ITEM 6-E

Council Meeting:  September 11, 1990     Santa Monica, California

TO:       Mayor and City Council

FROM:     City Staff

SUBJECT:  Recommendation to Authorize City Manager  to  Negotiate
          and Execute a Contract with the Department of Water and
          Power of the City of Los Angeles for the  Hydroelectric
          Generating Facility

Introduction

This report requests the City Council authorize the City  Manager
to  negotiate and execute a contract with the Department of Water
and Power of the City of Los Angeles for purchase of excess power
generated at the hydroelectric generating facility located at the
City's Water Treatment Plant.

Background

In  1981,  funds  were  budgeted  to  study  the  feasibility  of
utilizing   the  excess  pressure  from  the  Metropolitan  Water
District's water supply to the City to generate electrical power.
Any  power  not  required  for  operation  of  the  City's  Water
Treatment Plant would be sold to  the  Department  of  Water  and
Power  (DWP).  As a result of the study, the City Council awarded
a contract to Capital Conservation  Corporation  (formerly  named
HEC)  to  design,  construct  and  manage  for  27  years a small
hydroelectric  facility.   The  City  of  Santa  Monica  retained
ownership of the facility.

At that time, it was estimated that the facility  would  generate
.15  megawatts  of  power,  enough  for  approximately 120 homes.
Construction  was  completed  in  1983  at  which  time   Capital
Conservation Corporation entered into a contract with DWP for the
purchase of electrical power generated from the facility.

Recently, DWP notified the City that pursuant to  the  Department
of  Water  and  Power  of  the City of Los Angeles' Electric Rate
Ordinance 16398 DWP must contract with the owner of an electrical
generating station, not the operator.

The proposed  contract  would  contain  the  same  terms  as  the
contract  between  DWP  and Capital Conservation Corporation with
the exception of the insurance clause  which  requires  that  the
owner  maintain  a  $1.0 million per occurrence insurance policy.
DWP has agreed to accept the City's self-insurance program  under
the new contract.  Capital Conservation Corporation will continue
to maintain  a  $3.0  million  per  occurrence  insurance  policy
holding  the  City  harmless as required by its contract with the
City and, as facility manager, will continue  to  provide  excess
power to DWP under the terms of the new contract between the City
and DWP.

Budget/Financial Impact

There is no budget/financial impact since the payment  procedures
and contractual amounts will not change.


Recommendation

It is recommended  that  the  City  Council  authorize  the  City
Manager  to  negotiate and execute a contract with the Department
of Water and Power of the City of Los  Angeles  for  purchase  of
excess  power  generated at the hydroelectric generating facility
located at the City's Water Treatment Plant.

Prepared by:  Stan Scholl, Director of General Services
              Byron Gaines, Utilities Manager
              Jean Stanley Higbee, Administrative Analyst