ࡱ> ikj#` hbjbjmm 1l53a4(($$$8%T\%<(4%%%%%&&&14343434343434$5h08W49-&&--W4%%4111-%%141-1411:2,2%% _^$-2 4,4042 8#.@82828&(l1)$#+&&&W4W4c1j&&&4----((($L(((L((( SUBJECT TO CONFIDENTIAL TREATMENT UNTIL February 6, 2008 STATE OF MAINE PUBLIC UTILITIES COMMISSION January 24, 2008 CORRECTED Order Designating Standard Offer Provider and Directing Utility to Enter Entitlements Agreement MAINE PUBLIC UTILITIES COMMISSION Docket No. 2007-463 Standard Offer Bidding Process For Residential and Small Business Customers CENTRAL MAINE POWER COMPANY Docket No. 2007-471 Request for Approval of Request for Bids Pursuant to Chapter 307 and Associated Waivers ADAMS, Chairman; REISHUS and VAFIADES, Commissioner I. SUMMARY Through this Order, we designate Independence Power Marketing, LLC, (Independence) as a standard offer provider for the residential and small non-residential class in the Central fb88 Power Company (CMP) service territory. Independence is designated to provide standard offer service to 33% of the load for a one-year period beginning March1, 2008. The resulting overall price for standard offer service for the one-year period beginning March 1, 2008 will be $0.099739 per kilowatt-hour. The Independence standard offer bid was not linked to any bid to purchase of CMPs non-divested system contract entitlements to energy and capacity. The highest stand-alone bid for CMPs entitlements is Constellation Energy Commodities Group, Inc (Constellation). CMP is directed to sell these entitlements to Constellation for a one-year period beginning March 1, 2008, as specified in the Constellation stand-alone entitlement bid. II. BACKGROUND Pursuant to fb88s Restructuring Act, the Commission periodically administers a competitive bid process to select providers of standard offer service. 35-A M.R.S.A. 212(2). The Commission is also required by the Act to oversee the sale by utilities of the rights to energy and capacity from their non-divested entitlements and other non-divested generation-related assets. 35-A M.R.S.A. 3204(4). Since the standard offer service term beginning March 1, 2005, the Commission has segmented the standard offer load for the residential and small non-residential classes as a means to reduce the potential for large price swings. Thus, the Commission ultimately adopted a procurement schedule in which a supply for a third of the load is obtained each year pursuant to three-year arrangements. The Commission continued its practice of allowing bids for standard offer load to be linked to obtaining the output of utility non-divested entitlement contracts. In order to permit linked bids for each of the three segments of load, the Commission directed CMP to segment the sale of the output of non-divested entitlement contracts into pre-specified groups of entitlement contracts. As one 33% segment to serve standard offer load and CMPs resale of its system contracts entitlement expire on February 29, 2008, the Commission issued a RFP for 33% of CMPs small classes standard offer load on October 9, 2007. Order Approving Request for Standard Offer Bids, Docket No. 2007-463 (Oct. 9, 2007). On the same day, the Commission approved and CMP issued a RFP to re-sell its system contracts entitlement. Order Approving RFB and Granting Waivers, Docket No. 2007-526 (Oct. 9, 2007). In its October 9 RFP, the Commission decided to seek terms of service for less than three years. The Transition Period of the ISO-NE Forward Capacity Market (FCM) concludes on May 31, 2010. During the Transition Period, all listed ICAP resources will receive a monthly capacity payment based on a fixed payment rate that is adjusted for each Power Year. Because of the uncertainty of prices in the FCM after the Transition Period (the first auction of the FCM for capacity on and after June 1, 2010 has not yet occurred), the Commission decided not to seek bids that would extend service beyond the end of the Transition Period. Accordingly, the Commission sought bids for one and two year terms beginning on March 1, 2008. As directed by the Commission, CMP sought bids to purchase its system contracts entitlement for identical terms. Pursuant to the RFPs, indicative pricing was due on November 6, 2007. Based on the indicative pricing, a subset of bidders was selected for discussions on non-price items and such discussions have occurred among our staff, CMP and the selected bidders. Upon the conclusion of these discussions, bidders were requested to present final, binding bids on January 23, 2008. III. DISCUSSION We note at the outset that both the standard offer and entitlement sale bid processes were very competitive with the result being that standard offer prices and sale prices for utility entitlements have been established by a competitive market as contemplated by the Restructuring Act. As mentioned above, we asked for one-year and two-year bids. We decide to select bids for a one-year term rather than a two-year term. As a consequence of our decision to not seek three-year bids, we must seek bids for two-thirds of the small class standard offer load either next year or the year after. The Commission has appealed the FERCs decision to implement FCM payments during the Transition Period, and if we accept a two-year bid, we would lock in another year of standard offer prices that assume the Transition Period FCM prices and reduce the impact of a successful appeal. Furthermore, the world capital markets anticipate a softening of the United States and world economies in the coming months. Fossil fuel prices, including natural gas, have increased steadily for the past four years. Generally, fossil fuel prices tend to decline as the economy slows. For these two reasons, we decide that we should seek the larger portion of standard offer load one year rather than two years from now. Accordingly, we consider only one-year bids. Upon review of all the bids and the selection criteria in Chapter 301, we conclude that the Independence bid for standard offer service and the Constellation bid to purchase the system contracts entitlements provide the greatest value for ratepayers. Our selection of Independences bid requires further explanation. Another bidder bid an identical stand-alone bid of $0.09802 per kilowatt-hour. Chapter 301, 8(C)(3) provides that the Commission shall establish a reasonable means to determine the winning bidder when bids are identical. In this instance, before today the other bidder only indicated a willingness to submit a linked bid. Today, after inquires by our staff, the bidder indicated a willingness to commit to its standard offer load bid also on a stand-alone basis. However, because before today the other bidder was not prepared to submit a stand-alone bid, the bidder had not agreed to amended versions of the SOP Agreement with CMP. Because of this lack of finalized documents, we designate the bidder who had agreed to all the non-standard document forms as necessary to consider its bid before bid submission. We, therefore, designate Independence as the standard offer provider for 33% of the CMP residential and small non-residential classes for a one-year period beginning March 1, 2008 and direct CMP to enter into an entitlement agreement in accordance with the Constellation bid. Based on our decision today, the overall standard offer price for the CMP small class for the one-year period beginning March 1, 2008 will be $0.099739. This represents a blended price of this years winning bid for 33% of the load and the winning bids for 67% of the load in the prior two years. The average entitlement sales price for the system contracts entitlements over the one-year period is approximately $0.07336 per kilowatt-hour. In designating Independence as a standard offer provider, we accept its statement of commitment and bidder conditions. Both documents are attached to and incorporated into this Order. We find that these documents provide useful clarifications as to precise nature of the standard offer provider obligations, as well as reasonable protections for the provider with respect to actions of the fb88 Legislature, this Commission or the utility. We understand all conditions of the winning bidder are satisfied or will be shortly after the issuance of this Order. We are informed that the modified Standard Offer Provider Service Agreement that was attached to the winning bid is acceptable to CMP and we concur that the changes from the standard form are reasonable. We also find that the security presented by Independence as part of its standard offer proposal is reasonable and consistent with our rules and the RFP. The security includes an initial corporate guarantee. To the extent customer exposure increases above a specified threshold amount as a result of changes in market prices, Independence is required to post additional security in the form of a letter of credit or cash. A letter of credit or cash could also be required if the credit rating of the guarantor decreases. The Commission recognizes that Chapter 301 does not require T&D utilities to perform margining functions with respect to standard offer service and that such a margining function imposes additional risk on T&D utilities. CMP has agreed to calculate the Excess Market Exposure Security amounts and manage the process of obtaining any required Excess Market Exposure Security from standard offer providers for this standard offer period if they have protection from the risk of this activity. We explicitly find that CMP shareholders shall not be subject to any prudency risk or financial liability with respect to its margining activities related to standard offer service for any actions that CMP take and decisions that CMP make in the ordinary course of business of managing the margining requirements, as long as they take reasonable steps to inform the Commission of their activities in this regard.  To the extent that any other person or entities seek to impose any such prudency risk or liability on CMP in contravention to the previous sentence, any resulting direct or indirect costs, obligations, expenses or damages incurred by CMP shall be fully recovered, with carrying costs, from customers either through T&D rates or standard offer prices. Finally, we recognize that the standard offer arrangements approved in this Order create certain obligations and risks for CMP that should be properly borne by customers rather than shareholders. We are informed by our staff that CMP agrees to accept the obligations and risks as long as it is compensated for the financial consequences of satisfying those obligations. Therefore, we explicitly find that any direct or indirect costs, obligations, expenses or damages reasonably incurred by CMP, including administrative and security costs, in fulfilling its obligations or exercising its rights under the standard offer contract authorized by this Order shall be deferred on the utilitys books of account as regulatory assets and shall be fully recovered, with carrying costs, from customers either through transmission and distribution rates or standard offer rates. These risks include, but are not limited to: The costs of any performance assurance that CMP may be required to provide Independence under the arrangements; Any additional costs or losses that CMP may incur as a result of tolling any termination rights under the Standard Offer Provider Service Agreement pending the outcome of an arbitration proceeding; Any costs caused by contractually fixing any fees applicable to the standard offer provider for any period time, where such fees are otherwise subject to change; Any incremental costs attributable to the execution of the standard offer arrangements, including those related to the solicitation, evaluation, and negotiation of those arrangements; and This Order will be treated as designated confidential information pursuant to the Protective Order issued in this proceeding for a two-week period. After that, the confidential treatment of this Order will be removed. Dated at Augusta, fb88, this 24th day of January, 2008. BY ORDER OF THE COMMISSION _______________________________ Karen Geraghty Administrative Director COMMISSIONERS VOTING FOR: Adams Reishus Vafiades NOTICE OF RIGHTS TO REVIEW OR APPEAL 5 M.R.S.A. 9061 requires the Public Utilities Commission to give each party to an adjudicatory proceeding written notice of the party's rights to review or appeal of its decision made at the conclusion of the adjudicatory proceeding. The methods of review or appeal of PUC decisions at the conclusion of an adjudicatory proceeding are as follows: 1. Reconsideration of the Commission's Order may be requested under Section 1004 of the Commission's Rules of Practice and Procedure (65-407 C.M.R.110) within 20 days of the date of the Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought. 2. Appeal of a final decision of the Commission may be taken to the Law Court by filing, within 21 days of the date of the Order, a Notice of Appeal with the Administrative Director of the Commission, pursuant to 35-A M.R.S.A. 1320(1)-(4) and the fb88 Rules of Appellate Procedure. 3. Additional court review of constitutional issues or issues involving the justness or reasonableness of rates may be had by the filing of an appeal with the Law Court, pursuant to 35-A M.R.S.A. 1320(5). Note: The attachment of this Notice to a document does not indicate the Commission's view that the particular document may be subject to review or appeal. Similarly, the failure of the Commission to attach a copy of this Notice to a document does not indicate the Commission's view that the document is not subject to review or appeal. The Order issued on January 23, 2008 remains operative. This Corrected Order is issued to correct three misstatements in the January 23rd Order. The new text to correct the misstatements is noted in bold and is explained in new footnotes. A new paragraph is also added at the bottom of page 4 onto page 5. That paragraph, that is not relevant to a linked standard offer arrangement but that has been used since T&D utilities have managed our standard offer margining requirements in load-only arrangements, was inadvertently omitted in the editing process.  Independence is a subsidiary of The Goldman Sachs Group, Inc.  The January 23rd Order stated that Independence was designated to serve one-third of the load for this class. Our RFP and the SOP Agreement correctly reflect the 33% number. As noted in Supplemental Order issued in last years bid process for this class, CMP and BHE billing systems require whole number percentages (Docket No. 2006-591, Feb. 27, 2007). There were a number of references to one-third that need to be corrected this Corrected Order.  The January 23rd Order incorrectly stated the year as 2009.  The entitlement prices in the accepted bid are not higher than all of the linked entitlement bids. The higher linked entitlement bids require choosing a standard offer price that more than offsets the higher entitlement bids.  To the extent necessary, we waive the procedural requirements of Chapter 307 (pursuant to section 11 of the rule) so as to allow the utilities to enter into the entitlement agreements as directed. The January 23rd Order incorrectly stated the year as 2007.  The reasonable steps will include, but not be limited to, weekly e-mail communications from the CMP to Commission Staff reporting current market prices and the CMPs(,12789gpqwx " # &   $ 2 3 4 5 A B d ǼLJLJLJ}}plbh_%OJQJ^JhJhJhJOJQJ^Jh9OJQJ^JhnQOJQJ^JhG@;OJQJ^JhM hM 5OJQJ^J"jhM 0J5OJQJU^JhM 5OJQJ^JhG@OJQJ^JhM hnQhG@hG@5OJQJ\^JhnQ5OJQJ\^JhG@5\^J$(9:Ixy' J s t 3 ^` ^`gdM $a$$a$>*hh3 4 5 A B Z[kl'#(#@$`gdu+gdu+gdnQ`gdnQ 7$8$H$gdnQ $&d P a$ % 2 e h i j ~     7 C U [ _ i l m * = k x } ĴҠҖҌҠ҂ҖҠxkxxҠ҂hu+hu+OJQJ^Jhu+OJQJ^Jh ^OJQJ^JhfOJQJ^Jh)OJQJ^JhobOJQJ^JhM OJQJ^Jjh|,%0JOJQJU^JhThM 5OJQJ^JhG@OJQJ^Jjhob0JOJQJU^Jh_%OJQJ^JhJOJQJ^J* " !CFJM  *+12;IqǼDzǼǨǚzǼmǨmhnQ6OJQJ]^J"jhz=0J5OJQJU^Jhz=hz=5OJQJ^Jhz=hnQ5OJQJ^Jh)OJQJ^Jhz=OJQJ^Jhz=5OJQJ^JhnQOJQJ^JhG@hG@5OJQJ\^Jhu+OJQJ^JhG@OJQJ^JhobOJQJ^J*qrs[m PQeflm. @ !1"2"r"߽߽dzߩߩǙǏ{{hPOJQJ^Jh_OJQJ^JhOxOJQJ^JjhG@0JOJQJU^Jh^hOJQJ^JhJOJQJ^Jh)OJQJ^JhG@OJQJ^JhG@h#(OJQJ^Jhu+OJQJ^JhnQ6OJQJ]^JhnQOJQJ^J0r"""")#-#6#B#N#r#u####### $ $!$%$*$7$<$=$$$$$$$$%%/%?%D%G%S%j%%%%%%%%%%&&&͡h.POJQJ^Jh#(OJQJ^JhZOJQJ^J"jhz=0J5OJQJU^JjhG@0JOJQJU^Jh@_OJQJ^Jhz=5OJQJ^JhJOJQJ^JhG@OJQJ^JhPOJQJ^Jh)OJQJ^J3@$A$%&))++//3344444o5p5,6-6.6 7 & F h88^8^ & F h88^8 7$8$H$gd?ZR`gd?ZR`&(()).):)F)I)t)))I*U*** + ++++,-...///1[2r2b333j4n4{o{eehOxOJQJ^JhOxOJQJ^JaJhG@OJQJ^JaJ h?ZR^J%jh?ZRh?ZR0JOJQJU^Jh?ZROJQJ^Jh?ZRh?ZROJQJ^JhK=OJQJ^Jh&pOJQJ^Jh@_OJQJ^JhJOJQJ^JhG@5OJQJ\^Jh}SgOJQJ^JhG@OJQJ^J$n4o4w4x4}44p5+6-6/6 7+7,7-7/70717D7E777777777(8*8v::;⹯wowgYgPghG@0J>*^JjhG@OJQJU^JhG@0J^Jh|Y0J^JhE1S0J^JhnQOJQJ^Jh5B*OJQJ^Jphh|Yh|YH*OJQJ^Jh|YOJQJ^JhmOJQJ^Jh5OJQJ^JhG@5OJQJ\^J hG@^JhG@OJQJ^JaJhG@OJQJ^JhOxOJQJ^Jh^hOJQJ^J 7 7 7G7b7c7d7777777777$8$H$^`7$8$H$$ p@ `-`7$8$H$^``a$$ p@ `-7$8$H$a$$ p@ `-7$8$H$a$$ dP !-d7$8$H$a$gd577777777"8$8q:r:;;<<==> 0^`0 p@ `-0^`0 p@ `-$ p@ `-a$$ p@ `-a$7$8$H$;;;;<<==>>>>>>d?f??? 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