REPORT TO COUNCIL
SUBJECT
Title
Action on Amendment No. 2 to the Steam Sales Agreement with The Newark Group, Inc. to Extend the Agreement Until March 31, 2022
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 the steam from the City's cogeneration facility (Cogen) to The Newark Group, a Greif Company (Newark) for purchase for use in the manufacturing of recycled paper products at the California Paperboard Mill (California Paperboard). This type of manufacturing uses significant quantities of electricity, steam, water and sewer services, and therefore Newark is one of the City's largest electric, water and sewer customers. Cogen was designed to provide steam to the California Paperboard Mill, and Newark is SVP's only customer for the purchase of steam. On November 17, 2015, Council approved a five (5) year Steam Sale Agreement with The Newark Group, Inc. with an expiration date of October 31, 2020.
DISCUSSION
On March 9, 2021, Council approved Amendment No. 1 to extend the term of the Steam Sale Agreement to October 31, 2021 due to longer than expected time needed for negotiation since the COVID-19 pandemic had changed priorities for both parties. Staff has been actively negotiating a new Agreement with The Newark Group, which is under new ownership and is currently evaluating its production at the California Paperboard Mill in Santa Clara. Although there have been delays due to Covid-19 and new ownership, staff has progressed over the last 6 month extension. Staff developed a more detailed capital improvement and refurbishment plan with current equipment pricing for Cogen that meets the power plant's original service level requirements and has updated the fuel, water and labor cost forecasts. The two parties still need approximately six (6) more months until March 31, 2022 for The Newark Group to finish its economic a...
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