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AGENDA REGULAR MEETING OF AZUSA UTILITY BOARD/AZUSA CITY COUNCIL I AZUSA LIGHT & WATER 729 N. AZUSA AVENUE AZUSA, CA 91702 ROBERT GONZALES VICE CHAIRPERSON MEMBER AZUSA UTILITY BOARD URIEL E. MACIAS CHAIRPERSON JULY 27, 2009 6:30 P.M. JOSEPH R. ROCHA BOARD MEMBER ANGEL CARRILLO BOARD MEMBER P.M. Convene to Regular Meeting of the Azusa Utility Board and Azusa City Council • Call to Order • Pledge to the Flag • Roll Call A. PUBLIC PARTICIPATION i (Person/Group shall be allowed to speak without interruption up to five (5) minutes maximum time, Eubject to compliance with applicable meeting rules. Questions to the speaker or responses to the :speaker's questions or comments shall be handled after the speaker has completed his/her comments. Public Participation will be limited to sixty (60) minutes time.) 001 B: CONSENT CALENDAR The Consent Calendar adopting the printed recommended action will be enacted with one vote. If Staff or Councilmembers wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. Minutes. Recommendation: Approve minutes of regular meeting on June 22, 2009 as written. lune -09 UB Mmutes.pdf Approval of License Agreement with Power Settlements Consulting and Software, LLC. Recommendation: Approve the license agreement with Power Settlements Consulting and Software, LLC for data management system and authorize the Mayor to execute said agreement. Llki Power Settlements Lic Agrmt. pdf Proposal.pdf Item pdf 1 Approval of Support Letter and Resolution for Smart Grid Grant Application to the Department of Energy. Recommendation: Approve the following resolution: A RESOLUTION OF THE AZUSA UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, COMMITTING TO MATCH ANY GRANT FUNDS THAT MAY BE AWARDED BY THE U.S. DEPARTMENT OF ENERGY FOR A SMART GRID PROJECT IN THE CITY OF AZUSA UP TO ONE MILLION DOLLARS. % Smart Grid Grant.pdf Ltr Smart Grid Smart Grid Reso. pdf Grant.pdf 002 C. 1 4. i SCHEDULEDITEM :Ratification of Water Rights Agreement with City of Arcadia and Preauthorization Policy. Recommendation: (1) Ratify the execution of the water rights lease agreement with the City of .Arcadia; and (2) Approve the following resolution authorizing the City Manager or his designee to execute future water rights transactions: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, ADOPTING A POLICY AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO ENTER INTO REPLACEMENT WATER AGREEMENTS AND PRODUCTION RIGHT AGREEMENTS. STAFF REPORTS/COMMUNICATIONS California Resource Connection River Walk and Compost Workshop Program Reports CRC Project CRC Final Rpt Wtr Rt Agnt Wtr Rt Form Wtr Rt Reso Wtr Rt Trans-Reso.pdf lse-Arcadia.pdf Asgnrmt. pdf Trans.pdf STAFF REPORTS/COMMUNICATIONS California Resource Connection River Walk and Compost Workshop Program Reports Power Resources Projects Update Parr Res Updates. pdf Monthly Update on Filtration Plant �I WTPMoy.pdf Customer Service Operations Additional Information Follow-up I m:l CRC Project CRC Final Report.pdf Reporting.pdf Power Resources Projects Update Parr Res Updates. pdf Monthly Update on Filtration Plant �I WTPMoy.pdf Customer Service Operations Additional Information Follow-up I m:l Cust Svc Info Attachrtent. pdf Rpt. pdf 003 Photo Voltaic Solar System Update for Cardinal Laboratories Cardinal Sys PV. pdf 6. Update on Climate Change Legislation/H.R. 2454 LI J Cal>and-Tmde.pdf SCPPA HR 2454. pdf APPA Key Mess.pdf APPA Sum HR24S4.pdf San Gabriel Valley Municipal Water District's Public Education Program t SGVMWD-ConservPr Azusa Bus Shelters Azusa Bus Shelters og. pdf 005.]PG 006.JPG 8. Summer Water Supply Assessment/Drought Patrol Update (Verbal) E. DIRECTOR'S COMMENTS F. ADJOURNMENT Adjournment. `In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a city meeting, please contact the City Clerk at 626-812-5229. Notification three (3) working days prior to the meeting or time when special services are needed will assist staff in assuring that reasonable arrangements can be made to provide access to the meeting." "In compliance with Government Code Section 54957.5, agenda materials are available for inspection by members of the public at the following locations. Azusa City Clerk's Office - 213 E. Foothill Boulevard, Azusa City Library - 729 N. Dalton Avenue, and Azusa Light & Water -729 N. Azusa Avenue, Azusa CA." am CITY OF AZUSA MINUTES OF THE REGULAR MEETING OF THE AZUSA UTILITY BOARDICITY COUNCIL ! MONDAY, JUNE 22, 2009 — 6:30 P.M. The Utility Board/City Council of the City of Azusa met in special session, at the above date and time, at the Azusa Light and Water Conference Room, located at 729 N. Azusa Avenue, Azusa, California. Chairman Macias called the meeting to order. Call to Order f ROLL CALL Roll Call I4 PRESENT: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA I ABSENT: BOARD MEMBERS: NONE i 1 ALSO PRESENT: Also Present (j City Attorney Ferre, City Manager Delach, Assistant City Manager Makshanoff, Director of Utilities Hsu, Director of Resource Management Tang, Assistant to Utilities Director Kalscheuer, Assistant Director i{ ! Customer Care and Solutions Vanca, Director of Public Works/Assistant City Manager Haes, Assistant I' Director of Water Operations Anderson, City Treasurer Hamilton, Administrative Services Director -Chief Financial Officer Kreimeier, Controller Michaels -Aguilar, City Clerk Mendoza, Deputy City Clerk Toscano. I '.Public Participation Pub Part Executive Director of the Azusa Chamber of Commerce Irene Villapania presented the Chamber Budget I. Villapania Proposal for 2009-2010, and provided detailed information regarding the document. Comments ' Eliza Clifford, Region Manager of Southern California Edison, provided an update on the Tehachapi E. Clifford Transmission Project, stating they haven't completed the draft Environmental Impact Report (EIR), and So. Ca. Edison provided a map of the existing right of way, noting they have many energy efficiency programs and projects, and are able to add more renewables to the fuel mix. She responded to questions posed. I The CONSENT CALENDAR consisting of Items B-1 through B-8, was approved by motion of Board Consent Cal Member Rocha, seconded by Board Member Hanks and unanimously carried with the exception of items B-3 BI —B8 and B-6, which were considered under the Special Call portion of the Agenda. B-3 & 6 Spec I j 1. The minutes of the regular meeting of May 26, 2009, were approved as written. Min appvd 4 2. Approval was given to award a five-year contract to PMR Progressive, LLC for collection services of Progressive ! unpaid utility bills. Collect sys 005 3. SPECIAL CALL ITEM. Spec Call 4. Approval was given to award a contract to J. Fletcher Creamer & Sons, Incorporated for Water Project J. Fletcher WV -263, for the Water Main Cement Mortar Relining in the cities of Azusa, Covina, West Covina, Creamer&Sons Irwindale, and the County of Los Angeles, in amount of $1,198,103.50. Prj WV -263 5. The Account Holder Registration Agreement with WREGIS for the purpose of tracking generation of Acct Hldr Reg City's renewable resources was approved and the Mayor was authorized to execute the agreement. Agreement 6. SPECIAL CALL ITEM. Spec Call 7. Azusa Light & Water staff was authorized to (1) prepare, apply and submit a grant application to the Grant Appl. Department of Energy, either as a separate entity or in collaboration with others, in an amount not -to- Dept energy exceed a matching fund contribution of $1 million for the modernization of electric distribution system; and (2) solicit informal proposals for grant application consulting services and City Manager was authorized to execute Professional Services Agreement subject to review by City Attorney. 8. Approval was given to adopt the legislative positions included in this report and to authorize the Mayor Legislative to sign letters addressed to legislators to advocate the adopted positions. positions SPECIAL CALL ITEMS Special Call Lengthy discussion was held regarding the open canal deemed a historic resource during the proceedings of the Lic Agmt CIC Monrovia Nursery specific Plan and Project and staff was directed to review what was done in the past, look into viable option for the canal and present to Council, it was also to advise previous Council of any changes. Moved by Board Member Gonzales, seconded by Board MemberCarrillo and unanimously carried to approve License Agmt the license agreement with Covina Irrigating Company to use accepted public streets for its water line and that w/CIC the City Manager be authorized to execute on behalf of the City. approved Board Member Hanks addressed the Resolution regarding any seizure by State from City's Street Maintenance Hanks Fund requesting that staff send the resolution with great emphasis on behalf of the Board. Comments Board Member Gonzales offered a Resolution entitled: A RESOLUTION AUTHORIZING THE CITY ATTORNEY TO COOPERATE WITH THE LEAGUE OF CALIFORNIA CITIES, OTHER CITIES AND COUNTIES IN LITIGATION CHALLENGING THE CONSTITUTIONALITY OF ANY SEIZURE BY STATE GOVERNMENT OF THE CITY'S STREET MAINTENANCE FUND Moved by Board Member Gonzales, seconded by Board Member Carrillo to waive further reading and adopt. Resolution passed and adopted by the following vote of the Board Members: AYES: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA NOES: BOARD MEMBERS: NONE ABSENT: BOARD MEMBERS: NONE SCHEDULEDITEM Res. 09-051 Challenging Seizure of funds by State Sched Items Director of Utilities Hsu and Assistant Director Customer Care and Solutions Vanca presented the Resolution Dir of Util to Modify the Light & Water Rules and Regulations to Resolve Omissions, Inconsistencies with Business K. Vanca Practices, and Allow Lifeline Discount and Third -Party Notification to Apply to All Eligible Customers, presented detailing the five general areas that were identified. resolution 06/22/09 PAGE TWO ii. f� After lengthy discussion, Board Member Hanks offered a Resolution entitled: A RESOLUTION OF THE AZUSA UTILITY BOARDICITY COUNCIL OF THE CITY OF AZUSA, Res. 09-052 AMENDING THE AZUSA LIGHT & WATER RULES AND REGULATIONS GOVERNING THE Amending ELECTRIC AND WATER SERVICE SUPPLIED BY AZUSA LIGHT & WATER L&W Rules Moved by Board Member Hanks, seconded by Board Member Carrillo to waive further reading and adopt. Resolution passed and adopted by the following vote of the Board Members: AYES: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA NOES: BOARD MEMBERS: NONE ABSENT: BOARD MEMBERS: NONE Staff Rpts Director. of Utilities Hsu presented information regarding the possibility of the Relocation of Azusa Light & Dir of Util Water Payment Drop Box, stating that one recommendation was to place a box on Azusa Avenue which would Possible take up at least two parking spaces and would cost about $4,000 plus city permit fees. Concerns were voiced Relocation regarding vandalism, identify theft and discussion was held regarding other alternatives. The matter was Drop Box deferred in order that staff look into the cost of relocating the box closer to the curb and survey the use of the box in the front and back of the Utility building. Director of Utilities Hsu presented item regarding E -Billing Practices of Azusa Light & Water, stating that Update on about 10% of customers utilize the function and will provide the Board with a breakdown of residential versus E -Billing commercial customers. Director of Utilities Hsu presented the Main San Gabriel Basin Watennaster Drought Declaration, detailing the Drought contents i.e. the water graph which shows projections through September 30, 2009. He also noted what Declaration actions were taken to increase water supply, he responded to questions posed and invited all to tour the local Watermaster dam. Director of Utilities Hsu presented the Monthly Update on Water Filtration Plant, stating that they are still Update Water waiting for substantial completion notice as there are still items that have to be completed. Filtration Plant Director of Utilities Hsu presented the Replacement Water Cost Adjustment Factor (RWCAF) for FY 2009- RWCAF 2010 and provided history regarding it. Update Director of Utilities Hsu presented the Third Quarter San Juan Fuel Cost Adjustment (FCA) Update stating Quarterly FCA that per current FCA mechanism, the FCA charge in an amount less than $100,000 shall be carried over to the San Juan following quarter for recovery. Thus, San Juan FCA for the third quarter will be set to zero. Resource Director of Utilities Hsu presented item regarding Deferral of San Juan Forced Outage Insurance Policy stating San Juan that since the spot market for electricity has declined and has reached a point where the forward prices for spot Outage Ins market electric power are lower than the strike price of the offered insurance policy there is no need to purchase at this time. Director of Resource Management Tang provided an update on the Lodi Project stating that the application B. Tang with the PUC is still ongoing, the project is currently working, the permit to construct should be ready by the Update on end of the year, overall the project is on schedule, the cost has stayed at the same level, but about 30% higher Lodi than 2008 forecast due to financing and construction costs that have risen. 06/22/09 PAGE THREE LIM DIRECTOR'S COMMENTS Dir Cmts City Manager presented the Light and Water Budget Reductions from Original Proposed as requested by City Mgr Board Members. Comment Discussion was held regarding City watering schedule, possibly going dark for meetings in August; public Discussion parkway/right of way limitations/liabilities, condition of medians on Sierra Madre and Todd and a possible several items tour of the Dam. Moved by Board Member Gonzales, seconded by Board Member Carrillo and unanimously carried to adjourn. Adjourn TIME OF ADJOURNMENT: 8:04 P.M. SECRETARY NEXT RESOLUTION NO. 09-053. 06/22/09 PAGE FOUR AZUSA LIGHT \ W/.![9 CONSENT CALENDAR TO: HONORABLE MAYOR AND MEMBERS OF THE AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES C 7 DATE: JULY 27, 2009 SUBJECT: APPROVAL OF LICENSE AGREEMENT WITH POWER SETTLEMENTS CONSULTING AND SOFTWARE, LLC RECOMMENDATION It is recommended that the Utility Board/City Council approve the License Agreement with Power Settlements Consulting and Software, LLC and authorize the Mayor to execute the License Agreement. j BACKGROUND As staff has reported to the Utility Board previously, the California Independent System Operator (CAISO) instituted a new electric wholesale market structure as of April 1 of this year. The resulting market is a centralized electricity market whereby the city is required to sell all of our power resources into this market and buy out of this market all the electricity we need on an hourly basis. The CAISO uses sophisticated and complex optimization algorithms to determine the least cost dispatch of generation resources to serve all electric needs. Due to the extreme complexity of the market, the staff has been using specialized software contracted with the Structure Group to perform the daily scheduling and settlement functions. The agreement with Structure Group was approved by the Utility Board in July, 2007. Until recently, the software by Structure Group has been working reasonably well. In recent weeks, staff has noticed a slowdown in performance of the Structure Group's software and has encountered problems with keeping the size of the CAISO data files manageable. The root cause of these problems trace back to the shear size of CAISO daily data file which is about 5 gigabytes each day. The shear size of the daily file is 11' overwhelming the city's computer server system and thus impacting the performance of Structure Group's software. On several occasions, staff was unable to process and store the settlement data file onto city's computer server system, the city's IT staff had to' manipulate the server allocation to permit further processing, potentially significantly degrading the system performance of city's IT system and Power Resources' ability to process CAISO data. The instant software by Power Settlements Consulting and Software, LLC will mitigate this problem significantly, by parsing the massive daily CAISO data file into smaller sized files easier to manipulate and store. Unnecessary data can then be discarded and thus reduce the burden on city's computer server system. The software has the ancillary benefit of serving as a back up software if Structure Group's software fails and/or becomes too costly to maintain. Further, staff negotiated a special arrangement with the vendor of the software so that we can use the software and pay for it on a month-to-month basis with no commitment beyond the current month of use. Our expectation is that either CAISO or the Structure Group will upgrade their respective data management system to mitigate the data size problem on the front end so that users such as the city will not need to manipulate the data file to reasonable size on the back end. When this occurs, staff intends to terminate this software service with Power Settlements immediately. FISCAL IMPACT The cost of the License Agreement is $833 per month payable on a month-to-month basis, and the Agreement can be terminated at any time without penalties. Funds are available to pay for this service in approved Power Resources budget account 33-40-785- 560-6493. Prepared by: Bob Tang SettlerrentsAnayzer Desktop Version for _07-16-2009.da Azusa 07-16-2009.pc LICENSE AGREEMENT THIS LICENSE (this "Agreement") is made and entered into this day of 2009, by and between Power Settlements Consulting and Software, LLC (hereinafter "Power"), California limited liability company; and the City of Azusa (hereinafter "Licensee"), a municipal corporation duly authorized and existing under the laws of the State of California. RECITALS WHEREAS, Power is the owner of all right, title and interest in and to software, documentation and related information, including the intellectual property rights embodied therein, known as the desktop version of the SettleCore Settlements Analyzer Module j (collectively the "Software") and as further defined in Section 1. 1, below; WHEREAS, Licensee desires to install and operate the Software pursuant to the rights and licenses granted herein for Licensee's non-exclusive use of the Software, and use the documentation and related information for permissible purposes; and WHEREAS, Power is willing to grant such rights and licenses under the terms and conditions of this Agreement; NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: Article 1 DEFINITIONS When used in this Agreement the capitalized terms listed below shall have the following meanings: 1.1 "Software." Software includes only the Settlements Analyzer Module of the SettleCore shadow settlement system. Software is comprised of Object Code and Documentation that is installed on a server and accessed by the users on Licensee computers. 1.2 "Settlements Analyzer Module." The functionality within the SettleCore system that is used to load the Licensee's (including entities to which Licensee is assigned as the scheduling coordinator by the CAISO) California ISO ("CAISO") settlement files in the CAISO-issued XML format, to review and analyze the CAISO settlement file data, to perform ad-hoc charge code formula training, to export the CAISO settlement file data to spreadsheets, and to use the SIBR Upload Template (MS Excel spreadsheet included, that enables Licensee to perform limited scheduling functionality through the Advanced Submit process on the CAISO's SIBR portal) use of the spreadsheet functionality. License Agreement July 16, 2009 Page 1 of 12 1' Oil 1.3 "Code." Computer programming code. If not otherwise specified, Code shall include both Object Code and Source Code. Code shall include Maintenance Modifications and Enhancements thereto if, when, and to the extent that such Maintenance Modifications and/or Enhancements are delivered to Licensee by Power under this Agreement or under any other agreement or arrangement between the parties. 1.4 "Source Code." Code in programming languages such as "C#", including all database operations and procedures such as "SQL", plus all related development documents such as flow charts, schematics, statements of principles of operations, end-user manuals, architectural standards, and any other specifications that are used to create or that constitute the Software. Source Code shall also include the database tables and their design and layout, which are used by the Software. 1.5 "Object Code." Code in machine-readable form generated by compilation of Source Code and contained in a medium that permits it to be operated by Licensee. Includes the database and database design and layout provided in the Software. 1.6 "Documentation." User manuals and other written materials that relate to particular Object Code, including materials useful for operation (for example, user guides and training materials). Documentation shall include Maintenance Modifications and Enhancements thereto if, when, and to the extent that such Maintenance Modifications and/or Enhancements are delivered to Licensee by Power under this Agreement or under any other agreement or arrangement between the parties. 1.7 "Maintenance Modifications." Modifications, updates, or revisions made by Power to Code or Documentation that correct errors, support new releases of operating systems, or support new models of input-output (1/0") devices with which the Code is designed to operate. 1.8 "Enhancements." Modifications, additions, or substitutions, other than Maintenance Modifications, made by Power to Code or Documentation that accomplish incidental, performance, structural, or functional improvements. Enhancements may consist of Basic Enhancements or Major Enhancements, as defined below: a. "Basic Enhancements." Enhancements that result from warranty or maintenance services or that otherwise accomplish incidental, structural, functional, or performance improvements for which Power does not generally impose a separate charge on Licensee. b. "Major Enhancements." Enhancements that result in substantial performance, structural, or functional improvements or additions, including substantial redesign or replacement of any parts of the Source Code, for which Power does generally impose a separate charge on Licensee. License Agreement July 16, 2009 Page 2 of 12 012 Article 2 LICENSE 2.1 Grant. In consideration of the fees payable to Power pursuant to Article 3 hereof, Power hereby grants to Licensee a revocable, non-exclusive right and license (the "License") to use and operate the Software to import and view,, and to train on the the settlement statements which are sent or assigned by the CAISO to the Licensee. Licensee is permitted to download the Software from Power and install it on the local computer of only one user. 2.2 Restrictions. Licensee agrees to the following restrictions on the Software. Failure to adhere to these restrictions may result in the revocation of the License at the unilateral discretion of Power with or without notice to Licensee, except as specifically set forth herein: a. The Software may be installed by the Licensee at only one site to be approved in advance by Power. b. Licensee may not reproduce or transfer the Software, or any copy, adaptation, transcription, or merged portion thereof, except as expressly permitted by Power. Licensee's rights are non-exclusive and non -assignable. If Licensee transfers possession of any copy, adaptation, transcription, or merged portion of the Software to any other party, including, but not limited to, a successor in interest of Licensee's business that assumes all of the Licensee's obligations with respect to the Software, the Licensee's rights in the Software are automatically terminated. c. Licensee may (1) make a maximum of three copies of the Software in machine- readable form for non -backup purposes only; and (2) use the Software only for internal purposes (and not for service bureau work, multiple -user licenses or time- sharing arrangements). d. Power shall have sole and exclusive ownership of all right, title, and interest in and to the Software and all modifications and enhancements thereof prepared by Power (including ownership of all trade secrets and copyrights pertaining thereto), subject only to the rights and privileges expressly granted by Power hereunder. e. By accepting delivery of the Software Licensee acknowledges that Power claims and reserves all rights and benefits that are afforded under federal copyright law in the Software. f. The Source Code for the Software (and the information therein, to the extent not otherwise apparent in the Object Code. and the Documentation) is a trade secret of Power. Licensee is not entitled to receive Source Code, and under no circumstances may Licensee reverse -compile or reverse -assemble the Object Code. License Agreement July 16, 2009 Page 3 of 12 013 g. Licensee's obligations hereunder remain in effect for as long as it continues to possess or use the Software. h. Licensee shall not make any updates to the data or database tables, layouts, or schema used by the Software. j. Licensee agrees that only employees of the Licensee shall be permitted to operate the Software and to access the database used by the Software. Any requests to operate the Software or to access the database used by the Software, by non -employees of the Licensee, must be approved by Power in email form. k. Licensee shall be responsible for maintaining that the hardware and software which is installed on the server and client that the Software is also installed on are in proper working order. 1. In order for the Software to function as required, the Licensee shall be required to fulfill the following hardware and software obligations for the Software. i. The user's computer, on which the Software will be installed, shall have the following hardware: (1) an Intel processor, which shall be a Pentium P4 processor or a higher version, (2) have a minimum of one gigabyte of RAM, although at least two gigabytes are recommended, and (3) a hard drive with at least twenty gigabytes of free space. ii. The user's computer, on which the Software will be installed, shall have the following software: (1) an operating system that is one of the following: Microsoft Windows 2003, Windows Server 2008, Microsoft XP, or Microsoft Vista, (2) the Microsoft .Net Framework version 3.5 or higher, and Microsoft Excel 2003 or higher. m. Licensee agrees that if the Agreement is Terminated, as further described in Article 7 Section 7.2, that the Software license is immediately revoked as of the termination date, and that the Licensee must immediately uninstall the Software, including all backup copies. License Agreement July 16, 2009 Page 4 of 12 Article 3 SOFTWARE MAINTENANCE 3.1 CAISO Initiated Changes. Power shall deliver to Licensee an updated version of the Software each time that the CAISO initiates a change that affects the existing functionality of the Software. 3.2 Bugs Identified by the Licensee. Each time that the Licensee reports an error in the functionality of the Software ("Bug"), and Power verifies the validity of the Bug, the Bug shall be fixed no later than the end of the following calendar month. 3.3 Bugs Identified by Other Customers of Power. From time to time, Power shall issue updated versions of the Software which include Bug fixes identified by customers other than the Licensee identified in this Agreement. 3.4 Delivery of Maintenance Modifications and Basic Enhancements. Power shall deliver to Licensee, when and as prepared by Power in the course of its business, all Basic Enhancements and .Maintenance Modifications arising from time to time, for inclusion in the Software. However, Major Enhancements. will not be included within the Software. Article 4 PAYMENTS 4.1 Software License and Software Maintenance Fee. Licensee shall pay Power $833, per month, for the single user that is granted the license of the Software. This fee shall constitute the ongoing license fee to use the Software. This fee also includes the Maintenance of the Software, as described in Article 3. At any time, Licensee may request additional licenses of the Software, whereby Licensee will increase the Software License and Software Maintenance Fee by an additional $400, per month, for each additional user which may then download the Software onto their local computer. 4.2 Software Installation Fee. The Software can be downloaded and installed by Licensee without an implementation by Power. Thus, there is no Software Installation Fee. 4.3 Medium of Payment. All payments are payable in U.S. dollars. 4.4 Monthly Payment Due Dates. Licensee shall pay to Power the Software License and Software Maintenance Fee by the 151 day of each calendar month. The first payment shall be paid prior to Licensee downloading the Software from Power. 4,.5 Annual Payment; Late Fees; Interest. In the event any payment due to Power is not License Agreement July 16, 2009 h Page 5 of 12 015 paid within five days of its due date, a late fee of 10% of the amount owed shall be due and payable to Power. Additionally, interest at the rate of ten percent (10%) per annum shall accrue on the unpaid payment from the date due until paid. Article 5 CONFIDENTIAL MATERIALS 5.1 Acknowledgment of Confidentiality of Data. Power acknowledges that in the course of the communication with the Licensee, regarding its use of the Software, that it will be exposed to confidential data of the Licensee. Power acknowledges that the data must be kept confidential. The data will be kept at the Licensee's site, except in such cases where a user of the Licensee expressly agrees via email authorization that the data should sent to Power for the purpose of Bug fixes. 5.2 Confidential Information. Power has and will develop, compile, and own certain proprietary techniques and confidential information that have great value in its business (said techniques and information are referred to in this Agreement collectively as Confidential Information). Confidential Information includes not only information disclosed by Power to. Licensee in the course of the Term, but also information developed or learned by License during the Term. Confidential Information is to be broadly defined. Confidential Information includes all information that has or could have commercial value or other utility in the business in which Power is engaged or in which it contemplates engaging. Confidential Information also includes all information of which the unauthorized disclosure could be detrimental to the interests of Power, whether or not such information is identified as Confidential Information by Power. By example and without limitation, Confidential Information includes any and all information concerning teaching techniques, processes, software, database designs, formulas, trade secrets, inventions, discoveries, improvements, research or development and test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections, and customer and supplier identities, characteristics, and agreements. 5.3 Protection of Confidential Information. Licensee agrees that, at all times during or after the Term, it will hold in trust, keep confidential, and not disclose to any third party or make any use of the Confidential Information of Power except for the benefit of Power and in the course of this Agreement with Power. Licensee further agrees not to cause the transmission, removal, or transport of'Confidential Information from Licensee's principal place of business wherever located, without prior written approval of Power. Licensee acknowledges that it is aware that the unauthorized disclosure of Confidential Information of Power may be highly prejudicial to its interests, an invasion of privacy, and an improper disclosure of trade secrets. Whenever the approval, designation, specification, or other act of Power is required under this Agreement, Power may, by written designation, authorize an agent of Power to perform such act. License Agreement July 16, 2009 Page 6 of 12 016 Article 6 REPRESENTATIONS AND WARRANTIES 6.1 Right and Authority. Power represents and warrants that: a. it is the owner of the Software and Documentation (including all intellectual property rights therein under copyright, patent, trademark, trade secret, and other applicable law); b. it has the full and sufficient right and authority to grant the rights and licenses granted herein; c. the Software and Documentation have not been published under circumstances that have caused loss of any U.S. copyright therein; and d. the Software and Documentation, to the best of Power's knowledge, do not infringe any copyright or other intellectual property right of any third party. 6.2 Adequacy of Software and Documentation. Power represents and warrants that: a. the Software and Documentation are and shall be reasonably understandable and reasonably usable by the Licensee's users. 6.3 Conformity, Performance, and Compliance. Power represents and warrants that: a. the Software and Documentation to be delivered by Power hereunder have been prepared in a workmanlike manner and with professional diligence and skill, b. such Software and Documentation will reasonably function on the machine and with the operating system for which they are designed, and c. such Software and Documentation conform to the specifications and functions relating thereto. 6.4. Limitation of Warranties. Power does not assume any responsibility for any processes performed by Licensee utilizing the Software. Power shall not be deemed to make, or to have made, any express or implied warranties of any kind, character or description, including, but not limited to, fitness for a particular purpose or the warranty of merchantability concerning the Software, except as expressly stated in this Agreement. Article 7 TERM 7.1 Term of Agreement. This Agreement shall become effective beginning on License Agreement July 16, 2009 Page 7 of 12 017 2009, and shall terminate at 12:01 a.m. Pacific Standard Time on 2010, or sooner as provided in section 7.2 (the "Term"). 7.2 Termination. This Agreement may be terminated upon the occurrence of any of the following events: a. Termination At Will. Licensee and Power may terminate the Agreement without cause upon thirty (30) days written notice to the other party. b. Termination by Mutual Agreement. Licensee and Power may terminate or modify the terms of this Agreement by written agreement executed by both parties. C. Termination For Cause. In addition to the foregoing, Power may terminate this Agreement, or modify the Agreement, at any time for "just cause", herein defined as the happening of any of the following occurrences or acts: (i) A receiver for Licensee is appointed or applied for, or a petition under any bankruptcy chapter is filed by or against Licensee, or Licensee becomes insolvent or makes an assignment for the benefit of creditors, or is unable to pay its debts as they become due, or, if there is any levy, attachment or similar action that is not vacated or removed by payment or bonding within ten (10) days of such levy or attachment; or (ii) Licensee is charged with unethical or illegal practices or acts thereby jeopardizing, in the opinion of Power, Power's good name and good will; or (iii) Licensee grossly fails to perform a material condition or delegation of this Agreement that adversely and substantially affects the interests of Power, with immediate effect by giving written notice of termination to Licensee. Licensee, at its option, may terminate this Agreement in the event Power grossly fails to perform a material condition or delegation of this Agreement that adversely and substantially affects the interests of Licensee. Such termination may be effected only through written notice, specifically identifying the breach on which termination is based. Following receipt of such notice, Power shall have 30 days to cure such breach, and this Agreement shall terminate in the event that such cure is not effected by the end of such period. 7.3 Survival. In the event of the termination of this Agreement, in whole or in part, the provisions of Articles 5, 8, and 9 shall survive and continue in effect. License Agreement July 16, 2009 Page 8 of 12 1 Article 8 LIABILITY LIMITS 8.1 Exclusion of Consequential Damages, Etc. In no event shall either party be liable to the other for any consequential, indirect, special, or incidental damages, even if such party has been advised of the possibility of such potential loss or damage. The foregoing limitations shall not be construed to diminish the obligations of indemnity set forth in Article 10 hereof. 8.2 Limitation of Liability. In no event shall Power retain any liability for failures of the Software. In no event shall Power's liability under this Agreement exceed the amount Licensee has paid to Power under this Agreement. Article 9 INDEMNIFICATION 9.1 Indemnification by Licensee. Licensee shall indemnify, defend, and hold harmless Power and its officers, directors, shareholders, members, employees, agents, representatives, and customers (collectively, "Power Indemnitee") against all liability, claims, costs, damages, and expenses incurred by Power Indemnitee relating to or arising from or concerning the Software. Licensee agrees to reimburse Power for any amounts owed hereunder immediately upon demand, or alternatively, at the election of Power, to promptly and directly pay any such amounts with respect to any matter for which Power is indemnified pursuant to this Agreement (including attorney's fees by Power in defense or prosecution of any claim to which this Agreement applies) to such person or entity as Power designates. Any amount to be paid by Licensee shall be paid to Power or designee, within ten (10) days following written demand therefore by Power. 9.2 Indemnification by Power. Power shall indemnify, defend, and hold harmless Licensee and its officers, directors, shareholders, members, employees, agents, representatives, and customers (collectively, "Licensee Indemnitee") against all liability, claims, costs, damages, and expenses ,incurred by Licensee Indemnitee relating to or arising from or concerning the Software. Power agrees to reimburse Licensee for any amounts owed hereunder immediately upon demand, or alternatively, at the election of Licensee, to promptly and directly pay any such amounts with respect to any matter for which Licensee is indemnified pursuant to this Agreement (including attorney's fees by Licensee in defense or prosecution of any claim to which this Agreement applies) to such person or entity as Licensee designates. Any amount to be paid by Power shall be paid to Licensee or designee, within ten (10) days following written demand therefore by Licensee. License Agreement July 16, 2009 Page 9 of 12 Dig Article 10 MISCELLANEOUS 10.1 Freedom of Action. This Agreement shall not be construed to limit Licensee's right to obtain services or software programs from other sources, nor shall this Agreement be construed to limit Power's right to grant others any further non-exclusive right or license of the Software and Documentation. This Agreement aloneestablishes the rights, duties; and obligations of Licensee and Power with respect to the subject matter hereof. Licensee shall have no right or interest whatsoever in any software of Power other than the rights and licenses in the Software and Documentation granted herein, whether such software is conceived or developed by Power before, during, or after the course of Power's performance of this Agreement. 10.2 Rights and Obligations After Notice of Termination. If Power gives notice of termination of this Agreement, or if it becomes known that this Agreement will otherwise terminate in accordance with its provisions, Licensee shall return to Power all Software, Documentation and other items of property owned by Power forthwith. 10.3 Notices. Unless otherwise stated herein, all notices or other communications required or permitted hereunder shall be in writing, and shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, delivered or sent by overnight courier and shall be deemed received upon the earlier of: (i) If personally delivered, the date of delivery to the address of the person to receive such notice; (ii) If mailed, three (3) business days after the date of posting by the United States post office; and (iii) If sent by overnight courier, when delivered to the specified address. To Power: Power Settlements Consulting and Software, LLC 2728 Sixth Street La Verne, California 91750 Telephone Number: (626) 676-9387 Facsimile: N/A Electronic Mail: david.dan@powersettlements.com To Licensee: Notice of change of address shall be given by written notice in the manner detailed in this section. Rejection or other refusal to accept, or the inability to deliver because of changed address of which no notice was given, shall be deemed to constitute. receipt of the notice, demand, request or communication. 10.4 Required Actions of Power and Licensee. Power and Licensee agree to effectuate the intent of this Agreement. License Agreement July 16, 2009 Page 10 of 12 020 10.5 Captions. Any captions. to, or headings of, the section or subsections of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. 10.6 No Obligations to Third Parties. Except as otherwise expressly provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate any of the parties hereto, to any person or entity other than the parties hereto. 10.7 Amendment. The terms of this Agreement may not be modified or amended except by an instrument in writing executed by each of the parties hereto. 10.8 Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. 10.9 Applicable Law. The terms and provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflicts of laws' provisions. 10.10 Entire Agreement. This Agreement supersedes any prior agreements, negotiations and communications, oral or written, and contains the entire agreement between Power and Licensee as to the subject matter hereof. No subsequent agreement, representation or promise made by either party hereto, or by or to any employee, officer, agent or representative of either party shall be of any effect unless it is in writing and executed by the party to be bound thereby. 10.11 No Presumption. Each provision of this Agreement has been independently and freely negotiated by both parties as if this Agreement were drafted by both parties. In the event of any ambiguity in this Agreement, the parties waive any presumption or rule requiring or permitting interpretation of said ambiguity against or in favor of either party. 10.12 Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. If any 4 provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and ye I first above written. POWER: Power Settlements Consulting and Software, LLC, a California limited liability company By: j David Dan, President License Agreement July 16, 2009 Page 11 of 12 021 LICENSEE: License Agreement July 16, 2009 Page 12 of 12 City of Azusa, a municipal corporation M Printed Name: Title: 022 n Proposal for the Desktop Version of the SettleCore — Settlements Analyzer Prepared for: City of Azusa Prepared by: Power Settlements Consulting and Software, LLC Note: This proposal includes a cost estimate which will expire on 8-30-2009 if Azusa has not purchased the software noted in this proposal. This document shall be treated confidentially and may only be viewed by employees of Azusa. Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 1 of 6 023 1111 Overview The California ISO (CAISO) has recently redesigned their markets through the Market Redesign and Technology Upgrade (MRTU) project. MRTU was implemented on 4-01-2009. The market redesign contains significant changes to the manner in which power companies participate in the CAISO markets. Among other changes, the redesign includes a transition to a nodal congestion market, the inclusion of a Day -Ahead market, the inclusion of a residual unit commitment (RUC) service, an ancillary service capacity market redesign, and the rollout of a new Settlements and Market Clearing (SaMC) settlement system. Azusa has downloaded the free trial, Desktop Version of the SettleCore - Settlements Analyzer and has begun using the SaMC functionality to review and drill -down into the settlement statements issued during the MRTU market simulation. After reviewing the functionality of the free trial offer, Azusa had requested a proposal from Power Settlements Consulting and Software, LLC (Power Settlements) to download the Desktop Version of the SettleCore — Settlements Analyzer module onto the computer of 1 user (although at any time Azusa can increase the number of users, as indicated in the pricing section). The Desktop Version of the SettleCore — Settlements Analyzer module will provide Azusa the benefit of importing CAISO settlement files, and using the built-in training functionality to train its analysts on MRTU charge code formulas, by generating unlimited charge code validation examples, using Azusa's own settlement data. About Power Settlements Power Settlements is a consulting and software company that specializes in assisting energy companies with processing, validating, and automating all of their ISO and bilateral settlement processes. Power Settlements staff has been participating in the CAISO markets since 1998, and are considered experts in CAISO settlements. From their extensive experience with CAISO settlements, Power Settlements has developed its SettleCore settlement system, as a solution to instill automation, process controls, validations, traceability, and auditability into the ISO settlement process. SettleCore is a very feature -rich, user-friendly application that is designed to assist settlement analysts with all of their CAISO settlement functions. Power Settlements provides the assurance to its customers that it actively follows the CAISO markets to assess changes which will require updates to the SettleCore system, including: • Power Settlements attends the monthly MRTU Implementation Workshops. • Power Settlements participates in the weekly SaMC User Group conference calls (this working group discusses issues related to SaMC settlements). • Power Settlements participates in the weekly SIUG conference calls (this working group discusses technical changes). • Power Settlements participates in various other CAISO meetings that are held from time -to -time. Power Settlements staff is an active participant in the above forums, and routinely provides feedback to the CAISO. Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 2 of 6 024 Proposal Summary Power Settlements proposes to provide its Desktop Version of the SettleCore — Settlements Analyzer module to Azusa, which Azusa may download onto the computer of 1 (one) user. This software application, which is the same application as the free trial, Desktop Version of the SettleCore — Settlements Analyzer module that Azusa has downloaded, is the premier MRTU hands-on charge code training software. The application's main functions include: 1) the ability to import and view Azusa's SaMC settlement files, 2) the ability to export Azusa's SaMC data to spreadsheets, and 3) the superior CAISO settlement charge code training functionality in the "Calculation Details screen". Azusa has requested the Desktop Version of the SettleCore — Settlements Analyzer. This version is a "software lite" version of the server -client version of the SettleCore — Settlements Analyzer module, which Power Settlements also offers to CAISO scheduling coordinators. The Desktop Version of the SettleCore — Settlements Analyzer module uses SQL Server Express, which is a database application that can be downloaded from Microsoft for free, and employs a limited 4 GB database. This "software lite" version of the SettleCore — Settlements Analyzer module will enable Azusa to download the Desktop Version of the SettleCore — Settlements Analyzer module, without any additional software purchases (i.e., the server -client version of the SettleCore — Settlements Analyzer module, which is a more robust application, uses SQL Server Standard/Enterprise 2005, which requires a server and additional database G licensing requirements from Microsoft). Because Azusa has already downloaded the free trial version of the Desktop Version of the SettleCore — Settlements Analyzer module, no additional software implementation will be required. Rather, Power Settlements will provide a new application executable that Azusa will download, which will override the expiration date in the free trial version. Value The Desktop Version of the SettleCore — Settlements Analyzer module will provide the following value to Azusa. ✓ Premier Charge Code Training Feature. . • Users are able to select a settlement interval from their SaMC files and select the formula view. This action will then populate the Calculation Details screen, where the application will insert the associated "intermediate" and "reporting" billing determinants into the charge code BPM formula, so that the users are able to see step-by-step how the billing determinants are used to calculate the charge code settlement statement amount. ✓ Charge Code BPM Formulas. • The Charge Code Description screen contains the individual charge code formulas from the BPM configuration guides. ✓ SaMC File Drill -down Functionality. Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 3 of 6 025 • Users are able to view the summary charge code statement amounts, and then to drill - down into the detailed charge code statement amounts and the underlying billing. determinant data, which is used to calculate the SaMC statement amounts.. ✓ Reporting • Export SaMC data by charge code (one workbook with the summary and detailed settlement statement and one worksheet for each charge code's intermediate and reporting billing determinants). • Export SaMC data by pre -tale group (includes "pre -talc" billing determinants). ✓ Training • The users will be given a copy of the SettleCore — Settlements Analyzer User Guide for reference. • The users will be able to perform ad-hoc settlement training, using the superior charge code training functionality built into the application (Calculation Details screen). ✓ SIBR Upload Template • Limited scheduling functionality. • Excel template for loading bids, self -schedules, and inter -SC trades. • The template can be imported into the SettleCore — Settlements Analyzer, which will then produce the XML file format of the data that the users can manually upload to the CAISO's SIBR system. ✓ Support • Email and phone support is available during normal business hours. ✓ Future CAISO Changes Included • All future CAISO-initiated changes, which affect the existing functionality within the Desktop Version of the SettleCore - Settlements Analyzer module, will be provided at no additional cost. SettleCore Settlement System The SettleCore settlement system is comprised of three modules — the Settlements Analyzer module, the ISO Downloader module, and the Shadow Settlement and Dispute module. Together, these three modules provide a fully integrated settlement system. Azusa has requested a proposal which focuses on only the SaMC statement viewing and training functionality, and not shadow settlements. As such, this proposal focuses solely on the Desktop Version of the SettleCore - Settlements Analyzer module. SettleCore - Settlements Analyzer module — This module is used to load CAISO SaMC settlement files, to review and analyze the data, and to export the data to MS Excel. This module has a highly useful feature that provides hands-on CAISO settlement training. o View the charge code BPM formulas. o Right -click, and insert the SaMC billing determinants into the charge code BPM formulas, so that the users can see step-by-step how the CAISO calculated their SaMC settlement statement amount. Additional System Functionality This section describes general application functionality, which was not already described in the "Proposal Summary" section above. • Pivot Tables in Screens o Most screens within the system contain built-in pivot table functionality. This allows users to drag -and -drop certain fields, resulting in the screen automatically summing the Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 4 of 6 026 values to the user -selected level (i.e., sum from 10 minute to hour, sum from resource to scheduling coordinator, etc.) Effective Dating of Charge Codes o All charge code formulas will be effective -dated, to ensure that the users will see the calculation results that apply to the CAISO charge code formula for each flow date (e.g., if a charge code formula changed on 6-01-2009, then SettleCore will calculate show the original formula for all dates prior to and including 5-31-2009, and will show the new charge code formula beginning on 6-01-2009). Technology The SettleCore system has been designed: • Using Microsoft.Net (particularly using C#). • Using the Microsoft SQL Server 2005 Express database (limited 4 GB database). Hardware and Software This section describes the hardware and software considerations for the implementation of the Desktop Version of the SettleCore — Settlements Analyzer module. Please note that this version of the application can be downloaded directly onto the user's local computer, and does not require any additional hardware or software other than that noted below. I' User's Local Desktop Computer Hardware i The minimum requirements are: • Pentium P4 processor or higher. • 2 GB of RAM. • 20 GB of free hard -drive space. User's Local Desktop Computer's Software The following are the minimum software requirements. • One of the following operating systems: Windows Server 2003, Windows Server 2008, XP, or Vista. • The Microsoft .Net Framework version 3.5. • MS Excel 2003 or higher. [This section of the page is intentionally left blank]] Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 5 of 6 027 Proposal Price Estimate Power Settlements proposes to permit Azusa to license and download the Desktop Version of the SettleCore — Settlements Analyze module onto the local computer of one named user (this application may not be installed on a network; only a local computer). This proposal includes the following: • Month-to-month fee of $833 for 1 user. o Combined License fee and Software Maintenance and Support Fee. o If at any time Azusa elects to discontinue the use of the Desktop Version of the SettleCore — Settlements Analyzer, Azusa must uninstall the Desktop Version. • No software implementation fee. • Includes the monthly Power Settlements charge code validation training webinars. • At any time, Azusa may request that Power Settlements provide the Desktop Version for additional users, at the rate of $400 per additional user, per month. Estimates Power Settlements has generated the following proposal estimate based on incomplete requirements. As such, when more complete requirements become available, this estimate may change. Travel Costs Power Settlements office is located within approximately 30 miles of Azusa's office. As such, Power Settlements anticipates that travel -related costs will not apply. Software Rights Azusa acknowledges that Power Settlements is and will continue to be the sole owner of the SettleCore — Settlements Analyzer module, including, but not limited to the database design, software code, software algorithms, supplemental tools, user interfaces, and intellectual property, prior to and after the download of the desktop version of the SettleCore — Settlements Analyzer module. In the event that Azusa requires any additional customizations, which Power Settlements provides, Azusa acknowledges that Power Settlements is the sole owner of the software used to produce the customizations. Proposal for the Desktop Version of the SettleCore Settlements Analyzer Confidential Page 6 of 6 8-3. AZ USA f.lil USA CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL % / FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES [ �C DATE: JULY 27, 2009 U SUBJECT: LETTER OF COMMITMENT AND RESOLUTION FOR THE SMART GRID GRANT APPLICATION TO THE DEPARTMENT OF ENERGY RECOMMENDATION It is recommended that the Utility Board/City Council approve and sign the . Letter of Commitment and attached Resolution for City of Azusa's support of a smart grid federal grant application, which will be submitted by Azusa Light & Water to the Department of Energy. BACKGROUND As staff reported previously to the Utility Board, as part of federal economic stimulus package the Department of Energy (DOE) is accepting grant applications for smart electric grid applications. At the regular Utility Board meeting held on 22 June 2009, the Utility Board authorized staff to prepare, apply and submit a grant application to DOE. Our grant application involves an improvement project to our municipal electric distribution system, and said improvement project is commonly referred to as "smart grid". Staff is currently preparing the smart grid investment grant application package and intends to submit the grant application in August 2009. The grant application is for a proposed electric distribution system improvement project having a total cost estimated at $2 million. If the application is granted then $1 million will be funded by the federal grant and the cost to the City of this project would be substantially reduced. As written in the Funding Opportunity Announcement (DE -FOA -0000058, Part IV.C.2) dated June 25, 2005, it is a requirement for applicants to submit a Letter of Commitment from our governing body, the Utility Board/City Council stating the city's cost sharing commitment, in the ME, event that a grant fund is favorably awarded. The attached Letter of Commitment and the Resolution will accomplish this goal. FISCAL IMPACT By approving and signing the commitment letter together with the attached Resolution, Azusa Light & Water will be committed to provide a minimum of 50% cost share for the total project, in the amount not -to -exceed $1 million over a three year period when the proposed improvement project is expected to be completed. Contingent on receiving an award in the equivalent amount of $1 million for the grant application from the Department of Energy, Azusa Light & Water will include and provide in it's annual budget for Capital Improvement Projects, the same equivalent amount of funds necessary to cover the City's minimum cost share. Prepared by: F. Langit, Jr., PE, Senior Electric Engineer Attachments: Letter of Commitment Resolution 045 July 27, 2009 Nis. Patricia A. Hoffman Assistant Secretary Office of Electricity Delivery and Energy Reliability United States Department of Energy 1000 Independence Avenue, SW Washington, DC 20585 USA Subject: Letter of Commitment — Azusa Light & Water Smart Grid Investment Grant Program (DE -FOA -0000058 ; CFDA Number 81.122) Dear Assistant Secretary Hoffman: The City of Azusa owns and operates a municipal electric utility serving approximately 16,000 residents and businesses in our community, which is located in the eastern portion of Los Angeles County in Southern California. Our electric utility is managed along with our water ul:ility and collectively is referred to as Azusa Light & Water. Mle believe that our small municipal electric utility is an ideal candidate to demonstrate the effective deployment of smart grid technology, and on June 22, 2009, the Utility Board of Azusa Light & Water authorized staff to prepare, apply and submit a smart grid grant application package to the U.S. Department of Energy on behalf of the City of Azusa. This Letter of Commitment, together with our City of Azusa Resolution #=0000, affirms our support and commitment to this smart grid grant application package as submitted. Our proposed smart grid project will enable us to provide improved electric services to our community, which o will be more reliable and efficient. On behalf of the City of Azusa and Azusa Light & Water, we are fully committed to meeting the minimum cost sharing requirements of this grant should the City of Azusa be awarded funding through the application process. Thank you for this opportunity to submit an application. We look forward to favorable consideration of our application. If you have any questions, please call Mr. Federico Langit, Jr., Senior Electric Engineer, at (626) 812-5213. Sincerely, Joseph R. Rocha Mayor M RESOLUTION NO. A RESOLUTION OF THE AZUSA UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, COMMITTING TO MATCH ANY GRANT FUNDS THAT MAY BE AWARDED BY THE U.S. DEPARTMENT OF ENERGY FOR A SMART GRID PROJECT IN THE CITY OF AZUSA UP TO ONE MILLION DOLLARS. WHEREAS, on February 17, 2009, the President of the United States signed into law the American Recover and Reinvestment Act of 2009 ("ARRA"); and WHEREAS, the ARRA is intended to stimulate U.S. economic recovery, through, among other things, the implementation of innovative projects that improve the efficiency, reliability and usability, of electric distribution systems through "smart grid" technologies; and WHEREAS, grant fund applications for "smart grid" projects need to be submitted by interested parties by August _, 2009, to the U.S. Department of Energy, to be considered for ARRA funding; and WHEREAS, the City of Azusa owns and operates a municipal electric utility which serves approximately 16,000 residential and commercial customers in Los Angeles County, California; and WHEREAS, the City of Azusa's municipal electric utility makes an ideal candidate to demonstrate how smart grid technologies can be deployed to enhance electric utility services and establish operational efficiencies; and WHEREAS, in the Azusa's 2005 Electric System Master Plan, a much needed project was identified and proposed to provide "smart grid" substation monitoring and distribution line automation; and WHEREAS, the City of Azusa desires to implement a "smart grid" project consistent with its Master Plan and ARRA grant program guidelines for "smart grid" projects; and WHEREAS, U.S. Department of Energy (DOE), requires project applicants to provide a fifty percent match of funding toward "smart grid" projects awarded any ARRA grant funds; 447 NOW, THEREFORE, THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, DOES FIND AND DECLARE THAT: . SECTION 1. Authorization to Submit Application. The Utility Board/City Council hereby authorizes the City Manager or his or her designee to submit a grant application for a smart grid project to the U.S. Department of Energy for up to two million dollars. SECTION 2. Matching Fund Commitment. The Utility Board/City Council hereby is committed to match dollar -for -dollar up to one million dollars, any grant funds awarded to the City of Azusa in response to its grant application submitted to the U.S. Department of Energy for a "smart grid" project. PASSED, APPROVED AND ADOPTED this 27th day of July 2009. Joseph R. Rocha Mayor ME ATTEST: Vera Mendoza City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I, Vera Mendoza, City Clerk of the City of Azusa, do hereby certify that the foregoing Resolution No. was duly introduced and adopted at a regular meeting of the Azusa Utility Board/City Council on the 27th day of July 2009, by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Vera Mendoza City Clerk W AZUSA EIGHT t WATER AGENDAITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES 0 L DATE: JULY 27, 2009 SUBJECT: ANNUAL WATER RIGHTS TRANSACTIONS CONDUCTED BY WATER DIVISION RECOMMENDATION It is recommended that the Utility Board/City Council: (1) ratify the execution of the water rights lease agreement with the City of Arcadia; and (2) approve attached resolution authorizing the City Manager or his designee to execute future water rights transactions on behalf of the City of Azusa and entities controlled by the City. BACKGROUND The City of Azusa produces water from the Main San Gabriel Basin which is controlled by a Judgment, entered into the Court records January 4, 1973, and which has been periodically amended thereafter. The Judgment requirements are enforced by the Main San Gabriel Basin Watermaster office, with Court oversight. In 1993, the City of Azusa purchased the Azusa Valley Water Company along with the substantial water rights owned and controlled by Azusa Valley. Furthermore, the City of Azusa ("City") has a controlling interest in the Azusa Agricultural Irrigating Company ("Azusa Ag.") and by contract with the Miller -Coors Brewing Company, the City controls those water rights belonging to Miller -Coors that equal Miller's demand on the City of Azusa's water system. Water produced by the Hsu Water Filtration Plant is also a use of Azusa's Basin Water Rights that are monitored by the Watermaster. The City is the owner of record and otherwise beneficially controls, or is the duly authorized and acting agent for, the ownership of 8.11334 percent of the Production Rights (not including Miller -Coors) in the Main San Gabriel Basin as adjudicated in the case of "Upper San Gabriel Valley Municipal Water District vs. City of Alhambra et al." In order to keep the Basin replenished under the Judgment, each year in May the Watermaster Board sets the Safe Yield for 029 the following year and also sets the prices and assessments to be applied to the water produced in the current year. This year the price of USGVMWD replenishment water was set at $450/Acre- foot and SGVMWD replenishment water was set at $130/Acre-foot. The amount of water rights in terms of acre feet (AF) that the above entities possess varies with the Safe Yield for the Basin. In Fiscal Year 2008-2009, the Basin Safe Yield was set at 180,000 AF. Of that 180,000 AF, the City of Azusa has the water rights to produce 8.11334 percent of .180,000 AF (14,604.012 AF) plus 3,800 in Diversion Rights. Including Miller -Coors' water rights this year, the City has approximately 19,600 AF of water rights. Next Fiscal Year, 2009= 2010, the Basin Safe Yield has been set at 170,000 which will lower the City's corresponding water rights. In a typical year, the water rights controlled by the City are transferred between entities controlled by the City to offset overproduction with no exchange of money. However, because the Main San Gabriel Basin is in distress due to lack of rainfall and the inability of Metropolitan Water District of Southern California to deliver replenishment water to the Basin, Watermaster has temporarily suspended certain rules concerning water rights transfer that has allowed the City of Azusa to make some extraordinary water rights transfers to other Basin water producers. The Watermaster stipulation each year is that all temporary assignments or leases of water rights forms (attached) be finalized and notarized by the end of 'day, June 30, and filed with Watcrmaster by July 15. The temporary change in Watermaster water rights transfers allows the City to purchase a maximum amount of replenishment water from SGVMWD at $130/AF (7,918 AF @ $130/AF or $1,029,340) which allows the City to save approximately 5,000 AF of its own water rights. The City is then able to lease some of those rights (2,500 AF) to a willing lessee, in this case the City of Arcadia, at 92% of $450/AF (2,500 AF at 92% of $450 or $1,035,000), better than breakeven for the City. The benefit to the parties of this transaction is that Arcadia can offset 2,500 AF of their pumping in the Main Basin at a savings of $36.00 per AF, and the City of Azusa retains approximately 2,500 AF of water right to be used in Fiscal Year 2009-2010, effectively at no cost. The Safe Yield set by Watermaster for FY year 2009-2010 is 170,000 AF, which will increase the City's needs for Replacement Water, and the 2,500 AF of Production Right that the City retains will provide a buffer against possible water rate increases and increased Replacement Water obligations due to the lower Safe Yield. If Watermaster continues the suspension of the Water Rights Transfer restrictions, similar transactions may be a possibility in June of 2010. While the temporary water rights lease agreement with the City of Arcadia was entered into by staff to effect the transaction by the required deadline this year, the Utility Board's/City Council's ratification of this action is desired at this time to fully authorize the agreement and filing with Watermaster. Given the possibility of future similar transactions, staff developed the attached resolution with the assistance of the City Attorney's office to provide staff with pre -authorization to enter into such transactions prospectively on behalf of the City of Azusa and entities controlled by the City of Azusa. The resolution requires that all transactions executed by staff pursuant to the resolution be ratified by the Utility Board/City Council following prosecution by staff. 030 FISCAL IMPACT Until future lease transactions take place, there is no fiscal impact to approving the Resolution. The fiscal impact of ratifying the water rights lease with the City of Arcadia is $1,035,000 with a nest of approximately $5,700 considering purchase of water from SGVMWD, and approximately 2,500 AF of carryover water rights worth approximately $1,125,000. Prepared by: Chet Anderson, Assistant Director- Water Operations 031 LEASE OF WATER RIGHTS PRODUCTION RIGHT THIS LEASE OF WATER RIGHTS (the "Lease") is entered into on this 1 st day of July 2009, by and between Azusa Valley Water Company ("Owner") and the City of Arcadia ("Arcadia"), a California municipal corporation with respect to the following: RECITAL This Agreement is made with respect to the following facts: Owner owns of record and beneficially of otherwise controls, or is the duly authorized and acting agent for the owners of 2,500 acre feet of Production Rights in the Main San Gabriel Basin as adjudicated in the case of "Upper San Gabriel Valley Municipal Water District vs. City of Alhambra, et al" LASC No. 92418. The ownership of said Rights entitle Owners to take delivery or otherwise produce from the Main San Gabriel Basin said 2,500 acre feet of water on an annual basis or in such amount as is determined from time to time by the Main San Gabriel Basin Watermaster. As of the date hereof, the Rights associated with said Production Right are 2,500 acre-feet for the 2008-09 water year. AGREEMENT IN CONSIDERATION of the foregoing recital and the mutual promises set forth herein, Owner and Arcadia agree as follows: Leasing of Production Rights. Owner hereby leases to Arcadia, and Arcadia hereby leases from Owner 2,500 acre-feet of Rights for the term and upon the terms and conditions set forth in this Lease. 2. Term. The term of this Lease shall be for a period commencing June 20, 2009 and ending June 30, 2009. 3. Lease Rate, Payment and Adjustment (a) The gross rental payable under this Lease for the term set forth in paragraph 2 above shall be $1,035,000.00 which has been calculated on the basis of $414 per acre-foot, 92% of the Replenishment Rate of $450 as set by the Main San Gabriel Groundwater Basin Watermaster . Lease of Water Rights Page 1 7/21/2009 032 (b)The annual rate shall be paid by Arcadia upon receipt of an invoice for the full amount from Azusa Valley Water Company (c) All payments due Owner pursuant to this Lease shall be made and sent as follows: Azusa Valley Water Company P.O. Box 9500 Azusa, CA 91702 4. Agreement Re: Main San Gabriel Basin Watermaster. (a) Owner agrees to execute and deliver to Arcadia all documents which, from time to time, may be required by the Main San Gabriel Basin Watermaster to reflect the Lease to Arcadia of the Production Rights which are the subject of this Lease. All such documents shall be in such form and substance as shall be reasonably satisfactory to Owner, Arcadia and Watermaster. (b) Arcadia shall, at its expense, prepare and submit all reports required by the Main San Gabriel Basin Watermaster in connection with the exercise by Arcadia of the Rights. (c) This Lease entitles Arcadia to the use only of the Rights (i.e., purchase of water) associated with the Production Rights. Owner retains and does not convey to Arcadia any other Rights associated with said Production Right. 5. Other Provisions. Owner and Arcadia further agree as follows: (a) In the event any dispute shall arise between the parties to this Agreement, the same shall be resolved by arbitration conducted by the American Arbitration Association in accordance with the Commercial Arbitration Rules of the American Arbitration, as then in affect. Such arbitration shall be conducted in a site within Los Angeles County, California agreeable to both parties before three (3) arbitrators who shall be selected by mutual agreement of the parties; if agreement is not reached on the selection of arbitrators within fifteen days, then each of the parties shall select an arbitrator and the two (2) arbitrators so selected shall select a third. The provisions of the Commercial Arbitration Rules of the American Arbitration Association shall apply and govern such arbitration except that the prevailing party shall be entitled to recover from the other party its attorney's fees actually incurred in such amount as may be determined by the arbitrators. Lease of Water Rights Page 2 7/21/2009 033 (b) All communications, notices and demands (collectively "Notices") of any kind shall be made in writing and personally served or sent by registered or certified mail, postage prepaid to the following: Owner: Chet Anderson. Azusa Valley Water Company P.O. Box 9500 Azusa, California 91702 Arcadia: Patrick Malloy City of Arcadia - Public Works P.O Box 60021 Arcadia, California 91006 Any Notice personally served shall be effective upon service. Any Notice sent by mail, and properly addressed, shall be effective upon date of receipt, or refusal as indicated on the return receipt. Either party may change its address for Notices by Notice to the other given in a manner provided in this subparagraph. (c) This Lease shall inure to the benefit of and be binding upon the heirs, successors and assigns of both parties hereto. (d) Each party shall, upon request of the other party, take such further actions and execute and deliver such further instruments as shall be reasonably required to carry out the purpose and intent of this Lease. (e) This Lease is executed in the State of California and shall be governed by and construed in accordance with California law. Venue for any action arising out of or related to the Lease shall be placed in any court of the State of California with appropriate jurisdiction and located in the County of Los Angeles, with service of process to be in accordance with the then provisions of the California Code of Civil Procedure. (f) This Lease may be executed in two or more counterparts, each of which shall be an original but all of which, together, shall constitute a single instrument. It shall not be necessary for both parties to execute the same counterpart(s) of this Lease for this Lease to become effective. (g) This Lease constitutes the entire agreement of the Owner and Arcadia with respect to the subject matter hereof. This Lease supersedes all prior discussions and understandings with respect to the subject matter hereof. There are no representations, warranties, promises or covenants as to the subject matter hereof except as, expressly set forth in this Lease. (h) This Lease may be amended only by a written instrument executed by the party to be charged. Lease of Water Rights Page 3 7/21/2009 034 (i) The paragraph headings contained in this Lease are for convenience only and shall not be considered in the construction or interpretation of any provision hereof. (j) Owner represents and acknowledges that the is executing this Lease either as the beneficial and recorded owner of certain of the Production Rights or as the duly authorized representative of the beneficial and recorded owner of all Production Rights not beneficially owned by Owner. IN WITNESS WHEREOF, Owner and Arcadia have executed and delivered this Lease of Water Rights as of the day first above written. Azusa Valley Water Company A California Corporation Joseph F. Hsu Lease of Water Rights Page 4 City of Arcadia California Municipal Corporation (name & title) 7/21/2009 035 TEMPORARY ASSIGNMENT ORLEASE OF WATER RIGHT For a valuable consideration, receipt of which ishembyacknowledged, Azusa VAlley Water Co. ("Assignor") does hereby assign and transfer to City of Arcadia , ("Assignee ) commencing on.7 u n e 29.2009 and terminating<u n e 3 0, n 0 9, on the following water right(s): (Check followmg appropriate category) Production Right 2500 AF ❑ Inteerated Production Right (consisting of AF of "Prescriptive Pumping ❑ Prescriptive Punning Right AF Component" and AF of "Diversion Component") El Bare Annual Diversion Richt AF ❑ Carryover Right AF adjudicated to Assignor or his predecessor in the Judgment in the case of ' Uv= San Gabriel Valley Municipal Water Distri v. City of Alhambm et al." Los Angeles Superior Court No. 976128. Said assignment is made upon condition drat (1) Assignee shall exercise said right on behalf of Assignor for the period described bereinabove and the first water produced by Assignee from the Relevant Watersbed of the Main San Gabriel Basin after the date hereof shall be that produced hereunder, (2) Assignee shall put all waters utilized pursuant to said transfer to reasonable beneficial use; and (3) Assignee shall pay all Walermaster assessments on account of the water production hereby assigned or leased. DATED: June 30, 2009 ASSIGNEE alloy Signature Name of Designee (of Assignee) to receive service of Processes and Notices: P.O. Box 60021 Arcadia, CA 91660 Address TeLNo.: 626-256-6c;84 ASSIGNOR Azusa Valley Water Co. Chet F. Anderson Signature Name of Designee (of Assignor) to receive service of Processes and Notices: P.O. Box 9500 Azusa, CA 91702 - 9500 Address Tel. No.: 626-812-5209 To be executed by both Assignee and Assignor and, if separately requested by Wateumaster, be accompanied by a map of the service area where the water was used by Assignor and a map of the service area where the water is intended to be used by the Assignee. (Have the appropriate individual(s) or corporate attached acknowledgments completed as part of the temporary transfer.) A TRUE COPY HEREOF MUST BE FILED WITH WATERMASIER WITHIN 15 DAYS OF EXECUTION (To be accompanied by completed "Stipulation Re Intervention After Jndgmmr if Assignee is not a party to the Judgment) e CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT �S..o�Cni c��v-��Cc,�'_efG-t5.'H.�e:ec�v�a:LailniC�i3Gti�KC :<<.. •.<, ata «<:.�,�4'�:its�4.=a...�� v!Q.s� r�iG=ic:�Si:�Ca�'<. .:3Ls ,.v:.La State of California y 1 County of LUS ;7/e?� ele'S J} ` On 6-30- O JI before me, cA:54 6X06 e i 1SJe'XdFn, /V1d}x+✓t7 Dab - More Insert Nemo WO tilt d the ONca personally appeared MARS"COMIMR'IDBJ S "allay M 1737305 amo 2Loss AtyConnr. �rgrKApr T, 2011 Plece Ndary seat Ab who proved to me on the basis of satisfactory evidence to be the person(K whose name(o is/a(e subscribed to the within instrument and acknowledged to me that he/shetthey executed the same in his/ludr/tlir authorized capacity(jeg), and that by his/hp(/tVir signature(pron the instrument the personf,6tf, or the entity upon behalf of Which the person�4 acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS y hand otf. ,ial seal. Signature Signature d Ndary Pudic OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: I Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: ❑ Individual ❑ Corporate Officer—Title(s): ❑ Partner — ❑Limited ❑General _ ❑ Attorney in Fact TOP cl thumb here . ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: 110 AMIN, 10 Number of Pages: Signer's Name: ❑ Individual ❑ Corporate Officer — Title(s): _ ❑ Partner — O Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: RIGWJ UrABPRINT OF SIGNER TOP of thuMb here 037 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT aGr' y wuca4:vasC.eCrvl." �nt4a. r]`v`�fvra ht,.a r.L:.YCHLvt.. r v.C.at.,• yi.•aSLh v.L rSt-�G'�Sc:' r�v�.n4_••Cv.L: State of California /, 1 County /of �Lf/. 5 GI Pi/e J J} ^^'' On (� -30 - 09 before me, %13 _ /V6fGtt'Lt 10, 1, Date Here mean Name am I raw d the icer personally appeared who proved to me on the basis of satisfactory evidence to. be the persons) whose names) is/are subscribed to the within instrument and acknowledged to me that he/sdepkey executed the same in his/4D01Aeir authorized capacity(ies), and that by hls/hQF4he r signature(.&) on the instrument the person(&), or the entity upon behalf of which the person(a) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is. true and correct. WITNESS my hand 9ndpfficial seal. Signaturej Place Notary Seal Above Signature at Notary Pubac OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment or this form to another document. Description of Attached Title or Type of Document: Document Date: b -30-D Signer(s) Other Than Named Above: pa2it 122& &42Y Capacity(ies) Claimed by Signer(s) Signer's Name: C %C f%hlJlQrSeh ❑ Individual X Corporate Officer—Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Attorney in Fact ❑ TrusteeTop of thumb Isere I ❑ Guardian or Conservator ❑ Other: SiVeru I1s Representing: SGS Number of Pages: Signer's Name: ❑ Individual ❑ Corporate Officer —Titte(s): _ ❑ Partner —❑ Limited ❑ General ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer Is Representing: RIGRTTRUtAePPINT OF SIGNER 02007 National Notary Asaodarmn-9350 De SdoA ,P.O, But 2402•ChaMwerth. CA 913132402• m. Aalonebbtary.org tram 85907 AeoberCM ToM1Free 1.1I 876fi27 1 APPENDIX L LIST OF PRODUCERS AND THEIR DESIGNEES I. June 30, 2008 I PRODUCER DESIGNEE Adams Ranch Mutual Water Company Domenic T. Cimarusti (✓ Alhambra, City of Christine Montan Z4 Amarillo Mutual Water Company John Holzinger American Sheds Inc. Jim Dodenhoff Andrade, Susan Susan Andrade Aqua Capital Management LP Thomas W. Solon Arcadia, City of Pat Malloy Attalla, Phillip Y. and Mary L. Mary L. Attalla AZ -Two, Inc. Richard S. Chamberlain Azusa, City of Chet Anderson Azusa Agricultural Water Company Chet Anderson Azusa Associates, LLC Scott D. Stowell Azusa Valley Water Company Chet Anderson Bandel Family Trust Candace Garnier Bandel Banks, Gale C. and Vicki L. Gale and Vicki Banks Baseline Water Company Everett W. Hughes Beverly Acres Mutual Water Users Narda Wiltz Association Lance Baroldi Brezina Trust 2001, Raymond W. and Douglas Frymer Susan W. Brondino, Jeanne Jeanne Brondino Cadway, Inc. James M. Byerrum California -American Water Company Gary Valladao (Duarte System) California -American Water Company Gary Valladao (San Marino System) California Country Club Willard T. Bayer California Domestic Water Company James M. Byerrum Canyon Water Company William McIntyre Canyon Water & Development Chet Anderson Corporation Cedar Avenue Mutual Water William Keith Calhoun Company CEMEX California Aggregates, Inc. Brian R. Mastin Champion Mutual Water Company Bryan P. Hellein Chevron U.S.A. Leon F. Drozd, Esq. Citrus Valley Medical Center, Queen Gregory J. Landers of the Valley Campus Clayton Manufacturing Company Lance Baroldi Coiner, James W., James W. Coiner dba Coiner Nursery Corcoran Brothers Ray Corcoran L1 of 039 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, ADOPTING A POLICY AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO ENTER INTO REPLACEMENT WATER AGREEMENTS AND PRODUCTION RIGHT AGREEMENTS WHEREAS, the City of Azusa ("City") has a controlling interest in the Azusa Valley Water Company ("AVWC") and the Azusa Agricultural Irrigating Company ("Azusa Ag.") and an interest in water supplies as a result of a contractual arrangement with the Miller -Coors Brewing Company ("Miller") . As a result, the City is the owner of record and otherwise beneficially controls, or is the duly authorized and acting agent for, the ownership of 8.11334 percent of the Production Rights in the Main San Gabriel Basin as adjudicated in the case of "Upper San Gabriel Valley Municipal Water District vs. City of Alhambra et al." LASC No. 92418 ("Judgment"); and WHEREAS, the ownership of said Production Rights entitles the City, through its own rights and through the AVWC, to take delivery or otherwise produce from the Main San Gabriel Basin said 8.11334 percent of the Main San Gabriel Basin Production Rights on an annual basis or in such amount as is determined from time to time by the Main San Gabriel Basin Watermaster ("Watermaster"); and WHEREAS, surface and groundwater have been taken from the groundwater resources utilized by the water purveyors in the San Gabriel Valley ("Watershed") at a rate greater than that at which natural precipitation and runoff can replenish them. To maintain productivity of wells in spite of this overall condition, the Watershed must be recharged by importing water from outside sources and spreading it in basins located within Watershed. This replacement water currently is provided by three (3) local water districts which are referred to as "Responsible Parties" under the Judgment): Upper San Gabriel Valley Municipal Water District ("USGVMWD"); Three Valleys Municipal Water District; and the San Gabriel Valley Municipal Water District ("SGVMWD"). The City commonly purchases its replacement water from the SGVMWD and the USGVMWD; and WHEREAS, Watermaster determines the annual amount of water that can safely be produced from the Watershed. Parties which produce in excess of their percentage share of the operating safe yield are subject to assessment by Watermaster for the purpose of purchasing replacement water to recharge the groundwater basin. By agreement between the City, Watermaster, USGVMWD, and the SGVMWD, 40% of the City' s total annual water production is considered produced within the service boundaries of the SGVMWD and is subject to a water replacement cost (currently $130 per acre foot) for water produced in excess of the City's water rights. The remaining 60% of the City 's total annual ME water production is considered produced within the service boundaries of the USGVMWD and is subject to a water replacement cost (currently -$450.00 per acre foot) for water produced in excess of the City's water rights; and WHEREAS, based on the water production percentage allocations and current and future water replacement costs set forth above, the City is able to utilize replacement water purchases at the lower rate from SGVMWD in order to meet its assessment obligations. As a result, the City's Production Rights allocated under the USGVMWD are available for lease or temporary assignment to third parties who are also obligated to meet their respective assessment obligations; and WHEREAS, the City also executes leases involving the City's water rights and the City's interests in water rights of AVWC, Azusa Ag, and Miller as necessary to meet production and contractual requirements in connection with the Production Rights; and WHEREAS, the time period within which the City and other water purveyors receive Watermaster information regarding the extent of their assessment obligations and their need to purchase replacement water is very short and the time period commonly involves less than a business week on or about the end of the applicable fiscal year ("FYE Period"). Within said FYE Period, the water purveyors are required to: (a) determine their assessment obligations; (b) find a source which is willing to lease them an amount of replacement water; (c) enter into the applicable agreements for said arrangements; and (d) perform said agreements; and WHEREAS, as a result of the short FYE Period, it is not reasonably feasible to call and conduct a meeting of the City Council to consider approval of the replacement water purchase agreement ("Replacement Water Agreement") or any agreement whereby the City may take advantage of its available Production Rights by leasing or temporarily assigning such rights to a third party ("Production Right Agreement"); and WHEREAS, the purpose of this Resolution is to provide pre -authorization for the City Manager, or his designee, to execute the applicable Replacement Water Agreement and/or Production Right Agreement subject to ratification by the City Council. THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS: Section 1. Pre -Authorization. The City Council hereby provides pre -authorization for the City Manager, or his designee, to execute and otherwise enter into any and all Replacement Water Agreements and/or Production Right Agreements, which the City Manager, or his designee, may 041 determine in his reasonable discretion to be in the best interests of the City in order to meet water resource needs, financial obligations, and/or legal requirements. Section 2. Ratification. Any and all Replacement Water Agreements and/or Production Right Agreements which may be entered into by the City Manager or his designee pursuant to the authority set forth in this Resolution shall be brought before the City Council for consideration and possible ratification at a meeting of the City Council as soon as practicable after said action taken by the City Manager or his designee. Section 3. Existing Authority Of City Manager. Nothing in this Resolution shall be deemed to either expand or restrict the existing authority of the City Manager or his designee to enter into agreements or expend City funds. Nothing in this Resolution shall be deemed to impact the authority of the City Manager or his designee to enter into agreements or expend City funds in the event of an emergency or other urgent situation as such authority may be provided under any applicable rule, regulation, policy or Azusa Municipal Code provision. Section 4. Severability. If any section, subsection, clause or phrase in this Resolution is for any reason held invalid, the validity of the remainder of this Resolution shall not be affected thereby. The City Council hereby declares that it would have passed this Resolution and each section, subsection, sentence, clause, or phrase thereof, irrespective of the fact that one or more sections, subsections, sentences, clauses or phrases or the application thereof be held invalid. Section 5. Effective Date. This Resolution shall become effective upon its adoption. PASSED, APPROVED AND ADOPTED this _ day of 2009. JOSEPH R. ROCHA, MAYOR ATTEST: VERA MENDOZA, CITY CLERK CITY OF AZUSA APPROVED AS TO FORM: BEST BEST & KRIEGER LLP CITY ATTORNEY 042 f STATE OF CALIFORNIA ) ss. COUNTY OF ORANGE ) I, VERA MENDOZA, City Clerk of the City of Azusa, California, DO HEREBY CERTIFY that the foregoing Resolution was adopted at a regular meeting of the City Council of the City of Azusa held on the _ day of 2009, and was carried by the following roll call vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: i VERA MENDOZA, CITY CLERK i CITY OF AZUSA 00 D-1. AZUSA A .CNI i WUfN INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES DATE: JULY 27, 2009 SUBJECT: CALIFORNIA RESOURCE CONNECTIONS RIVER WALK AND COMPOST WORKSHOP PROGRAM REPORTS On January 26, 2009, the Utility Board approved a request by California Resource Connections (CRC) to help fund two environmental programs in Azusa: (1) a River Walk and Litter Clean-up event in amount of $7,400; and (2) Smart Gardening and Compost Workshop in amount of $3,900. The Compost Workshop was conducted on March 28, 2009, and the River Walk event was held on April 18, 2009. CRC is required to provide the City with a follow up report pursuant to the City's funding support for the two events, and a report was submitted by CRC in June on the two programs and is attached for your review and any comments you might have. Staff is generally pleased with CRC's initiative to propose and conduct such programs in Azusa and encourages Board Members to read the attached reports for details about the respective programs. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities Attachment �n i Am CRC Final Report. pdf 050 CALIFORNIA RESOURCE CONNECTIONS, INC. 1201 N. Azusa Avenue • Azusa, CA 91702 • 626.969.2491 • www.watershe4connections.org RESEARCH • EDUCATION • ACTION • LAND To: Azusa Utility Board / Azusa City Council From: Suzanne Avila, Program Director California Resource Connections, Inc. Date: June 10, 2009 Re: Final Report for Backyard Composting Workshop (3/28/09) and San Gabriel River Litter Clean-up Event (4/18/09) California Resource Connections, Inc. (CRC), Azusa non-profit organization with a mission to "connect people to land", is happy to submit the attached narratives and financial reports representing the final accounting for the 2 community environmental education events funded this year (2009) by Azusa Light and Water/City of Azusa. Specifically, these events were a Backyard Composting/Smart Gardening Workshop held March 28, 2009 at the Azusa River Wilderness Park; and a San Gabriel River Litter Clean-up event held April 18, 2009 along the river bike trail as part of the City of Azusa's Clean, Green, More Beautiful campaign. Through your support CRC was able produced two environmentally -conscious programs to educate residents on a variety of sustainable living practices and on the inherent qualities of the natural resources of the San Gabriel River watershed. This was the second year that CRC produced these events and interest throughout the community has grown as both events were well attended by Azusa residents of all ages. Both events were also produced by partnering and collaborating with a multitude of agencies. CRC is fortunate to have developed a number of partnerships over the years with organizations tasked with similar interests in conservation work. Our partners are happy to help when called upon, thus enforcing the relationship and helping CRC succeed. This year CRC identified nine new partnership opportunities, adding Azusa High School Science Department, Azusa Library Book Mobile, Citrus College Service Learning, Fresh & Easy Neighborhood Market, Mujeres de la Tierra, Priority One Medical Transport, Rain Bird Corporation, San Gabriel Valley Municipal Water district, and Wal Mart to our list of project sponsors. CRC is appreciative of the opportunity to work with and represent the City of Azusa in this endeavor. It is a pleasure creating and developing environmental programs in the Canyon City. 0.51 2009 Environmental Programs — Final Reporting EVENT #1 BACKYARD COMPOSTING/SMART GARDENING WORKSHOP Saturday, March 28, 2009, 9:00 am — 11:30 am Azusa River Wilderness Park 100 N. Old San Gabriel Canyon Road Azusa, CA 91702 Final Statistics: Number in attendance: 45 (36 participants + 9 volunteers) Copies of the Workshop sign in sheets are provided at the end of this document. i Composting bins distributed = 35 Total Bins given away free to Azusa residents: 34 (18 worm bins + 16 soil saver bins) Bins sold for nominal fee to non -Azusa residents: (1 soil saver bin) Composting bins remaining in CRC possession: 7 (7 soil saver bins stored inside Taylor House at Azusa River Park) Description of program: The purpose of the Azusa Smart Gardening Workshop was to educated residents on native plant gardening, promote water conservation practices, and encourage various methods of backyard composting including vermiculture (worm composting), all in an effort to promote sustainable living practices. CRC's main partners in producing the Azusa Smart Gardening Workshop were the Watershed Conservation Authority/Rivers and Mountains Conservancy (WCA/RMC), owners/operators of the Azusa River Wilderness Park, who allowed use of park facilities to host the event; and the California Conservation Corps (CCC) who provided a labor crew for equipment pickup and delivery, event set up and tear down, and who also served as event hosts helping things run smoothly and in a timely manner the day of the event. Morning check-in began with participants signing in at a registration tent where names and addresses were collected in order to keep track of residents to whom composting bins were distributed. All resident's addresses were checked against address collected at the previous year's Smart Gardening Workshop to insure that duplicate bins are not given to the same household. 052 Brief welcoming remarks were said by CRC directors, followed by the introduction of the Master Composter representing Los Angeles County Department of Public Works Smart Gardening Division, who conducted the lectures and composting demonstrations. Nurses from the Azusa Neighborhood Wellness Center then led a brief discussion on the health benefits of gardening. Students from Azusa High School Science Club dressed up as the "h2o Owl" water mascot representing the San Gabriel Valley Municipal Water District and distributed recycling bags donated by Azusa Light & Water. In addition, informational booths focusing on water conservation were hosted by Rain Bird Corporation and by Master Gardener Xilonin Cruz -Gonzales. Description of how event was advertised and marketed: A press release inviting Azusa residents to attend the Smart Gardening Workshop was created and advertised through the following: Assemblyman Dr. Ed Hernandez — via e-mail list of constituents Azusa Herald - article appeared on 03/28/09, page 2 Azusa Pacific University — Ministry and Services Azusa Unified School District- Student Achievement/Educational Services Azusa Woman's Club Newsletter — The Chain, March/April 2009 edition Citrus Community College — Service Learning City of Azusa City Council Meetings - during public participation on 03/02/09 and 03/16/09 City Hall Marquee — on rotation from 03/18/09 to 03/28/09 Library — flyers on front counter from 03/22/09 to 03/28/09 and Friends of the Library Newsletter March 2009 edition Light & Water April Clean and Green Campaign — announcement in Campaign pamphlet sent to all utility customers and on Light & Water marquee rotation from 03/18/09 to 03/28/09 On-line City Calendar — entire month of March 2009 Revolving Charter Cable Bulletin — entire month of March 2009 San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy Website - Month of March 2009 San Gabriel Valley Tribune — submitted via features@sgvn.com Costs associated with program activities: See Financial Report outlined in chart on next page. 3 053 EVENT #1 - Smart Gardening Workshop 2009 Financial Report: MATERIALS OUTLINED CITY OF AZUSA PARTNER IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES Program Planner(s) stipend for $3,200.00 $3,040.50 $6,240.50 California Resource Connections, Inc. - 42.66 hours @ $75.00/hour Program planning leadership. 40.54 hours @ $75.00/hour = $3,040.50 SA total hours = 92.5). 41 Composting Bins = $3,175.00 $3,175.00 Azusa Light & Water — 73 composting bins were 18 Worm + 23 Soil Savers purchased in 2008 for the first Smart Gardening ($89.50 each + $68.00 each) Workshop, at which 32 bins were given away. 41 bins remained and were used for 2009 Workshop, at which 34 bins were given away. 7 bins remain stored at the Taylor House/Azusa River Park. Creation, Translation, Duplication, $300.00 $300.00 California Resource Connections, Inc. — and Distribution of Outreach Designed, created, printed all outreach materials. Materials 4.0 hours @ $75.00/hour = $300.00 SA total hours = 92.5). Master Gardener(s) $400.00 $400.00 California Resource Connections, Inc. — Recruitment of 2 Master Gardeners 5.3 hours @ $75.00/hour = $400.00 SA total hours = 92.5). Bottled Water $50.00 $50.00 California Resource Connections, Inc. — Purchased 2 cases of bottled water. Azusa Recreation donation of $850.00 $850.00 Azusa Recreation and Family Services — Equipment Donation of use of 50 chairs 5 tables. (easy up tents, tables, chairs) Azusa City Library — Donation of use of 7 EZ -Up tents. CCC donation of Corps $1,000.00 $1,000.00 California Conservation Corps —2 Corps Members/Event Leaders Members, 6 hours each to pick up equipment from (12 hours @ $25.00 hour), Azusa Recreation (chairs and tables) and Azusa Use of equipment City Library (EZ up tents); EI Encanto site (truck, van, clean up equipment) preparation; host event (help mascot and participants); and event clean up. CD 4 C31 wA EVENT #1 - Smart Gardening Workshop 2009 Financial Report (continued): MATERIALS OUTLINED CITY OF AZUSA PARTNER. IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES WCA/RMC donation of facilities $1,500.00 $1,500.00 Watershed Conservation Authority / Rivers and (storage, restroom, parking lot), Mountains Conservancy — Use of facilities at EI Ranger Services Encanto/Azusa River Park; Ranger services day of 3 hours @ $75.00 hour the event. $250.00 $250.00 Azusa High School Science Club — 6 students hosted water mascot (h20 Owl) representing SGVMWD. $250.00 $250.00 Azusa Light & Water— Donation of recyclable grocery bags for participants. $500.00 $500.00 Azusa Pacific University School of Nursing and Neighborhood Wellness Center— 2 APU Nurses to discuss health benefits of gardening. $500.00 $500.00 County of Los Angeles Dept of Public Works Environmental Programs Division — 2 person team to lead workshop. $250.00 $250.00 Master Gardener Xilonin Cruz Gonzales — Hosted an educational booth on drought tolerant plants. $1,250.00 $1,250.00 Rain Bird Corporation — Donation for event and hosted an educational booth on water conservation. $500.00 $500.00 San Gabriel Valley Municipal Water District— Donated use of water mascot (h2o Owl). Event 1 Total $3,900.00 $13,115.50 1 $17,015.50 O Cil CJS EVENT #2 THINK RIVER! SAN GABRIEL RIVER LITTER CLEANUP Saturday, April 18, 2009, 9:00 am — 11:30 am Azusa River Wilderness Park 100 N. Old San Gabriel Canyon Road Azusa, CA 91702 Final Statistics: Number of participants: 151 people Ranging in age from 3 to 74. Amount of trash collected: 700 lbs. Trash consisted of plastics, paper, broken glass, tires, plywood scraps, one mattress, and numerous cigarette butts. Average amount of steps taken, per person, to walk the 3.6 mile river bike trail: 7,817 Azusa Neighborhood Wellness Center recommends walking 10,000 steps per day to maintain health and weight. j i Description of program: The purpose of Think River! Azusa — San Gabriel River litter clean up and watershed education walk was to conduct a community litter clean up along the San Gabriel River while educating participants on the importance of maintaining a healthy San Gabriel River watershed. This event was conducted as part of the City of Azusa's April 2009 Clean, Green and more Beautiful campaign. CRC's main partners in producing Think River! Azusa were the Watershed Conservation Authority/Rivers and Mountains I Conservancy (WCA/RMC), owners/operators of the Azusa River Wilderness Park, who allowed use of park facilities and provided park ranger services to help host the event; is and the California Conservation Corps (CCC) who provided a labor crew for equipment pickup and delivery, event set up and tear down, and who also served as event hosts helping things run smoothly and in a timely manner the day of the event. The morning's activities began at the Azusa River Park/EI Encanto parking lot with participants signing in at a registration tent. A morning snack of fruit and water was provided for all. The flag salute was led by Eagle Scout Candidate/Boy Scout Austin McMinn of Troop #888, Covina, California. On hand to for welcoming remarks were City of Azusa Mayor Joseph Rocha, City of Azusa Councilmen Robert Gonzales and Uriel Macias, Rivers and Mountains Executive Officer Belinda Faustinos, and Gil Cedillo, California Senator representing the 22"d Senatorial District. Participants were then invited to visit several educational stations as part of the 6 056 Watershed Education component. These stations were hosted by experts from the following organizations: Azusa Beautiful - who gave out information on city wide clean- up activities; Azusa City Library Book Mobile - who had books available for check out on topics such as insects, native plants and animals, and other nature elements; Azusa Neighborhood Wellness Center - who handed out sunscreen, insect repellant, and pedometers to educate participants on the health benefits of an outdoor walk; Mujeres de la Tierra - who provided interactive, hands-on information on the San Gabriel River Watershed in terms of water supply and water quality (i.e. how trash affects water quality); and Rain Bird Corporation — who disseminated information on the water conservation benefits of designing and maintaining drought tolerant landscapes. Eagle Scout Candidate Austin McMinn delivered a safety speech educating participants on the native plants and local wildlife that exist in a riverine environment and how to respond if participants encounter them. Each participant was given a trash bag and plastic glove and then the entire group was escorted across Highway 39 by the California Conservation Corps to the northern terminus of the Azusa River Bike Trail. On hand to help launch the walk were Woodsy Owl, representing the U.S. Forest Service and their ecology message; and h2o Owl, representing the San Gabriel Valley Municipal Water District and their water conservation message. Participants then walked south, picking up litter along the way while counting the number of steps taken to complete the walk via their pedometers. The Azusa Historical Society hosted an educational station that served as the official turn -around point of the watershed education walk. This station was located in the Hwy 39 bike trail parking lot across from the Forest Gateway Center. Members of the Azusa Historical Society had photos and artifacts on display that focused on the history of the San Gabriel River Watershed. In addition, the Historical Society members handed out water and collected trash bags if they were too heavy for participants to carry back. New trash bags were also handed out if needed. Conclusion of the event was back at EI Encanto/Azusa River Park where all trash bags collected, counted, weighed, and disposed of properly. Participants were asked to record the number of steps counted on their pedometers next to their name on the sign in sheet and were then given a recycling bag for participating. Description of how event was advertised and marketed: A bilingual flyer was created specifically to target and recruit Azusa Unified School District (AUSD) students. A total of 9,350 flyers were collated and distributed to students at Azusa's 12 elementary schools, 3 junior high schools, and 3 high schools, via the AUSD Educational Services Department. In addition, a press release inviting Azusa residents to attend the Think River! was created and advertised through the following: Assemblyman Dr. Ed Hernandez — via e-mail list of constituents rl 057 Azusa Herald - articles appeared on 04/02/09 Page 2 Community Calendar and on 04/09/09 Front Page as part of lead story Azusa Pacific University — Ministry and Services Azusa Unified School District- Student Achievement/Educational Services Azusa Woman's Club Newsletter — The Chain, March/April 2009 edition Citrus Community College — Service Learning City of Azusa City Council Meetings - during public participation on 03/02/09 and 03/16/09 City Hall Marquee — on rotation from 04/08/09 to 04/18/09 Library — flyers on front counter from 04/12/09 to 04/18/09 and Friends of the Library Newsletter April 2009 edition Light & Water April Clean and Green Campaign — announcement in Campaign pamphlet sent to all utility customers and on Light & Water marquee rotation from 04/08/09 to 04/18/09 On-line City Calendar — months of March and April 2009 Revolving Charter Cable Bulletin — Months of March and April 2009 San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy Website - Months of March and April 2009 San Gabriel Valley Tribune — article appeared on 03/18/09, Local News page 2 Costs associated with program activities: See Financial Report outlined in chart on next page. 1.1 058 EVENT #2 — Think River! Azusa 2009 Financial Report: MATERIALS OUTLINED CITY OF AZUSA PARTNER IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES Program Planner(s) stipend for $5,700.00 $7,612.50 $13,312.50 California Resource Connections, Inc. — 76hours @ $75.00/hour Program planning leadership. 101.5 hours @ $75.00/hour = $7,612.50 SA total hours = 181.5). Creation, Translation, Duplication, $300.00 $300.00 California Resource Connections, Inc. — and Distribution of Outreach Designed, created, translated, and printed all Materials outreach materials. 4.0 hours @ $75.00/hour = $300.00 SA total hours = 181.5). Port -a -Potty (x2) $600.00 $600.00 U.S. Forest Service — One ADA accessible port-a- ottie for placement at tum around point. Ambulance/Medic Service $800.00 $800.00 Priority -One Medical Transport — One (2 paramedics @ 4 hours each) ambulance and 2 paramedics stationed at Azusa River Park during event. Trash Bags $200.00 $200.00 CalTrans — 300 trash bags for participant use. Disposable Gloves, non Latex $100.00 $100.00 Dr. Thomas E. Gaffaney, DDS — 600 non -latex loves for participant use. Trash Disposal Service $400.00 $400.00 Athens Services — 10 cardboard box trash containers, 20 trash box liners, plus delivery; one additional trash pick- up of Azusa River Park bins prior to event. Water $500.00 $500.00 Costco —12 cases of bottled water. Snacks (Bananas and Orange) $350.00 $350.00 La Flor de Mexico — 6 boxes of whole bananas and 4 boxes of oranges. Azusa Recreation donation of $1,000.00 $1,000.00 Azusa Recreation and Family Services - Equipment Donation of use of 6 EZ -Up tents, 8 tables, 25 (easy up tents, tables, chairs chairs, 1 podium, 1 PAs stem. Azusa Police Department $850.00 $850.00 Azusa Police Department — Use of reader board Traffic Neon Sin to warn Hwy 39 traffic of pedestrians on bike trail, Q _01 - - - - -_ -_ - - - - - - - - - - - --- 9 - to t EVENT #2 — Think River! Azusa 2009 Financial Report (continued): MATERIALS OUTLINED CITY OF AZUSA PARTNER IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES CCC donation of Corps $1,000.00 $1,000.00 California Conservation Corps — 4 Corps Members/Event Leaders Members, 10 hours each to pick up equipment (40 hours @ $25.00 hour) from Azusa Recreation (tents, chairs, tables, Use of equipment podium, PA system); host event (help participants); (truck, van, clean up equipment) dress up as, and escort, the US Forest Service's "Woodsy Owl" and SGVMWD 's "h2o Owl", and conduct event clean up. San Gabriel Valley Mosquito $800.00 $800.00 San Gabriel Valley Mosquito Vector Control — 2 Vector Control and City of Hope boxes of insect repellant for participant use. donation of Safety Supplies City of Hope — 500 pedometers to hand out to (sunscreen, insect repellant, lip participants. block US Forest Service donation of $500.00 $500.00 U.S. Forest Service — Donation of Woodsy Owl event supplies and associated ecology curriculum. ffloodsy Owl, ice chests WCA/RMC donation of facilities $300.00 $300.00 Watershed Conservation Authority / Rivers and (storage, restroom, parking lot), Mountains Conservancy — Use of facilities at EI Ranger Services Encanto/Azusa River Park; Ranger services day of 4 hours $75.00 hour the event. - $500.00 $500.00 Azusa City Library Book Mobile — Served as an education station where participants could check out books on topics such as insects, native plants and animals, and other nature elements. $250.00 $250.00 Azusa Light & Water - Donation of recyclable grocery bags for participants. $250.00 $250.00 Azusa Beautiful - Hosted an education station and gave out information on city wide clean-up activities. $250.00 $250.00 Azusa High School Science Department - 6 students hosted water mascot (h20 Owl) representing SGVMWD. CD 10 O. EVENT #2 — Think River! Azusa 2009 Financial Report (continued): MATERIALS OUTLINED CITY OF AZUSA PARTNER IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES $250.00 $250.00 Azusa Historical Society - Hosted an educational station that focused on the history of the San Gabriel River Watershed and served as the official turn -around point of the watershed education walk. $250.00 $250.00 Azusa Pacific University School of Nursing and Neighborhood Wellness Center— Hosted an education station and handed out sunscreen, insect repellant, and pedometers to educate participants on the health benefits of an outdoor walk $500.00 $500.00 Azusa Unified School District— Student Achievement/Educational Services Department distributes two-sided, bilingual flyer to 9,350 students in AUSA elementary, junior high, and high schools. $250.00 $250.00 Boy Scout Troops #888 and #443 — Led flag salute and helped host the event. $200.00 $200.00 Citrus College Service Learning — Student recruitment offering community service hours for college credit. $250.00 $250.00 Fresh & Easy Neighborhood Market - Donation of recyclable grocery bags for participants. $250.00 $250.00 L.A. County Dept of Public Works Watershed Management Division — Event coordination with regional events and with water purveyors; Provided educational materials on safety issues along the river. $250.00 $250.00 Mujeres de la Tierra - Hosted an educational station that provided interactive, hands-on information on the San Gabriel River Watershed in terms of water supply and water quality. EVENT #2 — Think Riverl Azusa 2009 Financial Report (continued): MATERIALS OUTLINED CITY OF AZUSA PARTNER IN BUDGET REQUEST FUNDING CONTRIBUTION TOTAL NOTES $1,250.00 $1,250.00 Rain Bird Corporation — Hosted an educational station that disseminated information on the water conservation benefits of designing and maintaining drought tolerant landscapes; Donated the urchase of 500 pedometers for participant use. $200.00 $200.00 San Gabriel River Water Committee — Donated the purchase of safety supplies for participants (sunscreen, hand wipes, and napkins to serve snacks). $500.00 $500.00 San Gabriel Valley Municipal Water District - Donated use of water mascot (h2o Owl). $2,225.00 $2,225.00 Vulcan Materials Company, Western Division — Donated the printing of 9,500 copies of two sided bilingual flyer advertising event for distribution to AUSD students. Event 2 Total $7,400.00 $21,237.50 $28,637.50 0 12 Total funding amounts for two events: TOTAL FUNDING FOR TWO 2009 EVENTS CITY OF AZUSA FUNDING PARTNER CONTRIBUTIONS TOTAL 1 Community Gardening and ornposting Workshop Event 1 Total $3,900.00 $13,115.50 $17,015.50 2 River Clean Up as part of Clean and Green Campai n Event 2 Total $7,400.00 $21,237.50 $28,637.50 TOTAL AMOUNT SPENT $11,300.00 $34,353.00 $45,653.00 Sign in sheets for 2009 Smart Gardening Workshop follow on the next 7 pages. 13 063 PA 9 MAR-T-GARDEN-1-NG-WO-RKSHO-P=-S-A-T--U-R-DA-Y,-MARCH-2-8;--2009 AZUSA RESIDENTS Proof of Residency Driver's Utility We Name Street Address J City Zip Code License Bill Bir C1, fl* Mmrj TOO- 70'-2- �3 3 C4- /00 N cdA te)AeV1 C4 V1 V� ct AZUSA SMART GARDENING WORKSHOP - SATURDAY, MARCH 28, 2009 AZUSA RESIDENTS Proof of Residency Driver's Utility We Name Street Address City Zip Code License Bill Bin V' J S Le �t(1 iV�(t� iF v�SZ 1 C>2`� !,1 ��n� 6,'L Q�G c 2 i/ SC, ���a 4c, VA _Y0 2-3S r9Zusrf t.0 AZUSA 170 7- (027 (027 W, V I li V >J uw I,(2 CGtSh 0U S Ct n C �, Ct 17 Z AZUSA SMART GARDENING WORKSHOP -SATURDAY, MARCH 28, 2009__,_ Iq ►5 Ki N zo 9 AZUSA RESIDENTS Proof of Residency Driver's Utility We Name Street Address City Zip Code License Bill Bin o, qi0 cJ . S-1ty-rte Ajll of � II�6y �r�T12t�� -4 VY��E12�/l (�►� 19? �jES T-L,)ove-) pZ_ , �v AZUSA SMART GARDENING WORKSHOP 121 23 FIRM 0 AZUSA RESIDENTS SATURDAY, MARCH 28..2009 Proof of Residency Driver's utility We Name Street Address City Zip Code License Bill Bir• mw klcl Ve 0UraAf s 4 e, uj lo� ,� C - c�;��c� z p Pt' 1F s you Ack A-,jc ALO S-'� plluS(,k CH gnoL .4 'z -Az A 7170z AZUSA SMART GARDENING WORKSHOP - SATURDAY, MARCH 28, 2009 AZUSA RESIDENTS Name Street Address City Zip Code 97 �1ARl �i4hi1)PGELG 53`1.2 FCckyALE Avc AZo5A 9�7�}2 J a© OleC)c- ( G(hN0Acva � ��{�l` i��• �v��c� �v.Qr�tJL %4'w�'SL� C11 7UL y peg (1✓ (S - �Gt�s iso` c Ve- G1l�l 2 SGq vy�IrPi1, i c�8 �1 . 61zwv �ia�''✓ldrl �ivd� i AZUSA SMART GARDENING WORKSHOP - SATURDAY, MARCH 28, 2009 AZUSA RESIDENTS Name Street Address City Zip Code L4 13o1a9 Fay61i(Q C► mntul5+ CQn\10v1 Pca� AZUf1 91-1oa-- S�S�oq I- 34 �%I�ToI� �ctGGtwtaVl�GS f l0� �• S61AGOd /eve AZkSs9 9170 AZUSA SMART GARDENING WORKSHOP -- SATURDAY ,-MAR.CN_28,_2009_ hZUSA RESIDENTS vjv i Proof of Residency Name Street Address City Zip Code Driver's Utility License Bill WC Bir. [d�vin���kR�7 71 .. J .;i`_. ��� 1 �•� ti�� rte"-. l'', .�.� ��' �7-Vi .Y'; ���-� �: I 10 66 f (CCCC - 6�V. C- - CIX ` IN NV/ -- V/ V C,� I vjv i INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES 047 DATE: JULY 27, 2009 SUBJECT: POWER RESOURCES PROJECT UPDATES This is an update of various projects Power Resources Division is engaged in. No action is required by the Utility Board at this time. Federal Smart Grid Grant Application: As part of federal economic stimulus package, the Department of Energy (DOE) is providing 50/50 matching grants for projects that promote efficient and innovative use of electric grid, Smart Grid applications. Staff is working through Southern California Public Power Authority (SCPPA) for a joint application of ICE Bear technology. ICE Bear is a device that builds up ice during the off-peak hours and releases the cooling during the summer afternoons in the air conditioning system thus avoiding the use of electricity during the peak usage hours. Currently the city library uses an ICE Bear unit for cooling. Although the ICE Bear technology is a proven technology it is not cost effective without subsidies. With a 50% grant funding, this technology can be made cost effective. The total SCPPA grant request is about $20 million for 43 MW of ICE Bears, and city's share of the request is about $1 million for I MW of ICE Bears which is about 2% of city's average summer peak demand. If successful, we intend to work closely with our customers, e.g., schools, supermarkets, chain stores, APU, and others to disseminate this technology that reduces our summer electric peak loads. Garnet Wind Proiect Declared Commercially Operational: After more than six months of intense testing and certification with the California Independent System Operator (CAISO); the Garnet Wind project was declared commercially operational on June 2, 2009. So far the electric output of Garnet is exceeding our forecast and expectation and is providing about 10% of our customers' aggregate daily electricity consumption. The cost of 071 electricity is averaging $47/MWh (tied to the natural gas prices), one of the lowest cost renewable energy projects in California. In the month of June, the first month. that Garnet Wind became commercially operational, 20.45% of Azusa's retail electric consumption was served with renewable energy procured by the city from various sources (Highwinds, Garnet Wind, MWD small hydro), thus achieving the Renewable Portfolio Standard (RPS) goal of 20% a full year -and -a -half ahead of schedule, which was by end of 2010. Lodi Energy Center: Due to the backlog of generation projects and the mandatory furlough of California Energy Commission (CEC) technical staff, the Preliminary Staff Assessment (PSA) for Lodi Energy Center (LEC) has been delayed for three months. PSA is the first step in obtaining the Authorization for Construction (AFC) permit for the project. LEC project manager team continues to work intensely with the CEC staff toward the issuance of PSA. The LEC project Finance Committee has completed the selection of project financing team which consists of: PFM — financial consultant Orrick, Sutcliff — bond and disclosure counsel Goldman Sachs — Senior manager for bond underwriting LEC Finance Committee will be busy working to finalize the project financing documentation in. the next several months so that once the AFC permit is obtained from CEC, the project can be ready to issue bonds for the construction. The LEC Gas Subcommittee has been interviewing potential gas suppliers for the project. We anticipate completing the gas supply strategies by the time the project goes to financing. The Large Generator Interconnection Agreement (LGIA) with the California Independent System Operator (CAISO) is being executed to ensure timely engineering design, and construction of electric interconnection facilities to the CAISO bulk power transmission grid. Prepared by: Bob Tang 072 MONTHLY REPORT JULY, 2009 PROJECT: MEMBRANE TREATMENT UPGRADE OF THE CANYON FILTRATION PLANT PROJECT NO.: N=1 i I =:7_1 Svial: Y k7_Le3 to];; DESIGN ENGINEER: W VF -207 SSC CONSTRUCTION INC. BLACK & VEATCH INC. CONSTRUCTION MANAGER: BLACK & VEATCH, INC. PROJECT CONTRACT AMOUNT: $35,905,500.00 CHANGE ORDERS TO DATE: $100,642.76 $164,975.54 $57,261.33 $22,693.21 $9,454.31 $90,761.23 $71,407.91 $93,005.85 MONTHLY ACTIVITIES As of 07/21/09 G W EXTRA DAYS 10 14 4 0 24 2 34 0 88 $36,515,702.14 Approved July 23, 2007 Approved Sept 24, 2007 Approved Nov 26, 2007 Approved Feb 25, 2008 Approved July 28, 2008 Approved Oct 27, 2008 Approved Jan 26, 2009 Approved Feb. 23, 2009 No construction progress meetings were held Total CO's $610,202.14 (1.70% over bid price) Substantial completion was achieved July 15, 2009 Plant operators are running the treatment plant through its paces prior to placing online. Plant will be online in August To July 15, SSC is approximately 210 Calendar days behind schedule At $1,000/ day Liquidated Damages are $210,000 to substantial completion From July 15 to July 27 LD at $500/day are $6,000 C7 JUNE PROGRESS PAYMENT REQUEST: $81,249.85 TOTAL PAID TO DATE $36,435,496.27 AMOUNT TO ESCROW* $2,478,103.04 PROJECT PERCENT COMPLETE 99.78% JUNE PTD $36,354,246.42 'Fixed amount b. AZUSAtI4NT R'SA INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES DATE: JULY 27, 2009 SUBJECT: FOLLOW-UP TO UTILITY BOARD REQUESTS FOR ADDITIONAL INFORMATION FROM CUSTOMER SERVICE This report is a follow-up to Utility Board's requests for additional information at the June 22, 2009, Utility Board meeting regarding the Customer Service Division's Lifeline Program, various billing practices, drop box usage, customer count breakdown, and customer usage of online payment features. 1. Inform customers about the Lifeline Program. Customer Service will add this to the bill message for a two-month period annually. Additionally, information about the program and its application form can be found on our web site at www.ci.azusa.ca.us, then selecting Light & Water from the sidebar on the left. At the Light & Water home page, at the top of the sidebar on the left is a Search option. Type the word Lifeline to find all information on this program. 2. Recommend alternatives to shutting off medical facilities for non-payment to avoid unsafe situations for their clients. All customers receive a bill, courtesy reminder notice and a final or disconnect notice prior to shutoff for non-payment. When Customer Service prints the shutoff list, the list will be reviewed for any medical facility. That facility will receive a courtesy telephone call to notify them that their payment must be paid that day or their service will be shutoff the next morning. That gives the medical facility an additional day and last opportunity to either pay their bill or reschedule patient appointments. 3. A Light & Water customer tried to pay their utility bill by credit card and it would not go through even though the customer's credit card company said it should. It is likely that earlier this customer paid their utility bill by check to Light & Water and the 075 check was returned by the bank for non -sufficient funds. When this occurs the customer is requested to pay by cash for the next six months for two reasons. First, it takes much staff time to perform the many steps necessary to reverse the transaction on the customer's account and notify the customer of the situation and follow-up to be sure repayment is made. Second, every business day Light & Water sends an electronic file to our credit and debit card vendors, Paymentus and Infosend, so when a customer tries to make an online or telephone credit or debit card payment the account number the customer enters can be matched to our records. This way a payment is assured of getting applied to the correct account. These vendors can only accept and handle one electronic file from us that contains all customer account numbers. The file does not include customer accounts that are coded "cash only" due to an earlier non -sufficient funds check. We exclude these account numbers to not allow an electronic check payment be accepted by our vendors, Paymentus and InfoSend. Due to this account number exclusion from the file we send to the vendors, when a cash only customer tries to pay with either an electronic check, debit or credit card before the six month period is up, their utility account number is not available for acceptance of a payment by phone or Internet. After six months the customer's cash only status is removed and they can pay by any method. This is a common practice among utilities. Additionally, several years ago we discontinued accepting credit card payments inside our office because of the high cost of banking transaction fees. 4. The Utility Board inquired about the use of drop boxes located in the parking lot at the front of the Light & Water building and located behind the building next to the drive-through window. During the three week test period from June 22nd through July 13th, 933 payments, or 78%, were deposited in the box in the front of the building and the remaining 259, or 22%, were put in the drive-through drop box in the back of the building. There are no signs on Azusa or San Gabriel Avenues indicating location of the drop boxes. 5. Utility Board members requested a count of the number of residential and commercial/ industrial customers. They are as follows: 14,047 electric residential customers 19,706 water residential customers 33,753 total number of residential customers 1,927 electric commercial/industrial customers 2 435 water commercial/industrial customers 4,362 total number of commercial/industrial customers 6. The last request was for a report of the number and percent of payments using each method of payment. See attached report. Interestingly, while 10% of our customers are signed up to receive paperless bills through Online Billing, only half pay online, which is a free payment option. Prepared by: Karen Vanca, Assistant Director Customer Care & Solutions 0.76 . - _AZUSA_LIGHT-AND_WATER-CUSTOMER-SERVICE----------- ---- •Iu�yn��iq• For Period 07/2008 06/2009 WALK IN . AI: OFFIP.E CSR_HAND�POSTEMPAYMENTS4 s _ ;s• eELECTRONIC PAYMENT FILES.RECEIYEO u, Monthly PAYMENTS .. ,. Totals Payments t Check Mailed Drop Box 2 Home Banking s Pa entus 7 Online Billing Payments To Office Payments Payments 3 HEAP 4 ACH (CredltA)ebit s Lockbox card) & Payment IN. Cost to Payer) 07-2008 2,611 2,076 1,387 793 32 954 9,755 890 359 18,857 08-2008 Z. 1,217 .1,030 585 19 712 9,126 963 501 16,537 09-2008 2,853 1,469 1,467 646 23 850 11,418 947 691 20,364 10-2008 2,782 927 1,283 569 12 -940 10,599 1,077 813 19,002 11-2008 2,281 799 .1,165 484 8 615 8,557 858 806 15,573 12-2008 3,208 944 1,561 662 36 1,069 12,803 1,012 1,022 22,317 01-2009 2,278 761 1,096 493 52 633 8,819 925 899 15,956 02-2009 2,523 1,288. 461 5 851 10,361 832 971 18,136 03-2009 2,777 1,22,22 4 1,199 406 2 935 11,726 872 1,247 20,388 04-2009 2,644 834 ,1,276 400 12 833 10,937 881 1,220 19,037 05.2009 2,294 821 1,130 334 17 662 9,333 842 1,193 16,626 06-2009 2,914 1,011 1',320. 404 10 985 11,690 852 1,305 20,491 Total 31,549 12,927 15,202 6,237 228 10,039 125,124 10,951 1.1,027 223,284 31`419 �` "�r`P�`wr?- a Total s ' 4,1f11 �;,Q.,,, „�„�, �.:eNf'.. F.• ^v �:+z. ,:., r �. �.!�{'a., 4� t n , - s� , � � �, 157141 ` "�. 188,690 c nL ..V Yi'$k fyh'y'yJBi+%'{��+� F{�....dy�J^•+1 {c} S✓Piw _. -. Ah.7 .p� � . (excludes walk-in cash 1. Weare not able to capture the number of cash payments received. payments) 2. Online payments initiated through customers' bank web sites. 3. Low Income Home Energy Assistance Program (LI -HEAP). 4. In-house E -Z Payment Program whereby customer signs up for utility payments to be automatically debited from their checking account. 5. Mailed -in payments processed by RT Lawrence payment processor. 6. Payments processed over the phone or online per customer request; $3.25 charge. 7. Payments processed via Azusa Light & Water Online Billing & Payment Website; no charge to customer. M. Bauer INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES g' DATE: JULY 27, 2009 SUBJECT: PHOTO VOLTAIC SOLAR SYSTEM UPDATE FOR CARDINAL f �1:� :Zi77ar1 Ci77 I�.� Cardinal Laboratories/DeVos Sica L.L.C. (Cardinal Labs) is an industrial electric customer located within the southern portion of Azusa Light & Water's service territory. Cardinal Labs is in the process of becoming the first non-residential Solar Photo Voltaic (PV) customer on the Azusa Light & Water electric system. The PV system will consist of 374 poly -crystalline silicon modules, each rated at 225 watts for a total rated system size of 84,150 watts. The amount of power that will be produced by this PV system is approximately equal to 20 average households. The PV electricity generated will be enough to cover most of the Cardinal Labs power requirements and at times the facility could possibly be a "Net Generator" of electricity where they are producing more electricity that they use. Our current policy is to not pay a customer for excess energy put into our system on an annualized basis. Azusa Light & Water's Solar Partnership rebate program currently provides $2.80 per watt rebate for PV systems, and a premium rebate of $1.20 per watt if Azusa Light & Water can apply the energy toward the State's Renewable Portfolio Standard (RPS) requirement, which is 20 percent by 2010. However, Azusa's Solar Partnership program rebates are limited to 50 percent of the g-oss system cost. In the case of Cardinal Laboratories, the per watt rebate totals $336,600 while 50 percent of the gross system cost totals $291,000. Hence, the maximum allowed rebate under program guidelines is $291,000 for Cardinal Laboratories' project, which will be paid out of the Power Resources' budget of $300,000 for the Solar Partnership Program. Cardinal Labs anticipates the project will be completed by the end of July and will be planning a dedication ceremony in mid-September. Additional conservation measures are also being installed that will allow Cardinal Labs to reduce the projected system size, thus making the system more cost effective. 078 Cardinal Labs' overall goal is to qualify their building as a Leadership in Energy and Environmental Design, LEED, Certified building through their sustainable efforts that correspond to the number of credits accrued in five green design categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources and indoor environmental quality. LEED is an internationally recognized green building certification system, providing third -party verification that a building was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts. Prepared by: Paul Reid, Business Development/Public Benefit Programs Coordinator 079 INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES O� G DATE: JULY 27, 2009 &Y SUBJECT: CLIMATE CHANGE LEGISLATION / CAP -AND -TRADE / H.R. 2454 The climate change legislation introduced this year is turning out to be very challenging to local, state and federal officials. The state legislature has introduced various bills to mitigate green house gas (GHG) emissions and to implement AB 32, the Global Warming Solutions Act of 2006, which seeks to limit GHG emissions statewide to 1990 levels by 2020. The California Air Resources Board (CARB) has also begun efforts to develop regulations to implement AB 32, which includes a "Cap -and -Trade" program component. The State Cap -and -Trade program is intended to fulfill the market mechanism requirement in AB 32. CARB plans to use direct regulation to control approximately 80% of emissions and Cap -and -Trade to reduce an additional 20% of GHG emissions. Under Cap -and -Trade, GHG emission sources in certain sectors, such as electric utilities, would be assigned or otherwise acquire a baseline allowance of GHG emissions that they may emit in a particular year. The allowances would decrease over time so that the statewide emissions load is reduced by 2020 to the estimated level of emissions in 1990, which CARB estimates at 365 million metric tons of CO2 or its equivalent. Sources that are able to maintain emissions below their assigned cap would be allowed to bank their allowances for future use or sell them. Those sources that cannot maintain emissions below their caps, would have to buy allowances for each ton of GHG emissions above their cap. In this way, Cap -and -Trade is intended to encourage the development of technologies that most efficiently and cost-effectively reduce GHG emissions. However, there have been a number of concerns expressed about the State's proposed Cap -and - Trade program, including: (1) how emission allowances would be allocated at the start of the program; (2) what would be the cost of the allowances on per metric ton basis; (3) how costs would be controlled over time if such allowances were monetized and traded in open market; (4) whether the revenues from allowances would actually be used to reduce emissions; (5) timeframe for achieving the emission reductions; and (6) whether such allowance purchase obligations would duplicate federal requirements under a similar "Cap -and -Trade" program. It is 080 the general sentiment of many utilities that the State Cap -and -Trade program would be very costly and onerous for electric utilities to comply with. For example, not only would Azusa Light & Water have to pay for the added cost of renewable energy in its effort to comply with renewable portfolio standard (RPS) requirements, it would have to potentially pay for emission allowances while continuing to pay on its long-term financial obligation to buy energy produced by the San Juan Resource, which is a coal -fueled power resource. H.R. 2454 was introduced by Rep. Henry Waxman and Rep. Edward Markey on May 15, 2009, and proposes a comprehensive federal approach to reducing GHG. The nationwide and "economy -wide" GHG emission reduction goals proposed by H.R. 2454 are as follows: • 97% of the 2005 level by 2012 (3% reduction) • 80% of the 2005 level by 2020 (20% reduction) • 58% of the 2005 level by 2030 (42% reduction) • 17% of the 2005 level by 2050 (73% reduction) H.R. 2454 also includes a "Cap -and -Trade" regulatory scheme. Emission allowances were originally proposed to be allocated to various sectors in proportion to actual emissions. This would have had greater financial impacts on utilities that rely more on coal resources as opposed to those that rely on hydro power, for instance. This pitted regions like the Pacific Northwest, which are heavily dependent on hydro power, against regions like Kentucky that rely mostly on coal. Due to lobbying efforts to equalize costs, the emission allocations are now set to be distributed based on 50% GHG emissions and 50% sales. H.R. 2454 was also amended to provide 30% of the initial emission allocations to the utility sector at no cost, which would further reduce costs to consumers. However, even with changes in how emission allowances are allocated, and -the discounted costs for emission allowances in the initial program term, the Southern California Public Power Authority (SCPPA) estimates that by 2012 the cost of H.R. 2454 will be $123 million to SCPPA member agencies. While fiscal impact models are still being refined, one forecast model results in an estimated cost impact on Azusa of about $1.7 _million in 2012, increasing over time to about $9 million by 2030. Staff are recommending that Azusa continue to work with our affiliate associations, namely SCPPA and American Public Power Association (APPA), to advocate legislative positions of interest to the City of Azusa. In general, our associations tend to favor the federal approach over the state approach on "Cap -and -Trade", and will continue to advocate for: (1) federal preemption of State Cap -and -Trade legislation; (2) further reductions in costs where possible; and (3) oppose auctioning or market based pricing of emission allowances. See attachments for further information and details. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities IN SCPPA APPA Key Points. pdf APPA Sunrreryof Comrents.doc HR2454.doc 2009 SCPPA Snapshot of Issues Waxman -Markey Bill H.R. 2454, the American Clean Energy and Security Act (ACES) SCPPA Profile: • SCPPA represents 6 million customers served by consumer -owned electric utilities in the cities of Anaheim, Azusa, Banning, Burbank, Cerritos, Colton, Glendale, Los Angeles, Pasadena, Riverside, Vernon as well as the Imperial Irrigation District. • We are committed to reducing GHG emissions as outlined in AB 32 (30% by 2020 and 80% by 2050) and are working to reduce emissions through "complementary measures" (e.g. energy efficiency, renewable energy, as well as moving away from coal -based generation). Currently about 50% of SCPPA's generation is from coal. We are also actively participating in the California Air Resources Board's (CARB) AB 32 implementation process. • AB 32 emission reduction goals can be fully met through a 33% statewide Renewable Electricity Standard (RES) and cost-effective energy efficiency. These actions are oroiected to increase SCPPA's retail electric rates an average of 30%. Waxman -Markey • We are further analyzing the impact of the House -passed climate/energy bill; however, we would like to highlight our preliminary views. • From its inception, we have seen improvements; however, we still have concerns. • Our number one concern is the impact it will have on consumers. Positive features include: • Provides 30% of the emission allowances to the utility sector -at no cost to Local Distribution Companies (LDCs), which will ensure benefits of the allowances go directly to consumers. • We strongly support provisions that prohibit utilities from receiving more emissions allowances then needed to comply. • We also support the 1/2 of one % of allowances provided to small LDCs. 1 082. J Areas that Need Improvement: 1.) Allocations • Under this plan, SCPPA members will received only 79% of the allowances they need; causing them to purchase allowances at the approximate cost of $123 million (at $25 a ton) in 2012 and increasing every year thereafter. Thus, SCPPA believes more adjustments to the allowance allocations are needed: 1. The language in the bill says, in essence, that no LDC can get more allowances than it needs, is not workable, and should be tightened; and 2. SCPPA opposes giving 10% of the allowances to unregulated merchant coal generators. 2.) Clarify Preemption Provision • The pre-emption language on cap -and -trade is not strong enough in the House—passed bill. If Congress is going to set up a complex federal system to regulate GHG, it should preclude WCI, California, and others from regulating GHG. • Covered entities should not be required to submit allowances to more than one jurisdiction for the same emissions. This could happen if the federal government implements a cap - and -trade program and states were permitted to implement their own programs after 2017, as an "overlay" on the federal program. This would be inequitable and would double costs to consumers. Nothing in the Waxman -Markey bill addresses this potential "double jeopardy." Transmission • The House bill addresses planning and siting of transmission facilities — but not cost allocation. SCPPA supports efforts to encourage development of needed transmission lines, but not the language in the House -passed bill that provides revised "backstop" siting in the Western Interconnection for "green grid" only infrastructure. This requirement is not operationally feasible or efficient and should be deleted in Conference. 2 1 083. 'MI American yIM Public Power A Association APPA Key Message Points on H.R. 2454 as Passed by the House of Representatives While there are many important and controversial questions facing the 111 th Congress,'one of the most important to the electric utility industry is potential passage of a federal mandatory greenhouse gas (GHG) emissions reduction program to address climate change. The American Public Power Association (APPA), representing the interests of the more than 2,000 publicly -owned electric utilities nationwide, supports federal legislation to reduce GHG emissions, but recognizes the difficulty of addressing this issue in a comprehensive manner that achieves the desired environmental results while protecting the American economy and consumers. APPA, therefore, appreciates the hard work demonstrated by the House of Representatives in passing H.R. 2454, the American Clean Energy and Security Act of 2009. As the Senate now begins its work on the issue, however, APPA continues to have several strong concerns with the House -passed bill; specifically, its effects on consumers and the reliability of the electric system, as delineated below. A "Safety Valve" or other Equally Stringent Cost -Containment Mechanism Is Urgently Needed: 6 As stated in our Climate Change Policy Principles (see attached), APPA believes that any federal cap - and -trade regime should achieve the goals established by Congress with the least possible adverse f; economic impact on consumers of energy and the U.S. economy. Thus, such a program must include a safety valve (which sets a maximum allowance price) or other equally stringent cost control mechanism that mitigates price volatility and protects consumers. Unfortunately, cost increases associated with a renewable electricity standard (RES) and cap -and -trade regime to reduce GHG emissions will pose special challenges for low- and moderate- income households as these consumers tend to spend a larger share of their budgets on energy related products and services. A mechanism that sets a maximum allowance price would work to ensure that energy costs do not rise too high and too fast for these consumers. However, H.R. 2454 does not provide such a mechanism. APPA does not believe that the offsets program, the provisions on banking and borrowing of allowances, or the strategic reserve intended to provide cost containment in the bill are sufficient to provide the economic certainty for consumers and the U.S. economy that is provided by a safety valve. Allowances Should Be Allocated Rather than Auctioned, the Electric Utility Sector Should Receive the Amount of Allowances It Needs to Operate under the Targets and Timelines Established without Having to Fuel Switch, and Allocations Should only Be Given to Local Distribution Companies (LDCs): APPA appreciates the fact that H.R. 2454 allocates rather than auctions emissions allowances to the electric utility sector and urges the Senate to also reject an auction process. In particular, an auction unfairly disadvantages small, not-for-profit entities like public power electric utilities, and favors large, for-profit national and multi -national corporations. Under an auction, those entities that can afford to pay more are rewarded with allowances, and those that cannot match the auction price are left with either inadequate access to electricity or high prices. Moreover, an auction would expose our consumers to the risks of unpredictable cost increases and heightened regional economic inequalities. One of the rationales we have heard for relying so heavily on an auction is that the legislation should avoid giving industry a "windfall profit" at the expense of consumers. This concern arose from experience with the European cap -and -trade system where many generators included the market cost of allowances in their electricity prices even though they were allocated allowances and did not pay for them. Allocating allowances to load -serving entities, rather than fossil fuel -fired generators, eliminates his concern (see below). Moreover, in the case of not-for-profit, consumer -owned public power entities, we cannot reap any windfall or other profit by definition. Public power entities operate at cost, and any www.APPAnet.org Page 1 O additional costs (such as buying allowances at an auction) will be passed directly to consumers, while any costs avoided result in direct savings to our consumers. These additional costs will be imposed on regions of the country most economically impacted by climate change legislation such as those heavily dependent on coal. Additionally, the annual emissions cap will ensure reductions in emissions regardless of whether allowances are auctioned or allocated. Some parties are concerned that customers will not alter their behavior to reduce consumption unless their cost of energy increases substantially (through the addition of allowance prices). However, utilities and their regulators can agree to substantial investments in energy -efficiency programs to achieve the same goal of reduced electricity consumption. Once the decision is made to allocate allowances, we also believe it is important to allocate enough allowances for the utility sector's emissions profile to avoid fuel switching. Such a result would put tremendous upward pressure on the cost of natural gas. Finally, APPA would urge the Senate to ensure that allocations flow directly to the local distribution companies whose retail rates are regulated at the state and local levels as opposed to providing some allowances to wholesale or "merchant" generators, as is the case in H.R. 2454. Any electric sector allowances given directly to merchant generators means those allowances would not be available to help soften the impact of pricing carbon on consumers, through their LDCs. Moreover, since these generators are not owned by a regulated utility, the state commissions would have no way to ensure that consumers would receive the benefits of these free allowances. Finally, even under a free allocation methodology, generators will still add the opportunity cost to their price charged for electricity and to their bids in Regional Transmission Organization (RTO) run spot markets. Due to the structure and operation of these RTO -run markets, this will further exacerbate the increase in the cost of achieving carbon reduction goals by raising the price of all electricity sold in these markets — including renewable and nuclear generation which emit no carbon — and will severely distort the market price signals for carbon that are integral to the success of any cap and trade program. Avoiding Duplicative Regulation. APPA believes that federal GHG emissions reduction legislation should create a new regime for addressing these ubiquitous gases as opposed to relying on other laws, like the Clean Air Act (CAA), that were established for different reasons and to achieve different outcomes. For example, the CAA was created to reduce criteria pollutants that do not have global impacts, and the regulatory regimes and legal precedents that have evolved from the CAA do not lend themselves to regulating GHGs. APPA believes that a new program, with no ties to the CAA, will be a more effective and efficient way of reducing GHG emissions, and will avoid unnecessary confusion and litigation. Unfortunately, H.R. 2454 does not establish such a "bright line," although the House -passed bill is an improvement from previous iterations with regard to its interaction with the CAA. Targets and Timelines Should Be Realistic and Avoid Fuel -Switching: The targets and timelines established in H.R. 2454 are problematic in two ways: 1) the regulatory regime will not have time to be developed before electric utilities must reduce their emissions, which will create confusion; and 2) the technology for carbon capture and storage for the electric utility sector will not yet be available on a commercial scale before the emissions reductions are initiated, which will mean that many utilities will need to fuel -switch to natural gas (which, as mentioned above, will raise costs unnecessarily across the economy given natural gas's broad use as a fuel). Instead of mentioning the exact year in which such emissions reductions should begin, APPA urges the Senate to consider establishing the timeline of "at least five years after date of enactment of the bill" before reductions begin thereby giving the regulatory process time to be completed and the technology more time to become commercially viable. www.APPAnet.org Page 2 American Public Power Association July 2009 H.R. 2454, American Clean Energy and Security Act Summary of Major Climate Change Provisions Title III of H.R 2454, as passed by the House of Representatives on June 26, 2009, adds Title VII, Global Warming Pollution Reduction Program, and Title VIII, Additional Greenhouse Gas Standards, to the Clean Air Act (CAA). The following summary describes the major Title III provisions related to the electricity sector, including section and page reference numbers to the engrossed version of the bill. Section numbers in the 700s are in new Title VII, and section numbers in the 800s are in new Title VIII. Reduction Goals Sec. 702 (p. 682) and Sec. 703 (n. 683) The economy -wide greenhouse gas (GHG) emission reduction goals are: 97% of the 2005 level by 2012; 80% of the 2005 level by 2020; 58% of the 2005 level by 2030; and 17% of the 2005 level by 2050. The GHG reduction goals for the specified sources are the same as economy - wide goals for 2012, 2030, and 2050. The 2020 goal for specified sources is 83% of the 2005 level, which is slightly higher than the economy -wide goal. Sec. 705 (p. 684), Sec. 706 (P. 694) and Sec. 707 (p. 698) Sec. 705 requires the Environmental Protection Agency (EPA) to prepare a report every four years on global climate change, GHG monitoring capabilities, and the status of worldwide GHG reduction efforts. The report's recommendations must identify any additional reductions necessary to meet the economy -wide reduction goals established in Sec. 702 and to avoid specific GHG concentration and temperature thresholds. It also must identify strategies to achieve the additional reductions. Sec. 706 requires the National Academy of Sciences (NAS) to review the EPA reports (or conduct its own study if EPA fails to complete a report) and make its own analysis of technology issues. NAS must make recommendations to the President regarding scientific and technical information, as well as identifying the amount of additional reductions needed, based on the NAS review of the EPA report. Sec. 707 requires the President to direct Federal agencies to use their existing authorities to take actions identified in the EPA and NAS reports. In addition, if the reports conclude that additional reductions are needed or that global actions will not maintain safe GHG concentration and surface temperatures, the President shall submit to Congress a plan, including any k recommendations for legislation, to achieve additional reductions. APPA Position: APPA supports passage of legislation to address climate change, but believes that any cap -and -trade program implemented to address greenhouse gas reductions should be realistic and achievable, and provide ample time to develop, demonstrate and deploy new low - and zero -emitting technologies. APPA believes the targets and timelines in H.R. 2454 do not Ik allow ample time for these technological breakthroughs to occur, and should be revised. 086 American Public Power Association July 2009 Coverage of Electricity Sector Sec. 722(b)(1) (A. 735) Fossil fuel -fired generating units must submit allowances for all CO2 emissions, except emissions from petroleum-based or coal -based liquid fuels, natural gas liquid, renewable biomass, or petroleum coke. (Petroleum and coal -based liquids are covered at the upstream source.) Thus, both coal-fired and natural gas-fired units must submit allowances. APPA Position: APPA supports an economy -wide approach to addressing climate change, and appreciates the bill's broad application. Sec 700(13) definition of covered entity (p. 847) In this definitions section, the bill establishes size exclusions for several types of covered entities; generally the exclusion is for sources that emit 25,000 tons of carbon dioxide equivalent or less in a year. However, the exclusion does not apply to electricity sources. Allowance Cap Sec. 721'(e) (p. 725) The graph below compares the H.R. 2454 allowance cap with several 2008 bills: Dingell - Boucher, Lieberman -Warner, and Markey. In all cases, compliance begins in 2012, and both H.R 2454 and Dingell -Boucher delay the compliance date for certain industrial sources and for natural gas local distribution companies. After this phase-in period, the H.R. 2454 cap is very similar to the cap in the 2008 Markey bill. In contrast, Dingell -Boucher provides more allowances in the early years. E American Public Power Association Jule 2009 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 E c 3,000 2,500 2,000 1,500 1,000 500 Cap and Trade Allowances Industrial Sources Added NG LDCs Added ---------------- �----------- _Liaberman_Wamer-- - ----.. ----- —-- ----- ----- Markey-(2oos)----- ------ --- ---- -- --- - -- ---- - -- - --- -- --- -- - — - - - HR 2454 (Waxman - Markey) 0 N V 0 W O N V O O O O O O O N N N N N N N 1 allowance =1 metric ton of CO2 equivalent. t0 W O N V EO W O N V 0 W O N N M CO M M M V V V V V N O O O O O O O O O O O O O N N N N N N N N N N N N N Section 721(e) also provides that if the cap on emissions from covered entities does not represent specified percentages of 2005 emissions in 2012, 2014 or 2016, the allowance caps shall be adjusted to be consistent with the reduction targets established in Sec. 703. Sec. 721(f) (p. 729) Compensatory allowances will be distributed for fuels covered at upstream sources (petroleum- based fuels, for example) if the fuel is not used in combustion (as a feedstock, for example). Compensatory allowances may also be distributed for the destruction of fluorinated gases. APPA Position: See position under "Reduction Goals" above. Disposition of Allowances Sec. 781 (p. 862) and Sec. 782 (p. 863) These sections allocate allowances to various sectors and for various purposes. The chart on the following page shows allocations for the first few years of the program. Allocations to the electricity sector, natural gas local distribution companies (LDCs), and consumers of home heating oil end in 2029. Allocations for investment in clean vehicle technology and for domestic fuel production end in 2025 and 2026. Note that per Section 726 (Strategic Reserves), allowances to the strategic reserve are subtracted from the allowance caps established in Section 721. All other allocation percents set forth in the bill apply to this reduced cap level. 3 088 American Public Power Association July 2009 Allocation Percents for First Six Years of Program 2012 2013 2014 2015 2016 2017 2018 Sec 726: To the Strategic Reserve 1.00% 1.00% 1.000/0 1.00% 1.00% 1.00% 1.00% These allowances are subtracted from the cap established in Sec. 721; all other are based on this reduced amount.! Sec. 781: Supplemental Reductions Reduced Deforestation 5.00% 5.00% 5.00% 5.00% 5.00% _ 5.00% 5.60% Sec. 782: auctioned and proceeds deposited in Treasury. Climate Change Consumer Refund Account For 2026-2050, any undesignated allowances are auctioned & APPA Position: APPA supports a phase out of allowance allocations to the electric sector that is consistent with the development of deployable technology, but we are concerned that the ; initial allocations to the electric utility sector of 35 percent of total emissions are not sufficient to cover our emissions in the short-term as such technology is being developed. This percentage for the electric utility sector should be increased to at least 40 percent of total emissions. (See further discussion of the allowance allocation methodology below.) Climate Change Consumer Refunds Sec. 789 (o. 941) and Sec. 782(r) (o. 881) RE American Public Power Association July 2009 I 1 In each year after deposits are made to the Climate Change Consumer Refund Account, the Secretary of the Treasury shall provide tax refunds on a per capita basis to each household in the U.S., and the total distributed shall equal the amount in the Account. Beginning in 2021, the Fund receives money from the future years' allowance auctions. Beginning in 2026, the Fund also receives money from the auction of any allowances remaining after all specified allocations, and — unless otherwise specified — from the auction of all allocated allowances that are not distributed by March 31 of the following year. Electric Sector Allowance Allocations Sec. 783 (pp. 886-921) The electric sector receives 35% of total allowances for 2016 through 2025, and the sector's allowances are phased out (declining by seven percentage points each year) by 2030. (The allocation percents are higher in 2012-2015 because the total cap is lower, as the industrial and natural gas LDC sector are not subject to the cap until 2014 and 2016, respectively.) Allowances go first to merchant coal generators and long-term contract generators, with the remainder distributed to electric LDCs. I Merchant coal generators are generation facilities that derive at least 85% of heat input from coal or petroleum coke and are not subject to retail rate regulation. Facilities owned by a federal, state, regional agency, or power authority are specifically excluded from the merchant coal generator definition. Merchant generators receive allowances equal to 50% of qualifying emissions, adjusted downward based on the overall decline in the total emissions cap each year. Qualifying emissions are based on megawatt -hours (MWHs) generated in the year multiplied by the unit's base period emissions rate. The base period rate is the average emissions rate for 2006-2008, except new merchant coal units may use the average emissions rate in their first calendar year of operation. New merchant coal units are units that came on line between January 1, 2009 and January 1, 2013, and for which actual on-site construction began prior to January 1, 2009. Allocations to merchant generators are limited to 10% of the electric allocation each year. The Federal Energy Regulatory Commission (FERC) is required to complete a study by July 1, 2014 to determine whether the merchant coal generator allocation is likely to result in 1, windfall profits. Long-term contract generators include qualifying independent power producers, small power production facilities, cogenerators, and electric cooperatives. The definition does not exclude merchant coal generators, who can choose to receive allocations under either (but not both) the long-term contract allocation or the merchant coal allocation. To qualify, generators must have entered into a contract prior to March 1, 2007 that does not allow for recovery of compliance costs, provided that such contracts are not between affiliated entities. Long-term contract generators can receive allocations equal to emissions from their qualifying sales in the vintage year, but in total, the allocation is limited to 4.3 percent of the electric allocation each year. v I An LDC is an electric utility (1) that has a legal, regulatory, or contractual obligation to deliver electricity directly to retail customers, regardless of what entity sells the electricity as a commodity to the retail customer; and (2) whose rates (except in the case of an electric cooperative) are regulated by a state regulatory authority, state or political subdivision (or M American Public Power Association July 2009 agency thereof), or an Indian tribe. LDCs receive all allowances remaining after the allocations to merchant coal and long-term contract generators. Allowances to LDCs are distributed 50% based on total retail sales and 50% based on emissions in retail sales. However, the amount that any LDC can receive is limited to the allowances necessary to offset any increased electricity costs (due to enactment of Title III) to the LDC's retail ratepayers. Any allowances that are withheld from LDCs because of this limitation will be distributed to the remaining LDCs based on emissions in retail sales. Allowances distributed based on retail sales are calculated using average retail electricity deliveries for 2006-2008, or any other 3 consecutive years between 1999 and 2008 that the LDC chooses. Every three years, the allocation percents based on retail sales will be updated to reflect increases in the number of customers in an LDC's service territory. The EPA Administrator will calculate the emissions attributable to retail sales for all LDCs, based on a 3 -year historical period (2006-2008, or any 3 consecutive years between 1999 and; 2008). The EPA Administrator will determine average CO2 emissions attributable to each LDC's retail sales for each year, 1999-2008, and will use the best available data, including regional fuel mix information. Different methodologies may be applied in different regions if' appropriate to obtain the most accurate estimate. The Administrator must adjust historical emissions in retail sales estimates for coal plants that came online between 2006 and 2008 to reflect emissions that would have occurred had the , plants been operating for the whole 2006-2008 time period. For 2012 and 2013 allocations, the Administrator must adjust an LDC's emissions attributable to retail sales to reflect emissions' that would have occurred if new coal -fueled units were in operation during the historical period. For allocations in 2014 and later, an LDC that owns, co-owns, or purchases power from a new coal unit can elect to choose calendar year 2012 as its historical emissions base. New coal - fueled units are those that began operation between January 1, 2009 and January 1, 2013. LDC allowances must be used exclusively for the benefit of retail ratepayers. The benefits must be distributed among ratepayer classes, and no LDC may use allowances to provide any ratepayer a rebate that is based solely on the quantity of electricity delivered to the customer.: There is an exception for industrial customers: LDCs are required to pass on to these customers their share of the allowance value, and this can include rebates or rate reductions based solely, on the quantity of electricity delivered. There are extensive regulatory and reporting requirements to ensure the proper use of the allowances. There is a separate allocation to small electric LDCs. For any given year, a small LDC is one' that delivered less than 4 million MWHs of electric energy directly to retail customers in the. preceding year. The small LDC allocation is 0.5% of the emissions cap through 2025, declining to zero in 2030. Allowances are distributed based on the same measure of historic emissions in retail sales as used in the regular electric LDC allocation. The value of the allowances must be used for programs to achieve electricity savings; deployment of renewable energy technology; and programs to reduce electricity costs for low-income residential ratepayers. 091 American Public Power Association July 2009 Finally, there is a small, 0.35% allocation in 2012 to qualifying large coal-fired cogenerators that sell steam or electricity solely to multiple, separately -owned industrial or commercial facilities co -located at the same site with the cogeneration facility. Allowances may be distributed over a period of years. The purpose of the allocation is "to avoid disincentives to the continued use of existing energy-efficient cogeneration facilities at industrial parks." The following table shows electric sector allowances, including an estimate of the amount of allowances available for LDCs. HR 2454, Allowances Allocated to Electric Sector Electric sector allocation %s are applied AFTER Strategic Reserve %s are deducted from the cap.(Strategic Reserve % is 1 % through 2019; 2% for 2020.2029 & 3% thereafter.) All allowances are in millions, and one allowance = 1 metric ton of CO2. I Cap less To Small LDCs To Electric Sector To Long -Term Allowance Strategic Percent Percent To Merchant Contract Remaining Cav Reserve % of Cao Allowances of Cao Allowances Coal Generators for LDCs l (maximum of electric sector:) (10%max.) (4.3%max.) 2012 4,627 4,581 0.50% 23 43.75% 2,004 200 86 1,717 2013 4,544 4,499 0.50% 22 43.75% 1,968 197 85 1,687 2014 5,099 5,048 0.50% 25 38.89% 1,963 196 84 1,682 2015 5,003 4,953 0.50% 25 38.89% 1,926 193 83 1,651 2016 5,482 5,427 0.50% 27 35.00% 1,900 190 82 1,628 2017 5,375 5,321 0.50% 27 35.00% 1,862 186 80 1,596 2018 5,269 5,216 0.50% 26 35.00% 1,826 .183 79 1,565 2019 5,162 5,110 0.50% 26 35.00% 1,789 179 77 1,533 2020 5,056 4,955 0.50% 25 35.00% 1,734 173 75 1,486 2021 4,903 4,805 0.50% 24 35.00% 1,682 168 72 1,441 P 2022 4,751 4,656 0.50% 23 35.00% 1,630 163 70 1,397 2023 4,599 4,507 0.50% 23 35.00% 1,577 158 68 1,352 2024 4,446 4,357 0.50% 22 35.00% 1,525 152 66 1,307 2025 4,294 4,208 0.50% 21 35.00% 1,473 147 63 1,262 2026 4,142 4,059 0.40% 16 28.00% 1,137 114 49 974 2027 3,990 3,910 0.30% 12 21.00% 821 82 35 704 2028 3,837 3,760 0.20% 8 14.00% 526 53 23 451 2029 3,685 3,611 0.10% 4 7.00% 253 25 11 217 2030 3,533 3,427 0.00% 0 0.00% 0 0 0 0 APPA Position: APPA supports allocation of all electric sector allowances to LDCs only.(APPA also supports the revised definition of LDCs, which now includes all public power entities that serve load.) Thus, APPA opposes inclusion in the bill of the allocation of a portion of the electricity sector allowances directly to owners of unregulated merchant coal generation units. Any electric sector allowances given directly to merchant generators means those allowances would not be available to help soften the impact of pricing carbon on consumers, through their LDCs. 092 American Public Power Association July 2009 Moreover, since these generators are not owned by a regulated utility, the state commissions would have no way to ensure that consumers would receive the benefits of these free allowances. Finally, even under a free allocation methodology, generators will still add the opportunity cost to their price charged for electricity and to their bids in Regional Transmission Organization (RTO) run spot markets. Due to the structure and operation of these RTO -run . markets, this will further exacerbate the increase in the cost of achieving carbon reduction goals by raising the price of all electricity sold in these markets — including renewable and nuclear generation which emit no carbon — and will severely distort the market price signals for carbon that are integral to the success of any cap and trade program. Auctions Procedures Sec. 791 (P. 943) The EPA Administrator will establish regulations for auctioning allowances. Auctions will be held four times a year, beginning March 31, 2011, at the latest. At each auction, allowances for the current year (beginning in 2012) and a portion of allowances covering periods up to four ; years in the future will be offered. Auctions will be conducted under a single -round, sealed -bid, uniform -price format. Any person that meets financial assurance requirements may participate in auctions, and no entity can purchase more than 5% of allowances offered for sale at any quarterly auction. There is a minimum reserve auction price of $10 for auctions occurring in 2012, and the minimum will increase each year by 5% plus the rate of inflation as measure by the Consumer Price Index for all urban consumers. Each bidder must disclose any entity or person who is sponsoring or benefiting from the bidder's participation. After the auction, the Administrator will publish the identities of winning bidders, the quantity of allowances obtained by each bidder, and the clearing price. For the years 2012-2024, the Administrator shall set aside a specified percent of allowances to be held in a reserve for small business refiners. These refiners can purchase allowances for the current vintage year at the average auction price for allowances of the same vintage year that were purchased in auctions conducted in the preceding 12 months. Sec. 792 (p. 949) An entity that holds allowances may request the EPA Administrator to auction the allowances on consignment. APPA Position: Given our experiences with certain auctions, including those in RTO -markets, and other issues, APPA has serious concerns about auctioning allowances, and therefore appreciates the allocation of allowances to the electric utility sector included in the bill. i Offsets and International Allowances Sec. 722(d) (u. 74 0) Covered entities can comply with the requirement to submit emissions allowances issued under this program using alternative methods. Covered entities, collectively, can use offset credits to comply with up to 2 billion (metric) tons of GHG emissions each year. Individually, a covered entity can satisfy up to a certain 093 American Public Power Association July 2009 percentage of its requirement using offset credits. The percentage is computed by dividing 2 billion by the sum of 2 billion plus the prior year's cap. (This calculation equals 27% to 31% of the compliance obligation through about 2025, with the percentage increasing each subsequent year and reaching over 60% by 2050.) No more than half of the total percentage allowed in each year can be met by domestic offsets and no more than half can be met by international offsets. However, if the EPA Administrator determines that domestic offsets are likely to offset less than 0.9 billion metric tons of GHG in a given year, the Administrator may increase the percent of emissions that can be offset through international offsets. A covered entity must turn in one domestic offset credit or one international offset credit for each required emission allowance. Beginning in 2018, a covered entity must turn in 1.25 international offset credits for each required emission allowance. In any year, a covered entity can submit international allowances or compensatory allowances to satisfy its compliance requirements. Term offset credits are established under Title V of the bill — Agricultural and Forestry Related Offsets (which is administered by the Department of Agriculture), and may be used instead of domestic offset credits to temporarily demonstrate compliance. Term offset credits expire up to five years after they are issued. Once the term offset credit expires, covered entities that use these credits must demonstrate final compliance by replacing them with an allowance, domestic offset credit, or another non -expired term offset credit. Covered entities that use term offset credits must demonstrate financial assurance that they will have sufficient resources to obtain the necessary allowances or offset credits to demonstrate final compliance. APPA Position: APPA supports the broad availability of greenhouse gas offsets in connection with any cap -and -trade market from projects that achieve emission reductions. Qualified offsets should be additional, permanent, independently verified, enforceable, and measurable. In addition, offset allowances should be available from an expansive set of sectors and activities without arbitrary geographic or quantity limits on the use of qualified offsets to meet cap requirements. A workable offsets program is important in'the absence of a safety valve or other equally stringent cost containment mechanism. We believe that the cost containment function of the offsets program established in the bill is questionable. The program is also cumbersome as drafted and could potentially quell participation. Penalty for Non -Compliance Sec. 723 (p. 750) A covered entity that does not hold sufficient allowances on the compliance date must: (1) pay a penalty equal to the number of additional allowances needed to comply multiplied by twice the auction clearing price for the earliest vintage year of allowances sold at the most recent auction; and (2) submit in the following year the amount of allowances needed to make up for the shortfall. M American Public Power Association July 2009 Banking and Borrowing Sec. 725 (p. 754) An allowance can be used to meet the compliance obligation requirements for emissions in th'e vintage year or any subsequent year. In addition, an allowance may be used to meet compliance obligations for emissions in the calendar year immediately preceding the vintage year for the' allowance. No interest is charged. A covered entity can satisfy up to 15% of its obligation by borrowing allowances from a vintage 1 to 5 years later. These must be paid back with "interest" at the time that allowances are borrowed — interest is retirement of a number of allowances equal to 0.08 times the number of years until the vintage year. Strategic Reserve Sec. 726 (p. 757) Strategic reserve allowances shall be auctioned each quarter, and only covered entities can participate in the auction. An entity can purchase up to 20% of its annual obligation, but no entity can purchase more than 20% of the allowances offered for sale. A percentage of each year's allowances will be assigned to the strategic reserve: I% of the 2012-2019 allowances; 2% of the 2020-2029 allowances; and 3% of the 2030-2050 allowances. These allowances are allocated from the total pool of allowances established in Sec. 721 before any other allocations. All other allocation percents established in the bill are percents of the Sec. 721 allowances minus the amount allocated to the strategic reserve. In addition, any allowances offered for sale in a regular auction (under Sec. 791) but were not sold will be transferred to the strategic reserve. The allowances offered for sale each year are limited to 5% of the total emissions budget in '. 2012-2016 and 10% in 2017 and subsequent years. They will be sold at a single -round, sealed - bid, uniform -price auction at a minimum price, and any unsold amounts will be returned to t* reserve. (There is no provision for allowances that are assigned to the strategic reserve but never purchased in a strategic reserve auction.) The minimum strategic reserve auction price in 2012 is $28 (in constant 2009 dollars), and this is increased by 5%o, plus the inflation rate, in 2013 and 2014; the minimum price is 60% above a rolling 36 -month average market price in 2015 and subsequent years. Proceeds from strategic reserve auctions shall be deposited in the Strategic Reserve Fund, and the fund will be used to purchase international offset credits for reduced deforestation; these credits shall be retired and 80% of the amount converted to emissions allowances. These allowances may be used to fill the strategic reserve to its original size; allowances in excess of this amount may be assigned a vintage year and treated as part of the deficit reduction or climate change consumer refund pools (in accordance with Sec. 782(q) and Sec. 782(r)). APPA Position: Any federal cap -and -trade regime should achieve the goals established by i ' Congress with the least possible adverse economic impact on consumers of energy and the US. economy. Thus, such a program must include a safety valve (which sets a maximum allowance price) or other stringent cost control mechanisms that mitigate price volatility and protect 10 095 American Public Power Association July 2009 consumers. H.R. 2454 does not include a safety valve, and none of the other mechanisms intended to mitigate costs (offsets, strategic reserve, banking and borrowing) are sufficient. Carbon Market Assurance Sec. 341 (p. 1027) . This section establishes Part IV of the Federal Power Act, giving FERC oversight and assurance of carbon markets. FERC shall promulgate regulations for markets for regulated allowances (emission allowances, compensatory allowances, offset credits, and Federal renewable energy credits). Among other requirements, the regulations shall: prohibit fraud, market manipulation and excess speculation; ensure market transparency to allow for efficient price discovery; include position limits and margin requirements for market participants; limit counterparty risks and market power concentration risks associated with over-the-counter trading; and establish standards to qualify for trading facilities for regulated allowances. FERC is given enforcement authority, including a civil penalty of up to $1 million per day per violation. Felony penalties (fines up to $25 million and imprisonment up to 20 years) are established for fraud and false statements made in connections with transactions involving regulated allowances. In addition, a person convicted of these felonies cannot hold or trade regulated allowances for up to five years. A working group is established. to make recommendations to the Commodity Futures Trading Commission (CFTC) regarding oversight of regulated allowance derivations. FERC and the CFTC must submit annual reports on markets for allowances and allowance derivatives. Sec. 342 (p. 1045) The Commodity Exchange Act is amended to give the CFTC oversight of regulated allowance derivatives. APPA Position: Any federal cap -and -trade regime for carbon or greenhouse gases should provide for effective market oversight, including strong enforcement and penalties, to prevent market manipulation so that costs to consumers are minimized, market participants retain confidence in the market, and the market produces the desired environmental benefits in the most efficient and cost-effective manner. Additional Market Assurance Sec. 351 (p. 1046) k The bill amends the Commodity Exchange Act to provide additional regulation of derivative transactions in energy commodities, defined as coal, petroleum products, natural gas, electricity, and other energy sources. "Energy commodity" is removed from the definition of "exempt commodity." The Commodity Futures Trading Commission (CFTC) is given oversight of swaps involving energy transactions, and the exemption for over-the-counter swaps related to energy commodities is eliminated. CFTC jurisdiction is also extended to include energy transactions on foreign boards of trade. The CFTC is required to establish uniform speculative 11 096 American Public Power Association July 2009 position limits for energy transactions. There are also additional reporting and data requirements. The bill establishes a definition of "bona fide hedging transaction" Among other requirements, the transaction must be economically appropriate to the reduction of risks in the conduct of a commercial enterprise. (This provision addresses the swaps loophole, which allows institutional investors to use swaps to avoid position limits.) Sec. 352 (p. 1056) The Commodity Exchange Act is amended to make clear that nothing in the Act shall be interpreted to affect the jurisdiction of FERC in regard to FERC authorities under the Federal: Power Act and Natural Gas Act. APPA Position: Since the bill removes energy commodities from the exempt commodity ' category, energy derivatives must be traded on a CFTC -regulated exchange. The same would be true of carbon market derivatives, as they are non-agricultural and not specifically exempt. We believe that there are better ways to accomplish the goals of greater transparency and effective regulatory oversight of over-the-counter (OTC) energy derivatives and commodities markets without mandatory clearing or forcing these products to be moved onto an exchange, which can unnecessarily increase costs to consumers, and will work to modify these provisions going forward. Sec. 385 (o. 1077) Sec. 351, Sec, 352, and the market assurance provisions in Sec. 354-257 will be automatically repealed upon passage of legislation that includes regulatory reform of derivatives markets. Exchange for State -Issued Allowances Sec. 790 (p. 941) Emissions allowances issued by California, the Regional Greenhouse Gas Initiative, or the Western Climate Initiative prior to December 31, 2011 may be exchanged for allowances issued under Title VII. The exchange shall provide the entity with an amount sufficient to compensate for the cost of the state allowances. Relation to States Sec. 721(d) (R.724) The cap -and trade program established in Title VII of the Clean Air Act does not require any changes in state rate regulation, the Federal Power Act, or any program for competitive bidding for power supply in a state in which such program is established. Sec. 740 (p. 800) and Sec. 795 (p. 952) Under Sec. 740, the Administrator shall issue offset credits for projects. that were started after: January 1, 2001 and that received offset credits under a GHG emission offset program established by State or Tribal law or regulation prior to January 1, 2009. The program must also meet certain standards. Credits are limited to reductions or avoidance of GHG emissions that: occur after January 1, 2009, and up to three years after the bill's enactment or the time the Title VII offset program takes effect, whichever occurs first. 12 097 American Public Power Association July 2009 Sec. 795 provides that any person holding an offset credit that meets the Sec. 740 criteria can exchange the credit for an emissions allowance. In addition, entities that do not meet the Sec. 740 criteria but can satisfactorily document early reductions (between January 1, 2001 and January 1, 2009) can also receive emissions allowances. Sec. 782(t) allocates allowances to the Sec. 795 program in an amount equal to 1% of the 2012 cap. Sec. 334 (p. 1017) Section 116 of the Clean Air Act (CAA) provides that nothing in the CAA precludes a state (or a political subdivision) from adopting emission standards or requirements to control air pollution as long as the state standard is not less stringent than CAA requirements. H.R. 2454 amends Section 116 to include state (or political subdivision) programs that cap GHG emissions and require submission of allowances or offset credits. See 861 (page 1018) Notwithstanding section 116 of the CAA, no State or political subdivision shall implement or enforce a cap and trade program that covers capped emissions during the years 2012 through 2017. The term "cap and trade" does not include a target or limit on GHG emissions adopted by a state or political subdivision that is implemented other than through the issuance and surrender of a limited number of tradable allowances. It does not include other standards, limits, regulations, or programs to reduce GHG emissions. And it does not include requiremerits that fuels or other products meet an average pollution emission rate or lifecycle GHG standard. APPA Position: Given the ubiquitous nature of GHG emissions and the need for one set of clear, predictable goals for the electric utility sector to reduce such emissions, APPA believes that a national GHG reduction program should preempt state and regional programs. H.R. 2454 does not do so. Relationship to Other Parts of the Clean Air Act (CAA) Sec. 811 (p. 956) EPA is required to establish standards of performance under section 111 of the CAA for stationary sources whose GHG emissions are not capped and that meet certain size requirements. Standards of performance under section 111 will not be established for GHG emissions from a capped source. The final House -passed version of H.R. 2454 offers an improvement from prior iterations because all electric utilities are presumed to be "capped" sources. The bill, therefore, no longer provides a continuing risk of federal BACT (New Source Review Part D) for retrofit of carbon capture & geosequestration (CCS) or even for a New Source Performance Standard (NSPS) which is a natural gas equivalent. APPA Position: This is a major improvement. While this section would not preclude a state F' from passing a new law or regulation on coal-fired power plants, it does greatly diminish the "SACT" threat to the existing coal-fired (or even gas) generation for CO2 controls. Note: The language in Section 811 now applies to industrial and commercial sector since they are p "uncapped" units. This CAA regulatory language could conceivably apply to CO2 or methane emissions from a municipal government source but not from a municipal electric utility since 13 098 American Public Power Association July 2009 they would be presumed to be "capped." (The "capped" definition even applies to those units that do not meet the threshold for cap -and -trade.) Sec. 831 (p. 962) No greenhouse gas may be added to the list under section 108(a) of the CAA on the basis of its effect on climate change. (Section 108(a) requires the EPA Administrator to list air pollutants which may reasonably be anticipated to endanger public health or welfare. The Administrator is obligated to issue air quality criteria for an air pollutant within 12 months after it is listed.) Sec, 832 (p. 963) Section 115 of the CAA shall not apply to an air pollutant with respect to that pollutant's contribution to global warming. (Section 115 relates to air pollutants emitted in the U.S. that may endanger public health and welfare in a foreign country.) Sec. 833 p. 963) No greenhouse gas may be added to the list as a hazardous air pollutant under section 112 of the CAA unless it meets the listing criteria independent of its effects on climate change. (Section; 112 covers hazardous air pollutants.) Sec. 834 (P. 963) New source review. provisions in Part C of Title I shall not apply to a major emitting facility that is initially permitted or modified after January 1, 2009, on the basis of its emissions of any greenhouse gas. APPA Position: The language covering Part D of Title I (for nonattainment areas) is not as clear as it should be. This language on Section 834 does not preempt any pending lawsuits against power plants for CO2 which would mean a NAAQS. This section may need additional clarification going forward. Sec. 835 (P. 963) No stationary source shall be required to operate pursuant to a Title V permit solely because the source emits any greenhouse gases that are regulated solely because of their effect on global climate change. APPA Position: The language as written is good, but could be improved upon to clarify "solely" since Title V's operating permit program also includes a $45 per ton emissions fee (currently applied only to criteria pollutants at utilities). Sec. 727 (p. 770) The CAA's Title V permitting program shall be used to implement the provisions of the GHG cap -and -trade program for stationary sources that are covered entities and are already subject to the Title V permitting program. Any permits issued by EPA or a state shall prohibit annual emissions of greenhouse gases in excess of the number of emissions allowances held by the covered entity. A covered entity's statement that it holds sufficient allowances to cover its annual emissions is sufficient to meet the proposed and approved compliance planning 14G American Public Power Association July 2009 requirements of Title V. This language does not preclude a state from requiring an operating permit (or fee) under a state program and wouldt merit clarification in a Senate bill. APPA Position: APPA supports preemption of the Clean Air Act in any GHG reduction legislation. H.R. 2454 does not completely do so although the final bill is a significant improvement over prior iterations. APPA is undertaking further analysis of Title VII's Global Warming Pollution Reduction Program Part A and B to determine if, with certainty, the existing Clean Air Act could not be used for regulation once 450 ppm CO2 concentrations or a two degree in temperature change is triggered. (See pages 678-699.) 15 100 R AZUSA L OMI6 WATEK INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: BOB TANG, INTERIM DIRECTOR OF UTILITIES Z DATE: JULY 27, 2009 SUBJECT: SAN GABRIEL VALLEY MUNICIPAL WATER DISTRICT'S PUBLIC EDUCATION PROGRAM The San Gabriel Valley Municipal Water District (SGVMWD), a.k.a. Four Cities District, supplies State Water Project water to the cities of Azusa, Alhambra, Monterey Park and Sierra Madre. In recent years, the SGVMWD has more actively promoted water conservation within the service areas of its member cities through various outreach programs. The latest program includes using bus shelters for posters to promote water conservation. At the writing of this report, the following bus shelters are in use for this program: • On Foothill Blvd. in front of T -Burger • On Azusa Avenue north of 210 Fwy near Arco Station • On San Gabriel south of Sierra Madre Photos of posters in first bus shelter listed above are attached for your reference. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities 933" ERM EMM Azusa Bus Shelters Azusa Bus Shelters 005.0PG 006.0PG 10