Seattle City Light Legislation Summaries:

Council Bills/Ordinances:

1. C.B. 116138: Lucky Peak (Passed: 2/25/08)
2. C.B. 116174: Boulder Creek (Passed: 4/21/08)
3. C.B. 116176: Sacramento Municipal Utility District (Passed: 4/21/08)
4. C.B. 116193: Bothell Substation (In Committee)
5. C.B. 116194: Grand Coulee, Avista (Passed: 5/12/08)
6. C.B. 116231: T-Mobile (Passed: 6/09/08)
7. C.B. 116265: City Light Net Metering Program (Passed: 7/21/08)

Resolutions:

1. Resolution 31053: City Light Risk Management Policy and Recommendation (In Committee)
2. Resolution 31056: Skagit Environmental Endowment Commission (Passed: 5/12/08)
3. Seattle City Light Integrated Resource Plan (Upcoming)

1. C.B. 116138: Lucky Peak (Passed: 2/25/08)

An ordinance that authorizes City Light to enter into a 10 year, Generator Interconnection Agreement with Idaho Power and a 5 year transmission Agreement with Idaho Power. 

By way of background, as many of you know, as far back as 1984, City Light has purchased power from the Lucky Peak Hydro-electric facility near Boise, Idaho.  The arrangement provided for the interconnection of the facility to Idaho Power’s transmission grid and transmission across that grid to the Bonneville Power Administration’s grid.  The Federal Energy Regulatory Commission or FERC, as it is affectionately known, issued an Order that has the net effect of requiring City Light to enter into the Interconnection Agreement for a term of at least 10 years and a transmission agreement for a term of at least 5 years, in order to continue to have certainty of access to the power from Lucky Peak.

In short, the agreements are necessary for City Light to continue to have unrestricted access to power from Lucky Peak and without them, our ability to use or market the power from the plant could be severely limited, possibly resulting in a significant loss of revenue to the utility.  This bill does include a ratify and confirm clause, which is not our favored practice but in this case, it is necessary because the contracts here should be executed by March 10, 2008 or City Light runs the risk of losing its grandfathered status in the arrangement with Idaho Power.  

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2. C.B. 116174: Boulder Creek (Passed: 4/21/08)

This ordinance accepts a deed to the 1,080-acre Boulder Creek property in the Skagit River watershed and places the acquired properties under the jurisdiction of the City Light Department.  City Light originally purchased the property in the Cascade watershed with $742,300 in grant funds from the US Fish and Wildlife Service and the Washington Department of Natural Resources and was purchased pursuant to authority under Ordinance 121114.  City Light and the citizens of Seattle can be proud of City Light’s efforts in this regard.  This Ordinance will help to preserve more than one thousand acres of a high quality stream and an important ecosystem for salmon, trout, and other aquatic species. 

In addition, included in this deed will be 200 acres of old growth forest that provides a high quality habitat for threatened species, including Spotted Owls.

The Energy and Technology committee believes passage of this legislation will further demonstrate the City of Seattle’s commitment to salmon recovery and habitat preservation for the benefit of its citizens and future generations and therefore unanimously agreed on its approval. 

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3. C.B. 116176: Sacramento Municipal Utility District (Passed: 4/21/08)

Council Bill 116176 was passed by Full Council on April 21st, 2008. This ordinance provides authority to City Light to extend an existing delivery contract with the Sacramento Municipal Utility District (or SMUD).  The contract extension has two components:  (1) a power delivery component and (2) a power purchase component. 

The power delivery component would allow for City Light to deliver up to 15 Megawatts of energy to SMUD in exchange for SMUD deliveries of the equivalent amount of energy to City Light.  This would allow City Light to continue to schedule the output of energy from the Northwest Project in Burlington, WA, and SMUD would reciprocate by providing City Light with reliable capacity and energy in the winter months.

This Ordinance allows the current 18-month contract to be extended to a ten-year term and operates in conjunction with SMUD’s ten-year agreement with Sierra Pacific Inc. (SPI).  SMUD’s agreement with SPI provides for the purchase of a portion of the output of SPI’s new wood-waste (biomass) co-generation project in Burlington, Washington.   Because of the location of this project, SMUD required a counterpart to provide delivery services from the site.  While City Light is currently providing that service on a short-term basis, it now brings the request before the Full Council and seeks authority to continue to provide the service for the term of the contract.

The power purchase component will allow City Light to purchase energy from the project in excess of the agreed delivery amount.  In other words, City Light will be in a position to purchase power at cost, even though the amount of energy is very small (approximately 3 average megawatts).  While the contract cost is $62 per megawatt-hour (with a contract escalation rate of 1.75% per year), we know these figures will likely remain competitive over the term of the contract.

The project plant has been certified carbon neutral by Green-E, the national certifier of renewable energy, and the California Energy Commission.  Because the output from the plant is considered carbon neutral, the project will help City Light meet its requirements under the state’s Renewable Portfolio Standard established through Initiative 937.  However, as to not overstate the green effects of this transaction, the payment in energy that City Light will receive from Sacramento for the delivery service is not carbon neutral and City Light estimates that the energy will add approximately 7,800 metric tons of carbon to its balance sheet that will need to be offset and such costs were factored into this analysis.  

In sum, passage of this legislation will contribute to meeting three of City Light’s Integrated Resource Plan goals:  resource adequacy, adding new renewable resources, and reducing portfolio volatility.

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4. C.B. 116193: Bothell Substation (In Committee)

This proposed Council Bill amends Ordinance 121683 to provide authority to Seattle City Light to enter into multi-year transmission service agreements with PacifiCorp.  These agreements will allow City Light to replace existing transmission service agreements that expire in 2008.  As the Federal Energy Regulatory Commission (FERC) now requires that long-term transmission rights may only be secured for periods of at least five (5) years, a new transmission services agreement is necessary to transmit power from Stateline located near Walla Walla, Washington, to the Bonneville Power Administration’s transmission system network where it can be then transmitted to the City of Seattle.

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5. C.B. 116194: Grand Coulee, Avista (Passed: 5/12/08)

Council Bill 116194 was passed by the Energy and Technology Committee on May 7th, and by Full Council on May 12th. This is a bill that authorizes City Light to execute three agreements to provide for the transmission of power from the Summer Falls and Main Canal Hydroelectric Projects to the City of Seattle. This bill replaces an expired transmission agreement with the Avista Corporation for the transmission of power from the Summer Falls and Main Canal Hydroelectric Projects.

The agreements employ the services of both Avista and Public Utility District #2 of Grant County and will provide an efficient and cost-effective alternative to either interconnecting with the Bonneville Power Administration grid or continuing service under Avista’s previous contract.
The execution of these contracts will result in a net savings of $46,100 in 2008.

A range of transmission options were considered by City Light. One option, a $28 million transmission contract with Avista was considerably more expensive, where an option of a $10.5 million proposal for the City to construct new facilities was less expensive. The rroposed contracts are $11.3 million in net present value terms. Although the build option is marginally better on a straight present value basis, it exposes City Light to the cost risk and regulatory risk associated with building new transmission facilities. The contract option also resolves the dispute with the Grand Coulee Projects Hydroelectric Authority and results in a more efficient use of the region’s existing transmission facilities.

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6. C.B. 116231: T-Mobile (Passed: 6/09/08)

This proposed ordinance authorizes an agreement between Seattle City Light and T-Mobile USA, Inc. to permanently vacate and relocate certain City Light (fixed point-to-point) microwave radio systems at T-Mobile’s expense.

The agreement was designed to allow Seattle City Light and T-Mobile to accommodate the rather aggressive timeline to install the new system with T-Mobile willing to take all of the financial risk in the event Council did not approve.

T-Mobile did not complete construction of the new system by the agreement’s original date of December 31, 2007.  For this reason, T-Mobile has requested an extension to June 30, 2008, in order to complete its system, and for the relocation of Seattle City Light’s communication lines.  The extension provides sufficient time for relocation.

By background, the FCC previously licensed certain frequencies to City Light for communication purposes.  The FCC reallocated and auctioned certain frequencies including those paths used by City Light to commercial enterprises for use by emerging technologies known as the Advanced Wireless Services.  T-Mobile was the winner of the FCC Auction of the particular frequencies previously licensed to City Light.

T-Mobile has determined that its Advanced Wireless Services system may cause interference to City Light’s frequency paths and desires that City Light permanently vacate (in accordance with the FCC’s actions), its licenses to operate in the affected frequency paths and relocate its operations onto other microwave frequencies or other communication paths available to City Light.

Because City Light and T-Mobile desire to negotiate the replacement of the current microwave systems used by City Light, T-Mobile has agreed to design, construct and provide City Light -- at T-Mobile’s expense -- newly installed communication systems to replace the current systems.

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7. C.B. 116265: City Light Net Metering Program (Passed: 7/21/08)

This Council Bill amends Seattle Municipal Code regarding Seattle City Light’s Net Metering Program. Net metering allows City Light to credit customers who generate electricity via their own solar or other renewable technologies, which subsequently helps reduce the Utility’s overall system load. The amendments are necessary to remain in compliance with recent changes in state law, and will help to enhance participation for City Light customers who choose to net meter. In addition, this legislation broadens the definition of net metering systems to include additional renewable energy technologies, and provides an extended date for the use of net metering credits. The legislation also raises the caps on the electrical generating capacity of individual net metering systems, and on the cumulative generating capacity of all of City Light’s net metering customers. And last, by using a practice known as meter aggregation City Light will have the ability to bill net metering customers by allowing the Utility to combine readings from all meters on the premises of a given net metering customer.

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Resolutions:

1. Resolution 31053: City Light Risk Management Policy and Recommendation
   (In Committee)

A representative from City Light is scheduled to present their proposed Risk Management Plan at an Energy and Technology Meeting in the near future. The Risk Management Plan is necessary because "City Light faces significant uncertainty regarding both the quantity of power available to the utility and the range of prices prevailing in the wholesale power market."

In a typical year the supply of power inherent to City Light exceeds the demand of its customers, creating a surplus. This surplus power is then sold in the wholesale power market. The revenue generated by selling is "used to offset costs that would otherwise be borne by City Light’s retail rate payers." City Light can sell its surplus power in two different manners. One is that they sell the power in the "spot market" as the power makes itself available, or it can sell the power in the "forward market" for delivery in the future. Both methods of selling involve risk.

If City Light chooses to sell the surplus in the spot market, it exposes the utility to the possibility of selling at a low rate "because the wholesale market is flush with power." Selling projected surplus in the forward market reduces this risk, but then City Light is presented with the possibility of being forced to purchase power at higher prices "in order to meet those forward commitments (as well as retail demand) in the event actual supplies" are significantly less than estimated.

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2. Resolution 31056: Skagit Environmental Endowment Commission
   (Passed: 5/12/08)

This Legislation is in the form of a Resolution that sought Council’s approval of the "Skagit Environmental Endowment Commission’s (SEEC) 2008 Budget for its fiscal year of April 1, 2008 through March 31, 2009.

The Commission and Endowment was established in the mid-80’s as a part of an agreement between the City of Seattle and the Province of British Columbia relating to a proposed "High Ross Dam".  Earnings from the endowment plus annual supplemental payments by Seattle City Light and British Columbia Hydro allow the Commission to support a variety of educational and environmental projects in the upper Skagit watershed. 

Although the SEEC’s funds come from an endowment and are separate from City funds, the "High Ross Dam" Treaty requires the Commission to submit its annual budget to the Seattle City Council and British Columbia for review and approval.  In other words, this Resolution does not have any financial implications as indicated in the fiscal note.

The Commission allocated approximately $300,000 to continue support for projects relating to water quality, grizzly bear recovery, fisheries assessment, education, development of recreational facilities and land protection.  The SEEC’s goal to develop new strategies to protect these lands is consistent with the 1984 High Ross Treaty.

The Energy and Technology Committee believes the passing of Resolution 31056 will further demonstrate the City of Seattle’s commitment to conserve and protect wilderness and wildlife habitat, as well as enhance recreational opportunities in the Skagit Valley for the benefit of the citizens of Seattle and future generations. 

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3. Seattle City Light Integrated Resource Plan (Upcoming)

At the May 7th 2008 Energy and Technology Committee meeting Seattle City Light Superintendent Jorge Carrasco presented a briefing on the 2008 Integrated Resource Plan (IRP). The IRP is a long term plan that outlines how the utility will meet the projected needs of customers over the next twenty years. The IRP helps to ensure that City Light meets their responsibility to provide customers with reliable, reasonably priced electricity with an added focus of alternative forms of energy. Given the complex nature of generating and transmitting electricity IRP’s are usually based on "load forecasts and resource options that extend well into the future." Being that the IRP focuses on the long term it must be flexible in order to respond "to changing market conditions and future uncertainties."

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