GVEA’s amended fuel contract benefits members

by | Dec 15, 2015 | Board of Directors, Natural Gas | 0 comments

Last night, Golden Valley Electric’s board of directors unanimously approved amending its current fuel contract with Petro Star Inc. (PSI). Under this amended contract, PSI has agreed to reduce GVEA’s current Naphtha fuel price while they build a facility to produce and supply a new fuel, LSR (a lite-Naphtha-blend). GVEA’s North Pole Power Plant’s LM6000 Unit is capable of burning both these fuels.

GVEA’s board of directors also recognizes the need to support the Interior Energy Project (IEP). As a result, this past October GVEA committed to take 0.6b of LNG for the summer months (May – August), when there is less demand for home heating fuel. This helps stabilize IEP’s project by lowering their operating costs.

Bob Shefchik, manager of the Interior Energy Project, stated “GVEA’s consideration of summer use of the IEP gas supply provides a substantial benefit to the project, while maintaining GVEA’s near-term opportunity to take advantage of alternative low-cost fuels for most of the year.”

Effective January 1, 2016, GVEA will have an estimated immediate savings of approximately $23 million over the first 3 years of the amended fuel contract. This is due to the immediate price reduction on the current Naphtha fuel being supplied by PSI.

Projections show that GVEA members will continue to see further benefits over the first 10 years of this amended contract, once PSI’s new facility is online and supplying GVEA with LSR Turbine Fuel.

Borgeson said, “The amended contract for LSR fuel will allow GVEA to pass on a 20-25% fuel price reduction for the LM6000 at our North Pole Plant to our members. This savings is passed on to our members via the Fuel & Purchase Power section of their bills.”

GVEA’s board realized several other benefits this amended contract offers:

  • Immediate savings to GVEA members while IEP continues to work on bringing LNG to the Interior over the next 2-3 years.
  • The 12-year contract has several “off-ramps” for GVEA to exit and take advantage of LNG when it becomes available, provided it makes economic sense for GVEA to do so.
  • Supports our only local refinery in the Interior and brings construction jobs to the Interior as PSI builds their $20 million facility, which may be completed as soon as December 2016 (but no later than July 1, 2017).Borgeson added that GVEA intends to continue working with the Interior Energy Project as they strive to bring LNG to the Interior over the next few years.

“This is great news for GVEA rate-payers, as we’re always looking to lower Interior energy costs,” Borgeson said. “We’re pleased that our relationship with PSI, as our fuel provider for the last two years, has proven beneficial once again.”

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