2005 AGN NOV 01 I11 - Laserfiche WebLink

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CITY OF COLTON ITEM #11 AGENDA REPORT FOR COUNCIL MEETING OF NOVEMBER 01, 2005 TO: Honorable Mayor and Council Members FROM: Jeannette Olko, Electric Utility General Manager SUBJECT: Approval of Agreement with Navigant Consulting Inc. in an amount no -to - exceed $76,442 for a Risk Assessment and Management Plan. DATE: October 26, 2005 BACKGROUND: With the completion of the Agua Mansa Power Plant and the Magnolia Power Plant, the City of Colton Electric Utility has a need to develop a fuel resource portfolio to secure large volumes of gas on an ongoing basis. The volatility of the natural gas market dictates that the risk associated with the purchase of natural gas be mitigated as much as possible. In addition, there are many other risk management issues such as the purchase of power on the spot market, financial reserves, operational risk, and disaster planning that the electric utility faces. As a result, Colton Electric Utility has decided to develop a Risk Assessment and Management Plan to assist staff in addressing these issues. DISCUSSION/ANALYSIS: Given the recent completion of the cost -of -service and rate design study performed by Navigant Consulting, Inc., staff determined that it was in the best interest of the utility to capitalize on the results of the study and engage Navigant to develop a Risk Assessment and Management Plan in partnership with staff. Navigant Consulting staff has extensive knowledge of the business practices of this utility, its resource requirements, understands the risks faced by the utility, and also has experience in the development of risk management policy for municipal clients. The plan will include the development of a five-year peak load, energy sales, and fuel requirements forecast, discussion of risk related issues and the appropriate tools to use to manage that risk, establishment of appropriate tolerances for various risk exposures, development of an appropriate fuel portfolio, and analysis and recommendation of appropriate financial reserves, disaster preparedness plans, and finally the development of a risk policy and management program. It is the intention of staff to bring to both the utilities commission and council for approval the Risk Assessment and Management Plan when completed in the first quarter of 2006. The Colton Municipal Code, Title 3, Chapter 3.08.140(E) states in pertinent part that competitive bidding is not required for non-public projects when the City Manager determines that it would be in the best interest of the City to dispense with public bidding. Navigant Consulting has a unique knowledge of Colton's Electric Utility, including its infrastructure, operation, energy acquisition procedures, and rate structures, based on the Cost -of -Service study Navigant has been working on for the past 10 months. Due to Navigant's intimate knowledge of the City's utility, staff feels that it is in the City's best interest to utilize Navigant Consulting, Inc. to help develop a Risk Assessment and Management Plan that will mitigate the many risks faced by Colton Electric Utility. By hiring a different consultant, the duration and cost of the Risk Assessment and Management Plan would be greatly increased based on the need to educate another contractor on the City's infrastructure and operations. Therefore staff is recommending that the City Council dispense with competitive bidding and approve a Professional Services Agreement with Navigant Consulting, Inc. in an amount not to. exceed $76,442.