During the auction NextEra Energy Power Marketing, LLC, and J.P.Morgan Ventures Energy Corp. committed to pay $43,211,077 and $43,208,325, respectively, for a total of $86,419,402. Each will receive 4.5% of the output of Rocky Reach from 1 November 2011, through 30 June 2012, and 3% of the combined output of Rocky Reach and Rock Island dams from 1 July 2012, to 31 December 2015. Fixed monthly payments will begin as the power is delivered, beginning in November 2011.
This sale is the third of its kind in the past year. The previous two auctions have raised $129M – for output from 1 December 2010, through to 2014.
The PUD expects that having a base level of predictable power sales revenue during the next several years will help avoid large swings in power rates charged to local customers and help stabilize overall revenues. Due to low market power prices and low stream flows, revenues from surplus power sales have not been as high as in previous years, leading to budget deficits the past two years.
To help protect customers from those risks, PUD commissioners last year endorsed a new power sales strategy that allows the PUD to sell slices of renewable hydropower output for up to five years in advance. A slice means that purchasers are not guaranteed a specific number of megawatts, but, in exchange for fixed payments to the PUD, they will receive a percentage of hydropower production under whatever generating conditions exist at the time. This arrangement is designed to provide more predictability in future revenues and decrease the risk from below-average stream flows and low wholesale electricity prices.
