MONTPELIER – Twenty Vermont electric utilities have secured a big chunk of their customers’ power needs for the next 26 years as a result of the Vermont Public Service Board’s approval their 225-megawatt, power-purchase agreement with Hydro-Quebec Energy Services.
The deal replaces a 1987 contract Vermont utilities have had with Hydro-Quebec for 310 megawatts. That contract phases out beginning next year. The new contract takes effect Nov. 1, 2012.
“We are very pleased that the Public Service Board has validated our belief that this will be a very favorable contract for Vermont,” Central Vermont Public Service President Larry Reilly and Green Mountain Power President Mary Powell said in a joint statement. “This approval ensures a large, clean, renewable baseload energy source in our portfolios that will be competitively priced and reliable.”
Central Vermont Public Service and Green Mountain Power Corp. negotiated the agreement with Hydro-Quebec, “but we made sure we kept it open so other utilities could take part as well,” Robert Dostis of GMP said.
The starting price for the electricity will be $58.07 per megawatt-hour, which is less than the $69 per megawatt-hour the utilities pay Hydro-Quebec in 2012. The starting price will be adjusted in future years using a formula that considers regional electricity prices and movement of prices across the country, but also includes a dampening factor to prevent price swings.
Entergy Corp., owner of the Vermont Yankee nuclear plant, offered Vermont utilities a 20-year power purchase agreement with a first-year price of $49 per megawatt-hour, “followed by a market-adjusted pricing structure that ensured the utilities and their customers would benefit from low power market prices, ” Entergy officials said. The utilities didn’t accept the deal.
Dostis said comparing the offer from Entergy with the Hydro-Quebec agreement would be difficult because there are many more factors to weigh beside starting price. He listed annual price escalators, the length of the contract, the degree to which they protect against potential future market price increases and hours of the day energy is delivered.
“For example the power from VY would likely be 24-7 for 20 years, but would be contingent on the performance of a single power plant, while the HQ purchase covers peak hours only for a term of 26 years, and is not unit-contingent,” Dostis said. “Comparing starting prices does not give an entirely accurate picture of the long term value of the contracts.”
The Public Service Board concluded the Hydro-Quebec agreement offered a price that would be competitive or favorable over the term of the contract and assured greater price stability than purchases on the market.
It noted, too, that the contract ensured the flow of power wasn’t contingent on the availability of particular generating units or transmission paths – in contrast to the current contract.
The contract also provides that Vermont utilities and Hydro-Quebec could split profits if Vermont utilities could make money selling the “renewable attributes” of Hydro-Quebec power. There is a market for renewable attributes among out-of-state utilities that need to have larger percentages of the sources of their energy comes from renewable sources.
However, although Vermont recognizes large hydroelectric generation as a renewable energy source, other states don’t, so there is not yet a market for the renewable value attributed to HQ power.
Dostis said state policy encourages Vermont utilities to sell the renewable attributes of other power generation such as wind, solar and biomass, and to use the money to reduce the cost of electricity to Vermont consumers.
Hydro-Quebec has more than 41,000 megawatts of generating capacity, with 97 percent coming from hydropower dams.
Sandy Levine of the Conservation Law Foundation said she wanted more guarantees that Hydro-Quebec’s power was renewable and that it wasn’t going to sell the renewable attribute and still claim that attribute at home – double-counting the environmental value.
“Hydro-Quebec is not part of the renewable tracking that we use throughout New England,” Levine said. “We were seeking an independent confirmation.” The board didn’t agree to the extra requirements the Conservation Law Foundation requested.
Gov. Peter Shumlin welcomed the board’s approval of an agreement he said would mean “clean, reliable, and favorably priced power for Vermonters.” He added, “Hydro-Quebec has been an important partner in Vermont for many years, and will continue to be a key player in Vermont’s energy future.”
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