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 Council approve a Power Purchase Agreement with Mercuria Energy America, LLC, in an amount not to exceed $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, for the purpose of buying power and energy to serve the Los Alamos Power Pool's electric load, and I further move that Council delegate the authority to implement the Power Purchase Agreement to the Utilities Manager.
Utilities Manager's Recommendation
The Utilities Manager recommends that Council approve the motion as presented.
Board, Commission or Committee Recommendation
The Board of Public Utilities approved this request at their regular meeting on March 18, 2025 and recommends that Council 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.
Following a competitive selection process, DPUhas selected the lowest-priced offer from Mercuria Energy, LLC, for a new PPA to meet this need. At the time of publication of this staff report the offered price was at an average of $27.33 per megawatt-hour (MWh). This pricing is presented as an estimate because it may change along with market power prices, up until the day that the agreement is fully executed. The refreshed price could go up or down from the estimate. BPU approved a contract value for the three-month period of $3,046,680, with an approximate 25% contingency in the 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, Mercuria Energy America, LLC, is a 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.