Home Government City Morgan City signs new 50-year contract with IPA

Morgan City signs new 50-year contract with IPA

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At a Morgan City Council meeting this month, a unanimous decision in the affirmative was reached renewing a core power contract that began in 1977.

Dan Eldredge, representing Intermountain Power Agency (IPA), recently approached the Morgan City Council regarding participation in an Intermountain Power Project (IPP) contract.  This contract is one that Morgan City has entered into in the past. The current contract with the plant carries through until 2027.

Morgan City has a 0.19 percent interest in the current IPP project.  Because of new carbon regulations, this coal-burning plant will make the move to natural gas, a transition which is scheduled to be completed by 2025. This project required that IPA offer a contract renewal to each of the participating entities, a contract that would span a 50-year period, from 2027 to 2077.

The present majority of the power from this plant is sold to California municipalities for their use. Morgan City has a widely varied energy portfolio, so the city has not used their option to buy energy from this plant for quite some time as it has been cheaper to purchase power from the open market.

Eldredge offered that the city has the option to accept the same amount of power, some of the power, or none. If Morgan chooses to withdraw their participation, its shares will be offered to other participants.

The new plant, as presented, will produce around 1,200 megawatts.  But because of how gas power is produced, there will only be about 1,000 megawatts that will be allocated. However, if more California users pull out of the project, only 600 megawatts will be sold.

Concerned about being stuck with rates that are much higher than what we are currently using, Morgan City Mayor Ray Little questioned why so many California-based users would be pulling out of this contract. Eldredge noted that a lot of it has to do with the new laws that have been passed in California requiring cities to have 50 percent of their energy portfolios in renewable energy by 2030.

However, during the latest council meeting, City Attorney Gary Crane noted that those restrictions may ease a little in the coming years on a national level with the change in the White House.

The usage options will change a bit with the new contract, according to Eldredge. If Morgan City decides to sell off the power to other cities, they have to give one year’s notice to recall all or a portion of the power. Once the power is called back, Morgan City will be required to pay for it, even if it isn’t used for a three-year period. After the end of year three, the city can sell off 50 percent of their take and can sell of the remainder in year five if they desire.

The benefit of this is that this supplies Morgan City with a power resource they have that they are not paying for that they can recall, with certain conditions.

Eldredge stated the estimate for construction is $1.1 billion, not including the dismantling of the old plant. He noted that the long-term outlook for natural gas prices looks very stable for the next 20 years.

 

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