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HomeMy WebLinkAbout2001-06 DRAFT FIL HE ETHE SECRETARY MINUTES OF STEERING COMMITTEE MEET/l�i OFFICE OF waE COUNTY gEgRATIOH DISTFIICT Wednesday, June 27, 2001 JUL 18 201 A meeting of the Steering Committee of the Orange County Sanitation District was-- - - - held on Wednesday, June 27, 2001 at 5 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: STEERING COMMITTEE MEMBERS: OTHERS PRESENT: Directors Present: Thomas L. Woodruff, General Counsel Norm Eckenrode, Chair Don Hughes Peter Green,Vice Chair Pat McGuigan, Chairman, OMITS Committee STAFF PRESENT: Steve Anderson, PDC Committee Blake Anderson, General Manager Shirley McCracken, Chairman, FAHR Committee Bob Ghirelli, Director of Technical Services Jim Silva, County Supervisor Bob Ooten, Director of Operations and Alice Jempsa, Director, Guest of Chair Maintenance Mike Moore, ECM Manager Directors Absent: Lisa Lawson, Communications Manager Jean Tappan, Committee Secretary (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no comments by any member of the public. (4) RECEIVE. FILE AND APPROVE MINUTES OF PREVIOUS MEETING The minutes of the May 23, 2001 Steering Committee meeting were approved as drafted. (5) REPORT OF THE COMMITTEE CHAIR Committee Chair Norm Eckenrode reminded the members of the Legislators' Breakfast meeting scheduled for Friday, June 29,2001. There will also be a Directors Workshop on Saturday,July 14 between 8 and 11. The main topic for discussion will be levels of treatment. The CASA Annual Conference is being held in San Diego August 15-18 in San Diego. The deadline for registering is July 19. This afternoon, Director Jim Silva hosted a meeting with Huntington Beach leaders and Orange County Health Care Agency staff to discuss beach issues with District staff. Director Silva reported Minutes of the Steering Committee Page 2 June 27,2001 that the meeting was very informative and thanked the staff for their efforts. The group decided that they would meet monthly during the summer for updates on the beach monitoring and testing program. Chair Eckenrode announced that there isn't a need for a closed session. He also stated that he will be on vacation for the next couple of weeks and Vice Chair Peter Green will be Chair pro tam in his absence. Director Alice Jempsa, Los Alamitos, was welcomed as the Chair's guest for this meeting. (6) REPORT OF THE GENERAL MANAGER A. Huntington Beach Status Report General Manager Blake Anderson reported that the context of the testing at Huntington Beach includes the application for the permit renewal. He said that the choices the District has made up to today are because of considering air, land and water impacts and balancing them to make the most environmental sense. Bob Ghirelli said that the Board approved an interim budget of$2.9 million for the testing/monitoring program and it now appears that the final number will be closer to $5-5.1 million. Two of the six 48-hour surveys have been completed and he described the preliminary results from the June 19 testing. What it shows so far is that the beach is hot; the water is not. B. Public Opinion Survey Status Report Lisa Lawson stated that the survey is underway. The results will help staff evaluate the public's understanding of issues of importance to the District and what will be necessary to educate the public through our outreach program. C. Btasolids Short-term Options Status Report Mr. Ghirelli and Mike Moore updated the members on the Impacts to the District's biosolids disposal program now that Class B biosolids will be banned for land application in 2003 in Kam County and now in Riverside County. In order to use the biosolids on these land applications, they will have to meet Class A standards. A draft report has been submitted that looked at many options and it recommends further study on four technologies: composting; chemical stabilization; rail haul to Arizona; and heat drying technologies. Staff is evaluating the draft report and will make a recommendation to the OMITS Committee in August or September. Whichever option is chosen, the costs for biosolids disposal will be about double what is now being spent. D. GW RS Operating Agreement Mr. Anderson updated the members on the status of the operating agreement for the GW RS project. Terms are still being negotiated, and Mr. Anderson explained some of the issues that have not been resolved. He stated that he was confident agreement will be reached. Minutes of the Steering Committee Page 3 June 27, 2001 E. LEAD Program Mr. Anderson reported that 70 supervisors, managers and department heads completed the first leadership development program. Chapman University facilitated this effort. The consensus after the training was that all employees would benefit from this type of training. Mr. Anderson said that he is discussing a similar voluntary two- day workshop for electeds in Orange County with the heads of other Orange County agencies. F. Space Utilization Study The conceptual study for utilizing and improving workspace in the Administration Building has been completed. Staff is reviewing the study's recommendations and a formal report will be forthcoming- G. Public Information/Outreach Effort for GW RS Project Mr. Anderson provided a heads-up on the status of the public information/outreach program. Additional funds will be requested at the Board meeting for interim services until the four-year contract is awarded in September. The estimated annual level of effort is$900,000 per year. (7) REPORT OF GENERAL COUNSEL General Counsel Tom Woodruff updated the members on the history leading to the action on the Board agenda on the proposed agreement with Southern California Edison that addresses renewable energy pricing and payment issues. (8) DISCUSSION ITEM A. Committee Changes Authorized by PDC Committee Mr.Anderson reviewed the changes to the agenda report process that the PDC Committee approved at its last meeting. The reasons for the changes are to streamline and simplify the agenda reports and to help run the meeting more efficiently. The changes will be presented to the OMTS and FAHR Committees in August and if they accept the changes, the new agenda report form will be implemented beginning in September. (9) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY A. Director Green suggested that staff consider a sergeant-at-arms for the Board meetings. Arrangements will be made for security services. B. Directors Pat McGuigan and Steve Anderson asked for darification on two items on the Board agenda. (10) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. Minutes of the Steering Committee Page 4 June 27, 2001 (11) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND/OR STAFF REPORT There were none. (12) CONSIDERATION OF UPCOMING MEETINGS The next Steering Committee meeting is scheduled for July 18, 2001 at 5 p.m. The next Board Meeting is scheduled for July 18, 2001 at 7 p.m. (13) CLOSED SESSION There was no closed session. (14) ADJOURNMENT The Chair declared the meeting adjourned at 6:44 p.m. Submitted by: Jeffirappan SqWng Committee Secretary Giwpmelpeneel5leemq rnmmm«WIwM701 SC.0 Gme STATE OF CALIFORNIA ) )SS. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, 1 hereby certify that the Notice and the Agenda for the Steering Committee meeting held on Wednesday, June 27, 2001, was duly posted for public inspection in the main lobby of the District's offices on Friday, June 22, 2001. IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of June, 2001. �✓ 4"' Penny Kyle, SeErbtatey of the B rd of Directors of Orange County Sanitation Dis ct Posted: June 22 , 2001, 7:35 a.m. By gnature wNWgmWry mm�posung im CI ORANGE COUNTY SANITATION DISTRICT --W BOARD SECRETARY (2) ice: 17143962-2411 tax: 17141962-0 56 mmw.acad.r<m mailing address: e0. 8.8127 NOTICE OF MEETING lley.F4m PO Vall, 92728.8127 OF THE sD.ec address: STEERING COMMITTEE 108"Ellis Avenue Faonwin Valley CA 92706 7016 ORANGE COUNTY SANITATION DISTRICT Member a a WEDNESDAY, JUNE 27, 2000 - 5 P.M. Cities Anehegm DISTRICT'S ADMINISTRATIVE OFFICE Brno Buena Perk 10844 ELLIS AVENUE ,un:a'v,`e F FOUNTAIN VALLEY, CALIFORNIA 92708 Fullerton Garden Grove Huntington Beach Irvine La Hehre La Palma A regular meeting of the Steering Committee of the Board of Directors of nmrgort se Los,i,Batch t Orange County Sanitation District, will be held at the above location, date and 9ange time. Racenhs Bents Ana Beal Beech Stanton Tu.&n Villa Park Yenta Linda Caanty m Orange U.lcsry Districts Ca,,. MCaJ Midway Dry Water Districts Irvine Panch To maintain worldolass Ieadarsh,in waate.ta,and water resource management. STEERING COMMITTEE AND BOARD MEETING DATES FOR THE NEXT TWELVE MONTHS Wednesday, July 18, 2001* Wednesday, August 22, 2001 Wednesday, September 26, 2001 Wednesday, October 24, 2001 Wednesday, November28, 2001 Wednesday, December 19, 2001* Wednesday, January 23, 2002 Wednesday, February 27, 2002 Wednesday, March 27, 2002 Wednesday, April 24, 2002 Wednesday, May 22, 2002 Wednesday, June 26, 2002 *Tentatively rescheduled from regular fourth Wednesday. STEERING COMMITTEE (1) Roll Call: Meeting Date: June 27, 2001 Meeting Time: 5 p.m. Meeting Adjourned: Committee Members Norm Eckenrode, Chair Peter Green,Vice Chair Steve Anderson, Chair, PDC Committee Pat McGuigan, Chair, OMTS Committee Shirley McCracken, Chair, FAHR Committee Jim Silva,Supervisor Others Alice Jempsa, Guest Director Thomas L. Woodruff, General Counsel Don Hughes Staff Present Blake P. Anderson, General Manager................................. Greg Mathews, Assistant to the General Manager............. Jean Tappan, Secretary....................................................... Bob Ghirelli, Director of Technical Services........................ Gary Streed, Director of Finance......................................... Lisa Lawson, Communications Manager............................. c: Lenora Crane AGENDA REGULAR MEETING OF THE STEERING COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, JUNE 27, 2001 AT 5 P.M. ADMINISTRATIVE OFFICE 10844 Ellis Avenue Fountain Valley, California In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the District's Administrative Office not less than 72 hours prior to the meeting date and time above. All written materials relating to each agenda item are available for public inspection in the office of the Board Secretary. In the event any matter not listed on this agenda is proposed to be submitted to the Steering Committee for discussion and/or action, it will be done in compliance with Section 54954.2(b)as an emergency item or that there is a need to take immediate action which need came to the attention of the District subsequent to the posting of the agenda, or as set forth on a supplemental agenda posted not less than 72 hours prior to the meeting date. All current agendas and meeting minutes are also available via OCSD's Internet site located at www.ocsd.com. Upon entering OCSD's web site, please navigate to the Board of Directors section. (1) ROLL CALL (2) APPOINTMENT OF CHAIR PRO TEM. IF NECESSARY (3) PUBLIC COMMENTS All persons wishing to address the Steering Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chairman, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot action taken by the Committee except as authorized by Section 54954.2(b). Book Page I -2- June 27, 2001 Agenda (4) APPROVE MINUTES OF PREVIOUS MEETING Approve draft minutes of the May 23, 2001 Steering Committee meeting. (5) REPORT OF COMMITTEE CHAIR A. Legislators Breakfast, Friday,June 29 B. Directors Workshop, Saturday,July 14, 2001, 8-11 a.m. C. CASA Annual Conference in San Diego,August 15-18, 2001 (6) REPORT OF GENERAL MANAGER A. Huntington Beach Status Report B. Public Opinion Survey Status Report C. Biosolids Short-tens Options Status Report D. GW RS Operating Agreement E. LEAD Program (7) REPORT OF GENERAL COUNSEL A. Proposed Agreement with Southern California Edison Company Addressing Renewable Energy Pricing and Payment Issues (8) DISCUSSION ITEM (Item A) A. Report on Committee Changes Authorized by PDC Committee (9) OTHER BUSINESS COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS IF ANY (10) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING (11) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT (12) FUTURE MEETING DATES The next Steering Committee Meeting is scheduled for 5 p.m.,Wednesday,July 18, 2001. The next Board Meeting is scheduled for 7 p.m., Wednesday,July 18, 2001. Book Page 2 -3- June 27, 2001 Agenda (13) CLOSED SESSION During the course of conducting the business set forth on this agenda as a regular meeting of the Steering Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation,or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9. 54957 or 54957.6,as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c)employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Directors during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Board on any of these subjects, the minutes will reflect all required disclosures of information. A. Conference with General Counsel-Anticipated Litigation - Government Code Section 54956.9(c), One (1)potential case. B. Reconvene in regular session C. Consideration of action, if any, on matters considered in closed session. (14) ADJOURNMENT jt G.IVIRWANGENM\STEORING COMMIT ODWUNN63701 AGENDA,MEETING CALENDAR AND ROLL GALL aHEMDOC Notice to Committee Members: For any questions on the agenda or to place items on the agenda, Committee members should contact the Committee Chair or the Secretary ten days in advance of the Committee meeting. Committee Chair: Norm Eckenrode (714)993-8261 (Placentia City Hall) Secretary: Jean Tappan (714)593.7101 (714)962-0356(Fax) E-mail: Ita DDa nf�OCSd.COm Book Page 3 DRAFT MINUTES OF STEERING f'OMMITTEE MEETING Wednesday, May 23, 2001 A meeting of the Steering Committee of the Orange County Sanitation District was held on Wednesday, May 23,2001 at 5 p.m., in the Districrs Administrative Office. (1) The roll was called and a quorum declared present, as follows: STEERING COMMITTEE MEMBERS: OTHERS PRESENT: Directors Present: Thomas L. Woodruff, General Counsel North Eckenrode, Chair Don Hughes Peter Green, Vice Chair Director Beth Krom, Guest Pat McGuigan, Chairman, OMTS Committee Director Tony Kawashima, Guest Steve Anderson, PDC Committee Ryal Wheeler Shirley McCracken, Chairman, FAHR Committee Jim Silva, County Supervisor STAFF PRESENT: Directors Absent: Gary Streed, Director of Finance None Bob Ghirelli, Director of Technical Services Bob Ooten, Director of Operations and Maintenance David A. Ludwin, Director of Engineering Lisa Tomko, Director of Human Resources Lisa Lawson, Communications Manager Penny Kyle,Acting Committee Secretary (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no comments by any member of the public. (4) RECEIVE. FILE AND APPROVE MINUTES OF PREVIOUS MEETING The minutes of the April 25, 2001 Steering Committee meeting were approved as drafted. Book Page 5 Minutes of the Steering Committee Page 2 May 23, 2001 (5) REPORT OF THE COMMITTEE CHAIR Committee Chair Norm Eckenrode reported the first round of ocean discharge testing began earlier in the week. He also reported he attended a Watershed Management Workshop with the Santa River Watershed Group. One of the major issues discussed was the transition of the Chino dairy area after the dairies are gone and how to develop the land around the dairies that stay. (6) REPORT OF GENERAL MANAGER Gary Slreed, Director of Finance, reported that General Manager Blake Anderson was in Washington, DC, attending an AMSA conference. It was announced that the District was one of the recipients of the AMSA Gold Award,which is given to those agencies that meet all discharge requirements for the year. Bob Ghirelli, Director of Technical Services, reported on the first series of ocean discharge testing held earlier in the week. He reported the testing went very well, and approximately 2500 samples were collected during a 24-hour period,which is approximately equal to one half of the samples the microbiology lab does in one year. Approximately 200 staff members have been trained for the testing series to be conducted throughout the summer. The overall budget cost for this project will be in excess of$5 million. One of the major factors not originally included in the previous budget requests was staff time and labor overhead cost. Staff members expressed concern that AES does not want to contribute any monies toward this testing as previously reported. Mr. Ghirelli briefly discussed ocean discharge issues and reiterated the major issue facing the Board of Directors would be determining what level of treatment the ocean discharge water receive, should the current studies determine that the District's discharge is contributing bacteria to the beach. Bob Doter, Director of Operations & Maintenance, reported on an accelerated research schedule for microfiltration treatment technology for ocean discharge. If the level or type of treatment needs to be changed, microfiltration might prove to be a good alternative to full secondary treatment at a lower cost. The research project was slated for the next fiscal year but staff felt it was in the District's best interest to move this project for approval by the Board at the June Board meeting. Gary Streed reviewed the possible impact of user rates if the District must change the current level of treatment to full secondary treatment. An update was then given to the Directors on staffs response to the Orange County Grand Jurys report on restaurant grease management. The County of Orange is taking the lead to develop a response to the Grand Jury and a meeting with the affected cities/agencies has been scheduled. Response to the report will be due by July 25". Lisa Lawson, Communications Manager, reported the public opinion survey questions were being finalized. She also reported that the SARI Line Relocation public participation was going well. A meeting had been held with the citizen's advisory group,which was successful in reducing the group's anger and mistrust of the District. Book Page 6 Minutes of the Steering Committee Page 3 May 23, 2001 (7) REPORT OF GENERAL COUNSEL Thomas L. Woodruff, General Counsel, reported a need to add three items to the Closed Session, needing immediate attention which arose subsequent to the posting of the Agenda. General Counsel stated that these items could be added pursuant to California Government Code Section 54954.2(b)(2) upon a two-thirds vote of the Committee. It was moved, seconded and duly carried to: (1)Find that the matters arose subsequent to the posting of the Agenda, pursuant to authority of California Government Code Section 54954.2(b)(2); and (2)Add three closed session items, as Item Nos. 13(a)(3), 13(a)(4), and 13(a)(5), to the Agenda, to wit: Tran, at al. v. Orange County Sanitation District,at al.,Orange County Superior Court Case No. OOCC05306 (Government Code Section 54956.9); City of Los Alamitos v. Orange County Sanitation District, at al., Orange County Superior Court Case No. 01CCO2192 (Government Code Section 54956.9);and Confer with District's Labor Negotiating Team (Thomas L. Woodruff, General Counsel and Lisa Tomko, Director of Human Resources)re IUOE Local 501 (Government Code Section 54957.6). (8) DISCUSSION ITEMS Committee meetings format was discussed,and discussion centered on streamlining the meetings and information presented to the Directors in a more efficient manner. it was determined committee meetings should be limited to a maximum of two hours; presentations should be limited to the times listed on the agenda; and Directors should contact staff prior to the meeting for answers to specific questions. It was also suggested that additional workshops be held for newer Directors. (9) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There was no other business discussed. (10) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. (11) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND/OR STAFF REPORT There were none. (12) CONSIDERATION OF UPCOMING MEETINGS The next Steering Committee meeting is scheduled for June 27, 2001 at 5 p.m. Book Page 7 Minutes of the Steering Committee Page 4 May 23. 2001 (13) CLOSED SESSION The Steering Committee convened at 6:48 p.m. in Closed Session, pursuant to Government Code Sections 54957.6 and 54956.9,to discuss Agenda Item Nos. 13(a)(1), (2), (3), (4)and (5). Confidential Minutes of the Closed Session held by the Steering Committee have been prepared in accordance with California Government Code Section 54957.2,and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. No reportable actions were taken re Agenda Item Nos. 13(a)(1), (2), (3)and (5). The Committee did not consider Agenda Item No. 13(a)(4), and no report was given. At 7:00 p.m.,the Committee reconvened in regular session. (14) ADJOURNMENT The Chair declared the meeting adjourned at 7:00 p.m. Submitted by: Penny NI e Acting St ering Committee Secretary �wamau,•rinmer¢uwawem.p cwmai»w,a+.rnsna,scMweserc Book Page 8 J=A°''— tNGLvJB 1N ST— COti..rr4'Z PA-CKA4E I wJ LC_�A2 hS OtSt cSS iur law OFFlcFs of ITEs.� uWT<a GC. 12�P2C� WOODRUFF, SP&4DLIN & SMART A PROFESSIONAL CORPORATION 701 SOUTH PARKER STREET,SUITE SOW•ORANGE.CA 928684760 (714)558-7000 FAX(714)835-7787 DIRECTDIALf (714)560.2605 EMAIL: TLW@MS-LAW COM June 15, 2001 VIA FACSIMILE & U.S. MAIL Mr. Bruce L. McCarthy QF Resources Southern California Edison Company 2244 Walnut Grove Avenue, Suite 495 Rosemead, CA 91770 Re: Proposed A reement Addressin Renewable EnergyPricingand Pa ment Issues Seller: Orange County Sanitation District, Agreement No. QFID No. 1098 Dear Mr. McCarthy: This letter will serve to confirm a portion of the conversation between myself and Ms. Elizabeth Matthias of SCE's General Counsel's Office on June 13, 2001, concerning the above-referenced Agreement. Specifically, this office serves as General Counsel to the Orange County Sanitation District, and on behalf of our client, we acknowledge receipt of the proposed Agreement as described above, prepared specifically for the District and received on June 13, 2001. The Orange County Sanitation District is a public agency, governed by a Board of Directors of elected public officials. The authority to execute this Agreement can only be granted by affirmative action of that Board. The Board is unable to convene prior to the requested date of June 15, 2001, by which to have the Agreement executed and returned to your offices. The next meeting of the Board of Directors is scheduled for June 27, 2001. This will advise that based upon my review of the Agreement and the related information, as of this date, we will have this matter placed on the Agenda of the Board of Directors for June 27, 2001, with a request that the Board take action at that time. It would be reasonable to expect that the District Board of Directors would accept and act favorably upon the recommendation of Staff and Office of General Counsel, to approve this Agreement. As General Counsel, I will recommend that the Agreement be approved. TERRYCANDRUS•SiFPF03 J.BFATON•MLOTSBOBAK•JOHNECAVANAUGH•t GG.FARRWGNN•IOBFPHW,M9 Ai 9MOLEYRFRLP' DOfKLASGHOLLAND L018EJFFFREY ROBERTAAKMUS •MAGDA AIANA-WIANr RIIJEMiLOSKEY�"JHOMASF.NIXON�BARBARAPA6EANU �JA9JN E PESNIIX�UMARSANDJVAL�IOW40.SHAW GRE:ARY E 9MDYLW•KENNARO R 9NART,IR�DANO'1.K BRADIPI�IAt1M A UNDFRWOOD�IHOMASL WOODRUFF Book Page 9 Mr. Bruce L. McCarthy Southern California Edison Company June 15, 2001 Page 2 1 am advised that SCE will be preparing and distributing a third Agreement (in addition to the one which is the subject of this letter and one for the gas fired co- generators) shortly, after processing this renewable source producers Agreement. It seems clear that OCSD neither generally, nor literally meets the criteria of SCE for either a "gas fired" producer or a renewable fuel source producer. Based on that, we will wish to evaluate entering into the Excess Capacity Agreement in lieu of the Renewable Source Agreement. This is particularly important and relevant in light of the fact that SCE has not provided the District with any proposed Agreement for its Plant No. 1 Co-Generation Facility, Contract OFID2460. It is my understanding in my discussion with Ms. Matthias that the presentation of this letter will allow Edison to grant the District time to schedule this for Board action at its June 27, 2001 meeting, and to advise Edison of that action on the following day, June 28, 2001. If this is not acceptable to Edison, and would cause Edison to take action effectively barring the District from executing this or a similar Agreement at a later date, I request that you advise me immediately upon receipt of this letter, or immediately upon making your determination, but in any event prior to noon on June 15, 2001. Very truly yours, WOODRUFF, SPRADLIN & SMART A Professional Corporation 777Rq/ v/L` HOMAS L. WCOOODRUFF TLW:Iam GENERAL UNSEL-OCSD cc: 114r. B.P. Anderson Mr. R.J. Ooten Mr. M. Esquer Mr. D. Halverson Ms. P. Kyle 137661\1 Book Page to LAW OFFICES OF WOODRUFF, SPRADLIN & SMART A PROFESSIONAL COPFONAiION MEMORANDUM TO: Chairman and Members of the Board of Directors Orange County Sanitation District FROM: Thomas L. Woodruff, General Counsel DATE: June 21, 2001- RE: Agreement with Southern California Edison Re Purchase and Sale of District Generated Excess Electricity This report is submitted as of this date based upon the most current information available to the District. There is a very dynamic changing process which will likely result in some revisions or modification to the facts contained herein, which will be presented to the Board verba&at the meeting of June 27 2001. As you are generally aware, the District in 1991 and 1992, brought on-line our Central Generation Project, located at each of the treatment plants. These projects are the large gas fired internal combustion engines, which energize generators for the production of electricity. The fuel used by the District for the energy source on all the engines at Plant No. 2 is almost exclusively the digester methane gas produced in the ordinary course of the District's wastewater treatment process. Plant No. 1 uses about 30% digester gas and 70% natural gas purchased. The District does have time periods when it produces more electrical energy than it needs and as is more particularly described below, sells that energy to Southern California Edison, "SCE", pursuant to two contracts. The electricity is placed in the region-wide grid system for general public use. When the District brought the Central Generation Project on-line, we entered into two separate agreements with SCE described as "As Available Capacity and Energy Power Purchase Agreements". The Agreement relating to Plant No. 2 was executed September 9, 1991, and the Agreement for Plant No. 1 was executed July 2, 1992. The Agreements have a fixed duration of 30 years and provide for the formula upon which the excess electricity produced by the District is purchased and paid for by SCE. The pricing of the electricity purchased is based upon what is known in the industry as a methodology called Short Run Avoided Cost, "SRAC", calculated and as established by the California PUC. That rate historically has varied depending upon the cost of fuel. soondenoe Book Page I I Chairman and Members of the Board of Directors June 21, 2001 Page 2 During the first five months of the current fiscal year(FY 'W201), the District sold and SCE purchased an average of 400,000 Kwh at Plant No. 1 and 550,000 Kwh at Plant No.2, for a total price of approximately $300,000.00. As we are aware, SCE has expressed considerable concern over its continued financial viability and there is some opinion that it could follow with Pacific Gas & Electric "PG&E", and seek protection in the U.S. Bankruptcy Court. Starting with the November sale of power, SCE has failed and continues to fail to pay District for power delivered between November 1, 2000 and March 27, 2001. At the present time, there is a total outstanding balance of approximately $118,000.00 owing to the District. SCE has paid for all power delivered since March 27, pursuant to an order of the PUC. Recognizing that the non-payment was likely to continue for an indefinite period, the District Staff and Management decided that the Central Generation Project should be scaled back and turned down with the result that the District has sold drastically reduced quantities of electricity to Edison, averaging, by example, approximately 30,000 Kwh at Plant No. 1, and 15,000 at Plant No. 2, for most of December through March, 2001. The real reason for the scale back was the tremendously high natural gas prices that made exports by the District uneconomical. The decision to scale back was made prior to SCE deciding that they were not going to pay. Edison has sought relief both with the State Legislature and the State Public Utilities Commission "PUC"for its own financial crisis. In an effort to resolve their financial dilemma, SCE has requested the PUC to approve its negotiating and entering into amendments to existing energy purchase agreements with their present customers, which would include the District. They have developed three different standard agreements for each category of generator. The agreement proposed to the District can be summarized as follows: • SCE will pay District ten percent (10%) of the outstanding balance due, plus seven percent (7%) interest, within five (5)days of both parties signing. • SCE will pay District ten percent (10%) of the balance due, plus seven percent (7%) interest, within five (5) days of the Legislature and PUC approving its "bailout" plan. • SCE will pay the total balance due, including interest, within five (5) business days of receiving new debt financing proceeds. • The District and SCE will change the pricing terms for energy sold to SCE to a fixed rate for a period of five (5)years. SCE to pay 5.37 cents per Kwh. • All of the terms of the 1991-92 Agreements will remain in force. We have expressed some significant concern to SCE about the five (5)year fixed term pricing, and we have also questioned whether we should be included in the category of the Renewable Sources Providers at all. wandei •m I Book Page 12 Chairman and Members of the Board of Directors June 21, 2001 Page 3 As of June 18, 2001, 5:00 p.m., SCE determined that they had an insufficient number of subscribers accepting the proposal amendment to the agreement. They therefore extended till 5:00 p.m. on June 19, 2001, in which to obtain additional subscribers. They have indicated that if they failed to have sufficient subscribers by that time, the proposal will be withdrawn. In such event, no one knows exactly what the next step would be. The impact on the District is we would continue to simply await any proceedings that would ensure our receiving the past due sums owing. All electricity sold to SCE since March 27, 2001, has been paid for on a timely basis by SCE pursuant to an order of the PUC. It is the unanimous recommendation of the General Manager and his Staff that the District not enter into this agreement, and to abide by the terms of the 1991-92 Agreements and await further outcomes to determine the best method for collecting the past due sum owing to the District THOMAS L.WOODRUFF GENERAL COUNSEL-OCSD TLW:Iam cc: Mr. B.P. Anderson Mr. G.G. Streed Mr. R.J. Ooten Mr. D.D. Halverson soonaeme Book Page 13 Orange County Sanitation District (714) 962-2411 www.ocsd.com mailing address: P.O. Box 8127 Fountain Valley, California 92728-8127 street address: 10844 Ellis Avenue Fountain Valley, California 92708-7018 published on recycled paper