HomeMy WebLinkAbout20 Purchase Power Review FY21AGENDA ITEM #20
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MEETING DATE:April 6, 2022
TO:Board of Directors
FROM:Joe Horvath P.E., Electric Utility Director/Assistant GM
SUBJECT:Purchase Power Review FY21
APPROVED BY______________________________
Brian C. Wright, General Manager
RECOMMENDATION:
Provide input to staff on the District’s actual versus budgeted purchase power costs and
energy consumption for FY21.
BACKGROUND:
On September 4, 2019, a Workshop was presented to the Board to discuss the District’s
proposed Purchase Power and Resource Plan as part of the proposed FY20 - FY21
budget. This workshop covered the following topics: renewable portfolio standard targets;
conservation as first resource; diversified power supply plan; future renewable resources;
California Air Resources Board (CARB) Cap and Trade program; and proposed resources
and forecast costs for these fiscal years. The FY20 - FY21 Purchase Power and Resource
Plan was approved by the Board on November 6, 2019. The FY21 Purchase Power Plan
budgeted amounts, based on a forecasted energy purchase of 168,590 MWh, and a
summary of budgeted versus actual amounts for FY21 are shown in the following tables:
Item Budget $/MWh
Total Energy Supply - Various $11,910,491 $70.65
Transmission – NV Energy $1,004,908 $5.96
Total FY21 $12,915,399 $76.61
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Item Budget Actual % Diff
Total Energy Consumption (MWh)168,590 170,033 0.9%
Purchase Power Cost per ($/MWh)$76.61 $81.14 5.9%
Total Energy Cost FY21 $12,915,399 $13,795,797 6.8%
Energy production (MWh) by source in FY21, and the change compared to the previous
year, is detailed in the following table:
Note:Green denotes carbon free and brown denotes fossil fuel resources.
Source 2020 2021 Change Type
Horse Butte Wind 47,498 46,067 (1,431)Intermittent
Pleasant Valley Wind 335 405 71 Intermittent
Transjordan Landfill Gas 24,597 26,029 1,432 Base Load
Stampede Dam (WAPA)15,247 5,597 (9,651)Intermittent
TCID Hydroelectric Dams 8,386 3,741 (4,646)Intermittent
Veyo Waste Heat Recovery 8,425 6,108 (2,318)Base Load
Nebo Natural Gas 14,508 16,203 1,695 Base Load
5-Year Market Purchase 29,999 33,114 3,114 Base Load
Unspecified Market Purchases 17,214 32,771 15,557 Base Load
Total Energy Production 166,209 170,033
The District’s total energy consumption was about 1% more than budget, and total
purchase power costs were almost 7% more than budgeted for FY21. The two major
factors that affect the total purchase power cost are energy consumption by our customers
and resource costs. A 1% increase in energy usage, by itself, should equate to a
corresponding but approximate 1% increase in purchase power costs.
However, despite this small increase, there were several factors that contributed to a
larger total increase in purchase power costs. These factors include: reduced energy
production from all hydroelectric sources, the Horse Butte Wind project, and the Veyo
waste heat recovery project; greater than average yearly increase in retail energy sales to
customers; and significantly higher prices for market energy purchases. All these factors
helped increase the District's actual purchase power cost compared to budget. A more
detailed discussion of each factor follows.
Severe drought conditions across the western US have resulted in significantly lower
energy production from the majority of hydroelectric sources. The District procures
hydroelectric energy from 3 sources: Western Area Power Administration's (WAPA)
Stampede; Truckee Carson Irrigation District's (TCID) Old Lahontan; and TCID’s 26 Foot
Drop power plants. Combined energy production from these sources was 9,337 MWh in
FY21, compared to 23,624 MWh in FY20, an almost 60% reduction in one year. This
reduction resulted in a corresponding increase in market energy purchases.
Energy production from the Horse Butte Wind project was 46,607 MWh in FY21, compared
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to 47,498 MWh in FY20, a 3% drop in one year. Wind production varies yearly due to the
intermittent nature of this resource. The District also procures carbon-free energy from the
Veyo Project, a waste heat recovery generating facility located in Veyo, Utah. In
September, 2021 the untimely failure of the main generator bearing resulted in a 4-month
long outage and repair period. Energy production finally resumed in early January, 2022.
Energy production from Veyo was only 6,108 MWh in FY21, compared to 8,425 MWh in
FY20, a 28% reduction in one year. These reductions also resulted in a corresponding
increase in market energy purchases.
The District’s average energy growth over the last 15 years is about 1% per year. This has
been historically off-set by strong performance of the District’s energy conservation
programs. In FY21 the District consumed 172,976 MWh compared to 169,091 MWh in
FY20, an increase of about 2.6% in just one year. It is likely that this increase is due in part
to the on-going effects of the COVID pandemic which resulted in more energy usage as
customers stayed at home or increased occupancy of their second home in the District.
The increase also appears to be due to electrification, a significant trend that will likely
continue in the future due to growing electrification interest and initiatives at the local,
State, and Federal levels. The increased energy usage also resulted in the need to
increase production at the Nebo Natural Gas facility, and necessitated additional market
energy purchases.
The market price for energy rises or falls, primarily, as the cost of natural gas changes.
This is due to natural gas increasingly becoming the marginal fuel for electricity
generation, therefore natural gas power plants typically establish the market-clearing price
of energy generation. Natural gas prices have remained relatively low in recent years,
ranging from $2.00 to $3.00 per metric million British thermal units (MMBtu). The MMBtu is
the industry standard unit of gas measure and when converted to electric energy, 1 MMBtu
is approximately equivalent to 293 kWh. With the nationwide reduction of other fossil fuel
base load sources, the demand for natural gas has increased, resulting in upward
pressure on natural gas prices. These prices have now been ranging from $4.00 to $6.00
per MMBtu, resulting in increased market energy prices. The District's market energy
purchases averaged $64.60 per MWh in FY21, compared to $40.10 per MWh in FY20, an
almost 60% increase in one year.
Lastly, the District’s energy purchases from the UAMPS pool in February, 2021 had an
estimated incremental net cost impact of $170,000 due to Texas’s extreme cold event and
corresponding impact on energy markets.
Energy costs and consumption by month for FY21 are graphically depicted in the graphs
included in Attachment 1:
Budgeted vs. Actual Power Purchase Cost, 2021;
Budgeted vs. Actual MWh Consumption by Month, 2021;
Peak Load in MW by Month, 2015-2021;
Budgeted vs. Actual Power Sales, 2006-2021;
Resource Mix by Percentages, 2021; and
Resource Mix in MWh Purchases, 2014-2030.
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Historical energy usage data for the years 2005 through 2021 are depicted in the following
tables included in Attachment 2:
Energy Purchases with Transmission System Losses;
Actual vs. Budgeted Energy Purchases;
Energy Sales to Customers; and
Distribution System Losses.
Renewable Portfolio Standard (RPS)
On October 2, 2013 the Board approved the Renewable Energy Resources Procurement
Plan per the requirements of Senate Bill (SB) X1-2 (2011). This plan defines the minimum
required percentage (RPS) of renewable energy resources compared to retail sales per
three-year compliance period to the end of 2020. Other legislation has increased the RPS
requirements and extended the compliance periods to the end of 2030. In 2015, SB 350
was signed into law, which mandated a 50% RPS by December 31, 2030. In 2018, SB 100
was signed into law, which again increases the RPS to 60% by 2030 and requires all
state's electricity to come from carbon-free resources by 2045. Compliance periods and
RPS requirements are as follows:
Period 1 - January 1, 2011 through December 31, 2013 - 20% RPS;
Period 2 - January 1, 2014 through December 31, 2016 - 25% RPS;
Period 3 - January 1, 2017 through December 31, 2020 - 33% RPS;
Period 4 - January 1, 2021 through December 31, 2024 - 44% RPS;
Period 5 - January 1, 2025 through December 31, 2027 - 50% RPS; and
Period 6 - January 1, 2028 through December 31, 2030 - 60% RPS.
The District’s final RPS amount is the ratio of all qualifying renewable energy received
divided by the District’s total retail energy sales, as defined by the California Energy
Commission (CEC). Section 3201(bb) of CEC regulations define retail energy sales as:
"Sale of electricity by a POU to end-use-customers and their tenants, measured in MWh.
This does not include energy consumption by a POU, electricity used by a POU for water
pumping, or electricity produced for onsite consumption (self-generation)." The retail
energy sales calculation for the District according to the CEC definition is shown in the
following table:
Retail Sales per CEC MWh
FY21 Retail Sales to Customers 163,176
Water Pumping -7,095
Other District Usage -499
FY21 Retail Sales for RPS 155,582
The District has a diverse portfolio of renewable resources including hydroelectric, landfill
gas, wind, and heat recovery generation. Most of these resources include renewable
energy credits (RECs) that are transferred to the District in accordance with the energy
generated. However, several resources including Stampede hydroelectric, TCID
hydroelectric, and Veyo heat recovery projects come with a partial amount of RECs, or no
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RECs at all. These resources actually generated about 15,445 MWh in FY21. Since these
are RPS eligible and/or carbon free resources, the District purchased additional RECs to
supply the RECs that were lacking from these resources. The District's estimated
renewable energy portfolio performance, or RPS, for FY21 is shown in the table below.
Eligible Renewables and Carbon-Free MWh RECs % Retail Sales
Hydroelectric (Stampede)2,798 1.8%
Landfill Gas (Transjordan)26,029 16.7%
Wind (Horse Butte, Pleasant Valley)46,472 29.9%
Heat Recovery (Veyo, carbon-free, w/o RECs)
Unbundled RECs (Small Hydro & Heat Recovery)14,000 9.0%
Estimated RPS FY21 57.4%
RPS Requirement 2021 35.75%
The estimated RPS for FY21 is about 5% lower than the same estimate made last year at
this time for FY20 RPS. The factors contributing to a lower value this year include reduced
hydroelectric and wind generation compared to 2021 and the equipment failure at Veyo.
The District's final RPS value for FY21 will be known only after final energy and REC
information for District resources becomes available sometime in Q2, 2022. The final RPS
value is typically somewhat greater than the estimated value above. However, the final
RPS is also dependent upon the total amount of RECs that the Western Area Power
Administration (WAPA) transfers to the District for Stampede generation. This amount
varies from year to year, and is typically much less than half of the actual energy delivered
to the District from Stampede. In addition, changes to the overall RPS value are also due
to the variability of renewable resource generation from year to year. It should also be
noted that the District’s electric resource portfolio was essentially the same in FY21 as in
FY20. This will change in FY22 with the addition of the Red Mesa Solar Project to the
resource portfolio.
ANALYSIS:
Staff believes that, for the District, a future with higher load growth driven by community
growth and electrification is likely. Not only must the District continue to convert our
current electric resource portfolio to 100% carbon free, we must also plan for additional
resources with growth. This necessitates electric resource planning that considers and
incorporates multiple factors including:
Carbon Free vs. RPS vs. Fossil Fuel Resources
The District’s current RPS is estimated to be 57%, well ahead of State mandates,
with efforts to achieve 100% carbon free by 2045 or sooner while considering rates
and reliability.
Intermittent vs. Base Load Resources
A significant portion of the District’s renewable resources are wind, solar, and
hydroelectric and are intermittent in nature, with no control over the timing and
amount of generation. In order to meet the District’s 24-hour load needs, base-load
or resources that can be scheduled are required.
Daytime vs. Nighttime Availability
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The District has modeled our current portfolio, with the addition of Red Mesa Solar
Project, and demonstrated that we are approaching 100% carbon free during the
daytime hours. In order to achieve 100% carbon free, the District will be
increasingly required to procure carbon free resources during the evening and
nighttime hours.
Affordability and Equity
The District must continue to consider the impacts of rising electric rates on our
community and to California’s climate goals and strategies. Electric rates are bricks
and mortar for economic development and critical for electrification efforts.
Portfolio Timing, Diversification, and Risk
The management of the District’s electric resource portfolio considers and balances
- in addition to all of the above - timing, diversification, and risk.
Staff plans to bring to the Board additional workshops and future actions to address the
District’s electric resource planning and how this fits with the District’s budgets, strategic
initiatives, regulatory requirements, and mission.
California Air Resources Board (CARB) Cap and Trade Program
The Cap-and-Trade Program is a key element of California’s strategy to reduce
Greenhouse Gas (GHG) emissions, with annual auctions that began in 2013. Section
95892(d)(3) of the regulation states the following: "Auction proceeds and allowance value
obtained by the electric distribution utility shall be used exclusively for the benefit of the
retail ratepayers of each distribution utility, consistent with the goals of AB32, and may not
be used for the benefit of entities or persons other than such ratepayers." The Board
approved the use of auction proceeds to offset the cost of the District's renewable energy
resources, therefore meeting the goals of AB32. Four auctions are held annually, with
results for FY20 and FY21 as shown below.
Settlement Proceeds to
2020 Cap and Trade Auctions Price District
Auction 22, February 2020 $17.87 $375,270
Auction 23, May 2020 $16.68 $289,164
Auction 24, August 2020 $16.68 $411,396
Auction 25, November 2020 $16.93 $368,668
Total Auction Proceeds FY20
applied as revenue in FY21 $1,444,498
Settlement Proceeds to
2021 Cap and Trade Auctions Price District
Auction 22, February 2021 $17.80 $169,100
Auction 23, May 2021 $18.80 $178,600
Auction 24, August 2021 $23.30 $221,350
Auction 25, November 2021 $28.26 $278,135
Total Auction Proceeds FY21
applied as revenue in FY22 $847,185
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The revenues collected from the auctions in one fiscal year is spent in the following fiscal
year, consistent with standard accounting practice. Staff estimated auction proceeds to be
$1,400,000 in FY20, and $600,000 for FY21.These amounts were conservatively budgeted
as revenue in FY21 and FY22 to help pay for energy from renewable resources. The
actual auction proceeds were slightly higher than budgeted for in FY20 (proceeds applied
to FY21 as revenue), and significantly higher than budgeted for in FY21 (proceeds applied
to FY22 as revenue). The settlement price for the last 2 auctions in 2021 were much higher
than previous average settlement prices, which resulted in greater proceeds realized in
FY21. The number of auction allowances for the years out to 2030 have been greatly
reduced by CARB for all POU’s, including the District, starting in FY21. Staff estimates
auction proceeds to be about $500,000 for FY22 and beyond, although this is directly
impacted by trends in auction settlement prices and any regulatory changes.
FISCAL IMPACT:
A summary of budgeted versus actual energy and cost amounts for FY21 are shown in the
following table:
Summary FY21 Budget vs Actual
Power Purchases, MWh Budget Actual
Total Energy Purchase, MWh 168,590 170,033
Percent Difference, Actual vs. Budget 0.9%
Power Purchase Costs Budget Actual
Total Energy Supply $11,915,441 $12,597,379
Transmission - NV Energy $999,958 $1,181,195
Miscellaneous Costs $0 $17,223
Total Power Purchase Cost $12,915,399 $13,795,797
$ Over/(Under) Budget $880,398
Difference, Actual vs. Budget 6.8%
Purchase Power Cost ($/MWh)$76.61 $81.14
Percent Difference, Actual vs. Budget 5.9%
Cap & Trade Auction Proceeds Budget Actual
FY20 Proceeds Applied to FY21 Revenue $1,400,000 $1,444,498
FY21 Proceeds Applied to FY22 Revenue $600,000 $847,185
This item is in support of the following objectives and goals identified by the District.
OBJECTIVES:
1.Responsibly serve the public.
5. Manage the District in an environmentally sound manner.
6. Manage the District in an effective, efficient and fiscally responsible manner.
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GOALS:
1. Manage for Financial Stability and Resiliency
2. Environmental Stewardship: Create a sustainable resilient environment for all of our
communities.
ATTACHMENTS:
1. Energy Costs and Consumption by Month - FY21
2. Historical Energy Usage Data - FY06 to FY21