DEPARTMENT: Environmental Resources
FILE TYPE: Consent Action
TITLE
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Authorization To Amend Contract With Avant Energy, Inc., For Byllesby Dam Services
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PURPOSE/ACTION REQUESTED
Authorize an amendment to the existing contract with Avant Energy, Inc., for market operation services and execute Service Schedule 3 for CleanCounts registration for sale of renewable energy credits created at Byllesby Hydroelectric Facility.
SUMMARY
Dakota County owns the Byllesby Dam and operates the hydroelectric facility under the Federal Energy Regulatory Commission (FERC) safety regulations. Since 1987, the County coordinated dam operations and maintenance with Neshkoro Power Associates (NPA) through a lease agreement. The County Board authorized replacing NPA’s lease agreement with an operating agreement to provide hydropower operation services at Byllesby Dam by Resolution No. 11-305 (June 21, 2011), beginning May 1, 2011, and running through March 2021. The March 2021 agreement termination date was selected because it coincided with the expiration of the Power Purchase Agreement (PPA) between NPA and Xcel Energy for the Byllesby Dam. The PPA stipulated that it would expire in March 2021 or on the date the facility’s existing turbine equipment was shut down as part of the turbine upgrade project, with no option to renew the existing PPA.
After consultation with local power sales experts, the County Board authorized by Resolution No. 20-295 (June 16, 2020) a submittal of an application to the Midcontinent Independent System Operator for sales of energy, which allows the County to sell power generated by the Byllesby Dam to other utilities in the Midwest.
On July 19, 2022, the Dakota County Board of Commissioners authorized by Resolution No. 22-288 (July 19, 2022) the Physical Development Director to execute a contract with Avant Energy, Inc. to provide capacity market services for the sale of power. The contract term was established for five years, with a not-to-exceed amount of $111,500. The contract was not formally executed until August 1, 2024, to align closer with the energy production timeline. The original budget did not account for annual inflationary escalators written into the contract, which are tied to the Consumer Price Index (CPI). The proposed amendment aims to capture these annual escalations through the term of the contract. Because the CPI varies from year to year, a five percent annual inflationary rate has been assumed through 2029.
Additionally, the Byllesby Dam facility can generate additional revenue through the sale of Renewable Energy Credits (RECs) created from power generation activities. Staff proposes to execute an additional service schedule (Service Schedule 3) within the existing contract with Avant Energy, Inc., to facilitate registration and sale of the County’s RECs through CleanCounts. CleanCounts is a nonprofit organization that provides a web-based platform to track renewable energy generation. Registration through the CleanCounts system is a required process for the sale of RECs, as the software is able to issue digital certificates for each megawatt-hour of renewable energy generated. These certificates are required for the physical sale of the RECs.
Current projections estimate that RECs generated by the Byllesby Hydroelectric Facility could generate between $25,000 and $100,000 annually, depending on REC value and power generation. The proposed budget for the contract encompasses REC sales through the end of 2029, as well as a one-time cost for registration with the CleanCounts system.
RECOMMENDATION
recommendation
Staff requests the County Board to authorize the Environmental Resources Director to amend the existing contract and execute Service Schedule 3, with Avant Energy, Inc.
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EXPLANATION OF FISCAL/FTE IMPACTS
The original contract is $111,500. The proposed amendment adds $68,500, resulting in a total not-to-exceed amount of $180,000. The amendment allocates $42,500 to account for inflationary escalations in Service Schedule 1 and $26,000 for Service Schedule 3. These costs are incorporated into the County Manager’s 2026 Recommended Budget for Byllesby Dam and are paid for by revenues earned from energy sales.
☐ None ☐ Current budget ☒ Other
☐ Amendment Requested ☐ New FTE(s) requested
RESOLUTION
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WHEREAS, Dakota County owns the Byllesby Dam and operates the hydroelectric facility under Federal Energy Regulatory Commission (FERC) safety regulations; and
WHEREAS, since 1987, the County has coordinated the dam operations and maintenance with Neshkoro Power Associates (NPA) through a lease agreement; and
WHEREAS, the County Board authorized replacing NPA’s lease agreement with an operating agreement to provide hydropower operation services at Byllesby Dam by Resolution No. 11-305 (June 21, 20211), beginning May 1, 2011, and running through March 2021; and
WHEREAS, the March 2021 agreement termination date was selected as it was also the expiration date of the Power Purchase Agreement (PPA) between NPA and Xcel Energy for the Byllesby Dam; and
WHEREAS, the PPA language stipulated that the PPA was to expire on March 2021 or on the date the facility’s existing turbine equipment is shut down as part of the turbine upgrade project, with no option to renew the existing PPA; and
WHEREAS, with the approaching need for a new agreement for power sales, County staff has contracted with a local power sales expert to assess the County’s power sales options once the turbine upgrade project is completed; and
WHEREAS, by Resolution No. 20-295 (June 16, 2020), Dakota County authorized submittal of an application with the Midcontinent Independent System Operator (MISO) for sales of energy; and
WHEREAS, a MISO connection would allow the County to sell Byllesby Dam’s power to other utilities in the Midwest or on the spot energy market; and
WHEREAS, on July 19, 2022, the Dakota County Board of Commissioners authorized by Resolution No. 22-288 (July 19, 2022) the Physical Development Director to execute a contract with Avant Energy, Inc., to provide capacity market services for the sale of power; and
WHEREAS, the contract term was established for five years, with a not-to-exceed amount of $111,500; and
WHEREAS, the contract was not formally executed until August 1, 2024; and
WHEREAS, the original contract did not account for annual inflationary escalators tied to the Consumer Price Index; and
WHEREAS, the Byllesby Dam facility can generate additional revenue through the sale of Renewable Energy Credits (RECs) created from power generation activities; and
WHEREAS, current projections estimate that RECs generated by the Byllesby Hydroelectric Facility could generate between $25,000 and $100,000 annually, depending on REC value and power generation.
NOW, THEREFORE, BE IT RESOLVED, That the Dakota County Board of Commissioners hereby authorizes the Environmental Resources Director to amend the existing contract with Avant Energy, Inc., and to execute Service Schedule 3 for sale of the County’s Renewable Energy Credits created by the Byllesby Dam Hydroelectric Facility in the amount not to exceed $180,000, subject to the County Attorney’s Office as to form.
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PREVIOUS BOARD ACTION
11-305; 06/21/11
20-295; 10/26/20
22-288; 07/19/22
ATTACHMENTS
Attachment: Service Schedule 3 - REC Management Services - 2025
BOARD GOALS
☐ Thriving People ☒ A Healthy Environment with Quality Natural Resources
☐ A Successful Place for Business and Jobs ☐ Excellence in Public Service
CONTACT
Department Head: Nikki Stewart
Author: Cole Johnson