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Home My WebLink About7/3/2002 - STAFF REPORTS (25) rf SOUTHERN CALIFORNIA � Region Manager An EDISON INTERNATIONAL"Company June 28, 2002 To The Palm Springs City Council Members And The City Manager Dear Mayor Kleindienst and Honorable Council members: I am writing you to request the opportunity for the Southern California Edison Company to make a presentation to the Council regarding the proposed municipalization in the Coachella Valley. SCE attended the Council study session on June 26 when CVAG and EES Consulting made their presentation and were appalled at the amount of misinformation and misrepresentations made to the Council. Because there is now an item on the next Council agenda to take action on this issue, we believe it is critical for you as elected leaders of Palm Springs to allow SCE the opportunity to share our analysis and conclusions as to the economic viability of the proposed municipalization of the Valley. I look forward to hearing from you on this request. As was recognized Wednesday evening, this is a complicated and expensive proposition that is in need of a thorough public discussion prior to any formal policy decision. Sincerev, a •leen DeRosa Public Affairs Region Manager Cc: City Manager Assistant City Manager 36100 Cathedral Canyon Cathedral City,CA 92234 760-202-4211 1, Fax 760-202-4136 SOUTHERN CALIFORNIA J EDISON Region Manager An EDISON INTERNATIONAL"Company July 1, 2002 Mr. Will Kleindienst Mayor City of Palm Springs 3200 E. Tahquitz Way Palm Springs, CA 92262 Dear Mayor nst: (ltje_e� The question of whether Coachella Valley cities should take over Southern California Edison's (SCE) electric distribution facilities and form a new utility is of tremendous importance and potentially long-lasting consequences to the Valley, its taxpayers, residents and businesses. As many local elected officials have acknowledged, reliable information is essential to making an informed decision. Recent city council meetings in Rancho Mirage and Palm Springs have unfortunately failed to resolve questions about the relevant facts and issues. The issue before each city council in the Coachella Valley is not whether people like SCE, or whether people would like lower electric rates. The question is whether the proposed municipalization will result in lower rates. EES Consulting's study promises lower rates, but SCE's analysis of the EES study identified several matters of fact—not opinion—that show it will result in higher rates. Specifically, we believe that two significant errors were made by EES that would result in higher rates by a new government-owned utility • First, EES very clearly states in its June 4 memo that SCE's distribution rates are 4.94 cents per kWh. This is simply wrong, and is in fact about 2 cents higher than SCE's rates- This translates into a$46 million overestimation of the amount of distribution revenue it can utilize in projecting possible CVAG electric rates, lowering the amount available from $112 million to $66 million annually. • Second, in the same June 4 memo EES now projects $45 million per year in operating and maintenance costs rather than the $33 million($270/customer times 123,000 customers) EES stated in its Report. Taking these two factors into account,the proposed JPA Utility would not be able to cover its costs even if it made no reduction from SCE's projected distribution rates, and it was able to obtain SCE's facilities at their Original Cost plus a 14 percent premium. / //� Cathedral Cathedral Canyon it ,J`-/ 1 Cathedral City, CA 92234 (/�O �/C7/G, 760-202-4211 Fax 760-202-4136 (� l SOUTViERN CALII°ORNIA EDISON An EDISON INTEPIVAIYONALS Company To support SCE's position that a $46 million error was made, we ask that you and EES review the CH2M Hill Overview Report we distributed to councilmembers in each city last week. In addition, please review the documents provided to you in SCE's May 31, 2002 written comments that clearly demonstrate, using official documents filed with the California Public Utilities Commission, the facts regarding our distribution rates. After you review this information, we would like to meet with you to discuss the CH2M Hill conclusions. Because the differences in their conclusions stem from disagreements as to matters of fact,we would hope such a meeting could drive the matters to ground. If after this meeting and any agreed-upon follow-up, there are still questions or a disagreement on SCE's distribution rates, then SCE would entertain the possibility of splitting the cost with the EUMFS Group to have a mutually agreeable third party perform a limited review of SCE's, EES' and CH2M Hill's distribution rate positions to verify the existence of the two-cent error. This confirmation would provide the EUMFS Group with the necessary factual information on which to make a decision. I will call you shortly to discuss your views on these two factors, and to schedule a follow-up meeting. I hope you will accept our offer to meet and resolve these issues so that the EUWS Group can gain a clear understanding of the facts and begin to provide accurate information to the public prior to any public vote being scheduled. Sinc ely, Ka een DeRosa Public Affairs Region Manager cc: City Manager City Council Members Mission Springs Water District Board Members Desert Water Agency Board Members Coachella Valley Water District Board Members Agua Caliente Band of Cahuilla Indians Tribal Board Members' 36100 Cathedral Canyon Dr. 2 Cathedral City,CA 92234 A CH21VI HILL 825 NE Multnomah Suite 1300 Portland,OR 97232-2146 / � Tel 603.235.5000 V�riV-�,Ir-'SL��II L Fax 503.736.2000 July 2,2002 Mayor Will Kleindienst City of Palm Springs 3200 Tahquitz Canyon Way Palm Springs,CA 92262 Subject: CH2M HILL Relationship to Southern California Edison and the June 26 Remarks of Mr. Gary Saleba at the Work Session on CVAG Municipalization Efforts Dear Mayor: At the June 26,2002 City Council work session,Mr. Gary Saleba,EES Consulting,suggested that our comments on EES Consulting's work lacked objectivity because of another business relationship between CH2M HILL and Southern California Edison. Tiffs is not the case and should not shift the discussion away from the issue of feasibility of a new utility. Very few municipalization efforts are successful and many of the feasibility studies done to support the efforts have understated the costs of acquiring the existing utility's system. We hope the discussion can remain focused on the$46 million dollar difference between EES Consulting's estimated Edison distribution costs of 4.94 cents per kWh and the actual cost,which is now 2.75 cents per kWh and might increase to 3.1 cents per kWh. This difference represents almost all of the claimed savings from a new utility. This is the real issue. Mr. Saleba alleged a lack of objectivity because CH2M HILL has a very small ownership interest in a firm that is owned by Edison. The following provides background on CH2M HILL's business and our relationships with Edison. We hold ourselves to strict standards of professional conduct. Our other business relationship with SCE does not affect our objectivity in assessing whether or not a new municipal utility will in fact result in lower electric rates. We have been told by many of our clients that our familiarity with both investor-owned utility issues and publicly owned utility issues, and our impartiality that has come from working for both sectors of the industry,has been important to our selection as a consultant. We have advised some public agencies that municipalization would not be feasible and we have advised some investor-owned utilities that a proposed municipalization might be feasible. tl Mr.Will Kleindienst Page 2 July 2,2002 Our advice to Edison is the same advice we would give to the Coachella Valley cities if we were their consultants. CH2M HILL Background CH2M HILL is a large employee-owned engineering and consulting company with over 15,000 employees and annual revenues approaching$2 billion dollars. We work in the areas of water and wastewater,transportation,environmental stewardship, and energy. This work is for local,state,and federal governments and for private companies. We have done work in all 50 states and employ a staff of well over 1,000 in California. At any given time, we have over 10,000 open projects for over 1,500 different clients. We enjoy an excellent reputation with our clients,with regulatory agencies,within our profession,and our peers.We are proud of our reputation,strive to conform to the highest ethical standards,and believe our integrity is second to none. Relationship with Southern California Edison and the Conservation Financing Corporation We do have a 0.1 percent ownership interest in the Conservation Financing Corporation (Company),which is owned by Edison. The Company holds the environmental liabilities for the cleanup and mitigation costs for Edison's Visalia Pole Yard Superfund Site, the San Onofre Nuclear Generation Station(SONGS) Marine Mitigation Program,the Wetland mitigation project and an artificial kelp reef mitigation project for impacts from the SONGS project. In 1997,CH2M HILL made a$150,000 purchase of Class B,non-voting shares in the Company. This is CH2M HILL's investment;it is one tenth of one percent of the$151 million capitalization of the Company,which was funded from an insurance settlement. We advise and counsel the Company on environmental remediation efforts and techniques at several of its contaminated sites. To the extent we can help reduce the actual remediation costs to below the insurance settlement amount,we will share in the savings. We have no decision-making authority in the Company. Payout from the Company is expected October 31,2003. This relationship is essentially a consulting assignment with the compensation provided on a different basis than time and expenses. This relationship was disclosed to the California PUC at the time the Company was formed. CH2M HILL also has an agreement whereby it can market and utilize a steam injection environmental remediation technology,developed by Edison,in exchange for a payment to Edison of 5 percent of the total revenues on a remediation project at which it uses the technology. We have employed this technology on one project to date. Exclusive of these two arrangements,we have done about$1 million in work for Edison over the last 5 years. These primarily have been environmental site assessments associated with Edison s sales of properties as a result of California deregulation. x Mr.Will Kleindienst Page 3 fuly 2,2002 None of these are related to our current assignment of reviewing the feasibility of a new municipal electric utility in the Coachella Valley. Other Assignments in California We provide services to both public and privately owned electric utilities. We are providing engineering services to the City of Corona,in its attempts to develop its own power supply and to provide service to the Golden Cheese Factory. We have an owner's engineer assignment with the City of Pasadena for its development of several peaking generation units. We are doing non-power related work for the Los Angeles Department of Water and Power and for the Imperial Irrigation District. We have done work for Pacific Gas&Electric and San Diego Gas&Electric. We are doing work for several power plant developers in California and elsewhere. We are doing work for the Los Angeles Department of Water and Power,the California Energy Commission,numerous California municipalities,water and irrigation districts,and other agencies. Avoidance of Conflicts in General and in Municipalization Efforts We work in so many areas and for so many clients that it is essential we make our clients aware of potential conflicts of interest,do quality work,and avoid political advocacy that is counter to our clients'interests. History of Performance on Municipalization Projects Our municipalization work for Edison is an outgrowth of our municipalization analysis for the City of Berkeley,California,done in 1972. Our study for Berkeley concluded that Berkeley's municipalization of the PG&E system yielded a positive net present value and was feasible. The municipalization never occurred for various reasons. In addition we have performed municipalization studies for the following cities and investor-owned utilities: • Tillamook PUD,Oregon • Grays Harbor PLD,Washington • City of Miami Beach,Florida • Southern California Edison • Pacific Gas&Electric • Arizona Public Service • El Paso Electric Research into our background will show that we are respected throughout our industry. We can provide you with references on the quality of our work and our objectivity. Mr.Will Kleindienst Page 4 July 2,2002 We will be happy to report, discuss, and defend any work products we produce and to make public the details of our analysis. This is something that EES Consulting has been unwilling to do. If after thorough analysis,scrutiny and discussion,a new municipal utility can provide lower rates,with a high degree of certainty given the attendant risks,it should be formed. Sincerely, CH2M HILL Curtis L. Bagnall,P.E. Vice President c: Mayor Gerber,City of Rancho Mirage Mayor Negron,City of Indian Wells Mayor Richard Kelly,City of Pahn Desert Mayor Stattler,City of Cathedral City Mayor Weyuker,City of Desert Hot Springs Martha Edgmon From: Bob Winet[lbobwl@gte.net] Sent: Wednesday, July 03, 2002 9:47 AM To: DeynaH@ci.palm-springs.ca.us Subject: Coachella Valley Power Authority Dear Councilwoman Hodges, Please give your voters the opportunity to make an informed decision on this issue on the ballot this fall. If anyone knows the importance of listening to their constituents it is you. Respectfully, Bob Winet www.AddedValue.net www.FavoriteNet.com 4550 E. Mesquite Ave. Palm Springs, CA 92264 760-323-7553 cell 760-774-4450 fax 760-770-4092 email: lbobwl@gte.net Martha Edgmon From: Ron Oden Sent: Wednesday, July 03, 2002 9:42 AM To: Martha Edgmon Subject: FW: Coachella Public Power Authority >---------- >From: Bob Winet [SMTP: IBOBWI@GTE.NET] >Sent: Wednesday, July 03, 2002 9:42:54 AM >To: rono@ci.palm-springs.ca.us >Subject: Coachella Public Power Authority >Auto forwarded by a Rule Dear Councilman Ron, Please give your voters the opportunity to make the decision on this important issue on the fall ballot. Respectfully, Bob Winet www.AddedValue.net www.FavoriteNet.com 4550 E. Mesquite Ave. Palm Springs, CA 92264 760-323-7553 cell 760-774-4450 fax 760-770-4092 email: lbobwl@gte.net Bob Winet 760 770 4092 p. 1 F A c S I M I L E TO: p DD FROM: Q VVlht � Name: cltki cadoa — Name: -ftaAckt - Fax #: Fax #: Pages: Date/Time: -S`5C 7 MESSAGE: D&AILK 2 ._ S' MvW PA{ - LfJ' O Ot- 0 NJY-- C6 t)pE H P SAX 11 Jul 03 02 10: 28a Bob Winet 760 770 4092 P. 2 L" ADDED VALUE SS STORAGE Jaly 1, 2002AL SPACES AFFORDABLE MONTHLY RENT CENTRAL BUSINESS SERVICES ENTERPRISE CENTERS Cindy Uken The Desert Sun Opinion Page Editor �f 750 N. Gene Autry Trail V a� V Q�C`lo Palm Springs, CA 92262 Dear Ms. Uken, Re: Coachella Valley Municipal Power Authoft 'LET PALM SPRINGS VOTERS DECIDE" The Palm Springs City Council will meet this Wednesday,July 31 to determine if they will allow their constituents to vote on the issue of the Municipal Power Authority on the fall ballot. Palm Springs voters deserve the right to make an informed decision about forming a locally owned and operated utility for the benefit of residents and businesses in the Coachella Valley. Southern California Edison's (SCE)representatives have been lobbying hard to prevent a vote in Palm Springs, like they did in Rancho Mirage and the other cities involved so far without success. SCE has attempted to discredit the EES consulting study, sponsored by The Coachella Valley of Governments (CVAG). Most of their voluminous written arguments relate to verification of potential cost savings and the inflated value that SCE places on the cost to buy their infrastructure. Wholesale power now costs one tenth what it did when the state PUC approved an average 30%rate hike in March 2001,however,no rate reductions are occurring. Potential cost savings are important,however, the safety and enviromiiental issues are equally important. The Coachella Valley has ideal weather for solar generators. The energy produced by local wind farms should be going to the valley rather than being dissipated into the California grid as it is now. Alternate energy sources provide hope that with a public utility the valley can become self sufficient like the Imperial Irrigation District(IID)in the East valley that includs La Quinta,Indio, Coachella Thermal,et at. IID's annual report indicates they are a very profitable utility. IID's rates are 45%less than SCE although they have more wires,poles and far less density than the area currently serviced by SCE. Their operating costs are actually much lower than SCE. IID sells its power @ 8.67 cents pre kwh,compared to SCE @ 16.3 for SCE residential customers and even higher for small businesses, IID buys 70%of its power and they generate 30%, Arrn cF A.,o...... • V-1„. a....:....a rA 077Gd • ID" .171411 272_7RCq • Ra,r 176I11 47'i_091A , 60 '770 4052 P. 2 O _ 11 _Y Alternate energy sources can increase self generation-without depending on oil, a finite, non renewable resource,that causes pollution in our air. IID has never had a blackout! With the high temperatures of low desert summers blackouts are a public safety issue. Edison's last hope to prevent a local public utility from being formed is to have the Palm Springs City Council not put this issue on the ballot this fall and not let their voters make this decision. Palm Springs City Council is asked t6 show its leadership for the benefit of the whole valley by allowing their voters to make the choice this fall, based on the merits of forming a public utility. ReoIly " bmitted, red Hover Chairman CVAG Citizens Advisory Committee 49240 JFK Trail, Palm Desert,CA 92264 760-836-9037 V Bobiinne� Owner,Added Value Storage Editor, FavoriteNet.cotn 4550 East Mesquite Ave. Palm Springs, CA 92264 Phone: 760-770-9202 Jul uy u2 10: 31a Bob Winet 760 770 4092 p. l F A C S I M I L E To: �` � � FROM: Name: Name: h1CC U� 1 e�e1� Fax #: S 7-n-7 Fax #: 1 Pages: 5 Date/Time: fl &PA -7/3 MESSAGE: 21- r 9LC Iy��,lUCG0 'GU c �' Clsi �SSF'S �� c�if� � llS f�c pss � �a � �� `P « tsSe►� . HF= FAX � a� Date: July 3, 2002 To: Honorable Mayor and Members of the City Council From: David J. Aleshire, City Attorne� Subject: Power JPA Ballot Measure Attached are materials received in the last two days on this issue. Based on a conversation today with Roz Smith of CVAG,she says the ballot language is in flux and they welcome Palm Springs' participation. The key issue they would like the City to address is whether you want to put the question to a vote,understanding that the actual question is being developed over the next two weeks. The second question is whether you want to assist in drafting the measure. Any measure for the November ballot needs to be finalized by your July 31 meeting. DJA:imne Attachments - 3 OF PALM 9 u k ARORPi Ea RRA' A C'9</FO RIA�P Martha Edgmon From: Rosalind Smith [rsmith@cvag.org] Sent: Tuesday, July 02, 2002 12:36 PM To: marthae@ci.palm-springs.ca.us Subject: ballot language for Dave Aleshire-41 Importance: High q hallo(language-- Cntltlle txt Hi, Dave-- This is the draft language from Dean Griddle. He was working from suggested language sent to him by Fred Hoover and other members of the Working Group's ballot language committee. As you and I discussed at the study session, this is an early working draft that is constantly evolving. In a separate e-mail, I will send you a later draft by Mayor Pro Tom Dana Hobart of Rancho Mirage (a new member of the Working Group) . As I mentioned before, we are still working on this language and I am concerned that the Palm Springs City Council NOT think these drafts are final. We probably won't have the final version for a couple more weeks. Working Group Chair Percy Byrd has repeatedly said that he would welcome 1 or 2 members of the Palm Springs Council joining the Group as Dana Hobart and Ron Meepos from Rancho Mirage have done, so we can get Palm Springs' input on the ballot language. Let me know if you need anything else. See you tomorrow night. Thanks. Roz i Martha Edgmon From: Rosalind Smith [rsmith@cvag.org] Sent: Tuesday, July 02, 2002 12:36 PM To: marthae@ci.palm-springs.ca.us Subject: ballot language for Dave Aleshire-#2 Importance: High Dave-- This is the draft from Dana Hobart that I mentioned in the earlier e-mail. Thanks, Roz -----Original Message----- From: Deucelou@aol.com [mailto:Deucelou@aol.com] Sent: Monday, July 01, 2002 8:48 PM To: Deucelou@aol.com; MRMEEP@aol.com; moconnnor@rceo.org; saleba@eesconsulting.com; dcriddle@orrick.com; rsmith@cvag.org Subject: Prospective Ballot Language re Electric Utility Hello all After further discussion and input from Ron Meepos, I have made an attempt at advancing our working model, using most of the verbage Michael O'Connor provided this morning. As you can see, I have added some concepts which are intended to satisfy Rancho Mirage councilpersons, as well as address some of the contentions Edison will doubtlessly advance. Further, I have moved around some of the language in an effort to reduce the difficulty of reading this necessarily lengthy sentence. (I have assumed that we do NOT want to use more than one sentence because that would necessarily require more than one question, which seems antithetical to our objectives as ambiguities would be created and cast doubt on what the voters intended if the measure passes.) My use of the words "Joint Powers Authority"was intentional considering that this is the concept that has been in play for the past year or two, and is the concept that is most understood as being the vehicle required. I will continue to look at the paragraph and look forward to your hacking it up for one reason or another. My suggestion follows: Dana Hobart BALLOT LANGUAGE If your City Council [or other governing agency], following further research, review of relevant data, and economic investigation, concludes that it does appear realistic and economically feasible, do you support your city [or community]joining a Coachella Valley Joint Power Authority whose purpose is to provide reliable electric utility service at reduced rates by acquiring from Southern California Edison Company, through condemnation or negotiation, its electricity distribution facilities, and thereafter assume responsibility for providing electric utility service to residents of those cities in eastern Riverside County presently served by Southern California Edison Company? (� s 1n bwQc� k It IAN t vv to w cc Tnvv�l( &�A 5u11t�u\tC+P v a,cic w�a owv� �ew� vvv.�s-�� ►� n� Cmaw vG��w1 IT �� Ao " sn 66(*CliA Yc� � + � . s 7i2i02 DATE: July 2, 2002 TO: The Honorable Percy Byrd FROM: John L. Cook, City Attorney SUBJECT: Summary of the Electric Utility JPA Agreement 1. Creates a New Entity. The agreement creates a new public entity separate from the cities joining in the agreement. The potential parties to the JPA are Coachella Valley cities served by Edison. (Section 4). 2. No Liability for Debts. The JPA debts are not debts of the individual cities. (Sections 4[a] and 12), 3. Withdrawal. Any JPA member may withdraw at any time upon written notice. Withdrawal does not relieve the withdrawing city of its obligations under Section 8. (Section 17). The post withdrawal obligations are a continuing grant of authority to the JPA to provide electric service and to set electric rates within the territory of the withdrawing city. (Section 8 and the Local Access and Support Agreement) 4. Powers. The JPA may generate and distribute electrical power. (Section 5). 5. Local Access and Support Agreements. The JPA will reimburse participating cities for fi anchise fees and property taxes that SCE would have paid. (Section 8 and Exhibit A). Each City agrees to provide support services comparable to services provided to SCE. (Exhibit A, Section 2). The Access agreement continues after withdrawal from the JPA. (Exhibit A, Section 4). 6. Contributions. The JPA start-up fimding totaling $94,000 (Section 9) will not cover the cost to condemn the utility property. Thus, once the decision is made to proceed with condemnation,participating cities will need to advance these start-up acquisition expenditures. Since additional contributions are not required, an amendment to the agreement will specify how and when the startup funding must be contributed unless one or more parties agrees to advance the funding. Once the acquisition cost is Imown, bonds secured by JPA revenues can be sold to provide the necessary capital to acquire the utility property and reimburse the cities for the start-up funding. 8. Joinder. Eligible cities may join at any time by signing the JPA agreement and making an appropriate contribution. (Section 17). 9. Need for JPA. Formation of a JPA creates a public entity authorized to complete farther studies and to meet in closed session to discuss matters concerning litigation or property negotiations. C:\TEMP\Summary of the Electric Utility JPA Agreement.doc