HomeMy WebLinkAbout0414.094~,~ City of Palo Alto
~ City Manager's Report
~--.------------~----~------~--
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
AGENDA DATE: SEPTEMBER 7,1994 CMR:414:94
SUBJECT:
REQUF,s'f
PlIo Alto Eledric Utility Loin 10 We.tern Are. Power
Admbdstratlon and Shasta Dam Generator Upgrade ond
MaintC'uAUtE FinaDclag
'This is to infonn the Council Ooollt the staff discussion and a proposal for Palo Alto 10
It<sisl in fin .. ~cing deferred mainlenance and upgrades for four of the fiye Shasta
genel'lltors. The. Shasl> genemlors are part of the Central Valley Project (CVP) which
supplies the bulk of Palo AHo's electricity needs. If the project proceeds, staff will
provide a detailed report to the Utilities Advisory Commission and fO<jUest Council
approval on this malter in October,
Jq:CQMMENDATIONS
There are no recommendations and no City Counci I action required at this time.
POLICY IMPL!CA~
The City has nol preYiously participated in a loan arrangement such as the one outJinM
in this proposal. To make a significanl share of the r«juested loan puts the City in •
partnership with its largest supplier and assists with the fmancing of the project that
supplies the bulk of the City's power.
Utilizing some Utility reserve monel' in making the loan also presents an opportunity
to use reserve funds pro-actively to prevent an emergency rather than using them in
response to an emergency.
EXECUTIVE SUMMARY
For several years, the Bureau of Reclamation, the operator of the CVP, and the Western
Area Power Administration (Western), the marketing agency of the projecl hydro
.'"
.<
ootpuI, have been requesting Congressional budge! appropriation .utIlori!), for $19.8
million to fund work on the deteriorating Shasta Dam Hydro-eJeotric gonorators. That
work indud<:;:
-Rewind and upgrudc units l, 4 and 5 from 9SMW to 125 MW each
-New thrust bearings and = for units 2, l, 4 and 5
Western staff indicate thai u,., ~fil$ of the work will include:
-Improving system reli.billy -present windings are on the verge offailure
-Increasing operalion flexibility' thrust bearing improvements
. Provide the peaking flexibilH)' -during forced outages of other units
~ Jncfeasing proje1:1 outpu( " to meet customers' increased demand
These benefits would be incorporaled into the Central Valle), Projeol system and would
be shar<l by all customers.
Unfortunately, Congress has repealedly denied the approprialion of funds to pcrfonn
that work and advised Weslern 10 seek customer funds through the Contributed Funds
Act. Western has approached iL. cuslOmers to ask for an inlerest bearing loan of$19.8
million to fund this work. The Joan would be amortized b)' 1213112004 (the cxpiration
of Palo Alto's curroll conlllol). The inlerest r.le rna)' be adjllstable. Monthly payment'
(0 participating Weslern customers would be in the form of direcl billing credits as a
line item 01\ the Western bill.
Staff took the lead in responding to Western's request, bc.:ausc staff feels this is a
beneficial prolect, • s.fe loan (minimal default risk or interesl rale risk), and a good
way to dernOOSlrale 10 Congress that we ~ parUlCIS with Western.
FISCAL IMfAcr
Using Electric Vlility reserv", 10 fund $5 10 $'/ miliion of the loan to Western would
bring reserve 1 .. ,eI5 dO\\Tl closer to targel levels set by Council and would nol alfect
rates. Staff will continue to eXlltnine the situation \\lth respect to the Utility's reserve
liquidity needs and olher Weslern customers' willingness and ability 10 fund the loan,
" '.
";.'j
)
)
ENVIRONMENTAL ASSESSMENT
No envriorunentaJ ASSessment is needed by Palo AIIO.
I'repartd, By; Tom Hablisbi and Tom Kabat~
Department Head Approval; f ;/ ~ . _
~
l)irect of Utili' -
City Manager Approval:
1·,~
"" Utilities Advisor), Commission