Title
The Energy Authority (TEA) Natural Gas Guaranty (NB)
Explanation
On February 28, 2000, the City Commission approved GRU's membership in The Energy Authority (TEA), an organization comprised of six public power organizations throughout the United States and whose primary function is to buy and sell wholesale energy for its members at the best possible prices (while maintaining adequate security and controls). GRU is currently a one-fourteenth-share member. We have been very pleased with the service from TEA and on March 11, 2002 made a presentation to the City Commission regarding the effectiveness of our investment in TEA.
Staff has been working with TEA to allow it to begin the physical purchase of natural gas for GRU effective May 1, 2002. GRU uses natural gas in two capacities, the first being for fuel for our generators and the second for our natural gas customers' use. When buying gas for GRU, TEA must give the sellers a guaranty that we will pay for the gas when we receive it. The obligations of the City as a gas participant are described in the Restated and Amended Natural Gas Advance Agreement and include certain guarantys necessary to support gas transactions.
Guarantys have always been important in the electric and gas markets, however they are even more common in current times due to the well-publicized problems associated with Enron. These guarantys are provided to the sellers by TEA on our behalf in one of two forms depending upon what is required by the Seller. The first is a Bank Letter of Credit. The second is a Trade Guaranty which is essentially just a written document promising to pay.
On the electric side of TEA, the Commission approved a guaranty for electric power purchases in the amount of $9,642,857.12. The guaranty is required only for the power not generated internally but purchased off-system. Consequently, the amount of the comparable electric advance is less than that for natural gas, which must be 100%...
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