Just months after raising its rate for the first time in 10 years, Valley Electric Association, Inc. announced it will slash the 9.9 percent rate increase that went into effect in June.
The decision to cut the rate beginning on Jan. 1 was approved at VEA’s Board of Directors meeting Tuesday.
VEA reducing its power rate is tied to the pending sale of the cooperative’s 230-kilovolt transmission line to GridLiance Holdco, L.P. GridLiance will pay 2.4 times net book value for the assets, assume outstanding debt, and provide additional value that brings the total consideration of the sale to $200.6 million.
That sale required a two-thirds approval by VEA’s membership and garnered around 68 percent of the membership. The votes needed came after the cooperative extended its original deadline date by a month.
The board accepted the member-owners’ vote, which opened the door to the rate drop.
“How appropriate that this occurs during Thanksgiving week,” said John Maurer, VEA Board of Directors president. “This is a watermark day. We should all be thankful for the blessings that have come our way.”
The sale of the system has yet to become final until regulatory approvals are secured. Those approvals are expected to occur in the first quarter of 2017. The process of closing is a long one, which includes approval from the Federal Energy Regulatory Commission and the California Independent System Operator (CAISO).
Thomas Husted, VEA chief executive officer, called the transaction a partnership with GridLiance.
“It creates enormous benefits for the cooperative and the membership,” Husted said. “VEA will be able to assure reliable power at affordable rates while paying down a significant portion of its debt. Meanwhile, members will enjoy reduced rates, a prolonged period of rate stability, a cash premium of $579 and the largest capital credit retirement in the cooperative’s history.”
Maurer called the deal a “monumental, once-in-a-lifetime event,” while signing the asset-purchase agreement Tuesday.
With the size and scope of GridLiance, Husted said it will allow them to expand the high-voltage system in a way that would have been impossible for VEA.
GridLiance will contract with VEA long-term to manage, operate and maintain the system, in turn, keeping the local jobs associated with the system. In addition, keeping relationships and experience the VEA staff have developed will continue to positively effect the transmission system.
The acquisition will not affect the remaining transmission and distribution facilities owned by VEA.
Valley Electric’s 230-kilovolt transmission system, which encompasses 164 miles of transmission lines through Clark and Nye counties, was built between 1995 and 2013. The transmission lines run north and south out of Pahrump, connecting the VEA system to the regional transmission grid.
The entirely self-funded project established a vital backup service to VEA members which helps shield them from experiencing brownouts or blackouts that occur in other areas of the nation.
The system cost $90 million to construct and took 20 years to complete. VEA joined the CAISO in 2013, increasing the value of the transmission system.
Membership in the CAISO put the system in the California market and under CAISO’s regional tariff which optimized the system economically, while also opening opportunities for renewable energy generation in VEA’s service territory.
Contact reporter Mick Akers at makers@pvtimes.com. Follow @mickakers on Twitter.