With a shared goal of fuel and geographic diversity among its dozen muni utility members, the Southern California Public Power Authority (SCPPA) plans to continue its thrust from last year, looking at locking in more natural gas supplies, renewable energy projects and new transmission lines in the southern half of California in 2007. In an interview with Power Market Today Tuesday, SCPPA Executive Director Bill Carnahan outlined a full plate for the joint powers authority that sports a solid "A"-level credit rating.
SCPPA is working through initiatives kicked off last year and reviewing with its members, which include the nation's largest muni, Los Angeles Department of Water and Power (LADWP), various options and opportunities for this year, said Carnahan. These include how much interest there is for a "second phase" of the funding authority's aggressive natural gas purchases in the past two years.
For the six public-sector power entities involved last year (cities of Anaheim, Burbank, Colton, Glendale and Pasadena and Turlock Irrigation District), about 5% to 10% of their respective natural gas requirements were satisfied with the purchase of a portion of the reserves in the Barnett Shale field in Texas. "That completed Phase One of our gas acquisition," Carnahan said. "We set a target for what we were going to go out and look for with the original group of participants" (including LADWP).
"Very shortly, we'll be assessing interest by other participants to see if we want a phase two, with some of the existing participants and new participants. We don't know yet what is going to happen."
Carnahan stressed that the public sector utilities have set goals to diversify their natural gas portfolios in terms of supply areas and types of deals (reserves, pre-paid and short-term) as they attempt to diversify their power plant fuel sources, meet renewable portfolio standards set by the state and increase energy efficiency programs. They see synergy in having more of the gas and electric sources spread around, he said.
Besides the reserves acquired over the past two years in Wyoming and Texas, in recent months SCPPA has been working through the final details of locking in supplies with prices that vary over time at "some level below the market," Carnahan said (see Daily GPI, Nov. 15, 2006). "These are so-called 'index-minus' supplies, keying the index as closely as possible to a California price at a widely known trading point tied to a widely known market index so the utilities can be assured that all the gas covered over 20 or 25 years is at some discount to the market."
So far, SCPPA and its involved members are still working out "all the fine details," talking to Goldman Sachs and others. Carnahan said he hopes that SCPPA is now in the "final stages of negotiations" on this deal and it can be wrapped up in the next 30 to 60 days. "We're talking about delivery points, imbalance accounts, changing delivery points over time, and other fine details on how you make the deal as operationally advantageous as possible."
The gas supplies could come from any basin linked to Southern California, but the different receipt points for each utility involved are a major consideration, he said. "Most of what we're talking about are so-called 'minor details,' but one of those details could eventually blow up the whole deal, so until we sign on the dotted line, it is still to be negotiated," Carnahan said.
On the power side, the increasing push in California for renewables, energy efficiency and the greenhouse gas emissions reductions all affect SCPPA members now, and Carnahan said the financing arm is active on several fronts, although not all of them involve funding the programs. On renewables alone in the past two years, SCPPA has issued three requests from proposals -- two of which are still being worked on.
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