Item Number: 20
City Council / Board of Directors
Written Communications
Meeting of: August 19, 2025
Submitted By:
Brenda Hampton, Director of Electric Utility Services
Subject:
Approval of the North American Energy Standards Board Base Contract and Special Provisions (“NAESB”) for the Sale and Purchase of Natural Gas with EDF Trading North America, LLC.
Recommendation:
The Honorable City Council:
(1) Approve the North American Energy Standards Board Base Contract, Special Provisions to the Base Contract, Credit Support Addendum, and Special Provisions to the Credit Support Addendum (collectively, the “NAESB”) with EDF Trading North America, LLC. “EDF” for natural gas supply and related services and authorize the City Manager to execute the agreement; and (2) Allow the City Manager and/or his/her designee to execute transaction confirmations under the NAESB contract for procurement of firm gas supply not to exceed the City Manager’s Purchasing Authority pursuant to Ordinance No. 2381.
Fiscal Impact:
There is no fiscal impact associated with the execution of the North American Energy Standards Board Base Contract and Special Provisions to the Base Contract Strategic Plan Goal:
This item supports the City’s Strategic Plan, Goal A, Fiscal Sustainability. Execution of this contract will enable Victorville Municipal Utility Services “VMUS” to procure firm natural gas supply delivered from the Kern River Gas Transmission system (“Kern River” or “KRGT”) at competitive market prices thereby reducing total delivered cost of gas for VMUS customers.
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Background:
On February 7th, 2023, the Victorville City Council approved the execution of an Interconnection Agreement (“IA”) with KRGT to enable construction of a natural gas pipeline interconnection, meter station facilities, odorizer, and VMUS pipeline extension construction project. The construction of this infrastructure provided a new natural gas delivery point for the City.
On July 16th, 2024, the Victorville City Council approved a Capacity Release Agreement with High Desert Power Project, LLC (“HDPP”) and a Transportation Services Agreement with Kern River Gas Transmission Company for the permanent release of HDPP firm gas transmission capacity on the KRGT High Desert Lateral (“HDL”) to serve the City of Victorville’s new gas delivery point on the HDL. Construction and commissioning of the new Kern River interconnection was completed in September 2024.
Kern River transports approximately 1.8 billion cubic feet of gas per day from gas production basins in the Rocky Mountains to end-user customers in Utah, Nevada, and California. VMUS’s current gas supply needs are small in comparison, less than 1,000 cubic feet per day.
Most of the natural gas purchased and sold in the U.S. and on the Kern River system is transacted under NAESB contracts, which are largely based on the Uniform Commercial Code (UCC). The NAESB is a standard contract designed for transactional efficiency. A NAESB “Contract” consists of several related documents:
1. NAESB Base Contract. The NAESB Base Contract identifies the parties, selected options where options are provided in the General Terms and Conditions, and the non-price/non-volume aspects of the parties agreement;
2. General Terms and Conditions. These are attached to the NAESB Base Contract and are largely based on UCC law;
3. Special Provisions. Special Provisions are negotiated modifications of and additions to the General Terms and Conditions to reflect the business needs of the parties. Special Provisions can include terms such as credit support, added representations and warranties, and alternative dispute resolution;
4. Transaction Confirmation(s) (1-2 pages). Transaction Confirmations (TCs) contain the price, volume, term, and delivery point terms of the agreement.
The Victorville City Council has previously approved two NAESB Base Contracts and Special Provisions on November 19, 2024, and on January 21, 2025. It is important and beneficial for VMUS to have multiple NAESB contracts on file because it grants VMUS access to contract with a variety of suppliers who will provide competitive market pricing and terms. This will allow VMUS to pass-through competitive and fair market costs to its customers.
VMUS negotiated the attached NAESB Contract and Special Provisions with EDF to allow VMUS to do business in the future with this supplier.
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A NAESB Contract consisting solely of the NAESB Base Contract, General Terms and Conditions and Special Provisions is valid and executory indefinitely unless terminated by one or both parties with 30-days prior notice. It is the execution of one or more TCs that activates that NAESB Contract and the parties’ obligations to physically deliver and receive gas at the specified volume, delivery point and pricing. Termination of a NAESB Contract only becomes effective upon completion of the parties’ performances under any executory TCs.
Discussion:
A NAESB Contract is required to allow VMUS to procure gas supply from a reputable and creditworthy marketer for delivery into the Kern River capacity for ultimate delivery into the VMUS distribution system. The current TC with Morgan Stanley will expire on October 31, 2025. The City will issue a Request for Proposal “RFP” in Summer of 2025 to obtain competitive pricing and terms and will execute a TC with the most qualified bidder.
Currently, VMUS is only asking for approval to sign the EDF NAESB and Special Provisions to have on file and to be prepared for the issuance of the RFP.
The NAESB was negotiated by the VMUS commercial team, with review and advice from the City attorney and an outside consultant with in-depth expertise in the natural gas industry.
Due to its relatively small gas demand, VMUS will only take gas supply from one supplier at any given time. This will be accomplished by executing one or more TCs with one of the suppliers where an NAESB contract has been established. Execution of the NAESB contracts does not preclude the City from executing additional NAESB contracts with other qualified suppliers.
Since the NAESB contracts are standardized contracts and to further improve time efficiency, staff will only bring forth NAESB’s for the City Council approval should there be a substantive change to the standard NAESB.
Execution of these contracts and authorizing the City Manager or his/her designee to execute subsequent transaction confirmations will allow VMUS to efficiently and reliably manage gas supply to VMUS customers.
Staff remains available to answer any questions the City Council may have.
Prepared By:
Kinda Salloum, Senior Administrative Analyst
Attachments: A. Base Contract and Special Provisions for Sale and Purchase of Natural Gas with General Terms and Conditions with EDF Trading North America