HomeMy WebLinkAboutABAG PowerAGREEMENT
between
ABAG POWER
and
Town of Los Altos Hills
to Wind Up Electric Program
This Agreement between ABAG Publicly Owned Energy Resources (ABAG POWER), a joint
exercise of powers agency created under the California Joint Powers Act (California
Gornment Code §§6500 et seq.), and Town of Los Altos Hills (Town), is made effective
C*�evr-C_ !d, zggo C4 .
RECITALS
A. The Town became a signatory to the Joint Powers Agreement creating ABAG POWER
(JPA) (Attachment A, Exhibit 1) and a Member of ABAG POWER.
B. ABAG POWER has been, and continues to be, staffed by employees of the Association
of Bay Area Governments (ABAG).
C. The Town and ABAG POWER entered into the Direct Access Electric Aggregation
Agreement (DA Agreement) (a form of the DA Agreement is at Attachment A, Exhibit
2). Under the DA Agreement, the Town was a participant in the direct access electric
aggregation program (Electric Program) until the Electric Program was suspended
effective June 30, 2001 (the Electric Program 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 Working 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 (amounts owed to ABAG POWER and Members)
(liabilities, assets and costs are described in more detail in Attachments B and C).
F. 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 Town agree to wind up the Electric Program under the
following terms and conditions:
Payment, Town 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 ($6,099)
c) DA Credit - ($4,892)
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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 to Town the following sums:
a) In complete payment of the Balancing Account owed Town, such funds as are
available as of July 1, 2004. Both the payment schedule and the amounts to
be paid to Town are determined by §4 of this Agreement.
b) In complete payment of the Working Capital Deposits owed Town, the sum of
($6,099) within fifteen (15) days after the Town'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 Credit owed Town, the sum of ($4,892) within
fifteen (15) days after the latest of the following: i) the Town's execution and
return of an original of this Wind Up 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 Town, 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
Town are determined by §5 of this Wind Up Agreement.
e) In complete payment of the PX Escrow Deposit owed the Town, 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 Town are determined by §5 of this Wind Up
Agreement.
f) In complete payment of the Wind Up Costs Hold Back, the amount determined
under §11 of this Wind Up Agreement 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 Town acknowledges that:
a) funds available for disbursement were determined by ABAG POWER as
described in greater detail in Attachment C. Further, Town 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 equal 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 who were participating in the Electric Program
at the time of suspension ("Usage Ratio"). Further, Town approves such
allocation.
c) Working Capital Deposits were made by the Members in accordance with ABAG
POWER's financial records (see Attachment C). Town 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 Town's deposits to Working Capital to all
Working Capital Deposits made by all Members who were participants in the
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Wind Up Agreement
Electric Program at the time of suspension ("Working Capital Ratio"), Further,
Town approves such allocation.
d) the payment described in §1(c) is the result of allocating the DA Credit
available for disbursement among the Members in a ratio equal to the CTC
Reversals paid by Town 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, Town approves such allocation.
4. Balancing Account Payment Amount and Schedule. The amount of the Balancing
Account Payment to Town 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 have an independent financial audit
conducted for fiscal year 2003-04 which will identify the total amount available for
distribution. This amount will be allocated by the Usage Ratio and sent to Town no
later than March 31, 2005.
5. 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 Hundred 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 the 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. Upon 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 Town's share will be determined using the
Usage Ratio. ABAG will pay Town 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 warrants 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) ABAG 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 analysis 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 reached.
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. Town Due Dilicience_an__d Acceotance of Representations and Warranties. The Town
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 Town
hereby:
a) Releases ABAG POWER and ABAG from any and all liabilities or claims which
the Town, 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 Town, or anyone claiming through it, may have against ABAG POWER or
ABAG for any damages or injury arising out of the Town's participation in the
Electric Program.
c) Accepts the Contingent Risks described in Attachment D.
d) Agrees to defend and indemnify ABAG POWER and ABAG against any claims
made by any person claiming any rights through the Town for damages
resulting from the Town'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 Town acknowledges that each Member
executing a Wind Up Agreement substantially identical to this Wind Up Agreement,
excepting only the amounts set forth in §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 Town agrees that it will not make any claim against a Third
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Wind Up Agreement
Party Beneficiary for monies owed, or damages incurred by the Town, as a result of
the Town's or such Member's participation in the Electric Program.
9. Covenants.
a) The Town hereby covenants that it will 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 Town, any 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 Town and all Third Party 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 Town and all Third Party Beneficiaries to eliminate,
mitigate or resolve the possibility that a Contingent Risk will be triggered,
2) Cooperate with the Town and all Third Party Beneficiaries to fairly and
reasonably allocate costs associated with any Contingent Risk that is
actually incurred by the Town or 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 to 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 Beneficiary 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 Party Beneficiaries in accordance with CTC
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Wind Up Agreement
Reversal Ratio for any costs associated with recovery of DA Credits and in
accordance with the Usage Ratio for costs associated with recovery of
energy and/or UDC costs (see Attachment D).
5) Receive from the Town the share of any Contingent Risk incurred by the
Town, 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
Town is hereby terminated.
14. Assignment. This Agreement shall not be assigned, transferred, hypothecated, or
pledged by the Town.
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 Agreement shall be binding upon the successors,
assigns, or transferees of ABAG POWER or the Town 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. Severability. 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 the 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 reasonably 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 all 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 Beneficiaries 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. `
Dat • �z v+ 4�kO4
Dated: JCA �, a o U 7
MEMBER:
Signature,/
®� Y
Print �/,/,
Title f
ABAG PUBLICLY OWNED ENERGY
RESOURCES (ABAG POWER):
E
Euge r .Leo ,President
Approved as to Legal Form and Content:
By: L '---
Ke eth K. Mo al Counsel
ABAG Pub j wnednergy Resources (ABAG POWER)
Page 7
Wind Up Agreement
ATTACHMENT A
Exhibit 1 ABAG POWER JOINT POWERS AGREEMENT
Exhibit 2 DIRECT ACCESS ELECTRIC AGGREGATION AGREEMENT
EXHIBIT 1
JOINT POWERS AGREEMENT
creating
ABAG POWER
The public entities listed in Appendix A (Members) 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 form 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 purchase 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 procure related services on behalf of public
entities in the Pacific Gas & Electric Company's (PG&E) service area.
F. The formation of ABAG POWER enables the Members to take advantage of the
opportunities described in paragraph D in such manner 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.
Agreement
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
Wind Up Agreement — Attachment A
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 JPA 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 exercising 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 Section 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 debt, liability or obligation of any Member except
as separately agreed to by a Member 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
(1) Exercise all other powers necessary and proper to carry out the provisions of this
Agreement.
Wind Up Agreement — Attachment A
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 Members to execute the provisions of this
Agreement and implement programs undertaken by ABAG POWER. The
Members acknowledge that this designation 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 may not be removed as the administrating
Member except by reason of its fraud, gross negligence or gross
mismanagement or by a vote of two-thirds (2/3) of the authorized directors of
the Board.
(b) ABAG POWER will compensate ABAG 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 may serve any number of terms.
(c) Compensation. Directors and alternate directors are not entitled to
compensation. The Board may authorize 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 Board 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 may create other committees as set forth in the
Bylaws. ,
10. Officers and Employees.
(a) The officers of ABAG POWER are the 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
formation of ABAG POWER. If either 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 entitled to compensation. The Board may
authorize reimbursement of expenses incurred by officers.
(d) The Board may create such other offices 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 Debts and Obligations 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 any 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 transactions 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 POWER will pay the cost of the financial audit
and charge the cost against the Members in the same 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 administration 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 established 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 section only, all Members admitted after January
1, 1999 are New Members.
(a) A public entity may be admitted as a New Member only upon a two-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 a 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 if such withdrawal would adversely affect a
bond or other indebtedness issued by ABAG POWER, except withdrawal under such
circumstances may be effected upon a two-thirds (2/3) vote of the Board.
Wind Up Agreement — Attachment A
18. Expulsion/Suspension. ABAG POWER may expel or suspend a Member by a two-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 POWER 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 purpose 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's 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 amended 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. Severability. 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 which 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.
6
Wind Up Agreement — Attachment A
27. Effective Date. This Agreement becomes effective and ABAG POWER exists as a
separate public entity when the sum of the electric usage for all accounts committed by all
Members under all Direct Access Electric Aggregation Agreements between the Member and
ABAG equals or exceeds three hundred seventy thousand (370,000) mWh in a one year period.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and
year written below.
Date: By:
APPROVED AS TO LEGAL FORM
Legal Counsel
Attest:
Wind Up Agreement — Attachment A
APPENDIX A
ABAG POWER MEMBERS
Wind Up Agreement — Attachment A
EXHIBIT 2
DIRECT ACCESS
ELECTRIC AGGREGATION AGREEMENT
by and between the
ASSOCIATION OF BAY AREA GOVERNMENTS
and
PUBLIC AGENCY
within the service territory of
Pacific Gas & Electric Co.
dated '1998
This Direct Access Electric Aggregation Agreement, hereinafter "Agreement", is made
and entered into as of this day of 199_, by and between the
Association of Bay Area Governments (ABAG), a California joint powers agency, and
(Public Agency), a California
The parties hereby agree as follows:
1. Eligibility: 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 said program Participant(s).
2. Authorities: All parties understand and agree 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 Pacific 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 and 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 the transactions set forth, or contemplated, in
this Agreement will comply with CPUC requirements 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. ABAG has used its best good faith effort to
enumerate in said paragraph all such conditions 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 all conditions imposed on Public Agency to
participate in direct access as a customer, including but not limited to:
(a) submit such documents as may be required by the CPUC to the appropriate
entity,
Wind Up Agreement — Attachment A
(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 stranded 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 (UDC) 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. The 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 Meters.
5. CPUC Conditions Precedent to ABAG's Obligations: ABAG will take such action as
may be necessary to meet all conditions imposed 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 Supply: 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 ABAG 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 and 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 on the spot market or to the supplier.
Wind Up Agreement — Attachment A
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 proposal 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 provide 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 its 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 Changes 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, distribution, billing, and, if applicable, Hourly
Metering services, ABAG will establish up to ten (10) rates, each expressed as $x.xx/kWh
Wind Up Agreement — Attachment A
and will allocate each Account to a rate (Rate Schedule). In addition to the costs identified
in the preceding sentence, the Rate Schedule will 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 size 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 and 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 Contingency Reserve in a ratio in which the
numerator is the total estimated usage for all its Accounts and the denominator Is the total
estimated usage for all accounts in the aggregation (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) will be determined by ABAG.
14. Credit Reserve: Based on the size of the aggregation, ABAG will establish a Credit
Reserve for the purpose of meeting CPUC established 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 its 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 Account, ABAG will include in each monthly
invoice Public Agency the meter cycle, actual usage 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 as 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 Amounts 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
Wind Up Agreement — Attachment A
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, absent 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 Agency'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 Reserve 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 Agency fails to make timely payment, consistent
with the terms employed by ABAG, in addition to 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 agreement. ABAG is further authorized to invoice
Public Agency for reasonable charges associated with demands for payment on late
accounts as well as reasonable charges associated 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 Charges 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.
Wind Up Agreement — Attachment A
23. Cancellation:
23.1 Cancellation by Public Agencv: Commencing 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 liability related to the subject matter of the
Agreement. Public Agency may cancel the contract by giving ABAG sixty (60) days prior
written notice its intent to terminate effective December 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, Resorts 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 to, and copyright ownership of, all such
documents. The Public Agency hereby grants to 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, arising 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
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 Agency 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 Agreement 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 provisions 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.
Wind Up Agreement — Attachment A
34. Other Contract Provisions: This Agreement will be subject to the other standard
provisions set forth in the attached Exhibit B, which is incorporated by this reference.
IN WITNESS WHEREOF, the parties have hereunto set their hands effective the date and
year first above written.
ASSOCIATION OF BAY AREA GOVERNMENTS
By:
Eugene Y. Leong, Executive Director
Approved as to legal form and content:
By:
Kenneth K. Moy, Legal Counsel
PUBLIC AGENCY
By:
Approved as to legal form and content:
By:
Account Number
Date:
Date:
Date:
Date:
9
Wind Up Agreement - Attachment A
i.
f
-
'g
:
ASSOCIATION OF BAY AREA GOVERNMENTS
By:
Eugene Y. Leong, Executive Director
Approved as to legal form and content:
By:
Kenneth K. Moy, Legal Counsel
PUBLIC AGENCY
By:
Approved as to legal form and content:
By:
Account Number
Date:
Date:
Date:
Date:
9
Wind Up Agreement - Attachment A
DIRECT ACCESS AGGREGATION AGREEMENT - EXHIBIT A
List of Accounts
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 Agreement 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 grantors 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 and providing that such Insurance is primary
insurance and that no insurance of Public Agency will be called upon to contribute to a loss.
10
Wind Up Agreement — Attachment A
(4) Promptly upon execution of this Agreement, 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 by 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 subcontractors 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.
Wind Up Agreement — Attachment A
ATTACHMENT 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 promulgated 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 the 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 are 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 PG&E,
(c) electric grid services (reliability and control) from the ISO,
(d) schedule coordination (as described below) from NCPA,
(e) billing services from Arizona Public Services (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 Electric Program. Occasional services included,
but are not limited to, financial auditors, attorneys, electric meters sales and installation and
meter reading services.
ABAG POWER paid for the resources described above 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."
' 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 deposit funds were maintained at a level
sufficient to pay for 90 days (estimated) worth of 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 UP PLAN
Upon the suspension of the Electric Program, ABAG 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 a one-week period in August 2000 during
which it did not purchase electricity for the Members 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 UDC 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 been, and may never be invoiced to ABAG
POWER (for further discussion see Attachment D).
Based on the foregoing, ABAG POWER is concluding the wind up of the Electric Program
without settling the potential liabilities for UDC Charges 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 Escrow 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 eln
DIRECT ACCESS CREDIT
The Direct Access Credit results from the intersection of CPUC regulations and
extraordinarily high prices for electricity in 2000. The following is excerpted from a CPUC
draft document that describes what the Direct Access 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 a Commission -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 from 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 was 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 customers 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 credit 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 cin
Prior to June 1999, under the adopted tariffs, DA customers receiving the PX credit
could experience, at a minimum, a monthly 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 bills.
The dysfunction of California energy markets in 2000 through early 2001, undermined
the original basis for calculating the DA credit. The prices charged the utilities during
the waning days of the PX were substantially 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, PG&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% per annum. PG&E has paid Seventeen
Million Dollars ($17,000,000) in principal and Two Million Four Hundred Thousand Dollars
($2,400,000)in interest in fulfillment of the settlement.
Wind Up Agreement-Attmt B- v18 4-28-04 eln
ATTACHMENT 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 Board 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 $740,000 (see table
on next page)
Total CTC reversal
collected
from each member
Other
Working capital
Total working capital
collected from each
member
Members' Balancing
Account
Accumulated operating
Surplus/deficit
Total KWH usage
The following table shows balances of total audited assets and proposed disbursements as
of June 30, 2003 and current balances as of April 15, 2004 and target dates of distribution.
Total Assets
Payable to Members
PG&E Distribution*
Other
Members' Balancing
Account
Total Disbursements
Audited
Interim
Balances
Balances
6/30/2003
4/15/2004
($'MM)
($'MM)
23.84 24.36
Status
Will increase by accrued
interest net of operating
expenses
Target
Distribution
Date
As stated
below
18.27
18.83
Will not change
6/15/2004
5.41
5.41
Will not change
6/15/2004
0.16
0.12
Will decrease by operating
03/31/05,
expenses
after the FY 04
audit
23.84
24.36
* On February 18, 2004, the Executive Committee 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
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ATTACHMENT D
CONTINGENT RISKS
RISK ANALYSIS
Attached as Exhibit A is a table setting forth ABAG 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 how 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 a one-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 price 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 became 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 difficulties, and actions being taken to rectify
the situation. PG&E acknowledged that it had received ABAG POWER's notice, and although
it believed that ABAG POWER was in default of its 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 simple 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 electricity 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 the
price for imbalance energy an estimate of the amount of electricity that the Electric Program
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 on 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 that 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 DEPOSIT
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 bankruptcy 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 reductions 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 in 2000.1
The FERC has been engaged in a proceeding to determine 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 Appendix A, "Direct Access Credit."
Wind Up Agreement-Attmt D- 4-28-04 All
proceeding is now trying to determine what "just and reasonable" rates should have been
during specific times.z 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. However, 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 ratemaking 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 Credit 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 could have been raised, in the CPUC Complaint,
and all issues that were raised, or could have 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." 4 (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 its 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 argument and §4 is the negotiated compromise.
Background
On December 22, 2003, the U.S. Bankruptcy Court for Northern California, San Francisco
Division confirmed a Pian of Reorganization for PG&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 was pursuing claims challenging certain
actions by the CPUC during deregulation (CPUC Proceedings). Further, PG&E filed suit in
Federal District Court for Northern California against the CPUC challenging various aspects
of the deregulated energy market created under CPUC regulations and guidance. The CPUC
2 Pricing occurred on an hourly basis.
' One estimate of the impact of ]mown (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.
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 Settlement Agreement dismissed the lawsuits and
the CPUC Proceedings with prejudice, and committed both parties to supporting and
Implementing what ultimately became the Confirmed Plan. The dismissed CPUC
proceedings do not include the 1998 RAP or ABAG 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 02-04-026 (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 over PG&E.
3. The current CPUC and future CPUCs are bound 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 Access 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 action.5
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 date of a final order. The period in question,
December 28, 2000 to January 18, 2001, is two years old and counting. It is unfair for
5 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 years 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 and 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 full. (emphasis added )"7 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 Master Settlement Agreement], the
[Confirmed Plan] or any order entered by the [Bankruptcy Court] contemplated by or
required to supplement [the Master Settlement Agreement and the Confirmed Plan]."8
Ancillary Analysis
In addition to the "logic" of a bureaucratic recalculation of the Direct Access Credits in
response to the anticipated FERC ordered price reductions, 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 - Draft 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 Settlement 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 of the same FERC price rollback.9 The direct
6 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 which ABAG POWER's credits were "generated."
7 Settlement Decision, p. 78.
8 Master Settlement Agreement, p. 18, §21.
9 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.`
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 entitles such as ABAG POWER's electricity members) in order to
wring out the last bitter drop of savings generated 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 the Direct Access Credits paid to ABAG
POWER. However, ABAG POWER can pose the following legal argument in position: (a) the
CPUC is estopped from so doing by the CPUC's findings and actions in reaching the Master
Settlement Agreement with PG&E, and the CPUC'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 motivation 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. Allocated amounts have been rounded to the
nearest 10 dollars. Please see Attachment D for an explanation of the methodology and basis for this
(A)
A
(D)
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
$ 4,920
$ 5,550
$ 9,350 $
19,820
Town of Los Altos Hills
470
530
1,220
2,220
City of Antioch
74,030
83,420
164,090
321,540
City of Arcata
5,360
6,040
15,470
26,870
Town of Atherton
2,860
3,220
8,000
14,080
City of Benicia
18,160
20,470
50,600
89,230
City of Berkeley
4,060
4,570
55,190
63,820
County of Butte
28,680
32,310
107,610
168,600
City of Cloverdale
7,700
8,670
29,570
45,940
County of Monterey
78,860
88,860
151,450
319,170
County of Contra Costa
207,960
234,320
778,930
1,221,210
City of Cotati
3,960
4,460
10,690
19,110
City of Cupertino
20,620
23,230
49,040
92,890
City of Daly City
62,020
69,880
357,930
489,830
City of Davis
3,320
3,740
3,720
10,780
City of El Cerrito
5,130
5,780
16,530
27,440
City of Foster City
19,770
22,280
54,620
96,670
Golden Gate Bridge District
19,880
22,400
101,650
143,930
City of Gonzales
5,630
6,350
15,130
27,110
City of Half Moon Bay
2,840
3,200
7,180
13,220
H.A.R.D.
12,630
14,230
38,750
65,610
City of Hercules
7,890
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 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. Allocated amounts have been rounded to the
nearest 10 dollars. Please see Attachment D for an explanation 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.
(A)
(B)
(D)
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
44,790
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
910
1,020
3,800
5,730
2,880
3,240
17,130
23,250
7,770
8,760
26,690
43,220
91,810
103,450
346,500
541,760
20,620
23,240
131,420
175,280
24,810
27,950
93,390
146,150
6,570
7,410
11,540
25,520
$ 1,419,980
$ 1,600,000
$ 4,676,010 $
7,695,990