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For Immediate Release: June 30, 2006
Media Contact: : Claudia Chandler - 916-654-4989

Workshop Discusses Alternate Practices for California's
Credit Policy in Generation Projects


Sacramento - The Energy Commission explored alternative approaches to California's credit policies regarding new, re-powered, and renewable energy projects, at a workshop held June 27th. Participants included energy policy makers, financial managers, electricity utility representatives and other interested parties.

"Exploring alternate ways to reduce California's onerous credit polices for renewable energy projects will help California meet the Governor's goal of ensuring that 20 percent our electricity comes from renewable energy sources,"stated Joseph Desmond, Undersecretary of Energy Affairs of the Resources Agency.

Currently, credit requirements are imposed on new and re-powered electric generation projects, including renewable energy projects. The cost to build generation projects in California is twice the national average.

The workshop coincided with the release of the California Energy Commission consultant report, The Cost of Credit: A Review of Credit Requirements in Western Energy Procurement, which for the first time provided a comparison between different utility approaches for managing credit risk. The report found that investor owned and municipal utilities in California and electric utilities in other states do not have consistent generator credit policies. In addition, the report concluded that renewable development such as wind energy projects were generally penalized more than fossil fuel generation.

Credit policies have a significant impact on the cost of financing generation facilities, especially with smaller renewable energy projects. Credit requirements have been identified as a culprit in achieving the state's mandated 20 percent renewable energy generation by 2017. A spirited debate dominated the workshop focusing on the need to provide reasonable performance incentives without unfairly penalizing certain types of generation, including renewable generation. The objective is to have adequate and flexible financial protections that support a diverse and low cost electric generation fleet.

Workshop participants proposed a number of alternative approaches for refining California's credit policies, including the elimination of bid deposits, more flexible collateral options, and creative insurance products, including electric utility self insurance to address risk associated with third-party developer contracts.

The Commission is interested in building on the record developed in the workshop by facilitating the development of new credit policies and reducing the cost of capital for generation projects.

Presentations from the workshop, and a WebEx recording of the workshop, are available on the California Energy Commission's Web site at: www.energy.ca.gov/2007_energypolicy/documents/index.html#070606

A workshop report and transcript will be issued and posted at: www.energy.ca.gov/2007_energypolicy/index.html

More information about lowering capital costs for generation projects can be found on the California Energy Commission's Web site at: www.energy.ca.gov/lowering_capital_costs/

In a related action, the Energy Commission approved a $303,000 work authorization with Lawrence Berkeley National Lab at it's June 29, 2006 Business Meeting that will address operational and integration issues that delay or disadvantage renewable energy projects from coming on-line. Given the remote locations of several types renewable energy projects, such as wind and solar, transmission line access is key to the State successfully achieving the 20 percent renewable energy goal for electricity generation.

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