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CITY OF GLENDALE, CALIFORNIA
REPORT TO THE CITY COUNCIL
AGENDA ITEM
Report: Glendale Water and Power Annual Authority for the Purchase or Sale of Energy Commodities and Services.
1. Resolution approving renewal of annual authorization for the City Manager or GWP General Manager, or their designee, to enter into contracts for the purchase or sale of energy commodities and services, including the transfer of initiating and clearing brokers services, not to exceed five years in duration, and dispensing with competitive bidding.
COUNCIL ACTION
Item Type: Action Item
Approved for June 25, 2024 calendar
EXECUTIVE SUMMARY
It is necessary to dispense with competitive bidding and process contract approvals in a timely manner, by the City Manager and GWP General Manager to participate in the energy market. GWP participates in this market to ensure reliable and cost-effective power is procured to serve commercial and residential customers. The price and availability of energy, related commodities, and services are in constant fluctuation until approved contracts are in place. The term of these contracts can range in duration from the next hour up to five years in term.
RECOMMENDATION
Adopt a resolution dispensing with competitive bidding and renewing the annual authorization for the City Manager or GWP General Manager, to enter into GWP contracts for the purchase, sale, storage, scheduling, and transmission of energy commodities and services including renewable and environmental commodities and participation in related markets and auctions, and including the transfer of initiating and clearing brokers services for the use of financial instruments to stabilize prices, for terms not to exceed five years in duration.
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ANALYSIS
On June 13, 2023, the City Council approved Resolution No. 23-79 dispensing with competitive bidding, and renewing the annual authorization for City Manager and GWP General Manager, or their designee, to enter into GWP contracts for the purchase, sale, storage, scheduling, and transmission of energy commodities and services including renewable and environmental commodities and participation in related markets and auctions, and including the use of financial instruments to stabilize prices, for terms not to exceed five years in duration.
For many years, it has been necessary to make immediate decisions to buy or sell power, natural gas, environmental commodities, and related services. Power, natural gas, and environmental commodities are purchased and sold on a bilateral basis, either directly or through brokerage firms via brokerage service agreements, and via online exchanges regulated by the United States Commodity Futures Trading Commission (CFTC). Transactions related to renewable, carbon, and emission products are regulated by the State of California. It is not industry practice to solicit bids using the City’s standard bidding process because time is of the essence. Transactions are verbally executed and agreed to on an hourly basis or through confirmation letters that are executed and signed within days of the verbal agreements. To meet the City’s operational and regulatory needs, the City Manager and GWP General Manager, or designee, need to be able to promptly approve these contracts without a lengthy process that would bring each transaction to the City Council.
In addition, the City Council has added the authority to use financial instruments, such as: futures and forwards contracts, swaps, and options under International Swap and Derivatives Association (“ISDA”) Master Agreements and confirmations pursuant to such ISDA Master Agreements, with the City Manager’s authorization, to assist the City in stabilizing energy prices. GWP also utilizes initiating and clearing brokerage accounts at StoneX Group, for financial transactions with Intercontinental Exchange, Inc. (ICE) and CME Group. GWP must comply with the state-mandated renewable portfolio standard and greenhouse gas reduction targets. Accordingly, energy portfolio activities have been expanded to include renewable, carbon, and emission commodities and include participation in trading markets and auctions established by the state.
Furthermore, GWP is a Scheduling Coordinator in California ISO and is authorized to transact in the Day-ahead and Real-time markets. GWP employs the services of ConocoPhillips to manage all natural gas nominations, scheduling, imbalances, and optimize pipeline capacities.
Article VI, Section 9 of the Glendale Charter authorizes the City to dispense with competitive bidding where it is in the City’s best interest to do so. For the foregoing reasons, it is in the City’s best interest to dispense with competitive bidding, and renew the annual authorization for the City Manager or GWP General Manager, or their designee, to enter into GWP contracts for the purchase, sale, storage, scheduling, and transmission of energy commodities and services (natural gas or electric power), including renewable and environmental commodities and participation in related markets and auctions, and including the transfer of initiating and clearing brokers services for the 3{{section.number}}d
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use of financial instruments to stabilize prices, for terms not to exceed five years in duration. This will enable the City and GWP to maintain energy cost stability, to provide additional flexibility in managing its energy portfolio, to meet state renewable and greenhouse gas reduction mandates, and to reduce risks associated with such transactions.
Outlined in the proposed FY 2024-25 budget, the funds required to provide reliable and cost-effective energy and comply with state regulations total $154,912,848.
STAKEHOLDERS/OUTREACH
Non-applicable.
FISCAL IMPACT
GWP’s proposed budget for Fiscal Year 2024-25 includes line-item accounts for Purchased Power, Fuel - Natural Gas, Carbon Allowances, and Renewable Energy Credits in the amount of $154,912,848, to be used for contracts related to purchase of energy commodities and services in the following accounts:
Existing Appropriation
Amount Account String Funding Source
$34,884,682 GL: 45502-5820-GWP-4680-P0000 Electric Works Revenue Fund
$1,860,000 GL: 45506-5820-GWP-4680-P0000 Electric Works Revenue Fund
$2,135,750 GL: 45507-5820-GWP-4680-P0000 Electric Works Revenue Fund
$116,032,416 GL: 45510-5820-GWP-4680-P0000 Electric Works Revenue Fund
Funding for future years will be requested as part of the annual budgetary process.
ENVIRONMENTAL REVIEW (CEQA/NEPA)
Not Applicable. The action herein is not a project as defined under the California Environmental Quality Act (CEQA) and as such not subject to CEQA.
CAMPAIGN DISCLOSURE
Not Applicable.
ALTERNATIVES TO STAFF RECOMMENDATION
Alternative 1: Choose not to approve the annual renewal of the resolution to dispense with competitive bidding, and not authorize the City Manager or GWP General Manager to enter into contracts for the purchase or sale of energy commodities and services, including the transfer of initiating and clearing brokers services, not to exceed five years in duration. City Council may require competitive bidding for contracts for the purchase and sale of energy commodities and services. By doing so will put the 4{{section.number}}d
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City at a disadvantage and prevent GWP from engaging in established commodities markets and will remove GWP’s ability to efficiently procure electric power and gas commodities and services.
Alternative 2: Consider any other alternative not proposed by staff.
ADMINISTRATIVE ACTION
Submitted by:
Mark Young, General Manager - Glendale Water and Power
Prepared by:
Scott K. Mellon, Assistant General Manager - Power Management Chie Valdez, Integrated Resource Planning Administrator Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS/ATTACHMENTS
Not Applicable.