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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/19/2008 - FIRST READING OF ORDINANCE NO. 098, 2008, AMENDING ITEM NUMBER: 19 AGENDA ITEM SUMMARY DATE: August 19, 2008 FORT COLLINS CITY COUNCIL STAFF: Steve Catanach Brian Janonis SUBJECT First Reading of Ordinance No. 098, 2008, Amending Chapter 26 of the City Code Relating to the Provision of Electric Service. RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. EXECUTIVE SUMMARY Proposed changes to Chapter 26 of City Code clarify that the City's Utility is the sole provider of retail electric service within the City. An exception has been added to clarify that a property owner can provide electric serve to his or her own property when certain conditions are met. Clarification has been added about when franchise requirements must be met. Additionally,language specifying that parallel generation must be through a qualifying facility to ensure safe operation in coordination with the City's electric system has been added. BACKGROUND New technologies which allow the construction of small distributed generation resources have developed rapidly over the past few years. Wind,solar,biomass,biogas,diesel,and natural gas are some of the types of energy sources that can be used to generate electricity. The Utility is in full support of the development of these resources, but it is important that the public, utility personnel, operational stability and the viability of the City Utility are all preserved. The proposed Code change preserves the right of the City to be the sole retail seller of electricity to its citizens while supporting any opportunity an individual or business may have to develop its own resources under certain conditions.The change also ensures that if the generator is to be interconnected with the City system,it will be safe and properly protected from damage from or to the City electric infrastructure. The proposed revisions to the Code ensure that the City Council continues to have the authority to regulate the distribution and sale of electric energy to Fort Collins residents. The proposed Code amendment provides flexibility in the development of private generation resources. For example, CSU is currently planning to construct a new parking garage on Prospect Avenue. In the future, it intends to add photovoltaic solar panels on the roof of the structure. The site is not contiguous with the campus and would normally be served from Light and Power facilities. However,CSU would prefer to interconnect the solar array with its system in order to get August 19, 2008 -2- Item No. 19 both the highest financial benefit by offsetting retail electric rates, as opposed to selling excess capacity at wholesale rates, and to obtain the benefit of a renewable resource on its system. Today, CSU would have to franchise its electrical system to the City to interconnect the solar array with its system. The proposed Code amendment will allow CSU to obtain a revocable permit to cross Lake Street and connect to its system, if City Council approves a request for such permit. The Code amendment also recognizes that there may be situations where the City Utility is unable to serve a customer, either because of the size of the facilities in an area or because of the lack of facilities in the area. The City would evaluate the economics of extending or improving facilities versus the revenues lost by letting another entity serve them. Staff is not aware of any existing circumstances it believes meet this test. The Code amendment also recognizes that a customer may develop parallel generation resources and can interconnect them within the customer's property, provided that the generation facility meets the definition of a"qualifying facility". A qualifying facility is defined in the Code as: Qualifyingfacility shall mean an electric-generating facility operated in parallel with the City of Fort Collins electric distribution system that has been inspected for compliance with City interconnection requirements, has been issued a "Permit to Operate"by the City and is operated under a valid"Interconnection Agreement"with the City of Fort Collins. Parallel generation facilities must also comply with the City's interconnection requirement to ensure that the facility is being operated safely and that there is no potential for a back feed situation in which its generation energizes the City system during an outage. ATTACHMENTS 1. Electric Board Minutes. ATTACHMENT DRAFT - Excerpt Fort Collins Utilities Electric Board Minutes Wednesday,July 23, 2008 Electric Board Chairperson City Council Liaison John Morris, 377-8221 Wade Troxell, 219-8940 Electric Board Vice Chairperson Staff Liaison Dan Bihn, 218-1962 Robin Pierce, 221-6702 Roll Call Board Present Chairperson John Morris, Vice Chairperson Dan Bihn, Tom Bamish, John Graham, John Harris, Steve Wolley Board Absent Jeff Lebesch Staff Present Brian Janonis, Patty Bigner, Steve Catanach, Tom Rock, Kraig Bader, John Phelan, Norm Weaver, Eric Dahlgren, Jenny Lopez-Filkins and Robin Pierce Guests Council Liaison Wade Troxell; John Bleem, Mike Dahl and Joe Wilson, PRPA; Tony Georgis, RW Beck Consultants; Citizen Eric Sutherland Electric Code Change Light and Power Operations Manager Steve Catanach introduced a proposed change to the electric code as defined in Sections 26-391, 26-441 through 26-444 of the Municipal Code. The Code contains sole provider language necessary to clarify the City's position on obtaining and providing electricity within City limits. Fort Collins Utilities (FCU) entered into a sole provider agreement with Platte River Power Authority (PRPA). However, the City also needs the option to accommodate distributive generation projects. An example of such a project is a parking structure planned by Colorado State University (CSU). CSU will potentially add solar panels to the structure in the future, qualifying the structure as a distributive generation project. According to the way current ordinances are written, due to the location of the parking structure and its relationship to right-of-way, CSU would have to simply be a metered customer of the City. The proposed language is designed to provide a new level of flexibility and allow parties to petition City Council for a permit to cross over right-of-way and interconnect with their system, so long as the structure meets the "qualifying facility" criteria. It also recognizes if a party is not entering right-of-way for distributed generation. It does, however, still limit third party sales of electricity through appropriate restrictions in the 1 DRAFT -Excerpt Code. This Code change will go before Council at the August 19`h regular meeting and therefore requires action by the Board. An example was provided from another city in the region. A customer was working with a third party to install a project with some level of distributed generation. The third party wanted to act as a retailer to the customer, thus eliminating the city utility as the electricity provider. Typically, utilities rules do not allow additional retailers in competition, but additionally, FCU abides by the sole provider provision with PRPA and recognizes a commitment to protecting the interests of bond holders. Board Member Bamish noted an acceptable scenario where the owner of a solar panel runs a wire to a neighbor at no charge. However, the issue arises if the owner charges the neighbor for the electricity. Vice Chairperson Bihn noted a slightly different scenario where a third party wants to provide power that does not cross premise lines but crosses ownership lines. Mr. Catanach clarified that if a party is an owner of a distributed generation project, this is acceptable and would be covered under the interconnection agreement. However, a third party financing and owning the project facilities and selling only the kilowatt hours would not be allowed according to the Code. Vice Chairperson Bihn added that this practice is very prevalent in western states as a very effective way for financing solar projects. He shared an example of casino parking structures that are purchased by a party that in turn provides the casino electricity from the structure. Board Member Graham questioned if this practice is worth raising our rates to the rates that apply in western states to justify this right. Board Member Barnish noted our community has been successful in maintaining lower rates, because this type of practice is not allowed. Joe Wilson, General Counsel with PRPA, noted a third party solar developer in another city that wanted to install panels and sell electricity directly to a building on the same property. Typically under Colorado law,this would not be allowed. A customer can generate electricity for their own use, but service territory protection protects utilities from third party retailing. This guideline has eroded somewhat in light of solar development. As a solution, PRPA offered to enter into a simultaneous buy-sell transaction where PRPA purchased the solar-generated power at the price the customer was willing to pay and sold it at that price to the city utility, so the utility could sell it at that price to the customer. This was a transparent transaction to the customer and would not go against contractual protections or cause the utility to waive its territorial protections. Vice Chairperson Bihn noted that it also provides flexibility to build in a margin that covers ancillary services. Mr. Wilson noted each case can be different,but in this case, PRPA was willing to buy at the price the customer was willing to pay. Board Member Graham noted this is an important option to consider before moving forward. Vice Chairperson Bihn noted this practice exists all over the country, and Board Member Graham noted that electricity to many of these areas is not provided by a municipal owned utility. Board Member Harris added the importance of advancing solar projects while protecting the Utility's concerns. Board Member Wolley added if the Utility foresees cases where a party objects to selling through PRPA and wants to sell straight to the customer, problems could arise. The primary motivation behind the growing interest in solar projects is supporting environmental responsibility. 2 DRAFT - Excerpt Board Member Barnish asked whether PRPA would be left to hold a long term contract if a current customer willing to pay the higher cost leaves, and a new customer comes in that does not want to pay the higher costs. Mr. Wilson clarified the customer chose to bear the risk under any number of unforeseen possibilities that could develop, such as the solar developer going out of business. PRPA would want protection in that case, since they are still obligated to purchase the power. He added that service territory protections are very strong in Colorado. Board Member Graham asked whether this code change does well by our customers. Staff responded that the proposed language is favorable in allowing the Utility to offer customers more flexible options. Board Member Graham moved that the Board accept the code change language as written. Board Member Bamish seconded the motion. It passed unanimously. (5 for, 0 against) 3 ORDINANCE NO . 098 , 2008 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS RELATING TO THE PROVISION OF ELECTRIC SERVICE WHEREAS, new forms of energy generation and distribution are constantly appearing in the open market; and WHEREAS , the basic provisions in City Code regarding providing electric service and regarding obtaining electric service have not been updated since 1972 , and do not clearly state the City ' s intent with respect to new energy options; and WHEREAS , the City Council has determined that certain definitions contained in City Code Section 26-391 and the terms of Sections 26-441 through 26-444 should be amended to provide more clarity regarding permissible means for providing and obtaining electric service within City limits in light of the changing technology and related energy options . NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows : Section 1 . That the definition of "Parallel generation" contained in Section 26-391 of the Code of the City of Fort Collins is hereby amended to read as follows : Parallel generation shall mean the operation of qualifying facilities when interconnected with the utility system in accordance with the provisions of these rurlesthis Chapter and the electric utility rules and regulations and interconnection standards . Section 2 . That the definition "Small power production " contained in Section 26-391 of the Code of the City of Fort Collins is hereby deleted in its entirety: resources,Sv?aHpovverpirduction shall mean facilities which derive more than seventy-- five (75) percent of total energy input from biomass, waste or renewable including wind, solar and water, to produce electric power. Such facilities must be less than ei6hty (80) megawatts' capacity and nmst be owned by a person no primarily engaged in the generation or sale of electric energy7 Section 3 . That Section 26-441 of the Code of the City of Fort Collins is hereby amended to read as follows : Sec . 26-441 . Finitchise iequiied'roviding service. other public place in the eity tintess the eity eouneff has , by ordinance, granted permitted. (a) No person or entity other than the Utility may furnish electric service to any property in the City except as follows : ( 1 ) the owner of property receiving electric service may furnish or offer to furnish electric service to such property; provided, however, that if such service is provided through wires installed or maintained in, on, under or over a public place, the Council must first determine by resolution that the provisions of such service will not materially alter the viability of the electric utility system and will benefit the citizens of Fort Collins as well as the property owner; (2) if the City Council determines that the Utility cannot sufficiently and cost effectively provide electric service requested by a customer and the City Council may authorize the provision of such service by a non-City provider pursuant to the franchise requirements of the City Charter; and (3 ) electric service may be provided pursuant to § 26-444 below. (b) Any provision of parallel generation service must be made through a qualifying facility as defined in this Article and the initiation and operation of any qualifying facility is subject to the requirements and conditions described in the electric utility rules and regulations, interconnection standards and this Chapter. Section 4 . That Section 26-442 of the Code of the City of Fort Collins is hereby amended to read as follows : Sec. 26-442. Obtaining service. Except as otherwise provided , It shall be unlawful for any person to obtain electrical service from atry person who is not franchiscd pnrsnant tcrunless it is provided in accordance with § 26-441 to provide sueh electrieal service . -2 - Section 5 . That Section 26-443 of the Code of the City of Fort Collins is hereby amended to read as follows : Sec. 26443. City electric utility not affected. The provisions of this Division shall not apply to the eleetriealelectric utility and that utility shall be authorized to furnish electric service to any property within the City. Section 6 . That Section 26-444 of the Code of the City of Fort Collins is hereby amended to read as follows : Sec. 26-444. Annexations. Properties within any annexation to the City may continue to receive electricalelectric service from any utility previously furnishing such service without complying with the provisions of this Division until the receipt of written notice from the City of the City's readiness to provide such service . As of the date upon which the City has declared itself to be responsible for providing such service, all eleetriealelectric service within any annexed area shall be provided in accordance with the provisions of this Division. If the City is unable to provide eleetriealelectric service to annexed property prior to the expiration of the second year after annexation of that property, then the utility previously furnishing service may continue to do so if said continued service is authorized by the City Council through the grant of a revocable permit for that purpose . Any such revocable permit shall authorize the continued provision of electric service by the non-City utility to the annexed property until such time as the City either determines that the City is ready to provide electric service, or notifies said non-City utility that a franchise shall be required for the continuation of such service . Introduced, considered favorably on first reading, and ordered published this 19th day of August, A.D . 2008 , and to be presented for final passage on the 2nd day of September, A.D . 2008 . Mayor ATTEST : City Clerk -3 - Passed and adopted on final reading on the 2nd day of September, A.D . 2008 . Mayor ATTEST : City Clerk -4-