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HomeMy WebLinkAbout2004-01-05 Ordinance 4812follows: ORDINANCE NO. 4812 ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING THE CITY MANAGER TO PURCHASE A PORTION OF THE CITY'S ELECTRICITY REQUIREMENTS FROM CERTAIN PREQUALIFIED ELECTRICITY SUPPLIERS UNDER SPECIFIED TERMS AND CONDITIONS DURING CALENDAR YEARS 2004 THROUGH 2011, INCLUSIVE The Council of the City of Palo Alto does ORDAIN as SECTION 1. The City Council finds, as follows: A. In 1967, the United States entered into a contract No. 14-06-200-2948A with Pacific Gas and Electric Company ("Integration Agreement"). Under this contract, the Western Area Power Administration ("Western") provides electric capacity and energy to the City of Palo Alto ("City") over PG&E's transmission system. It will expire in December 2004. B. In 2000, the city entered into a contract No. 00- SNR-0033 with Western ("Base Resource Contract"). Under this contract, the City will receive less electric capacity and energy than is currently made available under the existing power purchase agreement. It will begin in January 2005 and will expire in December 2024. C. On November 13, 2001, the Council by minute order approved four primary energy portfolio objectives ("Objectives"); including the objective to ensure low and stable electric supply rates for customers, and it also adopted Ordinance No. 4724, authorizing a five-year purchase of energy and capacity during the 2005-2010 period. The City executed that purchase on August 13, 2002 with Coral Power, L.L.C. (the "2002 Coral Purchase") . D. On October 21, 2002, the Council by minute order approved seven electric portfolio planning and management guidelines to guide staff in developing and managing the city's long-term electric acquisition plan ("LEAP Guidelines"). One of the LEAP guidelines is to diversify energy purchases according to several factors, including, but not limited to, dates and terms of commitment, suppliers, prices and fuel sources. E. On August 4, 2003, the Council by minute order approved the LEAP Implementation plan and it also adopted Ordinance No. 4801, authorizing the purchase of energy and capacity during the 2005-2007 period. One element of the implementation plan is to gain approval for a set of master agreements with suppliers with the authority to transact for terms of up to three years. 031113 cl 0072336 1 F. In accordance with the City's LEAP Guidelines and Implementation Plan, the City must annually purchase and, incidental to purchases, sell electricity to meet the needs of its electric customers by entering into one or more contracts with terms varying from less than one month to five years. The City's Energy Risk Management Policies provide that the City will purchase only as much electricity as is needed to meet its load requirements established at the time a transaction is executed. G. A portion of the City's electricity demands are supplied by existing contracts, including the Base Resource Contract, contract for output derived from partial ownership in the Calaveras Hydroelectric plant with the Northern California Power Agency, an energy exchange contract with Seattle City Light, and a 25 MW purchase of power for five years starting in 2005. The balance of the City's electricity needs must be purchased from suppliers at market-based prices. H. The balance of electricity the City needs depends on the output from the Base Resource Contract and the Calaveras Hydroelectric Plant, which depends on hydrologic conditions. After 2004, the City will be required to purchase about one-third of its total electricity needs in an average hydrologic year. In a dry year, the City must purchase about one-half of its annual needs. In wet years, the City may have a surplus of electricity and could afford to sell about one-fifth of its projected annual needs. I. The cost for the City's market-based electricity purchases and incidental sales depends on the price offered by suppliers, the projected annual electricity customer requirements, and the output from the hydroelectric-based supply resources. The annual cost could fall within the range of approximately $16 million to $22 million per fiscal year during an average hydrologic year. Costs during a dry year could fall between $27 million and $37 million per fiscal year. Total aggregate transactions derived from purchases and incidental sales of surplus electricity could be between $25 million and $34 million per fiscal year during a wet year. J. In June 2003, the City initiated a Request for Proposals process in order to prequalify a number of electricity suppliers, based on their financial and legal qualifications and business experience, who are eligible to sell electricity to and purchase electricity from the City. K. BP Energy Company, Coral Power, L.L.C., Duke Energy Marketing America L.L.C., and Sempra Energy Trading Corporation each possess the minimum financial and legal qualifications and business experience in order to be eligible to do business with the City. 2 031113 cl 0072336 L. The City intends to purchase electricity from one or more of these pre-qualified suppliers for delivery during calendar years 2004 through 2011, inclusive, so long as the supplier with whom the City negotiates a specific purchase transaction continues to be qualified and otherwise eligible to transact with the City. SECTION 2. The Council hereby authorizes the Mayor to sign the Edison Electric Institute standard form contract, or equivalent, or in the case of Coral Power, L.L.C., the amended and restated contract, and it also authorizes the City Manager or his designated representative, the Director of Utilities, to negotiate one or more individual transactions thereunder, with BP Energy Company, Coral Power, L.L.C., Duke Energy Marketing America L.L.C., and Sempra Energy Trading Corporation. The authorization shall extend to individual transactions executed under the referenced standard form contract, provided that: (a) the maximum expenditure under any standard form contract and any and all separate transactions thereunder with any of the named suppliers shall not exceed $75 million in the aggregate; and (b) the maximum term of any transaction shall not exceed a term of three (3) years, commencing on the date the transaction is mutually agreed to by the parties, or a term of five years, in the case of the 2002 Coral Purchase, commencing on the date delivery of the transaction begins. The City may enter into a transaction greater than three years, provided that transaction receives the prior approval of the Council. SECTION 3. No standard form contract and any transaction entered into thereunder with any qualified electricity supplier executed by the City Manager or his designated representative and approved as to form by the City Attorney under the authority of this ordinance shall extend beyond December 31, 2011. SECTION 4. The Council hereby finds that this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to Section 15061(b) (3) of the California Environmental Quality Act Guidelines, because it can be seen with certainty that there is no possibility of significant environmental effects occurring as a result of the adoption of this ordinance. II II II II II 3 031113 cl 0072336 SECTION 5. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: December 15, 2003 PASSED: AYES: NOES: January 5, 2004 BEECHAM, BURCH, CORDELL, FREEMAN, KISHIMOTO, KLEINBERG, MORTON, MOSSAR, OJAKIAN ABSTENTIONS: ABSENT: ATT~T: Jfkp~1Lt< City Clerk Mayor Director of Utilities 4 031113 cI 0072336