HomeMy WebLinkAboutLight Comm 10/26/20151
RECEIVED
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Mansfield Municipal Electric Department
Minutes of Executive Session of Light CommissioneWWRink A 9: 05
October 26, 2015
Meeting called to order at 7:00 PM - i � J S E 1 T $
Present: Chairman Jess Aptowitz; Vice Chairman Olivier Kozlowski; Cleric Frank Delvecchio;
Commissioner George Dentin; Director Gary Babin; Financial Assistant Jacqueline Lee; Town
Manager William Ross; Ronald DeCurzio, Chief Executive Officer and Secretary of MMWEC;
Edward Kaczenski Jr., Director of Engineering and Generation Assets of MMWEC and Matthew
Ide, Director of Treasury and Commodities of MMWEC.
MMWEC Project 2015A Peabody Peaking Project - Ronald DeCurzio, Chief Executive
Officer and Secretary of MMWEC, introduced himself and his two co-workers, Edward
Kaczenski Jr., Director of Engineering and Generation Assets and Matthew Ide, Director of
Treasury and Commodities. Chairman Aptowitz introduced everyone representing MMED.
Director Babin stated that at the beginning of October MMWEC proposed a generating project to
its members, the Peabody Peaking Project, which is to be constructed on an existing site owned
by Peabody Municipal Light Plant (PMLP). He and Town Manager Bill Ross have reviewed it
and feel it looks like a good investment for MMED for two reasons. One is the fact that the plant
siting is already accomplished and there is an existing generating facility there owned by PMLP.
The second reason is due to the constraints in the current capacity market and the ever increasing
value of owning generation in that market. This generation ownership would prove to be very
valuable to MMED.
Town Manager Ross stated that he thinks that this proposal needs to be considered seriously as
there are too many capacity constraints right now. He stated that this facility may not produce a
lot of energy (kWh) but it still generates significant capacity revenue whether it generates
electricity or not. It would be advantageous in today's climate for MMED to take part in this.
Mr. DeCurzio gave more detail, explaining there are three ISO market components: energy,
transmission and capacity. In explaining the financial benefits of this project, he stated that
currently Mansfield is 40% exposed in the capacity market, MMWEC has been attempting to
find capacity units to build or buy into and have found that Peabody does have one location in an
industrial area with existing generation In order to participate MMWEC would have to bid the
unit into the ISO forward capacity market and be selected to clear the market. Mr. DeCurzio
explained that the reason this is being done in executive session is because of the confidential
nature of MMWEC's bid price, which if it were to become public knowledge might lead a
competitor to undercut their bid. He said that is something that could occur if a competitor had
this information. Mr. DeCurzio also explained that this plant may run only 2-5% of the time
because it is a peaking unit and would be in the reserve market for when it is needed during peals
periods. He said the unit is paid to sit and be idle until the ISO dispatches the unit during periods
( of high demand. Another benefit to the project is that it allows participating members to reduce
market volatility and gain a competitive rate advantage over the IOU's.
Mr. Ide stated that capacity costs have exploded and could continue to skyrocket in Eastern
Massachusetts due to the closure of the Brayton Point plant and now with the Pilgrim nuclear
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unit being closed down. He explained that the critical component of this project is to protect
Mansfield from these rapidly rising costs. Mr. Ide said that there is a price, which is MMED's
share of the debt and operating costs of the plant, to acquire this financial hedge. He said that
MMED's operating cost for the plant and debt service would be $466,694 annually and the Net
Present Value of the savings in the first year is estimated at $179,000. The project is projected to
produce a positive NPV throughout the life of the unit. Although he said that it would rarely run,
maybe 2% of the time, he believes this is a prudent investment. He reiterated that this is a hedge
against future volatility.
Clerk Delvecchio questioned how much of MMED's capacity exposure this would cover. Mr.
Ide answered that it would reduce MMED's open capacity position from 40% down to 32%.
Mr. Kaczenski explained how transmission constraints also were accounted for in this project.
He said that MMWEC looked at different sites and found that Peabody is the best location
because it is an existing site; is owned by a municipal light department; has natural gas and oil
storage on the site as well as all of the necessary infrastructure; and is not in a residential area but
is located in an old factory neighborhood. He explained that MMWEC's capacity auction bid
has to be competitive to clear the Forward Capacity Market Auction and he believes they have a
good chance of clearing the auction the first time. If they don't clear it the first time they would
have two more chances as the permits are good for three attempts. He also explained that the
studies which will be done as a prerequisite for submitting a bid in the 2020-2021 capacity
auction, which are due early in 2016, are good for seven years.
Commissioner Dentino said that it bothered him that the unit would only run 2% of the time and
he wondered what happens if the 2% goes down. Mr. DeCurzio answered that the plant is not
built for producing energy but that its value is in the capacity of the unit, which would be held in
reserve by the ISO to dispatch during periods of high demand.
Director Babin told the Board that they needed to make a decision as to whether to participate in
the project or not by November 19, 2015, Chairman Aptowitz questioned whether the Board
was comfortable taking a vote since Commissioner Annino was not present. Commissioner
Dentino felt it was too quick. to receive the information and be expected to vote. Chairman
Aptowitz agreed and said he wanted the full Board to consider the project. It was decided to
have an executive session prior to the Wednesday, November 4 Selectmen meeting in order to
take the vote. Town Manager Ross suggested that he and Director Babin sit down with
Commissioner Annino beforehand to review the information.
Motion: To approve the executive session minutes of January 21, 2015
(Kozlowsld/Delvecchio) Passes with changes by Chairman Aptowitz but not released 4/0
Motion: To adjourn to regular session at 8:10 PM
(KozlowsId/Delvecchio) Passes 4/0
i Respectfully submitted; Jacqueline Lee
Signature of Clerk Date of Approval
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