Chelan PUD outlines potential new approach to energy sales contracts

March 23, 2021

by APPA News
March 23, 2021

Washington State’s Chelan PUD is evaluating its strategies to sell carbon-free, surplus power as long-term energy output contracts expire over the next decade.

Chelan PUD General Manager Steve Wright on March 15 presented a plan that would support more economic growth locally, while also allowing the PUD to capitalize on favorable market conditions, the PUD said.

“With the current long-term market, we’re seeing the opportunity to create revenue that could lead to rate stability for our customer-owners,” Wright said. “We believe the market sees value now in renewable hydropower that can support carbon emission reduction goals.”

Chelan PUD said that its revenue from wholesale purchasers is the reason its customer-owners enjoy some of the lowest rates in the nation, noting that it produces more than enough power to meet local demand for electricity.

 “We are heavily dependent on these revenues to maintain the low rates in Chelan County,” Wright said.

Chelan PUD currently sells the energy it produces based on a formula roughly calculated as 50-30-20:

  • 50% is sold at wholesale as cost-of-production based, long-term slice of the hydroelectric contracts, including an Alcoa contract that expires in 2028, and Puget Sound Energy which expires in 2031;
  • 30% is sold at wholesale in market-based, 5- to 10-year slices of the hydro system;
  • 20% is used to serve customer-owners (residential, commercial and industrial) in Chelan County.

Wright proposed that commissioners consider a new formula that retains the basic structure for wholesale transactions while creating room for local loads to grow over time.

Specifically, 40-50% would be sold as long-term slice contracts based on cost of operations and the value of hydroelectricity. These contracts could serve customers outside Chelan County, or new large-load customers in Chelan County.

Under the proposal, 20-30% of energy would be sold in fixed-price, market-based contracts over 5 to 10 years. This amount may be reduced over time to serve unanticipated local load growth.

In addition, 20-30% would be used to serve local customer-owners as local load growth occurs.

Chelan PUD Commissioners will consider the proposal over the next month.