HomeMy WebLinkAbout2004-11-08 City Council (10)City of Palo Alto
C ty Manager’s Report
TO:HONORABLE CITY COUNCIL 4
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:NOVEMBER 8, 2004 CMR:430:04
SUBJECT:ADOPTION OF A RESOLUTION AUTHORIZING EXECUTION OF
A LETTER OF AGREEMENT AND PAYMENT OF $300,000 TO
THE CITY OF ROSEVILLE IN COMPENSATION FOR
CALAVERAS HYDROELECTRIC PROJECT WATER STORAGE
TRANSFERS PERTAINING TO THECULMINATION OFTHE
AGREEMENT BETWEEN THE CITIES OF PALO ALTOAND
ROSEVILLE FOR THE ASSIGNMENT OF CAPACITY INTHE
NORTH FORK STANISLAUS RIVER HYDROELECTRIC
DEVELOPMENT PROJECT AND OTHER ELECTRIC
RESOURCES
RECOMMENDATION
Staff requests that Council approve a resolution authorizing the City Manager to execute
the attached letter of agreement and to make a payment of up to $300,000 to the City of
Roseville in compensation for Calaveras hydroelectric project water storage transfers
pertaining to the c~.~lmination of the Roseville-Palo Alto Assignment Agreement of 1991..
BACKGROUND
In 1991, the City assigned its energy and capacity rights to 6.52% of Northern California
Power Association (NCPA) Calaveras hydro-electric project share to the City of
Roseville (Roseville), for the period Janual-y 1, 1991 to December 31, 2004 (CMR
155:91). This reduced the City’s rights to the project from 22.92% to 16:4% during this
period.
With the expiration of this assignment agreement in December 2004 - the expiration was
designed to coincide with the ending of City’s original Western agreelnent - the City
expects to take on rights to all 22.92% of its original share of the project. In an average
hydro year from 2005 fo~-vvard, the project is expected to meet approximately 12% of the
City’s animal energy needs.
CMR:430:04 Page 1 of 3
DISCUSSION
The original assignment agreement ("Agreement Between the Cities of Palo Alto and
Roseville for the Assignment of Capacity in the North Fork Stanislaus River Hydro
Electric Development Project and other Electric Resources", approved, by Council on
March 28, 1991) contemplated a simple reversion - whereby Roseville would relinquish
its rights to the 6.52% of assigned project share along with cola’esponding obligation to
pay the corresponding debt and Operating and Maintenance costs. However, the original
contract did not contemplate either a change in the amount Of water behind the dam that
NCPA carries over from one year to the next (and out of the contract period) or the
associated compensation for the amount of water behind the dam at the time of reversion
of rights on December 31, 2004.
h~ the past few years the amoullt of water behind the dam can-led over each December 31
for the NCPA pool share of the project has been approximately 50,000 acre-feet.
However, in anticipation of the loss of the flexibility of the Western Area Power
Association (WAPA) contract in 2005, NCPA intends to calTy over an additional quantity
of water behind the dam in 2004 to help in real-time operations in 2005. This additional
quantity of water can’ied over from 2004 to 2005 is expected to be 20,000 acre-feet. This
additional CalTyover of water results in a loss of value for Roseville in this final year of
the 1991-2004 assignment agreement. The value of this additional water is estimated at
$300,000. Since the benefit of this value will accrue to Palo Alto in 2005, Palo Alto and
Roseville staff, in coordination with NCPA staff, have detemained that it appears fair for
Palo Alto to pay this sum to Roseville in compensation for the loss of value Roseville
will suffer as a result of 10st electricity generation in year 2004.
Roseville staff has indicated that if Palo Alto does not compensate Roseville for the value
foregone by Roseville in 2004, Roseville will sell the rights to the water to another NCPA
member.
The attached letter of agreement is for Palo Alto to pay Roseville $300,000 for the rights
to cai~’yover water storage and for Roseville to waive its rights to otherwise act on or
dispose of those rights.
RESOURCE IMPACT
There is no resource impact related to this payment with respect to power budgets. NCPA
has withheld water that can generate about $300,000 worth of electricity in the coming
year. The $300,000 payment to Roseville gives Palo Alto the rights to a greater amount
CMR:430:04 Page 2 of 3
of energy in year 2005, and will result in the City having to procure less energy in year
2005 to meet loads.
POLICY IMPLICATIONS
There are no policy implications to this recommendation. The recomlnendation confomas
to the Utilities Strategic Plan and Energy Risk Management Policies and Guidelines.
ATTACHMENT
A. Resolution authorizing the City Manager to make a payment of $300,000 to the City
of Roseville in compensation for Calaveras hy&oelectric project water storage
transfers pertaining to the cuhnination of the Roseville-Palo Alto Assignment
Agreement of 1991
B.Letter Agreement between the Cities of Roseville and Palo Alto, regarding the
disposition of Roseville’s Sliare of Calaveras Project Water per the June 14, 1991
Roseville - Palo Alto Assignment Agreement
PREPARED BY:
DEPARTMENT HEAD"
~fSHIVA SWAMINATHAN
Senior.Resource Plmmer
ULRICH
..-Dirdctor of Utilities
CITY MANAGER APPROVAL:
HARRISON
Assistant City Manager
CMR:430:04 Page 3 of 3
***NOT YET APPROVED***
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO APPROVING SETTLEMENT A~REEMENT BETWEEN THE
CITY OF PALO ALTO AND THE CITY OF ROSEVILLE
REGARDING
TRANSFER
ASSIGNMENT
STANISLAUS
THE DISPOSITION OF WATER STORAGE
RIGHTS OF ROSEVILLE UNDER THE
OF CAPACITY IN THE NORTH FORK
RIVER HYDROELECTRIC DEVELOPMENT
(CALAVERAS)PROJECT AGREEMENT
WHEREAS, the City of Palo Alto ("City") has negotiated
and executed several contracts with the City of Roseville
(’!Roseville"), including an AGREEMENT BETWEEN THE CITIES OF PALO
ALTO AND ROSEVILLE FOR THE ASSIGNMENT OF CAPACITY IN THE NORTH
.FORK STANISLAUS RIVER HYDROELECTRIC DEVELOPMENT PROJECT AND
OTHER RESOURCES ("1991 Assignment. Agreement"); and
WHEREAS, both Palo Alto and Roseville are Northern
California Power Agency (~NCPA") power pool participants in the
operation of the North Fork Stanislaus River Hydroelectric
Development Project ("Calaveras Project");
WHEREAS, the 1991 Assignment Agreement, expiring
December 31, 2004, grants Roseville the rights to the power
output of 6.52% of the Calaveras Project hydroelectric output;
WHEREAS, changes in the Western Area Power
Administration (Western) long-term power contract have prompted
NCPA’s decision to decrease Calaveras’s power generation in 2004
in order to save water for use in 2005;
WHEREAS,. Roseville has alleged that NCPA’s strategy of
withholding water during 2004 (for use in 2005) will decrease
the benefits implicit in Roseville’s assigned interests in the
1991 Assignment Agreement by about $300,000, and raise Palo
Alto’s benefits by any equal amount in a manner that neither
Roseville nor Palo Alto intended and the 1991 Assignment
Agreement contemplated;
WHEREAS, the parties wish to resolve their differences
before the 1991 Assignment Agreement expires on December 31,
2004, and both believe they have reached a mutually acceptable
settlement of their claims and rights under the 1991 Assignment
Agreement.
041102 cl 0072455 1
***NOT YET APPROVED***
NOW,. THEREFORE, the Council of the City of Palo Alto
does RESOLVE.as follows:
SECTION i. The Council hereby approves the Settlement
Agreement between the Cities of Roseville and Palo Alto, which
pertains to the disposition of Roseville’s share of the water
storage transfer rights in and to the Calaveras Project pursuant
to th~ June 14, 1991 Assignment of Capacity in the North Fork
Stanislaus River Hydroelectric Development Project Agreement and
which requires the City of Palo Alto to pay three hundred
thousand dollars ($300,000.00) to the City of Roseville.
SECTION 2. The Council hereby authorizes the City
Manager to sign the Settlement Agreement on behalf of the City
of Palo Alto.
SECTION 3. 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
041102 cl 0072455 2
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement"), dated
2004, is made and entered into by and between,
THE CITY OF PALO ALTO, a chartered city and a municipal
corporation of the State of California ("Palo Alto") and THE
CITY OF ROSEVILLE, a chartered city and a municipal corporation
of the State of California ("Roseville") [individually, "Party"
and collectively, "Parties"], in reference to the following
facts and circumstances:
RECITALS:
I. On June 14, 1991, the Parties slgned the
"Agreement between the Cities of Palo Alto and Roseville for the
Assignment of Capacity in the North Fork Stanislaus River
Hydroelectric Development Project and Other Electric Resources"
("1991 Assignment Agreement"). The term began on January i,
1991 and will expire on December 31, 2004.
2. The Parties acknowledge that the 1991 Assignment
Agreement is silent with respect to the manner in whish the
Northern California Power Agency ("NCPA"), of which the Parties
are each a member, manages water releases and annual water
carryover at the North Fork Stanislaus River Hydroelectric
Development Project ("Calaveras Project").
3. Under the 1991 Assignment Agreement, Palo Alto
assigned to Roseville a 6~52 percent interest in its share of
the capacity and energy generated by the Calaveras Project, plus
a 6.52% share’ of "all enhancements included as part of" this
project (equal to about sixteen (16) megawatts of capacity).
Roseville has the ~right to assign its rights and obligations
pursuant to this agreement for any term less than four years
without Palo Alto’s consent.
4. Since the winter 2004, NCPA: has modified its
strategy for managing water flow at the Calaveras Project, to
decrease the quantity of water flow in order to anticipate the
termination of the long-term contract with the U.S. Department
of Energy, Western Area Power Administration.’ Effectively, this
strategy would retain more water and, consequently, reserve for
future use potential energy by the Pooling Agreement members who
retain a share of the Calaveras Project.
5. NCPA, in applying its modified water management
strategy to the Calaveras Project, has informed the Parties
that, for year-end 2004, it will carryover 70,000 acre-feet of
water. This represents an additional 20,000 acre-feet of year-
end carryover compared to prior normal levels at the Calaveras
041101 cl 0072464 i
Project. This equals about 4,000 to 6,000 megawatthours of
energy on a 6.52% share of the Calaveras Project output.
6. Roseville contends that NCPA’s strategy will
impair the anticipated benefits associated with its right under
the 1991 Assignment Agreement to future energy and, conversely,
will benefit Palo Alto to the same degree. The Parties have
agreed on what they believe are fair, mutually acceptable terms
and conditions to compromise their claims and settle their
differences concerning this energy under the 1991 Assignment
Agreement.
7. The Councils for each Party have determined that
this proposed settlement is in the public interest and
represents a fair compromise and settlement of Roseville’s
claims.
AGREEMENT:
In consideration of the covenants, terms and
conditions of this Compromise and Settlement Agreement,the
Parties agree, as follows:
i. This Agreement consists of a compromise and
settlement by the Parties of Roseville’s claims against Palo
Alto under the 1991 Assignment Agreement. By executing this
Agreement, each of the Parties intends to and does hereby
extinguish any and all claims now existing between them relating
to the 1991 Assignment Agreement.
2. In consideration of Palo Alto’s fulfillment of
its obligations to Roseville set forth in Section 3 below,
Roseville agrees t0 fulfill the fol.lowing obligations:
A. It will waive its right, as an Operating Entity
under the NCPA Facilities Agreement of September 22, 1993 (as
such term is defined in Schedule 3.03, Definition 41) among Palo
Alto, Roseville and other NCPA members, to cause energy that is
made available under the 1991 Assignment Agreement to be
dispatched in accordance with Roseville"s directions.
B. It will waive its right to assign the 1991
Assignment Agreement to a third party operating Entity; and
C. It will release and waive any and all of its
rights, title, interest and claims in and to monetary damages
and other non-monetary relief under the 1991 Assignment
Agreement against Palo Alto.
(/41101 cl 0072464 2
3. In consideration of Roseville’s fulfillment of
its obligations to Palo Alto set forth in Section 2 above, Palo
Alto agrees to fulfill the following obligations:
A. It will pay Roseville the sum of three hundred
thousand dollars ($300,000.00) within twenty (20) days of the
date of execution of this Agreement by the Parties or the dates
of adoption of resolutions by the Councils for the Cities of
Palo Alto and Roseville approving this settlement, whichever
date later occurs; and
B. It will release and waive any and all of its
rights, title, interest and claims in and to monetary damages
and other non-monetary relief under the 1991 Assignment
Agreement against Roseville.
4. The Parties shall execute any and all documents
reasonably necessary or appropriate to carry out the terms and
conditions of this Agreement.
5. This Agreement has been prepared and negotiated
by the Parties hereto, each of which has been represented by
counsel. Accordingly, the normal rules of construction to the
effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the construction and
interpretation of this Agreement.
6. The laws of the state of California shall govern
the interpretation and enforcement of this Agreement,’ without
regard to its conflicts (or choice) of law principles.
7. This Agreement shall become effective upon the
later occurring of. (A) the adoption Of Rose%ille and Palo Alto
City Council resolutions approving the Agreement and authorizing
the Parties execute it, and (B) the execution of this Agreement
by the Parties.
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041 lOl cl 0072464 3
IN WITNESS WHEREOF, the duly appointed representatives
of the Parties have executed this Agreement on the date first
above szazed in the counties in which each Party is domiciled.
CITY OF ROSEVILLE CITY OF PALO ALTO
City Manager Mayor
ATTEST:ATTEST:
City Clerk
APPROVED AS TO FORM:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED AS TO SUBSTANCE:
City Attorney
APPROVED:
Electric Utility Director City Manager
Director of Utilities
Director of Finance
041101 cl 0072464