Dr. Podlasek, probably the most visible skeptic of the clean energy plan, after some of the aldermen, has a letter in today's Journal-Register raising a few questions about CWLP's contract with FPL for wind power. (See my exhausting previous posts on the contract: 1, 2, 3, 4, 5.)
Dr. Podlasek says that there are still some issues in the contract that need more explanation. Well, here goes. (I've included a copy of Dr. Podlasek's letter as it ran in the SJR after the fold, so you can judge for yourself whether I'm answering his concerns.)
First, Dr. Podlasek says that it's worrying that there's an undisclosed connection between CWLP's consultants in selecting the wind power provider (The Energy Authority) and the provider (Florida Light and Power, or FPL) they chose. I'm not entirely sure what he's referring to, but I assume it's summed up in this picture: The Energy Authority market footprint. I'm not entirely clear what "market footprint" means--CWLP described TEA as a consultant constituted by municipal utilities pooling their money, so it could mean "pool of potential clients." Regardless, FPL--being part of a municipal utility--is on the map (although they don't get on the super special "who we serve" page). TEA's role in this was to develop and run the combined climate/energy price models that determine how much electricity each proposal could generate and what price that electricity could be sold at, based on location, time of day, and date, and based on CWLP's specifications.
Is this a relationship that ought to have been disclosed? I can't say. However, to give you a little bit of context, at a Citizen's Club panel in January, Dr. Podlasek warned all assembled that we'd soon be sending all of our money to Citigroup Goldman Sachs*, an investment house that's betting big on wind power. It's not hard to imagine that that's the complaint we'd be hearing about, if CWLP had gone with an investor-owned wind power provider, rather than one linked to a municipal utility. Dr. Podlasek doesn't suggest how TEA might be acting improperly, nor what the relationship is between TEA and FPL might be. If it is simply that FPL is part of a municipal utility, and therefore within TEA's customer base, I'm not sure that's something to be overly concerned about.
Second, Dr. Podlasek suggests that CWLP is playing word games with "no rate increase" and the fuel adjustment charge. To anyone who sat through aldermen Kunz and Edwards grilling Jay Bartlett over the energy inflation rate and what conditions would cause Springfield rates to go up and what would cause them to go down, it would be clear that CWLP is not dodging around a distinction between rates and the fuel adjustment charge. The idea that the contract will be revenue neutral is CWLP's estimate, and they made clear that it could be revenue positive, but that if certain conditions occur, it could also increase rates.
Third -- "the agreement should link the purchased electricity from Florida Power and Light to the spot market of electricity where CWLP will be selling this electricity" -- well, I'm not entirely sure what Dr. Podlasek means. TEA's projections for the spot price did include the location of the wind turbines, so ... as far I understand Dr. Podlasek's concerns, I think that addresses them. I'm happy to hear if I'm misunderstanding, though.
Fourth, Dr. Podlasek asks whether this 20 MW contract locks us in to buying from FPL, regardless of the price. In fact, this has the contract exactly backwards: rather than locking in the next contract, this contract is void unless the next contract passes as well. Moreover, his concern about the rate in the next contract was addressed by CWLP in response to aldermanic questioning: the rates for the next contract are the same as for this contract. If they go up, city council can reject the 100-MW contract, and do away with the 20-MW one at the same time.
I agree with Dr. Podlasek that CWLP's low rates and foresight are a boon to Springfield's economy, and I'd go further and say that CWLP will be even more important to Springfield's future than it has been to its past. We diverge because I think that this clean energy plan is a smart investment in preparing for a post-carbon world.
* LATER: Just realized I got the wrong investment house Dr. Podlasek was concerned about. Struck out the wrong one (Citigroup) and put in the right one (Goldman Sachs). My apologies.
Here is Dr. Podlasek's letter:
This letter is in response to the Wind Power Purchase Agreement between CWLP and Florida Power and Light (FPL). As the state legislature has learned the hard way, when dealing with electrical utility agreements, the devil is in the details. There are several issues related to this agreement that need further explanation.First, surprisingly, the 20 MW to be purchased from FPL is a small fraction of the 120 MW agreed to be purchased. In September 2006, CWLP received 16 proposals. The consulting firm retained by CWLP to evaluate the wind power purchase proposals has links to Florida Power
and Light, which is the company that the consultants selected to receive the contract. This nondisclosure raises a red flag of a potential conflict of interest.Second, CWLP has stated that this purchased power agreement will not result in a rate increase approved by the city council. However, it could result in an increase in the fuel adjustment clause. It is all semantics.
Third, to be revenue neutral as CWLP has promised, the agreement should link the purchased electricity from Florida Power and Light to the spot market of electricity where CWLP will be selling this electricity. It appears such a provision is not in the agreement.
Fourth, and perhaps most importantly, does the 20 MW agreement contain terms and conditions that would require CWLP to purchase the final 100MW from Florida Power and Light, irrespective of the price?
To protect the citizens of Springfield, the entire 120 MW purchase from Florida Power and Light should be considered as a package with all costs and risks identified.
Springfield is struggling to diversify its economy and to promote economic growth. One key advantage of Springfield has been relatively low electric rates at a time when other utility rates are escalating.
This advantage must be encouraged to have hope of future economic development.
Bob Podlasek, Springfield