Washington State’s Chelan PUD is exploring early termination of its long-standing power contract with Alcoa, the PUD said on June 1.
If the Alcoa contract ends early, Chelan PUD would consider replacing the contract with new agreements that better reflect today’s market, it said.
“Energy markets currently put a premium on carbon-free hydropower, which allows buyers to meet clean energy requirements. In addition, new regional programs require utilities to be prepared to generate more electricity on demand to ensure reliability,” the PUD said.
"Chelan PUD customer-owners pay some of the lowest electrical rates in the nation because of Chelan PUD’s ability to sell most of the hydropower it generates on the wholesale energy market," it said. "Proceeds from surplus energy sales allow the utility to invest in projects that improve the quality of life in Chelan County, such as broadband internet and parks."
“By adapting to today’s energy market, we’re putting Chelan PUD in a good position to maintain long-term financial stability and continue the steady, low rates that our customer-owners have enjoyed for years,” said Chief Energy Resource Officer Janet Jaspers.
History
In 2008, Chelan PUD and Alcoa entered into a long-term power sales agreement to provide power for aluminum smelting at Wenatchee Works. Smelting was curtailed in 2015, and Alcoa announced permanent closure in 2021.
The Alcoa power sales contract – and its related agreements – expire in October 2028. While the aluminum smelting is curtailed, Chelan PUD sells the unused energy in short-term markets. The proceeds are used to cover energy production costs.
Benefits
The possible change would bring several key benefits to customers, the PUD said:
- Continued predictable, stable rates by securing longer-term, higher pricing that captures the full value of the PUD’s surplus hydropower.
- Improved long-term portfolio plan: Longer contracts with staggered expiration dates provide more certainty and protection from market swings.
- Continued high reliability: If needed, the utility would have flexibility to retain more of its locally generated hydropower to meet state requirements.
“As part of Chelan PUD’s new vision, we are committed to creating bold, enduring value for future generations,” said General Manager Kirk Hudson. “The agreement with Alcoa served our community well for many years, but the energy landscape is changing rapidly. To respond to new opportunities and growing reliability needs, we must adapt and continually reassess our strategies.”
