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Home My WebLink About1996-10-15 City Council (30)City of Palo Alto City Manager’s Report 10 TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE:October 15, 1996 CMR:424:96 SUBJECT:Shasta Rewind Project Reserve REQUEST This is a request for Council approval of a Budget Amendment Ordinance (BAO) establishing the Shasta Rewind Project Loan Reserve (SRPL Reserve) for the amount of $4.39 million, to allow loans to the Department of Energy’s Western Area Power Administration (WAPA) and the Department of Interior’s Bureau of Reclamation (Bureau) through a transfer from the Electric Fund Rate Stabilization Reserve. The BAO also establishes the budgeted expense and revenue accounts for fiscal year 1996-97, to track loan advances to, and repayments from, WAPA. RECOMMENDATIONS Staff recommends that Council approve the attached BAO establishing the Reserve for the Shasta Rewind Project loan and the budget revenue and expense accounts for loan advances and repayments respectively. POLICY IMPLICATIONS The contract for maintenance work at the Shasta Powerplant makes a short-term, multi-part revolving loan to the Bureau to fund overdue hydroelectric generator maintenance and increase generator capacity at the Shasta Powerplant. It supports the City’s policy of being an active partner with the electric utility’s major power supplier, WAPA. CMR:424:96 Page 1 of 3 EXECUTIVE SUMMARY WAPA has been unsuccessful in obtaining the needed Congressional budget appropriation for the then estimated $21.175 million needed to fund the deferred maintenance work and to increase the generating capacity of the Shasta Dam hydroelectric generator. Congress expects WAPA power customers to loan the money needed to perform the work. On June 12, 1995, Council authorized the Mayor to execute a contract with WAPA and the Bureau of Reclamation to provide financing of up to $7,601,825 from Palo Alto with monthly payments over a four year period, with the monies to be repaid with interest staggered over a nine year period (CMR:279:95). Since that staff report, two changes have occurred. The project cost estimate has been reduced from $21,175,000. to $12,220,285. and the selected financing mechanism has become very short-term borrowings from customers typically one to three months long for each borrowing over a period of four years. The agreement with WAPA obligates the City for a current total financing of $4.39 million with contingencies and without potential 25 percent participation step-ups. Since the Utilities’ full obligation is up to $7.6 million, if other SRPL participants default causing step-up payments from Palo Alto, staff will return to Council to request an additional transfer from the Electric Rate Stabization Reserve (RSR). The $4.39 million amount will be transferred from the Electric RSR and set up on the City’s books as a separate reserve, the Shasta Rewind Project Loan Reserve. As funds are advanced periodically to WAPA, the amount of the loan commitment shown in the reserve account will be reduced, until the entire loan commitment is fulfilled. The transfer of $4.39 million from the Electric RSR would immediately cause that reserve to fall between its target level and its minimum level. However, the sum of the balances of the Electric RSR and the SRPLR will still be above the minimum target level of the Electric RSR. For rate making purposes, staff proposes to compare the sum of the balances of the Electric RSR and the SRPLR to the Electric RSR minimum target level, rather than to allow the formation of the revolving loan SRPLR to drive the need for an electric rate increase. The Utilities Department will include in each year’s budget an estimate of the expense that will be incurred in that year for funds advanced to WAPA, as well as expected repayment. While the repayment will be shown by WAPA as a credit against purchased power costs, staff will set up separate revenue and expense accounts to track all financial transactions related to the loan and the repayments. FISCAL IMPACT For FY 1996-97, staff estimates that $1.451 million will be advanced to WAPA, while $1.451 million will be received in repayment through credits to purchased power costs. This estimate is based on the Bureau’s June 1996 estimated cash call schedule and a three month lag time between advancing the funds and the credit being shown on the City’s WAPA purchase billing. The Bureau may provide an updated estimated cost schedule by November 1996. CMR:424:96 Page 2 of 3 ENVIRONMENTAL ASSESSMENT The creation of the Reserve does not constitute a project for the purpose of the California Environmental Quality Act. ATTACHMENTS CMR:279:95 Budget Amendment Ordinance PREPARED BY: Raveen Maan, Resource Planner Tom Kabat, Senior Resource Planner DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: Director of Utilities CMR:424:96 Page 3 of 3 ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 1996-97 TO CREATE THE SHASTA REWIND PROJECT RESERVE IN THE ELECTRIC FUND WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Counci! on June 24, 1996 did adopt a budget for fisca! year 1996-97; and WHEREAS, on June 12, 1995, Council approved a contract with the Department of Energy’s Western Area Power Administration (WAPA) and the Department of Interior’s Bureau of Reclamation for funding of overdue maintenance work and to increase generator capacity at the Shasta Powerplant; and WHEREAS, this contract obligates the City of Palo Alto to make revolving loans over a four year period totaling $4,390,000 with the funds being repaid with interest over a nine year period; and WHEREAS, the Electric Rate Stabilization Reserve will need to be reduced to establish the Shasta Rewind Project Reserve; and WHEREAS, staff has been advised by WAPA that contract requirements obligate the City to make $1,451,000 in loans in 1996- 97 and that the City will receive $1,451,000 in loan repayments in 1996-97; and WHEREAS, City Council authorization is required to amend the 1996-97 budget as hereinafter set forth. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION i. created. The Shasta Rewind Project Reserve is hereby SECTION 2. The sum of Four Million Three Hundred Ninety Thousand Dollars ($4,390,000) is hereby transferred from the Electric Rate Stabilization Reserve to the Shasta Rewind Project Reserve. SECTION 3. The transactions described in section 2 will reduce the Electric Rate Stabilization Reserve from $17,420,000 to $13,030,000. SECTION 4. The sum of One Million Four Hundred and Fifty One Thousand ($1,451,000) is hereby appropriated to non-salary expense in the functional area Supply Resources in the Electric Fund for loans to WAPA. SECTION 5. Revenue in the Electric Fund is hereby increased by One Million Four Hundred and Fifty One Thousand ($i,451,000)to reflect loan repayments by WAPA. SECTION 6. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 7. The Council of the City of Palo Alto hereby finds that the enactment of this ordinance is not a project under the California Environmenta! Quality Act for the City of Palo Alto and, therefore, no environmental impact assessment is necessary. SECTION 8. As provided in Section 2.04.350 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST:APPROVED AS TO FORM: City Clerk Senior Asst. City Attorney APPROVED: Mayor City Manager Deputy City Administrative Department Manager, Services Director of Utilities