HomeMy WebLinkAboutF-3. Procurement of Energy Information Item
Presented
F-3
INFORMATION ITEM
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA
UTILITY BOARD
FROM: GEORGE F.MORROW, DIRECTOR OF UTILITIES
DATE: JULY 28,2014
SUBJECT: PROCUREMENT OF ENERGY FOR SUMMER 2015 TO REPLACE A
TERMINATING CONTRACT
SUMMARY:
Staff is pleased to inform the Utility Board that it has consummated a 15 MW peak power purchase
(via a competitive process) for the July through September 2015 period at a price of$49.55/MWH.
This price is significantly lower than the $72.00/MWH power price paid this year under an
expiring arrangement that was signed in March 2009. The total transaction price is $915,684
resulting in a savings of$414,876 which will be benefit electric customers next year.
BACKGROUND:
As stated in a May 27 Utility Board informational report, AL&W's five-year 15 MW summer
contract with Shell Energy sunsets after this year which creates a considerable void in Azusa's
energy portfolio beginning in 2015. Although in 2015 AL&W expects to'begin taking energy
deliveries under a recently executed renewable solar PPA, energy from these deliveries will not
close the gap created by the terminated contract. Additionally, forward energy price uncertainty
exists due primarily to the fact that San Onofre Nuclear Generating Station has been permanently
shut down and the forecasted continuing "dearth" of California hydroelectric generation. Finally,
the rising economic activity in the region has perked up demand for power which in turn is
expected to exert upward pressure on energy prices.
Consistent with the resource planning mandate and risk management policy, Staff began
monitoring the 2015 energy market and determined that now is a good moment to make the
replacement purchase. Due to the convergence of several short term fundamental factors, such as
relatively low loads in California this summer (weather driven) and the absence thus far of
Atlantic/Caribbean hurricanes(forcing down gas production in the gulf),the forward energy prices
for 2015 have dipped substantially.
Prepared by: Yarek Lehr,Assistant Director of Resource Management
UB-122