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HomeMy WebLinkAboutResolution No. 4490 RESOLUTION NO. QLf70 A RESOLUTION APPROVING ALTERNATIVE TO SIX PERCENT IN LIEU OF TAX PAYMENT ON WHOLESALE ELECTRICITY SALES FROM THE EUGENE WATER & ELECTRIC BOARD. The City Council of the City of Eugene finds that: A. Significant revenues have been generated by the Eugene Water & Electric Board (EWEB) through sales for resale, resulting in benefits for the City through payments pursuant to Section 44(4) of the Eugene Charter of 1976. B. Significant changes have occurred in the wholesale electric market, making it difficult for EWEB to continue to make sales to other entities for resale and make its payments to the City under the current formula of six percent of EWEB's gross revenues. C. It would be in the best interest of the City, EWEB, and EWEB's customers to alter the payment terms for sales for resale for a trial period ending on December 31, 1997. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Section 1. Based on the above findings, which are hereby adopted, the City Council approves a change in the payments received from EWEB pursuant to Section 44( 4) of the Eugene Charter of 1976 as they relate to contracts entered into between EWEB and another power company, for sales for resale. During the trial period ending on December 31, 1997, the formula to be applied to all such contracts entered into after the effective date of this Resolution shall be seventeen percent of the net revenues from sales for resale. Payments shall continue to be made at the seventeen percent rate until expiration of the contract, notwithstanding the expiration of the trial period. Section 2. The current formula based on a percentage of gross revenues will continue to apply to sales for resale entered into prior to the effective date of this Resolution, to any contracts for services where EWEB is not responsible for supplying power, to all existing contracts, and to all retail sales. Section 3. This Resolution shall become effective after the EWEB Board also approves the change in payments, and the City Manager and EWEB General Manager execute a Memorandum of Understanding consistent with the terms of this Resolution. The foregoing Resolution adopted th~~ay of June, 1996. t! ;co!r'7 MEMORANDUM OF UNDERSTANDING BETWEEN: The City of Eugene, a municipal corporation of the State of Oregon (City) AND: The Eugene Water & Electric Board, a municipal utility owned by City of Eugene (EWEB) EFFECTIVE DATE: July 1, 1996 RECITALS A. The Eugene Water & Electric Board (EWEB) has generated significant revenues through sales for resale which have benefitted the City of Eugene (City) through payments pursuant to Section 44(4) of the Eugene Charter of 1976, and EWEB' s customers through lower rates. B. With the passage of the National Energy Policy Act of 1992 (EPAct92), there have been and continue to be significant changes in the wholesale electric markets. C. Current market conditions make it very difficult for EWEB to make sales to other entities which market or sell power ("Power Entities") for resale which generate sufficient margins to make its payments to City and to return benefits to EWEB' s customers. The current formula (six percent), when applied to the gross revenues of such a potential sale, is often larger than the entire net revenues from the sale and causes EWEB to forego sales for resale opportunities. D. EWEB and City believe it is in their best interest to alter the payment terms for sales for resale to adjust to the changing market conditions. The purpose of this agreement is to memorialize the understanding between the parties, which has been approved by their respective Board and Council. AGREEMENT 1. EWEB and City agree that until December 31, 1997 ("Trial Period"), payments to City for future sales to Power Entities for resale activity shall be based on a revised formula. This formula shall be: 1.1 Seventeen percent (17 %) of the net revenues from sales for resale. This percentage applies only to the trial period. It does not establish any precedent for future negotiations. 1. 2 Net revenues are defined as revenues from the sale less the cost of power and other services needed to deliver the power product to the purchaser. 1.3 The cost of power for the calculation will be either: the sale, or 1.3.1 The direct cost of power if that power is purchased to make 1.3.2 The cost of power purchased under its dispatchable power supply contracts in excess of the amount necessary to serve retail load. 1.4 Services include wheeling, reserve capacity, storage, etc. which are used to deliver the desired product to the Power Entity. 2. The current payments based on six percent of gross revenues will continue to apply to sales for resale made before the effective date of this agreement and to any contracts for services where EWEB is not responsible for supplying power. Moreover, nothing in this Memorandum is intended to affect any of EWEB 's other payments to City, including but not limited to payments related to sales to residential, commercial and industrial consumers. 3. EWEB and City recognize that with the changes occurring in the wholesale power market, it would be prudent to try this new relationship for a period of time and modify it as necessary. Therefore, this arrangement will apply to sales for resale made between the effective date of this agreement and December 31, 1997. If a sale extends beyond the end of this agreement, this arrangement will apply until that sale is completed. EWEB will inform City of any such sales which extend beyond the trial period. 4. EWEB and City will discuss the results of this arrangement at least every 6 months. At that time, EWEB will report on the effect of this agreement on sales for resale activity. This Memorandum of Understanding executed the date indicated below. EUGENE WATER & ELECTRIC BOARD CITY OF EUGENE By Randy Berggren, General Manager By Linda Norris, City Manager Pro Tern Dated: Dated: