The Q&As presented on this page are numbered chronologically based on the date of posting. Most recent Q&As are posted first. Q&As posted prior to February 21, 2006 (Q&As 1-49) are available on a separate page.
You must be registered as a Bidder to submit a question. BC Hydro's answers to Bidders' questions are for general information only, do not constitute legal or other advice, and do not amend or form part of the CFT, unless confirmed by Addendum or revised CFT Forms or CFT Reference Documents. For further information on the Q&A process, refer to section 9 of the CFT.
March 31, 2006
115. A Bidder has two projects – Project A and Project B. Project A is financially/technically feasible on its own but Project B, in order for it to be financially/technically feasible, is dependent on Project A going ahead. Section 11 of the CFT allows for two or more Projects to be tendered as Co-dependent tenders. Can Project A be tendered independently of Project B and Project B be tendered as Co-dependent on Project A?
Section 11 of the CFT (see bullet titled "Co-dependent Tenders") provides a Bidder with the option to submit separate Tenders for two or more Projects as Co-dependent Tenders. BC Hydro may accept all, but not less than all, the Co-dependent Tenders. Separate EPAs will be awarded for each successful Co-dependent Tender.
If a Bidder has two Projects (Project A and Project B) and would like to only designate Project B as co-dependent on Project A but Project A is not co-dependent on Project B, BC Hydro would allow such designations. By virtue of this designation the Bidder is stating that if Project A is selected to be awarded an EPA then an EPA need not be awarded to Project B. However, Project B can only be selected to be awarded an EPA if Project A is also selected to be awarded an EPA.
114. We are contemplating increasing the capacity of our project. Assuming we can confirm with BCH interconnections the point up to which the interconnection study is still valid, and assuming we stay below that threshold, can you conceive of a scenario where increasing the capacity would invalidate our Tender? We have reviewed the previous questions on this matter and understand that you will not make final determinations on this until after tenders are submitted. But if you could please describe a scenario where a small project could be declared invalid for increasing the capacity from what was submitted in the interconnection application (even though the interconnection application is still valid), we could then use that information to assess the risk of increasing the capacity.
Based on the limited information provided in your question, BC Hydro cannot come up with a scenario where the proposed increase in Plant Capacity would not be acceptable if it is compatible with the F2006 CFT Preliminary Interconnection Study. However, as noted in section 15.2 of the CFT, BC Hydro cannot make a determination regarding material consistency until the Tender has been submitted and all pertinent facts have been reviewed.
113. If a specific BCTC F2006 CFT Preliminary Interconnection Study Report states that The Direct Assignment Facilities or the Network Upgrades or both are unlikely to be in-service by the date that is 90 days prior to the COD specified in the Interconnection Study Application, but rather the Facilities and Network Upgrades are likely to be in-service by a date which is four (4) months after the COD specified, then in this case will the bidder be disqualified or injured for bidding using the original COD date specified in the Interconnection Study Application? Further, if the bidder is required to adjust the original COD date specified in the Interconnection Study Application, should the new COD date be compliant with the BCTC projected "in- service date," or rather another date, which is 90 days after the projected BCTC "in-service date?"
Based on the information provided, it does not appear reasonable to use the original COD specified in your F2006 CFT Preliminary Information Study Application for your Tender submission. In order for the Bidder to meet its delivery and other EPA obligations, the Tender should reflect the later COD given the interconnection facilities information contained in the F2006 CFT Preliminary Interconnection Study Report.
The tendered COD should reflect the latest in-service date of any interconnection-related facilities or transmission-related infrastructure required for a particular Project, plus an adequate period for pre-COD commissioning and testing. As part of its Risk Assessment process, BC Hydro will assess if the Bidder's Project development schedule and key development milestones (including the provision of required interconnection and transmission facilities) are realistic and will allow the tendered COD to be achieved.
112. Ref: Project Submission Instructions – Section 3.2.1 Financing Plan. In assessing the Financing Plan for a particular project, will BC Hydro consider whether the Project Proponent is allowing for an Interest Rate Increase Risk? Proponents must submit fixed price bids on April 7th. Considering the regulatory approval period and BCTC Interconnection Agreements, Finalization of Engineering, Procurement, Construction contracts (EPC) may not occur until March 1, 2007. Interest Rates could conceivably increase by 100 to 200 basis points, especially for proposed projects with estimated COD's in 2009 or later. Will BC Hydro assess the Financing Plans to determine whether proponents are considering this risk?
To meet the financial capacity threshold, the Bidder will have to demonstrate that it has sufficient funding commitments to develop and operate the Project. To obtain such commitments, BC Hydro assumes that the Bidder has demonstrated to its debt and equity providers that it can manage the Project development risks and financing risks and has adequate mitigation plans. Although it is not necessarily required, if a Bidder chooses to provide information regarding the risk of increased interest rates, including an awareness of and mitigation plan for potential Development Risk, such information would be helpful to BC Hydro in conducting the Risk Assessment.
111. Ref: Project Submission Instructions – Section 3.2.1 Financing Plan. In assessing the Financing Plan for a particular project, will BC Hydro consider whether the Project Proponent is allowing for a Construction Escalation Risk? Construction Escalation Risk is an important issue for bidders to consider. Due to the projected timelines of the 2006 CFT schedule, BCUC regulatory approval period, and BCTC Final Interconnection Agreements; Finalization of Engineering, Procurement, Construction contracts (EPC) may not likely occur until March 1, 2007. Realizing that proponents must submit fixed price bids to BC Hydro on April. 7th combined with the fact most EPC contractors will not provide fixed price quotes that extend past 6 months. How will BC Hydro assess Financing Plans to determine whether bidders are considering this risk?
To meet the financial capacity threshold, the Bidder will have to demonstrate that it has sufficient funding commitments to develop and operate the Project. To obtain such commitments, BC Hydro assumes that the Bidder has demonstrated to its debt and equity providers that it can manage the Project construction and other development risks and has adequate mitigation plans. Although it is not necessarily required, if a Bidder chooses to provide information regarding construction escalation risk, including an awareness of and mitigation plan for potential Development Risk, such information would be helpful to BC Hydro in conducting the Risk Assessment.
110. If a bidder elects to retain all GHG-related obligations under the EPA, how will BCH assess the risk of non-performance? Will BCH consider the values given in the GHG Adjustment table representative of the financial risk that a bidder who retains this liability will have to bear?
For those Bidders that elect to retain the GHG emission offset obligations, BC Hydro will evaluate the risk of not complying with such obligations by reviewing the information provided in subsection 3.10.2(a) of the Project Submission. More specifically, BC Hydro will assess the Bidder's mitigation plan for achieving its GHG offset obligations as well as the analysis and rationale provided regarding plan implementation. Although it is unlikely that the GHG Adjustment Table values will be used in the Risk Assessment, BC Hydro reserves the right to use any information submitted by the Bidder in the Tender in conjunction with the tables and other data provided in the CFT if such analysis is required for the overall CFT evaluation process.
109. We are bidding two projects into the call. If we receive two EPAs, the COD dates would be staggered with the less complicated one scheduled to finish first followed by the second project. If we only receive one EPA, the COD dates would depend on which one receives the EPA. What should we do to allow for this?
It is not clear what allowance is being requested. If the Bidder is seeking COD flexibility, the "Early COD" provisions of the EPAs may be helpful. Projects that are awarded an EPA are permitted to achieve COD up to 365 days prior to Guaranteed COD for Large Projects (per section 5.5 of the Large Project EPA) or prior to Target COD for Small Projects (per section 5.4 of the Small Project EPA), but no earlier than October 1, 2007.
108. The CFT Schedule states that Tenders will expire October 4, 2006, approximately 6 months after Tender Submission on April 7. In view of the fact that EPAs will not be executed until August 28th, when will the EPAs be filed with the BCUC, and how much time does BC Hydro allow for BCUC approval? In view of the length of time taken by the Duke Point approval process, what will happen if the BCUC process runs beyond October 4, and all of the Tenders expire?
As noted in section 3.2 of both the Large Project EPA and the Small Project EPA, BC Hydro will file the executed EPAs with the BCUC within a reasonable time after the Effective Date. If, within 120 days after the Effective Date, the BCUC has not accepted the EPAs for filing as energy supply contracts under section 71 of the Utilities Commission Act, then either the Seller or BC Hydro may terminate the EPA (see section 3.1 of both EPAs). BC Hydro cannot estimate the time required for the BCUC review process.
Regardless of when the BCUC review process concludes, Tenders will expire 180 days after Tender Closing Time (see section 14.11 of the CFT) and Tender Securities will be returned to unsuccessful Bidders promptly after their Tenders expire (per section 14.7 of the CFT). Please note that Tender expiry does not apply to successful Bidders with Awarded EPAs given that they would have entered into legally binding contracts with BC Hydro prior to the Tender expiry date.
Please also refer to Q&A 6.
March 30, 2006
107. If a bidder submits a two-part term pricing bid, are there limits as two how the first and second term bid (levelized or nominal) compare to each other, or how each compares to the overall levelized price?
For Bidders that select the Two-Part Term Pricing option as provided for in section 11 of the CFT (see page 11), there is no restriction with respect to the Bid Price tendered for the initial portion of the Term compared to the Bid Price for the balance of the Term. However, in determining the optimal portfolios, BC Hydro may consider and apply non-price criteria such as "the extent, if any, to which the exercise by a Bidder of the Two-Part Term Pricing option unduly accelerates payment for energy" (refer to section 15.5 of the CFT).
106. How the revised CFT Form #2 (March 17, 2006) should be filled in when bidding under the "Multiple Generating Units" "One Project" option and the Project has multiple sites? The rows in sections 4&5 tables are expendable to accommodate all required information from multiple generating units and all key elements, but in section 1 only one set of site coordinates could be entered.
Given the size limitations of CFT Form # 2, you can expand the space in the existing document or provide detailed information for each generating facility in a separate attachment. In the case of section 1 (Location), both the latitude and longitude fields are expandable and the Bidder can enter and label individual coordinates for each generating unit in each field or provide a separate attachment.
Please also refer to Q&A 49.
105. How would line losses be calculated and allocated if multiple IPPs were to interconnect via a common shared power line and/or transformer? (Indirect connection)
As outlined in Addendum 4, section 15.4 of the CFT has been revised with regard to interconnection and transmission adjustments (including energy losses) on both a Project stand-alone basis as well as a portfolio basis.
BC Hydro will submit tendered Projects to BC Hydro - Distribution Generator Interconnections and/or to BCTC to assess the impact of average energy losses on the Distribution System and/or Transmission System associated with the transmission of energy from the Project to the load centre. BC Hydro may also identify portfolios of Tenders for further assessment by BCTC, to further refine the interconnection and transmission adjustment, taking into account the impact of any interconnection/transmission interdependencies between Projects in a given portfolio.
104. Could you please explain the rationale for the following Clause in Appendix 6 - Standby Letter of Credit: "However, it is a condition of this Letter of Credit that it will be automatically extended without notice for a further one year period from the present or any future expiry date unless at least ninety (90) days prior to such expiry date we notify you in writing by courier or registered mail at your address above that we elect not to consider this Letter of Credit to be extended for any additional period."
As noted in subsection 13.4(c) of the Large Project EPA (and subsection 12.4(c) of the Small Project EPA), the letter of credit used for the Performance Security "must provide that it is renewed automatically, unless the issuing or confirming bank advises otherwise by the date specified in Appendix 6". This is a standard provision in letters of credit providing security for long-term contractual commitments given that such letters are typically issued for one-year periods. The automatic renewal provision allows the letter of credit to remain in place as long as required without the need for negotiation of amendments or extensions.
103. The submission requirements require that Bidder includes "copies of all applications and data provided to Terra Choice in support of that treatment". The information submitted to Terra Choice for Eco Logo Certification for our 2 Projects was extensive. Each copy of this Exhibit will consist of approximately 5-6, 6" Binders, half of which will be the EAO application. To reproduce 12 copies (2 Projects X 6 copies) is going to cost Bidder in the order of $10,000 not to mention the volume (at least 60, 6" Binders for this Exhibit alone) that will be delivered to BC Hydro’s offices. Can BC Hydro please re-confirm that this is what is required in the submission. Is the Terra Choice Letter not proof enough that the information was submitted?
BC Hydro has revised the requirements of section 4.3 of the Project Submission Instructions with respect to the submission of material provided to TerraChoice supporting the eligibility of a Project as Green. As noted in CFT Addendum 4, Bidders are required to only submit a list of all applications and data provided to TerraChoice in their Project Submissions, although they may be asked to submit copies at a later date.
102. Please confirm if special permission is required to tender the following Project configuration:
- 3 generating units with one point of interconnection - one EPA contract
as well as in an alternate tender:
- 1 generating unit with one point of interconnection - one EPA contract. It is our present understanding that under section 11 of the Call for Tenders, that special permission from BC Hydro will only be required if multiple generating units with multiple EPA contracts are to be interconnected at the same point of interconnection.
Your understanding of section 11 of the CFT is correct. For multiple generating units with a common point of interconnection and delivery, BC Hydro’s prior written consent is only required where the Bidder plans to tender the output under separate Tenders.
101. The Bidder is bidding 2 projects each combining multiple generating sites. Both projects (and all generators) will use the same point of interconnection. In fact, the main reason for separating the two projects was to have different COD’s for the two projects – one project having a COD in 2008 or 2009 and the other after 2009 but prior to September 2010. Starting up some generators early is crucial to offset the substantial costs related to interest during construction on a $300-million project. However, a number of factors (First Nations aversion to having the Participation Agreement apply to separate projects, LD mitigation, network upgrade amortization) are now overwhelmingly pointing toward a preference to have the Bidder bid one project cover all of the generating sites. Would BC Hydro allow us at this time to combine the 2 projects into 1 project, but allow for early COD’s on some of the generating units within the new combined project? If so, how would we notify BC Hydro that this was our intent?
A Bidder may combine multiple generating units into one Project and submit it as a single Tender or may treat the multiple generating units as separate Projects and submit them as multiple Tenders (see the bullet titled "Multiple Generating Units" in section 11 of the CFT). If multiple generating units are tendered as one Project and the Tender is accepted, a single EPA will be awarded in respect of the Tender. A Project can have only one COD; different CODs are not permitted for multiple generating units within the same Project.
The Bidder must ensure, however, that its interconnection study information is materially consistent with the tendering option selected. As noted in section 15.2 of the CFT, the "Bidder’s F2006 Preliminary Interconnection Study Application and any additional information furnished by the Bidder to support the study and the F2006 CFT Preliminary Interconnection Study Report must be based upon information that is consistent in all material respects with the Bidder’s Tender."
March 27, 2006
100. The following inequity in payment terms was pointed out during the January 20 Workshop and the Hydro representative responded that it would be reconsidered and possibly redrafted.
Section 12.2 states that "Any LDs owing by the Seller to the Buyer pursuant to this section 12.2 shall be payable on 15th day of the month following the month in which the delivery shortfall occurred." Section 11 (d) of Appendix 1 states that if this LD amount "remains unpaid for 15 days after its due date and such default has not been cured within 15 days after…" then this non-payment becomes a Buyer Termination Event.
However, in the case of Buyer’s payment obligations, the EPA is far more lenient. Section 9.1 states that "the Seller shall, by the 15th day of the month or the first Business Day thereafter, deliver to the Buyer a statement prepared by the Seller for the preceding month….and must indicate…any LDs payable by the Seller". Section 9.2 then gives the Buyer an additional 30 days to pay the Seller’s statement.
Section 9.5, dealing with Set-Off, does not allow the LD amount to be set-off by Hydro against the price owing for Eligible Energy unless the LD remains unpaid for 30 days. By that time, the Seller would be in default, having committed a Buyer Termination Event, and would have already incurred 30 days of interest on the LD amount. BC Hydro, on the other hand, would not yet be even 1 day late and would not have incurred even $1 of interest. While the Seller has 15 days to pay, before interest is charged, Hydro has effectively 45 days.
It is a false economy for Hydro to use the independent power producer as its bank. The cash balances retained in Hydro’s bank account will earn far less for the ratepayer than the amount that must be charged in the tendered price to cover the cost to the IPP for carrying these receivables.
In view of the fact that these payment terms are patently inequitable, and in view of the fact that the cost to the ratepayers will only be increased by financing Hydro’s short term cash balances at the IPP’s weighted average cost of capital, will Hydro be revising the EPA to remove this inequity and place both parties on the same payment terms? If invoices can be delivered by the 15th of the month, payments by both parties could be made by the last business day of the month.
BC Hydro does not intend to revise the payment terms of the EPA.
As prescribed in subsection 9.1(a) of the Large Project EPA, monthly statements for Eligible Energy must be delivered by the 15th day of the following month, but may be delivered earlier. Payment is due 30 days after the receipt of the statement (per subsection 9.2(a)). Payment terms of net 30 days are very common commercial practice on trade accounts of all kinds. These terms allow adequate time for review and verification of statements and payment processing.
Delivery shortfall LDs are not ordinary course trade accounts, but payments in respect of damages for delivery failures constituting a breach of contract. As prescribed in section 12.2 of the Large Project EPA, LDs are payable by the 15th day of the month following the month in which the delivery shortfall occurred. Normally, any delivery shortfall LDs should be reflected as a credit on the monthly statement (also to be submitted at the latest on the 15th day of the month as indicated above), by applying the netting provisions outlined in section 9.5 of the EPA. These set-off provisions effectively result in a discharge of the LD payment obligation such that no interest accrues in respect of LD payments and no Buyer Termination Event will occur.
Interest on overdue payments applies to both parties. Interest accrues from the due date of the payment in default.
March 24, 2006
99. Section 15.4 of the CFT Quantitative Bid Price Adjustments: states that "Levelized Bid Prices for Large Projects will be adjusted to take into account interconnection/transmission-related costs and energy losses,…" and slide 41 of the January 20 Workshop directed the bidder to the BCTC website, to a report titled "Bulk Transmission System Incremental Transmission Losses". However, the losses cited in the bubble-diagram in that report represent incremental losses "during the heaviest load hour". The use of such peak losses, rather than average losses, was questioned during the Workshop session and the Hydro representative responded that the matter was still under consideration.
In view of the fact that tendered projects will generally be operating on a more or less continuous basis all year, and in view of the fact that in every scenario tested in the cited BCTC System Impact Study, the average annual system losses corresponded to only 36-38% of the peak system losses, will BC Hydro change the evaluation methodology to use average losses rather than peak losses?
The cited System Impact Study also states that "The line flows are affected by many factors including … available VAr resources, and import/export levels." Not only does this study assume the heaviest load hours, it also allows for "230 MW of firm long term point-to-point export on the BCTC x BPAT path." Forcing the analysis to assume such a level of exports during the heaviest load hours will only exacerbate the losses and drive up the adjusted cost of domestic projects. In view of the fact that BC Hydro currently has a requirement for net energy imports that is three times the amount of the incremental energy that will be acquired from this Call, will Hydro have the loss analysis rerun to assume a more realistic net import scenario?
The type of generation technology used in our project can actually contribute VAr resources in response to system needs, which could lessen the amount of losses in our section of the bulk transmission system. Will Hydro request that BCTC take into consideration this potential loss saving?
Section 15.4 of the CFT (Quantitative Bid Price Adjustments) has been revised as outlined in Addendum 4. BC Hydro will submit tendered Projects to BC Hydro - Distribution Generator Interconnections and/or to BCTC to assess the impact of average energy losses on the Distribution System and/or Transmission System associated with the transmission of energy from the Project to the load centre. Accordingly, BC Hydro will not be using the BCTC report "Bulk Transmission System Incremental Transmission Losses For The Year 2008-09 Based On NITS-2004 Generation Pattern" posted on September 8, 2005 on the BCTC website for the purpose of determining energy losses on the Transmission System.
98. Will BC Hydro consider new material project information, which may positively or negatively affect the risk assessment, after the Tender Closing Time, April 7th? If so, how should a Bidder make BC Hydro aware of new information?
BC Hydro will carry out the Risk Assessment using the information contained in the Project Submission and will not consider any further information submitted by the Bidder after Tender Closing Time. However, as noted in section 15.3 of the CFT, BC Hydro may seek clarifications from the Bidder and/or undertake further investigations concerning a Project. Such clarification requests are meant to clarify, not augment or amend, the information provided in the Tender submission.
To the extent that there are challenges or issues affecting the Project, the Bidder should disclose such information in its Project Submission and provide any contingency or mitigation plans. As outlined in section 3.11.3 of the Project Submission Instructions, the Bidder should "describe all other known facts or circumstances that could reasonably be expected to have a material and adverse effect on the ability of the Bidder to develop and operate the Project and comply with its obligations under an Awarded EPA".
97. If a large project proponent has a energy delivery shortfall greater than 10% of the monthly firm energy tendered, if a bidders price was $70 per MW and the Mid C price was $50, would a bidder pay no liquidated damages as the LD Factor would be a negative number?
Bidders that tender a Monthly Firm Energy Profile and execute an Awarded EPA would be subject to delivery shortfall LDs as outlined in section 12.2 of the Large Project EPA. Liquidated Damages would be payable if (a) the Delivered Eligible Energy during the month is less than 90% of the Monthly Firm Energy Amount for that month and (b) the LD Factor is greater than zero. The LD Factor is based on (i) the lesser of the Mid-C Index and the LD Cap and (ii) the Escalated Bid Price adjusted for energy losses and the escalated Bid Price adjusters referenced in the Note to Bidders. If (i) minus (ii) is negative, then the LD Factor is zero and the amount of LDs payable is also zero.
A detailed example of the calculation of delivery shortfall LDs can be found on slides 85-90 of the presentation made at the Large Project Bidders’ Workshop on January 20, 2006, which is posted on the CFT Website.
96. Wind is the primary energy source for our projects and accounts for 100% of the annual energy source. Our Impact Assessment analysis has identified some GHG impact during the operation of the project mainly related to transportation and turbine maintenance. Please confirm that despite this minimal GHG impact, section 3.10 (project submission instructions) does not apply to Wind energy projects.
Section 3.10 of the Project Submission Instructions is intended to apply only to those Projects which directly consume fossil fuel in order to generate electrical energy. If a Project, such as a wind energy Project, does not directly consume fossil fuel to generate electricity, the Bidder can indicate that section 3.10 of the Project Submission is "Not Applicable".
95. Section 3.6 (Community Consultation) in the project submission instructions directs the bidder to provide a copy of any public notification issued concerning the Project and to provide a list of media where it was published. In the case of this project, the developer is the community itself (i.e. the municipality), the project is on municipal land and the project has been discussed at municipal council which is a public forum. Would the minutes of this Council meeting, and a subsequent newspaper article on the project, be considered sufficient evidence of public notification?
BC Hydro cannot pre-determine if specific Risk Assessment thresholds will be met prior to the review of the information being provided in Bidders’ Project Submissions. However, in the interest of providing further clarity and guidance to Bidders, the following comments may be helpful.
The intent of Section 3.6 of the Project Submission Instructions is to ensure that the public in the local community in which the Project will be located has been made aware of the proposed Project and will be provided with relevant Project information and an opportunity to respond. Generally, local newspaper articles would be an example of public disclosure of a Project, and discussions in a public forum such as a municipal or city council meeting would be an example of both public notification and a reasonable opportunity for public response.
94. Could you confirm the date that the ‘performance security’ Letter of Credit must be delivered to BC Hydro?
Section 13.1 of the CFT states that the Performance Security, together with an executed Awarded EPA, is to be delivered to BC Hydro within 15 days of BC Hydro having delivered the executable Awarded EPA to the Bidder.
93. We are a general partnership without a corporate seal. Are there any special signing requirements for the Tender Form and can we simply leave out the corporate seal?
In accordance with section 14.6 of the CFT, the Tender forms must be signed by each partner of a general partnership. If a partner is a corporation, the Tender forms should be signed by one or more directors or officers of the corporation and the corporate seal should be affixed if the corporation has, or is required by law to have, a corporate seal. For partners that are not corporations, no corporate seal is required.
92. In the Large Bidders Workshop presentation on slide 41, it states that energy losses used for the Bid Price Adjustments will be expressed as a percentage associated with the transmission of energy from the ‘Project’ to the Lower Mainland. Could you provide some guidance as to how this percentage is calculated, and if and where on the BCTC website the "Bulk Transmission System Incremental Transmission Losses" are located to help Bidders better assess their Project losses in terms of the bid price adjustments?
Section 15.4 of the CFT (Quantitative Bid Price Adjustments) has been revised as outlined in Addendum 4. BC Hydro will submit tendered Projects to BC Hydro - Distribution Generator Interconnections and/or to BCTC to assess the impact of average energy losses on the Distribution System and/or Transmission System associated with the transmission of energy from the Project to the load centre. Accordingly, BC Hydro will not be using the BCTC report "Bulk Transmission System Incremental Transmission Losses For The Year 2008-09 Based On NITS-2004 Generation Pattern" posted September 8, 2005 on the BCTC website for the purpose of determining energy losses on the Transmission System.
91. In the F2006 Open Call for Power Bidders' Workshop of January 20 2006, Focus on Large Projects; slides 39 through 47 describe the Bid Price Adjustments for transmission. The bottom of slide 40 states: "Bulk Transmission System Cost of Incremental Firm Transmission" aka CIFT - provides long-term unit costs of reinforcements on the bulk transmission system. Since power flows from the Lower Mainland to Vancouver Island, could you confirm that a generation project on Vancouver Island would have its evaluated bid price reduced by that CIFT?
Section 15.4 of the CFT (Quantitative Bid Price Adjustments) has been revised as outlined in Addendum 4. BC Hydro will use the BCTC Bulk Transmission System Cost of Incremental Firm Transmission report posted on the BCTC website and current at the time the interconnection and transmission adjustments are determined (the "CIFT" report) for purposes of establishing the cumulative cost of incremental firm transmission along the bulk transmission system to the load centre. For Large Projects located on Vancouver Island, a CIFT credit may be applied to Projects tendering Hourly Firm Energy (there will be no CIFT adjustment for Projects tendering Monthly Firm Energy). If a CIFT credit is applied, the levelized Bid Price will be reduced by the amount of the credit. For Small Projects located on Vancouver Island, there will be no CIFT adjustment.
90. In the F2006 Open Call for Power Bidders' Workshop of January 20 2006, Focus on Large Projects; slides 39 through 47 describe the Bid Price Adjustments for transmission. The bottom of slide 40 states: "Bulk Transmission System Cost of Incremental Firm Transmission" aka CIFT - provides long-term unit costs of reinforcements on the bulk transmission system. What is the CIFT from the Lower Mainland to Vancouver Island that will be used in this Bid Price Adjustment?
Section 15.4 of the CFT (Quantitative Bid Price Adjustments) has been revised as outlined in Addendum 4. BC Hydro will use the BCTC Bulk Transmission System Cost of Incremental Firm Transmission ("CIFT") report posted on the BCTC website that is current at the time the interconnection and transmission adjustments are determined for purposes of establishing the cumulative cost of incremental firm transmission along the bulk transmission system to the load centre. For Large Projects located on Vancouver Island, a CIFT credit may be applied to Projects tendering Hourly Firm Energy (there will be no CIFT adjustment for Projects tendering Monthly Firm Energy). For Small Projects located on Vancouver Island, there will be no CIFT adjustment.
89. Project Submission Instructions 3.2.4 (c) requires that we briefly describe any projects that our company or Affiliate has planned or is developing that are greater than 50% of the estimated capital cost of the Project tendered. How would a bidder approach this question where they, their bidding company or their Affiliate is a very large company (say $1-billion-plus) with an extensive list of development projects that may or may not succeed? If they are tendering a small project, they would have to disclose anything that is larger than say a $10-million project. Large companies are reluctant to release their confidential project list and details to anyone. They are not willing to release this highly confidential information to BC Hydro so that they can bid on a small generation project, which is only a very, very small portion of their business plan. BC Hydro simply wants to ensure that the Bidder and its Affiliates are not stretching themselves too long on resources. How can BC Hydro gain the comfort that they need without forcing companies to divulge their most confidential information when there is no need to do so?
The Risk Assessment threshold for Section 3.2 of the Project Submission Instructions is intended to "establish that the Bidder has, or has a viable plan to secure access to, sufficient financial resources to enable it to successfully develop and operate the Project in accordance with the terms of an Awarded EPA." The specific purpose of Section 3.2.4 (c) of the Project Submission Instructions is to enable BC Hydro to determine the likelihood that the Bidder and its Affiliates will have the financial capability to develop and operate the tendered Project given the Bidder’s other current and/or contemplated commitments.
A Bidder may choose not to disclose information related to every project having a capital cost equal to or greater than 50% of the capital cost of the tendered Project. However, the Bidder should ensure that it has submitted sufficient information with respect to its financial capabilities to meet the threshold for financial capacity and creditworthiness. If the Bidder does not provide enough evidence to satisfy the Section 3.2 threshold, it may be difficult for the Bidder’s Tender to pass the Risk Assessment.
88. Further to Section 14.6 of the F2006 CFT, please provide the signing requirements for a First Nation (a band, as defined under the Indian Act).
All forms for a Tender submission by a First Nation should be signed in accordance with subsection 2(3)(b) of the Indian Act, R.S.C. 1985, c. I-5. Accordingly, the signature block should state the following, with signatures for the appropriate number of council members:
Signed by a majority of the councillors of the council of the [First Nation’s name], duly convened, by:
87. In the Small Project EPA section 4.2 Modification of Plant Capacity states that the Seller may increase Plant Capacity by 10% at any time before COD. Appendix 1 – Definitions: "26. Eligible Energy states that all energy delivered in the month is accepted except that at which any time exceeds 120% of Plant Capacity."
Assume that I receive a BC Hydro EPA on my 5 MW project hydro project with an energy profile that said I would deliver 2,000 MWh in January. Assume before COD I discover I can produce more and the transmission system is able to accept this increased amount. BC Hydro will allow me to increase my Capacity by 10% to 5.5 MW. 120% of this new Capacity would now be 6.6 MW.
The implication of the wording in these sections is difficult to understand. Is the contract saying that BC Hydro will accept and pay the full contract price (adjusted for HLH and LLH) for all Energy in the month so long as it does not exceed 6.6 MW Capacity at any instant? In this instance the 2,000 MWh is irrelevant.
Is the contract saying that BC Hydro will accept and pay the full contract price (adjusted for HLH and LLH) for all Energy in the month so long as it does not exceed 120% of the 2,000 MWh of energy expected in January? In this instance BC Hydro would not pay anything for energy above 2,400 MWh.
Is it a combination of the two scenarios above where Capacity cannot exceed 6.6 MW and Energy cannot exceed 2,400 MWh?
The Small Project EPA does not require a Seller to commit to delivering a pre-determined amount of Energy to BC Hydro. Therefore, the amount of Eligible Energy that a Seller can deliver is limited to 120% of the Plant Capacity. If a Seller’s Plant has a Plant Capacity of 5.5 MW, then the maximum amount of Energy that will be accepted as Eligible Energy at any instant is 120% of 5.5 MW, or 6.6 MW.
86. Under Section 7.3 of the Large Project EPA the Seller is obligated to "…sell and deliver to the Buyer at the POI the Monthly Firm Energy Amount for the applicable month…". Under Section 7.8 (a) (v) , "…[ t]he obligations of the Seller under Section 7.3 are subject to: Authorized Planned Outages.
This implies that the Seller is relieved of its obligation to deliver Firm Energy during an Authorized Planned Outage, yet under Section 12.2 the Seller is still subject to LD’s if the Eligible Energy during the month is less than 90% of the Monthly Firm Energy Amount.
The Firm Energy Profile Election, which is imported into the EPA as Appendix 2, asks a Bidder to bid an annual monthly or hourly firm energy profile which will be used in all years of the EPA Term. This type of profile does not allow for Planned Outages for periodic major maintenance which is not annual in nature, but is on a five or six year cycle. During these major Planned Outages the Bidder will not be able to deliver over 90% of the Monthly Firm Energy Amount unless the annual profile that is bid is reduced to reflect the periodic maintenance that occurs only every five or six years.
Will the Bidder/Seller be subject to LD’s during major Authorized Planned Outages as indicated in Section 12.2 or be relieved of it’s obligation to deliver as stated in Sections 7.3 and 7.8 (a) (v) and not be subject to LD’s?
Under subsection 7.8(a) of the Large Project EPA, Sellers are excused from their obligation to deliver Firm Energy during periods of Authorized Planned Outages. As set out in subsection 1.1(f) of Appendix 3 of the EPA, any Eligible Energy delivered during such outage periods will be considered Non-Firm Energy.
Subsection 12.2(a) of the Large Project EPA indicates how the LD calculation for delivery shortfalls is adjusted to account for Authorized Planned Outages. For Sellers with a Monthly Firm Energy Profile, the number of minutes within a month attributable to an Authorized Planned Outage will be divided by the total number of minutes in that month in order to determine the reduced Monthly Firm Energy Amount which will be used for LD calculation purposes. For Sellers with an Hourly Firm Energy Profile, the number of minutes within an hour attributable to an Authorized Planned Outage will be divided by 60 minutes in order to determine the reduced Hourly Firm Energy Amount which will be used for LD calculation purposes.
85. The CFT Section 14.6 states that for General Partnerships, "the forms must be signed by each partner". Because "forms" is not capitalized, can you provide confirmation as to exactly which forms are to be signed by each partner? Specifically, the Tender Form clearly has a field for each partner and states that each partner is to sign, but the Bid Price/Options Form does not. Also, the Project Submission Certificate has only one field. Are there any other documents that must be signed or initialled by each Partner, as opposed to just one partner with signing authority.
As specified in section 14.6 of the CFT, the Tender Form, the Bid Price/Options Form, and the Project Submission must be signed by each general partner on behalf of the Bidder. The Bidder may attach an additional page to the forms to allow sufficient space for all required signatures (see Q&A 46).
March 22, 2006
84. Section 12.2 of the Large Project EPA states: " Delivery Shortfalls- If in any month after the first anniversary of COD, the Eligible Energy during the month is less than 90 % of the Monthly Firm Energy Amount for that month, the Seller shall pay LDs to the Buyer...." Does this sentence mean there are no LD's payable during the first twelve months after COD?
Yes - Liquidated Damages are payable only after the first anniversary of COD.
83. The beginning of slide 42 states: Energy losses (L%) converted to a $/MWh amount, then added to the levelized Bid Price (and after the other adjustments are made to the levelized Bid Price)- $/MWh adjustment = [ levelized Bid Price +/- other adj ] x [ L / (1-L) ] - L% is normally positive, but could be negative if there is are net line loss savings.
- What are the energy losses from the Lower Mainland to Vancouver Island that will be used in this Bid Price Adjustment?
- Since power flows from the Lower Mainland to Vancouver Island, could you confirm that a generation project on Vancouver Island would have its evaluated bid price reduced by the adjusted levelized Bid Price of the project times those energy losses divided by one minus those energy losses?
As noted in BC Hydro's response to Question 72, BC Hydro will be issuing an Addendum shortly regarding the determination of energy losses associated with the quantitative Bid Price adjustments described in section 15.4 of the CFT.
82. Section 14 of the Small Project EPA describes the Termination. I am unclear as to what the financial consequences are in the event that a bidder has a "change of heart" (i.e. construction costs increase so dramatically that the bid price no longer generates sufficient return to proceed with the project). I believe this would be considered a Deliberate Breach should the Seller terminate the contract. A bidder's full exposure for Deliberate Breach is only the Tender Security ($5k/MW) up to the award of the EPA (Effective Date). A bidder's full exposure for Deliberate Breach from the Effective Date plus 365 days is $10k/MW. What is the full exposure for Deliberate Breach from the Effective Date plus 365 days, until Target COD?
A Bidder that is awarded a Small Project EPA, but who fails to execute and deliver the Awarded EPA will be liable to BC Hydro for the Tender Security, which is the greater of (i) $5,000/MW multiplied by the Plant Capacity, or (ii) $5,000 (see section 14.7 of the CFT).
Once the EPA is awarded and executed, the Seller has the right to terminate the EPA at any time prior to the earlier of: (i) COD; and (ii) the first anniversary of the Effective Date (see subsection 14.2(a) of the Small Project EPA). If a Seller chooses to exercise its right to terminate under this provision, the Seller must pay BC Hydro a termination amount equal to $10,000/MW multiplied by the Plant Capacity of the Project (see subsection 14.5(a) of the Small Project EPA).
A Seller committing a Deliberate Breach of the EPA will be liable to BC Hydro for any damages incurred by BC Hydro as a result of the Deliberate Breach. The Seller’s liability is not limited to the Termination Payment amount specified in section 14.4 of the Small Project EPA. As prescribed in section 14.8 of the EPA, there is no limit of liability for Deliberate Breach and the Seller is exposed to the full extent of damages incurred by BC Hydro.
81. As the BCTC Preliminary Reports are due to be delivered to the proponents two weeks prior to the tender deadline of April 7, which coincides with the March 24, 2006 deadline for questions to be submitted, is there a possibility that the question deadline or due date for the tenders can be extended for one or two weeks to accommodate the questions that may arise from the Preliminary Interconnection Reports?
The deadline for submission of CFT questions and the deadline for Tender submissions will not be extended. However, there will be a limited opportunity for Bidders to discuss the F2006 CFT Preliminary Interconnection Study Reports with BC Hydro (in the case of Projects interconnected to the Distribution System) or with BCTC (in the case of Projects interconnected to the Transmission System). A letter accompanying the F2006 CFT Preliminary Interconnection Study Reports will provide Bidders with the option of having a meeting to discuss the study results prior to Tender Closing Time.
80. In Section 3.6 of the BC Hydro F2006 Open Call for Power – Project Submission Instructions, the threshold for community consultation includes the submission of a public notification in the local community where the Project will be located. Does BC Hydro consider this a minimum threshold for projects that are NOT required to undergo an Environmental Assessment process or other similar regulatory processes? For clarity, the notification would be provided for the purposes of the BC Hydro Call and would not be required under any other process for the approval of the project. Would BC Hydro still consider it a minimum threshold in the case of a project such as this?
As described in Addendum 3 to the CFT, section 3.6 of the Project Submission Instructions has been revised to reflect that supporting information should be submitted where community notification and consultation is "required under any law, permit, regulatory or government (including local government) process or any other approval process of any kind applicable to the Project". If a Bidder concludes that public notification and consultation is not required, then supporting rationale must be provided in the Project Submission.
March 17, 2006
79. A bidder has a project that involves two distinct stages, a first stage involving 20 MW with a COD and a second stage involving 80 MW with a different COD. The CODs are only one-year a part. Per an Application submitted by the bidder, BCTC is completing a F2006 CFT Preliminary Interconnection Study Report for the 100 MW project. The Bidder intends to submit Co-dependent Tenders one for 20 MW with one COD and another one for 80 MW with a different COD. The bidder will attach BCTC’s Interconnection Study Report for the 100 MW project to both tenders. How will BCH treat BCTC’s estimate of the Network upgrades in the evaluation process? Considering that the Tenders are Co-dependent will BCH proportion the estimate of the Network upgrades between the two projects?
For the evaluation of Co-dependent Tenders, BC Hydro will first calculate the aggregate Network Upgrade Costs of the individual Tenders that make up the Co-dependent Tenders and then allocate the total Network Upgrade Costs to the individual Tenders proportionately.
Given that the two stages of your Project appear to have a common interconnection point, you should also make note of section 11 of the CFT (see "Multiple Generating Units – Separate Projects" bullet) which states: "A Bidder may tender output from multiple generating units with a common point of interconnection and delivery under separate Tenders, with the prior written consent of BC Hydro."
Please refer to page 9 of the CFT document for further details regarding Co-dependent Tenders and multiple generating units.
78. Suppose a Bidder had a 100 MW project producing 350,000 MW.h annually and were bidding 70% of the energy as ‘firm’, could the following schedule and payment amounts be assumed?
1. Tender Security: $279,680 in the form of a letter of credit from a financial institution as outlined in Section 14.7 of the CFT Document due with the submission of Tender documents, April 7, 2006.
2. Performance Security: $6,000,000 in the form of a letter of credit from a financial institution as outlined in Section 13.4 of the Large Project EPA due with the delivery of an executed EPA on August 28, 2006.
3. After the first anniversary of COD: a reduction in the Performance Security to $1,118,721 for the remainder of the EPA.
Is the balance of the performance security ($4,881,279) returned to the Bidder on the first anniversary of COD and is there any interest paid by BC Hydro on this amount?
As shown below, BC Hydro confirms your Tender Security and Performance Security calculations based on the following Project assumptions:
Plant Capacity = 100 MW
Total annual firm tendered energy = 350,000 MWh x 0.70 = 245,000 MWh
Per section 14.7 of the CFT, for Large Projects, the Tender Security is $10,000/MW based on annual firm tendered energy in MWh, divided by 8,760.
Tender Security = [245,000 MWh/8760 hours] x $10,000/MW
; = 27,968 MW x $10,000/MW = $279,680
As defined in Appendix 1 of the Large Project EPA, the Performance Security is a letter of credit in the amount of:
a) prior to the first anniversary of COD, $60,000/MW multiplied by the Plant Capacity
Performance Security = 100 MW x $60,000/MW = $6,000,000
b) from and after the first anniversary of COD, $40,000/MW multiplied by the total of the 12 Monthly Firm Energy Amounts (contained in Appendix 2 of the EPA) divided by 8,760.
Performance Security = [245,000 MWh/8,760 hours] x $40,000/MW
; = 27.968 MW x $40,000/MW = $1,118,721
After the first anniversary of COD, the Buyer will release the Performance Security required prior to the first anniversary of COD ($6,000,000) upon receipt of the Performance Security required from and after the first anniversary of COD ($1,118,721). The Buyer is not required to pay the Seller any interest in association with any Performance Security delivered under the EPA.
77. Could you please give more detail on the nature of the equity and debt commitments required. Is a letter of support or financeability acceptable? Or is a full underwriting necessary? Are you looking for a particular level of commitment or type of commitment, which, if not met would disqualify or prejudice certain submissions?
The purpose of the Risk Assessment is to assess the likelihood that a Project can achieve COD and perform in accordance with the EPA. In order to assess a Bidder’s financial capacity and creditworthiness, BC Hydro needs to satisfy itself that a particular Bidder has or will have access to sufficient funds to develop and operate the Project in accordance with the terms of an awarded EPA.
As noted in section 3.2 of the Project Submission Instructions, examples of third party funding commitments include term sheets, letters of offer and executed financing documents. Generally, a reasonable financing commitment could take the form of a letter issued by the creditworthy bank or financial institution that affirms its willingness to provide the financing and Performance Security required for the development and operation of the Project. This letter of affirmation may be subject to conditions but, as stated in the threshold statement, the funding commitments should "not be subject to any conditions that could not reasonably be expected to be fulfilled" at the time the financing or security is required. While a full underwriting is not necessary to meet the threshold for financial capacity and creditworthiness, a letter of support or financeability which only provides an opinion that a Project is financeability would not likely constitute a commitment to finance the project and therefore may make it difficult for the Tender to pass the Risk Assessment.
For additional information, please refer to Q&A 23.
March 16, 2006
76. CFT Form #2 Section 7. We have submitted interconnection studies for both a direct and an indirect option. Can we submit a bid with two options for interconnection facilities (direct and indirect) as long as we have only one final bid price? Would we be better off to submit the bid twice; one with one interconnection option and the second bid with the other interconnection option?
Each Tender must be accompanied by a single interconnection option. If the Bidder wants to pursue both interconnection options (direct and indirect) for a particular Project, it can submit one Tender and one Alternate Tender. As prescribed in section 12 of the CFT, for each tendered Project the Bidder must have submitted a F2006 CFT Preliminary Interconnection Study Application and must have received a F2006 CFT Preliminary Interconnection Study Report.
75. With reference to Item 14.7 included in the BC Hydro F2006 Open Call for Power - Call for Tender Document. Can the letter of credit for the Tender Security be issued from an "International Operations" department of a Canadian financial institution meeting the credit rating required in the CFT but based in a different Canadian city than Vancouver?
The letter of credit can be issued by a bank or financial institution located in a city other than Vancouver. However, in this circumstance, the Tender Security must be advised by a Vancouver branch of the issuer, or by a Vancouver branch of another bank or financial institution, which meets the credit rating criteria specified in section 14.7 of the CFT.
74. BC Hydro’s example Calc of Adjusted Bid Price on page 50 of the F2006 OCFP Bidders Workshop handout stated: Loss adjustment = 55.23 X [.07/(1 -.07)] = $4.16/MWh, which is then added to the $55.23 to yield an Adjusted Bid Price of $59.39. Was the 7% (shown as .07) an example of an Incremental Transmission Energy Loss shown on the Bulk Transmission System bubble map? What is the Bid Adjustment for Energy Loss for the East Kootenay area, which has an "inward" arrow of 1.5%? For clarity, for the East Kootenay area, the bubble map shows -1.5%. But it also shows +4% and +6.5% to reach all the way down to the Lower Mainland load centre. Would the Loss Adjustment = 55.23 X [0.15/(1+0.15)] = $0.82, which is then deducted from the $55.23 to yield an Adjusted Bid Price of $54.42? Alternatively, those other 4% and 6.5% Losses could be incorporated into the calculation (i.e. netted off against the 1.5%). The former seems logical since electrons from East Kootenay are filling the local need and are not leaving that bubble.
The 7% loss factor used in the example was for illustrative purposes only, and was meant to represent the energy losses associated with the transmission of the electricity from the point of interconnection of a theoretical project to the Lower Mainland.
With respect to your queries regarding the BCTC bubble map, please note that BC Hydro will be issuing an Addendum shortly regarding the determination of energy losses associated with the quantitative Bid Price adjustments described in section 15.4 of the CFT.
March 15, 2006
73. In addition to our Contact Person, could you also permit our CFO to ask questions directly on behalf of the Bidder.
No other person other than the Bidder’s Contact Person may submit questions to the F2006 Call Q&A process (see section 9 of the CFT).
72. Bidder is ABC limited partnership. Tender Letter of Credit issued by (Vancouver bank) on behalf of DEF Corp. DEF Corp is a limited partner in ABC limited partnership. On Letter of Credit, applicant will read DEF Corp. Just to be clear, the bidder's name (ABC limited partnership) will not be listed as the applicant. Please confirm that this is acceptable to BC Hydro.
The applicant of the letter of credit can be another party acting on behalf of the Bidder. In this circumstance, the Letter of Credit should clearly state that the applicant is acting on behalf of the Bidder. If you are using the Form of Tender Security available on the CFT Website, the Applicant name at the outset of this document should read "DEF Corp, on behalf of ABC limited partnership". Furthermore, under item (1) of the body of the Form of Tender Security, the word "Applicant" should be replaced with the Bidder’s name (i.e. ABC limited partnership) in the first and last paragraph, given that it is the Bidder, and not the Applicant, that has a contractual arrangement with BC Hydro.
71. With regards to exhibits that accompany the project submission report, can these be submitted in separate three-ring binders or on a CD in electronic format with the appropriate exhibit reference? Some of the exhibits are large standalone reports, including Bankable Hydrology Studies, Water Power Development Plan, Environmental Assessment Application Report, etc. All these reports are very relevant as they provide comfort to BC Hydro that the projects meet risk threshold assessments.
As per the General Instructions section of the Project Submission Instructions: "If an Instruction calls for the submission of applications, reports, agreements, plans, schedules, resumes, studies or other documents, those documents should be referenced in the text as an Exhibit. Exhibits should be numbered sequentially and tabbed at the end of the Project Submission". If these Exhibits will not fit in the Project Submission binder, additional 3-ring binders with appropriate tabbed sections may be included as required. CDs should not be submitted as part of the Project Submission.
March 10, 2006
70. Call for Tenders document Section 11 states that we can submit Co-dependent Tenders. Where do we disclose in the bid documents that the bid is co-dependent with another tender? Would this be section "4.8 Other Data" of the Project Submission Instructions?
Please see section 14.13 of the CFT which states the following: "A Bidder that wishes to designate two or more Tenders in respect of different Projects as either Co-dependent Tenders or Mutually Exclusive Tenders, must submit complete Tenders for each Project, together with a letter specifying clearly those Tenders that are Co-dependent Tenders and/or those Tenders that are Mutually Exclusive Tenders. The letter should contain no other qualifications or conditions."
69. CFT Form #4 Section 3(b) - We have created an entity called Company A and this company will be used to bid into the April 7 CFT. At August 4 we will be informed that Company A has been awarded an EPA. It is our intent that at notification that our Company A has been awarded an EPA that we would create a Company B (for business/tax/financial reasons) that has an identical ownership structure as Company A and that Company B would hold the EPA (it would never be awarded to Company A). Is this permitted or would Company A be required to own the EPA for an instant and then sell it to Company B (consent not to be reasonably withheld by BC Hydro) the next instant?
The effect of section 3(b) of the Small Project Tender Form (CFT Form # 4) is that Company A cannot assign the Awarded EPA until after the date of execution of the Awarded EPA. Any such assignment would be subject to section 15.1 of the Small Project EPA.
Company A may assign its Bidder registration to Company B prior to or at the Tender Closing Time, subject to the conditions set out in section 7 of the CFT.
68. BC Hydro’s example Calc of Adjusted Bid Price on page 50 of the F2006 OCFP Bidders Workshop handout stated: Loss adjustment = 55.23 X [.07/(1 -.07)] = $4.16/MWh, which is then added to the $55.23 to yield an Adjusted Bid Price of $59.39. Addendum #2 changed BC Hydro from "will" to "may" do the Interconnection and Transmission Adjustment. Does that mean that the Energy Loss calculation above is still valid? Or is it waived or now subjective?
Please note that the Addendum 2 change to section 15.4 of the CFT pertaining to the "Interconnection and Transmission Adjustment" deals with the identification of portfolios for further BCTC assessment and does not refer to adjustments for energy losses. The levelized Bid Price for all Projects will be adjusted for energy losses in the manner shown on slide 50 of the presentations made at the Bidders’ Workshops on January 20, 2006 and posted on BC Hydro’s Website.
67. In Section 3.2.4a of the Project Submission Instructions, BCH refers to "rated Projects, Bidders, equity providers and/or guarantors." What is meant by the term rated in this particular context? Is this to mean credit rating? And under what circumstance can project itself be rated?
The term "rated" refers to Projects, Bidders, equity providers and/or guarantors that have a credit rating. Depending on the type of financing required by a Bidder, particularly non-recourse or limited recourse financing, Projects may be rated by credit rating agencies in order to facilitate such financing. Bidders are encouraged to contact their own financial advisor for further information pertaining to obtaining a credit rating for Projects.
66. Company ABC registered "Project 1" and "Project 1 - Alternate" prior to Jan 6, 2006 deadline for bidder registration. If "Project 1" is disqualified during the Tender evaluation process, will "Project 1-Alternate" automatically be disqualified, or are the two projects evaluated as mutually exclusive.
A Tender and an Alternate Tender for the same Project will be evaluated separately as Mutually Exclusive Tenders.
65. If Company ABC registered Project 1 prior to the Jan 6 2006 bidder registration deadline, but did not submit a registration form for Project 1 - Alternate, is company ABC entitled to submit a tender for Project - 1 Alternate on April 7 2006.
A Bidder may submit one Tender and one Alternate Tender for any particular Project. An Alternate Tender may reflect alternate tendered data for Plant Capacity, pricing and other terms. A Bidder is not required to submit a separate Bidder Registration Form for the Alternate Tender for the same Project. The Bidder is directed to section 11 of the CFT (see "Alternate Tenders" bullet) and the CFT Glossary for the definition of "Alternate Tenders" and "Project".
A Bidder may also change the information set out in the Bidder Registration Form at the time a Tender is submitted. Therefore, Company ABC may also submit a single Tender for Project 1 – Alternate based on differences in the data specified in the Bidder Registration Form for Project 1 provided that the changes to the Project information are not such that Project 1 – Alternate is a fundamentally different project than Project 1.
64. Section 15.1(a) of the EPA gives BC Hydro the right to terminate if: "the Seller has failed to obtain all Material Permits" within a year of the Guaranteed COD. Section 15.1 (d) provides a right of termination if "a Buyer Termination Event occurs. The definition of "Buyer Termination Event" (section 11 of Appendix 1) provides in essence, that if the Seller is in material default of any of its covenants, representations and warranties or other obligations under the EPA and cannot cure the default within 30 days but the Seller can demonstrate: "that the Seller is working diligently and expeditiously to cure the default and the default is cured within a further reasonable period of time" then there is no default. Would you confirm that section 15.1(d) applies to the covenant in section 4.3 to obtain "all Permits"? Does section 15.1(a) supersede section 15.1(d)?
Section 15.1(d) of the Large Project EPA applies to all covenants made by the Seller including the requirement to "…promptly obtain, comply with and maintain in full force and effect all Permits". If the Seller fails to obtain any Permits that are not Material Permits, the Seller will have the opportunity to cure the default before a Buyer Termination Event occurs. However, for Material Permits, section 15.1(a) of the Large Project EPA applies rather than section 15.1(d). Section 15.1(a) gives the Buyer the right to terminate the EPA for a failure to obtain Material Permits by 365 days prior to the Guaranteed COD, without giving the Seller an opportunity to cure the default.
63. The Bid Price is subject to escalation by a factor equal to up to 50% of CPI whereas the Discount Amount escalates at 100% of CPI. Over time this will result in a significant deterioration in the amount payable by BC Hydro for Non-Firm Energy. What is the reason for not applying the same CPI factor to the Bid Price and the Discount Amount?
It is not accurate to state that the Bid Price is subject to an escalation factor of up to 50% of CPI. As indicated in section 11 of the CFT (see bullet titled "Escalation"), the Bidder may tender a percentage of its Bid Price (0% to 50%) which is subject to escalation at 100% of CPI. Giving Bidders the option to choose the percentage of their Bid Price that is subject to CPI indexation allows them to offer a cost-effective price which matches their cost profile. The Bid Price percentage for CPI escalation purposes is capped at 50% because for most Projects the majority of costs will be capital costs and associated financing costs, which costs are not subject to inflation after construction is completed.
The $8.00/MWh Discount Amount prescribed for Non-Firm Energy for Large Projects was derived from the levelized cost of BC Hydro’s Mica Unit #5. Given that levelization requires the application of discount factors which reflect inflation, it is appropriate to escalate the Discount Amount at 100% of CPI.
March 8, 2006
62. Section 15.5 (a) of the EPA provides that: "If the Seller terminates this EPA under subsection 15.2 (a), the Seller shall pay to the Buyer an amount equal to $20,000/MW multiplied by the total of the Monthly Firm Energy Amounts set out in Appendix 2 divided by 8760". With respect, this constitutes a penalty in circumstances where the Seller having used "commercially reasonable" efforts has failed to obtain all Material Permits (as section 15.2 (a) is now worded). The Seller cannot exercise any control or leverage over the issuers of the various Permits. Failure to obtain Permits is also specifically excluded from the definition of "Force Majeure". In the circumstances, the Seller will already have suffered considerable financial loss which, it is submitted, should not be significantly increased by virtue of a termination payment. Would BC Hydro revise section 15.2 (a) to provide that if the Seller terminates under subsection 15.2 (a) no Termination Payment is payable? Similarly, would BC Hydro revise section 15.4 (a) to provide that if the Buyer terminates under section 15.1 (a) but the Seller has made commercially reasonable efforts to obtain the Material Permits then no Termination Payment is payable? If there are other sections which I have overlooked which require a termination payment in circumstances where the Seller is acting reasonably and diligently; is not culpable; and has no control over the outcome, then we make the same submission in relation to those sections.
BC Hydro does not intend to amend the Termination Payment provisions prescribed in sections 15.4(a) and 15.5(a) of the Large Project EPA. The rationale for having termination rights for failure to obtain Material Permits is contained in BC Hydro’s Supplemental F2006 Call Evidence filed on July 8, 2005 with the BCUC under the 2005 REAP proceeding (see item 13 of Exhibit C to the Direct Testimony of Mary Hemmingsen). The rationale largely states that the termination rights recognize that not all Projects will have secured all Material Permits at the time of EPA award. BC Hydro elected not to require Bidders to have all Material Permits prior to Tender submission in order to ensure a robust competition. The termination rights provide successful Bidders with some flexibility to terminate if Material Permits cannot be obtained while at the same time ensuring that the termination rights come at a price such that only Bidders that have sufficient confidence that their Projects will be permitted will participate in the CFT process.
March 7, 2006
61. The current BCTC studies with respect to our project contemplate a 24MW installation. We would like to bid a 25.2MW (nameplate) project, but will not do so if this will reduce the desirability of our bid from BC Hydro's perspective. Given that this (1) is a small discrepancy (5%) from the BCTC study, and (2) the project's output will be based on the monthly firm amounts included in the bid, could we get some assurance from BC Hydro in this regard before proceeding? We have read the previous responses to similar such questions, and would like some additional guidance from BCH as to whether this would be seen as a "material difference".
BC Hydro cannot provide any additional guidance on this issue. The materiality of any discrepancy between the tendered Plant Capacity and the F2006 CFT Preliminary Interconnection Study Application can only be assessed after the Tenders have been submitted.
60. Section 15.2 (a) of the EPA gives the Seller the right to terminate the EPA if: " the Seller, after using commercially reasonable efforts, has failed to obtain all Material Permits on terms satisfactory to the Seller acting reasonably, " within 18 months of the Guaranteed COD. As you are aware, the definition of "Material Permits" does not include the defined term "Permits" so that the lack of a building permit, for example, would not permit the "Seller" to terminate. The definition of "Permits" on the other hand does include "Material Permits". Would BC Hydro be prepared to delete the word "Material" where it appears before Permits so that it is a lack of "Permits" that gives the Seller the right to terminate? In addition, could consideration be given to reducing the time period to 365 days to correspond with the Buyer’s right to terminate in section 15.1 of the EPA in order to give the Seller an additional six months to obtain its Permits?
BC Hydro does not intend to amend Section 15.2 (a) of the Large Project EPA with respect to the reference to "Material Permits" as described in the Question. Further, with respect to Seller’s right to terminate the EPA due to a failure to obtain all Material Permits "on or before the date that is 545 days before the Guaranteed COD", BC Hydro does not intend to reduce the prescribed number of days. Please note that during the design phase of the CFT, BC Hydro provided more time for Bidders to obtain Material Permits by amending the trigger date for termination by the Seller from 32 months before Guaranteed COD to 18 months (or 545 days) before Guaranteed COD.
59. We are submitting two Under 10 MW projects into the F2006 Call for Power. These projects will be submitted into the Under 10 MW Call. These two projects are clustered and share the same new 69 kV transmission line. As these two projects share the same new transmission line, we assume they should be submitted together (i.e. Single Tender for both < 10 MW Projects)?
These Projects do not necessarily have to be submitted as a single Tender. Section 11 of the CFT (see page 9) summarizes the options for tendering Projects, multiple Projects and multiple generating units. Bidders should note the definition of a "Project" in the CFT Glossary. Bidders should also note the requirement for BC Hydro’s consent to tender multiple generating units with a common point of interconnection and delivery under separate Tenders (see "Multiple Generating Units – Separate Projects" within section 11 of the CFT).
58. If a Bidder cautiously bid a low Monthly Firm Energy Amount, it will dramatically increase its exposure to the Mid-C Price @ 70% discount as its Monthly Non-Firm Energy Amount will be limited to the Monthly Firm Energy Amount. Example: If a bidder decides to bid 30% of Long Term Average energy as its Monthly Firm Energy Amount to avoid LDs, its Monthly Non-Firm Energy Amount will be limited to 30% of LTA, being exposed to Mid-C @ 70% discount for 40% of its LTA. What is the rationale for such pricing structure?
The rationale for the pricing structure for Large Projects can be found in BC Hydro’s Supplemental F2006 Call Evidence filed on July 8, 2005 with the BCUC (see item 9 of Exhibit C to the Direct Testimony of Mary Hemmingsen). As noted in the referenced testimony, even though the F2006 Call targets the acquisition of firm energy from Large Projects, "BC Hydro is prepared to accept and pay for associated non-firm energy in order to ensure that a sufficient number of projects can compete in the CFT". Furthermore, "offering a fixed pricing structure for the first tier of non-firm pricing provides bidders with a higher level of revenue certainty so that they can bid in a cost-effective firm energy price".
March 3, 2006
57. For e-mails sent from BCH to the designated contact person, could we please have a second person copied on all e-mails.
In order to keep communications manageable, BC Hydro will only communicate with the Contact Person designated by Bidders. Thus, BC Hydro does not intend to copy additional individuals on its emails to Bidders. Bidders seeking broader distribution of CFT-related emails from BC Hydro should ensure that their designated Contact Person shares such information with other interested persons (e.g. by configuring their systems to automatically forward emails received from firstname.lastname@example.org).
56. The EPA provides for a Monthly Firm Energy Amount. LDs are payable if less than 90% of the Monthly Firm Energy Amount is delivered in any particular month. With hydro projects, the risk of incurring LDs for a delivery shortfall because of reduced water flows in any particular month is significant and will need to be accommodated in a higher Bid Price. If LDs were only charged on delivery shortfalls on a yearly rather than monthly basis, the risk to a hydro proponent would be much less and would allow for a lower Bid Price. What is the rationale for not allowing for delivery shortfall LDs being calculated on a yearly amount?
During the design of the F2006 Call, BC Hydro considered comments from various stakeholders regarding the Liquidated Damages ("LDs") provisions contained in the Large Project EPA. LDs are required because of BC Hydro's need for firm energy based on hourly or monthly deliveries. Allowing LDs to be calculated on a yearly basis would weaken the LD provisions which are designed to ensure that Sellers fulfil their commitment to deliver firm energy on an hourly or monthly basis.
By capping the LDs for delivery shortfalls using a mid-C price of $100/MWh, BC believes that it has provided for reasonable risk sharing and a liability limitation which will result in reduced Bid Prices. To further reduce the risk for successful Bidders, as part of the negotiated settlement for the 2005 REAP, BC Hydro committed to allow greater tolerances (i.e. 10% buffer) for firm energy deliveries before LDs are triggered.
March 2, 2006
55. Is it possible for a Bidder Contact Person to designate one or two alternates in the event that the Bidder Contact Person is indisposed for any reason? I will be out of the country for the next 10 days and I would like to designate one or two alternates.
As per section 6 of the CFT, "all communications from a Bidder to BC Hydro should come from the Bidder's Contact Person designated in its Bidder Registration Form, or as changed by subsequent notice to BC Hydro". As a result, Bidders are welcome to change the Bidder's Contact Person if necessary. Given that there can be only one Bidder's Contact Person; no "alternates" can be designated.
54. Paragraph 13.3 of the CFT Document indicates that the bidder has until 45 days prior to Tender Closing Time in order to make changes to the awarded EPA. The is also a Q&A regarding changes that happen prior to this date. The practicality of financing and commercial organization dictates that the final entity that holds the assets may not be the entity that owns them as at the time 45 days prior to the Tender Closing Time, even though the bidder may still be the major holder of the shares or general partner. This was the case in previous projects. Does section 13.3 preclude any change after 45 days prior, though the ultimate beneficial ownership may remain with the bidder? Can there be changes after the EPA is awarded as was the case in the past calls as long as the change does not materially change the nature and character of the plant and its ownership (i.e. from the bidder to a holding company or partnership to facilitate a financing arrangement). Currently there has not been any such change to the ownership for our bid, but if it is like our other project we are anticipating that there would be a similar change in the corporate structure.
Section 13.3 of the CFT deals with Project-specific changes to the prescribed form of EPA which are intended to accommodate Bidders' technology and operating scenarios. Section 7 of the CFT applies to changes in ownership structure whereby a Bidder can assign its registration to an Affiliate by submitting a revised Bidder Registration Form at any time prior to Tender Closing Time. Bidders should consider carefully the definitions of "Affiliate" and "Control" in the CFT Glossary to ensure compliance with the assignment requirements. Bidders are encouraged to give early notification of assignment so that any deficiencies in the assignment information can be identified and rectified prior to the Tender Closing Time.
Following the execution of an EPA, the Seller may assign or dispose of its interest in the EPA to an Affiliate, a Facility Lender, or a third party, in accordance with section 16 of the Large Project EPA and section 15 of the Small Project EPA. For Large Projects, BC Hydro's consent is required unless the Seller is assigning to an Affiliate. For Small Projects, BC Hydro's consent is required for all assignments.
53. I know that BCHYDRO has agreed to pay the costs of Terrachoice, but they sent me a recent application form and I have to commit BCHYDRO to paying a 0.6% royalty on ongoing sales. While not a huge amount, it does seem high, and do I have the Buyers permission to enter into an agreement such as this that binds you for payments…
As per section 11 of the CFT (see the "Green Projects" bullet), "if a Bidder tenders Green Attributes to BC Hydro, then under the EPA, BC Hydro will pay certain certification costs to obtain and maintain EcoLogoM Certification as set out in the EPA". Details of the associated fees payable by BC Hydro are contained in the prescribed EPA forms, namely, Appendix 10, Part B, section 7A.7 for the Large Project EPA and Appendix 9, Part A, section 7A.7 for the Small Project EPA. Accordingly, the Seller is responsible for obtaining EcoLogoM Certification and BC Hydro will provide reimbursement of all associated certification, licensing and audit fees as long as the Seller's Plant qualifies as a Green Project.
February 27, 2006
52. There is a requirement in the CFT submission document to have all documents submitted as double sided. We have many studies done and delivered that are single sided. Are the studies exempt from this requirement?
BC Hydro is encouraging Bidders to submit their Project Submissions, including any Exhibits, using double sided text.
February 22, 2006
51. The size of our proposed project has been reduced from 20 MW to 15 MW based on the bankable hydrology studies that have recently been updated. However, the current BCTC interconnection studies on the project are based on a 20 MW installation. BCTC has informed us that reducing the size of the project from 20 MW to 15 MW will not affect their studies (i.e. if anything the interconnection costs could be slightly lower). Is it acceptable to BC Hydro for our company to submit a 15 MW project for this project, with BCTC studies for a 20 MW installation? BCTC did not see a problem with this, but wanted us to confirm this fact with BC Hydro.
There is no prohibition on tendering a different-sized Project than contemplated in your F2006 CFT Preliminary Interconnection Study Application. As noted is section 15.2 of the CFT, once the Tender is received, BC Hydro will determine if the Project data differences have a material impact on the study results. Also, please see the response to Question 47.
50. Section 13.4 of the CFT requires the Performance Security in the form of a letter of credit. Is it possible for the Performance Security to take the form of a guarantee with a creditworthy and highly rated company?
Section 13.4 of the Large Project EPA stipulates that the "Seller shall maintain the Performance Security in the form of a letter of credit". The reference to "such other form as agreed to by the Buyer" means that the letter of credit does not need to conform to the sample form contained in Appendix 6 of the Large Project EPA but it still must be a letter of credit. Given that a corporate guarantee does not constitute a letter of credit, it cannot be used for Performance Security purposes.