HomeMy WebLinkAbout2005-02-22 City CouncilNOT YETAPPROVED
SECTION 2. The Council finds that the adoption of this
resolution does not constitute a proj ect under the California
Environmental Quality Act, and therefore no environmental
assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
031126 cl 0072343
2
APPROVED:
Mayor
City Manager
Director of
Administrative Services
Director of Utilities
MEMORANDUM 5
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
SUBJECT: CENTRAL VALLEY PROJECT CORPORATION
DATE: OCTOBER 1, 2003
REQUEST:
Staff requests a UAC recommendation to the City Council that the City become a
participant in the Central Valley Project Corporation.
BACKGROUND
The Northern California Power Agency (NCP A) Commission, at its September 26,
2002 meeting, directed its General Manager to complete the formation of the
Central Valley Project Corporation (CVP Corp). The CVP Corp, a California non-
profit corporation, was subsequently formed and the Articles of Incorporation and
Bylaws were filed with the California Secretary of State and accepted on
November 5, 2002 (Exhibit A). Since then, a temporary Board of Directors has
been installed and five customers have joined the CVP Corp.
The CVP Corp was created with a primary goal -protect, and if possible, enhance
the benefits of the Central Valley Project (CVP) power contracts. Approximately
80 customers receive power tlu'ough CVP power contracts -power contracts
marketed by the Western Area Power administration (Western). Over the past
several years, Western customers have been exposed to a number of crises
including lack of or reduced appropriations for purchased power and wheeling
costs and reduced funding for maintaining the CVP generators. Western
customers have responded to these crises by developing one-off solutions like the
CVP O&M funding agreement, the Shasta rewind funding agreement and the
Purchased Power and "Wheeling funding agreement. These collaborative efforts
have been critical to preserving the customer benefits of Western power contracts.
Nevertheless, the experience of the past several years has identified that these
collaborative efforts could be improved by taking advantage of economies of scale
in funding arrangements, responding faster to value-enhancing opportunities and
leveraging use of staff time.
DISCUSSION
Participation in the CVP Corp is available to all eligible Western customers
(federal and state agencies are not eligible). Exhibit B, "Central Valley Project
Corporation Membership Agreement" . describes the terms and conditions for
participation. The baseline costs associated with becoming a CVP Corp
participant is limited to a share of overhead costs. All participants share in
overhead administration costs according to the following formula: $30/MW of
Western power allocation. Palo Alto's share of administration costs is $5,250/year
($30/MW times 175MW).
Each program or project developed by the CVP Corp will be offered to every CVP
Corp participant and each participant could choose to subscribe to individual
programs or projects. Potential projects that the CVP Corp may provide include:
• Cash flow management to meet customer value opportunities
• Transition to non-federal ownership if divested
• Financing arrangements for short-and long-tenn resource firming
In essence, the CVP Corp is a more efficient way of unifying efforts and taking
advantage of economies of scale to preserve and enhance the customer benefits of
the Western power contracts.
According to the attached bylaws, the CVPCorp will have no members per se, but
will have associates .to which it may confer some or all of the rights of a member,
as set forth in the California Nonprofit Corporation Law. The CVP Corp will be
directed by a board of three to nine directors. Directors are first elected (for six
year tenus) by the existing interim directors. In the future; directors will be
elected (from a list of nominees) by directors.
The risk of joining the CVP Corp is that general overhead could grow to be
excessive compared to the benefits produced. The risk of costs of one program
being transferred from one set of participants to another set is eliminated by
having each program be approved and subscribed to separately. As described in
section (g) of Exhibit B, the costs and obligations related to each program or
project will be allocated to the participants who subscribe to the individual
program or project Additionally, under section U) of Exhibit B a participant may
terminate its individual participation with a 120 day written notice. The risk of not
joining the CVP Corp is that it will fail to achieve critical mass and fail to become
a viable provider of services to Western customers. The largest longrun potential
benefit of joining the CVP Corp is that it enhances the customers' ability to finance
purchase of the CVP if Congress were to unwisely divest it.
Staff recommends that the City join the CVP Corporation. Joining the CVP Corp
does not require that the City participate in any specific projects or programs. If
Council approves participation in the CVP Corp, individual projects or programs
offered by the CVP Corp will be brought to the Council for approval if staff
estimates that the benefit appears to outweigh the cost and risk.
ATTACHMENTS:
A: Articles of Incorporation on Central Valley Project Corporation and Bylaws
of Central Valley Project Corporation
B: Central Valley Project Corporation Membership Agreement
PREP ARED BY:
Senior Resource Originator
.~
REVIEWED BY: ./~ ,~ ALACHANDRAN
Wsistant Director
APPROVED BY:
BYLAWS OF
CENTRAL VALLEY PROJECT CORPORATION
a California Nonprofit Public Benefit Corporation
ARTICLE I
NAME
The name of this corporation shall be: Central Valley Project Corporation
("Corporation").
ARTICLEll
PRINCIP AL OFFICE AND PURPOSES
Section 1. Principal Office. The principal office for the transaction of the business of
the Corporation ("principal executive office") shall be fixed and located in California at a
location to be determined by the Board of Directors ("Board"). The directors may change the
principal office from one location to another. Any change of this location shall be noted by the
Secretary on these bylaws opposite this section, or this section may be amended to state the new
location.
Section 2. PUQJoses. The specific charitable purpose of this corporation is to provide
services or products, or facilitate the provision of services or products, to or for the benefit of
federal, state, or local governmental entities or municipalities (the "Participants"). Subject to
Article N.B of the Articles of Incorporation; this Corporation shall be permitted to conduct other
lawful activities permitted under the California Nonprofit Public Benefit Corporation Law.
ARTICLE III
MEMBERSHIP
Section 1. Mem bers. The Corporation shall have no members. Any action which
would otherwise require approval by a majority of all members or approval by the members shall
require only approval of the Board. All rights which would otherwise vest in the members shall
vest in the Board.
Section 2. Associates. Nothing in this Article III shall be construed as limiting the
right Of th~ Corporation to refer to persons associated with it as "members" even though such
persons are not members, and no such reference shall constitute anyone a member, within the
meaning of Section 5056 of the California Nonprofit Corporation Law. The Corporation may
confer by amendment of its articles or of these bylaws some or all of the rights of a member, as
set forth in the California Nonprofit Corporation Law, . upon any person or persons who do not
have the right to vote for the election of directors or on a disposition of substantially all of the
assets ofthe Corporation or on a merger or on a dissolution or on changes to the Corporation's
DOCSSC 1:325291.1
articles or bylaws, but no such person shall be a member within the meaning of said Section
5056.
ARTICLEN
DIRECTORS
Section 1. Powers. Subject to limitations of the articles and these bylaws, the activities
and affairs of the Corporation shall be conducted and all corporate powers shall be exercised by
or under the direction of the Board. The Board may delegate the management of the activities of
the Corporation to any person or persons, a management company, or committees, however
composed, provided that the activities and affairs of the Corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board. Without prejudice
to such general powers, but subject to the same limitations, it is hereby expressly declared that
the Board shall have the following powers in addition to the other powers enumerated in these
bylaws or statute:
(a) To select and remove all the other officers, agents, and employees of the
Corporation, prescribe powers and duties for them as may not be inconsistent with law, the
articles, or these bylaws, fix their compensation, and require from them security for faithful
servIce.
(b) To conduct, manage, and control the affairs and activities of the Corporation
and to make such rules and regulations therefor not inconsistent with law, the articles, or these
bylaws, as they may deem best.
(c) To adopt, make, and use a corporate seal and to alter the form of such seal
from time to tim~ as they may deem best.
(d) To borrow money and incur-indebtedness for the purposes, and to cause to
be executed and delivered therefor, in the corporate name, promissory no~es, bonds, debentures,
deeds of trust, mortgages, pledges, hypothecations, or other evidences of debt and securities
therefor.
(e) To carry on a business at a profit and apply any profit that results from the
business activity to any activity in which it may lawfully engage as a tax exempt corporation. No
part of such profits shall inure to the benefit of any of its directors, trustees, officers, members, or
to individuals.
Section 2. Number of Directors. The Board shall consist of a minimum of three (3)
regular members and a maximum of nine (9) regular members, the exact number of which shall
be determined from time to time by the Board. -The Board shall also have a corresponding
number of alternate members of the Board who shall act for and on behalf of, and in the place of,
the respective regular member when such regular member is not present at a meeting or
otherwise unable to act as a director. The incorporator shall appoint three (3) interim directors.
The interim directors shall perform actions necessary or appropriate to perfect the organization of
this Corporation and tal;ce such other actions as may be necessary or appropriate to qualify this
2
DOCSSCI :325291.1
Corporation as a tax exempt non-profit corporation under state and federal law (~, appoint
officers, select tax year and file an exemption application with the Internal Revenue Service and
California Franchise Tax Board). Thereafter, the directors shall be elected or appointed, as the
case maybe, and removed as provided in Sections 3 and 4 of this Article IV.
Section 3. Selection and Term of Office. All directors shall be elected at allrmal
meetings of the Board, when their terms expire. Unless earlier removed as provided hereunder,
each director shall hold office for six (6) years and until a successor has been elected or
appointed, as the case may be. There shall be no limits on the. number of consecutive full or
partial terms a director may serve on the board. The directors shall be chosen from a list of
individuals nominated by the Participants that (i) participates in a program of this Corporation,
and (ii) the Board has aclrnowledged in writing can nominate individuals. Each such Participant
shall be entitled to nominate up to ten (10) individuals. No individual shall be chosen by the
Board to act as a director other than from the list of nominations. The Board shall designate the
elected members ofthe Board as regular members or alternate members, as the case may be.
Section 4. Vacancies. Subject to the provisions of Section 5226 qf the California
Nonprofit Public Benefit Corporation Law, any director may resign effective upon giving written
notice to either the Chairman of the Board, the Secretary, or the Board, unless the notice
specified a later time for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be selected before such time, to take office when the resignation
becomes effective.
Vacancies in the Board shall be filled by a majority of the remaining directors, although
less than a quorum, or by a sole remaining director. Each director so selected shall hold office
until the expiration of the term of the replaced director and until a successor has been selected
and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case of the death,
resignation, or removal of any director or if the authorized number of directors is increased.
The Board may declare vacant the office of a director who has been declared of unsound
mind by a final order of court, or convicted of a felony, or found by a final order of judgment of
any court to have breached any duty arising under Article 3 of the California' Nonprofit Public
Benefit Corporation Law. Any director may be removed at any time, with or without cause, upon
approval by a majority of the directors then in office.
No reduction of the authorized number of directors shall have the effect of removing any
director before that director's term of office expires.
Section 5. Place of Meetings. Meetings of the Board may be held at any place in or
outside the State of California that has been designated from time to time by resolution of the
Board. In the absence of such designation, regular meetings shall be held at the principal
executive office of the Corporation.
3
DOCSSCI :325291.1
Section 6. Annual Meetings. The Board shall hold an annual meeting for the purpose
of organization, selection of directors and officers, and the transactiop of other business. Annual
meetings of the Board shall be held during the first quarter of each year.
Section 7. Other Regular Meetings. Other regular meetings of the Board shall be held
on such dates and at such times as may be fixed by the Board.
Section 8. Special Meetings. Special meetings of the Board for any purpose or
purposes may be called at any time by the Chairman of the Board or a majority of directors then
in office. Special meetings of the Board called by the Chairman of the Board shall be held upon
seven days' notice, and meetings of the Board called by a majority of directors then in office
shall be held upon 72 hOllIS notice. Notice may be provided by first-class mail, personally or by
telephone, including a voice messaging system or other system of technology designed torecord
and communicate messages, telegraph, facsimile" electronic mail, or other electronic means. Any
such notice shall be addressed or delivered to each director at such director's address as it is
shown upon the records of the Corporation by the director for purposes of notice or, if such
address is not shown on such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held. '
Notice by mail shall be deemed to have been given at the time a written notice is
deposited in the United States mails, postage prepaid; provided, however, that the United States
mails shall not be used to provide notice of a special meeting to be held on 72 hours notice. Any
other written notice shall be deemed to have been given at the time it is personally delivered to
the recipient or is delivered to a common carrier for transmission, or actually transmitted by the
person giving the notice by electronic means, including but not limited to, facsimile, telecopier,
email and similar means, to the recipient. Oral notice shall be deemed to have been given at the
time it is communicated, in person or by telephone or wireless, to the recipient or to a person at
the office of the recipient who the person giving the notice has reason to believe will promptly
communicate it to the receiver, .
Section 9. Quorum and Voting: A majority of the authorized number of directors shall
co.nstitute a quorum for the transaction of business, except to adjourn as provided in Section 13
of this Article IV. Each director present at a meeting duly held at which a quorum is present
shall be entitled to one vote. Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present in person, or otherwise in accordance
with Section 10, shall be regarded as the act of the Board, unless a greater number is required by
law or by the articles, except as provided in the next sentence. A meeting at which a quorum is
initially present may continue to transact business, notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum for that meeting.
Notwithstanding the foregoing, the Board may also act without a meeting by unanimous written
consent as provided in Section 13.
Section 10. Participation in Meetings by Conference Telephone. Members of the Board
may participate in a meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one another.
4
DOCSSC 1 :325291.1
Section 11. Waiver of Notice. Notice of a meeting need not be given to any director
who signs a waiver of notice or a written consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting, without
protesting, prior thereto or at its commencement, the lack of notice to such director. All such
waivers, consents, and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 12. Adiournment. A maJonty of the directors present; whether or not
constituting a quorum, may adjourn any meeting to another time and place. Notice of the time
and place of holding an adjourned meeting need not be given tCl absent directors if the time and
place is fixed at the meeting adjourned, except as provided in the next sentence. If the meeting is
adjourned for more than 24 hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors who were not present at the time
of the adjournment.
Section 13. Action Without Meeting. Any action required or permitted to be taken by
the Board may. be taken without a meeting, if all members of the Board, individually or
collectively, consent in writing to that action; provided, however, that the consent of any director
who has a material financial interest in a transaction to which the Corporation is a party and who
is an "interested director" as defined in Section 5233 of the California Nonprofit Public Benefit
Corporation Law shall not be required for approval of that transaction. Such action by written
consent shall have the same force and effect as a unanimous vote of the Board. Such written
consent or consents shall be filed with the minutes of the proceedings ofthe Board.
Section 14. Rights of Inspection. Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records, and documents of every kind and to
inspect the physical properties ofthe Corporation of which such person is a director. The right to
inspect such documents shall also be given to a representative of each Participant that (i)
participates in a program of this Corporation, and (ii) the Board has acknowledged in writing can
inspect the materials.
Section 15. Fees and Compensation. A director or member of a committee may receive
reasonable compensation for performing his or her duties with respect to this corporation, in an
amount to be determined by the Board. Reimbursement for expenses incurred in performance of
duties may be fixed or determined by the Board.
ARTICLE V
COMMITTEES
Section 1. Committees of the Board. The Board may appoint one or more committees,
each consisting of two (2) or more directors and no persons who are not directors, and delegate to
such committees any of the authority of the Board except with respect to:
(a) the taking of any final action on matters which, under the Nonprofit
Corporation Law of California, also requires members' approval or approval of a majority of all
the members;
5
DOCSSC) :325291.1
(b) the filling of vacancies on the Board or in any committee;
(c) the fixing of compensation of the directors for serving on the Board or on
any committee;
(d) the amendment or repeal of bylaws or adoption of new bylaws;
( e) the amendment or repeal of any resolution of the Board which by its express
terms is not so amendable or repealable;
(f) the appointment of any other committees of the Board or the members of
these committees.
(g) the expenditUre of corporate funds to support a nominee for director after
there are more people nominated for director than can be elected; or
(h) the approval of any self-dealing transaction, as such transactions are defined
in Section 5233(a) ofthe California Nonprofit Public Benefit Corporation Law.
Any such committee must be created, and the members thereof appointed, by resolution·
adopted by a majority of the authorized number of directors then in office, provided a quorum is
present, and any such committee may be designated by such name as the Board shall specify.
The Board may appoint, in the same manner, alternate members of any committee who may
replace any absent member at any meeting ofthe committee. The Board shall have the power to
prescribe the manner in which proceedings of any such committee shall be conducted. In the
absence of any such prescription, such committee shall have the power to prescribe the manner in
which its proceedings be conducted. Unless the Board or such committee shall otherwise
provide, the regular and special meetings and other actions of any such committee shall be
governed by the provisions of Article IV applicable to meetings and actions of the Board.
Minutes shall be kept of each meeting of each committee.
ARTICLE VI
OFFICERS
Section 1. Officers. The officers of this Corporation shall be a Chairman of the Board,
Secretary, and Chief Financial Officer. This Corporation may also have, at the discretion of the
Board, an executive director, a president, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article VI. Any number of offices may be
held by the same person, except as provided in the articles or in these bylaws and except that
neither the Secretary nor the Chief Financial Officer may serve concurrently as the Chairman of
the Board.
Section 2. Election and Tenn. Unless earlier removed as provided hereunder, each
officer shall hold office for three (3) years and until a successor has been elected. The officers of
this Corporation, except those appointed in accordance with the provisions of Section 3 or
Section 5 of this Article VI, shall be elected by the Board when their term expires. Any officer
6
DOCSSCI :325291.1
chosen by the Board shall serve at the pleasure of the Board, subject to the rights, if any, of an
officer under any contract of employment.
Section 3. Subordinate Officers. The Board may appoint, and may authorize the
Chairman of the Board or another officer to appoint, any other officers the business of the
Corporation may require, each of whom shall have the title, hold office for the period, have the
authority, and perform the duties specified in the bylaws or determined from time to time by the
Board. .
Section 4. Removal and Resignation. .Pilly officer may be removed, with or without
cause, by the Board at any time or, except in case of an officer chosen by the Board, by an officer
on whom such power of removal may be conferred by the Board. .Pilly such removal shall be
without prejudice to the rights, if any, of the officer under any contract of employment of the
offic~. .
.Pilly officer may resign at any time by giving written notice to the Corporation. .Pilly
resignation shall take effect at the date of the receipt ofthat notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the 3;cceptance of the resignation
shall not be necessary to make it effective. .Pilly resignation is without prejudice to the rights, if
any, of the Corporation under any contract to which the officer is a party.
Section 5. . Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled only in the manner prescribed in these bylaws
for regular election or appointment to that office, provided that such vacancies shall be filled as
they occur and not on an annual basis.
Section 6. Chairman of the Board. The Chairman of the Board shall preside at
meetings of the Board and exercise and perform such other powers' and duties as may be from
time to time assigned to him by the Board or prescribed by the bylaws.
Section 7. Secretary. The Secretary shall attend to the following:
(a) Book of minutes. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board may direct, a book of minutes of all
meetings and actions of directors, and committees of directors, with the time and place of
holding, whether regular or special, and, if special, how authorized, the notice given, the names
of those present at such meetings, and the proceedings of such meetings.
(b) Notices, seal and other duties. The Secretary shall give, or cause to be
given, notice of all meetings of the Board required by the bylaws to be given. The Secretary
shall keep the seal of the Corporation in safe custody. The Secretary shall have such other
. powers and perform such other du6es as may be prescribed by the Board or the bylaws.
Section 8. Chief Financial Officer. The Chief Financial Officer shall attend to the
following:
7
DOCSSC 1 :325291.1
(a) Books of account. The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of .the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and other matters
customarily included in financial statements. The books· of account shall be open to inspection
by any director at all reasonable times.
(b) Deposit and disbursement of money and valuables. The Chief Financial
Officer shall deposit all money and other valuables in the name and to the credit of the
Corporation with such depositories as may be designated by the Board; shan disburse the funds
of the Corporation as may be ordered by the Board; shall render to the directors, whenever they
request it, an account of all transactions as Chief Financial Officer and of the financial condition
of the Corporation; and shall have such other powers and perform such other duties as may be
prescribed by the Board or the bylaws.
Section 9. COIhpensation. Officers may receive such compensation, if any, for their
services, and such reimbursement for expenses, as may be fixed or determined by the Board.
ARTICLEvn
RECORDS AND REPORTS
Section 1. Corporate Records. The Corporation shall keep:
(a) Adequate and correct books and records of accounts;
\
(b) Written minutes of the proceedings of its Board and committees of the
Board; and
(c)
amended, to date.
Section 2;
The original ·or a copy of the articles of incorporation and bylaws, as
Annual Report.
(a) Financial statements shall be prepared as soon as reasonably practicable
after the close of the fiscal year. The financial statements shall contain in appropriate detail the
following:
(1) The assets and liabilities, including trust funds, of this Corporation as
of the end of the fiscal year;
(2) The principal changes in assets and liabilities, including trust funds,
during the fiscal year;
(3) The revenue or receipts of this Corporation, both unrestricted and
restricted to particular purposes, for the fiscal year;
8
DOCSSCI :325291.1
(4) The expenses or disbursements of this Corporation, for both general
and restricted purposes during the fiscal year;
(5) Any transaction during the previous fiscal year involving Fifty
Thousand Dollars ($50,000.00) or more to which this Corporation or a subsidiary was a party and
in which any directors or· officers of the Corporation or subsidiary had or has a direct or indirect
material financial interest. The report must disclose the names ofthe interested persons involved
in such transaction, stating such person's relationship to the Corporation, the nature of such
person's interest in the transaction and, where practicable, the amount of such interest; and
(6) The amount and circumstances of any indemnification or advances
aggregating more than Ten Thousand Dollars ($10,000.00) paid during the fiscal year to any
officer or director of the Corporation.
(b) Such financial statements shall be accompanied by any report thereon of
independent accountants, or, if there is no such report, the certificate of an authorized officer of
the Corporation that such statements were prepared without audit from the books and records of
the Corporation.
(c) A report including the financial statements prescribed above shall be
furnished annually to aU directors of the Corporation and each Participant that (i) participates in a
program of this Corporation, and (ii) the Board has acknowledged in writing can receive the report.
ARTICLE VIII
OTHER PROVISIONS
Section 1. Endorsement of Documents; Contracts. Subject to the provIsIOns of
applicable law, any note, mortgage, evidence of indebtedness, contract, conveyance, or other
instrument in writing and any assignment or endorsement thereof executed or entered into
between the Corporation and any other person, when signed by the Chairman of the Board,
Executive Director, and the Secretary or the Chief Financial Officer·shall be valid and binding on
the Corporation in the absence of actual knowledge on the part of the other person that the
signing officers had no authority to execute the same. Any such instruments maybe signed by
any other person or persons and in such manner as from time to time shall be determined by the
Board, and, unless so authorized by the Bo.ard, no officer, agent, or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to pledge its credit
or to render it liable for any purpose or amount. .
Section 2. Representation of Shares of Other Corporations. The Chairman of the
Board or any other officer or officers authorized by the Board are each authorized to vote,
represent, and exercise on behalf of the Corporation all rights incident to any and all shares of
any other Corporation or Corporations standing in the name of the Corporation. The authority
herein granted may be exercised either by any such officer in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said officer.
9
DOCSSCI :325291.1
Section 3. Construction and Definitions. Unless the context otherwise requires, the
general provisions, rules of construction, and definitions contained in the General Provisions of
the California Nonprofit Corporation Law and in the California Nonprofit Public Benefit
Corporation Law shall govern the construction of these bylaws.
Section 4. Amendments. These bylaws and the Articles of Incorporation of this
Corporation may be amended by a majority of the directors.
Section 5. Fiscal Year. The fiscal year of this Corporation shall be determined by
resolution of the Board.
Section 6. Corporate Seal. This Corporation shall have a seal which shall be specified
by resolution of the Board of Directors. The seal shall be affixed to all corporate instruments, but
failure to affix it shall not affect the validity of the instrument.
Section 7. Participants Review of Atmual Budget. The annual budget ofthis
Corporation shall be delivered to each Participant that (i) participates in a program of this
Corporation, and (ii) the Board has aclrnowledged in writing can receive the budget, for its review
before the budget is adopted by this Corporation. This Corporation shall in good faith evaluate
any comments or suggestions made by the Participants regarding the budget.
ARTICLE IX
INDEMNIFICATION
Section 1. Right ofIndenmity. To the fullest extent permitted by law, the Corporation
shall indemnify its directors, officers, employees, and other persons described in Section 5238(a)
of the California Nonprofit Public Benefit Corporation Law, including persons formerly
occupying any such position,' against all expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred by them in connection with any "proceeding," as that
term is used in that Section, and including an action by or in the right of this Corporation, by
reason of the fact that the person is or was a person described in that Section. "Expenses," as
used in this bylaw, shall have the same meaning as in Section 5238(a) of the California Nonprofit
Public Benefit Corporation Law.
Section 2. Approval of Indemnity. On written request to the Board by any person
seeking indemnification undo Section 5238(b) or Section 5238(c) of the California Nonprofit
Public Benefit Corporation Law, the Board shall promptly determine under Section 5238(e) of
the California Nonprofit Public Benefit Corporation Law whether the applicable standard of
conduct set forth in Section 5238(b) or Section 5238(c) has been met and, if so, the Board shall
authorize indemnification. If the Board cannot authorize indemnification because the number of
directors who are parties to the proceeding with respect to which indemnification is sought
prevents the formation of a quorum of directors who are not parties to that proceeding, the court
in which such proceeding is or was pending upon application made by the Corporation or the
agent or the attorney or other person rendering services in cqnnection with the defense, whether
or not such application by the agent, attorney, or other person is opposed by the Corporation,
shall determine under Section 5238(e) of the California Nonprofit Public Benefit Corporation
10
DOCSSCI:325291.1
Law whether the applicable standard of conduct set forth in Section 5238(b) or Section S238(c)
has been met and, if so, the court shall authorize indemnification.
Section 3. Advancement of Expenses. To the fullest extent permitted by law and
except as otherwise detennined by the Board in a specific instance, expenses incurred by a
person seeking indemnification under Sections 1 and 2 of this Article IX in defending any
proceeding covered by those sections shall be advanced by the Corporation before final
disposition of the proceeding, on receipt by the Corporation of an undertaking by or on behalf of
that person that the advance will be repaid unless it is ultimately determined that the person is
entitled to be indemnified by the Corporation for those expenses.
Section 4. Insurance. The Corporation shall have the right to purchase and maintain
insurance to the full extent permitted by law on behalf of its officers, directors, employees, and
other agents, against any liability asserted or incurred by any officer, director, employee, or agent
in.such capacity or arising out of the officer's, director's, employee's, or agent's status as such.
ARTICLE X
CERTIFICATE OF SECRETARY
I, the undersigned, certifY that I am the presently elected and acting Secretary of
CENTRAL V ALLEY PROJECT CORPORATION, a California nonprofit corporation, and the
above bylaws, consisting of 10 pages are the bylaws of this Corporation as adopted at a meeting
of the Board held on ,2003. .
DATED:
, Secretary
11
DOCSSCI :325291.1
Attachment C: Excerpt of Approved UAC Minutes from 10/01/03
Rosenbaum: Alright. Anything else on this item.
Bechtel: I would like your explanation as to why we didn't give the money back. It
should have gone the way and as long as the customers understanding.
Ulrich: I think it is important that the customer perceives this as a good value. Many
would have a very difficult time going out and purchasing the at the quantity that is here
and find a counterparty that would sell it to them so we provide a very good service.
Central Valley Project Corporation
Rosenbaum: All right. The final item on the agenda is the Central Valley Project
Corporation.
Ulrich: Randy is going to do this one too. Thank you. Let me call your attention to the
fact that we are talking about 5000 dollars, 5200.50 dollars but because it has a
significant change in the way we are advancing money there is a lot of money involved in
this so the administration cost of it is very insignificant but there is so many benefits of us
joining this corporation over the current we're funding that it is very compelling to join.
If you like Tom Kabat could give you a little of explanation of how we do it know. The
kinds of money we are talking about versus what the benefit will be for doing this.
Rosenbaum: I would appreciate that. I hope somewhere in there you can explain the
motivation for starting this.
Kabat: All right. I am Tom Kabat with the Utilities Department. I have been working
with dealing with the City's Western Contract for a number of years and some of the
things that have happened over the years to Western and its 80 customers have been
occasions of Congress under-funding certain aspects of the Central Valley Projects
instead of dams and generators that produce most of this power and when that
maintenance got under-funded some of the reliability was at risk and there were times
where the customers came together in fact sub-sets of the customers came together to
work with the Department of Interiors Bureau of Reclamation and with Department of
Energy's Western Area Power Administration to fund certain projects. One of them was
rewinding the generators at the Shasta Power Plant that had gone beyond their rated lives;
That took a year or so of working together to develop a contract to figure how we would
advance money, or how we would be tracked or we would be escrowed how we would be
credit~d back to the participants how we would be paid for by all customers regardless of
whether they were the fronters of money and those things take some time. We had to do
it again. After that we decided to expand the O&M in the Shasta Rewind type
arrangement to address all kinds of O&M opportunities and problems with the Central
Valley Projects so we got a more general O&M funding setup. We had to do the same
kind again about two or three years ago when it look like Western had to buy some
energy they did not have enough money in the budget, the customers had to front some
money for Western to be ready to go to purchase the energy otherwise they would have
-Approved 11/05/03-
UAC Minutes October 1, 2003 Page 28 of 37
cut the volume they supplied to us and so these all have been kind of one of solutions,
one at a time, as we have come to a problem and we have struggled to figure out how to
solve it. There also have been significant risks of about ten years ago now almost where
the administration has been proposing to divest the Central Valley Project and sell it. The
customers realized that these kind of slow maneuvers we do to get people together to
raise a few million dollars might be inadequate for raising the hundred of millions it
might take to purchase the CVP if it were divested. So one idea was to form this type of
entity, the CVP Corporation. It is a 50l3C Non-Profit Corporation. Group of customers
who are in the electric distribution business like municipal utilities, utilities district etc.
coming together to establish this entity they can do different things. They are going to be
able to roll up different products hopefully have a set of solutions that they work on they
perform for rolling out a product like financing products for smoothing up for our uneven
contributions that have been made to Central Valley Project causes and then if in the
unfortunate event that Congress does some day decide to divest the Central Valley
Project it would definitely help to have this kind of organization around. They would be
able to raise the capital needed to make substantial offer to purchase the project to keep it
intact to keep delivering the benefits it now delivers. So that is some of the background
about where we have been, what we have tried, what shortcomings we have seen, what
we are worried about, what we are doing to solve future problems and current problems.
Ulrich: Did you mention that project oriented ways this can work is that you can
participate project by project if it is in our best interests?
Kabat: Right. The idea is you can join the overall umbrella organization of the CVP
Corp. and then you subscribe to the individual services or projects and they are rolling
first one out as a kind of cost levelization escrow account for Central Valley Project
Improvement Restoration Fund. It is not a particularly big problem for Palo Alto so staff
does not propose that we participate in their very first offering but staff has proposed. that
we ask the Commission to recommend to Council have the City join the CVP
Corporation not that we pick up on the first product they offer.
Carlson: Who else are the major members I am sure at the most NCP A but are there
others that are in there?
Balachandran: There are seven members who joined so far and they needed six to
actually form the corporation officially. Some of the larger members that have joined so
far I believe Redding, BART and Silicon Valley Power then you have Biggs, Gridley,
and a couple of other small members who also joined. But a number of cities are in the
process that we are in of going towards those.
Carlson: What about SMUD for exainple, are they potential members?
Kabat: Yes they are.
Ulrich: We would like to have as bigger than distance.
-Approved 11/05/03-
UAC Minutes October 1, 2003 Page 29 of 37
Carlson: That's okay. So who outside of NCP A. SMUD and Sacramental Municipal
Utility District?
Ulrich: It would be TID and MID.
Carlson: What about LADWP?
Kabat: No they are not CVP customers.
Rosenbaum: Not everybody joins doesn't that create a problem? If SMUD were not to
join and there are projects to be advanced funded how would they pay their share?
Kabat: It may end up being some agreement between SMUD and CVP Corp on how that
is done.
Carlson: We have handled that in the past.
Rosenbaum: Yes, we have done all these things in the past. It is just not obvious to me
that this is anything but complication.
Ulrich: I think it is just the opposite. It does one is it makes it real clear what is in the
agreement and tells what each parties what share and role is that is one of the benefits.
The other benefit is that this money that we are already advancing, there is no, we are not
getting any interest on that money. Ifwe put it all into invest we would have mechanism
of being able to collect interest in terms of money on stock market.
Rosenbaum: Is there a staff here?
Kabat: I don't know that the corporation has hired staff. I think they intended to use ...
Ulrich: We look at the model. I have been on this team that has been looking at this
stuff. There is a model for this. This isn't something new and unique. Western already
has this in the Colorado area. It is the Transmission Agency of Rocky Mountains of
something like that. I just made that up. Western State Corp. I did not make that one up.
So we brought the Director which is a one-person organization out and frankly that
person could also manage the CVP Corp that is what we wanted to do. So it is very, very
minimal amount of staff work.
Balachandran: And currently NCP A staff is providing the admin support for this and so
the NCP A organization bills the CVP Corporation through a contract in place for
services. The Board of Directors is basically the temporary board of directors headed by
the General Manager and the Asst. General Manager. As soon as the organization
convenes they can basically convene at any time now since they have six members. A
Board of Directors will be instituted and continue to have the staff worked on by NCPA
till it gets to some kind of critical mass where there may be directors or higher ups.
-Approved 11/05/03-
UAC Minutes October 1 , 2003 Page 30 of 37
Carlson: Why can't NCPA do it?
Balachandran: They wanted to expand the membership and just not have limits for
NCPA.
Dahlen: Seems like the Board is really key to this. How many board seats would there
be potentially?
Ulrich: What we look at it. It is possible that Palo Alto would not be on the Board. It
doesn't necessary mean to you now that you are on the Board. But if I think the key for
our success is one is it where we want to invest our money. Do we see a direct benefit
back from Westem in the form of benefits we otherwise wouldn't get. Tom pointed out
the real key to this the govemment does not have the money to fund improvements and
without the improvements we do not get the benefit of higher efficient of production and
we don't get the benefit of that additional amount of megawatts or energy that are coming
out of that project. So far before we have invested the money and we're into the millions,
and City Council approved for this year was 4 million and we are already spending
advancing 4 million dollars. We get it back in the end of the month in a billing credit but
we have already committed and it has been an outstanding program and we have got
direct benefit back over the years that we have been doing it. So this is just going to
formalize it. We are going to do the same thing and participate in the same kind of
projects.
Rosenbaum: SMUD is by far the largest single customer, have they joined? Or are they
thinking of about joining.
Kabat: I do not know SMUD's status with the CVP.
Ulrich: I didn't check it out. I should have.
Balachandran: They have been included in the discussion from the inception and so I
know they have been brought along. I do not know where they are in the process of
decision making.
Ulrich: I have not heard of anybody that said that they are not going to join. So I can't
tell you everybody has.
Rosenbaum: I would say if they didn't join the effect of this the organization would be
greatly diminished.
Ulrich: I don't think so.
Rosenbaum: But you need their cooperation for any big projects.
Ulrich: We did that now.
-Approved 11/05/03-
UAC Minutes October 1, 2003 Page 31 of 37
Rosenbaum: That's good.
Balachandran: Admin cost of herding 15 cats to get into one project, like the Shasta
Project is high. Having some kind of umbrella organization like this will minimize the
cost. Time is going to get everyone together like what Tom said. If SMUD doesn't join I
don't have an idea of where they are with them. It is easier to do a contract with just two
parties CVP and SMUD.
Rosenbaum: Any further questions?
Dahlen: What is the timeframe when the effectiveness of the CVP Corp is no longer
beneficial to Palo Alto?
Balachandran: I wouldn't guess on that. I think it is going to be a pretty long term
because a lot of proj ects have pretty long term.
Ulrich: We decided twenty year contract will continue to ...
Balachandran: Resource contracts are in the decades.
Kabat: I would imagine it would be as long as we have our Western Contract the benefits
of working together with folks to keep making project better and safer.
Ulrich: Again the best part about this is you don't participate if you don't think it is in
our best interest, project by project. This is a corporate umbrella, which it sits under.
Rosenbaum: And you can leave with a 120 day written notice. The money is trivial so is
everyone convinced it is a good idea?
Ulrich: We thought what was important that the money we can even delegate that
authority to purchase, spend that kind of money. But the whole concept I think that the
big dollars involved in the project I think it is important that you see the benefit of it and
of course the City Council. We are going to take this to the Finance Committee and the
City Council. Not to get the 5000 dollar approval so they understand what we are doing.
Rosenbaum: Perhaps my colleagues have a better understanding of this than I do but I
really don't see why this is going to make life easier than what we have been doing
currently.· You all tell me I expect it but I just don't see it in what is been written or what
you have told me as to why this is such a wonderful thing. But I dare say Council
members might either take it on faith I am certainly willing to do or they may have throw
the lights at me trying to figure nut just ...
Ulrich: Of course you should be comfortable with it. We would like to go the Finance
Committee as far as UAC is supportive.
Rosenbaum: Oh yes. I will be happy to do it.
-Approved 11/05/03-
UAC Minutes October 1, 2003 Page 32 of 37
Carlson: I would like to move approval.
Rosenbaum: All right. We have a motion. Do we have a second?
Dahlen: I'll second it.
Rosenbaum: All right. Motion by Carlson and Second by Dahlen to approve the staff
recommendation that the City become a participant in the Central Valley Project
Corporation. Without further discussion all those in favor.
Aye, Aye, Aye,
Rosenbaum: That passes unanimously.
Ulrich: Thank you.
Kabat: Thank you.
Rosenbaum: Next regularly scheduled meeting November 5th• One item the Utilities
Quarterly Report.
Ulrich: I think we will have more on the agenda.
Joint Meeting of the City Council and UAC
Rosenbaum: Topics that might require support from staff at that meeting.
Ulrich: I think Mr. Carlson and Mr. Bechtel were at the last joint meeting last year. You
were there too?
Rosenbaum: I think we all were there.
Ulrich: You may recall the dialog, there is a limited amount of time. The meeting starts
at 5:45 and will be through before 7 p.m. I suggest there be a topic that we can have
dialog and have some conclusion by the end of the hour.
Bechtel: What I remember is one of the topics, a discussion, a question that I asked of
Council. .. did they feel they were getting useful information from our meeting minutes
and so on. That was at least one question we discussed and there was some dialog on
that. I don't think we need to answer the question again unless they are turned out. I
want to put this on the table, is that the kind of question we address Council, are we doing
our job effectively for them?
-Approved 11/05/03-
UAC Minutes October 1, 2003 Page 33 of 37
CENTRAL VALLEY PROJECT CORPORATION MEM:BERSHIP
AGREEMENT
This Membership Agreement (this "Agreement") is made and entered into effective as
of , 2003 between the Central Valley Proj ect Corporation, a
California nonprofit corporation ("CVP Corp"), and each undersigned participant,
collectively referred to as "Participants" and individually as a "Participant." The CVP
Corp and any of the Participants individually are called "Party" and collectively are
called "Parties."
Whereas, the CVP Corp is formed for the benefit of, and to carry out the purposes of, the
Participants by helping the, Participants achieve cost savings and efficiencies; and
Whereas, the CVP Corp can benefit the Participants by facilitating CVP customer
involvement in activities associated with the Western Area Power Administration
("W estem'~) and others; and
Whereas, the CVP Corp was also formed to act as a funding agent for those CVP
customers that voluntarily requested that service; and
Whereas, the Participants through the CVP Corp will provide review, funding, and
oversight for selected activities and proj ects ,on a case by case basis for those items
requiring funding; and
Whereas, the CVP Corp has entered into a contract with Western to act as payment agent
for certain Participants; and
Whereas., each undersigned Participant agrees to become a member and may choose
which activities, services, and/or projects it would like to participate in as offered by the
CVP Corp; and
Whereas, each Participant is willing to fund a proportionate share of the funding
commitment for each activity, service, and/or projects that the Participant has agreed to
participate in as delineated in the applicable Exhibit.
Now, therefore, in consideration of the terms, conditions and obligations of the CVP
Corp and the Participants in this Agreement, the Parties agree as follows:
a) Exhibits Made Part of Agreement. Each activity, service and/or project
offered by the CVP Corp shall be delineated in an Exhibit, which shall
become a part ofthis Agreement during the term fixed by its provisions.
Exhibit(s) existing under this Agreement may change during the term hereof,
provided, however, that each Exhibit attached hereto shall be in force and
effect in accordance with its terms until respectively superseded by a
subsequent exhibit, as allowed by the terms of the exhibit.
DOCSSCI :324625.2
b) Funding Commitment: Each undersigned Participant hereby agrees to fund
a pro-rata share of the total funding commitment for each activity, service or
project in which the Participant agrees to participate as delineated in the
applicable Exhibit. Each Participant further agrees to fund a pro-rata share of
the CVP Corp's start-up and administrative costs as determined by the CVP
Corp Board of Directors annually. A Participant may withdraw from funding
the activity designated in an Exhibit in accordance with the withdrawal terms
contained in the Exhibit but only after all of the obligations it has committed
to fund to date have been satisfied.
c) Deposit and Use of Funds: The Participant hereby appoints CVP Corp and
CVP Corp hereby accepts appointment as payment agent for the Participant
for purposes of accepting funds provided by the Participant to satisfy the
funding commitments in each Exhibit(s) designated by the Participant and
disbursing those funds as required by each Exhibit. Each Participant shall
deposit its pro-rata share of the funding commitment with the CVP Corp,
acting on behalf of and as an agent for all of the Participants, in payments as
described in the Exhibit(s). The CVP Corp will deposit, hold and maintain an
accounting for the funds received from the Participants and use such funds
only for the purposes of satisfying the funding commitment of the Participant.
In the event the Participants' funds are received prior to the time they are to be
disbursed pursuant to the Exhibit, suoh funds shall be invested pursuant to
investment policies established by the CVP Corp Board of Directors and net
earnings from such investment shall be retained for the benefit of the
Participant. If any funds remain after commitments for any period have been
satisfied in full, the remaining funds shall be returned to the Participants in
proportion to the amount contributed by each Participant. Participant
acknowledges and agrees that CVP Corp may engage third parties for the
financial management of all funds received and that such funds may be
commingled with those of other Participants and third parties.
d) Investment Earnings. The CVP Corp will invest funds paid to the CVP
Corp by the Participants, and will track the interest and/or earnings applicable
to each Participant; any net earnings will be credited to each Participant in
proportion to the individual Participant's amount of funds retained and being
managed by the CVP Corp. Periodic reports will be provided at least annually
to each participant showing the total amount of payments made to the CVP .
Corp, including the amount of payments made by the CVP Corp on behalf of
the Participant and the net earnings credited to the Participant.
e) Obligation for Payment of Pro-Rata Share. Each Participant shall pay its
funding commitment to the CVP Corp in payments as stated in the applicable
Exhibits. The CVP Corp intends to request funds from the Participant at such
times and in such amounts as necessary to meet the obligations contained in .
the Exhihit(s). If a Participant fails to make a payment within the time period
DOCSSCI :324625.2
listed in the Exhibit the Participant will be considered to be in default as to
that Exhibit.
f) Right of Set-off. If a Participant defaults as to its obligations under any
Exhibit, the CVP Corp shall have the right to utilize any excess funds credited
to that Participant under any other Exhibit(s), including the Participant's share
of interest or earnings, in order to satisfy the Participant's outstanding
obligations.
g) Resolution of Disputes. The Parties will use good faith efforts to settle all
disputes arising under, or in relation to, this Agreement. Should any dispute
remain unresolved for a period of twenty (20) days, such dispute shall be
forwarded to the Board of Directors for resolution. The Board of Directors
shall meet within thirty (30) days to discuss and attempt to reach a resolution
of the dispute. If a Participant fails to meet all of its obligations, it will be
excluded from participating in the CVP Corp's activities, services and/or
projects until its outstanding obligations are satisfied or otheIWise resolved.
The PartIcipant's obligations under this Agreement shall remain until
satisfied, unless otheIWise modified by procedures to resolve any outstanding
disputes, or settled by legal proceedings, with any and all accrued interest due
as a result oflate payments to the CVP Corp. No Participant shall be liable
under this Agreement for the obligations of any other Participant.
h) Budgets and Billing Procedures. Budgets an~ billing procedures will be
delineated in the applicable Exhibit.
i) Board of Directors. The Board of Directors will make decisions concerning
the administration ofthe CVP Corp's rights and obligations under this
agreement.
j) Tetm of the Agreement; Termination. This Agreement shall become
effective upon execution by the CVP Corp and upon the signature of a
sufficient number of Participants as determined by the CVP Corp Board of
Directors and, unless .earlier terminated, shall remain in effect until December
31, 2024. This Agreement may be tenninated by CVP Corp (i) if the CVP
Corp Board of Directors determines that CVP Corp's activities, services
and/or projects are not effective and efficient; provided, however, that such
termination will not be effective until CVP Corp shall have received written
notice from Western that all current obligations of the CVP Corp under the
CVP CorplWestern Agreement have been completed and provided further that
CVP Corp shall have provided a one hundred twenty (120) day written notice
to all Participants prior to such termination or (ii) sixty (60) days following a
default under of this Agreement or any Exhibit by the Participant which
remains uncured for sixty (60) days provided that CVP Corp shall have
provided a one hundred twenty (120) day written notice to such Participant
prior to such termination. Any Participant may terminate its individual
DOCSSC 1 :324625.2
participation in the Agreement by providing a one hundred twenty (120) day
written notice to the CVP Corp; provided, however, that such tennination by
the Participant shall not be effective until all the Participant's outstanding
obligations are met as delineated in the Exhibit(s).
k) Miscellaneous Provisions.
a) Limitation of Liability. In no event shall any party hereto be liable
for any special, incidental, indirect or consequential (including loss of
profit) or punitive damages in connection with this agreement, whether
based on breach of contract, breach of warranty, strict liability in tort
or any other cause of action.
b) Attorneys' Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
DOCSSCI :324625.2
c) Entire Agreement. This Agreement, including the Exhibits hereto,
constitutes the entire agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter
hereof.
d) Assignment. Neither a Participant nor the CVP Corp may assign this
Agreement without prior written consent of the Participant and the
CVP Corp.
e) Amendment; Waiver of Breach. Any term of this Agreement may
be amended or waived only with the written consent of the Participant
and the CVP Corp. No waiver of any term or breach of any of the
provisions contained in this Agreement or any Exhibit shall be .
construed to be a waiver of any subsequent breach of the same or of
any other provision of this Agreement.
f) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California, without giving effect to the principles of conflict of
laws.
g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together
will constitute one and the same instrument.
h) Successors and Assigns. Subject to the provision of the Agreement,
all ofthe terms, covenants and conditions of this Agreement shall
inure to the benefit of and shall bind the parties hereto and their
pennitted successors and assigns.
i) Separate Entities. The CVP Corp and each Participant are separate
entities, and nothing in this Agreement shall be construed to create or
imply any partnership or joint venture among the entities or any of
them, or to create any rights or liabilities of any entity hereto for rights
or liabilities of any other entity hereto, except to the extent otherwise
expressly provided herein or in any other agreement between the
entities.
j) Severability. If any clause, sentence, paragraph, or part of this
Agreement should for any reason be finally adjudged by any court of
competent jurisdiction to be unconstitutional or invalid, such judgment
shall not affect, impair or invalidate the remainder ofthe Agreement
but shall be confined in its operation to the clause, sentence,
paragraph, or part thereof directly involved in the controversy in which
the judgment is rendered. If such judgment modifies or holds invalid
any material terms or conditions of the Agreement in such a manner
that either the CVP Corp or any Participant(s) is required to incur new
or different obligations not expressly provided herein or forego
benefits which it was otherwise entitled to, these entities shall in good
faith renegotiate the terms and conditions affected by the judgment so
as to restore the original balance of benefits and burdens contemplated
by the entities as of the effective date ofthis Agreement. Such
renegotiated terms and conditions shall be in the form of an
amendment to the Agreement that shall be effective upon execution by
the CVP Corp or any Participant(s). The original Agreement shall
remain in full force and effect, as modified by said judgment, until the
negotiation process for the amendment is complete.
DOCSSC 1 :324625.2
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CVP Corp
By: ____________________ __
[Name]
Chair, Board of Directors
Participant
By:--,-__________ _
Name: ---------------------------
Title: ----------------------------
DOCSSC 1 :324625.2
Chairperson Morton called the meeting to order at 7:05 p.m. in the Council
Conference Room, 250 Hamilton Avenue, Palo Alto, California.
Present:
Absent:
Beecham, Freeman, Kishimoto, Morton
None
1. Oral Communications
None.
2. Approval of the City of Palo Alto Parti,=-lp_aJiQn inth~~_~ntn:1LVqJJ~y PrQj~c:J -------CorporafiOn(46-S:03y ---------------:~--~ ----
Director of Utilities John Ulrich said the attempt was to formalize the
relationship with Western Area Power Administration (Western) and Central
Valley Project (CVP) Corporation project. A corporation allowed Palo Alto, as a
member of the Board of Directors, to have a say in some of -the direction on the
mainten2.l1Ce and operation in some areas that the CVP could do to improve
reliability ~nd efficieney. In the past, Palo Alto participated in the projects in a-
~ less forma'! way. Staff l)ccasionally asked Council for funding in a budget form in ~ order to cdvance the evp funds used for significant improvements. There was
little risk f) Palo Alto for its participation. The Federal funding continued to
decrease each year. Participation in the CVP allowed Palo Alto to continue to
help the projects. The benefit was as monies were advanced, members of the
Board were,. able to se~ect projects. The money went into projects that were
monitored, Palo Alto continued to get hydroelectric power from CVP through
Western for-an additional 20 years when the new contract began on January 1,
2005. The request of Council was to know and understand where staff was
going and fh have knowiedge that the cost was approximately $5,250 based on
a formula shown in the staff report (CMR:468:03).
Utilities Advisory Commission Chairman Dick Rosenbaum said the Utilities
Advisory Commission (UAC) was somewhat mystified at first as to the
motivation for the proposed activity. The UAC was convinced the method was
used by at least one other agency in the Western region power area and
unanimously supported joining the CVP.
Council Member Kishimoto clarified the project cost was $5,000 to join with
project by project going to the Council.
Mr. Ulrich said the cost was based on the use of being credited on a monthly
basis for the amount put forward.
10/28/03 FIN:2
Council Member Kishimoto asked whether there were any credit risks.
Mr. Ulrich said some of the credit risks were listed in the UAC report and credit
risks were relatively small.
Girish Balachandran, Assistant Director of Utilities, Resource Management, said
a prefunding arrangement was one type of program. The basic point was to
have a structure that allowed the Council to respond to threats or opportunities
that came "down the pike.:: In the case of the O&M funding approved by the
Council in February and May 2003, money was provided to the Federal
government who would then credit it back to the City. The credit risk for
tn-dl'VldUCfI--P-toj:e~t5-:-W 6ura--I5-e-::-15 ro tTgnrto--lne Cou neil as -pa-n::--ortnesp~ecrfTc --
project proposal.
Council Member Freeman asked who were the three interim Board members.
Mr. Ulrich said. one was the General Manager of NCPA.
Mr. Balachandran responded the members were NCPA Senior Management.
Council Member Freeman said she went on the website ,and looked up what
NPCA was responsible for. The website noted the NCPA was established in
1968, and NCPA membership was open to municipalities, rural electric
cooperatives, irrigation districts, and other publicly owned entities interested in
the purchase, aggregation, scheduling, and management of electrical energy.
The CVP was a system of river diversions to get water to the Central Valley. The
intention of the CVP was to water the breadbasket of the nation. The intentions
were not initially for hydropower. Hydropower was the third reason for the CVP.
The first reason was fo~ flood control and the second was for irrigation. Her
concern was that the City put its money into the CVP Corporation, and the
City's interests were third tier. The focus of the organization was not clear in its
entirety. The benefit to the City was unclear.
Mr. Ulrich said the CVP Corporation had no affiliation or connection with the
Central Valley Project. The name was selected because the objection of the
corporation was to look at ways to help support and improve efficiencies for
power production. The Central Valley Project began in the late 1940s. Palo Alto
was most interested in improvements in power production and efficiency. Most
of the water users were also beneficiaries of power allocations from the Central
Valley Project. Staff felt it was better to be part of the corporation, as opposed
to having the corporation formed and Palo Alto not being on the Board of
Directors.
10/28/03 FIN:3
Council Member Freeman clarified Palo Alto subsidized the project by becoming
a member.
Mr. Ulrich said the $5,250 was the cost of the City's participation rather than a
subsidy.
Council Member Freeman asked what the Corporation did for Palo Alto that
NCPA could not do.
Mr. Ulrich said the Corporation was made up of anyone who was a beneficiary
of the Central y~II~L __ ,=-rs>ject. __ T~~_Jhr~_E2_m~JnRf~r$9n-tll~J:;?Q~n:LwQJJlrLbf
----tepfacecf5y-upto rilne permanent Doard members for six-year terms. Members
of the corporation could apply to be on the board of directors.
Council Member Beecham said the Federal Government owned the Central
Valley Project and Palo Alto received and paid for approximately ten percent of
the output of electricity. Getting certain improvements in operations and
maintenance was difficult. In the past, clumsy arrangements were made to pay
for the improvements. The Corporation was a more efficient method of doing
financing.
Senior Resource Originator Tom Kabat said the Corporation was in the process
of being formed and recently rolled out its first product. The plan was to roll out
several projects. The Corporation was recently approached by the Western and
asked whether the Corporation could perform two services for Western.
Western asked that the Corporation figure out a way for Western customers to
go into voluntary power exchanges with Western to handle times when there
was a lack of generation. That helped prevent Western from having to buy long-
term power contracts. Western looked at the Corporation for assistance on
providing a cash-tracking and management service for Western for some of its
50 smaller, non-municipal utilities. The Corporation looked at other issues such
as enhanced operation and maintenance services.
Chairperson Morton explained that NCPA incorporated an entity whose ultimate
members were beneficiaries of Western and the Central Valley Project. Each
entity that held individual contracts with Western were able to act collectively to
manage load or exchange power. The Corporation exp"anded NCPA's
membership because smaller, Federal users of power were brought into the
Corporation. The Corporation enabled Palo Alto to expand its influence with
Western.
10/28/03 FIN:4 _
"
Council Member Kishimoto asked for an understanding of how important
participation in the Corporation was and who did the analysis of the credit and
environmental information on a project-by-project basis.
Mr. Ulrich said staff had to do its homework to provide the analysis from Palo
Alto's staff basis and collectively with other members of the Corporation. Staff's
recommendation was to bring forward requesting the funds.
jv1r. Kabat said the Shasta rewinds was the first project the City was involved
with, which recently accomplished the first of up to five water wheel
replacements at the Shasta Dam. Each of those generated 15 megawatts of
------------;a-d-diti-onal-powerwith--no-:-:cha-A-g-e~in-Ure--rl\fer bper-atiorr:-Tne-ultlm ate -:oenefirof -------------
the Corporation might be if the Federal government chose to pursue divestiture
of the Central Valley Project. If the customers did not have a cohesive umbrella
organization, the customers might not be prepared to purchase the Central
Valley Project if it were divested. Palo Alto did not want the project to slip
through its fingers because the background work was not done.
Council Member Freeman said the Central Valley Project began as the jewel of
reclamation's crown, and the project encompassed 35 counties in an area
approximately 500 miles long and 60 to 100 miles wide, which made it: the
largest reclamation project in the United States. Divestiture felt more fearful
than a true reality. The Central Valley Project covered the lion's share of the
State of California. It was unlikely the government would divest from the
project. The biggest issue in the State was water. Water, rather than power/
took priority. Joining an organization that took different directions and had an
impact with the wetlands and farm districts was a concern.
Vice Mayor Beecham said the projects Palo Alto was involved in were under the
City's control. The Corporation was a finanCial instrument that allowed the City
to do what it wanted to do. The City was not involved in projects it did not wish
to be involved in.
MOTION: Vice Mayor Beecham moved, seconded by Morton/ that the Finance
Committee recommend to the City Council approval of the City of Palo Alto to
become a participant in the Central Valley Project Corporation (CVP Corp.) and
to include proposed amendments to the Articles of Incorporation.
Council Member Freeman agreed the Corporation was a financial instrument
with political ramifications, which could be detrimental to others. Palo Alto was
a small entity compared to other members. The larger picture, including the
cost for Palo Alto for power, needed to be looked at.
10/28/03. FIN:5
Council Member Kishimoto clarified the City was able to withdraw from the
Corporation at an,y time.
Mr. Ulrich said that was correct. The provision indicated a 120-day notice to
withdraw as long as financial obligations were fulfilled.
Mr. Yeats suggested changes to the Articles of Incorporation if the City became
a member of the Corporation: the government code for what is an acceptable
type for local government.
INCORPORATED INTO THE MOTION WITH APPROVAL OF THE MAKER
...... -.. -.... ······AND·:· SECONDER ··to ··make-the··TQjTowTng--2hange~s-·-Tn··the--Articre5--:-o{--·· ... -.------
Incorporation: 1) The annual report in Article 7 would be completed within six
months of the end of the fiscal year; 2) Add to Item 4 that there would be an
independent audit each year that would be part of the annual report; 3) In
Article 8, Section 5, add that the fiscal year match that of most local
governmental agencies (July 1 to June 30); and 4) Under the Membership
Agreement, add a policy that investments match.
Chairperson Morton asked Mr. Yeats to draft the changes in a letter to the CVP
Corporation after Council approval.
MOTION PASSED 3-1, Freeman "no. II
3. Adoption of a Resolution to Revise Utility Rate Stabilization Reserve
Guidelines and Terminate Gas Rate Schedule G-7 (467: 03)
Director of Utilities John Ulrich said the reserve levels and minimum and
maximum guidelines were looked at periodically. Staff did a comprehensive
review and utilized what were potential risks that impacted costs if some of the
risks actually materialized. The Strategic Plan was followed and risk
management policies were utilized to help evaluate the risks.
Utilities Advisory Commission Chair Dick Rosenbaum said the Utility Advisory
Commission (UAC) was appreciative of the level of detail performed by staff.
The UAC was happy to support the recommendation.
Council Member Kishimoto asked about funding for renovation of the MSC and
the goal the Council set with regard to the electrical schedule.
Mr. Ulrich said the policy was built around risks or something extraordinary
happening. There was a one-time risk and a component of ongoing risk.
10/28/03 FIN:6