By Vernon Robison
Moapa Valley Progress
The Overton Power District (OPD) will be scaling back on what officials feel is an excess supply of energy, allowing one of its intermediate-term energy contracts to expire at the end of this year. The energy contract, purchased three years ago through SHELL energy provided a total of 10 megawatts of supplementary power resources to the district for the year 2010. The power was anticipated to supply peak demand during the hot summer months.
In a report to the OPD board of directors, General Manager Delmar Leatham recommended that the expiring contract not be renewed. Leatham stated that, when the contract was purchased three years ago, district officials had anticipated a much higher rate of growth. But with that growth essentially dried up and key commercial power users either greatly reduced or closed down completely, the supplemental resource is not projected to be needed by the district in the upcoming year.
The report indicated that OPD used roughly 385,993,000 kilowatt hours (kwh) during 2010 at a total power cost of 25.6 million dollars. It was projected that the amount of power needed by the district to supply its customers would be largely unchanged in 2011. But by not renewing the SHELL contract, the district projects a reduced power cost of $23.3 million for 2011.
This is because the district lost money in the supplementary contract. Under the contract, the district was committed to pay 6.06 cents per kwh. But because of reduced demand, the district was unable to use all of the supplementary resources. A large block of the unused energy had to be sold back.
The district has an open exchange between NV Energy to either purchase short-term energy resources or sell excess resources as needed. But the cost of short term energy through NV Energy is currently much lower than the SHELL contract price which was locked in three years ago. Thus, OPD has only been able to sell back the excess supply for 3.28 cents per kwh. Thus the district has experienced a loss of roughly $2.2 million on the contract.
“I don’t think that we are going to see the growth return in 2011 to the point where we will need the supplement,” Leatham told the board. “Our recommendation is to let it expire and save the two million dollars next year.”
Leatham admitted that a sudden growth trend in the service area or extended periods of extreme high temperatures in the coming year could have an affect on the outcome. But he felt that, given the current economic environment, this action would be a safe bet.
“We’ll probably have to purchase power from NV Energy next year,” he said. “But chances are it will be at a lower cost than this contract was.”
The OPD has been making moves to avoid being in similar money-losing situations for the future, Leatham stated. The district has been part of the formation of the Silver State Energy Association (SSEA), a group of public agencies which will pool resources in purchasing a more cost-effective power supply.
SSEA membership organizations include Colorado River Commission, Southern Nevada Water Authority, Boulder City, Lincoln County Power District and OPD.
By pooling resources, the SSEA can buy resources in larger volume and better balance the cost for the group, Leatham said. “We don’t have to be negotiating relatively small contracts like this all by ourselves,” he said. “The group will have the ability to buy power on an hourly basis as needed to get the best price.”
