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Outline of TXU SESCO RFP

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Outline of TXU SESCO RFP

  1. 1. Revision One July 7, 2004 Request for Proposals Full Requirements Power Supply to TXU SESCO Energy Services Company June 2004 RFP Process Administered by Navigant Consulting, Inc.
  2. 2. Revision One July 7, 2004 1. GENERAL INFORMATION............................................................................................ 1 1.1 Introduction............................................................................................................ 1 1.2 Overview of the RFP ............................................................................................. 1 1.2.1 Description of SESCO ............................................................................... 1 1.2.2 Price-to-Beat Rates .................................................................................... 1 1.2.3 Purpose of RFP .......................................................................................... 1 1.2.4 Not an Offer ............................................................................................... 1 1.2.5 Web Site..................................................................................................... 2 1.2.6 Pricing Structure ........................................................................................ 2 1.2.7 Supply Characteristics Required................................................................ 2 (a) Scope of Electrical Load................................................................ 2 (b) Full Requirements.......................................................................... 2 (c) 100% Firm ..................................................................................... 2 (d) Delivery Point for Power Supply................................................... 3 (e) SESCO Regulatory Contingency................................................... 3 (f) Supplier Credit Requirements........................................................ 3 (g) SESCO Credit Commitment .......................................................... 3 (h) Model FRPSA................................................................................ 3 (i) SESCO Historical Load ................................................................. 3 2. RFP SOLICITATION AND PROPOSAL SUBMISSION PROCESS ............................. 4 2.1 Schedule................................................................................................................. 4 2.2 Cancellation, Modification or Withdrawal of the RFP.......................................... 4 2.3 SESCO Contact...................................................................................................... 4 2.4 Written Questions .................................................................................................. 5 2.5 Bidder Requirements ............................................................................................. 5 2.5.1 Proposal Submission Agreement ............................................................... 5 2.5.2 Acknowledgment of Changes .................................................................... 5 2.5.3 Disclosure of Bidder’s Joint Activities ...................................................... 5 2.5.4 Contribution and Indemnity Agreements................................................... 6 2.5.5 Bidder’s Nondisclosure Obligations .......................................................... 6
  3. 3. Revision One July 7, 2004 2.5.6 Confidentiality of Proposals ...................................................................... 6 2.5.7 Bidder Availability..................................................................................... 6 2.6 Proposal Submission.............................................................................................. 7 2.7 Proposal Content.................................................................................................... 7 2.7.1 Executive Summary ................................................................................... 7 2.7.2 Bidder Information..................................................................................... 8 2.8 Proposal Terms ...................................................................................................... 9 2.8.1 Term........................................................................................................... 9 2.8.2 Pricing ........................................................................................................ 9 2.8.3 Other ........................................................................................................ 11 2.9 Proposal Review and Evaluation Process ............................................................ 12 2.9.1 Threshold Requirements .......................................................................... 12 2.9.2 Proposal Evaluation Process .................................................................... 13 2.9.3 Notification of Evaluation Results and Negotiations............................... 13 3. REGULATORY APPROVALS, AND OTHER PERMITS, LICENSES, AND APPROVALS ................................................................................................ 13 3.1 Approval of PTB Rates........................................................................................ 13 3.2 Bidder Obligations ............................................................................................... 14 4. RESERVATION OF RIGHTS ........................................................................................ 14 4.1 Only FRPSA Is Binding on SESCO .................................................................... 14 4.2 No Representations or Warranties ....................................................................... 14 4.3 Bidder Pays Own Cost ......................................................................................... 14 4.4 Right to Modify or Withdraw RFP ...................................................................... 14 4.5 Right to Suspend RFP.......................................................................................... 15 EXHIBITS Exhibit A-1 Master Power Purchase and Sale Agreement Confirmation Exhibit A-2 Master Power Purchase and Sale Agreement Exhibit B Bidder’s Affidavit Exhibit C Proposal Submission Agreement Exhibit D Bidder Evaluation Form Exhibit E Confidentiality Agreement Exhibit F Proposal Pricing Form
  4. 4. Revision One July 7, 2004 SESCO 2004 Request For Proposals 1. General Information 1.1 Introduction This SESCO 2004 Request for Proposals (this “RFP”) is to solicit proposals for the sale and delivery of electric capacity, energy, and ancillary services to TXU SESCO Energy Services Company (“SESCO”). 1.2 Overview of the RFP 1.2.1 Description of SESCO SESCO is a Texas corporation that provides retail electric service to approximately 43,035 customers in East Texas. It is certified as a retail electric provider (“REP”) by the Public Utility Commission of Texas (“PUCT”). SESCO is the REP that is the successor to the retail electric business of TXU SESCO Company LLC (formerly known as “TXU SESCO Company”), which was a public utility that was unbundled on January 1, 2002 pursuant to the terms of the Public Utility Regulatory Act of Texas (“PURA”). 1.2.2 Price-to-Beat Rates As an affiliated REP, SESCO is obligated to provide electric service to certain customers at a price to beat (“PTB”) rate that is set under the provisions of PURA. This PTB rate is based on TXU SESCO Company LLC’s rates as of January 1, 1999, reduced by 6%. The customers entitled to receive service at the PTB rate are all customers within the former geographic service area of TXU SESCO Company LLC that have loads of 1 MW or less. 1.2.3 Purpose of RFP SESCO currently obtains all of its supply of electric capacity, energy, and ancillary services pursuant to the terms of a one-year full requirements power supply agreement (the “2004 Constellation Agreement”). The purpose of this RFP is to obtain a source of supply to replace the 2004 Constellation Agreement for the calendar year 2005. SESCO anticipates filing a request with the PUCT to adjust SESCO’s PTB rates based on the results of this RFP. 1.2.4 Not an Offer This RFP is not an offer to purchase electric energy or any other products. In connection with this RFP, SESCO or an agent operating on its behalf may enter into a Full Requirements Power Supply Agreement (“FRPSA”) with a Bidder offering the most favorable prices, terms, conditions, schedule, and other benefits to SESCO. However, SESCO reserves the right to reject any or all offers. -1-
  5. 5. Revision One July 7, 2004 1.2.5 Web Site This RFP, modifications or addenda to this RFP, and other important information about this RFP are on the SESCO 2004 RFP Web Site at: http://www.txucorp.com/2004sescorfp. 1.2.6 Pricing Structure Bidders are required to bid a heat rate conversion factor that will be multiplied by a weighted gas index price to produce a price in $/MWh. The heat rate conversion factor will be fixed by the Proposal, but the gas index component of the price will be based on the gas indexes on the date that the bid is awarded and the FRPSA is executed by SESCO and the selected Bidder, and not on the date that the Proposal is submitted. More details on the pricing are set out in Section 2.8.2 below. 1.2.7 Supply Characteristics Required Any FRPSA executed under this RFP must include the following key terms: (a) Scope of Electrical Load The SESCO load to be supplied includes the electrical power and energy requirements of all of SESCO’s customers that that are receiving PTB service (the “SESCO load”). In 2003, the coincident peak load of SESCO’s PTB customers totaled approximately 250MW. At the end of 2003, SESCO had approximately 43,035 PTB customers, of which approximately 35,595 are residential. These customer figures do not include approximately 8,000 street/outdoor lights that are not metered but are included as part of the SESCO load to be supplied. The SESCO load will change in quantity during the FRPSA term due to many different causes, including but not limited to customer switching, new customers, departing customers, changing load requirements of existing customers, changing market conditions for electricity and natural gas, and changes in SESCO’s PTB rates. SESCO’s actions may cause changes in the SESCO load by marketing efforts, requests to change the PTB rates, or otherwise, and the supplier is not excused from any of its obligations because the SESCO load changed or because SESCO’s actions changed the SESCO load. (b) Full Requirements Any FRPSA that results from this RFP must be a full requirements contract. The supplier must provide all energy needs and ancillary services requirements of the SESCO load, including without limitation balancing energy, qualifying scheduling entity (“QSE”) services, renewable energy credits, ERCOT settlement charges, and losses prior to the delivery points. (c) 100% Firm The service pursuant to any FRPSA under this RFP must be 100% firm. -2-
  6. 6. Revision One July 7, 2004 (d) Delivery Point for Power Supply The delivery points are the revenue meters of each SESCO customer that is receiving PTB service and are the light fixtures for street/outdoor lights. The supplier is required to provide all ancillary services required to deliver the energy to the revenue meter or light fixture, as appropriate. SESCO is responsible for any charges by the transmission and/or distribution provider(s). (e) SESCO Regulatory Contingency Any FRPSA with the selected Bidder may be conditioned on, or provide a termination right with respect to the failure to obtain, approval in a form and substance satisfactory to SESCO of an adjustment to its PTB rates. Alternatively, SESCO may choose not to sign an FRPSA until that approval has been received. (f) Supplier Credit Requirements The selected Bidder’s obligations under any FRPSA must be secured by credit in the minimum amount of $10,000,000.00, provided by a guarantee of performance from an entity that maintains an investment grade credit rating, by a letter of credit or other liquid security in a form satisfactory to SESCO, or by a combination of both. (g) SESCO Credit Commitment SESCO’s obligations under any FRPSA will be secured by credit in the minimum amount of $10,000,000.00, provided by a guarantee of performance from an entity that maintains an investment grade credit rating, by a letter of credit or other liquid security in a form satisfactory to the selected Bidder, or by a combination of both. (h) Model FRPSA A Model FRPSA, consisting of a Confirmation and a Master Agreement, is attached to this RFP as Exhibits A-1 and A-2. Bidders are required to confirm in their Proposals that, if selected, they will enter into a FRPSA on the terms specified in the Model FRPSA with no material changes to it. Bidders should be aware that SESCO does not intend to negotiate any material terms of the FRPSA. Bidders are responsible for reviewing all terms and conditions specified in the FRPSA and taking these terms and conditions into consideration in developing their Proposal(s). Bidders may include a discussion of provisions of the FRPSA that it suggests changing and the effect, if any, on Bidder’s proposed pricing of making those changes. (i) SESCO Historical Load A spreadsheet containing historical hourly loads based on ERCOT settlement data can be downloaded from the 2004 SESCO RFP Web Site (http://www.txucorp.com/2004sescorfp). Data before January 1, 2002, is not relevant because it includes wholesale points of delivery and other non-PTB load. SESCO makes no representations regarding the accuracy of the data or the usefulness of historical loads as an indicator of future loads. -3-
  7. 7. Revision One July 7, 2004 2. RFP Solicitation and Proposal Submission Process 2.1 Schedule SESCO intends to follow the schedule below, but it may modify any date set out below at any time before that date. SESCO will post on the 2004 SESCO RFP Web Site (http://www.txucorp.com/2004sescorfp) notice of any schedule changes. Event Date Public Notice of RFP 06/25/04 Deadline for Written or E-mail Questions about RFP 07/16/04 Deadline to Post Answers to Questions 07/23/04 Proposal Deadline 07/30/04 Short List Selection of Not More Than Two (2) Bidders (Target Date) 08/13/04 Select Winning Bid (Target Date) 08/27/04 All Proposals must be the Bidder’s best and final offer. Indicative bids will not be considered. SESCO does not intend to contact any Bidder to clarify its Proposals, although SESCO reserves the right to do so. Bidders should assume that they will not be given any opportunity to clarify or revise any terms specified in a Proposal following its submission. In addition, all Proposals are required to be (a) final and binding, (b) not conditioned upon the subsequent receipt of the approval of the board of directors or similar governing body of the Bidder, (c) irrevocable until 5:00 p.m. local Dallas, Texas time on August 13, 2004 or, if SESCO notifies the Bidder to the effect that the Proposal has been selected for negotiation prior to that time and date, until 5:00 p.m. local Dallas, Texas time on August 27, 2004 and (d) signed by an officer (or similarly situated representative) of the Bidder who is authorized to sign and submit the binding Proposal. During the period that final and binding Proposals are irrevocable, Proposals may not be modified, except as may be set forth in a written instrument that is signed by the Bidder and SESCO. 2.2 Cancellation, Modification or Withdrawal of the RFP SESCO reserves the right to cancel, modify, or withdraw this RFP and to revise the schedule specified above. SESCO will post on the SESCO 2004 RFP Web Site any such cancellations, modifications, or schedule changes that are made prior to the applicable due date for final and binding Proposals. SESCO will not make any material changes to the RFP after July 23, 2004 without making an appropriate change to the due date for submission of Proposals. 2.3 SESCO Contact Any questions about this RFP must be addressed either in writing or by email to the SESCO 2004 RFP Coordinator below before the applicable deadline date set out in Section 2.1 above. -4-
  8. 8. Revision One July 7, 2004 SESCO 2004 RFP Coordinator John Moore Notice to all Respondents Navigant Consulting 111 Congress Ave., Suite 1600 No telephone inquiries will be accepted. Austin, Texas 78701 Fax (512) 472-7721 Email jmoore@navigantconsulting.com 2.4 Written Questions Potential Bidders may submit written questions about this RFP by mail, fax, or e-mail to the SESCO 2004 RFP Coordinator described in Section 2.3 above by no later than 5:00 p.m. local Dallas Texas time on July 16, 2004. Answers to questions will be posted on the 2004 SESCO RFP Website by no later than 5:00 p.m. local Dallas, Texas time on July 23, 2004. 2.5 Bidder Requirements 2.5.1 Proposal Submission Agreement SESCO wants to maximize fair and impartial competition and prevent or avoid collusion by any parties in this RFP process. Proposals determined by SESCO, in its sole discretion, to have been made with the intent or effect of creating artificial prices, terms, or conditions will be rejected. SESCO expects all Bidders to comply with all the terms and conditions and conform to all of the requirements of this RFP in order to be eligible to participate in the solicitation process. The requirements to be eligible to participate include the requirement that each Bidder that submits one or more Proposals must sign and submit a Proposal Submission Agreement in the form included in Exhibits C. 2.5.2 Acknowledgment of Changes Bidders must include with each Proposal a list of all changes and modifications to this RFP that were promulgated before the date that the Proposal was submitted, to the extent that they are known to Bidder, and an acknowledgment by Bidder that those changes and modifications were taken into account in the preparation of the Proposal. 2.5.3 Disclosure of Bidder’s Joint Activities The Proposal Submission Agreement prohibits disclosure to any other person or entity by a Bidder of the fact of, or terms and conditions of, any Proposal that the Bidder intends or expects to submit in response to this RFP, and prohibits other action in concert with other persons or entities with respect to a Proposal or potential Proposal or the RFP process, except for the purpose of jointly developing a Proposal, and in such case, only after prior written notification to SESCO of an intent to make such disclosures or otherwise act in concert. Such notification to SESCO must include the identities of and background information concerning the persons or entities to which disclosures might be made, and must include a description of the disclosures and actions in concert that are contemplated. A Bidder’s failure to comply with these -5-
  9. 9. Revision One July 7, 2004 requirements of the RFP and the Proposal Submission Agreement may, depending on the circumstances, be sufficient grounds for rejecting a Proposal or disqualifying the Bidder from further participation in the RFP process. 2.5.4 Contribution and Indemnity Agreements Bidders that are comprised of more than one person or entity may enter into contribution or indemnity arrangements or agreements among themselves to allocate their respective obligations, but no such agreements or arrangements affect the rights of SESCO without the prior express written agreement of SESCO. All such contribution, indemnity, allocation, sharing and similar arrangements, agreements and understandings must be fully disclosed to SESCO. 2.5.5 Bidder’s Nondisclosure Obligations Neither Bidders nor their employees, consultants, or other representatives may disclose to any other person or entity (except for those participating in the Proposal, as described above) their participation in the RFP process, and Bidders may not disclose, collaborate on or discuss with any other person or entity (except for those participating in the Proposal, as described above) bidding strategies or the substance of Proposals, including without limitation the price or any other terms or conditions of any contemplated, indicative, or final Proposal. Such disclosure, collaboration, or discussion by Bidders or by their employees, consultants, or other representatives would violate this RFP and the Proposal Submission Agreement. 2.5.6 Confidentiality of Proposals (a) Subject to important qualification contained in subsection (b) below, SESCO agrees to keep Proposals confidential according to the provisions of the “Confidentiality Agreement” that is included in this RFP as Exhibit E. Each Proposal must include a copy of that Confidentiality Agreement signed by a duly authorized representative of Bidder. No further signature or other action of SESCO is necessary for that Confidentiality Agreement to bind SESCO. (b) As set out in that Confidentiality Agreement, SESCO may disclose Proposals and other confidential information as necessary or appropriate to obtain an adjustment to its PTB rates, but SESCO shall make reasonable efforts to restrict public access to the Proposal or other confidential information disclosed, by protective order or otherwise. However, the identity of the entity that enters into a FRSPA with SESCO, and the price contained in the FRPSA, will be made publicly available as part of the PTB adjustment proceeding. 2.5.7 Bidder Availability Unless and until SESCO announces or otherwise notifies a Bidder that the RFP process is terminated or concluded, or that its Proposal has been rejected, each Bidder that submits a Proposal will be expected to make available, upon reasonable notice, its duly authorized officers, representatives, and advisers for the purpose of questions, negotiations, and execution and delivery of an FRPSA. This obligation of a Bidder expires at 5:00 p.m. local Dallas, Texas time -6-
  10. 10. Revision One July 7, 2004 on August 13, 2004, unless SESCO has notified the Bidder that it has been short-listed. A short- listed Bidder that is invited to finalize an FRPSA is expected to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or appropriate to finalize, execute, and deliver that FRPSA as promptly as possible. 2.6 Proposal Submission (a) Each Bidder must submit at least one Proposal that conforms to the “Required Proposal Structure,” but Bidders may also submit any number of other Proposals, whether or not they conform to the Required Proposal Structure. The Required Proposal Structure means a Proposal that conforms to the Required Proposal Structure requirements of Sections 2.8.1 (Term) and 2.8.2 (Pricing Structure) below in addition to the other requirements of this RFP. (b) Bidders proposing multiple pricing structures must submit each as a separate Proposal. (c) For each Proposal, Bidder must submit an original and four copies of the fully completed Proposal to SESCO in a sealed envelope marked “SESCO 2004 REQUEST FOR PROPOSALS.” One of the copies must be unbound. (d) The Proposal must be organized in the sequence in which the information is requested, and each page must be clearly labeled to identify the portion of the RFP to which the information is responsive. (e) Bidder is required to confirm that the information provided in response to this RFP is true and accurate to the best of Bidder’s knowledge. Bidder must have Exhibit B – Bidder’s Affidavit signed by an authorized officer or principal of Bidder. (f) Bidder is required to include properly completed and executed copies of Exhibit C – Proposal Submission Agreement, Exhibit D – Bidder Evaluation Form, and Exhibit E – Confidentiality Agreement. (g) Bidder is required to include one or more properly completed Proposal Pricing Forms (Exhibit F to this RFP) in the Proposal. 2.7 Proposal Content In addition to the documents required in Section 2.6 above, each Proposal must include the information requested below: 2.7.1 Executive Summary On one page, provide an executive summary of the Proposal and discuss features of the Proposal that make it the best choice for SESCO. -7-
  11. 11. Revision One July 7, 2004 2.7.2 Bidder Information (a) Briefly describe Bidder’s business organization and history. (b) Provide the following information for the Bidder: (i) Name and parent affiliate, if any. (ii) Years of experience in supplying wholesale power in ERCOT. (iii) Identify all other regions (by NERC Region) of the country where bidder is currently engaged in selling wholesale power. (c) If Bidder is a partnership, list all partners. (d) If Bidder is a corporation that has ten or fewer shareholders, list all shareholders. (e) For each partner or shareholder listed in response to either (c) or (d) above: (i) List its respective equity ownership percentage in Bidder and amount of equity contributions. (ii) Provide the most recently available audited financial reports (including, but not limited to, SEC Form 10-K report). (iii) Indicate which owners, if any, are historically-underutilized businesses, including ethnic minority-owned or woman-owned businesses, and, if so, provide supporting documentation. (f) Describe the Bidder’s prior experience and capabilities that would enable the Bidder to successfully complete the proposed transaction. (i) Is Bidder currently operating as a Qualified Scheduler Entity (QSE) in ERCOT? (ii) Identify the QSE that would be used to schedule the Bidder supply resources. (iii) Identify all parties to whom Bidder currently provides full requirements wholesale power supply. (g) Describe the ownership arrangement for the Bidder and include any proposed ownership organization charts and the respective equity ownership percentages and amount of equity contributions for each owner. -8-
  12. 12. Revision One July 7, 2004 (h) Indicate whether the Bidder is a historically-underutilized businesses, including ethnic minority-owned or woman-owned businesses, and, if so, provide supporting documentation. (i) Provide the most recently available audited financial reports for the Bidder (including, but not limited to, SEC Form 10-K report). 2.8 Proposal Terms 2.8.1 Term (a) Each Proposal must state the term for which Bidder is proposing to sell electrical power and energy to SESCO beginning on January 1, 2005. Except for the one Proposal using the Required Proposal Structure that each Bidder is required to submit, the term must be for either one, two or three calendar years, starting on January 1, 2005. (b) For the one Proposal using the Required Proposal Structure that each Bidder is required to submit, the term must be a one-year term beginning on January 1, 2005. 2.8.2 Pricing (a) The price will be determined by a heat rate conversion factor, stated in the Proposal, multiplied by the NYMEX Gas Price for the day the FRPSA is executed by SESCO. “NYMEX Gas Price” is the weighted average, for that execution day, of the NYMEX natural gas futures settlement prices for the Henry Hub as published in The Wall Street Journal (either in print or on-line) for the months of the FRPSA term stated in the Proposal. (If a Bidder submits a Proposal for a term that extends beyond the months published in The Wall Street Journal, then the Bidder must specify an alternate publication in its Proposal for those months.) The weighting will be based on the monthly percentages set out in the following table. The monthly percentages in this table are derived from 2003 SESCO load numbers but are not a representation or warranty by SESCO that these volumes represent the actual volumes that will be experienced by the SESCO load in any particular month. As noted above, the SESCO load will change in quantity during the FRPSA term due to many different causes, including but not limited to customer switching, new customers, departing customers, changing load requirements of existing customers, changing market conditions for electricity and natural gas, and changes in SESCO’s PTB rates. SESCO’s actions may cause changes in the SESCO load by marketing efforts, requests to change the PTB rates, or otherwise, and the supplier is not excused from any of its obligations just because SESCO’s actions changed the SESCO load. -9-
  13. 13. Revision One July 7, 2004 Month Weighting Percentages January 8.5% February 7.56% March 7.01% April 6.76% May 8.56% June 9.3% July 10.64% August 10.87% September 8.42% October 7.51% November 7.00% December 7.87% TOTAL 100.0% (b) The Proposal must also, for illustration purposes only, state the price (in dollars per megawatt-hour) based on the NYMEX Gas Price for the FRPSA term on the date that the Proposal is prepared, but the price in any executed FRPSA will be the price determined by applying the heat rate conversion factor stated in the Proposal times the NYMEX Gas Price [as defined in subsection (a) above] as determined on the day that SESCO awards the bid and both SESCO and the selected Bidder execute the FRPSA. (c) To illustrate the calculation of the price, on May, 27 2004, the NYMEX futures prices for each month of 2005 were as stated in the table below. Assume that a Bidder had bid a heat rate conversion factor of 6.000 MMBtu per MWh in its Proposal. If the bid was awarded to that Bidder and the FRPSA was executed by SESCO and the Bidder on May 27, 2004, then the weighted average gas price would be $6.221 per MMBtu as shown in the following table: - 10 -
  14. 14. Revision One July 7, 2004 Example of Calculation of Weighted Average Gas Price Weighting NYMEX Month Percentage Gas Price $/MMBtu January 8.50% 7.078 0.602 February 7.56% 7.018 0.531 March 7.01% 6.826 0.479 April 6.76% 6.081 0.411 May 8.56% 5.909 0.506 June 9.30% 5.917 0.550 July 10.64% 5.942 0.632 August 10.87% 5.955 0.647 September 8.42% 5.915 0.498 October 7.51% 5.926 0.445 November 7.00% 6.101 0.427 December 7.87% 6.269 0.493 TOTAL 100.0% Weighted 6.221 Average Gas Price Then, the price under the FRPSA for each hour in 2005 would be $37.33 per MWh (the weighted average gas price of $6.221 per MMBtu times the heat rate conversion factor of 6.000 MMBtu per MWh). (d) For Proposals that propose a term of either two or three calendar years, the Bidder may bid a different heat rate conversion factor for each calendar year of the proposed term. 2.8.3 Other (a) Affirm that Bidder’s Proposal is subject to the Proposal characteristics set out in Section 1.2.6 above of this RFP. (b) State the estimated annual sales (in megawatt-hours) to SESCO by Bidder during the period from January 1, 2005 through December 31, 2005. (c) Bidder may provide any additional information that would provide useful information on the characteristics of the Proposal, including any features that add value to the Proposal for SESCO. - 11 -
  15. 15. Revision One July 7, 2004 2.9 Proposal Review and Evaluation Process 2.9.1 Threshold Requirements Each Proposal must meet the following Threshold Requirements (minimum requirements) to be considered in the evaluation process. (a) Pricing must be stated in terms of a formula based on NYMEX Gas Price for the contract term. Other pricing structures will not be considered in the evaluation of the Proposal. (b) The purchase of energy from Bidder must not cause SESCO to be subject to the plenary jurisdiction of the Federal Energy Regulatory Commission. (c) The Proposal must state the proposed term starting on January 1, 2005. Each bidder must submit at least one Proposal for a one-year term starting on January 1, 2005. (d) The Proposal, including the Bidder’s Affidavit, Proposal Submission Agreement, and Confidentiality Agreement must be completed and delivered by the applicable due date. (e) The Bidder must have the business and technical ability, experience, expertise, and reputation to deliver the energy and ancillary services in the time and manner contained in the Proposal. (f) Properly Completed Proposal (i) Each Proposal must include all forms in this RFP, properly completed, and provide all requested information. Each Proposal must comply with the format described in this RFP. (ii) The Proposal must provide sufficient detail to show that the Bidder has, or will provide, the business and technical ability, experience, expertise, and reputation to deliver the energy and ancillary services proposed in the time and manner contained in the Proposal. (iii) The Proposal must include one or more properly completed Proposal Pricing Forms (Exhibit F to this RFP). (iv) Bidder’s Affidavit (Exhibit B to this RFP) must be signed and sworn to by a duly authorized representative of Bidder and included in the Proposal. (v) A Bidder must execute and return, as part of the Proposal, the Proposal Submission Agreement (Exhibit C to this RFP). (vi) A Bidder must execute and return, as part of the Proposal, the Bidder Evaluation Form (Exhibit D to this RFP). - 12 -
  16. 16. Revision One July 7, 2004 (vii) A Bidder must execute and return, as part of the Proposal, the Confidentiality Agreement (Exhibit E to this RFP). (viii) The SESCO 2004 RFP Coordinator must receive the original and four complete copies of each Proposal, packaged as described in Section 2.6 above by the applicable deadline date. (g) Proposals described below are ineligible for this RFP: (i) Any Proposal that states or implies that any price proposed is conditional upon modification of the terms of this RFP. (ii) Any Proposal that is based upon or contains unrealistic assumptions. (iii) Any Proposal that would cause SESCO to be subject to the full plenary jurisdiction of the Federal Energy Regulatory Commission. 2.9.2 Proposal Evaluation Process Following receipt of the Proposals, Navigant Consulting will conduct a predefined evaluation process. Navigant Consulting will then furnish the results of its evaluation to SESCO. The principal consideration in evaluating Proposals will be price, although SESCO will also consider credit standing and other non-price factors. 2.9.3 Notification of Evaluation Results and Negotiations (a) SESCO will select a short list of no more than two (2) Bidders for further consideration. SESCO will contact each Bidder to notify it of the status of its Proposal and whether additional discussions or negotiations are warranted. (b) SESCO anticipates that discussions and negotiations for the selected Proposals will begin once the evaluation process has been completed as the prices for all Proposals are considered final and binding. Major changes to price, terms and conditions from original offers that are adverse to SESCO will not be permitted. (c) Placement in the short list of Bidders does not indicate acceptance by SESCO of any proposed contract terms. SESCO is not bound to any obligations unless and until a FRPSA is executed between the parties. 3. Regulatory Approvals, and Other Permits, Licenses, and Approvals 3.1 Approval of PTB Rates SESCO intends to seek approval by the PUCT of an adjustment in its PTB rates based upon the results of the RFP. Thus, any FRPSA with the selected Bidder may be conditioned on, or provide a termination right with respect to the failure to obtain, approval in a form and substance satisfactory to SESCO. Alternatively, SESCO may choose not to sign an FRPSA until that approval has been received. - 13 -
  17. 17. Revision One July 7, 2004 3.2 Bidder Obligations Bidders are responsible for having or obtaining all other necessary permits, licenses, and approvals associated with their Proposals. 4. Reservation of Rights 4.1 Only FRPSA Is Binding on SESCO A Bidder’s Proposal is deemed accepted by SESCO only when a FRPSA has been executed and delivered by SESCO and the Bidder. SESCO has no obligation to accept any Proposal, whether or not the stated price in the Proposal is the lowest price offered in the RFP process, and may reject any Proposal, or all proposals, in its sole discretion, for any reason without any obligation to disclose the reason for rejection. 4.2 No Representations or Warranties By participating in the RFP process, each Bidder agrees that: (a) except to the extent of any representations and warranties contained in a FRPSA, any and all information furnished by or on behalf of SESCO in connection with this RFP is provided without any representation or warranty, express or implied, as to the accuracy or completeness of such information; and (b) except as otherwise provided in a FRPSA, neither SESCO nor any of its representatives has any liability to any Bidder or its representatives relating to or arising from the use of or reliance upon any such information or any errors or omissions therein. 4.3 Bidder Pays Own Cost This RFP does not commit SESCO to pay any costs incurred by the Bidder in the preparation of a Proposal in response to this RFP, or to procure or contract for any products or services. Under all circumstances, each Bidder is responsible for all costs and expenses it incurs in connection with the RFP process. Under no circumstances, including SESCO’s termination of the RFP process at any time for any reason, is SESCO responsible for any costs or expenses of any Bidder incurred in connection with the RFP process. 4.4 Right to Modify or Withdraw RFP SESCO reserves the right to modify or withdraw this RFP, to negotiate with any qualified Bidders to resolve technical or contractual specifications, to reject any or all Proposals, and to terminate negotiations at any time. SESCO may, and expressly reserves the right to, at any time and from time to time, without prior notice and without assigning any reason therefore: - 14 -
  18. 18. Revision One July 7, 2004 (a) cancel, modify, or withdraw this RFP, reject any and all Proposals, and terminate negotiations at any time during the RFP process; (b) discuss with a Bidder and its advisors the terms of any Proposal submitted by the Bidder and obtain clarification from the Bidder and its advisors concerning the Proposal; (c) consider all Proposals to be the property of SESCO, subject to the provisions of this RFP relating to confidentiality, and any confidentiality agreement that may be executed in connection with the RFP process, and destroy or archive any information or materials provided in the Proposal submission (currently, SESCO intends to retain all Proposal information until all related regulatory processes have been completed); (d) request from a Bidder information that is not explicitly detailed in this RFP but that is necessary for evaluation of the Proposal; (e) determine which Proposals to accept, favor, pursue, or reject; (f) reject any Proposals that are not complete or contain irregularities, or waive irregularities in any Proposal that is submitted; (g) accept Proposals based on a combination of price and other factors; (h) determine which Bidders to allow to participate in the RFP process, including disqualifying a Bidder due to a change in the qualifications of the Bidder or in the event that Navigant Consulting or SESCO determines or believes that the Bidder has failed to conform with the requirements of this RFP; or (i) conduct negotiations with any or all Bidders or other persons. 4.5 Right to Suspend RFP If at any time SESCO determines that there is a defect in the RFP process or a deviation from the requirements of this RFP, or that collusive or fraudulent bidding has occurred or appears to have occurred, SESCO may suspend the RFP process in whole or in part as to any Bidder or Bidders. - 15 -

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