Magnolia Power Project Planning Agreement

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CITY OF COLTON AGENDA REPORT For the City Council Meeting of March 20, 2001 TO: Honorable Mayor and City Council APPROVAL: Henry T. Garcia, City Manager QT( FROM: Thomas K. Clarke, Utilities Director 7_100 SUBJECT: APPROVAL OF MAGNOLIA POWER PROJE T PLANNING AGREEMENT DATE: Monday, March 12, 2001 BACKGROUND At present, the City's existing summer electric load demand is 72 MW while our resource portfolio is 67 MW. This includes the largest unit contingent resource, San Juan 3, with 30 MW generation. Future or real-time markets have covered any deficit between our demand and resource portfolio, often at very high cost. Staff has been working to find valuable and economically viable resources to meet our future needs. In November 2000, the City of Colton indicated a (7) MW participation interest with the other SCPPA (Southern California Public Power Authority) cities in the City of Burbank's Magnolia Power Project. At the time of this writing, it is not certain whether all the potential participants that have expressed an interest in participating in the planning phase of this project, as shown in Exhibit A of the Planning Agreement, will follow through with a commitment. Colton's initial stake in this project will be 7 to 10 MW. In the event some of the prospective participants actually do drop out in the next several weeks, Colton staff would like to have authority to participate in the planning phase up to the 10 MW level. The upper range of 10 MW is within Colton's needs, and conforms to our policy on maximum MW's per unit. DISCUSSION Our agreements with the City of Pasadena and the Bonneville Power Administration, representing 30 MW of capacity, expire soon. At the same time our growth will continue to increase our demand for electricity. In July, August, and September, the City bought 5 to 10 MW at a fixed price to cover our summer load demand. The deficit in our resource needs may expose us to the volatile electric utility power supply market. Historically, all municipal utilities that own and control their own resources have been able to charge less than investor-owned utilities. Therefore, participation in the Magnolia Project will position the City for competitive rates, at or below market prices. Further participation in the Magnolia Power Project requires us to enter into a Planning Agreement. This agreement provides authority and procedures for the SCPPA Participants in the Project to undertake preliminary studies and analysis, obtain various permits and approvals, retain consultants and other professionals, pay related costs, obtain the necessary emission credits, procure long -lead equipment to enable an early in service date, and provides adequate information to the participants so that they may determine whether or not to proceed to the construction phase of a 238 MW power plant. ANALYSIS The project consists of a single, very large, high efficiency, approximately 238 MW combined cycle power plant, fueled by natural gas. It is being developed as a Study Project by SCPPA and will be located in the City of Burbank. Page 1 of 2 (with Attachment) -- Item #11