A Bidder will have the ability to use its bid assurance collateral posted as cash to meet its Performance Assurance under the REC Contract.  Depending on the details of the Project and the Bid, the Bidder may be required to post additional cash to fully meet its Performance Assurance under the REC Contract.

As context, the REC Contract requires the Bidder to post Performance Assurance in the form of a letter of credit or cash within five (5) business days of a request by the Company.  For a Bidder that is not rated at least BBB- from the rating agencies (or that does not have a guarantor that is so rated), the Performance Assurance is equal to the amount of the Collateral Requirement.  The Collateral Requirement is equal to 50% of the Annual Contract Value.  The Annual Contract Value is the price in the Bid for the Project times the annual quantity of RECs in the Bid for the Project.  For example, if the price in the Bid is $10/REC and the annual quantity of RECs is 42,000 RECs then the Collateral Requirement is $210,000 (50% * $10/REC * 42,000 RECs).  Within seven (7) business days of the Commission approval of a Project selected through the RFP, the Bidder must pay the Supplier Fees to the Illinois Power Agency (“IPA”).  The Supplier Fee per REC is announced no later than two (2) business days before the Bid Date.  The estimate of the REC provided to Bidders is $0.05/REC of the entire quantity of RECs over the fifteen (15) years of the REC Contract.

This response assumes that the Bidder has submitted cash as bid assurance collateral and that the Bidder has a Project that is selected through the New Solar RFP and approved by the Commission.

There are two cases.  The first case is one where, for a Company, the amount of bid assurance collateral provided by the Bidder in the Part 2 Proposal exceeds the sum of: (i) the Performance Assurance due under the REC Contract; and (ii) the Supplier Fees due to the IPA.  In that case, the Bidder will not be required to post additional cash to fully meet its Performance Assurance under the REC Contract.  The Bidder will have the ability instead to apply the bid assurance collateral posted with a Company to meet the Performance Assurance due to that Company.  For example, if the Bidder’s winning Project is 20 MW, the Bidder would have posted $80,000 (20 MW * $4,000/MW) with AIC.  Continuing the example above where the price in the Bid is $10/REC and the annual quantity of RECs is 42,000, the Performance Assurance due to AIC would be $61,593 (29.33% * 50% * $10/REC * 42,000 RECs, where 29.33% is AIC’s share of the Project).  Using the $0.05/REC as the estimate of the Supplier Fee, the Bidder will owe the IPA $31,500 ($0.05 * 42,000 RECs * 15 years), of which $9,238.95 is the portion attributable to the RECs to be delivered to AIC (29.33% * $31,500).  The bid assurance collateral to AIC ($80,000) covers the sum of the Performance Assurance and the AIC portion of the Supplier Fees ($61,593 + $9,238.95) and thus the Bidder is not required to post any additional cash with AIC for purposes of the Performance Assurance for the winning Project. A similar calculation would need to be performed for ComEd and MEC also.

The second case is one where, for a Company, the amount of bid assurance collateral provided by the Bidder in the Part 2 Proposal does not cover the sum of: (i) the Performance Assurance due under the REC Contract; and (ii) the Supplier Fees due to the IPA.  In that case, the Bidder will be able to use a portion of its bid assurance collateral for meeting the Performance Assurance but the Bidder will also be required to post additional cash to fully meet its Performance Assurance under the REC Contract for that Company.  For example, if the Bidder’s winning Project is 20 MW, the Bidder would have posted $80,000 (20 MW * $4,000/MW) with AIC.  Suppose the price in the Bid is $20/REC and the annual quantity is 42,000 RECs so that the Performance Assurance due to AIC would be $123,186 (29.33% * 50% * $20/REC * 42,000 RECs, where 29.33% is AIC’s share of the Project).  Using the $0.05/REC as the estimate of the Supplier Fee, the Bidder will owe the IPA $31,500 ($0.05 * 42,000 RECs * 15 years), of which $9,238.95 is the portion attributable to the RECs to be delivered to AIC (29.33% * $31,500).  The bid assurance collateral to AIC ($80,000) does not cover the sum of the Performance Assurance and the AIC portion of the Supplier Fees ($123,186 + $9,238.95).  The Bidder will have the ability to use $70,000 of its bid assurance collateral toward its Performance Assurance and the Bidder will be required to post an additional amount of $53,186 ($123,186 – $70,000).  The remaining $10,000 of the bid assurance collateral is not applied to the Performance Assurance as it is used to guarantee payment of the Supplier Fees ($10,000 is the amount of the Supplier fees, $9,238.95, round up to the nearest thousand). A similar calculation would need to be performed for ComEd and MEC also.

This response illustrates the calculations for the bid assurance collateral and the Performance Assurance for AIC only.  However, as stated above, the same calculations apply to each of the Companies (AIC, ComEd, and MEC) so that the amounts in this response represent only a portion of the bid assurance collateral and Performance Assurance due.  All prices and numbers of RECs are for illustrative purposes only.