The document discusses the key stages and characteristics of developing and implementing an effective competitive procurement process for securing electric power resources. It outlines a 5-stage process: 1) developing the RFO, 2) issuing the RFO, 3) evaluating offers, 4) negotiating contracts, and 5) regulatory approval. Recent trends include all-source solicitations and two-stage evaluations. Lessons highlight the importance of transparency, consistency, and integrating evaluation criteria and contracts. An effective process is fair, encourages competition, and balances utility and customer needs.
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Outline of Discussion
Process for Developing and Implementing an Effective
Competitive Procurement Process
Recent Trends in Competitive Procurement/Competitive Bidding
Processes
Lessons Learned Based on Recent Experiences
Characteristics of an Effective Competitive Procurement Process
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Objectives of Presentation
Provide a template on competitive procurement processes to
guide a utility or buying entity to develop and implement a
competitive procurement process for securing electric power
resources to meet system requirements
Discuss recent trends in competitive procurement and lessons
learned with power procurement processes
Identify the characteristics of an effective procurement process
from the perspective of an Independent Evaluator overseeing the
process
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Process for Developing and Implementing a
Competitive Procurement Process by Process Stage
Stage 1: Development of the RFO/RFP
Stage 2: Issue RFO/Bid Preparation
Stage 3: Evaluation of Offers/Bids
Stage 4: Contract Negotiations with Selected Bidders
Stage 5: Regulatory Approval of Contract (if required)
Total Timeline: ?
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Stage 1: Development of RFO/RFP
A. Address Key Issues
1. Role of competitive procurement/bidding in the IRP process
a. Amount of capacity to solicit
b. Timing of need
c. Type of resources required
d. System operational requirements
2. Type of bidding process
a. Multi-stage evaluation process (conformance to RFO requirements;
eligibility/thresholds; initial evaluation; detailed evaluation; selection)
b. Pre-qualification process; detailed evaluation
c. Indicative bid; shortlisting; binding bids; contract negotiations
3. Bidder eligibility
a. Supply only
Contract type (PPA, Turnkey, Tolling, RA Agreement)
b. All source solicitations/resource options
c. Targeted solicitation (Demand Response)
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Stage 1: Development of RFO/RFP
4. Project eligibility/threshold criteria
a. Project eligibility characteristics (size, resource type, COD date, location,
operational characteristics)
b. Site control
c. Interconnection status
5. Decisions regarding eligibility/threshold criteria
a. New, emerging market – utilize more lenient thresholds to encourage
competition
b. Mature market – stricter thresholds/more mature projects compete
6. Price Evaluation Methodology
a. Models/methodologies
b. Data requirements
c. Term of the evaluation
d. Evaluation of proposals with different term lengths
e. Development of input assumptions
f. Development of offer forms
g. Research assessments
– Capacity value
– Generation profiles/characteristics
– Load profile
– Transmission assessments
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Stage 1: Development of RFO/RFP
A. Address Key Issues (cont.)
7. Role of price and non-price factors - options
a. Specific weights (i.e. 60% price/40% non-price) – objective process
b. Primarily price with non-price considered in evaluation as a risk factor or
subjective criteria
8. Non-price or qualitative factors
a. Project development feasibility/viability
b. Project operational viability
c. Operating profile
d. Flexibility provisions
9. Credit Issues/Security Requirements/Amount of Security Required
a. Development period security
b. Operational period security
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Stage 1: Development of RFO/RFP
A. Address key issues (cont.)
10. Contract Issues
a. Development milestones
b. Events of default; Cure rights
c. Liquidated damages
d. Conditions precedent
e. Pricing provisions
f. Change in law risk
g. Force majeure
h. Operational performance standards
j. Termination rights
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Stage 1: Develop RFP
A. Address Key Issues (cont)
11. Operational Requirements by resource type (renewable, storage, hybrid, etc.)
a. Dispatchability/Scheduling
b. Other requirements (ramp rates, quick start capability)
12. Transmission considerations
a. Timing of interconnection application
b. Completion of interconnection studies for each bid
c. CAISO transmission tariff
d. Cost of transmission upgrades to deliver power to load
13. Flexibility requirements
a. Contract flexibility to delay or accelerate in-service date
b. Contract buyout or acquisition option
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Stage 1: Develop the RFO/RFP
B. Identification of Tasks/Schedule for Implementation
– 3-6 month timeframe from start to finish
– Develop schedule of tasks
C. Develop Evaluation Criteria and Weighting System
1. Threshold or minimum criteria
a. Lenient vs stringent threshold criteria
b. Price/non-price weights
c. Eligibility requirements
d. Overall evaluation process/methodology
D. Develop Internal Procedures Documentation
1. Organizational Structure
2. Documentation of decisions
3. Process for communications with Bidders and others
4. Reporting
5. Project Teams
6. Governance
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Stage 1: Develop RFO/RFP
E. Develop Power Contracts (Based on contract structures allowed)
F. Prepare Draft of the RFO/RFP
1. RFO/RFP protocol document
2. Response Package or Bid Forms
3. Contracts
G. Develop Database for Documenting Bid Evaluation and Selection
H. Develop and implement website for bidder communications
I. Test the Evaluation System
1. Prepare and evaluate test bids to test evaluation system and methodology
J. Prepare list of potential bidders; trade publications to notify market of RFO
issuance
K. Revisions to the RFP
L. RFP Approval (internal and external)
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Stage 2: Issue RFO/RFP/Bid Preparation
Issue RFO/RFP
– To bidder list and trade publications and other outlets
Organize and hold Bidders Conference or Bidders Webinar
– Decide on in-person conference or webinar only
Notice of Intent to bid form submitted (if first RFO or unique RFO may provide
value for assessing potential offers)
Respond to bidders questions
– Establish procedures and process for responding to bidder questions
– Hand-offs from RFO team to subject matter experts for responses if required
Finalize evaluation process and methodology
Complete preparation of input assumptions for evaluation
Finalize process for including transmission costs in offer evaluation
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Stage 3: Evaluation of Offers/Bids
Receipt of proposals (confidentiality/security)
Initial review of proposals
Completeness check
Clarification questions for bidders
Threshold/Minimum requirements evaluation (Stage 1)
Price evaluation/non-price assessment
– Single stage (evaluate and select offers based on initial offer) or two-stage
process (initial offers and best and final offers from shortlisted bidders)
Selection of the short-list
Portfolio evaluation
Select award group/winning bids for contract negotiations
Management presentation regarding selection
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Stage 4: Contract Negotiations
Review exceptions to power contracts
Organize contract negotiations team
Legal
Credit
Commercial expertise
Negotiate commercial terms
Negotiate credit terms
Finalize contracts
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Stage 5: Regulatory Approvals (Utility
requirements)
Advice Letter/application for contract approval
Cost recovery issues
Final approval
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Recent Trends in Competitive
Procurement Processes
With a more diverse array or resources available, recent solicitations have focused
on all source type solicitations, although we do see a number of targeted or limited
solicitations as well
Two-stage evaluation processes are common for All Source solicitations with the
first stage encompassing a comparison of “like resources” in resource buckets to
select a shortlist and second stage evaluation of shortlisted resources from each
bucket or category to select best portfolios
Wider range of contracts as a result of diverse resources
Hybrid projects gaining traction in several markets (i.e. solar plus storage), in some
cases providing a peaking-type resource in competition with conventional peaking
resources
Interconnection process has been one of the more critical path issues for project
development success
Common for threshold criteria to include site control and a Phase 1 or 2
interconnection study and in some cases bidder experience
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Recent Trends in Competitive Bidding
Processes
Bidder response to power procurement solicitations has generally been robust with
a large number of bidders competing for most products
Transmission costs and access are having an important impact for distinguishing
viable projects
Price-related criteria are generally the predominant selection criteria
Non-price used to ensure projects are viable
Utilities utilize a range of processes that treat price and non-price criteria
differently
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Lessons Learned
It is important to establish the procurement rules, evaluation and selection criteria, and buyer
requirements for the solicitation process before issuing the RFO
Preparation up-front is necessary, fair and consistent for all bidders
Assume that not all bidders will be satisfied with the process
Documentation of decisions regarding bid compliance and selection is very important
Try to maintain the schedule included in the Protocol document. Deviations from schedule can
frustrate bidders
While transparency in the solicitation process is important, open and transparent evaluation
systems can lead to gaming of bids and limit true competition. Process should be reasonably
transparent without providing evaluation models or input assumptions to bidders
It is important in undertaking a competitive procurement process that the RFP, Contract, and
information required of bidders (i.e. Response Package or Offer Forms) are integrated and
linked. Ensure information requested from bidders is used in the evaluation
Power contracting has become more complex and time consuming with new products and
resource options, including combinations of several resources in a portfolio
All reasonable costs (bid prices and utility system costs) should be included in the evaluation
process
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Characteristics of an Effective Competitive
Procurement Process
The solicitation process should be fair and equitable, comprehensive, unbiased to
all bidders and reasonably transparent
The solicitation process should ensure that competitive benefits for customers can
result from the process (enhance competition and provide clear and timely
directives to bidders)
The solicitation process should be designed to encourage broad participation from
potential bidders via outreach initiatives to prospective bidders
The RFP documents (i.e. RFO Protocol, Offer Forms or Response Package, and
Contracts) should describe the bidding guidelines, the bidding requirements to
guide bidders in preparing and submitting their proposals, the bid evaluation and
selection criteria, and the risk factors important to the utility issuing the RFO
The Protocol documents should clearly identify the products solicited, the
procurement targets, define the characteristics of the products, the evaluation
criteria and process, utility’s principles and objectives for the solicitation, and the
information that bidders should provide to ensure the buyer can effectively conduct
the evaluation
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Characteristics of an Effective Competitive
Bidding Process
The price evaluation methodology should allow for consistent evaluation of offers
of different sizes, in-service dates and offer terms
– The Least Cost Best Fit methodology used by California IOUs is effective in
meeting these provisions
The solicitation process should include thorough, consistent and accurate
information on which to evaluate bids, a consistent and equitable evaluation
process, documentation of decisions, and guidelines for undertaking the solicitation
process
The solicitation process should ensure that the power purchase agreements are
designed to provide a reasonable balance between the objectives of the counter-
parties, seeking to minimize risk to utility customers, and shareholders while
ensuring that projects can be reasonably financed and constructed
The solicitation process should incorporate the unique aspects of the utility system
and the preferences and requirements of the utility and its customers
The solicitation process should be undertaken in a manner consistent with
pertinent statutory and regulatory requirements and objectives
