HomeMy WebLinkAboutRes2010-053 Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -053
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER INTO A
SETTLEMENT AGREEMENT WITH CHUGACH ELECTRIC
ASSOCIATION
WHEREAS, in June, 2009, Chugach Electric Association, Inc. ( "Chugach "), the City's
wholesale electric provider, filed with the Regulatory Commission of Alaska ( "RCA ") a request for
approval of an increase in the base electric rates charged to its customers; and
WHEREAS, Chugach requested a 9.3 percent increase in the revenue requirement for sales
to the City, the effect of which would be an increase of $118,332 over the 2008 revenue received
from base rates, representing a 2.4% increase in the City's overall cost of purchased power; and
WHEREAS, the City intervened in the RCA docket considering Chugach's request, as did
Homer Electric Association ( "HEA ") and Matanuska Electric Association ( "MEA "); the Attorney
General of the State of Alaska is also participating in the RCA proceeding; and
WHEREAS, the RCA granted Chugach's request to increase base rates on an interim and
41.. refundable basis for bills rendered after October 9, 2009; and
WHEREAS, on May 14, 2010, HEA entered into a settlement agreement with Chugach; and
WHEREAS, given the benefits of the concessions negotiated between Chugach and HEA
and the costs and risks to the City of proceeding to a hearing before the RCA on Chugach's rate
increase, it is in the City's best interest to agree to a settlement with Chugach under the terms set
forth in the settlement agreement between Chugach and HEA; and
WHEREAS, on May 18, 2010, the City Manager signed a settlement agreement with
Chugach, attached hereto, wherein Chugach and the City agreed to resolve the issues between them
in accordance with the terms and conditions of the Chugach/HEA settlement agreement as if the
City were a party to that agreement and which provided that the rates for wholesale power paid by
the City will be based on a revenue requirement for serving the City that is calculated assuming the
adjustments and terms set forth in the Chugach/HEA settlement agreement; and
WHEREAS, the settlement agreement between Chugach and the City is expressly subject to
ratification and approval by the Seward City Council and the Regulatory Commission of Alaska.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA that:
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -053
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Section 1. The settlement agreement between the City and Chugach, executed by the
City Manager on May 18, 2010, and all actions taken by the City Manager in
connection therewith, are hereby approved and ratified.
Section 2. This resolution shall take affect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this 14th day of
June, 2010.
THE CITY OF SEWARD, ALASKA
can Bardarson, Vice -Mayor
AYES: Valdatta, Keil, Amberg, Smith, Shafer, Bardarson
NOES: None
ABSENT: Dunham
ABSTAIN: None
ATTEST:
7
JegLewis j
C Clerk
(City Seal)
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Council Agenda Statement
Meeting Date: June 14, 2010
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Through: Phillip Oates, City Manager 9p
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From: John Foutz � a P
11
Agenda Item: Authorizing the City ager to enter into a Settlement
Agreement with Chugach Electric Association, Inc.
BACKGROUND & JUSTIFICATION:
In June, 2009, Chugach Electric Association, Inc. (CEA), the City's wholesale electric provider, filed
with the Regulatory Commission of Alaska ( "RCA ") a request for approval of an interim increase in
the base electric rates charged to its customers (base rate includes customer charge, energy charge
and demand charge). The result was that Seward's base rates were increased 9.3 percent based on
CEA's revenue requirement for sales to the City of Seward. This rate increase from Chugach to the
City went into effect with the October 2009 billing, and was passed on to the City's customers
effective January 1, 2010.
In May 2010, Chugach offered a settlement to each party involved in the case. Given the benefits of
the concessions negotiated between Chugach and HEA and the costs and risks to the City of
proceeding to a hearing before the RCA on Chugach's rate increase request, it is in the City's best
interest to agree to a settlement with Chugach under the terms set forth in the settlement agreement
between Chugach and HEA.
In summary, the settlement stipulates that rather than increasing Seward's base rates by 9.3% as has
been done on an interim basis, Seward's base rates will be permanently increased by 8.0% over the
2008 base rates. Additional information is needed to assess what, if any, impact this will have on the
charges Seward Public Utilities assesses to its customers, although initial indications are that no
adjustment will be required.
Since this stipulation reflects a reduction in the interim rate, it is seen on the attached documents as a
rate reduction, and it offers Seward Public Utilities a refund of approximately $6,533 based on the
higher costs the Utility has paid during the interim period. Overall, this agreement results in Seward
Public Utilities remitting an additional $101,074 per year. There is no net impact to the utility's net
income as a result of this rate change.
INTENT:
The City Manager is hereby authorized to join into a settlement agreement hereby attached, with
Chugach Electric Association, Inc., to end the interim rate and approve a final rate ratified by the
RCA in 2009 without further action or expense.
CITY OF SEWARD
RESOLUTION 2010 -05
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) No
FISCAL NOTE:
This settlement agreement should not have an impact on the utility's bottom line, since it is the intent
of the City to pass the rate changes on directly to the utility's customers.
Approved by Finance Department: ✓� .�����'�.
ATTORNEY REVIEW: Yes X No 7 �
RECOMMENDATION: Council Approve Resolution 2010-053 authorizing the City Manager to
enter into a Settlement Agreement with Chugach Electric Association, Inc.
1
SETTLEMENT AGREEMENT
BETWEEN CHUGACH ELECTRIC ASSOCIATION, INC. AND CITY OF SEWARD
This settlement agreement ( "Seward Settlement Agreement ") is entered into by
and between Chugach Electric Association, Inc. ( "Chugach ") and the City of Seward, Seward
Electric Utilities Division ( "Seward ").
WHEREAS, on May 14, 2010, Chugach and Homer Electric Association, Inc.,
and Alaska Electric and Energy Cooperative, Inc. (together "HEA ") entered into a 2008 Test
Year Settlement Agreement and Settlement Agreement Regarding SRF Procedures and
Resolution of the Depreciation Docket ( "Chugach/HEA Settlement Agreement ") to settle and
resolve all issues among those parties in Dockets U -09 -80 and U -09 -97 of the Regulatory
Commission of Alaska ( "RCA "). A copy of the Chugach/HEA Settlement Agreement is
attached hereto as Exhibit 1;
WHEREAS, Seward is a party to Dockets U -09 -80 and U- 09 -97, but was not able
to adequately evaluate whether to join the Chugach/HEA Settlement Agreement prior to its
execution;
WHEREAS, Seward and Chugach desire to enter into a settlement agreement
conveying the same terms and conditions as are set forth in the Chugach/HEA Settlement
Agreement as though Seward had been a party to the Chugach/HEA Settlement Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
Chugach and Seward agree as follows:
1. Chugach and Seward agree to resolve the issues between them in
accordance with the terms and conditions of the Chugach/HEA Settlement Agreement as if
Seward were a party to that agreement.
2. Specifically, Chugach and Seward agree that the rates for wholesale power
paid by Seward will be based on a revenue requirement for serving Seward that is calculated
assuming the adjustments and terms set forth in the Chugach/HEA Settlement Agreement.
3. Nothing in this Seward Settlement Agreement or the Chugach/HEA
Settlement Agreement shall be construed as an amendment, waiver, or compromise of any
provision of the Power Sales Agreement between Chugach and Seward.
4. This Seward Settlement Agreement is subject to ratification and approval
by the City Council of the City of Seward. It is expected that the City Council of the City of
Seward will take action regarding this Seward Settlement Agreement on June 14, 2010.
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DORSEY & WHITNEY LLP
ATTORNEYS FOR CHUGACH CITY OF SEWARD, SEWARD
ELECTRIC ASSOCIATI N, INC. ELECTRIC UTILITIES DIVISION
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Donald W. Edwards, ABA #8004002 Phillip rr ates, City Manager
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SETTLEMENT AGREEMENT BETWEEN
CHUGACH ELECTRIC ASSOCIATION, INC. AND CITY OF SEWARD
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