HomeMy WebLinkAbout20100517 - VI-19
MEMO
To: Honorable Mayor and City Council
From: Tom Montgomery
Date: May 11, 2010
Re: Authorize Expenditure for Consulting Services to Negotiate Renewable
Energy Credits Settlement
Council is requested to authorize up to $5,000 in consulting services with Avant
Energy to negotiate a settlement with Xcel over ownership issues of Renewable
Energy Credits generated by the City’s hydroelectric facility.
Background
Renewable Energy Credits (REC) are tradable, non-tangible energy
commodities in the United States that represent proof that 1 megawatt-hour of
electricity was generated from an eligible renewable energy resource. Our hydro
plant generates about 23,000 to 26,000 RECs per year. Ownership of these
RECs are in dispute. RECs had not been created at the time our power purchase
agreement was signed. Although the City’s facility is generating the renewable
energy, Xcel argues that since they have a 50 year power purchase agreement to
purchase all of the power generated by the hydro plant that the RECs belong to
them.
Two years ago, Xcel asked the Minnesota Public Utilities Commission
(MPUC) to rule on ownership of RECs for the 46 renewable energy generators
they purchase power from and whose power purchase agreements are silent on
ownership of RECs. The MPUC has asked Xcel to attempt to arrive at negotiated
settlements with the 46 renewable energy generators and report back to the PUC
by June 2.
Xcel has proposed an agreement with the City to split ownership of the
RECs generated by our hydropower plant 50/50. Research completed by Jim
Strommen (an attorney with Kennedy and Graven whose use was authorized by
the City Council at the April 5 Council) indicates that the City may have a strong
claim for 100% of the REC ownership. One June 2, the PUC will determine what
to do with the power generators who have not settled the REC issue with Xcel
Energy. The PUC will likely direct use of an administrative law judge to make a
determination on ownership.
In an effort to avoid the cost of administrative law judge legal proceedings,
and subsequent PUC hearings, I am recommending hiring Jim Larson of Avant
Energy to serve as the City’s expert and assist with negotiations with Xcel Energy
to reach a more favorable settlement on RECs. Avant Energy was formerly
known as Dahlen-Berg, and is the firm that negotiated the Hydropower Facility’s
original power purchase agreement and helped the City through an overpayment
dispute with Xcel Energy in the mid 1990s.
Council Action Requested
Council is requested to authorize spending up to $5,000 on consulting
services with Avant Energy to negotiate a settlement with Xcel over ownership
issues of Renewable Energy Credits generated by the City’s hydroelectric facility.