The URL can be used to link to this page

Home My WebLink About2001-02-20 Ordinance 4683follows: ORDINANCE NO. 4683 ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING THE CITY MANAGER TO ENTER INTO LONG- TERM CONTRACTS FOR THE PURCHASE OF POWER AND ENERGY (ELECTRIC ENERGY AND CAPACITY) IN ANTICIPATION OF AN IMMEDIATE AND SUBSTANTIAL LOSS OF THE CITY OF PALO ALTO'S POWER NOW BEING FURNISHED BY THE WESTERN AREA POWER ADMINISTATION, AND DECLARING THE URGENCY THEREOF TO TAKE EFFECT IMMEDIATELY The Council of the City of Palo Al to does ORDAIN as SECTION 1. The City Council finds and declares as follows: A. Since 1964, the City of Palo Alto ("City") has been a recipient of power furnished under a contract init ly with the United States Department of the Interior, Bureau of Reclamation, but now with the United States Department of Energy, Western Area Power Administration, Central Valley Project, California ("WAPA"); B. In 1967, the United States entered into a Contract No. 14 06-200-2948A with the Pacific Gas and Electr Company (" PG&E") (hereinafter the "Integration Contract"), pursuant to which WAPA provides power (electric energy and capacity) to the City over PG&E's transmission system, and which contract will expire in 2004; C. In 1985, the City entered into a Contract No. DE- MS65 85WP59007 with WAPA ( fter the "WAPA Contract"), pursuant to which the City receives a substantial portion of its power (electric energy and capacity) for resale to s commercial and residential customers, and which contract has been extended until 2024; D. In September 1996, the electric generation industry fornia was deregulated under the authority Assembly Bill order to foster competition in the elect c generation marketplace for the ostens e purpose of lowering electric prices paid by California businesses and consumers, but lower prices have not yet materialized; E. Since the summer of 2000, the wholesale price of city has increased over five-fold, and PG&E, the incumbent electric service provider in northern Califorriia, has claimed to have incurred over $6.6 billion dollars in debt to pay for electricity provided by out-of-state power suppliers; as a consequence, its financial reserves have been depleted and its creditworthiness has been jeopardized; 1 010222 sd1 0052667 F. PG&E has openly speculated about its deteriorating financial condition and its ability to continue to secure electrici ty for its wholesale and retail customers in northern California, and PG&E has repeatedly informed the public that it may seek protection from its power supplier-creditors, who remain unpaid, under the United States bankruptcy laws; G. If PG&E should file for protection from its credi tors under the applicable bankruptcy laws, the City could expect PG&E as a debtor to seek the approval of the bankruptcy court to be relieved of its obligations under certain contracts, including the Integration Contract; H. If PG&E is permitted to reject the Integration Contract, the City will lose access to its major source of firming energy, and it is substantially likely that the City will be forced to secure alternative sources of electricity (and potentially transmission) at prices substantially higher than the City now pays in accordance with the aforementioned contracts; I. Energy suppliers soon may no longer be required to continue selling energy to local distribution companies (like PG&E) serving customers in the State of California; J. PG&E is authorized under federal law to seek a unilateral increase in the price of firming energy under the Integration Contract, and it has informed the United States and others, including the City, that it may immediately seek the approval of the Federal Energy Regulatory Commission ("FERC") to substantially increase the price of firming energy, in which event, the cost to the City to procure power will sharply escalate; K. In view of the precarious financial condition of PG&E and the grave implications of a bankruptcy filing by PG&E as well as a filing by PG&E at the FERC and the dire consequences of the City's immediate loss of its source of power, the City Manager seeks the authority to immediately secure electricity (and/or as necessary, transmission) from one or more qualified, reliable power suppliers and others in order to preserve the public health, safety and welfare of its residential and commercial electric utility customers; L. The foregoing conditions constitute an immediate threat to the health and safety of the residents of the City of Palo Alto, because the electricity supply could be reduced, impaired or substantially increased in price so as to threaten and irreparably harm basic residential and business customers. The adoption of this ordinance is necessary to immediately address the emergency that the City of Palo Alto faces. 2 010222 sdl 0052667 The City Council hereby authorizes the City Manager to enter and execute a contract or contracts for power (electric energy and capacity) with qualified power suppliers to permit the City to effectively mitigate the risk of volatile market prices. The City Manager may take all reasonably necessary steps to ensure the continued availabil of reasonably priced in-state transmission. A. Terms & Conditions. The contract or contracts shall not in the aggregate exceed 50 megawatts and no contract or. contracts shall exceed a term ten years. The contract or contracts shall to the extent possible comprise a portfolio of different quantities of power on different terms and conditions. The contract or contracts shall further meet the supplemental terms and conditions promulgated by the Standing Oversight Committee (" SOC" ) . B. Standing Oversight Committee. Four members of the City Council shall be appointed by the Mayor and approved by the City Council to serve as the SOC. The SOC shall have the authority and duty to promulgate, review and approve the supplemental terms and conditions under which the City Manager shall exercise the authority granted by this ordinance. The SOC shall meet regularly, as often as necessary, and shall approve one or more written statements of the supplemental terms and conditions under which the City Manager shall exercise the authority granted by this ordinance. C. Internal Review. The City Manager shall further seek the advice of the City Auditor as to any power contract exceeding a term of three years. All power contracts and other related contracts shall be approved as to form by the City Attorney. SECTION 3. The authority granted under this ordinance to the City Manager and the City Attorney will expire on March 1, 2002. No contract entered into and executed by the City Manager and the City Attorney under this authority may extend beyond March 1, 2012. The provisions of Section 2.30.120 of Chapter 2.30 of the Palo Alto Municipal Code, setting a maximum term of years for commodities contracts, hereby suspended with respect to the purchase electric commodities authorized under section 2 of this ordinance. SECTION 5. The City Council hereby finds that this ordinance 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 6ertainty that there is no possibility of significant 3 010222 sdl 0052667 environmental ordinance. occurring as a result of the adoption of this SECTION 6. This ordinance was adopted as an urgency ordinance by not s than a four-fths vote, and s,hall become effective upon the date of its adoption. This ordinance shall be of no further force and effect as of March 1, 2002, unless it is earlier repealed or extended by the City Council. INTRODUCED AND PASSED: February 20, 2001 AYES: BEECHAM, BURCH, EAKINS, FAZZINO, KLEINBERG, LYTLE, MOSSAR, OJAKIAN, WHEELER NOES: ABSTENTIONS: ABSENT: AT~ City Clerk Seni~y Attorney AP~ Director of ministrative Services 010222 sdl 0052667 APPROVED: ~~ Ma~ 4