HomeMy WebLinkAbout2000-12-18 City Council (28)City of Palo Alto
C ty Manager’s Report
TO:HONORABLE CITY COUNCIL 6
FROM:
DATE:
SUBJECT:
CITY MANAGER
DECEMBER 18, 2000
DEPARTMENT: UTILITIES
CMR: 456:00
APPROVAL OF CONTRACT 00-SNR-00241: ADVANCEMENT OF
FUNDS CONTRACT FOR CENTRAL VALLEY PROJECT
PURCHASE POWER AND WHEELING AMONG THE UNITED
STATES DEPARTMENT OF ENERGY WESTERN AREA POWER
ADMINISTRATION AND CERTAIN CENTRAL VALLEY PROJECT
FIRM ELECTRIC SERVICE CONTRACTORS
RECOMMENDATION
Staff recommends that Council:
Approve and authorize the Mayor to execute the attached contract 00-SNR-00241:
Advancement Of Funds Contract For Central Valley Project Purchase Power And
Wheeling Among The United States Department Of Energy Western Area Power
Administration And Certain Central Valley Project Firm Electric Service Contractors
(Contract) to facilitate the Western Area Power Administration’s (Western) monthly
purchase of power for its customers.
Authorize the City Manager or his designee to exercise the option to terminate the
contract termination is determined to be in the City’s best interest.
DISCUSSION
Western provides up to 90 percent of the City’s power needs at currently attractive cost-based
rates under an agreement that continues through the end of 2004. The Western contract
saves the City several million dollars per year. Western relies on hydro power, PG&E power
and market purchases to supply the power provided to the City and pays for this power with
Congressional appropriations. Rapidly rising market power purchase costs and a slow and
uncertain congressional appropriation process have left Western with a cash flow problem.
CMR:456:00 Page 1 of 3
Without significant customer participation in the contract, Western may run short of funds
once Congressional funding authority is exhausted. This could lead to significantly increased
costs for Palo Alto. Western worked with all of its public power customers to prepare the
attached contract which is intended to alleviate the potential cash flow problem by allowing
customers to voluntarily pre-fund money to Western on a no interest basis each month and
to receive an identical credit on a subsequent regular monthly bill. Execution of this contract
will not require the City to pay more than they would otherwise pay for firm electric service
from Western. The contract can be terminated by Palo Alto and, depending on the date of
notice of termination, could take effect as early as 12 months from the date of notice of
termination to as late as 24 months from the date of notice of termination.
RESOURCE IMPACT
There are no incremental resource impacts associated with approving this contract.
Managing this contract will be undertaken with existing staff resources. The cost of
participating in the contract would be lost interest. The benefit would be potentially avoiding
increased power supply costs. For example, if, on average, $1,000,000 was advanced and
outstanding through this contract and the City had to forego earning one half percent per
month interest, the lost opportunity cost would amount to $5,000 per month or $60,000 per
year. However, it is likely that without this voluntary contract, Western would implement
a mandatory advancement of funds condition on customer’s power delivery contracts that
would be more costly in lost interest and less flexible for customers. It is also possible that
in lieu of this agreement Western would decrease deliveries that it currently provides at 2.5
cents per kilowatt-hour and cause Palo Alto to seek market-priced power (market prices for
next year are in the 16 to 17 cent per kilowatt-hour range). This could cost Palo Alto an
additional $6,000,000 per month in some months. On balance, staff believes the benefits of
signing this contract exceed its cost.
POLICY IMPLICATIONS
Executing this contract is consistent with current policies supporting the efficient operation
of the Utilities Department.
ENVIRONMENTAL REVIEW
Approval of this agreement does not constitute a project under the California Environmental
Quality Act, and thus, no environmental assessment is required.
CMR:456:00 Page 2 of 3
ATTACHMENTS
A: Contract 00-SNR-00241 ADVANCEMENT OF FUNDS CONTRACT FOR CENTRAL
VALLEY PROJECT PURCHASE POWER AND WHEELING
B: RESOLUTION
PREPARED BY:Tom Kabat, Senior Resource Planner
Girish Balachandran, Manager of Supply Resources
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
~ ../I~.N ULRICH
!>fl~ties Director
AUD~Y S~MOUR
Assistant to the City Manager
CMR:456:00 Page 3 of 3
Contract No. 00-SNR-00241
ADVANCEMENT OF FUNDS CONTRACT
FOR CENTRAL VALLEY PROJECT
PURCHASE POWER AND WHEELING
Among the
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADMINISTRATION
and
CERTAIN CENTRAL VALLEY PROJECT
FIRM ELECTRIC SERVICE CONTRACTORS
Contract No.00-SNR-00241
ADVANCEMENT OF FUNDS CONTRACT
FOR CENTRAL VALLEY PROJECT
PURCHASE POWER AND WHEELING
among the
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADM]2NISTRATION
and
CERTAIN CENTRAL VALLEY PROJECT
FIRM ELECTRIC SERVICE CONTRACTORS
Table of Contents
Section ~
1.PREAMBLE .....................................................................................................................1
2.EXPLANATORY RECITALS ........................................................................................1
3.AGREEMENT .................................................................................................................2
4.TERM AND TERMINATION OF CONTRACT ............................................................2
5.DEFINITION OF TERMS ................................................................................................3
,6,PURCHASED POWER & WHEELING PROGRAM ~ING ..................................5
7.PARTICIPANTS’ FUNDING COMMITMENTS ...........................................................5
8.BILLING AND PAYMENT ............................................................................................6
9.CREDITING .....................................................................................................................7
10.EXHIBITS MADE PART OF CONTRACT ....................................................................8
11.EXECUTION IN COUNTERPART .................................................................................8
12.GENERAL POWER’ CONTRACT PROVISIONS .........................................................8
Exhibit A (Participants)
Exhibit B (Methodology for Calculation of Fair Share Amount)
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ADVANCEMENT OF FUNDS CONTRACT
FOR CENTRAL VALLEY PROJECT
PURCHASE POWER AND WHEELING
among the
UNITED STATES
DEPARTMENT OF ENERGY
WESTERN AREA POWER ADMINISTRATION
and
CERTAIN CENTRAL VALLEY PROJECT
FIRM ELECTRIC SERVICE CONTRACTORS
PREAMBLE: This Contract is made this ~ day of ,2000,
pursuant to the Acts of Congress approved June 17, 1902 (32 Stat. 388); March 4, 1921
(41 Stat. 1404); January 12, 1927 (44 Stat. 957), August 26, 1937 (50 Stat. 844); and
August 4, 1977 (91 Stat. 565); and Acts amendatory or supplementary to the foregoing
Acts; between the UNITED STATES OF AMERICA (United States), acting by and
through the Administrator, Western Area Power Administration (Western), Department
of Energy, Sierra Nevada Customer Service Region (SNR), represented by the officer
executing this Contract, and each of the FIRM ELECTRIC SERVICE CONTRACTORS
LISTED IN EXHIBIT A, hereinafter called Participants, or their successors and assigns;
sometimes hereinafter collectively called the Parties.
EXPLANATORY RECITALS: . ".
2.1 The Parties entered into electric service contracts which provide, among other
things, for the sale of firm power by Western to each Participant.
2.2 SNR purchases power and transmission services in order to firm and deliver
electric service to its customers through SNR’s integration Contract
No. 14-06-200-2948A (Contract 2948A) with the Pacific Gas & Electric
Company, through Contract No. 14-06-200-2947A with the Pacific Gas &
Electric Company, San Diego Gas & Electric Company, and Southern California
Edison (California Companies), and through various long-term contracts with
Northwest power suppliers. SNR also enters into short-term power purchase
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arrangements in accordance with its rights and obligations under Contract 2948A.
These arrangements are included in SNR’s Purchase Power and Wheeling
(PP&W) Program, (~ee Section 5.6).
2.3 In addition to appropriations and reimbursable authority with other Federal
agency customers, Western uses various types of alternative funding
arrangements, as authorized by Congress, in order to fund its PP&W Program.
2.4 The Participants desire to advance funds to Western for SNR’s existing long-term
purchased power and wheeling contracts as well as various short-term purchased
power and wheeling obligations. Advance funding of SNR’s purchased power
and wheeling requirements, in lieu of or in addition to appropriations, will assist
SNR in meeting its contractual obligations to its customers and suppliers.
2.5 The Parties recognize that execution of this Contract will not require Participants
to pay more than they would otherwise pay for firm electric service from Western.
2.6 Interested Parties will negotiate, in good faith, a successor agreement to this
Contract, should such successor agreement be determined by the Parties to be
necessary or beneficial.
AGREEMENT:The Parties agree to the terms and conditions set forth herein.
TERM AND TERMINATION OF CONTRACT:
4.1 Term: This Contract shall become effective upon execution by Western and shall
remain in effect through December 31, 2004. Western will execute this Contract
when Western determines there are a sufficient number of Participants to allow a
viable PP&W Program.
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4.2 Termination: Western may terminate this Contract upon a one-year written
notice to each Participant. Any Participant may terminate its participation in the
Contract by giving written notice to Western not later than the first day of a Fiscal
year for termination to be effective the last day of that Fiscal year. For any
termination notice received later than the first day of a Fiscal year, such
termination shall become effective on the last day of the following Fiscal year.
DEFINITION OF TERMS: As used herein, the following terms shall have the
meanings set forth below when used with initial capitalization, whether singular or plural:
5.1 Contract Rate of Delivery_: The maximum amount of firm power Western is
obligated to supply a Participant during any hour, as specified in their Firm
Electric Service Contract.
5.2
5.3
5.4
Fair Share Amount: The Participant’s estimated share of Western’s PP&W
Program costs as determined using the methodology specified in Exhibit B. Fair
Share Amounts include a prorata share of those costs associated with project use
and electric service contractors that are legally precluded from electing to
participate in this Contract, plus an estimate of pass-through wheeling costs ~,
attributed to the Participant, if applicable. A Participants Fair Share Amount shall
not exceed its Maximum Creditable Amount.
Firm Electric Service Contract(s): The contract(s) between the Participant and
Western listed in Exhibit A that requires, among other things, payments by the
Participant to Western for electric service from the Sierra Nevada Region.
Fiscal Year: The Federal fiscal year, which currently is October 1 of any calendar
year through September 30 of the following calendar year.
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5.5
5.6
5.7
5.8
5.9
Funding Commitment: The Participant’s Fair Share Amount, as it may be
adjusted in accordance with Sections 6.2 and 7.4, plus any additional amount the
Participant agrees t6 pay in accordance with Section 7.3, for any fiscal year. The
Funding Commitment for each Participant shall be specified in Schedule 1.
Purchased Power and Wheeling Program (PP&W Program): Western’s power
and transmission purchases used to firm and deliver electric service to its
customers and project use loads, through integration Contract 14-06-200-2948A
(Contract 2948A) with Pacific Gas & Electric Company, through Contract 14-06-
200-2947A with the California Companies, and through long-term power
purchase Contracts 92-SAO-30006 and 91-SAO-30005 with Pacificorp and
Contract 87-SAO-30002 with Enron Power Marketing, Inc., all as may be
superseded or amended. The PP&W Program also includes short-term power
purchases made by Western in accordance with its rights and obligations under
Contract 2948A, including economic and load management purchases.
Additional transmission or other transaction-based costs may be associated with
short-term or existing long-term purchases.
Maximum Creditable Amount: For each Participant, the total amount payable to
Western under the Contract(s) listed in Exhibit A during any Fiscal year.
Power Bill: The monthly bill from Western for service provided under a
Participant’s Firm Electric Service Contract(s).
Schedule 1: The document in which Western sets forth the Funding Commitment
and schedule for billing of advanced payments for each Participant for a Fiscal
year, as it may be revised from time-to-time.
4 Contract No.00-SNR-002z~I
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PP&W PROGRAM ADVANCE FUNDING:
6.1 Annually, on or before May 1, Western will determine the estimated cost and
components of the PP&W Program for the upcoming Fiscal year, and provide
each Participant with a Schedule 1.
6.2 The Parties understand the’level of funding required for a Fiscal year may vary
depending upon, among other things, hydrologic conditions of the Central Valley
Project, customer loads, and market power prices. Should the required level of
funding change, Western may update the estimated annual cost of the PP&W
Program as necessary, and adjust each Participant’s Fair Share Amount
accordingly, pursuant to the methodology set forth in Exhibit B. Any adjustment
to the Participant’s Fair Share amount shall not exceed the amount Western can
credit against payments due Western from the Participant under any sales
contracts or agreements. In the event an adjustment is required, Western will
prepare a revised Schedule 1. In no event shall payments under the revised
Schedule 1 be required in less than thirty (30) days following Western’s written
notice of such revision.
FUNDING COMMITMENTS:
7.1 The Participant agrees to make a monthly advance payment for its Fair Share
Amount. Western will determine each Participant’s Fair Share Amount based on
the formula set forth in Exhibit B. Funding commitments shall be for Fiscal year
blocks.
7.2 Each Participant’s Funding Commitment shall not exceed its Fair Share Amount
for any Fiscal year, as it may be adjusted in accordance with Section 6.2 and 7.4,
unless the Participant agrees to a larger Funding Commitment in accordance with
Section 7.3.
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7.3 In the event Western determines that the total of all Participants’ Fair Share
Amounts will not be sufficient to fund Western’s PP&W Program, Western will
request some or all of the Participants to agree to increase their Funding
Commitment.
7.3.1 Westem will notify the Participants of the amounts and time frames in
which additional funds will be required.
7.3.2 Any Participant may agree to advance additional amounts, provided
Western can credit such amounts against payments due Western from the
Participant under any sales contract or agreement. If a Participant agrees to
an increased Funding Commitment, Western will prepare a revised
Schedule 1.
7.4 The Participant’s Fair Share Amount may be re-determined by Western in the event
the Participant’s Contract Rate of Delivery is changed, or its load is reduced to a
level insufficient to allow the crediting of advances on its monthly power,
transmission, or other bill from Western. In the event a Participant’s Fair Share
Amount is reduced, Western may proceed in accordance with Section 7.3 if
necessary.
BILLING AND PAYMENT:
8.1 Monthly payments shall be made by the Participants in amounts and at times as
requested by Western. Beginning four (4) months prior to Western requiring the
funds for the PP&W Program, Western will bill the Participant for a one-month
advance payment based on Schedule 1. If practicable, monthly advances will not
exceed Western’s ability to credit the Participant within the.following three (3)
months. Payments will be collected monthly, at least ninety (90) days in advance of
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Westem’s estimated obligation; Exc~, That Western anticipates the last billing to
have been completed by October 1, 2004.
8.2 The Participant will continue to be billed separately for its power and pass-through
transmission purchases from Western in accordance with its Firm Electric Service
Contract.
8.3 Should other funding become available for Western to fund the PP&W Program,
Western shall reduce the billing or cease billing the Participants until such time as
ad~,ance funds are required.
8.4 The funds from each Participant will be held in a non-interest-bearing Western trust
account(s). Disbursements from that trust account(s) will be made as needed to
comply with this Contract.
CREDITING:
9.1 Each Participant will receive a credit on its monthly Power Bill for the amount of its
advance in the Western billing month following receipt of the advance. To the
degree practicable, the credit will be equal to its previous month’s advance. I~ the
entire credit cannot be applied to a Participant’s Power Bill, Western may apply
credits to other bills due Western by the Participant, or the credit balance may be
carried forward and applied to future bills on sales contracts or agreements. If the
Participant’s bills are not large enough to apply the credit within three (3) months,
Western shall issue the Participant a payment from unobligated funds in the trust
account referenced in Section 8.4. Such payment shall be for the amount of any
credit balance attributable to advances made three or more months prior unless
other arrangements are agreed to between Western and the Participant.
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9.2 Upon termination of this Contract, Western will reconcile each Participant’s
account. The Participant will be billed for any amount due and Western will credit
the Participant’s bill under any of its current sales contracts or agreements with
Western for any amount owed the Participant by Western. If the Participant’s
bill(s) is less than the amount of the credit, Western will issue the Participant a
payment for the difference from the trust account referenced in Section 8.4.
10.EXHIBITS MADE PART OF CONTRACT: Inasmuch as the "Participants" to this
Contract and the "Methodology for Calculation of Fair Share Amount" may change
during the term hereof, they will be set forth in Exhibits A and B, respectively. Exhibit
A may be revised by Western as necessary to reflect changes in the customers who are
advancing funds to Western under this Contract. Exhibit B may be revised in
accordance with its terms. Exhibits A and B are attached hereto and made a part hereof,
and shall be in full force and effect in accordance with their terms until respectively
superseded by subsequent exhibits.
11.EXECUTION IN COUNTERPART: This Agreement may be executed in a number of
counterparts and shall constitute a single document with the same force and effect as if
each Party had signed all other counterparts.
12.GENERAL POWER CONTRACT PROVISIONS: The General Power Contract
Provisions, effective July l~J, 1998, attached hereto, are hereby made a part of this
Contract, the same as if they had been expressly set forth herein; Provided, That the word
Contractor in the General Power Contract Provisions shall mean Participant for the
purposes of this Contract.
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IN WITNESS WHEREOF, the Parties have caused this Contract to be executed the day
and year first above written.
WESTERN AREA POWER ADMINISTRATION
By:
Title:
Address:
Power Marketing Manager
114 Parkshore Drive
Folsom, CA 95630-4710
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IN WITNESS WHEREOF, the Parties have caused this Contract to be executed the day
and year first above written. The signatories hereto represent that they have been appropriately
authorized to enter into this Contract on behalf of the Party for whom they sign.
CITY OF PALO ALTO
Attest:
By:
Title:
By:
Title:
Address:
10 00-SNR-00241
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IN WITNESS V~rHEREOF, the Parties have caused this Contract to be executed the day
and year first above written. The signatories hereto rep}esent that they have been appropriately
authorized to enter into this Contract on behalf of the Party for whom they sign.
Attest:
By:
Title:
CITY OF PALO ALTO
By:
Title:
Address:
10 00-SNR-00241
RESOLUTION NO.
’RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO APPROVING THE EXECUTION OF A CONTRACT FOR
ADVANCEMENT OF FUNDS FOR CENTRAL VALLEY PROJECT
00-SNR-00241 W~TH THE UNITED STATES DEPARTMENT OF
ENERGY, WESTERN AREA POWER ADMINISTRATION
WHEREAS, the City of Palo Alto
utility ’and a chartered city, is a "Prefer
Western Area Power Administration "Western!’
Department of Energy; and
"City"), a municipal
9nce Customer" of the
of the United States
WHEREAS, the City’s exlsting 40-year power supply
contract with Western continu.es through December 31, 2004; and
WHEREAS, rapidly ~ising power costs are exceeding
Westekn’s current budget authority and Western must use its
receipt-of-funds authority to purchase power;
WHEREAS, the City’s contract SNR-00241 with Western will.
assist Western in purchasing power to be supplied to the City at
favorable cost-based rates; and
WHEREAS, the City, other Western customers and WesterIT
halve been working together to formulate the Advancement Funds for
Central Valley Project Purchase Power and Wheeling Contract;
NOW, THEREFORE, the Council .6f the C~ty of Palo Alto
hereby RESOLVE as follows:
SECTION I. The Council hereby authorizes the City
Manager on behalf of the City to sign the attached Contract
00-SNR-00241 for the advancement of funds for Central Valley
Project Purchase Power and ~heeling .among the United States
Department of Energy Western Area Power Administration and certain
Central Valley Project firm electric service contractors.
SECTION 2. The Council hereby authorizes the City
Manager or his designee to exercise the option to terminate the
contract 00-SNR-00241 if the City Manager determines that an
amendment or terminatfon will be in the City’s best interest. The
City Manager shall inform the Council of any decision to terminate
the contract for advancement of funds.
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SECTION 3. 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:City Manager
Senior Asst. City Attorney Director of Administrative
Services
Director of Utilities
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