The Covington City Council voted to enter into negotiations for the purchase of 10 to 15 megawatts of additional base load capacity and to purchase 20 megawatts of peaking capacity at its Monday night city council meeting.
The purchase of the base load capacity will come from the city of Marietta, a Municipal Electric Authority of Georgia member, which has some extra base load capacity it wishes to sell. As a member of MEAG, Covington will take part in the negotiations along with other interested MEAG cities.
Base load capacity is energy used constantly. A base load plant is the most expensive to build but it has relatively low operating costs. The base load capacity from Marietta is generated through nuclear and coal-fired plants.
At the recommendation of Bill Meecham, utility director for the city of Covington and Charles Parmelee, an energy consultant, the city will negotiate for the purchase of 10 to 15 MW from Marietta which is reportedly looking to sell a total of 50 MW.
How much of that base load capacity Covington is able to acquire will depend on how many other MEAG cities wish to purchase capacity from Marietta. In a memo to the city council and mayor, Meecham recommended that the city purchase at a minimum 7 MW of base load capacity.
Once the Marietta energy is acquired, it will be available for use in 2008.
While prices will not be finalized until the negotiations with Marietta are complete, Parmelee estimated that the cost of 1 MW would be close to $1 million if payment were made in a lump sum. If payments were spread out over a period of 30 years, the price of 1 MW would be closer to $2.6 million.
Covington is currently purchasing 30 percent of its energy needs from the market. While market prices have been relatively stable for the past several years, according to Parmelee should the price in energy surge, Covington customers will see a sharp increase in their energy rates unless they procure a greater energy supply of their own.
"We feel that supplying more of our base power is important at this time otherwise we're subject to the volatility of the market," Covington City Manager Steve Horton said to the council at a work session before their Monday night meeting.
The purchase of 20 MW of additional peaker capacity will be acquired for the city by MEAG from an outside plant owner on a 20-year contract according to the memo.
Peaking capacity is energy used on only peak load days, most often the hottest days of summer when residents are running their air conditioners. While peaker capacity plants are the least expensive to build, their operating costs are the most expensive.
Peaking capacity also counts towards meeting the city's reserve requirement. Most modern peaking units run on natural gas though some others use oil.
The peaker capacity purchased by the city would be available for use in 2009.
According to a previous interview with Meecham, the cost of peaker energy under the contract is $43,200 per MW.