The Board of Water, Electric and Communications Trustees were presented with a summary of findings from Muscatine Power and Water’s (MPW) power supply study at Tuesday night’s meeting. Leidos Engineering, retained by MPW counsel, conducted the study of future power supply scenarios.
“The benefit of completing a power supply study is it helps establish a roadmap to best serve our customers,” explained MPW’s General Manager Gage Huston. “Although we don’t have a crystal ball, performing these studies gives us direction using market trends, data and recommendations from industry experts to make sound decisions so we can continue to provide low-cost, reliable electricity for decades to come.”
The study evaluated 18 scenarios against potential future market conditions in terms of both cost and risk to present alternatives that best meet the reliability, affordability, flexibility, and sustainability needs of MPW’s customers. All scenarios included the Utility’s obligation to secure a minimum of 156 megawatts (MW) of capacity to meet MPW’s requirement to service its customers. That requirement represents the minimum electricity power-generation capability a utility must own or have under contract to meet customers’ power needs, 24 hours a day, 7 days a week. This requirement of all MISO load-serving entities is key to keeping Muscatine and the bulk electric system reliable.
The Board of Trustees was given a presentation of study results and discussion of different options’ benefits and risks. The Board was not asked to approve selection of an option at this meeting, pending further information sharing at MPW’s Customer Forum on March 6.
The least-cost and least-risk scenarios included keeping Unit 9 online. Continuing to operate the coal-burning generation unit provided the lowest net cost on a per-kWh basis (affordability), while maintaining MPW’s award-winning reliability.
Other study highlights included additional opportunities to expand renewable energy sources in MPW’s power portfolio. A minimum of 100 MW of solar – including Muscatine Solar 1, the Utility’s 24 MW solar array that is under development – was a common thread in many of the least-cost scenarios.
The additional megawatts of solar capacity will make the Utility less dependent on carbon- intensive fossil fuels. Currently, 6% of MPW’s native system load comes from wind. The addition of 100 MW of solar would increase MPW’s renewable generation to 28% of native system load.
Construction on Muscatine Solar 1 at MPW’s Grandview Avenue Wellfield, is anticipated to begin in Q4 of 2024, with an operational target of Q4 2025.
Two options were studied to transition Muscatine’s power supply to 100% renewable energy sources. Due to their intermittent nature, wind and solar facilities require vast amounts of energy storage or an additional resource to provide power at all times of day and night. These additional items drove the costs of the 100% renewable options well above that of any other alternative. Interest in achieving a carbon-free supply is something that will continue to be evaluated, but at this time, pursuing this strategy would be the riskiest and costliest option.
The study recommended the further evaluation of a combined heat and power unit (CHP) versus a combined-cycle unit. Both these types of units would be fueled by natural gas. The CHP unit would be best suited to restarting the production of steam to a local industrial customer. The Inflation Reduction Act contains provisions for CHP projects that may make its development more economic. Federal guidance for CHP projects is currently under development. The study evaluated various options for a smaller CHP unit that could serve just a portion of MPW’s demand, but would provide redundancy and resiliency to the system, while also continuing a mutually beneficial partnership with a key customer.
“One of the unique attributes of Muscatine is its large industrial presence. For these industries to maintain production, they must be able to rely on us to provide reliable, consistent power,” said Huston. “Everyone at MPW takes this responsibility seriously because we know the positive economic impact these industries and their employees have on our community.”
Power supply studies are conducted by utilities for both long- and short-term planning to ensure reliable service to customers in the most cost-effective way. The studies consider forecasted electricity demand using supply- and demand-side resources, infrastructure and cost and performance assumptions for the next 20 years.
“Utilities across the nation are wrestling with the same issues we are,” shared Huston. “The power grid is experiencing shortfalls in generation due to unit retirements and the increase of renewables; however, demand is growing. The dilemma is how do utilities, like MPW, secure enough power to meet customer needs while minimizing the exposure to unstable market prices and maintaining reliability. Our team is investigating all viable scenarios to make the best decision for the Muscatine community.”
Although the study is complete, forecast and market assumptions will continue to be vetted for the Muscatine area. MPW invites interested customers to learn more and ask questions by attending a Customer Forum, Monday, March 6 from 4-6pm. Customers may reserve seating by emailing rsvp@mpw.org.
The Trustees were provided an update about the Utility’s employee pension plan. Financial markets were weak in 2022, resulting in a decline in the net position of the MPW pension fund. The results in 2022 analysis show MPW’s pension plan was 92% funded on a smoothed actuarial basis and 81% funded on a year-end basis. “The MPW pension fund had three strong years of returns prior to 2022, but inflation and interest rate increases in 2022 were among the reasons fixed and equity investment losses were significant,” stated Mark Roberts, director of finance and administrative services. According to Roberts, “despite the decline, the pension fund remains in a solid position.”
Roberts also reported on January 2023 financials. With declines in natural gas prices, MISO energy prices were lower than anticipated, which affected MPW’s financial results. However, all three utilities – Electric, Water and Communications – had positive changes in position (net income) for the month, which resulted in net income of $671,000 for MPW.
Lastly, the Trustees were presented with MPW’s 2022 Annual Report, available on MPW’s website. It provides information about MPW’s 2022 projects, initiatives, and metrics. To publish closer to yearend, the Annual Report includes an unaudited financial summary. Once reviewed, audited financial results will be posted on MPW’s website for public access.
In other business, the board:
- Approved payment for the January 2023 expenditures and transactions
- Set April 25, 2023 Public Hearing for roofing projects at MPW’s Generation Site
- Approved annual submittal of the MPW Reliability Plan to the Iowa Utilities Board (IUB)