HomeMy WebLinkAbout2000-06-12 City Council (11)TO:
City of Palo Alt0
City Manager’s Report
HONORABLE CITY COUNCIL 4
FROM:
DATE:
SUBJECT:
CITY MANAGER
JUNE 12, 2000
DEPARTMENT: UTILITIES
CMR: 280:00
AMENDMENT NO. 1 TO CONTRACT C9109355 WITH
FLYNN & ASSOCIATES FOR ASSISTANCE TO THE CITY
WITH ELECTRIC REGULATORY AFFAIRS FOR A TOTAL
AMOUNT OF $355,000 OVER THREE FISCAL YEARS.
REPORT IN BRIEF
This report requests that Council approve a contract amendment in the amount of
$25,000 for contract C9109355 with Flynn &Associates. The additional funding
is required to assist the City in participating in the Congestion Management
Reform Stakeholder proceedings, a major initiative recently launched by the
California Independent System Operator (ISO), and influencing policy decisions
impacting City’s transmission costs.
CMR:280:00 Page 1 of 6
RECOMMENDATION
Staff recommends that the Council authorize the amendment of contract
C9109355 with Flynn & Associates of an additional. $ 25,000 for a total contract
price over three fiscal years of $355,000, the purpose of which is to provide
consulting services to the City in the areas of transmission congestion
management reform and protection of City’s firm transmission rights.
BACKGROUND
In 1998-99, Flynn & Associates was hired by the City of Palo Alto Utilities (City)
for specialized consulting services in the electric regulatory area (CMR: 120:98).
Flynn & Associates was to assist the City in continuing to prepare for restructuring
of the electricity industry in California by monitoring and influencing regulatory
changes related to the operation of the Independent System Operator (ISO), and
the Power Exchange (PX). Exhibit A of Amendment No. 1 outlines the tasks
involved in providing these services.
DISCUSSION
During the FY 99-00, the pace of regulatory changes initiated by the ISO has
increased and stakeholder processes have been started in major areas such as
transmission access charge, long-term grid planning, and a new generator
interconnection policy. Lately, under direction from the Federal Energy
Regulatory Commission, the ISO has started a stakeholder process in transmission
congestion management reform. Congestion management is a market-based
process the ISO uses to allocate available transmission capacity when the demand
for transmission capacity exceeds its availability, creating congestion. The results
of this stakeholder process may have major impacts on the City’s cost of
transmission and energy prices. Although this work was within the scope of
services of the existing contract, the major level of work required for the
transmission congestion management reform process was not anticipated.. In
addition, PG&E had filed for a major increase in the transmission rate under City’s
Interconnection Agreement, and additionally filed for a reliability service charge
to be borne as part of the Interconnection Agreement..
The time required by the consultant tO perform these additional tasks hasdepleted
the funds approved for this contract, and staff has identified the need for additional
consulting services to augment staff resources and provide strategic advice and
specialized knowledge. A major focus of these additional services will be
influencing regulatory changes related to the congestion management policy of the
ISO and protecting the City from potential congestion charges. Attachment 2
provides further detail of the consultant’s tasks.
CMR:280:00 Page 2 of 6
RESOUoRCE IMPACT
The required additional funds for providing consulting services are available in the
FY 1999-2000 budget.
POLICY IMPLICATIONS
This recommendation is consistent with existing City policy.
ENVIRONMENTAL REVIEW
These services do not constitute a project for the purposes of the California
Environmental Quality Act.
ATTACHMENTS
Attachment 1: Amendment No. 1 to the Contract for consulting services with
Flynn & Associates
Attachment 2: Amendment to the Scope of work for Flynn & Associates.
PREPARED BY:Girish Balachandran, Supply Resources Manager
Shishir Mukherjee, Resource Planner
DEPARTMENT HEAD APPROVAL:
Director ¯
CITY MANAGER APPROVAL:
~IARRISON
Assistant City Manager
CMR:280:00 Page 3 of¯6
Attachme~ !
AMENDMENT NO. ONE TO CONTRACT NO. C9109355
BETWEEN THE CITY OF PALO ALTO AND
FLYNN & ASSOCIATES
This Amendment No. One to Contract No. C9109355 ("Contract") is
entered into ¯ ,2000 by and between the CITY OF PALO ALTO, a
chartered city and a municipal corporation of the State of California ("CITY"),
and FLYNN & ASSOCIATES, a California sole proprietorship, located at 4200
Driftwood Place, Discovery Bay, CA 94514-9267 ("CONTRACTOR").
RECITALS:
WHEREAS, the contract was entered into between the parties for the
provision of consulting services in January 1998; and
WHEREAS, the parties wish to amend the Contract;
NOW, THEREFORE, in consideration of the covenants, terms, conditions,
and provisions of this Amendment, the parties agree:
SECTION 1. The following exhibits to the Contract is hereby amended to
read as set forth in the attachment to this Amendment No. One, which is
incorporated in full by this reference:
a. Exhibit "A" entitled "SCOPE OF SERVICES AND TIME SCHEDULE
FOR FLYNN & ASSOCIATES" amended by addition of TASK 2
(Attachment 2).
b. Exhibit "B" entitled "FEE SCHEDULE".
SECTION 2. Except as herein modified, all other provisions of the
Contract and attached exhibits, and subsequent amendments thereto, shall remain
in full force and effect.
IN WITNWSS WHEREOF, the parties have by their duly authorized
representatives executed this Amendment No. One on ttie date first above written.
CMR:280:00 Page 4 of 6
ATTEST:CITY OF PALO ALTO
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
Mayor
FLYNN & ASSOCIATES
By:
Its:
Taxpayer I.D. No.
APROVED:
City Manager
Director of Utilities
Director of Administrative Services
Risk Manager
Attachments:
EXHIBIT "A":
EXHIBIT "B":
SCOPE OF SERVICES AND TIME SCHEDULE
FEE SCHEDULE
CMR:280:00 Page 5 of 6
Attachment 2
TASK 2: Additional Scope of Services (to Exhibit A) and Time Schedule for
Flynn & Associates:
Flynn & Associates (the CONT .P~kCTOR) will assist the City of Palo Alto (CITY)
to respond to the challenges related to the ongoing transmission congestion
management reform process of the California ISO in areas including, but not
limited to:
The CONTRACTOR will perform technical consulting, legislative and regulatory
services within the overall scope until June 30, 2000 for an additional amount not
to exceed $25,000. The CONTRACTOR will work with the CITY staff and at the
direction of the Project Manager or his designee, and concentrate his activities in
the following areas.
Alternative Proposals for Congestion Management Reform
The CONTRACTOR will review alternative proposals for Congestion
Management Reform under consideration in the ISO Stakeholder proceedings,
specifically the IEP, WPTF, Zonal Forward and Flow Gate proposals, and evaluate
alternative criteria for congestion zone creation and assessment and allocation of
congestion usage charges.
Evaluation of CITY’s Exposure to Congestion/Usage Charges
The CONTRACTOR will evaluate the impact on the CITY of alternate congestion
reform proposals, criteria for zone creation and assessment of congestion/usage
charges, and specifically, any increase in such potential costs. The
CONTRACTOR will try to influence the outcome of the congestion man.agement
reform process by participating in the stakeholder process and advocacy of
CITY’s preferred policies for congestion management reform, and equitable
allocation o£ congestion/usage charges.
Protection of CITY’s Firm Transmission Rights
The CONTRACTOR will provide strategic advice on how to protect CITY’s firm
transmission rights under the Interconnection Agreement with PG&E, and/or the
use of FTRs obtained by conversion of such rights by joining the ISO.
Specifically, the impact of congestion management reform process on CITY’s
firm transmission rights would be considered in the eventuality the Greater San
Francisco Bay Area is designated as a congestion zone.
CMR:280:00 Page 6 of 6
EXHIBIT A
SCOPE OF SERVICES AND TIME SCHEDULE FOR FLYNN & ASSOCIATES
;Electric Utility: Technical consfllting, Legi}late and Regulatory Services
Flynn & Associates (the CONTRACTOt() will assist.the City of PaloAlto (CITY) to
respond to the challenges related to electric industry restructuring in California in areas
including, but not limited to:
Assistance with monitoring and/or influencing any of the ISO/PX, CPUC, FERC and
investor-owned utilifi] (PG&E, SCE, and SDG&E).activities and filings~ ISOiPX
tariff amendments, ’grid management charges, administrative charges, protection of
CITY’S existing contract rights, and participation in the Existing Rights Working
Group. (ERWG). ,
Assistance ii, ith transmission and othe~ !SO and FERC related issues,, including
transmission pricing (transmission.access and usage fees)~ congestion management
and setting, up of congestion zones, firm transmission rights (FTR) auction, and
auction 6f existing rights as FTKs, and transmission owner’s. tariff with spee’ifie
emphasis on San Francisco Bay Area Transmission issues. -.
Assistance w.ith issues’related tomunie, ipal utilities, and C~lifomia Municipal Utilities.
association (CMUA); including those related to jurisdiction, tax-exempt bo.nds,
independence in setting rates, and related to their: San Francisco Bay area
Transmission issues.
.Assistance v~ith interv.entions in selected proceedings before CPUC and FEKC,
.including technical assistance, drafting of testimony, and/or ,analysi~ ~f related.
litigation.directly on behalf of the CITY or in eollaborati0n with other interested
Utilities, or through Transmission Agency of Northern California (TANC), Northern
California Power Agen.cy (NCPA) and/or CMUA. .
Other related areas as needed
TASK 1
The CONTRACTOR will perform technical consulting, legislative and regulatory services
within the overall scope until June 30, 1999. for an amount not to exceed $70,000. The
CONTR,. CTOR will work with the CITY staff ~nd at the direction of the. Project Manager.
or his designee; and concentrate his aetivi.ties in the following areas:
CITY"s Expos!are to Usage Charges/Congestion Fees
The CONTRACTOR willmonitor developments at the ISO which may affect the
exposure. the CITY has to paying marginal priced congestion fees as part of a
transmissiQn cost. Unless and until a formal ISO stakeholder process is developed
covering the adjustment of or designation of zones, this monitoring will be
¯ concentrated in ISO and PG&E stakeholder processes which concern pricing
incentives for new generation and satisfying the must run requirements oft he ISO.
2.Access Fee
The CONTRACTOR will monitor developments at the ISO with respect to the design
of a successor access fee to replace the current utility specific one contained in the
Transmission Ownei"s Tariff (TOO) of each of die thr.ee major investor-owned
utilities.in California.-This may involve participatioia in CMUA, TANC, NCPA and/or
other stakeholder grrup meetings which may be developing positions-on the subject.
In addition, the CONTRACTOR. will assist CITY Staff follow FEP~C deeislons, and
development.s on the current utility specific a’ecess fee which may set precedence for
¯ the future rate..
Ohd Management Charges (GMC)
The CONTRACTOR. will monitor developments at the ISO with respect-to the
unbundling .of the GMC based on the ISO appointed consultant’s report and
negotiations related to revised allocation of GMC on the basis of flows, transactions
and other billing parameters, and its impact on the CITY. This may involve
participation in CMUA, TANC, NCPA and/or-other stakeholder group meeting which
may be developing positions on the stibjeet~
4.Other issues
The CONTRACTOR will monitor other activities at the ISO, PX, FERC, CPUC and
Western which will!may have an effect on the CITY’s ability to maintain an
economical power supply. These include:
The effort to define system units to allow Palo Alto and other municipal
utilities to supply ancillary services in the ISO .markets.
’The effort at the Existing Rights Working Group (ERWG) to allow the
designation of a Metered Subsystem (MSS) and different levels of ISO
membership.
Development of and issuance of Firm Transmission Rights (FTR) by the ISO,
and the possibility tb auction existing, contract rights at the FTR auctions.
do The effect on western of the new ISO/PX environment and Changes to it
which might impact the price and/or the fl~xibility of this source ofpow.er for
Palo Alto.
~In addition to the abbvemonitoring activities, .within the allocated budget, the
CONTRACTOR will also work with the CITY staff to perform analytical studies of the
effect of proposed changes in the areas listed above. On the Same basis, the CONTRACTOR
will develop pbsition papers and assist the CITY in.developing positions on policy issues and
strategies for.dealing with them. : ’
The CONTRACTOR will develop and submit quarterly reports before March 31, 19.99,.and
.]~ne 30, 1999, which’describe the current state of regulatory iSsuesthat are critical to the
CITY and reco n’hnend a strategy for future CITY effoi-ts.
TASK ASSIGNM_I~NT PROCEDURE
The CONTRACTOR will be assigned .various tasks during the duration of the contract, in
addition to Task 1 above. Fortasksbeyond the above Task 1, Wliieh terminates on June 30,
1999, th~ CONTRACTOR will propose future tasks in writing. However, futUre woi:k is
" 0nly authorized under this Contract if such future work is authorized by the City"s Project
Manager.
EXHIBIT .~ B"
"FEE SCHEDULE
The maximum-compensation due and payable to CONTRACTOR,
whose hourly, rates also are set. forth in this Exhibit .~B", is
subject to CITY’s budget of $70,000 in FY 1998~99,: $I~0.;000 in FY-
1999-2000~ and $135,000 in FY 2000-01. pursuant to CITY’s Request
for Proposals No~ 109355 and CITY’s .appropriations for this service-
contract.’ No-representation or warranty is. made ’by C:TY .that
CONTRACTOR shall .be entitled to a.minimum amount of compensat.ion
under this Co~tract.
.Theat.tached bil!ing rates may be adjusted at th~ renewal
.date, if any, of this contract .to reflect the change in rates
officially establishedby the CONSULTANT’s Beard of Directors.
Repr~ducti6n, printing, communications, Computer.
services,-and other m:scellaneous, support?services shall be.billed
at 1.0% (ten percent) of the labor costs .for-the billing period.
This additional ~non-l~b0r" cost-will be"incihded for eachbilling.
peri~d~ -
A’II travel, fo0d~lodging and miscellaneous expenses,
except .automobile mileage, associated., with the provision
services .hereunder shall bebilled at cost. Autom0bile mileage
will be billed at the rate a.pproved by the Internal Revenue
~ervice.
RATE S ¯
Mr. Flynn’s hourly rate for the three. (3
this consulting services project .are as follows:
Year 1 -$190 per hour
Year 2 - $200 per hour
Yea~ 3 - $210 per hour
.year duration of
981224 V/. 0071566