(14)AR 110607 GE Ionics, Inc. - Laserfiche WebLink

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CITY OF COLTON ITEM #14 AGENDA REPORT FOR COUNCIL MEETING OF NOVEMBER 6, 2007 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: Jeannette Olko, Electric Utility General Manager SUBJECT: Approve First Amendment to the Agreement with GE Ionics, Inc. for Lease of Water Treatment Equipment for the Agua Mansa Power Plant DATE: October 29, 2007 BACKGROUND: On October 17, 2006, the City Council approved a five-year lease agreement with G. E. Ionics, Inc. for water treatment equipment necessary for operations at the Agua Mansa Power plant. Exhibit C of the Agreement included an escalation clause which now needs to be amended. DISCUSSION/ANALYSIS: The current escalation clause in Exhibit C, Price Schedule and Terms of Payment, allows for an upward price escalation by the greater of: (i) 2%; or (ii) a combination of two indices, which 50% of the payment amount is adjusted by the percentage increase in one index and the other 50% of the payment amount is increased by the percentage increase in the other increase. The clause does not specify which date to use to determine the index increase or decrease. As a result, G.E. Ionics chose the dates which benefited them the greatest, causing an increase upwards of 7% for 2007. To clarify the escalation issue, City Staff and G. E. Ionics, have negotiated a new escalation clause stating: All prices stated herein are in 2006 dollars and shall be adjusted upward by 3.5% on January 1, 2007. Subsequent annual adjustments shall be exactly 3.0% per year, beginning on the first day of January, each calendar year. The City Attorney's office has reviewed and approved the new escalation clause. G.E. Ionics has agreed to correct its billing for 2007 to reflect the 3.5% increase, instead of the 7% increase initially billed to us. This new language will allow better control of the costs associated with water treatment for the Agua Mansa Power Plant by fixing the escalation price. .ALTERNATIVES: If the Amendment is not approved, the Electric Department may face higher costs for water treatment, based on the indices for Chemicals and Allied Products and Employment Cost - Professional, Specialty and Technical Operations. FINANCIAL IMPACT: Funds are approved and available in the Agua Mansa Power Plant's operating budget, Account Number 520-8000-8009-2225-0548-000. ENVIRONMENTAL IMPACT: None.