HomeMy WebLinkAboutStaff Report 7748
City of Palo Alto (ID # 7748)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 5/1/2017
City of Palo Alto Page 1
Summary Title: Approval of Supplement No. 1 to the NCPA JPA Adding the
City of Shasta Lake
Title: Approval of Supplement Number 1 to Amended and Restated Northern
California Power Agency (NCPA) Joint Powers Agreement to add City of
Shasta Lake as a NCPA Member
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that the City Council approve Supplement No. 1 to the Amended and
Restated Northern California Power Agency Joint Powers Agreement Adding City of Shasta Lake
as a Party (“Supplement No. 1 to the JPA”), to allow the City of Shasta Lake to join NCPA as a
member. Supplement No. 1 is included with this Staff Report as Attachment A.
Background
The Northern California Power Agency (NCPA) was established in 1968 through a Joint Powers
Agreement (JPA) for the purpose of financing and developing electric generation facilities on
behalf of its members. The City of Palo Alto is one of twelve founding members along with the
Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara and
Ukiah, and the Plumas-Sierra Rural Electric Cooperative. Since first founded, NCPA has
expanded services to include power management, scheduling coordination, billing and
settlements, and legislative and regulatory compliance, monitoring and advocacy. NCPA has
also expanded its membership since its establishment to add Bay Area Rapid Transit (BART),
Port of Oakland, Truckee Donner Irrigation District and Turlock Irrigation District.
The City of Shasta Lake (Shasta Lake) desires to become an NCPA member and party to the JPA
so that it may receive the benefits of joint action, including services under NCPA’s Legislative
and Regulatory Affairs (L&R) program and possibly power management services in the future.
In order for Shasta Lake to become a member, the JPA must be amended and all members’
governing boards must approve the addition of Shasta Lake by executing Supplement No. 1 to
the JPA.
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Addition of Shasta Lake as a new member is consistent with the recent NCPA 2016-2021
Strategic Plan (Attachment B) which seeks to reduce costs borne by its members by increasing
revenues through the addition of new members and/or providing services to new entities.
NCPA’s operating costs are heavily focused on administrative overhead and physical resources
(e.g., information and technology systems), which are, for the most part, fixed. The NCPA
Strategic Plan calls for the agency to: “Maintain financial strength, grow new revenue and/or
reduce member costs by exploring new members/participants and expansion of current
services”. To this end, NCPA has successfully sought out opportunities to bring in new revenue
sources through service agreements for power management-related services and through
solicitations for new members.
In 2008, the NCPA JPA was amended and restated to, among other things, revise membership
status at NCPA. Prior to the amendment, NCPA had two levels of membership - full and
associate members. An associate member could participate in all programs at NCPA, however
had limited voting rights, liabilities and obligations. Under the amended and restated JPA all
members have the same rights, powers, privileges, immunities, duties, and obligations.
Without the ability to add associate members, careful consideration around the risks and
benefits associated with adding new members is warranted. As such, in February 2016, the
NCPA Commission approved a New Member Policy and Guidelines for Obtaining Membership
(“New Member Policy”, provided as Attachment C).
In April 2016, Shasta Lake submitted an application to become an NCPA member and party to
the JPA. After reviewing Shasta Lake’s application, NCPA concluded that Shasta Lake met the
criteria established in the New Member Policy and recommended that the NCPA Commission
approve Shasta Lake’s application at its June 23, 2016 meeting (NCPA Staff Report included as
Attachment D). The majority of members present at the meeting voted in support of adding
Shasta Lake (7 members in favor, 1 member opposed and 6 absent). Palo Alto cast the
opposing vote. At this point, all other NCPA members except Palo Alto have approved addition
of the City of Shasta Lake to the NCPA JPA.
Discussion
If added as a member, the City of Shasta Lake will bring moderate benefits and potentially some
strategic value to the agency and its membership. Its annual contribution towards NCPA’s
budget is expected to be approximately $129,000—representing approximately three percent
of NCPA’s fiscal year (FY) 2017 budget. Approximately $29,000 will go towards NCPA’s JPA fee
and the remaining will go towards funding the L&R program. All members are required to
participate in the L&R program and as signatories to the JPA have the same rights to vote on all
matters pertaining to the program(s) for which they are a participant and on general NCPA
matters. Additionally, NCPA feels that adding Shasta Lake as a member may strengthen NCPA’s
ability to gain support from Shasta Lake’s state and federal representatives in matters related
to energy policy. Although adding Shasta Lake is represented by the same legislators as the City
of Redding, NCPA’s view is that adding additional constituents may improve existing
relationships.
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Initially, Shasta Lake intends to only participate in NCPA’s L&R program, since it currently
receives power management services from the City of Redding; however, Shasta Lake is
exploring receiving power management services from NCPA. Power management and related
services are one of NCPA’s core competencies and represent much of NCPA’s fixed costs. At
the September 2016 NCPA Commission meeting, the Commission adopted a set of assumptions
to be used to develop a cost allocation for Shasta Lake should they decide to receive power
management services as well. Based on the set of assumptions, Shasta Lake’s contribution
could be about $343,000 per year or 3 percent of NCPA’s FY 2017 Power Management budget.
In casting its vote in opposition to Shasta Lake membership before the NCPA Commission, Palo
Alto raised a number of concerns with NCPA, including adequacy of the case made for adding
Shasta Lake as a member under the terms of the New Member Policy and the impact of
additional members on overall governance of the agency. NCPA has since identified
incremental improvements that address some of these concerns. NCPA staff did additional
work to provide Palo Alto with more information to better demonstrate alignment between the
principles set forth in the NCPA-approved New Member Policy and a potential Shasta Lake
membership. Most recently, at its March 2017 meeting the NCPA Commission also expanded
its Executive Committee membership. Broader membership on the NCPA Executive Committee
is expected to provide an additional avenue to reinforce transparency and representation in
decision-making.
Resource Impact
NCPA does not anticipate the need for additional resources and/or staff as a result of providing
services to Shasta Lake and therefore the addition of Shasta Lake will not adversely impact
NCPA’s budget or Palo Alto’s portion. NCPA’s overall FY 17 budget is $329 million which
includes an L&R program and Power Management budget of $3.9 million and $11.1 million,
respectively. Palo Alto’s share of the L&R program budget is $0.5 million. Should Shasta Lake
become a member, it would pay $100,000 toward the FY 2017 L&R budget plus $28,864 toward
the JPA fee. As a result, current NCPA members would see about a 2 percent decrease in their
L&R program fees, or $14,646 for Palo Alto. Should Shasta Lake decide to receive power
management services from NCPA, Palo Alto can expect to see a decrease in its contribution
towards power management of 2 percent or approximately $34,000 based on NCPA’s FY 17
budget.
Policy Implications
Approval of Supplement No. 1 to the JPA does not create new policy and is consistent with the
Utilities Strategic Plan’s focus to manage cost. Palo Alto remains concerned about the impact
NCPA member additions may have on JPA governance and projects. City staff expects to review
this issue carefully with respect to any future memberships proposed for NCPA.
Environmental Review
City of Palo Alto Page 4
Approval of Supplement No. 1 to the JPA to add Shasta Lake as an NCPA member would not
result in a direct or reasonably foreseeable indirect change in the physical environment and is
therefore not a “project” for purposes of Section 21065 the California Environmental Quality
Act. No environmental review is necessary.
Attachments:
Attachment A - Supplement No. 1 to Amended and Restated NCPA JPA Adding City of
Shasta Lake as a Party
Attachment B - NCPA Strategic Plan
Attachment C - NCPA New Member Policy Staff Report
Attachment D - NCPA Commission Staff Report (061716)
ATTACHMENT A
ATTACHMENT B
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EXECUTIVE SUMMARY
The rate of change in the utility sector is increasing, bringing significant changes to the process and
technology and providing options that did not exist just a few years ago. Electric energy continues to
fuel our communities and that has not changed, but how it is delivered and how it is used is causing
new challenges and opportunities for NCPA and its Members. Underlying the pace of change are
numerous environmental goals. NCPA intends to use it skills and resources to effectively assist our
Members in addressing the challenges and taking advantage of the opportunities.
The Strategic Plan highlights the current and future needs of the Agency and the Members and guides
the staff in prioritizing our resources. While all the changes to the utility sector prior to 2021 are
unknown, NCPA has examined the California landscape and tried to meet with each of the Members to
frame the opportunities and challenges ahead. We have reviewed our resources and assets to better
understand our strengths and areas of possible growth. We have established a framework to leverage
our ability to provide Member support by partnering with Southern California Public Power Association
(SCPPA). Together, the strategic initiatives have been developed to address the important industry
priorities and to help NCPA deliver a cleaner energy future to our Members.
Recent adoption of Senate Bill 350 by California dramatically changed the utility parameters for NCPA
Members, and we think adding the title “Delivering a Cleaner Energy Future” represents the strong
role of the strategic plan in supporting the Member requirements.
The Strategic Plan has several strategic initiatives that integrated together provide the roadmap. The
plan will be evaluated on an annual basis and necessary changes will be brought to the Commission for
consideration. Some milestones have been developed relative to each initiative and some which are
longer term will need further work before implementing.
NCPA is a creative and dedicated Agency that has produced Member benefits and advanced public
power in California. Opportunities exist for expansion, efficiency, more aggregation, and greater
support for the efforts of our Members and public power. Together, we can deliver a cleaner energy
future.
UNDERSTANDINGS
Achieving the strategies and goals in this plan requires a clear set of governance rules and agreements
before the agency can embark on allowing new members and forming a new services entity, and
contain or reduce costs for members by generating new revenue. In recognition of this need, staff
recommended and the membership unanimously approved modifications to Agency governance
agreements (Facilities Agreement, Pooling Agreement, Schedule Coordination Program Agreement and
a newly created Power Management and Administrative Services Program Agreement). Further, the
membership unanimously approved the structure under which new services and/or new business
structures would be adopted as described below:
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x Agreement modifications resulted in agreements that are:
o Asset based.
o Acknowledge obligations of the Agency to the asset owners and the asset owners to the
Agency and each other.
o Mandatory for services required by the third phase agreements, and provided by the
Agency, unless appropriate alternative arrangements have been secured by the asset
owner.
o Provide for two (2) year termination and/or withdrawal requirements to align with the
Joint Power Agreement (JPA) termination provisions.
o Reflective of an equity based business model structure-
Only JPA signatories have equity in the Agency,
Only JPA signatories can vote, and
Asset owning JPA signatories have full obligation(s) for Agency costs
assumed through execution of governance agreements.
o Incorporate sound business practices and risk management processes.
x New Services and/or new business structures will be adopted pursuant to:
o Approvals of JPA signatories (equity members) for the Agency to engage in the pursuit.
o Agreement of JPA signatories (equity members) to fund efforts pursued by the Agency
and to share in revenues derived.
o Agreements with the service recipients that incorporate sound business practices and
risk management processes.
o Agreement of JPA signatories (equity members) that they are responsible for current
“core” Agency costs (e.g., L&R, Power Management, A&G) on a “cost of service”
ownership basis, and ineligible to transition to a “market price” cost allocation basis that
may be offered to “non – members” in the future-
Agreement of JPA signatories (equity members) that they are eligible for any
new services that might be developed above and beyond NCPA’s current “core”
services (e.g., retail services) based on cost allocation and contract terms to be
developed in the future.
MISSION
To provide our Members cost effective wholesale power, delivery support, energy-related services,
and advocacy on behalf of public power consumers through joint action.
VISION
To be the premier provider of energy services to public entities.
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STRATEGIES and GOALS
x Protect, prepare, utilize and build on the strengths and unique aspects of JPA structure to
benefit NCPA’s Members.
o Goal: Partner with Members to expand the value and knowledge of public power
utilities in their communities,
o Goal: Develop and implement Commission and Executive Committee governance best
practices (12/2016) GM/Commissioners,
o Goal: Review committee process, number, function, effectiveness, and structure then
report findings to Commission (12/2016) GM/AGMs,
o Goal: Use new technology to share information and communicate with members
(Extranet) (12/2016) Administrative Services,
o Fully implement Shared Services Arrangements with SCPPA (06/2016) GM/AGMs,
o Fully implement Support Services Agreement with Members and develop processes and
systems necessary to support Members (12/2016) GM/AGMs,
o Goal: Assist members with Smart Grid implementations (12/2019) Administrative
Services, and
o Expand support of NCPA’s Internship Program (06/2016) HR.
x Maintain position as a credible, solution-oriented coalition builder and leader in state and
federal legislative and regulatory policy arenas.
o Goal: Protect NCPA Members from the imposition of disproportionate charges under
the Central Valley Project Improvement Act (CVPIA) (12/2016) L&R,
o Goal: Influence development of climate policies at CARB to prevent negative impacts on
NCPA and its Members (Scoping Plan Update, State Implementation Plan and cap-and-
trade amendments) (12/2016) L&R,
o Goal: Shape development of forthcoming agency regulations related to SB 350’s
Renewables Portfolio Standard, Integrated Resource Plan, and energy efficiency
provisions to protect local decision making (12/2016) L&R,
o Goal: Advance hydropower relicensing reform to promote a timely and cost-effective
process (12/2016) L&R,
o Goal: Provide public power leadership in CAISO efforts to regionalization and expansion
of the Energy Imbalance Market,
o Goal: Support the legislative and regulatory needs of the Agency assets to minimize cost
impacts related to operations and capital improvements,
o Goal: Minimize imposition of new mandates on NCPA Members (12/2016) L&R,
o Goal: Preserve tax-exempt financing for NCPA and its Members (12/2016) L&R,
o Goal: Streamline regulatory reporting requirements (12/2016) L&R,
o Goal: Secure funding for needed energy industry workforce development programs
(12/2017) L&R,
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o Goal: Build awareness among policymakers regarding the impacts of wildfires on
generation facilities, and advocate for additional funding for fire prevention and
suppression to protect these facilities (12/2017) L&R, and
o Goal: Expand the FERC engagement activities in preparation of greater jurisdiction
related to expansion of a regional market.
x Attract, develop and retain professional, high quality staff and governance.
o Goal: Complete a benchmark survey of unrepresented staff compensation (06/2016) HR,
o Goal: Implement comprehensive workforce plan, including succession planning for key
positions (12/2016) HR/GM/AGMs,
o Goal: Leverage technologies to automate processes, enable employee more self-
service support and enhance workforce development programs (12/2017)
HR/L&R/AGMs,
o Goal: Develop and implement cost effective NCPA and Member training programs in
support of NCPA’s workforce plan and member needs, partner with other entities such
as SCPPA to reduce costs, (12/2016) HR,
o Goal: Develop Executive Leadership Program for NCPA and its Members (06/2016) HR
o Goal: Expand support of NCPA’s Internship Program (06/2016) HR,
o Goal: Develop templates and tools for knowledge transfer (06/2017) HR, and
o Goal: Enhance the Commissioner training and seek more direct Commissioner
involvement on critical issues (12/2016) GM/AGMs.
x Develop and maintain diverse generation resource portfolio in accordance with renewable
portfolio standard and capacity obligations.
o Goal: Safely operate plants with no injuries,
o Goal: Operate existing assets within budget and plant metrics in the top quartile
(12/2016) Generation Services,
o Goal: Review member needs and develop generation growth plan and pursue new
projects in accordance with the plan (e.g., renewable projects or LEC2 for Members and
possibly non-members) (12/2016) Generation Services, and
o Goal: Develop member (MPP centered) specific procurement plans based on Members’
SB 350 obligations (12/2016) Power Mgmt.
x Develop/maintain strategies to control costs and minimize risks while maximizing the value of
assets.
o Goal: Bring internal policies and procedures up-to-date (12/2016) Admin
Services/Power Mgmt/GM/Generation Services,
o Goal: Ensure culture of compliance through annual training, regular communications
with staff, periodic mock audits, and ensure all laws and regulations are adhered to
(e.g., No NOVs, no fines, etc.), (on-going) GM/Generation Services,
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o Goal: Coordinate MSSA signatories’ efforts within all CAISO stakeholder processes to
minimize size, scope and impact on members and projects (12/2016) Power Mgmt,
o Goal: Develop methods to obtain member utility financial model data for those
members who would like enhanced assistance with wholesale procurement. (MPP/GPP
participants) (12/2016) Power Mgmt, and
o Goal: Expand the efforts related to electric grid security and preparedness.
x Maintain financial strength, grow new revenue and/or reduce member costs by exploring new
members/participants and expansion of current services.
o Goal: Develop proposed criteria/attributes associated with pursuit and acceptance of
new members/participants (03/2016) GM/Power Mgmt,
o Goal: Explore opportunities to develop new generation projects for non-members (on-
going) GM/Generation Services,
o Goal: Explore/research development of new NCPA services entity to develop economies
of scale necessary to compete in increasingly complex business environment (on-going)
GM,
o Goal: Explore business model changes and prepare business plan(s) to deliver additional
services to non-members/participants and non-traditional services to Members (on-
going) GM/AGMs,
o Goal: Proactively provide services and support to members related to compliance and
emergency preparedness (12/2016) Compliance Manager,
o Goal: Leverage IT knowledge and skills to assist Members with technology support
(12/2017) AGMs, and
o Goal: Review actuarial analysis and develop financial plans to resolve unfunded liabilities
associated with employee pension and retiree healthcare (06/2016) GM/AGMs.
x Help articulate and promote the value of NCPA and public power utilities to member
communities.
o Develop more turn-key communications that could be used by Members,
o Goal: Senior management will conduct NCPA road show as appropriate to promote the
value of member utilities and NCPA (on-going) GM/AGMs, and
o Goal: Obtain Member feedback on value of NCPA services and desired services (on-
going) GM.
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DEFINITIONS
1. MEMBER: Signatory to the NCPA Joint Powers Agreement.
2. PARTICIPANT: Non-members who participate in the Lodi Energy Center.
3. NON-MEMBER: Public entities in the western United States who participate in NCPA’s
projects/services and are not signatory to the Joint Powers Agreement.
CONCLUSION
The electric industry in California is in transition. NCPA will address the challenges and complexity of
today’s rapidly changing business environment while fulfilling its commitment to deliver clean, reliable,
cost-based energy to its Members and participants. The Strategic Plan will help chart our course for
2016-2021. Goals for the first two (2) years of the plan have been included in this document.
However, the plan will be reviewed and updated annually.
ATTACHMENT C
ATTACHMENT D