2004 AGN AUG 03 I16 - Laserfiche WebLink

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CITY OF COLTON Item #16 AGENDA REPORT FOR COUNCIL MEETING OF AUGUST 03, 2004 TO: HONORABLE MAYOR AND CITY COUNCIL � (� - FROM: Jeannette Olko, Electric Utility General Manager � SUBJECT: Request for Approval of Second Amended and Restated Services Agreement and Optimization Strategies with Coral Energy Management DATE: July 26, 2004 BACKGROUND: The City of Colton and Coral Energy Management initially entered into an agreement for scheduling and coordinating services May 1, 2000. Prior to completion of the Agua Mansa Power Plant in June 2003, the agreement was amended and restated to allow Coral to buy and sell natural gas on the City's behalf for use at the power plant, and to provide optimization services. The term of the amended agreement is through June 30, 2404 with automatic renewal for successive one-yea� terms. DISCUSSION/ANALYSIS: The Second Amended and Restated Services Agreement will continue to provide the electric utility scheduling and coordinating services for the City's electrical load and will continue to buy and sell natural gas for use at the Agua Mansa Power Plant. There is no change in the amount of the fee for these finro services, which is currently $12,500 per month. The optimization service that Coral provides to the City includes market and risk assessment of the City's resource portfolio, and analysis of strategies to reduce the City's cost of power and optimize the City's resource portfolio. There are five optimization strategies that Goral has proposed that if the City approves, would require separate amendments to the Agreement and also requires an extension of the Agreement to coincide with the terms of Optimization Strategy amendments. The five proposed optimization strategies include optimizing the Agua Mansa Power Plant, Magnolia Power Plant, certain transmission rights, and an energy exchange for San Juan power. The premium that the City will receive from Coral for these optimization strategies is $4,000,000. The longest term for these optimization strategies is from August 2004 through December 2008; therefore the term of the Second Amended and Restated Services Agreement is through December 31, 2008. FINANCIAL IMPACT: The City would receive an upfront payment of $4,000,000 from Corat Energy, which Coral expects to recoup through market transactions over the term of the Agreement. There is no additional impact to the City for the management fee it is currently paying for the scheduling and coordinating services and the gas management services that Coral is providing. The management fee is included in the electric utility's purchased power budget for FY C14-05. ENVIRt�NMENTAL IMPACT: None.