PSC's Rendition of Windfarm Location Among Shipping Lanes

For a full view of the above map, right click on image, then hit “View Image.” The organization is done, sorry to say at this point, by method of stream of consciousness. As I found it, I wrote it. The quickest way to read is to perfunctorily skim the Bold typed passages. Those were lifted directly from the document and more or less back up the more easily read commentary written underneath it…One can get a gist by reading the more easier-to-read fine print….Hope this helps in your understanding of this fascinating project that this state has taken on………

To begin with I will start with Hamermesh’s opening letter:

While it is labeled an “agreement,” and Bluewater has indicated that it is prepared to enter into that agreement, I wish to make clear that there are important aspects of it which Delmarva opposes, and there is therefore no mutually acceptable PPA at this point.

From the Staff Summary of Terms:

Proposed project consists of 150 wind turbines with a total nameplate capacity of 450 MWs with an anticipated full Commercial Operation Date of between June 30, 2014 but no later than November 30, 2016 with a term of 25 years from Commercial Operation Date.

………..

The pricing below for the project products will be escalated at 2.5% per year after 2007:
o Base Capacity Payment Rate = $70.23 per kW-year
o Base Energy Rate = $98.93 per MWh
o Base Renewable Energy Credits Rate = $19.75 per REC

From the proposed purchase power agreement between Delmarva and Bluewater Wind.

It would probably help the average reader to consider this agreement very similar to the buying and selling of a house….which as you may all know, is not very simple when one has to live through it. But instead of a house, we are to establish a contract between buyer and seller of electrical capacity…..Basically we are buying a bloc of power. That’s all.

Pages 2-28 are taken up with definitions.

Then on page 37 PDF or 31 actual:

The Parties acknowledge that the transfer of the value of the Contract Capacity from Seller to Buyer as set forth in this subclause (A) is fixed with PJM for each Capacity Year, and as such, the last Capacity Year commencing in the Services
Term may extend beyond the termination of the Services Term.

This just means the Capacity will be broken down in yearly increments and sold in bloc form on a year to year basis. At the end, as with any contract, there is leeway if all obligations have not been fulfilled.

From and after the Initial Delivery Date, all Delivered Energy produced by the Project up to a maximum of three hundred (300) MW per hour in any given hour and an aggregate maximum of 1,357,402 MWhs per Contract Year during the Services Term.

This means that Delmarva gets all of the wind power produced up to the 300MW per hour level….and Bluewater must satisfy the 1,357,402 MWhs per year…(Do the Math Please) On the year this averages out to 154.85 MWh’s (used the 1/4 day in the calculation). So for every stalled hour where we have 0 MWh’s, we need one hour of over 300MWh’s to meet the contract total…. simple enough.

Delmarva will buy all REC’s that come up before initiation date…These will be called Pre-Initial Delivery Date Products.

There will be exclusions in the contract for force majeure situations.

Seller shall at all times retain operational control of the Project, be responsible for all operation and maintenance of the Project and will bear all costs related to ownership, operation and maintenance of the Project.

This simply states that the Wind farm will belong to Bluewater. Delmarva will have no ownership of that entity.

Seller will not commit less than the entire Project to Buyer, nor sell any Product associated with the Project to any Person other than Buyer. Seller shall not be prohibited in any manner whatsoever from selling such Excess Products to any third party.

This just means until the 300MWh level is met, Bluewater can not sell power to someone else….but over 300MWh it must sell to someone other than Delmarva. This is to avoid future squabbling along the lines of I gave you extra then, so apply it to my deficit now……This clause is designed to keep it simple…..

Under 300MWh =======> Delmarva
Over 300MWh =======> Someone else….

Does this mean city co-op’s cannot receive Bluewater’s cheap wind energy, as per the signing early on in the process? We shall see…….

Buyer and Seller shall work in good faith to accommodate Seller’s need consistent with other provisions of this Agreement, provided Seller shall be liable for Buyer’s costs in accommodating Seller’s requests.

This says if Bluewater cannot fulfill the contract amount, then Bluewater owes Delmarva’s costs for covering that deficit. Delmarva cannot annul the contract just because of it.

To the extent that Seller receives any payment associated with the Products to be delivered to Buyer hereunder, including non-Energy or fixed payments associated with such Products received for or in connection with Resource Adequacy Requirements or Instructed Operations from any Person other than Buyer, Seller shall remit such payment to Buyer.

This just says that if any credits come Bluewater’s way for the energy under 300MWh contracted to Delmarva, then those credits correctly go to Delmarva…

Neither Seller nor any Affiliate of Seller… shall, without the prior written consent of Buyer, increase, modify, or decrease the Project Capacity or, after the Initial Delivery Date, the Capacity of the Project or any Unit or the number of Units,… nor take any other action withrespect to the Project or in connection with any expansion of the Project or construction of any new wind facility adjacent to the Project that would, or may reasonably be expected to increase the costs to Buyer.

This sounds bad at first. it means that Bluewater cannot expand to build a 600MW wind farm at a later date…..but if such were to penalize Delmarva, the buyer, in actuality, that would not be fair…. Hopefully the option to build without impacting Delmarva costs can be reworked allowing other users cheaper energy than that which is proposed by the contract…..

Buyer may elect in its sole discretion, at any time during the Contract Term, to discontinue its obligation to receive the Contract Capacity Amount from Seller under the Agreement and to require Seller to enter into a replacement power purchase agreement… to which Buyer shall purchase Energy and other Products…from Seller

Whoa! Delmarva can get out of the agreement whenever it wants? Provided a replacement agreement is agreed upon beforehand? Apparently so.

Bluewater will be responsible for installation and maintenance of transmission lines and meters…They can utilize a third party, if necessary. They absorb all costs associated therein.

3.3 [Reserved].

Whoa, again..its not a done deal….Section 3.3 is marked (Reserved)…Must be somewhat contentious..

Bluewater will be responsible for all costs and injury up to transfer point, after that Delmarva takes responsibility. Capacity responsibility will be transferred according to PJM rules, and Environmental Attributes (credits) will be transferred according to current law or GATS Operating Rules. (89 pages)

Past the transfer point Delmarva will be responsible for the costs of all network upgrades.

Congestion costs will be borne by Delmarva unless new forms of energy tie into the grid..such as individual windmills scattered across the state….then Bluewater will have to pay a percentage of the congestion costs. This seems like a plan to limit private wind turbines (or solar) from tying into the grid….Bluewater suffers each time they do…….There goes McDowell’s SES plan. (page 45 PDF, 39 actual).

Bluewater is to give a guess one week prior of its generated energy. This is besides the monthly schedule, and a daily update for the fifteen days, done every morning between 7 and 10, as well as a day ahead schedule broken down in hourly increments, and of course real time assessments of whether they will or will not hit the preplanned targeted amounts….

Bluewater is to report outages of each turbine as soon as they occur. Any charges assessed by the PJM for not meeting forcasted power levels will be split by Delmarva and Bluewater.

3.7 [Reserved]
Another future snag?

The Project Meter shall measure the delivery of Products at the Delivery Point. The actual physical location of the Project Meter is proposed to be at Seller’s on-shore switching station (near Bethany, Delaware).

I hope they like Grottos.

Testing of meters will have both parties present with the party requesting the adjustment, paying for the re-adjustment.

3.9 [Reserved].

If a planned outage lasting over 9 days occurs, Bluewater must give Delmarva 30 days notice prior to the month in which the outage will occur. Delmarva can request a change in timing of a planned shutdown. It will be Bluewater’s responsibility to get approval for all outages from the PJM in advance.

Delmarva will be allowed access rights during construction. Similar to a new home buyer being allowed to visit his house during its construction….The buyer will be responsible for all risks impacted by his visit….

Compensation. Bluewater gets paid monthly in arrears by this formula…..

MFPm = [[(BCPR x 8.333%) x MCCm] + [(BER x MED)] + [BRR x
MRD]] x AIA

BCPR =$70.23 per kwh
BER = $98.93 per MWh
BRR = $19.75 per REC
MED is the Delivered Energy
MRD is the number of RECs delivered to Buyer
MCC is the amount of Contract Capacity (restated in kw-year) for the Capacity Year in which such month falls.

MFPm is the Monthly Fixed Payment for the subject month; so based on this formula, it looks like we will have some fluctuation on a monthly basis throughout the year…..

Seller shall have sole responsibility for the design and construction of the Project
This was implied before.

Seller shall be permitted to terminate the Agreement and Buyer will return the Development Period Security to Seller less six million dollars ($6,000,000) as liquidated damages (such liquidated damages being Buyer’s sole remedy for such termination by Seller) if Seller, after making all commercially reasonable efforts to do so, is unable to secure the Permits required for the construction and commencement of Commercial Operation.

We are still hinging on permits, and failure to acquire them will cost Bluewater a 6 million payment to Delmarva.

Critical milestones, if not achieve within 18 months after the deadline, can be a deal breaker. Likewise a financial closing not happening after 18 months post dated, will do the same…

Seller will be required to pay Buyer daily liquidated damages (“Delay Damages”) in the amount of (i) $69,990 per day

Amount Bluewater will pay Delmarva per day for delay.

Each Party, through its Authorized Representatives, shall
have the right, at its sole expense, upon reasonable Notice and during normal business hours, to examine and copy the books and records of the other Party related to the Project
or the Agreement to the extent reasonably necessary to verify the accuracy of any statement, charge or computation

Audits encouraged. Below for all to see are the Limitations…..

ARTICLE VII LIMITATIONS

7.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY PRODUCT, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF LIQUIDATED DAMAGES
PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF LIQUIDATED DAMAGES IS PROVIDED (INCLUDING UNDER SECTIONS 5.2(C), 5.2(E), 5.4(A), 5.4(B), 5.4(D), 5.6, 5.7 AND 12.2) SUCH EXPRESS REMEDY OR MEASURE OF LIQUIDATED DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY THEREFOR, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY WITH RESPECT TO SUCH BREACH ARE WAIVED EXCEPT TO THE EXTENT EXPRESSLY SET FORTH HEREIN. IF NO REMEDY OR MEASURE OF LIQUIDATED DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE, PROVIDED THAT THE FOREGOING EXCLUSION SHALL NOT PRECLUDE RECOVERY BY A PARTY OF THE TERMINATION PAYMENT, THE TERMINATION FEE, DELAY DAMAGES, OR ANY LIQUIDATED DAMAGES EXPRESSLY HEREIN PROVIDED, NOR SHALL IT BE CONSTRUED TO LIMIT RECOVERY BY AN INDEMNITEE UNDER ANY INDEMNITY PROVISION IN RESPECT OF A THIRD PARTY CLAIM. UNLESS EXPRESSLY HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF SECTION 11.1 (INDEMNITIES), IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.

TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, INCLUDING FORFEITURES OF DEPOSITS, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE FULL HARM OR LOSS.

Your usual, not much different from renting a Plasma Screen television.

A security deposit (slightly more than that of a TV) of 6 million will be given at signing, and that will later raise to 12 million, then to 24 million to continue for the life of the contract.

In addition to any other Collateral required to be provided by Seller hereunder, to secure its obligations under this Agreement, Seller shall grant to Buyer a present and continuing perfected Lien on and security interest in all of Seller’s right, title and interest in and to the Project, the Project Contracts and all of Seller’s other assets

I’m surprised Bluewater agreed to that.

Each Party shall use reasonable efforts to implement the
provisions of and to administer this Agreement in accordance with the intent of the Parties to minimize all Taxes, so long as neither Party is materially adversely affected by such efforts.

What? Each party shall work together to minimize taxes?

Buyer has the right to terminate the Agreement with no further obligation or liability on the part of either Party if at any time during the term of the Agreement Buyer’s independent outside auditing firm determines that Buyer must consolidate Seller in its financial statements under FIN 16

So if Delmarva’s auditing firm insists a consolidation between Bluewater and Delmarva is necessary under FIN 46, then the deal can be broken. Delmarva does not want to consolidate with Bluewater Wind…Unh, uh…This will of course be brought before the PSC.

Dispute Resolution Before Commission. If the dispute cannot be so resolved by negotiation as set forth in Section 13.2 above, it shall be resolved at the request of any Party through the dispute resolution process administered by the Commission. Any decision by the Commission may be appealed to the extent provided by applicable Law.

Does this shut down the pending lawsuit still on hold? It appears to.

THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT. ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE FILED ONLY WITH THE STATE OR FEDERAL COURTS LOCATED WITHIN THE STATE OF DELAWARE.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed by its authorized representative as of the date first written above.

Seller: BLUEWATER WIND DELAWARE LLC
By: _____________________
Name: Title

Buyer: DELMARVA POWER & LIGHT COMPANY
By:_____________________
Name:Title::

Wow, that was long. Over all opinion…Towards the end I skimmed over many passages that were addressed before. There could be something lurking deep within…..Of course there always is with legal documents. Like a balloon payment or two.

Over all the 9.8 cents is a win. The going rate of 19.75 for energy credits is also a win….Most of all, the fact we have a deal that is wanting just two signatures, is the biggest win of all….

Recommendations: Atfer reading that, is to use this blog page as a reference if needed and to click onto the link if you want more detail….For those of you still wondering about the picture at the top, the red is the site of the proposed wind farm, nestled out of the way of the deep blue shipping lanes….The yellow line is the 3 mile nautical limit…..

Nest time the wind blows, think 9.8 cents….

Oh and I forgot to mention….There is not a backup generator plan mentioned….