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Home My WebLink AboutAgenda Report - July 16, 2003 E-14I.-ATY OF Lom COUNCIL COMMUNICATION AGENDA TITIi Adopt a resolution authorizing the City Manager to extend the consulting services agreement with McDonPartners, e - is :. , December 2003 to provide bulk power cost modeling � and strategic services to the Electric Utility Department ($70,000) (EUD) ; MEETING DATE: :# PREPARED BY: Electric Utiljt� �*� RECOMMENDED ACTION: That the City Council adopt a resolution.a.uthorizing the City Manager to extend the consulting, services ag . reemem with McDOPW4 'Partners, through : iii. to provide i.; power cost modeling INFORMATION:and strategic services to the Electric Utility Department ($70,000). BACKGROUND Department(ELID) has relied on the Northern California Power Agency (NCPA) to handle most of its seasonal energy needs. In the past, energy prices were bi on production costs. Now, energy prices are market driven. Markets have not been as volatile as 2001, but recent price volatility shows that we are beyond the low prices following the 2001 crisis. Market dsk is still viable. It is the intent ofthe EUD to reduce our exposure to market prices and lock in a stable and o.. energy .:g:rate customers. NCPA uses a sophisticated production cost model to optimize the value of NCPA resources for the ten NCPA pool members. Lodi is a member of the #!-A pool and t # mfr. frotrt modeling provided to all members. Things have changed. Although it is the EUD's intent that Lodi remains a pool member, the time has come for Lodi to evaluate it's own resource needs in terrin$ of. future energy market volatility. NGPA must continue to focus on the entire NCPA pool. It is the EUQ's intent to drastically limit our exposure to the vagaries of the existing energy market place. In that regard, we have previously retained the technical expertise of McDonald Partners developing cost model. The arrangement, which we are asking the Lodi City Council to approve, provides for a number of tasks to be performed by McDonald Partners. * Maintain Lodi Electric's Resource Planning Model. * Analyze and provide recommendations related to power market strategies to reduce market risk * A.ssist in negotiating agreements and evaluating the credit risk of energy suppliers. * Meet in Lodi on a monthly basis to review strategies Funding Approval, W* tie, Finance Directeur APPROVED: °�`✓ H. Dixon Flynn CITY COUNCIL SUSAN HITCHCOCK, Mayor EMILY HOWARD Mayor Pro Ternpore JOHN BECKMAN LARRY HANSEN KEITH LAND CITY OF LODI ELECTRIC UTILrTY DEPARTMENT ALAN N. VALLOW, DIRECTOR 1331 S HAM LANE LORI, CALIFORNIA 95242-3995 (209) 333-6762 FAX (209) 333--6639 Ma.rch 20, 2003 N. DIXON FLYNN City Manager MNDALL A. HAYS City Attorney SUSAN J. SLACKSTON City cleyk 0 Maintain Lodi Electric's Integrated Resource Planning Model to include current load forecasts, gas and power price forecasts, resource utilization, price risk expo%um and budgetary impacts.. a Compare actual data to forecasts to monitor the accuracy of the integrated Resource Model. a Make available McDonald Partners' proprietary forward gas and power curve data..on a quarterly basis throughout the engagement. & Negotiate enabling agreements with credit -worthy gas, power, and financial products Supplier& 0 Perform and maintain counter party credit analyses, a Monitor Lodi Electric's mark -to -market exposurelli.ability on term contracts, 0 Identify oppcfftunities and recommend transactions for utilization of Lodi Electric phoical assets including Lodi's share of the GOTP and the Lodi Gas Storage Project. 0 Recommend appropriateness of physical and financial hedging strategies for natural gas, power, and debt management. 0 Monitor gas and power markets on a regular basis and identify potential transaction structures. 0 Develop term sheets, solicit bids/offers from a pool of providers and analyze provider proposals. 0 Provide transaction -follow up to ensure proper deal confirmation, scheduling, accounting, and billing. Meet in Lodi on a •. a. to review strategies. Proposed fee, $11,500 per month for the fiscal year 2003/2004. It is anticipated�.Jhat continuing work for the next budget year will be at a tkiuced rate. Should additional meetings be required, incremental meeting time will be e/hour. Either party may can(��[ at beginany time on thirty days written notice. We propose that the retainer servioe ■: Lodi City Council anyoneAll information related to this assignment will behold in strictest confidence. No work shall b6 performed by other than Sandra or Michael McDonald without the express w6tter approval o. Lodi Electric. If the terms of this engagement as setforth in this letter are satisfactory, acceptance and return an original to me at the above address.. If you have any questions or need additional information, please call me at (209)-333-6762. 1 look forward to working with you on this assignment, I F McDonald Partners, Inc. BY' Principal Wim APPROVED. w Date: -1 Date: RESOLUTION NO. 2003-128 A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING THE CITY MANAGER TO EXECUTE A CONSULTING SERVICES AGREEMENT WITH MCDONALD PARTNERS, INC., TO PROVIDE BULK POWER COST MODELING AND STRATEGIC SERVICES TO THE ELECTRIC UTILITY DEPARTMENT NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby authorize the City Manager to extend the consulting services agreement with McDonald Partners, Inc., to provide bulk power cost modeling and strategic services to the Electric Utility Department, in an amount not to exceed $70,000.00 through December 2003. Dated: July 16, 2003 I hereby certify that Resolution No. 2003-128 was passed and adopted by the Lodi City Council in a regular meeting held July 16, 2003, by the following vote: AYES: COUNCIL MEMBERS — Beckman, Hansen, Howard, and Land NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — Mayor Hitchcock ABSTAIN: COUNCIL MEMBERS — None SUSAN J. BLACKSTON City Clerk 2003-128