Form revised February 4, 2010

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	CBO Analyst/Phone:
Seattle Public Utilities	Alex Chen/233-1522	Karen Grove/684-5805

Legislation Title:  AN ORDINANCE relating to the South Fork Tolt Hydroelectric Project; authorizing an installation, maintenance and operation agreement for certain distribution facilities; a distribution interconnection agreement; a long-term retail electric service agreement; and other necessary or convenient agreements; all for the provision of reliable long-term retail electric service to the water storage, diversion, conveyance, and water treatment facilities associated with the South Fork of the Tolt River; and ratifying and confirming prior acts.

Summary of the Legislation:  The proposed ordinance would authorize Seattle Public Utilities and Seattle City Light to execute three agreements regarding provision of retail electric service to SPU’s water treatment facilities on the South Fork of the Tolt River.  The agreements are:  1) the South Fork Tolt Facilities Retail Electric Service Agreement; 2) the South Fork Tolt Installation, Operation and Maintenance Agreement; 3) a distribution interconnection agreement; and other agreements necessary or convenient to facilitate delivery of reliable electric service to SPU’s water facilities. 

Background: SPU has operated water storage, diversion, conveyance, and water treatment facilities on the South Fork of the Tolt River since the early 1960’s.  Tolt River water comprises approximately one-third of Seattle’s water supply and significantly improves service reliability.   SPU’s Tolt watershed facilities are in Puget Sound Energy’s retail service area and PSE provided them electricity until 1996, when City Light began operating a new hydroelectric project on the river.  Those facilities include electric distribution lines between the City Light’s hydroelectric project and SPU’s treatment facility.  Since 1996, City Light has been providing electricity on PSE’s behalf to the Tolt Treatment Facility.  Power that is excess to the treatment plant’s needs flows into PSE’s electrical grid.  PSE provides City Light replacement power under a transmission agreement between two utilities.

A major winter storm in 2006 caused an extended electric service outage due in part to the failure of a City Light transformer.  Shortly thereafter, SPU asked City Light and PSE about capital improvements to increase service reliability to the Tolt Treatment Plant.  The parties have agreed this would be accomplished, in part, by installing a new 13.8/12.47 kV transformer owned by PSE but located at City Light’s switchyard.  City Light would install, operate and maintain the transformer and related equipment, with PSE reimbursing City Light for those costs.

The proposed agreements would clarify the ownership and maintenance responsibilities for these facilities.  In return for PSE making this investment in power reliability, SPU has agreed to continue purchasing electricity from PSE for 25 years.

While these agreements have fiscal implications for City Light, they do not increase budgetary requirements of either SPU or City Light.  City Light would benefit from being able to more readily recover its costs associated with maintenance of distribution facilities that support PSE’s electric service customer (i.e., SPU) at South Fork Tolt. 

· 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.

Appropriations: 

Fund Name and Number	Department	Budget Control Level*	2010 Appropriation	2011 Anticipated Appropriation
TOTAL

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

Notes:  No additional appropriations are required in 2010 for City Light or SPU related to these agreements. The transformer acquisition ($142,000) was funded from City Light’s 2009 capital program.  Projected 2010 expenditures for construction and installation of the transformer ($102,000) are already embedded in City Light’s current budget and work plan and the utility is not seeking incremental appropriation for 2010.  City Light will be reimbursed by PSE in 2010 for the full cost of the transformer acquisition and installation.

City Light’s total projected wholesale power sale revenues ($40,000) are incorporated in current wholesale revenue projections.  The proposed agreements provide a means for PSE to reimburse City Light for work done on PSE’s behalf, which reimbursements are expected to exactly offset City Light’s related operation expenses on an annual basis through the next 25 years.  

Projected ongoing operations and maintenance expenses ($1,000 annually) will be incorporated in City Light’s 2011 budget proposal to be submitted to City Council in late 2010.  Likewise, ongoing power sales revenues (projected at $100,000 annually beginning in 2011) will be incorporated in City Light’s 2011 wholesale power sales revenue projections. 

Anticipated Revenue/Reimbursement: Resulting From This Legislation:

Fund Name and Number	Department	Revenue Source	2010 Revenue	2011 Revenue
TOTAL

Notes:

See note under Appropriations.

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

Position Title and Department	Position # for Existing Positions	Fund Name & #	PT/FT	2010 Positions	2010 FTE	2011 Positions*	2011 FTE*
TOTAL

* 2010 positions and FTE are total 2010 position changes resulting from this legislation, not incremental changes.  Therefore, under 2010, please be sure to include any continuing positions from 2009.

Notes:  Not applicable.

· Do positions sunset in the future?  (If yes, identify sunset date): Not applicable.

Spending/Cash Flow:

Fund Name & #	Department	Budget Control Level*	2010 Expenditures	2011 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?  Not implementing this legislation would reduce electrical service reliability at the Tolt Water Treatment Facility. Reduced electrical reliability will increase the cost of operating the facility by requiring more frequent operation of the backup diesel generators. Furthermore, since the backup generators are not rated for continuous duty, backup generator reliability could itself be negatively impacted. Without electrical or backup generator power, the facility would not be able to serve its mission of supplying drinking water to approximately one-third of the City’s and wholesale customers.

· Does this legislation affect any departments besides the originating department? 
This legislation affects SPU and City Light only.

· What are the possible alternatives to the legislation that could achieve the same or similar objectives?  The major other alternative would be to have City Light become the electrical service provider to the water treatment facility. City Light investigated this alternative and concluded it would be more expensive than pursuing the course authorized in this legislation, due primarily to the need for City Light to replicate PSE’s current ability to backfeed power from the power grid to the water treatment facility.

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

· Other Issues (including long-term implications of the legislation): None.

· List attachments to the fiscal note below: None.