To embrace change or fight it? The choice to either act or wait and see is fraught with complexity.
Electric Executives' Forum - Summer 2001: Are You Ready?
Have your negotiations with PacifiCorp led to a new contract?
No, not with PacifiCorp. Our negotiations with PacifiCorp were not fruitful ... . Going from a full requirements customer, we have been creating more of a diverse portfolio of supply in different purchase power agreements with other providers.
What sorts of contracts are you entering into with these new suppliers?
Some of them are short-term, two-month types of contracts. Others [include], for example, a 10-year contract, which does not begin until September of this year. So it's a range of both short- and long-term contracts that we continue to try to build our portfolio.
But during this time of high prices, is it wise to enter into long-term contracts?
[The idea is] to keep a mix so that not all requirements are due at one time when the market might be at a very, very high peak, [such as what] we have just gone through experiencing with the termination of that PacifiCorp contract. [The idea is to put] some flexibility into the portfolio that provides termination of some contracts and the ongoing building of that, so you can try and take advantage of the market when it is at its best. There are diverse arguments as well with respect to long-term and short-term contracts. Some folks are encouraging long-term contracts when you can get that very good price, with the uncertainty of the market and the supply-demand imbalance at this time.
So it is not an easy task to just go out there and say, 'Okay, we would like to have a 10-, 15-, 20-year contract,' because you'd have to try to determine what that future may hold for you as well, let alone what might be happening just at six months or 12 months. When we are out there trying to acquire a purchase power agreement, two things are very important. One is reliability, and then, of course, the cost. And you try to make sure you achieve both of those criteria as you go forward with any type of negotiations.
Have you locked in contracts to meet your load requirement for this summer?
At what point are you in securing contracts for beyond this summer?
We do have about five contracts in place in short- and long-term. We are in the process of evaluating responses to a request for proposal that was issued earlier this year. ...
Who have you secured contracts with?
We have a contract with Public Service Co. of Colorado, and we also have some contracts with [various] Black Hills Corp. entities. ...
What would an extended heat wave this summer do to your system?
Again, [depending on] whatever that extended heat wave might be and what the surrounding impacts might be, we have forecasted we should be able to meet the load.
Have you implemented any demand-side programs?
Yes, we have. Of course, we are a combined gas and electric utility here, and through the winter months we of course encouraged conservation efforts, since natural gas prices have been high ... . In the open