Projected regional capacity shortfalls in coming years have Chelan CountyPUD considering more conservative wholesale energy trading policies.
The proposed changes are meant to limit the utility’s exposure to high market prices in a low-water year.
The PUD currently sells into the wholesale market using fixed price contracts and assumes an average water year. However, low river flows could leave the utility short, forcing it to rely on short-term market purchases to cover its load. Given the region’s projected capacity constraints, a low water year likely will drive power market prices up.
“If there is a bad water year, it could be very, very expensive,” Gregg Carrington, Chelan PUD’s managing director of energy resources, told the utility’s commissioners at their March 2 meeting.
To avoid that, Chelan PUD is considering using stress, or low, water conditions to determine how much capacity it can offer for fixed price wholesale contracts outside of the current year. Sales within the current year would be set at the Mid-C index price.
“For fixed price contracts, we will never sell more than we have under stress water conditions,” Carrington told Clearing Up.
The proposed changes would increase revenue volatility for the district, but it would also protect against a “low probability, high consequence event,” he said.
Based on the current policy, if 2021 has stress water conditions, Chelan could be 22 aMW short. If energy prices shot up to $300 per MWh when the PUD is short, the utility could lose nearly $58 million covering its obligations, according to a staff presentation at the March 2 meeting.
“Given what we know and with the region moving into this period of deficit, it seems like it’s the time to get more conservative with respect to marketing,” Carrington said during the meeting.
The proposed changes include similar tweaks to sales that use both fixed and index pricing.
In addition to the pricing changes, the proposed changes would give the district more flexibility in modeling load and resource balance and net wholesale revenue for its financial forecasts.
Chelan PUD commissioners are expected to vote on the proposed changes at their March 16 meeting.