REPORT TO COUNCIL
SUBJECT
Title
Action on Authorizing the City Manager to Negotiate and Execute the Transmission Owner Rate Case Program Agreement with the Northern California Power Agency to Provide Support Services in Transmission Owner Rate Cases on behalf of Silicon Valley Power
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara’s electric utility, Silicon Valley Power (SVP), is connected to the California Independent System Operator (CAISO) grid. In California, while the flow of energy on the transmission grid is controlled by the CAISO, three investor-owned utilities (IOUs) own a majority of the transmission grid: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). Transmission owners, like PG&E, SCE, and SDG&E, are required to develop and file Transmission Owner Tariffs (TO Tariff), which describe the terms and conditions for wholesale customers to access the transmission system at the Federal Energy Regulatory Commission (FERC). In addition, transmission owners are required to file a Transmission Revenue Requirement (TRR) at the FERC demonstrating the transmission owner is providing transmission services at just and reasonable rates. The TRR is the total cost of construction, maintenance, and operation of the transmission system, including the return on investment and depreciation. The TO Tariff and TRR must be approved by the FERC. The collective TRRs from participating transmission owners in the CAISO region sets the CAISO Transmission Access Charge (TAC), which is charged to load-serving entities such as SVP.
SVP, along with other CAISO stakeholders, can intervene as a party in the FERC transmission owner's rate cases to ensure the TRR filed by the transmission owner is just and reasonable. These rate cases typically require significant amounts of time and involve legal representation, forensic accountants to review transmission revenue requirements, and expert witnesses at rate hearings. Historically, SVP has relied on joint action agencies such as the Transmission Agency of Northern California (TANC) and the Northern California Power Agency (NCPA) to participate as a stakeholder in the rate cases because of their expertise and resources to manage transmission rate cases and their ability to share the cost of such participation among their members.
In March 2024, the NCPA formally created a Transmission Owner Rate Case Program to formalize NCPA’s participation in transmission owner rate cases and for the NCPA members to reimburse the NCPA for costs incurred.
DISCUSSION
As the TANC is no longer participating as a stakeholder in transmission owner rate cases, SVP desires to participate in the NCPA Transmission Owner Rate Case Program to take advantage of NCPA’s resources and subject matter expertise to manage transmission owner rate cases. The NCPA will also assist with the coordination efforts with other stakeholders such as the California Public Utilities Commission and Six Cities (six Southern California publicly owned utilities (POUs) that are also part of the CAISO grid).
Services provided under the Transmission Owner Rate Case Program include but are not limited to: (i) representing the interests of the participants by monitoring, analyzing, and participating in transmission owner rate cases before the FERC, including any appeals, (ii) engaging in other related filings and industry developments that affect the cost or provision of transmission services under the Transmission Owner Rate Case Program, and (iii) engaging in other transmission cost related activities as may be approved by the participants.
On August 22, 2024, the FERC approved a settlement of 3 PG&E transmission owner rate cases. This settlement will result in a refund of nearly $1 billion plus interest to transmission customers, including SVP. The refund will be distributed over time through CAISO and will offset a portion of SVP’s transmission access charges. Without the intervention in transmission owner rate cases, these refunds would not occur.
Under the agreement, each participant who elects to join the program will be obligated to pay its equitable share of costs associated with NCPA’s provision of services. This equitable share is based on each participating member's share of the total program participant load. In this case, SVP’s program participant percentage will be 63.55%. The Transmission Owner Rate Case Program Agreement may be amended from time to time if new participants are added to the program or when existing participants withdraw participation. In such cases, SVP’s cost share may also be adjusted.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(5) of Title 14 of the California Code of Regulations in that it is an administrative activity that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
The annual cost will be based on the estimated level of effort anticipated for the year and included as part of the annual NCPA budget development process. The estimated cost will be included in the annual NCPA budget which will be approved by the NCPA Commission. SVP’s share of the NCPA budget will be included in SVP’s recommended budget.
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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to negotiate and execute the Transmission Owner Rate Case Program Agreement (Agreement) with the Northern California Power Agency, subject to the review and approval as to form by the City Attorney; and
2. Authorize the City Manager or designee to take any actions as necessary to implement and administer the Agreement and to negotiate and execute amendments to those agreements to allow for program changes and changes in participation, subject to the review and approval as to form by the City Attorney.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jovan D. Grogan, City Manager