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Resolution No. 2017-052RESOLUTION NO. 2017-52 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON ADOPTING A NEW TRANSMISSION REVENUE REQUIREMENT FOR 2018 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, each PTO must include in its TO Tariff its Gross Load, which the ISO uses to calculate its grid -wide Transmission Access Charge ("TAC") rates, and which is related to the City's ability to recover its full TRR; 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 - 2 - 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 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, 128 FERC ¶ 61,237 (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 31, 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 - 3 - 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 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 request to utilize an ETC Adjustment Clause to reflect annual projected changes to SCE's TRR, in an order issued September 11, 2009, 128 FERC 1 61,235 (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, on January 6, 2015, the City approved revisions to the template used to calculate the annual ETC Adjustment Clause; and WHEREAS, on April 8, 2015, FERC approved the City's 2015 filing with FERC reflecting modifications to the base TRR as calculated using the revised ETC Adjustment Clause template; and WHEREAS, the City is required under the TO Tariff Order to submit annual filings with FERC reflecting modifications to the base TRR; and WHEREAS, the current Gross Load included in the City's TO Tariff is based on 2010 load data and the Public Utilities Department calculates that Gross Load in 2016 was 1,154,492 MWh, substantially lower than in 2010; and WHEREAS, a Notice of Public Hearing was published on October 3, 2017, notifying all interested parties that a hearing to consider - 4 - evidence to establish the City's new TRR and Gross Load was scheduled for October 17, 2017; and WHEREAS, the regular City Council meeting scheduled for October 17, 2017 was adjourned to October 24, 2017; and WHEREAS, notice of the Public Hearing was posted in accordance with Government Code section 54955.1; and WHEREAS, on October 24, 2017, 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 and Gross Load under the City's amended TO Tariff; and WHEREAS, the TRR for 2018 is shown in the amended Appendix I to the TO Tariff, a copy of which is attached hereto as Exhibit A and made a part hereof. WHEREAS, the Public Utilities Department has prepared a Report, dated October 17, 2017, 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, approved by FERC under the amended TO Tariff, and revised in 2015 are reasonable and which calculates the amount derived under the ETC Adjustment Clause for 2018; and WHEREAS, the Public Utilities Department has recommended the City adopt the TRR shown in the amended Appendix I to the TO Tariff, attached as Exhibit A, to be effective on January 1, 2018; 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 and Gross Load under the amended TO - 5 - 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 above recitals are true and correct. SECTION 2: The City Council of the City of Vernon finds that this action is exempt from California Environmental Quality Act ("CEQA") review, because it is a fiscal and administrative activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a "project" as defined by CEQA Guidelines section 15378. SECTION 3: 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 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 and Gross Load, to be effective January 1, 2018. SECTION 4: 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 5: The City Council of the City of Vernon hereby approves, pursuant to the TO Tariff and to be effective on January 1, - 6 - 2018, the establishment of the City's new TRR, Gross Load, and Appendix I to the TO Tariff implementing the new TRR and Gross Load, as described in the Public Utilities Department Report dated October 17, 2017. SECTION 6: 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 Report, and this City Council Resolution approving the new TRR and Gross Load, to FERC on behalf of the City of Vernon. SECTION 7: The City Clerk or Deputy City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk, or Deputy City Clerk, of the City of Vernon shall cause this resolution and the City Clerk's, or Deputy City Clerk's, certification to be entered in the File of resolutions of the Council of this City. APPROVED AND ADOPTED this 24th day of October, 2017. ATTEST: Maria 20 Ayala City Clerk APPROVED AS TO FORM: Katharine Mapes, Esq. Spiegel & McDiarmid, LLP Special Counsel to City Name: MelissA/A. Ybarra Title: Mayor - 7 - STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I Maria E . Ayala City Clerk / r of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2017-52, was duly passed, approved and adopted by the City Council of the City of Vernon at an adjourned regular meeting of the City Council duly held on October 24, 2017, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this2_� day of October, 2017, at Vernon, California. (SEAL) - 8 - aria Ayala City Clerk / EXHIBIT A APPENDIX I Transmission Revenue Requirement and TRBAA The Vernon Base Transmission Revenue Requirement is $3,833,U42,915,648 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: $2.708.40O ,766,120 Balance of Difference between prior year Forecast and Actual SCE ETC Costs: ($167�924336,502) Interest on Difference between prior year Forecast and Actual SCE ETC Costs: ($5,79.212A50) 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 negative $47.61-638,427 for calendar year 201-78. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is 1, 181,7241,154,492 MWhs. 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 Transmission Revenue Requirement and TRBAA The Vernon Base Transmission Revenue Requirement is $2,915,648 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: $2,766,120 Balance of Difference between prior year Forecast and Actual SCE ETC Costs: ($336,502) Interest on Difference between prior year Forecast and Actual SCE ETC Costs: ($12,450) 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 negative $38,427 for calendar year 2018. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is 1,154,492 MWhs. 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 PUBLIC UTILITIES DEPARTMENT REPORT REGARDING THE ESTABLISHMENT OF NEW GROSS LOAD AND A REVISED NEW TRANSMISSION REVENUE REQUIREMENT ASSOCIATED WITH VERNON'S HIGH VOLTAGE ENTITLEMENTS October 17, 2017 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 FERC. Each PTO must also include in its TO Tariff its Gross Load which the ISO uses to calculate its grid -wide Transmission Access Charge ("TAC") rates, and which is related to the City's ability to recover its full TRR. TRANSMISSION REVENUE REQUIREMENT At present, the City's high voltage transmission assets consist of three 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) TRR Report 2018 Page 2 of 6 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 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 phase -in period that began on August 1, 2009, during which the City's path -specific rates in those ETCs have been gradually stepped -up under incrementally increasing fixed TRR Report 2018 Page 3of6 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 issued September 11, 2009, 128 FERC ¶ 61, 237 (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 TRR tracking mechanism clause for the City's TRR ("ETC Adjustment Clause"), which allows 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, 128 FERC ¶ 61,235 (2009), in FERC Docket No. EL09-64-000 ("TO Tariff Order"). The City is required under the TO Tariff Order to submit annual filings each year with FERC reflecting annual modifications to the base TRR of the City. In January 2015, the City approved revisions to the template used to calculate the TRR Report 2018 Page 4 of 6 ETC Adjustment Clause and submitted these revisions to FERC. On April 8, 2015, FERC approved the City's 2015 TRR filing as calculated using the revised ETC Adjustment Clause template; the City has prepared this year's filing using that revised template. CALCULATION OF THE ETC ADJUSTMENT CLAUSE Section 5.3 of the Vernon TO Tariff identifies the items to be reflected in the ETC Adjustment. The ETC Adjustment Clause shall be calculated as: ETC Adjustment = ETCCF+ ETCCT+ I ETCCF = The forecast of SCE ETC Cost for the following calendar year ETCCT = The balance representing the prior period difference between the projected cost of the SCE ETCs ("SCE ETC Cost") and the actual cost. I = The interest balance for the ETC, which shall be calculated using the interest rate pursuant to Section 35.19(a) of FERC's regulations under the Federal Power Act (18 C.F.R. 35.19(a)). Interest shall be calculated based on the average ETC true -up balance each month, compounded quarterly. A summary of the elements of the Vernon ETC Adjustment Clause proposed to be effective January 1, 2018 is shown in Exhibit 1. The ETC Adjustment Clause to be effective for the twelve months starting January 1, 2018 is $2,417,168. The ETCCF Component The ETCCF component stands for the forecast of SCE ETC costs for the following calendar year, in this case 2018. These forecast SCE ETC costs reflect 2018 rates from Southern California Edison Company's draft FERC Filing, posted on its website pursuant to its formula rate protocols (approved in FERC Docket No. ER11-3697). That filing is scheduled to be made at FERC, in its final form, in December 2017, Vernon will true up any differences in its SCE ETC costs when it makes its 2019 TRR Report 2018 Page 5 of 6 TRR filing. The ETCCF for 2018 SCE ETC costs are projected to be $2,766,120 as shown in line 8 of Exhibit 1. The ETCCT Component ETCCT represents a balance that reflects the difference between prior year forecast and actual SCE ETC costs. The prior period in this case is the twelve-month period starting October 1, 2016 and ending September 30, 2017. A summary of the determination of the September 30, 2017 balance in the ETC Adjustment Clause is shown in Exhibit 1. The ETCCT component reflects 1) the previously projected 2016 SCE ETC costs of $214,600 per month, for the months October through December 2016 and projected 2017 SCE ETC costs of $225,700 per month, for the months January through September 2017, 2) actual 2016 SCE ETC costs of $ 208,680 per month, for the months October through December 2016 and $209,420 per month, for the months January through September 2017, and 3) refunds received by the City —all elements as reflected on Line No. 8, 15, and 16 of Exhibit 1. The net of these elements produce the under (or over) collection figures reflected in Line 17 of Exhibit 1. The ending balance is the sum of the beginning balance on October 1 and the (over)/under collection — both elements as reflected on Line 1 and 17 of Exhibit 1. The cumulative monthly balances are carried forward from month to month and the ETCCT component on September 30, 2017 of negative $336,502 is shown in line 19 of Exhibit 1. The I (Interest) Component The Interest component reflects interest on the difference between prior year forecast and actual SCE ETC costs. The monthly interest carrying costs are calculated using the 18 C.F.R. § 35.19(a) interest rates and calculation method. These interest rates are published by FERC and reflect the prime rate values published in the Federal Reserve Bank's "Selected Interest Rates." TRR Report 2018 Page 6of6 Interest is calculated monthly on the average cumulative monthly balance and is compounded quarterly. The interest component is negative $12,450, as shown in Lines 20-24 of Exhibit 1. GROSS LOAD Gross Load is the City's aggregate annual demand for electricity. The Public Utilities Department calculates and projects Gross Load as part of its normal operations. Since 2012, the Gross Load stated in the City's TO Tariff has been 1,181,728 MWh, a figure based on the City's 2010 actual load data. The City's Gross Load has declined since 2010. In 2016, the City's Gross Load, as measured by ISO -certified revenue quality meters, was 1,154,492 MWh. This decline in Gross Load means that the City will not recover from the ISO the full amount of its TRR unless its stated TO Tariff Gross Load is revised to reflect the City's actual load. Staff recommends submitting an amended version of the City's Appendix I to its TO Tariff that states the City's Gross Load for 2018 at 1,154,492 MWh, in accordance with a 2016 test year (the data supporting the calculation of this figure is attached hereto as Exhibit 2). RECOMMENDATIONS 1. Approve the establishment of new Gross Load and the City's revised new TRR for 2018 and revised Appendix I to the TO Tariff. 2. Authorize outside counsel to submit the City's TRR, ETC Adjustment Clause amount, the revised Appendix I to the TO Tariff, and this City Council Resolution approving the TRR and ETC Adjustment Clause amount to FERC on behalf of the City of Vernon. I m X I 1l S � $ 8 S � - "" - a="a - d a :g fr d �� z�!' o & a a $ E a f m W _ _ _MERE _ _ _ ... _ _ _ _ 5999 9 9 9 9 9 9 c yR R I 5 t x a tl a E E E z 9 E fr E 3 5 a 5 EXHIBIT 2 City of Vernon Calendar Year 2016 Gross Load (as measured by ISO -certified revenue quality meters) Month Load (MWhs) Jan-16 91,607.41 Feb-16 89,667.26 Mar-16 97,079.17 Apr-16 95,489.36 May-16 96,571.31 Jun-16 99,963.06 Jul-16 100,719.39 Aug-16 104,930.94 Sep-16 98,263.59 Oct-16 98,404.39 Nov-16 92,646.90 Dec-16 89,148.89 Calendar Year 2016 1,154,491.68 TRANSMITTAL COMMUNICATION CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: October 25, 2017 TO: Kelly Nguyen, General Manager of Public Utilities FROM: Deborah Juarez, Records Management Assistant & RE: Resolution No. 2017-52 — A Resolution of the City Council of the City of Vernon Adopting a New Transmission Revenue Requirement for 2018 in Accordance with Vernon's Transmission Owner Tariff and Providing for Tariff Sheet Changes to Implement the Adjustment Transmitted herewith is a certified copy of Resolution No. 2017-52 referenced above, for your transmittal, which was approved by City Council on October 24, 2017. Please ensure that a copy of the transmittal communication is sent to my attention for the file. Thank you. Enclosure c: Abraham Alemu Resolution No. 2017-52 CERTIFICATE STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES) I, Maria E. Ayala, 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. 2017-52 - A Resolution of the City Council of the City of Vernon Adopting a New Transmission Revenue Requirement for 2018 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 fix` -day of October 2017. SEAL: Mar a E. Aya a Cit Clerk STAFF REPORT �4 OB, VE RECEIVED �e OCT 12 2017 CITY ADMINISTRATION OCT 12 2017 STAFF REPORT Y. 101 tl )vl City CLERK'S OFFICE. PUBLIC UTILITIES DEPARTMENT DATE: October 17, 2017 TO: Honorable Mayor and City Council FROM: Kelly Nguyen, General Manager of Public Utilities `4u RE: A Resolution Adopting a New Transmission Revenue Requirement for 2018 in Accordance with Vernon's Transmission Owner Tariff and Providing for Tariff Sheet Changes to Implement the Adjustment Recommendation A. Find that approval of the proposed action is exempt from California Environmental Quality Act ("CEQA") review, because it is a fiscal and administrative activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a "project" as defined by CEQA Guidelines section 15378; and B. Conduct a Public Hearing; and C. Adopt a resolution adopting a new transmission revenue requirement for 2018 in accordance with Vernon's Transmission Owner Tariff and providing for tariff sheet changes to implement the adjustment. Background The City of Vernon 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 FERC. Each PTO must also include in its TO Tariff its Gross Load which the ISO uses to calculate its grid -wide Transmission Access Charge ("TAC") rates, and which is related to the City's ability to recover its full TRR. TRANSMISSION REVENUE REQUIREMENT At present, the City's high voltage transmission assets consist of three 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 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. The attached TRR Report supports the establishment of a new transmission revenue requirement associated with Vernon's high voltage entitlements. GROSS LOAD Gross Load is the City's aggregate annual demand for electricity. The Public Utilities Department calculates and projects Gross Load as part of its normal operations. Since 2012, the Gross Load stated in the City's TO Tariff has been 1,181,728 MWh, a figure based on the City's 2010 actual load data. The City's Gross Load has declined since 2010. In 2016, the City's Gross Load, as measured by ISO -certified revenue quality meters, was 1,154,492 MWh. This decline in Gross Load means the City will not recover from the ISO the full amount of its TRR unless its stated TO Tariff Gross Load is revised to reflect the City's actual load. Staff recommends submitting an amended version of the City's Appendix I to its TO Tariff stating the City's Gross Load for 2018 at 1,154,492 MWh, in accordance with a 2016 test year (the data supporting the calculation of this figure is attached hereto as Exhibit 2). Fiscal Impact The cost of Existing Transmission Service Contracts (ETC) incurred by the City will be recovered. Attachments 1. Notice of Public Hearing to Establish New Transmission Revenue Requirement 2. Resolution Adopting a New Transmission Revenue Requirement Page 2 of 2 City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 (323) 583-8811 NOTICE OF TWO SEPARATE PUBLIC HEARINGS REGARDING THE ESTABLISHMENT OF VERNON'S NEW TRANSMISSION REVENUE BALANCING ACCOUNT ADJUSTMENT AND VERNON'S NEW EXISTING TRANSMISSION CONTRACT ADJUSTMENT The City of Vernon will conduct a Public Hearing, which you may attend. PLACE: Vernon City Hall City Council Chamber 4305 Santa Fe Avenue Vernon, CA 90058 DATE & TIME: Tuesday, October 17, 2017, at 9:00 a.m. (or as soon thereafter as the matter can be heard) PURPOSE/SUBJECT: (1) To consider evidence to establish Vernon's new Transmission Revenue Balancing Account Adjustment for its high voltage (over 200 kV) transmission entitlements (all located outside the City) pursuant to Vernon's Transmission Owner Tariff, and (2) To consider evidence to establish new Gross Load and Vernon's new Existing Transmission Contract Adjustment for its high voltage (over 200 kV) transmission entitlements (all located outside the City) pursuant to Vernon's Transmission Owner Tariff. DOCUMENTS FOR REVIEW: Copies of a Resolution Establishing a Transmission Revenue Balancing Account Adjustment for 2018 and a Resolution Adopting a New Transmission Revenue Requirement will be available for public examination at Vernon City Hall, located at 4305 Santa Fe Avenue, Vernon, California or at http://www.cityofvemon.orglQovemment/public- meetings/city-council from October 12 to October 17, 2017. Please send your comments or questions to: Abraham Alemu City of Vernon, Public Utilities 4305 Santa Fe Avenue, Vernon, CA 90058 (323) 583-8811 Ext. 250 AALemu@ci.vemon.ca.us PROPOSED CEQA FINDING: Find that approval of the proposed action is exempt from California Environmental Quality Act ("CEQA") review, because it is a fiscal and administrative activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a "project" as defined by CEQA Guidelines section 15378. If you challenge the adoption/approval of the establishment of Vernon's new Transmission Revenue Balancing Account Adjustment, or Vernon's new Existing Transmission Contract Adjustment or any provision thereof in court, you may be limited to raising only those issues you or someone else raised at the hearing described in this notice or in written correspondence delivered to the City of Vernon at, or prior to, the meeting. Americans with Disabilities Act (ADA): In compliance with ADA, if you need special assistance to participate in the meeting, please contact the Office of the City Clerk at (323) 583-8811 ext. 546. The hearing may be continued or adjourned or cancelled and rescheduled to a stated time and place without further notice of a public hearing. Dated: October 3.2017 _ Maria . Ayala, City rk 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 - 2 - RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON ADOPTING A NEW TRANSMISSION REVENUE REQUIREMENT FOR 2018 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, each PTO must include in its TO Tariff its Gross Load, which the ISO uses to calculate its grid -wide Transmission Access Charge ("TAC") rates, and which is related to the City's ability to recover its full TRR; 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 - 2 - 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 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, 128 FERC 61,237 (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 31, 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 - 3 - 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 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 request to utilize an ETC Adjustment Clause to reflect annual projected changes to SCE's TRR, in an order issued September 11, 2009, 128 FERC ¶ 61,235 (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, on January 6, 2015, the City approved revisions to the template used to calculate the annual ETC Adjustment Clause; and WHEREAS, on April 8, 2015, FERC approved the City's 2015 filing with FERC reflecting modifications to the base TRR as calculated using the revised ETC Adjustment Clause template; and WHEREAS, the City is required under the TO Tariff Order to submit annual filings with FERC reflecting modifications to the base TRR; and WHEREAS, the current Gross Load included in the City's TO Tariff is based on 2010 load data and the Public Utilities Department calculates that Gross Load in 2016 was 1,154,492 MWh, substantially lower than in 2010; and WHEREAS, a Notice of Public Hearing was published on October 3, 2017, notifying all interested parties that a hearing to consider - 4 - evidence to establish the City's new TRR and Gross Load was scheduled for October 17, 2017; and WHEREAS, the regular City Council meeting scheduled for October 17, 2017 was adjourned to October 24, 2017; and WHEREAS, notice of the Public Hearing was posted in accordance with Government Code section 54955.1; and WHEREAS, on October 24, 2017, 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 and Gross Load under the City's amended TO Tariff; and WHEREAS, the TRR for 2018 is shown in the amended Appendix I to the TO Tariff, a copy of which is attached hereto as Exhibit A and made a part hereof. WHEREAS, the Public Utilities Department has prepared a Report, dated October 17, 2017, 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, approved by FERC under the amended TO Tariff, and revised in 2015 are reasonable and which calculates the amount derived under the ETC Adjustment Clause for 2018; and WHEREAS, the Public Utilities Department has recommended the City adopt the TRR shown in the amended Appendix I to the TO Tariff, attached as Exhibit A, to be effective on January 1, 2018; 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 and Gross Load under the amended TO - 5 - 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 above recitals are true and correct. SECTION 2: The City Council of the City of Vernon finds that this action is exempt from California Environmental Quality Act ("CEQA") review, because it is a fiscal and administrative activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a "project" as defined by CEQA Guidelines section 15378. SECTION 3: 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 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 and Gross Load, to be effective January 1, 2018. SECTION 4: 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 5: The City Council of the City of Vernon hereby approves, pursuant to the TO Tariff and to be effective on January 1, - 6 - 2018, the establishment of the City's new TRR, Gross Load, and Appendix I to the TO Tariff implementing the new TRR and Gross Load, as described in the Public Utilities Department Report dated October 17, 2017. SECTION 6: 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 Report, and this City Council Resolution approving the new TRR and Gross Load, to FERC on behalf of the City of Vernon. SECTION 7: The City Clerk or Deputy City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk, or Deputy City Clerk, of the City of Vernon shall cause this resolution and the City Clerk's, or Deputy City Clerk's, certification to be entered in the File of resolutions of the Council of this City. APPROVED AND ADOPTED this 24th day of October, 2017. ATTEST: City Clerk /Deputy City Clerk APPROVED AS TO FORM: Katharine Mapes, Esq. Spiegel & McDiarmid, LLP Special Counsel to City Name: Title: Mavor - 7 - STATE OF CALIFORNIA COUNTY OF LOS ANGELES I, ss City Clerk / Deputy City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. , was duly passed, approved and adopted by the City Council of the City of Vernon at an adjourned regular meeting of the City Council duly held on October 24, 2017, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this day of October, 2017, at Vernon, California. (SEAL) City Clerk / Deputy City Clerk - 8 - EXHIBIT A APPENDIX I Transmission Revenue Requirement and TRBAA The Vernon Base Transmission Revenue Requirement is $3,033;1642,915,648 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: $�*-. t 44 .7766_ 120 Balance of Difference between prior year Forecast and Actual SCE ETC Costs: ($-6-?4224_ 36.5Q- ) Interest on Difference between prior year Forecast and Actual SCE ETC Costs: ($_5 1 O) 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 negative $47-.41-638.4-27 for calendar year 201 �. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is_1, i_ +_4Q MWhs. 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 Transmission Revenue Requirement and TRBAA The Vernon Base Transmission Revenue Requirement is $2,915,648 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: $2,766,120 Balance of Difference between prior year Forecast and Actual SCE ETC Costs: ($336,502) Interest on Difference between prior year Forecast and Actual SCE ETC Costs: ($12,450) 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 negative $38,427 for calendar year 2018. Vernon's Gross Load, consistent with its TRR, used by the ISO to develop the Transmission Access Charge is 1,154,492 MWhs. 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 PUBLIC UTILITIES DEPARTMENT REPORT REGARDING THE ESTABLISHMENT OF NEW GROSS LOAD AND A REVISED NEW TRANSMISSION REVENUE REQUIREMENT ASSOCIATED WITH VERNON'S HIGH VOLTAGE ENTITLEMENTS October 17, 2017 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 FERC. Each PTO must also include in its TO Tariff its Gross Load which the ISO uses to calculate its grid -wide Transmission Access Charge ("TAC") rates, and which is related to the City's ability to recover its full TRR. TRANSMISSION REVENUE REQUIREMENT At present, the City's high voltage transmission assets consist of three 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) TRR Report 2018 Page 2 of 6 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 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 phase -in period that began on August 1, 2009, during which the City's path -specific rates in those ETCs have been gradually stepped -up under incrementally increasing fixed TRR Report 2018 Page 3 of 6 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 issued September 11, 2009, 128 FERC ¶ 61, 237 (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 TRR tracking mechanism clause for the City's TRR ("ETC Adjustment Clause"), which allows 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, 128 FERC ¶ 61,235 (2009), in FERC Docket No. EL09-64-000 ("TO Tariff Order"). The City is required under the TO Tariff Order to submit annual filings each year with FERC reflecting annual modifications to the base TRR of the City. In January 2015, the City approved revisions to the template used to calculate the TRR Report 2018 Page 4 of 6 ETC Adjustment Clause and submitted these revisions to FERC. On April 8, 2015, FERC approved the City's 2015 TRR filing as calculated using the revised ETC Adjustment Clause template; the City has prepared this year's filing using that revised template. CALCULATION OF THE ETC ADJUSTMENT CLAUSE Section 5.3 of the Vernon TO Tariff identifies the items to be reflected in the ETC Adjustment. The ETC Adjustment Clause shall be calculated as: ETC Adjustment = ETCCF+ ETCCT+ I. ETCCF = The forecast of SCE ETC Cost for the following calendar year ETCCT = The balance representing the prior period difference between the projected cost of the SCE ETCs ("SCE ETC Cost") and the actual cost. I = The interest balance for the ETC, which shall be calculated using the interest rate pursuant to Section 35.19(a) of FERC's regulations under the Federal Power Act (18 C.F.R. 35.19(a)). Interest shall be calculated based on the average ETC true -up balance each month, compounded quarterly. A summary of the elements of the Vernon ETC Adjustment Clause proposed to be effective January 1, 2018 is shown in Exhibit 1. The ETC Adjustment Clause to be effective for the twelve months starting January 1, 2018 is $2,417,168. The ETCCF Component The ETCCF component stands for the forecast of SCE ETC costs for the following calendar year, in this case 2018. These forecast SCE ETC costs reflect 2018 rates from Southern California Edison Company's draft FERC Filing, posted on its website pursuant to its formula rate protocols (approved in FERC Docket No. ER11-3697). That filing is scheduled to be made at FERC, in its final form, in December 2017; Vernon will true up any differences in its SCE ETC costs when it makes its 2019 TRR Report 2018 Page 5 of 6 TRR filing. The ETCCF for 2018 SCE ETC costs are projected to be $2,766,120 as shown in line 8 of Exhibit 1. The ETCCT Component ETCCT represents a balance that reflects the difference between prior year forecast and actual SCE ETC costs. The prior period in this case is the twelve-month period starting October 1, 2016 and ending September 30, 2017. A summary of the determination of the September 30, 2017 balance in the ETC Adjustment Clause is shown in Exhibit 1. The ETCCT component reflects 1) the previously projected 2016 SCE ETC costs of $214,600 per month, for the months October through December 2016 and projected 2017 SCE ETC costs of $225,700 per month, for the months January through September 2017, 2) actual 2016 SCE ETC costs of $ 208,680 per month, for the months October through December 2016 and $209,420 per month, for the months January through September 2017, and 3) refunds received by the City —all elements as reflected on Line No. 8, 15, and 16 of Exhibit 1. The net of these elements produce the under (or over) collection figures reflected in Line 17 of Exhibit 1. The ending balance is the sum of the beginning balance on October 1 and the (over)/under collection — both elements as reflected on Line 1 and 17 of Exhibit 1. The cumulative monthly balances are carried forward from month to month and the ETCCT component on September 30, 2017 of negative $336,502 is shown in line 19 of Exhibit 1. The I (Interest) Component The Interest component reflects interest on the difference between prior year forecast and actual SCE ETC costs. The monthly interest carrying costs are calculated using the 18 C.F.R. § 35.19(a) interest rates and calculation method. These interest rates are published by FERC and reflect the prime rate values published in the Federal Reserve Bank's "Selected Interest Rates." TRR Report 2018 Page 6 of 6 Interest is calculated monthly on the average cumulative monthly balance and is compounded quarterly. The interest component is negative $12,450, as shown in Lines 20-24 of Exhibit 1. GROSS LOAD Gross Load is the City's aggregate annual demand for electricity. The Public Utilities Department calculates and projects Gross Load as part of its normal operations. Since 2012, the Gross Load stated in the City's TO Tariff has been 1,181,728 MWh, a figure based on the City's 2010 actual load data. The City's Gross Load has declined since 2010. In 2016, the City's Gross Load, as measured by ISO -certified revenue quality meters, was 1,154,492 MWh. This decline in Gross Load means that the City will not recover from the ISO the full amount of its TRR unless its stated TO Tariff Gross Load is revised to reflect the City's actual load. Staff recommends submitting an amended version of the City's Appendix I to its TO Tariff that states the City's Gross Load for 2018 at 1,154,492 MWh, in accordance with a 2016 test year (the data supporting the calculation of this figure is attached hereto as Exhibit 2). RECOMMENDATIONS 1. Approve the establishment of new Gross Load and the City's revised new TRR for 2018 and revised Appendix I to the TO Tariff. 2. Authorize outside counsel to submit the City's TRR, ETC Adjustment Clause amount, the revised Appendix I to the TO Tariff, and this City Council Resolution approving the TRR and ETC Adjustment Clause amount to FERC on behalf of the City of Vernon. , ...��..... _�... � �....._ 5t 2 |§§} ! § ! § ! !! )|) !! f|) !(\\ ! § ! ! - � EXHIBIT 2 City of Vernon Calendar Year 2016 Gross Load (as measured by ISO -certified revenue quality meters) Month Load (MWhs) Jan-16 91,607.41 Feb-16 89,667.26 Mar-16 97,079.17 Apr-16 95,489.36 May-16 96,571.31 Jun-16 99,963.06 Jul-16 100,719.39 Aug-16 104,930.94 Sep-16 98,263.59 Oct-16 98,404.39 Nov-16 92,646.90 Dec-16 89,148.89 Calendar Year 2016 1,154,491.68 This space is for the County Clerk's Filing Stamp Zzts#erxr ( ra�x� �zC�Xir�x ioxts, �1ztr_ 161 S. AVENUE 24, LOS ANGELES, CA 90031 323 221-1092 • FX: 323 221-1090 • www.egpnews.com PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am a citizen of the United States and a resident of the County aforementioned; I am over the age of eighteen years, and not a party to or interested in the above -entitled matter. I am the principal clerk of the printer of EASTERN GROUP PUBLICATIONS' EASTSIDE SUN, NORTHEAST SUN BELL GARDENS SUN, VERNON SUN, COMMERCE COMET AND MNTEBEL,L0 COMET, newspapers of general circulation, printed and published THURSDAYS in the County of Los Angeles, and which newspaper of general circulation by the Superior Court of the County of Los Angeles, State of California, under the date of JUNE 21, 1966, CASE NUMBER 884861, that the notice, of which the annexed is printed copy (set in type not smaller the nonpareil), has been published in each regular and entire issue of sail newspaper and not in any supplement thereof on the following dates, to -wit: OCTOBER 05, all in the year 2017. I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at LOS ANGELES, California, this 05TTHH day of OCTOBER. 2017. CITY OF VERNON Proof of Publication of Citv of Vernon Notice of Two Separate Public Hea_rinas Regarding the Establishment of Vernon's New Transmission Revenue Balancing Account Adjustment and Vernon's New Existing Transmission Contract Adjustment CITY OF VERNON NOTICE OF TWO SEPARATE PUBLIC HEARINGS REGARDING THE ESTABLISHMENT OF VERNON'S NEW TRANSMISSION REVENUE BALANCING ACCOUNT ADJUSTMENT AND VERNON'S NEW EXISTING TRANSMISSION CONTRACT ADJUSTMENT The City of Vernon will conduct a Public Hearing, which you may attend. PLACE: Vernon City Hall, City Council Chamber 4305 Santa Fe Avenue, Vernon, CA 90058 DATE & TIME: Tuesday, October 17, 2017, at 9:00 a.m. (or as soon thereafter as the matter can be heard) PURPOSE/SUBJECT: (1) To consider evidence to establish Vernon's new Transmission Revenue Balancing Account Adjustment for its high voltage (over 200 kV) transmission entitlements (all located outside the City) pursuant to Vernon's Transmission Owner Tariff, and (2) To consider evidence to establish new Gross Load and Vernon's new Existing Transmission Contract Adjustment for its high voltage (over 200 kV) transmission entitlements (all located outside the City) pursuant to Vernon's Transmission Owner Tariff. DOCUMENTS FOR REVIEW: Copies of a Resolution Establishing a Transmission Revenue Balancing Account Adjustment for 2018 and a Resolution Adopting a New Transmission Revenue Requirement will be available for public examination at Vernon City Hall, located at 4305 Santa Fe Avenue, Vernon, California or at http://www.cityofvernon.org/government/public- meetings/city-council from October 12 to October 17, 2017. Please send your comments or questions to: Abraham Alemu City of Vernon, Public Utilities 4305 Santa Fe Avenue, Vernon, CA 90058 (323) 583-8811 Ext. 250 AALemu@ci.vernon.ca.us PROPOSED CEQA FINDING: Find that approval of the proposed action is exempt from California Environmental Quality Act ("CEQA") review, because it is a fiscal and administrative activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a "project" as defined by CEQA Guidelines section 15378. If you challenge the adoption/approval of the establishment of Vernon's new Transmission Revenue Balancing Account Adjustment, or Vernon's new Existing Transmission Contract Adjustment or any provision thereof in court, you may be limited to raising only those issues you or someone else raised at the hearing described in this notice or in written correspondence delivered to the City of Vernon at, or prior to, the meeting. Americans with Disabilities Act (ADA): In compliance with ADA, if you need special assistance to participate in the meeting, please contact the Office of the City Clerk at (323) 583-8811 ext. 546. The hearing may be continued or adjourned or cancelled and rescheduled to a stated time and place without further notice of a public hearing. Signature Dated: October 3 201'7 City Clerks