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W A T E R I E N E R G Y I l I E E RIVERSIDE PUBLIC UTILITIES Board Memorandum P U B L I C U T T l I T I F S BOARD OF PUBLIC UTILITIES DATE: July 16, 2010 ITEM NO: 13 SUBJECT: NEW HIGH VOLTAGE ELECTRIC SERVICE AGREEMENT BETWEEN KAISER PERMANENTE (KAISER) AND THE CITY OF RIVERSIDE ISSUE: Consideration of approval to enter into a three-year High Voltage Electric Service Agreement with Kaiser Permanente which includes a new adjusted rate schedule. RECOMMENDATION: That the Board of Public Utilities recommend that the City Council approve a three-year High Voltage Electric Service Agreement with Kaiser Permanente, from January 1, 2010 through December 31, 2012. BACKGROUND: Kaiser Permanente Hospital (Kaiser), with its main facility located on Magnolia Ave., is one of Riverside Public Utilities' (RPU) largest customers. Kaiser is unique among RPU's electric customers as they are one of only four large customers that receives substation service; energy that flows directly to its facility from a high voltage substation. Customers with very large electricity needs may qualify for this service according to the RPU Electric Rules and Rates Schedule. This type of service is cost beneficial for only the few largest RPU customers who are billed for power at this wholesale rate. Kaiser receives delivery of their electricity at the 69 KV level substation. The power is then transmitted from the substation through a line-specific, leased portion of the transmission system owned and operated by the City of Riverside and transmitted to Kaisers' facilities. Their suitable proximity to the substation is another primary factor for a cost effective rate under this agreement for 69 KV service. Kaiser Permanente entered into an Electric Service Agreement with the City of Riverside in October 1998. The contract extension expired on December 31, 2009, and Utility staff is proposing entering into a new three-year contract with Kaiser from January 1, 2010 to December 31, 2012. The rate schedule (per exhibit "C" of the proposed contract) includes estimated 6.5 percent rate increase retroactive to January 1, 2010, an 8.5 percent rate increase effective January 1, 2011, and a 7 percent rate increase effective January 1, 2012. The rate schedule was structured from the result of a recent Cost-of-Service study and includes Time-of-Use rates. FISCAL IMPACT: The rate will adjust by an estimated 22 percent increase over the next three (3) years. Prepared by: Michael J. Bacich, Utilities Public Benefits/Business Relations Manager Approved by: David H. Wright, Public Utilities General Manager Approved by: Belinda J. Graham, Assistant City Manager Approved as to form: Gregory P. Priamos, City Attorney