HomeMy WebLinkAboutResolutions - No. 2021-238RESOLUTION NO. 2021-238
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING EXPENDITURE
OF $1 MILLION FROM GENERAL OPERATING RESERVES FOR
SEPTEMBER 2021 POWER SUPPLY COSTS AND RATIFYING
EXPENDITURE OF $1 MILLION FROM GENERAL OPERATING RESERVES
FOR AUGUST 2021 POWER SUPPLY COSTS
WHEREAS, on August 2, 2021, Lodi Electric Utility (LEU) staff met with the City's Risk
Oversight Committee (ROC) to discuss the City's power supply costs and corresponding Energy
Cost Adjustment (ECA) for the months of August and September; and
WHEREAS, the ECA, approved by the City Council in 2007, is a monthly charge or
credit applied to customer utility bills based on corresponding increases or decreases in power
supply costs which mitigates the need for Council to consider more frequent changes to base
electric rates; and
WHEREAS, without the ECA, electric rates would need to be adjusted on a more
frequent basis to ensure sufficient reserves are available to address unforeseen cost increases;
and
WHEREAS, due to worsening drought conditions across the State and limited power
supply resources, LEU has experienced a corresponding increase in market power purchases
over the summer months; and
WHEREAS, LEU has taken proactive measures to secure contracts to cover Lodi's
summer energy needs and mitigate exposure to energy price volatility when demand is high and
power supplies are limited and based on forward energy price curves, LEU estimates that
locking in these contract purchases have mitigated approximately $700,000 in potential cost
exposure for August and September; and
WHEREAS, these increased purchases, based on the need to purchase more energy to
replace hydroelectric supplies and higher than anticipated market prices, have resulted in higher
than originally forecasted costs developed as part of the NCPA budget planning process; and
WHEREAS, due to these increased contract purchases and associated costs, the City
was facing an estimated ECA of over 4 cents per kilowatt-hour (kWh) for the month of August
which would have followed an over 5 cent ECA experienced by customers for the month of July;
and
WHEREAS, recognizing the impact of these higher than average ECA amounts on
customers and their utility bills over the summer months when usage is at its highest, the City's
Risk Oversight Committee took action to approve the use of $1 million in reserves from its
General Operating Reserve (GOR) to cover a portion of the August power supply charges to
reduce the August 2021 ECA by nearly half - down to 2.21 cents/kWh with action needed
quickly to ensure the timely posting and release of utility bills; and
WHEREAS, based on the most current information available to LEU, the September
ECA is estimated to be approximately 2.5 cents/kWh when, in most years on average, the
September ECA is closer to zero; therefore, staff also recommends using an additional
$1 million in GOR funds to cover a portion of the September power supply charges to bring the
September 2021 ECA closer to its historical average; and
WHEREAS, LEU's GOR provides funding for, among other things, business-related
areas of risk such as market power volatility and the cost of replacement power during dry year
conditions for which costs cannot reasonably be forecasted and budgeted; and
WHEREAS, as of June 30, 2021, LEU had an available balance of approximately
$12 million in its GOR held at Northern California Power Agency (NCPA) and while this action
will draw down $2 million in reserves, LEU Engineering staff have identified a strategy with
respect to a capital improvement project that will save approximately $2 million by implementing
a long-term, annual maintenance strategy for certain distribution system equipment versus a
one-time costly replacement originally budgeted in the current fiscal year.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
authorize the expenditure of $1 million from LEU's General Operating Reserves (GOR) held at
the Northern California Power Agency (NCPA) for September 2021 power supply costs and
ratify the expenditure of $1 million from the GOR at NCPA for August 2021 power supply costs.
Dated: August 18, 2021
I hereby certify that Resolution No. 2021-238 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held August 18, 2021 by the following votes:
AYES: COUNCIL MEMBERS — Chandler, Hothi, Khan, and Mayor Nakanishi
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — Kuehne
ABSTAIN: COUNCIL MEMBERS — None
` JENNIF CUSMIR
City Clerk
2021-238