School Solar

In, at times, a heated discussion the Lansing Board of Education further considered a PPA (Power Purchase Agreement) that is estimated to save the school district about a half million dollars over the 25 year life of the contract.  RER Energy Group's President Jim Kurtz and Solar Project Developer Michael Roach attended to give a presentation and answer questions for the board.  But the meeting became contentious at times, when School Board President Christine Iacobucci expressed concerns, especially noting that school attorney Brian Smith had not recommended signing the contract.

"We could generate energy savings," said School Business Administrator Mary June King.  "We could spend money on something other than electricity.  We could spend money on kids.  That's why we started this process.  Jim was critical in helping me to understand the process."

It has taken close to four years to get to the point of accepting or rejecting the PPA, which takes advantage of tax credits applied in a complicated formula.  RER finds investors to pay for a 1.5 megawatt solar array, leases the land, and constructs the facility.  About 1.7 million kWh of power is generated annually into NYSEG's power transmission grid, and the credit is granted to the school district, which then pays a lower rate to the investors.  The school district issued an RFP in 2013 to qualify for the credit, but a deadline for completed construction looms at the end of this year.

"We started this possibility of looking at solar back in 2013.  We sent out bid requests, then we started working with Dynamic Energy," summarized Lansing School Superintendent Chris Pettograsso.  "They ended up opting out because we couldn't reach an agreement on the PPA rate and escalation.  We resent the bid and ended up working with RER.  In June of 2015 the district signed a PPA agreement with RER.  In February RER and Lansing proposed revisions to the signed PPA.  We both learned something from talking with Cornell we learned about some protections we wanted in the PPA.  We met in June and gave Chris Santospirito and Mary June King permission to continue negotiations.  At our last board meeting our anticipation was that we weren't going to move forward.  But Chris, at the last minute had come up with an agreed upon rate and she was recommending that we do move forward."

"It's very good that the school went ahead with an RFP which locked you into something that is so favorable that utilities fought and screamed to kill it," Kurtz said.  And they killed it... except for those who got grandfathered.  Lansing is one of the few that was grandfathered.  It allows you to most cost effectively capture the fuel that comes down from the sun, and can put you in a position that can capture that for a very long time and create significant savings."

It is estimated that if the district completes the 25 year term of the PPA it would save $591,954 over the quarter century period. If the schools then chose to purchase the array it could realize a cumulative savings of $1,014,861 through year 30.  But Kurtz noted the savings could be more if the school district buys the array at the end of year 6, the earliest state law allows.  In that case the savings over 25 years could be $1,301,801, and at year 30 the district could have saved $1,845,419.

"You asked for extremely conservative numbers," Kurtz said.  "But don't let the extremely conservative numbers impact (your consideration of) the potential."

Not all board members were convinced.  Most had questions and reserved judgement throughout the presentation.  But Iacobucci complained that she had not received a copy of Kurtz's presentation until Monday afternoon, not leaving enough time for her to adequately prepare questions she felt necessarily to perform due diligence.  Pettograsso said the board would not likely learn anything new, but there would be time for discussion before a vote.  She noted Smith's memo had pointed out that the original estimate had been cut in half, and the current estimate might not be accurate, and worried that the district might not have the cash on hand to pay the penalty for early withdrawal if a future board wished to leave the contract.

"When you say it's so complicated that its hard to understand, that sets off a red flag for me," she said. "We have a fiduciary responsibility to our taxpayers to understand something that shouldn't be that complicated for us to understand.  That makes me concerned, coupled with a two page memo from our attorney, telling us this is not a good deal for us."

Board member Aziza Benson said that after reviewing the Powerpoint presentation she wanted to hear what Kurtz had to say and suggested holding questions for the end.

King said the site had not been identified and NYSEG's connection costs were unusually high when the first estimate was conceived.

"These are not things RER should have anticipated," she explained.  "Putting it in a diffrent location and building a road -- having them spend the money on that type of thing before we had the initial agreement, would be like us spending the money on detailed design planning for a capital project before we have the public referendum approving it.  So I don't think that's a legitimate argument.  I had that conversation with Brian again and again and again.  He's putting the cart before the horse."

An argument ensued about the future of energy costs, Iacobucci siting a chart showing natural gas costs going down, while Kurtz said they are already going up.

"What is the problem we're trying to solve by having another utility?" she argued at one point in the middle of the presentation.  "Gas prices are going down.  Energy prices are going down.  I don't understand what district problem were we trying to solve by having a PPA with your company."

Kurtz explained that the US began exporting natural gas for the first time in 60 years in 2016.  He noted that import facilities are being converted to export facilities because with such low natural gas prices in the United States, foreign companies are now buying gas here, witch is estimated to raise gas prices considerably for Americans, too, because of the world-wide demand.

"That's why natural gas prices have increased in the last 12 months, and that's why they're expected to double by the Energy Industry Administration."

Board member asked for clarification on the percentages representing the numbers used to calculate the school district's savings, the district's liability under various circumstances including missing the construction deadline, and what the penalty clause entails.

RER has developed 18 megawatts for schools, municipalities, and farmers in upstate New York, and a total of more than 30 megawatts of cost effective energy systems, raising more than $25 million in grants for 100 clients, and getting over $50 million of solar PPA agreements financed and built.

Pettograsso said the school board must vote at its next meeting on March 13th if there is to be a chance of completing the project before the deadline.  If the Board votes to go forward with the contract RER will execute a lease with hardie Farms, then sub-lease the land to the schools, a state requirement for the PPA.  Once that is done RER will order a revised interconnection study from NYSEG, begin the site plan process with the Town of Lansing Codes Department, and execute a contract with a road builder.  But at this point it is far from certain that the Board will go forward.

The deal was almost dead a few weeks ago as the deadline drew near and the school district and RER had still not forged an agreement they could both sign.  But at the last minute Kurtz sent a new revision that Santospirito ands King agreed was advantageous to the district, while protecting the schools from liability.

"We could generate energy savings," said School Business Administrator Mary June King.  "We could spend money on something other than electricity.  We could spend money on kids.  That's why we started this process.  Jim was critical in helping me to understand the process."