Common use of Cover Sheet Clause in Contracts

Cover Sheet. The cover sheet provides spaces for the parties to fill in identity and contact information, and make certain elections concerning certain provisions in the contract for which choices are available. For example, the parties can choose to have regular monthly invoicing, which they may consider appropriate for a back-and-forth, traditional trading relationship in RECs, or to have payment on delivery, which they may consider appropriate for use with a single project entity that is delivering RECs as generated. The parties may also choose to require prepayment in advance of delivery. Finally, the parties can choose semiannual payments, which may be appropriate for small projects generating a long-term stream of RECs. Such elections can be varied for any particular transaction by so stating on the Product Order, or for the whole contract by adding additional terms. Using the cover sheet, parties can elect to make certain credit terms applicable to their dealings. If that option is selected, turn to the portion of the cover sheet on which credit elections are made and choose which, if any, entity provides financial reports, and whether or not to provide credit assurances or margining during the course of performance of the contract. Since the creditworthiness of a party may change over time, the parties can elect not to provide performance assurance now, but to do so if the party’s financial condition deteriorates later, using the downgrade event option, although the parties will need to specify their own parameters for unrated entities. A collateral threshold would require the parties to post margin (generally this is cash) to each other should the open mark-to-market position from one party to the other reach above a certain level. If the parties do anticipate very active exchange of margin for large positions in volatile markets, they should consider the use of a collateral support annex, which sets forth in much greater detail the rules by which parties would exchange margin on a daily basis, such as those relating to the required timing of demands, transfers, returns and interest on deposits held. Options are also provided to enable margining, if elected, to hook into an existing EEI Master Power Purchase and Sale Agreement or ISDA Master Agreement with Credit Support Annex, if the parties have such an instrument in place between them. The parties can select the law that governs the contract. Although most trading counterparties elect to have their relationship governed by New York law, which is highly developed when it comes to trading contracts, there may be countervailing considerations, such as regulatory requirements, that would lead the parties to elect the law of a different jurisdiction, such as the State of a particular compliance markets. In such event, please note Article 8. Several different dispute resolution mechanisms are provided; none need to be selected, but a party that does select any is waiving rights, and so should be quite sure, after consultation with counsel, that the mechanism selected will work in accordance with your expectations. Although the Disclosure Document may look complicated at first glance, it is actually straightforward and a compact method of presenting and preserving important information. A particular quantity of renewable energy generation includes a variety of avoided emissions and other environmental impacts that are unknown in magnitude until measured. The standard REC product includes all these attributes intact and together. However, one can measure and verify a component, for example avoided carbon dioxide (CO2) emissions. The contract when used with the Disclosure Document sets forth optional mechanics permitting component verification and disaggregation. If sticks are identified in the REC bundle and verified to unlock their potential value, different buyers may attribute different values to the various sticks and the bundle, and the agreement is designed to maximize the ability of these components to find their highest bidder through full and accurate disclosure. The parties are free to abstain but, should they choose to disaggregate, they can generate a fully disclosing transaction record by using the Disclosure Document. The Disclosure Document sets forth information about the REC to be passed on to future buyers of the REC; Part A of the Product Order with Disclosure Document (Exhibit A) contains information about the terms of sale of the REC that is not required to be passed on. The example Product Order without Disclosure Document is a form currently widely used in RECs markets; the drafters wanted to be sure to provide the market place tools with which it is familiar, while at the same time providing tools to assist in the development of a unified RECs marketplace. The contract envisions many moving parts that can interlock, depending on the requirements of Applicable Programs. Since compliance programs are still very much in development, the contract is intended to provide moveable, interlocking parts for future program designers. Certification Authority, Delivery, and Verification Provider are three separate concepts. A Certification Authority certifies the existence of a REC. Verification relates to proof of claims, by a disclosed Verification Methodology used by the Verification Provider, of the characteristics of the Environmental Attributes of the REC. The contract lets parties select those parts they need for what they want to accomplish. Defining a Transaction through a Product Order, certification of a REC, and Delivery are the fundamental requirements for all Applicable Programs. The Certification Authority could be the Generation Information System, program administrator (if there is one), independent third party, or the seller itself through delivery of an Attestation, depending on what is required by the Applicable Program. Delivery transfers ownership of the REC from Seller to Buyer. Delivery of what the Certification Authority has certified is pursuant to the terms of the Applicable Program, and will vary by Applicable Program. For voluntary Applicable Programs, the parties may appoint the Seller as the Certification Authority, self-certifying the REC through what it states on the Attestation, and Delivering the REC by delivering the Attestation. Many regions have, or are developing, generation information systems that accurately record the generation from the applicable renewable resource and maintain accounts among which ownership of the resultant REC may be transferred. Verification of Environmental Attributes of the REC is an additional step; for example in connection with a future carbon-trading program into which RECs may be convertible upon verification. The Verification Provider applies a methodology to verify the REC or an aspect of the REC as Product, which verification, if required as part of a present or future Applicable Program, would give the Certification Authority what it needs to certify the Product. Absent that, specifying the Verification Provider and Verification Methodology is entirely optional. The parties can just do a simple Product Order without a Disclosure Document and then meet Delivery requirements of the Applicable Program. However, if it is used, the Disclosure Document thereafter “travels with the REC,” to be disclosed by a reseller, or the seller of a retained “stick” from the bundle. The drafters sought to provide flexibility and create a disclosure platform so Verification Methodologies, as they grew to be commonly used, could develop into marketplace standards. The verification option requires disclosing the who and the how, without mandating the who or the how, except to the extent required by the Applicable Program selected by the parties. This promotes disclosure and sets the stage for using market mechanisms to establish optimum verification methodologies as they become part of the landscape of REC markets.

Cover Sheet. The cover sheet provides spaces for the parties to fill in identity and contact information, and make certain elections concerning certain provisions in the contract for which choices are available. For example, the parties can choose to have regular monthly invoicing, which they may consider appropriate for a back-and-forth, traditional trading relationship in RECs, or to have payment on delivery, which they may consider appropriate for use with a single project entity that is delivering RECs as generated. The parties may also choose to require prepayment in advance of delivery. Finally, the parties can choose semiannual payments, which may be appropriate for small projects generating a long-term stream of RECs. Such elections can be varied for any particular transaction by so stating on the Product Order, or for the whole contract by adding additional terms. Using the cover sheet, parties can elect to make certain credit terms applicable to their dealings. If that option is selected, turn to the portion of the cover sheet on which credit elections are made and choose which, if any, entity provides financial reports, and whether or not to provide credit assurances or margining during the course of performance of the contract. Since the creditworthiness of a party may change over time, the parties can elect not to provide performance assurance now, but to do so if the party’s financial condition deteriorates later, using the downgrade event option, although the parties will need to specify their own parameters for unrated entities. A collateral threshold would require the parties to post margin (generally this is cash) to each other should the open markxxxx-to-market position from one party to the other reach above a certain level. If the parties do anticipate very active exchange of margin for large positions in volatile markets, they should consider the use of a collateral support annex, which sets forth in much greater detail the rules by which parties would exchange margin on a daily basis, such as those relating to the required timing of demands, transfers, returns and interest on deposits held. Options are also provided to enable margining, if elected, to hook into an existing EEI Master Power Purchase and Sale Agreement or ISDA Master Agreement with Credit Support Annex, if the parties have such an instrument in place between them. The parties can select the law that governs the contract. Although most trading counterparties elect to have their relationship governed by New York law, which is highly developed when it comes to trading contracts, there may be countervailing considerations, such as regulatory requirements, that would lead the parties to elect the law of a different jurisdiction, such as the State of a particular compliance markets. In such event, please note Article 8. Several different dispute resolution mechanisms are provided; none need to be selected, but a party that does select any is waiving rights, and so should be quite sure, after consultation with counsel, that the mechanism selected will work in accordance with your expectations. Although the Disclosure Document may look complicated at first glance, it is actually straightforward and a compact method of presenting and preserving important information. A particular quantity of renewable energy generation includes a variety of avoided emissions and other environmental impacts that are unknown in magnitude until measured. The standard REC product includes all these attributes intact and together. However, one can measure and verify a component, for example avoided carbon dioxide (CO2) emissions. The contract when used with the Disclosure Document sets forth optional mechanics permitting component verification and disaggregation. If sticks are identified in the REC bundle and verified to unlock their potential value, different buyers may attribute different values to the various sticks and the bundle, and the agreement is designed to maximize the ability of these components to find their highest bidder through full and accurate disclosure. The parties are free to abstain but, should they choose to disaggregate, they can generate a fully disclosing transaction record by using the Disclosure Document. The Disclosure Document sets forth information about the REC to be passed on to future buyers of the REC; Part A of the Product Order with Disclosure Document (Exhibit A) contains information about the terms of sale of the REC that is not required to be passed on. The example Product Order without Disclosure Document is a form currently widely used in RECs markets; the drafters wanted to be sure to provide the market place tools with which it is familiar, while at the same time providing tools to assist in the development of a unified RECs marketplace. The contract envisions many moving parts that can interlock, depending on the requirements of Applicable Programs. Since compliance programs are still very much in development, the contract is intended to provide moveable, interlocking parts for future program designers. Certification Authority, Delivery, and Verification Provider are three separate concepts. A Certification Authority certifies the existence of a REC. Verification relates to proof of claims, by a disclosed Verification Methodology used by the Verification Provider, of the characteristics of the Environmental Attributes of the REC. The contract lets parties select those parts they need for what they want to accomplish. Defining a Transaction through a Product Order, certification of a REC, and Delivery are the fundamental requirements for all Applicable Programs. The Certification Authority could be the Generation Information System, program administrator (if there is one), independent third party, or the seller itself through delivery of an Attestation, depending on what is required by the Applicable Program. Delivery transfers ownership of the REC from Seller to Buyer. Delivery of what the Certification Authority has certified is pursuant to the terms of the Applicable Program, and will vary by Applicable Program. For voluntary Applicable Programs, the parties may appoint the Seller as the Certification Authority, self-certifying the REC through what it states on the Attestation, and Delivering the REC by delivering the Attestation. Many regions have, or are developing, generation information systems that accurately record the generation from the applicable renewable resource and maintain accounts among which ownership of the resultant REC may be transferred. Verification of Environmental Attributes of the REC is an additional step; for example in connection with a future carbon-trading program into which RECs may be convertible upon verification. The Verification Provider applies a methodology to verify the REC or an aspect of the REC as Product, which verification, if required as part of a present or future Applicable Program, would give the Certification Authority what it needs to certify the Product. Absent that, specifying the Verification Provider and Verification Methodology is entirely optional. The parties can just do a simple Product Order without a Disclosure Document and then meet Delivery requirements of the Applicable Program. However, if it is used, the Disclosure Document thereafter “travels with the REC,” to be disclosed by a reseller, or the seller of a retained “stick” from the bundle. The drafters sought to provide flexibility and create a disclosure platform so Verification Methodologies, as they grew to be commonly used, could develop into marketplace standards. The verification option requires disclosing the who and the how, without mandating the who or the how, except to the extent required by the Applicable Program selected by the parties. This promotes disclosure and sets the stage for using market mechanisms to establish optimum verification methodologies as they become part of the landscape of REC markets.