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Good news on 2014 Wolfeboro electric rates

by Thomas Beeler
Editor of The Granite State News
May 24, 2012
WOLFEBORO — Selectmen got good news on future electric rates at their May 16 meeting.

Mayhew Seavey of PLM Electric Power Engineering, consultant to Wolfeboro's Municipal Electric Department, made a presentation on the recently-completed bidding process for the supply of electric power for the period 2014-16.

Seavey noted that "Forward Energy Prices" (the price for electricity to be supplied in the future) have been declining steadily since June 2011. The town is currently locked into a contract with Constellation Energy at the rate of $78 per megawatt hour (MWh) through Dec. 31, 2013. At one point in the energy price drop he said consideration was given to negotiating a "blend and extend" contract where lower current rates would be averaged with the fixed $78/MWh rate and the contract extended. However, rates continued to fall and attention was shifted to getting the best price on a new contract that would take effect on Jan. 1, 2014.

A request for proposals was sent out on March 12 to eight energy suppliers requesting what are known as "indicative prices" or preliminary bids on four supply formats: fixed blocks of energy with fuel-indexed pricing; fixed blocked of energy with fixed pricing; load-following energy with fuel-indexed pricing; and load-following energy with fixed pricing. "Fixed blocks of energy" are defined amounts of energy that a supplier will guarantee to supply; "load-following energy" is a commitment to supply power based on variable demand. Seavey explained that load-following energy is more expensive but better where you have peak loads that under a fixed block model would have to be purchased at prevailing market rates.

Seven suppliers provided indicative prices by March 23, and of those seven, four were short-listed for final contract negotiations. The four were: Constellation Energy (the current supplier), EDF Energy, NextEra Energy Resources (the Seabrook Nuclear Plant) and Dominion Resources. Also the four choices were reduced to one – load-following energy with fixed pricing – because the premium for load-following was very small. Because the bid energy prices were already low, there was no need to require indexing.

Seavey reported that the forward price of energy hit an all-time low just a week before the contract was signed.

Dominion dropped out of the negotiations over a potential tax issue. Prices from the other three bidders were close, but current supplier Constellation was the lowest at $46.30/MWh as a flat rate for three years and Constellation won the bid.

The law firm of Rubin and Rudman assisted in the negotiations and drawing up the contract.

On Jan. 1, 2014 the cost of electric power purchased by Wolfeboro Municipal Electric will drop by more than three cents per kilowatt hour or $2 million a year. Assumingno major increase in distribution costs, all of those savings will be passed along to Wolfeboro Electric customers.

Martin Lord & Osman
Salmon Press
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