(7)AR 060308 Wholesale Distribution Service

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ITEM #8 CITY OF COLTON MEMORANDUM FOR COUNCIL MEETING OF JUNE 03, 2008 TO: Honorable Mayor and City Council FROM: Jeannette Olko, Electric Utility General Manager SUBJECT: Approve Service Agreement for Wholesale Distribution Service with SCE DATE: May 28, 2008 BACKGROUND: The City is currently operating under terms of Southern California Edison's (SCE) Wholesale Distribution Access Tariff (WDAT). The WDAT provides for distribution service for generation from the Agua Mansa Power Plant. Power generated from the Agua Mansa Power Plant is only used to meet the city's electric load requirements; however, the Electric Utility has requested that power generated by the Agua Mansa Power Plant be allowed to be transmitted to the California Independent System Operator Corporation (ISO) grid. The reason for the request stems from resource adequacy requirements as dictated by the ISO; to be able to include the Agua Mansa Power Plant for resource adequacy purposes, the plant must be able to provide power to the state grid if called upon in an emergency situation. Under existing terms of the WDAT, the power generated from Agua Mansa must stay within the City's service territory. In addition, to reduce ancillary services costs, the Electric Utility would like to use the Agua Mansa Power Plant to self - provide these services, but can only do so if the option exists to transmit power to the state grid. The Electric Utility completed an application for new WDAT service, and has been waiting for SCE to complete both a system impact study and facilities study to determine the impacts this request has on their electrical system. DISCUSSION/ANALYSIS: Both studies have been completed, and SCE has proposed a Service Agreement for Wholesale Distribution Service. This agreement allows an export of power from the Agua Mansa Power Plant in an amount up to 43 MW, commencing the later of July 1, 2009, the date of completion of construction of facilities and/or upgrades on SCE's system necessary to accommodate the export, or the date that FERC permits. Service will terminate upon one year advance notice by the City or by SCE if the City does not utilize the agreement for two consecutive years, or if the City does not provide SCE advance notice of any changes to the power plant that may potentially impact SCE. The cost to the utility will be $366,000, to be paid on July 1, 2008, if the agreement is approved and executed. There will be ongoing operations and maintenance costs once construction is complete, to be paid monthly. The monthly payment is estimated to be $1,128.27.