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HomeMy WebLinkAboutResolution - 5576 - Contract - Gelber Management Inc - Consulting Services LP&L FP&ET - 06_26_1997Resolution No.5576 Item #82 June 26, 1997 MA JI Y • ► BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock a Professional Services Contract for consulting services for LP&L Fuel Purchases & Energy Transmissions, attached herewith, by and between the City of Lubbock and Gelber Management, Inc., and any associated documents, which Contract shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail. Passed by the City Council this 26thday of June , 1997. ATTEST: J1jj*1)AxH111 Kay Darnell, City Secretary APPROVED AS TO CONTENT: qcerm�� Victor Kilm , Purchasing Manager APPROVED AS TO FORM: Dle6ald G. Vandiver, City Attorney DG V :da/cc doc s/gelber.res June 16, 1997 Resolution No.5576 Item #82 June 26, 1997 PROFESSIONAL SERVICES AGREEMENT This Consulting Agreement effective July 1, 1997 is by and between the CITY OF LUBBOCK, TEXAS acting through LUBBOCK POWER & LIGHT(LP&L) MANAGEMENT and GELBER MANAGEMENT INC. ("Consultant"). WITNESSETH: WHEREAS, the City of Lubbock desires consulting services in regard to LP&L's fuel and energy management program for its production department ; and WHEREAS, Consultant has experience in and is willing to consult with City of Lubbock concerning fuel and energy management for LP&L; and WHEREAS, Consultant is willing to undertake certain other obligations to the City of Lubbock as herein set forth. NOW, THEREFORE, the parties hereto agree as follows: 1. Payment of Consulting Fee. A. A fee of 10% of the actual savings incurred from estimated budgeted amounts specified in Appendix A will be paid upon the first $350,000 in savings and 15% of the actual savings incurred from estimated budgeted amounts specified in Appendix A exceeding $350,000. These savings will be calculated according to Appendix A on a quarterly basis on the City fiscal year and subsequent addendums to Appendix A. B. A fee of 25% of actual margins involved with the wholesale sale of gas or electric energy outside of LP&L's system. C. A yearly retainer of $5000 to provide daily or as needed advice and information of a general nature and to pay for set-up costs such as the development of a specific lock -in strategy, the creation of an individual data base accessible by LP&L and for review of existing energy contracts. D. A fee to paid individually on a task -by -task basis for specific projects such as energy contract preparation and evaluation assistance, energy marketing strategy, or other specific projects needed by LP&L. Consultant will prepare a specific task description along with specific hourly estimates for services provided. The fee will be based on actual costs plus 20%. However such fee shall not exceed the maximum of $100,000 total. 2. Registration of Consultant. Consultant represents and warrants that it and all its representatives have all necessary registrations or memberships with or in the Commodity Futures Trading Commission, the National Futures Association and any other federal or state governmental body or agency (if any) required to perform the services and receive the consulting fee from City of Lubbock contemplated hereby and understands and agrees the City of Lubbock's obligation to make any payments shall be waived (without any obligation whatsoever to make compensating payments in the future) during any period as to which the City of Lubbock is advised by Counsel or otherwise becomes aware that Consultant does not have all regulations and memberships. 3. Consulting Services to be Rendered by Consultant. A. Consultant would provide consulting and risk management services to assist in reducing price volatility and minimizing LP&L's fuel costs. Consultant would work with LP&L to develop an initial hedging strategy based on existing market conditions and load forecasts. B. Consultant would assist LP&L in continually analyzing all relevant gas cost factors to help assure lowest possible gas costs on an ongoing basis. Monthly, or as conditions warrant, consultant and LP&L would review market conditions, revised load forecasts, and current hedge position to further reduce costs. C. Consultant would provide daily gas supply support during the summer months to purchase spot gas for LP&L's Plant No. 2. and/or look for other opportunities to reduce costs by taking advantage of efficiencies which may occur as a result of volume purchases and offsetting load profiles. D. Consultant would provide assistance in securing economic gas supplies for LP&L's Brandon Station. With the expiration of the current long-term supply contract in August, 1998, consultant would assist in solicitation and evaluation of proposals to serve this station and would make recommendations as to long-term and monthly risk management strategies appropriate for this supply. 2 E. Consultant would provide assistance in marketing excess gas when opportunities exist for LP&L to purchase electric power more cheaply than it can generate, or when excess gas must be sold due to equipment failure or for other reasons. F. Consultant would provide ongoing assistance in the purchase and/or marketing of electric power throughout the year. Services would include providing marketing information assistance in buying or selling power, and risk management services as applicable. G. In the event of an error or omission caused solely by consultant, consultant would rectify the problem as quickly as possible and would withstand any financial consequences incurred as a result of the error or omission. In the event that LP&L is unable or fails for any reason to act on advice of consultant such failure shall not result in any liability by LP&L to consultant whatsoever. It is the consultant's intention to forge a mutually beneficial alliance in the purchase and sale of natural gas and power by and for LP&L. Services covered above are not necessarily all-inclusive. As LP&L' s fuel consultant, consultant would to the extent possible, provide additional services and assistance as warranted by changing conditions, and on terms mutually agreed to by the parties. 4. Confidentiality. Consultant shall not disclose any information deemed by City of Lubbock to be confidential in the course of any consultations as contemplated by Section 3 unless City of Lubbock, in its sole discretion, states in writing that such information may be released by Consultant. Consultant further agrees to use all such proprietary information solely for the purpose set forth in Section 3. This Confidentiality Covenant shall bind Consultant not only during the term of this Agreement, but thereafter as well. 5. Reports. During the term of this Agreement, Consultant shall assist City of Lubbock in the preparation of any reports and other documents which City of Lubbock or any of its affiliates desires to transmit to its management or employees to the extent City of Lubbock may reasonably request. 6. Presentations. During the term of this Agreement, Consultant agrees that, to the extent feasible without interference with Consultant's regular business operations, its principals and employees shall be available to consult concerning presentations which City of Lubbock may wish to organize relating to fuel management and to attend such presentations, in each case to the extent City of Lubbock may reasonably request. Art Gelber shall be the consultant representative present at City of Lubbock presentations as long as adequate notice is given to avoid scheduling conflicts. City of Lubbock will reimburse Consultant for reasonable expenses associated with site visits. 7. Consultation Concerning Other Programs. During the term of this Agreement, Consultant agrees to discuss with City of Lubbock and its representatives the structure and operation of the other programs for which Consultant serves as advisor, however, Consultant need not disclose any information deemed by Consultant to be confidential to the other programs in the course of such consultations. 8. General Consulting Services. Consultant acknowledges and agrees that this Agreement contemplates that Consultant shall, to an extent not inconsistent with its responsibilities to third parties, and subject to the request by City of Lubbock management, provide general consulting services with respect to such matters as City of Lubbock shall reasonably request. Consultant hereby agrees that it shall, in good faith, cooperate in assisting City of Lubbock in that respect, regardless of whether the specific advice or service requested of Consultant is explicitly set forth herein, and give to City of Lubbock, as its officers described hereinabove may so request, the benefits of Consultant's experience and knowledge of the commodity markets, and consult with such persons in an advisory capacity concerning such markets and related matters. Consultant agrees, insofar as prior obligations shall permit, to hold itself available to consult and advise with officers and other representatives of City of Lubbock on the foregoing and related matters. However, it being expressly understood and agreed to that, in no event, shall Consultant consult, advise or confer with any particular employee or representative of City of Lubbock regarding fuel management or any matter described herein which may relate to any personal investment program of said particular employee or representative of City of Lubbock without the express written consent and approval of the City of Lubbock. 4 9. Term of Agreement. This Agreement shall continue in full force and effect for an initial term of Fifteen (15) months and thereafter until canceled by either party. City of Lubbock or Consultant may, in its sole discretion, terminate this Agreement at any time after the initial term, with or without cause, and at will, upon thirty (30) days written notice. This agreement shall commence on July 1, 1997. 10. Status of the Parties. Nothing herein shall be construed to constitute or infer the existence of a partnership, joint venture or association between Consultant and City of Lubbock. Consultant shall not be deemed an employee or representative or agent of City of Lubbock and Consultant expressly has no authority to act for, serve, bind or represent City of Lubbock in any manner or as a consequence hereof. 11. Notices. All notices required to be delivered under this Agreement shall be in writing (including telegraphic communication) or by telephone confirmed in writing, all such writings to be delivered personally or sent by first-class mail, postage prepaid, as follows: if to Consultant: GELBER MANAGEMENT INC. 910 Travis, Suite 1900 Houston, Texas 77002 Attn: Art Gelber Telephone: (713) 655-7000 Facsimile: (713) 655-1623 if to City of Lubbock: LUBBOCK POWER & LIGHT P. O. Box 2000 Lubbock, Texas 79457 Attn: Managing Director Telephone : (806) 767-2501 Facsimile: (806) 763-9711 5 12. No Assignment. The consulting services hereby contracted for by City of Lubbock are personal to Consultant. No party hereto may assign any of its rights hereunder without the prior written consent of the other party. This Agreement shall not be construed to confer any benefit on anyone other than the parties and their respective successors and assigns. 13. Governing Law. With respect to jurisdiction, this Agreement shall be governed by and construed in accordance with the laws of the STATE OF TEXAS, without regard to principle places of business, services rendered, and conflicts of laws. 14. No Waiver. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given. 15. No Disgorgement. Except as set forth in section 2 hereof, in no event shall Consultant be required to disgorge any consulting fees previously paid to it by City of Lubbock hereunder (unless an invoice submitted by City of Lubbock as contemplated hereby shall prove to have been incorrect). The payments due Consultant are in no respect contingent on any event subsequent (other than those set forth in Section 2 hereof), nor upon the receipt by City of Lubbock of any payments from any of its affiliates or a third party. Both parties hereto shall, however, be entitled to exercise full remedies at law in the event of a breach of the Agreement by the other party. 7of7 IN WITNESS WHEREOF, This Agreement has been executed by the parties hereto as of the day and year first above written and is to be effective July 1, 1997. r Name: Windy Sitton GELBER MANAGEMENT INC. By: .,��� �•Gr---� Name: Arthur W. Gelber Title: Mayor Title: ATTEST: By: , Name: Ka ie D. Darnell Title: City Secretary APPROVED AS TO CONTENT: By. une: J. Robert Massengale Title: Managing Director of Electrical Utilities 1C, 1 9: T i Title: First Assistant City Attorney Managing Director Appendix A LP&L's goal is to use the tools of the natural gas and electricity markets to come as close to, or beat, their budgeted numbers for buying natural gas and purchased power. LP&L currently has the following natural gas purchase contracts: Power -Tex Joint Venture (LG&E dated August 25, 1994) Adobe Gas Marketing (LG&E dated May, 1991) Mid -Plains Petroleum, Inc. (Davis Gas dated February 11, 1988) Choctaw Partners (dated December 9, 1988) Enermart Trust Savings will be based upon actual performance versus the LP&L budget. Calculations will be cost of commodity only. All charges or nominal charges for transportation and other non -commodity charges will be deducted prior to calculations. Determination of Savings Savings performance for natural gas will be calculated by the following formulas: • Budgeted Cost of Gas (including transportation) (Base) - Actual Cost of Gas (including any and all financial transactions) = Savings on Power -Tex • Budgeted Cost of Gas (including transportation) (Brandon) - Actual Cost of Gas (including any and all financial transactions) = Savings on Adobe • Budgeted Cost of Gas (including transportation) (Davis) - Actual Cost of Gas (including any and all financial transactions) = Savings on Davis Gas The budgeted cost of gas has been taken from LP&L's budget estimates for fiscal year 1998 as follows: Month Cost MMBtu $IMMBtu Oct-97 1,065,029 435,467 2.4457 Nov-97 1,033,205 421,419 2.4517 Dec-97 1,284,623 496,940 2.5851 Jan-98 973,688 435,467 2.2360 Feb-98 845,152 380,210 2.2229 Mar-98 963,572 435,467 2.2127 Apr-98 875,569 407,559 2.1483 May-98 1,286,380 605,496 2.1245 Jun-98 1,333,163 633,419 2.1047 Jul-98 1,784,188 858,467 2.0783 Aug-98 1,784,188 858,467 2.0783 Sep-98 1,184,690 589,897 2.0083 These budget numbers are detailed by contract in the attached LP&L Exhibit 1. The LP&L budget assumes 15 cents transportation cost for the Power -Tex volume, 20 cents for the Adobe volume, and 2 cents for the Davis Gas volume. The budget also assumes minimum gas purchases coupled with an increased emphasis on purchased power rather than generated power (see LP&L document "Determination of Power Supply Budget) Savings performance for electricity will be calculated by the following formulas: • Budgeted Cost of purchased power (firm and non firm) - Transportation Costs - Actual Cost of purchased power (including any and all financial transactions) _ Savings on purchased power. The budgeted cost of purchased power has been taken from LP&L's budget estimates for fiscal year 1998 as follows: FIRM KWH FIRM NON -FIRM KWH NON -FIRM$ Oct-97 48,360,000 1,374,391 13,489,832 320,251 Nov-97 46,800,000 1,329,588 16,581,736 408,100 Dec-97 48,360,000 1,494,324 19,035,394 476,346 Jan-98 48,360,000 1,574,118 12,473,287 321,482 Feb-98 43,680,000 1,444,498 15,219,650 370,177 Mar-98 48,360,000 1,473,529 3,963,259 85,684 Apr-98 46,800,000 1,432,548 3,797,938 83,960 May-98 48,360,000 1,491,906 6,403,126 148,525 Jun-98 46,800,000 1,486,836 10,270,965 246,814 Jul-98 48,360,000 1,512,217 9,099,297 210,965 Aug-98 48,360,000 1,626,347 10,003,568 223,424 Sep-98 46,800,000 1,463,436 13,352,144 318,701 Savings performance for each natural gas contract and purchased power contract will be evaluated monthly. At the conclusion of a calendar quarter, all contract savings will be totaled (Total Quarterly Savings) to determined the corresponding payment as follows: Share the Savings Contingency Compensation Performance will be based on a quarterly basis as per Section 1 paragraph A. Payment will be based on the following formula: If Total Quarterly Savings (TQS) are less than $87,500: Payment = TQS * 10% If Total Quarterly Savings (TQS) are more than $87,500 Payment = (87,500* 10%) + (TQS - 87,500)* 15% LP & L Exhibit I tT MR 0M RA" sz=s an PAD GAG zPJAM an9 1&M mom 03. rx/mm now 140" Hfm pro � s cM 1997 30,039,777 111r580 232,404 0 63,467 130,500 - 433,461 2w 19" 22,=,Q06 11,508 225,000 0 81,419 13s,000 _ 423,410 Ma IM 24,173,103 11,530 132,500 61,473 $3,467 1"J300 406,940 ors w.......rea.w.a�e.:.r w�a...s.ear.ar. s....:..w�r,ar •.aw..ue.. 77,184,769 17,405 690,000 61,473 182,353 414,000 1,359,026 in isle 31,3901330 11,700 232,500 0 63,467 130,300 435,447 m Igoe 17,416,439 LI,690 210,900 0 31,323 112,096 .340,216 34R lots 33,90L,497 1.1,800 232,500 0' 63,457 189,800 - 4351467 03,709,296 14,946 675,000 0 104,239 321,us 1,252.144 CCH 161,493,431 16,131 1,345,000 62,473 372,1112 805,816 2,994,979 Aft 399s 2109520952 11,480 2Zd,000 0 611419 121,110 .407,330 mt it" 33,627,271 110300 225,000 177#830 930447 1391900 E08,406 im 1909 54,231,$73 13.,400 437,000 0 61,429 1391000 #33,419 �� . �.a+.�•.w.essew 0. 143,01L," L1,292 617,000 177,3" 186,306 395,610 2,446,473 can 207,304,929 L3,B33 20232,000 2391M Mj M 2,202,323 4.231,445 - i 1999 of, on,SU 1I,ss0 633,309 0 49,661 139,500 838,467 A0a 1221 7$,E96,H4 22,900 455,S00 0 0,141 139,500 4581451 a!P 1994 34,213,061 11,no _437,000 0 91,419 1I,31s 5e9,®9r1 wun w ` 177, 944.339 . 12,911 I,'145, 000 4 180,353 370,478 2, 3061 "1 cvX 4",140,169 13,316 4,000,900 239,003 747,t70 1,372,003 6,388,276 '