LCRA poised to pay $60 million to back out of wind power contract
- Nov 20, 2016 7:36 pm GMT
Any day now, the
The decision to voluntarily pay the penalty reflects the economic realities of power in the age of cheap natural gas: In 2009, when its then-general manager inked the 18-year deal, the nonprofit LCRA locked in a price of
Today wind power sells for less than half of that price, leading the nonprofit utility that sells wholesale power to electric co-ops and cities around
The river authority's priority is to give its customers "the best priced product we can," said LCRA general manager
STATESMAN INVESTIGATION: Bonuses flow at LCRA, especially at the top
But the river authority's business partners, who will ultimately take a big haircut on their power sales, are livid.
"The whole project is predicated on this contract," said
One of E.ON's lenders is now suing the river authority; in filings, the LCRA has claimed government immunity to the suit.
"You can't act like private entity when you want to and a governmental entity when it suits you," says
But the LCRA says the
"A contract is a contract and words have meanings," said Wilson. "These were grown-up, sophisticated parties on both sides of this transaction. There was no ambiguity."
The LCRA appears to have the upper hand. In June a federal-court-appointed arbitrator agreed with the river authority that it could break the contract for
The LCRA had spent roughly
With at least a decade remaining on the contract, the
"The cost of wholesale power generation is a pass-through to our customers," said
"If all other things are equal and their consumption of power is the same, their monthly bill will be lower," he said.
Originally seeking to expand its wind holdings as a hedge against uncertainty in the fossil fuel market -- a new
Eighty-seven turbines were rapidly erected, generating enough electricity to power as many as 70,000 homes -- and by
But the price of wind dropped, following a dive in natural gas prices and the innovation of yet-bigger, more efficient turbines.
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Unlike wind farms in
The blades are still turning at Papalote Creek, but instead of selling the power at
LCRA will replace the power it bought from Papalote by getting more electricity from its coal and natural gas plants -- as well as buying power on the open market.
The climate consequences of getting out of the wind contract don't appear to be part of the conversation at the LCRA.
"We're pro-renewable -- if it fits what we need to do economically," Wilson says.
In 2015, about 48 percent of LCRA's energy output was generated from natural gas, about 47 percent from coal and about 5 percent from renewable sources, including wind and hydroelectric dams -- but the lion's share of that renewable energy was from the Papalote wind farm.
Wilson continued: "We want to deliver reliable power to our customers: As to the source of that, we're agnostic."
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