HomeMy WebLinkAboutStaff Report 2310-2161Item No. 4. Page 1 of 8
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Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: December 6, 2023
Staff Report: 2310-2161
TITLE
Recommendation to Adopt a Resolution Approving an Amendment to the City’s 2009 California-
Oregon Transmission Project Long-Term Layoff Agreement to Extend the City’s Layoff of its Share
of the California Oregon Transmission Project (COTP) until 2034 and to Receive Annual Market
Payments
RECOMMENDATION
Staff recommends the UAC recommend the City Council adopt a Resolution approving
Amendment No. 3 to the City’s 2009 California-Oregon Transmission Project Long-Term Layoff
Agreement to extend the term for 10 years until 2034 and to receive annual market payments,
as shown in Exhibit A to the attached Resolution.
EXECUTIVE SUMMARY
In 1984 the City of Palo Alto was a founding member of the Transmission Agency of Northern
California (TANC), a joint powers agency formed in 1984 to facilitate the construction and joint
ownership of transmission projects. TANC invested in construction of a high-voltage transmission
line from just north of the California Oregon border to Tracy in the Central Valley called the
California Oregon Transmission Project. The purpose of this line was to ensure publicly owned
utilities had sufficient transmission capacity outside of the PG&E-owned transmission system.
With the formation of the California Integrated System Operator (ISO), the City of Palo Alto
Utilities and several other publicly owned utilities joined the ISO. However, there were other
publicly owned electric utilities, along with the federal hydroelectric project the Western Area
Power Authority, which elected to not join the ISO and instead jointly decided to keep the COTP
outside of the ISO market and transmission planning process. This decision stranded Palo Alto’s
share of the COTP in a different balancing authority and limited the value of the asset to Palo
Alto.
Since the value streams from the COTP were preserved for those utilities not in the ISO, in 2009
Palo Alto entered into a 15-year temporary ownership agreement (or “layoff”) of its share of
COTP to three of these utilities who had not joined the ISO: Turlock Irrigation District (TID),
Modesto Irrigation District (MID), and the Sacramento Municipal Utilities District (SMUD). The
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2009 layoff term ends February 1, 2024 unless extended or replaced. Upon expiration in 2024
the City of Palo Alto Utilities Electric Portfolio would have been required to pay the TID, MID, and
SMUD approximately $1M (which is the value of the remaining useful life of existing capital
replacements). Staff briefed the UAC on the history and options for Palo Alto’s share of the COTP
in May 2023 (Staff Report: 2301-07951). The current 2009 Long-Term Layoff Agreement (2009
LTLA) and both of its amendments are included as Attachments B, C, and D.
Staff negotiated with current layoff recipients TID, MID and SMUD to extend the 2009 LTLA for
ten years until February 1, 2034 and add an annual market payment to the City of $550k in years
2024-2028 and $800k in 2029-2033. Amendment No. 3, approved by the TANC Commission on
November 15, 2023, is included for review as Attachment A. Following approval by TID, MID and
SMUD’s governing boards, Amendment No. 3 will be considered by Palo Alto’s City Council on
January 16, 2024. Staff recommends that the Utilities Advisory Commission recommend the
Council adopt a resolution authorizing the City Manager to execute Amendment No. 3.
1Staff Report 2301-0795 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes-
2023/05-may-2023/05-03-2023-2301-0795-info.pdf
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BACKGROUND
The COTP is a 340-mile, 500-kV AC transmission line between Southern Oregon and Central
California. The COTP became operational in March 1993, and has a total rated capacity of 1,600
MW.
From its northern end at the Bonneville Power Administration's Captain Jack Substation in
Southern Oregon, the COTP continues south to the Western Area Power Administration's Tracy
Substation and on towards the Tesla Substation (owned and operated by PG&E) in the CAISO
balancing area.
The Transmission Agency of Northern California (TANC) is a California Joint Powers Agency,
formed in 1984 to facilitate the construction and joint ownership of transmission projects. Palo
Alto was a founding member of TANC. Other members include MID, TID, SMUD and the Cities of
Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah.
TANC currently owns and operates approximately 87 percent of the COTP. Palo Alto is a signatory
to TANC’s 1990 Project Agreement No. 3 (PA3) (Resolution No. 6877, adopted March 26, 1990),
which provides the City a 3.6815%, or approximately 50 MW, share of TANC’s current entitlement
to transfer capability on the COTP. That line is expected to be increased in rating in 2025,
increasing Palo Alto’s share to 54 MW for north to south transmission.
Palo Alto decided to lay off its share of the line in 2009 to MID, SMUD, and TID, and that layoff
will come to end February 1, 2024 if not extended.
Figure 1. Map of COTP as part of the California-Oregon
Intertie.
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DISCUSSION
Analysis
In 2009 laying off the COTP at cost to non-ISO public utilities was a reasonable choice; however,
several fundamental policy and market changes have occurred in the last 15 years. These market
changes have made transmission both more expensive and more valuable.
Some of the market changes include high renewable electricity mandates, large increases in
transmission costs to deliver renewable electricity, greater electricity market integration with
neighboring states, and the California ISO’s 2020 creation of a revenue stream for ISO utilities
who make their portion of the COTP available to the ISO. Overall these changes increased the
value of the COTP to both Palo Alto and the utilities who currently operate Palo Alto’s share of
the COTP under the 2009 layoff agreement.
There are also substantial upcoming capital and operating expenses planned for the COTP to
which Palo Alto would need to contribute if it took back its share, and uncertainties around future
value streams which could make value of the City’s share of the COTP lower than the City’s cost
of ownership, as shown in Table 1.
Changes to the Current Layoff in the Amendment
Staff from Utilities and the City Attorney’s office negotiated the terms of a 10-year amendment
and extension of the 2009 layoff agreement with MID, TID and SMUD. Specifically, besides
extending the layoff term until 2034, the amendment includes an annual market payment of
$550k in years 2024-2028 and $800k in 2029-2033 from MID, TID and SMUD to Palo Alto. In
addition, extending the layoff term would ensure that all the operating costs and a large
percentage of the capital costs for the next 10 years would continue to be allocated to MID, TID
and SMUD.
Over the course of the current 15-year layoff PA3 participants have approved many required
capital projects to the COTP, which have mostly been replacements to existing facilities. As
detailed in the 2009 LTLA (Attachment B), the portion of the useful life of the capital
replacements that extend beyond the duration of the current layoff will be the responsibility of
the layoff entities, including Palo Alto. To date, approximately $1M of these capital obligations
would be payable by the City at the end of the layoff term in February 2024. Again, this $1M
represents the City’s share of the capital replacements whose life exceeds the duration of the
layoff, were the City to end the current layoff in 2024. If the City amends the layoff agreement
in accord with the terms in Amendment No. 3, then these previously accrued capital obligations
would be reduced substantially and be due in 2034 instead. This is reduction is shown in Table 1.
The annual payments to the City from the Districts receiving the layoff of $550k will start in 2024,
changing to $800k in 2029 through 2033.
Comparison of Amended Layoff Agreement and Bringing COTP Back
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A summary table with approximation of the annual costs and value streams is below, for the 10-
year layoff agreement, from February 1, 2024 to January 31, 2034. This table compares the
different costs and values of bringing the COTP back to Palo Alto’s electric portfolio versus
amending and extending the layoff agreement. The terms of the current layoff are shown as a
comparison, although an extension of the current layoff without the annual payments to Palo
Alto is not being considered.
Table 1. Financial comparison of current estimates of value for bringing COTP Back versus the proposed terms for the Amended
Layoff. The “Current Layoff Terms” are shown for comparison only, if the current layoff were extended, which is not under
consideration, but simply shown for comparison purposes. All numbers are presented on an annual basis for the ten-year term
covered by the proposed Amendment.
Annual Cost or Revenue
Bring COTP Back
to Portfolio
(2024-2034)
RECOMMENDED
Layoff Extension
(2024-2034)
Current Layoff
Terms
(2009-2024)
O&M Obligations -$1,400,000 --
New Capital Obligations -$600,000 -$350,000 -$350,000
Prior Capital Obligations -$100,000 -$40,000 -$40,000
CRR Options Revenue $920,000 --
Energy Transfer System Resources
Revenue $480,000 --
Average Layoff Payment -$675,000 -
Low Cost Renewables Value unclear --
Total Cost (-) or Value (+) per year -$700,000 $285,000 -$390,000
Detailed Estimates of Costs and Values
The prior capital obligation for repayment of about $1M (accrued from 2009 to 2024) is shown
on an annual basis for different options for the duration. If the City were to bring the resource
back rather than amend and extend the current layoff agreement, the City would be required to
pay roughly $1M in prior capital obligations (shown in the table above as $100k per year over 10
years), effective February 1, 2024.
The City is exempt from all operation and maintenance obligations related to PA3 during the
current layoff, and that will continue with this layoff extension. Under the current 2009 LTLA
Section 3.g. which remains unchanged via the potential extension, the City will be responsible for
paying the Districts back at the end of the layoff for the percentage of the useful life of that capital
replacement that extends beyond the term of the layoff agreement (in other words, when the
COTP share returns to the City).
There are substantial capital replacements planned for the next ten years, which TANC has
preliminarily decided to finance. Staff projects that the expected capital costs to the City without
a layoff extension will be approximately $600k per year for the 10 years covered by the proposed
extension. Approximately $1M of that total of $6M over ten years is anticipated to be funded by
TID, MID, and SMUD under a long-term layoff. Of the remaining $5M in capital expenditures from
2024-2034, Utilities staff, TANC staff, and NCPA staff are estimating approximately 70% of the
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capital replacements will need to be paid back to Districts in 2034, which is roughly $3.5M. This
is estimated from the anticipated expenditures based on the timing of the expenditures and the
lifetime of the actual equipment. These capital expenditures are shown in Table 1. These are for
planned capital expenditures, and actual capital expenditures could potentially be higher.
Under the 2009 layoff agreement, Palo Alto relinquishes “all of Palo Alto’s use of its interests,
rights, and obligations under TANC Project Agreement No. 3” unless TID, MID, and SMUD default,
and this would remain so under the amendment extending the current agreement.
Two revenue streams which are both volatile and uncertain are Congestion Revenue Rights (CRR)
Options, and Energy Transfer System Resources (ETSRs). The ISO made CRR options available to
Palo Alto in 20202;they are available to COTP owners so that entities can turn over their
percentage of the COTP on a monthly or annual basis to the ISO and collect both CRR value for
north to south and south to north throughout the year. This is essentially allowing the ISO to
optimize that portion of the COTP within the ISO full network model to minimize costs for all, and
then pass the value of the cost minimization to the respective COTP rights-holders.
ETSRs are the difference between the energy component of the locational marginal price at
different locations between Balancing Authorities beyond ISO, but within the Western Energy
Imbalance Market (WEIM) and the Extended Day Ahead Market (EDAM). EDAM is under
development and is expected to launch with PacifiCorp in 2025, and SMUD in approximately
2026. ETSRs essentially pass on the energy value to transmission owners who are connecting
lower cost resources to higher cost generation areas.
The COTP CRR options for public utilities like Palo Alto have averaged about $17k/MW per year.
Palo Alto’s current 51MW share will likely increase to 54MW by 2025, which staff estimates will
generate approximately $920k/yr in CRR Options revenue. The revenue from ETSRs is harder to
estimate and requires both that Palo Alto put its share of the COTP in the EDAM and that
transmission owners to the north do the same with their transmission. The City’s consultants
have also advised that there are additional nuances regarding how ETSRs are collected and
distributed that may impact these estimates. CAISO has not yet finalized the EDAM rules.
The potential value from lower cost renewable resources comes from the fact that there might
be high-quality wind resources able to directly connect on the COTP, which would be of value to
Palo Alto if the City opted to bring the asset back. However, securing transmission rights from
the COTP’s northern end at Captain Jack further north to where the resources are located is very
difficult. In addition, the COTP process for direct interconnection is only now being developed
and is likely to take years and require expensive power flow studies.
Alternatives
2 Explanation of the CRR Options developed for the COTP in 2020
https://www.youtube.com/watch?v=Io2ig60i9wo&t=146s
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Staff explored bringing the COTP share back and issued an RFP for renewables with preference
for interconnection at Captain Jack intertie. The City did not receive any offers, although there
was some potential for projects which would take several years to develop.
Staff also considered an outright sale of the City’s share of the COTP, but the regulatory
uncertainty with EDAM and other issues greatly diminished the value. There is also long-term
interest in maintaining the City’s share of the COTP to maintain flexibility of resources into the
future given the uncertain regulatory environment and the difficulty in siting and constructing
new transmission lines.
FISCAL/RESOURCE IMPACT
The recommended action to amend and extend the 2009 Layoff will not require payments from
Palo Alto until 2034, and Palo Alto will receive annual payments May 1st of $550k each year from
2024 to 2028 and then $800k from 2029 to 2033. The terms are the same as current cost
obligations meaning that PA3-related operations and maintenance costs during the layoff will
not be Palo Alto’s responsibility, while capital replacements made during the layoff will continue
to be allocated as described in Section 3.g. of the 2009 LTLA (Attachment B). In 2034 Palo Alto
will need to pay its share of capital investments covering the time after the layoff expires (2034
and onward) as well the City’s portion of capital costs and obligations that were prefunded by
the Districts during the layoff, if applicable. As shown in Table 1 these capital costs which are
being prefunded by the Districts from 2024-2034 can be tracked annually and funds can be set
aside for that repayment.
POLICY IMPLICATIONS
This proposed layoff amendment is consistent with the Utilities Strategic Plan, the Utilities
Electric Integrated Resources Plan, Sustainability Implementation Plans, and the City’s
Sustainability and Climate Action Plan (S/CAP).
ENVIRONMENTAL REVIEW
Staff’s recommendation does not require California Environmental Quality Act review, because
it does not meet the definition of a project under Public Resources Code Section 21065 and CEQA
Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause
a direct or indirect physical change in the environment. TANC certified the Final Environmental
Impact Report for the COTP in 1988.
NEXT STEPS
Staff will present Staff recommendation and UAC recommendation to City Council January 16,
2024.
ATTACHMENTS
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Attachment A: Resolution
Attachment B: Current 2009 Long-Term Layoff Agreement
Attachment C: Amendment No. 1 to the 2009 Long-Term Layoff Agreement
Attachment D: Amendment No. 2. to the 2009 Long-Term Layoff Agreement
AUTHOR/TITLE:
Dean Batchelor, Director of Utilities
Staff: Lena Perkins, PhD, Senior Resource Planner
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*NOT YET APPROVED*
6056795 UAC
Resolution No.
Resolution of the Council of the City of Palo Alto Approving
Amendment No. 3 to the 2009 California-Oregon Transmission
Project Long-Term Layoff Agreement with Certain Other Members of
the Transmission Agency of Northern California to Extend the Term
for 10 Years Until 2034 and to Receive Annual Market Payments
R E C I T A L S
A. The City of Palo Alto (“City”), a municipal utility and a chartered city, became a
founding member of the Transmission Agency of Northern California (“TANC”) in 1984, to
facilitate construction and joint ownership of transmission projects.
B. The City of Palo Alto, the California cities of Alameda, Biggs, Gridley, Healdsburg,
Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah; the Modesto Irrigation District
(“MID”); the Turlock Irrigation District (“TID”); and the Sacramento Municipal Utility District
(“SMUD”) are also members of TANC.
C. TANC currently owns approximately 87 percent of the California-Oregon
Transmission Project (“COTP”), a 500-kV transmission line that interconnects with the
Bonneville Power Administration at the Captain Jack Substation in Southern Oregon and with
Pacific Gas & Electric Company in California at the Tesla Substation.
D. The City became a participant in the COTP in 1990, by executing Project
Agreement No. 3 (PA3) and has a 3.6815%, or approximately 50 MW, share of TANC’s current
entitlement to transfer capability on the COTP.
E. Due to changes in the value of the COTP to the City’s electric portfolio in 2009
the City, along with the City of Roseville, executed the Long-Term Lay-off Agreement (“2009
LTLA”) to transfer each party’s full COTP entitlement and obligations to MID, TID and SMUD for
fifteen years (Resolution No. 8900).
F. Amendment No. 1 to the 2009 LTLA returned Roseville’s COTP interests, rights,
and obligations from MID, TID, and SMUD back to Roseville, and clarified the City’s voting rights
under TANC PA 3.
G. At TANC’s January 27, 2016 meeting, TANC approved a resolution authorizing the
issuance of California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series,
(“the 2016 COTP Bonds”). On March 9, 2016 TANC issued and sold its $173,920,000 California-
Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the “2016A Bonds”),
which have a maturity date of May 1, 2039.
H. Amendment No. 2 to the 2009 LTLA provided that in the absence of a default by
MIDTID, and SMUD, Debt Service for the 2016A Bonds and any extension thereof associated
with City’s 3.6815 Participation Percentage in TANC’s entitlement to Transfer Capability on the
COTP would be paid by MID, TID, and SMUD.
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*NOT YET APPROVED*
6056795 UAC
I. The Parties have agreed to execute this Amendment No. 3 to the 2009 LTLA,
attached as Exhibit A, to extend the 2009 LTLA for approximately an additional ten years to
January 31, 2034 to ensure that all of City’s interests, rights, and obligations associated with its
Participation Percentage under TANC PA 3 continue to be laid off to MID, TID, and SMUD for
the extended term of the 2009 LTLA in the absence of a default by MID, TID, and SMUD, and to
add an annual market payment to City from MID, TID, and SMUD. This Amendment No. 3, by
modifying the term of the 2009 LTLA, will also extend the term of ROSEVILLE’s layoff of its
South of Tesla (“SOT”) allocation, originally described in Section 4 of the 2009 LTLA.
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council approves Amendment No. 3 to the 2009 Long Term Layoff
Agreement by and Among the Transmission Agency of Northern California and Certain of its
Members, attached as Exhibit A to this resolution.
SECTION 2. As permitted by Section 2.30.290 of the City’s Municipal Code, the Council
delegates authority to the City Manager, or his designee, to execute further amendments to the
2009 Long Term Layoff Agreement as needed to maintain the value of the City’s laid-off COTP
share through the remaining term of the 2009 Long Term Layoff Agreement. Any further
amendments shall be in writing, accomplished in accordance with the terms of the 2009 Long
Term Layoff Agreement, as amended, and shall not exceed the limits of the authority granted
by the Council. Further amendments shall also require approval by the City Attorney’s Office,
TANC and the other 2009 Long Term Layoff Agreement participants.
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*NOT YET APPROVED*
6056795 UAC
SECTION 3. The Council finds that the adoption of this resolution does not constitute
a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5),
as an administrative governmental activity which will not cause a direct or indirect physical
change in the environment. TANC certified the Final Environmental Impact Report for the COTP
in 1988.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Assistant City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
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83112.00002\41775073.2
Exhibit A
6056786
Amendment No. 3
Long-Term Layoff Agreement
By and Among
the
Transmission Agency of Northern California
and certain
of its Members
namely
The City of Palo Alto
The City of Roseville
The Modesto Irrigation District
The Turlock Irrigation District
and
The Sacramento Municipal Utility District
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83112.00002\41775073.2
Exhibit A
6056786
TABLE OF CONTENTS
RECITALS ....................................................................................................................................................... 2
AGREEMENT .................................................................................................................................................. 3
Section 1. Effective Date ........................................................................................................................... 3
Section 2. Modification of Section 2, “Term” ........................................................................................... 3
Section 3. Addition of Section 3.k, “Annual Market Payment” ............................................................... 4
Section 4. Integration ................................................................................................................................ 4
SIGNATURES .................................................................................................................................................. 4
This Amendment No. 3 of the February 1, 2009 Long Term Layoff Agreement By and Among the
Transmission Agency of Northern California and certain of its members (“LTLA”), is entered into
as of the Effective Date defined in Section 1 of this Amendment No. 3, by and among the
Transmission Agency of Northern California (“TANC”) and certain of its members, namely the
City of Palo Alto, referred to as “PALO ALTO”, and, the City of Roseville (“ROSEVILLE”), the
Modesto Irrigation District (“MODESTO”), the Turlock Irrigation District (“TURLOCK”), and the
Sacramento Municipal Utility District (“SMUD”), with references to each entity individually and
collectively as “Party” or “Parties”. Capitalized terms used in this Amendment No. 3 are defined
in TANC Project Agreement No. 3, unless otherwise specifically defined in this Amendment No.
3.
RECITALS:
A. PALO ALTO, MODESTO, ROSEVILLE, TURLOCK, and SMUD are each Participants in and
parties to TANC Project Agreement No. 3 (“TANC PA 3”), entered into March 1, 1990.
B. In the LTLA, PALO ALTO and ROSEVILLE laid off their entitlement to TANC’s Transfer
Capability on the California-Oregon Transmission Project (“COTP”) associated with their
Participation Percentages under TANC PA 3 to MODESTO, TURLOCK, and SMUD for the
fifteen-year term of the LTLA.
C. In the LTLA, MODESTO, ROSEVILLE, TURLOCK, and SMUD accepted and assumed all of
PALO ALTO and ROSEVILLE’s Participation Percentages under TANC PA 3 for the term of
the LTLA.
D. Amendment No. 1 to the LTLA returned ROSEVILLE’s COTP interests, rights, and
obligations from MODESTO, TURLOCK, and SMUD back to ROSEVILLE, and clarified PALO
ALTO’s voting rights under TANC PA 3.
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83112.00002\41775073.2
Exhibit A
6056786
E. At TANC’s January 27, 2016 meeting, TANC approved a resolution authorizing the
issuance of California-Oregon Transmission Project Revenue Refunding Bonds, 2016
Series, (“the 2016 COTP Bonds”). On March 9, 2016 TANC issued and sold its
$173,920,000 California-Oregon Transmission Project Revenue Refunding Bonds, 2016
Series A (the “2016A Bonds”), which have a maturity date of May 1, 2039.
F. Amendment No. 2 to the LTLA provided that in the absence of a default by MODESTO,
TURLOCK, and SMUD, Debt Service for the 2016A Bonds and any extension thereof
associated with PALO ALTO’s 3.6815 Participation Percentage in TANC’s entitlement to
Transfer Capability on the COTP would be paid by MODESTO, TURLOCK, and SMUD.
G. The Parties have agreed to execute this Amendment No. 3 to the LTLA to extend the
LTLA for approximately an additional ten years to January 31, 2034 to ensure that all of
PALO ALTO’s interests, rights, and obligations associated with its Participation
Percentage under TANC PA 3 continue to be laid off to MODESTO, TURLOCK, and SMUD
for the extended term of the LTLA in the absence of a default by MODESTO, TURLOCK,
and SMUD, and to add an annual market payment to PALO ALTO from MODESTO,
TURLOCK, and SMUD. This Amendment No. 3, by modifying the term of the LTLA, will
also extend the term of ROSEVILLE’s layoff of its South of Tesla (“SOT”) allocation,
originally described in Section 4 of the LTLA.
H. The Parties agree that except as amended and modified by Amendment No. 1 and
Amendment No. 2, which remain in effect, and this Amendment No. 3, the LTLA remains
in full force and effect, without any other changes to any of its provisions.
NOW THEREFORE, in consideration of the premises described in the Recitals, and
in consideration of the terms, covenants, and conditions that are set out below, the
Parties have entered into this Amendment No. 3 to the LTLA.
AGREEMENT:
Section 1. Effective Date.
This Amendment No. 3 shall become effective and enforceable on January 30, 2024 at
0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment
No. 3 to TANC, or the date on which this Amendment No. 3 is duly executed by all of the
Parties and delivered to TANC, if January 30, 2024 passes without such execution and delivery
(hereinafter “Effective Date”).
Section 2. Modification of Section 2, “Term”.
Section 2 of the LTLA, entitled “Term”, is hereby modified as follows:
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83112.00002\41775073.2
Exhibit A
6056786
“The term of this Agreement shall be approximately twenty five (25) years commencing on the
Effective Date and terminating at 0000 hours Pacific Prevailing Time on January 31, 2034, unless
the Parties mutually agree in writing to extend the term of the Agreement for another five (5)
years (hereinafter “Term”).
Section 3. Addition of Section 3.k, “Annual Market Payment”.
Section 3.k., “Annual Market Payment.” is hereby added:
“Starting May 1, 2024, and on each May 1 thereafter for the term of the LTLA, MODESTO,
TURLOCK, and SMUD, in aggregate, will pay PALO ALTO an annual fixed payment of $550,000
per year to PALO ALTO for the 5 years from 2024 through 2028 ($61,820 from MODESTO or
11.24%%, $244,090 from TURLOCK or 44.38%, and $244,090 from SMUD or 44.38%), and
$800,000 per year for the 5 years from 2029 through 2033 ($89,920 from MODESTO or 11.24%,
$355,040 from TURLOCK or 44.38%, and $355,040 from SMUD or 44.38%). While this payment
will be administered by TANC in accordance with section 3.f of the LTLA, MODESTO, TURLOCK
and SMUD shall be jointly and severally liable to make the payment annually.”
Section 4. Integration.
Except as amended and modified by Amendment No. 1 and Amendment No. 2, which
remain in effect, and this Amendment No. 3, the LTLA remains in full force and effect, without
change to any of its provisions other than the text expressly altered by this Amendment No.3.
On the Effective Date this Amendment No. 3 and the LTLA shall be one, integrated Agreement.
The Parties have duly executed and delivered this Amendment via their authorized
representatives set forth below.
SIGNATURES:
TRANSMISSION AGENCY OF
NORTHERN CALIFORNIA
By:
Its:
Dated:
CITY OF PALO ALTO
By:
Its:
Dated:
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83112.00002\41775073.2
Exhibit A
6056786
TURLOCK IRRIGATION DISTRICT
By:
Its:
Dated:
SACRAMENTO MUNICIPAL
UTLITY DISTRICT
By:
Its:
Dated:
MODESTO IRRIGATION DISTRICT
By:
Its:
Dated:
CITY OF ROSEVILLE
By:
Its:
Dated:
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RESOLUTION 2016-XX
A RESOLUTION OF THE
TRANSMISSION AGENCY OF NORTHERN CALIFORNIA
APPROVING AMENDMENT NO. 2
TO THE 2009 LONG-TERM LAYOFF AGREEMENT
WHEREAS, the Transmission Agency of Northern California (TANC) is a joint exercise
of powers agency organized under the laws of the State of California; and
WHEREAS, the TANC Procedures for Long-Term Layoffs of Transmission Capacity govern
TANC Member layoffs of their California-Oregon Transmission Project (COTP) entitlements;
and
WHEREAS, pursuant to Resolution 2009-01, the Cities of Palo Alto and Roseville entered
into a Long-Term Layoff Agreement By and Among the Transmission Agency of Northern California
and certain of its Members (2009 LTLA) to lay off their COTP Entitlements; and
WHEREAS, pursuant to Resolution 2014-04, the City of Roseville’s COTP Entitlement
rights were restored and the affected cost sharing percentages associated with TANC Project
Agreements No. 3 (PA-3) and No. 5 (PA-5) were modified by Amendment No. 1 to the Long-Term
Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its
Members; and
WHEREAS, the City of Palo Alto’s COTP Entitlement associated with PA-3 remains laid
off to certain TANC Members; and
WHEREAS, parties to the 2009 LTLA as amended seek certainty regarding the
remaining cost sharing obligations associated with COTP; and
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Resolution 2016-__
2
WHEREAS, TANC’s General Counsel has drafted Amendment No. 2 to the Long-Term
Layoff Agreement By and Among TANC and certain of its Members (Amendment No. 2) to affirm the
duration of the existing cost sharing obligations; and
WHEREAS, draft Amendment No. 2 will not result in any changes to the cost sharing
percentages associated with PA-3 or PA-5; and
WHEREAS, the draft Amendment No. 2 to the Long-Term Layoff Agreement By and Among
TANC and certain of its Members (Amendment No. 2), has been reviewed and approved by the
Parties of the 2009 LTLA.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Commission of the
Transmission Agency of Northern California that the proposed Amendment No. 2 Long-Term
Layoff Agreement By and Among TANC and certain TANC Members is approved in the form
presented today, with such additional changes in form as the General Manager and General
Counsel agree and subsequently present to this Commission.
PASSED AND ADOPTED this 20h day of July, 2016 on a motion by _______________,
seconded by _______________.
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Resolution 2016-__
3
AYES NOES ABSTAIN ABSENT
City of Alameda
City of Biggs
City of Gridley
City of Healdsburg
City of Lodi
City of Lompoc
Modesto Irrigation District
City of Palo Alto
Plumas-Sierra Rural Electric Cooperative
City of Redding
City of Roseville
Sacramento Municipal Utility District
City of Santa Clara
Turlock Irrigation District
City of Ukiah
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Amendment No. 2
Long-Term Layoff Agreement
By and Among
the
Transmission Agency of Northern California
and certain
of its Members
namely
The City of Palo Alto
The City of Roseville
The Modesto Irrigation District
The Turlock Irrigation District
and
The Sacramento Municipal Utility District
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i
TABLE OF CONTENTS
RECITALS............................................................................................................1
AGREEMENT.......................................................................................................3
Section 1. Effective Date......................................................................................3
Section 2. Addition of Section 3.j, “Treatment of Project Agreement No.3
Debt”....................................................................................................3
Section 3. Integration...........................................................................................4
SIGNATURES.......................................................................................................4
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1
This Amendment No. 2 of the January 28, 2009 Long Term Layoff Agreement
(“LTLA”), is entered into by and among the Transmission Agency of Northern
California (“TANC”) and certain of its members, namely the City of Palo Alto (“PALO
ALTO”), the City of Roseville (“ROSEVILLE”), the Modesto Irrigation District
(“MODESTO”), the Turlock Irrigation District (“TURLOCK”), and the Sacramento
Municipal Utility District (“SMUD”), referred to as “Party” or “Parties,” as of the
Effective Date defined in Section 1 of this Amendment No. 2, with regard to the
following:
RECITALS:
A. In the LTLA, PALO ALTO laid off its interests, rights, and obligations to
TANC’s Transfer Capability on the California-Oregon Transmission
Project (“COTP”), associated with PALO ALTO’s Participation
Percentage, for the fifteen year term of the LTLA, which terminates on
January 28, 2024.
B. In the LTLA, MODESTO, TURLOCK, and SMUD accepted and assumed all
of the use of PALO ALTO’s interests, rights, and obligations transferred to
TANC, and by TANC to MODESTO, TURLOCK, and SMUD, for the term of
the LTLA.
C. Amendment No. 1 to the LTLA returned Roseville’s COTP interests, rights,
and obligations from MODESTO, TURLOCK, and SMUD back to Roseville,
and clarified PALO ALTO’s voting rights under Project Agreement No. 3.
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2
D. At TANC’s January 27, 2016 meeting, TANC approved a resolution
authorizing the issuance of California-Oregon Transmission Project Revenue
Refunding Bonds, 2016 Series, (“the 2016 COTP Bonds”). On March 9, 2016
TANC issued and sold its $173,920,000 California-Oregon Transmission
Project Revenue Refunding Bonds, 2016 Series A (the “2016A Bonds”).
E. The Parties have agreed to execute this Amendment No. 2 to the LTLA, to
provide that in the absence of a default by MODESTO, TURLOCK, or SMUD,
the Debt Service for the 2016A Bonds associated with PALO ALTO’s 3.6815
Participation Percentage in TANC’s entitlement to Transfer Capability on the
COTP will be paid by MODESTO, TURLOCK, and SMUD, as provided in this
Amendment No. 2.
NOW THEREFORE, in consideration of the premises described in the Recitals, and
in consideration of the terms, covenants, and conditions that are set out below, the
Parties have entered into this Amendment No. 2 to the LTLA.
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3
AGREEMENT:
Section 1. Effective Date.
This Amendment No. 2 shall become effective and enforceable on May 26,
2016 at 0001 hours Pacific Prevailing Time following the due execution and delivery
of this Amendment No. 2 to TANC, or the date on which this Amendment No. 2 is
duly executed and delivered to TANC, if May 26, 2016 passes without such
execution and delivery (hereinafter “Effective Date”).
Section 2. Addition of Section 3.j, “Treatment of Project Agreement No.3 Debt”.
Section 3.j, “Treatment of Project Agreement No.3 Debt”, is hereby added:
MODESTO, TURLOCK, and SMUD accept and assume the obligation to pay
PALO ALTO’s 3.6815 Participation Percentage of the Debt Service on the 2016A
Bonds in accordance with their respective Participation Percentages of the layoff
shares transferred in section 3.c of the LTLA from and after the end of the Term
of the LTLA until the last maturity date of the 2016A Bonds, currently May 1,
2039, and any extension thereof. Nothing in this Amendment No. 2 shall affect
or limit the underlying obligations of PALO ALTO under TANC Project Agreement
No. 3, such as, by way of example and not as a limitation, the obligation of PALO
ALTO, in the event of a default by MODESTO, TURLOCK, or SMUD, to pay to
TANC an amount equal to its Participation Percentage of all Debt Service on the
TANC Project Indebtedness and to pay to TANC an amount equal to PALO
ALTO’s Participation Percentage of TANC Project Costs, TANC Project O&M
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4
Costs, and TANC Capital Improvement Costs, as provided in section 4.1.3.2 of
TANC Project Agreement No. 3. Nothing in this Amendment No. 2 shall affect or
limit the other obligations of PALO ALTO under TANC Project Agreement No. 3,
such as, by way of example and not as a limitation, the obligations of PALO
ALTO to pay to TANC an amount equal to PALO ALTO’s Participation
Percentage of TANC Project Indebtedness issued and sold for certain future
Additions under section 3.1.2.2.2, and Replacements under section 3.1.2.2.3 of
TANC Project Agreement No. 3.
Section 3. Integration.
Except as amended and modified by Amendment No. 1 and this Amendment
No. 2, the LTLA remains in full force and effect, without change to any of its
provisions other than the text expressly altered by this Amendment No. 2. On the
Effective Date this Amendment No. 2 and the LTLA shall be one, integrated
agreement.
The Parties have duly executed and delivered this Amendment via their
authorized representatives set forth below.
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5
TRANSMISSION AGENCY OF TURLOCK IRRIGATION DISTRICT
NORTHERN CALIFORNIA
By: By:
Its: Its:
Dated: Dated:
CITY OF PALO ALTO SACRAMENTO MUNICIPAL
UTLITY DISTRICT
By: By:
Its: Its:
Dated: Dated:
MODESTO IRRIGATION DISTRICT CITY OF ROSEVILLE
By: By:
Its: Its:
Dated: Dated:
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