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Page 2 Magnolia Power Project For City Council Meeting of February 5, 2002 Building the Colton Jets Project and participating in the Magnolia Power Plant are only Lwo pieces of the rasource pu�le. The City will continue with its SCPPA partidpation in the San )uan, Hoover, and Palo Verde projects to meet its energy nePds. These firm resources will total approximately 90mW. Until the firm load exceeds this threshold on a continual basis, no more firm commitments should be made in a project. Short-term contracts and spent purchases wili suffice for minor fluctuations at minimal cost. ALTERNATNES The altematives are limited to two paths. Energy could be supplied via purchase contracts on a IimiSed term basis. These would be subject to availability and market conditions, ali containing a great deal of uncertainty. The other would be to participate in a different generation project. As of this date, no other projects are available that present the same economics as the Magnolia Projed. fISCAL IMPACT The financial impacts are directly related to the �ty's share in the praject. The project construction eosts will amount to approximately $297 million. Funding will tome from the sale of Electric Revenue Bonds by SCPPA. Repayment of the bonds will become a'�take or pay" obligation with the funding coming from electric rates. The estimated annual cost of debt service and operations of the plant is expected to cast the City somewhere around $4 million. This cost will become part of the Electric Utility's power supply budget and will not be seen until the 2004-2005 fiscal year. It is expected that tfiis resource will have little effect on the total revenue requirements of the Department. The pro-forma savings associated with the Colton Jets Project will offset the costs of the Magnolia power msts. Therefore, it is antidpated that there will be an insignificant impad on the ratepayers. £NVIRONMENTALIMPACT There are no environmental impacts for the City of Colton. RECOMMENDATION It is recommended that the City Council approve: 1) the Ordinance entering inio the Magnolia Power Prvject Power Sales Agreement; and 2) approve the Resolution authorizing the Electric Utility Direc#or to execute the Power Sales Agreement and the share of capaciry and energy pursuant to the Agreement. Report prepared by Thomas K. Clarke, Utllities Director REVIEW TEAM ONL1L � � �/J City Attorney: �i�— Finance Director: __��_ / City Manager: �� OTHER•