So the utility is municipal, and they’re locking in a contract wholesale price in exchange for guaranteeing the purchase of a certain amount of energy over the following year? Then the spot price falls and they get caught with their pants down if they bought too much?
Yep. Not just one year. 20 to 25 years. Nutz.
The hang up is they budgeted surplus sales at an assumed market price given the forward curve? Didn’t hedge? Seems pretty speculative. Of course they have the ultimate hedge— rate making authority.