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HomeMy WebLinkAbout4 Model Power Supply Portfolio Agenda Item # Public Utility District Memorandum To: Board of Directors From: Peter Holzmeister Date: December 8, 2006 Subject: Model Power Supply Portfolio Why this matter is before the Board: We need to secure a supply of electric power for our customers. We have secured a power supply until April 2009. After that, we have only a small allocation of hydroelectric under contract. We have an opportunity to secure a low- cost base load power supply from a new generation plant in Utah. Approval of that contract requires Board action. History: For several decades the District has relied on contracts with power generators to meet Truckee's electric power needs. For most of that time, these power supply contracts were regulated by the Federal Energy Regulatory Commission (FERC) under the terms of the Federal Power Act. The fact that the contracts were regulated by FERC resulted in reasonable rates being charged to the District. During all of Truckee's history, the power we received through these power supply contracts was primarily generated by coal. In 1998, the electric utility world changed. The country experimented with deregulation of electric generation. FERC no longer regulated wholesale power supply prices. Generation owners were allowed to charge what the market would bear. TDPUD learned that its power supply contracts, if based on market price, would be significantly more expensive. We did not want to be at the mercy of generators charging market priced power, so we made a commitment to seek ownership of generation. The advantage of owning generation is we serve ourselves at actual cost of generation with no mark-up based on what the market will bear. Seeking cost based power required us to confront the limitations in the electric transmission system that serves Truckee. Truckee is within the transmission system of Sierra Pacific Power Company. That transmission system is physically constrained. We can get power delivered to Truckee reliably only from the east, from Nevada, Utah and Idaho. So our commitment to secure cost-based power required us to look to that region. We became members of the Utah Associated Municipal Power Systems (UAMPS) in 2000. UAMPS is a joint action agency comprised of over forty communities in six states. UAMPS aggregates the power needs of those member communities and their financial resources and constructs electric generation plants to serve them cost-based electricity. 1 Model Power Supply Portfolio Memo Once we were members of UAMPS, we became eligible to participate in generation projects that they were planning. UAMPS is currently planning to construct a generating facility using coal as the fuel. The plant is scheduled to be on line during 2012. It is designed to be a base load resource. If TDPUD participates in this plant, we will have successfully secured our base load power needs for a fifty year period at a very attractive cost-based rate. There has been a great deal of public comment on this proposal. The public comment took two forms. Two public meetings were conducted by the District Board of Directors. A letter was sent to all twelve thousand customers of the District asking them to comment. A group of Truckee customers attended the public meetings and spoke passionately about their opposition to coal as a fuel because of its impact on the environment. They also expressed concern about the fifty year length of the contract for purchase of power from the Utah plant. They favored a movement to renewable power sources as quickly as possible. Responses to the letter mailed to customers favored entering into the contract for power from the Utah plant by a three to one ratio. These customers expressed a desire for renewable power, but said that rates are also a concern. They favored a balance between renewable power and low cost base power. Several of the customers commented that they would be willing to pay more for renewable power. Once we have a power supply portfolio of ownership in resources we will be able offer renewable power to customers and charge them a green power surcharge. We will have more opportunity to provide green power to those who can afford to pay for it and still offer lower rates to customers who need lower rates. New information: The Board and staff of the District have benefited from all the public input we have received. Based on the variety of opinions we heard, we would like to propose development of a power supply portfolio that 1. Recognizes a legitimate role for cost based power from the Utah plant to satisfy our base load needs. (15 megawatt from IPP-3) 2. Also recognizes the need to seek a natural gas contract, possible cost based through UAMPS. (8 megawatt) 3. Makes an aggressive commitment to secure renewable power, possibly through UAMPS. (8 megawatt from wind) 4. Makes an aggressive commitment to promote energy conservation and distributed generation within the Truckee community. (goal of 1% yearly reduction due to energy conservation measures) Attached is a draft resolution incorporating a model power supply portfolio prepared by Steve Hollabaugh Recommendation: I recommend that the Board adopt the Resolution Establishing a Model Power Supply Portfolio and direct staff to aggressively develop specific contract options for the Board to review 2 Model Power Supply Portfolio Memo y: h f.� S 9 s Public Utility Dis y k trict RESOLUTION 2006-XX Establishing Model Power Supply Portfolio for the Truckee Donner Public Utility District WHEREAS Truckee Donner Public Utility District(the District) provides electricity to its customers; and WHEREAS the District needs to secure a sufficient supply of firm electric power and energy to satisfy the needs of its customers; and WHEREAS the District also is committed to helping its customers conserve on the use of electric energy; and WHEREAS the District is concerned about the impact of electric power generation on the environment and is committed to supporting the development of renewable energy sources NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE DISTRICT that the following Power Supply Portfolio is hereby adopted, including the Renewable Portfolio Standard contained therein. 1. There is hereby established the Truckee Donner PUD Renewable Portfolio Standard (RPS) goal of 20% renewable energy resources in the overall mix of Truckee's power supply by the end of 2012. 2. The proposed power supply portfolio mix of generation to reach RPS goal and provide reliable energy to our customers is as follow. • Conservation — 1% yearly reduction due to energy savings by conservation measures • 15 MW of base load generation— IPP3 • 8 MW of wind generation • 8MW of Natural Gas capacity and energy • WAPA Allocation (Hydro) • Stampede (Small Hydro) 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 191" day of July, 2006. AYES: NOES: ABSTAIN: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT Tim F. Taylor, President ATTEST: Peter L. Holzmeister, District Clerk