1999 AGN JUN 15 I16 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT For the City Council Meeting of June 15, 1999 TO: Honorable Mayor and City Council APPROVAL: Henry T. Garcia, City Manager C FROM: Thomas K. Clarke, Utility Director _tx SUBJECT: Approval of Power Sales Agreement between the City of Colton, Sempra Energy Trading, and American Utility Network DATE: Monday, June 07, 1999 BACKGROUND Electric utility restructuring in California has created the opportunity for the City to make wholesale sales to a new type of customer, the Energy Service Provider, or ESP. ESPs provide electricity and related energy services to retail customers. American Utility Network (AUN) is one of several ESPs with which the Utility Department has been exploring possible benefits. ANALYSIS The proposed contract is essentially a low-risk test of the new electricity market. The low-risk properties of the transaction are the small quantity and short term. The quantity supplied is very low — half a Megawatt. (The City's owned and contracted generating capacity is over 80 Megawatts). The term is short — one year. The price of $21 per Megawatt - hour provides the ESP with estimated operating revenues of $21,024, with which he will have to purchase transmission and ancillary services estimated at $18,396. His estimated profit is between $1000 and $5000, depending on his management of the resource during peak periods. It could be higher if peak prices exceed last year's. In consideration, the City will receive substantial operational and market intelligence from the ESP to help it inform its own decision makers as it prepares for retail competition. The type of questions it will answer are: 1. What earnings might the City reasonably expect to make by becoming an ESP itself? 2. What is the administrative cost of meeting SCE requirements for ESPs doing business in their territory? 3. What other difficulties exist in providing retail energy outside the City? The most important data will be obtained in the first four months of the contract. This will be timely with respect to decisions to be made regarding direct access. In conclusion, this is a primarily a market trial in the form of a Power Sales Agreement. A copy of the proposed agreement is attached to this report. ALTERNATIVES Procure the information obtained from this test in some other manner or forego the effort entirely. FINANCIAL IMPACT If AUN schedules all energy available to it under the contract, the City will receive $91,980 in revenues. It is more likely that the energy will be scheduled about 60% of the time, yielding revenue of $55,188. During all non-scheduled periods, Sempra Energy Trading will manage the energy for the City's benefit. While the exact amount will depend on the market, by entering this agreement in exchange for the services and information to be provided, the City is foregoing earnings in the amount of the ESPs operating revenues, estimated at $21,024. RECOMMENDATION That the City Council approves the Power Sales Agreement between the City of Colton, Sempra Energy Trading, and American Utility Network. Report prepared by Timothy C. Trewyn, P.E., Assistant Electric Utility Director Page 1 of 1 (w/attachment) Item # 16