HomeMy WebLinkAboutResolutions - No. 2002-189RESOLUTION NO. 2002-189
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LODI
APPROVING THE FORM OF, AND AUTHORIZING THE
EXECUTION AND DELIVERY OF, AN AMENDMENT TO AN
ELECTRIC ENERGY PURCHASE AGREEMENT AND
AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, the City of Lodi (the "City"), a municipal corporation duly organized
and existing under and by virtue of the Constitution and laws of the State of California (the
"State"), owns and operates a municipal electric utility system (the "Electric System")
providing electric service to the inhabitants of the City; and
WHEREAS, in order to satisfy the electric service requirements of the inhabitants
of the City, the City has entered into contracts for the purchase of electric capacity and
energy and capacity rights in electric transmission facilities; and
WHEREAS, due to a financial crisis of the investor-owned utilities in the State and
a reduction in the amount of electricity available for purchase to serve consumers in the
State, the Govemor of the State declared a state of emergency and the State, through the
Department of Water Resources, commenced purchasing electricity to serve the Toads of
the customers of the investor-owned utilities; and
WHEREAS, the conditions leading to the Governor's declaring a state of
emergency created uncertainty as to whether the City would be able to purchase power in
the short-term markets to satisfy the load requirements of the inhabitants of the City; and
WHEREAS, the City, together with certain other members of the Northern
Califomia Power Agency ("NCPA"), acting through NCPA, arranged for the purchase of
electric energy from Calpine Energy Services, L. P. ("Calpine"), on the terms and
conditions of the Western Systems Power Pool Agreement (version effective July 1, 2000)
(the "WSPP Terms") and CAISO confirmations which would contain the specific terms of
the energy purchase; and
WHEREAS, in order to assure adequate electricity to satisfy the expected Toad
requirements of the inhabitants of the City, the City entered into a long-term, fixed-price
electric energy purchase agreement with Calpine consisting of the WSPP Terms and the
CAISO Confirmation, dated February 9, 2001, setting forth the amount of electric energy
purchased by the City from Calpine (the "Energy"), specifying certain terms and conditions
of such purchase and modifying certain provisions of the WSPP Terms (collectively, the
"Contract"); and
WHEREAS, pursuant to the Contract, the City is obligated to take and pay for the
Energy purchased, resulting in the City's obligation to make installment purchase
payments to Calpine in the amounts and at the times determined pursuant to the Contract;
and
WHEREAS, since the City entered into the Contract, the State has initiated an
electric energy conservation program which has resulted in a reduction of the electric load
requirements of retail customers throughout the State, including within the City; and
WHEREAS, since the City entered into the Contract, the State has supported and
encouraged, through modifications to the power plant approval process and other means,
the construction of new power plants, the repowering of older power plants to increase
production and an expansion of the facilities to import power and natural gas into the State
from other areas of the United States; and
WHEREAS, the reduction in electric load, the increase of electric production
facilities, an increase in the supply of, and reduction in the cost of, natural gas, the
regulation of maintenance schedules for power plants and other factors have significantly
reduced the demand or the rate of growth of demand for electricity in the State, including
the City, and resulted in an increase in the supply, and reduced the cost, of electricity in
the short-term markets; and
WHEREAS, as a result of the factors described above and other factors discussed
with this City Council, much of the Energy is expected to be sold by the City at prices
which the City anticipates will be significantly below the price paid for the Energy by the
City; and
WHEREAS, the City has determined that it is in its best economic interests to
provide for the sale of the Energy in one transaction rather than selling portions of the
Energy in multiple transactions over time; and
WHEREAS, the City has determined that the best economic use by the City of,
and the best return to the City for the sale of, the Energy can be achieved by selling the
Energy to Calpine in a single transaction; and
WHEREAS, the City has determined to sell the Energy to Calpine on the terms
and conditions set forth in an amendment to the Contract denominated Amendment
Number One to Electric Energy Purchase Agreement (the "Amendment"); and
WHEREAS, the City and Calpine have agreed upon the purchase price for the
Energy purchased by Calpine pursuant to the Amendment and have also agreed to net
the payments due from the City for its purchase of the Energy from Calpine against the
payments due from Calpine for its purchase of the Energy from the City; and
WHEREAS, the City and Calpine have agreed that the netting of such amounts
payable by the respective parties is properly reflected by the City making installment
payments (the "Installment Payments") at the times and in the amounts set forth in the
Amendment; and
WHEREAS, the Installment Payments are to be paid from available revenues of
the City's Electric System; and
DOCSLA1:427695.2
40490-7 EJC
WHEREAS, all acts, conditions and things required by the laws of the State of
California to exist, to have happened and to have been performed precedent to and in
connection with the consummation of the transactions authorized hereby do exist, have
happened and have been performed in regular and due time, form and manner as
required by law, and the City is now duly authorized and empowered, pursuant to each
and every requirement of law, to consummate such transactions for the purpose, in the
manner and upon the terms herein provided;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF LODI, AS FOLLOWS:
Section 1. This City Council hereby specifically finds and determines that the
actions authorized hereby constitute and are with respect to the public affairs of the City
and that the statements, findings and determinations set forth above and in the
preambles of the Amendment approved herein are true and correct. This City Council
hereby specifically further finds and determines that the consummation of the
transactions contemplated in this Resolution and in the Amendment shall result in
significant public benefits to the City in that the City expects to improve the costs and
liquidity requirements of the Electric System's operations through sale of the Energy as
provided in the Amendment.
Section 2.The Amendment proposed to be executed and entered into by the City
and Calpine, in the form presented at this meeting and on file with the City Clerk, and
the performance by the City of its obligations thereunder, are hereby approved, and
each of the City Manager and the Finance Director (each a "Designated Officer") is
hereby severally authorized and directed to execute the Amendment, for and in the
name and on behalf of the City, and deliver the Amendment to Calpine. The
Amendment shall be in substantially the form presented to this meeting and on file with
the City Clerk; provided however the Amendment may also include a pledge of the net
revenues of the City's Electric System on a basis consistent with the City's agreements
and obligations relating to such net revenues and such other nonsubstantive changes
therein as the Designated Officer executing the Amendment may approve, such
approval to be conclusively evidenced by the execution and delivery thereof.
Section 3. The provisions of the Amendment requiring or authorizing the
assignment of Calpine's rights to receive the Installment Payments, and certain rights
related to the Installment Payments, including without limitation the rights to enforce the
payment thereof and the other covenant obligations of the City in connection with the
Installment Payments are hereby specifically approved. Such assignment provisions
contemplate, and are included in the Amendment to facilitate, third parties obtaining
rights and benefits under the Amendment directly through such assignment, through an
offering of certificates of participation in the Installment Payments by or on behalf of an
assignee, or through some other structure to securitize the cash flow of the Installment
Payments. As a result the Amendment constitutes a contract within the meaning of
Section 53511 of the Government Code of the State for purposes of Sections 860 and
863 of the Code of Civil Procedure of the State.
DOCSLA I :427695.2
40490-7 EJC
Section 4. The City Clerk is hereby authorized and directed to attest the
signature of the Designated Officer executing the Amendment on behalf of the City, and
to affix and attest the seal of the City thereto, as may be required or appropriate in
connection with the execution and delivery of the Amendment.
Section 5. Each appropriate officer, employee or agent of the City is hereby
severally authorized and directed to do any and all things and to execute and deliver any
and all certificates, documents and instruments which he or she may deem necessary or
desirable in order to consummate the transactions authorized hereby and to carry out,
give effect to and comply with the terms and intent of this Resolution and the
Amendment. All such actions heretofore taken by any officer, employee or agent of the
City is hereby ratified, confirmed and approved.
Section 6. This Resolution shall take effect immediately upon its passage.
Date: September 4, 2002
I hereby certify that Resolution 2002-189 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held September 4, 2002 by the following
votes:
AYES: COUNCIL MEMBERS — Hitchcock, Howard, Land, Nakanishi, and
Mayor Pennino
NOES: COUNCIL MEMBERS - None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS - None
Approved As to Form:
--e7a44.44.4." ;(+2,/
Randall A. Hays
City Attorney
DOCSLA1:427695.2
40490-7 EJC
2002-189
SUSAN J. BLACKSTON
City Clerk