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HomeMy WebLinkAboutReso. 1986 - 256 - Approving the consultation agreement between the city of redding and resource management interantional inc to assis in negotiations of utility service agreement with pacific gas and electic company ti.. • Ili • RESOLUTION NO. —,'6 , A RESOLUTION OF THE CITY COUNCIL OF THE CITY SOF REDDING APPROVING THE CONSULTATION AGREEMENT BETWEEN THE CITY OF REDDING AND RESOURCE MANAGEMENT INTERNATIONAL) INC. TO ASSIST IN NEGOTIATIONS FOR A UTILITY SERVICE AGREEMENT WITH PACIFIC GAS AND ELECTRIC COMPANY, AND AUTHORIZING THE CITY MANAGER TO SIGN SAME. BE IT RESOLVED by the City Council of the City ofJRedding as follows: 1 . That the City Council of the City of Redding hereby approves the attached Consultation Agreement, not to 'exceed the sum of $37, 500 . 00, between the City of Redding and Resource Management International, Inc. (RMI) , of which RMI ' s Proposal to the City of Redding dated September 1986 is a part, to assist the City in its negotiations for a Utility Services Agreement with Pacific Gas and Electric Company; and 2. That the City Manager of the City of Redding is hereby authorized and directed to sign all necessary documents on behalf of the City of Redding, and the City Clerk is hereby authorized and directed to attest the signature of the City Manager and to impress the official seal of the City of Redding on the aforesaid documents, when appropriate; and 3. That true copies of the above-mentioned Consultation Agreement and Proposal are attached hereto and made a part hereof by reference. I HEREBY CERTIFY that the foregoing Resolution was introduced and read at a regular meeting of the City Council of v1 the City of Redding on the 6th day of October , 1986 , and was duly adopted at said meeting by the following vote : AYES: COUNCIL MEMBERS: Carter, Dahl , Gard, Johannessen, & Fulton NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None ABSTAIN: COUNCIL MEMBERS: None /44J -r LEE D. FULTON, M.D. , Mayor City of Redding ATTEST• d CC ad971,61 ETHAL A. NICHOLS, Cit Clerk by Connie Strohmayer, Deputy FORM RAN ALL A. HAYS, Cty Attorney Y -2- RESOURCE. • Rog/ • • MANAGEMENT INTERNATIONAL INC. 1010 HURLEY WAY•SUITE 500 SACRAMENTO, CALIFORNIA 95825 (916)924-1534 September 24, 1986 Mr. Rick Coleman Resources Manager Electric Department City of Redding 760 Parkview Avenue Redding, CA 96001 Dear Rick: Resource Management International, Inc . , (RMI ) is pleased to enclose herewith a proposal to the City of Redding (City) to assist in the negotiations for a Utility Services Agreement with the Pacific Gas and Electric Company (PGandE) . A future Utility Services Agreement with PGandE will be very important in maintaining the City' s attractive power rates. Unfortunately, PGandE agreements are often difficult and complex to negotiate and obtain reasonable terms. RMI and its staff members have extensive experience in the development of these agreements and we look forward to the opportunity to be of service to the City. Please call if you need further information or clarification on our proposal. Sincerely Maurice A. .ruth Vice President Enclosure cc: Sam Lindley E' s; y `., RESOURCE RESOU•MANAGEMENT INTERNATIONAL, INCA ,C,.. 'r MANAGEMENT ERNATIONAL IINT NT 1010 Hurley Way, Suite 500 Sacramento, CA 95825 (916) 924-1534 CONSULTATION AGREEMENT This is an agreement for Resource Management International, Inc. (IRMI) to provide consulting services to: Client CITY OF REDDING ELECTRIC DEPARTMENT Address 760 ..PARKVIEW AVENUE IIII City REDDING State CA Zip V 96001 I CONSULTING SERVICES The services to be provided are as follows: To assist in the negotiations for a Utility Service Agreement with the Pacific Gas and Electric Company. II • PROFESSIONAL AND PARAPROFESSIONAL FEES The fees for services, except testimony, shall be billed as follows: Managing Executive Consultant $ 95 per hour Principal Executive Consultant 85 per hour Executive Consultant 75 per hour Principal Consultant 68 per hour Supervising Consultant 62 per hour Senior Consultant 57 per hour Associate Professional 52 per hour Junior Professional 48 per hour Research Assistant 36 per hour Office Services 27 per hour The fees for testimony shall be billed as $ N/A per day or fraction thereof for N/A , and $ per day or fraction thereof for all other personnel. RMI fees shall be adjusted each year, commencing January 1, 1987 , to reflect the change in fees officially established by the RMI Board of Directors. III SUPPORT SERVICE CHARGES Charges for reproduction, printing, communications, computer services, word processing services, graphics, and other miscellaneous support services shall be billed at rates for such services as determined from time to time and officially established by the RMI Board of Directors plus ten percent expense reimbursement to RMI. 1 IV CONSULTANTS RMI may use the consultants listed below to assist in performing work here- under. The services of such consultants will be billed at the Consultants' rate to RMI, plus an amount which includes RMI's compensation for the administrative, financial, and organizational costs and other expenses incurred in connection with the consultants' work. The consultants will function as independent contractors and will rely on RMI for all administrative and billing functions. - 1 Billing Rate Consultant's Name Task to Client N/A • • V • TRAVEL AND EXPENSES All travel, food, lodging, and miscellaneous expenses associated with the provision of services hereunder, and incurred in accordance with established corporate policy, shall be billed at cost. VI LIABILITY AND CANCRT.ATION RIGHTS RMI agrees to indemnify, defend and hold Client harmless from and against any and all claims, demands, damages or expenses for which RMI is determined to be legally liable resulting solely from negligent acts, errors or omissions by • RMI in the performance of services required of it pursuant to this agreement. Claims, demands, damages or expenses resulting from the negligent acts, errors or omissions of Client, its officers, agents, employes, representatives or others are excluded from RMI's obligation pursuant to this section. The obligations of RMI to indemnify, defend and hold Client harmless for services performed hereunder shall be expressly limited to the greater of the fees collected by RMI pursuant to this agreement or the proceeds of its appli- cable insurance coverage, and shall terminate upon termination of this agreement. • • RMI shall not be liable to third parties or others not a party to this agree- ment unless such potential liability is expressly recognized and agreed to in this agreement. Either party may terminate this agreement by rendering written notice duly posted to the other party at the address noted herein, fifteen (l5) days prior to the desired termination date. Client shall pay for all fees earned and expenses incurred prior to the termination date. VII BILLING AND PAYMENT RMI shall submit a monthly billing statement to Client setting forth the amount due for services and itemizing amounts due for expenses. Client shall pay the full amount of such statement within thirty (30) days after receipt. Client agrees that any sums billed, not disputed in written form setting forth specific exceptions and unpaid after thirty (30) days from date of receipt, shall be subject to a late payment charge of one and one-half percent for each month or fraction thereof past due. VIII ATTORNEY'S FEES Should services of an attorney be required in connection with enforcement or performance of this agreement, the prevailing party shall be entitled to its attorney's fees, expenses, and costs. • IX AGREEMENT AND PARTIES The parties agree that all changes or modifications hereto shall be in writing and signed by both parties. This agreement is in lieu of all others expressed or implied. Client b(�; President Resource Management International, Inc. Dated: Dated: -1;c7; • PROPOSAL TO THE CITY OF REDDING TO ASS IST IN NEGOTIATIONS FOR A UTILITY SERVICE AGREEMENT WITH THE PACIFIC GAS AND ELECTRIC COMPANY SEPTEMBER 1986 , III 110 PROPOSAL TO THE CITY OF REDDING TO ASSIST IN NEGOTIATIONS FOR A UTILITY SERVICE AGREEMENT WITH THE PACIFIC GAS AND ELECTRIC COMPANY I . INTRODUCTION The City of Redding (City) has established goal in its Power Resource Plan to hold costs as low as possible, retain local control and independence, and to develop local, economical power resources. To achieve these goals and retain local control, the City recognized a need to ensure that it did not become entirely dependent on another utility for its power supply. These goals have been clearly stated in the 1984 Resource Plan and more recently in the City of Redding's Common, Forecasting Methodology VI filings before the California Energy Commission. The efforts were directed at avoiding a situation where the City could find itself forced to purchase power from source that may not be in the City' s best interest. Consistent with these goals, the City is pursuing several available options including power purchases from other utilities and development of local power resources . Pursuit of hese options requires that the existing Supplemental Power Agreement with PGandE be replaced with an agreement which will complement the intentions of the City. The existing Supplemental Agreement with PGandE is a - contract which obligates the City to purchase from PGandE power required to meet all of the City' s system load in excess of 116 MW. Power required to meet customer load up to 116 MWlis -1- III III supplied by the Western Area Power Administration at their preference customer rate. System peak requirements have exceeded this level regularly during summer peak demand periodsl. The Supplemental Agreement with PGandE contains, in addition to a 1 year termination provision, an automatlic termination provision which is triggered in the event the City obtains a source of its own electric generation. The source of generation could be either a resource developed in the City' s system or the delivery of power by a joint powers agency of which 1 Redding is a member. The existing PGandE contract also contains a provision which recognizes that the City may develop its own resources and states that if the City desires that some deliveries from PGandE continue to be available, at the City' s request, PGandE will enter into negotiations for a new agreement to establiNh just and reasonable rates, terms, and conditions for a new contract. To address the above concerns , the City has initiated negotiations with PGandE for the purpose of obtaining Ian agreement which could provide the required power reserles and possibly other services as well. As a result of assistance provided to theCityin other negotiations , Resource Management International, Inc. (RMI) has provided limited support1in this effort and now is proposing that involvement be increased and expanded so that negotiations can proceed and be adequately sustained. RMI proposes to perform the workplan presefted herein to the extent possible within the available budget in support of the City' s efforts to develop a reasonable contract with PGandE. -2- 411 111 II . CITY OF REDDING ELECTRIC UTILITY GOALS The City of Redding desires to continue to protide low cost reliable electric service in an environmentally responsible manner. Applicable goals are: (1) Present and future' power costs for Redding' s customers are to be held as low as, practicable; ( 2) Reliability and service levels are to be maintained and improved upon whenever possible; ( 3) Local control and independence are to be retained; (4) Development of economic, local power resources is preferred; ( 5) Power resourcells will be developed in an environmentally responsible manner; (6) A diversified power supply plan is preferred; ( 7) Load management and conservation programs will continue to be developed and promoted . Major uncertainties for Redding are: ° Cost and availability of Federal power Redding has historically received power for all of its requirements from Western while its total system demand was less than 116 MW. Whenever Redding ' s requirements exceed the 116 MW level, Redding must purchase supplemental wholesale power from 'PGandE to meet such excess. Since such a large portion of Redding' s power requirements are purchased ,from Western, any change in the cost of Western power causes significant effects on Redding ' s retail power rates. Beginning in 1983, Western established a rate schedule which approximately triples the energy cost between 1983 and 1986 . As a result, Redding has instituted substantial rate increases to match the increase in purchased power costs. Nevertheless , power from Western remains attractive when compared to the alternatives. Redding ' s agreement with Western expires on, December 31, 2004. The likelihood of renewal of a contract -3- • which would continue Redding' s present allocation is believed to be high but is not guaranteed. Replacement of all or part of the power purchased from Western could have a major rate impact on the customers of Redding. This uncertainty is one of the reasons that Redding has made efforts to diversify its power resources and supplies . Cost and availability of supplemental power The primary existing alternative for meeting Redding' s future demands _ and energy requirements is purchasing supplemental power from PGandE. PGandE ' s pumped storage hydroelectric facility at Helms Creek and the Diablo Canyon nuclear facility are causing substantial increases in the cost of PGandE wholesale power to meet Redding' s supplemental needs . As a result, alternative purchases and/or projects can be more advantageous to Redding. III . PGandE OBJECTIVES AND GOALS PGandE, on the other hand, has established goals which would: (1 ) maximize wholesale power revenues; ( 2) injure a revenue flow which would be adequate to recover their 1,investment in the Diablo Canyon Nuclear Power Plant; ( 3) develop 'rates for all services performed for other utilities , the so called "unbundling" of services; and (4) keeping retail rates as low as possible. These objectives and goals will make negotiations with PGandE time consuming and difficult. Nevertheless, successful negotiations with PGandE could achieve significant cost savings for the City' s power customers. IV. WORK PLAN RMI proposes that work on this project be divided into four task areas. Work performed would generally follow the order -4- . . • • of the tasks as appropriate to the negotiating process . Although I the tasks have been identified as discrete components in implementing this Work Plan, they will each be performed as needed in the support of City/PGandE negotiations. Task I - Technical Support of City/PGandE Negotiations RMI will provide experienced technical and negotiating personnel to support the City' s negotiating team in thq actual City/PGandE negotiations . Support materials for the negotiations will be prepared by RMI , including (but not limited toi) contract drafts, schedules , agendas and draft correspondence tolPGandE. Task II - Development of Negotiation Strategies As negotiations proceed, RMI will provide the City with periodic letter reports suggesting appropriate negotiating strategies and alternatives for City consideration. Discussion meetings with senior level City personnel will be heldlto review alternatives and probable impacts on the City. Task III - Contract Analyses Special contractual analyses and reviews will be needed as negotiations progress. These reviews will examine key sections of existing agreements (such as the City/PGandE supplemental agreement and Contract 14-06-200-2948A between Western and PGandE) to identify options and impediments to the City' sNfuture PGandE agreement. Letter or oral reports will be provided to the City on these reviews in support of the negotiations . Task IV - Special Technical Issue Reviews As negotiations proceed, brief special technical reviews are likely to be needed on particular issues , such as ulanning reserves, spinning reserves, emergency support, and the status of -5- • Diablo Canyon cost projections . This specialized information will be obtained from existing sources and studies by 1RMI (within the overall budget levels proposed herein) in support Lf the negotiating process. V. SCHEDULE RMI is proposing a schedule which will support negotiations through June, 1987 . Discussions/negotiations are currently underway and the next scheduled meeting of the parties is set for September 30. RMI ' s proposed work schedule is as follows : October 1986 Meet with PGandE, identifymajor issues ma�o ssu es between the Parties. November and Meet with PGandE and begin drafting of December 1986 contract principles. June 1987 Target for completion of Draft City/PGandE Agreements. One issue which could significantly impact the timing of these negotiations is the disagreement between PGandE "and Western over transmission capacity and availability of other services. As negotiations proceed, more defined target dates mayI be identified. V I. BUDGET Significant senior level staff support will be required to support the City/PGandE negotiations, as described in (this proposal. RMI respectfully proposes that the City of Redding approve a standard Consultation Agreement with RMI (a copy of which is -6- • • attached) , to carry on the negotiation work with the City and PGandE on a time and expense reimbursement basis for an amount not to exceed $37 , 500 . We estimate that this level of support should carry the negotiations through June 1987 . VII . PROJECT TEAM The following key personnel will be assigned to this Project and utilized as appropriate. Resumes for each of these individuals are provided as an appendix to this proposal . Lloyd H. Harvego, President - Project overview Maurice A. Kruth, Vice President - Management of negotiations Robert L. Crump, Project Director - Contract preparation, analysis , and strategy development Other RMI planning, engineering, and economic analysis Y staff will be utilized as necessary. -7- • , APPENDIX A RESUMES AND QUALIFICATION STATEMENTS -8- I LLOYD H. HARVEGO Mr. Harvego is the founder and President of RMI . He is an expert in the complex matters associated with electric and water utility management in the areas of resource planning, economic evaluation, and financing. He identified and developed several multiple party regional water and power projects and long-term contractual arrangements. His analytical and managerial experience includes water supply, hydroelectric, transmission, coal, nuclear, geothermal, and cogeneration projects and technologies. Accomplishments o Represented California interests in the tri-state (Arizona, California, Nevada) negotiation of the new 50-year 'contract allocating power from the 1500 MW federal Hoover Dam Power Plant to replace the 1935 contract that expires in 11987 . ▪ Represented Modesto and Turlock Irrigation Districts in negotiating a settlement with the City and County (If San Francisco for allocation of power from the Hetch Hetchy hydroelectric system. o Assisted with the development and execution of plans for the creation of the M-S-R Public Power Agency and the financing thereof, including management of the Agency ' s purchase, financing, transmission, and power brokerage for a 136 MW share of -a major coal project in New Mexico. • Developed a plan and managed activities to obtain necessary agreements between 24 public and investor-owned utilities to finance, own, design, construct, and operate a 500-kV transmission line between California and the Pacifi6 Northwest . • Managed the preparation of consultant ' s reports for financing for nearly $1. 5 billion in public utility bond and note issuances since April 1983 . Previous Positions o Career progression of 15 years to Deputy Chief of the Energy Division at the California Department of Water Resources. The division was responsible for power resource supply for the 1500 MW and 10 billion kWh per year power requirements of the California State Water Project. Education ° Graduate studies in Management, Contract Negotiation, and Financing. Bachelor of Science Degree in Electrical Engineering, University of Idaho. I MAURICE A. KRUTH Mr. Kruth is a Registered Civil Engineer and at RMI is Vice President for Engineering, responsible for the engineering aspects of all RMI activities . He is an expert in energy resource management , planning, and development , in power marketing and in regulatory agency matters . Accomplishments • Managed the initial development work on the California- Oregon Transmission Project on behalf of the Transmission Agency of Northern California. o Developed the 1981 Central Valley Project Marketing plan for the Western Area Power Administration and managed a $70 million annual purchased power budget and marketing program. o Managed Environmental Impact Statement preparation for Department of Energy' s power marketing programs, n1ational energy plan, and coal conversion programs . • Directed environmental programs for Maui County State of Hawaii , and served as technical expert on air, water , and hazardous waste pollution cases. Previous Positions o Assistant Manager of the Sacramento Area Office of the U. S . Western Area Power Administration. o Senior Engineer , U. S . Department of Energy, Washington, D. C. • District Engineer , U. S . Environmental Protection Agency, Hawaii . • Commissioned Officer , U. S . Public Health Service, Cincinnati , Ohio and Washington, D. C. Education • Master of Science Degree in Civil Engineering ( Specialty in Environmental Engineering) , Stanford University. • Master of Business Administration Degree, Xavier University, Ohio. Bachelor of Science Degree in Civil Engineering, Stanford University. 110 !II ROBERT L. CRUMP Mr . Crump is a Power Contract Negotiator at RMI . His expertise includes economic and operational analysis, drafting, negotiating and administering power sales , transmission and related contracts. Accomplishments • Responsible for administration of transmission and interconnection agreements for Portland General Electric Company ( PGE) . Developed generic wheeling rates and loss calculations for PGE. Played a key role in implementation of the 500-k/ Montana Intertie Transmission Agreements between the Bonneville Power Administration and the Colstrip Project Participants . • Represented PGE in the Hanford NPR 1983 to 1993 Power Purchase Negotiations . The analysis of which led to PGE' s decision to discontinue participation. • Provided analysis of Bonneville Power Administration' s Transmission Rate Design. Provided operational analysis of and coordinated responses to Bonneville Power Administration' s Near Term, Interim, and Long-Term Intertie Access Policy. Previous Positions Career progression of 12-1/2 years at PGE. Beginning in public relations as an educational supervisor at the Trojan Nuaclear Plant . From this position he transitioned to plant accounting and on to division engineering/estimating. His last five years with the utility were as a power contract analyst.- Education • Master of Business Administration Candidate, City University, Bellevue, Washington. • Bachelor of Arts Degree, General Science, Linfield College . SII • . APPENDIX B ABSTRACTS - I -12- . , 411 III RESOURCE MANAGEMENT INTERNATIONAL, INC. JOB ABSTRACT Assignment : Provide consulting services with regard to power sales contract negotiation, fuel supply negotiations and the preparation of a cost of service analysis and rate design study. Client/Client Type: City of Greenville, Texas Year of Performance: 1985 - Ongoing g 9 Job Description : Services include assisting the City in marketing excess capacity as the result of declining load growth. This work includes meetings with prospective bilk power purchasers and entities impacted by power transfers. The work is ongoing until all contracts are negotiated. In addition, RMI recently completed a comprehensive revenue requirements and cost of service analysis for the City' s electric, water and wastewater systems. This analysis speci- fically focused on fairly allocating joint and common (costs to the proper utility or general government function. An innovative general fund transfer policy was developed that should provide for stable transfers to the general fund while allowing a measure of predictability for the utility system. The cost-of-service was determined for each of the City' s customer classes using RMI ' s cost-of-service model . During the study, RMI worked with the Greenville staff to establish guidelines to be followed in the design of rates , such as maximum percentage increases, changes in rate schedules and consolidation of rate classes . Rates for each customer class were designed to fairly and equitably allocate cost to each customer class based ulpon cost causation principles. . . .. • III .1 RESOURCE MANAGEMENT INTERNATIONAL, INC. JOB ABSTRACT Assignment : Power Supply Alternatives Analysis and Contract Negotiations . Client/Client Type : Lone Star Municipal Power Agency Year of Performance: 1985 - Ongoing Job Description : RMI was instrumental in the formation and development of the Agency. RMI assisted in the development of initial contractual arrangements between these systems. RMI efforts have been directed towards overall power supplll consid- eration, and transmission arrangements . RMI is assisting in the development of contract negotiations for wholesale purchase between members of the Agency and GSU which allowed the members to directly participate in GSU ' s off system purchases. ) RMI has prepared an analysis of the development of a hydroelectric installation at the Sabine River Authority' s Toledo Bend Reservoir . I 411 111 RESOURCE MANAGEMENT INTERNATIONAL, INC. JOB ABSTRACT Assignment : Hetch Hetchy Power Contract Negotiations Client/Client Type: Modesto Irrigation District Year of Performance: 1980 - Ongoing Job Description : Modesto Irrigation District operates an electric utility system in Stanislaus County, Califoinia which serves the electrical power needs of over 69, 000 customers. The electrical power requirements of these customers are let from a diverse mixture of Modesto-owned power generation facilities and power purchase contracts . RMI is providing contract negotiation support to Modesto in the contracting of long-term power purchases from the City and County of San Francisco Hetch Hetchy Water and Power Project . As Modesto ' s negotiation agent, RMI is acting as lead in developing a contract with the City and County of San Francisco for the purchase of power from the Hetch Hetchy Water and Power Project . Modesto' s previous contract with the City and County of San Francisco expired in 1985. RMI assisted Modesto in developing an interim contract arrangement for the continued use of Hetch Hetchy power through 1987. This arrangement not only allows the interim use of power by Modesto, but also established several important principles for the purchase of power past 1987 . Considerations required for the negotiation process include priority of delivery of power among several users, inter- relationships between supporting contracts and agreemenllts, real- time operation requirements and power transmission arrangements . • • • . • RESOURCE MANAGEMENT INTERNATIONAL, INC. JOB ABSTRACT Assignment : Power resource evaluation and contract negotiations Client/Client Type : City of Needles, California Year of Performance: 1986 Job Description : RMI has been retained by the City of Needles, California to provide general consulting in the field of power resource management and contract negotiations. The City, with a newly created municipal electric utility, is evaluating long term power supply alternatives, transmission needs and the possible incorporation of renewable technologies, such as Photo Voltaic generating station into their resource base. • . RESOURCE MANAGEMENT INTERNATIONAL, INC. JOB ABSTRACT Assignment : Analysis of long-term power supply cost, contract negotiations for fuel and addi- tional power supply Client/Client Type: City of Weatherford, Texas Year of Performance: 1985 - present Job Description : In connectionCity' s with the City s review of potential bulk power supply alternatives, RMI was reained to prepare an economic analysis of the City' s existing source of supply and compare the results with cogeneration and other power supply alternatives. As a result of these activities ,j RMI has been engaged to assist the City in negotiations with three potential power suppliers. Additionally, RMI is assisting the City in negotiating a contract for a supplemental source of boiler fuel . RMI is assisting the City in the preliminary analysis of various load management strategies . Presently RMI is analyzing the results of a comprehensive consumer survey analyzing customer usage patterns and consumer percepltions of load management .