You may submit mark-ups to the Performance Assurance LOC and the Guaranty with your Credit Application, before the Bidder Qualifications Due Date. PPL will review any such documents along with your Bidder Qualification Materials, but is under no obligation to accept them. Please consult the list of already allowed and disallowed changes to the Letters of Credit, available at http://www.pplelectric.com/Business+Partners/polr-cbp/faq.htm.

Please see Section 4.9 of the POLR Rules, "Alternative Forms of Performance Assurance."

Please confirm the following:

The supplier is the LSE. Please see Article 2.5 of the POLR Supply Master Agreement.

The PPL POLR Supply Master Agreement states that:

Yes. ARRs are encompassed by CRRs.

For the period January 1, 2010 to May 31, 2010, please see section 4.1 of the PPL POLR Supply Master Agreement (SMA). PPL Electric Utilities will assign its rights to CRRs for the period January 1, 2010, through May 31, 2010 to POLR Suppliers on a pro-rata basis. All rights and obligations associated with such CRRs will accrue to the POLR Suppliers.

Please see section 4.4 of the PPL POLR Supply Master Agreement (“SMA”) and Articles 1.1.5 and 1.3.3 of the RFP Rules. To briefly summarize those sections, POLR Suppliers must provide their proportional share of PPL Electric Utilities' AEPS Obligations for 2010 as those obligations are set forth in the AEPS Act, and rules adopted by the PUC, and must do so consistent with the PUC's Orders in Docket No. P-00052188. POLR Suppliers must establish a GATS account and pay the GATS annual fee, transfer certificates to PPL Electric Utilities' GATS account in an amount sufficient to meet the POLR Supplier's obligation and pay proportional LSE GATS volumetric fees. The SMA includes Exhibit B, which shows current AEPS Obligations for 2010, but the requirements that Suppliers must meet are not defined or limited by the values in Exhibit B. The PPL Electric Utilities believe it is possible the solar photovoltaic (PV) percentage shown in Exhibit B may change.

Q.

No, PPL Electric will not accept changes to the POLR SMA.

The primary energy volumes (i.e., the day-after/first estimate of real-time, which does not include other energy volumes such as volumes associated with PJM's reconciliation process, inadvertent energy, etc.) to which the applicable winning $/MWh price will be applied if there are no changes made to current PJM business rules and settlement software would be, as you correctly state, the "Load without Losses" volume reported through PJM eSchedules less the applicable portion of NYPA energy. Specifically, this PJM provided report can generally be found through the following path in PJM eSuites: Login to Market Participant Account (Controlled Access) \ Application (System) = eSchedules \ Reports \ Type = Interchange; Name = Load eSchedules With andWithout Losses; Dates as desired \ Find Reports \ Download Reports.

Please note that this primary energy volume available in PJM's "Load eSchedules With and Without Losses” report is expected to represent almost the entirety of the energy volume for which the winning supplier will be paid, but it is expected that there will be other energy volumes that will be used for billing purposes such as energy volumes associated with PJM's reconciliation process, inadvertent energy, cushion energy, etc. It is expected that these other energy volumes will be small compared to the primary energy volumes.

Contract FAQ #9 states that "PPL Electric Utilities will report to PJM loads that include all distribution AND TRANSMISSION losses (including PJM assigned 500kV losses and unaccounted for energy). PJM will loss derate those loads for settlement purposes (see PJM Marginal Loss Implementation Details). Suppliers will be paid based on the loss derated load." (emphasis added)

Contract FAQ #27 states that "...suppliers will be paid for loads at the retail meter adjusted upward to include the distribution AND TRANSMISSION loss factors..." (emphasis added)

Contract FAQ #27 also states that the PJM marginal losses deration factor "...removes transmission loss associated with the PJM state estimator model."

The end result is that Suppliers are paid on volumes of load that include distribution losses and transmission losses, EXCLUDING (i.e., de-rated by) transmission losses associated with the PJM state estimator model. The transmission losses associated with the PJM state estimator model are included in the marginal loss component of the LMP. As stated in Article 1 of the POLR SMA, “Full Requirements Service” means all necessary Energy, Capacity, Transmission other than Network Integration Transmission Service, Ancillary Services, Pennsylvania Alternative Energy Portfolio Standard (AEPS) requirement, TRANSMISSION AND DISTRIBUTION LOSSES, congestion management costs, and such other services or products that are required to supply the Specified Percentage except for Network Integration Transmission Service and distribution service (emphasis added).

The date of the POLR SMA, including the PJM Declaration of Authority (Exhibit H), should be left blank. Should you win tranches in a solicitation, and should the results of the solicitation be approved by the PUC, PPL Electric will date the POLR SMA, including the PJM Declaration of Authority (Exhibit H) as of the day it executes the POLR SMA.

Please confirm that the Tier I and Tier II AEPS obligations (other than the solar portion of Tier I) are to be fulfilled equally from all six solicitations, and not fulfilled from only the 2007 solicitations, as is being done for the solar requirements.

Also, please explicitly state the most current AEPS obligations for year 2010 for Tier I, Tier II, and solar, as percentages, and to which loads these would apply.

We confirm that for the solicitations conducted in 2007, the POLR Suppliers for the Residential and Small C&I Groups will be responsible for the Residential and Small C&I Groups will be responsible for providing the entire solar supply obligation in the AEPS Act for 2010, but that this does not apply to non-solar requirements under the AEPS Act. Please see Article 1.1.5 of the RFP Rules.

The Signature page of the SMA has a line for someone to attest the signature on behalf of the Supplier.

Should this line be signed when we provide the SMAs to PPL Electric Utilities as part of our Bid Proposal? Who can attest the signature? Must either signature be notarized?

The requirements of the AEPS Act can be met by purchasing Renewable Energy Certificates.

Section 1.1.5 of the RFP Process and Rules document states that POLR Suppliers will be responsible for supplying "transmission (excluding transmission service within the PPL Zone)." Does this mean that NITS is excluded from the supplier’s responsibility?

That is correct. NITS is excluded from the supplier's responsibility. Please see Exhibit D of the PPL POLR Supply Master Agreement for an explanation of PJM invoice line-item responsibility.

When must winners in this sixth solicitation execute the Transaction Confirmations associated with the tranches they win?

Winners at this sixth Solicitation must execute their Transaction Confirmations by 2:00 PM EPT on the next business day following the PUC Decision approving the bid results. 

In Article 1 of the POLR SMA (Definitions) it states that:

“...under no circumstance shall an event of Force Majeure be based on: (i) the loss or failure of Seller’s supply; (ii) Seller’s ability to sell the Full Requirements Service at a price greater than that received under any Transaction; (iii) curtailment by a Transmitting Utility; (iv) Buyer’s ability to purchase the Full Requirements Service at a price lower than paid under any Transaction; or (v) Labor stoppage or lockout.

Were items (iii) and (v) included intentionally? These circumstances normally constitute Force Majeure.

"If a minimum of two quotes in a particular month are not available, then the Pricing Agent will determine the On-Peak Forward Price using an annual quote, obtained in the same manner above. In this case, the On-Peak Forward Price will be calculated as the product of the On-Peak Price Ratio and the annual price quote."

"If a minimum of two quotes in a particular month are not available, then the Pricing Agent will determine the Off-Peak Forward Price using an annual quote obtained in the same manner as discussed above. In this case, the Off-Peak Forward Price will be calculated as the product of the Off-Peak Price Ratio and the annual price quote."

We understand that under the terms of the SMA, a Seller needs to be an LSE.  We are having a difficult time reconciling how a Seller can meet the requirements as the PJM definition describes an LSE as an entity or its agent that serves end-users and that has been granted authority or has an obligation under law, regulation, or franchise to sell electric energy to end-users.

We understand the SMA to read that a Seller is providing full requirements to the Buyer, who is PPL Electric Utilities Corporation, not an end-user.  Would you provide clarification on the purpose of requiring the Seller to be an LSE and how it is acting as an LSE for purposes of the SMA, when it is not actually making sales to end-users? 

We have read the terms of the SMA related to the Seller’s obligation to act as an LSE and would like confirmation of our understanding of that responsibility.

1. Section 2.5 of the SMA states:

2.5 Status of Seller. Seller for purpose of the Agreement and any Transaction is a Load Serving Entity

2. Article 1 DEFINITIONS defines Load Serving Entity as follows:

“Load Serving Entity” or “LSE” shall have the meaning ascribed to it in the PJM Agreements.

3. The PJM definition of an LSE includes a requirement that the entity make sales to end-users. The SMA clearly states that the Seller is making wholesale sales to the utility, PPL Electric Utilities Corporation (“PPL”).

Is there is an inconsistency in the SMA language between the obligations of a Seller to deliver the requested “wholesale” product and the requirement under the PJM definition of LSE to make sales to end-users? Since Section 2.5 of the SMA uses the phrase “…Seller for purpose of the Agreement and any Transaction is a Load Serving Entity …”, we assume the intent of the SMA is that Seller be able to schedule and deliver the requested product in accordance with the abilities of a PJM LSE, but that Seller does not necessarily have to qualify as a PJM LSE for purposes of selling to retail load. (i.e. make sales to end-users).

Please confirm our understanding of the SMA.

The PJM definition of an LSE is as follows:

”Any entity (or the duly designated agent of such an entity), including a load aggregator or power marketer, (a) that serves end-users within the PJM RTO, and (b) that has been granted the authority or has an obligation pursuant to state or local law, regulation or franchise to sell electric energy to end-users located within the PJM RTO.”

The PJM definition of an LSE does not require that the LSE make sales directly to end users, as you state in your question, only that the LSE “serves end-users within the PJM RTO”, which is consistent with the Seller’s obligations under the SMA. The LSE must also be “granted the authority or [have] an obligation pursuant to state or local law, regulation or franchise to sell electric energy to end-users located within the PJM RTO” (emphasis added). Signing the POLR SMA with PPL Electric Utilities will allow the Supplier to satisfy the definition of a PJM LSE.

Your understanding is correct. Please also refer to “Contract” FAQ #24 and Article 4.1 of the POLR SMA.

In regard to Congestion Revenue Rights (“CRRs”) (which encompasses ARRs) for the period January 1, 2010, through May 31, 2010, PPL Electric, in its capacity as LSE for POLR Load during the Year 2009, will ensure that CRRs obtained in conjunction with its designation as LSE for POLR Load will be provided to the Seller pursuant to Article 4.1 of the POLR SMA.

In regard to CRRs for the period June 1, 2010, through December 31, 2010, the Seller is responsible for nominating and obtaining CRRs. The Seller, as an LSE serving POLR Load, shall have the right to request and nominate CRRs provided all Transactions for the Seller's Specified Percentage of POLR Load have been executed and are in full force and effect. Effective January 1, 2011 all CRR rights will transfer back to PPL Electric.

As stated in Contract FAQ #21, "[i]f during the transaction term a Seller that qualifies based on its Guarantor being a rated entity, elects to provide liquid security in lieu of the Guaranty, that is permissible under the POLR SMA." As long as the liquid security is an acceptable substitute, PPL Electric Utilities would provide written consent to terminate the parent guaranty.

According to Contract FAQ #34, “[u]nder the terms of the POLR SMA, the Supplier may provide, in lieu of an Unconditional Guaranty, another instrument of security acceptable to PPL Electric Utilities.” However, Section 12.1(j)(iii) of the PPL POLR SMA states that it is an event of default if “the Guarantor's guaranty [fails] to be in full force and effect for purposes of this Agreement (other than in accordance with its terms) prior to the satisfaction of all obligations of such Party under this Agreement without the written consent of the other Party." Can we simply terminate the Guaranty upon provision of another instrument of security to PPL Electric, or is termination of the Guaranty conditional upon consent from PPL Electric?

As a follow up to a Contract FAQ #67, can you please direct me to the section of the SMA that fixes the payment schedule?

Section 7.1 of the POLR SMA states the following: "Unless otherwise agreed to by the Parties, on or before the sixth (6th) Business Day of each month, Buyer shall deliver to Seller, via electronic transmission or other means agreed to by the Parties, an invoice ("Invoice") that sets forth the total amount due for the previous calendar month for all Transactions."