Loading...
HomeMy WebLinkAboutMinutes - City Council - unsigned - 1995-04-25 - Adjourned Regular Meeting1 04/25/95 City Council, Adjourned Regular Meeting City Council Chambers 1313 California Street Redding, California April 25, 1995 6:15 p.m. The meeting was called to order by Mayor Kehoe with the following Council Members present: P. Anderson, McGeorge, Murray and Kehoe. Council Member R. Anderson was absent. Also present were City Manager Warren, Assistant City Manager Perry, City Attorney Wingate, Electric Utility Director Lindley, Electric Utility Resources Manager Coleman, Electric Utility Resource Planner Gilfoy and City Clerk Strohmayer. RESOLUTION - re Agreement with PacifiCorp Agreement for the San Juan Project Power (E-120-500) Electric Utility Director Lindley related that in 1983, the Modesto/Santa Clara/Redding Joint Powers Agency (MSR) executed an agreement to purchase an ownership interest in the San Juan coal-fired power project (San Juan) located in New Mexico from Public Service Company of New Mexico. Mr. Lindley reviewed the Report to City Council dated April 20, 1995, incorporated herein by reference. Mr. Lindley stated that in early 1994, staff began searching for beneficial opportunities to layoff or exchange all or a portion of San Juan power beginning May 1, 1995. In October 1994, it appeared that a relatively favorable arrangement had been reached with the City of Riverside. Unfortunately, Riverside unexpectedly withdrew its interest in late January 1995. Mr. Lindley explained that the Power Exchange Agreement before the City Council provides for the exchange of San Juan energy delivered to PacifiCorp in the southwest for deliveries of energy from PacifiCorp to Redding at the California-Oregon border. The arrangement provides for the exchange of power in lieu of payments the City would otherwise pay to PacifiCorp for the purchase of power under the existing agreement. He highlighted the following points of the agreement: 1) PacifiCorp will obligate itself to a minimum take requirement of 9 megawatts of the City's 21.5 megawatt entitlement, or 130 million kilowatt hours of energy annually; 2) The City receives approximately 1.372 kilowatt hours of energy for every 1 kilowatt hour of energy PacifiCorp receives up to 130 million kilowatt hours annually. After the annual 130 million kilowatt hour threshold is achieved, the ratio becomes 1.1 to 1; 3) After the first 30 days, the agreement may be canceled by PacifiCorp with a one-year notice and by the City with four-months notice; and 4) Because the City was able to enter into this arrangement, a $5 to $7 million savings is expected over the first five-year incremental period. Mr. Lindley noted the following changes have been made since the Report to City Council dated April 20, 1995, was prepared: 1) The form of the document has been changed from an "Amendment" to an "Agreement;" 2) The indemnification provisions (Section 14) have been revised to reflect PacifiCorp's latest corporate language. He related the City Attorney and the Electric Department's outside legal counsel have reviewed and approved the new language; and 3) Section 7.1.4 was revised to relieve PacifiCorp from fulfilling its minimum San Juan energy-take obligations if the San Juan project experiences a forced outage (unexpectedly becomes inoperable or must reduce its maximum output). Mr. Lindley credited Electric Utility Resource Planner Gilfoy for initiating the PacifiCorp agreement and Electric Utility Resources Manager Coleman and his staff for the negotiations. In response to Council Member P. Anderson, Mr. Lindley explained the City intends to spot market any excess power not required by PacifiCorp. He reviewed the overhead entitled "Projected Rate Increases Needed to Meet Rate Mechanism October 1994 Forecast," incorporated herein by reference. This depicted the projected rates with the City of Riverside Agreement, without the City of Riverside Agreement, and with the 2 04/25/95 PacifiCorp Agreement. He cautioned there have been a number of significant changes in the electric utility projections since October 1994. Mr. Lindley recalled that staff has been requested to consider ways of lowering future rate increases. He referred to an overhead entitled "Potential Future Conditions to Lower Rate Increases," incorporated herein by reference, and highlighted the following items which are under consideration: 1) Use of MSR debt reserves to pay debt service on transmission project; 2) Refinance certain MSR debt; 3) Prepay MSR expenses - He believed the Electric Utility would be in a position this fiscal year to make prepayments without adversely impacting expenses beyond budget authorization; 4) Renegotiate MSR/Bonneville Power Administration (BPA) contract - Staff estimates negotiations could take as long as one year and result in annual benefits ranging between $100,000 and $1,000,000. He stated it is speculative, however, at this time whether the renegotiation would be a positive result for MSR; 5) Other wholesale transactions - This would include spot market selling Redding's unused MSR entitlement; and 6) Prepay certain PacifiCorp payments - He stated the City has a very beneficial agreement with PacifiCorp to purchase power. The power is then laid off to the Western Area Power Administration (WAPA) under a second agreement which permits the City to shape that power to meet its load requirements. He indicated the City could potentially save between $1 to $2 million annually over the life of the project if the City could fund a prepayment of the purchase of power under the terms of the agreement on a long-term basis. In response to Council Member Murray, Mr. Coleman explained the San Juan unit has to have at least 40 percent operation. Forty percent of the City's 21.5 megawatt entitlement equates to 8.4 megawatts, thereby PacifiCorp's minimum take requirement was rounded to 9 megawatts. He stated that PacifiCorp is expected to take 21.5 megawatts between the hours of 6:00 a.m. and 10 p.m., and 9 megawatts between 10:00 p.m. and 6:00 a.m. Mr. Lindley conveyed the difficultly of quantifying the PacifiCorp Agreement's overall impact on electric rates. Council Member Murray stated that there have been a number of recent articles indicating that depending on the outcome of several regulatory issues, Moody's is considering the downgrading of bond ratings of cities which have electrical power generation plants and facilities. Given the fact that the options being considered by staff to lower future rate increases deal primarily with bond issues, he believed it would behoove the City to be ahead of this curve as much as possible. He stressed that the PacifiCorp agreement represents twice the savings that either Santa Clara or Modesto expect to receive from their layoffs of San Juan power. MOTION: Made by Council Member P. Anderson, seconded by Council Member McGeorge, that Resolution No. 95-110 be adopted, a resolution of the City Council of the City of Redding approving entering into a Power Exchange Agreement between PacifiCorp and the City of Redding relative to San Juan project power. Voting was as follows: Ayes: Council Members - P. Anderson, McGeorge, Murray and Kehoe Noes: Council Members - None Absent: Council Members - R. Anderson Resolution No. 95-110 is on file in the office of the City Clerk. Mayor Kehoe expressed appreciation to Mr. Gilfoy for his efforts on behalf of the City. ADJOURNMENT There being no further business, at the hour of 6:45 p.m., Mayor Kehoe declared the meeting adjourned. APPROVED: 3 04/25/95 ________________________________ Mayor ATTEST: ______________________________ City Clerk