TITLE
Recommendation to authorize City Manager to enter into a natural gas supply agreement with BP Energy Company, Occidental Energy Marketing, Inc., or Coral Energy Resources, L.P. that meets or exceeds the following conditions: 1) full gas volume requirements; 2) term not to exceed three years; 3) annual volume of up to 10 billion cubic feet; 4) a price based upon a Southern California border price index; 5) a November-through-February price ceiling of not greater than $15.00 per Decatherm and an annual price floor of not greater than $8.50 per Decatherm; and 6) a monthly management fee not to exceed $150,000. (Citywide)
DISCUSSION
On March 4, 2003, and March 18, 2003, the City Council authorized the City Manager to enter into a long-term natural gas supply Agreement with Coral Energy Resources, L.P. for the term April 1, 2003 through March 31, 2006 (Coral Agreement). Long Beach Gas & Oil's (LBGO) ability to consistently provide the lowest Southern California residential gas prices over the last three years has been largely the result of the negotiated terms and structure of the Coral Agreement. The terms of the Coral Agreement are as follows:
A San Juan Basin (a major gas production area in New Mexico) market index plus a $0.36 per Decatherm interstate transportation charge to deliver the gas to the Southern California border A November through March price ceiling of $10.00 per Decatherm An annual price floor of $3.00 per Decatherm A monthly energy management fee of $84,000
Because the Coral Agreement ends on March 31, 2006, LBGO's intention is to obtain a replacement gas supply agreement that results in a gas supply that is comparably priced to those paid by other natural gas utilities in Southern California as well as provides a level of customer price protection against future market price increases. Concerns about potential future supply tightness and pressure from high oil prices are keeping market prices for natural gas much higher than when the ...
Click here for full text