Loading...
HomeMy WebLinkAbout0155.091j i ! \'lIE IfCNORAIILZ CITY COONeI L Palo Alto, california Aqr9«meDt Between the cities of palo Alto and RoseyillA tor the Aa'iqnm@nt ot Capacity in the North Fork Stlni§lous Riyer Bvdrqelactriq Dgyelqpmtnt proiect And other Electric Resourges JileJlbera of the Council: Thi •• tarf report requests City Cou.nc:il approval of an Agreement defining principles and general terms for the assignment of the City of Palo ~to'. surplus electric resources to the city of R~ville for a tara of fourteen years. Boqkground In 198), City council approved CMR:469:2 to provide the city of Palo Alto with a 22.92 percent entitlement in the North Fork Stanislaus River Hydroelectric Project (Calaveras). The decision to participate in the calaveras project in 1983 was .ade with the understanding that a portion of the electricity would bave to be ••• iqned until the entire project became economically useable. staff'. earlier efforts to layoff surplus Calaveras electrical output, in accordance with ~~e 1985 Electric Resource Plan, were unsuccessful due to adverse .arket conditions. However, in early 1990, warket conditions improved • .In September of 1990, staff .et with the Council, presented background inforaatiDn, and propo.ed a negotiating strategy for the .ale or other transfer of surplus resources. The neqotiatinq strategy va. to i~leaent the followlng principles: 1. ~. tranafer would be tor a .axinua of 20 years renewed by .utual agreeaent. 2. The price will .5~~I.te annually, reflecting wholesale .arket price for electricity. 31. T'be revenue fro. the transter a'Xceedis the aaxlau.. cost of replaceaent resource. purchaaed by the City of Palo Alto. QUUU5,91 " • 4. east_ ••• oct.ted with operation, maintenance, q_neral and .~ini.tratlon vill be borne by the purchaser. S. The purcha.er vIll not be entitled to project enhancements. Although no forael action was taken, Council qenerally accepted staff '. plans. In November 1990, ataff sought consulting services to review the .taff analysis and assusptions that have led staff to recoamend \ the assignment ot resources tor the terms discussed in this CHR. Enqineerinq and Eoo"""io Services (EES) was retainad to perfors thi. review and to •• Bure that atatf's proposed sale teras are ~tit1v.. no. COnsultant'. lI"port 110 attached to this report. In Deoaaber of 1990, ataft completed negotiations wi~. the city of Roseville tor the combined assignment of 6.52 percent of the calaveras project Capproxi,...tely 15 MW). 5 MW of the Northwest raaource with associated trans.lssien fro. the california Oregon Transmi •• ion Project (COTP), and 2.~ MW of off-peak energy auppliad by Pacific Ga. and Electric through a contract with the Morthern CalIfornia Pover Aqency (NCPA}. Some deViations, from the oriqinal principles presented to Council in September, were .. 4e primarily to 1) enhance the value of Calaveras to the _aiqnee by including the IIs.siqr.ment of other resource., 2) provide additional benefit to Palo Alto by daferrinq the purchase of those resources until their usaqe becomes more economical. The attached Agreement outlines the terms and oonditi~ns for the tnporary transfer of entitlemenh. Anllvaia; Laac! Sal once ... ed upon information available in 1983, the calaveras project vas expected to beCODe tully useable in palo Alto by the early 2000 .... Since then, both the Ulount of excess and the duration ot aurplus capacity have increased. Following are reasons for the chanq •• : 1. Tbe project vas originally desiqned to be 200 MW, however, .odlfications to the design resulted in the increase of the project ~paclty by approxia.tely 50 MW. Palo Alto'. entitlement ~t that additional capacity vas 10 MW. 2. Intensive Demand-Side Maneg ... nt activities initiated in 1985 have aucceastully reduced Palo Alto's anticipated load qrovth. Throughout thi. report the tera -.ale-is use~ tor convenient reference and due to apace li.itations on charta. The tran .. ction proposed t. a 14 year assignment. 0lIl:155:91 2 • '\ 3. Pollet ••• nocted by Council to contain growth and development in the City have tU~her reduced r.~ir .. ents frca tho •• projected in 1983. Th ••• factors have had a aignificant impact on the electric d ... nd and res~urce balance. However, the projected neecS tor additional energy has experienced little change primarily due to the U .. ited energy available froll calaveras. During th .. early 1990'., autt!cient resources are expected to be available to .eet energy needs even with the proposed Calavera~ sale. Beyond the .14-1990'., Palo Alto will need additional (&ne~ abundant) reaources to aeet summer enerqy loads. In all cir~.tance&, capacity provided by the project x1ll n2t be fully utili.ad until about the y.ar 2009; and it vill not be able to aeet addit.ional energy needs by iuelf. Therefore I the n:istlng resource .1x Iftmt be expanded and optimIzed to reduce the capacity .urplus and incre ... enerqy avail&bility bet~.en tha years 1995 and 2009. The process of daveloping and optimizing the resource _Ix is described. below .. TO ait19ate the apparent imbalance between the available capacity and energy L" the ell:istinq resource .. Ix and the capac! ty and anergy required to .eet the City's needs, staff developed the follOWing plan: 1. Add resources to .eet base load in order to increase the Available energy .ore quickly than the associated capacity. The city'. participation with NCPA in the development of the combined cycle project and the ~ashin9ton water Power contract ia intended to add those resources to the City's resource aix ~ 2.. AaalCJn, aa proposed. in the Aqr ..... nt, a portion of the city'. aurplus Calaveras project capacity and ••• eeiated energy. Thia draeaUcally reduces the capacity aurplu8 without increaainq th. ~cted energy shortage. acR:155:91 l '". -." • \ Capacity Balance _ w.."'n ..... c.&:I. HM(! WfOon, ........ Oao. NHd WIO CoM Figure ~ shows a 21 year plot of Palo Alto's electric peak load and resource capacity balance. The two lines represent the base t'oreca.st of annual peab, with and without. new conservation program to be proposed tor Council approval In the near future~ The stacked bar. represent the capacity of resources that Palo Alto either bas entitleDents to or ovn&~ These resources include: 175 MW of Western allocation, 51 NW of Calaveras project~ 10.65 MW ot Washington Water Power contract beq1nninq 1n 1993, 9 KW of an NCPA q •• fired collbined cycle plant: in 1993, 13 trW or calaveras e.."1hancement (French Meada~s power house) in 1'9', and 12 MW o~ Calaveras enhanceJI.."t (Ramsey power bouse) in 2003. The resources sold to the City of Roseville includo 1S XW o~ the Cslaveras project, 5 MW of the proposed Washington water PoWer contract, and 7 HW of the proposed Calaveras enh.ncement. (French Meadows and Ramsey power bouse.). The graph .hows that the capacity from the r.sourcea to be .old are clearly in excess of Palo Alto'. expected demand for the entire sale period. QIR,15S:91 4 • • Energy Balance Average Hydro Conditions Reo"""ce ROqur''''''''""I:.,.:Capa.::::;:;bI::r::iI",y_-::::-=::-::--:=-==-::::-=== 1.4 1.2 I 0.8 o.e 0.' 0.2 o 199, 1993 _ 1997 1IlQQ 2001 rooo 200Ii 2007 200II 20', Year _ 'WMlerl'l AlJocaUgn fZ2:J OCher RNOUf'u, em SOld ANo.:rCM ---Energy He" W/~ £ntlr~ H..eII IN/O ConI Figure 2 shows a 21 year plot ~f Palo Alto's electric energy load and resource l:Ialance. The two lines represent the base forecast ot annual enerqy needs .... ith and without the asswaed new ~onservation proqram. The stacked bars represent the available energ)F from resources that Palo Alto baa entitlements to or owns. These resources include: 1084 GWh of Western allocation l 103 GWh of PC&E oft peak firm energy trom 1990 through 1997, 115 GWh from the calaveras project, 93 GWb of the proposed Wasbl~ton water Power contract in 1993, and beyon~. 67 GWh of q85 fired combined cycle plant in 1993, 45 GWh ot proposed Calaveras enhancement {French -.adowa power house} in 1999, 31 GWh of pr~Bed Calaveras en.'>ancement (RaJuey power hO\l5e) in 200). The .ol~ resources: inclUde: 33 GWh ot Calaveras, U; GWb of •• abington water Power contract, and 21 GWb fro. the proposed Calaveras enhancements (French Meadows and Rhmsey power hou ••• ). Th. qrapb .hows enerqy surplus •• on an aM".l baais throuqhout the sale period aM beyond. aut: 155. 91 5 aIR:l55:91 Monthly Capacity Balance In 2000 JAH FEB MAR APA MAr .."..IN JI.A. AUG IEP OCT NOI DEC ..... Ot:p. fIi"d WfCone: -M-e;." HHd W!O Cof'\I: 3 MOWS th ... "ntbly capacity balance in the year It shows that a capacity .urpl~B will reaain in all after the Roaeville .ale~ / Monthly Energy Balance in 2000 Average Hydro Conditions JAN FEe WA.A .t.PFI MAY ..ruN JUt.. AUG 8EP OCT NOV DEC Figure 4: shows the aonthly energy balance in the year 2000 as"Ullln<J average bydro ex>ndi tiona. rt crt Ucal dry con4itions occur, they reduce aprinq surpl~a vltbou~ exac.rbatifl9 .u:mmer sbortagoes. It should be noted that the summer months have little or no energy surplus (July and September """.1d be deficit without new conservation). while the winter and spring months vlth their-10v enerqy needs account for most Of the ene~ surplus shown in Fiqure 2. CIIR:15S:91 7 .. , . 'D7:I'%11 I M 1'O''I9 D!ICT ftw tollovinq tebl. ahev. the .xpectca power production coat tor the te ... of the propoooed .ale. ~lU!LB I P1tODOC'fXOII C082' • U,UOB ~a OP ~ lUoTO'. PaoPOSBD 1UI.00llCli 8J.LB TO IIOlIlrVlt.LJI IIDBCl'BJ) VAL1III CAS. Additional prod .... Uoa .ro4uct ioD. Pl'o<SueUolI ReYellue .et \. _. ,1 , COats Coat. COata Pro. AdviUlhl/e 11/0 8&1e wit" .ale Due !"o •• 1e e.le of •• le %HI: ""P) ,IODO) "ODP) ,'oooi ('000, 1991 33,551 34,226 675 2,294 1,620 1113 34,851 35,583 732 2 1 506 1,774 1993 35,511 37,109 1,699 2,835 1,136 1994 39,513 41,03. 1,521 3,059 1.538 1995 U,740 44 ,485 1,746 3,261 1,515 1996 45,831 47,760 1,929 3,465 1,536 1997 48,,122 50,951 2,029 3,672 1,643 lUa 53,On 54,,218 2,191 3,882 1,691 1999 56,985 58,,920 1,,934 4 .. 0!16 2,160 2000 60,414 62,445 2,030 4,324 2,294 2001 '4,244 "r.l.11 2,167 4,544 2,377 2002 69,302 70,723 2,,421 4,605 2" 184 2003 74,196 76,854 2,659 4,668 2,009 2004 78,905 81,828 .2,923 4,136 1,813 :In the case where the sale 1s aac.1., the production coats are slightly bigber due to the need to purchase additional energy to replace the energy acleS.. However-, the revenue from the .ale will :aor. than ott •• t th1 •• clded coat:. '!"be net result 1. that the total production coet is l"".r than it would be under a "no .. ale" ......... rio. %t ill expected that the production cost, excluding del>t .....,1.,. .,...,t, vill be reduced by an averag_ of 3.4 percent annually. '!'be total revenue requir ... nt, ¥bieb include. debt .ervlee, i. redQCeCS by an av.ra9_ of 1.8 percent annually; and the expected ay.t ... v .... ge annual rate lncraasu would be reduced fro. • co.pound .verage of 4.61 percent to & c:oapound everage of 4.35 percent per year during the next ten year •• CIIR: 155' 91 • ~u., palo Alto'a rat. increas •• vill 11~.ly be 1/3 percent 1 ••• per year becaua. of the proposed aal •• -.as 2 end 3 :oboV t. ... aen"iUvity of the •• 1. n.t profit to a _ineUon ot load, hydrolc>qlcal and replac:: .. ent. energy price conditiona. ~AIIL11 2 PIIODIlCnOIl COST , UVPOB IDl.eor. CW DLO 1oL'fO" nolPOBlID US01mCJl ,ALII ro ItOllnIloLII IO.UIt1llil nLO& Q1J& I.dUUo ... l _otio .. Pro4uctlo111 'Pz04uctioD a.ve:aa. .. t coah COllt. COat. Froa 1.4va:a tai· w,O ,.1. Witll 8ala OU. To 8ale ,.le of •• le Jas: (IPO" 'lcOOl "oop' «10001 «SdPP' UII1 33,022 32,aU 819 2,.,4 1, "75 UU 33,125 33,988 863 2,506 1,643 1993 )),350 35,226 1.876 2,135 ,59 1914 41,643 43,274 1,631 3,059 1,427 1995 ~5,455 4',376 1,'20 3,261 1. .. 340 19U 49,397 51 .. 339 1,941 3,465 1,524 1997 5,0, 063 52,153 2,08' 3,672 1,583 1'98 55,796 5~,26' 2,4'3 3,&82 1,409 1'" 12,307 64,677 2,310 4,094 1,724 2000 ",583 69,085 2,502 4,324 1,822 2001 71,338 74,014 2,616 4,544 1,869 iOO1 76,4.2'1 79,452 1,025 .,605 1,580 2003 83,443 86,783 3 .. 340 4,668 1,328 2004 89,316 93,103 3,717 4,136 .1,019 'fABLI 2 shoW_ th~ product,Lon costs, revenue trOll .. and resulting net advantag_ of the proposed aal. to Ro •• vllle under a tight .at of conditlona that lov.r tbe net adv«ntage of aaking the 8ale. TIl ... conditione 1ncluda high n"ed l>y palo Alto due to biqher l08da and drier vaather, •• vell as h!iber .arket price. for replaetmant anergy. EVen under these condi"t!ons the: .ale 1. a4vantageowo. aIII.:155:91 9 . , • rULII , 1'1IODIIC'l'IOK COlI'! • UVUOI DIl'AC'!8 Olt PALO ax.ro" PII01'OBJU) U80DllC'II BlU.II \'0 1IOS1IVlu.. XInxtIII VlU.1IB CUll lLdd!t1 ..... 1 P"O.s.,.,UOD Productioll P,,04.,.,UOD "veaa. I.t coaU Coats co.t. 1' ..... Aot"."ta;. _/O •• le litll 8al. Du. ro .al. .ale of 'ale ns "PPO' «1000. «'2 PO ) "OPOl 110901 un 33,4-4' 3",010 561 ~,294 1,733 un 34,738 35,350 612 ~,506 1,894 1993 35,341 36,812 1,.72 2,a35 1.364 1994 39,717 40,893 1,,175 3,,059 1,883 1995 43,301 44,79l l,HO ',261 1,770 1996 46,301 46,213 1,905 3,465 1,560 1997 49,04' 51,018 1,975 3,672' 1,,697 1998 53,961 55,578 1,616 3,882 2,265 1999 59,456 60,909 1,453 .,094 ',641. 2000 53,306 54 ,843 1,537 4,324 2,,787 2001 56,106 57,74() 1,'34. 4.544 2,910 ZOOl 59,OU 60,199 1,787 4,605 2,818 :1003 63,671 65.615 1-,943 4,668 2,725 ~OO4 n,OOll 69,082 2,074 .,736 2,662 ~A8LE 3 shows the production costs, revenue froD, and reSUlting net advantage ot the proposed RosevillG sale under a loose Bet ot conditiona that raiae the net advante.ge. These conditions. include a low need by Palo Alto due to lower loads and vetter weather, as well as lower aarkot prices for replaceaent energy. The eale ia ~eci~edly advantageous under the .. conditions. Cpng1ueion 'lb_ b8netiU to the city of the proposecS sale "es.,lt f"oa the fo11"",I"9 : 1. Sal .. wIll Il1prove the .upply and 4e .... nd balane<o ioy "educing capacity .urplu. with .ini"",l reduction in ."erqy. 10 • · /" 2. Sal •• will reduce both production !Costa and total revenue ... qulrUHlnbi. J. Bal •• vill reduce the •• tl •• ted compound annual rat. iner .... frOli •• 67 percent to 4.32 percent (1/3 percent reduction) for" the ten of the ... la. mpBJJLDJ17 groa, Thi. r.view gave staff independent confi~ation ot two thing.: 1) that it appears to be in Palo Alto's best interest to .Ike the •• le a. described and 2} that the price Palo Alto haa negotiated with Rosevilla is an attractive one. Palo Alto has ccmpUecl with the thre .. ncollllllendationa that EllS .. de In the December 11 .. 1990 letter to Palo Alto. The three r9cammendations followed by ataff reapons.5 are listed below. -Firat .. a discounted value of .argin an~lY5i8 should be added to tine tune evaluation of difterent Balas." staff performed that type of analy&ia in order to structure .everal offer. in the spring of 1990. Staff ba. found that the neqotiated aale baa an expected present value of net benefits of $15.4 .il~on. -Second, any final sales should be presented as ~o the effect on either rates or average ~5tomer bills in terms of with and -.,1 tbout tho •• 1e .. - As mentioned earlier In this report~ ataff haa found that the sale is expected to allow electric rates to escalate 0 .. 32 percent less thbn they otherwise would. -Third, • check of the sale aqainst the vslue in th~ 24rk.t should he performed.· OS performed a comparison of the cost to Roseville of purchasing Calaveras output from Palo Alto va. the cost to Roseville of building. financing and operating an evuivalant combustion turbine project (if it vere allowed by requletors). The coapari.on .bowed tbat it Would coot Roseville 1 ••• to build the "_,,tion turbine. TIli_ led EllS to conclude that Palo Alto baa negotiated an attractIve 8ale prtce Lor its resource ... CIIR:155:91 11 Bte9l!!lpendatiph staff re~nd. that the City COUncil authorize the Mayor to execute the A9r ..... ent bet .... en the city of Palo Alto and tb .. City of Roseville providinq fDr the transfer ot rlihta tD certain electric qeneration and trans.i •• ion resource. for a l1alted tara. Re.pectfully .Ubaitted. cr~~ '1'OK 1lABASHl: senior Power Enqineer ~ (fc~e .. ~ =l.~ CIWIJ) L. yootfG (7 Drr.ctor. Utilities u • .'. • . . \ . EI~ fFr-Ci\ IT fi @ ECONOMIC AND ENGINEERING SERVICES, INC. Mr. Tom Habashl Senior Power Engineer City of Palo AllO 250 HamiJton A.enue Palo AlIO, CA 1I4301 Dear Mr. Habasbi: ,. Q.1c.r 1_· ~2(l1 ~ a.."'-':I "" . Suo~;ol ......... 'Naa.."'FI"'~ <2'06)-451 «I~ ~.~.u 2CI! 15' ao5II5 December 11. 1990 The City of Palo Alto (City) has retained ~nomic and Engin.erina Services. Inc. (EES) 10 review the staff ~ and recommeDdations regarding the3roposed sale of a portion of the ou!pu1 Of me City's Calaveras hydroelectric plant This leller r~por! delineates EES', findings with respect to !he foUowiog areas: 1. Palo Alto', resoor<:t Jiru:.tion, 2 Palo Alto's modeling techniques and assumptions. 3. Typical types ofresource sales evaluated, and 4. ReCOllltDe1ldations. EES has reviewed a number of internal documents including: -sc.na:lo Development for Resource PIlmnin.o;', "Calaveras Sales Analysis", and ...ncus proposed sales 10 Roseville and Alameda EES has also reviewed !he monthly production cost model utilized in the analysis to evaluate the various sales. PaIG Alto', ResoD ret! SltuaOOn The City is a 22.92% participant in the recently completed Calaveras Project. This project will supply the City with between 50 to 57 MW of capacity. With Calayeras, Western, NW sales and load mrutagement, the City's resnurCl'S ... ill exceed its system load well into the first decade of next millennium. Graph 1, which utilizes data . from the production costing model, depicts the load resource balance in terms of cap~city by mon!h for !he nen 20 years. There Is surplus capacity, partku'.arly in !he earty years. One of !he key assumptions with respect to the surpbs is the flattening of the demand forecast beYond the year 2000. This flattening is due to II number of assumptions relating 10 conservation, population growth, etc. Ho"'ever, if the flattening does not occur, it would be necessary to purchase partial requirements capacity from PO&£. Give,,!he ~lus nature of the City, the consultant finds It is apl'ropriate to consider II we of II portion of Cala .. ras and possibly other resources. The sale is appropriate if the revenue TC<I!'irement of the electric ull1ity ;. less with the SolIe than without !he sale. In o!her wortlS, !he lest of an economic scle ;. that the average bill to electric customer> will be less with the sale than withoulth. sale. .. • f." \ Mr. Tom Habashi December II, 1990 Pose 2 EI~ Mqdttjoctltt V.I." pi' Hal. A productiou cost model is utilized 10 modei the value of the sale. The model is monthly so as to c:>plllIe seasonality of r"",urees and klads. The model produces monthly production pow .. C05ts for the resources and Joads spedfied. The value of a sale of a specific poni!>n is modeUed as Ill. difference be tween the pro<!uctlon cost with the City retairung lbe fun Calaveras output compared to the higher Calaveras OUtpuL A sale is economic WIder the present metho<fology, if the revenue of the sale exceeds this difference. For example, in Graph 2 whicb is a bypothelkal <.zample, the revenue from the sale •• ceeds the value of the sale in everi ~. An expected. mini",,'m and maximum value of the sale was calcula~d ¥!ven sensitivity ariaIyses witll respect to loads, surpi ... sal... economy energy, f'v&E escatnion, Western pn.:e eScalation, waler conditions and otbor faClOls in the , production cost model A review of these scenario assumptions appeared reasonable, In particular, if the maximum value is utilized as a risk averse strategy. Ibe revenue of tlte sale must exceed this maximum value. The modeling designates. 10% chance of this oa:urrillg wllich provides a very conservative wgeL Graph 3 presents a minimum, • maximum and an ~cted value of the sale and revenue from !he sale for the most recent City of RoseVille sale. As Ille • .naIysls demoDStrates, the revenue from the sale exceeds .. en the maximum value. From this criteria the sale is economic. The City will have lower bills with the sale !han without. While the me<hodology provide. the proper signal {or determining if tlte sale is economic, the me<hodology should be fine runed to cliffereotiale betw~.eD sales terms. A discounted margin an.alysis with the time value of the sale should be added. Also, for the final proposal, a detailing 0( the rate impacts ... ith and without the we would elL"ance !he presentation of tile analysis. aearly, showing klwe, average bills with the sale would be benefictal Types .r Sales Two types of sai.s were proposed by the City 10 potential cuslomers. The first type 0( sale '5I>ecifies fixed demand .od energy charges with escalatiou rates, The =<l t)~ :l 0;]. speo:ffics th., 100% of ll:. Ca!::·.-or", OJt~f,would t,c p::id by the buyers. The O&M would be based on the yeariy determination by NCPA. A proportion of the fixed or debt amount would be paid in Ibe beftin!'ins years of the coDtraet, with this proportion escalaled loward 100% by a certain dale. A full COSt layoff s.ale {or a period shorter than tlte project Ufe is nO( possible given current market conditions. The advantage of the second approach over the first approach is that it provides nesotiatiDn flexi"i' for the City. Most potential C\lS1omers would like lower payments np fronl even thou they may be paying more relative 10 Ibe first approach laler. The second approach ows this pacltagilli. As long as the sale passes u,e economic criteria specified aboYe, the s.ale will be economic. The disadvan~ of Ibe second approach is that it masks Ibe energy and dem&nd prices oflbe sale. Implicit prices for demand and eneTgy s.~ould be derived " .. Mr, Tom Habubl December 11.1990 P~e3 - -, , .... ' ... ·~ .. EE~ and compared 10 current market price,s for similar sales. While the sale may be e.:onomic to !he City. jj is po5Slole lilat the sale might be priced below markeL Before finn] sales are concluded, ~ check of the impIlcit demand and eneTlIY prices of the sale should be made against other market ~ of similar strueture. . Three recommendations bave bl:en indicated above. First, a discounted Yalue of IlWl!ln anaMis should be added to fine tune eYaluation or different sales. Second,""f finaf sales SbOuId also be presented as to the effect on either rates or avenge customer bills in terms of .... illl &!ld without the sale. Third,. check or the sale agains1 the val~e in the market shOllld be performed. Ov-..roll, !be method or ev-..lu:otieg S3los &!id the t:fpe of sales utili2ed l'rovilk the Citf .. _ans of mitigating the initial high costS of the Calaveras project while preserving ilS benefirs roc bter use by tile City. If YOIlliave any questiOns regarding this letter repon. please d<> not hesitate to call me.. BP:drt v cry truly yours. ECONOMIC AND ENGINEEJUNG . SEFl.YICES, INC 'h\~~{)L~~. Boru'" Prok -~ 1 Senior ~t. .. , ' ~;-~-----' ------'---------.. . . CITY OF PALO ALTO COMPARISON Of PROPOSED CALAVERAS SALE TO ALTERNATIVE GENERATION: STEAM INJECTION COMBUSTION TURBINE '\ flEVENI)E STREAMS: SAlE \IS STlCT SAlE This analysis compares the proposed sale of Calav8tas 110 • po3Sibie resource alleme.1iv$. Steam Injection Combusllcn TUIt/ne C( STICT. The comparison Is made for bolh flrm or CfIIlcaI water conditions and for non-firm or average waIar eoncfolions. The ~ Is made on the basts of IevarlZsd C06l The pwamet«s for the STlCT are conservative In the! the figures reflect the 1989 EPR! TAG and have not been escalated. It assumed !hat the STlCT 18 bonded for 30 y&afS which also Is tie useful Rfe of "8 STlCT. This allows "e assumplion iIlat tie 0UlpVt tom the sncT Is purchased at cost 110 produce IncWng capflal. No offset for GIWage Is needed. The analysis computes the IeverlZed cost of \he STICT under PerIormaoce c:ondilions 01/ Celaveras with respect 110 water 0ClIIdis1i0n8. Under bolh firm and non-firm waler conditions 1he IeverlZ8d cost of the aa/e 16 higher than the STICT cost This nlIcates tie Sille Is Y8t')' profitable In refallon 110 aT!emalk:e generation choices. \ AGREEMENT B.ETWEEN 'l'ltE CITIES OF pJI.LO AL'l.'O AND ROSEVILLE FOR THE ASS IGNKENT OF CAPACITY IN THE NORTH FO!U<: STANISLAUS RIVER HYDROELECTRIC DEVl:LOPJlENT PROJECT All\) OTHER ELECTlIlC Rl!SOURCES A G R E E MEN T THIS AGREEMENT, is made and entered into this _____ day of April~ 1991, by And between the CITY OF PALO ALTO# a chartered city, as assignor, hereinafter referred to as ·Palo Alto,· and the CITY OF ROSEVILlE, a municipal corporation, as assignee, hereinaf­ ter referred to as ~Ro~eville.· WITNESSETH ~~I Palo Alto and Roseville are each &emhers of the Northern California Power Agency (-NCPA-) and Project Participants in the North Fork Stanislaus River-Hydroelectric Developmp..nt Projfl>ct (·Project-) to the extent of tventy-two and ninety-t'Wo hundredths per cent (22.92') and tYelve per cent t12.00%), respec­ tively; and WHEREAS, Palo Alto is willing to assign and Roseville is willing to accept, for a term of yc~rs, a portion of Palo Alto's Project Entitlement Percentage in the Project, a portion of Palo A1to's prospect.ive interest in the washington Water Power-NCPA Power Sale Agreement (·~~-NCPA Agreement-) and California-Oregon Transmission Project ("COTP"), and a portion of Palo Alto's settlement entitlement through NCPA of Pacific Gas , Electric Company off-peak contract ene~~ on the terms and conditions set forth in L~is Agreement; and ~~ Palo Alto and Roseville have received preli~i­ nary consent to the assignment from NCPA, and the Purcbasing participant cities of Alameda, Realdsburq and santa Clara; and WHEREAS, Palo Alto and Roseville desire such assignment to be subject to the terms~ conditions and de.finitions of the various contracts~ settlements and operating agreements 'Which govern Palo Alto's rights and obligations 'With respect to such assignment, except as expressly provided in this Agreement. NOW~ THEREFORE, in consideration of their ~utual covenants I the parties hereto agree as follows: 1. Definitions. The terms used in this Agreement shall have the Salle meanings herein as are qiven such terms in the following listed documents and definitions, provided that in the e.vent of conflict bet",een an express definition in this Agraement and a definition in any other document, the definition used herein shall control.. In the event of conf.lict between the definitions set forth in any of the following listed documents.. the definition :3hall be ascertained from the context, usage and intent of the parties as set forth in this Agreement. I! .. Documents: i. ACJreement for Construction, Operbtion and Financing or the North Fork stanislaus River Hydroelectric Development Project, dated as or September 1, 19a2, by and among 1 • \ '. /' the Northern Califorhia Power Agency and thet cities of BiC]9I1, GricHey, Realdsburq, LodL w:mpoc:, Palo Alto" Roseville, Santa Clara, Ukiah, and the plumas-Sierra Rural Cooperative (~Third Phase Calaveras Agreement-Jt Alameda, Redding, Electric ii. A9re~ent for the Transfer of Rights to Capacity and Energy of the North Fork stanislaus River Hydroelec­ tric Development Project, dated aG o~ February 1,. 1985, by and between the Cities of Reddinq and Alameda, Healdsburq, Roseville and Santa Clara: iii. Agreeme.nt for Sale of Surplus Capacity and: Energy of the North Fork stanislaus River Hydroelectric Development Project, dated as of February I, 1985, by and among the Northern California Power Agency and the cities of Alameda, Biggs, Gridley, Healdsburg" LOOi, Lompoc, Palo Alto, RosevIlle, santa Clara, Ukiah, and the Plumas-Sierra RJ..:ral Electric Cooperative (-Surplus Capacity Aqreement-)~ tv. Settlement Agreement Concerning FERC Docket No. EL89-4-000 Between Pacific Gas , Electric Company and Northern california Power Agency, dated January 30, 1990 (-PG'E Off-Peak Energy Settlement-); v. Agreement for Financing of Planning and Development. Activities for Purchase ot Po"tier from t:orthwest Rasource, dated July 23, 1990, by and between Northern california Power Aq'ency and the Cities of Ala:meda, Healdsburg, Lodi ... Lompoc, Palo Alto, Roseville, Ukiah, and the Turlock Irrigation Di6trict; vi. Draft Agreement for Purchase of Power from a Northwest Resource, dated Septe;:nber 19, 1990, by and between Northern california Power Agency and those of its members who have executed it (-Draft Third Phase Northwest Resource Aqree.ment-J , Which draft agreement refers to an agreement betWeen NCPA and Washington Water Power Company knO"aln as the Washington Watsr Power-NCPA Power Sale Agreement (~WWP-NCPA Aqreement~)~ vii. Transmission Aqency of Northern Califorr.ia Project Agreement No. 3 tor the california-Oregon Transmission Project, datEd March 1~ 1990, by and between the Transmission Agency of Northe.rn California and the Cities of Alameda, Healds­ ~urg, Lodi, Lompoc, Palo Alto l nedding f Roseville, santa Clara l Ukiah, and the Plumas-Sierra Rural Electric Cooperative, Modesto Irrigation District, Turlock rrriqation District, and the Sacramen­ to Municipal Utility District (ftTANC Project Agreement No. 3-); viii.. Draft California-Oregon Transz:'lission Project - Pacific AC Intertie Coordinated operations Agreement, dated July 9, 1990; ix. Draft NCPA Facilitie.s Agreement, Facilities SChedule FA 3.03, Hydroelectric Project No.1 Operating Procedures. 2 '. • / b. Qefinitions: i. -Assigned Project Share-shall mean six and fifty-two hund~edths per cent (6.52%) of the Project. ii. -COTP Line Tra~smission capacity Assiqnment a shall Bean the asslqnment by Palo Alto to Roseville, for a term of ye.::!lrs, of forty-e.!qht hundredths per cent (0.48') o! COTP capacity .. iii. -Existing Calaveras Plant-shalllllean the North Fork stanislaus River Hydroelectric Development Project (FERC Project No. 2409) which consists of the New Spicer Xeadow Dam and Powerhouse, North fork Diversion Dam and Tunnel, New Spicer Meadow Transmission Line, MCKay's Point Dam, Beaver Creek Diversion Dam, collierville Upper and Lower TUnnel, collierville Powerhouse and Collierville Transmission Line and related equipment. iv. assignment of def ined. in the ·WWP-NCPA Agreement Assignment-shall mean the Capacity, Energy and Ass<x:iated Transmission as WWP-NCPA Agreement. v. -Non-capital costs· shall mean system control and load dispatch costs; property, payroll or other taxes; adJliiinistl"ative and general direct and indirect charges: aaintanance reserve or related funds: and any other related no~-capltal costs whi~ may be charqed to Project Participants by NCPA~ vi. ·Capital Iw.provement Costs-shall mean all costs whicb .ay be charqed by NCPA to Project Participants~ other than Non-Capital costs or operation and Maintenance costs. vii. 1It000ration and Maintenance" shall lie an the Existing Calaveras Plant operation and maintenance as it may be defined fro. time to time in the NCPA annual buaqet. viii. IIPG&E Off-Peak Energy Settlement Assignment- shall mean the ~ssi9nment of otf-peak energy supplied by PG&E and purchased by NCPA in accordance to the terms of the PG&E Off-Peak Energy settlement which are set forth in a settleJllent agreement concerninq FERC Docket No. EL89-4-000. Ix. -Resource Substitute-shall mean the next NCPA resource project or contract with a capability factor, operating characteristics and te~ equivalent to the WWP-NCPA Agreement. 2. CAlayeras Assignment. Palo Alto hereby assigns to Roseville six and fifty-two hundredths per cent (6.52%) o~ the total Project capacity and enerqy, including six and fifty-two hundredths per cent (6.52t) of all enhancements included as part ot the NCPA HydroelectrIc Project No.1. This assiqnment is subject to all terJIS and oondi tions of the Third Phase Calaveras Agreement, except as expressly provided herein. a. ~. The assignment shall commence January 1, 1991 and end December 31~ 2004. 3 { . , . • b~ Operat.ion. Maint~nance and Qthe.L Non-Capital C2§.ll. Roseville will be responsible for all operation and Maintenance, and other Non-capital Costs,. excluding debt se,rvice associated witt'! six: and fifty-two hundredths per cent (6.52\) of the plant and associated enhancements. c~ pebt Service Payment Schedule~ Roseville will pay Palo Alto a portion of the net debt service obligation associated ~ith the Assigned Project Share of the Existing Calaveras Plant in accordance with the payment sched~le attached to this Agreement as Exhibit A~ Pdyment increases will be effective on January 1 of each year, commencing Jan~ary 1, 1992. Roseville will pay Palo Alto one hundred per cent (100\) of the debt service obligation associated with project enbancements not already financed and included as part of the Project as of January 1, 1991~ d. Voting Rights. With "respect to the Assiqned Project Share, Roseville shall have the right to use Pale Alto's voting rights under the Third Phase Agreement on Operation and Maintenance decisions up to and including December 31,. 1997. Palo Alto shall retain voting rights pertainlnq to capital improvement projects, incluains enhancements. e. Capital Improvement cost Payments. Capital Improvement Costs will be prorated between RosEville and Palo Alto according to the formula set forth in this paraqruph. Roseville will pay the amount determined by multiplyinq the cost of the Assigned Project Share of the capital i=provement project by the fraction created by dividing the remaining term of this Agre~ment at the time the capital iBprovement becomes operational by the projected life of the capital improvement project. This proration is represented hy the following formula: Roseville Capital Improvement Cost = A x BIC Where -A-equals six and fifty-two hundredths per c.ent (6~52\) of the cost of the capital j mprovement project, -BOI equals the lesser of the remaining tenn of this Agreement at the time the capital improvement becomes operational or tha ploject@d life of the capital improvement project, and ·c· equals the projected life of the capital improvement project. 3 ~ WWP-NCPA Agreement ~~gmDent. Palo Al to hereby agrees to assign to Roseville, at Palo Alto's share of the contract cost, five Meqawatts (5 MW) ot its prospective entitlement in the WWP­ NCPA Agreement or" if the WW.P-NCPA Agreement does not become effective, its Resource Substitute,. subject to paragraph l.b. below~ The 5 MW will be measured at the Sdme d.elivery point designated in the WWP-NCPA Agreement or, if a Resource Substitute is used, at the deltvery point speci!ic~ in the Resource substitute aqreements ~ This assignment will be subj ect to all terms and conditions of the Third Phase Northwest Resource Agreement and WWP­ NCPA Agreement~ and any Resource Substitute agreements, except as expressly provided herein~ "-------"----,---- "<.' ~,). , a. ~. This assignment ~ill be effective ~ith no furtr.er action by Palo Alto or Roseville upon the date the WW"P-NCPA ~~sreem.entt or a Resource Substitute approved by NCPA, becomes effective (cu~rently scheduled for 1993J, and shall end December 31 , 2004. b. Resource Substitute.. I1'\ the event the WWP-NCPA Agreement does not become effective., Palo Alto viII provide a ResOLlrce Substitute if available as provided herein~ Palo Alto sha~l have no obligation to provide a Resource Substitute unless an alte~na­ tive to the WWP-NCPA Aqreement is finally obtained by NCPA and becomes effective on or before Decembar 31., 1996. Roseville and Palo Alto agree that the combined Cycle Project No.1, which is currently being developed by NePA., is not and will not be consid­ ered a Resource Substitute for the w~-NCPA Agreement. c.. Acceptance by Rosevill·e~ RC.lseville: will have the right to refuse the WWP-NCPA ~9reement ~siqnaent or a Resource SUbsti­ tute it the terms or costs Are not acceptable to Roseville, pr~ideQ that Roseville has advised Palo Alto of its intention to refuse the purchase by written notice received by Palo Alto not later than. 30 days prior 'to the scheduled dat~ of MCPA's final adoption of the Third Phase ~orth'West Resource Agreement or its equivalent. Notwithstanding the fore<joing:, Roseville agrees to notify Palo Alto as soon as possible o~ its intentions, and to conGult with Palo Alto during WWP-NCPA ne90tiations~ d.. COTE Line r.L'ransmission Capacity Assigvment. If Roseville does not refuse the. WWP-NCPA Agreement Assignment or a Resource Substitute, Palo Alto will assign to Roseville ... at Palo Alto's share of the contract cost and for the same term of years as the 'WWP-NCPA Aqre~ment Assignment, forty-eight hundredths per cent (0.48\) of COTP capacity in order to provide Roseville transmission capacity for the WWP-NCPA Agreement Assignment or a. Resource Substitute whiCh can be transmitted on COTP. Once -within the first year of COTP operation., if mutually agreed upon by authorj~ed representatives of the parties., the COTP Line Trans:nission capacity Assignment may be increa.30ed or dec:-eased by up to forty-eight thousandths per cent (0 .. 048\) of COTP capacity in order to provide Roseville additional assurance of sufficient transmission capacity for the WW}?-NCPA Agreement Assignment or a Fesource Substitute. R~seville expressly accepts all riSK, and releases Palo Alto from any additional transmission capacity obligation, it for any reason the COTP tr~n5~ission capacity dssiqned pursuant to this paragraph is not SUfficient to deliv~r the 5 MW on a firm basis. 4. Pacific Gas " Electric company-Ofr-Peak Energy ~ettlement Ass%gnment. Palo Alto hereby assigns to Roseville, at Palo Alto~s share of the contract cost, two and one-half M~gawatts (2.5 MW) of its PG&E Off-Peak EnePgY Settlemen~ entitlement. Tbis Assignment is subject to all terms and conditions of the PG&E Cff-Peak Energy settlement, e~cept as expressly provided herein. 5 ell. I:itDD~ This assignment shall commence on January 1, 19Sn, and end the earlier of December 31, 2004 or the expiration or other terzination of the PG.E Off-Peak Enerqy settlement entitlement. 5. Bil] inq. Subject to approval by NePA, NCPA will bill Roseville directly for all Operation and Maintenance, and other Non-capital Costs ~nd debt service on the Assisne~ Project Share l for all costs l~curred in connection vith the PG&E Off-Peak Energy Settlement Ass igmlent I and for all costs incurred in connection .i~ the WWP-NCPA Ag~eement Assignment. For debt service on the Assigned Project Sha,re, NCPA .... tll alloc::lte payments to Palo Alto and Roseville in accordance with the schedule set forth in Exhibit A of this Agreement. Subject to approval by TANC 1 all COTP Line Transmission Capacity Assignment costs viII be billed directly to Roseville by TAMe. 6.. General Prov isions~ .. a.. Construction. As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine qender includes the feminine and neuter and vice versa~ h. Severability.. If any term, provision l covenant cr condition of this Agreement shall be determined invalid. void, or unenforceable, the remainder of this Agreement shall not be affect&d to the extent the remaininq provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. Not.withstanding the foregoing, the provisions relating to the WWP and PG&E assignments are essential elements of this Agreement, including paragraph 6.k. below 1 and the parties would not have entered into this Agreement but for such provisions, and therefore in the event such provisions are deterained to be invalid, void or unenforceabl~, this entire Aqreement shall be null and void and of no force and effect whatsoever as of the date such determination becomes final. c. CaDt.ions and Refe1;'ences. The captions of the section;; and subsections of this Agreement are solely for convenience of refer-ence" and shall be disregarded in the construction and interpretation of this Agreement .. d.. Time. Time is of the essence of this Agreement and of each and ev~ry term and condition hereof. e. Assignmen~. Roseville shall h~ve the riqht to assign t.~e riqhts and obI iqations created pursuant tc this Agreement fot' tiny term o~ leS5 than four (4) years. Roseville may seek Pal.o Alto's prior written consent to an assignment for a term of four (4) years or ~ore, subject to Palo Alto'& written consent which sha.ll not he u~reasonably -withheld. Any attempted assignment without Pale Alto~s prior written consent shall be grounds for termination of this aqreeltent~ No assiqnment shall relieve Roseville of its obligations under this Agreement i and the acceptance by Palo Alto of payments or other elements of perfor- 6 ..... -..... -----_ .. _--_.- • \ , .. " -mance from a third party shall not be deemed i! waiver of any provision of this A.greement or to :be cons.ent to A purported assiqTI..!l1ent. , \ f. waiver. No vaiver of any provision of this A9reement shall be effective unless in writinq and signed :by a du_ly autho­ rized representative of the party against whom enforcement of a waiver is sought. No waiver of any right or remedy in respect of any OCcurrence or event shall be d~emed a waiver of any right or remedy in respact of any other occurrenca or event. 9. Governing Law. This Agr.eement sball be constr"o.led in accordance with the laW's of the Stata of Californi~. This Agreement &.hall be construed as a whole according to its fai~ language and common meaning to achieve tha objectives and purposes of the parties. The rule of constt"'J.ction to the effect t.hat aBbiquitles are to be resolved against the drafting party shall not be eaployed in interpreting this Agreement, all parties having been represented and t,aving fully participatad in the negotiation of this Ag'reement ~ h. Ferea Majgurg.. Neither party shall be deened to be in default wbere failure or delay in performance of any of its obligations under this Agreement is caused by floods, earthquakes, other Acts of God, fires., 'Wars, riot.s or similar hostilities, strikes and other labor difficulties beyond the party·s cont~ol (including the party's employment force), court actions (such as restraining order or injunctionsJ, or other causes beyond the party 1 s control. However, if any such events shall occur, the term of this Aqreement and the time for performance by either party of any of its obligations hereunder shall not be extended for the period of time that such events prevented such pe~formance* 1. Entire Agreement. This Agreement sets forth and contains the entire understanding and aqreE:lDent of the parties. There are no oral or written represer,tations, understandings .. undertakings, or agreements ~hich are not contained or expressly referred to herein, and any such representations l understandings, or agreements are superseded by this Agreement. No evidence of any Eucb repr~sentations, understandings, or a9reements shall be. admissible in any proceeding ot any kind or nature relating to the terms or conditions of t.~is '~qreet!l.snt, its interpretation, or breach. j. No Third party Be_neficiariee. This Aqreel!lent is made and entered into for the sole protection and benefit o~ the parties and their Su.o:xes&ors and assigns. No othe.r person shall have any right of action based upon any provision of this Agreement. k. pUrchasing Participant Waiver Cqntingency. Palo Alto and P.oGe.vill~ have receiv-ed preliminary cO-nsent to the Ca.laveras. Assignment de.scribed in paragraph 2. above, from NCPA and t.he Purchasing Participant citie.s of Alameda, Healdsburg and Santa Clara, and upon execution of t. ... !is Agreement will seek a waiver, pursuant to section 2(b) of the sur~lus Capacity Agreement, of any 7 • _. rights the Purchasing participant cities may believe they possess under the Surplus Capacity Agreeaent. However, neither Palo Alto nor Roeevil1e believe or admit that this Agreement constitutes a Loll9' Term Power Purchase Contract within the meaning of the Surplus Capacit:r Agreel'\ent, and accordingly, neither Palo Alto nor Roseville believe. that consent to an assignment is required from the Purchasinq Participant cities. In the event any of the Purchasing Participant cities fails to waive any purported rights under t.."te Surplus capacity Agr~ement, Palo Alto !Shall have no obligation to perform: the WWP-NCPA Agreement Assignment or PG&E Off-Peak Energy Settlement Assignment. ~n adaition, in the event any 0% the Purchasing PartIcipant cities :talls to ltIaive any purported rights unde.r the Surplus capacity Agreement" either Palo Alto or Roseville may terminate this Agreement. 1. Cowlterparts. This Agreement aay be executed by the partle.s in counterparts, 'Which, counterparts shall be construed together and have the same effect as if all of the parties had executed the same instrument • • ~ FUrth.r AcUQrui.. Each Clf the parties shall cooperate with and provide reasonable assistance to the other to the extent cont".eJDplated in the :>erformance of all obliqations under this Agreeaent and the satisfaction of the conditions of this AqreeD.ent. Upon the. -request of either party at any t.ime, the other party shall pra.ptly execute I with acknowledqment or affidavit if reasonably required, arod .file or record such required instruJlents and wt.'itings and take any actions as may be reasonably necessary under the terms of this Agreement or to evidence or consummate ~~e trans~ctions contemplated by this Agree~ent .. ~ . n.· S iqnature Pages. execute and ackr.owledge this . which, when attached hereto, Agreement .. For convenience, the parties :may Agreement on separata signature paqes shall constitute this as one complete o~ Extensions. This Agreement may be extended only upon mutual agreement. Neither party has any obligation to consider or approve a proposed extension. Any terms for ~n extension will be subject to further n-eqotiatio-ns. My ertension of this Agreement .ust be completed by December 1" 2000. B :---; III WITlfESS WHEREOF.. this Agre_ent haa been executed by the parties .a of the day and year first vritt.n above. CYTY OF PALO ALTO Mayor AT'l'I!ST: city Clerk APPROVED AS TO FORM: City Attorney APPROVED: city Manager Director of Utilities 9 CITY OF ROSEVILLE ~:~~=-----------­City Manager ATTEST: city Clerk APPROVED AS TO FORI!: City Attorney APPROVED AS TO SUBSTANCE: Electric Utility Director 1. J. 4. 6. / Table 91 Contents ttltSn1tiODI Il. b. Qocument§ ~it1Qns Cllayeras lSsignment ". b. c. d. e. nIl! Opcroti on z MAintenance and other ~. Debt sery ice PAyment Schedule VOting BigbY.. .. ... CDpitol Improvement. Cost. Paypen4;,s WKP-KCPA Agreement Assignment a. b. c. ~ ResQUTCe Substitute Acceptance by ROseville Non-capital d. COTP Line Transmisei on capacity As~ignment Pacific Gas' Electric (»mpany Off-PeAt Energy Settlement­ AAliqnment A. Billing CAneral Provisions a. b. c. d. e. f. 9· h. 1. j. 11:. 1. •• n. o. Cgnstruction Sayf!rability capt ions and Be ferenees Un Assjgnment Waiyer Gqyemlnq Law force. Ma1 eur& Intire Agregm@nt No Third Party Beneficiaries Purchasing Participant Waiygr rxu~tingeney Counterparts rurth@£ Actions Signature Pages Extensions PQlIBTT A 1 1 J J 3 4 4 4 C 5 5 5 5 5 5 6 6 .' · . ca l •ndar Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 and beyond 'XBIBI-r> A Percent Of Debt Service sot 55t sot 65' 70' 75t 80t as, 90t 95' loot