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RESOLUTION NO. 2015-137 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING CONTINUATION OF ELECTRICITY COMMODITY PURCHASES FROM SHELL ENERGY AND AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS IN CONJUNCTION WITH THE PURCHASES
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution(s).
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SUMMARY
In order to help foster price competiveness, the California Public Utilities Commission in 1998 began allowing certain energy customers to purchase electricity from third-party providers (instead of their local Investor-Owner Utility), know as Direct Access Service. The City of Chula Vista purchases electricity for four municipal buildings from Shell Energy under Direct Access Service. The City is now updating its electricity procurement rates with Shell Energy, which are similar to last year's and approximately 30% lower than historical commodity prices. This approval would allow for continuation of the electricity commodity purchases for up to 1-year.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because the proposal consists of a continuing administrative action involving the purchase of electricity. Therefore, pursuant to Section 15378(b)(2) of the State CEQA Guidelines the activity is not subject to CEQA review.
BOARD/COMMISSION RECOMMENDATION
Not applicable.
DISCUSSION
In 1998, the California Public Utilities Commission began implementation of Assembly Bill 1890 (The Electric Utility Industry Restructuring Act) to make the generation of electricity more competitive in California. One of the key provisions was the creation of "Direct Access Service" options in which commercial, industrial, and agricultural customers could select to purchase electricity from a third-party Electric Service Provider, instead of from the local Investor-Owner Utility (such as San Diego Gas & Electric). Direct Access allows these customers to potentially negotiate better electricity commodity rates or higher renewable energy power mixes from the open market. The local utility still provides the transmission and distribution services for Direct Access customers within their service territories.
During the energy crisis in 2001, the Department of Water Resources was required to issue revenue bonds and enter into long-term electric energy purchasing contracts on behalf of California ratepayers. As a result, the California Public Utilities Commission suspended Direct Access in order to create a stable customer base to help the Department of Water Resources recover its costs. However, existing Direct Access customers could continue to purchase their electricity from an Electric Service Provider. The City of Chula Vista has four electricity accounts that have been "grandfathered" under Direct Access Service - Civic Center Library, South Library, Public Services South (Building 200), and Discovery Park. Over the last 12-months, the electricity commodity purchases for the four accounts totaled approximately $183,000.
Since 2004, the City has been under contract with Shell Energy (formerly Coral Power) to purchase electricity for its Direct Access accounts. To minimize utility cost fluctuations under the contract, the City "locks-in" electricity procurement rates for a certain time period through a Confirmation Letter with Shell Energy. The City's current Confirmation Letter and its associated rates are expiring at the end of June 2015. Therefore, staff is requesting that City Council approve continuation of electricity commodity purchases from Shell Energy and authorize the City Manager to execute a 1-year Confirmation Letter with a rate up to $44.49 per MWh in order to secure electricity procurement rates.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City's Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. Direct Access allows the City to potentially negotiate better electricity commodity rates or higher renewable energy power mixes from the open market, which supports the Economic Vitality goal.
CURRENT YEAR FISCAL IMPACT
Because the new Confirmation Letter and its associated electricity procurement rates would not be effective until July 1, 2015, there would be no impact during the current Fiscal Year 2014-15.
ONGOING FISCAL IMPACT
The new electricity procurement rates are very similar to current commodity prices, so it is expected that there will be no additional impact from the City's new Direct Access agreement with Shell Energy.
ATTACHMENTS
Attachment A - Shell Energy Confirmation Letter Example
Staff Contact: Robert Beamon