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W A T E R I E N E R 5 Y , L I F E RIVERSIDE PUBLIC UTILITIES Board Memorandum P U B L I C U T I L I T I E S BOARD OF PUBLIC UTILITIES DATE: July 16, 2010 ITEM NO: 10 SUBJECT: DYNAMIC SCHEDULING OF BOULDER CANYON PROJECT ENTITLEMENTS ISSUE: Consideration of two proposed agreements to enable dynamic scheduling of the City's Boulder Canyon Project ("Hoover") hydroelectric entitlements: RECOMMENDATIONS: That the Board of Public Utilities recommend that the City Council: 1. Approve the Dynamic Scheduling Agreement for Scheduling Coordinators between Riverside and the California Independent System Operator ("CAISO"); 2. Approve the Funding Agreement between Riverside and the Western Area Power Administration ("Western"); and 3. Authorize the City Manager, or his designee, to execute both agreements, as well as subsequent amendments to the Dynamic Scheduling Agreement for Scheduling Coordinators required as a result of Federal Energy Regulatory Commission ("FERC") directives. BACKGROUND: Riverside Public Utilities (RPU) is entitled to 30 MW of power from the Hoover powerplant. Hydroelectric projects like Hoover are extremely flexible and can quickly change their output in response to system conditions. "Dynamic Scheduling" refers to electronically signaling a generator to change its output, including energy output changes every four seconds. In the early 2000's, RPU, through the Southern California Public Power Authority ("SCPPA"), established most of the telecommunications and software systems necessary to utilize Hoover's Dynamic Scheduling capability. These actions were prompted by the extremely high energy prices seen during California's 2000-01 energy crisis. After the energy crisis concluded and market prices declined drastically, RPU did not pursue activation of this Hoover capability because the cost was calculated to exceed the benefit. With the recent implementation of the CAISO's Market Redesign and Technology Upgrade ("MRTU") program, however, staff believes that sufficient economic benefits exist to again consider utilizing Hoover's Dynamic Scheduling capability. Implementing Hoover Dynamic Scheduling will allow RPU to reduce its financial exposure to CAISO market price spikes. The CAISO requires entities wishing to utilize Dynamic Scheduling to execute the FERC-approved Dynamic Scheduling Agreement. This agreement governs the rules applicable to Dynamic Scheduling in the CAISO's markets and will allow RPU to fully utilize Hoover's Dynamic Scheduling capabilities. The one-time cost to upgrade the CAISO's telecommunications and software systems is approximately $49,000. On-going monthly costs of approximately $2,600 are anticipated.