04-026 ABAG Wind Up Electric ProgramAGREEMENT
between
ABAG POWER
and
City of Cupertino
to Wind Up Ele~~tric Program
This Agreement between ABAG Publicly Owned Energy Resources (ABAG POWER), a joint
exercise of powers agency created under the C~~lifornia Joint Powers Act (California
Go ernment Code §§6 00 et seq.), and City of Cupertino (City), is made effective
un~.e ~ o a~
RECITALS
A. The City became a signatory to the Joint Powers Agreement creating ABAG POWER
(JPA) (Attachment A, Exhibit 1) and a M~~mber of ABAG POWER.
B. ABAG POWER has been, and continues t~~ be, staffed by employees of the Association
of Bay Area Governments (ABAG).
C. The City and ABAG POWER entered into the Direct Access Electric Aggregation
Agreement (DA Agreement) (a form of tl~e DA Agreement is at Attachment A, Exhibit
2). Under the DA Agreement, the City w~3s a participant in the direct access electric
aggregation program (Electric Program) until the Electric Program was suspended
effective June 30, 2001 (the Electric Proc3ram is described in more detail in
Attachment B).
D. During the operation of the Electric Program and pursuant to the DA Agreement,
each Member was obligated to pay, and did pay, to ABAG POWER a proportionate
share of Electric Program costs and WorN;ing Capital needs (Electric Program costs
and Working Capital needs are described in more detail in Attachment B).
E. Upon suspension of the Electric Program, ABAG POWER retained funds (previously
paid by the Members as described in paragraph D) to pay (1) identified potential
Electric Program liabilities, (2) the costs of winding up the Electric Program, and (3)
the costs of marshalling assets (amount; owed to ABAG POWER and Members)
(liabilities, assets and costs are described in more detail in Attachments B and C).
ABAG POWER has determined that it cannot, within a reasonable timeframe, (1) pay
or eliminate certain potential liabilities, (2) marshal certain assets, or (3) eliminate
identified potential liabilities associated with a major asset.
Therefore, ABAG POWER and City agree to wind up the Electric Program under the following
terms and conditions:
Payment. City accepts as a true and proper accounting of all sums due to it from a
wind up of the Electric Program the following specific and contingent sums:
a) Balancing Account -a sum to be determined pursuant to §4
b) Working Capital Deposits ($92,444)
c) DA Credit - ($196,386)
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Wind Up Agreement
d) ISO Escrow Deposit - to be determined pursuant to §5
e) PX Escrow Deposit - to be determined pursuant to §5
f) Wind Up Costs Hold Back - to be determined pursuant to §11
2. Payment Terms. ABAG POWER will pay t~~ City the following sums:
a) In complete payment of the Balancing Account owed City, such funds as are
available as of July 1, 2004. Both i:he payment schedule and the amounts to
be paid to City are determined by fi4 of this Agreement.
b) In complete payment of the Working Capital Deposits owed City, the sum of
($92,444) within fifteen (15) days ~3fter the City's execution and return of an
original of this Wind Up Agreement or after ABAG POWER's receipt of the
~~Qualifying Agreement" as defined in §10, whichever is later.
c) In complete payment of the DA CrE~dit owed City, the sum of ($196,386) within
fifteen (15) days after the latest of the following: i) the City's execution and
return of an original of this Wind Ulu Agreement, or ii) after ABAG POWER's
receipt of the "Qualifying Agreement" as defined in §10, or iii) receipt of the DA
Credit from PG&E.
d) In complete payment of the ISO Escrow Deposits owed the City, such funds
that ABAG POWER may receive from time to time from the Northern California
Power Authority (NCPA) until all funds available from the ISO Escrow Deposits
are received. Both the payment schedule and the amounts to be paid to the
City are determined by §5 of this V1~ind Up Agreement.
e) In complete payment of the PX Escrow Deposit owed the City, funds that ABAG
POWER may receive from time to time from NCPA until all funds available from
the PX Escrow Deposit are received. Both the payment schedule and the
amounts to be paid to City are determined by §5 of this Wind Up Agreement.
f) In complete payment of the Wind l.ip Costs Hold Back, the amount determined
under §11 of this Wind Up AgreemE~nt on or before July 1, 2010.
3. Funds Available for Disbursement and Allocation Ratios. Based on ABAG POWER's
representation and warranties in §6 and such other documents as it deemed
necessary, the City acknowledges that:
a) funds available for disbursement were determined by ABAG POWER as
described in greater detail in Attacriment C. Further, City approves such
determination.
b) the payments described in §§1(a), (d), (e) and (f) of this Wind Up Agreement
are the result of allocating all the Balancing Accounts, ISO Escrow Deposits, PX
Escrow Deposits and Wind Up Costs Hold Backs available for disbursement
among the Members in a ratio equzil to each Member's electrical usage during
the period of time such Member participated in the Electric Program to the total
electrical usage by all Members wl-~o were participating in the Electric Program
at the time of suspension ("Usage Ftatio"). Further, City approves such
allocation.
c) Working Capital Deposits were made by the Members in accordance with ABAG
POWER's financial records (see Att~ichment C). City acknowledges that the
payment described in §1(b) of this Wind Up Agreement is the result of
allocating the Working Capital Deposits available for disbursement among the
Members in a ratio equal to the Cit~~'s deposits to Working Capital to all
Working Capital Deposits made by ;311 Members who were participants in the
Electric Program at the time of susK~ension (~~Working Capital Ratio"). Further,
City approves such allocation.
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Wind Up Agreement
d) the payment described in §1(c) is t:he result of allocating the DA Credit
available for disbursement among the Members in a ratio equal to the CTC
Reversals paid by City to all CTC Reversals paid by all Members (°CTC Reversal
Ratio"). The method for determining said ratio is described in greater detail in
Attachment C. Further, City approves such allocation.
4. Balancing Account Payment Amount and Schedule. The amount of the Balancing
Account Payment to City is based on the total funds available for disbursement after
payment of Working Capital Deposit and DA Credits and allocated to each Member by
the Usage Ratio. ABAG POWER will haves an independent financial audit conducted
for fiscal year 2003-04 which will identif~~ the total amount available for distribution.
This amount will be allocated by the Usa~~e Ratio and sent to City no later than March
31, 2005.
ISO Escrow Deposit and PX Escrow Deposit Amounts and Payment Schedule(s).
a) ISO Escrow Deposit. The amount in the ISO Escrow Deposit available for
disbursement to Members will be affected by regulatory and adjudicatory
actions of the California Independent System Operator (ISO), California Public
Utilities Commission (CPUC) or Federal Energy Regulatory Commission (FERC)
(see Attachments B and D). As of December 31, 2003, the total amount in the
ISO Escrow Deposit is Five Hundre~j Eight Thousand Two Hundred Fourteen
Dollars ($508,214). For a period of no less than two (2) years after the
effective date of the Qualifying Agreement or December 31, 2006, whichever is
later, ABAG POWER will monitor activities affecting fund balances in the ISO
Escrow Deposit and will challenge or accept such recalculations at its sole
reasonable discretion taking into account, among other factors, the amount of
the recalculation, the probity of they underlying cause of the recalculation and
the cost and probative value of challenging the recalculation.
b) PX Escrow Deposit. The California Power Exchange (PX) is in bankruptcy. As
of December 31, 2003, the total amount in the PX Escrow Deposit is One
Million Fifty-Six Thousand Five Hundred Six Dollars ($1,056,506). For a period
of no less than two (2) years after the effective date of the Qualifying
Agreement or December 31, 2006, whichever is later, ABAG POWER will
monitor activities affecting fund balances in the PX Escrow Deposit and will
challenge or accept such recalculations at its sole reasonable discretion taking
into account, among other factors, the amount of the recalculation, the probity
of the underlying cause of the recalculation and the cost and probative value of
challenging the recalculation. Upori its discharge from bankruptcy, the amount
in the PX Escrow Deposit available For disbursement to Members will be
determined.
c) Payments. NCPA may release portions of the ISO and/or PX Escrow Deposits
to ABAG POWER from time to time. ABAG POWER will place such amounts in
an interest bearing account until all funds have been released or December 31,
2006, whichever is earlier. The City's share will be determined using the Usage
Ratio. ABAG will pay City its share of the amount in such accounts at that
time. Any payments received by ABAG POWER after such disbursement will be
paid to Electric Program Members iF, in ABAG POWER's sole discretion, it is cost
effective to do so.
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Wind Up Agreement
6. ABAG POWER's Representations and Warranties.
a) ABAG POWER represents and warr~jnts that the descriptions provided in
Attachments A, B and C are, to the best of ABAG POWER's knowledge, true and
accurate for the purposes of (i) AB~4G POWER performing as required under the
Wind Up Agreement, and (ii) the Electric Program Members determining the
accuracy, fairness and appropriateness of the distribution of funds
contemplated by this Agreement.
b) In some instances, the operation of the Electric Program may have deviated
from the description contained in Attachment B or Attachment C or may omit
some factors. ABAG POWER represents and warrants that any such deviations
or omissions would not have had a material effect on the amounts to be
disbursed or the allocation of those amounts to any individual Member.
c) ABAG POWER represents that the ~~nalysis provided in Attachment D is, as of
April 15, 2004, a fair statement of the risk that the contingent liabilities
described in Attachment D will become actual liabilities. However, ABAG
POWER neither guaranties the outcome nor represents that such analysis is the
only conclusion that can be reache~J.
d) Only Electric Program Members who execute this Agreement are entitled to rely
on the information, representations and warranties set forth in this section and
Attachments A through D, inclusivE~ and any exhibits thereto.
7. City Due Dilioence and Acceptance of Representations and Warranties. The City has
reviewed this Wind Up Agreement, each of the Attachments and Exhibits and such
other documents as it has examined and has determined that there is no additional
information which it requires in order to make an informed decision on whether to
accept or reject the terms of this Agreement or in order to determine the amounts to
which it is entitled under the JPA or the DA. Therefore, the City hereby:
a) Releases ABAG POWER and ABAG from any and all liabilities or claims which
the City, or anyone claiming through it, may have against ABAG POWER or
ABAG for damages, injury or additional proceeds from the wind up of the
Electric Program.
b) Releases ABAG POWER and ABAG from any and all liabilities or claims which
the City, or anyone claiming through it, may have against ABAG POWER or
ABAG for any damages or injury arising out of the City's participation in the
Electric Program.
c) Accepts the Contingent Risks described in Attachment D.
d) Agrees to defend and indemnify Ae~AG POWER and ABAG against any claims
made by any person claiming any rights through the City for damages resulting
from the City's participation in the Electric Program, its execution of this Wind
Up Agreement or the performance of any of its obligations hereunder unless
such is caused by fraud, gross negligence or intentional misconduct of ABAG
POWER or ABAG, or their respective members, directors, agents or employees.
8. Other Electric Program Members. The City acknowledges that each Member
executing a Wind Up Agreement substantially identical to this Wind Up Agreement,
excepting only the amounts set forth in t;1 is a third party beneficiary of this Wind Up
Agreement (hereinafter, a Member who executes a Wind Up Agreement is a °Third
Party Beneficiary"). The City agrees that: it will not make any claim against a Third
Party Beneficiary for monies owed, or damages incurred by the City, as a result of
the City's or such Member's participation in the Electric Program.
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Wind Up Agreement
9. Covenants.
a) The City hereby covenants that it vrill do the following:
1) Notify ABAG POWER of any information, written notices, bills or any other
communication regarding a Contingent Risk, described in Attachment D,
2) Cooperate with ABAG POWER and all Third Party Beneficiaries to
eliminate, mitigate or resolve the possibility that a Contingent Risk will be
triggered,
3) Cooperate with ABAG POWER and all Third Party Beneficiaries to fairly and
reasonably allocate costs associated with any Contingent Risk that is
actually incurred by the City, ~jny Third Party Beneficiary or ABAG POWER,
and
4) Pay to ABAG POWER its share of any Contingent Risk incurred by ABAG
POWER, said share to be determined by the process described in
subsection 9(c) of this section.
b) ABAG POWER covenants that it will:
1) Notify the City and all Third P~irty Beneficiaries of any information, written
notices, bills or any other communication regarding a Contingent Risk,
described in Attachment D,
2) Upon the occurrence of an event described in 9(a)(1) or 9(b)(1):
(i) the Board of Directors of ABAG POWER (Board) or the Executive
Committee of the Board (Executive Committee), shall designate no
fewer than five (5) and no more than eleven (11) Third Party
Beneficiaries to form a Liability Allocation Committee (LAC).
(ii) The Board or the ExecutivE~ Committee shall delegate to the LAC, the
exercise of ABAG POWER's rights under Section 9.
c) ABAG POWER, on behalf of the LAC, covenants that the LAC shall:
1) Cooperate with the City and all Third Party Beneficiaries to eliminate,
mitigate or resolve the possibility that a Contingent Risk will be triggered,
2) Cooperate with the City and all Third Party Beneficiaries to fairly and
reasonably allocate costs asso~~iated with any Contingent Risk that is
actually incurred by the City oi- any Third Party Beneficiary, and
3) The LAC shall confirm the reasonableness and fairness of the proposed
allocation of costs by conducting a poll of Third Party Beneficiaries. If the
proposed allocation is agreed t:o by a majority of Third Party Beneficiaries,
then such plan is approved. For the purposes of this section, a majority
is:
(i) More than fifty percent (50%) of the votes cast determined by
counting each Third Party E3eneficiary as having one vote, and
(ii) More than fifty percent (50%) of the votes cast determined by
weighing each Third Party Beneficiary's vote by the amount disbursed
to it under this Agreement.
4) If the Third Party Beneficiaries do not approve a cost allocation plan under
Section 9 (c)(3) then the costs: associated with a Contingent Risk will be
allocated among all Third Part~r Beneficiaries in accordance with CTC
Reversal Ratio for any costs associated with recovery of DA Credits and in
accordance with the Usage Rai:io for costs associated with recovery of
energy and/or UDC costs (see Attachment D).
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Wind Up Agreement
5) Receive from the City the share of any Contingent Risk incurred by the
City, said share to be determined by the process described in subsection
9(3) or 9(4) of this subsection.
6) Pay the liability.
10. Effectiveness of the Wind Up Agreement. This Wind Up Agreement becomes
effective only if Members owed a total of Twenty Million Dollars ($20,000,000) under
§§1(a)-(c) execute a Wind Up Agreement substantially identical to this Wind Up
Agreement, excepting only the amounts set forth in §1. The executed Wind Up
Agreement which triggers this section is the Qualifying Agreement.
11. Wind Up Cost Hold Back Funds. ABAG POWER will retain the sum of One Hundred
Thousand Dollars ($100,000) for the purposes described in §12. The funds will be
separately accounted for by ABAG POWER and will be disbursed to Electric Program
Members in accordance with §2(f) and allocated among Electric Program Members in
accordance with the Usage Ratio.
12. Permitted Uses of Wind Up Cost Hold Back Funds. ABAG POWER may use funds in
the Wind Up Cost Hold Back to fund staff, consultants, attorneys or others engaged
in any of the tasks described in §§5 and 9 of this Wind Up Agreement. ABAG POWER
will send to each Electric Program Member an annual report on the use of funds and
fund balances.
13. Termination of DA Agreement. The DA Agreement between ABAG POWER and the
City is hereby terminated.
14. Assignment. This Agreement shall not b~~ assigned, transferred, hypothecated, or
pledged by the City.
15. Amendment. §§1 and 2 of this Agreement may be amended at any time, but only
by a writing signed by both parties. Any other section of this Agreement may be
amended only by a writing signed by both parties and all Third Party Beneficiaries.
16. Headings. The descriptive headings used in this Agreement are for convenience only
and shall not control or affect the meaning or construction of any of its provisions.
17. Controlling Law. This Agreement and all matters relating to it shall be governed by
the laws of the State of California.
18. Binding on Successors. Etc. This Agreerr~ent shall be binding upon the successors,
assigns, or transferees of ABAG POWER or the City as the case may be. This
provision shall not be construed as an authorization to assign or transfer this
Agreement other than as provided above.
19. Severabilitv. Should any part of this Agreement be declared unconstitutional,
invalid, or beyond the authority of either party to enter into or carry out, such
decision shall not affect the validity of th~~ remainder of this Agreement, which shall
continue in full force and effect; provided that, the remainder of this Agreement can,
absent the excised portion, be reasonabl~,r interpreted to give effect to the intentions
of the parties.
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Wind Up Agreement
20. Arbitration. Any disputes regarding the interpretation, effects, alleged breach or
powers and duties arising out of this Agreement will be submitted to binding
arbitration. An arbitration panel of three (3) individuals shall be formed as follows:
a) Each Third Party Beneficiary and ABAG POWER shall have the right to submit
the name and qualifications of an individual nominated for the panel. The
individual shall be a member in good standing of the State Bar of California.
ABAG POWER will compile a list of ;III such names, with the names of those
submitted more than once, appearing as many times as they were submitted
(List) .
b) Each Third Party Beneficiary which submitted a name and ABAG POWER, if it
submitted a name, shall have the right to strike a name from the List. The
order in which the Third Party BenE~ficiaries and ABAG POWER shall strike
names shall be determined by lot.
c) The striking process shall continue until only the names of three (3) qualified
individuals are left. They shall constitute the arbitration panel.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth
below.
Dated: ~~ ~~ ~~ M~3
Sidfiature
(~
Print Na
Title
Dated: L~^-~ ~ Zd D
Approved as to Legal Form and Content:
By:
Kenne K.l
ABAG ~blic
ABAG PUBLICLY OWNED ENERGY
RESOURCES (ABAG POWER):
cam'
Euge~ .Leo ,President
v
Resources (A.BAG POWER)
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Wind Up Agreement
EXHIE3IT 1
JOINT POWER: AGREEMENT
creai:ing
ABAG POWER
The public entities listed in Appendix A (Member:) entered into this Joint Powers Agreement
(Agreement) creating ABAG Publicly OWned Energy Resources (ABAG POWER). All Members
are public entities organized and operating under the laws of the State of California and each is
a public agency as defined in California Government Code Section 6500.
Recitals
A. Government Code Sections 6500-6515, permitting two or more local public entities by
agreement to jointly exercise any power common to them, authorizes the Members to enter
into this Agreement.
B. Public entities consume energy in the forrn of natural gas and/or electricity and use
telecommunications services in the performance of their essential governmental functions.
C. Federal and State agencies responsible for the regulation of the natural gas, electric and
telecommunications industries have determined that deregulation of these industries is in the
public interest.
D. Public entities have the opportunity to secure energy supplies and related services,
manage energy consumption, obtain telecommunications services, manage the use of
telecommunications services and determine conditions under which the private sector accesses
and uses, in a cooperative and coordinated manner, public resources and infrastructure used in
the delivery of such energy and services.
E. The Association of Bay Area Governments (ABAG), at its sole expense, has created and
implemented a natural gas aggregation to purch~~se natural gas and related services on behalf
of the program participants and has formulated, but not yet implemented, a program to
purchase electricity through direct access and pn~cure related services on behalf of public
entities in the Pacific Gas & Electric Company's (I~G&E) service area.
F. The formation of ABAG POWER enables the Members to take advantage of the
opportunities described in paragraph D in such rrianner and at such time as the Members may
decide.
G. The governing board of each Member has determined that it is in the Member's best
interest and in the public interest that this Agreement be executed and that it is participating
as a Member of ABAG POWER.
Agreerent
1. Formation of ABAG POWER. Pursuant to Chapter 5, Division 7, Title 1 of the
Government Code of the State of California (commencing with Section 6500) (as amended
2
Wind Up Agreement - Attachment A informational mrk
from time to time, the JPA Law), the Members hereby create a separate joint powers agency
which is named ABAG POWER.
2. Parties to Agreement. Each Member certifies that it intends to, and does, contract with
every other Member which is a signatory to this Agreement and, in addition, with such other
Member as may later be added as Members under Section 16. Each Member also certifies that
the deletion of any Member from this Agreement: does not affect this Agreement nor each
remaining Member's intent to contract with the other Members then remaining.
3. Purpose. ABAG POWER will acquire, for use by its Members, energy including, but not
limited to, natural gas and electricity, and of telecommunications services, and such other
services and goods as may be necessary or convenient to optimize costs savings and to
manage the use or the supply of energy or telecommunications services.
4. Membership. The following entities, or types of entities, are eligible for membership in
ABAG POWER:
(a) ABAG,
(b) members of ABAG, and
(c) any other public entity so long as :such public entity is a cooperating member of
ABAG at the time it joins ABAG POWER.
5. Limitation. Except as otherwise authorized or permitted by the )PA Law and for
purposes of, and to the extent required by Government Code Section 6509, ABAG POWER is
subject to the restrictions upon the manner of e~:ercising the powers of the Member specified
in the Bylaws.
6. Powers. ABAG POWER is authorized, in its own name, to do all acts necessary to fulfill
the purposes of this Agreement referred to in Se~~tion 3 including, but not limited to, each of
the following:
(a) Make and enter into contracts;
(b) Incur debts, liabilities and obligations; provided that no debt, liability or
obligation of ABAG POWER is a dent, liability or obligation of any Member except
as separately agreed to by a Memt~er agreeing to be so obligated;
(c) Acquire, hold, construct, manage, maintain, sell or otherwise dispose of real and
personal property by appropriate means, excepting only eminent domain;
(d) Receive contributions and donations of property, funds, services and other forms
of assistance from any source;
(e) Sue and be sued in its own name;
(f) Employ agents and employees;
(g) Lease real or personal property as lessee and as lessor;
(h) Receive, collect, invest and disburse moneys;
(i) Issue revenue bonds or other forms of indebtedness, as provided by law;
(j) Carry out other duties as required to accomplish other responsibilities as set
forth in this Agreement;
(k) Assign, delegate or contract with a Member or third party to perform any of the
duties of the Board, including, but not limited to, acting as administrator for
ABAG POWER; and
(I) Exercise all other powers necessar,r and proper to carry out the provisions of this
Agreement.
3
Wind Up Agreement - Attachment A informational mrk
These powers will be exercised in the manner provided by applicable law and as expressly set
forth in this Agreement.
7. Appointment of Administrating Member.
(a) ABAG is hereby appointed by the ~~tembers to execute the provisions of this
Agreement and implement prograirs undertaken by ABAG POWER. The
Members acknowledge that this dE~signation may cause potential conflicts of
interest to arise and waive any liability on the part of ABAG arising out of any
such conflict of interest. ABAG m~iy not be removed as the administrating
Member except by reason of its fr~~ud, gross negligence or gross
mismanagement or by a vote of tvvo-thirds (2/3) of the authorized directors of
the Board.
(b) ABAG POWER will compensate AB~~G for services rendered.
8. Board of Directors.
(a) Directors and Alternates. The Board is comprised of one director and, in a
director's absence, an alternate director from each member. Each Member will
appoint one director and one alternate. A director and/or alternate director may
be, but is not required to be, an elected official of the Member.
(b) Term. Directors serve a term of five (5) years unless removed earlier by the
appointing Member. Directors ma~,r serve any number of terms.
(c) Compensation. Directors and alternate directors are not entitled to
compensation. The Board may au~.horize reimbursement of expenses incurred
by directors or alternate directors.
(d) Delegation of Powers. The Board is, pursuant to Section 9(b), required to
delegate certain powers to specified committees and may delegate other powers
to committees but may not delegate the power to dismiss ABAG or amend the
Bylaws.
9. Committees. All directors are eligible for appointment to a committee.
(a) Executive Committee. The Board may create an Executive Committee as set
forth in the Bylaws.
(b) Program Committees. The Beard hereby delegates the power to oversee
implementation of a program to a Program Committee as set forth in the
Bylaws, provided each such director represents a Member which is participating
in the Program.
(c) Other Committees. The Board ma~,r create other committees as set forth in the
Bylaws.
10. Officers and Employees.
(a) The officers of ABAG POWER are tl'ie Chair, Vice-Chair, President, Chief Financial
Officer/Treasurer and Secretary.
(b) The Chair and Vice-Chair are directors elected or appointed by the Board at its
first meeting. The term of office for Chair and Vice-Chair is one year beginning
January 1. The President, Secretary and Chief Financial Officer/Treasurer serve
as set forth in the Bylaws. The duties of the officers are described in the Bylaws.
The Chair and Vice Chair assume their office upon election. The President, Chief
Financial Officer/Treasurer and Secretary assume the duties of their offices upon
Wind Up Agreement - Attachment A informational mrk
formation of ABAG POWER. If eitPier the Chair or Vice-Chair ceases to be a
director, the resulting vacancy will be filled at the next meeting of the Board.
(c) The Chair and Vice-Chair are not untitled to compensation. The Board may
authorize reimbursement of expenses incurred by officers.
(d) The Board may create such other ~~ffices and appoint individuals to such offices
as it considers either necessary or convenient to carry out the purposes of this
Agreement.
11. Limitation on Liability of Members for Dents and Oblioations of ABAG POWER. Pursuant
to Government Code Section 6508.1, the debts, liabilities, and obligations of ABAG POWER do
not constitute debts, liabilities, or obligations of ~3ny party to this Agreement. A Member may
separately contract for or assume responsibility for specific debts, liabilities, or obligations of
ABAG POWER.
12. Fiscal Year. The first fiscal year of ABAG POWER is the period from the date of this
Agreement through December 31, 1998. Each subsequent fiscal year of ABAG POWER ends on
December 31.
13. Budget. The Board may adopt, at its sole discretion, an annual or multi-year budget
not later than sixty (60) days before the beginning of a fiscal year.
14. Annual Audits and Audit Reports. The Chief Financial Officer/Treasurer will cause an
annual financial audit to be made by an independent certified public accountant with respect to
all ABAG POWER receipts, disbursements, other itransactions and entries into the books. A
report of the financial audit will be filed as a public record with each Member. The audit will be
filed no later than required by State law. ABAG {SOWER will pay the cost of the financial audit
and charge the cost against the Members in the Name manner as other administrative costs.
15. Establishment and Administration of Funds.
(a) ABAG POWER is responsible for thE~ strict accountability of all funds and reports
of all receipts and disbursements. It will comply with every provision of law
relating to the establishment and ~~dministration of funds, particularly Section
6505 of the California Government Code.
(b) The funds will be accounted for on a full accrual basis.
(c) The Chief Financial Officer/Treasurer will receive, invest, and disburse funds only
in accordance with procedures estz~blished by the Board and in conformity with
applicable law. The Chief Financial Officer/Treasurer will procure a fidelity bond.
16. New Members. For the purpose of this se~~tion only, all Members admitted after January
1, 1999 are New Members.
(a) A public entity may be admitted as a New Member only upon atwo-thirds (2/3)
vote of the Board and upon complying with all other requirements established by
the Board and the Bylaws.
(b) Each applicant for membership as ~~ New Member must pay all fees and
expenses, if any, set by the Board.
17. Withdrawal. Members may withdraw in accordance with conditions set forth in the
Bylaws provided that no Member may withdraw i1` such withdrawal would adversely affect a
bond or other indebtedness issued by ABAG POWER, except withdrawal under such
circumstances may be effected upon atwo-thirds (2/3) vote of the Board.
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Wind Up Agreement - Attachment A informational mrk
18. Expulsion/Suspension. ABAG POWER may expel or suspend a Member by atwo-thirds
(2/3) vote of the Board for a breach of this Agreement or the Bylaws determined by the Board
to be a material breach. The procedures for hearing and notice of expulsion of a Member are
provided in the Bylaws.
19. Termination and Distribution.
(a) This Agreement continues until terminated. However, it cannot be terminated
until such time as all principal of and interest on bonds and other forms of
indebtedness issued by ABAG POVIIER are paid in full. Thereafter, this
Agreement may be terminated by the written consent of two-thirds (2/3) of the
Members; provided, however, that: this Agreement and ABAG POWER continue to
exist after termination for the purK>ose of disposing of all claims, distribution or
assets and all other functions necessary to conclude the obligations and affairs of
ABAG POWER.
(b) After completion of ABAG POWER'; purposes, any surplus money on deposit in
any fund or account of ABAG POWER will be returned as required by law. The
Board is vested with all powers of ABAG POWER for the purpose of concluding
and dissolving the business affairs of ABAG POWER.
20. Notices. Notice to each Member under this Agreement is sufficient if mailed to the
Member and separately to the Member's Director to their respective addresses on file with
ABAG POWER.
21. Prohibition Against Assignment. No Member may assign a right, claim, or interest it
may have under this Agreement. No creditor, assignee or third party beneficiary of a Member
has a right, claim or title to any part, share, interest, fund or asset of ABAG POWER. However,
nothing in this section prevents ABAG POWER from assigning any interest or right it may have
under this Agreement to a third party.
22. Amendments. This Agreement may be arnended by an affirmative vote of the
governing bodies of [three-fourths (3/4)] of the Members acting through their governing
bodies. A proposed amendment must be submitted to each Member at least thirty (30) days
in advance of the date when the Member considers it. An amendment is to be effective
immediately unless otherwise designated. Appendix A to the Agreement may be amended to
correctly list current Members without separate action by the Members or the Board.
23. Severabilitv. If a portion, term, condition or provision of this Agreement is determined
by a court to be illegal or in conflict with a law of the State of California, or is otherwise
rendered unenforceable or ineffectual, the validity of the remaining portions, terms, conditions
and provisions is not affected.
24. Liability of ABAG POWER. Subject to limitations thereon contained in any trust
agreement or other documents pursuant to whicFi financing of ABAG POWER are implemented,
funds of ABAG POWER may be used to defend, indemnify, and hold harmless ABAG POWER,
any Member, any Director or alternate, and any Employee or officer of ABAG POWER for their
actions taken within the scope of their duties while acting on behalf of ABAG POWER.
25. Governing Law. This Agreement will be governed by and construed in accordance with
the laws of the State of California.
26. Counterparts. This Agreement may be executed in several counterparts, each of which
is an original and all of which constitutes but one and the same instrument.
Wind Up Agreement - Attachment A informational mrk
This Direct Access Electric Aggregation i~greement, hereinafter "Agreement", is made
and entered into as of this day of _ 199_, by and between the
Association of Bay Area Governments (ABp~G), a California joint powers agency, and
(Public Agency), a California
The parties hereby agree as follows:
1. Eligibilitx: Public Agency is a member or cooperating member of ABAG. ABAG will
provide directly, or at its option, will contract to provide for the purchase and management
of a direct access electric aggregation program (Electric Program) for members and
cooperating members of ABAG participating in :paid program Participant(s).
2. Authorities: All parties understand and ~igree that the legal authority for the Program
is granted by and subject to the California Public Utilities Commission (CPUC), as initially
authorized by CPUC Decision No. 97-05-040 and as it may be modified and/or augmented
through subsequent CPUC decisions, orders, rules, regulations, tariffs and rulings of the
CPUC administrative law judges (collectively, Decision).
2.1 Public Agency is a customer of P~~cific Gas & Electric (Utility) under the
jurisdiction of the CPUC. Public Agency appoints ABAG as its exclusive agent to coordinate
its participation in the Electric Program, on behalf of Public Agency for the accounts listed in
Exhibit A (Accounts), which is attached hereto ~~nd incorporated herein. Public Agency
represents and warrants that any prior agreement(s) for the purchase of electricity for the
Accounts from a supplier other than the Utility, which Public Agency may have executed, will
be terminated effective upon Commencement of Service as defined in Paragraph 31.
2.2 ABAG has reviewed the Decision and other materials developed by, or under
the auspices of the CPUC. ABAG believes that tl~e transactions set forth, or contemplated, in
this Agreement will comply with CPUC requirerr~ents for direct access by electric consumers
set forth in the Decision and current guidelines. ABAG has, simultaneous with this
Agreement, commenced the process of creating an independent joint powers agency (ABAG
POWER) to aggregate the Accounts of Participants for the purpose of direct access.
3. Background: The CPUC requires that all Utility customers be eligible for direct
access by January 1, 1998. The regulatory requirements for customers to engage in direct
access and for Electric Services Providers (ESP) to offer direct access to customers are
under development as of June 25, 1997. In Paragraphs 4 and 5 ABAG has listed all such
conditions of which ABAG is actually aware. ABi~G has used its best good faith effort to
enumerate in said paragraph all such condition:: which might ultimately be imposed on
direct access customers and ESP's. However, ABAG cannot represent or warrant that the
enumerated conditions represent all conditions currently contemplated by the CPUC or the
affiliated committees, subcommittees or working groups responsible for developing such
conditions. Further, ABAG cannot represent or warrant that the enumerated conditions will
remain unchanged or that new conditions will not be imposed. Public Agency hereby agrees
to hold ABAG harmless for any costs or direct or consequential damages, incurred by Public
Agency, or by anyone making a claim through Public Agency.
4. CPUC Conditions to Public Agency's Participation in Direct Access: Public Agency will
take such action as may be necessary to meet ~tll conditions imposed on Public Agency to
participate in direct access as a customer, inclu~Jing but not limited to:
(a) submit such documents as may be required by the CPUC to the appropriate
entity,
2
Wind Up Agreement - Attachment A informational mrk
(b) provide ABAG with such information as may be required by the Direct Access
Service Request (DASR),
(c) conform this Agreement to all requirements imposed by the CPUC for written
contracts between direct access customers and ESP's,
(d) install meters capable of providing hourly data and required data
communications capabilities (Hourly Meters) for each Account,
(e) pay, or caused to be paid, all str~rnded costs associated with the Utility meter
replaced under section (d) of this; paragraph, and
(f) pay, or cause to be paid all outstanding balances for all Accounts.
Under current CPUC proceedings, metering requirements may be met by a customer (a)
requesting the Utility Distribution Company (UC-C) to install Hourly Meters, (b) installing
Hourly Meters, or (c) causing Hourly Meters to be installed by third parties (including the
ESP). ABAG anticipates issuing a Request for Proposals to install Hourly Meters for all, or
some of the accounts previously identified to ABAG as accounts which potential participants
in the Electric Program wished to aggregate. TI-re choice of how Public Agency will fulfill the
metering requirement and whether all Participants must make the same election for their
respective Accounts will be mutually decided by ABAG and Public Agency at a later date
based on (1) the probability of installing Hourly Meters for all Accounts by January 1, 1998,
or the earliest possible date thereafter, (2) any additional costs incurred to install Hourly
Meters by such date, and (3) supply of Hourly Peters.
5. CPUC Conditions Precedent to ABAG's Obligations: ABAG will take such action as
may be necessary to meet all conditions imposE~d on ABAG to participate in direct access as
an ESP, including but not limited to:
(a) register with the CPUC,
(b) submit a DASR for each account,
(c) enter into a Basic ESP Service Agreement with the UDC,
(d) enter into the appropriate Billing Services Attachment to the Basic ESP
Agreement,
(e) enter into the appropriate Metering Services Attachment to the Basic ESP
Agreement,
(f) conform this Agreement to all requirements imposed by the CPUC for written
contracts between direct access customers and ESP's, and
(g) comply with ESP Credit Requirements.
The CPUC has not established ESP Credit Requirements. ABAG anticipates meeting ESP
Credit Requirements through the establishment of the Credit Reserve fund described in
Paragraph 19.
6. Electric Suoolv: Public Agency submitted to ABAG an expression of interest in
participating in the Electric Program by authorizing Utility to release specified historical
electric usage information to ABAG. After ABACI issued a Request for Proposals to provide
electric supply, it has entered into Memoranda of Understanding for the provision of electric
supply (MOU) with two (2) electric suppliers anti anticipates an MOU with a third supplier.
ABAG anticipates soliciting proposals for additional electric supply in Fall/Winter 1997.
Public Agency acknowledges that in order to meet Public Agency's electric needs ABAG will
enter into contracts for specified electric supply products (Contracted Supply) on behalf of
Public Agency and will authorize purchases of electric supply on the spot market (Spot
Supply) and sales of excess Contracted Supply ~~n the spot market or to the supplier.
3
'JVind Up Agreement - Attachment A informational mrk
7. Services: ABAG has provided, or will provide, the following services for the benefit
of Public Agency:
7.1 Analyze and evaluate electric load profiles and/or electric time of use data,
transmission, distribution, billing and metering options, and electric supply acquisition and
aggregation strategies;
7.2 Negotiate prices and quantities of an electric supply, scheduling services,
billing services, and other services, products or equipment reasonably necessary for Public
Agency's participation in the Electric Program through processes which may include but are
not limited to invitations to bid, requests for pr~~posal or competitive negotiations.
8. Direct Access Implementation: For each Account for which ABAG and Public Agency
fulfills the requirements of Paragraphs 4 and 5 and for which the UDC authorizes the
commencement of direct access, ABAG will pro~ride or cause to be provided an electric
supply and perform, or cause to be performed, the following services:
(a) scheduling;
(b) transmission;
(c) distribution;
(d) billing;
(e) Hourly Metering;
(f) general administrative, management, fiscal and consultation services
necessary or convenient for the Electric Program.
ABAG is negotiating contracts for the provision of scheduling and billing services.
Transmission and distribution services will be provided to Public Agency through regulated
tariffs. Hourly Metering options and the method for selecting the means of providing Hourly
Metering is described in Paragraph 4.
9. Agency Relationship: Public Agency authorizes ABAG to act as its exclusive agent to
implement the Electric Program for the Accounts and does hereby constitute and appoint an
authorized officer or agent of ABAG to act on it:~ behalf as its lawful agent for the
implementation of the Electric Program. This authorization will include the right to do and
perform all acts, with full power to execute all documents requisite and necessary to be
done in all matters relating to the purchase, sale, scheduling, transmission, distribution,
metering and billing of electricity for the Electric: Program, including without limitation, the
power to release Public Agency's historic and current electric usage data to third party
vendors and service suppliers.
10. Notification. of Chan4es in Accounts: Public Agency will notify ABAG of changes in
Public Agency's facilities or operations, which are reasonably expected to increase or
decrease the consumption of electricity by more: than ten percent (10%) as compared to
historical levels. Public Agency may add accounts to Exhibit A upon prior written notice to
ABAG and the submission of the appropriate form required by the CPUC or the Utility.
Public Agency may delete accounts from Exhibit A only upon written consent of ABAG, which
consent will not be unreasonably withheld, except that Public Agency may delete accounts
without ABAG's consent if Public Agency abandons the facility or transfers the facility to
another entity.
11. Rate Schedule: As soon as practicable after ABAG has fixed the costs of the
Contracted Supply, scheduling, transmission, di:~tribution, billing, and, if applicable, Hourly
Metering services, ABAG will establish up to ten (10) rates, each expressed as $x.xx/kWh
4
~Nind Up Agreement - Attachment A informational mrk
and will allocate each Account to a rate (Rate ~~chedule). In addition to the costs identified
in the preceding sentence, the Rate Schedule vrill include an estimated cost for Spot Supply
plus ABAG's fees for services rendered under this Agreement.
12. Invoiced Amounts: ABAG will invoice Public Agency, and Public Agency will pay,
monthly in advance an amount based on ABAG's estimate of Public Agency's anticipated
usage of electricity based on the Rate SchedulE~ for each Account (Invoiced Amounts).
13. Contingency Reserve: Based on the si::e of the aggregation, ABAG will establish a
prudent Contingency Reserve for the purpose of paying contingent transmission and/or
distribution charges (e.g. imbalance charges ar-d congestion management charges)
(Contingent Charges) plus an amount to cover ABAG's prudent cash flow requirements
based on ABAG's reasonable estimates of late or delinquent payments from Participants.
Public Agency will pay a portion of the ContingE~ncy Reserve in a ratio in which the
numerator is the total estimated usage for all ii:s Accounts and the denominator is the total
estimated usage for all accounts in the aggreg~ition (Contingency Reserve Surcharge). The
timing of the Contingency Reserve Surcharge payment(s) (e.g. up front lump sum or
staggered even or uneven monthly amounts) ~~ill be determined by ABAG.
14. Credit Reserve: Based on the size of tr-e aggregation, ABAG will establish a Credit
Reserve for the purpose of meeting CPUC estat-lished credit requirements for ABAG as an
ESP. Public Agency will pay a portion of the Credit Reserve in a ratio in which the
numerator is the total estimated usage for all it:s Accounts and the denominator is the total
estimated usage for all accounts in the aggregation (Credit Reserve Surcharge). The timing
of the Credit Reserve Surcharge payment(s) (e.g. up front lump sum or staggered even or
uneven monthly amounts) will be determined by ABAG.
15. Invoices/Actual Charges: For each Aca~unt, ABAG will include in each monthly
invoice Public Agency the meter cycle, actual u:~age during the meter cycle, and fees for
actual electricity consumed based on the Rate Schedule plus an allocated portion of
Contingent Charges incurred, if any, plus any applicable late payment charges (Actual
Charges). The invoice will also identify the prior balance, any payments since the previous
invoice, cumulative Invoiced Amounts, cumulative Actual Charges, and credit balances as
calculated pursuant to Paragraph 17. Contingency Reserve Surcharges and Credit Reserve
Surcharges will either be separately invoiced or included in one invoice based on ABAG's
decision regarding the timing of such surcharges and its agreement with the billing agent.
16. Payment: Invoices will be directed to and payment is to be made by Public Agency
directly to the escrow account designated pursuant to Paragraph 21 of this Agreement.
Payment of the Invoiced Amount is due immediately upon receipt of the invoice. Late
payment charges at the rate of one and a half percent (1.5%) per month calculated daily
on the outstanding balance will be imposed commencing on the thirty-first (31st) day after
the mailing date of the invoice. Late payment charges may, at ABAG's sole discretion, be
debited against Public Agency's Credit Account ,3s defined in Paragraph 17.
17. Credit Account: For each invoice, ABAG will calculate (a) the difference between the
Invoiced Amount and the Actual Charges for thE~ meter cycle, and (b) the difference
between the cumulative total of the Invoiced Arnounts and the cumulative total of Actual
Charges (Credit Account). Public Agency recognizes that the Credit Account is a calculation
of payments, credits, debits and charges made pursuant to this Agreement and that ABAG
will not be required to establish actual separate fund accounts with monies on behalf of, or
in the name of Public Agency. Unless the parties otherwise agree, ABAG will refund to
Public Agency an amount equal to the Credit Account plus a portion of interest earned on all
5
Wind Up Agreement - Attachment A informational mrk
Credit Accounts in the Electric Program, said portion to be determined by the Electric
Program Committee of ABAG POWER, within ninety (90) calendar days after termination or
cancellation of this Agreement.
18. Contingency Reserve Fund: Public Agency acknowledges that during the term of
this Agreement ABAG has the right to use monies in the Contingency Reserve Fund to pay
Actual Charges incurred by Participants in the Electric Program as such Actual Charges
become due. ABAG will deposit into the Contingency Reserve Fund any Invoiced Amount
payment, or portion thereof, which would, absE~nt draw on the Contingency Reserve Fund
described in the preceding sentence, have been applied towards payment of the Actual
Charges described in the preceding sentence. 'Within the Contingency Reserve Fund, ABAG
will maintain a separate accounting of Public Aclency's cumulative Contingency Reserve
Surcharge payments, less any draws on the Contingency Reserve Fund to pay any Actual
Charges incurred by Public Agency, plus any Invoiced Amount(s), or portion thereof, made
by Public Agency and deposited into the Contingency Reserve Fund as provided for in this
Paragraph (Contingency Reserve Fund Credit). Unless the parties otherwise agree, ABAG
will refund to Public Agency an amount equal to the Contingency Reserve Fund Credit plus a
portion of interest earned on the Contingency F:eserve Fund, said portion to be determined
by the Electric Program Committee of ABAG POWER, within ninety (90) calendar days after
termination or cancellation of this Agreement.
19. Credit Reserve Fund: ABAG does not anticipate any draws on the Credit Reserve
Fund. Unless the parties otherwise agree, ABAG will refund to Public Agency its cumulative
Credit Reserve Surcharge payments plus a portion of interest earned on the Contingency
Reserve Fund, said portion to be determined by the Electric Program Committee of ABAG
POWER, within ninety (90) calendar days after termination of this Agreement or the lifting
of the requirement to maintain such a fund, whichever is earlier.
20. Late Charges: In the event Public Agen~~y fails to make timely payment, consistent
with the terms employed by ABAG, in addition l:o any other remedy it may have hereunder
and notwithstanding the existence of any late payment penalty, ABAG may declare Public
Agency to be in default and terminate the agreE~ment. ABAG is further authorized to invoice
Public Agency for reasonable charges associate~~ with demands for payment on late
accounts as well as reasonable charges associa~:ed with suspension and resumption of
service hereunder.
21. Payment of Actual Charges: Subject to the terms and conditions of this Agreement,
ABAG agrees to deposit all Invoiced Amount payment and pay Actual Charges as follows:
21.1 An escrow or lock box account for the purposes of receiving Invoiced Amount
payments by Participants and paying Actual Ch~~rges will be established by ABAG.
21.2 The instructions for this escrow or lock box account have been approved by
ABAG, and will include a list of the authorized payees.
21.3 Only ABAG may authorize releasE~ of funds from the escrow or lock box
account, and such will only be to those payees identified in the escrow instructions and only
for Actual Charges.
22. Disputes Regarding Actual Charges: Any disputes between the parties regarding the
amount of any Actual Charges will be resolved pursuant to Section H of Exhibit B to this
Agreement and the Credit Account, as defined in Paragraph 9.3 will be adjusted as soon as
practicable to reflect the resolution of the dispute.
6
-Wind Up Agreement - Attachment A informational mrk
23. Cancellation:
23.1 Cancellation by Public Agency: C:ommencing no earlier than one (1) full year
from the Commencement Date, Public Agency may only withdraw or cancel this Agreement
consistent with the rules and regulations promulgated by the CPUC and in a manner which
releases ABAG from all responsibility and liabili1:y related to the subject matter of the
Agreement. Public Agency may cancel the coni:ract by giving ABAG sixty (60) days prior
written notice its intent to terminate effective C-ecember 31 of that current year..
23.2 Cancellation by ABAG: Actions by the utilities and/or CPUC to develop rules
which are in conflict with sound business practices, or impose unnecessary risk on either
party to this Agreement, or substantially prevent ABAG from performing its functions under
this Agreement may result in the cancellation of this Agreement by ABAG. ABAG will give
Public Agency written notice ninety (90) days prior to such cancellation and both parties will
work diligently to minimize the negative effects on ABAG and the Public Agency of such
cancellation.
24. Power Purchasing Pool Committee: _ (Public Agency
Representative), will be the Public Agency's representative to the Electric Program
Committee of the Board of Directors of ABAG POWER. The electric Program Committee will
provide policy direction for the Electric Program. The Committee's powers will include
admission of new Participants and the extension of any contracts for the purchase of electric
supply and/or related services under rules and procedures adopted by the Committee.
25. Approvals: The Public Agency Representative may grant any approval, or give any
direction required by this Agreement, in writing or orally. Written approvals or directions
may be transmitted physically, by facsimile or Electronically. Oral approvals will be
confirmed in writing by either party.
26. Attorneys' Fees: In the event either party invokes its right to arbitration under
Section H of Exhibit B due to an alleged breach of this Agreement, the prevailing party will
be entitled to recover reasonable attorneys' fees and costs as determined by the arbitrator.
27. Ownership of Files, Reports, Photographs, and Related Documents: Upon
termination of the Agreement, any and all files, reports, photographs, plans, specifications,
drawings, data, maps, models and related documents respecting in any way the subject
matter of this Agreement, whether prepared by ABAG, the Public Agency or third parties
and in whatever media they are stored will remain or will become the property of the Public
Agency and the Public Agency will acquire title i:o, and copyright ownership of, all such
documents. The Public Agency hereby grants i:o ABAG an irrevocable license to retain a
copy of all records covered by this section for ABAG's files.
28. Indemnity: Public Agency will indemnify and hold harmless ABAG and its directors,
its member agencies, its agents and its employees from and against all claims, damages,
losses and expenses including attorney's fees, ~irising out of or resulting from the
performance or non-performance of the services required by this Agreement, unless such is
caused by fraud, gross negligence or intentional misconduct of ABAG, its directors, its
member agencies, its agents or its employees.
29. Assignment/Security Arrangements: Public Agency hereby acknowledges that ABAG
will assign all its rights and obligations under this Agreement, except the rights of ABAG and
its directors, its member agencies, its agents and its employees to indemnity under
Wind Up Agreement - Attachment A informational mrk
Paragraph 28, to ABAG POWER upon the formation of ABAG POWER. Nothing in this
Agreement impairs ABAG POWER's right to have ABAG perform some or all of the
obligations pursuant to a separate Agreement .
30. Notices: The following addresses for thE~ giving of notices and invoices will be:
Public Agency Notices
Name:_
Address:
Telephone No.:
Facsimile No.:_
Email: _
Attn .
Public Aaency Invoicing Address
Name:_
Address:
Telephone No.:
Facsimile No.:_
Email: _
Attn .
ABAG Notices
ABAG
P. O. Box 2050
Oakland, CA 94604-2050
Assistant to the Executive Director
Telephone No: 510-464-7900
Facsimile No: 510-464-7970
31. Commencement Date and Term: This ~~greement is effective immediately upon
execution and delivery by both parties and the execution and delivery of counterparts of this
Agreement by other Participants with accounts which when combined with the Accounts
totals an estimated three hundred seventy thousand (370,000) mWh in a one (1) year
period. The Commencement Date for Public Agency is the latest date on which any one of
its Accounts is placed in direct access status by the UDC. This Agreement terminates one
(1) full year after the latest Commencement Date for any Participant.
32. Severability: If any provision of this Agreement or the application of any such
provision will be held by a court of competent jurisdiction to be invalid, void, or
unenforceable to any extent, the remaining pro~risions of this Agreement and the application
thereof will remain in full force and effect and will not be affected, impaired, or invalidated.
33. Captions: The captions appearing in this; Agreement are inserted as a matter of
convenience and in no way define or limit the provisions of this Agreement.
8
'JVind Up Agreement - Attachment A informational mrk
DIRECT ACCESS AGGREGATION AGREEMENT -EXHIBIT B
STANDARD CONTRACT PROVISIONS
A. Time of Essence. Time is of the essencE~ in this Agreement.
B. Waiver. The waiver by either party of a breach by the other of any provision of this
Agreement shall not constitute a continuing waiver or a waiver of any subsequent breach
either of the same or a different provision of this Agreement.
C. Controlling Law. This Agreement and all matters relating to it shall be governed by
the laws of the State of California.
D. Binding on Successors, Etc. This Agreerent shall be binding upon the successors,
assigns, or transferees of ABAG or Public Agency as the case may be. This provision shall
not be construed as an authorization to assign, transfer, hypothecate, or pledge this
Agreement other than as provided above.
E. Records/Audit. ABAG shall keep complete and accurate books and records of all
financial aspects of its relationship with Public Agency in accordance with generally-accepted
accounting principles. ABAG shall permit authorized representatives of Public Agency
and/or any of Public Agency's governmental gr~intors to inspect, copy, and audit all data
and records of ABAG relating to its performancE~ of services under this Agreement. ABAG
shall maintain all such data and records intact for a period of three (3) years after the date
that services are completed hereunder or this Agreement is otherwise terminated.
F. Prohibited Interest. ABAG's officers, employees or agents shall neither solicit nor
accept gratuities, favors or anything of monetary value from contractors, potential
contractors, or parties to subcontracts.
G. Insurance Requirements.
(1) ABAG shall, at its own expense, obtain and maintain in effect at all
times during the life of this Agreement the following insurance:
(a) Workers' compensation insurance as required by law.
(b) Comprehensive general liability insurance coverage of One Million Dollars
($1,000,000) in the aggregate for products and/or completed operations and
One Million Dollars ($1,000,000) per occurrence for automobiles.
(c) Professional liability insurance with minimum liability limits of Two Million
Dollars ($2,000,000) in the aggregate.
(2) All ABAG's insurance policies shall contain an endorsement providing that
written notice shall be given to Public Agency at least thirty (30) days prior to termination,
cancellation, or reduction of coverage in the policy or policies, and all policies shall be
carried by an insurance company or companies acceptable to Public Agency.
(3) In addition, each policy or policies of insurance described in subparagraph (2)
above will contain an endorsement providing for- inclusion of Public Agency and its
directors, officers, agents, and employees as additional insureds with respect to the work or
operations in connection with this Agreement grid providing that such insurance is primary
insurance and that no insurance of Public Agen~~y will be called upon to contribute to a loss.
10
~Nind Up Agreement - Attachment A informational mrk
(4) Promptly upon execution of this ,4greement, ABAG will deliver to Public
Agency certificates of insurance evidencing the above insurance coverages. Such certificates
will make reference to all provisions or endorsements required herein and will be signed on
behalf of the insurer by an authorized representative thereof. ABAG agrees that at any
time upon written request by Public Agency to make available copies of such policies
certified by an authorized representative of the insured.
(5) The foregoing requirements as to types and limits of insurance coverage to be
maintained by ABAG and approval of policies b`,r Public Agency are not intended to, and will
not, in any manner limit or qualify the liabilities: and obligations otherwise assumed by ABAG
pursuant to this Agreement, including, but not limited to, liability assumed pursuant to
ABAG's insurance policies under Subsections (1)(b) of this section.
(6) ABAG will require all subcontract~~rs to comply with the insurance
requirements described in Section G(1)(a)-(c), inclusive.
H. Arbitration. Any dispute between ABAG and the Public Agency regarding the
interpretation, effects, alleged breach or powers and duties arising out of this Agreement
will be submitted to binding arbitration. The arbitrator will be selected by agreement
between the parties by lot from a list of up to six (6) arbitrators with each party submitting
up to three (3) arbitrators.
11
`Hind Up Agreement - Attachment A informational mrk
ATTACH~~ENT B
BACKGROUND
The Members formed ABAG POWER to operate, among others, the Electric Program. Each
Member agreed to pay its share of all costs associated with the Electric Program and
appointed ABAG POWER as its agent for the purposes of implementing the Electric Program.
The Electric Program operated under rules prorriulgated by the California Public Utilities
Commission (CPUC), the California Independent: System Operator (ISO), the California
Power Exchange (PX) and the conventions and practices established by each of the
aforementioned entities and by PG&E pursuant 'to AB 1890 ("Deregulated Market"). The
Electric Program provided electricity to accounts specified by each Member under the JPA
and DA Agreement as defined in the body of thE~ Wind Up Agreement to which this
document is attached.
ABAG POWER is a separate legal entity under tl'ie JPA. Each Member is represented on the
ABAG POWER Board of Directors (Board). ABAG POWER continues to operate a natural gas
aggregation program. All program decisions arc: made under the policy direction of the
Board or the Executive Committee of the Board.
ABAG POWER used the following resources from the described entities in order to implement
the Electric Program:
(a) electrical energy from various generators and brokers,
(b) distribution and other services from F'G&E,
(c) electric grid services (reliability and control) from the ISO,
(d) schedule coordination (as described t~elow) from NCPA,
(e) billing services from Arizona Public SE~rvices (APS), and
(f) administrative and support services from the Association of Bay Area
Governments (ABAG).
In addition, ABAG POWER procured occasional services (not relevant to the wind up of the
Electric Program) during the operation of the ElE~ctric Program. Occasional services included,
but are not limited to, financial auditors, attornE~ys, electric meters sales and installation and
meter reading services.
ABAG POWER paid for the resources described ~~bove with payments made by the Members.
In order to maintain cash flow liquidity, Members funded Working Capital reserves for ABAG
POWER through both their monthly payments for electricity and through Working Capital
"calls." 1
Under the Deregulated Market, all electric aggregators were required to pay for ancillary
electric services (transmission and distribution costs, system reliability services, etc.)
through the ISO. In addition, energy purchases made from the PX required certain security
deposits be maintained. The PX and the ISO required such payments be made through a
recognized "scheduling coordinator."
1 At the beginning of the program, ABAG POWER billed Members on an estimated "levelized" schedule that included
amounts necessary to fund a working capital reserve. This methodology was later abandoned in favor of a monthly
bill based on actual expenses and a separate series of calls for working capital contributions from the Members.
ABAG POWER retained NCPA to act as the scheduling coordinator for the Electric Program.
NCPA also served as scheduling coordinator for its own members. The Deregulated Market
required electric aggregators to deposit funds into two escrow accounts, one with the ISO
and the other with the PX. (The latter deposit was only required if the electric aggregator
purchased energy from the PX.) NCPA made such deposits on behalf of ABAG POWER. The
ISO and PX drew down on the escrow accounts to pay for monthly energy (PX), if any, and
electric grid service charges (ISO). The escrow ~~eposit funds were maintained at a level
sufficient to pay for 90 days (estimated) worth ~~f energy and ancillary service charges.
ABAG POWER paid NCPA the funds necessary to maintain the escrow deposit funds at the
required levels. The amounts in the funds were held by NCPA in trust for ABAG POWER.
WIND UFO PLAN
Upon the suspension of the Electric Program, AE3AG POWER's billing agent, APS compiled
charges attributed to Member accounts. This data indicated that there were service charges
for transmission and other services from PG&E (:UDC Charges) that had not been invoiced to
ABAG POWER in the approximate amount of Three Million Three Hundred Thousand Dollars
($3,300,000). ABAG POWER also experienced cone-week period in August 2000 during
which it did not purchase electricity for the Merr~bers due to unstable market conditions.
Members continued to receive power. ABAG POWER has not been invoiced for the costs of
the energy consumed during this period. ABAG POWER estimates this cost to be
approximately One Million Four Hundred Thousand Dollars ($1,400,000) (based on load
profiling and prevailing energy costs).
Initially, ABAG POWER retained the funds it held in its own accounts to pay for the
uninvoiced UDC Charges and energy charges, and to pay ongoing wind up costs. ABAG
POWER has concluded that:
(a) some of the uninvoiced UDC Charges were included in the Direct Access
Credit calculation (see below),
(b) the balance of the uninvoiced UD(: Charges have not been, and may never be
invoiced to ABAG POWER (for further discussion see Attachment D), and
(c) the energy charges have not beers, and may never be invoiced to ABAG
POWER (for further discussion seep Attachment D).
Based on the foregoing, ABAG POWER is concluding the wind up of the Electric Program
without settling the potential liabilities for UDC (:harges and energy described above.
Further, ABAG POWER has concluded that the funds held by NCPA will not be released in the
foreseeable future (see below). Therefore, ABAG POWER is concluding the wind up of the
Electric Program without having received all of the funds held by NCPA in trust for ABAG
POWER in the ISO Escrow Deposit and the PX E~;crow Deposit.
Finally, ABAG POWER has settled its claim against PG&E for the Direct Access Credits (see
below). ABAG POWER is distributing the funds from the settlement as part of the wind up.
Wind Up Agreement-Attmt B- v18 4-28-04 cln
DIRECT ACCESS CREDIT
The Direct Access Credit results from the inters~~ction of CPUC regulations and
extraordinarily high prices for electricity in 200Ci. The following is excerpted from a CPUC
draft document that describes what the Direct ~~ccess Credit is and how it is derived.Z
~~Since 1998, PG&E and SCE have offered service to two distinct classes of customers.
Bundled service customers received the full range of electric services from the utilities,
which include energy procurement and delivery. PG&E and SCE customers could also
choose, under the DA option, to purchase energy from an electric service provider
(ESP). PG&E and SCE continue to deliver electricity to both [Direct Access] and
bundled service customers.
A. Rate Freeze
Total rates were frozen at levels in effect on June 10, 1996 for all customers. Bundled
service customers paid these frozen rates For the duration of the transition period
(January 1, 1998 through March 31, 2002 or aCommission-authorized earlier end
date). These frozen tariff rates included a generation rate component. The generation
rate was unbundled into a market price and a competition transition charge (CTC)
component. The CTC was calculated residually as the difference between the fixed
generation rate component and the market price, where the market price was based
on the utility's cost of procuring power frorn the PX and the California Independent
System Operator (ISO). All customers pay the CTC and the CTC revenues were to be
used to pay for the utility's stranded generation costs, also known as transition costs.
B. The Avoided Cost Credit
The utilities calculated a market price for billing purposes utilizing the cost and
quantities of power purchased from the PX. This PX price was used to determine the
contribution to the recovery of CTC (when compared to the generation rate component
of frozen rates) and also represented the utilities' avoided cost of procuring energy.
The PX component of the generation rate vvas either applied to recover the cost of
purchasing power for bundled service customers or given as a credit to DA customers.
The credit reflected the fact that DA custorers had chosen to procure their energy
through an ESP rather than the utility. So long as the market price, or DA credit,
remained below the generation component of the customer's frozen rate, the DA
customer continued to make a contribution to CTC in exactly the same manner as a
similarly situated bundled service customer.
C. The Zero Minimum Bill Provision
Because the DA credit was based on the market price from the PX, it was possible that
the credit would exceed either the generation rate component or the entire bill. If the
PX credit exceeded the generation rate component, there was a negative CTC, i.e., no
contribution to recovery of stranded costs. If the PX credit exceeded the entire
amount of the bill, meaning that the PX crE~dit was greater than the sum of the
generation, distribution, transmission, public purpose, and the other rate components,
there would be a negative bill. In other words, the DA customer would receive a credit
for the entire utility bill. This is also known as a "credit" bill.
z See Attachment D description of 1998 RAP -Draft Decision.
Wind Up Agreement-Attmt B- v18 4-28-04 cln
Prior to June 1999, under the adopted tariffs, DA customers receiving the PX credit
could experience, at a minimum, a month~y bill of $0. In D.99-06-058, the
Commission eliminated the zero minimum bill provision. The elimination of the zero-
minimum bill provision allowed DA customers to receive the entire PX credit even if it
resulted in a negative (credit) bill. Prior to market dysfunctions in mid 2000, PX
credits in excess of total monthly charges were generally carried over to succeeding
months and were netted against positive tills.
The dysfunction of California energy markets in 2000 through early 2001, undermined
the original basis for calculating the DA crE~dit. The prices charged the utilities during
the waning days of the PX were substanti~~lly higher than the cost of producing the
energy; were regularly higher than the generation component of frozen rates; and in
fact, were frequently so high that the DA credit exceeded the entire amount of a DA
customer's bill for the services the DA customer did take from the utility and the
generation rate component. The PX collapsed in January 2001."
Upon the suspension of the Electric Program, PCB&E owed ABAG POWER approximately
Twenty-One Million Three Hundred Thousand Dollars ($21,300,000) in unpaid Direct Access
Credits. ABAG POWER filed a complaint with the= CPUC to collect the credits. The CPUC
Complaint was stayed when PG&E filed for Chapter 11 bankruptcy in April 2002. ABAG
POWER settled its claim against PG&E for Seventeen Million Dollars ($17,000,000) plus
bankruptcy required interest at the rate of 4.19"/o per annum. PG&E has paid Seventeen
Million Dollars ($17,000,000) in principal and Tv/o Million Four Hundred Thousand Dollars
($2,400,000)in interest in fulfillment of the settlement.
Wind Up Agreement-Attmt B- v18 4-28-04 cln
ATTACHI'~ENT C
FINANCIAL INFORMATION
ABAG POWER settled its DA credit claim with PG&E in late 2002 for $17.0 million plus
interest at an annual rate of 4.19% to accrue beginning December 1, 2000. Accordingly,
staff reflected this settlement in the financial reports for fiscal year ending June 30, 2003,
with all other necessary adjustments incorporated therein to prepare for winding up the
Electricity Pool and distributing cash on hand to members by June 30, 2004. The Executive
Committee approved all these book adjustments prior to the year-end close, and our
independent auditors have completed their audit of the June 30, 2003 financial reports.
They expressed an unqualified opinion on thesE~ reports with no audit adjustments. Since
ABAG POWER has received payment in full plus accrued interest from PG&E for settlement
of the DA credit claim in April 2004, the payment dates as listed on the next page are
realistic.
Based on the audited financial reports of ABAG POWER for the year ending June 30, 2003
that were duly approved by the Executive Committee at its meeting held on February 18,
2004, the Electricity Pool has $23.8 million in total assets available for distribution to its
members (see Exhibit A). Total assets will continue to: (a) Increase by accrued interest
from the PG&E settlement and from the pool's investment in the Local Agency Investment
Fund, and (b) Decrease by operating expenses necessary to wind up the pool.
On October 27, 2003, the ABAG POWER Boarcl of Directors approved the methodology for
winding up the electric program and distributing funds. In accordance with this process,
funds in the Electricity Pool will be distributed in three categories.
Payable to Members Description Basis of Distribution
PG&E Distribution DA Credit settlement less
approximately $740,000 (see table
on next a e Total CTC reversal
collected
from each member
Other
Working capital Total working capital
collected from each
member
Members' Balancing
Account Accumulated operating
Surplus/deficit Total KWH usage
The following table shows balances of total audited assets and proposed disbursements as
of June 30, 2003 and current balances as of Api-il 15, 2004 and target dates of distribution.
Audited Interim
Balances Balances
6/30/2003 4/15/2004
($'MM) ($'IMM)
Total Assets
Payable to Members
PG&E Distribution*
Other
Members' Balancing
Account
23.84 24.36
18.27 18.83
5.41 5.41
0.16 0.12
23.84 24.36
Total Disbursements
Status
Will increase by accrued
interest net of operating
expenses
Will not change
Will not change
Will decrease by operating
expenses
Target
Distribution
Date
As stated
below
6/15/2004
6/15/2004
03/31/05,
after the FY 04
audit
* On February 18, 2004, the Executive Commii:tee approved: (a) retaining $100,000 from
the DA Credit settlement to pay for wind up expenses after June 3, 2004 (the residual
balance in the hold back fund will be distributed before July 1, 2010), and (b) applying
approximately $640,000 from the DA Credit settlement to pay °Other" (Working Capital).
Wind Up Agreement-Attmt C- 4-28-04 cln
Exhibit B to Attachment C
ABAG POWER Electric Program Allocation 8~ Distribution
(As of April 15, 2004)
Grand Total
Usage (kWh)
Members (1) Usage
City of Albany 3,269,408 0.35%
Town of Los Altos Hills 314,682 0.03%
City of Antioch 49,175,835 5.21
City of Arcata 3,562,992 0.38%
Town of Atherton 1,898,831 0.20%
City of Benicia 12,064,815 1.28%
City of Berkeley 2,696,431 0.29%
County of Butte 19,049,605 2.02%
City of Cloverdale 5,113,484 0.54%
County of Monterey 52,383,320 5.55%
County of Contra Costa 138,139,814 14.65%
City of Cotati 2,629,895 0.28%
City of Cupertino 13,694,587 1.45%
City of Daly City 41,194,260 4.37%
City of Davis 2,207,730 0.23%
City of EI Cerrito 3,404,997 0.36%
Uity of Foster City 13,133,829 1.39%
Golden Gate Bridge District 13,208,235 1.40%
City of Gonzales 3,741,591 0.40%
City of Half Moon Bay 1,888,466 0.20%
H.A.R. D. 8,386,287 0.89%
City of Hercules 5,239,548 0.56%
Town of Hillsborough 7,611,796 0.81%
Housing Auth. Co. of Alameda 1,248,447 0.13%
City of Los Altos 5,152,008 0.55%
Los Trancos Co. Water District 670,686 0.07%
City of Menlo Park 11,546,594 1.22%
City of Millbrae 5,241,722 0.56%
City of Mill Valley 10,532,429 1.12%
City of Milpitas 11,013,448 1.17%
Town of Moraga 1,768,987 0.19%
County of Napa 14,477,518 1.53%
City of Newark 8,728,855 0.93%
City of Orinda 1,602,274 0.17%
City of Pacifica 8,145,529 0.86%
City of Patterson 6,354,738 0.67%
City of Petaluma 36,118,882 3.83%
Original Net Total
CTC Streetlight CTC CTC DA Credit Working Cap. Total
Reversals Correction Reversals Reversal % Distribution (2) Deposits (3) Distribution (4)
$ 70,514 $ (37,804) $ 32,710 0.20% $ 37,440 $ 13,725 $ 51,165
4,274 4,274 0.03% 4,892 6,099 10,991
696,703 (122,580) 574,122 3.51% 657,142 167,352 824,494
79,173 (25,043) 54,131 0.33% 61,958 29,796 91,754
27,998 27,998 0.17% 32,047 18,123 50,170
251,386 (74,333) 177,053 1.08% 202,655 88,075 290,730
193,082 193,082 1.18% 221,003 61,428 282,431
376,505 376,505 2.30% 430,948 119,314 550,263
103,456 103,456 0.63% 118,416 35,056 153,473
531,804 (1,915) 529,889 3.24% 606,512 225,794 832,306
2,748,664 (23,395) 2,725,269 16.66% 3,119,351 545,198 3,664,549
37,545 (130) 37,415 0.23% 42,825 25,935 68,760
234,959 (63,383) 171,575 1.05% 196,386 92,444 288,830
1,417,366 (165,064) 1,252,303 7.65% 1,433,390 130,117 1,563,507
34,764 (21,751) 13,013 0.08% 14,894 20,009 34,903
57,838 57,838 0.35% 66.202 32.320 9R .r,22
301,085 (109,981) 191,104 1.17% 218,738 68,016 286,754
355,647 355,647 2.17% 407,074 45,318 452,392
54,963 (2,040) 52,923 0.32% 60,576 36,264 96,840
25,108 25,108 0.15% 28,738 14,071 42,810
135,566 135,566 0.83% 155,170 84,911 240,080
89,938 (12,002) 77,935 0.48% 89,205 56,859 146,064
107,637 107,637 0.66% 123,201 76,024 199,226
23,420 23,420 0.14% 26,806 18,003 44,810
73,385 73,385 0.45% 83,996 41,289 125,285
4,646 4,646 0.03% 5,318 6,698 12,016
267,524 (71,150) 196,373 1.20% 224,769 82,908 307,678
103,562 (58,891) 44,670 0.27% 51,130 37,973 89,102
204,374 (26,042) 178,332 1.09% 204,119 94,946 299,065
276,838 276,838 1.69% 316,870 83,865 400,734
12,800 12,800 0.08% 14,650 12,503 27,153
383,200 (1,297) 381,903 2.33% 437,128 73,627 510,755
174,076 (85,209) 88,868 0.54% 101,718 81,536 183,254
19,135 (1,122) 18,013 0.11% 20,618 18,433 39,051
165,604 (67,092) 98,512 0.60% 112,757 49,496 162,253
222,030 (3,126) 218,904 1.34% 250,558 35,892 286,450
457,781 (120,246) 337,535 2.06% 386,344 196,030 582,373
040415 revised Claim Breakdown for Windup Agr - 1 _
Exhibit B to Attachment C
ABAG POWER Electric Program Allocation ~ Distribution
(As of April 15, 2004)
Grand Total
Usage (kWh)
Members (1) Usage
City of Pinole 9,446,916 1.00%
City of Pleasanton 28,757,666 3.05%
R.A. F.C. 11,869,270 1.26%
City of Salinas 26,619,689 2.82%
City of San Carlos 6,896,150 0.73%
City of San Leandro 32,799,800 3.48%
City of San Mateo 29,749,102 3.15%
County of San Mateo 98,391,072 10.43%
City of San Pablo 6,222,193 0.66%
City of Santa Rosa 54,963,333 5.83%
City of Saratoga 2,899,035 0.31
County of Sonoma 4,805,048 0.51
South Co. Fire Authority 601,994 0.06%
City of Union City 1,911,061 0.20%
City of Vacaville 5,162,752 0.55%
City of Vallejo 60,985,603 6.47%
West County Wastewater Dist. 13,699,914 1.45%
Town of Windsor 16,479,736 1.75%
City of Winters 4,366,833 0.46%
GL WriteOn
Total (4) 943,239,722 100%
Original Net Total
CTC Streetlight CTC CTC DA Credit Working Cap. Total
Reversals Correction Reversals Reversal % Distribution (2) Deposits (3) Distribution (4)
252,199 252,199 1.54% 288,668 22,875 311,543
511,098 (133,465) 377,633 2.31% 432,240 182,101 614,341
225,935 225,935 1.38% 258,606 155,745 414,351
466,324 (262,362) 203,961 1.25% 233,455 133,488 366,943
160,947 (65,873) 95,074 0.58% 108,822 42,589 151,412
686,521 (199,508) 487,013 2.98% 557,436 157,723 715,160
688,758 (276,868) 411,890 2.52% 471,450 189,375 660,825
2,109,359 (71,151) 2,038,208 12.46% 2,332,939 604,514 2,937,453
82,505 82,505 0.50% 94,436 47,404 141,840
854,324 (194,168) 660,156 4.04% 755,616 296,993 1,052,609
38,110 (2,929) 35,181 0.22% 40,269 24,666 64,934
53,841 53,841 0.33% 61,627 39,725 101,352
13,289 13,289 0.08% 15,211 5,979 21,189
59,927 59,927 0.37% 68,592 8,269 76,861
93,369 93,369 0.57% 106,871 57,524 164,394
1,212,306 1,212,306 7.41% 1.387,609 353.803 1.741.413
459,806 (9) 459,797 2.81 % 526,285 136,567 662,852
328,111 (1,362) 326,749 2.00% 373,998 90,454 464,451
40,360 40,360 0.25% 46,196 39,032 85,228
(2) (2) (2) (2)
18,661,435 (2,301,293) 16,360,141 100% 18,725,870 5,414,272 24,140,142
Notes
(1) Total usage for entire program period. Data from billing agent (APS) for billing periods 4/98 - 7/01.
(2) Total of Net CTC Reversals, plus interest on bankruptcy claim, minus $100,000 hold back amount. This is equivalent to the bankruptcy claim principal and interest ($19,465,729),
less $639,859 allocated for repayment of Working Capital, minus $100,000 hold back amount.
(3) Total of "Working Capital Client Deposits" and "PX and ISO Client Deposits."
(4) Does not include Members Balancing Account, or ISO and PX escrow deposits with NCPA.
040415 revised Claim Breakdown for Windup Agr - 2 _
ATTACHh1ENT D
CONTINGENT RISKS
RISK AN/~LYSIS
Attached as Exhibit A is a table setting forth AB,4G POWER's best reasonable effort at
estimating the maximum reasonable liability (in total for the Electric Program) for each of
the listed contingent liabilities. The table allocates total liability of the program to individual
Members in accordance with the usage ratio, or CTC Reversal ratio, as appropriate. The
allocation is for illustrative purposes only. ABAG POWER does not have sufficient
information on which to base an estimate of ho~v the entity imposing the liability would
allocate the liabilities or how ABAG POWER and the Members ought to react to such
allocation.
A. UNINVOICED ENERGY CHARGES
Description of Risk
ABAG POWER is distributing to each of its Electric Program Members a proportionate share
of the Working Capital contributions made by Members in response to Working Capital calls
by ABAG POWER and residual funds from operating costs paid by Members during the
Electric Program (Balancing Account). These funds were held, in part, in reserve for
payment of charges for electrical energy consumed by Members of the Electrical Program
during aone-week period in August 2001 when ABAG POWER was not purchasing electricity
on behalf of the Electric Program (Gap Period).
As of February 29, 2004, ABAG POWER has not been invoiced for electricity consumed
during the Gap Period. Under the Wind Up Agreement, if ABAG POWER receives such a bill,
each Member will be required to pay its proportionate share.
Background
Under normal operating conditions, ABAG POWER purchased on behalf of the Members of
the Electric Program sufficient energy to meet their estimated needs. Purchases were made
from a variety of electricity generators and energy remarketers, under various contractual
formats (fixed price, indexed price, indexed prim with "floors" and/or "ceilings," etc.), and
at various prices. In all instances, one significant factor in the price of electricity is the hour
in which it is consumed. Energy during certain `'peak" periods was priced considerably
higher than at other periods.
In the summer of 2000, the electric market bec~~me highly unstable. ABAG POWER was
having a difficult time meeting credit requirements which our scheduling coordinator and
electricity sellers were imposing on the marketplace. Consequently, on August 2, 2000
ABAG POWER notified PG&E in writing of its diffi~~ulties, and actions being taken to rectify
the situation. PG&E acknowledged that it had rE~ceived ABAG POWER's notice, and although
it believed that ABAG POWER was in default of it:s ESP Agreement, PG&E would allow ABAG
POWER until August 7, 2000 to resolve the situation. Prior to this deadline, ABAG POWER
was able to secure scheduling coordination services and contract for electricity at a
reasonable price, without the additional credit requirements imposed by other energy
providers and remarketers.
Legal Analysis
From a legal perspective, the matter is a simples collection issue. Since ABAG POWER did
not enter into a contract during the Gap Period, there is no "seller" to invoice ABAG POWER
for any energy that was consumed. There are only two sources of electricity flowing into
the California grid that could have serviced the Electric Program during the Gap Period: the
ISO and PG&E.
The energy consumed by the Members could have been supplied through the ISO
"imbalance energy." This is a reserve maintained by the ISO when contracted for energy
supplies from PG&E and other electric service providers fall below the amount necessary to
keep the grid operational. Electricity Program ~=lectricity consumption during the Gap
Period could have come from this source.
Alternatively, PG&E supplies such a large amount of electricity over any period of time that
it could have been supplying part of the power for the Electric Program during the Gap
Period.
The risk of incurring the liability is wholly dependent on the ability either of the ISO or of
PG&E to "prove" that electricity consumed by Members during this period was supplied by
the party making the claim.
ABAG POWER is without sufficient information to evaluate the likelihood of this risk
occurring.
ABAG POWER has reviewed the price of imbalance energy for the period in question.
Imbalance energy prices tend to be the highest of all prices paid for electricity. Based on th
price for imbalance energy an estimate of the arnount of electricity that the Electric Progra
would have consumed during the Gap Period, the maximum exposure is estimated as One
Million Four Hundred Twenty Thousand Dollars ($1,420,000).
Finally, ABAG POWER notes that as time goes ors the ability of either the ISO or PG&E to
collect the data necessary to generate an invoicE~ and prove a claim diminishes.
B. UDC CHARGES
Description of Risk
From information provided by the Program's billing agent (APS) we believe there may be
UDC charges for which neither ABAG POWER nor its Members have been invoiced by PG&E.
During the period July 2000 to June 2001 the amount of UDC charges billed to members
(and collected by ABAG POWER) is greater than the amount invoiced from PG&E.
ABAG POWER is also aware of one instance in which UDC charges for the affected period
were generated by PG&E in connection with an electric account for a Member's streetlight
system. These accounts are unique in the PG&E billing system. Electricity consumed by a
streetlight system is not metered and is charged on an estimated consumption basis. In the
case of which ABAG POWER is aware, the Member had already paid PG&E for the asserted
UDC charges.
Wind Up Agreement-Attmt D- 4-28-04 All
Based on APS Billing information and information from ABAG POWER's review of the DA
Credit's owed by PG&E, ABAG POWER has concluded that the likely total exposure is
approximately One Million Six Hundred Thousand Dollars ($1,600,000).
LEGAL ANALYSIS
PG&E applies UDC charges to individual accounts based on the amount of electricity
consumed.
As noted above, streetlight accounts are uniquely billed by PG&E. In the case that has
come to ABAG POWER's attention, we believe tFiat the Member has been billed twice for the
same UDC charges. Other Members with streetlight accounts may encounter the same
situation.
C. ISO ESCROW DEPOSIT AND PX ESCROW D1=POSIT
Description of Risk
The PX Escrow Deposit and ISO Escrow Deposit held by NCPA on behalf of ABAG POWER are
subject to reduction or nonrefund. In the case of PX Escrow Deposit, all of the funds may
be consumed in the course of settling the PX's E~ankruptcy claims. The ISO Escrow Deposit
is subject to adjustments based on FERC ordered energy price rollbacks (see detailed
description in Section D below). The FERC ordered rollbacks can both increase and
decrease the ISO Escrow Deposit.
ABAG POWER bought electricity for use by the Electric Program and sold excess capacity
into the marketplace at various times. At those instances in which ABAG POWER was
purchasing electricity, the FERC ordered price rE~ductions will generate a refund and an
increase in the ISO Escrow Deposit. In those instances in which ABAG POWER sold energy
into the marketplace, the FERC ordered rollbacks can reduce the amount available from the
ISO Escrow Deposit. Based on ABAG POWER's review of the total amount of power sold
during the period under consideration by FERC for price reductions, we conclude that the
likely reductions do not exceed the amounts currently in the ISO Escrow Deposit.
Under these circumstances, we believe the risk is nominal
D. DIRECT ACCESS CREDITS
Description of Risk
ABAG POWER is distributing to each of its Electric Program Members a proportionate share
of the funds received from PG&E as settlement of ABAG POWER's claim against PG&E for
Direct Access Credits incurred during 2000 under the deregulated energy market in
California. The Direct Access Credit is a result of the application of a rate formula adopted
by the CPUC. The formula includes contemporaneous energy prices and the Direct Access
Credit is a by-product of high electricity prices iri 2000.1
The FERC has been engaged in a proceeding to cjetermine whether wholesale prices charged
by electricity generators and marketers during 2000 in California were "just and
reasonable." FERC has already found that at certain times such prices were not. The FERC
~ For a detailed description of Direct Access Credits, see Ap~~endix A, "Direct Access Credit."
Wind Up Agreement-Attmt D- 4-28-04 All
proceeding is now trying to determine what ~~ju~:t and reasonable" rates should have been
during specific times.2 The outcome will be an order requiring generators and marketers
who overcharged to refund money to purchasers.
In principle, the CPUC has the power to recalculate the Direct Access Credit based on the
FERC ordered reduction in electricity prices. Hovvever, FERC has no jurisdiction over the
CPUC and cannot compel such a recalculation. The result of such a recalculation would be a
reduction in the amount of Direct Access Credit owed ABAG POWER.3 The CPUC can
undertake a regulatory process referred to as r~~temaking in which the ultimate result could
be the imposition of a surcharge on Electric Program Member accounts to recoup overpaid
Direct Access Credits over a specified time period, or immediately.
This risk exposure is punctuated by §4 of the Stipulation and Release under which PG&E and
ABAG POWER are settling the Direct Access Cre~jit claim (Stipulation and Release). §4
states:
"[ABAG POWER] and PG&E expressly agree that this Stipulation and Release is a
compromise and settlement of all claims and matters that are disputed as between
the parties involving the 1998 RAP for the period through and including June 30,
2001, all issues that were raised, or coul~~ have been raised, in the CPUC Complaint,
and all issues that were raised, or could Dave been raised, in the Claim. In the event
that the CPUC issues any future ruling relating to the direct access credits at issue in
the Claim, the CPUC Complaint or the 1998 RAP, the parties will use their best
efforts to preserve the intent of this Stipulation and Release, consistent with
applicable law." a (emphasis added)
This provision was negotiated when PG&E declined to give ABAG POWER a full indemnity
against the possibility that the CPUC will take an action to impose a surcharge to recover
Direct Access Credits paid to ABAG POWER (or il:s electricity members). PG&E agreed that
the exposure exists but asserts that it cannot, as an entity regulated by the CPUC, agree to
make ABAG POWER whole in the event of an adverse CPUC action. PG&E asserts that an
indemnity provision would be characterized as an illegal circumvention (by PG&E) of the
CPUC. ABAG POWER acceded to PG&E's argumE~nt and §4 is the negotiated compromise.
Background
On December 22, 2003, the U.S. Bankruptcy Court for Northern California, San Francisco
Division confirmed a Plan of Reorganization for F'G&E (Confirmed Plan). The Direct Access
Credit was paid to ABAG POWER under the Stipulation and Release. The Stipulation and
Release was approved by the court and is included in the Confirmed Plan as a Class 7 Claim.
During the bankruptcy proceedings, PG&E and the CPUC submitted competing plans for the
reorganization of PG&E. Simultaneously, PG&E ~~vas pursuing claims challenging certain
actions by the CPUC during deregulation (CPUC Proceedings). Further, PG&E filed suit in
Federal District Court for Northern California ag~iinst the CPUC challenging various aspects
of the deregulated energy market created under CPUC regulations and guidance. The CPUC
z Pricing occurred on an hourly basis.
s One estimate of the impact of known (in Spring 2003) FERC ordered reductions on ABAG POWER's Direct
Access Credit resulted in a reduction of $4-5 million in Direct Access Credits owed. ABAG POWER believes the
estimate to be reasonable.
° The "1998 RAP" is the ratesetting proceeding described below under the same name. The "CPUC Complaint" is
ABAG POWER's initial complaint filed with the CPUC for payment of the Direct Access Credit.
4
Wind Up Agreement-Attmt D- 4-28-04 All
and PG&E reached a Master Settlement Agreement on all pending disputes, including those
before the Bankruptcy Court. The Master Settlf~ment Agreement dismissed the lawsuits and
the CPUC Proceedings with prejudice, and comrnitted both parties to supporting and
implementing what ultimately became the Confirmed Plan. The dismissed CPUC
proceedings do not include the 1998 RAP or AB,4G POWER's CPUC Complaint. The CPUC
action to approve the Confirmed Plan and the Master Settlement Agreement is documented
in the opinion issued for Investigation 02-04-02.6 (Settlement Opinion).
The Master Settlement Agreement between the CPUC and PG&E has the following relevant
features:
1. The CPUC agreed to include certain cost components in the CPUC's future regulatory
and ratemaking proceedings as they affect PG&E. Such cost components included the
sum of $2.2 billion designated the ~~regulatory asset." Rates established by the CPUC
must be sufficient to (a) support all of the cost components necessary to PG&E's
continued viability as an ongoing public utility and (b) amortize the regulatory asset
over a period of ten (10) years.
2. Within the constraints of the Confirmed Plan and the Master Settlement Agreement,
the CPUC retains its regulatory authority c-ver PG&E.
3. The current CPUC and future CPUCs are b~~und by the Master Settlement Agreement.
4. The CPUC acknowledges the continuing jurisdiction of the Bankruptcy Court to enforce
the Confirmed Plan.
Legal Analysis
The potential CPUC regulatory action on the Direct Access Credit can only be triggered by a
FERC ordered reduction in wholesale electricity energy prices for 2000. Only PG&E and a
Direct Access Credit recipient have standing to initiate an action to recalculate the Direct
Access Credit. PG&E and ABAG POWER are estopped from so doing by §4 of the Stipulation
and Release (see below). A recalculation of the Direct Access Credit can in theory be
initiated by the CPUC. The impetus for a CPUC action is bureaucratic and triggered by FERC
ordered price reductions.
The central question is whether the CPUC can legally do so in the face of ABAG POWER's
objections. The issue of recalculating Direct Aca~ss Credits based on FERC ordered refunds
was raised by PG&E in a ratemaking action before the CPUC (Application 98-07-003, the
~~1998 RAP" filed in 1998). The Administrative Law Judge (AU) issued a draft decision on
April 3, 2003 but the CPUC has not taken any action on it and it is not currently on the
CPUC agenda for consideration, public hearing or further actions
The 1998 RAP -Draft Decision states in pertinent part:
~~In our opinion it would be unreasonable to recompute the [Direct Access] credit
should FERC order refunds. We are confronted, initially, with three unknown factors:
whether FERC will order refunds: when FERC will order refunds (and when the order
become[s] final), and the amount of those refunds.' As of this writing, FERC has the
matter under consideration. Any order of refunds, if substantial, is expected to be
appealed. It is impossible to predict the d~~te of a final order. The period in question,
December 28, 2000 to January 18, 2001, i:s two years old and counting. It is unfair for
s No action can be taken without CPUC approval. Draft AU decisions on deregulation matters have had a mixed
reception before the CPUC. Some have been adopted as presented. Others have been subject to substantial
revision. The draft decision is Opinion Adopting a Post Power Exchange Direct Access Credit for Pacific Gas and
Electric Company (1998 RAP -Draft Decision).
Wind Up Agreement-Attmt D- 4-28-04 All
ratepayers who paid their utility bills two dears ago to be subject to an unknown
liability to be paid at an unknown future date. We need not elaborate on the intensive
effort required by PG&E to recomputed individual bills nor the intensive efforts and
spent resources of end users to verify those recomputed bills. Because we deny
PG&E's proposal we do not reach the question of whether approval of the proposal
would constitute retroactive ratemaking."
' When we speak of refunds in this context:, we refer not to money going back to DA
[direct access] customers, but to a recommendation of their credit. If a refund is
ordered, the credit would have been less zind the DA customer would have been
overpaid by PG&E thereby causing a repayment to PG&E.
The same logistical objections raised by the AU to retroactive reductions in Direct Access
Credits still stand and are amplified by the passage of yet another year since issuance of the
1998 RAP -Draft Decision and without further action by FERC.6 Further, the legal barriers
to "retroactive ratemaking," which the draft decision avoids, become a live issue.
Independent of the arguments made in the 1998 RAP -Draft Decision, a strong legal
argument can be made that the CPUC is estopped by the Settlement Opinion and Master
Settlement Agreement from reducing the amount of the Direct Access Credit paid to ABAG
POWER.
The Settlement Opinion makes the following policy finding: "It is in the public interest that
PG&E emerge from bankruptcy promptly....To emerge from bankruptcy PG&E should pay its
creditors. All allowed claims should be paid in fill. (emphasis added)"' On the date of the
Settlement Decision, ABAG POWER's Stipulation and Release was an "allowed claim" and
part of the record before the CPUC. It will be difficult for the CPUC to defeat the argument
that it is estopped from taking any (otherwise permitted) action that effectively modifies the
Stipulation and Release or reduces the payment required by the Stipulation and Release. In
addition, the Master Settlement Agreement states: "[PG&E and the CPUC] agree not to
contest the validity and enforceability of [the M~~ster Settlement Agreement], the
[Confirmed Plan] or any order entered by the [Eankruptcy Court] contemplated by or
required to supplement [the Master Settlement Agreement and the Confirmed Plan]."$
Ancillary Analysis
In addition to the "logic" of a bureaucratic recalculation of the Direct Access Credits in
response to the anticipated FERC ordered price Ieductions, there might be pressure on the
CPUC to recover Direct Access Credits to reduce general utility rates. In response, one can
raise the objection stated in the 1998 RAP - Dre~ft Decision that the costs to recalculate and
recover "overpaid" credits may well exceed the recovery. Finally, please note that the post-
bankruptcy CPUC ratemaking structure for PG&E: includes the "regulatory asset." Under the
terms of the Confirmed Plan and the Master Set1=lement Agreement, the amount of the
regulatory asset which must be amortized by ongoing electric rates will be reduced by any
monies actually recovered by PG&E as a result cf the same FERC price rollback.9 The direct
e Although, the contested time period misses most of the times during which ABAG POWER's Direct Access Credit
was generated. The same legal arguments apply and the FERC proceeding has expanded the timeframe for
potential price rollbacks to include more of the period in whi~~h ABAG POWER's credits were "generated."
Settlement Decision, p. 78.
s Master Settlement Agreement, p. 18, §21.
e Master Settlement Agreement, pp. 8-9, §2.d.
Wind Up Agreement-Attmt D- 4-28-04 All
effect of the FERC ordered rollback brings significant rate relief under the Confirmed Plan.~0
In the context of generalized rate relief, it appears doubtful that the CPUC would be willing
to undertake the ironic step of imposing a surcharge on certain classes of customers
(including local government entities such as ABAG POWER's electricity members) in order to
wring out the last bitter drop of savings generai:ed by the FERC ordered refunds. Another
impediment to such action by the CPUC is the specter of resurrecting the public debate
about California's failed energy deregulation program.
Conclusion
The CPUC has the theoretical ability to reduce tl~e Direct Access Credits paid to ABAG
POWER. However, ABAG POWER can pose the 1-ollowing legal argument in position: (a) the
CPUC is estopped from so doing by the CPUC's 1~indings and actions in reaching the Master
Settlement Agreement with PG&E, and the CPUi~'s support for the Confirmed Plan under
which the credits were paid, and (b) the logistical and equity issues raised in the 1998 RAP
- Draft Decision. In the absence of any motivai:ion to undertake such a step other than
bureaucratic purity of process, ABAG POWER's opinion is that the risk is nominal.
io Master Settlement Agreement estimates a potential recovery by PG&E of ($ ) in FERC ordered
price reductions.
Wind Up Agreement-Attmt D- 4-28-04 All
EXHIBIT A
TO ATTACHMENT D
Allocation of Estimated Contingent Liabilities.
This table illustrates the allocation of ABAG POWER's estimate of the Electric Program liability for the
denoted charges among Electric Program members. Allocate~j amounts have been rounded to the
nearest 10 dollars. Please see Attachment D for an explanation of the methodology and basis for this
Uninvoiced Direct Access
Energy Charges (1) UDC Charges (2) Credits (3)
Members $1,420,000 $1,600,000 $4,676,000 Total
City of Albany $ 4,9:?0 $ 5,550 $ 9,350 $ 19,820
Town of Los Altos Hills 4l0 530 1,220 2,220
City of Antioch 74,030 83,420 164,090 321,540
City of Arcata 5,3(30 6,040 15,470 26,870
Town of Atherton 2,8(30 3,220 8,000 14,080
City of Benicia 18,1(30 20,470 50,600 89,230
City of Berkeley 4,0(30 4,570 55,190 63,820
County of Butte 28,6£30 32,310 107,610 168,600
City of Cloverdale 7,7(10 8,670 29,570 45,940
County of Monterey 78,8E>0 88,860 151,450 319,170
County of Contra Costa 207,9(10 234,320 778,930 1,221,210
City of Cotati 3,9(10 4,460 10,690 19 110
City of Cupertino 20,620 23,230 49,040 92,890
City of Daly City 62,020 6 889 0 357,930 489,830
City of Davis 3,3:0 3,740 3,720 10,780
City of EI Cerrito 5,1~~0 5,780 16,530 27,440
City of Foster City 19,770 22,280 54,620 96,670
Golden Gate Bridge District 19,8Z:~0 22,400 101,650 143,930
City of Gonzales 5,60 6,350 15,130 27,110
City of Half Moon Bay 2,840 3,200 7,180 13,220
H.A. R.D. 12,60 14,230 38,750 65,610
City of Hercules 7,89'0 8,890 22,280 39,060
Town of Hillsborough 11,460 12,910 30,760 55,130
Housing Auth. Co. of Alameda 1,880 2,120 6,690 10,690
City of Los Altos 7,760 8,740 20,970 37,470
Los Trancos Co. Water District 1,010 1,140 1,330 3,480
City of Menlo Park 17,380 19,590 56,130 93,100
City of Millbrae 7,890 8,890 12,770 29,550
City of Mill Valley 15,860 17,870 50,970 84,700
City of Milpitas 16,580 18,680 79,120 114,380
Town of Moraga 2,660 3,000 3,660 9,320
County of Napa 21,800 24,560 109,150 155,510
City of Newark 13,140 14,810 25,400 53,350
City of Orinda 2,410 2,720 5,150 10,280
City of Pacifica 12,260 13,820 28,160 54,240
City of Patterson 9,570 10,780 62,570 82,920
City of Petaluma 54,380 61,270 96,470 212,120
City of Pinole 14,220 16,020 72,080 102,320
City of Pleasanton 43,290 48,780 107,930 200,000
R.A.F.C. 17,870 20,130 64,580 102,580
City of Salinas 40,070 45,150 58,300 143,520
EXHIBIT A
TO ATTACIHMENT D
Allocation of Estimated Contingent Liabilities.
This table illustrates the allocation of ABAG POWER's estimate of the Electric Program liability for the
denoted charges among Electric Program members. Allocated amounts have been rounded to the
nearest 10 dollars. Please see Attachment D for an explanati~~n of the methodology and basis for this
Members
City of San Carlos
City of San Leandro
City of San Mateo
County of San Mateo
City of San Pablo
City of Santa Rosa
City of Saratoga
County of Sonoma
South Co. Fire Authority
City of Union City
City of Vacaville
City of Vallejo
West County Wastewater Dist.
Town of Windsor
City of Winters
Total
Notes:
(1) Allocated by kWh usage
(2) Allocated by kWh usage
(3) Allocated on CTC Credit
Reversals. Represents PG&E's
estimate of the possible reduction
in the CTC credits due to the
FERC price mitigation hearings.
CA) CB) (~)
Uninvoiced Direct Access
Energy Charges (1) UDC Charges (2) Credits (3)
$1,420,000 $1,600,000 $4,676,000 Total
10,380 11,700 27,170 49,250
49,380 55,640 139,200 244,220
44,7!30 50,460 117,720 212,970
148,120 166,900 582,550 897,570
9,370 10,550 23,580 43,500
82,740 93,230 188,680 364,650
4,360 4,920 10,060 19,340
7,230 8,150 15,390 30,770
9'10 1,020 3,800 5,730
2,8130 3,240 17,130 23,250
7,710 8,760 26,690 43,220
91,8'10 103,450 346,500 541,760
20,6.?0 23,240 131,420 175,280
24,8'10 27,950 93,390 146,150
6,570 7,410 11,540 25,520
$ 1,419,9E30 $ 1,600,000 $ 4,676,010 $ 7,695,990
ABAG POWER Electric Program Total Distributions
(as of 4/15/04)
Members Total
Distribution (4)
City of Albany $ 51,165
Town of Los Altos Hills 10,991
City of Antioch 824,494
City of Arcata 91,754
Town of Atherton 50,170
City of Benicia 290,730
City of Berkeley 282,431
County of Butte 550,263
City of Cloverdale 153,473
County of Monterey 832,306
County of Contra Costa 3,664,549
City of Cotati 68,760
City of Cupertino 288,830
City of Daly City 1,563,507
City of Davis 34,903
City of EI Cerrito 98,522
City of Foster City 286,754
Golden Gate Bridge District 452,392
City of Gonzales 96,840
City of Half Moon Bay 42,810
H.A.R. D. 240,080
City of Hercules 146,064
Town of Hillsborough 199,226
Housing Auth. Co. of Alamed~i 44,810
City of Los Altos 125,285
Los Trancos Co. Water District 12,016
City of Menlo Park 307,678
City of Millbrae 89,102
City of Mill Valley 299,065
City of Milpitas 400,734
Town of Moraga 27,153
County of Napa 510,755
City of Newark 183,254
City of Orinda 39,051
City of Pacifica 162,253
City of Patterson 286,450
City of Petaluma 582,373
City of Pinole 311,543
City of Pleasanton 614,341
R.A.F.C. 414,351
City of Salinas 366,943
City of San Carlos 151,412
City of San Leandro 715,160
City of San Mateo 660,825
County of San Mateo 2,937,453
City of San Pablo 141,840
City of Santa Rosa 1,052,609
City of Saratoga 64,934
Claim Total Distribution by Member 4-15-04 - 1 -