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HomeMy WebLinkAboutResolution - 5831 - Power Agreement - City Of Tulia - WTMPA, Power Project - 04/23/1998RESOLUTION N0. 5831 Item #31 April 23, 1998 RESOLUTION 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 Power Agreement, attached herewith, by and between the City of Lubbock and City of Tulia, and any associated documents, which Agreement 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 23rd day of April , 1998. fiz, 0,0,7 W-4ti ATTEST: 16,.Ul , " A, " I J/�- kayt arnell, City Secretary APPROVED AS TO CONTENT: Paul Thompson, Managing Director of Electric Utilities APPROVED AS TO FORM: Richard K. Casner, Natural Reso ces Attorney da/ccdocs/poweragrmt-tulia. res April 16, 1998 . POWER AGREEMENT BETWEEN CITY OF LUBBOCK, TEXAS AND CITY OF TULIA, TEXAS This Power Agreement ("Agreement") made and entered into by and between the City of Lubbock, Texas ("Lubbock"), and the City of Tulia, Texas ("Tulia"), both of which are municipal corporations in the State of Texas (collectively Lubbock and Tulia may be referred to as the "Parties" or individually as "Party."). WITNESSETH: WHEREAS, West Texas Municipal Power Agency ("WTMPA"), a municipal corporation and political subdivision of the State of Texas, comprised of the cities of Lubbock, Floydada, Brownfield and Tulia, Texas ("Member Cities"), has adopted and is proceeding to implement a 62 MW electric power project; and WHEREAS, the Project will consist of (i) the acquisition, construction and installation of a 40 -MW combustion turbine generator at Lubbock Power & Light's ("LP&L") Plant No. 2 and (ii) the repowering of either unit 6 or 7, which are both existing 22 -MW Westinghouse non -reheat, condensing steam turbine generators located - at LP&L's Plant No. 2 ("the Project") for which WTMPA has contracted for the capacity; and WHEREAS, each Member City has agreed to purchase from WTMPA all power and energy required for the operation of its electric system in excess of power supplied by its current generation and transmission facilities (with certain exceptions for expansion) and renewable sources, and have agreed to pay any deficits of WTMPA based upon assigned percentages, as may be adjusted, established in Section 14 of the Amended Power Sales Agreement as of April 1, 1998, between WTMPA and the Member Cities; and WHEREAS, the Cities of Floydada, Tulia and Brownfield ("Cities") anticipate that there will be times when the power production from the Project which otherwise - would be allocated or available for their use will be in excess of their individual power requirements for their respective electric systems; and WHEREAS, the Cities have requested Lubbock to take that portion of Cities' percentages of such power production from the Project which, from time to time, may be in excess of Cities' requirements and (1) to pay WTMPA the Cost of Project Power for such quantities of excess power taken from the Cities, and (2) to pay the Cities a cost differential for such excess power taken as is described below; and WHEREAS, Lubbock has agreed to this request under the terms and conditions hereafter set forth; NOW, THEREFORE, in consideration of the mutual undertakings herein contained, Lubbock and Tulia agree as follows: SECTION I: Aereements of Lubbock (a) Lubbock agrees to take and pay Tulia for that portion of Tulia's percentage of power production from the Project actually received by Lubbock in excess of Tulia's requirements. (b) Lubbock agrees (1) to pay Tulia for the quantity of power production from the Project taken in excess of Tulia's requirements a payment based upon the difference between the KWH cost of Southwestern Public Service ("SPS") power and the KWH Cost of Project Power as hereinafter defined, and (2) to pay WTMPA the Cost of Project Power for the quantity of power production taken from the Project in excess of Tulia's requirements. (c) In the event the cost of SPS power should become equal to or less than the Cost of Project Power, Lubbock agrees that Tulia shall not be obligated to make any - payment to Lubbock for power taken by Lubbock from the Project in excess of Tulia's requirements. SECTION II: Agreements of Tulia (a) Tulia agrees to sell to Lubbock that portion of Tulia's percentage of power production from the Project in excess of Tulia's requirements. (b) Tulia agrees (1) to accept as payment from Lubbock for power production from the Project taken in excess of Tulia's requirements a payment based upon the difference in dollars between the KWH cost of SPS power and the KWH Cost of Project Power as hereinafter defined, and (2) that Lubbock shall be responsible to pay WTMPA the Cost of Project Power for the quantity of power production taken from the Project in excess of Tulia's requirements. (c) In the event the cost of SPS power should become equal to or less than the Cost of Project Power, Tulia agrees that Lubbock shall not be obligated to make any payment to Tulia for power taken from the Project in excess of Tulia's requirements. (d) Tulia agrees to utilize Project Power in compliance with all terms and provisions of that certain Gas Purchase Contract (sometimes referred to herein as the "TMGC Contract"), by and between Texas Municipal Gas Corporation ("TMGC") and Lubbock, including without limitation, the restrictions described on Exhibit "B", hereto. SECTION III: Definition of the Cost of Project Power (a) The Cost of Project Power is defined as the sum of the following costs in KW or KWH: Demand, Energy, Fuel, Fuel Transportation, O&M, and One-half (1/2) of SPS Transportation. These terms are defined as follows: I Demand Actual costs of principal and interest payments on the bonds issued by WTMPA to finance the Project which are made over any given year divided by the size of the Project in kilowatts adjusted into twelve (12) monthly payments. Energy $0. Fuel Actual fuel cost. This cost will be charged on the basis of each net KWH actually produced by the Project. The fuel cost will be the cost per KWH times the number of KWH taken. Fuel Actual cost to transport the fuel for the Project. This cost will be Transportation charged on the basis of each net KWH actually produced by the Project. O&M Actual cost for operations and maintenance of the Project, including without limitation cost for labor, supplies, insurance and a maintenance reserve fund for major maintenance items. One-half SPS Transportation The actual cost divided in half of the transportation fee billed by SPS to Lubbock to transmit power from Lubbock to the Member Cities. For further definition and clarification, examples of the above definitions and their application to a hypothetical set of circumstances are attached hereto as Exhibit "A" and incorporated herein for all purposes as part of this Agreement. 4 SECTION IV: Tulia's Use of Gas Lubbock shall purchase natural gas as fuel to operate the Project under contract with Texas Municipal Gas Corporation (-TMGC-). TMGC will issue (or has issued) tax- exempt bonds to finance the delivery of the gas. TMGC, therefore, has imposed certain restrictions on the use of power generated from fuel provided by it to Lubbock and requires that these restrictions apply to any Parties receiving power from the Project. Tulia expressly agrees herewith to observe and follow all of these restrictions during the effective period of the TMGC Contract. These restrictions include, but are not necessarily limited to, those set forth in Exhibit "B" attached hereto and incorporated herein for all purposes as a part of this Agreement. SECTION V: Tenn of Agreement. ' Subject to the terms hereof, the Term of this Agreement shall be of equal duration with any outstanding "West Texas Municipal Power Agency Revenue Bonds, Series 1998" (the "Bonds") and shall continue thereafter unless either Lubbock or Tulia gives one (1) year advance notice of termination. In the event Lubbock shall dispose or abandon'substantially all of the electric generating facilities owned by it or electric generation facilities related to the Project, and the Bonds have been paid, or provision for their payment has been made, pursuant to the terms of the Resolution authorizing the issuance of the Bonds, Lubbock, at its election, may terminate this Agreement as of the effective date of such disposal or abandonment. Upon such termination, Lubbock shall be released and relieved of all of its obligations and liabilities under this Agreement, occurring or accruing from and after the effective date of such disposal or abandonment. 5 SECTION VI. Notification. At such times as Tulia determines that its percentage of production from the Project exceeds its requirements, it shall provide Lubbock fifteen (15) days advance notice orally and shall confirm by facsimile notice the quantity of power which will be in excess of its requirements and the anticipated duration of the excess condition. j SECTION VII. Method of Pavment For the KWH taken by Lubbock or for which Lubbock has agreed to pay in excess of Tulia's requirements. Lubbock shall make payment to Tulia under the payment formula hereinabove set forth within fifteen (15) days following the close of the month of the transaction. Payment shall be made to Tulia at 201 N. Maxwell. Tulia, Texas 79088. Other arrangements mutually agreeable to the Parties which may be utilized shall not be construed as altering Lubbock's obligation to make payment. Unpaid amounts shall be subject to a late payment charge equal to one percent (I%) per month; provided, however, that such late payment charge shall not exceed the maximum charge which may be collected under the provisions of Texas law. Should Tulia dispute a payment amount and it is later determined that an underpayment occurred, Lubbock shall pay forthwith to Tulia the amount of the underpayment, together with one percent (1%) per month of the amount underpaid for the period of the underpayment. SECTION VIII. Default (a) As used in this Section VIII, "default" shall mean the failure of Lubbock or Tulia to perform any obligation in the time and manner required by this Agreement, n except where such failure to discharge obligations (other than the payment of money) is the result of Force Majeure as defined in Section XXIII hereof. (b) Upon failure of a Party hereto to perform any obligation required hereunder, the other Party shall give written notice of such default to the Party in default. The Party in default shall have thirty (30) days within which to cure such default, and, if cured within such time, subject to the terms of Section VIII, subparagraph (c), below, the default specified in such notice shall cease to exist. (c) If a default is not cured as provided in paragraph (b) above, or if damages for default have been occasioned by or shall have occurred to the non -defaulting Party notwithstanding cure by the defaulting party, the Party not in default may resort to all remedies available at law or equity, including recovery of reasonable expenses and reasonable attorneys' fees incurred in connection therewith. SECTION IX. Governing Law and Venue. The validity, interpretation and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Texas. Venue for any litigation arising out of a dispute under this Agreement shall lie in Lubbock County, Texas. SECTION X. Notice Any notice, request, demand or statement which may be given to or made upon a Party hereto by the other Party hereto under any of the provisions of this Agreement shall be in writing, unless it is specifically provided otherwise herein, and shall be treated as duly delivered when the same is either (1) personally delivered to the Director of Electric Utilities for the City of Lubbock or the City Manager of the City of Tulia, or (2) 7 deposited in the United States mail, by certified mail, postage prepaid, and properly addressed to the Party to be served, as follows: If the notice is to Lubbock: Director of Electric Utilities City of Lubbock P. O. Box 2000 Lubbock, Texas 79457 If the notice is to Tulia: City Manager City of Tulia 201 N. Maxwell Tulia, Texas 79088 The names, titles and addresses of either Party in this section may be changed by written notification to the other Party. SECTION XI. Section Headings Not to Affect Meaning The descriptive headings of the various articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof. SECTION XII. Effective Date of Agreement The effective date of this Agreement shall be the date on which the commercial operation of the 40 MW combustion turbine generator under the Project commences. SECTION XIII. Counterparts. This Agreement shall be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 SECTION XIV. Amendments. This Agreement may only be amended by a writing signed by both Parties. SECTION XV. Exhibits Exhibits A and B referred to herein and attached hereto are made a part hereof for all purposes. SECTION XVI. Severability. In the event any material term, covenant or condition of this Agreement, or any amendment hereto, or the application of any such term, covenant or condition shall be held invalid, illegal or unenforceable as to any Party or circumstances by any court or regulatory authority having jurisdiction, Lubbock and Tulia shall conduct good faith negotiations for the purpose of reaching a mutually acceptable written agreement to replace the deleted provision(s) with provision(s) that will most nearly accomplish the purpose and intent of the deleted provision(s). SECTION XVII. Computation of Time. In computing any period of time prescribed or allowed by this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next business day that is neither a Saturday, Sunday nor a legal holiday. SECTION XVIII. Limitation. This Agreement is not intended to and shall not create rights of any character whatsoever in favor of any person, corporation, association or entity other than the Parties E to this Agreement, and the obligations herein assumed are solely for the use and benefit of the Parties to this Agreement, their successors in interest, or assigns. SECTION XIX. Waivers. A waiver by'a Party of a default by the other Party shall not be deemed a waiver of any other or subsequent default. SECTION XX. Regulation. This Agreement is subject to applicable federal, state and local laws, ordinances, rules and regulations. Nothing herein contained shall be construed as a waiver of any right to question or contest any such law, ordinance, rule, regulation or asserted regulatory jurisdiction. SECTION XXI. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be binding upon the successors and assigns of the Parties hereto, but neither Party shall assign its interest in the Agreement in whole or in part without the prior written consent of the other Party, which consent will not be unreasonably withheld. Nothing contained herein shall require the consent of the non -transferring party to a transfer of this Agreement by virtue of a sale or other disposal of substantially all of the electric generation facilities of Lubbock or electric generation facilities related to the Project. Upon assignment, if the Bonds have been paid, or provision for their payment has been made, pursuant to the terms of the Resolution authorizing the issuance of the Bonds, Lubbock shall be released and relieved of all of its obligations and liabilities under this Agreement, occurring or accruing from and after the effective date of such assignment. 10 SECTION XXII. Survivorship of Obligations. Except as otherwise provided herein, the termination or cancellation of this Agreement shall not discharge any Party from any obligation it owes to the other Party under this Agreement by reason of any transaction, loss, cost. damage, expense or liability that shall occur or arise prior to such termination. It is the intention of the Parties that any such obligation owed (whether the same shall be known or unknown as of the- termination hetermination or cancellation of this Agreement) shall survive the termination or cancellation of this Agreement. SECTION XXIII. Force Majeure Neither Party shall be liable to the other Party for failure to perform its obligations under this Agreement when such failure is attributable solely to Force Majeure. Force Majeure shall mean any cause beyond the reasonable control of either Party, including, without limitation, failure, or imminent threat of failure, of facilities or equipment, flood, freeze, earthquake, storm, fire, lightning, other acts of God, epidemic, war, acts of a public enemy, riot, civil disturbance or disobedience, strike, lockout, work stoppages, other industrial disturbance or dispute, labor or material. shortage, sabotage, restraint by court order or other public authority, and action or nonaction by, or failure or inability to obtain the necessary authorizations or approvals from, any governmental agency or authority, which by the exercise of due diligence it could not overcome. Nothing contained herein shall be construed so as to require the Parties to settle any strike, lockout, work stoppage or any industrial disturbance or dispute in which it may be involved, or to seek review of or take an appeal from any administrative or judicial action. Failure of Lubbock to make payments to Tulia required by this Agreement shall not be construed as an event occasioned by force majeure. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed this 23 day of April , 1998. CITY OF LUBBOCK: ATTEST: -Ka Darnell, City Secretary APPROVED AS TO CONTENT: Paul Thompson, Managing Director of Electric Utilities APPROVED AS TO FORM: CITY OF TULIA: ►., C. 14MITT MAYOR ATTEST: Richard K. Casper, a sources Attomey da/final-pow-eragr-tulia.doc April 22. 1998 12 EXHIBIT "A" Demand Example: The principal and interest payments for a particular year are $2,968,560. Assume the size of the Project is 62,000 KW. Demand = ($2,968,560)/(62,000 KW)/(12 months) Demand = $3.99 per KW per month Fuel Example: Total fuel used = 363,700 MMBTU at $1.82 per MMBTU for a total fuel cost of $661,934. Assume 43,850,000 KWH are actually provided, the cost per KWH would be $661,934/43,850,000 KWH or $0.0151 per KWH taken. Fuel Transportation Example: Assume the cost to transport from all lines is 0.217 per MMBTU. 363,700 MMBTU transported so the total transportation cost is $78,923. When this is charged on the basis of 43,850,000 KWH actually produced, the cost per KWH would be $0.0018 per KWH taken. (No example) O&M One -Half SPS Transportation Example: SPS currently charges $0.00342 per KWH. Since much of this power will not leave Lubbock, the cost will be split between Tulia and Lubbock 50/50 or $0.00171 per KWH. Sample Application Using the above definitions and examples, the cost of Project power would be as follows for 1,000 KW of capacity and 744,000 KWH of energy. Cost of Project Power = Demand ($3.99 x 1,000 KW) + Energy ($0) + Fuel ($0.0151 x 744,000 KWH) + Fuel Transportation ($0.0018 x 744,000 KWH) + O&M ($0.005 x 744,000 KWH) + 1/2 SPS transportation ($0.00171 x 744,000 KWH) -2 - Cost of Project Power = $21,555.84 or $0.028973 per KWH. The actual payments made by Lubbock will be based upon the actual power taken. A complete example showing payment calculations is as follows: Example: Cost of SPS Power Cost of Project Power Demand $6.80/KWH Energy $0.0007/KWH Fuel Actual (Est. at $0.021/KWH Using 1 MW, 744,000 KWH Cost = $22,944.80/month Cost = $0.030840/KWH Demand Actual (use $3.99/KW) Energy $0 Fuel Actual (use $0.0151/KWH) Fuel Transport (use $0.001 8/KWH) O&M Actual (use $0.005/KWH) One-half SPS Transportation Actual (use $0.00171/KWH) For 1 MW 744,000 KWH Cost = $21,555.84/month Cost = $0.028973/KWH Payment = (Cost of SPS Power - Cost of Project Power) (Availability) Availability = (Energy Received by Lubbock)/(Total Energy Available) Note: The Energy received by Lubbock would equal the total energy available unless the unit was out of service for some time and/or some of the energy was taken by Tulia. Energy actually moving over the SPS system would pay the full $0.00342/KWH transportation charge. Assume that of the total energy available 744,000 KWH Tulia took 7,000 KWH to meet curtailment and that the unit did not run for 2 hours (1,000 x 2 hr. = 2,000 KWH). Lubbock would receive 744,000-7,000-2,000 = 735,000 KWH. Availability = 735,000/744,000 = 0.987903 Under this example, Lubbock would pay Tulia: Payment = (Cost of SPS power - Cost of Project Power) (Availability) Payment = (22,944.80 - $21,555.84) (0.987903) Payment = $1,372.16 EXHIBIT "B" TMGC RESTRICTIONS (a) General. Tulia's Use of Gas. Tulia shall use power and energy delivered to it from the Project solely for public J uses which it considers necessary, useful, or appropriate in connection with the operation of its electric utility system. (b) To Preserve Tax Exemption Tulia shall not knowingly use or permit the use of electric power and energy delivered to it from the Project (or any property used to distribute or consume such power and energy from the Project) in a manner which (or shall knowingly take or omit to take any other action which, if taken or omitted, respectively) would adversely affect (1) the exclusion of interest on any Bond, as defined in the TMGC Contract, issued by TMGC from the gross income, as defined in section 61 of the Internal Revenue Code, of the owner of the Bond, as defined in the TMGC Contract, for federal income tax purposes, if interest on such bond was stated to be excluded from gross income for federal income tax purposes when such Bond, as defined in the TMGC Contract, was issued, or (2) the exemption of the leases and royalties, as defined in the TMGC Contract, and their production from property and severance taxes. Without limiting the generality of the foregoing, Tulia shall comply with each specific covenant of Article 13 of the TMGC Contract, at all times prior to the last maturity of TMGC bonds, unless and until (1) TMGC shall have waived compliance with such covenant in writing or (2) Tulia shall have delivered to TMGC and each Trustee, as defined in the TMGC Contract, an Opinion of Counsel, as defined in the TMGC Contract, to the effect that failure to comply with such covenant, either generally or to the extent described therein, will not adversely affect any exclusion of interest on any such Bond, as defined in the TMGC Contract, from the gross income, as defined in section 61 of the Internal Revenue Code, of the owner of the bond for federal income tax purposes or any applicable property or severance tax J exemption, and thereafter such covenant shall no longer be binding upon Tulia to the extent described in such Opinion of Counsel, as defined in the TMGC Contract, anything in any other provision of this Section of Article 13 of the TMGC Contract to the contrary notwithstanding. If, due to the promulgation of new or amended Regulations, as defined in the TMGC Contract, the issuance of a private letter ruling to TMGC or a published ruling, or otherwise, TMGC concludes that compliance with any such covenant is not required to preserve the exclusion of interest on any Bond, as defined in the TMGC Contract, from such gross income, TMGC shall seek an Opinion of Counsel, as defined in the TMGC Contract, to such effect and, upon receipt of such an opinion, shall so waive compliance with such covenant and shall notify Tulia of such waiver. (c) Use in Limited Service Area. Unless otherwise agreed by TMGC in writing, Tulia agrees to resell power and energy received by it from the Project to persons who will consume the power and energy in a qualified service area or qualified annexed area within the meaning of section 141(d)(3)(B) of the Internal Revenue Code. For such purposes, (1) Tulia's "qualified service area" means an area throughout which Tulia has provided electric utility service at all times during each 10 -year period prior to the date on which TMGC acquires a Production Right, as defined in the TMGC Contract, pursuant to which gas sold and 2 delivered to the Project is produced or otherwise delivered to TMGC, and (2) Tulia's "qualified annexed area" means an area (a) that is contiguous to one of Tulia's qualified service areas or previously annexed qualified annexed areas and is annexed by Tulia for general governmental purposes, (b) within which Tulia furnishes electric utility service, available to all members of the general public, and (c) that does not exceed 10% of the 1 area of the qualified service area to which it is contiguous and all previously annexed qualified annexed areas contiguous thereto, determined as of the end of the calendar year preceding the calendar year in which such area is annexed. (d) No Private Use or Payments. Prior to the last maturity of the Bonds, as defined in the TMGC Contract, Tulia shall not use or permit the use of power and energy delivered to it from the Project (or any property used to consume or distribute such power and energy) directly or indirectly in any private business use, unless otherwise agreed by TMGC in accordance with the applicable provisions of each Indenture, as defined in the TMGC Contract. For these purposes, "private business use" means any trade or business carried on by any person, or any activity of any Person, as defined in the TMGC Contract, other than a natural Person, in each case excluding state and local governments, unless (1) such use is merely as a member of the general public, (2) such property is intended to be and is in fact reasonably available for use on the same basis as natural persons not engaged in a trade or business, (3) no priority rights therein or special benefits therefrom are extended to such Person (other than customary and reasonable differences in rates for different classes of users), and (4) the term of committed use (including renewal options) does not exceed 180 days. 3 For purposes of the foregoing covenant, property is considered to be "used" by a person if 1. person; 2. Dispositions: it is sold or otherwise disposed of, or leased, to such Operation and Management: It is operated, managed, or otherwise J physically employed, utilized, or consumed by such Person, as defined in the TMGC Contract, excluding operation or management pursuant to an agreement which meets the guidelines set forth in Revenue Procedure 97-13, including any amendments or revisions thereto or superseding Regulations, as defined in the TMGC Contract, or is described in subparagraph (A) through (D) of Section 1. 141-3 (b)(4)(iii) of such Regulations; 3. Legal Entitlements: capacity in or output or service from such property is reserved or committed to such Person under a take -or -pay, output, incentive payment, or similar contract or arrangement or special legal entitlements (e.g., priority rights) to beneficial use of such property are extended to such Person, as defined in the TMGC Contract; or 4. Economic Benefit: In the case of property not available for use by the general public, such property bestows a special economic benefit on such Person. final-exh-culia.doc April 16, 1998 n