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20100816 Regular City Council Meeting - MinutesMINUTES OF THE REGULAR CITY COUNCIL - LIGHT & POWER MEETING OF THE CITY OF VERNON HELD MONDAY, AUGUST 16, 2010, IN THE COUNCIL CHAMBER OF THE CITY HALL LOCATED AT 4305 SANTA FE AVENUE, VERNON, CALIFORNIA MEMBERS PRESENT: Gonzales, McCormick, Davis, Maisano, Newmire MEMBERS ABSENT: None The meeting was called to order at 8:00 a.m. by Mayor Gonzales.' The City Clerk announced that there were no changes to the agenda. The City Clerk announced that this was the time allotted for public comments. The Mayor asked if there was anyone in the audience who wished to address the City Council. No one responded. CONSENT CALENDAR 1. Approval of Light & Power Warrant Register No. 285, totaling $2,475,867.71, which covers the period of July 27 through August 9, 2010, and consists of the following: a. Ratification of wire transfers totaling $2,366,589.44; b. Ratification of the issuance of early checks totaling $34,488.29; and c. Authorization to issue pending checks totaling $74,789.98. 2. Approval of Gas Warrant Register No. 73, totaling $121,748.97, which covers the period of July 27 through August 9, 2010, and consists of the following: a. Ratification of wire transfers totaling $106,655.78; b. Ratification of the issuance of early checks totaling $14,688.19 and c. Authorization to issue pending checks totaling $405.00. It was moved by Davis and seconded by Maisano, that the matters on the Consent Calendar be approved as recommended. Motion carried, 5-0. RESOLUTIONS 1. RESOLUTION NO. 2010-113 - A Resolution of the City Council of the City of Vernon Approving and Authorizing the Execution of an Agreement with Palsons Electrical Engineering Services, Inc. for Engineering Services Related to the Leonis Substation 7kV Ground Fault Detection Project. It was moved by McCormick and seconded by Newmire, that Resolution No. 2010-113 be approved and adopted. Motion carried, 5-0. Regular City Council - Light & Power Meeting Minutes August 16, 2010 2. RESOLUTION NO. 2010-114 - A Resolution of the City Council of the City of Vernon Approving and Authorizing the Execution of an Agreement with JM Crew, Inc., d.b.a. Rhino Construction Services for Electrical Work Related to the Leonis Substation7kV Ground Fault Detection Project. It was moved by Maisano and seconded by McCormick, that Resolution No. 2010-114 be approved and adopted. Motion carried, 5-0. 3. RESOLUTION NO. 2010-115 - A Resolution of the City Council of the City of Vernon Amending Previously Amended Resolution No. 9639 Regarding the Compensation, Costs and Benefits of its Employees ("Salary Resolution") by Amending Schedule No. XIII of the Salary Resolution (Amendment No. 20) . It was moved by Newmire and seconded by Davis, that Resolution No. 2010-115 be approved and adopted. Motion carried, 5-0. 4. RESOLUTION NO. 2010-116 - A Resolution of the City Council of the City of Vernon Approving and Authorizing the Execution of Amendment Number Three to the Employment Agreement by and Between the City of Vernon and Donal O'Callaghan. It was moved by Maisano and seconded by Newmire, that Resolution No. 2010-116 be approved and adopted. Motion carried, 5-0. NEW BUSINESS 1. It was moved by McCormick and seconded by Davis to authorize the Interim Director of Light & Power to send letters of opposition to State Senator Gilbert Cedillo and State Assemblymember John A. Perez with regards to Senate Bill 722, which seeks to revise the Renewable Portfolio Standard. Motion carried, 5-0. Carlos Fandino, the Interim Director of Light & Power, responded that it is requiring that 330 of the City's retail sales have to be renewable resources by December 31, 2020. He then requested Abraham Alemu, the Electric Resources Planning & Development Manager, to come up and give a quick briefing on the bill. Abraham Alemu, the Electric Resources Planning & Development Manager, explained that the problem with the bill is the restriction of importing power from outside and requiring 75% of the renewable power to be in -state. Presently, the City is allowed to get 200 of its retail sales from renewable resources, and those renewable resources were not limited in -state which included power currently coming from Hoover Dam. Current legislation gives City Councils the authority to determine if the renewable resource is cost effective or not and if it impacts rates. SB 22 completely revises these requirements and takes away the City Council's authority to determine if it is cost effective or not. A good compromise would be 500 of those requirements instead of 75% being in the state and instead Page 2 of 6 Regular City Council - Light & Power Meeting Minutes August 16, 2010 of just allowing what is considered the renewable energy credit only limited to 10 according to this bill, we want it to be at 350. Also, we want the local governing body to have the authority to determine if the program is cost effective to its customers and the impact it has on the rates. The Light & Power Department is seeking the Council's guidance to send letters to representatives in Sacramento to call their attention to our concerns. The Mayor asked if the bill passes with the restrictions on Cities, how it will affect the City if a decision is made to buy a power plant outside of California. Donal O'Callaghan, the Director of Light, Power and Gas Capital Projects, responded that one is not dependent on the other. As far as buying a power plant outside California and importing power, the one thing the City will have to do is to ensure that the best available technology is involved in the emissions. The renewable issue is a separate issue. One is the removal of the authority from local government to state to implement anything that is coming and the proposed timeline is very short. The other issue is the 33o being renewable and there not being enough transmission lines. He stated that he does not think that even through the legislator that they will get to what we are looking at which is 2013. Abraham informed him that it is 2012. Donal continued explaining that is enormous from a perspective on what we are trying to do in California the amount of megawatts involved and really California does not have that sort of magnitude to be able to balance out that load with renewable. He explained that when you deal with wind from an energy point of view, if you have 100 megawatts, the reality of that is that you only have 30 megawatts or 34 megawatts because it only works at 34 capacity because of nature. You start getting into things that are really difficult to handle as we go forward. DISCUSSIONS 1. Project Gust: Update on the active position of the City with CAISO for the interconnection and transmission of wind turbine and solar energy from the renewable project land in Tehachapi. Donal O'Callaghan, the Director of Light, Power and Gas Capital Projects, reported that it was necessary to extend the bid deadline 24 to 48 hours because August is considered the Holiday Season in Europe and that this project is worth taking the additional time to get as many bids as possible. O'Callaghan also stated that the City completed an application for the interconnect with the Gust project to move energy from Tehachapi into this region. The City has an active position in the CAISO transmission interconnection cue and that interconnection request is for approximately 427 mega watts. The application also required a $7.7 million security deposit to have CAISO and Southern California Edison make the necessary upgrades to the system. The City's consultants advised that about $2.4 Page 3 of 6 Regular City Council - Light & Power Meeting Minutes August 16, 2010 million dollars of that deposit would be at risk, but the rest would be refundable. The reason why the $2.4 would be at significant risk is that SCE and CAISO would have to start preparing the upgrades and the design work. If the interconnect is viewed as having value to the bidders, then the plan would be to have the bidders cover the risk of the security deposit. The security deposit is due by August 26, 2010, and there may be a need for a special meeting if after receiving the bids and consulting with the advisor, if a bid with the interconnect is seen as low risk to the City and we can get the bidder to participate or give some guarantees of getting a return on the deposit. 2. Project Volt Financial Objectives: Includes discussion of the current financial position of the City and status of bonded indebtedness, electric utility rate projections and needs, and financial opportunities for the City's utility enterprises. Eric Fresch, Legal Services Consultant, reported that Latham & Watkins, the City's corporate lawyers, are working on structuring a transaction they think will enhance the value to the market place. The City's bond lawyers, Orrick Herrington, and the City Attorney are working to make sure that it is firmly grounded in law. Fresch reported that the acquisition of a power plant asset out of state was moving along better than expected. He stated that he needed to discuss with the City Attorney the ability of using some of the proceeds from the first phase of the Volt transaction to purchase a power plant asset at a very substantially reduced price. He discussed the Blackstone purchase of Dynergy which is a very large energy company that used to service the wholesale power to the City's system for the last decade. Blackstone purchased Dynergy for $540 million dollars and got control of $540 billion dollars worth of power plants at less than half the value. He stated that there are a lot of details to work out and did not realize that there was so much interest. He explained that the City is getting well positioned so that it can take advantage of the fact that these large funds still have enormous amounts of cash not going to work for them which means they will give more value to come in, give you their investment, clear all of the City's debt, pay all that down and use the rest to buy a power plant at half price that is contracted with many people who actually have much higher ratings than the City. The City has not started the normal bidding process yet, but Police and Fire Unions in Canada are one of the biggest interested bidders right now. Fresch stated that this was a wonderful opportunity for the City to financially ground itself and give it the capital it needs to build its system which will help the rate payers tremendously. In response to Councilman Davis, Fresch explained that a power plant purchased in Arizona would have to comply with some regulations of Southern California. It would not be able to be a dirty power plant in Arizona under Arizona laws. We own a part of the Hoover Dam and a piece of the Palo Verde Nuclear Generating Station that are located in Nevada and Arizona. He continued to explain that the laws he was referring to would not impact a plant that is near new, so that it has all of its environmental permitting Page 4 of 6 Regular City Council - Light & Power Meeting Minutes August 1.6, 2010 that is done to the current state of the law. Near new means it has a low heat rate which means the City would have the big market advantage in terms of the cost to produce electricity. The hope is to get great value on something that is idle. This is a public -private partnership similar to what they are doing in Canada, Europe and back East, but not so much out here which have more parochial systems. The people that run and operate them do not want to bring -anybody else in. The City is more flexible and is just looking to get the best rates to its customers. ORAL REPORTS 1. Brief reports and announcements from the Director of Light & Power. Carlos Fandino informed the Council about a couple of outages that occurred over the weekend. One was on the Basque 16kV circuit. The outage lasted approximately an hour and a half and crews had to go in and pull all of the cable from the underground and replace it. The cause of the outage is still under investigation, but it is believed that the cable failed due to age. The second outage on the 7kV circuits was caused by a Mylar balloon and there was no damage to the equipment and circuits, so power was able to be restored quickly. At 8:40 a.m., the Mayor called a short recess. At 8:45 a.m., all five members of the City Council in attendance prior to the recess reconvened in open session. It was moved by Newmire and seconded by McCormick, that the City Council enter into closed session to discuss the items listed on the closed session agenda. Motion carried, 5-0. At 9:12 a.m., the City Council resumed open session. CLOSED SESSION REPORT OUT The City Attorney reported that the City Council unanimously voted to: 1. Authorize the Interim City Administrator to execute and deliver a Letter of Intent to Pacific XC, L.P. for the property located at 4900 Pacific Boulevard, Vernon, California. 2. Approve the following employee appointments and reclassifications, effective August 2, 2010: a. Appoint Donal O'Callaghan as the Director of Light & Power Capital Projects; b. Reclassify Robin Tolmasoff from Executive Secretary to the City Administrator, to Secretary to the Director of Light & Power; and c. Reclassify Marianne Vazquez from Secretary to the Director of Light & Power, to Senior Administrative Assistant. The City Clerk announced that there were no further items on the agenda. Page 5 of 6 Regular City Council - Light & Power Meeting Minutes August 16, 2010 At 9:14 a.m., it was moved by McCormick and seconded by Newmire, that the meeting be adjourned. Motion carried. ATTE .11 Killard G. fY�ch City Clerk Hilario Gonza es Mayor Page 6 of 6