HomeMy WebLinkAboutOrd 412-2008 CAPP 24 year Electric Power Contract.pdfCITY OF ANNA, TEXAS
ORDINANCE NO. 412-2008
ORDINANCE OF THE CITY OF ANNA, TEXAS APPROVING AN
ELECTRIC POWER CONTRACT WITH CITIES AGGREGATION
POWER PROJECT, INC. (-CAPP-) FOR ELECTRIC CAPACITY
AND ENERGY, PROVIDING CAPACITY PAYMENTS AS PUBLIC
PROPERTY FINANCE CONTRACTUAL OBLIGATIONS OF THE
CITY, PLEDGING AND LEVYING AN AD VALOREM TAX TO
SUCH PAYMENTS, PROVIDING FOR ENERGY PAYMENTS
FOR ELECTRIC ENERGY SUBJECT TO ANNUAL
APPROPRIATION BY THE CITY, PROVIDING FOR THE
ASSIGNMENT OF SUCH CAPACITY PAYMENTS TO SUPPORT
DEBT ISSUED BY CAPP INCURRED TO ACQUIRE ELECTRIC
CAPACITY RIGHTS FROM LUMINANT GENERATION
COMPANY AND RELATED ENTITIES PURSUANT TO A 24 -
YEAR POWER PURCHASE AGREEMENT ("PPA");
AUTHORIZING THE CITY MANAGER OR OTHER
APPROPRIATE CITY OFFICER OR EMPLOYEE TO EXECUTE
AND DELIVER THE MEMBER CONTRACT; FURTHER
AUTHORIZING THE CITY MANAGER OR OTHER
APPROPRIATE CITY OFFICER OR CITY EMPLOYEE TO SIGN
ADDITIONAL AGREEMENTS ARRANGED BY CAPP FOR
ELECTRIC POWER NEEDED BY THE CITY IN THE PERIOD
2009-2013 IN EXCESS OF THE AMOUNT OBTAINED UNDER
THE MEMBER CONTRACT; ACKNOWLEDGING,
AUTHORIZING AND DIRECTING THE CITY MANAGER OR
APPROPRIATE CITY OFFICER OR CITY EMPLOYEE TO SIGN
AND RETURN CAPP'S DISCLOSURE LETTER; FURTHER
AUTHORIZING THE CITY MANAGER OR APPROPRIATE CITY
OFFICER OR OTHER CITY EMPLOYEE TO ACCEPT
CONFORMING CHANGES TO THE MEMBER CONTRACT
DEPENDENT ON THE FINAL TERMS OF THE CAPP PPA;
PROVIDING FOR VALIDITY AND SUFFICIENCY OF CITY
EMPLOYEE'S OR CITY OFFICER'S SIGNATURE IF THE
OFFICER OR EMPLOYEE LEAVES OFFICE OR EMPLOYMENT
PRIOR TO THE DELIVERY OF THE MEMBER CONTRACT;
ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS
ORDINANCE WAS PASSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT.
WHEREAS, the City of Anna, Texas must purchase electricity in order to
perform its proprietary and governmental functions; and
WHEREAS, the price of power sold in the deregulated retail market in Texas has
been directly linked to the daily fluctuations for natural gas futures prices, regardless of
the type of generation fuel; and
WHEREAS, natural gas prices are extremely volatile, resulting in an upward cost
trend and significant electric price instability; and
WHEREAS, the City is a member of the non-profit political subdivision
corporation Cities Aggregation Power Project, Inc. ("CAPF), which has the legal
authority to contract for the purchase of electricity on behalf of more than 100 political
subdivision members; and
WHEREAS, CAPP has endeavored to provide its members with the most
favorable energy pricing available in the market, delivering more than $100 million in
savings for its members since 2002; and
WHEREAS, the CAPP Board of Directors is a voluntary ten -member board
comprised entirely of city employees and city officials that directs the activities of
CAPP's legal and energy advisors; and
WHEREAS, the CAPP Board of Directors has investigated potential long-term
contracting options to both lower and stabilize electric prices for member political
subdivisions that must prepare annual budgets and require cost predictability for essential
services like electricity; and
WHEREAS, CAPP negotiated a Purchase Power Agreement ("PPA") with
owners of non -gas fired generation for the long-term, fixed price supply of power, which
will allow participating CAPP members to meet a portion of energy needs (approximately
60 percent) at a stable, known price for a 24 -year period; and
WHEREAS, the PPA calls for CAPP to contract with Luminant Generation
Company LLC, Big Brown Power Company, LLC and Oak Grove Management
Company, LLC (collectively, "Luminanf) for approximately 150 MW of baseload power
supplied by seven different units over 24 years and pre -paying a portion of the capacity
costs associated with power purchased pursuant to the long-term contract; and
WHEREAS, the City wishes to acquire a portion of its future electric energy
pursuant to the PPA between CAPP and Luminant; and
WHEREAS, to acquire power pursuant to the PPA, the City must enter into an
electric power contract, the Energy Sales Contract Between CAPP and the City of Anna,
Texas (the "Member Contract"), substantially in the form attached hereto; and
WHEREAS, CAPP will issue general revenue bonds, with the bond proceeds
used to pre -pay a portion of the 24 -year capacity commitment pursuant to the PPA on
behalf of the City and all participating CAPP members; and
Ord. 412-2008 CAPP-24 year power h. agreomort.d 2 10-274A
WHEREAS, bonds issued by CAPP will be backed by the individual Member
Contracts of each participating CAPP city committing to pay a capacity payment equal to
its proportionate amount of the debt service obligation associated with CAPP's
prepayment of PPA capacity costs; and
WHEREAS, the City's allocated total maximum capacity payment is $519,000
(total maximum monthly capacity payment is $ 4,000); and
WHEREAS, the Member Contract requires that certain capacity payments
payable by each participating CAPP member will be public property finance contractual
obligations pursuant to Texas Local Government Code Chapter 271, Subchapter A,
secured by a pledge of such member's ad valorem taxes, which will be assigned to
support debt issued by CAPP to pay the capacity costs of the PPA; and
WHEREAS, the fixed capacity component constitutes a long-temt, general
obligation tax debt of each participating member that is secured by a pledge of the
member's ad valorem taxes; and
WHEREAS, CAPP must secure an additional "wrap" agreement to arrange for
power deliveries when needed to meet the remaining portion of the City's energy needs
in excess of the baseload power provided under the Member Contract, with said wmp
agreement needing ratification/approval of the City; and
WHEREAS, the resulting power supply blend adds to both stability and savings
for the City; and
WHEREAS, the total capacity and energy to be purchased under the long-term
PPA cannot be known until all CAPP members have acted on their opportunity to
participate in the transaction; and
WHEREAS, a change in total capacity and energy obligated under the PPA will
change the cost of the transaction and may change the percentage of debt service
obligation and energy assigned to participating CAPP members; and
WHEREAS, the PPA is an effort, initiated by CAPP pursuant to direction and
support of its participating members, including the City, to diversify fuel sources and
minimize the risk associated with complete reliance upon electric pricing linked to
natural gas costs that are influenced by unpredictable weather, goo -political and global
economic factors, but nonetheless the PPA involves a number of somewhat unique risks
and uncertainties; and
WHEREAS, CAPP has prepared and distributed a Disclosure Statement dated
September 10, 2008, in the form attached hereto that identifies and describes certain risks
(but may not describe all risks) associated with the transactions contemplated by the
Member Contract and the PPA; and
Ord. 412-2008 C"P-24 y¢ a power pumhaee agm .d 3 10.27-08
WHEREAS, the Disclosure Statement is to be acknowledged, signed, and
returned to CAPP, prior to pricing of CAPP's bonds, if the Member Contract is approved;
and
WHEREAS, it is hereby officially found and determined that the meeting at
which this ordinance was passed was open to the public, and public notice of the time,
THE CITY OF ANNA, TEXAS:
I. The CAPP Member Contract, attached hereto and incorporated herein for
all purposes is deemed necessary and desirable for the City to meet its proprietary
functions and basic governmental responsibilities and is hereby approved.
2. The City acknowledges that the Member Contract requires that certain
capacity payments payable by the City will be public property finance contractual
obligations pursuant to Texas Local Government Code Chapter 271, Subehapter A,
secured by a pledge of such member's ad valorem taxes, which will be assigned to
support debt issued by CAPP to pay the capacity costs of the PPA; and the City further
acknowledges that the fixed capacity component constitutes a long-term, general
obligation tax debt of the City that is secured by a pledge of the City's ad valorem taxes.
3. The City of Anna. Texas hereby acknowledges that it has reviewed the
Member Contract and the Disclosure Statement dated September 10, 2008, and the City
Manager, or other appropriate officer or staff person of the City, is authorized and
directed to sign, date, and return by December 17, 2008, to CAPP both the Member
Contract and such Disclosure Statement.
4. The City Manager, or other appropriate officer or staff person of the City,
is authorized to approve modifications and corrections to the Member Contract that are
necessary to conform to changes to the assigned cost in the PPA after all CAPP members
have made decisions regarding participation in the long-term PPA, so long as no such
changes increase the City's capacity payment obligations in any year from the amounts
reflected in the Member Contract attached hereto.
5. The City Manager, or other appropriate officer or staff person of the City,
is authorized to sign additional agreements arranged by CAPP for the provision of
electricity during the period 2009-2013 that are necessary to meet the City's power needs
that exceed the power arranged through the Member Contract with CAPP, with the
understanding that any agreement for energy beyond 2009 is subject to the right of annual
appropriation.
6. The City Manager, or other appropriate officer or staff person of the City,
is hereby authorized, empowered and directed from time to time and at any time to do
and perform all such acts and things and to execute, acknowledge and deliver in the name
and under the corporate seal and on behalf of the City all such instruments, whether or
Ord. 412-2M CAPP-24 year,o plecAave aga dw 4 10.27-08
not herein mentioned, as may be necessary or desirable in order to carry out the terms and
provisions of this ordinance, the Member Contract and the Disclosure.
7. The City Manager, or other appropriate officer or staff person of the City,
is hereby authorized and directed to approve any changes or corrections necessary to this
ordinance, the Member Contract or any ancillary agreement, certificate or document,
prior to the initial delivery of the Member Contract in order to (i) correct any ambiguity
or mistake or properly or more completely document the transactions contemplated and
approved by this ordinance, (ii) approve any changes to the Member Contract as
contemplated in the recitals hereto and Section 3 hereto, or (iii) obtain the approval of the
Member Contract (and the debt issued by CAPP relating to the PPA) by the Texas
Attorney General's office.
8. In case any officer of the City whose signature shall appear on the
Member Contract shall cease to be such officer before the delivery of such Member
Contract, such signature shall nevertheless be valid and sufficient for all purposes the
same as if such officer had remained in office until such delivery.
9. That if any one or more sections or clauses of this ordinance is adjudged to
be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the
remaining provisions of this ordinance and the remaining provisions of the ordinance
shall be interpreted as if the offending section or clause never existed.
10. The City hereby finds that the statements set forth in the recitals of this
ordinance are true and correct, and the City hereby incorporates such recitals as a part of
this ordinance.
Signed on this the 30th day of October, 2008.
ATTEST:
Mayor Pro Tem, Kevin Anderson
N a Wilkison, City �y
OF A&
(hd.412-2CWCAPP-24ysetlwwerp .V�.dm 5 10,27-08