HomeMy WebLinkAbout6 Wholesale Power Supply AGENDA ITEM #6
Nam
Staff Report
To: Board of Directors
From: Stephen Hollabaugh—Assistant General Manager
Date: February 1, 2002
Subject: Wholesale Power Supply: Restructuring the contract:
Background:
As you are aware, our contract with Idacorp starting in 2002 and running through 2009 is
priced at $0.072 per kWh. Within this contract is some surplus power. When prices were
high, we had planned to sell this surplus but forward prices have fallen to a level that the
surplus energy would be projected to sell at a loss or deficit. I have been working with a
consultant "McDonald Partners" to help the District develop and negotiate some commodity
restructuring strategies.
Discussion:
Below is a description of a Transaction to restructure our current contract. Two separate
scenarios are described for discussion at this Board meeting.
Truckee Donner Public Utility District
Mid-C Exchange
Transaction Overview
Truckee Donner Public Utility District ("TDPUD") is contemplating entering into a financial
restructuring of its existing energy contract. TDPUD is considering two alternative
structures, Alternative A and Alternative B. Each structure includes two "off-market"
transactions. Alternative A will sell TDPUD's projected surplus energy at an above market
price through December 31, 2005. Alternative B will sell TDPUD's projected surplus for the
entire term of the existing contract, December 31, 2009. The "off-market" component in
each scenario will be repaid over the period 2010-2017 via a surcharge, "the off-market
component", that will be added to a new fixed price power purchase contract.
TDPUD will propose a schedule to its counterparty that will determine the "off-market"
amount of the surplus sales. Similarly, TPUD will provide a schedule for the pace of
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repayment of the off-market component. The schedules will reflect an estimate of TDPUD's
generation rates for the next fifteen years. The actual off-market amount will be a function of
Mid-C power prices and interest rates at the time the transaction is executed and will be
reflected as an adjustment to the proposed purchase prices.
All transactions will be subject to the approval of TDPUD's Board of Directors. Payments
required to be made by TDPUD pursuant to the proposed transactions will be made from
TDPUD Electric System operating funds and will be on a parity lien with other Electric
System operating expenses and power purchase costs.
The goal of the restructuring is to provide rate stability for TDPUD. A successful financial
restructuring should result in the following generation costs for TDPUD customers. All three
scenarios are based on approximately 2% load growth and our current estimate of Mid-C
market prices.
TDPUD Projected Generation Cost
110100
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Do Nothing Scenario A Scenario B
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