HomeMy WebLinkAbout2000-07-19 Agenda Packet - Board (19) TRUCKEE
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a Public
y District
Staff Report
To: Board of Directors
From: Stephen Hollabaugh—Power Supply Engineer
Date: July 13, 2000
Discussion of status and trends in the wholesale power supply market
Wholesale Power Supply - Where are the Prices Going?
The following presentation is meant to make the Board aware of what is
happening with Wholesale Energy Prices and open a discussion of what the
District may do to keep electric prices at an affordable level for our customers.
I have also attached a copy of an e-mail in response to Bob McDiarmid
question concerning the District and the price spikes in the Northwest.
0 Page 1
From: Robert McDiarmid
Sent: Wednesday, July 05, 2000
To: Steve Hollabaugh
c: Margaret A. McGoldrick; Lisa G. Dowden
Subject: Mid C 05893 005
Did you guys get hurt by the price excursion on the Mid C? I gather it went over $1,000/MWh for
the first time ever.
Response from Steve Hollabaugh:
Nope we're fine.
Here's a short history of our contract with Idaho.
The condensed version: We are doing great compared to the crazy prices we see today.
Our contract with Idaho started approx. July 1997. During 1997, the District received power
from Idaho Power under the base contract that averaged on and off peak daily prices for each
month added 2.25 mills for energy and charged $1.50 for monthly demand. The district did very
well in 1997 when prices were low in the Northwest.
In 1998 prices were low for most of the year with some spikes in August, Sept. and October.
We fixed some monthly forward prices in 1998 but overall we were over budget due to the price
spikes.
For the 1999 yearly load, the District did not want to "ride the market Price". In late 1998 1 fixed
prices for the entire year by swapping the Mid-C Average price for a yearly fixed price of$23.50
+2.25 per MWh plus $1.50 per KwMonth. This price ended up being below the market
price.
The 2000 load was addressed in similar manner. In April 1999, 1 was able to fix the calendar
year 2000 for$24.50 +2.25 per MWh plus $1.50 per KWMonth. I could have fixed 2001 at this
same price but we didn't have a long term transmission contract complete yet. Idaho was leary
of hedging a power contract without being sure the transmission was available, this cost us
some as you will see in 2001.
The 2001 Load. On April 21, 2000, 1 fixed prices for the entire 2001 calendar year at $35.17 +
2.25 per MWh plus $1.50 per KwMonth. At the same time I fixed a 5MW block for 2002 for
$33.50 +2.25 per MWh + $1.50 per KWMonth. The 2001 price of $35.17 is currently at least
$20 below market for 2001.
Currently we know our power purchase budget for 2001 and will be able to deal with the
increase compared to 2000 OK. I'm still looking for about 2/3 of our need for 2002.
Overall we have done very well with our power purchase contracts and haven't has to buy any
of the $1000+ power that is currently being marketed on the daily market.
Steve Hollabaugh
From: Sierra Pacific Resources [info@sierrapacific.com]
Sent: Wednesday, July 12, 2000 2:01 PM
To: SPR Subscribers
Subject: HIGHER FUEL, PURCHASED POWER COSTS WILL AFFECT SIERRA PACIFIC
RESOURCES' EARNINGS
Sierra Pacific Resources (NYSE: SRP) announced
today that unanticipated second quarter fuel and purchased
power costs for the company's two Nevada utility
subsidiaries will likely exceed budgeted expenses by an
estimated $70-80 million.
"Similar to other electric utilities in the West,
we have confronted an unprecedented and extremely volatile
energy market over the last several months, " said Mark
Ruelle, senior vice president, chief financial officer and
treasurer for Sierra Pacific Resources. "As a result,
we've been forced to pay significantly more for fuel and
purchased power than we had budgeted at the same time that
above-normal temperatures increased the demand for
electricity, particularly in southern Nevada.
"We expect fuel and purchased power expenses to
have a negative impact on second quarter earnings and an
ongoing negative earnings impact for the remainder of the
year, " Ruelle added.
The Company has pending litigation which, in
combination with future energy cost rate filings, would,
if successful, mitigate the impact of these higher energy
costs. Court hearings are scheduled to begin July 13.
The company is currently involved in settlement
discussions pertaining to these and other issues. The
company cannot predict the outcome of such discussions.
Headquartered in Reno, Nev. , Sierra Pacific
Resources is a holding company whose principal
subsidiaries are Nevada Power Co. , the electric utility
for southern Nevada, and Sierra Pacific Power Co. , the
electric utility for most of northern Nevada and the Lake
Tahoe area of California, and a natural gas and water
distributor in the Reno - Sparks area. Other subsidiaries
include the Tuscarora Gas Pipeline Co. , which owns 50
percent interest in an interstate natural gas transmission
partnership and Sierra Pacific Communications, a
telecommunications company.
This is being sent as a bulk e-mail. If you
recieve this and wish to "unsubscribe", please indicate in
your reply.
i
Who Spiked The
Power Prices ?
What is the going rate for
Wholesale Power?
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Price Volatility, What does it Mean?
No other energy commodity or
consumer product has such price
volatility that the price in three months
can fluctuate more than 600 percent.
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If the prices for basic commodities
rS
s soared to the heights reached in
as
electricity markets , the public outcry
would be deafening . See illustration
2
:basis CommodityComparison
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v Price Fluctuations of basic
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Commodities
If the prices for basic commodities
soared to the heights reached in
electricity markets , the public outcry
would be deafening . See illustration
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Who Spiked the Prices?
m Price fluctuations of other commodities
compared to electricity price variances
indicate to the extent to which the
market for electricity are flawed .
ad
m Logic dictates that significant forces ,
beyond the laws relating to supply and
demand , have corrupted electricity
power markets .
What Is the Goin Rate for
9
Wholesale Power?
m The following three charts show how
electricity prices have spiked , compared
to historical prices and future power
prices
~
Historical Daily Average Prices 1996 - 2000
Historical Mid Columbia Index
Daily Average Prices 1996 - 2000
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8
Daily Average Prices Apr-July 2000
Mid Columbia Index
Daily Average Prices - 4/2000 thru 7/2000
800.00 .,
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600.00
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30000
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0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 o O 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N
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0 0 b a N O N N N 0 N
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� N N e- � t- O
to to\ e\!}f \ \ \ \ \ \ \ \ \ \ \
O O O O O O O O O O 0
III
Energy Future Prices (Monthly)
ENERGY FUTURES AT COB
Monthly Hoes July 2000•Nov 2001
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Month 10
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Discuss and Explain Existing
Idaho Power Contract
v I ' ll quickly explain our current contract
with Idaho Power.
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4
11
What is the District to do?
The District has fixed prices for the
2001 calendar year.
The District has fixed prices for about
1 /3 of the load for 2002 .
Starting in 2005 , the District will receive
r a small allocation of WAPA resources .
f
(About 2 to 3 MW' s) .
12
I ' 11 be back
I am looking into some longer term
solutions . (I ' ll give some examples)
■ I will bring them to the Board of
Directors when they are ripe !
13
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