Title
Approval of a Short-term Power Purchase Agreement to Replace the Uniper Agreements
Recommended Action
I move that the Board of Public Utilities approve a short-term Power Purchase Agreement with Mercuria Energy America, LLC, in the amount of $51,334,560.00 and a contingency additional amount of $3,690,720.00, for a total of $55,025,280.00, plus applicable gross receipts tax, for the purpose of buying power and energy to serve the Los Alamos Power Pool's electric load, and forward to Council for approval.
Utilities Manager's Recommendation
The Utilities Manager recommends that the Board approve the motion as presented.
Body
If the BPU and County Council approve the Termination and Settlement Agreement and Release of Claims between the Incorporated County of Los Alamos, New Mexico, and Uniper Global Commodities North America LLC, then the DPU will need to secure a new source for the 40 MW of firm, around-the-clock power that is being lost from Uniper. Given the short time available to secure the new source of power and the current favorable pricing, DPU is seeking to enter into a short-term Power Purchase Agreement (PPA) to begin replacement power delivery on April 1, 2024, and end no later than February 28, 2026, for 40 MW of firm power, delivered to Four Corners 345kV or San Juan 345kV. The end date is selected to align with the planned Phase 1 power delivery from the Foxtail Flats Solar and Storage agreements. This replacement power will not be renewable or come with any Renewable Energy Certificates.
The expected price under the PPA is estimated at $76.50 / MWh, but the executed price will only be certain on the day that the PPA is executed. Accordingly, a contingency of $5.50/MWh is included to be prepared for this price uncertainty. The PPA will start on April 1, 2024, and end on February 28, 2026, a total of 699 days, with 671,040 MWh of energy delivered over the term. At the expected price the total PPA value is $51,334,560.00, the contingency amount is $3,690,720.00, for a total of $55,025,280.00.
Because both LAC and Mercuria are parties to the WSPP AGREEMENT, dated September 11, 2023 and included as Attachment A - Current Effective Agreement 09/11/23, the short-term PPA will be executed pursuant to this existing WSPP AGREEMENT, with the specific terms and conditions stated in the draft confirmation letter included as Attachment B - LAC Power System - Confirmation DRAFT. The draft confirmation letter will be finalized with the actual price immediately before it is signed.
Alternatives
The availability of alternative PPAs is uncertain. DPU has looked for, but not found an alternative PPA seller. Alternative sellers either do not have capacity, do not offer firm power, or are at a higher price. If this PPA is not approved, staff will seek another short-term PPA, or use day-ahead market purchases which come with a price risk. However, for comparison purposes, last summer WAPA acquired power for Sandia-Kirtland from January 2024 through December 2025 at $87.27/MWh, such that the current offered price at $76.50/MWh is favorably priced compared with last summer's market prices.
Fiscal and Staff Impact
No immediate fiscal impact because the approved budgets for power purchases are sufficient for this new short-term Power Purchase Agreement for fiscal year 2024. After the Uniper settlement is paid, a budget revision and proposed budgets for fiscal years 2025 and 2026 will be prepared. There is no anticipated staff impact since all associated work is a part of normal electric production work functions.
Attachments
A - Current Effective Agreement 09/11/23
B - LAC Power System - Confirmation DRAFT