HomeMy WebLinkAbout0280.095,
City of Palo Alto
City Manager's Report
TO: HO~ORABLE CITY CQlTXCa
I"ROM: CITY MA.1Ii.AGER DEPARTME."T: FralTIES
AGENDA DATE: JUNE 5,1995 C\1R;280:95
SUBJECT: Update to Council RegarDmg lbe Proposed Sale or lbe Po~·<r
Marketing Administrations
REQUEST
This repon is to update the Coundl on the tatest developments reg::i!'ding the Clinton
AdminIstration""s proposed tra[lsfer <>f me Power :Marketing Agencies (F~1As).
RECQMME1"DA TIONS
This report is for infoonation onIy~
POUCY IMPLICATIONS
If the proposed tra.n5fer of the PMAs materializes, chere "'111 be considerable policy implications
related 10 acquisition or the CiIy"s electric supply O<eds. These policy shifts .. 'ill be QlSCUSsro
in future reports '" Coune3.
EXECUTIVE SUMMARY
On April II. 1995. staff L'lfocmed Council (CMR:199:95) of the Ctinton Administr.>tion's
proposal ~ divest the Power Marketing Agencies. 1l:!e largest P.MA is the """estern .Area Power
AdmirJstraUail ('iVAPA). the S'JppIler 0{ 60 to 90 percent of Palo A..lto"s e1ectr1.::uy need'S.
During thar meeting. Council a-pproved a :-esoluoon opposing the privatir.YSon of the PM.."-s and
supporting restrucruring me e~tsting relafionsrup betv.:een the PMAs and their customers to
improve eff.K'ieocy by redoci.'1g the number of federai personnel and overbead cc&s required to
<operate Ehe PMAs.
In early May~ r..l-Je Hou~« Represemative (Hoose) passed thelT budget resolution ,·hjca
included the saTe of the PMAs ~o tfu: current custorn(r5. However. during a May 18 hearing on
possible transfer vi the P.MAs, the Chairman of the Resources Committees Subcornminee on
\Yater and PO\lo'c:r ~S(Jurces. Representative John Doolittle of California, stateJ that r.e remains
CMR:.lSO ;!lIS rag.: 1 or 3
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.ery concerned till! the HQuse could e((""lively reach the flnancial goal of the sale if the
transfer ()( the PMAs is limited to existing customers. Representative Dcx>lin1c·s panel would
hav. jur',sdktion ov<r any legislation 10 implement the sale.
On the Senate side. the Senate Budget Committee', proposal also included the sale of the PM).!
to the CU!RIl! customers. HQwcver. on MilJ 25. the Senate passed an amendment offered by
Senators Max Baucus and Larry Prcs5ler 10 remove the proposed privatization of the PMAs
frt'm the Sec",te Budget Resolution. This "",mon taken by the Senate is more in line "'ith the
Cooncij', stated position.
The cflfferences betweea ,be HQuse and the Senate budget proposals win be reconciled during
the negotiations betweeillhe House and Senate authorizing commIttees lIo'ho wilt continue lheic
wort: to write legislation 10 meet budget targets.
FOTENTIAL 0lJJ'WMES
Scenario 1. In an effort 10 reduce expenses and sli.-n do\\"U the size of the federal government,.
the Senate and House ultirnately agree 10 the transfer of the PMAs. To reach L'ta! compromi<;e,
Representative DooIinIe "",auld agree kJ the concept thar: the tralL'ifer be to existing c~1.0meTS as
outlined in the Administration's proposal.
Palo Alto is currently preparing for such an outcome by worl.::ing .... ,hb other customers of the
Central Valley Project (CVP/. one of four WAPA projects. to draft principles of an .greemeIll
10 facilitate the I!'.",sfer.
Scenario 2. In recognilion of the complexity of the WAPA system. which operate in 11
Weslera states. the House 'grees 10 postpone the sale of W AP A foc 11<'0 10 three years 10
carefuDy study the merits of the proposal. In IIlnI, the Senate agrees 10 the transfer of tlle other
PMAs .. WhiCb seems mod. less compIicated+ This could result in .. Jess desirable outcome for
Palo AlIe>_ becaw;e it increases the probability for future auctiooin;! of W AP A.
Palo Alto i:s preparing lor this outcome by engaging legislators 10 persuade tllem 10 treat WAPA
in tlle same manne, they will tre'" the other PMAs,
Scenario 3+ The authorizing Comnlinees, iT) an att.e1r'.pt to maximlze the value of lhe PMAs,
will ignore tlle House ,nd the Senate proposals in terms of the sale of the PMA, and vote to
auction an of the PMAs. ThIs is the least likely outcOIllf'. given that the authorizing committees
will spend the majcrly 0( their time? on larger issues such as mea>eare expenditure.
Nevertheless .. Palo Alto is preparing for this outcome by preparing to wort w'ith potential
bidders to ensure that any rate shoe\: 10 our customers would be minimi:7.ed. if DOt eliminated.
Scenario ... The House will abandon the sale of the PMAs in favor of obtaining coocc!S5ions
from the Senate on issues that have bigher priorir)' on their agenda, such. as the efunination of
several Administration departme ....
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~ 'ii' This outcome is more in line 'iTw'ith Palo Alto·s stared goals. FoDowlng sucb an outcome, staff
wilt (ootinue '" lmp1emen! strategies ~'lat would strengthen the ptr.nershlp betwee. W AI' A a!ld
its customers in goner>! .nd Palo Aka in particular,
NEXT SU:l'.S;
SIaff will continue 10 mooltor and influellCe the pofltical process, 10'00< v.'ith O!her W IU' A
customers on prlociples to facilitate the transfer. converse with other potential OWDti"So of CVP
S)'5!eDI, and work 10 stre~'>en ties with the W IU' A.
Staff Vr"l-lI update Council on this i.::nportan1 matter 00 .. monthly basis untJ1 Congress decides on
Ito future of the !'MAs.
ElIo"'1RONMENJAL ASSESS",a.Vi
This dQes not req'J.ire}lllY environmental asses.:."mCnl.
ATIACHMENIS
PREPARED BY: Tom Habashi, Assistanl Dire<1C< Resource Management
DEPARTMENT HEAD APPROVAL,
City Manager Approval:
Flge 1 or l