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HomeMy WebLinkAbout1998-036 RESOLUTION NO. 98-36 1 RESOLUTION OF THE CITY OF SAN BERNARDINO REGARDING 2 PARTICIPATION IN WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS AND SAN BERNARDINO ASSOCIATION OF GOVERNMENTS REGIONAL POWER PURCHASING AGGREGATION. 3 4 5 Whereas, the State of California Legislature adopted and the Governor signed ABI890 6 in 1996 which authorized the restructuring and deregulation of the electric industry in California, 7 and 8 Whereas, the primary objective of ABI890 was to ultimately reduce the cost of electricity 9 to the consumer, and 10 11 Whereas, the means to accomplish this cost reduction was to deregulate the generation of electric power and authorize consumers to purchase power through direct access to power 12 13 14 15 16 17 18 19 20 21 22 23 24 generators, and Whereas, said legislation authorizes local governments to join together and aggregate their electric loads to form power pools which will enable them to shop more competitively for power generation on the open market, and Whereas, the Western Riverside Council of Governments (WRCOG) and San Bernardino Association of Governments (SANBAG) have joined together to evaluate and consider formation of an aggregation of government agencies for acquisition of electric power generation, and Whereas, WRCOG and SANBAG have prepared and adopted a white paper which formally recommends formation of a power pool aggregation, establishes a schedule and budget for the defined work tasks, and extends an invitation to governmental agencies within the organizational boundaries to participate, and 25 IIIII 26 27 28 IIIII I 98- 6 1 2 3 4 5 6 RESOLUTION OF THE CITY OF SAN BERNARDINO REGARDING PARTICIPATION IN WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS AND SAN BERNARDINO ASSOCIATION OF GOVERNMENTS REGIONAL POWER PURCHASING AGGREGATION. Whereas, the cost to complete the tasks necessary to accomplish the aggregation is $150,000 and a tiered cost sharing formula has been developed to distribute the cost among participating agencies, and Whereas, those agencies choosing to participate in funding the required tasks will receive 7 8 their initial investment back from the first savings achieved under the program. 9 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF 10 SAN BERNARDINO AS FOLLOWS: 11 12 SECTION I. Approve participation in the WRCOG/SANBAG aggregation to create a 13 regional power acquisition pool, and 14 15 IIIII SECTION 2. Authorize the Mayor to execute the letter of participation (Attachment A). 16 17 18 19 IIIII IIIII IIIII 20 IIIII 21 IIIII 22 IIIII 23 IIIII 24 25 26 IIIII IIIII 27 28 IIIII IIIII 2 , q.c; 98-36 RESOLUTION OF THE CITY OF SAN BERNARDINO REGARDING PARTICIPATION IN WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS AND SAN 2 BERNARDINO ASSOCIATION OF GOVERNMENTS REGIONAL POWER PURCHASING AGGREGATION. 1 3 4 I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and 5 Common Council of the City of San Bernardino at a joint regular meeting thereof, held 6 on the 16th day of February , 1998, by the following vote, to wit: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Council Members: AYES NAYS ABSTAIN ABSENT NEGRETE x CURLIN x ARIAS x OBERHELMAN x DEVLIN x ANDERSON x MILLER x ~ {'--lfl_;6 (Y-ttA ~___ RA EL CLARK, City Clerk I gft. day of The foregoing resolution is hereby approved this February , 1998. ~ai~~ , TOM MINOR, Mayor City of San Bernardino Approved as to form and legal content: JAMES F. PENMAN 25 City Attorney 26 27 28 3 ... 98-36 CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM TO: James F. Penman City Attorney 0' .! I " ,1/ HustonT. Carlyle, Jr. _~ ~ a..,,{/ L,j" Sf. ASSIstant CllY Attorney " I', /, ,i / February 3,1998 ' U FROM: DATE: RE: Resolution ofthe City of San Bernardino regarding participation in Western Riverside Council of Governments (WRCOG) and San Bernardino Associa- tion of Governments (SANBAG) regional power purchasing aggregation I have reviewed the attached resolution and back up materials. The resolution appears to be in order and is ready for signature. I offer the following Dbservations on the back up materials and the subject matter in general. As a result of past actions taken by the California Public Utilities Commission and the State Legislature, the transmission and distribution services of electricity will remain with the current utility (Edison), but the generation (energy) portion of the industry will be opened to the market place. There is the possibility of savings depending on the pooling of consumers (aggregation) and the ability of that pool to demand and receive lower rates from the current ones in place. The proposed study would determine the availability of such lower rates by having the Cit) of San Bernardino be part of a consDrtium for RFPfRFQ purposes. While the City was not an original participant in the Task Force created to study this process, it has been attending and has been represented in many of the later meetings. According to the City Administrator's office, the consultant hired by the County to facilitate the RFPfRFQ process is not someone who is or would be bidding on the right to generate the energy. The Water Department would reimburse one half of the cost incurred by the City for this study. The information received would appear to be useful in determining which approach would be most advantageous to the City as it seeks to get the best generation of energy rate available. -, 98-36 FtB 09 7998 Western Riverside Council of Governments ~ WRCOG County of Riverside. City of Banning, City of Beaumont. City of Calimesa, City of Canyon Lake, City of Corona, City of Hemet. City of Lake Elsinore, City of Moreno Valley. City of Murrieta, City of Norco, City of Perris. City of Riverside. City of San Jacinto. City of Temecula February 3, 1998 Ms. Lori Sassoon Sr. Admin. Analyst City of San Bernardino 300 North D Street San Bernardino, CA 92402 Dear Ms. Sassoon As you are probably aware, the Western Riverside Council of Governments (WRCOG) and the San Bernardino Associated Governments (SAN BAG) joined forces last May to study the issue of the restructuring of the electric utility industry, The Joint Task Force conducted a study to explore the best course of action to pursue during the four year transition phase of the restructure that begins on March 31,1998. At its December 16, 1997 meeting the electric restructuring task force decided to continue this process by soliciting competitive bidders for power supplies and other energy services in the structure of a multi-agency aggregation. This decision significantly accelerates the time frames the Task Force had originally established for creating a power pool so that participants can maximize their savings from electrical restructuring. The Task Force is proposing to send out the Request for Qualifications and Proposals in the middle of March. The RFQ/P process will reveal the best option for savings; the default option (SCE); other available aggregation programs; or an Inland Empire Power Pool. Until specific offers for an aggregation program are provided, it is difficult to compare the choices available and to fully realize the benefits of competition. If the results of the RPQ/P demonstrate sufficient cost savings, each participating agency will be given the opportunity to participate in this regional aggregation program. As part of the process, the WRCOG/SANBAG task force needs to determine which agencies wish to be induded in the RFQ/P process. Letters were sent to all public agencies in Western Riverside County and San Bernardino County to invite participation and more than twenty public agencies in the two County area are now 3880 Lemon Street, Suite 300 . Riverside, CA 92501 . (909) 787.7985 . Fax (909) 787-7991 ::10:- , 98-36 signed up to participate in the program. We have received numerous requests to extend the deadline for receiving expressions of interest or resolutions of, participation due to difficulty in scheduling items onto Board and Council agendas. We have been able to work with the consultants to extend the deadline for participation to February 16, 1998 if you wish to be included in this process. Participation in this RFQ/P process does not obligate you to participate in any resulting regional aggregation program. If you choose to participate in RFQ/P we will also request your load profile information in order to provide required information for the bidders to provide energy costs. As a participant in the RFQ/P, your available options will be evaluated so that you can make the best decision for your agency. The Task Force was formed with common goals to maximize the benefits to participating agencies, while minimizing their potential exposure and liability. I hope that your agency will seriously consider this opportunity. We would appreciate receiving your response by February 16,1998. Please call Alan Crouse (WRCOG) at (909)787- 7985 or Kindred Murillo (Pedersen) (SAN BAG) at (760)228-5400 if you have questions or comments, or need assistance in responding. Yours sincerely, ~ L---' Alan Crouse Dir. Information Services 98 -'3 6 " -~ / -..=.7." ~.,.~~~~s?;, .~.\ - .~: -~ t\.~'I\ --,,~.;;-~ 1.- ~~'14::. . --~"'l >. --_/'l J'" ~-~--_.._-.> L ? -'-~-:~~i1)f ' ~~ ~;~/ Attachment A CITY OF San Bernardino OFFICE OF THE MAYOR TOM MINOR MAYOR January 29, 1998 Mr. Jeff Butzlaff WRCOG/SANBAG Electric Restructuring Task Force Chairperson c/o SANBAG 472 North Arrowhead Avenue San Bernardino, California 92401 Dear Mr. Butzlaff: The City of San Bernardino is a member of WRCOG/SANBAG's electric restructuring task force which is evaluating the potential for saving money by joining together to purchase electricity. The City of San Bernardino expresses its strong interest in the WRCOG/SANBAG regional aggregation program and is willing to continue with the next steps of this project. As part of the next step, WRCOG/SANBAG is authorized to include the City of San Bernardino's electrical load in the Request for Qualifications and Request for Proposals to potential competitive bidders for power supplies and other energy services. The City of San Bernardino is willing to participate in a WRCOG/SANBAG regional aggregation program given that additional competitive benefits for its agency can be achieved. We understand the results of the Request for Qualifications and Request for Proposals process will be compared against other available aggregation offerings to provide our agency the most cost -effective savings while minimizing potential exposure for member agencies. We look forward to continued progress towards establishing a successful regional aggregation program. Sincerely, TOM MINOR Mayor 300 NORTH '0' STREET, SAN BERNARDINO, CALIFORNIA 92418.0001 (10'1384-5133' FAX-(IOI131.-'OI7 98-36 Attachment B ELECTRIC UTILITY RESTRUCTURING Options For The Future EXECUTIVE SUMMARY INTRODUCTION The purpose and intent of this summary is to provide a brief overview, options, and recommendations for how the municipalities and local governments can effectively position themselves to take advantage of the opportunities available in the restructuring of the electric utility industry. The restructure of the electric utility industry is a complex subject. It has been the subject of countless hours of study, analysis, and actions by the Federal, State and local governments. AS 1890 was enacted by the State Legislature to authorize restructuring of the electric industry in California. Efforts are continuing today by the California Public Utilities Commission and the investor owned utilities to iron out the final details of all the implementing steps and actions. The purpose of this summary is to focus on those factors that will influence whether municipalities and local agencies will elect to take action in the immediate future to pursue electric restructuring opportunities. The material and recommendations presented herein has been prepared under the direction and guidance of a joint WRCOG/SANSAG Electric Restructuring Task Force made up of elected representatives, city managers and high level management staff from several agencies. BACKGROUND January 1, 1998 begins the four year transition period legislated by AS 1890 by which the electric utility industry will begin moving from vertically integrated market structure to as more competitive market structure. The vertically integrated electric utility that currently provides generation, transmission, and distribution services will no longer have the monopolistic advantage of providing all three services. The transmission and distribution services will remain with the Investor Owned Utility (IOU), while the generation (energy) portion of the industry will be opened to the competitive market place. Small commercial and residential customers will receive a 10% reduction in their electric bills on January 1, 1998. Rates for industrial, agricultural, and large commercial customers will remain frozen at their June, 1996 levels until the IOU's recover their .,"" ..,"" 98-36 This Report Was Prepared Under The Direction or The Joint WRCOG/SANBAG Electric Restructuring Task Force The following is a listing of the members of the joint task force and the jurisdiction they represented : JeffButzlaff; City Manager, Task Force Chair Gene Bourbonnais, Councilmember. Pat Williams, Councilmember Vrrginia Wyatt Denney, Mayor Pro Tem Alan Kapanicas, City Manager Laura Manchester, Assistant To The City Manager Michele Hatzl, Management Analyst Norm King, Executive Director Bill Mellen, Mayor Pro Tem Deirdre Bennett, Councilmember Kindred Pedersen, Utility Coordinator Gerald Katz., Electric Department Tom Parry, City Manager Ken Hubler, Senior Administrative Assistant Jeff Bloom, Community Development Director Pamela Easter, Public Affairs Project Manager fun King, District Manager City of Canyon Lake City of Canyon Lake City of San Jacinto City ofPerris Cities ofBeaumontlCalimesa City of Corona City of Moreno Valley SANBAG City of Big Bear Lake City of Colton San Bernardino County City of Colton City of Needles City of Hesperia City of Upland Southern California Edison The Gas Company ~8=~6 stranded investments.1 These are targeted to be recovered by December 31, 2001. During this four year transition period a significant portion of the electricity bills will be used to pay the accelerated depreciation of the IOU's generation assets that are not competitive in the new industry structure. This will be in the fonn of a Competition Transition Charge (CTC). The CTC will be approximately 25% to 40% of the total electric bill during the transition period and should drop to less than 10% early in the year 2002. The transmission and distribution portion of the electric bill will remain regulated by the Federal Energy Regulatory Commission (FERC) and the California Public Utilities Commission (CPUC). The transmission and distribution portion of the bill represents approximately 30% to 35% of the total bill. The opportunity for savings is only in the energy (generation), billing, and metering portions of the electric bill. Billing and metering are a very small amount in the overall bill, but can represent an area for potential savings. The energy (generation) portion currently represents 25% to 30% of the total electric bill and is the area in which savings can be gained by aggregating loads. OPTIONS There are several options available to municipalities and local agencies in considering a response to electric restructuring. While there are numerous opportunities for potential action and many of these are interactive, there are three distinct options that are discussed here. Do Nothing The first option is to "do nothing' which means that one chooses to stay with the current energy provider Southern California Edison (SCE). However, this option should only be considered after one has very clearly reviewed and studied the other options and makes an infonned choice to stay with SCE. The downside of this option is that there is no opportunity for savings through 'doing nothing'. Aggregation The second option is to fonn a power pool through aggregating. Aggregation is defined as "any marketer, broker, public agency, city, county, or special district that combines the loads of multiple end use customers in facilitating the sale and purchase of electric energy, and other services on behalf of these customers". Aggregations can be fonned in many 'Stranded investment - uneconomic generation costs which have not undergone market valuation, employee costs and above-market energy contract costs. u 98-36 different forms: . Aggregating only municipal loads . Aggregating large loads (20 kW and larger) . Aggregating all loads including residential . Aggregating multiple organizations or joining an existing aggregation The premise behind aggregation is to increase the buying power and leverage in negotiating energy costs, transmission access, metering, billing, and energy services to reduce the cost of electricity for the end user. Aggregation can increase the buying power of the end users by taking advantage ~f differing load profiles to build a flatter profile, which from the experience of other aggregations, commands the best energy prices. Metering, billing and energy services costs can also be reduced through the economies of scale provided by aggregation. Aggregations can be a city, county, or special district aggregating their own loads, or multiple agencies such as the Association of Bay Area Governments (ABAG) power pool. The San Diego Association of Governments (SANDAG) is another example of several local agencies choosing to work together on an aggregation program to maximize their purchasing power. The last and most expensive option is creating a municipal utility. A major diference between a municipal utility and an aggregation is the municipal utility has a defined territory whereas an aggregation does not Additionally, municipal utilities own their own distribution systems and aggregations depend on the Utility Distribution Company to provide distribution services. Forming a municipal utility would require significant up front investment to acquire .the existing electric distribution system from SCE at fair market value. It would also require obtaining a qualified staff and the necessary equipment to operate as a utility and provide customer service including connections, disconnections, metering, and billing_ CONCLUSION Aggregation is clearly the most cost effective choice for municipalities and local agencies to take advantage of the opportunities in the electricity utility restructure. The reasons aggregation is the most viable option are: Most cost effective way to gain savings because of the minimal up front costs and ability to gain savings on the energy (generation) portion of the bill. . Flexible approaches to achieving varied goals through choosing options of full service providers, bidding individual components, varied portfolio strategies, and purchasing from specific types of energy providers such as renewable power. . Can determine the level of risk desired through the power portfolio, structure ill 98-36 of organization, and type of energy provider. . Experience from other aggregations suggests that there is a 5% savings to be gained from aggregating. The most viable and desirable option for municipalities and local agencies to take is to join and support the WRCOG/SANBAG effort in forming a power pool, both from the point of view of initial and on-going costs, as well as in providing the size and diversity of loads needed to leverage the least cost energy prices in the mari<etplace. Sharing of costs with other municipalities and local agencies, possibly including both counties, cities, special districts, water districts, school districts, and military installations would lessen up front individual costs to establish a power pool; hire technical consultants; produce, distribute, and analyze a request for proposals; staff coordination; and legal counsel for setting up the legal aggregation structure SCHEDULE There are a number of steps and actions that must be taken to establish a power pool aggregation. These include: . Forming and establishing the appropriate legal entity for administration and decision making to administer a regional power pool and inviting municipalities and local agencies to participate. . Collecting the data required to enable a complete and accurate request for proposals to be prepared. . Preparing and distributing a Request for Proposals to energy providers and selecting the preferred energy provider(s). Entering into a contract with the energy provider and finalizing participation agreements with the participating members. It is projected that this process will take approximately nine (9) months to complete. This assumes a decision point at the end of the organizational/data collection phase, prior to preparing and issuing the request for proposals for energy generation and related services. It also assumes that all activities proceed in a timely manner. BUDGET The overall budget for the project is $150,000. A tiered cost sharing formula has been recommended to equitably distribute this cost across the project participants based on the amount of money currently being spent on electricity and assuming a 65% participation rate. It is anticipated that all partiCipants will receive their initial investment back within one to two months after implementation of a contract with an energy provider. This is based on the estimated savings that such a contract will achieve. IV gp--r; RECOMMENDA nONS The following recommendations are included: o Aggregate the municipal and local government loads in Western Riverside and San Bernardino Counties. o Form a legal entity for administration and decision-making .to administer a regional power pool. o Adopt the schedule and recommended budget for implementation of the project. o Establish and implement the recommended cost Sharing structure. o Invite interested public agencies to participate. v ~iJi8:~.3163'33 q: 35 '3097877991 "IRCDG RAl'iE ~5 Attachment C Cost Allocation Chart 11'11and Empire Power Pool ~____~,._...,...""...o;..,..,.-,..... The cost shartng foritltl1a is based on the annual electric expenditures of each organization Intirested In participating in the power pool. It is based on 8 65"k partlelpatlt)n ....te of those 80 agencies originally eltpresslng an intereet In forn'rii1~ a'power pool. Any money collected in exce.. of the project needs wiHbe'returned to those contributing in proportion to their origInal' contiibutlon,. Annual Eleet:l"icity,'Ii;~pcnditu res $0 -$99,999 I $100,000 -$:249,!i99 $250,000 - $4$9,Q9, .' ",' ';", $500,000 - $999,999 '", $1,000,000- $2,.ct~.999 $2,500,000'-$4,9-.,999 $5,000,000"$9;.,999 l' :" Over $10,000,000 Shuc of Cost $555 $925 $1,850 $3,700 $8,325 $12,950 $17,525 $26,825 Cost AUOClltiOll CUrt , 98-36 Attachment D WRCOG/SANBAG Task Force Participants Effective 1/23/98 Counties San Bernardino Cities Canyon Lake Hemet Lake Elsinore Moreno Valley Murrieta Temecula Fontana Montclair Twentynine Palms Rancho Cucamonga Redlands Yucaipa Yucca Valley School Districts Barstow Unified Victor Elementary District Militarv Installations March Air Force Base Airports/Reuse Aoencies Big Bear Airport SBIM Water/Sewer Districts Apple Valley Heights Water Baldy Mesa Water Bighorn-Desert View Water High Desert Water Joshua Basin Water Lee Lake Water Park Districts Hesperia Rec. and Park 98-36 CITY OF San Bernardino January 29, 1998 'UY~/<<lLt!c<<t:L !~V riIL!L ,J '?/It& I"A'ty, ~14i-c O/J?tt ~ p-- 'IUM:t'Ji/c>, OFFICE OF THE MAYOR TOM MAYOR M I NOR Mr. Jeff Butzlaff WRCOG/SANBAG Electric Restructuring Task Force Chairperson c/o SANBAG 472 North Arrowhead Avenue San Bernardino, California 92401 Dear Mr. Butzlaff: The City of San Bernardino is a member of WRCOG/SANBAG's electric restructuring task force which is evaluating the potential for saving money by joining together to purchase electricity. The City of San Bernardino expresses its strong interest in the WRCOG/SANBAG regional aggregation program and is willing to continue with the next steps of this project. As part of the next step, WRCOG/SANBAG is authorized to include the City of San Bernardino's electrical load in the Request for Qualifications and Request for Proposals to potential competitive bidders for power supplies and other energy services. The City of San Bernardino is willing to participate in a WRCOG/SANBAG regional aggregation program given that additional competitive benefits for its agency can be achieved. We understand the results of the Request for Qualifications and Request for Proposals process will be compared against other available aggregation offerings to provide our agency the most cost -effective savings while minimizing potential exposure for member agencies. We look forward to continued progress towards establishing a successful regional aggregation program. Sincerely, TOM MINOR Mayor 300 NORTH '0' STREET, SAN BERNARDINO, CALIFORNIA 92418.0001 (808) 384-5133. FAX-(IOI) 384-5017