REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the Office of the City Manager to Negotiate and Execute Amendment No. 3 to the Steam Sales Agreement with The Newark Group, Inc. to Extend the Agreement Until March 31, 2024 and Add Additional Financial Provisions
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
Since 1994, the City's Electric Utility, Silicon Valley Power (SVP), has provided steam from the City's cogeneration facility (Cogen) to The Newark Group, Inc., a Greif Company (Newark), for purchase and use in the manufacturing of recycled paper products at Newark's California Paperboard Mill (California Paperboard). This type of manufacturing uses significant quantities of electricity, steam, water and sewer services. Cogen was designed to provide steam to California Paperboard, and Newark is SVP's only customer for the purchase of steam. Newark is one of the City's largest electric, water and sewer customers.
On November 17, 2015, Council approved a five (5) year Steam Sales Agreement with The Newark Group, Inc. with an expiration date of October 31, 2020. On March 9, 2021, Council approved Amendment No. 1 to extend the term of the Agreement to October 31, 2021, primarily due to the impact of the COVID-19 pandemic. On October 19, 2021, Council approved Amendment No. 2 to extend the term of the Agreement to March 31, 2022, due to continuing Pandemic-related delays and the evolving need for a more detailed and updated Cogen Capital Investment Plan that would allow for Cogen's operation on a long-term basis.
DISCUSSION
In the intervening five months, SVP staff developed a more detailed Capital Improvement Plan to share with Newark and provided Newark with an indicative steam pricing proposal based on that plan. Upon review, Newark has expressed a preference to upgrade its own steam production facilities to meet all of its steam requirements. Newark estimates that this changeover will ...
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