REPORT TO COUNCIL
SUBJECT
Title
Public Hearing: Action to Waive First Reading and, Introduce an Ordinance Granting a Non-Exclusive Franchise to LS Power Grid California, LLC for the Power the South Bay and Power the Valley Connector Projects, and Adopt a Resolution Related to the Power the South Bay Project Environmental Impact Report.
Report
BACKGROUND
Electric transmission line upgrades are essential for ensuring reliable and sufficient electricity supply for Santa Clara and the greater Bay Area. With electricity usage growing, the electrical grid requires increased capacity to help ensure reliable electric service. The California Independent System Operator (CAISO) is a non-profit operator that oversees the operation of California’s bulk electric power system, transmission lines, and electricity market generated and transmitted by its member utilities.
Power the South Bay Project: In 2023, CAISO selected LS Power Grid California, LLC (LS Power) to develop, construct, and operate the Power the South Bay Project, which will install a 12-mile high-voltage electric transmission line that will connect the existing Pacific Gas and Electric (PG&E) Newark substation in Fremont, through San Jose, and to the existing Silicon Valley Power (SVP) owned Northern Receiving Station (NRS) substation in Santa Clara (Attachment 1). The Power the South Bay Project is designed as a 230 kilovolt (kV) alternating current (AC) transmission line and will be a combination of overhead and underground systems. In Santa Clara, the project will install an underground electric transmission line along Lafayette Street.
Power the Valley Connector Project: In April 2026, CAISO selected LS Power to develop, construct, and operate the Power the Valley Connector Project, which will install a 7-mile high-voltage electric transmission line between the NRS Substation and PG&E’s San Jose B Substation near downtown San Jose (Attachment 2). The Power the Valley Connector Project is currently designed as a 230 kilovolt (kV) alternating current (AC) underground transmission system. In Santa Clara, the project is currently shown to be installed along Lafayette Street, Agnew Road, and Montague Expressway. This alignment is preliminary and coordination with the Department of Public Works (DPW) and SVP has just begun.
Under Santa Clara City Code (SCCC) Chapter 5.20, a franchise grant, implemented through a franchise agreement approved by the City Council, is required to authorize LS Power to install, operate, and maintain transmission lines within the public right-of-way. Granting a franchise to LS Power would authorize the company to install and maintain transmission lines within the City for the Power the South Bay Project and Power the Valley Connector Project (LS Power Projects) and future projects, subject to the terms and conditions of any required encroachment permits.
Since spring 2023, DPW has been coordinating with LS Power and SVP on the future installation and alignment of the Power the South Bay Project’s proposed underground electric line and vaults within Lafayette Street. In April 2026, LS Power submitted an application to the City to grant LS Power a non-exclusive franchise to install, construct, maintain, and operate underground electric transmission lines in Santa Clara. They have already entered into non-exclusive franchise agreements with both the City of Fremont and City of San Jose. LS Power indicated their strong desire to begin construction of the Power the South Bay Project in July/August 2026 to have the system operational in June 2028 per CAISO’s deadline. For the Power the Valley Connector Project, a preliminary alignment has been identified and coordination with the City and SVP has just begun. CAISO’s deadline to complete the Power the Valley Connector Project is June 2030.
DISCUSSION
Procedure to Grant an Electric Franchise: Chapter 5.20 of the SCCC sets forth the procedures applicable for the granting of franchises, including electric franchises. A grant of franchise authorizes companies to use public property, such as streets, sidewalks, or public right-of-way to install and maintain facilities in order to provide specific services. To grant a non-exclusive franchise for the LS Power Projects and support their completion deadline schedules, the following steps are necessary on the dates listed:
• June 9, 2026: Council adopted Resolution No. 26-9568 (Attachment 3) to set a public hearing on July 7, 2026 for the proposed non-exclusive franchise to LS Power.
• July 7, 2026: Council to hold a public hearing on the proposed franchise to LS Power and introduce a proposed ordinance granting a franchise to LS Power.
• July 14, 2026: Council to adopt an ordinance granting a franchise to LS Power.
• August 13, 2026: Ordinance granting a non-exclusive franchise to LS Power takes effect (30 days after Council adopts the ordinance).
Proposed Franchise Terms: The proposed non-exclusive franchise with LS Power presented to the Council at the public hearing will include the following key terms:
• The City grants LS Power Grid California, LLC, a non-exclusive franchise to construct, operate, maintain, relocate and remove electric transmission facilities within City right-of-way.
• Above-ground facilities are not authorized under the franchise and would require separate approval.
• LS Power will pay the City an annual fee of 2.3% of the Santa Clara portion of its gross revenue on an annual basis.
• The term of the franchise will be 10 years with automatic renewals for successive 10-year terms up to 40 years.
• Prior to construction of the LS Power Projects, LS Power will obtain Public Works encroachment permits to install their facilities in the public right-of-way.
• If this franchise expires, is revoked, or is terminated, LS Power will remove all of their facilities in the public right-of-way upon written notice from the City.
• LS Power will maintain their facilities in a good workman-like manner including the pavement and trench that contains their facilities in the public right-of-way.
• The City will retain the right to require that LS Power relocate their facilities for any public City project, including, but not limited to, the construction, repair, relocation, or new installation of any above-ground or underground City facility, utility, storm drain, sewer, waterline, or roadway improvement.
• LS Power will indemnify the City, post $200,000 in faithful performance security, and will also provide adequate insurance throughout the duration of the franchise.
• LS Power must file a written acceptance of the ordinance terms with the City Clerk within 90 days after adoption, or the franchise becomes null and void.
• Upon request, LS Power must provide the City Engineer an annual certificate under penalty of perjury stating that it has complied in all material respects with applicable law, or identifying any known non-compliance.
• If LS Power causes a release of contaminants or an environmental condition, it must promptly perform required remediation at its sole cost and reimburse the City for remediation costs if the City must act.
• In addition to the franchise fee, LS Power must reimburse the City for its actual and administrative costs related to development, approval, administration, implementation, and enforcement of the franchise, including CEQA-related work and publication costs.
If a franchise is granted by the City, construction of the Power the South Bay Project is expected to begin in Summer 2026 (after the 2026 FIFA World cup matches in Santa Clara) and tentatively complete by Summer 2028. The terms of the franchise do not address the terms of interconnection with SVP which will be handled through a separate agreement.
Resolution Adopting the Final Environmental Impact Report: As a responsible agency under CEQA and pursuant to Sections 15091 and 15096 of the California Code of Regulations, the City of Santa Clara shall consider the Power the South Bay Project’s Environmental Impact Report (EIR) and adopt findings related to the City’s actions (i.e. issuance of encroachment permits) necessary for completion of the Power the South Bay Project. Staff have reviewed the Power the South Bay Project Final EIR and have determined that the information and analyses contained in it are adequate for the City’s use as a decision-making body related to its actions necessary to implement the Project within its jurisdiction. Consequently, staff recommend the adoption of a resolution adopting the findings of the Final EIR for the Power the South Bay Project (Attachment 5). The environmental process for the Power the Valley Connector Project has not been completed yet as the final transmission line alignment is still being developed.
ENVIRONMENTAL REVIEW
The California Public Utilities Commission (CPUC) is the lead agency for the Power the South Bay Project. The CPUC prepared a Final Environmental Impact Report (FEIR) for the Project in accordance with the California Environmental Quality Act. The CPUC granted LS Power Grid California a Certificate of Public Convenience and Necessity (CPCN) and certified the FEIR on March 19, 2026.
The FEIR and Mitigation Monitoring, Compliance, and Reporting Program (MMCRP) are posted on the CPUC’s website at https://ia.cpuc.ca.gov/environment/info/esa/psb/index.html.
FISCAL IMPACT
LS Power Grid California will pay the City an annual fee of 2.3% of the Santa Clara portion of its gross revenue on an annual basis, with the first year franchise payment expected to be approximately $175,000. The proposed 2.3% franchise fee was negotiated by the parties, is consistent with the rates charged by San Jose and Fremont, and reflects the fair and reasonable value of the franchise rights being granted.
There is no additional cost to the City, as LS Power will reimburse the City for staff time and expenses necessary to develop, approve, administer, implement, and enforce the franchise.
COORDINATION
This report has been coordinated with Silicon Valley Power, the City Manager’s Office, 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.
A Notice of the Public Hearing for the July 7, 2026, City Council meeting regarding this item was published in the Santa Clara Weekly. Additionally, notices of the public hearing were posted in the vicinity of the project site and mailed to neighboring properties.
RECOMMENDATION
Recommendation
1. Adopt a resolution (1) adopting the Power the South Bay Project Environmental Impact Report, prepared by the California Public Utilities Commission (A.24-05-014; SCH NO. 2024071095); (2) making certain findings as the responsible agency for purposes of and pursuant to the provisions of the California Environmental Quality Act of 1970; and (3) adopting a related Mitigation Monitoring and Reporting Program and Construction Impact Mitigation Plan, in connection with the approval of discretionary actions by the city necessary for the construction and operation of the Power the South Bay Project; and
2. Hold a public hearing, waive first reading, and approve introduction of an ordinance granting a non-exclusive franchise to LS Power Grid California, LLC on terms and conditions set forth in the ordinance for the Power the South Bay and Power the Valley Connector Projects for the purpose of transmitting electric service in the City’s public rights-of-way.
Staff
Reviewed by: Craig Mobeck, Director of Public Works
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Power the South Bay Project Location Map
2. Power the Valley Connector Project Location Map
3. Resolution No. 26-9568
4. Ordinance
5. Resolution Adopting the Findings of the EIR for the Power the South Bay Project