A lot goes in to delivering reliable, affordable power to members, and the cost of power tops that list. I want to share with you a little bit about the process of purchasing energy in this month’s column to give you a better understanding of how we have managed to keep energy prices stable for so long.
As it is with most cooperatives, more than 40 percent of VEA’s annual expense involves power supply. Running short is not an acceptable option, but neither is buying too much. Reliability requires adequate supply, and affordability demands that we only purchase what we need.
Energy demands fluctuate by season. The demand is highest during the hottest months of the summer and the coldest months of the winter. Regardless of the season, however, there is a minimum amount of power we need to meet consumer demand. That is known as our “base load,” and it represents about three-fourths of our requirements. Long-term agreements at low prices cover the base with about 20% of that coming from the Colorado River Project. (We would take more if they could sell it to us.)
“Peak loads” represent the power needed during times of extreme temperature. Those demands are not as predictable. As such, that power is purchased on a shorter-term basis at prices higher than our base load. Every day, we buy or sell to cover the difference between our estimates and the realities of the day.
Negotiating Valley Electric’s power supply agreements is one of the more complicated tasks we undertake. All the power we distribute to member-consumers is purchased, so we must make certain we are getting the amount we need – but no more. Renewable energy sources are important too. We can’t fill our portfolio only with cheap “brown” power; members want “green” energy as well. Every year, it becomes more important to ratchet up the percentage of renewables contained within our portfolio.
Approximately 7% of our power needs are generated by the Community Solar Project in North Pahrump. Renewable energy is generally more expensive, so we balance our desire to be responsible corporate citizens with the need to keep prices low and stable. We want to avoid exposing the members to the day-to-day market fluctuations, which is why we are always in the market managing our power portfolio. That is how members end up with a cost of 10.9 cents per kilowatt hour over a nine-year period.
Effectively managing the complexities of power purchases helps keep our rates low and our service reliable.
Until next month,
Chief Executive Officer
Angela Evans served at the executive level at utilities in New Mexico, Texas, California for more than 20 years before joining Valley Electric Association in 2017.