How to Negotiate Power Purchase Agreements

Power purchase agreements are for electricity.

If you want to participate in a bulk power purchase, either as a buyer or seller, but lack a generator or the infrastructure to distribute power, you can buy power from someone with a generator or sell power to someone with infrastructure. Even if you have everything you need, a power purchase agreement can be a good way to essentially buy or sell in bulk--by buying a lot of something, you reduce its individual cost, and power is no exception.

Instructions

1. Find an independent power company if you want to buy; find a utility or a large company if you want to sell.

2. Hire an adviser with the necessary expertise. There are a number of lawyers who specialize in power purchase agreements; you should hire one of these lawyers.

3. Check with your local utility oversight board as to whether a regulating official needs to be involved. This may be different depending on your location, so you absolutely must check.

4. Ensure the deal covers everything, as these are long-term agreements. If one party is able to get out of it without penalty, the other party is set up for a large financial sting. This means you need to cover who is in charge of maintenance, how much the power will cost, and what the penalties are for either side not following through.

References

• Cogeneration: Power Purchase Agreements
• DLA Piper: Negotiating Power Purchase Agreements

Resources

• Ret Screen: Power Purchase Agreement Template