Coal crunch time
Scrutiny over the proposed 50-year coal-based power deal in Truckee has spread beyond the boundaries of the public utility district.
From the national documentary series Frontline to the San Francisco Chronicle, radio stations and legislators in Sacramento and the nation’s Capitol, all eyes will be on the district’s five board members Wednesday evening.
That’s because the Truckee Donner Public Utility District is at the center of a perfect storm of environmental, legislative and consumer demands. From climate change and new legislation aimed at curbing it, to the dependability of “green” versus “dirty” power and keeping electricity bills low, the district now sits at the convergence of state, national and global issues most utilities have yet to fully wrestle.
At Wednesday’s special meeting, the board will take action on a proposed contract with Utah Associated Municipal Power Systems that will go into effect in 2012. If approved, the contract will allow the district to purchase entitlement shares in a yet-to-be built, coal-fired electric generation site called Intermountain Power Project 3 (IPP3), and to purchase a fixed amount of power ” anywhere from 15 to 24 megawatt hours annually ” for a price that’s nearly half the current market rate.
District staff and board members who favor the contract have repeatedly expressed the economic value of the deal, noting that without the contract Truckee ratepayers will assuredly get hit with a hefty rate increase.
“If we have to go out on the open market, the cost to us per megawatt is going to go up, so you’re looking at about a 25- to 30-percent rate increase if we don’t sign the contract,” said board member Tim Taylor.
But opponents of the contract care less about cost and more about environmental factors such as global warming and new renewable technologies.
“Many national environmental groups, including those in California, and the governor are trying to get municipalities no to buy conventional coal,” said ratepayer and retired UC Davis professor Bob Johnston. “California is turning the corner and [the district is] asleep at the wheel.”
It’s a tough spot to be in, several board members have said, because both economic and environmental ramifications are important to ratepayers.
But district General Manager Peter Holzmeister and Electric Utility Manager Stephen Hollabaugh are trying to spread the word that signing the contract will allow for the best of both worlds.
The district would like to purchase just enough power to cover Truckee’s baseload ” about the minimum average need. But there will still be a large power hole to fill in order to meet all use above the minimum.
If the district signs the 50-year contract and can stabilize a low baseload rate, then there will be enough money left over to purchase green energy at market rates, Hollabaugh said. However, if the contract does not get signed, then the district will have to purchase all power on the open market for a higher price, and there will not be enough money left over to invest in renewables, he said.
That the proposed power contract lasts 50 years is cause for concern among some board members and ratepayers. Here are some other points of the contract with which ratepayers should be familiar:
– The term: Section 2 (a) of the power sales contract details that the term of the contract shall not extend more than 50 years from the effective date (2012).
The duration of the contract was established to protect potential investors, according to Steve Gross, the Truckee Donner Public Utility District’s legal counsel. UAMPS intends to finance construction of the coal-fired power plant, IPP3, with the sale of bonds.
Long-term contracts provide assurance regarding the security of those bonds. Furthermore, after the bonds are repaid, IPP3’s costs will decrease, perhaps substantially, and could remain low for as many as 20 years, Gross said.
– The cost: Section 1 of the power sales contract describes the cost of the project, but does not expressly state a set price. District staff has estimated costs at $35 to $40 per megawatt hour of power, based on projections by the engineers hired to design IPP3, Gross said, but those prices are not guaranteed and have been projected using a 2006 U.S. dollar value.
According to the contract, costs are subject to change at any time due to unforeseen factors, including high interest rates on the bonds, increases in the cost of coal or other fuel supplies and any litigation fees related to the project.
– Getting out: Section 18 (3) of the power sales contract highlights that if a participant would like to exit the contract, the participant can transfer its entitlement shares to another UAMPS member, or can sell the shares to non-members at any time, with UAMPS approval.
– The Intermountain Unit 3 Project Power Sales Contract is available for viewing online at http://www.tdpud.org
Utah Associated Municipal Power Systems (UAMPS) is a joint powers authority comprised of 48 small utilities across the West. The Truckee Donner Public Utility District became a UAMPS member in 2000 as a way to secure transmission capabilities, said Stephen Hollabaugh, the district’s electric utility manager. Intermountain Power Project 3, the power generation site in which the Truckee utility district is interested, gained its air quality permit in 2005 and became a stand-alone project for UAMPS members.
Thirty-three UAMPS members will participate in the IPP3 project, district counsel Steve Gross said. Some UAMPS members are also involved in other projects, such as gas-fired power plants, transmission lines, hydroelectric projects, and wind power projects.
The Intermountain Power Project, located in Delta, Utah, about 100 miles southwest of Salt Lake City, currently has two coal-fired, steam electric generating stations, IPP1 and IPP2, that were built in the 1980s and have a net capacity of 1,800 megawatts.
A third generation station, called IPP3, will come on line in early 2012. UAMPS claims it will be the cleanest coal plan in the United States based on the amount of emissions projected.
The cleaning and filtering process to be used at IPP3 will significantly reduce the emission of mercury, nitrogen oxides, sulfur dioxide and particulate matter, according to UAMPS Project Administrator Tom Florence.
New technologies will also be used at IPP3 that will include giant sacks called baghouses that capture particles to be disposed of in on-site landfills, catalytic converters that combust particulates before they reach the air, and a “super critical” process that pressurizes coal under steam and heat to destroy toxic elements before the coal is even burned, Florence said.
– The contract will allow the district to purchase power at cost, which equates to an estimated $35 to $40 ” nearly half the market price.
– District officials do not want to renew their current contract with Constellation Energy Generation Group because the cost is too high ” nearly $60 per megawatt hour.
– Other sources are available to provide power, but none of them could guarantee reliable transmission from the source to Truckee.
Opponents of the district’s proposed power contract have been outspoken at public meetings and in submissions to the Opinion section of the Sierra Sun. But district staff said they have been hearing a very different tune, and in fact have received three times as many phone calls and e-mails in support of the contract and its potential to stabilize rates.
“I want people to understand the bigger picture. If we minimize how much we [spend], then we are going to have some money left to go after renewable resources. But if we have to buy everything on the open market, then we’re done. I don’t like coal just like everyone else, but I can’t look at this with blinders on.”
” Tim Taylor, Truckee Donner PUD board member
“I’m pretty much persuaded to vote ‘no’ on it because of the public input and my own research. I think that the board was not always as well-informed as it should have been. And not to its own error, but simply because we didn’t have complete answers, so I am a little concerned about that because the board has to rely on the staff to bring things to its attention. The fact that community got involved is a good thing.”
” Pat Sutton, Truckee Donner PUD board member
“I haven’t decided. I swear, everyday it’s different. I talk to one person and think yes, and I talk to another person and think no. When I sit in that meeting Wednesday and I vote, it might even be a surprise to me.”
” Joe Aguera, board member
“The cost of living is already high in Truckee and is pushing young families out. I have concerns about a doubling in the price of electricity, and how it would affect lower- and middle-income families and workforce housing. As a developer, we are trying to keep the cost down on our projects to attract young families and local employees. We don’t want them to have to live in Reno or Carson City and commute up here because of the cost of living.”
” Tom Grossman, ratepayer
“We have a responsibility to this place we call home. This responsibility extends much further than our pocket books. It extends to our health, our children and grandchildren’s health. It extends to all life . . . I believe we can find a better solution and perhaps be an example to other towns like Truckee who are at the mercy of suppliers. I want us to be part of the solution, not part of the problem in regards to the future.”
” Val Kelly, ratepayer
“I think we should go for it. I’m not to happy about the 50 years, but I don’t see being able to get around it. The thing that I really like is that later we can sell [the entitlement shares] as other options become available. Right now, everywhere in the country is having the same problem because gas is too expensive, wind isn’t dependable, and no one wants to cut down trees.”
” Juanita Schneider, ratepayer
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