HomeMy WebLinkAboutE-6.1. Approval To Purchase Resource Adequacy from NRGCONSENT CALENDAR
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY
BOARD
FROM: MANNY ROBLEDO, DIRECTOR OF UTILITIES
DATE: NOVEMBER 23, 2020
SUBJECT: APPROVE A FIVE-YEAR RESOURCE ADEQUACY POWER GENERATION
PURCHASE AGREEMENT WITH NRG POWER MARKETING LLC
BACKGROUND:
As a load serving entity (LSE) within the California Independent System Operator’s (CAISO)
Balancing Area (BA), Azusa Light and Water (ALW) is required to maintain sufficient power
generation capacity to serve the needs of its customers, including mandatory compliance with
several Western Electric Coordinating Council (WECC) and CAISO operational requirements. One
such requirements compels all LSEs to secure specific amounts of generating capacity proportional
to i) peak demand (system resource adequacy) and ii) intermittent renewable resources. LSE’s are
also required to procure specified quantities of generating capacity based on the LSE’s location
within the California grid (local resource adequacy). The recommended action would secure
approximately 20% of ALW’s system-wide resource adequacy requirement and approximately 55%
of ALW’s local resource adequacy requirement at a fixed and competitive price for a period of five
(5) years.
RECOMMENDATION:
Staff recommends the Utility Board take the following action:
1) Approve the purchase of 15 megawatts of resource adequacy power generation
capacity from NRG Power Marketing LLC for a period of five (5) years at a price of
$112,500 month; and
2)Authorize the Director of Utilities to execute the Contract, in a form acceptable to
the City Attorney
E-6Approved
Utility Board
11/23/20
Azusa & NRG Resource Adequacy Agreement
November 23, 2020
Page 2
ANALYSIS:
Based on CAISO annual load forecasts and power transmission engineering studies, a portion of the
required resource adequacy (RA) capacity must be derived from local resources, and in Azusa’s
case, the generating resources must be interconnected to the grid within or near the Los Angeles
Basin load area. Azusa satisfies a portion of this local capacity requirement from the several
existing contracts with renewable energy projects operating in the vicinity of the Los Angeles
Basin, i.e. Garnet Wind, MWD Hydro, San Dimas Hydro as well as Antelope, Big Sky, and
Summer Solar Photovoltaic, and DSR2 projects. The balance of the local RA capacity must be
purchased from parties operating generating resources in or near the LA basin, such as the proposed
NRG natural gas powered power plant located in Long Beach, California. Additionally, as of 2015
the CAISO requires all entities contracting for highly variable renewable resources (wind and solar)
to secure an ISO calculated amount of Flexible Capacity – a generating capacity that can quickly
respond to changes in wind and solar generation. Some of the local and system capacity Azusa
purchases may already include the flexible component CAISO requires.
Considering the expected capacity from its Mesa RP30 wind facility, Staff identified the need for
15 megawatts of additional capacity to meet its local requirements on a long-term basis. The
product offered by NRG is in addition to Azusa’s owned resources and is expected to fully satisfy
Azusa’s local adequacy requirements for the five-year period. Also, the product supports Azusa
flexible and system-wide resource adequacy capacity requirements, which vary depending on
demand and intermittency of its renewable resources.
After review of bids solicited by the Southern California Public Power Authority (SCPPA) from
power generation firms on May 31, 2020, NRG Power Marketing LLC was the only responsible
bidder offering resource adequacy capacity from a reliable and local power generation unit, which
satisfied all of the CAISO resource adequacy requirements for a period of five years. Staff’s
analysis of the market indicates that no other responsive bids were received because of the shortages
of resource adequacy capacity experienced during the recent heatwave in September and companies
not willing to commit to a fixed price for a five-year period. The price of $7.50 per kilowatt-month
bid by NRG is competitive with the long-term resource adequacy capacity procured under existing
contract from the Northern California Power Agency, which has an equivalent price of $9.00 per
kilowatt month. The City of Banning, also SCPPA member, is also procuring a similar amount (13
megawatts) of resource adequacy capacity from NRG at the same terms and conditions pursuant to
the same SCPPA solicitation.
Staff recommends that the Utility Board approve the purchase of local capacity from NRG at an
annual cost $1,350,000 starting January 2022 for five years and authorize the Director of Utilities to
execute the agreement with NRG in a form acceptable to City Attorney.
FISCAL IMPACT:
The annual cost for the capacity product is $1,350,000. This amount will be budgeted accordingly
in the five applicable budgets, under Power Resources budget account #33-40-775-550-6590.
Azusa & NRG Resource Adequacy Agreement
November 23, 2020
Page 2
Prepared by: Reviewed and Approved:
Richard Torres Manny Robledo
Assistant Director – Resource Management Director of Utilities
Reviewed and Approved:
Sergio Gonzalez
City Manager
Attachment
1) Resource Adequacy Power Generation Capacity Agreement