The Public Service Co. of Colorado unit of Xcel Energy (NYSE:XEL) is seeking Colorado Public Utilities Commission approval for a replacement energy exchange agreement with PacifiCorp.
This new exchange agreement effectively extends an existing arrangement on similar terms called the original exchange agreement. In addition, Public Service asked the commission in a March 16 motion to waive the competitive acquisition process as it pertains to the purchase transactions that Public Service makes to satisfy its power delivery obligations under the exchange agreement.
Also, Public Service wants the commission find that those power purchases made under the exchange agreement are exempt from the company’s trading business rules governing short-term energy purchases, and to authorize the company to recover the costs of all power purchases made under the exchange agreement through the current cost recovery mechanisms of other long-term power purchases for the term of the exchange agreement.
Public Service and PacifiCorp are parties to a long-term power supply agreement (LTPSA), which was entered into and approved by the commission as part of the 1992 bankruptcy reorganization of the Colorado-Ute Electric Association. Under the LTPSA, Public Service was to purchase capacity and associated energy from PacifiCorp starting in 1992 through Oct. 31, 2022. However, the LTPSA provided Public Service with the right to ramp down its purchases over a period and terminate the LTPSA early by providing notice to PacifiCorp in 2002.
Public Service elected to exercise that early termination right by ramping down the amounts acquired under the LTPSA starting in 2008 and ending in 2011. In a companion power and transmission service agreement (PTSA), the company was required to provide to PacifiCorp transmission service for the amount of capacity and energy that Public Service was not buying under the LTPSA from the Craig and Hayden coal plants to a mutually agreed point or points of delivery.
The Craig and Hayden units are remote from PacifiCorp’s system, and this agreement reflected a concern that PacifiCorp’s share of those units could be stranded if Public Service discontinued purchases under the LTPSA. Soon after the company provided notice of termination, PacifiCorp sought transmission service for capacity and energy from Craig and Hayden and was unable to secure an acceptable transmission path due to transmission constraints in Colorado.
As a result, Public Service and PacifiCorp discussed the situation and the possible need for litigation to resolve the matter. Ultimately, Public Service and PacifiCorp settled the matter by agreeing to the original exchange agreement. The commission approved the original exchange agreement and that company said it requests the same relief in this application.
The original energy exchange agreement was only a partial solution to the LTPSA in that the exchange agreement terms and conditions are for years 2008 through 2014, whereas the LTPSA covered additional years through 2022. The original exchange agreement allowed the company to ramp down its purchase of power under the LTPSA from 2008 through 2014 by providing for an exchange of capacity and energy in lieu of transmission service, which could not be provided due to transmission constraints.
Under the original exchange agreement, PacifiCorp delivers capacity and associated energy to Public Service at Craig and Hayden consistent with the deliveries listed under the LTPSA, and Public Service purchases capacity and energy from the market and delivers an amount of capacity and energy at specified delivery points remote from the Public Service system where PacifiCorp will be able to use the power consistent with the capacity (and associated energy) listed in the agreement. The specified delivery points are liquid market points where Public Service is able to buy power in the market.
The original exchange agreement was only intended to be an interim solution to the underlying dispute regarding Public Service’s obligation to provide transmission service to PacifiCorp under the PTSA in light of the early termination of the LTPSA, Public Service noted. Without this exchange agreement, the company would still be obligated under the LTPSA to acquire the 176 MW of capacity and energy or under the PTSA to deliver the Craig/Hayden capacity and energy to PacifiCorp. The underlying circumstances – limited transmission capacity from Craig and Hayden – have not changed, Public Service pointed out.