Cover Memo
City of Independence
AGENDA ITEM COVER SHEET
BILL NO. 15-033

1st R.



Agenda Title:

15-033 - 1R. An ordinance authorizing the City Manager to execute on behalf of the City of Independence, the Renewable Energy Power Purchase Agreement with Marshall Wind Energy, LLC, providing for the purchase of 20 megawatts of energy from the Marshall Wind Farm Project; payable only from the revenues of the Power and Light Operations and not from any tax revenues or general revenues.

Recommendations:

Staff recommends approval of this ordinance.

Background:

Missouri’s Renewable Portfolio Standard (RPS) requires Investor Owned Utilities to obtain a percentage of their annual energy needs from renewable energy. The City has a goal to meet or exceed Missouri’s RPS, which grows to a 10% requirement in 2018. The City currently gets 5% of its annual energy needs from renewable resources. To meet the 10% target for 2018, the City will need additional sources of renewable energy. To keep costs low, it is important to take advantage of the Production Tax Credit (PTC), which provides roughly $23 per megawatt-hour for generation from qualifying renewable energy projects. This PTC is set to expire in 2016.

To ensure the availability of the PTC, a Request for Proposal (RFP) was issued on October 9, 2014 seeking up to 20 megawatts of renewable energy from wind. The RFP was posted on Public Purchase, the City’s internet-based, e-procurement system. Of the thirty three potential providers that were notified by Public Purchase, proposals were received from Merrigan Energy Group; NEER Affiliate Wind Energy, LLC; and Marshall Wind Energy LLC (“Marshall”).

Marshall was determined to be the best overall value for the City, based on the evaluation criteria established in the RFP. See the attached evaluation report for additional information.

Marshall Wind Project:

The Marshall project is a 72 MW renewable wind energy facility to be located in Marshall County, Kansas. The project will consist of 36 large wind turbines. The energy produced from a 20 MW share of the project is projected to provide 89,000 MWh’s of energy each year or roughly 8% of Power & Light’s total annual energy needs. When combined with our existing Smoky Hills II wind purchase, roughly 13% of Power & Light’s annual energy needs will come from renewable wind energy. This is well above Missouri’s current 5% Renewable Portfolio Standard (RPS) for Investor Owned Utilities and exceeds the 2018 RPS requirement of 10%.

The other utilities purchasing energy from this project are the Kansas Power Pool for a 25 megawatt share and the Missouri Joint Electric Municipal Utility Commission for a 20 megawatt share.

Renewable Energy Purchase Agreement—Major Provisions:

The major terms of the agreement are as follows:

Term: 20 years from the Commercial Operation Date with a 5-year optional mutually agreeable extension.

Price: the price of energy is fixed for 20 years at $33.80 per MWh.

Commercial Options Date: Guaranteed by July 2016.

Location: Marshall County, Kansas.

Curtailment Risk: The financial risk of any and all curtailments of the energy production from the wind farm called by third parties (i.e., Southwest Power Pool, local utility, etc.) will be the responsibility of Marshall. In other words, the City is not responsible for payment of curtailed energy.

Negative Market Pricing: During periods of congestion on the transmission system, the Southwest Power Pool may send out negative locational market prices to encourage generators to either curtail or reduce the amount of energy being produced. Under the terms of the Agreement, the City is not financially responsible for negative market prices.

Renewable Attributes: Renewable attributes include green credits, carbon offsets, emissions credits, and any other environmentally related attributes that are, or in the future may be, recognized by any governmental authority, which are attributable to the production, purchase or sale of renewable energy. The City has ownership of these renewable attributes associated the energy purchased under the terms of the Marshall agreement.

Summary:

The 20 megawatt purchase from the Marshall Wind Farm Project will increase IPL’s renewable energy level from the current 5% to 13% of the City’s annual energy requirements and is estimated to provide a net present value of $2.8 million over the 20 year term of the Agreement.

The Public Utility Advisory Board passed a recommendation to the City Council to execute the Renewable Energy Purchase Agreement with Marshall at its March 19, 2015 meeting.

The Law Department with the assistance of outside legal counsel participated in the negotiations of the agreement.



Fiscal Impact:

Funds are available in the IPL Operating Budget Acct. No. 6145.5308 for this project.




Department: Power & Light Contact Person: E. Leon Daggett


Approvals:
   This item has been digitally signed by ...
      1.   Finance Department
      2.   Law Department
      3.   City Managers Office
      4.   City Clerk Department


Council Action: Council Action: Accepted

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Attachments / click to download
Ordinance
Economic Evaluation
Evaluation Report
Marshall Wind Power Energy Purchase Agreement