HomeMy WebLinkAbout7 5-Year Market Purchase 2022-2027 with UAMPS
AGENDA ITEM # 7
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MEETING DATE: December 16, 2020
TO: Board of Directors
FROM: Joe Horvath, P.E., Assistant General Manager/Electric Utility
Director
SUBJECT: Consideration to Approve a 5-Year Market Power Purchase
Agreement with UAMPS
APPROVED BY______________________________
Joe Horvath, P.E., Assistant General Manager/
Electric Utility Director
RECOMMENDATION:
Authorize the General Manager to execute the Confirmation to Lock-In Transaction
Confirmation for the Firm Power Supply Project (Attachment 1) with Utah Associated
Municipal Power Systems (UAMPS), and all necessary documents, for the purchase of
market power, priced at approximately $35 per MWh on average, for a 5-year period
starting in April, 2022 and ending in March, 2027.
BACKGROUND:
The District has an existing 5-Year market power purchase contract with UAMPS that
began on April 1, 2017 and ends March 31, 2022. The existing 5-year market power
purchase represents about 35% of the District’s annual energy requirements and is priced
at $46 per MWh. The market power purchase is shaped and scheduled to the District’s
load profile, filling the energy ‘gaps’ in our purchase power portfolio that are otherwise not
supplied by other generation sources. The 5-year market power purchase contract is an
important component in our portfolio that enables the District to deliver low-cost power to
reliably meet customer loads.
UAMPS has solicited proposals from qualified vendors for a new 5-year market power
purchase with a term starting in April, 2022 and ending in March, 2027. The recommended
proposal includes monthly load shaping, unique to each member agency, including the
District, over the 5-year term. A summary of the proposal, and a comparison to the
District’s existing 5-year contract, is shown in the following table.
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The District has been able to reduce the market purchase component of our electric
resource portfolio from 35% to 20% by adding other resources. However, this shaped
market purchase continues to be a critical resource in our power portfolio to ensure
resource adequacy at all times; particularly during the winter months when District
experiences our peak loads. The main driver in the decrease in the market power
purchase is the planned addition of the Red Mesa Solar Project to the District's power
portfolio, scheduled to start operation no later than June 1, 2022. The Red Mesa Solar
Project is expected to supply in excess of 10% of the District’s annual energy
requirements.
The proposed market purchase (2022-2027) is priced at about $35 per MWh on average.
In addition, the energy is scheduled to be delivered in Nevada, which reduces transmission
costs to the District, compared to delivery in Utah. UAMPS noted that all of the proposals
reflected energy forward prices across the Western market are relatively low in the 2022 to
2027 timeframe. UAMPS Pool Project prices should also be correspondingly low due to
market forces, however the UAMPS power pool is subject to hourly and daily market price
fluctuations which introduces a greater amount of risk to the District than entering into a
fixed price long-term contract. The lower price of the proposed product at $35 MWh,
compared to the existing 5-year product at $46 MWh, should help stabilize any rate
impacts our customers might experience if this portion of our purchase power portfolio
were replaced with daily market price generation. With low forward prices and a 5-year
term, entering into the proposed 5-year market power purchase contract is the
recommended option to meet District load requirements.
This item is in support of the following objectives and goals identified by the District.
1.05.020 Objectives:
1. Responsibly serve the public.
4. Provide reliable and high quality electric supply and distribution system to meet current
and future needs.
1.05.030 Goals:
1.1. Conduct the District’s business in a legal, ethical, open, and transparent manner.
4.3. Procure and contract for low cost electric power supplies to reliably meet current and
future loads, consistent with the Renewable Portfolio Standards and Risk Management
Policy.
FISCAL IMPACT:
The proposed Lock-In Transaction Confirmation for a 5-year market power purchase in
2022-2027 is priced at about $35 per MWh on average. The existing 5-year market
purchase (2017-2022) is priced at $46 per MWh. The lower price of the proposed product,
Item Existing Proposed
5-Year Product Term 2017 – 2022 2022 – 2027
Annual Energy, MWh 56,250 30,420
Annual Energy, % of Total 35% 20%
Price, $ per MWh $46 $35
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compared to the existing 5-year product, should help stabilize any rate impacts our
customers might experience if this portion of our purchase power portfolio were replaced
with higher priced generation.
ATTACHMENTS:
1. Confirmation to Lock-In Transaction Confirmation for the Firm Power Supply Project