Price Council Approves IPP Power Agreements
In a council meeting last Wednesday, Price city officials approved agreements to participate in Intermountain Power Project's third plant near Delta.
The plant is projected to begin production of more than 900 megawatts of electrical power in 2010. In 1978, Price agreed to participate in the first two IPP power plants until 2027.
The city currently has an entitlement share of approximately .36 percent in IPP1 and IPP2. Price's entitlement share means the city has the obligation to consume or sell the designated amount, but has agreed with other participants to sell excess power to the Los Angeles Department of Water and Power and the cities of Burbank, Glendale and Pasadena in California.
Southern California accounts for 75 percent of the plants' entitlement shares, but is able to consume much more than the designated amount. Price city and other participants currently do not use any of the electricty produced at the Intermountain Power Agency facility.
When the new plant comes online in 2010, Price will have a share of approximately 5,000 megawatts.
"At $39 per megawatt timed 5,000, that's what the contractual obligation to Price City would be," explained Mayor Joe Piccolo. "I've understood that the price of power right now is about $47 per megawatt. That's what we're paying to Utah Power. This power creates an advantage of about 18 percent by today's market rates."
"We're talking about a $35 to $39 obligation," said Nick Tatton, community director for the city. "The impression I had was that the portion the city now owns, which is all being sold to southern California, will be in place until 2027. With the new unit, I think if Price City hasn't developed to the point that they took all of that power, we would have the opportunity to sell it off to someone else. This is the time to commit to it for future growth, and then we'll have, if needed, that power. If not, I think we'll be able to sell it off. Los Angeles is saying right now that they don't want to buy it, but that's a political thing, not a realistic thing."
Piccolo expressed concern that council members weigh their decisions carefully, as it would affect the city's energy interests for decades. "There is some financial risk, and you are tying the hands of the future council members. So I would caution you to be sensitive to those facts. However, having said that, we are fiscal partners in [IPP1 and IPP2] and at this point have not been derogatorily affected by the fact we are participatory in those plants."
One significant difference is that the agreement to sell excess power to Southern California from IPP1 and IPP2 was in place early in the planning process for those facilities, while no such agreement exists for IPP3. "California Edison bought that power prior to the time that we committed to it. So there is a very basic difference in the two contracts." said Piccolo. "However, viewing the cost of power, I do not see coal becoming any cheaper or power becoming any less expensive to produce. I think there is a very limited risk related to this participatory action."
The mayor also pointed out that the Colorado River Storage Project, which produces power at Glen Canyon and Flaming Gorge, has had lower production levels with the drought, and there are a number of ideas and issues currently in discussion related to the future of those facilities. Piccolo suggested that if production continues to decline, the power from IPP3 would be a good supplement for that deficit.
Most of Price's current energy needs are met through Utah Power. However, Utah Power is expected to have expanded needs due to growth in various areas of the state. Utah Power's parent company PacifiCorp projects in its integrated resource plan that power needs in the state will continue to grow at a rate of 3.5 percent annually until 2016, at a greater rate than any of the areas served by PacifiCorp.
The plan also suggests that the Carbon plant could retire as soon as 2020, the Huntington plant by 2019 and the Hunter plant by 2025. Many of the other thermal plants that serve Utah Power and PacifiCorp are expected to be retired between 2015 and 2031.
The eastern side of PacificCorp's service area is expected to see power deficits as soon as 2009, growing to a deficit of 1,800 megawatts by 2015. "The needs of Utah Power along the Wasatch Front will require expanded power production in order to keep up with projected growth," said the mayor. "They can't place their eggs in one basket."
"The bonds on [IPP1 and IPP2] expire in 2024, and we do have an obligation on that power until 2027," said Tatton. "We would have an obligation for this power in 2010, or as the plant comes online. There is not a preexisting arrangement to lay that power off to LA, however the political climate may change, and they may request that, which would be an easy thing for Price City to participate in. Or we and/or an agent could arrange for another party that's interested in that power to lay it off to. If we do need it, we'll just go ahead and take it. If we can't lay it off, and we don't need it, we'll be buying a car that we don't necessarily need to drive."