Approval Sheet

CITY OF GILLETTE
P.O. Box 3003
201 E. 5th Street
Phone (307)686-5200
CITY OF GILLETTE


www.gillettewy.gov

 
DATE: 5/6/2013 7:00:00 PM
SUBJECT:
Council Consideration of the CT II Purchase and Sale Agreement Between Black Hills Wyoming, LLC, and Consolidated Wyoming Municipalities Electric Power System Joint Powers Board.
BACKGROUND:
At the regular City Council meeting on September 4, 2012, the Council approved a Letter of Intent (LOI) with Black Hills Corp for the Sale of  the CT II Peaking Facility and Provision of Energy Supply and Services. The CT II and associated infrastructure and contracts will cost $22 million. Gillette paid a deposit of $50,000 with the Letter of Intent and will pay an additional $ 950,000 dollars with the approval of the Purchase and Sale agreement (PSA) to yield a total PSA deposit, including the LOI deposit, of  $1 million. The PSA will be approved and signed by the Consolidated Wyoming Municipalities Electric Power System Joint Powers Board (JPB) who will provide the financing for the acquisition. The remainder of the purchase price will be due at closing, after the transaction is approved by the Federal Energy Regulatory Commission and upon the approval of the final contracts. An additional amount for capital additions to the CT II could be due at closing if those expenses occur. It is expected that the final approvals will take place by 2014 and coincide with the end of the MEAN contract and the end of Black Hills obligation to use the CT II for their Cheyenne load. Gillette's funding will be from the sale of revenue bonds by the Consolidated Wyoming Municipalities Electric Power System Joint Powers Board. Gillette will lease the facility from the JPB and pay rental in an amount sufficient to service the debt on the bonds and be directly  responsible for the O&M costs.

The CT II is fueled by natural gas and can produce up to 40MW of electricity and can do that very quickly from a dead start. The CT II would be operated by Black Hills and would be used to generate power when the cost of that power would be less than the price of non-firm power that could be purchased short term under the Economy Energy program. The CT II would be used as a source of supplemental power for the Gillette electrical system, which currently receives 23 MW of baseload power from the Wygen III coal and the remainder from other sources, principally from the Municipal Energy Agency of Nebraska (MEAN). The City has a contract with MEAN for Gillette's supplemental power needs, which can exceed 40 MW. That contract will expire in 2014 and preliminary discussions with MEAN indicate that a new contract will be for a significantly higher rate than the present contract. An analysis of Gillette's options to acquire supplemental power indicate that the purchase of the CT II unit and associated Economy Energy options will likely cost less than the projected new contract with MEAN or any other known option.
ACTUAL COST VS. BUDGET:
SUGGESTED MOTION:
I move for the Approval of the CT-II Purchase and Sale Agreement between Black Hills Wyoming, LLC and Consolidated Wyoming Municipalities Electric Power System Joint Powers Board.
STAFF REFERENCE:
Kendall Glover, Utilities Director
Charlie Anderson, City Attorney
ATTACHMENTS:
Click to download
PSA for the CT-II