A decade after eagerly signing a long-term contract to buy power from an Eastern Oregon and Eastern Washington wind farm, the Eugene Water & Electric Board is now suing to try to limit how much energy it must buy from the farm, the largest in the Pacific Northwest.
The move comes as EWEB wallows in excess power, some of which it has to sell at a loss.
The utility’s Eugene customers use about 285 average megawatts, leaving EWEB with another 80 average megawatts that it sells on what an EWEB spokesman calls “terrible” markets that are awash in superfluous power.
Seeking to curb how much power it must buy from the Stateline Wind Project in Umatilla and Walla Walla counties, the utility earlier this month sued J.P. Morgan Ventures Energy Corp., a branch of New York-based J.P. Morgan, which owns the contract requiring EWEB to buy power from Stateline through 2026.
In the lawsuit, EWEB claims J.P. Morgan is violating the contract by trying to require EWEB to buy power that J.P. Morgan obtains elsewhere, rather than from the wind farm. EWEB also argues that J.P. Morgan is trying to require EWEB to accept power from the wind farm on an interruptible, or “nonfirm” basis, rather than on a guaranteed, or “firm” basis.
EWEB says its contract to buy power from the wind farm requires the power to be provided on a “firm” basis that is guaranteed not to be interrupted. Guaranteed or “firm” power is generally more desirable than interruptible power because it is predictable and utilities can plan power purchases and sales around it.
The lawsuit follows EWEB’s expansion over the years into buying power from an array of different producers to feed Eugene’s expanding economy. The current slack economy, with power demand low, both in EWEB’s home territory and regionally, has turned some of those long-term obligations into financial liabilities for EWEB.
J.P. Morgan declined to comment on the lawsuit and has not yet filed an answer in Lane County Circuit Court.
EWEB is asking the court to rule that EWEB’s contract to buy power from Stateline requires that the power come only from Stateline, and that if Stateline is not producing power, J.P. Morgan can’t substitute power from other sources. EWEB also wants the court to affirm that the contract requires Stateline to provide “firm” power that “may not be interrupted for any reason except in emergency situations when continued delivery of power is not possible,” according to the lawsuit.
EWEB wants the court to affirm that the contract does not give J.P. Morgan the right to require EWEB to accept “nonfirm” power, which “may be interrupted for a variety of reasons, including, for example, when available transmission capacity must be allocated to other entities with higher priority ‘firm’ transmission rights,” according to the lawsuit.
Stateline, owned by Florida Power & Light, began operations in 2001 and consists of several hundred wind turbines in the Columbia River Gorge area.
In 2002, EWEB signed an agreement with PacifiCorp Power Marketing, the entity selling the farm’s power, to buy up to 25 megawatts of the farm’s output every year through 2026.
The sides have kept the price secret.
Subsequently, in 2010, J.P. Morgan Energy bought the power marketing contract, making J.P. Morgan Energy the one that provides the power to EWEB.
From the start of buying power from the farm, EWEB and PacifiCorp were unable to secure “firm” transmission rights along power supply lines, according to the lawsuit. So, EWEB negotiated with PacifiCorp and subsequently with J.P. Morgan on temporary agreements under which EWEB accepted “nonfirm” transmission, according to the lawsuit.
Those agreements give EWEB the right to cancel the power purchase contract if the provider – now J.P. Morgan – is unable to provide “firm” transmission, according to the lawsuit.
The temporary agreement to buy “nonfirm” power from J.P. Morgan expires on Dec. 31, 2014, according to the lawsuit.
EWEB declined to comment directly on the lawsuit, including whether it will ultimately seek to scrap the contract if J.P. Morgan can’t meet its terms.
Because of variations in wind speed, Stateline provides only about 6.5 average megawatts to EWEB, or about 1.5 percent of EWEB’s energy portfolio, EWEB spokesman Joe Harwood said.
The Bonneville Power Administration and EWEB’s own dams provide the bulk of EWEB’s total energy.
Supplementing those sources are Stateline and three other wind projects, as well as the Seneca wood-burning plant north of Eugene, Harwood said.
Of those three other wind projects, one provides EWEB power under a long-term contract and two are projects in which EWEB owns a part share, Harwood said. EWEB buys energy from Seneca under a long-term contract.
EWEB doesn’t hide the fact that these days it has much more electricity than it needs for its 86,000 Eugene customers. In good economic times, it could sell excess power at a profit.
But now, “we have too much power,” Harwood said. “We are long on power and the market is terrible.”
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