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Since August 8, 1899. the City of Vineland Electric Utility (CVEU) has continually met the needs of its customers with utility-owned generating equipment. However, on May 30, 1991, it reached a handshake agreement with Cogeneration Partners of America (CPA), the agent for Vineland Cogeneration Limited Partnership (VCLP). On August 13, 1991, the Vineland city council approved the contract to purchase energy and capacity from a non-utility generator.
Under the provisions of the contract CVEU will purchase 46.5 MW from VCLP's cogeneration project at Progresso Foods in Vineland.
WHY NON-UTILITY POWER?
In recent years, with annual load growth exceeding 2%, Vineland has outstripped its ability to meet peak demand with its own resources. In addition, as a satellite member of the Pennsylvania, New Jersey, Maryland Power Pool (PJM), Vineland is required to maintain reserves of approximately 23%. Load growth and peak demands during two extremely hot summers confirmed the city's need to acquire additional generating capability.
After determining that additional capacity was needed, the city hired Black & Veatch to do a power supply study. The consultant's report recommended that CVEU increase its capacity by adding a combined-cycle combustion turbine to its system if generation could not be obtained from other sources at less than or equal to its own avoided cost.
Two factors made CVEU consider nonutility power for new capacity -- the Public Utility Regulatory Policies Act (PURPA) of 1978, and a proposed cogeneration project at Progresso Foods in Vineland. Under PURPA, electric utilities must buy energy from a PURPA Qualifying Facility (QF) at the utility's avoided cost.
Prior to CVEU's power supply study, Progresso Foods had considered building a cogeneration plant and had received proposals from developers. One proposal was from CPA.
CPA proposed to construct a cogeneration facility and to sell the electricity to CVEU. Because this was a financially sound idea for Progresso, it decided that if CPA could negotiate a power purchase agreement (PPA) with CVEU, it would go ahead and construct a cogeneration plant.
Unfortunately, CVEU's entry into a PPA with a QF developer was not a simple task. Even though the city's objectives were clear, CVEU, as a department of the city. had to follow the local public contracts law. At that time, the law restricted the...