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HomeMy WebLinkAbout2002-12-09 City CouncilCity of Palo Alto C ty Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE:DECEMBER 9, 2002 CMR:431:02 SUBJECT:APPROVAL OF THE NATURAL GAS SERVICES AGREEMENT WITH INTERSTATE GAS SERVICES, INCORPORATED FOR NATURAL GAS OPERATIONS SERVICES FOR AN AMOUNT NOT TO EXCEED $306,000 OVER THE PERIOD JANUARY 1, 2003 TO DECEMBER 31, 2005 REPORT IN BRIEF In an effort to replace the gas operations services and residual gas formally provided by Enron, the City of Palo Alto (City) issued a Request for Proposal (RFP) in April 2002. Pacific Gas and Electric Energy Trading Corporation (PGET) was selected and, on July 22, 2002, Council passed Resolution 8205 authorizing the City Manager to execute a contract with PGET for natural gas operations services and residual gas (CMR:331:02). On August 1, 2002 Standard and Poor’s downgraded PGET’s parent company’s debt service credit rating to junk bond status. On August 14, 2002, the City elected to cease negotiations with PGET as it no longer complied with the City’s creditworthiness requirements. Hence, the contract was not finalized, and the City Manager did not execute the contract. The RFP process continued, resulting in the selection of Interstate Gas Services (IGS). An existing gas consultant to the City, IGS has been providing daily gas operations services since the contract with Enron was terminated. Under the attached Natural Gas Services Agreement, IGS will continue to provide natural gas operations services to the City. Unlike the PGET contract the Council authorized the City Manager to sign in July 2002, the attached agreement does not contemplate natural gas commodity to be provided to the City. The City will purchase all natural gas commodity needs through the City’s CMR:431:02 Page 1 of 5 two existing gas supply counterparties. In addition, a process is underway to obtain additional gas commodity counterparties. RECOMMENDATION Staff recommends that Council approve and authorize the Mayor to execute the attached Natural Gas Services Agreement with Interstate Gas Services, Inc. for natural gas operations services in an amount not to exceed $306,000 to commence January 1, 2002 an’d end December 31, 2005. BACKGROUND The City is obligated by law to provide reliable natural gas supplies to its approximately 23,000 gas customers. To achieve this mandate, the City procures gas from multiple gas commodity suppliers at the California-Oregon border and at the Pacific Gas and Electric Company’s (PG&E) Citygate. The gas commodity is then transported via PG&E’s gas transportation system to the City’s distribution system. ~As a gas wholesale customer on PG&E’s gas transportation system, the City must adhere to PG&E’s rules and regulations relating to gas operations, which include daily nominating and scheduling on PG&E’s system, monitoring and responding to Emergency and Operational Flow Order (EFO/OFO) events as called by PG&E, and assuring that gas supplies are balanced with the City’s actual gas usage. In order to properly carry out these functions, coverage for operations is needed on a 24 hours per day, seven days a week basis. The City’s failure to comply with PG&E’s gas operations requirements would subject it to penalties in accordance with PG&E’s published tariffs. In Spring 2001, Enron North America (Enron) was selected through an RFP process to be the City’s natural gas operations services and residual gas provider. Residual gas is gas needed within any given month to make up the difference between gas supplies purchased before the month and gas usage. As of November 30, 2001, the City had terminated the operations services contract with Enron. Since that time, Enron has not provided operations or gas commodity to the City: An existing gas consultant to the City, Interstate Gas Services (IGS), has been providing daily gas operations services since the contract with Enron was terminated. All gas supplies are now purchased from British Petroleum Energy Company (BP) and Sempra Energy Trading Company (Sempra) by agreements signed by the City on March 1, 200l and July 31, 2001, respectively, and later ratified by the Council (CMR’s 341:01 and 420:01). On April 1, 2002, staff sent an RFP to thirty seven natural gas suppliers operating in North America and to IGS.An evaluation committee consisting of staff from CMR:431:02 Page 2 of 5 Administrative Services Treasury and Purchasing Divisions and Utilities’ Resource Management Division reviewed the original proposals, and four firms were invited to participate in oral interviews. The committee carefully reviewed each firm’s qualifications and submittal in response to the RFP relative to the evaluation criteria. Pacific Gas and Electric Energy Trading Corporation (PGET) was chosen for further negotiations. On July 22, 2002, Resolution 8205 authorized the City Manager to execute a contract with PGET for natural gas operations services and residual gas (CMR:331:02). On August 1, 2002 Standard and Poor’s downgraded PGET’s parent company’s debt service credit rating to junk bond status. On August 14, 2002, the City elected to cease negotiations with PGET as it no longer complied with the City’s creditworthiness requirements. Hence, the City Manager elected not to finalize a contract under the authority confirmed by Resolution 8205. Only one of the remaining candidates, Cinergy, proposed to provide both natural gas operations services and residual gas and met the City’s creditworthiness requirements. However, negotiations with Cinergy were unsuccessful. IGS was left as the only viable alternative offering gas operations services but no residual gas. DISCUSSION IGS was selected to be the City’s gas operations provider. The following describes IGS relative to each of the evaluation criteria. 1.Creditworthiness Current City Energy Risk Management Guidelines for counterparty creditworthiness were applied as a screening criteria for firms providing residual gas. IGS is an independent gas services provider only and does not offer gas commodity. IGS is not rated by the credit agencies, but because IGS will not provide gas commodity to the City, the creditworthiness of IGS is not relevant. 2.Operations Service Level Firms were evaluated on their willingness and ability to provide daily operations services as required by PG&E’s operational requirements. IGS provides service seven days per week, 24 hours per day monitoring the PG&E system and managing the City’s gas supply. 3.Residual Gas Services Firms were evaluated based on their ability to provide residual gas services and daily or monthly balancing. All proposers who offered this service were eliminated due to CMR:431:02 Page 3 of 5 their inability to meet the other criteria. IGS does not offer this service. However, the City does have two existing commodity suppliers and a process is underway to obtain additional commodity suppliers. 4.Minimization of Risk Firms were assessed based on their ability to minimize commodity price and operational risks. IGS offers a high level of service that will help the City manage risk. Staff is working with the existing approved gas commodity counterparties to provide extra gas on cold winter days. 5.Cost The cost of each proposal consisted of the annual fee for providing daily operations, and the premium charged, if any, to the index price for the residual gas commodities. The cost was adjusted to account for different levels of service proposed. Additional costs were added, for proposals that provided lower levels of service, since Staff would have to spend internal resources to perform those missing functions. The fee structure proposed by IGS is reasonable for the services provided compared to the other proposals. 6.Past Performance If applicable, past performance with the City was evaluated. IGS has been the City’s gas operations service provider for nearly a year with excellent results. ALTERNATIVES TO STAFF RECOMMENDATION The alternatives evaluated include: 1. Develop the necessary skills, systems, and gas commodity counterparties to carry out all daily operations and residual gas balancing functions in-house by existing staff. 2.Reissue the RFP in an attempt to outsource both the operations and residual gas balancing functions to a single gas commodity supplier. Given the time and staff resources required to develop the skills in-house or conduct an RFP process coupled with the need to prepare for the approaching winter heating season, both of these alternatives were eliminated. RESOURCE IMPACT IGS’s proposed management fee is $8,500 per month. The term of the contract is January 1, 2003 through December 31, 2005. The City has budgeted for this amount within the fiscal year 2002/03 budget. The funds for subsequent years to cover the cost of CMR:431:02 Page 4 of 5 the management fee are included in the Utilities Department’s ten-year financial forecast and will be included in future year budgets. POLICY IMPLICATIONS This recommendation is consistent with the Council approved Utilities Strategic Plan to: 1) Preserve a supply cost advantage compared to market price; 2) Streamline and manage business processes to allow the City to work efficiently and cost effectively; and 3) Provide superior financial performance to the City and competitive rates to customers. This recommendation is consistent with the Council-approved Utilities Risk Management Policies and Procedures specifically adhering to the Counterparty Credit Policy. Further, this recommendation adheres to the City’s competitive selection process for services and to the Utilities Interim Risk Management Policies and Procedures, which require competitive bidding for commodity products. ENVIRONMENTAL REVIEW Approval of this contract does not constitute a project under the California Environmental Quality Act; therefore, no environmental assessment is required. ATTACHMENTS A:Draft of the Natural Gas Services Agreement by and Between Interstate Gas Services, Inc. and City of Palo Alto PREPARED BY: KARLA DAILEY Resource Planner DEPARTMENT HEAD: CITY MANAGER APPROVAL: of Utilities EMII_ HARRISON Assistant City Manager CMR:431:02 Page 5 of 5 COI~TTRACT NO BETWEEN T~~ ’:~; CITY OI~ }’ALO ALTO AND INTERSTATE GAS SERVICES, INC. FOR NATURAL GAS SERVICES This Contract No. __ ("Contract") is entered into as of 2002, by and between the CITY OF PALO ALTO, a chartered city and a municipal corporation of the State of California ("City"), and INTERSTATE GAS SERVICES, INC., a California corporation, located at 2600 Kitty Hawk Road, Suite 101, Livermore, California 94550 ("IGS"). CITY and IGS maybe referred to individually as a "Party" or collectively as the "Parties." RECITALS WHEREAS, CITY owns and operates a Gas distribution system for the sale of Gas to its retail customers, and owns firm capacity rights on PG&E’s Gas transmission system, more fully described herein as "Redwood Capacity"; and WHEREAS, CITY desires to provide for certain Gas services to CITY, including the administration of certain Of CITY’s Transportation Contracts (as defined herein), and the exercise of certain limited rights with respect to CITY’s Third Party Gas supply arrangements (collectively, the "Services") as more fully described in Exhibit "A" attached hereto; and WHEREAS, CITY desires to engage IGS, including its employees, if any, in providing the Services by reason of its qualifications and experience in performing the Services, and IGS has offered to perform the Services on the terms and in the manner set forth herein; NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Contract, the Parties agree as follows: SECTION 1. CONTRACT.TERM 1.1 The term of this Contract ("Contract Term") and the Services hereunder shall commence on January 1, 2003, and unless earlier terminated in accordance with the provisions hereof, shall terminate on December 31, 2005. 021021 syn704/0052778 SECTION 2. SCOPE OF SERVICES 2.1 The Services to be performed by IGS hereunder are described ir~ Exhibit A attached hereto and made a part hereof by reference. 2.2 CITY may order changes in the scope or character of the Services, either decreasing or increasing the Services required of IGS. In the event that such changes are ordered, subject to the approval of CITY’s City Council, as may be required; IGS will be entitled to compensation for all Services performed. Any increase in compensation for changes will be determined in accordance with the provisions of this Contract. CITY will not be liable for the cost or payment of any change in work, unless the amount of additional compensation attributable to the change in work is agreed to, in writing, by IGS and CITY before IGS commences the performance of any such change in work. SECTION 3. OUALWICATIONS, STATUS, AND DUTIES OF IGS 3.1 IGS represents and warrants that it has the expertise and professional qualifications to furnish or cause to be furnished the Services hereunder. IGS further represer~ts and warrants that the individuals performing the Services, (including any consultant or contractors), are duly licensed or certified by the State of California, to the extent such licensing or certification is required by law to perform the Services, and that the Services will be executed by them or under their supervision. IGS will furnish to CITY for approval, prior to execution of this Contract, a list of all individuals and the names of their employers or principals to be employed as consultants, and shall thereafter notify City of changes to personnel performing Services hereunder. 3.2 In reliance on the representations and warranties set forth in this Contract, CITY hereby hires IGS to perform, and IGS covenants and agrees that it will perform, the Services in a professional manner. 3.3 IGS will assign Dan Bergmann as the IGS project director to have supervisory responsibility for the perfom~ance, progress, and execution of the Services. If circumstances or conditions subsequent to the execution of this Contract cause the substitution of the project director for any reason, the appointment of a substitute project director or substit.ute project coordinator will be subject to the prior written approval of the CITY. 3.4 IGS represents and warrants that it will: 021021 syn 704/0052778 2 3..4.1 Subject to the Scope of Services set forth in Exhibit A, procure all permits and licenses, pay all charges and fees, and give all notices which may be necessary and incident to the performance of the Services; 3.4.2 Keep itself fully informed of all existing and future Federal, State of California, and local laws, ordinances, regulations, orders, and decrees which may affect those engaged or employed under this Contract and any materials used in IGS’s performance of the Services; 3.4.3 At all times observe and comply with, and cause its employees and consultants, if any,.who are assigned to the performance of this Contract to observe and comply with, the laws, ordinances, regulations, orders and decrees mentioned above; and 3.4.4 Will report immediately to the CITY, in writing, any discrepancy or inconsistency it discovers in the laws, ordinances, regulations, orders, and decrees mentioned above in relation to the Services. 3.5 Any and all written materials given to, or prepared or assembled by, IGS or its consultants, if any, under this Contract will become the property of CITY and will not be made available to any individual or organization by IGS or its consultants, if any, without the prior written approval of the city manager of CITY. 3.8 IGS will be responsible for employing or engaging all persons necessary to perform the Services. All consultants of IGS will be. deemed to be directly controlled and supervised by IGS, which wili be responsible for their performance. If any employee or consultant of IGS fails or refuses to carry out the provisions of this Contract or appears to be incompetent or to act in a disorderly or improper manner, the employee or consultant will be discharged immediately from further performance under this Contract on demand of the project manager. 3.9 In the performance of the Services hereunder, IGS and its employees, consultants, or contractors, if.any, will at all times be considered independent contractors and not agents or employees of CITY. SECTION 4. DUTIES OF CITY 4.1 The City Manager will represent CITY for all purposes under this Contract. Girish Balachandran, Assistant Director, Resource Management is designated as the 021021 syn 704/0052778 3 CITY project manager:-for the City Manager. The CITY project manager will supervise the performance, progress, and execution of the Services, and will be assisted by Raveen Maan, Karla Dailey, Shiva Swaminathan, and Monica Padilla, CITY’ S Resource Planners. 4.2 If CITY observes or otherwise becomes aware of any default in the performance of IGS, CITY will use reasonable efforts to give written notice thereof to IGS in a timely manner. SECTION 5. COMPENSATION 5.1 " In consideration of the full performance of the Services hereunder, CITY will pay IGS a monthly fee in the amount of Eight Thousand Five Hundred Dollars ($8,500.00), payable on or about the tenth day of the month following the month in which Services were rendered. IGS will not be paid for extra work or changes made necessary on account of IGS’s errors, omissions, or oversights. SECTION 6. RESERVED SECTION 7. INDEMNITY 7.1 IGS agrees to protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents, from any and all demands, claims, or liability of any nature, including death or injury t6 any person, property damage or any other loss, caused by or arising out of the negligence or willful misconduct of IGS, its officers, agents, consultants or employees; or conduct for which applicable law may impose strict liability on IGS in the performance Of or failure to perform its obligations under this Contract. IGS shall be liable for imbalance penalties imposed by PG&E, unless such penalties are the result of lack of CITY’s Gas supplies and/or the failure of CITY or PG&E to make relevant City Load information available to IGS during OFOiEFO events. 7.2 NOTWITHSTANDING ANY PROVISIONS OF THIS CONTRACT, THE PARTIES HERETO WAIVE ANY AND ALL RIGHTS, CLAIMS, OR OTHER CAUSES OF ACTION FOR INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF USE AND LOSS OF PROFITS AND OTHER BUSINESS INTERRUPTION DAMAGES ARISING OUT OF EITHER PARTY’S FAILURE TO FULLY PERFORM ITS OBLIGATIONS UNDER THIS CONTRACT. 021021syn704/O052778 4 SECTIQN 8. WAIVERS 8.1 The waiver by either Party of any breach or violation of an); covenant, term, condition or provision of this Contract or of the provisions of any ordinance or. law will not be deemed to be a waiver of any such covenant, term, condition, provision, ordinance, or law or of any subsequent breach or violation of the same or of any other covenant, term, condition, provision, ordinance ’or law. The subsequent acceptance by either Party of any fee or other money which may become due hereunder will not be deemed to be a waiver of any preceding breach or violation by the other Party of any covenant, term, condition or provision of this Contract or of any applicable law or ordinance. 8.2 No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Contract. SECTION 9. INSURANCE 9.1 IGS, at its sole cost and expense, will obtain and maintain, in full force and effect during the term of this Contract, the insurance coverage described in Exhibit "B", insuring not only IGS and its consultants, if any, but also, with the exception of workers’ compensation, employer’s liability and professional liability insurance, naming-CITY as an additional insured concerning IGS’s performance under this Contract. 9.2 All insurance coverage required hereunder will be provided through carriers with Best’s Keg Rating Guide ratings of A:X or higher which are admitted to transact insurance business in the State of California. Any and all consultants of IGS retained to perform Services under this Contract will obtain and maintain, in full force and effect during the term of this Contract, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 9.3 Certificates of such insurance, preferably on the forms provided by CITY, will be filed with CITY concurrently with. the execution of this Contract. The certificates will be subject to the approval of CITY’s risk manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled or altered by the insurer except after filing with the CITY’s city clerk thirty (30) days prior written notice of such cancellation or alteration, and that the CITY of Palo Alto is named as an additional insured except in policies of workers’ compensation, employer’s liability, and professional liability insurance. Current certificates of such insurance will be kept on file at all times during the term of this Contract with the city clerk. 021021 syn704/O052778 5 9.4 The procuring of such required policy or policies of insurance will not be construed to limit IGS’s liability hereunder or to fulfill the indemnification provisions of this Contract. Notwithstanding the policy 0r policies of insurance, IGS will be obligated for the full and total amount of any damage, injury, or toss caused by or directly arising as a result of the Services performed under this Contract, including such damage, injury, or loss arising after the Contract is terminated or the term has expired. SECTION 10. WORKERS’ COMPENSATION INSURANCE 10.1 IGS, by executing this Contract, certifies that it is aware of the provisions of the Labor Code of the State of California which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that Code, and certifies that it will comply with such provisions, as applicable, before commencing the performance of the Services. SECTION 11. TERMINATION OR SUSPENSION OF CONTRACT 11.1 City’s City Manager may suspend the execution of the Services, in whole or in part, or t~rminate this Contract, with or without cause, by giving thirty (30) days’ prior written notice thereof to IGS. Upon the effective date of such notice, IGS will immediately discontinue its performance under this Contract. 11.2 In the event of a substantial failure of performance by CITY hereunder, IGS may terminate this Contract or suspend its performance of the Services by giving thirty (30) days’ prior written notice thereof to CITY. 11.3 Upon such suspension or termination by CITY, IGS will be compensated for the Services performed prior to receipt of written notice from CITY. If the Contract is resumed after it has been suspended for more than 180 days, any change in IGS’s compensation will be subject to renegotiation and, if necessary, approval of CITY’s City Council. If this Contract is suspended or terminated on account of a default by IGS, CITY will be obligated to compensate IGS only for that portion of the Services which are of direct and immediate benefit to CITY, as such determination may be made by the City Manager in the .reasonable exercise of his or her discretion. 021021 syn 704/0052778 SECTION 12.ASSIGNMENT 12.1 This Contract is for the personal services of IGS, therefore, IGS will not assign, transfer, convey, or otherwise dispose of this Contract or any right, title or interest in or to the same or any part thereof without the prior written consent of CITY. A consent to one assignment will not be deemed to be a consent to any subsequent assignment. Any assignment made without the approval of CITY will be void and, at the option of the City Manager, this Contract may be terminated. This Contract will not be assignable by operation of law. SECTION 13. NOTICES 13.1 Except as otherwise provided herein, all notices hereunder will be given, in writing, and mailed, postage prepaid, addressed as follows: To CITY:Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 Copy to:Girish Balachandran Department of Utilities - 3rd Fir. City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 To IGS:Interstate Gas Services, Inc. 2600 Kitty Hawk Road, Suite 101 Livennore, CA 94550 Attn: Dan Bergmann Either Party may change its address for receipt of notices under this Contract by notice given to the other Party in the manner provided above. SECTION 14. CONFLICT OF INTEREST 14.1 In accepting this Contract, IGS covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 021021 syn 704/0052778 7 14.2 IGS further covenants that, in the performance of this Contract, it will not employ contractors or persons having such an interest mentioned above. IGS certifies that no one who has or will have any financial interest under this Contract is an officer or employee of CITY;’ this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. SECTION 15. NONDISCRIMINATION 15.1 As set forth in the Palo Alto Municipal Code, no discrimination will be made in the employment of persons under this Contract because of the age, race, color, national origin, ancestry, religion, disability, sexual preference or gender of such person. If the value of this Contract is, or may be, five thousand dollars ($5,000) or more, IGS agrees to meet all requirements of the Palo Alto Municipal Code pertaining to nondiscrimination in employment, including completing the requisite form furnished by CITY and attached hereto as Exhibit "C". 15.2 IGS agrees that each contract with IGS consultants or other independent providers relating to the Services will contain a provision substantially as follows: "[Name of Provider] will provide IGS with a certificate stating that [Name of Provider] is currently in compliance with all Federal and State of California laws covering nondiscrimination in employment; and that [Name of Provider] will not discriminate in the employment of any person under this contract because of the age, race, color, national origin, ancestry, religion, disability, sexual preference or gender of such person." 15.3 If IGS is found in violation of the nondiscrimination provisions of the State of California Fair Employment Practices Act or similar provisions of Federal law or executive order in the performance of this Contract, it will be in default of this Contract. Thereupon, CITY will have the power to cancel or suspend this Contract, in whole or in part, or to deduct the sum of twenty-five dollars ($25) for each person for each calendar day during which such person was subjected to di’scrimination, as damages for breach of contract, or both. Only a finding of the State of California Fair Employment Practices Commission or the equivalent federal agency or officer will constitute evidence of a breach of this Contract. 021021syn704/O052778 SECTION 16. MISCELLANEOUS PROVISIONS 16.1 IGS represents and warrants that it has knowledge of the requirements of the federal Americans with Disabilities Act of 1990, and the Government Code and the Health and Safety. Code of the State of California, relating to access to public buildings and accommodations for disabled persons, and relating to facilities for disabled persons. IGS will comply with or ensure by its advice that compliance with such provisions will be effected pursuant to the terms of this Contract. 16.2 Upon the agreement of the Parties, any controversy or claim arising out of or relating to this Contract may be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof. 16.3 This Contract will be governed by the laws of the State of California, excluding its conflicts of law. 16.4 In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State Of California. 16.5 The prevailing Party in any action brought to enforce the terms of this Contract or arising out of this Contract may recover its reasonable costs and attorneys’ fees expended in connection with that action. 16.6 This document represents the entire and integrated Contract between the Parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the Parties. 16.7 All provisions of this Contract, whether covenants or conditions, will be deemed to be both covenants and conditions. 16.8 The covenants, terms, conditions and provisions of this Contract will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants, as the case may be, of the Parties. 021021 s~704/0052778 16.9 I~f a court of competent jurisdiction finds or rules that any provision of this Contract or any amendment thereto is void or unenforceable, the unaffected provisions of this Contract and any amendments thereto will remain in full force and effect. 16.10 All exhibits referred to in this Contract and any addenda, appendices, attachments, and schedules which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Contract and will be deemed to be a part of this Contract. 16.11 This Contract may be executed in any number of counterparts, each of which will be an original, but all of which together will constitute one and the same instrument. 16.12 This Contract is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Contract will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Contract are no longer available. This Section 16.12 will take precedence in the event of a conflict with any other covenant, terms-condition, or provision of this Contract. ///// ///// ///// ///// ///// ///// ///// 021021 syn704/O052778 1 0 IN WITNESS .:- WHEREOF, the Parties hereto have by their duly representatives executed this Contract on the date first above written. authorized ATTEST:CITY OF PALO ALTO CITY CLERK MAYOR APPROVED AS TO FORM: City Attomey APPROVED: Assistant City Manager INTERSTATE GAS SERVICES, INC. Director of Administrative Services Title: Director of Utilities Taxpayer Identification No. -?2-Isz qq-2 Attachments: EXHIBIT "A": EXHIBIT "B": EXHIBIT "C": (Compliance with Corp. Code § 313 is required if the entity on whose behalf this contract is signed .is a corporation. ’In the alternative, a certified corporate resolution attesting to the signatory authority of the individuals signing in their respective ~apacities is acceptable) SCOPE OF SERVICES INSURANCE NONDISCRIMINATION COMPLIANCE FORM 021021 syn 704/0052778 . :: CERTIFICATE OF ACIQNOWLEDGMENT (Civil Code § 1189) On ’2L~/IK) o k/ ,2002, before me, the undersigned, a Notary Public in and for said C~ounty and State, personally appeared /J ¯ ~’,<~t",o,:’"-, personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted,, executed the instrument. WITNESS my hand and official seal. Public 021021 syn704/O052778 12 EXHIBIT A - SCOPE OF SERVICES 1.0 DEFINITIONS As used herein, the following terms, when capitalized, shall have the following meanings, unless the context clearly indicates otherwise.. "Baseload City Gate Quantity" means quantities of Gas (MMBtu per Day) that CITY purchases from a Third Party supplier delivered at the PG&E City Gate for a particular Month. "Baseload Contracts" shall mean those certain firm Gas purchase/sale agreements currently in effect or hereafter entered into between CITY and Third Party suppliers for the purchase/sale of the Baseload Redwood Quantity and the Baseload City Gate Quantity. "Baseload Redwood Quantity" shall mean quantities of Gas that CITY purchases from a Third Party supplier delivered into PG&E’s Malin receipt point (delivered on the PG&E side of the meter) expressed as a single daily quantity (MMBtu per Day) for a particular Month. "Business Day" means Monday thy. ough Friday except the official holidays recognized by CITY. "Ci _ty’s City Gate" means the interconnection point of PG&E’s local transmission system and CITY’s distribution pipeline. "City’s Load (or "Load") means the quantity of Gas required or consumed by CITY’s residential, commercial and industrial commodity customers as measured at City’s City Gate. "Contract Term" shall, have the meaning set forth in Section 1.1 of the Agreement. "__~y_" means a period beginning at 7:00 a.m. Pacific Standard Time on a calendar day and ending at 7:00 a.m. Pacific Standard Time on the next succeeding calendar day. "Emergency Flow Order" (or "EFO") means an event on PG&E’s Gas transmission system as defined in Section F of Gas Rule 14 ofPG&E’s t~riff, as amended from time to time. "Gas" means methane and other Gaseous hydrocarbons meeting the quality Standards of CITY’s Transporter. "Maximum Daily Quantity" (or "MDQ") means 30,000 MMBtu’s of Gas .per day, as defined in CITY’s Natural Gas Service Agreement with PG&E. "MMBtu" means one million (1,000,000) Btu (equal to one dekatherm), where Btu means British Thermal Unit, measured on a dry basis. "Month" means a period beginning at 7:00 a.m. Pacific Standard Time on the first Day of a calendar month and ending at 7:00 a.m. Pacific Standard Time on the first Day of the next succeeding calendar month. "Operational Flow Order" (or "OFO") means an event on PG&E’s Gas transmission system as defined in Section E of Gas Rule 14 of PG&E’s tariff, as amended from time to time. "PG&E" means the Pacific Gas & Electric Company and its successors or permitted assignees. "PG&E City Gate" means the interconnection point of PG&E’s backbone Gas transmission system and PG&E’s local Gas transmission system. "Redwood Capacity" means CITY’s firm capacity rights on PG&E’s Gas transmission system. "Swing Gas" shall mean Gas in variable quantities that CITY has made arrangements to purchase from a Third Party supplier for a particular Month. "Swing Gas Contracts" shall mean those certain firm _Gas purchase and sale agreementscurrently in effect or hereafter entered into between CITY and Third Party suppliers for the purchase and sale of Swing Gas. 2 "Third Party" means any party other than a Party. "Transportation Contracts" shall mean those certain Gas transportation contracts between CITY and PG&E made and entered into as of March 1, 1998 entitled "Natural Gas Service Agreement" and "Gas Transmission Service Agreement," as the same may be amended prior to the Effective Date. "Transporter" means any interstate or intrastate Gas transportation provider_. 2.0 SCOPE OF SERVICES 2.1 Natural Gas Purchase Agreements 2.1.1 2.1.2 2.1.3 IGS shall familiarize itself with all Baseload. Contracts and Swing Gas Contracts provided to IGS by CITY. IGS shall abide by the terms of Baseload Contracts and Swing Gas Contracts in providing Services to CITY. CITY shall exercise all rights and shall be fully responsible for all obligations under each BaSeload Contract and Swing Gas Contract, including, without limitation, payment for all Gas purchased thereunder. 2.2 Nominations, Daily Supply/Demand Balancing 2,2.!At least three (3) Business Days prior to the beginning of each Month during the Contract Term, CITY shall give IGS notice of the estimated daily Baseload Redwood Quantity, daily Baseload City Gate Quantity, and estimated quantities- of Swing Gas for such Month. Such notice will include (i) the name of each of CITY’s suppliers, (ii) each supplier’s contact person and phone number, (iii) 2.2.2 2.2.3 2.2.4 2.2.5 2.2.6 2.2.7 2.2.8 each supplier’s delivery/receipt point, (iv) each supplier’s pool number, and (v) the quantity of Gas that each supplier has agreed to supply on a daily basis. During the Contract Term, IGS shall act as CITY’s agent under the Transportation Contracts for the. purpose of performing the Services. Such agency shall at all times comply with applicable PG&E requirements. To further the purposes hereof, the Parties shall cooperate to complete, execute, and deliver such authorization documentation as may be required by PG&E from time to time. IGS shall be responsible for carrying out the functions necessary to balance CITY’s Load, using Gas purchasing and sales agreements entered into between CITY and CITY’s suppliers, on a monthly basis and on a daily basis during OFO/EFO events. The Parties will arrange with PG&E for IGS to act on behalf of CITY for the purpose of ma;aaging Gas control logistics. IGS shall initiate and maintain nominations for all Gas delivered to CITY. IGS shall perform Gas nomination services in compliance with all applicable interstate or PG&E standards. To the extent these standards are modified during the term of this Contract, IGS will assess those changes, comply as necessary and report the impact of such modifications (if any) to CITY. IGS shall perform Gas nomination and other Services in compliance with CITY’s "Interim Gas Operations Procedures for EFO/OFO Events," as the same may be changed by CITY from time to time. CITY shall allow IGS to monitor, on a daily basis, City’s Load recorded in PG&E’s meter data while IGS utilizes PG&E’s electronic bulletin board, "Inside Tracc". The Parties shall cooperate to ensure that IGS can obtain the data from CITY’s backup palse recorders. CITY will endeavor to maintain an accessible file of Gas usage data for backup purposes. 2.2.9 IGS shall monitor and record City’s Load on a regular basis, either remotely, through PG&E "Inside Tracc," or by receiving data directly from CITY, or otherwise, as made available by PG&E. 2.2.10 IGS shall monitor and record the ongoing balance between City’s Load and Gas delivered by Third Party suppliers. IGS shall email to CITY each Business Day an update of the ongoing Gas balance during each Month of deliveries. 2.2.11 IGS shall request and nominate more or less Gas from Third Party suppliers, as directed by CITY, - within the terms of Baseload Contracts and Swing Gas Contracts. 2.2.12 IGS shall be designated by CITY as authorized agent for the purposes of managing any Gas storage assets contracted for by CITY. CITY shall provide all necessary authorizations for IGS to do so. 2.2.13 IGS shall notify CITY in the event supplies are inadequate or excessive to customer demand. 2.3 OFOs and EFOs 2.3.1 IGS shall anticipate and respond to OFOs and EFOs by closely monitoring CITY consumption against supplier deliveries. IGS shall make supply delivery rate adjustments and/or storage injection and withdrawal adjustments as provided within the terms of CITY purchase agreements with its suppliers and storage contracts. IGS shall immediately notify CITY in the event CITY supplies are inadequate in any way to meet 5 2.3.2 2.3.3 OFO/EFO criteria. CITY accepts liability for imbalance penalties resultant of lack of supply and/or lack of customer usage information being available during OFO/EFO events. IGS accepts liability for imbalance penalti~es incurred resultant of IGS’ erroneously responding to an OFO/EFO event. IGS shall manage CITY’s storage assets, if any, to minimize penalties in OFO/EFO events. Provided adequate residual supplies are available and IGS is authorized accordingly to order residual supply or otherwise sell excessive Baseload Gas under prearranged deals between the CITY and it’s suppliers, CITY staff need not be available upon notification by PG&E and during OFO days. The following are conditions under which CITY shall be responsible for OFO penalties. i. CITY is unable to reduce Gas deliveries because of Baseload Contract minimums or other contract issues. ii.CITY is unable to purchase additional supplies because residual supplies are either not contracted for or do not perform when requested, and CITY staff does not respond timely to IGS’ calls or otherwise take action. CITY’S failure to provide IGS with Gas usage data. iii. 2.4 Natural Gas Requirements Forecasting IGS shall forecast near-term Gas requirements for CITY. The sole purpose of this IGS forecast is to estimate Gas requirements for the PG&E nomination requirements, which are one to four days’ usage (four days on a holiday weekend). The elements ofIGS’ forecast are: 2.4.2 i.Consumption Data - IGS shall maintain a database containing historical CITY daily consumption data. ii.Weather Data - IGS shall maintain an associated database containing heating degree day data and other pertinent weather data associated with historical Gas consumption data. iii.Forecast Model. IGS has developed and shall maintain and utilize for the benefit of CITY a forecast model that compares consumption data and weather data to forecast near term gas requirements for CITY. The results of IGS’ forecast shall be available to CITY at any reasonable time; however, the software and related programming are the property of IGS and not available to CITY under this Agreement. CITY will communicate to IGS, by e-mail and within ten (10) Days of receipt of information, any fundamental changes in the City Load ~hat become known to CITY during the Contract Term. Such fundamental changes may include, without limitation, a large customer’s election to buy or not buy Gas from CITY. 2.5 Monthly Gas Accounting and Imbalance Trading 2.5.1 2.5.2 IGS shall provide to CITY by the 10th Day of each Month a summary of daily Gas received and delivered with resultant Month-end preliminary imbalance. (The final imbalance is determined by PG&E and provided near the 15th Day of each Month following the Month of deliveries.) Any required imbalance trades will be arranged by CITY. 2.5.3 2.5.4 2.5.5 Prior to trading each Month, IGS shall inform CITY of current market conditions, expected value for imbalance Gas, and expected value of carrying imbalances forward versus selling or buying. At CITY’S request, IGS shall enter any imbalance trade in PG&E’s system once an imbalance trade has been made by the CITY. All imbalance payments shall be made to and from the CITY. (End of Exhibit.A) EXHIBIT B - INSURANCE REQUIREMENTS PART II- INSURANCE REQUIREMENTS FORM 650 CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH A BEST’S KEY RATING OF A:X, OR HIGHER, LICENSED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: ’ MINIMUM LIMITS REQUIRED YES TYPE OF COVERAGE STATUTORY YES YES WORKER’S COMPENSATION COMPREHENSIVE GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY. COMPREHENSIVE AUTOMOBILE LIABILITY, INCLUDING, OWNED, HIRED, NON-OWNED PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE REQUIREMENT BODILYINJURY PROPERTYDAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. BODILY INJURY EACH PERSON EACH OCCURRENCE PROPERTYDAMAGE BODILYtNJURY AND PROPERTY DAMAGE, COMBINED ALL DAMAGES EACH OCCURRENCE $1,000,000 $1,ooo,o0o $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 AGGREGATE $1,000,000 $1,000,000 $1,000,000 $1,000,000 $I,000,000 $1,000,000 $1,000,000 $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: BIDDER, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND .MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY BIDDER AND ITS SUBCONTRACTORS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSURES CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I1. INSURANCE COVERAGE MUST INCLUDE: A.A PROVISION FOR A WRI]-FEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY - SEE PART II, SECTION 500, FORMAL CONTRACT (SAMPLE).. SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE, OR COMPLETE THIS SECTION AND SECTION V, BELOW.. A.NAME AND ADDRESS OF COMPANY AFFORDING COVERAGE (NOT AGENT OR BROKER): NAME, ADDRESS, AND PHONE NOMBE’R OF YOUR INSU~NCE AGENT/BROKER: POLICY NUMBER(8): CITY OF PALO ALTO IFB 148416 PAGE 1 OF 2 PART II - INSURANCE REQUIREMENTS FORM ~650 D.DEDUCTIBLE-AMgUNT(S) (DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL): Ill. IV. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AND BIDDER’S SUBMI-I-I’AL OF CERTIFICATES OF INSURANCE EVIDENCING COMPLIANCE WITH THE REQUIREMENTS SPECIFIED HEREIN. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO "ADDITIONAL INSURES" A.PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTINGWITH ANY OTHER INSURANCE CARRIEDBY OR FOR THE BENEFIT OF THE ADDITIONAL INSURES. B.CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSURES UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. NOTICE 1. OF CANCELLATION IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. PROPOSER CERTIFIES THAT PROPOSER’S INSURANCE COVERAGE MEETS THE ABOVE REQUIREMENTS: THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. SIGNATURE(S) MUST BE SAME SIGNATURE(S) AS APPEAR(S) ON SECTION 300A. Signature: (Print or type name) Signature: Name: (Print or type name) NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. CITY OF PALO ALTO IFB 148416 PAGE 2 OF 2 EXHIBI-T C - CERTIFICATION OF NONDISCRIMINATION CERTIFICATION OF NQNDISCRIMINATION PROJECT: Natural Gas Services Certification of Nondiscrimination: SECTION 410 As suppliers of goods or services to the City of Palo Alto, the firm and individuals listed below certify that they do not discriminate in employment with regards to age, race, color, religion, sex, national origin, ancestry, disability, or sexual preference; that they are in compliance with all Federal, State, and local directives and execuiive orders regarding nondiscrimination in employment. THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. Signature: Name: ,:.’~P~-i ~- (PRINT OR TYPE NAME) Note:California Corporations Code Section 313 requires two corporate officers to execute contracts. *The signature of First Officer* must be one of the following: Chairman of the Board; President; or Vice President. **The signature of the Second Officer** must be one of the following: Secretary; Assistant Secretary; Chief Financial Officer; or Assistant Treasurer. (In the alternative, a certified corporate resolution attesting to the signatory authority of the individuals signing in their respective capacities is acceptable)