WAPA board outlaws long-term, fixed-rate agreements for power sales
Published: August 30, 2013
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ST. CROIX - The V.I. Water and Power Authority governing board passed a resolution on Thursday that will affect how it moves forward negotiating with entities that want to sell it power.
The resolution precludes WAPA from entering into long-term power purchase agreements at fixed-cost rates.
Officials said that is because as WAPA brings other energy sources online, the cost to generate a unit of power is expected to fall. Therefore, long-term power purchase agreements with fixed rates that might represent a savings now could wind up being more expensive for ratepayers in the long-run, if the cost for WAPA to produce the same amount of power drops below the fixed rate in the future.
"We can't accommodate these PPAs unless they're going to bring savings to the ratepayers over time," said WAPA executive director Hugo Hodge Jr. Power purchase agreements also are called PPAs.
Hodge said that WAPA already anticipates a significant reduction in its cost for producing electricity when it begins to use propane as a fuel next year.
Under the resolution, long-term power purchase agreements with qualifying small power production facilities or qualifying cogeneration facilities instead are to be based on avoided costs - the cost it takes WAPA to produce the same amount of power.
Hodge noted that these future agreements may have rates that change over time - like a floating interest rate - based on what it costs WAPA to produce the same amount of power.
The resolution, which the board passed at its regular meeting Thursday, does allow for a fixed-cost agreement if it is at a fixed rate that is projected to remain "well below" WAPA's cost to produce the same amount of power throughout the life of the agreement.
The board also took a number of other actions, including authorizing WAPA to move forward with the next phase of work in building the Midland Substation on St. Croix.
The board voted to authorize WAPA to proceed with Phase 2 of the Midland Substation construction with Dashiell Corporation at a cost of $2,276,115. Dashiell Corporation did Phase 1, as well. As part of the same motion, the board also approved the purchase, installation and commissioning of a 25 kV breaker cubicle with breaker control and protection panel with relay, at a cost of $337,236.92.
In other action, the board:
- Approved a change order for KEMA Consulting Services to conduct interconnection site studies for the six photovoltaic sites on WAPA's solar power RFP, at an additional cost of $45,000. The $45,000 change order brings the contract cost to $230,990.
- Approved $2,926,100 for Hamon Deltak Inc. to perform the engineering, design and fabrication of the required equipment for use in the existing Unit No. 21 heat recovery steam generator at WAPA's Randolph Harley Power Plant.
- Authorized $1,554,801.20 to contract Apex Covantage to provide WAPA with meter/module installation and project management services for WAPA's advanced metering infrastructure project.
- Authorized a $843,239 contract with Power Systems Engineering to provide consulting services to WAPA for management and procurement of smart grid projects and technologies and authorized payments on invoices for services previously rendered dating back to Jan. 7, the project start date.
- Approved a $561,900 contract with V.I. Paving to complete a 24-inch transmission water line upgrade at the Richmond pump station.
- Approved legal, technical and professional services up to $1 million in connection with WAPA's conversion of its generating facilities from the use of fuel oil to the use of liquid natural gas and liquid propane gas.
Entities from which WAPA has secured services so far include Venable LLC, attorney Robert Smith, Galway Energy Advisors LLC, and IHS Inc.
- Increased a contract with Public Resources Management Group by $125,000 to provide WAPA with additional professional and financial consulting services with preparing responses to the Public Services Commission's report on WAPA's electric and water LEAC filing for the third quarter. The amendment increases the contract from $175,092 to $300,092.
Board members present during the meeting were chairman Gerald Groner and members Cheryl Boynes Jackson, Juanita Young, Elizabeth Armstrong, Noel Loftus, and V.I. Energy Office Director Karl Knight.
Absent were Donald Francois, Department of Planning and Natural Resources Commissioner Alicia Barnes and Department of Licensing and Consumer Affairs Commissioner Wayne Biggs Jr.