REPORT TO COUNCIL
SUBJECT
Title
Action on a Substation Agreement with Intel Corporation for the Expansion of the Juliette Substation and an Increase to the Allocation of the Energy Capacity
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
In the mid-1990s, Intel Corporation (Intel) planned to significantly increase their electric load to serve their operations at 3750 Juliette Lane in the City of Santa Clara (Property). In 1995, Silicon Valley Power (SVP) built the first customer dedicated substation (Juliette Substation) at the Property to help serve this electric load. Intel paid all costs to build the initial substation which consisted of two transformers. Initially, SVP allocated 56 MVA of energy capacity for Intel’s use on the Property. Thereafter, SVP recently allocated an additional 6 MVA after the refurbishment of the two original transformers and Intel’s payment of the load development fees for the additional capacity.
Intel has seen a significant increase in their electrical demand due to the ongoing expansion of their data center operations at the Property. This is primarily due to the need for more computational power and data storage growth. To address this rising demand, Intel has requested an expansion to the Juliette Substation. Intel is seeking an agreement with SVP to expand the substation and increase their allocated energy capacity to 79 MVA.
DISCUSSION
According to Intel, this upgrade is critical for ensuring that its data centers can continue to operate efficiently and without disruption, and it will also support the company’s expanding role in technology innovation and data services. The substation expansion and additional capacity allocation will require improvements and infrastructure enhancements. The proposed substation agreement (Substation Agreement) sets forth the terms necessary to facilitate this expansion and power allocation while also protecting SVP’s interests (See Attachment 1).
The Substation Agreement details how SVP will make available the 79 MVA. This additional 17 MVA will be available to Intel for its use at the Property in accordance with an availability schedule contained in the Agreement. This additional capacity will be provided no earlier than August 1, 2029. It is important to note that this schedule is subject to adjustment based on several things, including, force majeure events, the completion of all the projects included in the System Expansion Plan, and other factors detailed in the Substation Agreement.
To accommodate this increased capacity allocation, Juliette Substation must be expanded. Intel will pay for the expansion of Juliette Substation. To expedite procurement, Intel will procure a third transformer, and the City will contract for installation of that transformer as well as other associated improvements at the site. Costs incurred by SVP related to the design, procurement, construction, inspection, and testing associated with the Juliette Substation will be paid in full by Intel. In addition, Intel will pay load development fees associated with the increased capacity based on the City’s Municipal Fee Schedule in effect at the times fees are due, currently estimated to be approximately $10 million. Once completed, the Juliette Substation will continue to be owned, operated, and maintained by SVP.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the action being considered is exempt from the California Environmental Quality Act (“CEQA”) pursuant to section 15303 (Class 3 - New Construction) of Title 14 of the California code of Regulations as the project would involve expansion of an electric substation facility.
FISCAL IMPACT
Sufficient funding is available in the Juliette Substation Transformer Rerate and Installation Project (CIP 2462) in the Electric Utility Capital Fund. Intel will be responsible for paying all costs related to the design, procurement, installation, construction, fabrication, inspection and testing of the associated substation. Contributions by Intel will be posted as revenue to that project.
In addition to the actual costs associated with the substation improvements to increase its capacity, Intel will pay the applicable Load Development Fee listed in the Municipal Fee Schedule, currently estimated to be $10 million. The Load Development Fee recovers the portion of the Bulk Electric System reinforcement work that SVP will need to do as a result of the additional load.
Revenue and additional expenses (if applicable) for future budget years will be requested through the budget process.
COORDINATION
This 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.
RECOMMENDATION
Recommendation
1. Determine that the proposed actions are exempt from CEQA pursuant to section 15302 (Class 3 - New Construction) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager to execute the Substation Agreement with Intel Corporation in connection with the expansion of the Juliette Substation and the allocation of energy capacity for Intel’s use at the property located at 3750 Juliette Lane in the City of Santa Clara in substantially the form presented and in a final form subject to review and approval as to form by the City Attorney; and
3. Authorize the City Manager to take any action as necessary to implement and administer the Substation Agreement and negotiate and execute future amendments so long as any such amendment does not result in any increased costs to the City of Santa Clara, subject to review and approval as to form by the City Attorney.
Staff
Reviewed by: Nico Procos, Acting Director of Electric Utility
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Proposed Substation Agreement with Intel Corporation