HomeMy WebLinkAbout2004-08-03 City Council (3)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:AUGUST 3, 2004 CMR:366:04
SUBJECT:APPROVAL OF A , RESOLUTION REQUESTING
ASSIGNMENT OF PALO ALTO’S BASE RESOURCE
PERCENTAGE TO NORTHERN CALIFORNIA POWER
AGENCY 04-SNR-00XXX WITH THE UNITED STATES
DEPARTMENT OF ENERGY, WESTERN AREA POWER
ADMINISTRATION
REPORT IN BRIEF
For the past several years, staff has informed Council of significant changes occurring as
the City’s Western Area Power Administration (Western) contract is renewed for 2005-
2024. Palo Alto’s Western Base Resource will essentially be an 11.62% share of the
Central Valley Project net output.
In order to maintain the status quo of being able to produce cost savings through Western
resource pooling, Western requires customers to assign their Base Resource Percentage to
their pooling entity, Northern California Power Agency (NCPA) in Palo Alto’s case.
Staff estimates the preserved savings to be approximately $650,000 per year.
CMR:366:04 Page 1 of 4
RECOMMENDATION
Staff requests Council’s approval of the attached resolution approving a request for
assignment of Palo Alto’s base resource percentage to Northern California Power Agency
04-SNR-00XXX with the United States Department of Energy, Western Area Power
Administration.
BACKGROUND
For about 20 years Western has allowed the NCPA pool members including Palo Alto to~
enjoy the benefits of cooperatively pooling their Western resource to achieve a variety of
cost reductions compared to the costs of meeting loads separately with separate shares of
Western resource. This has saved Palo Alto millions of dollars without exposure to risky
positions.
Palo Alto has always conformed, and will continue to conform, to federal power
marketing policies. Starting in 2005, Western is increasing its requirements for proof of
adherence to its longstanding policy of prohibiting customer resale of federal power.
Western’s post-2004 marketing program requires customers who seek to pool their
Western resource to assign their Base Resource percentage shares (BR%) to the pooling
aggregator in a revocable manner.
On July 7, 2004 the. Palo Alto Utilities Advisory Commission voted 5-0 to recommend
that Council approve staff’s recommendation to assign Palo Alto’s Western post 2004
Base Resource allocation percentage to NCPA for pooling purposes.
DISCUSSION
Analysis by staff and NCPA shows a Palo Alto share of savings of approximately
$650,000 per year achievable in the post-2004 period from load diversity and power
delivery arrangements to certain customers who are directly connected to the Westem
transmission system. This savings amount can fluctuate with a variety of factors,
including load growth in Palo Alto, in other member cities, particularly in cities like
Roseville which are directly connected to the Western transmission system. The risk to
the volume of savings may be mitigated by working cooperatively with directly
connected members who have loads exceeding their Western allocations and their
internal generation. Those are NCPA members like Roseville, Redding and Turlock.
The savings would not be impacted by Palo Alto’s own generation acquisitions or
operations. Pool principles have members avoid being economically harmed by pooling
and allow members to share positive savings that result from pooling.
CMR:366:04 Page 2 of 4
The assignment agreement maintains all of Palo Alto’s rights and obligations as they
pertain to an active Base Resource contract with a 0% BR share. This allows Palo Alto to
maintain an active relationship with Western and to participate independently in other
Western products if approved by Council. The agreement assigns only the BR% share
amount of 11.62% to NCPA to enable the continued realization of pooling savings.
NCPA would continue to handle the daily scheduling of energy associated with Palo
Alto’s 11.62% share of the Base Resource.
The assignment~agreement allows NCPA to aggregate the assigned allocation percentages
of all its participating members and to have a Base Resource contract of its own with an
allocation equal to the sum of those assigned to it. To enable the orderly unwinding of
agreements, the assigned allocations will be listed by city and percentage share in a table
in NCPA’s Base Resource contract. At the current time it is expected that all ten NCPA
pool members will participate in this assignment arrangement. Other non-pool members
have expressed interest in this arrangement and may participate at a later date.
The assignment agreement is revocable by Palo Alto upon 90 days prior written notice.
The assignment will run from 1/1/2005 through 12/31/2024. The assignment agreement
is for execution by Palo Alto and NCPA with an acknowledgement by Western. In order
to have time to develop and implement associated pooling benefit allocation algorithms
and information management systems, NCPA requests that members interested in
assignment secure needed Council approvals by September 30, 2004.
A final draft of the assignment contract prepared for Healdsburg is attached~ Staff has
requested and will receive a substantially identical executable original contract from
Western.
RESOURCE IMPACT
Approval of the assignment contract will maintain the status quo with respect to duties
and responsibilities split between Palo Alto and NCPA. Therefore approval has no
impact on Palo Alto staff resources. Under current assumptions staff estimates savings to
be approximately $650,000 per year.
POLICY IMPLICATIONS
Executing the assignment contract is consistent with Primary Portfolio Planning
Objective 2: Provide superior financial performance to customers and the City by
maintaining a supply portfolio cost advantage compared to market cost (CMR:425:01).
CMR:366:04 Page 3 of 4
TIMELINE
UAC approval was secured on July 7,2004. With Finance Committee approval, Staffwill
seek Council approval on September 13, 2004 and sign the agreement in October for an
effective date of January 1, 2005.
ENVIRONMENTAL REVIEW
Executing the assignment contract does not constitute a project for the purpose of the
California Environmental Quality Act. The assignment of Base Resource percentage
allocation to NCPA does not impact the volume, timing or temperature of water flows in
rivers. River flow is governed by other constraints and is managed through releases from
regulating reservoirs just downstream of power generating reservoirs. The assignment of
Base Resource percentages will on some days improve the release schedule of water from
power generators into regulating reservoirs to be a societally more efficient timing of use
of existing generators.
ATTACHMENTS
A: Model Contract 04-SNR-00XXX Request for Assignment of Member’s Base
Resource Percentage to Northern California Power Agency
B: Minutes of July 7, 2004 Utilities Advisory Commission Meeting
C: Resolution Approving A Request for Assignment of Palo Alto’s Base Resource
Percentage to Northern California Power Agency 04-SNR-00XXX with the United
States Department of Energy, Western Area Power Administration
PREPARED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
TOM
Senior Resource Originator
JO~N ULRICH
,/!D~ctor of Utilities
HARRISON
Assistant City Manager
CMR:366:04 Page 4 of 4
CMR:366:04 Att. A
Contract 04-SNR-OOXXX
REQUEST FOR ASSIGNMENT OF
CITY OF HEALDSBURG’S
BASE RESOURCE PERCENTAGE
TO NORTHERN CALIFORNIA POWER AGENCY
BACKGROUND:
1.1 The City of Healdsburg (Heal0sburg)is a municipal corporation, organized
and existing under the laws of the State of California.
1.2 Healdsburg has entered into Contract 00-SNR-00324, dated August 4,
2000, with Western Area Power Administration (Western), which provides
Healdsburg with a percentage of Western’s Base Resource power beginning
January 2005.
1.3 The Northern California Power Agency (NCPA) is a joint powers agency,
organized and existing under the laws of the State of California.
1.4 Healdsburg is a member of NCPA.
1.5 As a member of NCPA, Healdsburg desires to have Western assign
Healdsburg’s Base Resource Percentage under Contract 00-SNR-00324 to
NCPA so that NCPA may create a power resource portfolio for the mutual benefit
of qualified NCPA members.
ASSIGNMENT OF BASE RESOURCE PERCENTAGE:
2.1 Healdsburg hereby requests assignment of its 0.18594 percentage of the
Base Resource under Exhibit A to Contract 00-SNR-00324 to NCPA.
2.2 NCPA is agreeable to taking responsibility for Healdsburg’s 0.18594
percentage of the Base Resource.
2.3 Healdsburg shall retain its Base Resource Contract 00-SNR-000324 with
a 0.000 percent of the Base Resource during the term of assignment to NCPA.
2.4 Any allocation changes made pursuant to the 2004 Power Marketing Plan
shall apply to Healdsburg’s Base Resource Percentage, regardless of the
contract under which the allocation is being administered.
2.5 No action will be required of Healdsburg under Contract 00-SNR-00324
during the time that NCPA is holding Healdsburg’s Base Resource Percentage
under Contract 04-SNR-00XXX.
o
Contract 04-S N R-00XXX
2.6 This Assignment shall remain in full force and effect until the earlier of:
2.6.1 December 31,2024; or
2.6.2 Such time that Healdsburg requests reassignment of its Base
Resource Percentage by providing ninety (90) days written notice to the
Sierra Nevada Region of Western.
2.7 NCPA and Healdsburg shall jointly and severally indemnify and hold
Western harmless from and against all claims, damages, losses, and expenses,
including attorney’s fees, arising out of or resulting from this Assignment.
AGREEMENT:
All parties to this Assignment hereby agree that this Assignment will become
effective on the first day of the first month following the date of approval by the
Administrator of the Western Area Power Administration or a later date if agreed
to by Western and Healdsburg.
CITY OF HEALDSBURG
By:
Title:
Attest:
By:
Title:
Address:
Date:
401 Grove Street
Healdsburq, CA 95448-4723
NORTHERN CALIFORNIA POWER AGENCY
Attest:
By:
Title:
By:
Title:
Address:
Date:
180 Cirby Way
Roseville, CA 95678
Contract 04-SNR-00XXX
The above Request for Assignment of City of Healdsburg’s Base Resource Percentage
under Contract 00-SNR-00324 to the Northern California Power Agency is hereby
approved.
Date:
Michael S. Hacskaylo
Administrator
Western Area Power Administration
¯ ..P.a~g_e.3. o.f 3
CMR:366:04 Att. B
UTILITIES ADVISORY COMMISSION EXCERPT
July 7, 2004
ITEM NO. 4: Western 2005-2024 Base Resource Percentage Assignment to NCPA
Ulrich said staff does not have a formal presentation. Expect the best way to cover this
information is by the Commissioners asking questions. The agreement has the provision
for us to get out with short notice so we can get out at any time to hold the contract the
way we do now. Benefits are rather significant and we appreciate your concurrence.
Melton asked if initiative is driven by Western’s rules and regulations. We didn’t choose
to do but need to do. What is the background of why this exists.
Kabat said yes, Western has allowed pooling of resources for past 20 years and is now
changing provisions that to qualify to pool resources you must assign your base resource
percentage to a resource pooling entity.
Balachandran added that Western
Dawes asked about several years ago when we had the hydro blow-off and CPAU was
selling power to other powers. Is this in any way related to that issue or different? Could
be sold outside of the Muni-fraternity?
Balachandran - its’ not related.
A commissioner asked if this represents new savings that we do not already achieve.
Kabat- This is to try to maintain the status quo of saving money by pooling, about
$650,000 a year going forward. If we don’t pool, we would have to pay more.
Assigning to continue pooling can be viewed as either avoiding a future cost or
continuing current savings.
Motion: Rosenbaum moved to accept staff recommendation. Bechtel second.
Motion Approved: 5-0 Unanimous.
UAC Minutes 7/7/2004 Page 1 of 1
CMR:366:04 Att. C
***NOT YET APPROVED***
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO APPROVING A REQUEST FOR ASSIGNMENT OF PALO
ALTO’S BASE RESOURCE PERCENTAGE TO NORTHERN
CALIFORNIA POWER AGENCY 04-SNR-00XXX WITH THE
UNITED STATES DEPARTMENT OF ENERGY,WESTERN AREA
POWER ADMINISTRATION
WHEREAS, the City of Palo Alto (~City"), a municipal
utility and a chartered city, is a "Preference Customer" of the
Western Area Power Administration ("Western") of the United
States Department of Energy;
WHEREAS, the City has a twenty-year contract with
Western for an 11.62% share of Western’s "Base Resource", in
effect from January i, 2005 through December 31, 2004;
WHEREAS, the City, and some other Western customers with
Western’s consent, have operated a resource and load sharing
pool for the past two decades;
WHEREAS, the pooling of resources and loads is expected
to continue to save money for the City in the future;
WHEREAS, Western will continue to allow and encourage
pooling but only if each participant executes an assignment of
its "Base Resource Percentage" to the pooling entity, the
Northern California Power Agency ("NCPA") ;
WHEREAS, the City will continue to exercise its rights
and obligations under the Base Resource contract, though it will
have a zero Base Resource volume level and no associated
customer responsibilities;
WHEREAS, the City will continue to abide by Western’s
federal power marketing policies; and
WHEREAS, the City may enter into additional contracts
with Western at any time to meet its needs, and can terminate
the assignment to NCPA upon 90 days’ prior written notice;
NOW, THEREFORE, the Council of the City of Palo Alto
does RESOLVE as follows:
SECTION i. The Council hereby approves the City of Palo
Alto’s execution of the "Request for Assignment of Palo Alto’s
Base Resource Percentage to Northern California Power Agency 04-
040727 cl 0072430 1
***NOT YET APPROVED***
SNR-00XXX with the United States Department of Energy, Western
Area Power Administration. The City Manager is hereby
authorized to sign the agreement on behalf of the City of Palo
Alto.
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:
Mayor
APPROVED:
Senior Asst. City Attorney City Manager
Director of Utilities
Director of Administrative
Services
040727 cl 0072430 2