Purchase Power Contract
EXISTING BOROUGH ELECTRIC SUPPLY
The Borough purchases wholesale electric through our existing power supplier, American Municipal Power (AMP). There are three principal energy purchases by the Borough.
1.) The Borough is under a five year purchase agreement for load following energy a block purchase that began January 1, 2013 and terminates December 31, 2017. The load following energy supplier through AMP is NextEra with the Borough taking power as a third party beneficiary to the AMP-NextEra contract.
2.) The Borough receives a New York Power Authority allocation of federal preference power.
3.) Finally the Borough has purchases output power from the EDI landfill project.
Generally, available resources include contract resources and generation project resources. A contract resource is an energy purchase from a specific supplier at a fixed price. Contract purchases include base load resources, twenty-four hours per day, every day and purchases five days per week, 16 hours per day, Contract purchases can be for a fixed term, monthly, seasonally or annually.
Original contracts before the transition to the open market were load following contracts providing all Borough power requirements. In the open markets, the Borough has purchased fixed blocks of contract resources and generation output. Load following contracts became cost prohibitive; load fluctuations were supplied with pool power. The practical limitation with pool power is that when the Borough requires additional resources, other members will likely require the same resources, increasing the price of the power additional power.
There is an additional burden with block purchases of procuring too much or too little power. Unused power is sold on the market and additional power is purchased as required at market rates.
Block purchase recommendations are based on price and term whereas generation project recommendations are based on risk, price and term when solicitations are available. To date, contract resources have generally been preferred over generation resources based factors of risk, term and price. However, each recommendation for a power purchase is specific to the offering considered.
LOAD FOLLOWING SUPPLY
To mitigate the Borough’s power supply risk, in 2013 the Borough transitioned to and is currently served under a load following power purchase. A load following purchase is at a fixed price with the supplier serving any and all the load requirements of the Borough. The load following agreement allocates the risk of unforeseen load fluctuations on the power supplier and not the Borough.
With a block supply, excess purchased power is resold, often at a lower price than the amount paid. Additionally, when additional unforeseen power is required, the additional power is at market price often at a price greater than the contract price. Since municipal electric systems prefer price certainty for their customers, block supply agreements can introduce price risk unless mitigated.
In the past, load following contracts were comparatively more expensive than block purchases. However, recent decreases in power prices have reduced the premium associated with a load following contract and make load following contracts a viable way to mitigate power supply risk.
Current negotiations slowed for a time when NextEra was requiring load bands, contract maximums and minimums. During recent negotiations, NextEra has removed its load band requirements of providing load following energy with a contractual obligation of plus and minus 12 percent purchase constraints.
Additional load data has recently been compiled and is being forwarded to power suppliers with a price refresh requested. After the refresh is evaluated, an update will be forwarded to each Borough.