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Answers to Frequently Asked Questions are provided in this section. 

The first posting of FAQs will be in August. The last posting of FAQs will be in the latter part of January, after bidders are registered to participate in the Auctions. From that point, questions and answers are emailed directly to Registered Bidders and are not posted to the BGS Auction website. Questions that are not from Registered Bidders or their advisors are answered strictly on a best efforts basis.

Your use of this page (site) constitutes an acceptance of the Terms as described in the disclaimer.

 

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FAQ-112

Can we provide the letter of credit that our bank wants to issue to the BGS Auction Manager as a redline to the standard format for review?


Bidders had the opportunity to suggest modifications to the pre-auction letter of credit and the post-auction letter of credit in the comment process open to all potential bidders that closed at the end of October. With the Part 2 Application, bidders must submit their executed pre-auction letters of credit and the BGS Auction Manager will not review drafts.

Only the standard form of the pre-auction letter of credit and the modifications accepted through the comment process for use by bidders on an optional basis are acceptable to the EDCs. You may consult the list of modifications acceptable to the EDCs to ensure that the pre-auction letter of credit that you submit with your Part 2 Application is not deficient. This list is in the document “FINAL ACCEPTABLE Modifications to Pre-Auction Letter of Credit (November 6, 2017)” and is posted to the “application process” page of the “bidder info” tab.



1/2/2018, in Credit, Application.
FAQ-111

Will the EDCs evaluate the acceptability of our draft Letter of Reference before we submit it for purposes of the Part 2 Application?


The EDCs do not provide courtesy reviews of draft documents. Samples of the Letter of Reference are available on the "application process" page of the "bidder info" tab of the BGS Auction website. A bidder that uses these samples can be assured that they are acceptable to the EDCs. If a bidder submits a Letter of Reference in another format, this executed and final Letter of Reference will be reviewed by a committee of the EDCs after receipt of the Part 2 Application. The bidder will be notified of any needed amendment as soon as the committee has made its evaluation and in no event later than 6 PM EPT on January 11, 2018.



1/2/2018, in Credit, Application.
FAQ-110

In our Part 1 Application for the BGS-RSCP Auction, we presented financial information for our Guarantor. If we decide not to rely on the financial standing of our Guarantor and to rely on our own financial standing instead going forward, how should we provide notice to the Auction Manager?


The Auction Manager provides to each Qualified Bidder a notification of qualification that includes the requirements for presenting pre-auction security with the Part 2 Application. A Qualified Bidder that named a Guarantor in the Part 1 Application is required either:

• to provide a Pre-Auction Letter of Credit in an amount of $500,000 per tranche of the indicative offer at the maximum starting price and a Letter of Intent to Provide a Guaranty in an amount of $1.9M per tranche of the indicative offer at the maximum starting price; or:

• to provide a Pre-Auction Letter of Credit in an amount of $2.4M per tranche of the indicative offer at the maximum starting price.

This is stated to you in your notification of qualification. Please note that there is no mechanism or opportunity for the Qualified Bidder to request a creditworthiness assessment of another entity (including itself) after the Part 1 Application process is complete.



1/2/2018, in Credit, Application.
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FAQ-109

Can you confirm that no pre-auction security is required under the Part 1 Application and that any pre-auction security required is due with the Part 2 Application?


Correct. There is no pre-auction security required with the Part 1 Application, which has a deadline of noon (EPT) on December 12, 2017. Pre-auction security is required of all bidders with the Part 2 Application, which has a deadline of noon (EPT) on January 10, 2018. A bidder must submit a pre-auction letter of credit for each Auction in which the bidder is participating. A bidder participating in the BGS-RSCP Auction may also be required to submit additional pre-auction security as detailed in the bidder’s Notification of Qualification.



12/8/2017, in Credit, Application.
FAQ-108

Does the EDC Municipal Aggregation Enrollment file posted to the additional data page of the BGS Auction website contain all municipalities that are currently enrolled? It seems that the file is missing Old Bridge Township, which is located in JCP&L’s zone and is served by a third party supplier.


Thank you for bringing this to our attention. It would appear that Old Bridge Township in New Jersey was inadvertently excluded from the Municipal Aggregation Enrollment list for JCP&L. An updated Municipal Aggregation Enrollment file will be provided in January. The Auction Manager will send an announcement to website registrants when this file is posted.



12/8/2017, in Data.
FAQ-107

What mailing address do we use to send the pre-auction security documents?


The mailing address is provided in Paragraph 14 of the Pre-Auction Letters of Credit and is the same for all pre-auction security documents. For your convenience, the mailing address for pre-auction security documents is provided below:

BGS Auction Manager

One Gateway Center, Suite 720

Newark, NJ 07102



12/8/2017, in Credit.
FAQ-106

Did the Board compensate BGS Suppliers in any way when PJM changed the capacity construct with its Capacity Performance proposal?


During the proceeding for the 2015 BGS Auctions, prospective suppliers informed the Board that PJM was considering changes to the capacity market construct that could result in significant increases in the capacity charges assessed to BGS Suppliers over the charges that had been established to that point for the supply period. The EDCs argued that this change meant that BGS Suppliers and bidders would not, as they had in prior auctions, know the capacity cost of serving load prior to participating in the BGS Auctions. Thus this change would place BGS Suppliers and bidders at risk for unknown and unknowable costs due to a fundamental change in market rules. The EDCs recommended, and the Board accepted, that some payment adjustment be made for the change in the capacity market construct. A supplement to the BGS Supplier Master Agreements ("SMAs") was put in place for that purpose and approved by the Board. The supplement provided compensation to BGS Suppliers for incremental costs due to changes to the RPM construct under the Capacity Performance Proposal. The supplement was made available to participants in the 2015 BGS Auctions as well as available retroactively to winning bidders from the prior 2013 and 2014 BGS-RSCP Auctions. The Board accepted that it should take action given that the risks of the changes to the capacity construct were structural changes to the rules governing capacity markets, that were unforeseen and unhedgeable, and that had the potential to result in unknowable changes to the costs of serving BGS load (by opposition to risks associated with customer migration and economy driven energy and capacity market volatility, which BGS Suppliers must accept).

Specifically, the Supplement would compensate BGS Suppliers for differences between a specified PJM RPM Zonal Net Load Price for each year and the PJM RPM Zonal Net Load Price actually charged for load served for each EDC’s PJM zone. The Supplement is no longer in effect and is not relevant for the 2018 BGS Auctions. A copy of the Supplement is available from the Auction Manager upon request.



12/5/2017, in Supplier Master Agreement .
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FAQ-105

What is the formula for calculating a BGS Supplier’s capacity obligation and for calculating the Peak Load Allocation used?


The formula for calculating a BGS Supplier’s capacity obligation is provided below:

Capacity Obligation (BGS-RSCP or BGS-CIEP) = PLA x DZSF x PJM Forecast Pool Requirement x Final Zonal RPM Scaling Factor

The above Peak Load Allocation (“PLA”) used for purposes of calculating a BGS supplier’s capacity obligation is equal to the aggregate zonal allocations less wholesale and Third Party Suppliers’ capacity PLAs. The PLA will be adjusted by the EDC to account for customer switching; there is no additional formula for calculation of this quantity. The customer must notify the EDC that the customer is switching to a Third Party Supplier. The switch will be effective on the next meter read date, provided that the customer has notified the EDC of the switch at least twenty days prior to the meter read date.

Approximately five days prior to the day of supply, BGS Suppliers will receive the most accurate information available to the EDC on the capacity obligation for BGS Suppliers. This information reflects customer switching that will occur as BGS Suppliers do not receive notices of customer switches. The EDCs also provide an estimate of the capacity obligation twenty days prior to the day of supply, which will provide an indication of customer switching that could occur, but this information may be less accurate than the information available five days prior to the day of supply.



12/5/2017, in Supplier Master Agreement .
FAQ-104

In the event that we become a winning bidder in the Auction, is it required for the Authorized Representative or the Officer who names the Authorized Representative in the Part 1 Application to be the individual who executes the applicable Supplier Master Agreement (“SMA”)?


Neither the Authorized Representative, nor the Officer who names the Authorized Representative in the Part 1 Application, is required to be the individual who would execute the applicable SMA should the bidder win at the Auction. In the event that you become a winning bidder in the Auction, the entity that executes the applicable SMA must be the same entity that has agreed to the terms of the SMA in the Part 1 and Part 2 Applications. However, the individual who signs the SMA can be any officer who is empowered to undertake contracts and bind the bidder. Applicants will be provided the opportunity to name the individual who executes the SMA by filling out the CIEP/RSCP Contract Insert (P2-2/P2-4) during the Part 2 Application process.



11/29/2017, in Application.
FAQ-103

Does an applicant to the BGS Auctions need to be a Load Serving Entity (“LSE”) in the PJM Interconnection, L.L.C. (“PJM”) at the time of submitting the Part 1 Application?


No, the applicant does not need to be a PJM LSE at the time of submitting the Part 1 Application. However, if the applicant is not a PJM LSE at the time of submitting the Part 1 Application, the applicant must certify that there exist no impediments for the applicant to become a PJM LSE by the start of the supply period on June 1, 2018. The certification is made by completing the LSE Certification Insert, also labelled Insert #P1-4 and uploading the insert to Section 5 of the Part 1 Application. By the time service begins, each BGS-RSCP Supplier and each BGS-CIEP Supplier must be a member of PJM, must meet all applicable obligations that PJM ascribes to a Load Serving Entity, and must be a signatory of the PJM Reliability Assurance Agreement as amended and/or superseded.



11/29/2017, in Application.
FAQ-102

We do not have an office in New Jersey and we do not have a legal representative in New Jersey. Can you explain how we may comply with the requirements of Section 3 of the Part 1 Application?


Section 3 of the Part 1 Application does not compel the Applicant to have an office in New Jersey or to have legal counsel in New Jersey. A legal representative, for purposes of the Part 1 Application, is a person or company that agrees to accept service of process on the Applicant’s behalf. The legal representative can be either legal counsel or a representative agent. The individual or company serving as the Applicant’s legal representative must provide an address in New Jersey. If a company agrees to accept service of process on your behalf, an individual from that company must sign the Legal Representative Insert, also labelled Insert #P1-3. This individual may be updated in the event of employee turnover. The name of the individual and contact information must be provided.



11/29/2017, in Application.
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FAQ-101

The Part 1 Application asks for financial information for the Bidder. Are we required to provide this information if we rely on the financial standing of a guarantor?


Section 6 of the Part 1 Application asks the Applicant to provide financial information for the Bidder if this information is available, regardless of whether the Applicant is relying on the financial standing of a Guarantor. If any of this information is unavailable, the Applicant should state this fact in Section 11 of the Part 1 Application, the Justification of Omissions.



11/29/2017, in Application.
FAQ-100

Where can I find the tranche sizes for the BGS-RSCP and BGS-CIEP Auctions?


The size of a tranche for an EDC for a BGS Auction is a given fixed percentage of that EDC's BGS-RSCP or BGS-CIEP Load. The tranche sizes for the BGS-RSCP and BGS-CIEP Auctions are provided in the following announcements:

http://www.bgs-auction.com/bgs.press.annc.item.asp?anncId=595
http://www.bgs-auction.com/bgs.press.annc.item.asp?anncId=596



11/28/2017, in General, Data.
FAQ-99

What was the modification to Section 15.9 of the BGS Supplier Master Agreements that was proposed by the EDCs and that the Board did not accept?


The proposed change to Section 15.9 of the BGS Supplier Master Agreements is described in the EDCs’ Joint Proposal filed as part of the EDCs’ Proposal for Basic Generation Service Requirements to Be Procured Effective June 1, 2018. Alternatively, an interested party can compare the SMAs as filed in the Joint Proposal, which are posted to the “contract and credit” page of the “bidder info” tab of the BGS Auction website, to the final SMAs from the 2017 BGS Auctions, posted on the same page.



11/28/2017, in SMA Section 15.9.
FAQ-98

Can the EDCs provide the start and end dates for all the towns that are currently participating in municipal aggregation?


The data provided by the EDCs consists of the list of municipalities that have completed enrollment at the particular point in time when the data is compiled. The EDCs are not making available additional data regarding municipal aggregation at this time.



11/28/2017, in Data.
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FAQ-97

When will the Auction Manager announce tranche fees for the 2018 BGS Auctions? Can you please provide the tranche fees from recent BGS Auctions?


Tranche fees are announced each year at the information session for registered bidders. The tranche fees for the 2018 BGS Auctions will be announced Tuesday, January 23, 2018. The tranche fees for the 2015 – 2017 auctions are printed below.

2017:

BGS-RSCP: $26,200/tranche

BGS-CIEP: $21,800/tranche

2016:

BGS-RSCP: $25,200/tranche

BGS-CIEP: $20,300/tranche

2015:

BGS-RSCP: $25,800/tranche

BGS-CIEP: $20,100/tranche

Tranche fees are paid only by winners at the auction. The tranche fee will be netted against the first payment made to the winner during the supply period.



11/21/2017, in General.
FAQ-96

How should I interpret the minimum starting price of $425/MW-day for the BGS-CIEP Auction? Is this an energy price and how does it relate to current power prices in PJM?


Prior to the submission of Part 1 Applications, the Auction Manager announces a statewide minimum starting price and a statewide maximum starting price. As stated in Section VIII.B.1. of the ‘Provisional BGS-CIEP Auction Rules’ posted to the ‘auction rules’ page of the ‘bidder info’ tab of the BGS Auction website, these prices establish the range of possible prices in round 1 of the BGS-CIEP Auction. Each EDC will choose a starting level for its price for round 1 of the Auction that is between the minimum and maximum starting price. The final prices are reached at the close of the Auction, once the number of tranches bid falls to the number of tranches needed for each EDC.

The final price in the BGS-CIEP Auction for an EDC, or “CIEP Price”, is a capacity price that will paid on the basis of the capacity obligation of a BGS-CIEP Supplier given the number of tranches that it serves. The CIEP Price is not an energy price and is unrelated to power prices in PJM. As detailed in the BGS-CIEP Supplier Master Agreement and summarized in the BGS-CIEP Auction Rules (see example 1), a BGS-CIEP Supplier receives payments other than a capacity payment based on the CIEP Price, including payments for energy based on the PJM hourly spot price, for ancillary services based on a pre-determined value, transmission based on a value announced prior to the auction, and a standby fee levied on all CIEP customers (and not just on customers that take BGS).



11/21/2017, in General.
FAQ-95

How is a BGS Supplier’s capacity obligation calculated and when are BGS Suppliers notified of their capacity obligations?


The capacity obligation of a BGS Supplier (a BGS-CIEP Supplier or a BGS-RSCP Supplier) for an EDC is the BGS Supplier’s responsibility share of that EDC’s capacity obligation. The BGS Supplier’s responsibility share is the number of tranches the BGS Supplier is serving for that EDC times the percentage associated with each tranche. The capacity obligation for an EDC is calculated by multiplying the Peak Load Allocation (PLA) by the Daily Zonal RPM Scaling Factor (DZSF), the PJM Forecast Pool Requirement, and the Final Zonal RPM Scaling Factor, as follows:

Capacity Obligation (BGS-RSCP or BGS-CIEP) = PLA x DZSF x PJM Forecast Pool Requirement x Final Zonal RPM Scaling Factor

Approximately five days prior to the day of supply, BGS Suppliers will receive the most accurate information available to the EDC on the capacity obligation for BGS Suppliers. This information reflects customer switching that will occur as BGS Suppliers do not receive notices of customer switches. The EDCs also provide an estimate of the capacity obligation twenty days prior to the day of supply, which will provide an indication of customer switching that could occur, but this information may be less accurate than the information available five days prior to the day of supply.



11/21/2017, in Supplier Master Agreement .
FAQ-94

Entity A is contemplating selling a hybrid swap/credit-support product to Entity B, akin to a contingent credit sleeve. Entity A and Entity B are each a BGS Supplier. It is possible that each intends to bid in the next auction; however, these entities have not and do not intend to discuss with each other participation in future auctions. Further, Entity A and Entity B are not related entities, always bid separately, and have no agreements related to bidding in the auctions in any way.

The transaction can be described as follows. Entity B would pay Entity A a premium in exchange for Entity A standing ready and posting cash or a letter of credit directly to the EDC (not Entity B) if the PJM forward energy price exceeded a particular threshold. This would assist Entity B to meet its credit obligations under an existing Supplier Master Agreement.

This "contingent credit sleeve" product is negotiated after the close and certification of the results of the last BGS Auctions, and before the beginning of the next BGS Auction cycle. This product is not for the purposes of bidding in future BGS Auctions. Are there any issues with such a transaction under the Association and Confidential Information Rules?


As we understand your inquiry, Entity A would sell to Entity B a product that would obligate Entity A to post margin as an agent for Entity B when forward prices for PJM exceeded a certain threshold. As you have described the product, the product applies for BGS obligations only and not for a wider range of trading obligations. Further, it applies to BGS load won in Auctions already held and ruled upon by the BPU.

There is no issue, with respect to BGS certifications that have been made, with the two entities transacting such a product that relate to positions won in past auctions once the Supplier Master Agreements have been signed for the relevant supply period. Your concern is also whether entering into such a transaction could make it difficult for Entity A or Entity B to make the certifications required to participate in future BGS Auctions.

Without going through each certification in detail, an entity will generally be required to certify in future auctions that the entity has no bidding agreements, no knowledge of another bidder’s bidding strategy, no knowledge of another bidder's preference for bidding on any product, or no knowledge of another bidder's valuation of any product in the upcoming auction. You will also be required to certify that you have not revealed any such information to anyone, including another bidder. It does not seem that selling the product you describe, in the particular timeframe you describe, related only to past BGS obligations, would create any type of bidding arrangement for a future auction, would reveal confidential information with respect to bidding strategy, would reveal either entity’s valuation of the BGS product for future auctions, or would reveal an entity's preference for bidding on any specific product. Hence, it would seem that if Entity A and Entity B entered into this contingent credit sleeve arrangement in the timeframe you describe, the transaction would not have an impact on the certifications to be made for future auctions.

Our response does not contemplate, and would not necessarily apply, to a situation in which Entity A and Entity B entered into a general corporate agreement where Entity A would be supporting all of Entity B’s trading obligations. Similarly, we are assuming that the arrangement is not a transaction that would entail Entity A conducting due diligence with respect to Entity B’s trading operations, or BGS supply arrangements, or valuations (and vice versa). Further, we are assuming, as you have stated, that this credit product is not for the purposes of bidding in future BGS Auctions. Were any of these assumptions to be incorrect, the guidance we are providing could differ as the level of knowledge that each entity may have about the other’s valuation methods and preferences could make it difficult to make some of the required certifications. However, trading a contingent credit sleeve on a one time basis, without a review of the other entity’s trading strategies and BGS hedging and supply arrangements, does not in itself appear to pose any problem for future auctions. Finally, we note that the transaction you describe would not "make" one entity a financial institution for the other, and that any provisions for additional information to be provided to a financial institution under the Association and Confidential Information Rules would not apply to the circumstance described.



11/21/2017, in Association and Confidential Information Rules.
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FAQ-93

If two Qualified Bidders are associated, will these bidders be jointly subject to the load caps?


In general, Qualified Bidders that are associated with one another are considered as one bidder for the purposes of application of the load caps and for the administration of the auction.



11/21/2017, in Association and Confidential Information Rules.

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What's New

POSTING: EDC Municipal Aggregation Enrollment and CIEP Opt-In Files ...   GO >>

ANNOUNCEMENT: Final Seasonal Factors POSTING: Updated BGS-RSCP Rate Spreadsheets and Rate Spreadsheet Tool...   GO >>

Announcement: Rates for Firm Transmission Service Expected to be Announced by January 16, 2018...   GO >>

REMINDER: Part 2 Application Deadline is TODAY, Wednesday, January 10, 2018...   GO >>

REMINDER: Part 2 Application Deadline is TOMORROW, Wednesday, January 10, 2018...   GO >>

REMINDER: Part 2 Application Deadline is Wednesday, January 10, 2018...   GO >>

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FINAL REMINDER: Part 1 Application is Due by NOON TODAY!...   GO >>

ANNOUNCEMENT: Compliance Filing Documents Approved as Final Documents; POSTING: Terms and Conditions of Auction Software ...   GO >>

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ANNOUNCEMENT UPDATE: Total 2018 Auction RSCP Peak Load Share (MW) Update...   GO >>

POSTING: Final Part 2 Application Form...   GO >>

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