HomeMy WebLinkAboutAgenda Report - January 18, 2006 K-03AGENDA ITEM VY3
dh CITY OF LODI
COUNCIL COMMUNICATION
TM
AGENDA TITLE: Adopt resolution authorizing the City Managerand Electric Utility Directorto
procure energy requirements through fiscal year 2007 at an amount not to
exceed $39.8 million (EUD)
MEETING DATE: January 18, 2006
PREPARED BY Interim Electric Utility Director
RECOMMENDED ACTION: That the City Council authorize the City Manager and Electric Utility
Director to procure energy required to meet load serving obligations of Lodi
Electric through Fiscal Year 2007 in accordance with the City of Lodi
Energy Risk Management Policies at an amount not to exceed $39.8
million.
BACKGROUND INFORMATION: Issue: Lodi must procure wholesale energy in order to meet its load
serving obligations to its customersfor fiscal year 2007 and beyond. The
amount of wholesale energy that must be procured ranges from 42% to
94% of Lodi's total load serving obligation. A load and resource balance (attachment 1) provides detail
showing the sources of owned energy supply available to Lodi, the load serving obligation amounts and
the remaining energy balances that must be procured from the market in order to meet the load serving
obligation. The cost of procuring the wholesale energy (attachment 2) to meet Lodi's load serving
obligation (the net short) shows the amount of energy required by month, the prices for that energy
prevailing on January 5, 2006 and the resulting cost of procurement if all energy was to be procured at
the January 5, 2006 prevailing price. As long as Lodi has a net open position, Lodi will be exposed to
price risk associated with market volatility where prices are regularly rising and falling in the wholesale
energy markets. To reduce Lodi's exposure to this price risk, the net open position must be reduced.
City Council was presented with an Energy Risk Management Policy (ERMP) as part of the agenda
underwhich this purchase authorization is being requested. While the ERMP establishes the rules under
which energy will be procured, it does not specify strategies for how that energy should be procured. As
a result, staff again consulted with the agencies surveyed as part of the ERMP developmentto determine
whether those agencies had developed any written policies or strategies for procurement. Both Palo Alto
and Roseville have established written policies outside of their Risk Management Policiesthat prescribe
target levels for the net open position over various time horizons. A comparison of those target levels is
as follows:
APPROVED: /
Blair , City Manager
Adopt resolution authorizingthe City Manager and Electric Utility Director to procure energy requirements through
fiscal year 2007 at an amount notto exceed $39.8 million(EUD)
January 18, 2006
Page 2 of 3
Roseville attempts to maintain a minimum portfolio of fixed price energy supply such that at any given
time:
• 90% of expected energy requirements are covered 0 to 12 months out;
• 80% of expected energy requirements are covered 13 to 24 months out;
• 70% of expected energy requirements are covered 25 to 60 months out; and
• 30% of expected energy requirements are covered 61 to 120 months out
Palo Alto, similarly, has established trao procurement strategies and has memorialized those strategies in
documents entitled "Short -Term Electric Laddering Strategy" or STEAM and the "Long Term Electric
Acquisition Plan Guidelines" or LEAP. The documents providefor the following general procurement
practices:
• 80% to 120% of forecasted load requirements are covered 0 to 12 months out;
• 70% to 110% of forecasted load requirements are covered 13 to 24 months out; and
• 60% to 100% of forecasted load requirements are covered 25 to 36 months out
Palo Alto differs slightly from Roseville in that a substantial portion of their portfolio is hydro based, which
can vary +1- 20% in any one year, and as a result, they provide for a target range as opposed to a target
amount and take into consideration expected hydro production levels in making their procurement
decisions within the approved ranges.
If Lodi were to immediately adopt policies similar to Roseville and Palo Alto, Lodi would need to procure
virtually all of its net open position for the balance of 2006 and a large percentage of its net open position
for 2007. Unlike, Roseville and PaloAlto which have been procuring under these policiesfor the last
couple years when prices were significantly lower than currently prevailing prices, Lodi is in the position
of having to procure large amounts of its energy portfolio at relatively high prices when compared to
historical market prices.
As Lodi considers options for implementing a laddering strategy, and moving from a short-term
implementation of that laddering strategy, to a longer-term implementation of that laddering strategy,
advice from NCPA's economist may be instructive (attachment 3). Summarizing, NCPA indicatesthat
prices for the 3`" quarter of 2006 have dropped significantly in the past week to close at $95.50 per mwhr,
may decline further in the next two weeks as a result of unseasonably warm weather across the US, but
with a return to more typical winter temperatures could result in market price increases of 10% to 25%.
As a result, NGPA is recommending that agencies should consider purchasing 20% to 50% of their
remaining 2006 open position and more if a more favorable buying opportunity presents itself.
Unfortunately, because of the large open position, and relatively small amount of savings available to
absorb cost increases, Lodi must continue to look to close significantly larger portions of its net open
position in order to protect its savings accounts and maintain rate stability to the degree possible.
To put the issue of market volatility into perspective, staff prepared an estimate (for budget purposes) of
market purchase costs for fiscal year 2007 on November 28, 2005 utilizing market prices prevailing at
that time (HLH = $87.50Imwher and LLH = $65.001mwhr) which translated into total estimated market
procurement costs of $25 million. While prices have come down as indicated above for the V quarter of
2006, prices for the balance of fiscal year 2007 have increased since November 28,2005 (HLH =
$92.201mwhr and LLH = $73.30/mwhr) which translates into a total market procurementcost of $26.5
million - an increase of $1.5 million or 6% of the market purchase budget or 3.3% of the total power
supply budget.
Adopt resolution authorizingthe City Managerand Electric Utility Directorto procure energy requirements through
fiscal year 2007 at an amount notto exceed $39.8 million (EUD)
January 18, 2006
Page 3 of 3
Recommendation:
To begin reducing Lodi's exposure to this market volatility, staff is recommending procurementthrough
NCPA of 80% to 90% of Lodi's net open positionfor the 3`d quarter of 2006 and 65% to 75% of Lodi's net
open positionfor the Ott' quarter of 2006. This will help to address the immediate issue associated with
short-term volatility. The balance of fiscal year 2007, or 1" and 2nd quarters of 2007, will need to be
procured through contracts executed directly by Lodi, and which, will have to be brought back to Council
ata later date. Similarly, additional longer term resource procurement decisions which begin reducing
open positions two and three years out, will establish further price certainty, and either allow Lodi to take
advantage of decreasing prices in the future on the balance of Lodi's net open position or reduce Lodi's
exposure to rising prices on the balance of the net open position.
To implementthe initial laddering of purchases recommended above, staff recommends:
• The City Managerand Electric Utility Director be authorized to procure energy for fiscal year 2007
in the amounts of the net open position and at costs of up to 150% of costs of procurement of the
net open position as estimated and shown on attachment 2.
• That NCPA be authorized to implement automatic purchases of the net open position for Q3 and
Q4, in amounts specified by the City Manager or Electric Utility Director, should prices reach
agreed upon thresholds and a net open position for the quarter remain.
• That the City Manager and the Electric Utility Director be authorized to direct NCPAto replace
any amount of energy at currently prevailing prices in the event of a failure or disablement of any
one of Lodi's owned resources.
• City staff report to council, in accordancewith Energy Risk Management Policies, on the status
and dost of purchases for fiscal year 2007.
• City staff, through the Risk Oversight Committee established as part of the Energy Risk
Management Policies, continue to develop and refine a long term laddering strategy for energy
procurement over the next 36 months.
• City Council rescind the procurement authorization granted to the City Managerand Electric Utility
Director under Resolution No. 2001-246 and replace that authorization with the authority granted
underthe attached resolution.
FISCAL IMPACT: The total dost of procurement underthe authorization requested is estimated at
$26.5 million based on market prices prevailing on January 5, 2006.
FUNDING: Costs associated with procurement under the authorization requested will be
incurred when the energy is delivered, in fiscal year 2007. Council has not
adopted a budgetfor fiscal year 2007 and as a result, funding has not yet been
established. Ultimately, funding for this authorization will be supported by retail
electricity sales, once the fiscal year 2007 budget is approved.
Ruby Pal6te, Interim Finance Director
aA � &r�I�C._' .
David Dockham
Interim Electric Utility Director
DDAst
Atlachmersts (4)
cc: City Attorney
Attachment 1 - FY 2007 Load and Resource Balance
Heavy Load Hours (HLH) - (On -Peak)
Resource
(MWh) July 06
Aug 06
Sep 06
Oct 06
Nov 06
Dec 06
Geothermal
5442.4
5636.7
5325.3
5636.7
5040.0
5383.8
Calaveras
5451.7
5451.7
5297.3
1862.3
1242.5
1356.8
CT #1
0.0
0.0
0.0
0.0
0.0
0.0
STIG
0.0
0.0
0.0
0.0
0.0
0.0
Seattle CL Ex.
7437.6
4710.5
7260.5
3630.2
-5500.0
-8287.6
Western 1738.7 1577.4 1055.5 639.6 408.1 526.1
HLH Combined Purc 0.0 0.0 0.0 0.0 0.0 0.0
Total (On -Peak, MWh) 20070.4 17376.3 18938.6 11768.8 1190.6 -1020.9
Total Load (On -Peak) 31144.9 34620.4 28358.6 24852.2 23833.4 23641.2
MWh, Surplus/(Deficit) -11074.5 -17244.1 -9420.0 -13083.4 -22642.9 -24662.2
% of Load -36% -50% -33% -53% -95% -104%
Avg. MW (based on 400 hrs) -27.7 -43.1 -23.6 -32.7 -56.6 -61.7
FY 2006-2007 Energy Balance
Light Load Hours (LLH) - (Off -Peak)
Resource
(MWh) July 06
Aug 06
Sep 06
Oct 06
Nov 06
Dec 06
Geothermal
4276.1
4081.8
4184.2
4081.8
4469.5
4230.2
Calaveras
887.5
887.5
1009.0
525.3
371.1
339.2
CT #1
0.0
0.0
0.0
0.0
0.0
0.0
STIG
0.0
0.0
0.0
0.0
0.0
0.0
Seattle CL Ex.
1312.5
831.3
1281.3
640.6
-1833.3
-1462.5
Western 431.6 394.4 263.9 159.9 102.0 175.4
LLH Combined Purc 0.0 0.0 0.0 0.0 0.0 0.0
Total (Off -Peak, MWh) 6907.8 6194.9 6738.3 5407.6 3109.3 3282.2
Total Load (Off -Peak) 18854.9 16969.3 16174.9 13871.6 13759.2 15032.1
MWh, Surplus/(Deficit) -11947.1 -10774.4 -9436.5 -8464.0 -10649.9 -11749.9
% of Load -63% -63% -58% -61% -77% -78%
Jan 07 Feb 07 March 07 April 07 May 07 June 07
5617.9 5122.6 4564.6 5517.6 5500.9 5325.3
2486.5 3235.7 4831.6 5743.1 7937.3 4216.5
0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0
-7916.7 -7600.1 -8550.1 -1937.5 0.0 7260.5
511.7 593.0 629.5 875.8 1391.2 1381.2
0.0 0.0 0.0 0.0 0.0 0.0
699.3 1351.2 1475.6 10199.0 14829.3 18183.5
24748.7 22635.5 24603.2 24098.7 26441.6 29704.7
-24049.4 -21284.3 -23127.6 -13899.7 -11612.3 -11521.2
-97% -94% -94% -58% -44% -39%
-60.1 -53.2 -57.8 -34.7 -29.0 -28.8
Jan 07 Feb 07 March 07 April 07 May 07 June 07
4414.1 3864.4 3586.4 3678.4 4322.1 4184.2
806.7 1045.4 1754.6 2489.7 2765.3 1546.4
0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0
-750.0 -750.0 -600.0 -123.3 0.0 1281.3
287.8 363.5 385.8 536.8 794.8 782.4
0.0 0.0 0.0 0.0 0.0 0.0
4758.6 4523.2 5126.8 6581.6 7882.2 7794.3
13872.7 12247.2 13060.3 13930.4 14293.5 15183.2
-9114.1 -7724.0 -7933.5 -7348.9 -6411.2 -7389.0
-66% -63% -61% -53% -45% -49%
Avg. MW (based on 320 hrs) -37.3 -33.7 -29.5 -26.5 -33.3 -36.7 -28.5 -24.1 -24.8 -23.0 -20.0 -23.1
Attachment 2 - Cost of Procuring Wholesale Energy at January 5, 2006 Prevailing Prices
Jan. 5, 2006
200E
2007
Assumptions: Zero STIG and CT1 generation.
Average hydro conditions for Calaveras Project, Western Base Resource, and market prices.
Forward electricity prices based on Jan. 5, 2006 TFS Energy indications.
There are no forward energy transactions for Lodi during this period.
Lodi Total
ILodi HLH
ILodi LLH
HLH LLH
Total Cost
Surplus/(Deficit) I Load 1% of Load
Surplus/(Deficit) I Load 1%of Load
Surplus/(Deficit) Load I%of Load
$/MWH $/MWH
July
(23,022)
50,000
-46.0%
(11,075)
31,145
-35.6%
(11,947)
18,855
-63.4%
$ 95.50
$ 72.50
August
(28,019)
51,590
-54.3%
(17,244)
34,620
-49.8%
(10,774)
16,969
-63.5%
$ 95.50
$ 72.50
September
(18,857)
44,534
-42.3%
(9,420)
28,359
-33.2%
(9,437)
16,175
-58.3%
$ 95.50
$ 72.50
October
(21,547)
38,724
-55.6%
(13,083)
24,852
-52.6%
(8,464)
13,872
-61.0%
$ 91.75
$ 75.50
November
(33,293)
37,593
-88.6%
(22,643)
23,833
-95.0%
(10,650)
13,759
-77.4%
$ 91.75
$ 75.50
December
(36,412)
38,673
-94.2%
(24,662)
23,641
-104.3%
(11,750)
15,032
-78.2%
$ 91.75
$ 75.50
January
(33,164)
38,621
-85.9%
(20,099)
24,749
-81.2%
(13,064)
13,873
-94.2%
$ 94.75
$ 78.50
February
(29,008)
34,883
-83.2%
(17,334)
22,636
-76.6%
(11,674)
12,247
-95.3%
$ 94.75
$ 78.50
March
(31,061)
37,664
-82.5%
(21,350)
24,603
-86.8%
(9,711)
13,060
-74.4%
$ 94.75
$ 78.50
April
(21,249)
38,029
-55.9%
(11,925)
24,099
-49.5%
(9,324)
13,930
-66.9%
$ 87.75
$ 65.81
May
(18,024)
40,735
-44.2%
(11,612)
26,442
-43.9%
(6,411)
14,293
-44.9%
$ 87.75
$ 65.81
June
(18,910)1
44,888
-42.1%
(11,521)
29,705
-38.8%
(7,389)1
15,183
1 -48.7%1
$ 80.00
1 $ 60.00
FY Total
(312,564)
495,933
1 -63.0%
(191,969)
318,683
-60.2%
(120,595)
177,249
1 -68.0%
Assumptions: Zero STIG and CT1 generation.
Average hydro conditions for Calaveras Project, Western Base Resource, and market prices.
Forward electricity prices based on Jan. 5, 2006 TFS Energy indications.
There are no forward energy transactions for Lodi during this period.
LLH Cost
$ (866,166)
$ (781,147)
$ (684,150)
$ (639,035)
$ (804,069)
$ (887,125)
$ (1,025,534)
$ (916,406)
$ (762,313)
$ (613,629)
$ (421,938)
R 1443.3391
$ (8,844,849)
$ 73.3 /mwh
$ 95.50 $ 72.50
$ 91.75 $ 75.50
$ 94.75 $ 78.50
$ 85.17 $ 63.88
INDICATED COST OF DEFICIT ENERGY BALANCES
Total Cost
HLH Cost
2006 July
$
(1,923,781)
$
(1,057,615)
August
$
(2,427,955)
$
(1,646,808)
September
$
(1,583,761)
$
(899,611)
October
$
(1,839,434)
$
(1,200,399)
November
$
(2,881,551)
$
(2,077,482)
December
$
(3,149,864)
$
(2,262,739)
2007 January
$
(2,929,955)
$
(1,904,420)
February
$
(2,558,835)
$
(1,642,429)
March
$
(2,785,232)
$
(2,022,919)
April
$
(1,660,023)
$
(1,046,394)
May
$
(1,440,919)
$
(1,018,981)
June
$
(1,365,033)
$
(921,695)
Total July -June
$
(26,546,343)
$
(17,701,494)
SPOT net PURC. COST
(est)
$/MWH (avg.) $
84.9
/mwh $
92.2 /mwh
LLH Cost
$ (866,166)
$ (781,147)
$ (684,150)
$ (639,035)
$ (804,069)
$ (887,125)
$ (1,025,534)
$ (916,406)
$ (762,313)
$ (613,629)
$ (421,938)
R 1443.3391
$ (8,844,849)
$ 73.3 /mwh
$ 95.50 $ 72.50
$ 91.75 $ 75.50
$ 94.75 $ 78.50
$ 85.17 $ 63.88
Attachment 3 — Reprint of NCPA Analysis on Market Purchase Opportunity
From: Mike Mace
Sent: Friday, January 06, 2006 3:51 PM
Subject: Possible Near -Term Buying Opportunity for both Natural Gas and Electricity
Possible Near -Term Buying Opportunity for both Natural Gas and Electricity
Natural gas prices continued their rapid decline yesterday in response to an
unprecedented gas storage build of 1 BCf according to the EIA. Expectations were for a
withdrawal in the 50-60 Bcf range compared to a five year average withdrawal of 143 Bcf.
Storage builds at this point in the winter are extremely rate and this week's number reflects the
extraordinary warmer -than -normal conditions of recent weeks. While some industry analysts
suggest that this week's storage number is erroneous, the EIA has announced that it does not
plan to revise the number.
The decline in gas prices combined with recent regional precipitation has caused
substantial reductions in forward electric prices for NP15 as well. More importantly, the near term
forecast shows warmer than normal conditions persisting across the eastern half of the U.S. for
the next 14 days. This should lead to further fundamental downward pressure on both natural
gas prices and electricity prices for NP15. However, Risk Management Inc.'s (RMI) technical
analysis suggests that the natural gas market is oversold and could possibly experience a sharp
short covering rally in the next week. RMI expects the duration of such a rally to be brief.
NP15 peak period prices for Q3'06 dropped $5/MWh yesterday to close at $95.50/MWh.
While this is a very high price, it is substantially lower than prices just two months ago. Forward
natural gas prices for PG&E City gate for Q3'06 are now just under $9/Mwh. Please see slide #1
in the attachment for a listing of yesterday's forward gas and electric prices for NP15.
With these fundamentals in place, it is possible that a favorable buying opportunity may
arise in the next few weeks. Given that most expectations are for natural gas to average
$10/MMBtu for the remainder of 2006, any substantial retreat below $9/MMBtu would present a
relatively attractive buying opportunity for either gas or electricity for the remainder of 2006. A
number of industry analysts feel that the "fair market" value for natural gas in 2006 is in the $8-
$10/MMBtu range. Given the fundamental supply difficulties in the natural gas market, there is a
high probability of continued price increases/volatility later in 2006.
Therefore given a sufficient drop in gas/electric prices, members may want to lock in
forward prices at a "reasonable" range that provides protection against a repeat of the
extreme/volatile prices experienced in Q3 & Q4 of last year. Please keep in mind that a favorable
buying opportunity could be very brief as there is every expectation of a return to normal winter
weather which could cause prices to rise by 10-25% from current levels.
Member utilities may want to consider purchasing 20-50% of their remaining 2006/Q1'07
power/gas requirements if the price opportunity presents itself. Obviously, a more significant
price retreat would suggest purchasing a larger percentage. Beyond January, the next favorable
buying opportunity could take place later this spring.
If you have any questions or comments, please feel free to contact me.
Michael W. Mace
Economist
Northern California Power Agency
NP15 Forward Wholesale Electric Prices
(as of 1/5/06)
Electric Prices --------------------------------> Gas Prices ------------------------------->
NP15 1/5/2006 1/5/2006
1/5/2006
CT
HLH
LLH *
Baseload
SuperPk**
NYMEX
Basis
PG&E CG
FEB
Bid
$75.50
$57.50
$67.76
$87.29
$148.53
$83.33
$141.93
$78.92
Offer
$77.00
$59.50
$69.48
$77.17
$9.50
($1.10)
$8.40
MAR
Bid
$74.50
$55.25
$66.22
Offer
$76.50
$58.25
$68.65
$76.81
$9.60
($1.08)
$8.52
Q2 06
Bid
$72.25
$45.75
$60.86
Offer
$74.25
$48.75
$63.29
$76.11
$9.30
($0.83)
$8.47
Q3 06
Bid
$93.50
$70.50
$83.61
Offer
$95.50
$72.50
$85.61
$110.78
$9.43
($0.45)
$8.98
Q4 06
Bid
$89.75
$73.00
$82.55
Offer
$91.75
$75.50
$84.76
$94.32
$10.13
($0.73)
$9.40
Q107
Bid
$92.75
$76.50
$85.76
Offer
$94.75
$78.50
$87.76
$95.13
$11.13
($0.75)
$10.38
YR 07
Bid
$85.75
$65.50
$77.04
Offer
$87.75
$66.75
$78.72
$113.80
$9.73
($0.52)
$9.21
YR 08
Bid
$80.00
$59.75
$71.29
Offer
$82.00
$61.75
$73.29
$106.34
$9.19
($0.42)
$8.77
YR 09
Bid
$75.75
$53.75
$66.29
Offer
$77.75
$56.75
$68.72
$100.83
$8.67
($0.39)
$8.28
YR 10
Bid
$73.00
$50.75
$63.43
Offer
$74.00
$52.75
$64.86
$95.97
$8.24
($0.36)
$7.88
**Defined as HE13-HE20, annual values represent Q3
Generation Costs
STIG
CT
$80.00
$136.38
$81.08
$138.18
$80.63
$137.43
$85.22
$145.08
$89.00
$151.38
$97.82
$166.08
$87.29
$148.53
$83.33
$141.93
$78.92
$134.58
$75.32
$128.58
EIA Withdrawal Statistics - U.S. Lower 48
Injections ( Withdrawals)
3 -Nov
35
20
(27)
34
44
21
10 -Nov
(4)
35
(48)
32
34
10
17 -Nov
(90)
33
(1)
(32)
(6)
(19)
24 -Nov
(148)
30
(49)
(1)
(17)
(37)
1 -Dec
(73)
4 1
(91)
(59)
(5) 1
(45)
8 -Dec
(147)
(17)
(162)
(111)
(88)
(105)
15 -Dec
(147)
(42)
(159)
(134)
(61)
(109)
22 -Dec
(167)
(80)
(95)
(151)
(123)
(123)
29 -Dec
(208)
(126)
(123)
(80)
(178)
(143)
5 -Jan
(154)
(199) 1
(86)
(52)
(151)
(128)
12 -Jan
(86)
(128)
(136)
(153)
(88)
(118)
19 -Jan
(73)
(118)
(219)
(156)
(110)
(135)
26 -Jan
(119)
(106)
(247)
(195)
(230)
(179)
2 -Feb
(95)
(75)
(208)
(236)
(188)
(160)
9 -Feb
(87)
(174)
(150)
(224)
(176)
(162)
16 -Feb
(76)
(126)
(203)
(172)
(98)
(135)
23 -Feb
(109)
(74)
(154)
(164)
(88)
(118)
2 -Mar,
(72)
(145)
(176)
(96)
(107)
(119)
9 -Mar
(76)
(117)
(117)
(28)
(139)
(95)
16 -Mar
(18)
(92)
(85)
(46)
(95)
(67)
23 -Mar
(3)
(75)
7
(65)(89)
(45)
30 -Mar,
(58)
(61)
37
(18)
(59)
(32)
Storage Level ( BCF)
2748
3,152
3,145
3,155
3,293
3,099
2,744
3,187
3,097
3,187
3,327
3,108
2,654
3,220
3,096
3,155
3,321
3,089
2,506
3,250
3,047
3,154
3,304
3,052
2,434 1
3,254
2,956
3,095
3,299 1
3,008
2,287
3,237
2,794
2,984
3,211
2,903
2,140
3,195
2,635
2,850
3,150
2,794
1,973
3,115
2,540
2,699
3,027
2,671
1,765
2,989
2,417
2,619
2,849 1
2,528
1,611
2,790
2,331
2,567
2,698
2,399
1,525
2,662
2,195
2,414
2,610
2,281
1,452
2,544
1,976
2,258
2,500
2,146
1,333
2,438
1,729
2,063
2,270
1,967
1,238
2,364
1,521
1,827
2,082
1,806
1,151
2,190
1,371
1,603
1,906
1,644
1,075
2,064
1,168
1,431
1,808
1,509
966
1,990
1,014
1,267
1,720
1,391
894
1,845
838
1,171
1,613
1,272
817
1,728
721
1,143
1,474
1,177
799
1,636
636
1,097
1,379
1,109
796
1,5613
1,032
1,290
1,064
738
1,500+--N-011,014
1,231
1,033
NP15 Forward Prices — Feb'06
(Peak period quotes)
iu.A r uo4c coir ov rAQ
$9
$8
$7
$6
OI
O O O O r r r N N N O O
W W W W W W W W W W Z Z
G 13 G C G 13 G C C G >
NP15 Forward Prices — Mar'06
$88
$85
$82
$79
$76
$73
$70
$67
$64
(Peak period quotes)
Mid C -NP15 -SP15 PV COB
0 0
0
0 0
N M
O
O O
W
Z Z
W Z
NP15 Forward Prices - Q2'06
$105
$100
$95
$90
$85
$80
$75
$70
$65
$60
$55
$50
$45
$40
(Peak period quotes)
Mid C —NP15 —SP15 —PV —COB
0 0
c
c
c
0
c
c
0
0
0
0
0 0
Cl
M
Q a
a
Q
Q
N
>
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>
O
>
a
>
a
ON
w
U)
w
CO)O
N
V
ON
p
Z
O N
w w
0 o
NP15 Forward Prices - Q3'06
(Peak period quotes)
—Mid C —NP15 —SP15 —PV —COB
$125
$120
$115
$110
$105
$100
$95
$90
$85
$80
$75
$70
$65
Ln
un
un
0
0
o
un
cn
ccs
cA
W
un
cn
o
cc
0
00
0
0
0
0
0
0
0
0
0
0
0
0
of
ri
W
ao
m
ori
ao
Ln
ti
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Ui
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ai
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r
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r
O
r
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d
a
a
>
>
L
v
z
Q
Q
0
0
Z
Z
0
93
NP15 Forward Prices -
(Peak period quotes)
—Mid C —NP15 —SP15 —PV —COB
$110
$105
$100
$95
$90
$85
$80
$75
Q4'06
$70
1.r
LO Ln
O O
Ln
O
Ln
O
LO
O
LA
O
LO
O
LA
O
O
O
O
O
O
O
O t0
O p
O CD
r
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O
CO
r
N
r
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O
Li'l
r
M M
N O
H H
V V
H
V
H
V
>
O
>
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>
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O
0
W
0
W
V
W
0 Z
W Q
0 0
0
0
Z
Z
Z
z
c
o
c
c
NP15 Forward Prices — CY'07
(Peak period quotes)
-Mid C -NP15 -SP15 -PV -COB
$100
$95
$90
$85
$80
$75
$70
$65
$60
$55
$50
$45
gn
0
Ln
0
WLO
CR
o
LO
0
W
0
LO
c
Ln
c
LO
c
W
0
W
0
W)
c
Ln
0
Ln
0
Ln
0
W)
0
Ln
0
W)
0
M
00
z
>
C4
C4
z
T_
m
�
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W
a
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W
a
v_
a
a
a
r le
z
O
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N
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Ln T_
0
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a
v
N
a
v
r
�
O
0
O
>
O
z
N
>
O
z
Ln
r
U
c
$16
$15
$14
$13
$12
$11
$10
$9
$8
$7
$6
$5
Forward NYMEX Gas Prices by Qtr
Q1.06 Q2.06 Q3.06 Q4.06
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
M
r
ON
N
N
N
CO
O
CO
CO
O
C1
t0
CD
CO
O
N
r
O
N
r
O
N
r
M
N
O
N
r
O
N
r
O
N
r
r
N
M
M
le
Ln
Ln
CO
CO
1`
CO
CO
Cn
O
O
r
N
N
O
O
O
O
O
O
O
O
O
O
O
O
O
O
r
r
r
r
r
$135
$130
$125
$120
$115
$110
$105
$100
$95
$90
$85
$80
$75
$70
$65
$60
$55
$50
Forward N P 15 Peak Period Electric Prices
Q1.06 Q2.06 Q3.06 Q4.06
r N M (D r— Oro C O N M Ln W ti CO C O N M K
r r r r r r r r r r N N N 04 N N
Temperatures
rye �
too l0y� /�0
/�
r
I I 3
80 0
r
I I
I I
80 0
I
5 I
70 7D '
A B
w a
SD a
"D a
33 $
6-10 DAY OUTLOOK
TEMP PROBABILITY
MADE 6 Jan 2006
VALID Jan 12 — 16. 2006
- 6 to 10 Day Outlook
d
r',
T°
C�TOLOGr
VALUILS ABOVE (A) OR BELOW (BM
B MORMR4
ONSHROEO AREAS RRE NEAR-NORMAL
� t J �� J 1 •• f ..
Temperatures - 8 to 14 Day Outlook
r
0Q
too too
I
r
sO 0
If
!r 5
80 0
I
'S I
70 7D'`
A B
90 0 - -
50 0
qO 0 SS yo-
8-19 DAY OUTLOOK
TEMP PROBABILITY
MADE 6 Jan 2006
VALID Jan l9 — 20. 2006
S
r J
p
ON P[B [ �E�iI"nRE RiiRE C�C*DLOGT
WRLUES DSVE [RD OR SELON Cal MOLL
UNSHROEO REA$ ARE NEM-Nomft.
Preciptiation — 6 to 10 Day Outlook
too too
80 0
90 0
70 70
A B
s0 0
90 0
q0 0
a3 a
6-10 OAY OUTLOOK
PRCP PROBABILITY
MADE 6 Jan 2006
VALID Jan 12 — 16. 2006
dppgg�� o
TEx7NCrr'+CcSE$fi�+NiiRERfiLRRE FCST
VALUES ABOVE [R1 OR BELOx (81 NEDLRN
OxS�1N1DD RERS R a xCAR-HEDIRN
33
-
.... .........
dppgg�� o
TEx7NCrr'+CcSE$fi�+NiiRERfiLRRE FCST
VALUES ABOVE [R1 OR BELOx (81 NEDLRN
OxS�1N1DD RERS R a xCAR-HEDIRN
Preciptiation - 8 to 14 Day Outlook
100 i0Q
90 0
80 0
7O TO
A B
GO 0
so 0
q0 0
$3 2
J
8-19 DAY OUTLOOK
PROP PROBABILITY
MADE 6 Jan 2006
VALID Jan 1q — 20.
RESOLUTION NO. 2006-20
A RESOLUTION OF THE LODI CITY COUNCIL
AUTHORIZING THE CITY MANAGER AND ELECTRIC
UTILITY DIRECTORTO PROCURE ENERGY
REQUIREMENTS THROUGH FISCALYEAR 2007
WHEREAS, the City of Lodi must procure wholesale energy in order to meet its
load serving obligations to its customers for fiscal year 2007 and beyond, with the
amount of wholesale energy that must be procured ranging from 42% to 94% of Lodi's
total load serving obligation; and
WHEREAS, to begin reducing Lodi's exposure to this market volatility, staff
recommends procurement through Northern California PowerAgency (NCPA) of 80% to
90% of Lodi's net open position for the 3" quarter of 2006 and 65% to 75% of Lodi's net
open position for the 4"' quarter of 2006, which will help to address the immediate issue
associated with short-term volatility; and
WHEREAS, staff further recommends that the balance of fiscal year 2007, or 1 St
and 2nd quarters of 2007, will need to be procured through contracts executed directly by
the City of Lodi, which will be brought before the City Council for approval at a later date;
and
WHEREAS, similarly, additional longer-term resource procurement decisions,
which begin reducing open positions two and three years out, will establish further price
certainty and either allow Lodi to take advantage of decreasing prices in the future on
the balance of Lodi's net open position or reduce Lodi's exposure to rising prices on the
balance of the net open position.
NOW, THEREFORE, BE IT RESOLVED by the Lodi City Council that:
The City Manager and Electric Utility Director are hereby authorized to procure
energy for fiscal year 2007 in the amounts of the net open position and at costs
of up to 150% of costs of procurement of the net open position as estimated and
shown on ExhibitA attached hereto.
• That NCPA is authorized to implement automatic purchases of the net open
position for the 3`1 and 4"' quarters of 2006 in amounts specified by the City
Manager or Electric Utility Director should prices reach thresholds established by
the City Manager or Electric Utility Director and a net open position for the
quarter remain.
• That the City Manager and the Electric Utility Director are hereby authorized to
direct NCPA to replace any amount of energy at currently prevailing prices in the
event of a failure or disablement of any one of Lodi's owned resources.
• City staff shall report to Council, in accordance with Energy Risk Management
Policies, on the status and cost of purchasesfor fiscal year 2007.
City staff, through the Risk Oversight Committee established as part of the
Energy Risk Management Policies, shall continue to develop and refine a long-
term laddering strategy for energy procurement over the next 36 months.
• City Council hereby rescinds any previous procurement authorization granted to
the City Manager and/or Electric Utility Director, including but not limited to
Resolution No. 2001-246, and replaces those authorizations with the authority
granted under this Resolution.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
authorize the City Manager and Electric Utility Director to procure energy required to
meet load -serving obligations cf Lodi Electric through fiscal year 2007 in accordance
with the City of Lodi Energy Risk Management Policies (at an amount not to exceed
$39.8 million).
Dated: January 18,2006
-------- -------==- ___---- --
hereby certify that Resolution No. 2006-20 was passed and adopted by the Lodi
City Council in a regular meeting held January 18, 2006, by the following vote:
AYES: COUNCIL MEMBERS -Beckman, Hansen. Johnson, Mounce,
and Mayor Hitchcock
NOES: COUNCIL MEMBERS - None
ABSENT: COUNCIL MEMBERS - None
ABSTAIN: COUNCIL MEMBERS - None
-SUSAN J. BLACKSTON
City Clerk
2006-20
Attachment 2 -Cost of Procuring Wholesale Energy at January 5,2006 Prevailing Prices
Jan. 5.2006
2046
2007
Assumptions: Z8rD STIG and CTI generation
Lodi Total
Lodi 14LH
Lodi LLH
HLH LLH
Average hydro conditions for Calaveras Project, Western Base Resource, and market prices
Su lus! Deflc Load % of load
Su lust Deficit Load % of Load
Su lu Defl Load % of Load
SMM I $IMWH
July
(23,022}
50,000
-46.0%
(11,075)
31,145
-35.6%
(11,947)
18,855
-63.4%
$ 95.50
S 72.50
August
(28,019)
51,590
-54.3%
(17,244)
34,620
-49.8%
(10,774)
18,969
-616%
$ 95.50
$ 72.50
September
(18,657)
44,534
-42.3%
(9,420)
28,359
-33.2%
(9,437)
16,175
58.3%
$ 95.50
; 72.50
October
(21,547)
38,724
-55.6%
(13,083)
24,852
-52.6%
(8,454)
13,672
-61.0%
$ 91.75
$ 75.50
November
(33,293)
37,593
58.6%
(22,643)
23,833
-95.0%
(10,650)
13,759
-77.4%
$ 91.75
$ 75.50
December
(36,412)
38,673
-94.2%
(24,662)
23,641
-104,3%
(11 1.7M
15,032
-782%
S 91.75
S 75.50
January
(33,164)
38,621
-85.9%
(20,099)
24,749
-81.2%
(13,064)
13,873
-94.2%
S 94.75
S 78.50
February
(29,008)
34,883
-83.2%
(17,334)
22,636
-76.6%
(11,674)
12,247
-95.3%
S 94.75
$ 78.50
March
(31,061)
37,864
-82.5%
(21,350)
24,603
-66.8%
(9,711)
13,080
-74.4%
5 94.75
$ 78.50
April
(21,249)
38,029
55.9%
(11,925)
24,099
-49.5%
(9,324)
13,930
-66.9%
S 87.75
$ 65.81
May
(18,024)
40,735
-44.2%
(11,612)
26,442
-43.9%
(6,411)
14,293
-44.9%
S 87.75
$ 65.81
June
(18,910)
44.8MI
42.1%
(11,521)
29,705
-38.8%
(7,389)
15,1831
48.7%1$
80.001$
60.00
FY Total
(312,564)
495,933
1 -63.0%
(191,969)
318,683
-60.2%
(120,595)1
177,249
58.096
Assumptions: Z8rD STIG and CTI generation
Average hydro conditions for Calaveras Project, Western Base Resource, and market prices
Forward electricity prices based on Jan. 5, zoo6 TFS Energy Indications.
There are no forward energy transactions for Lodi
during this period.
INDICATED COST OF DEFICIT ENERGY BALANCES
Total ost
I
L" Coe
2006 July $
(1,923,781)
$
(1,057,615)
$
(866,166)
August $
(2,427,955)
$
(1,646,808)
$
(781.147)
Se tember $
1,583761
$
(899,611)
$
(684,150)
Octobe $
(1,839,434)
$
(1,200,399)
$
(639.035)
Novembe $
(2,881,551)
$
(2,077,482)
$
(804,069)
DecemberJ $
(3,149,864)
$
(2,262,739)
$
(687.125)
2007 Janualy(
$
(2,929,955)
S
(1,904,420)
S
(1,025,534)
Febzua
$
(2,558,835)
$
(1,642,429)
$
(916,406)
April
$
(1,660,023)
$
(1,046,394)
$
(613,629)
May $
(1,440,919)
$
(1,018,981)
$
(421.938)
Total July -June
(26,846,843)
$
(17,701,494)
$
(8,844,849)
$
$ 95.50 $ 72.50
$ 91.75 $ 75.50
$ 94.75 $ 78.50
$ 85.17 $ 63.88
M
x
ter.■