REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Delegating Authority to the City Manager to Execute Natural Gas Purchase Contracts and Related Documents for Delivery Through 2034
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The Strategic Plan for the Electric Utility adopted by the City Council calls for the Electric Utility to provide reliable, economic service. In order to supply the natural gas necessary to run the natural gas-fired Donald Von Raesfeld Power Plant (DVR) and Lodi Energy Center (LEC) Power Plants, the City will need to enter into natural gas supply contracts with vendors. It is also contemplated that such contracts would provide for the natural gas requirements of the Cogen and Gianera plants as appropriate.
To enable the City to act quickly in securing natural gas commitments by vendors in response to any Request for Proposal, on December 7, 2010, Council adopted Resolution 10-7807 delegating authority to the City Manager, or designee, to execute on behalf of the City any and all natural gas supply contracts with natural gas suppliers (not to exceed the total of 40,000 MMBtu per day) for delivery during the calendar years 2011 through 2026. The City Manager, or designee, is also authorized to execute all documents related to such transactions including, but not limited to, all credit enhancement documents and agreements, netting and set-off agreements, and confirmation agreements necessary to support and complete such transactions.
DISCUSSION
Eleven years have passed since the adoption of the 2010 gas purchase Resolution described above, while the needs to secure long-term natural gas contracts continue to exist even as more renewable resources are integrated into the utility's supply. The cost of natural gas, if not managed carefully, could result in a large exposure for the City's electric customers to substantial natural gas price volatility. Between the execution of...
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