HomeMy WebLinkAbout07804ORDINANCE NO. 7804
AN ORDINANCE CONSENTING TO THE TRANSFER OF FRANCHISE AND STREET LIGHTING
AGREEMENT FROM AQUILA, INC. TO BLACK HILLS CORPORATION, APPROVING A
STIPULATION AND AGREEMENT AND AUTHORIZING THE PRESIDENT OF THE CITY
COUNCIL TO EXECUTE SAME
WHEREAS, pursuant to Ordinances 5222 and 5703, Aquila, Inc.(f /k/a UtiliCorp United, Inc.)
( "Aquila ") currently holds a franchise to provide electric utility services to the City of Pueblo ( "City ")
and its residents ( "Franchise "), and
WHEREAS Aquila is a party to a Street Lighting Agreement dated as of June 30, 1985
between the City and Aquila ( "Street Lighting Agreement "),
WHEREAS, Black Hills Corporation ( "Black Hills ") is a holding company under the Public
Utility Holding Company Act of 2005 ( "PUHCA 2005 "). Black Hills, through its utility subsidiaries,
provides retail natural gas and electric service to approximately 137,000 utility customers in South
Dakota, Wyoming, and Montana.
WHEREAS, Aquila and Black Hills are parties to a Partnership Interests Purchase
Agreement dated February 6, 2007, which proposes the transfer, by Aquila, of its Colorado electric
utility assets, including, among other things, the Franchise and the Street Lighting Agreement, into
a limited partnership named Aquila Colorado Electric Opco, L.P. ( "Electric Company ") followed by
the immediate transfer of the general and limited partnership interests in Electric Company to
subsidiaries of Black Hills Corporation and the subsequent change of the name of Electric
Company to Black Hills /Colorado Electric Utility Company, LLP (collectively herein, "Transfer"), and
WHEREAS, under the provisions of the Franchise and Street Lighting Agreement, the City
reserved the right to consent to the transfer of the Franchise and Street Lighting Agreement and
Aquila, by letter dated October 26, 2007, seeks approval of the Transfer.
NOW THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that:
SECTION 1.
Consent and approval is hereby granted to the Transfer, consent being effective upon
execution of the Stipulation And Agreement attached hereto and incorporated herein, but if such
Stipulation and Agreement is not executed within seventy -two (72) hours after the effective date of
this Ordinance, consent and approval to the Transfer shall be deemed to be and hereby is
withdrawn.
SECTION 2.
The Stipulation And Agreement attached hereto, having been approved as to form by the
City Attorney, is hereby approved and the President of the City Council is authorized to execute the
Stipulation And Agreement in the name of the City and the City Clerk is directed to affix the seal of
the City thereto and to attest same.
SECTION 3.
This Ordinance shall become effective immediately upon final approval and passage. If the
Transfer fails to close for any reason, this Ordinance shall be deemed to be repealed.
INTRODUCED May 12, 2008
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Background Paper for Proposed
ORDINANCE
AGENDA ITEM # , 22—
DATE: May 12, 2008
DEPARTMENT: Law Department
TITLE
AN ORDINANCE CONSENTING TO THE TRANSFER OF FRANCHISE AND STREET
LIGHTING AGREEMENT FROM AQUILA, INC. TO BLACK HILLS CORPORATION,
APPROVING A STIPULATION AND AGREEMENT AND AUTHORIZING THE
PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME
ISSUE
Should the City approve the transfer of the electric utility franchise and street lighting
agreement from Aquila, Inc. to Black Hills Corporation?
RECOMMENDATION
City staff recommends approval of the transfer.
BACKGROUND
Aquila, Inc. has requested the City to approve the transfer of its electric utility franchise and
street lighting agreement to Black Hills Corporation ( "Black Hills "). The Ordinance
approves the transfer as well as the Stipulation and Agreement between the City, Aquila
and Black Hills which includes the following matters: Black Hills will (i) report to City
Manager with respect to number of approved employees, (ii) continue current level of
support to Energy Outreach Colorado and other agencies providing low income energy
assistance, (iii) maintain existing Aquila Service Centers and in good faith evaluate the
prudence of a customer service center for its service territory, to be located in Pueblo, (iv)
continue Aquila's demand side management ( "DSM ") evaluation, (v) continue Aquila's
smart metering ( "AMI ") program, and (vi) honor the employer and employee benefit
provisions of the Partnership Interests Purchase Agreement.
FINANCIAL IMPACT
Aquila will pay to the City $125,000 transfer fee and $125,000 to reimburse City for costs
incurred with respect to the transfer. Black Hills will pay the City $250,000 in settlement
of other issues raised by the City.
STIPULATIONS AND AGREEMENT
These stipulations are being entered into in connection with that certain
Ordinance No. 7 90 consenting to the Transfer described therein.
In connection with the Transfer, Black Hills Corporation has formed Black Hills
Utility Holdings, Inc., which, through subsidiaries, will hold the general and limited
partnership interests of Black Hills /Colorado Electric Utility Company, LLP. Aquila, Inc.,
as to its commitments in paragraph 8 below, and Black Hills Utility Holdings, Inc. ( "Black
Hills ") as to all of the other stipulations set forth below, agree that in the event of the
closing of the proposed transaction:
1. Black Hills will file a report with the City Manager of Pueblo no later than
60 days after the closing of the transaction informing the City Manager of the number of
approved employee positions in Aquila -WPC in Colorado, as of the date of Closing, and
shall file similar reports on the 12 and 24 — month anniversaries of the date of closing
of the transaction.
2. Black Hills will continue the current level of support and donations to
Energy Outreach Colorado and other agencies providing low income energy assistance
throughout Aquila's Colorado gas and electric service territories.
3. As part of the transaction, Black Hills is acquiring Aquila's customer call
center and will be maintaining the existing Aquila customer service model for Aquila -
WPC. Quality of service standards are in place, and Black Hills is committed to
complying with those standards.
4. Black Hills will, in good faith, seriously evaluate the prudency of a
customer service center for the service territory, to be located in Pueblo. This study will
evaluate, among other things, the services that could be provided, including, but not
limited to, bill paying (including paying in cash) and assistance with demand side
management programs, the number of full time employees that would be required for
various levels of service and all other associated costs. Black Hills will solicit input from
the City of Pueblo and communicate on an on -going basis about the evaluation. By
April 1, 2009, Black Hills will provide a report to the City of Pueblo including Black Hills'
evaluation of the prudency of such a customer service center and whether, subject to
approval of the Colorado Public Utilities Commission, Black Hills is willing to propose a
pilot project customer service center for the service territory. As part of the evaluation,
the City of Pueblo and Black Hills will consider filing an application jointly if Black Hills
decides to propose a pilot program.
5. Black Hills will continue Aquila's demand side management ( "DSM ")
evaluation effort which is currently in progress. Based on the technical, economic and
achievable potentials, as well as input from a DSM advisory group, a portfolio of DSM
programs has been identified that is expected to achieve the stated goals of HB07-
1037, including a 5% reduction from 2006 peak demand, and a 5% reduction of energy
by 2018. Achieving these goals has been included in Black Hills' modeling for the
utility's next resource plan. The DSM portfolio is subject to approval of the Colorado
Public Utilities Commission as part of a demand side management ( "DSM ") filing. In
addition to proposing DSM programs, Black Hills agrees as follows:
a. Black Hills will investigate the technological and economic
feasibility of including in a Commission - approved DSM program, a high efficiency
street lighting program for the City of Pueblo and other street lighting customers
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in the Colorado electric service territory. Such investigation will include a
determination of the availability and cost of high efficiency light bulbs for the
existing street lighting fixtures in the service territory, the availability and cost of
high efficiency light bulbs and street lighting fixtures for new installations in the
service territory, and the benefits and detriments reported by other utilities that
have considered or implemented such a program. Within six months after
closing, Black Hills will provide the City Manager of Pueblo with a report
regarding the results of this investigation.
b. To identify and evaluate other opportunities to work in partnership
with the City of Pueblo and all of the customers in its service territory to cost -
effectively meet the Colorado Demand Side Management mandates, and
encourage the efficient utilization of energy by all consumers, while not financially
penalizing Black Hills' Colorado gas and electric utilities.
6. Aquila is currently reviewing responses to its request for proposals to
implement an advanced metering infrastructure (smart metering) program ( "AMI "). AMI
involves a two way communication between a meter and the utility. Installation of AMI
may reduce operating costs and improve customer service and will lay the foundation
for potentially more customer options. Black Hills will continue this program after
closing. It is anticipated that a pilot program will be completed in 2008, and full
implementation of the program in the City of Pueblo is expected to occur in two phases
during 2009 and 2010.
7. Black Hills will honor the employee and employee benefit provisions of the
Partnership Interests Purchase Agreement.
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8. As required by Art. VIII, §2 of the franchise ordinance, upon approval of
the transfer by the Pueblo City Council, a transfer fee of $125,000.00 will be paid by
Aquila. Additionally, upon approval of the transfer by the Pueblo City Council, a
payment of $125,000 will be paid by Aquila to reimburse the City of Pueblo for costs
incurred in investigating, negotiating and approving the proposed transfer. The City
raised other issues in connection with the proposed transfer and Black Hills has agreed
to settle those issues for a payment of $250,000.00 which shall be made to the City of
Pueblo within 30 days after closing of the transaction. Black Hills shall notify the City of
Pueblo as to the date upon which closing occurred, within 3 business days of the
closing.
9. The Transfer does not constitute a purchase and sale as defined in
Section 14-4- 21(27), P.M.C., and no sales or use taxes are due and payable as a result
of the Transfer. Upon closing of the Transfer, the City of Pueblo's Director of Finance
will issue a certificate to that effect.
9. Black Hills assumes the Franchise and the Street Lighting Agreement.
INTRODUCED: May 12, 2008
CITY COUNCIL OF PUEBLO, COLORADO
> -'PRESIDENT OF THE CITY COUNCIL
SEAS.
ATTES_TED
CITY CLERK
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BLACK HILLS UTILITY HOLDINGS, INC.
AQUILA, INC.
BY:
Title: i7 5v