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HomeMy WebLinkAbout2001-06-04 City Council (5)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM: DATE: TITLE: CITY MANAGER JUNE 4~ 2001 TRANSMISSION AGENCY OF DEPARTMENT: UTILITIES CMR: 244:01 NORTHERN CALIFORNIA PROJECT AGREEMENT NO. 4 (PA4) FOR THE INVESTIGATION OF THE LOS BANOS-GATES TRANSMISSION PROJECT This is an informational report and no Council action is required. BACKGROUND Transmission Agency of Northem Califomia (TANC), Western Area Power Administration (Western), Pacific Gas & Electric Co. (PG&E) and the Califomia Independent System Operator (CAISO) are Eooperating in environmental and planning work for early completion of a new 500 kV AC line and facilities from Los Banos to Gates, thereby completing a third 500 kV line and reducing Path 15 congestion between ;Northern and Southern Califomia. Inadequate transmission capacity on Path 15 has lately decreased transfer capability in the south to north directiort and contributed greatly to electrical emergencies and rolling blackouts north of Path 15. The planning work involves an investigation of the feasibility of a third line, such as the Los Banos-Gates project. The investor-owned utilities .are faced with serious financial problems and it is unlikely that they would be completing this project as originally proposed in the mid- eighties. TANC and its members can take steps necessary to justify the need to implement the Los Banos-Gates project on Path 15. Participation in this project may provide the participants with valuable transmission rights. DISCUSSION The City has rights to a four percent share of the TANC entitlement in transmission capacity of the California-Oregon Transmission project (COTP). In 1989, PG&E and CMR:244:01 Page 1 of 3 TANC developed an agreement known as the South of Tesla (SOT) principles, which provided for contractual transmission service by PG&E between Southern and Northern California on Path 15. In 1993, a subset of TANC members elected to subscribe to 300 MW of this SOT service. Palo Alto did not elect to take this service. The present project enhancements being contemplated on Path 15 will first be allocated to the SOT recipients. If additional capacity is still available, Palo Alto will have a right to subscribe to this unused capacity as a result of having signed the TANC PA4 agreement and by virtue of its membership in TANC. The Director of Utilities has executed the TANC Project Agreement No. 4 (PA4) that would enable the City to jointly participate with TANC, Western, PG&E, California ISO and other parties in-environmental and planning work for the early completion of a new 500 kilovolt electric transmission line. from Los Banos to Gates (Path 15). Construction of this line will enhance the reliability of energy supplies to Northern California and the City would benefit from this increased reliability. Participation in this environmental work does not commit the City to participating in the construction of the transmission line. RESOURCE IMPACT PA4 would empower TANC to spend $50,000 of existing member equity funds for.this work. These funds are already available in each member’s name at TANC, as shown in the PA4 worksheet. TANC has requested reimbursement of the funds expended in environmental and planning work from the State of California and anticipates receiving future funds from the State for implementing the project. The City’s participation in the TANC PA4 can be managed with existing staff involved in oversight of TANC activities, and there is no additional resource impact for this project. Funds for this project exist in the member equity account at TANC and the City’s share will not exceed $10,000. POLICY IMPLICATIONS This decision is consistent with the Council approved Utilities Strategic Plan to obtain reliable electric supplies. CMR:244:01 Page 2 of 3 ATTACHMENTS A: TANC Project Agreement No. 4 for the Los Banos-Gates Transmission Project. PREPARED BY: Shishir Mukherjee Resource Planner DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: H of Utilities HARRISON Assistant City Manager CMR:244:01 Page 3 of 3 TRANSMISSION AGENCY OF NORTHERN CALIFORNIA PROJECT AGREEMENT NO. 4 FOR THE INVESTIGATION OF THE LOS BANOS-GATES TRANSMISSION PROJECT PREAMBLE This Project Agreement No. 4 is entered into as of March 31, 2001., by and among the Transmission Agency of Northern California, hereinafter referred to as "TANC’; and the Cities of Alameda, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Sacramento Municipal Utility Distric[; the Modesto Irrigation District; the Turlock Irrigation District; and the Plumas-Sierra RuralElectric Cooperative, with the regard to the following: RECITALS WHEREAS: A. In the South of Tesla Principles, dated as of August 25, 1989, TANC and PG&E recognized .that reinforcement may be required to maintain the adequacy of transmission service from the Tesla to Midway substations, and contemplated a new Los Banos-Gates 500 kV line and associated facilities which could increase transmission capability available to TANC and others. B.In the South of Tesla Agreement between TANC and its SOT Members, dated as of February 14, 1993, an election procedure was established for participation in the South of Tesla Reinforcements contemplated by the South of Tesla Principles, both of which reflect the TANC entitlement to 300 megawatts of firm, bi-directional transmission service provided by PG&E under the South of Tesla Principles. The election mechanism of. the South of Tesla Agreement provides, in part, that each SOT Member shall be entitled to take up to at least an amount equal to its Permanent Allocation in the first 300 megawatts of TANC’s participation in South of Tesla Reinforcements. The area in which South of Tesla Reinforcements are now recognized to be desirable is commonly known as Path 15. C. Recognition of the inadequacy of Path 15 in the face of the energy crisis is becoming widespread, particularly since transfer limitations south to north increased greatly in the recent past, have Contributed to electrical emergencies north of Path 15, and such limitations warrant an investigation of the feasibility of a third line, such as the Los Banos-Gates project. D. While attention to the problem presented by Path 15 is increasing, definitive plans have not been made to relieve the constraints by the addition of a third 500 kV line, as proposed in the original environmental documents prepared by TANC and the Western Area Power Administration in connection 2 with the development of the California-Oregon Transmission Project and, furthermore, the investor-owned utilities are suffering such serious financial infirmities that it is unlikely that the original plans could be effected as originally proposed. E.In TANC Resolution 88-1, adopted January 20, 1988, the TANC Commission found an overriding importance in the projects contemplated in the Final EIS/EIR prepared for the California-Oregon Transmission Project, having. found, after considerable study, that changes or alterations proposed for or incorporated into the Los Banos-Gates Transmission Project would avoid or substantially lessen the significant environmental effects of the project. "As such changes or alterations were then seen as being subject to approval by the Public Utilities Commission, TANC recommended them for adoption, but with the advent of the South of Tesla Principles and service from PG&E ¯between Tesla and Midway Substations for TANC and its SOT Members, the project was neither undertaken by PG&E nor TANC at the time. F.TANC and its Members have therefore concluded that it is in their interest and in the interest of the state that a further investigation be conducted to determine whether TANC and its Members should take steps necessary to be in a position to approve or carry out the Los Banos-Gates Transmission Project, 3 or a project similar to it, as studied in the Final EIS/EIR for the California-Oregon Transmission Project. NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth in this Agreement, TANC and the TANC Members that have signed below hereby agree as follows: AGREEMENT 1. INITIAL TEMPORARY FUNDING. A total of $100,000 is hereby authorized for expenditure to carry out the field survey environmental work, in coordination with state and federal agencies, to identify critical plant and endangered species, if any, during the spring season, to assist in updating work that had been completed on the Los Banos-Gates Transmission Project and the Final EIS/EIR for the California- Oregon Transmission Project, and to perform the Associated Authorized Activities described in section 4 of this Agreement. Of the $100,000 authorized to be expended, Members that have on-hand in TANC accounts original equity or advances may commit such amounts to expenditure under this Agreement or may advance such amounts separately, as and when required to keep accounts .payable current, as determined by the TANC Treasurer and Cont~oller in accordance with the Member Participation Percentages established in section 3 of 4 this Agreement. Expenditures shall not exceed $100,000 under this Agreement. It is contemplated that if TANC and its Members intend to proceed beyond this initial authorization of $100,000, a new agreement, which may be entitled Project Agreement No. 5, may be prepared for that purpose. Of the $100,000, up to $50,000, at standard rates in accordance with its customary contractual provisions, are pledged to be advanced by Navigant Consulting, Inc., without recourse to TANC or its Members, in consideration of the possibility that TANC may ultimately decide to proceed with Project Agreement No. 5, and in that connection, obtain advances or other sources of funding from which reimbursement of the fees and costs advanced by Navigant Consulting, Inc. may be made. 2.PRELIMINARY WORK PLAN. In consideration of this Agreement, on behalf of the Members that execute it, TANC shall carry out the Preliminary Work Plan described on Exhibit A, to identify any environmental issues in the prior study for the Los Banos-Gates Project and obtain field survey information to assist in determining the potential need for further environmental analysis, as well as the investigation of funding sources and cooperative arrangements that may be made with theState of California, PG&E, and others concerned about transfer capability through Path 15. 3.TANC MEMBER PARTICIPATION PERCENTAGES. In accordance with the Joint Powers Agreement dated December 10, 1984 and the South of Tesla Agreement between TANC and its SOT Members, dated as of February 14, 1993, the Members that execute this Agreement may be entitled to participate in any project that improves transfer capability between Los Banos and Gates as provided in section 6.2 of the South of Tesla Agreement or as the Members that execute this. Agreement may otherwise determine, as shown by the participation percentages listed on Exhibit B, attached to and incorporated into this Agreement. If a Project Agreement No. 5 is prepared, such agreement shall provide a means by which Members that did not execute this Agreement may participate in Project Agreement Nol 5 after the SOT Members have had an opportunity to elect percentages providing them with sufficient transfer capability on the contemplated upgrade. If a Member that is not a SOT Member executes this Agreement, it shall be entitled to precede any Member that does not execute this Agreement, in electing any available transfer capability, after the SOT Members have made their elections. 4.ASSOCIATED AUTHORIZED ACTIVITIES. By executing this Agreement, the Members that sign it authorize and direct TANC staff to: (a) seek appropriate outside participation and funding in the effort to upgrade Path 15, in order to reduce the potential exposure Of TANC and its Members to expenditures that might otherwise be fairly shared; (b) utilize and rely on the expert services and the assistance of the Treasurer-Controller, for the purposes of separately accounting for, and easing the examination of the means to fund and finance subsequent work leading toward the completion of studies and the presentation of a choice of whether to proceed with improvements that may improve transmission capability between Los Banos and Gates Substations, or between Tracy and Midway Substations;-and (c) call upon counsel and other consultants to advise TANC as may be necessary-and convenient. 5.NO COMMITMENTS. By executing this Agreement, no commitments are made to carry out, approve or perform any particular decision with respect to the Los Banos-Gates Project or the improvement of transfer capability between Tesla and Midway Substations, or Path 15, and nothing contained in this Agreement shall oblige TANC or any of its Members to take any particular action with respect thereto. Unless authorized in a subsequent Project Agreement No. 5 or similar agreement, activities under this Agreement shall cease at the limit of authorized expenditures set out in section I of this Agreement: 7 CITY OF ALAMEDA By: Name: Title: Date: CITY OF HEALDSBURG By: Name: Title: Date: CITY OF LODI By: Name: Title: Date: CITY OF LOMPOC By: Name: Title: Date: MODESTO IRRIGATION DISTRICT By: Name: Title: Date: 8 CITY OF REDDING By: Name: Title: Date: CITY OF ROSEVILLE By: Name: Title: Date: SACRAMENTO MUNICIPAL UTILITY DISTRICT -By: Name: Title: Date: CITY OF SANTA CLARA By: Name: Title: Date: 9 TURLOCK IRRIGATION DISTRICT By: Name: Title: Date: CITY OF UKIAH By: Name: Title: Date: PLUMAS-SIERRA COOPERATIVE RURAL ELECTRIC By: Name: Title: Date: TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Name: Title: Date: 10 PROPOSED INITIAL WORK PLAN FOR CRITICAL PATH WORK ACTIVITIES FOR THE PATH 15 UPGRADE PROJECT EXHIBIT A BACKGROUND During the original planning for the Califomia-Oregon Transmission Project (COTP), TANC and the COTP Participants considered a more expanded transmission project. that would include the COTP plus an additional 500kV transmission line segment between the Los Banos and Gates substations (Path 15). Westem and TANC completed an EIS/EIR for both the COTP and Los Banos-Gates in the mid-1980s. Plans for the Path 15 line segment were deferred when PG&E committed to provide 300 MW of firm, bi-directional transmission service to TANC known as South of Tesla (SOT) Transmission service under the South of Tesla Principles (SOTP). TRANSMISSION IMPROVEMENTS NEEDED Recent Stage 3 emergencies in northern Calffomia, an energy deficiency in California, and congestion on Path 15 have confirmed that a Path 15 upgrade must occur expeditiously. Benefits would be provided to system reliability and to the overall power markets in California. CURRENT SITUATION While the State of California, the Federal Government, the CAISO, PG&E, and others agree upon the need to upgrade Path 15, the issue that remains is how to accomplish the upgrade quickly. PG&E has announced that they plan to build the upgrade and indicates that it will take approximately four to five years. PG&E’s financial abilities to construct the Path 15 Upgrade remain uncertain; more recently the State of California has proposed (via new legislation) to acquire the transmission systems of PG&E and SCE. February 27, 2001 TANC has indicated a willingness to assist, subject to appropriate State financial support. TANC has made it clear that there needs to be financial backing from the State for the Path 15 world, since this project would benefit the entire State. Critical path environmental work on a Path 15 Upgrade must be started almost immediately to avoid missing the appropriate season for field surveys of plants and endangered species, a necessary prerequisite to construction. If missed, construction. could be delayed by approximately one year. SCOPE OF SERVICES There are several activities that TANC (on behalf ofthose members that so choose) should immediately undertake if the goal is to be in a position to energize the Path 15 Upgrade Project by summer 2002. For this preliminary period, TANC staff recommends that the following scope of services should be authorized and completed. Environmental Studies - Field survey environmental work will be undertaken, in coordination with appropriate State and Federal agencies, to identify critical plant and endangered species during the spring season. The existing TANC/Western EIS/EIR information will be updated and utilized wherever possible.. The full NEPA/CEQA EIS/EIR processes will not be commenced until later. Support activities to the field biologists will be provided by staff and other contractors to confirm the appropriate corridors of study. The primary products of this effort will be: 1) identification of any "fatal" environmental flaws for a specific corridor section, due to endangered species or other similar considerations and 2) field survey information that can be used in a subsequent updated Los Banos-Gates EIS/EIR, when prepared and issued in the 2001/2002 timeframe. BUDGET The activities described above will be conducted within 60 days of authorization by TANC, with a total not to exceed budget ceiling of $100,000. Navigant Consulting, Inc. February 27, 2001 will contribute up to $50,000 of this work on an "at risk" basis, using its current TANC billing rates and contractual provisions, in return for TANC’s pledge to make best efforts to secure State or outside funding and reimbursement for all of this work. and to support Navigant Consulting as Project Manager for the Path 15 work. Member contributions toward the remaining $50,000 will be pursuant to a TANC/Member short form agreement (Project Agreement), to be drafted promptly by General Counsel. No funds shall be expended on behalf of any Member without that Member’.s prior agreement for Path 15 work. It is anticipated that this initial budget will be superceded by subsequent work plans or that the TANC Commission may terminate Path 15 work if discussions with the State (and other parties) are not leading to a satisfactory outcome. The General Consultant, acting as staff to TANC, will then perform (or cause to be performed) the work described in the preliminary work plan. TIMELINE Enclosed is a ~ preliminary timeline/cashflow for the construction of the Path 15 Upgrade Project to meet a goal of in-service by summer Of 2002. This is a very aggressive schedule that is premised upon full and rapid cooperation and support, particularly from the State of California and PG&E. February 27, 2001 ooo o ooo L~