HomeMy WebLinkAbout1996-03-11 City CouncilTO:
City of Polo Alto
C ty Manager’s Report
HONORABLE CITY COUNCIL ~l~
FROM:CITY MANAGER DEPARTMENT: UTILITIES
AGENDA DATE: March 11, 1996 CMR:153:96
SUBJECT:Temporary Adjustment to Western Allocation
REQUEST
This report requests that Council approve and authorize the City Manager to execute a revision
to Exhibit A of Palo Alto’s Western Area Power Administration (Western) contract to
temporarily reduce its contract rate of delivery (CRD). This report further requests that
Council authorize the City Manager to extend, modify or terminate the revised Exhibit A as
evolving electric industry conditions warrant. Council authorized the City Manager in 1985 to
execute the current Western contract and the current Exhibit A was signed by the City
Manager.
RECOMMENDATIONS
Staff recommends that Council:
Approve and authorize the City Manager to execute .a revision to Exhibit A of its Western
contract to temporarily reduce Palo Alto’s Western allocation of power from the current
175 Megawatts (MW) to 138.7 MW.
2.Authorize the City Manager to extend, modify or terminate the revised Extfibit A as
evolving electric industry conditions warrant.
POLICY IMPLICATIONS
The revision of Exhibit A of the Western contract presents no policy implications.
CMR:153:96 Page 1 of 3
E~C~IVESUMMARY
DISCUSSION
The Alameda Bureau of Electricity recently revised its Western contract to temporarily reduce
its Western allocation of power significantly from 21.5 MW to 1.5 MW. Western solicited
applications from other customers for the temporary use of the 20 MW and received 95 MW of
valid applications.
Western solicited Palo Alto and other customer interest in a temporary reduction of their
allocations, so Western can temporarily reallocate an additional 75 MW to several of its
customers who are currently unable to gain access to less expensive power. In that way, the
applicant-customers would benefit by temporarily increasing their Western allocation and
decreasing their dependence on more costly power.
Palo Alto and NCPA staff have worked with Western to meet the need for the additional 75
MW from the existing allocations of NCPA members as follows:
Member MW % Share
Biggs 0.3 0.40%
Gridley 0.7 0.93 %
Healdsburg 1.3 1.73 %
Lodi 6.6 8.80%
Lompoc 1.3 1.73 %
Palo Alto 36.3 48.40%
Plumas Sierra 1.6 2.13 %
Roseville 24.3 32.40 %
Ukiah 2.6 3.47%
TOTAL 75.0 100.00%
Staff has determined that a 36.3 MW short-term reduction in Palo Alto’s Western allocation of
power is expected to save approximately $2.4 million over the next three years. The savings
are possible because wholesale electric market prices have dropped significantly, and over the
next few years they are expected to be lower than Western’s cost-based rates. Staff currently is
evaluating alternatives to replace part or all of the 36.3 MW, including firm purchases, options
on firm power and spot market purchases.
CMR:153:96 Page 2 of 3
Palo Alto’s CRD will revert to its original level (175 MW) on July 1, 1999, unless Palo Alto
postpones the reversion date to a later date. Palo Alto retains the option to recall all or
portions of its allocation once each calendar year. These contract provisions will give Palo Alto
the flexibility to control its power supply needs in a fluctuating market.
A third provision of the revision prohibits Western from prejudicially decreasing Palo Alto’s
post-2004 contract renewal allocation as a result of Palo Alto’s cooperation in temporarily
satisfying Western’s request.
At the January Utilities Advisory Commission meeting, staff discussed the potential temporary
CRD reduction with the UAC. Given the anticipated short time frame involved in finalizing
the reduction, the UAC directed staff to meet with two designated Commissioners to discuss
the details of the contract revision to avoid delaying implementation. Staff met with
Commissioners Eyerly and Grimsrud and received their concurrence with staff’s
recommendation.
CONCLUSIONS
By revising its contract to temporarily reduce its Western allocation by 36.3 megawatts:
Palo Alto could save approximately $2.4 million over three years, given expected market
prices.
Western agrees not to use Palo Alto’s willingness to cooperate in providing these benefits as
a reason to decrease Palo Alto’s long-term access to Western power.
FISCAL IMPACT
This contract revision is expected to reduce Palo Alto’s annual purchase power costs by
approximately $800,000, or 2.1 percent. These savings will help Palo Alto’s electric utility to
prepare for a more competitive environment.
ATTACHMENTS
Exhibit A, Revision 1
PREPARED BY: Tom Kabat, Senior Resource Planner
Doug Boccignone, Supply Resources Manager
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
FLEMING
Manager
CMR:153:96 Page 3 of 3
Department of Energy
Western Area Power Administration
Sierra Nevada Region
114 Parkshore Drive
Folsom, California 95630
t996
Mr. Edward Mrizek
Director of !.r~.iHfi.*s.
City of Palo Alto
Post Office Box 10250
Palo Alto, CA 94303
Dear Mr. Mrizek:.
Please find enclosed two originals of Exl~bit A, Kevison 1, to Contract No. DE-MS65-85WP59007
between the City of Palo Alto and Western Area Power Administration. The Exhibit revisions
decrease Palo Alto’s contract rate of delivery from Western by 36.300 MW, as muttmlly agreed. It
is Westem’s intent to reallocate the power on a temporary basis. Palo Alto may recall all or part of
its original allocation upon a 6-month written notice.
The temporary reduction in the CRD will in no way prejudice Palo Alto’s application for future
allocations, including those made a part of the 2004 Marketing Plan.
Western will incorporate provisions in the contracts of the customers receiving a temporary CRD
allocation stipulating that the temporary increase does not constitute a right to a permanent
increase in its Long-Term Firm Power allocation nor an agreement by Western to a permanent
increase in future allocations.
If the terms of the Exhibit are acceptable, please sign and date both originals, have the signatures
attested, apply the appropriate seal, and retttm both originals to Zola Jackson, Power Marketing
Manager, at this office. Upon signature by Western, an executed original will be sent to you for
your records.
If you have any questions, please contact Vicki Page at (916) 353-4561.
Sincerely,
Iames C. Feider
Regional Manager
Enolosure (2)
Exhibit A, Revision 1
City of Pale Alto
Coz~ract No. DE-MS65-85WP59007
L~gHIBIT A
(Contract Rate of Delivery)
1.This Exhibit A, Revision 1, to be effective under and as a part of Contract
No. DE-MS65-85WP59007 shall become effective March 1, 1996; shall supersede the current
Exhibit A dated April 30, 1985; and, shall remain in effect until either superseded by another
Exhibit A or upon termination of the Contract.
2. On Maroh 1, 1996, the Contract Rate of Delivery of 175.000 megawatts of Long-Term
Firm Power shall be reduced to 138.700 MW of Long-Term Finn Power.
3. We~em and Pale Alto have mutually agreed that Pale Alto’s CRD will be temporarily
~,d~ under the following terms and cond~ons:
3.1 Pale Alto’s CRD will revert to 175.000 MW on~uly 1, 1999 (Reversion Date), or
a later date as specified in Section 3.2 of this Exhibit A.
3~2 Pale Alto, at its sole option, may delay the Reversion Date for successive annual
terms after July 1, 1999 by notifying Western in writing of its intention to delay the
reversion at least six (6) months prior to the Reversion Date, or the anniversary date of
the Reversion Date thereafter.
3.3 Pale Alto may recall all or part of its ori~ CRD allocation upon six (6) months
written notice. Pale Alto will be limited to one recall per calendar year, commencing
with the 1997 calendar year unless agreed otherwise by Western.
3.4 Pale Alto may return a recalled portion of its allooation to Western if agreed to by
Western; Provided, That Pale Alto shall not, except for minor changes of 3 MW or less,
both increase and decrease its CRD in a calendar year.
3.5 This temporary reduction shall not constitute a waiver of Pale Alto’s contract right
to its Long-Term Firm Power allocation nor an agreement by Pale Alto to a permanent
decrease in its Long-Term Firm Power allocation.
Page 1 of 2
Exhibit A, Revision I
City of Pale Alto
Contra~ No. DE-MS65-85WP59007
3.6 The temporary reduction in CRD will in no way prejudice Pale Alto’s application
for future allocations, includin_~g those made a part of the 2004 Marketing Plan.
WESTERN AREA POWER ADMINISTRATION
Title:Re_aiottal Manager
Address:114 Parkshore Drive .
_Folsom. California 95630
Date:
CITY OF PALO ALTO
Attest:
By:
Title:
Title:
Address:
Date:,
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