HomeMy WebLinkAbout2000-07-17 City Council (13)TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:JULY 17, 2000 CMR:323:00
SUBJECT:APPROVAL OF RECIPROCITY AGREEMENT WITH PACIFIC
GAS AND ELECTRIC COMPANY
RECOMMENDATION
Staff recommends that the Council authorize the Mayor to execute the Reciprocity
Agreement between Pacific Gas and Electric Company and the City of Pal0 Alto
(Reciprocity Agreement).
BACKGROUND
On April 27, 1998 the City Council approved Staff’s recommendation (CMR: 130:98) to
initiate the sale of energy and energy-related services outside the City’s existing service
territory and authorized the City Manager to execute the Pacific Gas and Electric
Company (PG&E) Energy Service Provider Agreement (PG&E ESP Agreement). The
City intended to provide electric commodity service to selected customers within the
PG&E territory.
Subsequent to Council authorizing staff to initiate energy sales outside the City, PG&E
informed the City that it believes a Reciprocity Agreement between PG&E and the City
is required by Assembly Bill 1890 (AB 1890), which is the enabling law for electric
deregulation in California. AB 1890 states that no electric utility may serve the
customers of another utility unless the other utility is also allowed to serve the customers
of the first utility (i.e. both utilities must be open to direct access). The City and PG&E
disagree on the interpretation of the broad reciprocity provision of AB 1890. PG&E
believes that reciprocity refers to all energy-related services, including metering and
billing. The City believes that reciprocity is limited to the provision of commodity
moving forward, both parties have agreed to disagree on this interpretation and the
present Reciprocity Agreement is a practical solution that meets the needs of both PG&E
and the City.
CMR:323:00 Page 2 of 2
DISCUSSION
Execution of this Reciprocity Agreement is a pre-requisite to signing the PG&E ESP
Agreement. The Reciprocity Agreement outlines the terms and conditions under which
the City can serve PG&E electric customers and under which PG&E can serve the City’s
electric customers. Such terms and conditions include the amount of load within PG&E’s
service territory that the City can serve and requirements for billing and metering of
services. PG&E will continue to provide distribution, billing and metering services
outside the City’s service territory. The City will continue to be the sole provider of
distribution, billing and metering services within the City. Staff believes that the
Reciprocity Agreement will facilitate the implementation of the City’s plans for electric
sales outside of Palo Alto.
RESOURCE IMPACT
There is no resource impact associated with signing this Reciprocity Agreement.
POLICY IMPLICATIONS
Executing the attached Reciprocity Agreement is consistent with present policy regarding
electric sales outside of the City’s service territory (CMR: 130:98).
ENVIRONMENTAL REVIEW
Approval of this contract does not constitute a project under the California Environmental
Quality Act and, therefore, is exempt from the environmental assessment requirement.
ATTACHMENTS
1. Reciprocity Agreement Between Pacific Gas and Electric Company and the City of
Palo Alto
2. CMR 130:98 (w/o attachments)
PREPARED BY:Girish Balachandran,
Supply Resource Group Manager
DEPARTMENT HEAD APPROVAL:
of Utilities
CITY MANAGER APPROVAL:
HARRISON
Assistant City Manager
CMR:323:00 Page 2 of 2
RECIPROCITY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
THE CITY OF PALO ALTO
This Reciprocity Agreement (Agreement), dated
, 2000, is entered into between Pacific Gas and
Electric Company (PG&E) and the City of Palo Alto
(CPA) (collectively,the parties).
RECITALS
A. California Public Utilities Code ~ 9601(c)
provides, in pertinent part~ that: "(c) No local publicly owned
electric utility .. shall sell electric power to the retail
customers of [an] electrical corporation unless the first utility
has agreed to let the second utility make sales of electric power
to the retail customers of the first utility."
B.The parties agree that § 9601(c)’s requirement
for reciprocal access covers all commodity power sales, but do
not agree as to whether or not it covers related Revenue Cycle
Services.
C. The power sales currently contemplated by CPA in
PG&E’s service territory will be made through use of PG&E’s
electric transmission and distribution facilities under PG&E’s
Direct Access (PG&E/DA) program which provides access to those
facilities for that purpose.
D. CPA[s phased Direct Access (CPA/DA) program
currently limits the amount of load an Energy Service Provider
(ESP) can serve and the customer classifications to whom service
can be provided. CPA’s program does not currently allow an ESP
to provide Metering Services (though it does permit the
installation of parallel meters on a trial basis) or authorize
Consolidated Billing Services by the ESP. The PG&E/DA program
has no limits as to volume, customer classification or time for
making the direct access election, allows meter installation and
reading services by the ZSP or its designee, and Consolidated
Billing Services can be provided by the ESP or by PG&E on behalf
of the ESP.
E. CPA currently intends to use PG&E for Metering
Services related to CPA sales to retail customers in PG&E’s
service territory and to either provide Separate Bill~ng Services
or use the Consolidated Billing Services provided by PG&E.
F. Because metering and billing services are a part
of the PG&E D/A program, PG&E interprets § 9601(c) to require
equiv.-.lent reciprocal metering and ~>illing rights. CPA disagrees
and i~.terprets § 9601(c) to extend only to power sales_and not to
meterlng or billing. Both the parties wish to reach a practical
accommodation that will allow direct access and reciprocal direct
access to go forward. .
In consideration of the following covenants, terms, and
conditions, the parties agree as follows:
TERMS AND CONDITIONS
i. Definitions. The following terms when used in
this Agreement with initial capitalized letters or all
capitalized letters, as applicable, shall have the meanings set
forth below in this Section i. The definitions are equally
applicable to both the singular and plural forms of the terms
defined.
"Consolidated Billing Services" means the process by
which the ESP or the utility, in whose service territory the ESP
engages in retail sales, sends a consolidated bill for the
products and services that the ESP and the utility provide to the
customer.
"Direct Access Commodity Service" means electric power
sales made by CPA to customers in PG&E’s service territory as an
ESP using the then current PG&E/DA program, and electric power
sales made by PG&E to customers in CPA’s service territory as an
ESP using the then current CPA/DA program.
"Metering Services" means the meter installation,
maintenance, and related services provided by PG&E and/or CPA.
"Revenue Cycle Services" shall include, but not be
limited to, Metering Services, Consolidated Billing Services, and
Separate Billing Services.
~Separate Billing Services" means the process by which
the ESP and the utility, in whose service territory the ESP
engages in retail sales, send separate bills for the products and
services that each provides directly to the customer.
2. Term. The term of this Agreement shall be
coterminous with the shorter of any CPA agreement as an ESP. with
PG&E or any PG&E agreement as an ESP with CPA, provided, however,
that this Agreement may be terminated at any time pursuant to the
provisions of Paragraphs i0 and Ii below or for breach of any of
its terms and conditions. In the event of termination, any
Direct Access Commodity Service sale contract entered into prior
000710 syn 0071884
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to the termination shall remain in effect and the selling party
shall continue to function as an ESP in the other party’s service
territory to the extent necessary, and only to the extent
necessary, to carry out the terms and conditions of that sale
contract as it existed on the date of termination. This
Agreement shall be binding and effective upon its execution by
the parties; provided CPA shall execute an ESP agreement with
PG&E as a condition to providing Direct Access Commodity Services
as provided for in Paragraph 4; and further provided that PG&E
shall execute an ESP agreement with CPA as a condition to
providing Direct AcceSs Commodity Services as provided for in
Paragraph 7.
3. No Admission. The parties agree that discussions
of, agreement to, or implementation of the Agreement shall not be
construed as an admission or acknowledgement by either party of
any fact, liability, potential liability or responsibility with
regard to ~any matter arising from or related to any dispute
concerning or connected to CPA providing Revenue Cycle Services
within PG&E’s service territory or to PG&E providing Revenue
Cycle Services within CPA’s service territory.
4. CPA Direct Access Commodity Service. Subject to
this Agreement, the PG&E/DA program tariffs and CPA’s ESP
agreement with PG&E, and as otherwise allowed by law, CPA shall
be permitted to provide Direct Access Commodity Service to
customers located in PG&E’s service territory.
5. CPA Metering Service. Subject to the provisions
of Paragraph i0 below, the PG&E/DA program tariff, and CPA’s ESP
agreement with PG&E, CPA will use PG&E to provide Metering
Services related to CPA’s Direct Access Commodity Service.
6. CPA Billing Service. Subject to the provisions of
Paragraph II below, the PG&E/DA program tariff, and CPA’s ESP
agreement with PG&E, CPA will provide Separate Billing Services
and/or secure Consolidated Billing Services from PG&E for CPA
customers in PG&E’s service territory. CPA will pay for any
Consolidated Billing Services in accordance with the PG&E/DA
program tariff.
7. PG&E Direct Access Commodity Service. Subject to
this Agreement, the CPA/DA program, and PG&E’s ESP agreement with
CPA, and as otherwise allowed by law, PG&E shall be permitted to
provide Direct~Access Commodity Service to customers located in
CPA’s service territory, provided that during such time as the
CPA/DA program applies to less than all customers located in
CPA’s service territory, the amount of Direct Access Commodity
Service potentially available to PG&E in CPA’s territory shall be
at least equal to the amount of Direct Access Commodity Service
000710 syn 0071884
then being provided by CPA in PG&E’s service territory with
respect to both quantity and customer classification.
8. PG&E Metering Service. During the term of this
Agreement, the parties agree that they will continue in good
faith to seek to resolve their different Metering Service
policies and procedures in a mutually satisfactory manner. Until
there is a change in CPA’S metering policy, PG&E will use CPA for
Metering Services related to PG&E Direct Access Commodity Service
in CPA’s service territory and, if it so chooses, PG&E will be
permitted to install parallel meters.
9. PG&E Billing Service. At this time CPA represents
that it allows only Separate Billing Services and does not
provide Consolidated Billing Services for sales within its
service territory by either the ESP or by CPA for the ESP.CPA
agrees to further explore the Consolidated Billing Services issue
during the term of this Agreement. Until there is a change in
CPA’s billihg policy, PG&E will provide Separate Billing Services
in CPA’s service territory.
i0. Future Metering Service. This Agreement shall not
restrict CPA’s ability to provide or contract to have an entity
other than PG&E provide Metering Services for CPA Direct Access
Commodity Service customers in PG&E’s service territory upon 60
days written notice to PG&E. However, should CPA elect to pursue
those Metering Service options, CPA agrees that if it does not
allow PG&E to provide or consider equivalent reciprocal Metering
Service options in CPA’s service territory, PG&E may terminate
this Agreement on 60 days written notice to CPA from and after
the date PG&E receives written notice of CPA’s desire to provide
expanded Metering Services.
ii. Future Billing Service. This Agreement shall not
restrict CPA’s ability to choose to perform its own Consolidated
Billing Services for sales within PG&E’s service territory
pursuant to the PG&E/DA program upon 60 days written notice to
PG&E. However, should CPA elect to exercise this option, CPA
agrees that if it does not allow PG&E to provide or consider an
equivalent reciprocal billing option in CPA’s service territory,
PG&E may terminate this Agreement on 60 days written notice to
CPA from and after the date PG&E receives written notice of CPA’s
desire to perform its own Consolidated Billing Services.
12. Information Exchange. The parties agree to
provide customer usage information, on written authorization from
the customer,in accordance with each party’s respective ESP
Agreement.
13.Intentions. This Agreement is a mutual
accommodation;the parties acknowledge that they disagree as to
000710 syn 0071884
whether or not CPA has satisfied all reciprocity requirements of
§9601(c). Should this Agreement be terminated, the parties
.hereby agree that the issue of §9601(c) compliance will be
determined as if this Agreement and the services it describes
never existed and were never provided.
14. Meet and Confer.During the term of this
Agreement, the parties agre’e to meet and confer in a good faith
effort to resolve any matters in dispute.
15. Notices. All notices which shall or may be given
pursuant to this Agreement shall be in writing and delivered by
the United States Postal Service, by means of private express
delivery systems, or facsimile transmission, provided a copy of
the same is followed by delivery by the United States Postal
Service or by private express delivery system, as follows:
City:City of Palo Alto
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94303
Attn.: City Clerk
Copy to:City of Palo Alto
250 Hamilton Avenue
P.O. Box 10250
Palo’Alto, CA 94303
Attn: Girish Balachandran
Telephone: (650) 329-2214
Facsimile No.: (650) 326-1507
PG&E:David E.Rubin
H28E, 2468
123 Mission Street
San Francisco, CA 94105
Copy to:Jack F. Fallin
P.O. Box 7442
San Francisco, CA 94120-7442
Telephone:(415) 973-2883
Facsimile No.: (415) 973-3680
000711 syn 0071884
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16. Entire Agreement. This Agreement is the entire
understanding between the parties as to the subject matter herein
and supercedes all other agreements, written or oral, between the
parties related to the subject matter hereof. This Agreement may
be modified only by written instrument signed by the parties.
ATTEST:CITY OF PALO ALTO
City Clerk Mayor
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:By:
Name:
Assistant City Manager Title:
PACIFIC GAS AND ELECTRIC
COMPANY
Director of Utilities By:
Name:
Title:
Beve ly Z. Alexander
Vice President Rates
and Account Services
Taxpayer Identification No.
94-0742640
(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 capacities is
acceptable)
000710 syn 0071884
STATE OF
COUNTY OF
CERTIFICATE OF ACKNOWLEDGEMENT
(Civil Code ’ 1189)
On ~ /D .., 2000, before me, ~~ ~ ~.~ ,
a Notary Publlc ~in and for said County and State, personally
appeare~u~/~ ~. ~Z~/~ , 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 ~pon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature of Notary Public
000710 syn 0071884
7
3
TO:.HONORABLE CITY COUNCIL
ATTENTION: POLICY AND SERVICES COMMITTEE
FROM:
DATE:
CITY MANAGER
MARCH 23, 1998
DEPARTMENT: UTILITIES
CMR:130:98
SUBJECT:SALE OF ENERGY & ENERGY RELATED SERVICES OUTSIDE
THE CITY’S EXISTING SERVICE TERRITORY
REPORT IN BRIEF
This report requests that Council approve the sale of energy and energy-related services
outside the City’s existing service territory and authorize the City Manager or her designee
to negotiate custom tailored agreements based on the standard contract (Attachment 4) for
such extraterritorial services with customers who are presently being served by the City and
have facilities outside the City. Such contracts would commence after July 1, 1998. The City
Manager will execute the Energy Service Provider Agreement with Pacific Gas and Electric
(Attachment 3). The City Manager or her designee will also explore partnering and alliance
opportunities. This proposal was reviewed and approved by the UAC at its March 4, 1998
meeting.
CMR:130:98 Page 1 of 5
RECOMMENDATION
Staff recommends that the Council approve the sale of energy and energy-related services
outside the City’s existing service territory. Specifically, staff recommends:
Initially, limiting sales to Palo Alto customers with facilities outside the City.
Additional analysis will be completed in 1998 to examine expanding this market
segment
Ensuring that extraterritorial sales will not negatively impact tax-exempt bonds.
Ensuring that limitations of existing contracts are followed when se .rTing load outside
the City.
BACKGROUND
In 1992, the California Public Utility Commission (CPUC) initiated a comprehensive review
of the electric utility industry, followed by a formal rule to restructure the industry in April
1994. In the summer of 1996, a joint conference ofthe California legislature commenced an
intensive series of hearings with respect to electric industry restructuring. These efforts
Culminated in assembly Bill 1890 (AB 1890), which was signed into law by Governor
Wilson on September 23, 1996. Among other things, AB 1890 approved the formation of
two new entities, the Independent System Operator (ISO), which will control and operate
California’s transmission grid and the Power Exchange (PX), .which will facilitate
transactions between buyers and sellers of electricity. Information about AB 1890 was
provided to Council on September 26, 1996 (CMR:411:96).
Currently the City of Palo Alto Utilities (CPAU) serves 100 percent of the Palo Alto electric
and natural gas energy market. Electric and natural gas industry restructuring has prompted
the City to offer customers choice in selection of their energy provider. On March 17, 1997,
Council approved policy guidelines for implementing electric restructuring in Palo Alto. The
three policy guidelines were:
Allow customers within Palo Alto Utility’s distribution territory direct access (DA)
to other energy service providers in a staged plan,
Authorize the utility to collect a transition cost recovery (TCR) charge,
Authorize staff to investigate the administrative and legal issues relating to offering
energy for sale to customers outside its territory.
CMR: 130:98 Page 2 of 5
The third guideline, which is the subject of this report, further states that "the City may
authorize the offering of certain financial and non-financial products and services to its
electricity customers residing outside of the City’s jurisdictional boundaries, provided that
it can be established to the Council’s satisfaction that the interests of the City will be served
by the offering of these products and services and it is legally and administratively feasible
to engage in such transactions."
The DA plan was approved by the Council in December, 1997. On June 19, 1995, the City
Council approved (CMR:229:95; Resolution No. 7522) offering large natural gas customers
the opportunity to purchase gas supply on the open market. On December 1, 1997, the City
Council approved staff’s recommendation (CMR:460:97) to initiate an energy direct access
program for Palo Alto’s electricity customers.
DISCUSSION
There are two goals for pursuing outside sales. The first is utilization of existing resources
for maximum benefit to the City, and the second is customer retention. As of March 31,
1998, most customers in California will be able to choose an energy service provider (ESP).
Because of this, some existing CPAU customers are exploring the potential of consolidating
their load, both in Palo Alto and in other locations in the state. These key customers have
expressed interest in the City serving their facilities outside the City with electricity and
natural gas. Responding to their requests is important in retaining them as customers of the
City.
Staff examined the administrative and legal aspects of offering extraterritorial sales.
Additionally, staff had determined that it is administratively and legally feasible to embark
on such a program.
Attachment 2 provides the economic analysis which shows that extraterritorial sales willl be
economically favorable. In addition, staff believes that the benefits of initially working with
existing customers to secure and build load outside the City will test the necessary processes
and systems for supplying outside energy sales and minimize any risk.
Additionally, staff believes that the CPAU should continue to examine the feasibility of
additional extraterritorial marketing efforts on customers that meet the following criteria:
Customers/partners who are public agencies with service areas contiguous to City’s
service area so that community aggregation partnerships appear to be a natural
CMR:130:98 Page 3 of 5
extension of the City’s community service goal.
Custom~~"s with high growth potential, financial stability and a public image
consistent with CPA’s policies and objectives.
The policy guidelines also stated that staffwould explore opportunities to enhance revenues
by extending its marketing efforts through the use of partnership or strategic alliances with
power marketers to include ~etail customers residing outside the City’s service territory.
Staffhas initiated contact with a few energy marketers but efforts to-date have not come to
fruition. However, staff believes that continuing the process of searching for an appropriate
strategic partner will be beneficial. Final proposals from marketers will be brought to the
City Council for approval.
Due to customers’ preference in wanting one energy provider, staff recommends
authorization of extraterritorial gas and electric sales to existing customer facilities outside
the City.
On March 4, 1998, staff reviewed this proposal with the UAC.
On November 8, 1997, legislation (S. 1483) was introduced in Congress by Senator Frank
Murkowski (R-Alaska). This bill would eliminate the private use limitations on facilities
financed with tax-exempt bonds, for public power systems offering open access. But the
public power systems would have to surrender their fight to issue tax-exempt bonds in the
future and agree to call all their outstanding tax-exempt bonds within a short period. The
specifics of the proposal remain to be explored by the staff and other public power
organizations. Since Congress is in recess until late January 1998, no action has began in the
bill. Public Power organizations believe that there is not a strong interest in Congress on the
bill. Staff will closely follow and oppose this bill along with other public power utilities.
It should be noted that if outside sales are made by CPAU, It will be ensured that tax-exempt
bonds are not negatively impacted.
RESOURCE IMPACT
Existing personnel resources in the City and at Northem Califomia Power Agency (NCPA)
are anticipated to be sufficient to implement this recommendation. The financial impacts
are uncertain and depend on a number of factors including sales volume and profit margin.
At present, staff estimates a $630,000 profit potential over three years. Expenses and
revenues will be tracked and reported periodically to the City Council.
CMR: 130:98 Page 4 of 5
POLICY IMPLICATIONS
This recommendation is consistent with the City Council’s March 17, 1997 policy guidelines
regarding electric restructuring. However, these recommendations also extend to the
provision of natural gas service to customers outside the service territory.
TIME LINE
Extraterritorial contracts will not be signed prior to FY98-99. However, if the City Council
approves staff’s recommendation, staff will initiate negotiations in March, 1998 with
customers for service beginning July 1, 1998.
ENVIRONMENTAL REVIEW
This program does not constitute a project for the purposes of the California Environmental
Quality Act
.Attachments
Attachment 1:
Attachment 2:
Attachment 3:
Attachment 4:
Attachment 5:
Resolution approving the Initiation of an Extraterritorial Energy Sales
Program
Economic Analysis
PG&E ESP Agreement
Standard Contract
UAC Draft Minutes
Prepared By:Girish Balachandran, Manager, Supply Resources
Tom Habashi, Assistant Director of Utilities
Approved By:
City Manager Approval:
Manager
CMR:130:98 Page 5 of 5