Geothermal

[Richard Ha]

You are right Jerry. Avoided cost was a means to encourage development when oil price was around $20 per barrel. The PUC did change that to competitive bid recently. All new contracts are now competitive bid. Up until recently, a 25MW and a later 5MW contract were on the avoided cost formula. However, the PUC recently approved a new 8MW contract that was based on the new method. Although, the most recent avoided cost calculation was higher than 20 cents per kWh, the new 8MW contract was negotiated below 10 cents kWh. And, the old 5MW contract was renegotiated. It was renegotiated to around 11 cents kWh. The original 25MW was not renegotiated. New geothermal production will be on competitive bid. The estimated cost of geothermal production is less than 10 cents kWh according to a recent study. How much and how soon this translates into lower rates will depend on what the utility does. But, it will for sure translate into stable rates and then into lower rates.