Resolution No. 6879
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RESOLUTION NO. 6879
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A RESOLU~ION OF THE CITY COUNCIL OF THE CITY OF
VERNON ADOPTING AN INTEGRATED RESOURCE PLAN
UNDER THE GUIDELINES SET FORTH BY THE WESTERN
AREA POWER ADMINISTRATION PURSUANT TO THE ENERGY
POLICY ACT OF 1992
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WHEREAS, on October 24, 1992, President George Bush
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signed into law the Energy Policy Act of 1992 (EPA) which amended
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various laws, one of which was the Hoover Power Plant Act of 1984
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(Hoover Act), in order to promote energy efficiency by the users
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of Federal power and laid the basic groundwork for the
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deregulation of the electric utility; and
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WHEREAS, the amendments to the Hoover Act required all
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Western Area Power Administration (WAPA) customers to prepare an
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Integrated Resource Plan (IRP), which is a plan to meet long-term
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power resource needs in the most efficient way possible and in
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accordance with EPA provisions; and
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WHEREAS, the City of Vernon adopted Resolution No. 6532
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on November 1, 1994, determining pursuant to the EPA that Vernon
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would not implement 16 U.S.C. ~2621(d) (9); and
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WHEREAS, effective November 20, 1995, the WAPA Energy
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Planning and Management Program (EPAM) adopted EPA mandates for
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WAPA's customers to prepare an IRP and established the framework
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for extension of firm power resource commitments; and
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WHEREAS, as a Federal power user and WAPA long-term firm
power customer, the City of Vernon is required to file an IRP with
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WAPA under EPAM; and
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WHEREAS, 42 USC ~7276b(b) sets forth the following
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criteria for approval of an IRP:
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(1) Identification and comparison of all
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practicable energy efficiency and energy supply resource options;
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(2) An IRP must include a short-term (2 years)
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action plan and a long-term (5 years) action plan covering a
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minimum of 5 years describing specific actions the customer will
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take to implement its IRP;
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(3) An IRP must designate least-cost options to
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be utilized by the customer;
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(4) To the extent practicable, the customer
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shall minimize adverse environmental effects of new resource
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acquisitions and document these efforts in the IRP;
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(5) In the preparation and development of an IRP
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(or any revision or amendment of an IRP) , ample opportunity for
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full public participation shall be provided;
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(6) An IRP must include load forecasting
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including data which reflects the size, type, resource conditions,
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and demographic nature of the customer; and
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(7) Customers must provide methods of validating
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predicted performance in order to determine whether objectives in
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the IRP are being met.
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
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CITY OF VERNON AS FOLLOWS:
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SECTION 1: The city Council of the city of Vernon does
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hereby find and determine that the recitals contained hereinabove
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are true and correct.
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SECTION 2: The city Council of the city of Vernon hereby
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approves and adopts the "City of Vernon Department of Light &
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Power 1997-2001 Integrated Resource Plan, November 1996," a copy
of which has been presented to the City Council concurrently with
this resolution, and the City Council hereby orders said IRP to be
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received and filed by the City Clerk.
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SECTION 3: The City Council of the City of Vernon hereby
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determines that in the preparation and development of an IRP there
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was ample opportunity for full public participation.
SECTION 4: The City Council of the City of Vernon hereby
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9 instructs the City Clerk to file with WAPA the IRP and a copy of
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SECTION 5: The City Clerk of the city of Vernon shall
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13 thereafter the same shall be in full force and effect.
14 APPROVED AND ADOPTED this 5th day of November, 1996.
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EONIS C. MALBUR
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BRUCE V. MALKENHORST, City Clerk
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STATE OF CALIFORNIA
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COUNTY OF LOS ANGELES
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4 I, BRUCE V. MALKENHORST, city Clerk of the city of
5 Vernon, do hereby certify that the foregoing Resolution, being
6 Resolution No. 6879, was duly adopted by the City Council of the
7 City of Vernon at a regular meeting of the city Council duly held
8 on Tuesday, November 5. 1996, and thereafter was duly signed by
9 the Mayor of the City of Vernon.
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BRUCE V. MALKENHORST, City Clerk
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CITY COUNCIL
LEONIS C. MALBURG
Mayor
BRUCE V. MALKENHORST
City Administrator/City Oerk
FAX: (213) 581-7924
CITY HALL
DAVID B. BREARLEY
City Attorney
FAX:(818)~5818
KEVIN WILSON
Director of Community Services & Water
FAX: (213) 588-2761
KENNETH J. DeDARIO
Director of Light & Power
FAX: (213)583-1983
DAVE TELFORD
Fire Chief
FAX: (213) 581-1385
LOUIS ROSENKRANTZ
Police Chief
FAX: (213) 581-1178
(i,//
THOMAS A. YBARRA
Mayor Pro- Tem
Wm. "BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL McCORMICK
Councilman
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (213) 583-8811
November 7, 1996
Mr. Tyler Carlson, Area Manager
Western Area Power Administration
615 South 43rd Avenue
Phoenix, Arizona 85009
Dear Mr. Carlson:
Subject:
Integrated Resource Plan
The City of Vernon is pleased to submit its 1997-2001 Integrated Resource Plan (IRP) pursuant to
Section 114 of the Energy Policy Act of 1992 and Western Area Power Administration's (Western)
Energy Planning and Management Program (EPAM) that became effective on November 20, 1995,
Enclosed please find a copy of Vernon's IRP as well as a copy of City Council Resolution 6879
approving the plan. The City Council approved this resolution following a public hearing held on
November 5, 1996.
Vernon has addressed all requirements set forth in Western's EPAM and anticipates Western's
approvaL Should there be any questions, please contact me or J. Richard Sweeney at (213) 583-8811,
extension 242.
Sincerely,
;(~ J t.k~
Kenneth 1. DeDario
Director of Light & Power
KJD:rmt
Enclosures
c: Bruce V. Malkenhorst
J. FUchard Sweeney
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CITY OF VERNON
DEPARTMENT OF LIGHT & POWER
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INTEGRATEDRESOURCF PLA1V
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1997 -2001
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October 29, 1996
TO: Bruce V. Malkenhorst, City Administrator
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Kenneth J. DeDario, Director of Light & Power ~
SUBJECT: Integrated Resourpe Plan
FROM:
- Please place the following on the City Council agenda as a public
hearing:
Consideration of the City of Vernon, Department of Light &
Power , Integrated Resource Plan.
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If you have any questions or comments, please contact me. Thank
you for your consideration.
KJD/ah
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CITY OF VERNON
DEPARTMENT OF LIGHT & POWER
INTEGRATED RESOURCE PLAN
NOVEMBER 1996
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TABLE OF CONTENTS
Page No.
EXECUTIVE SUMMARY . . . . , . . . . , . . . . . . . . . . . . . . , , , , . . , . , , , , , . . , . . . , . . . . . . . 1
Chapter 1 - SYSTEM OVERVIEW . . . , , . . . , , , . . . , . , . , . , , , , . . . . , , , . , . . . . , . , , . . . , 2
1. 1 History. . . , . . . , . . . . . . . . . . . . . , , , , , , . , , . . , . , . . . . . . , , . . . , , . . 2
1.2 System Characteristics .,.."..".",."...",."...,."".., 3
1 ,3 Resource Planning ........,....",.",...".,.""......," 5
Chapter 2 - THE OPERATING ENVIRONMENT """,.""..",...."".,..,.. 7
2,1 Restructuring, . . . . . , , , , , . , . . . . , , . . . , , , . . , . , , , , , . , . . , . . , , , , 7
22 Implications From Restructuring ..".",..",."..""..."," 7
2.3 City of Vernon's Competitive Position ,.,..,.',.",...."....... 7
Chapter 3 - DEMAND AND ENERGY REQUIREMENT FORECAST, . . , . . . , . , , , , , . 10
3,1 Historical Load , . , , . . . , . , . . . , , , , , , , . , , , , , , , , . . , . , , , , . . . . . , 10
3,2 Forecast Methodology and Analysis ".",.,.",.."."..""., 11
Chapter 4 - RESOURCE PLANNING AND ASSESSMENT OF RESOURCES ",.'". 18
4.1 Resource Planning Practices ,. , , , , , , , , , . . , , , . . , . . , , . . , , . , , , . . 18
4,1,1 Past Planning Practices ."",..",.".....""., 18
4,1.2 Current Planning Practice, . , , . . , , , , , , . . , , , , , , , , , , 18
42 Resources and Load Balancing .. , , . . . . , . , . . , , . , , . . , . , . , , . . , . . 19
4.2.1 Current Supply-Side Resources "",..',..".,.... 19
4.2.1.1 Palo Verde Nuclear Generating Station, . . , . . .19
42,1.2 Hoover Uprating Project, , , . . , , , , , , . , , . . , 19
4.2.1.3 Vernon Power Plant ."".""".",..', 20
42,1.4 Salt River Project .""."..,.,."..,.,. 20
42.1.5 Arizona Public Service Company, , , , . . , . . , , 20
42,1.6 City of Azusa ",.."".".","""'" 21
4,2.1. 7 Bonneville Power Administration, . , , . . , , , . , 21
42-1.8 Western System Power Pool Participation . . , , 21
4.2,2 Load Balancing ."""..",.,..,.,...".."." 22
423 Demand-Side Management Activities. . . , , , , , . , . , , , , 24
4.23,1 Load Shifting Program ".",.....',..". 25
4,2,3,2 Free Energy Audit Program, . . . . , . , , . . , , , , 25
4,233 Low Emissions Assistance Program. . , , , , . , . 26
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TABLE OF CONTENTS
Page No.
4.3 Planning for the Future. . . . . . . . , . . . . . . . , . . , . , , . . . . , , . , . . . , , , , , . . . . 27
4.3.1 Supply-Side Resources ..",...,."",.,..",," 27
4.3.1.1 Excess Capacity in the Market, , , , , , , , . . . , , 27
4.3.1.2 Power PoolslWholesale Market, . . . . , . , , . . . 27
4.3,1.3 Practicable Supply-Side Resources ...",... 27
4.3.1.4 Advanced Technologies. , , . , . . , , , , . . . . . , , 28
4.3.2 Demand-Side Resources "".,.".".",'.."... 29
4.3.2.1 Current Market Trends """."""."" 29
4.3.22 Demand-Side Management as a Way to
Meet Customer Needs . , . , , , . . . , . , , . , , , . , 29
4.3.3 Transmission Resources and Market Access, . , . , . , , . . 29
4.3.3.1 California-Oregon Transmission Project
and DC Transmission Line Rights ".".",. 29
4.3.3,2 Mead-Phoenix Project and Mead-Adelanto
Project "",..",..".",."""",., 30
Chapter 5 - SHORT- and LONG-TERM IMPLEMENT A TION PLAN , , , , , , , . . , , , , , , 32
5,1 Short-Term Plan (2 Years - 1997 & 1998) .",..",."""...,..32
5,1.1 Supply-Side Resources "",.,.".",".""""" 32
5.1.2 Demand-Side Resources ",.""."."",.""" 32
5.1.3 Transmission Resources, , , . . , , , , . , , . , , . . , , , , , , , . 33
5,2 Long-Term Plan. , , . . . . . . , . . . , . , , , , , . , . , , . . , . , , , . , , . . , , . . . 33
5.2,1 Supply-Side Resources ".""..",.,.""..".. 33
5.22 Demand-Side Resources ...,..,..""...,."".. 33
5.2.3 Transmission Resources. . . . , . . , , , . , , , . , , , . , , , . . , 33
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Figure 1.1
Figure 1.2
Figure 3.1
Figure 3,2
Figure 3.3
Figure 3.4
Figure 3.5
Figure 3,6
Figure 3.7
Figure 3.8
Figure 4.1
Figure 4.2
Figure 4-3
Figure 4.4
Figure 4.5
Table 1.1
Table 1.2
Table 2,1
Table 3,1
Table 3-2
Table 3-3
Table 3.4
Table 3.5
Table 4,1
Table 4.2
LIST OF FIGURES
Page No.
Historical Peak Demand. . . . . . . , . , , . . . . . . . , . , , , , . . , , , . . . . . , .. ,...... 3
Historical System Energy Usage, . . , , , . , , . ' , . . . , , . . . , , , . , . . . . . , , H . , . .. 4
Historical Demand. . . . . . . . . . . . . . . . . . . , . . . . , , , , . , , . , , , , . , , , . , , . , , , .. 10
Historical System Energy Usage. . . , . , . , . , , , , , , . , , , , . , . , . , . . , . , , . . . . ., 10
Econometric Demand Model Evaluation. . . , . , , , , . . , . . . . , . , , , . . . . , , . . , .. 12
Econometric Energy Model Evaluation, , . . . . . , . . . . . . . . . , . , , . . . , . , . . . , .. 12
Autoregressive Demand Model Evaluation. . . . , , . . , , . . . , , , , , . . , . . . . . . , .. 14
Autoregressive Energy Model Evaluation, , . . . . . . , , , , . . , , , . , , , , , . . . , . , , , ,. 14
Autoregressive Demand Model Forecast. , , . , . , , , , . , . . , . , , . , , , . . . . , , , . .. 16
Autoregressive Model Energy Forecast, , , . . , , , , , . . . . . , . , , , , , . , . , . , , , , .. 17
Average Retail Energy Rate. , . . . , , , . , . . , . , . , , . , , , , . , , , . , , , . , , , . . , . , ,. 19
Committed and Uncommitted Summer Demand Resource Forecast ."""",.. 22
Committed and Uncommitted Winter Demand Resource Forecast. . , , . . , , , , , , ,. 23
Committed and Uncommitted Energy Resource Forecast . . . , , , . , , . , , , . , . . , " 23
Load Shifting Program (Typical Summer) , , , , , , , , . , , . . . . , . , , , . , , . , , , . . .. 26
LIST OF TABLES
Historical System Requirements. . . , . , , , , , ' , , , , . . , , , . , , , . , , , , , . , . , , . , , " 4
Retail Revenue and Energy Sales by Customer Class, , , , . , , , , , , . , . . . . . , , , . .. 5
Major California Public and Investor-Owned Utilities 1994 Average
Revenue (t/kWh} , , . . . . . . , . . . , . . . , , , , , . , , . , , , . , , , , , . . , . . , . , , , , . , , .. 8.
Econometric Demand Model Evaluation . , . . . . , , , , . . , , , , , . . , , , . , , , . . , , , , 13
Econometric Energy Model Evaluation ....""".",.."."""......, 13
Autoregressive Demand Model Evaluation, . , , , , , , . , , , , , , , , , , , . , , , , . , . . , , , 15
Autoregressive Energy Model Evaluation, . . , , . . . , . , . . , , , , , , , . , , , . , , . . , , , . 15
Demand and Energy Forecast, , , , , . , , . . . , , . . , , . , . , . , . , , . , , , . . , . , , , , . . 16
Committed and Uncommitted Resources, . . . . , , , , , . . , , , . , . , , , , , . , , , . . , . . , , 24
Current Transmission Arrangements. . . , , . . , . . , , . . , , , . , . , . , , . , , , . , , , . , , . , 31
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VERNON'S INTEGRATED RESOURCE PLAN
EXECUTIVE SUMMARY
The City of Vernon's ownership of its electric system since 1933 has proven advantageous to its
business community- Vernon's resource mix and large industrial customer base give Vernon a unique
advantage in today's competitive environment
As California's electric industry prepares for the new operating environment that is being created by
the State's Public Utility Commission (CPUC), the State Legislature, and the Federal Energy
Regulatory Commission (FERC), Vernon finds itself in a favorable competitive position with the
lowest average electric rates in the state, Although some changes in the electric industry may occur
as soon as January 1, 1998, Vernon foresees no immediate change to its operation.
Significant changes in Vernon's system requirements are not expected for the planning horizon
covered by this Integrated Resource Plan. To meet capacity and energy demand requirements in this
period, Vernon foresees using the most economical mix of its committed resources and bilateral
contracts.
Procurement practices now in place make use ofleast-cost planning techniques. This is achieved by
utilizing committed resources effectively along with mid- and short-term bilateral contracts, It is
expected that Vernon will continue to pursue this conservative practice in the near future as
California's electric industry transitions to a restructured environment
Vernon will continue its demand-side-management (DSM) programs currently in place which include
its Load Shifting Program, Free Energy Audit Program, and Low Emission Assistance Program,
Market trends in the DSM arena have shifted from the aggressive implementation of energy
conservation and load shaping programs to a focused set of programs designed to target customers
in a cost-effective manner using more innovative techniques than in the past Vernon believes that
customer oriented programs will playa significant role in maintaining Vernon as a favorable location
for industry.
Transmission assets available to or owned by Vernon have played a key role in Vernon's ability to
provide reliable, low cost power to its customers.
Taking all elements into consideration, Vernon will pursue a strategy geared towards meeting
customer needs using an aggressive yet conservative power procurement practice, This strategy will
achieve the goal of providing the highest quality service at lowest possible cost To achieve this goal,
Vernon will pursue a short-term (1st and 2nd year) and a long-term (3rd, 4th and 5th year)
implementation plan,
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1.
Chapter 1 - SYSTEM OVERVIEW
1.1 History
The City of Vernon (Vernon) is located approximately four miles southeast of downtown
Los Angeles. Vernon was founded in 1905 with the motto "Exclusively Industrial" city.
Its original territory comprised 2.33 square miles, Over the years Vernon grew to its
present size of 5.06 square miles. Vernon is governed by a City Council and is
administered by a Council-appointed City Administrator.
The history of Vernon's electrical system began with a group of businessmen who had
formed a non-profit corporation, the Vernon Industrial Development Association, for the
mutual benefit of industries located in Vernon. The directors of this Association were
businessmen in Vernon and were keenly aware of the need for economical energy to
operate their factories profitably,
John Leonis, then Mayor of Vernon, entered into negotiations for a more favorable
industrial rate with Southern California Edison (Edison) in early 1932, When Edison
declined to provide Vernon more favorable rates, the Vernon Industrial Development
Association requested that the City Council build its own power plant and electric
distribution system. In 1933, Vernon completed building the largest diesel generating
power plant in the nation at the time, allowing electric service to begin on June 19, 1933.
The municipal electric system established by Vernon was so successful that the diesel
engines operated almost continuously until increased load and more favorable rates from
Edison led Vernon to reevaluate its electric system operations. In 1937, Vernon entered
into a contract with Edison to operate, maintain and supply power to Vernon's electric
system, As the years passed, rising fuel costs, equipment age and air quality regulations
made the plant less economical to operate and the generators were retired in 1972. As
the generators were operated less, Edison would increasingly provide a larger portion
of Vernon's system load. However, Edison's rate increases in the 1970s, caused Vernon
to re-examine the benefits of operating its 1933 vintage engines and obtaining power
from third parties. Favorable economics led to the return of the engines to operation,
the purchase offirm power and economy energy from third parties, and construction of
two new gas turbine generators for peaking. This resource mix provided substantial
economic benefits to the customers,
On July 1, 1989, after over 50 years of Edison's operation of Vernon's electric system,
the contract between Edison and Vernon expired and was not renewed, Vernon, after
considering various options, decided to exercise more direct control over electric system
operation, Vernon met the formidable challenge of providing Vernon's customers with
reliable electric service and very competitive rates which are now the lowest on average
in the State of California,
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1.2 System Characteristics
Vernon's historical load characteristics are depicted in Figure 1.1 and Figure 1.2. As
these figures show, Vernon's peak demand and energy requirements have remained
fairly constant in the last four years. This trend is expected to continue in the near term,
with system peak demand and annual energy consumption remaining proximate to the
1995 levels of 174 MW and 1,070 GWhlYear respectively. Little change is expected
in the near term because of Vernon's urban location and environmental constraints.
With most of its service territory already developed, changes in system load are, to a
large extent, changes in energy density of existing facilities.
In the early 1990's, several large manufacturing facilities closed down. Figure 1.1
illustrates the load loss suffered in those years. Stringent air quality standards made it
increasingly difficult for heavy manufacturing industries to continue operations in
Vernon. Load recovered slightly in 1992 and has remained relatively stable since then.
Activity in the industrial sector reflects the overall health of the economy. Vernon's
large base of industrial customers in turn make Vernon's load particularly sensitive to
the industrial sector of the economy.
Figure 1.1. Historical Peak Demand
200
195
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CD
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165
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1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Year
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Figure 1.2. Historical System Energy Usage
1,200,000
1,150,000
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CD
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1,000,000
950,000
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Year
Vernon experienced substantial load loss in the early 1990s Vernon's load factor,
however, did not show a substantial change. Table 1.1 shows historical system load,
energy requirements and average load factor. As the data show, rather than seeing a
reduction in the system's load factor as a result of load loss, there is in fact a slight
increase in the overall load factor.
Table 1.1. Historical System Requirements
1986 1,157,209 196,386 673%
1987 1,145,183 189,593 69.0"10
1988 1,164,380 191,108 69.6%
1989 1,171,811 193,680 69,1%
1990 1,083,530 182,424 67-8%
1991 1,034,822 172,752 68,4%
1992 1,080,988 179,016 68,9%
1993 1,073,782 174,279 70.3%
1994 1,071,487 177,701 68-8%
1995 1,073,084 173,880 70.4%
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An important characteristic of Vernon's system is the unique customer mix. Table 1.2
shows the 1995 energy sales and revenue figures for each customer class, The table
shows that Vernon's industrial customers contributed approximately 75% of Vernon's
system energy and total revenue, while representing approximately 40% of all customers
in Vernon, Vernon's largest 100 customers (above 500 kW peak demand) represent
approximately 61% of the peak load and 71% of total energy usage. Residential
customers are not shown as a separate class since they represent less than 1 % of
Vernon's system load.
Table 1.2. Retail Revenue and Energy Sales by Customer Class
OTHER
CUSTOMERS
# of Customers 853 1057 130
% of Total 42% 52% 6%
Energy Use (MWh) 800,490 232,418 9,803
% of Total 77% 22% 1%
Revenue ($1,000) 36,020 13,034 815
% of Total 2%
2040
1,042,711
49,869
13 Resource Planning
On October 24, 1992, President George Bush signed into law the Energy Policy Act of
1992 (EPAct} This legislation amended various laws and laid the basic groundwork for
the restructuring of the electric utility industry. Among the laws amended by this
legislation was the Hoover Power Plant Act of 1984 (Hoover Act), The amendments
included language to promote energy efficiency by the users of Federal poweL
The amendments to the Hoover Act required all Western Area Power Administration
(Western) customers to prepare an Integrated Resource Plan (IRP). On November 20,
1995, the Western Energy Planning and Management Program (EP AM) became
effective. EP AM adopted EP Act mandates for Western's customers to prepare an IRP
and established the framework for extension of firm power resource allocations from
Hoover. As a Federal power user and Western customer, Vernon is required to file an
IRP with Western under EPAM, The IRP is a plan to meet long-term power resource
needs in the most efficient way possible and in accordance with EP Act provisions. The
IRP assesses utility load requirements and analyzes all available resources needed to meet
those requirements. The items to be addressed in this plan include the following:
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1.
2,
3.
4.
5,
6,
7.
Load forecast to reflect size, type, existing resource conditions and
demographic nature of the utility.
Identification and comparison of all current practicable energy efficiency and
energy supply resource options,
Designation of the least-cost options to be utilized by the utility,
To the extent practicable, qualitative analysis on how to minimize adverse
environmental effects of new resources,
Input from public participation,
Action plans covering a period of two and five years,
Methods of validating predicted performance,
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2.
Chapter 2 - THE OPERATING ENVIRONMENT
2.1 Restructuring
In addition to the planning requirements noted in Chapter 1, passage by Congress of the
EP Act amended existing federal law to encourage more competition and efficiency in the
electric industry. Amendments to the Federal Power Act gave the Federal Energy
Regulatory Commission (FERC) the authority to implement part of this legislation.
Using its new authority, the FERC issued a Notice of Proposed Rulemaking, The intent
of the proposed rulemaking was to provide open access to transmission facilities in a
non-discriminatory way and to allow parties with uneconomical investments to recover
stranded costs associated with those investments. On April 24, 1996 following a lengthy
participation process from stakeholders, the FERC issued its final rule as Order 888,
At the state level, the California Public Utility Commission (CPUC) has also begun to
address the issue of high electric rates, In May, 1994 the California regulators issued
their "Blue Book Proposal" which proposed the restructuring of the State's electric
industry as a way to lower electric rates to California consumers. Regulators and various
stakeholders debated the CPUC's proposal for a year and a half On December 20,
1995, the CPUC issued Decision 95-12-063 outlining the process by which the investor
owned utilities (IOU) would transition from a regulated environment to a competitive
market driven environment Assembly Bill 1890 (AB 1890), approved by the Governor
in September 1996 in part ratifies the CPUC's decision. AB 1890, however, includes
stronger language to safeguard small consumers from potential rate increases, as well as
language to protect programs such as Demand-Side-Management (DSM), research
demonstration and development (RD&D), and renewable energy resources, Several
parts of the CPUC's decision and AB 1890 are discussed further throughout this
document
2.2 Implications From Restructuring
Although the CPUC's Decision and AB 1890 are primarily directed at the State's three
10Us, there will be effects on other entities involved in providing electric service,
including municipalities like VernOR Vernon will continue to actively monitor
developments as State and Federal regulators implement industry restructuring.
23 City of Vernon's Competitive Position
The California Energy Commission (CEC) recently published a report entitled
"Municipal Utilities Strategies to Deal With Restructuring and Competition", This
report includes a compilation of average revenues for each class of customer for major
California public- and investor-owned utilities based on electric sales and revenues from
1994, Table 2.1 below shows this information,
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Table 2.1. MAJOR CALIFORNIA PUBLIC AND INVESTOR-OWNED
UTILITIES 1994 Average Revenue (t/kWh)
Residential Commercial Industrial
City of Anaheim 9,88 10-61 8.78 938
City of Burbank 9.85 9.76 9.35 9,58
City of Glendale 10,07 10,62 8.64 9.73
LADWP 9.95 7.72 823 932
Imperial Irrigation Dist K56 K25 (n/a) 838
Modesto Irrigation Dist 731 7,77 5.62 7,00
PG&E 12.25 11.04 7,05 10.55
City of Palo Alto 5,54 6.63 5,93 6,11
City of Pasadena 9.57 9,73 9.13 933
City of Riverside 10-71 10.44 8.78 9.94
SMUD KOO K11 7.13 7,59
SDG&E 11.03 9.72 7.47 9,74
City of Santa Clara 6,77 10,14 6.97 7,07
Edison 12.32 11.96 6.64 1038
Turlock Irrigation Dist K86 10,89 7,92 8.54
It is clear that Vernon and its customers are in a very advantageous position relative to
other utilities and consumers in the State, Vernon's favorable rate situation can be
attributed to its unique industrial load base characteristics and its aggressive stance in the
power marketplace,
Vernon's customer base has a predictable and consistent load throughout the year.
Vernon has enjoyed a nearly constant 70% load factor during the past 1 a-year period,
This high system load factor coupled with a predictable peak demand minimizes the
City's need for peaking resources obviating large capital expenditures typical of systems
with large daily and seasonal load variations,
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Vernon has aggressively pursued the economic advantages available in the broader
marketplace, It has obtained, through contractual rights and project construction,
transmission access to low cost resources outside the Southern California marketplace,
These practices will be discussed later in this document; they are mentioned here since
they materially contribute to the overall competitive picture,
Vernon pursued membership in the Western System Power Pool (WSPP) during the late
1980s but was unable to join until an arrangement for Vernon's participation was
worked out with Edison. Since becoming a WSPP member in 1994, Vernon has
effectively used WSPP for short-term power purchases and other transactions to replace
expensive self-generation traditionally used to follow system load variations,
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3.
Chapter 3 - DEMAND AND ENERGY REQUIREMENT FORECAST
3.1 Historical Load
Vernon's system peak demand and annual energy consumption over a 10 year period
are depicted in Figures 3.1 and 3.2.
Figure 3.1. Historical Demand
200 -------------------___
c::::- 195
S 190
~ 185
~ 180 -----------------_________ _________ __________________
E 175 ----------------------------- --- -------
~ 170 ---------------_________________________________________
Q
165 ----------------________________________________________
160
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Year
Figure 3.2. Historical System Energy Usage
1,200,000
:c 1,150,000 -
3:
:i 1,100,000 -__n__nn___n__
-
>,.
e' 1,050,000
~
c
W 1,000,000
950,000
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Year
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Figure 3,1 depicts how the system peak demand, which in 1986 exceeded 195 MW, has
declined substantially to a current level of approximately 174 MW. This 10% drop in
the system peak demand over a relatively short period of time is attributed to the load
loss from a few large industrial customers who closed down their operations, Over the
last few years, Vernon's load has remained fairly constant. Vernon recognizes the
sensitivity of its system demand to load changes from its large industrial customer base.
3.2 Forecast Methodology and Analysis
The historical load analysis looked at variables such as weather and found some
dependency. For instance hot weather will cause the refrigeration load in Vernon to be
higher, however the higher load from the refrigeration may not coincide with the peak
demand imposed by other large consuming customers,
The second analysis looked into economic factors, mainly unemployment figures, and
found some level of correlation, To test the usefulness of the correlation found, a single
variable econometric model was developed to show the significance of the correlation
between Vernon's system load and unemployment rates of the Los Angeles metropolitan
area, Figure 33, Figure 3.4, Table 3,1 and 3,2 show the actual system load and the
model's predicted load. The model developed was accurate for the most part as long as
changes in usage between years were not larger than 4%. For example, when energy
usage and/or peak demand changes in 1990, 1991 and 1992 equaled or exceeded 4%,
substantial discrepancy exist between the model predicted figures and the actual figures.
Although this methodology showed some degree of correlation, it would not be a useful
tool for forecasting purposes since predicting unemployment figures would be extremely
difficult.
A simpler load forecasting method based on the autoregressive time series trend model
is utilized to address the need for a practical forecasting methodology. This model has
the characteristic that the next interval forecasted figure is only dependent on the prior
interval value once a model is developed, The results of this model are evaluated
graphically on Figures 3,5 and 3.6 and the numbers are tabulated on Tables 33 and 3.4-
Using the autoregressive forecast model, the five-year forecast in Table 3.5 was
developed, The values under the column labeled Base represent the base forecast from
which a :tl % deviation was introduced to account for potential system load changes,
The forecast developed is also represented graphically on Figures 3.7 and 3,8.
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Figure 3.3. Econometric Demand Model Evaluation
200
195
190
-
~ 185 ----------____________
-
;g 180 ------------______ ______
CG
E 175
CD
Q
170 - - - - --
165 - -- - ---
160
1986 1987 1988 1989
----~---~----------------------------------
.
.
Actual
Model
1990 1991
Year
1992
1993
1994
1995
Figure 3.4. Econometric Energy Model Evaluation
1,200,000
1,150,000
-
.c
3: 1,100,000
::E
-
>.
e' 1,050,000
CD
c
W
---------------------------------------------------
1,000,000
.
.
Actual
Mode!
950,000
1986 1987
1988 1989 1990 1991
Year
1992 1993 1994 1995
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Econometric Demand Model Evaluation
% DIFFERENCE
BETWEEN MODEL
& ACTUAL PEAK
}jEMAND
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1985 7.0% 184,837 191,500
1986 6.7% 185,891 196,386 -25% 5.6%
1987 5,9% 188,702 189,593 -3.6% 0.5%
1988 4.9% 192,216 191,108 0,8% 0,6%
1989 4,6% 193,270 193,680 L3% 02%
1990 5,9% 188,702 182,424 -62% 33%
1991 82% 180,621 172.752 -5,6% 4A%
1992 9.8% 175,000 179,016 35% 23%
1993 9.8% 175,000 174,279 -2.7% OA%
1994 9A% 176,405 177,701 L9% 0,7%
1995 7,9% 181,675 173,880 -22% 43%
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Table 3.2. Econometric Energy Model EvaluatioIl
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% DIFFEREI'{CE
..BETWEEN.MQP~(,
....8c.AdlJALtNltI.l9Y
USAGE.
1985 7,0% 1,113,222 1,129,950
1986 6.7% 1,118,953 1,157209 2A% 3A%
1987 5.9% 1,134,236 1.145,183 -Ll% LO%
1988 4.9% 1,153,340 1,164,380 1,6% 1.0%
1989 4,6% 1,159,071 1,171,811 0.6% LI%
1990 5,9% 1,134,236 1,083,530 -8,1% 4.5%
1991 8.2% L090,298 1,034,822 -4.7% 5,1%
1992 9,8% 1,059,733 1,080,988 43% 2,0%
1993 9.8% 1,059,733 1,073,782 -0.7% 15%
1994 9A% 1,067,374 1,071,487 -0.2% OA%
1995 7,9% 1,096,029 1,073,084 -.1% 2,1%
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Figure 3.5. Autoregressive Demand Model Evaluation
200 -------------------------------_________________________
195
-190
~
:&! 185
-
~ 180 ---------------
e 175 - - - - - -
t! 170 - - -- - -
165 - - ----
160
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
.
Actual Demerxl
.
Model Demand
Year
Figure 3.6. Autoregressive Energy Model Evaluation
1,200,000
::c 1,150,000
~ 1,100,000
-
~
~ 1,050,000
CD
c
W 1,000,000
. Actual Energy
. Model Energy
950,000
1~1~1~1~1~1~ 1~1~1~1~1~
Year
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Table 3.3. Autoregressive Demand Model Evaluation
SYSTEM PEAK DEMAND
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ACfUALPEAK
I>I<:MAND% CHANGE
% J>IFFERENCE BEnVE:EN . . .
MonEL & ACfUAL PEAK DEMAND
I
1985 191,500
1986 188,167 196,386 2,5% 4.4%
1987 185,702 189,593 -3,6% 2,1%
1988 183,877 191,108 0,8% 3.9%
1989 182,528 193,680 1.3% 6,1%
1990 181,529 182,424 -6.2% 05%
1991 180,790 172,752 -5.6% 4.4%
1992 180,244 179,016 3,5% 0,,7%
1993 179,839 174;279 -2.7% 3,1%
1994 179,540 177,701 1.9% 1.0%
1995 179,319 173,880 -2.2% 3.0%
1996* 179,155 176,740 1.6% 13%
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Table 3.4. Autoregressive Energy Model Evaluation
SYSTEM ENERGY
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ACfUAL J<:NERGY
USAGE % CHANGE
% I>IFFERENCE HETWEENMODEL&
ACruAL ENERGY USAGE
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1985 1,129,950
1986 1,118,873 1,157;209 2.4% 3.4%
1987 1,111;259 1,145,183 -LI% 3.1%
1988 1,106,025 1,164,380 1,6% 5.3%
1989 1,102,426 1,171,811 0.6% 6.3%
1990 1,099,953 1,083,530 -8.1% 1.5%
1991 1,098,253 1,034,822 -4.7% 5.8%
1992 1,097 ,084 1,080,988 4.3% 15%
1993 1,096;280 1,073,782 -0,7% 2.1%
1994 1,095,728 1,071,487 -02% 22%
1995 1,095,348 1,073,084 0-1% 2,0%
1996* 1,095,087 1,084,132 0,1% 1,0%
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*1996 actual demand figure represents the highest system peak demand for period between January 1996 and September
1996. 1996 actual energy usage represents actual energy usage for period between October 1995 and September 1996.
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Table 3.5. Demand and Energy Forecast
1997 175,475 177,247 179,020 1,076,503 1,087,377 1,098,251
1998 175,087 177,622 181,192 1,067,924 1,089,608 1,111,509
1999 172,616 177,900 183,290 1,058,733 1,091,141 1,124,204
2000 171,087 178,105 185,337 1,049,158 1,092,195 1,136,542
2001 169,521 178,257 187,350 1,039,356 1,092,920 1,148,669
Figure 3.7. Autoregressive Demand Model Forecast
190
--------------------------------------------
185
-
at 180
::E
-
-g 175
ftS
E
CD 17 0
Q
---------------------------------------------------
.
.
.
~w~~ _______________________________
Base
165
-------------------------------------
High(+~
160
1997
1998
1999
Year
2000
2001
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Figure 3.8. Autoregressive Model Energy Forecast
1,160,000 T - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1,140,000
_ 1,120,000
.c
3: 1,100,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --
~ 1,080,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
~
C) 1,060,000 -
...
! 1,040,000
W
1,020,000
1,000,000
980,000
1997
.
Low{-fl~
.
Base
.
Hgh(+fl~
1998
1999
2000
2001
Year
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4.
Chapter 4 - RESOURCE PLANNING AND ASSESSMENT OF RESOURCES
4.1 Resource Planning Practices
4.1.1 Past Planning Practices
Up until 1982 Edison was the sole wholesale supplier to Vernon. But with
the substantial wholesale rate increases from the mid-seventies through the
mid-eighties, Vernon began to acquire new resources, The effort to acquire
access out of Edison's control area was accompanied by substantial litigation,
Vernon's efforts led to purchasing non-firm energy, participating in the
purchase of nuclear power, overhauling and operating 1933 vintage diesel
units, developing and purchasing firm resources, and participating in the
planning and ownership of several transmission lines,
4.12 Current Planning Practice
As Vernon moved into the 1990's and as the market became more open,
Vernon was able to increase its access to a wider range of wholesale markets
in the western United States. This resulted in substantial savings to Vernon's
customers,
Having gained experience in the 1980s, Vernon engaged in a more aggressive
power procurement strategy consisting of mid-term (1 to 3 years) and short-
term (monthly and daily) power purchase contracts and seasonal power
exchanges, In 1993, FERC approved a new settlement agreement between
Vernon and Edison which permitted Vernon to reduce the generation of its
power plant, use the capacity associated with it, and replace the generation
with market energy purchases.
Now in the mid~ 1990's, Vernon is able to meet most of its resource needs
through a combination of its City-owned generators, two long-term power
purchase contracts, mid- to short-term power purchase contracts, and spot
market purchases. Vernon continues to use Edison's Partial Requirements
(PR) Rate to fill unmet energy needs, The benefits of this planning practice
have accrued to customers in the form of reduced power rates. The
reductions in retail rates are illustrated in Figure 4,1 by showing changes in
the energy component of total revenue collected. This figure shows the
average retail energy cost component to Vernon's customers over the last 10
years.
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Figure 4.1. Average Retail Energy Rate
~. 3.0 - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
3:
~ 2.5 --- ---- __________________ ____________________________
~
-
Ui 2.0 - -- -- -- --
o
o
~ 1.5 ------------------------------------------------------
e'
CJ) 1.0 - - - - - - - - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
c
w
cD 0.5 ---------------------------------------------___________
>
~ 0.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Year
4.2 Resources and Load Balancing
4.2.1 Current Supply-Side Resources
4.2.1.1
Palo Verde Nuclear Generating Station
In 1981, Vernon, in conjunction with other municipalities in
the area, entered into a 45-year contract with the Southern
California Public Power Authority (SCPPA) to purchase
power generated from the Palo Verde Nuclear Generating
Station (PVNGS) in the State of Arizona. The power
purchase contract entitled Vernon to 11.03 MW of capacity.
Under the Integrated Operating Agreement (lOA) of
August 25, 1982, between Vernon and Edison, Edison
provides integration of Vernon's PVNGS resource into
Edison's system. As a result of the integration, Vernon
receives a capacity credit of 8.774 MW and the full amount
of energy delivered. Delivery of this resource began in April
1986 and shall continue until the year 2030.
4.2.1.2
Hoover Uprating Project
In 1987, Vernon entered into an agreement for the purchase
of firm capacity and energy from Western. This resource
became available as a result of a U.S. Bureau of Reclamation
project replacing the turbines and generators at Hoover Dam
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4.2-1.3
4,2,L4
4.2.1.5
with more efficient units and the upgrading of certain auxiliary
equipment. This uprating project increased the generating
capacity of the Hoover Generating Station by 503 MW,
Vernon's purchase represents 22 MW of an energy entitlement
of28,000 MWh/Year. In accordance with Special Condition
12 of Edison's PR Rate, Vernon began to receive deliveries of
power from Hoover in August 1987. This agreement
continues until the year 2017.
Vernon Power Plant
The power plant originally consisted of five large diesel
generators with a total nameplate capacity of 35 MW (21. 5
MW dependable), In 1989, Vernon added two natural gas
turbine generators with a nameplate generating capacity of
approximately 12 MW (1 L25 MW dependable}
Instead of operating the power plant as in the past, Vernon
purchases energy at a substantially lower cost through the
WSPP while, keeping the generating units in operating
condition to backup firm energy resources, This is the
anticipated operation mode of the power plant in the five year
planning term covered by this IRP. Vernon expects to retire
the five diesel generators in the year 2000 while continuing to
evaluate usage of the turbine units to provide backup capacity
and emergency generation,
Salt River Project
The City of Vernon entered into a firm power purchase
agreement with the Salt River Project (SRP) under which SRP
is to provide Vernon with firm power during the on- and mid-
peak periods, The power delivery for the remaining year of
the contract (1997) consist of3 5 MW /Hour for the entire year
during the peak periods specified above. Deliveries of power
began on January 1, 1995 and shall terminate December 31,
1997,
Arizona Public Service Company
Vernon entered into a firm power purchase agreement with
Arizona Public Service Company (APS) under which APS will
provide Vernon with 25 MW /Hour every day between
October 1 and April 30 for the term of the contract which
began in 1996. The contract shall expire on April 30, 2000,
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42,1.6
4.2,1.7
4.2.1.8
City of Azusa
As part of a settlement agreement between Vernon and the
City of Azusa, Vernon is to purchase around-the-clock firm
capacity and associated energy during the months of May,
June and July of every year between 1996 and 1998, The
agreement stipulates delivery rates of 20 MW /Hour in 1995
and 1996, and 32 MW/Hour in 1998, This power will be
made available at the Nevada-Oregon Border (NOB).
Bonneville Power Administration
Vernon and the Bonneville Power Administration (BP A)
entered into a power exchange agreement under which
Vernon is to deliver power to BP A during the months of
October, November and December; and BP A shall make the
energy delivery to Vernon during the months of May, June
and July. The delivery of power to BP A commenced
October 1, 1995 and shall terminate on September 30, 1998,
The 1996 and 1997 rates of power delivery to Vernon are 31
MW /Hour during the first 6 hours and the last two hours of
Monday through Saturday, and 40 MW /Hour for all other
hours, The 1998 rates of power delivery shall be 22
MW/Hour and 28 MW/Hour during the same time periods
above for 1996 and 1997, This contract also provides Vernon
with 60 MW of capacity resource during the summer months
of August and Septembec This feature of the contract allows
Vernon the flexibility to purchase the energy from BP A or the
open market
Western System Power Pool Participation
The WSPP is an organization made up of over 100 members
including IOUs, municipalities, power marketers and power
brokers in California, the Pacific Northwest and the
Southwest. The WSPP was organized in 1987 on an
experimental basis to try to determine whether a market-
based system would utilize generation and transmission
resources more efficiently in the regions mentioned. The
FERC gave its approval in 1991 to make WSPP permanent
Vernon became a member ofWSPP on March 8, 1994 and has
since used its membership effectively for conducting wholesale
transactions, The main advantage of the WSPP is the ease by
which transactions can take place, since the contract platform
is already established and the only parameters that the parties
have to negotiate include price, delivery rates, points of
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delivery rates, points of delivery and other minor issues
related to the transaction. Because of the characteristics of
the WSpp Agreement, Vernon has been able to utilize its
power and transmission resources in a more efficient manner.
4.2.2 Load Balancing
Figures 4.2 through 4.5 and Table 4.1 show the amount of committed and
uncommitted capacity and energy based on the forecasted load shown on
Table 3.5. The uncommitted capacity and energy reflect Vernon's practice
of procuring a portion of its resource needs through mid- and short-term
power purchases.
Figure 4.2. Committed and Uncommitted Summer Demand Resource Forecast
160
140
- 120
3:
:E 100
-
~ 80
.u
ns 60
Q.
ns 40
0
20
0
High Base low
1998
High Base Low
2001
Year
. Cormitted . Uncormitted . Cormitted . Uncormitted . Cormitted . Uncormltted
High High Base Base Low low
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Figure 4.3. Committed and Uncommitted Winter Demand Resource Forecast
160
140
~ 120
::E 1 00
-
~ 80
CJ
as 60
Co
(J 40
20
o
. Cormitted
High
High Base Low
1997
High Base Low High Base Low
1999 2000
Year
. Uncormitted . Cormitted
High Base
. Uncormitted . Cormitted
Base Low
. Uncormitted
Low
Figure 4.4. Committed and Uncommitted Energy Resource Forecast
1,200,000
1,000,000
-
.c
3: 800,000
::E
-
~ 600,000
e>>
CD 400,000
c
W
200,000
. Cormitted
High
o
High Base Low Hgh Base Low High Base Low Hgh Base Low High Base Low
1997 1998 1999 2000 2001
Year
. Uncormitted . Cormitted
High Base
. Uncormitted . Cormitted
Base Low
. Uncormitted
Low
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Table 4.1. Committed and Uncommitted Resources
1997 152 27 152 25 152 24
1998 118 63 118 59 118 56
1999 63 121 63 115 63 110
2000 63 123 63 116 63 109
2001 41 146 41 137 41 129
CAPACITY (WINTER MW)
1997 120 59 120 57 120 56
1998 86 95 86 91 86 88
1999 86 97 86 91 86 86
2000 86 99 86 92 86 85
2001 41 146 41 137 41 129
ENERGY (TOTAL MWh)
BASE
COl11mitted Uncol11nlitted
1997 429,055 669,196 429,055 658,322 429,055 647,448
1998 296,020 815,489 296,020 793,588 296,020 721 ,904
1999 210,425 913,779 210,425 880,716 210,425 848,308
2000 162,640 973,902 162,640 929,555 162,640 886,518
2001 100,600 1,048,069 100,600 992,320 100,600 938,756
4.23 Demand.Side Management Activities
Western issued its Guideline and Acceptance Criteria (G&AC) in 1981
requiring all Western customers to implement the Conservation and
Renewable Energy (C&RE) program,
In 1985, the G&AC were amended pursuant to Title II of the Hoover Power
Plant Act of 1984 to require each long-term firm power customer to develop
and conduct C&RE activities that would reduce resource requirements either
through DSM programs or through the development of renewable resources,
The G&ACs have since been replaced with Western's Energy Planning and
Management Program (EPAM) approved by Western on November 20, 1995,
Vernon has shown its commitment to the overall objectives of the C&RE
program by conducting a number of activities in an effort to encourage
customers to implement energy conservation measures in their facilities,
The programs Vernon continues to offer its customers include the Load
Shifting Program, Free Energy Audit Program, Low Emission Assistance
Program (LEAP) and Vernon's continued customer support to the customers'
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energy conservation and load management needs. The programs are designed
to assist customers with their efficient use of energy in order to keep the
customers competitive.
423.1
Load Shifting Program
Vernon initiated its Load Shifting Program by introducing its
first Time-of-Use (TaU) rate for its large industrial customers
on June 8, 1984. This program was initially targeted for
customers with a demand of 500 kW or higher. The TOU rate
was designed to reflect Vernon's wholesale TOU rate
structure under Edison's PR Rate and also to send a price
signal that would encourage customers to use power wisely
during the on-peak period, As the metering technology
evolved and became more accessible in the late 1980s, Vernon
found it economical to expand the program and introduced a
new TaU rate for customers with intermediate demands
between 200 kW and 500 kW, Vernon's new TaU rate
became effective on July 1, 1990.
Vernon's Load Shifting Program was marketed together with
the TaU rates as electric cost reduction mechanisms for
customers, This program is successful as some customers are
able to take advantage of the rate structure and reduce on-
peak demand costs, Vernon typically reduces its on-peak
demand by 6 MW,
The success of this program has translated into a reduction in
Vernon's wholesale cost under the Edison's PR Rate of
approximately $12 million annually for the last six years.
Figure 4,5 shows the cumulative demand of certain monitored
customers that are currently taking advantage of the load
shifting program,
4.2.3,2
Free Energy Audit Program
The energy audit and customer support programs began as a
commitment from Vernon's City Council to the overall
objectives of the C&RE program to engage in activities that
would result in energy savings, The combined load audited
under the program between January 1988 and December 1995
is approximately 160 MW of customer peak load. The
combined peak reduction from DSM activities for the same
period is approximately 8 MW while the combined energy
saving opportunities identified in the audits conducted in the
same time period totaled approximately 32,250 MWh. It has
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been estimated that the penetration of energy conservation
measures recommended or identified in customer audits is
approximately 10% or 3,225 MWh annually.
Figure 4.5. Load Shifting Program (Typical Summer)
~
~
-
10,000
8,000
6,000
4,000 ........---------------........................--..------...--...
'C
ca
o
...J
2,000
o
00:30 03:00 05:30 08:00 10:30 13:00 15:30 18:00 20:30 23:00
Time
4.2.3.3
Low Emissions Assistance Program
As mentioned earlier in this report, the City of Vernon has
experienced in the past some load loss from its large industrial
customer base. This load loss was attributed to a combination
of economic factors which increased the cost of doing
business in Southern California. Stringent air quality
regulations exacerbate the difficult and challenging
environment for businesses in Southern California. Many
industrial customers required process or equipment changes to
meet these regulations. To assist customers with regulating
compliance, Vernon established the LEAP on March 23, 1993.
The objective of this program is to assist customers in meeting
air quality regulations by providing a financial credit for the
incremental power used by electrical equipment necessary to
meet the air quality regulations. Vernon believes this type of
program contributes to the attainment of environmental
standards while helping customers meet business needs.
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4.3 Planning for the Future
4.3,1 Supply-Side Resources
4.3.1.1
Excess Capacity in the Market
Excess capacity in the marketplace is a reality. In its 1994
Electricity Report the CEC has indicated that capacity in the
State of California is expected to remain in an excess
condition for the next 12 years. It is anticipated tbat this
excess capacity will continue to play a key role in keeping
market prices low. New supply-side resource development
will be uneconomical in the near term since prices in the
market will continue to be driven by the incremental cost of
energy from the excess resources available.
4.3.1.2
Power PoolslWholesale Market
Restructuring of the electric industry promises increased
activity in the wholesale power market Vernon, since the
early 1980s, has increased its access to various regions in the
western United States, increasing its portfolio of suppliers as
welI as the volume of market transactions it conducts. Vernon
became a WSPP member in 1994 to increase its choices of
suppliers and to make efficient short-term purchase and sale
transactions of power and transmission capacity, The
restructuring process underway in California is expected to
increase wholesale power transactions by creation of a large
statewide power pool (Power Exchange) which will establish
the market clearing price for the energy based on supply and
demand, Vernon views the establishment of the Power
Exchange as another potential resource to meet its system
needs and wilI evaluate it on an economic basis along with
other resources,
4,3,1.3
Practicable Supply-Side Resources
As the electric market accommodates restructuring, the energy
market is beginning to resemble a commodity market. As this
occurs, market forces instead of regulatory forces will begin
to shape how the new commodity resources ( energy) are made
available to meet market demands, As discussed in Section
4.3.1.1, the need for new generation resources in the near
future or at least for the planning period of this IRP is not
apparent Furthermore, Vernon considers any long-term
capital project investment too risky as long as current market
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4.3,1.4
conditions exist Vernon plans to meet its demand by entering
into short- to mid-term bi-Iateral contracts and using the
market for spot purchases. Vernon will continue to use its
least-cost resource procurement practices providing the
necessary safety features in its contracts for maximum
reliability and minimum risk.
Advanced Technologies
Vernon's commitment to RD&D is demonstrated by its
participation in the world's largest molten carbonate fuel cell
demonstration project The Santa Clara Demonstration
Project (SCDP) is funded by a combination of public and
private utilities with support from the Federal Government
through the Department of Energy. The development of this
project started in 1991 with the commitment by the SCDP
participants to build a 2 MW prototype. Groundbreaking
began in April 1994 and construction was completed on
March 1996, The plant's formal dedication occurred on
June 3, 1996 at which time it had logged approximately 520
hours of operation. The test plan calls for a 1,000 hour
acceptance test period followed by a 9,000 hour endurance
test period which is scheduled to run through 1997.
Commercialization of the molten carbonate fuel cell
technology is expected to happen early next decade,
The attractiveness of this technology is that fuel cells provide
an efficient means of generating electricity from a variety of
fossil fuels without the conventional combustion process,
When operated in the cogeneration mode, fuel cells can reach
an efficiency of up to 80%. Instead of conventional
combustion, the fuel cell, through a chemical process, is able
to convert a hydrogen-rich fuel such as natural gas, into
electricity, heat, water and carbon dioxide.
Because of the absence of a combustion process, emissions
from this technology are minimal and air quality permitting is
obtained relatively easily,
As a participant in the SCDP, Vernon has the option to
purchase one of the first early production units. No
determination has been made at this time,
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4.3.2
4.33
Demand-Side Resources
4.3.2.1
Current Market Trends
The focus of DSM programs has shifted from traditional
resource conservation to providing value-added service for
customers. This trend has in part arisen as a result of the
increased demand from customers for value added services,
To address both increased competition and customer needs,
many utilities are developing strategies for customer retention
that combine low electric rates with value-added services
4.32.2
Demand-Side Management as a Way to Meet Customer
Needs
Vernon's DSM strategy will combine a mix of services that
meet customer needs while simultaneously providing energy
conservation and environmental benefits,
Vernon intends to increase the education level of its customers
while learning and identifying their needs. It intends to do this
through increased customer contact and an information
campaign that educates customers on current energy issues.
Transmission Resources and Market Access
In the early 1980s, Vernon began to acquire transmission acceSs to third
parties in order to have an opportunity to reduce purchases from Edison.
Over the years Vernon made substantial investments in obtaining transmission
access to different markets, These efforts have led to the acquisition of
various types of access/entitlements as shown in Table 4.2.
433,1
California-Oregon Transmission Project and DC Transmission
Line Rights
In the mid-1980s, Vernon joined in the development and
construction of the 500 kV AC California-Oregon
Transmission Project (COTP) which extends from the
California-Oregon border to the Tesla Substation south of
Sacramento, Vernon has ownership rights on the COTP line
of 121 MW of COTP north-to-south capacity. Vernon
entered into an agreement in 1992 with Pacific Gas and
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433.2
Electric (pG&E) that exchanged Vernon's COTP entitlement
for a portion ofPG&E's Pacific DC Intertie entitlement. The
transmission service agreement with PG&E gave Vernon the
right to 93 MW of north-to-south scheduling capacity and 82
MW south-to-north scheduling capacity on the DC Line,
In order to utilize the capacity obtained from the transmission
service agreement with PG&E, Vernon negotiated a firm
transmission service agreement with Edison that provides a
combined 60 MW of capacity between Edison's Sylmar
Substation and Vernon City Gate and between Midway
Substation and Vernon City Gate. In addition, Vernon
acquired 93 MW of capacity between Midway Substation and
Sylmar Substation.
Mead-Phoenix Project and Mead-Adelanto Project
Commercial operation of Vernon's most recent transmission
projects commenced April 15, 1996, The projects consist of
two 500 kV transmission lines: one between the Phoenix area
and the Las Vegas area and the other between the Las Vegas
area and the Los Angeles area. Participation in the Mead-
Phoenix Project entitles Vernon to 28 MW of bi-directional
transmission capacity between Westwing and Mead
Substations, 47 MW between the 500 kV and the 230 kV bus
at Mead Substation, and 75 MW ofbi-directional transmission
capacity between Mead and Marketplace Substations.
The second segment of the project, the Mead-Adelanto
Project, entitles Vernon to 75 MW of bi-directional
transmission capacity between Marketplace and Adelanto
Substations,
Vernon entered into an agreement with the Los Angeles
Department of Water and Power (LADWP) to provide
Vernon with 75 MW of bi-directional transmission capacity
between the Adelanto Substation and the midpoint of the
500 kV Victorville-Lugo transmission line. Vernon also has
a transmission agreement with Edison to provide wheeling
through Edison's control area between the Victorville-Lugo
Line midpoint and Vernon City Gate.
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I Table 4.2. Current Transmission Arrangements
I 1< .:.-.:.:-:-:.:.:.:.:.:.',:.:...'.......:...:.:.:..,'.'.','.-,"-'--. .1< HI ....--.,....,..',..,'.....................' ..>1
......-..... .... .......
.............""..
..RESQURCE.........>....... MWH ......REMARKS...
Ownership
I California-Oregon Transmission 121 Ownership but service has been
Project exchanged with PG&E for DC
I entitlement (NOB/Sylmar),
Mead-Adelanto Project 75 Stm1ed commercial operations on
April 15, 1996,
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Mead-Phoenix Project 28-75
Started commercial operations on
I April 15, 1996,
Firm Services
I AdelantolVictorville- Lugo 75 FromLADWP
Victorville- LugolV ernon 75 From Edison
I NOB/Sylmar 93 (N-S)/82 (S- N) From PG&E
Midway/SylmarlV ernon 60-93 From Edison
I Mead/Vernon 26 From Edison
Miscellaneous Services
I Various Non-Film Services Varies
WSPP Varies
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5.
Chapter 5 - SHORT- and LONG-TERM IMPLEMENTATION PLAN
Vernon will continuously evaluate its planning strategy to ensure the efficient utilization of
its generation and transmission resources, Resource procurement practices must maintain
sufficient flexibility to accommodate the rapid evolution of the electric industry not only to
capitalize on emergent opportunities but to survive the competitive pressures of the new
operating environment.
In keeping with its current strategy, Vernon will remain open to long-term resource
procurement as conditions warrant. At this time, large capital investments are not economical
and carry too much risk given the current excess resource situation and the high level of
uncertainty prevalent in the marketplace,
5.1 Short-Term Plan (2 Years - 1997 & 1998)
5.1.1 Supply-Side Resources
The uncertainty associated with the restructuring of the electric industry
injects a note of caution into the planning process. The impact of
restructuring will just begin in the initial two-year planning period, In this
climate, long-tenn resources carry a risk factor that for Vernon, removes them
from current consideration, The uncertainty of long-term resource
commitments combined with excess capacity available in the State of
California increases the attraction of short-term power purchase agreements.
Vernon's short-term planning strategy is to meet its resource needs through
a combination of its presently committed long-term resources and bi-lateral
power purchase transactions, Power purchase contracts will have varying
terms ranging from one day to five years,
While current levels of uncertainty exist, Vernon will continue the planning
practice outlined above. Vernon anticipates that this practice will remain
unchanged during this planning period as it grants Vernon the greatest level
of flexibility.
5. L2 Demand-Side Resources
Restructuring of the electric industry has influenced more than planning for
supply-side resources; it has also prompted a reexamination of the value and
practice of customer oriented services,
Vernon's customer education activities have been focused on energy
efficiency and conservation. With the current restructuring process promising
lower rates to all customers in the State and an increasing number of potential
non-utility suppliers, Vernon anticipates an increased level of communication
with customers.
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To achieve this, Vernon will develop and implement programs aimed at
keeping customers efficient and productive while educating them on the
energy conservation and management programs that Vernon offers. A
customer outreach program will be implemented during the first quarter of
1997 to identify energy services wanted by customers.
Identified projects will be presented to City Council for its consideration and
approval to meet the intent of AB 1980 approved by the Governor on
September 23, 1996. The law requires that revenue be collected starting
January 1, 1998 through December 31, 2001 at a rate of approximately 2.7%
of sales to fund projects in the area of demand-side-management services,
renewable energy, RD&D programs and/or services for low-income electric
customers. City Council approved programs will be implemented by the
Department.
5.1.3 Transmission Resources
Vernon's investments in transmission projects represent a substantial portion
of its assets. Legislation and regulation at the state and federal levels may
impact Vernon's current utilization of these resources. The City wil\ monitor
activities both at the state and federalleve\ in order to identify opportunities
and obstacles which it must address.
5.2 Long-Term Plan
5.2.1 Supply-Side Resources
Vernon expects sufficient change in the electric marketplace to warrant a
thorough reevaluation of its present planning strategy and procurement
practices. Management and staff will monitor the ongoing California electric
utility restructuring efforts to determine the extent of needed change. The
economic factors associated with asset procurement will in large measure
determine the procurement strategy for the remainder of this planning period.
5.2.2 Demand-Side Resources
Programs initially approved by the City Council will be reviewed for
effectiveness. Additional programs and services or deletions to current
programs will be identified and presented to City Council for approval.
5.2.3 Transmission Resources
Vernon expects significant short-term change in the operation of the
interconnected transmission system. Vernon wil\ reevaluate its transmission
strategy when sufficient information is available to make a determination.
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