Form revised April 10, 2006

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 the Superintendent or his designee to enter into Amendment No. 1 to North Mountain Substation Power Transfer Agreement with Public Utility District No. 1 of Snohomish County, Washington, which will provide for interconnection of a small generator and the return of any surplus generation that flows into the City’s transmission system.

· Summary of the Legislation: This ordinance will authorize City Light to execute an amendment to its Power Transfer Agreement with Public Utility District No. 1 of Snohomish County, Washington (“District”), which will allow the District to interconnect a small generator to its distribution system in the Darrington area that is served through the City’s North Mountain Substation. It will also allow City Light to charge the District an additional $1,000 per month for tracking and returning any Excess Generation from the generator that flows into our Skagit transmission lines.

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

In 1991, the District and the City executed a Power Transfer Agreement (pursuant to Ordinance No. 115624) that provides for the transfer of the District’s firm power from Bonneville Power Administration to the District at the City’s North Mountain Substation. This Agreement prohibits the interconnection of generation to the District’s system in the Darrington load area until the District negotiates an appropriate Power Transfer Agreement amendment and modified operating criteria with City Light.

In 2004, the District approached City Light about studying the impact of connecting a small co-generator to the District’s distribution system at the Hampton Lumber Mill in the Darrington area. City Light’s engineering staff studied the technical aspects of this proposal (pursuant to a cost reimbursement agreement with the District) and determined that there would be no significant impact resulting from the interconnection of the generator, providing appropriate operating guidelines or criteria were agreed between the utilities.

In 2005, the District and the City began to negotiate the required contract amendment and modified operation criteria to ensure safe and reliable operation of the proposed generator. The parties also agreed that the City should be compensated for tracking and returning any surplus generation that flows into the City’s transmission system.

Now the District and the City have completed negotiation of Amendment No. 1 to the North Mountain Substation Power Transfer Agreement, which will provide for interconnection of the Hampton Mill Generator and update the joint operating criteria to ensure safe and reliable operation of that generator. An ordinance is required to amend the 1991 Power Transfer Agreement.

· 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: This table should reflect appropriations that are a direct result of this legislation. In the event that the project/ programs associated with this ordinance have appropriations that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below.

Fund Name and Number	Department	Budget Control Level*	2006 Appropriation	2007 Anticipated Appropriation
TOTAL

*See budget book to obtain the appropriate Budget Control Level for your department.

Notes: None

Anticipated Revenue/Reimbursement: Resulting From This Legislation: This table should reflect revenues/reimbursements that are a direct result of this legislation. In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Fund Name and Number	Department	Revenue Source	2006 Revenue	2007 Revenue
TOTAL

Notes: Under this proposed amendment, City Light will add a $1,000 charge to its monthly invoices to the District for power transfer service as compensation for tracking and scheduling the return of surplus generation (“Excess Generation”) that flows into the City’s transmission system. If the amendment is approved, City Light will continue to bill the District demand and energy charges as before; however, the amount of energy transferred to the District by City Light will decline as a result of the operation of the generator, which will partially supply energy for the local load. Although the future output and operation of the 7.25-MW generator is somewhat uncertain, its round-the-clock operation could be expected to reduce the energy transfers by about 4 aMW. This will result in a reduction (approximately $20,000) in City Light’s collection of energy transfer charges. Thus, the net reduction of City Light’s total wholesale operating revenues as a result of this amendment is expected to be about $8,000 ($20,000 - $12,000) per year.

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact: This table should only reflect the actual number of positions created by this legislation In the event that positions have been, or will be, created as a result of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Position Title and Department*		Fund Name	Fund Number	Part-Time/ Full Time	2006 Positions	2006 FTE	2007 Positions**	2007 FTE**
	TOTAL

* List each position separately

** 2007 positions and FTE are total 2007 position changes resulting from this legislation, not incremental changes. Therefore, under 2007, please be sure to include any continuing positions from 2006

Notes: None

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

Spending/Cash Flow: This table should be completed only in those cases where part or all of the funds authorized by this legislation will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects). Details surrounding spending that will occur in future years should be provided in the Notes section below the table.

Fund Name and Number	Department	Budget Control Level*	2006 Expenditures	2007 Anticipated Expenditures
TOTAL

* See budget book to obtain the appropriate Budget Control Level for your department.

Notes: Not applicable

· 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.)

There would probably be no direct cost; however, the unresolved contractual issue (the current agreement prohibits a generation interconnection) creates a legal obstruction to the District’s resource development plans, which might eventually precipitate a dispute with this neighboring utility.

· 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.)

City Light could agree to the generator interconnection without collecting incremental compensation for tracking and scheduling the return of Excess Generation. In this case, the total loss of power transfer revenue would increase from $8,000 to $20,000 per year. An ordinance will still be required to authorize City Light’s execution of the Power Transfer Agreement amendment.

· 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.)

No; however, the ordinance will be discussed in a public session of the Energy and Technology Subcommittee.

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

Our accommodation of the District’s interests in this matter will help City Light maintain a cooperative working relationship with its neighboring public utility.

Please list attachments to the fiscal note below: None