Procurement Presentation

Power Procurement

by

Nick Nichols

PhilRECA Board of directorsOctober 16, 2008

What ECs Pay NPC For

Power Out of the Generator

Cor. Agham Rd. and Quezon Ave. And

Let’s first put some things in perspective.We pay for that complex in Diliman, and all the stuff that goes on inside - as well as pay for the cost of power from the IPPs or the costs of owning and operating the NPC generationSo what goes on inside NPC? ...

What ECs Pay NPC For

Planning Procurement

ContractManagement

Dispatch Services

Power Out of the Generator

Well, it’s Planning, Procurement, Contract Management, and Dispatch services (i.e. participating in WESM).

What ECs Pay IPP For

Power Out of the Generator

The IPPs aren’t going to do your planning and procurement for you ... unless you pay them to do it.

What ECs Have to Do

Planning Procurement

ContractManagement

WESM Participation & Dispatch

These are also the things that make sense to do on a joint-action basis. Sharing the costs and resources is one reason. Achieving market power (having a larger market footprint) is another. Expanding your portfolio options is yet another (some projects just won’t fit a single EC).

Planning

Prepare Outlooks & Forecasts

Supply Portfolio Determination

Leads to a Procurement

Outlooks & Forecasts go beyond forecasting load. It’s understanding market prices and supply options. They are required to figure out what you want (i.e. the portfolio determination). Can’t do procurement unless you know what you want to procure & when.

Procurement

Prepare & Manage Solicitations Evaluate

Negotiations Regulatory Approvals

LEGAL

Procurement involves a lot of things. The Evaluation includes understanding just what uncertainties (pricing and availability) you are exposing your customers to.

But Don’t Forget

Planning Procurement

ContractManagement

WESM Participation & Dispatch

You have to do all of these

Don’t forget “Procurement” is just one aspect of what you will need to be doing in order to get ... -->

... To Get This

Power Out of the Generator

What We Did on Panay

Formed a Consortium via MOU

First

To share the costs of consultant. Identify point team (Consortium Board) for addressing issues, interface with IPPs. (Limited tech assistance from NRECA in preparatory phase.)

What We Did on Panay

Assessed aggregated load requirements

Assessed extent to which existing resources and contracts would serve those requirements

Determined exposure to market

Estimated impact of that exposure

Portfolio Needs

Indicative

Some Peaking. Huge Base load and Intermediate load Exposure to market.

What We Did on Panay

Within Consortium, Keep Transparency High

Get Consensus Every Step

‣RFO Design‣Schedules‣Bidder Interactions‣Evaluations & Short Lists

Used simple, fundamental objectives to guide bidders:

1. Approximately 90 MW of Base & Intermediate Requirements

2. Start in January 20113. Looking for long-term contract

RFO Basis

Pricing structures up to bidder. One requirement is that bidder must be willing stick to fundamentals of offer during negotiations for ESA. Set up web site for disseminating information re RFO and handling Q&A.

RFO Basis

Estimated each ECs share of 90 MW

Consortium would negotiate the ECA as agent

for all ECs

ECA would be a bi-lateral with each EC

RFO Basis

Let The Competition Sort It Out

Then ...

Process

• Do the Planning

‣ Identify market exposure

‣ Identify what you want to procure

First ...

Process

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

• Establish Public* Website and eMail Box for Bidder Communication

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

• Establish Public* Website and eMail Box for Bidder Communication

• Prepare Data CD*

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

• Establish Public* Website and eMail Box for Bidder Communication

• Prepare Data CD*

• Announce & Release RFO

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

• Establish Public* Website and eMail Box for Bidder Communication

• Prepare Data CD*

• Announce & Release RFO

• Hold Bidders Conference

* = Items we didn’t do in Panay process.

Process

• Prepare and vet the RFO

• Prepare Your Model ESA*

• Establish Public* Website and eMail Box for Bidder Communication

• Prepare Data CD*

• Announce & Release RFO

• Hold Bidders Conference

• Respond to Bidder Q&A* = Items we didn’t do in Panay process.

• Market Valuation

• Market Value = Benefits - Costs

‣ Benefits = Capacity, Energy, A/S

‣ Costs Include Credit Enhancements, Transmission, A/S, as well as Price

• LRAC

Quantitative

• Portfolio Fit

• Proponent’s Credit Capability

• Proponent Team Qualifications

• Project Viability

• Technology Reliability

• Non-price Terms & Conditions

Qualitative

ContractManagement

WESM Participation & Dispatch

Procurement Process

Don’t forget “Procurement” is just one aspect of what you will need to be doing in order to get ... -->

Also Don’t Forget

Planning Procurement

ContractManagement

WESM Participation & Dispatch

You Need To Get Cost

Recovery For All of This!

It’s Not in the ERC Benchmarks