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Staff Report 391-07
City of Palo Alto City Manager’s Report 4 TO: FROM: DATE: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: UTILITIES OCTOBER 22, 2007 CMR: 391:07 FINANCE COMMITTEE AND UTILITIES ADVISORY COMMISSION RECOMMENDATION TO THE COUNCIL TO ADOPT A RESOLUTION APPROVING THE ULT1L4,-CLEAN LOCAL DISTRIBUTED GENE1L*TION INCENTIVE PROGRAM AND TO ADOPT A RESOLUTION ADOPTING NATURAL GAS RATE SCHEDULE G-COG GAS FOR ELECTRIC GENE1L&TION SERVICE RECO~ [MENDATIO.’~ This report requests that the City Council approve the proposed ultra-clean local distributed generation incentive prod’am, including proposed clarifications to the Pro~am Desi~a Guidelines, and the proposed new natural gas retail rate for electric generation service, "G- COG." BACKGROUND The Council approved Palo Alto’s current Long-term Electric Acquisition Plan (LEAP) Objectives and Guidelines in March 2007 (CMR: 158:07). The LEAP Objectives and Guidelines set long-term direction for staff in plaming and managing the electric supply portfolio. LEAP Guideline #5, which addresses local generation, states, "promote ultra clean distributed generation incentive program." The LEAP Implementation Tasks were most recently updated in April 2006 (CMR: 169:06), and include the development and implememation of a comprehensive plan to facilitate and implement clean high-efficiency distributed small-scale cogeneration. On November 6, 2006, the Council approved program desi~a guidelines for "Power from Local Ultra-Clean Generation Incentive" proNam, or "PLUG-In" (CMR:406:06), and directed staff to develop incentives, CMR:391:07 Page 1 of 3 rates, and rules-for ultra-clean customer-sited small-scale distributed generation. The proNam description and handbook and "G-COG" natural gas retail rate for electric generation establish the program incentives, rates, and rules. BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The Finance Comanittee reviewed the proposed implementation proNam and handbook and natural gas rate on October 2, 2007 (CMR:369:070, Attaclmaent A), following the Utilities Advisory Conamission’s (UAC) review on September 5, 2007. The Finance Committee and the UAC voted unanimously to recommend approval of the staff recommendation. The UAC report and its attaclm~ents provide prodam details which are described in the draft Prodam Description and Haadbook (UAC Report Attachment A), and which incorporate the previously approved prod-am design principles and guidelines on pages 2-4. The proposed clarifications to the prodam guidelines a’e indicated in redline strikeout in UAC Report Attaclm~ent B. RESOURCE IMPACT The recommended program budget funding for incentives of $5 million spread over ten years were stipulated in the Council-approved prodan guidelines. First year funding of $500,000 is included in the approved 2007-08 budget. The pro~’am is desiN~ed to achieve a modest rate reduction over the long run. Ix~ the worst case scenario, where the program is fully subscribed but cost savings are not realized, the average $500,000 almual budget would have a rate impact of approximately 0.05 cents per kwh, or about one-half of one percent. POLICY IMPLICATIONS This recommendation supports the PLUG-In prodam guidelines approved by Council in November, 2006 (CMR:406:06). The prodam also supports LEAP Implementation Task #6: Clean Distributed Generation, and also supports Tasks #1 (Climate Action Plan), #7 (Natural Gas-Fired Generation), #8 (Greater Bay Area Contracts), #9 (Portfolio Management), and #10 (Risk Management). The pro~’am is also in accordance with the Utilities Strategic Plan, Energy Risk Management Policies, the City’s Sustainability Policy, the Green Govermnent Pledge, and Comprehensive Plan Goal N-9 and Policies N-44 and N-47. The program supports the California Publicly-Owned Electric Utilities’ Principles Addressing Greenhouse Gas Reduction Goals endorsed by Council (CMR:315:06). [n addition, the program supports several California a~d U.S. energy policies that encourage greater utilization of high-efficiency distributed generation. ATTACHMENTS A: CMR:369:07 with all Attaclmaents B: Draft Finance Committee minutes excerpts October 2, 2007 CMR:391:07 i Page 2 of 3 PREPAID BY:tCARL E. IGNAPP, Senior Resource Plalmer ERIC KENISTON, Utilities Rate Analyst DEPARTMENT APPROVALS: CITY MANAGER APPROVAL: VALEI~.~i~ O~FONG Director, ~Ttilities CARL YEATS/ Director, Admi~iistrative Selwices EMILY HA.RRISON Assistant City Manager CMR:391:07 Page 3 of 3 ATTACHMENT A TO:HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM:CITY _~IANAGER DEPARTMENT: UTILITIES DATE:OCTOBER 2, 2007 CMR: 369:07 SUBJECT:UTILITIES ADVISORY COMMISSION RECOMMENDATION TO THE COUNCIL TO ADOPT A RESOLUTION APPROVING THE ULTRA- CLEAN LOCAL DISTRIBUTED GENEIL~_TION INCENTIVE PROGIL~_M AND TO ADOPT A RESOLUTION ADOPTING NATUIL~_L GAS RATE SCHEDULE G-COG GAS FOR ELECTRIC GENEIL4.TION SERVICE RECOMMENDATION This report requests that the City Council approve the proposed ultra-clean local distributed generation incentive program, including proposed clarifications to the Program Design Guidelines, and the proposed new natural gas retail rate for electric generation service, COG.’: BACKGROU~ D The Council approved Palo Alto’s current Long-term Electric Acquisition Plan (LEAP) Objectives and Guidelines in Maa’ch 2007 (CMR: 158:07). The LEAP Objectives and Guidelines set long-term direction for staff in planning and managing the electric supply portfolio. LEAP Guideline #5, which addresses local generation, s~ates, "promote ultra clean distributed generation incentive program." The LEAP implementation Tasks were most recently updated in April 2006 (CMR: 169:06), include the development and implementation of a comprehensive plan to facilitate and implement clean high-efficiency distributed small-scale cogeneration. On November 6, 2006: the Council approved program design guidelines for "Power from Local Ultra-Clean Generation Incentive" program, or "PLUG-In" (CMR:406:06), and directed staff to develop incentives, rates, and rules for ultra-clean customer-sited small-scale distributed generation. The Program Description and Handbook and "G-COG" natural gas retail rate for electric generation establish the program incentives, rates, and rules. CMR:369:07 Page 1 of 3 BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The UAC reviewed the proposed implementation program and handbook and natural gas rates on September 5, 2007. The UAC report and its attachments provide pro~am details which are described in the draft Prograna Description and Handbook (UAC Report Attacl:n-nent A), and which incorporate the previously approved program design principles and guidelines on pages 2- 4. The proposed clarifications to the program guidelines are indicated in redtine strikeout in UAC Report Attachment B. The UAC voted unanimously to recommend approval of the staff recon~nendation. RESOURCE IMPACT The recommended program budget funding for incentives of $5 million over ten years were stipulated in the Council-approved program guidelines. First year funding of $500,000 is included in the approved 2007-08 budget. The proNarn is designed to achieve a modest rate reduction over the long run, but in the worst case scenario, where the program is fully subscribed but cost savings are not realized, the average $500,000 a~znual budget would have a rate irnpact of approximately 0.05 cents per k~,~q~, or about one-half of one percent. POLICY IMPLICATIONS This recommendation supports the PLUG-In progam guidelines approved by Council in November, 2006 (CMR:406:06). The program also supports LEAP Implementation Task #6: Clean Distributed Generation, and also supports Tasks #1 (Climate Action Plan), #7 (Natural Gas-Fired Generation), #8 (Greater Bay Area Contracts), #9 (Portfolio Management), and #10 (Risk Management). The progam is also in accordance with the Utilities Strategic Plan, Energy Risk Management Policies, the City’s Sustainability Policy, the Green Gove~Tmaent Pledge, and Comprehensive Plan Goal N-9 and Policy N-44 and N-47. The program supports the California Publicly-Owned Electric Utilities’ Principles Addressing Gree~9~ouse Gas Reduction Goals endorsed by Council (CMR:315:06). In addition, the program supports several California and U.S. energy policies that encourage greater utilization of high-eftSciency distributed generation. ATTACHMENTS A:UAC Report with all Attachments: Item 2 September 5, 2007 B:Draft UAC meeting minutes excerpts Sept 5, 2007 C:Draft Resolution adopting the Ultra-Clean Distributed Generation Incentive Program D:Draft Resolution adopting the G-COG Retail natural gas rate for generation service PREPARED BY:t,L~kRL E. I~NAPP, Senior Resource Plalmer ERIC KENISTON, Utilities Rate Analyst DEPARTMENT APPROVALS: VALEiilE O.)FONG Dnector, Uti’ht~es CMR:369:07 Page 2 of 3 CITY MANAGER APPROVAL: Director. Ad~istrative Services ESIIL~7 HARRISON Assistant City Manager CMR:369:07 Page 3 of 3 ATTACHMENT A MEMORANDUM TO:UTILITIES ADVISORY COMMISSION FROM: UTILITIES DEPARTMENT DATE:SEPTEMBER 5, 2007 TITLE:APPROVAL OF U-LTtL, k-CLEAN LOCAL DISTRIBUTED GENERATION INCENTIVE PROGR_&M AND APPROVAL OF NATURAL GAS RATE FOR ELECTRIC GENERATION SERVICE. REQUEST Staff requests that the UAC recommend that City Council: 1. Approve the proposed ultra-clean local distributed generation incentive program. The program establishes incentives and rules for customer-sited small-scale distributed generation. 2.Approve the proposed clarifications to the Program Design Guidelines. 3.Approve the proposed new natural gas retail rate for electric generation service, "G- COG". BACKGROUND Council approved Palo Alto’s current Long-term Electric Acquisition Plan (LEAP) Objectives and Guidelines in March 2007 (CMR:158:07). The LEAP Objectives and Guidelines set long- term directions for staff in planning and managing the electric supply portfolio. LEAP Guideline #5, which addresses local generation, states, "promote ultra clean distributed generation incentive program." The LEAP Implementation Tasks were most recently updated in April 2006 (CMR: 169:06), and include the development and implementation of a comprehensive plan to facilitate and implement clean high-efficiency distributed small-scale cogeneration. On November 6, 2006, Palo Alto Ci~ Council approved program design guidelines for "Power from Local Ultra-clean Generation Incentive" pro~am, or "PLUG-In" (CMR:406:06). The program establishes incentives, rates, and rules for ultra-clean customer-sited small-scale distributed generation. The details of the proposed program are described in the draft Program Description and Handbook (Attachment A), which incorporates the Council-approved program design principles and guidelines on pages 2-4. The proposed clarifications to the program Guidelines are indicated in redline strikeout in Attachment B. Page 1 of 5 DISCUSSION Cogeneration is also known as combined heat and power (CHP). It is the practice of capturing the heat from a generator that is otherwise wasted, in the form of steam, hot water, or hot air, and applying it in some useful application, reducing the use of natural gas or other fuels that would otherwise have been used to provide the same heat. Doing so can achieve very high overall efficiency. Cooling can also be achieved using heat-driven chillers (absorption or adsorption chillers), reducing electric peak loads, and achieving even higher efficiencies. This practice is often referred to as combined heat, power and cooling (CHPC), or ’°trigeneration". Cogeneration achieves very high overall efficiency and low net greenhouse gas (GHG) emissions, achieves net cost savings, diversifies and reduces electric portfolio price risk, enhances customer and local reliability, reduces transmission and distribution system losses, and facilitates attaining City and customer environmental goals. Fuel cells, waste heat recovery, and renewable resources can also achieve many of the desired benefits even without meeting the cogeneration definition, and are therefore also included in the list of eligible technologies. Solar energy will continue to be supported in the City’s solar pro~ams separately from the PLUG-In program. As reported in a study conducted for CPAU by the Rocky Mountain Institute (RMI) in 2005, small-scale cogeneration offers an effective means to lower GHG emissions associated with electricity while also being cost-competitive with conventional alternatives. Even when using natural gas as a fuel, the reduced overall fossil fuel use due to reduced demand for power from the grid combined with the efficient use of thermal energy locally results in a net GHG reduction. P,_MI estimated a net carbon intensity of 0.35 short tons/MWh for large customer cogeneration compared to 0.62 for purchased market power, a reduction of 44%. The small-scale systems promoted by the program are small enough to fit neatly into customer sites with negligible community impacts. Typical applicable system sizes for the largest Palo Alto customers are in the 3-10 MW range. Because some larger customers are clustered closely together and may be able to achieve higher efficiency and cost effectiveness with a combined small-scale system, staff recommends modifying the 10 MW maximum size limit in the council- approved pro~am design guidelines (Guideline 1.e.) to be "10 MW per customer served", which more accurately reflects the original intent. Staff also recommends clarifying that "Over-the- fence" transactions (Guideline 3.e.) limitations apply to electricity or natural gas, not all forms of energy, such as chilled water, hot water, or steam. Because of their environmental advantages, cogeneration facilities smaller than 50 MV¢ that meet emission and noise criteria are explicitly granted a CEQA categorical exemption. To encourage ultra-clean energy technologies, Planning Department staff included technologies that are eligible under the program in the definition of resource conservation teclmologies in the new zoning ordinance, under Section 18.42.120 (approved July 30, 2007, CMR:301:07), which exempt such facilities from certain zoning restrictions and Floor-to-Area Ratio (FAR) limits. Page 2 of 5 Eligible technologies, efficiency, and emissions requirements are as defined in the approved program guidelines. A requirement to meet or beat the net GHG emissions limit pursuant to California SB 1368, passed in 2006, of 1,100 lb/MWh has been incorporated since the approval of the program guidelines. The program wilt operate in a manner very similar to energy efficiency or solar power rebates, and is based largely on the statewide program (Self-Generation Incentive Program, or SGIP) that is operated by investor-owned utilities such as PG&E. Incentives in excess of $200,000 are to be paid in two installments: the second being contingent on performance during the first 12-month period. Incentives are reduced for equipment that does not achieve sufficient annual operating hours, or annual capacity factor. Equipment removed from service in less than five years must reimburse incentives on a pro-rata basis. Customers who receive incentive payments from the PLUG-In program share the savings with CPAU that are realized fi-om avoided transmission costs. A 5 M W generator operating on natural gas that achieved all of the bonus incentives (other than the renewable fuels bonus incentive), would quali~ for $1.0 million in incentives and would generate electricity with a net carbon content less than half that of a new combined cycle power plant, while also reducing losses and enhancing reliability. The incentives would be recouped from transmission savings in approximately ten years if the generator only met the minimum operating hours requirement, and less than five years if it operated around the clock. If the system additionally reduced electric peak load due to waste heat-driven cooling replacing electric chillers, it could qualify for additional incentives of up to $100 per kW of peak demand reduction, which is provided by the electric energy efficiency and demand reduction program budget. Each peak kW reduced avoids approximately $50 in local capacity costs every year. A typical system may reduce peak load by as nluch as 1,000 to .3,000 kW. Customer credit for electric power generated is designed so that additional electric standby rates are not required, as the customer is billed for all electric use at its otherwise applicable retail rate, and is awarded credit for on-site generation at the utility’s avoided cost. Larger customers may elect to enter into a custom power purchase agreement wherein the City would buy the power in a contract with the customer, subject to Council approval. Additional terms and requirements are described in Section 3 of tile Handbook, which spell out details in support of the program guidelines. The step-by-step process is described in Section 4 of the Handbook. The program and retail natural gas rate for electric service are slated to go into effect on January 1, 2008. RESOURCE IMPACTS The program incentives of $5 million over ten years are funded through electric rates as part of the commodity charge, and projects that qualify as renewable or as R&D demonstration projects will be partly i~mded by Public Benefits funds for up to $1 million out of the $5 million total. The incentives would be paid initially out of supply rate stabilization reserves, and recovered slowly by the City’s portion of shared savings due to avoided transmission and market power purchase costs. Ongoing costs will be accounted for and reflected in the applicable electric and gas rates. The program is designed to achieve a modest rate reduction over the long run, but in Page 3 of 5 the worst case that the program became fully subscribed but cost savings are not realized, the average $500,000 annual budget would translate to a rate impact of approximately 0.05 cents per k\Vh, or about one-half of one percent. The incentive costs are included in the current budget. Al! projected costs, savings and revenues of the program will be incorporated into future budgets, depending on the level of customer participation. POLICY IMPLICATIONS The proposed program directly supports LEAP Guideline #5B: Local Generation, and LEAP Implementation Task #6: Clean Distributed Generation. In addition to LEAP Implementation Task #6, the PLUG-IN program also supports Tasks #1 (Climate Action Plan), #7 (Natural Gas- Fired Generation), #8 (Greater Bay Area Contracts), #’9 (Portfolio Management), and #10 (Risk Management). The program is also in accordance with the Utilities Strategic Plan, Energy Risk Management Policies, the City’s Sustainability Policy, the Green Government Pledge, and Comprehensive Plan Goal N-9 and Policy N-44 and N-47. The program directly supports recommendations of the energy subcommittee of the Mayor’s Green Ribbon Task Force to (1) reduce the carbon intensity of the energy supply provided by CPAU, and (2) deploy clean small-scale distributed generation, including incentives for !ocal renewables and low-net-GHG cogeneration. The program supports the California Publicly Owned Electric Utilities’ Principles Addressing Greenhouse Gas Reduction Goals endorsed by Council (CMR:315:06). In addition, the program supports Section 372 of California Public Utilities Code, "it is the policy of the state to encourage and support the development of cogeneration as an efficient, environmentally benefici!l, competitive energy resource that will enhance the reliability of local generation supply, and promote local business growth", and "to encourage the continued development, installation, and interconnection of clean and efficient self-generation and cogeneration resources, to improve system reliability for consumers by retaining existing generation and encouraging new- generation to connect to the electric grid, and to increase self- sufficiency of consumers of electrici~ through the deployment of self-generation and cogeneration." The proposed program fulfills the requirements under Public Utilities Code Section 353.11, that a local publicly owned utility review its rates, tariffs, and rules to identify," barriers to and determine the appropriate balance of costs and benefits of distributed energy resources in order to facilitate the installation of these resources in the interests of their customer-owners and the state. The program also supports the U.S. Energy Policy Act of 2005 requirements that electric utilities deploy a mix of electric generation technologies with different fuel sources (Public Utility Regulatory Policies Act of 1978 ("PURPA") Standard 12), and develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation (PURPA Standard 13). The proposed natural gas rate, G-COG, is desig-ned to facilitate implementation of customer-sited distributed generation in accordance with the approved program guidelines and Palo Alto’s retail rate design policies. Page 4 of 5 ATTACHI~fE. NTS A: Draft "Plug-In" Distributed Generation Incentive Pro~am Description and Handbook (Clean Version). B: Draft Plug-In Distributed Generation Incentive Pro~arn Guidelines (Redline Version). C: Draft G-COG Natural Gas Retail Rate for Electric Generation Service PREPARED BY: ¯Senior Resource Planner, Utilities Resource Management REVIE~rED BY: Jane Ratchye, Assistant Director of Utilities Tom Auzenne, Assistant Director of Utilities Tomrn Marstiall, .Assistant Director of Utilities Pant Domell, Assistant Director of Utilities Eric Keniston, Utilities Rate Analyst, Customer Support Services DEPARTMENT HEA_D: Page 5 of 5 Attachment A CITY OF PALO ALTO UTILITIES "PLUG-In" Distributed Generation Incentive Program PROGtL&M DESCRIPTION AND HANDBOOK AUGUST 2007 BACKGROI~’D On November 6, 2006, the Palo Alto City Council approved program design guidelines for "PLUG-In": Power from Local Ultra-clean Generation Incentive program (CM-R:406:06): (the "Program"). The Program establishes incentives, rates, and rules for ultra-clean customer-sited small-scale distributed generation. The Program supports several Ci~ policies as well as state and federal policies and regulato12~’ requirements. PLUG-In supports LEAP Guideline #5: Local Generation, LEAP Implementation Task #6: Clean Distributed Generation, and also supports Tasks #1 (Climate Action Plan), #7 (Natural Gas-Fired Generation), #8 (Greater Bay Area Contracts), #9 (Portfolio Management), and #10 (Risk Management). The plan is also in accordance with the Utilities Strategic Plan, Energy Risk Management Policies, the Ci~’s Sustainability Policy, the Green Government Pledge, and Comprehensive Plan Goal N-9 and Policy N- 44 and N-47. The Program supports the California Publicly Owned Electric Utilities’ Principles Addressing Greenhouse Gas Reduction Goals endorsed by the Council (CMR:315:06), and recommendations of the Mayor’s Green Ribbon Task Force on Climate Protection. In addition, the Program supports several California and U.S. energy policies that encourage greater utilization of high-efficiency distributed generation. The Program fulfills the requirements Public Utilities Code Section 353.11, that a local publicly owned utility review its rates, tariffs, and rules to identi~ barriers to, and determine the appropriate balance of, costs and benefits of distributed ener~’ resources in order to facilitate the installation of these resources in the interests of their customer-owners and the state. The program also supports she U.S. Energy Policy Act of 2005 requirements that electric utilities deploy a mix of electric generation technologies with different fuel sources (PURPA Standard 12), and de’~elop and implement a ten-year plan to increase the efficiency of its fossil fuel generation (PURPA Standard 13). Palo Alto is a member of the U.S. EPA’s Combined Heat and Power Partnership, which offers free cogeneration feasibility, study screening to interested customers. Existing Utility Rules and Regulations that may apply to pro~am implementation include: 5. Contracts 6. Credit 8. Access 18. Electrical Service Connections and Facilities on Customer’s Premises 20. Special Electric Utilit), Regulations 22. Special Gas Utility Regulations 27. Generating Facility~ Interconnections DRAF’T P_.ower from Local Ultra-clean Generation Incentive Program ("PLUG-In") PROGRAM DESIGN PRINTCIPLES CMR:406:06, UAC Report 04-Oct-2006 Princi pie I m plem e ntation Keep it Simple Build on similar statewide programs. Employ standard rates, rules and agreements. Foster Community Address visual, noise, other community concerns. Acceptance Keep the public informed. Cultivate Environmental Improvement Achieve High Efficiency Realize Cost Savings Mitigate Risk Enhance Reliability Ensure Security and Safety Clear and Timely Reporting Encourage New Technologies Require low net air emissions of pollutants and greenhouse gases. Offer bonus incentives for green certification and renewable energy sources. Require stringent conversion efficiency standards. Offer bonus incentives for Energy Star and ultra-high-efficiency. Conduct energy audits to identify cost-effective demand-side efficiency measures. Design rates to reflect full benefits and avoided costs, with shared savings to the participant and the other utility customers. Apply commodity pricing and contracts policies in Rule and Regulation 5. Require adequate insurance, equipment warranty, and credit quality. Limit size of overall program and maximum size of any single facility. Pay incentives based on measured performance. Design program to achieve resource diversity for the electric portfolio. Apply clear interconnection standards as defined in Rule and Regulation 27. Provide capacity, dispatch rights, and emergency power redirection capability. Added bonus for "islanding" capability (able to run in a blackout). Adhere to NCPA and CAISO scheduling protocols Adhere to interconnection s.tandards and City dispatch procedures. Owner to provide access to City staff to verify compliance. Customer to meet all regulatory reporting requirements. Added bonus for very high efficiency, low emissions, peak reduction, pre-commercial technologies, environmental stewardship, or other beneficial innovation. DRAFT Power from Local Ultra-clean Generation Incentive Program (;’PLUG-In") PROG.~JI DESIGN GUIDELINES: CMR:406:06, UAC Report 04-Oct-2006 1.Technical: Eligible technologies include cogeneration, fuel cells, waste heat recovery, or renewable energy conversion. Eligible fuels include natural gas and renewable fuels as defined in Section 2805 of the Public Utilities Code. Cogeneration must meet and maintain FERC and California efficiency and thermal energy utilization criteria. All technologies must meet ultra-clean distributed generation efficiency and emissions requirements established by the California Air Resources Board. e. Single system maximum size is 10 MW per customer served, and no larger than the greater of on-site peak electric load or on-site peak thermal load. f.Incremental groundwater. Reliability: water consumption from reclaimed or decontaminated a.Owner shall provide "must-offer" obligation to CPAU. The CiW reserves the right to instruct the generator to operate if it is off.. yet available. b.The City has the right to redirect power in an emergency. c.Must comply with CPAU Rule and Regulation 27 - Interconnection Standards. d.Ensure equipment availability and power generation performance acceptable to the City. Financial: a.Ten-year Program maximum is 20 MW or $5 million, whichever milestone is reached first. No Incentives shall be competitive with other programs available in the State, with bonus incentives for high efficiency, low environmental impact, demonstration of innovative new technologies, islanding capability, and electric demand reduction. Co May be customer or third-party owned. Power may be sold to CPAU or net metered and surplus power sold to CPAU, under the principle of ful! avoided cost with shared savings be~,een CPAU and host. e."Over-the-fence" transactions are not allowed (sale of electricity or natural gas to another CPAU retail customer). DILCFT Power from Local Ultra-clean __Generation Incentive Program ("PLUG-In") o f.All rates and customer contracts shall adhere to Rule and Regulation 5 - Contracts. Procedural: a.Satisfy all City zoning and permitting and other applicable requirements. b.Owner must provide suitable access to the site, and comply with CPAU dispatch requirements for safety and reliability c. Must adhere to NCPA and CAISO power scheduling protocols. d.Must comply with all data reporting regulations required of power generators. e.Ov~T~er must maintain creditworthiness and insurance coverage during the term of the agreement. f. Equipment warranty of no less than.5 years. c~ Contract length no more than 20 years. Legal: a. All aspects of the PLUG-In Program, including, but not limited to, the Program’s policies, procedures, guidelines, contracts, and forms, will be reviewed and approved as to form by the City Attorney’s Office. DRAFT Power from Local Ultra-clean Generation I__ncentive Program ("PLUG-In") PROGR_AM DESCRIPTION and PROCESS 1. Technical Requirements - Eligibility a. Fuels: i. ii. Natural Gas Renewable Fuels: Any non-fossil fuel resource other than those defined as conventional in Section 2805 of the Public Utilities Code. A facility using Renewable Fuels may not use more than 25 percent fossil fuel annually, as determined on a total energy input basis for the calendar year. b. Water Use: Any incremental water use must be derived from reclaimed water or decontaminated groundwater. c. Eligible Technologies i.Renewable Energy ii.Cogeneration- ultra-clean distributed resources at least 5% of useful output energy utilized as useful thermal energy. 1.Small Gas Turbines (>1 MW) 2.Micro-turbines (_<1 MW) 3.Reciprocating Engines 4.Fuel Cells iii.Distributed Generation- technologies that do not employ cogeneration may quali~ subject to alternate efficiency thresholds. iv. Fuel Cells. v. Waste Heat Recovery - technologies that converting heat from existing thermal processes to electricity. d. Ineligible Technologies i. Back-Up Generators - systems intended solely for emergency or back-up generation purposes. ii. Any system or equipment that is capable of operating in or switching to diesel fuel, or Diesel Cycle for continuous operation. iii. Generating technologies not listed in section l(c), e. Waste Heat Utilization and Energy Efficiency: i. Natural gas-fired cogeneration must meet all of the following criteria. 1.Utilize at least 5% of useful output energy utilized as useful thermal energy; a. T/(T+E) > 5% 2. FERC PURPA Efficiency >_ 42.5% (LHV); a. (E + T/2)iF~_m7 _> 42.5% 3, Exceed PUC 353.2 Ultra-Clean DG 60% (HHV) a. (E+T)/F~-rv >_ 60% Power from Local Ultra-clean Generation Incentive Program ("PLUG,In") 4. Where: a. T = The annual useful thermal output used for industrial or commercial process (net of any heat contained in condensate return and!or makeup water), heating applications (e.g. space heating, domestic hot water heating), used in space cooling application (i.e., thermal energy used by an absorption chiller). b. E = The annual electric energy made available for use, produced by the generator, exclusive of any such energy used in the power production process, converted into equivalent B tu using the factor 34 ! 4 Btu/kWh. ii. c. FLhw = The generating system"s annual Lower Heating Value (LHV) non-renewable fuel consumption. d. F~.~rv-= The generating system’s annual Higher Heating Value (HHV) non-renewable fuel consumption. Distributed Generation using natural gas must exceed 40% HHV electric efficiency when operating at maximum capacity. 1. E’~’mrv > 40% 2. \\~ere: a.E’ = The generating system’s rated electric capacity, converted to equivalent Btu/hr using the factor 3,414 Bin/kWh. b. F’mrv = The generating system’s Higher Heating Value (HHV) fuel consumption rate CBtu/hr) at rated capacity. c. Waste Heat Recovery shall use the incremental increase in natural gas use to estimate fuel use. iii.Generation using renewable fuels and waste heat recove~ are exempt from efficiency criteria. Emissions and Environment i. Ultra-Clean DG (PUC 353.2) <.07 lb NOx/kWh. 1. Credit for high efficiency calculated consistent with AB 1685 and the CPUC SGIP Handbook Section 2.5.9.3. ii. 2.Waste Heat Recovery shall use the incremental change in NO× emissions. Net CO2 emissions < 1.10 lbikV~. Useful therma! energy from cogeneration shall be converted to kwh using 3,414 Btw’kV~Q. 1. CO2/k\gheq = (CO2 lb)/~kV~n+Tk;V~n) _< 1.10 lb/kWh 2. Where DtL,:kFT Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") a.CO2 ib = The annual CO2 emissions based on annual fuel use using the factor 11.7 lb CO2 per therm. iii. b. Tkv~.n = The annual useful thermal output converted to kwh using the factor 3,414 Btu/kWh. C. ]~kWh = The annual electric energy in kwh made available for use, produced by the generator, exclusive of any such energy used in the power production process. 3.Waste Heat Recovery shall use the annual incremental change in natural gas use to estimate CO_~ lb, using the factor 11.7 lbs CO_~/therm. Generators that elect a Direct Buyback option under section 2.d.ii.3 shall also evaluate the electric-only CO2 emissions as follows: 1. If CO.,/kWh = (CO2 lb)/(Ekwh) >1.10 lb/kWh, the Direct Buyback Power Purchase A~eement may require limits on the number of hours per year that the generator may operate in electric-only mode such that the total annual CO~ emissions of combined operation do not exceed 1.10 lbiMWh. iv.Generation using Renewable Fuels are exempt from emissions criteria but must provide a copy of BAAQMD Permit to Operate. ~ Interconnection and Metering i. Rule & Regulation 27 defines electric interconnection requirements and process. ii. Natural gas supply to the generator and electricity produced by the generator must be metered separately from the rest of the faciliV. iii. Generator must provide adequate telemetry for SCADA and billing for electric and natural gas. h. Ownership may be customer or third-party owned. i. Power generated must serve on-site electric load and!or offered for sale to CPAU ii. Generator must be a permanent installation Size limits for "auxiliary equipment": no more than the greater of: i.Meet on-site peak electrical demand, ii.Meet on-site peak thermal demand, iii.In no case ~eater than 10 MW per customer served. DE&F’T Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") YES , YES NO YES "~ YES NO YES Figure 1. Efficiency and Emissions Criteria Flow Chart YES ............... T YES Electdc-Only ] Limits in PPA DRAFT Power from Local Ultra-clean Generation I_Encentive Program ("PLUG-In") 2. Incentives and Rates a. Incentives i. Incentives Limits ii. 1.10 MW system limit per customer ser~,ed. 2.Incentive may not exceed applicant net eligible project expenses after other ~ants, rebates and tax credits. Base Incentive Levels for Eligible Technologies. 1. CPAU base incentive levels for fossil fuel generation up to 2 MW Rated Capacity are based on minimum 50% eligible average Annual Capacity Factor (ACF) defined as follows. a. ACF = E/(C’8760); where i. E = The annual electric energy made available for use,.produced by the generator, exclusive of any such energy used in the power production process, measured in k o ii.C = The smaller of 2000 kW or the Rated Capacity of the generator, measured in kW. b.Base Incentives will be adjusted downward proportionally for facilities with ACF < 50% by using the factor ACF/50%. Base Incentives that are $200,000 or less shall be paid on successful completion of equipment acceptance test and submittal and approval of Final Incentive Claim Form. Incentives in excess of $200,000 shall be paid in two annual installments, subject to equipment performance verification by CPAU. a. First installment shall be paid on submittal and approval of Final Incentive Claim Form and successful completion of Field Verification test, equal to $200,000 plus one-half of incentive exceeding $200,000. b. The second installment shall be paid no sooner than 12 months after the first payment, and upon successfully demonstrating to the satisfaction of CPAU that over 12 consecutive months: i. The efficiency and emissions criteria ha~,e been met for all power generation; and ii. Annual Capacity Factor exceeds 50% as defined in 2.a.ii. 1. 4.Cumulative incentive reservations exceeding annual incentive budget shall be paid in annual installments subject to annual incenti-~e budget limitations. DRAFT Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") Table 1. PLUG-In Base Incentives Levels and Limits. CPUC incentives are shown for reference only. Small Gas Turbines (>1 MW) or Reciprocating Engines Micro-turbines (<1 MW unit size) Fuel Cells (CPAU exempt from 5% Thermal) Waste Heat Recovery or Non-Combustion Renewable Power 2007 CPUC SGIP $/kW $6OO $8OO $2,500 VV~nd $1500 CPAU2007BaseCPUC Incentive Maximum i-.: $/kWIncentive $St MW $600,000(1 MW) $800,000 (1 MW) $2.5 million (1 MVV) Wind $1.5 million $5OO $7OO $2,500 $1,000 CPAU-. Base Incentive i$lkW 2rid MW $250 $250 $250 CPAU Maximum Base Incentive $ $750,000 $900,000 $! .25 million (0.5 MW) $1.25 million iii. Bonus Incentives. 1. $50/kW for USEPA CHP Energy Star Award. a. Maximum $50,000. b. Paid upon receipt certification from USEPA. 2. $50/kW for LEED Certification of power facility. a. Maximum $.50,000. b. Paid upon receipt of LEED Certification. 3. $50/kW if>80% total efficiency HHV. a. Maximum $100,000. b. Paid after one year of operation upon verification by CPAU. 4. $25/kW incentive to include Black Start and Islanding capability for emergency reliability. a. Maximum $50,000. b. Paid upon completion of equipment acceptance test and submittal and approval of Final Incentive Claim Form. 5. $250/kW if fueled by renewable fuels. a.Maximum $2.50,000. b.Paid upon completion of equipment acceptance test and submittal and approval of Final Incentive Claim Form. c. Transfers ownership rights of Renewable Energy Credits to CPAU. d. Eligible Renewable generation may forego the incentive and instead enter a sales contract with CPAU for Renewable Energy Credits generated by the facilitT. iv. Supplementary Incentives: 10 DR_AFT Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") go 1.$100!kW of load reduction if cogenerator employing heat- driven cooling or other processes normally using electric power reduces electric peak demand. a. No maximum, but subject to total incentive limit not to exceed customer net cost. b. Heat-driven processes with electric backup must subtract the expected impact of electric backup equipment. c. Funded by efficiency and demand reduction budget. Incentive Reimbursement: 1. Equipment removed from service less than five years from initial start date shall reimburse PLUG-In incentive payments to CPAU on a pro-rata basis. vi.Maximum cumulative PLUG-In program incentives are limited to the lesser of $5 million or 20 MW cumulative Rated Capacity, whichever comes first. b. Eligible Equipment and Expenses. i. Eligible expenses include design, construction, equipment and supplies. ii. Expenses not eligible include customer employee labor, in-kind contributions, utilities special facilities or connection costs, and peaking generation equipment not included in minimum capacity factor criteria. iii.Customer must pay all utility connection cost attributable to the project (may be paid over time or deducted from incentive). c. Natural Gas Rates. d. Electric Generation equipment must have a separate gas meter in order to receive incentives. ii. Customer may use either the default natural gas retail rate or the distributed generation!cogeneration retail rate (G-COG). iii. Large systems (> 1 MW or >500,000 million therrns per year) may enter a custom gas purchase agreement (G-12 or equivalent). Rates. ii. Generation equipment must have a separate electric meter in order to receive incentives. Three alternatives are available to customers for receiving credit for power generated by eligible equipment. 1. Net Metered: Renewable energy generators that qualify for Net Energy Metering may use electric rate E-10: Net Energy Metering. E-! 0 is applicable to solar or wind turbine generating facilities of not more than 1 MW. 2.Co-Metered: For systems that do not automatically qualify for Net Ener~ Metering, customer may elect to be credited for 11 DRAFT Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") electric power generated at the City’s E-3 (electric buyback) retail rate. Customer shall be billed for all electric consumption at their default electric retail rate. This option is the default alternative. Direct Buyback: For systems 1MW or greater, customer may enter into a !ong-term contract with the City. This option involves a negotiated Power Purchase Agreement (PPA) subject to standard City credit and other qualifying supplier criteria, with rates and terms reflecting the City’s avoided costs at the time of the ageement. Agreements/Other Terms and Requirements a. Minimum!Maximum Term: Five to ~,enty years. b. CEQA!Planning: The facility must satisfy all City zoning and permitting and other applicable requirements. c.Interconnection Agreement: Customer must enter into an Interconnection A~eement acceptable to the City, such as FERC’s Small Generator Interconnection A~eement (SGIA) (see Rule 27). d. Special Facilities Agreement: Described in Rule 27 for electrical facilities, and may apply to special natural gas delivery or metering equipment,. e.Net Metering Agreement: Renewable Energy Credits from elec~tricity generated from renewable fuels shall be assigned to CPAU in order to enable the City to receive renewable fuel credit. f.Scheduling: for facilities in excess of 1 MW, generator must adhere to NCPA Scheduling protocols in accordance with CAISO practices. g.Reporting: Generator owner is responsible for submittal of all generator- specific data required by the CEC, BAAQMD, or other local, state, or federal authorities, with a copy to CPAU. tn addition, the generator shall submit a calendar year annual report summarizing monthly total gas consumption, electricity production, waste heat utilization, air emissions, and operating efficiency (form to be developed) h.Must-offer Dispatch: If the generator is not operating and not economic for owner to operate, CPAU retains option to instruct the generator to operate, wherein CPAU wil! pay fuel costs plus pre-determined variable operating cost. Gas use and electricity generation during the must-offer time periods are excluded from efficiency criteria but are subject to COx emissions limit. i. Surplus Sales: Surplus electric power from generators receiving incentive payments under this program may be sold only to CPAU unless otherwise approved by CPAU. j. Energy Audit: To qualify for the incentive payments, the host customer must complete an energy audit to identify opportunities for cost-effective enerD, efficiency measures that may be able to substitute for some of the 12 DRAFT Power frol-i1 Local Ultra-clean --Generation I__ncentive Program ("PLUG-In") need for cogeneration. The customer is not required to undertake the recommendations identified in the audit. k. Access & Inspections: Host must grant suitable facility access for inspections. 1. Insurance: Standard City insurance requirements apply as described in City of Palo Alto Form 650. m. Warrant?,: No less than 5 years. A customer-purchased extended warranty is acceptable. n. Field Verification: To be conducted by CPAU personnel or agents. o. Maintenance Coordination: Systems with rated capacity greater than 200 kW shall include a maintenance coordination letter to CPAU, which states that that the System Owner will schedule planned maintenance only between October and March and, if necessary, only during off-peak hours and/or weekends during the months of April to September. Process Reservation: The applicant must provide documentation demonstrating the ability to meet the efficiency, emissions, and other eligibility criteria, including engineering calculations with documented assumptions regarding the site’s therma! load. Specifically, the following documentation must be provided. i. Generator and Thermal System Description ii. Forecast of Generator Monthly Electric Generation iii. Forecast of Monthly Useful Therma! Output iv. Forecast of Generator Monthly Fuel Consumption v. Eligibility Screening Criteria a. Efficiency and Waste Heat Utilization b. Generator NOx Emissions Demonstrating < .07 lb/kWh c. Generator CO~_ Emissions Demonstrating < 1.1 lb/kWh vi. Incentive Calculation vii. Incremental water use and source description. All assumptions, backup documentation, hand calculations, models (with inputs and outputs) and custom spreadsheets used to develop the forecasts must be included in the documentation. Forecasts based solely on °°professional experience" or subjective observation will be rejected. Once a Reservation Request Form and application package is determined by CPAU to be complete and eligible, CPAU will (depending on funding availability) conditionally reserve a specific dollar amount for a specified Project system size. The initial reservation is valid for 60 calendar days. Within 60 calendar days of the date of the Conditional Reservation Letter, the applicant must submit a signed PLUG- In Distributed Generation Incentive Progam Agreement, at which time CPAU will issue a Reservation Confirmation and Incentive Claim Form with a reservation expiration date of 12 months. 13 DR_AFT P_ower from Local Ultra-clean Generation I__ncentive Program ("PLUG-In") Project Advancement: Within six months of issuance of the Reservation Confirmation, the applicant shall submit a progress report to CPAU demonstrating that adequate steps have been taken to complete the project within the 12 month time frame. Applicant may request an extension of up to 12 additional months if needed to meet air permit, City planning or building permit, or interconnection requirements. The progress report shall include the following documentation. i. Proof of Insurance. ii. Electrical Interconnection Application. iii. Air Permit Application. iv. Project Schedule v. Any substantive changes to the project description or system characteristics that may affect the system eligibility or incentive calculation. c. Interconnection: Palo Alto Utilities Rule and Regulation 27 details the process for completing interconnection for power generation. d. Project Completion: Upon project completion, Applicant shall submit a final Incentive Claim Form package, with necessary documentation that demonstrates, based on actual field test data, that the equipment meets the technical, efficiency and emissions criteria, and provides final cost breakdown information and final incentive calculation. e.Field Verification: Upon receipt of a complete final Incentive Claim Form package, CPAU or its agents may conduct a field -~erification visit to verify that the system is installed as represented in the application, is operational, interconnected and conforms to the eligibility criteria of the program, and to verify system capacity rating to conform the final incentive amount. f.Incentive Payments: Incentive payments shall be disbursed by the Ci~,, authorized by the City Manager, in accordance with Section 2(a). Cumulative incentive reservations exceeding annual incentive budget shall be paid in annual installments subject to annual incentive budget limitations. Equipment removed from service less than ten years from initial start date shall reimburse CPAU on a pro-rata basis (need to add to Progam Agreement and/or Final Incentive Claim Form) o Power Scheduling: Applicant with a generator that has a rated capacity of 1 MW or geater shall develop and implement procedures to comply with NCPA’s scheduling protocols, as they may be changed from time to time. A copy of the current version ofNCPA’s scheduling protocols are included as Appendix B. h. Reporting: Applicant shall comply with all repotting requirements imposed by federal, state, regional or local regulations as they apply to customer-sited power generation, including but not limited to CEC Data Collection Regulations, BAAQMD reports; or other such regulations, as they may be changed from time to time. Host Customer shall provide a copy of any such required report. At a minimum, the host customer shall !4 DRAFT Power from Local Ultra-clean Generation incentive Program ("PLUG-In") provide armuaI and monthly fuel consumption, electric power generation, and useful thermal energy output for the system, due quarterly within 60 days of the close of each quarter. CUSTOMER I Submit Reservation Request : . Application Packet::. PROJECTADVANCEMENT .Within 6 months, Submit p[o~f or: Project Advancement:Packet or ~ .:,i Request fo~ Sign AI! Remainin’g Agreements. Within !2 months,:S~bmit Final:. I Reservat on Confirmation and Incentive ..... Claim Form PaCket: I ReseWatiOnCOnfirmation and Incentive I:c a I CorrectiOn or :1,~ . ~YES I cPAU Processes Payment to Customer in 1 : ~c~0rdanc~ wfth ~ppli~bl~ P~meni sch~aigI Figure 2. PLUG-In Application and Incentive Claim Process. 15 DR_AFT Power from Local Ultra-clean Generation Incentive Program (~PLUG-In") APPENDIX A: DEFINITIONS ACF: Eligible .amnual Capacity Factor. Applicant: The entity’, either the Host Customer, System owner, or third part?, desi~ated by the Host Customer, responsible for the development and submission of the PLUG-In application materials and the main point of communication with CPAU. BAAQMD: Bay Area Air Quality Management District. Black Start: A generator with black start capability must be able to restart without a poser distribution system connection. Btu: British thermal unit. CAISO: California Independent System Operator. CARB: California Air Resources Board. CF: Capacity Factor - the ratio of actual energy production to the maximum possible energy production over a given time period. CEC: California Energy Commission CEQA: California Environmental Quality Act CHP: Combined Heat and Power, an alternative term for cogeneration. CO~_: Carbon Dioxide. Cogeneration: The sequential use of energy for the production of electrical and useful thermal energy. Co-metering: Electric metering arrangement whereby power generated by a customer-sited generator is credited at an electric buyback rate that is different from the otherwise applicable retail rate. CPAU: City of Palo Alto Utilities Department. CPUC: California Public Utilities Commission. DG: Distributed Generation. Diesel Cycle: A diesel cycle engine uses compression ignition rather than spark ignition to ignite the fuel-air mixture. E-3: CPAU’s Electric Buyback electric retail rate. 16 DtL~FT Power from Local Ultra-clean Generation Incentive Program ("PLUG-In") E-10: CPAU’s Net Energy Metering retail electric rate. Energy Star: US EPA rating system for energy efficiency and cogeneration. FERC: Federal Energy Regulatory Commission. Fuel Cell: Electric generator that produces electricity through an electrochemical reaction with a fuel source resulting in extremely low emissions, and may also produce heat in the form of and hot water or steam. G-COG: CPAU’s Distributed Generation retail gas rate. Generator Capacit),: Maximum net continuous power output of the packaged prime mover at indust~, standard conditions (59 degrees Fahrenheit at sea level) measured at the generator terminals. Usually expressed in kW or MW. GHG: Greenhouse gas. Green Tag: A Renewable Energy Credit. HHV: Higher Heating Value. Host Customer: An entity that meets all of the following criteria: 1) has legal rights to occupy the Site; 2) receives retail level electric or gas distribution service from CPAU; 3) is the utility customer of record at the Site; 4) is connected to the electric grid; and 5) is the recipient of the net electricity generated from the generation equipment. IOU: Investor-owned Utility. California IOUs are PG&E, SDG&E, SCE, and Southern California Gas Company. Islanding: Generator that can operate satisfactorily at 60 Hz without independently from the electric power grid. kW: kilowatt = 1000 watts. kwh: kilowatt-hour = 1000 watt-hours. LEED: Leadership in Energy & Environmental Design: a green building scoring system developed by U.S. Green Building Council. LHV: Lower Heating Value. MW: Megawatt = 1 million watts. MWh: Megawatt-hour = 1 million wa~-hours. !7 DEkFT Power from L__ocal Ultra-clean ~eneration Incentive Program ("PLUG-In") NCPA: Northern California Power Agency. Net Energy Metering: Electric metering arrangement whereby power generated by a customer-sited generator is credited at the otherwise applicable retail rate. NO,d Nitrogen Oxides. PLUG-In: Power From Local Ultra-clean Generation Incentive program. PPA: Power Purchase Agreement. PUC: California Public Utilities Code. QF: Qualifying Facility. Rated Capacity: Maximum net continuous power output of the packaged prime mover at industry standard conditions (59 de~ees Fahrenheit at sea level) measured at the Delivery Point. Usually expressed in kW or MW. Renewable Energy Credit: A credit that entitles the holder to claim generation of one MWh of renewable energy. Also known as a Green Tag. Renewable Fuel: A non-fossil fuel resource that can be categorized as one of the following: wind, solar, hydroelectric, gas derived from biomass, digester gas, solar, landfill gas. SGIA: Small Generator Interconnection Agreement- a standard interconnection agreement approve by FERC for use with power generation systems up to 20 MW. System Owner: The ow~ner of the generating system at the time the incentive is paid. In the case of a leased system, the lessor is the System Owner. Therm: 100,000 Btu. USEPA CHPP: United States Environmental Protection Agency Combined Heat & Power Partnership. 18 DRAFT Power from Local Ultra-clean Generation I__ncentive Program ("PLUG-In") APPENDIX B: SAMPLE NCPA SCHEDULING PROTOCOLS Prior to three (3) business days before the end of a month, Generator is to provide to NCPA and City a monthly forecast of loads and/or generation for the following month. At a minimum, monthly forecasts will be hourly kilowatt (kVV) values by weekday, Saturday, and Sunday/Holiday. No later than 14:00 each Thursday, Generator is to provide a forecast of loads and/or generation for the following week to the extent different from the monthly forecast in Paragraph 1. Weekly forecasts will be hourly kW values for each hour of the week. o ° Daily modifications to forecasts. Unless otherwise mutually agreed, Generator may make changes to the Weekly forecast by providing such changes to NCPA prior to 08:00 two (2) workdays before the active scheduling day° a. 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. Hourly modifications to active schedules. Unless otherwise mutually agreed, Generator may make changes to active schedules by providing such changes to NCPA with a minimum of 4 hours notice before the active hour to be changed. 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. a. 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 11:00. NCPA is to be notified of all planned or forced generation outages. At Generator’s request, NCPA will modify generation and load schedules for unforeseen circumstances in accordance with the above scheduling timeline constraints and NCPA Schedule Coordination Agreement. All notices and schedules are to be submitted to NCPA by phone, fax or email to the following persons: Chief Dispatcher/Scheduler. In the absence of forecasts and schedules as noted above, NCPA will utilize the most current information provided by Seller in the development and submission of schedules. 19 DEkFT P_ower from Local ~Itra-clean --Generation Incentive Program ("PLUG-In") APPENDIX C: FORMS, WORKSHEETS, AND AGREEMENTS 1. Reservation Request a. Reservation Request Application Checklist b. Reservation Request Form c. System Description Form d. PLUG-In Spreadsheet i. Reservation Request Worksheet ii. Efficiency and Emissions Criteria \Vorksheet iii. Incentive Reservation Calculation Worksheet 2.Project Advancement a. Proof of Project Advancement Checklist b. PLUG-In Progam Agreement ([Q b~idevel0ped) c. Proof of Insurance: In accordance with Palo Alto Form 650 d. Project Cost Breakdown Worksheet e. Renewable Fuel Affidavit (if applicable) 3.Incentive Claim a. Incentive Claim Form Checklist b. Reservation Confirmation and Incentive Claim Form c.Planned Maintenance Coordination Letter d. Final Project Cost Breakdown Worksheet e. Final Project Cost Affidavit 4.Interconnection Agreement a. May use existing tnterconnection Agreement for Photovoltaics/Wind less than 1 MW; or b. FERC-Approved SGIA for generators over l 5.Energ-y Sales Agreement (as applicable): a. Net Energy Metering Agreement: May use PV/Wind Net Energy Metering Agreement; or b. Power Purchase Agreement: Based on FERC-Approved Standard Offer 3 or Standard Offer 4, or other CitF,-approved contract. Note: Special Facilities Ageement (if applicable) and Gas Supply Agreement (if applicable) are custom agreements, developed as needed. 2O Attachment B - Redline DRAFT Power from Local Ultra-clean Generation Incentive Pro~am ("PLUG-In") PROGAM DESIGN GUIDELINES: CMR:406:06, UAC Report 04-Oct-2006 1.Technical: o No Eligible technologies include cogeneration, fuel cells, waste heat recovery, or renewable energy conversion. Eligible fuels include natural gas or-and renewable fuels as defined in Section 2805 of the Public Utilities Code. Cogeneration must meet and maintain FERC and grote--California efficiency and thermal energy utilization criteria. All technologies must meet ultra-clean distributed generation efficiency and emissions requirements established by the California gmie-Air Resources Board. e. Single system maximum size is 10 MW per customer served, and no larger than the greater of on-site peak electric load or on-site peak thermal load. f.Incremental groundwater. Reliability: water consumption from reclaimed or decontaminated a.Owner shall provide "must-offer" obligation to CPAU. The City reserves the right to instruct the generator to operate if it is off. vet-and available. b.The City has the right to redirect power in an emergency. c.Must comply with CPAU Rule and Regulation 27 - Interconnection Standards. d.Ensure equipment availability and power generation performance acceptable to the City. Financial: a.Ten-year Pprogram maximum is 20 MW or $5 million, whichever milestone is ,’eachedc-omes first. Incentives shall be competitive with other programs available in the State, with bonus incentives for high efficiency, low environmental impact, demonstration of innovative new technologies, islanding capability, and electric demand reduction. May be customer or third_--party owned. Power may be sold to CPAU or net metered and surplus power sold to CPAU, under the principle of full avoided cost with shared savings bet-ween CPAU and host. e."Over-the-fence" transactions are not allowed (sale of~lectricity or natural ~as to another CPAU retail customer). DEkFT Power from Local Ultra-clean Generation i_~ncentive Program ("PLUG-In") f All rates and customer contracts shall adhere to Rule and Regulation 5 - Contracts. Procedural: a.Satisfy al! City zoning and permitting and other applicable requirements. b.Owner must provide suitable access to the site, and comply with CPAU dispatch requirements for safety and reliabiliU, c. Must adhere to NCPA and CAISO power scheduling protocols. d. Must comply with all data reporting regulations required of power generators. e.Owner must maintain credit-worthiness and insurance coverage during the term of the agreement. f. Equipment warranty of no less than 5 years. g. Contract length no more than 20 years. Legal: a. All aspects of the PLUG-In Pprogam, including_, but not limited to, the P_pro~am’s policies, procedures, guidelines, contracts, and forms, will be reviewed and approved as to form by the CiU~ Attorney’s Office. 4 Attachement C Ao Bo GAS FOR ELECTRIC GENERATION SER¥-ICE UTILITY P,_&TE SCHEDULE G-COG APPLICABILITY: The following schedule shall apply to customer-owned power generating facilities who have retained gas direct access eligibility. TERRITORY: Within the service area of the City of Palo Alto and on land owned or leased by the City. C.RATES:Per Service Do Monthly Customer Charae:$345.00 Per Therm Char~es (To be added to Customer Charge Per Therm Supply Charge: Commodity Charge ............................................................................................$0.10-$2.00 Administrative Fee ....................................................................................................$0.0227 PG&E Local Transportation .....................................................................................$0.0212 Distribution Charge: Palo Alto Local Distribution .....................................................................................$0.1870 SPECIAL CONDITIONS: 1)Service under this schedule is subject to discontinuance in whole or in part, for operational " reasons, or if the City experiences supply or capacity shortages. The City will exercise reasonable diligence and care to furnish and deliver continuous service and a sufficient quantity" of gas to customers, but does not guarantee continuity of service or sufficiency of quantity. The City. shall not be liable for any damage caused by interruption of service, if the interruption of service is caused by an act of God, Fire, Strikes, riots, war, or any other cause that is beyond the City’s control. 2) ;) Gas supplied under this schedule is only available for the electric generation portion of the customer’s load purchases. The Commodity Charge for qualifying customers under this schedule may be determined based on one of t~vo methods: CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF FAL,12, ALTO UTILITIES Effective 1 - 1-2008 Original Sheet No. G-COG-1 4) GAS FOR ELECTRIC GENERATION SERVICE UTILITY RATE SCHEDULE G-COG (Continued) a)Weighted-Average Comrnodity Rate (available to all customers): i)The Commodity Charge will be equal to the City’s weighted average cost of gas calculated at the PG&E City Gate for gas purchased by the City at first of the month and daily market prices for that month. ii)The commodity charge will fall within the minimuM/maximum range set forth in Section C, and include the cost of transporting the gas to the PG&E City Gate. b) iii)Election of this commodity charge basis does not have a term, and constitutes the default billing basis for delivery should the customer not elect or renew a Fixed-Term Commodity Rate, as specified below; Fixed-Term Commodity Rate (available to customers with generation loads over 250,000 therms annually) i)The Commodity Charge and the term of said charge will be set at the time when the customer signs a letter ac "knowledging the term and price agreed upon with CPAU. The Commodity Charge shall be based upon the customer class average load shape, a risk premium, and market prices: The Commodity Charge will fall within the range set in Section C of this Schedule and will be for gas delivered to PG&E City. Gate. ii)The Commodity Charge shall be fixed for a 12 or 24-month term. iii)Quali~dng customers who choose to be charged under this commodity charge basis are required to sign a letter with CPAU committing to ~/price and term and to adhere to rules and regulations set forth in CPAU Rule and Regulation No. 5 (Contracts). The letter shall indicate the estimated gas consumption over the term of the contract rate. This consumption shall be served solely by CPAU. The other components of the rate: Administrative Fees, Transportation Charges, Distribution Charges and Monthly Customer Charges may be modified periodically with the Council’s approval. The Administrative Fee is equal to the allocable administrative and overhead costs incurred by the City in providing the gas service. CITY OF PALO ALTO UTILITIES Issued by the City Council UTILITIES Effective 7-1-2007 Original Sheet No. G-COG-2 GAS FOR ELECTRIC GENEI~&TION SERVICE UTILITY R_ATE SCHEDULE G-COG (Continued) 7) 8) PG&E Local transportation charge is equal to the cost of transporting gas from PG&E City Gate to the Palo Alto City Gate. Total monthly charge = therms used during the month X (Commodity Charge + Administrative Fee + PG&E Local Transportation Charge + Palo Alto Local Distribution Charge) + Monthly Customer Charge. Should the customer elect a Fixed-Term Commodity option, the customer must remain on the term rate for the term indicated on the Confirmation Schedule, providing the customer continues to receive distribution services from the City. The confirmation Schedule shall indicate the Customer’s approximate gas usage (load) over the term of the contract. This load shall be served solely by CPAU. CITY OF PALO ALTO UTILITIES Issued by the City Council CI’~’f ©P PAL’C, ALTO UTILITIES Effective 7-1-2007 Original Sheet No. G-COG-3 Attachment B Excerpts from the Draft Utilities Advisory Commission Meeting Minutes of 9/05/07 DRAFT UTILITIES ADVISORY COMMISSION MINUTES OF SEPTEMBER 5, 2007 ITEM 2: ACTION ITEM: Ultra-Clean Local Distributed Generation Incentive Pro~]ram and Natural Gas Rate for Electric Generation Service: Knapp summarized the proposed incentive program implementation plan and modifications to the program guidelines. The program establishes incentives, rates, and rules for ultra-clean customer-sited small-scale distributed generation. Rosenbaum inquired as to the origin of the restriction on water in the approved guidelines, which had arisen through the internal stakeholder process involving city staff from multiple departments and divisions. Dawes inquired as to details regarding the economic analysis applicable to the program. Knapp said he would send the analysis that had been shared with the UAC previously to clarify. Bechtel moved, Rosenbaum seconded, unanimous vote in favor of staff recommendation to recommend approval of the modifications to the program guidelines, adoption of the program implementation plan and handbook, and approval of the new natural gas retail rate "G-COG" applicable to distributed generation. Utilities Advisory Commission Minutes from: Approved on:Page 1 of 1 ATTACHMENT C RESOLUTION NO. RESOLUTION OF THE COI3_~CIL OF THE CITYOF PALO ALTO ADOPTING NEW ULTtL&-CLEAN LOCAL DISTRIBUTED GENEtL&TION INCENTIVE PROGtL&M OF THECITY OF PALO ALTO WHEREAS, the City of Palo Alto ("the CITY") provides electric service to residential and commercial customers located within its jurisdictional boundaries; and WHEREAS, the Council approved a set of energy portfolio planning objectives in March 2007, among them, providing competitive and predictable supply cost while balancing environmental, local reliability, rate and cost impacts; maintaining a supply portfolio cost advantage compared to wholesale electricity market cost; enhancing supply reliability to meet City and customer needs by pursuing opportunities including transmission systeln upgrades and local generation; and acting to maintain the City Council’s ability to exercise local control of decision making related to all aspects of serving customer energy needs; and WHEREAS, the Council approved a set of energy portfolio planning guidelines in March 2007, among them, to promote an ultra-clean distributed generation incentive program; and WHEREAS, the Council approved a set of ult~a-clean local distributed generation incentive pro~arn guidelines in November, 2006; and WHEREAS, ultra-clean distributed generation supports environmental and energy objectives and policies of the State of California and the United States Energy Policy Act of 2005; NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council herby approves the City of Palo Alto Department of Utilities Distributed Generation Incentive Program as described in the Program Description and Handbook, dated August 2007. // // // // 070926 jb 0072935 SECTION 2. The Council finds that the adoption of this resolution does not constitute a project under the California Enviromnel~tal Quality Act.. California Public Resources Code section 21080, subdivision (by(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: City, Attorney City Manager Director of Utilities Director of Administrative Services 070926jb 0072935 ATTACHMENT D RESOLUTION NO. RESOLUTION OF THE COU~-CIL OF THE CITY OF PALO ALTO APPROVKNG NATUP~&L GAS RATE SCHEDULE G-COG GAS FOR ELECTRIC GENEP,_ATION SERVICE 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, new Utility Rate Schedule G-COG (Gas for Electric Generation Service) is hereby added to read in accordance with sheets G-COG-l, G-COG-2 and G-COG-3, attached hereto and incorporate herein. Schedule G-COG sets forth the unbundled rates for customer-owned power generating facilities. The foregoing Utility Rate Schedule shall become effective ., 2007. SECTION 2. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in ,&-ticle VII, Section 2, of the Charter of the City of Palo Alto. 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 .APPROVED AS TO FORM: City Attorney Mayor ~.APPROVED: City Manager Director of Utilities Director of Administrative Services 070820jb 0072916 Attachment B Excerpts from the Draft Finance Committee Meeting Minutes of 10/02/07 DRAFT FINANCE COMMITTEE MINUTES OF OCTOBER 2, 2007 ITEM 3: ACTION ITEM: Utilities Advisory Commission Recommendation to the Council to Adopt a Resolution Approvin,q the Ultra- Clean Local Distributed Generation Incentive Proqram and to Adopt a Resolution Adoptin.q Natural Gas Rate Schedule G-COG Gas for Electric Generation Service: Karl Knapp summarized the proposed incentive program implementation plan and modifications to the program guidelines. The program establishes incentives, rates, and rules for ultra-clean customer-sited small-scale distributed generation. The presentation encompassed the City’s long-term energy balance, benefits of clean distributed generation, Council-approved Principles and Guidelines for the program, implementation plan highlights, and a savings and payback example. Morton inquired as to the possibility energy recovery from SLAC when it is operating. Knapp responded that SLAC is primarily a large electric toad, and that the waste energy produced to his knowledge did not constitute a significant source of waste heat for electricity generation. Mossar moved, Klein seconded, with a unanimous vote in favor of staff recommendation to recommend approval of the modifications to the program guidelines, adoption of the program implementation plan and handbook, and approval of the new natural gas retail rate "G-COG" applicable to distributed generation. Finance Committee Minutes from: Approved on: Page 1 of 1