Sponsor's Creditworthiness and Experience

Geysers parent company, Calpine, is in bankruptcy. While SCE is concerned, SCE is closely monitoring Calpine's progress and sees that certain recent actions represent positive signs that Calpine will successfully emerge from bankruptcy. In addition, to mitigate the risk that the seller will not perform as required by the PPA or will default following the commencement date, Geysers is required to post performance assurances.

5.8. Consistency with Adopted Standard Terms and Conditions

In D.04-06-014, the Commission set forth standard terms and conditions (STCs) to be incorporated into RPS agreements. Appendix A of that decision identified the STC, some of which are categorized as "may not be modified." The Geysers PPSA contains modifications to certain STCs.²² SCE states that these modifications were commercially necessary for Geysers or were not materially different from the STCs contained in D.04-06-014.

SCE states that a number of modifications were necessary, (1) to change the standard terms to reflect the fact that the Geysers PPSA is structured around the purchase of portion of the energy produced by all of the Geysers generating facilities and not, as the standard terms assume, energy produced by a single generating facility whose entire output is dedicated to SCE, (2) to reflect the fact that the hourly energy scheduled by Calpine from all of its generating assets with SCE will be paid at an index price, and (3) to include the renewable power premium payment for Calpine's monthly allocation of Green Attributes, based upon the meter readings at each individual generating facility.

Modifications that SCE considered to be immaterial affected the definition of "CPUC Approval" and "Green Attributes" and the contract sections that described the term, eligibility, assignment and applicable law. SCE states the modifications were very minor, were mutually agreed to by both parties and were made to provide more clarity to the PPA as a whole.

We have reviewed SCE's changes to the STCs and agree they were either necessary to reflect the facts of the Geysers PPSA, or in providing clarity, are minor as compared to the terms and conditions approved in SCE's 2005 Procurement Plan and R.04-04-026.

²² A comparison of the standard terms from D.04-06-014 to SCE's 2006 pro forma and the Geysers PPSA can be found in Appendix B of Exhibit 1 (Confidential).