05:02
Faizan
Power purchase agreements (PPAs) are contracts between electricity producers in which one party sells energy and/or generating capacity to another, who generally serves end-use retail customers. Instead of building a new power plant, for example, an electric company can opt for a power purchase agreement. Often, though one or more of the parties are not regulated, state and federal regulators may monitor or opine on a PPA.
Creation of PPAs
A power purchase agreement is a negotiated contract. Consequently, it is created through a process of negotiation between the parties. PPAs often include utilities that are regulated by state utility commissions as a buyer; so, the PPA and its terms are sometimes published in the course of a request for proposals process and are supervised by an independent monitor and/or regulatory staff. Once all of the parties, including the buyer and seller and regulators, agree to the terms of the contract, the power purchase agreement is executed by signatures in essentially the same way as typical contracts.
Features of a PPA
A power purchase agreement is a contract, Many of the components of a PPA are common to contracts generally. These include choice of law provisions, alternative dispute resolution tools, timing and method of payment. The most important terms in a PPA generally are the price of the electricity/capacity, the term of the contract and the delegation of responsibility for fuel costs and fuel procurement. Fuel is the major driver of changes in costs in the generation of power.
Varying regulatory involvement
In states with regulated retail markets, one should expect significant regulatory involvement by the Public Utilities Commission (the name for this commission varies from state to state). For regulated utilities planning to use the power purchase agreement to meet the needs of retail customers, the costs of the PPA flow through into retail electric bills. Because there is a direct impact on retail customers, the regulators typically will examine the reasonableness and the costs of the power purchase agreement before the costs are recovered.
Role of independent power producers
Independent power producers (IPPs) are unregulated entities that own power plants and generate electricity in the competitive wholesale market. IPPs sell their electricity and generating capacity in PPAs to retail providers and utilities who ultimately are responsible for providing retail service to customers. Examples of IPPs include Calpine, LS Power and Tenaska.
Benefits of Power Purchase Agreements
Power purchase agreements allow one party with available generation to make generation available to another party who needs it. The most immediate impact of this is that it helps the company in need avoid building a new power plant, which typically costs hundreds of millions, if not billions, of dollars. The competitive nature of power purchase agreements helps keep the costs of power plants and electricity lower, which ultimately helps reduce electricity bills for consumers.
Creation of PPAs
A power purchase agreement is a negotiated contract. Consequently, it is created through a process of negotiation between the parties. PPAs often include utilities that are regulated by state utility commissions as a buyer; so, the PPA and its terms are sometimes published in the course of a request for proposals process and are supervised by an independent monitor and/or regulatory staff. Once all of the parties, including the buyer and seller and regulators, agree to the terms of the contract, the power purchase agreement is executed by signatures in essentially the same way as typical contracts.
Features of a PPA
A power purchase agreement is a contract, Many of the components of a PPA are common to contracts generally. These include choice of law provisions, alternative dispute resolution tools, timing and method of payment. The most important terms in a PPA generally are the price of the electricity/capacity, the term of the contract and the delegation of responsibility for fuel costs and fuel procurement. Fuel is the major driver of changes in costs in the generation of power.
Varying regulatory involvement
In states with regulated retail markets, one should expect significant regulatory involvement by the Public Utilities Commission (the name for this commission varies from state to state). For regulated utilities planning to use the power purchase agreement to meet the needs of retail customers, the costs of the PPA flow through into retail electric bills. Because there is a direct impact on retail customers, the regulators typically will examine the reasonableness and the costs of the power purchase agreement before the costs are recovered.
Role of independent power producers
Independent power producers (IPPs) are unregulated entities that own power plants and generate electricity in the competitive wholesale market. IPPs sell their electricity and generating capacity in PPAs to retail providers and utilities who ultimately are responsible for providing retail service to customers. Examples of IPPs include Calpine, LS Power and Tenaska.
Benefits of Power Purchase Agreements
Power purchase agreements allow one party with available generation to make generation available to another party who needs it. The most immediate impact of this is that it helps the company in need avoid building a new power plant, which typically costs hundreds of millions, if not billions, of dollars. The competitive nature of power purchase agreements helps keep the costs of power plants and electricity lower, which ultimately helps reduce electricity bills for consumers.
Posted in: Products & Brands
