PUD locks power deal
The Truckee Donner Public Utility District signed an eight year deal to continue purchasing electricity from Idaho Power Company March 7, securing a fixed wholesale cost for residents.
Approved by the board of directors last Wednesday, the contract will set the wholesale cost of power at 7.2 cents per kilowatt hour for PUD customers until 2009.
“The wholesale cost of 7.2 cents per kilowatt hour is a little less than the 10-year contracts touted by Gov. Gray Davis at 7.9 cents per kilowatt hour,” PUD Assistant General Manager Steve Hollabaugh said.
Due to the ongoing energy crisis statewide, power costs have increased. Although the PUD wholesale power cost is nearly double what it was before, the contract allows the utility to cut rates if it can sell off-peak energy back to Idaho Power while prices are high.
“We feel very, very good about it,” board member Ron Hemig said of the deal. “It is still going to put us in the position of having the lowest rates for many years.”
The PUD purchased a predetermined volume of power, about 25,000 megawatts per day per year, which is more than the average peak volume during summer. If unused, the excess power can be resold to another Idaho Power customer per the PUD’s discretion and price. Credit for the unused portion will be returned to the PUD, and the savings will be passed on to its customers.
The Truckee Donner PUD is in a unique position because the season of peak use for Truckee customers occurs in the winter. Peak season for the rest of the state occurs in the summer. The PUD may be able to sell its surplus power allocation in the summer when demand around the state is highest, which will increase the profit and the credit passed through to its customers.
“For the next two years we expect the (spot market) prices will still be high,” Hemig said. “We will have the ability to receive revenues which we can bank.”
“We are taking a risk,” Hollabaugh said. “If market prices drop we’re at a loss.” He added, however, that it is a little risk compared to what could happen if the PUD were to buy spot market power, which, as of last Friday, cost about 22 cents per kilowatt hour. Prices have gone as high as 55 cents per hour.
“We will be able to take better advantage of our load shape this way,” Hollabaugh said. “The whole idea is to buy prudently and not put our customers at risk.”
Over the last several years PUD customers were fortunate to have some of the lowest power prices in the state. Even after losing an 11 percent credit, which raised power prices earlier this year, PUD customers still enjoyed low prices.
“We were very, very fortunate to have those rates, but the rates will be higher,” Hemig said of the rate change that will result from the deal. “They will still be lower than other municipalities.”
Working quickly to secure prices, which change by the hour, the PUD secured the contract with Idaho Power after it was prepared to go forward with ENRON, another power provider.
“Two things happened,” Hemig said. “ENRON’s prices went up and Idaho’s went down. We are used to working with Idaho, we like them, and we feel comfortable with them.”
While the ability to resell power is an advantage, it is not guaranteed. New customers may reduce excess power, average use could increase, or new power deals across the state could lower market demands.
Idaho Power will be the PUD’s agent or marketer, and will ultimately be responsible for the transaction.
In the meantime, the PUD will have to change its rates to meet its new wholesale costs.
No dates for rate hearings have been set.
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