PPA renegotiation
- Edison Electric Institute, Washington DC (United States)
Hundreds of power purchase agreements (PPAs) have been renegotiated. Changes in contract terms have benefited independent project owners, lenders, and power-purchasing utilities. Further, developers on both coasts have purchased projects in the secondary market to implement an acquisition strategy that includes value-added revisions in a project`s PPA. The origin of most renegotiation activity are regulatory conditions and expectations during the early to mid-1980s. At that time, regulatory comissions mandated PPAs with fixed or other price features that were based on a continuation of the rapid fossil fuel price escalation experienced during the early 1980s. When oil and gas prices declined beginning in 1986, PPAs such as these began to cause utilities to pay more for power under contracts with fixed prices than their current avoided costs. Thus, win/win renegotiatins became realistic. Utilities could lower their purchased-power costs, increase dispatch flexibility, and better position themselves for industry restructuring. NUGs could change operations and undertake other actions that actually increase forecasted income. Renegotiation activity has accelerated and by now may have involved more than 350 projects. While the level of activity is now high, industry participants expect it to decline as the stock of fixed and high-price contracts is worked off.
- OSTI ID:
- 96350
- Journal Information:
- Independent Energy, Vol. 25, Issue 5; Other Information: PBD: May-Jun 1995
- Country of Publication:
- United States
- Language:
- English
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