AGREEMENT NO. 2 ADDRESSING RENEWABLE ENERGY PRICING ISSUES
BETWEEN
HEBER GEOTHERMAL COMPANY
QFID NO. 3001
AND
SOUTHERN CALIFORNIA EDISON COMPANY
1. PARTIES.
The Parties to this Agreement No. 2 Addressing Renewable Energy Pricing Issues
("Agreement") are HEBER GEOTHERMAL COMPANY, a California general partnership,
("SELLER"), and Southern California Edison Company ("EDISON"), a California
corporation. EDISON and SELLER are hereinafter sometimes referred to
individually as a "Party" and jointly as the "Parties."
2. RECITALS.
This Agreement is entered into between the Parties with reference to the
following facts:
2.1 On August 26, 1983, HEBER GEOTHERMAL COMPANY's predecessor and EDISON
executed a power purchase agreement (the "Contract"), which establishes, among
other things, the terms and conditions pursuant to which EDISON purchases
electric power from SELLER and SELLER sells electric power to EDISON. The power
purchase agreement, together with all amendments is collectively referred to as
the "Contract."
2.2 On or about December 7, 2005, EDISON consented to an assignment of the
Contract to SELLER and such assignment was made.
2.3 Among other things, the Contract provides that EDISON will pay SELLER for
energy delivered by SELLER to EDISON in accordance with the short run avoided
cost ("SRAC") methodology established from time to time by the California Public
Utilities Commission ("Commission") for energy payments by EDISON to qualifying
facilities ("QFs").
2.4 On June 19, 2001 the Parties entered into an Agreement Re Renewable Pricing
and Payment Issues. On November 30, 2001, the Parties entered into Amendment No.
1 to the Agreement Re Renewable Pricing and Payment Issues. The Agreement Re
Renewable Pricing and Payment Issues and Amendment No. 1 to Agreement Re
Renewable Pricing and Payment Issues are collectively referred to as the
"Renewable Fixed Price Agreement."
2.5 The Renewable Fixed Price Agreement provides, among other things, that,
notwithstanding anything in the Contract to the contrary, the SRAC for energy
delivered to EDISON by SELLER for a period of five (5) years commencing May
1, 2002 (the "Initial Fixed Rate Period"), shall be a "fixed" price of 5.37
cents/kWh (the "Initial Fixed Rate") adjusted by Time-of-Delivery ("XXX")
factors set forth in EDISON's Time-of-
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Use rate schedule "TOU-8," in lieu of payments based upon the
Commission-approved SRAC methodology.
2.6 The Parties dispute the manner in which the Commission-approved SRAC
methodology should be implemented and applied, and/or whether any new fixed
energy rate should be approved, for energy deliveries under the Contract after
the expiration of the Initial Fixed Rate Period. These issues are currently
being litigated by EDISON at the Commission in Rulemaking ("R.") 00-00-000 and
R.00-00-000.
2.7 The Parties have agreed, subject to Commission Approval (as defined herein),
upon New Fixed Rates (as defined herein) to be paid to SELLER for energy
deliveries under the Contract during the New Fixed Rate Period (as defined
herein) and upon certain other terms and conditions related to their agreement
upon the New Fixed Rates and/or to be applicable during the New Fixed Rate
Period.
3. AGREEMENT.
In consideration of the promises, mutual covenants and agreements hereinafter
set forth, the Parties hereby agree to the following:
3.1 EFFECTIVE DATE.
Except for the provisions the effectiveness of which is expressly conditioned
upon Commission Approval (as defined below), this Agreement shall become
effective on the date that it has been executed by duly authorized
representatives of each of the Parties.
3.2 ENERGY PRICING DURING NEW FIXED RATE PERIOD.
3.2.1 NEW FIXED RATES.
Subject to Commission Approval (as defined below), notwithstanding any provision
of the Contract to the contrary, commencing on May 1, 2007, and for a five (5)
year period thereafter ("New Fixed Rate Period"), SELLER hereby elects, and
EDISON agrees, that the price for energy delivered to EDISON by SELLER during
the New Fixed Rate Period, shall be the prices ("New Fixed Rates") set forth in
the table below, in lieu of the prices resulting from application of the
Commission-approved SRAC methodology; provided, however, that if the Contract
terminates in accordance with its own terms, or for any other lawful reason,
prior to the end of the New Fixed Rate Period, then the New Fixed Rate Period
shall likewise terminate; and provided further, however, that to the extent
SELLER's solar thermal facility augments its energy input with natural gas or
other clean burning alternative fuel, and with respect only to the deliveries
from such facility that would, in the absence of this Agreement, be paid
pursuant to the Commission-approved SRAC methodology, 75% of the energy price
shall be set during the New Fixed Rate Period at the applicable New Fixed Rate
and 25% of the energy price shall be calculated according to the
Commission-approved SRAC methodology applicable at the time (the "Blended Solar
Rates"). During the New Fixed Rate Period, the New Fixed Rates, or, in the case
of solar thermal projects as provided above, the Blended Solar Rates, shall be
adjusted by Time-of-Delivery ("XXX") factors set forth in EDISON's
Time-of-Use rate schedule "TOU-8." The New Fixed Rates payable during the New
Fixed Rate Period are as follows:
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NEW FIXED RATE (CENTS/KWH)
PAYABLE FOR ENERGY
DELIVERIES DURING APPLICABLE
ENERGY DELIVERY PERIOD ENERGY DELIVERY PERIOD
---------------------- ----------------------------
May 1, 2007 - April 30, 2008 6.1500
May 1, 2008 - April 30, 2009 6.2115
May 1, 2009 - April 30, 2010 6.2736
May 1, 2010 - April 30, 2011 6.3364
May 1, 2011 - April 30, 2012 6.3997
Commencing on May 1, 2012, the SARC price payable to SELLER shall, for any
remaining term of the Contract, be established in accordance with the
Commission-approved SRAC methodology, XXX factors and any energy loss
adjustment factor then in effect.
3.2.2 ENERGY LOSS ADJUSTMENT FACTOR.
Unless otherwise specifically provided in the Contract, during the New Fixed
Rate Period, the energy loss adjustment factor ("ELAF") applicable to energy
deliveries made to EDISON by SELLER will be 1.0.
3.3 RELATIONSHIP TO COMMISSION SRAC PROCEEDING.
Effective upon Commission Approval (as defined below), the Parties forever
relinquish any rights or claims to pay or to be paid for energy deliveries
during the New Fixed Rate Period based upon terms or a rate of payment other
than those set forth in this Agreement. The Parties further agree not to seek to
enforce any order by the Commission or any court or governmental agency having
jurisdiction that establishes terms or a rate of payment for energy deliveries
during the New Fixed Rate Period other than those that set forth in this
Agreement.
3.4 ENVIRONMENTAL ATTRIBUTES, CAPACITY ATTRIBUTES AND RESOURCE ADEQUACY
BENEFITS.
3.4.1 SELLER'S EXCLUSIVE CONVEYANCE TO EDISON OF ENVIRONMENTAL ATTRIBUTES,
CAPACITY ATTRIBUTES AND RESOURCE ADEQUACY BENEFITS.
Subject to Commission Approval (as defined below), SELLER shall dedicate and
convey all Environmental Attributes, Capacity Attributes and Resource Adequacy
Benefits generated or produced by SELLER during the New Fixed Rate Period to
EDISON and EDISON shall be given sole title during the New Fixed Rate Period to
all such Capacity Attributes, Environmental Attributes and Resource Adequacy
Benefits. SELLER has not and will not convey to any person or entity other than
EDISON any Environmental
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Attributes, Capacity Attributes and Resource Adequacy Benefits associated with
the output from SELLER'S generating facility throughout the New Fixed Rate
Period.
SELLER shall use commercially reasonable efforts to take all actions and execute
all documents or instruments necessary (or to support EDISON's efforts) such
that, upon the commencement of the New Fixed Rate Period and continuing until
the end of the New Fixed Rate Period: (i) SELLER's generating facility is
certified by the California Energy Commission ("CEC") as an Eligible Renewable
Energy Resource ("ERR") for purposes of the RPS Legislation; and (ii) all
electrical output delivered to Edison from the generating facility is certified
by the CEC as an ERR for purposes of the RPS Legislation.
In addition, SELLER shall take all actions and execute all documents or
instruments necessary to effectuate the use of the Resource Adequacy Benefits
associated with SELLER's generating facility for Edison's sole benefit
throughout the Fixed Rate Period.
Such actions shall include, without limitation:
Cooperating with and encouraging the regional entity responsible for
resource adequacy administration to certify or qualify the generating
facility capacity for resource adequacy purposes;
Testing the generating facility in order to certify the generating facility
capacity for resource adequacy purposes; and
Committing to EDISON the generating facility capacity.
SELLER grants EDISON exclusive right, at any time or from time-to-time during
the Fixed Rate Period, to sell, assign, convey, transfer, allocate, designate,
award, report or otherwise provide any and all such Environmental Attributes,
Capacity Attributes and Resource Adequacy Benefits to third parties.
The inclusion in this Agreement of this Section 3.4 shall not be interpreted to
support any Parties' position with respect to the ownership, or lack thereof, of
Environmental Attributes, Capacity Attributes or Resource Adequacy Benefits
associated with SELLER's generating facility and the electrical output of such
generating facility under the Contract during periods other than the New Fixed
Rate Period. The Parties expressly reserve their respective positions with
respect to the ownership of Environmental Attributes, Capacity Attributes or
Resource Adequacy Benefits associated with SELLER's generating facility and the
electrical output of such generating facility under the Contract during periods
other than the New Fixed Rate Period.
3.4.2 DEFINITIONS.
For purposes of this Agreement, the following terms shall have the following
meanings:
"Environmental Attributes" means any and all credits, benefits, emissions
reductions, offsets, and allowances, howsoever entitled, attributable to
the generation from SELLER's generating facility and its displacement of
conventional electric energy generation. Environmental Attributes include
but are not limited to (i) any avoided emissions of pollutants to the air,
soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx),
carbon monoxide (CO) and other pollutants; (ii) any avoided emissions of
carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs)
that have been determined by the United
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Nations Intergovernmental Panel on Climate Change to contribute to the
actual or potential threat of altering the Earth's climate by trapping heat
in the atmosphere; and (iii) the reporting rights to these avoided
emissions, such as Green Tag Reporting Rights. Green Tag Reporting Rights
are the right of a Green Tag Purchaser to report the ownership of
accumulated Green Tags in compliance with federal or state law, if
applicable, and to a federal or state agency or any other party at the
Green Tag Purchaser's discretion, and include, without limitation those
Green Tag Reporting Rights accruing under Section 1605(b) of The Energy
Policy Act of 1992 and any present or future federal, state, or local law,
regulation or xxxx, and international or foreign emissions trading program.
Green Tags are accumulated on a kWh basis and one Green Tag represents the
Environmental Attributes associated with one (1) MWh of electric energy.
Environmental Attributes do not include (i) any electric energy, capacity,
reliability or other power attributes from SELLER's generating facility,
(ii) production tax credits associated with the construction or operation
of SELLER's generating facility and other financial incentives in the form
of credits, reductions, or allowances associated with SELLER's generating
facility that are applicable to a state or federal income taxation
obligation, (iii) fuel-related subsidies or 'tipping fees' that may be paid
to SELLER to accept certain fuels, or local subsidies received by the
SELLER for the destruction of particular pre-existing pollutants or the
promotion of local environmental benefits, or (iv) emission reduction
credits encumbered or used by SELLER's generating facility for compliance
with local, state, or federal operating and/or air quality permits. If
SELLER's generating facility is a biomass or landfill gas facility and
SELLER receives any tradable Environmental Attributes based on the
greenhouse gas reduction benefits or other emission offsets attributed to
its fuel usage, it shall provide EDISON with sufficient Environmental
Attributes to ensure that there are zero net emissions associated with the
production of electricity from such facility.
"ERR" means an eligible renewable energy resource for purposes of the RPS
Legislation.
"Capacity Attributes" means any and all current or future defined
characteristics certificates, tag, credits, ancillary service attributes,
or accounting constructs, howsoever entitled, including any accounting
construct counted toward any resource adequacy requirements, attributed to
or associated with SELLER's generating facility or any unit of generating
capacity of the generating facility during the New Fixed Rate Period.
"Resource Adequacy Benefits" means the rights and privileges attached to
any generating resource that satisfies any entity's resource adequacy
obligations, as those obligations are set forth in any Resource Adequacy
Rulings.
"Resource Adequacy Rulings" means Commission Decisions 00-00-000, 00-00-000
and any subsequent Commission ruling or decision, or any other resource
adequacy laws, rules or regulations enacted, adopted or promulgated by any
applicable governmental authority, as such decisions, rulings, laws, rules
or regulations may be amended or modified from time to time during the New
Fixed Rate Period.
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"RPS Legislation" means the State of California Renewable Portfolio
Standard Program, as codified at California Public Utilities Code Section
399.11 et seq. or any successor to this legislation.
4. OTHER TERMS AND CONDITIONS.
4.1 COMMISSION APPROVAL.
Sections 3.2.1, 3.2.2, 3.3, 3.4.1 and 3.4.2 of this Agreement, or, in the
alternative, of any form agreement upon which this Agreement is based if EDISON
submits that form instead to the Commission, are subject to Commission Approval
as to reasonableness for purposes of rate recovery by EDISON, and shall not
become effective until Commission Approval has been obtained or waived by
EDISON, as provided herein. "Commission Approval," as used in this Agreement,
shall mean that the Commission has issued a final decision, no longer subject to
appeal, approving this Agreement or the standardized form, as appropriate,
without condition or modification unacceptable to the Parties, and containing
findings to the effect that: (i) this Agreement (or the standardized form) and
EDISON's entry into this Agreement (or any agreement based substantially on the
standardized form) are reasonable and prudent for all purposes, including, but
not limited to, recovery of all payments made pursuant hereto in rates, subject
only to review with respect to the reasonableness of EDISON's future
administration of the Contract and this Agreement, and (ii) the terms of this
Agreement shall be in lieu of and replace in their entirety such orders as the
Commission may have previously issued or may hereafter issue that either require
EDISON to make any payments to SELLER for energy deliveries during the New Fixed
Rate Period that are different from or are in addition to the payment
obligations established by this Agreement, EDISON shall file with the Commission
the appropriate request for approval of this Agreement or the standardized form,
as appropriate, and seek such approval expeditiously. SELLER shall use
reasonable efforts in cooperation with EDISON for the purpose of obtaining
Commission Approval.
4.2 WAIVER OF COMMISSION APPROVAL.
In its sole discretion, EDISON may waive Commission Approval as to all or any
individual aspect of this Agreement requiring Commission Approval at any time by
giving notice of such waiver in writing to SELLER.
4.3 EFFECT ON CONTRACT.
Except as expressly provided herein, all provisions of the Contract, including
but not limited to the capacity payment provisions, shall remain in effect and
unchanged and shall not be affected by the terms and conditions of this
Agreement. Nothing herein shall be read to extend the term of the Contract.
4.4 NO WAIVER.
None of the provisions of this Agreement, including this paragraph, shall be
considered waived by either Party unless such waiver is given in writing. The
failure of either Party to insist in any one or more instances upon strict
performance of any of the provisions of this Agreement or to take advantage of
any of its rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights for the future, but the same
shall continue and remain in full force and effect.
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4.5 FURTHER AGREEMENTS.
This Agreement shall not be amended, changed, modified, abrogated or superseded
by a subsequent agreement unless such subsequent agreement is in the form of a
written instrument signed by the Parties.
4.6 ENTIRE AGREEMENT.
Subject to the provisions of Section 4.3 hereof, this Agreement constitutes the
entire agreement of the Parties and supersedes any and all prior negotiations,
correspondence, undertakings, and agreements between the Parties concerning the
subject matter of this Agreement.
4.7 SUCCESSOR AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and assigns.
4.8 CONSTRUCTION.
This Agreement is the result of negotiation and each Party has participated in
the preparation of this Agreement. Accordingly, any rules of construction to the
effect that an ambiguity is to be resolved against the drafting Party shall not
be employed in the interpretation of this Agreement. Furthermore, the underlined
headings used in this Agreement are for reference purposes only and do not
themselves constitute any of the terms of this Agreement.
4.9 GOVERNING LAW.
This Agreement shall be interpreted, governed, and construed under the laws of
the State of California as if executed and to be performed wholly within the
State of California.
4.10 NO PRECEDENT; USE IN LITIGATION.
Each Party agrees that this Agreement arises from unique facts and circumstances
and, as such, the various provisions of this Agreement, such as, but not limited
to, the New Fixed Rates shall not be used as evidence, or the basis for
disputing the validity or appropriateness of such rates, or for determination of
avoided costs before the Commission, the Federal Energy Regulatory Commission or
any court or other judicial or quasi-judicial body, and nothing herein may be
used as an admission against any Party. Neither Party will introduce or
otherwise use this Agreement or any of its terms or conditions in any judicial
or administrative proceeding or to influence any governmental action, other than
for the purpose of enforcing the terms and conditions of this Agreement.
4.11 AUTHORIZED SIGNATURES; NOTICES.
Each Party represents and warrants that the person who signs below on behalf of
that Party has authority to execute this Agreement on behalf of such Party and
to bind such Party to this Agreement. All notices given under this Agreement
shall be in writing and shall be effective on the same day if delivered by
personal delivery or facsimile transmission, one day after sending if delivered
by overnight delivery service, or five days after sending if delivered by first
class U.S. mail. Notices shall be directed to the individual or individuals who
are designated to receive notices under the Contract.
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4.12 TERMINATION.
This Agreement shall terminate automatically in its entirety two hundred and ten
(210) days from the date on which this Agreement has been executed by the
Parties if Commission Approval, as defined in Section 4.1 of the Agreement, has
not been obtained or waived by EDISON. However, the entirety of Section 4.10
shall survive any termination of this Agreement.
4.13 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original document and which together shall constitute a single
instrument.
HEBER GEOTHERMAL COMPANY
a California general partnership
By: /s/ Xxxx Xxxxx
---------------------------------
Name: Xxxx Xxxxx
Title: AUTHORIZED REPRESENTATIVE
Date: May 10, 0000
XXXXXXXX XXXXXXXXXX EDISON COMPANY,
a California corporation
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx
Senior Vice President, Power
Procurement
Date: 5/10/2006
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