HomeMy WebLinkAbout2024-02-07 Utilities Advisory Commission Agenda PacketUTILITIES ADVISORY COMMISSION
Regular Meeting
Wednesday, February 07, 2024
Council Chambers & Hybrid
6:00 PM
Utilities Advisory Commission meetings will be held as “hybrid” meetings with the option to
attend by teleconference/video conference or in person. To maximize public safety while still
maintaining transparency and public access, members of the public can choose to participate
from home or attend in person. Information on how the public may observe and participate in the
meeting is located at the end of the agenda. Masks are strongly encouraged if attending in
person. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o n
YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media
Center https://midpenmedia.org.
VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)
Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833
PUBLIC COMMENTS
Public comments will be accepted both in person and via Zoom for up to three minutes or an
amount of time determined by the Chair. All requests to speak will be taken until 5 minutes
after the staff’s presentation. Written public comments can be submitted in advance to
UACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available for
inspection on the City’s website. Please clearly indicate which agenda item you are referencing
in your subject line.
PowerPoints, videos, or other media to be presented during public comment are accepted only
by email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Once
received, the Clerk will have them shared at public comment for the specified item. To uphold
strong cybersecurity management practices, USB’s or other physical electronic storage devices
are not accepted.
TIME ESTIMATES
Listed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting to adapt to the participation of the public, or for any other reason
intended to facilitate the meeting.
CALL TO ORDER 6:00 PM ‐ 6:05 PM
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 PM ‐ 6:10 PM
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 PM ‐ 6:25 PM
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25 PM ‐ 6:30 PM
1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 3,
2024
UTILITIES DIRECTOR REPORT 6:30 PM ‐ 6:45 PM
NEW BUSINESS
2.Disscussion of the Supervisory Control and Data Acquisition Cyber Security Update
(DISUCSSION 6:45 PM – 7:30 PM) Staff: Darren Numoto
3.Discussion of the Residential Electric and Water Utility Customer Satisfaction Survey
Results (DISCUSSION 7:30 PM – 8:15 PM) Staff: Catherine Elvert
4.Discussion of Electric Grid Modernization Plan (DISCUSSION 8:15 PM – 9:15 PM) Staff:
Dean Batchelor
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING
ADJOURNMENT
5.Informational Update on City Council‐Approved Substation Improvement Agreement With
Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and
Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish the
Hanover Substation Upgrade Project (EL‐ 24001); CEQA Status – Exempt under CEQA
Guideline Sections 15301 and 15302
SUPPLEMENTAL INFORMATION
The materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. Code
Section 54954.2(a)(3)).
INFORMATIONAL REPORTS
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
1 Regular Meeting February 07, 2024
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, February 07, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen MediaCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while the
meeting is in progress. The Commission reserves the right to use more or less time on any item,
to change the order of items and/or to continue items to another meeting. Particular items may
be heard before or after the time estimated on the agenda. This may occur in order to best
manage the time at a meeting to adapt to the participation of the public, or for any other reason
intended to facilitate the meeting.
CALL TO ORDER 6:00 PM ‐ 6:05 PM
AGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 PM ‐ 6:10 PM
The Chair or Board majority may modify the agenda order to improve meeting management.
PUBLIC COMMENT 6:10 PM ‐ 6:25 PM
Members of the public may speak to any item NOT on the agenda.
APPROVAL OF MINUTES 6:25 PM ‐ 6:30 PM
1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 3,
2024
UTILITIES DIRECTOR REPORT 6:30 PM ‐ 6:45 PM
NEW BUSINESS
2.Disscussion of the Supervisory Control and Data Acquisition Cyber Security Update
(DISUCSSION 6:45 PM – 7:30 PM) Staff: Darren Numoto
3.Discussion of the Residential Electric and Water Utility Customer Satisfaction Survey
Results (DISCUSSION 7:30 PM – 8:15 PM) Staff: Catherine Elvert
4.Discussion of Electric Grid Modernization Plan (DISCUSSION 8:15 PM – 9:15 PM) Staff:
Dean Batchelor
COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS
FUTURE TOPICS FOR UPCOMMING MEETING
ADJOURNMENT
5.Informational Update on City Council‐Approved Substation Improvement Agreement With
Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and
Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish the
Hanover Substation Upgrade Project (EL‐ 24001); CEQA Status – Exempt under CEQA
Guideline Sections 15301 and 15302
SUPPLEMENTAL INFORMATION
The materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. Code
Section 54954.2(a)(3)).
INFORMATIONAL REPORTS
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
2 Regular Meeting February 07, 2024
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, February 07, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen MediaCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER 6:00 PM ‐ 6:05 PMAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 PM ‐ 6:10 PMThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10 PM ‐ 6:25 PMMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25 PM ‐ 6:30 PM1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 3,2024UTILITIES DIRECTOR REPORT 6:30 PM ‐ 6:45 PMNEW BUSINESS2.Disscussion of the Supervisory Control and Data Acquisition Cyber Security Update(DISUCSSION 6:45 PM – 7:30 PM) Staff: Darren Numoto 3.Discussion of the Residential Electric and Water Utility Customer Satisfaction SurveyResults (DISCUSSION 7:30 PM – 8:15 PM) Staff: Catherine Elvert4.Discussion of Electric Grid Modernization Plan (DISCUSSION 8:15 PM – 9:15 PM) Staff:Dean BatchelorCOMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETINGADJOURNMENT5.Informational Update on City Council‐Approved Substation Improvement Agreement WithTesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, andApproval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish theHanover Substation Upgrade Project (EL‐ 24001); CEQA Status – Exempt under CEQAGuideline Sections 15301 and 15302
SUPPLEMENTAL INFORMATION
The materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. Code
Section 54954.2(a)(3)).
INFORMATIONAL REPORTS
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
3 Regular Meeting February 07, 2024
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
UTILITIES ADVISORY COMMISSIONRegular MeetingWednesday, February 07, 2024Council Chambers & Hybrid6:00 PMUtilities Advisory Commission meetings will be held as “hybrid” meetings with the option toattend by teleconference/video conference or in person. To maximize public safety while stillmaintaining transparency and public access, members of the public can choose to participatefrom home or attend in person. Information on how the public may observe and participate in themeeting is located at the end of the agenda. Masks are strongly encouraged if attending inperson. T h e m e e t i n g w i l l b e b r o a d c a s t o n C a b l e T V C h a n n e l 2 6 , l i v e o nYouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen MediaCenter https://midpenmedia.org.VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/96691297246)Meeting ID: 966 9129 7246 Phone: 1(669)900‐6833PUBLIC COMMENTSPublic comments will be accepted both in person and via Zoom for up to three minutes or anamount of time determined by the Chair. All requests to speak will be taken until 5 minutesafter the staff’s presentation. Written public comments can be submitted in advance toUACPublicMeetings@CityofPaloAlto.org and will be provided to the Council and available forinspection on the City’s website. Please clearly indicate which agenda item you are referencingin your subject line.PowerPoints, videos, or other media to be presented during public comment are accepted onlyby email to UACPublicMeetings@CityofPaloAlto.org at least 24 hours prior to the meeting. Oncereceived, the Clerk will have them shared at public comment for the specified item. To upholdstrong cybersecurity management practices, USB’s or other physical electronic storage devicesare not accepted.TIME ESTIMATESListed times are estimates only and are subject to change at any time, including while themeeting is in progress. The Commission reserves the right to use more or less time on any item,to change the order of items and/or to continue items to another meeting. Particular items maybe heard before or after the time estimated on the agenda. This may occur in order to bestmanage the time at a meeting to adapt to the participation of the public, or for any other reasonintended to facilitate the meeting.CALL TO ORDER 6:00 PM ‐ 6:05 PMAGENDA CHANGES, ADDITIONS AND DELETIONS 6:05 PM ‐ 6:10 PMThe Chair or Board majority may modify the agenda order to improve meeting management.PUBLIC COMMENT 6:10 PM ‐ 6:25 PMMembers of the public may speak to any item NOT on the agenda.APPROVAL OF MINUTES 6:25 PM ‐ 6:30 PM1.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 3,2024UTILITIES DIRECTOR REPORT 6:30 PM ‐ 6:45 PMNEW BUSINESS2.Disscussion of the Supervisory Control and Data Acquisition Cyber Security Update(DISUCSSION 6:45 PM – 7:30 PM) Staff: Darren Numoto 3.Discussion of the Residential Electric and Water Utility Customer Satisfaction SurveyResults (DISCUSSION 7:30 PM – 8:15 PM) Staff: Catherine Elvert4.Discussion of Electric Grid Modernization Plan (DISCUSSION 8:15 PM – 9:15 PM) Staff:Dean BatchelorCOMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTSFUTURE TOPICS FOR UPCOMMING MEETINGADJOURNMENT5.Informational Update on City Council‐Approved Substation Improvement Agreement WithTesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, andApproval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish theHanover Substation Upgrade Project (EL‐ 24001); CEQA Status – Exempt under CEQAGuideline Sections 15301 and 15302SUPPLEMENTAL INFORMATIONThe materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. CodeSection 54954.2(a)(3)).
INFORMATIONAL REPORTS
12‐Month Rolling Calendar
Public Letter(s) to the UAC
PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to teleconference meetings via email,
teleconference, or by phone.
1. W r i t t e n p u b l i c c o m m e n t s m a y b e s u b m i t t e d b y e m a i l t o
UACPublicMeetings@cityofpaloalto.org.
2. Spoken public comments using a computer will be accepted through the
teleconference meeting. To address the Council, click on the link below to access a Zoom‐
based meeting. Please read the following instructions carefully.
You may download the Zoom client or connect to the meeting in‐ browser. If using
your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 ,
Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in
older browsers including Internet Explorer.
You may be asked to enter an email address and name. We request that you
identify yourself by name as this will be visible online and will be used to notify you
that it is your turn to speak.
When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will
activate and unmute speakers in turn. Speakers will be notified shortly before they
are called to speak.
When called, please limit your remarks to the time limit allotted. A timer will be
shown on the computer to help keep track of your comments.
3. Spoken public comments using a smart phone will be accepted through the
teleconference meeting. To address the Council, download the Zoom application onto
your phone from the Apple App Store or Google Play Store and enter the Meeting ID
below. Please follow the instructions B‐E above.
4. Spoken public comments using a phone use the telephone number listed below. When
you wish to speak on an agenda item hit *9 on your phone so we know that you wish to
speak. You will be asked to provide your first and last name before addressing the
Council. You will be advised how long you have to speak. When called please limit your
remarks to the agenda item and time limit allotted.
CLICK HERE TO JOIN Meeting ID: 966 9129 7246 Phone:1‐669‐900‐6833
Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public
programs, services and meetings in a manner that is readily accessible to all. Persons with
disabilities who require materials in an appropriate alternative format or who require auxiliary
aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at
(650) 329‐2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or
accommodations must be submitted at least 24 hours in advance of the meeting, program, or
service.
4 Regular Meeting February 07, 2024
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are
available for public inspection at www.CityofPaloAlto.org.
Item No. 1. Page 1 of 1
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: February 7, 2024
Staff Report: 2401-2517
TITLE
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 3, 2024
RECOMMENDATION
Recommended Motion
Staff recommends that the UAC consider the following motion:
Commissioner ______ moved to approve the draft minutes of the January 3, 2024 meeting as
submitted/amended.
Commissioner ______ seconded the motion.
ATTACHMENTS
Attachment A: 01-03-2024 DRAFT Minutes
AUTHOR/TITLE:
Jenelle Kamian, Program Assistant I
Item #1
Packet Pg. 5
Utilities Advisory Commission Minutes Approved on: Page 1 of 11
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF JANUARY 3, 2024 REGULAR MEETING
CALL TO ORDER
Chair Segal called the meeting of the Utilities Advisory Commission (UAC) to order at 6:00 p.m.
Present: Chair Segal and Commissioners Croft, Mauter, Metz and Phillips
Absent: Vice Chair Scharff and Commissioner Forssell
AGENDA CHANGES, ADDITIONS AND DELETIONS
None
PUBLIC COMMENT
None
APPROVAL OF MINUTES
ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on
December 6, 2023
Chair Segal invited comments on the December 6, 2023 UAC draft meeting minutes.
ACTION: Commissioner Phillips moved to approve the draft minutes of the December 6, 2023 meeting
as submitted.
Commissioner Croft seconded the motion.
The motion carried 5-0 with Chair Segal, Commissioners Croft, Mauter, Metz and Phillips voting yes.
Vice Chair Scharff and Commissioner Forssell absent.
UTILITIES DIRECTOR REPORT
Dean Batchelor, Utilities Director, delivered the Director's Report.
Happy New Year! Call customer service if you need to update your contact information.
New! Text Messages for Power Outages: CPAU’s new Outage Management System (OMS) allows us to
more quickly detect and respond to power outages. OMS can provide CPAU customers with information
about power outages through text alerts. All mobile numbers on file in our utilities account records were
automatically opted-in. To unsubscribe, you can reply STOP or QUIT when you receive an outage text.
Item #1
Packet Pg. 6
Utilities Advisory Commission Minutes Approved on: Page 2 of 11
Please ensure we have a current mobile number on file to receive text alerts. Visit
cityofpaloalto.org/outages for more information.
Fiber to the Premises and Grid Modernization Project: The City is working to upgrade and increase its
electric grid load to support higher grid demand for electrification. The City will install a fiber optic
network to provide high-performance broadband internet service. These two projects will be
constructed concurrently to reduce disruption and costs. Construction will begin in the pilot area in
northeastern Palo Alto in the first quarter of 2024. It is anticipated that pilot customers could subscribe
to fiber by mid-2024.
Public utility easements extend 2 to 5 feet behind the sidewalk. Contractors will clear vegetation and
trim trees in public right-of-ways and public utility easements. They will have IDs and badges. The City
will provide notice to customers prior to working on private property and if construction crews need
access to backyards.
Lead Service Line Inventory: CPAU is performing an inventory to determine if there is any lead pipe in
the water distribution system. The City will ask PAUSD and private schools to provide a plan for each
school to designate locations of lines and faucets on school premises for testing.
Water Supply and Hydro Conditions: The El Niño season has resulted in warmer but not wetter
weather. Water storage in the hydroelectric system and regional water system were in good shape
going into the winter. Average or above average precipitation in the coming months is possible. Staff will
provide an update in February.
The UAC Budget Subcommittee (Vice Chair Scharff and Commissioners Phillips and Croft) will meet in
approximately one week to review preliminary numbers. Staff will present preliminary numbers to
Finance in the first part of February. Staff will present final numbers to the UAC in March and to Finance
in April. Staff will go to Council in the first part of June for budget adoption and approval by July 1.
NEW BUSINESS
ITEM 2: DISCUSSION: Discussion and Update on the Fiscal Year 2025 Preliminary Utilities Financial
Forecast and Rate Projections
Public Comment: David Coale was surprised the report did not mention capital improvement projects or
address how rates may be affected by the end of gas.
Lisa Bilir, Senior Resource Planner, presented slides on preliminary FY 2025 rate changes to be effective
July 1, 2024. Staff will present full financial plans and details to the UAC in March. Staff projected a 5%
electric utility increase for FY 2025. Based on a transfer of 11.9% to the General Fund, staff proposed a
9% gas utility increase. The wastewater utility 9% proposed increase would bring reserves up to
guideline range and revenues in line with costs to sustain a rate of main replacement in the sewer
utility. The water utility proposal for a 5% overall increase reflected a 9% distribution rate increase. Staff
did not propose an increase to refuse this year but expected increases in future years. Storm drain fee
increases were based on CPI. A 3% CPI increase was modeled but the rate is not finalized. Overall, the
monthly utility bill would increase 5% or $20.50 based on an FY 2023 monthly residential bill of $369.
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Chair Segal queried if the City had an in-house or consultant grant writer to obtain government funding.
Dean Batchelor, Director of Utilities, replied that staff looked for federal or state grants for grid
modernization, fiber, EVs and chargers. Fiber had a dedicated person looking for grant opportunities.
Karla Dailey, Acting Assistant Director Resource Management, remarked there was an
interdepartmental team of City staff who meet once a month to review a list of grant opportunities and
identify the departments that might apply. Mr. Batchelor commented that the City used consultants and
City staff to apply for grid modernization and fiber grant applications.
Ms. Dailey addressed Commissioner Phillips’s questions regarding Slide 5. Staff goes to Council on
January 16 to request their approval for the layoff of a transmission asset. Prepayment of renewable
power purchase agreements is a project that staff is working on with the NCPA for the Calpine
geothermal contract. Many municipal gas utilities use a prepay structure as an IRS-codified way to take
advantage of the tax-exempt status of municipal utilities and is being used more frequently by electric
utilities. It takes a lot of work to put the agreement together and Palo Alto is not large enough but
Silicon Valley Power is large and has a large share of the project. This topic will be discussed at an NCPA
commission meeting this month.
Commissioner Croft asked how the large reserve and capital costs of installing fiber were funded as well
as the value proposition of fiber. She requested to review any documents or information presented at
previous meetings about the strategic importance of fiber as well as a projected income statement
balance sheet displaying the amounts we were investing and expected to receive in the future. Dave
Yuan, Utilities Strategic Business Manager, replied that staff was putting together a source and use
statement for dark fiber and fiber to the premises. In the 1990s, the fiber fund was created with a
transfer from the electric fund, which the fiber fund repaid in the early 2000s. Fiber leasing provides
funds for fiber reserves.
Jonathan Abendschein, Assistant Director Resource Management, addressed the UAC regarding the
electric utility. Staff tentatively proposed a 5% electric rate increase for FY 2025. There was good
hydroelectric generation in FY 2024 because of heavy rains in the winter of 2022/2023. There were
opportunities to sell surplus Resource Adequacy at higher prices as well as surplus Renewable Energy
Credits. There was a settlement related to the federal government lawsuit over hydroelectric power
from the Central Valley project. Our reserves will be better than expected but offset by major costs for
electrification and fiber, customer-related investments and general capital investment. Taking into
account bond financing, staff thought the net effect was positive.
A cost-of-service study is underway to ensure fair cost allocation among customers. Staff hoped to keep
increases to 5% or less for all customer classes. Staff would provide more information to the UAC in
March. The expected increase in transmission costs and increased grid investment would likely result in
yearly 5% rate increases. Electric distribution costs continue to rise steadily due to inflation as well as
challenges with recruitment and retention.
Mr. Abendschein emphasized that forecasts in the electric utility were uncertain because of the City’s
investments, ups and downs in the energy markets and electrification load uncertainty. Rate forecasts of
the California Independent System Operator (CAISO) unit cost the City pays for transmission have been
uncertain in previous years. January 1, PG&E had a 22% primarily transmission-driven rate increase.
CPAU uses a transmission consultant to track PG&E’s transmission rate cases to generate our forecast.
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Debt service for grid modernization will begin in FY 2025. Staff will provide more detail on the
assumptions in their presentation of the financial plans to the UAC in March.
Operational costs were increasing steadily. In recent years, there were significant increases related to
recruitment, retention and contracting, capital investment, construction inflation and shortages in the
utility construction industry.
Staff regularly advocates reducing transmission cost increases. CPAU intervened in collaboration with
other publicly owned utilities on transmission rate case resolution and expected reduced transmission
costs or possibly a small refund in the future.
A geothermal project will come into our supply portfolio on January 1, 2025.
Many of the types of utility equipment we purchase are in high demand, which affects availability and
costs as well as projects delays.
Commissioner Phillips asked why Slide 14 showed a 21% rate change but -5% on Packet Page 20. Mr.
Abendschein replied there was an increase of 21% in the base rate and a reduction in the hydroelectric
rate adjustor, resulting in customers seeing a net decrease of 5%. Staff will revise their materials when
they make their presentation to the UAC in March.
Staff projected electric supply operating reserves to be below minimum but return to target over the
forecast period due to a timing issue with the federal government settlement money.
The hydro stabilization reserve was $8.5 million, below the minimum of $11 million. The hydroelectric
rate adjustor may be activated if we have a bad hydro year, although staff wanted to avoid that. When
staff presents their proposal to the UAC in March, they will recommend using one-time revenues
associated with better hydro generation and Resource Adequacy sales to replenish the hydro
stabilization reserve. Staff desired a target level of at least $17 million.
Commissioner Croft noted several reserves were below minimum and asked staff to provide an
explanation to the UAC whenever that happened. Mr. Abendschein stated $8.5 million was transferred
to the hydroelectric stabilization reserve to raise it to a minimum acceptable level. $10 million was used
to repay loans from the electric special projects reserve during the pandemic and drought to stabilize
the operations reserve. There were large one-time capital investments for fiber and electrification as
well as expenses for major customers. The FY 24 financial plan projected below-minimum reserves due
to last year’s gas price spike. Council wanted a slower reserve recovery to avoid a larger rate increase.
The electric distribution fund was negative due to reappropriation for capital investments. The supply
fund will fall below minimum to transfer funds to the distribution operating reserve to cover significant
capital investments and bring that reserve above negative. The financial plan would build up the reserve
within the target guideline range over the next few years. Staff projected the electric distribution CIP
reserve to be low but remain within target over the forecast period.
Commissioner Mauter requested inclusion of past years’ projections to see projection accuracy. Mr.
Abendschein said it would be included in the financial plan.
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Commissioner Mauter asked if the cost-of-service study included an assessment of time-of-use (TOU)
and a rate for all-electric customers. Mr. Abendschein replied a TOU assessment was included in their
internal analysis but there was a legal question of whether it was the right time to adopt TOU rates.
CPAU’s largest customer classes have TOU rates and seasonal differences were reflected in all rate
classes. In two to three years, we would have equipment to reflect intra-day use. A rate for fully electric
customers was challenging. As we transition to TOU rates over the next two to three years, tiered rates
for residential electrification would go away.
Commissioner Metz suggested each utility have at least three reserve funds (commodity, operations,
CIP, maybe debt service or things we do not control such as transmission). It was important not to
transfer money between funds because it was very confusing and masked how we managed money and
the activity represented by each fund. When a fund was high, he thought it was more appropriate to put
money in treasury. When a fund was low, take money from treasury. Report at least on an annual basis
the status of each fund. Mr. Abendschein said that while staff was able to do root cause analysis
regardless of transfers between funds, he agreed the inter-fund transfers masked the visibility of those
causes in reporting. After the cost-of-service study, staff would realign the supply and distribution
components of rates for the electric utility. There were no interfund transfers for the electric utility
projected in the financial forecast beyond FY 2024. The gas utility, on the other hand, was more
complicated partly because of the way we set the commodity rate. Operational costs associated with
managing the commodity rate were difficult to integrate into a monthly varying commodity rate without
going to Council every month to change the rate. For administrative purposes, staff would likely
continue inter-fund transfers for the gas utility.
Commissioner Metz remarked it was helpful in business management to see if every year we
underestimated or overestimated costs. Trends were valuable in steering and managing the business.
Ms. Bilir presented the preliminary gas rate projections. Staff proposed a 16% distribution rate increase
for FY 2025 equating to overall increases in the customer’s gas bill of 9% in 2025, 7% in FY 2026 and FY
2027, 6% in FY 2028, and 5% in FY 2029. Gas utility revenues were below cost, so rates need to increase
to bring reserves within guideline ranges and revenues in line with costs.
Voters approved Measure L in 2022. Staff requested UAC feedback on the FY 2025 transfer amount.
Supply costs were expected to remain stable this winter. Council approved an insurance policy for this
year’s winter months to stabilize prices.
Gas distribution cost drivers include: Health, retirement and associated overhead costs continue to
increase. Underground construction costs have increased substantially. Cross-bore investigation costs,
although the UAC may recommend adjustments. Increase in transfers from the gas utility to the capital
projects fund because staff did not forecast enough.
Under Measure L, the gas utility transfers up to 18% of its gross revenues to the General Fund, although
Council may elect to transfer less. Last year, Council approved a transfer of 15.5% for FY 2024. Based
upon Council’s direction, staff recommended an 11.9% transfer for FY 2025 and gradually increase the
transfer up to 18% by 2027. An 11.9% ($9 million) transfer would result in a 9% overall rate increase in
FY 2025 versus a 14% rate increase with an 18% transfer ($13.6 million). Staff expected the gas
operations reserve to fall below minimum at the end of FY 2024 and be within the guideline range for FY
2027 and the remainder of the forecast period. The reserve projections were similar with either
Measure L transfer scenario.
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The supply rate stabilization reserve was negative at the end of FY 2023. There were enough funds in
the operations reserve to cover that amount but staff was unable to execute the transfer at the end of
FY 2023. Staff will propose revised language in the reserve guidelines for staff to perform future
transfers.
Chair Segal did not want to raise the transfer to 18%. The transfer amount went up as costs increased
and she did not believe it was in the spirit of Measure L to add to the General Fund with increased gas
utility rates. Commissioner Phillips agreed with the lower transfer amount and asked how staff chose
11.9%. Ms. Bilir replied it was Council’s direction to increase the transfer gradually to the voter-
approved level of 18%. Commissioner Phillips emphasized that voters approved a cap. Commissioner
Croft supported the 11.9% transfer but the annual rate increases were higher than she wanted.
Commissioner Mauter inquired if reserve projections accounted for efforts to electrify Palo Alto and the
expected changes in demand. Ms. Bilir responded that the preliminary projection included the capital
budget amount in FY 2028 for gas decommissioning and had a placeholder for electrification costs but
those costs were still unknown. Mr. Batchelor commented there was $400,000 in the FY 2024 budget to
start the study and hire a consultant to help us transition. There were dollars allocated in the S/CAP
budget. Commissioner Mauter opined it was sometimes not clear how we factored in major structural
changes. Mr. Abendschein explained that it was difficult to incorporate alternative projections within
the financial plans because the changes were so large. He could forward to the UAC a preliminary
analysis from a few years ago of various scenarios eliminating all single family residential gas use and
greatly decreasing commercial gas use as well as different rate impacts. Staff budgeted money for a gas
transition study. An S/CAP electrification funding study for the electric utility was going to Council on
January 16. Staff will discuss those studies with the UAC. The integrated resource plan in December
included a projection with high electrification loads.
Ms. Bilir presented preliminary water rate projections. Staff proposed a 9% distribution rate increase,
which equated to an overall 5% increase on the water bill. Last year, funds were utilized from the rate
stabilization reserve and capital reserve due to reduced revenues. Regionally, water sales have
decreased due to the drought and have not rebounded. The preliminary forecast relied on SFPUC’s rate
projection last May where they did not anticipate increasing the SFPUC rate this July; however, staff
expected to hear informally from SFPUC in January if they would increase our wholesale rate.
The water utility needed to raise a lot of money to pay for two tanks that need to be replaced and large
main replacement projects that occur every other year. Last year, the distribution rate increase was
limited to 2% because of the large commodity increase from SFPUC.
Chair Segal noted water main replacement acceleration was not included. Ms. Bilir responded that the
preliminary projections only included the budget amounts for water main replacement projects at a
typical level but not an acceleration of main replacement.
The One Water study would evaluate supply options but those were not included in the projections.
Commissioner Mauter queried when One Water supply alternatives might come online, have capital
expenditures or incur debt. Ms. Bilir replied it depended on the water supply option. Something taking
10 or 15 years of planning might be outside of this forecast timeframe whereas conservation could be
done in 2025. Staff will present details to the UAC as soon as they can.
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Water sales revenues, net of supply cost savings, were $2.4 million lower than forecasted. Expenses
were $1.6 million higher than forecasted, including transfer to the capital projects fund, accounting
adjustment to the beginning balance, and CIP costs were higher than anticipated. Staff projected the
operations reserve to be close to the minimum guideline range and return to target in FY 2029. The sales
forecast was lowered based upon recent reductions in sales due to drought and conservation. Cost
drivers include drought-related water sales reductions; health, retirement and associated overhead cost
increases; increased cost for generator rental, as well as cost for exposed pipeline in Arastradero for
water, wastewater and gas.
Commissioner Mauter asked for a breakdown of distribution operation costs for labor and electricity for
pumping. Ms. Bilir replied there was usually a chart with a breakdown of operation costs but she did not
have those details.
In answer to Commissioner Phillips query on the amount of commercial water usage versus residential,
Ms. Bilir replied it was about 63% residential and the rest was non-residential.
Commissioner Mauter wondered if rates were significantly different between commercial and
residential per CCF and was surprised to see a big difference in commercial and residential rates in other
cities. Ms. Bilir explained that the single family residential class had a tiered rate, meaning customers
paid more per unit if they exceeded 6 CCF of water usage within a given month. Nonresidential classes
do not have tiered rates. The irrigation charge was significantly higher. Other cities may use different
rate structures and customer classes, so it was difficult to compare rates.
Ms. Bilir presented preliminary wastewater rate projections. Last year, staff presented to Council three
years of 9% increases from FY 2024 through FY 2026. Increasing the rate of sewer main replacement
from an average of 1 mile per year to 2.5 miles per year was very important to replace remaining mains
within their approximately 100-year lifespan. That plan would have replaced all remaining mains within
108 years. Last year, Council also approved a large sewer main replacement a year early to coordinate
with the Caltrans repaving project on El Camino, so those funds were moved to the reappropriations
and commitments reserve. That main replacement project would fully utilize all of the capital reserve
funding and draw down the rate stabilization reserve to zero. Achieving a sustainable rate of main
replacement within the same time period would require more rate increases. Staff recommended
deferring the first of a series of capital projects from 2026 to 2028 and looking for cost cutting
opportunities this year. With this approach, all remaining mains would be replaced within 111 years.
Last year, staff projected the operations reserve would be at the minimum guideline level. However,
revenue projections were higher than actual revenue and projected costs were lower than actual costs
in FY 2023. The reserve dropped to negative $700,000. The sewer service charge revenue was very close
to staff’s projections but the projection for other revenue was too high, particularly the capacity fee
revenue for new development. In FY 2024, nonresidential sewer service charge revenue decreased
mostly due to reductions in water usage from last winter. Charges for commercial customers are based
upon their three lowest months of winter water usage, which was lower last winter.
CIP-related costs were higher than staff’s projection because staff did not project administrative costs. A
higher transfer out to capital projects impacted the reserve fund. Staff reconciled all costs in 2023 with
the accounting costs listed in the City’s financial statements to forecast more accurately next year. A
group of staff from Engineering, Admin, Rates and Budget convened to examine each of the categories
where projections were over or under to reach consensus on a better forecasting method.
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Chair Segal expressed her concern with deferring sewer main replacement. CPAU was significantly lower
than residential bills from other communities. Chair Segal thought there should be a discussion of the
consequences. She did not want to confront dangers that could have been avoided. Her recollection of
the discussion about accelerating main replacement was because they were so old. UAC chose the mid
timing instead of the fastest because of budget constraints. A 9% increase may be a couple dollars but
would have a big impact on when we start these projects. Ms. Bilir thanked Chair Segal for her input.
Staff presented to Council a range of options between 108 years to 114 years, so this was within the
range but not the expectation that was set.
Chair Segal wondered why staff recommended a rate increase that left wastewater reserves in a bad
place and our sewage pipes older than we would prefer. Mr. Batchelor replied that staff evaluated a
13% increase compared to the 9% proposal and staff could send it to the UAC after this meeting.
Commissioners could reply via individual emails if they agree to move it forward to Council. Staff could
receive input during the budget subcommittee meeting before staff goes to Finance. Ms. Bilir stated the
9% increase was $4.40 whereas a 15% increase was $7.30 per residential customer per month.
Commissioner Metz felt more nervous about several of the reserve funds being at or below their
minimum than bill increases. He thought staff should evaluate how to bring reserve funds into range
within a year or two.
Commissioner Phillips commented that the combination of the following factors convinced him there
was room to be more aggressive with rate increases. After a 9% increase, CPAU was substantially lower
than our neighboring communities. Deferring important maintenance worried him. Reserves were low.
Commissioner Mauter asked if Public Works determined the prices for major treatment projects. Ms.
Bilir replied that Karin North, Assistant Director Public Works, oversees the treatment plant. Public
Works provides regular updates on their capital projects. Staff incorporated those projections into the
forecast, but costs will continue to increase over the next five years and may not be fully captured.
Public Works was pursuing grant funding from Valley Water to offset some treatment costs. Some grant
funds are included in staff’s forecast for the financial plan. Additionally, there is a team composed of
staff from Public Works and Utilities that meets regularly regarding the ongoing work on the One Water
Plan.
With the structural changes we might see over the next decade when water and wastewater facilities
are more tightly integrated, Commissioner Mauter suggested thinking about reserve funds as
complementary to one another and the need for adequacy. She strongly supported increasing
wastewater and water reserve funds due to future increased wastewater treatment costs and the
associated costs of a One Water Plan.
Commissioner Croft asked how expenses were calculated and shared with partner cities. Ms. North
explained that CPAU provided two cost-of-service analyses for our partners. One is the fixed-rate capital
cost based on capacity rights from the 1980s when communities requested their allocation of the 40
million gallons/day capacity of the wastewater treatment plant. Second, there was an operating (flow
and load) cost share based on 34% flow, 22% ammonia, 22% total suspended solids and 22% oxygen
demand. CPAU sends our partners quarterly bills based on monthly data from samples collected
throughout the collection system for all partner agencies. CPAU met with partnering communities
frequently, gave them projections and kept them apprised of sewage treatment plant upgrades. The
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sewage treatment plant was being rebuilt. A $193 million project to remove nutrients started this year.
The sewage plant runs at 15 of the 40 million gallons/day capacity. Every partner city had more capacity
than they need. CPAU provided partners a 10-year forecast so they can project their rates.
ACTION: None
The UAC took a break at 8:21 p.m. and resumed at 8:32 p.m.
ITEM 3: DISCUSSION: Discussion and Update on Utilities Department Five-Year Capital Improvement
Program Progress and Projections
Public Comment: David Coale thought the City should plan for capital improvement projects to treat
forever chemicals (PFAS). He opined that pyrolysis was one of the most effective ways to treat
wastewater effluent. This was cost effective and energy neutral or energy positive in Redwood City.
Matt Zucca, Assistant Director WGW Engineering and Operations, discussed gas, water and wastewater
capital projects from FY 2019 projecting forward five years.
Staff split GMR 24 into two projects. GMR 24A is a gas replacement project in the Stanford Mall area.
Staff hoped to find out in the first part of 2024 if their application will be awarded a $12 million grant for
GMR 24B from the Pipeline and Hazardous Materials Safety Administration.
Of CPAU’s eight reservoirs, all were replaced and within the first quarter of their anticipated useful life
except for Park Reservoir and Dahl Reservoir. Reservoir projects cannot be performed at the same time
because taking two tanks offline would affect the operation of the water system. Before reissuing the
Park Reservoir RFP, staff had to determine why there were no responses in the first round. The Dahl
Reservoir upgrade was planned for FY 26.
Mohammad Fattah, Manager Electric Engineering, addressed the UAC regarding the electric utility. The
strategic focus was on grid modernization. The penetration of electric vehicles (EVs) in Palo Alto was
about 30% to 35%. Capacity was probably 50% of where it needed to be. There was about a 25%
compound annual growth rate (CAGR) on the annual increase of EVs. The fiber to the premise (FTTP)
project is in the design stage. In the next two to three weeks, work will begin on placing and replacing
poles. Grid modernization is a five-year program. The first segment of grid modernization services will
come live in June/July 2024 with the fiber network following in the pilot area. The Hanover Substation
upgrade project with Tesla was going through permitting and anticipated to break ground in the next
three to four weeks.
Staff was making efforts to provide prospective tenants or owners of newly constructed apartments and
condominiums the option to obtain communication services including dark fiber from the City.
SWOT analysis identified key threats of supply chain instability and labor shortage. Several engineering
staff left CPAU. It was a challenge to recruit and hire new engineers because engineers were moving to
more lucrative areas such as artificial intelligence (AI) and machine language (ML). CPAU created a two-
year rotation program for engineers to design, build, support and maintain substations; rotate to
transmission and distribution, new customer connections and customer services. The cost of
transformers more than doubled in the past five years with lead-time up 300%. Cable, especially aerial
cable because of California fires, was a very difficult commodity to obtain.
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The Foothills underground project for fire prevention was delayed until next year to seek easements for
electrical facilities. The AMI project was ongoing. Substation security systems will be updated, including
cameras and raising the walls. Substation circuit breakers were about 50 years old and some do not
have spare parts, so existing infrastructure would be reviewed for breaker replacement. Eighty percent
of the engineering staff focused on grid modernization and FTTP.
In reply to Commissioner Phillips’ question about AMI, Dave Yuan, Utilities Strategic Business Manager,
responded that residential was on target to finish by December 2024 and commercial by mid-2025.
Commissioner Metz asked when the UAC could see details on the $160 million for grid modernization
over the next five years. Mr. Fattah replied it was a work in progress. Staff did not have a date to return
to the UAC to present the program but first they will do an inventory of poles, miles of cable and wire
and identify which ones needed replacement.
ACTION: None
COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS
None
FUTURE TOPICS FOR UPCOMING MEETINGS
Commissioner Croft wanted a long-term forecast on buyers of excess solar energy and who was using
gas. She wanted to know staff’s confidence level that there were buyers for our excess energy if we
entered new solar contracts and the length of time that market would exist.
Commissioner Metz remarked that grid modernization was the biggest capital project but the UAC had
not seen any details. Dean Batchelor, Utilities Director, stated that Jonathan Abendschein spoke about it
in the resiliency study. Chair Segal pointed out that we had to issue a bond and voters need to be
informed. Commissioner Metz would like to know the reason why ratepayers in Palo Alto should spend
over $300 million, what we will achieve with that money and when, what we will not spend it on and
why. Commissioner Phillips wanted an explanation of what grid modernization entailed, what people
would be able to do when grid modernization was complete, how personal or commercial life may be
different and how will the environment be improved. If we do not modernize the grid in Palo Alto, he
asked what we would not be able to do, such as not being able to support more than X number of
homes installing solar or EVs. This construction project was building a capability and he wanted to
understand what that capability was. Mr. Batchelor replied that Tomm Marshall made the benefits clear
in his prior presentation. Without grid modernization, there is not enough capacity to allow whole-home
electrification. Mr. Batchelor will talk to staff about providing a report in the next couple of months to
the UAC on this project and its values. He agreed that residents needed to start getting informed so they
could understand the cost and the reasons we were asking for the bond.
Commissioner Metz requested staff to add calendared items on the rolling calendar. Chair Segal also
noted the long list of items to add to the calendar. Mr. Batchelor stated they would schedule the items
that needed discussion within the next 11 months. Mr. Batchelor could provide updates on some items
on a quarterly basis. Staff will put together a presentation about solar and its advantages.
Commissioner Metz asked for a cybersecurity update. Mr. Batchelor needed to contact the Director of IT
and Jonathan Lait about the permitting process and a timeline for presenting this topic to the UAC.
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NEXT SCHEDULED MEETING: February 7, 2024
ADJOURNMENT
Commissioner Phillips moved to adjourn.
Commissioner Mauter seconded the motion.
Motion carried 5-0 with Chair Segal and Commissioners Croft, Mauter, Metz and Phillips voting yes.
Vice Chair Scharff and Commissioner Forssell absent.
Meeting adjourned at 9:17 p.m.
Respectfully Submitted
Jenelle Kamian
City of Palo Alto Utilities
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Item No. 2. Page 1 of 1
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: February 7, 2024
Staff Report: 2401-2509
TITLE
Disscussion of the Supervisory Control and Data Acquisition Cyber Security Update
RECOMMENDATION
Staff is informing UAC of SCADA (Supervisory control and data acquisition), Cyber Security
Updates, and Advanced Metering Infrastructure (AMI).
ATTACHMENTS
Attachment A: Presentation
AUTHOR/TITLE:
Dean Batchelor, Director of Utilities
Darren Numoto, Director of Information Technology
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www.cityofpaloalto.org
Cyber Security Update
Utilities Advisory Commission
January 5, 2022
Scada Cyber Security Update
Utilities Advisory Commission
February 7, 2024
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2
Agenda
1.) Cybersecurity Overview and Priorities
2.)Supervisory Control and Data Acquisition (SCADA)
3.) Advanced Metering Infrastructure (AMI)
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3
Cybersecurity Overview
Human Layer
•Humans are the
primary target.
Perimeter Security
•Physical & digital
security
•SCADA Access
Network Security
•Secure access to the
network
•SCADA
User End point
Security
•Computers & mobile
devices
Application
Security
•Access to applications
& digital infrastructure
Data Security
•Protect & secure data
at rest and in transit
•Utilities
Critical Assets
•Sensitive data
•SCADA
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4
Cybersecurity Priorities
•Organization wide approach
•Interdepartmental
dependencies
•Cross functional teams
•Internal policies and procedures
•Data Governance
•Continual improvements
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5
Scada Security Overview
•Servers are on-premise
•Login requires VPN and 2 factor authentication
•Limited user access
•Multi-layer VPN, DMZ, and firewalls
•After hours laptop for Water/Gas SCADA access only, no internet access
once connected to VPN.
•Utilities SCADA Cybersecurity Red Team.
•Manual override mode: Isolate SCADA from network access.
•Disaster recovery (within 48 hours)
•Planned: Perimeter Security Enhancements, SCADA device upgrades
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6
AMI – Security Overview
•Enterprise DC – DMZ, VPN, Firewalls
•OS/App hardening, patching, EDR
•Remote access requires multifactor
authentication
•Role based access control
•Intrusion detection/prevention,
auditing/logging, SEIM
•Message encryption, HSM
•256-bit encryption
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7
Q&A
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Item No. 3. Page 1 of 1
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: February 7, 2024
Staff Report: 2401-2507
TITLE
Discussion of the Residential Electric and Water Utility Customer Satisfaction Survey Results
RECOMMENDATION
This item is for discussion and no action is requested. Staff presents the results of the City of Palo
Alto Utilities (CPAU) residential electric and water utility customer satisfaction surveys.
The attached presentation describes the goals, methodology, key findings, and considerations
for CPAU based on customer feedback from the survey results. The primary goals of this research
study were to assess customer satisfaction with CPAU, uncover customer perceptions of their
utility, and explore customer interest in various utility-related products and services. The
outcome of this research will enable CPAU to clearly understand customer expectations, act on
near-term opportunities for improvement, and create a strategic roadmap to increase customer
satisfaction.
ATTACHMENTS
Attachment A: Presentation
AUTHOR/TITLE:
Dean Batchelor, Director of Utilities
Staff, Catherine Elvert, Utilities Communications Manager
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RESIDENTIAL ELECTRIC AND WATER UTILITY CUSTOMER SATISFACTION SURVEY RESULTS
FEBRUARY 7, 2024 www.cityofpaloalto.org1
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TITLE 40 FONT BOLD
Subtitle 32 font
FEBRUARY 7, 2024 www.cityofpaloalto.org
PROJECT OVERVIEW AND RESEARCH OBJECTIVES
•Partnership with California Municipal Utilities Association (CMUA) and GreatBlue
Research, Inc.
•Statewide survey of municipal and investor-owned residential electric and water
utility customers
•Plus “oversample” survey in Palo Alto
•Conduct comprehensive research among residential customers to gain a deeper
understanding into their perceptions of the utility and satisfaction with the services
provided.
•Research outcomes will enable CPAU personnel to:
•a) more clearly understand, and ultimately set, customer expectations,
•b) act on near-term opportunities for improvement, and
•c) create a strategic roadmap to increase customer satisfaction.
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TITLE 40 FONT BOLD
Subtitle 32 font
FEBRUARY 7, 2024 www.cityofpaloalto.org
AREAS OF INVESTIGATION IN 2023
•GreatBlue and CPAU developed a research study to learn about the following topics:
•Organizational characteristic ratings
•Customer expectations
•Satisfaction with customer service and field personnel
•Reliability, quality, and service ratings
•Preferred methods of receiving information
•Importance of and satisfaction with self-service digital options
•Perception of CPAU’s emergency preparedness
•Interest in electric and water services and devices
•Awareness and utilization of incentives and rebates
•Demographic profiles of respondents
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TITLE 40 FONT BOLD
Subtitle 32 font
FEBRUARY 7, 2024 www.cityofpaloalto.org44
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FEBRUARY 7, 2024 www.cityofpaloalto.org
ELECTRIC CUSTOMER SURVEY
Results and Analysis
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1
Ratings
•CPAU received significantly higher ratings than the Northern California
region and/or the State of California in the following areas:
•average positive organizational characteristic rating,
•trust,
•meeting customer expectations,
•and customer service ratings
Notable Positive Ratings
•Average positive organizational characteristic rating of 70.9%
•Net Positive Score (NP+S) of 82.1%
•NPS = (advocates + loyal + satisfied)
•85.6% of customers provided positive ratings for CPAU "providing consistent
and reliable electric service to customers," which is higher than ratings
provided by customers in Northern California, statewide, and nationwide
•79.6% reported CPAU meets their expectations "all" or "most of the time"
KEY STUDY FINDINGS
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Outage Preparedness
•One-quarter (24.6%) believe CPAU is prepared to handle an emergency,
which is significantly less than the frequency of customers in Northern
California and the State of California who reported the same.
•Of note, nearly one-half (49.5%) indicated they “don’t know” if CPAU is
prepared to handle an emergency.
Electric Vehicles (EVs)
•Nearly one-half of customers (47.4%) have plans to buy an electric vehicle,
and 30.0% already own an electric vehicle.
•Over four-fifths (84.4%) are likely to charge their electric vehicle during
off-peak hours
•Over one-half (53.7%) are likely to install an L2 charger at their home
rather than rely on CPAU to upgrade its infrastructure to a faster
charging system.
KEY STUDY FINDINGS
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1
Electrification
•About two-thirds (67.0%) support CPAU
investing in electrification
•Just over one-half of customers (51.0%) are
considering purchasing an electrification
product
•Nearly one-half (46.5%) are aware of CPAU’s
electrification program; however, customers
under 55 years of age are significantly less
aware than customers 55 years of age or
older.
∘Despite this, significantly more customers
under 65 years of age plan to participate in
this program than customers 65 years of
age or older.
KEY STUDY FINDINGS
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CONSIDERATIONS
Strategy to push electrification to younger customers.
•Most CPAU customers are familiar with the concept of electrification and
support CPAU’s investment in it
•About one-half of customers are considering purchasing an electrification
product of some sort.
•Key differences based on demographics: under 55 years of age are less
familiar with electrification and CPAU’s program but show higher
enthusiasm, are more likely to believe electrification will save money and
are more interested in learning ways to lower their energy consumption.
•CPAU can use targeted email campaigns showing the difference in
efficiency between electrification products and fossil-fuel alternatives to
reinforce cost savings and reduced energy use from electrification.
•CPAU can present electrification program as an intro to transition to electric
and drive higher participation among younger customers.
•Promote electrification and electric products during times of higher
average energy consumption, showing energy and cost savings.
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CONSIDERATIONS
Consider implementing an off-peak electric vehicle charging rate in
conjunction with L2 home-charger installation.
•CPAU customers that own or plan to purchase an electric vehicle indicated
they are very likely to charge their vehicle during off-peak hours. There was
also a strong preference for Level 2 chargers over Level 1 chargers, and a
little over one-half showed interest in installing a home Level 2 charger. This
presents an opportunity for CPAU to promote Level 2 charger installations
more effectively. Implementing an off-peak electric vehicle charging rate
and presenting it as a bundle with home-chargers could increase the
attractiveness of the offer, potentially resulting in more home-charger
investments.
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Consider implementing an off-peak electric
vehicle charging rate in conjunction with L2
home-charger installation.
•CPAU customers that own or plan to
purchase an electric vehicle are very likely to
charge their vehicle during off-peak hours.
•Strong preference for Level 2 chargers over
Level 1 chargers, and a little over one-half
showed interest in installing a home Level 2
charger.
CONSIDERATIONS
•This presents an opportunity for CPAU to promote Level 2 charger installations more effectively.
•Implementing an off-peak electric vehicle charging rate and presenting it as a bundle with home
chargers could increase the attractiveness of the offer, potentially resulting in more home charger
investments.
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FEBRUARY 7, 2024 www.cityofpaloalto.org
WATER CUSTOMER SURVEY
Results and Analysis
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KEY STUDY FINDINGS
Ratings
•CPAU received significantly higher ratings than the Northern California
region and/or the State of California in the following areas:
•maintaining an adequate supply of water
•monitoring water quality
•environmental responsibility
•promoting the efficient use and conservation of water
Notable Positive Ratings
•Average positive organizational characteristic rating of 78.9%
•Net Positive Score (NP+S) of 87.4% (advocates + loyal + satisfied)
•CPAU received the highest ratings for "maintaining an adequate supply of
water,“ at 93.8% and received higher ratings than customers in Northern
California and the State of California for all other characteristics.
•85.0% of customers say CPAU meets their expectations all or most of the
time.
•80.7% report satisfaction with the most recent customer service experience.
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KEY STUDY FINDINGS
Water Quality and Conservation
•The majority of customers (95.5%) provided positive ratings for the
"overall quality of water" provided by CPAU.
•One-half of customers (55.5%) reported concern over possible
contaminants in CPAU's water supply. Significantly more customers
reported concern compared to Northern region customers (46.9%).
•However, 83.3% of respondents indicated they trust CPAU to take
immediate action to solve any issues with the water supply, which is
significantly more than the frequency of customers from the Northern
region and the State of California as a whole who reported the same.
•Over two-thirds of customers (68.3%) indicated they would support
water infrastructure investments.
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KEY STUDY FINDINGS
Program Use and Interest
•Nearly one-half of customers indicated they try hard to use less water
but could probably do a little more, compared to nearly two-fifths who
indicated they are doing everything they possibly can to use less water.
•Over two-thirds of customers indicated water conservation materials
would be useful, and nearly three-fifths reported a reading of their
household's water use compared to others in the neighborhood would
be useful.
Communication
•Significantly more customers prefer receiving information through digital
methods (website, email, social media) than traditional methods of
communication (TV, radio, direct mail).
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CONSIDERATIONS
Leverage digital channels for effective communication.
•Majority report preference to receive information through web, email,
and social media for operations, efficiency, and programs.
Tailor water conservation resources to suit the needs of
homeowners and renters.
•Nearly one-half report being proactive about reducing water
consumption, but also willing to do a little more to conserve water.
•Less than one-half is acquainted with CPAU's existing water
programs and rebates = potential to inform and involve those who
already expressed interest in water conservation efforts.
•Renters less focused on monitoring water usage compared to
homeowners.
•CPAU can strategically target outreach efforts to ensure renters have
access to resources tailored to their specific concerns about water
usage and conservation.
•Over two-thirds of both renters and homeowners find it beneficial to
receive effective strategies for reducing household water use.
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www.cityofpaloalto.org
Dean Batchelor
Utilities Director
dean.batchelor@cityofpaloalto.org
(650) 496-6981
Catherine Elvert
Utilities Communications Manager
catherine.elvert@cityofpaloalto.org
(650) 833-9433
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Item No. 4. Page 1 of 8
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: February 7, 2024
Staff Report: 2401-2508
TITLE
Discussion of Electric Grid Modernization Plan
RECOMMENDATION
This memorandum and presentation are for discussion purposes only; no action is requested at
this time.
EXECUTIVE SUMMARY
The City of Palo Alto’s Electric Grid Modernization for Community-Wide Electrification Project
(Grid Mod Project) was developed to enhance the distribution system’s grid resiliency and
reliability in a manner that will continue to accelerate the City’s clean energy and decarbonization
goals. Palo Alto’s grid must be modernized to reach the capacity required to electrify all homes
and cars. The modernized system will be designed to fully accommodate energy received from
local generation such as rooftop solar and battery storage, an important element in
decarbonization goals. There will be an upgrade to the distribution system to incorporate local
generation, allow two-way power flow, meet projected capacity needs, enhance voltage
regulation and system protection requirements, and provide a high level of resiliency and
reliability.
The Project’s three main objectives are:
•Increase capacity on the Electric Grid to allow for the addition of new electrical load from
the electrification of heating load, electric vehicles, and battery storage.
•Enhance system reliability and resiliency by installing advanced distribution network
protection schemes.
•Implement distribution system control technologies to allow for high levels of solar
penetration, battery storage, distributed energy resources, and electric vehicles.
To meet the expected increase in demands, this Project will increase network capacity. Capacity
increases will include the following work:
•Converting 4kV systems to 12kV.
•Installing more distribution transformers with greater capacity.
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•Rebuilding secondary networks by increasing the conductor size and creating more
secondary networks.
•Replacing four distribution substation transformers at two substations with larger
transformers having greater capacity.
BACKGROUND
The City established its first Climate Protection Plan in 2007, which is now the Sustainability and
Climate Action Plan (S/CAP). This plan has been periodically updated and aligned with current
conditions to provide a comprehensive roadmap to reducing greenhouse gas (GHG) emissions.
In 2013, Palo Alto became one of the first cities in the nation to source 100% carbon-neutral
electricity. In 2020, the City launched an update to reduce GHG emissions 80 percent below 1990
levels, i.e., reduce 624,095 metric tons of greenhouse gases by 2030 (the “80 x 30 goal"). This
goal exceeds even the state of California's world-leading reduction goal of 80% by 2050; the
California Global Warming Solutions Act of 2006 (AB32) requires the state to reduce its GHG
emissions 40% below 1990 levels by 2030 and set an aspirational goal to reduce emissions 80%
by 2050.
One major initiative in the S/CAP is to promote the transition to all-electric homes and electric
vehicles (EVs) to reduce greenhouse gas emissions. A 2021 impact analysis showed to meet the
“80 x 30 goal”, the City must electrify all of its roughly 15,000 single-family homes, replacing
natural gas equipment with efficient electric alternatives. Also, currently, one in six Palo Altans
drive an electric car, and EVs now account for more than 30% of new car sales in Palo Alto - the
highest adoption rate in the country. One of three newly registered vehicles in Palo Alto is an EV.
This transition, or “electrification,” will require an extensive upgrade to the electric distribution
network due to a large increase in electrical energy needed to replace gas heating equipment
with electrical equipment and support EVs.
As a result, the Grid Mod Project was developed to enhance the distribution system’s grid
resiliency and reliability in a manner that will continue to accelerate the City’s clean energy and
decarbonization goals. Palo Alto already supplies customers electricity from a 100% carbon
neutral portfolio and has been in the forefront of efforts to design programs allowing customers
to easily utilize clean energy through EVs and electric appliances.
Palo Alto’s grid must be modernized to reach the capacity required to electrify all homes and
cars. The modernized system will be designed to fully accommodate energy received from local
generation such as rooftop solar and battery storage, an important element in decarbonization
goals. There will be an upgrade to the distribution system to incorporate local generation, allow
two-way power flow, meet projected capacity needs, enhance voltage regulation and system
protection requirements, and provide a high level of resiliency and reliability.
ANALYSIS
The City conducted an electrification study to evaluate the impacts of projected electrification
loads on Palo Alto’s distribution and substation transformers, primary/secondary distribution
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circuits, and to propose upgrades needed to mitigate overloads. The estimated cost to construct
the necessary electric system upgrades for a 100% electrification scenario is between $220
million to $306 million, depending on the approach. Of the nine substations in Palo Alto, the
study recommends major design and equipment upgrades at two of the nine substations, and
minor to moderate upgrades at four substations to meet projected loads to support 100%
electrification.
The Grid Mod Project requires bringing online more transformers, replacing deteriorating wires
and connectors, upgrading or replacing poles, and providing battery storage and solar system
support to the interconnected grid. Specifically, the Project involves replacing the current 1,413
single phase pole top transformers rated less than 50kVA with the same type of transformers
rated 50kVA or larger. Additionally, there are currently 261 single-phase pad mount transformers
and 231 single-phase underground transformers installed on the distribution system. Based on
the projected average peak load of 6kVA per customer, 341 of these transformers (including all
231 underground transformers) will need to be replaced with 75kVA or larger transformers to
mitigate overloads. In order to limit the maximum number of customers per transformer to 15
(90kVA), an additional 83 transformers will need to be installed. Furthermore, 296,300 circuit
feet of open wire secondary conductors in the distribution system will be replaced with
aluminum aerial cable. These design aspects will accommodate 100% residential electrification
of end uses in the Palo Alto community, aligning with the City’s primary goal of decarbonization.
For future housing development, the City will perform new analysis and make appropriate
electric distribution network changes as needed for electrification.
Capacity increases on the network are needed to meet the additional load that will be placed on
the distribution network. The estimated average diversified electric energy demand for
households at the current time is approximately 2-3 kVA per home. When homes are electrified,
the diversified electric demand is expected to increase to approximately 6 kVA per home. This
increased load will exceed the capacity of the existing distribution network. Most of the impacts
of the increased load will be on the distribution transformers and the secondary networks serving
homes. In addition, some substation transformers will need to be replaced and upgraded to
support the new distribution network.
Capacity increases included in this Project are comprised of the following work:
•Converting remaining 4kV systems to 12kV.
•Installing more distribution transformers with greater capacity.
•Rebuilding secondary networks by increasing the conductor size and creating more
secondary networks.
•Replacing four distribution substation transformers at two substations with larger
transformers having greater capacity.
Grid resiliency and reliability are key factors in delivering a service to meet customer needs. As
electrification loads increase and customers become more dependent upon electricity to meet
household and transportation needs, the grid will need to be more reliable and have limited
downtime. To help facilitate meeting resiliency and reliability goals, the City’s dark fiber network
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is currently being expanded to provide services to the community and connectivity to electric
distribution switches and protection equipment.
To meet the need for greater reliability and resiliency, the Project includes the following:
•Additional circuit ties will be installed to improve the ability to pick up load during
outages.
•Automated restoration schemes that can be used to isolate faults and restore customers
will be installed where they are practical to deploy.
•Advanced distribution protection schemes will be installed to decrease the size of the
outages on the feeders.
Due to the high penetration of solar generation, battery storage, and EVs in this community,
there will be opportunities to test technologies to control input into the grid, maintain the voltage
regulation of the system, and control customer behavior through price signals. Palo Alto is
connected to the system operated by the California Independent System Operator (CAISO).
Currently the state electricity grid is undergoing a transformation to a grid that relies on
renewables. As a result, there are situations where the grid has too much supply, and at other
times it is short on supply. Palo Alto will implement technologies that can support the two-way
needs of the larger grid. These technologies include solar inverters that regulate power factor
and load output, vehicle to grid power supply, and demand management technologies. Palo Alto
developed low, mid, and high electric load forecasts through 2045 including the total expected
additional data center load, EV load, and building electrification load.
In addition to enhancing reliability and resiliency of the electric grid, electrification will benefit
the community by saving money, improving qualify of life, and helping the environment. While
electrification will typically result in higher electric bills, significant savings can be achieved
elsewhere, such as customers’ vehicle fuel and natural gas bills. EV owners can save about $1,000
per year on fuel and thousands of dollars more in maintenance over the life of an EV. As more
Low, Mid, and High Load Forecasts through 2045
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people switch from fossil fuel to electricity, there will be significant reduction in carbon emissions
which helps Palo Alto reach the “80 x 30 goal” to ensure the quality of life for future generations.
New electric-powered equipment and appliances are much more energy-efficient than the
devices they replace. Heat pump efficiency has risen from 10 SEER (seasonal energy efficiency
ratio) to close to 20 SEER — that’s 500% efficient — for cooling, and from 6 HSPF (heating
seasonal performance factor) to 10 FSPF — 250% efficient — for heating in a couple of decades.
Natural gas furnaces are 92% efficient.1
Customer benefits of grid modernization and electrification include:
•Reduced greenhouse gas emissions
•Grid-connected or smart appliances
•Reduced fire risk and avoid the risks of gas leaks
•Increased efficiency and lower energy costs from electric-powered equipment
•Reduced power outages
•Lower operating and maintenance costs for vehicles, equipment and appliances
HIGH-LEVEL ESTIMATED TIMELINE
Year 1 – 2024
Task 1.0: Overhead Distribution System Upgrade Pilot Project
Subtask 1.1 - Prepare design
Subtask 1.2 - Order and delivery of transformers
Subtask 1.3 - Material order and delivery
Subtask 1.4 - Construction
Task 2.0: Design Resource Acquisition
Subtask 2.1 - Prepare RFP for Design Services
Subtask 2.2 - Evaluate Proposals and Select Consultant
Task 3.0: Phase 1 Overhead System Improvements
Upgrade 10% of Overhead Distribution System
Subtask 3.1 - System Design
Subtask 3.2 - Order and delivery of transformers
Year 2 – 2025
Task 3.0 (continued): Phase 1 Overhead System Improvements
Subtask 3.3 - Material order and delivery
Subtask 3.4 - Construction
Task 4.0: Phase 2 Overhead System Improvements
Upgrade 40% of Overhead Distribution System
Subtask 4.1 - System Design
Subtask 4.2 - Order and delivery of transformers
Subtask 4.3 - Material order and delivery
1 https://www.questline.com/blog/beneficial-electrification-energy-utility-customers/
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Subtask 4.4 - Construction
Task 5.0: Transformer Upgrades – Colorado Substation
Subtask 5.1 - Substation Transformer Expansion Design
Subtask 5.2 - Order long-lead time material
Year 3 – 2026
Task 6.0: Phase 3 Overhead System Improvements
Upgrade 70% of Overhead Distribution System
Subtask 6.1 - System Design
Subtask 6.2 - Order and delivery of transformers
Subtask 6.3 - Material order and delivery
Task 7.0: Feeder Ties and Circuit Outlets – Colorado Substation
Subtask 7.1 - Design Circuits
Subtask 7.2 - Order long-lead time material
Task 8.0: Phase 4 Overhead System Improvements
Upgrade 100% of Overhead Distribution System
Subtask 8.1 - System Design
Year 4 – 2027
Task 5.0 (cont.): Transformer Upgrades – Colorado Substation (re-ordered)
Subtask 5.3 - Substation Construction
Task 6.0 (cont.): Phase 3 Overhead System Improvements
Subtask 6.4 - Construction
Task 7.0 (cont.): Feeder Ties and Circuit Outlets – Colorado Substation
Subtask 7.3 - Construction
Task 8.0 (cont.): Phase 4 Overhead System Improvements
Subtask 8.2 - Order and delivery of transformers
Subtask 8.3 - Material order and delivery
Task 9.0: Phase 1 Underground System Improvements
Upgrade 33% of Underground Distribution System
Subtask 9.1 - System Design
Task 10.0: Transformer Upgrades – Hopkins Substation
Subtask 10.1 - Substation Transformer Expansion Design
Subtask 10.2 - Order long-lead time material
Year 5 – 2028
Task 8.0 (cont.): Phase 4 Overhead System Improvements
Subtask 8.4 - Construction
Task 9.0 (cont.): Phase 1 Underground System Improvements
Subtask 9.2 - Order and delivery of transformers
Subtask 9.3 - Material order and delivery
Subtask 9.4 - Construction
Task 11.0: Phase 2 Underground System Improvements
Upgrade 66% of Underground Distribution System)
Subtask 11.1 - System Design
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Year 6 – 2029
Task 10.0 (cont.): Transformer Upgrades – Hopkins Substation
Subtask 10.3 - Substation Construction
Task 11.0 (cont.): Phase 2 Underground System Improvements
Subtask 11.2 - Order and delivery of transformers
Subtask 11.3 - Material order and delivery
Task 12.0: Phase 3 Underground System Improvements
Upgrade 100% of Underground Distribution System)
Subtask 12.1 - System Design
Year 7 – 2030
Task 11.0 (cont.): Phase 2 Underground System Improvements
Subtask 11.4 - Construction
Task 12.0 (cont.): Phase 3 Underground System Improvements
Subtask 12.2 - Order and delivery of transformers
Subtask 12.3 - Material order and delivery
Subtask 12.4 - Construction
FISCAL/RESOURCE IMPACT
High level estimated costs including labor and material by activity. The following unit costs are
from the 2021 CPUC PG&E Unit Cost Guide, except for pole top transformer and substation
transformer/switchgear costs which are provided by Utilities engineering staff. City will
continue to pursue grant funding opportunities as they arise.
STAKEHOLDER ENGAGEMENT
December 7, 2022 – Utilities Advisory Commission Meeting – Electric Distribution Infrastructure
Modernization Update https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-
minutes-reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-
minutes/agendas-and-minutes-2022/12-07-2022/12-07-2022-agenda-and-packet.pdf
Description Qty
Unit of
Measure Unit Cost Extended Cost
60/12 kV s ubstation trans former and switchgear 2 Unit 25,000,000$ 50,000,000$
115/60 kV s ubstation transformer and high s ide breaker 2 Unit 20,000,000$ 40,000,000$
Single phas e pole top trans former including pole make ready/replacement 1,400 Unit 20,000$ 28,000,000$
Single phas e pad mount trans former including s ubstructure 424 Unit 40,000$ 16,960,000$
Underground 12 kV circuit tie including cable, trench and s ubstructures 30,900 Foot 800$ 24,720,000$
Overhead 12 kV circuit tie/reconductor 11,000 Foot 220$ 2,420,000$
Overhead s econdary reconductor with AWAC 296,300 Foot 165$ 48,889,500$
4 kV to 12 kV convers ion including trans formers 381 Unit 23,200$ 8,839,200$
Total Estimate 219,828,700$
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Item No. 4. Page 8 of 8
June 7, 2023 – Utilities Advisory Commission Meeting – Electric Distribution Infrastructure
Modernization Update
https://cityofpaloalto.primegov.com/meeting/attachment/1764.pdf?name=Electrification%20
Modernrization%20Plan%206-7-2023
November 30, 2023 - Sustainability and Climate Action Plan Ad Hoc Committee Meeting –
S/CAP Progress and 100% Renewable Energy
https://www.cityofpaloalto.org/files/assets/public/v/1/sustainability/presentations/2023.11.30
-scap-ad-hoc-committee-meeting.pdf
ENVIRONMENTAL REVIEW
This informational report is not a project under CEQA. The overhead distribution system upgrade
pilot project currently in progress is categorically exempt from the California Environmental
Quality Act (CEQA) pursuant to CEQA Guidelines 15301 (repair, maintenance, of existing facilities)
and 15302 (replacement or reconstruction of existing facilities).
ATTACHMENTS
Attachment A: Presentation
AUTHOR/TITLE:
Dean Batchelor, Director of Utilities
Staff: Dave Yuan, Utilities Strategic Business Manager
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Discussion of Electric Grid Modernization Plan
February 7, 2024 www.cityofpaloalto.org
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2
Presentation Outline
§Distribution System Topology
§Residential Customer Connections – Past & Future
§Major Projects
-Upgrading Distribution System Hardware (Phase 1)
-Complete 4 kV to 12 kV upgrade (2 substation)
-Integrating new utility technologies
-Integrating with new customer technologies
-Fiber to the premise
§Timeline and Resources
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3
CPAU Topology
Generation Transmission
- owned by PG&E
-3 Transmission
Lines, 115 kV
rated
Receiving Substations
- 8 distribution substation
-1 transmission substation
- 60 kV sub transmission
network
Distribution System
Network
- 12.47 kV primary circuit
-4.16 kV primary circuit
-Transformers (TX) range: 5
kVA – 2.5 MVA
CPAU Customers
-120/240 V for residential
-120/208/480V for commercial
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4
Existing Customer Connections
§3 KVA Expected peak load demand from residential customer
§For new, relocated, or upgraded 200 A electrical services
§Customer invoiced for standard fee
§For new, relocated, or upgraded >200 A electrical services
§Customer invoiced advance engineering fee
§Customer invoiced for additional expenses determined by
estimators
§Customer is responsible for any substructure work, secondary cabling,
and electric meter panel
§CPAU responsible for infrastructure upgrades & labor of connecting
electrical services
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5
Updated Customer Connections - Future
§6 kVA expected peak load demand from residential customer
– up from 3 kVA estimated allocation from the past
§Customers will still receive standard invoice for 200 A service
§In Development: standard connection fee for 400 A service
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6
CPAU Strategic Projects
Grid Modernization
for Electrification
•Upgrade current
infrastructure (TXs, cable
sizes, etc.)
•Integrating new technology
(i.e., AMI, fault indicators,
remote switching, fuse savers)
•Customer technologies (solar
PV, ESS, EV, V2X, HPWHs)
Fiber to the Premise
(FTTP)
•CPA new internet service provider
•Goal: to upgrade and expand the existing fiber backbone and FTTP for all homes and businesses
•To build new fiber connections to support CPA Internet services to all Palo Alto homes
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7
Upgrading Existing Distribution System Elements
§Overall System Upgrade
o Upgrade 4 kV lines installed in 1967 to 12 kV lines
o Upgrade 4 of 30 substation transformers
o Upgrade 1741 of 3000 distribution system transformers
o Upgrade 56 miles of secondary and 17 miles of primary
distribution lines
§Phase 1
o Complete system upgrades and improvements affecting
6,784 customers
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Grid Modernization Phase 1
Pilot Area
Customers: 1,224
Total Poles: 409
Phase 1
Customers: 6,784
Total Poles: 1,650
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Overhead Secondary System Design
Upgrade to
50 kVA TX
Up to 8
customers per
50 kVA
transformer
4/0 AL cable to replace
majority of existing
open wire or rack
secondary conductors
Fiber to the house
addition
9
Service drop to be
replaced with 1/0
AL triplex
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Overhead Electrification Scope of Work
•Approximately 1400 single phase
pole top TXs will need to be
replaced with a 50 kVA or larger
TX
•A total of 296,300 circuit feet (56
miles) of open wire and rack
secondary conductors will need
to be replaced with aerial cable
(1/0 AL Or 4/0 AL) for the entire
City
10
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Underground Secondary System Design
Must be
75 kVA TX
350 AL sec. cable to replace
any smaller cable
Up to 12
customers per
transformer
Up to 12
customers per
transformer
350 AL sec. cable to replace
any smaller cable
Remove all
URD TXs
Replace
with 75
kVA TX
Pad Mount Transformer
System
URD Transformer System
11
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Underground Electrification Scope of Work
•Of the 261 single phase
padmount TX in CPA, 110 TX will
need to be replaced with a
75kVA or larger TX
•An additional 52 TXs will need to
be installed
•All 231 single phase URD TX in
CPA will need to be replaced
with a 75KVA or larger TX
•An additional 31 TXs will need to
be installed
12
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13
Grid Modernization impact on CPAU Infrastructure
Supply/Resources Transmission Substations
-replace 4 of 30
substations TX with
larger capacity
Distribution System
Network
- Replaced secondary cable
-4.16 kV circuit to be replaced
with 12.47 kV
-upgrade and add TX
-replace service laterals
-remove URD TX
CPAU Customers
-New service fees
-Integrate AMI and other
customer technology
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§Consultants
§ENTRUST
§Magellen
§Soudi Inc
§Contractors
§MP Next Level
§VIP Powerline Corp
§Davey Tree
§Funding
§Est. Budget of $220-
$306M
§Bond Issuance / Debt
Financing
§CIP Funding
Resource Necessities
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15
Fall 2024
Proposed Timeline
Pilot Area Complete
Summer 2025 Phase 1 Complete
Winter 2030 All Phases Complete
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16
THANK YOU!
Dean Batchelor, Director of Utilities
Dean.batchelor@CityofPaloAlto.org
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Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: February 7, 2024
Staff Report: 2303-1214
TITLE
Informational Update on City Council-Approved Substation Improvement Agreement With Tesla
Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal
Year 2024 Budget Amendment in the Electric Fund to Establish the Hanover Substation Upgrade
Project (EL- 24001); CEQA Status – Exempt under CEQA Guideline Sections 15301 and 15302
RECOMMENDATION
On January 16, 2024 Council approved staff’s recommendation to:
1. Approve and authorize the City Manager or their designee to execute the Substation
Improvement Agreement (SIA) and attached Capacity Reservation Agreement between
the City of Palo Alto and Tesla for the design and construction of a substation
improvements at the City of Palo Alto’s Hanover Substation (Attachment A).
2. Amend the Fiscal Year 2024 Budget Appropriation for the Electric Fund (requires a 2/3
vote) by:
a. Establish the Hanover Substation Upgrade Project (EL-24001) in the amount of
$15,000,000; and
b. Decrease the Electric Fund Operations Reserve by $15,000,000.
EXECUTIVE SUMMARY
Tesla is moving its engineering headquarters to the former HP Headquarters at 1501 Page Mill
Road where it will perform advanced research and development to support the vehicles and
products it produces. The City proposed to rebuild the existing Hanover Substation to replace the
existing substation facilities, which are nearing the end of their useful life, and to accommodate
Tesla’s power needs, via improvements designed and installed by Tesla. To best meet the needs
of Tesla and the City, a public private partnership was proposed and will be implemented through
a Substation Improvement Agreement (SIA), including an associated Encroachment Permit, and
Capacity Reservation Agreement.
The maximum cost of the Hanover Substation project is estimated to be $24,000,000 with the
cost being shared equally, subject to specified exceptions in the SIA (for an estimated
$12,000,000 by each party). To facilitate the transfer of existing feeders not serving Tesla to the
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new transformers being installed and cover the costs of City inspections, the City will fund an
additional $3,000,000. The total initial cost to the City for this project is $15,000,000. It should
be noted that Tesla paid all costs to expedite materials needed for this project and the expediting
fees have been excluded from the $24,000,000 total cost of the project.
At the end of construction, all assets meeting City requirements as specified in the SIA will
become City property. The assets to be transferred to City ownership and control will be general
use assets that can be used to serve other City customers. Tesla will reserve capacity in exchange
for additional demand-based charges as outlined in the Capacity Reservation Agreement, which
is attached to the SIA. Tesla will receive monthly credits upon completion of the facilities for up
to 7 years, based on Tesla’s projected energy usage. Total credits will be no more than the
estimated $12,000,000 to be invested by Tesla.
BACKGROUND
Tesla announced its engineering headquarters to 1501 Page Mill—formerly known as HP
headquarters. It plans to install computers and charging facilities to support research into the
electric vehicles it produces. The existing transformers at Hanover Substation, closest to the Tesla
site, require upgrades to meet Tesla’s anticipated needs and to continue to serve the City’s other
customers in the area. Tesla has indicated that it would like to be operational at the Page Mill
site by the Spring of 2024.
The City’s Electric Utility staff have also determined that the existing HV 20 and HV 21
transformers at Hanover Substation need replacement. These transformers are undersized
relative to the needs of customers in the Stanford Business Park, require a higher-than-normal
level of maintenance and are nearing or past their useful lives of 50 years.
ANALYSIS
The project proposes to install two 12 kV 50 MVA transformers to replace two 4kV transformers
that served 1501 Page Mill Road and make all substation improvements necessary to
accommodate the installations. Generally, three to four years are spent on a substation upgrade.
However, Tesla is requesting to finish all construction at the substation and energize their new
building by April 2024. The City cannot meet this timeline under normal City processes due to
insufficient staffing to coordinate the design and construction of all facilities and the time
required to complete the City public procurement process. To meet the proposed installation
timeline the use of a public private partnership1 executed through a Substation Improvement
Agreement (SIA) is recommended.
Pursuant to the SIA, Tesla will design, procure, install, and commission two-50MVA transformers,
three 60Kv substation breakers, a Power Distribution Center (12kV Switchgear), two 12 kV
feeders, and will reroute 12 kV feeders from existing transformers to the new transformers.
These upgrades will serve Tesla, accommodate customers in the Stanford Research Park, replace
outdated infrastructure, and modernize and reorganize the substation for greater efficiency. The
design will be subject to CPAU approval and compliance with CPAU standards.
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The SIA has been structured to provide infrastructure for the capacity needed by Tesla, replace
City equipment at the end of its useful life, and limit the financial risk to the City and the electric
rate payers. Since the work being done at Hanover Substation is a joint project with benefits for
both parties the initial costs for the project have been split equally, subject to limited exceptions
in the SIA. The total cost for the project is estimated to be $27,000,000, not including any
expediting fees. Costs for the work inside the substation (approximately $24,000,000) will initially
be split in half with each party providing approximately $12,000,000. The City will fund another
$3,000,000 of improvements (separately from the SIA) to move feeder connections not related
to service for Tesla from substation banks being retired to the new transformers in the Hanover
Substation and to fund engineering review and inspection services that will occur prior to and
during construction of the project. Tesla will be responsible for all additional costs associated
with expediting of materials and services that resulted from the accelerated schedule it has
proposed.
Tesla is providing the initial funding, design, and construction services for the improvements
inside the substation, subject to partial City reimbursement. At the completion of the substation
construction, the City will evaluate the installed systems for compliance with City-approved
plans, specifications, and other requirements and providing the design and installation complies
with the terms of the SIA, the City will accept the facilities. After acceptance, the actual costs for
the project will be determined and the portion of the substation that was built solely for City
distribution system use, (e.g., not related to the 1501 Page Mill Road project) will be reimbursed
to Tesla.
The City will reserve up to 11,200 kVA of capacity to serve Tesla’s facilities, in exchange for Tesla’s
payment of a monthly Capacity Reservation Fee calculated based on Tesla’s monthly demand.
The Monthly Capacity Reservation Fee is designed to compensate the City for reserving system
capacity for Tesla’s future use and corresponds to the operation and maintenance costs of the
facilities providing the capacity. It applies only if Tesla’s monthly demand falls below the levels
specified in the Capacity Reservation Fee. Upon completion of the facilities, Tesla will receive a
Monthly Capacity Usage Credit for up to 7 years based on Tesla’s projected energy usage and
ramp up rate. Total credits will be capped at $12,000,000 and to protect the City against cost
overruns, project costs subject to reimbursement under the SIA are limited to $12,000,000,
subject only to any mutual agreement to amend the SIA. The Monthly Capacity Usage Credit is
intended to reimburse Tesla for its financial contribution to general use facilities, i.e., that portion
that is not already reimbursed by the City under the terms of the SIA, while reducing the risk of
the City investing in assets that end up being underutilized. This credit is based on the expected
revenue from energy sales to Tesla over the term of the agreement. The calculations for these
payments and credits are outlined the Capacity Reservation Agreement (Exhibit D).
Due to the timeline for completion of this project the engineering design and the procurement
of long-lead time materials have already been completed by Tesla, acting at its own risk. The City
supplied specifications for the materials to be ordered and was consulted on the acceptability of
the engineering design firm being used to prepare the plans. Since the award of the design
contract, the City has been reviewing design drawings and materials to ensure that they comply
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with the City specifications and standards. Tesla has proceeded knowing that reimbursement for
expenses from the City is contingent upon the completion of the SIA.
City staff also reviewed the construction bids for this project. Tesla received four bids for the
construction of Hanover Substation and selected the lowest bid. Staff reviewed references for
the selected contractor and agreed that the contractor had sufficient experience to construct the
substation improvements.
FISCAL IMPACT
To fund this project a new Capital Improvement Project, EL-24001 (Hanover Substation Upgrade)
has been created. Staff recommended increasing the Fiscal Year 2024 Electric Fund CIP and
establishing EL-24001 in the amount of $15,000,000 to fund the $12,000,000 contribution for the
City’s half of the substation rebuild and $3,000,000 for the rearrangement of the distribution
feeders and city costs for engineering review and inspection services and decreasing the Electric
Fund Operating Reserve by $15,000,000. The Electric Fund Distribution and Supply reserves has
a balance of $38.5 million. The Electric Fund reserves will continue to stay within the minimum
and maximum reserve guidelines after the transfer.
Staffing for the engineering review and inspection services will be provided by internal staff and
outside consultants that are under contract. The expected total cost of these services is $400,000
and will be funded from the $3,000,000 funding being allocated to this project for City work on
the site.
RESOURCE IMPACT
The approval of this agreement is consistent with existing City policies governing Public-Private
Partnerships, and the Council approved 2018 Utilities Strategic Plan – Strategic Objectives,
Priority 4 – Strategy 1 “Establish a proactive infrastructure replacement program, based on
planned replacement before failure to support reliability and resiliency”. Facing an evolving utility
business environment, aging infrastructure needs, and sustainability objectives, CPAU must
maintain a competitive position in the market. Remaining financially sustainable and competitive
in the market while optimizing our resources is key to maintaining and enhancing our value of
City of Palo businesses and customers.
STAKEHOLDER ENGAGEMENT
This project is located in an existing substation on Stanford lands. City staff has had discussions
with Stanford informing them of the intention to upgrade Hanover Substation. Stanford indicated
that they were supportive of this project to provide service to a lessee on their property. A City
Encroachment Permit, which attaches and incorporates the Stanford lease terms, granting Tesla,
its employees, and contractors a revocable privilege to enter and use the substation property
during construction is attached as Exhibit B to the Substation Improvement Agreement.
ENVIRONMENTAL REVIEW
This project is categorically exempt from the California Environmental Quality Act (CEQA)
pursuant to CEQA Guidelines 15301 (repair, maintenance, of existing facilities) and 15302
(replacement or reconstruction of existing facilities).
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ATTACHMENTS
Attachment A: Presentation
Attachment B: Tesla Substation Agreement
AUTHOR/TITLE:
Dean Batchelor, Director Utilities
Staff: Tomm Marshall, Assistance Director of Electric Utilities
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Substation Improvement Agreement
Hanover Substation (Tesla)
January 16, 2024 www.cityofpaloalto.org
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1
Agenda
•Background
•Project Summary
•Project Schedule
•Project Funding
•Contract Documents
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1
Tesla Advanced Compute Center in Palo Alto, California
•AI and High-Performance Compute Center
•Global Engineering and AI Headquarters
•Former HP Headquarters at 1501 Page Mill Road
Background
CPAU Hanover Substation
3350 Hanover Street
Palo Alto, California 94304
1501 Page Mill Road,
Palo Alto, CA 94304
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1
Project Summary
Design and build the following at Hanover Substation :
•Grading and structural site improvements
•Install (2) 60 kV circuit breakers
•Install (1) 60 kV bus tie breaker
•Install (2) 50 MVA 60kV/12kV transformers
•Install (1) 12kV power distribution center
•Install (2) 12kV feeders (to Tesla)
•Install bus switches, buswork, wiring, and feeder outlets to Tesla’s onsite
switchgear
•Test and commission all equipment and components
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1
Hanover Substation Upgrade Project Schedule
•Assumes a 40-hour work week
•Key milestones
§City Council Approval – January 16, 2024
§Construction Begins – January 29, 2024
§PDC Delivery – April 8, 2024
§Project Completion (Estimated) – September 17, 2024
Project Schedule
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1
A Public/Private partnership to help in expediting the construction of needed facilities
Tesla requested additional distribution capacity at their Palo Alto facility
The date requested by Tesla for delivery of the new facilities was unachievable given the current City processes
Tesla agreed to pay all of the cost related to expediting fees (approx. $3 Million)
Total project cost - $24,000,000 (included construction costs $15,000,000)
•Initial Project Funding
§Tesla providing all initial costs for design and construction of the project.
•City’s Reimbursement to Tesla
§City will reimburse 50% of the substation construction costs up to a maximum cap of $12,000,000 at
acceptance of the substation project.
•Tesla Costs
§Construction of 12kV feeders to serve Tesla.
•City’s Costs
§12kV feeder extension from existing transformers to the new transformers.
Project Funding Summary
Description City
Cost
Tesla
Cost
Total
Major Equipment & Design $4.5M $4.5M $9M
Construction (Bulk material and labor)$5.5M $5.5M $11M
Expediting Fees & Feeder Scope -$3M $3M
Tesla Cost Savings (Deferred feeder
scope & 40-hour work schedule)
-($1.7M)($1.7M)
Total Base Project Cost $10M $11.3M $21.3M
Additional contingency for contaminated
soil removal (RCS-2)
$2M $2M $4M
Estimated Worst-case Project Cost --$25.3M
City’s Contractual Limit $12M --
Tesla Approved Budget --$21.3M
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1
Summary - The City and Tesla have entered into an Improvement Agreement in which the Parties will jointly
design, construct, install and fund improvements to increase the electrical capacity at the Hanover Substation to
support Tesla’s new electrical demand load at 1501 Page Mill Road, Palo Alto, California 94304. The Agreement
consists of the following contract documents:
•Substation Improvement Agreement
§Establishes terms for the Public-Private Partnership.
•Encroachment Permit
§Allows Tesla to perform work at the Hanover Substation Site.
•Capacity Reservation Agreement
§City reserves 11,200 kVA (9,000 kW demand) of electric capacity for Tesla.
§Tesla pays a monthly Capacity Reservation Fee.
§Tesla receives a Monthly Capacity Usage Credit to compensate them for their contribution of general use assets based
on the amount of electricity used each month.
Contract Documents
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1
Request
•Staff requests Council’s approval of a Substation Improvement Agreement With Tesla Inc. to Install
Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal Year 2024 Budget
Amendment in the Electric Fund to Allocate $15,000,000 to the Hanover Substation Upgrade Project (EL-
24001).
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
SUBSTATION IMPROVEMENT AGREEMENT
BETWEEN
CITY OF PALO ALTO
AND
TESLA, INC.
FOR THE HANOVER SUBSTATION
Dated January 16, 2024
1 Improvement Agreement
6056799 Hanover Substation
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TABLE OF CONTENTS
Recitals ................................................................................................................................3
Agreement
1.
2.
3.
4.
5.
6.
7.
8.
9.
Definitions and Purposes ..............................................................................................4
Party Representatives and Relations.............................................................................7
Term .............................................................................................................................8
Site Access...................................................................................................................9
Project Funding...........................................................................................................10
Design Development...................................................................................................12
Conditions for Commencement of Project Construction...............................................14
Project Construction....................................................................................................17
Insurance....................................................................................................................23
10. Indemnity; Limitations on Liability................................................................................24
11. Assignment.................................................................................................................25
12. Force Majeure.............................................................................................................26
13. Project Records ..........................................................................................................27
14. Default ........................................................................................................................28
15. Notices........................................................................................................................30
16. Dispute Resolution......................................................................................................31
17. Miscellaneous Provisions............................................................................................32
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Project Description
Encroachment Permit
Project Budget
Capacity Reservation Agreement
Project Schedule
Insurance Requirements (Tesla)
Insurance Requirements (Engineer)
Insurance Requirements (General Contractor)
Construction Contract Form
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SUBSTATION IMPROVEMENT AGREEMENT
BETWEEN
THE CITY OF PALO ALTO
AND TESLA, INC.
FOR THE HANOVER SUBSTATION
This Substation Improvement Agreement (“Agreement”) is dated and effective as of
January 16, 2024 (the “Effective Date”), and is made and entered into by and between the
City of Palo Alto, a California chartered municipal corporation (“City”), and Tesla, Inc., a
corporation organized under the laws of the State of Delaware (“Tesla”) (individually, a
“Party” and, collectively, the “Parties”), in reference to the following facts and circumstances:
RECITALS:
A.The City owns and operates a municipal electrical utility operated by a division
of the City known as City of Palo Alto Utilities (“CPAU”), which provides electricity to
residential and commercial customers within the utility’s service area.
B.The City owns and CPAU operates the Hanover Street Substation
(“Substation”), an electrical distribution substation located at 3350 Hanover Street, Palo Alto,
California 94304.
C.The Substation is located on property that the City has leased from the Board
of Trustees of the Leland Stanford Junior University since 1957 (the “Leased Premises”),
subject to the terms of the 1957 Lease Agreement and subsequent amendments thereto
(“Lease”).
D.The purpose of the Agreement is to establish a public-private partnership
between the City and Tesla to expedite the installation of additional capacity on the CPAU’s
distribution network for the expansion of Tesla’s electrical load at Tesla’s facilities at 1501
Page Mill Road, Palo Alto, California 94304 (the “Tesla Facility”)
E.The Parties seek to jointly effectuate the design, installation and funding of a
project to expand load capacity at the Substation to provide up to 30 MVA of capacity for the
Tesla Facility pursuant to the terms of a separate Capacity Reservation Agreement between
the Parties, which may include reserved capacity for other Tesla facilities served by the
Substation (“Capacity Reservation Agreement”), and to expand the Substation, including
switch gear improvements, for future use by the CPAU (collectively, the “Project”).
F.The Parties have agreed to fund the Project through their respective
contributions, as set forth in this Agreement.
G.The Parties have agreed that Tesla will take the lead in design and
construction of the Project subject to the terms of this Agreement and in consideration for the
terms of the Capacity Reservation Agreement.
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IN CONSIDERATION OF the foregoing and the following covenants, terms and
conditions, the Parties agree:
AGREEMENT:
1.DEFINITIONS AND PURPOSES.
1.1 Recitals Incorporated. The foregoing Recitals are expressly incorporated
into this Agreement.
1.2 Definitions. The following terms used in this Agreement, including the
Recitals, have the meanings set forth in this Section 1.2:
“Agreement” means this Agreement.
“Capacity Reservation Agreement” means the agreement to be entered into
by the Parties, in substantially the form attached as Exhibit D (Capacity
Reservation Agreement).
“City” means the City of Palo Alto, a California chartered municipal
corporation, acting by and through its City Council.
“City Agents” means individuals or entities acting within their capacity as duly
authorized agents of the City for the Project or for the Substation.
“City Reimbursement” means the City’s obligation to reimburse Tesla for
Project costs as further specified in Section 5 and Exhibit C (Project Budget),
the amount of which may be subject to adjustment as further specified in
Section 5 and as expressly provided elsewhere in the Agreement.
“City Improvements” means that portion of the Project intended to expand the
Substation capacity for future City use, but excluding the Tesla Improvements,
as further described in Exhibit A (Project Description).
“City Representative” has the meaning set forth in Section 2.2.
“Claims” means any claim, action, suit, proceedings, demand, investigation,
assessment or liability of whatsoever kind or character made or brought by any
third party.
“Construction Contract” means the contract between Tesla and the General
Contractor for construction of the Project in accordance with the Construction
Documents, as further specified in Section 7.4.
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“Construction Cost” means the amount to be paid to the General Contractor
to construct the Project based on the Construction Contract price.
“Construction Documents” means the final Design Development Documents
developed pursuant to Section 6, which have been approved by the City for
construction of the Project and for which the City has issued a building permit,
including any post-approval modifications pursuant to duly authorized change
orders pursuant to this Agreement.
“Construction Period” means the period beginning from the commencement
by the General Contractor of construction activities at the Site in accordance
with the terms of the Construction Contract, and concluding upon the Project
Acceptance Date.
“CPAU” means the City of Palo Alto’s Utilities division.
“CPAU Rules and Regulations” means the rules and regulations relating to
utility service approved and adopted by resolution of the City of Palo Alto City
Council pursuant to Chapter 12.20 of the Palo Alto Municipal Code, as may be
amended from time to time, and accessible online via the City’s website.
“Day” means a calendar day, unless a “business day” is specified; for the
purposes of this Agreement, “business day” excludes any “Regular Holiday” or
“Other Special Day” referred to in PAMC Section 2.08.100 or any Friday that is
considered a “9/80” day, when the City does not require employees, electing to
work nine business days in a ten-business-days biweekly period, to work on
such days.
“Design Development Documents” means the plans and specifications for
the Project which are developed pursuant to Section 6 and prepared by the
Engineer to become the Construction Documents upon mutual approval of the
final design.
“Effective Date” means the date set forth in the preamble to this Agreement.
“Encroachment Permit” means the Encroachment Permit required pursuant
to Section 4.1, in the form attached as Exhibit B (Encroachment Permit).
“Engineer” means either (i) the engineering firm identified in Section 6.2.A, or
(ii) one or more Tesla employees who are fully licensed and qualified to design
the Project.
“Force Majeure Event” has the meaning provided in Section 12.1.
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“General Contractor” means New River Electrical Corporation, being a duly
licensed and qualified general contractor, or any replacement general
contractor retained by Tesla and approved by the City pursuant to Section
7.4.A.
“Governmental Authority” means any national, regional or local government,
any political subdivision thereof, or any governmental, quasi-governmental,
regulatory, judicial or administrative agency, authority, commission, board or
similar entity having jurisdiction over the performance of the Project, the
Substation Improvements, the Substation or their operations, or the Site or
otherwise over any Party, including any applicable independent system
operator or regional transmission organization, the Federal Energy Regulatory
Commission, and the North American Electric Reliability Corporation.
“Laws” means all applicable local, state, and federal laws, regulations, rules,
codes, ordinances, permits, orders, and the like enacted or imposed by or
under the auspices of any Governmental Authority with jurisdiction over the
Project, including labor, health and safety requirements, the PAMC, and the
CPAU Rules and Regulations.
“Lease” has the meaning set forth in Recital C.
“Leased Premises” has the meaning set forth in Recital C.
“PAMC” means the Palo Alto Municipal Code.
“Project” has the same meaning provided in Recital B, as further described
and depicted in Exhibit A (Project Description), and includes both the City
Improvements and the Tesla Improvements.
“Project Acceptance Date” means the date on which the City accepts the
Project according to City procedure.
“Project Budget” means the budget that the Parties have agreed upon for
design and construction of the Project pursuant to this Agreement based on
estimated costs as of the Effective Date, including funds expended for Project-
related expenses before the Effective Date, as further detailed in Exhibit C
(Project Budget), which may be updated by mutual agreement of the Parties.
“Project Schedule” means the most current schedule for completing the
Project as set forth in Exhibit E (Project Schedule), which may be updated by
mutual agreement of the Parties.
“Retention” has the meaning provided in Section 5.3 of this Agreement.
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“Site” means the physical location for construction of the Project, as further
described and depicted in the Encroachment Permit.
“Substation Improvements” means, collectively, all of the physical
improvements to and in connection with the Substation pursuant to the Project,
Including the City Improvements and the Tesla Improvements.
“Term” has the meaning provided in Section 3 of this Agreement.
“Tesla” means Tesla, Inc., a corporation organized under the laws of the State
of Delaware.
“Tesla Facility” has the meaning set forth in Recital D to this Agreement.
“Tesla’s Agents” means individuals or entities acting within their capacity as
duly authorized agents of Tesla to provide services for the design or
construction of the Project, which includes Tesla’s employees, its Engineer
and the General Contractor and its subcontractors.
“Tesla’s Contribution” means Tesla’s funding obligation for design and
construction of the Project, subject to offset by the City Reimbursement as
further specified in Section 5 and Exhibit C (Project Budget), the amount of
which may be subject to adjustment as further specified in Section 7 and as
expressly provided elsewhere in the Agreement.
“Tesla Improvements” means that portion of the Project that includes design
and installation of two 50 MVA transformers, two 60 kV circuit breakers, a
power distribution center, bus switches, buswork, wiring, feeder outlets, and
feeders to Tesla’s switchgear at the Tesla Facility, but excluding the City
Improvements, as further described in Exhibit A (Project Description).
“Tesla Representative” has the meaning set forth in Section 2.3.
1.3 Purposes of Agreement. The purposes of this Agreement are to design and
construct the Project as set forth in Recitals D and E, above, consistent with the Project
Description attached hereto as Exhibit A (Project Description) and incorporated herein.
The Substation Improvements are intended to provide 30 MVA of capacity during normal
operation of the City’s electric system.
2.PARTY REPRESENTATIVES AND RELATIONS
2.1 Communication and Coordination. In order to facilitate prompt
communications and coordination between the Parties, each Party has designated a single
point of contact with authority to make high level decisions and to coordinate approvals by
each Party as needed for efficient design and construction of the Project.
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2.2 City Representative. The City Representative is the individual authorized by
the City to serve as the primary point of contact for routine communications with Tesla
concerning the Project. The City’s Representative will not have independent authority to
accept, reject, direct, or stop work on the Project; to modify the approved design; or to
approve change order requests on behalf of the City. The City Representative has the right,
but not the obligation to attend the pre-construction conference and weekly progress
meetings, and may be present at the Substation during construction of the Project, subject to
compliance with generally applicable health and safety requirements. The City
Representative for the Project is Tomm Marshall, and contact information for the City
Representative will be provided to Tesla within 10 days after the Effective Date. City reserves
the right to replace the City Representative with another qualified individual upon written
notice to the Tesla Representative, which will include contact information for the new City
Representative.
2.3 Tesla Representative. Tesla’s authorized representative for administration
and implementation of this Agreement, including coordination and direct communications with
the Construction Liaison Team, is Andy Kim, and contact information for the Tesla
Representative will be provided to the City within 3 days after the Effective Date. Tesla
reserves the right to replace the Tesla Representative with another qualified individual upon
written notice to the City Representative, which will include contact information for the new
Tesla Representative.
2.4 Monthly Meetings and Weekly Reports to City. Designated
representatives of each Party will meet monthly following the Effective Date, to ensure
timely and effective communications on Project progress, including updates on design
development, construction, schedule, budget, and other construction-related issues, such
as changes in design, changed conditions, inspection, testing, and similar matters. In
addition, Tesla will submit a weekly written report, sent by email to the City Representative,
summarizing the progress made during the preceding week, providing schedule and budget
updates, and identifying any significant issues or concerns relating to its performance relative
to the Project.
3.TERM.
Unless this Agreement is terminated pursuant to Section 14, the Term of this Agreement will
begin upon the Effective Date and will remain in effect until each of the following has
occurred:
3.1 The Project has been completed, including all obligations set forth in Sections
8.11, 8.12, 8.13, and 8.14;
3.2 City has accepted the Project; and
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3.3 City has paid the full amount of City Reimbursement, including any Retention,
if any, pursuant to Section 5.3.
For the avoidance of doubt, the City Representative and the Tesla Representative will confirm
in writing the date upon which each of the actions identified in Sections 3.1 through 3.3 have
been completed for purposes of establishing the effective date of the Capacity Reservation
Agreement. Notwithstanding the foregoing, the following provisions will survive termination of
the Agreement or expiration of the Term: Section 10 (Indemnity; Limitations on Liability),
Section 13 (Project Records), Section 15 (Notices), and Section 16 (Dispute Resolution).
4.SITE ACCESS. The Tesla Agents will have reasonable access to the Substation for
design and construction of the Project pursuant to an Encroachment Permit, as set forth
below.
4.1 Encroachment Permit. Prior to commencement of the Construction Period,
Tesla will obtain an Encroachment Permit from the City, in conformance with the applicable
requirements of the PAMC and this Agreement and pursuant to terms and conditions of the
Encroachment Permit form attached hereto as Exhibit B (Encroachment Permit) and
incorporated herein. No other right, title or interest, including, but not limited to, any estate,
ownership, leasehold, easement or other property interest, in the Site is granted or intended
to be granted by the City to Tesla by this Agreement except as may be specified in the
Encroachment Permit. The City will not take any action to revoke the Encroachment Permit,
or take any action to compel Tesla or the General Contractor to vacate the Leased Premises
or remove property there from, unless and until the Encroachment Permit is revoked as
specified in Section 7 of the Encroachment Permit. In the event of any conflict or
inconsistency between the terms of this Agreement and the terms of the Encroachment
Permit, the terms of this Agreement will take precedence.
4.2 City Access. Subject to compliance at all times with applicable Laws and the
Site safety requirements agreed by the Parties for the Construction Period, the City
Representative and City Agents, including City inspectors will have unrestricted access to the
Site during construction of the Project in order to perform their duties subject to generally
applicable health and safety rules for the Site. Nothing in this Agreement will be construed to
limit the City’s right to enforce contractual requirements or Laws protecting workers, the
environment, or public or worker health, safety and welfare.
4.3 Coordination and Site Security. In order to avoid conflicts between the
ongoing operations of the Substation and activities for the Project and to ensure Site security,
before commencing work on the Project, the City Representative and Tesla Representative,
or their respective authorized delegees, will meet with the General Contractor to identify
which portion(s) of the “Permit Area” (as defined in the Encroachment Permit) will be
designated for access and for other specified Project-related activities, and to establish
mutually acceptable protocols for shared use of the single access gate for the Site. The areas
designated for specified Project-related activities may be adjusted during the Project, if
needed, to avoid interference with the operations, maintenance, or repair of the Substation.
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These area designations and any adjustments thereto will be memorialized in writing by City
and provided to the Tesla Representative for delivery to the General Contractor. The City
Representative will also inform the Tesla Representative and the General Contractor of the
currently applicable security requirements for the Site. Tesla will be solely responsible for
ensuring that the General Contractor and its subcontractors are contractually obligated to
comply with the terms of the Encroachment Permit, including use of the Permit Area as
designated pursuant to this paragraph, and compliance with all security requirements for the
Substation.
5.PROJECT FUNDING.
5.1 Project Budget. The Project Budget is attached hereto as Exhibit C (Project
Budget) and incorporated herein. The Project Budget is subject to further amendment by
mutual agreement of the Parties following the conclusion of the design development process
in Section 6, prior to commencement of construction pursuant to Section 7, and, as
applicable, based on change orders pursuant to Section 8.
5.2 Allocation of Project Costs. Tesla will be responsible for funding design and
construction of the Project in accordance with the Construction Documents developed
pursuant to Section 6 (collectively, the “Tesla Contribution”), including procurement of
equipment and materials, subject to partial reimbursement from the City for certain items as
set forth below:
A.Tesla Costs. The Tesla Contribution includes 100% of the costs for the
following items, with no contribution from the City Reimbursement:
1.Purchase, installation and connection of two 12 kV feeders
which will be used to serve the Tesla Facilities;
2.Feeders and on-site switches installation needed to serve the
Tesla 30 MVA load;
3.Costs that Tesla elected to pay to expedite delivery of
equipment for the Project before the Effective Date;
4.Costs for generally required permits, including the building
permit for the Project;
5.Costs to accelerate Project completion after construction has
commenced if such acceleration is requested by Tesla for Tesla’s
convenience, including labor overtime costs and additional Project overhead
costs, e.g., additional inspection costs related to the accelerated construction
schedule.
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In addition, Tesla will reimburse the City for 50% of the premium paid by the City for
course of construction or builder’s risk coverage pursuant to Section 9.3 (“COC
Reimbursement”). The COC Reimbursement will be deducted from the City
Reimbursement at the time of payment of the City Reimbursement pursuant to
Section 5.3.
B.City Costs. The City will reimburse Tesla for 100% of the costs
associated with the installation of substructure (conduit, vaults, pads, etc.) which are
required solely for City Improvements outside of the Substation.
C.Shared Costs. Subject to a cumulative total cap of on the City’s
payment obligations under this Agreement as set forth in Exhibit C, in addition to the
substructure costs in Section 5.2(B), the City will reimburse Tesla for 50% of the costs
for the following, except for costs which are solely Tesla’s responsibility, as stated in
Section 5.1.A, above, or elsewhere in this Agreement (collectively, the “City
Reimbursement”):
1.Grading and structural site improvements necessary for the new
Substation improvements;
2.Design and installation of the two 50 MVA transformers, three
60 kV circuit breakers, a power distribution center, and related bus switches,
buswork, wiring and feeder outlets;
3.Purchase, installation, and connection of two 60 kV transformer
bank circuit breakers;
4.
breaker;
Purchase, installation, and connection of a 60 kV bus tie
5.Purchase, installation and connection of two 50 MVA, 60 to 12
kV transformers;
6.Purchase, installation and connection of a 12 kV distribution
load center; and
7.
8.
Testing and commissioning of all equipment and components,
the COC Reimbursement.
minus
D.Change Order Costs. Each Party will be responsible for additional
costs due to any approved additive change order, which is approved and issued in
accordance with the change order approval terms in Section 8.7, below, consistent
with the cost allocation provisions set forth in subsections A-C, inclusive, above;
except that if (i) costs for a betterment change is sought by only one Party after the
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Construction Documents have been approved, or (ii) additional costs are incurred
under the Construction Contract which are the responsibility of that Party as specified
in this Agreement, that Party will be solely responsible for the added costs of such
corresponding change order. Likewise, if the cost of the Construction Contract is
reduced due to a deductive change order, which is approved and issued in
accordance with the change order approval terms in Section 8.7 below, the City
reimbursement obligations will be adjusted consistent with the cost allocation
provisions set forth in subsections A-C, inclusive, above.
5.3 City Reimbursement. The Parties will update Exhibit C (Project Budget) to
include the Construction Cost for the Project after Tesla has selected the General Contractor
to construct the Project, and subject to mutual agreement will update the cap on the City
Reimbursement. The City Reimbursement will be paid to Tesla within 60 days following City’s
acceptance of the Project as specified in Section 8, with the exception of an amount equal to
50% of the amount retained by Tesla under the Construction Contract pending the
achievement of “Final Completion” under and as defined in the Construction Contract (the
“Retention”), which may be retained by the City until 30 days after all of the following have
occurred: (i) final as-built and record drawings have been submitted pursuant to Section 8.11,
(ii) final versions of equipment maintenance and operating manuals have been submitted
pursuant to Section 8.12.A.3, (iii) all punch list items have been completed in accordance with
the requirements of the Construction Contract pursuant to Section 8.12.A.5, (iv) the
Contractor certification is received in accordance with Section 8.12.A.6, and (v) Site
clearance and restoration is completed in accordance with Section 8.12.A.7.
5.4 Modification for Lack of Funds. The City Reimbursement is subject to the
fiscal provisions of the Charter of the City of Palo Alto and the PAMC, including PAMC
Section 2.30.260, pertaining to contracts with terms exceeding one year. If the amount
appropriated for the City Reimbursement at the time this Agreement is approved by the City
Council, the Agreement will be modified to exclude or reduce the City Reimbursement only
under the following circumstances: at the end of any fiscal year, if any additional funds are
needed for the City Reimbursement due to unforeseen cost increases, but those additional
funds are not appropriated for the following fiscal year; or at any time within a fiscal year if
funds are only appropriated for a portion of the fiscal year and funds for the City
Reimbursement are no longer available. Notwithstanding the foregoing, if additional funds
needed for the City Reimbursement obligation are not timely appropriated, the Parties will
meet and confer regarding potential adjustments to the Capacity Usage Credit under and as
defined in the Capacity Reservation Agreement to offset any shortfall caused thereby. This
provision will take precedence in the event of a conflict with any other covenant, term or
condition of this Agreement.
6.DESIGN DEVELOPMENT.
6.1 Responsibility. Tesla is responsible for creating the Design Development
Documents, including the final Construction Documents for construction of the Project,
consistent with the Project description in this Agreement, including Exhibit A. The final
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Construction Documents are subject to City approval to ensure compliance with the
standards set forth in this Section 6.
6.2 Design Professional. All Design Development Documents for the Project will
be signed by a qualified, registered, professional engineer, licensed in California, and with
relevant substation design experience. City has the right to approve any other third-party
engineer or engineering firm retained under contract with Tesla to serve as Engineer for the
Project, including design development before construction and design consultation during
construction. Tesla will work with and direct its Engineer, in consultation with City staff, to
develop the Design Development Documents in order to complete the Project within the limits
of the Project Budget, as set forth in Exhibit C.
A.Approved Engineer. The City hereby approves of Power Engineers,
Inc., as the Engineer for the Project. If, for any reason, Tesla wish to substitute a
different firm to serve as Engineer for the Project, the substitution will be subject to the
City’s prior written approval of the proposed firm. Tesla will require the Engineer to
provide and maintain insurance coverage, including professional liability insurance,
that meets the City’s standard requirements for design professional insurance as
further specified in Section 9, below.
6.3 Compliance. The Project will be designed and constructed in compliance with
Laws, and in compliance with the most current version of the City Public Works Department’s
Standard Drawings and Specifications; the City Utility Department’s Water, Gas, Wastewater,
and Electric Utilities Standards, including City standard substation design layouts; current
California General Safety Orders; and the current applicable National Electric Safety Code.
6.4 Design Development. The City will review and approve all Design
Development Documents for conformance with City specifications and standards, including
compliance with City-approved equipment specifications provided to Tesla for procurement of
equipment to be incorporated into the Project. Tesla will seek the City’s approval of the final
Design Development Documents, coordinating submittals and responses with the City
Representative. The City’s Representative will promptly coordinate the City’s internal review
of the Design Development Documents among all of the City departments that will have
responsibilities pertaining to the operation or maintenance of the Substation. The City may
provide written comments and directions to Tesla and its Engineer to apply to design
development. The Engineer will consider the City’s comments and directions and if applicable
will provide an updated estimate of the construction cost for the revised design for the
Project. The Design Development Documents will include contractor submittal requirements
for submittals that will be subject to City approval during the Construction Period, comparable
to those submittal requirements required by the City’s current standards and specifications,
including shop drawings, purchase submittals, e.g., cut sheets, and the like, to ensure that
the Project and its components, including, but not limited to the components listed in Exhibit A
(Project Description) conform to the City-approved design for the Project. The process for
review and approval of the Design Development Documents is as follows:
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A.Design Development Documents Review.
1.The final Design Development Documents will be submitted to
CPAU for City review and comment.
2.The City may either approve the Design Development
Documents or may provide comments for further revisions necessary for the
City’s approval, in which case Tesla will resubmit the Design Development
Documents with revisions as directed by the City’s comments.
3.The City’s Representative will promptly notify the Tesla
Representative in writing once the City has approved the Design Development
Documents.
B.Cooperation. The City will provide reasonable staff support and other
assistance to Tesla without charge, upon reasonable request, in connection with
review and development of the Design Development Documents and submittal
reviews, including cost estimate updates. City staff support may include program
expertise, design suggestions or recommendations, and information, including
information on City standards and City requirements and procedures.
C.Materials and Equipment Procurement. All material and equipment to
be incorporated into the Substation as part of the Project are to be approved as part of
the City approval of the Design Development Documents. Any subsequent changes to
the materials and equipment shall require approval by the City prior to installation. The
following items are subject to prior factory inspection and approval by the City as a
condition precedent to delivery to the Site:
1.
2.
The transformers; and
The power distribution center.
D.Errors and Omissions. Notwithstanding the City’s assistance or the
City’s approvals of the Design Development Documents in accordance with this
Agreement, the City will not be liable in any way for the Engineer’s errors and
omissions, nor any costs arising to correct such errors and omissions.
6.5 Budget Update. Subject to mutual agreement, the Parties may elect to
update the Project Budget set forth in Exhibit C, including the estimated cost to construct the
Project, upon conclusion of the design development process set forth in this Section 6.
7.CONDITIONS FOR COMMENCEMENT OF PROJECT CONSTRUCTION
7.1 Conditions Precedent to Construction. Tesla will not permit construction to
begin on the Project, and will not be obligated to commence construction of the Project, until
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all of the conditions precedent to construction set forth in this Section 7 have been satisfied or
waived.
A.Notification. Tesla’s Representative will notify the City Representative
in writing when all of the conditions precedent to construction set forth in this Section
have been satisfied or waived. Within 14 days thereafter, the City Representative will
either (1) confirm that all of the conditions have been satisfied or waived, or (2)
identify which conditions have not yet been satisfied or waived.
B.Commencement. Tesla will cause construction to commence on the
Project within 90 days following notification from the City Representative that all
conditions precedent to Construction have been satisfied or waived. The Parties may
mutually agree to extend this time if necessary due to provisions outside the control of
the Parties, including adverse weather or site conditions or a Force Majeure Event.
C.Deadline. If all of the conditions precedent to commencement of
construction set forth in this Section 7 are not satisfied or waived by the
commencement deadline in 7.1.B, unless the Parties mutually agree to extend the
deadline for satisfying any such outstanding condition, this Agreement will terminate
without further liability to either Party and neither Party shall have any further rights or
obligations under this Agreement.
7.2 Design Development Documents. Approval of the final Design Development
Documents by each Party is a condition precedent to the commencement of Project
construction.
7.3 Permits and Authorizations. As a condition precedent to commencement of
construction, Tesla will provide written proof to the City that all necessary permits and
approvals from any and all agencies having jurisdiction over the Project, including the City,
have been authorized, including, as applicable, building permits, street opening permits,
encroachment permit, utility encroachment permits, and health permits. Subject to
compliance by Tesla with applicable permitting requirements, the City will provide reasonable
support to Tesla in connection with the timely granting of any permits or approvals necessary
for the Project and which are issued by the City or any of its agencies or departments.
7.4 Construction Contract. As a condition precedent to commencement of
construction, Tesla will provide written proof to the City that Tesla has entered into the
Construction Contract with a General Contractor that is reasonably acceptable to the City,
based on the form of agreement attached as Exhibit I, Construction Contract Form, as
meeting the requirements in this Section 7.4, and that the General Contractor has submitted
all bonds and proof of insurance required by the Construction Contract as specified below.
A.General Contractor. Tesla’s selection of any replacement General
Contractor shall be subject to prior approval by the City, which shall not unreasonably
delayed or withheld provided the proposed contractor (1) possesses the requisite
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California contractor’s license(s), and (2) is a “responsible bidder” as that term is
defined PAMC section 2.30.440(c).
B.Construction Contract. The Construction Contract between Tesla and
its General Contractor will include the following:
1.General Compliance. The Construction Contract will require
that General Contractor and its subcontractors will not take any action or fail to
take any action which would cause Tesla to be in default under this Agreement
or the Encroachment Permit, including, but not limited to, compliance with
requirements pertaining to Site security.
2.Compliance with Construction Documents. The Construction
Contract will require the General Contractor to construct the Project as
specified in the approved Construction Documents, which must be attached or
incorporated therein, and in accordance with all applicable permits and
authorizations. The Construction Contract must also include a traffic
management plan, consistent with the City’s current traffic control
requirements, that has been approved by the City.
3.Payment and Performance Bonds. The Construction Contract
will require the General Contractor to submit a payment and a performance
bond prior to commencement of construction and to remain in effect
throughout the Construction Period, each for 100% of the Construction Cost,
using bond forms provided or approved by the City and in compliance with
Laws, including Civil Code section 9550 and PAMC section 2.30.500.
4.Insurance. The Construction Contract will require the General
Contractor to maintain insurance coverage throughout the Construction Period
as specified in Section 9, below.
5.As-Built Drawings. The Construction Contract will require the
General Contractor to prepare and maintain as-built drawings showing any
changes from or details not shown in the Construction Documents, suitable for
preparation of record drawings.
6.Legal Compliance. The Construction Contract will require the
General Contractor and its subcontractors to construct the Project in
compliance with applicable Laws, including prevailing wage and Labor Code
requirements and any conditions of approval required to be obtained from any
Governmental Authority, to the extent any such Laws or conditions of approval
are applicable to the General Contractor’s performance under the Construction
Contract.
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7.Warranty. The Construction Contract will require a one-year
warranty guaranteeing the work performed by the General Contractor and its
subcontractors, consistent with the City’s requirements in its standard
specifications, with the warranty period commencing on the Project
Acceptance Date.
7.5 Condition Related to Project Costs. As a condition precedent to
commencement of Project construction, the Parties will further revise the Project Budget, if
needed, based on the cost of the Construction Contract, and subject to mutual agreement of
the Parties.
7.6 Capacity Reservation Agreement. As a condition precedent to
commencement of Project construction, the Parties will execute the Capacity Reservation
Agreement based substantially on the form attached as Exhibit D (Capacity Reservation
Agreement).
8.PROJECT CONSTRUCTION
8.1 Responsibility. Tesla will be responsible for construction of the Project and
for directing its General Contractor to complete the Project within the Project Schedule, as set
forth below.
8.2 Project Schedule. The Project will be completed within three years following
commencement of construction (provided that such period shall be extended to account for
any Force Majeure Event delaying completion of the Project, and/or any additional time
granted pursuant to a change order under the Construction Contract which has been
approved or deemed approved by the City). Unless the time for completion is extended by
mutual agreement of the Parties. The Parties’ planned schedule for design and construction
of the Project is set forth in the Project Schedule, attached as Exhibit E (Project Schedule)
hereto. The Project Schedule will be refined by Tesla to reflect the as-planned construction
schedule, within ten days following issuance of the building permit(s). Each Party will exercise
its reasonable efforts to perform its respective obligations in a reasonably timely manner to
complete the Project within the time set forth in the Project Schedule. Notwithstanding the
foregoing, the Project Schedule may be amended at any time based on mutual agreement of
the Parties.
8.3 General Standards. Construction of the Project will be executed so as to
materially conform to the requirements of the approved Construction Documents, including
the workmanship standards contained therein. The General Contractor and its subcontractors
must be licensed in good standing as required by the State of California before performing
any work on the Project.
A.Inspection. The Project will be subject to inspection during the
Construction Period in the same manner as any substation improvement project
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constructed under the City’s jurisdiction in the City’s role as a Governmental Authority
responsible for compliance with applicable permit(s) and Laws. No construction may
be performed at the Site without a City inspector onsite. The City shall be liable for
reasonable, documented costs incurred under the Construction Documents in respect
of delays in the performance by Tesla or the General Contractor which is caused by
the failure by or delay in such City inspector(s) to attend construction activities at the
Site, when required during normal hours for Project construction and following
reasonable notice for work to be performed outside of those hours, with the exception
of failure or delay due to a Force Majeure Event for which relief is granted under the
Construction Documents. At all times during the Construction Period, one or more City
inspectors may be onsite to monitor and review construction of the Project to ensure
compliance with the Construction Documents, the building permit, and applicable
Laws. City inspection services will be scheduled based on the Project Schedule and
approved working hours for the Project.
B.Special Inspections. Tesla will notify the City Representative in
advance of any special inspection needs so that the City has the opportunity to have a
qualified inspector available on a timely basis.
C.Submittals and Substitutions. The City reserves the right to review and
approve any submittal or substitution request relating to the Project components listed
in Exhibit A (Project Description).
D.Remedies. Subject to Section 8.7, the City will not bear the cost for
unapproved deviations from the approved Construction Documents that negatively
impact the City’s future operation of or the future capacity of the Substation.
Remedies for installation of Substation Improvements that do not comply with the
approved Construction Documents may include one or more of the following, at the
City’s election:
1.Removal and reinstallation of the deviating or defectively
installed component;
2.Modifications to mitigate the deviation from the Construction
Documents; or
3.Adjustment to the City Reimbursement obligation
commensurate with the City’s estimated cost to remedy the deviation, negative
impacts on the City’s future operational costs, or negative impacts on the
Substation capacity.
8.4 Project Commencement. The General Contractor will be required to
commence construction of the Project in accordance with the Construction Documents within
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90 days after the City has confirmed, pursuant to Section 7.1, that all of the conditions
precedent to construction of the Project have been satisfied or waived.
8.5 Construction Meetings.
A. Pre-Construction Conference. The Parties will schedule a pre-
construction conference to take place before any work begins on the Site the General
Contractor’s designated project manager and superintendent(s); the Engineer; the
designated inspector(s); and any other individuals whom the Parties mutually agree
should be in attendance. The pre-construction conference will address relevant
Project objectives and constraints, including communication protocols to ensure
efficient and effective communications throughout the construction process; safety
requirements; environmental considerations; scheduling; submittals; change order
procedures; substitution procedures; the City-approved traffic control plan; noise
management; City’s Site security requirements; parking; and compliance with the
Encroachment Permit, including area designations established pursuant to Section
4.3.
B.Weekly Meetings. In addition, Tesla will schedule weekly meetings for
the duration of the Construction Period, which will be attended by the General
Contractor, the Engineer, and other individuals whose participation is important to
help ensure efficient construction of the Project consistent with the Construction
Documents, the Encroachment Permit, and the terms of this Agreement. The City
Representative and City officials with direct responsibility for the Project have the
right, but not the obligation, to attend these weekly meetings.
C.Agendas and Minutes. Tesla will be responsible for preparing and
distributing agendas and minutes for the pre-construction conference and the weekly
meeting to all meeting participants with copies to the City Representative.
8.6 Prevailing Wages. Work on the Project will constitute a “public works” project
as defined under Labor Code section 1720 set seq.
A.Prevailing Wage Requirements. All contractors and subcontractors
performing work on the Project are required to pay general prevailing wages as
defined in Subchapter 3, Title 8 of the California Code of Regulations and Section
16000 et seq. and Labor Code Section 1773.1. Before entering into the Construction
Contract to perform work on the Project and at all times while performing work on the
Project, the General Contractor and its subcontractors must be registered with the
California Department of Industrial Relations (“DIR”) to perform public work under
Labor Code Section 1725.5. Pursuant to Labor Code Section 1773, the general
prevailing rate of per diem wages and the general rate for holiday and overtime work
in this locality for each craft, classification, or type of worker needed to perform the
work may be obtained at the Purchasing Office of the City of Palo Alto. All contractors
and subcontractors for the Project must comply with the provisions of Labor Code
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Sections 1775, 1776, 1777.5, 1810, and 1813. The General Contractor must also
comply with the provisions of Labor Code sections 1776 and 1812 and all
implementing regulations, which are fully incorporated by this reference, including
requirements for electronic submission of payroll records. The Construction Contract
will be subject to compliance monitoring and enforcement by the DIR, pursuant to
Labor Code section 1771.4.
B.Construction Contract. The Construction Contract must include the
prevailing wage requirements set forth above, or as otherwise required by Labor Code
provisions currently in effect when the Construction Contract is executed.
8.7 Change Orders. Any proposed changes to the City-approved Construction
Documents are subject to prior mutual agreement between the Parties, except as set forth
herein. Any change orders proposed by the City will be subject to prior approval by Tesla and
subject to the City’s commitment to pay for any increased cost resulting from its proposed
change order. Tesla may authorize change orders to the Construction Contract without prior
approval from the City, except under any of the following circumstances, each of which
requires prior written approval by the City Representative:
A.Cost Impact. The City’s share of the additional cost for a proposed
change or its share of the costs for cumulative changes would increase the total of the
City Reimbursement obligations by more than $50,000.00.
B Scope Alteration. The proposed change would materially alter the
Project scope or purposes of this Agreement, including, but not limited to adverse
impacts on normal operations and use of the Substation, including the City’s planned
expansion of the Substation capacity.
C.Adverse Impacts. The proposed change would significantly reduce the
quality, functionality, or life-expectancy of the improvements or constituent
components.
D.Maintenance Impacts. The proposed change would materially increase
the City’s costs to operate, repair, or maintain the improvements or constituent
components of the Substation.
E.Conflict. The proposed change would conflict with or be inconsistent
with the provisions or objectives of this Agreement.
F.Governmental Approval. The proposed change would require new or
amended approval by a Governmental Authority, including amendments to any
permit(s).
Provided that in no event shall the City have approval rights for change orders providing time
or cost relief to the General Contractor in accordance with the Construction Documents
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where the General Contractor has an entitlement to relief (and Tesla does not have discretion
in terms of relief awarded) for (i) Force Majeure Events or changes in Laws after the effective
date of the Construction Contract, or (ii) delays to performance under the Construction
Documents which are not caused by the General Contractor or its subcontractors. Tesla shall
keep the City informed as to the relief determinations respect of such change orders, and
shall consult the City and use its reasonable efforts to minimize the relief granted to the
General Contractor in respect of item (ii) above.
8.8 Site Maintenance. During the Construction Period, Tesla and Tesla’s Agents,
at their sole cost, will maintain the Site and the Project in a commercially reasonable, clean
and safe manner and in compliance with the Agreement, the Encroachment Permit and Laws.
Tesla or Tesla’s Agents will provide approved containers for trash and garbage generated at
the Site and arrange for their disposal. The City reserves the right, to enter and inspect the
Site for compliance with this maintenance requirement and applicable safety requirements.
Tesla’s Site maintenance obligations will terminate upon City’s acceptance of the Project.
8.9 Utility Service. Tesla will be responsible for timely payment of all utility
services required for the Project during the Construction Period, pursuant to applicable City
and utility provider requirements, including electric, water, wastewater and garbage services,
and fiber, and timely payment of all applicable utility connection charges, required to perform
and complete the Project.
8.10 [Not Used]
8.11 Record Drawings. Upon completion of the Project, the Engineer will prepare
the record drawings based on the General Contractor’s as-built drawings and provide the City
Representative with a complete set of electronic AutoCAD drawings of the Design
Documents, and one PDF of a red-lined set (i.e., not electronic AutoCAD drawings) reflecting
the actual construction of the Project based on the Contractor’s as-built drawings. Submission
of provisional copies of such complete and accurate record drawings and the as-built
drawings is a condition precedent to City acceptance of the Project, with final versions of
such record drawings and as-builts to be submitted within ninety (90) days of acceptance.
8.12 Completion and Acceptance. Tesla will use reasonable efforts to achieve
completion of the Project within three (3) years of the commencement of construction
(provided that such period shall be extended to account for any Force Majeure Event
delaying completion of the Project, and/or any additional time granted pursuant to a change
order under the Construction Contract which has been approved or deemed approved by the
City).
A.Conditions for Acceptance. Once the Project has been completed in
accordance with the Construction Documents, the Construction Contract, and the
terms of this Agreement, the City will accept the Project as complete in accordance
with standard City procedure, and will notify the Tesla of acceptance of the Project,
subject to Tesla’s satisfaction of each of the following conditions 1 to 4 below for City
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acceptance (except to the extent that one or more of these conditions precedent to
acceptance is expressly waived by the City, in whole or in part):
1.Project Completion. Substantial Completion of the Project is
achieved pursuant to the Construction Documents and approved change
orders.
2.As-Built and Record Drawings. City receipt of provisional as-
builts and the record drawings pursuant to Section 8.11.
3.Manuals. City receipt of provisional equipment maintenance
and operating manuals for the Substation Improvements.
4.Inspection. The City Representative has been provided with
written confirmation that the Project has passed inspection for permit and code
compliance.
5.Punch List Completion. Completion of all punch list items in
accordance with the requirements of the Construction Contract, unless the City
agrees to accept the Project subject to exceptions for any specified incomplete
punch list item.
6.Contractor Certification. City receipt of the General Contractor’s
signed certification that all subcontractors and suppliers have been paid and
that there are no pending claims (including stop payment noticed or payment
bond claims) against the General Contractor in relation to the Project.
7.Site Restoration. Tesla has caused all trash and garbage to be
removed from the Site and those portions of the Site that have not been
modified in connection with the Substation Improvements in accordance with
the requirements of the Construction Documents have been restored to their
pre-construction condition.
8.Warranty. Tesla has caused warranty rights and guarantees to
be assigned (by direct or collateral assignment) or otherwise transferred to the
City in accordance with Section 8.13.
For the avoidance of doubt, Tesla shall be obligated to complete all of the
conditions 1-8 above, with conditions 4 to 8 to be completed (and the final as-built
drawings and operation and maintenance manuals delivered to the City) as soon as
reasonably possible following acceptance by the City.
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B.Notice of Completion. Following acceptance, the City will record a
notice of completion pursuant to Civil Code section 9204, within 15 days following the
City’s acceptance of the Project.
8.13 Transfer Following Acceptance. Tesla covenants that the Project will
transfer to the City free and clear of all liens, claims (including stop payment or payment bond
claims), or liability for labor or materials upon acceptance of the Project by the City on the
Project Acceptance Date, so that the City is the sole owner of all of the Substation
Improvements. Subject to payment in full by the City of its reimbursement obligations under
Section 5 of this Agreement, Tesla will execute a deed or other document reasonably
acceptable to the City quitclaiming any and all right, title and interest in and to the Substation
Improvements installed pursuant to the Project, effective as of the Project Acceptance Date.
Tesla will assign any remaining third-party warranties and workmanship guarantees in the
Construction Contract, including the General Contractor’s minimum warranty therein, to the
City effective as of the Project Acceptance Date. If City terminates this Agreement for Tesla’s
default, Tesla will assign to City all third-party product warranties applicable to materials and
equipment installed prior to termination, in each case to the extent such warranties are
capable of being assigned.
8.14 Operation and Maintenance of the Substation Improvements. Following
the Project Acceptance Date, the City shall be responsible for the maintenance and operation
of the Substation Improvements and all other equipment located within the Leased Premises
and all other cables and connections up to the point of service to Tesla. The City will bear all
risk of loss associated with the Substation (including the Site) and Substation Improvements
up to the Point of Delivery to Tesla (as defined in Rule and Regulation 2 of the CPAU Rules
and Regulations) from and after the Project Acceptance Date.
8.15 Capacity Reservation Agreement. The Capacity Reservation Agreement will
become effective in accordance with its terms.
9.INSURANCE.
9.1 Coverage Requirements.
A. Tesla will insure its obligations under this Agreement as specified in
Exhibit F, Insurance Requirements (Tesla), either by (i) maintaining in effect with
responsible insurance carriers with a Best Insurance Reports rating of “A-“ or better or
(ii) through a formal self-insurance mechanism that has both: (a) a Best Insurance
Reports rating of “A-“ or better; or (b) a financial size category of “VI” or
higher; provided, that if such self-insurance program does not meet (a) and (b), then
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the Party’s use of self-insurance for the coverages herein shall be subject to the City’s
approval, not to be unreasonably withheld, conditioned, or delayed.
B.Tesla must require its Engineer to obtain and maintain during the Term
the insurance coverage described in Exhibit G, Insurance Requirements
(Engineer).
C.Tesla must require the General Contractor to obtain prior to beginning
and to maintain throughout construction of the Project, up to the date of Project
acceptance, the insurance coverage described in Exhibit H, Insurance
Requirements (General Contractor).
9.2 General Requirements. The insurance must remain in full force and effect
during the Term, commencing on the Effective Date, except as otherwise specified for the
General Contractor in Section 9.1, above.
9.3 COC Policy. City may obtain course of construction or builder’s risk coverage
("COC Insurance") for the Construction Period, covering the Site and the Project pursuant to
this Section 9.3 and the terms of Section 5.3. The terms of such COC Insurance shall be
subject to the reasonable advance approval of Tesla. Tesla and the General Contractor shall
be named additional loss payees under the COC Insurance. The City will provide Tesla with a
copy of the COC Insurance, together with a copy of the paid premium invoice, promptly
following issuance of the policy. For any insured loss covered by the COC Insurance, the
deductibles shall be borne equally by the Parties.
10.INDEMNITY; LIMITATIONS ON LIABILITY.
10.1 Indemnity. To the fullest extent permitted by law, Tesla will protect, defend,
indemnify and hold harmless the City, its elected and appointed officials, officers, employees,
City Agents and representatives, from any and all Claims for death of or injury to persons,
property damage or any other loss, to the extent caused by or arising out of the negligent acts
or omissions, or willful misconduct, of Tesla, Tesla’s Agents (individually or collectively), its
employees, officers, agents, engineers, contractors or design professionals, in the
performance of or failure to perform Tesla’s obligations under this Agreement.
10.2 Indemnification Procedures.
A.Notice. The City will give the Tesla prompt notice of any Claim for
which indemnification is sought under this Section 10. Failure to give prompt notice
will not diminish the Tesla’s obligations under this Section 10 to the extent such failure
does not materially prejudice the Tesla’s ability to defend the Claim.
B.Defense. Tesla shall control the defense of the Claim, and the City may
participate in the defense at its own expense with legal representation of its choice. If
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the Claim is one that cannot by its nature be defended solely by Tesla, then the City
will make available information and assistance as Tesla may reasonably request, at
Tesla’s expense.
C.Consent. Tesla may not, without the prior written consent of the City,
consent to the entry of any judgment or enter into any settlement:
1.that provides for injunctive or other non-monetary relief affecting
the City; and
2.unless such judgment or settlement provides for an
unconditional and full release of the City and does not diminish any rights of
the City under this Agreement or result in additional fees or charges to the
City.
D.Remedies. If Tesla fails to take reasonable steps to defend the City
against a Claim in accordance with this Agreement within a reasonable time after
receipt of a request for indemnification, the City may undertake the defense of such
Claim without waiving its rights and remedies under this Agreement.
E.Limitation. Notwithstanding anything to the contrary, in no event will
Tesla be obligated to the City, except on a proportionate basis, to the extent a Claim
arises out of or is due to the negligence or willful misconduct of the City, the City’s
Agents, or its employees, officers, agents, inspectors, engineers or contractors.
10.3 Waiver of Certain Damages. In no event shall either Party be liable to the
other Party for any consequential, indirect, incidental, special, exemplary or punitive damages
(including without limitation damages incurred by a financing) arising out of or relating to any
breach of this Agreement, whether or not the possibility of such damages has been disclosed
in advance or could have been reasonably foreseen and regardless of the legal or equitable
theory (contract, tort or otherwise) upon which the Claim is based.
10.4 No Individual Liability. The City acknowledges and agrees that the liability of
Tesla under this Agreement is limited to the assets of Tesla, and no officer, director,
employee, agent or contractor of Tesla or other individual affiliated with Tesla will be
responsible or liable for the obligations of Tesla under this Agreement.
11.ASSIGNMENT.
11.1 No Assignment Without Consent. Except as set forth in Section 11.2,
neither Party will assign, transfer, encumber or convey this Agreement without the express
written approval of the other Party, which such Party may give or withhold in its sole
discretion, and any such assignment, transfer or conveyance without the approval of the
other Party will be void and, in such event at the other Party’s option, this Agreement may be
terminated upon thirty (30) days’ prior written notice to Party making such assignment,
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transfer or conveyance in breach of this provision. All of the terms and conditions of this
Agreement will be binding on the assignee or transferee, its assigns, transferees, and
successors in interest.
11.2 Collateral Assignment. Tesla may with prior written notice to the City, and
with the City’s prior written consent, collaterally assign this Agreement as security to, or as
part of any factoring arrangement with, any financing party, provided that financing party
agrees, in an enforceable written instrument, to be fully bound by Tesla’s legal obligations
under the terms of this Agreement, but no assignment of this Agreement under this Section
11.2 will release Tesla from its obligations and liabilities under this Agreement. A permitted
assignee under this Section 11.2 will be bound by the obligations of this Agreement upon a
foreclosure and upon the City’s request will deliver a written assumption of assignor’s rights
and obligations under this Agreement to the City. Any written instrument used to effectuate
the terms of this Section 11.2 is subject to prior approval by City, which approval will not be
unreasonably withheld or delayed, with respect to conforming with the terms herein.
12.FORCE MAJEURE. A Party will be temporarily excused from the performance or
further performance of any of its covenants or agreements or any terms or conditions that it is
obligated to fulfill hereunder, and such Party’s nonperformance will not be deemed an event
of default under this Agreement for any period, to the extent that such Party is reasonably
unavoidably prevented, hindered or delayed for any period of time from performing any of its
covenants or agreements, in whole or in part, or any term or condition it is required to perform
or satisfy, as a result of a Force Majeure Event. The Parties agree to use reasonable efforts
to avoid and mitigate the effects caused by the occurrence of the relevant Force Majeure
Event.
12.1 Definition. “Force Majeure Event” means any act or circumstance beyond
the reasonable control and not attributable to the fault or negligence of the Party seeking
relief, including acts of God, epidemic, pandemic, flood, fire, earthquake, climatic conditions
at the Site that are unusual for the time of year, explosion, action or inaction of a public
authority (including delays caused by permitting authorities) for reasons other than the
claiming Party’s fault, war, terrorist threats or acts or other civil unrest, piracy, lock-outs,
strikes or other labor disputes, restraints or delays affecting carriers, and shall include the
inability or delay in obtaining supplies of adequate or suitable materials to the extent caused
by a Force Majeure Event. Force Majeure Events include any emergencies declarations by
any Governmental Authority requiring shutdown or forced curtailment of the Project or the
Substation, or imposing delays or other impacts on a Party’s performance (including those
arising from shut-in, social distancing or other orders by Governmental Authorities, delays or
non-availability of labor or materials, enhanced safety or monitoring requirements, or due to
any epidemic or pandemic). However, financial cost alone or as the principal factor shall not
constitute grounds for a claim of force majeure.
12.2 Notice. A Party will provide written notice promptly to the other Party to the
extent that Party relies on the provisions of this Section to temporarily excuse its failure to
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perform any of its covenants or agreements or any duties under this Agreement due to a
Force Majeure Event.
12.3 Damage to Project.
A.Responsibility for Damage. Tesla will be responsible for any damage
to the Site or the Substation Improvements (other than damage expressly
contemplated in the performance of the work under the Construction Contract) that
arises due to acts or omissions of Tesla, Tesla’s Agents or the General Contractor
during the Construction Period. Except as expressly set forth in this Agreement,
including, but not limited to, the indemnity and insurance requirements set forth
herein, the City will be responsible for any other loss or damage to the Site or the
Substation Improvements that is not covered by the insurance required under this
Agreement.
B.Damage Prior to Acceptance. If any part of the Project is damaged by
fire, other peril, or any other cause, before the Project has been accepted by the City,
Tesla will promptly direct its General Contractor to take appropriate measures to
secure the Site to avoid further damage or unsafe conditions. Tesla will make
reasonable efforts to complete the Project on schedule, if reasonably possible
depending on the scope and nature of the damage. Construction of the Project will be
suspended, in whole or in part, only to the extent necessary to ensure worker and
public safety or to limit the cost to repair and complete the Project.
C.Insurance Claim. Tesla may, at its sole option prepare and submit a
claim to its insurer(s) or rely on self-insurance, if applicable, for funds to repair and
rebuild all insured loss pursuant to the applicable insurance coverage required under
Section 9 and exhibits thereto. Both Parties will cooperate to expedite recovery of
insurance proceeds for which Tesla elects to make submit a claim to cover the
insured loss.
13.PROJECT RECORDS.
13.1 Maintenance of Project Records. Tesla will maintain or caused to be
maintained by its Engineer, General Contractor and subcontractors, if any, in accordance with
their respective standard practices books and records relating directly to design and
construction of the Project (excluding for the avoidance of doubt any documents which are
subject to confidentiality obligations to third parties, which are subject to attorney-client
privilege or which constitute privileged work product) until the earlier of three (3) years from
the Project Acceptance Date or any earlier termination of this Agreement. Tesla will retain
such books and records at accessible locations during the record retention period.
13.2 Inspection of Records. The City may inspect and copy such books and
records upon thirty (30) days’ prior written notice from the City at any reasonable time during
the above-referenced record retention period.
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13.3 Survival. This Section will survive the termination of this Agreement.
14.DEFAULT.
14.1 Choice of Remedies.
A.Remedies for Tesla Default. Except as otherwise provided under this
Agreement and subject to the dispute resolution provisions of Section 16, if Tesla
defaults in the performance of any covenant, term or condition contained in this
Agreement and such default is not corrected within 30 days of receipt of a written
notice of default from the City, the City may elect to enforce any of the following rights
and remedies:
1.In the case of a material default, such as abandonment of the
work; uncorrected or repeated material violation of any Laws; or refusal or
repeated, unexcused failure to construct the Project in material conformance
with the requirements of the Construction Documents, City may elect to
terminate this Agreement upon 30 days prior notice to Tesla.
2.The City may cure any default of Tesla by performance of any
act, including payment of money, and the cost and expense thereof, plus all
reasonable administrative costs actually incurred by the City in so curing, will
become immediately due and payable by Tesla to the City.
3.The City may initiate an action or suit in law or equity to enjoin
any acts which may be unlawful or in violation of the rights of the City
hereunder.
4.The City may pursue any other right or remedy as may be
provided at law or in this Agreement.
B.Remedies for City Default. Except as otherwise provided under this
Agreement and subject to the dispute resolution provisions of Section 16, if the City
defaults in the performance of any covenant, term or condition contained in this
Agreement and such default is not corrected within 30 days of receipt of a written
notice of default from Tesla, Tesla may elect to enforce any of the following rights and
remedies:
1.In the case of a material default, Tesla may elect to terminate
this Agreement upon 30 days prior notice to the City.
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2.Subject to the provisions of Section 16.3, Tesla may initiate an
action or suit in law or equity to enjoin any acts which may be unlawful or in
violation of the rights of Tesla hereunder.
3.Subject to the provisions of Section 16.3, Tesla may pursue any
other right or remedy as may be provided at law or in this Agreement.
C.Wrongful Stoppage or Suspension of Project. If either Party wrongfully
stops or suspends work on the Project, other than as authorized herein or pursuant to
the lawful exercise of the City’s police powers; actions necessary to operate, maintain,
or repair the Substation; or to comply with Laws, that Party will be responsible for all
additional costs, reasonably incurred by the other Party to complete the Project as a
result of such wrongful stoppage or suspension, provided the Party claiming
entitlement to additional costs transmitted a timely notice objecting to the stoppage or
suspension, and stating the grounds for such objections, and provided the Parties
engage in the dispute resolution procedures in Section 16. As used in this paragraph,
“wrongful” and “wrongfully” refer to actions that constitute a material breach of this
Agreement but exclude City’s reasonable exercise of its police powers in accordance
with Laws; actions necessary to operate, maintain, or repair the Substation; or to
comply with Laws.
D.Additional Time for Cure. Except as otherwise provided in this
Agreement, in the event of any material default by either Party that is not cured within
30 days of written notice of default from the aggrieved Party, or such additional period
of time as is reasonably necessary to cure the default, not to exceed 60 additional
days, the aggrieved Party may pursue any rights or remedies provided by law or
equity to enforce the Agreement, subject to prior compliance with the dispute
resolution procedures in Section 16.
14.2 Termination.
A.Failure to Timely Commence the Project. If Tesla fails to cause
construction on the Project to commence within 90 days after City’s notification
pursuant to Section 7.1 that all conditions precedent to construction have been met or
waived, City may terminate this Agreement. If the Agreement is terminated pursuant
to this paragraph, each Party will bear its own loss with respect to expenditures it has
incurred for design and construction of the Project, and neither Party will be entitled to
further contribution from the other Party for such expenditures.
B.Termination after Project Commencement. If this Agreement is
terminated by either Party after work on the Project has already commenced by
delivery of written notice of termination at least thirty (30) days prior to the effective
date of the termination, Tesla is responsible for prompt removal of the personal
property of Tesla or any Tesla Agents from the Site, including temporary facilities for
Project construction, and restoring the Site back to its pre-construction condition, with
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the exception of Substation Improvements that have already been fully installed at the
Site, or as otherwise specified by the City, no later than thirty (30) days after the
notice of the termination, unless a longer period is specified in the notice of
termination. City will have the right to dispose of any such personal property that is not
timely removed, and the right to recover any costs it incurs to remedy any failure by
Tesla to timely remove such personal property and restore the Site. Otherwise, each
Party will bear its own loss with respect to expenditures it has incurred for design and
construction of the Project, except that:
1.The City will compensate Tesla for Substation Improvements
that have been fully installed and incorporated into the Substation, provided
those Substation Improvements (a) have been installed in accordance with the
Construction Documents to the City’s reasonable satisfaction, and (b) function
as intended based on specified inspection, testing, or commissioning.
2.With respect to materials or equipment which are on Site, but
which have not yet been fully installed or incorporated into the Substation, City
will have the right, but not the obligation, to retain such materials or equipment
for subsequent installation or incorporation, subject to payment to Tesla of an
amount equal to the cost of such materials or equipment retained by the City.
The Parties mutually intend that disposition of and compensation for
improvements, equipment, or materials upon termination after Project
commencement should be fair and equitable in relation to the circumstances,
and should not result in any unfair enrichment nor an unfair burden to pay for
improvements, equipment, or materials that offer little or no benefit without a
completed Project.
14.3 Enforcement. The remedies given to the Parties hereunder, or by any Laws
now or hereafter enacted, are cumulative and the exercise of one right or remedy will not
impair the right of a Party to exercise any or all other remedies. In case any suit, action or
proceeding to enforce any right or exercise any remedy is brought or taken and then
discontinued or abandoned, then, and in every such case, the Parties will be restored to their
former positions, rights and remedies as if no such suit, action or proceedings had been
brought or taken.
15.NOTICES. All notices, requests and approvals by a Party will be given, in writing, and
delivered by personal service, the United States Postal Service, express delivery service, or
electronic mail transmission, as follows:
To City:City of Palo Alto
City Clerk
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
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With copies to each of:
Utilities Department
250 Hamilton Avenue
Palo Alto, CA 94303
ATTN: Tomm Marshall
To Tesla:Tesla, Inc.
1 Tesla Road
Austin, TX 78725
E-Mail: energynotices@tesla.com
ATTN: Andy Kim
Any notice hereunder will be deemed to have been given upon receipt at the designated
address, except that a notification delivered on a weekend, holiday, or other day that the
recipient Party is not open for business, will be deemed received on the recipient Party’s first
business day thereafter. For convenience of the Parties, copies of notices may also be given
by email; however, neither Party may give official or binding notice by email.
16.DISPUTE RESOLUTION. Except as expressly provided in this Agreement, good faith
compliance with the dispute resolution procedures herein, is a condition precedent to either
Party initiating a legal action against the other Party.
16.1 Informal Resolution. If a dispute arises between the Parties from or in
connection with this Agreement or any Exhibit hereto (a “Dispute”), the following procedure
will govern the resolution of any such Dispute:
A.Informal Negotiation. Each Party will nominate a representative to be
responsible for engaging in good faith efforts to resolve the Dispute on behalf of that
Party for a 14-day resolution period, beginning with either Party’s written notice
requesting Dispute resolution pursuant to this provision. Notwithstanding the
foregoing, it is understood that under the terms of the PAMC, final authority to
approve proposed resolution of a dispute on behalf of the City may be vested in the
City Council, in which case the 14-day resolution period will be extended so that City
Council approval may be requested in accordance with standard procedures for such
matters.
B.Further Negotiations. If the Dispute remains unresolved within the 14-
day period or due to failure to secure City Council approval, as applicable, before
either Party initiates mediation under Section 16.2 and 16.3, either Party may refer the
Dispute, in writing, for final settlement to Tesla’s General Counsel and the City
Manager, or designee, who will jointly convene within ten days of receipt of the
referral request and use reasonable efforts to consider and resolve the Dispute. The
Parties will ensure that their respective representatives confer for a period of 14 days
from the date of referral by either Party. Notwithstanding the foregoing, it is
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understood that under the terms of the PAMC, final authority to approve proposed
resolution of a dispute on behalf of the City may be vested in the City Council, in
which case the 14-day resolution period will be extended so that City Council approval
may be requested in accordance with standard procedures for such matters.
C.Impasse. If final resolution cannot be achieved, the Parties may follow
the procedures described in Sections 16.2 and 16.3.
16.2 Mediation. In the event of an unresolved Dispute between the Parties with
respect to this Agreement or the enforcement of rights hereunder, after reaching impasse
pursuant to Section 16.1, either Party may, by notice to the other Party (the “Mediation
Notice”), require such dispute to be submitted to non-binding mediation in Palo Alto,
California, with a single mediator who is mutually acceptable to the Parties. The Parties will
use reasonable efforts to cause such mediation to be convened, conducted and completed
within a reasonable period of time, from the date of the Mediation Notice, subject to the
availability of a mutually acceptable mediator and commensurate availability of the individuals
that each Party, respectively, requires to represent it at mediation, including legal counsel,
percipient witnesses, expert witnesses, sureties, and individuals authorized to negotiate a
settlement. If such mediation does not result in a settlement of the Dispute or if one or more
of the Parties does not in good faith participate in such mediation, either Party may pursue
other available legal or equitable remedies. The cost of mediation, including the mediator’s
fee, will be shared equally by the Parties, but each Party is solely responsible for its own legal
costs and its own legal representation.
16.3 Remedies for Default. Subject to good faith compliance with the dispute
resolution procedures in this Section, nothing contained in this Agreement will prevent or
otherwise restrict either Party from pursuing its legal or equitable rights, including injunctive
relief and specific performance, in the event of a default by the other Party. Notwithstanding
the foregoing, Tesla must comply with the applicable provisions of the Government Claims
Act and the PAMC, as a condition precedent to filing any lawsuit or claim relating to this
Agreement.
16.4 Limitations. Notwithstanding anything to the contrary set forth herein, prior to
any termination of this Agreement and for so long as the City does not default under this
Agreement, Tesla will not terminate its construction of the Substation Improvements, unless
authority to do so is granted by the City or conferred by a court of competent jurisdiction, or
this Agreement has been validly terminated. To the full extent practicable, work on the Project
will not be unilaterally suspended, delayed, or stopped by either Party solely because the
Parties are engaged in dispute resolution pursuant to this Section 16.
17.MISCELLANEOUS PROVISIONS.
17.1 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California. The Parties will comply with all applicable
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federal, state and local laws in the exercise of their rights and the performance of their
obligations under this Agreement.
17.2 Covenants and Conditions. All provisions of this Agreement, whether
covenants or conditions, will be deemed to be both covenants and conditions.
17.3 Entire Agreement; Amendment. This Agreement represents the entire
agreement between the Parties and supersedes all prior negotiations, representations and
contracts, whether written or oral. This Agreement may be amended by an instrument, in
writing, signed by the Parties. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will constitute one and
the same instrument.
17.4 Waiver. The waiver by either Party of any breach or violation of any covenant,
term, or condition of this Agreement or of the provisions of any permit, approval, ordinance or
other City Laws will not be deemed to be a waiver of any such covenant, term, or condition,
or of any subsequent breach or violation of the same or any other covenant, term, or
condition. The subsequent acceptance by either Party of any consideration which may
become due or payable hereunder will not be deemed to be a waiver of any preceding breach
or violation by the other Party of any other covenant, term, or condition of this Agreement. No
waiver or consent will constitute a continuing waiver or consent.
17.5 Nondiscrimination. The PAMC prohibits discrimination in the employment of
any individual under this Agreement because of race, skin color, gender, age, religion,
disability, national origin, ancestry, sexual orientation, housing status, marital status, familial
status, weight or height of that person. Tesla acknowledges that it has read and understands
the provisions of PAMC Chapter 2.30 relating to nondiscrimination in employment and the
penalties for violations thereof, and it agrees to comply with all requirements of PAMC
Chapter 2.30 pertaining to nondiscrimination in employment.
17.6 Independent Contractor. In the construction of the Project or other duties
imposed upon it by this Agreement, Tesla will act at all times as an independent contractor
and not as an employee of the City. Nothing in this Agreement will be construed to establish a
partnership, joint venture, group, pool, syndicate or agency between the Parties. No provision
contained herein will be construed as authorizing or empowering either Party to assume or
create any obligation or responsibility whatsoever, express or implied, on behalf, or in the
name of, the other Party in any manner, or to make any representation, warranty or
commitment on behalf of the other Party. In no event will either Party be liable for: (1) any
loss caused by the other Party in the course of its performance hereunder, except as
expressly provided herein; or (2) any debts, obligations or liabilities of the other Party,
whether due or to become due.
17.7 Representations and Warranties. On the Effective Date, each Party
represents and warrants to the other Party that: (1) it is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation; (2) to the best of the Party’s
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knowledge, the execution, delivery and performance of this Agreement, the exhibits
incorporated herein and the Encroachment Permit are within its powers, have been duly
authorized by all necessary action and do not violate any of its governing documents, any
contracts to which it is a party or any law, rule, regulation, or order; (3) it has not filed and it is
not now contemplating the filing for bankruptcy protection or, to its knowledge, threatened
against it which would result in it being or becoming bankrupt; (4) there is not pending or, to
its knowledge, threatened against it or any of its affiliates any legal proceedings that could
materially adversely affect its ability to perform its obligations under this Agreement and the
exhibits incorporated herein; and (5) it is unaware of any events or circumstances, currently
existing or likely to arise, that would prevent it from performing its obligations under this
Agreement.
17.8 Exhibits; Order of Priority. All exhibits referred to in this Agreement are by
such references incorporated in this Agreement and made a part hereof. The following
exhibits are made a part of this Agreement:
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Project Description
Encroachment Permit
Project Budget
Capacity Reservation Agreement
Project Schedule
Insurance Requirements (Tesla)
Insurance Requirements (General Contractor)
Insurance Requirements (Engineer)
Construction Contract Form
A.Order of Precedence. If any inconsistencies between this Agreement
and the exhibits exist, the following order of precedence (in declining order of priority)
in the interpretation hereof or resolution of such conflict hereunder shall prevail:
1.
2.
3.
3.
3.
4.
5.
The body of this Agreement;
Exhibit D;
Exhibit B;
Exhibit A;
Exhibit C;
Exhibit E; and
All other exhibits.
17.9 Organizational Documents. Upon request of the City, Tesla will furnish to
the City for its records copies of its articles of incorporation and bylaws and any other
information reasonably requested by the City and relating to its organization status.
17.10 Publicity. The Parties acknowledge that the City is subject to California Laws
governing charter cites, including public disclosure requirements which include, but are not
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limited to, open meeting requirements pursuant to Government Code section 54950 et seq.
and public record disclosure requirements pursuant to Government Code section 7920 et
seq. Except as required for compliance with applicable Laws, neither Party shall advertise or
issue any public announcement regarding the execution of this Agreement or its contents, or
use the other Party’s mark, name or logo in any marketing literature, web sites, articles, press
releases (including interviews with representatives of media organizations of any form), or
any other document or electronic communication, without the prior written consent of the
other Party. The foregoing shall not prohibit a Party from making any public disclosure or
filing that it determines in good faith is required by Laws, including, but not limited to, in
respect of Tesla, the rules of the stock exchange on which its shares, or the shares of its
parent company, are listed.
17.11 Interpretation. The Parties agree that the normal rule of construction to the
effect that any ambiguity is to be resolved against the drafting party will not be employed in
the interpretation of this Agreement or any amendment or Exhibit hereto.
17.12 Consent. When either Party is required to give its consent to the other Party,
the Party whose consent is required will not unreasonably withhold or delay that consent,
unless it is specifically stated that it is within the Party’s sole discretion to give or withhold its
consent.
17.13 Venue. In the event that an action is brought, the Parties agree that trial of
such action will be vested exclusively in the state courts of California or in the United States
District Court for the Northern District of California in the County of Santa Clara, State of
California. Each Party hereby waives any right it may have pursuant to Code of Civil
Procedure Code section 394 to file a motion to transfer any action arising from or relating to
this Agreement to a venue outside of Santa Clara County, California, without the prior
express written consent of the other Party.
17.14 Attorney’s Fees. The prevailing Party in any action brought to enforce the
provisions of this Agreement may recover its reasonable costs and attorney’s fees expended
in connection with that action.
17.15 Severability. If a court of competent jurisdiction finds or rules that any
provision of this Agreement, the exhibits, or any amendment thereto, is void or
unenforceable, the unaffected provisions of this Agreement, the exhibits, or any amendment
thereto, will remain in full force and effect.
[Signature page follows.]
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IN WITNESS WHEREOF, the Parties by their duly authorized representatives have
executed this Agreement on the Effective Date.
APPROVED AS TO FORM:CITY OF PALO ALTO
Molly Stump, City Attorney
APPROVED:
Ed Shikada, City Manager
Dean Batchelor, Director of Utilities
TESLA, INC ration
Vaibhav Taneja, Chief Financial
Officer
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Exhibit A to Substation Improvement Agreement
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EXHIBIT A
PROJECT DESCRIPTION
The Project will consist of design, construction, installation and/or connection of the following
elements at Substation and in the area surrounding Substation:
1.
2.
3.
4.
5.
6.
7.
8.
Grading and structural site improvements for the new Substation Improvements;
Two 60 kV transformer bank circuit breakers;
One 60 kV bus tie breaker;
Two 50 MVA, 60 to 12 kV transformers;
One 12 kV power distribution center;
Two 12 kV feeders to serve the Tesla Facilities.
Bus switches, buswork, wiring, and feeder outlets to Tesla’s onsite switchgear; and
Testing and commissioning of all equipment and components.
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EXHIBIT B
ENCROACHMENT PERMIT
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This document is recorded for the benefit
of the City of Palo Alto and is entitled
to be recorded free of charge in accordance
with Section 6103 of the Government Code.
After recordation, mail to:
CITY OF PALO ALTO/REAL ESTATE
DIVISION
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94301
SPACE ABOVE THIS LINE FOR RECORDER'S USE
A.P. No.:
Permit No.:
Project:
CITY OF PALO ALTO
ENCROACHMENT PERMIT
(#)
THIS ENCROACHMENT PERMIT (“Permit”) dated as of January 16, 2024, is made by and
between the CITY OF PALO ALTO, a California chartered municipal corporation (“City”),
and TESLA, INC., a Delaware corporation (“Permittee”), individually, a “Party” and
collectively, the “Parties.”
RECITALS
A.This Permit is required by and issued in conjunction with the Parties’ Hanover
Substation Improvement Agreement (“Improvement Agreement”), effective January 16,
2024.
B.The Improvement Agreement involves improvements to the City’s Hanover
Substation (“Substation”) on certain real property (“Property”) which the City has leased
from the Board of Trustees for the Leland Stanford Junior University (“Lessor”), pursuant
a lease effective on July 1, 1957, and the 1962 amendment thereto (“Stanford Lease”,
attached hereto as Exhibit B) for the purposes of constructing, maintaining and operating
an electric power substation.
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C.The Stanford Lease as amended expired on its terms on or about June 30, 2007,
the Lease has not been amended to extend the original term, and no rent has ever been
due under the Lease besides the City’s payment of applicable taxes. Stanford and the City
have continued to conduct themselves in their dealings in respect to the Hanover
Substation in accord with the amended Lease, notwithstanding the expiration.
TERMS AND CONDITIONS
City and Permittee agree as follows:
1.Encroachment Permit. City confers to Permittee and the employees, contractors
and agents of Permittee (“Permittee’s Agents”) a revocable (pursuant to Section 7
hereof), non-exclusive and non-possessory privilege to enter upon, use, and encroach into
the Property, which is situated in the County of Santa Clara, State of California, and more
particularly described in Exhibit A attached hereto (the “Permit Area”), for the limited
purpose and subject to the terms, conditions and restrictions set forth below. This Permit
gives Permittee a license only and notwithstanding anything to the contrary herein, this
Permit does not constitute a grant by City of any ownership, leasehold, easement or other
property interest or estate whatsoever in the Permit Area, or any portion thereof.
2.Use of Permit Area. Permittee and Permittee’s Agents may enter and use the
Permit Area for the sole purpose of the design, construction, installation, and
commissioning of the “Substation Improvements” as defined in the Improvement
Agreement ( “Substation Improvements”) and ingress and egress thereto, and for no
other purpose whatsoever.
3.Term of Permit. The privilege conferred to Permittee pursuant to this Permit shall
apply for a term (“Term”) which will commence on the date on which this Permit is
executed and delivered by City, and shall expire upon the earlier of: (a) City acceptance
of the “Project” as defined and specified in the Improvement Agreement (“Project”), (b)
thirty (30) days written notice from City revoking this Permit pursuant to Section 7 hereof
or, (c) ten (10) days written notice of termination from Permittee.
4.Subject to City Uses. Notwithstanding anything to the contrary in this Permit, any
and all of Permittee’s activities hereunder shall be subject and subordinate at all times to
City’s existing and future use of the Permit Area for public utility or other public purposes.
City shall in no way be liable for any damage or destruction to Permittee’s property and/or
Improvements resulting from any repair or maintenance activities by City. Permittee shall,
at City’s request, immediately remove or relocate any personal property of Permittee or
Permittee’s Agents, including temporary facilities or equipment, on or in the Permit Area
to allow City access to the utilities or other City owned facilities. In the event City deems
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it necessary, in City’s sole discretion, City shall have the right to remove or relocate any
such property and City shall not be responsible for restoring or returning same to its prior
condition.
5.Responsibility for Maintenance of Improvements. During the Term, and as
further specified in the Improvement Agreement, Permittee shall be solely responsible
for repairing and maintaining all Substation Improvements placed by Permittee in or on
the Permit Area pursuant hereto in good and safe condition prior to the date of the
transfer of ownership of the Substation Improvements to the City and the City’s
acceptance thereof in accordance with the terms of the Improvement Agreement.
6.Covenant to Maintain Permit Area. In connection with its use, Permittee shall at
all times during the Term, at its sole cost, maintain the Permit Area in a good, clean, safe,
secure, sanitary and sightly condition, so far as the Permit Area may be affected by
Permittee’s activities under this Permit.
7.Revocability. This Permit is subject to revocation if the Improvement Agreement
is terminated pursuant to Section 14 of the Improvement Agreement or if the City is
unable to proceed with the Project due to any third party legal action preventing use of
the Permit Area for the Project. Revocation of this Permit in accordance with the terms
hereof shall be effected by the City sending written notice to Permittee as specified in
Sections 3 and 9. If the Permit is revoked after work has commenced on installation of the
Substation Improvements pursuant to the Improvement Agreement, the provisions of
Section 14.2.B of the Improvement Agreement will apply, including, but not limited to,
those provisions addressing removal of personal property, restoration, disposition of
materials and equipment, and responsibility for expenditures and loss.
8.Damage. Permittee shall not do anything in, on, under or about the Permit Area
that could cause damage or interference to any City utilities or other property located in,
on, under or about the Permit Area. As used in this Section 8 and Section 13, below,
“damage” expressly excludes alterations to the Permit Area which are authorized by the
“Construction Documents” as that term is defined in Section 1.2 of the Improvement
Agreement. Permittee agrees to reimburse City for any damage caused by Permittee to
City owned property or facilities by virtue of Permittee’s construction of Substation
Improvements or other activities of Permittee or Permittee’s Agents within the Permit
Area within thirty (30) calendar days of City’s demand.
9.Notice. If any notice given pursuant to this Permit is not personally delivered to
Permittee, the notice shall be deemed to be delivered five (5) days after deposit of the
notice in a sealed envelope, postage fully prepaid, in a mailing facility regularly
maintained by the United States Post Office Department, or the next business day after
deposit of the notice with a nationally recognized overnight courier, addressed to as the
Party to be notified as follows:
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To Permittee:
1 Tesla Road, Austin, TX 78725
Attn: General Counsel / Legal
Phone: +1. 512.516.8177
Email: legal@tesla.com;
cc : energynotices@tesla.com
To City:
City of Palo Alto
City Clerk
250 Hamilton Avenue
Palo Alto, CA 94303
Email: City.Clerk@cityofpaloalto.org
cc: tomm.marshall@cityofpaloalto.org
cc: amy.bartell@cityofpaloalto.org
10.Compliance with Laws. During the Term, Permittee shall, at its expense, conduct
and cause to be conducted its activities on the Permit Area in a safe and reasonable
manner and in compliance with all applicable laws of any governmental or other
regulatory entity (including, without limitation, the Americans with Disabilities Act) and
all covenants, restrictions and provisions of record, whether presently in effect or
subsequently adopted and whether or not in the contemplation of the Parties, including
any applicable terms of the Stanford Lease, attached hereto as Exhibit B, including the
original 1957 lease agreement and the 1962 amendment.
11.Removal of Property. Without limiting City’s rights under this Permit, if during
the Term, Permittee or Permittee’s Agents fail to comply with the terms of this Permit or
the Improvement Agreement with respect to placement or storage of personal property
on the Property, including materials, tools, or equipment, Permittee shall promptly, at
City’s written request, remove or relocate at its sole expense any and all such personal
property of Permittee or Permittee’s Agents, including temporary facilities or equipment,
installed or placed in, on, under or about the Property by Permittee or Permittee’s Agents
(excluding, however, the Substation Improvements, which shall not be altered, removed
and/or relocated except as otherwise may be permitted under the Improvement
Agreement), under any of the following circumstances:
(a) as may be necessary to avoid any actual or reasonably likely interference with
the Substation or any of City’s utilities or other structures now or later constructed
or with the maintenance thereof;
(b) to avoid or remedy any potential violation of the Stanford Lease; or
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(c) to avoid unauthorized interference with any other operations or land uses by
City.
In the request, City shall specify reasonable time limits for removal or relocation of the
property. If after such written notice Permittee fails to complete the removal or
relocation within the prescribed time limits, City shall notify Permittee of same and have
the right to perform the requested removal or relocation and charge Permittee all
reasonable, direct and documented out of pocket costs and expenses (excluding
overhead and salaries for the City’s personnel) incurred by City in performing the work.
Undisputed portions of such amount shall be due and payable within thirty (30) days after
the City’s demand therefor. In the event of an emergency, City may, at its sole option and
without notice, remove, relocate, or protect at Permittee’s sole expense, any and all
property installed or placed in, on, under or about the Property by Permittee (excluding,
however, the Substation Improvements, which shall not be altered, removed and/or
relocated except as otherwise may be permitted under the Improvement Agreement).
12.Surrender. Upon the expiration of the Term, Permittee shall immediately
surrender the Permit Area, including the Substation Improvements located thereon,
broom cleaned, and free from hazards created by Permittee or Permittee’s Agents and
clear of all of Permittee’s debris. At such time, Permittee shall remove all of its personal
property and equipment from the Permit Area, and shall repair, at its cost, any damage
to the Permit Area caused by such removal, reasonable wear and tear excepted.
Permittee’s obligations under this Section shall survive any termination of this Permit.
13.Repair of Damage. If any portion of the Permit Area or any property of City
located on or about the Permit Area is damaged or threatened by any of the activities
conducted by Permittee or Permittee’s Agents, in a manner not contemplated nor
authorized under the terms of the Improvement Agreement or Construction Documents,
Permittee shall, at its sole cost, immediately notify City in writing of such damage or threat
after becoming aware of same. City may remedy, but shall not be obligated to remedy,
such damage or threat at Permittee’s sole cost, based on the City’s reasonable, direct and
documented out of pocket costs, but excluding regular salary and benefit costs for
salaried City employees. In the event City elects not to remedy such damage or threat,
Permittee shall repair any and all such damage and restore the Permit Area or property
to its previous condition subject to City’s inspection, review and approval (excluding,
however, the Substation Improvements, which shall remain in the Permit Area and not
be subject to alteration, removal and/or relocation except as may otherwise be provided
under the Improvement Agreement).
14.Defaults by Permittee. Permittee’s failure to perform any of its obligations under
this Permit, or Permittee’s default in the performance of any of its other obligations under
this Permit, will be governed by the terms in Section 14 of the Improvement Agreement
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pertaining to default and cure. Permittee’s obligations under this Section shall survive the
expiration or termination of this Permit.
15.Indemnity; Limitations on Liability. The respective indemnification obligations of
the City and Permittee during the Term shall be as set forth under the terms of the
Improvement Agreement, such obligations to survive the expiration or other termination
of the Permit.
16.Insurance Requirements. During the term of this Permit, Permittee, and each of
its contractors and agents which enter onto the Property to carry out permitted activities,
shall each maintain in full force and effect the insurance coverage specified in Section 9
of the Improvement Agreement and corresponding Exhibits thereto.
17.Assignment. This Permit is personal to Permittee and Permittee shall not assign,
transfer, or encumber its interest in this Permit and/or the Substation Improvements,
except as authorized in Section 11 of the Improvement Agreement.
18.General Provisions. (a) This Permit may be amended or modified only by a writing
signed by City and Permittee. (b) This instrument (including the exhibit(s) hereto)
contains the entire agreement between the parties and all prior written or oral
negotiations, discussions, understandings and agreements are merged herein. (c) If
Permittee consists of more than one person then the obligations of each person shall be
joint and several. (d) Permittee may not record this Permit or any memorandum hereof
without the prior consent of City. (e) City will promptly notify Permittee of any action or
steps by Lessor that may affect the rights granted pursuant to this Permit, whereupon
City and Permittee will meet and confer to consider available options with reference to
the purpose of the Improvement Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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The Parties agree to the foregoing as witnessed by the following signatures:
"OWNER"“PERMITTEE"
CITY OF PALO ALTO TESLA, INC.
By:
City Manager Vaibhav Taneja
Chief Financial Officer
1 Tesla RoadAPPROVED AS TO FORM:
Austin, TX 78725
1.512.516.8177
Asst. City Attorney
APPROVED AS TO CONTENT:
Director of Utilities
Attachments:
EXHIBIT “A”: DESCRIPTION OF PERMIT AREA
EXHIBIT “B”: STANFORD LEASE
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EXHIBIT A
DESCRIPTION OF PERMIT AREA
The Permit Area is located at 3350 Hanover Street, Palo Alto, California, 94304, shown
on the map below, and is coextensive with the leased premises as described in Exhibit B.
3350 Hanover Street
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EXHIBIT B
STANFORD LEASE
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Exhibit B to Substation Improvement Agreement
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I.CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF )
)
)
COUNTY OF
On , before me,
(insert name and title of the officer)
who proved topersonally appeared
me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
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Exhibit C to Substation Improvement AgreementDocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT C
PROJECT BUDGET
1. Estimated Project Cost. The estimated cost to design and construct the Project is
$24,000,000, including the estimated Construction Cost of $15,000,000 (subject to
modification by subsequent change orders).
2. Tesla’s Contribution. Tesla is responsible for all costs to design and construct the
Project, including design and procurement costs incurred prior to approval of the
Construction Documents, subject to reimbursement from the City, as set forth in Section 5
of the Agreement, and as further specified below. Tesla’s Contribution includes the
following cost components:
A.All Project-related costs incurred by Tesla prior to the Effective Date of the
Agreement.
B.100% of the costs associated with feeders and any switches installation at the
Tesla Facility needed to serve a 30MVA load.
C.
D.
All permit fees that are not waived by the City.
The cost for insurance policies required pursuant to Section 9 of the
Agreement.
I.The cost of all other items specified as Tesla’s obligation under the Agreement
and the Encroachment Permit.
2. City Reimbursement. Subject to a cumulative total cap of $12 million, the City is
responsible for reimbursing Tesla as specified in Section 5 of the Agreement. Tesla will
timely provide City with documents evidencing the costs subject to the City
Reimbursement, such as paid invoices and the like, sufficient to establish the actual
expenditures which are subject to reimbursement herein.
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EXHIBIT D
CAPACITY RESERVATION AGREEMENT
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DATED JANUARY 16, 2024
CITY OF PALO ALTO
-and-
TESLA, INC.
CAPACITY RESERVATION AGREEMENT
relating to
the Hanover Substation
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TABLE OF CONTENTS
1. INTERPRETATION ....................................................................................................... 2
2. TERM......................................................................................................................... 8
3. CAPACITY RESERVATION ............................................................................................ 8
4. CAPACITY USAGE CREDITING.................................................................................... 10
5. BILLING AND INVOICING .......................................................................................... 10
6. TERMINATION.......................................................................................................... 10
7. DISPUTE RESOLUTION .............................................................................................. 12
8. REPRESENTATIONS, WARRANTIES AND COVENANTS ................................................ 13
9. ASSIGNMENT AND NOVATION ................................................................................. 14
10. NOTICES .................................................................................................................. 14
11. CONFIDENTIALITY AND ANNOUNCEMENTS............................................................... 14
12. MISCELLANEOUS...................................................................................................... 15
SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS............ SCHEDULE 1
SCHEDULE 2: MONTHLY CAPACITY USAGE REPORT .................................... SCHEDULE 2
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THIS CAPACITY RESERVATION AGREEMENT is made on January 16, 2024
BETWEEN:
(1)
(2)
CITY OF PALO, a California chartered municipal corporation "City"); and
TESLA, INC., a corporation organized under the laws of Delaware, whose principal place of
business is at Giga Texas, 1 Tesla Road, Austin, TX 78725 ("Tesla").
RECITALS:
A
B
C
D
The City and Tesla have entered into the Improvement Agreement pursuant to which the Parties
shall jointly design, construct, install and fund improvements to the Hanover Substation to
increase the Capacity of the Hanover Substation, on the terms and subject to the conditions
therein.
Following completion of the improvements to the Hanover Substation contemplated under the
Improvement Agreement, the City is willing to allocate and reserve, in respect of the Hanover
Substation, the Reserved Capacity to serve the electricity needs of the Tesla Facilities, on the
terms and subject to the conditions set forth in this Agreement.
In addition to the terms that apply to Tesla as a CPAU Electric Service customer pursuant to
the CPAU Rules and Regulations, the City and Tesla have agreed that in consideration for the
City making the Reserved Capacity available for Tesla, Tesla will pay the City a Monthly
Capacity Reservation Fee as further specified in this Agreement.
The City and Tesla have further agreed that in addition to the consideration paid by the City
under the terms of the Improvement Agreement for the Hanover Substation improvements
designed and installed by Tesla, Tesla will be afforded a Monthly Capacity Usage Credit as a
credit against the Monthly Capacity Reservation Fee, if applicable, subject to a Capacity Usage
Credit Maximum.
E It is a condition precedent to the effectiveness of the Improvement Agreement that the City and
Tesla shall have executed and delivered this Agreement.
IT IS AGREED:
1.INTERPRETATION
1.1 Definitions
In this Agreement:
"Agreement" means this Capacity Reservation Agreement.
"Billing Period" has the meaning provided in Rule and Regulation 2 of the CPAU Rules and
Regulations as may be amended from time to time.
"Business Day" means any day other than a Saturday, Sunday or any other day observed as a
legal holiday by the City.
"Capacity" means the maximum instantaneous power (expressed and measured in kVA) that
can be delivered by CPAU in compliance with its operating practices, to Electric Service
customers served by the Hanover Substation.
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"Capacity Reservation Fee Start Date" means the earlier of (i) the date falling 18 months
from the Effective Date, or (ii) the date on which the monthly Demand for the Tesla Facilities
has reached 9.00 MW.
"Capacity Reservation Modification" has the meaning given in Clause 3.5(a).
"Capacity Reservation Period" means the period commencing on the Effective Date and
ending on the date that is seven (7) years from the Effective Date.
"Capacity Usage Credit Maximum" has the meaning given in paragraph (a) of Schedule 2.
“Capacity Usage Credit Period” means the period commencing on the Capacity Reservation
Fee Start Date and ending on the date that is seven (7) years from the Capacity Reservation Fee
Start Date.
"Consultation Period" has the meaning given in Clause 6.3(c).
"Contracted Peak Demand" has the meaning given in paragraph (a) of Schedule 1.
"CPAU" means the City’s Utilities Department, which operates the City’s electrical utility
system, including the Hanover Substation, to provide Electric Service.
"CPAU Event of Default" has the meaning given in Clause 6.2.
"CPAU Rules and Regulations" means the rules and regulations relating to utility service
approved and adopted by resolution of the City of Palo Alto City Council, pursuant to Chapter
12.20 of the Palo Alto Municipal Code, as may be amended from time to time, and accessible
online via the City’s website.
"Default" means any CPAU Event of Default or Tesla Event of Default, as the context
requires.
"Defaulting Party" means:
(a)
(b)
the City, in respect of a CPAU Event of Default; and
Tesla, in respect of a Tesla Event of Default.
"Delivered Energy" means the energy delivered to a Tesla Facility at a Point of Delivery.
"Demand" means the highest rate of metered Delivered Energy, expressed and measured in
kW, registered within a specific time interval (normally fifteen minutes within a monthly
Billing Period unless otherwise specified).
“Distribution Demand Charge” means the Distribution component of a Demand charge listed
in a rate schedule established by the City for provision of Electric Service, often varying based
on season and time period, and with the possibility of multiple demand charges applying to a
specific time period, all of which are charged based on the metered Demand for that time period.
"Dispute" means any dispute, disagreement or claim between the Parties concerning, relating
to or arising from this Agreement, excluding any dispute, disagreement or claim concerning
billing for Electric Service that is subject to the provisions of the CPAU Rules and Regulations.
"Due Date" means, in relation to any Monthly Invoice, the date on which payment is due in
accordance with Clause 5.3(a).
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"Effective Date" means the date determined in accordance with Clause 2.1, on which this
Agreement comes into full force and effect.
"Electric Service" means the generation, transmission, and distribution of electrical power by
CPAU for retail use.
"Expiration Date" means the date on which the Term ends and this Agreement expires in
accordance with its terms.
"General Use Utility Asset Costs" has the meaning given in paragraph (a) of Schedule 2.
"Governmental Agency" means any national, regional or local government, any political
subdivision thereof, or any governmental, quasi-governmental, regulatory, judicial or
administrative agency, authority, commission, board or similar entity having jurisdiction over
operation of the Substation or CPAU operations, or either Party, including any applicable
independent system operator or regional transmission organization, the California Public
Utilities Commission, the Federal Energy Regulatory Commission, and the North American
Electric Reliability Corporation.
"Hanover Substation" means the substation owned and operated by the City, including any
facilities ancillary thereto, located at 3350 Hanover Avenue, Palo Alto, California 94304.
"Hanover Substation Improvement Completion Date" means the date on which the City
accepts the installation of the improvements to the Hanover Substation as complete in
accordance with the Improvement Agreement.
"Improvement Agreement" means the Substation Improvement Agreement relating to the
Hanover Substation dated on or about the date of this Agreement and entered into between the
City and Tesla.
"JAMS" has the meaning given in Clause 7.2(a).
"kVA" means kilo-volt-amperes, which is a measure of apparent power.
"kW" means kilowatts, a unit of power equal to 1,000 watts.
"kWh" means kilowatt-hours, the amount of energy delivered in one hour where delivery is at
a constant rate of one kilowatt.
"Law" means all applicable local, state, and federal laws, regulations, rules, codes, ordinances,
permits, orders, and the like enacted or imposed by or under the auspices of any Governmental
Agency with jurisdiction over the Hanover Substation or either Party, including labor, health
and safety requirements, the Palo Alto City Charter, the Palo Alto Municipal Code, and the
CPAU Rules and Regulations.
"MW" means megawatts, a unit of power equal to 1,000 kW.
"Monthly Capacity Reservation Fee" has the meaning given in paragraph (b) of Schedule 1
as a payment due from Tesla to the City as consideration for the Reserved Capacity.
"Monthly Capacity Usage Credit" has the meaning given in paragraph (b) of Part 2 of
Schedule 1.
"Monthly Capacity Usage Credit Rate" has the meaning given in paragraph (b) of Schedule
2.
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"Monthly Invoice" means an invoice in respect of Monthly Capacity Reservation Fees and
Monthly Capacity Usage Credits in any Billing Period.
"Monthly Payment" means the sum of the Monthly Capacity Reservation Fee (less any
Monthly Capacity Usage Credit).
"Monthly Statement" means a statement provided with the Monthly Invoice giving the
information set out in Clause 5.2(b).
"Non-Defaulting Party" has the meaning given in Clause 6.3(a).
"Party" means a party to this Agreement, and shall include its successors in title, permitted
assignees and permitted transferees.
"Point of Delivery" has the meaning provided in Rule and Regulation 2 of the CPAU Rules
and Regulations, as applied to electricity delivered to a Tesla Facility pursuant to this
Agreement.
"Reserved Capacity" means the portion of Capacity that is reserved by CPAU to provide
Electric Services to the Tesla Facilities, measured in kVA, as further set forth in Schedule 1 (as
such schedule may be amended from time to time).
"Signature Date" means the date on which both the City and Tesla have executed this
Agreement.
"Subsequent Period" means the period commencing on the expiration of the Capacity
Reservation Period and ending on the Expiration Date or upon early termination of this
Agreement, whichever occurs first.
"Term" means ten years from the Effective Date as stated in Clause 2.1.
"Termination Notice" has the meaning given in Clause 6.3(h).
"Tesla Event of Default" has the meaning given in Clause 6.1.
"Tesla Facility" means the Tesla site located at 1501 Page Mill Road in the City of Palo Alto,
and subject to mutual agreement of the Parties memorialized in an amendment to this
Agreement, may also include additional Tesla facilities located on other sites that are connected
to and served by the Hanover Substation.
"US Dollars" or "USD" means United States Dollars, the lawful currency of the United States
of America.
1.2
1.3
Headings
Clause headings used in this Agreement and the table of contents are for convenience only and
will have no effect on the interpretation or construction of any of the terms of this Agreement.
Interpretation
(a)Wording
In this Agreement, unless provided otherwise:
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(i)the use of the singular form of a word includes the plural form and the use of
the plural form includes the singular;
(ii)
(iii)
a word of any gender includes the corresponding words of each other gender
and a reference to one sex includes a reference to all sexes;
any cognate with respect to a word or expression defined in this Agreement
shall bear a corresponding meaning;
(iv)
(v)
the words "include" and "including" are to be construed without limitation; and
wherever provision is made for the giving or issuing of any notice, decision,
consent, acceptance, agreement, expression of satisfaction, endorsement,
approval, certificate, instruction or determination by any person, unless
otherwise specified, such notice, decision, consent, acceptance, agreement,
expression of satisfaction, endorsement, approval, certificate, instruction or
determination shall be in writing (and writing shall be inclusive of mail
transmitted electronically) and the words "notify", "decide", "consent",
"accept", "agree", "endorse", "approve", "certify", "instruct" or "determine"
and other cognate expressions shall be construed accordingly.
(b)Dates & Times
In this Agreement, unless provided otherwise:
(i)a time of day shall be construed as a reference to the current Pacific time zone;
(ii)a "month" shall be construed as a calendar month according to the Gregorian
calendar beginning at 24:00 hours on the last day of the preceding month and
ending at 24:00 hours on the last day of that month;
(iii)
(iv)
(v)
a "day" shall be construed as a twenty-four (24) hour period ending at 24:00
hours;
where a period of time is specified to run from or after a given day or the day
of an act or event, it is to be calculated exclusive of that day; and
where a period of time is specified as commencing on a given day or the day
of an act or event, it is to be calculated inclusive of that day.
(c)References
In this Agreement, unless provided otherwise, a reference to:
(i)a statute or enactment shall be construed as a reference to such statute as it may
have been, or may from time to time be, amended or re-enacted;
(ii)
(iii)
an obligation includes a liability and a duty and a reference to performance
includes observance;
materials, information, data and other records shall be to materials,
information, data and other records whether stored in electronic, written or
other form; and
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(iv)a clause or a Schedule shall be reference to a clause or Schedule of this
Agreement. References to this Agreement or any other document shall be
construed as a reference to this Agreement or that other document as it may
have been, or may from time to time be, amended, varied, novated, replaced or
supplemented.
(d)General Terminology
In this Agreement, unless provided otherwise, "average" for any calculation shall,
subject to any contrary indication, be construed as meaning an arithmetic mean.
1.4 Construction
(a)Force of Definitions
If any provision in a definition in this Agreement is a substantive provision conferring
rights or imposing obligations on either Party, then, notwithstanding that it is in a
definition, effect shall be given to it as a substantive provision of this Agreement.
(b)Force of Recitals
The recitals are not intended to create any legally binding rights or obligations for the
Parties, but may be used to evidence the intention of the Parties in entering into this
Agreement wherever any such intention is relevant in interpreting any particular term
of this Agreement.
(c)Persons and Corporations
(i)A reference to a "person" includes any individual, company, corporation, firm,
partnership, joint venture, undertaking, organisation, trust, government
authority or government department (in each case whether or not having
separate legal personality).
(ii)A reference to a person includes that person's successors and permitted assigns
and, in the case of a natural person, that person's legal personal representatives.
(iii)Where any person to whom reference is made ceases to exist or is reconstituted,
renamed or replaced, or its functions or powers are transferred to another
person, that reference shall (unless the context requires otherwise) be taken to
be to the person so established or constituted in its place or succeeding to its
powers or functions.
(d)Laws
Save where the contrary is indicated, in this Agreement any reference to an act of a
Governmental Agency, code, rules, regulations or any Law or any section of, or
schedule to, or other provisions thereof, shall be construed, at the particular time, as
including a reference to any modification, extension or re-enactment thereof then in
force and to all instruments, orders, rules or regulations then in force and made under
or deriving validity from the relevant act of a Governmental Agency, code, or Law.
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2.TERM
2.1 Effectiveness and Term
This Agreement shall take effect on the Hanover Substation Improvement Completion Date
(the "Effective Date") and shall continue until ten (10) years from the Effective Date (the
"Term"), unless terminated sooner pursuant to Clause 6 herein.
3.CAPACITY RESERVATION
3.1 Determination of payments for Reserved Capacity
(a)
(b)
The Monthly Capacity Reservation Fee for the Reserved Capacity provided by the City
to Tesla pursuant to Clause 3 of this Agreement will be calculated in accordance with
the provisions of Schedule 1.
Tesla’s payment of the Monthly Capacity Reservation Fee will apply for each month
that Reserved Capacity is made available for Tesla until expiration of the Term or
termination of the Agreement, including the Capacity Reservation Period and the
Subsequent Period.
3.2 Reservation of Capacity during the Capacity Reservation Period
(a)Commencing on the Effective Date, the City shall reserve and make available not less
than the amount of Reserved Capacity for Electrical Service provided to the Tesla
Facilities for the Capacity Reservation Period.
(b)In consideration for the Reserved Capacity made available in any Billing Period during
the Capacity Reservation Period, beginning with the first full Billing Period after the
Capacity Reservation Fee Start Date Tesla shall pay to the City a Monthly Capacity
Reservation Fee calculated in accordance with paragraph (b) of Part 1 of Schedule 1.
(c)For the avoidance of doubt, following the Capacity Reservation Fee Start Date Tesla
shall pay the Monthly Capacity Reservation Fee to the City during the Capacity
Reservation Period irrespective of whether Tesla's aggregate 12-month average
monthly peak demand in respect to the Tesla Facilities drops below the Reserved
Capacity.
(d)
(e)
The Monthly Capacity Reservation Fee applies solely as consideration for the Reserved
Capacity and does not apply to payment for Electric Services billed pursuant to the
CPAU Rules and Regulations.
The City reserves the right but not the obligation to meet its obligations with respect to
the Reserved Capacity in whole or in part at any given point in time from CPAU
facilities other than the Hanover Substation without affecting Tesla’s obligations with
respect to the Monthly Capacity Reservation Fee or the City’s obligations with respect
to the Monthly Capacity Usage Credit.
3.3 Reservation of Capacity during the Subsequent Period
(a)During the Subsequent Period, the City shall, in respect of the Hanover Substation,
continue to reserve and make available not less than the Reserved Capacity to serve the
electricity needs of the Tesla Facilities, provided that if Tesla's aggregate 12-month
average monthly peak electricity demand in respect to the Tesla Facilities drops below
the Reserved Capacity, the City shall:
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(i)promptly notify Tesla in writing of such event; and
(ii)if Tesla fails to increase its aggregate twelve (12)-month average monthly peak
electricity demand in respect to the Tesla Facilities to at least the Reserved
Capacity within six (6) months of receipt of such written notice from the City,
the City will have the right to divert any of the Capacity originally reserved for
Tesla to other Electric Service customers.
(b)
(c)
In consideration for the Reserved Capacity made available during any Billing Period
during the Subsequent Period, Tesla shall pay to the City a Monthly Capacity
Reservation Fee, calculated in accordance with Schedule 1.
No Monthly Capacity Reservation Fee shall be payable by Tesla to the City if the City
fails to make available to Tesla the Reserved Capacity at any time during that Billing
Period.
3.4
3.5
Sale and Purchase of Electric Service
In addition to the Capacity Reservation Fee, if any, Tesla shall pay the City on a monthly basis
for Electric Service provided to the Tesla Facilities in accordance with the CPAU Rules and
Regulations. In addition to the rights and obligations conferred by this Agreement in respect to
the Reserved Capacity, the City will provide Electric Service to the Tesla Facilities in
accordance with the CPAU Rules and Regulations.
Capacity Reservation Modification
(a)Tesla may request a change to the amount of Reserved Capacity provided by the City
to Tesla, including a corresponding adjustment to the amount of the Monthly Capacity
Reservation Fee, during the Term pursuant to this Agreement (a "Capacity
Reservation Modification"), subject to approval by the CPAU Director or his or her
authorized delegee.
(b)To initiate a Capacity Reservation Modification, Tesla must send a written notice to
the City requesting the modification. If Tesla’s requested modification seeks an
increase in the amount of Reserved Capacity, City approval of the request will be
subject to a determination by the CPAU Director that the CPAU system can
accommodate the requested increase at that time. The approved changes to the amount
of Reserved Capacity, the corresponding Monthly Capacity Reservation Fee, and
Contracted Peak Demand in Schedule 1 will go into effect in the Billing Period no
sooner than 90 days from receipt of the notice and approval by the City. The Parties
shall determine the revised Reserved Capacity, Monthly Capacity Reservation Fee, and
Contracted Peak Demand promptly following Tesla’s request for a Capacity
Reservation Modification in accordance with the provisions of Schedule 1. For
purposes of a Capacity Reservation Modification, the CPAU Director is authorized to
modify Schedule 1, consistent with the terms and conditions of this Agreement, without
City Council approval.
(c)Once the Capacity Reservation Modification is initiated the revised Monthly Capacity
Reservation Fee will apply for each month that the revised Reserved Capacity is made
available for Tesla until expiration of the Term or termination of the Agreement,
including the Capacity Reservation Period and the Subsequent Period, unless the
amount of Reserved Capacity is subsequently changed pursuant to a later Capacity
Reservation Modification, in which case the most recent approved version of Schedule
1 will control.
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4.CAPACITY USAGE CREDITING
Monthly Capacity Usage Credit4.1
(a)In respect to each Billing Period from the Capacity Reservation Fee Start Date until
either the Capacity Usage Credit Period expires or the Capacity Usage Credit
Maximum has been reached, whichever occurs first, Tesla shall receive from the City
a Monthly Capacity Usage Credit, calculated in accordance with Schedule 2.
(b)
(c)
In no event shall the aggregate of all Monthly Capacity Usage Credits accrued during
the Term exceed the Capacity Usage Credit Maximum.
Any Monthly Capacity Usage Credit accrued during any Billing Period shall be set-off
against the Monthly Capacity Reservation Fee payable in that Billing Period, if
applicable, and only the balance shall be paid by Tesla to the City pursuant to Clause 5
below.
5.BILLING AND INVOICING
5.1 Currency of Monthly Invoices and payments
Except as otherwise expressly provided in this Agreement, each Monthly Invoice shall be for
amounts in USD and all payments shall be made in USD in accordance with the CPAU Rules
and Regulations.
5.2 Delivery of Monthly Invoices
(a)Commencing with the Billing Period following the month in which the Effective Date
occurs, the City shall submit to Tesla, in accordance with the CPAU Rules and
Regulations, a Monthly Invoice setting out the City's computation of the Monthly
Payment for that Billing Period in respect to the Monthly Capacity Reservation Fee, if
applicable, and the Monthly Capacity Usage Credit.
(b)Each Monthly Invoice shall include a Monthly Statement setting out:
(i)a calculation of:
(A)
(B)
the Monthly Capacity Reservation Fee, if applicable; and
the Monthly Capacity Usage Credit; and
(ii)such further supporting documentation and information as Tesla may
reasonably request, provided that no such request shall prejudice or delay
payment of the amount due in respect of the relevant Monthly Invoice.
5.3 Payment of Monthly Invoices
(a)An amount payable under a Monthly Invoice shall be paid in immediately available
and freely transferable cleared funds for value on or before the due date specified
therein (the "Due Date") to such account of the City as shall have been previously
notified to Tesla.
(b)Tesla shall pay to the City any amount referred to in a Monthly Invoice on or before
the Due Date.
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5.4 Set off rights
(a)Where in any Billing Period there is both a Monthly Capacity Reservation Fee and a
Monthly Capacity Usage Credit, the two amounts shall be set-off against each other
and only the balance shall be paid by Tesla to the City in lieu of each such payment in
respect of that Billing Period. Any payment shall be made to the appropriate account
of the City.
(b)Save insofar as permitted by the provisions of Clause 5.4(a) above, all payments by
Tesla to the City under this Agreement shall be made free of any restriction or
condition, whether by way of set-off or otherwise, but the making of payments shall be
without prejudice to the other rights of Tesla.
5.5
5.6
Application of payments
Payments due from Tesla to the City pursuant to this Agreement, including payments for
Electric Service and Monthly Capacity Reservation Fees, will be subject to the provisions of
Rule and Regulation 11 of the CPAU Rules and Regulations.
Disputed Monthly Invoices
If Tesla wishes to dispute a Monthly Invoice, it shall do so in accordance with the CPAU Rules
and Regulations.
6.TERMINATION
6.1 Termination for Tesla Events of Default
The City may give notice to Tesla of its intention to terminate this Agreement before the
Expiration Date upon the occurrence of any of the following events (each, a "Tesla Event of
Default"), except where such event arises as a result of a material breach by the City of this
Agreement or a CPAU Event of Default:
(a)Tesla commits a material breach of any of its material obligations under this Agreement
and does not remedy the breach within thirty (30) Business Days of receiving notice
from the City of such breach, provided that if such failure cannot be remedied by Tesla
within such period of thirty (30) Business Days with the exercise of reasonable
diligence, then such cure period shall be extended for an additional reasonable period
of time (not to exceed thirty (30) Business Days), so long as such breach is capable of
being remedied with the exercise of reasonable diligence and Tesla is exercising
reasonable diligence to remedy such breach; or
(b)a representation or warranty made or repeated by Tesla in accordance with Clause 8.1
proves to have been incorrect or misleading in any material respect when made or
repeated.
6.2 Termination for CPAU Events of Default
Tesla may give notice to the City of its intention to terminate this Agreement before the
Expiration Date upon the occurrence of any of the following events (each, a "CPAU Event of
Default"), except where such event arises as a result of a material breach by Tesla of this
Agreement or a Tesla Event of Default:
(a)the City commits a material breach of any of its material obligations under this
Agreement and does not remedy the breach within thirty (30) Business Days of
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receiving notice from Tesla of such breach, provided that if such failure cannot be
remedied by the City within such period of thirty (30) Business Days with the exercise
of reasonable diligence, then such cure period shall be extended for an additional
reasonable period of time (not to exceed thirty (30) Business Days), so long as such
breach is capable of being remedied with the exercise of reasonable diligence and the
City is exercising reasonable diligence to remedy such breach; or
(b)a representation or warranty made or repeated by the City in accordance with Clause
8.1 proves to have been incorrect or misleading in any material respect when made or
repeated.
6.3 Termination Procedure
Upon the occurrence of Tesla Event of Default or a CPAU Event of Default, the following
procedures shall be followed by the Parties:
(a)Upon the occurrence of a Tesla Event of Default or a CPAU Event of Default, as the
case may be, which is not cured by the Defaulting Party within the applicable grace
period, if any, the other Party (the "Non-Defaulting Party") may, at its option, initiate
termination of this Agreement by delivering a notice of its intention to terminate this
Agreement (a "Notice of Intention to Terminate") to the Defaulting Party. The
Notice of Intention to Terminate shall specify in reasonable detail the Tesla Event of
Default or CPAU Event of Default, as the case may be, giving rise to such notice.
(b)
(c)
A Notice of Intention to Terminate given pursuant to Clauses 6.3(a) shall be specified
as such, and shall specify in reasonable detail the event giving rise to such notice.
Service of a Notice of Intention to Terminate by one Party shall not at any time preclude
service of a Notice of Intention to Terminate by the other Party.
Following the delivery of a Notice of Intention to Terminate, the Parties shall, consult
for a period ("Consultation Period") of thirty (30) days commencing on such delivery
date with respect to any such Tesla Event of Default or CPAU Event of Default (or
such longer period as the Parties may mutually agree), as to what steps shall be taken
with a view to mitigating the consequences of the relevant Tesla Event of Default or
CPAU Event of Default, as applicable, taking into account all the circumstances.
(d)During the Consultation Period:
(i)the Defaulting Party may continue to undertake efforts to cure the Default, and
if the Default is cured at any time prior to the delivery of a Termination Notice
in accordance with Clause 6.3(e), then the Non-Defaulting Party shall have no
right to terminate this Agreement in respect of such cured Default (but without
prejudice to any rights in respect of any future breach of this Agreement);
(ii)each Party shall not impede or otherwise interfere with the other Party's efforts
to remedy the Tesla Event of Default or CPAU Event of Default, as the case
may be, which gave rise to the issuance of the Notice of Intention to Terminate;
and
(iii)both Parties shall, save as otherwise provided in this Agreement, continue to
perform their respective obligations under this Agreement.
(e)If, during the Consultation Period, the Defaulting Party has diligently pursued the cure
of the Default but the Default could not, with the exercise of reasonable diligence, be
cured within such Consultation Period, then the Defaulting Party shall have the further
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period of time which is reasonably necessary to cure that Default, which, further period
shall, subject to Clause 6.3(g), not exceed thirty (30) days, and the Consultation Period
shall be extended in accordance with such extension.
(f)An extension to the Consultation Period of greater than the thirty (30) days referred to
in Clause 6.3(e) may be established if agreed by the Non-Defaulting Party.
(g)If a Defaulting Party determines that it requires the benefit of a further period to cure
the Default as provided for under Clause 6.3(e), it shall, as soon as reasonably
practicable thereafter (but not later than the expiration of the thirty (30) day period
established in accordance with Clause 6.3(e)) give notice to the Non-Defaulting Party
that more time is required to rectify the Default, giving a reasonable explanation as to
why more time is required and requesting that the Consultation Period be extended by
the further period referred to in the notice.
(h)Within fifteen (15) days of the expiration of the Consultation Period (as it may be
extended in accordance with the foregoing clauses), or, if there is no Consultation
Period, within fifteen (15) days of the date of the Notice of Intention to Terminate, or
unless, in the case of a Tesla Event of Default or a CPAU Event of Default giving rise
to the Notice of Intention to Terminate such Default shall have been remedied, the Party
having given the Notice of Intention to Terminate may terminate this Agreement by
delivering a notice to the other Party terminating this Agreement ("Termination
Notice"), whereupon this Agreement shall terminate on the date of the Termination
Notice.
7.DISPUTE RESOLUTION
Negotiation and Mediation7.1
(a)Any Dispute arising from or relating to this Agreement shall first be promptly referred
to the Parties' respective senior level management for resolution.
(b)If the Parties' senior level management are unable to resolve any such Dispute within
twenty (20) days after referral, or within any mutually agreed upon extension thereof,
either Party may, by notice to the other Party (the "Mediation Notice"), require such
Dispute to be submitted to non-binding mediation in Palo Alto, California, with a single
mediator who is mutually acceptable to the Parties. The Parties will use reasonable
efforts to cause such mediation to be convened, conducted and completed within a
reasonable period of time, from the date of the Mediation Notice, subject to the
availability of a mutually acceptable mediator and commensurate availability of the
individuals that each Party, respectively, requires to represent it at mediation, including
legal counsel, percipient witnesses, expert witnesses, sureties, and individuals
authorized to negotiate a settlement. The cost of mediation, including the mediator’s
fee, will be shared equally by the Parties, but each Party is solely responsible for its
own legal costs and its own legal representation.
7.2 Arbitration
(a) If and to the extent the Parties are unable to resolve the Dispute through mediation,
then either Party may take the unresolved portion of a Dispute to arbitration in
accordance with the then-current Streamlined Arbitration Rules of the Judicial
Arbitration and Mediation Services ("JAMS"). The existence, content and result of
the arbitration shall be held in confidence by the Parties, their representatives, any other
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participants and the arbitrator, subject to the limits of Law governing the City’s public
disclosure obligations.
(b)
(c)
(d)
The arbitration will be conducted by a single arbitrator selected by agreement of the
Parties or, failing such agreement, appointed in accordance with JAMS, in either case,
in San Francisco County, California.
The arbitration award shall be final and binding on the Parties and the Parties shall not
have the right to appeal any such award, except to the extent expressly required by
California Law.
Each Party will bear its own expenses in the arbitration and will share equally the costs
of the arbitration; provided, however, that the arbitrator may, in their discretion, award
reasonable costs and fees to the prevailing Party.
7.3 Performance of Obligations to Continue
(a)Pending final resolution of each Dispute hereunder, the Parties shall each continue to
fulfil their respective obligations hereunder, irrespective of whether any Dispute has
been noticed, submitted, or is under negotiation or consideration by either Party.
(b)Upon resolution of each Dispute, whether by agreement of the Parties or through a
Dispute proceeding, any amounts found to be owing by either Party shall be promptly
paid by the Party owing payment to the other Party from the day following the date of
the overpayment or underpayment, as applicable, until the date of repayment in full.
7.4 Specific Performance
Notwithstanding anything to the contrary contained in this Clause 7, if, due to a material breach
or threatened material breach a Party is suffering irreparable harm for which monetary damages
are inadequate, or if a Party is seeking to enforce an arbitration award obtained pursuant to this
Clause 7, such Party may petition a court of competent jurisdiction for injunctive relief, specific
performance or other equitable relief.
8.REPRESENTATIONS, WARRANTIES AND COVENANTS
General Representations and Warranties8.1
Each Party represents and warrants to the other Party on the Signature Date and the Effective
Date that:
(a)
(b)
(c)
it is a legal entity, duly organized, validly existing and in good standing under the Law
of jurisdiction of incorporation or formation, as applicable;
this Agreement constitutes a legal, valid and binding obligation of such Party
enforceable in accordance with its terms; and
the execution, delivery and performance of this Agreement (i) is within its powers; (ii)
has been duly authorized by all requisite action; and (iii) to the best of the Party’s
knowledge will not violate any agreement, commitment, certificate or other document
to which it is a party or by which any of its assets may be bound or affected.
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8.2 Covenants
Each Party shall comply with all applicable Law required for the performance of its obligations
under this Agreement.
9.ASSIGNMENT AND NOVATION
General9.1
Subject to Clause 9.2, neither Party shall assign or transfer its rights or obligations under this
Agreement without the prior written consent of the other Party. Any purported assignment,
novation or transfer without such consent, whether voluntary or involuntary, by operation of
Law, under legal process or proceedings, by receivership, in bankruptcy or otherwise, is void.
9.2 Unauthorized Assignments
Any attempted assignment of this Agreement (or any part thereof) or any of the rights, duties
and obligations under this Agreement other than in strict conformance with this Clause 9 is null
and void and of no force or effect.
10.NOTICES
Notices10.1
(a)All notices allowed or required under this Agreement shall be in writing, sent to the
address for notices given for the City and Tesla on the signature page to this Agreement,
or such other address as either Party may notify the other Party in writing from time to
time, and shall be deemed given:
(i)if sent by courier, on the date when left at the address of the recipient if such
date is a Business Day or on the next Business Day if such date is not a
Business Day; and
(ii)if sent by email, upon receipt by the sender of an email confirming receipt (or
otherwise evidencing receipt) of the notice by the recipient (in which case the
email will be deemed received on the date it was a received by the recipient if
such date is a Business Day, or on the next Business Day if such date is not a
Business Day). An automatic "read receipt" shall not constitute confirmation
of receipt for purposes of this Clause 10.1.
(b)Notices shall be sent to the notice address given for the City and Tesla on the signature
page to this Agreement, or such other address as either Party may notify the other Party
in writing from time to time. Nothing in this Clause 10.1 shall be construed to restrict
the transmission of routine communications between representatives of the City and
Tesla.
11.CONFIDENTIALITY AND ANNOUNCEMENTS
The Parties acknowledge that the City is subject to California Law governing charter cites,
including public disclosure requirements which include, but are not limited to, open meeting
requirements pursuant to Government Code section 54950 et seq. and public record disclosure
requirements pursuant to Government Code section 7920 et seq. Except as required for
compliance with applicable Law, neither Party shall advertise or issue any public announcement
regarding the execution of this Agreement or its contents, disclose the existence of this
Agreement or otherwise disclose its contents, or use the other Party’s mark, name or logo in
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any marketing literature, web sites, articles, press releases (including interviews with
representatives of media organizations of any form), or any other document or electronic
communication, without the prior written consent of the other Party. The foregoing shall not
prohibit a Party from making any public disclosure or filing that it determines in good faith is
required by Law, including, but not limited to, in respect of Tesla, the rules of the stock
exchange on which its shares, or the shares of its parent company, are listed.
12.MISCELLANEOUS
Governing Law12.1
This Agreement and all claims arising out of or relating to this Agreement and the transactions
contemplated hereby shall in all respects be governed by and interpreted in accordance with the
Law of the state of California, without regard to the conflicts of Law principles that would result
in the application of any Law other than the Law of such state.
12.2 No Waiver
(a)No waiver by either Party of any default or defaults by the other Party in the
performance of any of the provisions of this Agreement:
(i)shall operate or be construed as a waiver of any other or further default or
defaults whether of a like or different character; or
(ii)shall be effective unless in writing duly executed by a duly authorised
representative of such Party.
(b)Neither the failure by either Party to insist on any occasion upon the performance of
the terms, conditions, and provisions of this Agreement nor time or other indulgence
granted by one Party to the other shall act as a waiver of such breach or acceptance of
any variation or the relinquishment of any such right or any other right under this
Agreement, which shall remain in full force and effect.
12.3 Entire Agreement; Severability
This Agreement constitutes the entire agreement between the Parties regarding the subject
matter hereof and supersedes all prior agreements, representations and understandings, oral or
written, between the Parties regarding the subject matter hereof. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, such
term shall be severable from the remainder of this Agreement and the remainder of this
Agreement or the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected and each term and
provision of this Agreement shall be valid and be enforced to the fullest extent permitted by the
Law.
12.4 Costs
Each Party will be solely responsible for its own costs and expenses incurred in connection with
the preparation, negotiation, execution, delivery and performance of, and compliance with, this
Agreement.
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12.5 Amendment; Modification; Waiver
No amendment or modification of this Agreement is effective unless it is in writing and signed
by each Party. No waiver by either Party of any provision of this Agreement is effective unless
explicitly set forth in writing and signed by such Party. No failure to exercise, or delay in
exercising, any right or remedy arising from this Agreement operates or may be construed as a
waiver thereof. No single or partial exercise of any right or remedy hereunder precludes any
other or further exercise thereof or the exercise of any other right or remedy.
12.6 Relationship of the Parties
The relationship between the Parties is that of independent contractors. Nothing contained in
this Agreement shall be construed as creating any agency, partnership, joint venture or other
form of joint enterprise, employment or fiduciary relationship between the Parties, and neither
Party shall have authority to contract for or bind the other Party in any manner whatsoever.
12.7
12.8
Further Assurances
Each Party agrees to execute and deliver all further instruments and documents, and take all
further action, as may be reasonably necessary to complete performance by the Parties
hereunder and to effectuate the purposes and intent of this Agreement.
No Third-Party Beneficiaries
This Agreement and all rights hereunder are intended for the sole benefit of the Parties and shall
not imply or create any rights on the part of, or obligations to, any other person. Claims by
non-Parties indemnified pursuant to this Agreement may only be brought by a Party to this
Agreement.
12.9 Survival
Provisions of this Agreement which by their nature contemplate or govern performance or
observance subsequent to the termination or expiration of this Agreement or any transactions
contemplated herein shall survive such termination or expiration. Except as otherwise set forth
in this Agreement, the expiration or termination of this Agreement will not affect any liabilities
of the Parties that accrued prior to such expiration or termination.
12.10 Good Faith and Fair Dealing
Each Party's actions in connection with this Agreement (including in the performance of its
obligations and enjoyment of its rights hereunder), will be undertaken in accordance with the
principles of good faith and fair dealing. Such obligation shall be interpreted to mean that a
Party must act honestly and reasonably, but shall not be required to otherwise act contrary to
its legitimate commercial interests.
12.11 Successors and Assigns
This Agreement shall be binding upon, and inure to the benefit of the Parties and their respective
successors and permitted assigns.
12.12 Counterparts
This Agreement may be executed by each Party on a separate counterpart, each of which when
executed and delivered shall constitute an original, but both counterparts shall together
constitute one and the same instrument.
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12.13 Mutuality of drafting
The Parties hereby stipulate and agree that each of them fully participated and was
adequately represented by counsel in the negotiation and preparation of this Agreement and
the Parties further stipulate and agree that in the event of an ambiguity or other necessity
for interpretation to be made of the content of this Agreement, this Agreement shall not be
construed in favour of or against either Party as a consequence of such Party having had a
greater role in the preparation of this Agreement, but shall be construed as if the language
were mutually drafted by both Parties with full assistance of counsel.
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In witness whereof the Parties, intending to be legally bound, have caused this Agreement to be executed
by their duly authorised officers as of the date first above written.
CITY OF PALO ALTO
By:
Name: Ed Shikada
Title: City Manager
APPROVED AS TO FORM:
By:
Name: Molly Stump
Title: City Attorney
APPROVED:
By:
Name: Dean Batchelor
Title: Director of Utilities
ADDRESS:
City of Palo Alto
City Clerk
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
With copies to:
Utilities Department
250 Hamilton Avenue
Palo Alto, CA 94303
Signature Page to Capacity Reservation Agreement
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ATTN: Tomm Marshall
TESLA, INC.
By:
Name: Vaibhav Taneja
Title: Chief Financial Officer
Address:
Attn:
1 Tesla Road, Austin, TX 78725
General Counsel / Legal
+1.512.516.8177Phone:
Email:
cc:
legal@tesla.com
energynotices@tesla.com
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SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS
The Reserved Capacity for the Tesla Facilities is 11,200 kVA unless modified by a Capacity
Reservation Modification.
Determination of the Monthly Capacity Reservation Fee
The Monthly Capacity Reservation Fee for the Reserved Capacity listed above is calculated in kW
rather than kVA. This is because the City meters peak energy Demand based on kW rather than kVA.
To calculate a Monthly Capacity Reservation Fee based on kW for a Reserved Capacity based on kVA,
a conversion from kVA to kW is required. In actual day-to-day operation of the CPAU electric system,
a capacity of 1 kVA might be able to transmit a range of kW quantities depending on the characteristics
of the electric load. For the purpose of the Monthly Capacity Reservation Fee this Agreement assumes
that 11,200 kVA Reserved Capacity corresponds to 9,000 kW Demand. Because the Monthly Capacity
Reservation Fee is intended to reimburse the City for the opportunity cost of reserving unused capacity
for Tesla rather than marketing it to other customers, it is indexed to the Distribution Demand Charge
for the applicable rate schedule. However, because the Distribution Demand Charges are designed to
recover costs based on a month-varying metered peak Demand, the Capacity Reservation Fee includes
a month-varying Contracted Peak Demand below that corresponds to a monthly load shape that the City
and Tesla have agreed is reflective of what the Parties expect Tesla’s eventual actual load shape will
be.
(a)For the purposes of this Schedule 1, the following term has the following meaning:
"Contracted Peak Demand" means, for each Billing Period corresponding with the relevant
month:
(i)January:
February:
March:
April:
7,500 kW;
7,500 kW;
7,500 kW;
7,500 kW;
7,500 kW;
9,000 kW;
9,000 kW;
9,000 kW;
9,000 kW;
7,500 kW;
7,500 kW; and
7,500 kW.
(ii)
(iii)
(iv)
(v)May:
(vi)
(vii)
June:
July:
(viii) August:
(ix)
(x)
September:
October:
(xi)
(xii)
November:
December:
(b)Determination of the Monthly Capacity Reservation Fee
Schedule 1
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The "Monthly Capacity Reservation Fee" for any Billing Period shall be an amount in USD
equal to:
(B – A)*C
where:
A is the highest fifteen (15) minute peak Demand measured by CPAU meter(s) in relation
to the Tesla Facilities during that Billing Period;
B
C
is the Contracted Peak Demand for that Billing Period; and
is the Distribution Demand Charge(s) applicable to the peak time period for the season
corresponding to the Billing Period defined in the applicable rate schedule set by the
City and selected by Tesla (if multiple rate schedules apply) pursuant to the CPAU
Rules and Regulations.
Notwithstanding the foregoing, if application of the formula set forth hereinabove for determining the
Monthly Capacity Reservation Fee results in a negative number sum for any Billing Period, for purposes
of this Agreement, that negative number sum will be deemed to equal zero for that Billing Period.
Schedule 1
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SCHEDULE 2: MONTHLY CAPACITY USAGE CREDIT
Determination of the Monthly Capacity Usage Credit
(a)For the purposes of paragraph (b) of this Schedule 2, the following terms have the following
meaning:
"Capacity Usage Credit Maximum" means an amount in USD equal to the aggregate amount
of the General Use Utility Asset Costs incurred by Tesla pursuant to the Improvement
Agreement, excluding therefrom those amounts that have reimbursed to Tesla by the City under
the terms of the Improvement Agreement. The Parties will amend this Schedule 2 to include
the amount of the Capacity Usage Credit Maximum within 14 Business Days following
payment of the “City Reimbursement” pursuant to the Improvement Agreement, as that term is
defined therein.
"General Use Utility Asset Costs" means, in relation to the improvements installed by Tesla
and accepted by the City pursuant to the Improvement Agreement, the aggregate documented
cost in USD incurred by each Party associated with the material cost, but excluding the design
and construction costs, of all equipment and fixed assets that can be used for any CPAU
customer (and not restricted to serving a Tesla Facility), as determined by CPAU, including,
but not limited to, transformers, switchgear, protection equipment, and cables, but expressly
excluding any costs associated with the acceleration of production or accelerated delivery of
such equipment.
(b)Determination of the Monthly Capacity Usage Credit
The "Monthly Capacity Usage Credit Rate" for any Billing Period during the Capacity
Reservation Period shall be an amount specified on a USD per kWh basis equal to:
A / (B * C)
where:
A
B
is the Capacity Usage Credit Maximum;
is the estimated annual electrical consumption of the Tesla Facilities expressed in units
of kWh, being 75,000,000 kWh; and
C is the Capacity Usage Credit Period expressed in years, being seven (7) years.
The “Monthly Capacity Usage Credit” for any Billing Period shall be an amount specified in
USD equal to the Monthly Capacity Usage Credit Rate multiplied by the Delivered Energy for
the Billing Period.
Schedule 2
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EXHIBIT E
PROJECT SCHEDULE
Pursuant to Section 8.2, the below schedule, dated December 14, 2024, constitutes the
planned schedule for design and construction of the Project as of the Effective Date of the
Agreement.
Project completion is expected to occur 245 days after the latter of the issuance of the Notice
to Proceed, applicable permits, or execution of this Agreement.
•
•
•
•
•
City Council Approval: January 16, 2024
Construction begins: January 29, 2024
Demolition: January 29, 2024 – March 2024
Power Distribution Center delivery: April 2024
Project Completion: September 17, 2024
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EXHIBIT F
INSURANCE REQUIREMENTS (TESLA)
1.1. Commercial General Liability Insurance.
1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third
party bodily injury or property damage.
1.1.2. USD $10,000,000 general aggregate
1.1.3. Coverages.
1.1.3.1.
met by combination of Primary and Umbrella or Excess Liability policies.
1.1.3.2. Include the City as additional insured where required by written
contract.
The total of required limits for liability coverage required herein may be
1.2. Business Automobile Liability Insurance.
1.2.1. USD $1,000,000 combined single limit for third party bodily injury or third party
property damage,
1.2.2. Coverages.
1.2.2.1.
with the work performed under this Agreement.
1.2.2.2. Include the City as additional insured where required by written
contract.
Coverage with respect to any l vehicles of Tesla used in connection
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1.
1.3.1.1.1.
1.3.1.1.2.
Coverages.
As required by state or federal laws.
Tesla may waive Workers’ Compensation Insurance
requirement if it is a qualified self-insured in the state in which the work
under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1.
1.3.2.2.
1.3.2.3.
USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit F shall
include a waiver of subrogation. This release and waiver shall be null and void if such loss or
damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. Tesla shall give the other party prior written notice in the event of
cancellation of any policy required to be obtained under Exhibit F.
Deductibles and Self-Insured Retentions. Tesla may select their own insurance
deductibles or self-insured retentions for insurances required under Exhibit F, to the extent
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such deductibles or self-insured retentions are reasonable. Tesla’s self-insured retentions
and deductibles are the sole responsibility of Tesla.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of
insurance during the Term, Tesla shall provide certificates of insurance to the other party
evidencing the required insurance in Exhibit F.
Subcontractor Insurance. Tesla shall require each of its subcontractors performing work
during the Term to maintain insurance coverage in accordance with the insurance
requirements of Tesla’s standard subcontract, supplier or designer agreements, as
applicable.
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EXHIBIT G
INSURANCE REQUIREMENTS (ENGINEER)
1.1. Commercial General Liability Insurance.
1.1.1. USD $2,000,000 each occurrence or per claim, combined single limit for third
party bodily injury or property damage.
1.1.2. USD $2,000,000 general aggregate
1.1.3. Coverages.
1.1.3.1.The total of required limits for liability coverage required herein may be
met by combination of Primary and Umbrella or Excess Liability
policies.
1.1.3.2.
1.1.3.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.2. Business Automobile Liability Insurance.
1.2.1. USD $1,000,000 combined single limit for third party bodily injury or property
damage.
1.2.2. Coverages.
1.2.2.1.Coverage with respect to any and all vehicles of the General Contractor
whether owned, hired, leased, borrowed, or non-owned, assigned to or
used in connection with the work performed under this Agreement.
Include the City and Tesla as additional insured.1.2.2.2.
1.2.2.3.Separation of insureds/severability of interests.
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1.
1.3.1.1.1.
1.3.1.1.2.
Coverages.
As required by state or federal laws.
The General Contractor may waive Workers’ Compensation
Insurance requirement if it is a qualified self-insured in the state in
which the work under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1.
1.3.2.2.
1.3.2.3.
USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
1.4. Professional Liability or Errors and Omissions Insurance.
1.4.1. USD $5,000,000 each claim.
1.4.2. USD $5,000,000 in aggregate.
1.4.3. Coverages.
1.4.3.1.Written on a Claims-made basis
1.4.3.2.The retroactive date shall be not later than the Effective Date.
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Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit G shall
include a waiver of subrogation. This release and waiver shall be null and void if such loss or
damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. The Engineer shall give the City prior written notice in the event of
cancellation of any policy required to be obtained under Exhibit F.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of
insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing
the required insurance in Exhibit G.
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EXHIBIT H
INSURANCE REQUIREMENTS (GENERAL CONTRACTOR)
1.1. Commercial General Liability Insurance.
1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third
party bodily injury or property damage.
1.1.2. USD $5,000,000 general aggregate
1.1.3. USD $5,000,000 products/completed operations aggregate.
1.1.4. Coverages.
1.1.4.1.The total of required limits for liability coverage required herein may be
met by combination of Primary and Umbrella or Excess Liability policies.
1.1.4.2.
1.1.4.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.2. Business Automobile Liability Insurance.
1.2.1. USD $5,000,000 combined single limit for third party bodily injury or property
damage,
1.2.2. Coverages.
1.2.2.1.Coverage with respect to any and all vehicles of the General Contractor
whether owned, hired, leased, borrowed, or non-owned, assigned to or
used in connection with the work performed under this Agreement.
1.2.2.2.
1.2.2.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1.
1.3.1.1.1.
1.3.1.1.2.
Coverages.
As required by state or federal laws.
The General Contractor may waive Workers’ Compensation
Insurance requirement if it is a qualified self-insured in the state in
which the work under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1.
1.3.2.2.
1.3.2.3.
USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
1.4. Contractor’s Pollution Liability Insurance.
1.4.1. USD $1,000,000 each claim.
1.4.2. USD $2,000,000 in aggregate.
1.4.3. Coverages.
1.4.3.1.
1.4.3.2.
Written on a Claims-made basis.
The retroactive date shall be not later than the Effective Date.
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Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit H shall
include a waiver of subrogation. This release and waiver shall be null and void if such loss or
damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. The General Contractor shall give the City prior written notice in the
event of cancellation of any policy required to be obtained under Exhibit H.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of
insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing
the required insurance in Exhibit H.
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EXHIBIT I
CONSTRUCTION CONTRACT FORM
Master Services Agreement (Construction)
This Master Services Agreement (“MSA” or “Agreement”) is entered into by and between Tesla Inc., a Delaware
corporation with offices at 13101 Tesla Road, Austin, Texas 78725 (“Tesla” or “Owner”) and the service
provider identified below (“Contractor”) effective as of the date signed below by Tesla (“Effective Date”) and
govern Contractor’s performance, and Tesla’s purchase, of services.
1.THE SERVICES
1.1 Obligation to Provide the Services, Generally. The parties intend through this Agreement to create a
master contract setting forth the terms and conditions under which the Contractor will perform the Work
and/or specified services, which make up the whole or a portion of particular Project or Projects. Individual
work orders (“Work Authorization” or “Work Authorizations”) will be executed in the form attached hereto as
Exhibit A, setting forth the agreement regarding Project-specific terms. This Agreement does not obligate
Owner to engage Contractor to perform any work or Contractor to perform any work, until both parties have
signed a Work Authorization, and then only for the Project specified in the Work Authorization. Any affiliate
of Owner (the “Service Recipient”) will have the right to enter into a Work Authorization pursuant to this
Agreement, and with respect to such Work Authorization, such affiliate becomes a party to this Agreement and
references to Owner in this Agreement are deemed to be references to such affiliate.
1.2 Authorization of Services through Work Authorization. Contractor shall provide, and Tesla may
purchase, Services pursuant to a Work Authorization. Both parties must sign a Work Authorization for it to be
effective. If Contractor commences services for Owner or any affiliate of Owner in the absence of a Work
Authorization, this Agreement will nevertheless apply, unless the parties agree otherwise in a writing signed
by both parties. If there is a conflict between this Agreement and an Work Authorization, the terms of this
Agreement will prevail; except that an Work Authorization may amend or override the terms of this Agreement
if and to the extent that the Work Authorization identifies the provision(s) of the Agreement the Work
Authorization is intended to amend or override and expressly states that the Parties intend to amend or
override such provision(s) for purposes of that Work Authorization. The execution of a Work Authorization by
the Owner and the Contractor creates a separate and distinct standalone construction contract that is
applicable only to the Project identified in the Work Authorization, even though such Project-specific
construction contract incorporates and makes reference to this Agreement, and other Project-specific
construction contracts may also incorporate and refer to this Agreement. In no event shall the rights and
obligations of the Owner and Contractor under one Project-specific construction contract affect the rights and
obligations of Owner and Contractor under a different Project-specific construction contract.
1.3 Work; Scope of the Services. For each Project, the term “Work” means all reasonably necessary and
inferable construction and services required of the Contractor by the Contract Documents (including, without
limitation, all work, labor, materials, tools, equipment, transportation, procedures, techniques, and supplies),
whether completed or partially completed, and whether completed by Contractor, Subcontractors, Sub-
subcontractors, Suppliers or any other entity for whom the Contractor is responsible under or pursuant to the
Contract Documents, and includes all other labor, materials, equipment and services provided or to be provided
by the Contractor to fulfill the Contractor’s obligations, including final completion of the construction in
accordance with the Drawings and Specifications to achieve a complete and functioning Project in compliance
with the Contract Documents. The Work may constitute the whole or a part of the Project, as described in the
applicable Work Authorization. The “Services” are the following, as they may be supplemented, modified or
replaced during the Term: (a) the functions described in this Agreement or in an Work Authorization as
functions for which Contractor is responsible; and (b) any functions related to the foregoing that are not
specifically described in this Agreement or in an Work Authorization but are required for the provision of the
Services and the completion of the Work in accordance with this Contract Documents.
1.4 Services Not Exclusive. Contractor is a non-exclusive provider of Services. Tesla and its Affiliates have
no obligation to order or purchase any Services. The extent and quantity of Services purchased shall be
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determined by Tesla. Tesla may purchase from any third party services that are identical or similar to the
Services described in this Agreement. Contractor will cooperate and coordinate with Tesla or any other service
providers selected by Tesla as reasonably required for Tesla or the service provider to perform services for
which it is responsible.
1.5 Relationship of the Parties. The Contractor accepts the relationship of trust and confidence established
by this Agreement and covenants with the Owner to cooperate with the Owner and all of the Owner’s
consultants, and exercise the Contractor’s skill and judgment in furthering the interests of the Owner; to furnish
efficient business administration and supervision; to furnish at all times an adequate supply of workers and
materials; and to perform the Work in an expeditious and economical manner consistent with the Owner’s
interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor
and to make payments to the Contractor in accordance with the requirements of the Contract Documents.
Nothing in this Agreement shall be deemed to create a joint venture or partnership between Contractor and
Tesla or any of Tesla’s Affiliates.
1.6 The Contract Documents. The Contract Documents form the “Contract for Construction” or the
“Contract”. The Contract represents the entire and integrated agreement between the Owner and Contractor
and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be
amended or modified only by a Work Authorization or Modification. The Contract Documents shall not be
construed to create a contractual relationship of any kind (1) between the Owner and a Subcontractor or a Sub-
subcontractor, or (2) between any persons or entities, other than the Owner and the Contractor. For each
Project, the Contract Documents consist of this Agreement, any Supplementary Conditions of the Agreement as
set forth in the applicable Work Authorization, Drawings, Specifications, Addenda issued prior to execution of
this Agreement, the applicable Work Authorization, other documents listed in the Work Authorization and
Modifications issued after execution of this Agreement, all of which form the Contract, and are as fully a part of
the Contract as if attached to this Agreement or repeated herein. Except as provided to the contrary in any
Work Authorization or Modification, the Contract represents the entire and integrated agreement between the
parties hereto and supersedes prior negotiations, representations or agreements, either written or oral,
including, without limitation the terms of any purchase order now or hereafter accepted (or deemed accepted)
by Contractor.
2.PERFORMANCE
2.1 Time of Performance.
(a)Contract Time. The Commencement Date shall be the date of the notice to proceed with construction
on the Project site ("Notice to Proceed") sent by Owner to Contractor with respect to the Project or such other
date as set forth in the Work Authorization. No Work on site shall be commenced by Contractor until receipt
of a Notice to Proceed from Owner. However, during the period between the date the Agreement is executed
and the date the Notice to Proceed is issued, certain elements of the Work may be authorized by the Owner.
During such period all of the terms of the Agreement shall apply. The Contract Time shall be measured from
the Commencement Date as specified in the applicable Work Authorization or Notice to Proceed. The
Contractor shall achieve Substantial Completion of the Work within the Contract Time(s) specified in the
applicable Work Authorization, subject to adjustments of the Contract Time as provided in the Contract
Documents. Contractor will provide the resources necessary to, and will, complete all Services diligently, in a
timely manner, and in accordance with the time schedules set forth in this Agreement (or applicable Work
Authorization). Time is of the essence with respect to the provision of Services under this Agreement.
Contractor will promptly notify Tesla in writing upon becoming aware of any circumstances that may
reasonably be expected to jeopardize the timely completion of any Services. Contractor will use Commercially
Reasonable Efforts to avoid or minimize any delays in performance and will inform Tesla of (a) the steps
Contractor is taking or will take to do so and (b) the projected completion time. Within thirty days after the
Effective Date, Contractor shall prepare and submit to Owner for Owner’s approval a schedule for performance
of the Work in a format and with a level of detail acceptable to Owner (the “Construction Schedule”). The
Construction Schedule shall be of a critical path method type, acceptable to the Owner, that shall also (i) provide
a graphic representation of all activities and events that will occur during the performance of the Work; (ii)
identify each phase of construction and occupancy; (iii) set forth dates that are critical in ensuring the timely
and orderly completion of the Work in accordance with the requirements of the Contract Documents (“Project
Milestones”); and (iv) include time loss for normal adverse weather conditions whether shown in the
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Contractor’s logic and durations or not. The schedule shall be regularly updated by Contractor to reflect Project
progress and conditions and any such updates shall be promptly provided to Owner in electronic and hard
copy.
(b)Substantial Completion.
(i)Unless otherwise defined in an applicable Work Authorization, Substantial Completion is the
stage in the progress of the Work when the Work or designated portion thereof is sufficiently
complete in accordance with the Contract Documents so that the Owner can occupy or utilize the
Work for its intended use, subject only to a list (“Punchlist”) of minor items that do not adversely
affect such use (“Punchlist Items”), provided, in addition, that as a condition precedent to
Substantial Completion, the Contractor shall provide the Owner with a schedule of all permits
required for the Work and occupancy of the Project and, attached to such schedule, a copy of
each such permit.
(ii)When the Contractor considers that the Work, or a portion thereof which the Owner agrees to
accept separately, is substantially complete, the Contractor and Owner will make an inspection
to determine whether the Work or designated portion thereof is substantially complete. If the
Owner’s inspection discloses any item, including a Punchlist Item, which is not sufficiently
complete in accordance with the Contract Documents so that the Owner can occupy or utilize the
Work or designated portion thereof for its intended use, the Contractor shall, before issuance of
the Certificate of Substantial Completion, complete or correct such item upon notification by the
Owner. In such case, the Contractor shall then submit a request for another inspection by the
Owner to determine Substantial Completion.
(iii)When the Work or designated portion thereof is substantially complete, the Contractor will
prepare a “Certificate of Substantial Completion” that shall establish the date of Substantial
Completion, shall establish responsibilities of the Owner and Contractor for security,
maintenance, heat, utilities, damage to the Work and insurance, and shall fix the time within
which the Contractor shall finish any and all items on the Punch List accompanying the
Certificate of Substantial Completion. Warranties required by the Contract Documents shall
commence on the date of Substantial Completion of the Work or designated portion thereof
unless otherwise provided in the Certificate of Substantial Completion. The Contractor shall
complete all items within 30 days after issuance of the Certificate of Substantial Completion,
provided, however, if certain items cannot be completed due to the unavailability of necessary
labor or materials, the Contractor shall have such additional time as is reasonably required to
complete such items. All Work to be performed by the Contractor after Substantial Completion,
including but not limited to Punch List work, shall be coordinated with the Owner and shall be
performed after-hours unless otherwise agreed to by the Owner.
(iv)The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for
their written acceptance of responsibilities assigned to them in such certificate. Upon such
acceptance and consent of surety, if any, the Owner shall make payment of retainage applying to
such Work or designated portion thereof. Such payment shall be adjusted for Work that is
incomplete or not in accordance with the requirements of the Contract Documents
(c)Late Delivery Damages. Without limiting the foregoing and subject to the limitations, if any, set forth
in the Work Authorization, Owner shall have the right to recover its damages incurred for actual, out-of-pocket
costs either, in Owner’s sole discretion, (i) to expedite Owner’s vendors’ work to avoid having to hold over in
existing premises or to find replacement premises due to a delay caused by Contractor; or (ii) to hold over in
existing premises or to find and occupy replacement premises, including, but not limited to, increased rent,
moving, storage, transportation, fit-out and temporary occupancy costs due to a delay caused by Contractor.
(d)Delays and Extensions of Times. If the Contractor is delayed at any time in the commencement or
progress of the Work by (i) an act or neglect of the Owner or of an employee or of separate contractor employed
by the Owner; or by changes ordered in the Work by Owner (collectively “Compensable Delays”); or by (ii)
labor disputes beyond the Contractor’s control, fire, or unavoidable casualties (collectively “Excusable Delays”),
then in either case, the Contract Time shall be extended by Change Order to the extent such delay will prevent
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the Contractor from achieving Substantial Completion within the Contract Time, taking into consideration,
without limitation, any float in the critical path Project schedule. The Contractor acknowledges and agrees that
equitable adjustments in the Contract Time and equitable adjustments to the Contractor’s General Conditions
will be permitted for a delay only to the extent such delay (i) is not caused by the Contractor or its
Subcontractors of any tier or its Suppliers, (ii) could not be limited or avoided by the Contractor’s timely notice
to the Owner of the delay or reasonable likelihood that a delay will occur, or (iii) could not be avoided or
mitigated by reasonable work-around or precautionary measures. If there is a concurrent delay to the critical
path attributable to Contractor and Owner, it will be proportionately allocated between Owner and Contractor
based on the percent of impact caused by each party. The part of a concurrent delay allocated to the Owner is
an Excusable Delay. Any adjustment in the Contract Time shall be limited to the impact of a delay on the critical
path of the Project schedule. The Contractor further agrees that its right to receive an extension of time
pursuant to the provisions of this Section shall be Contractor’s sole and exclusive remedy with regard to any
delays or interferences with the Contractor’s schedule for completion of the Work, and Contractor hereby
waives any and all claims for monetary damages arising out of or related to any such delay or interference,
including, without limitation, claims for delay damages, and any other form of time-related damages, or any
other claimed direct or consequential damages of any type or nature whatsoever.
(e)Change Orders
(i)Change Orders Generally. Changes in the Services may be accomplished after execution of the
Work Authorization by written agreement (including via email) of Contractor and Tesla (each a
“Change Order”) using the change order form set forth in Exhibit B. Tesla will not be responsible
for any change to the Contract Price unless Tesla approves or directs additional or changed
Services through a Change Order before such additional or changed Services are commenced.
Upon mutual execution of a Change Order, Contractor will promptly comply with such Change
Order and all the terms and conditions of the Agreement apply to any Change Order. The
Contract Price or Contract Time shall not be increased or extended by a Change Order except as
specifically set forth in the Change Order. The adjustment to Contract Price, if any, for any change
agreed to by the Contractor and Tesla in a particular Change Order shall constitute full and total
payment for such change and for the impact (direct or indirect) to the remainder of the Services,
and no other claim for any additional cost, damage, loss or expenses of any kind may be made by
Contractor as a result of such Change Order.
(ii)Change Order Requests by Contractor. Contractor may request changes to a Work Authorization
by delivering a written request to Tesla (a “Change Order Request”). Any Change Order Request
made by Contractor will include the following information: (a) a clear and concise explanation
of the proposed changes; (b) validation of the requirements of the changes; (c) the exact amount
and explanation of methods used to calculate any adjustments in the Contract Price and/or Work
Schedule resulting from the Changes; and (d) a proposal for an updated Contract Price, Contract
Time and Project Milestones, as applicable. A Change Order Request will not modify any Order
until Tesla executes a Change Order expressly accepting the Change Order Request. Contractor
will continue to perform obligations under the Agreement and Order regardless of the status or
outcome of Change Order Requests.
2.2 Manner of Performance. The Contractor agrees to provide the Work in accordance with the
requirements of the Contract Documents and in accordance with the construction industry standards and
practices. For each Project, the Contractor shall fully execute the Work described in the Contract Documents,
except as specifically indicated in the Contract Documents to be the responsibility of others. The Contractor
shall supervise and direct the Work, using the Contractor’s best skill and attention in accordance with the
Contract Documents, all Laws, and the construction standards and practices for the industry. The Contractor
shall be solely responsible for, and have control over, initiating, maintaining, and supervising all safety
precautions and programs to insure the safe provision or performance of the Work, and will control, supervise
and direct the construction means, methods, techniques, sequences and procedures and coordinate all portions
of the Work under the Contract, unless the Contract Documents give other specific instructions concerning
these matters. If the Contract Documents give specific instructions concerning construction means, methods,
techniques, sequences or procedures, the Contractor shall evaluate the jobsite safety thereof and, except as
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stated below, shall be fully and solely responsible for the jobsite safety of such means, methods, techniques,
sequences or procedures. If the Contractor determines that such means, methods, techniques, sequences or
procedures may not be safe, the Contractor shall give timely written notice to the Owner and shall not proceed
with that portion of the Work without further written instructions from the Owner. If the Contractor is then
instructed to proceed with the required means, methods, techniques, sequences or procedures without
acceptance of changes proposed by the Contractor, the Contractor shall not be responsible for any loss or
damage arising solely from those Owner-required means, methods, techniques, sequences or procedures.
Except with respect to third-party vendors performing work at the Project site pursuant to separate contracts
between the Owner and such vendors, Contractor shall be solely responsible for all construction means,
methods, techniques, sequences and procedures and for coordinating all portions of the Work. Contractor shall
give Contractor's personal supervision to the Work using Contractor's best skill and attention. Contractor
agrees to cooperate and coordinate with any third-party vendors performing work at the Project site pursuant
to separate contracts between the Owner and such vendors, including reasonable cooperation in scheduling
the use of shared items such as freight elevators, cranes and loading areas
2.3 Review of Project Site and Contract Documents. Execution of the Agreement by Contractor constitutes
a representation by Contractor that it has visited the Project Site and reviewed the Contract Documents, and is
familiar with the requirements of the Work and the conditions under which the Work will be performed. In
particular, Contractor represents that it has satisfied itself with regard to the geotechnical and underground
conditions related to the Work, and has performed all of the investigation of such conditions the Contractor has
determined is necessary. The Contractor shall promptly send written notice to the Owner if the Contractor
encounters any differing site conditions, or if the Drawings and Specifications are incomplete or if there are
any errors or omissions in the Drawings. In addition, as part of the Work, the Contractor must satisfy all
applicable federal and local laws, codes, regulations, ordinances and orders, as well as applicable regulations
of any other body with jurisdiction over the Project and requirements of public or private utilities with no
increases in the Contract Price or Contract Time. The Contractor acknowledges that (a) the Contractor has
included the Contract Price to cover all costs which may result from the risks assumed by the Contractor in this
Agreement, (b) the Contractor waives all rights to claim additional costs above the Contract Price as a result of
the assumption of these risks, and (c) the provisions of this paragraph 2.3 apply notwithstanding any
provisions to the contrary contained in the Contract Documents.
2.4 Responsibility for Supplying Certain Resources. Contractor shall provide and pay for all labor,
materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and
other facilities and services necessary for proper execution and completion of the Work whether temporary or
permanent and whether or not incorporated into the Work. Contractor shall be responsible for the proper
delivery, handling, application, storage, removal and disposal of all materials and substances brought to the
Project Site by Contractor. The Contractor shall have the responsibility to coordinate the Contractor’s work
with the utility service providers, municipal and/or off-site Contractors related to the Project and in the
absence of other special provision of Contract Documents to the contrary, shall be required to coordinate with
said entities the physical street/right-of-way work and connection to the structures and/or extensions from
the structures to the off-site and/or on-site utilities so that the Work constructed by the Contractor is properly
sequenced, and functional for the intended use and purpose thereof. Such coordination and supervision costs
incidental thereto, are incidental to the Work and part of the Contract Price. Contractor shall plan and lay out
all Work in advance of operations so as to coordinate all Work without delay or revision. Contractor shall
establish and maintain existing lot lines, restrictions and benchmarks. Contractor shall establish and maintain
all other lines, levels and benchmarks necessary for execution of the Work and take necessary steps to prevent
dislocation or destruction.
2.5 Compliance with Laws and Tesla Policies.
(a)Except for permits and fees that are specifically made the responsibility of Tesla by this Agreement or
any Work Authorization, Contractor will, at its cost and expense, obtain all necessary regulatory approvals,
licenses, and permits (collectively, “Permits”) applicable to its business and comply with all Laws applicable to
its business or the performance of its obligations under this Agreement, as such Laws may be revised from time
to time. Contractor shall provide copies of any such Permits at Tesla’s request.
(b)Contractor will comply with, and perform the Services in compliance with, all Laws pertaining to:
(i) occupational safety and health; (ii) protection of persons and property from death, injury or damage;
(iii) the environment and the use, handling, storage, labeling and disposal of toxic or hazardous materials;
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(iv) labor and employment conditions; (v) wages and hours; (vi) workmen’s compensation and unemployment
insurance, (vii) affirmative action and equal employment opportunity; and (viii) to the extent relevant to
Contractor’s performance of Services, Laws with respect to data privacy, data protection, and consumer
privacy.
(c)To the extent not prohibited by Law, Contractor will promptly notify Tesla in writing of any
investigation or inquiry into whether Contractor (or any of its Subcontractors) is charged with failing to comply
with any Laws that may or will impact, or are otherwise applicable to, Contractor’s performance under this
Agreement.
(d)If the Project site is a site that Owner leases from the underlying owner of the site (the “Landlord”) and
Owner is making improvements to the site for purposes of occupancy as a tenant in connection with the use
and occupancy of the Project site, Contractor will comply with the requirements of the use, license, or lease
agreement to which Owner and Landlord are a party, together with any rules and regulations of the Project site
put in place by the Landlord. Contractor acknowledges that disputes between Owner and Landlord (if any) may
become subject to arbitration under the provisions of lease between Owner and Landlord, and if requested in
writing by Owner to do so, Contractor shall participate in and become a party to any such arbitration
proceeding and agrees to be bound by any final and binding arbitration decision rendered therein. This Section
shall apply only to issues and claims directly relating to Contractor and only so long as Contractor has the
opportunity and rights to fully participate in any arbitration, including, but not limited to, selection of
arbitrators.
(e)Contractor will comply with any Tesla policies, standards, rules, and procedures (collectively, “Tesla
Policies”) applicable to performance of the Services or the Tesla Facility that are disclosed to Contractor in
writing, as such Tesla Policies may be revised from time to time.
2.6 Suspension of Performance. The Owner may, without cause, order the Contractor in writing to
suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine.
The Contract Price and Contract Time shall be adjusted for increases and decreases in the cost and time caused
by suspension, delay or interruption as described in Section 2.1(d). No adjustment shall be made to the extent:
(1) that performance is, was or would have been so suspended, delayed or interrupted by another cause for
which the Contractor is responsible; or (2) that an equitable adjustment is made or denied under another
provision of the Contract.
2.7 Warranty. In addition to any other warranty provisions contained in the Agreement, Contractor
warrants to Tesla that Materials and equipment furnished under the Agreement will be of good quality and
new unless otherwise required or permitted, that the Work will be free from defects not inherent in the quality
required or permitted, and that the Work will conform to the requirements of the Contract Documents. Work
not conforming to these requirements, including substitutions not properly approved, shall be considered
defective. Contractor’s warranty excludes damage or defect caused by abuse, modifications not executed by
Tesla, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage.
Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment. The
minimum warranty provided by Contractor shall be 1 year from the date of Substantial Completion. Contractor
will promptly correct any Work that are defective or that do not otherwise comply with the Work Authorization
at Contractor’s sole expense without causing unreasonable interruption to Customer’s business operations in
the Project. All warranties shall survive completion, acceptance and final payment. In the event that damage or
defect is caused by abuse, improper modification, or lack of maintenance on Tesla’s part, the warranty shall
only exclude any such specific damage or defect and shall continue to cover the rest of the assembly, provided
that in the event the defect relates to material or equipment that has been specified by Tesla by brand name,
the manufacturer’s warranty shall apply in the event of conflict between the manufacturer’s warranty and this
sentence. To the extent the Work consist of equipment or other movable or functional components
manufactured by other companies, Contractor will obtain warranties for such equipment or components for a
period of no less than the manufacturer’s standard warranty period and Contractor will manage administration
of the warranties issued by those companies. Contractor will not be liable for defects in these components or
damages resulting from these defects, unless due to Contractor’s negligent procurement or installation.
2.8 Hazardous Materials. Contractor is responsible for compliance with any requirements included in the
Contract Documents regarding hazardous materials. If the Contractor encounters a hazardous material or
substance not addressed in the Contract Documents, Contractor shall, upon recognizing the condition,
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immediately stop Work in the affected area and report the condition to the Owner in writing. Owner shall
obtain the services of a licensed laboratory to verify the presence or absence of the material or substance
reported by the Contractor and, in the event such material or substance is found to be present, to cause it to be
removed or rendered harmless. The Owner shall not be responsible under this Article 5.8 for materials
Contractor brings to the Project Site. Except to the extent of the Contractor, Contractor’s employees and agents,
or subcontractor’s negligence, or Contractor’s failure to immediately provide notice to Owner regarding the
hazardous materials (other than hazardous materials to which Contractor was already aware prior to the
Effective Date herein referred to as “Known Environmental Conditions”) as set forth above, the Owner shall
indemnify and hold harmless the Contractor, subcontractors, and employees of any of them from and against
claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting
from performance of the Work in the area affected by hazardous materials (other than Known Environmental
Conditions) if in fact the material or substance presents the risk of bodily injury or death and has not been
rendered harmless within a reasonable period of time after its discovery, provided that such claim, damage,
loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of
tangible property (other than the Work itself), except to the extent that such damage, loss or expense is due to
the fault or negligence of the party seeking indemnity.
2.9 Clean Project. Contractor shall keep the Project site and surrounding area free from accumulation of
waste materials or rubbish caused by operations under the Agreement. At completion of the Work, Contractor
shall remove waste materials, rubbish, Contractor’s tools, equipment, machinery and excess materials from the
Project Site.
2.10 Progress Reports. By 2:00 p.m. (PST) each Friday during the Contract Time, Contractor will deliver to
Tesla in electronic format a weekly progress report, which report shall include, without limitation, (1) pictures
of the Project site detailing progress made during the week, (2) a Change Order log, detailing any Change Orders
that have been agreed to by the parties in the previous week, or have been proposed by either party during the
previous week. Tesla’s acceptance of Contractor’s weekly progress report shall in no way serve as Tesla’s
acceptance of any Change Order that has not been otherwise agreed to by the parties.
3.CONTRACTOR PERSONNEL AND SUBCONTRACTING
3.1 General Requirements for Contractor Personnel.
(a)“Contractor Personnel” means any personnel furnished by Contractor to perform any part of the
Services, including employees and independent contractors of Contractor, its Affiliates and Subcontractors.
(b)Contractor will assign an adequate number of Contractor Personnel to perform the Services who are
properly educated, trained, familiar with and fully qualified for the Services they are assigned to perform
(including, without limitation, licensed in the relevant regions to provide work that requires a license).
Contractor will assign sufficient supervisory personnel to provide adequate liaison with Tesla. Contractor will
manage, supervise and provide direction to Contractor Personnel and cause them to comply with the
obligations and restrictions applicable to Contractor under this Agreement. Contractor is responsible for the
acts and omissions of Contractor Personnel under or relating to this Agreement. Contractor is responsible for
validating the identity of and ensuring that Contractor Personnel assigned to perform Services (i) have the legal
right to work in the country(ies) in which they are assigned to work, and (ii) conform to all applicable Tesla
Policies with respect to personal and professional conduct (including the wearing of an identification badge
and adhering to general safety, dress, behavior, and security practices).
(c)Prior to assigning any Contractor Personnel to perform any Services, Contractor shall perform
background checks of the personnel. Such background checks may have been performed as part of Contractor’s
standard pre-employment screening process and will include the following, at a minimum: (i) education
verification; (ii) prior employment verification for all employees; (iii) social security verification; and
(iv) felony and misdemeanor criminal checks. Tesla may require Contractor to provide written evidence of
successful background checks on Contractor Personnel at any time. Unless prohibited by law, Contractor may
not assign any person to perform Services for Tesla who was convicted of any criminal offense involving
extortion, embezzlement, money laundering, or who has been convicted of a felony crime without Tesla’s prior
written consent.
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3.2 Key Contractor Positions. “Key Contractor Positions” means those positions designated as such in
Exhibit A or the applicable Work Authorization. Contractor will cause each of the Contractor Personnel filling
the Key Contractor Positions to devote substantially full time and effort to the provision of the Services during
the period of assignment. The appointment, removal and replacement of any person to a Key Contractor
Position may only be made with Tesla’s prior written approval, such approval not to be unreasonably withheld.
3.3
(a)
Subcontracting.
Work not performed by Contractor with its own forces shall be performed by Subcontractors
(“Subcontractors”). Subject to Section 3.3(b), Contractor may not subcontract or delegate the performance of
any part of the Services without Tesla’s prior written consent, which Tesla may withhold in its sole discretion.
If Tesla approves a Subcontractor that is an Affiliate of Contractor, such approval is subject to the Subcontractor
remaining an Affiliate of Contractor. Tesla may require Contractor to replace any previously approved
Subcontractor whose performance, in the reasonable judgment of Tesla, has been unacceptable. Contractor is
responsible for managing all Subcontractors and is responsible for all Subcontractors to the same extent as if
the subcontracted Services were retained by Contractor. Contractor will be Tesla’s sole point of contact
regarding the Services and all subcontracted Services, including for payment. Contracts entered into between
Contractor and Subcontractors and Suppliers shall bind the Subcontractors and Suppliers to all the provisions
of this Agreement as they apply to the Subcontractors’ and Suppliers’ portions of the Work,
(b)Contractor may, in the ordinary course of business, utilize third party services or products that are not
dedicated to performance of Services for Tesla and that are not material to any particular function constituting
a part of the Work. Contractor may also engage individual independent contractors to supplement its employee
workforce. Such arrangements do not constitute Subcontracting for the purposes of this Section. Contractor
will nevertheless be responsible for such parties. The Contractor shall be responsible to the Owner for acts and
omissions of the Contractor Parties, the Contractor’s employees, Subcontractors and their agents and
employees, and other persons or entities performing portions of the Work for, or on behalf of, the Contractor
or any of its Subcontractors.
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4.CHARGES
4.1 Contract Price. For each Project, the Owner shall pay the Contractor in current funds the Contract Price
in the applicable Work Authorization, as adjusted for additions or deductions made by Change Order in
accordance with the Contract Documents. For clarification, Owner will make no payments to Contractor apart
from those it makes for Work Authorization and shall not exceed the Contract Price.
4.2 Schedule of Values. Owner shall pay Contractor for successfully carrying out the Work according to the
agreed schedule of values defined in the relevant Work Order unless specified therein that Contractor will only
be entitled to request payment of amounts associated with a Construction Milestone upon completion of the
applicable Construction Milestone conditions precedent.
4.3 Progress Payment. Subject to the terms of this Section 4.3, on or before the 25th day of each month
after the Effective Date, Contractor shall submit to Owner an application for payment (“Application for
Payment”) in a form acceptable to Owner, for payment of the portion of the Work actually completed in the
period covered by the Application for Payment. Based upon Applications for Payment submitted to the Owner
by the Contractor with all necessary supporting documentation required by this Agreement, the Owner shall
make progress payments for Work completed in accordance with the Contract Documents. Such payments shall
be made to the Contractor as provided below and elsewhere in the Contract Documents. The period covered
by each Application for Payment shall be one calendar month ending on the last day of the month or as set forth
in the applicable Work Authorization. Owner shall make payment to the Contractor sixty (60) days after receipt
of an Application for Payment that complies with this Agreement. Contractor shall submit Applications for
payment for the labor and materials furnished the prior month, on a monthly basis.
(a)Each Application for Payment submitted by Contractor shall contain sufficient detail for Owner to
discern how the amount requested in such application is broken out among Contractor’s costs of supplies,
materials, Subcontractors (identified individually with specificity), taxes, fee, overhead and any other costs,
and any other details which Owner may request. Each such Application for Payment shall be accompanied by
(i) conditional lien releases from all Subcontractors and material Contractors who performed and were paid
for any Work or provided and were paid for any materials for the Work through the date of the Application for
Payment and (ii) unconditional lien releases from all Subcontractors and material Contractors who performed
and were paid for Work or provided and were paid for any materials for the Work through the date of the prior
Application for Payment, such that at the time of an Application for Payment the unconditional and conditional
lien releases for the Project shall be current for all materials provided to and Work performed on the Project
through the respective Application for Payment. Owner’s obligation to pay Contractor the amount requested
in the correct Application for Payment shall be subject to Owner’s receipt of both such lien releases, which must
be reasonably satisfactory to Owner. All lien waivers and releases and all stop payment documents shall
comply with all Laws of the state in which the Project is located.
(b)Each Application for Payment shall be based on the most recent schedule of values submitted by the
Contractor in accordance with the Contract Documents. The Contractor shall update the schedule of values as
reasonably requested by Owner, but no less than every three months, to show changes therein. The schedule
of values shall allocate the entire Contract Price among the various portions of the Work. The schedule of values
shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may
require. This schedule, unless objected to by the Owner, shall be used as a basis for reviewing the Contractor’s
Applications for Payment.
(c)Each Application for Payment shall show the percentage of completion of each portion of the Work as
of the end of the period covered by the Application for Payment. The percentage of completion shall be the
lesser of (1) the percentage of that portion of the Work which has actually been completed; or (2) the
percentage obtained by dividing (a) the expense that has actually been incurred by the Contractor on account
of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the
next Application
(d)Each Application for Payment made by the Contractor to the Owner shall constitute a warranty to
Owner that the Work has progressed to the point indicated and that the quality of the Work is in accordance
with the Contract Documents. In taking action on the Contractor’s Applications for payment or by making
payments upon any Application for Payment, the Owner shall be entitled to rely on the accuracy and
completeness of the information furnished by the Contractor and shall not be deemed to represent that the
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Owner has made a detailed examination, audit or arithmetic verification of the documentation or other
supporting data; that the Owner has made exhaustive or continuous on-site inspections, or that the Owner has
made any on-site inspections; or that the Owner has made examinations to ascertain how or for what purposes
the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and
verifications, if required by the Owner, will be performed by the Owner’s auditors or other personnel acting in
the sole interest of the Owner.
(e)Charges, if any, that Contractor fails to invoice to Tesla within 120 days of the date that such charges
should have been billed to Tesla will not be payable by Tesla. In the case of third party charges for which Tesla
is responsible for paying or reimbursing Contractor, the 120-day period will not begin to run until Contractor
has been invoiced for such charges by the applicable third party.
(f)The amount to be paid on an Application for Payment shall be calculated by:
(i)Take that portion of the Contract Price properly allocable to completed Work as determined by
multiplying the percentage of completion of each part of the schedule of values less retainage. Pending
final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included;
(ii)Add that part of the schedule of values allocable to materials and equipment delivered and
suitably stored at the site for subsequent incorporation in the Work, or if approved in advance by the
Owner, suitably stored off the site at a location agreed upon in writing, less retainage;
(iii)
(iv)
Subtract the aggregate of previous payments made by the Owner;
Subtract the shortfall, if any, indicated by the Contractor in the documentation required by
Section 4.3(a) to substantiate prior Applications for Payment, or resulting from errors subsequently
discovered by the Owner’s auditors in such documentation; and
(v)Subtract amounts, if any, for which the Owner has withheld payment as provided in Section 4.4.
4.4 Owner Withholding. Owner shall be permitted to withhold progress payments from Contractor for
any of the reasons identified below until the reasons giving rise to the withholding are removed:
(a)
(b)
defective Work not remedied;
third party claims filed or reasonable evidence indicating probable filing of such claims unless security
acceptable to the Owner is provided by the Contractor;
(c) failure of the Contractor to make payments properly to Subcontractors and/or Suppliers or for labor,
materials or equipment;
(d)
(e)
(f)
reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Price;
damage to the Owner or a separate contractor;
reasonable evidence that the Work will not be completed within the Contract Time, and that the unpaid
balance would not be adequate to cover actual or liquidated damages for the anticipated delay;
(g)
(h)
failure to carry out the Work in accordance with the Contract Documents;
any claims which Owner has against Contractor under or in connection with the Contract Documents
or Contractor’s work; or
(i)failure of the Contractor to provide updated weekly status reports and progress schedules.
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When the reasons giving rise to the withholding are removed, Owner shall pay the withheld amounts within
thirty (30) days.
4.5 Retention. Except with the Owner's prior approval, payments to Subcontractors and Contractors at all
tiers (including all major fabricators and manufacturers) and to the Contractor for self-performed work shall
be subject to retainage of not less than ten percent (10%) unless stated otherwise in the applicable Work
Authorization. The Owner and the Contractor shall agree upon a (1) mutually acceptable procedure for review
and approval of payments to Subcontractors and (2) the percentage of retainage held on Subcontracts, and the
Contractor shall execute subcontracts in accordance with those agreements. Payments to Contractor shall be
subject to a retainage of 10% of the Contract Price with the final 10% of Contract Price payable upon Final
Completion unless stated otherwise in the applicable Work Authorization.
4.6 Contractor Payment of Subcontractors. Within seven days after receipt of any progress payment by
Contractor, Contractor shall pay (and secure the discharge of any liens asserted by) all persons furnishing labor,
equipment, materials or other items in connection with the performance of the Work (including, but not limited
to, any Subcontractors, Sub-subcontractors or Suppliers). Contractor agrees that provided Owner has paid
Contractor in accordance with the Contract, Owner has the right to a lien free Project. Owner may, at its
discretion, make joint payments to Contractor and its creditors. Owner reserves the right, in the event a claim
is made against Owner arising out of any obligation incurred by Contractor under the Contract or in connection
with performance of the Work, to withhold payments due to or become due to Contractor in such amounts as
are necessary to cover the claim and any costs or expenses arising in connection with the legal settlement
thereof. Contractor further agrees that if any lien or claim is filed or made against the Project site, Project or
Owner as a result of Contractor’s failure to meet its obligations, Owner upon fourteen (14) days prior written
notice shall have the right to settle said lien or claim directly and deduct the cost of the settlement from
payments due Contractor, provided that Contractor within such fourteen (14) day period has not settled such
lien or claim or bonded around such lien claim in a manner satisfactory to Owner.
4.7 Final Payment. Provided that the Contract Price is not exceeded, final payment, constituting the entire
unpaid balance of the Work (which shall include the retention withheld), shall be made by the Owner to the
Contractor when
(a)the Contractor has fully performed the Contract (including completing work on Punch Lists) except for
the Contractor’s responsibility to correct Work, and to satisfy other requirements, if any, which extend beyond
final payment;
(b)
(c)
the Contractor has submitted a final accounting for the Work and a final Application for Payment;
Contractor has submitted to Tesla both a physical copy (to be left at the Project site) and a digital copy
of the final as-built record Drawings and Specifications in both of physical copy
(d)
(e)
(f)
Contractor has submitted to Tesla all warranties and all operation and maintenance manuals;
Completion of Punch List items;
Appropriate final lien releases have been delivered to the Owner for Contractor, all Subcontractors,
and all Contractors; and
(g)the Contractor has recorded a certificate of completion with the applicable governmental authority in
accordance with the Laws.
As used herein, the term “Final Completion” and words of similar impact shall mean that all of the requirements set
forth above have been fully performed, and “Final Completion Date” shall mean the date on which Final Completion
occurs. The Owner’s final payment to the Contractor shall be made no later than sixty (60) days after receipt by
Owner of a final Application for Payment containing confirmation of the items set forth above and such other terms
as a required pursuant to the terms of the Contract Documents.
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4.8
(a)
Incidental and Out-of-Pocket Expenses.
Unless expressly provided otherwise in a Work Authorization, Tesla is not responsible for any
additional costs or expenses of any nature incurred by Contractor in connection with the provisions of the
Services, including travel expenses, clerical or administrative personnel, long distance telephone charges, etc.
(“Incidental Expenses”). To the extent that an Work Authorization requires Tesla to reimburse Contractor for
Incidental Expenses, Tesla is not responsible for any such reimbursement unless the expenses are (i) approved,
in each instance, in advance by Tesla; (ii) substantiated by appropriate receipts and related documentation;
and (iii) in compliance with Tesla’s corporate travel policies and procedures, as amended from time to time in
Tesla’s sole discretion. In no event will Tesla be liable for payment of any Incidental Expenses that exceed
Contract Price under a Work Authorization by 10% or more.
(b)“Out-of-Pocket Supply Expenses” are the reasonable, demonstrable and actual out-of-pocket expenses
incurred by Contractor for equipment, materials, or supplies required for performance of the Services and
specified in writing by Tesla as reimbursable, and “Out-of-Pocket Service Expenses” are the reasonable,
demonstrable and actual out-of-pocket expenses incurred by Contractor for services (such as with tier 2 service
providers) required for performance of the Services and specified in writing by Tesla as reimbursable (“Out-of-
Pocket Expenses” refers collectively to Out-of-Pocket Supply Expenses and Out-of-Pocket Service Expenses).
Out-of-Pocket Expenses are to be determined net of all rebates, discounts and allowances received by
Contractor, and shall not include Contractor's actual or allocated overhead costs, administrative expenses or
other mark-ups; provided, however, that Contractor may charge Tesla a five percent (5%) markup on Out-of-
Pocket Supply Expenses.
4.9
(a)
Taxes.
Contractor may charge, and Owner will pay, applicable federal, state or local sales or use taxes or value
added taxes that Contractor is legally obligated to charge with respect to the Work (“Taxes”), provided that the
Contractor shall identify the amount of Taxes due on each payment as a separate line item on its Application
for Payment and shall be responsible for remitting to the appropriate office of the State in which the Project is
located, the amount received from the Owner for payment of Taxes. Although not included as part of the
Contract Price, the Contractor shall show Taxes for the Contract Price on the schedule of values as a separate
line item. Owner may provide Contractor an exemption certificate acceptable to the relevant taxing authority,
in which case Contractor shall not collect the Taxes covered by such certificate, and if the Contract Price
assumed that such Taxes would be collected, the Contract Price shall be reduced by the amount of such Taxes.
Contractor will be solely responsible for all other taxes or fees (including penalties, interest, and other additions
thereto) arising from the Contract and Work.
(b)Withholding Taxes. Owner shall maintain the right to deduct or withhold any taxes that Owner
determines it is obligated to withhold from any amounts payable to Contractor under this Agreement, and
payment to Contractor as reduced by such deductions or withholdings will constitute full payment and
settlement to Contractor of such amounts. Tesla shall not be obligated to pay for any Taxes (i) that are assessed
on any goods or services used or consumed by Contractor (or its Subcontractors) in providing the Services
where the tax is imposed on Contractor’s (or its Subcontractor’s) acquisition or use of the goods or services in
its provision of the Services; or (ii) that are assessed by taxing authorities in countries other than the United
States or the country in which Tesla receives the Services.If laws, rules or regulations require the withholding
of income taxes or other taxes imposed upon payments set forth in this Section 4, Tesla shall make such
withholding payments as required and subtract such withholding payments from the payments. Tesla shall
submit appropriate proof of payment of the withholding taxes to the Contractor within a reasonable period of
time. At the request of Contractor, Tesla shall give Contractor such reasonable assistance, which shall include
the provision of appropriate certificates of such deductions made together with other supporting
documentation as may be required by the relevant tax authority, to enable Contractor to claim exemption from
such withholding or other tax imposed or obtain a repayment thereof or reduction thereof and shall upon
request provide such additional documentation from time to time as is reasonably required to confirm the
payment of tax.
4.10 Failure of Payment. If the Owner, through no fault of the Contractor, does not pay the Contractor within
thirty (30) days after the date established in the Contract Documents the undisputed portion of any Application
for Payment or the amount awarded by binding dispute resolution, then the Contractor may, upon five (5)
additional business days’ written notice to the Owner, stop the Work until payment of the amount owing has
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been received. The Contract Time shall be extended appropriately and the Contract Price shall be increased by
the amount of the Contractor’s reasonable costs of shut-down, delay and start-up, plus interest as provided for
in the Contract Documents.
5.OWNER
5.1 General. The Owner is the person or entity identified as such in the Agreement or applicable Work
Authorization and is referred to throughout the Contract Documents as if singular in number. The Owner shall
appoint an individual named in the Work Authorization as its representative for the Project (“Owner’s
Representative”). Notwithstanding anything to the contrary in this Agreement, no person or entity may bind
Owner in any manner with respect to this Agreement other than (i) Owner’s Representative; (ii) the president
or a vice president of Owner, and (iii) any other representative of Owner that is expressly granted such
authority in a Work Authorization or other document executed by Owner (and then only to the extent of such
grant). The term “Owner” refers to the entity or individual named in the Work Authorization as such, or its
successors in interest. Neither the presence of, nor the monitoring or observations of the Owner’s
Representative shall limit or reduce the Contractor’s liability for defects in the Work, and it is understood that
the Contractor will be solely and completely responsible for its Work, compliance with the Contract Documents,
and the working conditions on the job site, including safety, during the performance of the Work. The day-to-
day communications between the Owner and Contractor, including all written authorizations and written
communications shall be directed to the Owner and, if one is designated in the Work Authorization, the Owner’s
Representative.
5.2 Information and Services Required of the Owner. Except for Permits that are the responsibility of the
Contractor under the Contract Documents, including those required under Section 2.6, the Owner shall secure
and pay for necessary approvals, easements, assessments and charges required for Owner’s use or occupancy
of permanent structures or for permanent changes in existing facilities. If the Contractor becomes aware of any
such approvals or permits that are the Owner’s responsibility, Contractor shall promptly, in writing, notify the
Owner of the requirement. The Owner shall furnish information or services required of the Owner by the
Contract Documents with reasonable promptness. The Owner shall also furnish any other information or
services under the Owner’s control and reasonably required for the Contractor’s performance of the Work with
reasonable promptness after receiving the Contractor’s written request for such information or services.
5.3 Savings Clause. Tesla's failure to perform, or cause to be performed, any of its responsibilities (other
than payment as required under Article 4) will not constitute grounds for termination by Contractor except as
provided in Section 8.4 (Termination by Contractor); provided, however, that Contractor’s nonperformance of
its obligations under this Agreement will be excused if and to the extent (i) such nonperformance results from
Tesla’s failure to perform any of its responsibilities, and (ii) Contractor provides Tesla with reasonable notice
of such nonperformance and, if requested by Tesla, uses Commercially Reasonable Efforts to perform
notwithstanding Tesla’s failure to perform. If Contractor’s use of Commercially Reasonable Efforts to perform
in such a circumstance would cause Contractor to incur significant uncompensated expenses, Contractor may
notify Tesla. In that case, Contractor’s obligation to continue its efforts to work around Tesla’s failure to
perform will be subject to Tesla agreeing to reimburse Contractor for its incremental uncompensated expenses.
5.4
(a)
Access to Tesla Systems and Facilities.
From time to time, Tesla may provide Contractor with access to proprietary computer systems and
technologies owned and operated by Tesla and/or its affiliates to facilitate the Services (the “Systems”).
Contractor will only use the Systems for the business purposes of Tesla. Tesla may periodically monitor all
uses of the Systems as allowed by law and review user access records maintained by Contractor. Contractor’s
users will have no expectation of privacy when using the Systems. Contractor shall be solely responsible for
obtaining and maintaining the hardware and software it uses which are necessary to properly access the
Systems and perform the Services.
(b)Tesla will provide to Contractor Personnel assigned to work at a Tesla Facility the reasonable use of
the facility. Contractor will use the Tesla Facility for the sole purpose of providing the Services. Contractor will
be responsible for any damage to the Tesla Facility caused by Contractor Personnel. Contractor will permit
Tesla and its agents and representatives to enter into those portions of Tesla Facility that are occupied by
Contractor Personnel at any time and, when those portions of the Tesla Facility are no longer required for
performance of the Services, Contractor will return them to Tesla in substantially the same condition as they
were in when Contractor began use of them, subject to reasonable wear and tear.
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6.CONFIDENTIALITY
6.1 Confidentiality. Tesla’s mutual non-disclosure agreement as of the Effective Date or, if applicable, the
signed non-disclosure agreement then in effect between the Parties (“NDA”) sets forth the Parties’ respective
confidentiality obligations hereunder. The NDA is hereby incorporated by reference in this Agreement, and the
terms and conditions of the NDA will continue in force throughout the Term. Tesla’s Confidential Information
shall be deemed, for purposes of this Agreement, to include all Intellectual Property Rights owned or separately
licensed by Tesla.
6.2 Data Security. Contractor will: (i) establish, implement and maintain commercially reasonable
safeguards against the destruction, loss, alteration and unauthorized access and use of Tesla Data in the
possession or control of Contractor (or its Subcontractors) that are no less rigorous than those maintained by
Tesla as of the Effective Date and are no less rigorous than those maintained by Contractor for its own data of
a similar nature; and (ii) comply with Tesla’s information and data security policies as disclosed to Contractor
from time to time. Upon written request by Owner, Contractor will deliver to Tesla a copy of all Tesla Data in
its possession or control in the form and format requested by Tesla.
7.Intellectual PRoperty Rights
7.1 Tesla Material. “Tesla Material” means all information systems and technology, software, tools,
methods, forms, processes, workflows, data, compilations, designs, manuals and other material owned,
licensed to, or developed by Tesla (or its Affiliates) that is made available to Contractor Personnel for use in
rendering the Services. Subject to any limitations or restrictions set forth in agreements between Tesla (or its
Affiliate) and third party licensors of Tesla Material, Tesla grants Contractor a limited, nonexclusive, non-
transferable, no-charge license during the Term to Use the Tesla Material in the location(s) approved by Tesla
as set forth in Work Authorizations in accordance with this Agreement for the sole purpose of providing the
Services. When Tesla Material is no longer required for performance of the Services, or in any event upon
expiration or termination of the Agreement, Contractor will return it to Tesla in an agreed format or, at Tesla’s
election, destroy it and certify the destruction of all copies in Contractor’s (and any Subcontractor’s) possession
or control.
7.2 Developed Material. Subject to Section 7.3, Tesla will own all Intellectual Property Rights in and have
the sole right to use all Deliverables and other work product created by Contractor Personnel for Tesla under
this Agreement (collectively, “Developed Material”). Developed Material will be deemed to be works made for
hire owned by Tesla upon their creation. To the extent that any such Developed Material is not deemed to be
a work made for hire and the property of Tesla by operation of Law, Contractor irrevocably assigns, transfers
and conveys to Tesla, without further consideration, all of its right, title and interest (including all Intellectual
Property Rights) in and to such Developed Material. Contractor shall execute (and cause its employees to
execute) such documents or take such actions as Tesla may reasonably request to perfect Tesla’s ownership of
Developed Material. Contractor will promptly disclose the creation of Developed Material to Tesla. Tesla
grants to Contractor a fully paid-up, royalty-free, nonexclusive license during the Term to Use such Developed
Material solely as necessary to perform the Services, and to sublicense Subcontractors involved in rendering
the applicable Services to do the same on Contractor’s behalf.
7.3 Contractor Material. Tesla’s ownership of Developed Material that incorporates any material created
and owned by Contractor (or its Subcontractor) outside the performance of Services hereunder (“Contractor
Material”) will be subject to Contractor’s (or its applicable Subcontractor’s) ownership of such Contractor
Material. Unless otherwise agreed in a separate written license agreement executed by the Parties, Contractor
grants to Tesla (and its Affiliates) a non-exclusive, royalty-free, perpetual, irrevocable, transferable, fully paid-
up, world-wide license to Use, sublicense and distribute Contractor Material that is incorporated into any
Developed Material or is reasonably required to Use any Developed Material in a cost-effective manner (e.g.,
tools). Contractor shall obtain Tesla’s written approval prior to incorporating any Contractor Material into any
Developed Material.
7.4 Third Party Material. Contractor will not incorporate any third party proprietary materials,
information or intellectual property (“Third Party Material”) into Developed Material, including all
Deliverables or other work product to be delivered to Tesla, unless Contractor has obtained for Tesla a
perpetual, worldwide, fully paid-up, royalty-free, non-exclusive license permitting Tesla and its Affiliates to
use, sublicense and distribute such Third Party Material in the conduct of their normal business operations.
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7.5 Open Source Code. Contractor represents and warrants that it will not incorporate any Open Source
Code into a Deliverable or other work product to be delivered to Tesla without Tesla’s express, prior written
consent.
7.6 Intellectual Property Rights Agreements with Contractor Personnel. Contractor is responsible for
having in place with all Contractor Personnel (either directly or indirectly through their respective employers)
such agreements respecting Intellectual Property Rights as are necessary to comply with this Section 7
(Intellectual Property Rights).
7.7 Licenses and Rights Survive Bankruptcy. All licenses and rights of Use granted under or pursuant to
this Agreement shall be deemed to be licenses to rights in “intellectual property” for the purposes of
Section 365(n) of the United States Bankruptcy Code.
7.8 No Interference. Nothing in this Agreement will be deemed to prevent Contractor from carrying on its
business or developing for itself or others materials that are similar to or competitive with those produced as
a result of the Services provided they do not contain or disclose any Confidential Information or proprietary
information of Tesla or otherwise infringe or constitute a misappropriation of Tesla’s Intellectual Property
Rights.
8.TERM AND TERMINATION
8.1 Initial Term. Unless terminated earlier as provided below, the term of the Agreement will be from the
Effective Date until the first anniversary of the Effective Date (the “Term”). Thereafter, this Agreement will be
automatically extended on a month-to-month basis until either party terminates this Agreement pursuant to
this Section 8 or by providing at least 180 days prior written notice of termination to the other party.
8.2 Termination, Generally. This Agreement or a Work Authorization may only be terminated as provided
in this Section 8. Termination by a Party will be without prejudice to any other rights and remedies available
to a Party. Tesla will not be obliged to pay any termination charges or demobilization fees in connection with
the termination of this Agreement.
8.3
(a)
Termination by Tesla.
For Convenience. Owner may, at any time and for any reason or for no reason, terminate the
Agreement or any Work Authorization. Following a termination for convenience, Contractor shall be entitled
to receive payment for Work executed, and the reasonable costs incurred by reason of such termination, but
shall not be entitled to any recovery for lost profits or lost business opportunity.
(b)For Cause.
(i)Tesla may terminate this Agreement, a Work Authorization or a Project, for cause, as follows: (a)
for default without affording Contractor any additional time or opportunity to cure: (i) if
Contractor commits a breach of Section 6 (Confidentiality) of this MSA; (ii) if Tesla is not able to
perform under this Agreement by a reason outside of it’s reasonable control, including without
limitation, by reason of a casualty or other destruction of the Project site; (iii) if Contractor
violates any Tesla Policies of which Contractor has been given notice or applicable Laws; (iv) if
Contractor breaches Section 9.6 (Debarment) of this MSA; or (v) if Contractor commits multiple
breaches of this Agreement, none of which is necessarily a material breach, but which Tesla
determines have had an aggregate effect comparable to that of a material breach; or (b) if
Contractor has breached any material obligation under this Agreement and does not cure the
breach within 15 days after receiving notice of it from Tesla, including, without limitation, (i)
refusal or failure to supply enough properly skilled workers or proper materials, (ii) fails to make
payment to Subcontractors or Suppliers for materials or labor in accordance with this
Agreement; (iii) fails to provide Owner with a construction schedule, construction schedule
updates, weekly progress reports, certificates of insurance or any required payment or
performance bond in the form and within the time required under the Contract Documents, (iv)
failure to achieve Substantial Completion or Final Completion on or before the dates specified in
the Contract Documents or otherwise fails to adhere to the Construction Schedule in performing
the Work, or (v) fails to timely remove Mechanic’s Liens, provided, in each case, Contractor shall
not be entitled to a grace period if it has breached the same obligation more than once.
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(ii)Upon termination of this Agreement for cause by Owner, Contractor will discontinue the Work,
and Owner will be entitled to take possession of the Work and the Project Site and all or any part
of the equipment and materials delivered or en route to the Project Site for incorporation into
the Work. If requested by Owner, Contractor will make every reasonable effort to cancel any
existing orders, subcontracts, and other contracts specified by Owner upon terms satisfactory to
Owner, and Contractor will not place any further orders or enter into further subcontracts for
Equipment and Materials, labor, services or facilities for the terminated Work. Contractor, upon
request, will also deliver and assign to Owner, and Owner may assume, any and all contracts,
subcontracts, purchase orders, and options made by Contractor in performance of the
terminated Work. In addition to any other remedies and damages to which Owner may be
entitled to pursue, Owner shall be permitted to seek enforcement of the provisions of this Section
by means of specific enforcement or injunction. Notwithstanding any termination, Contractor
will take such steps as are reasonably necessary to preserve and protect Work completed and in
progress and to protect materials, supplies, plant and equipment at the Work Site or in transit.
(iii) Upon termination by Owner for cause, Contractor shall not be entitled to receive any further
payment until the Work is completed. If the unpaid balance of the Contract Price ultimately
exceeds the Owner’s cost of completing the Work, such excess shall be paid to Contractor. If the
costs of completing the Work exceed Contractor’s unpaid Contract Price, Contractor shall pay
the difference to Owner.
8.4 Termination by Contractor. The Contractor may terminate the Contract if the Work is stopped for a
period of 90 consecutive days through no act or fault of the Contractor or a Subcontractor, Sub-subcontractor
or their agents or employees or any other persons or entities performing portions of the Work under direct or
indirect contract with the Contractor, for any of the following reasons only: (1) Issuance of an order of a court
or other public authority having jurisdiction that requires all Work to be stopped; (2) An act of government,
such as a declaration of national emergency that requires all Work to be stopped; or (3) Owner has not
delivered payment pursuant to an Application for Payment for two (2) consecutive months without providing
notice of any withholding.
8.5 Operational Transition. Upon termination or expiration of this Agreement, Contractor will deliver to
Tesla and/or a subsequent supplier any remaining property of Tesla in Contractor’s possession, including
reports, data, work product, and Confidential Information (alternatively, as requested by Tesla, Contractor will
destroy such property), and certify that all such Tesla property has been removed from Contractor’s systems,
premises and control and either returned or destroyed. All materials in electronic form shall be delivered to
Tesla on such media and in such file format as Tesla may direct.
9.REPRESENTATIONS AND WARRANTIES OF CONTRACTOR
9.1 Performance of Services. Contractor represents and warrants that it will perform all Services (i) in
accordance with this Agreement and the Work Authorizations; (ii) in a good, professional and workmanlike
manner, free from defects in material and workmanship and in accordance with industry standards; (iii) in
strict accordance with Contractor’s specifications, samples or other descriptions provided to Tesla or approved
or adopted by Tesla; (iv) in compliance with all applicable Laws; (v) efficiently and in a cost-effective manner
subject to the requirements of this Agreement; and (vi) using qualified personnel with suitable training,
education, experience and skill to perform the Services in accordance with timing and other requirements of
the Agreement.
9.2 Contractor Registration. The Contractor hereby warrants and represents that it is a duly licensed
Contractor under the laws of the state in which the Project is located and that its Contractor’s license number
is as set forth in the Work Authorization.
9.3 Sufficient Information. Execution of a Work Authorization by the Contractor is a representation that
the Contract Documents are sufficient to have enabled the Contractor to determine the cost of the Work therein,
to enter into the Work Authorization, and to accomplish the Work for an amount not in excess of the Contract
Price within the Contract Time provided for in the Contract Documents. The Contractor further represents and
warrants that prior to execution of the applicable Work Authorization it has visited and examined the Project
site, examined all physical, legal, and other conditions affecting the Work and is fully familiar with all of the
conditions thereon and thereunder affecting the same, including (1) the nature, location and character of the
Project site, including all structures and obstructions thereon, both natural and man-made; (2) the nature,
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location, and character of the general area in which the Project is located, including without limitation, its
climatic conditions, available labor supply and labor costs, and available equipment supply and equipment
costs; and (3) the quality and quantity of all materials, supplies, tools, equipment, labor and professional
services necessary to complete the Work in the manner and within the cost and time frame required by the
Contract Documents. THE FAILURE OF THE CONTRACTOR TO FULLY ACQUAINT ITSELF WITH ANY
PROVISION OF THE CONTRACT DOCUMENTS OR OTHER MATTER SHALL NOT IN ANY WAY RELIEVE IT FROM
THE RESPONSIBILITY FOR PERFORMING THE WORK IN ACCORDANCE WITH THE CONTRACT DOCUMENTS
AND WITHIN THE GUARANTEED MAXIMUM PRICE AND THE CONTRACT TIME AS PROVIDED FOR IN THE
CONTRACT DOCUMENTS.
9.4 Non-Infringement. Contractor represents and warrants that: (a) the Services will not infringe or
misappropriate any Intellectual Property Rights of any third party; (b) Contractor has all rights and licenses
necessary to convey to Tesla the ownership of (or license rights to Use) as required under this Agreement or
the Work Authorization, all Intellectual Property Rights in Deliverables, Developed Materials and other
materials provided to Tesla; and (c) no Deliverables or other materials provided to Tesla, nor their use by Tesla
will infringe or constitute an infringement or misappropriation of any Intellectual Property Rights of any third
party.
9.5 Malware. Contractor represents and warrants that it will not introduce Malware into Tesla’s or any of
its Affiliates’ systems and that Contractor will exercise Commercially Reasonable Efforts to prevent Malware
from being so introduced. If Malware is found to have been introduced into Tesla’s or any of its Affiliates’
systems as a result of a breach of the foregoing warranty, Contractor will, at no additional charge, assist Tesla
in eradicating the Malware and reversing its effects and, if the Malware causes a loss of data or operational
efficiency, to assist Tesla in mitigating and reversing such losses.
9.6 Debarment. For the full Term of the Agreement, Contractor represents and warrants that it shall not:
(a) be debarred, suspended, excluded or disqualified from doing business with the United States Government;
or (b) be listed on the Excluded Parties List System maintained by the General Services Administration of the
United States Government (found at www.sam.gov/SAM ); or (c) be an entity with which U.S. entities are
prohibited from transacting business of the type contemplated by the Agreement or with which U.S. entities
must limit their interactions to types approved by the Office of Foreign Assets Control, Department of the
Treasury (“OFAC”), such as by Law, executive order, trade embargo, economic sanction, or lists published by
OFAC. Contractor agrees to immediately notify Tesla in writing in the event Contractor breaches any of its
representations and warranties or has reason to believe that it will become in breach of any of such
representations and warranties.
10.INSURANCE
10.1 Types of Insurance. During the Term of this Agreement, unless otherwise set forth in a Work
Authorization, Contractor shall obtain and maintain at its own cost and expense (and shall cause each
Subcontractor to maintain) policies for the following insurance coverages:
(a)Commercial general liability insurance with minimum coverage of at least One Million Dollars
($1,000,000) combined single limit per occurrence and Two Million Dollars ($2,000,000) general aggregate,
naming Tesla as an additional insured. This will include coverage for: bodily injury; property damage; premises
and operations; products and completed operations; broad form property damage including completed
operations; explosion, collapse, underground hazards; contractual liability; contractors’ protective liability;
and personal injury liability.
(b) Products and completed operations coverage, which shall include broad form property damage and
XCU endorsements.
(c)Automobile liability insurance on all owned, non-owned and/or hired vehicles with minimum
coverage of at least One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury
and/or property damage, and physical damage insurance for the actual cash value of each such vehicle.
(d)Umbrella general liability coverage in the minimum amount of $5,000,000 or as established in the
Work Authorization.
The policies furnished in compliance with Section 10.1 (a) – (d) shall be primary insurance to any other liability
insurance of Owner.
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(e)Employer’s liability insurance with minimum coverage of at least One Million Dollars ($1,000,000).
Contractor shall also comply with all applicable workers’ compensation and/or other laws that may accrue in
favor of any Contractor Personnel in all locales where Contractor Personnel perform(s) hereunder.
(f)Contractor’s Professional Liability Insurance with minimum limits of $5,000,000 per claim and
aggregate and Contractor’s Pollution Liability Insurance coverage with minimum limits of $5,000,000 per claim
and in the aggregate, or as established in the applicable Work Authorization for both insurance requirements,
with all coverage retroactive to the earlier of the date of the Agreement or the commencement of work.
(g)If the Work include design/build work, Professional Liability Insurance covering liability for loss or
damage due to an act, error, omission or negligence, with a minimum limit of (i) Five Million Dollars
($5,000,000) per claim and aggregate for mechanical (including fire protection), electrical and curtain wall
enclosure, and (ii) Two Million Dollars ($2,000,000) per claims and aggregate for all other trades. Professional
liability coverage shall be provided by annual policy or policies to be renewed for a continuous period of two
years following the Final Completion Date of the Project by the Owner or such longer period as the Contract
Documents may require. Renewal policies during this period shall maintain the same retroactive date.
10.2 Insurance, Generally. Contractor will be responsible for all deductibles and retentions with regard to
its insurance. In the case of loss or damage or other event that requires notice or other action under the terms
of any insurance coverage described above, Contractor will be solely responsible for taking such action.
Contractor will provide Tesla with contemporaneous notice and such other reasonable and relevant
information as Tesla may request regarding the event. The policies shall: (a) be primary and not contributory
with any liability coverage carried by Tesla or any Affiliate of Tesla; (b) name Tesla and any other entity
reasonably requested by Tesla as additional insureds; (c) provide for severability of interests; (d) provide for
waiver of subrogation; (e) be with one or more insurance companies rated A minus or better (as determined
by A.M. Best & Company), and licensed to do business in the locations where Services are to be performed; (f)
shall remain in force for the benefit of the Owner for claims arising out of the Work under this Agreement for
at least 24 months after Final Completion, except for completed operations coverage which shall extend for a
period of six (6) years from Substantial Completion, and (g) require the insurer to give Tesla at least 30 days’
prior written notice of any restrictive change, non-renewal or cancellation that may affect Tesla’s rights
thereunder. Contractor will furnish to Tesla a certificate evidencing such coverage, upon request.
11.INDEMNIFICATION
11.1 Indemnification by Contractor. To the fullest extent provided by Law, Contractor will indemnify,
defend and hold harmless Tesla, its Affiliates and their respective officers, directors, employees, agents and
representatives (collectively, “Tesla Indemnitees”), from any and all losses arising from, in connection with,
or based on allegation of any of the following:
(a)
(b)
Any Claim by, on behalf of or relating to Contractor Personnel;
Any Claim that, if true, would constitute a breach of Contractor’s obligations under Section 6
(Confidentiality);
(c)Any Claim that, if true, would arise from or be attributable to a breach of Contractor’s obligations under
Section 2.5 (Compliance with Laws and Tesla Policies);
(d) Any Claim that, if true, would arise from or be attributable to a breach of Contractor’s obligations under
Section 9.4 (Non-Infringement);
(e)Any Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal
property of third parties (including employees of Tesla and Contractor and their respective Subcontractors)
caused by the tortious conduct of Contractor, any Contractor Personnel, or any of Contractor’s third-party
suppliers; and
(f)The inaccuracy or untruthfulness of any representation or warranty made by or on behalf of
Contractor in this Agreement.
If Losses are caused or alleged to be caused in part by any joint or concurrent negligent act (either active or passive),
willful misconduct, omission or breach of contract by the Tesla Indemnitees, the Contractor shall indemnify, hold
harmless and defend the Tesla Indemnitiees from such Losses only to the extent such Losses do not arise out of or
result from the sole and active negligence or willful misconduct of the Tesla Indemnitiees. In no event shall
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Contractor be obligated to indemnify a Tesla Indemnitee for Losses which arise out of or result from the sole and
active negligence or willful misconduct of such Tesla Indemnitee or its agents, servants or independent contractors
who are directly responsible to such Tesla Indemnitee, excluding Contractor herein.
11.2 Infringement Claims. If any item used by Contractor to provide the Services becomes, or in
Contractor's reasonable opinion is likely to become, the subject of an infringement or misappropriation Claim,
Contractor will at its expense, in addition to indemnifying Tesla Indemnitees as provided in this Section 11
(Indemnification) and to the other rights Tesla may have under this Agreement, (i) promptly secure the right
to continue using the item, or (ii) if this cannot be accomplished with Commercially Reasonable Efforts, then
replace or modify the item to make it non-infringing or without misappropriation; provided, however, that any
such replacement or modification may not degrade the performance or quality of the affected components of
the Services or disrupt Tesla’s business operations, or (iii) if neither of the foregoing can be accomplished by
Contractor with Commercially Reasonable Efforts, then upon at least 180 days’ prior written notice to Tesla,
Contractor may remove the item from the Services, in which case Contractor's charges will be equitably
adjusted to reflect such removal. If removal of the item from Services causes material loss or degradation of
the Services, such loss or degradation will constitute a material breach of this Agreement by Contractor in
respect of which Tesla may exercise its termination and other rights and remedies.
11.3 Indemnification Procedures. Tesla will give Contractor prompt written notice of any Claim for which
indemnification is sought under this Section 11 (Indemnification). Failure to give notice will not diminish
Contractor’s obligation under this Section if Contractor has or receives knowledge of the existence of such Claim
by any other means or if the failure does not materially prejudice Contractor's ability to defend the Claim.
Contractor may select legal counsel to represent Tesla (said counsel to be reasonably satisfactory to Tesla) and
otherwise control the defense of such Claim. If Contractor elects to control the defense of such Claim, Tesla
may participate in the defense at its own expense. If Contractor, within a reasonable time after receipt of such
notice, fails to defend Tesla, Tesla may undertake the defense of and compromise or settle the Claim on behalf
and at the risk of Contractor. If the Claim is one that cannot by its nature be defended solely by Contractor,
then Tesla will make available information and assistance as Contractor may reasonably request, at
Contractor's expense. Contractor may not, without the prior written consent of Tesla, (i) consent to the entry
of any judgment or enter into any settlement that provides for injunctive or other non-monetary relief affecting
any Tesla Indemnitee, or (ii) consent to the entry of any judgment or enter into any settlement unless such
judgment or settlement provides for an unconditional and full release of the Tesla Indemnitees and does not
diminish any of Tesla’s rights under this Agreement or result in additional fees or charges to Tesla.
12.Liability
12.1 For any breach of this Agreement or this Master Services Agreement by Contractor, Contractor shall
be liable to Tesla for direct damages caused by Contractor’s breach, incidental damages incurred by Tesla as a
result of such breach, other damages that were reasonably foreseeable at the time of the breach as a result of
such breach, and costs and expenses incurred by Tesla in connection with the foregoing types of damages,
including without limitation any costs and expenses of containment, sorting, repair, replacement, cure, cover,
or other costs and expenses incurred by Tesla (including labor).
12.2 TESLA WILL NOT BE LIABLE TO CONTRACTOR IN CONNECTION WITH THE AGREEMENT OR THIS MASTER SERVICES
AGREEMENT FOR ANY INTEREST, PENALTIES OR CONSEQUENTIAL, INCIDENTAL, INDIRECT, MULTIPLE, EXEMPLARY, OR PUNITIVE
DAMAGES, OR ANY LOSS OF REVENUE, BUSINESS, SAVINGS OR GOODWILL, REGARDLESS OF THE FORM OF ACTION OR THE THEORY OF
RECOVERY, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(a).
13.
13.1
DISPUTE RESOLUTION
Informal Dispute Resolution.
(a)The Owner and Contractor shall first endeavor to negotiate resolution of Claims and disputes relating
to the Contract directly. If the Claims cannot be resolved through such negotiations within a reasonable time,
either Party may request non-binding mediation to be conducted in San Francisco, California, by the Judicial
Arbitration and Mediation Services/Endispute (“JAMS”) or by a mediator approved by both Parties, and neither
Party shall unreasonably withhold approval of a mediator proposed by the other Party in good faith. Each Party
shall participate in the mediation process in good faith, with each bearing its own expenses and equally sharing
the fees and expenses of the mediator.
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(b)If the Parties are unable to resolve a Claim through good-faith negotiations within 60 days after
commencing mediation, the Claim shall be resolved exclusively by final and binding arbitration conducted by the
JAMS in accordance with the then-current JAMS Streamlined Arbitration Rules & Procedures. The existence, content
and result of the arbitration shall be held in confidence by the Parties, their representatives, any other participants, and
the arbitrator. The arbitration will be conducted by a single arbitrator selected by agreement of the Parties or, failing
such agreement, appointed in accordance with the JAMS rules. The arbitrator shall be experienced in agreements for
capital equipment. Any demand for arbitration and any counterclaim will specify in reasonable detail the facts and
legal grounds forming the basis for the claimant’s request for relief and will include a statement of the total amount
of damages claimed, if any, and any other remedy sought by the claimant. The arbitration will be conducted in the
English language in Palo Alto, California. Each Party will bear its own expenses in the arbitration and will share
equally the costs of the arbitration; provided, however, that the arbitrator may, in their discretion, award reasonable
costs and fees to the prevailing Party. The arbitrator will have full power and authority to determine issues of
arbitrability and to interpret or construe the applicable provisions of the Contract and/or this Master Services
Agreement and to fashion appropriate remedies for breaches of the Contract and/or this Master Services Agreement
(including interim or permanent injunctive relief); provided that the arbitrator will not have any right or authority:
(i) in excess of the authority of a court having jurisdiction over the Parties and the dispute would have absent this
arbitration agreement; (ii) to award damages in excess of the types and limitation of damages found in the Contract
and/or this Master Services Agreement; or (iii) to modify the terms of either the Contract or this Master Services
Agreement. The award of the arbitrator will be issued within 30 days of the completion of the hearing, shall be in
writing, and shall state the reasoning on which the award is based. Judgment upon the award rendered in the arbitration
may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, the Parties acknowledge that
Seller’s breach of an obligation under this Master Services Agreement or the Contract will subject Tesla to irreparable
and continuing injury for which remedies at law would be inadequate and, accordingly, Tesla shall be entitled to
temporary, preliminary, or permanent injunctive relief, specific performance, or other equitable relief as appropriate.
Seller hereby waives any bond requirements for obtaining equitable relief. The Parties further consent to the
jurisdiction of any state or federal court with subject matter jurisdiction located within a district that encompasses
assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment (or
award) against the assets of such Party.
(c) Each Party shall continue performing its obligations under the Master Services Agreement and the
Contract while a dispute is being resolved unless and until such obligations are terminated by the termination or
expiration thereof.
13.2
(a)
Jurisdiction and Venue.
If the Owner and Contractor do not resolve the Claim or dispute through mediation, any and all such
Claims or disputes shall be decided through litigation under the laws of the State of California. The exclusive
venue for such litigation shall be a court of competent jurisdiction located in the United States District Court
for the Northern District of California or, if that court does not have jurisdiction, in the Superior Court of the
State of California, County of Santa Clara. The Parties irrevocably and unconditionally waive any objection to
the laying of venue of any proceeding arising out of or relating to the Agreement in such courts. The Parties
further consent to the jurisdiction of any state or federal court with subject matter jurisdiction located within
a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the
enforcement of the judgment (or award) against the assets of such Party.
(b)Contractor may not sue or bring any action of any kind whatsoever against Owner on any Claim or
dispute under the Contract Documents after the expiration of three hundred sixty-five (365) days from
Substantial Completion. This contractual period of limitation takes precedence over any contrary or conflicting
statutory provision or rule of law applicable to any Claims or disputes which the Contractor may seek to bring.
14.MISCELLANEOUS
14.1 Waiver. No failure or delay by a Party in exercising any right, power or remedy will operate as a waiver
of that right, power or remedy, and no waiver will be effective unless it is in writing and signed by an authorized
representative of the waiving Party. If a Party waives any right, power or remedy, the waiver will not waive
any successive or other right, power or remedy that Party may have.
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14.2 Remedies Cumulative. All remedies provided in this Agreement are cumulative and in addition to and
not in lieu of any other remedies available to a Party under this Agreement, at law, or in equity.
14.3 Assignment. Contractor may not assign, transfer or otherwise convey or delegate any of its rights or
duties under this Agreement to any other Party (except to the successor in a merger or acquisition of
Contractor) without the prior written consent of Tesla, and any attempt to do so will be void. This Agreement
shall be binding upon the respective successors and permitted assigns of the Parties.
14.4 Governing Law. This Agreement will be interpreted and construed in accordance with the substantive
laws of California and the United States generally applicable therein, without regard to any provisions of its
choice of law rules that would result in a different outcome. Notwithstanding the foregoing, if a Claim relates
to or is the subject of a mechanic’s lien, the party asserting such Claim may proceed in accordance with
applicable law to comply with the lien notice or filing deadlines.
14.5 Audits and Records. During business hours and upon reasonable advance notice, Tesla and its agents
may inspect, examine and audit the records and data of Contractor (and its Subcontractors) that pertain to the
Services to verify (a) the accuracy of Contractor’s invoices, and (b) Contractor’s compliance with this
Agreement. In support of the foregoing right, Contractor will keep and maintain (i) financial records relating
to this Agreement in accordance with generally accepted accounting principles, (ii) records substantiating
Contractor’s invoices, (iii) records pertaining to Contractor’s compliance with this Agreement and the Work
Authorizations, and (iv) such other operational records pertaining to performance of the Services as Contractor
keeps in the ordinary course of its business. Contractor will retain such records for the longer of three (3) years
after the Term ends or as required by applicable Laws. Contractor will make such records available to Tesla
and its auditors for examination and copying upon request.
14.6 Notices. All formal notices, requests, demands, approvals and communications under this Agreement
(other than routine operational communications) (collectively, “Notices”) will be in writing and may be served
either (i) in person or (ii) by registered or certified mail with proof of delivery, addressed to the Party at the
addresses set forth below. Notices given as described in the preceding sentence will be considered received on
the day of actual delivery. A Party may change its address or designee for notification purposes by giving the
other Party prior written notice of the new address or designee in the manner provided above. The Parties
may mutually agree that certain types of routine approvals and notices of a non-legal nature may be given by
electronic mail.
In the case of Tesla:With a copy to:
Tesla, Inc.Tesla, Inc.
13101 Tesla Road
Austin, Texas 78725
13101 Tesla Road
Austin, Texas 78725
Attn:Attn: Legal Department
In the case of Contractor:(Note: If no information is listed here for
Contractor, notices shall be sent to the attention of
the Contractor representative who signs this
MSA.)
Attn:
14.7 Interpretation. Section references are to sections of the document in which the reference is contained
and will be deemed to refer to and include all subsections of the referenced section. The section headings in
this Agreement are for reference purposes only and may not be construed to modify or restrict any of the terms
of this Agreement. This Agreement will be deemed to have been written by both Parties. Section references
are to sections of the document in which the reference is contained and will be deemed to refer to and include
all subsections of the referenced section. The section headings in this Agreement are for reference purposes
only and may not be construed to modify or restrict any of the terms of this Agreement. This Agreement is
written in the English language, and the English text of this Agreement shall prevail over any translation hereof.
Unless the context requires otherwise, (i) “including” (and any of its derivative forms) means including but not
limited to, (ii) “may” means has the right, but not the obligation to do something and “may not” means does not
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have the right to do something, and (iii) “will” and “shall” are expressions of command, not merely expressions
of future intent or expectation.
14.8 Order of Precedence. In the event of conflicts or discrepancies among the Contract Documents,
interpretations will be based on the following priorities: (a) Work Authorization, solely to the extent the Work
Authorization parties agree that the Work Authorization amends this Agreement, (b) this Agreement, as
amended, including all Exhibits; (c) Addenda, if any, with those of later date having precedence over those of
earlier date; (d) Modifications to the Drawings and Specifications issued after the execution of the Work
Authorization, Specifications, Drawings, and Addenda issued prior to execution of the Work Authorization; and
(f) Specifications and Drawings. Unless specifically enumerated in the Agreement or any Work Authorization,
the Contract Documents do not include the advertisement or invitation to bid, instructions to bidders, sample
forms, other information furnished by the Owner in anticipation of receiving bids or proposals, the Contractor’s
bid or proposal, or portions of Addenda relating to bidding requirements.
14.9 Severability. If any provision of this Agreement or a Work Authorization is held invalid by a court with
jurisdiction over the Parties to this Agreement, such provision will be severed from the Agreement, and the
remainder of this Agreement will remain in full force and effect.
14.10 Third Party Beneficiaries. This Agreement is entered into solely between Tesla and Contractor and,
except for the Parties’ indemnification obligations under Section 11 (Indemnification) and the Service
Recipients, will not be deemed to create any rights in any third parties or to create any obligations of either
Tesla or Contractor to any third parties.
14.11 Survival. Any provision of this Agreement that contemplates or governs performance or observance
subsequent to termination or expiration of this Agreement will survive the expiration or termination of this
Agreement for any reason, including the following Sections: 6 (Confidentiality), 7 (Intellectual Property Rights),
9 (Representations and Warranties of Contractor), 11 (Indemnification), 12 (Liability), 13 (Dispute Resolution)
and 14 (Miscellaneous) .
14.12 Entire Agreement. This Agreement including all Schedules constitutes the entire agreement between
the Parties with respect to its subject matter and merges, integrates and supersedes all prior and
contemporaneous agreements and understandings between the Parties, whether written or oral, concerning
its subject matter. Any terms and conditions on any order or written notification from either Party that purport
to vary or supplement this Agreement shall not be effective or binding on the other Party. This Agreement may
be amended or modified solely in a writing signed by a duly authorized representative of each Party.
14.13 Defined Terms. Terms used in this Agreement with initial capitalization have the meanings specified
where used or in this Section 14.13.
(a) “Addenda” or “Addendum” means written information adding to, clarifying or modifying the bidding
documents.
(b)“Affiliate” means with respect to an entity, any other entity or person controlling, controlled by, or
under common control with, such entity. For purposes of this Agreement, "control" means possessing, directly
or indirectly, the power to direct or cause the direction of the management, policies or operations of an entity,
whether through ownership of voting securities, by contract or otherwise.
(c) “Change” means any material change to the scope of, charges for, or other contractual commitments of
a Party with respect to, the Services being provided by Contractor.
(d)“Change Order” means a mutually agreed Change to the scope, timing, manner or cost of performing
the Services pursuant to an Work Authorization. A change order may not modify the terms of the body of this
Agreement.
(e)“Claim” means any demand, or any civil, criminal, administrative or investigative claim, action or
proceeding (include arbitration) asserted, commenced or threatened against an entity or person by an
unaffiliated third party. For the purposes of this definition, an employee of either Party is considered an
unaffiliated third party.
(f)“Commercially Reasonable Efforts” means taking all such steps and performing in such a manner as a
well managed company would undertake where it was acting in a determined, prudent and reasonable manner
to achieve a particular desired result for its own benefit.
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(g)“Deliverable” means any work product identified as a ‘Deliverable’ in the Agreement or an Work
Authorization.
(h)“Drawings” mean graphic and pictorial portions of the Contract Documents showing the design,
location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and
diagrams.
(i)“Intellectual Property Rights” means all (i) patents, patent applications, patent disclosures and
inventions (whether patentable or not), (ii) trademarks, service marks, trade dress, trade names, logos,
corporate names, Internet domain names, and registrations and applications for the registration for any of
them, together with all goodwill associated with any of them, (iii) copyrights and copyrightable works
(including computer programs and mask works) and registrations and applications for registration, (iv) trade
secrets, know-how and other confidential information, (v) waivable or assignable rights of publicity, waivable
or assignable moral rights, (vi) unregistered and registered design rights and any applications for registration,
and (vii) database rights and all other forms of intellectual property, such as data.
(j)“Law(s)” means any statute, regulation, ordinance, rule, order, decree or governmental requirement
enacted, promulgated or imposed by any governmental authority at any level (e.g., municipal, county, province,
state or national).
(k)“Malware” means program code or programming instruction(s) or set(s) of instructions intentionally
designed to disrupt, disable, harm, interfere with or otherwise adversely affect computer programs, data files
or operations, or other code typically described as a virus, Trojan horse, worm, back door or other type of
harmful code.
(l)“Modification” is (1) a written amendment to the Contract signed by both parties, (2) a Change Order,
(3) a Work Authorization or (4) a written order for a minor change in the Work issued by the Owner that does
not increase costs or construction time.
(m)“Open Source Code” means software that requires as a condition of its use, modification or distribution,
that it be disclosed or distributed in source code form or made available at no charge, including, without
limitation, software licensed under the GNU General Public License (GPL) or the GNU Lesser/Library GPL.
(n)
(o)
“Party” means either Tesla or Contractor, as required by the context.
“Project” means a group of related functions or activities that spans multiple days, weeks, or months
and builds cumulatively toward the achievement of defined target outcomes or objectives. A Project typically
has multiple phases or life-cycle stages and involves written project plans with defined interim milestones and
deliverables to measure progress toward the achievement of its target outcomes or objectives. The Services
provided for each Tesla Facility will be deemed a separate Project for purposes of this Agreement.
(p)“Specifications” means that portion of the Contract Documents consisting of the written requirements
for materials, equipment, systems, standards and workmanship for the Work, and performance of related
services.
(q)“Substantial Completion” or “Substantially Complete” is further defined as the date certified
respectively, by the Owner when (i) the Owner have prepared a Punchlist of Work remaining to be performed
and has established sufficient reserves for purposes of completing such Punchlist of Work, and (ii) all required
governmental or regulatory inspections applicable to the Contractor’s Work have been conducted and all final
approvals required for occupancy have been obtained from all authorities having jurisdiction over the Project.
Any such occupancy or use described above shall not negate or change the responsibility of the Contractor to
Owner for satisfactory completion of the Work nor shall such occupancy or use negate any insurance provisions
required hereunder.
(r)“Supplier” means a person or entity who has a direct or indirect contract with Contractor or a
Subcontractor at any tier to provide any equipment, supplies, materials, or other goods in connection with the
Work and who is not a Subcontractor or a Sub-subcontractor.
(s)“Tesla Data” means all data and information regarding Tesla, its customers and suppliers that is either:
(i) furnished, disclosed or otherwise made available to Contractor Personnel, directly or indirectly, by or on
behalf of Tesla pursuant to this Agreement; or (ii) collected or created by Contractor Personnel on behalf of
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Tesla in the course of performing the Services. Tesla Data will be deemed to be Confidential Information that
is subject to the NDA.
(t)“Tesla Facility” means, collectively, the Tesla facility or real property at which Contractor will perform
Services and the reasonable office space, furniture, fixtures, equipment, hardware, software, telephones, office
supplies, and other facility resources to be provided or made available by Tesla to Contractor Personnel who
are assigned by Contractor to work on Tesla premises by mutual agreement of the Parties, as evidenced in the
applicable Work Authorization.
(u) “Use” means the right to use, execute, display, copy, perform, distribute copies of, maintain, modify,
enhance, and create derivative works of software or other copyrighted or copyrightable works.
(v)“Work Authorization” means the form of document that will be used to authorize Contractor to perform
Services by mutual agreement of the Parties. When duly executed by the authorized representatives of both
Parties, a Work Authorization becomes an “Work Authorization.”
15.MECHANIC’S LIENS
15.1 If at any time, a lien is filed on the Project arising out of the Work, the Contractor, within five (5) days
after the date of the filing of such notice of lien, and to the Owner’s satisfaction and in accordance with the
mechanic’s lien laws of the place where the Project is located, shall discharge and remove the lien or post a
bond satisfactory to the Owner for such lien or claim of lien and shall indemnify and hold the Owner harmless
for all costs, including, but not limited to, attorneys’ fees and expert fees, regarding such lien or claim of lien,
together with interest on the same from the date any such cost was paid by Owner until reimbursed by
Contractor at the rate of interest provided in the Agreement, except if the lien is the result of Owner’s
nonpayment of an amount contained in a previously submitted pay application over which no good-faith
dispute exists between Owner and Contractor. The obligations of Contractor under this Subsection shall survive
the expiration or termination of the Contract.
15.2 Contractor shall promptly advise Owner in writing of any action, administrative or legal proceeding or
investigation as to which Subsection 15.1may apply, and provided the Owner is not in default of its payment
obligations to the Contractor, Contractor, at Contractor’s expense, shall assume on behalf of Owner, and
conduct with due diligence and in good faith, the defense thereof with counsel satisfactory to Owner, provided
that Owner shall have the right to be represented therein by advisory counsel of its own selection and at
Contractor's expense, and provided further that if the defendants in any such action include Contractor and
Owner and Owner concludes that Contractor has a conflict of interest and cannot adequately represent the
Owner, then the Owner shall have the right to select separate counsel to participate in the defense of such action
on its own behalf for which fifty percent (50%) of the cost shall be at the Contractor’s expense. In the event of
failure by Contractor to fully perform in accordance with this Subsection, Owner, has the option of, and without
relieving Contractor of its obligations hereunder, to so perform, but all costs and expenses, including but not
limited to attorneys’ fees and expert fees, so incurred by Owner in that event shall be reimbursed by Contractor
to Owner, together with interest on the same from the date any such expense was paid by Owner until
reimbursed by Contractor at the rate of interest provided in the Agreement. The obligations of Contractor
under this Subsection shall survive the expiration of termination of the Contract.
15.3 The Owner shall release any payments withheld due to a lien or claim of lien if the Contractor removes
the lien or obtains security acceptable to the Owner or a lien bond that is (i) issued by a surety acceptable to
Owner, (ii) in a form and substance satisfactory to the Owner, and (iii) in an amount not less than one hundred
fifty percent (150%) of such lien claim. By posting a lien bond or other acceptable security, however, the
Contractor shall not be relieved of any responsibilities or obligations under this Section 15.3, including without
limitation the duty to defend and indemnify the Owner. The cost of any premiums incurred in connection with
such bonds and security shall be the responsibility of the Contractor and shall not be a part of, or cause any
adjustment to, the Contract Price.
15.4 Notwithstanding anything to the contrary contained herein, if the Contractor does not promptly post
the bond, the Owner may withhold 150% of the amount of such lien until such lien is discharged or the Owner
is protected by bond satisfactory to the Owner in the amount of at least 150% of the amount of the lien or other
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means satisfactory to the Owner. If no monies are available to be withheld, the Contractor shall within three
(3) consecutive calendar days refund to the Owner 150% of the amount of such lien(s).
15.5 Notwithstanding anything in Section 15 to the contrary, and in the event the Contractor fails to make
payments to its Subcontractors or Suppliers in accordance with this Contract and does not provide justifiable
reasons to the Owner upon Owner’s request, Owner may, at the Owner’s sole discretion, elect to make any
payment requested by the Contractor on behalf of a Subcontractor of any tier or a Supplier, jointly payable to
the Contractor and each Subcontractor and/or Supplier. The Contractor and such Subcontractor or Supplier
shall be responsible for the allocation and disbursement of funds included as part of any such joint payment. In
no event shall any joint payment be construed to create any (i) contract between the Owner and a
Subcontractor or Supplier of any tier, (ii) obligations from the Owner to such Subcontractor or Supplier, or (iii)
rights in such Subcontractor or Supplier against the Owner. The Contractor agrees to sign such additional
documents and take such action as the Owner shall deem necessary to carry out the intent of this Section 15.5.
Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute
this Agreement as of the Effective Date.
Tesla, Inc.Contractor
By:By:
Printed:
Title:
Date:
Printed:
Title:
Date:
Company:
Address:
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EXHIBIT A
APPROVED WORK ORDER NO. FOR SERVICES
1.Introduction. This Work Order is entered into as of the Date of Order set forth below by and between the
Tesla affiliate set forth below (for the purposes of this Work Order, “Tesla”) and Contractor, and made a part of that
certain Master Services Agreement between [INSERT TESLA ENTITY] (“Tesla”) and [CONTRACTOR NAME
AND ADDRESS] ( hereinafter “Contractor”) dated [INSERT AGREEMENT DATE] (the “Agreement”). This Work
Order sets forth the terms and conditions for the Project described in this Work Order. All capitalized terms not defined
in this Work Order have the respective meanings set forth in the Agreement.
2.Description of Project Services and Performance Measurement.
Contractor will perform the following Services pursuant to this Work Order.
(a) [describe services, any required resources, any Deliverables, and any deadlines or milestones]:
(b) Project Site:
(c) Project Milestones (specify delivery dates): [IF APPLICABLE]
(i)Contractor shall begin Work on , and shall be substantially complete as soon as due
. ordiligence and good practice will permit, but not later than
(ii)
Project Milestones Deadline
Substantial Completion Date
Final Completion Date
(d) List of applicable Plans and Specifications:
3.Work Schedule:
From the mutual execution of this Work Order until Substantial Completion, at Tesla’s request, Contractor shall
provide weekly written updates to Tesla describing the Services completed to date and a comparison of costs incurred
versus budgeted amounts and providing an updated Work Schedule for the remainder of the Services, including the
anticipated date of Substantial Completion.
Tesla may request additional services after the Effective Date. Unless otherwise agreed by the Parties in writing, the
fees for such services will be calculated by multiplying the Productive Hours by the applicable agreed billing rates
set forth herein, or currently on file.
Tesla shall have the right within the general scope of the Work and without notice to any surety or sureties of the
Contractor, to make changes in the Work pursuant to a written change order (“Change Order”), either by altering
the nature of the same or by adding to or deducting from it as more specifically set forth in the Construction General
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Conditions incorporated herein.
4.Contract Price. With reference to Section 4 (Charges) of the Agreement, Tesla will pay the Contractor
for the performance of work specified herein the total price of (INSERT TOTAL AMOUNT OF WORK ORDER IN
TEXTand no cents) ($00,000.00).
5.Monthly Invoicing: Tesla will pay Contractor the amount above in accordance with the Agreement, subject
to receipt of invoices from Contractor in a form and content reasonably acceptable to Tesla. Such invoices shall contain
sufficient information to allow Tesla to determine the accuracy of the amounts billed and shall include invoices from
all subcontractors, any relevant certificates of completion, unconditional lien waivers for all past work and conditional
lien waivers for current work. Tesla will pay invoices not disputed in good faith as per the Agreement, less a retainage
of 10%. Tesla will pay the accumulated retainage 30 days after the later of (a) receipt of the Close Out Book; or (b)
Final Completion; in each case together with invoices and final unconditional lien waivers from all subcontractors.
Payment terms are otherwise as set forth in the Agreement, however Contractor shall be paid by Tesla within (
days of Tesla’s receipt of the applicable invoice for such amounts.
)
6.Key Contractor Positions. With reference to Section 3.2 (Key Contractor Positions) of the MSA, the Key
Contractor Positions for purposes of this Work Order, if any, are:
7.Service-Specific Terms and Conditions. Annexes or additional documents attached hereto set forth
additional terms and conditions which may apply for purposes of this Work Order, if applicable to the Services to be
performed hereunder.
Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute
this Approved Work Order as of the date last entered below.
TESLA, INC.Contractor
By:By:
Printed:
Title:
Date:
Printed:
Title:
Date:
Company:
Address:
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EXHIBIT B
FORM OF CHANGE ORDER
TESLA MASTER SERVICES AGREEMENT (CONSTRUCTION) CHANGE ORDER
Work Authorization No:
Change No.:Date:
Architect/Engineer:
To (Contractor):
Your proposal dated has been accepted for making the following changes:
DESCRIPTION OF CHANGE DECREASE INCREASE
(Attach additional sheets if required.)
NOTICE TO PROCEED DATE:ORIGINAL CONTRACT SUM:
Contract Time Days Complete*Subtotal
Present Contract
This Change
New Contract Time
New (Add) (Deduct)
Present Contract Sum
New Contract Sum
*SUBSTANTIAL COMPLETION DATE
This Change Order is an amendment to the Agreement, and all contract provisions shall apply unless specifically
exempted. The amount and time Change designated are the maximum agreed to by both the Owner and the
Contractor for this change. In consideration of the foregoing adjustments in Contract Time and Contract Sum, the
Contractor hereby releases Owner from all Claims, demands, or causes of action arising out of the transactions,
events and occurrences giving rise to this Change Order. This written Change Order is the entire agreement between
Owner and Contractor with respect to this Change Order. The cost of the change indicated on the face of this Change
Order is the entire amount of the change, and no backup documentation attached hereto may reserve the
Contractor’s right to increase the contract time or the cost of this change for extended overhead or general
conditions or any other reason.
AGREED TO IN FORM AND CONTENT
CONTRACTOR
ARCHITECT/ENGINEER
TESLA, INC.
DATE
DATE
DATE
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