HomeMy WebLinkAboutAgenda Report - November 15, 2006 E-12MeWA 1TW & it
Cffy of Lom
COIL COMMUNICATION
AGENDA TITLE, AdgAjesolutMn audKddng Ve City NM wW and Metric UiHky Directrlr Ip
procude energy► and/or naturw1l gas for fte4d year 2OW418 at an amount not to
exceed $25 rnNHon (EUD)
MEETOM DATE: Noveo0or 15, 2006
PREPARED BY: Etecft UtllAy Director
RECON ACTION: Authorize the City Manager and Electric Utility Director to procure
energy and/or natural gas to reduce Electric Utility Department's open
position (energy not fully procured on an advanced basis) for fiscal
year 2007-08 in accordance with the City of Lodi Energy Risk Management Policies at a cost not to
exceed $25 million.
BACKWtOUND INfORMAIRON: Lodi's Electric Utility Department (EUD) must procure wholesale
energy in order to economically meet its customer load obligations ibr
fiscal year 2007-M (FY08) and beyond. In FY08, EUD's projected
"open position" is approximately 340 gigawatt -hours (GWH) or about 65% of EUD's total customer load
obligation.
As long as EUD has a net open position, it will be exposed to price risk associated with market volatility
since prices are regularly ris3thg and falling in the wholesale energy markets. To reduce exposure to this
price risk to an acceptable level, EUD's open position can be reduced through strategic market
purchases. In FY07, for instance, a series of energy and natural gas purchases were consummated
which reduced EUD's open position from over 60 percent to a level of less than 5 percent.
Attachment 1 is the load and resource balance statement for EUD for FY08. It details (i) EUD's projected
load serving obligations, (ii) the sources of energy supply available to EUD from its own resouroe
entitlentents and (ili) the remaining energy balances that must be procured from the market in order to
serve EUD's customers in the most economic fashion. This attachment shows a FY08 load obligation of
500 GWH, a contribution of 780 GWH from EUD's resource entitlements and a net open position of about
340 GVYH. Attachment 1 also shows that the estimated cost of procuring energy to close EUD's FY08
open position is $23 million based on current energy market conditions.
EUD intends to dose the bulk of its FY08 open position by making a number of energy and/or natural gas
purchases over the next 6 to 8 months, although additional purchases may be made throughout FY08
when ppadent to reduce risk and manage energy costs. As outlined in the Energy Risk Management
Policy (LRMP) adopted by City Council on January 18, 2006, the City's Risk Oversight Committee (ROC)
will review proposed transactions and purchasing strategies. In this regard, the ROC is charged with
ensuring that proposed transactions conform with the accepted types of transactions detailed in the
ERMP. ROC shall have the responsibility for ensuring that business is conducted in accordance with the
Energy Risk Management Policies (ERMP) and will consider transactional risk limits.
APPROVED:
Blair KHM City Manager
Adopt bion aurwrtzl the CNV Manayar and Electric Ud ft Director to procure energy
andlor illatawal his for fisc year 20674M at an amount not to exceed $25 million (EW)
Navemhsr 15, 211F06
Page 2 of 2
The FYQ3 energy and natural gas purchases will be mace through procurement activities directed by the
Northern Callomia Power Agency (NCPA). Presently, NCPA is authorized to procure energy and natural
gas for ft mender agencies for a period of up to one year; however the NCPA Commission can extend
this period N it desires.
This reed authorization includes the possible purchase of natural gas. Spot natural gas prices have
dropped'dra maticallty over to past few months and short term prices are at their lowest since 2003. As a
result, it may be economic to purchase natural gas on a forward basis for consumption by the Lodi Steam
Injected Gas Turbine) STIG plant (located at the White Slough Pollution Control Facility) to satisfy
portions of next summer's (1'i quarter of FY08) open position.
For information, EUD is presently working with other NCPA members to establish a longer term energy
buying pogram to be adrnini4ered by NCPA. Preliminary concepts for such an arrangement are
expected to be considered by the NCPA Commission over the next couple of months. If favorably
received by the Commission, detailed contractual documents to establish a formal energy/gas buying
program will be developed for formal approval by participating members. h is expected that NCPA
members desiring to belong th the "NCPA Power Procurement Project" would be able to purchase
energy for a forward period of up to five years under a structured arrangement presently under
development.
FISCAL IWACT: The tolol cost of procurement under the authorization requested is estimated at
$23 million based on market price curves prevailing on October 1, 2006.
FUNI)I1G: Costs associated with procurement under this authorization will not be incurred
until energy is delivered in fiscal year 2008. The City has not adopted a budget for
fiscal year 2007-08 and as a result, funding has not yet been established. Funding
for this authorization will be supported by retail electricity sales revenue, once the
fiscal year 2007-08 budget is established and approved by the City Council.
Ruby , Financial gervices Man*er
George F. Morrow
Electric utility Diredor
G Furst
Attachment
City of LODI
LOAD
MWH Total
HLH
LLH
NCPA Gen.
MWH Total
Geothermal
Calaveras
CTI
STIG
SCL Exchange
WESTERN
MWH Total
Open Position
MWH Total
HLH
LLH
$ Total
HLH
LLH
Attachment 1
IULY07 AUG SEPT OCT NOV DEC JAN 08 FEB MAR APR MAY JUNE08 TOTALS
55,715 50,820 44,023 38,559 36,230 39,545 38,194 35,393 37,408 36,482 40,886 46,913 500,168
34,995 33,864 27,366 25,296 23,461 24,495 24,332 23,026 23,955 23,855 26,027 30,381 321,053
20,720 16,956 16,657 13,263 12,769 15,050 13,862 12,367 13,453 12,627 14,859 16,532 179,115
21,296 17,294 19,689 15,301 2,687 1,595 2,867 4,078 6,023 13,508 17,321 22,553 144,212
8,664 8,644 8,345 8,602 8,293 8,551 8,530 7,685 8,108 7,078 7,984 8,159 98,643
3,839 3,081 2,760 2,407 1,764 2,843 3,683 4,834 7,262 8,300 9,337 5,810 55,918
8,794 5,569 8,584 4,292 (7,370) (9,799) (9,347) (8,442) (9,347) (1,869) - 8,584 (10,349)
2,570 1,972 1,319 799 510 701 799 956 1,015 1,413 2,168 2,158 16,382
(31,848) (31,554) (23,015) (22,458) (33,033) (37,249) (34,528) (30,359) (30,369) (21,562) (21,397) (22,201) (339,573)
(17,311) (19,890) (12,023) (14,141) (23,564) (25,235) (24,410) (21,563) (21,439) (14,526) (13,259) (12,893) (220,254)
(14,537) (11,665) (10,992) (8,317) (9,469) (12,014) (10,118) (8,795) (8,931) (7,036) (8,138) (9,309) (119,320)
(2,321,539) (2,387,717) (1,662,044) (1,583,311) (2,366,164) (2,650,119) (2,303,889) (2,027,513) (2,025,840) (1,247,570) (1,219,833) (1,252,078) (23,047,616)
(1,514,720) (1,740,332) (1,051,975) (1,067,670) (1,779,084) (1,905,275) (1,757,517) (1,552,567) (1,543,576) (915,139) (835,318) (812,242) (16,475,416)
(806,819) (647,385) (610,068) (515,641) (587,079) (744,843) (546,372) (474,946) (482,264) (332,432) (384,515) (439,836) (6,572,200)
GM
10/6/2008
Source: NCPA
RESOLUTION NO. 2006-204
A RESOLUTION OF THE LODI CITY COUNCIL
AUTHORIZING THE CITY MANAGER AND ELECTRIC
UTILITY DIRECTOR TO PROCURE ENERGY AND/OR
NATURAL GAS FOR FISCAL YEAR 2007-08 AT A COST
NOT TO EXCEED $25 MILLION
WHEREAS, the City of Lodi must procure wholesale energy in order to
economically meet its load serving obligations to its customers for fiscal year 2007-08
with the projected amount of wholesale energy that must be procured equaling
approximately 65% of Lodi's total load serving obligation; and
WHEREAS, to begin reducing Lodi's exposure to this market volatility, staff
recommends procurement of electricity and/or natural gas to reduce or eliminate Lodi's
net open position for fiscal year 2007-08; and
WHEREAS, it is expected that Lodi's purchases under this Resolution will be
made through the procurement activities of the Northern California Power Agency and
could occur in various amounts and timeframes through the end of fiscal year 2007-08;
and
WHEREAS, Lodi's purchases under this Resolution will conform to the accepted
transaction types and other provisions of the City of Lodi Energy Risk Management
Policies adopted by the City Council on January 18, 2006 (Resolution 2006-19).
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
authorize the City Manager and Electric Utility Director to procure energy and/or natural
gas to reduce Lodi Electric Utility's open position to meet load -serving obligations for
fiscal year 2007-08 in accordance with the City of Lodi Energy Risk Management
Policies at a cost not to exceed $25 million.
Dated: November 15, 2006
I hereby certify that Resolution No. 2006-204 was passed and adopted by the
Lodi City Council in a regular meeting held November 15, 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
2
R NDI JOHL
City Clerk
2006-204