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CL-2332 Work Session   Item #: B.       
Meeting Date: 06/16/2020  
Subject:    Modifying the 2016 PSEG Electric Capacity Agreement
From: Jason Grey

COUNCIL ACTION
Work Session Meeting:     06/16/2020
SUMMARY
The City entered into a ten-year agreement with Public Service Enterprise Group (PSEG) in 2016, a regulated utility company from New Jersey, for 15 megawatts of capacity to be scheduled in the Regional Transmission Organization (RTO) zone of PJM interconnection system.  Due to changes in the zone by Pennsylvania Jersey Maryland Interconnection (PJM), and at no fault of PSEG or the City, the RTO zone boundaries changed for upcoming years in locations where PSEG owns generation assets.  PSEG has requested that the City receive capacity from the eastern Pennsylvania/New Jersey region known as the Mid-Atlantic Area Council (MAAC) zone within the PJM footprint.  Currently, the MAAC zone is priced at a higher value than the RTO zone and the proposed changes to the agreement allow for fewer megawatts of capacity to be delivered at the higher value.  In turn, if the MAAC zone is at a lower value than the RTO zone, the City will receive additional megawatts of capacity.  The proposed changes will install a mechanism to allow both parties to secure the financial goals of the original contract.
BACKGROUND
In May 2016, the City entered into a 15 megawatt (MW) capacity hedge with PSEG, a regulated utility company in New Jersey.  The capacity hedge went into effect on June 1, 2019 and will last until May 31, 2029.  The capacity hedge provides a fixed price for the 15 MWs of capacity over the next ten years.  The hedge is approximately six percent of the City's total need.  The capacity is non-generation specific and is to be scheduled within the RTO zone of the PJM interconnection system.
RECOMMENDATION
Staff recommends that City Council approve and authorize the City Manager to Amend the 2016 PSEG agreement with the proposed revisions.
 

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2016 Agreement
Red Lined Agreement


    

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