HomeMy WebLinkAboutAgenda Report - April 20, 2011 C-08AGENDA ITEM C*O%
A% CITY OF LODI
COUNCIL COMMUNICATION
AGENDA TITLE: Adopt Resolution Authorizing the City Managerto Terminate Lodi's Participation in
the Seattle City Light Capacity and Energy Exchange Third Phase Agreement
MEETING DATE: April 20, 2011
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: Adopt a resolution authorizing the City Managerto terminate Lodi's
participation in the Seattle City Light Capacity and Energy Exchange
Third Phase Agreement.
BACKGROUND INFORMATION: On October6, 1992, the Northern California Power Agency (NCPA)
and several of its members, including Lodi, executed the Seattle
City Light Capacity and Energy Third Phase Agreement (Exchange
Agreement).
The associated "Capacity and Energy Exchange Agreement between the City of Seattle, City Light
Department and Northern California Power Agreement" (NCPA/Seattle Agreement) allows Seattle City
Light (Seattle) to provide 60 MW and 90,580 MWh to NCPA during the period June 1 through October 15
of each year, and for NCPAto deliver46 MW and 108,696MWh of energy to Seattle during the period
December 1 through April 30 of each year. Lodi is a 41.667 -percent participant in this Exchange
Agreement.
This contract was designed to make use of excess generation. The Pacific NW has excess power in the
summer, when California needs it most. California has excess generation capacity in the winter months,
when demand peaks in the Pacific NW. This contract was signed in 1992to begin deliveries in 1993, as
the California Oregon Transmission Project (COTP) came on line that same year.
Historicallythis contract has resulted in costs that ranged from plus or minus $208,000/yr, while
delivering 25 MW of firm capacityto Lodi that could be counted on for planning purposes. Due to the
recent narrowing of energy prices between summer and wintertime periods, the economics of the
exchange have worsened. Lodi's share of the cost of delivering 60 MW to Seattle City Light resulted in
losses of $608,000 from November 2008 through October 2009 and $600,000 from November 2009
through October 2010.
It is expected that this pricing trend will continue, therefore staff recommends that Lodi terminate its
participation in the Exchange Agreement. Other NCPA agencies have ended their participation for these
very reasons, leaving Lodi, Silicon Valley Power (City of Santa Clara) and the City of Ukiah the remaining
NCPA participants. Neither utility is interested in acquiring Lodi's share, and the electricity from Seattle
City Light does not qualify as renewable energy under State guidelines, giving little incentive to continue
the contract any longer than necessary.
Termination underthe NCPA/Seattle Agreement and the Exchange Agreement require a seven-year
notification. Lodi must deliver that notice by April 30 or the termination will be delayed another year.
Bartlam, City Manager
Adopt ResolutionAuthorizing the City Managerto Terminate Lodi's Participation in the Seattle City Light Capacity and Energy
ExchangeThird Phase Agreement
April 20,201 1
Page 2 of 2
FISCAL IMPACT: No immediatefiscal impact. The impact in seven years is impossible to predict,
but if power costs remain at current levels, the utility's costs will decline.
FUNDING: Not applicable.
Eli beth A. Kirkley
Electric Utility Director
PREPARED BY: Matt Foskett, Rates and Resources Manager
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A RESOLUTION OF THE LODI CITY COUNCIL
AUTHORIZING THE CITY MANAGER TO TERMINATE
THE CITY OF LODI'S PARTICIPATION IN THE SEATTLE
CITY LIGHT CAPACITY AND ENERGY EXCHANGE
THIRD PHASE AGREEMENT
WHEREAS, on October 6, 1992, the City of Lodi (City) entered into the Seattle
City Light Capacity and Energy Exchange Third Phase Agreement (Exchange
Agreement) with the Northern California Power Agency (NCPA) and other NCPA
Members; and
WHEREAS, it has been found that the City's continued participation in the
Exchange Agreement is no longer in the economic interest of the City and its electric
rate payers; and
WHEREAS, because the Exchange Agreement requires a seven-year
notificationto terminate Lodi's participation in the agreement, staff recommends that the
City Council approve the City of Lodi's termination of its participation so that notice can
be given by the required date of April 30, 2011.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
authorize the City Manager to terminate Lodi's participation in the Seattle City Light
Capacity and Energy Exchange Third Phase Agreement.
Dated: April 20, 2011
hereby certify that Resolution No. 2011-59 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held April 20, 2011, by the following vote:
AYES: COUNCIL MEMBERS — Hansen, Katzakian, Nakanishi, and
Mayor Johnson
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — Mounce
ABSTAIN: COUNCIL MEMBERS — None
JOHL
City Clerk
2011-59