HomeMy WebLinkAboutMinutes - January 30, 2001 SMLODI CITY COUNCIL
SPECIAL CITY COUNCIL MEETING
CARNEGIE FORUM, 305 WEST PINE STREET
TUESDAY, JANUARY 30, 2001
A. ROLL CALL
The Special City Council meeting of January 30, 2001 was called to order by Mayor Nakanishi at
7:02 a.m.
Present: Council Members — Hitchcock, Howard, Land, Pennino and Mayor Nakanishi
Absent: Council Members — None
Also Present: City Manager Flynn, City Attorney Hays, and City Clerk Blackston
City Clerk Blackston reviewed the Mayor's and Council Member's Weekly Calendar (filed).
City Manager Flynn reported that a special closed session meeting has been scheduled for
January 31, 2001 at 6:00 p.m. to discuss information from Pacific Care, the City's health care
broker.
Council Member Pennino commended the City Manager for his excellent presentation last Friday
to City employees regarding their health insurance coverage.
B. REGULAR CALENDAR
B-1 "Adopt resolution authorizing the Northern California Power Agency (NCPA) General
Manager to enter into multi-year electric power purchase and sale contracts on behalf of
the City of Lodi"
Electric Utility Director Vallow explained that, until last summer, a period of three months
was considered a long-term energy contract. In the current market there is merit in
contracting for much longer periods of time. He stated that last week two power
marketers offered 10 -year deals to NCPA, but participating cities did not have
authorization to enter into the contracts. The life span of bilateral contracts is between 15
to 45 minutes. Yesterday, natural gas for a one-year forward contract was selling for
about $14 a million British Thermal Units (BTU); a two-year forward purchase contract
was selling at approximately $8; and a five-year contract was approximately $5.20.
Mr. Vallow stated that when these opportunities surface Electric Utility needs to take
advantage of them immediately. The resolution being presented to Council today will give
the authorization to do so. Mr. Vallow pointed out that the draft resolution needs to be
corrected to replace the word "power" with "energy'. He explained that power implies
electricity only, where energy implies either electricity or gas.
Mr. Vallow reported that Electric Utility is currently working with Enron on a multi-year
power purchase contract.
In answer to questions by Council Member Land, Mr. Vallow reported that Lodi's cost of
generation is now approximately 8.5 to 9 cents a kilowatt hour. Electric Utility is looking at
3, 7, and 10 -year contracts. They spot market for 20-25% of the total usage. Electric
Utility's goal is to fit resources under their projected cash flow for the next 10 years. Their
long-term objectives are to be competitive and ward off upward pressures on prices.
In reply to questions by Mayor Nakanishi, Mr. Vallow stated that he is not allowing for any
spot market exposure for the next 24 to 36 months because the energy markets are too
volatile. He explained that on a 7 -year contract the surplus is immediately sold to another
power marketer.
Continued January 30, 2001
In response to Council Member Hitchcock, Mr. Vallow stated that previously he had
forecasted that California's energy crisis may improve in three years, but due to recent
actions by the state legislature, he suspects that it will now be five years. He stated that
Electric Utility's long-term financial plan has increased 8-10%. Mr. Vallow projected that
even in a worse case scenario Electric Utility will maintain a 15-25% competitive
advantage. In the next one to two years he expects a 10% power purchase premium and
a possible return to baseline in three years. He reported that Electric Utility is 4% ahead
on sales and could possibly outgrow the problem.
MOTION / VOTE:
The City Council, on motion of Council Member Land, Hitchcock second, unanimously
adopted Resolution No. 2001-14 authorizing the Northern California Power Agency
(NCPA) General Manager to enter into multi-year electric energy purchase and sale
contracts on behalf of the City of Lodi.
C. COMMENTS BY THE PUBLIC ON NON -AGENDA ITEMS
None.
D. CLOSED SESSION
Mayor Nakanishi adjourned the City Council meeting at 7:35 a.m. to a Closed Session to discuss
the following matter:
L-1 Review of Council Appointees — City Manager, City Attorney, and City Clerk — to include
compensation evaluation (Gov. Code 54957)
RETURN TO OPEN SESSION / DISCLOSURE OF ACTION
The City Council meeting reconvened at 8:14 a.m., and City Attorney Hays announced that there
were no reportable actions taken in closed session.
ADJOURNMENT
There being no further business to come before the City Council, the meeting was adjourned at
8:15 a.m.
ATTEST:
Susan J. Blackston
City Clerk
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