Powering ahead: finding stability in a volatile energy market

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Power Lines

Pumping plants that rely on thousands of megawatts of power every year lift water so it can flow by gravity through the 336-mile CAP system. To ensure reliable and cost-effective power, CAP has developed a diversified power portfolio and is continuously looking for ways to purchase power at the right time, and for a reasonable price.

But the future market for buying energy is quickly changing: CAP is expecting less readily available power supplies, higher prices, and increased volatility.

And this is happening as CAP enters into periods of Colorado River shortage, when less water will be diverted and delivered – changing the amount of energy needed to operate the system. 

Throughout these challenges, CAP is continuing to strive to provide rate stability to water users, seeking to increase this stability through a request for proposal (RFP) for new long-term power contracts.  This proposal will emphasize the need for stable energy sources and will include the options of solar, natural gas, and wind.

CAP’s power portfolio: providing flexibility for the future

CAP has created its power portfolio and sources of power to align with its Board of Directors strategic objectives.

The strategy is flexible so CAP can modify the amount of energy acquired on a yearly basis to match our pumping needs, including both market purchases (short-term agreements with power providers) and long-term contracted purchases (at least 5 years).

Before the power portfolio: Navajo Generating Station

Historically, most of the power needed to move CAP water came from a single source – the Navajo Generating Station (NGS) — which owners closed in late-2019.

To manage its power needs in anticipation of the closure, CAP established a post-NGS energy strategy — the power portfolio – which includes renewable supplies like solar, and a combination of long-term and market purchases. This strategy’s goal was to ensure CAP’s dependable and cost-effective methods of power purchasing were passed onto water users through reliable and stable rates.

The goal was achieved. Since NGS closed, CAP has delivered water at a significantly lower energy cost while continuing to meet its repayment obligation to the Federal government.

Long-term power sources: the RFP skinny

Ensuring stability for our water users is critical. Because of the anticipated future fluctuating power market, CAP is looking for new long-term contracts (most 15-30 years) to lock in rates so water users have stable rates to support their budget planning processes.

The RFP indicative bid round opened Oct. 27, 2021 and proposals for awards will be selected April 1, 2022. This issue has been discussed at previous CAWCD meetings. See more details from the Oct. 21 Finance, Audit and Power (FAP) meeting agenda materials.

For specific updates on this issue and more, the public is invited to attend upcoming CAP board meetings, as well as stakeholder briefings and roundtables.

Visit our Meetings page.