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Home My WebLink About10 Power Point Consideration to Approve R2022-17 Red Mesa Solar Project September 7, 2022 Transaction Schedule with UAMPSAmended and Restated Red Mesa Tapaha Solar Project -Resolution 2022Consideration of ACTION ITEM #10 •BACKGROUNDBACKGROUND 17Resolution 2022Consideration of 17Resolution 2022Consideration of electrified households in the United States-75% of all un•15,000 of 55,000 homes do not have electricity•Largest Native American territory in the United States (27,000 sq. mi.)•support electrification of homes on the Navajo Nationto these projects a significant amount of the proceeds from uses NTUA •Nationon the Navajo five years within the last scale solar projects -NTUA has developed and energized two utility•developing a solar generation project2018 about began discussions in late Tribal Utility Authority (NTUA) Associated Municipal Power Systems (UAMPS) and the Navajo Utah •BACKGROUNDBACKGROUND 17Resolution 2022Consideration of 17Resolution 2022Consideration of from UAMPS memberseffective after obtaining governing body approvals PPA would become •1, 2022Commercial Operation Date (COD) scheduled for June •with 16 members participatingtotaled 66MW UAMPS member interest •17, 2019on July UAMPS Board approved the PPA •, with a 2% annual escalation factor for 25 yearsMWhEnergy cost $23.15 •completed in early July 2019with NTUA were Negotiations •in early 2019Power Purchase Agreement (PPA) UAMPS negotiated a •Projectby NTUA as the Red Mesa Tapaha Solar Designated •Utah, AnethNavajo Tribal land in southeast Utah near the town of photovoltaic generation project would be located on Proposed solar •BACKGROUNDBACKGROUND 17Resolution 2022Consideration of 17Resolution 2022Consideration of in September 2019Solar Project Transaction Schedule Mesa Tapaha authorizing the Red 20 -2019Board adopted Resolution •was requiredResolution authorizing the Project’s Transaction Schedule •participant in the Master Firm Supply AgreementDistrict is •Schedule for Member participationTransaction Firm Supply Agreement with a specific used a Master UAMPS •2022-70% in midincrease the District’s RPS to approximately Help •free-Energy is renewable and carbon•Includes the associated Renewable Energy Credits (RECs)•requirementtotal annual District energy 6MW is about 10 percent of the •6MW share of the Projectobtained a District •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 New COD of March 15, 2023•fixed)MWh, with 2% annual escalation for 25 years ($40.36 MWh$31.5 •NTUA proposed new energy price and COD•pricingoriginal PPA financing is unavailable at Bank •controlmaterials outside of their and cost increases for delays Schedule •pricingrelief from the contract for original COD and energy Requested •2022received a Force Majeure claim from NTUA in May, UAMPS •solar panels, inverters, and other hardware•pricingVendors were unable to honor delivery schedules and •down during COVIDNation and NTUA offices were shut Navajo •2022COD would need to be extended to at least September 1, •2021schedule in October, informed UAMPS that the Red Mesa Project was behind NTUA •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 2021participating Member of UAMPS in April, that NTUA became a full litigation is with Additional complication •uncertainto litigation by NTUA and outcome Subject •retain development security fundsUAMPS to break contract and Allow •contractalso had the option of identifying an anticipatory breach of UAMPS •uncertainwould be very difficult, expensive, and outcome Litigation •claimhad the option of litigating the Force Majeure UAMPS •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 investigationdown by 46% due to the DOC trade group, notes that solar installation forecasts for 2022 and 2023 are based -Energy Industries Association (SEIA), a Washington, D.C.Solar •Vietnam?including Malaysia, Thailand, Cambodia and China by funneling components through affiliates in nearby countries manufacturers are skirting tariff rules on solar imports from Are Chinese •violations involving solar panels purchased from Asian suppliersrade T•Marchof Commerce (DOC) investigation that began in Department hold nationwide awaiting the outcome of a Solar projects on •environmentthis challenging due to projects delayed or cancelled Many •globallyprojects nationwide and chain constraints have slowed deliveries for new solar Supply •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 LevelTenEnergy (LevelTenaccording to an analysis performed by PPA marketplace analytics firm Caused prices for PPAs to rise almost 30% since the beginning of 2021 •nationwidescale solar projects are fully subscribed -Existing and planned utility•buyersShortage of new renewable projects available to utility •MWhprobability of an increased energy price approaching $40 High •option is to search for a new solar project Another •improvetake some time for solar panel delivery schedules to May •2022Asian nations in June, tariff exemption for solar panels sourced from these four Southeast month Biden issued an emergency declaration for a 24President •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 at end of Q1, 2022MWhSolar is $36.31 American averaged national PPA price index graph for North -marketLevelTen's •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 District’s participation at the 6 MW amount remains unchanged•2022meeting on July 20, UAMPS Board approved the Amended and Restated PPA at the regular •2023September 15, Scheduled COD is March 15, 2023 with a not to exceed date of •yearsfixed, for a term of 25 MWhPricing for energy is $37 •2022were completed in July, Negotiations •NTUAProject participants agreed to renegotiate the PPA with all these reasons, UAMPS staff recommended, and Red Mesa For •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 governing body approvals from all Members, including the Districtbecome effective upon UAMPS obtaining New PPA with NTUA will •included as Attachment was Agreements with UAMPS, Project Amended and Restated Transaction Schedule and Auxiliary 17, authorizing the Red Mesa Tapaha Solar Resolution 2022roposed •2019Similar to the documents and approvals made by the District in •participationwith UAMPS is required for District Schedule Transaction authorizing the Red Mesa Project’s Resolution •Membersupdated agreement with its specific Transaction Schedule for the Red Mesa Project as the is again using a Master Firm Supply Agreement with a UAMPS •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 also included in Attachment 1was The Talking Points document •Majeure."increased for any reason, including Excused Delay or Force language that states, “In no event shall the Contract Price be The Contract Price in the Amended and Restated PPA includes ?will not increase againMWhRestated PPA’s price per What guarantee do we have that the Amended and -an example As •answersseveral expected questions and corresponding Lists •publicMember Agencies and the a number of common questions from the governing bodies of prepared a “Talking Points” document in anticipation of staff UAMPS •ANALYSISANALYSIS 17Consideration of Resolution 202217Consideration of Resolution 2022 20 previously adopted by the Board-Resolution 201917 will also have the effect of rescinding -If adopted, Resolution 2022•UAMPSTransaction Schedule and Auxiliary Agreements with the Red Mesa Tapaha Solar Project Amended and Restated 17 authorizing Staff recommends the Board adopt Resolution 2022•timegeneration in the shortest possible scale solar energy cost, utilityfor the District to acquire lowthe COD, staff believes the Red Mesa Project remains the best option events resulting in a price increase and a significant delay to Despite •FISCAL IMPACTFISCAL IMPACT 17-Consideration of Resolution 202217-Consideration of Resolution 2022 clearing price of energy-NG power plants establish the market•generationNG increasingly becoming the marginal fuel for energy •NG) changesprice for energy changes as the cost of Natural Gas (Market •purchasesin commercial operation requires market energy Delay •District energy resourcesone of the lowest cost Remains •fixedMWhEquivalent to $29.66 •with a 2% escalationMWh25% increase from 2019 pricing of $23.15 •yearsfixed, for a term of 25 MWhfor energy is $37 Pricing •share, about 10 percent of total annual energy requirements6MW •Schedule)Summary (Amended and Restated Transaction Mesa Project Red •FISCAL IMPACTFISCAL IMPACT 17-Consideration of Resolution 202217-Consideration of Resolution 2022 summerNatural Gas Plant operating at full load during Assumes Nebo •resourcesaverage energy production from other Assumes •energy$600,000 to $1,200,000 to purchase market Estimate •Projectimpact due to delay in Red Mesa Cost •Septemberfor July, August and MWh$100 to $200 For example: Pricing •priceseffect is increased market energy Net •MMBtuNG prices are now ranging from $6.00 to $10.00 •pricesin upward pressure on NG results for NG Increased demand •sourcesNationwide reduction of other fossil fuel base load •MMBtuprices low for many years, ranging from $2.00 to $4.00 NG •Pricingand Energy NG •FISCAL IMPACTFISCAL IMPACT 17-Consideration of Resolution 202217-Consideration of Resolution 2022 6.8Mbalance $urrent C•runs-overuse of Electric Rate Reserve funds to mitigate any Potential •costsrecommends a December 2022 review of purchased power Staff •pricesdemand, weather, and market energy ustomer C•costsvariables that affect final purchase power Multiple •Projectto the delay of the Red Mesa ue D•at year endrun -is $988,000 or 7.3% cost overForecast •13.5M2022 Budget for purchased power is $ •RECOMMENDATIONRECOMMENDATION 17-Consideration of Resolution 202217-Consideration of Resolution 2022 Agreements with Utah Associated Municipal Power SystemsProject Amended and Restated Transaction Schedule and Auxiliary 17 authorizing the Red Mesa Tapaha Solar -Resolution 2022Adopt