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HomeMy WebLinkAbout2003-03-17 City Council (5)C~ty of Palo Alto C ty Manager’s Report 3 TO: FROM: DATE: SUBJECT: HONOIL~BLE CITY COUNCIL CITY MANAGER MARCH 17, 2003 ADOPTION OF A DEPARTMENT: UTILITIES CMR: 179:03 RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A LETTEROF AGREEME~ T FOR ’NTHEOPTIONTOPURCHASE\\ESTEl~AREA POWER ~SADMINISTILATION EXCES CAPACITY REPORT IN BRIEF RECOMMENDATION Staff recomrnends Council adopt the attached resolution authorizing the City Manager to execute the attached Letter of Agreelnent with the Western Area Power Administration for the option to purchase excess capacity electric pow,er that becomes available during the period of April 1, 2003 through March 31, 2004. BACKGROUND Palo Alto and Western Area Power Administration (Western) are cmxently operating under a 175 Megawatt Colnmercial Fima Power contract expiring December 31, 2004 . CPAU’s existing Western Commercial Firm Power contract is an important asset that allows for significant flexibility to cover electricity loads at cost-based prices. Over the years, CPAU and Western have developed several ancillary agreements to halwest extra value created by long-term relationships. These include a Letter of Agreement (LOA) CMR:179:03 Page 1 of 4 that makes excess capacity electric power (WEC) available to customers such as City of Palo Alto Utilities (CPAU). The current WEC LOA expires on March 31,2003. WEC is an energy product that Western markets if the Central Va!ley Project is producing more energy than Western is obligated to provide under existing contracts. WEC power is typically priced at about 2.5 cents per kilowatt-hour (k\Vh). By purchasing it, CPAU can substitute it for higher cost resources in its energy portfolio that can range from 3 to 10 cents per kwh.- This produces a savings for CPAU and helps maintain low retail rates. The higher cost resources are made available to other NCPA pool members at prevailing market prices. CPAU has participated in WesterlYs WEC marketing program for several years, and by doing so has saved its electric utility customers several million dollars compared to purchasing sirnilar volumes of energy at market prices. The volume of" WEC available to CPAU is highly variable and depends on the water operations and the generator operating conditions of the Central Valley Project, and on the loads of CPAU and Northern California Power Agency (NCPA). Neither CPAU’s participation in, nor the existence of the WEC marketing program affect the physical operation of the Central Valley Project. DISCUSSION Staff is requesting that Council adopt a resolution authorizing the City Manager to execute an LOA with the Western Area Power Administration for WEC purchases with a cost not t o exceed $ 7,000,000. O n February 1 4, 2 003, Western provided signed WEC contracts for customers to execute for the April 1, 2003 - March 31, 2004 time period. WEC power will likely be available and economically attractive on about April 5, 2003. The attached WEC agreement is nearly identical to the three prior annual WEC contracts. \Vestern offers signed standardized WEC contracts to participants and does not allow negotiation for customization. Net savings to CPAU from its participation in the WEC program are estimated at about $2,000,000 for the term of the agreement and could range between $0 and $5 million. Net savings depend on many variables including: a) hydrology b) United States Bureau of Reclamation’s maintenance of generators c) the difference between market prices and the WEC price CMR:179:03 Page 2 of 4 d) Furore resource management decisions by the City regarding its regular Western product. Such as, making room for more \VEC energy by a temporary capacity reallocation. Entering into the agreement has no fixed cost. Exercising the agreement costs about 2.5 cents per k\Vh. N CPA on Palo Alto’s behalf, will exercise the agreement as often as possible when t he g ross savings from t hat exercise exceed 2.5 c ents!k\~q~. Electricity offered by Western is only accepted when CPAU and the NCPA pool have adequate loads and the price of the WEC provides net benefits. Consequently, participation in the program has very loxx risk. Choosing to not participate will almost certainly be m ore expensive than participating. There is very low risk in executing transactions under the agreement, because the City is not obligated to accept the energy when it is offered by Western. NCPA will continue to use alternative resources if its cost (market price) is lower than the cost of WEC (12.5 cents). The mmq,tet price would have to unexpectedly fall below 2.5 cents per k\Vh within one day in order to realize a loss. This would have to happen more than 90% of the time for net savings not to be realized. POLICY IMPLICATIONS The proposed agreement complies with, and is subject to, continuing adherence to the CPAU’s Energy Risk Management Policies, Guidelines, and Procedures. Furthermore, all daily transactions undertaken by NCPA to manage this agreement are subject to NCPA’~ own internal risk management policies and procedures and are overseen by the NCPA Commission and its own Risk Oversight Committee. The approval of this contract is consistent with existing policies. It is also consistent with the Council- approved Utilities Strategic Plan [CMR 418:00 and 432:02] Strategy 2: Preserve a supply cost advantage compared to the market price; and Strategy 3: Streamline and manage business process to allow the City of Palo Alto Utilities to work efficiently and cost- effectix ely. This recommendation also supports the second of the City’s Energy Risk Management Objectives listed in the Council-approved Energy Risk Management Policies [CMR 400:02], ~Preserve a Supply Cost Advantage", whereby ~°Wholesale transactions are effected to maximize the ~alue of assets for the benefit of CPAU’s retail customers. CMR:179:03 Page 3 of 4 CPAU will take actions to: .... (b) enhance revenue by taking advantage of flexibility inherent in CPAU contracts and resources... ENVIRONMENTAL REVIEW Execution of the WEC purchase agreement does not constitute a project for the purposes of the California Environmental Quality act. ATTACHMENTS A: Resolution authorizing the City Manager to execute the attached WEC Letter of Agreement B: Western WEC Letter of Agreement 0_~-SNR-00>~ -~ April 1, 2003- March 31, ~004 PREPARED BY: TOM KABAT Senior Resource Originator DEPARTMENT HEAD: JO~’ULRICH /DireCtor, / of Utilities ( CITY MANAGER APPROVAL: EM~iLY HARRISON Assistant City Manager CMR: 179:03 Page 4 of 4 RESOLUTION NO. -- r~ ~ ~,’~TT "~HP OF PALORESOLUTIONOK ~u~_~ ~OUNb_-, OF ....CiTY FOR ~XCESS ~ ....o WITH THE ....~-~, o~,C~!y 0~-s~-00543 _ .UNiTEs STATEq DEPARTHENT OF ENERGY, WESTERN AREA POWER ADH!N ! STKhT iON u~ili2y and a char2ered is a "Preference bus~om=~ of 2he DeoarEmenE of Energy; WHEREAS, the City’ s existing one-year excess w~th WesEern wi] ] -’-~"= on ~v~arch ~ ?nn~. ..........O uD_mrWH~R<~.S, the City,’-’ ~- W=<~=-~ cus=omers ant Western. -~}~ ~to ~ormuia~e ~he excess CaD~CLE~~ r.ar Ke~lnc program; ~- < capacity to w=:~:.~:~.= .....WHEREAS, Western se::~ exces~_- cost based ra=es; and ~.~’:~FORE the bo:~c:~ o,_ :~qOW,± nm=,.m , hereby ~’<~P fo!lows: o= o-~ Alto SECTION i The Council hereby .....v=~ r:ne v of ~]÷.~rm, n inN~mG~’ ’ ~’ in ~he Western.~_=~--=~ .... ....... ~par2lclpauion --- ~,..s~{ ~ -~--~i ~n’ ~ exces~ ~aoaci ~V marketing orogram relating to the CenuraA o~a~ California,_ _~ _a~ , ,~’~h°r~ zed under =.~nrouan D, and which inas been. s_~.._ DeDar2ment of ~ne’~~, Wes2ern Area ~ ....~A~mini ~Cierra Nevada CusEomer aervlse Region ~ ~~an~mer iS O~ ....zed ~o <ia~ the ~e~er of Ag ...... ~ benazz o~ the ,~,~ ~: Palo 030306 syn 0072245 b~bZZ’~:’~_.? ~ Counc==~ ..... ~inds that the adoption of Chq~.~_~ project under the Californiareso±~Eio~ does nor ~on~:<~u~a -- ~ --~ n ~r,e~l assessment isEnvironmental Qua!iry Act and no =nv~o..m ...... AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ±erK Hayor ZPOROVED AS TO FORH: Senior Asst.Attorney Services Director o{ Utilities 03030(~ syn 00.72245 Department of Energy Western Area Power Administration Sierra Nevada Customer Service Region 114 Parkshore Drive Folsom, California 95630-4710 Letter of Agreement 03-SNR-00543 Mr. John Ulrich Director of Utilities City of Palo Alto 250 Hamilton Avenue 2nd Floor Palo Alto, CA 94301-2593 Dear Mr. Ulrich: This Letter of Agreement 03-SNR-00543 (LOA) is made between the Sierra Nevada Customer Service Region (SNR) of the Western Area Power Administration (Western) and the City of Palo Alto for SNR to provide Shasta Rewinds and daily excess capacity and associated energy to Palo Alto. Additionally, SNR needs, at certain times, the ability to reduce its Customers’ scheduled Central Valley Project commercial firm power. Palo Alto hereby agrees to assist SNR in its load management efforts according to the terms and conditions specified in this L©A. SNR and Palo Alto agree to the following terms and conditions: 1. This LOA shall become effective on April 1,2003, and shall remain in effect through March 31,2004, except as otherwise provided in Sections 14 and 17 herein. All obligations incurred under this LOA shall be preserved until satisfied. 2.Excess capacity and associated energy shall be made available as follows: 2.1 Shasta Rewinds Excess Capacity (SREC) 2.1.1 Palo Alto will be allocated its percentage share (35.9%) of SREC as a result of participating in the Shasta Rewinds project in accordance with Contract 94-SAO-00047. Allocations will be based on the weekly average additional capacity available as defined in Contract 94-SAO-00047. SNR will offer SREC with at least a 50 percent capacity factor; however, Palo Alto can preschedule SREC at less than a 50 percent capacity factor. The capacity factor associated with SREC shall not be more than 67 percent, unless agreed.to by the Parties. 2.2 2.3 2.1.2 Five days prior to the beginning of each month, SNR will evaluate the upcoming estimated generation forecasts. Based on that evaluation, SNR will determine whether it is more beneficial to SNR to have Palo Alto purchase or return the energy assoc.iated with SREC. SNR will notify Palo Alto in writing by facsimile or electronic mail whether SNR will make the energy associated with SREC available on a purchase or return basis. If SNR offers SREC as a sale, it will be at the rates provided in Exhibit D to this LOA. If SNR offers SREC on an exchange basis, SNR will notify Palo Alto in writing by facsimile or electronic mail of the terms and conditions for the return to SNR of the energy associated with the SREC. 2.1.3 On Thursday of each week, by 3:00 p.m., SNR will notify Palo Alto of the amount of SREC and associated energy available for the following week (Monday through Sunday). Daily Excess Capacity (DEC): 2.2.1 Five days prior to the beginning of each month, SNR will evaluate the upcoming estimated generation forecasts. Based on that evaluation, SNR will determine whether it is more beneficial to SNR to have Palo Alto purchase or return the energy associated with DEC. SNR will notify Palo Alto in writing by facsimile or electronic mail whether SNR will make the energy associated with DEC available on a purchase or return basis. If SNR offers DEC as a sale, it will be at the rates provided in Exhibit D to this LOA. If SNR offers DEC on an exchange basis, SNR will notify Palo Alto in writing by facsimile or electronic mail of the terms and conditions for the return to SNR of the energy associated with the DEC. 2.2.2 SNR will notify Palo Alto of the total amount of DEC and associated energy available to Palo Alto each day during the term of this LOA. 2.2.3 Palo Alto will have the right to request all or a portion of the DEC and associated energy available to Palo Alto. 2.2.4 SNR’s preschedulers will confirm the requested amount, or a lesser amount, depending on the amounts requested and the criteria in Section 6. Load Management Excess Capacity (LMEC): 2.3.1 SNR will offer a monthly amount of LMEC to Palo Alto. SNR will determine, at its sole discretion, the amount of LMEC and the associated capacity factor to allocate to Palo Alto. SNR will make its best effort to determine the amount of LMEC available to Palo Alto at least three (3) days prior to the start of each month, during the term of this LOA. 2 2.3.2 SNR will offer LMEC with at least a 50 percent capacity factor; however, Palo Alto can preschedule LMEC at less than a 50 percent capacity factor. The capacity factor associated with LMEC shall not be more than 67 percent, unless agreed to by the Parties. 2.3.3 As a requirement of Palo Alto receiving LMEC, Palo Alto agrees to reduce its schedule of commercial firm power in an amount equal to the amount of LMEC received for such month. SNR may waive this requirement on a case-by-case basis upon Palo Alto’s request. The maximum amount of commercial firm power subject to the required reduction is an amount equal to the amount of LMEC allocated to Palo Alto during that month. Palo Alto will not be required to reduce its schedule of commercial firm power to an amount less than the remainder of Palo Alto’s maximum coincident allocation minus Palo Alto’s then- effective allocation of LMEC. Example: If, for the month of July 2003, SNR allocates 50 MW of LMEC to Palo Alto and Palo Alto’s maximum coincident allocation is 300 MW, SNR may require Palo Alto to reduce its schedule of commercial firm power to 250 MW (300 MW - 50 MW), and upon such request, Palo Alto must comply, or lose its allocation of LMEC. This reduction in schedule is in addition to any curtailments or reductions required under any other contracts between Western and Palo Alto. 2.3.4 Palo Alto understands that if LMEC becomes unavailable during any time that Palo Alto’s commercial firm power schedule has been reduced pursuant to Section 2.3.3 above, Palo Alto will be able to increase its schedule of commercial firm power in an amount equal to the amount of LMEC that has become unavailable. 2.3.5 During the period of time that LMEC is available to Palo Alto, each reference to "Hourly Load Pattern" in Contract DE-MO65-85WP59098 between SNR and the Northern California Power Agency (NCPA) shall mean "An amount of power in each hourly period multiplied by the ratio (not greater than one) of the maximum coincident allocation less the then- effective LMEC allocation divided by the forecasted peak system load for the month." 3. SREC, DEC, and LMEC and associated energy may be curtailed to the extent required by an outage of one or more Central Valley Project generating units affecting SNR’s ability to provide some or all of the SREC, DEC, and LMEC and associated energy for the duration of the outage. SREC, DEC, and LMEC may also be curtailed to the extent required by increased project use pumping which reduces the amount of SREC, DEC and LMEC and associated energy available. SREC, DEC, and LMEC and associated energy may also be curtailed to the extent required by either a reduction in transmission capability on the California-Oregon Intertie affecting SNR’s ability to import power from the Northwest Or a reduction in the transmission capability on the Central Valley Project transmission system. To the extent that SNR must curtail deliveries hereunder, SNR will immediately notify Palo Alto and will reduce Palo AIto’s schedule at the commencement of the next applicable scheduling hour that begins at least 30 minutes after the notification. SNR will determine the extent to which it curtails the SREC, DEC, and LMEC and associated energy. If necessary, curtailments will first apply to DEC, then to SREC, and lastly to LMEC. 4. The receipt of SREC, DEC, and LMEC and associated energy shall not reduce Palo Alto’s obligations to take its minimum annual energy entitlement and capacity requirements provided under existing contracts between Western and Palo Alto and/or NCPA. The.35 percent minimum take requirement set forth in NCPA’s scheduling contract applies to NCPA’s entire maximum coincident allocation as it is defined in such contract. 5. Exhibit A sets forth the authorized representatives for Palo Alto and SNR for scheduling and real-time transactions. 6. Palo Alto may request an amount of SREC, DEC, and LMEC and associated energy, in accordance with Exhibit B, not to exceed the balance of its unmet expected peak load for the month after adjustment for its current contract rate of delivery. Palo AIto’s peak load shall not include wholesale sales for resale. Palo Alto shall provide its expected peak load forecast for a month by the 20th day of the preceding month. 7. SREC, DEC, and LMEC will be scheduled on the day and by the time specified in Exhibit B. Once scheduled, any changes to scheduled quantities requested by Palo Alto shall be implemented only if agreed to by SNR. 8. Palo Alto will not schedule amounts of SNR preference products, including commercial firm power, SREC, DEC, and LMEC, in excess of its load. 9. SREC, DEC, and LMEC and associated energy will be delivered to the point of delivery designated in Exhibit C. Transmission service beyond the point of delivery shall be the responsibility of Palo Alto. 10. SNR will bill Palo Alto for LMEC based on the scheduled energy. In the event of a curtailment of LMEC by SNR, Palo Alto will be required to pay for only that amount of LMEC actually received. Exhibit D specifies the rate for LMEC provided hereunder. 11. Subject to Sections 2.1.2 and 2.2.1, if SNR sells the SREC and/or DEC to Palo Alto, SNR will bill Palo Alto for SREC and/or DEC based on the scheduled energy. In the event that SNR curtails either SREC and/or DEC, Palo Alto will be required to pay for only that amount of SREC and/or DEC actually received. Exhibit D specifies the rates for SREC and DEC provided hereunder. 12. In order to ensure SNR’s ability to continue to provide reliable, firm electric service to all of its preference customers, Palo Alto hereby agrees to pay all or a portion of its bill under this LOA, as described herein, directly to SNR’s power suppliers. 4 13. 12.1 Palo Alto and SNR agree that Palo Alto assumes no obligation to the specified power suppliers for such payments and that they are made as an administrative and accounting accommodation to SNR. Palo Alto and SNR further agree that all obligations for supply of Palo AIto’s power allocation hereunder remain with SNR. 12.2 SNR shall determine the amount of Palo Alto’s bill under this LOA to be paid to power suppliers. Such amount shall be deducted from Palo AIto’s bill under this LOA. In no event shall Palo Alto be obligated to pay an amount in excess of its bill under this L©A, based on scheduled or actual use quantities. 12.3 Any failure to pay a power supplier in the time period specified on Palo Alto’s bill shall constitute nonpayment of a portion of Palo Alto’s bill and shall be subject to the General Power Contract Provisions attached hereto for nonpayment of bills in full when due. 12.4 Agreement by Palo Alto to pay a portion of SNR’s power purchase contract obligations shall not be contingent upon Congress making appropriations for expenditures by Western for such power purchase contract. Billing and payments for the power provided hereunder shall be as follows: 13.1 Billing and payment for power provided pursuant to this LOA shall be in accordance with the Billing and Payment provisions (Article 13) of the General Power Contract Provisions attached hereto. Bills shall be sent to Palo Alto at the following address: City of Palo Alto Electric Department Attn: Girish Balachandran 250 Hamilton Avenue 2nd Floor Palo Alto, CA 94301-2593 13.2 In accordance with Section 12 above, SNR shall notify Palo Alto of the power suppliers, the amount to be paid to each power supplier, and all other necessary information, by specifying that information on Pato Alto’s bill. 13.3 Palo Alto shall pay the designated power suppliers the amounts due within the payment period specified on its bill. 13.4 Palo Alto shall make payments to the power suppliers by an electronic transfer of funds or check, at the option of Palo Alto, unless otherwise agreed between SNR and Palo Alto. Palo Alto shall send the documentation of payments sent to designated power suppliers to SNR as soon as practicable. 13.5 Payments due to Western may be wired for electronic transfer deposit to Western’s sub-account (American Bank Association No. 021030004, Subtype 10) of the Treasu.ry Department’s account with the Federal Rese.rve Bank in New York City, (BNF = AC-89001602). SNR will include account number information with the bill. Palo Alto may also send payments in check form to the following address: Department of Energy Western Area Power Administration File No. 51587 Post Office Box 60000 San Francisco, CA 94160-1580 13.6 If agreed to by the Parties, SNR may credit monthly amounts due Palo Alto for power sold to SNR, under various contracts SNR may have for purchasing power from Palo Alto, against the amounts due to SNR under this LOA. In the event the amount due by Palo Alto to SNR is less than the amount owed by SNR to Palo Alto, then SNR shall pay the difference to Palo Alto. In the event the amount due by SNR to Palo Alto under those purchase power contracts is less than the amount owed by Palo Alto to SNR under this L©A, then Palo Alto shall pay the difference to SNR. 14. In the event that Contract 14-06-200-2948A is terminated, this LOA shall terminate concurrently; Provided.., That all outstanding energy return and payment obligations incurred prior to termination of this LOA shall be preserved until satisfied. 15. The Authorized Representatives; Posting, Response, and Confirmation Time Schedule; Point of Delivery; and the Rates for LMEC, SREC and DEC with Associated Energy are set forth in Exhibits A, B, C, and D, respectively. Exhibits A, B, C, and D are attached hereto, and each shall be in force and effect in accordance with its terms until superseded by a subsequent exhibit or termination of this LOA. 16. The General Power Contract Provisions dated July 10, 1998, attached hereto, are hereby made a part of this LOA the same as if they had been expressly set forth herein; Provided; That Articles 20 through 30 shall not apply. 17. Either Party may terminate this LOA upon a thirty-day written notice given to the other Party. If you are in agreement with the terms and conditions written above, please indicate your approval by signing and dating both originals of this LOA, and return one original to Gloria Davis (N6205) at this office. If you have any questions, please contact .Jeanne Haas at (916) 353-4438, or Hiroshi Kashiwagi at (916) 353-4477. Sincerely, In Duplicate Seal Attest: By: Thomas R. Boyko Power Marketing Manager ~,~ldress: ’-: PALO ALTO Title:Date: City of Palo Alto Exhibit A to Letter of Agreement 03-SNR-00543 EXHIBIT A (Authorized Representatives) 1. This Exhibit A made to be effective under and as a part of Letter of Agreement 03-SNR-00543 (LOA), shall remain in effect until superseded by another Exhibit A or upon termination of this LOA. 2. SNR’s authorized representative for scheduling transactions shall be its preschedulers, who can be contacted by telephone at (916) 353-4091 or (916) 353- 4092, by fax at (916) 353-2210, or by electronic mail at presched@wapa.gov. For real- time transactions, SNR’s dispatchers are the authorized representatives. Palo Alto can contact SNR’s dispatchers at (916) 353-2200. 3. The authorized representative for scheduling or real-time transactions for Palo Alto shall be its scheduling agent, the Northern California Power Agency, who can be contacted by telephone at (916) 781-4281, by fax at (916) 781-4239, or by electronic mail at kevinm @ ncpa.com. Page 1 of 1 City of Palo Alto Exhibit B to Letter of Agreement 03-SNR-00543 EXHIBIT B (Posting, Response, and Confirmation Time Schedule) 1. This Exhibit B, made to be effective under and as a part of Letter of Agreement 03-SNR-00543 (LOA), shall remain in effect until superseded by another Exhibit B or upon termination of this LOA. 2. The following table outlines the normal sequence of events, provided there is no prescheduling holiday, observed by SNR and Palo Alto, during a particular week: If daily excess capacity is available on: Sunday Monday Tuesday Wednesday Thursday Friday SNR posts the amount available to Palo Alto by 12:00 p.m., Palo Alto responds by 1:00 p.m., SNR confirms the amount by 3:00 p.m. on the prior: Thursday Thursday Friday Monday Tuesday Wednesday Wednesday Palo Alto schedules Dy ~:uu a.m. on the prior: Friday Friday Monday Tuesday Wednesday Thursday Thursday 3.SNR reserves the right to modify this Exhibit B if SNR deems it necessary. Page 1 of 1 City of Palo Alto Exhibit C to Letter of Agreement 03-SNR-00543 (Point of Delivery) 1. This Exhibit C, made to be effective under and as a part of Letter of Agreement 03-SNR-00543 (LOA), shall remain in effect until superseded by another Exhibit C or upon termination of this LOA. 2. SNR, under terms and conditions stipulated in this LOA, will furnish excess capacity and associated energy to Palo Alto at the Tracy 230-kV Substation at a delivery voltage of 230 kV. 3. Delivery of excess capacity and associated energy to the point indicated will be subject to available transmission capability. Page 1 of 1 City of Palo Alto Exhibit D to Letter of Agreement 03-SNR-00543 F_AnlD I D (Rates foF LMEC, SRE© and DEC with Associated Energy) 1. This Exhibit D, made to be effective under and as a part of Letter of Agreement 03-SNR-00543 (L©A), shall remain in effect until superseded by another Exhibit D or upon termination of this LOA. 2.The rate for SREC and DEC and associated energy shall be comprised of: 2.1 The estimated Pacific Gas & Electric Company’s full thermal production rate (at the time of the excess capacity sale) used to determine Energy Account No. 2 transactions, currently 20.16 mills per kWh; 2.2 An administrative adder of 0.5 mills per kWh; 2.3 The Central Valley Project nonfirm transmission rate of 1.0 mill per kWh; and 2.4 Any additional purchase power or other costs incurred by SNR due to decisions made to the benefit of the excess capacity program. SNR will assess this charge after the fact, once all costs are determined. 3. SNR may change the rate for SREC and DEC and associated energy by giving Palo Alto 30 days advance written notice. SNR will modify Exhibit D to reflect the change in rate. 4. The composite rate for LMEC and associated energy shall be equal to the Central Valley ProjectFirm Power Composite Rate, which is 24.63 mills per kWh through September 30, 2003, and 24.73 mills per kWh beginning October 1,2003, plus any charges or credits associated with the creation, termination, or modification to any tariff, contract, or schedule accepted or approved by FERC, under which Western takes service. Page 1 of 1