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Resolution No. 2022-021RESOLUTION NO. 2022-21 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING THE CANCELLATION OF VERNON’S TRANSMISSION OWNER TARIFF SECTION 1. Recitals. A. 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. B. The City is a Participating Transmission Owner (PTO) with the California Independent System Operator (CAISO) by virtue of it having turned over operational control of its three existing transmission contracts to the CAISO’s operational control. C. The City’s three existing transmission contracts are: (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). Two of the three existing transmission contracts are with SCE; the remaining is with the Los Angeles Department of Water and Power (LADWP). D. The relationship between the City as a PTO and CAISO is governed by the CAISO’s Transmission Control Agreement (TCA) which sets forth the specific duties and obligations of all PTOs, including the filing of a Transmission Owner Tariff (TO Tariff) with the Federal Energy Regulatory Commission (FERC) as the means by which a PTO sets forth its charges for transmission access to the CAISO Controlled Grid. E. The City’s TO Tariff filed at FERC sets forth the City’s Transmission Revenue Requirement (TRR) for its high voltage transmission facilities and entitlements placed under the ISO’s operational control. The City has no high voltage transmission facilities, so the City’s TRR merely includes a pass-through of the costs of the three existing transmission contracts incurred by the City. The TRR for each PTO is then included in the formula used by the CAISO to develop the CAISO’s transmission access charges for use of the CAISO transmission grid. F. On October 19, 2021, the City Council adopted Resolution No. 2021-32 approving, among other things, the establishment of the City’s most recently revised TRR and Appendix I to the TO Tariff implementing the revised TRR, to be effective January 1, 2022. G. Further, the TO Tariff provides for the use of a Transmission Revenue Balancing Resolution No. 2022-21 Page 2 of 4 _______________________ Account Adjustment (TRBAA) to ensure that all transmission revenue credits and other credits flow through to CAISO Tariff and TO Tariff transmission customers. H. On October 19, 2021, the City Council adopted Resolution No. 2021-33 approving, pursuant to the TO Tariff, the establishment of the City’s revised TRBAA for 2022, and revised Appendix I to the TO Tariff implementing the revised TRBAA for 2022, to be effective on January 1, 2022. I. The City has determined that its three existing transmission contracts are no longer economically beneficial and has decided to terminate each of them, which results in the need to cancel the City’s TO Tariff on file with FERC, and terminate its participation in the CAISO as a PTO by withdrawing from the TCA. J. In order to effectuate the City’s termination of participation in the CAISO as a PTO, the City must request FERC approval to cancel its TO Tariff on file with FERC. Cancellation of the TO Tariff includes termination of the City’s TRR and TRBAA tariff mechanisms. K. Once the TO Tariff cancellation filing is accepted by FERC, the CAISO has indicated it will submit to FERC an amendment to the TCA withdrawing the City as a signatory. L. In addition to being a PTO, the City is also a metered subsystem (MSS) in the CAISO. After the City ceases to be a PTO with the CAISO upon cancellation of its TO Tariff and withdrawal from the TCA, the City will continue to operate under the metered subsystem agreement it has with the CAISO. As a non-PTO MSS, the City will be assessed wheeling access charges for transmission service based on wheel-through transactions from or across the CAISO grid. The basis for wheeling access charge assessment by the CAISO will change from the current gross load basis to a net load basis. M. The Public Utilities Department has recommended the cancellation of the City's TO Tariff. This cancellation will not result in any new or increased service charges or assessments to the City’s ratepayers. N. The City Council desires to approve the cancellation of the City’s TO Tariff. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 2. The City Council of the City of Vernon hereby finds and determines that the above recitals are true and correct. SECTION 3. The City Council of the City of Vernon finds that this action does Resolution No. 2022-21 Page 3 of 4 _______________________ not constitute a “project” pursuant to section 15378(b)(2) of the Guidelines to the California Environmental Quality Act (CEQA), because such action constitutes an administrative activity; and even if the adoption of the proposed item did constitute a project, it would be exempt in accordance with CEQA Guidelines section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. SECTION 4. The City Council of the City of Vernon hereby further finds and determines there are compelling reasons to justify the cancellation of the City’s TO Tariff to be effective October 7, 2022, concurrent with the termination of the City’s existing transmission contracts. SECTION 5. The City Council of the City of Vernon hereby declares that in no way shall this Resolution affect the City Council’s adoption or determination of any previous Resolution related to the City’s TO Tariff TRR or TRBAA adjustments. SECTION 6. The City Council of the City of Vernon hereby approves the cancellation of the City’s TO Tariff effective October 7, 2022, as described in the Public Utilities Department Report dated June 21, 2022. SECTION 7. The City Council of the City of Vernon hereby authorizes outside counsel to submit the City’s TO Tariff Cancellation filing and any necessary supporting documentation, to FERC on behalf of the City of Vernon. SECTION 8. The City Clerk shall certify the passage and adoption of this resolution and enter it into the book of original resolutions. APPROVED AND ADOPTED this 21st day of June, 2022. _______________________ LETICIA LOPEZ, Mayor ATTEST: LISA POPE, City Clerk (seal) APPROVED AS TO FORM: ___________________________ ZAYNAH N. MOUSSA, Interim City Attorney Resolution No. 2022-21 Page 4 of 4 _______________________ I CERTIFY THAT THE FOREGOING RESOLUTION NO. 2022-21 was passed and adopted by the City Council of the City of Vernon at the Regular meeting on June 21, 2022 by the following vote: AYES: 5 Council Members: Davis, Merlo, Ybarra, Larios, Lopez NOES: 0 ABSENT: 0 ABSTAIN: 0 _______________________________ LISA POPE, City Clerk (seal) City Council Agenda Item Report Submitted by: Jessica Balandran Submitting Department: Public Utilities Meeting Date: June 21, 2022 SUBJECT Cancellation of Vernon’s Transmission Owner Tariff Recommendation: A. Find that the proposed action does not constitute a “project” pursuant to Section 15378(b)(2) of the Guidelines to the California Environmental Quality Act (CEQA) because such action constitutes an administrative activity; and even if the adoption of the proposed item did constitute a project, it would be exempt in accordance with CEQA Guidelines Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment; and B. Adopt Resolution 2022-21 approving the cancellation of Vernon’s Transmission Owner Tariff. Background: The City of Vernon is a Participating Transmission Owner (PTO) in the California Independent System Operator Corporation (CAISO). Vernon was provided PTO status solely because it turned over operational control of its three existing transmission contracts to the CAISO’s operational control. The City’s three existing transmission contracts are: (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). The relationship between the City as a PTO and CAISO is governed by the CAISO’s Transmission Control Agreement (TCA) which sets forth the specific duties and obligations of all PTOs, including the filing of a Transmission Owner Tariff (TO Tariff) with the Federal Energy Regulatory Commission (FERC), in which a PTO sets forth its charges for transmission access to the CAISO Controlled Grid. The TO Tariff filed with FERC sets forth Vernon’s Transmission Revenue Requirement (TRR) for its high voltage transmission facilities and entitlements under the CAISO’s operational control. While the City does not own any transmission assets and has no high voltage transmission facilities, the Transmission Revenue Requirement (TRR) merely includes a pass-through of the costs of the three existing transmission contracts incurred by the City. The TRR for each PTO is included in the formula used by the CAISO to develop the transmission access charges for the use of the CAISO transmission grid. Consequently, the City has determined that its three existing transmission contracts are no longer economically beneficial and decided to terminate each of them, which results in the need to cancel the City’s TO Tariff on file with FERC and terminate its participation in the CAISO as a PTO. The City has provided notices of termination of the existing transmission contracts with SCE and LADWP, each with an effective date for the termination of October 7, 2022. SCE and LADWP have confirmed in writing that termination of the existing transmission contracts will be effective October 7, 2022. In addition, the CAISO has also confirmed that it can accommodate the City’s termination date of October 7, 2022. The City provided the CAISO with a notice of withdrawal from the TCA, with an effective date of November 1, 2022. On May 17, 2022, the CAISO posted on its website the City’s notice of withdrawal from the TCA. The CAISO has more recently indicated that the CAISO will be able to file an amendment of the TCA to withdraw Vernon as a signatory to the agreement effective October 7, 2022. To effectuate the City’s termination of participation in the CAISO as a PTO, the City must provide FERC notice of cancellation of its TO Tariff on file with FERC. In addition to being a PTO, the City is a metered subsystem (MSS) in the CAISO. After the City ceases to be a PTO with the CAISO upon cancellation of its TO Tariff and withdrawal from the TCA, the City will continue to operate under the MSS agreement with the CAISO. As a non- PTO MSS, the City will be assessed wheeling access charges for transmission service based on wheel-through transactions from or across the CAISO grid. The basis for wheeling access charge assessment by the CAISO will change from the current gross load basis to a net load basis. Currently, the City is assessed the CAISO’s transmission access charges based on gross electric load. The City’s termination of its participation in the CAISO as a PTO will allow the City to net its electric load with internal generation for wheeling access charge assessment purposes, potentially lowering the City’s costs. Therefore, staff recommends the City Council approve the cancellation of the TO Tariff. Cancellation of the City’s TO Tariff will not result in increased rates to the City's electric customers; as a result, no public hearing is necessary. Fiscal Impact: The fiscal impact is unknown at this time, although t he basis for the wheeling access charge assessment by the CAISO will change from the current gross load basis to a net load basis, potentially lowering the City's costs. Attachments: 1. Resolution No. 2022-21 2. Draft Transmission Owner Tariff Termination Filing