Insuring Security Requirements of Power Contractsby Alexander Ellis, III, Fairfield & Ellis Inc, Boston, MA, USA,
Abstract: Under the fixed, or levelized rate utility contract, utility offers a fixed rate for the life of the contract. In the early years, the rate is in excess of the utility's avoided cost. In the latter years, as avoided cost rates inexorably rise, the utility will be paying less than the avoided cost. One concern is that developers, having garnered available development fees and tax credits in the early years, will have little incentive to see the power purchase agreement through to its conclusion, thus leaving the utility unable to recapture the funds 'loaned'. To protect themselves and their ratepayers, and yet be reasonable with developers, utilities have been searching for ways to protect their interests under the contract. This paper discusses some of these methods.
Subject Headings: Contracts | Electric power | Power plants | Security | Industrial facilities | Fees | Taxation
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