Form revised August 4, 2003

 

FISCAL NOTE FOR NON-CAPITAL PROJECTS

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

City Light

Carol Everson/4-3564

Thomas Dunlap/6-9120

 

 

Legislation Title:

 

AN ORDINANCE relating to the City Light Department; authorizing the Superintendent to enter into two Replacement Interruptibility Contracts with Nucor, Inc., for the provision of interruptible power to Nucor’s 26KV plant service and to its Arc Furnace  Service.

 

·        Summary of the Legislation:

This ordinance modifies and extends for a one-year period the current rates and terms of service for Nucor Steel.  The basic terms of the contract are:

-         Electric energy charges in 2004 are increased by $3/MWh compared to their levels in 2003.  They are, however, still below the standard high demand general service rate.

-         The deferred electricity charges from 2002 and 2003 are paid immediately (at a discount representing the benefit of immediate payment as opposed to payment over a five year period).

-         Deferred electricity charges from 2004 will be calculated using a comparison of the rates actually paid in 2004 with the rates adopted for 2005 (with a cap on this differential).

-         The interruptibility provisions of the contract are strengthened.

 

·        Background: (Include brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

The existing terms of service were specified in Ordinance 120667 passed in December 2001 and the subsequent contracts signed with Birmingham Steel.    After Birmingham’s bankruptcy, its Seattle plant was sold to Nucor Steel Corporation.  Nucor elected to assume Birmingham’s contracts with Seattle City Light.

 

·        Please check one of the following:

 

____    This legislation does not have any financial implications. (Stop here and delete the remainder of this document prior to saving and printing.)

 

__x__  This legislation has financial implications. (Please complete all relevant sections that follow.)

 

Appropriations: (Please only reflect the dollar amount actually appropriated by this legislation.)

Fund Name and Number

Department

Budget Control Level*

2003

Appropriation

2004 Anticipated Appropriation

 

 

 

 

 

TOTAL

 

 

 

 

* This is line of business for operating budgets, and program or project for capital improvements

Notes:

 

Anticipated Revenue/Reimbursement: Resulting From This Legislation:

Fund Name and Number

Department

Revenue Source

2003

Revenue

2004

Revenue

41000

SCL

443310

 

$1,000,000

41000

SCL

587900

 

-$1,000,000

TOTAL

 

 

 

$0.0

Notes:

 Under the current arrangements (before modification and extension in this ordinance) City Light anticipated receiving $24.4 million, including $2.8 million for repayment of deferred charges from 2002-2003 and $21.6 million for consumption at standard HDC rates.  That assumes that the plant was operated at 2003 consumption levels.   If the plant shut down, City Light might have received about $11.8 million from selling the power that would have gone to Nucor on the wholesale market.

 

Under the new arrangements with Nucor authorized in this ordinance, they will pay $9 million immediately.  (This is prepayment, with a discount, of a stream of anticipated revenues for 2004 – 2008)  In addition, we would anticipate receiving $16.4 million for energy consumed. Thus the estimated cash received in 2004 would total $25.4.

 

The cash flow for 2004 is thus increased by $1.0 million.  The cash flows for 2005 – 2008 are decreased by about $2.7 million per year.  However, the revenue stream is much more certain as the future cash flows were dependent on the plant remaining open.

 

 

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:

Position Title*

Part-Time/ Full Time

2003 Positions

2003 FTE

2004 Positions**

2004 FTE**

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

 

 

 

·        Fund Name and Number: _________________________________________

·        Department:  ___________________________________________________

 

*   List each position separately

** 2004 positions and FTE are total 2004 position changes resulting from this legislation, not incremental changes from 2003.

 

 

·        Do positions sunset in the future?  (If yes, identify sunset date):

 

 

Spending/Cash Flow: (Please complete this section only in those cases where part or all of the funds will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects.)

Fund Name and Number

Department

Budget Control Level*

2003

Expenditures

2004 Anticipated Expenditures

 

 

 

 

 

TOTAL

 

 

 

 

* This is line of business for operating budgets, and program or project for capital improvements

Notes:

See notes on revenue above.

 

 

·        What is the financial cost of not implementing the legislation? (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented.)

 

The cash-flow for 2004 would be reduced by $1 million if the plant would have remained open and using electricity at the 2003 level.  It would result in reduced cash-flow of $12.6 million if the plant closed down.  Implementing this legislation significantly decreases the probability of plant closure in 2004.

 

·        What are the possible alternatives to the legislation that could achieve the same or similar objectives? (Include any potential alternatives to the proposed legislation, such as reducing fee-supported activities, identifying outside funding sources for fee-supported activities, etc.)

 

None.

 

·        Is the legislation subject to public hearing requirements:  (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)

 

There have been no public hearings held on this legislation.  There is no statutory requirement for a public hearing.  However, as an action that changes the rates paid by a customer, there would usually be a public hearing and the fact that public hearings have been held concerning past rate ordinances has been an important part of defending rates against challenges.  We would suggest that there be a public hearing scheduled in the course of Council review of this legislation.

 

·        Other Issues (including long-term implications of the legislation):