Subject: Yuba City Cogen 5 yr gas deal
From: [email-masked]
To: houston <[email-masked]>
Cc: [email-masked], [email-masked]
Date: Wed, 1 Aug 2001 11:56:33 -0700 (PDT)

Kim,

We spoke last week about a possible 5 yr gas deal for our Yuba City plant.
Below is our RFP.  I'll call to discuss.

Thanks, Paul Cummins
916-996-2291 cell
916-447-5171 work

Request for Proposal ("RFP")
Yuba City Cogeneration Partners, LP
650 Bercut Drive, Suite C
Sacramento, CA  95814

Background.  Yuba City Cogeneration Partners, LP ("YCC") is the owner of a 49
megawatt cogeneration facility ("Facility") in Yuba City, California.  YCC
sells its 49 megawatts to Pacific Gas and Electric Co. ("PG&E"), an entity
that recently filed for bankruptcy protection.  YCC recently entered into a
five-year, fixed-price electricity agreement with PG&E, and YCC desires to
enter into a long-term Natural Gas Supply Agreement ("NGSA") with an
appropriate supplier ("Seller") of natural gas.  The NGSA shall be subject to
approval of the YCC project lenders, and YCC will only be able to enter into
the NGSA after bankruptcy court approval of the five-year, fixed-price
electricity agreement with PG&E. As a result, YCC will require a daily update
to proposals it receives (to account for varying market conditions) until it
receives all necessary approvals to enter into a final NGSA.

Term. The term sheet contemplates either a three-year natural gas supply
agreement or a five-year natural gas supply agreement.  Under either term,
the starting date will be tentatively August 1, 2001, subject to the
necessary approvals.

Point(s) of Delivery.  PG&E City Gate.

Annual Volumes.  For the purposes of this RFP, it is assumed that the
Facility will consume monthly and annual gas volumes under one of three
different operating scenarios:

    Scenario        Annual Volume, mmBtu

       1                1,210,000

The typical, historical daily usage at the Facility has been 6,000 mmBtu/day,
except periods of maintenance or reduction by the Facility due to the
satisfaction of capacity requirements under its power purchase agreement
("PPA") with PG&E, and the typical, monthly historical usage has been based
upon a Monday through Friday operation.  Scenario 1 is indicative of plant
operations for the satisfaction of the minimum requirements of the PPA,
essentially 80%.

YCC would prefer a NGSA that is based upon annual volumes in a rolling
12-month period.

Monthly Balancing.  Monthly balancing on the PG&E system shall be the
Seller's responsibility, subject to the limitations of the YCC's natural gas
transportation agreement with PG&E, and subject to the PG&E gas system rules
and tariffs.  Seller shall be responsible for any gas imbalance charges
incurred on the PG&E System.

Usage Estimates.  For the purpose of assisting Seller in the Nomination
process, YCC shall make usage estimates in advance and as usage occurs.
Seller should specify requested frequency of usage estimates.

Monthly True-Up.  Actual usage at the Facility will almost certainly be of
some variance to the forecasted monthly gas volumes.  Seller shall propose a
means of "true-ing up" the actual usage to the forecasted monthly volumes.
The ideal system of true-ing up would allow for flexibility to both YCC and
Seller ("the Parties") under the following minimum circumstances:

1. True-up of variance between forecasted usage and actual, if any.

2. If gas price volatility has created daily or other market pricing that
creates financial incentive to the Parties to curtail deliveries to the
Facility and remarket the natural gas to the spot or other market.

3. Allowance for the Facility to curtail deliveries for planned or unplanned
maintenance.

Monthly true-up may incorporate resolution of the differences between price
and volume.

Day of Nomination.  The date of Nomination of daily gas volumes by the Seller
to the PG&E City Gate shall be at the option of, and as determined by Seller,
subject to the limitations of YCC's natural gas transportation agreement with
PG&E, and subject to the PG&E gas system rules and tariffs.

Maximum Daily Nomination Quantity:  YCC's natural gas transportation
agreement with PG&E allows for a maximum daily nomination quantity of 9,550
MMbtu/Day.

Price.  YCC seeks a NGSA that will provide a physical price hedge via three
alternative strategies.  The strategies are as follows:

Strategy        Price Hedge

       1            Fixed price for the term.
       2            Floating price, with a not-to-exceed cap.
       3            Floating price, with a minimum and maximum price.

YCC acknowledges that other hedging strategies exist and may be advisable for
the NGSA.  The Seller is encouraged to supply a proposal that incorporates
other strategies.

Credit and Payment Terms.  YCC can offer the following credit and payment
mechanisms for the purpose of removing credit and payment concern from the
Seller:

1. Semi-Monthly Payment. Semi-Monthly payment for gas based on expected
consumption over the first fifteen (15) calendar-day period of each month,
and the expected consumption over the balance of each month via a wire from
YCC to be made one day following the receipt of payments for electrical
energy from PG&E.

2. Priority payment.  YCC has an agreement with its lender that costs of fuel
shall have first priority in the waterfall of cash flows, i.e. the fuel
supplier shall be paid from project cash flows prior to the payment of all
other costs incurred, including repayment of debt, operations and maintenance
costs, management fees, etc.

RFP Response may be sent via fax to Paul Cummins @ 916-447-7602.  Please call
916-447-5171 for questions.