REPORT TO COUNCIL
SUBJECT
Title
Action on the Electric Service Agreement with Equinix Corporation
Report
BACKGROUND
During the fall of 2017, the Equinix Corporation (“Equinix”), an international business exchange and co-location data center facility with multiple locations in the City of Santa Clara, advised Silicon Valley Power (“SVP”) that it was considering expanding its underutilized facility at 1350 Duane Avenue providing it was permitted to install a greater than 5 MW fuel cell self-generation plant.
In further discussions, SVP advised Equinix that this installation would require SVP to supply back-up electrical service in the event that this proposed fuel cell was not available (e.g. instances of interruptions to fuel supply, switchgear/equipment failures, or during annual maintenance periods). It was determined that SVP’s then existing standby rate schedule was not directly applicable to the fuel cell circumstances. Through cooperative discussions with Equinix and the fuel cell provider, SVP was able to more clearly understand the circumstances by which it may be required to provide back-up services. SVP and Equinix determined how back-up services would be incorporated in Equinix’s fuel cell procurement modeling.
Outside of those negotiations, on December 19, 2017, City Council adopted Resolution 17-8485 which updated Rate Schedule SB-1, effective on January 1, 2018, to broaden the applicability of Rate Schedule SB-1 to accommodate the greater variance of self-generation configurations.
DISCUSSION
Equinix continued procurement of the fuel cells as part of their national corporate strategy. Equinix indicated in discussion that except for the fuel cell installation, they would not be expanding their business at 1350 Duane Avenue. Since Equinix had approached SVP prior to the final modification and approval of Rate Schedule SB-1, they had not been able to properly assess the impact of the updated Rate Schedule SB-1 on their expansion and fuel cell plans. In recognition of these unique circumstances and in the interest of maintaining a good faith relationship, SVP is recommending approval of the attached Electric Service Agreement to modify Rate Schedule SB-1 rates for Equinix, premised on them meeting specified growth targets at 1350 Duane Avenue. The agreement provides for the modified standby rates for a three year term and, if approved, will terminate on August 31, 2021.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
Equinix has indicated that its economic plans to grow its business and related tax base within Santa Clara is tied to the use of a fuel cell at its 1350 Duane Avenue location. Such a use is subject to SVP’s Rate Schedule SB-1. However, due to the timing of negotiations and discussions between SVP and Equinix, through the Electric Service Agreement SVP would charge Equinix at a modified, discount rate which, at its maximum during the three year term, will be approximately $16,630 per month less than would be collected under Rate Schedule SB-1. However, in order to achieve such a maximum discount, Equinix would have to grow its base demand for electric service from SVP such that revenue to SVP will have increased by over $100,000 per month.
COORDINATION
This report has been coordinated with the Finance Department and 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
Approve the Electric Service Agreement with Equinix Corporation to provide electric service at a modified standby rate for a three (3) year term.
Staff
Reviewed by: John C. Roukema, Chief Electric Utility Officer
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Electric Service Agreement with Equinix Corporation