Tolling Agreement Electricity
ORLANDO-As gas prices rise and electricity prices rise, more and more companies are turning to toll agreements to finance and share the risk of building new commercial power plants, Dealmaker says. For liability to the toll, the agreement serves as a physical hedge of assets to cover electricity trading positions. At the same time, commercial investments can be used to extract the “volatility value” or upward trend that could be present in volatile gas and electricity markets, Feldman said. In August 2014, Duke Energy Corporation (Duke) and Calpine Corporation (Calpine Corporation), a competing wholesale electricity vendor in Florida, agreed to purchase the Osprey Energy Center (Osprey), a combined natural gas and gas power plant in Florida, in Calpine. The structure of the proposed transaction included a toll agreement that gave Duke responsibility for determining the amount of electricity to be generated at Osprey and purchasing the fuel needed to generate that electricity. In essence, the toll agreement allowed Duke to take operational control of the Osprey facility and limited Calpine`s role to the “mechanical operation of the Osprey facility, in accordance with Duke`s instructions.”  Toll agreements are a common feature of the energy sector. Through these agreements, a buyer supplies fuel to an electric generator and, in exchange, the generator will return electricity to the buyer. Although commonly used, the United States has recently found that such a toll agreement, when entered into between companies considering a merger, opposes the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (HSR Act), which led to the imposition of heavy financial penalties on the buyer. For the restructuring of power purchase agreements and the calculation of returns on equity, the value of volatility is an effective buffer added to the cash reserves needed to cover debt servicing. ==Individual evidence==Woo is a lead partner of Energy and Environmental Economics, Inc. (E3) in San Francisco.
With over 20 years of experience in the energy supply sector, Dr. Woo has published major publications in the electricity, applied microeconomics and applied finance sectors. He earned a Ph.D. in Economics from the University of California, Davis. As gas prices rise and electricity prices rise, more and more companies are turning to toll agreements to finance and share the risk of building new commercial power plants, Dealmaker says. Roger D. will speak Wednesday at Power-Gen International. Feldman, a partner and co-chair of Bingham`s financing and development group Dana LLP, said the basic model seems to be that energy companies, which can handle both fuel and electricity risk, take over such projects. According to DOJ, agreements that transfer economic ownership and are executed before the HSR notification and the expiration of the waiting period may, under the HSR Act, constitute a shot if concluded, while a buyer intends to acquire the target.  These types of agreements allow a buyer to take control of an objective and obtain effects of the concentration before the regulatory authorities have completed their anti-dominant examination. .