HomeMy WebLinkAboutReso 2003-191 - Gas ReservesRESOLUTION NO. 2003-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
AUTHORIZING THE REDDING ELECTRIC UTILITY TO IDENTIFY AND
NEGOTIATE THE PURCHASE OF NATURAL GAS RESERVES IN COOPERATION
WITH SILICON VALLEY POWER
WHEREAS:
A. City Council Resolution No. 2000-200 authorized Redding Electric Utility (Pd~U) to
construct a 43-megawatt gas turbine generation unit at Redding Power Plant that consumes
approximately 10,000 dtherms~ per day of natural gas.
B. City Council Resolution No. 2001-26 authorized REU to enter into long-term natural gas
transportation contracts not to exceed 25 years.
C. City Council Resolution No. 2001-36 authorized REU to enter into multi-year natural
gas commodity contracts not to exceed $16 million per year.
D. REU has successfully acquired multi-year natural gas contracts for up to 5,000 dtherms
per day of natural gas through the year 2009 at an average price of $3.56 per dtherm or $6.5 million
per year.
E. Natural gas prices have increased since REU made its initial purchases and are expected
to exceed $4.00 or more for the fbreseeable future.
F. Discounts of $0.60-5;0.90 per dtherm recently have been obtained by other utilities
acquiring natural gas reserves.
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL THAT:
1. It is in the best interests of the City's utility customers to pursue the acquisition of natural
gas reserves as part of the City's natural gas portfolio.
2. It is the finding of City Council that, pursuant to Redding Municipal Code 4.20.080
(A)(6), the request by the City lvlanager, or his designee, to purchase natural gas reserves does not
constitute a public works project. Therefore, the City Manager, or his designee, is authorized to
identify and negotiate the purchase of up to $18 million in natural gas reserves on behalf of the City
of Redding.
3. It is the finding of City Council that, pursuant to Redding Municipal Code 4.20.080
(A)(3), the professional services needed to complete the gas reserves purchase are of such a nature
as to not be customarily subject 'to bid procedures. The City Manager, or his designee, are further
authorized to complete the contractual retention of the required professional services to include an
~One decatherm (dtherm) is a unit of natural gas measurement equal to 1 million British
Thermal Units (BTU). A decatherm is a unit more widely used in the energy industry for .gas
measurement.
investment banker with rec/~l~izeq natural gas reserves experience, le~. services from a recognized
attorney with natural gas reserve experience in the appropriate state, consulting services from a
recognized reservoir engineering firm, a title insurance firm with proven experience in title insm'ance
for natural gas reserves, and a consultant with proven experience in the natural gas reserves
acquisition process. Redding's expenditures for the above professional services are not to exceed
an initial amount of $100,000 unless or until a definitive agreement is reached for the acquisition of
natural gas reserves. All expenditures for services subsequent to a definitive agreement will be
included in the $18 million limit.
3. The City Manager, or his designee, may enter into an arrangement with Silicon Valley
Power to share the exploratory costs and either jointly through a Joint Powers Agency or individually
own the purchased gas reserves.
4. Upon the successful completion of the negotiations for the purchase of natural gas
reserves, the final legal structure, purchase agreement, and financing arrangements will be contingent
upon subsequent City Council approval.
I HEREBY CERTIFY the foregoing resolution was introduced, read, and adopted at a
regular meeting of the City Council of the City of Redding on the 16th day of December 2003 by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
COUNCIL MEMBERS: Cibula,
COUNCIL MEMBERS: None
COUNCIL MEMBERS: None
COUNCIL MEMBERS: None
Kight, Mathena, Stegall and Pohl.meyer
/ ·
ayor
Attest:
Form Approved:
BRAD L. FULLER, City Attorney