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Home My WebLink About2007-09-19 Agenda Packet - Board (17) Agenda Item # 9 Truckee Donner PUD Purchase Power Plan and 2008 Budget Review September 19, 2007 Mission Statement of Truckee Donner PUD March 7,2007 The Mission of Truckee Donner Public Utility District is to provide adequate, reliable and high quality water and electrical power services, and to manage District resources in an open, responsible, environmentally sound manner at the lowest practical cost. In pursuing this Mission, the District will actively seek renewable energy sources as set forth in its Renewable Portfolio Standard. • Objective 2. Provide an adequate, reliable and high quality electric supply and distribution system to meet current and future needs. — 2.5 Procure and contract for low cost electric power supplies to reliably meet current and future loads. 2 Renewable Portfolio Standard (Excerpt) — TDPUD March 21, 2007 • POLICY: • Truckee Donner Public Utility District RPS Obiectives • Meet the intent of SB 1078 to encourage renewable resources. • Maintain reliable overall energy supply portfolio. • Minimize adverse impact of acquiring new renewable energy resources on customer electric rates. • Truckee Donner Public Utility District Electric Oualified RPS Resources • Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric. These would include but may not be limited to any resource that meets the definition of"Eligible renewables" pursuant to section 398.4(h)(1) of the California SB 1305, which sets forth the requirements for power content labels: — Geothermal (including low-temperature geothermal heat pumps) — Hydroelectric — Solar — Wind — Biomass and waste — Fuel cells • RPS Target: • At such time that projected resources do not exceed projected demand, TDPUD will strive to include qualifying resources to meet projected demand. • Truckee Donner Public Utility District resource mix will have a minimum of 21% of renewable resources by 2010. Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric. 3 TDPUD Has Developed a Comprehensive Power Supply Plan • Existing power supply contract expires at the end of 2007 (93% of supply) — Existing contract essentially eliminated price volatility • Future Portfolio is intended to balance: — Conservation - Contract Duration — Renewable Resources - Cost — Resource Diversity - Price Volatility Proposed Expected Case Expected Case 2008 Year 2009 Year 2007 Year Market Energy Market Energy Energy 3% 0% SCE Natural Gas Natural Gas 450X 0 Hydro ° 6% 7% Hydro SCE Hydro ° 4/0 65% 9% Coal Geothermal 9, 25% Geothermal 40% 4 Conservation is Considered First Resource • Historic load growth has averaged 4.7% over the last three years • Forecast assumes that load increases by only 1% over the next three years — Conservation may account for 1-3% of total load — Offsets growth that would otherwise require additional resources • Conservation is estimated to shave approximately 1MW from TDPUD's monthly average energy requirements — Greater conservation will reduce market purchases 5 Renewable Resources Could Provide Nearly 25% of Energy • Stampede Hydroelectric Plant — Approximately 3.4MW run of river plant — Output will be shared with the City of Fallon — Majority of energy will be received March-July, project online on August 2007, TDPUD receiving energy in September 2007 — Expected cost is $38/MWh — Contract has been approved by the Board • _Rye Patch - Geothermal Project — Ten year contract — Approximately 4 MW is expected in summer 2008 — Expected cost is about $65/MWh — Contract has been approved by the Board • UAMPS Shaped Capacity & Energy (SCE) Project — Additional capacity is available beginning in summer 2008 — Expected cost is in the mid $50/MWh range — Project fits TDPUD's remaining baseload need at a relatively low cost 6 Additional Resources - Possibly Available to TDPUD • Payson Natural Gas Project — 145 MW UAMPS owned project in commercial operation — Payson location enables delivery via UAMPS Power Pool — Long-term cost based power purchase agreement is available — Majority of energy is received during high load hours — Expected cost is approximately $80.00/MWh — Price fluctuates with the cost of natural gas and unit dispatch — Project adds to resource and fuel diversity • Geothermal Project (2) — Empire Farms — Existing geothermal project — Approx. 2 MW in commercial operation — Investigating exiting existing Sierra Pacific contract to sell to TDPUD 7 TDPUD Proposed Resource Plan — (Expected) 2008 TDPUD Resource Profile High Load Hours - 2008 30.0 25.0 20.0 15.0 10.0 5.0 (5.0) ARM (10.0) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ■ Geo 1 ❑ Stampede E Geo 2 ■ SCE ❑ Payson ■ HLH Gap • Plan results in resource diversity, minimal price volatility and an expected all-in cost in the range of $60/MWh • Current gas forecast and average heat-rate • Short position in first quarter of 2008 remains to be addressed s TDPUD Resource Portfolio — Expected 2008 2008 Year M arket Energy 3% Natural Gas 3% Hydro SCE 0 4/0 65% Geothermal 25% Projected Wholesale Power Cost = $9,750,443 9 TDPUD Proposed Resource Plan - 2009 Expected TDPUD Resource Profde High Load Hours -2009 35.0 30.0 25.0 20.0 15.0 10.0 5.0 (5.0) (10.0) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ■ Ge o 1 ❑ Stampede E Ge o 2 ■ SCE ❑ Payson ■ HLH Gap • By 2009, the plan results in an all-in cost in the range of $62/MWh — Expected variability in cost is within $1 .00/MWh — Expected cost of comparable Constellation renewal for 2008 is approximately $78.5/MWh 10 TDPUD Resource Portfolio — Expected 2009 Expe de d C as e 2009 Year M arket Energy 0% SCE Natural Gas 45% 6% Hydro 9% Geothermal 40% .� 11 2008 Risk to Budget - Reduced Geothermal Case TDPUD Resource Profile High Load Hours - 2008 30.0 25.0 20.0 15.0 10.0 5.0 (5.0) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ■Geo 1 ❑Stampede M Geo 2 ■SCE ❑Payson ■HLH Gap • High heat-rates and high gas prices • Geo 1 is delayed and reduced, Geo 2 is not able to sell to TDPUD • Expected all-in cost in the range of $62.8/MWh 12 TDPUD Resource Portfolio —Reduced Geothermal 2008 Energy Net Market 16% SCE Natural Gas 71% 3% Hydro 4% Geothermal 6% Projected Wholesale Power Cost = $10,340,000 13 Worst Case —Reduced Geothermal & SCE Unit Down • Reduced Geothermal Case and One Unit of SCE is down for entire year 2008 Energy SCE 45% Net Market 42% Geothermal 6% Hydro 4% i Natural Gas 3% Projected Wholesale Power Cost = $1196209000 14 TDPUD Resource Portfolio — Risk vs Benefit • Short position in first four months of 2008 remains to be addressed. • Currently the price for on-peak energy for our open position is a little less than what was forecast in August to set the proposed budget. — Fixing this open position reduces the risk of a higher price in the first quarter and provides greater budget certainty. • If the District doesn't lock in this resource, the spot price may be higher or lower than currently forecast. �. 15 Purchase Power Expenditure Detail — Expected 2008 PURCHASED POWER EXPENDITURES DETAIL 2008 BUDGET BUDGET 7 MONTHS ENDED BUDGET $ BUDGET Purchased Power Costs 2007 JULY, 2007 2008 CHANGE Tot 11 al Energy Supply-Various $ 8,547,723 $ 5,032,683 $ 9,750,443 $ 1,202,720 Transmission - Sierra Pacific Power Company $ 968,504 $ 509,521 $ 998,453 $ 29,949 Scheduling - NCPA $ 76,260 $ 41,297 $ 63,372 $ (12,888) Power Supply Costs from Market Purchases(NCPA) WAPA cost/(credit) toward MWh s $ (382,870) 2632368 Total Bulk Power Costs $9,286,831 $ 5,679,810 $ 10,692,765 $ 1,405,934 Total Annual MWh 156,943 92,552 161,604 4,661 Total Delivered Cost$/MWH $59.17 $61.37 $66.17 $6.99 16 Expected Case — Reduced Geothermal Case — Worst Case • Change from 2007 Budget PURCHASED POWER EXPENDITURES DETAIL BEST CASE ALMOST WORST WORST CASE 200811 BUDGET - � �� - m �JBUDGET $ BUDGET $ BUDGET $ BUDGET 2007 CHANGE CHANGE _ _ N CHANGE T 11 otal Energy Supply - Various $ 8,547,723 $ 1,202,720 : $ 1,792,2717 $ 3,0727277 Transmission - Sierra Pacific Power Company 1 $ 968,504 $ 29,949 " $ 29,949 $ 29,949 Scheduling - NCPA $ 76,2601 $ (12,888) $ (12,888)� . ._ . ._ _s .---------- .. Power Supply Costs from Market Purchases (NCPA) $ - WAPA cost/(credit) toward MWh's $ (382,870) $ 263,368 $ 263,368 $ 263,368 .......... Total Bulk Power Costs- Change from 2007 $ 9,286,831 $ 1,405,934 $ 1,995,492 $ 3,275,492 Total Annual MWh / Change from 2007 156,943 4,661 4,661 4,661 Total Delivered Cost $/MWH - Change from 2007 $59.17 $6 99 $10.64 $18 54 17 Best Case - Plan Requires Balancing Capability • Current power supply contract includes puts and calls to balance hourly load • TDPUD has neither transmission access nor staff to manage hourly buys/sells in house • UAMPS manages a power pool to aggregate its members' balancing needs — Pool purchases surplus energy from members — Sells energy to members as necessary to meet load requirements — Supplements member-member transactions with market purchases and sales • Pool charges an administrative fee of $0.50 MWh • UAMPS transmission arrangements enable deliveries to Gonder • UAMPS All-In-Pool Agreement is approved 18 Summary • Resource Plan balances conservation, renewable resources, fuel diversity, long-term contracts and medium term purchases. This plan puts the District well on its way to address the Districts RPS goals • Achieves an expected "Best Case" all-in cost in the range of $60.00/MWh • Minimizes price volatility due to fuel and weather risk • Summary of Action Items (or direction from Board) — First four months of 2008 buy resource to fill open position — Insurance for Reduced Geo Case (possible option on 3rd Qtr) • Future Actions Required — Approve Payson Project Power Purchase Agreement (after due diligence) — Approve Empire Farm Geothermal Power Purchase Agreement (after due diligence) -. 19 TRUCKEE DONNER Public Utility DI'StrICL RESOLUTION 2007-05 RESOLUTION ADOPTING AN AMENDED RENEWABLE PORTFOLIO STANDARD WHEREAS Truckee Donner Public Utility District provides electric service to residences and businesses in its service territory; and WHEREAS California Senate Bill 1078, signed into law on September 12, 2002 requires the District to adopt a Renewable Energy Portfolio whose purpose is to define the District's goal with respect to securing renewable energy in its power supply mix; and WHEREAS the Board of Directors of the District wish to amend the District's current Renewable Energy Portfolio by better defining its goal for securing renewable energy resources; NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT AS FOLLOWS: 1. The following Renewable Portfolio Standard is hereby adopted 2.The prior Renewable Portfolio Standard adopted by the Board on February 4, 2004 is hereby repealed. PURPOSE: Truckee Donner Public Utility District's policy regarding SB1078—Renewable Portfolio Standard (RIPS). This RIPS will replace and update the RIPS approved by the Board in 2003. BACKGROUND: State Senate Bill 1078 (SB1078)was signed into law on September 12, 2002 and was effective January 1, 2003. The SB1078 legislation modifies the California Public Utilities Code to include a specific renewable resource requirement for investor owned utilities(IOUs). SB1078 required IOU's to maintain a minimum of 20% of their power from eligible renewable resources by 2017. SB107 (Simitan) was passed in 2006 and accelerates the IOU target to 20% by 201031he legislation (SB1078) also includes provisions that apply to publicly owned utilities. These provisions would include: • Requirement that the governing body implement and enforce a renewable portfolio standard to encourage renewable resources • Each public utility governing board must define the terms of its RIPS. The terms would include: o What qualifies as a renewable resource (i.e. whether or not to count large hydroelectric projects (in excess of 30MW) o The percentage of the total energy resources that are to be renewable o The time frame in which to meet the "goal" of the defined standard 1 RPS Res. 2007-05 Discussion points: 1. Although excluded for the purposes of the IOU's requirements under S131078, TDPUD's future share in "large" hydroelectric projects is a valuable and critical component of the energy needs of the community. TDPUD's allocation of the Western Area Power Administration (WAPA) started on January 1, 2005. This power is under a long term contract with the Department of Energy's Western Area Power Administration (WAPA). Truckee Donner Public Utility District believes that a separation of large and small hydroelectric projects at a 30MW level is arbitrary and ignores the unique nature of the resources provided by WAPA and the Department of Interior's Bureau of Reclamation. Truckee Donner Public Utility District will include all hydroelectric regardless of size and location as meeting the District's renewable portfolio standard. 2. The District's location in the Sierra Pacific Power transmission control area differs from all of the other publically-owned utilities in California. TDPUD is a transmission dependent utility(TDU)electrically internal to Sierra Pacific Power's control area.The interconnection points to Sierra Pacific Power's control area are Summit Intertie(to CAISO),Alturas Line (to near COB), Gonder Substation near Utah (this is the current location of our existing contract deliveries and includes the Pacific Corp and LADWP control areas), and Midpoint Substation (to Idaho Power). This transmission configuration must be taken into account when trying to identify future renewable resources. POLICY: Truckee Donner Public Utility District RPS Objectives • Meet the intent of SB 1078 to encourage renewable resources. • Maintain reliable overall energy supply portfolio. • Minimize adverse impact of acquiring new renewable energy resources on customer electric rates. Truckee Donner Public Utility District Electric Qualified RPS Resources • Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric. These would include but may not be limited to any resource that meets the definition of "Eligible renewables" pursuant to section 398.4(h)(1) of the California SB 1305, which sets forth the requirements for power content labels: o Geothermal (including low-temperature geothermal heat pumps) o Hydroelectric o Solar o Wind o Biomass and waste o Fuel cells 2 RPS Res. 2007-05 RPS Target: • At such time that projected resources do not exceed projected demand, TDPUD will strive to include qualifying resources to meet projected demand. • Truckee Donner Public Utility District resource mix will have a minimum of 21% of renewable resources by 2010. Renewable resources are defined as non-fossil fueled electric generating resources, including hydroelectric. Strategies for meeting RPS objectives: • Public benefit funds may be used to implement projects and may be used to supplement the production projects. • TDPUD's allocation of the Western Area Power Administration (WAPA) started on January 1, 2005 is a non-fossil fuel resource will be included in the RPS objective. TDPUD will strive to acquire small hydro electric from WAPA within the Sierra Pacific control area. • In the future, TDPUD may contract for geothermal generation in Northern Nevada and Wind generation backed by Natural Gas. Ongoing Review of Truckee Donner Public Utility District RPS • A two-year review standard of the RPS will address changes in the Truckee Donner Public Utility District power portfolio including market power purchases, entitlement shares of projects and potential changes in the renewable energy technologies. PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility District in a meeting duly called and held within said District on the 21 st day of March, 2007. AYES: Directors Aguera, Hemig, Sutton, Taylor and Thomason NOES: None ABSTAIN: None ABSENT: None TRUCKEE DONNER PUBLIC UTILITY DISTRICT Tim F. Taylor, President ATTEST: Peter L. Holzmeister, District Clerk 3 RPS Res. 2007-05 • Resolution No. 2004 - 16 ADOPTING POLICY AUTHORIZING DISTRICT STAFF TO ENTER INTO CONTRACTS ESTABLISHING THE PRICE OF POWER WHEREAS, the District has entered into a contract with Constellation Power Source(CPS) for the purchase of wholesale power and energy; and WHEREAS, the District has entered into a contract with Western Area Power Administration (WAPA) for the purchase of wholesale power and energy; and WHEREAS,the District has entered into a contract with Northern California Power Agency (NCPA) for scheduling services; and WHEREAS, the District can manage its price risk by purchasing financial instruments and or physical instruments; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS THAT: 1. The Power Supply Engineer of the District, in consultation with staff of Northern California Power Agency and with the approval of the District General Manager, is authorized to execute financial and or physical contracts, which manage the price risk of the power and energy purchased subject to the following terms and conditions. 2. In entering into a said contract the following procedures shall be observed- a) There shall be established a list of pre-approved firms offering financial risk management services within the electric industry, which list shall be submitted to the Board of Directors for approval, and may be amended from time to time. b) A minimum of two telephone quotes shall be secured from firms on the pre- approved list, which quotes shall be recorded on the transaction memorandum which shall be prepared to document the actions leading up to purchase of the contract. c) The Power Supply Engineer shall consult with the appropriate staff of the Northern California Power Agency regarding the desirability to seek quotes, and shall again so consult after receipt of the two quotes. These consultations shall be documented in the transaction memorandum. Resolution 2004-16 d) In no event shall any single contract entered into under authority of this policy extend for a period of greater than four months. e) Prior to executing the contract, the Power Supply Engineer shall submit his recommendation to the General Manager of the District. After securing approval from the General Manager, the Power Supply Engineer is authorized to execute the contract. f) The Power Supply Engineer shall inform the Board of Directors of any executed transaction by providing a copy of the transaction memorandum as part of the next monthly staff report. PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the fifth day of May, 2004 by the following roll call vote: AYES: Directors Aguera, Hemig, Maass, Sutton and Van Gundy NOES: None ABSTAIN: None ABSENT: None TRUCKEE DONNER PUBLIC UTILITY DISTRICT James A. Maass, President of the Board ATTEST: Peter L. Holzmeister, District Clerk Resolution 2004-16