Legalectric

Wall Street finally gets what the DOE’s been saying forever: IGCC IS TOO RISKY FOR PRIVATE INVESTMENT!

The DOE, in its Mesaba Notice of Intent, said specifically, expressly, that IGCC is too risky:

DOE Notice of Intent — “too risky”

And here’s a report on Wall Street’s awakening:

Investors warned against coal-to-gas power plants

By JEFF MONTGOMERY, The News Journal
Posted Wednesday, May 16, 2007

A proposal to build a coal-to-gas power plant in Delaware was dealt another blow Tuesday, this time by Wall Street.

One of the world’s top credit rating agencies cautioned that next generation coal gasification power plants remains unproven and a “clear risk” to investors, a position that could raise questions about the financial viability of a proposed coal-to-gas plant here.

The warnings were part of a wide-ranging report by Standard & Poor’s on the financial risk that climate change poses to financial markets, investors and industries.

Delaware policymakers are expected to decide next week if they should tie Delmarva Power’s future to NRG Energy’s proposal for a more-than $1.5 billion coal-to-gas project at the company’s Indian River power plant. The Delaware Public Service Commission could require the utility to sign a long-term agreement to purchase power.

“The risk is immediate and clear, in the sense that the technology is unproven and it’s not clear how well they would run three years from today,” said Swami Venkatraman, a utility analyst with Standard & Poor’s. Gasification developers are likely to have trouble even getting firm construction prices from builders, Venkatraman said.

Venkatraman was speaking generally about risks to companies and industries, not about specific projects or companies. The review touched on major industries worldwide, from utilities to autos and insurance.

“We are more confident that climate change is happening, and we are more confident that it will be of significant cost, but the cost of remediation remains very uncertain because we don’t have the technology yet,”said Standard & Poor’s Chief Economist David Wyss.

Wyss referred to warnings that human use of fossil fuels and other activities has increased carbon dioxide and other “greenhouse gases” in the atmosphere, increasing global temperatures and triggering changes in climate. Estimates of the potential cost have ranged as high as a catastrophic 20 percent loss of the world’s gross domestic product to far less damage, even a gain, if governments act promptly.

Standard & Poor’s assigns companies a credit rating based on their financial outlook and an assessment of risk they face. A lower credit rating raises a company’s cost of borrowing money for a project.

Existing concerns

Greenhouse gas worries have been prominent in recent state and Public Service Commission reviews of bids for proposed long-term contracts between Delmarva Power and three power plant ventures.

State lawmakers ordered the bidding last year, saying the competition could help stabilize prices and energy supplies.

The PSC last week recommended that Delmarva negotiate with an offshore wind power venture developed by Bluewater Wind LLC. But commissioners also encouraged consideration of a Conectiv natural gas plant or NRG’s project as a backup.

A final vote, involving the PSC and three other state agencies, could come as early as Tuesday.

Philip Cherry, a Department of Natural Resources and Environmental Control policy manager who has represented one of the voting agencies, declined to predict an outcome.

Cherry said that uncertainties in NRG’s gasification plan had already earned it a third-place ranking in a three-way race, despite hopes by some that the technology would allow clean use of America’s abundant coal resources.

NRG spokeswoman Lori Neuman said that other experts have concluded that coal-to-gas plants are financially viable sources of clean energy.

“We know there will always be opposing viewpoints on any technology,” Neumann said, adding that the company stands by coal-to-gas “as a source of reliable and environmentally responsible energy.”

PSC consultants ranked the NRG plan lowest overall because of cost and financing concerns. But the full commission last week directed Delmarva to negotiate with all three bidders to develop a wind project backed up by natural gas or coal gas power.

“Clearly, they [Standard & Poor’s] need to be listened to. They’re right in some respects,” Cherry said. “There are no commercially operating IGCC [coal gasification plant] facilities that are sequestering carbon right now. That does pose some difficulties for the industry.”

Gov. Ruth Ann Minner also has said that the coal project deserves further consideration, while not endorsing the idea.

The need for change

John M. Byrne, who directs the University of Delaware’s Center for Energy and Environmental Policy, said that the insurance industry already had arrived at the conclusions that Standard & Poor’s outlined Tuesday.

“It’s an important step. It suggests that we’re no longer discussing ‘if’ there’s climate change, but how we’re going to reflect it in the market,” said Byrne, who has worked for years with a scientific advisory panel to the United Nation’s Intergovernmental Panel on Climate Change.

Standard & Poor’s said Tuesday that the European Union’s focus on the “carbon intensity” of energy would continue to spur investment in renewable sources, including wind power. Major decisions lie ahead for utilities on emissions targets and methods for reducing carbon dioxide pollution.

Standard & Poor’s Damien Magarelli said insurers have already begun taking climate change risks into account, in part after seeing a “wake-up call” in the large number of high-intensity hurricanes during 2005.

Byrne, who recently helped develop a proposed “sustainable energy utility” that would help state residents reduce electricity use, said that the U.N. climate panel is calling for a 60 percent cut in carbon dioxide emissions from 1990 levels during the next few decades. That goal will be reached with both cleaner energy and actual cuts in consumption nationwide, he said.

“The real policy challenge we all have is how to make it possible for all sectors of our society to use substantially less energy” while still meeting social and economic needs, Byrne said.

Bill Grant, Midwest director of the Izaak Walton League, a national conservation organization, had this to say: “We can ignore this reality until it’s too late to avert the worst effects of global warming, or we can lead by example at home and implement low-carbon coal technologies and carbon capture.”

Low-carbon coal? Say what???? Really, I’m not making this up. This was in a Neal St. Anthony STrib column this weekend… I cannot believe. The full article is below. But this is no suprise given that Bill Grant was at the Sawmill in Grand Rapid, ostensibly to speak on “Conservation” per the program, but instead, like the others present, was promoting IGCC – coal gasification near the site Excelsior Energy has proposed for the Mesaba Project:

Bill Grant – Sawmill – Energy Efficiency and Climate Change

To let the Izaak Walton League know what you think, click on “CONTACT” at the bottom of their home page… and since that doesn’t work, I guess you’ve got to call STAFF and BOARD OF DIRECTORS. Here’s the contact info for Bill Grant in the Midwest Office:

Izaak Walton League – Midwest Office (MWO)
1619 Dayton Ave Suite 202
St. Paul, MN 55104
(651) 649-1446

To look up your IWLA chapter, CLICK HERE

Neal St. Anthony: ‘Clean coal’ possible, experts say, but needs federal help

Xcel Energy and others are embracing coal gasification, but government spending on crucial research has declined.

By Neal St. Anthony, Star Tribune

Last update: May 11, 2007 – 9:47 PM
Xcel Energy CEO Dick Kelly says the Minnesota-based utility will be a national leader in the pursuit of “clean coal” — including a proposed plant in Colorado that will divert carbon emissions to underground burial. But it’s going to need help.

“We’re first going after conservation from residential and business customers because we need to slow the growth in electricity usage,” Kelly said in an interview this week. “Then we’re going after carbon-free sources of energy such as wind, hydro, solar and natural gas. But we’ve got to eventually get to ‘clean coal.’ And we can’t do it alone.”

Kelly’s comments followed the release of a study by a coalition of utilities, state regulators and environmental groups that criticized the federal government’s feeble commitment to the challenge of reducing CO2 emissions from coal, America’s most abundant boiler fuel for power plants.

The report of the Coal Gasification Work Group, shepherded by the nonprofit Great Plains Institute of North Dakota, is significant because it has eight states from the heartland acknowledging the threat of global warming and the importance of U.S. leadership in fixing the problem.

Xcel has pledged several million dollars this year and is looking for other investors in a next-generation Colorado plant of up to 600 megawatts that would use integrated gasification combined cycle technology that can capture 90 percent or more of the CO2 and mercury emissions. The company hopes the technology can be adapted to existing plants.

Boosting efficiency

The “clean-coal” technology uses a chemical process to convert coal into a gas. It is burned in a modified combustion turbine to generate electricity, increasing the efficiency of the plant and reducing emissions. The captured CO2 can be stored underground or piped to depleted oil wells for storage and to aid in the extraction of hard-to-get oil.

A 1970s-vintage gasification plant in North Dakota already is capturing thousands of tons daily of CO2 for injection into an oil field in Saskatchewan, Canada. But integrating the technologies for widespread use is going to require the Bush administration to do more than talk about clean coal, critics say. The Great Plains report said federal spending on related research and development has declined over the past several years.

“Early adopters of these technologies face greater risks, especially with low-rank coals,” said Charlie Bullinger, senior engineer with Great River Energy of Elk River, Minn. “That’s why we’re encouraging an expansion of federal incentives to reduce the risk.”

President Bush has pointed to clean coal as a partial solution to America’s energy issues, including conversion of coal to liquid fuels, and approved some research funding. But the administration has barely acknowledged global warming despite mounting scientific evidence and even calls by industrialists for American leadership in “green technologies.”

Beyond wind and hydro

“We’re doing a lot with wind and some with hydro,” said Mike Gregerson, a retired Xcel engineer who was a technical adviser to the Great Plains group. “Down the road the feds are going to [limit carbon emissions], we feel, but the technology won’t be proven yet.

“The U.S. needs to get going,” he said. “My history in the utility industry says if you encourage the utility industry now, they’ll get to where they need to go.”

Xcel, under Kelly already the largest U.S. seller of wind-generated electricity, has joined with several other leading utilities calling on the industry to lead globally in carbon-avoidance. Kelly said Xcel will need industry and government partners to prove that large-scale coal gasification paired with carbon sequestration can work over the next decade.

“We need to invest in this technology and we can fix this,” said Kelly. “We do need some help from the government.”

Bill Grant, Midwest director of the Izaak Walton League, a national conservation organization, had this to say: “We can ignore this reality until it’s too late to avert the worst effects of global warming, or we can lead by example at home and implement low-carbon coal technologies and carbon capture.”

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com

From 2006 Gov’s Wade In event!

Then, she was almost in over her head, and now she’s as bad as Governor Pawlenty, shamefully promoting IGCC, coal gasification, when the truth is out there for all the world to see…

In today’s News Journal:

Minner sees role for NRG coal plant

Gov. Ruth Ann Minner still believes a coal gasification plant could be right for Delaware, despite the Public Service Commission’s endorsement this week of wind power.

The governor said it might make sense to combine wind power with NRG Energy’s proposed coal plant, a combination that provoked skepticism from some energy specialists.

Tell Gov. Minner what you think about her stand on IGCC: (302) 744-4101 Dover; (302) 577-3210 Wilmington.

Email her Chief of Staff, Mark Brainard at mark.brainard@state.de.us

What did NRG propose? Worth a look see to check out their professional redaction job:

CLICK HERE FOR SITE WITH RFP BIDS

Gov. Minner puts her credibility on the line for NRG? Why? IGCC (coal gasification) is the biggest boondoggle to come down the pike. The people of Delaware are not aware of the details of the NRG proposal because it has been kept shrouded in secrecy. But it’s all public information in Minnesota’s Excelsior Energy docket about the PPA for the Mesaba Project.

ALJs’ Decision Here

Shouldn’t Gov. Minner be paying attention to this extensive record and detailed decision?

What the record, agency staff analysis, and the ALJ decision in our proceeding demonstrates, and NRG has NOT proven otherwise, is that IGCC is not environmentally superior. It does not significantly reduce major pollutants when compared with state of the art coal. IGCC does not do one thing for CO2 levels other than greatly increase them! Like the Mesaba Project, NRG does not commit to carbon capture and storage (CSS), and that’s because it’s not a demonstrated option, no commercial IGCC plant is doing it. CSS is not happening anytime soon, and the DOE said so in its addendum to the Gilberton coal-to-liquids EIS.

DOE Addendum – Blog Post

Shouldn’t Gov. Minner be paying attention to the DOE?

Another thing the Excelsior record demonstrates is that IGCC is very very costly, and not in the public interest. The whole point of HB6 and the PSC’s RFP docket is to gain price stability for the SOS ratepayers, and IGCC, with its reliance on a commercially undemonstrated technology, one deemed by the DOE to be “too risky for private investment” is not a reasonable way to achieve it. IGCC, because it is “too risky,” can only gain a foothold with massive federal and state subsidies, on the backs of the taxpayers, and what would we get? Another economic and environmental disaster like Wabash River, so unreliable it took 22 full time engineers to cobble it together, it was shut down because it was inoperable, it was routinely violating the water permit… great idea…

Shouldn’t Gov. Minner be paying attention to the past IGCC projects?

As I testified before the PSC on Tuesday, admonishing DNREC’s Phil Cherry for his astounding false statements in support of IGCC, there’s just no excuse for supporting IGCC given the MN record that is PUBLIC for the world to see and consider. Their statements are contrary to the evidence. Politically, that’s a bad spot to be in.

Shouldn’t Gov. Minner recognize the opportunity to direct Delaware energy policy in a sustainable, renewable direction? Shouldn’t Gov. Minner reject unreliable, costly and risky IGCC?

Not long ago, I was calling and emailing the few contact people I could find about those “National Interest Electric Transmission Corridor” meetings — THREE meetings for the whole damn country — THREE. That entire program is such a crock, because we don’t need no stinkin’ transmission… however, THEY do if they want to accomplish their goal of bulk power transfer, capturing megabucks, holding pass-through communities hostage as they build a grid on local land…  WHO BENEFITS?  WHO PAYS?
I wasn’t the only one incensed by their THREE meetings. From Sen. Charles H. Schumer, D-NY:

“This uninformed decision by the DOE simply defies logic and places an unacceptable and noxious burden on the communities that would be affected by NYRI’s proposed power line,” Schumer said. “Why is it easier or better to hold a hearing in Rochester than in Utica, or Oneonta or Norwich or Middletown or another locale easily accessible to the communities that lie directly in its path? I am very concerned that DOE may be trying to duck these communities so their voices won’t be heard. This needs to be immediately rectified by setting a hearing in a locale easily accessible to the communities that lie directly in its path.”

Schumer: More power hearings needed

Way to go! And lo and behold, they scheduled FOUR more, again, for the whole country, only FOUR:

The U.S. Department of Energy (DOE) will hold four additional public meetings for the two draft National Interest Electric Transmission Corridors (NIETC) during the 60-day public comment period, which closes on July 6. The four additional meetings will be held in June in Phoenix; Las Vegas; Pittsburgh, Penn.; and Rochester, N.Y.

DOE sets more meetings for draft National Corridors

And why would they want transmission corridors declared? Why to build transmission lines, of course:

Study group recommends 2 massive power lines

… it’s getting a little greedy in here…

Where is all this going?  Check out the PJM 2007 Strategic Report.

… sigh…

Oh, it was a LONG meeting. It makes an equally long post.

As in Minnesota, it’s not quite dead, but the plug has been pulled and we’re waiting for the inevitable.

The good news is that the PSC did adopt the staff recommendation for a wind/gas hybrid! Sure makes my day when state agency staff recommend something I’ve been pushing for so long, and then the PSC actually adopts it, like wow, a bit of progress. And staff is recommending a big broad look at energy policy. I don’t have the exact quote, but in his presentation to the Commissioners explaining how they got to proposing the hybrid, Bob Howatt, PSC staff, said something like, having done all the work of analyzing the proposals, and seeing the necessary path, “It’s time staff just said what needs to be done” (Bob, if that’s off, let me know). They did a superb job on it, of course I can pick at points, but the overview was, indeed, just what was needed, and this is a trend that needs nurturing — FORETHOUGHT IN POLICY!

Delaware PSC staff – wind/gas combo!

Here’s the report from the News Journal, something to do while I’m finishing my write up:

PSC endorses offshore wind farm with gas backup for Delmarva

And yes, DNREC’s Phil Cherry needs a little awakening, spouting things about IGCC that are patently false. So much for his credibility as a public servent charged with protecting the state’s natural resources! I’ll be sending him his own personal copy of the ALJs’ recommendation that the Mesaba PPA be denied. He’s got access, they know the Mesaba info is all public record, and there’s no excuse for misrepresenting IGCC — which then leads me to question… WHY???

PSC DECISION

The PSC motion passed was to accept the staff recommendation of the wind/natural gas hybrid EXCEPT that both Conectiv and NRG are to negotiate at same time. Bluewater Wind is also to be evaluated as single supplier, and that the PPA shall be reduced but it shall not be a fixed figure, to provide flexibility. The precise words will appear in a PSC order soon.

Here’s the PSC Staff Recommendations (p. 63-71, click below for link) in its entirety — it’s too well done to omit any of it:

VI. PSC STAFF RECOMMENDATIONS

In order to integrate the complex components of the RFP process and develop a workable solution, the Commission must consider the possibilities from the State of Delaware’s perspective. It is important to have dependable energy sources, a reliable energy system, reasonable prices and price stability. The General Assembly seeks to ensure that innovative baseload technologies, environmental benefit, existing fuel and transmission facilities, fuel diversity and use of existing brownfield sites are valued in any generation solicitation. Staff recommends a course of action that gives back to Delaware more control of its energy future through a supply portfolio that satisfies the EURSCA’s underlying intent. Accordingly, Staff

recommends that the State craft a comprehensive package of energy options that will allow utilities, their customers, and Delawareans to reap maximum benefits over time.
The critical nature of efficient management of future energy supply options drives Staff’s recommendation. Delmarva should have the first option to manage future SOS requirements, with the caveat that such management would require a commitment to minimizing and stabilizing overall SOS energy costs. Staff believes that by requiring Delmarva to conduct an IRP, the EURCSA intended Delmarva to be responsible for managing the resources. Certainly, it is in the best position to do so. Nevertheless, Staff further recommends that should Delmarva decline its responsibility, the State should issue an RFP for energy management services, at Delmarva’s cost, to manage the supply options sought in Delaware’s portfolio.

Staff believes that each of the parties that submitted bids in this RFP are serious about bringing new generation to Delaware, and thus recommends granting Bluewater and Conectiv the first opportunity to negotiate within the construct of the RFP. Thus, Staff recommends that Delmarva be directed to negotiate with Bluewater for an offshore wind farm in the 200-300 MW range and with Conectiv Energy for a 150-200 MW CCGT with synchronous condenser capabilities, to be located in southern Delaware at a site to be determined. Although neither Bluewater’s nor Conectiv’s current proposal is a complete solution to Delaware’s energy concerns, they each provide value to the long-term energy supply portfolio in Delaware. Wind power coupled with the availability of a gas fired turbine provides a secure energy source with minimal environmental impact. Although Staff’s recommendation is not the least expensive solution, it is a complementary energy arrangement that will help to mitigate global warming and reduce dependence on fossil fuels. Taken together, these projects, when appropriately managed, should have a positive impact on price stability.

Staff recognizes that this is not a perfect solution and that the bidders may be unwilling to support such a concept. Moreover, this option creates an additional layer of complexity, because additional natural gas capacity would be necessary to locate a natural gas turbine in southern Delaware. However, given the attendant benefits, Staff believes that this option should be pursued.

If Bluewater and/or Conectiv do not support Staff’s recommendation, Staff agrees with the IC that a renewable-only RFP is appropriate. Depending on the form of renewable resource bids submitted, Staff may recommend that Delmarva self-build a CCGT.

a. Essential Energy Portfolio
Staff’s recommendation to negotiate long-term contracts with Bluewater and Conectiv is not a final solution to Delaware’s energy needs. Staff recommends a portfolio approach, but the above recommendation relates solely to SOS customer needs. Staff recommends that the Commission endorse the portfolio planning approach for SOS supply and ensure that Sustainable Energy Utility concepts (to the extent they fit) are woven into Delmarva’s IRP.

b. The Hybrid Need/Benefit
Staff refers to the wind farm/gas turbine as the Delaware Hybrid. It is a combination that creates a synergistic benefit beyond that of either project standing alone. The wind farm may lack reliability on days when peak load is needed, whereas the gas turbine, while not the worst environmental offender by far, lacks the cleanliness and low fuel costs of a wind farm. The gas turbine provides peak supply, and the wind farm provides clean energy. In addition to environmental benefits, wind farms can provide voltage support, depending on the types of turbines incorporated in the plan. Because both projects would be located in southern Delaware, system reliability, particularly voltage and reactive support, for the entire Delmarva Peninsula will be enhanced. This coupling of innovative wind technology with veteran gas turbine technology can provide the equivalent of a smaller base load generation plant.

c. Risk Assessment
Several risks accompany Staff’s recommended proposal. First, offshore wind farms are more expensive and federal permitting practice is unclear. The exclusive utilization of a gas turbine for peaking and Voltage Amps Reactive (VAR) support is also expensive. Building smaller scale plants miss the economies of scale associated with larger generating units. Second, a long-term contractual arrangement could be overpriced. However, the financial risk of Staff’s recommendation is arguably outweighed by innovation, positive environmental impact, capitalization on existing fuel and transmission infrastructure, promotion of fuel diversity, and enhanced reliability. The addition of generation in southern Delaware can help meet Delaware’s needs and avoid the need for a $1.2 billion transmission line. In addition, the Delaware Hybrid will still be smaller in capacity than the projects offered by several of the larger sized bids and provide less energy than those projects, thereby reducing the overall risk associated with them. Staff concludes that the financial risks associated with its recommendation are manageable and limited and that its recommendation satisfies the intent of the EURCSA.

VII. PATH FORWARD

a. Delmarva Direction
Staff recommends that Delmarva be directed to negotiate in good faith with both Bluewater and Conectiv in an attempt to finalize a PPA for the energy needs defined above. Staff further recommends that Delmarva provide at least weekly updates on the progress of negotiations. Staff also recommends that Delmarva consider the options for regulated generation, to the extent that it may enrich the negotiated outcomes.

b. PPA Negotiations
Staff recommends independent oversight of PPA negotiations, either through an existing contracting organization or with a firm specializing in PPA negotiations.

c. Critical Concerns
There are several critical concerns that should be addressed in this proceeding. First, the potential for a non-bypassable surcharge, the need to curtail customer choice and the potential to re-regulate generation all must be considered. Because customer choice remains a distinct possibility, Delmarva is concerned with potential customer migration should SOS energy prices surpass energy market prices. In the event of migration, Staff recommends rolling generation capacity and ancillary service charges related to the PPAs into a non-bypassable surcharge payable by all Delmarva customers. Staff declines to address the issue of curtailing energy supply choice at this time. If management of the SOS energy portfolio is successful, customer choice will not likely be an issue. However, customer choice should remain an option for those customers desiring supply service from other parties. Accordingly, Staff recommends deferring any potential action intended to eliminate customer choice.

Finally, Staff addresses the suggestion to return to regulation of public utilities in Delaware. The EURCSA confers permissive authority to Delmarva to build regulated generation. Staff concludes that re-regulation should remain an option pending the conclusion of the RFP proceeding. The State Agencies may exercise the self-build regulated option if none of the bidders are willing to provide the requested generation.

VIII. CONCLUSIONS

The review and analysis mandated by the EURCSA was initiated in August 2006 and has continued over the last nine months. The process has provided a critical learning experience for the participants. More importantly, it has afforded all participants in this process a tremendous opportunity to be educated and have a better understanding through public input of the issues surrounding the building of new generation resources in Delaware.

Staff’s conclusions with respect to the process at this time are as follows:

1. Delaware needs additional generation in Delaware. Maintenance of the status quo presents enormous risks and uncertainties associated with the potential for older unit shutdowns within and outside the State, the possibility (indeed, probability, as evidenced in recent SOS auction results) of being held hostage to PJM’s new capacity “Reliability Pricing Model” and rapidly rising capacity prices, coupled with an unquenched growth in demand for energy on the Delmarva Peninsula. Although a meritorious argument exists that no single risk is imminent, the uncertain future indicates that it would be in Delaware’s best interest to take control now of its future generation needs before an emergency arises. With the potential for impending unit shutdowns in southern Delaware, and the consequences of aging generation resources, future reliability issues and more transmission congestion on the Peninsula are likely. It is critical that we plan now for the anticipated growth in population as people migrate to Delaware for better business opportunities and retirement advantages. It should be noted that only eight years ago, Delmarva was forced to implement rolling blackouts in southern Delaware in order to prevent a cascading event that would have potentially caused widespread outages on the Peninsula. The lack of sufficient transmission capacity and native generation located in southern Delaware contributed to the severity of the outage by limiting the amount of reactive power available to maintain the system. Without proper planning, future population growth will only exacerbate this problem as older generation units are retired.

2. In light of the need for both reliable electric service and clean renewable energy in today’s environment, negotiation with two companies that desire to build additional generation resources in Delaware sends the message that Delaware is serious about managing its own energy future. Staff recommends that Delmarva be directed to negotiate in good faith with both Conectiv and Bluewater for a hybrid energy supply that combines a 200-300 MW offshore wind farm with a 150-200 MW synchronous condenser CCGT in Sussex County to determine these bidders’ interest in meeting Delaware’s needs.

3. Staff also recommends the development of an energy portfolio policy that includes demand response, energy efficiency, distributed renewable energy, new Delaware generation, market contracts and spot market purchases with adequate transmission to support delivery of regional supplies as the optimal arrangement for Delaware.

4. Under this portfolio approach, Delaware generation needs to be the right size, in the right place, available at the right time, and developed with the right pricing structure to meet Delaware’s needs — not the needs of project developers. Moreover, Delaware’s energy portfolio should not be at the mercy of the regional energy market that, in the past, has not been kind to Delaware or its neighbors.

5. Delaware has the option to provide regulated solutions for securing SOS energy supply. Such an option could be pursued either through negotiations with bidding companies, through Delmarva’s delivery business or through other utility companies desiring to provide services in Delaware. If negotiations fail, regulated solutions should be considered to structure suitable deals through negotiations.

6. The economics of the current bid process provide the bidders with returns that are only marginally above a typical regulated project. This distinction is caused by the reasonable assurance of revenues to cover changing conditions in the longer term. Staff recommends that the risk of some level of future cost change may be assumed by the buyer in negotiations, but only to the extent it results in real initial bid price savings.

7. The current Delaware environment appears to disaggregate energy supply responsibility. While all the portfolio components can be complementary, the legislative mandate of 30% market purchases, set levels of demand resources managed by the Energy Office’s Sustainable Energy utility, new generation resources managed by the Commission, and the potential for market contracts negotiated by Delmarva might not be the most effective set of conditions. Staff recommends investigation of a unified authority (private, public or joint) to direct Delaware’s energy affairs (perhaps in cooperation with the State Agencies overseeing this RFP).

8. With respect to actively managing the energy portfolio, Staff has serious reservations about Delmarva’s willingness to voluntarily assume that role (and, to be fair, its attendant risks). Staff recommends that Delmarva be given the first option to serve as resource manager, with performance expectations set and understood. Staff further recommends that should Delmarva refuse the option, the State should contract with a separate party for such resource management, at Delmarva’s cost.

9. As reported in the IC’s Interim IRP Report, there is little or no impact on the relative bid evaluations with respect to Delmarva’s suggested IRP solutions. Staff’s additional review revealed no significant change in the relative rankings even with modified ranking weights. Staff recommends acceptance of the bid evaluation as completed by the IC.