2004 AGN JUL 06 I20 - Laserfiche WebLink

Browse Search

CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF JULY 06, 2004 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: Thomas K. Clarke, Electric Utility Directo v k�� -V-V�z ,- Item #20 SUBJECT: Power Sales Agreement with the City of San Bernardino from the Agua Mansa Power Plant DATE: June 22, 2004 BACKGROUND: The City of Colton completed construction of the Agua Mansa Power Plant in June of 2003. The plant has been operational since that time. The plant is a 48 MW simple -cycle generating facility that is fueled by natural gas. Colton has determined that the plant has excess capacity when the plant operates. This is because the plant does not load follow perfectly since it operates more efficiently when it operates at maximum output. The excess capacity is sold on the open market and is subject to external influences that can dramatically change the price hour to hour. DISCUSSION/ANALYSIS: The City of San Bernardino is an electric customer on the Colton electric system. The sole point of delivery is the RIX (Rapid Injection/Extraction) tertiary treatment facility on Agua Mansa Road. The electric system currently serves RIX under Rate Schedule CS — Contract Service. The rate was negotiated based on the service characteristics and requirements at the treatment facility. The City of San Bernardino has been investigating ways to reduce future power costs, increase reliability, and find a mechanism to levelize costs over the long term. One option that rose to the top choice was to acquire generation and use the output at RIX. They have evaluated the installation of cogeneration at various locations to supplement San Bernardino's energy purchases from Colton. As an alternative to cogeneration, Colton has offered San Bernardino an option to buy into the Agua Mansa Power Plant. The concept would not involve an actual equity entitlement in the physical plant, but rather a contract sale that provides the same economic benefits as though there was a direct ownership interest. This is accomplished by calculating the installed capital costs of the plant and associated infrastructure, allocating a pro -rata share of the plant operating costs, and creating mechanisms to account for the actual costs of gas and energy reconciliation. These aspects have been expressed contractually in the proposed agreement, and provide for full recovery of the expenses Colton incurs for the ownership and operation of the Agua Mansa Power Plant. Entering into this agreement with San Bernardino will not impose any operating or financial impediments to the City of Colton Electric Utility. In fact, this agreement accomplishes quite the opposite by offering financial enhancement.