Form revised December 4, 2006
FISCAL NOTE FOR NON-CAPITAL PROJECTS
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Department: |
Contact Person/Phone: |
DOF Analyst/Phone: |
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City Light |
Marilynn Semro/386-4539 |
Thomas Dunlap/386-9120 |
· Summary of the Legislation:
This 10-year agreement sets forth terms and conditions for City Light to:
(a) Provide scheduling and delivery services of up to 15 MW of power to the Sacramento Municipal Utility District (SMUD) at the California-Oregon Border (COB) that SMUD purchased from a new renewable resource in the Northwest,
(b) Receive up to 25 MW of winter energy in payment for such services, and
(c) Purchase from SMUD all of the new renewable energy and environmental attributes (Renewable Energy Credits or REC) associated with this resource in excess of 15 MW or approximately three average megawatts.
In addition, the agreement allows the City Light Department (City Light) to deliver an alternative renewable resource to SMUD and keep the renewable power delivered into City Light’s system. This agreement has a net present value to City Light of about $5 million. The agreement is made in accordance with the WSPP Inc. Agreement of March 16, 2007, a standardized agreement applicable to capacity and/or energy transactions. City Light and SMUD have entered into this agreement for an 18-month term effective August 1, 2007.
· Background: (Include brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable):
SMUD entered into a 10-year power purchase agreement with Sierra-Pacific Industries to purchase the environmental attributes and the net energy output (about 18 MW) from a new 28 MW wood-waste (biomass) cogeneration project located in Burlington, Washington. This project will be certified to meet the California Renewable Portfolio Standard (RPS). This project is also carbon neutral. SMUD intends to use it to help them meet California’s RPS. SMUD requested City Light schedule and deliver up to 15 MW of the power to SMUD at the COB.
City Light agreed to provide the service. Instead of cash, City Light negotiated payment in the form of winter energy to aid in meeting its winter load and resource adequacy requirements pursuant to the 2006 Integrated Resource Plan (IRP). The amount is based upon the cost of providing the service and the lost opportunity value in using the transmission for City Light’s power transactions. In the 1st contract year, City Light will receive 17,700 MWh (5,900 MWh/month) delivered in December, January and February and in subsequent contract years the amount will vary depending on the cost of providing the service and the opportunity cost. City Light has the ability to move up to 25 hours of winter deliveries between months on 3 days notice to help meet unexpected cold weather events.
In addition, City Light agreed to terms that allow an alternative renewable resource to be delivered to SMUD at COB. City Light will then keep the power generated by the biomass project that is delivered into the City Light system. Using an alternative resource will reduce transmission usage and costs. In order to minimize the administrative burden of the contract, SMUD will keep the environmental attributes associated with the biomass project and City Light will keep the environmental attributes associated with the energy delivered from any alternative renewable resource. Should receipt by SMUD of environmental attributes from one renewable resource and receipt of energy from a different renewable resource not meet California RPS requirements, City Light has agreed instead to exchange the environmental attributes with SMUD.
The agreement provides for SCL to purchase from SMUD the renewable energy and environmental attributes generated by the project in excess of 15 MW (anticipated to be about 3 aMW or 26,300 MWh annually) for the same price SMUD is paying. Currently this price is set at $62/MWh and will be escalated annually at 1.75%.
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.
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Fund Name and Number |
Department |
Budget Control Level* |
2007 Appropriation |
2008 Anticipated Appropriation |
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TOTAL |
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*See budget book to obtain the appropriate Budget Control Level for your department.
Notes: City Light will purchase from SMUD all renewable energy and RECs in excess of 15 MW (estimated at 26,300 MWh annually) to serve load or will market the power and use the RECs to mitigate green house gases, for City Light’s retail Green-Up programs, or to sell in the wholesale market or meet City Light’s RPS requirements.
The expected cost to purchase the 3aMW of new renewable biomass energy that is the subject of this agreement is $683,000 in 2007 and $1.7 million in 2008. The cost includes environmental attribute costs. This legislation proposes no appropriations. City Light will meet the agreement’s 2007 and 2008 purchase agreement obligations with appropriations authorized in the 2007 Adopted Budget (Ordinance 122298), and with $1.7 million of the 2008 appropriations to the Utility’s Purchased Power Budget Control Level, SCL700.
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Fund Name and Number |
Department |
Revenue Source |
2007 Revenue |
2008 Revenue |
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TOTAL |
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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.
Notes: No revenues are anticipated for the 2007 or 2008 budget from this item. However, the agreement will result in some cost reduction from avoiding the need to acquire some energy to meet load (please see Attachment 1 to the Fiscal Note). For the scheduling and delivery service City Light provides under this Agreement, City Light will receive in payment about 25 MW of winter energy annually to help serve City Light’s winter load requirements and reduce power needed to meet its resource adequacy requirement.
City Light also has the ability to move up to 25 hours of winter deliveries between months on 3 days notice. This is estimated to have a net present value of about $5 million greater than the status quo, not including the value of the RECs. The forward energy market for 2008 is in the range of $60/MWh to $65/MWh and the current value of the RECs is in the range of $4/MWh-$5/MWh at the time the agreement was framed.
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.
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Position Title and Department* |
Fund Name |
Fund Number |
Part-Time/ Full Time |
2007 Positions |
2007 FTE |
2008 Positions** |
2008 FTE** |
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TOTAL |
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* List each position separately
** 2008 positions and FTE are total 2008 position changes resulting from this legislation, not incremental changes. Therefore, under 2008, please be sure to include any continuing positions from 2007.
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.
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Fund Name and Number |
Department |
Budget Control Level* |
2007 Expenditures |
2008 Anticipated Expenditures |
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TOTAL |
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* See budget book to obtain the appropriate Budget Control Level for your department.
Notes: None.
· 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 cost of not implementing the legislation is the loss of $5 million (NPV) received in the form of winter energy, a lost opportunity to purchase a cost-effective new renewable resource close to City Light’s load that would help City Light meet its RPS requirements, meet its resource adequacy targets, and winter load requirement.
· 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.)
The Utility is interested in other opportunities to enter into agreements that will contribute to meeting its resource adequacy needs and achieving its renewable resource portfolio standard at reasonable cost. City Light will continue its effort to identify and engage in such agreements. No such opportunity existed at the time for consideration as a possible alternative to the agreement posed by this legislation.
· 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.)
The ordinance will be discussed in public sessions of the City Council’s Energy and Environmental Policy Committee and the City Council.
· Other Issues (including long-term implications of the legislation):
None.
Please list attachments to the fiscal note below:
Attachment 1:
Economic Analysis.