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HomeMy WebLinkAboutAgenda Packet - July 23, 2012 - UB�9 AGENDA REGULAR MEETING OF AZUSA UTILITY BOARD AZUSA LIGHT & WATER 729 N. AZUSA AVENUE AZUSA, CA 91702 AZUSA UTILITY BOARD ANGEL CARRILLO CHAIRPERSON URIEL E. MACIAS VICE CHAIRPERSON KEITH HANKS BOARD MEMBER 6:30 P.M. Convene to Regular Meeting of the Azusa Utility Board A. 1 • Call to Order • Pledge to the Flag • Roll Call PUBLIC PARTICIPATION JULY 23, 2012 6:30 P.M. JOSEPH R. ROCHA BOARD MEMBER ROBERT GONZALES BOARD MEMBER (Person/Group shall be allowed to speak without interruption up to five (S) minutes maximum time, subject 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.) 1 00-1. B. UTILITIES DIRECTOR COMMENTS C. UTILITY BOARD MEMBER COMMENTS r D. 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. 1. Minutes. Recommendation: Approve minutes of regular meeting on June 25, 2012 as written. D-1. Mins 6-25. pdf 2. Authorization to Register and Create an Account with the GHG Compliance Instrument Tracking System. Recommendation: Authorize the Director of Utilities to register and create an account with the Compliance Instrument Tracking System Service (CITSS) as required by the California Air Resources Board (CARB) and administer, either directly or through his designee(s), any activities associated with the account, as needed for AB 32 compliance. D-2. CUSS Reg Rpt.pdf 3. Approval of Professional Services Agreement with SA Associates. Recommendation: Approve a Professional Services Agreement in amount of $58,000 with SA Associates to provide inspection services for Water Main Replacement Project W-265. 63. Insptn Svc for W-265.pdf 002 r*' E. SCHEDULED ITEMS 1 Approval of (1) First Amendment to the Lodi Energy Center (LEC) Project Management and Operations Agreement: and (2) Resolution to Appoint LEC Project Representatives for GHG Matters. Recommendation: (1) Approve the First Amendment to the LEC Project Management and Operations Agreement and authorize execution by the Director of Utilities; and (2) approve the following resolution appointing representatives of the City to provide GHG compliance directions to the LEC Project. ; 9 ' A RESOLUTION OF THE CITY COUNCIL AND UTILITY BOARD OF THE CITY OF AZUSA, CALIFORNIA, APPOINTING REPRESENTATIVES OF THE CITY TO PROVIDE GHG COMPLIANCE DIRECTIONS TO THE LEC PROJECT. It 11 E-1.1. LEC PMOA E-1.2. PMOA E-1.3. LEC RESO.pdf Rpt.pdf Armdmt.pdf Recommendation: Ratify the execution of the water Company. �I E-2. Wtr Rt Lease.pdf lease agreement with Canyon Water 3. Approval of Request for Proposals (RFP) for Consulting Services to Assist Azusa in Formulating Least Cost AB32 Compliant Can -and -Trade Strategies and Alternatives. Recommendation: (1) Approve the scope of work for Request for Proposals (RFP) to assist Azusa Light & Water in assessing and selecting best/viable Greenhouse Gases (GHG) auction and Compliance Instrument trading alternatives and strategies; and (2) authorize issuance of the RFP for consulting services. E-3. RFP for GHG • Consuting Svcs.pdf 4. Approval of an Amendment to Rate Schedule 11EDR-2" Revising Economic Development Rate Discounts for Qualified Non -Residential Electric Customers. Recommendation: Adopt the following resolution approving the amended Schedule Economic Development Rate -2 (EDR-2). A RESOLUTION OF THE CITY COUNCIL AND UTILITY BOARD OF THE CITY OF AZUSA, CALIFORNIA, AMENDING ELECTRIC UTILITY RATE SCHEDULE "EDR-2 ECONOMIC DEVELOPMENT RATE" PROVIDING ECONOMIC DEVELOPMENT INCENTIVES FOR QUALIFIED COMMERCIAL AND INDUSTRIAL ELECTRIC CUSTOMERS. wit % W11 E-4.1. EDR Rpt. pdf E-4.2. EDR-2 E-4.3. EDR-2 Reso.pdf Schedule.pdf 3 °, OG3. F. STAFF REPORTS/COMMUNICATIONS 1. CMUA Legislative Update F-1.1. CMUA Leg F-1.2. CMUA Update. pdf Update.pdf 2. San Juan Update trt � � J F-2. SJ Update.pdf - 3. Expansion of City of Glendora Water Production Facilities in Azusa (Verbal) 4. Update on "Section 27" of the Main San Gabriel Valley Water Basin Regulations (Verbal) G. ADJOURNMENT , �I 1. 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 r members of the public at the following locations: Azusa City Clerk's Office - 213 E. Foothill Boulevard, Azusa City Library - 729N. Dalton Avenue, and Azusa Light & Water -729 N. Azusa Avenue, Azusa CA." L 004 J um i qty : �•��.�1-�•� ���-t� ��.� July 23, 2012 Chair Angel Carrillo '4 � r� AZUSA LIGHT & WATER Utilities Director Comments 2 R AZUSA LIGHT 6 WATER Uti i ity = ���.� r�•i � �}tl� r���=���tti AZUSA LIGHT & WATER June 25, 2012 Minutes 0 GHG Compliance Instrument Tracking System Professional Services Agreement w/ SA Associates ($58,000) 0 AZUSA L 1'G H i 6 WATER gym- wFco (.)oi I c (e ° PMOA is "Project Management and Operations Agreement" for LEC ° Since PMOA's establishment in 2010, CARB has adopted "Cap -and -Trade" Program It is necessary to amend PMOA to reflect the impact of Cap -and -Trade 141 AZUSA LIGHT b WATER Cap -and -Trade • Program began in 2012 with enforcement beginning next year (2013) C7 . "Covered Entities" are given right to emit a limited amount of GHG per year The `right to emit' GHG is conveyed by Allowances Covered entities like Azusa receive free Allowances based on historical emissions Free Allowances decline annually with a total reduction of 15% by 2020 7 AZUSA LIGHT & WATER Fir-�t Ar1��-����•�if��-��7t o Provides NCPA, as LEC owner/operator, legal authority to comply with Cap -and -Trade o Allows Participants to transfer Allowances to NCPA in lieu of paying NCPA to acquire Alternatively, Participants can direct NCPA to acquire Allowances on their behalf o Participant's responsible for pro rata share of costs of compliance Participants required to appoint representative to," 41 provide Cap -and -Trade direction to NCPA AZUSA LIGHT 8 WATER Recommendation • That the Utility Board: —Approve PMOA First Amendment — Appoint Director of Utilities as Azusa authorized representative for LEC Cap -and -Trade matters — Appoint Assistant Director of Resource Management as alternative representative '�YVY 9 AZUSA L I G H T 6 W AT E N Rtifii�:�.�ti���� Azusa Utility Board July 23, 2012 ki AZUSA LIGHT G W A T E R t.�c-:k�•�r-�.���rlci ° Temporary suspension of Section 27 Watermaster rule allows Azusa opportunity to lease surplus water rights ° When rule suspended, Azusa can purchase its full Allocation of State Water Project water and free up additional water rights for leasing. ° SWP water priced at $130 per acre-foot Lease market price reflects price for Main Basin VIE replacement water AZUSA LIGHT 6 WATER Azusa was successful in leasing 4000 AF to Canyon Water Company Price of $450/AF for 4000 AF equals $1.8 million Leases typically consummated during last few days of fiscal year UB Resolution 09-C69 delegates authority to staff to consummate lease transactions subject to ratification 12 AZUSA U G H i & W ATE F Recommendation • That the Utility Board ratify the FY12 water lease transaction with Canyon Water Company 13 AZUSA LIGHT & WATER Cap mandmTrad a Strategy Azusa Utility Board July 23, 2012 4 .ki I'r"` AZUSA LIGHT L WATER ° Cap -and -Trade rules for GHG are being finalized by Air Resources Board (CARB) o Annual emissions "cap" has been set for certain covered load -serving entities like Azusa ° Annual allowances will be issued to Azusa reflecting its historical GHG emissions If actual emissions exceed free Allowances, additional Allowances or Offsets must be purchased -,Z 15 AZUSA LIGHT & WAT EV. o Managing Allowances expected to be complex o IOUs and CAISO-connected POUs must sell all free Allowances in quarterly CARB operated auctions (first in November 2012) This "Trade" portion of Cap -and -Trade allows those desiring or needing allowances to obtain same (including professional traders) Secondary trading markets expected also 16 AZUSA LIGHT b WATER ° Azusa forced to sell its free Allowances in CARB auctions and to buy back allowances from auctions or free market o Auction rules complex including posting of security ° Auction floor price of $10/Allowance with a 6i soft cap of $50/Allowance s o��` o This creates substantial market risk for Azusa and other similar POU's `*,w 17 AZUSA L I G H I 6 W AT L R v The trading issues related to Cap -and -Trade are complex and serious, partly due to newness/uncertainty of the program ° Staff believes it may be prudent to obtain outside assistance to develop GHG trading & procurement (i.e. compliance) strategies m AZUSA LIGHT & WATER o Document the mechanics of CARB auctions o Identify prudent strategies to buy, sell and trade compliance instruments ° Optimize cash flows from auction participation and Allowance acquisition ° Assure compliance with rules regarding use of auction revenues ° Establish mechanism to manage/minimize risks of Compliance instrument auctions and ,, trading �`� 19 AZUSA LIGHT 6 WATER RE"t:t�)I1liTlE"Il C���•��I [��Il That the Utility Board: —Approve RFP Scope of Work for development of GHG compliance strategies — Authorize staff to issue RFP for consulting services 20 AZUSA LIGHT b WATER I Azusa Utility Board July 23, 2012 AZUSA LIGHT & WATER On June 25, 2012, the Utility Board approved E D R-2 o Five year program with base electric discount of 15% Large industrial customers and entities developing "City -owned" property can get extra discounts in years 1- 3 o At the meeting, Staff was requested to look at mechanism to recover discounts from customers who move out of the City before 5 yrs is over 0A �ryr AZUSA L i G H i 6 W P i E R ° Customers who receive a discount in excess of 15% would be required to refund a prorata portion of the discount if they did not remain a customer for 5 years.. Example: Customer terminating service after 40 months (i.e. 20/60) would lose 1/3 of discount received over 15% /o 5 o Amount would be billed to customer at closing. Other than deposit, no security is proposed at this time. -3M 23 AZUSA LIGHT 6 WATER ° Gave qualified customer 60 days to apply for EDR-2 program following start of service Provides 15% discount to existing large industrial customers that expand existing load by over 100 KW with 50 percent load factor 24 AZUSA LIGHT h WATER That the Utility Board approve a Resolution amending EDR-2 effective on July 24, 2012 25 AZUSA LIGHT 6 W A l E 9 Ir7fic•}r�T��.�tit•��� o CMUA Legislative Update o San Juan Update Expansion of Glendora Water Facilities in Azusa Update on "Section 27" of Watermaster regulations 26 AZUSA LIGHT d WATER AZUSA IIGMI l NATER CITY OF AZUSA MINUTES OF THE REGULAR MEETING OF THE AZUSA UTILITY BOARD/CITY COUNCIL MONDAY, JUNE 25, 2012 — 6:30 P.M. The Utility Board/City Council of the City of Azusa met in regular session, at the above date and time, at the Azusa Light and Water (AL& W) Conference Room, located at 729 N. Azusa Avenue, Azusa, California. Boardmember Gonzlaes called the meeting to order and led in the Flag Salute. Call to Order ROLL CALL Roll Call PRESENT: BOARD MEMBERS: GONZALES, MACIAS, HANKS, ROCHA ABSENT: BOARD MEMBERS: CARRILLO ALSO PRESENT: Also Present City Attorney Ferre, City Manager Makshanoff, Director of Utilities Morrow, Assistant to the Utilities Director Kalscheuer, Pubic Works Director/Assistant City Manager Haes, Assistant Director of Electric Operations Langit, Police Captain Momot, Assistant Director of Water Operations Anderson, Assistant Director of Resource Management Lehr, Electric Test Technician Beterbide, Assistant Director of Customer Service and Care Vanca, City Clerk Mendoza, Acting Deputy City Clerk Hernandez. PUBLIC PARTICIPATION Pub Part Mr. Jorge Rosales addressed Board Members regarding items D-5, solicitation of proposals to provide J. Rosales inspection services for project W-265, and asked ifformal bidding procedures applied to this project; and E-1, Comments two proposed electric vehicle public charging stations, expressing his concern for this expense during the economic times. Mr. Mike Lee addressed Board Members wishing good luck to Ms. Candace Toscano for her recent retirement M. Lee from city employment; inquired on the location of a proposed parking structure; and made comments regarding Comments a newspaper article on homeless. At this time, the meeting was taken over by Vice Chairman Macias who apologized for his tardiness. Chairman Takes Mtg. Utilities Director Morrow responded to question posed on project W-265 stating that the list of possible G. Morrow bidders is of those who have stated interest in the project, and the project will also be advertised should Responds to additional companies be interested in bidding. Question 0GS UTILITIES DIRECTOR'S COMMENTS Director's Comments Utilities Director Morrow gave a slide presentation on the Lodi Energy Center Dedication to be held on August 10, further information will be given; and he showed a video on "Pride in Public Power." UTILITY BOARD MEMBERS COMMENTS 12154,, The CONSENT CALENDAR consisting of Items D -I through D-7, was approved by motion of Board Consent Cal Member Hanks, seconded by Board Member Gonzales and unanimously carried*, with the exception of item D 4 Spec Call D-4 which was considered under the Special Call portion of the Agenda. The minutes of the regular meeting of May 29, 2012, were approved as written. Min appvd 2. The Mayor was authorized to execute a Two -Year Extension Agreement of the Low Income Home LIHEAP Energy Assistance Program (LIHEAP) with the State of California; and the following Resolution was Agmnt adopted and entitled: Extension A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, EXTENDING THE LOW Reso INCOME HOME ENERGY ASSISTANCE PROGRAM FOR AZUSA RESIDENTS. 12-C43 3. A Certain Grants of Easement from Los Angeles County Flood Control District accepting permanent LACo grants of easement for Water Project W-265 was accepted; the following Resolution was adopted and Easement entitled, and City Clerk was authorized to file it at the Office of Los Angeles County Recorder: Proj W-265 A RESOLUTION OF THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA Reso ACCEPTING CERTAIN GRANT OF EASEMENT AND DIRECTING THE RECORDING 12-C44 THEREOF. 4. SPECIAL CALL Spec Call 5. Solicitation for Proposals to Provide Inspection Services for Water Main Replacement Project W-265 in RFP Lark Ellen Avenue, Brockport Street, Bellbrook Street, Vogue Avenue, Benwood Street, Benbow Street, Proj.W-265 and Cypress Avenue in Los Angeles County, near West Covina was approved. 6. The Azusa Light & Water 2011 Power Source Disclosure Report and Posting was approved. 2011 Pwr Score Disc Rprt 7. The clarified Appendix D-1 of the Azusa Power Resources Risk Management Policy was approved. Risk Mngmnt Policy SPECIAL CALL ITEMS Spec Call 4. Approval of Contract with J De Sigio Construction Incorporated for Water Main Replacement Project Agreement W-265. J. De Sigio Construction Boardmember Hanks addressed the item requesting staff to collect samples of the removed pipes to Water Main visually see the damaged. Replacement Proj W-265 Moved by Boardmenber Hanks, seconded by Boardmember Rocha and unanimously carried*, to award a contract to J. De Sigio Construction, Inc. for Water Main Replacement Project W-265, which includes replacement of 6,200 linear feet of water main of various sizes and appurtenances in Lark Ellen Avenue, Brockport Street, Bellbrook Street, Vogue Avenue, Benwood Street, Benbow Street, and Cypress Avenue in Los Angeles County, near West Covina in amount not -to -exceed $1,429,780. 06/25/2012 PAGE TWO 000 SCHEDULED ITEMS: Utilities director Morrow introduced the item stating that this has been an ongoing effort to find options to minimize the cost of installing Electric Vehcile (EV) charging stations units, This is a national project managed by the Department of Energy who is deploying several thousand EV chargers to a number of metropolitan areas; AL&W has been negotiating with ECOtality using their grant money, and two proposed locations to install the EV charges are being presented for consideration of the Board. The only expense to AL&W will be to extend electric service to the units; maintenance of the chargers will be the responsibility of ECOtality, and the AL&W will receive 50% of any revenue proceeds; the public will also benefit with the stations attracting travelers to stop and visit the city while charging their vehicles; and it will be an opportunity to purchase two electric vehicles for City staffs use. Sched Items EV Charging Stations G. Morrow Comments Discussion was held regarding the city hall location not being accessible to the public, the cost to extend Discussion electric services to the station, and the upkeep due to possible graffiti vandalism. After further discussion, Boardmenbers requested staff to look into changing the City Hall location to Light and Water, which they consider it has better access to the public. Moved by Borarmember Hanks, seconded by Chairman Pro -tem Macias, and unanimously carried* to reject Approve Opt option 1, a Level 11 EV station ad City Hall; and to approve option 2, a Level IIIDC Fast Charging Station at 2 Only, 6 1 & 6'h and San Gabriel. San Gab Rate Schedule "EDR-2" Revising Economic Development Electric Rate Discounts for Qualified Non Renewal Residential Electric Customers. EDR-2 Electric Utilities Director Morrow addressed the item stating that this is to replace the current Rate Schedule due to Utility expire June 30, 2012, which provided 10-20% discount for a3 year period to commercial/industrial customers; Rate Sched the new discount will be for 3 years at a discount of 15% and a term of 60 months; he explained the premium Non - option, and gave detailed information on how the discounts will be provided to new or expanded customers; Residential this discount is possible due to the surplus energy; the revenue will be higher than selling it in the wholesale Customers market; and the longer the customer stays in business, the more the city and AL&W benefits. Discussion was held regarding new and expanding customers, the period of time they need to be in this Discussion program, how to encourage new businesses, and Boardmembers instructed staff to set up policies as to qualifying customers, specifically the number of years to stay in business in order to qualify them. Boardmember Hanks offered a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL AND UTILITY BOARD OF THE CITY OF AZUSA, Reso 12-C45 CALIFORNIA, APPROVING ELECTRIC UTILITY RATE SCHEDULE "EDR-2-ECONOMIC DEVELOPMENT RATE" PROVIDING ECONOMIC DEVELOPMENT INCENTIVES FOR QUALIFIED COMMERCIAL AND INDUSTRIAL ELECTRIC CUSTOMERS. Moved by Boardmember Hanks, seconded by Chairman Pro -tem Macias and unanimously carried to waive further reading and adopt. Resolution passed and adopted by the following vote of the Board: AYES: BOARD MEMBERS:GONZALES, MACIAS, HANKS, ROCHA NOES: BOARD MEMBERS:NONE ABSENT: BOARDMENBERS: CARRILLO It was consensus of the Boardmembers to cancel the Utility Board Meeting of August 27, 2012. Cancel Aug UB Mtg 06/25/2012 PAGE THREE 007 STAFF REPORTS/COMMUNICATIONS Staff Rpts Utilities Director Morrow provided information on the results of smart grid study done regarding the cost and Info Smart benefits of a potential smart grid project implementation by the Azusa Light and Water. Grid Proj Utilities Director Morrow provided information regardingthe Annual Adjustment of Replacement WaterCosts Update Adj Adjustment and Temporary Leasing of Excess Water Rights. He indicated that there will not be a surcharge Repl Cost increase due to the surplus on hand. Utilities Director Morrow gave an update on the San Juan Unit stating that this is still an ongoing project; he Update explained that SB 1368, if approved, will force plants to make environmental improvements which may cause San Juan a shut down of the San Juan Plant; Natural Resource Defense Council and Sierra Club are after entities that are Unit involved in San Juan putting AL&W to be under more scrutiny, and the environmental agencies efforts to close down the San Juan unit claiming contamination. This is a contamination free facility and the haze, which is claimed to be problematic for health, is to improve air visibility only, but causes no contamination. Moved by Boardmember Hanks seconded by Boardmember Gonzales and unanimously carried* to adjourn Adjourn TIME OF ADJOURNMENT: 8:00 P.M. SECRETARY NEXT RESOLUTION NO. 12-C46. * Indicates Chairman Carrillo absent. 06/25/2012 PAGE FOUR 008 AZUSA 114X1 { W/.It• CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS O UTILITY BOARD FROM: GEORGE MORROW, DIRECTOR OF UTILITIES DATE: JULY23, 2012 SUBJECT: AUTHORIZATION TO REGISTER AZUSA AND CREATE AN ACCOUNT WITH THE GHG COMPLIANCE INSTRUMENT TRACKING SYSTEM AS REQUIRED BY THE CALIFORNIA AIR RESOURCES BOARD UNDER ITS CAP -AND -TRADE PROGRAM RECOMMENDATION It is recommended that the Utility Board authorize the Director of Utilities to register and create an account with the Compliance Instrument Tracking System Service (CITSS) as required by the California Air Resources Board (CARB) and administer, either directly or through his designee(s), any activities associated with the account, as needed for AB 32 compliance. BACKGROUND In 2006, Assembly Bill 32 (AB32), the Global Warming Solutions Act of 2006, became law. Key objective of the law is to limit emission of green house gases (GHG) in California to1990 levels by the year 2020. CARB developed regulations and market mechanisms through which GHG emission reductions would be achieved. The Cap -and -Trade program is a cornerstone component of such CARB-developed GHG market mechanism. The Cap -and -Trade program became effective on January 1, 2012 and covers the term though December 31, 2020, however, enforcement of the program will not begin until January 1, 2013. Under Cap -and Trade, "covered entities" (i.e. entities subject to enforcement under the program) are given the "right" to emit limited volumes of CO2 equivalent greenhouse gases per year. The right to emit is conveyed by means of Allowances -- issued, controlled and awarded to covered entities by the CARB. Based on given entity's historic 009 Registration with CITSS July 23, 2012 Page 2 CO2 emissions. Covered entities are awarded a number of free annual Allowances for the years 2013-2020. The volume of free Allowances decline linearly such that the overall decline during the 2013 to 2020 period is about 15%. Covered entities whose emissions exceed their award of free Allowances will need to buy Allowances (or carbon Offsets) from the market or face steep CARB penalties. In accordance with Cap -and Trade rules, a covered entity, such as Azusa, has to register with CARB and open CARB accounts for Allowance holding, transferring, selling, buying and surrendering — we already did so based on the authority granted by the Utility Board on January 23, 2012. In addition to this particular registration, CARB further requires registration and creation of account with CITSS for the purpose of, among other things, keeping track record of ownership of Allowances and other compliance instruments. There are two primary components of the CITSS in the first release: user registration and account application. User registration is required in the CITSS prior to applying for entity compliance instrument accounts. Compliance instrument accounts must be established before an entity can apply to participate in the first GHG allowance auction currently scheduled for November 2012. Further, CARB "recommends" that (1) CITSS user registration be completed as quickly as possible, and no later than August 1, 2012; and (2) CITSS account application be completed no later than September 1, 2012. FISCAL IMPACT There is no direct fiscal impact at this time. Prepared by: Yarek Lehr, Assistant Director of Resource Management 010 fNIVANk A CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: JULY 23, 2012 SUBJECT: APPROVAL OF A PROFESSIONAL SERVICES CONTRACT WITH SA ASSOCIATES TO PERFORM INSPECTION SERVICES ON PROJECT W-265 WATER MAIN REPLACEMENT RECOMMENDATION It is recommended that the Utility Board approve a Professional Services Contract in the amount of $58,000 to SA Associates to provide inspection services on Project W-265. BACKGROUND A construction contract for Project W-265, Water Main Replacement in Lark Ellen Avenue, et al, in unincorporated Los Angeles County near West Covina was awarded at the June 25, 2012 meeting of the Utility Board; the project is one which will require onsite, fulltime inspection during construction. On June 25, 2012, the Utility Board approved issuance of a Request for Proposals (RFP) for an inspection contract. Eighteen (18) inspection services consultants submitted proposals for this project and eleven (11) consultants submitted proposals that were responsive to the RFP. The responsive consultants were judged on proposed fee for the 150 calendar day project; personnel and company experience inspecting pipeline projects similar to Project W-265; and responsiveness to the requirements of the RFP. Oil Pipeline Replacement Inspection Services July 23, 2012 Page 2 SA Associates $58,000.00 TYR Inc. $64,500.00 LEE & RO, Inc. $66,846.00 Onward Engineering $68,000.00 Civiltec Engineering, Inc. $78,800.00 Willdan Engineering $80,640.00 Integris Management Group $84,487.20 KOA Corporation $96,000.00 K & L Inspection Service Inc $100,800.00 Valli Coo er& Associates $112,320.00 Pacifica Services, Inc. $133,800.00 SA Associates, who submitted the lowest proposed fee, has inspected past projects for the Water Division and has performed well. FISCAL IMPACT The fiscal impact of this item is $58,000. A budget item for this project, Capital Improvement Program Budget Account No. 32-80-000-721-72112B, was approved by the Utility Board in FY 2011-2012 and carried over to FY 2012-2013. Prepared by: Chet Anderson, Asst. Director - Water Operations 012 ,5 4 er'' , 9 440110, ad) I AZUSA CONSENT CALENDAR TO: THE HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: JOE JACOBS, DIRECTOR OF RECREATION AND FAMILY SERVICES VIA: JAMES MAKSHANOF CITY MANAGER DATE: JULY 6, 2012 SUBJECT: NOTICE OF COMPLETION FOR CDBG ATHLETIC COURT RESURFACING PROJECT NO 601409-11 RECOMMENDATION: It is recommended to City Council that they authorize Notice of Completion for CDBG Athletic Court Resurfacing and direct staff to file the NOC with the Los Angeles County Recorders Office accordingly. BACKGROUND: This Award of Contract for this project was approved at the Council meeting of April 16, 2012. Notice to Proceed was given on May 14, 2012 and all work was completed on June 12, 2012. FISCAL IMPACT: The project was fully funded at$31,942 in account#1880000910-713D60409-7130. The bid award was$30,775.00. An additional change order of$1,000 was added,resulting in the resurfacing of the Splash Pad at the Azusa Aquatics Center. The project was still completed under budget at $31,775.00. Attachment: Notice of Completion 12-072 Cyaii4,z—Ce -7(/ / ao/- Uvt4J ) 17 _. F-1 SCHEDULED ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF 'WE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIE DATE: JULY 23, 2012 SUBJECT: APPROVAL OF (1) FIRST AMENDMENT TO THE LODI ENERGY CENTER PROJECT MANAGEMENT AND OPERATIONS AGREEMENT, AND (2) RESOLUTION TO APPOINT LEC PROJECT REPRESENTATIVES FOR GHG MATTERS RECOMMENDATION It is recommended that the Azusa Utility Board (1) approve the First Amendment to the Lodi Energy Center Project Management and Operations Agreement and authorize execution by the Director of Utilities, and (2) approve the attached Resolution appointing representatives to provide LEC Project direction regarding the sale, purchase and surrender of GHG Compliance Instruments. BACKGROUND As a participant in the Lodi Energy Center (LEC), Azusa entered into the LEC Project Management and Operations Agreement (PMOA) in August 2010. Subsequent to the execution of the PMOA, the California Air Resources Board (CARB) adopted a Green House Gas (GHG) "Cap & Trade" Program pursuant to the mandates of AB 32, the "Global Warming Solutions Act". The "Cap & Trade" Program became effective on January 1, 2012 (enforceable beginning January 1, 2013) and applies to all California -interconnected electric generators and importers of electricity into California. As a result, it is necessary to amend the provisions of the PMOA to reflect the impact of the Cap & Trade rules on the Lodi Energy Center Project. 013 July 23, 2012 LEC PMOA First Amendment Page 2 Under Cap & Trade, "Covered Entities" such as the Northern California Power Agency (NCPA) in its role as operator/owner of the LEC Project, has the obligation to comply with Cap & Trade regulations including the obligation to surrender GHG Compliance Instruments (i.e. Allowances, Offsets and other CARB approved instruments) related to GHG emissions attributed to the LEC project. The PMOA First Amendment provides NCPA with the legal authority to comply with Cap & Trade regulations in a manner agreeable to the LEC participants which are ultimately responsible for all costs of compliance. Key aspects of the First Amendment are as follows: • A new Section 3.3c is added to the PMOA to address Cap & Trade obligations. • NCPA will be responsible for complying with Cap & Trade rules affecting LEC and will consult with LEC Participants as such rules evolve/change. • LEC participants are responsible for their respective share of LEC's cost to comply with the Cap & Trade Program • If allowed by the Cap & Trade program rules, an individual LEC Participant may transfer Compliance Instruments to NCPA in lieu of paying NCPA to acquire Compliance Instruments on their behalf. • If desired, an LEC Participant may direct NCPA to acquire Compliance Instruments for that participant's LEC Compliance Account, at such participant's cost. • LEC Participant providing direction to NCPA to purchase Compliance Instruments shall warrant the authority of the person providing such direction on its behalf. • NCPA shall account for LEC's Compliance Instruments and obligations separately from its other projects and shall establish separate LEC only -pertinent accounts for each LEC participant. • NCPA shall establish procedures in PMOA Schedule 11.00 to ensure accurate and timely accounting of Compliance Obligations and Compliance Instruments related to LEC. Staff recommends approval of the First Amendment to the Lodi Energy Center Project Management and Operations Agreement as being necessary to ensure compliance by the project with California's Cap & Trade regulations for Green House Gas reductions. In addition, Staff recommends that the Utility Board appoint the Director of Utilities to be the City of Azusa's duly authorized representative to provide any necessary direction to NCPA to purchase, sell or surrender Compliance Instruments for Azusa's account with NCPA and for the Assistant Director of Resource Management to be appointed as the alternate representative. olA July 23, 2012 LEC PMOA First Amendment Page 3 FISCAL IMPACT There is no direct fiscal impact of the recommended actions herein. Prepared by: George F. Morrow, Director of Utilities 015 NCPA :.ne:=f:M1 rq:�erf VlL °rYrtN Al.1 r.fr FIRST AMENDMENT TO THE LODI ENERGY CENTER PROJECT MANAGEMENT AND OPERATIONS AGREEMENT This First Amendment ("Amendment") to the Lodi Energy Center Project Management and Operations Agreement is made and entered into as of the _ day of 2012 ("Effective Date"), by and between the Northern California Power Agency ("NCPA"), a joint powers agency organized under the laws of the State of California, and each of the undersigned Participants in the Lodi Energy Center Project ("Participants") (collectively, the "Parties"). WHEREAS, the Parties entered into the Lodi Energy Center Project Management and Operations Agreement dated effective August 1, 2010, (the "Agreement") for the purpose of governing all matters related to the operations and management of the Lodi Energy Center, and WHEREAS, the Agreement sets forth NCPA duties, obligations and authority in connection with the management and operation of the Lodi Energy Center; and WHEREAS, the Parties now desire to amend the Agreement to clarify that NCPA's authority to obtain all necessary Federal, state and local permits, licenses, opinions and rulings to construct, operate, and maintain the Project in accordance with all legal and regulatory requirements and Prudent Utility Practice includes, but is not limited to, participation in the California Air Resources Board's Cap -and - Trade Program and the ability to transfer Compliance Instruments between NCPA and Participants as set forth below. WHEREAS, the Lodi Energy Center Project Participant Committee voted to approve this Amendment to the Agreement on March 12, 2012; and WHEREAS, the Parties have agreed to modify Article 3, Section 3.3, (NCPA's Obligations, Duties and Authority) to add a new Section 3.3c, and WHEREAS, in accordance with Article 22, Section 22.1 all changes to the Agreement must be in writing and signed by all the Parties; NOW, THEREFORE, the Parties agree as follows: 1. Article 3, Section 3.3 (NCPA's Obligations, Duties and Authority) of the Agreement shall be amended to add a new Section 3.3c, which shall read in full as follows: C. 1. NCPA Obligation For the sake of clarity, and as provided in Section 27.2 of the PSA and in Sections 3.3b.2 and 3.3b.5 above, the authority and obligation of NCPA and the NCPA General Manager to obtain Federal, state and local permits, licenses, opinions and rulings as necessary to construct, operate, and maintain the Project in accordance with all legal and regulatory requirements and Prudent Utility Practice includes, but is not limited to, the acquisition and surrender of any necessary Compliance Instruments to meet environmental 010 emissions compliance obligations when required bylaw. A Compliance Instrument means an allowance, ARB offset credit, or sector -based offset credit as provided under the Cap -and -Trade Program defined below in section 3.3c.2. 2. Purpose: Future Program; Definitions This Section 3.3c and Agreement Schedule 11.00 are intended to address applicable obligations imposed on Covered Entities, including NCPA in its role as LEC owner/operator, by the California Global Warming Solutions Act (AB 32) and Title 17 California Code of Regulations, Article 5, Section 95800 et seq. (Cap -and - Trade Program or Cap -and -Trade). If any other applicable program, regulation, or law imposes requirements on NCPA, in its role as LEC owner/operator, relating to greenhouse gas emissions or similar types of environmental mandates, NCPA will consult with the PPC and will manage and comply with such requirements in a manner as similar as feasible to the process described in this Section 3.3c, including through the development of an appropriate Agreement Schedule addition to this Agreement, if necessary. Provided, however, that under all circumstances each Participant shall be responsible for its GES of all costs of such compliance. All definitions in this Section 3.3c and Agreement Schedule 11.00, not otherwise defined in the PSA or this Agreement, are as stated in the Cap -and -Trade Program. 3. Participants' Obligations; Alternatives Each Participant shall be responsible for its GES of all costs incurred by NCPA attributable to the Project in complying with Cap -and - Trade, including costs incurred in obtaining Compliance Instruments that the NCPA General Manager may acquire or purchase as provided in Agreement Schedule 11.00, as may be amended from time to time. In lieu of paying for any portion of its GES of the cost of obtaining necessary Compliance Instruments, to the extent permitted by law and administratively feasible, Participants may transfer and NCPA may accept Compliance Instruments, and/or Participants may request placement of Compliance Instruments that are directly allocated to such Participant(s) into NCPA's LEC Compliance Account as provided in Agreement Schedule 11.00, as may be amended from time to time. To the extent any directly allocated Compliance Instruments are statutorily or otherwise prohibited from being used to meet the Project's Compliance Obligations, NCPA has no obligation to accept any such placement of directly allocated Compliance Instruments into NCPA's LEC Compliance Account from any Participant. In addition, Participants may provide direction to NCPA, in accordance with procedures described in Agreement Schedule 11.00, as may be amended from time to time, for the purchase of Compliance Instruments to meet all or a portion of a Participant's GES of the Project's Compliance Obligation, in which case NCPA shall participate in Auctions and Allowance Price Containment Reserve Sales in accordance with such Participant's directions. Each Participant providing direction to NCPA to purchase Compliance Instruments warrants the authority of the person executing such direction on such Participant's behalf, and NCPA shall be entitled to fully rely upon the authority of such person irrespective of whether such direction may be in First Amendment to the Lodi Energy Center Project Management and Operations Agreement 017 contravention of any regulations, procedures, protocols or rules applicable to such Participant. NCPA will treat any such Participant directions to purchase Compliance Instruments as confidential to the extent allowed by law. No additional costs or penalties shall be incurred by other Participants or NCPA by reason of any such transfer, placement, or direction; and any identifiable additional costs, charges, fees, penalties, liabilities and damages incurred by the Project or NCPA resulting from such activities will be fully charged to, and paid by, the Participant taking such action(s). Under no circumstances shall any Participant be liable under the PSA, the PMOA or PMOA schedules for any costs, charges, fees, penalties, liabilities, and damages arising out of activities related to Cap -and -Trade compliance for any emission sources other than the Project, including, but not limited to, penalties for failure to comply with reporting, surrender, or other legal obligations. 4. Project's Cap -and Trade Account NCPA shall establish, as appropriate, internal accounting for LEC separate from those of NCPA's other projects. LEC Project accounting shall include: a) Compliance Instruments and Compliance Obligations to reflect the Project's share of NCPA's total Compliance Obligation; b) any Compliance Instruments provided to NCPA by Participants for the Project; and c) any Compliance Instruments purchased by NCPA forthe Project pursuant to Participants' directions. NCPA shall establish procedures in Agreement Schedule 11.00, as may be amended from time to time, for accurate and timely accounting of the Project's share of NCPA's total Compliance Obligations and Compliance Instruments, 5. Participants' Cao -and -Trade Accounts NCPA shall establish, as appropriate, individual Participant accounts which shall include: a) Compliance Instruments and Compliance Obligations to reflect each Participant's GES of the Project's Compliance Obligation; b) any Compliance Instruments provided to NCPA by each Participant; and c) any Compliance Instruments purchased by NCPA pursuant to each Participant's directions. NCPA shall establish procedures in Agreement Schedule 11.00, as may be amended from time to time, for accurate and timely accounting of such Project related Compliance Obligations and Compliance Instruments. Such accounting shall also include and allocate to the responsible Participant(s) any identifiable costs, charges, fees, penalties, liabilities, and damages arising out of a Participant's activities related to Cap -and -Trade compliance for the Project, including, but not limited to, penalties for failure to comply with reporting, surrender, or other legal obligations, resulting from a Participant's decisions or actions to transfer Compliance Instruments or request placement of Compliance Instruments into NCPA's LEC Compliance Account, or provide directions to NCPA. Under no circumstances shall NCPA or any other Participant be liable for such costs attributable to the responsible Participant. First Amendment to the Lodi Energy Center Project Management and Operations Agreement M 2. This Amendment in noway alters the terms and conditions of the Agreement except as specifically set forth herein. The Parties have executed this Amendment as of the Effective Date. NORTHERN CALIFORNIA POWER AGENCY By Approved as to form: CITY OF AZUSA Approved as to form: By: First Amendment to the Lodi Energy Center Project Management and Operations Agreement Date: Title: Title: Date: \J SAN FRANCISCO BAY AREA RAPID TRANSIT DISTRICT By: Tit Approved as to form: Title: Date: CITY OF BIGGS By: Date: Approved as to form: By:, Date: CALIFORNIA DEPARTMENT OF WATER RESOURCES Date: Approved as to form: Tit Date: First Amendment to the Lodi Energy Center Project Management and Operations Agreement 020 CITY OF GRIDLEY Approved as to form: By: Tit Date: CITY OF HEALDSBURG Date: Approved as to form: By: CITY OF LODI Title: Approved as to form: By: Date: First Amendment to the Lodi Energy Center Project Management and Operations Agreement 021 CITY OF LOMPOC By: Title: Date Approved as to form: M3 Date: MODESTO IRRIGATION DISTRICT Tit Date: Approved as to form: Title: PLUMAS-SIERRA RURAL ELECTRIC COOPERATIVE By: Date: Approved as to form: By: Date: First Amendment to the Lodi Energy Center Project Management and Operations Agreement 022 POWER AND WATER RESOURCES POOLING AUTHORITY Date: Approved as to form: By: Title Date CITY OF SANTA CLARA Title: Date: Approved as to form: By: Title: CITY OF UKIAH Date: Approved as to form: 0 First Amendment to the Lodi Energy Center Project Management and Operations Agreement 023 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL AND UTILITY BOARD OF THE CITY OF AZUSA, CALIFORNIA APPOINTING REPRESENTATIVES OF THE CITY TO PROVIDE GHG COMPLIANCE DIRECTIONS TO THE LEC PROJECT WHEREAS, the City of Azusa is a participant in the Lodi Energy Center project owned and managed by the Northern California Power Agency; and WHEREAS, Cap & Trade regulations adopted by the California Air Resources Board (CARB) in furtherance of AB 32, the Global Warming Solutions Act require the electric utility sector to reduce GHG emissions beginning in calendar year 2013; and WHEREAS, under Cap & Trade, "Covered Entities" such as the Northern California Power Agency (NCPA) in its role as operator/owner of the LEC Project, has the obligation to comply with Cap & Trade regulations including the obligation to surrender CARB approved GHG Compliance Instruments related to GHG emissions attributed to the LEC project; and WHEREAS, the LEC Project Management and Operations Agreement (PMOA), as amended by the First Amendment and as supplemented by the associated Schedule 11, provides an LEC participant with the option to direct NCPA to purchase Compliance Instruments on its behalf; and WHEREAS, the PMOA provides that LEC participants who may wish to provide NCPA with direction to purchase Compliance Instruments on its behalf shall designate an authorized representative and an alternative to provide such direction to NCPA via written and signed Participant Purchase Directives. NOW, THEREFORE, the City Council and Utility Board of the City of Azusa resolve as follows: Section 1: Appoints the Director of Utilities as the City of Azusa's duly authorized representative to issue and sign Participant Purchase Directives to NCPA related to the acquisition of Compliance Instruments for the Lodi Energy Center project. Section 2: Appoints the Assistant Director of Resource Management as the City of Azusa's duly authorized alternate representative to issue and sign Participant Purchase Directives to NCPA related to the acquisition of Compliance Instruments for the Lodi Energy Center project in the absence of the authorized representative. 024 PASSED, ADOPTED and APPROVED this 23`h day of July 2012. Joseph R. Rocha, Mayor ATTEST: Vera Mendoza, City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City Council/Utility Board of the City of Azusa at a regular meeting of the Azusa Utility Board on the 23rd day of July, 2010. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Vera Mendoza, City Clerk 025 AZUSTA SCHEDULED ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THEUSA UTILITY BOARD / J FROM: GEORGE MORROW, DIRECTOR OF DATE: JULY 23, 2012 SUBJECT: ANNUAL WATER RIGHTS LEASING TRANSACTIONS CONDUCTED BY WATER DIVISION RECOMMENDATION It is recommended that the Utility Board ratify the execution of the water rights lease agreement with Canyon Water Company. 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 obtained additional water rights from the dissolution of the Azusa Agricultural Water 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's water system. 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 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 Upper San Gabriel Valley Municipal Water District 026 Water Rights Lease July 23, 2012 Page 2 (USGVMWD) replenishment water was set at $640/Acre-foot and the price of San Gabriel Valley Municipal Water District (SGVMWD) replenishment. water was set at $130/Acre-foot. The amount of water rights in terms of acre feet (AF) that Azusa, Azusa Valley, and MillerCoors possess varies with the Safe Yield for the Basin. In Fiscal Year 2010-2011, the Basin Safe Yield was set at 210,000 AF. The City of Azusa has water rights to produce 6.91279 percent of 210,000 AF (14,517.03 AF) plus 3,785 AF in Diversion Rights. Including Miller -Coors' water rights this year (1,547.00 AF), the City has approximately 19,849 AF of water rights. Next Fiscal Year, 2012-2013, the Basin Safe Yield has been set at 200,000 AF. 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 Watermaster by July 15. The temporary change in Watermaster water rights transfers has allowed the City to purchase a maximum amount of replenishment water from SGVMWD at $130/AF (6,394 AF @ $130/AF or $831,201) which allowed the City to save approximately 4,300 AF of its own water rights. The City was then able to lease some of those rights (4,000 AF) to another party, in this case the Canyon Water Company, for $1,800,000. While the temporary water rights lease agreement with Canyon Water Company 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, as allowed by Resolution 09-C69 passed by the Utility Board at their July 27, 2009 meeting, is desired at this time to fully authorize the agreement and filing with Watermaster. FISCAL IMPACT The fiscal impact of ratifying the water rights lease with the Canyon Water Company is $1,800,000 with a net of approximately $970,000 considering the purchase of water from SGVMWD. Prepared by: Chet F. Anderson P.E., Assistant Director- Water Operations 027 0 AZUSA SCHEDULED ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF AZUSA UTILITY BOARD FROM: GEORGE MORROW, DIRECTOR OF UTILITIES DATE: JULY 23, 2012 SUBJECT: REQUEST FOR PROPOSALS (RFP) FOR CONSULTING SERVICES TO ASSIST AZUSA IN FORMULATING LEAST COST AB32 COMPLIANT CAP -AND -TRADE STRATEGIES AND ALTERNATIVES. RECOMMENDATION It is recommended that the Utility Board: (1) approve scope of work for Request for Proposals (RFP) to assist Azusa Light & Water in assessing and selecting best/viable Greenhouse Gases (GHG) auction and Compliance Instrument trading alternatives and strategies; and (2) authorize issuance of the RFP for consulting services. BACKGROUND In 2006, the Legislature passed and Governor Schwarzenegger signed into law Assembly Bill 32 (AB32), the Global Warming Solutions Act of 2006. A key objective of the law was to limit emission of GHG in California to 1990 levels by the year 2020. AB32 directed the California Air Resources Board (CARB) to develop a plan on how to best achieve the AB32 goals and create pertinent regulations and enforcement mechanisms. In general, all California businesses operating within Cap -and -Trade covered sectors are subject to the law. In case of the electric utilities, all California based generation and imports of energy into California are subject to the law and associated regulations. Through a multi -year-long public process, the CARB developed regulations and market mechanisms through which GHG emission reductions would be achieved. The Cap -and - Trade program is a cornerstone component of the CARB-developed GHG market mechanism. The Cap -and Trade program became effective on January 1, 2012 and covers the term through December 31, 2020. Enforcement of this program will begin on January 1, 2013. 028 Cap -and -Trade Consulting July 23, 2012 Page 2 Under the rules of Cap -and Trade an annual emissions cap has been established for each "covered entity" (i.e., a California entity subject to enforcement under the program). The cap establishes upper bounds of maximum permissible no -cost CO2 emissions that a covered entity may produce or be otherwise responsible for. Emissions Caps are established by means of Allowances issued, controlled and awarded to covered entities by the CARB. Based on an entity's historic CO2 emissions, the entity is given a number of free annual Allowances for the years 2013-2020. It should be noted that the annual volumes of free Allowances decline linearly such that the overall decline during the 2013 -2020 term is about 15%. Covered entities whose emissions exceed the free Allowance coverage need to buy Allowances or Offsets from the market or else face steep CARB penalties. It is important to note that although Azusa will receive close to adequate Allowances for resources historically utilized to serve Azusa's load, the allowances may not cover excess San Juan generation (generation that Azusa must take under the contract but which is in excess of Azusa's needs). In accordance with rules and regulations of Cap -and Trade, covered entities must register with CARB and open three accounts for Allowances — an Allowance Holding Account, a Limited Use Holding Account and a Compliance Account. Holding Account is used for Allowance and Offset depositing, banking, transacting, and transferring, Limited Use Holding Account is used for depositing Allowanced slated for CARB auction(s), and Compliance Account is used for Allowance "retiring" as part of the compliance process. As stated above, CARE -issued Allowances will be awarded free to each covered California utility (whether an investor owned utility — IOU, or a publicly owned utility - POU). All IOUs and the California Independent System Operator (CAISO or ISO) interconnected POUs must then sell all their free Allowances via CARB operated quarterly auctions. This is the "trade" portion of the Cap -and -Trade mechanism. The rationale behind it is that the Compliance Instrument market should be made such that in addition to covered entities, "opt in" entities (entities that have no compliance obligations but want to trade) can obtain compliance instruments. As an expected, and desired, side - effect of the mandatory auctions, the secondary markets for Compliance instruments will be created. The secondary markets will likely be dominated by big covered entities - IOUS and oil refineries as well as professional trading houses — investment banks and such. It is highly unfortunate that CARB is forcing the ISO -interconnected POUs to sell all their free allowances through the CARB auctions, just like the IOUs, and make them "buy back" all needed instruments from the auction or the market at potentially inflated prices. The result is that,-POUs such as Azusa, Anaheim, Riverside, Pasadena, Colton and Banning, will bear potentially substantial market risk in connection with their Cap - and -Trade compliance. It needs to be stated that the above mentioned ISO -interconnected POUs are currently engaged to change CARB's decision forcing them into involuntary participation in GHG 029 Cap -and -Trade Consulting. July 23, 2012 Page 3 Compliance instrument markets. In light of the fact that results of the above referenced POU engagement (to be exempt from mandatory selling of their allowances) may not materialize any time soon, Staff needs to identify and assess the best AB32 compliant strategies for Cap -and -Trade with special emphasis on participation in the mandatory CARB auctions. The trading issues that may precipitate from Cap -and -trade are serious and complex, partly because they are/ will be all new. Accordingly, Staff needs and recommends retaining consultant(s) to assist with the following proposed scope of work: 1. Confirming and documenting Azusa's understanding of how the CARB auctions will work 2. Identifying optimum strategies to sell, buy and trade compliance instruments 3. Help optimize Azusa's auction cash flows (monies from mandatory sales of Azusa Allowances may not be equal to monies required to buy the needed volumes of allowances for compliance). 4. Comply with rules that may be developed regarding use of revenues associated with the sale of Free Allowances. 5. Identify risks associated with Compliance instrument auctions and trading, and devise methods and ways to mitigate such risk. FISCAL IMPACT The cost proposals will be reported at the next Utility Board meeting following receipt and evaluation of the proposals by Staff. Prepared by: Yarek Lehr, Assistant Director of Resource Management 030 SCHEDULED ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: JULY 23, 2012 SUBJECT: APPROVAL OF AN AMENDMENT TO RATE SCHEDULE "EDR-2" REVISING ECONOMIC DEVELOPMENT RATE DISCOUNTS FOR QUALIFIED NON-RESIDENTIAL ELECTRIC CUSTOMERS RECOMMENDATION It is recommended that the Utility Board adopt attached resolution approving amended Schedule Economic Development Rate -2 (EDR-2). BACKGROUND On June 25, 2012, the Utility Board approved Rate Schedule EDR-2 which revised the electricity rate discounts available to qualified commercial/industrial customers as a measure to promote economic development in Azusa. In conjunction with its approval, the Utility Board directed staff to consider incorporating provisions into the rate schedule to reduce the discounts to qualified customers who discontinue electric service prior to the completion of the 5 year discount period. To address this item, staff has added the following provision to the EDR-2 tariff:' "Customers terminating their electric service prior to completion of the 60 month discount period, and who do not immediately transfer service to a successor at that location with a similar scale operation for the remaining discount term, shall be required to refund a pro rata portion of their discount in excess of 15% based on the length of time still remaining in the discount period. For example, a customer terminating service after 40 months shall be responsible for repaying 20/60 (i.e. 1/3) of the dollar amount of the discounts previously received in excess of the 15% level." In addition, Staff modified the deadline for filing an application with the utility for an EDR-2 discount. Previously, a business was required to file an application prior to initiation of electric 031 Economic Development Rate July 23, 2012 Page 2 service. Some businesses fail to meet this hard deadline. The amendment provides businesses any extra 60 days to file their EDR-2 application after start of electric service. Staff also eliminated some redundant language in the rate schedule and made revisions related to new and expanded industrial load, including limiting the discount for expanded customer load to 15%. FISCAL IMPACT It is difficult to predict the fiscal impact of the proposed Schedule EDR-2 revisions, but conceptually they could result in reimbursements to the utility of a portion of previously provided discounts if businesses do not remain for 60 months. In addition, the extension of time to file an application could result in additional businesses qualifying for a discount. Prepared by: George F. Morrow, Director of Utilities Attachments: Resolution EDR Schedule 032 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL AND UTILITY BOARD OF THE CITY OF AZUSA, CALIFORNIA, AMENDING ELECTRIC UTILITY RATE SCHEDULE "EDR-2-ECONOMIC DEVELOPMENT RATE" PROVIDING ECONOMIC DEVELOPMENT INCENTIVES FOR QUALIFIED COMMERCIAL AND INDUSTRIAL ELECTRIC CUSTOMERS. WHEREAS, pursuant to Section 78-37 of the Azusa Municipal Code, the City Council is required to adopt rules and regulations governing the operation and services provided by the Azusa Light & Water Department; and WHEREAS, on June 25, 2012 the Utility Board approved Rate Schedule EDR-2 titled "Economic Development Rate"; and WHEREAS, in conjunction with its approval of EDR-2, the Utility Board requested that Staff consider implementing a provision to recapture a portion of the discounts received by a qualified customer who terminates electric service prior to the 60 month discount term; and WHEREAS, Staff is proposing a modification to EDR-2 to address the Utility Board's request and to make several other modifications to the rate schedule. NOW, THEREFORE, THE CITY COUNCIL AND UTILITY BOARD DO HEREBY RESOLVE AS FOLLOWS: 1. That the "Schedule EDR-2—Economic Development Rate", attached hereto as Exhibit A, is hereby amended and included in Azusa Light & Water Rules and Regulations. 2. That the amended EDR-2 Schedule, attached hereto as Exhibit A, shall become effective on July 24, 2012. 3. The City Clerk shall certify the adoption of this Resolution. Joseph Rocha, Mayor 033 ATTEST: Vera Mendoza, City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City Council/Utility Board of the City of Azusa at a regular meeting of the Azusa Utility Board on the 23th day of July, 2012. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Vera Mendoza, City Clerk 034 EXHIBIT A SCHEDULE EDR-2 ECONOMIC DEVELOPMENT RATE Applicability: Applicable to qualified non-residential customers receiving electric service from Azusa Light & Water for the purpose of (i) incenting businesses occupying new buildings/facilities or certain vacated commercial space or (ii) industrial business attraction and/or expansion; as provided below or (iii) developing properties which either are or had been owned by the City of Azusa or its redevelopment agency for development purposes. Territory: Within the electric service area of the City of Azusa. Rate: New non-residential customers occupying space in (i) new buildings/facilities or (ii) existing commercial buildings/facilities that have been vacant for ninety (90) days or longer, are eligible to receive a discount equal to 15% of the electric bill associated with the qualifying facility electric load. In addition, certain customers may qualify for an additional discount as described below, provided that no customer may receive more than one additional discount. Additional Discount New Non-residential Customers developing `City of Azusa Owned Property" Non-residential customers who are otherwise qualified to receive an EDR-2 discount and who develop City of Azusa Owned Property are eligible to receive an additional 25% discount to their electric bill for the first 12 months and. an additional 10% discount to their electric bill for the next 24 months. "City of Azusa Owned Property" shall mean property owned by the City of Azusa or the Azusa Redevelopment Agency on January 1, 2012. Additional Discount for New Industrial Load Industrial customers otherwise qualified for an EDR-2 discount are eligible to receive an additional 25% discount to their electric bill for the first 12 months and an additional 10% discount to their electric bill for the next 24 months if the new or expanded industrial load is (i) sized at 100 KW or greater and (ii) is projected to have a monthly load factor of 50 percent or higher. The discount is only payable for months that the Effective July 24, 2012 035 customer's load meets these two criteria.. For expanded industrial load, the discount is only applicable to the electricity usage associated with the expanded load. An Industrial Customer is one who operates facilities that are primarily used for the manufacturing of goods. Discount for Expanded Industrial Load Industrial Customers with expanded (i.e. additional) electrical load which (i) is sized at 100 KW or greater and (ii) is projected to have a monthly load factor of 50 percent or higher are eligible for an EDR-2 discount. The amount of such discount shall be equal to 15% of the electric bill associated with the expanded electric load. The discount is only payable for months that the customer's load meets these two criteria. If the expanded load cannot be separately metered, the utility will estimate the portion of a customer's electric bill associated with the expanded load. Special Conditions: I. Schedule EDR-2 shall become effective on July 1, 2012 and applies to customers who receive a permit or development agreement from the City of Azusa on and after July 1, 2012 to build/modify qualified non-residential facilities. 2. Customers desiring to take advantage of Schedule EDR-2 must file an application with Azusa Light & Water for approval not later than 60 days following initiation of electric service to the qualified new or expanded load. Applicants are encouraged to submit an application as early as possible in their siting/development process in order to ensure the applicability of the EDR-2 rate and the level of associated discounts for their. planned location. 3. Upon approval and initiation of electric service, EDR-2 discounts shall apply for a period of sixty (60) months subject to paragraph 7 below. 4. The EDR-2 discounts shall not apply to the CEC fee, State Energy Tax, Public Benefits charge or any other assessment or charge levied on electric bills after the effective date of this rate schedule unless specifically provided otherwise. The EDR-2 discounts shall apply to the Power Cost Adjustment or any successor surcharge/factor related to power supply costs. 5. Expanded industrial load must be separately metered or sub -metered to enable verification of the minimum additional load requirement. Such metering shall be at the customer's cost. The industrial discount premium shall not apply for any billing period that the qualified industrial load does not meet the minimum size or load factor. 6. Light & Water shall be responsible for (i) establishing/enforcing rules and procedures for administering this rate schedule and (ii) determining whether customers meet the qualifications set forth herein. Customers shall provide Effective July 24, 2012 IM information on a timely basis for the purposes of verifying eligibility and administering the terms of this rate schedule. 7. Schedule EDR-2 shall remain effective for new qualified customers through June 30, 2015 (i.e. 3 years). No discounts will be applied for billing periods after June 30, 2020. 8. Customers terminating their electric service prior to completion of the 60 month discount period, and who do not immediately transfer service to a successor at that location with a similar scale operation for the remaining discount term, shall be required to refund a pro rata portion of their discount in excess of 15% based on the length of time still remaining in the discount period. For example, a customer terminating service after 40 months shall be responsible for repaying 20/60 (i.e. 1/3) of the dollar amount of the discounts previously received in excess of the 15% level. 9. The Director of Utilities shall be responsible for implementing this rate schedule to include determination of whether or not an applicant qualifies hereunder for a discounted service. 10. The Azusa Utility Board may modify or eliminate EDR-2 at any time provided that such modifications or elimination shall not affect entities that have been previously approved for service under EDR-2. Effective July 24, 2012 037 v r_ f INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF T BOARD Z1j�SIAA UTILITY FROM: GEORGE F. MORROW, DIRECTOR OF DATE: JULY 23, 2012 SUBJECT: UPDATE ON CALIFORNIA LEGISLATIVE MATTERS AFFECTING UTILITIES Attached is a copy of the June 29, 2012 Legislative Update prepared by the California Municipal Utilities Association (CMUA). Azusa Light & Water is an active member of this association and serves on its Board of Directors. Prepared by: George F. Morrow — Director of Utilities Attachment 0.38 CM 1 ' A June 29 2012 +www.cmua.org f r, u„ 915 L Street Suite # 146045amwnto, 6195814+191813265810 water update -AB-1422 (Perea) Water Bond Delay- CMUA Support This bill will be the vehicle for delay of the water bond from the November 2012 ballot to the November 2014 ballot. Yesterday, AB 1503 (Peres) was amended to be the vehicle for the bond delay, but the author has decided to use AB 1422 instead. Once in print, AB 1422 is expected to pass very quickly, as did the last bond delay measure. CMUA took a support position in advance of the bill being introduced. The bill is currently in the Senate, and will need to pass that house and go back to the Assemblyfor a concurrence vote. AB 1508 (Carter) Metal Theft - CMUA Support On Monday the bill passed out of the Senate Business, Professions and Economic Development Committee on an 8 to 1 vote. CMUA and Southern California Edison testified in support explaining that metal theft is a serious problem for electric and water utilities. AB 1508 closes a loophole in law that allows metal wire and other metal products, with a value of less than $20, to bypass existing metal theft prevention protocols. AB 2230 (Gatto) Recycled Water Car Washes - CMUA Support On Tuesday the bill passed out of the Senate Natural Resources and Water Committee on a parry line vote of 6 to 2. CMUA, MWD, and Burbank provided leading testimony in support of the measure. The bill requires new car washes in the state to reuse water. The measure is expected to result in more than 22 thousand acre feet of saved water, as estimated by DWR's draft CII Task Force Report. AB 2443 (Williams) Quagga Mussel Prevention -CMUA Support The measure passed out of Senate Natural Resources and Water Committee this week on a 6 to 2 vote. Senator Cannella abstained from voting, but said he might vote in favor of the bill on the Senate Floor because of the need to provide a sustainable source of fundingfor local agencies to prevent the spread of the quagga. AB 2443 assesses up to a $10 annual fee on recreational boaters, which would be made available to local agencies to fund their local quagga inspection programs. CMUA, Sonoma County Water Agency, and MWD provided testimony in support. AB 2595 (Hall) Desalination - CMUA Support Despite opposition from the California Coastal Commission, and some hesitancy from Chair Pavley, the bill passed on a 7 to 0 vote. The bill seeks to create a task force to evaluate and possibly streamline the many permitting processes of ocean desalination projects. The Commission testified that the bill was largely duplicative of the 2002 Desalination Task Force authored by Assemblyman Hertzberg CMUA testified in support. The bill will next be heard in Senate Appropriations, where the funding for the creation of the task force will need to be worked out for the bill to continue to move forward. SB 1386 (Lowenthal) Groundwater Management - CMUA Support After a long debate in committee, the bill passed of the Assembly Water Parks and Wildlife Committee on Tuesday of this week on an 8 to 1 vote. The measure will facilitate groundwater storage in Southern California - a critical statewide resource objective - by resolving a number of statutory uncertainties related to groundwater storage activities that occur in the area of the Central Basin aquifer. Long Beach Water Department and the Water Replenishment District of Southern California testified in support, as did CMUA. The measure is opposed by Central Basin Municipal Water District and may face a tough fight when it is heard on the Assembly Floor. www.twkteccom/CM UA_Tweets 039 . energy update AB 1186 (Skinner) Cap &Trade auction funding - CMUA Watch The bill was last amended on June 6th, with amends that clarified that the 10% of auction revenues go toward grants for schools K-12. The bill was finally heard in Senate Energy Committee on June 18th, where the debate focused on concerns of too many bills on the issue of auction revenue allocation. The source for the funds specified in the bill, concerned a majority of members and the author declared she didn't care where the funding source came from so long as there was "a funding source" to be found. The bill passed 8-3 and is up in Senate Environmental Quality, July 2. AB 1900 (Gatto) In-state Biomethane Resources - CMUA Support This bill was heard on Monday, June 25, in Senate Energy Committee and was back to back with AB 2196 Chesbro. Both bills are doublejoined together. Assemblymember Gatto reluctantly accepted at least one amendment that will be adopted in Senate Environmental Quality is to remove language specific to a "PUC pilot project" using in-state biomethane. The amendment was suggested in the Committee analysis, and the Chairman echoed his desire to have this provision removed. The bill passed 11-0 and will be heard in Senate Environmental Quality on Monday, July 2. AB 1990 (Fong) FIT - CMUA Oppose The bill still deals with making half of the 750MW required under the state's FITto go toward small scale renewable power (375MW), created in locations that are "disadvantaged and impacted communities" as defined. The bill was amended June 26, 2012, with amendments that include allowingthe CPUC, in consultation with CARB, to develop rules to determine the most disadvantaged and impacted communities. The bill still includes large and small POUs, but grants flexibility to POUs with less than 75,000 customers to adjust requirements established within the bill if those adjustments are for demographic distribution of populations meeting the environmental justice screening method, "or as individual circumstances merit". Bill is up in Senate Energy Committee July 3, and has a large line up of opposition but also a huge lineup of environmental and environmental justice support. Democrats will be hard pressed not to vote for the bill, even if some are sympathetic to the duplicative process this bill creates for all utilities. All 2196 (Chesbro) Biomethane -CMUA Support if Amended The bill was heard on Monday, June 25 in Senate Energy Committee. The debate was robust with lively comments made by Senator Rod Wright (D -Los Angeles) on the core issue; maintaining the faimess of these legal agreements. In the end, Chairman Padilla, Senators Kehoe, Rubio and Wright desired an amendment to change the January 1, 2012 date to March 28, 2012 and leave the other issues aside for now. The Vote was 11-1, with Senator Simitian making remarks about POU motivations both now and in the past regarding their opposition to prior RPS bills. Senator Simftian cast the only "NO" vote. The bill will be heard in Senate Environmental Quality on Monday, July 2. The Chairman is Senator Simitian. SB 594 (Wolk) Aggregate Net Metering - CMUA Oppose This bill was heard in the Assembly Utilities Committee on Monday, June 25. The author accepted a list of amendments specific to the IOUs that were outlined in the Committee Analysis. The author did not accept an NCPA requested amendment at Committee, but has committed to an amendment that would allow the governing boards of each POU to make its own determination on whether or not there are cost -shifts. If there are, than SB 594 provisions do not apply. If there are no cost -shifts, than SB 594 provisions do apply to that POU. NCPA declared its neutrality at that committee based on this understanding. CMUA remains opposed until amendments can be reviewed. SO 1122 (Rubio) Small scale biogas/biomass energy - CMUA "concerned" This bill originally required the CPUC to direct electrical corporations to procure 250 MW of small scale biogas/biomass energy as specified. The bill has seesawed over the past 30 days with changes that prompted CMUA concerns. Author responded to these concerns and the bill as amended June 28, now only deals with small scale projects for "electrical corporations". The bill no longer includes POUs but CMUA is checking to make sure there are no other pending bills that could conceivably loop them into 399.20 by reference. The bill will be heard in Assembly Natural Resources, on July 2. SB 1222 (Jeno) Solar roof permits - CMUA Oppose This bill was heard in Assembly Loral Government on Wednesday, June 27, and was recently amended on June 19, 2012, to raise cap on local permits for solar installations. The bill still sets a cap of $400 on residential installations but allows a $15 per kW adder. The bill raises the $400 cap on commercial permit installations to $1000 with a $7 per kW adder on installations between 51 kW to 250 kW, plus another $5 for installations between 251kW and above. The bill passed 7-1, and is pending before the Assembly Appropriations Committee. June 292012+w .cmua.org 04U A6. Adak INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THESA UTILITY BOARD J FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: JULY 23, 2012 SUBJECT: SAN JUAN "REGIONAL HAZE" UPDATE On July 2, Environmental Protection Agency (EPA) Administrator Lisa Jackson sent a letter to New Mexico Governor Susana Martinez, granting a 90 -day stay of its regional haze order to allow for discussions between the state, Public Service of New Mexico (PNM) and EPA to come up with an "alternative" plan to meet federal .regional haze requirements for the San Juan Generating Station (SJGS). Jackson said "this would be in the environmental and economic best interest of New Mexico." Jackson's letter instructs the New Mexico Environmental Department to take the lead in the discussions. A copy of the letter has been sent to SCPPA. The EPA letter is in response to an April 26 letter from Governor Martinez where she states, "We owe it to taxpayers to see if we can avoid further litigation by resolving this dispute outside of the courtroom." In statements to the media after issuance of the Governor's letter, Pat Vincent -Col lawn, Chairman, President and CEO of PNM Resources, PNM's parent company, expressed an interest in engaging in discussions and noted their objectives: "If we are able to move toward a dialogue with Mr. Sam Coleman, Acting Regional Administrator United States Environmental Protection Agency on alternatives, we will continue to seek a balanced approach that considers customer costs, environmental benefit and the economic impact to the citizens of the state, particularly the Four Comers region." In a subsequent letter from Patrick Apodaca, PNM Senior Vice President, General Counsel and Corporate Secretary, PNM reiterated support for finding a "third way separate from the NM State Implementation Plan (SIP) or the EPA's Federal Implementation Plan (FIP) that could include phasing out one or more coal units, in exchange for installation of less expensive technology on the remaining units. For SCPPA members (i.e. Azusa) who are minority owners of the SJGS (Units 3&4), such an agreement could provide significant cost savings. Retrofitting the facilities with Selective Catalytic Reduction (SCR) is estimated to cost close to $900 million, compared to an estimated ,041 San Juan Regional Haze Update July 23, 2012 Page 2 $77 million for the state of New Mexico's plan to retrofit the facilities with Selective Non - Catalytic Reduction (SCNR.) Given the 5 -year compliance deadline and the significant costs associated with the retrofits, finding a mutually agreeable alternative would be a positive step forward for SCPPA members with ownership in San Juan. It is uncertain, however, how such an arrangement would affect Azusa's planned layoff/sale of San Juan to UAMPS. I will keep the Utility Board updated on this new development. Prepared by: George F. Morrow — Director of Utilities 042