STATEMENT OF ISSUE
In July 2005, the City was approached by Seminole Electric Cooperative, Inc. (SECI) seeking connection and transmission service for a new delivery point being developed by Talquin Electric Cooperative (Talquin) near Woodville. Negotiations have been ongoing over the last 3-1/2 years to establish the transmission rate, terms and conditions of service for this proposed delivery point, that will be located adjacent to the City’s transmission line connecting the Purdom Plant and substation BP-11. Staff has been assisted by R.W. Beck and John & Hengerer (the City’s FERC counsel) in developing the rate and the contract terms. Based on current estimates of the load Talquin will serve at the Woodville delivery point, the City’s revenue from transmission services would be approximately $14,000/month. While work on the actual delivery point has not yet begun, SECI and the City have completed negotiations on the terms and conditions of the transmission services agreement, and staff is seeking authorization for the City Manager to execute this agreement when final.

RECOMMENDED ACTION
Option 1. Authorize the City Manager to execute the Woodville Delivery Point and Transmission Services Agreement between Seminole Electric Cooperative, Inc. and the City of Tallahassee with the concurrence of the City Attorney.

FISCAL IMPACT
Option 1. Fiscal impact related to this agreement would be transmission service revenues of approximately $168,000/year once service begins at the Woodville delivery point.

Kevin G. Wailes, General Manager – Electric Utility

Anita Favors Thompson, City Manager

For information, please contact: Gary S. Brinkworth, ext 3066.

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES

1. Talquin has determined that to adequately serve existing and future customer demand in the northern section of Wakulla County an additional delivery point (substation) will be required. SECI will be supplying the power to the proposed Woodville delivery point under an existing agreement with Progress Energy, but they have requested that the City deliver this power.

2. SECI has requested firm transmission service for the Woodville delivery point, comparable to the character of service the City provides its existing retail customers. Because the City currently has no firm transmission service customers, staff has been working with R.W. Beck (Beck) and John & Hengerer (J&H) to develop a transmission rate and associated service agreement. Development of this transmission service rate has taken place in conjunction with the ongoing work on the City’s new Open Access Transmission Tariff (OATT), since this rate should be consistent with rates developed under the OATT. Currently, Beck’s support has been funded from the same task order that is supporting the OATT (budget of $120,000); the budget for support from J&H is $16,000.

3. While the rate was under development, staff has been engaged in ongoing negotiations with SECI about the terms and conditions of the transmission services agreement that will facilitate delivery of power to the Woodville substation. These negotiations have been extensive, but a near-final agreement has been drafted that is acceptable to both parties and consistent with the terms and conditions of the pro forma OATT approved by the Federal Energy Regulatory Commission (FERC).

4. The proposed rate for this delivery point agreement is composed of a transmission service charge and a charge for some ancillary services necessary to ensure reliable delivery of the power purchased from Progress Energy. The rate was developed using the same ratemaking principles used to establish the City’s OATT rates and charges. SECI has accepted the proposed rate of $1.59/kW-month as a stipulated value (meaning that no detailed analysis was done by SECI on the City’s ratemaking methodology). Based on the current forecasted load at the Woodville substation, this rate will produce transmission revenues of approximately $14,000/month.

5. The transmission services agreement has an initial term of 10 years, with an option for SECI to request a 5-year extension of the initial term. Thereafter, the agreement has an automatic rollover provision for successive 3-year terms, and can be terminated by either party with 24 months notice. The agreement also includes a dispute resolution process that consists of three steps: good faith negotiations, followed by mediation, followed by binding arbitration. Although the binding arbitration step does present some risk to the City, it is a standard provision in FERC approved Open Access Transmission Tariffs and

staff believes the overall dispute resolution process is acceptable. The City Attorney’s Office has been involved in the development of this agreement, along with the City’s FERC counsel at John & Hengerer.

6. The agreement between the City and SECI is essentially complete, but there are some minor edits that are still pending. Staff is seeking authorization from the City Commission, for the City Manager to execute this agreement on behalf of the City once those edits are complete and the City Attorney concurs that the agreement is ready for execution.

CHARITABLE CONTRIBUTIONS
Not applicable.

OPTIONS

Option 1. Authorize the City Manager to execute the Woodville Delivery Point and Transmission Services Agreement between Seminole Electric Cooperative, Inc. and the City of Tallahassee with the concurrence of the City Attorney.

Option 2. Direct staff to revise the transmission services agreement based on input from the City Commission. Selection of this option will delay finalization of the agreement and may result in additional costs for technical and legal support during ongoing negotiations.

Option 3. Do not authorize the City Manager to execute this transmission services agreement. Selection of this option will require staff to return to the City Commission once the agreement is final and seek approval.

FISCAL IMPACT

Option 1. Fiscal impact related to this agreement would be transmission service revenues of approximately $168,000/year once service begins at the Woodville delivery point.

Option 2. Impact not quantifiable at this time. Will likely require additional work by staff from R.W. Beck and John & Hengerer (depending on the nature of the instructions from the Commission) and may result in a request for supplemental funds for one or both consulting agreements associated with this effort.

Option 3. Impact not quantifiable at this time. May result in additional work by technical and legal advisors (leading to possible request for supplemental funds).

ATTACHMENTS/REFERENCES
None.