Exhibit 10.8
------------
FOURTH AMENDMENT TO THE
POWER PURCHASE AGREEMENT BETWEEN
ZOND WINDSYSTEM PARTNERS, LTD
AND PACIFIC GAS AND ELECTRIC COMPANY
(PG&E Log No. 01W017)
This Amendment, dated as of the latest date set forth below ("Amendment"),
is entered into by and between PACIFIC GAS AND ELECTRIC COMPANY ("PG&E"), a
California corporation, and ZOND WINDSYSTEM PARTNERS LTD., Series 85-C, a
California limited partnership, ("Seller"). PG&E and Seller are sometimes
referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
1. Wind Developers, Inc. ("WDI"), Seller's predecessor, and PG&E entered
into an interim Standard Offer No.4 Power Purchase Agreement ("PPA") dated
January 7, 1985, for the purchase and sale of electric energy and capacity from
a wind generating facility managed by Zond that is located at the Altamont Pass
in Alameda County, California ("Facility"). The PPA was assigned by WDI to Zond
Systems, Inc. ("Zond") and thereafter assigned by Zond to Seller. The PPA was
subsequently amended by agreement of the Parties. The PPA and any amendments
thereto that were executed prior to the date of this Amendment are collectively
referred to herein as the "Agreement."
2. The Agreement was scheduled to expire on December 29, 2005, but was
extended through January 31, 2006 by letter agreement between the Parties dated
December 28, 2005.
1
3. On January 26, 2004, the California Public Utilities Commission ("CPUC")
issued Decision 04-01-050 ("the Decision"), in which it ordered the utilities to
offer five-year SO1 contracts at short-run avoided cost prices, as may be
modified by the CPUC, to qualifying facilities ("QFs") with expiring PPAs,
pursuant to a Standard Offer 1 ("SO1") contract provided: (1) the QF was in
operation and under contract with a utility to sell power at any time during the
period between January 1, 1998 and the effective date of the Decision; and (2)
the QF contract expired or is set to expire before December 31, 2005. The
Decision provides that any new pricing methodology adopted by the CPUC would
apply to the five-year SO1 contracts.
4. The California Court of Appeal issued an opinion on review of the
Decision, requiring any overpayments made to a QF operating under a five-year
SO1 contract to be subject to refund to the utilities if the CPUC determines
that the prices paid under that contract exceed the utilities' avoided costs.
Southern Cal. Edison Co. v. Public Utilities Comm., 128 Cal. App. 4th 1 (2005).
5. The Agreement was executed by the Parties prior to: (1) the formation of
the California Independent System Operator ("CAISO"); and (2) the enactment of
the California Renewables Portfolio Standard ("RPS") Program, Public Utilities
Code ss.ss. 399.11 through 399.16.
6. PG&E and Seller hereby amend the Agreement to comply with the Decision,
as modified by the Court of Appeal, and to make certain other modifications of
the Agreement, as set forth below.
AGREEMENT
In consideration of the premises described above and the terms and
conditions set forth below, PG&E and Seller agree to modify the Agreement and
agree as follows:
2
1. DEFINITIONS
-----------
Any term not defined herein shall have the meaning ascribed to it in the
Agreement.
2. TERM OF AGREEMENT
-----------------
This Amendment shall be in effect from December 30, 2005 through December
29, 2010 (the Extended Term), provided that Seller shall have the right to
terminate the Agreement upon the delivery to PG&E of written notice at least
thirty (30) days prior to the requested termination date.
3. ENERGY PURCHASE
---------------
A. PG&E shall purchase and accept delivery of Seller's Net Energy Output
from the Facility.
--------
B. Through July 16, 2006 PG&E shall pay Seller for energy deliveries
pursuant to the fixed energy price specified in the Third Amendment to the PPA
dated November 13, 2001. PG&E shall pay Seller for energy deliveries during the
remainder of the Extended Term at prices equal to PG&E's short-run avoided cost,
according to the methodology that is approved and may be revised by the CPUC for
payments to QFs.
C. Payment for energy shall be based on the time of delivery. The time
periods currently in effect are shown in Appendix A to this Amendment. Time
period definitions may change from time to time as determined by the CPUC.
D. PG&E has contracted to purchase the energy associated with the
Facility with the nameplate rating specified in Article 3 (b) of the Agreement.
- --------
If Seller installs a Facility with a nameplate rating greater than that
--------
specified in Article 3 (b) of the Agreement, PG&E shall not be required to
accept or pay for energy associated with the incremental increase in the
nameplate rating under this Amendment.
3
E. Energy payments made to Seller pursuant to this Amendment will be
adjusted by an energy loss adjustment factor, as approved by the CPUC and may be
modified by the CPUC from time to time.
4. CAPACITY PURCHASE
----------------
A. PG&E shall pay Seller for as-delivered capacity during the Extended
Term at prices authorized (and as may be revised) by the CPUC.
B. Payment for capacity shall be based on time of delivery. The time
periods currently in effect are shown in Appendix A to this Amendment. Time
period definitions may change from time to time as determined by the CPUC.
C. PG&E has contracted to purchase the as-delivered capacity associated
with the Facility of the nameplate rating described in Article 3 (b) of the
--------
Agreement. If Seller installs a Facility with a nameplate rating greater than
--------
that specified in Article 3 (b) of the Agreement, PG&E shall not be required to
accept or pay for as-delivered capacity associated with the incremental increase
in nameplate rating under this Amendment.
D. As-delivered capacity payments made to Seller pursuant to this
Amendment will be multiplied by a capacity loss adjustment factor (CLAF) as
approved by the CPUC and may be modified by the CPUC from time to time.
5. ENVIRONMENTAL ATTRIBUTES
------------------------
A. Seller hereby agrees to convey and hereby conveys to PG&E all
Environmental Attributes (as defined below) associated with the Net Energy
Output and as delivered capacity from the Facility purchased by PG&E during the
--------
Extended Term. Seller represents and warrants that during the Extended Term, as
defined in Section 2 of this Amendment, Seller holds the rights to all
Environmental Attributes from the Facility, Seller has not contracted nor
--------
4
intends to contract to transfer any such rights to any third party and Seller
agrees to convey and hereby conveys all such Environmental Attributes to Buyer
as included in the delivery of the energy and capacity from the Facility. As
--------
used in this Amendment, the term "Environmental Attributes" means any and all
benefits, emissions reductions, offsets, and allowances, howsoever entitled,
directly attributable to the generation from the Facility. Environmental
--------
Attributes include but are not limited to: (1) any avoided emissions of
pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen
oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided
emissions of carbon dioxide (CO2), methane (CH4) and other greenhouse gases
(GHGs) that have been determined by the United Nations Intergovernmental Panel
on Climate Change to contribute to the actual or potential threat of altering
the Earth's climate by trapping heat in the atmosphere; and (3) the reporting
rights to these avoided emissions such as Green Tag Reporting Rights. Green Tag
Reporting Rights are the right of a Green Tag Purchaser to report the ownership
of accumulated Green Tags in compliance with federal or state law, if
applicable, and to a federal or state agency or any other party at the Green Tag
Purchaser's discretion, and include without limitation those Green Tag Reporting
Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any
present or future federal, state, or local law, regulation or bill, and
international or foreign emissions trading program. Green Tags are accumulated
on kWh basis and one Green Tag represents the Environmental Attributes
associated with one (1) MWh of energy. Notwithstanding the forgoing, the term
"Environmental Attributes" shall not include (i) any energy, capacity,
reliability or other power attributes from the Facility, (ii) production or
--------
other tax credits associated with the construction or operation of energy
projects or the production of electricity from the Facility and other financial
--------
incentives in the form of credits, reductions, or allowances associated with the
Facility or the production of energy from the Facility that are applicable to a
- -------- --------
5
state or federal income taxation obligation, (iii) fuel-related subsidies or
"tipping fees" that may be paid to Seller to accept certain fuels, or local
subsidies received by the generator for the destruction of particular
pre-existing pollutants or the promotion of local environmental benefits, (iv)
emission reduction credits encumbered or used by the Facility for compliance
--------
with local, state, or federal operating and/or air quality permits and (v) any
payment or other subsidy made or granted to the Seller by the California Energy
Commission (CEC) or any other governmental entity with respect to the production
of energy from or the capacity of the Facility.
--------
B. Seller agrees that within three months of the date of this Amendment
it shall obtain and maintain certification of the Facility as a renewable energy
--------
resource for California's Renewable Portfolio Standard (RPS) program, for the
Extended Term, in accordance with CEC's Renewables Portfolio Standard
Eligibility Guidebook (publication no. 500-04-002F1) and as may be subsequently
amended. PG&E and Seller agree that the Facility, as currently constructed,
--------
meets the requirements for such certification on the date of this Amendment. In
the event that at any time during the Extended Term the Facility no longer meets
--------
the stated criteria for an eligible renewable resource, PG&E shall have the
right to terminate the Agreement upon the delivery to Seller of written notice
at least thirty (30) days prior to the requested termination date and PG&E shall
have no further obligation to accept and pay for any electricity generated by
the Facility.
--------
6. PAYMENTS
--------
PG&E shall pay Seller once a month for energy and as-delivered capacity
deliveries during the prior month as specified in Section A-4 of Appendix A to
the Agreement.
6
7. OTHER MODIFICATIONS
-------------------
To comply with the CPUC's directive that utilities purchase QF energy
and as-delivered capacity at short-run avoided operating costs, the Parties
agree to delete in their entirety Articles 2, 3 (f), 4, 5, 7 and 12, and
Appendices B, C, D, and E of the Agreement.
8. RESERVATION OF RIGHTS
---------------------
PG&E is entering into this Amendment as directed by the CPUC in the
Decision. PG&E reserves its right to seek reimbursement of payments made under
this Amendment to the extent that such payments are determined by the CPUC, a
court, or other governmental entity to exceed PG&E's avoided costs (as defined
in the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. ss. 824a-3, et
seq.).
9. INTERRUPTION OF DELIVERIES
--------------------------
In the event that PG&E receives a notice from the CAISO ordering PG&E to
interrupt delivery of energy from the Facility, then Seller shall not be
--------
required to deliver such energy and as-delivered capacity from the Facility and
--------
PG&E shall not be obligated to accept or pay for such deliveries of energy and
as-delivered capacity that have been interrupted or reduced pursuant to any such
order issued by the CAISO.
10. NO OTHER MODIFICATIONS
----------------------
Except as expressly modified by this Amendment, no provision of the
Agreement is or shall be deemed to be modified, amended, waived, or otherwise
affected by this Amendment. To the extent that this Amendment is inconsistent
with any provision of the Agreement, this Amendment shall govern the rights and
obligations of the Parties.
11. EFFECTIVE DATE
--------------
This Amendment shall be effective as of December 29, 2005.
7
12. SIGNATURES
----------
IN WITNESS WHEREFORE, Seller and PG&E have caused this Amendment to be
executed by their authorized representatives. By signing this Amendment, the
representatives of the Parties warrant that they have the requisite authority to
bind their respective principals.
PACIFIC GAS AND ELECTRIC COMPANY ZOND WINDSYSTEM PARTNERS, LTD
Series 85-C, a California Limited
Partnership
By: /s/ Roy Kuga By: Zond Windsystems Management V LLC,
----------------------------- its general partner
Name: Roy Kuga Signature: /s/ Jesse E. Neyman
--------------------------- --------------------------
Title: Vice President, Energy Supply Name: Jesse E. Neyman
------------------------------- ------------------------------
Date: May 19, 2006 Title: President & CEO
----------------------------- ------------------------------
Date: May 19, 2006
-----------------------------
8
Appendix A
TABLE A(1) - TIME PERIODS
Monday Saturdays,
through Sundays, and
Friday(2) Holidays
------ --------
Seasonal Period A
(May 1 - October 31)
Peak Noon None
to
6:00 p.m.
Partial-Peak 8:30 a.m. None
to
noon
6:00 p.m.
to
9:30 p.m.
Off-Peak 9:30 p.m.
to
1:00 a.m.
5:00 a.m. 5:00 a.m.
to to
8:30 a.m. 1:00 a.m.
Super Off-Peak 1:00 a.m. 1:00 a.m.
to to
5:00 a.m. 5:00 a.m.
Seasonal Period B
(November 1 - April 30)
Partial Peak 8:30 a.m. None
to
9:30 p.m.
Off-Peak 9:30 p.m.
to
1:00 a.m.
5:00 a.m. 5:00 a.m.
to to
8:30 a.m. 1:00 a.m.
Super Off-Peak 1:00 a.m. 1:00 a.m.
to to
5:00 a.m. 5:00 a.m.
- -------------------------------------------------------------------------------
(1) This table is subject to change to accord with the peak, partial-peak,
off-peak, and super off-peak periods as defined by CPUC decision.
(2) Except for the following holidays: New Year's Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Veteran's Day, Thanksgiving Day,
and Christmas Day, as specified in Public Law 90-363 (5 U.S.C.A. Section
6103(a)).