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Nervous about Coal this Christmas

Truckee's utility district considers its electricity for the future
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People are nervous about Truckee’s electricity. The Truckee Donner Public Utility District (TDPUD) is nervous because as of 2009, the district isn’t sure from where the bulk of its power will be coming. Many ratepayers and several out-of-area voices are nervous because the district is considering alleviating the unknown by signing a 50-year contract for coal-fired power from a Utah company.

The deal purportedly will provide a considerably lower price for power than the district pays now, in exchange for a long-standing commitment. But the bottom line encompasses more than the stated price, opponents say. Coal is detrimental to the environment and humans, they say, and the contract will tie the district long-term to a technology that will soon be outdated.

A sense of urgency heightens the nervous energy – a newly signed California law will kick into effect January 1, 2007, and make it illegal for the district to sign the agreement. The law, SB 1368, prohibits utilities from signing contracts for more than a 5-year term with power sources that generate more pollution than power plants in California.

The issue has generated an overflowing boardroom on Nov. 15 and Nov. 29, stern letters from Sen. Dianne Feinstein and national organizations, and 'truckloads of emails,' as TDPUD General Manager Peter Holzmeister put it.
After two lengthy public meetings, the board is primed for a final vote on Dec. 13.

Small fish in a big sea
Although Truckee is in California, 'electrically we are in Nevada,' said Stephen Hollabaugh, TDPUD Assistant General Manager. The town is tied to Sierra Pacific Power Company transmission lines that restrict reliable power choices to the east only – from Nevada, Utah and Idaho.

Ninety percent of the district’s power currently comes from Constellation Energy Commodities Group at an average cost of $50 per MWh and is primarily coal-based. The remaining 10 percent comes from hydroelectric power.

The contract with Constellation will expire at the end of 2007 and the district has been searching for another power source for the past six years, Hollabaugh said. The search led to the 50-year contract with Utah Associated Municipal Power Systems (UAMPS), a company representing 49 utility districts in six states. TDPUD has been a UAMPS member since 2000.

'Small players have a hard time accessing the same power prices that larger groups can get,' said Douglas Hunter, UAMPS General Manager, at the Nov. 29 TDPUD board meeting. UAMPS offers ‘small players’ a chance to combine forces, buy into power -generator projects and put themselves in an ownership position, Hunter said. Otherwise, districts are vulnerable and at the whims of the market, which is volatile and hard to predict.

UAMPS is planning a new coal-fired power plant, the Intermountain Unit 3 (IPP3), which will be the third coal-burning facility at a site located in Millard County, Utah. Under the deal being considered, the TPDUD would help pay for construction, loans, and operating costs for the new plant and in turn receive first dibs for the generated power. Power from IPP3, set to go on-line in 2012, will cost an estimated $35/MWh versus an estimated $70/MWh for market power, adding up to a savings of $5 million annually, district officials said.

The $35 price is not fixed and could vary depending on the three factors in the cost, however UAMPS has built into the estimated price every contingency you can think of, Hollabaugh said. Moreover, the loan for the plant has a 30-year life, which means for the last 20 years of the agreement, TDPUD’s 'cost will plummet,' cutting in as much as half, Hunter said.

The goal is to secure low-cost coal power from the Utah power plant for the district’s 'base load' and use the savings to secure alternate fuel power for our 'peaking power needs,' Hollabaugh said. 'If we spend all our money on the base-load power, we leave little room for buying more green power.'

The district has repeatedly stated a strong desire to incorporate more renewables into the energy mix, but coal is currently the most prevalent power source available in the U.S. while renewable energy is scarce and in high demand.

Speaking to a full boardroom, filled primarily with contract opponents, Holzmeister said, 'When I compare where you’d like to see us go and where we’re going as a district, it isn’t as far as you might think, I just can’t do it in the time period you’d like,' he said. 'It’s just not out there; the most prevalent and available power is coal – whether you like to hear it or not.'

Staff is currently recommending the district secure 15 MW (versus 20 MW in the original proposal) with the UAMPS contract, equal to approximately 114,000 MWh, Hollabaugh said. The district’s anticipated three percent growth in energy load will leave a lot of head-room for green power purchases through the years, he said. For example, in year 2015, the district’s demand will be approximately 200,000 MWh, leaving an 86,000 MWh gap that could be filled with renewable sources. The district’s current load hovers just above 150,000 MWh.

If the district has to buy market-rate power, local rates will have to increase by 25 to 30 percent as early as 2009 to cover the cost difference, district officials say. A three percent rate increase in 2006 brought 'great consternation' from local ratepayers, said TDPUD board president Ron Hemig at a Nov. 15 meeting. Imagine the response to a 30 percent increase, he said.

However, rates likely will increase regardless of the IPP3 contract. After the contract with Constellation sunsets in 2007, the district has a contract with UAMPS at $60/MWh from 2008 through 2009, still leaving a three-year gap before IPP3 is running. Unless the district can find power at today’s $50 price, ratepayers can expect a rate increase.

Externalizing Costs
As the nation turns its attention to global warming, heat-trapping carbon dioxide is under the spotlight and coal is at its side. With AB 32, signed into law by Gov. Arnold Schwarzenegger in September, California became the first state in the nation to fight global warming by slapping caps on carbon dioxide and other emissions. Late last year, the California Public Utilities Commission passed a law that essentially prohibited investor owned utilities from buying power from coal-fired power plants operating outside of the state. The Commission’s regulation did not apply to TDPUD, since it is a publicly-owned utility.

'Coal accounts for over 50 percent of [the nation’s] electricity generation and is the dominant source of carbon dioxide emissions ranging from 83 to 86 percent since 1990,' according to a May 2006 report by the U.S. Department of Energy.

In addition to carbon dioxide, coal-fired power plants emit sulfur dioxide and nitrogen oxides, both primary causes of acid rain. Coal plants are also the number one source for mercury, a potent neurotoxin that threatens the nervous, digestive and respiratory systems in animals. These pollutants compromise the health of the earth and humans, contract opponents say, and are hidden costs of coal. Ignoring these costs and associated risks puts the district out of step with the community and the state.

'It might be better to pay for the externalities in coal now,' said Steve Frisch, a TDPUD ratepayer at the Nov. 15 meeting. He suggested the district consider a series of five-year contracts and make a commitment to reduce the district’s carbon emissions.

Due to pollution, the cost of coal will increase in upcoming years, many say. An October 2006 report by the Union of Concerned Scientists says limits on global warming emissions are coming soon and will make coal power plants more costly in the near future. 'The risk of carbon regulation – at the state or federal level – is likely the most important to consider, but risk of strengthened regulations of sulfur dioxide, nitrogen oxides, and mercury also deserve note,' says the report.

For TDPUD, future carbon dioxide regulation could 'easily add up to $8 million to $16 million per year by 2027' with the pending UAMPS contract, according to a joint letter from conservation groups including Natural Resources Defense Council and the Sierra Club.
The primary purpose of SB 1368 bill is to 'protect us from all the additional and uncertainties of coal costs. Every imaginable fee will come back to [ratepayers],' said Betony Jones, a two-year Truckee resident.

'If we try to skirt this new law, where does that leave us ethically?' asked Truckee resident Brian Woody.

Other communities are also grappling with the UAMPS coal issue. Six cities in southern California, already in contract with UAMPS, recently declined to extend their agreements ending in 2027. Instead, they plan to seek out 'alternative energy from cleaner sources,' according to a L.A. Times Nov. 22 article. In the November election, several cities in Idaho voted down ballot measures that would have signed them up for the IPP3 project.

The UAMPS contract does have 'off ramps' built into it, allowing the district to sell its 'entitlement share' to other utilities in the future, officials say.

Would other utilities be interested in coal-power at that time in the future? There’s no telling. Regardless, 'our fingerprints would still be on the project,' said Josh Susman, a Truckee Town Councilmember, at the Nov. 15 meeting.

If not coal, then what?
A recent report from the Rand Corporation suggests the United States will be able to secure 25 percent of its energy from renewables by the year 2025. Right now, however, renewable energy is only two percent of available power in the nation, TDPUD officials say, which precludes the district from being able to secure 100 percent green power. Given the 10 percent of hydroelectric power already in the mix, the district is already ahead of the nation’s average, Hollabaugh said. In addition, the district is working to secure another 3 percent from the Stampede dam, located just north of Truckee.

The Golden State as usual stands out from the crowd. According to the California Energy Commission, the state uses more renewable power, 10.6 percent, than any other state.

Plus, the district has more options that may open up in the near future, says Scott Terrell, TDPUD’s conservation specialist. For example, Northern Nevada is a documented geothermal source; nearby Plumas-Sierra Rural Electric Co-op is building a 22 MW wind farm; and Loyalton already has a co-generation plant, converting biomass into energy. While these sources aren’t immediately available to the district, the 50-year contract would limit the district’s opportunities, he said. Terrell is an outspoken opponent to the contract and believes the controversy may have cost him his job at the district.

Legally, the district has no choice but to integrate renewables into its energy portfolio. In 2002, California adopted a Renewable Portfolio Standard, requiring electricity providers to obtain at least 20 percent of their power from renewable energy resources by 2017. On Dec. 13, the TDPUD is looking to adopt a RPS goal of 20 percent by the end of 2012. Currently there are 20 states plus the District of Columbia that have RPS policies in place.

Another useful option would be to restructure the electric rates so small and modest users of power would pay a lower rate versus a higher rate for high users of power, Terrell said.

Several members of the public have criticized the district, saying it has not actively pursued conservation options. At the Nov. 29 meeting, Hollabaugh did not include conservation in his presentation on the district’s energy portfolio mix, though he did say that exclusion was a mistake.

Through the state’s 'Energy Action Plan,' adopted by the state’s energy agencies and endorsed by Gov. Schwarzenegger, conservation is given top priority. The Plan establishes a 'loading order' of preferred energy resources, placing energy efficiency as the state’s top priority, followed by renewable energy generation, then clean, fossil fuel, central-station generation.

'The growth rate of worldwide energy consumption could be cut by more than half over the next 15 years through more aggressive energy-efficiency efforts by households and industry,' reported the New York Times in a Nov. 29 article, citing a study by the McKinsey Global Institute.

'The cleanest and cheapest source of power is conservation,' Terrell said. 'A unit of energy conserved is equal to a unit of energy used, but staff has been limited for years in spending for conservation programs.'During public comment at the Nov. 29 meeting, Terrell introduced the 'conservation power plant' concept, in which a district helps customers reduce their energy needs through efficiency measures, and customers pay back the district at a reduced rate for the energy they have saved as a result.

Members of the public also have asked the district for a comprehensive report on the different options TDPUD has explored. Such a report does not exist, but the district has been 'looking all over the place for power supply for years,' Hollabaugh said, 'and options don’t come up all at once, so a [comprehensive] report is not possible. The market is constantly shifting.'

The district is still stinging from the 2000 energy market collapse, when the district had to buy its way out of a contract tying it to an exorbitant rate for power. Gun-shy about entering the volatile energy market, staff is looking to secure power for its customers, with a diversified portfolio, while keeping rates down. 'Without a reliable and cost-effective base load source, it will be hard to stabilize rates and incorporate a lot of renewable resources,' Hollabaugh said.

Meanwhile, the prospect of a 50-year relationship with coal has left many anxious. Boardmember Bill Thomason said he will vote no on the contract because although the district would be buying into a long-term situation, there is no certainty the district will receive cheap power. 'Even if the project doesn’t go on-line, we’re paying for them to build it,' he said.

'When I first heard about the proposal, my personal reaction was strong, almost visceral,' said Beth Ingalls, Truckee resident and outgoing Town Mayor. 'If you choose this path solely because of money, that is short sightedness.'

Current Proposal before TDPUD board, Dec. 13:
The Board and staff of the District have benefitted from all the public input we have received. Based on the variety of opinions we heard, we would like to propose development of a power supply portfolio that
1. Recognizes a legitimate role for cost based power from the Utah plant to satisfy our base load needs. (15 megawatt from IPP-3)
2. Also recognizes the need to seek a natural gas contract, possible cost based through UAMPS. (8 megawatt)
3. Makes an aggressive commitment to secure renewable power, possibly through UAMPS. (8 megawatt from wind)
4. Makes an aggressive commitment to promote energy conservation and distributed generation within the Truckee community. (goal of one percent yearly reduction due to energy conservation measures)

Contact TDPUD
Peter Holzmeister, General Manager 530-587-3896, peterholzmeister@tdpud.org
Boardmembers:
Joe Aguera, 530-587-5481, mrsmorticia@earthlink.net
Ron Hemig, 530-582-8158, ron@hemig-erle.com
Pat Sutton, 530-587-4161, resutton@sbcglobal.net
Tim F. Taylor, 530-581-1116, ext. 17, ttaylor@auerbachengineering.com
William L. Thomason, 530-582-0112, wltcpa@exwire.com

 
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Reader comments so far...

Lisa & Craig (not verified)
"Dear Editor Mayumi, We are on vacation and checked with friends to learn about the decision the Truckee Donner PUD made on the 50 Year Coal Contract. (as it has come to be known). Thank you to the board members who voted against this contract! We know this was complicated and we appreciate the time and effort all five board members put into the decision. Thank you for your service and especially thank you for the no votes! Signed, Lisa Wallace; Craig Threshie"

Mayumi E. (not verified)
"News Flash: Yes means no! In a moment of comic relief, boardmembers voted on the motion "to decline to approve the contracts; which meant to vote on the contract, they had to vote 'yes.' Confused? So were some of the boardmembers. Regardless, PUD voted no, 4 to 1, on the contract last night. "

Joanna Walters (not verified)
"Just a quick reply to Bob... 1. There are geothermal heat pumps (currently in use at the Alder Creek Middle School) which are available today to significantly reduce the need for electricity. Also Northern NV is an *ideal* location for large scale geothermal generating facilities. 2. Solar panels usually are integrated into *existing* and new buildings, so they are no more intrusive than those sky blue metal roofs all over Tahoe Donner's A-frames. Please "

Rick Solinsky (not verified)
"A reply to Bob Heath and also Prentis Davis who wrote an editoral in that "other" paper. Why do both of you guys just assume the "same people who are against coal would also be against windmills and solar panels". I find that very narrow minded thinking. Without pre-supposing what others think about a subject, I would offer you stay on topic with your own opinions. I fear that both of yours assumptions are incorrect. I happen to be probably on of the most green people in Truckee. I create 80% of my own power for my home from both wind and solar. And personally, I think that the best location for a wind farm is directly across the street from my home on Airport Flat. If they chose to erect wind mills across from me- bring it on. Turbines are moving art forms, I'd love to have a wind farm across from me- there are a lot worse things that can go in there - like another strip mall or truck stop. I think the main point that everyone is missing is the 50 year contract. If the PUD came out and said they were going to sign a 50 year contract on solar electricity, or wind farms, or whatever, I would (almost) be as concerned. Fifty years is a REALLY long time, especially when technology is growing by orders of magnitude every couple of years. This afternoon I had a phone discussion with Robert Mowriss who is very involved with this whole subject- he had some great ideas where Truckee could get power options. One of his ideas was to use the sewer plant's effluents for a source of biofuel to power a power plant. It appears there are potential solutions out there, but the management of the PUD was looking toward the more mainstream methods and overlooking the more creative ones. One quick point- the fact that the PUD didn't even consider a conservation power plant just blows me away. Hello? If the District put some funding into conservation, it could help diminish future demands. Its kind of like designing a home for an off-grid power supply. You don't just go in and build the home with a sub-zero refer and all the latest gadgets..... and then go out and buy the power generation equipment- that is way too expensive. The prudent person makes conscious choices- trying to find the most efficient appliances - trying to get the load down to the bare minimum and then goes out and buys the solar panels or wind or hydro. It is just too expensive to do it any other way. Rick Solinsky "

Timothy Condon (not verified)
"Great work, Mayumi. I think your article does a great job summarizing events thus far. I would like to add just one thing: Worth noting, just over two weeks ago, on the 22nd of November, the Utah Supreme Court ruled that conservation organizations, namely The Grand Canyon Trust and the Sierra Club, in fact DO have the legal standing to challenge regulatory permits for coal-fueled power plants. Originally, the Utah Air Quality Board denied the Sierra Club's petition to challenge the permit that the Air Quality Board granted Intermountain Power to construct the IPP3 plant. Now, however, the permit IS being challenged and a legal battle WILL ensue. If the TDPUD signs the contract with Intermountain, ratepayers WILL become financially responsible for this legal battle, a battle that could prohibit the construction of IPP3. We must consider this. Do your part and share this information with the board. Below you will find an abstract of the Supreme Court case as well as a link to the entire document. 11/22/2006 UTAH CHAPTER OF SIERRA CLUB AND GRAND CANYON TRUST v. UTAH AIR QUALITY BOARD AND INTERMOUNTAIN POWER SERVICES CORP. Sierra Club Has Standing to intervene where the Utah Air Quality Board granted Intermountain a Permit to Construct and Operate a Power Plant. Supreme Court of Utah The Utah Air Quality Board (Board) granted Intermountain Power Services Corp (Intermountain) a permit to construct and operate a power plant in Millard County. Sierra Club filed a petition before the Board, objecting to the permit and seeking to intervene. The Board denied the petition, stating that Sierra Club had no standing. The Supreme Court held that Sierra Club has standing, both under the traditional and alternative tests; therefore, the Board erred in denying standing, and its decision substantially prejudiced Sierra Club by denying it the opportunity to challenge the Executive Secretary’s Order or to defend its interests. Submitted by: Mills Gallivan of Gallivan, White & Boyd, P.A. - Posted: 11/22/2006 http://www.utcourts.gov/opinions/supopin/SierraClub1112106.pdf"

Bob Heath (not verified)
" The average Truckee resident doesn't seem to understand the problem. They focus on green house issues and it is a concern to me also but what are the alternatives? Right now the power that does not create green house gases are solar, wind, hydro and nuclear. I would bet that the same people that are against coal power would also be up in arms to see our community with wind mill and solar panels cluttering up our landscape. The best Hydro locations are already gone and according to some of the latest news they are going to be a big disaster. That leaves nuclear which I support. This country has more BTU,s in coal that Saudi Arabia has in oil. We should sign the deal and pursue ways to cut down on pollution. Bob Heath 530 582-8821 "

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October 11, 2018