NDIA Conference Charleston SC March 27, 2002

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NDIA Conference Charleston SCMarch 27, 2002

• John Nelson, Acting Chief, Installation Support
  Contracting Division
• Defense Energy Support Center

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Electricity Restructuring Status
Delayed Indefinitely
Retail Access Implemented
Retail Access Implemented, non-functioning market
Retail Access Scheduled in 2002
Retail Access Scheduled 2003 or later
Restructuring Under Consideration
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Legislative Activity

• S.B. 517 7.5 renewable by 2010
• Currently on hold
• Increasing renewable requirements by States

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State Commission Rulings

• Maryland Renewable
• Solar, Wind, Tidal, Geothermal, Biomass (waste to
  energy, landfill), Hydroelectric, Digester Gas
• Pennsylvania Renewable
• Solar, Wind, Low-Head Hydro, Waste, Geothermal,
  Landfill Gas, Mine-based Gas, Sustainable Biomass

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State Rulings (Contd)

• New Jersey Renewable
• Class I Solar, Photovoltaic, Wind, Fuel Cell,
  Geothermal, Tidal, Landfill Gas, Biomass if
  harvested in a sustainable manner
• Class II Resource Recovery or Hydro Facility
  provided certain conditions are met

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State Rulings (Contd)

• Maine Renewable
• Wind, Hydro, Solar, Biomass, Waste to Energy,
  Tidal, Fuel Cells, Geothermal
• Texas Renewable
• Solar, Wind, Geothermal, Hydro, Tidal, Biomass
  including landfill gas

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Impediments

• PL 100-202, Sec 8093 in a nutshell
• No Federal funds can be used to purchase
  electricity inconsistent with State law including
  State utility commission rulings
• NAFTA
• February 19, 2002--- It's the little details that
  keep getting in the way. In this case its how the
  U.S. states define 'green electricity', or energy
  from renewable sources, that could lead to a
  trade dispute with Canada. (Eyeforenergy)

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FAR 12.302

• (c) Tailoring inconsistent with customary
  commercial practice.
• The contracting officer shall not tailor any
  clause or otherwise include any additional terms
  or conditions in a solicitation or contract for
  commercial items in a manner that is inconsistent
  with customary commercial practice for the item
  being acquired unless a waiver is approved in
  accordance with agency procedures. The request
  for waiver must describe the customary commercial
  practice found in the marketplace, support the
  need to include a term or condition that is
  inconsistent with that practice and include a
  determination that use of the customary
  commercial practice is inconsistent with the
  needs of the Government. A waiver may be
  requested for an individual or class of contracts
  for that specific item.

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EO 13123

• Sec. 710. Renewable energy'' means energy
  produced by solar, wind, geothermal, and biomass
  power.

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Commercial Acquisition vs. Government Unique

• Experience shows you need to procure what is
  being sold
• If a state has x as portfolio it is hard to buy y
• Exceptions to commercial practice
• Expensive
• Result in loss of competition
• If our specification is other than state mandated
  could result in 8093 violation
• 8093 Must procure according to State law
• State Regulations - 4 of 5 include Hydro of any
  size and the 5th includes small

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Partnering with Services

• DESC
• Contracting Expertise
• Market Knowledge
• Military Services
• Knowledge of local requirements
• Knowledge of servicing utility

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ElectricEity Program Business Approach
Electricity Acquisition Approach
BUSINESS PHILOSOPHY
Supply Customer with Reliable Energy From Best
Value Supplier
First
Second
Utilize innovative contracting and commercial
practice

Competition is the Best Test of the Market
Third
Remaining with the Incumbent Utility is a
Business decision - AFTER COMPETITION
Fourth

• ACQUISITION STRATEGY
• Make the acquisition a partnership with our
  customers
• Specific RFP terms and conditions based on local
  market standard commercial product and
  customer needs/risk profile
• Utilize FAR Part 12 Electric commodity is an end
  item of supply
• Best Value Buying Technical Rating weighted more
  heavily than price
• Award only if total delivered cost under supply
  contract is less than applicable tariff for
  equivalent electric utility service

CUSTOMER FIRST
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Electricity Program Solicitation Process

• Partner with Customers to Identify Requirements
• Conduct Market Research
• Analyze Retail Access Rules and Tariffs,Identify
  Competitive Opportunities,Establish Benchmark for
  Savings
• Assist Customer in Selecting Performance Period
• Assist Customer to Determine Risk Preference
• Price Stability, Guarantee Savings Versus Tariff
• Tailor Pricing to Reflect Preferences of Customer
• Identify all costs- Metering, loss of special
  rate tariff, etc.
• Obtain Incremental Load Data from Utility

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Renewable Approach

• DESC requests renewable on behalf of our
  customers. When requested by requiring activity,
  will establish specific preference for various
  percentages of renewable.
• This does not eliminate FAR Part 12 issue or
  state portfolio issue.

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Renewable to Date

• State Location Offer Result
• PA DOE Bettis Hydro, 100 Premium No
  Award
• IL DOE Fermi Green Tag, 8/MW No
• Argonne Wind/Landfill, 15/Wind Award
• only
• NJ DOE Princeton No Offer
• NV DOE NTS No Offer
• TX NASA Johnson 5 Mixed Source Award

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DoD Renewable Energy Initiatives

• Ascension Island and other Wind
• China Lake other Geothermal studies
• Million Solar Roofs
• Ft. Huachuca
• Edwards AFB
• Renewables Studies
• Air Force Wind