Why flexibility matters to this utility

Colorado city of Fountain decided flexibility mattered most in future electrical plans 

 by Allen Best

In 2014, when Curtis Mitchell negotiated a new wholesale electrical contract for Fountain, the city located 10 miles south of downtown Colorado Springs, he thought it was a swell deal. That contract lowered rates for Fountain’s customers by 21%.

“We thought the contract was the end-all, be-all,” Mitchell recalled this week. “But it’s actually gotten better.”

Fountain last week entered into a new deal, this time with Guzman Energy, and Mitchell expects rates to slip even more beginning in August.

It’s an unusual contract. Fountain must continue to honor its existing contract with Xcel Energy subsidiary Public Service Co. of Colorado. That contract from 2015 continues through January 2027. After that, Guzman will supply Fountain through 2039.

Guzman will be paying Fountain this summer the first of $12.2 million in payments for the right to have the contract in 2027. This will give Fountain’s customers reduced rates. When the Guzman contract begins, costs will decline by 17% and wholesale costs 25%.

When Guzman begins supplying Fountain, Fountain will have an option to start building solar, either itself or through agreements with others. The intent is to enhance flexibility.

Mitchell points out that the price for solar has dropped to 2 cents a kilowatt-hour “Take the clock back 10 years and I could not have predicted that,” he says.

This is from  Big Pivots No. 11 (5.25.2020). To be on the distribution list, send you e-mail address to [email protected]

Before signing the contract with Xcel, Fountain thought about building its own natural gas plant. Now he’s very happy Fountain stayed foot-loose and fancy free.

“We are not stuck with a coal plant and trying to figure out how to reduce emissions,” said Mitchell. “It gives us flexibility, which has really worked to our advantage as we negotiated with Guzman.”

Fountain lies in a valley lined with coal plants: two coal plants operated by Colorado Springs Utilities and, 35 miles to the south near Pueblo, three coal-burning units of Comanche.

The contract with Guzman gives Fountain greater ability to respond to the uncertainties of the future. The contract allows Fountain to buy 20% of its power from another renewable energy source in 2033. Mitchell sees solar, whether in Fountain or elsewhere, as the most likely.

Mitchell says the flexibility of the new contract was a key advantage because of the uncertainties going forward. Shifts in the energy market are one consideration, but also uncertain is evolving requirements for reductions in greenhouse gas emissions.

Fountain, Colorado’s fifth largest municipal electrical utility, is subject to a law adopted by Colorado last year to achieve 80% reductions in electrical supplies by 2030 and to eliminate all emissions by 2050.

Already, Mitchell has had what he describes as productive discussions with Will Toor, the director of the Colorado Energy Office. Toor is responsible for helping bring all utilities in Colorado not subject to review by the Public Utilities Commission in line with what is being called the Colorado Energy Plan.

Fountain delivers electricity to 19,000 metered customers but a total population of 60,000, including the adjoining Widefield and Security areas. Xcel provides 92% to 96% of Fountain’s electricity. Hydropower delivered by the Western Area Power Authority and from Pueblo Dam deliver the balance to Fountain.

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Allen Best

1 thought on “Why flexibility matters to this utility”

  1. Such an important story. Thank you!!
    Great to have an example of what can happen when a community is “foot loose and fancy free” and free to look for the best deal for that community–including receiving payment to become a future customer like Fountain is getting. Moving beyond the monopoly model we’ve had and starting to treat customers like they are something to value–such a concept.

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