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Your question assumes that a sufficient test of whether a bidder will, in good faith, be able to make all certifications in the Part 2 Application, is whether the transaction requires disclosure of confidential information (relative to bidding strategy or regarding the Auction Process), and whether the transaction includes provisions that induce a Qualified Bidder to act in a pre-determined way in the auction. This assumption is false; although this test is relevant, it is not sufficient to determine whether a bidder will, in good faith, be able to make the certifications of the Part 2 Application.
Certainly, if Qualified Bidders were party to a transaction that required a Qualified Bidder to disclose confidential information, or that would induce a Qualified Bidder to behave in a pre-determined way in the auction, then almost certainly the Qualified Bidders would be unable to make all certifications in the Part 2 Application. However, even if the Qualified Bidders were parties to a transaction that did not require a Qualified Bidder to disclose confidential information and that did not provide inducements for a Qualified Bidder to behave in a pre-determined way in the auction, a Qualified Bidder may well not be able to make some of the certifications from the Part 2 Application. A Qualified Bidder should evaluate whether it can make each and every certification and it should not conclude that it can make those certifications simply because it has not been a party to a transaction that requires the disclosure of confidential information and/or because it has not been a party to a transaction that provides inducements for a Qualified Bidder to act in a pre-determined way.
Recall that a Qualified Bidder in the BGS-RSCP Auction will be asked to make the following certifications:
- The Qualified Bidder will be asked to certify that it is not a party to any contract for the purchase of power that might be used as source of supply for BGS-RSCP, and that would require the disclosure of confidential information to the counterparty under such a contract or to any other party, or that would provide instructions, direct financial incentives or other inducements for the BGS-RSCP Bidder to act in a way determined by the counterparty in the agreement and/or in concert with any other bidder in the BGS-RSCP Auction.
- The Qualified Bidder will be asked to certify that it does not have any knowledge of confidential information relative to the bidding strategy of any other Qualified Bidder in the BGS-RSCP Auction.
- The Qualified Bidder will be asked to certify that it will not disclose confidential information relative to its own bidding strategy except to bidders with which it is associated, to its Advisor, and to its financial institution. The BGS-RSCP Bidder may, however, during negotiations of contractual arrangements for power to serve BGS-RSCP load were it to be a winner at the BGS-RSCP Auction, discuss with the counterparty to such arrangements the nature of the products purchased, the volume, and the price at which it is willing to buy these products.
- The Qualified Bidder will be asked to certify that, except for information publicly announced by the Auction Manager or the Board, it will not disclose any information it has regarding the Auction Process, including any round results and the status of its participation in the BGS-RSCP Auction, with any party except its Advisor and bidders with which it is associated.
- The Qualified Bidder must certify that, other than entities with which it is affiliated, and other than bidders named in the Part 1 Application as parties with whom the Qualified Bidder has entered into a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, no party has agreed to defray any of its costs of participating in the BGS-RSCP Auction, including the cost of preparing the bid, the cost of any financial guarantees, the cost to be paid upon winning a tranche, and any other participation cost.
Please note that all statements where a bidder is asked to certify that it will not disclose confidential information, the bidder is asked to certify that it will not disclose this confidential information to any other party; these statements are not limited to asking the bidder to certify that it will not disclose confidential information to other Qualified Bidders.
You ask about certain specific types of transactions. Please note that all transactions require a case-by-case consideration of whether the parties to the transaction that are Qualified Bidders will be able to make the certifications of the Part 2 Application; see, for instance, FAQ-20, FAQ-21, FAQ-25, and FAQ-39.
Transaction of a shaped product may or may not impede the ability of Qualified Bidders to make or uphold the certifications of the Part 2 Application. Transaction of a shaped product in isolation, with that product having a fixed price, a fixed volume and delivery pattern, along with no contingency between winning at the auction and purchasing the product, may not reveal the buyer’s or the seller’s assessment of migration risk or weather risk. A shaped product can be used not only to support a bid in the auction but it can be used outside the auction and it can be resold to another buyer in or out of the auction. A shaped product in and of itself is not sufficient to meet the supply obligations of a BGS-RSCP Supplier; several other significant components are required. Such a transaction need not reveal or provide confidential information relative to the bidding strategy, but such a transaction could reveal or provide confidential information relative to the bidding strategy. For example, if this transaction were not an isolated transaction but instead the parties were engaged in a series of transactions that included shaped products for varying delivery patterns, or if shaped products were added to other components that could be used for BGS-RSCP Supply, the totality of these transactions would most likely reveal confidential information relative to the bidding strategy of one or both parties. If the totality of the transactions reveal confidential information relative to the bidding strategy of one or both parties, it would not be possible for the bidders to make or uphold all certifications of the Part 2 Application. Each Qualified Bidder is asked in its Part 2 Application to certify that it does not have and will not obtain confidential information relative to the bidding strategy of another Qualified Bidder and that it has not and will not reveal confidential information relative to its own bidding strategy to another party. Confidential information relative to bidding strategy includes the bidder’s estimation of the value of a tranche of the various EDC systems; the bidder’s estimation of the risks associated with serving BGS-RSCP load or of serving a particular EDC; and a bidder’s contractual arrangements for power with a party to serve BGS-RSCP load were the bidder to be a winner at the auction.
Transaction of a load-following energy product, that is, one that followed actual BGS-RSCP load in some way, for example for an EDC territory, would likely impede the ability of Qualified Bidders to make or uphold the certifications of the Part 2 Application, even if the product were not a full-requirements product. Transaction of such a product would reveal a significant component of a bidder’s cost and would reveal an estimation of the seller’s risk of serving BGS-RSCP load. Such products have no or extremely limited alternative use outside of the context of the BGS-RSCP Auction. It is difficult to envision that a Qualified Bidder could transact for such a product with another Qualified Bidder and be able to make all certifications in the Part 2 Application including certifications that the bidder has not revealed confidential information relative to its bidding strategy and is unaware of confidential information relative to another Qualified Bidder’s bidding strategy. The same would be true of basis products that would be tied to the BGS-RSCP load shape in any way, or to any product for which the transaction was contingent upon the outcome of the auction.
11/20/2023, in Association and Confidential Information Rules.
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