12-01-1998 CC RPT 23 - Laserfiche WebLink

Home

People Serving PeoFlc CITY OF RIVERSIDE CITY COUNCIL MEMORANDUM Riverside HONORABLE MAYOR AND CITY COUNCIL DATE: December 1, 1998 ITEM NO: 23 SUBJECT: KAISER FOUNDATION HOSPITAL - RIVERSIDE POWER CONTRACT Backclround: Deregulation in areas served by Investor Owned Utilities started March 31, 1998. It is expected that Riverside Public Utilities (RPU) will participate in 1999 with phased-in customer choice. Those customers most at risk to leave RPU's service are the Electric Utility's largest consumers of electricity. These customers are most likely to seek alternative sources of electricity when open access is approved. The Washington International Energy Group, in its report to City Council, strongly recommended that RPU retain as many large customers as possible. By doing so, the Utility will gain revenue stability through the deregulation transition period and the customer will see cost savings before open access is available to them. RPU met with Kaiser Foundation Hospital (Kaiser) to explore the possibility of negotiating a power sales agreement based on load profile and account aggregation. Kaiser asked RPU to look at a cost-effective plan to buy or lease the high voltage electric substation that serves the hospital to take advantage of high voltage pricing. This option is available to all customers but is only cost beneficial for RPU's very largest customers. Kaiser uses over 18,000,000 kWh a year and is one of RPU's top ten customers. Currently, two other customers take service at the 69kV level and several others have expressed interest. Kaiser will lease the equipment from RPU during the term of the contract with the option to purchase the equipment if they choose to procure power elsewhere at the end of the contract term. Cost savings to the customer of 30% to 34% are expected when obtaining service at the 69kV rather than the 12kV rate. Kaiser and RPU staff have met as necessary since May 1996 to reach agreement on this arrangement and draft a final contract. The final contract is a straightforward seven-year agreement with an early termination clause after the fifth year. Kaiser receives power at the 69kV level close to expected market prices and receives price certainty for at least five years. RPU retains Kaiser as its primary customer by taking a proactive role in large customer contracts. The City benefits by continuing its strong relationship with Kaiser and retaining the electric revenues within the City. Finally, other utility customers benefit through the continued contribution from Kaiser to average power costs. The Board of Public Utilities approved and recommended City Council approval of this item at its meeting of November 20, 1998. 23-1