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HomeMy WebLinkAbout2002-11-18 City CouncilCity of Palo Alto city Manager’s Report 3 TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILTIES DATE: SUBJECT: NOVEMBER 18, 2002 CMR:429:02 RESOLUTION RATIFYING THE AGREEMENT TO EXTEND THE EXISTING NATURAL GAS TRANSMISSION AND STORAGE SERVICES CONTRACT WITH’ PACIFIC GAS AND ELECTRIC COMPANY RECOMMENDATIONS Staff recolmnends that City Council adopt the proposed resolution ratifying the Agreement executed by the City Manager to extend the existing Finn Transmission and Storage Agreement with PacificGas and Electric Company (PG&E) for the calendar year 2003. BACKGROUND On March 1,1998, the Northern California natural gas market experienced a dramatic change with the restructuring of services on the PG&E system under a broadly based settlement lmown as the’ "Gas Accord". Prior to the Gas Accord many PG&E services such as backbone transmission and local transmission were offered as a combined (bundled) product thus forcing the end user or the distribution company to hold backbone capacity and assume all market risk. The approval of the Gas Accord brought new changes and choices to gas marketers, shippers and end user customers. PG&E separated (unbundled) its local transmission and backbone transmission as two separate products. It no longer required an end-user to hold backbone capacity. The Gas Accord is effective through DeCember 31, 2002. In October 2001, PG&E filed Application 01-10-011 with the California Public Utilities Commission (CUPC) requesting that the Gas Accord Aructure and rates be extended through December 3.1, 2004 while the industry works to adjust to PG&E’s bankruptcy resolution. The result was a new one year settlement known as the "Gas Accord II" and was approved by the California Public Utilities Commission (CPUC) on August 22, 2002 for the 2003 calendar year period. CMR:429:02 Page 1 of 3 DISCUSSION The City of Palo Alto meets its natural gas load requirement by purchasing gas at the California border and at a point within California. Natural gas purchased at the California border is transported over PG&E’s backbone transmission lcnown as the Redwood path. The gas is then transported over PG&E’s local transmission system and delivered to the City’s receiving stations. Under the Gas Accord I settlement, Palo Alto was allocated 6,197mmbtu/day of capacity on PG&E’s Redwood Path at a low tariff rate. Under Gas ~ccord II settlement, PG&E extended the same allocation of the Redwoodpath to the City of Palo Alto. The City Attorney’s office advised the City Manager sign PG&E’s Firm Transmission and Storage Service Extension Agreement and advised staff to request that City Council ratify the contract by means of a resolution. RESOURCE IMPACT Approval of the proposed resolution will allow the City to maintain the low priced backbone transmission needed to transport gas to the City. The alternative would be to purchase backbone capacity on the market at an additional cost, ranging between $213,000 and $328,000 for the one year term. POLICY IMPLICATIONS This recommendation is consistent with the Council approved Utilities Strategic Plan to preserve a supply cost advantage compared to the market price. ENVIRONMENTAL REVIEW Adoption of the proposed resolution does not constitute a project under the California Environment Quality Act and, therefore, is exempt from the environment assessment requirement. ATTACHMENTS A: Resolution B: PG&E’s Finn Transmission and Storage Service Extension Agreement CMR:429:02 Page 2 of 3 PREPARED BY: RAVEEN MAAN Resource Planner DEPARTMENT HEAD: o f Utilities CITY MANAGER APPROVAL: EMILY SON Assistant City Manager CMR:429:02 Page 3 of 3 RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO RATIFYING THE EXECUTION OF THE NATURAL GAS FIRM TRANSMISSION AND STORAGE SERVICES EXTENSION AGREEMENT WITH PACIFIC GAS AND ELECTRIC COMPANY WHEREAS, the City of Palo Alto ("City") .is a municipal corporation and a charter city, duly and validly created, organized and existing under the constitution and laws of the State of California; and WHEREAS, the City has the full legal right, power and authority to execute contracts for the purchase of electricity and natural gas under Californla law, the Charter of the City of Palo Alto and the Palo Alto Municipal Code; and WHEREAS, the City currently receives natural gas transmlssion services from Pacific Gas and Electric Company under the terms of the Gas Accord, which has been modified by the Gas Accord II settlement agreement; and WHEREAS,the City Manager negotiated the Firm Transmission and Storage Service Extension Agreement, which extends natural gas transmission service provided by PG&E, on behalf of the City Council. NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION i. The Council hereby ratifies the execution of the Firm Transmission and Storage Service Extension Agreement by the City Manager, under which the City will continue to receive its allocation of 6,197 MMBtu per day of natural gas capacity on the PG&E Redwood Path pipeline under the terms of the Gas Accord II settlement agreement. // // // // // 021023 syn 0072227 SECTION 2. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act and the CEQA Guidelines and, therefore, no environment assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST:APPROVED: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney Mayor City Manager Director of Utilities Director of Administrative Services 021023 syn 0072227 2 Firm Transmission and Storage Service Extension Agreement Pacific Gas and Electric Company (the Company) and City of Palo Alto (Customer) hereby agree as follows: Customer has the option to extend its firm serv=ce up to the amount or amounts contracted with the Company in 2002 as set forth in Paragraph 3. Customer must specify in writing, in the space(s) provided in Paragraph 3, the amount of each service it will extend. The period of such extension shall be for the dates specified in Paragraph 3 or until the date the facilities used to provide the service(s) become .subject to Federal Energy Regulatory Commission (FERC) jurisdiction.. All extended service(s) shall be subject to the Company’s filed tariffs, including creditworthiness requirements. 2.If this Agreement is not received by the Company on or before 5:00 p.m., Pacific Time, September 12, 2002, Customer shall be deemed to have not extended any service, and: (a) the service amounts set forth in Paragraph 3 shall be returned to the Company and shall be included by the Company in the total amount of service offered in the Open Season and (b) such service(s) shall terminate at the end of the gas day December 31, 2002, (for transportation service) or March 31, 2003 (for storage service). -I-o be "received by the Company," this Agreement must be signed by an authorized representative of Customer and delivered by mail, facsimile or courier to and received by the Company at: By US Mail Pacific Gas and Electric Company Products and Sales Department Contracts Mail Code N15A P.O Box 770000 San Francisco, CA 94177-0001 By Express Mail Pacific Gas and Electric Company Products and Sales Department Contracts 245 Market Street 15th Floor, Room 1504 San Francisco, CA 94105-1702 By Facsimile: 415.973.9247 A facsimile copy of this Agreement, if received by the Company as specified herein, shall be binding on the parties as though it is an original 3. Firm Transportation Service Contract 0758CRON01 Extenda .hie MDQ.(Dth/d) 6,148 Extension Term1 1/1/03 to 12/31/03 Initial Here to Extend Full Contract MDQ Initial Here to Reject Contract Extension Initial Here to Reduce MDQ New MDC! (less than or equal to Extendable MDQ) 1Firm transportation service is extended for a term beginning January 1, 2003, and ending on the earlier of 1) the date on which a FERC certificate becomes effective with respect to the Company’s gas transmission and storage assets, as requested in Pacific Gas and Electric Company’s November 30, 2001, application or 2) the end of the gas day December 31, 2003. The Extendable MDQ above is the maximum amount that may be extended by Customer. If applicable, Customer may also elect to extend a lesser amount of service by initialing and indicating a lesser amount in the "New MDQ" space provided. o Once (a) Customer has completed this Agreement by indicating Customer’s desired extension services or by declining all service in Paragraph 3; and (b) Customer has provided an authorized signature below; and (c) this completed and executed Agreement has been received by the Company, as defined in Paragraph 2; then this Agreement shall be a binding commitment by the Company to provide and by Customer to pay for the levels of service specified herein for the full term specified in Paragraph 3. By signing in the space provided below, Customer agrees to be bound by the terms of this Agreement, to satisfy the Company’s creditworthiness requirements and to execute a Gas Transmission Service Agreement (GTSA) andior the Exhibit(s) thereto as requested by. Pacific Gas and Electric Company. Further, Cus.tomer represents that the signature provided is made by a representative authorized to act on behalf of the Customer’s organization in this matter. FOR CITY Signature Name Date. Title of Authorized Representative.