Cheney City Council nixes power deal

Power issues were on display at the Cheney City Council's Jan. 13 meeting, the first of 2015.

The main issue swirled around what to do with one megawatt (MW) of Tier Two power the city purchased in 2012 through its partnership with other electrical utilities from the Northwest Intergovernmental Energy Supply via the Closed Resource Pool. NIES purchased a total of 3MW from Shell Energy in 2012 for use through Sept. 30, 2016 at a price of $40.92 per megawatt hour (MWh) based upon projected load requirements from members at the time.

Both Cheney and the city of Centralia, also a member of the group, have determined they will not need all of the power currently purchased to serve their retail loads through Sept. 30, 2016, and therefore have a power surplus. Another group member, Kootenai Electric Cooperative in North Idaho, needs additional power to serve its retail load through 2016 and beyond and sought to purchase the additional power from Cheney and Centralia.

The issue is the price for electricity is falling just like the price for crude oil and with it gasoline at the pump. Cheney Light Department Director Joe Noland told the council the parties picked a specific day's electrical price to negotiate around, which was the price of electricity on Dec. 10, 2014.

That price of $31.15 MWh would have resulted in losses to both Cheney and Centralia, with Cheney's loss between $80,000 and $85,000. But the price kept dropping and eventually Kootenai backed out until a more favorable rate to them could be established.

Kootenai, subject to terms and conditions of the Joint Resource and Power Planning Agreement between the group members, finally agreed to buy the power at $29.02 MWh. That price and agreement, which Noland said would result in a loss of $105,000 to Cheney, was brought before the council Tuesday night with three possible decisions: decline it, decline it and make a new offer or amend the price to what Cheney would like in the hopes Kootenai would reconsider, something Noland said was not likely.

Eventually, the council voted unanimously to withdraw the offer to Kootenai in the hopes the cooperative would come back and renegotiate with the group members. For Mayor Tom Trulove, the cooperative's moves amounted to a violation of the group's agreement to share the gains and losses of power purchases.

"I feel Kootenai isn't playing by the rules of our group," Trulove said.

"They essentially broke their word," Councilman Graeme Webster echoed in agreement.

Noland added that the city has met its load forecast criteria for 2017, so the issue of having surplus power shouldn't reappear anytime soon.

"We have not purchased for 2018 or 2019," he cautioned. "Right now we're concerned about what we're going to do with this surplus and how we mitigate the impacts."

To that extent, as part of the power sharing agreement, Cheney can remarket the remaining portion not being made available for purchase by other members on the open market. Council approved a resolution authorizing Trulove to quickly make that decision to sell should the market turn favorable.

Noland said by withdrawing the offer to Kootenai, Cheney had set a floor on how low it would go in selling on the open market of $29.02 MWh. Noland doesn't see the price returning near the 2012 level, so even $31 or $32 MWh would be acceptable.

"I'd like for the mayor to authorize a sell (price) a little north of that," he added.

In other power issues, the council accepted the purchase of the Light Department's new digger/derrick truck, replacing its current 15-year-old vehicle. The $228,376 plus tax purchase price came in below the estimate of $250,000, and came with several amenities in addition to what was requested.

Trulove reiterated to the council that the truck was purchased by Light Department funds, provided via ratepayers, that must be spent on equipment and other department needs.

"The city is not rich," he added.

John McCallum can be reached at jmac@cheneyfreepress.com.