delay Damages would not occur. Consequently, the carrying cost of providing Delivery Date Security would needlessly increase our cost of doing business and our resulting bid price to PG&E. Would PG&E waive the requirement for Delivery Date Security? (12-8-04)

Per the terms of the Protocol, the Delivery Date Security is required to be posted until the start of the Services Term which shall not commence until the Seller has satisfied all conditions precedent to the Initial Delivery Date (please refer to the terms of the Protocol for details of the conditions precedent). Thus, PG&E will require posting of the Delivery Date Security until all such conditions are met.

7) Can an existing QF with a contract that was under a “paper curtailment” on November 2, 2004 still bid into the LTRFO process? (1-27-05)

Yes, as long as the QF status has not changed and the existing QF contract with PG&E has been maintained, “paper curtailments” of the output of the project will not affect your ability to participate in the LT RFO process.

8) In the RFO, PG&E states its preference for dispatchable resources. Most QFs are not dispatchable. Will a QF have to meet these criteria? (also Section III, Q16) (11-18-04)

In this RFO, PG&E will consider baseload generation. However, PG&E prefers dispatchable peaking and dispatchable shaping generation.

9) We are an operating QF. Therefore, pre-construction and construction milestones are inapplicable and delays that would give rise to Delay Damages would not occur. Consequently, the carrying cost of providing Delivery Date Security would needlessly increase our cost of doing business and our resulting bid price to PG&E. Would PG&E waive the requirement for Delivery Date Security? (also Section XII, Q5) (12-8-04)

Per the terms of the Protocol, the Delivery Date Security is required to be posted until the start of the Services Term which shall not commence until the Seller has satisfied all conditions precedent to the Initial Delivery Date (please refer to the terms of the Protocol for details of the conditions precedent). Thus, PG&E will require posting of the Delivery Date Security until all such conditions are met.

RFO Section IV: Evaluation of Offers

1) How will transmission cost information be considered in the evaluation? (also Section IX, Q21) (11/09/04)

Transmission cost would be considered in the evaluation process as set forth in Section IV of the RFO. The participant should request this information from Electric Transmission and Interconnection. Please refer to Section IX, the Electric Transmission Interconnection section of the RFOs.

2) If you use proxy costs to evaluate proposals, and select a project based on those. If the subsequent Facility Study costs are higher, is the project selection in jeopardy? (11/09/04)

Project selection occurs when PG&E makes a compliance filing based, in part, on the most current FS cost information. If the CPUC does not approve a contract and suggests that PG&E negotiate with other Participants based in part on updated FS costs, then PG&E will consider next steps.

3) Does the potential for LMP implementation impact how Offers are reviewed? (11/09/04)

Yes. This could affect both the market valuation and the portfolio fit assessment.

4) How would delivery of power to the San Francisco/San Jose area be valued compared to delivery to eastern California? (11/09/04)

See previous answer regarding LMP. Please refer to Section IV, Evaluation.

5) Will a full network transmission model be used in the evaluation of market valuation? (also Section IX, Q22) (11/09/04)

The evaluation methodology will employ an option model. The methodology will consider the various attributes associated with the offered project. These attributes include dispatchability, and locational value. Other transmission impacts are considered in other evaluation criteria set forth in Section IV of the RFOs.

6) What groups within PG&E will participate in offer evaluation? (11/09/04)

The evaluation will be led by the Market Assessment and Quantitative Analysis group with participation by the RFO team and others within PG&E.

7) Will the ISO participate in offer evaluation? (11/09/04)

PG&E does not plan to have CAISO participate in the offer evaluation.

8) Who are the members of the PRG? (11/09/04)

The PRG for PG&E includes individuals from the California Energy Commission (CEC), California Utility Employees (CUE), the Department of Water Resources (DWR), the CPUC’s Energy Division, Natural Resources Defense Council (NRDC), Office of Ratepayer Advocates (ORA), The Utility Reform Network (TURN), and the Union of Concerned Scientists.

9) How will PG&E evaluate imputed debt from must-take contracts? (11/09/04)

Our position on this can be found in chapter 2 and 2a of our Integrated Resource Plan Filing. This filing can be found at:

General Resource Plan Ch 02 (DOC, 175 KB)

General Resource Plan Ch 02 - App A (DOC, 47 KB)

General Resource Plan Ch 02 - Atch 1 (XLS, 26 KB)

General Resource Plan Ch 02 - Atch 2 (DOC, 82 KB)

10) Are “build to own” compared to “power purchase”? or are each allocated 50% of PG&E needs? (updated 3/24/05)

Per the CPUC Long-term Plan Decision of December 16, 2004, PG&E will be evaluating offers for Ownership and Power Purchase on a comparable basis.

11) How will PG&E determine success? Is it economics? Is it location? Is it a combination of factors, and if so, can you please tell us? (11/09/04)

Please see the Evaluation section (Section IV) of the RFOs.

12) Can PG&E identify any specific locations that it prefers? (updated 3/24/05)

PG&E will not identify any specific locations, aside from Humboldt. However, it will take into account locational value in its evaluation of different offers.

13) Is PG&E supplying any projections of Dispatch of the Peaker facilities which can be used as a determinate of annual gas load? (11-24-04)

PG&E is not supplying any projections of dispatch.

14) At several points in the RFO you ask for data on a $/kw or $/kw-yr basis. You also ask for capacity ratings at both ISO and July conditions. Which rating is to be used to calculate the $/kw? (11-24-04)

Please use the International Organization for Standardization, (ISO) rating. Please refer to www.iso.org for more information.

15) The calculation of capacity value in Appendix E for each specific month is not clear. Should we use the average temperature and humidity for all the hours of the specific month? (11-24-04)

Yes, use the average temperature and humidity for all hours of the relevant month.

16) How will PPA proposals with different contract term lengths be evaluated on a market valuation basis? (12-2-04)

Our basic approach employs an Option Model in conjunction with forward market curves to identify the economic value of the spark spread and other value sources associated with generation. Cash flows derived from this analysis are used to derive a value for each proposal. Extending the contract term length will change and extend the cash flows but will not change the method of evaluation. In addition, our other economic criteria include Debt Equivalence and Portfolio Fit. These will also be used in our evaluation and may have an impact on our overall analysis.

17) Does the “shape” (timing) of the fixed payments associated with an offer have any ramification in the evaluation? (1-4-05)

The timing of the fixed payments has an impact on market value, customer rates, credit and performance risk, and viability. PG&E will consider all those impacts in its evaluation.

18) "Appendix E - Offer Data Forms (revised 12-22-04)", states the following:

"Peak July Conditions are based on the average of the monthly maximum daily peak temperatures of the preceding 10 years for the month of July as provided by the National Climatic Data Center ("NCDC") at http://www.ncdc.noaa.gov/servlets/ULCD. Data from the NCDC should be for a geographically nearby weather station that approximates the conditions at the specific plant site. Expected operating conditions are the average of the monthly temperature for the preceding 10 years."

Should the Peak July Temperature is to be calculated as the average of the maximum temperatures on the peak July day for the past 10 years (i.e., the average of 10 data points), or as the average of the maximum temperatures of all the July days for the past 10 years (i.e., the average of 310 data points)? (2-23-05)

The Peak July Temperature should be based on the average of the maximum observed temperature in the month of July for each of the past 10 years (i.e., the average of 10 data points). This data point will assist PG&E in understanding the plant output under hotter than average conditions when it is likely the PG&E system will experience higher than expected peak loads.

19) Will a Participant’s existing SIS/FS results be used for estimating Network Upgrade Costs in the bid evaluation process? (also Section IX, Q5) (11-24-04)

It depends upon whether a Participant has maintained its ISO queue position and when the study was done:

a) For those Participants that have lost their queue position, it will be necessary for these Participants to submit a new Completed Application to the ISO and establish a new ISO queue position. To the extent preliminary SIS/FS results from any new studies that might be required are available at the time of the evaluation, such results will be used to estimate network upgrade costs for purposes of bid evaluation. If preliminary results are not available, then the previous FS cost plus the cost of any additional network upgrades beyond those identified in the previous SIS/FS will be used.

b) For those Participants that have maintained their queue position but have not executed a GSFA and FS costs are more than 90 days old, it will be necessary for these Participants to request an update to the SIS/FS. To the extent preliminary SIS/FS results are available, such results will be used to estimate network upgrade costs for purposes of bid evaluation. If preliminary results are not available, then the previous FS cost plus the cost of any additional network upgrades beyond those identified in the previous SIS/FS will be used.

c) For those Participants that have maintained their queue position and have signed a GSFA but FS costs are more than 90-days old, PG&E will increase the costs contained in the FS by 5% per year to account for escalation that may have occurred since the FS study was completed. Additionally, PG&E will include in the evaluation the cost of any additional network upgrades that may be required to accommodate the interconnection of the Participant’s generator since the execution of the GSFA. The Participant would not provide funding for such upgrades

d) For those Participants that have maintained their queue position and the FS costs are no more than 90-days old, PG&E will uses the costs contained in the FS.

20) Does PG&E have a preference for either the aeroderivative or industrial (frame) type of combustion turbine? (also Section IV, Q20) (new 11-18-04)

PG&E will evaluate the costs and benefits of each technology in the context of all the other Offers received.

21) Does PG&E prefer a plant design with significant Duct Firing capacity? (also Section IV, Q21)(11-18-04)

PG&E will calculate the costs and benefits of any specific proposed plant design. It will take into account the costs of specific design considerations including the long-term operational costs such as increased heat rate and/or reduced output at normal operating loads, and maintenance expenses, as well as the benefits of the additional capacity and operational flexibility.

22) Can variable O&M be priced in $/hr instead of $/MWh? (also Power Purchase - Misc., Q1) (11/09/04)

Yes, variable O&M can be priced in $/hr.

23) Will the peaking offers include only the Transmission Proxy costs identified for the Peak Period case, while shaping offers will include the higher of the Peak Period and Off-Peak period proxy costs? (also Section IX, Q7) (12-2-04)

For purpose of evaluating offers transmission proxy costs would be applied in the absence of cost estimates for SIS/FS. The generation profile of the offer would be considered in applying the appropriate Peak or Off-Peak proxy costs.

24) How will the GHG adder be applied in comparing the PPA proposals which must comply with the "Compliance with Law, Environmental Risk and Indemnity" section and the Facility Ownership proposals which may have cost -of - service treatment for future environmental costs? (04-22-05)

In the evaluation process, the GHG adder will be applied to all proposals, PPA and Facility Ownership, in the same manner. Amount of generation will be estimated for each Offer Variation, and costs associated with this generation will include costs attributed to GHG, as reflected by the GHG adder.

25) The “Emissions” tab in Appendix F1 requests emissions at Maximum Operational Capacity and then at declining percentages of Operating Capacity. Please define “Maximum Operational Capacity” and “Operational Capacity” – at what ambient conditions should these be determined? (04-22-05)

The capacities should be consistent with the capacities listed on the "Heat Rate" tab for ISO conditions.

26) Regarding Appendix F1 (“Project Data Sheets”), please define “Annual Energy Limit” as shown on the operating flexibility tab. (04-22-05)

Annual energy limit refers to the maximum amount of energy the plant can produce subject to all the applicable constraints such as air emissions or energy limits.

RFO Sections V to VIII: RFO Process


1) Will PG&E be sending out a list of attendees to the October 15th Participant Conference? (11/09/04)

No, PG&E will not be sending out the Participant’s Conference attendee list.


2) Will you make the short list of projects public? (11/09/04)

No. PG&E will not make the short list public.


3) Can we submit multiple sites with a single Offer deposit? (11/09/04)

No. Under the Long Term Power Purchase RFO, PG&E will allow up to four offer variations per Offer Deposit. All offers under a given Offer Deposit must be for a project which has the same location, size and delivery point. The variations permitted under a single Offer Deposit are (i) one offer under the Long Term Facility Ownership RFO, and (iii) three offers under the Long Term PPA RFO which only vary price and term.


4) Is PG&E or any affiliates bidding projects into the RFO? (11/09/04)

PG&E will not Offer into either RFO. PG&E will not accept Offers from an affiliate into either RFO.


5) Does PG&E have a position on the use of union labor or signing a PLA? Does PG&E have a position on the proposer signing an MLA? (11/09/04)

PG&E would like the Participant to indicate whether it has entered into Project Labor Agreements (“PLA”) or Maintenance Labor Agreements (“MLA”) in California for the proposed project and specify when and where.


6) Is there any encouragement of minority participation under General Order 156 of November 2003 which eliminates exclusions of any product categories from requiring minority application? (11/09/04)

The RFO will be treated like any other PG&E contract. If there is ownership participation by women or minorities in the offer, we would want to know about that and consider it in the evaluation.


7) What are the steps in applying for gas service if unit is not to be in PG&E’s gas system? (also Section X, Q8) (11/09/04)

It will be determined by the gas provider that will be servicing your project.


8) As PG&E is moving forward ahead of the CPUC decision, are you going to have an independent evaluator/ monitor involved from the initial phase or are you going to wait until this is required as part of their decisions and bring into the process in the middle of the RFO process? (updated 3/24/05)

Per the CPUC Long-term Plan decision of December 16, 2004, PG&E will be using an independent evaluator.


9) Will there be another RFP next year for 2009/2010/2011? In other words, is this an annual process/event? (11/09/04)

That depends on load growth, the results of this year’s RFP, and other changes in resource availability.


10) If PG&E wants 2010 capacity, why request offers by 12/1/04? Why start this before PUC approval? (11/09/04)

There is a significant lead time to permit and build generating plants. For example, a combined cycle plant can take 4-6 years to put into operation. Please note that the initial offers are now due April 27, 2005.


11) What happens if the CPUC makes changes to the PG&E proposed Long-Term Resource Plan? (updated 3/24/05)

The RFO issued on March 18, 2005 reflects the CPUC decision of December 16, 2004.


12) Will we have the opportunity to meet with PG&E staff to provide a due diligence briefing? (11/09/04)

We would welcome a technical briefing.


13) Can we submit an offer for a site that is not yet fully permitted? (11/09/04)

Yes. We will accept Offers not yet fully permitted. Please see the Term Sheet.


14) I would like to obtain a list of the holders of your RFO's so we can consider whom to contact regarding providing services in connection with their proposal to PG&E. (11-18-04)

PG&E is not releasing this information.


15) PG&E, do you have a target date to submit the next set of questions or can we submit them at any time and wait for your response in the update? (11-18-04)

No, PG&E does not have target dates to submit questions. Please submit your questions to either longtermpprfo@pge.com or ownershiprfo@pge.com as soon as you have them.


16) If providing two different proposals for different but nearby sites, and only one of them could be built because of transmission constraints, when would PG&E refund the deposit for the proposal/project that was not chosen? (11-24-04)

Per Section VI, "Binding Nature of Offer," of the Power Purchase RFO, the offer deposit will be retuned when:

a. PG&E’s rejection of the Offer subsequent to shortlist selection when no Offer is shortlisted for the same project under the PSA RFO;

b. In the course of negotiation, the parties cannot agree on the terms of the Offer and PPA, and PG&E rejects the Offer and PPA as submitted by Participant when no Offer is shortlisted for the same project under the PSA RFO;

c. Upon execution and approval of the PPA and Participant’s submission of the letter of credit required under the PPA (“Performance Assurance”);

d. To the extent Regulatory Approval of the Offer has not been obtained before it is no longer required to be binding under Section VI.A. of this RFO and the Participant does not agree to be bound for a longer period of time.


17) If providing two different technology choices, for example an aeroderivative or an industrial type of combustion turbine, both with the same size , would the participant be required to provide deposits for each technology? (11-24-04)

Per Section VI, "Binding Nature of Offer," of the Power Purchase RFO: each Offer into the PPA will require a separate Offer Deposit. Participants may also provide up to four offer variations under a single Offer Deposit. All offers under a given Offer Deposit must be for a project which has the same size, location and delivery point. The variations under a single Offer Deposit are

(i) one offer under the Long Term Facility Ownership RFO and

(ii) three offers under the Long Term PPA RFO which can only vary price and term.



18) What if my application does not provide the detail that you request in your appendices? Will my proposal be considered ineligible? (11-24-04)

Complete the application the best of your knowledge. PG&E will contact you if it requires any clarification.



19) Are Initial Offers transferable? For example, if Party A owns a site and submits an Initial Offer, then transfer site control to Party B, can Party B take control of the Initial Offer? (12-2-04)

A request for such a transfer would not disqualify the Initial Offer. However, transfer of the Initial Offer to Party B would be subject to PG&E’s approval. Specifically, the Offer would need to be re-evaluated, taking into consideration the evaluation criteria outlined in Section IV of the RFO, including Credit and Participant Qualifications. Given the need to re-evaluate the offer, the timing of such a request would influence the likelihood of approval.



20) If a Participant’s Initial Offer is not shortlisted, are there any circumstances under which that Participant might forfeit its Offer Deposit? (12-2-04)

As stated in the Section VI.C of the RFO,
“the Participant will forfeit the Offer Deposit in its entirety under the following conditions:

a. Participant’s withdrawal of the Offer other than a result of its no longer being binding as required by Section VI.A. of this RFO;

b. Any material misrepresentation of pricing or other information knowingly submitted by Participant.”


21) Is a Participant subject to forfeiting its Offer Deposit if, after its Initial Offer is shortlisted, it experiences a change in circumstances or discovers new information that results in the submittal of a Final Offer with a higher price than the Initial Offer? (12-2-04)

Participant would be subject to forfeiting its Offer Deposit if the lower price in the Initial Offer were a “material misrepresentation of pricing or other information knowingly submitted by Participant.” PG&E recognizes that as offers become more refined during development of Final Offers, pricing may be affected. Participants should remain aware, however, that the process remains a competitive one, and significant changes in pricing may affect an Offer’s chances of being selected.


22) Within Section VI. C. of the RFOs, under the "Letters of Credit" heading, PG&E seems to reserve a discretionary right to extend the Offer Deposit Letter of Credit for an indefinite period of time, pending Regulatory Approval. Section XVII (Regulatory Approval) does not state any expected duration for the CPUC review period. The Participants cannot reasonably execute a PSA, however, that binds them to fixed prices over an indefinite period of time. How long a Regulatory Approval period does PG&E expect, and what allowance (if any) is made for escalation in PSA prices if the Regulatory Approval process takes longer than expected? Alternatively, can PG&E designate a time period after which Participants will be permitted to terminate the PSA due to lack of Regulatory Approval? (1-4-05)

Please note that Section VI.A. of the RFO states that "Given the length of the Regulatory Approval process, each shortlisted Participant must agree to be bound by its Final Offer(s) for a period of eight (8) months from the date PG&E files the PSA(s) with the winning Participant(s) with the CPUC. If the CPUC grants (subject to appeal) Regulatory Approval of the PSA within the eight-month period, each shortlisted Participant must agree to be bound by its Final Offer(s) for any additional period of time required for the CPUC order granting Regulatory Approval to become final and non-appealable." Any termination prior to regulatory approval becoming final and non-appealable would result in the participant forfeiting its offer deposit.


23) When does the participant have to post the additional Offer Deposit and when will it be returned? When does the Participant have to post the Delivery Date Security? (1-4-05)

As Section VI.C of each of the RFOs states: “[a]t the date of submission for Regulatory Approval of selected Final Offers, an additional Offer Deposit of $5 per kW (for a total of $10 per kW of the maximum monthly Capacity) will be required from each selected Participant with respect to each selected Offer.” After regulatory approval, the participant must post the Delivery Date security. After the Delivery Date security is posted, the Offer Deposit of $10/kW will be returned.


24) Would a price alteration between the Initial Offer and the Final Offer due to interest rate fluctuations be considered a "material misrepresentation"? Alternately, will PG&E accept bids in which the pricing is variable and tied to an interest rate benchmark, as long as the rationale is explained? (1-4-05)

As Section VII. B. 3, of the of each of the RFOs states, Participants may provide a Term Sheet “that is marked to show any proposed changes”. Furthermore, as that section states, “any material changes proposed by the Participant to the Term Sheet, and any subsequent refusal to be bound by its proposed changes, will be given consideration in the overall Offer evaluation process.”


25) If/when a shortlisted project receives regulatory approval, within how many days will PG&E return Initial Offer Deposits to the bidder? Once a completed project reaches the Initial Delivery Date, within how many days will the Deposit Date Security be returned to the operator? (1-4-05)

The Initial Offer Deposit will be returned within ten business days after receipt of the Delivery Date Security. Following the Initial Delivery Date and the posting of the Independent Amount by the Seller, within ten business days Buyer will return the Delivery Date Security to Seller after satisfaction of any liquidated damage amounts then due.


26) Within Section VI. C. of your RFO, for the "Offer Deposit", you require that either an initial deposit of cash or a Letter of Credit be submitted in the amount of $5 per kW. Will an "Insurance Bond" be acceptable? (1-4-05)

An Insurance Bond will not be acceptable.


27) I’m planning on submitting a proposal with three units at 100 MWs per unit for 300 MWs. Can I submit two variations for two units at 200 MWs and one unit at 100 MWs for the same offer deposit based on the 300 MW bid? (1-27-05)

No, you must provide an offer deposit for each configuration. Section VI. C. of the Long-Term Power Purchase Request For Offers documents states that all “offers under a given Offer Deposit must be for a project which has the same size, location and delivery point. The variations under a single Offer Deposit are (i) one offer under the Long Term Facility Ownership RFO and (ii) three offers under the Long Term PPA RFO which can only vary price and term.”


28) If a submitted project is not shortlisted and the project's Initial Offer deposit was secured by a cash deposit, will the Initial Offer deposit (i.e. the cash) be returned within 10 business days? (1-27-05)

Yes, the initial offer deposit will be returned within 10 business days.


29) Will PG&E allow participants to bid multiple, mutually exclusive, configurations at a single site? (2-16-05)

Yes, as long as the participant follows the protocols defined in the RFO documents, such as a separate offer deposit, for each configuration.


30) Would PG&E accept a Corporate Guaranty from a company with an S&P rating of A- or higher in lieu of the cash deposit or letter of credit for the initial offer deposit? (2-16-05)

The bid (initial offer) security and the delivery date security should be posted either in the form of a letter of credit or a cash deposit. The requirements for a Letter of Credit are specified in Section VI. “Binding Nature of Offer”.


31) Section VI.C of the RFO states that “the Participant will forfeit the Offer Deposit in its entirety under the following conditions:

1. Participant’s withdrawal of the Offer other than as a result of its no longer being binding as required by Section VI.A. of this RFO”.

We plan to bid three mutually exclusive offers for our site of which only one can be built. We recognize that an Offer Deposit is required for each. If PG&E accepts only one of the three options, will we be released from the above provision relative to forfeiture of the Offer Deposit (assuming there is no other ‘bad faith’ element) for the remaining two offers and that the Offer Deposits for the other two offers will be returned within 10 business days? (2-23-05)

Each mutually exclusive option will be interpreted as a separate project from an Offer Deposit perspective. Assuming the offers were made in “good faith,” PG&E will return the Offer Deposits for projects that were not shortlisted or if PG&E rejects the project subsequent to shortlist. PG&E will determine its preferred resource mix through a multi-objective evaluation process, and will take into account site constraints. Because of the mutually exclusive nature of these options, at least two of the proposed projects will not be chosen.

The protocols governing the Offer Deposit are specified in Section VI. C. of the Long Term Power Purchase Request for Offers.


32) We are writing to request a small change to Appendix A – Long Term Request for Offers Agreement due to the nature of our intended bid. Our project’s business arrangement is that our company has the right to submit an initial bid to the RFO and holds an option to purchase 100% of the LLC (currently owned by another Corporation) if the initial bid is successful. Therefore, we request the ability to insert both company names as “Participant” and to add an additional signature block. Additionally, if our bid is selected to the shortlist, we would need to modify the Confidentiality Agreement in a similar manner – inserting language similar to “between Pacific Gas and Electric Company, a California corporation (PG&E) and the LLC and its Development Partner, our Corporation” into paragraph one of the CA and adding an additional signature block. (4-22-05)

Multiple companies as signatory to a LTRFO bid is not acceptable. PG&E requires a single party to accept the responsibility associated with an RFO bid. With PG&E”s permission, this responsibility may be re-assigned to another party during the RFO process.


33) In your Oct 04 presentation about Long Term Power Procurement RFO http://www.pge.com/docs/pdfs/suppliers_purchasing/wholesale_electric_supplier_solicitation/Conference_of_10-15-04_FINAL.pdf

You list that " Meet resource requirements by implementing the preferred loading order:
- Customer Energy Efficiency Programs
- Customer Demand Response Programs
- Distributed Generation Programs
- Renewable Power
- Power to Fill Residual Needs

In this recent RFO dated 3-18, no mention was made about EE or Demand Response. Will there be a subsequent RFO including this? If so, when do you expect it? Please advise. (4-22-05)

In regard to Demand Response:
PG&E currently has no plans to issue any RFOs for Demand Response Programs in 2005. As with the energy efficiency programs, PG&E will be filing its plans for Demand Response Programs for 2006-08 on June 1, 2005.
In regard to Energy Efficiency:
In Decision 05-01-055 (the “Decision”), issued January 27, 2005, the California Public Utilities Commission (CPUC) adopted an administrative structure for energy efficiency programs that includes competitive solicitations for programs to be implemented by third-party providers. In the Decision, the CPUC requires the Investor Owned Utilities (IOUs) to competitively bid 20% of their energy efficiency portfolios, and to file the portfolio components that will be put out to bid and their proposed bid evaluation criteria (Ordering Para. 6.). Accordingly, PG&E will be filing a program application at the CPUC on June 1, 2005. The application will describe PG&E’s plans for bidding out portions of the 2006-08 energy efficiency program portfolio, including the specific request for proposals (RFPs) to be issued; proposed bid evaluation criteria, expected funding and savings from third-party competitive bids; and information on the bid process. These RFPs will be issued after the Commission rules on the company's portfolio proposal and bidding criteria, probably in the fall.


34) Appendix A of the RFO states: "Participant has not engaged in and will not engage in, Communications (as defined in the RFO) with any other Participant in the RFO concerning any terms contained in Participant's Offer, unless explicitly authorized by PG&E . . ."
Could you please clarify that PG&E authorizes Participants to engage in Communications with joint venture partners? Some Participants may be considering Offers from wholly-owned projects and also from joint venture projects where they might be partial owners with other entities. In such a case, a Participant could potentially need to be involved in discussions regarding pricing, terms & conditions (assuming this is included in the definition of "Communications") at the joint venture level as to the development of the joint venture proposal. Would it acceptable for a Participant to engage in Communications with its JV if the JV were going to be a Participant, when at the same time, one or more of the owners might also be potential Participants with respect to other Offers from projects they own wholly or with other JV partners?
(4-22-05)

Communications with partners who are party to an RFO offer is acceptable so long as the specific information regarding the offer is not shared with another party who may offer different and separate proposal into the RFO process.


35) The RFO document, Section VI, Item C, Offer Deposit states that the Participant will be required to provide an “Offer Deposit” in the amount of $5/kW of the maximum monthly Capacity as set forth on Participant’s completed Appendix F (“Generation Facility Information Form”. We assume this means one of the forms in Appendix F1 (“Project Data Sheets”)? Please clarify which capacity number you would like us to use (e.g. does this mean the maximum capacity for a given month (e.g. January) provided in the “Capacity” tab of these data sheets? Note that these numbers will be degraded output as a function of fired hours).
(4-22-05)

As the PPA Term Sheet describes, the offer deposit should be based on the maximum monthly Capacity as set forth in Appendix F. That is the maximum capacity value for any given month found on the Project Data Sheet.

RFO Section IX: Electric Transmission and Interconnection


1) Must all generators connect at transmission voltage? If not, how would evaluation be different? (11/09/04)

Projects of 25 MW or more would generally connect at a transmission voltage (60 kV and above).


2) If the project site requires a physical interconnection to reach the electric grid or gas backbone, will PG&E provide those connections? How are eminent domain or easement issues handled? Permitting by PG&E? community issues? (11/09/04)

For gas and electricity, the seller is responsible for the facilities necessary to connect to the existing system.


3) If a project has an interconnect study which has expired and a draft GSFA with PG&E, could fees for the study be negotiated, and the interconnect study simply “revised and updated”? (11/09/04)

If the facility has lost its queue position with the CAISO, the study would need to be redone.


4) Our project is located in northeastern California near the Malin Substation. We believe that this location is outside of CAISO control. We intend to interconnect directly to the WAPA and Pacificorp 500kV lines running south from Malin. Since we are outside of CAISO, is our project disqualified from bidding the power supply RFO? We have had transmission and interconnect studies performed by Navigant which we would make available to PG&E. What should we do regarding the requirement to submit an application to CAISO by 11/1/04? (also Section II, Q28) (11-24-04)

Please see Question 17 in Section III, Eligibility, of this Q&A regarding interconnecting to an existing line. To maintain eligibility, an application for the SIS must be filed by March 28, 2005. Any study that is done by a party other than PG&E Transmission Planning must be approved by the CAISO and PG&E Transmission Planning.


5) Will a Participant’s existing SIS/FS results be used for estimating Network Upgrade Costs in the bid evaluation process? (also Section IV, Q19) (11-24-04)

It depends upon whether a Participant has maintained its ISO queue position and when the study was done:

a) For those Participants that have lost their queue position, it will be necessary for these Participants to submit a new Completed Application to the ISO and establish a new ISO queue position. To the extent preliminary SIS/FS results from any new studies that might be required are available at the time of the evaluation, such results will be used to estimate network upgrade costs for purposes of bid evaluation. If preliminary results are not available, then the previous FS cost plus the cost of any additional network upgrades beyond those identified in the previous SIS/FS will be used.

b) For those Participants that have maintained their queue position but have not executed a GSFA and FS costs are more than 90 days old, it will be necessary for these Participants to request an update to the SIS/FS. To the extent preliminary SIS/FS results are available, such results will be used to estimate network upgrade costs for purposes of bid evaluation. If preliminary results are not available, then the previous FS cost plus the cost of any additional network upgrades beyond those identified in the previous SIS/FS will be used.

c) For those Participants that have maintained their queue position and have signed a GSFA but FS costs are more than 90-days old, PG&E will increase the costs contained in the FS by 5% per year to account for escalation that may have occurred since the FS study was completed. Additionally, PG&E will include in the evaluation the cost of any additional network upgrades that may be required to accommodate the interconnection of the Participant’s generator since the execution of the GSFA. The Participant would not provide funding for such upgrades

d) For those Participants that have maintained their queue position and the FS costs are no more than 90-days old, PG&E will uses the costs contained in the FS.


6) Will a Participant be charged for an update of its SIS/FS study? (11-24-04)

Yes, PG&E will charge a Participant the actual cost of performing any new or updated SIS/FS study that is required for this RFO. PG&E will not charge a Participant to escalate the cost contained in a SIS/FS study provided that study was conducted after June 1, 2002, the effective date of Amendment 39 of the CAISO Tariff (refer to CAISO’s Generating Unit Interconnection Procedure, http://www2.caiso.com/docs/2002/06/11/2002061110300427214.html) and the Participant has maintained its ISO queue position.


7) Will the peaking offers include only the Transmission Proxy costs identified for the Peak Period case, while shaping offers will include the higher of the Peak Period and Off-Peak period proxy costs? (also Section IV, Q23) (12-2-04)

For purpose of evaluating offers transmission proxy costs would be applied in the absence of cost estimates for SIS/FS. The generation profile of the offer would be considered in applying the appropriate Peak or Off-Peak proxy costs.


8) Are applications for electric and gas interconnection studies transferable? For example, if Party A owns a site and submits applications for interconnection studies, then transfer site control to Party B prior to January 14, 2005, can Party B take control of the interconnection studies and submit the Initial Offer? (12-2-04)

If Party B is able to demonstrate site control as specified in Section III of the RFOs, the studies would be transferable. If Party B were proposing changes to the plant configuration, however, another interconnection study would be required.


9) We intend to offer PG&E two different equipment options from a single site. This is to allow PG&E to compare the costs and operating characteristics and select the equipment type that best meets its needs. However the ISO has told us we cannot request Interconnect Studies for different types of equipment at the same interconnection point. Please confirm that we can bid different equipment from the same site and how to respond to the ISO. (1-14-05)

A bidder may bid different equipment from the same site into the RFO process. However, a bidder will need to post an Initial Offer Deposit for each configuration submitted under the RFO.

According to CAISO Tariff Amendment 39, a developer is only allowed to submit one application for interconnection per site using one type of equipment and one output size. The bidder should submit to the CAISO for an SIS/FS for the configuration that would likely have the most significant system impact and therefore represent the upper bound on system upgrade costs. If the developer wishes to modify their application, Amendment 39 allows them to modify their Interconnection Agreement (IA) once prior to commencing the Facilities Study (FS). This should not prevent a developer from offering an alternative technology in their bid since they can revise their application prior to starting the FS.

In addition, a similar question was raised earlier regarding changes to equipment after an offer is submitted. Please refer to question number 2, under "Facility Ownership – Misc. Issues" section of the Q&A posted on PG&E's website.


10) What is the exact definition of NP15? (also Section III, Q5) (11/09/04)

It is as currently defined by the CAISO. This information can be found at http://www.caiso.com/marketops/technical/index.html. For specific questions for specific projects, please contact Ben Morris of PG&E’s Transmission Planning Department at BEM8@pge.com.


11) Are projects required to have a physical interconnection (i.e. dedicated line) to an NP15 substation? If a project is located in ZP26 and is not able to construct a line to an NP15 substation, would this preclude them from being considered? (also Section III, Q9) (11-18-04)

Projects other than QFs are required to have a firm physical interconnection to a busbar in NP15. This interconnection can be physical interconnection (dedicated line) or a firm contract path for the term of the PPA. PG&E will not consider a project connected to a bus in ZP26 unless it has a firm contract path to NP15 or is a QF that meets the criteria described in the RFO.


12) Our project is located at the California Oregon Border (COB), and project's System Impact Study (SIS) and Facility Study (FS) were recently completed by BPA. Does our project with the proposed interconnection to Captain Jack Substation need to file for any additional interconnect studies in order to comply with requirements set forth in the terms for PG&E's 2004 Long Term Power Purchase RFO? (also Section III, Q10)(11-18-04)

Captain Jack is not a substation located in NP15. PG&E requires that firm physical deliveries are made to NP15.


13) As a part of this long term RFO, what is the likelihood that PG&E would be willing to contract for a PPA from an asset located at SP-15? (also Section III, Q13)(11-18-04)

As stated in the Section III, Eligibility Requirements, of the Long Term Power Purchase RFO, “the Participant must provide for firm physical delivery of its generation to a busbar at a specified delivery point (designated by Seller) within the area designated as NP15, as presently defined by the California Independent System Operator Corporation (“CAISO”)”.


14) Item #6 in the Eligibility Requirements (Section III) states that "The Participant must provide firm physical delivery ....at a specified delivery point (designated by the seller...". Can this specified delivery point be on any of the ISO controlled facilities (including 500-kV) within NP15? For example, could a seller state that the delivery point will be on the Tesla-Metcalf 500-kV line? (also Section III, Q14) (11-18-04)

Yes, any CAISO controlled facilities in NP15 are considered eligible for interconnection. An offer for a project proposing to interconnect at the Tesla- Metcalf 500 kV line would be considered eligible.


15) What if my potential project interconnects to a line that spans NP15 and ZP26? The geographical location of the project is in ZP26. (also Section III, Q17) (11-18-04)


If a project interconnects with a transmission line, both ends of the line must interconnect with substations that are in NP15 as currently defined by the CAISO for the project to be considered eligible.


16) With the Path 15 upgrade going in, would delivery to the Midway substation be eligible as physically delivered to NP15? (also Section IX, Q16) (11-24-04)

No, the Midway Substation is located in ZP26. In order to qualify, facilities other than QFs must deliver on a firm physical basis to a busbar within NP15.


17) What are the requirements, if any, for transmission interconnection of existing QF projects in order to Offer? (also Section IX, Q 17) (11/09/04)

Information the requirements for transmission and interconnection studies on existing QFs can be found on PG&E's website, www.pge.com or http://www.pge.com/suppliers_purchasing/new_generator/converting/. This web page explains the process an existing QF would follow to interconnect to the CAISO grid.


18) With upgrades into the Midway Substation, would a QF tied into PG&E through the Midway Substation be considered for the bid? also Section IX, Q 18) (11-24-04)

Yes, a QF interconnected at the Midway Substation is eligible.


19) We have an existing QF that has been interconnected to a substation within NP15 for a number of years and we are contemplating bidding into the RFO. Do we need to file for a SIS and get a FS? (also Section IX, Q 19) (11-24-04)

Please refer to this web site for information regarding existing generation and the need for an SIS/FS: http://www2.caiso.com/docs/2002/06/11/2002061110300427214.html.
Please contact via e-mail if you have any further questions.


20) I have several potential QF projects which may interconnect near to what I believe is “Path 15.” I’m not sure if these are located in the CAISO ZP 26 or NP15 zones. Can I sell power to you from either, or both of these sites? (also Section IX, Q 20) (12-2-04)

QFs in ZP26 or NP15 or which can provide firm physical deliveries to NP15 are eligible to bid into the PPA RFO.


21) How will transmission cost information be considered in the evaluation? (also Section IV, Q1) (11/09/04)

Transmission cost would be considered in the evaluation process as set forth in Section IV of the RFO. The participant should request this information from Electric Transmission and Interconnection. Please refer to Section IX, the Electric Transmission Interconnection section of the RFOs.


22) Will a full network transmission model be used in the evaluation of market valuation? (also Section IV, Q5) (11/09/04)

The evaluation methodology will employ an option model. The methodology will consider the various attributes associated with the offered project. These attributes include dispatchability, and locational value. Other transmission impacts are considered in other evaluation criteria set forth in Section IV of the RFOs.


23) Will it be necessary to initiate a transmission System Impact Study by March 28, 2005 if the bidder intents to use the existing PG&E site at Humboldt Bay for the HBPP replacement? (also Section X, Q9) (3/24/05)

Yes, it is necessary to initiate both a Transmission and Gas System Impact Study.

RFO Section X: Gas Supply and Interconnection


1) The connection cost of gas may not be known at the time of the Offer. Additionally, the Offers may be tolling agreements. Which party is responsible for these unknown costs? (11/09/04)

If the Preliminary Application for Gas Service is initiated before March 28, 2005, estimated connection costs should be known in time to submit your initial offer. The seller is responsible for connection costs.


2) Is a Preliminary Application for Gas Service (PAGS) required if gas deliveries won’t be off of PG&E’s gas system? (11/09/04)

No. Participants must submit Attachment I, but will need to request gas service information from their service provider.


3) Under Section X titled "Gas Supply And Interconnection" found on page 17, the first paragraph reads "If gas is the fuel source, Offers should reflect a Fuel Conversion Agreement arrangement (tolling) where PG&E would procure and deliver the gas commodity to the plant." Our question is: Will PG&E procure, pay for, and deliver fuel consumed for the purpose to test the plant, where such testing is to be conducted by the Participant? Such testing will be necessary to prove satisfactory plant performance, before final acceptance by PG&E. (11-18-04)

Fuel for start-up testing along with the power resulting from start-up testing will be negotiated as a separate agreement or as part of the definitive contract document.


4) Our project is located in northeastern California near the Malin Substation. The two former PGT pipelines bringing gas from Canada cross over our site. We intend to interconnect directly to these pipelines for gas supply. Since these lines are not in the PG&E system, what should we do regarding the RFO requirement to submit a preliminary application for gas service by November 1, 2005? We intend to bid the long term power purchase RFO as a tolling project and are assuming PG&E can supply from the former PGT pipelines. Is this a correct assumption? (11-24-04)

The participant will have to make interconnection arrangements with the owner of the pipeline. In any event, to be eligible, PG&E requires that seller provide the gas interconnection information requested in Appendix I of the PPA RFO by December 1, 2004. Under the Power Purchase Agreement, PG&E can deliver the commodity to the plant. Finally, as a reminder, power is required to be delivered to NP15.


5) What information needs to be submitted for the application for gas service versus the information required to be submitted for the application? (11-30-04)

Section X of the RFO (pages 17 and 18) provides an overall explanation of the submittal process. This includes a seven step description of the process. Required forms are in Appendix I.

Regarding Appendix I:

Appendix I - The Gas Interconnection Information Form is not required for the Preliminary Application for Gas Service. However, it is required for the bid submittal. The Preliminary Application for Gas Service provides the information necessary to fill out this the Gas Interconnection Information Form.

Exhibit 1 - Gas System Operations - Transmission System Planning Interconnection Information Sheet is required for the Preliminary Application for Gas Service.

Exhibit 2 - Agreement to Perform Tariff Related Work is required for the Preliminary Application for Gas Service.


6) Are applications for electric and gas interconnection studies transferable? For example, if Party A owns a site and submits applications for interconnection studies, then transfer site control to Party B prior to January 14, 2005, can Party B take control of the interconnection studies and submit the Initial Offer? (12-2-04)

If Party B is able to demonstrate site control as specified in Section III of the RFOs, the studies would be transferable. If Party B were proposing changes to the plant configuration, however, another interconnection study would be required.


7) Within the Power Purchase Agreement Term Sheet, under "Force Majeure", will the Participant be entitled to Force Majeure relief if there are delays or interruptions in the Buyer's supply of natural gas fuel (either before or after the Initial Delivery Date)? (1-4-05)

Except for a failure or curtailment resulting from a Force Majeure, the failure of Gas transportation service will not excuse performance. However, a failure of the Buyer to deliver Gas will excuse the Seller’s corresponding obligation to deliver the associated Products and neither Buyer nor Seller will have any further obligation or liability to the other due to the failure.


8) What are the steps in applying for gas service if unit is not to be in PG&E’s gas system? (also Section V, Q7) (11/09/04)

It will be determined by the gas provider that will be servicing your project.


9) Will it be necessary to initiate a transmission System Impact Study by March 28, 2005 if the bidder intents to use the existing PG&E site at Humboldt Bay for the HBPP replacement? (also Section IX, Q23) (3/24/05)

Yes, it is necessary to initiate both a Transmission and Gas System Impact Study.

RFO Section XI: Generating Facility Description


1) Does PG&E want Simple Cycle CTs that are designed to easily accept expansion to Combined Cycle at a later date? (11-18-04)

PG&E does not have a preference for an Offer that easily accepts expansion from simple cycle to combined cycle. The cost of converting over to combined cycle would be taken into account when Offers provide conversion flexibility.


2) Does PG&E have a preference for either the aeroderivative or industrial (frame) type of combustion turbine? (also Section IV, Q20) (new 11-18-04)

PG&E will evaluate the costs and benefits of each technology in the context of all the other Offers received.


3) Does PG&E prefer a plant design with significant Duct Firing capacity? (also Section IV, Q21)(11-18-04)

PG&E will calculate the costs and benefits of any specific proposed plant design. It will take into account the costs of specific design considerations including the long-term operational costs such as increased heat rate and/or reduced output at normal operating loads, and maintenance expenses, as well as the benefits of the additional capacity and operational flexibility.


4) In completing Appendix E "Guarantee at Peak July Conditions", many of the closest geographically weather stations on the NCDC website do not contain a full 10 years of data. Would you prefer more data from a site further away, or accept the closer weather station if there are >5 yrs of data available? Should we calculate performance at the average relative humidity as well? (11-18-04)

Please use the weather station site that best approximates the temperature and humidity conditions of plant site and has 10 plus years of consistent data. The calculations should include both temperature and humidity.


5) In Appendix E "Compensation", is the "Variable Energy Price ($/ MWh)" component "N/A" for bidders offering a toll? (11-18-04)

Yes, N/A is appropriate for tolls


6) Would you please clarify what is meant by "Fast Start/Ramp Capability" in Appendix J. Does the specified requirement apply to start-up (cold, warm or hot) from zero speed to 40 MW in three minutes or simply increasing output by 40 MW in three minutes with generating equipment already synchronized to the grid? (3/24/05)

The "Fast Start/Ramp Capability" refers to the capability of the units to increase output by 40 MW in three minutes. This can be accomplished by having the generators synchronized to the grid or start-up from zero MWs to 40 MWs in three minutes.

RFO Section XII: Financing and Credit


1) Will PG&E be willing and able to post collateral equivalent to its requirement of sellers? (11/09/04)

Yes, for the mark-to-market portion, but not for the independent amount. PG&E views its risk on the independent amount as uncapped, while the seller’s risk is capped by the capacity payments.


2) The offer deposit should be capped at some amount sufficient to cover PG&E’s costs if the deal craters. Will PG&E agree to any cap for offers larger than 50MW? (11/09/04)

PG&E will not agree to any offer deposit cap.


3) How will collateral threshold for a Seller with a BBB rating from S&P be evaluated? How about an A rating? (11-18-04)

PG&E evaluates counterparties based on a variety of factors, including but not limited to the industry risk, industry outlook & volatility, concentration risk, credit rating, financial condition and liquidity position. Then, in consideration of such factors, and in view of the terms and the nature of the anticipated business, we would establish collateral thresholds.


4) Since our company has no debt, will PG&E accept a lien on our assets as collateral? What if we grant step-in rights? (new as of 12-8-04)

For the initial bid process, PG&E is only considering letters of credit and cash deposits as acceptable forms of collateral. However, during the due diligence period, PG&E may consider other forms of collateral based solely on PG&E’s discretion.


5) We are an operating QF. Therefore, pre-construction and construction milestones are inapplicable and delays that would give rise to Delay Damages would not occur. Consequently, the carrying cost of providing Delivery Date Security would needlessly increase our cost of doing business and our resulting bid price to PG&E. Would PG&E waive the requirement for Delivery Date Security? (also Section III-QF, Q9) (12-8-04)

Per the terms of the Protocol, the Delivery Date Security is required to be posted until the start of the Services Term which shall not commence until the Seller has satisfied all conditions precedent to the Initial Delivery Date (please refer to the terms of the Protocol for details of the conditions precedent). Thus, PG&E will require posting of the Delivery Date Security until all such conditions are met.


6) The "Credit" section on pg 20 of the Power Purchase Agreement Term Sheet requires $60,000/MW plus 60 months of Mark-to-Market collateral for "60-month generation technology" like ours. Would the amount of such collateral wind down proportionally when there is less than 60 months remaining in a PPA? If, for example, we were to bid a 5 year PPA, maintaining 60 months worth of collateral when there are on 40 or 30 or 20 months remaining in the PPA term would needlessly increase our cost of doing business and the resulting bid price to PG&E. (new as of 12-8-04)

Your concerned is fully addressed in the methodology used to calculate the Mark-to-Market. For the 60 months generation technology, the calculations are based on the lower of (i) 60 months and (ii) the remainder of the term of the PPA.

Power Purchase Misc. Issues


1) Can variable O&M be priced in $/hr instead of $/MWh? (also Section IV, Q22) (11/09/04)

Yes, variable O&M can be priced in $/hr.


2) Can fixed and variable O&M be indexed to inflation? (11/09/04)

Yes, assuming the indices, formula and methodology used are specified.


3) Why the requirement for full “units”? Couldn’t a portfolio of varying PPA quantities and terms better match the shape of your “need”? (11/09/04)

In its long-term plan, PG&E identified a significant need for operationally flexible generating capacity. Sharing ownership of a plant would likely compromise the ability for PG&E to control the operations of the plant to meet PG&E needs. As a simple example, maintenance scheduling would have to be coordinated with another owner and such combined scheduling may not fit PG&E’s needs. Furthermore, Resource Adequacy requires that the generator be clearly and uniquely identified, and available to be dispatched into the CAISO markets. Since PG&E will be providing natural gas for gas-fired plants and is the SC for such a plant, splitting ownership rights for these plants could unduly compromise our rights to the RA credits from the unit or plant. In addition, PG&E is seeking a significant amount of capacity, 2,200 MWs, and allowing partial ownership or a contract for part of a unit makes reaching such a goal even more challenging.


4) Why are partial units excluded, especially as it may relate to units under contract to CDWR for a fraction of the hours in a given year? (11/09/04)

Please see above answer.


5) Is there any disadvantage to having a long term proposal? Is there a maximum term that will be accepted? (11/09/04)

Our PPA RFO has a 5 year minimum, and no maximum. Our evaluation criteria will be applied over each term submitted. Please see Section II of the RFO for PG&E’s RFO and Product goals.


6) Will PG&E consider an offer that includes an option to purchase the plant at the end of the PPA term? (11-18-04)

Yes, we would consider the offer; however PG&E does not plan to enter into an agreement that includes an option for plant purchase at the end of the PPA term.


7) Within the term sheet, under "Contract Term and Services Term", is it correct that the "Effective Date" does not occur until PG&E has received Regulatory Approval? (1-4-05)

Yes, the Effective Date does not occur until PG&E has received Regulatory Approval, which must be final and non-appealable.


8) Within the term sheet, under the "Remedies" section in connection with default termination, the draft document indicates that PG&E could charge a Termination Payment ($15,000 per MW) in addition to exercising "all remedies available to it". Is the $15,000 per MW an agreed cap on liability (like liquidated damages), or are Participants exposed to liability for other damages if PG&E terminates the agreement for default? (1-4-05)

The $15,000/MW is a cap on the termination payments only. Other damages may apply.


9) Within the term sheet, under "Other Terms and Conditions", would PG&E be willing to agree that Seller would be have a pre-approved right to assign the Definitive Agreement to the lender(s) disclosed in Participant's Offer when it was approved by PG&E? Third party lenders typically require such a right of assignment in their financing documents. (1-4-05)

Yes, subject to mutually agreeable terms and conditions.


10) Please define the following terms, that are used to identify data to be submitted in Appendix E, Offer Data Forms, as used in your Request for Offers Appendices, as found in the Long Term PPA Offer Form: 1) Spinning Reserve, 2) Non-Spinning Reserve 3) Regulating Reserves; And 4) Minimum Scheduled (MWs). (1-4-05)

Spinning Reserve, Non-Spinning Reserve and Regulating Reserve are defined by the CAISO at: http://www1.caiso.com/aboutus/glossary/. Minimum Scheduled MWs refers to the minimum output level at which the generation unit can operate. For example, a 100 MW plant may have a Minimum Schedule of 40 MWs and can be scheduled between 40 and 100 MWs when operating.


11) Can you provide sample calculations of your proposed "Start-Up Adjustment" in Appendix D, at various NSRs?  (3/28/05), (updated 4/22/05)

The following is an example of the “Start-Up Adjustment in the PPA Term Sheet. It represents a calculation for the first quarter. As the table shows, the assumed Number of Starts Requested (NSR) for the quarter is 41 and Completed Number of Starts (CNS) for the quarter is 39. This results in a Startup Factor of 95.1%. According to the Start-Up Adjustment Table, an NSR between 30 and 50 and a Start-Up Factor of 95% or greater results in a Start-Up Adjustment Factor or 10%. As described in the term sheet, this 10% Start-Up Adjustment will be subtracted from the calculated Availability value for each month in the quarter and the resulting number shall be the final Availability value that is applied to the Non-Availability Discount and the Availability Bonus. Thus, if the actual availability for January, February and March was 100%, 95% and 99% respectively, the “Start-Up” adjusted availability would be 90% for January, 85% for February and 89% for March. If a reduction was applicable, as in this example, the reduction would be calculated for each month per the methodology applied for calculating Non-Availability Discounts and the monthly value is summed for the quarter and divided by 12 and applied monthly to reduce the next 12 month's Capacity and Fixed O&M payments owed to Seller (see Table below). If the CNS was 36 as opposed to 39, this would result in a Start-Up Factor of 87.8% and a Start-Up Adjustment Factor of 25%.

Number of Starts Requested Completed Number of Starts Availability "Start-Up Adjusted Availability % Reduction in Monthly Charge Monthly Fixed Capacity & O&M Charge $ Reduction in Monthly Charge
January 20 19 100% 90% 8% $9.00 $0.72
February 15 14 95% 85% 18% $6.00 $1.08
March 6 6 99% 89% 10% $5.00 $0.50
Total 41 39 $2.30
CNS= 39
NSR= 41
Start-Up Factor: 95.1%
Start-Up Adjustment Factor: 10.0% Next 12 Months Reduction in Capacity and Fixed O&M Charges: $0.19

Facility Ownership Misc. Issues

1) For plants that PG&E will purchase, does PG&E plan to operate and maintain plants or will third party O&M providers be contracts to operate/maintain the new plants? (11/09/04)

PG&E plans to operate and maintain the plants. PG&E will accept offers that provide an option for an LTSA type arrangement.

2) Can I submit one Offer per site with alternative equipment, e.g. different turbine manufacturers? (11/09/04)

Prior to submission of their Final Offer, Participants may change EPC contractor and equipment vendor arrangements with PG&E’s approval, at PG&E’s sole discretion. Please see Section XI of the RFO.

3) Please elaborate on how PG&E expects the bidder to manage pre-closing plant operations. We assume that PG&E will identify staffing requirements based on bidder input and hire and pay for personnel. We also assume that bidder should include the cost of training PG&E personnel in their offer. Please confirm. What will be PG&E's role during plant mobilization? Will they, for example, implement their own operating procedures or will bidder be required to fully mobilize the project utilizing their own staff while training the PG&E employees? Our concern is that our standard operating procedures may not be compatible with PG&E O&M standards. (4/11/05)

PG&E will supply its own labor during training. Participants should include other training-related costs in their offer. Issues regarding operating procedures during mobilization will be negotiated.

4) Section C ii of Form J (Function Specifications) requires that Reciprocating Engines have a maximum engine speed of 500rpm. The limit essentially eliminates all modern medium speed (250-1,000 rpm) and high speed (>1,000rpm) technologies. Would PG&E please review this requirement and, if deemed appropriate, amend the RFO to remove this limit or to increase it to include medium speed engines if the intent was to eliminate high speed engines. (4/11/05)

For shaping resources, PG&E would like medium or low speed engines designed for continuous operation.