Form revised December 9, 2004

 

FISCAL NOTE FOR NON-CAPITAL PROJECTS

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

City Light

Cindy Wright/386-4533

Thomas Dunlap/386-9120

 

 

Legislation Title:  AN ORDINANCE relating to the City Light Department; authorizing execution of Amendment No. 2 to the Service Agreement for Point-to-Point Transmission and the Transmission Assignment Agreement, which together will provide for the continuation of firm transmission for Skagit Treaty power from January 1, 2006 through December 31, 2035.

 

·        Summary of the Legislation:   The proposed legislation will provide for the Superintendent of the City Light Department to enter into Amendment No. 2 to the Service Agreement for Point-to-Point Transmission and the Transmission Assignment Agreement, which together will provide for the long-term transmission of Skagit Treaty power at no cost to the City of Seattle (“City”). 

 

·        Background:  On April 2, 1984 representatives of the United States and Canada signed the Treaty between the United States of America and Canada Relating to the Skagit River and Ross Lake, and the Seven Mile Reservoir on the Pend d’Oreille River (the “Skagit Treaty”).   The Treaty resolved a number of issues between the City and the Canadians related to planned hydroelectric developments on the Skagit and Pend Oreille Rivers, but perhaps most importantly it provided for British Columbia to compensate the City for not constructing its High Ross Dam on the Skagit River.  The Skagit Treaty, which extends through 2065, provides that the Bonneville Power Administration (“BPA”) shall treat transmission of Skagit Treaty power as if it were generated in the United States.

Also in 1984, the City and the Province of British Columbia entered into an agreement dated March 30, 1984 (the “1984 Skagit Agreement”) providing for British Columbia to supply the City with power equivalent to that which would have been produced by the construction of the High Ross Dam (the “Skagit Treaty Power”) for the period January 1, 1986 through January 1, 2066.

The 1984 Skagit Agreement provided that British Columbia pay the cost of transmission of the Skagit Treaty Power and further provided that the Province and the City work in concert to achieve mutually beneficial transmission arrangements which allow for the Province of British Columbia to use surplus transmission capacity when it is not needed for transmission of Skagit Treaty Power to the City. 

The Province delegated its responsibilities for power supply to its crown corporation, British Columbia Hydro and Power Authority (“B.C. Hydro”).

BPA first provided transmission for the Skagit Treaty Power under an Integrated Resources Transmission Service Agreement with the City under a contract dated November 10, 1987.  Effective October 1, 1996, the transmission service for the Skagit Treaty Power was converted to a point-to-point transmission service agreement under BPA’s (then newly developed) open access transmission tariff, which service agreements were annually renewed until 1999, when the City (pursuant to Ordinance 119347) signed on January 28, 1999 the long-term Service Agreement for Point-to-Point Transmission with BPA that expires on December 31, 2005 (“Skagit PTP Agreement”).

 

Simultaneously, the City and B.C. Hydro executed an agreement (authorized pursuant to Ordinance 119349), Agreement for the Transmission of Skagit Treaty Power Between British Columbia Hydro and Power Authority and the City of Seattle, that assigned the City’s rights and obligations under the Skagit PTP Agreement to B.C. Hydro through December 31, 2005.  B.C. Hydro subsequently delegated its power scheduling responsibilities to Powerex Corp. (“Powerex”) through a separate re-assignment agreement.

 

As all of these agreements expire at the end of this year, the parties have decided to replace them on a long-term basis under similar terms, except that the assignment of the City’s rights and obligations will be made directly to Powerex.  Under the proposed amendment and agreement, the City will continue to contract with BPA for long-term transmission rights for its Skagit Treaty Power, but assign the financial and operational responsibilities to Powerex on a long-term basis.   The new assignment agreement will also provide for termination following the occurrence of certain events, which will ensure that the City can recover valuable transmission rights in the event that British Columbia defaults on its Skagit Treaty obligations. 

 

·        Please check one of the following:

 

__X__ This legislation does not have any financial implications.

 

Notes:  Since the financial obligation under the existing agreement has been assigned to B.C. Hydro/Powerex and will be assigned to Powerex under the proposed agreement, City Light does not budget and will not budget for this transmission expense.  Signing these agreements will not affect City Light’s budgets or financial outlook.

 

·        What is the financial cost of not implementing the legislation?  If B.C. Hydro and Powerex continue to fully perform their respective obligations under the 1984 Skagit Agreement until 2066 (as currently expected), failing to execute the proposed agreements would have no financial consequence to the City.   If, on the other hand, British Columbia defaulted on its Skagit Treaty Power deliveries to the City, then in addition to losing an extremely valuable power resource, the City would also have no rights to the transmission path.

 

·        What are the possible alternatives to the legislation that could achieve the same or similar objectives? The only alternative is to do nothing, thereby relinquishing (permanently) the control of transmission rights on the B.C. – Seattle transmission path.  City Light does not recommend this alternative.  After 2020, the major part of the City’s power payment obligations will be satisfied and then the Skagit Treaty Power will likely be the City’s lowest cost purchased power resource for many years thereafter.  The deliberate retention of the B.C – Seattle transmission rights is part of City Light’s strategy to ensure the long-term performance of British Columbia on its Skagit Treaty obligations, specifically delivery of High Ross replacement power between 2020 and 2066.

 

·        Is the legislation subject to public hearing requirements:  No.

 

·        Other Issues:  None.