Distributed Energy Resources

Borough captures price savings with landfill gas contract extension

The Borough of Chambersburg, Pa., has entered a contract extension for power generated from a landfill gas-to-electricity power plant that will lower the price of the energy that the borough is consuming from the project.

Since 2012, the borough has been consuming electricity from a landfill gas-to-electricity power plant. Energy Power Partners (EPP) owns the facility, which was originally developed by a division of the PPL Corporation.

The borough and EPP have been cooperating on an extension to the original contract, entered into in 2011, which would have ended at the end of 2022.

The original arrangement with PPL included the borough’s construction of a power line, dubbed “the extension cord,” which delivers the electricity from the landfill to the borough. An alternative energy grant from the Pennsylvania Commonwealth Financing Authority made that part of the project possible.

On November 18, the Chambersburg Town Council entered into a contract extension with EPP at a public meeting.

Borough Electric Department Superintendent Ronald Pezon said the new arrangement with EPP allows the borough to purchase electricity from the plant at a significant discount, saving the borough $7.8 million in power costs over the next twelve plus years. “Such a significant savings leads directly to lower electricity bills for our customers,” he said.

Borough Manager Jeffrey Stonehill, who also serves as Director of Utilities for the Borough of Chambersburg, said that the proposed 2020 budget currently being reviewed by the Town Council includes a 1.98% across-the-board reduction in retail rates for Borough electric customers. This would be the fourth electric rate reduction in the past seven years and would save the typical residential customer about $2 per month, he said.

Chambersburg has been acquiring the full output of the electricity under a purchased power agreement (PPA) for an initial 10-year term, 2013-2022, at a fixed price of $63/MWh for the entire term with no additional delivery or congestion fees as the connection is made to a substation within Chambersburg’s power system.

From the beginning, there was the potential to invest in further future generation over an extended term of the agreement, the borough noted.

The new price will be $51/MWh for all hours fixed. More importantly, the borough was able to negotiate that price starting January 1, 2020. Therefore, the overall cost savings on this PPA over the current contract price -- if the parties would have simply extended it another 10 years at the present price of $63/MWh -- is approximately $7.8 million.

The borough will start saving approximately $600,000 per year starting in January 2020 over what the Borough was paying EPP for the same power. In addition, all of the protections of the original agreement have stayed in place.

Recognizing the immediate cost savings over the current contract term, Pezon estimates the true cost of power for the contract extension to be approximately $43/MWh. “This is a very competitive power supply cost and reflects the behind the meter nature of the project,” he said.

The electric energy produced from this facility represents an approximate 15% slice of all the power in Chambersburg.

The borough noted that methane-to-energy systems at landfills have a dual benefit for the environment -- they generate electricity from renewable fuel while also eliminating emissions of methane, a gas that may contribute to global climate change.