REPORT TO COUNCIL
SUBJECT
Title
Action on Delegation of Authority to the City Manager to Negotiate and Execute the Third Phase Agreement with the Northern California Power Agency for a Power Purchase Agreement with South Sutter Water District
Report
COUNCIL PILLARS
Deliver and Enhance High-Quality Efficient Services and Infrastructure
Promote Sustainability and Environmental Protection
BACKGROUND
The City of Santa Clara’s Electric Department, Silicon Valley Power (SVP), purchases a portion of the energy it supplies to the residents and businesses within the city. Senate Bill 100 requires SVP to meet the State of California Renewable Portfolio Standards (RPS), under which SVP must procure a specified percentage of its retail sales from renewable energy resources by a particular year.
Specifically, retail sellers and local publicly owned electric utilities must procure a minimum of its electricity products from eligible renewable energy resources at the following percentages: 44% of retail sales by December 31, 2024, 52% by December 31, 2027, and 60% by December 31, 2030.
Pursuant to 2.105.090(b) of the City Code, “any contract for the purchase or sale of water, electrical power, fuels for the generation of electrical power, wastewater and recycled water” are exempt from following the purchasing procedures under the City’s Centralized Purchasing Program.
SVP is responsible for the purchase of electrical power either by a) entering into Power Purchase Agreements (PPA) with project developers through their direct offerings and/or b) through a request for proposal process. Each potential project may have unique characteristics that impact the value of the resource to SVP customers. Staff evaluates potential projects on locational value, shape of the generation output, environmental attributes, capacity attributes, operational flexibility, and viability.
Northern California Power Agency (NCPA) is a not-for-profit Joint Powers Agency whose membership includes municipalities, a rural electric cooperative, and other publicly owned entities including the City of Santa Clara. The mission of NCPA is to provide members with cost effective wholesale power, energy-related services, and advocacy on behalf of public power consumers through joint action.
In late 2020, South Sutter Water District (SSWD) issued a Solicitation for Renewable Power Sales to entities seeking to purchase renewable and carbon free energy from an existing hydroelectric generating power plant located at Camp Far West Reservoir in Placer County, California. The Camp Far West Hydroelectric facility has a capacity of 6.8 megawatts (MW) and is owned and operated by SSWD. The facility generates energy on a run-of-river basis associated with the release of water for environmental and irrigation purposes. NCPA received this Solicitation.
After receiving the project details from NCPA, SVP staff evaluated and analyzed the project and determined the Camp Far West Hydroelectric facility would further diversify SVP’s renewable energy portfolio. SVP expressed interest to NCPA in purchasing up to 100% of the projects renewable and carbon free energy as well as the associated project attributes. NCPA indicated that no other NCPA members expressed interest in the project and as a result, SVP would receive the full share of the project output.
NCPA, working closely with SVP staff, has been leading the negotiations of a power purchase agreement with SSWD on behalf SVP. To enable NCPA to enter into the PPA with SSWD on behalf of SVP, SVP will need to execute a Third Phase Agreement with NCPA which specifies the rights and obligations of NCPA and SVP regarding governance and administration of the PPA and obligates SVP to pay for all project costs for project participation, administrative services costs, scheduling coordination costs, and all other costs related to the PPA.
DISCUSSION
The term of the PPA will be for twenty years. SVP’s share of the generation output would be approximately 23,659 MWh annually (or 0.63% of SVP’s calendar year (CY) 2020 retail sales) based on forecasts of average hydrological conditions. The generation output will vary based on water availability. SVP staff is requesting that the City Council delegate authority to the City Manager to negotiate and execute the Third Phase Agreement with NCPA for a Power Purchase Agreement with SSWD for up to 100% of the project output.
The proposed contract for the Camp Far West Hydroelectric Facility would increase and further diversify SVP’s renewable energy portfolio in accordance with the Council's adopted Policy on Environmental Stewardship and Renewable Portfolio Standards. In addition, there are limited development risks because the project is an existing hydroelectric power plant that is currently operating and participating in California’s energy market.
If the proposed project is approved, the parties intend to execute the agreement late 2021. SSWD will begin delivering the Camp Far West Hydroelectric Facility output to NCPA’s combined portfolio of resources on SVP’s behalf in early 2022. SVP will provide Council with updates as needed through the SVP quarterly update or emails to Council.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA under 15378(b)(2) as it is an Administrative Activity. The South Sutter Water District is the lead agency for the Camp Far West Hydroelectric Facility Project for CEQA purposes.
FISCAL IMPACT
Three components of the contract price includes Capacity Payment, Energy Payment, and Environmental Attribute Payment. SVP will purchase approximately 23,659 MWhs annually based on forecasts of average hydrological conditions during the contract term. The estimated annual net cost of the proposed contract is approximately $709,770. Sufficient funds are available in the FY 2021/22 and FY 2022/23 Biennial Operating Budget in the Electric Utility Operating Fund Resources: Non-JPA. Budget for future years will be included in the recommended budgets.
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
1. Authorize the City Manager to negotiate and execute the Third Phase Agreement with Northern California Power Agency for a Power Purchase Agreement with South Sutter Water District; and
2. Authorize the City Manager to execute administrative amendments to the Third Phase Agreement with Northern California Power Agency as may be needed from time to time during the term of the Power Purchase Agreement.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Deanna J. Santana, City Manager