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Resolution No. _________
Resolution of the Council of the City of Palo Alto Approving Edison Electric Institute Master Power Purchase and Sale Agreements with NRG Business Marketing LLC, DRW Energy Trading LLC, and Dynasty Power Inc., Delegating Authority to the City Manager to Transact Under the Master Agreements for Electricity-Related Commodities and Services, and Updating the City’s Standard Form Edison Electric Institute Master Power Purchase and Sale Agreement
R E C I T A L S
A. An active set of creditworthy counterparties is essential for the City of Palo Alto (City) to meet its electric supply portfolio planning objectives, internal risk management controls, and external operational and regulatory requirements.
B. The City desires to enter into Edison Electric Institute (EEI) Master Power Purchase and Sale Agreements (Master Agreements) with NRG Business Marketing LLC (NRG), DRW Energy Trading LLC (DRW), and Dynasty Power Inc. (Dynasty) to provide additional electricity suppliers with which to transact in a timely and competitive manner.
C. The proposed Master Agreements with NRG, DRW, and Dynasty have been negotiated under terms and conditions acceptable to the City, reviewed and approved by the City Attorney’s Office, and deemed suitable by the City’s Energy Risk Manager.
D. Staff has identified that NRG does not fully satisfy the City's investment-grade credit rating requirement, but recommends a waiver of this requirement given the company's strong balance sheet, positive ratings outlook, and the limited number of active counterparties currently available to the City.
E. DRW and Dynasty are privately-held and therefore lack a credit rating, but staff recommends a waiver of the City's investment-grade credit rating requirement for them based on the strength of their financial data.
F.All three proposed counterparties will be required to post collateral in the form of cash or a letter of credit from an A+ rated bank, within five business days of the award of a transaction.
G. Palo Alto Municipal Code (PAMC) Section 2.30.340 permits the use of Master Agreements to buy and/or sell electricity, gas, and related services through preapproved suppliers, subject to the City’s Energy Risk Management Policy, Guidelines, and Procedures.
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H. Executing these Master Agreements does not commit the City to any transactions with these counterparties but allows for future transactions to be executed efficiently.
I. Staff has also identified minor updates to the City’s standard form version of the EEI Master Power Purchase and Sale Agreement that are needed to clarify the City's 'one-way termination' provisions and better align them with current industry standards, thereby making the City's contract language more acceptable to suppliers.
J. The City Council’s approval of the Master Agreements with NRG, DRW, and Dynasty, and updates to the City’s standard form version EEI Master Agreement does not constitute a project under the California Environmental Quality Act (CEQA) as it will not result in any reasonably foreseeable direct or indirect change in the environment.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby approves the execution of the Edison Electric Institute Master Power Purchase and Sale Agreement with NRG Business Marketing LLC, DRW Energy Trading LLC and Dynasty Power Inc. (Exhibits A, B and C to this Resolution).
SECTION 2. The Council hereby delegates authority to the City Manager or their designee, the Director of Utilities, to transact under the Master Agreements for electricity- related commodities and services subject to the following limitations:
(a) The date for delivery of the electricity products for each transaction shall not exceed 36 months from the date the transaction is executed;
(b) The delivery date for any transaction shall not extend beyond December 2027; (c) The maximum aggregate transaction limit under the Master Agreement shall be $25 million;
(d) All transactions shall be subject to the Palo Alto Municipal Code; and (e) All transactions shall be subject to the City’s Energy Risk Management Policies, Guidelines, and Procedures.
SECTION 3. The Council hereby waives the investment-grade credit rating requirement for NRG, DRW, and Dynasty.
SECTION 4. The Council hereby approves an updated standard form version EEI Master Power Purchase and Sale Agreement (Exhibit D).
SECTION 5. The Council hereby authorizes the City Manager or their designee, the Director of Utilities, to take any administrative actions necessary to implement this Resolution.
Attachment A
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Attachment A
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INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________ Assistant City Attorney City Manager
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Director of Utilities
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Director of Administrative Services