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HomeMy WebLinkAbout1982-03-18 City Council Summary MinutesSpecial Meeting Thursday, March 1 ITEM UTILITIES STUDY SESSION: PALO ALTO ELECTRIC ENERGY LOAD FORCAST/ALTERNATIVE ENERGY RESOURCES ADJOURNMENT 1982 1 7 8 5 1 7 9 G Special Meeting Thursday, March 18, 1982 The City Council of the City of Palo Alto met on this date in the Council Conference Room, 250 Hamilton Avenue, at 7:30 p.m. Present: Bechtel, Cobb, Eyerly, Fazzino, Fletcher, Klein, Levy, Witherspoon Mayor Eyerly announced that the Harry Allen Coal Project was the only item on the agenda. He said the schedule would be that the City Utilities Depaetment would make a presentation, the Sierra Club would make a presentation, the Northern California Power Agency '(NCPA} representative would give; the proposal of NCPA, the 'City Utilities Department would give an` analysis of the proposal, and then the Council -would discuss the pros. and cons of the pro- ject. UTILITIES STUDY SESSION: PALO ALTO ELECTRIC UTILITY LOAD E -N ER O Y 1E S C E' (CAR : r8 b : 2 ) Director of Utilities Edward Aghjayan said that at a City Council meeting a few months ago, staff was given the authority to indi- cate that' the City wished to participate in the planning of the Harry Allen Project at a level of 20 megawatts, and a participa- tion amount of $30,000. He said money was paid into NCPA for the planning of the project. At that time Roger Fontes, the Director of Planning for NCPA, indicated that he had to negotiate an agree- ment among the partners in the project--NCPA being one partner. He said the agreement was now complete and called for a total commitment in excess of the amount originally approved by the Council for planning, but that the agreement covered the planning stage through the decision on whether to build. He said if NCPA signed the agreement and went along with it, there would be little the City Could do about stopping it midway, and could be asked to centeibute more money as the project progressed, which could result in a total commitment of funds by the City of Palo Alto, -at the 20 megawatt level, of $84,000 rather than the $30,000 origi- nally -agreed upon. He reiterated that the- money was only for planning, design, and bringing the project to the stage of whether to build. He said the NCPA Committee decided to ask all of the cities to return the project t� their Councils for review, and he believed. it was appropri ate tot bring the project back to the Council and ascertain how they wanted to proceed. Staff recom- mended that .the City stay at the $30,000 evel of participation. If the City stayed with the -$3M00 level, it would reduce the City of Palo Alto's megawatt percentage, _or snare of the project from 20 megawatts to slightly under six megawatts. Mr. Aghjayan said the recommendation was based on the new forecast and analysis of the City's needs, and staff aid not believe 20 megawatts of. the Harry Alien Project were needed-, Mr. Aghjayan said that in order to present a balanced argument on the pluses and minuses of the project, a representative from NCPA and a representative of the Sierra Club were asked to attend the meeting. He said each would be asked to make a 10-15 minute presentation on their views of the Harry Allen Project. He said Frank Set1ey',would present the' staff analysis of the project _ and then the matter would beopened up for discussion as to whether. the City should proceed. He said there were a number of ways the Council could approach the matter --to .90 with the full $84,000 commitment of .funds and stay at the 20 megawatts; second, approve the staff recommendation; or, third, to pull out of the project completely. 1 I 1 7 8 5 3/18/82 Mr. Aghjayan said staff believed that $5,000 - $10,000 of the $30,000 already invested by the City of Palo Alto had been spent; but that most of the money could be refunded if the Council desired. Mayor Eyerly commented that one reason the Council had to make a decision tonight was that the C'I ty was under some deadlines which related to the deadlines NCPA was under. Frank Betley, Supervising Engineer, Energy Planning, said that the original project proposed by PG&E , Southern California Edison Company and Nevada Power Company was comprised of the 2000 mega- watt Harry Allen coal fired powerplant, and the 500 megawatt Warner Valley powerplant (a very controversial aspect of the pro- ject because it was located about 17 miles upwind from Zion National Park. A third major component was utilization of a coal source from the Alton coal fields, approximately five miles from Bryce Canyon, which involved both the strip mining operation and an underground mining operation. He said another controversial portion of the project was water rights to supply water for a coal slurry -pipeline which would deliver coal slurry from the Alton fields to the Warner Valley ey powerplant as well as the Harry Allen powerplant. The fourth major component of the project was the transmission route. Mr. Betley said that the current project was different from the original project. It was the Harry Allen Powerplant which, instead of 2,000 megawatts was reduced to 1,500 megawatts, and the elimination of the Water Valley Powerplant. He said the transmission route was still up in the air and in need of further study. He said that the Alton coal fields, contained in the original proposal as a sure source of coal, was also up in the air and alternatives were being investigated. He commented that the investigations for other sources of coal were being done on an economic basis. A number of aspects of the project had changed -- some were in an uncertain state and some were eliminated. Mr. Betley said the project - was to be located near Las Vegas because Nevada Power Company was the sponsor of the project. He said the Nevada Power Company wanted to build a plant in their own service territory and were looking for other partners. Mayor Eyerly asked who some of the partners were in the project. Mr. Betley responded that NCPA, Turlock Irrigation District, SMUU, Southern California Public Power Agency which was made up of a group of southern. cities, Modesto Irrigation Di strict , several small utilities in Nevada ---both puhli and private, as well as the -- Nevada Power Company and two small utilities in Utah were partners in the project. Councilmember Klein asked Mr. Betley to explain the share owner- ship and generation entitlement differentials. Mr. Betley responded that Nevada Power Company bought an ownership share of 199 megawatts, however, their generation entitlement share will be 385 megawatts. As an example, NCPA would .fund 253 megawatts of the project and would only receive 210_ megawatts of the project, and NCQA would sell.. 43 megawatts .back:' to the Nevada Power Company at. cost. He said the reason for that was to give Nevada an opportunity to build a project with public money. Mr. Aghjayan said that staff was recommending the project from an economic prospective --the recommendation was not _ to go . ahead with the project, but rather a $3.0,000 investment that would bring the City to a go or no -yo decision --a full planning cost. He said the $30,000 for six megawatts was $5,,000 per megawatt, which was a L:7-8 6 1/18/8Z very low cost to keep a project alive. Calaveras, for example, was $35,000 per megawatt for the City of Palo Alto to get into the pl anni ng. He said the Harry Allen Project was a good base load project based on comparative analyses with other alternatives, it was a lower cost, it fit the City's load picture, and was a very low cost. Staff recommended staying at the $30,000 level and six megawatts. Counci 1 member Levy asked if the current plan included any of the coal fields which were close to Bryce Canyon; Mr. Bet 1 ey responded that while the existing plan included the coal fields close to Bryce Canyon, they were under review. He said that the Nevada Power Company was the sole manager of the project previously, and now every public utility in California was involved. Other utilities had a large share of the voice in the project, and' had demanded that another coal study be undertaken. While Bryce Canyon was in the on gi nal pl an, it was now being re-evaluated. Michael Papari an, California Energy Representative for the Si erra Club,. said that he covered energy issues for the whole state and was based in Sacramento. He sai a the Sierra Club's problems with the faci 1 ity had beef' primarily centered on the impact on the park resources in southern Utah --the impacts on. Bryce National Park and Zion National Park. He said that the Bryce National Park impacts were because of the Al ton coal field within si ght and sound of the park possibly involving some air quality degradation of the region. He said that water availability in the area was another issue. The facility was expected to be fed by the slurry pipeline with coal and water mixed in and piped 183 miles to the Harry Allen plant itself. He said water was very tight in southern Utah and the Sierra Club had been worki ng closely with the farmers ` and local residents who were concerned about the future of their water supply. He said ai r quality in Nevada and Utah was a concern, and said that the Sierra Club members in southern Nevada were con- cerned about what the Harry Allen plant would do to the air qual- ity- in the region because of the several state parks in the region of the Harry Allen plant itself. He said he h.d not looked at the avail able alternatives for Palo Alto in terms of PG&E , SMUD and Southern California Edison. In those cases it was believed that there were preferable alternatives available at less cost. He said that the preliminary agreement indicated that the Alton coal fields would be the preferred coal source. Regarding the Alton coal source, right before Cecil Andrus left as Secretary of the Interior, he ruled that about ore --third of that coal source was unsuitable for mining. Fol l owi ng his deci si on, the applicants went to court asking that the portions ruled unsuitable for mining be ruled suitable for mini ng. At the same time, the Si erra Club went to court with same environmental groups and local residents argui ng that sources that were sui t abi a for mining be ruled unsuitable for mining. He said that the likely outcome would be that when the decision was made, the other party would appeal the decision and it would likely tie up the coal source in court for five to six years. He said Mr. Watt had wanted to get . in and reverse the ruling and the courts ruled that he could not do that. Mr. Papari an said that regarding a slurry fed facility, there was one existing slurry fed facility at the Mojave Powe^plant , which had experienced_ a substantial number . of problems and its capacity factors were right about 50%. He said the problems were technical in nature and it was uncleare whether the Harry Allen plant '.would achi eve a very high capacity factor. The- factors used by SMUD, and the Cal i forth a Energy Commission were around 65%. -He said that if the Alton ; coal fields were sought once the court cases Were set- tled, mining plans would have to be filed and that could take sev- eral years to resolve. The Alton coal field, from a ° practical prospects ve, probably would not happen. Regarding the cost of the project, staff estimates seemed accurate. He said there were some 1 7 8 7. 3/18182 1 1 1 1 1 lingering questions, and one was the coal source. He said that if another coal source was sought, additional costs would be incurred possibly because of the rail lines, higher cost of coal, and pos- sible additional water costs if rail was not the alternative and slurry was. He thought that transmission lines were important to consider because the routing of transmission lines had not been finalized. It would need to be clear where the lines would go; and if possible, to get them from Nevada to California to Palo Alto. He thought that the estimates of costs made by the Nevada Power Company were understandably low. He advised that some inde- pendent analysis be sought of the cost that Nevada Power came up with based on their records. Regarding Nevada Power Company's control of the project, and the entitlement situation, what would happen was that the municipal utilities in California would buy more of a share than they would receive, and Nevada Power would have the voting rights on the differences in those shares. He. said that Nevada Power was' in relatively poor financial condition, and that their recent bond issues were relatively high for utility bonds. He said the preliminary agreement called for the partici- pants to pay back Nevada Power's front costs in the project at a rate of about 17-1/2%, which was high for utility related costs, but about ri ght for Nevada Power. Water ri ghts had not been secured: and Utah had not yet ruled on whether to go ahead and allow the water rights in the event of a coal slurry pipeline. Mr. Paparian made the following recommendations on behalf of the Sierra Club: 1. The preference was for California Municipal utilities to not get involved in the project. 2. If the City of Palo Alto did participate, it was recommended that: a) Some independent estimates of the costs be sought (indepen- dent of Nevada Power Company). He said the preliminary agreement called for Nevada Power Company to make some cost estimates; b) Some analysis of the transmission capabilities should be sought --where the routes would go, etc. c) A coal source be in hand before a final agreement was reached so that all the costs would be known. d) The California Energy Commission review the economics of the project and some of the possible alternatives of power transfers from the northwest or elsewhere. Counci lmember Levy asked if the Sierra Club was closed to all coal fired projects, and if it was possible to build a coal fired plant without Sierra Club opposition. Mr. : Papari an said no, but that the Sierra Club would not yet in the position of supporting a coal fired power pr=oject. He said it would depend upon the air quality impacts'>,and the coal source. Further, he said At was possible to build a coal fi red plant' wi th-; cut opposition from the Sierra Club and that it was done in the southwest. Mayor Eyerly asked if the Sierra Club felt that any portion of the Alton coal field was usable. Mr. Papari an responded that the Sierra Club's position was that none of the Alton coal field was usable because of air pollution and the °.visual and noise impacts. Counci lmember Levy asked if an oil fired pl ant was preferable to a coal fired plant. Mr. Papari an responded that if coal and oil were the only two options, because of the long .term problems of oil availability, it made more sense to have a coal fired plant. Councilmember Levy asked if the Sierra Club felt that the coal could be cleaned up satisfactorily enough as it was being burned in terms of coal versus oil. Mr. Paparian said yes, dependent upon _the source, where it was sited, and the degree to which it would be cleaned up. Gouncilmember Renzel asked how the Four. Corners plant would com- pare to the Harry Allen plant in terms of cunt rol technology. Mr. Papari an responded that initially the .Four Corners plant had a lot of problems with air quality. A court settlement was reached with the owners of the facility whereby it would be cleaned up substantially more. He said he understood that the'Harry Allen plant .would be somewhat cleaner- than the Four Corners plant. Mr. Papari an said that in the large. service territories like PG&E and Northern California Edison, it was usually clear to the Sierra Club that there were alternatives -that made coal use absolutely necessary, - Roger-Fontes, representative from.NCPA, hoped he would not have to sell the powerpl ant to the .Council. He said that no power - plant, including a. geothermal powerplant, could win a beauty con- test. He said the Harry Allen Project would be cleaner than any oil burning powerplant in California. He said that the basic change in the project from when it was first presented to the Council in October was that the project manager of the Nevada Power Company was convinced to change the scope and study period for the preliminary- agreement. He said the priiject did not con- template usi ngeAl ton coal, but rather envisioned developing a coal supply plant which would be included as' -part'~ of the final .project agreement.- Because the Nevada Power Company owned coal rases for coal that might be considered, they_ were precluded by the terms of the agreement from participating in those negotiations and/or signing the agreement. Mr. Fontes said that PG&E, Nevada Power, and - Edison owned coal. He said PG&E owned coal through a blind holding company and Nevada Power owned coal. Since all three investment utilities owned coal, ,the question was whose coal should be used. He said that an independent consultant was hired and the results were that the Alton Coal and-. the slurry line were the cheapest and were substantially cheaper than the coals -owned: by PG&E and Edison. He said that Nevada Power Company was on- a capital expansion program and had a growth rate higher than Palo Alto's, and their problems about adding capacity were more severe. He said that Nevada Power sold stock in November at book value, and throughout the industry that was very uncommon in this country. He said PG&E had a ' probl em with a nuclear pl a'nt down the coast that cost them a bond rating. He said the project -was not the Harry- Allen Warner Valley Energy System. He believed that municipal utilities in California and elsewhere had seen an opportunity to pick up good pieces of a project available for construction without picking, up the bad luggage that had gone along with it. The Harry Allen -Project had a prevent significant deterioration' (PSD) ' permit which was the Clean Air -Act requirement that clean- areas. stay clean_. He said that the Harry Allen Project had a PSD permit Wfecti ve today for a 2,000 megawatt station 'using coal similar to . Alton coal, and staff had been provided with some information about what kinds of coal ranges -should be shopped for. He said that the preliminary agreement did not commit the project to the Alton coal fields. "Is 7 89 :3/18/82- Mr. Fontes said that the Al ton coal had not yet been excluded because from an economic point of view, . it would be hard to exclude ,it. Another point of the Alton field was that it could be brought, in by slurry. He said there were a lot of problems in southern Utah, but they could resolved. A good part about slurry lines was that rail escal ati on did not have to be paid so that the power costs of the project would not vary -steeply over time. He said a lot of Texas utilities and Louisiana utilities burning coal had been paying all the .profits of the railroad for the last ten years. He said that with the potential for deregulating the rail- road, most people felt that -slurry pipelines would be a techno- logical option in the future used generally when shipments of coal were made for distances greater than 100 miles. Mr. Fontes said that NCPA's obligation under the agreement would be 14% of 210 megawatts. Counci l member Klein said he was concerned that if something went wrong after the cities were committed for millions of dollars, and when they went to write off their loss, he asked who had the higher loss. Mr. .Fontes explained that NCPA had take -or -pay contracts with the cities that were building the projects. For example, the City of Alameda had signed a take -or -pay contract, and if the geothermal project burned to the ground, never ran and never produced one kilowatt hour of energy, Alameda had pledged whatever it took for the City to pay the bond trustee to return the payment of those bonds. He said. that arrangement was typical in project financing because all the money was bor► owed --it was ,not like a home where one came. i n with some equity and did some financing with the bank. The take -or -pay contracts were always a provision of major power purchase contracts. He said NCPA would have a power sales con- tract with the Nevada Power Company for their 43 megawatts, and that was their take -or -pay contract. With that, NCPA's lender would lend NCPA enough money to build NCPA's share and Nevada Power Company's share, and their obligation, under take -or -pay, was the liability for paying back whatever the costs were even if the project never worked. He said the capital markets would never loan NCPA a dime, if cities did not pledge to make good on the bonds if the project did not go. He said Nevada Power stood at risk for every megawatt they signed for in the agreement -`with NCPA to take. Mr. Aghjayan said he was told that the quality of the coal from the Alton Coal Field had a low heating value and thus ran up transportation costs by 30%. Mr. Fontes said that the Alton coal was great coal , and he thought the numbers had been misread, and when SMUD calculated -their fuel costs they forgot to dewater the slurry'. Mr. Aghjayari said that another issue was. the State having a right to claim up to b0% of that power at some point. Mr. _ Fontes said that was the Nevada recapture provision. He said that when Nevada heard that California was not going to allow powerplants to be built, they thought there might be an increased demand on powerplants in their state. The recapture provision was.: a way for the State of Nevada to justify building powerplants for California's use. He said the provision said that during the end of the ` project when the project passed its A3ond life --30 years old --at least half the project had to beowned by Nevada entities. He said,Nevada Power had proposed that NCPAwould own its share of the project .for -30 years, and then -over the next five years, they would recapture whatever was necessary so that by the 35th year, Nevada, Overton and Lincoln Power Districts (the Nevada entities) had control of at least 50% of the project. He said Nevada Power would pay .NCPA. for buying the project back, but the price had hot been determined. He said that was the way the Nevada revised statutes were .interpreted, and that was the way it was submitted to the Nevada Service Commission. He said there was a provision in the preliminary agreement to bring the project to a go or no go situation later this year. Nevada Public Service Commission had to approve a recapture scheme, and NCPA hoped they would approve the one suggested by the Nevada Power Company. If they dial not, NCPA would take a hard look at the project economics, and might recommend not going on with the project.. He said that all the economic analyses so far assumed that in the 30th year, NCPA would have to start selling back about one-third of its generation. Mr. -Fontes said that people differed on the water situation in southern Utah. He understood that the water was otherwise unused in the area of a faulted sandstone called the Navajo Sandstone formation. He said the_ ground water basin was recharged and was like a large sponge and every rainy season -it was -recharged. He said a test pump ran at about 80,000 gallons per hour for about three days- without a drop in pressure, and the estimate he heard from Utah International was that if they pumped at the rates anti- cipated for 30 years, they would draw it down five inches over its .total service area. They assumed some recharge but not -100% recharge. He said there were issues that had to be resolved. Utah's water rights were -different from California's and there was a possibility that., i f any new water use were to impact an >: exi sti ng right, the new developer would not be allowed to develop. The Utah State Water Engineer had to grant a permit, and no one had yet applied for it. Me said that if a slurry line had to be used, it had to have a water supply, He said one tended to look at the bad parts of projects because id was pretty hard to find a beauti- ful powerplant, but the Harry Allen project would use sewage effluent water out of the Cl ark County Advanced Waste Treatment facility for cooling water. He said that an agreement with Clark County still had tobe signed and firm up the waste water supply, but there was still a dispute about who would pay for the convey- ance, and to pump the water from the sewage plant over to the facility. Mayor Eyerly asked how far down the line major decisions would have to be made. Mr. Fontes said that the next major agreement --the participation agreement --was now being negotiated and would be the document to start construction and work through operations.. He said the agreement was in its third revision, and he expected it would be done by the first of May. The next step would be to negotiate the power sales contracts, and he suspected that because of the amount of legal wording and contractual obligations from the project agreement .it would be done within a month or. two. He thought the biggest problems for the project would be securing the coal sup- ply, working on the transmission corridor, and having the finan- cing arranged for all the participants. He thought that by the end of the year the project would be at the go or no-go decision point. Mayor Eyerly commented that the staff's recommendation was the 5.9 megawatts, and continued use of the money already pledged by the City of Palo Alto. He asked where that would take the project in time. Mr. Fontes responded that the agreement had a cap on it, and the coordinating committee could not spend more than $6 million. He said that the initial budget to start preliminary plant engi- neering was $1,600,000. He said that an architect and engineering contract would probably be awarded by s'fmmer to do the preliminary engineering and that would be a big bulk of the $6 ni#i l on. Caunci !member Witherspoon asked ,what the options were for the transmission.- lines. '.1 7:9 1 3/18/82 Mr. Fontes responded that he was to attend a meeting tomorrow regarding that subject, and understood that Southern California Edison was bringing in a proposal that could not be refused. He said that the reason the original line was proposed was because there was a project called the White Pine County Power Project being built by Los Angeles and Southern California Public Power Authority, Nevada 'Power, and Sierra Pacific Power. He said that because of the power by displacement and the similarity of parti- cipants, it looked as thought it would be possible for the Harry Allen power to be .taken from Lake Pine which saved 400 miles of transmission losses at 6%. He said that could be a large savings over the life of the project; however, there were other projects planned -for that area. Sierra Pacific Power's bonds were in worse shape than Nevada Power so they announced a construction slowdown, and have delayed other projects, being built. He said it looked like there were two corridors approved as part of the project by Bureau Land Management from the McCullough Switching Station (three miles inside the Nevada border) to the major Edison, L.A. Department of Water and Power interconnection at Vincent/Lugo. He said he thought that Edison would suggest that if the Harry Allen participants in Northern California would agree to build a line - from McCullough to the Switching Station and let them have con- tract rights over.. that line to bring in some- of ,their own power, including some Harry Allen power from the Nevada Power Company on a lay off sales agreement, then- they would deliver our power at Midway. He said PG&E had said they could get the power from Midway to Testier which was the major transmission substantion in the area for a little bit of money and probably a little lay off energy. Mr.-Fontes said that one or two new transmission lines would prob- ably have to be built from McCullough to the Vincent/Lugo Switching station Ile the area. He said the new line from Midway to Testier which many --including the Energy Commission- had recommended be built, was delayed because Edison and PG&E did not cooperate enough that they would want to put out money for a transmission line they would only, allow themselves to use. Mr. Fontes said that it had been mentioned that the project cost about $5,000 to $6,000 per megawatt for the planning, it would 'take the project through the end of the year, and it would be a" .go or no-go situation. He said that $35,000 was mentioned for the Calaueras Project. Further, there was a current geothermal project which was costing $500,000 per megawatt. He thought the Harry Allen project was an opportunity to pick up a project with a lot of permitting already done. Vice Mayor. Bechtel, sei d it was estimated that the project would cost $5 billion; and, therefore, NCPA's share was 14% of $5 billion., and Palo Alto's share would be $ 58 million. She asked if the loan was to be at 17.5%. Mr. Fontes . said that. Nevada Power . had spent $10 million to get the project where it was today, and wanted NCPA to pay those`; costs back to them. NCPA refused and told them that if the project went, NCPA would pay back the planning :monies for the project out of the proceeds of the financing. He said that -when NCPA built a project=, it did the same thing --their planning monies were ' taken and put into their next project. He said Nevada was concerned about their debt and having to cover it, and -.showed NCPA their books. ; NCPA accountants calculated their current interest rate; and, in essence NCPA. would borrow: $10 million commencing October 1._ From October. 1, ,_1982 until the time when Nevada Power was paid, and if a participation agreement was ultimately signed, . NCPA. -would pay 17.5% on the $10 million. He said it would not come out of Palo Alto's pocket, it would come out of the proceeds of the bond sale. 1. 7 9 2 3/18/82 Mr. Aghjayan commented that six megawatts would be a commitment of about $20 million for the City. Mayor Eyerly asked how much the City of Palo Alto received annually from the electricity it sells. Mr. Aghjayen responded that Palo Alto's current revenues were about $20 million, and next year would be about: $30 million because of the western increase in electricity. He said staff's position was that it was a good planning project even though all the answers were not known. Staff felt it was worth it to stay in the project at least until the final decision was made. He said that if Council felt that the environmental issues were so severe that the City of Palo Alto should not be involved at any cost, that was a decision the Council should make toni ght. Councilmember Witherspoon said she was concerned environmentally and otherwise about the project, but thought that the .price of $30,000 -to keep the City's options open on a $20 million project was hard to argue with. She could not justify stopping now when she had seen Palo Alto's needs, and the potential for Palo Alto's source of power was so great. MOTION: Councilmember Witherspoon moved, seconded by Eyerly, to approve the staff recommendation to participate in the Harry Allen project at the $30,000 level, which would give the City a right to 5.9 megawatts. Vice Mayor Bechtel felt there were too many problems with the project and that the City should not participate. There were a lot of economic problems, but she thought that the environmental problems outweighed the reasons, for participation. She would vote against the City's participation. Councilmember Renzel said that while the Harry Allen project was better than some of the others, it may not be good enough. She had serious problems with pipelining the coal with scarce water in an area anywhere around Nevada, Arizona or Utah where the water was already a scarce resource and the holding capacity of the land for the people who were already there was severely limited. She thought the City would be better off to address its energy needs here, and if that could not be done, then the City's rate scheduling_could be addressed so that the cause, of the incremental growth would pay for the incremental costs. She would oppose the motion. Mayor Eyerly commented that the a environmental concerns which everyone in Palo Alto shared was a strong reason for Palo Alto to stay involved in the project. He pointed out that the Council was not required to invest any more money at this time, but the investment of the token money would give the City a ,voice, and would put Palo Alto in a position to make an endeavor to protect the environment on .a project that would probably be built whether Palo Alto was a participant or not.- He said that when the project reached the stage for: final decision, it might be, found not to be economically sound, or maybe the environmental concerns would be. too great. He said there were choices that had to be made on the project before the project ' was actually to that point, and he thought it behooved the City Council and the environmentalists to stay in there and say what the project should not impact. He pointed out that the project might turn out to be a good project environmentally and economically in the long run. hi view of the City's needs in . the long range power planning, he thought the City should remain a participant. Councilmember Pletcher said that NCPA had 14% of the voice in the decisions, and Palo Alto had a fraction of that. She -said there were a lot of uncertai.nties, i.e., no assured coal source and the water problem was not solved, and 'having seen what could be done with conservation, she thought -that if the City made an all out effort, it could reduce its energy consumption and go with some of the other projects and _ make due. Councilmember Klein asked who would pick up the part of the capa- city of the plant that the City was giving up if the motion failed. Mr. Fontes said someone else had tripled their interest when some- one else dropped out. He thought that within the group of parti- cipants, there was sufficient interest in the project to carry it at 1,500 megawatts through the planning study. He said that assumed that NCPA was in for some respectable number. Councilmember Klein said he would support the motion because he basically agreed with Mayor Eyerly. He added that he was far from committed to ultimately voting for the project, and thought there were very serious problems to be resolved, but that there were serious problems to be resolved in any energy project. He said energy was .a key element to society and there were no easy solu- tions to the problems. He thought every energy project would be very easy to vote against, but if every energy project were voted against, Palo Alto would end up with a Serious economic problem in. ten or fifteen years. He thought the Council must make some com- promises with its convictions --society needed energy --and the Council ' s voting against the Harry Allen project would not make or break the project. Further, if Palo Alto did not participate in any of the projects, and conservation was not successful enough, it would have to buy its power from PG&E; and ten years down the line, PG&E would sell Palo Alto electricity that comes in part from Di ablo Canyon. He said that would bother him a lot more than participating in Harry Allen or Calaveras. He realized the deci- sion was not easy, and thought perhaps there was no good decision --only a less bad decision. He thought the Harry Allen en project at least had the potential to be less bad. He would vote in favor of the motion. Councilmember Levy said there was no project that was completely free from environmental concerns, and there was no kind of project at this time that was completely free from economic conerns. He said the Harry Allen project had its problems which were primarily r.el ated to the envi ronmental impacts on the National Parks in th'e southwest and on the intermountain aquifer, He said that if both environmental problems still existed when it was time to take the next step, he would vote against it. He thought the long range needs were somewhat more severe than the staff report indicated. He endorsed staff's philosophy to make small participations in a lot of different projects. The cost was $30,000, which would take the City to a final decision; and, if at the next step, the same kinds of environmental concerns were still present, the City could write off the $30,000 and get out. Councilmember Cobb agreed with Counci lmembers Klein and Levy. He said that the incremental costs to stay`in the project and given what had been spent to date, he thought it was a small price to pay to keep a place at the table. He -thought the Co,unc.i l had an obl i gati on. to -the_ people in Palo Alto to keep as many options' open as possible because he did not think the City knew- its energy future as well as it -would like to think., He would .vote in favor of the motion. He thought the significant concern about coal plants being used, in any magnitude-' was the question . of the environmental impact' i n a global sense to which no one knew the answer. Vice Mayor Bechtel said she understood that the California Energy Commission's adopted policy. was. to look for and encourage work in renewable resources, and she hoped that Palo Alto would do what- ever possible to get into some of the other options and .look at them,. '1 7 9 4 3/18/82 Councilmember Renzel reminded the Council that when Palo Alto paid for part of a study, it was moving a project forward. She did not think it was necessarily true that Palo Alto's` space would be taken by someone else. Regarding the argument that Palo Alto should stay in the project because it was fundamentally environ- mentalists and could influence the direction of the project, she thought Palo Alto could influence the direction as environ- mentalists and did not have to be participants to do it. She urged th t the Council vote. agai nst the motion. AMENDMENT: Councilmember-Renzei moved, seconded by Fletcher, that when the project returned to the Council for any final approval the routing of the transmission lines be known, the source of the coal be firm, and that independent costs estimates be received for the power which would come from other than the Nevada power, and that the Energy Commission be asked to review the cost of the project and any alternative costs. - Mr. Aghjayan said that the only time staff would return to the Council for a decision on the project was when the final decision of go or not go was made; and by -that time all the issues raised by the Council would have to be answered with the exception that he lid not know what would be ascertained from the Energy Commission and he did not know how much to trust them. He said that if the Energy Commission gave a figure on the cost of the project, the City staff would still look at the costs to ascertain the City's estimates. He said staff would come back once more before the decision was made to go beyond the $30,000 to sign the NCPA . Memter Agreement which put everything that had been talked about into final focus. The agreement was in draft form, and would be before the Council in three to four weeks. Councilmember Levy said he agreed that the details related to sources of coal, methods of transportation, etc. were all part of any final approval process. He did • not necessarily agree that staff's figures would be better than the Energy Commission, but had been satisfied up to now with the staff; s numbers and did not see any reason to have anyone else go over the numbers. He wanted the vote on the amendment to be split with one related to the details of the project and the other related to the costs of the project. Councilmember Cobb commented that he had personally done work with the Energy Commission and said he would trust= the City Utilities staff 100 times before he would trust the Energy Commission. Mayor Eyerly urged that the Council vote against the amendment because it would have the' opportunity to address those matters when the project returned for Council . decision. He thought the amendment was premature and would not accomplish anythi ng. Vice Mayor Bechtel said that as she understood the amendment it was to request that information at the time it returned for a go or no go decision. She thought the request was reasonable, and said Mr. Aghjayan said it would be done anyway. Mayor Eyerly was concerned that some of theMaterial might not be available at the time of the final decision, and yet there might be reasons to go ahead. He was afraid that if that type of ,condi-- tion was placed on the project, presumably •the City would be out and not have the chance to make the decision at the time with all the facts. Councilmember Klein said he' was not sure who was :\._bound by the amendment Councilmember Renzel thought the Council that the information was needed and was another factor -in the Council's decision -making. amendment :,was a remi nder to'' the 1 1 Counci lmember Renzel said she assumed that in order for the Coun- cil to make a decision that information would have to filter down from NCPA to the City. Mr. Fontes said that the preliminary agreement specifically required that for $6 million, the City would receive a fuel supply plant and a transmission Supply plan. He said that regarding "a binding coal agreement," the project would not have a binding coal agreement until a year before commercial operation 1988, and then would have a letter of intent from the coal supply and a contract for delivery. Counci lrnember Renzel said her intent was to know what coal source was being talked about. Mr. Fontes said that part of the project agreement would be to agree to let the construction manager sign a letter of intent for the coal supply contract. Mr. Aghj ayan said he interpreted the amendment to be an assignment to staff that simultaneously with the final agreement, they pre- pare a report that addressed the other issues. AMENDMENT PASSED regarding environmental concerns and the segments of the project which revolved around the coal source by a vote of 7-1, Eyerly voting "no," Fazzino absent. AMENDMENT FAILED for_a review of the costs from the California Energy Commission and alternatives by a vote of 2-6, Eyerly, Bechtel, Klein, Cobb, Witherspoon, Levy voting "no," Fazzino absent. MOTION AS AMENDED PASSED to approve the staff recommendation of a commitment of 6.9 megawatts by a vote of 5-3, Fletcher, Renzel, Bechtel voting "no," Fazzino absent. ADJOURNMENT' Council adjourned at 10:00 p.m. ATTEST: APPRUVED: