Electric 

Currently we purchase electricity from the local electric utility serving the various locations. In spite of the fact that electric de-regulation has been implemented in PA, the current retail electric market is basically non-existent. Few, if any Electric Generation Suppliers (EGSs) are quoting prices that beat the "cost-to-compare" or shopping credit that is available. Since we have campuses all over the state, there are many PA electric utilities serving Penn State.

Electric power "retail access", that is the ability to buy it from any generating source, and have it delivered through the local utility company transmission and distribution systems to our facilities, became available in 2001. It was hoped that we would be able to reduce our expenditures for electricity by buying from a lower cost generator, if available, and by aggregating our loads to develop a more attractive load to a generator, both from the aspects of purchased volume, and the profile of the requirements throughout the year.

Our experience was that aggregation did not provide better pricing - primarily since the EGSs were quoting prices on a rate schedule basis. We also thought that a single vendor would jump at the opportunity to supply not only electricity but all of our coal and natural gas requirements as well. At the time, no one was interested. In spite of this, we still were able to obtain a cost saving electric contract during the first year of partial electric de-regulation with our 1998 RFP For Electricity, Gas & Coal.

Prior to the expiration of our first contract (18 months), we modified the 1998 process to only include electricity, and continued with our traditional procurement practices for coal and natural gas. No viable proposals were received from the 2000 RFP For Electricity. Under separate initiatives, several 8-month contracts were obtained for the campus locations. Two of these contracts were for 100% renewable generating sources, and we became involved in the Solar Schools program and received two solar photovoltaic systems for installation on our facilities.

Following our minimum 12-month period at the POLR (Provider of Last Resort) rate, we again attempted to find the retail electric market. This time we entered into a contract with a service firm who specializes in the internet retail energy market. They made efforts beyond the contractual obligations to try and aggregate load from many western PA customers, and to talk directly to the suppliers. Again we were unsuccessful in obtaining any cost saving contracts.

As part of the Environmental Strategy for Finance & Business, we made a successful proposal to purchase PA-based wind power for 5% of the University Park electric consumption, later adding all campus locations. This was a 5-year contract beginning November 2001.  In the fall of 2006, new contacts were established to purchase 20% of the University's electrical consumption from green power sources. 

As the industry moves from a regulated to deregulated market, many options will need to be evaluated.

Coal

Coal is purchased for the University Park Campus on a yearly contract basis.  Coal is contracted for on a yearly basis from a third party vendor. The contract can be re-negotiated in yearly increments if both parties agree.   The Penn State Coal Specification requires the following parameters:

Specification of Coal

Quality of Coal will be substantially free from bone, slate, rock, sulfur balls, dirt, and other characteristic impurities or extraneous foreign matter. Coal will not have signs of excessive moisture, oxidation, or weathering.

The FY 06-07 contract price is $80.00 per ton including delivery.

Natural Gas

Natural Gas is contracted on a two-year basis from a third party vendor (PepCo). This contract can be re-negotiated in yearly increments if both parties agree.  The contract contains a fixed price for production and delivery to the city gate (Basis pricing) and NYMEX based commodity pricing.  Natural gas transportation is a tariff rate with Columbia Gas, the local distribution company.  Our cost at the burner tip for FY 05-06 is approximately $8.61 per mcf, a slight increase over last year due to the two-year contract.  Although this price is currently attractive based on market prices, the first year of the two-year contract exceeded market much of the time, illustrating the tradeoff involved with longer term contracts. 

Propane

Propane is purchased as necessary at remote auxiliary locations around University Park where Natural Gas is unavailable.  The purchased quantities of Propane are low compared with other commodites (0.04% of total), and is therefore purchased as needed from local vendors.

Fuel Oil

Fuel Oil is purchased as necessary to keep the oil fresh and the tanks full. The quantity of oil shown may not all be used in the year it was purchased since natural gas is typically our fuel of choice.

Renewable Power

Renewable Energy is purchased by Penn State for 20% of electrical power consumption at all campuses.  Please see our Green Power Purchase for more information.