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Purchase Agreement Utility

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Apr 11

V. Interconnection and transmission. The AAE requires the vendor to pay for the interconnection costs (including network updates required by the new project) and all costs of transferring energy to the point of delivery. If the seller is the promoter (unlike a distributor), he is also responsible for negotiating the interconnection agreement with the transmission provider. The buyer is responsible for arreasing and paying for the transfer from the place of delivery. (For more information on interconnection and transmission, see Chapter 5) In the case of decentralized production (where the generator is on a construction site and the energy is sold to the building occupants), commercial PPAs have developed as a variant allowing companies, schools and governments to source directly from the generator and not from the distribution company. This approach facilitates the financing of distribution-related production facilities, such as photovoltaics, micro-turbines, alternative piston engines and fuel cells. In general, the sale of energy directly to the end consumer is regulated by state procurement commissions, unlike the regulation of wholesale electricity sales, which falls under the jurisdiction of the Federal Energy Regulatory Commission. Historically, the seller of energy for a direct end-user was regulated under state laws, usually by the State Supply Board. In addition, in many legal systems, in order to encourage these public service companies to make the necessary investments for retail, utility companies have been granted an exclusive right to serve their customers in the territory of the services provided to such a public service (i.e.dem franchise).

In the absence of legislative change to this typical legal structure, a direct sale to an end user could have two unintended consequences for the solar energy designer: (1) The solar energy developer may regulate itself as a public utility under national law (including the requirement to justify its tariffs for the sale of energy at costs); and (2) it may find that its sale is contrary to the exclusive self-service area of the incumbent operator.

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