Title
Approval to Execute a Power Purchase Agreement in an Amount not to Exceed $3,833,000 Plus Applicable Gross Receipts Tax, to Meet Forecasted Los Alamos Power Pool Load for the Months of April 2026 through June 2026
Recommended Action
I move that the Board of Public Utilities recommend approval of a Power Purchase Agreement with a yet-to-be determined provider, competitively selected on March 31 2026, in an amount not to exceed THREE MILLION EIGHT HUNDRED THIRTY-THREE THOUSAND DOLLARS ($3,833,000.00) plus applicable gross receipts tax, to meet forecasted Los Alamos Power Pool load for the months of April 2026 through June 2026, 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
DPU’s current Power Purchase Agreement (PPA) with Tenaska Power Systems, Inc. ends on March 31, 2026. At most 45 megawatts (MW) of power are needed for all of April through June to meet 80% of the Los Alamos Power Pool’s forecasted load. 80% is selected as a planning target because it avoids procuring excessive power and the associated cost risk of selling that excessive power at a loss.
DPU is seeking the lowest-priced offer for a new PPA to meet this need. At the time of publication of this staff report a single offer has been received at an estimated price of $31 per megawatt-hour (MWh) and the DPU will continue to solicit additional offers until the end of the day on March 31, 2026. This pricing is presented as an estimate because it will change along with market power prices, up until the very day that the agreement is fully executed. This refreshed price could go up or down from the estimate. 45 MW for the three-month period is 98,280 MWh, with a value of $3,046,680. An approximately 25% contingency adds $8 per MWh with an amount of $786,240 to account for a potential refreshed price increase, for an amount of $3,833,000, excluding GRT. GRT at 7.0625% is $271,000, for a total amount of $4,104,000.
The selected power supplier will be party to the WSPP AGREEMENT, dated October 31, 2025, and the PPA will be executed pursuant to this WSPP AGREEMENT, with the specific terms and conditions stated in a confirmation letter prepared immediately before execution of the agreement.
To provide context for this total amount, the Los Alamos Power Pool’s average monthly energy cost for calendar year 2025 was $2,600,000 and the average energy price was $61.12. Wholesale power prices remain low and now is an excellent time to contract for power.
If staff were not limited by the term of the ECA and the pending fiscal year 2027 budget approval, then staff would recommend contracting for power through June 2027 to lock in the current low prices.
Staff will bring another PPA covering July 2027 for approval after the fiscal year 2027 budget is approved. The PPA will be sized in consideration that the Los Alamos National Laboratory’s combustion gas turbine generator will run in July, contingent upon the Los Alamos Neutron Science Center operating at full power.
Alternatives
If the PPA is not approved, staff will not have time to seek approval of another PPA. Staff will use economy purchases to buy power, which comes with a price risk.
Fiscal and Staff Impact
No immediate fiscal impact because the approved budget for power purchases is sufficient for this proposed PPA. There is no anticipated staff impact since all associated work is a part of normal electric production work functions.