ࡱ> gif%` =bjbjNN 1f,,0a( """8#dx#<d.#####$$$-------$V/h1--''$$''''-##.***''##-*''-**:W+,+## 򖟀"'+ -,4.0d.+ J27(J2+J2+$Q%r*%\&$$$--!*v$$$d.''''''''dxd x SUBJECT TO CONFIDENTIAL TREATMENT UNTIL January 27, 2009 STATE OF MAINE PUBLIC UTILITIES COMMISSION January 13, 2009 Order Designating Standard Offer Provider and Directing Utility to Enter Entitlements Agreement MAINE PUBLIC UTILITIES COMMISSION Docket No. 2008-400 Standard Offer Bidding Procedure for CMP and CMP Residential and Small Non-Residential Customers and All MPS Customers CENTRAL MAINE POWER COMPANY Docket No. 2008-394 Request for Approval of Request for Bids Pursuant to Chapter 307 for Sale of Energy and Capacity and Associated Waivers REISHUS, Chairman; VAFIADES and CASHMAN, Commissioners I. SUMMARY Through this Order, we designate FPL Energy Power Marketing, Inc. (FPL) as a standard offer provider for 33% of the load of residential and small non-residential class in the Central fb88 Power Company (CMP) service territory for a 3-year period beginning March 1, 2009. We also designate FPL as a standard offer provider for 33% of the load of residential and small non-residential class for a 2-year period beginning March 1, 2009. The resulting overall price for standard offer service for the one-year period beginning March 1, 2009 will be $0.089244 per kilowatt-hour. The winning FPL 3-year standard offer bid was linked to its bid to purchase CMPs non-divested hydroelectric and nuclear entitlements. CMP is directed to sell the hydroelectric and nuclear entitlements to FPL for a threeyear period beginning March 1, 2009, as specified in the FPL linked bid. The winning FPL 2-year standard offer bid was not linked. The highest stand-alone bid for CMPs system entitlements is Constellation Energy Commodities Group, Inc. (CECG). CMP is directed to sell the system entitlements to CECG for a 2-year period beginning March 1, 2009, as specified in the CECG stand-alone system entitlements 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 CMPs 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. In its October 9, 2007 Request for Proposals (RFP) for service to begin on March 1, 2008, the Commission sought terms of service for less than three years because of then existing uncertainty over the ISO-NE Forward Capacity Market (FCM) prices after the FCM transition prices terminated on May 31, 2010 (the first auction of the FCM for capacity on and after June 1, 2010 had not yet occur). The Commission decided not to seek bids that would extend service beyond the end of the FCM 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 entitlements for identical terms. The Commission accepted a one-year linked bid for a tem that ends on February 28, 2009. As a result of last years decision to accept a one-year bid, the current RFP requested pricing for two of the one-third load segments and CMP sought separate bids for its system contracts entitlements, and its hydroelectric and nuclear entitlements. The Commissions RFP allowed for bids for term lengths of one, two, and three years. Pursuant to the RFP, indicative pricing was due on November 5, 2008. Upon the conclusion of discussions on non-price items, bidders were requested to present final, binding bids on January 13, 2009. 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 bids on two of the one-third load segments for term lengths of one year, two years and three years. We decide to select a bid for three years and a bid for two years so as to return to the process (starting with next years bid solicitation) of annually selecting a standard offer provider to serve one-third of the small class load for a period of three years. Upon review of all the three-year bids and the selection criteria in Chapter 301, we conclude that the FPL linked bid provides the greatest value for ratepayers. We, accordingly, designate FPL as the standard offer provider for 33% of the CMP residential and small non-residential class for a three-year period beginning March 1, 2009 and direct CMP to sell its hydroelectric and nuclear entitlements according to the FPL linked bid. Upon review of all the two-year bids, we conclude that the combination the FPL standard offer bid with the CECG stand-alone bid for CMPs system entitlements provide the greatest value for ratepayers. We, accordingly designate FPL as the standard offer provider for 33% of the CMP residential and small non-residential class for a two-year period beginning March 1, 2009 and direct CMP to sell its system entitlements to CECG for a corresponding 2-year period. Based on our decision today, the overall standard offer price for the CMP small class for the one-year period beginning March 1, 2009 will be $0.089244. This represents a blended price of this years two winning bids for 33% of the load and the winning bid for 34% of the load two years ago. The average entitlement sales price for the hydroelectric and nuclear entitlements over the three-year period is approximately $67.58 per megawatt-hour, and the average entitlement sales price for the system entitlements over the two-year period is approximately $62.59 per megawatt-hour. In designating FPL as a standard offer provider, we accept its statements of commitment and bidder conditions. These 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 providers obligations, as well as reasonable protections for the providers with respect to actions of the fb88 Legislature, this Commission or the utility. We understand all conditions of the winning bidders are satisfied or will be shortly after the issuance of this Order. We are informed that the modified Standard Offer Provider Service Agreements that were attached to winning bids are acceptable to CMP and we concur that the changes from the standard form are reasonable. We also find that the security presented by FPL as part of its linked standard offer proposal and the security provided by FPL in its stand-alone standard offer proposal are reasonable and consistent with our rules and the RFP. The linked bid security covers both the standard offer and entitlement obligations and includes an initial corporate guarantee. To the extent customer exposure increases above Credit Rating Threshold amounts stated in the Comprehensive Credit Support and Final Settlement Calculation Agreement as a result of changes in market prices, FPL 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 unlinked bid security, similarly, acts to protect customers from market price changes and is reasonable and consistent with our rules and the RFP. Finally, we recognize that the linked standard offer and entitlement 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 various contracts and arrangements 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 a counterparty under the arrangements; Any provision that allows for a decrease or offset to the entitlement sale price, such that CMP collects from buyer any amount less than the entitlement sales price approved in this Order, including such decreases or offsets arising from actual or alleged changes in law or regulation; Any additional costs or losses that CMP may incur as a result of tolling any termination rights under any 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 linked standard offer arrangements, including those related to the solicitation, evaluation, and negotiation of those arrangements; and Any costs or losses that CMP incurs as a result of a default by FPL on any of their contractual or other obligations and the consequential termination of any contract or obligation associated with the linked standard offer and entitlement arrangements authorized in this Order for which CMP is not compensated by associated security. 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, Maine, this 13th day of January, 2009. BY ORDER OF THE COMMISSION _______________________________ Karen Geraghty Administrative Director COMMISSIONERS VOTING FOR: Reishus Vafiades Cashman 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.  Order Approving Request for Standard Offer Bids, Docket No. 2007-463 (Oct.9, 2007).  Order Designating Standard Offer Provider and Directing Utility to Enter Entitlements Agreement, Docket Nos. 2007-463, 2007-471 (Jan. 23, 2008).  The entitlement prices in the accepted linked bid are higher than the stand-alone entitlement bids. Thus, the choice of the winning linked bid does not provide any advantage to the small class customers over utility customers more generally and actually works to reduce stranded costs for all of CMP ratepayers.  The winning FPL standard offer 3-year bid is Year 1-$0.08689/kWh, Year 2-$0.09404/kWh, Year 3-$0.09670/kWh.  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 winning FPL standard offer 2-year bid is Year 1-$0.08689/kWh, Year 2-$0.09411.     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