HomeMy WebLinkAbout1998-03-23 City CouncilCity of Palo Alto
City Manager’s Report
3
TO:.HONORABLE CITY COUNCIL
ATTENTION: POLICY AND SERVICES COMMITTEE
FROM:
DATE:
CITY MANAGER
MARCH 23, 1998
DEPARTMENT: UTILITIES
CMR:130:98
SUBJECT:SALE OF ENERGY & ENERGY RELATED SERVICES OUTSIDE
THE CITY’S EXISTING SERVICE TERRITORY
REPORT IN BRIEF
This report requests that Council approve the sale of energy and energy-related services
outside the City’s existing service territory and authorize the City Manager or her designee
to negotiate custom tailored agreements based on the standard contract (Attachment 4) for
such extraterritorial services with customers who are presently being served by the City and
have facilities outside the City. Such contracts would commence after July 1, 19.98. The City
¯Manager will execute the Energy Service Provider Agreement with Pacific Gas and Electric
(Attachment 3). The City Manager or her designee will also explore partnering and alliance
opportunities. This proposal was reviewed and approved by the UAC at its March 4, 1998
meeting.
CMR: 130:98 Page 1 of 5
RECOMMENDATION
Staff recommends that the Council apprrve the sale of energy and energy-related services
outside the City’s existing service territory. Specifically, staff recommends:
Initially, limiting sales to Palo Alto customers with facilities outside the City.
Additional analysis will be completed in 1998 to examine expanding this market
segment
Ensuring that extraterritorial sales will not negatively impact tax-exempt bonds.
Ensuring that limitations of existing contracts are followed when serving load outside
the City.
BACKGROUND
In 1992, the California Public Utility Commission (CPUC) initiated a comprehensive review
of the electric utility industry, followed by a formal rule to restructure the industry in April
1994. In the summer of 1996, a joint conference of.the California legislature commenced an
intensive series of hearings with respect to electric industry restructuring. These efforts
culminated in assembly Bill 1890 (AB 1890), which was signed into law by Governor
Wilson on September 23, 1996. Among other things, AB 1890 approved the formation of
two new entities, the Independent System Operator (ISO), which will control and operate
California’s transmission grid and the Power Exchange (PX), .which will facilitate
transactions between buyers and sellers of electricity, information about AB 1890 was
provided to Council on September 26, 1996 (CMR:411:96).
Currently the City of Palo Alto Utilities (CPAU) serves 100 percent of the Palo Alto electri¢
and natural gas energy market. Electric and natural gas industry restructuring has prompted
the City to offer customers choice in selection of their energy provider. On March 17, 1997,
Council approved policy guidelines for implementing electric restructuring in Palo Alto. The
three policy guidelines were:
Allow customers within Palo Alto Utility’s distribution territory direct access (DA)
to other energy service providers in a staged plan,
Authorize the utility to collect a transition cost recovery (TCR) charge,
Authorize staff to investigate the administrative and legal issues relating to offering
energy for sale to customers outside its territory.
CMR:130:98 Page 2 of 5
The third guideline, which is the subject of this report, further states that "the City may
authorize the offering of certain financial and non-financial products and services to its
electricity customers residing outside of the City’s jurisdictional boundaries, provided that
it can be established to the Council’s satisfaction that the interests of the City will be served
by the. offering of these products and services and it is legally and administratively fe,asible
to engage in such transactions."
The DA plan was approved by the Council in December, 1997. On June 19, 1995, the City
Council approved (CMR:229:95; Resolution No. 7522) offering large natural gas customers
the opportunity to purchase gas supply on the open market. On December 1, 1997, the City
Council approved staff’s recommendation (CMR:460:97) to initiate an energy direct access
program for Palo Alto’s electricity customers.
DISCUSSION
There are two goals for pursuing outside sales. The first is utilization of existing resources
for maximum benefit to the City, and the second is customer retention. As of March 31,
1998, most customers in California will be able to choose an energy service provider (ESP).
Because of this, some existing CPAU customers are exploring the potential of consolidating
their load, both in Palo Alto and in other locations in the state. These key customers have
expressed interest in the City serving their facilities outside the City with electricity and
natural gas. Responding to their requests is important in retaining them as customers of the
City.
Staff examined the administrative and legal aspects of offering extraterritorial sales.
Additionally, staff had determined that it is administratively and legally feas.ible to embark
on such a program.
Attachment 2 provides the economic analysis which shows that extraterritorial sales willl be
economically favorable. In addition, staffbelieves that the benefits of initially working with
existing customers to secure and build load outside the City will test the necessary processes
and systems for supplying outside energy sales and minimize any risk.
Additionally, staff believes that the CPAU should continue to examine the feasibility of
additional extraterritorial marketing efforts on customers that meet the following criteria:
Customers/parmers who are public agencies with service areascontiguous to City’s
service area so that community aggregation partnerships appear to be a natural
CMR: 130:98 Page 3 of 5
extension of the City’s community service goal.
Customers with high growth potential, financial stability and a public image
consistent with CPA’s policies and objectives.
The policy guidelines also stated that staff would explore opportunities to enhance revenues
by ~xtending its marketing efforts through the use of partnership or strategic alliances with
power marketers to include retail customers residing outside the City’s service territory.
Staff has initiated contact with a few energy marketers but efforts to-date have not come to
fruition. However, staffbelieves that continuing the process of searching for an appropriate
strategic partner will be beneficial. Final proposals from marketers will be brought to the
City Council for approval.
Due to customers’ preference in wanting one energy provider, staff recommends
authorization of extraterritorial gas and electric sales to existing customer facilities outside
the City.
On March 4, 1998, staff reviewed this proposal with the UAC.
On November 8, 1997, legislation (S. 1483) was introduced in Congress by Senator Frank
Murkowski (R-Alaska). This bill would eliminate the private use limitations on facilities
financed with tax-exempt bonds, for public power systems offering open access. But the
public power systems would have to surrender their right to issue tax-exempt bonds in the
future and agree to call all their outstanding tax-exempt bonds within a short period. The
specifics of the proposal remain to be explored by the staff and other public power
organizations. Since Congress is in recess until late January 1998, no action has began in the
bill. Public Power organizations believe that there is not a strong interest in Congress on the
bill.. Staff will closely follow and oppose this bill along with other public power utilities.
It should be noted that if outside sales are made by CPAU, It will be ensured that tax-exempt
bonds are not negatively impacted.
RESOURCE IMPACT
Existing personnel resources in the City and at Northern California Power Agency (NCPA)
are anticipated to be sufficient to implement this recommendation. The financial impacts
are uncertain and depend on a number of factors including sales volume and profit margin.
At present, staff estimates a $630,000 profit potential over three years. Expenses and
revenues will be tracked and reported periodically to the City Council.
CMR: 130:98 Page 4 of 5
POLICY IMPLICATIONS
This recommendation is consistent with the City Council’s March 17, 1997 policy guidelines
regarding electric restructuring. However, these recommendations also extend to the
provision of natural gas service to customers outside the service territory.
TIME LINE
Extraterritorial contracts will not be signed prior to FY98-99. However, if the City Council
approves staff’s recommendation, staff will initiate negotiations in March, 1998 with
customers for service beginning July 1, 1998.
ENVIRONMENTAL REVIEW
This program does not constitute a project for the purposes of the California Environmental
Quality Act
.Attachments
Attachment 1:
Attachment 2:
Attachment 3:
Attachment 4:
Attachment 5:
Resolution approving the Initiation of an Extraterritorial Energy Sales
Program
Economic Analysis
PG&E ESP Agreement
Standard Contract
UAC Draft Minutes
Prepared By:Girish Balachandran, Manager, Supply Resources
Tom Habashi, Assistant Director of Utilities
Approved By:
City Manager Approval:
ty Manager
CMR: 130:98 Page 5 of 5
ATTACHMENT 2
ECONOMIC ANALYSIS
Target Market and Potential
Staff examined the market potential for outside retail sales. The outside market has been defined
to be Palo Alto key customers’ sites in other Bay Area cities, and which are not in other munis’
service territories. RFPs from key customers and selective phone inquiries were used to estimate
the size of that market. The information gathered through the phone inquiries was coupled with
existing key customer data to develop a range for the levels of energy consumption at these outside
sites.
Profit Function
Staff established the profit potential to be a function of 1) availability of electricity below
market price; 2) estimated supply price margin; 3) administrative expenses associated with
marketing and managing outside sales contracts; and 4) estimated profit potential in bundling
commodity sales with energy services. Low, base and high values were developed for each
of the variables to develop a profit and cost ranges.
Administrative Expenses
Administrative expenses include start up and incremental costs for marketing, operations, stipply
management, and legal support. It is assumed that a three year program would be authorized. This
allows the distribution of start-up costs over three years. Start-up expenses include all the
development costs needed to bring the service to market. High, low and base values for each
expense item Were established by a panel of staff experts. On-going costs are the incremental costs
required to make an individual sales effort and to provide the operational, management, and legal
support for each sale. These were also given high, low, and base values by the panel.
Energy Services
The team identified a potential source of revenue from bundling energy services such as, energy
efficiency, risk management, technical consulting and auditing, with the commodity sales. Staff
members who had previously been involved in consulting, estimated the costs and mark up for these
services.
RESULTS
We assumed that profit potential would be highly sensitive to fluctuations in price margin, and
therefore examined profit potential under different price margins, in addition to different sales
volume scenarios.
CMR: 130:98
The preliminary analysis showed a profit potential for outside retail sales over a three year period.
The expected profit potential is $630,000.
CMR: 130:98
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THECITY OF PALO ALTO
APPROVING THE PROVISION OF ELECTRIC UTILITY
SERVICE TO CUSTOMERS LOCATED OUTSIDE OF THE
JVJRISDICTIONAL BOUNDARIES OF THE CITY OF PALOALTO
WHEREAS, in the exercise ~of powers granted under
Article XI, Section 9 of the California Constitution and California
statutes, a municipal utility has the right to provide electric and
natural gas utility services to inhabitants located inside and
outside of that municipal utility’s jurisdictional boundaries and
collect fees and charges therefor;
WHEREAS, from time to time, the City of Palo Alto ("City")
may develop light, heat or power in excess of its native load needs
which could be sold to customers located outside the City’s
jurisdictional boundaries whenever the City’s interests in
efficiently managing and utilizing its resources would be promoted;
WHEREAS,.on December i, 1997, pursuant to Resolution Number
7221, the Councll approved th~ City’s Direct Access Program topermit certain classes of the City, s electric utility customers to
negotiate with alternate suppliers of electricity, and such action
was taken pursuant to the powers vested in the City under the
California Constitution, -the Charter~of the City.of Palo Alto, the
Palo Alto Municipal Code and other City rules and regulations and
not pursuant to any other source of authority, including Assembly
Bill 1890;
WHEREAS, under Resolution No. 7221, the Council was
informed that the City could mitigate its potential losses of
electricity revenues that may arise under the Direct Access Program
by providing energy services to customers located outside of. the
C ty s 3urlsdlctlonal boundarles, ~f it is administratively,
financially, and legally feasible to engage in such services;
NOW, THEREFORE, the Council of the City of Palo Alto does
hereby RESOLVE as follows:
SECTION I. The City Council finds and declares that:
(A) Under the California Constitution, California
statutes and the Charter of the City of Palo Alto, the City has the
legal authority to sell or distribute light, heat or power in
excess of the needs of local inhabitants to inhabitants located
outside of the City’s jurisdictional limits;
(B) Under Assembly Bill 1890, the California
investor-owned utilities are required to open their electric
service territories to competition by in-state and out-of-state
energy suppliers, power marketers and other participants, and are
authorized to engage in competition with other investor-owned
utilities and municipal utilities;
(C) The implementation of the City’s Direct AccessProgram could lead to the loss of substantial amounts of electric
utility revenues, if the City’s industrial and commercial class of
customers, representing approximately 80 percent of the City’s
971215 syn 0071332
electric utility revenues,
suppliers of electricity;
should negotiate with alternate
(D) From time to time, the City may have light, heat
or power in excess of its native load requirements which could be
sold or distributed to inhabitants outside of the City’s
jurisdictional boundaries;
(E) Some of the City’s industrial and commercial class
of electric utility customers have requested that the City consider
providing power to their facilities located outside of Palo Alto’s
boundaries; and
(F) The Department of Utilities has and has access to
the personnel, administrative and technical resources to effect the
sale and distribution of excess light, heat and power outside of
the City’s boundaries.
SECTION ~. Effective July i, 1998, the City of Palo Alto
is hereby authorized to sell or distribute light, heat or power to
inhabitants in California, including industrial and commercial
customers, located outside of the jurisdictional boundaries o~ the
City of Palo Alto, whenever the City develops an excess of llght,
heat or power over and above the. amount which is necessary for theuse of the City’s electric util~ty customers. In the exercise of
such authority, the City Manager is hereby authorized to develop
and present for the Council’s consideration the utility rules and
regulations that shall govern the City’s sale or distribution of
light, heat or power outside of the jurisdictional boundaries of
the City.
SECTION 3. The Council finds that the adoption of this
resolution does not constitute a project for purposes of the
California Environmental Quality Act,and,therefore,noenvironmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
Mayor
City Manager
Director of"’ ud’illties
Acting-D[rect0r Of
Administrative Services
971215 syn 0071332
t’i "~al Cal. P.U.C. Sheet No.
¯ .Cal. P.U.C. Sheet No.Pacific Gas an, .actric Company
San Francisco, California
Cancelling
PACIFIC GAS AND ELECTRIC COMPANY
ENERGY SERVICE PROVIDER (ESP) SERVICE AGREEMENT
FORM NO. 79-948
(ATTACHED)
(N)
(N)
Advtce Letter No
Dectston No
27103 x
1716. E Issued by
97-10-087 Thomas E. Bottorff
V~ce President
Rates & Account Services
Date Filed
Effective
Resolution No.
December 1, 1997
Pacific Gas and Electric Company
ENERGY SERVICE PROVIDER (ESP) SERVICE
AGREEMENT
This Energy Service Provider (ESP) Service Agreement (this "Agreement") is made and entered
into as of this ~ day of ............... by and between"
" ("ESP"),
a organized and existing under the laws
of the state of , and "Pacific Gas and Eiectdc Company" (’PG&E"), a
corporation organized and existing under the laws of the state of California. From time to time,
ESP and PG&E shall be individually referred to herein as a "Party" and collectively as the
=Parties."
Section 1:
1.1
1.2
General Description of Agreement
This Agreement is a legally binding contract, The Parties named in this Agreement
are bound by the terms set forth herein and otherwise incorporated herein by
reference. This Agreement shall govem the business relationship between the
Parties hereto by which ESP shall offer electrical energy services, including, but
not limited to, account maintenance and billing services, electrical meter
installation, meter reading services and/or any other services that may be
approved by the California Public Utilities Commission (=CPUC") in Direct Access
transachons with customers in PG&E’s service territory (’Direct Access Services").
Each Party, by agreeing to undertake specific activities and.responsibilities for or
on behalf of customers, acknowledges that each Party shall relieve and discharge
the other Party of the responsibility for said activities and responsibilities with
respect to those customers. Except where explicitly defined herein (including
Attachment A hereto), the.definitions controlling this Agreement are contained in
PG&E’s applicable rules or in the relevant direct access tariff.
The form of this Agreement has been developed as part of the CPUC regulatory
process, was intended to conform to CPUC directions, was filed and approved by
the CPUC for use between PG&E and ESPs and may not be waived, altered,
amended or modified, except as provided herein or in the relevant direct access
tariff, or as may otherwise be authorized by the CPUC.
Section 2:
2.1
Representations
Each Party represents that it is and shall remain in compliance with all applicable
laws and tariffs, including applicable CPUC requirements.
Form No. 79-948
Page 1 of ] 5
Tariffs & Compliance
October 30,1997
2.2
2.3
2.4
Each person executing this Agreement for the respective Parties expressly
represents and warrants that he or she has authority to bind the entity on whose
behalf this Agreement is executed.
Each Party represents that (a) it has the full power and authority to execute and
deliver this Agreement and to perform its terms and conditions; (b) the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate or other action by such Party; and (c.) this agreement
constitutes such Party’s legal, valid and binding obligation, enforceable against
such Party in accordance with its terms.
Each Party shall (a) exercise all reasonable care, diligence and good faith in the
performance of its duties pursuant to this Agreement; and (b) carry out its duties in
accordance with applicable recognized professiona! standards in accordance with
the requirements of this Agreement.
Section 3:Term of Service
The term of this Agreement shall commence on the date of execution by both
Parties hereto (the =Effective Date") and shall terminate on the eadier of (a) the
date ESP informs PG&E that it is no longer operating as an ESP in PG&E’s
service territory; (b) the eadier termination pursuant to Section 4 hereof; or (c) the
effective date of a new ESP Service Agreement between the Parties hereto.
Notwithstanding the Effective Date of this Agreement, the ESP acknowledges that
=t may only offer Direct Access Services to customers effective January 1, 1998, or
such other date as may be directed by the CPUC for commencement of such
serv=ces by ESPs, and only after it has complied with all provisions of this
Agreement and PG&E’s applicable tadffs.
Section 4:
41
4.2
Events of Default and Remedy for Default
An Event of Default under this Agreement shall include either Party’s matedal
breach of any provision of this .Agreement, including those incorporated by
reference herein, and failure to cure such breach within thirty (30) calendar days of
receipt of wntten notice thereof from the non-defaulting Party; or such other pedod
as may be provided by this Agreement or PG&E’s direct access tadff.
In the event of such an Event of Default, the non-defaulting Party shall be entitled
(a) to exercise any and all remedies available under PG&E’s direct access tariff ;
(b) to the extent not inconsistent with PG&E’s direct access tadff, to exercise any
and all remedies provided for by law or in equity; and (c) in the event of a material
Event of Default, to terminate this Agreement upon wdtten notice to the other.
Party, which shall be effective upon the receipt thereof.
Form No. 79-.948, ’
Page 2 of ] .5
"l’ariffs & Complianc~
October 30.1997
4.3 Breach by any Party hereto of any provision of PG&E’s direct access tariff shall be
governed by applicable provisions contained therein and each ;Party will retain all
rights granted thereunder.
Section 5:
5.1
5.2
Billinq, Metering and Payment
Billing options and metering services which are available to ESP shal~ be as
described in PG&E’s direct access tariff, as stated in PG&E’s Electdc Rule 22.
Billing and metering options applicable to a particular customer shall be designated
in the Direct Access Service Request submitted by the ESP for such customer.
PG&E will bill and the ESP agrees to pay PG&E for all services and products
provided by PG&E in accordance with the terms .and conditions set forth in
PG&E’s direct access tariff, as stated in PG&E’s Electdc Rule 22 and PG&E’s rate
schedules. Any services provided, by the ESP to PG&E shall be by separate
agreement.between the Parties and are not a subject o,f this Agreement.
Section 6:
Section 7:
7.1
Limitation of Liability
Each ’Party’s liability to the other Party for any loss, cost, claim, injury, liability, or
expense, including reasonable attomeys’ fees, relating to or arising from any act or
¯ omission in its performance of this Agreement, shall be limited to the amount of
d=rect damage actually incurred,.except as provided for in this section. In no event
shall either Party ~be liable to the Other Party foi’~-any indirect, special,
consequential, or punitive damages of any kind whatsoever, Whether in contract,
tort or stnct hability, except in the event of an action covered by the Indemnification
prov=slons of Section 7 of this Agreement, in which event this Section 6 shall not be
apphcable
Indemnification
To the fullest extenf permitted by law, and subject to the limitations set forth in
SectIon 6 of this Agreement. each Party (the =Indemnifying Party") shall indemnify
and hold harmless the other Party, and its current and future direct and indirect
parent companies, affiliates and their shareholders, officers, directors, employees,
agents, servants and assigns (collectively, the "Indemnified Party") and at the
Indemnified Party’s option, the Indemnifying Party shall defend the Indemnified
Party from and against any and all claims and/0r liabilities for losses, expenses,
damage to property, injury to or death of any person, including, but not limited to,
the Indemnified Party’s employees and its affiliates’ employees; subcontractqrs
and subcontractors’ employees, or any other liability incurred by the Indemnified
Party, including reasonable expenses, legal and otherwise, which shall include
reasonable attorneys’ fees, caused wholly or in part by any negligent, grossly
Form No. 79-948’
Page 3 of ] .~
Tarff/z & Compliance
October 30.1997
7.2
7.3
negligent or willful act or omission by the Indemnifying Party, its officers, directors,
employees, agents or assigns adsing oLrt of this Agreement, except to the extent
caused wholly or in part by any negligent, grossly negligent or willful act or
omission of the Indemnified Party.
If any claim covered by Section 7.1 is brought against the Indemnified Party,
then the Indemnifying Party shall be entitled to participate in, and unless in the
opinion of counsel for the Indemnified Party a conflict of interest between the
.Parties may exist with respect to such claim, assu~me the defense of such claim,
with counsel reasonably acceptable to the Indemnified Party. If the Indemnifying
Party does not assume the defense of the Indemnified Party, or if a conflict
precludes the Indemnifying Party from assuming the defense, then the
Indemnifying Party shall reimburse the Indemnified Party on a monthly basis for
the Indemnified Partys defense through separate counsel of the Indemnified
Party’s choice. Even if the Indemnifying Party assumes the defense of the
Indemnified Party with acceptable counsel, the Indemnified Party, at its sole
option, may participate in the defense, at its own expense, with counsel of its
own choice without relieving the Indemnifying Party of any of its obligations
hereunder. In no event shall either Party be liable to the other Party for any
indirect, spec=al, consequential, or punitive damages of any kind whatsoever,
whether in contract, tort or strict liability.
The Indemnifying Party’s obligation to indemnify under this Section 7 shall
surv=ve termination of this Agreement, and shall not be limited in any way by any
hm=tat~on on the amount or type of damages, compensation or benefits payable
by or for the Indemnifying Party under any statutory scheme, including,-without
hm=tat=on, under any Workers Compensation Acts, Disability Benefit Acts or
other Employee Benefit Acts.
Section 8:
81
Assignment and Delegation
Ne=ther Party to this Agreement shall assign any of its rights or obligations under
th=s Agreement, except with the pdor wdtten consent of the other Party, which
consent shall not be unreasonably withheld or delayed. No assignment of this
Agreement shall reheve the assigning Party of any of its obligations under this
Agreement until such obligations have been assumed by the assignee. When duly
assigned in accordance with the foregoing, this Agreement shall be binding upon
and shall =nure to the benefit of the assignee and the assignor shall be relieved of
its r=ghts and obhgations. Any assignment in violation of this Section 8 shall be
void.
8.2 Notwithstanding the provisions of this Section 8, either Party may subcontract its
dut=es under this Agreement to a subcontractor, provided that the subcontracting
Party shall remain fully responsible as a principal and not as a guarantor for
performance of any subcontracted duties, shall serve as the point of contact
Form No. 79-94~
Page 4 of ] 5
Tariffs & Compliance
October 30,1997
between its subcontractor and the other Party, and shall provide the other Party
with thirty (30) calendar days’ prior wdtten notice of any such subcontracting,
which notice shall include such information about the subcontractor as the other
Party shall reasonably require, and provided further that each Party may
subcontract its obligation to provide Metering or Meter Reading Services under
this Agreement only to subcontractors who have complied with all certification or
registration requirements described in applicable law, CPUC rules and PG&E’s
direct access tadff. If either Party.subcontracts any of its duties hereunder, it
shall cause its subcontractors to perform in a manner which is in conformity with
that Party’s obligations under this Agreement.
Section 9:IDdependent Contractors
Each Party shall perform its obligations under this Agreement (including any
obligations performed by a.Party’s designees as permitted under Section 8 of
this Agreement) as an independent contractor.
Section 10:Entire Aqreement
This Agreement consists of, in its entirety, this Energy Service Provider Service
Agreement and all attachments hereto, all Direct Access Service Requests
submitted pursuant to~this Agreement and PG&E’s direct access tariff. This
Agreement supersedes all other agreements or understandings, wdtten or oral,
between the Parties related to the subject matter hereof. "This Agreement may be
modified from time to time only by an instrument in wdting,signed by both Parties.
Section 11"
11.1
Nondisclosure
Neither Party may disclose any Confidential Information obtained pursuant to this
Agreement to any third party, including affiliates of such Party, without the express
pnor wntten consent of the other Party. As used herein, the term =Confidential
Information" shall include, but not be limited to~ all business, financial, and
commercial information pertaining to the Parties, customers of either or both
Parties, suppliers for either Party, personnel of either Party, any trade secrets, and
other information of a similar nature, whether wdtten or in intangible form that is
marked propnetary or confidential with the appropriate owner’s name. Confidential
Information shall not include information known to either Party prior to obtaining the
same from the other Party, information in the public domain, or information
obtained by a Party from a third party who did not, directly or indirectly, receive the
same from the other Party to this Agreement or from a party who was under an
obligation of confidentiality to the other Party to this Agreement or information
developed by either Party independent of any Confidential Information. The
receiving Party shall use the higher of the standard of care that the receiving Party
Form No. 79-948 -
Page 5 of [ .5
Tariffs & Compliance
October 30,1997
11.2
uses to preserve its own confidential information or a reasonable standard of care
to prevent unauthorized use or disclosure of such Confidential.i.nformation. Each
receiving Party shall, upon termination of this Agreement or at any time upon the
request of the disclosing Party, promptly return or destroy all Confidential
Information of the disclosing Pa.rty then in its possession.
Notwithstanding the preceding, Confidential Information may be disclosed to any
govemmental, judicial or regulatory authority requiring such Confidential
Information pursuant to any applicable law, regulation, ruling, or order, provided
that: (a) such Confidential Information is submitted under any applicable
provision, if any, for confidential treatment by such governmental, judicial or
regulatory authority; and (b) prior to such disclosure, the other Party is given
prompt notice of the disclosure requirement so that it may take whatever action it
deems appropriate, including intervention in any proceeding and the seeking of
any injunction to prohibit such disclosure.
Section 12:
Section 13:
131
Enforceability
If any provision of this Agreement or the application thereof, is to any extent held
invalid or unenforceable, the remainder of this Agreement and the application
thereof, other than those provisions which have been held invalid or
unenforceable, shall not be affected and shall continue in full force and effect and
shall be enforceable to the fullest extent permitted by law or in equity.
Notices
Except as otherwise provided in this Agreement, any notices under this Agreement
shall be =n wdting and shall be effective upon delivery if delivered by (a) hand; (b)
U.S Mail, first class postage pre-paid, or (c) facsimile, with confirmation of receipt
to the Parties as follows:
If the notice is to ESP:
Contact Name:
Business Address:
Facsimile:
Form No. 79-948
Page 6 of ] 5
Tariffs & Comphance
October 30,1997
If the notice is to PG&E:
Contact Name: Director of ESP Relations
Business Address:
Account Services Department
Mail Code H 28 B
P.O. Box 770000
,San F..ra.ncisco, CA 94177
13.2
13.3
Section 14: "
Each Party shall be entitled to specify as its properaddress any other a6dress in
the United States upon wdtten notice to the other Party.
Each Party shall designate on Attachment A the person(s) to be contacted with
respect to specific operational matters relating to Direct Access service. Each
Party shall be entitled to specify any change to such .p.e. rson(s) upon wdtten notice
to the other Party. ~ -"
Time of Essence
The Parties expressly agree that time is of the essence for all portions of this
Agreement.
Section 15:
151
15.2
Dispute Resolution
The form of this Agreement has been filed With ~-nd approved by the CPUC as part
of PG&E’s applicable tariffs. Except asprovided in Section 15.2 and 15.3, any
d=spute arising between the Parties relating to interpretation of the provisions of
th~s Agreement or to the performance of PG&E’s obligations hereunder (including
the performance of Billing Services, Metedng Services and MDMA Services by
PG&E) shall be reduced to wdting and .referred to’the Parties’ representatives
identified on Attachment A for resolution. Should such a dispute adse, the parties
shall be required to meet and confer in an effort to resolve their dispute. Pending
resolution, the Parties shall proceed diligently with the performance of their
respective obligations under this Agreement, except if this Agreement has been
terminated under Section 4.2. If the Parties fail toreach an agreement within a
reasonable period of time, the matter shall, upon demand of either Party, be
submitted to resolution before the CPUC in accordance with the CPUC’s rules,
regulations and procedures applicable to resolution of such disputes.
Any dispute adsing between the Parties relating to interpretation of the provisions
Form No. 7~-948
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October 30,1997
15.3
154
of this Agreement or to the performance of the ESP’s obligations hereunder
(including the performance of Billing Services, Metedng Se.r;vices and MDMA
Services by the ESP) shall be reduced to writing and referred to the Parties’
representatives identified on Attachment A for resolution. Should such a dispute
adse, the parties shall be required to meet and confer in an effort to resolve their
dispute. Pending resolution, the Parties shall proceed diligently with the
performance of their respective obligations under this Agreement, except if this
Agreement has been terminated under Section 4.2. If the Parties fail to reach an
agreement within a reasonable pedod of time, the parties may mutually agree to
pursue mediation or arbitration to resolve such issues,
Notwithstanding the provisions of’Paragraph 15.1 and 15.2 above: (a) all disputes
between the Parties relating to the payment by the ESP of any PG&E fees or
charges shall be subject to the provisions of PG&E’s applicable tariffs governing
disputes over customer bills; (b) all disputes between the Parties regarding
Competition Transition Charges payable by direct access customers or the ESP on
behalf of such customers shall be subject to the provisions of PG&E’s applicable
tariffs; and (c) PG&E may pursue available remedies for. unauthorized electrical
use by the ESP in a court of competent jurisdiction.
If the dispute, involves a request for damages, parties are notified that the
Commission has no authority to award damages. To resolvesuch issues, the
parties may mutually agree to pursue mediation or arbitration to resolve such
=ssues, or if no agreement is reached, to pursue other legal remedies that are
available to the parties.
Section 16:Applicable Law and Venue
Th~s Agreement shall be interpreted, governed by and construed in accordance
w~th the laws of the State of California, and shall exclude any choice of law rules
that direct the application of the laws of another jurisdiction, irrespective of the
place of execution or of the order in which the signatures of the parties are affixed
or of the place or places of performance. Except for matters and disputes with
respect to which the CPUC is the initial proper venue for dispute resolution
pursuant to applicable law or this Agreement, the federal and state courts
located in San Francisco County, California shall constitute the sole proper
venue for resolution of any matter or dispute hereunder, and the Parties submit
to the exclusive jurisdiction of such courts with respect to such matters and
d=sputes.
Section 17:Force Majeure
Neither Party shall be liable for any delay or failure in the performance of any part
of this Agreement (other than obligations to pay money) due to any event of force~
Form No, 79-g~,8
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Tariffs & Compliance
October 30,1997
majeure or other cause beyond its reasonable control, including but not limited to,
unusually severe weather, flood, fire, lightning, epidemic, quarantine restriction,
war, sabotage, act of a public enemy, earthquake,, insurrection, riot, civil
disturbance, strike, work stoppage caused by jurisdictional and similar disputes,
restraint by court order or publ!c authority, or action or non-action by or inability to
obtain authorization or approval from any governmental authority, or any
combination of these causes, which bY the exercise of due diligence and foresight
such Party could not reasonably have been expected to avoid and which by the
exercise of due diligence is unable to overcome. It is agreed that upon the Party
so affected giving written notice and reasonably full particulars of such-force
majeure to the other Party within a reasonable time after the cause relied on, then
the obligations of the Party, so far as they are affected by the event of force
maieure, shall be suspended during the continuation of such inability and
circumstance and shall, so far as possible, be remedied with all reasonable
dispatch, in the event of force majeure, as described herein, both Parties shall
take all reasonable steps to comply with this Agreement and PG&E’s applicable
tariffs despite occurrence of a force majeure event.
Section 18:
,I~.I,
Unauthorized Use of Energy (Energy Theft)
The ESP represents and warrants that for each of its Customers, and ’at all times
during which it provides Direct Access services as an Energy Service Provider,
the ESP shall completely, accurately, and in a timely manner account for each of
its Customer’s loads with a duly authorized Scheduling Coordinator. Load data
not accounted for in this manner may provide grounds for termination of this
Agreement. For verification purposes only, PG&E shall have complete access to
the ~clent~ty of the Scheduling Coordinator and the load data provided to it by the
ESP Such information is to remain confidential, and shall not be disclosed to
any unauthorized person.
PG&E shall notify the ESP immediately and the ESP shall notify PG&E
~mmed~ately of any suspected unauthorized energy use. The Parties agree to
preserve any evidence of unauthorized energy use. Once unauthorized energy
use =s suspected, PG&E, in its sole discretion, may take any or all of the actions
permitted under PG&E’s applicable tariffs.
Section 19:Not a Joint Venture
Unless specifically stated in this Agreement to be otherwise, the duties,
obhgations, and liabilities of the Parties are intended to be several and not joint
or collective. Nothing contained in this Agreement shall ever be construed to
create an association, trust, partnership or joint Venture or to impose a trust or
partnership duty, obligation, or hability on or with regard to either Party. Each
Party shall be hable md=vidually and severally for its own obligations under this
Form No. 79-948"
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Tadffs & Compliance
October 30,1997
Section 20:
Agreement.
Conflicts Between this Agreement and PG&E’s Direct Access Tariff
Should a confiict exist-or develop between the provisions of this Agreement and
PG&E’s direct access tadff, as approved by the CPUC, the provisions of PG&E’s
direct access tariff shall prevail.
Section 21 :
21.1
21.2
Amendments or Modifications
Except as provided in Section 21.2, no amendment or modification shall be
made to this Agreement, in whole or in part, except by an instrument in writing
executed by authorized representatives of the Parties, and no amendment or
modification shall be made by course of performance, course of dealing or usage
of trade.
This Agreement may be subject to such changes or modifications as the CPUC
may from time to time direct or necessitate in the exercise of its jurisdiction,’ and
the Parties may amend the Agreement to conform to changes directed or
necessitated by the CPUC. In the event the Parties are unable to agree on the
required changes or modifications to thiS Agreement, their dispute shall be
resolved in ’accordance with the provisions of Section 15 hereof or, in the
alternatIve, ESP may.elect to terminate this Agreement upon written notice to
PG&E, which shall be effective upon the receipt thereof. PG&E retains the right
to unilaterally file with the CPUC, pursuant to the CPUC’s rules and regulations,
an apphcat~on for a change in PG&E’s rates, charges, classification, service or
rules, or any agreement relating thereto.
Section 22:Billin.cl Options Offered to End-Use Customers by ESP
Check which billing options (as described in PG&E’s direct access tariff ) ESP
intends to provide its Customers under this Agreement.
Consolidated Billing by PG&E.
Consolidated Billing by the ESP.
If ESP is selecting this billing
option, (a) ESP must submit, a
credit application on the form
supplied by PG&E; and (b) the only
method for notify=ng ESP of PG&E
charges will be electronic.
Form No. 79-9~8
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Tarfffs & Compliance
October 30.1997
Separate PG&E and ESP Bills.
ESP may change these elections from time to time in compliance with the
relevant direct access tariff upon prior written notice to PG&E. The Direct
Access Service Request (DASR) for each Direct Access customer will specify
which billing option will apply to that customer. If ESP specifies in any DASR
any’ billing option that has not been checked above, the DASR will be rejected.
Section 23:Me..ter...Options Offered to End-Use Customers by ESP
Check which meter options (as described in PG&E’s direct access tariff) ESP will
offer for some or all of its Customers served under this Agreement.
~ESP will provide Houdy Meters.
~ESP will offer Hourly Meter Installation Services.
~ESP will offer Hourly Meter Reading Services.
ESP may change these elections from time to time in compliance with PG&E’s
direct access tariff upon prior written notice to PG&E. The Direct Access Service
Request (DASR) for each Direct Access customer will specify which metering
option will apply to that Customer. If ESP specifies in any Direct Access Service
Request any metering option that has not been checked above, the DASR will be
rejected. .~
Section 24: Audits
24 1
24.2
PG&E and the ESP shall each retain such specific records as may be required to
support the accuracy of meter data provided in their respective consolidated
bilhngs. When either Party reasonably believes that errors related to metering or
bilhng activity may have occurred; a Party may request the production of such
documents as may be required to vedfy the accuracy of such metering and
consolidated billing. Such documents shall be provided within ten (10) business
days of such request. In the event the requesting Party, upon review of such
documents, continues to believe that the other Party’s duty to accurately meter
and provide consolidated billing for usage has been breached, the requesting
Party may direct that an audit be conducted. PG&E and the ESP shall designate
their own employee representative or their contracted representative to audit the
other party’s records. ..
Any such audit shall be undertaken by PC&E, the ESP, or their contracted
representative at reasonable times without interference with the audited Party’s
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Tatfff~ & Comphance
October 30,1997
business operations, and in compliance with the audited Party’s secudty
procedures, PG&E and the ESP agree to cooperate fully with any such audit.
24.3 Specific records to support the accuracy of meter data provided in the
consolidated billings may require examination of billing and metedng support
documentation maintained by subcontractors. PG&E and the ESP shall include
a similar clause in their agreements with their subcontractors reserving the right
to designate their own employee representative, or "their contracted
representative to audit records related to consolidated billing to Direct Access
Customers.
24.4
24.5
The auditing Party will notify the audited Party in wdting of any exception taken
as a result of an audit. The audited Party shall refund the amount of any
undisputed exception to the auditing Party within ten (10) days. If the audited
Party fails to make such payment, the audited Party agrees to pay interest,
accruing monthly, at a rate equal tothe pdme rate plus two percent (2%) of Bank
of America NT&SA, San Francisco, or any successor institution, in effect from
time to time, but not to exceed the maximum contract rate permitted by the
applicable usury laws of the State of California. Interest will be computed from
the date of written notification of exceptions to the date the audited Party
reimburses the auditing Party for any exception. The cost of such audit shall be
paid by the auditing Party;~ provided, however, that in the event an audit verifies
overcharges of five percent (5%) or more, then the audited Party shall reimburse
the auditing Party for the cost of the audit.
This right to audit shall extend for a period.of three (3) years following the date of
final payment under this Agreement. Each party and each subcontractor shall
reta=n all necessary records and documentation for the entire length of this audit
period
Section 25: Miscellaneous
25.1
25.2
Unless otherwise stated in this Agreement: (a) any reference in this Agreement
to a sect=on, subsection, attachment or similar term refers to the provisions of
this Agreement; (b) a reference to a section includes that section and all its
subsections; and (c) the words "include," "includes," and "including" when used in
this Agreement shall be deemed in each case to be followed by the words
"without limitation." The Parties agree that the normal rule of construction to the
effect that any ambiguities are to be resolved against .the drafting Party shall not
be employed in the interpretation of this Agreement
The provisions of this Agreement are for the benefit of the Parties and not for any
other person or third party beneficiary, The provisions of this Agreement shall not
impart rights enforceable by any person, firm or organization other than a Party or
Form No. 79-948
Page 12 of l .~
Tariffs & Compliance
October 30,1997
25.3
25.4
a successor or,assignee of a Party to this Agreement.
The descriptive headings of the vadous sections of this Agreement have been
inserted for convenience of reference only and shall in no way define, modify or
restrict any of the terms and pr.ovisions thereof.
Any waiver at any time by either Party of its rights with respect to a default under
this Agreement, or with respect to any other matter adsing in connection with this
Agreement, shall not be deemed a waiver with respect to any other or subsequent
default or matter and no waiver shall be considered effective unless in writing.
25.5 Each Party shall be responsible for paying its own attorneys’ fees and other costs
associated with this Agreement, except as provided in Sections 6 and 7 hereof. If
a dispute exists hereunder, the prevailing Party, as determined by the CPUC, or as
may otherwise be determined by the dispute resolution procedure contained in
Section 15 hereof, if used, or by a court of law, shall be entitled to reasonable
attorneys’ fees and costs.
25.6
25 7
To the extent that the CPUC has a, right under then-current law to audit either
Party’s compliance with this Agreement or other legal or regulatory requirements
pertaining to Direct Access transactions, that Party shall cooperate with such
audits. Nothing in this Section shall be construed as an admission by either Party
with respect to the dght of the CPUC to conduct such audits or the scope thereof.
Except as otherwise provided in this .Agreement, all dghts of termination,
cancellation or other remedies in this Agreement are cumulative.Use of any
remedy shall not preclude any other remedy in this Agreement..-.
The Parties have executed this Agreement on the’dates indicated below, to be effective upon
the later date.
On Behalf of ESP On Behalf of PG&E
BYi By:
Name:.Name:
Title:Title:
Date:Date:
Form No. 79-948
Page 13 of ] 5
Tariffs & Compliance
October 30,1997
A. Definitions:
ATTACHMENT A
Billing Services - The consolidated billing services described in PG&E’s direct access tariff
which are provided by PG&E and/or ESP.
Consolidated ESP Bill - The consolidated bill prepared and presented by ESP to an end-use
customer which includes the customer’s ESP Charges and PG&E Charges.
Consolidated PG&E Bill - The consolidated bill prepared and presented b~ PG&E to an end-
use customer which includes the Customer’s ESP Charges and PG&E Charges.
Direct Access Customer - An end-use customer located within PG&E’s service territory who
purchases Direct Access Services through the ESP.
ESP Charqes - Charges for Direct Access Services provided by the ESP.
Meterinq Services - The meter installation, maintenance and related services described in
PG&E’s direct access tariff which are provided by PG&E and/or ESP.
Meter Reading Services - The meter reading and related services described in PG&E’s direct
access tariff which are provided bY PG.&E and/or ESP.
PG&E Charqes - Charges (a) for services provided by PC&E; or (b) which are energy-related
and which are approved by the CPUC or the Federal Energy Regulatory Commission (including
any Competition Transition Charges or Fixed Transition Amount Charges owing to PG&E or its
affihates, as those terms are defined under the California Public Utilities Code). Fixed Transition
Amount Charges are also referred to as Trust Transfer Amount (TTA) Charges.
B. Contact Persons {Section 13.3):
1.Billing Services
PG&E Contact: ESP Billinq 4151972-5825
ESP Contact:
o Meterinq and Meter Reading Services
PG&E Contact: ESP Meterinq Event Group 4151972-5363
ESP Contact:
Attachment A
Form No. 79.948
Page 1 of 2
Tariffs & Compliance
October 30,1997
C. Parties’ Representatives (Section 15,1):
PG&E Representative:
Manager of Account Services
Account Services Department
Mail Code H 28 B
P.O. Box 770000
San Francisco, CA 94177
ESP Representative:
Contact Name
Business Address
Attachment A
Form No, 79-948
Page 2 of 2
Tariffs & Compliance
October 30.1997
EXTRATERRITORIAL SERVICES CONTRACT
This EXTRATERRITORIAL SERVICES CONTRACT, dated as of
, is made and entered into by and between the
CITY OF PALO ALTO and , in
reference to the following facts:
A. The CITY supplies and distributes electrical energy
and energy services to Palo Alto residents and businesses at prices
which are adopted by resolution and established under rates set
forth in the City of Palo Alto Utility Rules and Regulations.
B. Substantial changes in federal and California law
have resulted in the deregulation of the natural gas and electric
utility industries. In July 1994, the. CITY first, offered to
eligible industrial customers and large commercial customers an
opportunity to acquire natural gas transportation service without
purchasing natural gas from the CITY. On March 24, 1997, the City
Council responded to the developments prompted by the passage of
Assembly Bill 1890 in September, 1996 by adopting Resolution No.
7657. It was superseded by Resolution No. 7720, adopted December
I, 1997, in which direct negotiations between the CITY’s electric
utility customers and alternative suppliers of electricity were
authorized.
C. On February __, 1998, the City Council adopted
Resolution No. __, approving the sale and provision of excess
energy (electricity and natural gas) and related energy services to
inhabitants located outside of the jurisdictional boundaries of the
City of Palo Alto, effective July i, 1998. The CITY has determined
that the provision of Extraterritorial Service, initially, will be
made to the CITY’s eligible industrial and large commercial
customers that have facilities located outside of the boundaries of
Palo Alto.
D. The CUSTOMER has requested, and has been determined
to be eligible to receive, Extraterritorial Service.
THE PARTIES AGREE, as follows:
ARTICLE i. SPECIAL TERMS
I.i The special terms that are denoted by initial or
full capitalized letters in this Contract and the Confirmation
Schedules shall have the meanings setforth in EXHIBIT "A", unless
the context clearly indicates otherwise.
1.2 The CITY shall have the right, but not the
obligation, to adopt standard terms and conditions governing the
CITY’s use of its Utility System, and every part thereof, at any
time during the Term hereof by ordinance or resolution, or both, as
a result of changes in federal, state or local law or policy.
980304 syn 0071360
1
1.2.1 In the event that the CITY adopts standard terms
and conditions governing the CITY’s use of its Utility System which
(i) would materially and adversely affect the rights or obligations
of the CUSTOMER with respect to the provision of Extraterritorial
Service, then, upon the request of the CUSTOMER, the Parties shall
in good faith confer and attempt to renegotiate the Provisions of
this Contract which are affected thereby.
1.2.2 If the Parties are unable to reach mutual’
agreement on such renegotiated Provisions within thirty (30) Days
after the Day on which the CUSTOMER’s election to renegotiate is
communicated, in writing, to the CITY, the CUSTOMER will have the
right for a period of an additional sixty (60) Days to terminate
this Contract by giving at least thirty (30) Days prior written
notice of termination to the CITY. Any such termination shall be
deemed a termination by the CUSTOMER for convenience and the
CUSTOMER shall be obligated to pay to the CITY, or shall be
entitled to receive from the CITY, respectively, the difference
between the amount that the CUSTOMER would have paid in the absence
of this Contract and the amount that the CUSTOMER actually paid
under this Contract. Unless otherwise agreed to by the Parties
during the course of renegotiations, the Charges in effect and~
applicable to the sale of Energy and the rendering of Energy~
Services hereunder shall~ continue in effect during the period of
renegotiation and notice under the Provisions of this Article.
1.2.3 Subject to Subsection 1.2.2 above, to the degree
or extent any special term in this Contract-is, directly, in
conflict with the standard terms and conditions adopted by the CITY
following the execution of this Contract, the applicable Provision
that imposes the higher duty or standard shall govern.
ARTICLE 2.TERM AND TERMINATION
2.1 This Contract shall be binding on the Parties on the
Effective Date.
2.2 The Initial Term of this Contract shall begin on the
Commencement Date and shall be for a period of (__)
years, unless this Contract is terminated earlier in accordance
with the Provisions hereof. The expiration or termination of this
Contract shall not affect or excuse the performance of either Party
under any Provision hereof that by its terms survives any such
termination or expiration.
2.3 The Initial Term may be extended by the Parties, by
mutual agreement, for a period of (__) years, provided,
however, any Extension Term may be terminated earlier in accordance
with the Provisions hereof. The City Manager, acting on behalf of
the CITY and with the approval of the City Attorney as to form,
will approve the application of the CUSTOMER to extend the Initial
Term, provided that:
980304 syn 0071360
2
2.3.1 The CUSTOMER gives to the Utilities Director,
acting on behalf of the CITY, a written request to extend the
Initial Term at least ninety (90) Days prior to its expiration;
2.3.2 The CUSTOMER submits any and all documents and
information reasonably requested by the CITY in support of the
written ~request to extend the Term, pays any and all CITY
processing fees and other Charges and complies with all other CITY-
established terms, conditions and procedures pertaining to the
request to extend the Term;
2.33 The CUSTOMER is not then in default under the
Provisions hereof on the Day that the CUSTOMER submits the written
request to extend the Initial Term; and
2.3.4 The Parties mutually agree to be bound by all
other Provisions, if any, governing the rights and obligations of
the Parties during the Extension Term.
ARTICLE 3.EXTRATERRITORIAL SERVICES
3.1 Subject to the Provisions hereof, beginning on the
Commencement Date, the CITY agrees to sell Energy to the CUSTOMER,
and the CUSTOMER agrees to purchase Energy from the CITY as more
fully described in the Confirmation Schedule(s) set forth in
EXHIBIT "C". The CUSTOMER covenants and agrees to purchase Energy
within one or more bands that establish the maximum and minimum
purchases of Energy. If the CUSTOMER takes delivery of more than
the maximum amount of Energy as identified in EXHIBIT "C", then the
CITY will sell-the amount of Energy in excess of the maximum amount
to the CUSTOMER at the market clearing price. If the CUSTOMER takes
delivery of less than the minimum amount as identified in EXHIBIT
"C", then the CUSTOMER will pay the CITY as if .it had consumed such
minimum amount of Energy. Subject to the Provisions hereof, the
Energy provided by the CITY to the CUSTOMER shall be firm and
uninterruptible and shall be delivered in accordance with the
requirements of the ISO. The Provisions of this Contract,
including the Energy Charges, shall apply only to the CUSTOMER’s
purchase of Energy for use at the Facilities. To the extent that
the CUSTOMER wishes to purchase Energy for other purposes or~ for
facilities other than the Facilities, including sale to a third
party, such purchases are not covered by this Contract.
3.2 With respect to each Facility, all Energy to be sold
by the CITY to the CUSTOMER for use at that Facility shall be
delivered to the CUSTOMER’s Meter at the Delivery Point.
3.3 The CITY shall arrange, be responsible for, and pay
for any costs or charges incurred by or associated with the~
delivery of the Energy to the Delivery Point. The CUSTOMER shall
arrange, be responsible for, and pay for any costs or charges
incurred for or associated with the delivery of the Energy from the
Delivery Point.
980304 .syn 0071360
3.4 The CITY shall schedule the delivery of the Energy
to the Delivery Point. The Parties shall coordinate their
Scheduling activities and notices to one another, giving the CITY
sufficient time to meet the deadlines and requirements of the ISO,
as needed, for the purchase and delivery of Energy. Each Party
shall use commercially reasonable efforts to avoid the imposition
of any Penalties assessed as a result of a Party’s failure to
comply with the ISO’s scheduling requirements. When a Party’s
actions or inactions are responsible for the imposition ~ of
Penalties, that Party shall bear the responsibility for~remedying,
to the extent possible, the situation creating such Penalties and
for reimbursing and holding the other Party harmless .for and in
respect of such Penalties.
3.5 As soon as practicable after the Effective Date, and
in any event at least thirty (30) Days prior to the Commencement
Date, each Party shall by written notice designate one or more
Authorized representatives, who shall be authorized to act on its
behalf with respect to Scheduling and the resolution of any
disputes or objections under Sections 3.7, 3.8, and 3.9. Either
Party may change the designation of one or more of its Authorized
representatives by giving written notice to the other Party. Except
as expressly provided herein, the Authorized representative Of a
Party shall have no authority to modify or execute any. amendment to
this Contract.
3.6 As between the Parties, the CITY shall be deemed to
be in exclusive possession and control (and be responsible for any
damages or injury caused thereby) of the Energy prior to its
delivery to the Delivery Point, and the CUSTOMER shall be deemed to
¯ be in exclusive possession and control (and be responsible for any
damages or injury caused thereby) of the Energy at and from the
Delivery Point. Title to the Energy and all risks associated
therewith shall pass to the CUSTOMER at the Delivery Point. The
CITY shall indemnify and hold the CUSTOMER harmless from and
against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, attorneys’ fees) arising
from the use or misuse of the Energy prior to the transfer of title
and the risk of loss to the CUSTOMER, and the CUSTOMER shall
indemnify and hold the.CITY harmless from and against any and all
claims, losses, liabilities, damages, and expenses (including,
without limitation, attorneys’ fees) arising from the use or misuse
of the Energy after title and the risk of loss has passed to the
CUSTOMER.
3.7 Unless excused by an event of Force Majeure, an
Event of CUSTOMER Default, or the CUSTOMER’s failure to accept the
delivery of Energy, if the CITY fails to deliver all or part of the
Energy required by the CUSTOMER to each of the Facilities, the
CUSTOMER shall be permitted (during the period of and only to the
extent of the CITY’s failure to meet these requirements) to
purchase Energy from alternate suppliers, and the CITY shall pay
the CUSTOMER, on the date payment would otherwise be due to the
CITY, an amount equal to the product of the amount of Energy
supplied to the CUSTOMER for such Facilities by an entity mther
980304 syn 0071360
4
than the CITY and the Replacement Price, plus any additional costs
incurred by the CUSTOMER in obtaining delivery of the Energy to the
Delivery Point, less any costs that the CUSTOMER avoids as a
consequence of the CITY’s failure to perform. In no event shall
the Replacement Price include any Charges, Penalties, ratcheted
Demand Charges, or similar charges, or any charges or costs
assessed or imposed by any Person in order to recoup the expenses
and liabilities associated with stranded investments.
3.8 Unless excused by an event of Force Majeure, an
Event of CITY Default, or the CITY’s failure to deliver Energy, if
the CUSTOMER fails to purchase all of the Energy set forth in
EXHIBIT "C", the CUSTOMER shall pay the CITY, on the date payment
would otherwise be due, an amount equal to the product of (I) the
amount of Energy utilized by the Facilities that was not delivered
by the CITY and (2) the positive difference, if any, obtained by
subtracting the Sales Price from the Energy Charge.
3.9 The CUSTOMER’s expected usage of Energy while this
Contract is in effect shall be established in EXHIBIT "C".
ARTICLE 4.EXCEPTIONS TO EXTRATERRITORIAL SERVICES
4.1 The CITY shall be temporarily excused from the
obligation to sell Energy to the CUSTOMER upon the occurrence of an
event of Force Majeure for the period of time that the CITY is
temporarily unable to deliver Energy, upon the failure of the
CUSTOMER to perform a material obligation which is a condition
precedent to the CITY’s obligation of performance, or as may be
required by Law.
4.2 If either Party is rendered unable by any event of
Force Majeure to carry out, in whole or in part, its obligations
under this Contract, then, during the pendency of such event but
for no longer period, the obligations of theParty affected by the
event (other than the obligation to make payments then due or
becoming due) shall be suspended to the extent required. Neither
the CUSTOMER’s inability, economically, to use the Energy purchased
hereunder nor the CITY’s ability to sell Energy to a market at a
more advantageous price constitutes an event of Force Majeure. The
Party affected by an event of Force Majeure shall provide the other
Party with written notice setting forth the full details thereof as
soon as practicable after the occurrence of such event and shall
take all reasonable measures to mitigate or minimize the effects of
such event of Force Majeure. This Provision shall not require the
CITY to deliver, or the CUSTOMER to receive, any Energy at points
other than the Delivery Point.
ARTICLE .5. "ENERGY C~ARGES
5.1 The Energy Charges, including, without limitation,
Ancillary Charges, Connection Charges, Demand Charges, Distribution
Charges, Energy Service ~Charges, Metering Charges, Reservation
Charges, Scheduling Charges, Storage Charges and Standby Service
Charges, shall be set forth in one or more Confirmation Schedules.
9g0304 V/n 0071360
5.2’ The CITY will be responsible for paying the UDC
charges associated with delivery of Energy to the Delivery Point.
These costs will be passed through to the CUSTOMER as part of the
CITY’s bill and reimbursed by the CUSTOMER.
5.3 The Ancillary .Charges and Scheduling Charges are
included in the Energy~Charge and will not be separately charged to
the CUSTOMER.
5.4 The CUSTOMER shall be responsible for all Taxes
(other than income taxes) and Charges imposed on the CITY on
account of its provision of Energy to the CUSTOMER under this
Contract. These costs will be passed through to the CUSTOMER as
part of the CITY’s bill and shall be reimbursed by the CUSTOMER.
5.5 The Energy Charges to the CUSTOMER will be adjusted
to reflect any increase or decrease in Taxes (other than income
taxes), fees or other charges that occur after the Effective Date
and that apply to the CITY as a consequence of its sale of Energy
to the CUSTOMER under this Contract. The CITY will make reasonable
efforts, as practicable, to assist the CUSTOMER in its efforts to
mitigate the effects of any increase in such Taxes, fees, or other
charges, such as providing analytical~support.
5.6 The Energy Charges to the CUSTOMER for each month
shall include an additional amount equal to the amount of all
charges imposed on the CITY by any Agency regulating the sale or
provision of Energy to any of the Facilities, where the purpose of
such charges is to recover the stranded costs of public utilities,
the costs of social programs previously implemented or funded by
public utilities, or any other charge resulting from the
restructuring of the electric utility industry to allow competition
among electricity suppliers for sales of electricity to retail
customers, including, but not limited to,the competitive
transition charge.
ARTICLE 6. METERING
6.1 The Energy and the Peak Demand imposed by each
Facility shall be metered separately at each Facility.
6.2 The CUSTOMER shall provide all Meters, including
meter recorders and related equipment, which are necessary to
measure the Energy delivered to the CUSTOMER and the Peak Demand
under this Contract, and shall allow the CITY to have
contemporaneous remote access to pulse meter data. At the request
of the CUSTOMER, the CITY will obtain and sell to the CUSTOMER such
Meters, including meter recorders and related equipment. Any such
purchase by the CITY to be resold to the CUSTOMER shall be subject~
to the CITY’s prior approval. The applicable purchase price will
be the CITY’s out-of-pocket cost to purchase such items, plus any
and all applicable Taxes. The CUSTOMER shall provide and pay all
initial and continuing costs of any communications facilities
(includingtelephone lines) reasonably necessary for the CITY to
have contemporaneous remote access to the pulse meter data.
980304 syn 0071360
6
6.3 The CUSTOMER shall test the metering system at each
Facility within one (I) month of the Effective Date and at least
annually thereafter. The CITY may upon five (5) Days prior written
notice perform or cause to be performed additional tests of the
metering equipment at any Facility at its own expense. If, upon
testing, the metering system at a particular Facility is found to
be inaccurate by more than one-half of one percent (0.5%), the CITY
and the CUSTOMER shall mutually determine, using Prudent Utility
Practices, the correct amount of Energy delivered to the CUSTOMER
for the actual period during which inaccurate measurements were
made. If the period of the inaccuracy of the metering system cannot
be accurately determined, it shall be deemed to have begun on the
date that is midway between the date on which such system was found
to be inaccurate and the date ofthe last testing of such system.
The difference~between the previous payments by the CUSTOMER for
the period of inaccuracy and the recalculated amount shall be
refunded to the CUSTOMER or offset against, or added to, the next
payment to the CITY under this Contract, as the case may be.
ARTICLE 7 BILLING AND PAYMENT
7.1 Within seven (7). days following the end of each
Billing Period and in accordance with guidelines imposed by the
ISO, the CITY will render a consolidated invoice to the CUSTOMER
for Energy provided by the CITY to each of the Facilities in that
Month.
7.2 The CUSTOMER shall pay each invoice in full on or
before the Payment Due Date. Payment shall be made by wire
transfer to an account designated, in writing, by the CITY’s
Administrative Services Director to the CUSTOMER or in such
alternative manner as may be agreed upon in writing by the Parties.
7.3 Amounts which are unpaid by the CUSTOMER beyond the
Payment Due Date shall accrue interest daily at the Overdue Rate
from, and including, the Payment Due Date to, but excluding, the
date upon which payment is made.
7.4 Each Party and its authorized representative(s) has
~the right, at its sole expense, during normal business hours and
upon five (5) Days prior written notice, to examine the records of
the other Party to the extent it is reasonably necessary to verify
the accuracy of any meter reading, invoice, charge, or computation
(each a "Calculation") made pursuant to this Contract. If any such
examination reveals any inaccuracy in any such Calculation, the
necessary adjustments in such Calculation, any invoice based upon
such Calculation, and the payments thereof will be made promptly
and shall bear interest calculated at the Overdue Rate from, and
including, the date the overpayment or underpayment was made to,
but excluding, the date upon which payment is made. No adjustment
for any Calculation, invoice or payment will be made, unless a
Party objects, in writing, to the accuracy of that Calculation,
invoice or payment prior to the lapse of one (I) year from the
rendition thereof. All disputed amounts shall be paid when due in
accordance with Section 7.2 and, if such dispute is resolved in
980304 ~m 0071360
7
whole or in part against the CITY, then the amount of any
overpayment will be promptly refunded to the CUSTOMER or credited
to its next monthly bill from the CITY in accordance with this
Section 7.4.
ARTICLE 8.CONFIDENTIALITY
8.1 The Parties agree that (i) the CUSTOMER will not
disclose to any Person the terms and conditions of thi~ Contract
and (ii) the CITY wili not disclose to any Person any Confidential
Information or the Load information provided to the CITY by the
CUSTOMER under this Contract, during the term of this Contract and
for a period of two (2) years following any expiration or
termination of this Contract without the prior written consent of
the other Party. A Party may disclose such information (i) to its
Affiliates and to its and its Affiliates’ directors, officers,
employees, agents, lenders or advisors, provided that the Party
shall inform such representatives of the confidential nature of
such information and its obligations hereunder and shall cause such
representatives to maintain such information in confidence in
accordance with this Contract; or (ii) when it is required by Law,
or as may be required in response to any summons or subpoena or in
connection with any litigation or any administrative proceeding
before a local, state,-or federal regulatory agency. Before a
Party shall disclose any such information as a result of legally
compelled disclosure, such Party will notify the other Party of the
required disclosure and shall assist the other Party in attempting
to obtain a protective order maintaining the confidentiality of the
information to be disclosed. Each Party agrees to be responsible
for the actions and disclosures of any of its Representatives with
respect to the information accorded confidential treatment by this
Section 8.1.
ARTICLE 9. INSURANCE
9.1 During the Term hereof, the CUSTOMER, at its sole
cost and expense, shall obtain and maintain or cause to be obtained
and maintained the poiicies of insurance in the amounts specified
in the Confirmation Schedule(s), or if such requirements are not
.addressed in the Confirmation Schedule(s), in the requirements of
theIS0, if any, or the Utility Rules and Regulations, including,
without limitation, workers compensation and employers liability
insurance,~ commercial general liability insurance, and fire all
risk replacement cost insurance.
ARTICLE I0~INDEMNITY AND LIMITATIONS
I0.I Each Party shall indemnify,~ protect,~ defend (with
counsel reasonably acceptable to the other Party) and hold harmless
the other Party, its council members, directors, officers,
trustees, employees, partners, principals, contractors, agents and
representatives, from and against any and all administrative and
judicial proceedings and orders, charges, claims, costs, damages,
demands, expenses, fines,, judgments, liabilities, losses,
penalties, and remedial actions of any kind (collectively,
980304 ~ 0071360
8
"Damages"), including, without limitation, reasonable attorney’s
fees and the costs of defense arising, directly or indirectly, in
whole or in part, out of such Party’s activities or such Party’s
property described in this Contract and not arising out of the sole
negligence or willful misconduct of the other Party. The other
Party shall be liable only for the Damages arising from its
negligence or willful misconduct, and shall not be responsible for
any Damages occurring by reason of anything done or omitted to be
done by any Third Party who is not an agent or ’representative of
~that Party.
ARTICLE Ii. WAIVER
ii.i The consent by a Party to any act by the other
Party shall, not be deemed to imply consent or to constitute the
waiver of a breach of any Provision hereof or a continuing waiver
of any subsequent breach of the same or any other Provision, nor
shall any custom or practice which may arise between the Parties in
the administration of any part of the Provisions hereof be
construed to waive or lessen the right of a Party to insist upon
the performance by the other Party in strict accordance with the
Provisions hereof.
11.2 The CUSTOMER waives any and all claims or causes of
action against the CITY, or its council members, officers,
employees, and agents, which it may now or hereafter have at any
time for any economic or non-economic loss or damage suffered by
the CUSTOMER as a result of a curtailment of Energy sold to the
CUSTOMER, where the curtailment is beyond the reasonable control of
the CITY, except as such claim or cause of action may arise from
the active negligence or the willful misconduct of the CITY, its
council members, officers, employees, or agents. In the event of
a Curtailment, the CITY shall use reasonable efforts to obtain
Energy from alternate energy suppliers.
ARTICLE 12.ASSIGNMENT
12.1 The CUSTOMER may assign or transfer, pursuant to a
merger or sale of all or substantially all of the assets or stock
of the CUSTOMER, all of its rights and obligations under this
Contract to any Person, so long as the surviving or purchasing
entity assumes, in writing, all of the obligations of the CUSTOMER
under this Contract, and the CITY, acting by and through the City
Manager, confers its approval, which shall not be unreasonably
withheld. The CUSTOMER may assign some or all of its rights
hereunder to any Affiliate of the CUSTOMER, provided that the
CUSTOMER gives thirty (30) Days prior written notice to the City
Manager and the City Attorney and obtains the written approval of
the City Manager acting on behalf of the CITY, which consent shall
not be unreasonably withheld.
12.2 Any assignment, transfer, license, conveyance,
sale, hypothecation or encumbrance hereof by the CUSTOMER not
authorized hereunder shall be null and void, and, at the option of
the CITY, acting by and through the City Manager with the approval
980304 s’yn 0071360
9
of the City Attorney, shall constitute an Event of CUSTOMER
Default.
12.3 The CUSTOMER, as assignor, and any Person,
including an Affiliate, as assignee, to whom the rights and
obligations of the CUSTOMER under this Contract are assigned shall
be and remain jointly and severally liable for the performance of
all obligations of the CUSTOMER under this Contract.~
ARTICLE 13.REPRESENTATIONS AND WARRANTIES
13.1 The CUSTOMER represents and warrants:
13.1.1 It is a corporation duly organized and validly
existing and in good standing under the Laws of the State of
. It has all requisite corporate power and authority
to own or lease its property, real and personal, and operate its
business as and where it is now being conducted.
13.1.2 It has the power and authority to enter into this
Contract and perform its obligations hereunder. The execution,
delivery and performance hereof have been duly authorized by all
necessary corporate actions and proceedings.~ This Contract is (and
any other instrument, document or writing to be executed and
delivered by the CUSTOMER pursuant hereto will be) legal, valid and
binding obligations of the CUSTOMER, and enforceable against~ the
CUSTOMER in accordance with the Provisions hereof except as may be
limited by applicable Laws.
13.1.3 The execution and delivery hereof and any other
instrument, document or writing contemplated hereby by the CUSTOMER
will not conflict with or violate or constitute a breach or default
under the articles of incorporation or bylaws of the CUSTOMER .
13.1.4 All information, financial statements, records,
reports, resolutions, certifications and other documents or
writings which will be submitted by the CUSTOMER pursuant to the
Provisions hereof will be true and correct at the time such
information, financial statements, records, reports, resolutions,
certifications and other documents or writings are submitted or
made available to the CITY.
13.2 The CITY represents and warrants:
13.2.1 It is a municipal corporation duly organized and
validly existing and in good standing under the Laws of the State
of California. It has all requisite corporate power and authority~
to own or lease its property, real and personal, and operate its
business as and where it is now being conducted.
13.2.2 It has the power and authority to enter into this
Contract and perform its obligations hereunder. The execution,
delivery and performance hereof have been duly authorized by all
necessary actions and proceedings. This Contract is (and any other
instrument, document or writing to be executed and delivered by the
980304 ~yn 0071360
10
CITY pursuant hereto will be) legal, valid and binding obligations
of the CITY, and enforceable against the CITY in accordance with
the Provisions hereof except as may be limited by applicable Laws.
13.2.3 The execution and delivery hereof and any other
instruments, documents or writings contemplated hereby by the CITY
will not conflict with~or violate any provision of the Charter of
the City of Palo Alto or the Palo Alto Municipal Code.
13.2.4 To the extent required by Law, it will obtain the
authorization of the CPUC or FERC, or both, to provide Energy
within and outside of the jurisdictional boundaries of Palo Alto,
and to operate as an energy service provider.
13.3 EXCEPT AS EXPRESSLY PROVIDED wRREIN, THE CITY MAKES
NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO MERCHANTABILITY OR FITNESSFOR ANY
PARTICULAR PURPOSE.
ARTICLE 14. DEFAULT AND REMEDIES FOR DEFAULT
14.1 This Contract may be terminated by the ~CITY upon
the occurrence of an Event of Default by the CUSTOMER under this
Contract ("Event of CUSTOMER Default"), and the CUSTOMER fails to
cure the same within thirty (30) Days or such longer period of time
as is provided below, after receipt of notice thereof from the
CITY, or, when the cure reasonably requires more than thirty (30)
Days, the failure of the CUSTOMER to commence to cure within such
thirty (30) Days and thereafter diligently and continuously
prosecute such cure to completion, including, without limitation,
any of the following Events of Default:
14.1.1 Failure to pay any Energy Charges, when due,
unless the CUSTOMER in good faith disputes all or any portion of
such Energy Charges, in which case the CUSTOMER shall pay only the
undisputed portion, if any, until such dispute is resolved;
14.1.2 Failure to pay any Tax or Charge, when due, or
the failure to perform any other obligation requiring the payment
of money under the Provisions hereof, and the failure continues for
a period of forty-five (45) Days, unless the CUSTOMER in good faith
disputes all or any portion of such Tax or Charge, in which case
the CUSTOMER shall pay only the undisputed portion, if any, until
such dispute is resolved;
14.1.3 Failure to observe, perform or comply with any
material Provision hereof required to be observed, performed or
complied with by the CUSTOMER;
14.1.4 Assignment or transfer of its interest in this
Contract, whether voluntarily or by operation of Law, in violation
of the Provisions hereof;
980304 syn 0071360
II
14.1.5. General assignment of its assets for the benefit
of its creditors;
14.1.6 Filing by or against the CUSTOMER a petition to
have the CUSTOMER adjudicated a bankrupt, or a petition for a
reorganization or arrangement under any Law relating to bankruptcy
or insolvency, unless the same is dismissed within one hundred
eighty (180) Days after the same is instituted;
14.1.7 A Person other than the CITY obtains an order or
decree in any court of competent jurisdiction enjoining or
prohibiting the CUSTOMER from performing under this Contract, and
such order or decree is not vacated within one hundred eighty (180)
Days after the granting thereof, unless the CUSTOMER upon the
written demand of the CITY indemnifies the CITY against loss or
damage suffered by the CITY as a result of the CUSTOMER’s
nonperformance pursuant to such order or decree; and
14.1.8 Any representation, warranty, or statement made
by the CUSTOMER in this Contract that shall prove to have been
incorrect in any material respect when made.
If.there is an Event.of CUSTOMER Default, the CITY shall give
notice to the CUSTOMER at least thirty (30) Days before any
termination shall become effective.
14.2 This Contract may be terminated by the CUSTOMER
.upon the occurrence of an Event of Default by the CITY ("Event of~
CITY Default"), including, without limitation:
14.2.1 Failure to observe, perform or comply with any
material Provision hereof required to be observed, performed or
complied with by the CITY, and the CITY fails to cure the same
within thirty (30) Days, or, when the cure reasonably requires more
than thirty (30) Days, the failure of th~ CITY to commence to cure
within such thirty (30) Days and thereafter diligently and
continuously prosecute such cure to completion;
14.2.2 General assignment of its assets for the benefit
of its creditors, or the filing by or against the CITY a petition
to have the CITY adjudicated a bankrupt, or a petition for a
reorganization.or arrangement under any Law relating to bankruptcy
or insolvency, unless the same is dismissed within one hundred
eighty (180) Days after the same is instituted, unless the CITY
upon the written demand of the CUSTOMER indemnifies the CUSTOMER
against loss or damage suffered by the CUSTOMER as a result of the
CITY’s non-performance pursuant to such order or decree; and
14.2.3 A Person other than the CUSTOMER obtains an order
or decree in any court of competent jurisdiction enjoining or
prohibiting the CITY from performing under this Contract, and such
order or decree is not vacated within one hundred eighty~(180) Days
after the granting thereof, unless the CITY upon the written demand
of the CUSTOMER indemnifies the CUSTOMER against loss or damage
980304 syn 0071360
12
suffered by the CUSTOMER as a result of the CITY’s non-performance
pursuant .to such order or decree.
If there is an Event of CITY Default, the CUSTOMER shall give
notice to the CITY at least thirty (30) Days before any
termination shall become effective.
14.3 In addition to all other rights and remedies
provided by Law or otherwise provided in this Contract, to which
the Non-Defaulting Party may resort cumulatively, or in the
alternative, the Non-Defaulting Partymay:
14.3.1 Except as otherwise provided herein, keep this
Contract in effect and enforce all of its rights and remedies
hereunder, including the right to payment of Energy Charges and
other Penalties and Charges as they may become due, or the right to
delivery of Energy, by appropriate legal action;
14.3.2 Seek the specific performance hereof by the
Defaulting Party or other rights or remedies at law or in equity;
and
14.3.3 Terminate for cause this Contract by giving
notice of termination.
14.4 NOTWITHSTANDING ANY OTHER PROVISION OF THIS
CONTRACT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
CONSEQUENTIAL, EXEMPLARY, INDIRECT, INCIDENTAL, LIQUIDATED,
PUNITIVE OR SPECIAL DAMAGES, OR LOST REVENUE, LOST PROFITS OR OTHER
BUSINESS INTERRUPTION DAMAGES, WHETHER BY STATUTE, IN TORT OR
CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE, TO ANY PERSON
ARISING OUT OF THIS CONTRACT OR THE PERFORMANCE OR NONPERFORMANCE
OF ANY PROVISION OF THIS CONTRACT, EVEN IF SUCH PARTY ~AS BEEN
INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. THE CITY’S TOTAL
LIABILITY FOR ANY CLAIM OR DEMAND OF THE CUSTOMER ARISING OUT OF
THIS CONTRACT S~ALL NOT EXCEED THE AMOUNT OF THE ENERGY CHARGES’
PAID BY THE CUSTOMER UNDER THIS CONTRACT TO T~E CITY PRIOR TO THE
DATE OF CLAIM OR DEMAND.
14.5 Neither the CUSTOMER nor the CITY shall be indefault in the performance of any obligations under this Contract
when a failure of performance shall be due to an event of Force
Maj eure.
¯14.6 Neither the CUSTOMER nor the CITY shall be relieved
of its obligation to perform if such failure is due to causes
arising out of its own negligence or due to removable or remediable
causes which it fails to remove or remedy within a reasonable time
period.
14.7 Either the CUSTOMER or the CITY, if rendered unable
to fulfill any of its obligations under this Contract by reason of
an event of Force Majeure, will give prompt written notice of such
fact to.the other and shall exercise due diligence to remove such
inability with all reasonable speed.
980304 ~ 0071360
13
14.8 Notwithstanding anything to the contrary herein,
the Parties’ obligations under Sections 3.6, 3.7, 3.8, Article 5,
Section 6.3, Article 7 and 8, Section 14.4, and Article 16 shall
survive the termination or expiration of this Contract.
14.9 Each Party agrees that it has a duty to mitigate
damages and covenants that it will use commercially reasonable
efforts to minimize any damages it may incur as a result of the
other Party’s performance or non-performance of this Contract.
ARTICLE 15.NOTICE
15.1 All notices which shall or may be given pursuant to
this Contract shall be in writing and delivered by the United
States Postal Service, by means of private express delivery
systems, or by facsimile transmission, provided a copy of the same
is followed by delivery by the United States Postal Service or by
private express delivery systems, as follows:
CITY:City of Palo Alto
250 Hamilton Avenue
-P. O. Box 10250
Palo Alto, CA 94303
. Attn.: City Clerk
Telephone No.: (650) 329-2571
Copy to:City of Palo Alto
250 Hamilton Avenue
P. O. Box 10250
Palo Alto, CA 94303
Attn.: Director of Utilities
Telephone No.: (650) 329-2277
Copy to:City of Palo Alto
250 Hamilton Avenue
P. O. Box 10250
Palo Alto, CA 94303
Attn.: Manager, Supply Resources Group
Telephone No.: (650) 329-2689
Telecopier No.: (650) 326-1507
CUSTOMER:
Attn.:
Telephone No.: ( )
Telecopier No.: ()
Copy to:
Attn.:
Telephone No.: ( )
Telecopier No.: ( )
980304 syn 0071360
14
Notices hereunder shall be effective upon delivery to the
addressee.
ARTICLE 16.MISCELLANEOUS,, PROVISIONS
16.1 This Contract contains the entire understanding
between the Parties with respect to the subject matter herein.
There are no representations, warranties, agreements or
understandings (whether oral or written) between the Parties
relating to the subject matter hereof which are not fully expressed
herein. This Contract may not be amended except pursuant to a
written instrument signed by the Parties. This Contract shall be
binding upon and inure to the benefit of the successors and
permitted assignees of the Parties. The Article headings hereof
are inserted for convenience of reference only, are not a part
hereof and shall have no effect on the construction or
interpretation hereof. This Contract may be executed in any number
of counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument. All
exhibits, Confirmation Schedules and amendments thereto referred to
in this Contract and any addenda, attachments, and schedules which
may, from time to time, be referred to in any duly executed
amendment to this Contract are by such reference incorporated in
this Contract and shall be deemed a part hereof.
16.2 This Contract shall be governed by and construed in
accordance with the Laws of the State of California without regard
to its conflicts of laws rules or principles. In the event that
suit is brought by a Party, the Parties agree that trial of such
action shall be vested exclusively in the state courts of
California, County of Santa Clara, or in the United States District
Court, Northern District of California, in the County of Santa
Clara. If any Provision is held by a court of competent
jurisdiction in a final judicial action to be void, voidable,, or
unenforceable, such Provision shall be deemed severable from the
remaining Provisions and shall in no way affect the validity of the
remaining portions hereof.
16.3 Each Party and its counsel have reviewed this
Contract. Accordingly, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the construction and interpretation
hereof.
16.4 Time is of the essence. For the purposes hereof,
the time in which an act is to be performed shall be computed by
excluding the first Day and including the last. If the time in
which an act is to be performed falls on a Saturday, Sunday, or any
Day observed as a official holiday by the CITY, the time for
performance shall be extended to the following Business Day.
980304 s’yn 0071360
15
IN WITNESS WHEREOF, this Contract is executed by the duly
appointed representatives of the Parties on the date first above
stated in the city of Palo Alto, County of Santa Clara, California.
APPROVED AS TO FORM:,CITY OF PALO ALTO
Senior Asst. City Attorney City Manager
APPROVED:
Director of Utilities
By:
Its:
Taxpayer I.D. No.
[Signature to be notarized]
SUMMARY OF EXHIBITS AND ATTACHMENTS
EXHIBIT "A"SPECIAL TERMS
EXHIBIT "B"CUSTOMER FACILITIES
EXHIBIT "C"LOAD INFORMATION
EXHIBIT "D"ENERGY CHARGES
CONFIRMATION SCHEDULE NO. 1
980304 syn 0071360
16
EXHIBIT "A"
SPECIAL TERMS
"Administrative Services Director" means the individual
designated as the director of administrative services under Section
2.08.150 of Chapter 2.08 of Title 2 of the Palo Alto Municipal
Code, and any Person who is designated the representative of the
director of administrative services.
’~ffillate"means (i) any Person or entity that, directly
or indirectly, owns, controls or holds with the power to vote fifty
percent (50%) ~or more of the outstanding voting rights of the
CUSTOMER, (ii) any Person or entity fifty percent (50%) or more of
the outstanding voting securities of which is, directly or
indirectly, owned, controlled or held with power to vote by the
CUSTOMER, (iii) any Person or entity who is a director or executive
officer of a Person or entity which is an affiliate thereof under
(i) or (ii), (iv) any Person or entity that, directly or
indirectly, through one or more intermediaries, is under common
control with the CUSTOMER, or (v). any general partner or limited
partner of a Person or entity that, directly or indirectly, owns,
controls or holds with power to vote eighty percent (80%) or more
of the outstanding voting rights of the CUSTOMER. For the purposes
of (iv) above, a Person or entity shall be deemed under common
control with the CUSTOMER 0nly if the Person or entity that
exercises such common control ~owns, controls or holds twenty-five
(25%) or more of the outstanding voting rights of both the CUSTOMER
and any such other Person or entity.
"Agency" means any local, county, state or federal
governmental body or quasi-governmental body, including, without
limitation, the CPUC, the FERC and any joint powers agency, but
excluding the CITY and any board, commission or council of the
CITY.
"Ancillary Charges" means the charges for Energy Services
offered by the CITY to all Customers, including, without
limitation, Balancing Service, Backup Generation Service, Load
Monitoring Service, Scheduling Coordination Service, Voltage
Support Service and Standby Services, as more fully described in
one or ~more Confirmation Schedules to this Contract.
"Average Daily Quantity" or "ADQ" means the quantity of
Energy purchased by the CUSTOMER from one or more Energy Suppliers
on a daily basis in each Month, which the CITY is required to
deliver to one or more of the Delivery Points, as more fully
described in one or more Confirmation Schedules to this Contract.
"Average Demand" means the average metered demand of the
CUSTOMER determined over a specified period of time, as described
in one or more of the Confirmation Schedules.
"Average MonthlyQuantlty" or "AMQ" means the quantity Of
Energy purchased by the CUSTOMER on a Monthly basis in each
9~0304 syn 0071362
calendar year, which the CITY is required to deliver to one or more
of the Delivery Points, as more fully described in one or more the
Confirmation Schedules to this Contract.
"Backup Generation Services" means the Capacity and Energy
Services provided to a CUSTOMER to replace the loss of its
generation sources and to cover that portion of Demand that exceeds
the supply of generation.
"Balancing Service" means a type of Energy Services that
may be.provided by the CITY to accommodate the difference between
the CUSTOMER’s consumption of the quantity ofnatural gas that is
received at one or more of the Delivery Points and the quantity of
natural gas purchased by the CITY on behalf of the CUSTOMER, as
more fully described,- if applicable, in one or more of the
Confirmation Schedules.
"Billing Period"means the period of time between the
times and dates on which’any of the CUSTOMER’s Meters is read for
billing purposes, as more fully described in one or more of the
Confirmation Schedules, or, if none is stated, each Month. In the
event that the Effective Date or the date of termination occurs on
a Day other than the first day of a Month, "Billing Period" shall
mean, for such Month or Months only, the period from the Effective
Date through the end of the Month during which the Effective Date
occurs or the period from the beginning of the Month during which
the date of termination occurs through~ the date of termination,
respectively.
"Business Day" means any Day, except a Saturday, Sunday,
or any Day observed as a legal holiday by the CITY.
"Capacity" means the total quantity of power that can be
transmitted over the applicable portions of a transmission network
or other infrastructure for a specified period of time.
"Charge" means any assessment, cost, fee or levy, other
than an Energy Charge or a Tax.
"CITY" means the government of the City of Palo Alto, a
chartered city and a municipal corporation duly organized and
validly existing under the Laws of the State of California, with a
principal place of business located at 250 Hamilton Avenue, Palo
Alto, County of Santa Clara.
"City Attorney" means the individual designated as the~
city attorney of the CITY under Section 2.08.120 of Chapter 2.08 of
Title 2 of the Palo Alto Municipal Code, and any Person who is
designated the representative of the city attorney.
"City Clerk" means the individual designated as the city
clerk of the CITY under Section 2.08.110 of Chapter 2.08 of Title
2 of the Palo Alto Municipal Code, and any Person who is
designated the representative of the city clerk.
980304 syn 0071362
2
"City Manager" means the individual designated as the city
manager of the CITY under Section 2.08.140 of Chapter 2.08 of Title
2 of the Palo Alto Municipal Code, and any Person who is
designated the representative of the city manager.
"Confidential Information" means information concerning
the CUSTOMER that is designated as or marked confidential and (I)
is protected as a trade secret under the Laws of the state of
California or pursuant to a written agreement of confidentiality,
(2) pertains to the business of the CUSTOMER that is known and made
available only to the CUSTOMER or its Affiliates, or both, and (3)
is considered confidential and privileged information under the
Provisions hereof. It does not mean information that (1) is or may
become generally known in the trade or business of the CUSTOMER or
its Affiliates, or both, (2) is received by the CITY in good faith
from a Third Party who has the right to disclose such information
and who has not received such information, directly or indirectly,
from the CUSTOMER or its Affiliates, or both, (3) is in the
possession of the CITY or generally known to the CITY prior to the
Commencement Date hereof, or (4) is required to be disclosed to the
CITY as a condition precedent to any action to be taken by the
CITY.
"Confirmation" means a written notice confirming ~the
details of a specific Transaction for the purchase of Energy or the
rendering of Energy Services as set forth in a Confirmation
Schedule.
"Confirmation Deadline" means forty-eight (48) hours after
a Party receives a Confirmation.
"Confirmation Schedule" means a written confirmation of
a Transaction involving the purchase of Energy.
"Contract"means this Extraterritorial Services Contract
between the City of Palo Alto and .
"Contract Price" means the sum total of any and all Energy
Charges pursuant to the execution of a Transaction.
"Contract Year" means a period of twelve (12) consecutive
Months, beginning on the Commencement Date, and every twelve (12)
consecutive Months thereafter.
"Commencement Date" means the Day on which the CITY is
permitted by Law to supply to the CUSTOMER, and the CUSTOMER is
permitted by Law to receive from-the CITY, Energy at all~ of the
Facilities.
"CPUC" means the State of California Public Utilities
Commission and any successor agency or agencies.
"CUSTOMER"means (Name), a corporation duly organized and
validly existing under the Laws of the State of (fill in), with a
principal place of business located at (Street Address and City),
980304 s3,n 0071362
3
and its directors, officers, employees, partners, principals,
agents and contractors and its successors and permitted assignees.
"Day" means.any calendar day, unless a Business Day is
specified, commencing at 12:00:00 a.m. Pacific Standard Time on a
calendar day and ending at 12:00:00 a.m. Pacific Standard Time on
the following calendar day.
"Defaulting Party" means+a Party who commits a material
breach and is in default of this Contract.
"Delivery Point" means the place or location at which the
CUSTOMER’s Meter at the Facility is interconnected with the UDC’s
distribution facilities.
"Demand" means the level of Energy, expressed in MCFs
(natural gas) or Kilowatts or Megawatts (electricity),
respectively, that the CITY is required to deliver to the Facility
at a specified period of time, as more fully described in one or
more of the Confirmation Schedules. ~
"Demand Charge" means the price charged by the CITY to
meet the CUSTOMER’s Demand, as more fully described in one or more
of the Confirmation Schedules.
"Department of Utilities" means the City of Palo,
Department of Utilities, which represents the City of Palo Alto in
utilities matters.
"Distribution Charges" means the Charges imposed by the
CITY for the transportation of Energy from any supply point on the
UDC distribution network to one or more of the Delivery Point.
"Effective Date" means the date on which this Contract is
executed by the Parties.
"Energy" means the quantity of electricity, measured in
Kilowatt-Hours (kWh), or natural gas, measured in therms, or both,
that is delivered by the CITY to one or more of the Delivery
Points, as more fully described in one or more of the Confirmation
Schedules, including any Energy-related services.
"Energy Charge" means the price of an Energy product that
is delivered to the CUSTOMER, as more fully described in one or
more of the Confirmation Schedules.
"Energy Supplier" means the Person or entity which is
engaged in the business of selling Energy, as described in one or
more of the Confirmation Schedules.
"Event of Default" means any Provision described in
Article 14 which entitles the Non-Defaulting Party to exercise the
rights set forth in this Contract, or by Law, upon the occurrence.
of a default by the Defaulting Party.
980304 syn 0071362
"Extension Term" shall have the meaning set forth
Section 2.3.
UExtraterritorial Services~ means the provision of Energy
to an inhabitant having a facility located outside of the
jurisdictional boundaries of Palo Alto.
"Facilities" means the real property, building facilities,
and other improvements and appurtenances thereon occupied by the
CUSTOMER outside of the jurisdictional boundaries of Palo Alto, at
which one.or more of the Delivery Points is located, in existence
either at the Commencement Date or during the Term hereof, as more
fully described in one or more of the Confirmation Schedules.
"FERC" means the Federal Energy Regulatory. Commission.
"Force MaJeure" means the occurrence of any event on or
after the Effective Date and during the Term hereof that is not
within the reasonable control of the Party claiming suspension ~(the~
"Claiming Party"), and that, by the exercise of due diligence, the
Claiming Party is unable to overcome or to avoid or cause to be
avoided, and which has a material adverse effect on the provision
or delivery or acceptance of Energy, or the design, construction,
installation, management, operation, testing, use or enjoyment of
the Utility System or the Facilities, including, without
limitation, an Act of God, an act of a superior governmental
authority, an act of a public enemy, action or restraint by court
order or public or governmental authority (so long as the Claiming
Party.has not applied for or assisted in the application for, and
has opposed where and to the extent reasonable, such government
action); changes in applicable laws, rules and regulations that
prevent in whole or in part the Claiming Party from performing its
obligations; and failure of either Party to be granted or maintain
a necessary or appropriate regulatory approval (so long as the
Claiming Party has taken reasonable action to obtain or continue
such regulatory approval); civil disturbance, earthquake, fire,
floods, a labor dispute or strike or a boycott which could not be
reasonably contemplated by the Party affected thereby, a labor,
fuel or material shortage, loss of transmission or transportation
services, sabotage, interruption by a Transportation Provider,
unless the Claiming Party caused such interruption.
"Improvement"means any addition, alteration, betterment,
construction or modification to the Utility System or the
Facilities.
2.2
"Initial Term" shall have the meaning set forth in Section
"ISO" means the California Independent Service Operator
Corporation, a California nonprofit corporation with a principal
place of business in Folsom, California.
"Kilowatt~ or "kW" means a unit of measurement of power
equal to 1,000 watts.
980304 m!n 0071362
"Kilowatt-Hour" or "kWh" means a unit of measurement of
power consumption of 1,000 watts for a period of one hour.
"La~’means any administrative or judicial act, decision,
bill, certificate, charter, code, constitution, opinion, order,
ordinance, policy, procedure, rate, regulation, resolution, rule,
schedule, specification, statute, tariff, or other requirement of
any district, local, municipal, county, joint powers, state, or
federal agency, or any other Agency having joint or several
jurisdiction over the Parties to this Contract, in effect either at
the Commencement Date or during the Term hereof, including, without
limitation, any regulation or order of an official or quasi-
official entity or body governing the applicable service provided
by the CITY, including the Provisions of this Contract, to which a
Customer may be subject or bound.
"Letter of Credit" means an irrevocable transferable
standby letter of credit issued by a major United States commercial
bank or a foreign bank with a United States branch .office with such
.bank having a credit rating of at least "A-" from S&P or "A3" from
Moody’s and being in a form reasonably acceptable to the Party in
whose favor the letter of credit is issued.
"Load" means the quantity of Energy required by the
CUSTOMER over a specific~period of time, or the amount of power
delivered or required at any specific point on the Utility System.
"Load Monitoring Services" means services which entail,
without limitation, the assessment of the functions, operation and
performance of the CUSTOMER’s power facilities and a review of the
efficiency of electricity consumption over one or more periods of
time.
"Loop Flow"means the difference between the path or paths
on which the Parties have agreed that power will be delivered to
the CUSTOMER and the actual path or paths on which such power is
delivered.
"Loss" means the amount of power expressed as a percentage
that is not delivered by the Energy supplier to the CUSTOMER on
account of ambient conditions existing at the time of transmission.
~arket-based Energy" means Energy, the price of~ which is
established on the open market at the California border (in the
case of natural gas) or on the NYMEX (in the case of electricity),
or other comparable index.
"Maximum Daily Quantity" or, "MDQ" means the maximum
quantity of natural gas that is purchased by the CUSTOMER and is
scheduled for delivery each Day by the CITY to one or more of the
Delivery Points.
"Megawatt" or "MW" means a unit of measurement of power
equal to 1,000 KW. ,
980304 .syn 0071362
"MCF means a unit of measurement of the volume of natural
gas equal to 1,000 cubic feet.
"Megawatt-Hour" or "MWH" means a unit of measurement of
power consumption of i, 000 KW for a period of one hour.
"Meter" means the equipment or instrument that measures
the quantity of electricity or natural gas, or both, delivered by
the CITY to one or more of the Delivery Points.
"Metering Charge" means the Charge(s) for the purchase,
installation, testing, maintenance, repair and removal of metering
Or other similar data gathering equipment related to the energy use
of the Customer.
"Minimum Daily Quantity" means the minimum quantity of
natural gas~that is purchased by the CUSTOMER and is scheduled for
delivery each Day by the CITY to one or more of the Delivery
Points.
"MMBtu" means a unit of measurement of the quantity of
natural gas equal to 1,000,000 Btu.
~onth" means a Month, commencing at 12:00:00 a.m. Pacific
Standard Time on the first Day of the Month and ending at 12:00:00
a.m. Pacific Standard Time on the first Day of the following Month.
"Moody’s" means Moody’s Investor Services, Inc. or its
successors and assigns.
"Multiplier" means a factor which is used to convert a
quantity of natural gas measured at one or more of the CUSTOMER’s
Meters into heat or thermal energy for billing purposes, and is
used to convert the average number of Therms per i00 CF of natural
gas consumed over a specified period of time.
"Nomination" means the quantity of natural gas ordered bythe CUSTOMER for delivery during a specified period of time.
"Non-Defaulting Party" means any Party who is not a
Defaulting Party.
"NYMEX" means the New York Mercantile Exchange.
"Off-Peak Demand" means a level of Demand Of the CUSTOMER during
a specified period of time of a Day, usually commencing at Ii:00
p.m. of the first Day and expiring at 6:00 a.m. of the following
Day.
"Overdue Rate" means the prime rate or reference rate of
interest per annum established by Citibank, N.A., New York, New
York, or its successor, on the date of the invoice, plus two
percent (2%) per annum, or the maximum interest rate permitted by
Law, whichever is less.
980304 syn 0071362
"Parties" means the CITY and the C"JSTOMER.
"Party" means the CITY or the CUSTOMER.
"Payment Due Date" means the date which is thirty (30)
Days after end of a Billing Period on which the CUSTOMER is
required to pay an invoice in full.
"Peak Demand" means the maximum level of Demand of the
CUSTOMER measured in kilowatts (kW) during a specified period of
time of a Day, usually commencing at 6:00 a.m. and expiring at
Ii:00 p.m. on the same Day.
"Penalties"means any and all Charges levied by the ISO.
"Person" means any individual, for profit corporation,
nonprofit corporation, limited liability company, partnership,
limited liability partnership, joint venture, business trust, sole
proprietorship, or other form of business association.
"Provision" means any agreement, circumstance, clause,
condition, covenant, fact, objective, qualification, restriction,
recital, reservation, representation, term, warranty, or other
stipulation in this Contract or in Law that defines or otherwise
controls, establishes, or limits the performance required or
permitted by any Party hereto. All Provisions, whether covenants
or conditions, shall be deemed to be both covenants and conditions.
"Receipt Point" means a place or location at which
electricity or natural gas is received by the CITY from its Energy
Supplier.
"Replacement Price" means the positive difference, if
any, obtained by subtracting the Energy Charge from the price at
which the CUSTOMER, acting in a commercially reasonable manner,
purchases substitute or replacement energy for the Energy not
delivered by the CITY.
"Sales Price" means the price at which the CITY, acting
in a commercially reasonable manner, resells (if at all) Energy not
received by the CUSTOMER, reduced by additional transportation,
storage and handling charges, if any (including, without
limitation, charges for applicable ancillary services), incurred by
the CITY to effect such. resale, and absent a resale by CITY, the
market price for such’ quantity of Energy not taken, assuming
delivery at the DeliveryPoint, during the period when such Energy
should have been received by the CUSTOMER as determined by the CITY
in a commercially reasonable manner.
"Scheduling" means (i) in reference to the CITY, the act
of making power or natural~gas available for delivery to or for the
account of the CUSTOMER or (ii) in reference to the CUSTOMER, the
act of causing the CUSTOMER’s Transmission Provider or
Transportation Provider to make available at one of more of the
Delivery Points sufficient transmission capacity or transportation
980304 syn 0071362
capacity to permit such Transmission Provider or Transportation
Provider to receive the quantities of power or natural gas that the
CITY must make available at one or more of the Delivery Points.
"Scheduling Charges" means the charge for the arrangement
of the delivery of Energy to a CUSTOMER by the CITY.
"S&P"means the Standard & Poor’s Rating Group, a division
of McGraw-Hill, Inc., or its successors and assigns.
"Standby Services" means support service that is
available, as needed, to supplement a CUSTOMER to replace normally
scheduled power.
"Storage Charges" means a Charge for the service in which
natural gas in received by the seller of the service and held for
the account of the CUSTOMER for redelivery at a later time.
"Tax"means any assessment, charge, imposition, license,
or levy (including any utility users tax) in effect either at the
Commencement Date or during the Term hereof and imposed by any
Agency, including the CITY.
"Term"means the Initial Term and the Extension Term, if
applicable.
"Third Party" means any party, other than the CITY or the
CUSTOMER.
"Transaction" means any agreement or amendment thereto by
the Parties for the purchase of Energy, as set forth in one or more
Confirmation Schedules.
"Transmission Provider" means any Third Party that
provides TransmissiOn Service.
"Transmission Service" means the scheduling of the
Interstate Delivery or Intrastate Delivery, or both, of power.
"Transportation Provider" means any Third Party that
provides Transportation Service.
"Transportation Service" means the scheduling of the
Interstate Delivery or Intrastate Delivery, or both, of natural
gas.
"UDC"means the local utility distribution company which
has interconnecting facilities with the CUSTOMER’s Facility.
"Utilities Director" means the individual designated as
the director of utilities under Section 2.08.200 of Chapter 2.08 of
Title 2 of the Palo Alto Municipal Code, and any Person who is
designated the representative of the director of utilities.
980304 syn 0071362
"Utility Rules and Regulations" means the compendium of
utility rules, regulations and rate schedules prepared by the
Department of Utilities and adopted by ordinance or resolution of
the Council pursuant to Chapter 12.20 of the Palo Alto Municipal
Code.
"Utility System" means the CITY’s electric power and
natural gas distribution systems, including, without limitation,
all substations, distribution towers, generators, transformers,
busses, wires, poles, vaults, conduits, capacitors,~ resistors,
pipes, valves, fittings, and risers that are Used to deliver Energy
to Customers.
"Voltage Support Services" means the technical assistance
rendered to a CUSTOMER in monitoring the quality and quantity of a
direct electric current passing through an electrical circuit,
including, without limitation, an electrical conductor.
"Year" means a calendar year, unless a Contract Year is
specified, commencing at 12:00:00 a.m. Pacific Standard Time on the
first Day of the calendar year and ending at 12:00:00 a.m. Pacific
Standard Time on the first Day of the following calendar year.
In addition to the foregoing, other Special Terms are defined
throughout the Contract and the Confirmation Schedules.
980304 syn 0071362
EXHIBIT
CUSTOMER FACILITIES,
The Facilities of the CUSTOMER, to which the CITY will
supply Energy pursuant to this Contract, are:
980304 wn 0071362
ii
EXHIBIT
LOAD INFORMATION
[INSERT CUSTOMER LOAD SHAPE AND TOLERANCES]
980304 syn 0071362
12
EXHIBIT
ENERGY CHARGES
The Energy Charge for a Month is equal to the product of (I) the
aggregate Load (measured by the total Megawatt hours carried to
three decimal places) received at the Facilities from the CITY in
that Month and $ per MWh. The Capacity Charge for a Month
is equal to the maximum Demand (measured in Megawatts) during the
Month multiplied by $ per MW.
980304 syn 0071362
13
7.C. Marketing Energy Services Outside City Boundaries
Commissioner Eyerly: Tom Habashi will make the presentation.
Mr. Habashi: This is the last of a three-part series. If you
~remember, we have had three policies approved. One had to do with
direct access, another had to do with stranded costs and
.transmission cost recovery charged, and the third had to do with
investigating outside sales. We have al~eady dealt with one
stranded cost issue last July. Direct access was dealt with last
December, and now we are dealing with the last item - sales outside
of Palo Alto. I will now pass this item along to Mr. Balachandran
to make an opening statement, and we will then be present to answer
any questions.
Mr. Balachandran: To , I am sure you
are going to have questions on it. The one correction that I would
make is in the recommendations, the second bullet. In the report
we will be taking to the Policy and Services Committee on March
24th, the second bullet should read: ~Ensuring that
extraterritorial sales will not negatively impact tax-exempt
bonds." Previously it said that we will not makes sales from
resources that are funded by tax-exempt bonds. The reason for that
is that resources that are funded by tax-exempt bonds can be used
to make sales, but there are certain limitations, sO we will be
’following those limitations as opposed to restricting ourselves
completely from using them.
Commissioner Eyerly: Thank you, Girish. Any questions?
Commissioner Gruen: I would like to ask about the limitations.
What is it that w~ can or cannot do?
Mr. Balachandran: The I.R.S. has made some limitations. For
example, you cannot sell power from a facility that is financed by
tax-exempt bonds for more than 30 days. But any sale for less than
30 days is allowed, and it does not count against what they call
~private use" or "bad use." So we do not want to limit ourselves
to saying that we will not make any sales, per se, as long as they
follow applicable regulations and constraints. We should give
ourselves the aSility to do that.
Commissioner Gruen: Okay. One of the reasons you give for doing
extraterritorial sales is that existing customers might want to
have a quotation that includes areas outside of Palo Alto. Do you
have any existing customers who have an interest in this? How many
are there? Without telling me who they are, can you give me some
idea as to what volume is involved?
Mr. Balachandran: About half a dozen of our key account customers
have expressed an interest in our serving the facilities outside.
Two or three have expressed a serious interest in that.
Commissioner .... Gruen: I understand that we ought to keep our
existing customers happy, and that means that we may have to come
up with a wider deal to keep them our customers. If this were a
regular business, one of the other things one might say is that we
see an opportunity here to make some money. I don’t know how you
say ~make some money" in our municipal context, although I have
been seeing this word ~margin" being thrown around in places where
I would have expected to see the word ~profit" used, so maybe that
is the right terminology for it. Is that one of the objectives?
If we think we can come up with positive dollars in, is that a
reason to do extraterritorial sales?
Mr. Habashi: Yes, I think we are saying that we want to maximize
our existing assets. So that may very well add up to what you just
said. It is pretty much the same thing. We are just going to get
a little bit more benefit out of what we have.
Commissioner Gruen: Narrowing on this issue of assets, presumably
this extraterritorial distribution is not what we are selling. So
all of the equipment and facilities that we have in place within
Palo Alto are not what we are talking about.
(contracts?) (Both talking at once)
Mr. Habashi. contracts, I am talking about billing
systems, things that we can use for extraterritorial sales. I am
not talking about assets’as in infrastructure.
Commissio.ner Gruen: So Calaveras and how much power is available
to us from it would be an asset, and this is a way of selling that
asset and getting some money for it. Is that what we are talking
about?
2
Mr. Habashi: To the extent that we live within the I.R.S.
regulations, yes.
~ommissioner Gruen: Okay. Other than power contracts, what other
assets do we have that we might get some benefits from?
Mr. Habashi: Our facilities, our contracts, our people, and our
systems here in the city. I know that I will be using my computer
a lot more if we do this. It would be an increased use of assets.
Mr. Balachandran: If I might add to that, in order to sell energy
and energy-related services, we could go to the customer and offer
them consulting services, for example, energy efficiency, power
quality p~ograms, etc. and how they could basically improve their
systems, also do billing analysis for them, give them advice.
Commissioner Gruen: Do we have customers who are looking for that?
Mr. Balachandran: Right now, I would say yes and no. There is
some interest, but they are not breaking down the doors for that
kind of service. I believe it would be an add-on service to the
entire package of services that we will be offering. I think the
core is the commodity at low cost, and you add on the other
services to sweeten the deal.
Commissioner Johnston: I am interested in the bill proposed by
Senator Frank Murkowsky, although it sounds ’like it may not be
going anywhere. As I understand it, if we, as a city municipal
utility, decided that we do want to engage in competition, we-do
have an option not to for at least some time. As for those who
would say that tax-exempt bonds represent a subsidy to municipal
public power agencies, and why should they get it if they are free
to compete, I am curious, since you indicate that the city is going
to oppose this bill. What is the main argument that you use as to
why a public entity that is competing with private entities should
be allowed to get its money at a cheaper rate?
Mr. Balachandran: Well, first of all, I don’t think we will be
fighting on our own. We will be doing it along with a larger trade
organization like APPA, LPPA, etc. ~
Commissioner Johnston: People will act in their own self-interest.
I understand that. You will not be alone. I am just curious as to
what arguments you are going to use.
Mr. Balachandran: I am not really familiar with, the arguements~
they would use but if I were involved in them, this is what I would
say. There have been studies done, when you look at the tax breaks
that the IOUs get versus what we purportedly get under tax-exempt
bonds, they tend to be the same. The IOUs get tax breaks in
different forms, in different ways, that we do not get. So the
playing field is actually pretty level when you look at the total
subsidy, so to speak, that munis get versus what the IOUs get. It
is pretty, level. The same argument has been used, for example, in
the PMA power where we get subsidized federal power. When you look
at the IOUs (and studies have been done which compare the tax
breaks that the IOUs get, the FERC hydro licenses that they get to
renew for 50 or I00 years, etc.), the benefits seem to be the same.
So those are the arguments that we would use.
Additionally, some Of these requirements are pretty punitive. Some
of the constraints in this bill state that we would have to call
all outstanding tax-exempt bonds almost immediately. That would be
quite a hardship to municipal entities. So one is just an equity
issue and the other is punitive. Those are the arguments we would
se.
Mr. Habashi: To add one more thing, in anticipation of these
arguments, most municipa! utilities (and I assume it includes Palo
Alto when we go to sell outside of Palo Alto ) will be using
purchases that we make from the market, to turn around and sell
those. Right now, we are buying somewhere between 30%, 40%, 50%
sometimes from the market to meet our load.’ Most likely, we will
turn that over, if need be, and sell it outside if we have to buy
additional stuff from the market for our customers. I don’t want
to say ~never," but most likely, we will not be using our resources
that were financed with tax-exempt bonds (especially Calaveras,
because it only meets 5% of our load) to sell outside of Palo Alto.
Commissioner Johnston: On the broader issue of this particular
staff recommendation, as I think you know, I have been a strong
supporter of saying, if we are going to open our doors, we ought to
have the right to go elsewhere, and we ought to pursue it. I am
obviously happy to see we are doing that. So from that standpoint,
I am entirely supportive of this.
4
There is, however, an element that causes me some misgivings. I
want to discuss it a bit. That has to do with what is in this
report and what is not in this report. I understand that this is
the kind of report that cannot contain everything that you might
want to see. I am referring to the financial viability of such a
venture. You indicate in here that there are going to be certain
startup costs~ and you think it is appropriate to amortize them
over three years. I do not disagree with that. That is fine. You
also indicate that you anticipate a $630,000 profit over the three-
year period. From my reading, that was really the only number that
was in there at all. The difficulty with that from the standpoint
of asking the UAC to say Whether they think this is a good business
proposition is that thereis no estimate of the risk or the margin
or anything by which one would be able to ask, does this look like
a good deal. Are~we talking about making a $630,000 profit out of
a very modest revenue stream of perhaps $3 million over that time
period, which would be a good margin, but a relatively low volume?
Or are we thinking that this will grow to be quite substantial, and
we are talking about making $600,000 out of $30 million over that
same time period? That could make one say, with just a little
tweak in some ofthe assumptions here, we could be losing a lot of
money. There isn’t really a feel in here for what the startup
costs are. If we are not really successful, we do not really know
what the liability is.
I recognize that you have probably gone through all of those
numbers, that you have them, and I think it is appropriate that
they not be shared in a public forum, given that this is an entry
into the competitive market. First of all, I would like to have
you respond to that, and depending upon your response, I will then
have a comment to make.
Mr... Habashi: Yes, it would be wise to ignore the numbers for now,
since we have not really researched the market very well. But let
me see if I can give you some comfort from doing what we are doing.
We do not intend to invest any additional money into buying
computers, for example, or hiring any more staff. We are basically
redirecting some of the efforts that we are making today toward
doing some of these activities in the future. If it happens that
we need to spend additional monies in order to make this more of a
successfu! venture, we will obviously share that with you. We are
starting with a cost of zero at this point.
As far as revenues are concerned, if you were to look at all of the
customers that we have in the key accounts, and if you were to look
at all of the facilities !.n the bay area, you are probably adding
one-third to one-half of our load. I am not sure which, as we have
not gotten to the final number yet. So we are not looking toward
making significant sales beyond what we have in place now. Without
actually giving you the numbers, it would be very difficult to say
specifically what we are expecting in terms of dollars. We are
expecting a margin, of somewhere around five or ten percent in
sales. Obviously, if we are buying from the market and selling to
the market, if we buy on an index base, we will be selling on an
index base, so what we are doing is to realize a fixed margin over
and above the cost of buying. It is a little more assured than
what we have right now selling to the City of Palo Alto customers.
Right now we have the fixed assets that we have to pay for on a
fixed basis,~ and then we turn around and sell it to the customers
on an annual basis, based on some sort of an index number.
With the outside sales, we can match the purchases very closely to
the sales. In this way, we will make sure that we are not putting
any money at risk at this point. Again, we need to spend a little
time doing more of this, and without getting the approvals, it is
very hard to justify the investment.
Commissioner Johnston: Tom, that is helpful. Let me suggest to
you where~I would like to come out on this, and get your reaction
to it. ultimately, you are asking us for a recommendation to the
City Council to approve these. What I would like to do is to make
a recommendation to do that, to approve going forward with these.
In the same moZion, however, I would make it clear that based upon
what we have seen from the standpoint of deregulation, we think
this is an important element of the program as we have supported in
the past. I would also make it clear to the City Council that we
really are not in a position to make a business judgment because of
the issues of the sensitivity of the numbers. I think it .is
important for the council to understand that. Then the council can
decide that that is fine and that that is all they really need to
know right now and that conceptually, we are going in the right
direction. Or they can say no, they want to have a couple of
council members sit down in closed session with us and go through
it. They can take the appropriate action.
What I think would~be a disservice to them would be for us to give
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the impression that we have been over this in fine detail, and we
feel that not only should we go this way but that it is going to
make money right away, etc. So what I would like to do is to make
the recommendation in that fashion, and I hope that that is
acceptable to staff.
Mr. Habashi: That is quite acceptable. Indeed, we were talking
about it today, and it is most likely that we will remove the
section from the staff report that talks aboub the financial
viability of this venture before it goes to council. So the
numbers you have seen and have commented upon tonight are not
likely to be going forward to the City Council. As a matter of
fact, they definitely wil! not.
~ommissioner Eyerly: Paul, it sounds like you are ready to make a
motion to approve the staff recommendation, with some added wording
to clarify what we have not discussed, and why we think it is
necessary to go ahead. Let me ask a couple of questions first
before you make the motion.
I notice that the city attorney has okayed the sale of gas sales
outside of our boundaries. Staff has indicated that there is some
interest from some customers to have their energy resources come
from the same source. That sounds good to me.
On the last page of the report, I am a little confused about some
attachments mentioned. In Attachment #2, the PG&E and ESP service
agreement, Form 79-948, I notice at the top of that page that it
says "canceling." Does that mean that we are canceling this
agreement with PG&E?
Mr. Balachandran: That is the just format that they use. That
means they are canceling the previous version. They have different
versions of the rate schedule coming out.
Commissioner Eyerly: Another thing on the attachments is that in
Attachment #~, it says that Grant is developing a standard
contract. [CANNOT FIND ATTACH. #3] Is that for work with PG&E?
Mr. Balachandran: No,’ that is the standard contract between the
city and the customer. That has been developed since this report
was prepared. When we prepared this report for you, that was not
completed, as yet, but itwill be included in the council packet.
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Commissioner Johnston: Since we did not have a complete copy of
the contract until receiving it tonight, I did feel comfortable
with regard to the overall direction after going through the pages
that we did receive, but do you think there are things in this
completed document that we really ought to review?
.Mr. Balachandran: This is a standard, boilerplate contract that
every ESP that is going to work in California will have to sign.
So it is not something we will be negotiating, one on one, with
PG&E. It is a standard contract.
Commissioner Johnston: That’s fine.
MOTION: Commissioner Johnston: I move approval of the staff’s
three recommendations as amended verbally this evening with regard
to the second recommendation, as follows: the second
recommendation should read: "Ensuring that extraterritorial sales
will not negatively .impact tax-exempt bonds." Also, I would like
the City Council to bear in mind that this approval is based on its
being what we believe to.be the correct strategic direction, based
on all of the prior review that we ~have done, but it is not
specifically based on a review of the financial data or viability
of this proposal simply because of the fact that as we enter this
competitive environment, the data here would be somewhat sensitive,
and we have not had an opportunity to review it.
.SECOND: By Commissioner Gruen. I happily second the motion, as
you have gotten to the issue exactly, which is yes, we ought to be
selling stuff, but We have not defined "profitable."
MOTION PASSES: Chairman Eyerly: That motion passes unanimously on
a vote of 3-0, with Commissioners Grimsrud and Sahagian absent.
~ommissioner Gruen: Let me ask~ how you will go about deciding,
operationally, whether to make a particular deal or not. Who are
the people that will be involved? What will you look at in
deciding if it is worth going through?
Mr. Habashi: First, we will find out if there is an interest. If
there is, we will go and talk to the people who are running the
facilities who are interested. We will find out precisely what are
the things they are looking for. Then we will go back and talk
internally as to how to price these things, and (i) determine
whether we can do these things that they want, and~ (2) if we can do
it, we will price it and go to them with a set of principle~. They
will look at those principles and see if they like them. If not,
we will negotiate them. If we can reach an agreement, we will put
it into a contract, and if we don’t, we don’t I think that is
likely to be the process.
CommissiQner...Gruen: Okay. We have been talking about retention of
customers. Have we lost any customers? Has anyone said, we are
going to go away unless you do something?
Mr. HabaShi: There is one customer that took advantage of the
first open season of the direct access program. We are going to
continue with that customer. They have not completely moved toward
the competition yet. They are just moving along through the
process. Most likely, by April, we will find out if they have
decided to go with another supplier.
Commissioner. Gruen: How big a customer is that?
Habashi: I believe they are about one megawatt.
Mr. Balachandran: That is a half percent of our load.
Commissioner Gruen: Thank you.
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