HomeMy Public PortalAbout030-2006 - Amendment to the Capacity PurchaseORDINANCE NO. 30-2006
AN ORDINANCE OF THE CITY OF RICHMOND AUTHORIZING THE EXECUTION
AND DELIVERY OF THE THIRD AMENDMENT TO THE CAPACITY PURCHASE
AGREEMENT BY AND BETWEEN THE CITY OF RICHMOND AND THE INDIANA
MUNICIPAL POWER AGENCY
WHEREAS, the City of Richmond (the "Member") is a municipal corporation created and
existing under the laws of the State of Indiana and is a member in good standing
of the Indiana Municipal Power Agency ("Agency"), a body corporate and politic
and political subdivision of the State of Indiana, created pursuant to Ind. Code §
8-1-2.2 (the "Act") and exercising thereunder a part of the sovereign powers of
the State of Indiana; and
WHEREAS, the Member owns and operates a municipal electric system which furnishes retail
electric service to the public; and
WHEREAS, the Member is required by law to provide customers with an adequate, reliable
and economical supply of electric power and energy; and
WHEREAS, the Agency and the Member entered into a Capacity Purchase Agreement
("Agreement") on April 1, 1982, pursuant to the authority of the Common
Council of the City of Richmond, Indiana, given by Ordinance No. 12, 1982 and
adopted March 15, 1982; and
WHEREAS, subsequently, the Member was authorized by Ordinance 3-1985 of the City of
Richmond to enter into First and Second Amendments to the Agreement, with the
First Amendment dated January 7, 1985 and effective February 1, 1984 and the
Second Amendment dated January 7, 1985 and effective January 1, 1985; and
WHEREAS, the Agency has dispatched Member's Generating Facilities as base load
generation since the inception of the Agreement; and
WHEREAS, the Agency has paid Member for its Dedicated Capacity based on the terms of
Section 4 of the Agreement and considering the cost of "Displaced Purchased
Power and Energy;" and
WHEREAS, relevant circumstances have changed since execution of the Agreement and First
and Second Amendments thereto, and in view of such changes, the Agency and
the Member agree that the formula for determining the cost of Displaced
Purchased Power and Energy and the payment for Dedicated Capacity in Section
4 of the Agreement should be amended as soon as possible; and
WHEREAS, the Member therefore seeks a Third Amendment to the Agreement and the
Agency has agreed to such amendment, as approved by the Board of
Commissioner's of the Agency on February 24, 2006; and
WHEREAS, the Third Amendment to the Agreement is marked as Exhibit A and is attached
thereto, and incorporated herein by reference, and two (2) copies of each are on
file in the office of the City Clerk for public inspection pursuant to Ind. Code §
36-1-5-4; and
WHEREAS, based upon the foregoing, the Member by this Ordinance hereby finds and
determines to approve the Third Amendment to the Agreement;
NOW, THEREFORE, BE IT ORDAINED BY THE COMMON COUNCIL OF THE
CITY OF RICHMOND, INDIANA, THAT:
SECTION 1. The Member is authorized pursuant to this Ordinance to enter into the
Third Amendment to the Agreement in the form attached hereto as Exhibit A.
SECTION 2. The findings and determinations set forth in the preambles to this
Ordinance are hereby made findings and determinations of the City of Richmond.
SECTION 3. By this Ordinance, the Mayor is hereby authorized and directed to execute
and deliver, and the City Clerk is hereby authorized to attest and seal, the Third Amendment to
the Agreement.
SECTION 4. All ordinances and parts of ordinances in conflict herewith are hereby
repealed.
SECTION 5. This Ordinance shall be in full force and effect from and after its passage.
PASSED AND ADOPTED by the Common Council of the City of Richmond, this
_20th day of March, 2006.
S/S Karl SharR , President , - Deleted:
(Karl Sharp)
ATTEST: ,S/S _ Karen Chasteen City Clerk - Deleted:
(Karen Chasteen) Formatted: Underline
PRESENTED to the Mayor of the City of Richmond, Indiana, this 21s,__ day of March, 2006, at - - Deleted:
9:00 a.m.
S/S Karen _Chasteer�_ , City Clerk _ _ _ _ - - - fDeleted:
(Karen Chasteen)
APPROVED by me, Sarah L. Hutton, Mayor of the City of Richmond, Indiana, this _211ss _ day - - - Deleted:
of March, 2006, at 9:05 a.m.
�S/S_ _Sarah L. Hutton _Mayor _ _ - - - Deleted:
(Sarah L. Hutton) Formatted: Underline
ATTEST: S/S Karen Chastee City Clerk - Deleted:
(Karen Chasteen)
THIRD AMENDMENT TO
CAPACITY PURCHASE AGREEMENT
BETWEEN
INDIANA MUNICIPAL POWER AGENCY
AND
CITY OF RICHMOND, INDIANA
Deleted: _
THIS AMENDMENT (the "Amendment") made this _28t day of
Deleted:
—March,___, 2006, by and between the Indiana Municipal Power Agency, a body
corporate and politic and political subdivision of the State of Indiana, organized and existing
under the laws of the State of Indiana (the "Agency"), and the City of Richmond (the
"Member"), to the Capacity Purchase Agreement between the Agency and the Member entered
into as of the 1st day of April, 1982, and subsequently amended by the First Amendment, dated
January 7, 1985, effective February 1, 1984 and the Second Amendment, dated January 7, 1985,
effective January 1, 1985 (the "Agreement").
RECITALS
WHEREAS, the Agency has dispatched Member's Generating Facilities as base load
generation since the inception of the Agreement; and
WHEREAS, the Agency has paid Member for its Dedicated Capacity based on the terms
of Section 4 of the Agreement and on "Displaced Purchased Power and Energy," which means
"power and energy which would otherwise have been purchased by the Agency had the
Generating Facility not been available for use by the Agency;" and
WHERAS, under the Agreement, Displaced Purchased Power and Energy was based on
the cost from the then existing I&M/AEP purchase power agreement with the Agency; and
Exhibit "A"
WHEREAS, the Agency entered into a new purchase power agreement with AEP
effective January 1, 2006, pursuant to which the Agency purchases 150 MW of firm power on
terms and conditions that are very different from the terms and conditions of prior agreements
with AEP, and which affect the application of the Displaced Purchased Power and Energy and
the amount the Agency pays Member for Dedicated Capacity provided by its Generating
Facilities; and
WHEREAS, prior to January 1, 2006, the Agency used Member's Generating Facilities
as base load units, with a capacity factor of between 60% to 70%; and
WHEREAS, Member's fuel costs and emission allowance costs have increased
significantly during the recent past; and
WHEREAS, Member's Generating Facilities are uneconomical to run under the existing
Agreement as base load units with the present cost increases; and
WHEREAS, Member's Generating Facilities are located in the recently -developed PJM
Energy Market; and
WHEREAS, the PJM Energy Market provides an opportunity to operate the Member's
Generating Facilities economically as intermediate loading machines at less than a 60% capacity
factor; and
WHEREAS, it is more economical for the Agency to use Member's Generating Facilities
as intermediate load facilities and for the Agency to pay Member for Dedicated Capacity using
LMP pricing from the energy market operator in the determination of the cost of Displaced
Purchased Power and Energy; and
WHEREAS, the Agency and the Member agree that the formula for determining the cost
of Displaced Purchased Power and Energy and the payment for Dedicated Capacity in Section 4
of the Agreement should be amended in the foregoing manner from the effective date until
December 31, 2006 ("initial term') and during any renewal term.
NOW THEREFORE, for and in consideration of the payments and performance which
already have been made and performed under the Agreement and in consideration of the
promises herein contained, the Agency and the Member agree that the Agreement shall be, and is
hereby, modified, altered and changed in the following respects only:
Effective April 1, 2006, Section 4 of the Agreement is amended to add a new Section 4
(K) to read as follows:
(K) Upon prior written notice from Member to the Agency, and at the option of Member,
the Agency may dispatch the Member's Generating Facilities in the PJM Energy Market as
intermediate or peaking units, instead of base load units. If the Member provides the Agency
with written notice that it elects to have the Agency dispatch its Generating Facilities as
intermediate or peaking units under this Section 4(K), then the terms of Section 4 shall be
amended as provided in this Section 4 (K) for an initial term from April 12006 to December 31,
2006. If Member gives written notice to the Agency at least sixty (60) days prior to December
31, 2006 and each December 31 thereafter, then this Section 4 (K) of the Agreement shall remain
in effect from January 1 through December 31 of each year that this Agreement is renewed.. The
initial term and any renewal term of this Section 4 (K) ends on December 31 of the year when
Member fails to give written notice to Agency at least sixty (60) days prior to December 31.
The Agency will work with the Member to establish operating guidelines for dispatching
of Member's Generating Facilities.
During the time period the Member's Generating Facilities are dispatched by the Agency
as intermediate or peaking units, the Agency's payments for Dedicated Capacity under Sections
4(A), 4(B) and 4(C) will be suspended and replaced by payments for Dedicated Capacity under
this Section 4(K).
The Agency's monthly payments for Dedicated Capacity under this Section 4(K) will be
based on the actual net revenue received by the Agency for the Member's actual generation
during the month (LMP Monthly Pam), as described below.
LMP Monthly Payment for Dedicated Capacity = the sum of the hourly Net LMP
Revenue over every hour of the month.
Where:
Net LMP Revenue is the sum of the Day -Ahead Revenue and the Real -Time
Revenue minus the Real -Time Operating Reserve Charge by hour. The
Net LMP Revenue shall be subject to an after -the -fact true up for any
adjustments in these revenues or charges received by the Agency from the
energy market operator.
Day -Ahead Revenue is the product of (1) the scheduled generation in megawatts
for each hour from the Member's Generating Facilities and (2) the Day -
Ahead AEP Load Zone LMP price for the same hour as published by the
energy market operator. The scheduled generation will be determined by
the Agency in consultation with the Member.
Real -Time Revenue is the product of (1) the difference between the Real -Time
Generation for each hour from the Member's Generating Facilities and (2)
the Real -Time AEP Load Zone LMP price for the same hour as published
by the energy market operator. Real Time Revenue can be either positive
or negative.
Real -Time Generation is the difference between the scheduled and actual net
generation in megawatts for each hour from the Member's Generating
Facilities. Real -Time Generation canbe either positive or negative.
Real -Time Operating Reserve Charge is the product of the (1) absolute value of
the Real -Time Generation for each hour and (2) hourly Real -Time
Operating Reserve Charge for the same hour, as published by the energy
market operator.
Exhibit VII attached hereto contains a sample of how the LMP Monthly Payment for
Dedicated Capacity is calculated. In the event the energy market operator significantly modifies
the LMP pricing methodology, or eliminates it altogether, the Agency and Member will
cooperatively work together to develop a replacement payment method that will accomplish the
same objective as intended by this Section 4 (K).
Total payments for Dedicated Capacity during any twelve-month period will not exceed
the total Member Capacity Costs (MCC), and Member Fuel Costs (MFC), as defined below.
MCC = Member Capacity Cost: Member Capacity Cost for the month of usage
of Dedicated Capacity by the Agency shall be the actual cost per kW
incurred by Member in the previous month, including all of the
operations and maintenance costs incurred in running the Generating
Facilities, insurance costs, an allocated share of the Member's
administration and general expenses, a proportionate part of the
Member's production -related debt service costs, and an allowance for
amortization of and interest on expenditures for Capital or Fixed Assets
and Extraordinary Items, as defined in Form A-1. This cost will be
determined on standardized forms (see Exhibit II), using costs
determined in accordance with the Uniform System of Accounts from the
Member's records.
MFC - Member Fuel Charge: The Cost of Fuel per net kWh produced by the
Member's Generating Facility during the month of usage of Dedicated
Capacity by the Agency.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
Capacity Purchase Agreement to be executed by their proper officers, respectively, being
thereunto duly authorized, and their respective corporate seals to be hereto affixed, as of the day,
month and year first above written.
INDIANA MUNICIPAL POWER AGENCY
$y:_S�S�------------------------------ Deleted:_
Chairman
Attest:
By: _S/S , - Deleted:
Secretary
(SEAL)
CITY OF RICHMOND, INDIANA
By: _Sarah L.-Hutton, - - - f Deleted:
Sarah L. Hutton Mayor
Attest:
By: _S/S Karen Chasteeri - - Deleted:
Karen Chasteen Clerk
(SEAL)