HomeMy WebLinkAboutStaff Report 234-08City of Palo Alto
C ty Manager’s Report
5
TO:
FROM:
DATE:
SUBJECT:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: UTILITIES
MAY 12, 2008 CMR: 234:08
UTILITIES ADVISORY COMMISSION RECOMMENDS
ADOPTION OF A RESOLUTION APPROVING THE
AGREEMENT FOR ASSIGNMENT OF RIGHTS RELATING TO
AND AMENDING THE SEATTLE CITY LIGHT CAPACITY AND
THIRD PHASE AGREEMENT BY AND AMONG CERTAIN
NORTHERN CALIFORNIA POWER AGENCY MEMBERS,
INCLUDING PALO ALTO, WHICH WILL TRANSFER ITS
INTERESTS IN THE AGREEMENT TOTHE CITY OF S.A~NTA
CLARA
RECOMMENDATION
Staff and the Utilities Advisolw,- Commission (UAC) reconmaend that Council adopt the attached
resolution enabling the assigntaaent of Palo Alto’s share of the Seattle City Light Exchange
Contract to the City of Santa Clara.
BACKGROUND
The Northern California Power Agency (NCPA) is a party to a seasonal energy exchange
contract (Exchange) of 60 MW with Seattle City Light (SCL) by which SCL delivers energy to
NCPA in the months of June through October ("stmmaer") and NCPA delivers energy to SCL in
the months of November through April ("winter"). Through an NCPA Third Phase Agreement,
Palo Alto became a participant to the Exchange (CMR:371:92 and Resolution No. 7128)
effective March 16, 1993. Palo Alto’s share of the Exchange is 18.3 percent, or approximately
10 megawatts (MW) with the actual energy volumes varying by month. Other NCPA
participants to the Exchange include the Cities of Roseville, Lodi, Healdsburg, and Ukiah.
The purpose of entering into the Exchange was to meet both parties’ energy profile needs. SCL
needed energy in the winter and had surplus energy in the summer, whereas NCPA’s participants
in the Exchange had the opposite profile. Further, Palo Alto is a part-oyster of the California-
Oregon Transmission Project (COTP), an electric transmission line that extends from the
California-Oregon Border (COB) to NCPA. The Exchange provided an oppo(cuni~, to better
utilize COTP as deliveries of the Exchange take place at COB.
CMR: 234:08 Page 1 of 3
NCPA entered into the Exchange when winter energy prices were significantly lower than
sunnner prices and to maintain a neutral value for the Exchange, sunm~er energy deliveries were
set at 83 percent of the winter energy delivery quantities. Market conditions since the energy
crisis in 2001 have narrowed the spread between smmner and winter prices, thus rendering the
Exchange no longer neutral. Additionally, given the reformulation of the Western contract for
hydroelectric energy at the end of 2004, the exchange no longer meets Palo Alto’s energy needs.
Lastly, Palo Alto is contemplating assigning a portion of its share of the COTP, which would
require obtaining alternative transmission to transport the Exchange energy from COB to
Northern California. For these reasons, in July 2007, Palo Alto requested that NCPA consider
options for terminating or assigning Palo Alto’s full share of the Exchange.
DISCUSSION
The value of the Exchange is a function of the seasonal energy price differential, the scheduling
flexibility inherent in the Exchange, which allows NCPA the ability to schedule the energy in the
most valuable periods, and any capacity value available to meet the state’s Resource Adequacy
Requirements for system capacity.
In calendar years 2006 and 2007, the Exchange cost Palo Alto about $200,000 per year. Given
cun’ent market prices for energy, the Exchange is expected to continue to be of negative value
for Palo Alto by about $185,000 per year, or about $1.4 million over the period 2009 through
2015.
Through an assignment, Palo Alto can assign all of its rights and obligations under the NCPA
Third Phase Agreement for SCL Exchange to another pm~icipant of the Exchange or another
NCPA member. The Cit)~ of Santa Clara has expressed interest in taking over the entire
Exchange at no cost to the party assigning the Exchange. Staff prefers this alternative, as it is
expected to save the City beta~een $0.7 and $1.4 million over the seven-year period required
under the termination alternative. The City of Santa Clara may have a different electric portfolio
management objectives than Palo Alto’s, the Exchange may fit better into its overall portfolio, or
it may be able to better utilize its transmission assets.
Alternatives
Staff exan~ined several alternative actions for the Exchange besides assignment to the City of
Santa Clara. These include: terminating the contract with notice as allowed for in the contract
and terminating early as allowed for in the contract.
1. Termination
The Exchange can be unilaterally te~aninated by NCPA or SCL on May 31 of any year provided
advance notice of seven years is given. The next possible termination notice date is May 31,
2008, which would terminate the contract on May 31, 2015.
2. Early Termination
Both parties can nmtually a~ee to terminate earl?, (within the seven ?,ear notice requirement).
Early termination may require a termination payment by NCPA to SCL in order to get out of the
Exchange. This alternative is not feasible since not all Exchange participants desire to terrninate
the contract.
CMR: _~4:08 Page 2 of 3
BOARD/COMMISSION REVIEW AND RECOMMENDATIONS
At its April~, "~ 2008 meetin~.~, the UAC voted unanimously to recommend that the Council
approve an assigmnent of Palo Alto’s share and obligations of the Seattle City Light Exchange at
no cost to Palo Alto (Minutes attached).
RESOURCE IMPACT
Assigmnent of the SCL Exchange is expected to save Palo Alto approximately $200,000 in FY
08/09 and $1.4 million over the seven-year required termination period. Additionally, Palo Alto
will need to cover its share of NCPA’s expense in preparing the necessary assigmnent
documents. NCPA does not anticipate the cost to exceed $5,000. Funds to pay NCPA expenses
are available within the electric supply budget.
POLICY IMPLICATIONS
This recommendation is consistent with Council policy.
ENVIRONMENTAL REVIEW
The adoption of the resolution approving the assigmnent of contract rights does not constitute a
project under the California Enviroimaental Qualit?~ Act. Therefore, no enviromnental
assessment is required.
ATTACHMENTS
A: Resolution of the Council of the City of Palo Alto Approving the Agreement for Assigmnent
of Rights Relating to and Amending the Seattle City Light Capacity and Third Phase
Agreement by and ~nong Certain Northern California Power Agency Members, Including
Palo Alto, Which Will Transfer Its Interests in the Agreement to the City of Santa Clara
B: Resolution 08-02, Resolution of the NCPA to Initiate Transfer of Rights by Project
Pai~icipants in the Seattle City Light Third Phase Agreement
C: Agreement for Assignment of Rights Relating to and Amending Seattle City Light Capacity
and Third Phase Agreement
D: Minutes from the April 2, 2008 UAC meeting
PREPARED BY:
REVIEWED BY:
Padilla, Sr. Resource Plamaer
Ratchye, Assistant Director of Utilities, Resource Management
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
VALERIE O.~,FON~G
Director of Utilities
STEVE EMSLIE/KELLY MORARIU
Deputy City Managers
CMR: 234:08 Page 3 of 3
NOT YET APPROVED ATTACHMENT A
RESOLUTION NO.
RESOLUTION OF THE COUENCIL OF THE CITY OF PALO ALTO
APPROVING THE AGREEMENT FOR ASSIGNMENT OF RIGHTS
RELATING TO AND AMENDING THE SEATTLE CITY LIGHT
CAPACITY AND THIRD PHASE AGREEMENT BY AND AMONG
CERTAIN NORTHERN CALIFORNIA POWER AGENCY
MEMBERS, INCLUDING PALO ALTO, WHICH WILL TRANSFER
ITS INTERESTS IN THE AGREEMENT TO THE CITY OF SANTA
CLARA
WHEREAS, the City of Palo Alto ("City"), a municipal utility and a chartered city,
is a member of the Northern California Power Agency ("NCPA"); and
WHEREAS, NCPA entered into the "Capacity and Energy Exchange Agreement
Between the CitT of Seattle, City Light Department and the Northern California Power Agency
("Exchange Agreement"), to facilitate the exchange of capacity and energy between the parties
for their mutual benefit: and
WHEREAS, on October 6, 1992, pursuant to the Exchange Agreement, NCPA and
certain NCPA members, including the City, entered into the "Seattle City Light Capacity and
Energy Exchange Third Phase Agreement of the Northern California Power Agency" ("SCL
Agreement"), to realize the benefits of the Exchange Agreement to the SCL Agreement
members; and
WHEREAS, by Resolution No. 7128, adopted on August 10, 1992, the Council
authorized the City’s participation in the SCL Agreement, in the participation percentage of
18.333 percent, in order that the City might better manage commodity costs and its transmission
capacity rights in the California Oregon Transmission Project; and
WHEREAS, changes in the wholesale electric markets has resulted in a substantial
reduction in the benefits the CitT might gain from its projected ongoing participation in the SCL
Agreeinent, and the City is motivated to consider assigning its rights and obligations to interested
parties; and
WHEREAS, the City of Santa Clara ("Santa Clara") has expressed interest in
acquiring the City’s interests under the SCL Agreement and, pursuant thereto, on JanuaU 25,
2008, the NCPA Commission adopted its Resolution No. 08-02, effectively approving Santa
Clara’s acquisition of the City’s interest (and the interests of other NCPA members) in the SCL
Agreement, by adding Santa Clara as a party;
NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE
as follows:
080416jb 0073009
NOT YET APPROVED
SECTION 1. The Council hereby approves the City’s participation in the Agreement
For Assignment Of Rights Relating To And Amending The Seattle City Light Capacity And
Third Phase Agreement, whereby the City’s participation percentage will drop from 18.~.~ per
cent to zero per cent and its rights and obligation under the SCL Agreement will transfer to Santa
Clara.
SECTION 2. The Council finds that the adoption of this resolution does not
constitute a project under the California Environmental Quality Act and the CEQA Guidelines
and, therefore, no environment 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 Utilities
Director of Administrative
Services
080416jb 0073009
ATTACHMENT B
Resolution No. 08-29
A RESOLUTION OF THE COMMISSION
OF THE NORTHERN CALIFORNIA POWER AGENCY
AUTHORIZING ASSIGNMENT AND AMENDING SEATTLE CITY LIGHT
CAPACITY AND ENERGY EXCHANGE THIRD PHASE AGREEMENT
WHEREAS, the Northern California Power Agency ("NCPA") and the Cities of Healdsburg,
Lodi, Palo Alto, Roseville and Ukiah ("Project Participants") have executed the Seattle City Light
Capacity and Energy Exchange Third Phase Agreement ("SCL Agreement") on or about October 6,
1992, which is attached hereto as Exhibit 1;
WHEREAS, pursuant to the SCL Agreement, each of the SCL Project participants owns
participation percentages and megawatts of Firm Capacity and Associated Energy, which is
specified in the SCL Third Phase Agreement attached as Exhibit 1; and
WHEREAS, Section 8 of the SCL Agreement provides for the transfer of rights therein by
SOL Project Participants to NCPA members who are not Project Participants and provides that
those NCPA members have a right to purchase said rights from the Project Participants on the
same terms and conditions set forth in the SOL Agreement; and
WHEREAS, pursuant to Section 8 of the SCL Agreement, certain Project Participants,
specifically, the Cities of Roseville, Palo Alto and Healdsburg desire to transfer their surplus project
capacity to Silicon Valley Power, the municipal utility of the City of Santa Clara, who is a NCPA
member, but not a SCL Project Participant; and
WHEREAS, SVP is the sole NPCA member that has an interest in obtaining the surplus
SCL Agreement Project capacity;
WHEREAS, the SCL Agreement permits NCPA to transfer project participants rights
between the Cities of Roseville, Palo Alto and Healdsburg to SVP;
WHEREAS, Section 15 of the SCL Agreement permits NCPA and the Project Participants
to amend said agreement in writing executed by all parties;
WHEREAS, NCPA’s General Counsel has prepared an Agreement for Assignment of
Rights Relating to and Amending the Seattle Oity Light Capacity and Energy Exchange Third
Phase Agreement, ("Amended Agreement") attached hereto as Exhibit 2,which has been reviewed
by the Project Participants and SVP;
NOW, THEREFORE, BE IT RESOLVED by the Commission of the Northern California
Power Agency as follows:
Section 1. The Commission hereby approves the Agreement for Assignment of
Rights Relating to and Amending the Seattle City Light Oapacity and Energy Exchange Third
Phase Agreement, attached hereto and incorporated herein as Exhibit 2;
Section 2. The Commission hereby authorizes the General Manager to effect the
necessary transfer of energy and capacity rights from the Cities of Healdsburg, Palo Alto and
Roseville to SVP as set forth the Amended Agreement attached as Exhibit 2;
Section 3. The Commission grants NCPA authority to invoice either credits or
charges to each Project Participant of the SOL Project as specified in as the Amended Agreement
attached as Exhibit 2;
PASSED AND ADOPTED this 30~ day of April, 2008 by the following vote on roll call:
Vot.__~e
Alameda
BART
Biggs
Gridley
Healdsburg
Lodi "/
Lompoc .
Palo Alto
Port of Oakland
Redding
Roseville ’Y
santa Clara "/
TPackee Donner
Turlock
Ukiah
Plumas-Sierra
Abstained Absent
.~,,
PATRICK KOLSTAD
Chairman
Attest:
DENISE DOW
Assistant Secretary
i07919vl
ATTACHMENT
AGREEMENT FOR ASSIGNMENT OF RIGHTS RELATING
TO AND AMENDING
SEATTLE CITY LIGHT CAPACITY AND THIRD PHASE
AGREEMENT
This Agreement for Assigmnent of Rights Relating to and .Amending Seattle City
Light Capacity and Third Phase Agreement "Agreement" between certain Project
Participants of the Seattle City Light ("SCL") Capacib~ and Energy Exchange Third
Phase Agreement ("SCL Agreement"), and amending said SCL Agreement, dated as of
. 2008 (the "Effective Date"), is by and an~ong the Northern California
Power Agency, a joint powers agency of the State of California ("NCPA"), and the Cities
of Healdsbm’g, Lodi, Roseville, Palo Alto and Ukiah (all of whom, are jointly refen’ed to
as "the SCL Project Pm~icipants"), and the City of Santa Clara doing business as Silicon
Valley Power ("SVP"), who is currently not a SCL Third Phase Project Participant, (all
of whom are jointly referred to as "the Parties")
WITNE S SETH:
WHEREAS, NCPA and the Project Participants have previously executed that
certain Agreement called Seattle City Light Capacity and Energy Exchange Third Phase
Agreement dated October 6, 1992 (the "SCL Agreement"); and
\¥TIEREAS, pursuant to the SCL Agreement, each of the SCL Project
Pm-ticipants owns participation percentages and megawatts of Firm Capacity and
Associated Energy, which is specified in the SCL Third Phase Agreement; and
WHEREAS, Section 8 of the SCL Agreement provides for the transfer of rights
therein by SCL Project Participants to NCPA members who are not Project Participants
and provides that those NCPA members have a right to purchase said rights from the
Project Participants on the same terms and conditions set forth in the SCL Agreemem;
and
WHEREAS, pursuant to Section 8 of the SCL Agreement, certain Project
Participants, specifically, the Cities of Roseville, Palo Alto and Healdsburg desire to
transfer their surplus project capacity to SVP, who is a NCPA member, but not a SCL
Project Participant; and
W]IEREAS, SVP is the sole NPCA member that has an interest in obtaining the
surplus SCL Agreement Project capacity;
WHEREAS, NCPA’s Capacity and Energy Exchange Agreement permits NCPA
to transfer project pm~icipants rights between the Cities of Roseville, Palo Alto and
Healdsburg to SVP;
WHEREAS, Section 15 of the SCL A~eement permits NCPA and the Project
Participants to amend said agreement in v~a’iting executed by all parties;
Page 1 of 7
WHEREAS, capitalized tern~s used in this Agreement and not expressly defined
herein shall have the same meanings as such terms have in the SCL Agreement;
WHEREAS, on January 25, 2008, at a regularly schedule meeting of the NCPA
Commission, SCL Agreement Project Participants reviewed and approved this
transaction pending approval from Project Participants’ governing boards; and
WHEREAS, on January 25. 2008, the NCPA Commission also directed the
General Manager and General Counsel to prepare the necessary Agreement to effect this
transfer and assigmnent by seeking Project Pa~icipants’ governing boards approvals;
NOW, THEREFORE, the Parties a~ee as follows:
Section 1. Purpose. The purpose of this Agreement is to (a) amend the SCL
Capacity and Exchange Third Phase Agreement to allow SVP to become a Project
Participant; (b) enable certain SCL Project Participants, specifically, the Cities of
Healdsburg, Palo Alto and Roseville, to transfer their rights to Project Capacity and
Associated Energy and all benefits and burdens associated with the SCL Agreement to
SVP; and (c) permit NCPA to effect the transfer of this surplus Project Capaci~’ and
energy related to the SCL Agreement and to reimburse NCPA for all reasonable costs
incurred in effecting this transfer and assigmnent; and to (d) mnend the SCL A~eement
so that SVP becomes a Project Participants and agrees to be bound by the irrevocable
assigmnent of the obligations and rights of the Cities of Roseville, Palo Alto and
Healdsburg under the SCL Agreement.
Section 2.Amendment to SCL Third Phase Agreement
2.1 Pursuant to Section 15 of the SCL A~eement, the Project
Participants and NCPA hereby amend and modi~7 the SCL A~eement to add SVP as a
Project Pal.ticipant.
2.2 SVP agrees to be added as a Party to the SCL Agreement, and
becomes a Project Participant of the SCL Agreement and expressly agrees to be bound to
all terms, conditions, obligations, responsibilities and duties set forth in the SCL
Agreement as of the Effective Date of this Agreement.
2.3 All Project Participants, including the Cities of Lodi and Ukiah,
whose interests, rights and responsibilities pursuant to the SCL Agreement, remain
unchanged, expressly consent to and agree to add SVP as Project Participant to the SCL
Third Phase Agreement.
2.4 All other terms and conditions of the SCL A~eement that are not
amended or modified herein remain unchanged and shall continue in force and effect.
Section 3. Transfer of Surplus Capacity and Ener@~
Page 2 of 7
3.1 Pursuant to Section 8 of the SCL Agreement, as of May 31. 2008.
the "Transfer Date," the Cities of Healdsburg, Palo Alto and Roseville shall transfer and
assign their surplus Project Capacity and the Project Entitlement Percemages to SVP as
set forth in Appendix A, which is attached to this Agreement and is incorporated herein.
Such Project Capacity Associated Energy is hereby deemed as "surplus" by the Cities of
Healdsburg, Palo Alto and Roseville, and shall be transferred to SVP for its beneficial
use. NCPA and the Project Participants acknowledge and agree that Healdsburg, Palo
Alto and Roseville’s surplus Project Capacity and Energy interests shall be deemed to be
transferred to SVP as of the Transfer Date, pursuant to Appendix A.
3.2 Said transfers and assignments shall be irrevocable and shall take
effect on the Transfer Date. After the Transfer Date, the participation percemages of the
Project Participants sha!l be adjusted on a going forwarded basis pursuant to Appendix A.
3.3 After the transfer and assigmnent of surplus Project Capacity and
Project Entitlement percentages to SVP, the Cities of Healdsburg, Palo Alto and
Roseville, shall have a remaining Project Entitlement Percentages as set forth in
Appendix A. The participation percentages of the Cities of Lodi and Ukiah remain
unchanged.
3.4 NCPA shall undertake all necessary actions to effect this transfer
and assigmnent and will continue to perform the duties set forth in the SCL Agreement
for all Project Participants, including SVP.
3.5 NCPA shall make all necessary adjustments to the budget and
billing statements to all Parties pursuant to Section 6 of the SCL Agreement. A new
monthly billing statement shall be sent to SVP, showing its share of costs and other
charges payable pursuant to this Agreemem, and any other credit or debit adjustments in
accordance with the SCL Agreement.
3.6. The Parties recognize that NCPA will incur expense in
administering this assigmnent. The Pro’ties expressly agree to reimburse all costs and
fees, including attorney’s fees, incurred by NCPA in effecting this transfer and
assig~ament of surplus Project Capacity and Project Entitlement percentages to SVP in an
an~ount not to exceed $10,000 in total.
Section 4. Authority. Each signatory to this Agreement represents and
warrants that he/she has been duly authorized by the signatory’s governing board for
whom he/she executed it as demonstrated by a resolution from each signatory’s
governing board.
Section 5. Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute a single instrument.
Page 3 of 7
Section 6. Notice. Any notice, demand or request required or authorized by
this Agreement to be given to any Patty shall be in wxiting, and shall be personally
delivered to the Party’ representative on the NCPA Commission or transmitted to the
Party at the address shown on the signature page hereof. The designation of such address
may be changed at any time by written notice given to the Secretat’y of the NCPA
Commission who shall thereupon give written notice of such change to each Party.
Section 7. Waiver. No waiver of the perfolxnance by a Patty of any
obligation under this Agreement with respect to any default or any other matter at’ising in
colmection with this Agreement shall be effective unless in writing.
Section 8. Withdrawal by Project Participants. No Project Pat-ticipant,
which term now includes SVP, may withdraw from this A~’eement. However, NCPA
will use its best efforts to assist any Participant that wishes to assign all or any portion of
its rights pursuant to terms of the SCL Third Phase Agreement.
Section 9. Counsel Representation. Pursuant to the provisions of California
Civil Code section 1717(a), each Party to this Agreement was represemed by counsel in
the negotiation and execution of this Agreement. In light of this representation, this
Agreement shall not be construed as drafted by or be construed against any pat-ticular one
of the Parties.
Section 10. Dispute Resolution. The Parties agree to make best efforts to
settle all disputes related to this Agreement among themselves, and to meet and confer in
good faith to that end. In the event that a dispute catmot be resolved by consultation and
good faith meet and confer processes, the Parties agree that any such dispute shall be
submitted to binding arbitration. The at’bitration shall be governed by the Con~nercial
Arbitration Rules of the American Arbitration Association from time to time in force.
Costs and attorney’s fees shall be recoverable by the prevailing party.
Section 11. Amendments. This Agreement may be atnended only in x~a’iting.
Section 12. Integrated Agreement.This is an inte~ated agreement. It
contains all of the understandings of the Parties.
Section 13. Severability. This Agreement is severable. In the event that any
of the terms, covenatats or conditions of this A~eement or the application of any such
term, covenant or condition is held invalid as to any person or circumstance by any court
having jurisdiction, a!l other terms, covenatats or conditions of this A~eement and their
application shall not be affected thereby, but shall remain in full force and effect unless
the court holds that they are not severable from the other provisions of this Agreement.
Page 4 of 7
Section 14. Governing Law.
the State of California.
1N WITNESS WHEREOF, each
approval of its governing body.
NORTHEt~N CALIFORNIA
POWER AGENCY
Its:
Attested by:
This Agreement shall be governed by the law of
Party has executed this Agreement with the
CITY OF HEALDSBURG
By
Its:
Attest by:
Secretary City Clerk
Approved as to form
General Counsel
CITY OF LODI
By
Its:
Attested by
City Clerk
Approved as to Fom~
City Attorney
CITY OF PALO ALTO
By
Its:
Attested by
City Clerk
Page 5 of 7
Approved as to form Approved as to Forrn
City- Attorney City Attorney
CITY OF ROSEVILLE
By
Its:
Attested by
CITY OF SANTA CLARA
BE
Its:
Attested by
City Clerk City Clerk
Approved as to form Approved as to Form
City Attorney City Attorney
CITY OF UKIAH
Bv
Its:
Attest by Approved as to form
CitT Clerk City Attorney
Page 6 of 7
APPENDIX A
AMENDED
NCPA / SCL CAPACITY AND ENERGY EXCHANGE
THIRD PHASE AGREEMENT
PARTICIPATION PERCENTAGES AND MEGAWATTS
Member
Healdsburg
Lodi
Palo Alto
Rosevitle
Santa Clara (SVP)
Ukiah
Percent
0.000
41.667
0.00
0.00
54.333
4.00
Megawatts
0.0
25.0
0.0
0.0
32.6
2.4
Total 100.00 60.0
Percentages amended as of Effective Date of May 3 !, 2008
Page 7 of 7
ATTACHMENT D
nRAFT
UTILITIES ADVISORY COMMISSION
MINUTES OF APRIL 2, 2008
CALL TO ORDER
Chairman Rosenbaum
Commission (UAC),
called to order at 7:00 P.M. the scheduled meeting of theUtilities Advisory
Present: Commissioners George Bechtel, Dexter Dawes, John Melton, and Dick Rosenbaum
Absent: Commissioner Marilyn Keller and Council Liaison Yiaway Yeh
OFL&L COMMUNICATIONS
Bruce Hodge, Palo Alto resident, spoke to the Commission regarding carbon emissions, He asked for the
utilities plan to reduce emissions over the next 20 years, Chair Rosenbaum directed him to recent memos
updating the Commission on such efforts.
APPROVAL OF THE MINUTES
The minutes from the March 5, 2008, were unanimously approved,
AGENDA REVIEW
No changes to the agenda were requested.
REPORT FROM COMMISSION MEETINGS/EVENTS
There were no reports,
UTILITIES DIRECTOR REPORT
Utilities Director Valerie Fong gave the following updates:
Utilities Advisory Commission Minutes Approved on:Page 1 of 7
Retail Rate: The UAC and staff recommendation for retail rates was unanimously approved by Finance
Committee on March 18th and is expected to go to the full Council on June 9th. Fong also provided a quick
update on past and upcoming customer communications regarding the rate increases including press
releases, Frank’s Weekly memos, and notifications through customer bills, letters, postcards and customer
meetings.
Hydro Conditions: Northern Sierra precipitation is at 80% of average to date and because of low reservoir
levels (about 80% of average), hydro electric generation is expected to be below average if precipitation
resumes median levels for the rest of the season.
New Lodi: NCPA’s 250MW new natural gas-fired Lodi project has been fully subscribed and permitting
work has begun, however, Palo Alto declined to participate in the project as the City’s long term capacity
needs require generation to be sited within the Great Bay Area.
Local Cogen: Staff continues to explore customer-sited cogeneration options within the City.
Earth Month Activities: Copies of Earth Month activities provided to the Commission, and also posted on
the City’s website, indicate special presentations planned for April 3, April 12, and April 16 with the
Greenlight Film Festival planned for Thursday April 17.
Compact Fluorescent Lights: The City of Palo Alto Utilities (CPAU) is offering 5 for $1 compact
fluorescent lights through Palo Alto Hardware and Peninsula Hardware. Commissioner Dawes noted that
the supplies are quickly snapped up at these locations, and suggested better inventory management for the
inevitable customer demand for the item.
UNFINISHED BUSINESS
Utilities Advisory Commission Minutes Approved on:Page 2 of 7
NONE
NEW BUSINESS
ITEM 1: INFORMATION ITEM: Enerqy Risk Management Report for the Second Quarter, Fiscal Year
2007-2008
Karl Van Orsdol, Energy Risk Manager, summarized the quarterly report. He noted that there were no
exceptions to report and that all transactions were fully in accordance with the City Energy Risk
Management Policies, Procedures and Guidelines. Van Orsdol noted that the overall credit exposure was
approximately $7.5 million for gas and electricity combined. This exposure is significantly lower than from
previous years. Van Orsdol also noted that the load resource balance is within limits and reflects the
increasing importance of non-carbon sources of electricity in the City’s electricity purchases. He pointed
out that all but one of the City’s counterparties maintains an excellent credit rating, but that the City has no
exposure with that one outlier.
ITEM 2: ACTION ITEM: Proposed Increase in Utility Water, Gas. Wastewater, and Electric Connection
Fees and Water and Wastewater Capacity Fees
Roland Ekstrand, Senior Engineer gave a short presentation explaining the methodology for calculating
each of the two separate groups of one time charges (connection fees and capacity fees) for new or
upgraded utility services.
Eckstrand replied to questions regarding the impact of the capacity fees on low income housing, calculating
the capacity fees for single family housing, and the completeness of the connection fees in capturing the
City’s cost of installing new services.
Utilities Advisory Commission Minutes Approved on:Page 3 of 7
Commissioner Rosenbaum requested that the connection fees and the capacity fees be voted on
separately. The connection fees were approved unanimously. The capacity fees were approved 3 to 1
with Rosenbaum the dissenting vote.
Action: Commissioner Dawes moved to approve the recommended connection fee increase,
Commissioner Bechtel seconded the motion. The motion carried unanimously. Commissioner Dawes
moved to approve the recommended capacity fee increases. Commissioner Melton seconded the motion.
The motion carried by a vote of 3 to 1 with Commissioner Rosenbaum dissenting.
ITEM 3: ACTION ITEM: Recommendation to Assiqn the Seattle City Light Exchanqe Contract to Another
NCPA Member A.qency
Senior Resource Planner Shiva Swaminathan explained the rationale for the recommended assignment of
the Seattle City Light (SCL) Contract. He noted that flows from the SCL exchange contract (Palo Alto
receives energy in June through October and provides energy from November through March) do not fit
with the electric portfolio since the hydro generation is highest in the spring and summer months and the
portfolio has excess energy, but is deficit in the winter, when Palo Alto must return the energy. In addition,
Swaminathan said that the value of the exchange is and is projected to be negative given the energy price
differences between summer and winter.
Commissioner Melton asked why others value the SCL Contract while Palo Alto does not. Swaminathan
replied that other agencies have different portfolio profiles. Moreover, they might be able to achieve
additional value by doing their own scheduling and trading, and the nature of their transmission assets may
provide more pathways for buying and selling energy.
Action: The UAC acted on a combined motion with Item 4 below.
Utilities Advisory Commission Minutes Approved on:Page 4 of 7
ITEM 4: ACTION ITEM: Recommendation to Lay-off the City’s Share of the California-Oreqon
Transmission Project
Swaminathan explained that the primary justification for the recommended long-term lay-off of the
California-Oregon Transmission Project (COTP) is that the cost of the asset is greater than its value.
COTP, located within the Western Area Power Administration-Sacramento Municipal Utility District (SMUD)
control area has more value to entities within the SMUD control area.
Commissioner Dawes asked what the risks of the layoff are to Palo Alto. Fong responded that, as outlined
in the report, the risks include: 1) Palo Alto’s access to resources in the northwest will be reduced and
these resources could become valuable to meet the City’s Renewable Portfolio Standard (RPS) goals; and
2) the risk that the counterparties harvest some value from COTP, but do not pay the bills - this could
conceivably occur for a maximum of two months.
Action: Commissioner Dawes moved to approve both the recommended SCL assignment and the COTP
layoff. Commissioner Bechtel seconded the motion. The motion carried unanimously.
ITEM 5: INFORMATION ITEM: Utilities Report: Water, Gas, Electric, Fiber and Financial Issues Updates
Staff offered no presentation on this item, but answered questions from Commissioners.
On the water report, Commissioner Dawes asked about the likelihood of litigation on San Francisco Public
Utilities Commission’s Program Environmental Impact Report for the Water System Improvement Program
Assistant Director Jane Ratchye responded that it depends on what alternative San Francisco selects.
Commissioner Melton noted the grim progress on the new water contract negotiations.
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There were no questions on the gas report.
Regarding the electric report, Commissioner Bechtel asked what the definition of "local" means in terms of
the local capacity requirements, Senior Resource Planner Shiva Swaminathan explained that this is
defined by the California Independent System Operator and that not all of it needs to be in the Greater Bay
Area load pocket.
On the financial report, Commissioner Melton asked why the expenses are front loaded in the first half of
the fiscal year. Utility Rates Analyst Eric Keniston responded that the amounts in the first half of the fiscal
year include commitments as well as actual expenses. Commissioner Dawes remarked on the great
profitability of the fiber fund.
ITEM 6: INFORMATION ITEM: Enerqy Policy Act (EPACT) Reportin,q Update on Time Based Meterinq
and Pricin.q
Commissioner Melton stated that CPAU is not expanding its time-based metering options due to short-term
software and hardware issues. However, the report also says that even if all the software and hardware
were in place, this doesn’t make sense given CPAU’s portfolio costs and profile. Director Fong agreed that
even if everything was in place, it still may not make sense to offer these rates, however we must study
them under the EPACT of 2005 and make a decision whether we implement them or not. Commissioner
Bechtel also noted that it would make sense when/if customers demanded it. Given that TOU rates have
been in existence for six years and customers have not taken them suggests that they are not in demand.
Commissioner Rosenbaum offered that another reason that this wouldn’t make sense at least for the
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residential sector is the fact that the residential customer load is only 16% of the total load, which is not
enough to provide much mutual benefit. He suggested that this should also be mentioned in the report.
ITEM 7: INFORMATION ITEM: 2007 Statewide and Palo Alto Business Customer Satisfaction Survey
Results
Commissioner Dawes observed that it was mildly disappointing to see CPAU’s ratings fall from 2 years ago
and be lower than other NCPA members. He wondered if staff has developed any programs to address the
concerns raised on the report. Director Fong responded there were a few things to mention here.
Unfortunately this year the number of major accounts surveyed was much smaller, and they usually provide
more favorable evaluation of utility services. Second, there is greater focus on customer service to small
(non key) accounts. We are somewhat restricted in terms of our customer service representatives for
smaller accounts due to other projects, and that may have also impacted the results. We also know that the
web site could be improved and we have plans to tweak the web site so that information is more easily
accessible. Commissioner Melton perceived that the power delivery score declined and that reliability is
always the customer’s most important issue. He said that he personally had not experienced power
outages, but asked whether outages are more common in some areas of the city. Fong replied that capital
improvement projects have been moved up to address problems in some targeted areas (e.g. California
Avenue business district). In summary, we are disappointed that these are the results, we are not
surprised, and we are taking action to address the issues raised in this survey.
The next schedule meeting is set for May 7.
Meeting adjourned at 8:45 P.M.
Respectfully submitted,
Marites Ward
City of Palo Alto Utilities
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