11-I Electric Supply ContractDRAFT
F:ALICEhO. EWORK\CURRENT CAPP Electric Supply Agr for 2004 Res
September 5, 2003
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, 2004; AUTHORIZING
ELIGIBLE DESIGNEES TO INCLUDE THE CHAIRMAN OF CAPP.
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 and 2003 for its members; and,
WHEREAS, CAPP anticipates preserving current contract terms and achieving commodity
prices in a contract for a 12 to 24 month period effective January 1, 2004 that continue to produce
savings over the regulated price to beat (PTB); and
WHEREAS, CAPP believes that the pricing opportunity window for favorable 2004-2005
deliveries will be short-lived (in the October to mid-November time period) 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, experiences in contracting for 2002-2003 demonstrated that Retail Electric
Providers demand immediate response to an offer and may penalize delay with higher prices; and,
WHEREAS, the deregulated electric market is complex, likely to penalize those unaware
of its transmission constraints and likely to reward those who can improve the size and shape of the
particular load to be served and the City benefits from jointly shared experience and collective
purchasing power through CAPP; and,
WHEREAS, it is necessary for the City to contract for a supply of electricity for 2004 or at
least partially revert to PTB rates; and,
WHEREAS, CAPP's current delivered energy prices provide savings when measured against
PTB, and PTB rates likely will continue to remain higher than prices CAPP can achieve on behalf
of the City; 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 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 designee may include the
Chairman of CAPP. The contract may be for a 12 to 24 month time frame.
Section 3. That a copy of this resolution shall be sent to Mary Bunkley with the City
Attorney's office in Arlington and Geoffrey M. Gay, legal counsel to CAPP, before October 8, 2003.
and
PASSED AND APPROVED on this 8th day of September, 2003, by a vote of__ ayes
__ nays at a regular meeting of the City Council of the City of Paris, Paris, Texas.
ATTEST:
Curtis Fendley, Mayor
Mattie Cunningham, City Clerk
APPROVED AS TO FORM:
Larry W. Schenk, City Attorney
LLOYD, GOSSELINK, BLEVINS, ROCHELLE,
BALDWIN & TOWNSEND, P.C.
ATTORNEYS AT LAW
111 CONGRESS AVENUE TELEPHONE (512) 322-5800
SUITE 1800 Mr. Gay's Direct Linc: (512)322-5875 TELECOPIER (512)472-0532
AUSTIN, TEXAS 78701 EmaJl: ggay~lg]awfirm.com www. lalawfirm.com
MEMORANDUM
TO: CAPP Members
FROM: Geoffrey M. Gay
DATE: September 5, 2003
RE: Resolutions Authorizing Signatory For 2004 CAPP Electric Services
Agreement
First Choice Power has notified CAPP that it will not offer the price necessary to
trigger the option for 2004 service under the electric services contract for 2003 signed
late last year. Yesterday, the CAPP Board authorized the release of a new request for
proposal from retail electric providers to serve CAPP's electric load in 2004. Since the
current contract option was not exercised and a new contract must be prepared and
signed, each CAPP member must designate an individual to sign a document
committing the member's load to the new CAPP contract (most likely to be signed in
October).
Attached please find a model resolution for your consideration. This or a similar
document must be passed during the next four weeks. The model places the authority
to sign with the city manager or the city manager's designee. This year I encourage,
with the CAPP Board's permission, each city manager to designate Jay Doegey,
Chairman of CAPP, as the authorized signatory. If your city council is uncomfortable in
authorizing your city manager to delegate to CAPP the power to sign the contract on the
city's behalf, the model resolution can be modified by deleting the last phrase in the
header and the next to last sentence in Roman Numeral I under "Be It Resolved..."
Given the savings and the favorable terms and conditions that CAPP has
achieved during 2002 and 2003, I am hopeful that most cities will find it expedient to
trust the CAPP Board (consisting exclusively of city employees) and pass the model
resolution in its current form. Please remember that the market expects 24-hour
acceptance of an offer of a given price. If you intend to rely upon the city manager or
other designated city employee to sign the contract, that person must be available
during the mid to late October time frame for immediate consideration of the contract.
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My office will contact each city in the near future for an update on the timing of
passage of an authorizing resolution and the name of the designated signatory. Please
send a copy of the resolution upon passage to both the City Attorney's office in the City
of Arlington and my office.
Please feel free to call me if you have any questions.
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LLOYD, GOSSELINK, BLEVINS, ROCHELLE,
BALDWIN & TOWNSEND, P.C.
ATTORNEYS AT LAW
111 CONGRESS AVENUE TELEPHONE (512) 322-5800
SUITE 1800 Mr. Cray's Dir~'tLine: (512)322-5875 TELECOPIER (512)472-0532
AUSTIN, TEXAS 78701 Email: g~ay~lglawfim].com www. lalawflrm.com
MEMORANDUM
TO: CAPP Members
FROM: Geoffrey M. Gay
DATE: September 5, 2003
RE: Electric Franchise Fees For 2002
Cities that recently received franchise fee payments in August for electric
consumption in 2002 may have noticed a decline in value in comparison to comparable
payment in 2001. Many cities may experience significant (double digit percentage) lost
revenue. The primary causes for decreased fee payments are: first, a 1999 legislative
change to a formulaic approach that became effective January 1, 2002 and second,
2001 was an extraordinary year for utility revenues because of high fuel costs and
surcharges of previously under-recovered fuel costs. It is important to note that the
selection of a particular retail provider over other potential providers plays no role in the
calculation or payment of franchise fees. In other words, the franchise fee payments to
CAPP member cities during 2003 for consumption within municipal limits during 2002 is
not influenced by CAPP's choice of provider. Your city's franchise fee recovery would
be the same irrespective of whether CAPP contracted with First Choice Power, TXU,
Reliant, or any other retail electric provider that serves the Texas market.
PUPA Section 33.008 now requires that franchise fees be based upon a factor
(that will vary by city) multiplied by the total sales (kWh) within municipal limits. The
factor is the ratio of kWh consumption within a city during 1998 and the franchise fees
paid on those 1998 sales (factor = 1998 fees/1998 kWh). Thus, current franchise fees
are not sensitive to changes in the price of electricity. Furthermore, it is the incumbent
transmission and distribution or "wires" company that is responsible for paying franchise
fees as a rental on the use of public rights-of-way. The franchise fees are recovered by
the wires company as part of the non-bypassable rates set by the Public Utility
Commission.
CAPP's legislative agenda during the most recent regular legislative session
included a bill to add an inflation adjustment to the statutory language on how electric
franchise fees are to be calculated. The bill did not get out of committee. This issue will
likely remain on CAPP's legislative agenda until the law is changed.
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