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Home My WebLink AboutRes2009-134 Sponsored by: Oates CITY OF SEWARD, ALASKA RESOLUTION 2009 -134 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER INTO A SPECIAL CONTRACT WITH THE ALASKA RAILROAD FOR DISCOUNTED ELECTRIC RATES FOR THE ALASKA RAILROAD COAL FACILITY WHEREAS, the Alaska Railroad Corporations operates a coal - loading facility in Seward year -round and provides full -time employment and financial influx to the City; and WHEREAS, job creation, job retention, and promotion of coal exportation and economic development are important to residents of Seward; and WIIEREAS, economic stability of operation of the Alaska Railroad Coal Facility is necessary to avoid moving the facility to a different city; and WHEREAS, except while actually loading coal, the actual demand for electric power is lower than 750 kW; and WHEREAS, the Utilities Manager is authorized to negotiate a special contract, subject to approval by the City Council, for customers who have a demand in excess of 750kW or that have OISIM unique power requirements that cannot be reasonably addressed by the large general service tariff; and WHEREAS, the Utilities Manager has recommended that the City Council recognize the unique power requirements of the Railroad for operating and maintaining the coal delivery system. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA that: Section 1. The City Manager is authorized to enter into a Special Contract for Electric Rates ( "Contract ") with the Alaska Railroad Corporation for the Coal Facility in substantially the form presented at this meeting. Section 2. The Recitals stated above are incorporated herein by reference as findings of the City Council. We furthcr find, in accordance with the City of Seward Electric Tariff and for the reasons stated above, that the Alaska Railroad's Coal Facility has unique power requirements that cannot be reasonably addressed by the large general service tariff. Section 3. This resolution shall be effective immediately. The contract shall be effective January 1, 2010. PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this 14` day of December 2009. CITY OF SEWARD, ALASKA RESOLUTION 2009 -134 THE CITY OF SEWARD, ALASKA Willard E. Dunham, Mayor AYES: Valdatta, Bardarson, Keil, Shafer, Amberg, Dunham NOES: None ABSENT: Smith ABSTAIN: None ATTEST: Jc n Lewis Ci y Clerk b .. • i von (City Seal) •6 , R y t 4b OF t . a A� �rarrseam�� ° �� Council Agenda Statement of s a 9 Meeting Date: December 14, 2009 4 . To: City Council Through: Phillip Oates, City Manager From: John Foutz, Electric Utility Manager Agenda Item: Special Contract with Alaska Railroad for Discounted Electrical Rates for the Coal Facility BACKGROUND & JUSTIFICATION: The electric tariff, as of January 1, 2010, will no longer have an industrial rate. There are three customers that are being charged the industrial rate when the tariff changes will go into effect. Asking these customers to increase from the industrial rate to the large general service rate in one year would be financially damaging for these businesses. The electric tariff allows, "special contracts to be negotiated by the utilities manager with a customer that have demand in excess of 750 kilowatts (kW) or that have unique power requirements that cannot be reasonably addressed by the large general service tariff" In the case of the Alaska Railroad these unique requirements include year round employment for Seward residents, economic influx for the Seward area, seasonal demand in excess of 750 kW, and the importance of keeping the Alaska Railroad in the community of Seward. Alaska Railroad claims that if they were to have to pay the large general service rate they could not maintain the facility profitably and would be forced to close the facility. If the facility were to close the impact would influence the community by higher unemployment rates and loss of revenues to the City of Seward and the surrounding Seward area. The Special contract applies only to the Coal Facility, and not other railroad property. INTENT: To sign a special contract with the Alaska Railroad for a special electric rate for the Coal Facility for two years, giving them time to become financially stable. CONSISTENCY CHECKLIST: Where applicable, this agenda statement is consistent with the Seward City Code, Charter, Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures or Other Plans or Policies: Yes (List Below) Electric Rates & Charges: Page 2 -2: 3. Special Contracts: Special contracts may be negotiated by the Utilities Manager with customer that have a demand in excess of 750 kW or that have a unique power requirements that cannot be reasonably addressed by the large general service tariff. Special contracts may include, but are not limited to, provisions for instantaneous demand charges, time of service, interruptible power, minimum and maximum demand, adjustment of demand level, ownership and payment of new distribution facilities, termination charges and power factor. Special contracts must be approved by the City Council. FISCAL NOTE: In 2009 the Alaska Railroad Coal Facility was charged a rate of $0.00574 per Kilowatt -hour for an energy charge and $10.25 per Kilowatt for a demand charge. After negotiations with representatives for the Alaska Railroad an agreement was reached for rates higher than previously yet financially reasonable. The suggested rate for the Alaska Railroad Coal Facility in the year 2010 is $0.020 per kilowatt -hour for the energy charge and $11.19 per kilowatt for the demand charge. In the year 2011 the energy rate will increase to $0.040 per kilowatt -hour and the demand charge will remain the same. Any other charges or rates that may be applicable will follow the Large General Service rate class. The following table shows the 2009 rate as a basis per month, followed by the approximate amounts the Alaska Railroad Coal Facility will pay under the Large General Service or by Special Contract in 2010 and 2011. Also included is the estimated percentage increase over the 2009 rate. Signing the Alaska Railroad Coal Facility to a special contract will increase the electric department's revenues by approximately 15.71% in 2010 and 28.44% in 2011. The approximate dollar amount per month in 2010 is $2,545.32 and $4,609.32 in 2011. The yearly estimated increase is $30,543.84 for 2010 and $55,311.84 for 2011. If the Alaska Railroad Coal Facility pays the Large General Service rate the percentage increase would be 56.73% and an increase to annual revenue of $110,313.84. RAILROAD Current Special Special 2009 Large General Service 2010 Contract 2010 Contract 2011 Average Monthly Bill Electric Operations & Infrastructure Fee $30.00 $31.50 $31.50 $31.50 Energy $0.0050 charge (rate) 3 $0.07413 $0.0200 $0.0400 Avg. cust kWh 103200 61920 103200 103200 2,064.0 4,128.0 518.58 4,590.13 0 0 $0.04263 41280 1,759.77 Energy charge 518.58 6,349.90 2,064.00 4,128.00 Fuel cost (rate = $0.057298 @ 9/09) 5,913.15 5,913.15 5,913.15 5,913.15 Demand Charge (per $10.15 $13.65 $11.19 $11.19 kW) Avg. Cust kW 960 960 960 960 13,104.0 10,742.4 10,742.4 9,744.00 0 0 0 Total 25,398.5 18,751.0 20,815.0 Electric 16,205.73 5 5 5 Increase per $9,192.8 $2,545.3 $4,609.3 month: 2 2 2 Percentage overall increase: 56.73% 15.71% 28.44% Approved by Finance Department: ----- .'L PI 0 e ii IA FZ L- f 2) ATTORNEY REVIEW: Yes X No RECOMMENDATION: The City Council pass resolution 2009- 1. " >;Igiving the city manager authorization to enter into a special contract with the Alaska Railroad for special electric rates for the coal facility.