THE ELECTRICITY PURCHASING POOL
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THE ELECTRICITY PURCHASING POOL |
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In December 1995, after over two years of debate and public hearings, the California Public Utilities Commission (CPUC) announced a new structure for the electric utility industry. Under the proposed structure, local governments may be able to purchase electricity from a third party supplier as soon as January 1, 1998.
For many local governments, it may not be feasible or cost-effective to purchase electricity from a third party supplier individually for two reasons. First, regulations may not allow smaller local governments to enter the market individually until the year 2003, denying access to potential cost savings for five years. Second, smaller local governments may not use enough electricity to achieve a level of savings that would offset the cost of selecting and contracting with a third party supplier. Third, all sizes of local governments may not have an individual electric load profile (time of use pattern) that is capable of leveraging the best prices from third party suppliers.
However by joining a pool or aggregation, a local government may be able to: 1) gain access to the market prior than it would under the regulations, and 2) combine its electric requirements with others to create a load profile that is both large and attractive to the lowest cost power suppliers.
In July 1995, ABAG announced its intention to create a Power Purchasing Pool
for local governments interested in aggregating their load with other local
governments. In early 1996, ABAG successfully created a natural gas purchasing
pool. In August 1995, ABAG solicited local government and special district
interest in a pooled request for proposal (RFP) for electricity and ancillary
services. Approximately 100 local governments and special districts requested
that their electric load be included in the RFP. ABAG released the RFP in late
1996.
MEMO TO INTERESTED JURISDICTIONS
TO: Interested Jurisdictions and Special Districts
FROM: Eugene Y. Leong, ABAG Executive Director
SUBJECT: ABAG's Power Purchasing Pool: Regional RFP for Electric Supply
I am writing to update you on ABAG's Power Purchasing Pool and to invite your jurisdiction to participate in the next phase of the Pool's development, the purchase of electric supply and related services through a Request for Proposals (RFP) process.
Background
In August 1995, ABAG announced it would form a Power Purchasing Pool to leverage lower prices for local governments on natural gas (already deregulated) and electricity (when deregulated). In January 1996, ABAG presented the results of a natural gas procurement process and offered ABAG members and cooperating members a one-year contract priced 5.5 percent below PG&E's cost. Twenty-nine jurisdictions joined the Pool at that time and have been receiving natural gas under the Pool's program since April 1996.
Status of the Proposed Restructuring of the Electric Utility Industry
In December 1995, the California Public Utilities Commission (CPUC) announced its intention to restructure the electric utility industry by January 1998. Under the CPUC's plan, it appears likely that local governments will be able to contract for their own power supply and that voluntary aggregations, like ABAG's Power Purchasing Pool, will be allowed. More definitive information, including eligibility requirements and any limits on pool size and composition, is scheduled to be announced in September.
ABAG would like to begin the procurement process for the Power Purchasing Pool shortly after the eligibility requirements are announced for two reasons: 1) ABAG's experience forming the natural gas aggregation showed that negotiating legal and financial arrangements to support a pooled purchase require a long lead time, and 2) other entities, private and public, are acting to secure lower cost power and early action may be necessary to secure the most advantageous prices.
ABAG's RFP for Electric Supply and Related Services
ABAG will issue an RFP for electric supply and related services in mid-October 1996. The RFP will solicit competitive pricing for:
In order to appropriately size the potential electric supply needed, ABAG is asking interested jurisdictions to complete the Statement of Interest and PG&E Data Request Letter. ABAG will forward the Data Request Letter to PG&E with the Request Letters it receives from other jurisdicitons. Data will be used exclusively to build an electric load profile for the RFP.
Any local government or special district in the PG&E service territory is eligible to participate. The RFP will be distributed to electric suppliers and posted publicly in mid-October 1996. Suppliers will have approximately three weeks to respond to the RFP. A short list of electric suppliers will be selected in November with final recommendations likely in December. ABAG anticipates negotiation of contract documents will start in January 1997 and all financial and legal arrangements between the supplier, ABAG, and those jurisdictions choosing to participate in the ABAG Pool will be completed in 1997 so the electric purchasing may start January 1, 1998.
Participation is voluntary and does not commit the participants to any future purchase of electric supply from ABAG or any electric supplier chosen as a result of the RFP process. This is an excellent opportunity for local governments to obtain pricing information.
On behalf of the current members of the ABAG Purchasing Pool, I encourage you to consider joining us in this search for lower cost power. If you have questions regarding ABAG's Request for Proposals, please do not hesitate to contact me at (510) 464-7910. Or you can reach me by e-mail at EugeneL@abag.ca.gov.
Electric Pool Participants
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Copyright © 1996-1998 ABAG. All rights
reserved.
dmm 03/03/99