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HomeMy WebLinkAbout20110207 - VIII-A-1E To: Mayor Hicks and City Councilmembers From: Tom Montgomery Date: February 2, 2011 Re: Accept Proposal for Renewable Energy Credit Management Services Council Action Requested: Council is requested to accept the enclosed proposal from Avant Energy to manage the certifying and sale of Renewable Energy Credits (REC) from the hydroelectric facility. Background Information: The MN Public Utilities Commission recently ruled that the RECs generated by the City's hydroelectric facility belong to the City and not to Xcel Energy. (All the power generated by the hydro plant is sold to Xcel through a long term power purchase agreement. Xcel had argued that purchasing the power also included the RECs that were created.) Now that the ownership of the RECs has been established, the City needs to certify and sell the RECs that are created from our power generation. Avant Energy's services will include tracking, registering and certifying the City's RECs on a monthly basis, and working with brokers to find potential REC buyers. Avant Energy is a local energy management company that was formerly known as Dahlen, Berg & Company. The City has used Dahlen, Berg & Co. for past disputes with Xcel Energy, and utilized Avant Energy to help us understand and follow the MN PUC decision making process on REC ownership. Avant Energy was recommended to the City by the Suburban Rate Authority attorney Jim Strommen, and the City of Saint Cloud is also considering a REC management services proposal from Avant Energy. Financial Impact: Avant Energy is proposing an annual fee of $1,000 plus a 5% fee on gross revenue from REC sales. Additional 3rd party fees will include REC certification and transaction and broker fees. Anticipated revenue will vary greatly depending on REC commodity prices and hydropower facility generation. A rough guess for 2011 City net revenue from REC sales may be as much as $10,000. Attachments: • Avant Energy REC Management Services Proposal Cft� df Hastlms + 101 FbL rM Street East + Haslings, MN 55033 -1955 9 k:e6i4 #23 + f-65id437-443 + 41ww uhastings mus Proposal for REC Management Services To The City of Hastings Utilities Department 1225 Progress Drive Hastings, MN 55033 January 21, 2011 Avant Energy, Inc. 200 South Sixth Street, Suite 300 Minneapolis, MN 55402 612- 349 -6868 www.avantenergy.com 1 AVANT 00 E N E R G Y January 21, 2011 Table of Contents Table of Contents Section 1. Background Page 1 Section 2. Scope Page 2 Section 3. Qualifications Page 3 Section 4. Staffing Page 4 Section 5. Schedule and Fees Page 5 January 21, 2011 Section 1. Background Background Hastings Provides a Variety of Water Services Hastings Owns the Lock and Dam No. 2 Hydroelectric Generation Facility Hastings has a Purchase Power Agreement with Xcel Energy The City of Hastings Utilities Department provides water, wastewater, and hydroelectric services to 7,300 accounts in Minnesota. The City owns the Lock and Dam No. 2 facility located on the Mississippi River in Hastings. The Lock and Dam includes two turbines and two generators that have a combined nameplate rating of 4.4 MW. Hastings sells energy and capacity to Xcel Energy through a Purchase Power Agreement (PPA). The PPA between Hastings and Xcel Energy does not specify ownership treatment of Renewable Energy Credits (RECs). Hastings Owns the The Minnesota Public Utilities Commission (MN PUC) issued an RECs Generated by order on September 9, 2010 confirming that Hastings owns the the Lock and Dam RECs generated by the Lock and Dam facility. Facility Hastings Wants to Every MWh of energy produced by the Lock and Dam facility also Increase Revenue by produces a REC at no additional cost. These RECs are purchased by Selling RECs entities to meet state mandated renewable energy objectives. Hastings will receive additional revenue by selling RECs. Hastings Seeks Firm Hastings is seeking a firm to serve as its agent and provide REC to Perform REC services for its renewable generation resources. These services will Services begin February 1, 2011. January 21, 2011 Section 2. Scope Scope Proposed Scope of This section describes the scope of work that Avant proposes to Work perform for Hastings. Register Hastings in RECs are tracked in an online portal called the Midwest Renewable Midwest Renewable Energy Tracking System (M- RETS). Energy Tracking System (M -RETS) Avant will set -up Hastings as a Generator Owner in M -RETS by submitting registration paperwork, configuring Hastings' system access, and coordinating with the M -RETS staff. Avant will review and update Hastings' registration documents on an annual basis as required by the M -RETS rules of operation. Avant will have read/write permissions in M -RETS and Hastings will have read -only access to monitor activity in the system. Manage the M -RETS requires generators to record meter data monthly, and Monthly Meter Data Avant will coordinate the process with Hastings. Process Avant will also streamline the meter process by creating efficient procedures that automatically gather and transfer data. Coordinate with a M -RETS requires generator owners to work with a Qualified Qualified Reporting Reporting Entity (QRE). It is the QRE's responsibility to validate Entity (QRE) and submit meter data in M -RETS. QRE's provide a clear separation between reporting and selling RECs. Avant will contract with a third party QRE, and then coordinate the monthly exchange of data between Hastings and the QRE. Utilize Relationship Avant will act as Hastings' agent when working with brokers to with REC Broker to identify potential REC buyers. Avant will manage the broker Identify Potential relationship and all the required paperwork. Avant will work on Buyers Hastings' behalf to maximize each transaction's profit margin. Manage REC Each transaction will require a contract between Hastings and the Contract Execution buyer. The contract will include transaction details and payment terms. Avant will draft the contract, review with both counterparties, and manage the execution. FA January 21, 2011 Section 3. Qualifications Qualifications Uniquely Qualified Avant is uniquely qualified to provide REC services to Hastings. to Provide REC Avant has provided REC services to Minnesota utilities since the Services to Hastings inception of the M -RETS system in 2007. Avant has acted as management agent for the Minnesota Municipal Power Agency (MMPA), and REC procurer for multiple Great River Energy Cooperatives. Experience Utilizing Avant has extensive experience in buying and selling energy related Brokers in Energy commodities. Over the years, Avant has built strong relationships Transactions with multiple brokers. Expertise in Avant has expertise in M -RETS system interface processes such as M -RETS System registering, transferring, and retiring RECs. Avant also creates and Management maintains M -RETS user accounts. Works Closely with Avant works closely with APX, the M -RETS system administrator. APX (M -RETS Avant also regularly attends M -RETS user group meetings to stay Administrator) up -to -date on changing rules and regulations. This allows Avant to keep customers such as Hastings informed of important REC issues. Provides Local Avant personnel are located near Hastings in Minneapolis, and are Knowledge and available to provide local support to Hastings as needed. Support January 21, 2011 Section 4. Staffing Staffing Staff Dedicated to The Avant staff listed below will provide REC Services to Hastings. Hastings Joseph V. Fulliero Joe Fulliero is a principal at Avant Energy and serves as the Vice President of Operations. Mr. Fulliero has over 25 years experience in generation planning, load forecasting, generation dispatch, fuel and trading. He has broad experience in power and gas operations in the NE, NY, PJM, Midwest and SERC regions. Mr. Fulliero has a BS in Engineering, a BA in Liberal Arts and an M.S. in Management. Oncu H. Er Oncu Er is a principal at Avant Energy, Inc. He oversees the long term planning for MMPA's energy supply portfolio and is also the Senior Trader for Avant Energy. Oncu also manages the entire Minnesota Municipal Power Agency REC portfolio. He has over eleven years of experience in natural gas and electricity futures and options trading. Mr. Er received a B.A. in economics magna cum laude from Macalester College. He received an M.B.A. in finance from University of Minnesota's Carlson School of Business. Molly J. Weyandt Molly Weyandt joined Avant Energy in 2007 as a Business Analyst. She is currently the Manager of Power Services. Ms. Weyandt has expertise in back - office operations including MISO settlements, NERC compliance, and energy system administration. Ms. Weyandt received a B.A. in Business Management cum laude from the College of Saint Benedict. Steven D. Lyons Steven Lyons joined Avant Energy in 2010 as an Analyst. Mr. Lyons is responsible for back - office operations, MISO settlements, and M- RETS system administration. Mr. Lyons received a B.S. in Marketing from Saint Cloud State University and an M.B.A from the University South Carolina. rd January 21, 2011 Section 5. Schedule and Fees Schedule and Fees Proposed The following implementation schedule allows for a smooth Implementation transition to Hastings' participation in the REC Market. The listed Schedule tasks represent a two -week transition period once Hastings and Avant have executed an agreement for services. Execute Agreement for Services Week 1 Complete Registration Paperwork Week 1 Configure Software Systems Week 1 Develop Meter Tracking Files Week 2 Execute Broker Contract Week 2 Approve REC Sales Agreement Week 2 Fee Structure and MMPA proposes to enter into an arrangement with Hastings that Invoice Process includes all REC sales generated from the Lock and Dam facility. The agreement would include the following invoice provisions: 3r Part Charges Avant proposes to pass on all 3 rd party charges to Hastings without adding any mark up. These costs will include M -RETS registration fees, transfer fees, and Qualified Reporting Entity fees, as well as other transaction and broker fees, etc. Avant Commission Avant would charge an annual flat fee of $1000. Avant would also charge a variable fee of 5% of the gross revenues on REC sales. Invoice Timeline Avant would send all applicable fees on a monthly basis with a payment term of net 30. Term The proposed term is two years with a 6 month renewal notice.