09-F Electric Supply AgreementAGENDA INFORMATION SHEET
PROJECT: Adoption of the attached resolution authorizing the City Manager to sign an electric supply
contract for 2003 (and possibly 2004) pursuant to recommendation of the Board of Directors of Cities
Aggregation Power Project (CAPP), of which the City of Paris is a member.
BACKGROUND: At its July meeting, the CAPP Board of Directors, consisting exclusively of city
representatives, authorized negotiations for a 2003 electric power supply contract to commence with the
current Retail Electric Provider (REP) serving CAPP's load in 2002. Specifically, the CAPP REP has been
informed that, upon the REP fulfilling two conditions prior to October 11, 2002, its current contract with
CAPP members will be extended. First, the REP must substantially solve all billing problems and second,
provide a delivered commodity price below the current commodity price. If those two conditions are not
met, CAPP will release a request for proposal on October 14, 2002, to REPs who are believed to be able
to serve CAPP's load.
Regardless of whether the CAPP Board endorses the current or a different REP for 2003, CAPP
member cities will need to take immediate action to accept or reject the contract. Electricity prices tend
to track prices for natural gas which can be volatile, and therefore, REPs maintain that any given offer will
only be open for a 24 hour period. The attached resolution is a necessary step in positioning the City to
capture the price that CAPP is able to achieve from its negotiations with REPs. The model resolution was
approved for distribution to members by the CAPP Board at its August 8, 2002, meeting. The approved
resolution should be returned to Mary Bunkley with the Arlington City Attorney's office before September
30, 2002.
While the current CAPP REP has had some billing problems, the conclusion of CAPP's consultants
and counsel is that all REPs are experiencing similar problems. On the other hand, discussions with non-
CAPP member cities leads to the conclusion that CAPP has an extremely favorable contract (i. e., risk and
penalty avoidance, simplicity) from the perspective of cities. Additionally, the CAPP REP has committed
to an account-by-account verification for CAPP members that the Board's advisors believe is unique in the
competitive marketplace.
DESCRIPTION: The proposed resolution would authorize the City Manager or his designee to ratify the
2003 contract between CAPP and its approved REP and approve a power supply agreement for a period
of 12 to 24 months. The City of Paris adopted a similar resolution last year associated with the approval
of the current CAPP agreement.
RECOMMENDED ACTION: Consider approval of the proposed resolution.
STAFF CONTACT: City Attorney Larry W. Schenk; City Manager Michael E. Malone
COUNCII, DATE: Consider for approval at City Council's September 9, 2002, regular Council meeting.
ADDITIONAL MATERIALS: See proposed resolution and accompanying correspondence from
Geoffrey Gay, CAPP legal counsel.
DRAFT
J:\Attorney\ALICE\RESWORK\CiJRRENT\CAPP Contract Res 2002.wpd
August 22, 2002
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS,
PARIS, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS
DESIGNEE TO EXECUTE AN ELECTRIC SUPPLY AGREEMENT
PURSUANT TO THE CONTRACT TO BE SIGNED BY CITIES
AGGREGATION POWER PROJECT, INC. FOR DELIVERIES OF
ELECTRICITY EFFECTIVE JANUARY 1, 2003; MAKING OTHER
FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND
DECLARING AN EFFECTIVE DATE.
WHEREAS, the City of Paris, Paris, Texas (City), is a member of Cities Aggregation Power
Project, Inc. (CAPP), a nonprofit political subdivision corporation dedicated to securing electric
power for its more than 80 members in the competitive retail market; and,
WHEREAS, CAPP negotiated favorable contract terms and a reasonable commodity price
for delivered electricity in 2002 for its members; and,
WHEREAS, CAPP anticipates preserving current contract terms and achieving slight
improvement in current commodity prices in a contract for 2003; and,
WHEREAS, CAPP believes that the pricing opportunity window for favorable 2003
deliveries will be short-lived and that CAPP members must be able to commit contractually to prices
within a 24-hour period in order to lock-in favorable prices; and,
WHEREAS, experience during 2001-2002 has demonstrated that Retail Electric Providers
demand immediate response to an offer; and,
WHEREAS, because the deregulated electric market is complex, likely to penalize those
unaware of its constraints, and likely to reward those who can improve the size and shape of a
particular load, the City benefits from jointly shared experiences and collective purchasing power
arranged through CAPP; and,
WHEREAS, it is necessary for the City to contract for a supply of electricity in 2003 or at
least partially revert to price to beat rates (PTB); and,
WHEREAS, CAPP's current delivered energy prices provide savings when measured against
PTB, and PTB rates likely will be increased before the end of the year; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS,
TEXAS:
Section 1. That the findings set out in the preamble to this resolution are hereby in all things
approved.
Section 2. That the City Manager or his designee is hereby authorized and directed to sign,
on behalf of the City of Paris, an electric power agreement pursuant to the contract approved and
recommended by the CAPP Board of Directors within 24 hours of said approval and
recommendation. The contract may be for a 12 to 24 month time frame.
Section 3. That a copy of this resolution shall be sent to Ms. Mary Bunkley with the City
Attorney's office in Arlington before September 30, 2002.
Section 4. That this resolution shall be effective from and after its date of passage.
PRESENTED AND PASSED on this 9th day of September, 2002, by a vote of ayes
and nays at a regular meeting of the City Council of the City of Paris, Texas.
Michael J. Pfiester, Mayor
ATTEST:
Mattie Cunningham, City Clerk
APPROVED AS TO FORM:
Larry W. Schenk, City Attorney
I - 0IRCEIVED
AvG } 2 2002
LLOYD, GOSSELINK, BLEVINS, ROCHELLE,
BALDWIN & TOWNSEND, P.C.
ATTORNEYS AT LAW
111 GONGRESS AVENUE
SUITE 1800
AUSTIN, TEXAS 78701
Mc Gay's Uirea Line: (512) 322-5875
Email: ggaY@Igiawfmm.com
MEMORANDUM
TO: All CAPP Members
FROM: Geoffrey M. Gay
DATE: August 12, 2002
RE: City Resolution For 2003 Contract
t;i'1"Y AI"i'~li.fV8Y
PA3tI5, TEXAS
TELEPHONE (512) 322-5800
TELECOPIER (512)472-0532
www;lglawfirm _com
Attached please find the model resolution and draft staff report supporting the resolution
approved for distributian by the CAPP Board at its meeting on August 8, 2002 and referenced in
my memo of August 9, 2002. Please note that a copy of the approved resolution should be
returned to Mary Bunkley at the Arlington City Attoroey's office by no later than September 30,
2002.
f 81 SOOmac1mmo020 B 12gmg
DRAFTSTAFF REPORT
Puruose
The purpose of this report is to recommend adoption by the Mayor and City Council of
the attached resolution authorizing the City Manager to sign an electric supply contract for 2003
(and possibly 2004) pursuant to recommendation of the Board of Directors of Cities Aggregation
Power Project (CAPP), of which the City of is a member.
Discussion
At its July meeting the CAPP Board of Directors, consisting exclusively of city
representatives, authorized negotiations for a 2003 electric power supply contract to commence
with the current Retail Electric Provider (REP) serving CAPP's load in 2002. Specifically, the
CAPP REP has been informed that upon the REP fulfilling two conditions prior to October 11,
2002, its current contract with CAPP members will be extended. First, the REP must
substantially solve all billing problems and second, provide a delivered commodity price below
the current commodity price. If those two conditions are not met, CAPP will release a request
for proposal on October 14, 2002 to REPs who are believed to be able to serve CAPP's load.
Regardless of whether the CAPP Board endorses the current or a different REP for 2003,
CAPP member cities will need to take immediate action to accept or reject the contract.
Electricity prices tend to track prices for natural gas which can be volatile, and therefore, REPs
maintain that any given offer will only be open for a 24 hour period. The attached resolution is a
necessary step in positioning the city to capture the price that CAPP is able to achieve from its
negotiations with REPs. The model resolution was approved for distribution to members by the
CAPP Board at its August 8, 2002 meeting. The approved resolution should be returned to Mary
Bunkley with the Arlington City Attorney's office before September 30, 2002.
While the curcent CAPP REP has had some billing problems, the conclusion of CAPP's
consultants and counsel is that all REPs are experiencing similar problems. On the other hand,
discussions with non-CAPP member cities leads to the conclusion that CAPP has an extremely
favorable contract (i.e., risk and penalty avcidance, simplicity) from the perspective of cities.
Additionally, the CAPP REP has committed to an account-by-account verification for CAPP
members that the Board's advisors believe is unique in the competitive marketplace.
Recommendation
The City's staff recommends that the Mayor and City Council authorize the City
Manager or his designee to ratify the 2003 contract between CAPP and its approved REP and
approve a power supply agreement for a period of 12 to 24 months.
RESOLUTION NO.
A RESOLUTION OF THE CITY OF , TEXAS,
AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO EXECUTE
AN ELECTRIC SUPPLY AGREEMENT PURSUANT TO THE CONTRACT
TO BE SIGNED BY CITIES AGGREGATION POWER PRO7ECT, 1NC. FOR
DELIVERIES OF ELECTRICITY EFFECTIVE 7ANUARY 1, 2003
WHEREAS, the City of , Texas (City) is a member of Cities
Aggregation Power Project, Inc. (CAPP), a nonproSt political subdivision
corporation dedicated to securing electric power for its more than 80
members in the competitive retail market; and
WHEREAS, CAPP negotiated favorable contract terms and a reasonable commodity
price for delivered electricity in 2002 for its members; and
WHEREAS, CAPP anticipates preserving current contract terms and achieving slight
improvement in current commodity prices in a contract for 2003; and
WHEREAS, CAPP believes that the pricing opportunity window for favorable 2003
deliveries will be short-lived and that CAPP members must be able to
commit contractually to prices within a 24-hour period in order to lock-in
favorable prices; and
WHEREAS, experience during 2001-2002 has demonstrated that Retail Electric
Providers demand immediate response to an offer; and
WHEREAS, the deregulated electric market is complex, likely to penalize those
unaware of its constraints and likely to reward those who can improve the
size and shape of a particular load, the City benefits from jointly shared
experience and collective purchasing power azranged through CAPP; and
WHEREAS, it is necessary for the City to contract for a supply of electricity in 2003 or
at least partially reveR to price to beat rates (PTB); and
WHEREAS, CAPP's current delivered energy prices provide savings when measured
against PTB, and PTB rates likely will be increased before the end of the
year.
1 813\00'unacbth020805gmg
.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
TEXAS:
1.
That the City Manager or his designee is hereby authorized to sign an electric power
agreement pursuant to the contract approved and recommended by the CAPP Board of Directors
within 24 hours of said approval and recommendation. The contract may be for a 12 to 24
month time frame.
U.
A copy of the resolution shall be sent to Mary Bunkley with the City Attorney's office in
Arlington before September 30, 2002.
PRESENTED AND PASSED on this day of , 2002, by a vote
of ayes and nays at a regular meeting of the City Council of the City of
, Texas.
Mayor
ATTEST:
1813?00\ma6~oth0208059mg