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HomeMy WebLinkAboutStaff Report 2456City of Palo Alto (ID # 2456) Finance Committee Staff Report Report Type:Meeting Date: 2/7/2012 February 07, 2012 Page 1 of 3 (ID # 2456) Summary T itle: Renewable Feed-in Tariff Program Adoption Title: Recommendation to Adopt Two Resolutions Pertaining to the Proposed Local Renewable Energy Feed-in Tariff Program Including the Purchase Prices and Agreements and to Adopt an Ordinance Amending Two Sections of Chapter 2.30 of the Municipal Code Relating to Faciliation of a Feed-In Tariff Program From:City Manager Lead Department: Utilities Recommendation Staff recommends that the Finance Committee recommends that the City Council adopt the following: 1.Resolution (Attachment A) : a.Adopting the feed-in tariff prices and program rules and requirements; b.Adopting a standard form power purchase agreement for the purchase of local renewable energy; c.Adopting an interconnection agreement for the interconnection of non-net-metered generators; d.Authorizing the City Manager or designee to sign one or more contracts for a maximum output of 5 megawatts (MW) of solar capacity; and e.Adopting changes to the previously approved Renewable Feed-in Tariff Policies and Design Guidelines. 2.Resolution (Attachment B), approving changes to Utilities Rule and Regulation 27 (Generator Interconnection). 3.Ordinance (Attachment C), amending Sections 2.30.340 and 2.30.360 of Chapter 2.30 of Title 2 the Palo Alto Municipal Code (Contracts and Purchasing Procedures) to incorporate provisions that would facilitate the implementation of a feed-in tariff program. Discussion On November 15, 2011, the Finance Committee recommended approval of a Local Renewable Energy Feed-in Tariff (FIT) Program (Staff Report #2168). At that time the purchase prices were not finalized. Subsequent to the Finance Committee meeting, staff finalized the purchase prices and prepared a staff report for the Council’s consideration at its December 12, 2011 meeting (Staff Report #2329, provided as Attachment E). As the Finance Committee did not see the finalized prices, the item was removed from the Council’s agenda to afford the Finance Committee an opportunity to review and provide a recommendation to the Council on the February 07, 2012 Page 2 of 3 (ID # 2456) purchase price. Following the December Council meeting staff continued to check the avoided cost calculation and refine the model used to generate the FIT prices. A recent model correction resulted in an increase to the avoided cost of local capacity of roughly 0.5 ¢/kWh. The revised proposed FIT prices are 11.909 ¢/kWh for a 10-year contract, 12.766 ¢/kWh for a 15-year contract, and 13.553 ¢/kWh for a 20-year contract. These revised prices differ from the prices shown in the December 12, 2011 staff report, but are reflected in the resolution and program rules attached to this staff report. In addition to finalizing the purchase prices, staff has reformatted the program so that the purchase prices are not presented in a utility rate schedule format, but are presented simply as an attachment to one of the resolutions. There is not a California law or Municipal Code requirement that prices for renewable energy purchased from energy providers must be adopted by utility rate schedule. No substantive changes have been made to the program rules since the Finance Committee reviewed the program on November 15, 2011. The revised resolutions are provided as Attachments A and B and the revised program rules are provided in Attachment D. In addition to the two resolutions, staff also requests the Council’s adoption of an ordinance to amend Chapter 2.30 of the Palo Alto Municipal Code (Contracts and Purchasing Procedures) to incorporate provisions related to FIT programs, specifically to exempt wholesale energy purchases made through a Council-approved FIT program from the requirement to use a request for proposal or formal bid process. The amendment also exempts such contracts from conforming to certain credit rating requirements. This ordinance (provided as Attachment C) is the same as the one considered (and recommended for Council approval) by the Finance Committee on November 15, 2011. Staff will present further information related to the purchase prices at the February 7, 2012 Finance Committee meeting. There has been some discussion with industry analysts about the appropriate pricing for the feed-in-tariff program to best ensure incentivizing of investment and installation of solar installations in Palo Alto. Some pricing recommendations rise to 14C per kWh. While this is slightly above our “avoided cost” policy, it can be argued that the extra pricing may provoke faster participation. The City can better benefit from information related to installation and billing and other aspects of the program through wider participation. It should be remembered that the feed-in-tariff initiative is essentially a pilot program at this time, with the program capped at 4 mWh. The cost differential at full participation up to the 4 mWh cap between 13.5 Cents and 14 cents per kWh is approximately $30,000 annually. The Finance Committee should give careful consideration of the appropriate pricing to incentivize participation in the program. Discussion of other aspects of the program can be found in the attached staff report. February 07, 2012 Page 3 of 3 (ID # 2456) Attachments: ·Attachment A: Revised Resolution Adopting PaloAltoGreen FIT Program (PDF) ·Attachment B: Resolution Adopting Changes to Utility Rule and Regulation 27 (PDF) ·Attachment C: Ordinance amending Chapter 2.30 (Purchasing) of the PAMC (PDF) ·Attachment D: Program Prices and Rules (PDF) ·Attachment E: City Council Staff Report (ID 2329) Renewable Feed-in Tariff Program, December 12, 2011 (PDF) Prepared By:Jon Abendschein, Resource Planner Department Head:Valerie Fong, Director City Manager Approval: ____________________________________ James Keene, City Manager *NOT YET APPROVED* 120119 dm 0073647 Resolution No. Resolution of the Council of the City of Palo Alto Approving the PaloAltoGreen Local Energy Program, Including the Policies and Design Guidelines, As Amended, the Program Eligibility Requirements, the Power Purchase Agreement and the Interconnection Agreement, and Granting the City Manager The Authority to Sign The Contracts For Local Renewable Resources in an Amount Not To Exceed $1,180,000 per Year A. The City has adopted goals and policies in support of the use of renewable energy in meeting a portion of the City’s wholesale electric portfolio needs, including Comprehensive Plan Goal N-9 (a clean, efficient, competitively-priced energy supply that makes use of cost- effective renewable resources), the Climate Protection Plan, Chapter 3 (Utilities), and the Long- Term Electric Acquisition Plan (LEAP) Strategy #3 (Renewable Portfolio Standard, or RPS). B. The Council finds that energy from local sources provides certain benefits when compared to imported energy, including a reduction in costs and energy losses associated with energy’s transmission and distribution, the value of a reducing the City’s capacity requirements, and the economic development associated with purchasing power produced within Palo Alto rather than outside it. C. The City has adopted in its LEAP Implementation Plan Goal #9, which calls for the evaluation of the potential of a feed-in tariff program (FIT) in meeting a portion of its RPS goals from local renewable sources, Goal #10, which calls for approval of the policy elements of such a plan if determined to be feasible, and Goal #19, which call for adoption of rates, rules, and standard contracts in support of those policies. D. On August 1, 2011 the City adopted Policies and Guidelines for Development of a FIT Program, which will be amended, and now wishes to adopt program eligibility rules and requirements, an amended rule and regulation, and two standard form contracts in support of those policies. E. On or about _________, 2012, the Council will adopt a resolution approving amendments and an addition to Utilities Rule and Regulation 27, pertaining to generator interconnection. NOW, THEREFORE, the Council for the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. A Power Purchase Agreement, attached hereto as Exhibit A, is hereby approved in connection with the implementation of the City’s Local Energy Program. SECTION 2. An Interconnection Agreement, applicable to generators not subject to net energy metering, attached hereto as Exhibit B, is hereby approved in connection with the implementation of the City’s Local Energy Program. *NOT YET APPROVED* 120119 dm 0073647 SECTION 3. The Program Eligibility Requirements, attached hereto as Exhibit C, are hereby approved in connection with the implementation of the City’s Local Energy Program. SECTION 4. The Policies and Design Guidelines for the PaloAltoGreen Local Energy Program, as amended, attached hereto as Exhibit D, are hereby approved in connection with the implementation of the City’s Local Energy Program. SECTION 5. The Council hereby authorizes the City Manager or his designee to sign contracts for the output of one or more solar energy generating facilities located within Palo Alto’s jurisdictional boundary with an aggregate capacity not exceeding five (5) megawatts. The prices of the output shall not exceed those authorized under Exhibit C. The output of the generating facilities shall conform to the City’s rules and regulations. The contracts shall conform to the terms and conditions of the Power Purchase Agreement and the Interconnection Agreement. The total cost commitment made by the City under the Power Purchase Agreements shall not exceed $23,600,000. SECTION 6. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8), therefore, no environmental review is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Asst. City Attorney City Manager ___________________________ Director of Utilities ___________________________ *NOT YET APPROVED* 120119 dm 0073647 Director of Administrative Services 120112 dm 0073700 RESOLUTION NO. ________ RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING AMENDMENTS TO UTILITIES RULE AND REGULATION 27 PERTAINING TO GENERATOR INTERCONNECTION The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1.Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 27 (Generating Facility Interconnections)is hereby amended by modifying Parts C (Application and Interconnection), D (Generating Facility Design and Operating Requirements), and F (Metering, Monitoring, and Telemetry), and adding Part G (Supplemental Review), to read in accordance with sheet numbers 1 through 20, attached hereto as Exhibit A and incorporated herein. The foregoing Utilities Rule and Regulation 27, as amended, shall become effective on April 2,2012. SECTION 2.The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ______________________________________________________ City Clerk Mayor APPROVED AS TO FORM:APPROVED: ______________________________________________________ Senior Assistant City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Not Yet Approved Ordinance No. Ordinance of the Council of the City of Palo Alto Amending Sections 2.30.340 and 2.30.360 of Chapter 2.30 of Title 2 [Contract and Purchasing Procedures] of the Palo Alto Municipal Code to Exempt from Competitive Solicitation Requirements and Impose A Minimum Creditworthiness Requirement In Regard To Contracts Awarded under the PaloAltoGreen Local Energy Program The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Section 2.30.340 of Chapter 22.04 of Title 2 of the Palo Alto Municipal Code is hereby amended to read, as follows: 2.30.340 Contracts for wholesale utility commodities. (a) Solicitation of Contracts (1) Contracts for purchase or sale -incidental -to -purchase of wholesale utility commodities providing for an estimated expenditure of $65,000 or less shall be solicited by informal bid or informal request for proposal in accordance with the provisions of section 2.30.400. Contracts for a purchase or sale -incidental -to -purchase of wholesale utility commodities providing for an estimated expenditure of $65,000 or more shall be solicited by formal bid, formal request for proposal or combination thereof, in accordance with the provisions of sections 2.30.410, 2.30.420 or 2.30.430. (2) Master contracts containing general terms and conditions for wholesale utility commodities that provide for the execution of one or more individual water, gas or electricity purchase and sale -incidental -to -purchase transactions under the terms of the master contract, shall be solicited by formal bid, formal request for proposals, or combination thereof, in accordance with the provisions of sections 2.30.420, 2.30.430 or 2.30.440. It is expected that the city will enter into several master contracts with different counterparties for the purchase and sale -incidental -to -purchase of gas and electricity utility commodities at wholesale. Whenever the city desires to execute an individual purchase or sale incidental to purchase transaction for gas or electricity commodities at wholesale, any counterparty that executes a master contract with the city and that is otherwise eligible to bid for or propose in regard to the particular transaction in accordance with the city's Energy Risk Management Policies, Guidelines and Procedures Manual shall be solicited, in writing (by mail, facsimile or electronic mail), and shall be eligible to tender a bid or proposal on the transaction. The counterparty offering the price for wholesale utility commodities deemed to be the most advantageous to the city shall be eligible for award of a contract for the transaction. (b) Basic terms and conditions. For contracts not otherwise within the city manager's authority to award, the council may by resolution authorize the city manager to award and sign a contract with a qualified, eligible counter party for the purchase and incidental sale of wholesale 111025 dm 0073642 1 Not Yet Approved utility commodities. This authority shall extend to contracts awarded under any city "feed -in tariff" local energy program. The resolution shall specify the limits of the authority delegated, including the maximum dollar amount of the authority and the duration of the contracts and/or transactions that may be executed under the delegation of authority. Any resolution delegating authority to the city manager to contract for electricity shall specify generally at least the following terms and conditions: quantity and the description of energy and energy services to be procured, including, but not limited to, on -peak and off-peak energy and ancillary services; term, specifying a not -to -exceed period of time; period of delivery denoted in years or months or years and months; and point of delivery or the locus on the interstate transmission system at which transfer of title is made. Any resolution delegating authority to contract for gas shall specify generally at least the following terms and conditions: quantity and the description of gas services to be procured, including, but not limited to, scheduled gas and gas transportation services; term, specifying a not -to -exceed period of time); period of delivery denoted in years or months or years and months; and point of delivery of the locus on the interstate transmission system at which transfer of title is made. (c) Required contract terms for gas and electric procurement contracts. The city shall use standardized form contracts for the procurement of gas and electricity, as practicable, including, but not limited to, form contracts created and copyrighted by the Edison Electric Institute, the Western States Power Pool, and the North American Energy Standards Board, Inc. and contracts used by any city "feed -in tariff' local energy program. Unless waived by resolution of the city council, a contract for procurement of gas or electricity and any amendment to the contract shall not be awarded by the city and executed by the duly authorized representatives of the city, unless the following terms and conditions are required: (1) governing law shall be the laws of the state of California; (2) choice of venue shall be the county of Santa Clara; and (3) a counterparty shall obtain and maintain during the term of the contract the minimum credit rating established as of the date of award of contract of not less than a BBB - credit rating established by Standard & Poors and a Baa3 credit rating established by Moody's Investors Services, but the minimum credit rating requirement shall apply to a counterparty that is awarded a contract under a city "feed -in tariff" local energy program only to the extent the counterparty sells a quantity of energy in excess of the threshold established by that program. (d) Public agency contracts. The City may procure and make sales -incidental -to - purchase of wholesale utility commodities from energy counter parties through public agencies, including but not limited to the Northern California Power Agency and the federal Western Area Power Administration. The City may engage the public agency to act as the agent of the City to procure wholesale utility commodities, provided that the public agency conducts a competitive selection process and awards one or more contracts in substantial compliance with the contract procurement procedures and requirements of this chapter. The city attorney shall determine whether the contract procurement process substantially complies with the provisions of this chapter. For the purposes of this Section 2.30.340, the public agency process shall be deemed to substantially comply if the public agency (1) conducts a formal or an informal bidding or proposal process to solicit bids or proposals for the provision of wholesale utility commodities, (2) executes a standardized form contract, including a form contract created and copyrighted by the Edison Electric Institute and the Western States Power Pool, or equivalent, as determined by the city attorney, and (3) unless waived by resolution of the city council, the standardized form 111025 dm 0073642 2 Not Yet Approved contract requires or specifies (a) the governing law shall be the laws of the state of California, (b) the choice of venue shall be identified according to either the county in which such public agency does business or the preference for federal or sate court jurisdiction over the public agency and the energy counter party and the contract, and (c) the energy counter party shall obtain and maintain during the term of the contract the minimum credit rating established as of the date of award of contract of not less than a BBB- credit rating established by Standard & Poors and a Baa3 credit rating established by Moody's Investors Services. (e) Risk Management Policies, Guidelines and Procedures Manual. All procurement of gas and electricity by contract for wholesale utility commodities shall conform to the requirements of the city's Energy Risk Management Policies, Guidelines and Procedures Manual. SECTION 2. Section 2.30.360 of Chapter 22.04 of Title 2 of the Palo Alto Municipal Code is hereby amended to read, as follows: 2.30.360 Exemptions from competitive solicitation requirements. The following are exemptions from the informal and formal competitive solicitation requirements of this chapter. It is expected that the exemptions will be narrowly applied. The department requesting an exemption shall provide all relevant information supporting the application of the exemption to the purchasing manager. Based on this information, the purchasing manager shall make a recommendation to the city manager and the city manager shall determine whether an exemption from competitive solicitation requirements applies. Nothing herein is intended to preclude use of competitive solicitations where possible. (a) Emergency contracts as defined in Section 2.30.210(f). (b) Situations where solicitations of bids or proposals would for any reason be impractical, unavailing or impossible provided that in the case of a public works project, the project is not otherwise required by the Charter to be formally bid. These situations are those where solicitations of bids or proposals would not be useful or produce any advantage for the city. Situations where solicitations of bids or proposals would be impractical, unavailing or impossible, include, but are not limited to, the following: (1) Specifications cannot be drawn in a way that would enable more than one vendor or contractor to meet them; (2) Due to circumstances beyond the control of the city, the time necessary to use the competitive solicitation process procedures and requirements would result in a substantial economic loss to the city, or the substantial interference with a required city operation; and (3) Special conditions attached to a grant, donation or gift requires the use of particular goods and/or services. All requests for exemptions under this subsection shall be supported by written documentation (facsimile or electronic mail may be used), approved by the department head and forwarded to purchasing. 111025 dm 0073642 3 Not Yet Approved (c) Where competitive bids or requests for proposals have been solicited and no bid or proposal has been received or no bid or proposal meeting the requirements of the invitation to bid or request for proposal has been received, provided that, in the case of a public works project, the project is not otherwise required by the Charter to be formally bid. (d) Contracts for goods, wholesale commodities and related services, general services or professional services available from only one source where there is no adequate substitute or equivalent provider. Examples of acceptable sole source purchases are: equipment for which there is no comparable competitive product, proprietary products sold directly from the manufacturer, a component or replacement part for which there is no commercially available substitute and which can be obtained only from the manufacturer, items where there is only one authorized distributor in the area, and items where compatibility with items in use by the city is an overriding consideration. All requests for sole source purchases shall be supported by written documentation (facsimile or electronic mail may be used), approved by the office or department head and forwarded to purchasing. (e) Contracts for goods where, pursuant to Section 2.30.900, the city manager has determined that standardization of the supplies, materials or equipment is permissible. (f) Placement of insurance coverage and bonds. (g) Legal services contracts, including outside counsel and experts for litigation or other legal proceedings. (h) Professional services contracts for private development related studies and services when funded wholly by private developers. (i) Professional services contracts where the estimated total expenditure by the city, regardless of term, does not exceed $25,000.00. (j) Cooperative purchases where the city participates with one or more other governmental or public agencies in a cooperative agreement, provided the solicitation process used is substantially similar to the process required by this chapter; or (k) The use of another governmental or public agency's contract provided: (i) the agency used a solicitation method substantially similar to the method required by this chapter; (ii) the contract allows other agencies to utilize or the vendor authorizes the city to utilize; (iii) the contract is consistent with requirements specified in this Code; and (iv) there is an overall value to the City's utilizing the contract versus the city performing it's own solicitation. (1) Contracts with Northern California Power Agency, Transmission Agency of Northern California, and Western Area Power Administration to procure wholesale utility commodities and related services that meet the requirements of Section 2.30.340(d). (m) Contracts with Pacific Gas and Electric Company and the California Independent Service Operator Corporation for energy transmission services to the extent necessary and expedient to provide for the general health, safety and welfare of its citizens. 111025 dm 0073642 4 Not Yet Approved (n) Contracts with any public agency or governmental body to construct a public work where the public agency or governmental body has used methods similar to those required by this chapter to contract for the work. (o) Contracts with any public utility holding a certificate of public convenience and necessity or any entity holding a cable communications system franchise pursuant to Chapter 2.10 construct a public work where such work involves property of such public utility or cable communications system franchisee and is otherwise of direct concern to both the city and such public utility or cable communications system franchisee, provided that the project is not otherwise required by the Charter to be formally bid. (p) Contracts with private developers to construct public improvements in connection with their development project even if the city contributes funds to the improvement project, provided that the project is not otherwise required by the Charter to be formally bid. (q) Projects where the public work is performed by the city with its own employees. (r) Contracts where the estimated total expenditure by the city does not exceed $5,000.00. (s) Contracts with entities to procure wholesale utility commodities and related services under a city "feed -in tariff" local energy program that meet the requirements of Section 2.30.340(c). SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. 1/ 111025 dm 0073642 5 Not Yet Approved SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Senior Asst. City Attorney City Manager Director of Utilities 111025 dm 0073642 6 PALOALTOGREEN LOCAL ENERGY PROGRAM PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective Date: April 2, 2012 A. PARTICIPATION ELIGIBILITY REQUIREMENT: The PaloAltoGreen Local Energy Program (the “Program”), Program Year 2012, is open to participation by any Eligible Renewable Energy Resource, as defined in Section D.5, with a total generation capacity of at least 100 kilowatts (kW). B. TERRITORIALITY REQUIREMENT: In order to be eligible to participate in the Program during Program Year 2012, an Eligible Renewable Energy Resource must be located in and generating electricity from within the utility service area of the City of Palo Alto. C. PRICES FOR CERTIFIED RENEWABLE POWER: The following purchase prices (“Program Prices”) shall apply to the electricity produced by an Eligible Renewable Energy Resource participating in the Program starting in Program Year 2012, except as provided in Sections D.3 and D.6. Solar generation facilities: Contract Term Price 10 years 11.909 ¢ / kWh 15 years 12.766 ¢ / kWh 20 years 13.553 ¢ / kWh D. ADDITIONAL RULES AND REQUIREMENTS: 1. The owner of the Eligible Renewable Energy Resource shall enter into a Power Purchase Agreement, Eligible Renewable Energy Resource (PPA) with the City of Palo Alto. 2. The last Eligible Renewable Energy Resource that is eligible for participation in the Program during Program Year 2012 will be the Eligible Renewable Energy Resource that first causes the total capacity of Eligible Renewable Energy Resources receiving payments under the Program to exceed four (4) MW (the “Program Capacity”). 3. An application for participation in the Program to sell output to the City (the “Application”) may be submitted at any time during the month. Any number of PPAs may be awarded at the end of each month. If the City can accept all Applications submitted without exceeding the Program Capacity, then all Applications will be accepted at the applicable Program Price(s). If, in any month, the City cannot accept all Applications submitted during that month without exceeding the Program Capacity, then the PPAs will be awarded in the following order of precedence: PALOALTOGREEN LOCAL ENERGY PROGRAM PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective Date: April 2, 2012 a. The City will provide notification to all applicants that apply in the current month that there is insufficient capacity to accept all Applications. All applicants that apply for participation in the current month will be afforded two (2) weeks from the notification date to submit bid prices at which electricity from its proposed resource will be sold to the City. The bid price must be less than the price for the applicable term described in Section C, or the City will reject or will be deemed to have rejected the bid price. b. The City will award one or more PPAs based upon the proposed bid prices. The first award will be made to the applicant offering the lowest bid price and any subsequent award(s) will be made to the next higher prices, until the Program Capacity has been attained. c. Nothing in this ‘bid price’ process will affect the status of applications accepted in previous months. 4. In order for an Eligible Renewable Energy Resource to be eligible for participation in the Program during Program Year 2012, the City must receive an Application on or before December 31, 2012 or, if that day does not fall on a regular business day of the City, on the business day immediately preceding December 31, 2012. 5. For the purposes of Program Year 2012, an Eligible Renewable Energy Resource means an electric generating facility that: (a) is defined and qualifies as an “eligible renewable energy resource” under California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25471, respectively, as amended; (b) uses a solar fuel source; and (c) meets the territoriality requirement set forth in Section B. 6. The California Energy Commission’s (“CEC”) certification of the Eligible Renewable Energy Resource shall be required within six (6) months of the commercial operation date of the electric generating facility; the facility’s owner shall provide written notice of the CEC’s certification to the City. If the City takes delivery of the facility’s electricity prior to the CEC’s certification, then, as the facility’s electricity cannot be considered in fulfillment of the City’s RPS requirements, the price that the City will pay for the facility’s electricity (the “Pre-Certification Price”) will be set at 65% of the applicable Certification Price. Upon the CEC’s certification of the facility, the City will pay the applicable Certification Price for the facility’s electricity delivered on and after the date of the CEC’s certification. The City will “true-up”, as appropriate, the difference between the Certification Price and the Pre-Certification Price for any electricity received and paid for by the City, effective as of the date of certification of the Resource. 7. If an Eligible Renewable Energy Resource is authorized to participate in the Program, then that Resource shall not be entitled to receive any rebate or other incentive from the City’s Photovoltaic (PV) Partners Program, Power from Local Ultra-Clean Generation Incentive (PLUG-In) Program, or other similar programs funded by the City’s ratepayers. To the extent any rebate or incentive is paid to the owner of the Resource, that rebate or incentive shall be disgorged and refunded to the City if the Eligible Renewable Energy Resource continues to participate in the Program. If a rebate or an incentive has been paid to the Eligible Renewable Energy Resource, then that Resource shall be ineligible to participate in the Program. PALOALTOGREEN LOCAL ENERGY PROGRAM PROGRAM ELIGIBILITY RULES AND REQUIREMENTS PROGRAM YEAR 2012 Effective Date: April 2, 2012 8. All electricity generated by the Eligible Renewable Energy Resource shall be delivered only to the City. No portion of the electricity may be used to offset any load of the generating facility (other than incidental loads associated with operating the generating facility). 9. A metering and administration fee of $34.73/month will be charged to each Eligible Renewable Energy Resource that participates in the Program during Program Year 2012. City of Palo Alto (ID # 2329) City Council Staff Report Report Type: Action ItemsMeeting Date: 12/12/2011 December 12,2011 Page 1 of 8 (ID # 2329) Summary T itle: Renewable Feed-in Tariff Program Adoption Title: Finance Committee Recommendation to Approve Two Resolutions Adopting Utility Rate Schedule, Approving Changes to Utilities Rule and Regulation, and Approving Agreements for a Local Renewable Energy Feed-in Tariff Program and to Approve an Ordinance Amending Two Sections of Chapter 2.30 of the Municipal Code Relating to Faciliation of a Feed-In Tariff Program From:City Manager Lead Department: Utilities Recommendation Staff, the Utilities Advisory Commission (UAC), and the Finance Committee recommend approval of the following: 1.Resolution (Attachment D) a.Adopting Utility Rate Schedule E-PAGLE2012; and b.Approving changes to Utilities Rule and Regulation 27 (Generator Interconnection). 2.Resolution (Attachment G): a.Approving a standard form power purchase agreement for purchase of local renewable energy; b.Approving an Interconnection Agreement for the interconnection of non-net- metered generators; c.Authorizing the City Manager or designee to sign one or more contracts for a maximum output of 5 megawatts (MW) of solar energy, costing up to 13.064 cents per kilowatt-hour (¢/kWh), for terms not exceeding 20 years and for a maximum appropriation of $27.0 million; and d.Adopting changes to the previously approved Policies and Design Guidelines. 3.Ordinance (Attachment K) amending Sections 2.30.340 and 2.30.360 of Chapter 2.30 of Title 2 the Palo Alto Municipal Code (Contracts and Purchasing Procedures) to incorporate provisions that would facilitate a feed-in tariff program. The Finance Committee recommends that the program be named Palo Alto Clean Local Energy Accessible Now (Palo Alto CLEAN). Staff and the UAC recommend that the program be named PaloAltoGreen Local Energy Program. December 12, 2011 Page 2 of 8 (ID # 2329) Executive Summary The City adopted Policies and Design Guidelines to guide development of a renewable feed-in tariff (FIT) program in August 2011. Since then, staff has completed development of the program and has provided the final documents and rate schedule for Council consideration. If approved, staff is ready to launch the program in February 2012. Background This program resulted in part from Council direction in May 2010 to staff and the UAC to review the City’s strategies for procuring renewable energy and encouraging energy efficiency. In March 2011 Council approved an update to the City’s Long-term Electric Acquisition Plan (LEAP), which included several specific tasks to implement that Council direction. One task was to examine the feasibility of procuring some of the City’s renewable energy supply from local renewable sources using a FIT. Staff determined the program would be feasible and developed Policies and Design Guidelines for a renewable FIT program, which Council adopted in August 2011 (Staff Report ID #1827). Several additional approvals are required to implement the program. These were discussed at the UAC on October 5, 2011 and at the Finance Committee on November 15, 2011. Both bodies recommended approval of the program. Discussion The staff proposal is discussed in detail in the report to the Finance Committee (Staff Report ID #2168, Attachment C to this report), but there are some items that were not finalized at the time that the Finance Committee reviewed the proposal. Updates to Program Materials At its November 15, 2011 meeting the Finance Committee recommended Council approve the program materials proposed by staff with the understanding that staff would finalize the materials prior to Council action. These updates are summarized in Attachment B. The updated program materials are included in Attachments D through K, and the places where they differ from what the Finance Committee reviewed are summarized in Attachment A. The original documents can be found in the report to the Finance Committee (Staff Report ID #2168). Program Price In its proposal to the Finance Committee, the price was left blank in the proposed rate schedule. This was because staff was waiting to finalize the proposed rate until receiving the latest information on renewable market prices. The proposed rates are: 13.064 cents per kilowatt-hour (¢/kWh) for a 20-year contract, 12.3 ¢/kWh for a 15-year contract, and 11.469 ¢/kWh for a 10-year contract. The components of each price are shown in Table 1 below. A detailed description of each component is described in more detail in Attachment A. The program is a value-based program, meaning the FIT rate is set equal to the market price for the renewable power plus the value of power delivered locally, which avoids transmission and other costs. The proposed rate was developed using the 2011 market price referent (MPR) recently released by the California Public Utilities Commission (CPUC). The MPR is used for December 12, 2011 Page 3 of 8 (ID # 2329) various purposes in the renewables programs mandated for the investor-owned utilities, and has been used to set prices in their FIT programs. Prices for renewable contracts in the past have usually been at or above the MPR, though some proposals have been lower. The City recently received proposals in response to a Request for Proposals for renewable energy and the prices received were roughly equivalent to 2011 MPR. Table 1: Proposed Rates by Rate Component 10 year 15 year 20 year ¢/kWh ¢/kWh ¢/kWh 1.Energy 6.3 6.7 7.3 2.RPS Premium 2.7 3.0 3.1 3.Local Capacity 0.1 0.1 0.1 4.Transmission 1.8 1.9 1.9 5. Transmission and Distribution Losses 0.6 0.6 0.6 6.TOTAL 11.5 12.3 13.1 Chart 1 below is an updated version of Chart 1 in the Finance Committee staff report provided in Attachment C. Chart 1: Proposed Rates 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 10 year 15 year 20 year ¢/kWh T&D Losses Transmission Local Capacity RPS Premium Energy 13.1 ¢/kWh 11.5 ¢/kWh 12.3 ¢/kWh Committee Review and Recommendations On November 15, 2011, the Finance Committee discussed the program in detail. The Committee asked several clarifying questions about how the FIT price would be set, the impact December 12, 2011 Page 4 of 8 (ID # 2329) of the program on rates, and the contribution of the program to the City’s half-cent per kWh limit on the impact of renewable purchases on rates. There were questions about the impact of this program on the Photovoltaic (PV) Partners program, and staff clarified that the FIT program was independent of the PV Partners program. A concern was expressed that owners of existing commercial solar installations would stop using the power on site and would instead sell to the City, and staff clarified that projects that had received PV Partners rebates were ineligible for the program. In response to a question, staff clarified that the FIT price is fixed for the term of the contract for each applicant. All applications received each month could get the fixed price in the FIT rate schedule. If more applications are received in a month than could be accommodated within the program limits, a bidding mechanism described in the rate schedule would be used as a tie breaker to determine the winning applicants. There was also some discussion of whether a program similar to the FIT program could be created to serve as a public benefit condition of Planned Community (PC) Zones. The discussion centered on requiring, as a condition of PC Zone approval, the grant of a rooftop lease to the City for the development of a solar project. Clarifications to the Finance Committee Staff Report In addition to the discussion about the program, the Finance Committee made several suggestions to clarify information in the report to improve understanding. Finance Committee members recommended revising Table 5 in the Finance Committee report to make clear how the FIT program compares to the City’s existing renewable contracts. Staff provides Table 2 below to address the issues expressed by the Finance Committee. Note that the green premium (in ¢/kWh)of the FIT program is lower than some of the City’s renewable recent contracts. This is because the price of renewable power has decreased in the last few years. It is also worth noting that while the total contract price for the FIT program is higher than for other renewable contracts, the City saves on transmission charges and transmission and distribution losses. The value of those savings is roughly 2.6 ¢/kWh for a 20 year contract, and when they are factored into the cost of the FIT contracts, the net cost for the FIT contracts is less than some of the City’s existing renewable contracts. December 12, 2011 Page 5 of 8 (ID # 2329) Table 2: Green Premium for Existing Renewable Energy Contracts Date Contract Executed Annual Energy (GWh) Levelized Project Cost (¢/kWh) Adjusted* Brown Market Cost (¢/kWh) Green Premium (¢/kWh) Green** Premium ($1000/yr) Small Hydro N/A 10.0 N/A N/A -- High Winds Nov. 2004 51.8 5.76 5.50 0.26 132 Shiloh Wind Oct. 2005 74.4 6.30 6.95 (0.65)(484) Santa Cruz LFG Nov. 2004 11.2 6.23 5.93 0.30 33 Half Moon Bay LFG Jan. 2005 40.8 5.90 6.75 (0.85)(349) Keller Canyon LFG Aug. 2005 11.8 7.09 8.39 (1.30)(154) Johnson Canyon LFG Aug. 2009 11.2 12.36 6.73 5.63 633 Crazy Horse LFG May 2010 21.6 10.76 6.93 3.83 826 San Joaquin LFG May 2010 32.0 11.81 7.56 4.25 1,359 Western Geo Geothermal Apr. 2011 8.5 11.30 7.95 3.35 284 Total -All Committed Contracts 273.3 2,281 Proposed FIT, 2012 Program Year, if fully subscribed 2012 6.0 13.10 10.00 ***3.35 201 Total -All Committed Contracts Plus the 2012 FIT Program 279.3 2,482 *Brown Market Costs for existing renewables contracts represent the cost of buying equivalent power in the energy market and are levelized across the project’s contract period, and adjusted for the comparison project’s delivery shape and local and system capacity value, but do not include transmission costs and losses. **Green Premium represents the premium associated with the fact that the energy is renewable. ***The Brown Market component of the FIT price is set equal to the costs the City would incur when buying brown power outside of Palo Alto and transporting it to the City’s distribution system.It includes transmission costs, transmission losses, and local and system capacity value in addition to the cost of the energy. Another point of clarification recommended by the Finance Committee is that the rate impact for the FIT Program be shown in terms of both unit rate (¢/kWh) increase and in percentage rate increase. Table 3 below shows the rate impact of the proposed FIT program and compares it to the rate impact of existing renewable contracts. The City has set a limit in its Long-term Electric Acquisition Plan (LEAP) that the total rate impact of renewable contracts shall not exceed 0.5 ¢/kWh. Table 3 shows how the City’s existing contracts contribute to that limit, and how much the proposed 2012 FIT program year would impact rates if it were fully subscribed at 4 MW of capacity. Staff estimates that the impact would be .02 ¢/kWh, or a 0.2% rate increase in FY 2013. The actual contribution will depend in part on the actual participation rate and the actual generation of the rooftop solar systems. December 12, 2011 Page 6 of 8 (ID # 2329) The Finance Committee voted to recommend that the Council approve the staff recommendation with the caveat that certain details in the contract may change and the rate would be finalized by the time that Council considered the program documents. The minutes of the November 15, 2011 Finance Committee meeting are provided in Attachment L. Program Name Both the UAC and Finance Committee meetings involved extensive discussion of the program name and whether to join an effort being undertaken by a nonprofit organization to rebrand FIT programs as Clean Local Energy Accessible Now (CLEAN) programs. The UAC held two votes on the name. The first, to name the program Palo Alto CLEAN, failed 3- 4 (Keller, Barry, Waldfogel, and Eglash opposed). Three Commissioners said they were persuaded by the arguments in favor of the CLEAN name, and commented that there was a substantial rebranding effort underway to change the name of FIT programs to CLEAN programs. They expressed the belief that CLEAN would become a nationally recognized name. They thought Palo Alto should become the first utility to adopt the name. Other Commissioners said the CLEAN name did not resonate with them, that the program reminded them of cleaning or street sweeping, and expressed the opinion that the program should use a locally recognizable name. One Commissioner recommended using the successful Table 3: Rate Impact of Renewable Contracts Green Premium Costs ($1000/yr) Rate Impact of Green Premium (¢/kWh)* Rate Impact of Green Premium (% of system average rate)** Small Hydro --- High Winds 132 0.01 0.1% Shiloh Wind (484)(0.05)-0.4% Santa Cruz LFG 33 0.00 0.0% Half Moon Bay LFG (349)(0.04)-0.3% Keller Canyon LFG (154)(0.02)-0.1% Johnson Canyon LFG 633 0.07 0.6% Crazy Horse LFG 826 0.09 0.7% San Joaquin LFG 1,359 0.14 1.2% Western Geo Geothermal 284 0.03 0.3% Total -All Committed Contracts 2,281 0.24 2.0% Proposed FIT, 2012 Program Year, if fully subscribed 201 0.02 0.2% Total -All Committed Contracts Plus the 2012 FIT Program 2,467 0.26 2.2% *Based on FY 2013 projected sales, 956 million kWh (956 GWh). **Based on FY 2013 forecasted system average rate, 11.7 ¢/kWh. December 12, 2011 Page 7 of 8 (ID # 2329) PaloAltoGreen brand as the basis for the program’s name. A second vote, to name the program PaloAltoGreen Local Energy Program passed 6-1 (Foster opposed). The Finance Committee voted 2-1-1 (Schmid opposed, Yeh abstaining) to name the program Palo Alto CLEAN. Two Council Members expressed the belief that CLEAN either was already the industry standard name for FIT programs, or would become so in the future, and that Palo Alto should adopt the name because it would be nationally recognizable rather than locally recognizable. One Council Member disagreed, saying that the name was not descriptive of the program and that other programs have names with “clean” in them. Timeline If the Council approves the staff recommendation, staff will open the program to applications in February 2012. Staff will return to Council in the fall of 2011 with a review of the first program year and a proposal for the 2013 program year. Resource Impact Staff estimates that staff time equivalent to about 1 Full Time Equivalent (FTE) citywide is required to process program applications, issue any required permits, inspect 12-16 solar generating systems and connect them to the distribution system. Staff expects to be able to process this number of system interconnections with existing staff. Aside from the staff time, the Program’s costs are primarily those related to the price the City will pay over the contract terms for each project. Staff estimates that these costs could be up to $27 million over 20 years. By design, these costs will not be greater than the cost of other long-term contracts for renewable energy projects to meet the City’s RPS goal. If additional equipment is required to connect the project to the City’s distribution system, the cost will be the responsibility of the applicant. Staff does not believe many upgrades will be required to the City’s distribution system, but will make an appropriate determination as part of the processing of project applications. The fees proposed in the revised Rule and Regulation 27 (Attachment C) along with the fee in the Rate Schedule (Attachment E) will fully recover the costs associated with interconnecting generators that participate in the Program and any costs associated with metering. Policy Implications The proposed program is consistent with the Council-approved Long-term Energy Acquisition Plan (LEAP), specifically LEAP Strategy #3 (Renewable Portfolio Standard), which is to “promote and facilitate the deployment of cost-effective local resources by…evaluating a Feed-in-Tariff (FIT) to promote locally sited renewable resources.” Related to achieving the RPS goal of at least 33% by 2015, the LEAP Implementation Plan includes several initiatives related to a FIT program, including: ·Initiative 9: Evaluate the merits of implementing a feed-in-tariff (FIT) and the potential to meet RPS goals through local renewable resources; ·Initiative 10: Seek UAC recommendation and Council approval of the policy elements of a FIT to encourage local renewable resource projects; and December 12, 2011 Page 8 of 8 (ID # 2329) ·Initiative 19: Following receiving Council direction from Implementation Plan Initiative #10, develop a FIT proposal including rate, rules, regulations, standard contract form and limits. Environmental Review The adoption of this Program does not constitute a project under the California Environmental Quality Act (CEQA), California Public Resources Code section 21080, subdivision (b)(8). However, development of the generation facilities that will sell power under this Program may constitute a project under CEQA. Such CEQA review would be managed by the City’s Planning Department. Attachments: ·Attachment A -Summary of Additional Changes to Program Materials (PDF) ·Attachment B -Price Methodology (PDF) ·Attachment C -Finance Committee Report (PDF) ·Attachment D -Resolution Adopting Rate Schedule and Rule and Regulation Changes(PDF) ·Attachment E -Rate Schedule E-PAGLE2012 (PDF) ·Attachment F -Revised Utility Rule and Regulation 27 (PDF) ·Attachment G -Resolution Adopting Renewable FIT Program (PDF) ·Attachment H -Revised Renewable FIT Policies and Design Guidelines (PDF) ·Attachment I -Interconnection Agreement (PDF) ·Attachment J -Power Purchase Agreement, Eligible Renewable Energy Resource (PDF) ·Attachment K -Ordinance Adopting Changes to Chapter 2.30 of the Palo Alto Municipal Code (Contract and Purchasing Procedures)(PDF) ·Attachment L -Draft Excerpt of Minutes of November 15, 2011 Finance Committee Meeting (PDF) Prepared By:Jon Abendschein, Resource Planner Department Head:Valerie Fong, Director City Manager Approval: ____________________________________ James Keene, City Manager Staff-Recommended Changes to Program Materials When it presented the program materials to the Finance Committee, staff was awaiting the results of feedback from the public was doing some final additional review. A few changes are recommended, most of which are non-substantive. The Finance Committee approved the documents subject to additional modifications by staff. Below are the modifications staff has made to the program materials since the Finance Committee meeting.The single substantive addition is shown in bold. Document Location in Document Changes to Document from Version Proposed to Finance Committee 1 Rate Schedule (Attachment E) Throughout Change all mentions of “eligible renewable generating facility” to “Eligible Renewable Energy Resource” for consistency with the Power Purchase Agreement and California Energy Commission definitions. 2 Rate Schedule (Attachment E) Throughout Change all mentions of “rate” to “price.” 3 Rate Schedule (Attachment E) Note 1 Correct the reference to the Power Purchase Agreement to “Power Purchase Agreement, Eligible Renewable Energy Resource.” 4 Rate Schedule (Attachment E) Note 5 Make definition of Eligible Renewable Energy Resource consistent with the Power Purchase Agreement. 5 Rate Schedule (Attachment E) Note 9 Include metering and administrative fee in the rate schedule. 6 Interconnection Agreement (Attachment I) Front Page, Exhibit Moved generating facility information from front page of the document to the exhibit 7 Power Purchase Agreement (PPA) (Attachment J) Pg. 1, Recital 2 Change “Energy” to “Output,” which is more inclusive. 8 PPA (Attachment J) Pg. 2 Add reference to Exhibit PPA-B in definition of Commercial Operation Date 9 PPA (Attachment J) Throughout Change all mentions of “rate” to “price.” 10 PPA (Attachment J) Pg 6, 2.4.1 Correct “and” to “or.” The intent of the section is that it applies if either condition is true. 11 PPA (Attachment J) Pg 6, 2.4.4 Clarifications to make the section easier to understand for project developers. 12 PPA (Attachment J) Pg 6, 2.7 Clarifies that the section applies only to incentives paid for by Palo Alto ratepayers, not other incentives like Federal tax credits. 13 PPA (Attachment J) Pg 8, 4.2 Corrects “Buyer” to “Seller.” 14 PPA (Attachment J) Pg 8, 5.2.1 Language clarification, no substantive change 15 PPA (Attachment J) Pg 9, 6.6 Corrects “Buyer” to “Seller.” 15 PPA (Attachment J) Substantive Change Pg 11, 8.3 Additional language required to protect the City from potential review by the Federal Electric Regulatory Commission (FERC) of FIT contracts. Will only apply to large (1 MW+) projects. 16 PPA (Attachment J) Pg 14, 14.0 Changes clarify that the Seller has the right to terminate the contract before the project becomes operational, a right that is referenced in other parts of the contract. 16 PPA (Attachment J) Exhibit PPA-A Adds generator description to the Exhibit 16 PPA (Attachment J) Exhibit PPA-B Modifications to the Commercial Operation Date Letter exchanged when the project is complete to make it clearer and more usable. 16 PPA (Attachment J) Exhibit PPA-C Updated to reflect current NCPA power scheduling procedures. 17 PPA (Attachment J) Exhibit PPA-D Updated to reflect current WREGIS REC tracking procedures. Renewable FIT Program Pricing Methodology Based on planning assumptions as of: November 17, 2011 Technology:Solar Rate Components by Contract Length: Table 1: Proposed Rates by Rate Component 10 year 15 year 20 year ¢/kWh ¢/kWh ¢/kWh 1.Energy 6.5 6.9 7.3 2.RPS Premium 2.5 2.8 3.1 3.Local Capacity 0.1 0.1 0.1 4.Transmission 1.6 1.8 1.9 5. Transmission and Distribution Losses 0.5 0.6 0.6 6.TOTAL 11.3 12.2 13.1 Chart 1: Proposed Rates 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 10 year 15 year 20 year ¢/kWh T&D Losses Transmission Local Capacity RPS Premium Energy 13.1 ¢/kWh 11.3 ¢/kWh 12.2 ¢/kWh Description of rate components: 1.Energy:The value of the energy generated by a solar generating system accounting for the time of day the energy is generated by a typical solar system located in Palo Alto. 2.RPS Premium:The additional value of the renewable energy in meeting the City’s Renewable Portfolio Standard. Requires certification by the California Energy Commission. 3.Local Capacity:The value of the solar generating system in reducing the City’s peak load, in turn reducing the City’s Local Capacity Area Resource obligations under the California Independent System Operator (CAISO) tariff. 4.Transmission: The value of the locally generated energy in reducing transmission access charges. 5.Transmission & Distribution Losses:To import energy into Palo Alto and deliver it to a customer load, the City must purchase more energy than the customer consumes because some of the energy is lost during delivery over the transmission and distribution system. Because the generating system is located in Palo Alto at a customer site, even if it is sold to the City and not used directly by the customer, the City still avoids these losses. This rate component represents the savings associated with avoiding those transmission and distribution losses. City of Palo Alto (ID # 2168) Finance Committee Staff Report Report Type: Meeting Date: 11/15/2011 November 15, 2011 Page 1 of 16 (ID # 2168) Summary Title: Proposed PaloAltoGreen Local Energy Program Title: Utilities Advisory Commission Recommendation to Approve Implementation Documents Including the Rate, Rule and Regulation, and Agreements to Implement the Proposed PaloAltoGreen Local Energy Program From: City Manager Lead Department: Utilities Recommendation Staff recommends that the Finance Committee support the Council’s adoption of the following: 1. Resolution (Attachment A) a. Adopting Utility Rate Schedule E-PAGLE2012; and b. Approving changes to Utilities Rule and Regulation 27 (Generator Interconnection). 2. Resolution (Attachment D): a. Approving a standard form power purchase agreement for purchase of local renewable energy; b. Approving an Interconnection Agreement for the interconnection of non-net-metered generators; c. Authorizing the City Manager or designee to sign one or more contracts for a maximum output of 5 megawatts (MW) of solar energy, costing up to 15 cents per kilowatt-hour (¢/kWh), for terms not exceeding 20 years and for a maximum appropriation of $27 million; and d. Adopting changes to the previously approved Policies and Design Guidelines. 3. Ordinance (Attachment M) amending Sections 2.30.340 and 2.30.360 of Chapter 2.30 of Title 2 the Palo Alto Municipal Code (Contracts and Purchasing Procedures) to incorporate provisions that would facilitate a feed-in tariff program. Executive Summary To date, all of the City’s renewable energy purchases have been from non-local sources. The proposed PaloAltoGreen Local Energy Program (Program) will enable Palo Alto property owners to participate in achieving the City’s renewable energy goals by developing renewable generation projects on their property and selling the power to the City. Staff is proposing a streamlined purchasing process that will make development of such projects easier. The common term for the type of program staff is proposing is a feed-in tariff (FIT) program. FIT programs are used to encourage small local renewable energy projects by streamlining the November 15, 2011 Page 2 of 16 (ID # 2168) purchasing process and allowing developers to lock in a fixed price for the sale of the output of their projects using a standard contract offered by the utility. The Program springs from the Council’s direction in May 2010 to the Utilities Advisory Commission (UAC) and staff to analyze and make recommendations to the Council on, among other things, alternative power purchasing mechanisms. FIT programs were among the alternatives analyzed. After the UAC’s review in April 2011, the Council approved the Policies and Design Guidelines (Guidelines) governing program development in August 2011. Staff then noted it would return to the Council for approval of documents necessary for Program implementation. These documents include a utility rate schedule, which establishes the rate at which the City would purchase energy, a standard power purchase agreement, a standard interconnection agreement, and changes to the process the City uses to connect generators to its electric distribution system. The Program is designed to spread purchases over several years. For calendar year 2012, the first program year (PY 2012), staff proposes a 4 megawatt (MW) cap on purchases and a 100 kilowatt (kW) minimum project size to control workload and mitigate risks. Staff also proposes limiting Program eligibility to solar generators in PY 2012. Thus, in PY 2012 the Program would focus primarily on larger commercial sites, namely, those with 25,000 square feet or more of roof space. After completing PY 2012, staff will re-examine the annual cap, the minimum project size, and the limitation to solar generation and may recommend changes for PY 2013. If PY 2012 is fully subscribed at 4 MW, the energy from the projects would be roughly 6,000 MWh/year, enough to power 1,000 homes, or 0.6% of the City's annual electricity usage. The total cost of the energy over 20 years would be $18 million. Staff is requesting authorization for up to 5 MW of purchases; however, because of the way the cap is implemented. The last project to be accepted in to the Program will be the one that causes the Program cap to be exceeded, meaning total purchases under the Program could be greater than 4 MW of capacity. Implementation of the cap is described in more detail below. At this time, the draft agreements and rates proposed for the Program may be revised further by the time of the Council’s adoption. Background In July 2009, when staff requested that the Finance Committee recommend that the Council approve a renewable energy contract with Ameresco Johnson Canyon landfill (CMR: 305:09), the Finance Committee discussed the rising cost of renewable energy and stated that the high prices should prompt a review of the policies and guidelines related to the acquisition of renewable power and suggested an increased emphasis on efficiency improvements that could reduce electricity use. In August 2009, the Council agreed with the Finance Committee's recommendation and directed staff to work with the UAC to reassess the City’s plans for renewable power and energy efficiency. On May 3, 2010, the Council discussed a Colleague’s Memo (“Request to the City Council to Direct the Utilities Advisory Commission to Make Recommendations to the City Council on a Comprehensive Energy Efficiency and Renewables November 15, 2011 Page 3 of 16 (ID # 2168) Procurement Strategy”) and unanimously voted to direct the UAC, supported by appropriate staff, to analyze and make recommendations to the Council on, among other things, alternate mechanisms to power purchase agreements. Among the alternatives to be analyzed were FIT programs. The City has a variety of policies in support of purchasing power from renewable sources. These policies are embodied in the Comprehensive Plan and the Climate Protection Plan, among other places. The City's specific renewable energy purchase goal is referred to as its Renewable Portfolio Standard (RPS), and is defined in the City’s Long-term Electric Acquisition Plan (LEAP). To date, all of the City’s renewable power supply has been derived from sources outside of Palo Alto. A FIT program can enable a local building owner to participate in helping the City meet its RPS goal by building a renewable generator on its property and selling the power to the City. A Palo Alto building owner could, for example, build a rooftop solar project and sell the power directly to the City, or could lease the building rooftop to a solar developer, who builds and owns a solar system and then sells the power to the City. In either case, a Palo Alto rooftop becomes a source of solar power that the City can count toward its renewable goals. Generating power locally provides some advantages over importing power. For example, because the power is generated close to where it is used, little of it is lost in transmission, and the City also avoids charges associated with accessing the transmission system. Small local generators can also reduce the City’s peak load, which reduces the amount of generation capacity the California Independent System Operator Corporation (CAISO) requires the City to maintain, thus reducing the City’s costs. Despite providing these advantages, small generators in Palo Alto have some disadvantages when trying to compete in a Request for Proposal (RFP) purchasing process. One disadvantage is the size of the projects that could be privately developed in Palo Alto; typically such projects are rooftop solar projects with less than 1 MW of generating capacity. These small projects are generally less attractive to both investors and utilities in an RFP context. For project developers, the small size and payoff does not justify the time to develop a bid given the chance they might not receive a contract. The utility prefers larger projects in an RFP due to the time to negotiate and administer a number of small projects individually. One way of reducing those obstacles is to streamline the purchasing process for small projects by allowing any project that meets certain eligibility criteria the ability to lock in a fixed price to sell its power to the utility under a long-term standard contract. The power industry term for this type of arrangement is “feed-in tariff” (FIT). A FIT program is designed to simplify the development of renewable power projects by providing project developers with a standard contract and the ability to sell power to the local utility at a fixed rate for a fixed term. FIT programs have been successful at stimulating renewable energy project development in Europe, and renewable FIT programs have been tried in several cities and states across the United States. Most large utilities in California offer a FIT program. November 15, 2011 Page 4 of 16 (ID # 2168) A strategy in the 2011 LEAP update was to evaluate the feasibility of implementing a FIT program to fulfill a portion of the RPS and to promote and facilitate the development of cost- effective local renewable generation resources. Staff completed its evaluation early in 2011 and drafted a set of policies and guidelines for the development of a local renewable energy purchasing program. Staff presented Policies and Design Guidelines for a FIT program to the UAC on April 6, 2011, and they were approved by the Council on August 1, 2011. The fundamental elements of the policy include: 1. The program is intended to purchase energy for the City’s RPS program; 2. Projects must be located in Palo Alto; 3. Solar, wind, and biogas-fueled projects are eligible; 4. The City will offer a long-term power purchase agreement (PPA) at a fixed rate to projects that meet the project eligibility rules; 5. The rate will be based on the market value of the renewable energy and any additional value provided by the fact that the energy is delivered locally, such as avoided transmission costs and losses; and 6. The PPA will be standard and non-negotiable. When the Guidelines were approved in August, staff noted that there were several aspects of the program that would require more analysis, and that staff would return to the UAC, the Finance Committee, and the Council for approval of the implementing elements, including the standard power purchase agreement, the standard interconnection agreement, the applicable rate schedules and rules changes and any other authorities or program documents required to launch the Program. This report conveys those final elements needed to implement the Program. Discussion To implement the Program, staff needs the Council’s adoption of two resolutions (Attachments A and D) and an ordinance (Attachment M), which: •Approve a utility rate schedule (Attachment B) that sets the rate the City will pay for the output of renewable generation projects in the City and various conditions for receiving that rate. Note that the actual rate is not shown in the rate schedule. Staff has developed a tentative rate (described below), but the final rate will be determined prior to the Council’s approval based on the results of a renewable RFP to be completed by the end of October; •Approve a standard power purchase agreement (Attachment E) that owners of the generation projects will be required to sign; •Approve changes to Utilities Rule and Regulation 27 – Generator Interconnection (Attachment C) that will modify the process for connecting generators to the City’s electric distribution system. The modifications will enable them to be connected in a way that allows them to deliver power into the City’s distribution system so it can be sold to the City rather than be used on site. It also allows for a simplified generator connection process for those generators that will have a minor impact on the City’s distribution system. November 15, 2011 Page 5 of 16 (ID # 2168) •Approve an Interconnection Agreement (Attachment F) that the generation owner must sign in order for its generator to be connected to the City’s distribution system. This Interconnection Agreement can be used for projects not participating in the Program as well. •Authorize the City Manager or his designee to enter into contracts for local renewable energy on the City’s behalf. The limits on this purchasing authority are discussed below. •Adopt changes to the Guidelines (Attachment G) to allow 10-, 15-, or 20-year contract terms and to make other minor clarifications to the wording of the Guidelines. •Amend Chapter 2.30 of the Palo Alto Municipal Code (Contracts and Purchasing Procedures) to incorporate provisions related to feed-in tariff (FIT) programs, specifically to exempting wholesale energy purchases made through a Council-approved FIT program from the requirement to use a request for proposal or formal bid process. It also exempts such contracts from conforming to certain credit rating requirements. Staff had not yet fully developed a few aspects of the Program when the Council approved the Guidelines in August. Those aspects now require additional explanation and are discussed in depth below. These newly developed aspects include: •Purchasing in multiple years: In August, staff had not yet decided whether to cap the amount of generating capacity purchased each year, thus spreading purchases across multiple calendar years. Staff is now proposing such a cap. •First year program limits: For PY 2012 staff now recommends setting a 4 MW capacity cap and a 100 kilowatt (kW) minimum project size. Staff will return next fall to set the cap for PY 2013. Staff recommends a few changes to the Program’s details, outlined in August but now discussed below, and include: •Limiting the Program to solar generators for PY 2012; and •Permitting 10- or 15-year contract terms in addition to 20-year terms. Accepting Only Solar Projects in PY 2012 The Guidelines, adopted in August, stated that wind, biogas, and solar would be Program- eligible. At the time staff proposed the Guidelines, it was expected wind and biogas would be as easy to include in the Program as solar, but some aspects of those technologies required further analysis. Because wind and biogas have little economically viable, privately developable potential in Palo Alto, and because there are plenty of good potential solar sites in Palo Alto, staff is recommending launching a solar-only program for PY 2012. Pending further study, staff plans to eventually make the Program available to wind and biogas projects, and possibly to other renewable technologies as well, but does not recommend delaying the Program’s launch to complete that analysis. November 15, 2011 Page 6 of 16 (ID # 2168) 10-, 15-, or 20-Year Contract Term In reviewing various FIT programs in California, staff found that nearly all offered ten-, fifteen-, or twenty-year terms. Staff does not anticipate significant additional work associated with offering three different contract term choices, so a minor change to the Guidelines to accommodate various contract lengths is recommended. Spreading Purchases Across Multiple Contract Years One aspect of the Program that was not previously discussed in detail in the Guidelines is using an annual cap on participation in order to spread purchases over multiple years. Staff believes spreading purchases over several years is prudent because it reduces price risk and the City might be able to take advantage of decreases in the price of solar energy. Solar energy prices have decreased significantly over the last decade, and a lot of effort is being devoted to continuing to lower those costs, such as the Department of Energy’s Sunshot program. Buying over multiple years also reduces any operational risk posed by the Program, because staff has the opportunity to modify the Program’s rules and contracts based on what is learned during each program year. Program Year 2012 Limits Staff proposes calendar year 2012 as the first program year and expects to launch the program in February 2012. For PY 2012, staff proposes setting a purchase cap of 4 MW of generating capacity with a minimum project size of 100 kW. Staff chose the cap and minimum project size as a way of controlling workload and also as a way of mitigating various risks, which are discussed below. Staff has attempted to control the workload impacts of Program implementation because the Program will require more staff effort than current renewable energy contracts demand. Workload related to contract administration will increase due to the larger number of contracts required to achieve the same amount of generation capacity, and additional work will be required to connect the generator to the electric grid and to conduct the additional building inspections, as shown in Table 1 below. When the City purchases imported power, another local government agency is responsible for the inspections and another utility is responsible for connecting the generator to the electric grid. With a FIT program, the City will perform both tasks. As staff gains experience with connecting and inspecting these projects during PY 2012, staff will look for ways to re-engineer the process to allow more members of the community to take part in the program. November 15, 2011 Page 7 of 16 (ID # 2168) Table 1: Workload of Various Types of Renewable Projects Type of project Estimated # projects required to reach 4 MW* Entity Responsible for Building Inspection Entity Responsible for Generator Interconnection Entity Responsible for Contract Negotiation / Administration Small facility rooftop solar (10kW-100kW)~100 City City City 50% small facilities, 50% large facilities 55-60 City City City Large facility rooftop solar (>100 kW)12-16 City City City Large renewable projects outside of Palo Alto 1-2 Other municipality Other utility City *Estimated based on actual Palo Alto rooftop capacities Potential Project Locations There are a variety of rooftop sizes in Palo Alto, but they can be roughly categorized as large commercial (>100 kW solar capacity, buildings with a roof profile larger than 25,000 square feet), small commercial (10-100 kW solar capacity, smaller than 25,000 square foot roofs), and residential (<10 kW solar capacity). Staff’s proposal will permit only large commercial buildings to participate in PY 2012. Attachment H shows those potential locations. Staff will reach out to these building owners; staff has contacted the Stanford Land Management Company, as many of these projects are located in the Stanford Research Park. Purchase Authority In developing a more stream-lined purchasing process, delegation of the Council’s authority to the City Manager or his delegate for contract execution is a first step. If adopted, the resolution in Attachment D would delegate this authority. The authority is limited to the purchase of the output from solar generating facilities totaling 5 MW in capacity during PY 2012 at a maximum price of 15 ¢/kWh (which corresponds to a twenty-year contract). The 5 MW purchasing authority is higher than the 4 MW program capacity cap to allow staff the flexibility to accept a project that is larger than the remaining capacity available under the cap. In other words, the last project staff will accept for PY 2012 is the one that would cause the 4 MW cap to be met or exceeded. For example, if staff has already accepted applications for 3.8 MW of capacity and then receives one more application for 0.5 MW of capacity, then staff would accept that proposal as the final project for PY 2012, leading to 4.3 MW of total capacity. Assuming solar production of between 1,500 and 1,650 kWh per kW of capacity, purchasing the output from 4 MW of solar capacity would result in $18-20 million in program costs over 20 years. The maximum proposed appropriations of $27 million represents optimistic planning assumptions: 5 MW of solar capacity accepted into the Program with 1,800 kWh generated per kW of capacity. November 15, 2011 Page 8 of 16 (ID # 2168) Fee Changes Staff is also seeking changes to the fees associated with generator interconnection. These are contained in the amendments to Utility Rule and Regulation 27 (Attachment C). Currently solar projects smaller than 1 MW are exempted from interconnection fees. Staff is proposing to maintain the fee exemption for net metering projects, but recover the full costs associated with reviewing and interconnecting generators that sell power to the City under the Program. Purchase Rate Methodology The proposed rate schedule E-PAGLE2012 is shown in Attachment B. It will contain three purchase rates, depending on the contract length requested by the developer. Tentative rates are shown in Chart 1, below, but staff may modify these rates before the Council’s adoption based on the responses to a renewable RFP that are due in late October. This RFP will update staff’s estimate of the market value of renewable power. Staff is requesting a Finance Committee recommendation of the terms and conditions in the rate schedule; the actual rates will be finalized prior to the Council’s approval. Under the proposed rate schedule and power purchase agreement (PPA), the City will purchase all of the generator’s output at a fixed rate for the term of the PPA. The Program is value- based, as compared to cost-based, meaning rates are based on the market value of the energy and other attributes (together called output) rather than the cost of the project. The rate is established so that it does not exceed the market value of the output plus any additional value associated with the generation of energy locally. A complete description of the rate methodology is included in Attachment I. As shown in Chart 1 below, the elements of the value-based rate include the value of the underlying energy, the market premium for renewable energy, the value of local capacity that the CAISO requires for grid reliability, the avoided cost of transmission that would otherwise be required to import energy from outside the City, and the energy losses associated with transmission and distribution (T&D). November 15, 2011 Page 9 of 16 (ID # 2168) Chart 1: Tentative Solar Purchase Rate by Component and Contract length - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 10 year 15 year 20 year ¢/ k W h T&D Losses Transmission Local Capacity RPS Premium Energy 15 ¢/kWh14.5 ¢/kWh 14.8 ¢/kWh Technical and Economic Potential Staff has estimated the technical potential (the maximum that can be achieved if only technical considerations are considered) for solar at roughly 80 MW: 45 MW on large commercial rooftops (25,000 square feet of roof space or larger) and 35 MW on small commercial rooftops (2,500-25,000 square feet of roof space). This is an estimate based on roof outlines in the City’s Geographic Information System (GIS); some of these roofs may not be able to support solar systems. The economic potential of the Program (those projects that are economic to build, operate, maintain, and provide a return to the developer) will be substantially less than the technical potential. Indications about Program subscription levels are mixed. On the one hand, staff has anecdotal evidence that certain projects in Palo Alto could be economic at the preliminary offer rates. Staff estimates that the cost of a rooftop solar system would have to be in the range of $3-4/watt to justify a project with a 15 ¢/kWh PPA rate; some anecdotal evidence points to current installations achieved at close to these costs or even lower. That evidence includes industry’s equipment price indices. Solar developers and others in the solar industry have also indicated that projects are being developed with costs in that range and several solar developers have already expressed interest in Palo Alto’s program. Other evidence points to the opposite conclusion. Costs of large rooftop solar systems installed under the Photovoltaic (PV) Partners rebate program have been in the $7-8/watt range. While this is slightly higher than the costs of large rooftop solar systems under the California Solar Initiative, neither program has realized installations in the $3-4/watt range. In fact, installations November 15, 2011 Page 10 of 16 (ID # 2168) as recent as 2011 have been in the $6-7/kW range, both inside and outside of Palo Alto. A recent paper by the Electric Power Resource Institute (“Integrated Generation Technology Options,” June 2011) has estimated that the levelized cost of electricity for solar projects is above 20 ¢/kWh and will remain there for several years. One way to better assess the economic potential would be a comprehensive study of potential Palo Alto sites and the economics associated with them. The cost and staff time associated with such a study would likely not be much more than the cost of actually developing and launching the Program. Staff has concluded that it is simpler and cheaper to simply launch the Program and await the response, so long as risks are properly managed. Even if there is a weak response in PY 2012, if the cost of solar energy continues to fall, the Program may begin to produce results in the future. Effect on Renewable Portfolio If the City secured the installation of 4 MW of solar PV projects by 2013, the City’s renewable energy supply would increase by about 0.6% (from roughly 28%% to 28.6%) of the City’s load by 2015. The installation of 4 MW of local solar PV projects at the proposed purchase rate for the 20-year term contract would result in an overall rate impact of approximately 0.026 ¢/kWh. This is based on comparing the renewable energy portion of the proposed purchase rate (11.0 ¢/kWh) with the comparable cost of purchasing “brown energy” on the wholesale market for the same time period (7.2 ¢/kWh – which includes an adjustment for the delivery shape of solar PV power). Table 2 below is a summary of the premiums paid to date for the City’s existing renewable energy contracts, as well as the green premium associated with 4 MW of solar PV projects through the Program. In all, the City’s existing renewable energy contracts plus 4 MW of local solar PV projects would result in a total rate impact of about 0.27 ¢/kWh. This is well within the approved 0.5 ¢/kWh rate impact limit on the City’s renewable energy purchases. November 15, 2011 Page 11 of 16 (ID # 2168) Table 5: Green Premium for Existing Renewable Energy Contracts Date Contract Executed Annual Energy (GWh) Levelized Project Cost ($/MWh) Adjusted* Brown Market Cost ($/MWh) Green Premium ($/MWh) Green Premium ($1000/yr) Small Hydro N/A 10.0 N/A N/A - - High Winds Nov. 2004 51.8 57.6 55.0 2.6 132 Shiloh Wind Oct. 2005 74.4 63.0 69.5 (6.5) (484) Santa Cruz LFG Nov. 2004 11.2 62.3 59.3 3.0 33 Half Moon Bay LFG Jan. 2005 40.8 59.0 67.5 (8.5) (349) Keller Canyon LFG Aug. 2005 11.8 70.9 83.9 (13.0) (154) Johnson Canyon LFG Aug. 2009 11.2 123.6 67.3 56.3 633 Crazy Horse LFG May 2010 21.6 107.6 69.3 38.3 826 San Joaquin LFG May 2010 32.0 118.1 75.6 42.5 1,359 Western Geo Geothermal Apr. 2011 8.5 113.0 79.5 33.5 284 Total - All Committed Contracts 273.3 2,281 *Brown Market Costs are levelized across the project’s contract period, and adjusted for the comparison project’s delivery shape, local and system capacity value, transmission costs and losses. Financial Impacts The Program is one of several methods the City can use to acquire renewable power, which includes purchasing renewable power outside of Palo Alto by an RFP process or owning renewable generation indirectly through the Northern California Power Agency (NCPA). In PY 2012, staff expects little or no additional financial impact to the City by purchasing renewable energy through the Program when compared to these other purchasing methods, but it also expects little savings. This is because staff is proposing setting the rate equal to its estimate of the market value of renewable energy, adjusted for the additional value provided by the fact that the energy is generated locally. If there is substantial demand for the Program, staff may be able to achieve savings by lowering the rate over time, especially if solar project costs fall. Assuming the tentative rate shown in Chart 1 above, if the first program year were fully subscribed the cost of the power purchased is expected to be $18-20 million, depending on the productivity of the participating solar generators. This is equivalent to the cost of purchasing the same amount of renewable power outside Palo Alto and importing it over the electric transmission system. Purchasing Ordinance Amendment Minor amendments to the Palo Alto Municipal Code are required to implement the Program because it involves the wholesale purchase of power at a fixed rate rather than through an RFP process. Wholesale purchases of power are generally subject to Chapter 2.30 of the Palo Alto Municipal Code (Contracts and Purchasing Procedures), which the attached ordinance amends to permit wholesale energy procurement using a FIT program. November 15, 2011 Page 12 of 16 (ID # 2168) Chapter 2.30 is also being amended to address minimum creditworthiness requirements for power purchase agreements under the FIT program. The current creditworthiness requirements were adopted in 2004 to address purchases of large amounts of energy from power marketers and suppliers. The current provisions of Chapter 2.30 do not address market entrants, lacking a credit rating, that are engaged in the sale of small quantities of renewable energy (such as developers of small solar projects under the Program). The consequences of counterparty default under the Program will be mitigated by the fact these projects are small in size and the risk of financial default will not have a significant material adverse effect on the City. The need for imposition of minimum credit rating requirements arises only if the amount of Program capacity under contract with a single developer has the potential to create significant risk for the City. See “Program Risks,” below, for further discussion of when this risk becomes significant. Program Risks In designing the Program, staff considered a number of risks associated with FIT programs and designed mitigations into the program to reduce or eliminate them. These are summarized in detail in Attachment K. Some of these risks include: •The risk that the program rate is set too high, meaning that the local energy would be purchased at a higher price than necessary. The impact of this risk is mitigated in two ways: first, by setting the price based on the best available information staff can obtain on renewable market prices, which is why the rate will not be finalized for City Council consideration until staff has received the results of a recent renewable RFP, and second, by establishing an annual cap to limit the amount of participation in any given program year. In the event there is high demand for the program, staff can lower the rate in subsequent program years or switch to a bid-based program structure, whereby project developers bid prices into the program with the lowest prices accepted. •In the case of high demand, the risk that the number of applications overwhelms the City’s Building Division and Utilities Engineering Division.This risk is mitigated by limiting the amount of Program participation and setting a minimum project size. •The risk that a project ceases production before the contract term is complete.This could happen for a variety of reasons. For example, a rooftop solar system might have to be dismantled to accommodate a building demolition or reroofing. The consequences of such an occurrence are small if the City buys replacement renewable energy at a lower price, but are larger if the replacement energy is more expensive. This risk is mitigated as this Program involves purchases from several small projects rather than a single large project. A single small project failure will have a far smaller impact than a single large one. •The risk that large numbers of distributed generators cause problems with the distribution system.Other utilities have reported a variety of operating problems on their distribution systems due to distributed generation. This is because these distribution systems are typically designed to serve load and not to manage generation, and individual system components can fail when distributed generation is added to the system. To November 15, 2011 Page 13 of 16 (ID # 2168) mitigate this risk the Utilities Engineering Division has reviewed initial estimates of potential project locations, has identified situations in which upgrades to the system might be necessary, and will continue to monitor the system going forward. The risk is also mitigated by ensuring that the cost of mitigating any impacts to the system is borne by the project applicants, not ratepayers, and by limiting the amount of project participation each year so problems can be identified and mitigated as they develop. •The risk of bankruptcy of one of the City’s counterparties, leading to rejection of the PPA. This risk is only consequential if the bankruptcy filing occurs when the power market prices are higher than contract prices, meaning that the City must replace the lost energy with higher priced energy if and when the contract is rejected in bankruptcy. The risk is mitigated by two factors: first, that the Program is most likely to involve the purchase of small amounts of power from a variety of counterparties, and second, that the amount of power involved in the program is fairly small. If PY 2012 is fully subscribed, the amount of power delivered will be equivalent to 0.6% of the City’s load. For comparison, in FY 2011 the smallest amount of power delivered by any of the City’s existing counterparties was equivalent to over 4% of load. This means that even if the entire program capacity was owned by a single counterparty, the consequences of a default would be small. Staff estimates the increase in rates due to such a default in a time of high energy prices would be roughly 0.04%. Utilities staff and the Utilities Risk Oversight Committee believe that if a single counterparty owns 20 MW of solar capacity in Palo Alto it would be prudent to monitor that counterparty’s financial health and possibly limit the number of additional contracts the City enters into with that counterparty, but not before that point. Comparison to Other Programs Staff reviewed a variety of other FIT programs in the United States; a summary of those programs is included in Attachment J. Generally, with minor exception(s), those FIT programs achieving significant amounts of rooftop solar energy have paid rates higher than the rate proposed for this program. In California, a major obstacle to the success of FIT programs has been delays in getting projects connected to each utility’s distribution system. Staff believes the City’s distribution system is adequately designed for rooftop solar project connections, and that such delays will be minimal. Comparison to the PV Partners Program The City has an existing program, the PV Partners, which provides incentives to residents and businesses to install solar panels. The Program differs from the PV Partners in two key ways: first, it is not an incentive program, and involves only paying for the actual value of the energy, and second, in the Program all of the power is delivered to the City instead of used on-site and, therefore, it can be used to fulfill the City’s RPS. The PV Partners is currently economically more favorable to its participants than the Program. For a PV Partners participant, the value of the incentives combined with the value of the bill reduction is equivalent to a 21-25 ¢/kWh FIT. This means that for customers who own their own buildings and are interested in installing solar, the PV Partners will be a better value in the short term. However, the PV Partners only has incentives remaining for roughly 3.8 MW of November 15, 2011 Page 14 of 16 (ID # 2168) solar generating capacity and when those incentives are exhausted, the program may not continue. Some building owners may also opt to use the Program even before the PV Partners incentives are exhausted, because they do not occupy their own buildings and are not responsible for their tenants’ electric bills, so they would not realize the benefit of the electric savings to offset the cost to install a PV system. If the current tenant(s) is (are) not interested in partnering with a building owner to participate in the PV Partners, the Program could be a viable alternative. Commission Review and Recommendation At its October 5, 2011 meeting, the UAC reviewed various aspects of the proposed Program. At that meeting the UAC agreed with the staff recommendation and voted unanimously (7-0) to recommend that the City Council adopt the following parameters for implementation of PY 2012: •A rate to buy local renewable generation based on its value, calculated according to the methodology shown in Attachment I; •Establish February 1, 2012 through December 31, 2012 as the eligibility period for the PY 2012; •Set a limit of 4 MW on the amount of capacity procured during PY 2012; •Restrict participation to include only solar generators for PY 2012; •Set a minimum capacity of 100 kW for generators participating during PY 2012; and •Changing the Guidelines to permit a choice of contract terms (10, 15, or 20 years). The UAC members asked questions about how the Program would compare to the PV Partners, raised questions about how the Program would function in various situations, and recommended that staff include a discussion of potential project risks when communicating to the Finance Committee and the Council. Comments were supportive of the Program. The UAC also discussed an alternative name for the program. A commissioner offered “Palo Alto CLEAN”, for Clean Local Energy Accessible Now. There were comments both in support and opposition to the name. A motion to recommend changing the name to “Palo Alto CLEAN” failed by a vote of 3-4, and a subsequent motion to recommend the name “PaloAltoGreen Local Energy Program” passed by a vote of 6-1. The minutes of the meeting are provided as Attachment L. The rationale for a name change is driven by the cumbersome and unclear meaning of feed-in- tariff (FIT) to the public. Renaming the program is part of the effort to increase understanding and potential participation. The name, Palo Alto CLEAN connects to an effort to try and generate a new term nationally for feed-in-tariff (FIT). Palo Alto Green Local links to the City’s existing program. November 15, 2011 Page 15 of 16 (ID # 2168) Timeline After the Finance Committee’s consideration of the attached program materials, staff will seek the Council’s approval in December 2011. Meanwhile, staff will finalize the marketing and administrative processes for the program with the goal of commencing the program on February 1, 2012. Staff will return to the UAC and the Council with a Program review and update in fall 2012 with any recommended changes to the Program for PY 2013. Resource Impact Staff estimates that staff time equivalent to about 1 Full Time Equivalent (FTE) citywide is required to process program applications, issue any required permits, inspect 12-16 solar generating systems and connect them to the distribution system. Staff expects to be able to process this number of system interconnections with existing staff. Aside from the staff time, the Program’s costs are primarily those related to the price the City will pay over the contract terms for each project. Staff estimates that these costs could be up to $27 million over 20 years. By design, these costs will not be greater than the cost of other long-term contracts for renewable energy projects to meet the City’s RPS goal. If additional equipment is required to connect the project to the City’s distribution system, the cost will be the responsibility of the applicant. Staff does not believe many upgrades will be required to the City’s distribution system, but will make an appropriate determination as part of the processing of project applications. The fees proposed in the revised Rule and Regulation 27 (Attachment C) will fully recover the costs associated with interconnecting generators that participate in the Program. Policy Implications The proposed program is consistent with the Council-approved Long-term Energy Acquisition Plan (LEAP), specifically LEAP Strategy #3 (Renewable Portfolio Standard), which is to “promote and facilitate the deployment of cost-effective local resources by…evaluating a Feed-in-Tariff (FIT) to promote locally sited renewable resources.” Related to achieving the RPS goal of at least 33% by 2015, the LEAP Implementation Plan includes several initiatives related to a FIT program, including: •Initiative 9: Evaluate the merits of implementing a feed-in-tariff (FIT) and the potential to meet RPS goals through local renewable resources; •Initiative 10: Seek UAC recommendation and Council approval of the policy elements of a FIT to encourage local renewable resource projects; and •Initiative 19: Following receiving Council direction from Implementation Plan Initiative #10, develop a FIT proposal including rate, rules, regulations, standard contract form and limits. Environmental Review The adoption of this Program does not constitute a project under the California Environmental Quality Act (CEQA), California Public Resources Code section 21080, subdivision (b)(8). However, development of the generation facilities that will sell power under this Program may constitute a project under CEQA. Such CEQA review would be managed by the City’s Planning Department. November 15, 2011 Page 16 of 16 (ID # 2168) Attachments: •Attachment A: Resolution Adopting E-PAGLE2012 Rate Schedule and Amending Rule and Regulation 27 (PDF) •Attachment B: Rate Schedule E-PAGLE2012 (PDF) •Attachment C: Rule 27 Revised (PDF) •Attachment D: Resolution Adopting Palo Alto Green Local Energy Program (PDF) •Attachment E: Power Purchase Agreement (PDF) •Attachment F: Interconnection Agreement (PDF) •Attachment G: Revised Policies and Design Guidelines (PDF) •Attachment H: Map of Potential Project Locations (PDF) •Attachment I: Rate methodology detail (PDF) •Attachment J: Comparison to other programs (PDF) •Attachment K: Summary of Program Risks and Mitigations (PDF) •Attachment L: Excerpted Draft UAC Minutes - Oct 5, 2011 (PDF) •Attachment M: Ordinance Amending Municipal Code Sections 2.30.340 and 2.30.360 (PDF) Prepared By: Jon Abendschein, Resource Planner Department Head: Valerie Fong, Director City Manager Approval: James Keene, City Manager Finance Committee Report Attachments A through G are omitted. See City Council Report Attachments D through J SpaceSystemsLoral CPAUtilities Engineering Greendell S i t e Piazza'sMarket ElCarmeloElementarySchool HewlettPackard 204 Varian Building4 Building4A 1 Fry'sElectronics ParkingLot RossiAircraft(Chevron) ZPAircraftMaint ShorelineAvionics GarlandElementarySchool OhloneElementarySchool SheratonPaloAlto WalterHayesElementarySchool MainLibrary ArtCenter PAUSDAdministrativeOffices LucieSternCommunityCenter BUILDING3 BUILDING1 Town&CountryShoppingCenter CityHall EMB4 EMB-3 EMB-2 EMB-1 U.S.PostOffice CrownePlazaCabanaHotel 202 TermanMiddleSchool VACANTSEP2003 CAFEB25 R-1 A-4 Building2 Building3 Building1 SpinalCordCenter SITESERVICES Math-4 Math-1 Math&ScienceOffice(MS-6) HE2ELLHE1(HomeEc) M6M13M12 M11M10 M9M8 M7 RC10 RC9 Lockers GYM DanceStudio FitnessCenter WrestlingRoom ADOffice Boys WorldLanguages L31L21L22 L23L24 L25 L26 L27 L13 L14 L15L12 L11 L5 L8L7L4L3 L1L2 L6 A&B &English-SocialStudiesOffices LOCKERS SpangenbergAuditorium LittleTheater D-14&GreenRoom Amphitheater AddisonElementarySchool G EE HewlettPackard Nordstrom's Crate&BarrelAndronico'sMarket Neiman-Marcus AZMOORPLACE CLeeBuilding JuanaBrionesElementarySchool Offices Building6 PaloAltoSquare Macy'sMensStore Bloomingdales ELECTIONEERCOURT THEPORTICO PALANTINECT SANDHILLWALK CLARIONCT LADYELLENPL Macy's A-1 A-2 R-3 A-5 R-6E S1 S2 S3 Science SCIENCEPREPAREA S1 S3 S5 S7 S9 S2 S4S6S8S10 Building1 Building7 B J A Hillview1 Hillview2 HIllview3 HIllview4 TheWestinHotel E PARKINGGARAGE TraderJoe's StanfordBarn LucilleSalterPackardChildren'sHospital StanfordMedicalCenter StanfordMedicalHospital StanfordMedicalHospitalStanfordMedicalHospital StanfordMedicalHospital ParkingStructure3 AdvancedMedicineCenter Th i s m a p i s a p r o d u c t o f the C i t y o f P a l o A l t o G I S Th i s d o c u m e n t i s a g r a p h i c r e p r e s e n t a t i o n o n l y o f b e s t a v a i l a b l e s o u r c e s . 0' 1 1 3 1 ' 22 6 2 ' Potential Customers For Solar Roof Tops >100 kW CITY OF PALO ALTO I N C O R P O R A T ED CAL IFORNIA P a l o A l t o T h e C i t y o f APR IL 1 6 1 8 9 4 Th e C i t y o f P a l o A l t o a s s u m e s n o r e s p o n s i b i l i t y f o r a n y e r r o r s . © 1 9 8 9 t o 2 0 1 0 C i t y o f P a l o A l t o rlo n g , 2 0 1 1 - 0 9 - 2 8 1 2 : 3 2 : 0 9 (\\ c c - m a p s \ g i s $ \ g i s \ a d m i n \ P e r s o n a l \ r l o n g . m d b ) ATTACHMENT H PaloAltoGreen Local Energy Program Rate Methodology and Current Planning Assumptions Based on planning assumptions as of: September 13, 2011 Technology: Solar Rate Components: 10 year 15 year 20 year ¢/kWh ¢/kWh ¢/kWh 1. Energy 6.7 7.1 7.5 2. RPS Premium 5.2 4.8 4.5 3. Local Capacity 0.1 0.1 0.1 4. Transmission 1.8 2.0 2.2 5. T&D Losses 0.6 0.7 0.7 6. TOTAL 14.5 14.8 15.0 - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 10 year 15 year 20 year ¢/k W h Energy RPS Premium Local Capacity Transmission T&D Losses 15 ¢/kWh14.5 ¢/kWh 14.8 ¢/kWh Description of rate components: 1.Energy:The value of the energy generated by a solar generating system accounting for the time of day the energy is generated by a typical solar system located in Palo Alto. 2.RPS Premium:The additional value of the renewable energy in meeting the City’s Renewable Portfolio Standard. Requires certification by the California Energy Commission. 3.Local Capacity:The value of the solar generating system in reducing the City’s peak load, in turn reducing the City’s Local Capacity Area Resource obligations under the California Independent System Operator (CAISO) tariff. 4.Transmission:The value of the locally generated energy in reducing transmission access charges. 5.Transmission & Distribution Losses:To import energy into Palo Alto and deliver it to a customer load, the City must purchase more energy than the customer consumes because some of the energy is lost during delivery over the transmission and distribution system. Because the generating system is located in Palo Alto at a customer site, even if it is sold to the City and not used directly by the customer, the City still avoids these losses. This rate component represents the savings associated with avoiding those transmission and distribution losses. ATTACHMENT I PaloAltoGreen Local Energy Program Comparison to Other Utility Programs Comparison of CPAU Purchase Rate to Other Program Purchase Rates Utility Program Name Eligible Technology Solar price Notes San Diego Gas & Electric (SDG&E) Feed-in Tariff All renewables 1.5 MW and smaller 11.6 ¢/kWh1 No completed solar projects Pacific Gas and Electric (PG&E) Standard Contracts for Purchase (Feed-in Tariffs) All renewables 1.5 MW and smaller 13.1 ¢/kWh1 Southern California Edison (SCE) California Renewable Energy Small Tariff (CREST) All renewables 1.5 MW and smaller 13.2 ¢/kWh1 No completed rooftop solar projects, only ground mounted Marin Energy Authority Feed-in Tariff All renewables 13.4 ¢/kWh Sacramento Municipal Utility District (SMUD) Feed-in Tariff Solar and Combined Heat and Power 14.5 ¢/kWh5 Primarily ground- mounted solar, one parking lot solar project City of Palo Alto Net Metering Solar 12.9-14.3 ¢/kWh2 For a solar project that offsets a commercial customer’s load (no rebates) City of Palo Alto PaloAltoGreen Local Energy Program Solar 15.0 ¢/kWh City of Palo Alto PV Partners Rebates + Net Metering Solar 21.2-24.6 ¢/kWh2 For a solar project that offsets a commercial customer’s load and gets rebates Southern California Edison (SCE) Solar Photovoltaic Program (SPVP) Rooftop solar (1-2 MW) 24.0 ¢/kWh3 Auction program. Price represents the bid cap. All Vermont utilities Vermont Sustainably Priced Energy Development Program (VermontSPEED) Standard Offer Program Various renewables 24.0 ¢/kWh CPS Energy (San Antonio, TX) Solartricity 25 kW to 500 kW, primarily rooftop 27.0 ¢/kWh Gainesville Regional Utility Solar Feed-in Tariff Rooftop and ground mount solar 29.0 ¢/kWh4 1. Actual rates are based on the time of energy delivery. Estimated equivalent solar price was calculated using an hourly solar generation profile from National Renewable Energy Laboratory’s PVWatts tool. 2. Estimated based on solar profile of project in Palo Alto and other customer financial assumptions. 3. Auction-based program. Maximum allowable bid price shown. 4. Commercial scale rooftop solar price shown 5. Based on rates in effect when the program opened in 2010. Program is now closed. ATTACHMENT J 0.0 0 5.0 0 10 . 0 0 15 . 0 0 20 . 0 0 25 . 0 0 30 . 0 0 35 . 0 0 SDG&E Renewable FIT (1) PG&E Renewable FIT (1) SCE Renewable FIT (1) Marin Energy Authority Solar FIT SMUD Solar FIT CPAU Net Metering (Commercial Customer, No Rebate) (2) Proposed CPAU Solar FIT CPAU Net Metering (Commercial Customer, with Rebate) (2) SCE Solar Photovoltaic Program (3) All Vermont utilities (VermontSPEED) CPS Energy (San Antonio, TX) - Solartricity Gainesville Regional Utility FIT (4) ¢/kWh No t e s : 1. A c t u a l r a t e s a r e b a s e d o n t h e t i m e o f e n e r g y d e l i v e r y . E s t i m a t e d e q u i v a l e n t s o l a r p r i c e w a s c a l c u l a t e d u s i n g a n h o u r l y s o l a r g e n e r a t i o n p r o f i l e f r o m N a t i o n a l R e n e w a b l e En e r g y L a b o r a t o r y ’ s P V W a t t s t o o l f o r a f i x e d t i l t a t l a t i t u d e p r o j e c t . I n p r a c t i c e , h i g h e r e q u i v a l e n t r a t e s c o u l d b e a c h i e v e d fro m u s i n g s i n g l e - o r d u a l - a x i s t r a c k i n g , f r o m g o o d proj e c t m a i n t e n a n c e , o r d u e t o f a v o r a b l e w e a t h e r c o n d i t i o n s . 2. E s t i m a t e d b a s e d o n s o l a r p r o f i l e o f p r o j e c t i n P a l o A l t o a n d o t h e r c u s t o m e r f i n a n c i a l a s s u m p t i o n s . 3. A u c t i o n - b a s e d p r o g r a m . M a x i m u m a l l o w a b l e b i d p r i c e s h o w n . 4. C o m m e r c i a l s c a l e r o o f t o p s o l a r p r i c e s h o w n Su m m a r y o f P a l o A l t o G r e e n L o c a l E n e r g y P r o g r a m R i s k s a n d M i t i g a t i o n s Ri s k D e s c r i p t i o n C o n s e q u e n c e R e c o m m e n d e d M i t i g a t i o n Ov e r p r i c i n g – en e r g y m a r k e t ch a n g e s Th e p r i c e t h e C i t y o f f e r s f o r ren e w a b l e e n e r g y i s t o o h i g h . F o r ex a m p l e , t h e C i t y s e t s i t s f e e d - i n tar i f f p r i c e a n d l a t e r d i s c o v e r s i t ca n g e t e n e r g y f r o m o t h e r ren e w a b l e s o u r c e s f o r m u c h l e s s . Cit y p a y s m o r e t h a n n e c e s s a r y for r e n e w a b l e e n e r g y . I t s h o u l d be n o t e d t h a t t h i s i s a r i s k w i t h an y p u r c h a s e o f e n e r g y , n o t jus t e n e r g y p u r c h a s e d t h r o u g h a f e e d - i n t a r i f f . Sp r e a d p u r c h a s e s o v e r m u l t i p l e y e a r s an d r e g u l a r l y t e s t r e n e w a b l e s m a r k e t Lim i t t h e a m o u n t o f p a r t i c i p a t i o n e a c h ye a r In t h e c a s e o f h i g h p a r t i c i p a t i o n , co n s i d e r s w i t c h i n g t o a n b i d - b a s e d pr o g r a m Ov e r p r i c i n g – va l u e o f l o c a l en e r g y c h a n g e s Ch a n g e s i n t h e C i t y ' s d i s t r i b u t i o n sy s t e m o r c h a n g e s i n r e g u l a t i o n s lea d t o a c h a n g e i n t h e v a l u e o f loc a l e n e r g y t o t h e C i t y . F o r ex a m p l e , a s e c o n d c o n n e c t i o n t o the t r a n s m i s s i o n s y s t e m a t a hig h e r v o l t a g e w o u l d r e d u c e tra n s m i s s i o n a c c e s s c h a r g e s , low e r i n g t h e v a l u e o f l o c a l ge n e r a t i o n . Cit y p a y s m o r e t h a n n e c e s s a r y for r e n e w a b l e e n e r g y . I t s h o u l d be n o t e d t h a t t h i s i s a r i s k pa r t i c u l a r l y a s s o c i a t e d w i t h pu r c h a s i n g f r o m l o c a l ge n e r a t o r s . Sp r e a d p u r c h a s e s o v e r m u l t i p l e y e a r s t o red u c e t h e a m o u n t o f e n e r g y a s s o c i a t e d wi t h a n y s i n g l e f o r e c a s t o f t h e v a l u e o f loc a l g e n e r a t i o n . Lim i t t h e a m o u n t o f p a r t i c i p a t i o n e a c h ye a r In t h e c a s e o f h i g h p a r t i c i p a t i o n , co n s i d e r s w i t c h i n g t o a n b i d - b a s e d pr o g r a m Lo w pa r t i c i p a t i o n Th e p r i c e i s t h e C i t y o f f e r s i s t o o low – n o p a r t i c i p a t i o n . F o r ex a m p l e , t h e C i t y s e t s i t s ren e w a b l e p r i c e a t 1 5 c e n t s / k W h , lat e r d i s c o v e r s n o p r o j e c t de v e l o p e r c a n b u i l d i n P a l o A l t o f o r les s t h a n 1 8 c e n t s / k W h Cit y l o s e s o n l y t h e u p - f r o n t s t a f f tim e d e v o t e d t o p r o g r a m de v e l o p m e n t Lo o k f o r o p p o r t u n i t i e s t o r e d u c e de v e l o p m e n t c o s t s o f r e n e w a b l e ge n e r a t i o n i n P a l o A l t o . Ma i n t a i n p r o g r a m , w a i t t o t a k e ad v a n t a g e o f d e c r e a s e s i n t h e c o s t o f dis t r i b u t e d g e n e r a t i o n . ATTACHMENT K Ri s k D e s c r i p t i o n C o n s e q u e n c e R e c o m m e n d e d M i t i g a t i o n Gr i d I m p a c t s T h e C i t y f i n d s t h e r e a r e un e x p e c t e d i m p a c t s f r o m l a r g e am o u n t s o f d i s t r i b u t e d g e n e r a t i o n on i t s d i s t r i b u t i o n s y s t e m Pro b l e m s w i t h p o w e r q u a l i t y an d r e l i a b i l i t y Ca r e f u l e n g i n e e r i n g r e v i e w t o i d e n t i f y are a s o f t h e d i s t r i b u t i o n s y s t e m t h a t ne e d m o n i t o r i n g . Lim i t t h e a m o u n t o f p a r t i c i p a t i o n e a c h ye a r s o p r o b l e m s d e v e l o p s l o w l y a n d ca n b e d e a l t w i t h a s C i t y s t a f f i d e n t i f i e s the m . Id e n t i f y t h e t y p e s o f a p p l i c a t i o n s t h a t ha v e t h e p o t e n t i a l t o i m p a c t t h e dis t r i b u t i o n s y s t e m . Tr a c k w o r k b e i n g d o n e a t o t h e r u t i l i t i e s on t h e i m p a c t o f d i s t r i b u t e d g e n e r a t i o n on p o w e r q u a l i t y a n d r e l i a b i l i t y . Wo r k l o a d ba c k l o g Th e p r o g r a m i s p o p u l a r , a n d t h e Cit y r e c e i v e s m o r e a p p l i c a t i o n s tha n i t c a n p r o c e s s . Pro j e c t b a c k l o g s c r e a t e pr o b l e m s f o r a p p l i c a n t s Pro c e s s i n g g e n e r a t o r int e r c o n n e c t i o n s d i v e r t s s t a f f fro m o t h e r e l e c t r i c e n g i n e e r i n g pr o j e c t s Lim i t t h e a m o u n t o f p a r t i c i p a t i o n e a c h ye a r t o a n a m o u n t t h a t C i t y s t a f f c a n ma n a g e a t e x i s t i n g s t a f f i n g l e v e l s . If t h e p r o g r a m h a s h i g h d e m a n d , a s s e s s sta f f i n g l e v e l s n e e d e d t o e x p a n d t h e pr o g r a m . R e c o v e r a l l c o s t s o f a d d i t i o n a l sta f f i n g f r o m p r o g r a m a p p l i c a n t s . Co s t o f ad d i t i o n a l wo r k l o a d Co n n e c t i o n f e e s d o n ' t c o v e r t h e ful l c o s t o f c o n n e c t i n g t h e ge n e r a t o r t o t h e d i s t r i b u t i o n sy s t e m . If f e e s d o n ' t c o v e r t h e c o s t o f rev i e w , o t h e r r a t e p a y e r s w i l l b e su b s i d i z i n g p r o j e c t s t a k i n g p a r t in t h i s p r o g r a m a n d w i l l , i n es s e n c e , b e o v e r p a y i n g f o r t h e i r ren e w a b l e e n e r g y s u p p l y . Pro p e r l y d e s i g n e d f e e s t r u c t u r e t h a t as s e s s e s a l l c o s t s t o t h e a p p l i c a n t . Re d u c e r e v i e w t i m e a n d c o s t w h e r e v e r po s s i b l e . Ri s k D e s c r i p t i o n C o n s e q u e n c e R e c o m m e n d e d M i t i g a t i o n Ge n e r a t i n g fac i l i t y o w n e r go e s b a n k r u p t Th e s y s t e m o w n e r g o e s b a n k r u p t an d t h e C i t y ' s c o n t r a c t i s b r o k e n i n ba n k r u p t c y c o u r t . Th i s i s o n l y a r i s k i f t h e C i t y wo u l d h a v e t o b u y r e p l a c e m e n t ren e w a b l e e n e r g y a t a h i g h e r pr i c e . I f c h e a p e r r e n e w a b l e en e r g y i s a v a i l a b l e , t h i s b e n e f i t s the C i t y . Th e f a c t t h a t t h e p r o g r a m i n v o l v e s ma n y s m a l l e r p r o j e c t s r a t h e r t h a n o n e lar g e p r o j e c t r e d u c e s t h e i m p a c t o f o n e pr o j e c t f a i l i n g Cit y o n l y p a y s f o r e n e r g y p r o d u c e d – n o up - f r o n t p a y m e n t s . I f s y s t e m s t o p s pr o d u c i n g e n e r g y , i t c o s t s t h e C i t y no t h i n g . Mo n i t o r t h e n u m b e r o f p r o j e c t s b u i l t b y a s i n g l e o w n e r . C o n s i d e r l i m i t s o n am o u n t i n s t a l l e d b y a s i n g l e o w n e r Ge n e r a t i n g fac i l i t y b r e a k s do w n Sy s t e m b r e a k s d o w n a n d i s n ' t rep a i r e d . Th i s i s o n l y a r i s k i f t h e C i t y wo u l d h a v e t o b u y r e p l a c e m e n t ren e w a b l e e n e r g y a t a h i g h e r pr i c e . I f c h e a p e r r e n e w a b l e en e r g y i s a v a i l a b l e , t h i s b e n e f i t s the C i t y . Th e f a c t t h a t t h e p r o g r a m i n v o l v e s ma n y s m a l l e r p r o j e c t s r a t h e r t h a n o n e lar g e p r o j e c t r e d u c e s t h e i m p a c t o f o n e pr o j e c t f a i l i n g Cit y o n l y p a y s f o r e n e r g y p r o d u c e d – n o up - f r o n t p a y m e n t s . I f s y s t e m s t o p s pr o d u c i n g e n e r g y , i t c o s t s t h e C i t y no t h i n g . Mo n i t o r t h e n u m b e r o f p r o j e c t s b u i l t b y a s i n g l e o w n e r . C o n s i d e r l i m i t s o n am o u n t i n s t a l l e d b y a s i n g l e o w n e r Ri s k D e s c r i p t i o n C o n s e q u e n c e R e c o m m e n d e d M i t i g a t i o n Ch a n g e t o h o s t sit e m a k e s ge n e r a t i n g fac i l i t y un a v a i l a b l e Fo r r e a s o n s b e y o n d t h e g e n e r a t i n g fac i l i t y o w n e r ' s c o n t r o l , t h e ge n e r a t o r m u s t b e r e m o v e d . F o r ex a m p l e , t h e o w n e r o f a r o o f t o p so l a r s y s t e m i s f o r c e d t o r e m o v e i t wh e n t h e b u i l d i n g i s r e - r o o f e d o r ow n e r d e c i d e s t o d e m o l i s h a n d reb u i l d . Th i s i s o n l y a r i s k i f t h e C i t y wo u l d h a v e t o b u y r e p l a c e m e n t ren e w a b l e e n e r g y a t a h i g h e r pr i c e . I f c h e a p e r r e n e w a b l e en e r g y i s a v a i l a b l e , t h i s b e n e f i t s the C i t y . Re q u i r e e v i d e n c e t h a t t h e g e n e r a t i n g fac i l i t y o w n e r h a s a l e a s e w i t h rea s o n a b l e s e c u r i t y t h a t t h e h o s t s i t e wi l l b e a v a i l a b l e f o r t h e d u r a t i o n o f t h e co n t r a c t . Th e f a c t t h a t t h e p r o g r a m i n v o l v e s ma n y s m a l l e r p r o j e c t s r a t h e r t h a n o n e lar g e p r o j e c t r e d u c e s t h e i m p a c t o f o n e pr o j e c t f a i l i n g Cit y o n l y p a y s f o r e n e r g y p r o d u c e d – n o up - f r o n t p a y m e n t s . I f s y s t e m s t o p s pr o d u c i n g e n e r g y , i t c o s t s t h e C i t y no t h i n g . Pro b l e m s w i t h pr o g r a m d e s i g n As s t a f f i m p l e m e n t s t h e p r o g r a m , pr o b l e m s w i t h t h e p r o g r a m do c u m e n t s o r f l a w s i n t h e pr o c e d u r e s a r e i d e n t i f i e d . Un k n o w n R e v i e w a n d s t a y u p t o d a t e o n o t h e r uti l i t i e s ' e x p e r i e n c e s w i t h s i m i l a r pr o g r a m s . Lim i t t h e a m o u n t o f p a r t i c i p a t i o n e a c h ye a r s o a n y p r o b l e m s a r e l i m i t e d t o a sm a l l n u m b e r o f p r o g r a m p a r t i c i p a n t s . Pro g r a m ma n i p u l a t i o n by a p p l i c a n t s Be c a u s e t h e p r o g r a m o f f e r s a hig h e r r a t e f o r a l o n g e r c o n t r a c t ter m , a p r o j e c t a p p l i c a n t m a y b e tem p t e d t o a s k f o r a l o n g e r t e r m wh e n t h e y k n o w t h e p r o j e c t w i l l no t l a s t t h e f u l l t e r m . Th e C i t y o v e r p a y s f o r t h e p o w e r de l i v e r e d . To a p p l y , e v i d e n c e i s r e q u i r e d t h a t t h e ap p l i c a n t h a s t h e r i g h t t o u s e t h e s i t e for t h e f u l l t e r m o f t h e c o n t r a c t . A n ex a m p l e o f s u c h e v i d e n c e m i g h t b e a ro o f t o p l e a s e a g r e e m e n t . EXCERPTED DRA FT MINUTES OF UTIL ITIES A DVISORY COMMISSION MEETING OF OCTOB ER 5, 2011 ITEM 1:: ACTION: Proposed PaloAltoGr eenn Local Energy Program Resource Planner Jon Abendschein provided an overview of staff's proposal. The program being proposed was a feed-in tariff (FIT) program under the proposed name PaloAltoGr eenn Local Energy Program. He noted that the purpose of the program was to achieve Renewable Portfolio Standard goals and reduce obstacles to local generation. The UAC had reviewed the program previously and had recommended approval of Policies and Design Guidelines, but there were aspects of the program that had not been developed at that point. Staff was requesting UAC recommendations on those items. They included a change to the Policies and Design Guidelines to allow 10-, 15-, or 20 year-contract terms, limiting the program to solar for the first program year, spreading purchases under the program over multiple program years, and setting a 4 MW program cap and a 100 kW minimum project size for the first program year. He discussed the methodology for determining the program rate, and said that the rates discussed in the staff report were preliminary. The final rate proposal would be determined at the City Council meeting. Staff would reach out to owners of sites with solar potential and to potential project developers prior to final adoption. The program would go to the Finance Committee for approval in November, the City Council in December, and assuming approval, the program would commence in February 2012. Staff plans to return to UAC, Finance Committee, and Council in fall 2012 for adoption of the 2013 program year. Chair Foster noted that some of the parameters of the program such as the minimum project size and maximum cap are for the first year of the program only and will be revisited in subsequent years. He noted that he was comfortable with most aspects of the program. Commissioner Eglash liked the program details, but would like to see the fiscal impact of the program and recommended that this should be a part of any future presentations to the Finance Committee and Council. Other impacts besides fiscal should also be discussed including how this impacts RPS goals and the risks of the program (e.g. risk that no one will participate in the program and any operational and legal risks). The proposal also took place in the context of the strategic plan, and any future presentations should include some discussion of how this proposal fits into that wider plan. Mr. Abendschein noted that the total cost of a fully subscribed FIT program would be roughly $18-20 million over a 20 year life of the projects. Commissioner Eglash clarified that if the rate is established by valuing the local energy produced, then the fiscal impact will be zero since the alternative is renewable PPAs. Mr. Abendschein agreed, assuming that the program rate was set equal to the market price of renewable power. To manage that risk, staff was relying on the most up to date information from a renewable RFP set to close that month. Commissioner Waldfogel asked if the Market Price Referent (MPR) could be used as a renewable benchmark. Mr. Abendschein stated that the California Public Utilities Commission no longer calculates the MPR. Commissioner Melton asked how staff can expect that the FIT will compete with the existing solar net metering and rebate program if the value delivered to the customer by that program is greater than the rate offered by the FIT program. Mr. Abendschein noted that there were only 3 MW of capacity left in the rebate program, and once the rebates were gone, the FIT program became more valuable. In addition, there are situations in which the FIT will make sense for building owners, including those where the energy cannot all be used on site, or where tenants pay the electric bills. ATTACHMENT L Commissioner Cook asked how the 4MW cap would work. Mr. Abendschein said that once the cap was filled the program would stop until the next program year. Commissioner Cook asked why prices were higher for longer contract terms. Mr. Abendschein said it was related to increasing transmission and energy costs over time. Commissioner Cook asked if there would be issues with the rest of the City processes and asked if CPAU has reached out to other City departments to ensure that permit processes will be streamlined. Mr. Abendschein said that he has worked with the Engineering Division and plans to work with the Building Division to ensure that the process will be as smooth as possible. Director Fong noted that the Utilities Department was also involved in the City Manager’s effort to streamline permit processes at the Development Center. Commissioner Cook recommended including a discussion of risks in future presentations, including how they are being mitigated, and also recommended including discussion of the fact that there were no fiscal impacts compared to other ways of procuring renewable energy. Director Fong added that the program cap was intended to mitigate. Commissioner Waldfogel complimented Jon Abendschein on the report. He asked if we can ensure that time to get a permit does not preclude applicants from being able to complete the process in the time allowed. He asked how an applicant would be able to withdraw from the program in the event of a major change to the site, such as a commercial reroof. Mr. Abendschein said there were provisions in the contract for those types of events. A CTION: Chair Foster made a motion to recommend that the City Council adopt the parameters set forth in the staff report with the clarification that the minimum capacity of 100 kW is specifically for the first program year. This motion did not include action on the program name. Commissioner Cook seconded the motion. The motion carried unanimously (7-0). Regarding the title of the program, Chair Foster recommended that the program should be named Palo Alto CLEAN (Clean Local Energy Accessible Now). The term “feed-in tariff” was unpopular. The CLEAN name was outward looking, rather than inward like the PaloAltoGr eenn name. He had found several organizations using the CLEAN name and noted that Craig Lewis, the Executive Director of the CLEAN Coalition, which is based in Palo Alto, had requested that the City use the CLEAN name. He believed that the CLEAN name would become widely adopted, and that the City should move to adopt that name for the program. Vice Chair Berry asked to hear from staff on the name. Director Fong stated that staff chose the name, PaloAltoGr eenn Local Energy Program, partly in response to the feedback from the UAC, when the majority advised tying the name to the successful PaloAltoGr eenn brand. Chair Foster stated that in the initial survey of names, the CLEAN name was not part of the offered choices. Commissioner Eglash stated that he preferred the PaloAltoGr eenn name. Palo Alto CLEAN brought to mind sidewalk cleaning. Commissioner Cook said he was persuaded by arguments in favor of the CLEAN name. Commissioner Melton said he had earlier expressed an opinion to maintain the PaloAltoGr eenn brand, but thought PaloAltoGr eenn Local Energy Program was a cumbersome name. He said it was unclear whether CLEAN would become a nationally adopted name, but that there was enough support for the name that he was persuaded to support using it for this program. Commissioner Waldfogel recommended distinguishing between brands and products. PaloAlto Gr eenn is the brand, and products offered under that brand should use prevailing language. The City should use the name that would be recognized by the program users, whether that was FIT or CLEAN. Commissioner Keller liked the Green name. CLEAN did not resonate with her. Chair Foster stated that the Council will make the final decision. He pointed out that PACE (Property Assessed Clean Energy) was not a descriptive name, but is now widely known and associated with Berkeley. Vice Chair Berry noted that the PaloAltoGr eenn name is tied to a very successful program nationally and that we should use that name. CLEAN did not resonate with him. The name should be inward looking and resonate with Palo Altans. A CTION: Chair Foster moved to recommend to the City Council adopting Palo Alto CLEAN as program name. Commissioner Cook seconded the motion. The motion failed (3-4) with Commissioners Keller, Berry, Waldfogel and Eglash opposed. Commissioner Eglash moved that the program be named the PaloAltoGr eenn Local Energy Program. Commissioner Waldfogel seconded the motion. The motion passed (6-1) with Chair Foster opposed. Finance Committee Report Attachment M is omitted. See City Council Report Attachment K RESOLUTION NO. _________ RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO ADOPTING UTILITY RATE SCHEDULE E-PAGLE2012 AND APPROVING AN AMENDMENT TO UTILITIES RULE AND REGULATION 27 OF THE CITY OF PALO ALTO UTILITIES PERTAINING TO GENERATOR INTERCONNECTION The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-PAGLE2012 (PaloAltoGreen Local Energy Program Purchase Rate Schedule - 2012) as attached hereto as Exhibit A and incorporated herein, is hereby adopted. The foregoing Utility Rate Schedule, as amended, shall become effective February 1, 2012. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 27 (Generating Facility Interconnections), Part C (Application and Interconnection), Part D (Generating Facility Design and Operating Requirements), Part F (Metering, Monitoring, and Telemetry), and new Part G (Supplemental Review), is hereby amended to read in accordance with sheet numbers 1 through 20, attached hereto as Exhibit B and incorporated herein. The foregoing Utilities Rule and Regulation 27, as amended, shall become effective January 1, 2012. // // // // // // // // // // // // // SECTION 3. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services PALOALTOGREEN LOCAL ENERGY PROGRAM PURCHASE RATE UTILITY RATE SCHEDULE E-PAGLE-2012 CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 2-1-2012 Original Sheet No. E-PAGLE2012-1 A. APPLICABILITY: This schedule applies to Eligible Renewable Energy Resources, as defined in the Special Notes section of this schedule, with a total generation capacity of at least 100 kilowatts (kW). B. TERRITORY: To be eligible for this schedule, an Eligible Renewable Energy Resource must be located within the service area of the City of Palo Alto. C. RATES FOR CERTIFIED RENEWABLE POWER: The following purchase prices shall apply to the power produced by an Eligible Renewable Energy Resource, except as provided in Note 3, below. Solar generation facilities: Contract Duration Price 10 years 11.469 ¢ / kWh 15 years 12.300 ¢ / kWh 20 years 13.064 ¢ / kWh D. NOTES: 1. The generating facility owner is required to enter into a Power Purchase Agreement, Eligible Renewable Energy Resource (PPA) with the City of Palo Alto. 2. The last project that is eligible for this rate schedule is the first one that causes the total capacity of projects receiving payments under this rate schedule to exceed 4 MW. 3. Applications may be submitted at any time during the month. PPAs will be awarded at the end of each month. If the City can accept all applications submitted without exceeding the program capacity stated in Note 2 of this Section D, above, all applications will be accepted at the rates listed in Section C. If, in any month, the City cannot accept all applications submitted that month because of the rule stated in note D.2, above, then staff will award contracts based on a bid system as follows: PALOALTOGREEN LOCAL ENERGY PROGRAM PURCHASE RATE UTILITY RATE SCHEDULE E-PAGLE-2012 CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 2-1-2012 Original Sheet No. E-PAGLE2012-2 a. All applicants who applied in the current month will be given two weeks to submit a bid price at which they are willing to sell the power from their proposed system. The bid price must be less than the prices in Section C, or the bid will be rejected. b. The City will award PPAs to applicants based on the proposed bid prices, starting from the lowest, until the program capacity has been filled. The last project to be accepted will be the first one that causes the program capacity cap in note D.2 above to be exceeded. c. Nothing in this process will affect the status of applications accepted in previous months. 4. For an Eligible Renewable Energy Resource to be eligible for this rate schedule, the City must receive an application to sell the output from the facility under this rate schedule before December 31, 2012 5. For the purposes of this rate schedule an Eligible Renewable Energy Resource means an electric generating facility that 1) is defined and qualified as an “eligible renewable energy resource” under California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25471, respectively, as amended, 2) uses a solar fuel source, and 3) is located within the service area of the City of Palo Alto. 6. CEC certification of the Eligible Renewable Energy Resource is required within six months of the operation date of the facility. Before the facility is certified by the CEC, the facility’s energy cannot be used to fulfill the City’s RPS, and so the price paid for the facility’s output (the “Pre-Certification Price”) will be 65% of the rates specified in Section C. Upon CEC certification of the facility, the City will pay the full price for any future energy and will true-up to the full price for any energy already received that becomes retroactively eligible to fulfill the City’s RPS upon CEC certification of the facility. 7. If the City purchases the output of the Eligible Renewable Energy Resource under this rate schedule, the project owner shall not receive rebates or other incentives from the Photovoltaic (PV) Partners Program, Power from Local Ultra-Clean Generation Incentive (PLUG-In) Program, or other similar programs funded by the City’s ratepayers. If any rebates or incentives have already been paid related to an Eligible Renewable Energy Resource, it is not eligible for this rate schedule. 8. All energy from the facility must be delivered to the City. No portion of the energy may be used to offset any load aside from incidental loads associated with operating the generating facility. PALOALTOGREEN LOCAL ENERGY PROGRAM PURCHASE RATE UTILITY RATE SCHEDULE E-PAGLE-2012 CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 2-1-2012 Original Sheet No. E-PAGLE2012-3 9. A metering and administration fee of $34.73/month will be assessed on each Eligible Renewable Energy Resource receiving payments under this rate schedule. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 6x-01xx-20101 Sheet No. 1 A.APPLICABILITY This Rule describes the Interconnection, Operating and Metering requirements for Generating Facilities to be connected to the City of Palo Alto Utilities (CPAU) Electric Distribution System. Subject to the requirements of this Rule, CPAU will allow the Interconnection of Generating Facilities with its Distribution System. In order to provide for uniformity and to encourage the Interconnection of renewable energy generation, this Rule has been written to be consistent with the technical requirements of CPUC Rule 21 and IEEE 1547. Language from IEEE 1547 that has been adopted directly (as opposed to paraphrased language or previous language that was determined to be consistent with IEEE 1547) is followed by a citation that lists the clause from which the language derived. For example, IEEE 1547-4.1.1 is a reference to Clause 4.1.1. In the event of any conflict between this Rule and any of the standards listed herein, the requirements of this Rule shall take precedence. B.GENERAL RULES, RIGHTS AND OBLIGATIONS 1.Authorization Required to Operate. A Producer must comply with this Rule, execute an Interconnection Agreement or, if a Producer is a customer-generator, as that term is used in Rule and Regulation 29, a Net Energy Metering and Interconnection Agreement with CPAU, and receive CPAU’s express written permission before Parallel Operation of its Generating Facility with CPAU’s Distribution System. CPAU shall apply this Rule in a non- discriminatory manner and shall not unreasonably withhold its permission for Parallel Operation of Producer’s Generating Facility with CPAU’s Distribution System. 2.Separate Agreements Required for Other Services.A Producer requiring other Electric Services from CPAU including, but not limited to, Distribution Service provided by CPAU during periods of Curtailment or interruption of the Producer’s Generating Facility, will enter into agreements with CPAU for such Services in accordance with CPAU’s Rules & Regulations and Utility Rates. 3.Service Not Provided With Interconnection. Interconnection with CPAU's Distribution System under this Rule does not provide a Producer any rights to utilize CPAU's Distribution System for the transmission, distribution, or wheeling of Electric power. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 2 4.Compliance With Laws, Rules & Regulations and Utility Rates.A Producer shall ascertain and comply with applicable CPAU Rules & Regulations and Utility Rates; applicable Federal Energy Regulatory Commission (FERC) approved rules, tariffs and regulations; and any local, state or federal Law, statute or regulation which applies to the design, siting, construction, installation, operation, or any other aspect of the Producer’s Generating Facility and Interconnection Facilities. 5.Design Reviews and Inspections.CPAU shall have the right to review the design of a Producer’s Generating Facility and Interconnection Facilities and to inspect a Producer’s Generating Facility and/or Interconnection Facilities prior to the commencement of Parallel Operation with CPAU’s Distribution System. CPAU may require a Producer to make modifications as necessary to comply with the requirements of this Rule. CPAU’s review and authorization for Parallel Operation shall not be construed as confirming or endorsing the Producer’s design or as warranting the Generating Facility and/or Interconnection Facilities’ safety, durability or reliability. CPAU shall not, by reason of such review or lack of review, be responsible for the adequacy or capacity of such equipment. 6.Right to Access.A Producer’s Generating Facility and Interconnection Facilities shall be accessible to CPAU personnel whenever necessary for CPAU to perform its duties and exercise its rights under its Rules & Regulations and Utility Rates and any Interconnection Agreement, including the Net Energy Metering and Interconnection Agreement, between CPAU and the Producer. 7.Confidentiality of Information.Any information pertaining to Generating Facility and/or Interconnection Facilities provided to CPAU by a Producer shall be treated by CPAU in a confidential manner. CPAU shall not use information contained in the Application to propose discounted rates to the Customer unless authorized to do so by the Customer or the information is provided to CPAU by the Customer through other means. 8.Prudent Operation and Maintenance Required. A Producer shall operate and maintain its Generating Facility and Interconnection Facilities in accordance with Prudent Electrical Practices and shall maintain compliance with this Rule. 9.Curtailment and Disconnection. CPAU may limit the operation or disconnect or require the disconnection of a Producer’s Generating Facility from CPAU’s Distribution System at any time, with or without notice, in the event of an Emergency, or to correct Unsafe Operating Conditions. CPAU may also limit the operation or disconnect or require the disconnection of GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 3 a Producer’s Generating Facility from CPAU’s Distribution System upon the Provision of reasonable written notice: (1) to allow for routine maintenance, repairs or modifications to CPAU’s Distribution System; (2) upon CPAU’s determination that a Producer’s Generating Facility is not in compliance with this Rule; or (3) upon termination of the Interconnection Agreement or the Net Energy Metering and Interconnection Agreement. Upon the Producer’s written request, CPAU shall provide a written explanation of the reason for such Curtailment or disconnection. C.APPLICATION AND INTERCONNECTION PROCESS 1.APPLICATION PROCESS a.Applicant initiates contact with CPAU. Upon request, CPAU will provide information and documents (such as sample agreements, Load Sheets, technical information, listing of Certified Equipment, applicable Rate Schedules and Metering requirements) to a potential Applicant. Unless otherwise agreed upon, all such information shall normally be sent to the Applicant within three (3)Business Days following the initial request from the Applicant. b.Applicant Completes a Load Sheet. All Applicants shall complete and submit a Load Sheet and 3 sets of plan drawings for review. Load Sheets and plans may be dropped off at the Development Center at 285 Hamilton Avenue, or Utilities Engineering at 1007 Elwell Court. 1.CPAU shall complete the Initial Review, absent any extraordinary circumstances, within 10 Business Days of receiving the Load Sheet and plans. If defects are noted, CPAU and Applicant shall cooperate to establish a satisfactory Application. 2.The Initial Review fee shall be waived for solar powered Generating Facilities. 3.Fifty percent of the fees associated with the Initial Review will be returned to the Applicant if the Application is rejected by CPAU or the Applicant retracts the Application. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 4 42.Applications that are over one year old (from the date of CPAU’s acknowledgement) without a signed Interconnection Agreement or Net Energy Metering and Interconnection Agreement, or a Generating Facility that has not been approved for Parallel Operation within one year of completion of all applicable review and/or studies are subject to cancellation by CPAU; however, CPAU may not cancel an Application if the Producer provides reasonable evidence that the project is still active. 5.The Applicant may propose, and CPAU may agree to, reduced costs for reviewing atypical Applications, such as Applications submitted for multiple Generators, multiple sites, or otherwise as conditions warrant. c.CPAU Performs an Initial and Supplemental Review and Develops Preliminary Cost Estimates and Interconnection Requirements. 1.Upon receipt of a satisfactorily completed Application and any additional information necessary to evaluate the Interconnection of a Generating Facility, CPAU shall perform an Initial Review using the process defined in Section G. The Initial Review determines if: (a)the Generating Facility qualifies for Simplified Interconnection; or (b) the Generating Facility requires a Supplemental Review. 2.CPAU shall complete its Initial Review, absent any extraordinary circumstances, within 10 Business Days after receipt of a completed Application including Load Sheet and plan drawings. If the Initial Review determines the proposed Generating Facility can be Interconnected by means of a Simplified Interconnection, CPAU will provide the Applicant with an Interconnection Agreement for Applicant’s signature. 3.If the Generating Facility does not pass the Initial Review for Simplified Interconnection as proposed, CPAU will notify the Applicant and perform a Supplemental Review. Applicant shall pay an additional $600 or the then applicable fee for the Supplemental Reviewthe applicable Advance Engineering Fee shown in Table C.1, below, unless the Application is Formatted:Justified Formatted:Font:Bold Formatted:Font:Bold Formatted:Font color:Auto GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 5 withdrawn. The Supplemental Review will result in CPAU providing either: (a) Interconnection requirements beyond those for a Simplified Interconnection, and an Interconnection Agreement or the Net Energy Metering and Interconnection Agreement for Applicant’s signature; or (b) a cost estimate and schedule for an Interconnection Study. The Supplemental Review shall be completed, absent any extraordinary circumstances, within 20 Business Days of receipt of a completed Application and fees. The Interconnection Study will may require additional fees and more time to complete, depending on the complexity of the project to be studied. If the Supplemental Review determines that new or modified Utility-owned distribution and/or protection facilities are required, the Applicant will be charged the estimated cost of any Utility-owned facilities determined to be required by the Review.These facilities will be treated as Special Facilities for the purpose of determining Applicant costs. The $600 or then applicable Supplemental Review fee shall be waived for solar powered Generating Facilities that do not sell power to the grid. d.When Required, Applicant and CPAU Commit to Additional Interconnection Study Steps. When a Supplemental Review reveals that the proposed Generating Facility cannot be Interconnected to CPAU’s Distribution System by means of a Simplified Interconnection, or that significant Interconnection Facilities installed on CPAU’s system or Distribution System modifications will be needed to accommodate an Applicant’s Generating Facility, CPAU and Applicant shall enter into an agreement that provides for CPAU to perform additional studies, facility design and engineering, and to provide a fixed price or an estimate for actual cost billing to the Applicant, at the Applicant’s expense (the Advanced Engineering Fee). The Interconnection Study agreement shall set forth CPAU’s estimated schedule and Charges for completing such work. Interconnection Study fees for solar generating facilities up to 1 megawatt (MW) that do not sell power to the grid will be waived up to the amount of $5,000. Formatted:Widow/Orphan control GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 6 TABLE C.1 Summary of Fees and Exemptions Generating Facility Type Initial Review Fee Supplemental ReviewAdvance Engineering Fee Interconnection Study Fees Non-Net Energy Metering $0 $600 As Specified by CPAU All Net Energy Metering projects.$0 $0 As Specified by CPAU $0 Non-Net Energy Metering projects smaller than 100 kW capacity $0 $600 As Specified by CPAU Non-Net Energy Metering Projects 100 kW to 499 kW in capacity. $0 $4,000 As determined by estimate Non-Net Energy Metering 500 kW or greater in capacity. $0 $7,500 As determined by estimate Solar 1MW or less that does not sell power to the grid First $5,000 of total review and study fees waived Formatted:Keep with next Formatted:Keep with next Formatted Table GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 6 2.INTERCONNECTION PROCESS a.Applicant and CPAU enter into an Interconnection Agreement or a New Energy Metering and Interconnection Agreement and,where required, a Special Facilities Agreement for Interconnection Facilities or Distribution System Modifications. CPAU shall provide the Applicant with an executable version of the Interconnection Agreement or the Net Energy Metering and Interconnection Agreement as appropriate,for the Applicant’s Generating Facility and desired mode of operation. Where the Supplemental Review or Interconnection Study performed by CPAU has determined that modifications or additions to its Distribution System are required, or that additional Interconnection Facilities will be necessary to accommodate an Applicant’s Generating Facility, CPAU may also provide the Applicant with a Special Facilities Agreement. This agreement shall set forth CPAU and the Applicant’s responsibilities, completion schedules, and fixed price or estimated costs for the required work. b.Where applicable, CPAU installs required Interconnection Facilities or modifies CPAU’s Distribution System. After executing the applicable agreements, CPAU will commence construction/ installation of CPAU’s Distribution System modifications or Interconnection Facilities which have been identified in the agreements. The parties will use good faith efforts to meet schedules and estimated costs as appropriate. c.Producer arranges for and completes Pre-parallel Testing of Generating Facility and Producer’s Interconnection Facilities. The Producer is responsible for testing new Generating Facilities and associated Interconnection Facilities to ensure compliance with the safety and reliability Provisions of this Rule prior to being operated in parallel with CPAU’s Distribution System. For non-Certified Equipment, the Producer shall develop a written testing plan to be submitted to CPAU for its review and acceptance. Alternatively, the Producer and CPAU may agree to have CPAU conduct the required testing at the Producer’s expense. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 7 Where applicable, the test plan shall include the installation test procedures published by the manufacturer of the generation or Interconnection equipment. Facility testing shall be conducted at a mutually agreeable time, and depending on who conducts the test, CPAU or and Producer shall be given the opportunity to witness the tests. d.CPAU Authorizes Parallel Operation or Momentary Parallel Operation. CPAU shall authorize the Producer’s Generating Facility for Parallel Operation or Momentary Parallel Operation with CPAU’s Distribution System, in writing, within 5 days of satisfactory compliance with the terms of all applicable agreements. Compliance may include, but not be limited to, Provision of any required documentation and satisfactorily completing any required inspections or tests as described herein or in the agreements formed between the Producer and CPAU. A Producer shall not commence Parallel Operation of its Generating Facility with CPAU’s system unless it has received CPAU’s express written permission to do so. D.GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS This section has been revised to be consistent with the requirements of ANSI/IEEE 1547-2003 Standard for Interconnecting Distributed Resources with Electric Power Systems (IEEE 1547). Exceptions are taken to IEEE 1547 Clauses 4.1.4.2 Distribution Secondary Spot Networks and Clauses 4.1.8.1 or 5.1.3.1, which address Protection from Electromagnetic Interference. Also, RULE AND REGULATION 27 does not adopt the Generating Facility power limitation of 10 MW incorporated in IEEE 1547. 1.GENERAL INTERCONNECTION AND PROTECTION FUNCTION REQUIREMENTS The Protective Functions and requirements of this Rule are designed to protect CPAU’s Distribution System and not the Generating Facility. A Producer shall be solely responsible for providing adequate protection for its Generating Facility and Interconnection Facilities. The Producer’s Protective Functions shall not impact the operation of other Protective Functions utilized on CPAU’s Distribution System in a manner that would affect CPAU’s capability of providing reliable service to its Customers. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 8 a.Protective Functions Required. A Generating Facility operating in parallel with CPAU’s Distribution System shall be equipped with the following Protective Functions to sense abnormal conditions on CPAU’s Distribution System and cause the Generating Facility to be automatically disconnected from CPAU’s Distribution System or to prevent the Generating Facility from being connected to CPAU’s Distribution System inappropriately: 1.Over and under voltage trip functions and over and under frequency trip functions; 2.A voltage and frequency sensing and time-delay Function to prevent the Generating Facility from energizing a de-energized Distribution System circuit and to prevent the Generating Facility from reconnecting with CPAU’s Distribution System unless CPAU’s Distribution System service voltage and frequency is within the ANSI C84.1-1995 Table 1 Range B Voltage Range of 106V to 127V on a 120V basis, inclusive, and a frequency range of 59.3 Hz to 60.5 Hz, inclusive, and are stable for at least 60 seconds, and; 3.A Function to prevent the Generating Facility from contributing to the formation of an Unintended Island, and cease to energize the CPAU system within two seconds of the formation of an Unintended Island. The Generating Facility shall cease to energize CPAU’s Distribution System for faults on CPAU’s Distribution System circuit to which it is connected (IEEE1547-4.2.1). The Generating Facility shall cease to energize CPAU’s Distribution circuit prior to re-closure by CPAU’s Distribution System equipment (IEEE1547-4.2.2). b.Momentary Paralleling Generating Facilities. With CPAU’s approval, the transfer switch or scheme used to transfer the Producer’s Loads from CPAU’s Distribution System to Producer’s Generating Facility may be used in lieu of the Protective Functions required for Parallel Operation. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 9 c.Suitable Equipment Required. Circuit breakers or other interrupting devices located at the Point of Common Coupling must be Certified or "Listed" (as defined in Article 100, the Definitions Section of the National Electrical Code) as suitable for their intended application. This includes being capable of interrupting the maximum available fault current expected at their location. Producer’s Generating Facility and Interconnection Facilities shall be designed so that the failure of any one device shall not potentially compromise the safety and reliability of CPAU’s Distribution System. The Generating Facility’s paralleling-device shall be capable of withstanding 220% of the Interconnection Facilities’rated voltage (IEEE 1547-4.1.8.3). The Interconnection Facilities shall have the capability to withstand voltage and current surges in accordance with the environments defined in IEEE Std C62.41.2-2002 or IEEE Std C37.90.1-2002 as applicable and as described in J.3.e (IEEE 1547-4.1.8.2). d.Visible Disconnect Required: When required by CPAU’s operating practices, tThe Producer shall furnish and install a ganged, manually-operated isolating switch (or a comparable device mutually agreed upon by CPAU and the Producer) near the Point of Interconnection to isolate the Generating Facility from CPAU’s Distribution System. The device does not have to be rated for Load break nor provide over- current protection. The device must: 1.Allow visible verification that separation has been accomplished. (This requirement may be met by opening the enclosure to observe contact separation.) Molded case circuit breakers do not meet the visible contact requirement and are not acceptable as a Visible Disconnect device. 2.Include markings or signage that clearly indicates open and closed positions. 3.Be capable of being reached quickly and conveniently 24 hours a day by CPAU personnel for construction, maintenance, inspection, testing or reading, without obstacles or requiring those seeking access to obtain keys, special permission, or security clearances. 4.Be capable of being locked in the open position. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 10 5.Be clearly marked on the submitted Single Line Diagram and its type and location approved by the CPAU prior to installation. If the device is not adjacent to the PCC, permanent signage must be installed at a CPAU- approved location providing a clear description of the location of the device. Generating Facilities with Non-Islanding inverters totaling one (1) kilovolt- ampere (kVA) or less are exempt from this requirement. e.Drawings Required. Prior to Parallel Operation or Momentary Parallel Operation of the Generating Facility, CPAU shall approve the Producer's Protective Function and control diagrams. A Generating Facility equipped with a Protective Function and control scheme previously approved by CPAU for system-wide application or only Certified Equipment may satisfy this requirement by reference to previously approved drawings and diagrams. f.Generating Facility Conditions Not Identified. In the event this Rule does not address the Interconnection conditions for a particular Generating Facility, CPAU and Producer may agree upon other arrangements. 2.PREVENTION OF INTERFERENCE The Producer shall not operate a Generating Facility or Interconnection Facilities that superimpose a voltage or current upon CPAU’s Distribution System that interferes with CPAU operations, service to CPAU Customers, or communication facilities. If such interference occurs, the Producer must diligently pursue and take corrective action at its own expense after being given notice and reasonable time to do so by CPAU. If the Producer does not take corrective action in a timely manner, or continues to operate the facilities causing interference without restriction or limit, CPAU may, without liability, disconnect the Producer's facilities from CPAU’s Distribution System, in accordance with Section B.9 of this Rule. To eliminate undesirable interference caused by its operation, each Generating Facility shall meet the following criteria: a.Voltage Regulation. The Generating Facility shall not actively regulate the voltage at the PCC while in parallel with CPAU’s Distribution System. The Generating Facility shall not cause the service voltage at other Customers to go outside the requirements of ANSI C84.1-1995, Range A (IEEE 1547-4.1.1). GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 11 b.Operating Voltage Range. The voltage ranges in Table D.1 define protective trip limits for the Protective Function and are not intended to define or imply a voltage regulation Function. A Generating Facility shall cease to energize CPAU’s Distribution System within the prescribed trip time whenever the voltage at the PCC deviates from the allowable voltage operating range. The Protective Function shall detect and respond to voltage on all phases to which the Generating Facility is connected. 1.Generating Facilities (30 kVA or less). Generating Facilities with a Gross Nameplate Rating of 30 kVA or less shall be capable of operating within the voltage range normally experienced on CPAU’s Distribution System. The operating range shall be selected in a manner that minimizes nuisance tripping between 106 volts and 132 volts on a 120-volt base (88-110% of nominal voltage). Voltage shall be detected at either the PCC or the Point of Interconnection. 2.Generating Facilities (greater than 30 kVA). CPAU may have specific operating voltage ranges for a Generating Facility with a Gross Nameplate Rating greater than 30 kVA, and may require adjustable operating voltage settings. In the absence of such requirements, the Generating Facility shall operate at a range between 88% and 110% of the applicable Interconnection voltage. Voltage shall be detected at either the PCC or the Point of Interconnection, with settings compensated to account for the voltage at the PCC. Generating Facilities that are Certified Non-Islanding or that meet one of the options of the Export Screen (Section l.3.b) may detect voltage at the Point of Interconnection without compensation. 3.Voltage Disturbances. Whenever CPAU’s Distribution System voltage at the PCC varies from and remains outside normal (nominally 120 volts) by the predetermined amounts set forth in Table D-1, the Generating Facility’s Protective Functions shall cause the Generator(s) to become isolated from CPAU’s Distribution System: GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 12 TABLE D.1: Voltage Trip Settings Voltage at Point of Common Coupling Maximum Trip Time(1) Assuming 120 V Base % of Nominal Voltage # of Cycles (Assuming 60 Hz Nominal) Seconds Less than 60 Volts Less than 50%10 Cycles 0.16 Seconds Greater than or equal to 60 Volts but less than 106 Volts Greater than or equal to 50% but less than 88%120 Cycles 2 Seconds Greater than or equal to 106 Volts but less than or equal to 132 Volts Greater than or equal to 88% but less than or equal to 110% Normal Operation Greater than 132 Volts but less than or equal to 144 Volts Greater than 110% but less than or equal to 120% 60 Cycles 1 Second Greater than 144 Volts Greater than 120%10 Cycles 0.16 Seconds (1)“Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). For Generating Facilities with a Gross Nameplate Rating greater than 30 kVA, set points shall be field adjustable and different voltage set points and trip times from those in Table D.1 may be negotiated with CPAU. c.Paralleling. The Generating Facility shall parallel with CPAU’s Distribution System without causing a voltage fluctuation at the PCC greater than ±5% of the prevailing voltage level of CPAU’s Distribution System at the PCC, and meet the flicker requirements of D.2.d. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 13 d.Flicker. The Generating Facility shall not create objectionable flicker for other Customers on CPAU’s Distribution System. To minimize the adverse voltage effects experienced by other Customers (IEEE 1547-4.3.2), flicker at the PCC caused by the Generating Facility should not exceed the limits defined by the “Maximum Borderline of Irritation Curve” identified in IEEE 519-1992 (IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems, IEEE STD 519-1992, Institute of Electrical and Electronic Engineers, Piscataway, NJ). This requirement is necessary to minimize the adverse voltage affects experienced by others Customers on CPAU’s Distribution System. Generators may be connected and brought up to synchronous speed (as an induction motor) provided these flicker limits are not exceeded. e.Integration with CPAU’s Distribution System Grounding. The grounding scheme of the Generating Facility Interconnection shall not cause over-voltages that exceed the rating of the equipment connected to CPAU and shall not disrupt the coordination of the ground fault protection on CPAU’s Distribution System (IEEE 1547-4.1.2).Also see Section F. f.Frequency. CPAU’s controls system frequency, and the Generating Facility shall operate in synchronism with CPAU’s Distribution System. Whenever CPAU’s Distribution System Frequency at the PCC varies from and remains outside normal (nominally 60 Hz)by the predetermined amounts set forth in Table D.2, the Generating Facility’s Protective Functions shall cease to energize CPAU’s Distribution System within the stated maximum trip time. TABLE D.2: Frequency Trip Settings Generating Facility Rating Frequency Range (Assuming 60 Hz Nominal) Maximum Trip Time (1) (Assuming 60 Cycles per Second Less than 59.3 Hz 10 Cycles Less or equal to 30 kW Greater than 60.5 Hz 10 Cycles Less than 57 Hz 10 Cycles Less than an adjustable value between 59.8 Hz and 57 Hz but greater than 57 Hz (2) Adjustable between 10 and 18,000 Cycles (2),(3)Greater than 30 kW Greater than 60.5 Hz 10 Cycles GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 14 (1)“Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). For Generating Facilities with a Gross Nameplate Rating greater than 30 kVA, set points shall be field adjustable and different voltage set points and trip times from those in Table D.2 may be negotiated with CPAU. (2)Unless otherwise required by CPAU, a trip frequency of 59.3 Hz and a maximum trip time of 10 cycles shall be used. (3)When a 10-cycle maximum trip time is used, a second under frequency trip setting is not required. g.Harmonics. When the Generating Facility is serving balanced linear Loads, harmonic current injection into CPAU’s Distribution System at the PCC shall not exceed the limits stated below in Table D.3. The harmonic current injections shall be exclusive of any harmonic currents due to harmonic voltage distortion present in CPAU’s Distribution System without the Generating Facility connected (IEEE 1547-4.3.3). The harmonic distortion of a Generating Facility located at a Customer’s site shall be evaluated using the same criteria as for the Host Loads. Table D.3 Maximum Harmonic Current Distortion in Percent of Current (I)(1,2) Individual Harmonic Order h, (odd harmonics)3 h<11 11  h < 17 17  h < 23 23  h < 35 35  h Total Demand distortion (TDD) Max Distortion (%)4.0 2.0 1.5 0.6 0.3 5.0 (1)IEEE 1547-4.3.3 (2)I = the greater of the maximum Host Load current average Demand over 15 or 30 minutes without the GF, or the GF rated current capacity (transformed to the PCC when a transformer exists between the GF and the PCC). (3)Even harmonics are limited to 25% of the odd harmonic limits above. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 15 h.Direct Current Injection. Generating Facilities should not inject direct current greater than 0.5% of rated output current into CPAU’s Distribution System. i.Power Factor. Each Generator in a Generating Facility shall be capable of operating at some point within a Power Factor range from 0.9 leading to 0.9 lagging. Operation outside this range is acceptable provided the reactive power of the Generating Facility is used to meet the reactive power needs of the Host Loads or that reactive power is otherwise provided under tariff by CPAU. The Producer shall notify CPAU if it is using the Generating Facility for Power Factor correction. Unless otherwise agreed upon by the Producer and CPAU, Generating Facilities shall automatically regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. 3.TECHNOLOGY SPECIFIC REQUIREMENTS a.Three-Phase Synchronous Generators. For three-phase Generators, the Generating Facility circuit breakers shall be three-phase devices with electronic or electromechanical control. The Producer shall be responsible for properly synchronizing its Generating Facility with CPAU’s Distribution System by means of either manual or automatic synchronizing equipment. Automatic synchronizing is required for all synchronous Generators that have a Short Circuit Contribution Ratio (SCCR) exceeding 0.05. Loss of synchronism protection is not required except as may be necessary to meet D.2.d (Flicker) (IEEE 1547-4.2.5). Unless otherwise agreed upon by the Producer and CPAU, synchronous Generators shall automatically regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. A power system stabilization function is specifically not required for Generating Facilities under 10 MW Net Nameplate Rating. b.Induction Generators. Induction Generators (except self-excited Induction Generators) do not require a synchronizing Function. Starting or rapid Load fluctuations on induction Generators can adversely impact CPAU’s Distribution System's voltage. Corrective step-switched capacitors or other techniques may be necessary and may cause undesirable ferro-resonance. When these counter measures (e.g.,additional capacitors) are installed on the Producer's side of the Point of Common Coupling, CPAU must review these measures. Additional equipment may be required as determined in a Supplemental Review or an Interconnection Study. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 16 c.Inverters. Utility-interactive inverters do not require separate synchronizing equipment. Non-utility-interactive or “stand-alone” inverters shall not be used for Parallel Operation with CPAU’s Distribution System. d.Single-Phase Generators. For single-phase Generators connected to a shared single-phase secondary system, the maximum Net Nameplate Rating of the Generating Facilities shall be 20 kVA. Generators connected to a center-tapped neutral 240-volt service must be installed such that no more than 6 kVA of unbalanced power is applied to the two “legs” of the 240-volt service. For Dedicated Distribution Transformer Services, the maximum Net Nameplate Rating of a single-phase Generating Facility shall be the transformer nameplate rating. 4.SUPPLEMENTAL GENERATING FACILITY REQUIREMENTS a.Fault Detection. A Generating Facility with an SCCR exceeding 0.1 or one that does not cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island shall be equipped with Protective Functions designed to detect Distribution System faults, both line-to-line and line-to-ground, and shall cease to energize CPAU’s Distribution System within two seconds of the initiation of a fault. b.Transfer Trip. For a Generating Facility that cannot detect Distribution System faults (both line-to-line and line-to-ground) or the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds, CPAU may require a Transfer Trip system or an equivalent Protective Function. For net metered or non-net metered Generating Facilities, the Facility will be considered capable of supporting an Unintended Island if the aggregate distributed generation output is 80% or more of the Distribution System real-time load kW seen at CPAU’s source-side Distribution Protection Device. c.Reclose Blocking. Where the aggregate Generating Facility capacity exceeds 15% of the peak Load on any automatic reclosing device, CPAU may require additional Protective Functions, including, but not limited to reclose-blocking on some of the automatic reclosing devices. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 17 E.INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS OWNERSHIP AND FINANCING 1.SCOPE AND OWNERSHIP OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a.Scope. Parallel Operation of Generating Facilities may require Interconnection Facilities or modifications to CPAU’s Distribution System (“Distribution System modifications”). The type, extent and costs of Interconnection Facilities and Distribution System modifications shall be consistent with this Rule and determined through the Supplemental Review and/or Interconnection Studies described in Section C. b.Ownership.Interconnection Facilities installed on Producer’s side of the Point of Common Coupling (PCC) may be owned, operated and maintained by the Producer or CPAU. Interconnection Facilities installed on CPAU’s side of the PCC and Distribution System modifications shall be owned, operated and maintained only by CPAU. 2.RESPONSIBILITY OF COSTS OF INTERCONNECTING A GENERATING FACILITY a.Study and Review Costs. A Producer shall be responsible for the reasonably incurred costs of the reviews and studies conducted pursuant to Section C.1 of this Rule. b.Facility Costs. A Producer shall be responsible for all costs associated with Interconnection Facilities owned by the Producer. The Producer shall also be responsible for any costs reasonably incurred by CPAU in providing, operating, or maintaining the Interconnection Facilities and Distribution System modifications required solely for the Interconnection of the Producer’s Generating Facility with CPAU’s Distribution System. c.Separation of Costs.Should CPAU combine the installation of Interconnection Facilities or Distribution System modifications required for the Interconnection of a Generating Facility with modifications to CPAU’s Distribution System to serve other Customers or Producers, CPAU shall not include the costs of such separate or incremental facilities in the amounts billed to the Producer. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 18 d.Reconciliation of Costs and Payments. If the Producer selected a fixed price billing for the Interconnection Facilities or Distribution System modifications, no reconciliation will be necessary. If the Producer selected actual cost billing, a true-up will be required. Within a reasonable time after the Interconnection of a Producer’s Generating Facility, CPAU will reconcile its actual costs related to the Generating Facility against any advance payments made by the Producer. The Producer will receive either a bill for any balance due or a reimbursement for overpayment as determined by CPAU’s reconciliation. The Producer shall be entitled to a reasonably detailed and understandable accounting for the payments. 3.INSTALLATION AND FINANCING OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a.Agreement Required. The costs for Interconnection Facilities and Distribution System modifications shall be paid by the Producer pursuant to the Provisions contained in the Special Facilities Agreement. Where the type and extent of the Interconnection Facilities or Distribution System modifications warrant additional detail, Producer and CPAU shall execute separate agreement(s) to more fully describe and allocate the parties’ responsibilities for installing, owning, operating and maintaining the Interconnection Facilities and Distribution System modifications. b.Interconnection Facilities and Distribution System Modifications. Interconnection Facilities connected to CPAU’s side of the Point of Common Coupling and Distribution System modifications shall be provided, installed, owned and maintained by CPAU at Producer’s expense. c.Reservation of Unused Facilities.When a Producer wishes to reserve CPAU-owned Interconnection Facilities or Distribution System modifications installed and operated as Special Facilities for the Producer at Producer’s expense, but idled by a change in the operation of the Producer's Generating Facility or otherwise, Producer may elect to abandon or reserve such facilities consistent with the terms of its agreement with CPAU. If Producer elects to reserve idle Interconnection Facilities or Distribution System modifications, CPAU shall be entitled to continue to Charge Producer for the costs related to the ongoing operation and maintenance of the Special Facilities. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 20 d.Refund of Salvage Value. When a Producer elects to abandon the Special Facilities for which it has either advanced the installed costs or constructed and transferred to CPAU, the Producer shall, at a minimum, receive from CPAU a credit for the net salvage value of the Special Facilities. F.METERING, MONITORING AND TELEMETRY 1.GENERAL REQUIREMENTS All Generating Facilities shall be metered in accordance with this Section F and shall meet all applicable standards of CPAU contained in CPAU’s applicable rules and published CPAU manuals dealing with Metering specifications.For general metering requirements, see CPAU Rule and Regulation 15. For net metering requirements, see CPAU Rule and Regulation 29. 2.METERING BY CPAU The ownership, installation, operation, reading and testing of revenue Metering Equipment for Generating Facilities shall be by CPAU only. 3.NET GENERATION METERING For purposes of monitoring Generating Facility operation to determine standby Charges and applicable non-bypassable Charges as defined in CPAU’s tariffs, and for Distribution System planning and operations, consistent with Section B.4 of this Rule, CPAU shall have the right to specify the type, and require the installation of Net Generation Metering equipment. CPAU shall only require Net Generation Metering to the extent that less intrusive and/or more cost effective options for providing the necessary Generating Facility output data are not available. In exercising its discretion to require Net Generation Metering, CPAU shall consider all relevant factors, including but not limited to: a.Data requirements in proportion to need for information; b.Producer’s election to install equipment that adequately addresses CPAU’s operational requirements; c.Accuracy and type of required Metering consistent with purposes of collecting data; d.Cost of Metering relative to the need for and accuracy of the data; e.The Generating Facility’s size relative to the cost of the Metering/monitoring; f.Other means of obtaining the data (e.g., Generating Facility logs, proxy data etc.); GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 20 and g.Requirements under any Interconnection Agreement with the Producer. 4.POINT OF COMMON COUPLING METERING For purposes of assessing CPAU Charges for retail service, the Producer’s PCC Metering shall be reviewed by CPAU, and if required, replaced to ensure that it will appropriately measure Electric power according to the Provisions of the Customer’s Electric Service tariff. Where required, the Customer’s existing Meter may be replaced with a bi-directional meter so that power deliveries to and from the Producer’s site can be separately recorded. Alternately, the Producer may, at its sole option and cost, require CPAU to install Multi- Metering Equipment to separately record power deliveries to CPAU’s Distribution System and retail purchases from CPAU. Where necessary, such PCC Metering shall be designed to prevent reverse registration. 5.TELEMETERING If the nameplate rating of the Generating Facility is 1 MW or greater, Telemetering equipment at the Net Generator Metering location may be required at the Producer's expense. If the Generating Facility is Interconnected to a portion of CPAU’s Distribution System operating at a voltage below 10 kV, then Telemetering equipment may be required on Generating Facilities 250 kW or greater. CPAU shall only require Telemetering to the extent that less intrusive and/or more cost effective options for providing the necessary data in real time are not available 6.LOCATION Where CPAU-owned Metering is located on the Producer’s Premises, Producer shall provide, at no expense to CPAU, a suitable location for all such Metering Equipment. 7.COSTS OF METERING The Producer will bear all costs of the Metering required by this Rule, including the incremental costs of operating and maintaining the Metering Equipment. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective x-xx-20116-01-2010 Sheet No. 20 G.SUPPLEMENTAL REVIEW If the Generating Facility meets any of the following criteria, the Facility does not qualify for Simplified Interconnection Review and must undergo a Supplemental Review: 1.Output from the Generating Facility at any time will be equal to or greater than 15% of the load on the distribution line section. 2.The aggregate distributed generation on the distribution line section exceeds 80% of the real- time peak load kW. 3.Startup, shutdown or other operating characteristics of the Generating Facility cause voltage drop or flicker to exceed CPAU’s allowable limits as specified in Section D. 4.The Generating Facility is connected to a 4kV distribution feeder which has line-to –neutral connected load and the Generating Facility nameplate rating exceeds 10% of the line section peak load. 5.The Generating Facility, in aggregate with other generation, shall not contribute more than 10% to the circuit’s maximum fault current (END) Formatted:Normal,Numbered + Level:1 +Numbering Style:A,B,C, …+Start at:7 +Alignment:Left + Aligned at:0.25"+Tab after:0.75" +Indent at:0.75",Keep with next Formatted:Not All caps Formatted:Font:Not Bold Formatted:Font:Bold Formatted:Font:Not Bold Formatted:Font:Not Bold Formatted:Font:Bold Formatted:Font:Not Bold Formatted:Font:Not Bold Formatted:Font:Bold Formatted:Font:Not Bold Formatted:Font:Not Bold Formatted:Font:Not Bold Formatted:Indent:Hanging:0.5" *NOT YET APPROVED* 111025 dm 0073647 Resolution No. Resolution of the Council of the City of Palo Alto Approving the Palo Alto Green Local Energy Program, Including the Policies and Design Guidelines, Power Purchase Agreement and Interconnection Agreement, and Granting the City Manager The Authority to Sign Contracts For Local Renewable Resources in an Amount Not Exceeding $1,350,000 per Year A. The City has adopted goals and policies in support of the use of renewable energy in meeting a portion of the City’s wholesale electric portfolio needs, including Comprehensive Plan Goal N-9 (a clean, efficient, competitively-priced energy supply that makes use of cost- effective renewable resources), the Climate Protection Plan, Chapter 3 (Utilities), and the Long- Term Electric Acquisition Plan (LEAP) Strategy #3 (Renewable Portfolio Standard, or RPS). B. The Council finds that energy from local sources provides certain benefits when compared to imported energy, including a reduction in costs and energy losses associated with energy’s transmission and distribution, the value of a reducing the City’s capacity requirements, and the economic development associated with purchasing power produced within Palo Alto rather than outside it. C. The City has adopted in its LEAP Implementation Plan Goal #9, which calls for the evaluation of the potential of a feed-in tariff program (FIT) in meeting a portion of its RPS goals from local renewable sources, Goal #10, which calls for approval of the policy elements of such a plan if determined to be feasible, and Goal #19, which call for adoption of rates, rules, and standard contracts in support of those policies. D. On August 1, 2011 the City adopted Policies and Guidelines for Development of a FIT Program and wishes to adopt rates, rules, and standard contracts in support of those policies. E. The City will adopt a resolution approving Utility Rate Schedule E-PAGLE2012 and approving an amendment to Utilities Rule and Regulation 27, pertaining to generator interconnection. NOW, THEREFORE, the Council for the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. A Power Purchase Agreement, attached hereto as Exhibit A and incorporated herein, is hereby approved in connection with the implementation of the Local Energy Program. SECTION 2. An Interconnection Agreement, applicable to generators not subject to net metering, attached hereto as Exhibit B and incorporated herein, is hereby approved in connection with the implementation of the Local Energy Program. SECTION 3. The Council hereby authorizes the City Manager or his designee to sign contracts for the output of one or more solar energy generating facilities located in Palo Alto with an aggregate capacity not exceeding five (5) megawatts. The contract price of the output *NOT YET APPROVED* 111025 dm 0073647 shall not exceed the rates adopted in Utility Rate Schedule E-PAGLE2012, and the output of the facilities shall conform to the rules described in that rate schedule. Such contracts shall conform to the Power Purchase Agreement. The total cost of all Power Purchase Agreements shall not exceed $27,000,000. SECTION 4. The Council hereby adopts the revised Policies and Design Guidelines for the PaloAltoGreen Local Energy Program, attached hereto as Exhibit C and incorporated herein. SECTION 5. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b)(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Asst. City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services City of Palo Alto Utilities (CPAU) PaloAltoGreen Local Energy Program Policies and Guidelines POLICIES 1.The Renewable FIT objective of the Palo Alto Green Local Energy Program (Program) is to maximize fulfillment of the City of Palo Alto (City)’s Renewable Portfolio Standard (RPS)renewable energy procurement goals and requirements from local renewable energy sources. 2.Enrollment will be capped at the amount of energy projected to be required to fulfill the City’s RPSrenewable energy procurement goals and requirements. 3.Eligible resources will include those resources that are deemed renewable by the California Energy Commission (CEC) and that can be included in meeting RPS goals,including solar photovoltaic (PV) systems, wind, and biogas-fueled generators. 4.Eligible resources are toshall be located in the City and connected to the distribution system on CPAU’s the City’s side of customer meters. 5.The Renewable FITProgram purchase rate, set as a fixed-price in cents per kilowatt-hour (kWh) for a twenty-yearfixed term, will be based on CPAU’s the City’s avoided energy and capacity cost (i.e., value-based) and may vary by load shape for each renewable energy resource type. 6.The agreement between CPAU the City and a pProgram participants will be a non-negotiable, twenty-year standard form contract available to all eligible resources. 7.Program participants will be responsible for direct costs associated with the project (such as interconnection and metering). 8.Projects with a Renewable FITthat participate in the Program will not be eligible for a net metering tariff or incentives under the PV Partners Program, the Power from Local Ultra-clean Generation Incentive (PLUG-In) Program, or any other CPAU-funded incentive program funded by the City’s electric ratepayers. 9.City Council must approve the Renewable FITProgram rates, standard form contracts,and any updates. PROGRAM DESIGN GUIDELINES 1.The methodology for calculating avoided cost should include all of the following that apply to the technology in question: a.The value of renewable energy (including the value of avoided carbon); b.Local capacity value related to the applicable characteristics of the technology; c.Avoided transmission charges, transmission losses, and ISO charges; d.Avoided distribution losses; and e.Any other avoided costs attributable to local renewable generation 2.A standard form contract will be established and published. The term will be 20 years. 3.An annual pProgram cap on the amount of generating capacity or renewable energy procured will be established. 4.Maximum and minimum limits on individual project sizes may be used to limit the number of projects or the risk associated with the operation of any single project. These may be differentiated by technology type. 5.Updates to rates, contract terms and conditions, or program size should occur at regular scheduled intervals or should involve substantial advance notice to project developers. 6.Metering requirements will be designed to meet any applicable California Independent System Operator (CAISO), Northern California Power Agency (NCPA), and City operational requirements. 7.Interconnection rules will be established or modified to ensure FIT Program projects meet all City, NCPA, and CAISO operational requirements. Interconnection rules may be modified on a schedule independent of the FIT Program update schedule. 8.The FIT program Program will be designed similarly to FIT comparable programs (such as feed-in tariff programs) in other utility service areas where desirable, reasonable and feasible. 110927 dm 0073626 1 INTERCONNECTION AGREEMENT This Interconnection Agreement (the “Agreement”), dated, for convenience, ____________________, 20__ (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), acting by and through its Department of Utilities (“CPAU”), and ABC COMPANY, a California corporation (the “Facility Owner”), located at the address stated below (the City and the Facility Owner are referred to, individually, as a “Party”, and, collectively, as the “Parties”). 1.0 TERM 1.1 This Agreement takes effect on the Effective Date, and it will continue for a term of ten (10) years, until it is earlier terminated, as follows:(a) the Facility Owner gives the City or CPAU thirty (30) days’prior written notice of termination;(b) if Operating Mode #2 or Operating Mode #3 is selected in Exhibit A, upon the effective date of termination of the Power Purchase Agreement or the Other Agreement between the Parties; or (c) a Party effectively terminates due to a material default and breach by the other Party. 1.2 Upon a default referred to in Section 1.1(c), the non-defaulting Party shall give written notice of such event of default to the defaulting Party. The defaulting Party shall have sixty (60)days from the receipt of notice of default in which to cure the default; provided,if the defaulting Party informs the non-defaulting Party that it cannot cure the default within the sixty-days period and it in good faith has continuously and diligently attempted to cure the default, then,if the defaulting Party cures within six (6) months from the receipt of the notice of default, the non-defaulting Party may not terminate this Agreement..No default shall be deemed to exist if the failure to discharge an obligation (other than the payment of money) is the result of force majeure or an act or omission of the other Party 2.0 GENERATING FACILITY INTERCONNECTION AND METERING 2.1 The Facility Owner will install, operate, maintain, and repair the Generating Facility and use the meter(s) that meet(s)the requirements of CPAU’s Rules and Regulations, as amended, and other applicable laws, rules and regulations, including, without limitation, CPAU’s interconnection standards,as set forth in its Utilities Rule and Regulation 27 (“Rule 27”). 2.2 CPAU, at its sole cost and expense, may inspect and approve the installation of the Generating Facility and verify or otherwise authenticate the accuracy of the meter(s)as a condition precedent to its obligation to interconnect. 2.3 The Facility Owner grants to the City, including CPAU, its officers, employees, agents and representatives the non-exclusive right of ingress and egress on, over and across the Premises,upon reasonable prior notice,for the purpose of inspecting and approving the installation and operation of the Generating Facility and authenticating the accuracy of the meter(s), or without notice,in the event of an emergency, to protect the public health, safety and welfare,or in regard to a disconnection of the Generating Facility, if CPAU reasonably determines that a condition hazardous to person or property exists and immediate action is necessary to protect person or property from damage or interference caused by the Facility or as a result of the lack of properly operating protective devices of the Facility. 2.4 The Facility Owner will obtain and maintain the required governmental approvals, authorizations, permits, and any policy (or policies)of insurance, including, without limitation, commercial general liability, property, and professional liability insurance, as may be required by the City or CPAU or applicable laws. 2.5 The Facility Owner will comply with all applicable federal, state and local safety and performance standards applicable to the Generating Facility and established by or under the National Electrical Code (NEC), the Institute of Electrical and Electronics Engineers (IEEE) and accredited testing laboratories, including, without limitation, Underwriters Laboratories (UL), and in accordance with the applicable orders, rules and regulations of the California Public Utilities Commission, pertaining to the safety and reliability of electrical generating systems, and applicable City building codes. 110927 dm 0073626 2 2.6 Neither the City nor CPAU will be obligated to accept or pay for, and the City or CPAU may require the Facility Owner to temporarily interrupt or reduce, the delivery of available energy generated by the Generating Facility in the event of the following: (a) whenever CPAU determines that the interruption or reduction is necessary in order for CPAU to construct, install, maintain, repair, replace, remove, investigate, or inspect any part of CPAU’s electric utility distribution system; or (b) if CPAU determines that the interruption or reduction is necessary on account of an emergency, voluntary or involuntary outage, force majeure, or compliance with good utility practice. 2.7 Notwithstanding any other provision of this Agreement, if CPAU determines that either (a) the operation of the Generating Facility may threaten or endanger the public health, safety or welfare or the City or CPAU’s personnel or property, or (b) the continued operation of the Generating Facility may endanger the operational integrity of CPAU’s electric utility distribution system, then CPAU will have the right to temporarily or permanently disconnect the Generating Facility from CPAU’s electric utility distribution system upon the delivery of prior reasonable notice to the Facility Owner; provided, CPAU may act without giving prior notice to the Facility Owner, if CPAU determines that it is impracticable to provide the notice. The Generating Facility will remain disconnected until such time as CPAU is satisfied that the conditions referred to in this subsection have been corrected or sufficiently addressed. 2.8 The Facility Owner will (a) maintain the Generating Facility, which interconnects with CPAU’s electric utility distribution system, in a safe and prudent manner and in conformance with all applicable laws, rules and regulations, including, without limitation, the requirements of this Section 2, and (b) obtain any governmental approvals, authorizations and permits required for the construction and operation of the Generating Facility. 2.9 The Facility Owner will reimburse CPAU for any and all losses, damages, claims, penalties, or liability that the City or CPAU may incur or sustain as a result of the Facility Owner’s failure to obtain and maintain any and all governmental approvals, authorizations and permits that may be required for the construction, installation, operation, repair or maintenance of the Generating Facility. 3.0 INTERCONNECTION FACILITIES, DISTRIBUTION SYSTEM UPGRADES, AND AFFECTED SYSTEMS 3.1 The Facility Owner shall, in accordance with CPAU Rule 27 or other applicable CPAU Rule,pay,in advance and in full,for all of CPAU’s estimated design and construction costs of the Interconnection Facilities and the Distribution System Upgrades, which are specified in Exhibit A. 3.2 In the event that the Facility Owner owns the real property,on which the Interconnection Facilities are or will be located,then the Facility Owner shall grant to the City and CPAU (or in the event that Facility Owner is leasing or otherwise obtaining rights to locate the Generating Facility on real property of a third party,the Facility Owner shall obtain for the City and CPAU): 3.2.1 The right to install the Interconnection Facilities and related equipment or materials on that real property along the most practical route,which is of sufficient width to provide the appropriate and safe clearance from all structures now or hereafter erected on that real property; and 3.2.2 The right of ingress and egress to and from that real property,as may be reasonably necessary for CPAU to operate, maintain, repair, and remove the Interconnection Facilities. 3.3 Where rights-of-entry or easements are required on or over that real property or the property of a third party for the installation of the Interconnection Facilities, the Facility Owner acknowledges and agrees that CPAU’s obligation to install the Interconnection Facilities is expressly conditioned on the granting, without cost to the City or CPAU, of any and all necessary rights-of-entry or easements to the City. 3.4 THE CITY MAKES NO REPRESENTATIONS, WARRANTIES, COVENANTS OR ASSURANCES WITH RESPECT TO THE DESIGN, CONSTRUCTION, DURABILITY OR SUITABILITY OF THE 110927 dm 0073626 3 NEW INTERCONNECTION FACILITIES OR ANY PART THEREOF, WHETHER EXPRESS OR IMPLIED, AND THE CITY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, QUIET ENJOYMENT,AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE APPLICABLE TO SUCH WORK. 3.5 The one-line diagram of the interconnection (at the Delivery Point) is described in Exhibit A. The Interconnection Facilities are the sole and exclusive property of and shall be owned, operated, maintained, and repaired by the City and CPAU, and the Facility Owner disclaim any interest therein. 3.6 The Facility Owner shall pay CPAU for the costs of the Interconnection Facilities. The direct costs for the design and construction of the Interconnection Facilities shall be paid in advance by the Facility Owner. The Facility Owner shall be additionally responsible for costs related to ongoing operations, maintenance, and replacement of the Interconnection Facilities. 3.7 Upon the Facility Owner’s discontinuation of use of the Interconnection Facilities due to termination of this Agreement, or otherwise, CPAU shall have the right to remove any portion of the Interconnection Facilities from the real property on which the Interconnection Facilities are installed or located. 3.8 As may be required by applicable agreements between the City or CPAU and one or more Affected Systems’owners and/or operators, CPAU shall coordinate with those Affected Systems’owners and/or operators to support the interconnection. An “Affected System” is an electric system not owned by the City or CPAU but to which CPAU’s electric utility distribution system is connected. “Affected System” includes,without limitation,the transmission system that is owned by the Pacific Gas and Electric Company but is operated by the California Independent System Operator Corporation (“CAISO”). If upgrades to an Affected System are required by an Affected System owner and/or operator as a condition of interconnection of the Generating Facility, then the Facility Owner shall be responsible for the costs of such upgrades. The Facility Owner and each Affected System owner and/or operator shall enter into one or more agreements that provide(s)for the financing of such upgrades, as needed, and any repayment as set forth in applicable tariffs of the Affected System’owner and/or operator. The Facility Owner, at its own cost and expense, shall be responsible for entering into any other agreements as may be required by an Affected System’s owner and/or operator as a condition of interconnected operation and complying with the requirements of any applicable tariffs. Such agreements may include the “Participating Generator Agreement”(ISO Tariff Appendix M)and the “Meter Services Agreement for CAISO Metered Entities” with the CAISO. 4.0 INDEMNITY 4.1 Each Party, as indemnitor, shall defend, protect, indemnify and hold harmless the other Party, as indemnitee, its elected and appointed officials, directors, officers, employees, agents and representatives of the other Party from and against any and all losses, liability, damages, claims, costs, charges, demands, or expenses (including any direct, indirect or consequential loss, liability, damage, claim, cost, charge, demand, or expense, and reasonable attorneys’ fees) for personal injury or death and property damage, arising, directly or indirectly, out of or in connection with (a) the engineering, design, construction, maintenance, repair, operation, supervision, inspection, testing, protection or ownership of the indemnitor’s facilities, or (b) the making of replacements, additions, betterments to, or reconstruction of the indemnitor’s facilities; provided, however, the Facility Owner’s duty to indemnify the City and CPAU shall not extend to any loss, liability, damage, claim, cost, charge, demand, or expense resulting from interruptions in electrical service to CPAU’s electric utility customers other than the Facility Owner. Neither Party shall be indemnified hereunder for its loss, liability, damage, claim, cost, charge, demand, or expense arising out of or resulting from its sole negligence or willful misconduct. 4.2 Notwithstanding the foregoing indemnity, and excepting a Party’s willful misconduct or sole negligence, each Party shall be solely responsible for damage to its own facilities resulting from electrical disturbances or faults. 110927 dm 0073626 4 4.3 This Section 4 shall not be construed to relieve any insurer of its obligations to pay any insurance claims in accordance with the provisions of any valid insurance policy to be procured by a Party. 4.4 EXCEPT AS OTHERWISE PROVIDED IN SECTION 4.1, A PARTY SHALL NOT BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, PUNITIVE, EXEMPLARY, SPECIAL OR INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS, LOSS OF REVENUE, LOSS OF OPPORTUNITY OR LOSS OF DATA), HOWSOEVER CAUSED, WHETHER ARISING UNDER TORT, CONTRACT, OR OTHER LEGAL THEORY, AND WHETHER OR NOT FORESEEABLE, THAT ARE INCURRED BY THE OTHER PARTY. 5.0 NOTICE 5.1 Any notice required to be given under this Agreement will be delivered, in writing, and electronically mailed or delivered by the United States Postal Service,with postage prepaid and correctly addressed to the Party, or personally delivered to the Party, at the address below. Changes to such designation may be made by notice similarly given. All written notices will be directed, as follows: TO CITY:City of Palo Alto Department of Utilities 250 Hamilton Ave Palo Alto, CA 94301 ATTN.: Utilities Resource Management Phone: (650) 329-2689 FAX: (650) 326-1507 Email: UtilityCommoditySettlements@CityofPaloAlto.org TO FACILITY OWNER:ABC Company 123 Main Street Anytown, CA 90909 ATTN:Senior Vice-President of Operations Phone: (999) 999-9999 FAX: (999) 111-1111 Email: RenewableEnergyOperations@ABCInc.org 6.0 MISCELLANEOUS PROVISIONS 6.1 This Agreement is governed by and interpreted in accordance with the laws of the State of California as if executed and to be performed wholly within the State of California. 6.2 Any amendment or modification to this Agreement will not be binding upon the Parties, unless the Parties agree thereto, in writing. The failure of a Party at any time or times to require performance of any provision hereof will in no manner affect the right at a later time to enforce the same. No waiver by a Party of the breach of any covenant, term or condition contained in this Agreement, whether by conduct or otherwise, will be deemed or be construed as a further or continuing waiver of any such breach or a waiver of the breach of any other covenant, term or condition, unless such waiver is stated, in writing. 6.3 This Agreement supersedes any existing agreement, to which the City and the Facility Owner are parties, under which the Facility Owner is currently operating the Generating Facility, and any such agreement shall be deemed terminated as of the date this Agreement becomes effective. IN WITNESS WHEREOF, the Parties by their duly appointed representatives have executed this Interconnection Agreement in Palo Alto, County of Santa Clara, as of the Effective Date. 110927 dm 0073626 5 CITY OF PALO ALTO ABC COMPANY __________________________________________________________________ City Manager President APPROVED AS TO FORM:APPROVED: __________________________________________________________________ Senior Asst. City Attorney Director of Utilities 110927 dm 0073626 6 EXHIBIT A PART 1. GENERATING FACILITY DESCRIPTION 1.Service address: ___________________________________, Palo Alto, CA ____________(the “Premises”) 2.Generating Facility Description: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 3.Gross power rating of the Generating Facility ________ kW, based on:  Inverter rating  Solar array rating (Panel rated output at PV USA test conditions x inverter efficiency)  Generator nameplate  Prime mover nameplate 4.Generating Facility primary fuel/technology: ____________________________________________________ 5.Net power rating of the Generating Facility: ____ kW, which is the gross power rating stated above net of power used in the Generating Facility to power lights, motors, control systems, and other electrical loads used in operation, including losses on the Generating Facility’s electric distribution system 6.Maximum instantaneous power to be exported through the Point of Common Coupling: ______ kW 7.Generating facility is connected to the CPAU distribution system at ______ Kv 8.Operating Mode (select one of following):  #1 Power used on-site; no energy export or incidental energy export (default choice);  #2 Sale to CPAU (feed-in tariff (FIT) rate or merchant generator), which requires disclosure of the Power Purchase Agreement # ______________;  #3 Other Agreement: Description: ____________________________________________________________, which requires disclosure of the Other Agreement # ______________. 110927 dm 0073626 7 PART 2. INTERCONNECTION FACILITIES DESCRIPTION; ESTIMATED COSTS  No Interconnection Facilities are required.  Interconnection Facilities are required (provide information below). 1.The Interconnection Facilities Description: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 2.The direct costs of the design and construction of the Interconnection Facilities shall be paid in advance by the Facility Owner in accordance with Rule 27,as amended. 3 The Final Estimated CPAU Design and Construction Costs is $_____________. 4 The Final Estimated CPAU Operations and Maintenance Cost is $ ________________. 5.The Total Cost of Interconnection Facilities is $______________. 6.A One-line Diagram of the Interconnection is inserted as Page(s)__ through __. 7.A diagram of the Site Layout is inserted as Page(s)__ through __. PART 3. DISTRIBUTION SYSTEM UPGRADES REQUIRED  No Distribution Upgrades are required.  Distribution Upgrades are required (provide information below). 1.Description of Distribution Upgrades: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 2.The direct costs of the design and construction of the Distribution Upgrades shall be paid in advance by the Facility Owner in accordance with Rule 27,as amended. 3.The Final Estimated CPAU Design and Construction Cost is $_____________. 4.The Final Estimated CPAU Operations and Maintenance Cost is $ ________________. 5.The Total Cost of the Distribution Upgrades is $______________. 6.A description of the Distribution Upgrades is inserted as Page(s)__ through __. 110928 dm 0073627 1 POWER PURCHASE AGREEMENT ELIGIBLE RENEWABLE ENERGY RESOURCE (Palo Alto Green Local Energy Program) This Power Purchase Agreement -Eligible Renewable Energy Resource,dated, for convenience, ________________,20___ (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation, and ABC COMPANY, a California corporation (individually,a “Party” and,collectively,the “Parties”). RECITALS 1. The Buyer has adopted and implemented its Local Energy Program, which allows an owner of a qualifying electric generation system to sell to the Buyer the power output of a small-scale distributed generation Eligible Renewable Energy Resource, subject to the Local Energy Program’s terms and conditions. 2. The Seller owns or operates and desires to interconnect its Facility in parallel with Buyer’s Distribution System and sell the Output of the Facility directly to the Buyer in furtherance of the Local Energy Program. 3. The Parties do not intend this Agreement to constitute an agreement by the Buyer to provide retail electrical service to the Seller. 4. The Parties wish to enter into a power purchase agreement for the sale and purchase of the Output of the Facility. The Parties will enter into a separate “Interconnection Agreement” in connection with this Agreement. NOW THEREFORE, in consideration of the foregoing recitals and the following covenants, terms and conditions, the Parties agree,as follows: AGREEMENT 1.0 DEFINITIONS The initially capitalized terms, whenever used in this Agreement, have the meanings set forth below,unless they are otherwise herein defined. The terms “include,” “includes,” and “including,” when used in this Agreement, shall mean, respectively,“include, without limitation,“ “includes, without limitation” and “including, without limitation.” “Agreement” means this Power Purchase Agreement –Eligible Renewable Energy Resource between the Buyer and the Seller. “Business Day” means any day except a Saturday, Sunday,or a day that the City observes as a regular holiday under Palo Alto Municipal Code section 2.08.100(a). “Buyer” refers to the City of Palo Alto, California, with a principal place of business at 250 Hamilton Avenue, Palo Alto, California 94301. “Buyer’s Distribution System” means the wires, transformers, and related equipment used by the Buyer to deliver electric power to the Buyer’s retail customers,typically at sub-transmission level voltages or lower. “CAISO” means the California Independent System Operator Corporation,or successor entity. “CAISO Tariff” means the CAISO FERC Electric Tariff,as amended. 110928 dm 0073627 2 “Capacity” means the ability of a generator at any given time to produce Energy at a specified rate,as measured in megawatts (“MW”) or kilowatts (“kW”),and any reporting rights associated with it. “Capacity Attributes” means any current or future defined characteristic, certificate, tag, credit, or ancillary service attribute, whether general in nature or specific as to the location or any other attribute of the Facility, intended to value any aspect of the Contract Capacity of the Facility to produce Energy or ancillary services, including contributions towards Resource Adequacy (including those requirements defined in Section 40 of the CAISO Tariff) or reserve requirements (if any), and any other reliability or power attributes. “CEC” means the California Energy Resources Conservation and Development Commission,or successor agency. “Certificate of RPS Eligibility”means a certificate issued by the CEC as evidence of RPS Certification of the Facility. “City”means the government of the City of Palo Alto, California. “Commercial Operation” means the period of operation of the Facility,once the Commercial Operation Date has occurred. “Commercial Operation Date” means the date specified in the Commercial Operation Date Confirmation Letter, as set forth in Exhibit “PPA-B,:”which the Parties execute and exchange in accordance with this Agreement. “Contract Capacity” means the installed electrical Capacity available upon the Commercial Operation Date of the Facility in an amount,as specified in Exhibit “PPA-A.” “Contract Capacity”is measured at the Buyer’s revenue meter at the Delivery Point and is net of any Station Service Loads, any applicable Facility step-up transformer losses, and distribution losses on Buyer’s Distribution System up to the Delivery Point. “Contract Price” means the price paid by the Buyer to the Seller for the Output generated at the Facility and received by the Buyer, as set forth in Exhibit “PPA-A.” “CPUC”means the California Public Utilities Commission, or successor agency. “Delivery Point” means the point of interconnection to Buyer’s Distribution System,where the Buyer accepts title to the Output. “Delivery Term” means the period of time from the Commercial Operation Date through the expiration or earlier termination date of this Agreement. “Eligible Renewable Energy Resource” means an electric generating facility that is defined and qualified as an “eligible renewable energy resource”under California Public Utilities Code Section 399.12(e)and California Public Resources Code Section 25471, respectively, as amended. “Energy” means electrical energy generated from the Facility and delivered to Buyer’s Distribution System with the voltage and quality required by the Buyer, and measured in megawatt-hours (“MWh”) or kilowatt- hours (“kWh”), as metered at the Delivery Point. “Facility” means the qualifying renewable energy generation equipment and associated power conditioning and interconnection equipment that deliver the Output to the Buyer at the Delivery Point. “FERC” means the Federal Energy Regulatory Commission,or successor agency. “Forced Outage” means an unplanned outage of one or more of the Facility’s components that results in a reduction of the ability of the Facility to produce Capacity. 110928 dm 0073627 3 “Force Majeure” means an event or circumstance,which prevents a Party from performing its obligations under this Agreement, and which is not in the reasonable control of, or the result of negligence of, the Party claiming Force Majeure, and which by the exercise of due diligence is unable to overcome or cause to be avoided. “Force Majeure”shall include: (a) An act of nature, riot, insurrection, war, explosion, labor dispute, fire, flood, earthquake, storm, lightning, tidal wave, backwater caused by flood, act of the public enemy, terrorism, or epidemic; (b) Interruption of transmission or generation services as a result of a physical emergency condition (and not congestion-related or economic curtailment) not caused by the fault or negligence of the Party claiming Force Majeure and reasonably relied upon and without a reasonable source of substitution to make or receive deliveries hereunder, civil disturbances, strike, labor disturbances, labor or material shortage, national emergency, restraint by court order or other public authority or governmental agency, actions taken to limit the extent of disturbances on the electrical grid;or (c) Other similar causes beyond the control of the Party affected,which causes such Party could not have avoided by the exercise of due diligence and reasonable care. A Party's financial incapacity, the Seller’s ability to sell the Output at a more favorable price or under more favorable conditions,or the Buyer’s ability to acquire the Output at a more favorable price or under more favorable conditions or other economic reasons shall not constitute an event of Force Majeure. “Force Majeure” does not include a Forced Outage to the extent such event is not caused or exacerbated by an event of Force Majeure,as described above, and does not include the Seller’s inability to obtain financing, permits, or other equipment and instruments necessary to plan for, construct, or operate the Facility. “Good Utility Practice” means those practices, methods and acts that would be implemented and followed by prudent operators of electric energy generating facilities in the western United States, similar to the Facility, during the relevant time period, which practices, methods and acts, in the exercise of prudent and responsible professional judgment in the light of the facts known at the time the decision was made, could reasonably have been expected to accomplish the desired result consistent with good business practices, reliability, and safety. The Seller acknowledges that its use of Good Utility Practice does not exempt it from performing any of its obligations arising under this Agreement. “Good Utility Practice”includes, at a minimum, those professionally responsible practices, methods and acts described in the preceding paragraph that comply with manufacturers’ warranties, restrictions in this Agreement, the interconnection requirements of Buyer, the requirements of governmental authorities, and WECC and NERC standards. “Good Utility Practice”also includes the taking of reasonable steps to ensure that: (a) Equipment, materials, resources, and supplies, including spare parts inventories, are available to meet the Facility’s needs; (b) Sufficient operating personnel are available at all times and are adequately experienced and trained and licensed as necessary to operate the Facility properly and efficiently, and are capable of responding to reasonably foreseeable emergency conditions at the Facility and emergencies whether caused by events on or off the Facility’s site; (c) Preventive, routine, and non-routine maintenance and repairs are performed on a basis that ensures reliable, long-term and safe operation of the Facility, and are performed by knowledgeable, trained, and experienced personnel utilizing proper equipment and tools; (d) Appropriate monitoring and testing are performed to ensure equipment is functioning as designed; and (e) Equipment is not operated in a reckless manner, in violation of manufacturer’s guidelines or in a manner unsafe to workers, the general public, or the connecting utility’s electric system or contrary to environmental laws, permits or regulations or without regard to defined limitations such as, flood conditions, safety inspection requirements, operating voltage, current, volt ampere reactive (VAR) loading, frequency, rotational speed, polarity, synchronization, and control system limits; and equipment and components are designed and manufactured to meet or exceed the standard of durability that is generally used for electric energy generating facilities operating in the western United States and will function properly over the full range of ambient temperature and weather conditions reasonably expected to occur at the Facility site and under both normal and emergency conditions. “Green Attributes” refers to the definition set forth in the Standard Terms and Conditions, Appendix A-2, 110928 dm 0073627 4 as amended, Decision D.07-02-011, as modified by D.07-05-057, of the CPUC, which incorporates the definition of “Environmental Attributes” set forth in the Standard Terms and Conditions, Appendix A-1, as amended, D. 04-06-014. “Green Attributes” includes any and all credits, benefits, emissions reductions, environmental air quality credits, offsets, and allowances, howsoever entitled, attributable to the generation from the Facility,and its displacement of conventional energy generation, whether existing now or arising in the future. “Green Attributes”includes RECs, as well as (1) any avoided emissions of pollutants to the air, soil or water,such as sulfur oxides (“SOx”), nitrogen oxides (“NOx”), carbon monoxide (“CO”) and other pollutants; (2) any avoided emissions of carbon dioxide (“CO2”), methane (“CH4”), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other greenhouse gases (“GHGs”) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere; and (3) the reporting rights to these avoided emissions such as Green Tag Reporting Rights and RECs. “Green Tag Reporting Rights”are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser’s discretion, and include those Green Tag Reporting Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on a kWh basis and one Green Tag represents the Green Attributes associated with one (1) MWh of Energy. “Green Attributes”do not include (i) any Energy, Capacity, reliability, or other power attributes of the Facility, (ii) production or investment tax credits associated with the construction or operation of the Facility and other financial incentives in the form of credits, grants, reductions, or allowances associated with the Facility that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or “tipping fees” that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular pre-existing pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered, used or created by the Facility for compliance with or sale under local, state, or federal operating and/or air quality permits or programs. If the Facility is a biomass or landfill facility and the Seller receives any tradable Green Attributes based on the Facility’s greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, the Seller shall provide the Buyer with sufficient Green Attributes to ensure that there are zero net emissions associated with the production of electricity from the Facility. “Green Attributes” includes any other environmental credits or benefits recognized in the future and attributable to Energy generated by the Facility during the Term that may not be represented by Green Tag Reporting Rights or RECs, unless otherwise excluded herein. Any Green Attributes provided under this Agreement shall be documented by RECs, or any other representation of the environmental benefits of the Output, the monthly cumulative total of which shall be provided to the Buyer,as specified herein. “Interconnection Agreement” refers to the agreement between the Buyer and the Seller, specific to the interconnection of the Facility to Buyer’s Distribution System. “Local Energy Program” refers to the PaloAltoGreen Local Energy Program, a renewable energy program established by the City by adoption of resolution number _______, dated ______, of the Palo Alto City Council,whereby the Buyer will purchase from the Seller the Output of Eligible Renewable Energy Resources that meet specified criteria set forth in CPAU’s utility rate schedule, as amended. “NERC” means the North American Electric Reliability Corporation, or successor organization. “NCPA” means Northern California Power Agency, a California joint action agency,or successor agency. “Output” means all Capacity associated with Contract Capacity and associated Energy made available from the Facility, as well as any Capacity Attributes, Green Attributes, or other attributes existing now or in the future associated with Contract Capacity and/or associated Energy. “Output”does not include production or investment tax credits associated with the construction or operation of the Facility and other financial incentives in the form of credits, grants, reductions, or allowances associated with the Facility that are applicable to a state or federal income taxation obligation. “Planned Outage” means an outage,scheduled in advance,of one or more of the Facility’s components 110928 dm 0073627 5 that results in a reduction of the ability of the Facility to produce Capacity. “Pre-Certification Price” means the price to be paid for all Energy delivered to the Buyer prior to the RPS Certification Date,as specified in Exhibit “PPA-A”. “Renewable Energy Credit”or “REC” has the meaning set forth in Section 399.12(h)(1) and (2) of the California Public Utilities Code, and includes a certificate of proof that one unit of electricity was generated by an Eligible Renewable Energy Resource. Currently,RECs are used to convey all Green Attributes associated with electricity production by a renewable energy resource. RECs are accumulated on a kWh basis and one REC represents the Green Attributes associated with the generation of 1 MWh (1,000 kWhs) from the Facility. For purposes of this Agreement, the term REC shall be synonymous with the term Green Tag, green ticket, bundled or unbundled renewable energy credit, tradable renewable energy certificates, or any other term used to describe the documentation that evidences the renewable and Green Attributes associated with electricity production by an Eligible Renewable Energy Resource. “Renewables Portfolio Standard”or “RPS”means the standard adopted by the State of California pursuant to Senate Bill 2 1st Extraordinary Session (SBX1 2, Chapter 1, Statutes 2011-12), and California Public Utilities Code Sections 399.11through 399.31, inclusive, as may be amended, setting minimum renewable energy targets for local publicly owned electric utilities. “Reservation Deposit” means the monetary deposit submitted by the Seller (or the Facility sponsor on behalf of the Seller) to secure a reservation of the Local Energy Program’s rates. The Reservation Deposit is set forth in Exhibit “PPA-A.” “Resource Adequacy” means a requirement by a governmental authority or in accordance with its FERC- approved tariff, or a policy approved by a local regulatory authority, that is binding upon either Party and that requires that Party to procure a certain amount of electric generating capacity. “RPS Certification” means certification by the CEC that the Facility qualifies as an Eligible Renewable Energy Resource for RPS purposes, and that all Energy produced by the Facility qualifies as generation from an Eligible Renewable Energy Resource, as evidenced by a Certificate of RPS Eligibility. “RPS Certification Date”means the date on which the RPS Certification begins,as specified in the Certificate of RPS Eligibility. “Seller”means ABC Company, California with a principal place of business at 123Main Street, Anytown, California 90909. “Station Service Load” means the electrical loads associated with the operation and maintenance of the Facility,which may at times be supplied from the Facility’s Energy. “Term” has the meaning set forth in Section 14.1 hereof. “WECC”means the Western Electricity Coordinating Council, the regional entity responsible for coordinating and promoting regional bulk electric system reliability in the Western Canada and the United States, or any successor organization. 2.0 SELLER’S GENERATING FACILITY, PURCHASE PRICE AND PAYMENT 2.1 Facility. This Agreement governs the Buyer’s purchase of the Output from the Facility, as described in Exhibit “PPA-A.”The Seller shall not modify the Facility to increase or decrease the Contract Capacity after the Commercial Operation Date. 2.2 Products Purchased. During the Delivery Term, the Seller shall sell and deliver, or cause to be delivered, and the Buyer shall purchase and receive, or cause to be received, the Output from the Facility. The Seller shall not have the right to procure the Output from sources other than the Facility for 110928 dm 0073627 6 sale or delivery to the Buyer under this Agreement or to substitute the Output. 2.3 Delivery Term. The Delivery Term shall commence on the Commercial Operation Date under this Agreement,and shall continue for an uninterrupted period of  ten (10) years,  fifteen (15) years, or  twenty (20) years; This period will commence on the first day of the calendar month immediately following the Commercial Operation Date. As evidence of the Commercial Operation Date, the Parties shall execute and exchange the “Commercial Operation Date Confirmation Letter,” attached hereto as Exhibit “PPA-B.”The Commercial Operation Date shall be the date on which the Parties acknowledge, in writing, that the Facility starts operating and is otherwise in compliance with applicable interconnection and system protection requirements,including the final approvals by the City’s building department official. 2.4 Payment for Products Purchased. 2.4.1 Deliveries Prior to RPS Certification Date. Once the Facility has achieved Commercial Operation, if the CEC has not issued a Certificate of RPS Eligibility for the Facility or the Facility has not been registered with the appropriate entity for the tracking of Green Attributes, the Buyer will pay the Seller for the Output by multiplying the Pre-Certification Price by the quantity of Energy. 2.4.2 Deliveries After RPS Certification Date. Once the Facility has achieved Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the Facility, and the Facility has been registered with the appropriate entity for the tracking of Green Attributes, the Buyer shall pay the Seller for all Output on or after the RPS Certification Date by multiplying the Contract Price by the quantity of Energy. 2.4.3 True-up Upon Issuance of Certificate of RPS Eligibility. Once the Facility has achieved Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the Facility, and the Facility has been registered with the appropriate entity for the tracking of Green Attributes, the Buyer will pay the Seller an amount equal to the difference between the Contract Price and the Pre-Certification Price for the Output (a) that was delivered on or after the RPS Certification Date and (b) for which the Seller has already received payment at the Pre- Certification Energy Price. 2.4.4 Energy in Excess of Contract Capacity. The Seller shall not receive payment for any Energy or Green Attributes delivered in any hour to the Buyer in excess of the following amount of energy (in kilowatt-hours): 110% of the Contract Capacity (in kilowatts) multiplied by one hour.Any payment in excess of this amount shall be refunded to the Buyer, on demand. 2.5 Billing. The Buyer shall pay the Seller by check or electronic funds transfer, on a monthly basis, within thirty (30)days of the meter reading date. 2.6 Title and Risk of Loss. Title to and risk of loss related to the Output shall be transferred from the Seller to the Buyer at the Delivery Point. The Seller warrants that it will deliver to the Buyer the Output free and clear of all liens, security interests, claims,encumbrances or any interest therein or thereto by any person,arising prior to the Delivery Point. 2.7 No Additional Incentives.The Seller warrants that it has not received any other incentives funded by the Buyer’s ratepayers and it further agrees that,during the Term, it shall not seek additional compensation or other benefits from the Buyer pursuant to the following programs of the Buyer: (a) Photovoltaic (PV) Partners Program; (b)Power from Local Ultra-Clean Generation Incentive (PLUG- In) Program;or (c) other similar programs that are or may be funded by the Buyer’s ratepayers. 110928 dm 0073627 7 3.0 RPS CERTIFICATION; GREEN ATTRIBUTES 3.1 CEC Certification. The Seller, at its own cost and expense, shall obtain the RPS Certification within six (6) months of the Commercial Operation Date. The Seller shall maintain the RPS Certification at all times during the Delivery Term. The foregoing provision notwithstanding, the Seller shall not be in breach of this Agreement and the Buyer shall not have the right to terminate this Agreement, if the Seller’s failure to obtain or maintain the RPS Certification is due to a change in California law, occurring after the Commercial Operation Date, so long as the Seller has used commercially reasonable efforts to obtain and maintain the RPS Certification and the Seller’s actions or omissions did not contribute to its inability to obtain and maintain the RPS Certification. 3.2 Obligation to Deliver Green Attributes.The Seller shall sell and deliver to the Buyer, and the Buyer shall buy and receive from the Seller, all right, title, and interest in and to Green Attributes associated with Energy,produced by the Facility and delivered to the Buyer at the Delivery Point,whether now existing or that hereafter come into existence during the Term, except as otherwise excluded herein; provided, the Buyer shall not be obligated to purchase and pay the Seller for any Green Attributes associated with any amount of the Output,that is generated by any fuel which is not renewable and which cannot be counted for the purpose of the production of Green Attributes. The Seller agrees to sell and make all such Green Attributes available to the Buyer to the fullest extent allowed by applicable law, in accordance with the terms and conditions of this Agreement. The Seller warrants that the Green Attributes provided under this Agreement to the Buyer shall be free and clear of all liens, security interests, claims and encumbrances. 3.3 Conveyance of Green Attributes. The Seller shall provide Green Attributes associated with the Facility,which shall be documented and conveyed to the Buyer in accordance with the procedure described in Exhibit “PPA-D.” 3.4 Additional Evidence of Green Attributes Conveyance. At the Buyer’s request, the Seller shall provide additional reasonable evidence to the Buyer or to third parties of the Buyer’s right, title, and interest in the Green Attributes and any other information with respect to Green Attributes,as may be requested by the Buyer. 3.5 Modification of Green Attributes Conveyance Procedure. The Buyer may unilaterally modify Exhibit “PPA-D”in order to reflect changes necessary in the Green Attributes conveyance procedures, so that the Buyer may be able to receive and report the Green Attributes,purchased under this Agreement,as belonging to the Buyer. 3.6 Reporting of Ownership of Green Attributes. The Seller shall not report to any person or entity that the Green Attributes sold and conveyed to the Buyer belong to any person other than the Buyer. The Buyer may report under any applicable program that Green Attributes purchased by the Buyer hereunder belong to it. 3.7 Greenhouse Gas Emissions. The Seller shall comply with any laws and/or regulations regarding the need to offset emissions of GHGs by delivering to the Buyer the Energy from the Facility with a net zero GHG impact. 4.0 CONVEYANCE OF CAPACITY ATTRIBUTES 4.1 Conveyance of Resource Adequacy Capacity.The Seller shall not report to any person or entity that the Resource Adequacy Capacity, as defined in the CAISO Tariff) associated with the Facility, if any,belongs to a person other than the Buyer, which may report that Resource Adequacy Capacity purchased hereunder belongs to it to fulfill the Resource Adequacy requirements, as defined in Section 40 of the CAISO Tariff, as amended, or any successor program. The Seller shall take those actions described in Section 6.0 hereof, as applicable, to secure recognition of Resource Adequacy Capacity by the CAISO. 110928 dm 0073627 8 4.2 Conveyance of Other Capacity Attributes.In addition to the obligations imposed on the Seller under Section 4.1, the Seller will undertake any and all actions reasonably needed to enable the Buyer to effect the recognition and transfer of any Capacity Attributes in addition Resource Adequacy, to the extent that such Capacity Attributes exist now or will exist in the future;provided, if such actions require any actions beyond the giving of notice by the Seller, then the Buyer shall reimburse all out-of- pocket costs and charges of such actions. 4.3 Reporting of Ownership of Capacity Attributes.The Seller shall not report to any person or entity that the Capacity Attributes sold and conveyed to the Buyer belong to any person other than the Buyer. The Buyer may report under any such program that such Capacity Attributes purchased hereunder belong to it. 5.0 METERING AND OPERATIONS 5.1 Timing of Outages. The Seller may not schedule or take any Planned Outage from 12:00 p.m.through 7:00 p.m.Pacific Time during the months of June through October. 5.2 Outage Reporting. 5.2.1 Buyer Request.The Seller is not required to report any Planned Outage or Forced Outage,unless the Buyer first submits a written request to the Seller to commence Outage reporting. Upon receipt of such a request, the Seller shall report all subsequent Planned Outages and the Forced Outages according to the procedures described in subsections 5.2.2 and 5.2.3, and shall continue such reporting until (a) the termination of this Agreement for any reason, or (b) the Buyer subsequently provides written notice to the Seller that the Seller may cease such reporting in the future. 5.2.2 Planned Outage Notifications. The Seller shall notify the Buyer at least 72 hours in advance of any Planned Outage that would result in a reduction in the effective Output of the Facility during the period over which the Planned Outage is scheduled. Notification shall be provided by e-mail to the e-mail address (or addresses)set forth in Exhibit “PPA-F.” 5.2.3 Forced Outage Notifications. Within 24 hours of the occurrence of a Forced Outage of the Facility that impacts the ability of the Facility to produce Energy, the Seller shall notify the Buyer of the Forced Outage, including the Capacity of the Facility that is impacted, and the expected duration of the Forced Outage. Within 24 hours of the return of the Facility to service following the Forced Outage,the Seller shall notify the Buyer of the return-to-service details. Notification shall be made by e-mail to the address (or addresses)set forth in Exhibit “PPA-F.” 5.3 Metering.The Buyer shall furnish and install one or more standard watt-hour meters to read Energy generated by the Facility,and it will charge a meter fee to the Seller to cover the costs associated with the meter’s purchase and installation. As requested, the Seller shall provide and install a meter socket in accordance with the Buyer’s metering standards. The Buyer reserves the right to install additional metering equipment at its sole cost and expense. 6.0 PARTICIPATING GENERATORS 6.1 Applicability.This Section 6.0 shall apply if the Facility meets the definition of a “Participating Generator,”as may be defined by the CAISO Tariff. This Section 6.0 shall not apply if the definition applies to the Facility only upon the election by the Seller. For the purposes of this Section 6.0, all special terms not otherwise defined in Section 1.0 are defined in the CAISO Tariff. 6.2 Participating Generator Agreement. The Buyer will notify the CAISO of the Seller’s interconnection to Buyer’s Distribution System. If the CAISO requires it, the Seller, at its own expense, shall negotiate and enter in to two contracts, a “Participating Generator Agreement”and a “Meter Services 110928 dm 0073627 9 Agreement for CAISO Metered Entities,” with the CAISO. 6.3 Scheduling Coordination. If the CAISO requires the Seller to enter in to a Participating Generator Agreement, then the Seller shall designate NCPA as the Buyer’s scheduling coordinator. The Buyer, acting in its sole discretion,may replace NCPA as the scheduling coordinator for the Facility. If NCPA ceases to be the scheduling coordinator for the Facility and the Buyer has not, upon fourteen (14) days’ prior written notice of inquiry from the Seller, appointed a replacement scheduling coordinator, then the Seller shall have the right to appoint a replacement scheduling coordinator on the Buyer’s behalf. Thereafter, the Buyer shall enter into all reasonable and appropriate agreements with such replacement scheduling coordinator at its own costs. 6.4 Scheduling Procedure. The Buyer may require the Seller to provide the Buyer with Energy forecasts on a periodic basis,as may be necessary for the Buyer to account for expected Facility generation in its daily power scheduling process. The requirements are set forth in Exhibit “PPA-C.” 6.5 Modification of Scheduling and Outage Notification Procedure. The Buyer may unilaterally modify Exhibit “PPA-C”to reflect changes necessary in the scheduling and Outage notification procedures. 6.6 Provision of Other Equipment. If the Seller is required to enter into a Participating Generator Agreement with the CAISO, then the Seller, at its own cost and expense, shall provide and maintain data transmission-grade phone line and telecommunications equipment at the meter location that complies with applicable requirements of the CAISO, the Buyer, and NCPA. Any meter installed by the Seller shall comply at all times with the CAISO’s metering requirements. If the Seller fails to provide or maintain any such required equipment or data connection,then the Buyer shall acquire, install and maintain the same at the Seller’s sole cost and expense. 6.7 Designation as Resource Adequacy Resource. The Buyer may submit a written request to the Seller to obtain the CAISO’s designation of the Facility as a Resource Adequacy Resource. Upon receipt of such request, the Seller shall provide such information and undertake such steps as may be required by the CAISO in order to complete such an assessment. If the Buyer makes such a request, then the Buyer shall be responsible for the following: (1) any costs charged to the Seller by the CAISO as a condition of applying for or receiving designation as a Resource Adequacy Resource, including any deposits required during the study process or the cost of any related studies or deliverability assessments performed by the CAISO;(2) the capital, installation, and maintenance costs of any additional equipment required by the CAISO as a condition of receiving designation as a Resource Adequacy Resource;(3) the costs of any Network Upgrades, as defined in the CAISO Tariff,as may be required by the CAISO, provided, the Buyer shall receive any subsequent repayments from the CAISO or the Participating Transmission Owner related to such upgrades;and (4) any charges or penalties assessed by the CAISO as a consequence of the Facility’s designation as a Resource Adequacy Resource. 6.8 CAISO Charges. The Buyer shall be solely responsible for paying all costs and charges associated with the receipt of Energy under this Agreement, at the Delivery Point, and for the transmission and delivery of Energy from the Delivery Point to any other point downstream of the Delivery Point, including transmission costs and charges, competition transition charges, applicable control area service charges, transmission congestion charges, inadvertent energy flows, any other CAISO charges related to the transmission of such Energy by the CAISO and any charge assessed or collected in the future pursuant to any utility tariff or rate schedule , however defined, for transmission or transmission-related service rendered by or for any transmission-owning or operating entity. The Seller will undertake any and all actions reasonably needed to allow the Buyer to comply with any obligations, and minimize any potential liability, under the CAISO tariff. If and to the extent that the Seller fails to comply with the notice provision in Exhibit “PPA-C,”concerning Outages,or with its obligations as outlined in the previous sentence, the Seller shall be wholly responsible for all imbalances, deviations, or any other CAISO charges or penalties associated with such Outage or other CAISO Tariff obligation. 6.9 Participating Intermittent Resource Program.Upon the request of the Buyer, the Seller 110928 dm 0073627 10 shall apply to the CAISO to participate in the Participating Intermittent Resource Program (“PIRP”), as defined by the CAISO, or any similar or successor program designed to reduce imbalance charges for non- dispatch resources such as solar generators. The Seller shall take all reasonable actions and execute documents and instructions necessary to enable participation of the Facility in the PIRP or any such program. If the Buyer makes such a request, the Buyer shall be responsible for the following,if required by the CAISO for the sole purpose of participation in the PIRP or any such program: (a) capital and installation costs of additional equipment;and (b) any deposits or charges imposed by the CAISO as a condition of participating in the PIRP or any such program. 6.10 Inclusion in Metered Subsystem. At the option of the Buyer, the Facility may be included within NCPA’s metered sub-system in connection with the scheduling of power over the CAISO grid and related functions; provided, however,that such inclusion shall have no adverse effect on the Facility’s operations or the Seller (or any such effect shall be fully mitigated by the Buyer). The Seller will undertake any and all actions reasonably needed to allow the Buyer to comply with any obligations, and minimize any potential liability, under the CAISO Tariff; provided, that if such actions require any actions beyond the giving of notice to be provided by the Buyer, then the Buyer shall reimburse the Seller for all out-of-pocket costs and charges of such actions. 7.0 COMMERCIAL OPERATION DATE;REFUND OF RESERVATION DEPOSIT 7.1 Commercial Operation Date. The Facility shall achieve Commercial Operation by the Commercial Operation Date deadline (the “Deadline”), which is one (1)year from the Effective Date. 7.2 Reservation Deposit. The Buyer acknowledges that, as of the Effective Date or other date established by the Buyer,the Seller has provided the Reservation Deposit to the Buyer. 7.2.1 If the Commercial Operation Date occurs on or prior to the Deadline, the Buyer shall refund to the Seller the Reservation Deposit without interest. 7.2.2 If the Commercial Operation Date commences within seventy (70)days of the Deadline, the Seller, as liquidated damages and not as a penalty,shall relinquish its claim to a ten percent (10%)portion of the amount of the Reservation Deposit for every full week transpiring between the Deadline and the Commercial Operation Date, but the total amount to be relinquished to the Buyer shall not exceed 100%of the Reservation Deposit. 7.2.3 If the Facility has not achieved Commercial Operation within seventy (70)days of the Deadline, then the Buyer may terminate this Agreement without liability of either Party to the other Party by giving written notice of termination to the Seller. 7.2.4 If the Seller gives notice of termination to terminate the Agreement before Commercial Operation occurs, then the Buyer shall refund a percentage of the Reservation Deposit equal to the following:the percentage to be refunded will equal A/B, where A equals the number of days between the date of the Seller’s notice of termination, received by the Buyer,and the Deadline, and B equals the number of days between the Effective Date and the Deadline. 7.3 Return of Reservation Deposit. The Buyer shall return to the Seller the Reservation Deposit, without interest, in the event that (a) the Buyer furnishes written notice of the costs of interconnection (defined in the Interconnection Agreement to include the costs related to the Interconnection Facilities and Distribution Upgrades)to the Seller and (b) within thirty (30) days of receipt of the notice regarding costs of interconnection, the Seller provides the Buyer with written notice that the Seller does not intend to sign the Interconnection Agreement and does intend to proceed with the project. 8.0 REPRESENTATION AND WARRANTIES; COVENANTS 8.1 Representations and Warranties. On the Effective Date, each Party represents and warrants to the other Party that: 110928 dm 0073627 11 8.1.1 It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 8.1.2 The execution, delivery and performance of this Agreement is within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; 8.1.3 This Agreement and each other document executed and delivered in accordance with this Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms; 8.1.4 It is not bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming bankrupt; 8.1.5 There is not pending or, to its knowledge, threatened against it or any of its affiliates, if any,any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement; and 8.1.6 It is acting for its own account, has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of, and understands and accepts, the terms, conditions and risks of this Agreement. 8.2 General Covenants. Each Party covenants that,during the Term: 8.2.1 It shall continue to be duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 8.2.2.It shall maintain (or obtain from time to time as required, including through renewal, as applicable) all regulatory authorizations necessary for it to legally perform its obligations under this Agreement; and 8.2.3 It shall perform its obligations under this Agreement in a manner that does not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule,regulation, order or the like applicable to it. 8.3 Covenant by Seller. The Seller covenants that, during the Term: 8.3.1 If the Eligible Renewal Energy Resource or the Facility is considered an ‘eligible qualifying facility’ under applicable law and has a net power production capacity of greater than one (1) megawatt, then the Seller covenants and agrees that, within thirty (30) days of the Effective Date or longer period allowed by law, it will complete and file Form No. 556 or other similar form with FERC as the registration may be required by law.” 9.0 GENERAL CONDITIONS 9.1 Facility Care and Interconnection. During the Delivery Term, the Seller shall execute and maintain an Interconnection Agreement with the Buyer,whereby the Seller shall pay and be responsible for designing, installing, operating, and maintaining the Facility in accordance with all applicable laws and regulations and shall comply with all applicable Buyer, WECC, FERC, and NERC requirements, including applicable interconnection and metering requirements. The Seller shall also comply with any modifications, amendments or additions to the applicable tariff and protocols. The Seller also shall arrange and pay independently for any and all necessary costs under the Interconnection Agreement with 110928 dm 0073627 12 the Buyer. 9.2 Standard of Care. The Seller shall: (a) operate and maintain the Facility in a safe manner in accordance with its existing applicable interconnection agreements, manufacturer’s guidelines, warranty requirements, Good Utility Practice, industry norms (including standards of the National Electrical Code, Institute of Electrical and Electronic Engineers, American National Standards Institute, and the Underwriters Laboratories, and in accordance with the requirements of all applicable federal, state and local laws and the National Electric Safety Code, as such laws and code norms may be amended from time to time; (b) obtain any governmental authorizations and permits required for the construction and operation thereof. The Seller shall make any necessary and commercially reasonable repairs with the intent of optimizing the availability of electricity to the Buyer. The Seller shall reimburse the Buyer for any and all losses, damages, claims, penalties, or liability that the Buyer incurs as a result of the Seller’s failure to obtain or maintain any governmental authorizations and permits required for the construction and operation of the Facility throughout the Term. 9.3 Access Rights. The Buyer, its authorized agents, employees and inspectors shall have the right to inspect the Facility on reasonable advance notice during normal business hours and for any purposes reasonably connected with this Agreement or the exercise of any and all rights secured to the Buyer by law, or its tariff or utility rate schedules or utilities rules and regulations. The Buyer shall make reasonable efforts to coordinate its emergency activities with the safety and security departments, if any, of the Facility’s operator. The Seller shall keep the Buyer advised of current procedures for communicating with the Facility operator’s safety and security departments. 9.4 Protection of Property. Each Party shall be responsible for protecting its own facilities from possible damage resulting from electrical disturbances or faults caused by the operation, faulty operation, or non-operation of the other Party’s facilities and such other Party shall not be liable for any such damages so caused. 9.5 Insurance. During the Term, the Seller shall obtain and maintain and otherwise comply with the insurance requirements,as set forth in Exhibit “PPA-E.” 9.6 Buyer’s Performance Excuse; Seller Curtailment. 9.6.1 Buyer Performance Excuse. The Buyer shall not be obligated to accept or pay for the Output during Force Majeure that affects the Buyer’s ability to accept Energy. 9.6.2 Seller Curtailment. The Buyer may require the Seller to interrupt or reduce deliveries of Energy: (a) whenever necessary to construct, install, maintain, repair, replace, remove, or investigate any of its equipment or part of the Buyer’s Distribution System or facilities; or (b) if the Buyer determines that curtailment, interruption, or reduction is necessary due to a System Emergency, as defined in the CAISO Tariff, an unplanned outage on Buyer’s Distribution System, Force Majeure, or compliance with Good Utility Practice. 9.7 Notices of Outages. Whenever possible, the Buyer shall give the Seller reasonable notice of the possibility that interruption or reduction of deliveries may be required. 9.8 No Additional Loads. The Seller shall not connect any loads not associated with Station Service Loads at the location of the Facility in a manner that would reduce Energy provided from the Facility to the Buyer hereunder. The Seller shall obtain separate retail electric service under the Buyer’s rate schedules for the service of such additional loads. 10.0 FORCE MAJEURE 10.1 Effect of Force Majeure. A Party shall be excused from its performance under this Agreement to the extent, but only to the extent, that its performance hereunder is prevented by Force Majeure. A Party claiming Force Majeure shall exercise due diligence to overcome or mitigate the effects 110928 dm 0073627 13 of Force Majeure; provided, that nothing in this Agreement shall be deemed to obligate the Party affected by Force Majeure (a) to forestall or settle any strike, lock-out or other labor dispute against its will; or (b) for Force Majeure affecting the Seller only, to purchase electric power to cure Force Majeure. 10.2 Remedial Action.A Party shall not be liable to the other Party if the Party is prevented from performing its obligations hereunder due to Force Majeure. The Party rendered unable to fulfill an obligation by reason of Force Majeure shall take all action necessary to remove such inability with all due speed and diligence. The nonperforming Party shall be prompt and diligent in attempting to remove the cause of its failure to perform, and nothing herein shall be construed as permitting that Party to continue to fail to perform after that cause has been removed. Notwithstanding the foregoing, the existence of Force Majeure shall not excuse any Party from its obligations to make payment of amounts due hereunder. 10.3 Notice of Force Majeure. In the event of any delay or nonperformance resulting from Force Majeure, the Party directly impacted by Force Majeure shall, as soon as practicable under the circumstances, notify the other Party,in writing,of the nature, cause, date of commencement thereof and the anticipated extent of any delay or interruption in performance. 10.4 Termination Due to Force Majeure. If a Party will be prevented from performing its material obligations under this Agreement for an estimated period of twelve (12) consecutive months or longer due to Force Majeure, then the unaffected Party may terminate this Agreement, without liability of either Party to the other, upon thirty (30) Days’prior written notice at any time during Force Majeure. 11.0 INDEMNITY 11.1 Indemnity by the Seller. The Seller shall indemnify, defend,and hold harmless the Buyer, its elected and appointed officials, directors, officers, employees, agents, and representatives against and from any and all losses, claims, demands, liabilities and expenses, actions or suits, including reasonable costs and attorney’s fees, resulting from, or arising out of or in any way connected with claims by third parties associated with (A) (i) Energy delivered at the Delivery Point; (ii) the Seller’s operation and/or maintenance of the Facility; or (iii) the Seller’s actions or inactions with respect to this Agreement, and (B) any loss, claim, action or suit, for or on account of injury, bodily or otherwise, to, or death of, persons, or for damage to or destruction of property belonging to the Buyer or other third party, excepting only such loss, claim, action or suit as may be caused solely by the willful misconduct or gross negligence of the Buyer, its agents, employees, directors or officers. 11.2 Indemnity by the Buyer. The Buyer shall indemnify, defend, and hold harmless the Seller, its directors, officers, employees, agents, and representatives against and from any and all losses, claims, demands, liabilities and expenses, actions or suits, including reasonable costs and attorney’s fees resulting from, or arising out of or in any way connected with claims by third parties associated with acts of the Buyer, its officers, employees, agents, and representatives, relating to: (A) Energy delivered by the Seller under this Agreement after the Delivery Point, and (B) any loss, claim, action or suit, for or on account of injury, bodily or otherwise, to, or death of, persons, or for damage to or destruction of property belonging to the Seller or other third party, excepting only such loss, claim, action or suit as may be caused solely by the willful misconduct or gross negligence of the Seller, its agents, employees, directors or officers. 12.0 LIMITATION OF DAMAGES EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED UNLESS EXPRESSLY HEREIN PROVIDED. NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR 110928 dm 0073627 14 CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. UNLESS EXPRESSLY HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF SECTION 11 (INDEMNITY), IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. 13.0 NOTICES Notices shall, unless otherwise specified herein, be in writing and may be delivered by hand delivery, United States mail, overnight courier service, facsimile or electronic messaging (e-mail)to the addresses set forth in Exhibit “PPA-F.”. Whenever this Agreement requires or permits delivery of a “notice” (or requires a Party to “notify”), the Party with such right or obligation shall provide a written communication in the manner specified below. A notice sent by facsimile transmission or electronic mail will be recognized and shall be deemed received on the Business Day on which such notice was transmitted if received before 5 p.m. Pacific Time (and if received after 5 p.m., on the next Business Day) and a notice by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent or such earlier time as is confirmed by the receiving Party unless it confirms a prior oral communication, in which case any such notice shall be deemed received on the day sent. A Party may change its addresses by providing notice of same in accordance with this provision. A Party may request a change to Exhibit “PPA- F”as necessary to keep the information current. 14.0 TERM, TERMINATION EVENT AND TERMINATION 14.1 Term. The Term shall commence upon the execution by the duly authorized representatives of each of the Parties, and shall remain in effect until the conclusion of the Delivery Term, unless terminated sooner pursuant to the terms and conditions of this Agreement. All indemnity rights shall survive the termination of this Agreement for twelve (12) months. 14.2 Termination Event. 14.2.1 The Buyer shall have the right,but not the obligation,to terminate this Agreement upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The Facility has not achieved Commercial Operation within seventy (70) days following the Deadline; (b) After the Commercial Operation Date, the Seller has not sold or delivered Energy from the Facility to the Buyer for a period of twelve (12) consecutive months; (c) If the Facility does not obtain RPS Certification within six (6) months of the Commercial Operation Date and maintain RPS Certification as required by Section 3.2;or (d) The Seller breaches any other material obligation of this Agreement. 14.2.2 The Seller shall have the right,but not the obligation,to terminate this Agreement upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The Buyer fails to make a payment due and payable under this Agreement within thirty (30) days after written notice that such payment is due; (b) The Buyer breaches any other material obligation of this Agreement; or (c) at any time prior to the Commercial Operation Date, subject to the provisions of Section 7 of this Agreement. 14.3 Time to Cure.None of the events described in Section 14.2 other than a termination under 14.2.2(c) shall constitute a Termination Event if the Buyer or the Seller cures the event, failure, or circumstance within thirty (30) days after receipt of written notification sent by the other Party, seeking termination,or such longer period as may be necessary to cure so long as the Party subject to the Terminating Event is exercising diligent efforts to cure. 14.4 Termination. 14.4.1 Declaration of a Termination Event. If a Termination Event has occurred and is 110928 dm 0073627 15 continuing, the Party with the right to terminate shall have the right to: (a) send notice, designating a day, no earlier than thirty (30) days after such notice is deemed to be received (as provided in Section 13), as an early termination date of this Agreement (the “Early Termination Date”),unless the Seller has timely communicated with the Buyer and the Parties have agreed to resolve the circumstances giving rise to the Termination Event; (b) accelerate all amounts owing between the Parties; and (c) terminate this Agreement and end the Delivery Term effective as of the Early Termination Date. 14.4.2 Release of Liability for Termination Event. Upon termination of this Agreement pursuant to this section neither Party shall be under any further obligation or subject to liability hereunder, except with respect to the indemnity provision in Section 11 hereof, which shall remain in effect for a period of 12 months following the Early Termination Date. 14.5 No Limitation on Damages. Nothing in this Agreement shall be deemed or construed to limit a Party’s right to recover damages from the other Party, except as otherwise provided in this Agreement. 15.0 RELEASE OF DATA Except as may be exempt from disclosure under applicable law, the Seller authorizes the Buyer to release to any regulatory authority having jurisdiction over the Facility or a Party,or to any request made pursuant to the California Constitution or the California Public Records Act, information regarding the Facility, including the Seller’s name and location, operational characteristics, the Term of this Agreement, the Facility resource type, the scheduled Commercial Operation Date, the actual Commercial Operation Date, the Contract Capacity,payments made to the Seller and Energy production information. The Seller acknowledges that this information may be made publicly available. 16.0 ASSIGNMENT Neither Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld. 16.1 Upon the written request of the Seller, the Buyer will execute a “Consent and Agreement”between the Seller and the Seller’s lender(s), if any,in the form acceptable to the Parties; provided, for illustration purposes only, an exemplar is attached hereto as Exhibit “PPA-G.” 16.2 Notwithstanding the foregoing, no Consent and Agreement shall be required for: 16.2.1 Any assignment or transfer of this Agreement by the Seller to an affiliate of the Seller, provided that such affiliate’s creditworthiness is equal to or better than that of Seller, as reasonably determined by the non-assigning or non-transferring Party; or 16.2.2 Any assignment or transfer of this Agreement by the Seller or the Buyer to a person succeeding to all or substantially all of the assets of such Party, provided that such person’s creditworthiness is equal to or greater than that of such Party, as reasonably determined by the non-assigning or non-transferring Party. 16.2.3 Notification of any assignment or transfer of this Agreement under Section 16.2.1 or 16.2.2 shall be given to the non-assigning or non-transferring Party in accordance with Exhibit “PPA-F.” 17.0 APPLICABLE LAW,VENUE,ATTORNEYS’ FEES, AND INTERPRETATION This Agreement will be governed by and construed in accordance with the laws of the State of California.The Parties will comply with applicable laws pertaining to their obligations arising under this Agreement. In the event that an action is brought, the Parties agree that trial of such action will 110928 dm 0073627 16 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.The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. 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. 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 Exhibit or any amendment thereof. 18.0 SEVERABILITY If any provision in this Agreement is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Agreement and the Parties shall use their best efforts to modify this Agreement to give effect to the original intention of the Parties. 19.0 COUNTERPARTS; INTERPRETATION OF CONFLICTING PROVISIONS This Agreement may be executed in one or more counterparts,each of which shall be deemed an original and all of which shall be deemed one and the same Agreement. Delivery of an executed counterpart of this Agreement by facsimile or portable document format (“PDF”)transmission will be deemed as effective as delivery of an originally executed counterpart. Each Party delivering an executed counterpart of this Agreement by facsimile or PDF transmission will also deliver an originally executed counterpart, but the failure of any Party to deliver an originally executed counterpart of this Agreement will not affect the validity or effectiveness of this Agreement. In the event of a conflict between the Agreement and any, some or all of the Exhibits, the document imposing the more specific duty or obligation will prevail. 20.0 GENERAL No amendment to or modification of this Agreement shall be enforceable unless reduced to writing and executed by both Parties. This Agreement shall not impart any rights enforceable by any third party other than a permitted successor or assignee bound to this Agreement. Waiver by a Party of any default by the other Party shall not be construed as a waiver of any other default. The headings used herein are for convenience and reference purposes only. 21.EXHIBITS The following exhibits shall be deemed incorporated in and made a part of this Agreement. Exhibit “PPA-A”-Facility Description, Rates, and Reservation Deposit Exhibit “PPA-B”-Commercial Operation Date Confirmation Letter Exhibit “PPA-C”-Scheduling and Outage Notification Procedure Exhibit “PPA-D”-Green Attributes Reporting and Conveyance Procedures Exhibit “PPA-E”-Insurance Requirements Exhibit “PPA-F”-Notices Exhibit “PPA-G”-Form of Lender Consent and Agreement // // 110928 dm 0073627 17 // // // // IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their authorized representatives as of the Effective Date. APPROVED AS TO FORM:CITY OF PALO ALTO _____________________________________________________________________ Senior Asst. City Attorney City Manager APPROVED:ABC COMPANY _____________________________________________________________________ Director of Administrative Services President ___________________________________ Director of Utilities 110928 dm 0073627 18 EXHIBIT “PPA-A” Facility Description, Rates, and Reservation Deposit Program Rates Palo Alto Green Local Energy Program Purchase Rate Schedule E-PAGLE-____ Contract Price $__.__ / kWh Pre-Certification Price $__.__ / kWh Reservation Deposit Reservation Deposit ($20/kW of Contract Capacity)$__________ Service address:___________________________________, Palo Alto, CA ____________ Facility Description: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Contract Capacity:________ kW, based on: Inverter rating Solar array rating (Panel rated output at PV USA test conditions x inverter efficiency) Facility primary fuel/technology:____________________________________________________ 110928 dm 0073627 19 EXHIBIT “PPA-B” Commercial Operation Date Confirmation Letter In accordance with the terms of the Power Purchase Agreement (PaloAltoGreen Local Energy Program), dated ______________(the “Agreement”) by and between the City of Palo Alto, as the Buyer,and ABC Company, as the Seller, this Confirmation Letter serves to document the Parties’agreement that (i) the conditions precedent to the occurrence of the Commercial Operation Date have been satisfied, and (ii) the Buyer has received Energy, as specified in the Agreement, as of ______________, _______.The actual installed Contract Capacity is ________ kW. This Confirmation Letter shall confirm the Commercial Operation Date, as defined in the Agreement, as of the date referenced in the preceding sentence. IN WITNESS WHEREOF, each Party has caused this letter to be duly executed by its authorized representative as of the date of last signature provided below: Buyer Seller By: _______________________________ By: _____________________________ Name: Name: ___________________________ Title: Director of Utilities Title: ____________________________ Date: _____________________________ Date: ____________________________ In recognition of the Commercial Operation Date relative to the Effective Date of the Agreement by and between the Buyer and the Seller, the Seller hereby calculates the amount to return, if any, of the Seller’s deposit, as follows: Original Reservation Deposit Amount: _$_______________ Commercial Operation Date Deadline:__________________ Commercial Operation Date is prior to Deadline Commercial Operation Date occurred _____ weeks following the Deadline, meaning that ___ % of the Reservation Deposit is relinquished by Seller per Section 7.2.2 of the Power Purchase Agreement. Amount (if any) of Reservation Deposit to return to the Seller is:$___________________ 110928 dm 0073627 20 EXHIBIT “PPA-C” Scheduling and Outage Notification Procedure C.1 Applicability. This Exhibit” PPA-C”shall apply if the Facility is subject to Section 6.0 of this Agreement. C.2 Annual Operations Forecast C.2.1 No later than September tenth (10th) of each calendar year, Seller will provide NCPA with an annual operations forecast detailing hourly expected generation and all proposed planned Outages for the next calendar year. The annual operations forecast for the calendar year shall be provided no later than ninety (90) days prior to the scheduled Commercial Operation Date of the Generating Facility. C.2.2 NCPA may request modifications to the annual operations forecast at any time, and Seller shall use good faith efforts to accommodate the requested modifications. C.2.3 Seller shall not conduct Planned Outages at times other than as set forth in its annual operations forecast, unless approved in advance by NCPA, which approval shall not be withheld or delayed unreasonably. C.2.4 Seller shall not schedule or conduct Planned Outages from 12:00 p.m. through 7:00 p.m. Pacific Time during the months of June through October. C.3. Short Term Operations Forecasts C.3.1.Quarterly Operations Forecast C.3.1.1 No later than the fifth (5th) day of January, April and July of each Contract Year, Seller shall provide a quarterly operations forecast by hour of expected generation, and all proposed Planned Outages for next full quarter and the twelve (12) months following that quarter. As an example, by January 5, 2013, Seller would provide a quarterly operations forecast by hour of expected generation for the period April 1, 2013 through June 30, 2013, and identifying all proposed Planned Outages for the period April 1, 2013 through June 30, 2014. C.3.1.2 NCPA will approve or require modifications to the proposed quarterly operations forecast within ten (10) days of receipt of the quarterly operations forecast. C.3.1.3 If required by NCPA, Seller will provide a modified quarterly operations forecast no later than seven (7) days after receipt of required modifications from NCPA. C.3.2 Weekly Update C.3.2.1 By no later than 14:00 of each Wednesday, Seller shall provide an electronic update, in a format specified by NCPA, to the quarterly operations forecast for the following seven (7) days (Thursday through the next Wednesday). C.3.2.2 The weekly update shall include hourly expected generation and all proposed planned Outages for the relevant seven (7) day period. C.4 Outage Detail for Annual and Short Term Operations Forecasts. Outage information provided by Seller shall include, at a minimum, the start and stop time of the Outage, capacity out of service (kW), the equipment that is or will be out of service, and the reason for the Outage. 110928 dm 0073627 21 C.5 General Scheduling Protocols C.5.1 Daily Modifications to Forecasts. Unless otherwise mutually agreed, Seller may make changes to the weekly update to the quarterly operations forecast by providing such changes to NCPA prior to 08:00 of the day that is two (2) Business Days before the active scheduling day as determined by the WECC prescheduling calendar. Example: For power that is scheduled for generation or delivery on Thursday, March 29, changes must be submitted to NCPA no later than 08:00 on Tuesday, March 27. C.5.2 Hourly Modifications to Active Schedules. Unless otherwise mutually agreed, Seller may request changes to active schedules by providing such changes to NCPA with a minimum of four (4) hours notice prior to the applicable CAISO market deadline (e.g. Hour Ahead Scheduling Process (“HASP”) Scheduling deadline, as defined in the CAISO Tariff). Active day Schedule changes are not binding. Changes to active Schedules are limited to two (2) changes per day, excluding forced Outages, unless otherwise agreed to between the Parties. One request for a Schedule change, of one hour or multiple hours duration, constitutes one Schedule change. Example: For power that is scheduled for generation or delivery in hour ending 15:00 (for the period from 14:01 to 15:00), changes must be submitted to NCPA no later than 10:00. C.5.3.Unforeseen Circumstances. At Seller’s request, NCPA may, but is not required to, modify the Schedules for the Generation Facility Output for unforeseen circumstances in accordance with the above scheduling timeline constraints described in this Exhibit PPA-C. C.5.4.Absence of Forecasts. In the absence of forecasts and schedules as required by this Agreement or this Exhibit, NCPA shall utilize the most current information provided by Seller in the development and submission of Schedules. C.6 Outage Reporting Protocols C.6.1.Notification. Seller shall notify NCPA of all planned or forced outages of the Generating Facility to ensure compliance with CAISO Outage Coordination and Enforcement Protocols. C.6.1.1 Outage information provided by Seller is to include, at a minimum, start and stop time of Outage, Capacity out of service (kW), equipment out of service, and reason for the Outage. C. 6.1.2 Planned Outages not included in the annual operations forecast, the quarterly operations forecast, or the weekly update, shall be provided by Seller to NCPA at least four (4) Business Days prior to the start of the requested outage. C. 6.1.3 At any time prior to the start of a Planned Outage, the CAISO may deny the Outage due to a System Emergency (as defined in the CAISO Tariff) or as otherwise permitted under the CAISO Tariff. If NCPA receives notice that the CAISO has denied an Outage in accordance with the CAISO Tariff, NCPA will notify Seller as soon as possible and Seller shall modify the planned Outage as required by the CAISO. C.6.2 Commencement of an Outage.Seller shall not begin any Planned Outage without prior approval of NCPA and the CAISO. C.6.3 Forced Outages C.6.3.1 Forced Outages shall be reported by Seller to NCPA within twenty (20) minutes of such Outages. 110928 dm 0073627 22 C.6.3.2 Notice by Seller to NCPA of a Forced Outage shall include the reason for the Outage (if known), expected duration of the Outage, and the Capacity reduction. C.6.3.3 By no later than the end of the next Business Day following the day on which a Forced Outage occurred, a detailed written report shall be provided by Seller to NCPA specifying the reason for the Outage, expected duration of such Outage, capacity reduction, and actions taken to mitigate such Outage. C.6.4 Return to Service.Seller shall notify NCPA as soon as possible, but in any case prior to the Generating Facility being returned to service. C.7 Notices. All Scheduling notices and Schedules are to be submitted to NCPA by phone, fax or email, or other means as may be mutually agreed by the Parties, to the persons designated in Exhibit PPA-F. C.8 Changes in Scheduling and Outage Procedure. The Buyer shall revise Exhibit “PPA-C,” or,as appropriate, give written notice to the Seller regarding the revision, and issue a new Exhibit “PPA-C,”which shall then become part of the Agreement to reflect changes in the scheduling and outage notification procedure. 110928 dm 0073627 23 EXHIBIT “PPA-D” Green Attributes Reporting and Conveyance Procedures D.1 Additional Definitions for the Conveyance of Green Attributes D.1.1 “Certificate Transfers” means the process, as described in the WREGIS Operating Rules,whereby a WREGIS account holder may request that WREGIS Certificates from a specific generating unit be directly deposited into another WREGIS account. D.1.2 “WREGIS Certificates” means a certificate created within the WREGIS system that represents all Renewable and Green Attributes from one MWh of electricity generation from an Eligible Renewable Energy Resource that is registered with WREGIS. D.1.3 “WREGIS Operating Rules” means the document published by WREGIS that govern the operation of the WREGIS system for registering, tracking, conveying, among others. RECs produced from Eligible Renewable Energy Resources that shall be registered with WREGIS. D.1.4 “WREGIS” means Western Renewable Energy Generation Information System. D.2 RECs. Green Attributes shall be conveyed by the Seller to the Buyer through RECs, which shall be registered tracked and conveyed to the Buyer,using WREGIS. D.3 WREGIS Registration. Prior to the Commercial Operation Date, the Buyer will register the Facility in the Buyer’s WREGIS account on behalf of the Seller. The Buyer shall charge back to the Seller any costs of registering and maintaining the registration of the Facility with WREGIS.Seller shall provide any documents required by WREGIS and assign to Buyer its rights to register the Facility in WREGIS using agreements provided by WREGIS. D.4 Buyer’s WREGIS Account.The Buyer shall, at its sole expense, establish and maintain the Buyer’s WREGIS account sufficient to accommodate the WREGIS Certificates produced by the output of the Facility. The Buyer shall be responsible for all expenses associated with (A) establishing and maintaining the Buyer’s WREGIS Account, and (B) subsequently transferring or retiring WREGIS Certificates. D.5 Qualified Reporting Entity. The Buyer shall be the Qualified Reporting Entity (as such term is defined by WREGIS) for the Facility, and shall be responsible for providing the metered Output data to WREGIS. D.6 Reporting of Environmental Attributes.In lieu of the Seller’s transfer of the WREGIS Certificates using Certificate Transfers from the Seller’s WREGIS account to the Buyer’s WREGIS account, the Buyer shall report the Facility as being directly in its WREGIS account, which will preclude the Seller from reporting the Facility in its own WREGIS account. D.6.1 By avoiding the use of Certificate Transfers, there will be no transaction costs to the Seller or the Buyer for the Certificate Transfers that would otherwise be used. D.6.2 WREGIS Certificates for the Facility will be created on a calendar month basis in accordance with the certification procedure established by the WREGIS Operating Rules in an amount equal to the Energy generated by the Project and delivered to the Buyer in the same calendar month. D.6.3 WREGIS Certificates will only be created for whole MWh amounts of energy generated. Any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient generation is accumulated for the creation of a WREGIS Certificate and all such accumulated 110928 dm 0073627 24 MWh of Environmental Attributes will then be available to Buyer. D.6.4 If a WREGIS Certificate Modification (as such term is defined by WREGIS) will be required to reflect any errors or omissions regarding the Green Attributes from the Facility, then the Buyer will manage the submission of the WREGIS Certificate Modification. D.6.5 Due to the expected delay in the creation of WREGIS Certificates relative to the timing of invoice payments under Section 2, the Buyer will normally be making an invoice payment for the Output for a given month in accordance with Section 2 before the WREGIS Certificates for such month may be created in the Buyer’s WREGIS account. Notwithstanding this delay, the Buyer shall have all right and title to all such WREGIS Certificates upon payment to the Seller in accordance with Section 2. D.7 Changes in Green Attributes Reporting and Conveyance Procedures.The Buyer shall revise this Exhibit “PPA-D,”as appropriate, give written notice to the Seller regarding the revision, and issue a new Exhibit “PPA-D,”which shall then become part of this Agreement in the event that: D.7.1 WREGIS changes the WREGIS Operating Rules (as defined by WREGIS) after the Effective Date or applies the WREGIS Operating Rules in a manner inconsistent with this Exhibit “PPA-D”after the Effective Date; or, D.7.2 WREGIS is replaced as the primary method that the Buyer uses for conveyance of Green Attributes, or additional methods to convey all Green Attributes,are required. 110928 dm 0073627 25 EXHIBIT “PPA-E” Insurance Requirements CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, WILL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH A BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: MINIMUM LIMITS REQUIRED TYPE OF COVERAGE REQUIREMENT EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION AUTOMOBILE LIABILITY STATUTORY STATUTORY YES COMMERCIAL GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $2,000,000 $2,000,000 $2,000,000 YES COMPREHENSIVE AUTOMOBILE LIABILITY, INCLUDING, OWNED, HIRED, NON-OWNED BODILY INJURY -EACH PERSON -EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 NO PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: PROPOSER, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY PROPOSER AND ITS SUBCONSULTANS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSURES CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I.INSURANCE COVERAGE MUST INCLUDE: A.A PROVISION FOR A W RITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B.A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY –SEE, SAMPLE AGREEMENT FOR SERVICES. II.SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE, OR COMPLETE THIS SECTION AND IV THROUGH V, BELOW. A.NAME AND ADDRESS OF COMPANY AFFORDING COVERAGE (NOT AGENT OR BROKER): B.NAME, ADDRESS, AND PHONE NUMBER OF YOUR INSURANCE AGENT/BROKER: 110928 dm 0073627 26 C.POLICY NUMBER(S): D.DEDUCTIBLE AMOUNT(S) (DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL): III.AW ARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AND PROPOSER’S SUBMITTAL OF CERTIFICATES OF INSURANCE EVIDENCING COMPLIANCE WITH THE REQUIREMENTS SPECIFIED HEREIN. IV.ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSURES” A.PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING W ITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSURES. B.CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSURES UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C.NOTICE OF CANCELLATION 1.IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2.IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY W RITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. V.PROPOSER CERTIFIES THAT PROPOSER’S INSURANCE COVERAGE MEETS THE ABOVE REQUIREMENTS: THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. SIGNATURE(S) MUST BE SAME SIGNATURE(S) AS APPEAR(S) ON SECTION II, ATTACHMENT A, PROPOSER’S INFORMATION FORM. Firm:_______________________________________________________________________ Signature:_________________________________________________________ Name:_________________________________________________________ (Print or type name) Signature:_________________________________________________________ Name:_________________________________________________________ (Print or type name) 110928 dm 0073627 27 NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. 110928 dm 0073627 28 EXHIBIT “PPA-F” Notices Contract Administration BUYER:SELLER: City of Palo Alto Utilities Resource Management 250 Hamilton Avenue Palo Alto, CA 94301 Ph: 650-329-2689 Em: UtilitiesResourceManagement@CityofPaloAlto.Org Billing and Settlements BUYER:SELLER: City of Palo Alto Utilities Resource Management 250 Hamilton Avenue Palo Alto, CA 94301 Ph: 650-329-2689 Em: UtilityCommoditySettlements@CityofPaloAlto.Org Forecasting and Outage Reporting under Section 6 of this Agreement Planned Outages: BUYER:SELLER: Forced Outages BUYER:SELLER: Forecasting and Scheduling BUYER:SELLER: 110928 dm 0073627 29 EXHIBIT “PPA-G” Form of Lender Consent and Agreement This CONSENT AND AGREEMENT (this “Consent”), dated as of __________ ___, 20__, is entered into by and among the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), XYZ COMPANY, a California corporation (the “Lender,”by its agent, KLM COMPANY (the “Administrative Agent”), and ABC COMPANY, a California corporation (the “Borrower”). Unless otherwise defined, all capitalized terms have the meaning given in the Contract (as hereinafter defined). RECITALS A. Borrower intends to develop, construct, install, test, own, operate and use an approximately ____ MW electric generating facility located in the city of Palo Alto in the State of California, known as the _________________ Project (the “Project B. In order to partially finance the development, construction, installation, testing, operation and use of the Project, Borrower has entered into that certain financing agreement dated as of _____________ (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Financing Agreement”), among Borrower, the financial institutions from time to time parties thereto (collectively, the “Lenders”) , and Administrative Agent for the Lenders, pursuant to which,among other things, Lenders have extended commitments to make loans and other financial accommodations to, and for the benefit of, Borrower. C. City and Borrower have entered into that certain Power Purchase Agreement, dated as of _____________ (attached hereto and incorporated herein by reference, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the “Power Purchase Agreement”) D. City and Borrower have entered into that certain Interconnection Agreement, dated as of _____________ (attached hereto and incorporated herein by reference, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the “Interconnection Agreement”). E. Pursuant to a security agreement executed by Borrower and Administrative Agent for the Lenders (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”), Borrower has agreed, among other things, to assign, as collateral security for its obligations under the Financing Agreement and related documents (collectively, the “Financing Documents”), all of its right, title and interest in, to and under the Power Purchase Agreement and Interconnection Agreement to Administrative Agent for the benefit of itself, the Lenders and each other entity or person providing collateral security under the Financing Documents. F. It is a requirement under the Financing Agreement that City and the other parties hereto execute this Consent. AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the parties hereto hereby agree as follows: 1. CONSENT TO ASSIGNMENT. City acknowledges the assignment referred to in Recital E above, consents to an assignment of the Power Purchase Agreement and Interconnection Agreement pursuant thereto, and agrees with Administrative Agent as follows: (a) Administrative Agent shall be entitled (but not obligated) to exercise all rights and to cure any defaults of Borrower under the Power Purchase Agreement or Interconnection Agreement, as the 110928 dm 0073627 30 case may be, subject to applicable notice and cure periods provided in the Power Purchase Agreement and Interconnection Agreement. Upon receipt of notice from Administrative Agent, City agrees to accept such exercise and cure by Administrative Agent if timely made by Administrative Agent under the Power Purchase Agreement or Interconnection Agreement, as the case may be, and this Consent. Upon receipt of Administrative Agent's written instructions and to the extent allowed by law, City agrees to make directly to such account as Administrative Agent may direct City in writing from time to time, all payments to be made by City to Borrower under the Power Purchase Agreement or Interconnection Agreement, as the case may be, from and after City’s receipt of such instructions, and Borrower consents to any such action. City shall have no liability to Borrower under the Power Purchase Agreement,Interconnection Agreement, or this Consent for directing such payments to Administrative Agent in accordance with this subsection (a). (b) City will not, without the prior written consent of Administrative Agent (such consent not to be unreasonably withheld), (i) cancel or terminate the Power Purchase Agreement or Interconnection Agreement, or consent to or accept any cancellation, termination or suspension thereof by Borrower, except as provided in the Power Purchase Agreement or Interconnection Agreement and in accordance with subparagraph 1(c) hereof, (ii) sell, assign or otherwise dispose (by operation of law or otherwise) of any part of its interest in the Power Purchase Agreement or Interconnection Agreement, except as provided in the Power Purchase Agreement or Interconnection Agreement, or (iii) amend or modify the Power Purchase Agreement or Interconnection Agreement in any manner materially adverse to the interest of the Lenders in the Power Purchase Agreement and Interconnection Agreement as collateral security under the Security Agreement. (c) City agrees to deliver duplicates or copies of all notices of default delivered by City under or pursuant to the Power Purchase Agreement or Interconnection Agreement to Administrative Agent in accordance with the notice provisions of this Consent. City shall deliver any such notices concurrently with delivery of the notice to Borrower under the Power Purchase Agreement or Interconnection Agreement. To the extent that a cure period is provided under the Power Purchase Agreement or Interconnection Agreement, Administrative Agent shall have the same period of time to cure the breach or default that Borrower is entitled to under the Power Purchase Agreement or Interconnection Agreement, except that if City does not deliver the default notice to Administrative Agent concurrently with delivery of the notice to Borrower under the Power Purchase Agreement or Interconnection Agreement, then as to Administrative Agent, the applicable cure period under the Power Purchase Agreement or Interconnection Agreement shall begin on the date on which the notice is given to Administrative Agent. If possession of the Project is necessary to cure such breach or default,and Administrative Agent or its designee(s) or assignee(s) declare Borrower in default and commence foreclosure proceedings, Administrative Agent or its designee(s) or assignee(s) will be allowed a reasonable period to complete such proceedings so long as Administrative Agent or its designee(s) continue to perform any monetary obligations under the Power Purchase Agreement or Interconnection Agreement, as the case may be. City consents to the transfer of Borrower's interest under the Power Purchase Agreement and Interconnection Agreement to the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, City shall recognize the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or other purchaser or grantee as the applicable party under the Power Purchase Agreement and Interconnection Agreement (provided that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee assume the obligations of Borrower under the Power Purchase Agreement and Interconnection Agreement, including, without limitation, satisfaction and compliance with all credit provisions of the Power Purchase Agreement and Interconnection Agreement, if any, and provided further that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee has a creditworthiness equal to or better than Borrower, as reasonably determined by City). 110928 dm 0073627 31 (d) In the event that either the Power Purchase Agreement or Interconnection Agreement, or both is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within forty-five (45) days after such rejection, the Administrative Agent shall so request, City will execute and deliver to Administrative Agent a new power purchase agreement or interconnection agreement, as the case may be, which power purchase agreement or interconnection agreement shall be on the same terms and conditions as the original Power Purchase Agreement or Interconnection Agreement for the remaining term of the original Power Purchase Agreement or Interconnection Agreement before giving effect to such rejection, and which shall require Administrative Agent to cure any defaults then existing under the original Power Purchase Agreement or Interconnection Agreement. Notwithstanding the foregoing, any new renewable power purchase agreement or interconnection agreement will be subject to all regulatory approvals required by law. City will use good faith efforts to promptly obtain any necessary regulatory approvals. (e) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) elect to perform Borrower's obligations under the Power Purchase Agreement and Interconnection Agreement, succeed to Borrower’s interest under the Power Purchase Agreement and Interconnection Agreement, or enter into a new power purchase agreement or interconnection agreement as provided in subparagraph 1(d) above, the recourse of City against Administrative Agent, Lenders or their designee(s) and assignee(s) shall be limited to such parties’ interests in the Project, and the credit support required under the Power Purchase Agreement and Interconnection Agreement, if any. (f) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) succeed to Borrower's interest under the Power Purchase Agreement and Interconnection Agreement, Administrative Agent, the Lenders or their designee(s) or assignee(s) shall cure any then-existing payment and performance defaults under the Power Purchase Agreement or Interconnection Agreement, except any performance defaults of Borrower itself, which by their nature are not susceptible of being cured. Administrative Agent, the Lenders and their designee(s) or assignee(s) shall have the right to assign all or a pro rata interest in the Power Purchase Agreement and Interconnection Agreement to a person or entity to whom Borrower’s interest in the Project is transferred, provided such transferee assumes the obligations of Borrower under the Power Purchase Agreement and Interconnection Agreement and has a creditworthiness equal to or better than Borrower, as reasonably determined by City. Upon such assignment, Administrative Agent and the Lenders and their designee(s) or assignee(s) (including their agents and employees) shall be released from any further liability thereunder accruing from and after the date of such assignment, to the extent of the interest assigned. 2. REPRESENTATIONS AND WARRANTIES. City hereby represents and warrants that as of the date of this Consent: (a) It (i) is duly formed and validly existing under the laws of the State of California, and (ii) has all requisite power and authority to enter into and to perform its obligations hereunder and under the Power Purchase Agreement and Interconnection Agreement, and to carry out the terms hereof and thereof and the transactions contemplated hereby and thereby; (b) the execution, delivery and performance of this Consent, the Power Purchase Agreement and the Interconnection Agreement have been duly authorized by all necessary action on its part and do not require any approvals, material filings with, or consents of any entity or person which have not previously been obtained or made; (c) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement is in full force and effect; (d) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement has been duly executed and delivered on its behalf and constitutes its legal, valid and binding 110928 dm 0073627 32 obligation, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law); (e) there is no litigation, arbitration, investigation or other proceeding pending for which City has received service of process or, to City’s actual knowledge, threatened against City relating solely to this Consent, the Power Purchase Agreement, or the Interconnection Agreement and the transactions contemplated hereby and thereby; (f) the execution, delivery and performance by it of this Consent, the Power Purchase Agreement, and the Interconnection Agreement, and the consummation of the transactions contemplated hereby, will not result in any violation of, breach of or default under any term of any material contract or material agreement to which it is a party or by which it or its property is bound, or of any material requirements of law presently in effect having applicability to it, the violation, breach or default of which could have a material adverse effect on its ability to perform its obligations under this Consent; (g) neither City nor, to City’s actual knowledge, any other party to the Power Purchase Agreement or Interconnection Agreement, is in default of any of its obligations thereunder; and (h) to City’s actual knowledge, (i) no Force Majeure Event exists under, and as defined in, the Power Purchase Agreement or Interconnection Agreement and (ii) no event or condition exists which would either immediately or with the passage of any applicable grace period or giving of notice, or both, enable either City or Borrower to terminate or suspend its obligations under the Power Purchase Agreement or the Interconnection Agreement. Each of the representations and warranties set forth herein shall survive the execution and delivery of this Consent and the consummation of the transactions contemplated hereby. 3. NOTICES. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by facsimile and (c) if otherwise delivered, upon the earlier of receipt or three (3) Business Days after being sent registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to City: [___________________________________] [___________________________________] [___________________________________] Telephone No.: [______________________] Facsimile No.: [_______________________] Attn: [______________________________] If to Administrative Agent: [___________________________________] [___________________________________] [___________________________________] Telephone No.: [______________________] Facsimile No.: [_______________________] Attn: [______________________________] 110928 dm 0073627 33 If to Borrower: [___________________________________] [___________________________________] [___________________________________] Telephone No.: [______________________] Facsimile No.: [_______________________] Attn: [______________________________] Any party shall have the right to change its address for notice hereunder to any other location within the United States by giving thirty (30) days written notice to the other parties in the manner set forth above. 4. ASSIGNMENT, TERMINATION, AMENDMENT. This Consent shall be binding upon and benefit the successors and assigns of the parties hereto and their respective successors, transferees and assigns (including without limitation, any entity that refinances all or any portion of the obligations under the Financing Agreement). City agrees (a) to confirm such continuing obligation in writing upon the reasonable request of (and at the expense of) Borrower, Administrative Agent, the Lenders or any of their respective successors, transferees or assigns, and (b) to cause any successor-in-interest to City with respect to its interest in the Power Purchase Agreement or Interconnection Agreement to assume, in writing in form and substance reasonably satisfactory to Administrative Agent, the obligations of City hereunder. Any purported assignment or transfer of the Power Purchase Agreement or Interconnection Agreement not in conjunction with the written instrument of assumption contemplated by the foregoing clause (b) shall be null and void. No termination, amendment, or variation of any provisions of this Consent shall be effective unless in writing and signed by the parties hereto. No waiver of any provisions of this Consent shall be effective unless in writing and signed by the party waiving any of its rights hereunder. 5. GOVERNING LAW. This Consent shall be governed by the laws of the State of California applicable to contracts made and to be performed in such State. THE STATE COURTS SITUATED IN THE STATE OF CALIFORNIA SHALL HAVE EXCLUSIVE JURISDICTION TO RESOLVE ANY DISPUTES WITH RESPECT TO THIS CONSENT AND AGREEMENT WITH City, ASSIGNOR, AND LENDER IRREVOCABLY CONSENTING TO THE JURISDICTION THEREOF FOR ANY ACTIONS, SUITS, OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONSENT AND AGREEMENT. 6. COUNTERPARTS. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. SEVERABILITY. In case any provision of this Consent, or the obligations of any of the parties hereto,shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions, or the obligations of the other parties hereto, shall not in any way be affected or impaired thereby. 8. ACKNOWLEDGMENTS BY BORROWER. Borrower, by its execution hereof, acknowledges and agrees that neither the execution of this Consent, the performance by City of any of the obligations of City hereunder, the exercise of any of the rights of City hereunder, or the acceptance by City of performance of the Power Purchase Agreement by any party other than Borrower shall (1) release Borrower from any obligation of Borrower under the Power Purchase Agreement or Interconnection Agreement, (2) constitute a consent by City to, or impute knowledge to City of, any specific terms or conditions of the Financing Agreement, the Security Agreement or any of the other Financing Documents, or (3) except as expressly set forth in this Consent, constitute a waiver by City of any of its rights under the Power Purchase Agreement or Interconnection Agreement. Borrower and Administrative Agent acknowledge hereby for the benefit of City that none of the Financing Agreement, the Security Agreement, 110928 dm 0073627 34 the Financing Documents or any other documents executed in connection therewith alter, amend, modify or impair (or purport to alter, amend, modify or impair) any provisions of the Power Purchase Agreement. CITY OF PALO ALTO XYZ COMPANY _____________________________________________________________________ ABC COMPANY ___________________________________ Not Yet Approved Ordinance No. --- Ordinance of the Council of the City of Palo Alto Amending Sections 2.30.340 and 2.30.360 of Chapter 2.30 of Title 2 [Contract and Purchasing Procedures] of the Palo Alto Municipal Code to Exempt from Competitive Solicitation Requirements and Impose A Minimum Creditworthiness Requirement In Regard To Contracts Awarded under the PaloAltoGreen Local Energy Program . The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Section 2.30.340 of Chapter 22.04 of Title 2 of the Palo Alto Municipal Code is hereby amended to read, as follows: 2.30.340 Contracts for wholesale utility commodities. (a) Solicitation of Contracts (1) Contracts for purchase or sale-incidental-to-purchase of wholesale utility commodities providing for an estimated expenditure of $65,000 or less shall be solicited by informal bid or informal request for proposal in accordance with the provisions of section 2.30.400. Contracts for a purchase or sale-incidental-to-purchase of wholesale utility commodities providing for an estimated expenditure of $65,000 or more shall be solicited by formal bid, formal request for proposal or combination thereof, in accordance with the provisions of sections 2.30.410, 2.30.420 or 2.30.430. (2) Master contracts containing general terms and conditions for wholesale utility commodities that provide for the execution of one or more individual water, gas or electricity purchase and sale-incidental-to-purchase transactions under the terms of the master contract, shall be solicited by formal bid, formal request for proposals, or combination thereof, in accordance with the provisions of sections 2.30.420, 2.30.430 or 2.30.440. It is expected that the city will enter into several master contracts with different counterparties for the purchase and sale-incidental-to-purchase of gas and electricity utility commodities at wholesale. Whenever the city desires to execute an individual purchase or sale incidental to purchase transaction for gas or electricity commodities at wholesale, any counterparty that executes a master contract with the city and that is otherwise eligible to bid for or propose in regard to the particular transaction in accordance with the city's Energy Risk Management Policies, Guidelines and Procedures Manual shall be solicited, in writing (by mail, facsimile or electronic mail), and shall be eligible to tender a bid or proposal on the transaction. The counterparty offering the price for wholesale utility commodities deemed to be the most advantageous to the city shall be eligible for award of a contract for the transaction. (b) Basic terms and conditions. For contracts not otherwise within the city manager's authority to award, the council may by resolution authorize the city manager to award and sign a contract with a qualified, eligible counter party for the purchase and incidental sale of wholesale 111025 dm 0073642 Not Yet Approved utility commodities. This authority shall extend to contracts awarded under any city "feed-in tariff" local energy program. The resolution shall specify the limits of the authority delegated, including the maximum dollar amount of the authority and the duration of the contracts and/or transactions that may be executed under the delegation of authority. Any resolution delegating authority to the city manager to contract for electricity shall specify generally at least the following terms and conditions: quantity and the description of energy and energy services to be procured, including, but not limited to, on-peak and off-peak energy and ancillary services; term, specifying a not-to-exceed period of time; period of delivery denoted in years or months or years and months; and point of delivery or the locus on the interstate transmission system at which transfer of title is made. Any resolution delegating authority to contract for gas shall specify generally at least the following terms and conditions: quantity and the description of gas services to be procured, including, but not limited to, scheduled gas and gas transportation services; term, specifying a not-to-exceed period of time); period of delivery denoted in years or months or years and months; and point of delivery of the locus on the interstate transmission system at which transfer of title is made. (c) Required contract terms for gas and electric procurement contracts. The city shall use standardized form contracts for the procurement of gas and electricity, as practicable, including, but not limited to, form contracts created and copyrighted by the Edison Electric Institute, the Western States Power Pool, and the North American Energy Standards Board, Inc. and contracts used by any city "feed-in tariff' local energy program. Unless waived by resolution ofthe city council, a contract for procurement of gas or electricity and any amendment to the contract shall not be awarded by the city and executed by the duly authorized representatives of the city, unless the following terms and conditions are required: (1) governing law shall be the laws of the state of California; (2) choice of venue shall be the county of Santa Clara; and (3) a counterparty shall obtain and maintain during the term of the contract the minimum credit rating established as of the date of award of contract of not less than a BBB­ credit rating established by Standard & Poors and a Baa3 credit rating established by Moody's Investors Services, but the minimum credit rating requirement shall apply to a counterparty that is awarded a contract under a city "feed-in tariff' local energy program only to the extent the counterparty sells a quantity of energy in excess of the threshold established by that program. (d) Public agency contracts. The City may procure and make sales-incidental-to- purchase of wholesale utility commodities from energy counter parties through public agencies, including but not limited to the Northern California Power Agency and the federal Western Area Power Administration. The City may engage the public agency to act as the agent of the City to procure wholesale utility commodities, provided that the public agency conducts a competitive selection process and awards one or more contracts in substantial compliance with the contract procurement procedures and requirements of this chapter. The city attorney shall determine whether the contract procurement process substantially complies with the provisions of this chapter. For the purposes of this Section 2.30.340, the public agency process shall be deemed to substantially comply if the public agency (1) conducts a formal or an informal bidding or proposal process to solicit bids or proposals for the provision of wholesale utility commodities, (2) executes a standardized form contract, including a form contract created and copyrighted by the Edison Electric Institute and the Western States Power Pool, or equivalent, as determined by the city attorney, and (3) unless waived by resolution of the city council, the standardized form 111025 dm 0073642 2 Not Yet Approved contract requires or specifies (a) the governing law shall be the laws of the state of California, (b) the choice of venue shall be identified according to either the county in which such public agency does business or the preference for federal or sate court jurisdiction over the public agency and the energy counter party and the contract, and (c) the energy counter party shall obtain and maintain during the term of the contract the minimum credit rating established as of the date of award of contract of not less than a BBB-credit rating established by Standard & Poors and a Baa3 credit rating established by Moody's Investors Services. ( e) Risk Management Policies, Guidelines and Procedures Manual. All procurement of gas and electricity by contract for wholesale utility commodities shall conform to the requirements of the city's Energy Risk Management Policies, Guidelines and Procedures Manual. SECTION 2. Section 2.30.360 of Chapter 22.04 of Title 2 of the Palo Alto Municipal Code is hereby amended to read, as follows: 2.30.360 Exemptions from competitive solicitation requirements. The following are exemptions from the informal and formal competitive solicitation requirements of this chapter. It is expected that the exemptions will be narrowly applied. The department requesting an exemption shall provide all relevant information supporting the application of the exemption to the purchasing manager. Based on this information, the purchasing manager shall make a recommendation to the city manager and the city manager shall determine whether an exemption from competitive solicitation requirements applies. Nothing herein is intended to preclude use of competitive solicitations where possible. (a) Emergency contracts as defined in Section 2.30.21O(f). (b) Situations where solicitations of bids or proposals would for any reason be impractical, unavailing or impossible provided that in the case of a public works project, the project is not otherwise required by the Charter to be formally bid. These situations are those where solicitations of bids or proposals would not be useful or produce any advantage for the city. Situations where solicitations of bids or proposals would be impractical, unavailing or impossible, include, but are not limited to, the following: (1) Specifications cannot be drawn in a way that would enable more than one vendor or contractor to meet them; (2) Due to circumstances beyond the control of the city, the time necessary to use the competitive solicitation process procedures and requirements would result in a substantial economic loss to the city, or the substantial interference with a required city operation; and (3) Special conditions attached to a grant, donation or gift requires the use of particular goods and/or services. All requests for exemptions under this subsection shall be supported by written documentation (facsimile or electronic mail may be used), approved by the department head and forwarded to purchasing. 111025 dm 0073642 3 Not Yet Approved (c) Where competitive bids or requests for proposals have been solicited and no bid or proposal has been received or no bid or proposal meeting the requirements of the invitation to bid or request for proposal has been received, provided that, in the case of a public works project, the project is not otherwise required by the Charter to be formally bid. (d) Contracts for goods, wholesale commodities and related services, general services or professional services available from only one source where there is no adequate substitute or equivalent provider. Examples of acceptable sole source purchases are: equipment for which there is no comparable competitive product, proprietary products sold directly from the manufacturer, a component or replacement part for which there is no commercially available substitute and which can be obtained only from the manufacturer, items where there is only one authorized distributor in the area, and items where compatibility with items in use by the city is an overriding consideration. All requests for sole source purchases shall be supported by written documentation (facsimile or electronic mail may be used), approved by the office or department head and forwarded to purchasing. (e) Contracts for goods where, pursuant to Section 2.30.900, the city manager has determined that standardization of the supplies, materials or equipment is permissible. (f) Placement of insurance coverage and bonds. (g) Legal services contracts, including outside counsel and experts for litigation or other legal proceedings. (h) Professional services contracts for private development related studies and services when funded wholly by private developers. (i) Professional services contracts where the estimated total expenditure by the city, regardless of term, does not exceed $25,000.00. CD Cooperative purchases where the city participates with one or more other governmental or public agencies in a cooperative agreement, provided the solicitation process used is substantially similar to the process required by this chapter; or (k) The use of another governmental or public agency's contract provided: (i) the agency used a solicitation method substantially similar to the method required by this chapter; (ii) the contract allows other agencies to utilize or the vendor authorizes the city to utilize; (iii) the contract is consistent with requirements specified in this Code; and (iv) there is an overall value to the City's utilizing the contract versus the city performing it's own solicitation. (I) Contracts with Northern California Power Agency, Transmission Agency of Northern California, and Western Area Power Administration to procure wholesale utility commodities and related services that meet the requirements of Section 2.30.340( d). (m) Contracts with Pacific Gas and Electric Company and the California Independent Service Operator Corporation for energy transmission services to the extent necessary and expedient to provide for the general health, safety and welfare of its citizens. 111025 dm 0073642 4 Not Yet Approved (n) Contracts with any public agency or governmental body to construct a public work where the public agency or governmental body has used methods similar to those required by this chapter to contract for the work. (0) Contracts with any public utility holding a certificate of public convenience and necessity or any entity holding a cable communications system franchise pursuant to Chapter 2.10 construct a public work where such work involves property of such public utility or cable communications system franchisee and is otherwise of direct concern to both the city and such public utility or cable communications system franchisee, provided that the project is not otherwise required by the Charter to be formally bid. (P) Contracts with private developers to construct public improvements in connection with their development project even if the city contributes funds to the improvement project, provided that the project is not otherwise required by the Charter to be formally bid. (q) Projects where the public work is performed by the city with its own employees. (r) Contracts where the estimated total expenditure by the city does not exceed $5,000.00. (s) Contracts with entities to procure wholesale utility commodities and related services under a city "feed-in tariff' local energy program that meet the requirements of Section 2.30.340( c). SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. II II II II II II II 111025 dm 0073642 5 Not Yet Approved SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Senior Asst. City Attorney City Manager Director of Utilities ll1025 dm 0073642 6 FINANCE COMMITTEE DRAFT EXCERPT Regular Meeting November 15, 2011 Utilities Advisory Commission Recommendation to Approve Implementation Documents Including the Rate, Rule and Regulation, and Agreements to Implement the Proposed PaloAltoGreen Local Energy Program Jon Abendschein, Resource Planner, made a presentation on the Staff proposal. The program was a result of direction by the City Council in May 2010 to re-examine the City's approach to purchasing renewable energy and to investigate the possibility of purchasing renewable energy from local sites in Palo Alto using a feed-in tariff (FIT) program. Council had approved a set of design guidelines for the program, but additional approvals were required to implement the program, including a rate schedule, changes to utility rules and regulations, and standard contracts. The rate schedule was not final because Staff was waiting for more up to date information on the renewables market. The rate would be finalized when Staff took the proposal to Council. There were also some minor changes Staff would propose to the other program documents. He discussed the long-term potential of the program. The potential energy that could be generated by solar on Palo Alto's 1200 commercial rooftops was equivalent to roughly 10% of the City's load. Half was on large rooftops, half was on small rooftops. For the first program year Staff was proposing a solar-only program focused on large commercial rooftops and limited to 4 MW, which was 5% of the total Palo Alto rooftop potential. Solar was the most viable resource in Palo Alto, and the program limits were established to manage workload. Risks were mitigated by the fact that the energy from the program came from many small projects, so the consequences of failure of any single project was small. The City would only pay for energy delivered, and would have no ownership stake in the projects. Staff had performed outreach to a variety of groups, and had received positive feedback on the draft program materials. If the Finance Committee recommended approval, Staff would take the proposal to Council in December 2011, launch the program in February 2012, and return to Council in fall of 2012 for a review of the program and a proposal for the 2013 program year. Council Member Schmid asked how the maximum rate impact of the renewables program was calculated. Mr. Abendschein said it was a half-cent maximum impact on rates. Council Member Schmid asked what percentage of the existing rates that represented. Jane Ratchye, Assistant Director of Resource Management, stated that the percentage was approximately 5% of the average rate for the entire City. Council Member Schmid recommended including that number in future reports. He referred to Table 5 in the Staff report and asked how much energy the program would produce. Mr. Abendschein stated the program would produce 6 gigawatt-hours (GWh) per year. Ms. Ratchye clarified that was based on 4 megawatts (MW) of capacity multiplied by 1,500 hours per year of solar production. Council Member Schmid asked whether the price in the rate schedule was the actual price of the FIT contracts or whether it was a maximum, with the actual prices set using an auction. Mr. Abendschein stated that the auction was only a tie-breaking mechanism in the event the number of applications exceeded the cap. The City would accept applications every month and all applicants would receive the rate. Ms. Ratchye clarified that the rate would be fixed, and if, for example, the rate was 14 cents, all applicants would receive a contract at that rate. Council Member Schmid said the Staff report implied that it would be very hard for anyone to develop a project if the rate were 15 cents. Mr. Abendschein said Staff was not entirely sure at what rate the project economics would work. Council Member Scharff asked how the rate compared to the rates for existing contracts in Table 5. Mr. Abendschein said a 13 cent per kilowatt-hour (kWh) rate was equivalent to a price of $130 per megawatt-hour (MWh), and that $20-30 of that was related to the fact that the project was located in Palo Alto. Council Member Scharff asked whether that value was part of the levelizing process. Mr. Abendschein said there were several components to the rate, each with its own forecast, and that the levelizing process created a single flat rate for each of those components using present value calculations. Ms. Ratchye clarified that the price was fixed, and did not change for the length of the contract. Council Member Scharff asked whether the transmission costs associated with the City's existing contracts were included in Table 5 of the Staff report, and whether that represented the $20-30 of value associated with the project being located in Palo Alto. Mr. Abendschein said that was the case. Ms. Ratchye said there was also value associated with the time of day solar power was generated. Council Member Schmid asked whether it was possible to calculate the green premium by subtracting the brown power costs from the total market price. Mr. Abendschein said such a calculation did not include transmission costs. The transmission costs associated with the City's existing contracts were not included in Table 5 of the Staff report. Ms. Ratchye said one could consider the transmission costs to be included in the brown power price. Council Member Schmid asked what the cost of energy was. He said the current cost was $40 per MWh. Mr. Abendschein said the cost of energy was based on forecasts over the 20 year period. Council Member Schmid said there was uncertainty about the forecast, and if you used $40, local solar looked like the most expensive renewable power source in the portfolio. Ms. Ratchye clarified that Council Member Schmid was referring to the green premium column. Mr. Abendschein stated that the green premium would be roughly $30 per MWh. Council Member Schmid asked whether there were any cheaper sources of renewable energy out there. Mr. Abendschein said the rates were set based on the market price of renewables. The City would offer to buy power from any solar developer in Palo Alto at that rate market rate. Ms. Ratchye said the program was designed to be a value-based program, meaning it was based on the value of the renewable energy, not the cost to develop the project. Renewable market prices were lower than Staff had thought they were when developing the program. Council Member Schmid asked whether the was City essentially paying a premium for people to sell power to the City instead of using it on site if the average customer rate was 11 cents per kWh and the City was offering to purchase power at 14 cents per kWh. Mr. Abendschein said that the 11 cents per kWh was an average rate that included both cheaper brown power and more expensive renewable power, while the 14 cent per kWh was just for the renewable power. Council Member Shepherd asked whether Council Member Schmid was inquiring whether the City was creating an incentive for building owners with existing solar projects to stop allowing their tenants to use the solar on site and instead selling it to the City. Council Member Schmid said he was. Council Member Shepherd said that situation did not exist in Palo Alto. Mr. Abendschein said the City would not accept any project into the program that had previously received rebates under the Photovoltaic (PV) Partners program, and that all existing commercial rooftop systems had received those rebates. Council Member Schmid asked whether this program would replace the PV Partners program. Mr. Abendschein said people could still receive rebates under that program, though eventually the rebate budget would run out. Council Member Schmid said the Staff report stated that the program would not continue after the rebates ran out. Mr. Abendschein said the intention of that section of the Staff report was to make it clear there were only enough rebates remaining for approximately 3.5 MW of solar capacity in the program. Council Member Schmid asked whether the PV Partners program would continue once the rebate budget had been used. Mr. Abendschein said that would be a policy discussion to have once that happened. Ms. Ratchye stated that this program would not affect the PV Partners program, and that the rebates for residential systems would continue to be available. Council Member Schmid asked whether the residential rebates were subject to a limit. Mr. Abendschein said they were. Council Member Schmid recommended clarifying areas of the report related to the rates and the green premium. Council Member Shepherd said she appreciated the work of the UAC in reviewing the program and the fact that it had been brought to the Finance Committee gradually over time. She thanked Council Member Schmid for his questions. She was excited about the program. She asked whether Staff was going to look at building life when establishing FIT contracts. Mr. Abendschein said Staff would require proof that the project developer had the right to use the building over the entire length of the contract. He said that project developers tended to look for buildings that will not require major upgrades over the length of the project. Developers had the same interest in the site being preserved over the length of the contract. Council Member Shepherd said it seemed like a solar system on a rooftop could cloud the title to the building and that Staff should pay attention to those types of issues. Many of the buildings in Silicon Valley were aging. She was glad Staff was focusing on solar. She had concerns about biogas and wind turbines, but she hoped in the future Staff would be able to include a wider range of renewable resources in the program. She appreciated that the Staff proposal allowed for multiple contract terms. She said that the City's economic development Staff should be brought into the conversation about the name. CLEAN was a brand, and her initial reaction was to go with Palo Alto CLEAN. Council Member Scharff asked whether the rate would be the same for different contract terms. Mr. Abendschein said the rate would be higher for longer contract terms. Council Member Scharff asked why Staff was not proposing offering building owners the option of having the same rate for shorter contract terms. Locking them in for a longer period made it less likely they would participate in the program. Mr. Abendschein said that developers required longer term contracts in order to get financing. Council Member Scharff clarified that he was suggesting offering the long-term contract but allowing developers to opt out before the end of the contract term. Mr. Abendschein said that allowing developers the ability to opt out before the end of the contract term would result in the City overpaying for the energy. The value of the contract to the City would rise over time, and the fixed rate meant that while in the short term the City would pay more than the value of the energy, in the long term it would pay less. Council Member Scharff asked whether it was the case that the City overpaid in the beginning of the contract but underpaid later in the contract. Mr. Abendschein said it was. Council Member Schmid clarified that the value rose over time rather than the price decreasing. Council Member Scharff asked how the City prevented people from modifying their building. Ms Ratchye stated that the contract said that to the extent they provided the City energy the City would pay for it at a fixed rate. It did not prevent them from removing the building. Council Member Scharff asked whether a solar system owner would be able to go out of business by demolishing the building and ceasing to provide energy. Mr. Abendschein said yes, but clarified they would not have the option to simply stop selling the City energy so that they could sell it to somebody else. Council Member Scharff asked whether, in the event the building owner removed the building or stopped selling the City energy, the City would be overpaying for the power it had already received, and whether Staff was concerned about that. Mr. Abendschein said the City would overpay in that event, and that Staff was concerned about it. The risk would be mitigated because Staff would require proof of a right to use the site for the entire length of the contract, whether that was in the form of a rooftop lease or proof of ownership. Council Member Scharff asked whether Staff had done an inventory of possible sites. Mr. Abendschein said Staff had. Council Member Scharff asked whether Staff had done an inventory of how much time was remaining on ground leases in Stanford Research Park. Mr. Abendschein said Staff had not. Staff had talked to Stanford Lands Management and made them aware of the program. Staff had not asked for data on the length of ground leases, and he was not confident the data would be made available. The time required to generate an inventory was comparable to the time required to launch the program and find out the response. Council Member Yeh stated he was excited about the program, but had not heard the entire Staff presentation and subsequent discussion, and so would wait until the City Council meeting to participate in the discussion. Council Member Shepherd asked whether, if a building owner had multiple sites, whether the City had a stake in what site they received the energy from. Mr. Abendschein said the City did not. In that situation the City would execute one contract for each site. If one of the sites stopped producing energy, the total amount of energy produced would decrease, and the City would only pay for the energy being produced on the other sites. Council Member Shepherd asked if the contract for the site that stopped producing could be moved to a different site. Mr. Abendschein clarified that the contracts were site specific and tied to the address. Council Member Scharff asked whether it would make economic sense for the City to invest in developing a solar system on a Palo Alto building owner's rooftop if that building owner were required to grant the City a rooftop lease as a condition of approval for a development permit, such as a Planned Community (PC) Zone, and whether it was possible for the City to realize some savings in that case. Ms. Ratchye said the risk profile of ownership was different. Mr. Abendschein said it was something that other utilities had done, but that the risk profile was different because it involved the City putting in money up front, meaning if something happened to the project, the City could lose the money it put in. City Manager Keene said leaving aside the issue of the risk profile, there was nothing that precluded the Council from having that type of a condition of approval. Council Member Scharff said there was a sense that the current public benefits for development projects were not extensive enough and that Staff should begin thinking about the potential for this type of program. Council Member Schmid commented on the name. He said CLEAN was not descriptive. He asked for some clarification on the source of the name. City Manager Keene said there was some brainstorming by Staff on the name resulting in the Staff proposal that night, PaloAltoGreen Local Energy Program. At the UAC there was discussion of two names, Palo Alto CLEAN and PaloAltoGreen Local Energy Program. The UAC had recommended the second one. Council Member Schmid said the name was important. There was a national campaign to rebrand FIT programs as CLEAN programs. He recommended going with Palo Alto CLEAN, and in the future other utilities would adopt the CLEAN name. MOTION: Council Member Scharff moved, seconded by Council Member Shepherd to rename the program Palo Alto Clean. Council Member Shepherd suggested the City's economic development Staff examine the naming issue, since this was a commercial program. City Manager Keene said to bear in mind that the program could eventually include residences. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND THE SECONDER to request that City economic development Staff examine the issue of the name. Council Member Shepherd said CLEAN was becoming the brand for FIT programs, and Palo Alto should not use different language from everyone else. She did not want the City to miss opportunities because people could not find the program because they were looking for the wrong term. City Manager Keene said the term "clean" had some meaning in itself, but that there was also a more specific effort to rebrand FIT programs using the acronym CLEAN, and that it remained to be seen if that would take hold. It depended on the Committee's objectives for the program. Council Member Schmid asked that Staff include discussion of the name when taking the program to Council. Council Member Scharff said Staff would do that regardless of the Finance Committee's recommendation. City Manager Keene said that Staff would take to Council a summary of the rationale for the choices made by the UAC and the Finance Committee on the name. Council Member Shepherd asked whether CLEAN was the new term for FIT programs. City Manager Keene said there was an effort underway by a group to replace the term FIT with CLEAN. MOTION PASSED 2-1, Schmid opposed, Yeh abstaining City Manager Keene said the program was essentially a rooftop leasing program, and he asked whether there was a nexus between increasing energy use in a building location and their willingness to use the program. Ms Ratchye said the amount of energy from the rooftop was a fraction of their energy needs. She was unsure there was a correlation between the energy use at a location and a Mr. Abendschein said this program was an additional way for building owners to add solar to their rooftops. Council Member Shepherd said she had seen extensive use of the CLEAN name when doing web searches on the name. Council Member Schmid clarified that the rate schedule was incomplete and that Staff was not requesting adoption of the rate itself, but rather the form of the rate schedule with the rate to be filled in at the Council meeting. Mr. Abendschein said that was the case, and also requested that the Finance Committee include in the motion that the program materials would be approved subject to minor changes by Staff to the standard contracts and the rate schedule. MOTION: Council Member Schmid moved, seconded by Council Member Scharff, that the Finance Committee support the Council’s adoption of the following subject to minor changes by Staff in the language of the standard contracts and rate schedule:  Resolution adopting the Utility Rate Schedule E-PAGLE2012, and approving changes to the Utilities Rule and Regulation 27 Generator Interconnection.  Resolution approving a standard form power purchase agreement for purchase of local renewable energy, approving an Interconnection Agreement for the interconnection of non-net- metered generators, authorizing the City Manager or designee to sign one or more contracts for a maximum output of five megawatts (MW) of solar energy, costing up to 15 cents per kilowatt-hour (c/kWh), for terms not exceeding 20 years and for a maximum appropriation of $27 million, and adopting changes to the previously approved Policies and Design Guidelines.  Ordinance amending sections 2.30.340 of Chapter 2.30 of Title 2 of the Palo Alto Municipal Code to incorporate provisions that would facilitate a feed-in tariff program. MOTION PASSED 3-0, Yeh Abstaining