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Resolution No. 2010-145RESOLUTION NO. 2010-145 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON ADOPTING ANEW TRANSMISSION REVENUE REQUIREMENT FOR 2011• IN ACCORDANCE WITH VERNON'S TRANSMISSION OWNER TARIFF AND PROVIDING FOR TARIFF SHEET CHANGES TO IMPLEMENT THE ADJUSTMENT WHEREAS, the City of Vernon ("City") is a chartered municipal corporation of the State of California that owns and operates a system for the generation, purchase, transmission, distribution and sale of electric capacity and energy; and WHEREAS, the City is a Participating Transmission Owner ("PTO") with the California Independent System Operator Corporation ("ISO") and the Federal Energy Regulatory Commission_("FERC") has approved its existing Transmission Owner;Tariff ("TO Tariff"); and WHEREAS, the ISO reimburses the City according to the City's current Transmission Revenue Requirement ("TRR") in return for the City turning over to the ISO the operation and control of the City's transmission entitlements; and WHEREAS, the City's transmission entitlements include rights under certain contracts (each an "ETC") including (i) an -agreement with the City of Los Angeles Department of Water and Power entitled "Los Angeles -Vernon Adelanto-Victorville-Lugo Firm Transmission Service Agreement" (the "LAWDP ETC"); (ii) an agreement with Southern California Edison Company ("SCE") entitled "Amended and Restated Edison -Vernon Victorville-Lugo Firm Transmission Service Agreement" (the "SCE Victorville-Lugo ETC"); and (iii) an agreement with SCE entitled "Amended and Restated Edison -Vernon Mead Firm Transmission Services Agreement" (the "SCE Mead ETC"); and WHEREAS, the City's costs under the LADWP ETC, the SCE Victorville-Lugo ETC, and the SCE Mead ETC have traditionally been, based upon a negotiated fixed "path -specific" rate charged by LADWP or SCE, based on the actual costs of the specific transmission lines made available under each ETC, multiplied by the amount of transmission capacity guaranteed to the City under each ETC; and WHEREAS, on August 1, 2008, SCE filed a petition with FERC seeking to amend the pricing structure under the SCE Victorville-Lugo ETC and the SCE Mead ETC to replace the negotiated path -specific rates set forth in those ETCs with a "postage -stamp" rate which reflects the blended rate SCE charges to the ISO for the actual usage of all of SCE's transmission lines by customers of the ISO; and WHEREAS, the postage -stamp rate which SCE charges to the ISO is derived from SCE's TRR and, therefore, will change each time SCE amends its TRR; and WHEREAS, on September 30, 2008, FERC accepted, subject to refund and hearing and settlement procedures, SCE's proposed revisions under the SCE Victorville-Lugo ETC and the SCE Mead ETC to replace the negotiated path -specific rates set forth in those ETCs with a postage - stamp rate, and thus the City's costs under the SCE Victorville-Lugo ETC and the SCE Mead ETC will vary proportionately with any changes in SCE's TRR; and WHEREAS, the City reached a settlement agreement (the "SCE Settlement") with SCE to amend the SCE Victorville-Lugo ETC and the SCE Mead ETC to replace the path -specific rates set forth in those ETCs with SCE's postage -stamp rate after a phase -in period that began on August 1, 2009, during which the City's path -specific rates in those ETCs are gradually stepped -up over three years (the "Phase -In Rates") until the path -specific rates are equal to SCE's postage -stamp rate as -2- of January 1, 2013; and WHEREAS, under the SCE Settlement, the City's costs for the SCE Victorville-Lugo ETC and the SCE Mead ETC are equal to (i) from August 1, 2009; until December 31, 2012, the Phase -In Rates, and beginning on January 1, 2013, the SCE postage -stamp rate, in each case multiplied by (ii) the amount of transmission capacity guaranteed to the City under each ETC; and WHEREAS, FERC approved the SCE Settlement pursuant to an order issued September 11, 2009 in. FERC Docket Nos. ER08-1343-000, ER08-1353-000, ER09-187-000, ER09-187-001, EL09-19-000, and ER09-446- 000 ("SCE Settlement Order"); and WHEREAS, on behalf of the City, the Brattle Group, an experienced utilities consulting firm, developed a tracking mechanism for the City's TRR ("TRR Tracking Mechanism") to allow the City's TRR to be adjusted annually, effective January 1 of each year, to reflect changes in the City's costs under the SCE Victorville-Lugo ETC and the SCE Mead ETC that change as a result of (i) the stepped -up rates implemented between August 1, 2009 and December 3.1, 2012; or (ii) any change in SCE's TRR on or after January 1, 2013; and WHEREAS, on the basis of the Brattle Group's analysis and evidence from City staff, which was considered during a public meeting of the City Council held on July 13, 2009, the City, on July 15, 2009 ("July 15 FERC Filing"), filed with FERC proposed revisions to its TO Tariff proposing stated,TRRs for each of the years 2010 to 2012, which dollar amounts were also included in the SCE Settlement ("TO Tariff Revisions"); and WHEREAS, the City also submitted in the July 15 FERC Filing a request to utilize an "ETC Adjustment Clause" to adjust automatically -3 each year the costs the City incurs attributable to any changes in SCE's TRR associated with SCE's High Voltage Existing Contracts Access Charge ("HVECAC") rate; and WHEREAS, FERC approved the City's July 15 FERC Filing, including the TO Tariff Revisions and the City's proposed calculations of the TRR for years 2010 to 2012, and additionally approved the City's request to utilize an ETC Adjustment Clause to reflect annual projected changes to SCE's TRR, in an order issued September 11, 2009 in FERC Docket No. EL09-64-000 ("TO Tariff Order"); and WHEREAS, under the TO Tariff Order, the City's TO Tariff revisions went into effect on August 1, 2009; and WHEREAS, the City is required under the TO Tariff Order to submit annual filings no later than November 1 of each year with FERC reflecting annual modifications to the base TRR; and WHEREAS, FERC has approved the TRR for 2011 asagreed to by the City and SCE under the SCE Settlement, and which will be implemented by the tariff sheet included as Appendix I of the amended TO Tariff, attached hereto as Exhibit A and made a part hereof; and WHEREAS, under the SCE Settlement, because the TRRs have been fixed in each of the years 2010 to 2012, the true -up amount between the City and SCE is zero with respect to these calendar years-, and thus there are no changes associated with SCE's fixed TRR and no cost modification needs to be reflected under the ETC Adjustment clause for the 2011 TRR; and WHEREAS, pursuant to the TO Tariff Order, the approved new TRR number will take effect as of January 1, 2011; and WHEREAS, a Notice of Public Hearing was posted on October 6, 2010, notifying all interested parties that a hearing to consider evidence to establish the City's new TRR was scheduled for October 18, 2010, at approximately 8:00 a.m., subject to the hearing being continued or adjourned to a stated time and place without further notice of public hearing; and WHEREAS, on November 1, 2010, the City Council held a Public Hearing in which the City Council took evidence from staff and those other persons in attendance who wished to be heard on the calculation of the City's new TRR.under the City's amended TO Tariff; and WHEREAS, the Light & Power Department has prepared a Staff Report, dated -October 13, 2010, with exhibits, a copy of which is attached hereto as Exhibit B and made a part hereof, which reiterates its previous conclusions that the TRR and ETC Adjustment Clause mechanism developed by The Brattle Group and approved by FERC under the amended TO Tariff, are reasonable; and WHEREAS, the Light & Power Department has recommended the City adopt the TRR contained in the SCE Settlement and approved by FERC, to be effective on January 1, 2011; and WHEREAS, the City Council has heard and considered all evidence, written and oral, presented in consideration of the establishment of the City's new TRR under the amended TO Tariff. 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 further finds and determines that all persons have had the opportunity to be heard or to file written comments to the proposed adoption of the -5- City's TRR, and after due consideration of any and all evidence submitted at the Public Hearing, determines there are compelling. reasons to justify the adoption of the City's TRR, to be effective January 1, 2011. SECTION 3: The City Council of the City of Vernon hereby declares that: (a) any determination made pursuant to this Resolution regarding the validity or reasonableness of any portion of any TRR or TO Tariff shall apply only prospectively from the date of this Resolution; and (b) in no way shall this Resolution affect the City Council's adoption or determination of any previous TRR or TO Tariff. SECTION 4: The City Council of the City of Vernon hereby approves, pursuant to the TO Tariff and to be effective on January 1, 2011, the establishment of the City's new TRR and Appendix I to the TO Tariff implementing the new TRR, as described in the Light & Power Staff Report dated on or about October 13, 2010. SECTION 5: The City Council of the City of Vernon hereby authorizes outside counsel to submit the City's TRR, the amended Appendix I to the Vernon TO Tariff and supporting documentation, such as the Staff Report, and this City Council Resolution approving the new TRR, to FERC on behalf of the City of Vernon. SECTION 6: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this Resolution, and the City Clerk of the City of Vernon shall cause this Resolution and the City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 1st day of November, 2010. Name: Hilario Gonzales Title: Mayor ATTAT: • �•��BCity Clerk -7- STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2010-145, was duly passed, approved and adopted by the City Council of the City of Vernon at a special meeting of the City Council duly held on Monday, November 1, 2010, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this I day of November, 2010, at Vernon, California. (SEAL) L TRR ETC ADJUSTMENT EXHIBIT A Appendix I to Vernon's Transmission Owner Tariff (Redlined) rl APPENDIX I Transmission Revenue Requirement and TRBAA The Vernon Base.Transmission Revenue Requirement is $','� 601,275,480 and is comprised of the following components: Base TRR costs not subject to ETC Adjustment Clause: $498,480 ETC Adjustment Clause: Forecast SCE ETC Costs: $720,48A777�QL0_ Balance of Difference between prior year Forecast and Actual SCE ETC Costs: $0 Interest on Difference between prior year Forecast and Actual SCE ETC Costs: $0 The ETC Adjustment Clause is: The projected SCE ETC Cost for the next calendar year, plus the true -up (positive or negative) of the prior October through September SCE ETC Cost with interest calculated pursuant to 18 C.F.R. § 35.19a. The ETC Adjustment Clause will be recalculated annually and filed with the Commission with a proposed effective date of January 1 of each year. The TRBAA is a positive $411,7 �4 .109 for calendar year 294-0:2011. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is 1,288,684 MWh. All of Vernon's transmission facilities and Entitlements placed under the ISO's Operational Control are High Voltage Facilities as defined by the ISO Tariff. The'TRBAA will be recalculated annually consistent with the ISO Tariff approved by the Vernon City Council, and provided to the ISO. Appendix I to Vernon's Transmission Owner Tariff (Clean) APPENDIX I Transmission Revenue Requirement and TRBAA The Vernon Base Transmission Revenue Requirement is $1,275,480 and is comprised of the following components: Base TRR costs not subject to ETC Adjustment Clause: $498,480 ETC Adjustment Clause: Forecast SCE ETC Costs: $77700 Balance of Difference between prior year Forecast and Actual SCE ETC Costs: $0 Interest on Difference between prior year Forecast and Actual SCE ETC Costs: $0 The ETC Adjustment Clause is: The projected SCE ETC Cost for the next calendar year, plus the true -up (positive or negative) of the prior October through September SCE ETC Cost with interest calculated pursuant to 18 C.F.R. § 35.19a. The ETC Adjustment Clause will be recalculated annually and filed with the Commission with aproposed effective date of January 1 of each year. The TRBAA is a positive $18,109 for calendar year 2011. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is 1,288,684 MWh. All of Vernon's transmission facilities and Entitlements placed under the ISO's Operational Control are High Voltage Facilities as defined by the ISO Tariff. The TRBAA will be recalculated annually consistent with the ISO Tariff approved by the Vernon City Council, and provided to the ISO. EXHIBIT B CITY OF VERNON LIGHT AND POWER DEPARTMENT STAFF REPORT REGARDING THE ESTABLISHMENT OF A NEW TRANSMISSION REVENUE REQUIREMENT ASSOCIATED WITH VERNON'S HIGH VOLTAGE ENTITLEMENTS October 13, 2010 The City of Vernon ("Vernon" or "City") is a Scheduling Coordinator and a Participating Transmission Owner ("PTO") in the California Independent System Operator Corporation ("ISO"). To participate in the ISO, PTOs are required to turn over administrative control of their transmission facilities and- entitlements to the ISO. In return, the ISO collects revenues for each PTO pursuant to calculations that reflect the expenses and capital costs incurred by each PTO to provide transmission services. These calculations are known as Transmission Revenue Requirements ("TRRs"). The relationship between PTOs and the ISO is governed by a Transmission Control Agreement ("TCA"), which sets forth specific duties and obligations of all PTOs. The TCA requires all PTOs to file a Transmission Owner Tariff ("TO Tariff') and TRR with the Federal Energy Regulatory Commission ("FERC"). The TCA further requires all PTOs to file any changes in their TRRs with the FERC.. At present, the City's high voltage transmission, assets consistofthree long- term contracts (known as "existing transmission contracts" or "ETCs") which provide the City with dedicated access to -high voltage transmission facilities owned by other entities. Specifically, the City has contractual entitlements to utilize transmission assets pursuant to one long-term transmission contract with the Los Angeles Department of Water and Power ("LADWP"), and two long-term transmission contracts with Southern California Edison ("SCE"). The ETCs with SCE consist of one (the "SCE Victorville-Lugo ETC" described in SCE's FERC Rate Schedule 360) providing 11 MW of transmission capacity along the path between the Victorville- Lugo midpoint and the point of interconnection with the City's internal transmission system (the "City Gate"), and one (the "SCE Mead ETC" described in SCE's FERC Staff Report TRR 2011 Page 2 of 4 Rate Schedule 207) providing 26 MW of transmission capacity along the path between the Mead 230 substation and the City Gate. The costs of these ETCs make up the majority of the costs recovered through the City's TRR. Until recently, for each of the ETCs, the City paid the owner of the transmission facilities a fixed rate which was specific to the transmission path provided under each ETC. On August 1, 2008, SCE proposed to increase its TRR and associated rates in FERC Docket No. ER08-1343-000. In a related filing submitted in FERC Docket No. ER08-1353-000, SCE proposed to transition both of its ETCs with Vernon from their current, fixed "path -specific" rates to a so-called "postage stamp" rate methodology which reflects the blended rate which SCE charges the ISO pursuant to its own TRRs for the actual usage of all of SCE's transmission facilities by customers of the ISO (the "HVECAC Rate"). The HVECAC Rate that SCE proposed in its TO Tariff is derived from SCE's TRR and, therefore, will change each time SCE amends its TRR. On September 30, 2008, FERC accepted, subject to refund and hearing and settlement procedures, SCE's proposed revisions to its TO Tariff to transition the negotiated path -specific rates set forth in the SCE Victorville-Lugo ETC and the SCE Mead ETC to the uniform HVECAC Rate, and thus the City's costs under those ETCs will vary proportionately with any changes in SCE's TRR The City reached a settlement agreement (the "SCE Settlement") with SCE to amend the SCE Victorville-Lugo ETC and the SCE Mead ETC to fully transition the path -specific rates set forth in those ETCs to SCE's HVECAC Rate after a phasean period that began on August 1, 2009, during which the City's path -specific rates in those ETCs will be gradually stepped -up under incrementally increasing fixed rates (the "Phase -In Rates") until the path -specific rates are equal to the HVECAC Rate as of January 1, 2013. FERC approved the SCE Settlement pursuant to an order Staff Report TRR 2011 Page 3 of 4 issued September 11, 2009, in FERC Docket Nos. ER08-1343-000, ER08-1353- 000, ER09-187-000, ER09-187-001, EL09-19-000, and ER09-446-000 ("SCE Settlement Order"). On behalf of the City, the Brattle Group, an experienced utilities consulting firm, developed a tracking mechanism for the City's TRR ("ETC Adjustment Clause"), which will allow the City's TRR to be adjusted annually, effective January 1 of each year, to reflect changes in the City's transmission expenses associated with any changes implemented by SCE in the HVECAC Rate associated with the SCE Victorville-Lugo ETC and the SCE Mead ETC. On the basis of the Brattle Group's analysis and evidence from City staff, which was considered during a public meeting of the City Council held on July 13, 2009, the City, on July 15, 2009 ("July 15 FERC Filing"), filed with FERC the proposed (i) revisions to its TO Tariff proposing the City's stated TRRs for each of the years 2010 to 2012, which dollar amounts were also included in the SCE Settlement ("TO Tariff Revisions") and (ii) the ETC Adjustment Clause tracking mechanism. The July 15 FERC Filing acknowledged that, to the extent that the SCE Settlement was accepted, because the stated Phase -In Rates would be fixed, the ETC Adjustment Clause for the term of the Phase -In Rates would be zero. FERC approved the City's July 15 FERC Filing, including the TO Tariff Revisions, the City's proposed calculations of the TRR for years 2010 to 2012, and the City's request to utilize an ETC Adjustment Clause, in an order issued September 11, 2009 in FERC Docket No. EL09-64-000 ("TO Tariff _Order'). Specifically, for 2011, FERC approved a TRR of $1,275,480. The City is required under the TO Tariff Order to submit annual filings no later than November 1 of each year with FERC reflecting annual modifications to the base Staff Report TRR 2011 Page 4 of 4 TRR of the City. Because FERC approved the SCE Settlement, and the City's TRR is fixed for calendar year, 2011, the ETC Adjustment Clause reflecting the amount required to true -up the TRR between the City and SCE is zero. RECOMMENDATIONS 1. Approve the establishment of the City's new TRR for 2011 and revised Appendix I to the TO Tariff. 2. Authorize outside counsel to submit the City's TRR and ETC Adjustment Clause for 2011, the revised Appendix I to the TO Tariff, and this City Council Resolution approving the TRR and ETC Adjustment Clause, to FERC on behalf of the City of Vernon. CERTIFICATE STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES) I, Willard Yamaguchi, City Clerk of the City of Vernon, County of Los Angeles, State of California, hereby certify that the attached is a full and complete copy of: RESOLUTION NO. 2010-145 A Resolution of the City Council of the City of Vernon Adopting a New Transmission Revenue Requirement for 2011 in Accordance With Vernon's Transmission Owner Tariff and Providing for Tariff Sheet Changes to Implement the Adjustment IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official Seal of the City of Vernon, County of Los Angeles, State of California, on this day of November 2010. SEAL: W(ilfar'd Y m liulllhi City Clerk_,,,' Page 1 of 1 Juarez, Debbie From: Juarez, Debbie Sent: Monday, November 01, 2010 9:21 AM To: Fandino, Carlos; Alemu, Abraham; Hunter, Audra; Mermis, Michelle; Tolmasoff, Tania; Yamaguchi, Willard Subject: Res. No, 2010-145 Transmission Revenue Requirement for 2011 Attachments: Res. No. 2010-145 Transmission Revenue Requirement for 2011.PDF 11/1/2010 RECEIVED n C T 2 1 2010 CITY CLERK'S OFFICE STAFF REPORT LIGHT & POWER DEPARTMENT DATE: October,21, 2010 TO: Honorable Mayor and City Council FROM: Carlos Fandino, Director of Light & Power RE: Transmission Revenue Requirement for 2011 gLpgse Detailed Staff Report is enclosed. Recommendation: 1. Approve the establishment of the City's new TRR for 2011 and Appendix I to the TO. 2. Authorize outside counsel to submit the City's TRR and ETC Adjustment Clause for 2011, the amended Appendix I to the TO Tariff, and this City Council Resolution approving the TRR and ETC Adjustment Clause, to FERC on behalf of the City of Vernon. Staff would like this matter to be addressed on the November 1, 2010 City Council meeting. Fiscal impact: There is no known fiscal impact. CF:AA:rmt Attachments