HomeMy WebLinkAbout2016-01-13 Utilities Advisory Commission Agenda Packet
NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956
I. ROLL CALL
II. ORAL COMMUNICATIONS
Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable
time restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from
discussing or acting upon any topic initially presented during oral communication.
III. APPROVAL OF THE MINUTES
Approval of the Minutes of the Utilities Advisory Commission Meeting held on December 2, 2015
IV. AGENDA REVIEW AND REVISIONS
V. REPORTS FROM COMMISSIONER MEETINGS/EVENTS
VI. DIRECTOR OF UTILITIES REPORT
VII. UNFINISHED BUSINESS
None.
VIII. NEW BUSINESS
1. Update Regarding Staff Work Plan for Fiber-to-the Premises and Wireless Network and Discussion
Ongoing Discussions With Google & AT&T
2. Report on Current Status of the Electric Overhead to Undergrounding Conversion Program Discussion
3. Staff Recommendation that the Utilities Advisory Commission Recommend that the City Action
Council Adopt a Resolution Approving a Power Purchase Agreement with Hecate Energy
Palo Alto LLC for up to 75,000 Megawatt-hours Per Year of Energy over a Term of up to
40 years for a Total Not to Exceed Amount of $101 Million
4. Solar Hot Water Heating Program Discussion
5. Selection of Potential Topic(s) for Discussion at Future UAC Meeting Action
6. Staff Recommendation that the Utilities Advisory Commission Recommend that the City Action
Council Adopt a Resolution Approving the Amended City of Palo Alto Utilities Legislative
Policy Guidelines
7. Update and Discussion on Impacts of Statewide Drought on Water and Discussion
Hydroelectric Supplies
IX. COMMISSIONER COMMENTS
X. NEXT SCHEDULED MEETING: February 3, 2016
UTILITIES ADVISORY COMMISSION - SPECIAL MEETING
WEDNESDAY, JANUARY 13, 2016 – 7:00 P.M.
COMMUNITY MEETING ROOM
Palo Alto City Hall – 250 Hamilton Avenue
Chairman: Jonathan Foster Vice Chair: James F. Cook: Commissioners: Arne Ballantine, Michael Danaher, Steve Eglash, Garth Hall, and Judith Schwartz Council Liaison: Gregory Scharff
Utilities Advisory Commission Minutes Approved on: Page 1 of 8
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF DECEMBER 2, 2015
CALL TO ORDER
Vice Chair Cook called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission
(UAC).
Present: Vice Chair Cook, and Commissioners Ballantine, Danaher, and Eglash
Absent: Chair Foster, and Commissioners Hall and Schwartz and Council Liaison Scharff
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
Commissioner Eglash moved to approve the minutes from the November 4, 2015 UAC meeting
as presented and Commissioner Danaher seconded the motion. The motion carried
unanimously (4-0) with Vice Chair Cook and Commissioners Ballantine, Danaher and Eglash
voting yes, and Chair Foster and Commissioners Hall and Schwartz absent.
AGENDA REVIEW AND REVISIONS
Commissioner Eglash suggested that New Business Item #3 (Status Update on the Five Items of
Interest Discussed in Joint UAC/Council Meeting) should include a discussion of all the items
except for recycled water since he would recuse himself on that item, since he is an employee
of Stanford University and the Stanford-owned land is the key area served by the proposed
project, leaving the commission with less than a quorum. Chair Cook agreed to the change in
the agenda.
REPORTS FROM COMMISSION MEETING/EVENTS
None.
UTILITIES DIRECTOR REPORT
1. Communications
Utilities staff has been working closely with the Office of Emergency Services, Public Works and
other City departments on winter storm, flood and emergency preparedness in anticipation of
an El Niño type rain season. City staff has prepared a new Utilities Safety brochure and
distributed safety and emergency preparedness tips in multiple utility bill inserts, ads, social
DRAFT
Utilities Advisory Commission Minutes Approved on: Page 2 of 8
media and on the web. Staff attended neighborhood and business group meetings to educate
customers about emergency preparedness and the resources available to them in advance of,
during and after a storm. The webpage, www.cityofpaloalto.org/storms provides a wealth of
information on these subject matters. Although winter may bring heavy rain, staff continues to
communicate that drought regulations are still in effect, and the State will likely extend water
use restrictions past February, should drought conditions persist.
2. PG&E and Trees
As part of its Pipeline Safety Initiative program, PG&E is clearing vegetation and any structures
close to, or on top of, its large gas transmission line that runs through Palo Alto. Public Works is
leading the effort to coordinate with PG&E and ensure that the wo rk is carried out in
accordance with City standards, and that proper mitigation measures are taken to equitably
replace any lost trees or structures. December 2 (tonight) PG&E is hosting a public meeting
about its plans for work in Palo Alto related to its Pipeline Safety Initiative.
3. Events, Workshops and Speaking Engagements
Several noteworthy events in November included:
November 5: CPAU organized a Facilities Managers meeting at Tibco.
November 12: CPAU staff met with French delegates to discuss technology and utility
programs.
November 12: CPAU Utility Marketing Program Administrator Lacey Lutes spoke to the
Kiwanis Club about utility programs.
November 13-14: The City hosted the Building Carbon Zero California conference, followed
by a PedalHaus tour of sustainable homes in Palo Alto.
UNFINISHED BUSINESS
None.
NEW BUSINESS
ITEM 1: DISCUSSION: Discussion of Director of Utilities Recruitment
City Manager Jim Keene introduced Teri Black, the recruiter hired to find the replacement for
current Director of Utilities Valerie Fong, who will retire effective the end of December 2015.
He said that he would like the UAC to provide any input with respect to the qualities and
characteristics that they are looking for in the next Director and the challe nges that the UAC
sees in the years ahead. He said that, from his experience with executive recruiters, Ter i Black
is excellent in performing adequate outreach at the start of a recruitment process
Ms. Black said that it was important to get the recruitment started with a “soft opening” of the
position in late December, then start heavier recruitment efforts in January with intensive
advertising, use of social media, direct phone calls to potential candidates, and attending
conferences to drum up interest in the position to find individuals for th is unique position. The
position posting will close at the end of January so that the new Director will be on board in the
early spring of 2015.
Utilities Advisory Commission Minutes Approved on: Page 3 of 8
City Manager Keene said that Assistant City Manager Ed Shikada will be assigned to lead the
department in the interim. He noted that Shikada has been San Jose's City Manager and is a
licensed engineer. He said that this recruitment will be challenging since the market is
relatively small, the cost of living in the area is high, and there are potential commuting
difficulties which make it challenging to recruit. The UAC can help to frame the opportunity to
make it as attractive as possible since the City and Utilities have a good brand.
Commissioner Eglash asked about the schedule for preparing the job description. Ms. Black said
that the recruitment brochure will be finished soon. City Manager Keene added that the
standard job description is available, but that the brochure will be filled out with details about
the needs of the community and the challenges expected in the position.
Commissioner Eglash asked if the names of the candidates will become public. Ms. Black replied
that only the selected candidate's name will be public when the recruitment is finished. City
Manager Keene added that the City’s process is that the City Manager selects the Director and
the Council has the opportunity to approve or not approve the select ed candidate. He said that
confidentiality is critical in attracting top-notch applicants for this position.
Commissioner Eglash said that the recruitment should be focused on the fact that this is a
municipally-owned utility since that is a unique place.
Commissioner Ballantine said that the Director should have core competency on the
transmission level as well as at the distribution level since problems and issues Utilities faces
are broad and we need to be looking for a long-term Director of Utilities.
Commissioner Danaher said that the candidates should know that Palo Alto has excellent staff
and sweet Commissioners. One important attribute is to be environmentally conscious and,
noting that there are many changes and innovations now in the utility industry, the Director
needs to be both open to innovation and capable of running the utility day to day.
Vice Chair Cook noted that this is a unique opportunity and that there are so many utilities that
the Director is responsible for—electric, fiber, gas, wastewater, and water. Also, the
environmental policies are very important to the community. He noted that it has been very
difficult to find and keep employees in all levels of the utility. He added that the industry is
changing rapidly and that those who can manage that level of change are attractive to many
places including investor-owned utilities and private companies. This is an opportunity to work
in a community with aggressive environmental policies as well as low rates. He added that
safety is a huge priority. The Director should have a vision of the future of how to operate the
utility in a safe and cost-effective manner. Many of these goals are in opposition and must be
balanced appropriately. Also, the Director will be second guessed by the UAC and the public
and Council. He said that it's an amazing opportunity, but a difficult job, for the right person.
Also, there is a huge and increasing amount of regulation. The Director needs to be flexible to
deal with all these issues while trying to implement interesting and innovative policies and
Utilities Advisory Commission Minutes Approved on: Page 4 of 8
dealing with an industry that is being torn apart and changing at a furious rate. The traditional
business model is gone and the Director must be able to find a way forward and help to
determine what path the City should take. It's a monumental task and Director Fong has been
an exceptional leader. He said that he feels fortunate as a ratepayer that she's been leading the
utility. Vice Chair Cook told City Manager Keene that he wishes him all the best to replace
Director Fong.
City Manager Keene noted that we need someone who is fired up about the o pportunity
despite all the issues that must be addressed.
Commissioner Danaher suggested that the City could offer some attractive solutions to some of
the issues such as leasing an electric car for the Director if they live, for example, in the East Bay
and have a lengthy commute.
ITEM 2. ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy Accessible
Now (CLEAN) Program at the Current Contract Price of $0.165 per kilowatt-hour for Local Solar
Resources and at the Avoided Cost Level ($0.081 to $0.082 per kilowatt-hour) for Local Non-
solar Eligible Renewable Resources
Senior Resource Planner Jim Stack noted that staff returns every year near the end of the year
to update the program and the value (or "avoided cost") of local renewable supplies. He
discussed the history of the program as it changed from when the program was first adopted in
March 2012. He noted that when the Finance Committee last reviewed the program, it voted to
reduce the contract price for solar resources from 16.5 cents/kWh to the avoided cost at the
time (9.3 cents/kWh), however the Council ultimately approved continuing the 16.5 cents/kWh
price, but directed that the rent revenues from an imp ending project to put solar PV on City
parking garage rooftops be allocated to the Electric Fund to offset the rate impact of paying a
contract price that exceeds the avoided cost. Stack noted that despite the avoided cost being
lowered based on the latest renewable energy request for proposals, staff recommends that
the 16.5 cent/kWh price be continued.
Commissioner Eglash asked why, given the direction from Council in May, this topic is coming
back to the UAC now. Stack said that it is prudent to revisit the value of solar and the program
annually. Assistant Director Jane Ratchye added that it has been a full year since this item was
last discussed by the UAC.
Commissioner Eglash said he expects as the cost of solar has fallen and continues to fall, that
the CLEAN price should eventually be attractive to someone. Stack reminded that the federal
Investment Tax Credit (ITC) is scheduled to fall significantly at the end of 2016, which will
change the economics for projects. Commissioner Eglash noted that the value of solar has
fallen and the excess cost (the amount by which the CLEAN contract price exceeds the local
solar avoided cost) has grown, but it is still small compared to the impact to the electric utility
from the drought so he is persuaded to agree with the staff recommendation to maintain the
16.5 cent/kWh price.
Utilities Advisory Commission Minutes Approved on: Page 5 of 8
Commissioner Ballantine commented that additional equipment is required for local solar
installations to provide local grid resiliency because if there is a power outage, solar systems
employing standard inverters will all shut off as well and will not continue to provide power to
the building or the grid. He said that supply reliability is an interesting issue and the City may
want to think about encouraging or requiring systems to use new grid technology so that all the
inverters for these systems don’t turn off when we really want them to be operating. He said
that installations operating independent of the utility system may be considered too. He noted
that there could be a technical situation with the inverters in the event of a voltage variation
that could lead to reduced reliability. He suggested that the program should consider this
problem in its design. He added that if the program does not have any takers, maybe there are
other issues such as obtaining financing that could be solved. He said that perhaps a different
incentive structure could be contemplated with a focus on the load ing of the distribution
system since there could be a location on the distribution system that would benefit more from
the addition of distributed generation, but that as certain types of renewables come online, the
City may see negative impacts on the system in some areas.
Commissioner Danaher asked how the avoided cost of the non-solar renewable energy was
calculated. Stack explained that the non-solar renewable energy is calculated by looking at the
general cost of renewable energy based on results from the latest Request for Proposals (RFP)
for baseload-type projects like a biomass generator, and adding in additional values provided by
local generation, such as reduced transmission costs, resource adequacy capacity requirements,
and distribution system losses. Commissioner Danaher asked why the avoided cost of solar was
higher than for non-solar local renewables. Ratchye replied that it is because energy prices
tend to be higher in the middle of the day, which coincides with when solar systems are
generating energy.
Commissioner Eglash suggested that the breakdown of the value of solar could be added to the
report to clarify all the parts that make up the avoided cost , and noted that a prior staff report
had provided that detail. Stack said that the breakdown of the components of the avoided cost
could be added to the report as it goes to the Finance Committee and Council for consideration.
Vice Chair Cook agreed that the Council would benefit from seeing this diagram of the makeup
of the avoided costs.
Commissioner Danaher said that he still doesn’t understand why local solar is more valuable
than solar from the Central Valley transmitted to the City. Stack summarized the aspects of the
avoided costs including the losses and transmission costs. Ratchye noted that the difference
between the avoided cost (about 8.9 cents/kWh) and the CLEAN price was part of the findings
made by Council when it last approved the CLEAN price. She pointed to Attachment A of the
report, the draft resolution, which lists the additional values of local solar in Section 3 including:
“a portion of the City’s electric expenditures remain within the community, which provides
revenue for local economic development”, reducing the need for new transmission lines,
shading which can reduce the energy required for building cooling and create value for vehicle
Utilities Advisory Commission Minutes Approved on: Page 6 of 8
owners, and resiliency of the City’s distribution system in combination with other equipment
such as electric storage systems (e.g. batteries).
Commissioner Ballantine suggested that with grid support capable inverters, the local resiliency
value can be realized. Without that, it can't provide local resiliency. He said that there must be
grid support capable inverters, or storage, or direct wiring to load to actually have a local
resiliency benefit.
Commissioner Danaher said that the goal is to have the cleanest possible resources at the
lowest possible cost. He said that he would rather not subsidize local solar if it can be found
outside the City for a better price. He would prefer one price for solar and a premium price for
solar that can actually provide local reliability. He noted that the extra $380,000 per year for 25
years (the difference between the solar avoided cost and the CLEAN price of 16.5 cents/kWh)
could pay for extra staff, which could be more valuable.
Vice Chair Cook said that there is great interest in having solar locally and that Commissioner
Danaher is a new commissioner without the benefit of those prior discussions.
Commissioner Danaher said that if there were grid support capable inverters included, then the
value would be increased and the price could be increased.
Commissioner Ballantine said that factoring grid support capability into the proposal would
take time and can't be done overnight. He said that this is what we have right now and he
supports it.
Commissioner Eglash recommends approval of continuing the CLEAN price at 16.5 cents/kWh,
noting that the proposal is the same as Council action just 7 months ago. Ratchye explained
that the situation is different from the Council action in May 2015 in some significant ways. She
reminded that the Finance Committee voted unanimously to reduce the CLEAN price for local
solar to the avoided cost, but that the Council ultimately decided to continue the 16.5
cents/kWh price after directing that the expected revenue from the expected lease for the City
garage solar systems be allocated to the Electric Fund to cover the excess cost for the portion of
the program cap that was planned to be used by that project. However, the lease negotiations
are proceeding with a new vendor and the lease payments are significantly less than the
original proposal. In addition, Ratchye reminded that the avoided cost of local solar has
declined consistent with the latest renewable energy RFP results.
Commissioner Eglash said that the Council and community recognize the value of local solar
and that it has been consistent in its support for the extra costs above the market value. He
noted that he opposed such a high CLEAN price when it was initially presented to the UAC, but
supports the recommendation tonight because of the strong support for solar in the
community.
Utilities Advisory Commission Minutes Approved on: Page 7 of 8
Commissioner Danaher recommended that the report that moves on to the Council explicitly
enumerate the benefits of local solar.
ACTION:
Commissioner Eglash made a motion that the UAC recommend that Council support the staff
recommendation. Vice Chair Cook seconded the motion. The motion carried by a 3-0 vote with
Vice Chair Cook and Commissioners Eglash and Ballantine voting yes, Commissioner Danaher
abstaining and Chair Foster and Commissioners Hall and Schwartz absent.
ITEM 3. DISCUSSION: Status Update on the Five Items of Interest Discussed in Joint Utilities
Advisory Commission and Council Meeting, Including (1) Fiber-to-the Premises; (2)
Undergrounding of Electric Lines; (3) Second Electric Connection; (4) Electrification; and (5)
Recycled Water
Vice Chair Cook noted that since there was less than a full commission attending this meeting,
the item may need to be brought back to the Commission for a broader discussion.
Public Comment
Herb Borock noted that there was a Council item on fiber on Monday this week (November 30).
He summarized the Council discussion on Fiber-to-the Premises (FTTP). He noted that the
citizens committee has lost some of its members and that Chair Foster is now on the
committee. He said he was skeptical that the Google deal was beneficial to the city.
Commissioner Danaher said that he attended the Council meeting. He gave his own summary
and said Council voted unanimously to explore the idea.
Vice Chair Cook noted that the topics of electric undergrounding and the second transmission
line are on the upcoming agenda.
ITEM 4. ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting
Commissioner Danaher said that he would like to see a discussion of the value of local solar,
including the parts above the avoided cost. Commissioner Eglash said that he did not see the
value of such a discussion unless there was a decision to be made and that he sees an item on
the upcoming agenda regarding an update of the Long -term Electric Acquisition Plan including
an evaluation of renewable energy. After listening to Commissioner Eglash, Commissioner
Danaher withdrew his suggestion.
Commissioner Ballantine noted that he had asked last month for an item on the solar hot water
heating program, but that the item was provided as an informational item. He asked that it be
put on the agenda for discussion at a future meeting.
ACTION:
None.
Utilities Advisory Commission Minutes Approved on: Page 8 of 8
ITEM 5. DISCUSSION: Update and Discussion on Impacts of Statewide Drought on Water and
Hydroelectric Supplies
Senior Resource Planner Karla Dailey provided an update on the impacts of the drought. She
said that the City is doing well towards meeting its water reduction goals for calendar year 2015
to date and for the period starting June 2015 for which the City's mandated reduction goal from
the State is 24%.
Vice Chair Cook asked what the impact of the El Niño rains will be and whether we will be out
of the drought. Dailey said that the State may continue water use restrictions and/or make new
permanent conservation measures. She added that Hetch Hetchy water supplies rely heavily on
snowpack, not just rain, and that it is unclear if this year’s El Niño will result in above normal
snowpack levels..
COMMISSIONER COMMENTS
None.
Meeting adjourned at 8:53 p.m.
Respectfully submitted,
Marites Ward
City of Palo Alto Utilities
1
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: JANUARY 13, 2016
SUBJECT: Update Regarding Staff Work Plan for Fiber to-the-Premises and Wireless
Network and Ongoing Discussions with Google & AT&T
This update, on staff’s Council-approved work plan for fiber-to-the-premises (FTTP) and
wireless network and ongoing discussions with Google and AT&T , is for the Utilities Advisory
Commission’s (UAC) information. This update has been prepared to keep the UAC and Council
apprised of the ongoing FTTP and wireless network initiatives. At its November 30, 2015
meeting, Council directed staff to actively pursue the proposed Work Plan in response to the
Council Motion on the FTTP Master Plan and Wireless Network Plan and negotiations with third
party providers (Google Fiber and AT&T) simultaneously, rather than phasing these efforts.
Items of special interest include:
FTTP Master Plan review with Citizen Advisory Committee (page 5)
The Wireless Network Model update based on 20 Year Forecast (page 5)
Cost Estimate to Expand Wireless Access in City Facilities and Retail Areas (page 6)
RFP to Add Dedicated Wireless Communications for Public Safety and Utilities (page 6)
Dig Once Strategy/Ordinance (pages 7-10)
Co-Build Model discussion with AT&T and Google (page 11)
RFI to Explore a Municipal-Owned and a Public-Private Partnership FTTP Network (page
11)
Google Fiber Update (page 12)
AT&T Update (page 13)
Request for Temporary Fiber and Wireless Senior Program Manager (page 13)
ENVIRONMENTAL REVIEW
Discussion of the Staff’s Work Plan for FTTP and Wireless Network Plan and Ongoing
Discussions with Google & AT&T does not meet the California Environmental Quality Act's
(CEQA) definition of "project" under California Public Resources Code Sec. 21065, thus no
environmental review is required.
ATTACHMENT
A. City Council Staff Report #6301 Work Plan for Fiber to-the-Premises and Wireless
Network and Ongoing Discussions with Google & AT&T-November 30, 2015
REVIEWED BY: JIM FLEMING, Senior Man ment Analys~
APPROVED BY:
'rector Information Technology/CIC
City of Palo Alto (ID # 6301)
City Council Staff Report
Report Type: Action Items Meeting Date: 11/30/2015
City of Palo Alto Page 1
Summary Title: Work Plan for Fiber to -the-Premises and Wireless Network
and Ongoing Discussions with Google & AT&T
Title: Approval of Staff's Plan to Simultaneously Pursue Response to
Council's Motion on Fiber -to-the-Premises Master Plan and Wireless
Network Plan and Continuation of Negotiations With Google Fiber, AT&T;
Approval and Authorization for the City Manager to Execute Amendments to
two Contracts with Columbia Telecommunications Corporation dba CTC
Technology & Energy Extending Each Contract Term T hrough June 30, 2016
and Increasing Compensation Under: (1) Contract Number C15152568 by
$94,490 for a Total not to Exceed Amount of $226,140; and (2) Contract
Number C15152569 by $58,850 for a Total not to Exceed Amount of
$203,794; Approval of a Temporar y Fiber and Wireless Senior Program
Manager Position for Three Years at $228,000/year; and Adoption of a
Related Budget Amendment Ordinance for Fiscal Year 2016 to Provide
Appropriation in the Amount of $172,850
From: City Manager
Lead Department: IT Depar tment
Staff Recommendation
Staff recommends that Council:
1.Approve staff’s plans to pursue the following work concurrently, given that delay in
either case could foreclose future options for the City:
a.Response to Council Motion (Attachment A) on Municipal Fiber and Wireless:
Staff has developed the Work Plan set forth below to address, by the third
quarter of 2016, the Council’s September 28, 2015 Motion (the “Council
Motion”) requesting clarification and additional work in connection with the
City’ Fiber to the Premises (“FTTP”) Master Plan and Wireless Network Plan; and
b.Third Party Provider (Google Fiber, AT&T) Negotiations: Staff is continuing
discussions and negotiations with third parties considering new service
deployments in Palo Alto, including both Google Fiber (potential citywide FTTP
network) and AT&T (GigaPower service), and is currently targeting the end of
ATTACHMENT A
City of Palo Alto Page 2
2015 through Q1 2016 for Council consideration of necessary agreements and
approvals.
2. Approve a temporary contract position for a Fiber and Wireless Senior Program
Manager, dedicated to Fiber-to-the-Premises and wireless initiatives, in the amount of
$228,000 annually, $684,000 for a period up to three (3) years.
3. Approve and authorize the City Manager or his designee to execute amendments to two
contracts with Columbia Telecommunications Corporation dba CTC Technology &
Energy (“CTC”) as follows:
a. Increasing the not-to-exceed amount for Contract No. C15152568 (Wireless
Network Plan) by $94,490 from $131,650 to $226,140 (includes a 10%
contingency for the provision of related additional, but unforeseen consulting
services) and extend the contract to June 30, 2016 to develop a Request for
Proposal for dedicated wireless communications for Public Safety and Utilities, in
addition to evaluating the expansion of wireless access in retail areas
(Attachment B).
b. Increasing the not-to-exceed amount for Contract No. C15152569 (FTTP Master
Plan) by $58,850 from $144,944 to $203,794 (includes a 10% contingency for the
provision of related additional, but unforeseen consulting services) and extend
the contract to June 30, 2016 to provide technical analysis of the RFI responses
and any consulting services needed to help develop a “Dig Once” ordinance for
consideration by the Council (Attachment C).
4. Approve a related Budget Amendment Ordinance (“BAO”) in the total amount of
$172,850 for Fiscal Year 2016 from the Fiber Fund Rate Stabilization Reserve;
appropriate $114,000 to fund the temporary Fiber and Wireless Senior Program
Manager position for the second half of FY 2016 and $58,850 to fund the CTC contract
amendments for FTTP (Attachment D).
Staff’s recommendation is to actively pursue the proposed Work Plan in response to the Council
Motion on the FTTP Master Plan and Wireless Network Plan and negotiations with third party
providers (Google Fiber and AT&T) simultaneously, rather than phasing these efforts. Staff’s
recommendation that work be completed in parallel is driven by the requirement to preserve
both options, inherent in the Council’s motion. There may be a significant risk in delaying third
party negotiations (particularly Google Fiber) in order to complete aspects of the Council
Motion first, may affect Google Fiber or AT&T interests in building in Palo Alto. At the same
time, note that concurrent work required will impact timelines for work products associated
with both the Council Motion and negotiations with Google Fiber and AT&T. One of the most
critical and immediate requirements then is for direct meetings between the City Manager and
Google to clarify and define opportunities sought by the Council for over -build and co-build
initiatives, as part of Google’s plans for fiber in Palo Alto.
Executive Summary
City of Palo Alto Page 3
On September 28, 2015, staff reviewed with Council the two reports prepared by CTC
Technology & Energy (“CTC”) for the Fiber-to-the-Premises Master Plan (“FTTP Master Plan”)
and the Wireless Network Plan (Reference CMR ID # 6104)1.
Council did not adopt staff’s recommendation. Instead, the Council Motion, among other
things, directed staff to (1) proceed immediately with two formal solicitations for an RFI for a
municipally-owned and/or public-private partnership FTTP network, and an RFP for wireless
communications for Public Safety and Utilities, and potentially the expansion of wirele ss access
in retail areas; (2) perform cost model analyses; (3) develop a “Dig Once” ordinance; (4) discuss
a “co-build” with AT&T and Google, based on the City laying its own conduit to the premise
during the respective buildouts. A copy of the Council M otion is attached to this Staff Report as
Attachment A.
Staff has developed a work plan to address all the components of the Council’s Motion. Work
related to the Motion began immediately after the Council meeting and staff recommends
Council approval of amendments to the City’s existing contracts with CTC to assist staff in
addressing the Council Motion.
Palo Alto and four neighboring cities (Mountain View, San Jose, Santa Clara and Sunnyvale) are
under consideration as expansion cities for Google Fiber. Google has indicated that it intends
to make an announcement in the beginning of 2016 on whether it will deploy Google Fiber in
these cities. Staff understands that Google’s announcement is contingent on each city
addressing various agreements and the environmental review by the end of the year (e.g.,
California Environmental Quality Act (“CEQA”) determination, encroachment agreements for
the use of the public rights-of-way, and agreements for utility pole attachments). Staff has
reached out to the other cities regarding timelines to formalize applications, permits,
agreements and approvals. It appears these cities are on schedule to meet Google’s end -of-the-
year target.
AT&T has submitted the first permit application to the City for review. AT&T plans to begin
construction and provide service in 2016.
Given the timelines for both the Council Motion and third party providers Google and AT&T,
staff recommends moving forward with the activities related to the Council Motion and third
party providers concurrently to keep all options viable; however, Google’s timeline for its
planned announcement early next year, both third -party providers’ desire to move forward
with build-outs in 2016, and the next steps for City fiber and wireless based on Coun cil’s
direction create some conflict. For instance, there may be a real risk that delays ( either as a
direct or indirect consequence of the current effort to keep both options open) on Google Fiber
work could affect Google’s inclusion of Palo Alto in its planned announcement. The work on
1 Although staff has not re-attached the underlying agreements with CTC to this staff report, full copies of those
contracts are available as attachments to CMR ID # 5443, available here:
https://www.cityofpaloalto.org/civicax/filebank/documents/45634
City of Palo Alto Page 4
the various items covered in the Motion and our ability to be timely and responsive to the third
party providers is slowed and complicated by the additional, unanticipated work required by
the Motion. The goals in the motion are worthy—a desire to ensure the potential for near
ubiquitous access to fiber, now and into the future, and preserve City flexibility over the long
term in the quantity and quality of fiber access in Palo Alto. But the dual directives are not
simple to manage and accomplish and are not without risk.
Background
On September 28, 2015, Council reviewed the FTTP Master Plan and Wireless Network Plan
(Reference CMR ID # 6104), which had recommended:
1. Defer issuing a Request for Information (RFI) until after December 31, 2015 to
determine interest from the private sector in partnering with the City to build and
operate a citywide fiber-to-the-premises (FTTP) network. The intervening time between
now and the end of the year should enable emerging gigabit broadband services from
the private sector to be settled. During this time staff will further evaluate strengths and
weaknesses of public utility options.
2. Issue Request for Proposal(s) (RFP) to add dedicated wireless facilities to improve
communications for Public Safety and Utilities departments; with an option for
expanding Wi-Fi coverage at City facilities and public areas.
The Council did not support staff’s recommendation to defer issuing an RFI until after
December 31, 2015, while the emerging private broadband services settled. Council directed
staff to move forward with the RFI to explore two FTTP models: (1) a municipal -owned model
with contractors for build and ongoing operations and (2) a public-private model with City-
owned fiber and private partner (such as Sonic.net) operating and owning electronics -- in
addition to considering both Google in the market and not in the market. To that end, staff will
also need to consider the impact of Google Fiber in both models, if Google elects to build a
network in Palo Alto. In addition to issuing the RFI, Council directed staff to:
Review with the Citizen Advisory Committee (“CAC”) the model assumptions and cost
estimates in the FTTP Master Plan report for a city owned and operated network. If
there is a disagreement between CTC’s report and the CAC’s recommendation, staff will
report to the Council the highlights of the discrepancy and provide the Council with a
revised forecast as an Action Item;
Develop a “dig once” ordinance;
Initiate discussions with AT&T and Google Fiber on a “co-build” model.
For the Wireless Network Plan, Council approved staff’s recommendation to issue an RFP to
improve wireless communications for Public Safety and Utilities. Council also directed staff to:
Work with CTC to develop a 20-year forecast for citywide wireless consistent with the
FTTP report; and
City of Palo Alto Page 5
Evaluate expanding wireless access in retail areas, with an option of expanding Wi-Fi
coverage at City facilities and public areas as part of the RFP.
Discussion
Staff seeks direction and approval from Council to pursue the Council Motion Work Plan and
Third Party Provider Negotiations with Google Fiber and AT&T concurrently. Staff recommends
expediting efforts on both initiatives because they have the potential to ach ieve the Council’s
goal of creating a ubiquitous fiber network in Palo Alto reaching nearly all residents and
businesses. Since the same staff members are working on both the Motion and Third Party
Providers, staff also recommends adding additional resources to meet the targeted timelines.
Additional expertise may also be required.
1. STAFF WORK PLAN
COUNCIL MOTION ON MUNICIPAL FIBER AND WIRELESS
A. Review FTTP Master Plan with Citizen Advisory Committee (CAC)
On October 29, 2015, staff facilitated an interactive session with members of the CAC and CTC
to review the FTTP Master Plan report. CTC provided an overview of the detailed data and cost
assumptions supporting the $47 million FTTP outside plant (OSP) cost estimates. This overview
covered the network design model, cost estimation methodology, key field survey metrics
surrounding Palo Alto, unit pricing and cost estimate breakdown. The meeting did not cover
the additional $30 million required for equipment purchases, financing and operational a nd
maintenance expenses. Since the meeting, CTC has provided a detailed summary of the model
assumptions, cost drivers, and unit pricing of the OSP buildout. Staff scheduled a follow up
meeting with CAC on November 12, 2015 to identify and discuss any di sagreements between
CTC’s report and CAC’s recommendations (and other matters). The results of the meeting were
productive regarding dialog between staff and the CAC in terms of identifying discrepancies.
Staff will report the disagreements between the CTC and CAC cost estimates in the next Council
FTTP update.
B. Update Wireless Network Model based on 20 Year Forecast
CTC updated the 20 year financial models (Attachments E1 and E2) for scenario 2 phase A
(Provide 100 Mbps blanketed public Wi-Fi to core City businesses and residential areas) and
scenario 2 phase B (Provide 1 Gbps blanketed public Wi-Fi to core City businesses and
residential areas). The results from the updated models did not change significantly from the
original 7 year forecasts because new technologies are constantly emerging and the lifecycle of
Wi-Fi technologies is between five to seven years. As is the case with much of the equipment
associated with Information Technology, there is a relatively short user technology timeframe
for wireless equipment. In other words, while the equipment may still be operational and fully
functional over possibly a decade, the combination of the movement of technology to new
generations of hardware, the development of new software, and the lack of cos t-effective long-
City of Palo Alto Page 6
term support from equipment manufacturers requires fairly frequent equipment replacement
cycles. In the 20-year model, CTC assumes replacement of equipment every seven years so the
financial forecast repeats itself after every seven years. It is important to note both staff and
CTC are not recommending a citywide public Wi-Fi deployment under scenario 2 phases A and
B. Staff’s recommendation is to improve Wi-Fi access for Public Safety and Utilities and highly
visited public facilities (i.e. community centers, parks) if feasible.
C. Provide Cost Estimate and Fiber Backhaul Information to Expand Wireless Access
in City Facilities and Retail Areas
Staff has provided CTC with a map of the existing fiber network and splice points in the City .
CTC will first focus on the priority I and II sites identified in the report and will eventually
address the priority III sites. Based on the existing fiber network and splice points, CTC will
provide a high level interconnection cost estimate of each individual access point to a central
control and distribution center. CTC may be required to make individual site visits to review
existing infrastructure, targeted coverage area and opportunities for a common build. A high
level estimate can be completed by December 2015.
Expanding Wi-Fi access to retail areas (e.g. University Avenue, California Avenue) was not
included in the original scope of work. Based on the existing fiber network and splice points,
CTC can develop an engineering design and cost estimates on the installation and equipment
required to provide wireless access in these targeted retail areas. This will require a contract
amendment in the amount of $15,000 and can be completed by December 2015.
D. Issue RFP to Add Dedicated Wireless Communications for Public Safety and
Utilities
CTC has provided the City an RFP template to construct a Critical Infrastructure Wireless
Network (CIWN) that will enable secure wireless data transfer in the FCC-licensed 4.9 GHz
Public Safety wireless band. The RFP defines the full range of equipment and services to be
procured to support the CIWN deployment, including network hardware components, system
integration support for the network implementation, staff training, testing, maintenance, and
documentation. A contract amendment (Exhibit B) in the amount of $94,490 will be required to
customize the RFP to meet the business needs of Public Safety and Utilities in scenario 3
(Deploy a Point-to-Multipoint Network for Secure City Enterprise Access) and scenario 4
(Deploy a Citywide Mobile Data Network for Public Safety). CTC will have to gather specific user
requirements from the departments including site locations, number of users, minimum
throughput and coverage area in order to prepare an engineering design. The RFP would be
issued by March 2016 and final findings and recommendations will be completed by the third
quarter of 2016.
As noted in Staff Report No. 5443, CTC’s assistance with RFP development and evaluation
precludes CTC’s involvement in subsequent project phases. Where parties collaborate in the
City of Palo Alto Page 7
development of an RFP, general conflict of interest prohibitions, including section 1090 of the
California Government Code, often preclude such from subsequently bidding on the resultant
RFP they have helped to develop. The contract amendments recommended for Council
approval here only contemplate CTC’s assistance with development of an RFP and evaluation of
responses for a possible second build-out phase (if Council decides such an RFP is warranted).
The recommended contract amendments do not in any way contemplate CTC’s involvement in
any manner, including as a bidder, in such a second phase given conflict of interest prohibitions.
In addition, CTC is not affiliated with equipment manufacturers or cable operators and has no
relationships with firms or individuals who may submit proposals in response to future RFPs
that may be developed through this engagement. CTC’s responses to the FTTP and Wireless
RFPs states that “we can provide independent guidance; we have, as a policy, no financial stake
in the strategies you choose and will not bid on any resulting construction work.”
E. Develop a Dig-Once Ordinance
The Council Motion requested that staff bring forth a “Dig-Once” ordinance to Council as soon
as possible. As staff indicated at the September 28, 2015 Council Meeting, development of a
Dig-Once strategy for the City requires coordination and input from the City’s Utilities, Public
Works, and Development Services departments, the City Attorney’s Office as well as additional
research to: (1) identify the City’s existing strengths in coordinating underground work; and (2)
survey approaches adopted and/or proposed in other jurisdictions.
Staff is currently pursuing such coordination and research effort s (including federal, state and
other municipal Dig-Once approaches) in order to evaluate the City’s existing Dig-Once
approach and any opportunities that may exist for expansion. Staff recommends approval of
the attached contract amendment with CTC (Exhibit C), which includes a not-to-exceed amount
of $10,000 for Dig-Once related research and consulting services to supplement staff’s work in
this area. Staff is currently targeting the first quarter of 2016 to return to Council with this
item.
Although staff’s research and coordination effort is already underway, staff may nevertheless
benefit from additional direction Council may be to provide, particularly with respect to
Council’s goals for a City Dig-Once strategy. Additional information concerning Dig-Once
policies is provided below, including a description of the City’s already existing tools for
encouraging coordination amongst internal departments and external parties.
i. Dig-Once Defined
“Dig-Once” is typically a reference to polices, practices, ordinances, resolutions, agreements
and other efforts that attempt to consolidate work in the Public Right-of-Way (“PROW”)
amongst utility and telecommunications providers by opening streets and the PROW to related
construction simultaneously.
City of Palo Alto Page 8
ii. Goals for a Dig-Once Strategy
Potential objectives for a Dig-Once strategy vary, and may include:
Protection of newly and recently paved roads and sidewalks
Enhancing the uniformity of construction and efficient, non-duplicative placement of
infrastructure in the PROW
Reducing overall costs of all underground work, both utility and telecommunications
related, in the PROW for public and private parties.
Specifically facilitating communications network deployment by private entities by
reducing the cost of construction
Leveraging construction by third party entities for the deployment of a public
communications network.
Achievement of any of the above stated goals using a Dig-Once strategy is not without trade-
offs. For instance, implementation of a Dig-Once strategy may extend overall construction
work on a given project or increase daytime noise and impact parking. A Dig -Once strategy
could also have significant staff impacts and costs, including previously unanticipated increases
in internal staff work, the need to engage third party consultants and contractors for various
studies and construction work, and the sheer cost of materials for installation.
The goals underlying a Dig-Once strategy are also subject to limitations imposed by the legal
framework applicable work in the PROW discussed briefly in this staff report.
iii. Methods for Implementing a Dig-Once Strategy
Existing Dig-Once strategies can generally be categorized as requiring:
Some form of joint planning, notice and coordination of work in the PROW; and
Whenever technically feasible and economically practicable, that the public agency
and/or private party install conduit and/or telecommunications infrastructure in an
open PROW.
Local governments rely on a patchwork of ordinances, resolutions, formal and informal policies,
guidelines, standard specifications for communications conduit installation, joint trench
agreements, master conduit agreements to impose the above stated requirements on private
and public parties working in the PROW. Such requirements may be imposed on all
construction underway in the City, or on a more targeted basis in connection just with capital
improvement projects of a significant size being undertaken by the public agency or private
party.
iv. City’s Existing Dig-Once and Coordination Tools
City of Palo Alto Page 9
Even though the City has not adopted a formal Dig-Once policy, the City has a suite of policies
and negotiated agreements with external parties in place that encourage coordination amongst
City departments and external parties when streets or the PROW are opened for construction.
These policies and agreements share a number of characteristics with “Dig -Once” policies,
ordinances and agreements adopted in other jurisdictions.
Third Party Applicant Coordination with the City: Section 12.10.060 of the Palo Alto Municipal
Code (“Coordination with City”) requires applicants desiring to utilize the PROW or any street,
alley, sidewalk or other public place to notify the City in advance. Those applicants must
coordinate, to the fullest extent practicable, utility and street work to minimize damage, avoid
undue disruption and interference with the public use of PROW, streets, alleys, sidewalks or
other public places. In addition, whenever two or more parties have concurrent ly proposed a
major excavation in the same block, section 12.10.060 directs these parties to meet and confer
with the City to determine whether it is feasible to conduct a joint operation.
Joint Trench Coordination in Underground Utility Districts: Section 12.16.030 of the Palo Alto
Municipal Code (“Underground Utilities”) prohibits poles, overhead lines and associated
overhead structures in established underground districts. When the City establishes new
underground utility districts, the City must coordinate with existing utility and
telecommunications providers in the district in order to cooperatively underground all
infrastructure that was previously above ground. The City relies on its existing Master
Agreement for Installation of Underground Facilities in the City of Palo Alto (the “Master
Agreement”) with AT&T and Comcast to facilitate joint trenching and placement of the
underground facilities belonging to the City and to third party telecommunications providers in
the PROW and on private properties in underground utility districts. Under the terms of the
Master Agreement, the trenching party must notify and offer joint participation to the non -
trenching parties. In particular, the trenching party provides non -trenching parties with the
proposed trenching location, approximate time of opening, and an offer to perform the
construction, installation and placement of underground facilities. The cost of the trenching
and construction is then shared amongst the participating parties.
Targeted Work Zones: In response to the Audit of Street Maintenance (Office of the City
Auditor, 2006), staff established a “Targeted Work Zones” concept to improve coordination of
street work being performed by the City’s utilities and public works departments to protect
street resurfacing projects to minimize utility street cuts in restored streets.
Master License Agreement for use of City Conduit: The City also adopted a Master License
Agreement for the use of City-controlled spaces for communications infrastructure, including
installations on utility poles and streetlight poles and in underground conduit (Resolution
9193), which can obviate the need for time consuming negotiations of new agreements every
time a third party provider desires to access City conduit underground.
v. Other Dig-Once Strategies
City of Palo Alto Page 10
A variety of Dig-Once strategies are being considered or have otherwise been adopted at both
the federal and local level.
For instance, both the City and County of San Francisco2 and Santa Cruz County3 have adopted
local Dig-Once strategies. Each approach takes a number of steps to facilitate cooperation,
most notably requiring coordination amongst City departments and third parties working in the
PROW and the establishment of standard specifications for the placement of communications
conduit in the PROW. In each case, the adopted Dig-Once measures require the placement of
conduit where practicable and feasible.
Dig-Once related legislation has been introduced in both houses of Congress. Senator Amy
Klobuchar (D-MN) introduced the “Streamlining and Investing in Broadband Infrastructure Act”
(S.2163) and Representative Anna Eshoo (CA-18) introduced the Broadband Conduit
Deployment Act (H.R.3805). Both measures adopt a nearly identical approach to Dig-Once,
requiring that conduit be installed in connection with projects that receive federal highway
funding. Note that in each case, installed conduit is not dedicated to the federal government’s
use for the purpose of establishing a federal, state or local broadband network; the conduit is
available to all potential providers. The bills expressly require that “any requesting broadband
provider would have access to the installed conduit on a competitively neutral and
nondiscriminatory basis, for a charge not to exceed a cost-based rate.” Senator John Thune (R-
SD) is also circulating draft legislation, entitled the MOBILE NOW Act, which would likely include
a Dig-Once component that is less prescriptive than the requirements in the Klobucher and
Eshoo bills. Staff will continue to monitor the draft of the MOBILE NOW Act as it is developed.4
On June 14, 2012, President Obama signed an Executive Order directing the U.S. Department of
Transportation to review Dig-Once requirements in existing programs and opportunities for
installation of broadband on highway rights of way.5 The Executive Order directs the
Department of Transportation to identify best practices for minimizing excavati ons and for
opportunities to utilize Dig-Once policies.
vi. Legal Framework
Generally, under federal and California law, and subject to certain conditions protecting the
City’s PROW management and compensation authority and land use authority, the City cannot
prohibit most third party providers from gaining access to the PROW and utilities infrastructure
2 Ordinance No. 220-14, adopted November 2014 (http://tinyurl.com/oaz2qly)
3 http://tinyurl.com/oozsuq3
4 Note that the Klobuchar and Thune bills are not stand-alone Dig-Once legislation. Instead, each measure
packages Dig-Once provisions alongside language of great concern to local governments because of its potential to
restrict local authority and flexibility in the area of wireless and telecommunications siting.
5 https://www.whitehouse.gov/the-press-office/2012/06/14/executive-order-accelerating-broadband-
infrastructure-deployment
City of Palo Alto Page 11
located therein. The City can, however, establish reasonable rates, terms and conditions of
access to utilities infrastructure in the PROW, including adopting rules and regulations relating
to the time, place and manner of attachment to that infrastructure.
F. Discuss a Co-Build Model with AT&T and Google
In the September 28, 2015 Motion, Council directed staff to discuss a co -build model with AT&T
and Google on how the City can lay its own conduit to the premise during the buildouts.
Citizen’s Advisory Committee (“CAC”) Members discussed the co -build concept at the CAC’s
November 12, 2015 meeting. CAC Member Bob Harrington provided Council with a m emo
describing the co-build concept during the September 28, 2015 Council meeting.
Staff has conducted some preliminary research and raised the co -build concept with CTC.
Based on initial research and discussions, the City is unaware of any existing co -build model
that has occurred between a municipality and an incumbent or an overbuilder.
Staff has informed Google of Council’s Motion and Google has requested a more detailed
description of the co-build model. Most importantly, as discussed at the most recent CAC
meeting, it is imperative that the City Manager meet with top Google Fiber decision makers to
discuss the co-build options and opportunities. Clarification on this subject will be most
instructive and could influence the next steps the City takes and our timelines in response to
current Council directives. Staff also plans to raise the issue in its discussions with AT&T
concerning the AT&T GigaPower expansion.
G. Issue RFI to Explore a Municipal-Owned and a Public-Private Partnership FTTP
Network
CTC will assist the City in developing an RFI to explore and evaluate potential vendors or
partners who are interested in building a fiber network in Palo Alto. The RFI document should
clearly articulate the City’s needs and desires, and invite private companies to respond and
outline their unique approaches to solving the City’s connectivity needs. The RFI will be
strategically developed to elicit interest from an array of vendors or partners and provide the
City a better cost estimate associated with its goals. CTC encourages the City to exercise
caution in the requirements of the RFI because it may deter potential vendors or partners from
responding if they do not believe they possess the staff or qualifications to meet a strict list of
City’s demands. The RFI will be issued by March 2016.
Given the importance and time sensitivity of the RFI responses, staff recommends amending
CTC’s contract to provide technical analysis and recommendation of the responses. The
additional scope of work includes analysis of the individual responses, high level summary of
the responses, outline of the perceived City risks and benefits and areas that require further
investigation. Depending on the number of responses and discussions with the potential
City of Palo Alto Page 12
provider(s) and the City, the contract amendment is $58,850. Final findings and
recommendations will be completed by the third quarter of 2016.
2. THIRD PARTY PROVIDER (GOOGLE FIBER, AT&T) NEGOTIATIONS
A. Google Fiber
Google Fiber’s proposed FTTP (fiber-to-the-premises) deployment would largely be limited to
the public right of way, both underground and on utility poles. Google is proposing to construct
an FTTP infrastructure network that would allow them to provide Internet and video service
throughout the City. According to Google, the proposed project includes the installation of
aggregators that connect to main line fiber-optic infrastructure. From these aggregators (in
existing equipment rooms), the fiber cables would travel along existing utility corridor s (either
above or below ground) into underground vaults (or, if necessary, aboveground utility cabinets)
and then the vaults/cabinets to customers. Criteria that would be used to site vaults and other
network infrastructure include the following:
Network optimization
Conflict with other utilities
Safety
Impact on residences
Aesthetics
Street characteristics
Google’s basic network design would include a fiber ring, in addition to approximately 300 large
vaults and up to 4,000 small vaults distributed thro ughout the City. Although it is anticipated
that traditional utility cabinets would not be necessary, certain situations may require the
deployment of aboveground cabinets as part of the system to enhance network performance.
At this time, Google does not plan to build “Local Aggregation Sites” in Palo Alto (also known as
“prefabricated fiber huts”). Google’s FTTP network in Palo Alto would be served by fiber huts
located in adjacent cities. At this time, staff does not believe that Google’s fiber ring w ould
have any impact on the City’s existing fiber ring in terms of being a competitor to the
commercial dark fiber enterprise.
Google’s network design will require attaching fiber -optic cable and supporting infrastructure
to the majority of utility poles in Palo Alto. Of the 6,000 utility poles in Palo Alto, approximately
5,400 are co-owned with AT&T under a Joint Pole Agreement executed in 1918. Attachment of
Google’s fiber and supporting facilities to utility poles, or attachment of similar facilities by any
other third party, requires the execution of a Master License Agreement (“MLA”) for the use of
City-controlled space on utility poles and streetlight poles and in conduits.
The City anticipates that substantial staff and third party contracting r esources for legal
services, engineering, inspection, planning and administration will be required in connection
with the Google Fiber Project. The significant staff and third party contractor time required is
City of Palo Alto Page 13
attributable to the both the complex nature of the project and Google’s desire to pursue an
accelerated timeline. Google’s goal is to complete its project within 24 to 36 months. For
instance, the Google Fiber project currently requires staff and third party consultant work,
including:
Drafting and negotiation of a Master License Agreement, Master Encroachment
Agreement, Cost Recovery Agreement and potential amendments to existing City
agreements related to utility poles and development of a California Environmental
Quality Act determination.
Planning for engineering review of work submittals, field inspection of utility poles and
construction, joint pole coordination with AT&T, locating of underground infrastructure,
mapping and customer communication.
Preparation for plan reviews, permit processing, traffic control reviews and tree
trimming coordination.
As noted above, the City has already incurred and will incur costs and expenses beyond what
the City would otherwise recover for under the Municipal Fee Schedule and will request that
Google reimburse the City for such costs and expenses through a cost recovery agreement.
B. AT&T GigaPower
In April 2014, AT&T announced their plan to bring fiber to the Silicon Valley area.
Subsequently, in May 2015, AT&T approached the City with intentions to bring its gigabit
Internet service to Palo Alto. This service, called “GigaPower”, is an upgrade to AT&T’s existing
U-verse services (Project LightSpeed) and will be deployed to residents by the installation of
approximately twenty seven (27) new cabinets that will be placed next to existing U-verse
cabinets. Initially, AT&T will select neighborhoods with high potential for adoption and will use
consumer demand levels to determine further deployments in the city.
AT&T has submitted the first permit application to the Department of Public Works for review.
AT&T plans to begin construction and provide service in 2016.
3. STAFFING
A. Temporary Fiber and Wireless Senior Program Manager
Approximately 1.75 FTEs are assigned from the Information Technology and Utilities
Departments to work on the various fiber-related initiatives. Given the time sensitivity and
rigorous workload and expertise needed in relation to Council’s Motion, Google Fiber, AT&T
GigaPower and other third party telecommunication requests, staff recommends adding a
contractor position for up to three years who will be dedicated to the fiber -to-the-premises and
wireless initiatives for the City. The current market rate for a non -benefit Senior Project
City of Palo Alto Page 14
Manager consultant is $110/hour, which equated to an annual cost of $228,000 and an overall
cost of $684,000 over the three-year period.
B. Cost Recovery for Third Party Projects
Staff will be returning to Council in January 2016 for approval for reimbursable contract services
if the departments of Public Works and Utilities retain temporary staff or through a RFP process
to engage third party contract services to facilitate Google’s FTTP network deployment and
AT&T upgrades, if necessary. Determining total estimated costs for temporary staff ing and
contract services are in progress. Staff’s current plan is to propose funding for these resources
initially from Fiber Fund reserves pending Council’s approval to use the reserves, in the event
that the City’s costs are not recoverable up front, b ut rather require reimbursement.
Timeline
Staff expects most of the work on the Motion to be completed by March 2016. The findings
and recommendations of the two solicatations will be completed by the third quarter of 2016.
The deployment of Google Fiber in the City is expected to take approximately 24-36 months
from the start date, which is to be determined. The first phase of AT&T GigaPower is expected
to be completed during 2016.
Conclusive decision meetings on co-build between the City Manager and Google need to occur
before the end of the calendar year.
Given the aggressive timelines for both the Council Motion and third party providers, staff is
concerned about its capacity to complete all the activities described in this report on a timely
basis.
Resource Impact
A Budget Amendment Ordinance in the amount of $172,850 for Fiscal Year (FY) 2016, offset
with a reduction to the Fiber Fund Rate Stabilization Reserve, is recommended to fund the
following:
$114,000 for a temporary Senior Project Manager consultant for six months from
January through June 2016; beginning in FY 2017, staff will request the full funding for
this position as part of the annual budget process.
$58,850, which includes a 10 percent contingency, for a contract amendment with CTC
to provide analysis and recommendation of the RFI responses for the municipal-owned
and public-private partnership FTTP network and consultation on a dig once policy.
A contract amendment in the amount of $94,490, which includes a 10 percent contingen cy,
with CTC to develop a detailed RFP and provide analysis for wireless communications for Public
Safety, Utilities, City facilities and retail areas will be funded by existing operating budgets in IT,
Public Safety and Utilities.
City of Palo Alto Page 15
If staff is tasked with accomplishing the effort with existing resources, electric and fiber system
improvements will be deferred, audits will need to be delayed, and new customer connections
will be significantly delayed.
Environmental Review
Council’s approval of the following does not meet the California Environmental Quality Act
(CEQA) definition of a “project” set forth in California Public Resources Code Sec. 21065, thus
no environmental review is required: (1) staff’s plan to pursue its response to the Council
Motion on Municipal Fiber and Wireless and negotiations with third party providers (Google
Fiber, AT&T) concurrently; (2) a temporary contract position for a Fiber and Wireless Senior
Program Manager; (3) two amendment to the City’s contract with CTC for the FTTP Master Plan
and Wireless Network Plan; and (4) related BAOs.
Attachments:
Attachment A - 09-28-15 Excerpt Item 8 DRAFT ACTION Minutes (PDF)
Attachment B - CTC Wireless Network Plan Contract Amendment Final (PDF)
Attachment C - CTC FTTP Master Plan Contract Amendment Final (PDF)
Attachment D - BAO XXXX - FTTP AND WIRELESS NETWORK (DOCX)
Attachment E1 - Palo Alto Wireless Scenario 2 Phase A - 20 Year Forecast (PDF)
Attachment E2 - Palo Alto Wireless Scenario 2 Phase B - 20 Year Forecast (PDF)
CITY OF PALO ALTO CITY COUNCIL
EXCERPT DRAFT ACTION MINUTES
Page 1 of 4
Special Meeting
September 28, 2015
The City Council of the City of Palo Alto met on this date in the Council
Chambers at 5:36 P.M.
Present: Berman, Burt arrived at 5:49 P.M., DuBois, Filseth, Holman,
Kniss, Scharff, Schmid, Wolbach
Absent:
Action Items
8. Discussion of Fiber-to-the-Premises Master Plan and Direction to Staff
on Next Steps for Fiber and City Wireless Services.
MOTION: Council Member DuBois moved, seconded by Council Member
Burt to:
A. Adopt a goal of creating a ubiquitous fiber network in Palo Alto with
City ownership of Fiber assets; and
B. Reject the consultant’s report “as is” and request:
i. In the Fiber-to-the-Premises (FTTP) Master Plan, detailed
assumptions, and their impacts, used to forecast the FTTP capital
additions are to be reviewed by, and agreed to, by a majority of
active citizen advisors; once this is accomplished, a revised
forecast is to be provided; and
ii. In the Wireless Network Report:
a. A 20-year forecast should be provided consistent with the
FTTP report; and
DRAFT ACTION MINUTES
Page 2 of 4
City Council Meeting
Draft Action Minutes: 9/28/15
b. The description of Scenario 1 lacked both a price forecast
and fiber backhaul details for the proposed municipal
properties to be served; these details should be included in
an update prior to a Request for Proposals (RFP).
(Scenario 1); and
C. Issue an RFP for Public Safety and Utilities Departments (Scenarios 3
and 4); and
D. Wireless plans will not use Fiber funds; and
E. Direct Staff to bring a dig-once Ordinance as soon as possible; and
F. Direct Staff to discuss co-build with AT&T, Google, and Comcast how
the City can lay its own conduit to the premise during their buildouts;
and
G. Move forward with Request for Information (RFI) exploring both Muni-
owned model with contractors for build and ongoing operations, and
public-private model with City owning fiber and private partner (such
as Sonic) operating and owning electronics, considering both Google in
the market and without Google in the market.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion Part A, “reaching nearly all
residents” after “Palo Alto.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion at the end of Part D, “at this
time.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion Part B, Subsection (ii)(b),
“expanding wireless to retail areas in North and South Palo Alto.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion at the end of Part A, “and
that goal will be revisited in the first quarter of 2016.”
DRAFT ACTION MINUTES
Page 3 of 4
City Council Meeting
Draft Action Minutes: 9/28/15
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion at the end of Part B,
Subsection (i), “to the Council as an Action Item.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to replace in the Motion Part B, Subsection (i),
“and agreed to, by a majority of active citizen advisors” with “Citizens
Advisory Committee (CAC); if there is a disagreement between the
consultant’s report and the CAC’s recommendation, the Staff Report to
Council will highlight the discrepancy.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to replace in the Motion Part B, “Reject the
consultant’s report “as is” and request” with “Request an update to the
consultant’s report including:”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to replace in the Motion Part A, “goal” with
“preferred alternative.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to remove from the Motion Part F, “Comcast.”
AMENDMENT: Council Member Berman moved, seconded by Council
Member Scharff to remove from the Motion Part G, “Move forward with
Request for Information (RFI) exploring both Muni-owned model with
contractors for build and ongoing operations, and Public—private model with
City owned fiber and private partner (such as Sonic) operating and owning
electronics, considering both Google in the market and without Google in the
market.”
AMENDMENT FAILED: 4-5 Berman, Holman, Kniss, Scharff yes
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to remove from the Motion Part B, Subsection (i)
“by the majority of.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to remove from the Motion Part E, “as soon as
possible.”
DRAFT ACTION MINUTES
Page 4 of 4
City Council Meeting
Draft Action Minutes: 9/28/15
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion Part C, “to add dedicated
wireless communications to increase communication” after “Issue RFP.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion at the end of Part D, “but will
be revisited when Council reviews Fiber Goals in the first quarter of 2016.”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion at the end of Part B,
Subsection (ii)(b), “with an option for expanding Wi-Fi coverage at City
facilities and public areas as part of the Request for Proposals (RFP).”
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion Part A, “as a public benefit”
after “Fiber assets.”
MOTION AS AMENDED PASSED: 9-0
Adjournment: The meeting was adjourned at 11:58 P.M.
1
AMENDMENT ONE TO CONTRACT NO. C15152568
BETWEEN THE CITY OF PALO ALTO AND
COLUMBIA TELECOMMUNICATIONS CORPORATION DBA CTC
TECHNOLOGY & ENERGY
This Amendment One (“First Amendment”) to Contract No. C151525668 (“Agreement”)
is entered into ___________, 2015 (“Amendment Effective Date”), by and between the CITY OF
PALO ALTO, a California chartered municipal corporation (“CITY”), and COLUMBIA
TELECOMMUNICATIONS CORPORATION, dba CTC Technology & Energy, a Maryland
corporation, located at 10613 Concord Street, Kensington, MD (“CONSULTANT”)
(collectively, the “Parties”).
R E C I T A L S
A. The Agreement dated effective December 1, 2014, was entered into between the
Parties for Consultant to develop a Wireless Network Plan with a near-term focus on Wi-Fi
deployment and a long-term consideration of other wireless technologies (“Project”) for the City.
B. The Parties now desire to expand the scope of work, extend the term of the
Agreement from its current expiration date of May 30, 2015 to June 30, 2016 and to increase the
current “Not to Exceed Amount” by from $131,650 to $217,550, with a contingency (10 percent
of the increased amount) for the provision of related additional, but unforeseen consulting
services.for a total Not-to-Exceed Amount of $226,140, to allow for Consultant to work with
staff to: (1) evaluate expanding wireless access in retail areas, with an option to expand Wi-Fi
coverage of City facilities and public areas as part of a Request for Proposal; and (2) issue a
Request for Proposal and analyze responses to add dedicated wireless communications to
increase communication for Public Safety and Utilities departments.
C. To accomplish these purposes, the Parties wish to amend the Agreement.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this First Amendment, the Parties agree:
SECTION 1. Section 2. TERM is hereby amended to read as follows:
“SECTION 2. TERM. The term of this Agreement shall be from December 1,
2014 through June 30, 2016, unless terminated earlier pursuant to Section 19 of
this Agreement.”
SECTION 2. Section 4. NOT TO EXCEED COMPENSATION is hereby amended to
read as follows:
“SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to
be paid to CONSULTANT for performance of the Services described in Exhibit
“A-1”, including both payment for professional services and reimbursable
expenses, shall not exceed Two Hundred and Twenty-Six Thousand and One
Hundred and Forty Dollars ($226,140), which includes a contingency amount of
Eight Thousand, Five Hundred and Ninety Dollars ($8,590) as described in
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
2
Exhibit “C-2” for the provision or related additional, but unforeseen consulting
services. The applicable rates and schedule of payment are set out in Exhibit “C-
1”, entitled “COMPENSATION,” which is attached to and made a part of this
Agreement.
Additional Services, if any, shall be authorized in accordance with and subject to
the provisions of Exhibit “C-1”. CONSULTANT shall not receive any
compensation for Additional Services performed without the prior written
authorization of CITY. Additional Services shall mean any work that is
determined by CITY to be necessary for the proper completion of the Project, but
which is not included within the Scope of Services described in Exhibit “A-1”.
SECTION 3. The following exhibit(s) are hereby added to the Agreement as set forth in
the attachment(s) to this First Amendment, which are incorporated in full by this reference:
a. Exhibit “A-1” entitled “SUPPLEMENTAL SCOPE OF SERVICES”.
b. Exhibit “B-1” entitled “SUPPLEMENTAL SCHEDULE OF
PERFORMANCE”
c. Exhibit “C-2” entitled “SUPPLEMENTAL COMPENSATION”
SECTION 4. Except as herein modified, all other provisions of the Agreement, including
any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties have by their duly authorized representatives
executed this First Amendment on the Amendment Effective Date.
CITY OF PALO ALTO
____________________________
City Manager
APPROVED AS TO FORM:
_____________________________
Senior Deputy City Attorney
COLUMBIA TELECOMMUNICATIONS
CORPORTION dba CTC
TECHNOLOGY & ENERGY
By:___________________________
Name:_________________________
Title:________________________
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
President
Joanne Hovis
3
EXHIBIT “A-1”
SUPPLEMENTAL SCOPE OF SERVICES
Background:
The City desires to engage Consultant to assist staff with preparing a response to the City
Council’s September 28, 2015 Motion, including the following work that was not covered in by
Exhibit “A”:
1. Evaluate expanding wireless access in retail areas, with an option for expanding Wi-Fi
coverage at City facilities and public areas as part of the RFP (Scenario 1).
2. Issue a Request for Proposal (RFP) and provide technical analysis of responses to add
dedicated wireless communications to increase communication for Public Safety and
Utilities departments (Scenarios 3 and 4).
Tasks for Evaluating Expansion of City Wi-Fi in City Sites and Retail Areas:
1. Based on the maps of the existing fiber optic backbone network, Consultant will work
with staff to identify splice points in the network (including the amount of dark fiber
strands available at these points) to support backhaul for wireless access points. This
information will be used to analyze the capacity of the existing network to support fiber
backhaul for priority City sites 1 and 2, and eventually priority site 3 listed in the Wireless
Network Plan, in addition to Wi-Fi service in retail areas such as California Avenue and
University Avenue.
2. Dependent on the analysis of the fiber maps, splice points and available dark fiber strands
at these splice points, review existing infrastructure (e.g. streetlight poles and traffic
signal poles) to support the installation of wireless access point, and identify targeted
coverage areas and opportunities for a common build.
Deliverables:
1. Based on this analysis and identification of fiber-connected wireless access points,
Consultant will provide a cost estimate for the interconnection of each access point to a
central control and distribution center.
2. Consultant to develop an engineering design and cost estimate for the installation of
equipment required to expand the City’s existing Wi-Fi Network (i.e. priority sites noted
above), in addition to deploying Wi-Fi access in retail areas to be identified by staff.
Tasks for Issuing a Request for Proposal (RFP) to add dedicated wireless communications
to increase communication for Public Safety and Utilities departments (Scenarios 3 and 4):
1. Consultant has provided staff with a RFP template to construct a Critical Infrastructure
Wireless Network (CIWN) that will enable secure wireless data transfer in the FCC-
licensed 4.9 GHz Public safety wireless band. The RFP template defines the full range of
equipment and services to be procured to support the CIWN deployment, including
network hardware components, system integration support for the network
implementation, staff training, testing, maintenance, and documentation. The RFP will be
customized for Scenario 3 (Deploy a Point-to-Multipoint Network for Secure City
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
4
Enterprise Access) and Scenario 4 (Deploy a Citywide Mobile Data Network for Public
Safety).
a. In Scenario 3, the City would deploy a citywide high-reliability, dedicated, critical
infrastructure broadband wireless network to support Public Safety and Utilities’
needs. City Hall would serve as the core site for a point-to-multipoint deployment.
Consultant will confirm information gathered during the April-May 2015 user
assessment conducted with Public Safety and Utilities for Scenario 3, including
site locations, number of users, minimum throughput and coverage area;
Consultant to prepare an engineering design for the contemplated RFP;
Consultant to work with staff to confirm the estimated capital costs stated in the
Wireless Network Plan to construct the infrastructure for this deployment and the
estimated annual operating costs.
b. In Scenario 4, the City would create hot spots for Public Safety mobile data
network access to augment existing wireless operations at key facilities (e.g.
schools, stadiums, business/commercial zones). The hot spots would provide
radial coverage to first responders and other authorized users. The City would
equip its public safety vehicles with exterior mounted antennas and mobile routers
capable of acting as access points. Consultant to evaluate locating access points at
Utilities’ nine electric substations and other fiber-connected City facilities to
provide coverage to a significant portion of the City. Consultant to work with
Public Safety staff to confirm the estimated capital costs stated in the Wireless
Network Plan to construct the infrastructure for this deployment and the estimated
annual operating costs.
Deliverables:
1. Upon completion of (a) and (b), Consultant to finalize the RFP(s) and work with staff to
identify potential respondents prior to issuance. Staff will determine with Consultant if
one comprehensive RFP will be issued for Scenarios 3 and 4, or separate RFPs for each
scenario.
2. Consultant to work with staff to evaluate the RFP responses for Scenarios 3 and 4 and
present findings and recommendations for City Council review and approval.
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
5
EXHIBIT “B-1”
SUPPLEMENTAL SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services so as to complete each milestone within the number of
days/weeks specified below. The time to complete each milestone may be increased or decreased by
mutual written agreement of the project managers for CONSULTANT and CITY so long as all work
is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of
work consistent with the schedule below within 2 weeks of receipt of the notice to proceed.
Milestones 1 Completion
No. of Days/Weeks
From NTP
Evaluate Wi-Fi Expansion at City Facilities/Parks 30 days
& Retail Areas
RFP(s): 60 days
• Scenario 3 – Point to Multipoint Network
• Scenario 4 – Mobile Data Network
RFP(s) Evaluation 120 days
1 References to Deliverables correspond to the Deliverables in Exhibit “A” attached to this Agreement.
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
6
EXHIBIT “C-2”
SUPPLMENTAL COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule
below. Compensation shall be calculated based on the hourly rate schedule attached as Exhibit C-1
up to the not to exceed budget amount for each task set forth below.
The compensation to be paid to CONSULTANT under this Agreement for all services described in
Exhibit “A-1” (the “Supplemental Services”) and 10 percent contingency shall not exceed $94,490.
CONSULTANT agrees to complete all Supplemental Services, including reimbursable expenses,
within this amount. Additional Services are not authorized under this Agreement. Any work
performed or expenses incurred for which payment would result in a total exceeding the maximum
amount of compensation set forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The
CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the
tasks or categories listed below provided the total compensation for Supplemental Services,
including reimbursable expenses, does not exceed $94,490. Additional Services are not authorized
under this Agreement.
BUDGETSCHEDULE 2 NOT TO EXCEED AMOUNT
Evaluate Wi-Fi Expansion at City Facilities/Parks
& Evaluate Retail Areas $15,000
RFP(s):
• Scenario 3 – Point to Multipoint Network $25,000
• Scenario 4 – Mobile Data Network $27,900
RFP(s) Technical Analysis and Recommendation $18,000
Sub-total Supplemental Services $85,900
Reimbursable Expenses $0
Total Supplemental Services and Reimbursable Expenses $85,900
10 Percent Contingency for the provision of related additional,
but unforeseen consulting service3
$8,590
Total Supplemental Services, Reimbursable Expenses & Contingency $94,490
Additional Services (Not to Exceed) $0
2 References to deliverables correspond to the deliverable set forth in Exhibit “A” attached to this Agreement.
3Calculated as 10% of Total Supplemental Services and Reimbursable Expenses.
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
1
AMENDMENT ONE TO CONTRACT NO. C15152569
BETWEEN THE CITY OF PALO ALTO AND
COLUMBIA TELECOMMUNICATIONS CORPORATION DBA CTC
TECHNOLOGY & ENERGY
This Amendment One (“First Amendment”) to Contract No. C15152569 (“Agreement”)
is entered into ___________, 2015 (“Amendment Effective Date”), by and between the CITY OF
PALO ALTO, a California chartered municipal corporation (“CITY”), and COLUMBIA
TELECOMMUNICATIONS CORPORATION, dba CTC Technology & Energy, a Maryland
corporation, located at 10613 Concord Street, Kensington, MD (“CONSULTANT”)
(collectively, the “Parties”).
RECITALS
A. The Agreement dated effective December 1, 2014, was entered into between the
Parties for Consultant to develop a Fiber-to-the-Premises Master Plan (“Project”) for the City.
B. The Parties now desire to expand the scope of work, extend the term of the
Agreement from its current expiration date of May 30, 2015 to June 30, 2016 and to increase the
current “Not to Exceed Amount” from $144,944 to $198,444, with a contingency (10% of the
increased amount) for the provision of related additional, but unforeseen consulting services for a
total Not-to-Exceed Amount of $203,794, to allow for Consultant to work with staff to: (1)
research and provide advice regarding “Dig Once” strategies; (2) develop a Request for
Information and provide technical analysis of the responses for exploring both municipal-owned
fiber-to-the-premises (FTTP) models and contractors for build and ongoing operations, and a
Public-Private model with City-owned fiber and private partner operating and owning
electronics, considering both Google Fiber in the market and not.
C. To accomplish these purposes, the Parties wish to amend the Agreement.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this First Amendment, the Parties agree:
SECTION 1. Section 2. TERM is hereby amended to read as follows:
“SECTION 2. TERM. The term of this Agreement shall be from December 1,
2014 through June 30, 2016, unless terminated earlier pursuant to Section 19 of
this Agreement.”
SECTION 2. Section 4. NOT TO EXCEED COMPENSATION is hereby amended to
read as follows:
“SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to
be paid to CONSULTANT for performance of the Services described in Exhibit
“A-1”, including both payment for professional services and reimbursable
expenses, shall not exceed Two Hundred and Three Thousand and Seven Hundred
and Ninety-Four Dollars ($203,794), which includes a contingency amount of
Five Thousand, Three Hundred and Fifty Dollars ($5,350) as described in Exhibit
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
2
“C-2” for the provision of related additional, but unforeseen consulting services.
The applicable rates and schedule of payment are set out in Exhibit “C-1”, entitled
“COMPENSATION,” which is attached to and made a part of this Agreement.
Additional Services, if any, shall be authorized in accordance with and subject to
the provisions of Exhibit “C-1”. CONSULTANT shall not receive any
compensation for Additional Services performed without the prior written
authorization of CITY. Additional Services shall mean any work that is
determined by CITY to be necessary for the proper completion of the Project, but
which is not included within the Scope of Services described in Exhibit “A-1”.
SECTION 3. The following exhibit(s) are hereby added to the Agreement as set forth in
the attachment(s) to this First Amendment, which are incorporated in full by this reference:
a. Exhibit “A-1” entitled “SUPPLEMENTAL SCOPE OF SERVICES”.
b. Exhibit “B-1” entitled “SUPPLEMENTAL SCHEDULE OF
PERFORMANCE”
c. Exhibit “C-2” entitled “SUPPLEMENTAL COMPENSATION”
SECTION 4. Except as herein modified, all other provisions of the Agreement, including
any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties have by their duly authorized representatives
executed this First Amendment on the Amendment Effective Date.
CITY OF PALO ALTO
____________________________
City Manager
APPROVED AS TO FORM:
_____________________________
Senior Deputy City Attorney
COLUMBIA TELECOMMUNICATIONS
CORPORTION dba CTC
TECHNOLOGY & ENERGY
By:___________________________
Name:_________________________
Title:________________________
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
Joanne Hovis
President
3
EXHIBIT “A-1”
SUPPLEMENTAL SCOPE OF SERVICES
Background
The City desires to engage Consultant to assist staff with preparing a response to the City
Council’s September 28, 2015 Motion, including the following work that was not covered in by
Exhibit “A”: :
1. Assist with research and development of a “Dig Once” strategy, as requested by City.
Many localities have adopted some form of “dig once” policy that opens streets and
rights-of-way to utility construction when related projects are underway.
2. Move forward with an Request for Information (RFI) exploring both municipal-owned
models and contractors for build and ongoing operations, and Public-Private model with
City owned fiber and private partner (such as Sonic.net) operating and owning
electronics, considering both Google in the market and not.
Task for “Dig Once” Ordinance:
Consultant will work with City (including City Attorney’s Office), as requested by City, to assist
with research and analysis of “dig once” ordinances and approaches in other communities and to
evaluate existing City policies, practices and municipal codes that are already in place assure
coordination among City departments and external parties (e.g. Google Fiber, AT&T and
Comcast) for installing communication conduit for future use when any underground utility work
occurs.
Deliverable for “Dig Once” Ordinance:
1. As requested by City, written materials and/or oral reports concerning City policies,
practices and municipal codes and Dig Once approaches in other communities.
Tasks for Request for Information:
The RFI will be completed under the current contract scope of services(Exhibit “A”). Consistent
with the Supplemental Schedule of Performance set forth in Exhibit “B-1”, a draft of the RFI will
be completed by mid-December 2015 in the current Agreement; however, due to the importance
and time sensitivity of the RFI response, Consultant to provide technical analysis and
recommendations of the RFI responses.
Deliverables for Request for Information:
1. Consultant to prepare a preliminary technical analysis of all of the RFI responses. After
this preliminary analysis is completed, prepare a high level summary of all responses.
This analysis will include conducting follow up teleconferences with up to three of the
respondents if additional information is necessary to complete the analysis. Once the
analysis and summary are completed, conduct a WebEx with staff to review the summary
and findings and recommendations.
2. Consultant will work with City to conduct a detailed analysis of the preferred RFI
responses. This analysis will include detailed discussions and information requests from
the respondents. Consultant will prepare a report with findings and recommendation
regarding the feasibility of the response and the vendor’s ability to offer a viable proposal
to deploy a citywide fiber-to-the-premises network solution in the City.
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
4
EXHIBIT “B-1”
SUPPLEMENTAL SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services so as to complete each milestone within the number
of days/weeks specified below. The time to complete each milestone may be increased or
decreased by mutual written agreement of the project managers for CONSULTANT and CITY so
long as all work is completed within the term of the Agreement. CONSULTANT shall provide a
detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the
notice to proceed.
Milestones 1 Completion
No. of Days/Weeks
From NTP
1. Dig Once Strategy 120 days
2. Request for Information Deliverables
• Prepare RFI Draft 30 days
• Initial Technical Analysis of Responses 90 days
3. Report with an in-depth analysis of the responses that
Consultant and staff deem to be the most responsive 120 days
to the RFI
1 References to tasks correspond to the Deliverables in Exhibit “A-1” attached to this Agreement.
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
5
EXHIBIT “C-2”
SUPPLEMENTAL COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget
schedule below. Compensation shall be calculated based on the hourly rate schedule attached as
Exhibit C-1 up to the not to exceed budget amount for each task set forth below.
The compensation to be paid to CONSULTANT under this Agreement for all services described
in Exhibit “A-1” (the “Supplemental Services”) and 10 percent contingency shall not exceed
$58,850. CONSULTANT agrees to complete all Supplemental Services, including reimbursable
expenses, within this amount. Additional Services are not authorized under this Agreement. Any
work performed or expenses incurred for which payment would result in a total exceeding the
maximum amount of compensation set forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below.
The CITY’s Project Manager may approve in writing the transfer of budget amounts between any
of the tasks or categories listed below provided the total compensation for Basic Services,
including reimbursable expenses and 10 percent contingency, does not exceed $58,850.
Additional Services are not authorized under this Agreement.
BUDGET SCHEDULE 2 NOT TO EXCEED AMOUNT
Deliverable 1 (Dig Once Strategy)3 $10,000
Deliverable 2 (Initial RFI Response Analysis) $13,500
Deliverable 3 (Report with technical analysis
and recommendation of preferred RFI responses) $30,000
Sub-total Supplemental Services $53,500
Reimbursable Expenses $0
Total Supplemental Services and Reimbursable Expenses $53,500
10 Percent Contingency for the provision of related additional,
but unforeseen consulting services 4
Total Supplemental Services, Reimbursable Expenses & Contingency $58,850
Additional Services (Not to Exceed) $0
2 References to deliverables correspond to the deliverable set forth in Exhibit “A-1” attached to this Agreement.
3 Not-to-Exceed Amount is not a lump sum payment, and total amount is not guaranteed. Consultant agrees to bill
City for work related to Dig-Once strategy only for such work requested by City, based on hourly rates set forth in
Exhibit C-1 up to the Not-to-Exceed Amount identified herein.
4 Calculated as 10% of Total Supplemental Services and Reimbursable Expenses
DocuSign Envelope ID: EF5C2785-B14F-4403-81EA-C66B66A0A9F3
1
Revised November 16, 2015
XXXX/so
Ordinance No. XXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET
FOR FISCAL YEAR 2016 IN THE FIBER OPTIC FUND TO PROVIDE AN APPROPRIATION
OF $172,850 TO THE FIBER OPTICS FUND BUDGET TO FUND A TEMPORARY PROJECT
MANAGER CONSULTANT FOR FIBER-TO-THE-PREMISES AND WIRELESS INITIATIVES
AND THE AMENDMENT OF A CONSULTANT CONTRACT WITH CTC TECHNOLOGY &
ENERGY FOR THE FIBER-TO-THE-PREMISES MASTER PLAN, OFFSET BY A REDUCTION
TO THE FIBER OPTIC FUND RATE STABILIZATION RESERVE.
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. The Council of the City of Palo Alto finds and determines as follows:
A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of
Palo Alto, the Council on June 15, 2015 did adopt a budget for Fiscal Year 2016; and
B. Palo Alto and four neighboring cities (Mountain View, San Jose, Santa Clara and
Sunnyvale) are under consideration as expansion cities for Google Fiber, with a potential
deployment start in early 2016. Google has indicated that the City will only remain in
contention for Google Fiber expansion if various agreements and environmental reviews are
resolved by the end of the year; and
C. Palo Alto is in negotiations with AT&T regarding implementation of AT&T
GigaPower internet service upgrades; and
D. On September 28, 2015, the City Council reviewed two reports prepared by CTC
Technology & Energy (CTC) for the Fiber-to-the-Premises Master Plan (FTTP Master Plan)
and the Wireless Network Plan; and
E. Council approved a motion directing staff to proceed immediately with two formal
solicitations for a Request For Information (RFI) for a municipally-owned and/or public-
private partnership FTTP network, and a Request For Proposals (RFP) for wireless
communications for Public Safety and Utilities, and potentially the expansion of wireless
access in retail areas; perform cost model analyses; develop a “Dig Once” ordinance; and
discuss a “co-build” with AT&T and Google, based on the City laying its own conduit to the
premise during the respective buildouts; and
F. In response to Council’s motion, staff has developed a wireless initiatives work
plan to accommodate Google Fiber’s proposed FTTP deployment, parallel review of Google
and AT&T’s plans, possibility of infrastructure “co-build,” and develop a “Dig Once
ordinance”; and
E. Staff recommends adding additional resources to supplement staff currently
working on wireless initiatives to meet targeted timelines in Fiscal Year 2016; and
2
Revised November 16, 2015
XXXX/so
F. One Hundred Seventy Two Thousand Eight Hundred Fifty Dollars ($172,850) is
needed to fund these wireless initiatives for the remainder of Fiscal Year 2016, of which
$114,000 will fund a temporary Senior Project Manager consultant dedicated to Fiber-to-
the-Premises and wireless initiatives, and $58,850 for a contract amendment with CTC to
provide analysis and recommendation of the Request For Information responses for the
municipal-owned and public-private partnership FTTP network and consultation on a “dig
once” policy; and
SECTION 2. The sum of One Hundred Seventy Two Thousand Eight Hundred Fifty
Dollars ($172,850) is hereby appropriated to the Fiber Optic Fund operating budget to fund
the temporary Senior Project Manager consultant and the amendment to the CTC contract.
This increase is offset by a reduction to the Fiber Optics Fund Rate Stabilization Reserve.
SECTION 3. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this
ordinance shall become effective upon adoption.
SECTION 4. The Council of the City of Palo Alto hereby finds that this is not a project
under the California Environmental Quality Act and, therefore, no environmental impact
assessment is necessary.
INTRODUCED AND PASSED: Enter Date Here
AYES:
NOES:
ABSENT:
ABSTENTIONS:
NOT PARTICIPATING:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Senior Assistant City Attorney City Manager
____________________________
Director of Administrative Services
3
Revised November 16, 2015
XXXX/so
____________________________
Utilities Director
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
November 4, 2015
The projections used in this analysis were prepared to assist in the assessment of the financial
feasibility of establishing a enterprise to offer connectivity services in the identified service area.
Where appropriate, the analysis includes projected operating revenues, expenses, and cash flows for
the life of the system based on estimated construction costs and various market penetration rates.
This analysis should not be used for any other purpose. There will be differences between the
projected and actual results, because events and circumstances frequently do not occur as
expected, and those differences may be material. CTC has no responsibility to update or certify this
projection for events and circumstances occurring after the date of this projection.
Wireless Financial Analysis - Scenario 2 Option A
Financial Projections Rev 2
Palo Alto, CA
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
Financial Projections Rev 2
November 4, 2015
Income Statement
Year 12345678910
a. Revenues
Wireless Connection 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000 612,000 612,000
Wireless Equipment and Connection Fees (non-recurring) - - - - - - - - - -
Total 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$
b. Operating Expenses - Cash (not including taxes in line h)
Operating Expenses 171,510$ 383,160$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$
Operating Expenses - Misc. 256,700 185,200 160,200 160,200 160,200 160,200 160,200 142,200 142,200 142,200
Support Allocations 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 478,210$ 618,360$ 605,930$ 605,930$ 605,930$ 605,930$ 605,930$ 587,930$ 587,930$ 587,930$
c. Revenues less Cash Operating Expenses (a-b)13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ 24,070$ 24,070$ 24,070$
d. Operating Expenses - Non-Cash
Depreciation 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$
e. Operating Income (d-c)(600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (590,430)$ (590,430)$ (590,430)$
f. Non-Operating Income
Interest Income -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Investment Income - - - - - - - - - -
Interest Expense (Short-Term) - - - - - - - - - -
Interest Expense (Long-Term)) - - - - - - - - - -
Interest Expense (Internal) - - - - - - - - - -
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
g. Net Income (600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (590,430)$ (590,430)$ (590,430)$
h. Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
i. Net Income After Fees & In Lieu Taxes (600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (590,430)$ (590,430)$ (590,430)$
CTC Technology & Energy 2
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
Financial Projections Rev 2
November 4, 2015
Income Statement
Year
a. Revenues
Wireless Connection
Wireless Equipment and Connection Fees (non-recurring)
Total
b. Operating Expenses - Cash (not including taxes in line h
Operating Expenses
Operating Expenses - Misc.
Support Allocations
Total
c. Revenues less Cash Operating Expenses (a-b)
d. Operating Expenses - Non-Cash
Depreciation
e. Operating Income (d-c)
f. Non-Operating Income
Interest Income
Investment Income
Interest Expense (Short-Term)
Interest Expense (Long-Term))
Interest Expense (Internal)
Total
g. Net Income
h. Taxes
i. Net Income After Fees & In Lieu Taxes
11 12 13 14 15 16 17 18 19 20
612,000 612,000 612,000 612,000 612,000 612,000 612,000 612,000 612,000 612,000
- - - - - - - - - -
612,002$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$
395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$
142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200
50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
587,930$ 587,930$ 587,930$ 587,930$ 587,930$ 587,930$ 587,930$ 587,930$ 587,930$ 587,930$
24,072$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$
614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$
(590,428)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
(590,428)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
(590,428)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$
CTC Technology & Energy 3
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
Financial Projections Rev 2
November 4, 2015
Cash Flow Statement
Year 1234567891011
a. Net Income (From Income Statement)(600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (590,430)$ (590,430)$ (590,430)$ (590,428)$
b. Cash Outflows
Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Interest Reserve - - - - - - - - - - -
Depreciation Operating Reserve - - - - - - - - - - -
Financing - - - - - - - - - - -
Capital Expenditures (4,686,660)$ -$ -$ -$ -$ -$ -$ (4,184,160)$ -$ -$ -$
Total (4,686,660)$ -$ -$ -$ -$ -$ -$ (4,184,160)$ -$ -$ -$
c. Cash Inflows
Interest Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Depreciation Operating Reserve - - - - - - - - - - -
Debt Service Reserve - - - - - - - - - - -
Short Term Financing - - - - - - - - - - -
Long Term Financing (Bond) - - - - - - - - - - -
Cash Start - - - - - - - - - - -
Internal Loan - - - - - - - - - - -
Internal Funding (non‐loan)4,686,660 - - - - - - 4,184,160 - - -
Total 4,686,660$ -$ -$ -$ -$ -$ -$ 4,184,160$ -$ -$ -$
d. Total Cash Outflows and Inflows (b+c)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
e. Non-Cash Expenses - Depreciation 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$
f. Adjustments (Proceeds from)
Short Term Financing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Long Term Financing (Bond) - - - - - - - - - - -
Internal Loan - - - - - - - - - - -
Internal Funding (non-loan) (4,686,660) - - - - - - (4,184,160) - - -
Total (4,686,660)$ -$ -$ -$ -$ -$ -$ (4,184,160)$ -$ -$ -$
g. Adjusted Available Net Revenue (4,672,870)$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ (4,160,090)$ 24,070$ 24,070$ 24,072$
h. Principal Payments on Debt
Short Term Bond/Loan Principal -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Long Term Bond Principal - - - - - - - - - - -
Internal Loan Principal - - - - - - - - - - -
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
i. Net Cash 13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ 24,070$ 24,070$ 24,070$ 24,072$
Avoided Costs (see j and k below) - - - - - - - - - - -
Adjusted Net Cash 13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ 24,070$ 24,070$ 24,070$ 24,072$
Cash Balance (Enterprise)
Unrestricted Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ 61,850$ 85,920$ 109,990$ 134,062$
Depreciation Operating Reserve - - - - - - - - - - -
Debt Service Reserve - - - - - - - - - - -
Total Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ 61,850$ 85,920$ 109,990$ 134,062$
CTC Technology & Energy 4
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
Financial Projections Rev 2
November 4, 2015
Cash Flow Statement
Year
a. Net Income (From Income Statement)
b. Cash Outflows
Debt Service Reserve
Interest Reserve
Depreciation Operating Reserve
Financing
Capital Expenditures
Total
c. Cash Inflows
Interest Reserve
Depreciation Operating Reserve
Debt Service Reserve
Short Term Financing
Long Term Financing (Bond)
Cash Start
Internal Loan
Internal Funding (non‐loan)
Total
d. Total Cash Outflows and Inflows (b+c)
e. Non-Cash Expenses - Depreciation
f. Adjustments (Proceeds from)
Short Term Financing
Long Term Financing (Bond)
Internal Loan
Internal Funding (non-loan)
Total
g. Adjusted Available Net Revenue
h. Principal Payments on Debt
Short Term Bond/Loan Principal
Long Term Bond Principal
Internal Loan Principal
Total
i. Net Cash
Avoided Costs (see j and k below)
Adjusted Net Cash
Cash Balance (Enterprise)
Unrestricted Cash Balance
Depreciation Operating Reserve
Debt Service Reserve
Total Cash Balance
12 13 14 15 16 17 18 19 20
(590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$ (590,430)$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
-$ -$ -$ (4,184,160)$ -$ -$ -$ -$ -$
-$ -$ -$ (4,184,160)$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - 4,184,160 - - - - -
-$ -$ -$ 4,184,160$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$
614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - (4,184,160) - - - - -
-$ -$ -$ (4,184,160)$ -$ -$ -$ -$ -$
24,070$ 24,070$ 24,070$ (4,160,090)$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$
24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$
- - - - - - - - -
24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$ 24,070$
158,132$ 182,202$ 206,272$ 230,342$ 254,412$ 278,482$ 302,552$ 326,622$ 350,692$
- - - - - - - - -
- - - - - - - - -
158,132$ 182,202$ 206,272$ 230,342$ 254,412$ 278,482$ 302,552$ 326,622$ 350,692$
CTC Technology & Energy 5
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
November 4, 2015
Capital Additions
Year 12345678910
a. Fiber Implementation Costs
Fiber (30 year depreciation) 502,500$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Expansion Fiber (30 year depreciation) - - - - - - - - - -
Headend and Hub Equipment (10 year depreciation) - - - - - - - - - -
Headend and Hub Equipment (7 year depreciation) - - - - - - - - - -
Network Equipment (6 year depreciation) - - - - - - - - - -
CAI Customer Equipment (6 year depreciation) - - - - - - - - - -
Total 502,500$ -$ -$ -$ -$ -$ -$ -$ -$ -$
e. Wireless Network Costs (7 year depreciation)
Microwave (10 year) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Structures (20 year) - - - - - - - - - -
Access (10 year) - - - - - - - - - -
Network Equipment (7 year) 3,045,500 - - - - - - 3,045,500 - -
Spare Equipment (7 year) 25,000 - - - - - - 25,000 - -
Installation & Engineering (7 year) 1,113,660 - - - - - - 1,113,660 - -
Total 4,184,160$ -$ -$ -$ -$ -$ -$ 4,184,160$ -$ -$
f. Wireless Customer Connection Cost (5 year depreciation)
CPE -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Total Capital 4,686,660$ -$ -$ -$ -$ -$ -$ 4,184,160$ -$ -$
Total Accrued Capital 4,686,660$ 4,686,660$ 4,686,660$ 4,686,660$ 4,686,660$ 4,686,660$ 4,686,660$ 8,870,820$ 8,870,820$ 8,870,820$
Total Funded by Depreciation Account ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Financial Projections Rev 2
CTC Technology & Energy 6
City of Palo Alto
Scenario 2 Option A - Blanket Wi-Fi 802.11 g/n
November 4, 2015
Capital Additions
Year 1
a. Fiber Implementation Costs
Fiber (30 year depreciation) 502,500$
Expansion Fiber (30 year depreciation) -
Headend and Hub Equipment (10 year depreciation) -
Headend and Hub Equipment (7 year depreciation) -
Network Equipment (6 year depreciation) -
CAI Customer Equipment (6 year depreciation) -
Total 502,500$
e. Wireless Network Costs (7 year depreciation)
Microwave (10 year) -$
Structures (20 year) -
Access (10 year) -
Network Equipment (7 year) 3,045,500
Spare Equipment (7 year) 25,000
Installation & Engineering (7 year) 1,113,660
Total 4,184,160$
f. Wireless Customer Connection Cost (5 year depreciation)
CPE -$
Total -$
Total Capital 4,686,660$
Total Accrued Capital 4,686,660$
Total Funded by Depreciation Account ‐$
Financial Projections Rev 2
11 12 13 14 15 16 17 18 19 20
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - 3,045,500 - - - - -
- - - - 25,000 - - - - -
- - - - 1,113,660 - - - - -
-$ -$ -$ -$ 4,184,160$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ 4,184,160$ -$ -$ -$ -$ -$
8,870,820$ 8,870,820$ 8,870,820$ 8,870,820$ 13,054,980$ 13,054,980$ 13,054,980$ 13,054,980$ 13,054,980$ 13,054,980$
‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
CTC Technology & Energy 7
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
November 4, 2015
The projections used in this analysis were prepared to assist in the assessment of the financial
feasibility of establishing a enterprise to offer connectivity services in the identified service area.
Where appropriate, the analysis includes projected operating revenues, expenses, and cash flows for
the life of the system based on estimated construction costs and various market penetration rates.
This analysis should not be used for any other purpose. There will be differences between the
projected and actual results, because events and circumstances frequently do not occur as
expected, and those differences may be material. CTC has no responsibility to update or certify this
projection for events and circumstances occurring after the date of this projection.
Wireless Financial Analysis - Scenario 2 Option B
Financial Projections Rev 2
Palo Alto, CA
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
Financial Projections Rev 2
November 4, 2015
Income Statement
Year 12345678910
a. Revenues
Wireless Connection 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000 444,000 444,000
Wireless Equipment and Connection Fees (non-recurring) - - - - - - - - - -
Total 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$
b. Operating Expenses - Cash (not including taxes in line h)
Operating Expenses 170,440$ 225,990$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$
Operating Expenses - Misc. 242,700 150,200 150,200 150,200 150,200 150,200 150,200 150,200 150,200 150,200
Support Allocations 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 463,140$ 426,190$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$
c. Revenues less Cash Operating Expenses (a-b)(19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
d. Operating Expenses - Non-Cash
Depreciation 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$
e. Operating Income (d-c)(462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
f. Non-Operating Income
Interest Income -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Investment Income - - - - - - - - - -
Interest Expense (Short-Term) - - - - - - - - - -
Interest Expense (Long-Term)) - - - - - - - - - -
Interest Expense (Internal) - - - - - - - - - -
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
g. Net Income (462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
h. Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
i. Net Income After Fees & In Lieu Taxes (462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
CTC Technology & Energy 2
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
Financial Projections Rev 2
November 4, 2015
Income Statement
Year
a. Revenues
Wireless Connection
Wireless Equipment and Connection Fees (non-recurring)
Total
b. Operating Expenses - Cash (not including taxes in line h
Operating Expenses
Operating Expenses - Misc.
Support Allocations
Total
c. Revenues less Cash Operating Expenses (a-b)
d. Operating Expenses - Non-Cash
Depreciation
e. Operating Income (d-c)
f. Non-Operating Income
Interest Income
Investment Income
Interest Expense (Short-Term)
Interest Expense (Long-Term))
Interest Expense (Internal)
Total
g. Net Income
h. Taxes
i. Net Income After Fees & In Lieu Taxes
11 12 13 14 15 16 17 18 19 20
444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000
- - - - - - - - - -
444,002$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$
233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$
150,200 150,200 150,200 150,200 150,200 150,200 150,200 150,200 150,200 150,200
50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$
10,622$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$
(432,778)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
(432,778)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
(432,778)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
CTC Technology & Energy 3
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
Financial Projections Rev 2
November 4, 2015
Cash Flow Statement
Year 1234567891011
a. Net Income (From Income Statement)(462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
b. Cash Outflows
Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Interest Reserve - - - - - - - - - - -
Depreciation Operating Reserve - - - - - - - - - - -
Financing - - - - - - - - - - -
Capital Expenditures (3,324,160)$ -$ -$ -$ -$ -$ -$ (3,036,660)$ -$ -$ -$
Total (3,324,160)$ -$ -$ -$ -$ -$ -$ (3,036,660)$ -$ -$ -$
c. Cash Inflows
Interest Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Depreciation Operating Reserve - - - - - - - - - - -
Debt Service Reserve - - - - - - - - - - -
Short Term Financing - - - - - - - - - - -
Long Term Financing (Bond) - - - - - - - - - - -
Cash Start - - - - - - - - - - -
Internal Loan - - - - - - - - - - -
Internal Funding (non‐loan)3,324,160 - - - - - - 3,036,660 - - -
Total 3,324,160$ -$ -$ -$ -$ -$ -$ 3,036,660$ -$ -$ -$
d. Total Cash Outflows and Inflows (b+c)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
e. Non-Cash Expenses - Depreciation 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$
f. Adjustments (Proceeds from)
Short Term Financing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Long Term Financing (Bond) - - - - - - - - - - -
Internal Loan - - - - - - - - - - -
Internal Funding (non-loan) (3,324,160) - - - - - - (3,036,660) - - -
Total (3,324,160)$ -$ -$ -$ -$ -$ -$ (3,036,660)$ -$ -$ -$
g. Adjusted Available Net Revenue (3,343,300)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ (3,026,040)$ 10,620$ 10,620$ 10,620$
h. Principal Payments on Debt
Short Term Bond/Loan Principal -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Long Term Bond Principal - - - - - - - - - - -
Internal Loan Principal - - - - - - - - - - -
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
i. Net Cash (19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
Avoided Costs (see j and k below) - - - - - - - - - - -
Adjusted Net Cash (19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
Cash Balance (Enterprise)
Unrestricted Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ 62,390$ 73,010$ 83,630$ 94,250$
Depreciation Operating Reserve - - - - - - - - - - -
Debt Service Reserve - - - - - - - - - - -
Total Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ 62,390$ 73,010$ 83,630$ 94,250$
CTC Technology & Energy 4
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
Financial Projections Rev 2
November 4, 2015
Cash Flow Statement
Year
a. Net Income (From Income Statement)
b. Cash Outflows
Debt Service Reserve
Interest Reserve
Depreciation Operating Reserve
Financing
Capital Expenditures
Total
c. Cash Inflows
Interest Reserve
Depreciation Operating Reserve
Debt Service Reserve
Short Term Financing
Long Term Financing (Bond)
Cash Start
Internal Loan
Internal Funding (non‐loan)
Total
d. Total Cash Outflows and Inflows (b+c)
e. Non-Cash Expenses - Depreciation
f. Adjustments (Proceeds from)
Short Term Financing
Long Term Financing (Bond)
Internal Loan
Internal Funding (non-loan)
Total
g. Adjusted Available Net Revenue
h. Principal Payments on Debt
Short Term Bond/Loan Principal
Long Term Bond Principal
Internal Loan Principal
Total
i. Net Cash
Avoided Costs (see j and k below)
Adjusted Net Cash
Cash Balance (Enterprise)
Unrestricted Cash Balance
Depreciation Operating Reserve
Debt Service Reserve
Total Cash Balance
12 13 14 15 16 17 18 19 20
(432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
-$ -$ -$ (3,036,660)$ -$ -$ -$ -$ -$
-$ -$ -$ (3,036,660)$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - 3,036,660 - - - - -
-$ -$ -$ 3,036,660$ -$ -$ -$ -$ -$
443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
- - - (3,036,660) - - - - -
-$ -$ -$ (3,036,660)$ -$ -$ -$ -$ -$
10,620$ 10,620$ 10,620$ (3,026,040)$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
-$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - -
- - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$
10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
- - - - - - - - -
10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$
104,870$ 115,490$ 126,110$ 136,730$ 147,350$ 157,970$ 168,590$ 179,210$ 189,830$
- - - - - - - - -
- - - - - - - - -
104,870$ 115,490$ 126,110$ 136,730$ 147,350$ 157,970$ 168,590$ 179,210$ 189,830$
CTC Technology & Energy 5
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
November 4, 2015
Capital Additions
Year 1 2 345678910
a. Fiber Implementation Costs
Fiber (30 year depreciation) 287,500$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Expansion Fiber (30 year depreciation) - - - - - - - - - -
Headend and Hub Equipment (10 year depreciation) - - - - - - - - - -
Headend and Hub Equipment (7 year depreciation) - - - - - - - - - -
Network Equipment (6 year depreciation) - - - - - - - - - -
CAI Customer Equipment (6 year depreciation) - - - - - - - - - -
Total 287,500$ -$ -$ -$ -$ -$ -$ -$ -$ -$
e. Wireless Network Costs (7 year depreciation)
Microwave (10 year) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Structures (20 year) - - - - - - - - - -
Access (10 year) - - - - - - - - - -
Network Equipment (7 year) 1,995,500 - - - - - - 1,995,500 - -
Spare Equipment (7 year) 25,000 - - - - - - 25,000 - -
Installation & Engineering (7 year) 1,016,160 - - - - - - 1,016,160 - -
Total 3,036,660$ -$ -$ -$ -$ -$ -$ 3,036,660$ -$ -$
f. Wireless Customer Connection Cost (5 year depreciation)
CPE -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Total Capital 3,324,160$ -$ -$ -$ -$ -$ -$ 3,036,660$ -$ -$
Total Accrued Capital 3,324,160$ 3,324,160$ 3,324,160$ 3,324,160$ 3,324,160$ 3,324,160$ 3,324,160$ 6,360,820$ 6,360,820$ 6,360,820$
Total Funded by Depreciation Account ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Financial Projections Rev 2
CTC Technology & Energy 6
City of Palo Alto
Senerio 2 Option B - Blanket Wi-Fi 802.11 ac
November 4, 2015
Capital Additions
Year
a. Fiber Implementation Costs
Fiber (30 year depreciation)
Expansion Fiber (30 year depreciation)
Headend and Hub Equipment (10 year depreciation)
Headend and Hub Equipment (7 year depreciation)
Network Equipment (6 year depreciation)
CAI Customer Equipment (6 year depreciation)
Total
e. Wireless Network Costs (7 year depreciation)
Microwave (10 year)
Structures (20 year)
Access (10 year)
Network Equipment (7 year)
Spare Equipment (7 year)
Installation & Engineering (7 year)
Total
f. Wireless Customer Connection Cost (5 year depreciation)
CPE
Total
Total Capital
Total Accrued Capital
Total Funded by Depreciation Account
Financial Projections Rev 2
11 12 13 14 15 16 17 18 19 20
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
- - - - - - - - - -
- - - - - - - - - -
- - - - 1,995,500 - - - - -
- - - - 25,000 - - - - -
- - - - 1,016,160 - - - - -
-$ -$ -$ -$ 3,036,660$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ -$ -$ -$ -$ -$ -$
-$ -$ -$ -$ 3,036,660$ -$ -$ -$ -$ -$
6,360,820$ 6,360,820$ 6,360,820$ 6,360,820$ 9,397,480$ 9,397,480$ 9,397,480$ 9,397,480$ 9,397,480$ 9,397,480$
‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
CTC Technology & Energy 7
Page 1 of 3
2
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILTIES DEPARTMENT
DATE: JANUARY 13, 2016
SUBJECT: Report on Current Status of the Electric Overhead to Undergrounding
Conversion Program
The purpose of this report is to provide an update on the status of the Electric Utility’s
Overhead to Underground Conversion Program (Program).
EXECUTIVE SUMMARY
In 2011 and 2012, staff presented reports to the UAC on the status of the Program, alternatives
for continuation, and a proposal for formation of a citizen electric underground advisory body.
After the Commission and Finance Committee approved the idea of an advisory body it was
presented to the City Council on March 8 2013. The motion to “appoint an advisory body to
solicit community input on potential changes to the City of Palo Alto Utilities electric overhead
to underground conversion policy” failed, 4 (yes) – 5 (no).
Staff continues to work on completing the districts that have been agreed to with AT&T
(Underground Utility Districts 46 and 47 are in different stages of design/construction; UUD 42
and 43 will begin the process in 3-5 years). Until a decision is made on how/who will pay for
the additional cost incurred by the City due to funding restrictions placed on AT&T by CPUC
tariffs, staff will meet with AT&T to discuss additional districts that meet their criteria for
sharing in the cost of the project.
BACKGROUND
Historically, approximately 2% of the annual electric revenue has been used for funding an
undergrounding project in an underground district, which typically takes three years to
complete. The Program was started in 1965 and approximately 47% of the City has been either
undergrounded through overhead to underground conversion or was originally developed with
underground utilities.
Most of the areas of the city that were converted from overhead to underground were
considered General Public Interest and Benefit Undergrounding (see Attachment B for
definition) projects and focused on highly traveled areas and business districts. Due to this
status, AT&T reimbursed the City for the cost of installation of their substructures.
Page 2 of 3
DISCUSSION
As reported in the January 2010 staff report, most of the remaining undergrounding will be in
areas that are 100% residential neighborhoods. The underground tariff under which AT&T
operates, California Public Utilities Commission (CPUC) Rule 32 (A)1, does not require AT&T t o
pay for telephone substructure work in most residential neighborhoods. The funding
restrictions in this tariff mean that any additional costs associated with AT&T work due to
undergrounding of electric facilities will have to be funded by the City and its customers. The
funding change will increase the undergrounding substructure costs by approximately 20% and
the overall construction costs by approximately 10%.
In the past, AT&T funded its substructures in a small number of residential areas even tho ugh
AT&T was not strictly required to under the tariff. However, AT&T has indicated in discussions
with Staff that it will strictly follow the tariff in all future undergrounding projects.
It should be noted that the CPUC has not established contributi on rules for cable TV so
Comcast, or any other third party attaching facilities is not required to fund its share of the
undergrounding. Through agreement between cable TV and AT&T, jointly owned poles by CPA
and AT&T, all parties are required to fund its share of the undergrounding costs. Over the
years, staff has presented reports to the Commission and Council Members on the various
aspects of the program. Table 1 lists the most recent reports and subject of each.
Prepared for Meeting Date Subject LINKS
City Council March 18,
2013
Community advisory body
to study underground
program
STAFF REPORT
https://www.cityofpaloalto.org/civicax/filebank/documents/33496
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/34104
Finance
Committee
December 18,
2012
Community advisory body
to study underground
program
STAFF REPORT
http://www.cityofpaloalto.org/civicax/filebank/documents/32374
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/32971
Utilities
Advisory
Commission
September 5,
2012
Proposal for community
advisory body
STAFF REPORT
http://www.cityofpaloalto.org/civicax/filebank/documents/30849
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/31448
Finance
Committee
November 15,
2011
Update on status and
alternatives for continuing
program
STAFF REPORT
http://www.cityofpaloalto.org/civicax/filebank/documents/32840
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/32516
Utilities
Advisory
Commission
September 7,
2011
Update on status and
alternatives for continuing
program
STAFF REPORT
http://www.cityofpaloalto.org/civicax/filebank/documents/30141
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/30300
Utilities
Advisory
Commission
January 6,
2010
Status of undergrounding
program
STAFF REPORT
http://www.cityofpaloalto.org/civicax/filebank/documents/18231
MINUTES
http://www.cityofpaloalto.org/civicax/filebank/documents/18898
Table 1: Utilities staff reports to Council Members and Utilities Advisory Commission
Staff is working on completing the districts to which AT&T has agreed for cost sharing purposes.
Underground Utility District 46 is in design and Underground Utility District 47 is in construction
and should be completed by the end of June 2016. UUD 42 and 43 will begin the design
process within the first quarter of 2016; once the design is agreed upon with Comcast and
AT&T it will take another 2 to3 years to complete construction. Staff will continue to meet with
AT&T to discuss additional districts that meet the criteria for sharing in the cost of the project.
RESOURCE IMPACT
Funding and staffing needs for the Overhead to Underground Conversion Program will be
impacted by the future policy decisions made on the direction of the program.
POLICY IMPLICATIONS
This project supports Utilities' Key Strategy Number 7 -Implement programs that improve
quality of the environment and Supporting Objective Number 2-Invest in utility infrastructure
to deliver reliable service.
ENVIRONMENTAL IMPACT
Discussion of the current status of the Electric Overhead to Undergrounding Conversion
Program does not meet the California Environmental Quality Act's {CEQA) definition of
"project" under California Public Resources Code Sec. 21065, thus no environmental review is
required.
ATIACHMENTS
Attachment A: Map -Existing Underground Districts
Attachment B: Rule and Regulation 17
PREPARED BY:
REVIEWED BY:
APPROVED BY:
TOM TING, Engineering Man ager -Electric oc{ nY" JP,
DEAN BATCHELOR, Assistant Director, Engineering~
C?~
EOSHIKADA
Assistant City Manager/Interim Director of Utilities
Page 3 of 3
UG DISTRICT #5
UG DISTRICT #1
UG DISTRICT #2
1965
UG DISTRICT #3
UG DISTRICT #4
PROPOSED UNDERGROUND DISTRICTS
UG DISTRICT #9
UG DISTRICT #6
UG DISTRICT #7
UG DISTRICT #8
UG DISTRICT #13
UG DISTRICT #10
UG DISTRICT #11
UG DISTRICT #12
UG DISTRICT #17
UG DISTRICT #14
UG DISTRICT #15
UG DISTRICT #16
1966
1966
1968
1968
1968
1969
N/A
1968
1968
1969
1971
1971
1972
1973
1974
1974
1981
1982
1983
1983
1984
1985
1985
1986
1987
1989
1990
1991
1994
1995
1996
1999
UG DISTRICT #18 1977
UG DISTRICT #25
UG DISTRICT #22
UG DISTRICT #23
UG DISTRICT #24
UG DISTRICT #29
UG DISTRICT #26
UG DISTRICT #27
UG DISTRICT #28
UG DISTRICT #33
UG DISTRICT #30
UG DISTRICT #31
UG DISTRICT #32
UG DISTRICT #37
UG DISTRICT #34
UG DISTRICT #35
UG DISTRICT #36
UG DISTRICT #38
UG DISTRICT #39
UG DISTRICT #401979
1979UG DISTRICT #20
UG DISTRICT #19
2005
2006
2005
RD
2017 - 2019
2015 - 2017
UG DISTRICT #42
UG DISTRICT #46
EXISTING UNDERGROUND DISTRICTS
14
10
27
44
UG DISTRICT #44 2004
ELECTRIC ENGINEERING
UTILITIES DEPARTMENT
CITY OF PALO ALTO
45
JAN 2O14
1982UG DISTRICT #21
UG DISTRICT #41 2008
2016 - 2019UG DISTRICT #43
46
2011 - 2015UG DISTRICT #47
UG DISTRICT #45 2010
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L
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L
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BOWDOIN STBOWDOIN ST
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DON
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41
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23
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32
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13
11
7
15
6
25
26
4
36
36
38
40
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6
31
19
34
43
42
45
9
47
ATTACHMENT A
El C
a
m
i
n
o
R
e
a
l
Pena Ct McK
e
l
l
a
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L
n
I
r
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n
C
t
M
a
y
b
e
l
l
A
v
e
Alta Mesa A
v
e
Thain Way
531
535
539
4175
4170
W.
C
h
a
r
l
e
s
t
o
n
R
d
.
4195
4191-
4
1
9
3
473
474
471
476
4211
535
540
541
551
556
562 557
554
4170
544
548
536
550
4222-
4
2
2
4
4220
4214-
4
2
1
6
4218
A
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a
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e
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R
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.
550
544
549
553 566
5604174
529
4185
565
4200
530
570
4180
550
531
538
532
4190
496
488
470
4173
464
468
El C
a
m
i
n
o
R
e
a
l
Boundary Map
Underground District No. 46
California
UTILITIES, ELECTRIC ENGINEERING
City of Palo Alto
LEGEND
Project Boundary
Feb 2014
Tom Ting
SR. ENGINEER / MANAGER
CHKD.
APPROVED
DRWN
ENGR.JV
SHEET
MAP #CKT #
REV.DATE
NTS
SCALE
APPR.
11OF
W.O.# / DRAWING #
DESCRIPTION
Cowper St
Li
n
c
o
l
n
A
v
e
Ad
d
i
s
o
n
A
v
e
Lane 56 (Pvt.)Ch
a
n
n
i
n
g
A
v
e
Downing Lane
Ho
m
e
r
A
v
e
Fo
r
e
s
t
A
v
e
Middlefield Rd.Middlefield Rd.
Webster St
Fo
r
e
s
t
A
v
e
Webster St
Cowper St
Ho
m
e
r
A
v
e
Webster St
Ch
a
n
n
i
n
g
A
v
e
Ad
d
i
s
o
n
A
v
e
Ch
a
n
n
i
n
g
A
v
e
Cowper St Cowper St
10361018
1033 1043
566
1110
528
510-520
558-560
567
1022
580
574
566
539
527-533
551
581
934
637
460
825
837 501-547
633
661-665
667-669
640-648
600
827
619
643-653
627
532
469
475
736-738724-732
559-563
534-536
507
725
730718
702-704
738-740
760
746-750
721
609
751
617-619
644-648
652
680
728-730
655
657
640
628
649-653
668-674
734-744
621-629
745
543-545
670
660
475
Channing House
Addison Elementary School
6 UNITS
8 UNITS
4 UNITS
10 UNITS
889
845-847835
940
BLDG. 6
BLDG. 9
664
WEBSTER WOODS
BLDG. 10BLDG. 3
BLDG. 2
BLDG. 1 BLDG. 15 BLDG. 14
ROLLER & HAPGOOD
1028
16 UNITS
24 UNITS
9 UNITS
556-596
505
1000
944-948
936-940
904
926
838810-816 828-830
707 741-747 953 711
935
Webster Oaks Apts.
4671042
1055
536
580
510
540-558
536
526
1021
525
538-552
595
585
10481044
575
1026
537-543
519-521518-520
524-540
575940
561
569
980
803
800
809-823
655-659654-666
630-638
618
850
615
675
528
637
680
678
880-884
744-748
567-569
539-543
515-517
720
466
542-544
550-566
610-616
727
711
705
525
759
734
707-715 741-
752 760
633-641
660-666
739
735
601-619
577
675
801
759735-737711727-729719-721
827-829 835 853
703
943-945925
905
1001 1011
8 UNITS
524-526
543-545
3 UNITS
6 UNITS
6 UNITS
BLDG. 7
BLDG. 8
BLDG. 5
BLDG. 4
BLDG. 11
BLDG. 16
BLDG. 12
4 UNITS
850
904-926
24 UNITS
471
952912
468
918
965-971
939-945931-935923-925
846
471
459
818-820
483
907-925
737
595
753
759
749725
505
530
563565567
1015
629
631
Li
n
c
o
l
n
A
v
e
Li
n
c
o
l
n
A
v
e
Middlefield Rd.
CHKD.
SR. ENGINEER / MANAGER
ENGR.
DRWN
APPROVED
California
UTILITIES, ELECTRIC ENGINEERING SHEET OF
City of Palo Alto CKT #MAP #SCALE
DATEREV.APPR.
W.O.# / DRAWING #
DESCRIPTION
OPS.
UG 47
Boundary Drawing
SW
GJ
EM
GJ
July 2010
1 1
NTS
Proposed Underground District No. 47
Homer / Cowper / Addison / Middlefield / Channing / Webster
B5
B6
40012979
WO# 40012979
CONVERSION OF ELECTRIC AND
COMMUNICATION FACILITIES TO UNDERGROUND
RULE AND REGULATION 17
CITY OF PALO ALTO
UTILITIES RULES AND REGULATIONS
Issued by the City Council
Effective 6-1-2010
Sheet No. 1
A. POLICY AND PRIORITIES
CPAU will replace existing overhead Electric distribution facilities and communication facilities
with underground facilities due to system operational considerations, or upon Application of an
individual or group of individuals, and/or at the direction of the City Council, subject to budgetary
considerations, the order of priorities listed below, and minimum project size specified in the
applicable section of this Rule.
The extent of CPAU’s financial participation in a conversion project will depend on whether the
locale of the project is designated by the City Council as an area of general public interest and
benefit, or an area of primary local public benefit, or whether the area fails to qualify for either of the
foregoing designations.
Underground conversion in areas of general and local public benefit will be considered in
accordance with the following order of priorities.
1.First priority will be given to overhead CPAU lines along streets, roads, or rights-of-way on
which major new roadway construction, realignment or on roadways designated as high
priority for re-pavement/overlay by the City’s Public Works Department.
2.Second priority will be given to overhead CPAU lines along rights-of-way through the
interior of blocks which have heavy tree foliage where poles have deteriorated to the point
where replacement is necessary and undergrounding is an economic alternative to pole
replacement.
3.Third priority will be given to overhead CPAU lines along streets, roads, or rights-of-way in
areas zoned commercial, light industrial, and limited manufacturing where Load growth
requires major overhead reconstruction and undergrounding is an economical alternative.
4.Fourth priority will be given to overhead CPAU lines which are hidden or partially hidden
by surrounding tree foliage along streets, roads, or rights-of-way where poles have
deteriorated to the point where replacement is necessary and under-grounding is an
economic alternative to pole replacement.
ATTACHMENT B
CONVERSION OF ELECTRIC AND
COMMUNICATION FACILITIES TO UNDERGROUND
RULE AND REGULATION 17
CITY OF PALO ALTO
UTILITIES RULES AND REGULATIONS
Issued by the City Council
Effective 6-1-2010
Sheet No. 2
5. Fifth priority will be given to overhead utility lines which are constructed along a major
arterial where poles have deteriorated to the point where replacement is necessary and under-
grounding is an economic alternative to pole replacement.
6. Sixth priority will be given to overhead utility lines which are constructed along streets,
roads, or rights-of-way in areas zoned Residential.
The intent of the six priority schedule is to provide guidance when establishing or selecting
areas for undergrounding overhead utility lines. However, any area where overhead utility
lines are located in streets, roads, or rights-of-way may be included in an Underground
Utility District for engineering, operating, or economic reasons.
B. IN AREAS OF GENERAL PUBLIC INTEREST AND BENEFIT
CPAU will replace its existing overhead distribution lines and communication cables with
underground distribution facilities at CPAU’s expense along public streets and roads, on public
lands, and on private property across which satisfactory easement or rights-of-way have been
obtained or may be obtained without cost or condemnation by the City provided that:
1. The Project extends a minimum distance of two City blocks or 750 feet.
2. The City Council has:
a. Determined that such under-grounding is in the general public interest. Included
among the reasons for such determination may be:
1. Such under-grounding will avoid or eliminate an unusually heavy
concentration of overhead distribution and communication facilities or the
construction of an existing Pole Line to accommodate additional overhead
circuits.
2. Said street or road or right-of-way is extensively used by the general public
and carries a heavy volume of vehicular traffic.
3. Said street or road or right-of-way adjoins or passes through a civic or public
recreation area or an area of scenic interest to the general public.
CONVERSION OF ELECTRIC AND
COMMUNICATION FACILITIES TO UNDERGROUND
RULE AND REGULATION 17
CITY OF PALO ALTO
UTILITIES RULES AND REGULATIONS
Issued by the City Council
Effective 6-1-2010
Sheet No.3
b. Adopted an ordinance creating an underground district in accordance with the
applicable sections of Chapter 12.16, Underground Utilities, of the Palo Alto
Municipal Code, which provides, among other things:
1. That all existing overhead communication and Electric distribution facilities
in such district shall be removed.
2. That each property owner served from such overhead distribution and
communication facilities shall provide, within a period of time established by
the City Council and at the property owner’s expense and in accordance with
CPAU applicable Rules and Regulations and schedule of Charges for
underground Service connections, all electrical Service facility construction
and Charges on his Premises necessary to receive Service from the
underground distribution and communication facilities after they are
completed and in operation.
3. CPAU is authorized to discontinue overhead Services after the period of time
established by City Council for reconnection to the underground distribution
and communication facilities has expired.
C. IN AREAS PRIMARILY OF LOCAL PUBLIC BENEFIT
CPAU will replace its existing overhead distribution and communication facilities with underground
distribution and communication facilities along public streets, roads, or other locations mutually
agreed upon when requested by a group of Applicants or an authorized representative of a group of
Applicants, provided that:
1. The project includes at least one block to 600 feet.
2. The City of Palo Alto City Council has:
a. Determined that such undergrounding is in the general public interest, but primarily
of local benefit.
b. Adopted an ordinance creating an underground district in accordance with the
CONVERSION OF ELECTRIC AND
COMMUNICATION FACILITIES TO UNDERGROUND
RULE AND REGULATION 17
CITY OF PALO ALTO
UTILITIES RULES AND REGULATIONS
Issued by the City Council
Effective 6-1-2010
Sheet No.4
applicable sections of Chapter 12.16, Underground Utilities, of the Palo Alto
Municipal Code, which provides among other things:
1. That all existing overhead communication and Electric distribution
facilities in such district shall be removed.
2. That each property owner served from such overhead distribution and
communication facilities shall provide, within a period of time
established by the City Council and at the property owner’s expense
and in accordance with the CPAU applicable Rules and Regulations
and schedule of Charges for underground Service connections, all
electrical Service facility construction and Charges on his Premises
necessary to receive Service from the underground distribution and
communication facilities after they are completed and in operations.
3. That CPAU is authorized to discontinue overhead Service after the
period of time established by the City Council for reconnection to the
underground distribution and communication facilities has expired.
3. The Applicant or group of Applicants pays 50 percent of the total costs, exclusive of
transformers and associated equipment, for the replacement of the overhead Electric
distribution lines with underground Electric distribution facilities in the Public Right-of-Way
or easement. CPAU will pay 50 percent of said costs and will provide the transformers and
associated equipment.
Where the street-lighting system in areas to be under-grounded is mounted on overhead
poles to be removed, the street-lighting facilities shall be replaced in accordance with the
standards and requirements of CPAU, and the cost shall be borne by the Applicant or group
of Applicants.
The cost of undergrounding communication facilities shall be borne by the Applicant or
group of Applicants as determined by applicable tariffs and rules of the servicing utility.
Where overhead Fiber Optics systems exist, 100 percent of the cost to place them
underground will be borne by the Applicant or group of Applicants.
CONVERSION OF ELECTRIC AND
COMMUNICATION FACILITIES TO UNDERGROUND
RULE AND REGULATION 17
CITY OF PALO ALTO
UTILITIES RULES AND REGULATIONS
Issued by the City Council
Effective 6-1-2010
Sheet No.5
D. IN AREAS OF INSUFFICIENT PUBLIC BENEFIT TO QUALIFY UNDER SECTION B OR
SECTION C
When mutually agreed upon by the Director of Utilities and an Applicant, overhead distribution and
communication facilities may be replaced with underground distribution and communication
facilities provided that:
1. The Applicant requesting the change enters into an agreement with CPAU to pay, in
advance, a non-refundable sum not less than 75 percent of the estimated total cost of the
replacement of overhead Electric distribution lines with underground Electric distribution
facilities, in the Public Right-of-Way or easement, exclusive of transformers and associated
equipment. The share borne by CPAU shall be determined by the Electrical Engineering
Manager on his or her calculation of the benefit to CPAU.
Where the street-lighting system in areas to be under-grounded is mounted on overhead
poles to be removed, the street-lighting facilities shall be replaced in accordance with the
standards and requirements of CPAU, and the cost shall be borne by the Applicant or group
of Applicants.
The cost of undergrounding communication facilities shall be borne by the Applicant or
group of Applicants as determined by applicable tariffs and rules of the servicing utility.
Where overhead Fiber Optics systems exist, 100 percent of the cost to place them
underground will be borne by the Applicant or group of Applicants.
2. Each property owner served from such overhead distribution and communication facilities
shall agree to provide at his or her own expense, within a period of time established by
CPAU, all electrical and communication Service facility construction and changes on his or
her Premises necessary to receive Service from the underground distribution and
communication facilities when they are completed and in operation.
(END)
Page 1 of 15
3
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: JANUARY 13, 2016
SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt a Resolution Approving a Power Purchase
Agreement with Hecate Energy Palo Alto LLC for up to 75,000 Megawatt-hours
Per Year of Energy over a Term of up to 40 Years for a Total Not to Exceed
Amount of $101 Million
REQUEST
Staff recommends that the Utilities Advisory Commission (UAC) recommend that the City
Council adopt a Resolution (Attachment A) to:
1. Approve a Power Purchase Agreement (PPA) with Hecate Energy Palo Alto LLC (HEPA), a
Delaware limited liability company, for the acquisition of up to 75,000 Megawatt-hours
(MWh) per year of energy from the Wilsona solar project (Wilsona) over a maximum of
forty years at a total cost not to exceed $101 million; and
2. Waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do
business with the City, as HEPA will provide a $5.2 million letter of credit as a
development assurance deposit, and a subsequent $2.6 million letter of credit as a
performance assurance deposit.
3. Delegate to the City Manager or his designee, the authority to execute on behalf of the
City the PPA with HEPA, the three contract term extension options available to the City
under the PPA, and any documents necessary to administer the agreements that are
consistent with the Palo Alto Municipal Code and City Council approved policies.
4. Waive the application of the anti-speculation requirement of Section D.1 of the City’s
Energy Risk Management Policy as it may apply to surplus electricity purchases resulting
from the City’s participation in the Wilsona PPA, due to the variability of the City’s
hydroelectric resources.
EXECUTIVE SUMMARY
As part of ongoing efforts to meet the City’s Carbon Neutral Plan requirements, as well as to
comply with the recently adopted state Renewable Portfolio Standard (RPS) mandate of
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providing at least 50% of sales from qualifying renewable resources, staff issued a request for
proposals (RFP) for renewable resources in the spring of 2015 and evaluated the proposals
based on price, value, viability and compatibility with the City’s needs. Under this RFP, staff
sought projects that would begin delivering energy to Palo Alto in 2021, which is when one of
the City’s older wind energy contracts will expire. After thorough review, staff concluded that
the Wilsona solar photovoltaic (PV) project proposal had the best total score.
When it begins operating in mid-2021, the 26-megawatt (MW) project1 will provide about 7.5
percent of the City’s annual energy needs, and will be sited on low productivity, previously
disturbed agricultural land in Los Angeles County. The project was proposed by Hecate Energy
LLC (Hecate), a privately-held developer, owner, and operator of solar, wind, energy storage,
and natural gas projects. Headquartered in Nashville, Hecate was founded in 2012 by the
executive team that built (and subsequently sold) the compan y OCI Solar Power. Hecate
currently has over 2,400 MW of projects under development.
The Wilsona PPA (Attachment B) is structured with a 25-year initial term, followed by three
separate five-year extension term options that can be exercised at the City’s sole discretion.
The project’s contract price of $36.76 per MWh is substantially lower than the prices of any of
the City’s previous renewable energy contracts. But as with all of those prior contracts, Palo
Alto will make no upfront payments under the Wilsona PPA; energy will be paid for only after it
is delivered.
Further mitigating the risks posed by this contract, HEPA will be required to post a $5.2 million
development assurance deposit, which the City will be able to keep in the event that the
project is not completed in a timely manner. This deposit amount is almost three times greater
than the amount provided under any of the City’s other solar PV contracts. In addition, the
Wilsona project will be a “fully deliverable” project , meaning that it will provide Resource
Adequacy (RA) value to the City, in addition to the value of its renewable energy.
BACKGROUND
Per the Council-approved Long-term Electric Acquisition Plan (LEAP) Objectives and Strategies,
updated in April 2012 (Staff Report 2710), the City’s RPS target is to procure at least 33% of its
retail sales volume from qualifying renewable resources by 2015, and to continue procuring
renewable resources as long as the cumulative rate impact of all of the City’s renewable
resources is not more than 0.5 cents per kilowatt-hour (¢/kWh).
In addition, California’s Senate Bill (SB) 350, signed into law in October 2015, requires all
electric utilities in the state, including Palo Alto’s municipal utility, to procure increasing
amounts of renewable resources in order to serve their retail customers. Utilities must procure
at least 40% of their retail sales volume from renewable resources by December 31, 2024, at
1 Under the terms of the PPA, the Wilsona project will be sized between 25 and 27 MW, with an expected size of
26 MW. All references to the Wilsona project’s 26 MW size in this report should be understood to capture that
range.
Page 3 of 15
least 45% by December 31, 2027, and at least 50% by December 31, 2030 (and each year
thereafter).
Finally, in March 2013, Council approved the City’s Carbon Neutral Plan for the electric supply
portfolio, to be achieved starting in 2013 (Staff Report 3550). Since 2013 and over the next
couple of years of implementing the Carbon Neutral Plan, the City expects to achieve carbon
neutrality with its renewable energy portfolio, its carbon-free hydroelectric resources and by
purchasing renewable energy certificates (RECs) to offset the emissions associated with its
wholesale market power purchases. Starting in 2017, the City plans to achieve carbon neutrality
entirely through the acquisition of additional “hard resources” that supply the City with both
energy and environmental attributes so that REC purchases can be minimized —and the
Wilsona PPA is a part of that long-term effort.
Current Status of Renewable Resources in Palo Alto’s Electric Portfolio
The City has executed eight PPAs for new renewable resources that are currently delivering
energy to Palo Alto, with one additional resource (Hayworth Solar) expected to begin operating
by the end of November 2015. The currently operating resources include two wind projects,
five landfill-gas-to-energy (LFGTE) projects, and one solar PV project. Besides Hayworth, an
additional three PPAs have been executed for solar projects that are still under development
and expected to begin operating by the end of 2016. The City has also executed PPAs for three
other resources but subsequently terminated those agreements after the supplier s ran into
problems developing the projects and requested unacceptable contractual concessions.
Summary information for all 12 currently contracted RPS resources is provided in Table 1.
Page 4 of 15
Table 1 – Palo Alto’s Existing Renewable Energy Contracts
Project Supplier Technology Date Contract
Executed
Actual or
Estimated
Online Date
Annual
Energy
(GWh)
High Winds Iberdrola Wind Nov. 2004 Dec. 2004 48.2
Shiloh Iberdrola Wind Oct. 2005 Jun. 2006 64.5
Santa Cruz Ameresco Landfill Gas Nov. 2004 Feb. 2006 9.9
Half Moon Bay Ameresco Landfill Gas Jan. 2005 Apr. 2009 43.9
Keller Canyon Ameresco Landfill Gas Aug. 2005 Aug. 2009 14.9
Johnson Canyon Ameresco Landfill Gas Aug. 2009 May 2013 10.4
San Joaquin Ameresco Landfill Gas May 2010 Apr. 2014 30.3
EE Kettleman Land Clēnera Solar PV Nov. 2012 Jul. 2015 53.5
Subtotal – Operating 275.5
Hayworth Solar sPower Solar PV Jun. 2014 Nov. 2015 63.7
Elevation Solar C sPower Solar PV Jul. 2013 Dec. 2016 100.8
Western Antelope
Blue Sky Ranch B sPower Solar PV Jul. 2013 Dec. 2016 50.4
Frontier Solar Clēnera Solar PV Jul. 2013 Dec. 2016 52.5
Subtotal – Under Development 267.4
Total – All Executed Contracts 542.9
In addition, through its contract with the Western Area Power Administration and through its
ownership share of the Calaveras Hydroelectric Project , the City receives a small amount of
energy from “small” hydroelectric projects that qualify under the state’s RPS standard. These
resources that can be counted towards the City’s RPS requirements together account for about
1% of the City’s sales in normal water years.
Lastly, Palo Alto CLEAN, a local solar PV feed-in tariff program, was launched in March 2012
(Staff Report 2548, Resolution 9235). Under the current program design approved in May 2015
(Staff Report 5849), the Palo Alto CLEAN program may provide up to 0.5% of Palo Alto’s electric
energy needs.
Together, when all of the renewable facilities under contract enter commercial operation, and
assuming Palo Alto CLEAN provides 0.5% of the City’s total energy supply, the City’s RPS is
expected to be about 43.2% of total energy supply needs in 2016, and 57.7% in 2017, as shown
in Figure 1 below. However, one of the City’s earliest PPAs, for the Shiloh I wind project, is set
to expire in May 2021. Once it does, the City’s RPS will fall to about 50.0% (in 2022). Figure 1
shows actual energy deliveries through 2014 and estimated deliveries after that date.
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Figure 1 – Palo Alto’s Committed Renewable Resources
Green Premium Calculation
To conform to the City’s RPS policy rate impact limitation of 0.5¢/kWh on average, staff
compares the total cost of each renewable resource to the wholesale market price of non -
renewable energy at the time that the contract for the resource is executed. The green
premium represents the additional cost paid for renewable energy compared to non -renewable
energy from the market. For each resource the levelized2 cost impact ($/year) is calculated as
follows:
Green Premium = (PPA cost + transmission charges – capacity value) – brown power cost,
where “PPA cost” is the renewable energy cost adjusted for its time -of-delivery3; “transmission
charges” are any costs Palo Alto would incur to get the energy delivered to CAISO territory;
“capacity value” is any system or local capacity value provided by the resource; and “brown
2 Levelizing is a process of taking nominal cash flows, discounting them to present value, summing the present
values, and amortizing the present value into uniform annual payments like a mortgage. The discounting and the
amortizing are both performed with the user’s discount rate or time value of money.
3 In general, solar PV projects deliver energy during the on-peak hours when energy deliveries are more valuable;
thus solar PV project prices are discounted slightly in the green premium calculation. The opposite adjustment is
usually true of wind projects.
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power cost” is the wholesale market price quote for non -renewable energy delivered to
Northern California for an equivalent term.
DISCUSSION
This section of the report will cover the following topics:
A. The Market for Renewable Resources in California
B. Results of Palo Alto’s Renewable Resource Request for Proposals (Spring 2015 RFP)
C. Wilsona Solar Project Summary
D. Contract Mechanisms for Mitigating Project Risks
E. Energy Risk Manager’s Assessment
F. Palo Alto’s Renewable Resource Portfolio with Wilsona
A. The Market for Renewable Resources in California
California’s aggressive RPS mandates for electric utilities resulted in a supply-demand
imbalance in the renewables market that drove prices up, particularly between 2007 and 2011.
However, in the past several years renewable energy prices have plummeted – largely due to
an influx of low-cost solar panels into the market. Prior to 2011, solar was generally the most
expensive type of renewable energy technology; now it is easily the least expensive.
Furthermore, in the past few years, supply and demand factors have shifted decidedly in favor
of buyers like Palo Alto. A large number of renewable energy developers have entered the
market in recent years—reacting to the then-high renewable energy contract prices and the
large appetites of the state’s large investor-owned utilities (IOUs) seeking to meet their RPS
procurement requirements. But, as of now, the IOUs have contracted for enough renewable
energy to meet their mid-term needs and have dramatically slowed their procurement efforts.
This has left a large pool of project developers competing with each other to win contracts with
a relatively small pool of buyers. As a result, renewables prices—particularly for solar—have
been driven down to the point that they are now roughly at parity with long-term brown
market prices.
However, there are a number of factors that have the potential to push renewable energy
prices back up in the mid- to long-term. Among them are:
a) The scheduled expiration of federal tax incentives for renewable energy projects—
including the reduction from 30% to 10% of the Investment Tax Credit (ITC)4 and
accelerated depreciation rules;
b) The recent passage of SB 350, the new 50% by 2030 RPS mandate, which will likely spur
all of the state’s electric utilities to begin actively procuring renewable energy for the
2020 to 2030 time period; and
4 At the time the City issued this RFP, and through the majority of the negotiations process with Hecate, the ITC
was slated to drop from 30% to 10% at the end of 2016. However, in mid -December 2015 Congress extended the
ITC at the 30% level for an additional three years. It is now scheduled to reduce to 26% for projects beginning
construction in 2020, and to 22% for projects beginning construction in 2021, before falling to the 10% level again.
Page 7 of 15
c) The enactment of the U.S. Environmental Protection Agency’s (EPA’s) Clean Power Plan,
which is likely to lead other Western states to more actively pursue renewable
resources in order to reduce the carbon emissions associated with their electricity.
All of the above factors suggest that now is a good time to lock in long-term commitments at
historically low prices in order to help the City meet its carbon neutrality goals and its post -
2020 RPS requirements.
B. Results of Palo Alto’s Renewable Resource Request for Proposals (Spring 2015 RFP)
The City typically contracts for renewable power by independently issuing RFPs, the most
recent of which was released in April 2015 in pursuit of projects that would deliver renewable
energy starting in 2021 to replace the Shiloh I wind PPA when it expires in 2021. Staff expected
to receive proposals from projects that would be constructed before the end of 2016 (in order
to take advantage of the 30% federal ITC—which, at the time the RFP was issued, was
scheduled to be reduced to 10% at the end of 2016; however, in December Congress extended
it at the 30% level until the end of 2019 ) or from projects that would not be completed until
2021. In response to this RFP, the City received 41 project proposals, which is about half as
many as were received in response to the City’s prior RFP in fall 2013. This drop-off in proposals
received is likely due to the fact that the City was requesting a rather late contract start date of
2021. The 41 proposals represented a total capacity of 900 MW and 2,600 gigawatt-hours per
year (GWh/year) of energy from a variety of different generating technologies. The proposed
projects included 32 solar PV projects, five wind projects, two biomass projects, one
geothermal project, and one ocean wave project.
The proposals were evaluated based on price and value, project/contract viability, and
compatibility with Palo Alto’s electric portfolio. The City received many attractive proposals—
including several that were priced lower than any of Palo Alto’s previous PPAs—but ultimately
the Wilsona proposal received the highest overall score.
In evaluating the price and value of different offers staff takes into account:
The daily and seasonal shape of the energy output;
The location of the output;
The structure of the output in terms of meeting legislated criteria (i.e., satisfying
limitations on the use of the three categories of renewable resources defined by the
state’s RPS law);
The likely capacity value of the output;
The likely interconnection cost to get the output onto the grid; and
The green premium, which is calculated for each proposal as the proposal cost minus
the cost of buying the equivalent amount of non-renewable resource output.
Figure 2 depicts the range of green premiums for the proposals received in the spring 2015 RFP,
sorted by type of generation technology. Overall, the green premiums of these projects were
somewhat lower than those of the project proposals received through the fall 2013 RFP, and
those of the top few proposals were substantially lower.
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Further, the viability of each proposed project /contract was evaluated in terms of accomplished
and remaining project development steps, along with the financial standing and development
experience of the project developer.
Figure 2 – Green Premiums and Project Start Dates of RFP Proposals
C. Wilsona Solar Project Summary
The Wilsona PPA proposal was submitted by Hecate Energy, a privately -held Nashville-based
firm that develops solar PV, wind, energy storage, and natural gas projects in the U.S. as well as
abroad. Hecate currently has over 2,400 MW of projects under development. In June 2014, the
Los Angeles Department of Water and Power board unanimously approved the award of 190
MW of solar PV PPAs to Hecate—an award that comprises two 56 MW projects, a 50 MW
project, and 28 MW of in-city distributed generation solar PV projects. Additionally, Hecate’s
management team led the partnership for a 400 MW solar PPA with CPS Energy of San Antonio,
Texas—the largest municipal solar development in the U.S.
Wilsona Solar is a 26 MW project, with expected annual energy deliveries of 75,000 MWh
(approximately 7.5% of the City’s energy needs) in the first year of the contract term . As with
any solar PV plant, the annual output is expected to decline at a rate of about 0.5% per year
due to solar panel degradation effects. The project is expected to begin commercial operations
Page 9 of 15
in the first half of 2021, and will interconnect to the California Independent System Operator
(CAISO) grid as a Full Capacity Deliverability Status (FCDS) resource, which means that the City
will be able to claim capacity value from the project. The project will be sited on disturbed
agricultural land about 20 miles east of the City of Palmdale in Los Angeles County, and will
interconnect at the Wilsona Substation.
The Wilsona PPA is structured as a 25-year base contract term, followed by three separate five-
year extension term options that can be exercised by Palo Alto in its sole discretion. The
negotiated price for the PPA is $36.76 per MWh for the entire term of the contract, which is
about 47% lower than the price of the lowest cost solar PPA that was approved by the Council5.
As of today, the green premium for a 40-year contract term is significantly lower than that of a
25-, 30-, or 35-year term. For this reason, and assuming the development of the project
proceeds according to plan, it appears likely that the City will want to exercise all three contract
term extension options. Staff therefore seeks Council authorization to exercise all three
options, which would extend the 25-year base contract to a full 40-year contract term for the
City. Staff also requests that Council delegate authority to the City Manager to exercise the
extension term options, so that the City may act expeditiously if staff determines that it is in the
City’s best interest to exercise each option near the end of the then -current contract term.
Delegation of such authority to the City Manager is permissible under section 2.30.290 of the
Palo Alto Municipal Code.
D. Contract Mechanisms for Mitigating Project Risks
With any new, or “greenfield,” electric generation resource there is a risk that th e project will
not be built, will come online later than scheduled, or will stop performing at some point after
it comes online. The Wilsona project, in particular, due to its planned 2021 start date, is at a
relatively early stage of development and therefore can be considered at greater risk than
other, more advanced projects. To mitigate these risks, the City has negotiated the inclusion of
very sizable development and performance assurance deposits in this PPA. Also, as with all
PPAs, this agreement is structured so that the City pays only for metered output from the
project after it has been delivered each month. This structure minimizes the City’s exposure to
operational, maintenance, and counterparty default risks in the contract.
For this project, HEPA will provide a development assurance deposit of $5.2 million (in the form
of a letter of credit), or $200/kW of installed capacity, which will be available to the City, and
withheld from the developer, if the project misses the commercial operation timing milestone .
The development deposit provides an incentive to the developer to complete the project on
time. It also provides compensation to the City should the project suffer unexcused delays or
fail to materialize. Due to the extended length of time before the Wilsona project begins
5 The levelized price for the Hayworth Solar PPA approved in June 2015 is $68.72 per MWh for the 34-year term
(assuming both extension term options are exercised). (See Staff Report 4791, Resolution 9416.)
Page 10 of 15
operating, staff negotiated a significantly greater development assurance amount under this
PPA compared to prior ones6 in order to offset the increased development risk.
After the start of commercial operations, HEPA will provide a $2.6 million performance
assurance deposit (also in the form of a letter of credit), or $100/kW of installed capacity, which
will be available to the City, and withheld from HEPA, if certain performance measures are not
met. The performance deposit provides an added incentive for the operator to maintain the
project output and provides compensation to the City should performance be less than
expected, which would require the City to secure replacement renewable energy.
In addition to risks related to project development, operations, and counterparty default, it
should also be noted that there is a risk that in the future the CAISO could impose additional
fees on the owners or off-takers of resources with highly intermittent output such as the
Wilsona project. As more solar and wind resources are added to the state’s generation mix in
the coming years to meet the new 50% RPS mandate, the cost of managing the intermittency of
these resources and ensuring the stability of the electric grid will likely increase, and it is
possible that this additional cost will be passed on to the owners of the resources that are
driving the cost increases. On the other hand, it is also possible that these cost increases would
be spread evenly across all CAISO load-serving entities, regardless of the level of intermittency
of their generation portfolios. While it is important to acknowledge the potential for future cost
increases as a result of executing this agreement, it should also be noted that it is highly
unlikely that these cost increases would be great enough to make the Wilsona project less
attractive to the City than a non -intermittent alternative (i.e., a geothermal or biomass project)
based on the response to the City’s recent renewable energy RFP.
E. Energy Risk Manager’s Assessment
The Energy Risk Manager (ERM) was involved in the final stages of the RFP evaluation process
when two final candidates were being considered. The ERM analyzed the creditworthiness of
each counterparty and provided the results to the RFP selection team. Credit assessments were
performed on the companies providing financing for the projects. HEPA’s financial backer is
Hecate Energy.
The ERM assessed the expected default frequency (EDF) of Hecate using Moody’s credit
measure tool, which extracts credit signals by combining information from the equity markets
with the company’s debt structure as reported on its financial statements. This analysis yielded
an EDF of 1.02 percent (meaning that there is an estimated one in 98 chance of default by the
company within the next year).
The risks to the City of entering into the proposed PPA are that the suppl ier defaults or is
unable to perform according to the terms of the contract. If this occurs, the City might need to
buy renewable energy from another supplier in order to meet its RPS obligations under state
6 Under the City’s other five solar PPAs, the development assurance amounts range from $20/kW to $75/kW of
installed generating capacity.
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law or to meet the City’s RPS and Carbon Neutral goals. These risks are minimized by the
following terms of the proposed PPA:
The City is not at risk for paying for output that is not delivered. The City will make no
payments under the PPA unless and until energy from the project is delivered to the Cit y.
The supplier’s development assurance deposit funds provide some degree of comfort that
the project will be completed. If it is not, then the City would be able to access the
development deposit funds of up to $5.2 million to help offset the cost of proc uring
replacement renewable energy.
Once the project becomes operational, the unclaimed development deposit funds will be
returned to HEPA. At the same time, a new performance assurance deposit will be posted
by HEPA and can be used by the City to cover op erational and performance risk. Staff
believes this amount ($2.6 million) is sufficient to cover these risks given that the operating
costs for solar plants are much lower than their operating revenues; thus project owners
tend to keep their projects operating.
In general, businesses in the renewable industry lack extensive financial and operational track
records, and because of the capital-intensive nature of these projects, they tend to be highly
leveraged as well. Hecate Energy is no exception; thus, it is not investment-grade and has a
higher projected default rate than the City’s other (non renewable) electric and gas suppliers.
However, under the terms of the Wilsona PPA, if the project does not come to fruition
according to the construction start and commercial operation date milestones set forth in the
PPA or if the supplier defaults at any time during the term of the agreement, the City can access
the then-current development assurance funds provided by the letter of credit. For these
reasons, staff recommends that the Council waive the investment-grade credit requirement for
public agency contracts required under Section 2.20.340(d) of the Palo Alto Municipal Code.
This conforms to Council action on prior renewable resource contracts with similar
characteristics (CMR:461:04, CMR:100:05, CMR:350:05, CMR:343:09, CMR:226:10, Staff Report
3223, Staff Report 3845, and Staff Report 4791).
F. Palo Alto’s Renewable Resource Portfolio with Wilsona
The City has made commitments to renewable resources projected to provide 57.7% of its
energy from qualified renewable resources by 2017. However, in May 2021 the City’s PPA for
the Shiloh I wind project—which was executed in 2006, and is one of its larger PPAs—is set to
expire. Three more PPAs are then set to expire in 2028 and 2029. If the Wilsona solar project is
added to the City’s renewables portfolio, Palo Alto’s renewable resources would be expected to
provide about 57.5 % of total sales in 2022. Additionally, the Wilsona project would enable the
City to meet its Carbon Neutral Plan goal as well as the state’s 50% RPS mandate through 2028.
Figure 3 illustrates the City’s existing renewable resource commitments, with the Wilsona
project included as a “pending” resource. Also shown are reference lines indicating the level of
renewables that would be needed to achieve a 50% RPS, and the level that would produce a
carbon neutral electric supply portfolio. (The volume of renewable energy certificates (RECs)
Page 12 of 15
that need to be procured each year in order for the City to achieve a 100% carbon neutral
electric supply portfolio is shown as well. The large volume of RECs required from 2013 through
2016 is largely due to the impacts of the current drought, which has reduced the output of the
City’s two hydroelectric resources.) These reference lines indicate that the inclusion of Wilsona
in the City’s renewable resources portfolio would enable the City to achieve greater than a 50%
RPS level and a 100% carbon neutral supply portfolio through long-term renewable and hydro
resources through 2028, even under slightly dry hydrological conditions7.
Figure 3 – Palo Alto’s Renewable Resources with Wilsona
As indicated in Figure 3, staff projects that adding the Wilsona PPA to the City’s renewables
portfolio would cause a surplus of carbon neutral electric supplies from 2026 through 2028.
However, this will be true only if hydrologic conditions are close to (or wetter than) the long-
term average level and all of the renewable resources that the City has contracted for that are
still under development (plus the Wilsona project) are completed on-time and deliver the
7 Note that the City’s electric needs may change over time from the forecast shown in Figure 3. Load forecasts are
updated annually and staff is aware of pressures lowering needs due to energy efficiency improvements from
appliance standards and increasingly stringent building codes as well as increasing local generation, p articularly
from rooftop PV systems. On the other hand, increasing attention to electrification of natural gas using appliances
such as water and space heaters as well as increasing penetration of EVs have an upward pressure on electric
loads. Regardless of load trends, staff is confident that sufficient renewable supplies can be secured to meet
future RPS requirements and carbon neutral goals.
Page 13 of 15
expected amount of energy to the City. As the year 2013 through 2016 data points on the
carbon neutral reference line indicate, “dry hydro” years are becoming increasingly common in
northern California, and they can have a tremendous negative impact on the output of the
City’s hydroelectric resources. In such years, even the addition of the Wilsona PPA and all of the
other contracted resources that are still under development would not be sufficient to achieve
a carbon neutral supply portfolio without the purchase of RECs. Also, it is the City’s experience
that some renewable energy projects that are contracted for experience significant
development delays, or end up not being built at all. The City’s experience in this regard is
consistent with the broader renewables market. The California Energy Commission, for
instance, has estimated the failure rate for renewables contracts to be between thirty and forty
percent.8 The City itself has cancelled three renewable PPAs it executed since the projects did
not proceed as planned.
If, however, the City’s carbon neutral electric supply portfolio exceeds the amount of
generation needed to achieve carbon neutrality in any given year, the City would have the
ability to either “bank” the RECs associated with that generation for use in a later time period,
or sell the surplus into the short-term markets. Prices for short-term REC sales are currently
expected to be fairly advantageous for the City over the long -term, so these surplus positions
would likely result in little if any financial loss for the City.
Section D.1 of the City’s Energy Risk Management (ERM) Policy prohibits speculative buying and
selling of energy products. Under the ERM Policy, “speculation” is defined as “buying energy
not needed for meeting forecasted load or selling energy that is not owne d.” Because the
Wilsona project has the potential to lead to surplus electric purchases, including du ring the
2026 through 2028 time period, staff recommends that the UAC recommend that Council waive
application of the ERM Policy’s anti-speculation requirement to the City’s participation in the
Wilsona PPA. Staff’s recommendation is based on the information set forth above, including the
variability of the City’s hydroelectric resources and potential uncertainties associated with the
viability and timeliness of renewable energy projects in the City’s portfoli o that are currently
under development.
Table 2 provides a summary of renewable energy project volumes and the associated annual
green premium amounts for the City’s committed renewable energy supplies as well as the PPA
under consideration. As shown in the table, the annual green premium for the Wilsona PPA is
estimated at -$1.1 million. This means that the contract will is expected to cost the City $1.1
million per year less than brown power purchases would, based on current forward projections
for brown power costs. If Council approves the Wilsona PPA, the total rate impact for all
renewable supplies would be only 0.123¢/kWh—well within the 0.5¢/kWh rate impact limit
Council established for the RPS goal.
8 According to the CEC: “Data from the Energy Commission’s [Investor Owned Utility] contract database indicates
that since the start of the RPS Program, about 30 percent of long-term RPS contracts (10 years or more) approved
by the California Public Utilities Commission (CPUC) have been cancelled. The contract failure rate increases to
about 40 percent when also considering contracts that have been delayed.” California Energy Commission. 2011
Integrated Energy Policy Report. Publication Number: CEC-100-2011-001-LCF. 2011.
Page 14 of 15
Table 2 – Summary of the City’s Current Renewable Energy Supplies and the Proposed Project
Delivery
Begins
Annual
Generation
(GWh)
Levelized
Price
($/MWh)
Adjusted
Brown
Market
Price
($/MWh)
Green
Premium
($/MWh)
Total
Annual
Green
Premium
($1000)
Small Hydro Before 2000 10.0 N/A N/A 0 0
High Winds Dec. 2004 48.2 57.6 55.0 2.6 123
Shiloh I Wind Jun. 2006 64.5 63.0 69.5 (6.5) (419)
Santa Cruz Feb. 2006 9.9 62.3 59.3 3.0 29
Ox Mountain Apr. 2009 43.9 59.0 67.5 (8.5) (375)
Keller Canyon Aug. 2009 14.9 70.9 83.9 (13.0) (194)
Johnson Canyon Mar. 2013 10.4 123.6 67.3 56.3 588
San Joaquin Jun. 2013 30.3 118.1 75.6 42.4 1,285
Kettleman Jul. 2015 53.5 77.0 60.1 16.9 903
Hayworth Solar Oct. 2015 63.7 68.7 65.0 3.7 234
Elevation Dec. 2016 100.8 68.8 72.7 (4.0) (399)
W. Antelope Dec. 2016 50.4 68.8 69.2 (0.4) (22)
Frontier Solar Dec. 2016 52.5 69.0 67.1 1.9 98
Total Committed Projects 553 Total Committed Green Premium 1,852
Wilsona Jun. 2021 75 36.8 51.4 (14.6) (1,095)
Total with Wilsona
(but without Shiloh) 563 Total Green Premium
with Wilsona (without Shiloh) 1,176 *
* The annual green premium associated with a rate impact of 0.5¢/kWh is equal to $4.8 million
NEXT STEPS
The Wilsona PPA has been reviewed and approved by staff and by the City Attorney’s Office.
The PPA has also been executed by the supplier and sent to the City for execution once
approved by Council. Staff plans to seek a Finance Committee recommendation for Council
approval in December. If recommended by the Finance Committee, staff plans to seek Council
approval of the PPA by early next year.
RESOURCE IMPACT
The cost of renewable energy supplies from Wilsona is expected to be up to $101 million over
the 40-year term of the agreement (if all three extension options are exercised). The annual
expected cost is up to $2.8 million. Approval of the PPA would result in a retail rate impact from
all renewable resources, including the Wilsona project, of up to 0.12¢/kWh in 2022. The
expected future cost for procuring renewable resources to meet the City’s RPS goal is already
included in the current five-year financial forecast.
POLICY IMPLICATIONS
Approval of the proposed PPA is in conformance with the City's Long-term Energy Acquisition
Plan (LEAP), specifically the City's Renewable Portfolio Standard to meet at least 33% of the
electric sales from renewable energy by 2015. Approval of the proposed PPA would also further
the City's efforts to achieve a carbon neutral electric supply portfolio entirely through the
acquisition of additional "hard resources" that supply the City with both energy and
environmental attributes.
ENVIRONMENTAL REVIEW
Approval of this agreement does not meet the definition of a project under the California
Environmental Quality Act (CEQA), pursuant to Public Resources Code Section 21065. However,
the City intends to receive output from a project that will constitute a project for the purposes
of CEQA. The project developer will be responsible for acquiring necessary environmental
reviews and permits on the project to be developed.
During the development phase of the project, the PPA allows for the City to review the project
CEQA documents and the project's environmental impacts. If the City determines that the
project will have a si gnificant negative environmental impact, it can require HEPA to develop
and implement a remediation plan in order to mitigate these impacts.
ATTACHMENTS:
A. Resolution of the Counci l of the City of Palo Alto Approving a Long Term Power Purchase
Agreement with Hecate Energy Palo Alto LLC for the Purchase of Solar Electricity
B. Power Purchase Agreement with Hecate Energy Palo Alto LLC
PREPARED BY:
REVIEWED BY:
APPROVED BY:
~STACK, Senior Resource Planner
0~%:ant Director, Resource Management
EDSHIKADA
Assistant City Manager/Interim Director of Utilities
Page 15of15
* NOT YET APPROVED *
Resolution No. _________
Resolution of the Council of the City of Palo Alto Approving a Long
Term Power Purchase Agreement with Hecate Energy Palo Alto LLC
for the Purchase of Solar Electricity
A. On April 16, 2012, Council approved an update to the Long-term Electric
Acquisition Plan’s (LEAP) strategy related to the Renewable Portfolio Standard (RPS). The
updated strategy specifies that the City’s objective is to reduce the carbon intensity of the
electric portfolio by pursuing a minimum level of renewable purchases of at least 33 percent of
retail electricity sales by 2015 within a rate impact cap of 0.5 cents per kilowatt-hour.
B. On March 4, 2013, Council approved a Carbon Neutral Plan, which enabled the
City to achieve a carbon neutral electric supply portfolio starting in calendar year 2013.
C. On October 7, 2015, the Governor approved Senate Bill (“SB”) 350, which
requires that all retail sellers of electricity in California, including publicly-owned utilities, serve
50 percent of their retail electricity sales with renewable energy by 2030.
D. The City is interested in purchasing power generated by renewable resources for
the benefit of its electric customers.
E. By purchasing renewable energy resources, the City will help reduce the
production of greenhouse gases, will meet its RPS requirements under SB 350 and LEAP, and
will meet its Carbon Neutral Plan goals.
F. Hecate Energy Palo Alto LLC (“HEPA”) through its parent company, Hecate
Energy LLC, proposed its project, the Wilsona solar photovoltaic plant, in response to the City’s
Request for Proposals 156876 (“RFP”) in May 2015. Its proposal is highly competitive with
other RFP respondent proposals.
G. The execution of a power purchase agreement (“PPA”) with HEPA is anticipated
to enable the City to meet a seven and a half percent portion of its goal of sourcing at least 33
percent of its electric needs from renewable resources and its goal to implement the Carbon
Neutral Plan.
H. Under the terms of this PPA, the City is allocated a 100 percent share of the
power from HEPA’s solar project located in Los Angeles County, California, which will yield
approximately 26 megawatts of plant net output when completed.
I. The PPA is for a twenty-five year base contract term and will allow the City to
extend the PPA at its sole option for up to three additional five-year terms.
ATTACHMENT A
* NOT YET APPROVED *
J. The City’s participation in the Hecate Energy Palo Alto PPA may result in surplus
electric purchases that are inconsistent with the anti-speculation requirement of section D.1 of
the City’s existing Energy Risk Management Policy, due to variability of the City’s hydroelectric
resources, and potential uncertainties associated with the timeliness and viability of the
renewable energy projects in the City’s portfolio still under development.
The Council of the City of Palo Alto does RESOLVE as follows:
SECTION 1. The Council approves the power purchase agreement (PPA) between
Hecate Energy Palo Alto LLC, as seller, and the City of Palo Alto, as buyer. The delivery term of
the PPA is up to forty (40) years, commencing upon the commercial operation date of the
planned electric generation facility, which date is expected to be no later than June 1, 2021. The
City will receive a 100 percent share of the facility’s net output. Spending authority under the
PPA shall not exceed one hundred one million dollars ($101,000,000).
SECTION 2. The Council delegates to the City Manager, or his designee, the authority
to execute the PPA with Hecate Energy Palo Alto LLC on behalf of the City, and the authority to
execute any documents necessary to administer the PPA that are consistent with the Palo Alto
Municipal Code and City Council approved policies.
SECTION 3. As permitted by section 2.30.290 of the Palo Alto Municipal Code, the
Council delegates to the City Manager, or his designee, the authority to exercise the three
extension term options, to extend the twenty-five year base contract to a full forty year
contract term for the City.
SECTION 4. With respect to the Council’s award of the PPA referred to in Section 1
above, the Council waives the creditworthiness requirements of Palo Alto Municipal Code
section 2.30.340(c), as that requirement may apply to Hecate Energy Palo Alto LLC.
SECTION 5. With respect to the Council’s award of the PPA referred to in Section 1
above, the Council waives the anti-speculation requirement of Section D.1 of the City’s existing
Energy Risk Management Policy, as that requirement may apply to surplus electricity purchases
caused by the City’s participation in the PPA with Hecate Energy Palo Alto LLC.
SECTION 6. The Council’s approval of this PPA does not meet the definition of a
project under the California Environmental Quality Act (CEQA), pursuant to Public Resources
Code Section 21065. However, the City intends to receive output from a project that will
constitute a project for the purposes of CEQA. The project developer will be res ponsible for
acquiring necessary environmental reviews and permits on the project to be developed. During
the development phase of the project, the City will become a “responsible agency” under the
CEQA proceedings. As such, the PPA allows for the City to review the project CEQA documents
and issue a notice of determination with respect to its review of the projects. Staff anticipates
working with the City Attorney’s Office and the Planning Department to undertake this
assessment and make a determination.
* NOT YET APPROVED *
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Senior Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative
Services
Execution Version
POWER PURCHASE AGREEMENT
Between
The City of Palo Alto
(as “Buyer”)
and
Hecate Energy Palo Alto LLC
(as “Seller”)
Dated as of _______________, 2016
ATTACHMENT B
TABLE OF CONTENTS – Page i
TABLE OF CONTENTS
PREAMBLE ......................................................................................................................1
RECITALS ......................................................................................................................1
GENERAL TERMS AND CONDITIONS .................................................................................1
ARTICLE I: DEFINITIONS; RULES OF INTERPRETATION ...............................................1
1.1 Definitions. .........................................................................................................1
1.2 Rules of Interpretation. ...................................................................................... 17
ARTICLE II TERM, PURCHASE AND SALE ....................................................................... 18
2.1 Conditions Precedent to Commencement of Term of Agreement ....................... 18
2.2 Agreement Term, Delivery Term, Acceleration and Extension .......................... 18
2.3 Purchase and Sale of the Output ........................................................................ 20
2.4 Price.................................................................................................................. 21
2.5 Test Energy ....................................................................................................... 22
2.6 Environmental Attributes .................................................................................. 22
2.7 Resource Adequacy........................................................................................... 23
2.8 Tax Credits and Incentives. ............................................................................... 23
2.9 CEQA. .............................................................................................................. 24
2.10 Right of First Refusal for Expansion Plant and Expansion Plant Output . ........... 25
2.11 Refurbishment o f Plant...................................................................................... 26
ARTICLE III METERING AND BILLING ............................................................................. 27
3.1 Metering Requirements. .................................................................................... 27
3.2 Billing. .............................................................................................................. 28
3.3 Payment ............................................................................................................ 29
3.4 Billing Agent. ................................................................................................... 29
ARTICLE IV SELLER'S OBLIGATIONS............................................................................... 29
4.1 Development, Finance, Construction and Operation of the Plant . ...................... 29
4.2 General Obligations. ......................................................................................... 32
4.3 Construction Milestones. ................................................................................... 34
4.4 Milestone Excused Delay and Liquidated Damages........................................... 36
4.5 Obligation to Schedule and Deliver. .................................................................. 37
4.6 Output Obligations, Performance LDs and Buyer’s Right to Operate. ............... 40
ARTICLE V BUYER’S OBLIGATIONS ................................................................................ 42
5.1 Delivery and Transmission. ............................................................................... 42
5.2 Taxes. ............................................................................................................... 42
5.3 Notification of Transmission Outages. .............................................................. 42
ARTICLE VI FORCE MAJEURE ........................................................................................... 43
6.1 Remedial Action. .............................................................................................. 43
6.2 Notice. .............................................................................................................. 43
6.3 Termination Due To Force Majeure Event . ....................................................... 43
TABLE OF CONTENTS – Page ii
ARTICLE VII DEFAULT, REMEDIES AND TERMINATION ............................................ 44
7.1 Events of Default by Buyer. .............................................................................. 44
7.2 Events of Default by Seller................................................................................ 44
7.3 Termination for Default. ................................................................................... 45
7.4 Limitation of: Remedies, Liability and Damages. .............................................. 47
ARTICLE VIII REPRESENTATIONS AND WARRANTIES................................................. 48
8.1 Seller’s Representations and Warranties. ........................................................... 48
8.2 Buyer Representations and Warranties. ............................................................. 50
8.3 Covenants ......................................................................................................... 50
ARTICLE IX DEVELOPMENT, INTERIM AND PERFORMANCE ASSURANCE ............. 51
9.1 Grant of Security Interest/Remedies. ................................................................. 51
9.2 Development Assurance, Interim Assurance and Perfo rmance Assurance. ........ 52
9.3 Letter of Credit.................................................................................................. 54
ARTICLE X MISCELLANEOUS ........................................................................................... 56
10.1 Indemnification. ................................................................................................ 56
10.2 Assignment. ...................................................................................................... 57
10.3 Notices. ............................................................................................................. 58
10.4 Electronic Transmission .................................................................................... 59
10.5 Captions. ........................................................................................................... 59
10.6 No Third Party Beneficiary. .............................................................................. 59
10.7 No Dedication ................................................................................................... 59
10.8 Entire Agreement; Integration; Amendments..................................................... 59
10.9 Applicable Law. ................................................................................................ 60
10.10 Venue. .............................................................................................................. 60
10.11 Rule of Construction. ........................................................................................ 60
10.12 Attorneys’ Fees and Costs. ................................................................................ 60
10.13 Nature of Relationship. ..................................................................................... 61
10.14 Good Faith and Fair Dealing; Reasonableness. .................................................. 61
10.15 Severability. ...................................................................................................... 61
10.16 Confidentiality. ................................................................................................. 61
10.17 Cooperation. ..................................................................................................... 63
10.18 Audit. ................................................................................................................ 63
10.19 Mobile Sierra Doctrine. ..................................................................................... 63
10.20 Counterparts...................................................................................................... 63
10.21 Debt Liability Disclaimer. ................................................................................. 63
10.22 No Implied Waiver of Breach............................................................................ 64
SIGNATURE PAGE ................................................................................................................ 65
TABLE OF CONTENTS – Page iii
EXHIBITS
The following Exhibits constitute a part of this Agreement and are incorporated into this
Agreement by reference:
EXHIBIT A PLANT DESCRIPTION AND SITE DRAWINGS
EXHIBIT B ENVIRONMENTAL ATTRIBUTE TRANSFER FROM SELLER TO
BUYER
EXHIBIT C INSURANCE COVERAGES
EXHIBIT D SCHEDULING PROTOCOLS
EXHIBIT E-1 FORM OF MONTHLY PROGRESS REPORT
EXHIBIT E-2 COD CERTIFICATION
EXHIBIT F-1 FORM OF LETTER OF CREDIT
EXHIBIT F-2 FORM OF LENDER CONSENT AGREEMENT
EXHIIBT G EXPECTED ANNUAL ENERGY PRODUCTION
EXHIBIT H SELLER DOCUMENTATION CONDITIONS PRECEDENT
POWER PURCHASE AGREEMENT - Page 1 of 65
POWER PURCHASE AGREEMENT
PREAMBLE
This Power Purchase Agreement, together with the exhibits referenced herein, is made and entered
into as of the Execution Date, by and between the City of Palo Alto, a California chartered
municipal corporation (“Buyer”), and Hecate Energy Palo Alto LLC, a Delaware limited liability
company (“Seller”).
RECITALS
1. Seller intends to develop, finance, build, own and operate a solar photovoltaic electric
generating facility which shall obtain a Full Capacity Deliverability Status Finding from
the CAISO as described herein and be located at the Site.
2. Buyer is a municipal utility governed by the City of Palo Alto, by and through its Council,
which has all powers necessary and appropriate to a municipal corporation, including but
not limited to the authority granted by the City Charter, Article XI, Sec tion 9(a) of the
California Constitution, California Government Code Section 39732 and California Public
Utilities Code Section 10002, to establish, purchase, and operate public works to furnish its
inhabitants with electrical power. Under this authority, Buyer is engaged in the business of
delivering electricity to its residential and commercial customers in Palo Alto, California,
and buying electricity with the intention of routinely taking physical delivery.
3. Buyer wishes to purchase the Output of the Plant to meet Buyer’s needs at a known price
and timing and intends to resell related Energy to its residential and commercial customers.
4. Buyer is willing to purchase, and Seller is willing to sell, the Output of the Plant, on the
terms and conditions and at the prices set forth in this Agreement.
NOW THEREFORE, in consideration of the recitals above and the following covenants, terms
and conditions, the Parties agree:
GENERAL TERMS AND CONDITIONS
ARTICLE I: DEFINITIONS; RULES OF INTERPRETATION
1.1 Definitions.
The following initially capitalized terms, whenever used in this Agreement, have the meanings set
forth below unless the context of their use otherwise indicates or they are otherwise defined in
other sections of this Agreement.
AC: Alternating current.
POWER PURCHASE AGREEMENT - Page 2 of 65
Accelerated Contract Delivery Start Date Notice: Has the meaning set forth in Section 2.2(c).
Agreement: Means this Power Purchase Agreement between Buyer and Seller, which is
comprised of the Preamble, Recitals, these General Terms and Conditions, and all appendices,
schedules, exhibits and any written supplements attached hereto and incorporated herein by
reference, as well as all written and signed amendments and modifications thereto.
Ancillary Services: Has the meaning set forth in the CAISO Tariff.
Attorneys’ Fees: Means reasonable attorneys’ fees and costs, including at trial and on appeal,
including an amount equal to the fair market value of legal services provided by attorneys
employed by it as well as any attorneys’ fees paid to third parties.
Availability Standards: Means the program set forth in Section 40.9 of the CAISO Tariff, as it
may be amended, supplemented or replaced (in whole or in part) from time to time, setting forth
certain standards regarding the desired level of availability for Resource Adequa cy resources and
possible charges and incentive payments for performance thereunder.
Bankrupt: Means with respect to any entity, such entity (a) files a petition or otherwise
commences, authorizes or acquiesces in the commencement of a proceeding or cause of action
under any bankruptcy, insolvency, reorganization or similar Law, or has any such petition filed or
commenced against it and such case filed against it is not dismissed in sixty (60) calendar days, (b)
makes an assignment or any general arrangeme nt for the benefit of creditors, (c) otherwise
becomes bankrupt or insolvent (however evidenced), (d) has a liquidator, administrator, receiver,
trustee, conservator or similar official appointed with respect to it or any substantial portion of its
propert y or assets, or (e) is generally unable to pay its debts as they fall due.
Battery Storage Facility: Has the meaning set forth in Section 2.12.
Battery Storage Facility Request: Has the meaning set forth in Section 2.12.
Business Day: Means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday and
shall be between the hours of 8:00 a.m. and 5:00 p.m. local time for the relevant Party’s principal
place of business where the relevant Party, in each instance unless otherwise specified, shall be the
Party from whom the notice, payment or delivery is being sent and by whom the notice or payment
or delivery is to be received.
Buyer: Has the meaning in the Preamble, and any successor or permitted assignee.
CAISO: The California Independent System Operator Corporation, or its functional successor.
CAISO Tariff: The California Independent System Operator Corporation, Fifth Replacement
FERC Electric Tariff, as it may be amended, supplemented or replaced (in whole or in part) from
time to time.
Calculation Period: Means successive periods consisting of two (2) consecutive Contract Years
with the first Calculation Period commencing on the Contract Delivery Start Date, and with each
POWER PURCHASE AGREEMENT - Page 3 of 65
subsequent Calculation Period commencing on the twelve (12) month anniversary of the
commencement of the prior Calculation Period.
Calculation Period Deemed Delivered Energy Production: For each Calculation Period, an
amount expressed in MWh equal to the sum of (i) the total Output delivered by Seller to the Point
of Interconnection in such Calculation Period, plus (ii) the Seller Excused Energy Amount for such
Calculation Period.
Calculation Period Expected Energy Production : Means an amount expressed as MWh equal
to the sum of the Expected Annual Energy Production for the relevant two Contract Years during
each Calculation Period.
Capacity Attributes: Means any current or future defined characteristic (including the ability to
generate at a given capacity level, provide Ancillary Services, and ramp up or ramp down at a
given rate), certificate, tag, credit, flexibility, or dispatchability attribute, whether general in nature
or specific as to the location or any other attribute of t he Plant, intended to value any aspect of the
capacity of the Plant to produce any and all Output, including any accounting construct so that the
maximum amount of Initial Capacity of the Plant may be counted toward Resource Adequacy
Requirement s or any ot her measure by the CPUC, the CAISO, the FERC, or any other entity
invested with the authority under federal or state Law, to require Buyer to procure, or to procure at
Buyer’s expense, Resource Adequacy or other such Output.
CARB: Means the California Air Resources Board or any successor agency.
CEC: Means the California Energy Resources Conservation and Development Commission or
any successor agency.
CEC Certification and Verification: Means that the CEC has certified (or, with respect to
periods before the Plant has commenced commercial operation (as such term is defined by and
according to the CEC), that the CEC has pre-certified) that the Plant is an ERR for purposes of the
Califor nia Renewables Portfolio Standard and that all Output produced by the Plant qualifies as
generation from an ERR for purposes of the Plant.
CEQA: The California Environmental Quality Act , as it may be amended from time to time.
Change in Law: The enactment or issuance of any new Law, the amendment, alteration,
modification or repeal of any existing Law or any authoritative interpretation of any existing Law
issued by a competent court, tribunal or Governmental Authority contrary to the existing official
interpretation thereof, in each case coming into effect after the Execution Date and which must be
complied with in order for the Plant to be constructed and operated lawfully.
COD Certification: Seller’s certification of Commercial Operation in the form set forth as
Exhibit E-2, duly executed by Seller and its Licensed Professional Engineer.
Commercial Operation: The condition of the Plant whereby it is operating and able to produce
and deliver the Output to Buyer pursuant to the terms of this Agreement.
POWER PURCHASE AGREEMENT - Page 4 of 65
Commercial Operation Date: The date upon which Seller delivers the COD Certification to
Buyer in accordance with Section 4.3(d) and thereby notifies Buyer that Commercial Operation
has commenced.
Commercial Operation Milestone: Has the meaning set forth in Section 4.3(b)(vi).
Condition Precedent: Means each of, or one of, the conditions set forth in Section 2.1(a)(i)
through (iii), and “Conditions Precedent” shall refer to all of the conditions set forth in Section
2.1(a)(i) through (iii).
Conditional Use Permit a permit approving the conditional use for the development,
construction and operation of the Plant required and by any Governmental Authority..
Conditional Use Permitting Milestone: Has the meaning set forth in Section 4.3(b)(ii).
Confidential Information: Has the meaning set forth in Section 10.16(a).
Construction Milestone: Has the meaning set forth in Section 4.3(b)(v).
Construction Start Date: The date on which Seller delivers to Buyer a copy of the Notice to
Proceed that Seller has delivered to the EPC Contractor for the Plant.
Contract Delivery Start Date: Has the meaning set forth in Section 2.2(b)(i), or, if accelerated,
the meaning set forth in Section 2.2(c).
Contract Year: A period of twelve (12) consecutive months, with the first Contract Year
commencing at 12:00 a.m. on the Contract Delivery Start Date, and each subsequent Contract Year
commencing on the twelve (12) month anniversary of the Contract Delivery Start Date.
Contractual Obligations: As to Seller, any material agreement, instrument or undertaking to
which Seller is a party or by which it or any of its Plant property is bound.
Costs: With respect to a Non-Defaulting Party, (a) brokerage fees, commissions and other similar
third party transaction costs and expenses reasonably incurred by such Party either in terminating
any arrangement entered into pursuant to this Agreement or entering into new arrangements which
replace this Agreement and (b) all Attorneys’ Fees incurred by the Non-Defaulting Party in
connection with the termination of this Agreement.
CPRA: Has the meaning set forth in Section 10.16(a).
CPUC: Means the California Public Utilities Commission or any successor entity.
Credit Rating: Means, with respect to any entity, (a) the rating then assigned to such entity’s
unsecured senior long-term debt obligations (not supported by third party credit enhancements) or
(b) if such entity does not have a rating for its unsecured senior long-term debt obligations, then the
rating assigned to such entity as an issuer rating by S&P and/or Moody’s. If the entity is rated by
both S&P and Moody’s and such ratings are not equivalent, the lower of the two ratings shall
POWER PURCHASE AGREEMENT - Page 5 of 65
determine the Credit Rating. If t he entity is rated by either S&P or Moody’s, but not both, then t he
available rating shall determine the Credit Rating.
Cure: Has the meaning set forth in Section 9.3(b).
DA Price: The resource specific locational marginal price (“LMP”) applied to the PNode
applicable to the Plant in the CAISO Day-Ahead Market.
Daily LD Amount: For each day or portion of a day for which delay liquidated damages are
payable under Section 4.4(b), an amount equal to the total amount of Development Assurance
required hereu nder divided by 365.
Damage Payment: Means (a) the dollar amount to be posted as Development Assurance pursuant
to Section 9.2(a)(i) hereof, less (b) amounts collected by Buyer as the Daily LD Amount pursuant
to Section 4.4(b), if any.
Day-Ahead Market: Has the meaning set forth in the CAISO Tariff.
Defaulting Party: Means the Party that is subject to an Event of Default.
Delivery Term: Has the meaning set forth in Section 2.2(b)(i), or if extended, the meaning set
forth in Section 2.2(d).
Development Assurance: Means the collateral provided by Seller to Buyer to secure Seller’s
obligations hereunder in accordance with Sect ion 9.2(a)(i) of this Agreement.
Development Progress Report: Means the report similar in form and content attached hereto as
Exhibit E-1.
Discretionary Curtailment: Has the meaning set forth in Section 4.5(c)(ii)(A).
Dispatch Down Period: The period of curtailment of delivery of Output from the Plant that is not
Discretionary Curtailment and results from:
(a) A curtailment ordered by the CAISO (whether directly or through a Scheduling
Coordinator or the Participating Transmission Owner), for any reason, including,
but not limited to, any System Emergency, any warning of an anticipated System
Emergency, or any war ning of an imminent condition or situation which could
jeopardize the CAISO’s or Participating Transmission Owner’s electric system
integrity or the integrity of other systems to which the CAISO or the Participating
Transmission Owner is connected;
(b) A curtailment ordered by the Participating Transmission Owner or distribution
operator (if interconnected to distribution or sub-transmission system) for any
reason, including but not limited to, (i) any situation that affects normal function of
the electric system including, but not limited to any abnormal condition that
requires action to prevent circumstances such as equipment damage, loss of load, or
abnormal voltage conditions, (ii) any warning, forecast or anticipation of
POWER PURCHASE AGREEMENT - Page 6 of 65
conditions or situations that jeopardize the Participating Transmission Owner’s
electric system integrity or the integrity of other systems to which the Participating
Transmission Owner is connected; or (iii) as a result of scheduled or unscheduled
maintenance or construction on the Participating Transmission Owner’s
transmission facilities or distribution operator’s facilities that prevents the delivery
or receipt of Output to or at the Point of Interconnection; or
(c) A curtailment in accordance with Seller’s obligations under its Interconnection
Agreement with the Participating Transmission Owner or distribution operator;
provided, that any of the foregoing events (a) through (c) shall not have been solely
caused by the acts or omissions of Buyer.
Distribution Upgrades: Has the meaning set forth in the CAISO Tariff.
EA Agency: Any local, state or federal entity, or any other Person, that has responsibility for or
jurisdiction over a program involving transferability of Environmental Attributes, including,
without limitation, the Clean Air Markets Division of the United States Environmental Protection
Agency (together with any successor agency, the “EPA”), the CEC, the CPUC, CARB, and any
successor commission or agency thereto.
Early Termination Date: Has the meaning set forth in Section 7.3(a)(i).
Electric System Upgrades: Means any Network Upgrades, Distribution Upgrades, or
Interconnection Facilities that are determined to be necessary by the CAISO or Participating
Transmission Owner, as applicable, to physically and electrically interconnect the Plant to the
Participating Transmission Owner’s electric system for receipt of Energy a t the Point of
Interconnection.
Eligible Intermittent Resource: Has the meaning set forth in the CAISO Tariff.
Eligible Intermittent Resource Protocols or EIRP: Has the meaning set forth in the CAISO
Tariff, including but not limited to Appendix Q attached thereto.
Eligible LC Bank: Means either a U.S. commercial bank, or a foreign bank issuing a Letter of
Credit through its U.S. branc h; and in each case the issuing U.S. commercial bank or foreign bank
must be acceptable to Buyer in its sole discretion and such bank must have a Credit Rating of at
least: (a) “A-, with a stable designation” from S&P and “A3, with a stable designation” from
Moody’s, if such bank is rated by both S&P and Moody’s; or (b) “A-, with a stable designation”
from S&P or “A3, with a stable designation” from Moody’s, if such bank is rated by either S&P or
Moody’s, but not both, even if such bank was rated by both S &P and Moody’s as of the date of
issuance of the Letter of Credit but ceases to be rated by either, but not both of those ratings
agencies.
Eligible Renewable Energy Resource: Has the meaning set forth in California Public Utilities
Code Section 399.12 and California Public Resources Code Section 25741, as either code
provision is amended or supplemented from time to time.
POWER PURCHASE AGREEMENT - Page 7 of 65
Energy: Means three-phase, 60-cycle alternating current electric energy measured in MWh and
net of auxiliary loads and station electrical uses (unless otherwise specified). For purposes of the
definition of “Environmental Attributes”, the word “energy” shall have the meaning set forth in
this definition.
Environmental Attributes: Any and all credits, benefits, emissions reductions, offsets, and
allowances, howsoever entitled, attributable to the generation from the Plant or Expansion Plant(s)
(to the extent of sales to Buyer of Expansion Plant Output pursuant to Section 2.10), and its
displacement of conventional energy generation. Environmental Attributes include, without
limitation, Renewable Energy Credits, and all of the following: (a) any avoided emissions of
pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon
monoxide (CO) and other pollutants; (b) any avoided emissions of carbon dioxide (CO2), methane
(CH4) and other greenhouse gases (GHGs) that have been determined by the United Nations
Intergovernmental Panel on Climate Change to contribute to the actual or potential threat of
altering the Earth’s climate by trapping heat in the atmosphere; and (c) the reporting rights to these
avoided emissions such as Environmental Attributes Reporting Rights.
Environmental Attributes Reporting Rights: The rights of a purchaser of Environmental
Attributes to report the ownership of accumulated Environmental Attributes in compliance with
federal or state law, if applicable, and to a federal or state agency or any ot her party at the
discretion of the Environmental Attributes’ purchaser, and include without limitation those
Environmental Attribute Reporting Rights accruing under Section 1605(b) of the Energy Policy
Act of 1992 and any present or future federal, state, or local law, regulation or bill, and
international or foreign emissions trading program. Environmental Attributes are accumulated on
a kWh basis and one Environmental Attribute represents the amount of Environmental Attributes
associated with one (1) MWh of Energy. Environmental Attributes do not include (i) any Energy,
capacity, reliability or other power attributes from the Plant or Expansion Plant(s), if any, or (ii)
tax credits associated with the construction or operation of the Plant, Expansion Plant (s), if any, or
any other associated contract or right, and other financial incentives in the form of credits, rebates,
reductions, or allowances associated with the Plant, Expansion Plant(s), if any, or any other
associated contract or right, that are applicable to a state or federal income taxation obligation.
Environmental Laws: Any and all federal, state and local laws, including statutes, regulations,
rulings, orders, administrative interpretations and other governmental restrictions and
requirements relating to the discharge of air pollutants, water pollutants or process waste water or
otherwise relating to the environment or hazardous substances, as amended from time to time.
EPA: Has the meaning set forth in the definition of EA Agency.
EPC Cont ract: The Seller’s engineering, procurement and construction contract with the EPC
Contractor.
EPC Contractor: An engineering, procurement, and construction contractor, or if not utilizing an
engineering, procurement, and construction contractor, the ent ity having lead responsibility for the
management of overall construction activities, selected by Seller, with substantial experience in
the engineering, procurement, and construction of utility-scale solar photovoltaic power plants.
POWER PURCHASE AGREEMENT - Page 8 of 65
ERR: Has the meaning set forth in the definition of Eligible Renewable Energy Resource.
Event of Default: Has the meanings set forth in Section 7.1 as to Buyer, and Section 7.2 as to
Seller.
Execution Date: Means the date on which all of the Conditions Precedent set forth in Section
2.1(a) have been satisfied or waived in writing by both Parties.
Expansion Plant: Any expansion of the Plant from its Initial Capacity, or any other electricity
generating facility owned or controlled by Seller or its affiliates, located at the Site. Each such
expansion of the Plant or additional facility shall be deemed to be an “Expansion Plant.”
Expansion Plant Output: All capacity, Output, associated Environmental Attributes, Ancillary
Services, contributions towards Resource Adequacy or reserve requirements (if any) and any other
reliability or power attributes produced by Seller at any Expansion Plant.
Expected Annual Energy Production: Means an amount expressed as MWh equal to the
expected Energy associated with the Output to be produced by the Plant based on its Expected
Initial Capacity for each Contract Year during the Delivery Term, including degradation, as set
forth on Exhibit G.
Expected Initial Capacity: Has the meaning set forth in Section 2.3(c)(i).
Extended Delivery Term: Has the meaning set forth in Section 2.2(d).
Extended Delivery Term Option Exercise Notice: Has the meaning set forth in Section 2.2(d).
FCDS Finding Milestone: Has the meaning set forth in Section 4.3(b)(vii).
FERC: The Federal Energy Regulatory Commission and any successor organization.
Financing Milestone: Has the meaning set forth in Section 4.3(b)(iv).
Force Majeure Event: Any act, event or circumstance that wholly or partly delays or prevents a
Party from timely performing obligations under this Agreement or from complying with
conditions required under this Agreement , only to the extent that such act, event or circumstance is
(x) reasonably unforeseeable, (y) directly or indirectly beyond the reasonable control of and
without the fault or negligence of, or caused by, the Party relying thereon as justification for such
delay, nonperformance, or noncompliance, and (z) the Party seeking to have its performance
obligation(s) excused thereby has taken all reasonable precautions and measures in order to
prevent or avoid such event or mitigate the effect of such event on such Party’s ability to perform
its obligations under this Agreement and which by the exercise of due diligence such Party could
not reasonably have been expected to avoid and has been unable to overcome.
(a) Subject to the foregoing, events that could qualify as Force Majeure Events include
the following:
POWER PURCHASE AGREEMENT - Page 9 of 65
(i) acts of God or the elements, extreme or severe weather conditions,
explosion, fire, epidemic, landslide, mudslide, sabotage, lightning,
earthquake, flood or similar cataclysmic event ;
(ii) war (declared or undeclared), blockade, civil insurrection, riot, civil
disturbance, acts of the public enemy (including acts of terrorism),
sabotage, revolution, expropriation or confiscation;
(iii) except in the case of (b)(vii) below, strike, work stoppage or other labor
dispute or difficulty caused or suffered by a Party (in which case the
affected Party shall have no obligation to settle the strike or labor dispute on
terms it deems unreasonable);
(iv) any restraint or restriction imposed by Law or other acts or omissions of
Governmental Authorities, whether federal, st ate or local, which by the
exercise of due diligence and in compliance with applicable Law a Party
could not reasonably have been expected to avoid and to the extent which,
by exercise of due diligence and in compliance with applicable Law, such
Party has been unable to overcome (so long as the affected Party has not
applied for or assisted such act by a Governmental Authority);
(v) emergencies declared by the Transmission Provider or any other authorized
successor or regional transmission organization or any state or federal
regulator or legislature requiring a forced curtailment of the Plant or making
it impossible for the Transmission Provider to transmit Energy, including
Energy to be delivered pursuant to this Agreement; provided that, if a
curtailment of the Plant pursuant to this subsection (a)(v) would also meet
the definition of a Dispatch Down Period, then it shall be treated as a
Dispatch Down Period for purposes of this Agreement; or
(b) A “Force Majeure Event” shall not include:
(i) economic conditions that render a Party’s performance of this Agreement at
the Price unprofitable or otherwise uneconomic (including Buyer’s ability
to buy Energy or Environmental Attributes at a lower price, or Seller’s
ability to sell Energy or Environmental At tributes at a higher price, than the
Price);
(ii) a governmental act by Buyer that delays or prevents Buyer from timely
performing its obligations under this Agreement;
(iii) a Plant equipment failure, except where such failure is caused by a Force
Majeure Event of the specific type described in any of subsections (a)(i)
through (a)(v) above;
(iv) failure or delay in grant of Permits or approvals of any type for the
construction, operation or maintenance of the Plant , except where such
POWER PURCHASE AGREEMENT - Page 10 of 65
failure is caused by a Force Majeure Event of the specific type described in
any of subsections (a)(i) through (a)(v) above ;
(v) Discretionary Curtailment;
(vi) failures or delays by the Participating TO and/or the CAISO in entering
into, or performing under, any agreements with Seller contemplated by this
Agreement;
(vii) a strike, work stoppage or labor dispute limited only to any one or more of
Seller, Seller’s affiliates, the EPC Contractor or subcontractors thereof or
any other third party employed by Seller to work on the Plant;
(viii) a Party’s inability to pay amounts due to the other Party under this
Agreement, except if such inability is caused solely by a Force Majeure
event that disables physical or electronic facilities necessary to tr ansfer
funds to the payee Party;
(ix) Seller’s failure to obtain additional funds, including funds authorized by a
state or the federal government or agencies thereof, to supplement the
payments made by Buyer pursuant to this Agreement;
(x) Seller’s inability to obtain sufficient fuel, power or mat erials to operate the
Plant, except where such failure is caused by a Force Majeure Event of the
specific type described in any of subsections (a)(i) through (a)(v) above ;
(xi) a Forced Outage except where such Forced Outage is caused by an event of
Force Majeure of the specific type described in any of subsections (a)(i)
through (a)(v) above; or
(xii) a failure to complete, or a delay in completing, interconnection or Electric
System Upgrades by the Commercial Operation Milestone, including by
any third party.
Forecasting Service: Has the meaning set forth in Section 4.5(d).
Forced Outage: Means any unplanned reduction or suspension of the electrical output from the
Plant or unavailability of the Output in whole or in part from a unit in response to a mechanical,
electrical, or hydraulic control system trip or operator -initiated trip in response to an alarm or
equipment malfunction and any other unavailability of a unit for operation, in whole or in part, for
maintenance or repair that is not a Planned Outage and not the result of Force Majeure.
FPA: Has the meaning set forth in Sectio n 8.1(c)(i).
Full Capacity Deliverability Status or FCDS: Has the meaning set forth in the CAISO Tariff.
Full Capacity Deliverability Status Finding or FCDS Finding: A written confirmation from
the CAISO that the Plant is eligible for FCDS.
POWER PURCHASE AGREEMENT - Page 11 of 65
GAAP or Generally Accepted Accounting Principles: Means the standards for accounting and
preparation of financial statements established by the Federal Accounting Standards Advisory
Board (or its successor agency) or any successor standards adopted pursuant to relevant Securities
Exchange Commission rule.
Gains: With respect to any Party, an amount equal to the present value of the economic benefit to
it, if any (exclusive of Costs), resulting from the termination of the Agreement for the remainder of
the Term, determined in a commercially reasonable manner, subject to Section 7.3 hereof. Factors
used in determining economic benefit may include reference to information either available to it
internally or supplied by one or more third parties, including quotations (either firm or indicative)
of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in
the relevant markets, market price referent, market prices for a comparable transaction, forward
price curves based on economic analysis of the relevant markets, settlement prices for a
comparable transaction at liquid trading hubs (e.g., NYMEX), all of which should be calculated
for the remainder of the Term to determine the value of the Output.
Governmental Authority: Any federal or state government, or political subdivision thereof,
including, without limitation, any municipality, township or county, or any entity or authority
exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to
government, including, without limitation, any corporation or other entity owned or controlled by
any of the foregoing.
Incentives: Any and all tax credits, including Section 45 Credits and Section 48 Credits,
deductions, allowances, depreciation and exemptions applicable to federal, state and local taxes
and any other payment, credit, deduction, benefit, grant or monetary incentive provided by any
federal, state or local Governmental Authority or any Person, whether now in effect or arising in
the future, in each case arising from the activities contemplated by this Agreement, including any
“Renewable Energy Production Incentive Payments” from the U.S. Department of Energy and any
“Energy Investment Tax Credit” described in Section 48 of t he Internal Revenue Code of 1986, as
it may be amended or supplemented from time to time. Notwithstanding the foregoing, Incentives
shall not include anything that qualifies as Output (including any Environmental Attributes).
Indemnified Party: Has the meaning set forth in Section 10.1(b).
Indemnifying Party: Has the meaning set forth in Section 10.1(b).
Ineligible LC Bank: Has the meaning set forth in Section 9.3(c)(i)(A).
Ineligible LC Bank Notice Period: Has the meaning set forth in Section 9.3(c)(i).
Initial Capacity: Has the meaning set forth in Section 2.3(c)(ii).
Interconnection Agreement: The agreement and associated documents (or any successor
agreement and associated documentation) by and among Seller, the Participating TO and the
CAISO governing the terms and conditions of Seller’s interconnection with the CAISO grid,
including any description of the plan for interconnection of the Plant to the Participating TO’s
system.
POWER PURCHASE AGREEMENT - Page 12 of 65
Interconnection Agreement Milestone: Has the meaning set forth in Section 4.3(b)(i).
Interconnection Facilities: Has the meaning set forth in the CAISO Tariff.
Interim Assurance: The collateral provided by Seller to Buyer to secure Seller’s obligations
hereunder in accordance with Section 9.2(a)(ii) of this Agreement.
kWh: Means kilowatt -hour (AC).
Law: Means any statute, law, treaty, rule, regulation, CEC guidance document, ordinance, code,
permit, enactment, injunction, order, writ, decision, authorization, judgment, decree or other legal
or regulatory determination or restriction by a court or Governmental Authority of competent
jurisdiction, including any of the foregoing that are enacted, amended, or issued after the
Execution Date, and which becomes effective after the Execution Date; or any binding
interpretation of the foregoing.
LC Notice: Has the meaning set forth in Section 9.3(c).
Local Capacity Area: Has the meaning set forth in the CAISO Tariff.
Lender(s): Any Person(s) providing money or extending credit (including any capital lease) to
Seller, including in the form of debt or tax equity, for (a) the construction of the Plant, (b) the term
or permanent financing of the Plant, or (c) working capital or other ordinary business requirements
for the Plant. “Lender(s)” shall not include any trade creditor(s) of Seller.
Letter of Credit: Means an irrevocable, non-transferable standby letter of credit issued by Wells
Fargo, N.A., or other banking institution acceptable to Buyer in its sole discretion, the form of
which must be substantially as contained in Exhibit F-1 to this Agreement; provided, that, if the
issuer is a U.S. branch of a foreign commercial bank, Buyer may require changes to such form, the
issuer must be an Eligible LC Bank on the date of Transfer, and the issuing Letter of Credit amount
may not be greater than the Maximum Issuing Amount if the total amount of collateral posted by
the Seller in the form of Letter of Credit exceeds ten million dollars ($10,000,000.00) on the date
of Transfer.
Licensed Professional Engineer: Means a Person acceptable to Buyer in its reasonable judgment
who (a) is licensed to practice engineering in California, (b) has training and experience in the
power industry specific to the technology of the Plant, (c) has no economic relationship,
association, or nexu s with Seller or Buyer, other than to meet the obligations of Seller pursuant to
this Agreement, (d) is not a representative of a consultant, engineer, contractor, designer or other
individual involved in the development of the Plant or of a manufacturer o r supplier of any
equipment installed at the Plant, and (e) is licensed in an appropriate engineering discipline for the
required certification being made.
LMP: Has the meaning set forth in the definition of DA Price.
Losses: With respect to any Party, an amount equal to the present value of the economic loss to it,
if any (exclusive of Costs), resulting from the termination of this Agreement for the remainder of
the Term, determined in a commercially reasonable manner , subject to Section 7.3 hereof. Factors
POWER PURCHASE AGREEMENT - Page 13 of 65
used in determining the loss of economic benefit may include reference to information either
available to it internally or supplied by one or more third parties, including quotations (either firm
or indicative) of relevant rates, prices, yields, yiel d curves, volatilities, spreads or other relevant
market data in the relevant markets, market price referent, market prices for a comparable
transaction, forward price curves based on economic analysis of the relevant markets, settlement
prices for a comparable transaction at liquid trading hubs (e.g. NYMEX), all of which should be
calculated for the remainder of the Term to determine the value of the Output. If the
Non-Defaulting Party is the Seller, then in addition to lost payments for Output pursuant to this
Agreement, “Losses” shall exclude any associated loss of investment tax credits and other lost tax
benefits.
Maximum Issuing Amount: Means the amount of a Letter of Credit to be issued by an Eligible
LC Bank, which cannot exceed the lesser of (a) sixty percent (60%) of the total collateral posted by
Seller in the form of Letter of Credit including the Letter of Credit to be issued or (b) twenty-five
million dollars ($25,000,000.00), without Buyer’s prior written consent.
Milestones: Means the key development activities required for the construction and operation of
the Plant, as set forth more particularly in Section 4.3(a).
MW: Megawatt (AC).
MWh: Megawatt-hour (AC).
Network Upgrades: Has the meaning set forth in the CAISO Tariff.
Non-Defaulting Party: Has the meaning set forth in Section 7.3(a).
Notice to Proceed: The full notice to proceed provided by Seller to the EPC Contractor following
execution of the EPC Contract between Seller and such EPC Contractor and satisfaction of all
conditions to performance of such contract, by which Seller authorizes such EPC Contractor to
begin construction of the Plant without any delay or waiting periods.
Output: The capacity, Energy, Environmental Attributes, Ancillary Services, contributions
towards Resource Adequacy, reserve requirements (if any), and any and all other reliability or
power attributes which are or can be produced by or associated with the Plant .
Overproduction Energy Price: Has the meaning set forth in Section 2.4(a).
Participating Intermittent Resource: Has the meaning set forth in the CAISO Tariff.
Participating TO or Participating Transmission Owner: An entity that (a) owns, operates and
maintains transmission lines and associated facilities and/or has entitlements to use certain
transmission lines and associated facilities, and (b) has transferred to the CAISO operat ional
control of such facilities and/or entitlements to be made of the CAISO Grid. For purposes of this
Agreement, the Participating TO is Southern California Edison.
Participating TO System: The transmission system owned by the Participating TO.
POWER PURCHASE AGREEMENT - Page 14 of 65
Parties: Buyer and Seller, and their respective successors and permitted assignees.
Party: Buyer or Seller, and each such Party’s respective successors and permitted assignees.
Performance Assurance: The collateral provided by Seller to Buyer to secure Seller’s
obligations hereunder in accordance with Section 9.2(a)(iii) of this Agreement.
Performance LDs: Has the meaning set forth in Section 4.6(b).
Permits: All material federal, state or local authorizations, certificates, certifications,
pre-certifications, permits, licenses and approvals required by any Governmental Authority for the
construction, ownership, operation and maintenance of the Plant, other than the Conditional Use
Permit .
Permitting Milestone: Has the meaning set forth in Section 4.3(b)(iii).
Person: An individual, partnership, corporation, business trust, limited liability company, joint
stock company, trust, unincorporated association, joint venture, Governmental Authority or other
entity.
Planned Outage: Means the removal of equipment from service availability for inspection and/or
general overhaul of one or more major equipment groups. To qualify as a Planned Outage, the
maintenance (a) must actually be conducted during the Planned Outage, and in Seller’s sole
discretion must be of the type that is necessary to reliably maintain the Plant, (b) cannot be
reasonably conducted during Plant operations, and (c) causes the generation level of the Plant to be
reduced by at least ten percent (10%) of the Initial Capacity.
Plant: The power generation facilities to be constructed, owned and operated by Seller located on
the Site for the generation and delivery of electricity, including the step -up transformer, revenue
quality meter and all other facilities up to the Point of Interconnection, but not including any
Expansion Plant.
PNode: Has the meaning set forth in the CAISO Tariff.
Point of Interconnection: The point on the electrical system where the Plant is physically
interconnected with the Participating TO System, which is anticipated to be at the Wilsona
Substation.
Pre-FCDS Energy Price: Has the meaning set forth in Section 2.4(b).
Price: The price set forth in Section 2.4.
Project: Has the meaning set forth in Section 2.9(c)(i).
Prudent Utility Practice: Has the meaning in the CAISO Tariff.
QF: Has the meaning set forth in Section 8.1(c)(1).
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Real-Time Market: Has the meaning set forth in the CAISO Tariff.
REC or Renewable Energy Credit: Has the meaning set forth in California Public Utilities Code
Section 399.12(h) and CPUC Decision 08-08-028, as may be amended from time to time or as
further defined or supplemented by applicable law.
Report Period means the interval between dates when Seller must deliver each Development
Progress Report to Buyer according to Section 4.3(c)(i)-(iii), as applicable.
Requirements of Laws: Collectively, any federal, state or local law, treaty, franchise, rule or
regulation, or any order, writ, judgment, injunction, decree, award or determination of any
arbitrator or court or other Governmental Authority, in each case applicable to or binding upon
Seller or Buyer or any of its property or to which Seller or Buyer or any of its respective properties
are subject.
Resource Adequacy: Means an obligation of load serving entities, including Buyer, that requires
Buyer to procure a certain amount of electric generating capacity.
Resource Adequacy Requirements: Has the meaning set forth in Section 2.7(a).
SCADA: Has the meaning set forth in Section 3.1.
Scheduling Coordinator: Means a qualified entity designated by Buyer to provide the
Scheduling Coordinator Functions for the Plant pursuant to this Agreement.
Scheduling Coordinator Functions: Means the functions specified in “Responsibilities of a
Scheduling Coordinator” of the CAISO Tariff undertaken by an entity certified by the CAISO as
qualifying as a Scheduling Coordinator pursuant to the CAISO Tariff.
Section 45 Credits: Those tax credits available u nder Section 45 of Subtitle A, Chap. 1A, Part IV
of the Internal Revenue Code of 1986, as amended, or any other similar state, federal or local tax
credits, deductions, payments or benefits arising from the generation and sale of electricity using
qualifying renewable resources, not including any Environmental Attributes.
Section 48 Credits: Those tax credits available under Section 48(a)(3)(A)(i) and 48(a)(5) of the
Internal Revenue Code of 1986, as amended, or any other similar state, federal or local t ax credits,
deductions, payments or benefits arising from the investment in qualifying energy properties, not
including any Environmental Attributes.
Seller: Has the meaning in the Preamble, and any successor or permitted assignee.
Seller Excused Energy Amount: Means, for each Calculation Period, an amount expressed in
MWh, equal to the aggregate amount of reduction(s) in delivered Output during such Calculation
Period as a result of Dispatch Down Periods, Discretionary Curtailment, Force Majeure Events,
Buyer’s breach or default hereunder or failure to accept delivered Output, or Forced Outages to the
local transmission or distribution system.
POWER PURCHASE AGREEMENT - Page 16 of 65
Seller Execution: Means the date an authorized representative of Seller duly executes this
Agreement as evide nced by the date set forth next to its signature on the Signature Page hereof.
Seller’s Parent: Means Hecate Energy, LLC
Shortfall: Has the meaning set forth in Section 4.6(b).
Site: The description of the Plant and Site Drawings as described on Exhibit A.
Site Drawings: Has the meaning set forth on Exhibit A.
Substitute Bank Period: Has the meaning set forth in Section 9.3(c).
Substitute Letter of Credit : Has the meaning set forth in Section 9.3(c).
System Emergency: Has the meaning set forth in the CAISO Tariff.
Term: Has the meaning set forth in Section 2.2(a).
Termination Payment: Means, with respect to the Non-Defaulting Party, the sum of (a) the
Losses or Gains, and Costs, which such Party incurs as a result of the termination of this
Agreement pursuant to Section 7.3, plus (b) the sum of all amounts then owed to the
Non-Defaulting Party by the defaulting Party determined as of the Early Termination Date.
Test Energy: Output (to the extent available) generated by the Plant and delivered to the Point of
Interconnection prior to the Contract Delivery Start Date.
Transfer: Means with respect to Letters of Credit the delivery of the Letter of Credit conforming
to the requirement s of this Agreement, by Seller or an Eligible LC Bank to Buyer or delivery of an
executed amendment to such Letter of Credit (extending the term or varying the amount available
to Buyer thereunder, if acceptable to Buyer) by Seller or Eligible LC Bank to B uyer.
Two Year Minimum Production Threshold: For each Calculation Period, an amount expressed
in MWhs equal to eighty percent (80%) of the Calculation Period Expected Energy Production for
such Calculation Period. For the avoidance of doubt, an example of the Two Year Minimum
Production Threshold is the sum of 80% of the Calculation Period Expected Energy Production for
the first Contract Year of such Calculation Period plus 80% of the Calculation Period Expected
Annual Energy Production for the second Contract Year of such Calculation Period.
Watch: Has the meaning set forth in Section 9.3(c).
WREGIS: The Western Renewable Energy Generation Information System, or any successor
renewable energy tracking program.
POWER PURCHASE AGREEMENT - Page 17 of 65
1.2 Rules of Interpretation.
The following rules of interpretation shall apply in addition to those set forth in Sections 10.3,
10.4, 10.5, 10.6, 10.8, 10.11, 10.13, 10.14, 10.15, 10.17, 10.20 and 10.22:
(a) The term “month” shall mean a calendar month unless otherwise ind icated, and a
“day” shall be a 24-hour period beginning at 12:00:01 a.m. Pacific Prevailing Time
and ending at 12:00:00 midnight Pacific Prevailing Time; provided that a “day”
may be 23 or 25 hours on those days on which daylight savings time begins and
ends.
(b) Unless otherwise specified herein, all references to any agreement or other
document of any description shall be construed to give effect to amendments,
supplements, modifications or any superseding agreement or document as then
existing at the applicable time to which such construction applies.
(c) Capitalized terms used in this Agreement, including the exhibits hereto, shall have
the meaning set forth in Section 1.1, unless otherwise specified.
(d) Unless otherwise specified herein, references in the singular shall include
references in the plural and vice versa, pronouns having masculine or feminine
gender shall be deemed to include the other, and words denoting natural persons
shall include partnerships, firms, companies, corporations, joint ventures, trusts ,
associations, organizations or other entities (whether or not having a separate legal
personality). Other grammatical forms of defined words or phrases have
corresponding meanings.
(e) References to a particular article, section, subsection, paragraph, subp aragraph,
appendix or attachment shall, unless specified otherwise, be a reference to that
article, section, subsection, paragraph, subparagraph, appendix or attachment in or
to this Agreement.
(f) Any reference in this Agreement to any natural person, Governmental Authority,
joint powers agency, corporation, partnership or other legal entity includes its
permitted successors or assigns or to any natural person, Governmental Authority,
joint powers agency, corporation, partnership or other legal entity succeeding to its
functions.
(g) All references to dollars are to U.S. dollars.
(h) The term “includes” and “including” when used in this Agreement shall be by way
of example only and shall not be considered in any way to be in limitation, whether
or not so specified.
POWER PURCHASE AGREEMENT - Page 18 of 65
ARTICLE II
TERM, PURCHASE AND SALE
2.1 Conditions Precedent to Commencement of Term of Agreement.
(a) Conditions Precedent . The Term of this Agreement shall not commence until the
occurrence of all of the following:
(i) Seller Execution;
(ii) At least five (5) Business Days before Seller Execution, Buyer receives
from Seller the conditions precedent documentation listed in Exhibit H; and
(iii) This Agreement has been approved by the Palo Alto City Council, and duly
executed by the authorized representatives of Buyer.
(b) Failure to Meet All Conditions Precedent . If the Conditions Precedent set forth in
Sections 2.1(a) are not satisfied or waived in writing by both Parties, then either
Party may terminate this Agreement effective upon receipt of notice by the other
Party. Neither Party shall have any obligation or liability to the other, including for
a Termination Payment or otherwise, by reason of such termination.
2.2 Agreement Term, Delivery Term, Acceleration and Extension.
(a) Agreement Term. The term of this Agreement shall commence, and this
Agreement shall be effective, upon the satisfaction or written waiver of the
Conditions Precedent set forth in Section 2.1(a) of this Agreement and, unless
earlier terminated pursuant to an express provision of this Agreement, shall remain
in effect until the conclusion of the Delivery Term (the “Term”).
(b) Delivery Term.
(i) The Parties agree that the delivery term shall mean: a period of delivery of
Output of twenty-five (25) Contract Years beginning with the first date that
Buyer accepts delivery of the Output from the Plant in connection with this
Agreement following Seller’s demonstration of satisfaction of the items
listed in this Section 2.2(b)(ii) (the “Contract Delivery Start Date”) and
continuing until the end of the twenty-fifth (25th) Contract Year (“Delivery
Term”), unless terminated as provided by the terms of this Agreement;
provided that, the Parties agree that (x) the Contract Delivery Start Date
shall occur on June 1, 2021, which may be accelerated pursuant to Section
2.2(c), and (y) the Delivery Term shall end on May 31, 2046, which may be
extended pursuant to Section 2.2(d). For the avoidance of doubt, the
maximum Delivery Term shall not extend past the fortieth (40th)
anniversary of t he Contract Delivery Start Date.
POWER PURCHASE AGREEMENT - Page 19 of 65
(ii) The Contract Delivery Start Date shall occur as soon as practicable once all
of the following have been satisfied:
(aa) Seller delivers the COD Certification set forth at Exhibit E-2 to
Buyer and, if applicable, an Expected Annual Energy Production
table in the form attached hereto as Exhibit G updating the Expected
Annual Energy Production originally calculated based on the
Plant’s Expected Initial Capacity and provided pursuant to Section
2.1(a)(ii) for its Initial Capacity (which shall remain subject to the
limits set forth in Section 2.3(b)(ii));
(bb) Buyer shall have received and accepted the Performance Assurance
in accordance with the relevant provisions of Article 9.2(a)(iii) of
the Agreement;
(cc) Seller shall have obtained the requisite CEC Certification and
Verification for the Plant and delivered a copy of same to Buyer ;
(dd) all of the applicable Conditions Precedent in Section 2.1(a)
have been satisfied or waived in writing;
(ee) Seller shall have demonstrated satisfaction of Seller’s other
obligations under this Agreement that commence prior to or as of
the Delivery Term, including taking all necessary steps to allow the
RECs transferred to Buyer to be tracked in WREGIS;
(ff) Seller shall have provided Buyer with a copy of the notice letter
from the Participating Transmission Owner authorizing the Plant to
commence commercial operation; and
(gg) unless Seller has been directed by Buyer not to participate in the
Participating Intermittent Resource program, Buyer shall have
received written notice from the CAISO that the Plant is certified as
a Participating Intermittent Resource to the extent such Participating
Intermittent Resource status exists and is available at such time as
the conditions in subsections (aa) through (ff) of this Section
2.2(b)(ii) are satisfied.
(c) Buyer Acceleration of Contract Delivery Start Date. Buyer may, in its sole
discretion, accelerate the Contract Delivery Start Date to a new date no more than
six (6) months prior to the Contract Delivery Start Date, unless otherwise agreed in
writing by the Parties. Subject to this Section 2.2(c), if Buyer desires so to
accelerate the Contract Delivery Start Date, it shall deliver six (6) months prior
written notice to Seller specifying the new Contract Delivery Start Date (the
“Accelerated Contract Delivery Start Date Notice”), which shall thereafter for
all purposes be deemed to be the “Contract Delivery Start Date”.
Notwithstanding the foregoing, Seller and Buyer may at any time mutually agree in
POWER PURCHASE AGREEMENT - Page 20 of 65
writing to accelerate the Contract Delivery Start Date to a date earlier than the
Contract Delivery Start Date.
(d) Extension of End of Delivery Term. Buyer may, in its sole discretion, extend the
end of the Delivery Term by up to an additional fifteen (15) years, in one or more
five (5)-year increment s each and all at the same Price set forth in Section 2.6 (each,
an “Extended Delivery Term”). Subject to this Section 2.2(d), if Buyer desires so
to extend the Delivery Term, it shall deliver a written notice (“Extended Delivery
Term Option Exercise Notice”) to Seller by not later than three hundred sixty-five
(365) calendar days prior to the end of the Delivery Term specifying the Extended
Delivery Term, which shall thereafter for all purposes be deemed to be the
“Delivery Term”.
2.3 Purchase and Sale of the Output.
(a) Purchase and Sale of Output . During the Delivery Term, Seller shall sell and
deliver, or cause to be delivered, and Buyer shall purchase and receive, or cause to
be received, the Output (subject to Section 2.4(a)) at the Point of Interconnection,
and Buyer shall pay Seller the Price in accordance with the terms of this
Agreement, unless specifically excused by the terms of this Agreement. In no
event shall Seller have the right to procure any element of the Output from sources
other than the Plant for sale or delivery to Buyer under t his Agreement, or sell
Output from the Plant to a third party. Buyer shall be the only party that may claim
credit for the Output (subject to Section 2.4(a)), as may be available to Buyer from
time to time. Buyer shall have no obligation to receive or purchase Output from
Seller prior to or after the Delivery Term, except for Test Energy. Seller shall be
responsible for any costs or charges associated with the Output or its delivery of the
Output up to the Point of Interconnection. Buyer shall be responsible for any costs
or charges imposed on or associated with the Output after its receipt at and from the
Point of Interconnection.
(b) Title and Risk of Loss. As between the Parties, Seller shall be deemed to be in
exclusive control (and responsible for any damages or injury caused thereby) of all
Output purchased by Buyer prior to the Point of Interconnection, and Buyer shall
be deemed to be in exclusive contro l (and responsible for any damages or injury
caused thereby) of all Output purchased by Buyer at and from the Point of
Interconnection. Title to and risk of loss as to all Output purchased by Buyer shall
pass from Seller to Buyer at the Point of Interconnection. Seller warrants that it
shall deliver all Output to Buyer free and clear of all liens, security interests, claims
and encumbrances or any interest therein or thereto created by any Person other
than Buyer.
(c) Capacity of Plant .
(i) Expected Initial Capacity. Seller and Buyer each acknowledge and agree
that as of the Execution Date the Parties expect that the generation
capability of the Plant as of the Commercial Operation Date shall be 26
POWER PURCHASE AGREEMENT - Page 21 of 65
MW AC, net of all auxiliary loads, station electrical uses, and electrical
losses (the “Expected Initial Capacity”). Seller shall complete and deliver
to Buyer the Expected Annual Energy Production table in the form attached
hereto as Exhibit G based on the Expected Initial Capacity pursuant to
Section 2.1(a)(ii).
(ii) Actual Initial Capacity. Seller shall use commercially reasonable efforts to
ensure that the installed capacity of the Plant determined as of the
Commercial Operation Date (the “Initial Capacity”) is same as the
Expected Initial Capacity, but in no event shall be less than 25 MW AC or
more than 27 MW AC, and shall be determined based upon the sum of the
nameplate ratings (AC) of all Plant inverters. If applicable, Seller shall
update the Expected Annual Energy Production table it delivered to Buyer
pursuant to Section 2.1(a)(ii) and 2.3(c)(i) above, to reflect the Plant’s
Initial Capacity (which shall remain subject to the installed capacity
limitations set forth in this sub-section) and deliver such revised table to
Buyer pursuant to Section 2.2(b)(ii)(aa).
2.4 Price.
Subject to the adjustments described in Sections 2.4(a) and (b) and related to Performance
LDs under the provisions of Section 4.6, during the period of delivery of any Test Energy
and during the Delivery Term, for Output delivered or tendered to Buyer at the Point of
Interconnection, Buyer shall pay Seller a price per MWh of Output equal to Thirty Six
Dollars and Seventy-Six Cents ($36.76) per MWh (“Price”). The Price shall be the total
compensation owed by Buyer for the Output delivered or tendered to Buyer during the
period of delivery of any Test Energy and during the Delivery Term, as adjusted as
follows:
(a) Overproduction Output Price. For any and all Output in excess of one hundred five
percent (105%) of the Expected Annual Energy Production for the then-current
Contract Year, if any, Buyer shall pay Seller a price per MWh of Output that is the
lesser of (i) ninety percent (90%) of the Price or (ii) the hourly DA Price at the Point
of Interconnection (either (i) or (ii) being referred to as the “Overproduction
Energy Price”), subject to: (i) Buyer shall be obligated to purchase any and all
Output delivered or tendered to Buyer in excess of one hundred five percent
(105%) up to and including one hundred twenty percent (120%) of the Expected
Annual Energy Production for the then-current Contract Year and (ii) Buyer shall
have the right, but not the obligation to purchase, Output in excess of one hundred
twenty percent (120%) or more of the Expected Annual Energy Production for the
then-current Contract Year, and, if applicable, subject to Section 2.4(b). If Buyer
chooses not to exercise this right of first refusal in sub-section (ii) above, Seller
may sell such Output to a third party so long as such third party sale does not affect
or impair in any material way Seller’s ability to meet its obligations or Buyer’s
rights with respect to this Agreement as determined by Buyer in its reasonable
discretion; and/or
POWER PURCHASE AGREEMENT - Page 22 of 65
(b) Pre-FCDS Energy Price. For any and all Output delivered or tendered to Buyer
prior to the date on which Seller has obtained a Full Capacity Deliverability Status
Finding from the CAISO, if any, Buyer shall pay Seller a price per MWh of Output
equal to ninety percent (90%) of the Price (“Pre-FCDS Energy Price”) and, if
applicable, subject to Section 2.4(a).
For the avoidance of doubt, if both conditions (a) and (b) above occur, then Buyer
shall pay Seller the Price adjusted by both (a) and (b), and if only one condition (a)
or (b) above occurs, then Buyer shall pay Seller the Price adjusted by either (a) or
(b), as applicable.
2.5 Test Energy.
For a period of up to ninety (90) days prior to the commencement of the Delivery Term,
Buyer shall purchase and accept from Seller at the Point of Interconnection and pay for as
described in Section 2.4, the Output relating to any Test Energy pursuant to the terms of
this Agreement; provided that the decision to produce and deliver Test Energy hereunder
shall be at the sole discretion of Seller. All Test Energy sha ll be scheduled in accordance
with the scheduling protocols set forth in Exhibit D, as may be modified by the Parties
pursuant to Section 4.1(g).
2.6 Environmental Attributes.
(a) Purchase and Sale of Environmental Attributes. During the Term, Seller shall sell
and transfer to Buyer, and Buyer shall purchase and receive from Seller, all right,
title and interest in and to the Environmental Attributes associated with the Output,
if any, whether now existing or subsequently generated or acquired (other than by
direct purchase from a third party) by Seller, or that hereafter come into existence,
during the Term, as a component of the Output purchased by Buyer from Seller
hereunder. Subject to Section 2.6(c), Seller agrees to transfer and make such
Environmental Attributes available to Buyer immediately to the fullest extent
allowed by applicable Law upon Seller’s production or acquisition of the
Environmental Attributes. Seller agrees to convey and hereby conveys all such
Environmental Attributes to Buyer as included in the delivery of the Output from
the Plant. Seller shall not assign, transfer, convey, encumber, sell or otherwise
dispose of all or any portion of the Environmental Attributes to any Person other
than Buyer. As of the Effective Date and continuing throughout the Term, Seller
represents and warrants that Seller holds the rights to all Environmental Attributes
from the Plant, the Plant qualifies and is certified by the CEC as an ERR and the
Plant’s Output qualifies under the California Renewable Portfolio Standards
requirements. To the extent that a Change in Law occurs after the Effective Date
that causes this representation and warranty to be false or misleading, it shall not be
an Event of Default if Seller has used commercially reasonable efforts to comply
with such Change in Law and takes all actions as determined by Buyer in its
reasonable discretion to implement any change or improvement to the Plant to
maintain such certification or qualification.
POWER PURCHASE AGREEMENT - Page 23 of 65
(b) Buyer’s Right to Report Ownership of Environmental Attributes. During the Term,
Seller shall not report to any Person or entity that the Environmental Attributes
granted hereunder to Buyer belong to anyone other than Buyer, and Buyer may
report under any program that such Environmental Attributes purchased hereunder
belong to it.
(c) Documentation of Environmental Attributes. Seller shall document the production
of Environmental Attributes under this Agreement by delivering with each invoice
to Buyer such attestations or other documents as may be required by Exhibit B.
Seller agrees to promptly and cooperatively update or modify Exhibit B, as
necessary, to ensure that Buyer receives full and complete title to, and the ability to
record with any EA Agency as its own, all of the Environmental Attributes
purchased hereunder. At Buyer’s request, the Parties, each at their own expense,
shall execute all such documents and instruments in order to transfer the
Environmental Attributes specified in this Agreement, to Buyer or its designees, as
Buyer may reasonably request. In the event of the promulgation of a scheme
involving Environmental Attributes administered by an EA Agency, upon
notification by an EA Agency that any transfers contemplated by this Agreement
shall not be recorded, the Parties shall promptly cooperate in taking all reasonable
actions necessary so that such transfer can be recorded. Each Party shall promptly
give the other Party copies of all documents it submits to the EA Agency to
effectuate any t ransfers.
2.7 Resource Adequacy.
(a) Resource Adequacy Requirements. During the Delivery Term, Seller grants,
pledges, assigns and otherwise commits to Buyer all of the Plant’s Initial Capacity,
including Capacity Attributes from the Plant, to enable Buyer to meet its Resource
Adequacy or successor program requirements, as the CPUC, CAISO and/or other
regional entity may prescribe, including submission of a supply plan or Resource
Adequacy plan (“Resource Adequacy Requirements”). From the Execution
Date, and for the duration of the Delivery Term, Seller shall take all commercially
reasonable actions, including complying with all applicable registration and
reporting requirement s, and executing any and all documents or instruments
necessary to enable Buyer to use all of the capacity of the Plant, including Capacity
Attributes, to be committed by Seller to Buyer pursuant to this Agreement to meet
Buyer’s Resource Adequacy Requirements during the Delivery Term.
(b) Availability Standards. Seller shall be responsible for all costs, charges, expenses,
penalties, and obligations resulting from Availability Standards, if applicable, and
Seller shall be entitled to retain all credits, payments, and revenues, if any, resulting
from Seller achieving o r exceeding Availability Standards, if applicable.
2.8 Tax Credits and Incentives.
Buyer acknowledges and agrees that all Incentives shall be owned by Seller, and that Buyer
shall not claim Incentives. Buyer agrees to cooperate with Seller, as may be necessary, to
POWER PURCHASE AGREEMENT - Page 24 of 65
allow maximization of the value of, and realization of, all Incentives; provided that Buyer
shall not be required to incur additional costs or accept any diminution in value of its rights
under this Agreement or of the Output purchased hereunder. In addition, Buyer shall not
take any action (except as otherwise permitted under this Agreement), that would in any way
reduce or eliminate the availability to Seller of any Incentives, including the Section 45
Credits and the Section 48 Credits, and Buyer shall forego any credits or benefits available to
it (other than Environmental Attributes), including rights to purchase of Test Energy, to the
extent necessary to allow Seller to obtain the full benefit of the Incentives, but in no event
shall Buyer be required to forego receipt of Output after the Contract Delivery Start Date.
2.9 CEQA.
(a) CEQA Determinations. Any and all CEQA requirements for or related to the
development of the Plant shall be the responsibility of Seller; provided, that , Buyer
reserves any and all of its rights and powers under CEQA that may be applicable,
appropriate, and within Buyer’s jurisdiction, including the power in its sole
discretion to:
(i) review the Plant’s environmental impacts;
(ii) prepare and/or review environmental documents and studies;
(iii) review mitigation measures and/or alternatives in order to avoid or lessen
any significant environmental impacts resulting from the Plant;
(iv) determine that any significant impacts that cannot be mitigated are
acceptable due to overriding considerations; or
(v) decide to terminate this Agreement due to any significant adverse
environmental effects resulting from the Plant that were unable to be
mitigated and were unacceptable for lack of overr iding considerations in
Buyer’s reasonable discretion.
(b) Seller’s Responsibility to Provide CEQA Documents. Seller shall be required to
provide to Buyer final (and executed, if applicable) copies of all CEQA documents
within ten (10) days of their approval by the CEQA lead agency.
(c) Conditions Precedent to Buyer Purchase. The Parties therefore acknowledge and
agree that Buyer has no obligation to purchase the Output under this Agreement
until all of the following have occurred:
(i) Seller has complied with all applicable CEQA requirements in connection
with its permitting, construction and operation of the Plant (the “Project”);
(ii) Buyer has, as part of such CEQA compliance, been designated as a
“Responsible Agency” for the Project under Section 15096 of the CEQA
Guidelines;
POWER PURCHASE AGREEMENT - Page 25 of 65
(iii) Buyer has satisfactorily complied with all applicable requirements of
Section 15096 relating to the Project, as determined by Buyer in its
reasonable discretion consistent with CEQA requirements;
(iv) Buyer has notified Seller that Buyer elects not to terminate the PPA
pursuant to Section 2(a)(v); and
(iv) the applicable period for any legal challenges under CEQA relating to the
Plant has expired without any such challenge having been filed or, in the
event of any such challenge, the challenge has been determined adversely to
the challenger by final judgment or settlement .
(d) Buyer Termination of Agreement . If Buyer decides not to approve the purchase of
Output from the Plant and to terminate this Agreement as described in Section
2.9(a)(v), Buyer shall give Seller written notice thereof and this Agreement shall
terminate within sixty (60) calendar days from the giving of such notice. Any
termination under this Section 2.9(c) shall be “no-fault”, and neither Party shall
have any liability to the other arising out of such termination, and Buyer shall
promptly return to Seller all Development Assurance less any LD Amount paid by
or due and payable by Seller prior to the date of such termination for reasons
unrelated to this Section 2.9. For the avoidance of doubt, this Section 2.9(c) shall
not affect the rights and remedies associated with any other termination rights set
forth in this Agreement.
2.10 Right of First Refusal for Expansion Plant and Expansion Plant Output.
(a) Buyer’s Right of First Refusal for Development of Expansion Plant . During the
Term, Seller may, in exercising its sole discretion, determine, from time to time, to
develop, finance, construct and/or operate an Expansion Plant. Each time such a
determination is made, Seller shall notify Buyer of such determination and sha ll
offer, in writing, to sell the Expansion Plant Output to Buyer. The offer shall
include the price to be paid by Buyer for the Expansion Plant Output, the term, and
other principal terms and conditions of the proposed sale. If Buyer wishes to accept
such offer to purchase all (but not less than all) of the Expansion Plant Output,
Buyer shall so notify Seller within ninety (90) calendar days of its receipt of such
offer. Buyer and Seller shall promptly thereafter enter into good faith negotiation
of commercial modifications to this Agreement incorporating such Expansion
Plant Output offer. Until the revised Agreement incorporating an Expansion Plant
is executed, Seller’s proposal, accepted by Buyer (including any modifications
agreed upon in writing by both Parties), shall control all dealings between the
Parties relating to the Expansion Plant. Should any issue arise that is not covered
by such documentation, the terms of this Agreement (prior to amendment for the
Expansion Plant or Expansion Plant Out put) shall apply.
(b) Buyer’s Right to Purchase Expansion Plant Output . If Buyer does not accept
Seller’s offer to purchase the Expansion Plant Output within ninety (90) calendar
days of receipt of Seller’s offer, Seller shall be deemed authorized to offer t o sell
POWER PURCHASE AGREEMENT - Page 26 of 65
that portion of the Expansion Plant Output to one or more third parties at a price and
on other terms and conditions which, taken as a whole, are at least as favorable to
Seller as the price and other terms and conditions set forth in Seller’s offer to
Buyer. If Seller offers to disaggregate the Expansion Plant Output for the purpose
of selling the same to multiple independent buyers, Seller shall notify Buyer, in
writing, of the terms and conditions of such offers, and Buyer shall again have the
right of first refusal consistent with the terms set forth above for each of the lesser
amounts being offered to the third parties. If Buyer does not purchase the
Expansion Plant Output and Seller sells such Expansion Plant Output to a third
party, Seller shall promptly certify, in writing, to Buyer that the terms and
conditions of sale of such Expansion Plant Output to such third party, taken as a
whole, are at least as favorable to Seller as the price and other terms and conditions
set forth in Seller’s offer to Buyer, and, Seller shall provide the relevant final
contract and any other supporting documentation for such certification by Buyer.
Upon the sale of such Expansion Plant Output in compliance with this Agreement,
Buyer shall have no further rights to be offered or to purchase such Expansion Plant
Output. Buyer’s refusal, in writing, of the Expansion Plant Output from one
Expansion P lant shall not affect Buyer’s right to purchase the Expansion Plant
Output from a subsequently developed Expansion Plant under the terms of this
Agreement. Notwithstanding any provision to the contrary herein, Seller shall not
sell or provide the Expansion Plant Output to any third party, unless Seller can do
so without compromising in any material way its ability to provide the Output or
Expansion Plant Output, if any, to Buyer hereunder. The materiality of any such
impact shall be determined by Buyer, act ing in its reasonable discretion.
2.11 Refurbishment of Plant.
During the Term, Seller may refurbish the Plant, alter components of the Plant, replace
components of the Plant, add additional solar modules or inverters, or replace solar
modules or inverters with more powerful solar modules or inverters, in order to increase
the Plant estimated peak AC capability up to the lesser of the Initial Capacity or to the
amount allowed by the Interconnection Agreement ; provided, however, that Seller may not
perform any refurbishment to increase capacity higher than the Initial Capacity without the
prior written consent of Buyer, and Buyer shall have the right, in its sole discretion, to
accept or decline to permit any such refurbishment that may increase the Initial Capacity.
2.12 Optional Battery Storage at the Site.
At any time and multiple times during the Term, Buyer may, upon written request (“Battery
Storage Facility Request”), ask Seller to review and evaluate the development of a batt ery
storage facility or facilities capable of storing up to 25 MWh located at the Site (“Battery Storage
Facility”). The Battery Storage Facility Request may ask Seller to develop a detailed proposal or
may include a detailed proposal (or a combination thereof) for the development of the Battery
Storage Facility. Seller hereby agrees to review, develop and/or evaluate the Battery Storage
Facility Request in good faith and to use its best efforts to take all actions and to do all things
necessary, proper or advisable to consummate, make effective and comply with the development
of the Battery Storage Facility. Within sixty (60) days of receipt of any Battery Storage Facility
POWER PURCHASE AGREEMENT - Page 27 of 65
Request, Seller shall provide a written response to Buyer describing in detail the feasibility of the
development of a Battery Storage Facility, upon what terms and why, and including supporting
documentation and such other information as Buyer may reasonably request. Seller agrees to
negotiate the terms and conditions for the development of such Battery Storage Facility in good
faith; provided, however, that Seller shall not be required to add any such storage unit(s) to the
Plant unless and until Seller, Buyer and any Lenders each (in their sole and absolute discretion)
approves the technical details of such unit(s) and appropriate amendments to this Agreement or
negotiation of a separate battery storage agreement , including additional compensation related to
such unit(s).
ARTICLE III
METERING AND BILLING
3.1 Metering Requirements.
The transfer of Output from Seller to Buyer shall be measured by revenue quality metering
equipment at the Point of Interconnection or another nearby location reasonably acceptable
to Buyer. Such metering equipment, including any equipment required fo r communicating
meter data (e.g., a dedicated data line) to Buyer or the CAISO, shall be selected, provided,
installed, owned, maintained and operated, at Seller’s sole cost and expense, by Seller or its
designee in accordance with applicable CAISO rules. Seller shall exercise reasonable care
consistent with Prudent Utility Practice in the maintenance and operation of any such
metering equipment, and shall test and verify the accuracy of each meter at least annually.
Seller shall inform Buyer sufficiently in advance of the time and date of these tests to
permit Buyer to be present, and shall permit Buyer to be present , at such tests and to
receive the results of such tests. Subject to Buyer paying the cost of any update or upgrade
to such metering equipment pursuant to a new requirement of the CAISO, the Participating
TO or any other Governmental Authority, adopted aft er the Contract Delivery Start Date,
each of Seller’s meters shall be accurate to the metering specifications then in effect for
CAISO meter accuracy. Seller shall further install and maintain all equipment and data
circuits necessary to transmit all monitored real time supervisory control and data
acquisition (“SCADA”) system data and real time data from the CAISO meter to the
CAISO and, if applicable, Buyer’s Scheduling Coordinator, while adhering to both CAISO
and, if applicable, Buyer’s Scheduling Coordinator’s communications protocols. Seller
shall provide Buyer with a copy of each certificate of compliance issued by CAISO, if any.
Seller shall provide Buyer and, if applicable, its Scheduling Coordinator access to all
monitored SCADA points to be used at their discretion in real time monitoring. Buyer, at
its sole cost and expense, may install and maintain check meters and all associated
measuring equipment necessary to permit an accurate determination of the quantities of
Output delivered under this Agreement, provided the referenced equipment does not
interfere with Seller’s metering equipment. Seller shall permit Buyer or its Scheduling
Coordinator or its agent access to Seller’s Plant for the purpose of installing and
POWER PURCHASE AGREEMENT - Page 28 of 65
maintaining such check meters. Seller shall submit to the CAISO, or allow the CAISO to
retrieve, any meter data required by the CAISO related to the Plant output in accordance
with the CAISO’s settlement and billing protocol and meter data tariffs. Buyer shall have
reasonable access to relevant meters and associated facilities, as well as real time access to
all meter data, as is necessary for Buyer or , if applicable, its Scheduling Coordinator to
perform its duties as scheduling coordinator and comply with the requirements of the
CAISO Tariff.
3.2 Billing.
Seller shall provide to Buyer on or before the tenth (10th) day of each month an invoice for
the Output for the prior month based upon meter data for Output delivered in such
calendar month (taking into account any line losses to the Point of Interconnection),
enclosing reasonably appropriate supporting CAISO documentation and any
corresponding attestation that may be required pursuant to Section 2.6(c). Such invoice
may be transmitted by e-mail to UtilityCommoditySettlements@cityofpaloalto.org, or to
any other e-mail address designated, in writing by Buyer. Should either Seller or Buyer
determine at a later date, but in no event later than two (2) years after the orig inal invoice
date, that the invoice amount was incorrect, that Party shall promptly notify, in writing,
the other Party of the error. If the amount invoiced was lower than the amount that should
have been invoiced, then Buyer shall, upon receiving verification of the error and
supporting documentation from Seller, pay any undisputed portion of the difference
within thirty (30) calendar days of receipt of verification. If the amount invoiced was
higher than the amount that should have been invoiced, then S eller shall, upon receiving
verification of the error and supporting documentation from Buyer, pay any undisputed
portion of the difference within thirty (30) calendar days of receipt of verification. Any
such adjusted amount owing by Seller or Buyer shall be subject to the interest rate as
designated in Section 3.3, running from the original due date of payment.
POWER PURCHASE AGREEMENT - Page 29 of 65
3.3 Payment.
For Output delivered to Buyer pursuant to this Agreement, Buyer or its agent shall pay
Seller by electronic transfer of funds by the later of the twentieth (20th) day of the month or
the tenth (10th) Business Day after the invoice is received in accordance with Section 3.2,
subject to Buyer’s right to set -off any Daily LD Amount or Performance LDs owed by
Seller to Buyer as described in Sections 4.4(b)(iii) or 4.6(b)(iii), respectively. Payments
made after the due date shall be considered late and shall bear interest on the unpaid
balance at an annual rate equal to two percent (2%) plus the average daily prime rate as
determined from the "Money Rates" section of The Wall Street Journal fo r the days of the
late payment period multiplied by the number of calendar days elapsed from and including
the day after the due date, to and including the payment date. Interest shall be computed on
the basis of a 365-day year. In the event this index is discontinued or its basis is
substantially modified, the Parties shall agree on a substitute equivalent index. Should
Buyer in good faith dispute the amount of an invoice, Buyer or its agent may withhold such
disputed amounts until the dispute is resolved in accordance with Section 10.10. Such
disputed amounts shall bear interest at the interest rate described above. Failure of Buyer
or its agent to withhold any amount shall not constitute a waiver of Buyer’s right to
challenge such amount.
3.4 Billing Agent.
Seller agrees Buyer may designate an agent to act on its behalf for billing purposes, so long
as Buyer remains liable for its obligations under this Agreement.
ARTICLE IV
SELLER'S OBLIGATIONS
4.1 Development, Finance, Construction and Operation of the Plant.
During the Term, Seller covenants that at no cost to Buyer, unless otherwise specifically
stated in this Agreement, it shall:
(a) Develop, Finance and Construct the Plant . Design, develop, finance and construct
the Plant;
(b) Real-time Monitoring. Provide Buyer with access to a “real time” Plant monitoring
system (which, at a minimum, shall provide “real time” information regarding the
net output of the Plant) that is anticipated to be internet protocol-based and include
any applicable alarms required by Prudent Utility Practice;
(c) Permits. Seek, obtain, maintain, comply with and, as necessary, renew and modify
from time to time, all Permits, certificates or other authorizations or approvals,
including comply with any and all CEQA requirements for or related to the
POWER PURCHASE AGREEMENT - Page 30 of 65
development of the Plant and prepare any and all necessary CEQA documentation,
including any environmental impact studies, as described more specifically in
Section 2.9, which are necessary for the construction, operation and maintenance of
the Plant or required by any Requirements of Laws or Governmental Authority as
prerequisites to Seller’s performance of this Agreement ;
(d) Operation and Maintenance - Compliance. Operate, maintain, and repair the Plant
in accordance with this Agreement, all Requirements of Laws applicable to Seller
or the Plant, all Contractual Obligations and Permits, and in accordance with
Prudent Utility Practice, including with respect to efforts to maintain availability of
the Expected Annual Energy Production subject to normal system wear-and-tear
and the panel degradation factor set forth on Exhibit G. Seller shall obtain in its
own name and at its own expense any and all pollution or enviro nmental credits or
offsets necessary to operate the Plant in compliance with the Environmental Laws;
(e) Operation and Maintenance – Prudent Utility Practice. Operate and maintain in a
manner consistent with Prudent Utility Practice the facilities it will own and
otherwise cooperate with the Participating TO in the physical interconnection of
the Plant to the Participating TO System in accordance with the Interconnection
Agreement;
(f) Insurance. Obtain and maintain the policies of insurance in the amounts and with
the coverages as set forth on Exhibit C;
(g) Outages. By October 1st of each year of the Delivery Term, provide each of Buyer
and, if applicable, its Scheduling Coordinator with an annual projection of
scheduled Planned Outages for the fo llowing calendar year. Should Seller make
any changes to such projection, it shall notify Buyer and, if applicable, its
Scheduling Coordinator of such changes at least fourteen (14) calendar days in
advance of any newly scheduled or rescheduled Planned Outage. If Buyer requests
a change to the scheduled date of any Planned Outage (including to a date set forth
in a change notice from Seller), Seller shall consider such request in good faith and
notify Buyer of its decision within seven (7) calendar days of receipt of Buyer’s
request. In no instance other than Saturdays, Sundays and federal holidays during
the period of reliability accounting (initially the period between June 1 st and
September 30th but subject to changes selected at Buyer’s discretion for
conforming to CAISO availability assessment) shall Seller schedule Planned
Outages of more than twenty-four (24) hours during the Delivery Term. In
connection with any Planned Outage or Forced Outage in excess of one (1) MW of
Plant capacity, Seller shall notify Buyer and, if applicable, its Scheduling
Coordinator, as soon as practicable, of the percentage of Plant (based on percentage
of Output loss) expected to be out of service and how long the Planned Outage or
Forced Outage is expected to last. If the Planned Outage or Forced Outage is total
and is due to failure of the Plant rather than the transmission and distribution
system beyond the Point of Interconnection, Seller shall give Buyer and , if
applicable, its Scheduling Coordinator at least four (4) hours’ prior notice before
re-energizing the Plant. In addition, Seller shall comply with Buyer’s Scheduling
POWER PURCHASE AGREEMENT - Page 31 of 65
Coordinator’s scheduling protocols, as may be changed from time to time. A copy
of the scheduling protocols prepared jointly by the Parties as of the Execution Date
and then-anticipated to be appropriate as of the Commercial Operation Date is
attached as Exhibit D. The Parties agree, within thirty (30) days after achievement
of the Construction Milestone to commence reviewing the appropriateness of such
scheduling protocols and work together (including meeting in-person) and, if
applicable, with Buyer’s Scheduling Coordinator to make and complete prior to the
delivery of Test Energy under Section 2.5, any modifications necessary to ensure
the scheduling protocols’ consistency with the CAISO Tariff, its Operating
Procedures and Business Practice Manuals, and the then-planned operating
procedures for the Plant; provided that, during the Delivery Term, Buyer shall
provide Seller with any revised scheduling protocols within a reasonable period of
time to the extent , if applicable, its Scheduling Coordinator provides the same to
Buyer;
(h) Interconnection. Perform all studies, pay all fees, obtain all necessary approvals
and execute all necessary agreements to secure the interconnection, distribution
and/or transmission arrangements, including negotiate and enter into an
Interconnection Agreement sufficient to allow Seller to deliver the Output to the
Point of Interconnection and into the CAISO-controlled grid for sale to Buyer
pursuant to the terms of this Agreement;
(i) FCDS Status and Copy of Finding. Ensure that its interconnection, distribution
and/or transmission arrangements shall provide for Full Capacity Deliverability
Status as of the FCDS Finding Milestone (unless extended pursuant to Section 4.4)
and throughout the remainder of the Delivery Term. Seller shall provide to Buyer a
copy of the FCDS Finding within fifteen (15) days of such finding having been
obtained from the CAISO. All costs or amounts designated in the Plant’s full
capacity deliverability study to obtain FCDS or any costs and expenses incurred by
Seller for FCDS studies shall be Seller’s sole responsibility.
(j) Participating Generator Agreement and Meter Service Agreement. Negotiate and
enter into a Participating Generator Agreement and a Meter Service Agreement for
CAISO Metered Entities with the CAISO, the load control area operator for the
Participating TO System, to which the Plant is interconnected. Buyer shall pay for
or reimburse Seller for any such costs or charges associated with these agreements,
except to the extent such cost or charge is required to be paid by Seller under this
Agreement in Sections 3.1 and 4.1(h). Seller shall cooperate with Buyer to
minimize any such costs as are to be reimbursed by Buyer;
(k) Start-ups and Shut-downs. Coordinate all Plant start-ups and shut-downs, in whole
or in part, with Buyer in accordance with CAISO scheduling protocols and the
reasonable protocols established by Buyer that are not inconsistent with the CAISO
Tariff and CAISO procedures; and
(l) Development Assurance, Interim Assurance and Performance Assurance. Fund
and maintain the Development Assurance and Interim Assurance, as applicable, to
POWER PURCHASE AGREEMENT - Page 32 of 65
assure Seller ’s timely development of the Plant and achievement of Commercial
Operation and the Contract Delivery Start Date, including the performance of all
construction tasks; and fund and maintain the Performance Assurance to assure
Seller’s delivery of the Output to Buyer, all in accordance with Article IX.
4.2 General Obligations.
(a) Records. Seller shall keep complete and accurate operating and other records and
all other data for the purposes of proper administration of the Agreement, including
such records as may be required by any Governmental Authority or Prudent Utility
Practice;
(b) Organizational Good Standing and Compliance with Laws and Agreement . During
the Term of this Agreement, Seller shall continue to (i) preserve, renew and keep in
full force and effect its organizational existence and good standing, and take all
reasonable action to maintain all applicable Permits, rights, privileges, licenses and
franchises necessary or desirable in the ordinary course of its business; (ii) comply
with all Requirements of Laws, including Environmental Laws, applicable to Seller
or the Plant; and (iii) comply with all Contractual Obligations related to the
operation and maintenance of the Plant;
(c) Further Development Information. Seller shall provide to Buyer such other
information regarding the permitting, engineering, construction or operations of the
Plant as Buyer may from time to time reasonably request, subject to licensing or
other restrictions of Seller or a third party with respect to confidentialit y, disclosure
or use; provided, nothing herein shall limit Buyer’s right to agree to confidentiality
or sign a confidentiality agreement in connection therewith before acquirin g
knowledge of such information;
(d) CAISO Agreements. Seller shall enter into any agreements with the CAISO
required by the CAISO for generators delivering power into the CAISO-controlled
grid. Except for such costs and charges as are expressly identified in this
Agreement as Seller’s costs, Buyer shall reimburse Seller for all cos ts and charges
under such agreements. Seller shall cooperate with Buyer to minimize any such
costs as are to be reimbursed by Buyer;
(e) Financial Statements. If requested by Buyer, Seller shall deliver to Buyer (a)
within four (4) months following the e nd of each fiscal year, a copy of Seller’s and
Seller’s Parent’s annual report containing audited consolidated financial statements
for such fiscal year (or if not available, unaudited consolidated financial statements
for such fiscal year) and (b) within forty-five (45) calendar days after the end of
each of its first three (3) fiscal quarters of each fiscal year, a copy of Seller’s and
Seller’s Parent’s quarterly report containing unaudited consolidated financial
statements for such fiscal quarter. In all cases, the statements shall be for the most
recent accounting period and shall be prepared in accordance with GAAP and shall
be certified by the Chief Financial Officer or equivalent officer of Seller on behalf
of Seller and of Seller’s Parent on behalf of Seller’s Parent, dated no earlier than ten
POWER PURCHASE AGREEMENT - Page 33 of 65
(10) Business Days prior to delivery to Buyer (i) as fairly presenting the financial
condition of Seller and Seller’s Parent, as applicable, subject only to what would
typically be included in year-end audit adjustments and footnotes; provided,
however, that should any such statements not be available on a timely basis due to a
delay in preparation or certification, such delay shall not constitute an Event of
Default so long as Seller diligently pursues the preparation, certification and
delivery of the statements;
(f) Notice of Expected Initial Capacity. Within fifteen (15) calendar days of the later
of (i) obtaining the authority to construct for the Plant from the applicable
Governmental Authority or (ii) Seller’s receipt of the system impact and facility
cost studies from the Participating TO, Seller shall provide written notice to Buyer
stating t he then-expected Initial Capacity of the Plant in MW AC (which shall be
subject to the Initial Capacity limits described in Section 2.3(c)(ii)) and specifying
other material key P lant design details;
(g) Site Size Requirement . Seller agrees and hereby certifies to Buyer that the Site
(including any proposed modification to the Site described in Section 4.2(h)) shall
be sufficient in size and scope to accommodate both the Plant and the potential
future build out of a Battery Storage Facility (whether the Parties agree to develop
the battery storage facilities or not). Seller acknowledges and agrees that Buyer’s
potential ability to add a Battery Storage Facility under Section 2.12 and the
obligation to size the Site accordingly in this Section 4.2(g) are material
inducements to Buyer to enter into this Agreement .
(h) Modification of Site. Seller shall not modify the Site without the prior written
consent of Buyer, which consent shall not be unreasonably withheld, conditioned
or delayed. With respect to any proposed Site modification Seller shall provide
written notice to Buyer describing the proposed Site modification, the reasons
therefor, and the extent of any impact such modification would have upon any and
all of the Milestones and including a revised Exhibit A reflective of the proposed
modification. Seller shall provide Buyer with other relevant information
reasonably requested by Buyer regarding the proposed Site modification. At all
times during this Agreement, Seller covenants that the Site (and any proposed Site
modification) shall be sufficient in size and scope to accommodate both the Plant
and a potential future build out the Battery Storage Facility as contemplated by
Section 2.12 (whether the Parties agree to develop the battery storage facilities or
not). Notwithstanding any provision to the contrary, any fees and costs related to
modifications contemplated by this Section 4.2(h) shall be subject to Section
10.12(a).
(i) Final Site Drawings. Seller shall provide to Buyer final Site Drawings ninety (90)
days prior to the Commercial Operation Date.
POWER PURCHASE AGREEMENT - Page 34 of 65
4.3 Construction Milestones.
(a) Seller Pursuit of Milestones. The Parties agree that time is of the essence in the
performance of Seller’s obligations under this Agreement. The Parties further
agree that the Milestones must be achieved in a timely fashion or Buyer shall suffer
damages which are difficult to estimate with reasonable certainty. Upon request,
Seller shall promptly provide Buyer with documentation satisfactory to Buyer,
acting in the reasonable exercise of Buyer’s discretion, to support the progress,
status and achievement of the Milestones by the dates set forth below (in addition to
the reports, notices, updates, certifications, documentation and materials described
in this Section 4.3 below).
(b) Individual Milestones. Seller covenants that it shall diligently pursue to
completion each of the following Milestones:
(i) By December 22, 2017, Seller shall have executed and delivered to Buyer
the Interconnection Agreement for the Plant (the “Interconnection
Agreement Milestone”);
(ii) By August 28, 2019, Seller shall have obtained the Conditional Use Permit
necessary, in final form, to commence construction of the Plant (the
“Conditional Use Permitting Milestone”);
(iii) By August 28, 2019, Seller shall have obtained all Permits necessary, in
final form, to commence construction of the Plant (the “Permitting
Milestone”);
(iv) By October 15, 2019, Seller shall have arranged for the financing of the
construction of the Plant or otherwise make funds available to commence
and complete construction (the “Financing Milestone”);
(v) By August 3, 2020, Seller shall have commenced construction of the Plant
(the “Construction Milestone”);
(vi) By June 1, 2021, Seller shall deliver the COD Certification to Buyer (the
“Commercial Operation Milestone”); and
(vii) By August 1, 2021, Seller shall have obtained a Full Capacity Deliverability
Status Finding from the CAISO (the “FCDS Finding Milestone”).
(c) Development Progress Reports. Seller shall regularly provide to Buyer
Development Progress Reports concerning the progress towards construction and
completion of each of the Milestones (including whether Seller has met or is on
target to meet each of the Milestones), which shall be substantially similar in form
and substance to that attached as Exhibit E, and include such additional information
as reasonably required by Buyer in its sole discretion. Seller shall also agree to
meetings between representatives of Buyer and Seller to review such monthly
reports and discuss Seller’s construction progress, as Buyer may request from time
POWER PURCHASE AGREEMENT - Page 35 of 65
to time. Seller shall deliver the Development Progress Report to Buyer describing
activities for the applicable Report Period no less frequently than:
(i) From the Execution Date until completion of the Interconnection
Agreement Milestone, on a bi-annual basis, with the first Development Progress
Report due under this Section 4.3(c)(i) on the date that is six (6) months after the
Execut ion Date and with each subsequent Development Progress Report due under
this Section 4.3(c)(i) on the date that is the six (6) calendar month anniversary of
the prior due date;
(ii) From the Interconnection Agreement Milestone until Seller delivers the
Notice to Proceed to the EPC Contractor for the Plant , on a quarterly basis, with the
first Development Progess Report due under this Section 4.3(c)(ii) on the date that
is fifteen (15) days after the close of the first full calendar quarter following Seller’s
achievement of the Interconnection Agreeent Milestone and with each subsequent
Development Progress Report due under this Section 4.3(c)(ii) on the date that is
fifteen (15) days after the close of each calendar quarter thereafter ;
(iii) From the date Seller delivers the Notice to Proceed to the EPC Contractor
for the Plant until achievement of all Milestones, on a monthly basis, with the first
Development Progress Report due under this Section 4.3(c)(iii) on the date that is
fifteen (15) days after the close of the first full calendar month following Seller’s
delivery of the Notice to Proceed to the EPC Contractor for the Plant and with each
subsequent Development Progress Report due under this Section 4.3(c)(iii) on the
date that is fifteen (15) days after the close of each month thereafter. (d) Notice
of Commercial Operation Date and COD Certification. Seller shall provide written
notice to Buyer thirty (30) calendar days in advance of the anticipated Commercial
Operation Date, and shall provide Buyer with written weekly updates thereafter
detailing the status of Seller’s progress in achieving Commercial Operation until
the week preceding the Commercial Operation Date. Once Commercial Operation
of the Plant has commenced, Seller shall deliver to Buyer by electronic mail or
facsimile, with originals to follow by hand-delivery, courier or mail service, the
COD Certification in the form attached hereto as Exhibit E-2, which date of
delivery shall establish the Commercial Operation Date as described in the COD
Certification.
(e) Certification of Completion of Milestone. Within five (5) Business Days of the
completion of each Milestone (except for the Commercial Operation Milestone
which certification is described in subsection (d) above), Seller shall provide a
certification to Buyer (along with any relevant supporting documentation), stating
Seller’s achievement or satisfaction of each such Milestone. In addition, Seller
shall provide to Buyer additional information concerning Seller’s progress towards,
or confirmation of, achievement of the Milestones, as Buyer may reasonably
request from time to time.
(f) Notice of Failure to Achieve Milestone. Upon becoming aware that it shall, or is
reasonably likely to, fail to achieve any Milestone by the required date, for any
POWER PURCHASE AGREEMENT - Page 36 of 65
reason including a Force Majeure Event, Seller shall so notify Buyer, in writing, as
soon as is reasonably practical. Such notice shall provide information regarding the
cause of the delay, provide a revised estimat ed date for achievement of the
Milestone(s), and otherwise describe Seller’s plan for meeting the Milestone(s).
Seller’s notice shall also explain any impact such delay may or shall have on any
other Milestone, and measures to be taken to mitigate such impact.
4.4 Milestone Excused Delay and Liquidated Damages.
(a) Permitted Extensions to Milestones. In the event that a Force Majeure Event
causes a delay to the achievement of any Milestone then, and in each such case,
each Milestone deadline may be extended by that number of calendar days the
applicable Force Majeure Event actually delays completion of such Milestone.
For the avoidance of doubt, any extension of the deadline for one Milestone shall
not extend the deadline for completion of any other Milestones. Notwithstanding
the foregoing,
(i) in no event shall the combined extensions under this Section 4.4(a) for any
individual Milestone arising from Force Majeure Events exceed six (6) months in
the aggregate;
(ii) in no event shall the combined extensions under this Section 4.4(a) for all
Milestones combined arising from Force Majeure Events exceed twelve (12)
months in the aggregate; and
(iii) if on any given day two or more events cause delay to a Milestone at the same
time (i.e., occur concurrently), Seller shall only be entitled to one (1) day of delay
for such day.
(b) More Than Six (6) Months Excused Extensions; Daily LD Amount. If the
combined excused extensions for any individual Milestone exceed six (6) months
in the aggregate as set forth in Section 4.4(a)(i), Seller shall be liable to Buyer for
liquidated damages for each day or portion of a day of unexcused delay in an
amount equal to the Daily LD Amount. In Buyer’s sole discretion, Buyer shall be
entitled to collect the Daily LD Amount for the relevant number of unexcused days
of delay on a monthly basis within ten (10) days of Seller’s receipt of an invoice
from Buyer therefor by one or more of the follo wing:
(i) drawing upon the Development Assurance or Interim Assurance, as applicable
(which shall be subject to the replenishment provisions set forth in Section 9.2(a)(i)
or (ii), respectively);
(ii) receiving payments from Seller; and/or
(iii) setting off against any amounts owed to Seller by Buyer for the purchase of
Output hereunder under Section 3.3.
POWER PURCHASE AGREEMENT - Page 37 of 65
So long as Seller timely pays and continues to pay any and all of the Daily LD
Amount when due, Buyer shall not be permitted to terminate this Agree ment for up
to twelve (12) months. The Parties agree that Buyer’s receipt of the Daily LD
Amount shall (x) not be construed as Buyer’s declaration that an Event of Default
has occurred under any provision of Article VII and (y) not limit Buyer’s right to
receive a Termination Payment or Damage Payment, as applicable, upon exercise
of Buyer’s default right pursuant to Article VII. Each Party agrees and
acknowledges that (I) the damages that Buyer would incur due to Seller’s delay in
achieving the Milestones would be difficult or impossible to predict with certainty
and (II) the Daily LD Amount is an appropriate approximation of such damages.
(c) More than Twelve (12) Months Excused Extensions or Non-Payment of Daily LD
Amount; Termination of Agreement . If for all Milestones the combined excused
extensions exceed twelve (12) months in the aggregate as described in Section
4.4(a)(ii), or if for any reason Seller fails to pay, or discontinues paying, any or all
of the Daily LD Amount when due, Buyer may terminate this Agreement by
written notice to Seller. This twelve (12) month period shall not be further extended
as a result of a Force Majeure Event , including a Force Majeure Event as
contemplated by Section 6.3. In Buyer’s sole discretion, Buyer shall be entitled to
collect the Damage Payment within ten (10) days of Seller’s receipt of an invoice
from Buyer therefor by one or more of the following:
(i) drawing upon the Development Assurance (which shall be subject to the
replenishment provision set forth in Section 9.2(a)(i));
(ii) receiving payments from Seller within ten (10) days of receipt of an invoice
from Buyer therefor; and/or
(iii) setting off against any amounts owed to Seller by Buyer for the purchase of
Output hereunder as set forth in Section 3.3.
If Seller fails to achieve the Milestones, including the Construction Milestone and
Commercial Operation Milestone, as permitted in and limited by the performance
excuse provisions set forth in this Section 4.4, only the damages or remedy set forth
in this Section 4.4(c), and no other, shall be available to Buyer; provided that, the
Parties agree that the prior sentence shall not in any way limit Buyer’s right to
receive a Damage Payment or Termination Payment, as applicable, including for
failure to achieve the Construction Milestone or Commercial Operation Milestone,
for any reason other than as described in this Section 4.4, including exercise of
Buyer’s default right pursuant to Article VII.
4.5 Obligation to Schedule and Deliver.
(a) Appointment of Scheduling Coordinator. As of the Execution Date, Buyer hereby
appoints Seller to act on behalf of Buyer as its Scheduling Coordinator under this
Agreement for the transmission, delivery and receipt of Output from the Plant
at the Point of Interconnection in accordance with all applicable CAISO and related
POWER PURCHASE AGREEMENT - Page 38 of 65
rules and protocols. At least ninety (90) days before the beginning of delivery of
Test Energy, Seller shall take all actions and execute and deliver to Buyer or the
CAISO all documents necessary to become and act as Buyer’s Scheduling
Coordinator. Seller as Scheduling Coordinator shall do all things reasonably
needed to comply with any obligations, and minimize any potential lia bility, under
the CAISO Tariff. Seller represents, warrants and certifies that Seller shall be
certified by the CAISO as a qualifying Scheduling Coordinator so long as it
provides Scheduling Coordinator Functions on behalf of Buyer for the Plant. Seller
as Buyer’s Scheduling Coordinator shall comply with all Scheduling Coordinator
Functions under the CAISO Tariff and shall conduct all scheduling for the Plant in
full compliance with the terms and conditions of this Agreement and the applicable
CAISO Tariff, all requirements of EIRP (if applicable) and protocols and
scheduling practices for Energy on a Day-Ahead basis or pursuant to the
Hour-Ahead Scheduling Process, as such terms are defined in the CAISO Tariff,
and the scheduling protocols attached hereto as Exhibit D. Commercial
arrangements for such transmission and delivery services shall be coordinated and
settled by the Scheduling Coordinator directly with the CAISO or other third
parties. Seller shall act as Scheduling Coordinator, and perform any and all duties
and responsibilities related thereto, at Seller’s own expense and at no charge to
Buyer at all time during its appointment as Scheduling Coordinator hereunder .
Buyer may at any time during the Term in its sole discretion and for any reason
replace Seller as Scheduling Coordinator (or any subsequent Scheduling
Coordinator) for the Plant with another Scheduling Coordinator upon fifteen (15)
days advance written notice; provided that in such event the Scheduling
Coordinator being replaced shall within ten (10) days of receipt of such notice
provide copies of all scheduling-related records, data, hist ory and information to
the replacement Scheduling Coordinator simultaneously with written certification
of provision of the same to Buyer.
(b) General Confirmations. The Parties acknowledge their general understanding and
intent, subject to the terms and conditions of this Agreement, as follows:
(i) Seller shall use all reasonable efforts consistent with Prudent Utility
Practice to maximize the Output;
(ii) Seller shall be responsible to arrange for, and shall bear all risks associated
with, delivery of all Output to the Point of Interconnection;
(iii) Buyer shall be obligated to pay for all Output delivered to the Point of
Interconnection (subject to Section 2.4(a)); and
(iv) Buyer shall be responsible to arrange for, and shall bear all risks associated
with, acceptance and transmission of Output at and from the Point of
Interconnection.
(c) Curtailment Rights.
POWER PURCHASE AGREEMENT - Page 39 of 65
(i) Mandatory Dispatch Down Periods. Seller shall reduce delivery amounts
as directed by the CAISO, Participating TO, or any successor thereof during
any Dispatch Down Period. For the avoidance of doubt, Buyer shall not be
required to pay Seller for the Output that Seller could have delivered to
Buyer but for such order.
(ii) Discretionary Curtailment .
(A) Buyer may require Seller to curtail deliveries of Output from the
Plant to the Point of Interconnection for any reason in Buyer’s sole
discretion (a “Discretionary Curtailment”) by delivering a
dispatch notice to Seller, provided that (1) such Discretionary
Curtailments shall be limited to a total of not more than twenty-five
percent (25%) of the Expected Annual Energy Production, with the
first fifty (50) hours of such amount in each Contract Year at no
charge to Buyer, and (2) the dispatch notices shall be consistent with
the operational characteristics set forth in Exhibit D. Seller shall
reduce the Plant’s delivered Output by the amount and for the period
set forth in each dispatch notice.
(B) In addition to paying Seller for all Output actually delivered and not
curtailed hereunder (subject to Section 2.4 and the adjustments in
(a) and/or (b)), Buyer shall pay Seller, on the date payment would
otherwise be due in respect of each month in which any
Discretionary Curtailment occurred after giving effect to the
maximum of fifty (50) hours of no -charge curtailment specified in
Section 4.5(c)(ii)(A)(1), an amount equal to (1) the amount of
Output that Seller could reasonably have delivered to Buyer but for
such Discretionary Curtailment multiplied by (2) the Price, the
Over-Production Energy Price and/or the Pre-FCDS Price, as
applicable.
(iii) Failure to Comply. If Seller fails to comply with a dispatch notice that
meets the requirements for a Discretionary Curtailment, then, for the
amount of Output (measured in MWhs of Output) that the Plant delivered in
contradiction to the dispatch notice, Seller shall pay Buyer the greater of:
(A) Two hundred percent (200%) of the aggregate Price for such MWhs
plus any penalties or other charges actually incurred resulting from
Seller’s failure to comply with the dispatch notice; and
(B) the CAISO’s Real-Time Market price for the applicable PNode for
such MWhs plus any penalties or other charges actually incurred
resulting from Seller’s failure to comply with the dispatch notice.
(d) Eligible Intermittent Resource; Participating Intermittent Resource; and Forecast
Fee.
POWER PURCHASE AGREEMENT - Page 40 of 65
(i) EIRP. Unless the Plant is not EIRP-eligible or as otherwise directed by
Buyer pursuant to Section 2.2(b)(ii)(gg), (i) Seller shall provide Buyer with a copy
of the notice from CAISO certifying the Plant as a Participating Intermittent
Resource as soon as practicable after Seller’s receipt of such notice of certification,
(ii) as of the first date of delivery of Test Energy and until the Plant receives
certification as a Participating Intermittent Resource, Seller, at its sole cost, shall
comply with EIRP and additional protocols issuec by the CAISO for Eligible
Intermittent Resources, and (iii) throughout the Delivery Term, Seller, at its sole
cost, shall participate in and comply with EIRP and all additional protocols issued
by the CAISO for a Participating Intermittent Resource. If the EIRP is no longer
made available by the CAISO or if Buyer directs Seller not to participate in such
program, then throughout the Delivery Term, Seller, at its sole cost, shall
participate in and comply with all other protocols, rules or regulations issued by the
CAISO for generating facilities providing energy on an intermittent basis.
Throughout the Delivery Term, Buyer in its limited capacity as Seller’s Scheduling
Coordinator shall facilitate communication with the CAISO and provide other
administrative materials to CAISO as necessary to satisfy Seller’s obligations as
Seller’s Scheduling Coordinator .
(ii) Forecast Fee. As an Eligible Intermittent Resource, the Scheduling
Coordinator shall schedule Plant Output based upon a day-ahead and hour-ahead
forecast developed by the CAISO (the “Forecasting Service”).
Seller shall bear all forecast fees imposed by the CAISO for use of the Forecasting
Service or any successor CAISO forecasting service up to and including
$0.10/MWh (irrespective of whether Seller uses its own forecasting service in
addition to the Forecasting Service). If such fees exceed this amount, the Parties
shall each be responsible for, and each agrees to pay, fifty percent (50%) of such
excess. Seller agrees to provide the Forecasting Service with sufficient data to
support a reasonably accurate and unbiased forecast with respect to the Output to be
sold by Seller to Buyer. To the extent the CAISO no longer provides the
Forecasting Service (or a successor Forecasting Service) for the Plant Output,
Seller and Buyer shall promptly coordinate to develop an alternative source for
day-ahead and hour-ahead forecast information to be used by the Scheduling
Coordinator for scheduling Plant Output.
4.6 Output Obligations, Performance LDs and Buyer’s Right to Operate.
(a) Two (2) Year Minimum Production Threshold . Seller guarantees that the
Calculation Period Deemed Delivered Energy Production for each Calculation
Period shall be no less than the Two (2) Year Minimum Production Thresho ld for
such Calculation Period in accordance with this Section 4.6. No less frequently
than quarterly during each year, Seller shall calculate and prov ide notice to Buyer
of the then-cumulative amount of the Seller Excused Energy Amount for such year,
along with an explanation in reasonable detail of the calculation thereof based on
historical Plant data, meteorological data, Output projections (including by the
CAISO, if applicable) and other relevant data. The calculation shall be subject to
POWER PURCHASE AGREEMENT - Page 41 of 65
review and approval by Buyer.
(b) Performance LDs. If, for any Calculation Period, the Calculation Period Deemed
Delivered Energy Production is less than the Two (2) Year Minimum Production
Threshold (any such shortfall, in MWh, a “Shortfall”), then Seller may cure such
Shortfall by paying or crediting Buyer liquidated damages based on the amount of
such Shortfall in an amount equal to (i) the amount of such Shortfall multiplied by
(ii) the per MWh Price in this Agreement multiplied by (iii) a factor of 1.2
(“Performance LDs”). In Buyer’s sole discretion, Buyer shall be entitled to collect
Performance LDs within ten (10) days of Seller’s receipt of an invoice from Buyer
therefor by one or more of the following:
(i) drawing upon the Perfo rmance Assurance (which shall be subject to the
replenishment provision set forth in Section 9.2(a)(iii);
(ii) receiving payments from Seller on a monthly basis within ten (10) days of
receipt of an invoice from Buyer therefor ; and/or
(iii) setting off against any amounts owed to Seller by Buyer for the purchase of
Output hereunder as set forth in Section 3.3.
If for any Calculation Period Seller is obligated to pay or credit any Shortfall
damages hereunder, then, for purposes of calculating the Ca lculation Period
Deemed Delivered Energy Production for the immediately succeeding Calculation
Period, the amount of the Calculation Period Deemed Delivered Energy Production
for the first year in such succeeding Calculation Period shall be deemed to be equal
to the greater of (a) the actual Calculation Period Deemed Delivered Energy
Amount for such first year, or (b) eighty percent (80%) of the Calculation Period
Expected Annual Energy Production for such first year.
Except as otherwise expressly stated in this Section 4.6(b), the Performance LDs
shall be Buyer’s sole monetary remedy for any Shortfall or failure to produce the
Output or failure to maintain any specified Two Year Minimum Production
Threshold (subject to Buyer’s right to operate in Section 4.6(c)). The Parties agree
that Buyer’s receipt of the Performance LDs shall (x) not be construed as Buyer’s
declaration that an Event of Default has occurred under any provision of Article VII
and (y) not limit Buyer’s right to receive a Termination Payment upon exercise of
Buyer’s default right pursuant to Article VII. Each Party agrees and acknowledges
that (I) the damages that Buyer would incur due to Shortfall would be difficult or
impossible to predict with certainty and (II) the Performance LDs are an
appropriate approximation of such damages.
(c) [Reserved].
POWER PURCHASE AGREEMENT - Page 42 of 65
ARTICLE V
BUYER’S OBLIGATIONS
5.1 Delivery and Transmission.
Except for Seller’s obligations pursuant to Sections 3.1, 4.1(k), 4.1(l) and 4.5(d), Buyer
shall be solely responsible for paying costs and charges associated with the delivery and
receipt of the Output under this Agreement at the Point of Interconnection and for the
transmission and delivery of the Output from the Point of Interconnection to any other
point downstream of the Point of Interconnection (including, without limitation,
transmission costs and charges, competition transition charges, applicable control area
service charges, transmission congestion charges, inadvertent energy flows, any other
CAISO charges related to the transmission of such Output by the CAISO and any charge
assessed or collected in the future pursuant to any utility tariff or rate schedule, however
defined, for transmission or transmission-related service rendered by or for any
transmission-owning or operating entity). If and to the extent that Seller fails to comply
with the notice provisions in Section 4.1(g) concerning Forced Outages or with its
obligations as outlined in the previous sentence, Seller shall be wholly responsible for all
imbalances, deviations, or any other CAISO charges or penalties associated with such
Forced Outage or CAISO Tariff obligation (it being understood, however, that all such
charges and penalties (if any) shall be borne by Buyer if Seller has not failed to comply
with such provisions or obligations).
5.2 Taxes.
Buyer shall pay and be fully responsible for any sales, use, gross receipts, utility or other
taxes, assessments or fees, if any, incurred or imposed on the sale or transfer of Output
from Seller to Buyer under this Agreement. Buyer shall not be responsible for any taxes
measured on the net income of Seller, ad valorem taxes paid by Seller that are associated
with Seller’s rights and privileges relating to the Site or any taxes imposed as a result of
Seller’s corporate structure, including, without limitation, limited liability company or
other entity fees and taxes.
5.3 Notification of Transmission Outages.
Buyer shall exercise reasonable efforts to provide Seller with as much advance notice as
practicable of any Forced Outages on the Participating TO System or other transmission or
delivery facilities which is reasonably likely to result in a Dispatch Down Period.
POWER PURCHASE AGREEMENT - Page 43 of 65
ARTICLE VI
FORCE MAJEURE
6.1 Remedial Action.
Subject to the limitation on extensions of Milestones set forth in Section 4.4(a), a Party
shall not be liable to the other Party if the Party is prevented from performing its
obligations hereunder due to a Force Majeure Event. The Party rendered unable to fulfill
an obligation by reason of a Force Majeure Event shall take all action necessary to remove
such inability with all due speed and diligence. The non-performing Party shall be prompt
and diligent in attempting to mitigate the effects of and to remove the cause of its failure to
perform, and nothing herein shall be construed as permitting that Party to continue to fail to
perform after said cause has been removed. Notwithstanding the foregoing, the existence
of a Force Majeure Event shall not excuse any Party from its obligations to make payment
of amounts due hereunder.
6.2 Notice.
In the event of any delay or nonperformance resulting from a Force Majeure Event, the
Party suffering the Force Majeure Event shall, as soon as practicable under the
circumstances, notify the other Party, in writing, of the nature, cause, date of
commencement thereof and the anticipated extent of any delay or interruption in
performance.
6.3 Termination Due To Force Majeure Event.
If a Party is prevented in any material respect from performing any material obligations
under this Agreement solely due to a Force Majeure Event lasting for a period of twelve
(12) consecutive months or longer, the unaffected Party may terminate this Agreement ,
without liability of either Party to the other, upon thirty (30) calendar days’ prior written
notice at any time following expiration of such period of twelve (12) consecutive months .
In such event, Buyer shall promptly return to Seller all Development Assurance, Interim
Assurance or Performance Assurance, as applicable, less any LD Amount paid by or due
and payable by Seller prior to the date of such termination for reasons unrelated to this
Section 6.3. For the avoidance of doubt, this Section 6.3 shall not affect the rights and
remedies associated with any other termination rights set forth in this Agreement.
POWER PURCHASE AGREEMENT - Page 44 of 65
ARTICLE VII
DEFAULT, REMEDIES AND TERMINATION
7.1 Events of Default by Buyer.
The following shall each constitute an “Event of Default” by Buyer:
(a) Buyer breaches any material obligation or covenant (other than one covered by
Section 7.1(b) or (c) of this Agreement) and fails to cure such breach within thirty
(30) calendar days after written notification of breach by Seller or, if the breach
cannot be cured within thirty (30) calendar days, such longer period as may be
necessary to cure such breach as long as Buyer is exercising dilige nt efforts to cure
such breach;
(b) Buyer fails to make any payment when due under this Agreement within thirty (30)
calendar days after written notice that such payment is due; or
(c) Buyer becomes Bankrupt.
7.2 Events of Default by Seller.
The following shall each constitute an “Event of Default” by Seller:
(a) Seller breaches any material obligation or covenant (other than ones covered by
Sections 7.2(b) through and including (k) of this Agreement or for which a remedy
is specified) and fails to cure such breach within thirty (30) calendar days after
written notification of breach by Buyer or, if the breach cannot be cured within
thirty (30) calendar days, such longer period as may be necessary to cure such
breach as long as Seller is exercising diligent efforts to cure such breach;
(b) Seller fails to make any payment when due under this Agreement within fifteen
(15) calendar days after written notice that such payment is due;
(c) Seller becomes Bankrupt ;
(d) Seller consolidates or amalgamates with, or merges with or into, or transfers all or
substantially all of its assets to, another entity and, at the time of such consolidation,
amalgamation, merger or transfer, the resulting, surviving or transferee entity fails
to assume all the obligations of Seller under this Agreement to which it or its
predecessor was a party by operation of Law or pursuant to an agreement
reasonably satisfactory to Buyer;
(e) Seller sells or transfers the Output (or any individual component thereof),
Expansion Plant Output (or any individual component thereof), if any, the right to
the Output (or any individual component thereof), or the right to the Expansion
Plant Output (or any individual component thereof) to the extent that such
Expansion Plant Output is purchased by Buyer, to any Person other than Buyer.
POWER PURCHASE AGREEMENT - Page 45 of 65
(f) Seller fails to comply with the terms of Buyer’s right of first refusal as described in
Section 2.4(a) or 2.10 of this Agreement;
(g) Subject to Section 4.4, Seller fails, for any reason other than an unauthorized act or
omission by Buyer, to achieve the Construction Milestone;
(h) Subject to Section 4.4, Seller fails, for any reason other than an unauthorized act or
omission by Buyer, to achieve the Commercial Operation Milestone;
(i) If at any time during the Term of this Agreement, Seller delivers or attempts to
deliver to the Point of Interconnection for sale under this Agreement Output that
was not generated by the Plant;
(j) Failure by Seller to satisfy the creditworthiness or collateral requirements agreed to
pursuant to Sections 9.1, 9.2 or 9.3 of this Agreement; or
(k) Failure by Seller to achieve the Contract Delivery Start Date.
7.3 Termination for Default.
(a) Declaration of Early Termination Date. If an Event of Default with respect to a
defaulting Party shall have occurred, is continuing and has not been cured, the other
Party (the “Non-Defaulting Party”) shall have the right to:
(i) send notice, designating a day, no earlier than ten (10) calendar days after
the day such notice is deemed to be received as an early termination date of
this Agreement (“Early Termination Date”) on which to (A) collect the
Damage Payment if any Event of Default arose at any time prior to the
commencement of the Delivery Term, including an Event of Default
pursuant to Section 7.2(j), or (B) collect the Termination Payment (which
shall be calculated in accordance with Section 7.3(b)) if any Event of
Default arose during the Delivery Term;
(ii) accelerate all amounts owing between the Parties, terminate this Agreement
and end the Delivery Term effective as of the Early Termination Date;
(iii) withhold any payments due to the Defaulting Party under this Agreement;
(iv) suspend performance;
(v) exercise its rights pursuant to Section 9.1 of this Agreement to draw upon
and retain Development Assurance, Interim Assurance or Performance
Assurance, as applicable; and
(vi) exercise any other right or remedy available at Law or in equity to the extent
otherwise permitted under this Agreement.
(b) Calculation of Termination Payment .
POWER PURCHASE AGREEMENT - Page 46 of 65
(i) The Non-Defaulting Party shall calculate, in a commercially reasonable
manner, a Termination Payment as of the Early Termination Date. Third
parties supplying information for purposes of the calculation of Gains or
Losses may include dealers in the relevant markets, end-users of relevant
output, information vendors and other sources of market information. If the
Non-Defaulting Party uses the market price for a comparable transaction to
determine the Gains or Losses, such price should be determined by using
the average of market quotations provided by three (3) or more bona fide
unaffiliated market participants. If the number of available quotes is three,
then the average of the three quotes shall be deemed to be the market price.
Where a quote is in the form of bid and ask prices, the price that is to be
used in the averaging is the midpoint between the bid and ask price. The
quotes obtained shall be: (i) for a like amount, (ii) of the same Output, (iii)
at the same (or a reasonably equivalent) PNode, and (iv) for the remainder
of the Delivery Term, or in any other commercially reasonable manner.
(ii) If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses
and Costs, if any, resulting from such termination of this Agreement, the
amount of the Termination Payment shall be zero.
(iii) The Non-Defaulting Party shall not have to enter into replacement
transactions to establish a Termination Payment.
(iv) The Termination Payment shall be the sole and exclusive remedy available
to the Non-Defaulting Party in connection with its termination of this
Agreement if any Event of Default arose during the Delivery Term, and
shall not include consequential, incidenta l, punitive, exemplary, indirect or
business interruption damages.
(c) Notice of Termination Payment . As soon as practicable after notice of termination,
notice shall be given by the Non-Defaulting Party to the Defaulting Party of the
amount of the Termination Payment due from the Defaulting Party to the
Non-Defaulting Party, if any. The notice shall include a written statement
explaining in reasonable detail the calculation of such amount and the sources for
such calculation. The Termination Payment shall be made to the Non-Defaulting
Party fifteen (15) calendar days after such termination payment notice is effective.
(d) Disputes Regarding Termination Payment . If the Defaulting Party disputes the
Non-Defaulting Party’s calculation of the Termination Payment, in whole or in
part, the Defaulting Party shall, within ten (10) calendar days of receipt of the
Non-Defaulting Party’s calculation of the Termination Payment, provide to the
Non-Defaulting Party a detailed written explanation of the basis for such dispute.
Following delivery of such a notice, disputes regarding the Termination Payment
shall be resolved in accordance with Section 10.10.
(e) Damage Payment . The Parties agree that the Damage Payment to be paid by Seller
for any Event of Default arising prior to the commencement of the Delivery Term
POWER PURCHASE AGREEMENT - Page 47 of 65
shall be considered liquidated damages and not a penalty, in accordance with
Section 7.4(D) and subject to Section 7.4(B).
7.4 Limitation of: Remedies, Liability and Damages.
(A) THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND
MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY
THE ESSENTIAL PURPOSES HEREOF.
(B) EXCEPT AS OTHERWISE PROVIDED HEREIN, THE RIGHTS AND
REMEDIES OF A PARTY PURSUANT TO THIS ARTICLE VII SHALL BE
CUMULATIVE AND IN ADDITION TO THE RIGHTS OF THE PARTIES
OTHERWISE PROVIDED IN THIS AGREEMENT.
(C) FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY
OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR
MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET
FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES
AT LAW OR IN EQUITY ARE WAIVED, UNLESS THE PROVISION
PROVIDES THAT THE EXPRESS REMEDIES ARE IN ADDITION TO
OTHER REMEDIES THAT MAY BE AVAILABLE.
(D) IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY AND ALL SUCH OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED UNLESS
EXPRESSLY HEREIN PROVIDED. NEITHER PARTY SHALL BE LIABLE
TO THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF USE, LOSS OF
REVENUES, LOSS OF PROFIT, OR OTHER BUSINESS INTERRUPTION
DAMAGES, INTEREST CHARGES, COST OF CAPITAL OR CLAIMS OF ITS
CUSTOMERS OR MEMBERS TO WHICH SERVICE IS MADE, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY
PROVISION OR OTHERWISE EXCEPT TO THE EXTENT PART OF AN
EXPRESS REMEDY OR MEASURE OF DAMAGES HEREIN. EXCEPT AS
SET FORTH IN ARTICLE IX AND EXCEPT TO THE EXTENT SELLE R
VIOLATES ITS UNDERTAKING NOT TO PROVIDE OR SELL RIGHTS TO
PART OR ALL OF THE OUTPUT OR EXPANSION PLANT OUTPUT, IF
ANY, TO A PARTY OTHER THAN BUYER (EXCEPT AS SET FORTH IN
SECTION 2.4(A)), SELLER SHALL NOT BE LIABLE TO BUYER FOR
FAILURE TO PROVIDE ANY SPECIFIC AMOUNT OF OUTPUT
HEREUNDER.
POWER PURCHASE AGREEMENT - Page 48 of 65
(E) THE PARTIES ACKNOWLEDGE AND AGREE THAT THE (I) THE DAILY
LD AMOUNT SET FORTH IN SECTION 4.4(b), (II) THE DAMAGE
PAYMENT SET FORTH IN SECTION 4.4(c), (III) THE DAMAGE PAYMENT
SET FORTH IN SECTION 7.3(a)(i)(B), AND (IV) THE PERFORMANCE LDS
SET FORTH IN SECTION 4.6(b); ARE EACH REASONABLE AND
REPRESENT A FAIR AND GENUINE ESTIMATE OF THE DAMAGES THAT
WOULD OCCUR RELATED TO THE EVENTS DESCRIBED THEREIN. THE
PARTIES ACKNOWLEDGE THAT IT WOULD BE IMPRACTICABLE OR
EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN SUCH
CIRCUMSTANCES, AND THEREFORE THEY HAVE DEEMED THE
LIQUIDATED DAMAGES SET FORTH ABOVE TO BE THE AMOUNT OF
DAMAGE SUSTAINED BY BUYER OR SELLER UPON THE OCCURRENCE
OF SUCH CIRCUMSTANCES. THE PARTIES FURTHER AGREE THAT
PAYMENT OF SUCH AMOUNTS SHALL BE AS AND FOR LIQUIDATED
DAMAGES AND NOT AS A PENALTY AND ARE THEREFORE NOT
SUBJECT TO AVOIDANCE UNDER CALIFORNIA CIVIL CODE SECTION
1671.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller’s Representations and Warranties.
In addition to the representations and warranties set forth in other sections of this
Agreement, Seller represents and warrants to Buyer that as of Seller Execution:
(a) Seller is duly organized and validly existing as a limited liability company under
the laws of Delaware, and has the lawful power to engage in the business it
presently conducts and contemplates conducting in this Agreement, and Seller is
duly qualified in California and each jurisdiction wherein the nature of the business
transacted by it makes such qualification necessary;
(b) Seller has the legal power and authority to make and carry out this Agreement and to
perform its obligations hereunder; all such actions have been duly authorized by all
necessary proceedings on its part;
(c) Either:
(1) the Plant shall on the Commercial Operation Date be a "qualifying small
power production facility" (“QF”) as that term is defined in Section
3(17)(C) of the Federal Power Act (“FPA”) and shall be entitled to all of the
exemptions from regulation provided in 18 CFR §§ 292.601(c) and 292.602
applicable to a QF with the capacity of the Plant; and (B) no approval
POWER PURCHASE AGREEMENT - Page 49 of 65
(except with respect to "qualifying small power pro duction facility" status
and market-based rate authorization under Section 205 of the FPA) with
respect to this Agreement is required from FERC; or
(2) Seller shall on the Commercial Operation Date be an "exempt wholesale
generator" as that term is defined in Section 1262(6) of the Public Utility
Holding Company Act of 2005, and (B) no approval (except with respect to
“exempt wholesale generator" status and market based rate authorization
under Section 205 of the FPA) with respect to this Agreement is required
from FERC. In the event that the Plant is not a "qualifying small power
production facility" that is exempt from Sections 205 and 206 of the FPA on
the Commercial Operation Date or any date thereafter, Seller shall make
appropriate filings under the Federal Power Act within sixty (60) calendar
days so as to comply with applicable law, subject at all times to the
provisions of Section 10.19 of this Agreement;
(d) The execution, delivery and performance of this Agreement by Seller shall not
conflict with its governing documents, any applicable laws, or any covenant,
agreement, understanding, decree or order to which Seller is a party or by which it
is bound or affected;
(e) This Agreement has been duly and validly executed and delivered by Seller and, as
of Seller Execution, constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms against Seller, except to t he extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally or by
general principles of equity;
(f) There are no actions, suits, proceedings or investigations pending or, to the
knowledge of Seller, threatened, in writing, against Seller or any of its affiliates, at
law or in equity, before any Governmental Authority, which individually or in the
aggregate are reasonably likely to have a materially adverse effect on the business,
properties or assets or the condition, financial or otherwise, of Seller, or to result in
any impairment of Seller’s ability to perform its obligations under this Agreement;
(g) It is not Bankrupt and there are no proceedings pending or being contemplated by it
or any of its affiliates, or, to its knowledge, threatened against it or its affiliates
which would result in it being or becoming Bankrupt; and
(h) It is, or shall be deemed for all purposes to be, a forward contract merchant within
the meaning of the U.S. Bankruptcy Code (as in effect as of the Execution Date of
this Agreement).
POWER PURCHASE AGREEMENT - Page 50 of 65
8.2 Buyer Representations and Warranties.
Buyer represents and warrants to Seller that as of the Execution Date:
(a) Buyer is a municipal corporation, duly organized and validly existing, and has the
lawful power to engage in the business it presently conducts and contemplates
conducting in this Agreement;
(b) Buyer has the legal power and authority to make and carry out this Agreement and
to perform its obligations hereunder and all such actions have been duly authorized
by all necessary proceedings on its part;
(c) The execution, delivery and performance of this Agreement by Buyer shall not
conflict with its governing documents, any applica ble laws or any covenant,
agreement, understanding, decree or order to which Buyer is a party or by which it
is bound or affected;
(d) This Agreement has been duly and validly executed and delivered by Buyer and, as
of the Execution Date, constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms against Buyer, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally or by
general principles of equity;
(e) There are no actions, suits, proceedings or investigations pending or, to the
knowledge of Buyer, threatened, in writing, against Buyer, at law or in equity,
before any Governmental Authority, which individually or in the aggregate are
reasonably likely to have a materially adverse effect on the business, properties or
assets or the condition, financial or otherwise, of Buyer, or to result in any
impairment of Buyer’s ability to perform its obligat ions under this Agreement;
(f) It is not Bankrupt and there are no proceedings pending or being contemplated by it
or, to its knowledge, threatened against it which would result in it being or
becoming Bankrupt; and
(g) It is, or shall be deemed for all purposes to be, a forward contract merchant within
the meaning of the U.S. Bankruptcy Code (as in effect as of the Execution Date of
this Agreement).
8.3 Covenants.
(a) General Covenants. In addition to other covenants in this Agreement, each Party
covenants that throughout the Delivery Term:
(i) it shall continue to be duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its formation;
POWER PURCHASE AGREEMENT - Page 51 of 65
(ii) it shall maintain (or obtain from time to time as required, including through
renewal, as applicable) all regulatory authorizations necessary for it to
legally perform its obligations under this Agreement; and
(iii) it shall perform its obligations under this Agreement in a manner that does
not violate any of the terms and conditions in its governing documents, any
contracts to which it is a party or any Law, rule, regulation, order or the like
applicable to it.
(b) Seller Covenants. In addition to other covenants in this Agreement, Seller
covenants that :
(i) Throughout the Delivery Term that it shall take no action or permit any
other Person or entity (other than Buyer) to take any action that would
impair in any way Buyer’s ability to rely on the Plant in order to satisfy its
Resource Adequacy Requirements; and
(ii) It shall comply with all CAISO Tariff requirements applicable to an
Interconnection Customer (as defined in the CAISO Tariff) and shall take
any other necessary action, including payment of fees and submission of
requests, applications or other documentation, to promote the completion of
the Electric System Upgrades prior to the Commercial Operation Date.
ARTICLE IX
DEVELOPMENT, INTERIM AND PERFORMANCE ASSURANCE
9.1 Grant of Security Interest/Remedies.
To secure its obligations under this Agreement and to the extent Seller delivers the
Development Assurance, Interim Assurance and/or Performance Assurance, as applicable,
hereunder, Seller hereby grants to Buyer, as the secured party, a first priority secu rity
interest in, and lien on (and right of setoff against), and assignment of, all such
Development Assurance, Interim Assurance and/or Performance Assurance posted with
Buyer in the form of cash collateral and cash equivalent collateral and any and all p roceeds
resulting therefrom or the liquidation thereof, whether now or hereafter held by, on behalf
of, or for the benefit of, Buyer. Within thirty (30) calendar days of the delivery of the
Development Assurance, Interim Assurance or Performance Assurance, as applicable,
Seller agrees to take such action as Buyer reasonably requires in order to perfect a
first-priority security interest in, and lien on (and right of setoff against), such
Development Assurance, Interim Assurance or Performance Assurance and any and all
proceeds resulting therefrom or from the liquidation thereof, respectively. Upon or any
time after the occurrence or deemed occurrence and during the continuation of an Event of
Default or an Early Termination Date, Buyer, as the Non-Defaulting Party, may do any one
or more of the following:
POWER PURCHASE AGREEMENT - Page 52 of 65
(a) exercise any of the rights and remedies of a secured party with respect to all
Development Assurance, Interim Assurance or Performance Assurance, as applicable,
including any such rights and remedies under the law then in effect;
(b) exercise its rights of setoff against any and all property of Seller, as the Defaulting
Party, in the possession of the Buyer or Buyer’s agent;
(c) draw on any outstanding Letter of Credit issued for its benefit; and
(d) liquidate all Development Assurance, Interim Assurance or Performance Assurance, as
applicable, then held by or for the benefit of Buyer free from any claim or right of any
nature whatsoever of Seller, including any equity or right of purchase or redemption by
Seller.
Buyer shall apply the proceeds of the collateral realized upon the exercise of any such
rights or remedies to reduce Seller’s obligations under the Agreement (Seller remaining
liable for any amounts owing to Buyer after such application), subject to the Buyer’s
obligation to return any surplus proceeds remaining after such obligations are satisfied in
full.
9.2 Development Assurance, Interim Assurance and Performance Assurance.
(a) Provision of Security by Seller. Except as set forth in Section 2.1(b), Seller agrees
to deliver to Buyer collateral to secure its obligations under this Agreement which
Seller shall maintain in full force and effect for the period posted with Buyer, as
follows:
(i) Development Assurance. Development Assurance pursuant to this Section
9.2(a)(i) in the amount of Five Million Two Hundred Thousand Dollars
($5,200,000.00) (equal to $200 per kW AC multiplied by the Expected
Initial Capacity) and in the form of cash or a Letter of Credit within ten (10)
calendar days following the Execution Date until Seller posts the Interim
Assurance or Performance Assurance pursuant to Section 9.2(a)(ii) or (iii)
below with Buyer, as applicable; provided that, if Buyer collects or is
entitled to collect a Daily LD Amount by drawing upon the Development
Assurance pursuant in Section 4.4(b)(i), Seller agrees that within ten (10)
Business Days following written notice from Buyer related thereto, Seller
shall replenish the Development Assurance by an amount equal to the
encumbered Development Assurance ;
(ii) Interim Assurance. Interim Assurance pursuant to this Section 9.2(a)(ii) in
the amount of Two Million Six Hundred Thousand Dollars ($2,600,000,00)
and in the form of cash or a Letter of Credit from the Commercial Operation
Date until the Seller posts Performance Assurance pursuant to Section
9.2(a)(iii) below; provided that, (A) with Buyer’s consent, Seller may elect
to apply a portion of the Development Assurance posted pursuant to Section
9.2(a)(i) toward the Interim Assurance posted pursuant to this Section
POWER PURCHASE AGREEMENT - Page 53 of 65
9.2(a)(ii); and (B) Seller shall not be required to deliver to Buyer the Interim
Assurance if the Commercial Operation Date occurs on the same date as t he
Contract Delivery Start Date; and (C) if Buyer collects (or is entitled to
collect) a Daily LD Amount for failure to achieve the Milestones by
drawing upon the Interim Assurance pursuant to Section 4.4(b), Seller
agrees that within ten (10) Business Days following written notice from
Buyer related thereto, Seller shall replenish the Interim Assurance by an
amount equal to the encumbered Interim Assurance; and
(iii) Performance Assurance. Performance Assurance pursuant to this Section
9.2(a)(iii) in the amount of Two Million Six Hundred Thousand
($2,600,000.00) (equal to $100 per kW AC multiplied by the Expected
Initial Capacity) and in the form of cash or a Letter of Credit from the
Contract Delivery Start Date and ending at the expiration of the Delivery
Term; provided that, (A) with Buyer’s consent, Seller may elect to apply a
portion of the Development Assurance or Interim Assurance posted
pursuant to Sectio n 9.2(a)(i) or 9.2(a)(ii) toward the Performance
Assurance posted pursuant to this Section 9.2(a)(iii), as applicable; and (B)
if Buyer collects or is entitled to collect Performance LDs by drawing upon
the Performance Assurance pursuant in Section 4.6(b), Seller agrees that
within ten (10) Business Days following written notice from Buyer related
thereto, Seller shall replenish t he Performance Assurance by an amount
equal to the encumbered Performance Assurance.
The amount of Development Assurance, Interim Assurance and Performance
Assurance required under this Agreement shall not be deemed a limitation of
damages.
(b) Use of Development Assurance.
Buyer shall be entitled to draw upon the Development Assurance posted by Seller
for its Daily LD Amount until the Development Assurance is exhausted , subject to
the provision for replenishment set forth in Section 9(a)(1). Buyer shall also be
entitled to draw upon the Development Assurance for any damages arising upon
Buyer’s declaration of an Early Termination Date.
(c) Termination of Development Assurance.
If (i) Buyer terminates this Agreement pursuant to Section 2.1(b) or 2.9(c), or (ii)
after the Commercial Operation Date (as extended pursuant to Section 4.4(a)), no
damages are due and owing to Buyer under this Agreement ; then in either case
Seller shall no longer be required to maintain the Development Assurance, and
Buyer shall return to Seller the Development Assurance, plus interest under the
applicable account, less the undisputed amounts drawn in accordance with Section
9.2(b), if any. The Development Assurance (or portion thereof) shall be returned
within thirty (30) calendar days of Seller’s provision of the Interim Assurance or
Performance Assurance unless, with Buyer’s consent, Seller elects to apply the
POWER PURCHASE AGREEMENT - Page 54 of 65
Development Assurance (or a portion thereof) toward the Interim Assurance or
Performance Assurance posted pursuant to Section 9.2(a)(ii) or (iii), as applicable.
(d) Use of Interim Assurance.
Buyer shall be entitled to draw upon the Interim Assurance posted by Seller for any
damages arising in or during the time period from the Commercial Operation Date
until the Contract Delivery Start Date upon Buyer’s declaration of an Early
Termination Date.
(e) Termination of Interim Assurance.
If after the Contract Delivery Start Date, no damages are due and owing to Buyer
under this Agreement, then Seller shall no longer be required to maintain the
Interim Assurance, and Buyer shall return to Seller the Interim Assurance, plus
interest under the applicable account, less the amounts drawn in accordance with
Section 9.2(d). The Interim Assurance (or portion thereof) shall be returned to
Seller within thirty (30) calendar days of Seller’s provision of the Performance
Assurance unless, with Buyer’s consent, Seller elects to apply the Interim
Assurance posted pursuant to Section 9.2(a)(ii) toward the Performance Assurance
posted pursuant to Section 9.2(a)(iii), as applicable.
(f) Return of Performance Assurance and Interest.
Buyer shall return the unused portion of Development Assurance, Interim
Assurance or Performance Assurance, as applicable, including the payment of any
interest due thereon to Seller within thirty (30) days after the following has
occurred: (i) the Term of the Agreement has ended, or subject to Section 7.3, an
Early Termination Date has occurred, as applicable; and (ii) all payment
obligations of the Seller arising under this Agreement, including payments
pursuant to a Damage Payment, Termination Payment, indemnification payments
or other damages are paid in full (whether directly or indirectly such as through
set-off or netting).
9.3 Letter of Credit.
Development Assurance, Interim Assurance or Performance Assurance provided in the
form of a Letter of Credit shall be subject to the following provisions:
(a) Renewal of Letter of Credit . If Seller has provided a Letter of Credit pursuant to
any of the applicable provisions in this Article Nine, then Seller shall renew or
cause the renewal of each outstanding Letter of Credit on a timely basis in
accordance with this Agreement.
(b) Failure of Letter of Credit and Cure. In the event the issuer of such Letter of Credit
at any time (i) fails to maintain the requirements of an Eligible LC Bank or Letter of
Credit, (ii) indicates its intent not to renew such Letter of Credit, or (iii) fails to
honor Buyer’s properly documented request to draw on such Letter of Credit, Seller
POWER PURCHASE AGREEMENT - Page 55 of 65
shall cure such occurrence by complying with either (A) or (B) below in an amount
equal to the outstanding Letter of Credit, and by completing the action within five
(5) Business Days after the date of Buyer’s notice to Seller of an occurrence listed
in this subsection (Seller’s compliance with either (A) or (B) below is considered
the “Cure”):
(A) providing a substitute Letter of Credit that is issued by an Eligible LC Bank,
other than the bank which is the subject of Buyer’s notice to Seller in
Section 9.3(b) above, or
(B) posting cash.
If Seller fails to cure or if such Letter of Credit expires or terminates without a full
draw thereon by Buyer, or fails or ceases to be in full force and effect at any time
that such Letter of Credit is required pursuant to the terms of this Agreement, then
Seller shall have failed to meet the creditworthiness or collateral require ments of
Section 9.2.
(c) Substitute Letter of Credit . Notwithstanding the foregoing in Section 9.3(b), if, at
any time, the issuer of such Letter of Credit has a Credit Rating on “credit watch”
negative or developing by S&P, or is on Moody’s “watch list” under review for
downgrade or uncertain ratings action (either a “Watch”), then Buyer may make a
demand to Seller by notice (“LC Notice”) to provide a substitute Letter of Credit
that is issued by an Eligible LC Bank, other than the bank on a Watch (“Substitute
Letter of Credit”). The Parties shall have thirty (30) Business Days from the LC
Notice to negotiate a Substitute Letter of Credit (“Substitute Bank Period”).
(i) If the Parties do not agree to a Substitute Letter of Credit by the end of the
Substitute Bank Period, then Buyer shall provide Seller with Notice within
five (5) Business Days following the expiration of the Substitute Bank
Period (“Ineligible LC Bank Notice Period”) that either:
(A) Buyer agrees to continue accepting the then currently outstanding
Letter of Credit from the bank that is the subject of the LC Notice,
but such bank shall no longer be an Eligible LC Bank (“Ineligible
LC Bank”) and Buyer shall not accept future or renewals of Letters
of Credit from the Ineligible LC Bank; or
(B) the bank that is the subject of the LC Notice is an Ineligible LC
Bank and Seller shall then have thirty (30) days from the date of
Buyer’s Notice to Cure pursuant to Section 8.5(b) and, if Seller fails
to Cure, then t he last paragraph in Section 9.3(b) shall apply to
Seller.
(ii) If the Parties have not agreed to a Substitute Letter of Credit and Buyer fails
to provide a Notice during the Ineligible LC Bank Notice Period above,
POWER PURCHASE AGREEMENT - Page 56 of 65
then Seller may continue providing the Letter of Credit posted immediately
prior to the LC Notice.
(d) Letter of Credit Costs. In all cases, the reasonable costs and expenses of
establishing, renewing, substituting, canceling, increasing, reducing, or otherwise
administering the Letter of Credit shall be borne by Seller.
ARTICLE X
MISCELLANEOUS
10.1 Indemnification.
(a) Seller Indemnification Prior to Commercial Operation Date . Up to and including
the Contract Delivery Start Dat e, Seller shall indemnify, defend, and hold harmless
Buyer, and its City Council members, officers, agents and employees, from any
claim, liability, loss, injury or damage arising out of, or in connection with, the
negligence, willful misconduct or violation of applicable law by Seller and/or its
agents, employees or sub-contractors, excepting only loss, injury or damage caused
by the negligence, willful misconduct or violation of applicable law of personnel
employed by Buyer to the extent caused by such negligence, willful misconduct or
violation of applicable law of Buyer’s employed personnel. If an Indemnified
Party determines that it is entitled to defense and indemnification under this Section
10.1, such Indemnified Party shall promptly notify the Indemnifying Party in
writing of the losses, and provide all reasonably necessary or useful information,
and authority to settle and/or defend the losses. No settlement that would impose
costs or expense upon the Indemnified Party shall be made without such Party’s
prior written consent.
(b) Seller and Buyer Indemnification after Commercial Operation Date. After the
Contract Delivery Start Date, each Party (“Indemnifying Party”) shall defend,
indemnify and hold harmless the other Party and its officers, directors, employees,
agents, affiliates and representatives and, in the case of Buyer, its City Council
members (each, an “Indemnified Party”) from and against any and all losses,
including but not limited to losses arising from personal injury or death, or damage
to property, but only to the extent such losses result from or arise out of the
negligence, willful misconduct or violation of applicable law by the Indemnifying
Party, its employees, subcontractors or agents. If an Indemnified Party determines
that it is entitled to defense and indemnification under this Section 10.1, such
Indemnified Party shall promptly notify the Indemnifying Party in writing of the
losses, and provide all reasonably necessary or useful information, and authority to
settle and/or defend the losses. No settlement that would impose costs or expense
upon the Indemnified Party shall be made without such Party’s prior written
consent.
POWER PURCHASE AGREEMENT - Page 57 of 65
10.2 Assignment.
(a) General Assignment . Except as provided in Sections 10.2 (b) and (c), neither Party
shall assign this Agreement or its rights hereunder without the prior written consent
of the other Party, which consent shall not be unreasonably withheld , conditioned
or delayed so long as among other things (i) the assignee as sumes the transferring
Party’s payment and performance obligations under this Agreement, (ii) the
assignee agrees in writing to be bound by the terms and conditions hereof, (iii) the
transferring Party delivers financial statements, information and other evidence
satisfactory to the non-transferring Party of the proposed assignee’s technical and
financial capability to fulfill the assigning Party’s obligations hereunder and (iv)
the transferring Party delivers such tax and enforceability assurance as the o ther
Party may reasonably request. Seller shall be responsible for reimbursement of
Buyer’s Attorneys’ Fees related to this Section 10.2(a) as described in Section
10.12(a).
(b) Assignment to Financing Providers. Notwithstanding any provision to the contrary
in this Section 10.2, Seller shall be permitted to assign this Agreement as collateral
for any financing or refinancing of the Plant with the prior written consent of the
Buyer, which consent shall not be unreasonably withheld, conditioned or delayed.
If Buyer gives its consent, then such consent shall be in a form substantially similar
to the Form of Lender Agreement attached hereto as Exhibit F-2; provided that (i)
Buyer shall not be required to consent to any additional terms or conditions beyond
those contained in Exhibit F-2, including extension of any cure periods or
additional remedies for financing providers and (ii) Seller shall be responsible for
reimbursement of Buyer’s Attorneys’ Fees as described in Section 10.12(a).
(c) Assignment in Connection with a Change in Control. Notwithstanding any
provision to the contrary in this Section 10.2, any direct or indirect change of
control of Seller (whether voluntary or by operatio n of Law) shall be deemed an
assignment and shall require the prior written consent of Buyer, which consent
shall not be unreasonably withheld, conditioned or delayed. At Buyer’s request,
Seller shall promptly deliver financial statements, information and other evidence
satisfactory to Buyer regarding the proposed change of control of Seller. Seller
shall be responsible for reimbursement of Buyer’s Attorneys’ Fees related to this
Section 10.2(c) as described in Section 10.12(a).
(d) Unauthorized Assignment. Any assignment or purported assignment in violation
of this Section 10.2 is void.
POWER PURCHASE AGREEMENT - Page 58 of 65
10.3 Notices.
Unless otherwise expressly allowed hereunder, any notice, demand, request, or
communication required or authorized by this Agreement shall be delivered either by hand,
facsimile, electronic mail, overnight courier or mailed by certified mail, return receipt
requested with postage prepaid, to:
City of Palo Alto
250 Hamilton Avenue, 8th Floor
Palo Alto, CA 94301
Attention: Senior Deputy City Attorney / Utilities
Fax: (650) 329-2646
Email: jessica.mullan@cityofpaloalto.org
with a copy to:
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Attention: Director of Utilities
Fax: (650) 329-2946
Email:
on behalf of Buyer;
and to:
Hecate Energy Palo Alto LLC
115 Rosa Parks Blvd.
Nashville, TN 37203
Attention: Chris Bullinger
Telephone: 480-239-5617
Email: cbullinger@hecateenergy.com
with a copy to:
Hecate Energy, LLC
300 S. Wacker Dr., Ste. 1850
Chicago, IL 60606
Attention: Craig Overmyer
Telephone: 312-357-9621
Email: covermyer@hecateenergy.com
on behalf of Seller.
The designation and titles of the person to be notified or the address of such person may be
changed at any time by written notice delivered in the manner set forth in this Section 10.3.
POWER PURCHASE AGREEMENT - Page 59 of 65
Whenever this Agreement requires or permits delivery of a “notice” (or requires a Party to
“notify”), the Party with such right or obligation shall provide a written communication in
the manner specified herein. Any such notice, demand, request, or communication shall be
deemed received (i) if delivered by the delivering Party by hand, facsimile or electronic
mail on the Business Day on which such notice was transmitted if received before 5:00
p.m. (and if received after 5:00 p.m., on the next Business Day) at the receiving party’s
notice address specified in this Section 10.3; or (ii) upon receipt by the receiving Party if
sent by overnight courier or mailed by certified mail, return receipt requested with postage
prepaid; or (iii) if notice is required in the form of sub-sections (i) and (ii), then on the
earlier of (i) or (iii).
10.4 Electronic Transmission.
Facsimile or electronic or PDF transmission shall be the same as delivery of an original
document; provided that, at the request of either Party, the other Party shall confirm
facsimile or electronic or PDF signatures by signing and delivering an original document;
provided further, however, that the execution and delivery of this Agreement and its
counterparts shall be subject to Section 10.20.
10.5 Captions.
All titles, subject headings, section titles and similar items are provided for the purpose of
reference and convenience and are not intended to be inclusive, definitive or to affect the
meaning of the contents or scope of the Agreement.
10.6 No Third Party Beneficiary.
No provision of the Agreement is intended to, nor shall it in any way, inure to the benefit of
any customer, property owner or any other third party, so as to constitute any such Person a
third party beneficiary under the Agreeme nt, or of any one or more of the terms hereof, or
otherwise give rise to any cause of action in any Person not a Party hereto.
10.7 No Dedication.
No undertaking by one Party to the other under any provision of the Agreement shall
constitute the dedication of that Party's system or any portion thereof to the other Party or
to the public or affect Seller as an independent entity and not a public utility.
10.8 Entire Agreement; Integration; Amendments.
This Agreement, together with the Preamble and each and every exhibit, appendix,
attachment, amendment, schedule and any written supplements hereto, if any, constitutes
the entire, integrated agreement between the Parties and supersedes any and all prior oral or
written understandings. No amendment, addition to or modification of any provision
hereof shall be binding upon the Parties, and neither Party shall be deemed to have waived
any provision or any remedy available to it, unless such amendment, addition, modification
or waiver is made, in writing, and signed by a duly authorized officer or representative of
POWER PURCHASE AGREEMENT - Page 60 of 65
the Parties.
10.9 Applicable Law.
This Agreement and the rights and duties of the Parties hereunder shall be construed,
enforced and performed in accordance with the laws of the state of California, and/or the
laws of the United States, as applicable, without regard to principles of conflicts of law
which may direct the application of the laws of another jurisdiction.
10.10 Venue.
The Parties hereby submit to the exclusive jurisdiction of the federal courts for the
Northern District of the State of California; provided, however, that if such federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the stat e courts sitting in the County of Santa Clara,
State of California.
10.11 Rule of Construction.
This Agreement shall be considered for all purposes as prepared through the joint efforts of
the Parties and shall not be construed against one Party or the other as a result of the
preparation, substitution, submission or other event of negotiation, drafting or execution
hereof.
10.12 Attorneys’ Fees and Costs.
(a) Buyer’s Costs Due to Seller’s Change. Notwithstanding any provision to the
contrary herein, Buyer shall be entitled to recover from Seller, upon Buyer’s
request, Buyer’s Attorneys’ Fees associated with the review, evaluation,
negotiation, execution and/or delivery of any and all documents, consents,
amendments, modifications or restatements related to this Agreement pursuant to
Sections 4.2(h), 10.2(a), 10.2(b), and 10.2(c) and, if such actions require any
actions beyond the giving of notice by Buyer, any and all other Seller-initiated
proposed modifications (whether agreed to or not) of any and all terms or
conditions of this Agreement which include, by way of illustration, but not of
limitation: Milestones, Price, Capacity, quantity of Output, Point of
Interconnection, FCDS Finding and/or Discretionary Curtailment. The Parties
agree that this Section 10.12(a) shall be inter preted inclusively and broadly, with
the intention of reimbursing Buyer for its legal fees, expenses and costs rather than
not.
(b) Judicial Action. If a suit or action is instituted to enforce or interpret any term of
this Agreement, t he prevailing party in any suit or action brought to enforce or
interpret the provisions of this Agreement shall be entitled to recover its Attorneys’
Fees at any hearing, any trial, on appeal, and on any petition for review or other trial
court or appellate proceeding. In addition, the prevailing party shall be entitled to
recover its Attorneys’ Fees incurred in enforcing its rights under this Agreement in
POWER PURCHASE AGREEMENT - Page 61 of 65
connection with any nonjudicial action or the exercise of nonjudicial remedies, and
in any administration, arbitrative, mediation or dispute resolution process or
proceeding.
10.13 Nature of Relationship.
The duties, obligations and liabilities of the Parties are intended to be several and not joint
or collective. The Agreement shall not be interpreted or construed to create an association,
joint venture, fiduciary relationship or partnership between Seller and Buyer or to impose
any partnership obligation or liability or any trust or agency obligation or r elationship upon
either Party. Seller and Buyer shall not have any right, power or authority to enter into any
agreement or undertaking for, or act on behalf of, or act as or be an agent or representative
of or otherwise bind the other Party.
10.14 Good Faith and Fair Dealing; Reasonableness.
The Parties agree to act reasonably and in accordance with the principles of good faith and
fair dealing in the performance of this Agreement. Unless expressly provided otherwise in
this Agreement, (i) wherever the Agreement requires the consent, approval or similar
action by a Party, such consent, approval or similar action shall not be unreasonably
withheld, conditioned or delayed, and (ii) wherever the Agreement gives a Party a right to
determine, require, specify or take similar action with respect to matters, such
determination, requirement, specification or similar action shall be reasonable , unless a
different standard is otherwise specified in this Agreement .
10.15 Severability.
Should any provision of the Agreement be or become void, illegal or unenforceable, the
validity or enforceability of the other provisions of the Agreement shall not be affected and
shall continue in full force and effect. The Parties shall, however, use their best endeavors
to agree on the replacement of the void, illegal, or unenforceable provision(s) with legally
acceptable clauses which correspond as closely as possible to the sense and purpose of the
affected provision.
10.16 Confidentiality.
(a) Public Records Act and Confidential Information Designated by Seller. Seller
acknowledges that Buyer is a public agency subject to the disclosure requirements
of the California Public Records Act, Cal. Gov. Code § 6250 et seq. (“CPRA”). If
documents or information submitted to Buyer contain S eller’s proprietary and
confidential information and Seller claims that such information falls within one or
more CPRA exemptions, Seller must clearly mark such information
“CONFIDENTIAL AND PROPRIETARY”, and identify the specific lines
containing such information (the “Confidential Information”). Buyer shall
disclose such Confidential Information to third parties only to the extent required
by California law (including, without limitation, the California Constitution, the
CPRA and the Brown Act) as set fo rth in this Section 10.16.
POWER PURCHASE AGREEMENT - Page 62 of 65
(b) Disclosure of Confidential Information by Buyer . In the event of a third party
request for Buyer to disclose such Confidential Information, Buyer shall make
reasonable efforts to provide notice to Seller prior to disclosure. If Seller contends
that any Confidential Information is exempt from the CPRA and wishes to prevent
disclosure, Seller shall obtain a protective order, injunctive relief or other
appropriate remedy from a court of law in Santa Clara County before Buyer’s
deadline for responding to the CPRA request. If Seller fails to obtain such remedy
prior to Buyer’s deadline for responding to the CPRA request, Seller agrees that
Buyer may disclose the requested Confidential Information. Seller further agrees
that Buyer shall have no liability to Seller arising out of any disclosure by Buyer of
any Seller Confidential Information before Seller has timely obtained an order,
injunctive relief or other appropriate remedy to prevent Buyer from making the
requested third party disclosure. Each Party shall be bound by its obligations of
confidentiality hereunder for a period of two (2) years from the expiration or earlier
termination of this Agreement.
(c) Non-Confidential Information. Notwithstanding anything to the contrary in this
Section 10.16, nothing shall restrict any Party from using or disclosing confidential
information in any manner it chooses which (i) is or becomes generally available to
the public other than as a result of a disclosure directly or indirectly by the
disclosing Party or its representative(s); (ii) was within the using or disclosing
Party’s possession prior to it being furnished hereunder, provided that such
information is not subject to another confide ntiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, any other party with
respect to such information; (iii) is rightfully obtained by a Party from third parties
authorized to make such disclosure without rest riction; (iv) is legally required to be
disclosed by judicial or other governmental action as determined by such Party’s
attorney acting in good faith (including, but not limited to, the California
Constitution, the CPRA and the Brown Act); or (v) is disclosed without a duty of
confidentiality to a third party by, or with the authorization of, the disclosing Party;
or (vi) is independently developed by the recipient.
(d) Disclosure to the City Council of Palo Alto . Notwithstanding any provision to the
contrary in this Section 10.16, Buyer shall be permitted to disclose this Agreement
and related information to the City Council of Palo Alto for the express purpose of
obtaining approval to execute this Agreement , including any written amendment
or modification thereto.
POWER PURCHASE AGREEMENT - Page 63 of 65
10.17 Cooperation.
The Parties agree to reasonably cooperate with each other in the implementation and
performance of the Agreement. Such duty to cooperate shall not require either Party to act
in a manner inconsistent with its rights under the Agreement.
10.18 Audit.
Both Parties shall maintain all records relating to the other Party or this Agreement for a
minimum of two (2) years after the expiration or earlier termination of the Term and shall
permit the other Party, upon reasonable notice, at its sole expense and during normal
working hours, to examine such records as the requesting Party deems reasonably
necessary to protect its rights.
10.19 Mobile Sierra Doctrine.
Notwithstanding any provision of this Agreement, the Parties intend that the standard of
review for changes to any rate, charge, classification, term or condition of this Agreement
proposed by a Party shall be the “Mobile-Sierra public interest” standard of review, as
stated by the United States Supreme Court in Morgan Stanley Capital Group Inc. v. Public
Utility District No. 1 of Snohomish County, 554 U.S. 1164 (2008) and consistent with the
order of the Supreme Court in NRG Power Marketing LLC, et al. v. Maine Public Utilities
Commission et al., No. 08-674, 130 S.Ct 693 (2010). Any modifications proposed by a
non-contracting third party or FERC acting sua sponte shall be the most stringent standard
permissible under applicable law.
10.20 Counterparts.
This Agreement may be executed in one or more counterparts and by different Parties on
separate counterparts, all of which shall be deemed one and the same agreement and each
of which shall be deemed an original. Delivery of an executed counterpart of this
Agreement by fax or other electronic means shall be deemed as effective as delivery of an
originally executed counterpart. Any Party delivering an executed counterpart of this
Agreement by facsimile or other electronic means shall also deliver an originally executed
counterpart, but the failure of any Party to deliver an originally executed counterpart of this
Agreement shall not affect the validity or effectiveness of this Agreement.
10.21 Debt Liability Disclaimer.
For the avoidance of doubt, the Buyer, including, but not limited to, any source of funding
for Buyer, any General Fund of Buyer or any special self-insurance program, is not liable
for any debts, liabilities, settlements, liens, or any other obligations of the Seller or its heirs,
successors or assigns. Buyer shall not be liable for and shall be held harmless and
indemnified by Seller for (a) any claims or damages arising out of any other contract to
which Seller is a party, and (b) subject to Section 10.1(b), any tortious action or inaction,
negligent error in judgment, act of negligence, intentional tort, negligent mistakes or other
POWER PURCHASE AGREEMENT - Page 64 of 65
acts taken or not taken by the Seller, its employees, agents, servants, invitees, guests or
anyone acting in concert with or on behalf of the Seller.
10.22 No Implied Waiver of Breach.
Waiver by a Party of any breach of a specific provision of this Agreement shall not be
construed as a waiver of any other breach of that term or any other term of this Agreement.
[SIGNATURE PAGE ON NEXT PAGE]
POWER PURCHASE AGREEMENT - Page 65 of 65
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the Parties have caused this Agreement to be duly
executed as of the day, month and year set forth next to each of the Parties’ signatures below.
SELLER:
Hecate Energy Palo Alto LLC
By:
Name: Chris Bullinger
Title:Manager
Date: January 6, 2016
BUYER:
CITY OF PALO ALTO
APPROVAL AS TO FORM:
By:
Name:
Title: Senior Deputy City Attorney
Date:
CITY OF PALO ALTO
APPROVAL BY ADMINISTRATIVE
SERVICES DIRECTOR
By:
Name: Lalo Perez
Title: Administrative Services Director
Date:
CITY OF PALO ALTO
APPROVAL BY UTILITIES DIRECTOR
By:
Name:
Title: Utilities Director
Date:
CITY OF PALO ALTO
APPROVAL BY CITY MANAGER
By:
Name: James Keene
Title: City Manager
Date:
CITY OF PALO ALTO
APPROVAL BY MAYOR
By:
Name:
Title: Mayor
Date:
EXHIBIT A – Page 1
EXHIBIT A
PLANT DESCRIPTION AND SITE DRAWINGS
Plant Description
Plant name: Wilsona Solar
Plant physical address: Near the corner of 240th St. and E Palmdale Blvd. in Palmdale, CA 93591
Total number of units at the Plant : 26 inverters of 1 MWac capacity each
Technology t ype (including any applicable model): PV solar modules connected to solar inverters
that connect to the grid via transformers
Interconnection Point of Plant: Wilsona Substation (Pnode: WILSONA_6_N001)
Local Capacity Area: N/A
Nameplate capacity of the Plant: 26 MWac
Description of units: More than 80,000 photovoltaic solar modules mounted on trackers and
connected to 26 inverters that convert DC power to AC Power. The inverters are connected to the
grid via transformers
Site Drawings
Site Map:
The term, “Site” as defined in the Agreement means the following parcel description upon which
the generating facility is located and as identified in the following topographical map and Assessed
Parcel Number, and the below Interconnection Facilities and metering configuration as evidenced
in the related diagram (collectively, the “Site Drawings”):
[INSERT MAP]
Assessed Parcel No.: ______________
Interconnection Facilities and metering diagram:
The Plant shall use the following Interconnection Facilities and metering configuration as
identified in this one-line diagram included in this Exhibit A:
[INSERT ONE-LINE DIAGRAM FOR
INTERCONNECTION FACILITIES AND METERING]
EXHIBIT B - Page 1
EXHIBIT B
ENVIRONMENTAL ATTRIBUTE TRANSFER FROM SELLER TO BUYER
Participation in the Western Renewable Energy Generation Information System. Seller shall, at its
sole expense take all actions and execute all documents or instruments necessary to ensure that all
WREGIS Certificates associated with all Renewable Energy Credits corresponding to all delivered
Output are issued and tracked for purposes of satisfying the applicable requirements of the
California Renewables Portfolio Standard and transferred in a timely manner to Buyer for Buyer’s
sole benefit. Seller shall comply with all applicable laws, including, without limitation, the
WREGIS Operating Rules, regarding the certification and transfer of such WREGIS Certificates
to Buyer and Buyer shall be given sole title to all such WREGIS Certificates. Seller shall be
deemed to have satisfied the warranty in this EXHIBIT B, paragraph (h) provided that Seller
fulfills its obligations under this EXHIBIT B, paragraphs (a) through (h) below. In addition:
(a) Prior to the Contract Delivery Start Date, Seller shall register the Plant with WREGIS and
establish an account with WREGIS (“Seller’s WREGIS Account”), which Seller shall
maintain until the end of the Delivery Term. Seller shall transfer the WREGIS Certificates
using “Forward Certificate Transfers” (as described in the WREGIS Operating Rules)
from Seller’s WREGIS Account to the WREGIS account (s) of Buyer or the account(s) of a
designee that Buyer identifies by Notice to Seller (“Buyer’s WREGIS Account”). Seller
shall be responsible for all expenses associated with registering the Plant with WREGIS,
establishing and maintaining Seller’s WREGIS Account, paying WREGIS Certificate
issuance and transfer fees, and transferring WREGIS Certificates from Seller’s WREGIS
Account to Buyer’s WREGIS Account.
(b) Seller shall cause Forward Certificate Transfers to occur on a monthly basis in accordance
with the certification procedure established by the WREGIS Operating Rules. Since
WREGIS Certificates shall only be created for whole MWh amounts of Energy generated,
any fractional MWh amounts (i.e., kWh) shall be carried forward until sufficient
generation is accumulated for the creation of a WREGIS Certificate.
(c) Seller shall, at its sole expense, ensure that the WREGIS Certificates for a given calendar
month correspond with the Energy corresponding to delivered Output for such calendar
month as evidenced by the Plant’s metered data.
(d) Due to the ninety (90) day delay in the creation of WREGIS Certificates relative to the
timing of invoice payment under Section 3.3, Buyer shall make an invoice payment for a
given month in accordance with Section 3.3 before the WREGIS Certificates for such
month are formally transferred to Buyer in accordance with the WREGIS Operating Rules
and this EXHIBIT B. Notwithstanding this delay, Buyer shall have all right and title to all
such WREGIS Certificates upon payme nt to Seller in accordance with Section 3.3.
(e) A “WREGIS Certificate Deficit” means any deficit or shortfall in WREGIS Certificates
delivered to Buyer for a calendar month as compared to the delivered Energy for the same
calendar month (“Deficient Month”), after taking into account applicable delays in the
EXHIBIT B - Page 2
issuance of WREGIS Certificates referenced in the prior paragraph or otherwise arising
under WREGIS Operating Rules. If any WREGIS Certificate Deficit is caused, or the
result of any action or inaction, by Seller, then Seller shall take all actions reasonably
necessary to remedy such circumstances and failure to do so shall be a breach hereunder by
Seller.
(f) Without limiting Seller’s obligations under this EXHIBIT B, to the extent a WREGIS
Certificate Deficit is caused by an error or omission of WREGIS, the Parties shall
cooperate in good faith to cause WREGIS to correct its error or omission.
(g) If WREGIS changes the WREGIS Operating Rules after the Execution Date or applies the
WREGIS Operating Rules in a manner inconsistent with this EXHIBIT B after the
Execution Date, the Parties promptly shall modify this EXHIBIT B as reasonably required
(i) to cause and enable Seller to transfer to Buyer’s WREGIS Account a quantity of
WREGIS Certificates for each given calendar month that corresponds to the delivered
Energy in the same calendar month or (ii) as may otherwise be reasonably appropriate to
address such inconsistency.
(h) Seller warrants that all necessary steps to allow the Renewable Energy Credits transferred
to Buyer to be tracked in the Western Renewable Energy Generation Information System
shall be taken prior to the first delivery under this Agreement.
EXHIBIT C – Page 1
EXHIBIT C
INSURANCE COVERAGES
At its own expense, Seller shall secure and maintain during the Term the following insurance with
the coverage amounts indicated for occurrences during and arising out of Seller’s performance of
this Agreement. Such insurance shall be placed with responsib le and reputable insurance
companies as determined by Buyer in its reasonable discretion in compliance with Requirements
of Laws applicable to Seller.
(a) Workers’ Compensation/Employer’s Liability. Seller shall maintain Workers’
Compensation Insurance and Employer’s Liability Insurance which comply with
Requirements of Laws applicable to Seller.
(b) Automobile Liability. Seller shall maintain Automobile Liability Insurance in compliance
with Requirements of Laws applicable to Seller, including coverage for owned, non-owned
and hired automobiles for both bodily injury (including death) and property damage,
including automobile liability contractual endorsement and uninsured/underinsured
motorist protection endorsements.
(c) Third Party Liability. Seller shall maintain third party liability insurance in compliance
with Requirements of Laws applicable to Seller on a project -specific basis covering against
legal responsibility to others as a result of bod ily injury, property damage and personal
injury arising from the operation and maintenance of the Plant. Such policy shall be written
with a limit of liability not less than $10,000,000 and a deductible not to exceed $10,000.
Such liability may be in any combination of primary and excess/umbrella. Coverage shall
include, but not be limited to, premises/operations, explosion, collapse, underground
hazards, broad form property damage and personal injury liability. Such coverage shall not
contain exclusions for punitive or exemplary damages.
(d) Property Insurance. Seller shall maintain third party property insurance on a
project-specific basis covering cost of repairing Plant and or interconnection equipment to
operational condition. Such policy shall be written with coverage sufficient to replace and
rebuild the Plant. Coverage shall include, but not be limited to, fire, storm damage,
equipment failure, damage to equipment precluding operation under prudent utility
practice, premises/operations, explosion, collapse, underground hazards, broad form
property damage.
Upon the request from Buyer, Seller shall promptly provide Buyer with applicable insurance
certificates confirming the insurance coverages required above.
EXHIBIT E-1 – Page 1
EXHIBIT D
SCHEDULING PROTOCOLS
Dated: ___________, 2016
The following scheduling protocols shall govern the scheduling of Output from the Plant pursuant
to that certain Power Purchase Agreement dated as of ___, 201 6, by and between the City of Palo
Alto and Hecate Energy Palo Alto LLC (the “Agreement”). Capitalized terms not defined herein
have the meanings set forth in the Agreement.
1. Test Energy
Pursuant to Section 2.3(a) of the Agreement all Test Energy shall be scheduled in accordance with
the following procedure:
All Test Energy produced by the Plant will be scheduled in accordance with CAISO Operating
Procedure No. 5320 (Resource Trial Operation and Test Energy Process), as such may be amended
from time to time. Pursuant to CAISO Operating Procedure No. 5320, pre-commercial resources
are required to make arrangements with the CAISO for executing Trial Operations.
I. At least ten (10) calendar days prior to the first planned Trial Operation date Seller shall
provide Buyer a Test Energy schedule for the Plant. The Test Energy schedule shall
include the following information:
a. Expected MW output for each hour during the testing period;
b. Start and Stop times of the test;
c. NRI Test Energy Template; and
d. Any operating constraints or testing limits that may impact the testing process.
II. At least seven (7) calendar days prior to the first planned Trial Operation date (not
including the submittal date and the date the test is requested to begin), the Scheduling
Coordinator shall submit an outage request to the CAISO for the Test Energy schedule
provided by Seller.
III. Pending CAISO’s approval of the outage request for Trial Operations and testing, the
Scheduling Coordinator shall coordinate with Seller and CAISO to perform Pla nt testing.
2. Scheduling Protocols
The Scheduling Coordinator shall submit Bids for forecasted Plant Output to the CAISO in
accordance with the CAISO Tariff and Business Practice Manuals, as the same may be amended or
revised from time to time.
I. Forecasts
EXHIBIT E-1 – Page 2
Plant Output shall be scheduled according to Section 4.5(d) of the Agreement.
II. Submission of Bids
For each trade date, Scheduling Coordinator will develop and submit Bids for Plant Output into the
CAISO markets in accordance with the CAISO market timelin es. Day-ahead and real-time Bids
for Plant Output shall be consistent with the CAISO forecast. Bids may consist of Self-Schedules,
economic Bids, or a combination of Self-Schedules and economic Bids. Self-Schedule Bids shall
be equal to the applicable C AISO forecasted Output, and economic Bids shall be limited to an
amount not to exceed the applicable CAISO forecasted Output.
III. Dispatch Notices
Scheduling Coordinator shall provide dispatch notices to Buyer to communicate CAISO
day-ahead and real-time market awards. Dispatch notices may include, but are not limited to, the
following information: (i) scheduled Plant output by applicable operating interval, (ii) start -up
instructions, (iii) shut -down instructions, (iv) ramping instructions, and (v) other information that
may be relevant to the scheduled operations of the Plant.
a. Day-Ahead Dispatch Notices. Dispatch Notices for Day-Ahead market awards will be
provided to Buyer through a form of electronic communication as mutually agreed upon by
Buyer and Scheduling Coordinator.
b. Real-Time Dispatch Notices. Dispatch Notices for Real-Time market awards will be
provided to Buyer through Scheduling Coordinator’s automated SCADA control system,
whereby Scheduling Coordinator will send a generator operating set point directly to the
Plant’s control systems.
3. Outage Coordination
Pursuant to the Agreement, Seller shall provide Scheduling Coordinator with all information
required to submit timely outages to the CAISO in accordance with the CAISO Tariff and outage
coordination procedures. Scheduling Coordinator shall perform all outage coordination activities
on behalf of the Plant, including but not limited to, submission of planned and forced outages to
the CAISO through use of CAISO’s Outage Management System (O MS), in accordance with the
CAISO Tariff and outage coordination procedures.
I. Communicating Outages to Scheduling Coordinator
a. Required Information
Seller shall provide the following information to Scheduling Coordinator at the time Seller submits
a request for a planned or forced outage:
EXHIBIT E-1 – Page 3
Name of Facility
CAISO Resource ID
Start Date/Time of the Outage
End Date/Time of the Outage
Explanation for Reason of Outage
Unit Availability During the Outage
Emergency Return to Service Time (if called upon by the C AISO)
II. Outage Submission Timeline
Planned Outage requests must be submitted to Scheduling Coordinator at least seven (7) days in
advance of the start date of the outage; whereby the seven (7) day period shall not include the date
on which the request is submitted, or the start date of outage. Outage requests submitted less than
seven (7) days in advance of the start date of the outage will automatical ly be designated by the
CAISO as a Forced Outage (unless otherwise approved by the CAISO as a Planned Outage).
Outages that occur in the active day (or real-time) must be reported to Scheduling Coordinator as
soon as possible.
4. Discretionary Curtailment
Pursuant to Section 4.4(c), Buyer may require Seller to curtail deliveries of Energy from the Plant
for any reason in Buyer’s reasonable discretion by delivering a dispatch notice to the Scheduling
Coordinator. Scheduling Coordinator shall provide d ispatch notices for discretionary curtailments
to Seller in accordance with the procedure described in Sect ion 2(III) of this Exhibit D.
EXHIBIT E-1 – Page 4
EXHIBIT E-1
FORM OF DEVELOPMENT PROGRESS REPORT
Development Progress Report
[Plant Name] Plant
[Report Month and Year]
[Date of Report]
This Development Progress Report describes the construction and status and progress toward the
achievement of each of the Milestones of the [Plant Name] Plant, which guaranteed Commercial
Operation Milestone is _____, for the _____ [insert period that report is due as required under
Section 4.3(c)] and year of ____________ (“Report Period”) as required pursuant to Section
4.3(c) of that certain Power Purchase Agreement by and between _________ (“Seller”), and the
City of Palo Alto (“Buyer”), dated ____________ (the “Agreement”). (Capitalized terms used in
this report but not defined herein shall have the meanings set forth in the Agreement.)
This report shall be completed and delivered by Seller to ___________________ at Buyer,
together with all attachments and exhibits. Buyer should direct any questions about this report to
_______________ at Seller.
1. General Plant Description
Please provide a general description of the Plant, including its location, Site size,
technology type, nameplate capacity, interconnection point, ownership, and any other
information relevant to a general description of the Plant.
2. Property Acquisition Activities and Site Control
In this section, please include information on property acquisition or site control activities
for the Plant, including the date of execution of significant documents, and information on
the expecting timing of future significant activities .
a. Prior Period’s Activities
Please provide a description and dates of all major Site acquisition or control related
activities completed prior to the Report Period.
b. Report Period’s Activities
Please describe in detail the Site acquisition or control related activities that occurred
during the Report Period.
EXHIBIT E-1 – Page 5
c. Next Period’s Activities
Please describe the Site acquisition or control related activities that are expected to be
performed during the period following the Report Period.
3. Permitting
In this section, please provide information on each of the Conditional Use Permit and other
Permits required for the construction of the Plant and the status thereof. List the applicable
governmental agency, the type of application/approval requested, and the dates (expected
or actual) of significant activity. Significant activity includes, but is not limited to,
application submission, no tice of complete application, notice of preparation, public
hearing or comment period, draft documents and/or approvals, final documents and/or
approvals, notice of determination and/or issuance of permit. If the government agency
maintains a website with information on the approval process for the Plant, please provide
a link.
a. Prior Period’s Activities
Please provide a description of all major activities related to the Conditional Use
Permit and other Permits completed prior to the Report Period.
b. Report Period’s Activities
Please describe in detail the activities related to Permits that occurred during the Report
Period.
c. Next Period’s Activities
Please list the activities related to Permits that are expected to be performed during the
period following the Report Period.
4. Interconnection
EXHIBIT E-1 – Page 6
In this section, please provide a description of all major interconnection related
activities, dates of completion of significant activities and the expected timing of future
significant activities including, but not limited to, information on the status of
interconnection studies, Interconnection Agreements, design and construction of
Interconnection facilities (e.g., substations, switchyards, gen-ties, system protection
schemes, telecommunications equipment to the extent not already covered in the Plant
construction information in Section 8), network upgrades, and grid outage and/or
interconnection schedules, and information related to Full Capacity Deliverability
Status Finding applications, studies, timing, correspondence and . Describe any and all
factors that may affect the ability of the Plant to deliver Energy to the Buyer.
a. Prior Period’s Activities
Please provide a description of all major interconnection related activities completed
prior to the Repo rt Period.
b. Report Period’s Activities
Please describe in detail the Interconnection related activities that occurred during the
Report Period.
c. Current Period’s Activities
Please list the Interconnection related activities that are expected to be performed
during the period following the Report Period.
5. Design and Engineering
In this section, please provide information on the design and engineering of the Plant.
a. Prior Period’s Activities
Please provide a description and dates of all major design and engineering related
activities, including dates of completion of significant activities and expected timing of
future activities.
b. Report Period’s Activities
Please describe in detail the design and engineering related activities that occurred
during the Report Period.
c. Current Period’s Activities
Please list the design and engineering related activities that are expected to be
performed during the period following the Report Period.
6. Financing
EXHIBIT E-1 – Page 7
In this section, please include information on each separate phase of financing for the
Plant. Include information on debt, equity and/or federal or state loans or grant.
b. Report Period’s Activities
Please describe in detail the financing related activities that occurred during the Report
Period.
c. Current Period’s Activities
Please list the financing related activities that are expected to be performed during the
period following the Report Period.
7. Major Equipment Procurement
In this section, please include information on all major equipment to be procured for all
portions of the Plant to be completed by Seller, including switchyards, substations and any
other interconnection equipment, in addition to generating and auxiliary equipment .
a. Prior Period’s Activities
Please provide a description and dates of all major equipment procurement related
activities completed prior to the Report Period, including the date of execution of
significant documents, and information on the expected timing of future significant
activities.
b. Report Period’s Activities
Please describe in detail the Major Equipment Procurement related activities that
occurred during the Report Period.
c. Next Period’s Activities
Please list the Major Equipment Procurement related activities that are expected to be
performed during the period following the Report Period.
8. Construction
In this section, please include information on the status of any construction-related factors
that may affect the ability of the Plant to deliver the Output to the Buyer. Include
information on the Plant infrastructure, generating equipment, and major auxiliary
equipment. Also include information on the substations, switchyards, gen-ties,
telecommunications equipment or other interconnection facilities that are the direct
responsibility of the Plant.
a. Prior Period’s Activities
EXHIBIT E-1 – Page 8
Please provide a summary of the status and progress of each major construction activity
for all portions of the Plant, including a schedule showing expected or actual dates as
applicable. Provide the name of the EPC Contractor, the date of execution of the EPC
Contract, and the date of issuance of a full notice to proceed (or equivalent). For each
major type of equipment, break out the number of each item (to be) installed and/or
commissioned in each period.
Please attach a copy of the all of the progress reports received during the previous
Report Period from the EPC Contractor pursuant to the construction contract between
Seller and EPC Contractor.
b. Report Period’s Activities
Please describe in detail the Construction related activities that occurred during the
Report Period.
c. Current Period’s Activities
Please list the Construction related activities that are expected to be performed during
the period following the Report Period.
9. Startup and Commissioning
In this section, please include information on the status of activities related to preparation
for Commercial Operation, including equipment testing, commissioning , release to
operations, requirements of the grid operator, and any other activities that must be
conducted before the Plant may deliver Output to the grid and/or declare Commercial
Operation (as evidenced by delivery of the COD Certification).
a. Prior Period’s Activities
Please provide a description of all major startup and commissioning activities related to
preparation for Commercial Operation completed prior to the Report Period.
b. Report Period’s Activities
Please describe in detail the Startup and Commissioning related activities that occurred
during the Report Period.
c. Current Period’s Activities
Please list the Startup and Commissioning related activities that are expected to be
performed during the period following the Report Period.
10. Milestones Schedule
EXHIBIT E-1 – Page 9
a. [Insert Gantt chart]
b. Milestone Schedule
a. Please describe the status and progress toward or achievement of each Milestone in
the construction schedule for the Plant, including dates of completion of completed
Milestone(s) and the expected date of completion of uncompleted Milestone(s).
The expected date is the current best estimate, and may change from time to time as
better information becomes available.
c. Remedial Action Plan
Please describe any issues which Seller expects in its reasonable judgment may
adversely affect the schedule, including the cause of the delay and what remedial
actions Seller intends to take to ensure that each of the Milestones shall be attained by
their required dates.
III. Pictures
If available, please provide pictures documenting construction and startup progress of the Plant.
The information contained in this Seller’s Development Progress Report is true and
accurate and reflects, to the best of Seller’s knowledge, the current status of the construction of the
Plant as of the date specified below.
Seller:
By:_______________________________
Name:_____________________________
Title:______________________________
Date:______________________________
EXHIBIT E-2 – Page 1
EXHIBIT E-2
COD CERTIFICATION
This COD Certification (“Certification”) is delivered by ___________ (“Seller”) to The City of
Palo Alto (“Buyer”) in accordance with the terms of that certain Power Purchase Agreement dated
as of the Execution Date (“Agreement”) by and between Seller and Buyer. All capitalized terms
used in this Certification but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Agreement. Seller hereby certifies and represents to Buyer the
following:
1. Commercial Operation occurred on: __________ [date]
2. The Plant equipment representing _________ MW AC of Initial Capacity has been
installed, tested and is capable of generating Output in accordance with the manufacturer’s
specifications.
3. The Plant is substantially complete and capable of delivering Output as described in the
Agreement.
4. The CAISO has provided notification of Commercial Operation in accordance with the
CAISO Tariff, and documentation of such notification is attached heret o or shall be
provided to Buyer promptly upon Seller’s receipt thereof.
EXECUTED by Seller this ______ day of _____________, 20__.
By: _________________________________
Name: ______________________________
Title: _______________________________
The undersigned, a licensed professional engineer, hereby certifies that, to its current knowledge,
the foregoing is substantially true and correct.
[LICENSED PROFESSIONAL ENGINEER]
By: _________________________________
Name: ______________________________
Title: _______________________________
EXHIBIT E-2 – Page 2
RECEIVED by Buyer this ____ date of ______________, 20__
which date shall be the Commercial Operation Date.
By: _________________________________
Name: ______________________________
Title: _______________________________
EXHIBIT F-1 – Page 1
EXHIBIT F-1
FORM OF LETTER OF CREDIT
Issuing Bank Letterhead and Address
STANDBY LETTER OF CREDIT NO. XXXXXXXX
Date: [Insert issue date]
Beneficiary: City of Palo Alto Applicant: [Insert name and address
of Applicant]
250 Hamilton Avenue
Palo Alto, CA 94301
Attention: Credit Risk Management
Letter of Credit Amount: [insert amount]
Expiry Date: [insert expiry date]
Ladies and Gentlemen:
By order of [insert name of Applicant] (“Applicant”), we hereby issue in favor of the City of Palo
Alto (the “Beneficiary”) our irrevocable standby letter of credit No. [insert number of letter of
credit] (“Letter of Credit”), for the account of Applicant, for drawings up to but not to exceed the
aggregate sum of U.S. $ [insert amount in figures followed by (amount in words)] (“Letter of
Credit Amount”). This Letter of Credit is available with [insert name of issuing bank, and the
city and state in which it is located] by sight payment, at our offices located at the address stated
below, effective immediately, and it shall expire at our close of business on [insert expiry date]
(the “Expiry Date”).
Funds under this Letter of Credit are available to the Bene ficiary against presentation of the
following documents:
1. Beneficiary’s signed and dated sight draft in the form of Exhibit A hereto, referencing this
Letter of Credit No. [insert number] and stating the amount of the demand; and
2. One of the following statements signed by an authorized representative or officer of
Beneficiary:
EXHIBIT F-1 – Page 2
A. “Pursuant to the terms of that certain [insert name of the agreement] (the “Agreement”),
dated [insert date of the Agreement], between Beneficiary and [insert name of Seller under
the Agreement], Beneficiary is entitled to draw under Letter of Credit No. [insert number]
amounts owed by [insert name of Seller under the Agreement] under the Agreement; or
B. “Letter of Credit No. [insert number] shall expire in thirty (30) days or less and [insert
name of Seller under the Agreement] has not provided replacement security acceptable to
Beneficiary.
Special Conditions:
1. Partial and multiple drawings under this Letter of Credit are allowed;
2. All banking charges associated with t his Letter of Credit are for the account of the Applicant;
3. This Letter of Credit is not transferable; and
4. The Expiry Date of this Letter of Credit shall be automatically extended without a written
amendment for a period of one year and on each successive Expiry Date, unless at least sixty
(60) days before the then current Expiry Date, we notify you by registered mail or courier that
we elect not to extend the Expiry Date of this Letter of Credit for such additional period.
We engage with you that drafts drawn under and in compliance with the terms of this Letter of
Credit shall be duly honored upon presentation, on or before the Expiry Date (or after the Expiry
Date as provided below), at our offices at [insert issuing bank’s address for drawings].
All demands for payment shall be made by presentation of originals or copies of documents; or by
facsimile transmission of documents to [insert fax number], Attention: [insert name of issuing
bank’s receiving department], with originals or copies of documents to follow by overnight mail.
If presentation is made by facsimile transmission, you may contact us at [insert phone number] to
confirm our receipt of the transmission. Your failure to seek such a telephone confirmation does
not affect our obligation to honor such a presentation.
Our payments against complying presentations under this Letter of Credit shall be made no later
than on the sixth (6th) banking day following a complying presentation.
Except as stated herein, this Letter of Credit is not subject to any condition or qualification. It is our
individual obligation, which is not contingent upon reimbursement and is not affected by any
agreement, document, or instrument between us and the Applicant or between the Beneficiary and
the Applicant or any other party.
Except as otherwise specifically stated herein, this Letter of Credit is subject to and governed by
the Uniform Customs and Practice for Documentary Credits, 2007 Revision, International
Chamber of Commerce (ICC) Publication No. 600 (the “UCP 600”); provided that, if this Letter
of Credit expires during an interruption of our business as described in Article 36 of the UCP 600,
we shall honor drafts presented in compliance with this Letter of Credit within thirty (30) days
after the resumption of our business and effect payment accordingly.
EXHIBIT F-1 – Page 3
The law of the State of New York shall apply to any matters not covered by the UCP 600.
For telephone assistance regarding this Letter of Credit, please contact us at [insert number and
any other necessary details].
Very truly yours,
[insert name of issuing bank]
By:
Authorized Signature
Name: [print or type name]
Title:
EXHIBIT F-1 – Page 4
Attachment 1 to Exhibit F-1
SIGHT DRAFT
TO: [INSERT NAME AND ADDRESS OF PAYING BANK]
AMOUNT: $________________________ DATE: __________________________
AT SIGHT OF THIS DEMAND PAY TO THE ORDER OF THE CITY OF PALO ALTO THE
AMOUNT OF U.S.$________(______________ U.S. DOLLARS)
DRAWN UNDER [INSERT NAME OF ISSUING BANK] LETTER OF CREDIT NO.
XXXXXX.
REMIT FUNDS AS FOLLOWS:
[INSERT PAYMENT INSTRUCTIONS]
DRAWER
BY:___________________________
NAME AND TITLE
EXHIBIT F-2 – Page 1
EXHIBIT F-2
FORM OF LENDER CONSENT AGREEMENT
CONSENT AND AGREEMENT
This CONSENT AND AGREEMENT (“Consent and Agreement”) is entered into as of
____________________, between the City of Palo Alto (“Buyer”), and _________________, as
collateral agent1 (in such capacity, “Financing Provider”), for the benefit of various financial
institutions (collectively, the “Secured Parties”) providing financing to _______ (“Seller”).
Buyer, Seller, and the Financing Provider shall each individually be referred to as a “Party” and
collectively as the “Parties”.
Recitals
A. Pursuant to that certain Power Purchase Agreement dated as of ________________
(as amended, modified, supplemented or restated from time to time, as including all related
agreements, instruments and documents, collectively, the “Assigned Agreement”) between Buyer
and Seller, Buyer has agreed to purchase energy from Seller.
B. The Secured Parties have provided, or have agreed to provide, to Seller financing
(including a financing lease) pursuant to one or more agreements (the “Financing Documents”),
and require that Financing Provider be provided certain rights with respect to the “Assigned
Agreement” and the “Assigned Agreement Accounts,” each as defined below, in connection
with such financing.
C. In consideration for the execution and delivery of the Assigned Agreement, Buyer
has agreed to enter into this Consent and Agreement for the benefit of Seller.
Agreement
1. Definitions. Any capitalized term used but not defined herein shall have the meaning
specified for such term in the Assigned Agreement.
2. Consent. Subject to the terms and conditions below, Buyer consents to and approves the
pledge and assignment by Seller to Financing Provider pursuant to the [Security Agreement] of
(a) the Assigned Agreement, and (b) the accounts, revenues and pro ceeds of the Assigned
Agreement (collectively, the “Assigned Agreement Accounts”).
1 This form assumes that a collateral agent will hold the security on behalf of a syndicate of lenders and
therefore, the consent would be signed by the collateral agent in such capacity for the benefit of the secured parties. If
that is not the case, please modify.
EXHIBIT F-2 – Page 2
3. Limitations on Assignment . Financing Provider acknowledges and confirms that,
notwithstanding any provision to the contrary under applicable law or in any Financing Docu ment
executed by Seller, Financing Provider shall not assume, sell or otherwise dispose of the Assigned
Agreement or any of Financing Provider’s rights under the Assigned Agreement (whether by
foreclosure sale or other liquidation sale, conveyance in lieu of foreclosure or otherwise) unless,
on or before the date of any such assumption, sale or disposition, Financing Provider or any third
party, as the case may be, assuming, purchasing or otherwise acquiring the Assigned Agreement
(a) cures any and all defaults of Seller under the Assigned Agreement which are capable of being
cured and which are not personal to the Seller, (b) executes and delivers to Buyer a written
assumption of all of Seller’s rights and obligations under the Assigned Agreement in form and
substance reasonably satisfactory to Buyer, (c) otherwise satisfies and complies with all
requirements of the Assigned Agreement, (d) provides such tax and enforceability assurance as
Buyer may reasonably request, and (e) is a Permitted Transferee (as de fined below). Financing
Provider further acknowledges that the assignment of the Assigned Agreement and the Assigned
Agreement Accounts is for security purposes only and that Financing Provider has no rights under
the Assigned Agreement or the Assigned Agreement Accounts to enforce the provisions of the
Assigned Agreement or the Assigned Agreement Accounts unless and until an event of default has
occurred and is continuing under the Financing Documents between Seller and Financing Provider
(a “Financing Default”), in which case Financing Provider shall be entitled to all of the rights and
benefits and subject to all of the obligations which Seller then has or may have under the Assigned
Agreement to the same extent and in the same manner as if Financing Pro vider were an original
party to the Assigned Agreement.
“Permitted Transferee” means any person or entity who is reasonably acceptable to Buyer.
Financing Provider may from time to time, following the occurrence of a Financing Default, notify
Buyer in writing of the identity of a proposed transferee of the Assigned Agreement, which
proposed transferee may include Financing Provider, in connection with the enforcement of
Financing Provider’s rights under the Financing Documents, and Financing Provider shall deliver
to Buyer financial statements, information and other evidence satisfactory to Buyer of the
proposed transferee’s technical and financial capability to fulfill the Seller’s obligations under the
Assigned Agreement. Buyer shall, within thirty (30) Business Days of the later of its receipt of
such written notice and delivery of such financial statements, information and other evidence ,
confirm to Financing Provider whether or not such proposed transferee is a “Permitted Transferee”
(together with a written statement of the reason(s) for any negative determination) it being
understood that if Buyer shall fail to so respond within such thirty (30) Business Days period such
proposed transferee shall be deemed to be a “Permitted Transferee”.
4. Cure Rights.
(a) Notice to Financing Provider by Buyer. Buyer shall, concurrently with the delivery
of any notice of an event of default under the Assigned Agreement (each, an “Event of Default”)
to Seller (a “Default Notice”), provide a copy of such Default Notice to Financing Provider
pursuant to Section 9(a) of this Consent and Agreement. In addition, Seller shall provide a copy of
the Default Notice to Financing Provider the next Business Day after receipt from Buyer,
independent of any agreement of Buyer to deliver such Default Notice.
EXHIBIT F-2 – Page 3
(b) Cure Period Available to Financing Provider Prior to Any Termination by Buyer.
Upon the occurrence of an Event of Default, subject to (i) the expiration of the relevant cure
periods provided to Seller under the Assigned Agreement, and (ii) Section 4(a) above, Buyer shall
not terminate the Assigned Agreement unless it or Seller provides Financing Provider with notice
of the Event of Default and affords Financing Provider an Additional Cure Period (as defined
below) to cure such Event of Default. For purposes of this Agreement “Additional Cure Period”
means (i) with respect to a monetary default, twenty (20) calendar days in addition to the cure
period (if any) provided to Seller in the Assigned Agreement, and (ii) with respect to a
non-monetary default, forty-five (45) calendar days in addition to the cure period (if any) provided
to Seller in the Assigned Agreement.
(c) Failure by Buyer to Deliver Default Notice. If neither Buyer nor Seller delivers a
Default Notice to Financing Provider as provided in Section 4(a), the Financing Provider’s
applicable cure period shall begin on the date on which notice of an Event of Default is delivered to
Financing Provider by either Buyer or Seller. Except for a delay in the commencement of the cure
period for Financing Provider and a delay in Buyer’s ability to terminate the Assigned Agreement
(in each case only if both Buyer and Seller fail to deliver notice of an Event of Default to Financing
Provider), failure of Buyer to deliver any Default Notice shall not waive Buyer’s right to take any
action under the Assigned Agreement and shall not subject Buyer to any damages or liability for
failure to provide such notice.
(d) Extension for Foreclosure Proceedings. If possession of the Plant (as defined in the
Assigned Agreement) is necessary for Financing Provider to cure an Event of Default and
Financing Provider commences foreclosure proceedings against Seller within thirty (30) calendar
days of receiving notice of an Event of Default from Buyer or Seller, whichever is received first,
Financing Provider shall be allowed a reasonable additional period to complete such foreclosure
proceedings, such period not to exceed ninety (90) calendar days; provided, however, that
Financing Provider shall provide a written notice to Buyer that it intends to commence foreclosure
proceedings with respect to Seller within ten (10) Business Days of receiving a notice of such
Event of Default from Buyer or Seller, whichever is received first. In the event Financing Provider
succeeds to Seller’s interest in the Plant as a result of foreclosure proceedings, the Financing
Provider or a purchaser or grantee pursuant to such foreclosure shall be subject to the req uirements
of Section 3 of this Consent and Agreement.
5. Setoffs and Deductions. Each of Seller and Financing Provider agrees that Buyer shall
have the right to set off or deduct from payments due to Seller each and every amount due Buyer
from Seller whet her or not arising out of or in connection with the Assigned Agreement.
Financing Provider further agrees that it takes the assignment for security purposes of the
Assigned Agreement and the Assigned Agreement Accounts subject to any defenses or causes of
action Buyer may have against Seller.
6. No Representation or Warranty. Seller and Financing Provider each recognizes and
acknowledges that Buyer makes no representation or warranty, express or implied, that Seller has
any right, title, or interest in the Assigned Agreement or as to the priority of the assignment for
security purposes of the Assigned Agreement or the Assigned Agreement Accounts. Financing
Provider further recognizes and acknowledges that it has relied exclusively on its own
investigation and due diligence with respect to and is responsible for satisfying itself as to the
EXHIBIT F-2 – Page 4
existence and extent of Seller’s right, title, and interest in the Assigned Agreement, and Financing
Provider hereby releases Buyer from any liability resulting from the assignment for security
purposes of the Assigned Agreement and the Assigned Agreement Accounts.
7. Amendment to Assigned Agreement . Financing Provider acknowledges and agrees that
Buyer may agree with Seller to modify or amend the Assigned Agreement, and that Buyer is not
obligated to notify Financing Provider of any such amendment or modification to the Assigned
Agreement. Financing Provider hereby releases Buyer from all liability arising out of or in
connection with the making of any amendment or mod ification to the Assigned Agreement.
8. Payments under Assigned Agreement . Buyer shall make all payments due to Seller under
the Assigned Agreement from and after the date hereof to __________, as depositary agent, to
ABA No. __________, Account No. __________, and Seller hereby consents to any and all such
payments being made in such manner. Each of Seller, Buyer and Financing Provider agrees that
each such payment by Buyer to such depositary agent of amounts due to Seller from Buyer under
the Assig ned Agreement shall satisfy Buyer’s corresponding payment obligation under the
Assigned Agreement.
9. Miscellaneous.
(a) Notices. All notices hereunder shall be in writing and shall be deemed received (i)
at the close of business of the date of receipt, if delivered by hand or by facsimile or other
electronic means, or (ii) when signed for by recipient, if sent registered or certified mail, postage
prepaid, provided such notice was properly addressed to the appropriate address indicated on the
signature page hereof or to such other address as a party may designate by prior written notice to
the other parties, at the address set forth below:
If to Financing Provider:
Name:
Address:
Attn:
Telephone:
Facsimile:
Email:
If to Buyer:
Name:
Address:
EXHIBIT F-2 – Page 5
Attn:
Telephone:
Facsimile:
Email:
(b) No Assignment . This Consent and Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of Buyer, and shall be binding on and inure to the
benefit of the Financing Provider, the Secured Parties and their respective successors and
permitted transferees and assigns under the [loan agreement] and [security agreement].
(c) No Modification. This Consent and Agreement is neither a modification of nor an
amendment to the Assigned Agreement.
(d) Choice of Law. The parties hereto agree that this Consent and Agreement shall be
construed and interpreted in accordance with the laws of the State of California, excluding any
choice of law rules which may direct the application of the laws of another jurisdiction.
(e) No Waiver. No term, covenant or condition hereof shall be deemed waived and no
breach excused unless such waiver or excuse shall be in writing and signed by the party claimed to
have so waived or excused.
(f) Counterparts. This Consent and Agreement may be executed in one or more
duplicate counterparts, and when executed and delivered by all the parties listed below, shall
constitute a single binding agreement.
(g) No Third Party Beneficiaries. There are no third party beneficiaries to this Consent
and Agreement.
(h) Severability. The invalidity or unenforceability of any provision of this Consent
and Agreement shall not affect the validity or enforceability of any other provision of this Consent
and Agreement, which shall remain in full force and effect.
(i) Amendments. This Consent and Agreement may be modified, amended, or
rescinded only by writing expressly referring to this Consent and Agreement and signed by all
parties hereto.
(j) Attorneys’ Fees. If a suit or action is instituted to enforce or interpret any term of
this Consent and Agreement, the prevailing party in any suit or action brought to enforce or
interpret the provisions of this Agreement shall be entitled to recover its reasona ble costs and
attorneys' fees at any hearing, any trial, on appeal, and on any petition for review or other trial
court or appellate proceeding. In addition, the prevailing party shall be entitled to recover its
reasonable costs and attorneys’ fees incurr ed in enforcing its rights under this Consent and
Agreement in connection with any nonjudicial action or the exercise of nonjudicial remedies, and
EXHIBIT F-2 – Page 6
in any administration, arbitrative, mediation or dispute resolution process or proceeding. In
addition, the prevailing party shall be entitled to recover an amount equal to the fair market value
of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third
parties.
(k) Rule of Construction. It is understood and agreed that the rule of construction that
a written agreement is to be construed against the party preparing or drafting such agreement shall
not be applicable to the interpretation of this Consent and Agreement , it being recognized that each
of Buyer and Financing Provider has contributed substantially and materially to the preparation of
this Consent and Agreement.
IN WITNESS WHEREOF, each of Buyer and Financing Provider has duly executed this Consent
and Agreement as of the date first written above.
[SIGNATURE BLOCKS]
ACKNOWLEDGEMENT
The undersigned hereby acknowledges the Consent and Agreement set forth above, makes the
agreements set forth therein as applicable to Seller, including the obligation of Seller to provide a
copy of any Default Notice it receives from Buyer to Financing Provider the next Business Day
after receipt by Seller, and confirms that the Financing Provider identified above and the Secured
Parties have provided or are providing financing to the undersigned.
________________________
[name of Seller]
By: _________________________________
Name: _______________________________
Title: ________________________________
EXHIBIT G – Page 1
EXHIBIT G
EXPECTED ANNUAL ENERGY PRODUCTION
Contract Year Expected Annual Energy Production (in MWh)
1 75,000
2 74,625
3 74,252
4 73,881
5 73,511
6 73,144
7 72,778
8 72,414
9 72,052
10 71,692
11 71,333
12 70,977
13 70,622
14 70,269
15 69,917
16 69,568
17 69,220
18 68,874
19 68,529
20 68,187
21 67,846
22 67,507
23 67,169
24 66,833
25 66,499
26 66,167
27 65,836
28 65,507
29 65,179
30 64,853
31 64,529
32 64,206
33 63,885
34 63,566
35 63,248
36 62,932
37 62,617
38 62,304
39 61,992
40 61,682
EXHIBIT G – Page 2
___ Dated as of Seller Execution, with the Expected Annual Energy Production for Contract Year 1
based on the Expected Initial Capacity of 26 MW AC and each subsequent Contract Year reduced
by a degradation factor of 0.5%.
___ Dated as of Commercial Operation Date, with the Expected Annual Energy Production for
Contract Year 1 based on the Initial Capacity of ___ MW AC (subject to the Initial Capacity
limitations described in Section 2.3(c)(2) of the Agreement and each subsequent Contract Year
reduced by a degradation factor of ___%.
Capitalized terms have the meanings set forth in that certain Power Purchase Agreement dated ___, by and
between the City of Palo Alto, as Buyer, and Hecate Energy Palo Alto LLC, as Seller.
EXHIBIT H – Page 1
EXHIBIT H
SELLER DOCUMENTATION CONDITION PRECEDENT
Seller shall provide to Buyer all of the following documentation at least five (5) Business Days
prior to the Seller Execution:
1. A copy of each of (A) the articles of incorporation, certificate of incorporation,
operating agreement or similar applicable organizational document of Seller and
(B) the by-laws or other similar document of Seller (collectively, “Charter
Documents”) as in effect, or anticipated to be in effect, on the Seller Execution.
2. A certificate signed by an authorized officer of Seller, dated no earlier than ten (10)
Business Days prior to the Seller Execution, certifying (A) that attached thereto is a
true and complete copy of the Charter Documents of the Seller, as in effect at a ll
times from the date on which the resolutions referred to in clause (B) below were
adopted to and including the date of such certificate; (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the board of directors (or
other equivalent body) or evidence of all corporate or limited liability company
action, as the case may be, of Seller, authorizing the execution, delivery and
performance of this Agreement, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, and (C) as to the name,
incumbency and specimen signature of each officer of Seller executing this
Agreement.
3. A certificate from the jurisdiction of Seller’s incorporation or organization
certifying that Seller is duly organized, validly existing and in good standing under
the laws of such jurisdiction.
4. Evidence of Site control (e.g. lease with redacted price terms) satisfactory to Buyer.
5. A copy of the most recent financial statements (which may be unaudited) fro m
Seller and Seller’s Parent together with a certificate from the Chief Financial or
equivalent officer of Seller, dated no earlier than ten (10) Business Days prior to the
Seller Execution, to the effect that, to the best of such officer’s knowledge, (A) such
financial statements are true, complete and correct in all material respects and (B)
there has been no material adverse change in the financial condition, operations,
Properties, business or prospects of Seller since the date of such financial
statements.
6. A completed Expected Annual Energy Production table based on the Plant’s
Expected Initial Capacity in the form set forth at Exhibit G.
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT 4
DATE: JANUARY 13, 2016
SUBJECT: Solar Hot Water Heating Program
The attached informational report was provided to the Uti lities Adviso ry Commission (UAC) for
its December 2, 2015 meeti ng, but was not agendized for discussion. At that meeting, the UAC
requested that the item be agendized for discussion; therefore, the report is provided to enable
that d iscussion .
ATTACHMENT:
A. December 2, 2015 Report to the UAC: Information on City of Palo Alto Utilities' So lar Water
Heating Program
PREPARED BY:
APPROVED BY:
~Listant Director, Resource Management
EDSHIKADA
Ass i stant City M anager/Interim Director of Utilities
Page 1of1
Page 1 of 2
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILTIES DEPARTMENT
DATE: December 2, 2015
SUBJECT: Information on City of Palo Alto Utilities’ Solar Water Heating Program
This is an informational report and requires no action by the Utilities Advisory Commission
(UAC).
SUMMARY
At its October 2015 meeting, the UAC requested information about the City of Palo Alto
Utilities’ (CPAU’s) Solar Water Heating Program (SWHP). This report contains information
presented to the UAC and/or City Council in previous reports. New program achievements will
be included in the Fiscal Year 2015 Demand-Side Management Report.
BACKGROUND
CPAU offered a solar water heating program in the early 1980’s, including a very successful
group buy program that lowered costs for participants. More recently, CPAU discussed plans to
implement a solar water heating incentive program in the City’s Ten-Year Energy Efficiency
Portfolio Plan, which was approved by the City Council in April 2007 (Staff Report 216:07). In
October 2007, the State Legislature enacted California’s Solar Water Heating and Efficiency Act
of 2007 (AB 1470), which requires publicly-owned utilities like CPAU to adopt, implement and
finance a solar water heating system incentive program.
CPAU’s SWHP provides incentives to residential and non-residential customers who install
qualifying solar water heating systems that offset energy used by an existing water heater or
boiler. The program also provides necessary education and training to stakeholders. The
program is available to all CPAU natural gas and electricity customers. CPAU’s SWHP is
administered by the Center for Sustainable Energy.1
DISCUSSION
CPAU’s Solar Water Heating Program (SWHP) has made little progress in achieving its goal of 30
installed systems per year, since low natural gas prices make the return on investment for SWH
systems unattractive.
1 The original contract with the Center for Sustainable Energy was approved by Council in April 2008 (Staff Report
174:08). The current contract was approved in May 2013 (Staff Report 3692).
ATTACHMENT A
Page 2 of 2
Detailed SWHP activity is provided in the Demand Side Management Achievements for Fiscal
Year 2014 report, which was provided to the UAC in February 2015, and to the Council in May
2015 (Staff Report 5708). That report included a count of solar water heating systems installed
to date as shown below:
Customer-Side Solar Water Heating Systems Program Achievements versus Goals
Year SWH Systems
Goal
SWH Systems
Installed
FY 2009 30 7
FY 2010 30 17
FY 2011 30 10
FY 2012 30 1
FY 2013 30 1
FY 2014 30 11
Total 43
As part of the cost-effectiveness of electrification options for residential appliances and
vehicles, the cost effectiveness of solar water heating was presented in a report provided to the
UAC in July 2015 and to the Council in August 2015 (Staff Report 5971). The relevant section
from that report is provided below:
Solar Water Heating: Wet versus Dry
A solar PV system combined with a HPWH [Heat Pump Water Heater] (“dry solar
water heating”) is more cost-effective than installing a solar thermal water
heating system (“wet solar water heating”). Using the base case assumptions
above, the 20-year cost of ownership for a solar thermal water heating system
with electric back-up is estimated to be $9,000. By contrast, the 20-year net cost
of ownership for retrofitting a home to install a HPWH plus installing one
kilowatt of solar PV at $4.50 per Watt—the amount of capacity needed to
provide electricity for all HPWH usage—is approximately $7,000. Therefore, dry
solar water heating is currently more cost-effective in Palo Alto given available
net energy metering and federal incentives.
RESOURCE IMPACT
Production of this memorandum is not part of CPAU’s work plan, but is being provided as
requested by the UAC, and required 6 hours of staff time.
Page 1 of 2
6
MEMORANDUM
TO: UTILITIES ADVISORY COMMISSION
FROM: UTILITIES DEPARTMENT
DATE: JANUARY 13, 2016
SUBJECT: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt a Resolution Approving the Amended City of Palo
Alto Utilities Legislative Policy Guidelines
______________________________________________________________________________
REQUEST
Staff requests that the Utilities Advisory Commission (UAC) recommend that the City Council
adopt the attached resolution approving amendments to the Utilities Legislative Policy
Guidelines.
BACKGROUND
The utility industry is a high-profile and heavily regulated industry subject to continuous
legislative action at both the state and federal levels. Such legislation can influence, among
other things, the reliability and security of the supply and distribution infrastructure,
commodity procurement practices, customer service and billing, program design, rate design,
and activities and costs associated with climate protection. Representatives of the City
(appointed and elected officials and staff) participate in Federal and State legislative forums to
advocate positions on issues facilitating the City’s current strategic objectives, as adopted in the
2011 Utilities Strategic Plan and subsequently modified in the 2013 Utilities Strategic Plan
update: ensuring a reliable and safe supply of utility resources, providing customer service
excellence, managing costs, and ensuring environmental sustainability. The City also
participates in joint action efforts to advocate for goals and objectives shared by other publicly -
owned utilities.
At the state level, hundreds of bills focused on the utility industry can be introduced each year.
The number of bills introduced, the pace at which bills change and new language is negotiated,
and the often surprising speed at which bills can be placed for a vote during the legislative year
requires staff and elected officials to respond quickly if the City is to have any influence on the
resulting legislation. Often, a response to an amended bill is required in a matter of a day or
two. These timing constraints preclude a return to the UAC and Council for approval each time
a response is required. Therefore, a set of policy guidelines is developed each year that
identifies the goals and priorities for the City to be applied by staff when evaluating and
responding to legislation. While the guidelines are used by staff for evaluating legislation, any
advocacy positions taken in alignment with these guidelines will be subject to the approval of
the Utilities Director or City Manager per the City’s legislative advocacy process. Although it is
impractical to return for approval each time a letter is sent in response to a bill amendment,
the issues under debate are known to the UAC and Council through their participation in
legislative commi~ee meetings, and updates from the City Manager, the Utilities Dir_ector and
City staff. Forma l letters responding to legislative bills or amendments will be distributed to the
UAC and Council.
DISCUSSION
The proposed Utilities Legislative Policy Guidelines have been updated to respond to recent
legislative and regulatory trends. Exhibit A, attached to the resolution, shows the proposed
revised guidelines, with the changes from the last approved set of guidelines highlighted in
Attachment B. The priorities are grouped in six sections: the first listing goals, trends and
priorities that are common to all utilities, and the foilowing five sections identifying goals,
trends and priorities that are specific to electric, fiber optic, natural gas, wastewater collection
and water services.
Attachment C provides a summary of key legislative action from 2015 and a look forward at
anticipated issues that have a good chance of reappearing in the second year of California's
2015/2016 legislative session. Some of these are bills that were held back in 2015 and may be
taken up again this year, others are approved statutes that staff anticipates will have follow up
legislation.
Staff returns every year with an update to the gu i delines and is proposing the guidelines, if
adopted by Council, remain in effect from February 22, 2016 until the next approved update.
RESOURCE IMPACT
There is no direct resource impact associated with adoption of the proposed legislative policy
guidelines. However, actions taken that support the efficient use of the City's assets and
resources will help control costs, i mplement the Council's policies and goals, and protect the
interests of utility customers.
ENVIRONMENTAL REVIEW
The UAC's consideration of the Legislative Policy Guidelines does not meet the California
Environmental Quality Act's definition of a "project" under Public Resources Code Section
21065.
ATTACHMENTS
A. Draft Resolution with Exhibit A: February 2016 Update to the Utilities Legislative Policy
Guidelines
B. February 2016 Update to the Utilities legislative Policy Guidelines -Redline version
showing changes from the previous Utilities Legislative Policy Guidelines
C. Review of legislative Activities in 2015
PREPARED BY: HEATHER DAULER, Senior Resource Planner
REVIEWED BY: DEBRA LLOYD, Utilities Compliance Manager "J)L
a_~ DEPARTMENT HEAD:
EDSHIKADA
Assistant City Manager/Interim Director of Utilities
Page 2 of 2
Utilities Legislative Policy Guidelines *Draft*February 2016 Update
Resolution No. _________
Resolution of the Council of the City of Palo Alto Approving the City
of Palo Alto Utilities’ Legislative Policy Guidelines
A. The City of Palo Alto Utilities Strategic Plan (“Strategic Plan”), approved by the
Palo Alto City Council on July 18, 2011, [Staff Report #1880], and amended on August 5, 2013
(Staff Report #3950), provides a set of Strategic Objectives for the City of Palo Alto Utilities
Department (CPAU) to follow in ensuring a reliable and safe supply of utility resources,
providing customer service excellence, managing costs, and ensuring environmental
sustainability.
B. CPAU annually identifies Utilities’ Legislative Policy Guidelines that facilitate the
Strategic Plan’s Strategic Objectives, and advocates for utility-related issues at Federal and
State legislative forums in furtherance of those objectives.
C. Action on some of these issues may require active involvement of Palo Alto
elected and appointed officials.
D. The Utilities’ Legislative Policy Guidelines were presented to the UAC at its
January 13, 2016 meeting, and the UAC voted _______ to recommend that the City Council
approve the Utilities’ Legislative Policy Guidelines.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the resolution approving the Utilities
Legislative Policy Guidelines, effective February 22, 2016. All prior versions of the City of Palo
Alto Utilities Legislative Policy Guidelines, including the Legislative Policy Guidelines adopted by
Council on March 2nd, 2015 (Resolution No.9498) are hereby repealed and replaced in their
entirety by the Utilities Legislative Policy Guidelines, attached to this Resolution as Exhibit A.
SECTION 2. Staff will review the Guidelines annually and any proposed changes will
be approved by City Council.
SECTION 2. The Council finds that the adoption of this resolution does not constitute
a project under Section 21065 of the California Environmental Quality Act (CEQA) and the CEQA
Guidelines, and therefore, no environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ATTACHMENT A
Utilities Legislative Policy Guidelines *Draft* February 2016 Update
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Senior Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Included as Exhibit A to Resolution
Utilities’ Legislative Policy Guidelines
Formal advocacy positions taken in alignment with these guidelines will be subject to the
approval of the Utilities Director or City Manager as per the City’s Legislative Program Manual
ALL UTILITES
Goals
1.Preserve/enhance local accountability in the control and oversight of matters impacting utility
programs and rates for customers.
2.Support efforts to maintain or improve the reliability and security of the supply, transmission,
storage, distribution/collection, and data infrastructures.
3.Support legislation that makes bold progress in cost effectively reducing greenhouse gas (GHG)
emissions, , recognizes without penalizing early voluntary action, and supports statewide climate
protection goals.
4.Maintain the City of Palo Alto Utilities’ (CPAU’s) ability to provide safe, reliable, sustainable, and
competitively-priced utility services.
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
1. Advocate goals through active
participation in joint action
efforts.
Federal,
State, and
Regional
2.Support legislation that allows
local evaluation and design of
more efficient energy solutions,
fuel switching, and demand
control programs.
Federal,
State, and
Regional
3.Promote utility legislation and
regulations that support
effective and consistent
compliance and reporting
requirements. Ensure such
legislation and regulations
have received stakeholder
review and cost benefit
analysis.
Federal,
State, and
Regional
Reliability
Councils
4.Oppose unreasonable and
inequitable financial burdens
through active participation in
CMUA and NCPA legislative
activities.
Federal,
State, and
CPUC
EXHIBIT A TO ATTACHMENT A
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
5. Advocate for state and federal
grants for local and regional
energy efficiency and
conservation measures,
renewable resources, fiber
optic, fuel switching,
wastewater collection systems
and recycled water projects.
Federal
and State
6. Maintain right of way access
for utility infrastructure.
Federal
and State
7. Protect the financial and
operational value of utility
assets and contracts;
preserve local regulatory
control of both.
Federal
and State
8. Enhance utility customer
protections for data security
and confidentiality.
Federal
and State
9. Maintain existing low cost
municipal financing options for
infrastructure projects and
advocate for new federal and
state programs that recognize
critical infrastructure needs.
Federal
and State
10. Promote legislation and
regulations supporting
reasonable and consistent
requirements for utility
notifications, , safety,
services, public
communications, billing,
payments, and customer
assistance.
Federal
and State
11. Support Proposition 26
reform efforts to provide
ratemaking flexibility to
balance conservation,
revenue sustainability, and
low income assistance
programs.
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
12. Seek state and regional
funding to enhance the
efficiency, security, and
reliability of infrastructure
that maintains utility
customer data security and
confidentiality.
Federal
and State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
ELECTRIC
Goals
1. Preserve/enhance the ability of municipal utilities to exercise local accountability and oversight over
matters impacting customer service, programs (such as demand side efficiency and conservation
programs), and rate structure.
2. Preserve/enhance the reliability and security of infrastructure.
3. Support legislation that recognizes early voluntary action in reducing GHG emissions and
specifically exempts a municipality from burdensome requirements that could result from
the early action.
4. Preserve just and reasonable utility rates/bills established by local governing bodies.
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l
1. Advocate goals through Northern California
Power Agency (NCPA), California Municipal
Utilities Association (CMUA), American Public
Power Association (APPA), Transmission
Agency of Northern California (TANC), and Bay
Area Municipal Transmission Group (BAMx)
with support from Palo Alto staff; strive to
present the same or substantially the same
message
Federal and
State
2. Support NCPA in its continued efforts to
streamline the state regulatory reporting
responsibilities, to eliminate duplicative data
and report submittals to multiple state
regulatory agencies, including the CEC, CARB,
and the California Independent System
Operator (CAISO).
State
3. Advocate for legislation/regulations that
provide local accountability and design of:
Net Energy Metering (NEM) successor
programs designed to fit local conditions
and priorities;
Electric Integrated Resource Plans
cost-effective renewable distributed
generation and cogeneration projects,
and standards and permitting
requirements for connecting such
resources to the local distribution system;
balancing state and local policy
implementation and ratepayer equity;
equitable rate design and tariffs;
cost-effective electric efficiency programs;
implementation of renewable portfolio
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l standards;
cost-effective storage integration;
direct access requirements;
smart meters and smart grid design and
implementation; and
use of public benefit funds (as allowed in
AB 1890 (1996)
4. Support cap-and-trade market designs that:
protect consumers from the exercise of
market power;
allocate allowances that help mitigate
impacts to Palo Alto customers while
providing incentives for utilities to lower
GHG emission portfolios;
provide flexible compliance mechanisms
such as banking and borrowing of
allowances; and
allocate funds generated from cap-and-
trade markets to cost-effective GHG-
reduction related activities, not as a
revenue source for state or federal general
funds.
Federal and
State
5. Support legislation for renewable portfolio
standards that:
maintain local compliance authority;
avoid mandates for technology or source
specific carve outs, and minimum term
requirements;
allow utilities to pursue all cost-effective
resources available to meet portfolio
needs including use of Renewable Energy
Certificates (RECs);
ensure uniform application of RPS
standards, avoiding punitive and/or
duplicative non-compliance penalties;
restrict new regulations expanding CEC
jurisdiction over publicly owned utilities;
allow local distributed generation to
count in full towards RPS; and
prioritize the use of existing
transmission system assets over
building new transmission.
Local and
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l
6. Support/encourage transmission,
generation, and demand-reduction
projects and solutions including
advocating for financing or funding
solutions/options for projects that:
enhance/ensure reliability;
ensure equitable cost allocation following
beneficiary pays principles (including
protection against imposition of state-
owned electric contract costs on municipal
utility customers);
improve procurement flexibility (e.g.
resource adequacy rules that ensure
reliability and provide flexibility in meeting
operational requirements or flexibility in
meeting State renewable portfolio
standards);
support the continuation of federal and
state financial incentives that promote
increased renewable development;
improve market transparency (particularly
transparency of IOU’s transmission and
procurement planning and implementation
activities); and
reduce negative environmental
impacts on the Bay Area and the
Peninsula.
Local, State,
and Federal
7. Advocate for Congressional, legislative, or
administrative actions on matters impacting
costs or operations of the Western Area
Power Administration (Western) such as:
support of Congressional Field Hearings to
explore modernizing flood control
strategies, river regulation and generation
strategies at Central Valley Project (CVP)
plants to enhance generation, water
delivery, flood control and fisheries;
protection of the status of Western Power
Marketing Administration and cost-based
rates;
provisions for preference customers’ first
take at available land with economic
potential for wind farms;
balancing efforts for competing
environmental improvements in rivers and
Delta conditions with water supply and
hydropower impacts;
Federal,
State and
Regional
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l support grid modernization without
compromising the primary mission of
Western and recognizing the
achievements already made in California
without adding duplicate costly efforts;
monitoring and evaluating impacts of Delta
conveyance proposals on Western Base
Resource allocation;
advocating for an equitable distribution
of costs between water and power
customers of the Central Valley Project;
and
advocating for clear product provisions,
fair allocation of Base Resource Capacity
and fair contract terms under Western’s
2025 Power Marketing Plan and new
Western Base Resource contracts.
8. Advocate for Congressional or administrative
actions on matters relating to overly
burdensome reporting and compliance
requirements established by the North
American Reliability Corporation (NERC), the
Federal Energy Regulatory Commission (FERC)
or the Western Electricity Coordinating
Council (WECC).
Federal,
State and
Regional
9. Support fair and reasonable application of grid
reliability requirements established by NERC,
WECC, or FERC and seek appropriate remedies
(if needed) for inequitable or punitive
application of fees and fines.
Federal and
Regional
10. Work with CAISO and/or FERC:
to give buyers of renewable intermittent
resources relief from imbalance penalties;
to promote financial and operational
changes that result in timely and accurate
settlement and billing; and
to provide critical input on the need for
various transmission projects in light of the
escalating costs to the City to import power
using the bulk transmission system.
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l
11. Work with NCPA, CMUA and NERC to ensure
that:
Federal, state and regional designations
of “critical cyber assets” are
appropriately applied to only truly
critical local distribution infrastructure;
and
CPAU retains local control over
implementation of utility industry cyber
security standards, policies and
procedures.
Federal and
Regional
Utilities Legislative Policy Guidelines February 2016
Update
6053662
FIBER OPTIC
Goals
1. Preserve and enhance the authority of local government to (1) develop broadband solutions that
align with community needs and (2) expand consumer choice for competitive Internet connectivity
and other advanced services delivered over fiber-optic networks.
2. Encourage the competitive delivery of broadband services by permitting the use of public rights-of-
way and Utilities infrastructure in a responsible manner, provided that local rights of way authority
and management is preserved and contractual or other use does not compromise the City’s existing
utility safety, service, and operational s obligations.
3. Support local government authority over zoning-related land use for communications infrastructure
in accordance with reasonable and non-discriminatory regulations.
4. Support the Council’s Technology and the Connected City initiative of 2013, to fully leverage the
City’s fiber-optic and infrastructure assets such as public rights-of-way, utility poles and conduit
for the broadband expansion.
Goals
Legislative Policy Guidelines
Venue
1. Support
Municipal
Delivery
2. Competitive
Delivery
3. Local
Authority
over Land
Use
4. Support
Council
Initiatives
1. Advocate for these goals through the
American Public Power Association
(APPA), California Municipal Utilities
Association (CMUA), National
Association of Telecommunications
Officers and Advisors (NATOA),
National League of Cities (NLC), and the
Next Century Cities initiative (NCC),
with support from City staff.
Federal
and State
2. Support legislation and regulations that
preserve and enhance municipal
delivery of conventional and advanced
telecommunication services as
prescribed by the Telecommunications
Act of 1996.
Federal
and State
3. Support the goals of the Federal
Communications Commission’s (FCC),
National Broadband Plan to improve
Internet access nationwide.
Federal
and State
4. Oppose legislation and regulations that
benefit the incumbent cable TV,
telephone, and telecommunications
companies at the expense of
community-owned fiber-optic and
wireless networks.
Federal
and State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines
Venue
1. Support
Municipal
Delivery
2. Competitive
Delivery
3. Local
Authority
over Land
Use
4. Support
Council
Initiatives
5. Support legislation and regulations that
preserve and enhance utility customer
data security and confidentiality
protections by the providers of
telecommunication services.
Federal
and State
6. Support the Council’s directive to
concurrently pursue the findings and
recommendations in the Fiber-to-the-
Premises Master Plan and Wireless
Network Plan and continue discussions
and negotiations with third parties
considering new service deployments
in Palo Alto.
Local
7. Support legislation and regulations
that::
Permit the contractual use of
public right-of- way and Utilities
infrastructure;
Preserve local rights-of-way
authority and management;
Preserve local government zoning
and siting authority for wireless
and wireline communication
facilities;
Support local “dig once” policies
to ensure conduit and fiber are
available for lease on reasonable
terms; and
Oppose legislation and regulations
that arbitrarily reduce
compensation received by local
governments from other entities
for the economic use of the public
rights-of-way and other public
properties required for
communication infrastructure (e.g.,
utility poles, streetlight poles, ducts
and conduits).
Federal,
State and
Local
Utilities Legislative Policy Guidelines February 2016
Update
6053662
NATURAL GAS
Goals
1. Preserve/enhance the ability of municipal utilities to develop and implement demand side
efficiency and conservation programs, alternative gas supplies, and rate structures.
2. Increase the security and reliability of the gas supply and transmission infrastructure. This includes
retaining access to intra- and interstate gas transmission systems to reliably serve customers.
3. Support efforts to reduce greenhouse gas emissions and protect the environment.
4. Preserve just and reasonable utility rates/bills established by local governing bodies.
Goals
Legislative Policy Guidelines Venue 1. Local
Accountability
2. Reliability of
Infrastructure
3. Environ-
ment
4. Cost
Control
1. Advocate most of these goals
mainly through the American
Public Gas Association (APGA) with
minor support from Palo Alto staff.
Primarily
Federal with
minor
advocacy at
State level
2. Work with Northern California
Power Agency (NCPA) and
California Municipal Utilities
Association (CMUA) to the extent
that the City’s goals as a gas
distributor align with generators’
use of natural gas.
Federal and
State
3. Support cost effective renewable
gas supplies from in or out of state
sources. In case of mandated
renewable portfolio standards,
advocate for controls and off-
ramps similar to the electric RPS
that minimize customer cost
impact.
Federal and
State
4. Advocate for financing or funding
for cost-effective natural gas
efficiency and solar water heating
end uses.
Federal and
State
5. Support market transparency and
efforts to eliminate market
manipulation through reasonable
oversight.
Federal
6. Support municipal utilities’ ability
to enter into pre-pay transactions
for gas supplies.
Federal
7. Support efforts to improve pipeline
safety.
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines Venue 1. Local
Accountability
2. Reliability of
Infrastructure
3. Environ-
ment
4. Cost
Control
8. Work with partners to discourage
extension of CPUC regulatory
authority over municipal gas
operations.
State
9. Support cap-and-trade market
designs that:
protect consumers from the
exercise of market power;
allocate allowances that
mitigate impacts to Palo Alto
customers while preserving
City environmental goals;
advocate for an allowance
allocation methodology that
provides flexibility for Palo Alto
to structure rates to align GHG
costs and revenues;
provide flexible compliance
mechanisms such as banking
and borrowing of allowances;
and
allocate funds generated from
cap-and-trade markets to GHG
related activities, not as a
revenue source for state or
federal general funds.
Federal and
State
10. Support legislation that aims to
protect public health and
encourages transparency regarding
the practice of hydraulic fracturing
or “fracking” for natural gas
development, while opposing
blanket moratoriums that aren’t
supported by science.
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
WASTEWATER COLLECTION
Goals
1. Support ability of municipal utilities to develop and manage their own conservation and efficiency
programs and retain authority over ratemaking, including the imposition of non-volumetric
customer meter or infrastructure charges for wastewater collection service.
2. Encourage efforts to increase the reliability of the local wastewater collection systems.
3. Maintain the provision of reliable and sustainable wastewater collection service at a fair price.
4. Support equal comparisons of wastewater collection systems by regulatory agencies in order to
minimize and reduce onerous, costly, time-intensive reporting requirements and improve value
and accuracy of information reported to the public.
Goals
Legislative Policy Guidelines Venue
1. Local
Accountability
2. Reliable
Infrastructure
3. Maintain
service
4. Valuable
reporting
1. Advocate goals through active
participation in the Association of
Bay Area Governments (ABAG).
Local,
Regional
& State
2. Support regulations of wastewater
collection systems that recognize:
local jurisdictions’ proactive
efforts to replace and maintain
wastewater collections
systems;
the need to provide affordable
and cost based collection
service; and
the unique characteristics of
each collection system.
Local,
Regional
& State
3. Support regional agencies in their
pursuit of:
environmentally sustainable,
reliable wastewater collection
service at a fair price; and
regional comparisons of
wastewater collection projects
for future state grant funding.
Local and
Regional
5. Advocate for funding and local
regulations for wastewater
collection system projects and
requirements that reduce
overflows and improve collection
system efficiency.
Regional,
State and
Federal
Utilities Legislative Policy Guidelines February 2016
Update
6053662
WATER
Goals
1. Support the ability of public utilities and districts to develop and implement their own water
efficiency and conservation programs while retaining authority over ratemaking, including the
ability to optimize volumetric, fixed, and drought-related pricing and balance the goals of revenue
certainty and water use efficiency.
2. Increase the security and reliability of the regional water system owned and operated by the San
Francisco Public Utilities Commission (SFPUC).
3. Support efficiency and recycled water programs in order to minimize the use of imported supplies.
4. Provide environmentally sustainable and reliable supplies of high quality water.
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
1. Advocate goals through active
participation in the Bay Area Water Supply
and Conservation Agency (BAWSCA),
California Urban Water Conservation
Council (CUWCC), and California
Municipal Utilities Association (CMUA),
with support from Palo Alto staff for
BAWSCA
Local,
Regional
and State
2. Participate in CUWCC Best Management
Practice (BMP) revisions and development
to ensure that aggressive and cost-
effective efficiency goals are incorporated
and operating proposals are reasonable,
achievable, and cost-effective.
State
3. Advocate to ensure that legislative actions
regarding the Hetch Hetchy Regional
Water System include:
timely rebuilding of the regional water
system;
maintenance of the quality of
delivered water;
minimization of any increase in the
cost of water;
no additional exposure to more
frequent or severe water
shortages;
increased real-time monitoring
data availability to ensure water
quality;
support for the existing water system
and its operation;
SWRCB responsiveness to SFPUC water
quality issues;
Local,
Regional
and State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
4. Advocate for interpretations or
implementation of Water Code provisions
that maintain or reinforce the authorities
and protections available to the City and
BAWSCA members outside of San
Francisco.
Local,
Regional
and State
5. Support BAWSCA to enable it to
advocate for:
an environmentally sustainable,
reliable supply of high quality water at
a fair price;
for Wholesale Customers’ rights
under the Water Supply Agreement
for water from SFPUC that meets
quality standards;
a SFPUC rate structure that is
consistent with the Water Supply
Agreement and is based on water
usage;
preservation of Palo Alto’s existing
contractual water allocation and
transportation rights on the SFPUC
Hetch Hetchy system; and
regional planning for conservation,
recycled water, and other water supply
projects.
Local and
Regional
6. Advocate for actions that:
preserve Palo Alto’s existing
contractual rights; and
preserve local control over water use
and limit encroachment from outside
jurisdictions.
Local and
Regional
7. Support infrastructure security and
reliability including an interconnection
between the SCVWD West Pipeline with
the SFPUC’s Bay Division Pipelines 3 and 4.
Regional
and State
8. Support notification requirements that
inform residents/customers but do not
inflict undue or unobtainable requirements
on the utility.
State
9. Support local control of public benefit
funds, funding levels and program
design.
State
Utilities Legislative Policy Guidelines February 2016
Update
6053662
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
10. Support beneficiary pays methodologies to
prevent taxes or fees imposed on SFPUC
customers to fund infrastructure
improvements and costs of water sources
that do not serve Palo Alto customers.
State and
Regional
11. Advocate for financing or funding for water
conservation programs and recycled water
projects that meet end-use needs and
conserve potable water and oppose
legislation that would reduce such funding.
State,
Regional
and
Federal
12. Support infrastructure security and
reliability that includes equitable allocation
of funds for increasing the security of
infrastructure and that protects the City
from unnecessary regulations.
Local,
State and
Federal
13. Support legislation that promotes
responsible groundwater management
while recognizing Palo Alto’s existing and
historical groundwater extraction
practices.
State
14. Support Proposition 218 reform efforts to
provide ratemaking flexibility to balance
conservation, revenue sustainability, and
low income assistance programs.
State
15. Advocate for reasonable statewide water
conservation efforts (both drought
response and long term) that achieve
required water savings while minimizing
customer and commercial impact,
protecting the City’s urban canopy and
minimizing the City’s enforcement costs.
State
16. Protect the City and County of San
Francisco’s water rights as well as those
of the co-grantees of the Raker Act.
State
17. Support legislation that would protect the
City’s infrastructure and treatment
investments from future state-wide cuts
in water use.
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 1 of 19
Utilities’ Legislative Policy Guidelines
Formal advocacy positions taken in alignment with these guidelines will be subject to the
approval of the Utilities Director or City Manager as per the City’s Legislative Program
Manual
ALL UTILITES
Goals
1.Preserve/enhance local accountability in the control and oversight of matters impacting utility
programs and rates for our customers while balancing statewide climate protection goals.
2.Support efforts to maintain or improve the reliability and security of the supply, transmission,
storage, and distribution/collection, and data infrastructures.
3.Support legislation that makes bold progress in cost effectively reducing greenhouse gas (GHG)
emissions, and , recognizes without penalizing early voluntary action, and supports statewide
climate protection goals.
4.Maintain the City of Palo Alto Utilities’ (CPAU’s) ability to provide safe, reliable, sustainable, and
competitively-priced utility services.
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
1. Advocate goals through active
participation in joint action
efforts.
Federal,
State, and
Regional
2.Support legislation that allows
local evaluation and design of
more efficient energy solutions,
fuel switching, and demand
control programs.Support
legislation that will result in the
most cost-effective reduction
of GHG emissions, recognition
of early action, and inclusion of
more efficient solutions, fuel
switching, and demand control
programs, in integrated
resource plans.
Federal,
State, and
Regional
3.Promote utility legislation and
regulations that support
effective and consistent
compliance and reporting
requirements. Ensure such
legislation and regulations
have received stakeholder
Federal,
State, and
Regional
Reliability
Councils
ATTACHMENT B
Utilities Legislative Policy Guidelines February 2016
Update
Page 2 of 19
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
review and cost benefit
analysis.Promote utility
legislation and regulations
that have undergone
stakeholder review and
applicable cost benefit
analysis to support reasonable
reliability standards and
compliance requirements, and
effective and consistent
reporting requirements,
customer communications,
and goal-setting.
4. Oppose cost shifts from Federal
or State budgets and California
Public Utilities Commission
(CPUC) jurisdictional utilities
unreasonable and inequitable
financial burdens through
active participation in CMUA
and NCPA legislative activities.
Federal,
State, and
CPUC
5. Advocate for sState and
fFederal grants for local and
regional measures regarding
energy efficiency and ,
conservation measures,
renewable resources, fiber
optic, fuel switching,
wastewater collection systems
and recycled water projects.
Federal
and State
6. Maintain right of way access
for utility infrastructure.
Federal
and State
7. Protect the financial and
operational value of existing
utility assets and contracts;
and localpreserve local
regulatory approvals control
of sameboth.
Federal
and State
8. Enhance utility customer
protections for data security
and confidentiality.
Federal
and State
89. Maintain existing low cost
municipal financing options for
infrastructure projects and
Federal
and State
Utilities Legislative Policy Guidelines February 2016
Update
Page 3 of 19
Goals
Legislative Policy
Guidelines
Venue
1. Local
Accountability
2. Reliability,
Security
&
Infrastructure
3. Climate
Protection
4. Service &
Cost
Control
advocate for new federal and
state programs that recognize
critical infrastructure needs.
910. Promote utility legislation
and regulations that
supporting reasonable and
consistent requirements for
utility notifications,
compliance, and reporting
requirements for safety,
services, public
communications, billing, and
payments, and customer
assistance.
Federal
and State
11. Support Proposition 26
reform efforts to provide
ratemaking flexibility to
balance conservation,
revenue sustainability, and
low income assistance
programs.
State
12. Seek state and regional
funding to enhance the
efficiency, security, and
reliability of infrastructure
that maintains utility
customer data security and
confidentiality.
Federal
and State
Utilities Legislative Policy Guidelines February 2016
Update
Page 4 of 19
ELECTRIC
Goals
1. Preserve/enhance the ability of municipal utilities to exercise local accountability and oversight over
matters impacting customer service, programs (such as demand side efficiency and conservation
programs), and rate structure.
2. Preserve/enhance the reliability and security of infrastructure.
3. Support legislation that makes bold progress in cost effectively reducing GHG emissions and
encourages recognizes early voluntary action in reducing GHG emissions and specifically
exempts a municipality from burdensome requirements that could result from the early
action.
4. Preserve just and reasonable utility rates/bills established by local governing bodies.
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l
1. Advocate goals through Northern California
Power Agency (NCPA), California Municipal
Utilities Association (CMUA), American Public
Power Association (APPA), Transmission
Agency of Northern California (TANC), and Bay
Area Municipal Transmission Group (BAMx)
with support from Palo Alto staff; strive to
present the same or substantially the same
message to speak with a coordinated voice.
Federal and
State
2. Support NCPA in its continued efforts to
streamline the state regulatory reporting
responsibilities, to eliminate duplicative data
and report submittals to multiple state
regulatory agencies, including the CEC, CARB,
and the California Independent System
Operator (CAISO).
State
3. Advocate for legislation/regulations that
provide local accountability and support
fordesign of:
Net Energy Metering (NEM) successor
programs designed to fit local conditions
and priorities;
Electric Integrated Resource Plans
cost-effective cleanrenewable distributed
generation and cogeneration projects,
and standards and permitting
requirements for connecting such
resources to the local distribution system;
balancing state and local policy
implementation and ratepayer equity;
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 5 of 19
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l equitable rate design and tariffs;
cost-effective electric efficiency programs;
implementation of renewable portfolio
standards;
cost-effective storage integration;
direct access requirements;
smart meters and smart grid design and
implementation; and
use of public benefit funds (as allowed in
AB 1890 (1996)
4. Support cap-and-trade market designs that:
protect consumers from the exercise of
market power;
allocate allowances that help mitigate
impacts to Palo Alto customers while
providing incentives for utilities to move to
lower GHG emission portfolios;
provide flexible compliance mechanisms
such as banking and borrowing of
allowances; and
allocate funds generated from cap-and-
trade markets to cost-effective GHG-
reduction related activities, not as a
revenue source for state or federal general
funds.
Federal and
State
5. Support legislation for renewable portfolio
standards that:
promote the 33% goal for the state;
maintain local compliance authority;
avoid mandates for technology or source
specific carve outs, and minimum term
requirements;
allow utilities to pursue all cost-effective
resources available to meet portfolio
needs low cost alternatives by utilizing the
existing transmission system to access
out-of-state resources, including use of
Renewable Energy Certificates (RECs);
ensure fair uniform application of RPS
standards, that avoiding punitive and/or
duplicative non- compliance penalties;
restrict extension new regulations
expanding of CEC jurisdiction over
pPublicly oOwned uUtilities;
consolidate GHG reduction goals and
Renewable Portfolio Standards under one
Local and
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 6 of 19
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l clean energy standard;
allow the counting of local distributed
generation to count in full towards
RPS; and
prioritize the use of the existing
transmission system assets over
building new transmission.
6. Support/encourage transmission,
generation, and demand-reduction
projects and solutions including
advocating for financing or funding
solutions/options for projects that:
enhance/ensure reliability;
ensure equitable cost allocation following
beneficiary pays principles (including
protection against imposition of state-
owned electric contract costs on municipal
utility customers);
improve procurement flexibility (e.g.
resource adequacy rules that ensure
reliability and provide flexibility in meeting
operational requirements or flexibility in
meeting State renewable portfolio
standards);
support the continuation of federal and
state financial incentives that promote
increased renewable development;
improve market transparency (particularly
transparency of IOU’s transmission and
procurement planning and implementation
activities); and
reduce the negative environmental
impacts on the Bay Area and the
Peninsula.
Local, State,
and Federal
7. Advocate for Congressional, legislative, or
administrative actions on matters impacting
costs or operations of the Western Area
Power Administration (Western) such as:
support of Congressional Field Hearings to
explore modernizing flood control
strategies, river regulation and generation
strategies at Central Valley Project (CVP)
plants to enhance generation, water
delivery, flood control and fisheries;
protection of the status of Western Power
Marketing Administration and cost-based
Federal,
State and
Regional
Utilities Legislative Policy Guidelines February 2016
Update
Page 7 of 19
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l rates;
provisions for preference customers’ first
take at available land available with
economic potential for wind farms;
balancing efforts for competing
environmental improvements in rivers and
Delta conditions with water supply and
hydropower impacts;
achieving the
support grid modernization goals of
Secretary Chu’s March 16, 2012 memo
without compromising the primary
mission of Western and recognizing the
achievements already made in California
without adding duplicate costly efforts;
monitoring and evaluating impacts of Delta
conveyance proposals on Western Base
Resource allocation; and
advocating for an equitable distribution
of costs between water and power
customers of the Central Valley Project;
and.
advocating for clear product provisions,
fair allocation of Base Resource Capacity
and fair contract terms under Western’s
2025 Power Marketing Plan and new
Western Base Resource contracts.
8. Advocate for Congressional, legislative, or
administrative actions on matters relating to
overly burdensome reporting and compliance
requirements established by the North
American Reliability Corporation (NERC), the
Federal Energy Regulatory Commission (FERC)
or the Western Electricity Coordinating
Council (WECC).
Federal,
State and
Regional
9. Support fair and reasonable application of grid
reliability requirements established by NERC,
WECC, or FERC and seek Congressional
appropriate remedies (if needed) for
inequitable or punitive application of fees and
fines.
Federal and
Regional
10. Work with CAISO and/or through FERC:
to give buyers of renewable intermittent
resources relief from imbalance penalties;
to promote financial and operational
changes that result in timely and accurate
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 8 of 19
Goals
Legislative Policy Guidelines
Venue
1. Local
Accountability
2.
Reliability
3. GHG
Reduction
4. Cost
Contro
l settlement and billing; and
to provide critical input on the need for
various transmission projects in light of the
escalating costs to the City to import power
using the bulk transmission system.
11. Work with NCPA, CMUA and NERC to ensure
that:
Federal, state and regional designations
of “critical cyber assets” are
appropriately applied to only truly
critical local distribution infrastructure;
and
CPAU retains local control over
implementation of utility industry cyber
security standards, policies and
procedures. Monitor cyber security
issues to ensure that CPAU, which
currently does not have critical cyber
assets, retains local control over its cyber
security needs while remaining exempt
from NERC cyber security standards.
Support NCPA to protect it and its
member agencies from unnecessary
cyber security regulations.
Federal and
Regional
Utilities Legislative Policy Guidelines February 2016
Update
Page 9 of 19
FIBER OPTIC
Goals
1. Preserve and enhance the authority of local government to (1) develop broadband solutions that
align with community needs and (2) expand consumer choice for competitive Internet connectivity
and other advanced services delivered over fiber-optic networks.
2. Encourage the competitive delivery of broadband services by permitting the use of public rights-of-
way and Utilities infrastructure in a responsible manner, provided that local rights of way authority
and management is preserved and the contractual or other use does not compromise the City’s
existing utility safety, and service, and operational s obligations.
3. Support local government authority over zoning-related land use for communications infrastructure
in accordance with reasonable and non-discriminatory regulations.
4. Support the Council’s Technology and the Connected City initiative of 2013, to fully leverage the
City’s fiber- optic and infrastructure assets such as public rights-of-way, utility poles and conduit
for the broadband expansion.
Goals
Legislative Policy Guidelines
Venue
1. Support
Municipal
Delivery
2. Competitive
Delivery
3. Local
Authority
over Land
Use
4. Support
Council
Initiatives
1. Advocate for these goals through the
American Public Power Association
(APPA), California Municipal Utilities
Association (CMUA), National
Association of Telecommunications
Officers and Advisors (NATOA),
National League of Cities (NLC), and the
Next Century Cities initiative (NCC),
with support from City staff.
Federal
and State
2. Support legislation and regulations that
preserve and enhance municipal
delivery of conventional and advanced
telecommunication services as
prescribed by the Telecommunications
Act of 1996.
Federal
and State
3. Support the goals of the National
Broadband Plan, issued in 2010 by the
Federal Communications Commission’s
(FCC), National Broadband Plan to
improve Internet access in the United
Statesnationwide.
Federal
and State
Utilities Legislative Policy Guidelines February 2016
Update
Page 10 of 19
Goals
Legislative Policy Guidelines
Venue
1. Support
Municipal
Delivery
2. Competitive
Delivery
3. Local
Authority
over Land
Use
4. Support
Council
Initiatives
4. Oppose legislation and regulations that
benefit the incumbent cable TV, and
telephone, and telecommunications
companies at the expense of
community-owned fiber-optic and
wireless networks.
Federal
and State
5. Support legislation and regulations that
preserve and enhance consumer utility
customer data security and
confidentiality protections when
dealing with by the incumbent
providers. of telecommunication
services.
Federal
and State
6. Support the Council’s directive to
concurrently pursue the findings and
recommendations in the Fiber-to-the-
Premises Master Plan and Wireless
Network Plan and continue discussions
and negotiations with third parties
considering new service deployments
in Palo Alto.
Local
Utilities Legislative Policy Guidelines February 2016
Update
Page 11 of 19
Goals
Legislative Policy Guidelines
Venue
1. Support
Municipal
Delivery
2. Competitive
Delivery
3. Local
Authority
over Land
Use
4. Support
Council
Initiatives
6.7. Support legislation and regulations
that: encourage the competitive
delivery of broadband services by
permitting the use of public right-of-
way and Utilities infrastructure:
Permit the contractual use of
public right-of- way and Utilities
infrastructure;
Support legislation and regulations
that Ppreserve local rights-of-way
authority and management;
Support legislation and regulations
that Ppreserve local government
zoning and siting authority for
wireless and wireline
communication facilities;
andSupport local “dig once”
policies to ensure conduit and
fiber are available for lease on
reasonable terms; and
Oppose legislation and regulations
that arbitrarily reduce
compensation received by local
governments from other entities
for the economic use of the public
rights-of-way and other public
properties that required for
support communication
infrastructure (e.g., utility poles,
streetlight poles, ducts and
conduits).
Federal,
State and
Local
Utilities Legislative Policy Guidelines February 2016
Update
Page 12 of 19
NATURAL GAS
Goals
1. Preserve/enhance the ability of municipal utilities to develop and implement their own demand
side efficiency and conservation programs, alternative gas supplies, and rate structures.
2. Increase the security and reliability of the gas supply and transmission infrastructure. This includes
retaining access to intra- and interstate gas transmission systems to reliably serve customers.
3. Support efforts to reduce greenhouse gas emissions and protect the environment.
4. Preserve just and reasonable utility rates/bills established by local governing bodies.
Goals
Legislative Policy Guidelines Venue 1. Local
Accountability
2. Reliability of
Infrastructure
3. Environ-
ment
4. Cost
Control
1. Advocate most of these goals
mainly through the American
Public Gas Association (APGA) with
minor support from Palo Alto staff.
Primarily
Federal with
minor
advocacy at
State level
2. Work with Northern California
Power Agency (NCPA) and
California Municipal Utilities
Association (CMUA) to the extent
that the City’s goals as a gas
distributor align with generators’
use of natural gas.
Federal and
State
3. Support cost effective renewable
gas supplies from in or out of state
sources. In case of mandated
renewable portfolio standards,
advocate for controls and off-
ramps similar to the electric RPS
that minimize customer cost
impact.
Federal and
State
4. Advocate for financing or funding
for cost-effective natural gas
efficiency and solar water heating
end uses.
Federal and
State
5. Support market transparency and
efforts to eliminate market
manipulation through reasonable
oversight.
Federal
6. Support municipal utilities’ ability
to enter into pre-pay transactions
for gas supplies.
Federal
7. Support efforts to improve pipeline
safety.
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 13 of 19
Goals
Legislative Policy Guidelines Venue 1. Local
Accountability
2. Reliability of
Infrastructure
3. Environ-
ment
4. Cost
Control
8. Work with partners to discourage
extension of CPUC regulatory
authority over municipal gas
operations.
State
89. Oppose legislative proposals
resulting in unreasonable costs for
Palo Alto’s customers.
Federal and
State
9. 9Support cap-and-trade
market designs that:
protect consumers from the
exercise of market power;
allocate allowances that help
mitigate impacts to Palo Alto
customers while providing
incentives for natural gas
utilities to move to lower GHG
emission portfoliospreserving
City environmental goals;
advocate for an allowance
allocation methodology that
provides flexibility for Palo Alto
to structure rates to align GHG
costs and revenues;
provide flexible compliance
mechanisms such as banking
and borrowing of allowances;
and
allocate funds generated from
cap-and-trade markets to GHG
related activities, not as a
revenue source for state or
federal general funds.
Federal and
State
10. 11. Support legislation that aims to
protect public health and
encourages transparency regarding
the practice of hydraulic fracturing
or “fracking” for natural gas
development, while but not
blanketopposing blanket
moratoriums that aren’t supported
by science.
Federal and
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 14 of 19
WASTEWATER COLLECTION
Goals
1. Support ability of municipal utilities to develop and manage their own conservation and efficiency
programs and retain authority over ratemaking, including the imposition of non-volumetric
customer meter or infrastructure charges for wastewater collection service.
2. Encourage efforts to iIncrease the reliability of the local wastewater collection systems.
3. Maintain the provision of reliable and sustainable wastewater collection service at a fair price.
4. Support equal comparisons of wastewater collection systems by regulatory agencies in order to
minimize and reduce onerous, costly and, time-intensive reporting requirements and improve
value and accuracy of information reported to the public.
Goals
Legislative Policy Guidelines Venue
1. Local
Accountability
2. Reliable
Infrastructure
3. Maintain
service
4. Valuable
reporting
1. Advocate goals through active
participation in the Association of
Bay Area Governments (ABAG).
Local,
Regional
& State
2. Support future regulations of
wastewater collection systems that
recognize:
local jurisdictions’ proactive
efforts to replace and maintain
wastewater collections
systems;
the need to provide affordable
and cost based collection
service; and
the unique characteristics of
each collection system.
Local,
Regional
& State
3. Support provision of sufficient
resources for regional agencies to
enable them to advocate forin
their pursuit of:
environmentally sustainable,
reliable wastewater collection
service at a fair price; and
regional comparisons of
wastewater collection projects
for future state grant funding.
Local and
Regional
4. Support infrastructure security and
reliability including equitable
allocation of funds for increasing
the security of infrastructure.
Regional,
and State
5. Advocate for funding and local
regulations for wastewater
Regional,
State and
Federal
Utilities Legislative Policy Guidelines February 2016
Update
Page 15 of 19
Goals
Legislative Policy Guidelines Venue
1. Local
Accountability
2. Reliable
Infrastructure
3. Maintain
service
4. Valuable
reporting
collections system projects and
requirements that reduce
overflows and improve collection
system efficiency.
Utilities Legislative Policy Guidelines February 2016
Update
Page 16 of 19
WATER
Goals
1. Support the ability of municipal public utilities and districts to develop and manage implement
their own conservation and water efficiency and conservation programs and while retaining
authority over ratemaking, including the ability to optimize volumetric and, fixed, and drought-
related pricing charges to and balance the goals of revenue certainty and water use efficiency.
2. Increase the security and reliability of the regional water system owned and operated by the San
Francisco Public Utilities Commission (SFPUC).
3. Support efficiency and recycled water programs in order to minimize the use of imported supplies.
4. Provide Maintain the provision of an environmentally sustainable, and reliable supply supplies of
high quality water at a fair price.
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
1. Advocate goals through active
participation in the Bay Area Water Supply
and Conservation Agency (BAWSCA),
California Urban Water Conservation
Council (CUWCC), and California
Municipal Utilities Association (CMUA),
with support from Palo Alto staff for
BAWSCA
Local,
Regional
and State
2. Participate in California Urban Water
Conservation Council (CUWCC) Best
Management Practice (BMP) revisions and
development to ensure that aggressive
and cost-effective efficiency goals are
incorporated and operating proposals are
reasonable, achievable, and cost-effective.
State
3. Advocate to ensure that legislative actions
regarding the Hetch Hetchy Regional
Water System include the following
requirements:
timely rebuilding of the regional water
system;
maintainmaintenance of s the
quality of delivered water;
minimizminimization of es any
increase in the cost of water;
creates no additional exposure to
more frequent or severe water
shortages;
increased real-time monitoring
data availability to ensure water
quality;
Local,
Regional
and State
Utilities Legislative Policy Guidelines February 2016
Update
Page 17 of 19
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
support fors the existing water system
and its operation.;
SWRCB responsiveness to SFPUC water
quality issues;
4. Advocate for interpretations or
implementation of Water Code provisions
(such as those enacted by AB 1823 (2002),
AB 2058 (2002) and SB 1870 (2002)) that
maintain or reinforce the authorities and
protections available to the City and
BAWSCA members outside of San
Francisco.
Local,
Regional
and State
5. Support provision of sufficient resources
for BAWSCA to enable it to advocate for:
an environmentally sustainable,
reliable supply of high quality water at
a fair price;
for Wholesale Customers’ rights
under the Water Supply Agreement
for water from SFPUC that meets
quality standards;
a SFPUC rate structure that is
consistent with the Water Supply
Agreement and is based on water
usage;
a contract amendment to modify the
drought time water allocation
between the SFPUC and the BAWSCA
agencies for a fairer allocation of the
burden of water shortages;
preservation of Palo Alto’s existing
contractual water allocation and
transportation rights on the SFPUC
Hetch Hetchy system; and
regional planning for conservation,
recycled water, and other water supply
projects.
Local and
Regional
6. Advocate for actions that:
preserve Palo Alto’s existing
contractual rights; and
preserve local control over water use
and limit encroachment from outside
jurisdictions.
Local and
Regional
7. Support infrastructure security and
reliability including an interconnection
between the SCVWD West Pipeline with
the SFPUC’s Bay Division Pipelines 3 and 4.
Regional
and State
Utilities Legislative Policy Guidelines February 2016
Update
Page 18 of 19
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
8. Support notification requirements that
inform residents/customers but do not
inflict undue or unobtainable requirements
on the utility.
State
9. Support local control of public benefit
funds, funding levels and program
design.
State
10. Support beneficiary pays methodologies to
prevent taxes or fees, in particular those
imposed on SFPUC customers, to fund
infrastructure improvements and costs of
other water sources such as the
Deltawater sources that do not serve Palo
Alto customers.
State and
Regional
11. Advocate for financing or funding for water
conservation programs and recycled water
projects that meet end-use needs and
conserve potable water and oppose
legislation that would reduce such funding.
State,
Regional
and
Federal
12. Support infrastructure security and
reliability that includes equitable allocation
of funds for increasing the security of
infrastructure and that protects the City
from unnecessary regulations.
Local,
State and
Federal
13. Support legislation that promotes
responsible groundwater management
while recognizing Palo Alto’s existing and
historical groundwater extraction
practices.
State
14. Support Proposition 218 reform efforts to
provide ratemaking flexibility to balance
conservation, revenue sustainability, and
low income assistance programs.
State
15. Advocate for reasonable statewide water
conservation efforts (both drought
response and long term) that achieve
required water savings while minimizing
customer and commercial impact,
protecting the City’s urban canopy and
minimizing the City’s enforcement costs.
State
16. Protect the City and County of San
Francisco’s water rights as well as those
of the co-grantees of the Raker Act.
State
17. Support legislation that would protect the
City’s infrastructure and treatment
investments from future state-wide cuts
State
Utilities Legislative Policy Guidelines February 2016
Update
Page 19 of 19
Goals
Legislative Policy Guidelines Venue 1. Local
Authority
2. Reliable
Infrastructur
e
3. Minimize
imports
4. Supplies
at fair cost
in water use.
ATTACHMENT C
1
Review of Legislative Activities in 2015
2015 was year one of California’s two-year 2015-2016 legislative session, and it was an active
energy and water year. Much of the energy legislation targeted GHG emissions and
renewables, while much of the water legislation focused on the drought and conservation
efforts. Of the state bills City of Palo Alto (CPAU) staff tracked in 2015, ten were signed into
law, sixteen never passed the legislature (ie: the bills “died”), and two passed the legislature,
but were vetoed by the Governor. Of the bills that died, we expect at least four to return in
2016.
Following is a summary of the state legislation and federal issues CPAU staff followed in 2015,
along with any positions taken by the Northern California Power Agency (NCPA) and California
Municipal Utilities Association (CMUA), two associations with active CPAU staff involvement.
State Legislation
Energy Related Bills
AB 88 (Gomez) – Sales and use taxes: exemption: energy or water efficient home appliances:
The bill would have established a sales and use tax exemption for any "energy or water efficient
home appliance" purchased by a "public utility" that is provided at no cost to a "low -income
participant" in a federal, state, or ratepayer-funded energy or water efficiency program.
Status: Passed the legislature, vetoed due to the Governor’s concern about new tax exemptions
during times of financial uncertainty
AB 645 (Williams) – California Renewables Portfolio Standard: This bill mirrored SB 350 regarding
changes to the Renewables Portfolio Standard (RPS) program to require the amount of electricity
generated per year from eligible renewable energy resources be increased to at least 50% by
December 31, 2030. While SB 350 was signed into law, the legislature did not pass AB 645.
Status: Died in the Senate
AB 802 (Williams) – Energy efficiency: (1) Requires the CPUC to authorize IOUs to provide
incentives and assistance for measures that conform to the California Energy Commission’s (CEC)
energy efficiency standards for existing buildings and allows IOUs to recover the reasonable
associated costs through their rates. (2) Requires utilities to maintain records of the energy usage
data of all buildings to which they provide service for at least the most recent 12 month period
and, upon the request and authorization of the owner (or owner's agent), provide aggregated
energy usage data to the owner or to the owner's account in the ENERGY STAR Portfolio Manager.
AB 802 expands the scope of buildings covered under existing benchmark requirements, and
removes some of the customer privacy requirements. Palo Alto does not have an automated
system for providing energy use data so the expansion of the program requires more resources to
ATTACHMENT C
2
either continue the manual process or automate. Staff are currently reviewing and working with
NCPA on customer privacy issues.
Status: Signed into law
AB 1110 (Ting) – Greenhouse gases emissions intensity reporting: Current law requires electric
utilities to disclose their electricity sources as a percentage of annual sales (the Power Content
Label or PCL). This bill would have required electric utilities to also disclose the greenhouse gas
(GHG) emissions intensity associated with their electricity sources. Palo Alto’s concern with this
bill was that it would prohibit an adjustment in the calculation of GHG emissions through the
application of renewable energy credits (RECs); i.e., the market purchases the City’s el ectric utility
makes to cover shortfalls in the portfolio not met by hydro or renewable resources will have a
GHG emission factor assigned to them that would not be “neutralized”, or netted out, by the RE C
purchases. While this bill was focused on certain Community Choice Aggregators who, according
to bill proponents, were not fully disclosing the electrical sources, it had obvious impacts on the
City’s messaging for its carbon neutral electricity portfolio. NCPA worked with the bill’s author to
allow for the inclusion of additional information in the PCL, along with the emissions factor.
Status: Died in the Senate
AB 1236 (Chiu) – Electric vehicle charging stations: This statute requires cities and counties to
adopt an ordinance, with certain specific elements, that creates an expedited permitting process
for electric vehicle (EV) charging stations. For a local government with a population the size of Palo
Alto’s (less than 200,000), the ordinance must be passed by September 30, 2017.
Status: Signed into law
AB 1330 (Bloom) – Demand Response: The bill would have CPUC establish annual goals for
demand response and require POUs to achieve the goals. The language would have the
unprecedented impact of having the CPUC dictate program requirements for PO Us.
Status: Died in Senate
AB 1448 (Lopez) – Personal energy conservation/real property restrictions: This statute permits
tenants, as well as owners in a homeowners association, to use clotheslines and drying racks if
certain conditions are met, including that the clothesline or drying rack will not interfere with the
maintenance of the property. CMUA supported this bill.
Status: Signed into law
AB 1453 (Rendon) – Electrical corporations: underground electrical facilities: worker safety : This
bill sought to prohibit work directly on energized underground electrical equipment and require d a
qualified electrical worker to determine that underground electrical equipment has been de -
energized and is in a mode that would make the equipment safe to be worked on.
Status: Died in Senate
ATTACHMENT C
3
SB 32 (Pavley) – California Global Warming Solutions Act of 2006: emissions limit : This bill would
have required the California Air Resources Board (CARB) to approve statewide GHG emissions
limits equivalent to 40% below the 1990 level by 2030 and 80% below the 1990 level by 2050. It
would also prohibit CARB from implementing the next update of the California Globa l Warming
Solutions Act of 2006 (AB 32) Scoping Plan until it had taken specified actions, including submitting
the Scoping Plan to the Legislature for review. CMUA supported this bill.
Status: Died in the Assembly
SB 119 (Hill) – Protection of subsurface installations: The Dig Safe Act of 2015 would have
modified the laws relating to excavations near substation instillations. SB 119 was supported by
CMUA.
Status: Vetoed as the bill created a new enforcement committee within the State Licensing
Board and the Governor believed excavation safety authority rests with the CPUC.
SB 180 (Jackson) – Emissions of greenhouse gases: This bill would have replaced the GHG
emission performance standards for base-load generation with standards for both non-peaking
and peaking generation. Both NCPA and CMUA took opposing positions on the bill over concern
that the very low emission standards proposed would effectively block further investment in
natural gas generation and impact grid reliability.
Status: Died in the Senate
SB 272 (Hertzberg) – The California Public Records Act: local agencies: inventory: In implementing
the California Public Records Act, this statute requires most local agencies to create a catalog of
enterprise systems, make the catalog publicly available upon request, and to post the catalog on
the local agency's Internet Web site. CMUA opposed the bill on the grounds of cost impact to local
agencies and cybersecurity concerns with making information available about utility cont rol
systems. The bill explicitly exempts infrastructure and mechanical control systems that control or
manage street lights, electrical, natural gas, or water or sewer functions. However, general cost
impacts and security concerns remain.
Status: Signed into law
SB 350 (De León) – Clean Energy and Pollution Reduction Act of 2015: By December 31, 2030, 50
percent of energy must come from renewables and the energy efficiency of existing buildings must
double. Palo Alto successfully negotiated accommodation s for our hydro portfolio during high
hydro years (when hydro exceeds 50% of our portfolio, CPAU’s RPS requirement will be reduced).
The bill also mandates the preparation and submission of integrated resource plans (IRPs). While
preparing an IRP per se is not a burden for Palo Alto, the language is very prescriptive, hastily
constructed, introduces redundant reporting requirements and requires the IRP to be submitted
to, and reviewed by, the CEC. Despite a coordinated attempt to remove or fix the IRP language,
the momentum to pass SB 350 was unstoppable. There will be a concerted effort by NCPA and
CMUA in 2016 to pass legislation to fix the more erroneous sections of the IRP requirements, as
well as to modify language holding POUs responsible for IOU duties.
ATTACHMENT C
4
Status: Signed into law
SB 550 (Hertzberg) – Net energy metering: This bill would, for POUs such as Palo Alto, redefine
“aggregate customer peak demand,” for the purposes of calculating the 5% net energy metering
(NEM) program limit as the highest sum of the non -coincident peak demands of all the customers
of that utility in any calendar year, potentially doubling the MW cap.
Status: Died in the Senate
SB 687 (Allen) – Renewable gas standard: This bill would have required CARB, by June 2016, to
adopt a renewable gas standard (RGS) requiring all gas sellers to provide specified percentages of
renewable gas to retail end-use customers for use in California.
Status: Died in the Senate
Water Legislation
AB 349 (Gonzalez) – Common interest developments: property use and maintenance: This statute
voids any attempt by a common interest development to prohibit use of artificial turf or any other
synthetic surface that resembles grass. CMUA supported.
Status: Signed into law
AB 585 (Melendez), AB 603 (Salas) and AB 1139 (Campos) – Personal income tax credits: outdoor
water efficiency and turf removal: Three similar bills providing tax credits for outdoor water
efficiency. AB 585, for taxable years 2016-2020, would allow a credit equal to 25% of the amount
paid by a qualified taxpayer for water-efficiency improvements made to outdoor landscapes, up to
$2,500 per taxable year. AB 603 and AB 1139 would have allowed a credit to a taxpayer
participating in a lawn replacement program, in an amount equal to $2 per square foot of
conventional lawn removed from the taxpayer's property. CMUA supported the three bills.
Status: All died in the Assembly
AB 606 (Levine) – Water conservation: This statute requires, when feasible, state agencies to
reduce water consumption and increase water efficiencies when building on state -owned
property, purchasing property, or replacing landscaping or irrigation. State property leased to a
private party for agricultural purposes is exempted. CMUA supported.
Status: Signed into law
AB 723 (Rendon) – Plumbing fixtures: WaterSense standards: This bill was gutted and amended
to require property owner disclosure of their responsibility to replace all noncompliant plumbing
fixtures in newly or renewed leased properties by a certain date.
Status: Died in the Senate
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AB 786 (Levine) – Common interest developments: property use and maintenance: This statute
clarifies that during drought conditions, when a homeowner in an HOA receives recycled water
from a retail water supplier to use in watering lawns or vegetation, the HOA may levy a fine or
assessment if that homeowner does not use the recycled water for landscape irrigation . CMUA
supported.
Status: Signed into law
AB 1164 (Gatto) – Water conservation: drought tolerant landscaping: This statue prohibits cities
and counties from enacting or enforcing any ordinance or regulation prohibiting the installation of
drought tolerant landscaping, synthetic grass, or artificial turf on residential property. CMUA
supported.
Status: Signed into law
AB 1173 (Williams) – Water equipment: backflow prevention devices testing: certification: This
bill attempted to mandate the hiring of a certified individual to test backflow prevention devices if
a local health officer did not already have such a backflow device testing program. CMUA’s
position was “oppose unless amended”.
Status: Died in the Senate
AB 1315 (Alejo) – Public contracts: water pollution prevention plans: delegation : This bill would
have prohibited a charter city from delegating to a contractor the development of a plan used to
prevent or reduce water pollution or runoff on a public works contract, with certain exceptions.
While not limited to water utilities, CMUA does not favor this bill.
Status: Died in the Assembly
AB 1531 (Committee on Environmental Safety and Toxic Materials) – State Water Resources
Control Board: The statute makes technical changes to provisions of the Water Code and the
Health and Safety Code. Specifically, among other things, it eliminates outdated legal provisions,
corrects mistaken cross references, and provides authority to conform drinking water and water
quality requirements to federal requirements. It also makes several statutory changes to improve
the efficiency and effectiveness of the Safe Drinking Water Regulatory Program.
Status: Signed into law
SB 7 (Wolk) – Housing: water meters: multiunit structures: This bill would have mandated the
instillation of individual water meters (ie: submeters), on all new multifamily residential units or
mixed commercial and multifamily units built on or after January 1, 2017. It also required landlords
to bill residents for the increment of water used by unit residents.
Status: Died in the Assembly
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SB 471 (Pavley) – Water, energy, and reduction of greenhouse gas emissions: planning: This bill
attempted to allow reductions of GHG emissions associated with the water sector, including water
use, supply, and treatment, to be eligible for AB 32 cap and trade revenue.
Status: Died in the Assembly
Looking forward
In 2016, we expect to see new state legislation addressing stormwater funding and short-term
GHG emissions as well as continued legislation addressing Power Content Label reporting (AB
1110), demand response goals (AB 1330), water conservation (SB 7), and GHG emission limits
(SB 32). We will also work with NCPA and CMUA on cleaning up SB 350 language.
Federal Issues
Following their August recess, Congress returned with a short amount of time before the
November elections and a number of priority issues to contend with. Narrowly avoiding a
government shutdown, Congress passed its financial package on December 18th. At one point,
this financial “omnibus” bill contained language from a California Representative regarding the
drought, but that language was dropped in final negotiations.
EPA Emission Standard
The Environmental Protection Agency’s (EPA) has proposed rules intended to significantly
reduce the amount of greenhouse gas emissions across the nation, under section 111(d) of the
Clean Air Act. These rules apply to electric generating units as well as other sources of GHG
emissions. Preliminary analysis indicates the new rules will likely have minimal impact in
California, though the treatment of hydropower remains uncertain and questions remain how
the EPA’s proposal will be incorporated into the State’s existing GHG policies and regulations.
California’s regulatory agencies believe that the emissions reductions can be achieved through
the cap-and-trade program, the existing renewable portfolio standard mandates, and the
additional measures addressed in the scoping plan update currently underway at the Air
Resources Board.
Grid Reliability
In 2015, the Federal Energy Regulatory Commission (FERC) approved the North American
Electric Reliability Corporation (NERC) Risk-based Registration Initiative. This initiative uses a
consistent approach to risk assessment and registration to implement changes aim ed at
ensuring the right entities are subject to the right set of reliability standards . Palo Alto supports
efforts to rationalize the registration process so that resources, at all levels, can be focused on
those issues that have a material impact on grid reliability. Palo Alto’s distribution system, in
particular, does not impact the bulk grid reliability.
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Drought
Two key measures, one in the House carried by a Republican and the other in the Senate
authored by a Democrat, failed to pass in 2015. Senator Feinstein intends to push her bill in
2016.
CFTC swap dealer definition
On September 24, the Commodity Futures Trading Commission (CFTC) granted the relief sought
by public power systems, and exempted utility operations-related swaps from the $25 million
“special entity” swap dealer threshold. With approval of this rule, public power systems will be
on equal footing with private utilities and should regain access to counterparties for swap
transactions.