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- Marty Blake
- The Prime Group, LLC
- 502-425-7882
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- A legally binding agreement between two or more parties which obliges
each party to do or not to do a certain thing
- Technically, a valid contract requires:
- an offer
- an acceptance of that offer
- consideration
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- An explicit proposal to contract
- Includes the terms and conditions that the offerer is proposing
- Considerable flexibility as long as terms are not illegal
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- An affirmative response to an offer signifying an unequivocal
willingness to accept the terms of that offer
- Completes the contract and binds both the person that made the offer and
the person accepting the offer to the terms and conditions of the
contract
- The moment of acceptance is the moment from which a contract is said to
exist
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5
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- Under common law, there can be no binding contract without
consideration.
- Defined as "some right, interest, profit or benefit accruing to the
one party, or some forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other”
- Something of value received by each party
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- Force Majeure
- Definition of what constitutes Force Majeure
- Formerly, an inevitable, unpredictable act of nature, not dependent on
an act of man
- Used in insurance contracts to refer to war and acts of nature such as
earthquakes, lightning
- Currently, used in power and gas contracts to mean just about anything
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- Can it be used for economic interruptions?
- Can make a firm power contract into a non-firm power contract
- You need a clear understanding of what constitutes Force Majeure in a
contract
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- Term of the agreement
- Length of the contract
- When do termination rights kick in? ex. 8 years with ability to
terminate on 60 day notice after 3 years
- Regulatory outs or legislative changes – what is termination liability?
- Early termination payments
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- Term of the agreement
- Customers want flexibility to exit earlier on variable priced
agreements
- Early termination is not as big an issue on fixed price agreements
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- Price structure
- How is settlement price calculated?
- What is included in the price and what is out (and thus the customer’s
responsibility)
- Flat pricing vs. more creative alternatives
- Fixed price contract
- Variable price contract – indexed to market price or published index
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- Price escalators
- Fuel adjustment clause
- purchased power adjustment clause
- other trackers ex. CPI, price of commodity
- Energy imbalance charges
- Other ancillary services
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- Special charges – both direct access and utility
- Stranded costs
- Environmental remediation
- Social programs
- Universal service
- DSM
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- Ability of marketer to switch customer to standard offer rate
- Marketer makes customer whole by honoring the price in the contract?
- How is interruptible service handled and who gets the benefits
- Agency agreements – is the marketer your agent?
- For what functions? (limited agency)
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- Financial recourse to recover the cost of replacement power
- Liquidated damages
- Penalties for excess use and deficiency use
- For example, greater than 110% of anticipated use for excess use and
less than 90% of anticipated use for deficiency use
- Usually linked to flat rate pricing
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- Who pays for delivery service from the local utility?
- Customer pays – less liability if marketer defaults. Delivery service
is not included in marketer’s rate.
- Marketer pays – can result in liability exposure to customer if
marketer defaults
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- What is point of delivery (POD)?
- Customer takes title and risk of loss at POD
- Customer’s premise
- Utility or ISO?
- Bankruptcy and default provisions – can buyer get out of contract if
supplier defaults or files for bankruptcy?
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- Taxes and franchise fees
- Changes in T&D terms and conditions
- Assignability of contract
- Dispute resolution
- Business model of supplier
- Buyers have a preference for asset based
- Utility or utility affiliate – regulatory oversight
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Notes
