REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to (1) Execute Amendment No. 1 to the Substation Agreement with 1220 Santa Clara Propco, LLC for the Memorex Junction Substation and (2) Negotiate and Execute Amendments to Other Existing Customer Substation Agreements to Allow for Load Ramp Acceleration and/or Additional Capacity, Subject to Power Availability and Incorporation of Standardized Terms for Curtailment and Other Conditions
Report
BACKGROUND
On May 5, 2022, the City and 1220 Santa Clara Propco, LLC (Customer) entered into a Substation Agreement (Substation Agreement), pursuant to City Council authorization under RTC 22-1704, for the (1) delivery of electrical power to Customer’s data center located at 1200 Memorex Drive (Property) and the (2) development of infrastructure for the delivery of that power, including the construction of Memorex Junction Substation. Under the Substation Agreement, the City agreed to provide power to the Property pursuant to a load ramp schedule, with capacity increasing incrementally to a maximum of 31 MVA by 2027.
Customer desires additional electric capacity with an accelerated load ramp, and the City is willing to accommodate Customer, subject to terms of the proposed amendment.
DISCUSSION
Proposed Amendment No. 1 to 1220 Santa Clara Propco, LLC Substation Agreement
As previously communicated to the City Council, Silicon Valley Power (SVP) is experiencing significant load growth. To address this demand, SVP is upgrading its facilities and coordinating with the California Independent System Operator (CAISO) through the transmission planning process. In parallel, SVP has been developing innovative approaches to bring large-load customers online while continuing to protect residential and small commercial customers. The proposed amendment reflects one such approach.
The proposed amendment increases the available electric capacity to the Customer from 31 MVA to 77 MVA. SVP will provide new electric capacity pursuant to a revised load ramp, culminating in 77 MVA by July 2031, subject to the completion of System Capacity Improvement Facilities and other terms of the proposed amended agreement. The System Capacity Improvement Facilities include the following: (1) the Battery Energy Storage System (BESS) Project, (2) PG&E’s Series Compensation Project, (3) LS Power’s Newark - Northern Receiving Station (NRS) 230kV line, (4) SVP’s Kifer Receiving Station (KRS) 115 kV upgrade, (5) SVP’s Northern Receiving Station (NRS) upgrade, (6) SVP’s Scott Receiving Station (SRS) 115 kV upgrade, and (7) the completion of SVP’s new NRS-KRS 115 kV line.
The proposed amendment provides SVP curtailment control of Customer’s feeder breakers on the Property. SVP will exercise this curtailment control as needed in order to maintain grid reliability in accordance with standard operating practices. The Customer’s equipment will be integrated into SVP’s Supervisory Control and Data Acquisition (SCADA) system, providing the utility with real-time visibility and command capabilities. Customer will pay all costs for required upgrades to their system in connection with the curtailment control.
This level of curtailment control will give SVP more streamlined, responsive operational control of the grid, aligned with real-time system conditions. This protects all SVP residential and commercial customers and provides large load customers with the potential for accelerated load ramps.
The proposed amendment also includes (1) revised electric capacity reduction language in the event Customer failure to use its allocation, (2) clarification regarding the timing and amount of the load development fee payment c, (3) waiver of consequential damages provisions, and (4) other administrative revisions to bring the agreement closer in line with SVP’s standardized terms. It is important to note that the Customer will pay load development fees at current levels to offset its impact to SVP’s grid. Additional capacity will not be made available to the Customer unless these fees are paid.
Note: City Council approval of this Amendment will implement the conditional approval of a settlement agreement with the Customer that the City Council acted on in closed session at their April 7, 2026, Council meeting.
Other Substation Agreement Amendments
There are several large load customers that may be interested in exploring amendments to their substation agreements to possibly accelerate their current load ramps and increase capacity. If the City Council approves the proposed amendment with the Customer, Staff is also requesting that the City Council delegate the authority to the City Manager to negotiate and execute separate amendments to existing substation agreements with other customers. SVP intends to engage approximately five (5) existing customers and evaluate whether the customer is eligible for any accelerated load ramp and/or additional capacity, subject to any SVP or California Independent System Operator grid limitations. Any amendment will contain curtailment control provisions and other language similar to that for the amendment with 1220 Santa Clara Propco, LLC. Again, this protects all SVP residential and commercial customers from, among other things, system interruptions and provides large load customers with the potential for accelerated load ramps. The amendments will also include standardized SVP substation agreement terms. Like 1220 Santa Clara Propco, LLC, these customers will also be required to pay load development fees at current levels which will ensure that their grid impacts are properly mitigated.
These proposed amendments and authorizations provide innovative and flexible tools to meet the needs of its large load customers while safeguarding the integrity of SVP’s grid and maintaining its availability to all customers.
Flexible Load Interconnection Program
For informational purposes, SVP is currently developing a Flexible Load Interconnection Program (“FLIP”) to better manage large loads in a manner that is less disruptive to SVP and its customers. It is envisioned that FLIP will be a voluntary program open to large load customers who execute an amended substation agreement that includes the curtailment provision. A central part of the program will be bi-directional communication between customers and SVP for planned/unplanned events. Customers will be requested to reduce loads under certain circumstances. If a customer does not reduce sufficiently, SVP will have the option to curtail that customer. FLIP will have several components including the curtailment control provisions outlined in the proposed amendment with 1220 Santa Clara Propco, LLC. SVP has engaged Emerald AI and is currently working on the development of a pilot program with a major customer which will help develop the program’s parameters. Upon the pilot’s completion, SVP will seek additional City Council authority if necessary.
ENVIRONMENTAL REVIEW
The environmental impacts of the Customer’s data center and Memorex Substation were evaluated in accordance with the California Environmental Quality Act (CEQA) under an Environmental Impact Report (EIR), which was adopted by the City Council on November 9, 2021. The proposed amendment does not require substantial changes to the project; therefore, no amendment to the EIR will be required.
As for other substation amendments, load ramps and additional capacity commitments will be subject to applicable CEQA environmental approvals. No amendments will be approved through this authorization if any accelerated load ramps or additional electric capacity would require additional improvements, which would trigger additional CEQA approvals; any such amendments would be brought back for City Council review and approval.
FISCAL IMPACT
The Customer will be charged a Load Development Fee in accordance with the load ramp schedule outlined in the Amendment to the Agreement and the applicable fee set in the Municipal Fee Schedule at the time of invoice issuance. For reference, an increase of 46 MVA, from 31 MVA to 77 MVA, would result in an estimated $28.0 million Load Development Fee, based on the FY 2025/26 Adopted Municipal Fee Schedule. The actual Load Development Fee collected will be dependent on the timing of the load ramp and will be incorporated into the corresponding budget years.
Customer will pay all costs for required upgrades to their system connection with the curtailment control.
COORDINATION
The report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to execute Amendment No. 1 to the Substation Agreement by and between the City of Santa Clara, California, and 1220 Santa Clara Propco, LLC, in substantially the form presented, subject to the review and approval as to final form by the City Attorney;
2. Authorize the City Manager or designee to negotiate and execute amendments to existing substation agreements with customers to allow for accelerated load ramps and/or additional capacity and subject to (a) SVP or CAISO grid limitations and (b) the inclusion of curtailment control provisions, revised capacity commitments, and other SVP standardized agreement term, in final forms reviewed and approved by the City Attorney; and
3. Authorize the City Manager or designee to take any and all actions as are necessary or advisable to implement and administer the agreements as amended.
Staff
Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan D. Grogan, City Manager
ATTACHMENT(S)
1. Substation Agreement with 1220 Santa Clara Propco, LLC
2. Amendment No. 1 to Substation Agreement with 1220 Santa Clara Propco, LLC