Resolution No. 91941
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RESOLUTION NO. 9194
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
LETTER AGREEMENT AND AUTHORIZATION TO COMMENCE WORK
BY AND BETWEEN THE CITY OF VERNON AND PA CONSULTING
GROUP FOR THE MALBURG GENERATING STATION
WHEREAS, the City of Vernon ("City") constructed the Malburg
Generating Station within the City limits for the purpose of producing
additional generating capacity; and
WHEREAS, the Light & Power Department has determined that it
(needs the services of a consultant to conduct an analysis and prepare a
report providing an overview of future market pricing and the value of
assets within the California market to assist the City in the valuating
of the Malburg asset; and
WHEREAS, the Director of Light & Power has determined that PA
Consulting Group ("PA Consulting") possesses the technical knowledge
and expertise to furnish the services required by the City for a cost
of approximately $40,000.00; and
WHEREAS, the City Council of the City of Vernon has
determined that, pursuant to the provisions of subsection (a) of
Section 2.27 of the Vernon City Code, it is in the public interest and
necessity to enter into an agreement with PA Consulting.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
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approves the Letter Agreement and Authorization to Commence Work with
the PA Consulting, a copy of which is attached hereto as Exhibit A and
incorporated by reference.
SECTION 3: The City Council of the City of Vernon hereby
authorizes the Acting City Administrator to execute said Letter
Agreement and Authorization for, and on behalf of, the City of Vernon.
SECTION 4: The City Council of the City of Vernon hereby
directs the Acting City Clerk, or his designee, to send one fully
executed Letter Agreement and Authorization to:
PA Consulting Group
Attn.: Todd Filsinger
300 Interlocken Crescent, Suite 410
Broomfield, Colorado 80021
SECTION 5: The Acting City Clerk of the City of Vernon
shall certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 13th day of December, 2006.
Le ✓V'Vl�
THOMAS A. YB RRA, Mayor Pro-Tem
ATTEST : f�
BRUCE V. LKENHORST, JR.
Acting City Clerk
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STATE OF CALIFORNIA
ss
COUNTY OF LOS ANGELES
I, BRUCE V. MALKENHORST, JR., Acting City Clerk of the City of
Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 9194, was duly adopted by the City Council of the City
of Vernon at a regular meeting of the City Council duly held on
Wednesday, December 13, 2006, and thereafter was duly signed by the
Mayor Pro-Tem of the City of Vernon.
BRUCE V. MALKENHORST, JR.
Acting City Clerk
(SEAL)
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EXHIBIT
A
AConsulting
Group
390 Interlocken Crescent
Suite 410
Broomfield
Colorado 80021
Tel: +1 720 566-9920
Fax: +1 720 566-9680
www.paconsulting.com
December 12, 2006
D. O'Callaghan
4305 Santa Fe Avenue
City of Vernon
Vernon, CA 90058
Via a -mail: docallaghann-ci.vernon.ca.us
Dear Mr. O'Callaghan:
PA Consulting Group, Inc. (PA) is pleased to provide this proposal letter to assist the City of Vernon
in the process of selling the Malburg asset. We enjoyed speaking with you and the team on Friday,
December 15t. We believe that our market expertise will provide a valuable service to you. This
letter refers to the scope, commercial arrangements and terms of business under which PA will
undertake this engagement.
Scope of Work
We have divided the team's requests into the following 4 tasks.
Task 1 — Obtain the data necessary to conduct the analysis
The client will provide PA with the data necessary to complete the agreed upon tasks within the
scope of the engagement. The data required to conduct the analysis will include unit operating
characteristics, historical financial and operating statistics, and any other relevant project
information that will stream -line PA's analysis. In the absence of receiving the necessary data, PA
will conduct the analysis using generic assumptions.
Task 2 — Complete a fundamental analysis of the California market
PA will use an off -the -shelf October 2006 base case from its fundamental modeling process to
project energy and capacity prices in California. PA's fundamental model executes an hourly
production -cost based dispatch of supply to meet demand in a manner that minimizes total system
cost. PA's fundamental analysis will consider the impact of locational marginal prices. The long-
term results of PA's fundamental analysis will reflect the Southern California market being in a state
of economic equilibrium.
continued
continued
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Task 3 — Conduct a merchant dispatch optimization analysis of the Malburg asset
PA will use its asset dispatch optimization model to project the operations and margins of the
Malburg asset through the year 2025. PA will dispatch the asset using power and gas forward
market prices in the near -term and fundamental projected market prices thereafter. PA will provide
the projected market prices, asset operations, and asset margins (the results) with the
understanding the results will be used by the sell side project team for related analysis and will not
be conveyed or distributed to outside parties.
Task 4 — Draft a California market expert summary for use in the Information Memorandum
PA will deliver a qualitative market summary that provides an overview of the California market.
Topics will include current power markets, key developments, a transmission overview, market
drivers, and select legislative initiatives that may affect future market pricing and the value of assets
within the California market. The market summary will be used in the Malburg Information
Memorandum.
Commercial Terms
PA proposes to conduct the Project on a time and materials basis with labor billed at our standard
commercial billing rates. Ranges in commercial billing rates are provided in Table 1, and all project
staff are subject to these rates. Professional fees and direct expenses, if any, will be subject to an
8% administrative charge. PA estimates the cost of completing tasks 1 through 4 to be
approximately $30,000 to $40,000, including administrative fees (the total fees for completing tasks
1 through 4 are not to exceed $40,000, including administrative fees). PA anticipates the above
analysis will be completed within two weeks of obtaining an executed engagement letter and the
information requested within task 1 (note the days starting on December 23rd through January 1 S`
are excepted from this time frame). Work requested beyond this scope is likely to exceed this
estimate. PA is available to perform additional analysis and provide additional advisory services
upon request. PA will also have the services of an independent project team available to assist
potential buyers as necessary.
Table 1%
Commercial Billing Rates
Title/Role
Hourly Billing Rate
Members of Management
$300 — $625
Managing Consultants
$240 — $545
Principal Consultants
$185 — $435
Consultants
$185 — $330
Consultant Analysts
$175 — $270
Analysts
$165 — $245
Technical Associates
$75
f Rates subject to change quarterly
continued
C1
continued
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Terms of Business
This agreement will be governed by the attached Commercial Terms of Business US ToBC 2003.1
("ToB"), and this letter agreement.
If you find this proposal satisfactory, please execute the 'Authorization to Commence Work" and
return this letter to attention of:
Leihonie Delisa
390 Interlocken Crescent, Suite 410
Broomfield, CO 80021
PA appreciates the opportunity to prepare this proposal. If you have any questions regarding the
scope of work or the attached commercial terms documents, feel free to contact me at
720-566-9926.
Sincerely,
- - 14- W-4 00, �
Todd Filsinger
Member of PA's Management Group
Encs Commercial Terms of Business US ToBC 2003.1
continued
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continued PA
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Authorization to Commence Work
Proposal to the City of Vernon
Parties signing this Agreement warrant that they are duly authorized to sign on behalf of their
respective organizations. We hereby agree and accept the Proposal dated December 12, 2006
and the Commercial Terms of Business US ToBC 2003.1.
Signed for and on behalf of
PA Consulting Group, Inc.
Name: Todd Filsinger
Title: Member of PA's Management Group
Date: December 12, 2006
Signed for and on behalf of
The City of Vernon
Name:
Title:
Date:
PROPOSAL: US TERMS OF BUSINESS CONSULTING SERVICES
(REFERENCE: US ToBC 2003.1)
These Terms of Business have been entered into between PA CONSULTING GROUP, INC. ("PA") and the party to whom the Proposal is addressed ("Client')
(together the "Parties") as of the date set out in the Schedule of Charges.
In the event of any inconsistency between these Terms of Business, the Schedule of Charges and the Proposal (jointly, the "Agreement'), these Terms of Business
shall prevail and, in the event of any inconsistency between the Schedule of Charges and the Proposal, the Schedule of Charges shall prevail.
1. PA's Obligations
1.1 PA will perform the services (the "Services") as set out in the agreement (the "Agreement') entered into by PA and the Client which, for the avoidance
of doubt, includes these Terms of Business, with reasonable care and skill in accordance with good practice within the consulting industry, using
appropriately qualified staff.
1.2 PA will so far as it is practical use the consultants identified to the Client in the Proposal. However, PA may replace these personnel with consultants
of equivalent skills and experience (including third party consultants), subject to the Client's prior written consent, not to be unreasonably delayed,
made conditional or withheld.
1.3 PA will use reasonable endeavours to meet agreed or estimated timescales.
2. Client's Obligations
2.1 The Client will provide such facilities, materials, information and resources forthe performance of the Services as reasonably requested by PA. The
Client will liaise with PA as appropriate during the performance of the Services and shall respond quickly to PA's reasonable requests for consultation,
information, decisions and approvals.
3. Fees and Payment
3.1 An estimate of fees and expenses for the Services is set out in the Agreement. This estimate is not an offer to perform the Services for a fixed price.
All fees and charges due under the Agreement are exclusive of VAT, sales and use and similar taxes of any kind.
3.2 All fees and charges referred to in the Agreement are payable upon presentation of the invoice. Interest may be charged in respect of any invoice
unpaid within 30 days.
3.3 Without prejudice to its other rights, the Client agrees to make payment to PA of all sums due without reduction or deferment on account of any claim,
counterclaim or set-off.
4. Forecasts and Recommendations 1 Third Party Services
4.1 Statements made by PA relating to the Services, and all surveys, forecasts, recommendations and opinions (together "Forecasts") in any proposal,
report, presentation or other communication by PA are made in good faith on the basis of information available at the time. Forecasts are not a
representation, undertaking or warranty as to outcome or achievable results.
4.2 Implementation of the results of the Services and completion of any project of which the Services form part may require the involvement or
supervision of or giving advice to third parties engaged by the Client. PA strongly recommends that the Client obtain independent advice before
entering into any legally binding commitment with any such third parties.
4.3 PA may, during its performance of the Services, make statements about or recommendations of third party software, equipment or services. No
warranty shall be attributable to PA with respect to such software, equipment or services, and the Client shall look solely to the warranties and
remedies provided by any such third party with whom it may contract.
5. Confidentiality
5.1 PA and the Client each undertake, during the provision of Services and for two (2) years after completion of the Services or earlier termination of the
Agreement, to keep confidential information that can reasonably be understood to be confidential received from, or on behalf of the other Party in
relation to the Agreement, whether orally, electronically or in permanent form ("Confidential Information"). Either Party may disclose Confidential
Information to its employees, subcontractors and advisors, and those of other companies in its Group, on a need -to -know basis who are in all cases
contractually obliged to the disclosing Party (including within an employment contract) to keep the information confidential. "Group" means
companies which control, are controlled by or are under common control with one of the Parties.
5.2 Confidential Information excludes any information which is (i) in the receiving Party's possession at the time of disclosure (other than by breach of the
Agreement); (ii) received from a third party (other than one whom the receiving Party knows or should reasonably assume is not entitled to disclose
it); (iii) published before or after the date of disclosure through no fault of the receiving Party; (iv) independently developed by the receiving Party
without the use of the Confidential Information; or (v) required to be disclosed by law or a competent regulatory authority.
5.3 If PA and the Client have separately entered into an agreement in respect of any Confidential Information ("NDA") with each other, the Agreement
shall prevail over the terms of the NDA in the event of any conflict or inconsistency between the Agreement and the NDA.
US TOB 2003.t.doc
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PROPOSAL: US TERMS OF BUSINESS CONSULTING SERVICES
(REFERENCE: US ToBC 2003.1)
6. Intellectual Property and Rights of Use
6.1 "IP" means all forms of intellectual property, including, without limitation, property in and rights under registered and unregistered copyright, domestic
and foreign patents, conceptual solutions, circuit layout rights, performance rights, design rights, designs, database rights, trade names, registered
and unregistered trademarks, service marks, corporate names, internet domain names, trade dress, brand names, computer programs, trade secrets,
methodologies, ideas, processes, inventions, methods, tools and know, how, formulae and recipes and entitlement to make application for formal or
otherwise enhanced rights of any such nature.
6.2 IP and rights to IP owned by any Party on the date of the Agreement ("Background IP") shall remain the property of that Party.
6.3 The Client hereby grants to PA a royalty -free, non-exclusive, non -transferable licence to use the Client's Background IP as required to allow PA to
perform its obligations under the Agreement.
6.4 IP developed by PA in the course of performing the Services ("Foreground IP") and rights to such IP will be owned by PA. Upon completion of all
phases of the Services and on receipt of payment in full by PA, PA will grant to the Client a royalty -free, non-exclusive, non -transferable licence to use
any Foreground IP and PA's Background IP required for the Client to use the results of the Services for the purposes set out in the Proposal. The
licence will be terminable by PA for any act not expressly authorised by this clause.
6.5 PA warrants that to the best of PA's knowledge and belief the results of the Services shall not infringe the copyright of any third party.
6.6 PA does not conduct any searches of registrable IP, and thus does not warrant that any such IP will be outside the scope of any patent or other IP
registration.
7. Liability
7.1 PA accepts liability without limitation for death or personal injury to any person due to its negligence or the negligence of its employees.
7.2 PA accepts liability for physical damage to or loss of the Client's tangible property, including loss of data, if the damage or loss is due to PA's
negligence or breach of contract. For the purposes of this clause, liability will be capped at US$750,000 in respect of any one incident or series of
connected incidents and is further capped at a maximum aggregated amount of US$3,000,000 in respect of all claims falling within the ambit of this
clause 7.2.
7.3 In respect of any liability other than those falling within clauses 7.1 and 7.2 above, PA's total liability arising out of or in connection with the Agreement
shall not exceed in aggregate 1500/6 of the fees paid by the Client.
7.4 PA shall not in any circumstances be liable to the Client whether in contract, tort (including negligence) or otherwise for.
(i) Any loss of profit, loss of contracts, loss of benefit, loss of anticipated savings, loss of reputation, loss of goodwill or loss of use
suffered or incurred directly or indirectly by the Client;
(ii) Any consequential or indirect loss or damage howsoever arising and of whatsoever nature; and
(iii) Any punitive or exemplary damages.
7.5 Nothing in this Clause 7 shall limit the liability of either Party for fraud or deceit
7.6 Each Party shall have the obligation to prove, minimise and mitigate all losses claimed under this Agreement
8. Indemnities
8.1 The Client agrees to indemnify PA against any third party claim brought against PA in respect of any injury, damage or loss occasioned by the Client
or a third parry's use or operation of the results of the Services without PA's approval, regardless of whether that third party claim is brought against
PA in contract, tort (including negligence) or otherwise whatsoever.
9. Force Majeure
9.1 Neither Party will be liable for any breach of the Agreement which results from that Party being prevented, hindered or delayed from observing or
performing its obligations under the Agreement by an act beyond its reasonable control. The Party so affected will, as soon as reasonably possible,
give notice to the other Party of the occurrence of such event.
10. Termination
10.1 The Agreement may be terminated by either Party at any time:
(a) on thirty days' written notice to the other Party; or
(b) if the other Party becomes insolvent.
Pi
US TOB 2003.1
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4
PROPOSAL: US TERMS OF BUSINESS CONSULTING SERVICES
(REFERENCE: US ToBC 2003.1)
10.2 The Agreement may be terminated by PA in the event that payment due to PA is outstanding more than 30 days from presentation of invoice.
10.3 Termination will not affect any accrued rights and liabilities arising out of the Agreement
10.4 Where PA is entitled to terminate the Agreement it may, instead, elect (without prejudice to PA's other rights and remedies including its right to
terminate) to suspend performance by giving written notice to that effect to the Client.
11. Term
11.1 The term of the Agreement shall be from the date of signing the Agreement until the date that the Services performed thereunder are completed,
unless terminated as described in clause 10 hereof.
12. General
12.1 Non -Solicitation — Both Parties undertake, during the performance of the Services and for six months from their completion, not directly or indirectly to
solicit any of the other Party's employees (whether as an employee or an independent contractor) who is or has been concerned with or engaged in
the performance or procurement of the Services. This clause 12.1 will not prevent either Party from advertising for staff in public media.
12.2 Counterparts — The Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
12.3 Third Party Beneficiaries - Unless expressly stated otherwise in the Agreement, each Party intends that the Agreement shall not benefit or create any
right or cause of action in or on behalf of any person other than the Parties. Notwithstanding the foregoing, the Agreement shall be binding upon and
enure to the benefit of the Parties' successors and permitted assigns.
12.4 Assignment - The Client shall not assign the Agreement or any right arising under it without PA's prior written consent.
12.5 Publicity — Neither Party will make any public statement or release any public material relating to the Services or their performance under the
Agreement without the prior written consent of the other Party. PA may include the Client's name on its published list of clients. PA may also refer to
the Services without mentioning the Client by name.
12.6 Entire Agreement— Subject to clause 5.3, the Agreement (including, for the avoidance of doubt, these Terms of Business), together with the Schedule
of Charges and the Proposal contain the entire understanding and agreement of the Parties with respect to the subject matter thereof. There is no
express or implied prior understanding, warranty, representation or undertaking which is not included in or superseded by the Agreement. PA and the
Client agree that all implied terms relating to fitness for purpose implied both by statute and by law hereby are excluded.
12.7 Amendment — Any amendment to the Agreement will only be valid if it is agreed to by both Parties in writing.
12.8 Waiver— Delay or omission by a Party in exercising its rights or remedies hereunder will not be deemed a waiver of any such right or remedy.
12.9 Notice — Notices and other communications to be served under the Agreement shall be in writing and shall be deemed given when (i) delivered by
hand, (ii) one (1) business day after mailed, to the addressee, if sent by Express Mail, Fed Ex, or other express delivery service (or two (2) business
days, if mailed to a destination outside the United States), (iii) three (3) business days after mailed, to the addressee, by regular mail delivery of the
U.S. Postal Service, or ('iv) on receipt of a transmission report, if sent by facsimile (in all cases in the absence of evidence of earlier delivery), to the
addressee at the address set forth in the Agreement.
12.10 Severability — If any of the provisions of the Agreement is judged to be invalid, illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of the Agreement will not in any way be affected or impaired thereby.
12.11 Governing Law— The Agreement will be governed by and construed in accordance with the laws of the State of New York, regardless of the law that
might be applied under principles of conflicts of laws.
12.12 Jurisdiction — Any legal action or proceeding with respect to the Agreement may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York and, by execution and delivery of the Agreement, each Party hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Party further irrevocably consents to the service of
process out of any of the aforementioned courts in any action or proceeding by the mailing of copies thereof by guaranteed overnight courier to such
Party at its address set forth in the Agreement, such service to become effective seven (7) business days after such mailing. Nothing in the
Agreement shall affect the right of PA to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed
against the Client in any other jurisdiction. Each Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising out of or in connection with the Agreement brought in the courts referred to above and
hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
US TOB 2003.1
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LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro -Tern
WM. "BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL McCORMICK
Councilman
December 20, 2006
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4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811
Mr. Todd Filsinger
PA Consulting Group
300 Interlocken Crescent, Suite 410
Broomfield, Colorado CA 80021
Re: Letter Agreement for the Malburg Generating Station
Dear Mr. Filsinger:
MARK C. WHITWORTH
Fire Chief
LEWIS J. POZZEBON
Director of Environmental Health
S. KEVIN WILSON
Director of Community Services
SHARON L. DUCKWORTH
City Treasurer
DONAL O'CALLAGHAN
Director of Light & Power
Transmitted herewith is a signed copy of the above -referenced letter
agreement, approved by City Council on December 13, 2006, through
Resolution No. 9194.
If you have any questions regarding this matter, please call Mr. Donal
O'Callaghan, at (323) 583-8811 ext. 834.
ery truly yours,
Nelly G' on
Deputy City Clerk
NG:dr
c: Donal O'Callaghan
Sharon Duckworth
Resolution No. 9194
Agreement File No. 06-146
Excruglveiy Wnbughial