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Home My WebLink About2012/06/19 Item 08CITY COUNCIL AGENDA STATEMENT ~`~~ CITY OF CHUTA VISTA 6/19/12, Item g ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING CONTINUATION OF ELECTRICITY COMMODITY PURCHASES FROM SHELL ENERGY AND AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS IN CONJUNCTION WITH THE PURCHASES ~,~ _ SUBMITTED BY: DIRECTOR OF PUB WORKS/"f REVIEWED BY: CITY MANAGER C.~ ASSISTANT CITY NAGER 5~ 4/STHS VOTE: YES ~ NO ^X SUMMARY In order to help foster price competiveness, the California Public Utilities Commission in 1998 began allowing certain energy customers to purchase electricity from third-party providers (instead of their local Investor-Owner Utility), know as Direct Access Service. The City of Chula Vista purchases electricity for four municipal buildings from Shell Energy under Direct Access Service. The City is now updating its electricity procurement rates, which are approximately 40% lower than previous commodity prices, with Shell Energy for up to 2-yeazs. ENVIRONMENTAL REVIEW The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because the proposal consists of a continuing administrative action involving the purchase of electricity. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA review. RECOMMENDATION Council adopt the resolution. BOARDS/COMMISSION RECOMMENDATION Not applicable. 8-1 6/19/12, Item `~ Page 2 of 3 DISCUSSION In 1998, the California Public Utilities Commission began implementation of Assembly Bill 1890 (The Electric Utility Industry Restructuring Act) to make the generation of electricity more competitive in California. One of the key provisions was the creation of "Direct Access Service" options in which commercial, industrial, and agricultural customers could select to purchase electricity from a third-party Electric Service Provider, instead of from the local Investor-Owner Utility (such as San Diego Gas & Electric). Direct Access allows these customers to potentially negotiate better electricity commodity rates or higher renewable energy power mixes from the open market. The local utility still provides the transmission and distribution services for Direct Access customers within their service territories. During the energy crisis in 2001, the Department of Water Resources was required to issue revenue bonds and enter into long-term electric energy purchasing contracts on behalf of California ratepayers. As a result, the California Public L7tilities Commission suspended Direct Access in order to create a stable customer base to help the Departrnent of Water Resources recover its costs. However, existin Direct Access customers could continue to purchase their electricity from an Electric Service Provider. The City of Chula Vista has four electricity accounts that have been "grandfathered" under Direct Access Service -Civic Center Library, South Library, Public Services South (Building 200), and Discovery Pazk. Over the last 12-months, the electricity commodity purchases for the four accounts totaled approximately $244,000. Since 2004, the City has been under contract with Shell Energy (formerly Coral Power) to purchase electricity for its Direct Access accounts. To minimize utility cost fluctuations under the contract, the City "locks-in" electricity procurement rates for a certain time period through a Confirmation Letter with Shell Energy. The City's current Confirmation Letter and its associated rates are expiring at the end of June 2012. Therefore, staff is requesting that City Council approve continuation of electricity commodity purchases from Shell Energy and authorize the City Manager to execute a 1- year Confirmation Letter with a rate up to $55.00 per MWh in order to secure electricity procurement rates. Although rates change daily on the open market (based on nationwide electricity supply and demand price signals), rates are currently at historical lows and are approximately 40% lower than previous commodity prices. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found that Councilmember Castaneda and Councilmember Ramirez have property holdings within 500 feet of the boundaries of some of the properties which are the subject of this action. Although this could create a conflict for the Councilmember, pursuant to California Code of Regulations section 18704.2, no conflict exists. CURRENT YEAR FISCAL IMPACT Because the new Confirmation Letter and its associated electricity procurement rates would not be effective until July 1, 2012, there would be no impact during the current Fiscal Yeaz 2012. However, there would be utility cost savings from the new rates in the following year. 8-2 6/19/12, Item ~ Page 3 of 3 ONGOING FISCAL IMPACT During Fiscal Year 2013, it is estimated that there would be utility cost savings of at least $50,000 from the new electricity procurement rates for the City's Direct Access accounts. ATTACHMENTS Attachment A -Shell Energy Confirmation Letter Example Prepared 6y: Brendan Reed, Environmental Resource Manager, Public Works -Conservation Section H: (PUBLIC WORKS- ENGIAGENDAI CAS2012106-19-121She11 Energy Direct Access_CAS_FINAL. doc 8-3 S.~MPLE, NOT FOR EXECUTION Shell Energy North America (LJS), L.P. Dea] No.: SHELL ENERGY NORTH AMERICA S , L.P. CITY OF CHULA VISTA Attn: Commercial Advisor Attn: Phone: 858-320-1500 Phone:619-409-5918 Fax:713-767-5414 Fax: 619-409-5884 June 13, 2012 CONFIRMATION This Confirmation confirms the agreement reached on June 13, 2012 between CITY OF CHULA VISTA ("Bauer") and SHELL ENERGY NORTI3 AMERICA (US), L.P. ("Shell Enerev" or "Seller") pursuant to and in accordance with the Energy Sales Agreement dated June 16, 2004 ("ESA") between Buyer and Shell Energy. This Confirmation constitutes part of and is subject [o al] of the terms and provisions of such ESA. Terms used but not defined herein shall have the meanings ascribed to them in the ESA. Buyer and Shell Energy hereby agree to the sale of Energy by Shell Energy to Buyer under the terms and conditions as follows: Contract Quantity: Per the Block Power Table Below (plus or minus a 25% hourly bandwidth): . , ~ . 7: s:_.'+,.. ~ "` -.;~. ..... ,., ,.. .. ,...5ea{onat ~aad3hapes =;x - . , ... .-~,~ _.. . 1 2 3 4 5 6 7 8 9 30 11 12 HE lan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 D.1 0.1 z D.1 0.1 0.l D.1 0.1 0.1 0.1 0.l o.l o.l o.l 0.1 3 0.1 0.l 0.1 0.l o.l o.l 0.1 D.1 0.l a.l o.l 0.1 4 D.1 0.1 0.l o.l 0.1 0.1 0.l o.l 0.1 0.1 0.l o.l s o.1 0.1 0.1 0.1 0.1 0.1 0.l a.1 0.1 0.1 0.1 0.1 6 0.1 0.1 0.1 0.1 0.1 o.i o.1 a.1 0.1 0.1 0.1 0.1 7 0.1 0.1 0.1 0.1 0.l 0.1 0.1 0.l o.l o.l o.l o.l s o.l o.l o.l o.l o.l o.z D.z o.z a.z o.l o.l o.l 9 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 10 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.2 0.2 0.2 11 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.2 12 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.2 13 0.2 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.2 14 0.2 0.3 0.2 0.3 0.3 0.3 0.3 0.4 D.3 0.3 0.3 0.2 IS 0.3 0.3 0.2 0.2 0.2 0.3 0.3 0.4 0.3 0.3 0.3 0.2 16 0.3 0.3 0.2 0.2 0.2 0.3 0.3 0.4 0.3 0.3 0.3 0.2 17 0.2 0.3 0.2 0.2 0.2 0.2 0.3 0.4 0.3 0.3 0.3 0.2 18 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 19 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 20 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 21 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 22 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 23 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 24 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Total 3.6 3.9 3.6 3.7 3.5 3.8 4.1 4.7 4.9 4.3 3.8 3.4 Days 31 28 31 30 31 30 31 31 30 31 30 31 Total KWh 111,548 108,541 111,637 110,114 109,850 114,126 126,361 146,622 133,749 134,471 113,841 106,772 TOTAL 46.9 P~~~ of2 SAMPLE, NOT FOR EXECUTION Delrve~y Point: SP-15 EZ Gen Hub Contract Price: $54.00 per MWhr The Contract Price includes an Allowance for hourly shaped bandwidth up m an excess of 25% over the hourly Contract Quantity or a 25% deficiency below the hourly Contract Quantity. Product: CAISO Energy Delivery Term: July 1, 2012 through June 30, 2013 This Confirmation sets forth the terms of the Transaction into which the Parties have entered and together with the ESA shall constitute the entire agreement between the Parties relating to the contemplated purchase and sale of Energy. SHELL ENERGY NORTH AMERICA S , L.P. CITY OF CHULA VISTA By: SAMPLE, NOT FOR EXECUTION Ey: SAMPLE, NOT FOR EXECUTION Name: Name: Title: Title: Please return the signed confirmation to Shell Energy at Fax: (713) 767-5414. Deal Number: P$se~ of 2 RESOLUTION NO. 2012- RESOLUTION APPROVING CONTINUATION OF ELECTRICITY COMMODITY PURCHASES FROM SHELL ENERGY AND AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS IN CONJUNCTION WITH THE PURCHASES WHEREAS, the California Public Utilities Commission began implementation of Assembly Bill 1890 in 1998 to make the generation of electricity more competitive in California through the creation of "Direct Access Service"; and WHEREAS, Direct Access allows commercial, industrial, and agricultural customers to purchase electricity from athird-party Electric Service Provider, instead of from the local Investor-Owner Utility; and WHEREAS, Direct Access allows these customers to potentially negotiate better electricity commodity rates or higher renewable energy power mixes from the open market; and WHEREAS, City of Chula Vista has four electricity accounts that are under Direct Access Service with Shell Energy; and WHEREAS, under the contract with Shell Energy, the City "locks-in" electricity procurement rates for certain time periods through a Confirmation Letter to minimize utility cost fluctuations; and WHEREAS, the City's current Confirmation Letter and associated rates are expiring; and WHEREAS, rates are currently at historical lows and are approximately 40% lower than previous commodity prices. NOW, THEREFORE, the City Council of the City of Chula Vista does hereby resolve that it: 1. Approves continuation of electricity commodity purchases from Shell Energy, and 2. Authorizes the City Manager, or his designee, to execute a 1-year Confirmation Letter with rates up to $55.00 per Me Presented by Richard A. Hopkins Director of Public Works 8-6