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HomeMy WebLinkAboutStaff Report 233-05<.:.~. ,.,: ;~. ***NOT YET APPROVED*** SECTION 2. The Council-finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney 050428 cl 0072541 2 Mayor APPROVED: City Manager Director of Utilities Director of Administrative Services .' Exchange Revolving Account for use as the CVP Corporation determines pursuant to the terms and conditions of this Participant Exhibit B. 9. Project Use and First Preference Energy Needs: 9.1 There are periods of time when CVP Generation is insufficient to meet the Project Use and First Preference energy needs. This can occur on an hourly, daily, weekly, or longer basis and typically occurs during the fall and winter months. When CVP Generation is insufficient, Western is responsible for ensuring that energy is available to meet Project Use and First Preference power requirements. Base Resource is available under Western's 2004 Power Marketing Plan only after Western meets its obligations to Project Use and First· Preference customer power. Western has determined that to meet its Project . Use and First Preference obligations, Western must establish an Energy Exchange Bank account for CVP Corporation transactions. 9.2 Exhibit B of the Western and CVP Corporation contract requires the CVP Corporation to provide Western the necessary Bank Energy to meet Western's Project Use and First Preference needs, but only up to the point of the value in the Energy Exchange Revolving Account. The Exchange Participants may also be asked to provide Voluntary Contributions if additional funds are needed in the Energy Exchange Revolving Account. If Voluntary Contributions are made by the Exchange Participants to achieve a higher threshold, the new threshold level will be determined by the mutual agreement between Western and the CVP Corporation. 10. Energy Exchange Arrangement: 4 10.1 General Concepts: 10.1.1 Western shall maintain and administer an Energy Exchange Bank to track Bank Energy and Bank Return Energy values. 10.1.2 Monthly, Western will provide a statement of Energy Exchange Bank transactions; including an ending Energy Exchange Bank Balance to CVP Corporation. Any time that CVP Corporation provides Bank Energy to Western, the Energy Exchange Bank Balance will be reduced accordingly. Any time that Western provides Bank Return Energy to CVP Corporation, the Energy Exchange Bank Balance will be increased accordingly. . 10.1.3 CVP Corporation will provide Bank Energy to Western, and Western will provide Bank Return Energy to CVP Corporation subject to scheduling protocols developed by Western and the CVP Corp. .' 6 Energy that will be required by Western. The procedures and timeline for submitting weekly and daily information between Western and the CVP Corporation is set forth in Attachment 2 to Exhibit B in the CVP Corporation and Western contract. 10.2.2 The Bank Energy that the CVP Corporation causes to be delivered to Western will be Western Electricity Coordinating Council (WECC) "Firm" energy, valued using the on-peak and off-peak firm NP15 index price for the day the energy is delivered. The on-peak index will be used for energy delivered during on-peak hours; the off-peak index will be used for energy delivered during off-peak hours. The applicable day's on- peak or off-peak index price will be multiplied by the number of megawatts delivered each hour of the day. The calculated sum for all hours of the day, multiplied by an administrative adder of 1.05, will determine the dollar value of the Bank Energy supplied for that day and will be added to the amount owed by Western to the Energy Exchange Bank. Attachment 1 to Exhibit B of the CVP Corporation and Western contract provides an example of how the bank accounting process will work. 10.2.3 The CVP Corporation will provide to Western a certain number of megawatts for each respective hour of the active day, and will confirm , these hourly amounts with Western. The CVP Corporation will cause to be delivered the requested Bank Energy to Western at Western's Tracy 230-kV SUbstation (or as otherwise agreed) in accordance with t~e . schedule received from Western. All ISO load-related costs, including ISO export costs associated with deliveries of Bank Energy from the ISO grid to the SMUD Control Area shall be borne by Western, excluding ISO congestion costs, which shall be borne by the Designated Supplier(s). All delivery costs from outside of California shall be. borne by the Designated Supplier(s). 10.2.4 If the CVP Corporation and Western agree, Bank Energy can be delivered to a point other than on Western's transmission system. 10.2.5 The CVP Corporation Administrator will coordinate the arrangements for the delivery of energy to Western. The details of this coordination process are contained in Attachment A, Scheduling Protocols, and the associated timelines in Attachment B, Timelines for Scheduling. After Bank Energy is delivered, entities providing the energy will bill the CVP Corporation for that energy based upon the on-peak and off-peak firm NP15 index price for the day the energy is delivered. The on-peak index will be used to pay for the energy delivered during on-peak hours and the off-peak index will be used to pay for energy delivered during the off-peak hours. When a bill is received from the Designated Supplier, the CVP Corporation Administrator will verify the energy also join from April 1 to August 31 if all of the existing Exchange Participants have a zero Bank Return Energy value in the Energy Valuation Account. 11.4.5 For the hourly scheduling of Bank Return Energy under either Section 11.4.3.1 or Section 11.4.3.2 time period, the CVP Corporation will allocate the Bank Return Energy limits provided by Western to each Exchange Participant based upon the Base Resource Percentage normalized to 100 percent. For example, Participant A has a Base Resource Percentage of 20 percent and Participant B has a Base Resource Percentage of 30 percent The percentages normalized to 100 percent are 40 percent and 60 percent respectively. If Western states that the maximum limit for Bank Return Energy scheduling is 50 MWh, Participant A can schedule up to 20 MWh (40% times 50 MWh) and Participant B can schedule up to 30 MWh (60% times 50 MWh). Each Exchange Participant -. can schedule up to their allocated amount as long as they comply with the provisions of Article 10.3.2. 11.4.6 It is the responsibility of each Exchange Participant to schedule the Bank Return Energy reserved pursuant to Section 11.4.3.2 by August 31 of each year. If the Exchange Participant does not want to schedule any or all of its Bank Return Energy reserved pursuant to Section 11.4.3.2, the Exchange Participant will notify the CVP Corporation Administrator of its intent to not schedule Bank Return Energy. The CVP Corporation Administrator will then notify the other Exchange Participants of the availability of Bank Return Energy from that Exchange Participant. The remaining Exchange Participants may then schedule that energy value. If more than one Exchange Participant wants to schedule the energy value, it will be prorated amongst the interested parties based upon their Base Resource percentage normalized to 100 percent. If none of the other Exchange Participants want to schedule the Bank Return Energy by September 30, the Exchange Participant who did not schedule its reserved Bank Return Energy value is still obligated to pay that value to the CVP Corporation for deposit into the Energy Exchange Revolving Account. 12. Administration: 12 12.1 NCPA will initially be the CVP Corporation Administrator to coordinate the Bank Energy purchases and the Bank Return Energy with Western. The CVP Corporation Administrator will coordinate the schedules of the Exchange Participants with Western and will also maintain the accounts. NCPA will also act on behalf of its members who assign their CVP Base Resource percentage to NCPA, thus representing those assignments who are participating in this agreement. 12.2 The interest that accrues in the Energy Exchange Revolving Account will be pro rata allocated to each Exchange Participant based on the dollar value that 14 and Western is terminated. If there is still money in the CVP Corporation Energy Exchange Revolving Account for CDEC when Exhibit B between the CVP Corporation and Western is terminated, the Exchange Participant will be refunded its share of the remaining dollars. 13.3 When Exhibit B between the CVP Corporation and Western is terminated, the share of the funds remaining in the Energy Exchange Revolving Fund will be returned after the requirements in 10.1.6 of this exhibit are satisfied. The Exchange Participant will be refunded the total of all Voluntary Contributions that were made by the terminating Exchange Participant to the CYP Corporation Bank Account, by no later than the one-year anniversary of the terminating Exchange Participant's written notice. The returned Voluntary Contributions will be paid interest earned at the average rate of the CVP Corporation Energy Exchange Revolving Account starting from 120 days after the termination notice until the funds are returned. No funds will be return to the Exchange Participant for payments made by the Exchange Participant to the CVP Corporation for Bank Energy received or any energy received during the seeding phase under this Participant's Exhibit B, except at the time of the termination of the Western-CVP Corp Contract and/or Exhibit B to the Western-CVP Corp Contract, per Section 10.1.6 of this Participant's Exhibit B. EXCHANGE PARTICIPANT 8y: _____________ _ Title: _____________ _ Address: ____________ _ CENTRAL VALLEY PROJECT CORPORATION 8y: _____________ _ Title,,-: __ --.:::C~h~aC!.!.ir!.!..m~a.!..!.n _______ _ Address:_----!-.18:::...:0~C~irb~yL_W!...!...:::::a~y _____ _ Roseville, Ca 95678 " 3.8 By 0600 hours, of the Scheduling Day, the CCA will provide final Bank Return Energy schedules to each EP. 3.9 By 0800 hours, of the Scheduling Day, each EP will provide Bank Return Energy schedules to Western at the time of providing its Base Resource schedules. ·4. FORECASTS: . In addition to the monthly estimates, the procedures and Timelines for submitting weekly and daily information between the Western and the CVP Corporation is set forth in Attachment B. 21 " 5 8:00CBE (E) N-W for alternate delivery CVP Corporation bank energy schedules by participant by delivery point (Participants have then 2 hours for schedules with ISO) 15:00 CBE (P) W-P E-Tagging information to participants for bank energy Note: The 15:00 timeframe for providing E-tagging information is the latest possible time. E-Tagging information will be provided in a timely manner between the parties. 2 ~ " f~~ ':;j · , TO: HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM: CITY MANAGER DEP ARTMENT: UTILITIES DATE: APRIL 5, 2005 CMR:196:05 SUBJECT: RECOMMENDATION FOR THE CITY OF PALO ALTO UTILITIES TO SUBSCRIBE TO THE CENTRAL VALLEY PROJECT CORPORATION SEASONAL EXCHANGE PROGRAM RECOMMENDATION Staff recommends Council authorize the City Manager to execute Pm1icipant Exhibit B (Energy Exchange Arrangements for Project Use and First Preference Support) in order to participate in the Central Valley Project Corporation (CVP Corp.) seasonal energy exchange program. BACKGROUND On Feb 22, 2005 Council approved Palo Alto's joining the CVP Corporation [CMR:I02:05]. Staff committed to seek Council approval to subscribe to various beneficial services offered by CVP Corp. Western Area Power Administration (Western) has executed a seasonal energy exchange agreement with the CVP Corp. Under that agreement, Western will provide energy to certain CVP Corp subscribers during the months of May through August most years. The subscribers will purchase it on a daily basis and pay the CVP Corp for the energy at a rate equal to 95% of the Dow Jones North of Path 15 (DJNP15) on-peak mm'ket price index. Regardless of Palo Alto's participation, Western will market up to 10% of its available energy into the seasonal exchange program. IIi the winter when Western needs more energy than the Central Valley hydro project can generate, Western can order energy from the CVP Corp. The CVP Corp provides the energy to Western at no charge from market sources (including voluntary designated suppliers who are pru1icipants in the exchange). '" CMR:196:05 Page 1 of 4 DISCUSSION Pmiicipation creates an oppOliunity for Palo Alto to receive up to $750,000 worth of energy from Western that it would otherwise be unable to receive, priced at 95% of market. Subscribers also receive a scheduling benefit from being able to have the energy scheduled into the most valuable hours of each day. That scheduling benefit on average may provide about 6% additional value. Assuming that Western provides $4 million worth of energy each year and Palo Alto's share is 13%, and that Palo Alto realizes 5% discount and the 6% scheduling benefit, then Palo Alto's average annual benefit will be $57,000. Subscribers are also able to volunteer to pmiicipate in the winter time energy banking with Western. The City would provide energy (via NCPA) to Western as Western requests. The average benefits of pmiicipation in that side of the cycle are estimated at 1 % and amount to about $5,000/year. Those benefits would vary between a net cost of $10,000 and a net benefit of $20,000 per year depending upon which hours of the day Western needs energy. Daily operation in the exchange program will be handled by NCP A, which already handles this service for a half dozen NCPA members. It will be NCPA's responsibility to schedule the available CVP Corp exchange energy on the participants' behalf in a beneficial way. At the start of each return energy season (when Western provides energy to the subscribers) Western will announce a seasonal must-pay dollar volume for each subscriber. During the months of April through August each subscriber is able to choose the days and hours they wish to receive the energy and pay towards the must-pay seasonal dollar target. This way Western has seasonal . dollar volume certainty and participants have discretion in tenns of picking the days and hours during which they wish to purchase energy. Given pool accounting rules, it is in the participant's interest to have NCP A select to purchase the energy in the highest peak load hours of summer days. Either party (CVP Corp or Palo Alto) may terminate Palo Alto's SUbscription to Participant Exhibit B with 120 days notice to the other. Risk Assessment The Energy Risk Manager has reviewed and agrees with the recommendation in this CMR. The risks considered with the CVP Corp exchange agreement center on four concerns: price risk, volume risk, credit risk, and operational risk. Overall the risks associated with this program are very low. The price risk of the Seasonal Exchange program participation itself is nil since daily energy would arrive at daily index and be credited based on the same index. During the April to August period, CVP will receive supplies from Western. It is not known if Western will allow adequate capacity for NCPA to shape the received energy deliveries into the highest ISO load hours ·to maximize the price advm}tage to the participants. While Western has indicated it will endeavor to shape the deliveries as requested, it is not obligated to do so. lfthe actual deliveries do not correspond wi.th Palo Alto's needs, NCPA will be required to purchase the energy on Palo Alto's beh~tlf on the spot market, negating the price benefits of the exchange. Additionally, during the November to March p~riod, CVP will purchase supplies from, or exchange products with, volunteering participants to meet the hourly demands outlined by Western. It is not known if Western will shape its request into the lowest value hours (or lowest ISO load hours) to help the supplier participant's economics. Western is not obligated to do so. CMR:196:05 Page 2 of4 NCP A administers the exchange agreement. NCP A has verbally indicated it will work to fairly distribute energy during these, periods to all of the participants. Additiona.11y, since the April tlU'ough August delivery period has a "take or pay" contract arrangement, CP AU will ensure that it receives its full allotment of power to maximize the contract value. RESOURCE IMPACT The program paIiicipation would be managed by NCP A staff aIId would not adversely impact Palo Alto resources. POLICY IMPLICATIONS Subscribing to the Seasonal Exchange program is consistent with Primary Portfolio Planning Objective 2: Provide superior financial performance to customers and the City by maintaining a supply cost adVaIltage compared to market cost (CMR:425:01). ENVIRONMENTAL REVIEW Exhibit B Seasonal Exchange has been in place and operating without Palo Alto for about one year and will not be effected by Palo Alto's subscription to it. Neither the existence of Exhibit B Seasonal Exchange, nor Palo Alto's subscription to it will have any effect on the levels of reservoirs, volumes and timings of flows ofrivers or pumping of water etc. ATTACHMENTS A: Participant Exhibit B (Energy Exchange Arrangements for Project Use and First Preference SuppOli) B:_ Resolution approving execution of Exhibit B. CMR:196:05 Page 3 of 4