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HomeMy WebLinkAboutAPPA Power Supply RFP Guide 1997 a *, 4 ; ity Support Review Existing Power Supply Contract Brief Council and Gain Approval * Form Power Supply Team . Prepare for and hold pubic meetings Power Supply RFP Project Schedule ie’ F —- Prepare/Distribute RFP Documents ;™’ es Update System and Loa Information ; a FO: We, Distribute & Response ‘Wite REP Text Distribute RFP Notices and Copies Process Inquiries and Proposals ‘Hold Bidders Conference ’ ‘Notice of intentt to Bid Due 3 Bid Proposals Due Evaluate Bids. ‘Negotiating, Contracting & Deciding Negotiations, Development of Contract Terms be : Fal Decision and Selection of Supper Regulatory igs i Time Line APra American Public Power Association 2301 M Street N.W. Washington, D.C. 20037-1484 Power Supply RFP Guide A Basic Guide For Public Power Systems by Elizabeth R. Benson Energy Associates 7303 Timber Lane Falls Church, Virginia 22046-2735 703/641-7948 American Public Power Association 2301 M St., N.W. Washington, D.C. 20037 Power Supply RFP Guide About The Author Elizabeth Benson has over fourteen years experience managing energy marketing, strategic planning and customer programs, as well as a strong background in government and regulatory affairs. Ms. Benson heads her own consulting practice, Energy Associates, in Falls Church, Virginia. The firm concentrates on competitive electricity markets, strategic planning and regulatory change. Ms. Benson was part of the team that evaluated power supply and generation options for Dover, Delaware, a 175 MW municipal utility. The Dover RFP process secured a new power supply arrangement which cut purchased power costs by at least 20% and will save the utility $77 million over the contract's term. Dover was the first major municipal utility to choose a power marketer to provide full requirements service, power plant oper- ation and other services. She has authored two articles in Public Power Magazine related to Dover-the first (July-August 1995) describes the process used by the city to respond to market opportunities, and the second (May-June 1996) describes the outcomes of the solicitation and the city's reaction to it. Ms. Benson’s other clients include: Vineland, New Jersey, Los Angeles Department of Water & Power, Delaware Municipal Electric Corporation, Hydro Quebec, and Powerex, the marketing affiliate of B. C. Hydro. This guide supplements APPA's Power Supply Primer (APPA Cat- alog #760) which describes, in technical terms, the processes of determining electrical load requirements and evaluating power supply options. Copyright © 1997 by the American Public Power Association All rights reserved. Published by the American Public Power Association 2301 M St. N.W., Washington, D.C. 20037-1484 Table of Contents IntrOductiONn .......secccsccossssesssessecsossscessccsecsosessesscsseuesessosesesosees Section I—Getting Started Know what you want to accomplish YOUr CUITENLE CONULACE .....eeeeeeeeseteeseseseeteeeseseseseeeeneneneneseseeeens Community leadership cesecscsosscecersesocsncsccssnececessnseversresvncsvens UMGING SIP seeessstsosansetsacadsnessenesescsscassucastsesstoisesscessusnosiescaes MNne Market so cccissestscsccsecssasacteestetssaccoucasadestesssasseusaseecssstecseasace Request for qualifications............:..00 COME ere stscieeeseue tsetse rate TEX sce Str DUtLOM oeseasesestssessezs eesestssconsceassucsescescssestacesseuevazaesnsas ons z Bidders, COMfEren Ce. toi. .l.utsecsescecescrsesserssesuteneacescaesesuesesa ses INOLIGE OF INteMt CO: DIG vis sscsese; sosevessiescsesscsssassavaccusassnvaesureesns Evaluating Dids........cccesceseseeeseeseseeseeeecsenecseeecseeeeseeeeseeeees SHORES isc titie re sessescsastsateseronensueusaeaeeesesacecacueatensese sas Section I1I—Negotiating, Contracting and Deciding............ page 27 TEE nee Oa Oe ee et eusaatuatnanlnedaney page 27 TING COM UACE ase isescs res sesssnescasecnserscsesueneesenseenssctenencterescetesieses page 29 NTTA@: OCISION 23 oss 3 sas sass ocsers coe seavs rac evees desvsesssesececsesesssescoeseess page 31 Regulatory filings .........cccecececeeseseseseseseeeneneeseeeseseeneneeseeenenens page 33 Conehysi@n esters cscseseeacuesewtononsvavoweseuesegeeeseusserueasensusreneasaesters page 35 Section I[V—Sample RFP Formiat.........csssssssessseeeeresereeseeeee page 39 Section V—Trade Press ........sssseeseeees .«-page 55 Section VI—Sample Proposal Screening Matrix..............0+ page 59 Power Supply RFP Guide Introduction Introduction Just five years after enactment of the Energy Policy Act of 1992, U.S. electricity markets are remaking themselves. Wholesale competition, in particular, has accelerated as improved transmission access makes it easier to move competitive generation from suppliers to cus- tomers. By now millions of words have been written on the legal and regula- tory changes that are under way and who will benefit from them. Some pundits claim that increased competition is a threat to public power because only the economies of scale that come with size can assure future success. However, the facts tell a very different story. In reality, it’s a great time to be a public power utility because com- petitive markets are now available to benefit public power customers. Cities and towns that have gone to the marketplace to supplement or replace existing power supply arrangements have seen their costs drop substantially—often from 15 to 20 percent; sometimes from 30 to 40 percent. In addition, some of these communities have entered into successful alliances and other means of strategic support with the nation’s top power supply and services companies. Despite these positive results, many other public power utilities with access to competitive wholesale markets have yet to take action. While wholesale power supply regulations have changed irreversibly since 1992, many existing contracts remain structured around out- moded terms, conditions and prices. For many cities existing long- term power contracts are charging above market prices for electricity. To put it plainly, many public power utilities are missing a tremen- dous opportunity to lower their power costs, expand services to their customers, enhance their financial return to the community, and improve their competitiveness. More alarmingly, some public power utilities are jeopardizing their future; in some cases even calling into question whether they will survive once their customers are able to choose suppliers directly. Power Supply RFP Guide Introduction Power Supply RFP Guide In an effort to encourage more public power utilities to take advan- tage of competitive electricity markets, APPA is offering this guide to conducting a power supply request for proposals (RFP). If your utility has decided to do a power supply solicitation or is considering it, this guide will help you plan, implement and know what to expect as you move through it. A request for proposals is the utility’s statement of need to the mar- ketplace. RFPs contain technical, legal and market information about the utility and make that information available to potential suppliers. RFPs also define the terms of the power supply solicita- tion. But a successful RFP is not only a well written document. A suc- cessful RFP is also an effectively functioning process. For public power utilities, this means decision makers who are informed about the market and open to new ways of doing business. It means com- munities that sponsor a vigorous and fair competition so they will get the best the market has to offer. It also means key stakeholders and a general public involved enough in the actions of decision makers to be confident that the power supply choices made are in the commu- nity’s long-term best interest. Because each public power utility is different and because power supply is complex, this Guide does not pretend to provide a simple formula for success. But it does contain practical information and advice that, combined with your own experience, and the appro- priate expertise, will help you navigate through a power supply solici- tation. The key to doing it right lies first in assembling the resources and putting together the process to do the job. Power Supply RFP Guide Section | Getting Started Section |—Getting Started “As the world changes, we're less likely to see the 20- and 30-year contracts we've seen in the past. Municipal utilities will be in the market more, not less. It is very important that they learn how to do things right.” Bob Haug, Executive Director, Iowa Association of Municipal Utilities Know what you want to accomplish Just as it is risky to ignore the historic changes now under way in the electric utility industry, it is also unwise to jump into the market without first having a clear view of what you want to accomplish. There are both practical and strategic reasons. First, to create and sustain an effective RFP process, you'll need to make sure the community knows why it’s important to do it at all. As interesting as power supply is to utility people, it is an arcane topic to almost everybody else. You need to find an issue that means some- thing to your community, understand how it affects your future, and communicate that information clearly to the people whose help you need. If you don’t, it is unlikely that the community—and especially its decision-makers—will provide the support and commit the resources for a power supply RFP. Communicate practical reasons for going to the market. Choice is good, but having a choice of suppliers may not be a compelling enough reason to get people moving, or to keep them interested. On the other hand, if your utility’s rates aren’t competitive, or it needs more capacity, or its existing assets need to be upgraded to meet operating and environmental standards, you are more likely to get the community’s attention. If you make your point in financial or other terms that every one understands you should be able to keep the community’s attention. Sometimes the greatest motivator is an outside issue. In recent years, several municipal utilities that received buyout offers from investor- owned utilities have chosen to go to the marketplace instead. Galva- nized by outside forces, these communities initiated power supply RFPs, contracted with new power suppliers, decreased their purchased power costs substantially, and strengthened their competitive positions overall. Power Supply RFP Guide 5 Section |—Getting Started Power Supply RFP Guide Second, think of accessing today’s competitive power markets as a strategic opportunity—a chance not only to lower costs, but also to build a stronger municipal utility. To do this you need to be candid about both your utility’s strengths and its shortcomings, and use the RFP process to help amplify your strong points and address your weaker ones. Look around you at the restructuring taking place throughout the industry at-large. In all these cases, utility managers are making changes either to preserve or enhance their strategic positions. You need to consider addressing the same issues. A power supply RFP, if structured well, can help you do just that. Your utility’s current contract If you have not otherwise done so, get out the utility’s current power supply contract and review the rights and obligations stipulated in it. While this may seem obvious, in fact many public power utilities are not at all familiar with the language in their current power contracts. Many smaller systems, especially, have taken full requirements ser- vice from the same suppliers for decades and have not reviewed the terms and conditions that govern their legal relationship with those suppliers in many years. In particular, review the contract’s termination — provisions. Depending on the language agreed to in the past, market opportuni- ties may either be virtually immediate, or somewhat delayed. In many cases, it is going to be in your utility’s best interest to exercise the contract’s termination provisions so you can start the move to the marketplace. Even if you are comfortable with a current supplier, don’t overlook the likelihood that competition will improve the existing arrangements. There is considerable evidence that municipal utilities that initiate a competitive RFP process can cut their power supply costs substantially and add valuable services and support, even if they elect to stay with their current supplier. The existing supplier—like everybody else— sharpens its pencil and becomes more creative when competing for business. As importantly, competition reinforces your status with your supplier. As a customer with choices, you have leverage and a greater say about your future. Section |—Getting Started Before giving notice to terminate, review the contract with legal counsel. While contract language may seem obvious, many times it is not. There may be organizational, policy, or operational issues that affect how to take action. This does not mean you should stop, just be sure to proceed from an informed position. Community leadership To be successful, an RFP needs a community leader with the ability to marshal resources, manage controversy, deal with changing condi- tions, and help the community question long held beliefs when nec- essary. He or she should give overall focus to the solicitation, help communicate progress, and deal with problems as they arise. Very often the utility’s general manager or another employee who enjoys the confidence of elected officials is the obvious choice. In some communities an elected official or a city manager will best be able to sustain the necessary interest and commitment. Other com- munities will elect to have several people—perhaps one to manage the community and political processes, and another to provide tech- nical and policy support to the RFP process itself. Whatever the arrangement, the community leader must be solidly committed to the RFP process, knowledgeable about its status, and willing to devote time to see it through successfully. Finding help “Tt’s a false economy to resist spending money on qualified lawyers and consultants. The money you spend on these experts will save you millions of dollars over the life of the contract—a great return on your investment. ” Daniel Sack, Superintendent, Concord Municipal Light, Concord, Massachusetts Some larger public power utilities may have “in-house” resources with the expertise and time required to undertake a power supply RFP. Most publicly owned utilities won’t. There’s no getting around it. Power supply is complex, especially now because deals are being struck in the midst of massive market Power Supply RFP Guide 7 Section |—Getting Started Power Supply RFP Guide restructuring. To be successful, public power utilities need to be competently supported and represented by people who know what they’re doing. If your utility has an ongoing relationship with outside legal, engi- neering, financial and marketing consultants, it may want to engage them to work with you on the RFP. Just be certain that they are indeed expert in the new world of competitive power supply. If, for example, you have worked with an attorney on wholesale rate cases, make sure he or she has solid power supply experience. Rate cases and power supply are two very different things. And be certain that these people are equipped to look at the full range of market opportunities, not just those in which they spe- cialize. For example, if your utility has previously used a consulting firm to help it plan and construct a peaking unit, make sure that the firm’s expertise extends to other power supply solutions as well. If you need to find power supply legal and consulting professionals, you may want to request proposals from a variety of firms and then evaluate those proposals in light of your needs. Municipal utilities that have suc- cessfully completed power supply solicitations are an excellent source of recommendations, as are organizations such as the American Public Power Association and state municipal associations. Sometimes the best people can appear through more unorthodox means. Don’t be reluctant to consider the consultant who seeks you out as long as that person’s qualifications and reputation check out. Interview potential consultants, making sure that you are consid- ering the individuals who will actually do the work. Some firms market their services with one group of people, and use others to perform the work. Make sure you know who you're hiring. Be sure that the people and firms you are considering have neither conflicts of interest with any potential supplier, nor any bias toward a single energy application. Beyond their legal, technical, and market expertise, be sure to hire people who will work well with your utility and your community. A Section |—Getting Started power supply RFP requires people to work closely together, and to deal with complex and often sensitive issues. It is critical that you select experts with whom you can develop a solid, trusting relation- ship. After finding the assistance you need, make the terms of the engage- ment explicit. This will include both the scope of the work, and the payment terms. Many power supply consultants bill clients on an hourly basis, and will expect to do so with your utility as well. How- ever, if you are interested in another approach be sure to discuss it. Recognize that expertise costs money. But also keep in mind that the investment made in consultants is likely to pay a substantial return to the community from the lower costs and enhanced services you'll receive through a new power supply arrangement. Given the impor- tance of competitive power to your community’s overall prosperity, investing in qualified consultants is an economically prudent deci- sion. The market “Public officials have to be educated about the opportunities that today’s market provides so they will confidently support efforts to find a better supply arrangement.” James Greever, Superintendent, Electric Department, City of Geneva, Illinois The world where public power utilities have the same supplier, full requirements service, and 30-year contracts is going away. In its place are the opportunities of a market with ample supplies of energy and capacity and an increasing number of qualified sellers vying for customers. Today, and for the foreseeable future, it is a buyer’s market. Despite this, many public power utilities have been reluctant to step forward because they don’t really know what is taking place or how it will affect them. This is a serious problem when it resides with the elected officials or commissioners who are legally responsible for making key utility decisions. If a power supply RFP is to be successful, the people who will decide its outcome need to be comfortable that doing business Power Supply RFP Guide 10 Section |—Getting Started Power Supply RFP Guide differently can benefit the community even as it preserves the sta- bility and reliability they count on. Decision makers need to know why today’s electricity market offers them greater opportunity—what legal and regulatory changes have taken place, what new suppliers have entered the picture, how pricing is changing, how risk can be managed, what new services are being offered. They need to know why their community is attractive to competitive suppliers, and why it will continue to be attractive in the future. They need to know that today’s market is significantly more complex than in the past, but that this complexity does not have to disadvan- tage them, even if they are small. They need to have the opportunity to hear about these issues in plain language, to ask questions, to receive responses that make sense, and to consider how these changes will affect their utility’s future. There are a number of good sources of information about today’s markets. Start with written information from your state association or APPA. Some municipal utilities and joint action agencies hire experts to brief elected officials and commissioners on the market. For municipal utilities that have decided to pursue an RFP, a top source of information is their attorney/consultant team—because of its expertise, because it will tailor general information to the commu- nity’s unique circumstances, and because it will be available throughout the solicitation. Community process “We were able to find the best deal for us because we agreed to ground rules up front and then stuck by them.” James Hutchison, Mayor, City of Dover, Delaware How a community organizes itself to deal with a power supply RFP will have a significant effect on the success of the solicitation. While there are no absolute rules governing a community process, there are characteristics that seem time and again to be part of a successful experience. They include: Section |—Getting Started Involving the right people at the right times—elected officials, community opinion leaders, the media, key customers and stakeholders, utility employees, and the electorate. In most communities each of these groups will play a role in a successful RFP—sometimes major, sometimes minor. Paying attention to when and how to involve different people is important. It can make the difference between a community that backs a power supply decision, and one that does not. Knowing who decides—in some communities a board of utility commissioners is legally responsible for power supply decisions. In others, a city council. In still others, the electorate may make some decisions. If you have not revisited your utility’s power supply arrange- ments for some time, it may not be immediately obvious where the responsibility lies. Before you issue an RFP, make sure you know. Playing it straight—to attract the best that the market- place has to offer, the power supply process needs to be above board. Competitive suppliers want a process that is clean, tough and open. Public power utilities that use an RFP solely to research market pricing, or run a sham process to justify an approach or a sup- plier that has already been selected, will not attract the best bidders. Moreover, using these tactics will diminish the utility’s reputation in the marketplace. Maintaining confidentiality—confidentiality is central to maintaining your leverage in potential deals. You must keep both bidders’ ideas and their pricing from leaking to the public or to other bidders. If you don’t, you will severely diminish your ability to negotiate aggressively among the most attractive bidders. If you feel that being a public entity precludes being able to consider proposals in private, look further. A substan- tial number of municipal utilities have successfully con- ducted confidential power supply RFP processes. Any of them would be an excellent source of information on how to do it correctly. Power Supply RFP Guide 11 12 Section |—Getting Started Power Supply RFP Guide I Going it alone or with others—some of the smallest municipal utilities are likely to benefit by conducting a power supply solicitation in alliance with other utilities. Together they have more customers, possibly a better load factor, and definitely more resources. This is the principle behind joint action, but your utility does not have to belong to a joint action agency to band together with others. Some smaller utilities form power supply “buying clubs.” In some parts of the country they have been doing this for years; in others, power supply-based alliances are just forming. There is no set way to determine when joining with other communities is best. Its value may lie as much in the history and objectives of the different utility sys- tems as it does in the size of the combined load. Nev- ertheless, many smaller utilities are likely to benefit by joining forces. For most it’s worth pursuing. In each community there may be additional issues that need addressing. The important point is to develop consensus among key decision makers on the process to be used, and then use it. Power Supply RFP Guide Section II The Request For Proposals (RFP) Section |' ~he Request For Proposals (RFP) “Putting together a good RFP takes time and effort because you're trying to give potential suppliers the best information you can. Evaluating proposals and negotiating with bidders also takes time and effort because you're trying to get the best deal you can.” W. Kent Palmerton, Manager, Industry Restructuring Programs Northern California Power Agency Updating system and load information In many ways a power supply RFP is a biography of your electric utility. It contains information on load, customers, projected growth patterns, assets, and plans for improvement. It discusses pertinent legal and regulatory issues and describes current power supply arrangements and interconnection points. Before your utility issues an RFP, it needs to update all relevant system and load data. The more accurate and complete the informa- tion provided in the RFP, the better the bidders will be able to address the utility’s needs. Request for qualifications If you expect an unusually large number of responses to the solicita- tion, you may want to issue a request for qualifications (RFQ) first. The purpose of an RFQ is to narrow the list of possible vendors to those most qualified. Vendors passing the RFQ screen are then asked to submit a formal RFP. Most public power RFPs today attract between 15 and 20 responses—a manageable number. Because you'll request vendor qualifications as part of the RFP, a separate RFQ is not going to be necessary in most cases. Scope You need to decide how flexible to make the RFP. Some utilities prefer to tell the marketplace exactly what they want. If, for example, they believe they need 20 MW of baseload capacity for 5 years, that’s what they ask the market to provide. Other utilities take a broader, more flexible approach, preferring instead to provide information about their system and customers, and challenging bid- ders to address their needs creatively. Even though a prescriptive RFP is straightforward and may be easier to evaluate, in today’s Power Supply RFP Guide 15 16 Section II—The Request For Pr ~ ~~ als (RFP) Power Supply RFP Guide market many public power utilities can benefit much more from flexibility. Think of it this way. If you ask for peaking power that’s what you'll get, even though the utility’s needs might be better met by reconfig- uring its total supply portfolio. Or, if your utility’s generating plant is “off limits,” you may not learn that it may have greater value if it is operated differently, or that it will hamper your future indepen- dence because it costs too much to operate. If you foreclose discussion on different approaches to the issues you face, you'll shut out many creative solutions. But if you issue an RFP that lays out your needs and challenges bidders to find a better way to serve the utility’s requirements, you’re likely to learn about attrac- tive options you hadn’t considered. Text There is no single way to write an RFP. It is critical, however, to describe your utility clearly and accurately, convey your needs, pro- vide information on the context within which those needs exist, and point the potential bidder in a preferred direction, if that is what you want to do. Whether you adopt a prescriptive or a flexible approach to the RFP, you need to provide detailed information to enable bidders to understand the situation and construct a proposal. That informa- tion includes: 1) Your utility—describe your system’s size (in customers, geography, MW and MWh), its assets (transmission, distribution and generation), operating history, pro- jected patterns of growth, and the reasons for and objectives of your power supply RFP. 2) Existing power supply—describe the existing power supply arrangements (full or partial requirements, contracts, inter-connection agreements, relevant rights to power pools, etc.), name existing supplier(s), and discuss other relevant issues. 3) 4) 5) Section |’ ~1e Request For Proposals (RFP) Proposal requirements / supply concepts—describe the range of power supply options that you will con- sider (full or partial requirements service, new gener- ating units, upgrading existing facilities, capacity options, demand-side management proposals, combi- nations of preferred options, etc.), your pricing prefer- ences and specifications, your interest in proposals that will help your utility respond to competitive changes, and any issues unique to your utility that need addressing. Planning parameters—describe your utility’s load char- acteristics and load forecasts. Note any planned system changes and their impact on projected power supply needs. Describe environmental issues faced by your utility and your projected responses to them, etc. Evaluation criteria—specify both price and non-price evaluation criteria. Price criteria include capacity, energy, transmission, and total delivered price on a cost per kWh. They also include costs related to a particular proposal such as facility siting and permitting costs, land and construc- tion costs, fuel costs, legal and consulting fees, etc. If bidders tie prices to an index in any manner, make sure they specify the index, describe the formula that determines how the index works, and provide pro- jected prices for a specified term into the future. If bidders propose guaranteed pricing, or another fixed pricing method, make sure they specify the prices over the term of the proposed deal so the revenue stream can be evaluated. Non-price criteria include: reliability of supply; finan- cial stability and reputation of the supplier; proposals to increase your utility’s operating efficiency, optimize existing resources, address environmental concerns, provide support during market restructuring, enhance Power Supply RFP Guide 17 18 Section lI—The Request For Pri Power Supply RFP Guide us (RFP) 6) 7) 8) 10) 11) the local economy, or otherwise add tangible value to the community, etc. Operating issues—specify required delivery points. Describe relevant transmission and substation issues. Identify any local and/or regional issues that will have a material effect on operations or reliability (e.g., transmission constraints), etc. Legal and regulatory issues—describe any lawsuits or outstanding regulatory issues that may have a material effect on the operation of your utility. Contract term—describe the preferred number of years the deal should last (e.g., 3 years, 5 years, 10 years), but also note where you will be flexible. Tradi- tional contract terms of 20 and even 30 years are pretty much unheard of today. Five-year terms are much more common, but longer term contracts are also being signed, especially if there are capital costs associ- ated with the deal. If there are terms you will not con- sider at all because they are either too short or too long, let bidders know. Customer and other special services—encourage bid- ders to offer specialized services and support that will add value to their proposals for your community, pro- vide you with strategic support, and help you compete effectively in the future (e.g., employee training, tech- nical support, and customer services). Standard contract terms—if your community or your state require standard contract terms of any kind, let bidders know what they are. Qualifying bidders—require bidders to demonstrate both their financial stability and operating capability. Make sure you ask for information such as annual reports, Securities and Exchange Commission (SEC) 10-K and Federal Energy Regulatory Commission Section li ~'e Request For Proposals (RFP) (FERC) Form 1 reports (where applicable), audited financial statements including income statements and balance sheets, bond ratings, evidence of required licenses, FERC approval to sell power at market-based rates (where applicable), accreditation and certifica- tions, information on relevant regulatory oversight, and any additional information you need. Also require bidders to disclose past delivery problems, if any, and provide evidence that they have experience (or reasonably similar experience) successfully per- forming the kinds of activities they propose to perform for you. 12) Process and timing—specify when the proposal is due, whom to contact for questions, where to submit the proposal, and how many copies of the proposal to submit. Tell bidders how long the pricing and terms of their proposals need to be valid, and when the new contract with your utility will go into effect. If you plan to have a bidder’s conference prior to the date the proposal is due, note the time, place, any response requirements, and special instructions. Describe the evaluation process you plan to use once you receive the proposals (e.g., screening and ranking, in-depth proposal evaluation, short-list recommenda- tions, negotiations, contract development, final deci- sion if the final proposal benefits the community). Make it clear that the RFP is not an offer to purchase electricity, but a request for proposals, and that your utility reserves the right to accept or reject any pro- posal. Also make it clear that no decision will be final until the community’s legally responsible body votes to accept a contract. 13)Supporting information—provide documentation on your utility’s assets and operating history, and fore- Power Supply RFP Guide 19 20 Section lI—The Request For Pr’ als (RFP) Power Supply RFP Guide casted information on its load, capacity obligations and on any operating changes that will occur. Adequate supporting information enables bidders to assess your needs and construct better proposals. A sample REP format for a fictional municipal utility is included in Section IV. Distribution Because today’s market offers an increasing number of qualified bid- ders, lots of new ideas, and the chance to tailor power supply and other resources to your distinct needs, it makes sense to distribute your RFP as broadly as possible, both geographically and in terms of the bidders you seek. There are excellent suppliers in all categories: utilities, power mar- keters, independent power producers, and alliances featuring the talents of each. In most cases, it is in your interest to let the market- place work by distributing the RFP to all kinds of suppliers over a wide geographic area. In addition to direct mail, you should use local and regional newspa- pers and periodicals to announce your plans. Be sure to notify industry trade press. They will make your solicitation known to sup- pliers throughout the entire country. Several trade press and media suggestions are included in Section V. When your utility signals its intent to move to the market by issuing a power supply RFP, the current supplier can respond in a number of different ways. It can react positively—by bidding for your utility’s business, or by proposing better terms for the existing supply arrangements—or negatively—by questioning your utility’s right to take action, or the reliability of other suppliers, or by telling you that your utility will owe stranded costs if it leaves. Whatever the response, assume that the current supplier still wants your utility's business and say so. The current supplier cannot penalize your utility for leaving as long as it is actively bidding for your business. Section |'—The Request For Proposals (RFP) Bidders conference Between the time the RFP is issued and the date it is due, you may want to meet with bidders to address questions or resolve uncertain- ties. A bidders conference provides an efficient way to communicate fairly and consistently with those who are interested in your business. It can be especially useful when a solicitation is complex, when a large number of potential bidders is interested, or when you want to combine it with another activity, such as an opportunity for bidders to inspect system facilities. Notice of intent to bid Some utilities ask bidders to submit a notice of their intent to bid some weeks prior to the formal due date for proposals. This pro- vides a means to gauge interest in the solicitation, and an opportu- nity to gain some information on the kinds of bids that will be submitted. Evaluating bids When you receive the bids, evaluate and rank them based on your price and non-price criteria. 1) Screening—you may want to start by screening the pro- posals quickly to eliminate any that are clearly inappro- priate. Screening criteria might include reputation and financial stability of the bidder, responsiveness to the RFP, length of the term offered, reliability of the offering, etc. Be prepared, however, to keep most, if not all the pro- posals after you screen. In today’s market, most pro- posals are serious, well thought through, and competitive. A sample screening matrix is included in Section VI. 2) Clarifying proposals—following a close reading of each proposal, evaluators will assemble the information they need to evaluate the offers. They will clarify each pro- posal with the bidders. They will assess how attractive each proposal is from the perspectives of price and Power Supply RFP Guide 21 22 Section ||—The Request For Pranasals (RFP) Power Supply RFP Guide 4) deliverability, and will determine what impact each has on existing and future operations of the municipal utility. Financial evaluation—because bids will likely cover a wide range of proposed solutions, their costs, and therefore their impact on the public power utility, cannot be immediately compared. However, skilled power supply professionals can compare known and measurable power supply and other costs of the bid by evaluating the net present value (NPV) of all costs over the term of each proposal. Multi-year power supply proposals cannot be compared without considering the time value of money and using a NPV evaluation. Transmission—a key part of the evaluation is the impact of transmission pricing and other transmission issues on each deal. Terms like “open access” and “comparability,” and services like “network” and “point-to-point” need to be translated into hard num- bers, and factored into the cost. Proposals must make it clear which party will be responsible for securing and maintaining transmission, and which will manage transmission issues in the future. Evaluating at a time of uncertainty—public power utili- ties and evaluators must consider how market changes will affect the deal they’re evaluating today without knowing exactly what those changes will look like. Market change does not mean that today’s deals are necessarily riskier, but it does mean that the quality, sta- bility, skill and reputation of the firms you do business with is increasingly important. Two important issues—a bidder’s financial strength and its willingness and capability to assume transmis- sion responsibilities—have already been addressed. You will also want to assure that your utility is protected from price volatility during the course of the proposed deal by bidders’ ability to hedge against dramatic fluc- tuations. Section |'—The Request For Proposals (RFP) In addition, you should assess whether the bidders are able and willing to help your utility meet other compet- itive challenges it will face—ranging from improving its overall operating efficiency, to providing support to customers. Short-listing After evaluating each proposal, you'll select a short-list of the bidders and prepare to negotiate with them. It is generally in your best interest to short-list several bidders. Negotiating with only one limits the number of ideas you'll be working with, and significantly decreases your leverage. In many communities, the legal decision makers—the utility com- mission, the city council—will need or want to approve the short-list. Even as you notify all bidders that you'll be negotiating with those on the short-list, you do not have to release any of the bidders from fur- ther consideration. Some communities prefer to keep all bids active, reasoning that there may yet be opportunities for their participation, depending on the negotiations. Power Supply RFP Guide 23 Power Supply RFP Guide Section III Negotiating, Contracting, and Deciding Section IlI—Ne~>*'1ting, Contracting, and Deciding “If municipal utilities negotiate from a position of strength and secure a power supply contract which actively manages risk, they can be competitive well into the next century.” Frances Francis, Attorney, Spiegel & McDiarmid, Washington, D.C. The negotiation Negotiation is arguably the most important part of securing a suc- cessful power supply deal. Negotiation is where the outline of each deal will get filled in, where weak parts will get firmed up, where rough parts will get argued over and—if it goes right—resolved, and where you will really get to know the people who want to do business with you. No two negotiations are alike, but successful ones have similar elements. They include: I The negotiating team—the team needs to have legal, financial, technical, market and any other areas of expertise that are central to the deals you are consid- ering. Even if outside experts carry the major negoti- ating responsibility, it is important to have a utility or community representative present and actively involved in all negotiating sessions. Only a utility or community representative can provide important local information, reinforce the community’s commitment to a competitive process, and assure continuity after the deal is concluded. i Negotiating authority—the team must have the authority to make decisions on the utility’s behalf during negotiating sessions. This means that negotia- tors and key community decision-makers must share common objectives for the negotiations, must commu- nicate frequently, and must trust one another. i Establishing a framework—setting a positive tone for the negotiations will help determine how successful they will be. Having several attractive bid proposals on the table puts your utility in a position of considerable strength. Your negotiators have the chance to sharpen Power Supply RFP Guide 27 28 Section Il|—Negotiating, Contratin, and Deciding Power Supply RFP Guide each deal, even as they work to determine which is the best overall package for the community. Negotiators also have the chance to establish a solid, professional relationship with each bidder, one that can carry over after the deal is complete. Use the pressure of competition to get the best deal you can from each bidder, but remember that you can only do so if the negotiations are fair. Bidders who don’t believe they have a chance to win the utility’s business, won’t compete as hard as they can for it. Confidentiality—it is essential to keep the pricing and terms of all proposals confidential, even as you work to improve each. Revealing confidential information skews the direction of a negotiation, demoralizes the bidders, and sets the bottom limit for the bids. In short, it means a less competitive contract. Skilled negotiators can refine terms and pricing among different bidders without revealing confidential information. (For most municipally-owned utilities, the time to dis- close specific information to the public is when final recommendations are made. But even then it is impor- tant to honor legitimate confidentiality issues in order to preserve your utility’s relationship with its bidders.) Solving problems and being creative—in a competitive market, a power supply agreement is limited only by the creativity of those negotiating the deals. Anything that is lawful can be tried. Use the negotiations to solve problems—those in the bids, and those which come up during the negotiations. You'll learn a lot about prospective suppliers and their approach to problem-solving during negotiations. Make the most of that knowledge. Adding value—look for ways that each of the bids can add value beyond power supply to your community. Be aware of the strategic strengths of each bidder, and Section Il|\—Negotiating, Contracting, and Deciding make an effort to secure services and support to help your utility become a more competitive energy sup- plier. But be strategic yourself. Don’t ask a supplier to take over a function merely because you think it will be easier. There are functions your utility should keep and perform extremely well—no matter what— because they are at the center of the service it provides. Consider them in that context before you decide to give them to someone else. i Community involvement and emerging issues—keep decision-makers abreast of the negotiation’s progress, without compromising the commitment to confiden- tiality. Pay particular attention to evolving community issues (e.g., customer and economic development issues, utility personnel issues, cost and competitive issues, etc.) which have an impact on the value of each deal to the community. Depending on the situation, these issues may require tailoring the negotiations to address them. The contract Some municipal utilities conclude a first round of negotiations before they develop specific contract language with the remaining bidders. Others select a winning proposal first, then conduct con- tract talks with only that party. Still others make contract develop- ment a key part of the negotiation with each short-listed bidder. When and how you draft specific contract language depends both on your strategy and on the advice and experience of the legal counsel and other experts retained by your utility. Keep in mind, however, that you have more leverage with bidders while the process is still competitive. For this reason, many power supply contracts are sub- stantially written during the negotiation process. However you proceed, there are similar issues to consider when drafting a power supply contract. Power Supply RFP Guide 29 30 Section |lI—Negotiating, Contractina. and Deciding Power Supply RFP Guide The importance of the contract—the power supply contract is a much more flexible and creative docu- ment today than it was in the past. While there have always been unique features in power supply contracts, historically many terms have been laid down by the Federal Energy Regulatory Commission (FERC) based on provisions of the Federal Power Act (FPA). Today the contract, not regulation, is key. Contracts set forth the terms, conditions, pricing and obligations that each party agrees to, and that each party can legally enforce against the other. Contract issues and contract language need to be carefully thought- through, and tailored to unique, and—in some cases— uncertain circumstances. Contracts need to consider the present, while establishing the rights and responsi- bilities of each party for a “not completely clear” future. Contract issues—price and reliability remain at the center of power supply contracts. Make sure that your contract stipulates price and reliability obligations clearly. If your utility and its potential suppliers build incentives, reopeners, or other unique pricing mecha- nisms into a contract, make clear the circumstances under which they will be triggered, and the methods by which they will be measured so that each party will understand its rights and obligations. Access to the nation’s transmission system is expanding as a result of FERC Order 888, but transmission issues are still evolving. Because there is still so much uncer- tainty, contract language dealing with transmission and the obligations of each party is even more important than in the past. Your utility will need to secure the transmission it needs to cover present and future requirements. You must be sure that interconnection rights and agree- ments have been established with the neighboring Section |lI—Neaotiating, Contracting, and Deciding utility which connects your utility to the high voltage transmission system, that the proper equipment is—or will be—in place to assure that the transaction will pro- ceed smoothly and be measured properly, and that you know who has the responsibility to pay the cost of such equipment. Make sure the contract stipulates which party will shoulder transmission responsibilities, and whether there are circumstances under which those responsibil- ities might be reconsidered by the parties during the contract’s term. Public power utilities should also make sure that power supply contracts address market restructuring issues and increasing competition. Some examples include: 1) stipulating how the parties to the contract will respond to perhaps as yet unknown risks associated with legal and regulatory changes; and 2) addressing how the parties will address the prospect of retail load loss in municipal jurisdictions due to future competi- tion. Municipal utilities need to understand who is bearing what risk during the course of the deal, making sure that risk is not being shifted unnecessarily, or unknow- ingly to them. Municipal utilities also should stipulate that, except as enumerated specifically in the contract, no stranded cost claim can be made by the supplier if the muni chooses a different supplier in the future. The decision At the end, your decision is likely to be made using a combination of analysis, instinct, and judgment about the community’s needs. At the end it is useful to step back, and think about your prospective decision in the broadest terms possible. For example: — Do the reasons for the recommendation make common sense as well as business sense? Power Supply RFP Guide 31 32 Section |li—Negotiating, Contractina. and Deciding Power Supply RFP Guide — Are they in line with where electricity markets are headed? — Do they conform with what the community wants and needs to accomplish? — Perhaps most importantly, do you want to do business with the proposed supplier? No matter how good the offer, if you don’t feel com- fortable with the people who are part of the deal, it probably isn’t the right deal for your community. Before your community’s legal decision-makers make their final judgment, it is likely that you will want to brief and gain input from key stakeholders, opinion-leaders, utility employees, the media, etc. How you do this depends entirely on the community’s needs and practices. In some communities, certain aspects of a decision may be controversial; in others they may not. If negotiations have continued with multiple parties until the end of the process, decision-makers may want to lay out and discuss each of the options it is considering. In all cases, communities will likely want to compare the new option(s) to their utility’s business-as-usual operations, or “base case,” so people will understand what the differ- ences are. How ever your utility and its decision-makers proceed, it is important that they provide information to the community which makes it clear why the effort that is culminating was important to do in the first place. Thinking back to the beginning of the process, citizens will want to know what total value the community will receive from a new supplier. Sometimes a community will face trade-offs or tough deci- sions that are of special concern to one or more groups. These con- cerns will need to be discussed and weighed in the context of what is in the best interest of the utility, its customers, and the community at- large as they face a future of greater competition. After securing all final input and following all legal requirements, your utility’s decision makers will make their judgment. Section Il|—Nenatiating, Contracting, and Deciding If you decide to choose a new supplier, you may have to address stranded costs with your utility’s current supplier. If you do, con- front it directly. Learn what the current supplier thinks will be stranded and what it thinks the cost will be. Then determine for yourself what the impact on your utility and customers may be—both in the short and longer terms. Keep in mind that what a supplier initially says is stranded is not nec- essarily what you will owe. First and foremost, the supplier will have to demonstrate to regulators that it had a reasonable expectation that it would continue serving your utility, a heavy burden in situa- tions where existing contracts have termination provisions. If it passes this hurdle, the supplier must also convince regulators that losing your utility’s load will cause it to lose any opportunity to recover the cost of investment incurred to serve the load. It will also have to demonstrate how much cost is stranded, and it will have to prove that it cannot mitigate the cost through any other means. Overall, remain alert to how the stranded cost issue is evolving and look for creative ways to resolve it. For example, you may be able to eliminate or substantially diminish stranded costs through negotia- tion. Even if your utility must pay, it may be better off considering its situation as a whole. Remember that the stranded cost issue can cut both ways—be sure you’ve thought it through from both wholesale and retail perspec- tives. It is important that principles are equitable regardless of which side you’re on because they may be applied equally to your utility when retail access is implemented and it faces losing customers. Regulatory filings Different suppliers may have somewhat different regulatory obliga- tions. The following information will give you an idea of what those obligations are, but should not substitute for information specific to your utility’s situation. — Traditional transactions—if your utility does business with a supplier whose wholesale transactions continue to be regulated traditionally, the supplier will be Power Supply RFP Guide 33 34 Section IlI—Negotiating, Contractina and Deciding Power Supply RFP Guide required to submit its agreement with you to the FERC for approval. Your contract can go into effect the day after it is filed with the FERC, although it may be sub- ject to further regulatory proceedings which could result in changes to the agreement. — Price caps—today most regulated suppliers have already filed cost information with the FERC which enables them to enter into wholesale transactions that are priced up to a FERC-approved “price cap.” Trans- actions “up to” the supplier’s price cap are, in effect, pre-approved and can go into effect immediately. Within 30 days after the transaction commences, the supplier must file a standard service agreement with the FERC providing evidence that your utility has agreed to take service from the supplier. — Market-based rates—an increasing number of utilities and all power marketers have received FERC approval to sell wholesale energy and capacity at “market-based” rates. This means that the FERC has determined that these suppliers cannot control access to the market or manipulate market pricing. Transactions with sup- pliers selling at market-based rates don’t require FERC approval, although they too require that a service agreement be on file with the FERC within 30 days after the transaction begins. In addition, if your utility enters into a contract for more than one year with a supplier selling power at market-based rates, the supplier must submit the agreement to the FERC as part of a quarterly reporting requirement. FERC approval processes are still evolving. Regardless of the sup- plier selected, be sure that your utility’s legal counsel advises you in detail about the approval process that may be required, the steps that may need to be taken, and the timing that may be involved. Section |l|—Neaotiating, Contracting, and Deciding Conclusion All that’s left now is for public power utilities to take the next steps. Those who have already done so are benefiting from more competi- tive power supply today. If you remain skeptical, ask around. Most importantly, talk to public power utilities which have completed power supply solicitations. Their experiences will provide many examples of the different agreements that exist, and the kinds of benefits that are available. Don’t be reluctant to consider breaking with existing patterns, existing suppliers, or existing ways of doing business. Public power has remained a vibrant segment of this country’s electricity industry precisely because it has responded progressively to changing condi- tions. Today, in the face of arguably the greatest changes ever faced by the electricity industry, it is critical that publicly owned utilities again respond. If they do they will continue to be able to provide the competitive prices and tangible, locally controlled services that their customers and communities expect. It is a time of great opportunity. Take advantage of it. Section |V—Sample RFP Format Power Supply RFP Guide Section IV Sample RFP Format Power Supply RFP Guide Section |V—Sample RFP Format Request for Power Supply and Services Proposals Power Supply RFP Guide 39 40 Section |V—Sample RFP Forma* City of Grace Electric System Request for Power Supply and Services Proposals Table of Contents Power Supply RFP Guide QVEFVIEW ..00-.00resccesncsesscsnsevensorescoresessussesesssessssesessescoveseeseseses page 41 The Grace Electric System (GES) .......sscsssssssseeereeesessseeseees page 43 Potential Supply Concepts .........ssssscssessressseeeerseseceseesseensees page 44 Outline of RFP Responses.. Proposal Evaluation — Price and Non-price Factors RFP Process............0000+ Other Information / Exhibits ........csssssssssssessssssecsesssessessssoes page 51 A-INOUCE OF tent tONBIGs-.-..coccuscccscsssesesacsvscsectceseseeesesseses page 52 BGS Annual REPOL tisesccceconsevorsssstecswessseconvotostsserararsossars page xx C- One-line Diagram of GES System... page xx D - 10 Year Forecast of Load and Capacity..........cccsseseeee page xx E - GES Purchase Summaries from Energy Power & Light for Three Past Fiscal Years......page xx F - Hourly GES System Load Data for Gihree |Past Hiscal YEatsicccssccscartesstscenssecnressnceesscecsscesencces page xx G - Monthly Operating Data for GES Combustion Turbine Generator ..........::.::0ce00 page xx Section |V—Sample RFP Format City of Grace Electric System Request for Power Supply and Services Proposals Overview The Grace Electric System (GES) is a municipally owned and operated electric utility that serves customers in the City of Grace, GES is currently a partial requirements customer of Energy Power & Light Co. (EP&L) with calendar year 199_ energy requirements of ___ GWh and calendar year 199_ summer peak demand of ___ MW. GES also owns ___ MW of oil- and natural gas-fired generation which it uses to provide service during peak periods. GES is seeking proposals to supplement and/or replace its existing power supply arrangements so that it will be in a better position to: 1) reduce existing costs and risks; 2) meet forecasted capacity and energy requirements; 3) provide improved services to its customers; and 4) address the overall challenges of competitive electricity markets. This Request for Proposals (RFP) provides information on GES’ operating history, and on its current power supply arrangements, its operations and its assets. It also provides information on forecasted growth over the next 10 years. GES wants to secure the most competitive power supply arrangement possible in line with its corresponding need for highly reliable ser- vice. Accordingly, GES will consider a wide range of power supply arrangements including: 1) purchasing power from a_ third-party provider or providers; 2) modifying or adding to its existing generation and/or transmission facilities; 3) leasing operation of some of its current electric utility system to a third-party provider; 4) arranging a combination of these options; or 5) considering another option from a credible provider which effectively and reliably addresses GES’ present and future needs. Power Supply RFP Guide 42 Section |V—Sample RFP Forme’ Power Supply RFP Guide GES is soliciting proposals for firm capacity and energy beginning January 1, 199_. GES prefers a contract term of 10 years, but will consider either shorter or longer terms if conditions warrant, and if the bids otherwise meet GES requirements. A bidders conference will be held in Grace at 10 o’clock a.m. on June 25, 199_. At that time GES will entertain all questions related to this RFP. At the same time, potential bidders may make plans to tour the GES generating unit and other relevant GES facilities. All potential bidders must submit a notice of their intent to bid to GES’ authorized representative by June 30, 199_. A Notice of Intent to Bid form is included with this RFP as Exhibit A. Interested bidders must submit a proposal to GES’ authorized repre- sentative on or before July 31, 199_. Bidders must certify in writing that all proposal terms, including pricing, will remain in effect until December 31, 199_. All proposals must respond completely to the terms set forth in this RFP. Proposals which are not responsive to this RFP may be eliminated from further consideration. This RFP is not an offer to purchase power supply and service. GES reserves the right to accept or reject any and all responses to this RFP. GES also reserves the right to cancel or reissue this RFP. No power supply and services proposal will become official until a com- pleted contract is approved by the Grace City Council, and by juris- dictional regulatory bodies, if any. Section |V—Sample RFP Format The Grace Electric System (GES) GES is a municipal electric utility which was founded in 1892. GES owns and operates substation and distribution facilities that serve a combined total of customers ( residential, commercial, and _____ industrial). In calendar year 199_, GES had energy requirements of ___ GWh and a summer peak demand of ___ MW. Exhibit F of this RFP summarizes GES system load data for the past three fiscal years. GES’ load is forecasted to grow 2% annually over the next five years, and slightly less thereafter. This will require GES to acquire ___ MW of additional capacity to serve its load and to maintain adequate reserve margins. Additional information on GES customers, and on load and capacity forecasts can be found in Exhibits B and D of this RFP. GES owns and operates a single cycle, #2 oil- and natural gas-fired combustion turbine generator which has a summer rating of __ MW, and which operates during peak periods. The unit was placed in ser- vice in 1985. Monthly operating data for the GES combustion tur- bine can be found in Exhibit G of this RFP. GES’ generation is in compliance with Phase II of the Clean Air Act Amendments. GES is not aware of any pending lawsuits or regula- tory actions pertaining to environmental issues, or to the operations of its utility in general. GES is interconnected with the EP&L [or host control area*] trans- mission system at GES’ Apple Creek and Staley substations. Addi- tional information on GES substations, distribution facilities, and interconnection points can be found in Exhibits B and C of this RFP. GES is a partial requirements customer of EP&L and purchases __ MW of capacity and associated energy from EP&L. GES’ current contract with EP&L terminates on December 31, 199_. Exhibit E of this RFP contains additional information on GES purchases from EP&L. The host control area and requirements service provider may be the same utility. The host control area will likely remain as the transmission provider regardless of the power supply provider selected by the process. Power Supply RFP Guide 43 44 Section |V—Sample RFP Formé* Power Supply RFP Guide GES is located within and is a member of the Southeastern Electric Reliability Council (SERC). GES is committed to meeting its obliga- tions as required by that region of the North American Electric Reli- ability Council (NERC). — Historically, GES has fulfilled those obligations as part of its contract with EP&L, but GES is willing to consider other arrangements if it can be shown that they continue to fulfill its obligations to SERC, Potential Supply Concepts GES is interested in proposals which respond to its needs for relia- bility and long term price stability, but which also will help it remain competitive as the electric utility industry restructures. Accordingly, while this RFP outlines several power supply concepts, GES will entertain additional proposal concepts so long as they otherwise meet its requirements for reliability and cost competitiveness. For all concepts, the proposer shall arrange for and provide appro- priate transmission service from the supply resource(s) to GES’ inter- connections with EP&L. — full requirements service—the proposer should pro- vide firm capacity and energy to serve all of the GES load beginning January 1, 199_. At a minimum, the proposal should address all of the price factors, and qualifying criteria described in this RFP. The full requirements supplier will be responsible for providing power supply, transmission, ancillary and metering services. Full requirements service assumes retirement, moth-balling, or otherwise changing the use of GES’ combustion turbine generator. Proposers must identify how they will offset facility retirement, cold storage, or other costs. — partial requirements service—the proposer should provide firm capacity and energy to serve a portion of the GES load beginning January 1, 199_. At a min- imum, the proposal should address all of the price fac- tors, and qualifying criteria described in the RFP. Proposer should also discuss whether its bid will “ection |V—Sample RFP Format require GES to use its combustion turbine differently than current practice. I new generating facilities—GES will consider proposals to meet its current and future load requirements by installing new generating facilities. Any proposal to construct a new facility must meet all reliability requirements of SERC, and must include all costs asso- ciated with interconnecting it to the GES system. In addition, proposers must demonstrate that the new facility meets all siting and certification requirements of the State of , and of any other pertinent laws and regulations. — other proposals—GES will evaluate other proposals including, but not limited to: offers to upgrade existing substation and generation facilities, demand- side management proposals with a peak demand impact of __ MW, a combination of supply and demand-side proposals with a peak demand impact of MW, or proposals that otherwise address GES’ needs and improve its ability to compete in the future. GES reserves the right to combine any one partial requirements pro- posal with any other in order to create a more attractive total resource package. Each proposer must have the ability to provide adequate reserves to meet SERC planning and operating reserve requirements— including transmission, if applicable—for any power supply arrange- ment. Power Supply RFP Guide 45 Section |V—Sample RFP Forma‘ Outline of RFP Responses To facilitate review of the proposals, GES is asking each bidder to submit its proposal in conformance with the following outline. I. Proposer Information—company name, address, contact person and phone number of the proposer. Date of the proposal and certification that the proposal will not expire before December 31, 199_. Signature and title of the bidder’s authorized repre- sentative. Statement that the proposal complies with all applic- able federal, state and local laws and regulations. II. Proposal Summary—summarize the concept or concepts that are being proposed. Separately identify key assumptions and explain why each is reasonable. II. Price for the Concept or Concepts Being Proposed—state in full the prices for the concept or concepts being proposed. Provide tables showing the price for each year of the proposal. Fully explain all assumptions used. Also explain price escalators, if used. capacity price energy price transmission price ancillary services prices non-fuel O&M price—if proposal is for a generating facility other costs regulatory costs total price TOM MOORS IV. Transmission Facilities—describe the proposed contract path, describe any proposed transmission upgrades or installations, identify and explain any unique characteristics or problems related to transmission arrangements, etc. V. Other Proposal Features—describe any other features which are unique to the proposal and describe how those features con- tribute to the overall value of the offering. VI. Proposer Qualifications—provide financial and performance data demonstrating proposer’s ability to fulfill the terms of its proposal. 46 Power Supply RFP Guide “ection |V—Sample RFP Format Proposal Evaluation — Price and Non-price Factors Each proposal will be evaluated initially in line with the price and non-price factors set forth in this section. Price Factors—price factor values must be presented first in current year dollars. Escalation rates used for each subsequent year must be clearly specified. To compare the proposals it receives in response to this RFP, GES may use uniform escalation rates. I capacity price—specify the details of capacity pricing used in the proposal. — energy price—specify the details of energy pricing used in the proposal. — non-fuel operations and maintenance costs—specify details of non-fuel operations and maintenance costs if relevant to the proposal. I transmission—specify the details of transmission pricing used in the proposal, and of transmission arrangements which assure cost-effective deliverability. — ancillary services—specify all associated FERC ancil- lary services charges and responsibilities. I regulatory costs—specify any known regulatory costs (e.g., environmental compliance costs, FERC filing fees, etc.) which may affect the cost of energy and capacity during the term of the proposal. Non-price Factors—non-price factors include the following: I type of resource—specify information on the type of resource being offered. For example: unit, system, or market purchase. Information on the quantity of the purchase, and the name, technology, fuel type, accred- itation, operating history, etc., if a unit purchase. Ifa system or market purchase, provide information veri- fying the bidder’s rights to the resource. Power Supply RFP Guide 47 48 Section |'V—Sample RFP Forme” Power Supply RFP Guide financial qualifications of the proposer—provide audited financial statements including income state- ments and balance sheets for the last five years. Also provide current credit rating, annual reports, FERC Form 1 (if applicable), 10-K report, etc. other qualifications of proposer—provide evidence of FERC approval of power marketer status, demonstrate experience providing similar services, discuss ability to support GES during market restructuring, provide market references relevant to the GES proposal, etc. generating unit factors—note features which demon- strate reliability and which optimize use of the pro- posed generating unit such as operating history, fuel flexibility, availability, outage rates, dispatchability, etc. impact on current operations of GES—identify oper- ating, personnel and other impacts of a material nature on the current operations of GES. Describe all pertinent aspects of those impacts including whether they will be immediate or phased-in, how they will affect GES’ current employees, whether they will improve GES’ overall competitiveness, etc. Section |V—Sample RFP Format RFP Process The following process will be followed by GES: Bidders Conference—a bidders conference will be held in Grace at 10 o'clock a.m. on June 25, 199_ at 2347 W. Lawn Avenue, confer- ence room #3. At that time GES will respond to all questions related to this RFP. At the same time, potential bidders may make plans to tour the GES generating unit and other relevant GES facilities. Notice of Intent to Bid—potential bidders must submit a notice of their intent to bid to GES’ authorized representative by June 30, 199_. A Notice of Intent to Bid form is included with this RFP as Exhibit A Evaluation Process—GES will assess each proposal according to the following evaluation process: 1) initial proposal review to determine whether each pro- posal meets the minimum requirements of the RFP; 2) screening analysis to identify areas of each proposal which need clarifying; 3) requests for clarification with response deadline; 4) detailed evaluation based on those clarifications; 5) proposal ranking and short-list recommendations; 6) negotiations with short-listed bidders; and 7) recommendation to the Grace City Council of top bid, if it is determined that the bid provides substantial ben- efits to GES. Due Date—proposals in response to this RFP must be received by GES’ authorized representative no later than 5 o’clock p.m. on July 31, 199_. Proposals must conform to the outline set forth in this RFP. Bidders must submit five (5) copies of their proposal. Power Supply RFP Guide 49 50 Section |V—Sample RFP Formet Power Supply RFP Guide Costs—all costs incurred preparing and submitting a response to this RFP will be the responsibility of the proposer. All costs associ- ated with responding to GES questions, or any meetings with GES and its representatives shall also be the responsibility of the proposer. Authorized Representative—GES’ authorized representative is: Arthur E. Hanson Hanson & Dell, LLC 1234 Fifth Street Arrington, __ 56789 935-555-4567 935-555-4568 - Fax Questions—questions related to this RFP should be directed to Mr. Hanson at 935-555-4567, or 935-555-4568 - Fax. Section |V—Sample RFP Format Other Information / Exhibits A sample Exhibit A - Notice of Intent to Bid is included with this doc- ument Samples of Exhibits B through G, which would contain information specific to each utility, are not included with this document. Power Supply RFP Guide 51 Section |V—Sample RFP Format Exhibit A Notice of Intent to Bid Grace Electric System Proposer: (company name) (address) (name and title of contact person) (telephone) (Fax number) Type of Proposal: (brief description of resource) Quantity in MW: Term in Number of Years: Fuel, if Generation: Operation Date: Authorized by: (name and title) Date: Submit a completed, signed original of this form to GES’ authorized representative. A Fax of this form may be submitted, if it is followed by an original that is received within four business days of the due date. 52 Power Supply RFP Guide Power Supply RFP Guide Section V Suggested Trade Press Contacts * Section V—Trade Press In addition to direct mail and local and regional media distribution of notices about your utility's RFP, circulating information about the RFP to the industry trade press will help broaden the market that takes interest in your power supply solicitation. This list provides some suggested national trade press contacts that may be interested in your RFP. Some of these journals print routine information about RFPs, and others may cover your RFP only if there is something unusual about it. Also consider posting your RFP on the Internet and then inform the trade press about the Internet address. COGEN Publications P.O. Box 2303 Falls Church, VA 22042 phone: (703) 641-0613 fax: (703) 641-9265 Electric Light & Power 1421 S. Sheridan Road Tulsa, OK 74112-6619 phone: (918) 835-3161 fax: (918) 831-9834 Electric Power Alert PO Box 7167, Ben Franklin Station Washington, DC 20044 phone: (703) 416-8566 fax: (703) 416-8543 Electric Utility Week 1200 G Street, N.W. # 1100 Washington, DC 20005 phone: (202) 383-2183 fax: (202) 383-2125 Electric Power Daily 1200 G Street, N.W. # 1100 Washington, DC 20005 phone: (202) 383-2254 fax: (202) 383-2125 Electrical World 11 W. 19th Street New York, NY 10011 phone: (212) 337-4073 fax: (212) 627-3811 Published frequently (daily or weekly) * Electricity Daily 1800 Harpers Ferry Road Knoxville, MD 21758 phone: (301) 834-8098 fax: (301) 834-5157 Energy Daily 627 National Press Bldg. 14th St., N.W. Washington, DC 20045 phone: (202) 662-9720 fax: (202) 662-9744 Energy Report 1616 North Fort Myer Drive # 1000 Arlington, VA 22209 phone: (703) 816-8634 fax: (703) 528-4926 Energy Services Marketing Letter 111 Presidential Blvd. # 127 Bala Cynwyd, PA 19004 phone: (215) 667-2160 fax: (215) 667-5593 Independent Energy 1421 S. Sheridan Road Tulsa, OK 74112 phone: (918) 835-3161 fax: (918) 831-9776 Megawatt Daily 1616 N. Fort Myer Dr. # 1000 Arlington, VA 22209 phone: (703) 528-1244 fax: (703) 528-1253 Power Supply RFP Guide 55 56 * Power Supply RFP Guide Power 11 W. 19th Street New York, NY 10011 phone: (212) 512-2000 fax: (212) 627-3811 Power Engineering 1421 S. Sheridan Road Tulsa, OK 74112-6619 phone: (918) 835-3161 fax: (918) 831-9834 Power Value 2472 Eastman Ave., Bldg. 33 Ventura, CA 93003-5792 phone: (805) 650-7070 Public Power Weekly American Public Power Association 2301 M St., N.W. Washington, DC 20037 phone: (202) 467-2947 or (202) 467-2900 fax: (202) 467-2910 Public Utilities Fortnightly 8229 Boone Blvd. # 401 Vienna, VA 22182 phone: (703) 847-7720 fax: (703) 917-6964 Restructuring Today 4418 MacArthur Blvd. Washington, DC 20007 phone: (202) 298-8201 fax: (202) 298-8210 Transmission & Distribution World 9800 Metcalf Overland Park, KS 66212-2215 phone: (913) 967-1757 fax: (913) 967-1904 Published frequently (daily or weekly) Power Supply RFP Guide Section VI Sample Proposal Screening Matrix Section VI—Sample Proposal Screening Matrix Buryuey afeiany payybian S80IAI8S B woddns sawoysno uoneynday SUOI}IPUOD Y Ayyiqeija1 Q Ayqigeys Jasodoid SUUJ9} JO I} | SUA} UOISSIWSUeL} Jeloueuly sasodosd Swwa} jeloueuly / aod (saxog ayj u! HuyBlem uBisse samatAas) ea} BulusasoS swI4 Bulsodolg 59 Power Supply RFP Guide