The Turlock Irrigation District will continue to supply the full electric energy requirements of the Merced Irrigation District for the next three years, as the districts agreed to extend an existing contract set to expire this June.
Although TID representatives attempted to secure a long term agreement for 20 years, MeID staff opted for a three year contract until 2017 due to their own future expenditures.
“We tried discussing a longer, 20 year contract, but during that time they’ll have large expenditures and couldn’t make that kind of commitment,” said Director of Energy Markets Jim Farrar. “We went through a lot of different options, and agreed on April 2017. There are some advantages…it is better than us selling the energy to other customers elsewhere.”
For many years, both districts have benefited from their number of agreements through which TID provides services to MeID in support of MeID’s electric system, including an interconnection agreement in 1996, and an electric utilities support services agreement since 1999. MeID has been purchasing power for resale to its retail electric customers from TID for several years, while also receiving an amount of energy from the Western Power Administration.
The Power Sales Agreement was last renewed in 2011, when the districts agreed to have it extended for three years until 2014. With the current contract ending on June 30, MeID requested another three year extension, noting that the three-years-at-a-time extensions are part of their long term strategy.
“They are going to have to make significant transmission expenditures, and have not been able to fully explore their options yet,” said Farrar. “So they weren’t ready to sign a 20 year contract yet. At first they were interested in a one year extension, but we weren’t going to do that so we settled on 2017. There were also some differences on opinion on how we price different things, but those were settled in negotiations.”
TID Director Michael Frantz asked Farrar why MeID would opt for several short term agreements, when securing a long term agreement would seem more favorable as a 20 year contract would allow TID to provide MeID lower rates.
“It’s more of a strategic plan for them,” said Farrar in response to Frantz. “It’s good for us, quite frankly, with respect to this part of our business…There are engineering studies that they have not fully explored or evaluated, so they don’t have all the information available to make the best decision for their district. It’s a tough strategic decision.”
According to TID, extending the existing agreement will result in revenues that offset the variable costs of supplying the energy while contributing to the fixed costs associated with maintaining and operating the TID electric system. Staff also reported that the agreement will mitigate a substantial amount of risk to TID, while providing a significant benefit to TID ratepayers.