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City Council Meeting <br />I, ZUUU <br />SUBJECT: REQUEST FOR APPROVAL OF PROFESSIONAL SERVICES AGREEMENT <br />FOR DESIGN OF A POWER GENERATION FACILITY WITH STEWART & <br />STEVENSON, INC., OF SANTA ANA, CALIFORNIA, IN THE AMOUNT OF <br />$150,000 <br />engine plant to protect from and sell into the highly volatile regulation and peaking <br />markets, with operations under the control of the City of Colton. Colton's interest <br />would be about 98% (5MW) of a total estimated plant cost of $5 million. <br />The Electric Utility is proceeding with feasibility studies on Type 1, and hereby is proposing to <br />proceed with the detailed design of Type 2. Both facilities are proposed to be located in the City <br />of Colton for their local economic and electrical benefits. Both are natural gas fueled for air <br />quality. <br />ALTERNATIVES <br />The Electric Utility, based on existing market conditions that will become worse before they get <br />better, believes that time is of the essence with respect to the development of both types of <br />physical hedges. The Utility is already employing financial hedges and could resort to them <br />entirely, albeit with their inherent disadvantages. The concern with the sole use of financial <br />hedges is the risk of significant cash balance losses should a peak month have a long period of <br />cooler than expected weather. <br />Conservation has its place, and the Utility has awarded contracts for energy efficiency. <br />Progress is slow in large measure due to customer reticence to make their necessary share of <br />the investment. Customers also hesitate to curtail operations of their manufacturing or stop <br />cooling their homes. <br />FINANCIAL IMPACT <br />Funding for these services is available in the Electric Utility Capital line item 520-8000-8014- <br />3890-0107-000. Contract costs are capped at $50,000 for the contract period often months. <br />ENVIRONMENTAL IMPACT: None. <br />RECOMMENDATION <br />Staff recommends that the City Council approve the Professional Services Agreement between <br />the City of Colton and Stewart and Stevenson, Inc., of Santa Ana, California, in the amount of <br />$150,000 for the design of a Five -Megawatt Electric Generation Facility. <br />Report prepared by Timothy C. Trewyn, P.E., Assistant Electric Utility Director <br />Page 3 of 3 <br />