(8)AR 100510 EI Colton, LLC - Laserfiche WebLink

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STAFF REPORT ITEM NO. O8 DATE: OCTOBER 5, 2010 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: ROD FOSTER, CITY MANAGER/GENERAL MANAGER PREPARED BY: JAMES EARHART, INTERIM DIRECTOR OF UTILITY SERVICES SUBJECT: APPROVE SECOND AMENDMENT TO THE OPERATIONS & MAINTENANCE AGREEMENT WITH EI COLTON, LLC FOR THE AGUA MANSA POWER PLANT RECOMMENDED ACTION It is recommended that City Council approve the Second Amendment to the Operations & Maintenance Agreement with EI Colton, LLC for the Agua Mansa Power Plant, and ratify staff's Notice of Termination of Existing Agreement, dated June 21, 2010. GOAL STATEMENT The proposed action will support the City's goals to provide safe, reliable, affordable, and environmentally sustainable electric service. BACKGROUND On October 9, 2002, the City Council approved the Operations and Maintenance Agreement (O&M Agreement) and Administrative Services Agreement (ASA) with EI Colton, LLC for the operation of the Agua Mansa Power Plant. On August 3, 2001, City Council approved the Amendment and Termination Agreement to terminate the Administrative Services Agreement and to transfer certain services from the ASA to the O&M Agreement. The current agreement includes a base monthly fee, currently $700,248.00 per year, operating labor expenses of approximately $414,000.00 per year, and a monthly ERC Management Fee equal to $111,957.16 per year. The term of the O&M Agreement was October 15, 2002 to June 30, 2010, with automatic renewal for one-year periods unless a Notice of Intent to Terminate is issued by either party at least three hundred sixty-five (365) days prior to the automatic renewal date. ISSUES/ANALYSIS The contract entered its first automatic one-year renewal period July 1, 2010. In an effort to reduce costs, Electric Utility staff opened negotiations with the contractor prior to the automatic renewal period, resulting in changes to the contact terms which will reduce the annual fees paid to EI Colton, LLC, while keeping the same degree of O&M services. The new terms include a