WAPA rethinks power sales for an uncertain era

With the frequency of extreme weather events rising each year, like many Americans and American companies, WAPA has faced growing energy costs. 

You might assume a federal organization like WAPA has all the energy it needs. After all, WAPA markets renewable power from 57 hydroelectric dams across its 15-state footprint. However, at times, WAPA needs to purchase power to meet its contractual agreements with customers, and increasingly, this happens when energy prices are at their highest – during major cold snaps and heat waves. 

Yet, as it has from its inception, WAPA continues to adapt to the rapid changes in the energy industry. 

“One of the ways WAPA is evolving its business practices to tackle the problem of rising purchase power costs is through innovative approaches to its contracts with customers,” said Senior Vice President and Desert Southwest Regional Manager Jack Murray. 

WAPA’s Desert Southwest region supplies a case in point. 

Contracts designed for the future

When DSW began its effort to renew its 20-year Parker-Davis Project contracts with customers, its Power Marketing team recognized that new approaches could help reign in WAPA’s purchase power and wheeling, or PPW, costs. 

“We realized that by tying customer allocations for hydropower to the Bureau of Reclamation’s 24-month water availability forecast, the region could reduce the need for PPW in times of drought and extreme weather,” said DSW Power Marketing Manager John Paulsen. 

“Going forward, we are proposing that Parker-Davis Project customers’ hydropower allocations will be based and adjusted primarily on generation projections,” Paulsen added. 

P-DP Firm Electric Service contracts will expire Sept. 30, 2028, necessitating the remarketing effort, which the region calls the Post-2028 Marketing Initiative. 

Power marketing initiatives, or PMIs, typically begin with an informal process including meetings to brief existing and potential new customers on the overall effort and how they can provide input and stay involved. DSW began informal conversations with customers in 2020, and held two informal, current-customer meetings and a meeting with potential new customers in winter 2023. 

Following informal engagement, WAPA then issues its marketing proposals in the Federal Register, providing details on the public process and proposing changes. 

Go with the flow

On May 20, 2024, DSW issued its Notice of Proposal in the Federal Register. The proposed 2028 P-DP power marketing plan includes innovations to reduce future PPW costs. Most significantly, it proposes a new methodology to align more closely with changing hydrology in the West. 

Customer allocations would be adjusted quarterly based on the Bureau of Reclamation’s hydropower projections in the most recent 24-Month Study. 

“This approach allows for allocations to line up more closely with actual generation, reducing the frequency and scale of power purchases from the market,” explained DSW Power Marketing Advisor Jennifer Henn. “Available generation, minus priority use power, would be allocated to customers based on a pro-rata share of their seasonal capacity allocations.” 

To facilitate this adaptation, WAPA plans to develop a tool that uses the 24-Month Study, generator status, water and elevation, reduced water releases, hourly pricing and projected hourly load, and other relevant information to produce optimized energy requirements for each contractor. 

Due to changes in load demand, WAPA is also proposing to change its current requirement that customers schedule a minimum of 25% of their capacity and energy deliveries in off-peak hours. The new minimum requirement would align the most recent 24-Month Study results with how energy is scheduled within the Western Interconnection. 

“This approach intends for contractors to receive the maximum benefit of their resource allocation while meeting Reclamation’s water requirements, reducing PPW costs and minimizing energy sales in low-load hours,” Henn said. 

Additionally, under the proposal, when customers foresee a need for additional power supplies beyond what’s included in their firm electric service contract, they can buy “optional energy” on a separate, advance-funded, pass-through cost basis. 

The proposed 2028 P-DP power marketing plan also includes the following potential tweaks to the status quo: 

• slight reductions to existing allocations to create a “resource pool” for new customers; 
• allocations of less than one megawatt; 
• updated practices around excess energy and transmission system use; 
• and proposed eligibility criteria for new customers.