HomeMy WebLinkAboutMINUTES - 04102001 - SD.8 C�
TO: BOARD OF SUPERVISORS
CONTRA
FROM: John Sweeten,County Administrator ' :.� COSTA
Barton J.Gilbert,General Services Director -.. i�;r
�-_�-- � COUNTY
Y�'`i C•UVIL'l�
DATE: April 10,2001
SUBJECT: Five-Year Contract for Electric Energy
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION(S):
1. SUPPORT the ABAG Power proposal to enter into a five-year contract for electricity with
Calpine, leveraging the existing contract to obtain a favorable fixed rate, effective July 1,
2001.
2. AUTHORIZE the County's representative on the ABAG Power Board to represent the
County's position at Power Board meetings.
3. ACKNOWLEDGE that the terms and conditions of the final contract between Calpine and
ABAG Power will be brought back to the Board of Supervisors for review and approval.
BACKGROUND/REASON(S)FOR RECOMMENDATION(S):
Contra Costa County is a member of the ABAG Power Consortium,which purchases electricity for its
member agencies under a fixed rate contract with Calpine. The current 16-month contract with
Calpine is at$81/MWh(8.1¢/kwh)and expires December 31,2001.
CONTINUED ON ATTACHMENT: —YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR_RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S): QA,
ACTION OF BOARD ON APPROVED AS RECOMMENDED g OTHER XX
Following their discussion,the Board took the following action:
DIRECTED that in Recommendation No. 1,the word"Calpine"is replaced with the words"Power provider",
and in Recommendation No.3,the word"Calpine"is also replaced with the words"Power provider";and
APPROVED staffs Recommendations 1,2 and 3 including the changes.
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
_Xj_UNANIMOUS(ABSENT IV' — — — 1 TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED
ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact
ATTESTED April 10, 2001
JOHN SWEETEN,CLERK OF
THE ARD OF SUPERVISORS
AND O TY OAF
cc: CAO
General Services
ABAG Power BY L DEPUTY
ABAG Power members are being asked to vote on two alternatives at the next Board meeting on
April 18,2001:
1) selling the remainder of the current contract with Calpine;and
2) leveraging the current contract into a new 5-year fixed rate contract at a more favorable
rate.
Selling the Current Contract
The existing contract with Calpine is well below the current market rate of approximately$195/MWhr.
If sold, it would net a substantial one-time payment for each of the ABAG Power member agencies.
Assuming a sale effective July 1, 2001 at $195/MWhr, Contra Costa County would receive
approximately$2.3 million.
If the Calpine contract is sold, Contra Costa County would revert to PG&E for its electricity. PG&E
rates are regulated by the PUC, which recently announced a significant rate increase. It is not yet
clear what the new rates would be for our buildings, but they would likely be higher. For our larger
buildings, we would undoubtedly pay both a usage and peak load charge (the Calpine contract is a
fixed rate, regardless of the time of day the electricity Is used).
The advantages of the"sell"option are:
1) The one-time payment could be used for energy-efficient building retrofits.
2) Our price for electricity would be tied to PG&E rates,which could go down over the next
few years if there is an increase in supply/reduction in demand.
3) If, at a future date, we decide to return to PG&E for our electricity, the State may
impose a fee for the privilege of doing so.
Five-Year Contract
ABAG staff has had a number of discussions with Calpine on the future of the electric program,
including the option of selling the current contract. Both ABAG staff and Calpine agree that the
program is not viable on a year-to-year contract basis, since electric power cannot be purchased
short-term at a competitive price at this time(and probably not for the next 2-3 years).
Calpine has indicated that it is willing to enter into a five-year contract, either an extension of the
existing contract or a blend which uses the remaining value of the current contract to further reduce
the contract cost. ABAG believes that a blended contract would maximize potential price savings.
The advantages of the 5-year contract option are:
1) Electricity rates would be stable over the next 5 years.
2) Rates recently approved by the State PUC appear to be higher than anticipated rates
under a new Calpine contract.
3) As a direct access electric customer, we would probably avoid some or all of the costs
of the state electricity purchases, including the associated financing and bond costs
(now estimated between$10-20 billion).
4) Over the life of the 5-year contract,the savings in electricity costs would likely be more
than the one-time payment under the"sell"option.
5) The new contract would provide an opportunity to add new County buildings (such as
Los Medanos Health Clinic)to the Calpine contract.
6) Sale of the Calpine contract would defeat the overall purpose of participating in the
State electric deregulation program and could be used as an example by the PUC and
State of why direct access should be ended. It may also hurt ABAG Power's claim with
the PUC to receive payment for sale of excess power earlier this year. The
implementation of a long-term contract for electric power will make ABAG Power a
stronger player in the State energy program and more difficult for the State to
undermine ABAG Power's status as a successful direct access service provider.
A decision by the ABAG Power Board to pursue a 5-year contract will commence negotiations with
Calpine. The resulting proposed contract will come back to the Board of Supervisors for review and
approval.
Dave Finegan and Jerry Lahr,ABAG Power staff,will be present at the Board of Supervisors meeting
to respond to technical questions and to provide further information.
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