HomeMy WebLinkAbout2000-10-16 City CouncilTO:
ATTENTION:
FROM:
City of Palo Alto.
City Manager’s Repo_lt-
HONORABLE CITY COUNCIL
FINANCE COMMITTEE
CITY MANAGER DEPARTMENT: UTILITIES
CMR:378:00
DATE:
TITLE:
OCTOBER 16, 2000
APPROVAL OF CONTRACT 00-SNR-00336: UNITED
STATES DEPARTMENT OF ENERGY WESTERN AREA
POWER ADMINISTRATION CENTRAL VALLEY
PROJECT, CALIFORNIA CONTRACT FOR ELECTRIC
SERVICE BASE RESOURCE WITH CITY OF PALO ALTO
REPORT IN BRIEF
Palo Alto’s contract with the Western Area Power Administration (Western) is the
cornerstone of the City’s electric supply portfolio. The current contract expires at the end
of 2004. In the post-2004 period, the contract Western offers its electric customers such
as Palo Alto will be very different. This staff report seeks Council approval for a post-
2004 "Base Resource Contract" which will serve as a building block to enter into other,
more specialized contracts. If the City of Palo Alto does not enter into the Base Resource
Contract by December 31, 2000, it will not be eligible for any other energy resources
from Western after the end of 2004.
The energy provided through this Base Resource Contract is derived primarily from a
hydroelectric source and will, therefore, vary with water supply conditions. This
variation leads to risks that are not present in the current contract, in which a third party
provides the energy above that produced by the hydroelectric facilities. Even with the
increased uncertainty, staff estimates the value of the Base Resource Contract to exceed
its cost by about a factor of three.
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RECOMMENDATION
Staff requests that Council approve execution of the Western Base Resource Contract
(Contract 00-SNR-00336: United States Department of Energy Western Area Power
Administration Central Valley Project, California Contract for Electric Service Base
Resource with City of Palo Alto).
BACKGROUND
Palo Alto’s existing 40-year power supply contract with Western expires on December
31, 2004. Currently, the power supply from the Federal Central Valley Project (CVP) is
combined with the resources of the Pacific Gas and Electric Company (PG&E) through
an integration contract. The integration agreement with PG&E will also expire on
December 31, 2004. After an extensive public process, Secretary of Energy Bill
Richardson signed Western’s Post-2004 Marketing Plan (Plan) on June 10, 1999. The
Plan was made public in the Federal Register in late June 1999. The Plan allows for
existing customers, such as Palo Alto, to receive power allocations after 2004 based on
their existing entitlements.
On August 18, 1999, Palo Alto entered into Amendment Number One to its Western
contract, giving Palo Alto rights to negotiate post-2004 contract(s) in accordance with the
Plan (CMR:316:99). Since then, the staffs of Palo Alto, other Western customers and
Western have been working together to formulate a Base Resource Contract which
defines the source and share of electric power that Western will provide its customers
including Palo Alto. On June 30, 2000, Western finalized the Base Resource Contract.
Palo Alto and all other Western Preference Customers have until December 31, 2000 to
sign the contract. The terms of the new Base Resource contract are substantially different
than the existing contract, primarily due to the lack of an integration agreement.
The staffs of Palo Alto and other Western customers will work with Western on the
details of implementing various parts of the Base Resource Contract during the next two
years. During that same time period, Western and its customers will pursue custom
contract development and execution.
DISCUSSION
Base Resource Description
Western’s Base Resource under the Plan is a very different product than the current
Western Commercial Firm product. Currently, Western provides a capacity and energy
allocation with minimum and maximum hourly, monthly, and yearly entitlements. Under
the Plan, beginning in 2005, each customer will commit to pay a percentage of Western’s
costs in exchange for the same percentage of the output from the Base Resource.
Therefore, the Base Resource is essentially a slice of the available hydroelectric resource.
As such, it is a nonfirm product and is subject to uncertain water supply conditions.
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Supplemental energy or capacitY will be available in addition to the Base Resource from
Western. Such additional supplies or services must be contracted from Western through
a custom product agreement. If customers do not enter into an agreement for the Base
Resource, they are not eligible for any other Western products or services.
The Base Resource, as described in the Plan, is the resource "available after meeting the
requirements of Project Use [water pumps for the Central Valley Project], and First
Preference customers [customers from the "counties of origin", where the CVP Trinity
and New Melones dams are located] and any adjustments for maintenance, reserves,
transformation losses and certain ancillary services". The generation designated as the
Base Resource consists of: 1) CVP generation, which provides the majority of the energy
produced; 2) a purchase power contract for 50 megawatts (MW) of peak load hour,
market-priced energy that terminates in 2014; and 3) generation from the Washoe project,
which is a small project located in northeast California producing an average annual
generation of 10 gigawatt-hours (GWh).
The estimated average annual generation of the CVP is 3,600 GWh after Project Use
obligations are met. CVP generation is highly dependent on water supply conditions.
During a dry year, CVP generation is expected to produce 2,100 GWh/year. A wet year
is expected to produce 5,100 GWh/year. CVP generation is also dependent on
environmental constraints and water delivery obligations to CVP water customers.
Palo Alto’s Base Resource Allocation and Cost
Since Palo Alto’s Base Resource allocation is about 11.6 percent, the energy available
should be approximately 440 GWh/year in an average year. Annual energy available to
Palo Alto in a dry and wet year is expected to be 265 GWh and 615 GWh, respectively.
This compares to Palo Alto’s energy entitlement of 1100 GWh/year in the existing
contract and Palo Alto’s fiscal year 1999-00 load of approximately 1200 GWh. Staff is
exploring many options to fill the gap created after 2004. Options include relying on the
market for all or part of the needs, purchasing the output from a gen.eration plant, owning
part of a generation plant, or siting small generation plants near or inside Palo Alto.
Western’s Base Resource will be a cost-based resource and is expected to cost about $50
million/year. This means that Palo Alto’s 11.6. percent obligation will be about $6
million/year regardless of how much of the Base Resource is available and utilized by
Palo Alto. Thus, in an average hydrologic year, the cost of Base Resource energy is
expected to be about $14 per megawatt-hour (MWh). In a dry year, the cost of Base
Resource energy could be $23/MWh. Extremely dry years could increase costs even
more. A wet year would yield more energy, at an estimated cost of only $10/MWh.
These costs compare to the estimated market value of energy for the period 2004-24 of
approximately $45-50/MWh. Thus, the Base Resource energy is expected to cost only 30
percent of the cost of energy from the open market. (For comparison purposes, the cost
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of firm energy under Palo Alto’s existing contract with Western is $18/MWh in fiscal
year 1999-00 and $30/MWh in fiscal year 2000-01.)
Base Resource Contract Elements
The main features of the Base Resource contract include:
1.Term: The contract term is for 20 years starting on January 1, 2005.
2.Customer communication: Given the hydrologic uncertainty that the Base
Resource introduces, Western commits to providing its customers energy and
capacity production estimates on an annual, monthly, and weekly basis. This will
assist customers in their planning for the succeeding twelve-month period.
3.Daily scheduling: Customers will be able to submit daily preferred schedules to
fully use their Base Resource allocations subject to hourly minimum and
maximum constraints designated by Western.
4.Exchange program: Western will establish two exchange programs - an hourly
and a seasonal program. Details about these programs are not available at this
time and will be developed over the next two years by Western and its customers.
5.Rates: Customers are obligated to pay their percentage share of Western’s costs
regardless of Base Resource production or whether they are able to use their
allocation of Base Resource.
6.Adjustment to Base Resource allocation: To prevent sale to others for resale,
Western may adjust a customer’s Base Resource allocation if it finds that the
customer’s load is less than its Base Resource energy.
7.2015 Resource Pool: A pool of resources for the 2015-2024 period will be
developed by Western and will require adjustments of all customers’ Base
Resource allocations. The pool is needed because the purchase power contract
that makes up part of the Base Resource will terminate at the end of 2014 and, at
the same time, the Sacramento Municipal Utility District will be required to give
up some energy according to its settlement agreement with Western. The effect on
Palo Alto of the creation of this pool is expected to be minor.
8.Changes in Organizational Status: Western can adjust its obligation under the
contract in the event of certain organizational changes.
Risks of the Base Resource
Since Base Resource allocations are take-or-pay and subject to water supply conditions,
Palo Alto will be taking on a greater level of risk than the existing contract. However,
staff believes that the cost of the Base Resource will be low relative to other alternatives
available in the wholesale electric market and that the risk is worth accepting at this time.
Plans to mitigate and control the risk will be a major area of work effort for the next two
years as Western and its customers shape Western’s custom product offerings.
Other risks (besides hydrologic risks) associated with the Base Resource agreement
include the likelihood of generation outages, Western cost control, and regulatory risk.
Since the take-or-pay nature of the contract guarantees Western that its costs will be
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covered, there is some concern that Western has no economic incentive to work with the
Bureau of Reclamation (the owner of the CVP dams and generation facilities) to optimize
production~ from the project. In addition, there is always a threat of regulatory or
legislative changes that could reduce the economic attractiveness of the project. The only
termination provision available to Palo Alto is specified in the General Power Contract
Provisions as follows: "Palo Alto may terminate by notifying Western in writing within
ninety days of a rate adjustment. Western can make rate adjustments as it sees fit."
RESOURCE IMPACT
The cost of this contract is estimated at approximately $6 million per year. Approval of
this contract has no increased resource impact since a major commitment to the
management of the Western contract is already accounted for in current and future
Utilities plans and budgets. Staff anticipates that signing this contract will continue to
keep Palo Alto’s electric utility’s costs below market costs.
POLICY IMPLICATIONS
Executing this contract is consistent with current utility policies supporting the pursuit of
low-cost energy supplies.
TIMELINE -
Palo Alto has until December 31, 2000 to sign the Base Resource Contract. If Council
authorizes Palo Alto to enter into the Base Resource Contract, the next steps will be to
look into alternative ways to fill the energy hole left by the expiration of the existing
PG&E/Western integration agreement. The analysis will include the expected annual and
monthly Base Resource output in average, dry, and wet years, the expected annual cost,
and the alternative resources and agreements available to Palo Alto.
ENVIRONMENTAL REVIEW
Approval of the Western Base Resource Contract does not constitute a project under the
California Environmental Quality Act and, therefore, is exempt from the environmental
assessment required under that act.
ATTACHMENT
Attachment A: Contract 00-SNR-00336: United States Department of Energy Western
Area Power Administration Central Valley Project, California Contract
for Electric Service Base Resource with City of Palo Alto (without
Appendix A - "the Green Book")
CMR:378:00 Page 5 of 6
Attachment B:Resolution of the Council of the City of Palo Alto Approving the
Execution of a Contract for Electric Service Base Resource 00-SNR-
00336 with the United States Department of Energy Western Area
Power Administration
PREPARED BY: Jane Ratchye, Senior Resource Planner
REVIEWED BY: Girish Balachandran, Supply Resource Group Manager
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
ULRICH
tor of Utilities
AUDREY SEYMOUR
Assistant to the City Manager
CMR:378:00 Page 6 of 6
Contract 00-SNR-00336
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADMINISTRATION
CENTRAL VAiLEY PROJECT, CALIFORNIA
CONTRACT FOR ELECTRIC SERVICE
BASE RESOURCE
WITH
CITY OF PALO ALTO
Contract 00-SNR-00336
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADMINISTRATION
CENTRAL VALLEY PROJECT, CALIFORNIA
CONTRACT FOR ELECTRIC SERVICE
BASE RESOURCE
WITH
CITY OF PALO ALTO
Section Table of Contents
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PREAMBLE ..................... ......................................................................................1
EXPLANATORY RECITALS ................................................................................1
AGREEMENT .......................................................................................................2
TERMINATION OF AMENDMENT FOR RIGHT TO PURCHASE AFTER 2004.. 2
EFFECTIVE DATE AND .TERM OF CONTRACT ........; ........................................3
DEFINITION OF TERMS ......................................................................................3
BASE RESOURCE ESTIMATES AND AVAILABILITY FORECAST ....................6
ELECTRIC SERVICE FURNISHED BY WESTERN .............................................8
DELIVERY ARRANGEMENTS ........................................................, .................10
SCHEDULING PROCEDURES AND PROTOCOLS ..........................................11
EXCHANGE PROGRAM ....................................................................................11
INDEPENDENT SYSTEM OPERATOR OR REGIONAL TRANSMISSION
ORGANIZATION ................................................................................................12
WESTERN RATES ...................~ .........................................................................13
INTEGRATED RESOURCE PLAN .....................................................................13
ADJUSTMENT OF BASE RESOURCE PERCENTAGE ....................................13
2015 RESOURCE POOL ...................................................................................15
METERING AND POWER MEASUREMENT RESPONSIBILITIES ...................15
CHANGES IN ORGANIZATIONAL STATUS .: ......................................... ...........15
BUSINESS PROTOCOLS ..................................................................................17
ENFORCEABILITY .............................................................................................17
GENERAL POWER CONTRACT PROVISIONS ................................................18
APPENDIX MADE PART OF CONTRACT .........................................................18
EXHIBITS MADE PART OF CONTRACT ..........................................................18
SIGNATURE CLAUSE
RESOLUTION/CERTIFICATE
Contract 00-SNR-00336
SCHEDULE OF RATES
GENERAL POWER CONTRACT PROVISIONS
EXHIBIT A - BASE RESOURCE PERCENTAGE AND POINT(S) OF DELIVERY
EXHIBIT B - EXCHANGE PROGRAM
EXHIBIT C - SCHEDULING PROCEDURES AND PROTOCOLS
EXHIBIT D - REGULATION AND RESERVES
APPENI~IX A - GREEN BOOK
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Contract 00-SNR-00336
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADMINISTRATION
CENTRAL VALLEY PROJECT, CALIFORNIA
CONTRACT FOR ELECTRIC SERVICE
BASE RESOURCE
WITH ¯
CITY OF PALO ALTO
1.PREAMBLE: This Contract is made this day of
2000, pursuant to the Acts of Congress approved June 17, 1902, (32 Stat. 388);
August 26, 1937, (50 Stat. 844); August 4, 1939, (53 Stat. 1187); and August 4, 1977,
(91 Stat. 565); and Acts amendaiory or supplementary to the foregoing Acts; between
the UNITED STATES OF AMERICA (United States), acting by and through the
Administrator, Western Area Power Administration, Department of Energy’, hereinafter
called Western, represented by the officer executing this Contract, or a duly appointed
successor, hereinafter called the Contracting Officer; and CITY OF PALO ALTO, a
municipality, hereinafter called the Contractor or Palo Alto, its successors and assigns;
each sometimes hereinafter individually called the Party, and both sometimes
hereinafter collectively called the Parties.
EXPLANATORY RECITALS:
2.1 Western markets the surplus generation from, and operates a high-voltage
transmission system as a part of, the Central Valley Project (CVP).
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2.2 Western and the U.S. Department of the Interior, Bureau of Reclamation
(Reclamation), have agreed to work together to efficiently serve Project Use and
preference loads.
2.3 On June 25, 1999, Western’s final 2004 Power Marketing Plan (Marketing
Plan) was published in the Federal Register (64 FR 34417). The Marketing Plan
sets forth how Western’s Sierra Nevada Region will market the power generated
from the CVP and Washoe Project.
2.4 Western has an existing purchase power contract to supplement CVP and
Washoe.Project generation.
2.5 Western is willing to provide and Palo Alto desires to purchase a
percentage of the Base Resource consistent with the Marketing Plan.
2.6 Under the Marketing Plan, Western requires that all Western power be
scheduled in accordance with the applicable control area operator requirements.
3. AGREEMENT:
The Parties agree to the terms and conditions set forth herein.
4. TERMINATION OF AMENDMENT FOR RIGHT TO PURCHASE AFTER 2004:
Amendment 1 to Contract DE-MS65-85WP59007, between Palo Alto and Western shall
terminate upon the effective date of this Contract.
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EFFECTIVE DATE AND TERM OF CONTRACT:
5.1 This Contract shall become effective on the date of execution and shall
remain in effect until midnight of December 31,2024, subject to prior termination
as otherwise provided for herein.
5.2 The date of initial service under this Contract is January 1, 2005.
6.DEFINITION OF TERMS:
As used herein, the following terms whether singular or plural, or used with or without
initial capitalization, shall have the following meanings:
6.1 "Base Resource" means CVP and Washoe Project power output and any
purchases made under the Enron Contract, as determined by Western to be
available for marketing, after (1) meeting the requirements of Project Use and
First Preference Customers, and (2) any other adjustments required for
maintenance, regulation, reserves, transformation losses, and ancillary services.
6.2 "Base Resource Operating Capability" means that portion of the Maximum
Operating Capability that Western determines to be available to Customers in
any hour.
6.3 "Capacity" means the instantaneous electrical capability of a generator,
transformer, transmission circuit, or other equipment.
6.4 "Central Valley Project" means the multipurpose Federal water and power
project extending from the Cascade Range in northern California to the plains
along the Kern River, south of the City of Bakersfield.
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6.5 "Custom Product" means a combination of products and services,
excluding provisions for load growth, which may be made available by Western
per Customer request, using the Customer’s Base Resource and supplemental
purchases made by Western.
6.6 "Customer" means an entity that is qualified under Reclamation law to
receive Western Power and has a Base Resource Contract with Western.
6.7 "Enron Contract" means Contract 87-SAO-30002, as amended, which
provides for Western to purchase power from Enron Power Marketing, Inc., to
supplement CVP and Washoe Project generation. The Enron Contract
terminates December 31,2014.
6.8 "Energy" means the actual electrical output Of a generator over a specified
period of time; electric energy is usually measured in kilowattho~rs or
megawatthours.
6.9 "First Preference Customer" means a Customer wholly located in Trinity,
Calaveras, or Tuolumne Counties, California, as specified under the Trinity River
Division Act (69 Stat. 719) and the New Melones provisions of the Flood Control
Act of 1962 (76 Stat. 1173, 1191-1192).
6.10 "FERC" means the Federal Energy Regulatory Commission or its
successor.
6.11 "Hourly Base Resource Schedule" means that portion of the Base
Resource Operating Capability that Western declares as the final scheduled
Base Resource energy for Palo Alto for each hour of the operating day.
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6.12 "ISO" means the California Independent System Operator or its
successor.
6.13 "NERC" means the North American Electric Reliability Council or its
successor.
6.14 "Marketing Plan" means Western’s final 2004 Power Marketing Plan for
the Sierra Nevada Region.
6.15 "Maximum Operating Capability" means the maximum electrical capability
from CVP generation and the Enron Contract available to produce energy and/or
provide ancillary services in any one or more hours.
6.16 "Minimum Base Resource" means the amount of Base Resource energy
generated each hour as a result of CVP minimum water release plus purchases
under the Enron Contract.
6.17 "Operating Reserves" means the combination of spinning and non-
spinning reserves required to meet WSCC, NERC, and the control ~rea
operator’s requirements for reliable operation of the power system.
6.18 "Primary Marketing Area" means the area which generally encompasses
northern and central California extending from the Cascade Range to the
Tehachapi Mountains, and west-central Nevada.
6.19 "Power" means ~lectric ca’pacity and energy.
Contract 00-SN R-00336 5
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6.20 "Project Use" means the power used to operate CVP or Washoe Project
facilities in accordance with authorized purposes and pursuant to Reclamation
law.
6.21 "RTO" means regional transmission organization, which is an organization
that meets the minimum characteristics and performs the minimum functions
specified in FERC Order 2000, as that order may be amended or superseded.
6.22 "Regulation" means the service provided by generating units equipped
and operating with automatic generation control which will enable such units to
respond .to direct control signals in an upward or downward direction to match, on
a real time basis, demand and resources, consistent with WSCC, NERC, and the
control area operator’s criteria.
6.23 "Scheduling Coordinator" means an entity that is responsible for providing
hourly load and resource schedules to the control area operator, in accordance
with a FERC-approved tariff.
6.24 ’~Vashoe Project" means the Federal water project located in the
Lahontan Basin in west-central Nevada and east-central California, as described
in the Marketing Plan.
6.25 ’~tVSCC" means the Western Systems Coordinating Council or its
successor.
BASE RESOURCE ESTIMATES AND AVAILABILITY FORECAST:
7.1 Appendix A describes the availability of the Base Resource in terms of
estimated energy and capacity production. Appendix A should be used for long-
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term planning purposes only.
actual operating conditions.
It should not be considered representative of
7.2 Beginning in 2004, on or before April 30th of each year, Western will
provide to Palo Alto a forecast of the availability of the Base Resource for the
applicable twelve-month period. The forecast will provide the following
information concerning the Base Resource:
7.2.1 A declaration of the anticipated water year type;
7.2.2 Estimates of Base Resource Operating Capability and energy, for
the period April 1st through September 30th of the current year, given the
Enron Contract, actual reservoir levels, snow pack, and estimated runoff
as of April 1st;
7.2.3 Estimates of the Base Resource Operating Capability and energy,
for the period October 1st of the current year through March 31~t of the
following year, based on historic weather patterns, projected weather
patterns, and existing conditions;
7.2.4 Maximum Operating Capability of the CVP for each month;
7.2.5 Purchases underthe Enron Contract and generation from the CVP
and Washoe Project for each month;
7.2.6 Energy required for estimated Project Use loads, First Preference
Customers’ loads, and any ancillary service requirements for each month.
The forecast will also include the estimated amount of Base Resource
energy not available due to scheduled maintenance.
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7.3 By the end of each month, Western will provide to Palo Alto a monthly
Base Resource forecast that will contain the amounts of Base Resource
Operating Capability and energy estimated to be available for each month on a
rolling twelve-month basis, based on 90, 50, and 10 percent exceedence levels.
The monthly forecast will contain the following information:
7.3.1 Maximum Operating Capability of the CVP for each month;
7.3.2 Energy required for estimated Project Use loads, First Preference
Customers’ loads, and any ancillary service requirements. The forecast
will also include the estimated amount of Base Resource energy not
available due to scheduled maintenance.
7.4 By Friday of each week, Western will provide to Palo Alto a weekly Base
Resource forecast that will contain estimated amounts of Base Resource
Operating Capability and energy to be available for the next week based on the
Enron Contact and anticipated CVP operations. The weekly forecast will set
forth the energy required for estimated Project Use loads, First Preference
Customers’ loads, and any ancillary services requirements. The forecast will
also include the estimated amount of Base Resource energy not available due to
scheduled maintenance.
7.5 Western shall make all reasonable efforts within its control to ensure that
the forecasted Base Resource will be available.
ELECTRIC SERVICE FURNISHED BY WESTERN:
8.1 Palo Alto will be entitled to receive a percentage of the Base Resource as
set forth in Exhibit A, attached hereto and made a part hereof.
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8.2 The estimated amount of energy available to Palo Alto during any given
time period shall be determined by multiplying its Base Resource percentage by
the total amount of Base Resource energy available during that period.
8.3 The minimum amount of energy Palo Alto will be required to schedule for
each hour shall be determined by multiplying its Base Resource percentage by
the Minimum Base Resource, unless otherwise agreed to by Western. However,
if Palo Alto does not have sufficient load to take its percentage of the Minimum
Base Resource, any excess energy shall be made available to Western for the
hourly exchange program as described later in this Contract under Section 11
and Exhibit B.
8.4 The maximum amount of energy Palo Alto may schedule in any hour shall
be determined by multiplying its Base Resource percentage by the Base
Resource Operating Capability. However, Palo Alto may schedule energy in
excess of this maximum, if approved by Western, to accommodate purchases or
exchanges from the seasonal or hourly exchange program.
8.5 Palo Alto will be entitled to the benefit of available regulation and
operating reserves from the CVP in proportion to its Base Resource percentage.
The method in which the benefits of regulation and operating reserves will be
provided will be determined prior to the date of initial service and set forth in
Exhibit D attached hereto.
8.6 Western’s obligation to pro~tide Palo Alto’s Base Resource is limited to the
actual CVP generation and imports under the Enron Contract available on a real-
time basis. Western shall have no obligation to replace any Base Resource that
is unavailable due to scheduled maintenance, system emergencies, forced
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outages, or other constraints. Any costs incurred by either Party as a result of
deviations between actual and scheduled Base Resource energy shall be the
responsibility of Paio Alto. Western will notify Palo Alto as soon as reasonably
practicable of any situation that will impact-the availability of the Base Resource,
and will modify schedules accordingly, on a pro-rata basis.
8.7 Due to the variable nature of the Base Resource, Western may provide a
Custom Product upon Customer request. Any Custom Product will be the
subject of a separate contractual arrangement.
DELIVERY ARRANGEMENTS."
9.1 Western will make Palo Alto’s Base Resource available at the generator
bus or such other point(s) as the Parties may mutually agree, as specified iri
Exhibit A. If requested by Palo Alto, Western will deliver that portion of Palo
Alto’s Base Resource energy from CVP generation that is directly connected to
Western-owned transmission facilities, to Pal0 Alto’s facilities that are directly
connected to Western-owned transmission facilities..The rates and terms of this
service shall be in accordance with Western’s then-current open access
transmission tariff.
9.2 Palo Alto must provide written notification to Western by July 1,2004,
demonstrating that it has arranged for delivery of its Base Resource energy to its
load. Such notification shall include both transmission and distribution level
arrangements, as applicable. Western shall have no obligation to make Base
Resource available to Palo Alto if delivery arrangements are not in effect.
However, Palo Alto shall not be relieved of its obligation to pay its percentage
share of the Base Resource during the time in which delivery arrangements are
not in effect.
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10.SCHEDULING PROCEDURES AND PROTOCOLS;
10.1 All energy furnished by Western to Palo Alto will be provided on a
scheduled basis. Palo Alto agrees to abide by the FERC-approved scheduling
procedures and protocols, as set forth in Exhibit C herein. The Parties recognize
that the scheduling procedures and protocols may require modification from time-
to-time to reflect updated operating procedures that may become applicable to
the Parties. In such event, the Parties shall mutually agree to make the
appropriate modifications to Exhibit C.
10.2 In the event that Palo Alto does not abide by the protocols and procedures
made effective by FERC and applicable to Western, and Western incurs costs as
a result, Palo Alto agrees to pay all such costs.
11.EXCHANGE PROGRAM:
11.1 Western will establish and manage an exchange program to allow all
Customers to fully and efficiently use their Base Resource percentage. The
exchange program is a mechanism to:
11.1.1 Make available to Western, for provision to other Customers, any
Base Resource energy a Customer cannot use on a pre-scheduled basis
due to insufficient load;
11.1.2 Help mitigate the costs incurred by a Customer for the power it is
obligated to pay for, but may not be able to use..
11.2 The exchange program will consist of a seasonal exchange program and
an hourly exchange program.
11.2.1 Under the seasonal exchange program, Palo Alto may elect to
make available to Western that portion of its Base Resource percentage
Contract 00-SNR-00336 11
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that it is unable to use due to insufficient load. Palo Alto, through
Western, will be able to exchange its unusable Base Resource percentage
with other Customers. Any Customer may submit a request to Western to
exchange or purchase energy through the seasonal exchange program.
11.2.2 Under the hourly exchange program, all Base Resource energy in
excess of a Customer’s load will be retained by Western and offered by
Western for sale to other Customers. Any Customer may submit a
request to Western to purchase energy that is made available to the
hourly exchange program.
11.3 The exchange program procedures are set forth in Exhibit B, attached
hereto, and such procedures shall apply to all Customers that participate in the
exchange program.
11.4 Exchanges of the Base Resource between Palo Alto and others, outside
of the Western-managed exchange program, or other Western-managed
program, is prohibited.
12. INDEPENDENT SYSTEM OPERATOR OR REGIONAL TRANSMISSION
ORGANIZATION:
The Parties understand that Western may join the ISO or an RTO. In the event
Western either joins or is required to conform to the protocols of an ISO or RTO, the
Parties shall mutually agree to make any protocol changes to Exhibit C to this Contract
to conform to the terms and conditions required by an ISO or RTO and made effective
by FERC. In the event that Palo Alto does not abide by the protocols made effective by
FERC aad applicable to Western, and Western incurs costs as a result, Palo Alto
agrees to pay all such costs.
Contract 00-SN R-00336 12
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13.WESTERN RATES:
13.1 The Base Resource will be provided on a take-or-pay basis. Palo Alto will
be obligated to pay its Base Resource percentage share of Western’s costs,
whether or not it uses its full Base Resource percentage.
13.2 Palo Alto shall pay for the electric service furnished hereunder in
accordance with the rates, charges, and conditions set forth in the CVP schedule
¯ of rates applicable to the Base Resource, effective January 1,2005, or any
superseding rate schedule.
14.INTEGRATED RESOURCE PLAN:
In accordance with the Energy Policy Act of 1992, Paio Alto is required to meet the
requirements of Western’s Energy Planning and Management Program (EPAMP). To
fulfill the requirements of EPAMP, Palo Alto must develop and submit an integrated
resource plan or alternative report, as applicable. Specific EPAMP requirements are set
forth in the Federal Register at (64 FR 62604) and may be found on Western’s website.
Failure to comply with Western’s EPAMP requirements may result in penalties as
specified therein. Palo Alto understands that Western may re-evaluate its EPAMP
requirements and change them from time-to-time as appropriate. Such change~ will be
subject to a public process and publication in the Federal Register.
15.ADJUSTMENT OF BASE RESOURCE PERCENTAGE:
15.1 Prior to the date of initial service, Western may adjust Palo Alto’s Base
Resource percentage, as set forth in Exhibit A herein, if Western determines that
Paio Alto’s extension contract rate of delivery is greater than its actual usage, as
specified in the Marketing Plan.
Contract 00-SNRo00336 13
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15.2 After the date of initial service, Western may adjust Palo Alto’s Base
Resource percentage under any of the following conditions:
15.2.1 Palo Alto sells energy associated with its Base Resource
percentage to another entity for resale by that entity;
15.2.2 Palo Alto uses the energy associated with its Base Resource
percentage to serve loads outside of the Sierra Nevada Region’s Primary
Marketing Area;
15.2.3 Palo Alto’s annual energy associated with its Base Resource
percentage, is ten percent greater than its actual annual energy usage.
15.3 If Western determines that Palo Alto has met any of the conditions in
Section 15.2 above, Western will take the following steps:
15.3.1 Notify Palo Alto of the nature of the concern;
15.3.2 Analyze Palo Alto’s usage of the energy associated with its Base
Resource percentage and determine if an adjustment is necessary on a
case-by-case basis, with due consideration of any circumstance that may
have temporarily altered Palo Alto’s energy usage; ~,
15.3.3 Provide a 90-day written notice of any adjustment, if an
adjustment is deemed necessary; and
15.3.4 Reduce or rescind Palo Alto’s Base Resource percentage
permanently on the effective date specified in the notice.
Contract 00-SNRo00336 14
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16.2015 RESOURCE POOL:
Western will reduce Palo Alto’s Base Resource percentage to establish the 2015
Resource Pool. Western will recalculate the percentages for all Customers pursuant to
the Marketing Plan. The new Base Resource percentage will be set forth in a revised
Exhibit A, effective January 1, 2015.
17.METERING AND POWER MEASUREMENT RESPONSIBILITIES:
Palo Alto shall be responsible for electric power metering equipment requirements and
power measurement data associated with the use of Western power under this Contract
as follows:
17.1 Unless previously furnished and installed by Western, Palo Alto shall
furnish, install, operate, maintain, and replace, meters and associated metering
equipment as required by the appropriate jurisdictional authority for deliveries of
Western power scheduled to each delivery point on the Western grid, the ISO
controlled grid, a utility distribution company grid, or other electrical system as
may be applicable.
17.2 Palo Alto shall measure power deliveries and provide certified settlement
quality metering data to Western as requested. It is generally contemplated that
Western will require this data on a monthly basis.
18.CHANGES IN ORGANIZATIONAL STATUS:
18.1 If Palo Alto changes its organizational status or otherwise changes its
obligation to supply electric power to preference loads, Western reserves the
right to adjust Western’s power sales obligations under this Contract, as Western
deems appropriate. Changes in organizational status include but are not limited
to:
18.1.1 Merging with another entity;
Contract 00-SNR-00336 15
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18.1.2 Acquiring or being acquired by another entity;
18.1.3 Creating a new entity from an existing one;
18.1.4 Joining or withdrawing from a member-based power supply
organization; or
18.1.5 Adding or losing members from its membership organization.
18.2 For the purposes of this Section 18, a member is any preference entity
that is included in a membership, which has the responsibility of supplying power
to the end-use consumer or customer. Memberships include but are not limited
to:
18.2.1 Municipality;
18.2.2 Cooperative;
18.2.3 Jointpowers authority; or
18.2.4 Governmental agency.
18.3 For purposes of this Section 18, participation in a State promulgated direct
access program shall not be deemed to be a change in a Customer’s
organizational status or its obligation to supply electric power to preference
loads.
18.4 Prior to making an organizational change, Palo Alto may request an
opinion from Western as to whether Palo Alto’s proposed organizational change
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will result in an adjustment of Palo Alto’s Base Resource percentage under this
.;ection 18. Palo Alto shall provide Western with all relevant documents and
information regarding the proposed organizational change. Based on the
documents and information furnished, Western will provi~le Palo Alto with an
opinion.
18.5 In addition to the above, if the change in organizational status results in a
proposed transfer of the Contract, or any portion thereof, Section 37 of the
General Power Contract Provisions (GPCP), "Transfer of Interest in Contract,"
generally requires the Customer to obtain prior written approval from Western’s
Administrator. Organizational changes that typically propose transfer of the
Contract, or a portion of the Contract, and require prior written approval from
Western include but are not limited to:
18.5.1 Merging with another entity;
18.5.2 Acquiring or being acquired by another entity;
18.5.3 Joining an entity; and
18.5.4 Creating a new entity.
19.BUSINESS PROTOCOLS;
Western reserves the right to make process or procedural improvements in the efficient
and effective administration of this Base Resource Contract as needed.
20. ENFORCEABILITY-"
It is not the intent of the Parties that this Contract confer any rights on third parties to
e~force the provisions of this Contract except as required by law or express provision in
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this Contract. Except as provided in this Section, this Contract may be enforced, or
caused to be enforced, only by Western or Palo Alto, or their successors or assigns.
21. GENERAL POWER CONTRACT PROVISIONS;
The GPCP, effective July 10, 1998, attached hereto, are hereby made a part of this
Contract, the same as if they had been expressly set forth herein; Provided, That, in the
event of a conflict between the GPCP and the provisions in the body of this Contract,
the Contract shall control. The usage of the term "Contractor" in the GPCP shall mean
Palo Alto. The usage of the term "firm" in Articles 17 and 18 of the GPCP shall be
deemed to be replaced with the words "Base Resource."
22. APPENDIX MADE PART OF CONTRACT;
A description of the CVP and its estimated output under certain hydrological conditions
are provided in Appendix A attached hereto. The information provided in Appendix A is
for planning purposes only. Western may revise Appendix A to reflect operational
changes, as necessary. Western will notify Palo Alto of any revisions to Appendix A as
soon as practicable.
23. EXHIBITS MADE PART OF CONTRACT;
Exhibit A (Base Resource .Percentage and Point(s) of Delivery), Exhibit B (Exchange
Program), Exhibit C (Scheduling Procedures and Protocols), and Exhibit D (Regulation
and Reserves) existing under this Contract may vary during the term hereof. Each of
said exhibits shall become a part of this Contract during the term fixed by its provisions.
Exhibits A, B, C, and D are attached hereto, and each shall be in force and effect in
accordance with its terms until respectively superseded by a subsequent exhibit, as
allowed by the terms of each exhibit.
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Contract 00-SNR-00336 18
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IN WITNESS WHEROF, the Parties have caused this Contract to be executed the day
and year first above written.
WESTERN AREA POWER ADMINISTRATION
By:
Title:
Address:
Power Marketinq Mana,qer
114 Parkshore Drive
Folsom, CA 95630-4710
(Attest)
By:.
Title:
CITY OF PALO ALTO
By:.
Title:
Address:
Contract 00-SN R-00336 19
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO APPROVING THE EXECUTION OF A CONTRACT FOR
ELECTRIC SERVICE BASE RESOURCE 00-SNR-00336 WITH
THE UNITED STATES DEPARTMENT OF ENERGY, WESTERN
AREA POWER ADMINISTRATION
WHEREAS, the City of Palo Alto ("City"), a municipal
utility and a chartered city, is a "Preference Customer" of the
Western Area Power Administration ("Western") of the United States
Department of Energy; and
WHEREAS, the City’s existing 40-year power
contract with Western expires on December 31, 2004; and
supply
.WHEREAS, on August 18, 1999, the City entered into
Amendment Number One to Contract DE-MS65-85WP59007 with .Western,
which gave the City the right to negotiate post-2004 contract(s)
in accordance with the Western 2004 Power Marketing Plan; and
WHEREAS, the City, other Western customers and Western
have been working together to formulate the Base Resource Contract
in accordance with the 2004 Power Marketing Plan; and
NOW, THEREFORE, the Council of the City of Palo Alto
hereby RESOLVE as follows:
SECTION i. The Council hereby authorizes the City
Manager Alto on behalf of the City to sign the attached Contract
00-SNR-00336: United States Department of Energy Western Area
Power Administration Central Valley Project, California Contract
for Electric Services Base Resource with City of Palo.
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000928 sy~ 00719~7
SECTION 2. The Council finds that the adoption of this
resolution does not constitute’ a project under the California
Environmental Quality Act and no environmental assessment is
required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:
Senior Asst. City Attorney
City Manager
Director of Administrative
Services
Director of Utilities
000928 syn 0071927
City of Palo Alto
Contract 00-SNR-00336
Exhibit A
EXHIBIT A
(Base Resource Percentage and Point(s) of Deliveryi
1. This Exhibit A, to be effective under and as part of Contract 00-SNR-00336
(Contract), shall become effective upon execution of the Contract; and Shall remain in
effect until either superseded by another Exhibit A or termination of the Contract.
2. On the effective date of this Exhibit A, Palo Alto’s percentage of the Base
Resource is 11.62024%.
3. Palo Alto’s Base Resource percentage may be adjusted by Western as specified
in the Contract.
4.. Palo Alto’s Base Resource percentage will be adjusted effective January 1,2015,
in accordance with the Marketing Plan, to establish the 2015 Resource Pool for new
power allocations.
5.The point(s) of delivery for Palo Alto’s Base Resource shall be
6. This Exhibit A shall be replaced by Western as necessary in accordance with
Sections 9, 15, 16, and 18 of the Contract.
Exhibit A to Contract 00-SNR-00336 Page 1 of 1
City of Palo Alto
Contract 00-SNR-00336
Exhibit B
EXHIBIT B
(Exchange Program)
1. This Exhibit B, to be effective under and as a part of Contract 00-SNR-00336,
(Contract) shall become effective upon execution of the Contract; and, shall remain in
effect until superseded by another Exhibit B or termination of the Contract.
2. The Parties acknowledge that the exchange program procedures will change
between the date the Contract is executed and the date of initial service hereunder.
The Parties agree to work together collaboratively to develop exchange program
arrangements which will maximize the benefits of CVP.
3. Prior to the date of initial service, Western shall replace this Exhibit B with
Exhibit B, Revision 1. At such time as Western promulgates Revision 1 to this
Exhibit B, Palo Alto shall have a one-time option of (1) executing Revision 1 to this
Exhibit B within the time specified in the transmittal letter, or (2) terminating the Contract
upon 30-days advance written notice. In the event Palo Alto fails tO take either action
within the specified time frame, Exhibit B, Revision 1, shall be deemed to become
effective.
4. Western shall make subsequent revisions to Exhibit B, after consultation with its
Customers.
5. Western will manage an exchange program to allow for Customers to fully and
efficiently use their Base Resource percentage energy. The program consists of the
following two elements:
5.1 Seasonal exchange: a mechanism that allows a Customer with seasonal
load variation to make that portion of its Base Resource percentage that it is
unable to use due to insufficient load, available to the seasonal exchange
program. In coordination with Western, Palo Alto will be able to exchange its
unusable Base Resource percentage, through Western, with other Customers.
5.2 Hourly exchange: a, mechanism that provides for Western to retain all
Base Resource energy in excess of a Customer’s load on an hourly basis.
6.General Principles:
6.1 Customers must take their percentage of the Base Resource.
6.2 If a Customer’s total load in any hour, as established in its day ahead
schedule, is less than its Hourly Base Resource Schedule, then the energy in
excess of the schedule is made available to the Western exchange program.
Exhibit B to Contract 00-SNR-00336 Page 1 of 2
City of Palo Alto
Contract 00-SNR-00336
Exhibit B
6.3 Western shall establish an estimated pool energy "rate" for the purpose of
pool transaction settlements.
6.4 Customers with total load greater than their Base Resource percentage in
any hour may request pool energy from Western, if available.
6.5 Exchange program suppliers shall have first priority for purchases from the
pool, during hours when they are not depositing energy, up to the amount of
energy previously deposited.
6.6 Western will allocate pool energy to Customers that have requested pool
energy.
6.7 Pool takers are obligated to pay at the pool energy "rate."
6.8 Pool providers are credited funds at the pool energy "rate."
6.9 Western takes all remaining pool energy not taken by Customers and
provides it into the open market(s).
6.10 Revenues collected by Western from the open market(s) will first be
credited to the pool providers up to the pool energy "rate."
6.11 Any remaining revenue will be used to offset Western’s overall costs.
Exhibit B to Contract 00-SNR-00336 Page 2 of 2
City of Palo Alto
Contract 00-SN~-00336
Exhibit C
EXHIBIT C
(Scheduling Procedures and Protocols)
1. This Exhibit C, to be effective under and as a part of Contract 00-sNR-00336
(Contract), shall become effective upon execution of the Contract; and, shall remain in
effect until superseded by another Exhibit C or termination of the Contract.
2. Both Parties recognize that these scheduling procedures and protocols, may
require modification from time-to-time. In such event, Western shall make the
appropriate modifications to this Exhibit C as mutually agreed to by the Parties. For
more information on changes to scheduling protocols and procedures, refer to
Sections 10 and 12 of this Contract.
3. Designation of Scheduling Coordinator (SC): Palo Alto shall notify Western of its
designated Scheduling Coordinator not less than 60 days prior to the date of initial
service. In the event that Palo Alto’s Scheduling Coordinator arrangement changes,
Palo Alto shall notify Western in writing, not less than 30 days prior to the change,
unless a shorter notification period is agreed to by Western.
Scheduling Procedures:
4.1 Western will determine the Maximum Operating Capability, total
generation, and ramping rates for the Base Resource.
4.2 Not less than 24 hours prior to the active day, Western will notify Palo Alto
of its share of the Base Resource Operating Capability, Minimum Base Resource
and total energy available for that day. Based on these criteria, Palo Alto shall
notify Western of its preferred schedule for that day. Western will use a
compilation of all Customers’ preferred schedules as a basis for determination of
the optimal generation schedule. Western will then notify Palo Alto of its Hourly
Base Resource Schedule for that day.
4.3 For weekdays, Palo Alto shall provide Western with a copy of its day
ahead load and resource schedule, including the information listed in Section 4.5
below, by 9:00 a.m. of the business day prior to the day the schedule will be
implemented, or at least two (2) hours prior to the submission time required by
the ISO or control area operator, whichever is earlier. For weekends and
holidays, as defined by the wSCC, Palo Alto shall provide Western with its day-
ahead schedule by 9:00 a.m. of the business day, at least two days prior to the
day the schedule will be implemented, or at least two (2) hours prior to the
submission time required by the ISO or control area operator, whichever is
earlier. The day-ahead schedule shall include megawatt values for each hourly
period of each day and a megawatt-hour total for each day. The day-ahead
schedule amounts shall be to the nearest tenth of a megawatt, with the day-
ahead schedule of Western power not to exceed Palo Alto’s percentage of the
Exhibit C to Contract 00-SNRo00336 Page 1 of 2
City of Palo Alto
Contract 00-SNR-00336
Exhibit C
Base Resource Operating Capability for any hour, as it may be adjusted to
accommodate exchanges or purchases under the Western exchange program.
4.4 In the event of curtailments or emergencies, Western shall notify Palo Alto
as soon as practicable so it may adjust its schedule in a timely manner.
4.5 The following information shall be included in the day ahead schedule:
4.5.1 Western power by hour;
4.5.2 Other power by hour [If Western is Palo Alto’s SC];
4.5.3 Palo Alto’s forecasted system load by hour [If Western is Palo Alto’s
sc].
4.6 Palo Alto’s unscheduled Western power in any hour is not available to
Palo Alto as an operating reserve or to meet any ancillary service requirements
of the ISO or the control area operator for Palo Alto’s load.
4.7 Schedules shall be transmitted by a communication link established
between Western and Palo Alto or as otherwise agreed to by the Parties. The
communication link shall be provided and paid for by Palo Alto. The data format
shall be acceptable to both Parties and shall be in conformance with established
WSCC protocol in effect at the time.
Schedule Changes:
5.1 Palo Alto may not adjust its Western power schedule after the final hour
ahead schedules have been accepted by the ISO or control area operator as
applicable.
5.2 Daily schedules shall be confirmed by Palo Alto and Western’s
dispatchers at the end of the active day, at which time Palo Alto and Western’s
dispatchers will attempt to resolve any scheduling conflicts..
5.3 No after-the-fact schedule change by either Party shall be allowed.
Exhibit C to Contract 00-SNR-00336 Page 2 of 2
City of Palo Alto
Contract 00-SNR-00336
Exhibit D
EXHIBIT D
(Regulation and Reserves)
1. This Exhibit. D to be effective under and as a part of Contract 00-SNR-00336
(Contract), shall become effective upon execution of the Contract; and shall remain in
effect until either superseded by another Exhibit D or termination of the Contract.
2. The Parties acknowledge that the protocols and procedures of the ISO relating to
regulation and operating reserves will change between the date the Contract is
executed and the date of initial service hereunder. The Parties agree to work together
collaboratively to develop arrangements which will maximize the benefits of operating
reserves and regulation capabilities of the CVP. The method in which Western provides
these services to Palo Alto may be physical, financial, or both.
3. Prior to the date of initial service, Western shall replace this Exhibit D with
Exhibit D, Revision 1. At such time as Western promulgates Revision 1 to this
Exhibit D, Palo Alto shall have a one-time option of (1) executing Revision 1 to this
Exhibit D within the time specified in the transmittal letter, or (2) terminating the Contract
upon 30-days advance written notice. In the event Palo Alto fails to take either action
within the specified time frame, Exhibit D, Revision 1, shall be deemed to become
effective.
4. Western shall make subsequent revisions to Exhibit D, after consultation with its
Customers.
Exhibit D to Contract 00-SNR-00336 Page 1 of 1