Solar deal will help Mesa electricity customers

Mesa is taking steps to insulate the 18,000 residential and commercial customers in its 5.5-square-mile Electric Service Area, which includes the downtown, from spikes in their energy bill and eventually save them some money.

Council on March 9 unanimously approved a contract with nonprofit Arizona Electric Power Cooperative to lock in a rate for 20 years of $29.63 per megawatt hour for energy and $11.65 per kilowatt a month for energy storage, beginning in 2027.

The city is one of 10 participants in AEPCO’s 400-megawatt Pinal solar project located south of Eloy in Pinal County. A 400-megawatt battery energy storage system is co-located on site.

“Pinal Solar project is really a unique opportunity for the City of Mesa,” said Deb Ferraro, Energy Resources coordinator at the March 5 study session. “It’s our very first utility-scale solar project.

“So that enables us to benefit from the economies of scale and obtain solar power for much less than typically we would be able to have access to since we’re going into this project with a lot of other players.”

Purchasing power can be volatile with the price dependent on factors such as time of year, weather and demand, according to the city.

“There have been times where the market has gone a little bit crazy and prices went up so much that it wasn’t really a reasonable expectation for us to pass that on to our customers,” Ferraro said.

“And that was when we utilized about $20 million in (American Rescue Plan Act) funds to subsidize the cost. That was as a result of market volatility. We can’t dictate what market prices are.”

According to Ferraro, if the city opted not to go ahead with the contract, there would be a gap between the projected load and resources, causing Mesa to purchase power at a much higher cost ranging from $60 to $151 per megawatt hour.

The contract also will help the city move forward on its goal of having a reliable, affordable and sustainable electric utility, according to Scott Bouchie, Energy and Sustainability director.

Since 1917 when it purchased a private utility company, Mesa has been supplying power currently to 15,514 residential and 2,789 commercial customers, including its own facilities, the largest user.

Pinal Solar will be one of the lowest-priced resources in Mesa’s power portfolio and the second lowest long-term purchase of power, behind two hydropower contracts, which together comprise 18% of the energy source for the area.

The city buys its electric supply through long-term agreements and short-term seasonal and daily power market purchases.

Pinal Solar will add another 21% in renewable energy to the portfolio, bringing the total to 57%, which also includes energy generated on city-owned assets such as solar canopies at the Main Library’s parking lot.

“The Pinal Solar Project energy costs will be combined with other resource costs to help calculate a monthly variable on customer bills,” spokesman Kevin Christopher later said. “If that number, multiplied by customer consumption, is reduced due to good pricing on electric energy contracts such as Pinal Solar, the customer bills will decrease proportionately.” 

Ferraro also touted the benefits of the battery energy storage system, commonly referred to as BESS.

“By taking the solar energy that we create from the solar panels and then storing it in the battery, we can utilize that stored power at times when power prices are higher,” she said. “So when everyone is coming home, the sun is setting, the ovens are turning on, the laundry is going, the air conditioning is running and we start getting close to our peak then we’re able to utilize this stored power to shave off some of our peak demand – thus saving us even more money, where we would have had to purchase power through one of our other various ways in order to meet the needs of our customers.”

Councilwoman Dorean Taylor praised staff for its work.

“This is going to offset higher costs because we can lock it in at that rate,” Taylor said, calling the deal “just a big win.”

Vice Mayor Scott Somers asked how the drop in the Colorado River’s water level would affect its hydropower generation as 18% of the city’s portfolio includes that source.

Ferraro responded that under the long-term power purchase agreements for hydroelectricity generated by the Colorado River Storage Project or CRSP, if there is not enough water to generate the power, the city is entitled to receive replacement power or money in lieu of it.

Councilman Rich Adams noted that the cost over time drops for technology as it improves. Adams was absent from the March 9 vote on the contract.

“This is a good deal but I want to understand the basis that we felt comfortable committing to a 20-year solid, firm rate,” he said. “Are we just anticipating that costs will continue to rise?”

Bouchie said that in his 17 years of doing solar projects for the city, he has seen solar prices come down significantly and that Pinal Solar is a result of that.

“This is the lowest price for a solar project in the time that I’ve been doing this,” Bouchie said.

He said that the contract meets the city’s goal and gives certainty of what the costs will be heading into the future.

“Can I tell you for sure that 20 years from now, this will be the absolute lowest contract that we have?” Bouchie said.”I can’t tell you that, but I can tell you, in today’s market, this is a fantastic deal for us.”

Councilwoman Jenn Duff said that there is more demand for power than supply and pointed to both utility providers APS and SRP “trying to double the size of their power just to anticipate what’s on the plate right now.”

“It’s a national issue about power, especially with the AI and data centers and all that kind of stuff,” Duff said. “The issue of power is not going to be solved quickly.

“I am not feeling like we’re in a position of stability in our power prices. Now we have a war so we’ll see what that brings. But I know that there’s just so much more demand than supply on the market, and so I’m so glad that we’re securing the resiliency to go forward and having that available here in Mesa.”

Mayor Mark Freeman encourages staff to look for other opportunities to add more solar systems to the grid.

“On top of that, we have other city-owned facilities where we could put solar and then integrate that with the other utility provider and sell that power or do some wheeling on the electricity to allow us to pay for that versus having the second-party contractors,” Freeman said.

Bouchie said that after council approves the contract, staff will begin planning what the next projects would look like.

The takeaway from this agreement is that a diverse portfolio will lead to reliability and lower cost, City Manager Scott Butler said.

“We use every option available to us as part of that portfolio,” he said. “I think that serves our customers and our ratepayers.”