Energy RFP Q&A - Illinois Power Agency - 2009 Procurement for Ameren Illinois Utilities

The Procurement Administrator will endeavor to answer all submitted questions in a timely and professional manner in accord with the goals of the RFP process. Questions will be answered by the Procurement Administrator in the order they are received, except in those cases where a specific question requires additional consideration, thereby extending the response period.

Invoices will be issued shortly following RECs award notifications, they will be sent to winning bidders before the end of May, with payment due by June 30th, as stated on the Supplier Fee Form.

Yes, the results have been posted to the ICC website.

Please clarify the definitions of the On-Peak Settlement Period "all hours starting Hour Ending ("HE") 0800 through HE 2300 Eastern Prevailing Time ("EPT") for weekdays excluding NERC holidays during the Term" and the Off-Peak Settlement Period "all hours of all calendar days in Eastern Standard Time ("EST") during the Term that are not On Peak hours in the ISDA Confirmation Letter."

There would be no overlap of hours, as the contract states Off-Peak would be all hours in EST that are not On-Peak hours. Therefore an hour cannot be both On and Off Peak.

Since the Midwest ISO (MISO) operates its market in EST year round, this is how the Financial Swap Market was established. This is consistent with how ICE trades the same product on its exchange.

The schedule in the RFP states that bidders will be notified of selection on May 8, 2009, but Section 6.3 states: "All bids must remain open, firm and binding until 5:00 pm on May 8, 2009, or until the ICC has accepted or rejected the results of the procurement event." Please explain what "or until the ICC has accepted or rejected the results of the procurement event" means. Is there a chance bids will have to be open longer than 5:00 pm on May 8th?

No. The ICC may accept or reject the results of the procurement sooner than 5:00 pm on May 8, 2009, at which point non-winning bids are closed. The clause highlighted is intended only to clarify that the bids only need to remain open until the ICC decision, even if it occurs sooner than 5:00 pm on May 8, 2009.

The supplier fee is preliminarily estimated to be $0.04/MWh. The final supplier fee and additional information will be posted on the Energy Bidder Registration by Monday, May 4th.

If a bidder was successful in the 2009 capacity procurement and provided a parent guaranty for the associated capacity contract(s), and then is successful in the 2009 energy procurement, can the capacity contract guaranty be replaced by a single consolidated guaranty that covers the capacity and energy contracts?

Yes, in this case, the Ameren Illinois Utilities would prefer to receive a single consolidated guaranty for both the capacity and energy contracts that would replace the capacity contract guaranty. Please see the Bidder Registration page for MSWord versions of the Form of Guaranty for bidders with both capacity and energy contracts.

(Posted 5/1/09, Revised 5/4/09)

Successful bidders for both the 2009 capacity and energy procurements can but will not be required to provide separate parent guaranties. Rather, they are encouraged to provide a single consolidated guaranty to cover all resulting capacity and energy Fixed Price Customer Supply Contracts for the three Ameren Illinois Utilities. [Note that Fixed Price Customer Supply Contracts also include BGS-FP Supplier Forward Contracts in effect with the AIUs after May 31, 2009.] Since the AIUs have determined a single unsecured credit limit for bidders, providing a single consolidated guaranty avoids dividing the unsecured credit amount among guaranties relating to these contracts. Having a single consolidated guaranty is also consistent with any collateral requests (margin calls) that would include both capacity and energy market exposure calculations.

The pre-bid LC and the performance assurance Form of LC (Exhibit B to the Confirmation Letter) contain language (in sections 5 and 6, respectively) that require the bank providing the LC to transfer any amounts drawn on that LC "at the opening of business on the first Business Day next succeeding the date of such drawing" if the drawing notification is made on or after 11:00 AM. What time is the "opening of business" for the purpose of these LCs?

The Ameren Illinois Utilities will expect any such transfer of funds by 10:00 AM on the next Business Day in the relevant time zone.

Please see the Bidder Registration page for MSWord versions of the Form of Guaranty for bidders with various combinations of BGS, capacity and energy contracts that have the information for the "Guaranteed Party" filled in.

Please note that a single consolidated Guaranty (instead of three Guaranties) is recommended to cover the unsecured credit offered by the three Ameren Illinois Utilities.

(Posted 5/1/09, Revised 5/4/09)

Will winning bidders be permitted to amend their guaranties (e.g., from $40 million, currently the unsecured cap for the AmerenIP contract for highest rated entities) to lower amounts, if the amount of load won justifies a lower maximum amount?

Yes. Please note that successful bidders will be required to provide collateral to cover any amount by which market exposure exceeds the guaranty. Thus lowering the guaranty below the unsecured credit award may increase that bidder's collateral requirement.

If a bidder was awarded blocks as a result of the 2009 Capacity RFP and posted cash collateral to the Ameren Illinois Utilities, how will the guaranties if that bidder is also awarded blocks as a result of the 2009 Energy RFP? If guaranties are issued for the Energy RFP up to the awarded collateral threshold, will that also cover the Capacity RFP, such that the cash collateral could be returned? Would that change the guaranty language?

Guaranties provided for successful bidders in the 2009 AIU Capacity and/or Energy Solicitations will cover both capacity and energy contracts. Thus if a successful bidder provided cash or a letter of credit as collateral for capacity contracts and is awarded any energy contracts, that bidder may put a guaranty in place to cover both contracts and AIU will return any collateral amounts, provided that any market exposure calculated at that point is less than the guaranty, i.e. additional collateral is not required.

The monetary value for the monthly settlement will be determined by summing the hourly products of the difference between the Fixed Price and the Floating Price times the MW quantity for each hour in the appropriate calendar month. The Fixed Price will be provided from the terms of the ISDA Confirmation Letter and the hourly Float Price can currently be obtained from the Midwest ISO webpage under the "Market Info" tab.

As stated in section 4.1 of the RFP, the products will be divided between the three Ameren Illinois Utilities as follows: 50% to AmerenIP, 33% to AmerenCIPS, and 17% to AmerenCILCO.

Consistent with paragraph 5.5 of the RFP for Standard Wholesale Energy Products, an unsecured credit limit (collateral threshold) has been determined for each bidder or its designated guarantor. A bidder's guarantor may provide a guaranty in any amount it chooses, provided, however, the Ameren Illinois Utilities (AIUs) will assign a value to a guaranty only up to the unsecured credit limit determined for that guarantor. The bidder will be required to post cash or letter of credit to cover amounts of calculated exposure that exceed the lower of (i) the unsecured credit limit specified by the guaranty or (ii) the guarantor's credit limit.

The Fixed Price Customer Supply Contract concept attempts to link the 2009 capacity RFP and 2009 energy RFP contracts (and any other contracts designated as Fixed Price Customer Supply Contracts) through cross default (see Section 1(j) of the form agreement), close-out netting (see Section 1(i) of the form agreement) and collateral netting (see Section 8(a) of the form agreement and Total Exposure Amount discussion below). In this way, the credit exposure and default risk of both parties under Fixed Price Customer Supply Contracts is mitigated to some degree.

As discussed above, the Total Exposure Amount is the method of providing for collateral netting across all Fixed Price Customer Supply Contracts to allow for more efficient use of collateral and of credit limits. For the Confirmation Letter, the normal definition of �Exposure� applies. For other Fixed Price Customer Supply Contracts, however, �exposure� is defined pursuant to the particular Fixed Price Customer Supply Contract and will apply and be netted with the Confirmation Letter �Exposure� to determine the Total Exposure Amount applicable across all Fixed Price Customer Supply Contracts.

The structure of the Energy RFP contract is a long form confirmation; meaning that all transactions between a bidder and a utility will be placed into Table 1 and will be governed by this single document. The long form confirmation incorporates the 1992 ISDA Master Agreement and 1994 ISDA Credit Support Annex. This structure is different from a master agreement with different confirmations underneath it, but functionally works in the same way by having all transactions and legal documents act as a single agreement; the long form confirmation, though, is one document with only one signature block.

The monetary value for the monthly settlement will be the determined by summing the hourly differences between the Fixed Price and the Floating Price for the appropriate calendar month. The Fixed Price will be provided from the terms of the ISDA Confirmation Letter and the hourly Float Price can currently be obtained from the Midwest ISO webpage under the "Market Info" tab.

The ICC currently has Special Open Meetings scheduled for Thursday, May 7, 2009 at 10:30 am and Friday, May 8, 2009 at 10:30 am with the Energy RFP results on the agenda.

Each bidder's total collateral threshold under the Ameren Illinois Utilities Capacity and Energy RFPs is consistent with the ComEd Standard Products RFP. The values in the individual contracts will be different because the collateral threshold is divided over three utilities, but the total amount is the same.

Winning energy bidders will execute three contracts, one with each Ameren Illinois Utility.

The Bidder Registration Form and Form of Pre-Bid Letter of Credit, along with submission instructions for both are now posted on the Energy Bidder Registration page. Bid submission materials are also available. If you are affiliated with a pre-qualified bidder but do not have the password to access the page, please contact aiurfp@levitan.com.

Information regarding submission and terms of the pre-bid letter of credit can be found on the Energy Bidder Registration page. If you are affiliated with a pre-qualified bidder but do not have the password to access the page, please contact aiurfp@levitan.com.

Winning bidders will have the option to provide either a single guaranty covering all three Ameren Illinois Utilities or three separate guaranties, one for each transaction. The Ameren Illinois Utilities' credit personnel will work with winning bidders following award notifications to answer any bidder-specific questions.

Yes; the total amount of unsecured credit offered to affiliated bidders will be limited to the maximum of $80 million of unsecured credit that could be offered to any single bidder. This maximum limit will be applied regardless of whether the affiliated bidders rely on a parent company guarantee. If the total of the unsecured credit amounts calculated for the affiliated bidders exceeds the $80 million maximum, then the $80 million of unsecured credit will be divided among the affiliated bidders pro rata with the unsecured credit amounts calculated for the individual affiliated bidders.

As stated in the RFP, the Ameren Illinois Utilities will enter into binding contracts within three days after the ICC decision approving the results of the procurement event. Performance assurance must be provided immediately following contract execution, that is, the performance assurance will also be due within three business days of the ICC decision. Under the IPA Act, the ICC is allowed two business days to make its decision. If they take the full two days, the decision and award notifications will take place on Friday, May 8th, and contracts and associated documents will need to be executed and in place by Wednesday, May 13th. If the ICC takes less time to make its decision, the notification and execution dates will be moved up accordingly.

The Procurement Administrator and Procurement Monitor will submit their reports to the ICC on Wednesday, May 6th. The ICC will then have until Friday, May 8th, to accept or reject the results of the RFP. It is possible that the ICC will not take the whole two days, but nothing earlier than May 8th can be guaranteed. If the information is available in advance, we will notify bidders of the ICC's meeting schedule. Winning bidders will have three business days from the ICC decision to execute contracts and post performance assurance.

The Energy RFP, page 4, indicates that the floating price will be at the Ameren Illinois Utilities Load Zone, which implies a single settlement node. However, the confirmations indicate different settlement indices for each of the three utilities. Will there be different settlement points and different settlement prices for each utility?

AMIL.BGS3 (AmerenCILCO), AMIL.BGS6 (AmerenCIPS) and AMIL.BGS9 (AmerenIP) are slices of the AIU system with the same LMPs.

Section 5.6, Bidder Registration, of the Energy RFP requires pre-qualified bidders to provide a pre-bid irrevocable letter of credit (ILOC) in the amount of $250,000. The RFP also specifies the form, date, and validity period for the ILOC.

This requirement is consistent with the 2008 AIU Energy RFP that was successful last year. The Ameren Illinois Utilities have not established a procedure or rules for accepting cash or other collateral in place of the pre-bid ILOC. The Procurement Administrator does not consider the ILOC requirement unduly burdensome for bidders. Therefore cash or other collateral cannot be provided as a substitute for the pre-bid ILOC.

The Bidder Registration form will be available on either April 24th or April 27th. The final Form of Pre-Bid Letter of Credit is scheduled to be released on or before April 29th, as stated in the RFP, although efforts will be made to release it sooner, given the tight schedule. The deadline for submitting the Pre-Bid Letter of Credit and the Bidder Registration Form has been changed to Monday, May 4th, in order to give bidders as much time as possible to secure the necessary LC. Additional instructions will be made available once the forms are issued.