2004 AGN JUL 06 I20 - Laserfiche WebLink

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FINANCIAL IMPACT: This agreement benefits the Colton ratepayers in a number of ways. First, San Bernardino will be required to make an up front payment to Colton for the hard acquisition costs of capacity ownership. This ownership interest will be set at 1.4 megawatts. This will amount to $1,194,000 paid to the Electric Utility for the capacity entitlement. Second, the capacity ownership will create an energy entitlement of 957,600 kWh's annually. This energy will be billed to San Bernardino on a take -or - pay basis at the rate of 7.26 cents per kWh. This amount is based on a gas proxy rate of $5.00 per mmbtu. This actual price charged will be based on the actual price of gas that was used or would be used to generate the energy for San Bernardino. The monthly bill will be based on the proxy amount and a balancing account will be established and trued up quarterly. The take -or -pay arrangement will create a levelized revenue stream to the City of Colton. This income will actually be a reduction in the costs to operate the Agua Mansa Power Plant. Even though the sales revenue will drop slightly, the offset in operating expenses gives the ratepayer an added benefit by removing expenses that would otherwise be subject to the 1.25 times coverage ratio. This agreement will not create any additional costs of scheduling, dispatching, or non -generation related costs. This is merely a paper transaction that is accomplished through billing and accounting. No actual transfer of property will take place nor will there be any transactional costs modified. As a result of this transaction, there will be a reduction of revenue to the Electric Utility of approximately $700K, which will be offset by a reduction in expenditures of approximately $800K (primarily due to pass through of gas costs). This reduction in Electric Utility revenue will equate to a loss of revenue to the General Fund of 10% or $70K in fiscal year 2005-06. It is anticipated that this loss to the General Fund will be offset by the addition of new commercial/industrial customers during fiscal year 2004-05. ENVIRONMENTAL IMPACT: None. CONFLICT OF INTEREST — Gift Disclosure Requirements City of San Bernardino President: Judith Valles, Mayor Contact: Bernie Kersey RECOMMENDATION: Staff recommends that City Council a power sales agreement with the City of San Bernardino for a capacity and energy entitlement from the Agua Mansa Power Plant. Attachment: Prepared by: Thomas K. Clarke REVIEW TEAM ONLY City Attorney: 10.4. Finance Director: City Manager:_, � 1 OTHER: `r.