Chelan PUD prepares long-term power contracts for a new energy market

by Rachel Hansen | Jul 08, 2021

Chelan PUD took another step towards implementing its long-term energy marketing strategy. Staff shared with commissioners Tuesday a starting point to replace long-term, cost-based contracts due to expire over the next 10 years.

Chelan PUD produces more than enough power to meet local demand for electricity. Surplus energy produced by Rocky Reach and Rock Island dams are sold in wholesale power markets using cost-based and market-based contracts. The PUD uses that revenue to keep local rates low and enhance the quality of life for customer-owners with services like parks and super-fast internet.

Chelan PUD will have energy available for sale after long-term contracts with Alcoa and Puget Sound Energy expire in 2028 and 2031, respectively. Under the long-term marketing strategy, the PUD plans to offer some cost-based products that would produce more revenue than existing contracts while also offering purchasers capacity and carbon-free energy at a price below other renewables.

Driven by a regulatory pull toward more carbon-free energy sources, demand for renewable energy is rising, which has increased prices. Hydropower is a cornerstone among renewables because it economically produces energy around-the-clock without sun, wind, or air emissions.

A team of staff presented plans for an updated template for long-term energy contracts, which will serve as a starting point for negotiations with potential buyers (starting at 00:41:00 on the board audio).

The new contract template also includes the best features of past agreements, including:

  • It provides buyers a “slice,” which is a percentage of energy produced from the dams. The PUD and purchasers would share the output of Rock Island and Rocky Reach aligning interests to maximize the value of Chelan PUD hydropower.
  • Buyers would agree to cover a slice of costs related to producing and delivering energy, to help mitigate risks such as low river flows, and equipment outages. The contract retains PUD control of all capital, operations and maintenance expenditures related to its dams and transmission lines.

The PUD is engaging potential purchasers in discussions about the contract template.

“I’m very encouraged by what you presented, the direction we’re going, and the deep thought process of maximizing value and protecting PUD from risk in the future,” said Commissioner Garry Arseneault.

In other news, commissioners:

  • Heard a construction update for the PUD Service Center at Olds Station (00:07:10)
  • Received a progress report on the implementation of safety recommendations at the PUD’s hydro projects (00:26:00)
  • Approved a guaranteed maximum price amendment with GE Renewables to rehabilitate the first unit at Rock Island Powerhouse II (01:43:00)

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Media contacts

Rachel Hansen: (509) 661-4320
Neil Neroutsos: (509) 661-8291

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