Form revised February 6, 2008

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
City Light	Robin Cross/ 206-684-3392	Karl Stickel/ 206-684-8085

Legislation Title:  AN ORDINANCE relating to the City Light Department; authorizing an amendment to the Power Purchase and Sale Contract for the Lucky Peak Power Plant Project, which simplifies the calculation of the Royalty Payment made by City Light.

· Summary of the Legislation:

The legislation approves an amendment to the Power Purchase and Sale Contract for the Lucky Peak Power Plant Project for Seattle City Light (‘City Light') to amend the Royalty Payment formula to a fixed rate of 8.60 mills/kWh for the period October 1, 2008 through September 30, 2038 and escalate it each year over the period by applying an annual compounding rate of 3%.  This formula replaces the formula proposed in the original contract that refers to an index that no longer exists. 

The proposed change to the Royalty Payment formula reduces the uncertainty and potential for disagreement arising out of differences in interpretation of variables contained within the formula currently memorialized in the Power Purchase and Sale Contract for the Lucky Peak Power Plant Project between Boise-Kuna Irrigation District, Nampa & Meridian Irrigation District, Wilder Irrigation District and Big Bend Irrigation District (collectively the "Districts") and City Light. 

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

Commencing on the date of commercial operation, October 1, 1988, City Light began making monthly royalty payments to the Districts as provided for in Power Purchase and Sale Contract for the Lucky Peak Power Plant Project ("Contract").  In order to settle the differences in interpretation of certain variables, City Light and the Districts amended the formula in May 1991.  The amended Royalty Payment formula fixed the rate at 8.3 mills/kWh.  Per the amendment, this rate is multiplied by the actual monthly generation to determine the monthly Royalty Payment to be paid to the Districts, and is effective through September 30, 2008.

For the period October 1, 2008 through September 30, 2038 the Contract contemplates a formula for determining the Royalty Payments that again is likely to result in differences of interpretation and potential conflict.  Therefore, City Light and the Districts have negotiated an alternative formula that fixes the rate at 8.60 mill/kWh commencing October 1, 2008.  The rate of 8.60 mills/kWh is escalated each year by applying an annually compounding rate of 3% and is multiplied by the actual monthly generation to determine the monthly Royalty Payment.  Implementing this new formula is expected to preserve the financial benefits anticipated in the Contract over the remaining 30 years.

· Please check one of the following:

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

Note:  As outlined in the background, the amendment to the contract will have financial implications to Seattle City Light.  However, no new appropriation authority is needed as existing budget will cover this change.

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 had, or will have, appropriations in other legislation, please provide details in the Notes section below.

Fund Name and Number	Department	Budget Control Level*	2008 Appropriation	2009 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	2008 Revenue	2009 Revenue
TOTAL

Notes:  Revenue from the contract would be generated if SCL sells the energy received from the project on the open market.

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

Position Title and Department	Position # for Existing Positions	Fund Name & #	PT/FT	2008 Positions	2008 FTE	2009 Positions*	2009 FTE*
TOTAL

* 2009 positions and FTE are total 2009 position changes resulting from this legislation, not incremental changes.  Therefore, under 2009, please be sure to include any continuing positions from 2008.

Notes: None.

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

Not applicable.

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 & #	Department	Budget Control Level*	2008 Expenditures	2009 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.)

Different interpretations of the contract terms regarding the Royalty Payment formula after September 30^th, 2008, could impact Seattle City Light financially, if the contract isn't amended.  That cost is unknown.  The City of Seattle through Seattle City Light has invested heavily in the Lucky Peak Power Plant Project and has reached an agreement with the various Irrigation Districts for resolution of the issue.

· 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 at this time.

· 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, there will be public notice and comment period providing an opportunity for public comment at the council meeting prior to council's vote to approve or reject the legislation.

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

None.