HomeMy WebLinkAboutStaff Report 343-09TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: AUGUST 3, 2009 CMR: 343:09
REPORT TYPE: CONSENT
SUBJECT: Finance Committee Recommendation to Adopt a Resolution Approving
the Ameresco Johnson Canyon Landfill Gas Renewable Energy Power
Purchase Agreement for the Acquisition of Up to Two Average
Megawatts of Energy Over Twenty Years at an Estimated Cost Not to
Exceed $30 Million
RECOMMENDA TION
Staff and the Finance Committee recommend that Council adopt a resolution approving the
Power Purchase Agreement (PPA) with Ameresco Johnson Canyon LLC, a Delaware limited
liability company. Additionally, for this agreement, staff and the Finance Committee
recommend the Council waive the application of the investment-grade credit rating requirement
of Section 2.30.340(d) of the Palo Alto Municipal Code to this transaction.
BACKGROUND
One of the Council-adopted Long-term Electric Acquisition Plan (LEAP) Guidelines is to meet
33 percent of the City's electrical load with renewable resources by 2015, while ensuring the
retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average, or
approximately 5 percent of the average retail rate premium (CMR: 158:07).
By 2010, the City expects to meet 20 percent of the City's annual electrical usage with
renewable resources with minimal impact on retail rates, thus needing approximately 13 percent
of annual usage to meet the 33 percent renewable portfolio goal by 2015. The City issued a
Request for Proposals (RFP) in March 2009 for renewable electric power supplies. The proposal
from Ameresco Johnson Canyon LLC is deemed to be one of the best and, since the City already
has several current PPAs with Ameresco, the contract details were completed relatively quickly.
DISCUSSION
Ameresco owns and operates several landfill gas-fired plants in the greater Bay Area and Palo
Alto currently has PPAs with four other Ameresco landfill gas-fired power projects. This project
is to be built at Johnson Canyon Landfill in Gonzales, California.
Under the PPA, the City would receive and pay for the entire net output from the 1.4 Megawatt
(MW) first unit. The expected output is equal to about 11,200 Megawatt-hours (MWh) per year,
CMR: 343:09 Page 1 of 4
an amount roughly equal to 1.1% of the City's total electric load. The City would pay for actual
output delivered for a starting price of 10.9 cents per kilowatt-hour (kWh) escalating at 1.5% per
year for a term of 20 years. The price is approximately equal to the Market Price Referent
(MPR) that is used by the California Public Utilities Commission (CPUC) when evaluating bids
submitted by the state's investor-owned utilities, such as the Pacific Gas and Electric Company.
After the initial project is built and operational in 2010, Ameresco expects to expand it
approximately every four years as increased amounts of landfill gas are produced by the growing
landfill. The PPA allows Ameresco to sell to Palo Alto the output from any future expansions at
the project at a 15% discount to the then current MPR for alternative generation. Thus, Palo Alto
is committed to buy from Ameresco the output from any future expansions at the project only if
Ameresco offers them at a rate of 85% of the then current MPR for alternative generation, up to
a maximum price of $150 per MWh. The expansions could result in Palo Alto receiving up to 7
MW of the expansions (5 additional 1.4 MW expansions over the 20 year term of the PPA). This
would equate to approximately an additional 5.5% of the City's current total electric load. A
new PPA would be developed for each of the expansions and each one would require Council
approval.
If Ameresco cannot, or chooses not to, sell the output from the expansions for 85% of the MPR,
Palo Alto is neither committed to take, nor to pay for, the output from the expansions. However,
Palo Alto has the right of first refusal on a price for which Ameresco is willing to sell the output
of the expansions.
The City has previously executed four contracts with Ameresco, and the completion of this PP A
would increase Ameresco's total share of renewable energy deliveries to 91.6 gigawatt hours per
year, about 9% of the City's electric needs. Ameresco's share of the City's renewable energy
purchases is a relatively high percentage of the City's committed eligible renewable energy
contract volumes to date, but the risks to the City are mitigated by a number of factors including
the City's step-in rights to operate the plants in the event of default, the absence of a cross-
default provision, which isolates each contract from default of one of the other contracts, and
Ameresco's positive record of performance with the City.
Ameresco is a relatively small company that does not have a credit rating by Moody's Investor
Services or Standard and Poor's. Ameresco is a rapidly growing company and, as such, does
face some of the stresses inherent in rapid growth. These stresses have led to an increase in the
estimated default frequency (EDF) from 0.4% to 1.1% based on staff analysis of the 2007 and
2008 audited financial reports. Despite this increase in risk, Ameresco does demonstrate
continued financial strength in several areas given its size and growth, and when compared with
many other renewable energy companies.
Since energy deliveries will be tied to a specific generator at a specific location, in contrast to
market contracts whose deliveries are often backed by the financial strength or collateral of
companies rather than a physical asset, staff recommends that the Council waive the investment-
grade credit requirement for public agency contracts required under Section 2.20.340 (d) of the
Palo Alto Municipal Code. This conforms to Council action on prior renewable resource
contracts with similar characteristics (CMR: 461:04). This waiver is intended to benefit only
small but sound companies that do not have credit ratings. The agreement between Palo Alto
and Ameresco (Attachment C) was reviewed by Utilities staff, the City Attorney's office, and the
CMR: 343:09 Page 2 of 4
Energy Risk Manager to determine that the combination of value, price, terms, creditworthiness
of provider, and credit assurances warrant Palo Alto's participation.
COMMITTEE REVIEW AND RECOMMENDATIONS
The Finance Committee considered the contract on July 21,2009 (Attachment B: CMR: 305:09).
The committee discussed the current high prices for renewable power compared to renewable
power contracts entered into in 2005 and 2006. They stated that these high prices should prompt
a review of the policies and guidelines related to the acquisition of renewable power and the
emphasis on efficiency improvements that could reduce electricity use. Staff advised that such a
review was already underway and that the Utilities Advisory Commission would first review and
make recommendations to Council for any changes to policies, guidelines, or resource or
efficiency plans. A report requesting Council direct staff to conduct this review is also under
consideration by the Council on August 3,2009 (CMR: 342:09).
The Finance Committee voted unanimously (3-0) to recommend that the City Council adopt a
resolution approving the Power Purchase Agreement (PPA) with Ameresco Johnson· Canyon
LLC, a Delaware limited liability company. Additionally, for this agreement, staff recommends
the Council waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code to this transaction. The notes from the Finance
Committee meeting are provided as Attachment D.
RESOURCE IMPACT
The cost of renewable supplies under the agreement is expected to be about $90 million over 20
years if all expansions are completed. The annual expected cost is $1.2 million in the first year
with the cost escalating 1.5% per year over the 20-year term of the PPA. The initial plant and
PPA is expected to have a total 20-year cost of about $28 million. The additional $62 million in
total future costs assumes that expansions are built about every 4 years and that the MPR
escalates at about 1.5% per year. However, each of these expansions would require separate
PPAs to be approved by Council prior to execution.
Staff does not expect this PPA to push the portfolio beyond the 0.5¢/kWh limit RPS guideline
adopted by Council. The PPA costs about $500,000 per year more than the cost of non-
renewable power, adding about 0.05¢/kWh, or about 10% of the allowed guideline limit adopted
by Council.
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in the agreement to purchase renewable
energy and thereby is consistent with one of Council's top three priorities of Environmental
Protection.
ENVIRONMENTAL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City intends to receive
output from projects that will constitute a project for the purposes of CEQA. Project developers
will be responsible for acquiring necessary environmental reviews and permits on projects to be
developed.
CMR: 343:09 Page 3 of 4
ATTACHMENTS
A. Resolution approving Renewable Energy Power Purchase Agreement between Palo Alto
and Ameresco
B. CMR: 305:09 Adoption of a Resolution Approving the Ameresco Johnson Canyon
Landfill Gas Renewable Energy Power Purchase Agreement for the Acquisition of Up to
Two Average Megawatts of Energy Over Twenty Years at an Estimated Cost Not to
Exceed $30 Million (without attachments)
C. Renewable Energy Power Purchase Agreement between Palo Alto and Ameresco
D. Draft excerpted notes from the July 21,2009 Finance Committee meeting
PREPARED BY: ~OMKABAT W Senior Resource Originator
olrANE RA TCHYE \J Assistant Director, Resource Management
VALE~NG
REVIEWED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
JAMES KEENE
City Manager
CMR: 343:09 Page 4 of 4
Not Yet Approved All ACHMENl A
Resolution -----
Resolution of the Council of the City of Palo Alto Approving
the Long Term Power Purchase Agreement (Landfill Gas
Power) with Ameresco Johnson Canyon L.L.C. for the
Purchase of Electricity Generated by Landfill Gas Electric
Generating Facilities
WHEREAS, the City of Palo Alto("City"), a municipal utility and a chartered city
is a member of the Northern California Power Agency ("NCP A");
WHEREAS, on March 5, 2007, the City approved eight electric portfolio
planning and management guidelines to guide the development and management of the
City's long-term electricity acquisition plan; one of the guidelines is to pursue and target
levels of new renewable resource energy purchases equal to thirty percent and thirty three
percent of the City's expected energy load by 2012 and 2015, respectively;
WHEREAS, the City is interested in purchasing power generated by renewable
resources for the benefit of its electric customers;
WHEREAS, by purchasing these sources of renewable energy, the City will help
reduce the production of greenhouse gases and assist in reducing volatile organic
compound emissions;
WHEREAS, Ameresco Johnson Canyon L.L.C. proposed its project in response
to the City's Request for Proposals 130699 in March 2009 and it was competitive with
other RFP respondents;
WHEREAS, executing a power purchase agreement with Ameresco Johnson
Canyon L.L.C. will not eliminate the City's need for renewable energy from other RFP
respondents;
WHEREAS, the City is allocated a 100 percent share of the power from the initial
project, amounting to 1.4 megawatts plant net output;
WHEREAS, the power purchase agreement allows Ameresco Johnson Canyon
L.L.C. to sell the City additional output, if developed, at 85% of the applicable Market
Price Referent;
WHEREAS, Monterey County will be the lead agency for the purposes of
California Environmental Quality Act ("CEQA");
NOW, THEREFORE, the Council of the City of Palo Alto hereby RESOLVE as
follows:
The Council hereby approves the City'S execution of the Long
Term Power Purchase Agreement (Landfill Gas Power) made between Ameresco
090630 jb 0073186 1
Not Yet Approved
Johnson Canyon L.L.C., as Seller and the City of Palo alto, as Purchaser. The Term of
the contract is 20 years, commencing on the Commercial Operation Date of the proposed
generation facility. Quantity is a 100 percent share of the 1.4 average megawatt plant net
output. Spending authority under the contract is up to thirty million dollars
($30,000,000). The City Manager or his designee is hereby authorized to sign the
contract with Ameresco Johnson Canyon L.L.C. on behalf of the City.
SECTION 2. With respect to the Council's award of the Long Term Power
Purchase Agreement referred to in Section 1 above, the Council hereby waives the choice
of venue and credit rating terms and conditions requirements of Palo Alto Municipal
Code section 2.30.340(c).
The Council finds that the adoption of this resolution does not
constitute a project under the California Environmental Quality Act and no
environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
090630 jb 0073186 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENT B
TO: HONORABLE CITY COUNCIL
ATTN: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: JUL Y 21, 2009 CMR: 305:09
SUBJECT: Adoption of a Resolution Approving the Ameresco Johnson Canyon Landfill
Gas Renewable Energy Power Purchase Agreement for the Acquisition of Up
to Two Average Megawatts of Energy Over Twenty Years at an Estimated
Cost Not to Exceed $30 Million
RECOMMENDATION
Staff recommends that the Finance Committee recommend that Council adopt a resolution
approving the Power Purchase Agreement (PPA) with Ameresco Johnson Canyon LLC, a
Delaware limited liability company. Additionally, for this agreement, staff recommends the
Council waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) ofthe Palo Alto Municipal Code to this transaction.
BACKGROUND
In 2002, the Council adopted a renewable resource portfolio standard with the objective of
meeting 20 percent of the City'S electrical load with renewable resources by 2015, while
ensuring the retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average,
or approximately 5 percent of the average retail rate premium (CMR:398:02).
In March 2007, the Council advanced and increased the Renewable Portfolio Standard (RPS)
with a target to meet 20 percent of City loads with renewable resources by 2008 and 33 percent
by 2015. The new target was to be achieved while maintaining the retail rate impact measure of
0.5¢/kWh (CMR:158:07). It should be noted that California's RPS measure excludes large
hydroelectric resources that account for approximately 50 percent of the City's electric supply in
an average hydro year. If the City was able to include its hydroelectric resources in the RPS
calculation, approximately 68% of the load would currently be met with renewable resources.
The City expects to meet the 20 percent RPS goal by 2010 (about two years later than targeted)
with minimal impact on retail rates. The City is still seeking new renewable energy equal to
approximately 13% of annual usage to meet the 33 percent renewable portfolio goal by 2015.
The City issued a Request for Proposals (RFP) in March 2009 for renewable electric power
supplies. Sixteen project proposals were received by the RFP closing date of April 28, 2009.
CMR: 305:09 Page 1 of4
Staff is still evaluating some of the proposals and negotiating with some of the proposers. The
proposal from Ameresco Johnson Canyon LLC is deemed to be one of the best and, since the
City already has several current PPAs with Ameresco, the contract details were able to be
completed relatively quickly.
DISCUSSION
Ameresco owns and operates several landfill gas-fired plants in the greater Bay Area and is
executing a landfill gas fuel agreement with the Johnson Canyon Landfill in Gonzales,
California. The project was proposed in Palo Alto's 2009 RFP process. Palo Alto currently has
PPAs with four other Ameresco landfill gas-fired power projects. As a result of negotiations,
Ameresco would like to enter into a new PP A with the City to sell the full output of the first unit
at Johnson Canyon to Palo Alto for a price starting at 10.9¢/kWh and escalating at 1.5% per year
for a term of 20 years. The price is approximately equal to the Market Price Referent (MPR) that
is used by the California Public Utilities Commission (CPUC) when evaluating bids submitted
by the state's investor-owned utilities, such as the Pacific Gas and Electric Company. If bid
prices are at or below the MPR, then they are accepted as per se reasonable by the CPUC.
Therefore, the MPR acts as a market price benchmark for renewable power supplies.
The plant would be built by Ameresco and would qualifY as a renewable power project under
State-adopted definitions. It would be electrically connected to the transmission system operated
by the California Independent System Operator. Under the terms of the PP A, Palo Alto would
pay predetermined rates over the term of the agreement for any energy delivered. If delivered
volumes should decline, Palo Alto's payments to Ameresco would be reduced proportionately,
freeing up money to purchase replacement renewable energy from other sources.
Palo Alto would receive and pay for the entire net output from the 1.4 Megawatt (MW) plant.
The expected plant output is equal to about 1.28 average MWs, or 11,200 Megawatt-hours
(MWh) per year, an amount roughly equal to 1.1 % of the City's total electric load.
The project has a relatively high initial cost to develop the site and the interconnections needed
to operate the first engine. After the initial project is built and operational in 2010, Ameresco
expects to be able to expand it approximately every four years as increased amounts of landfill
gas are produced by the growing landfilL The expansions are envisioned as an additional 1.4
MW engine and generator set each time there is sufficient gas to support its operation.
The PP A allows Ameresco to sell to Palo Alto the output from any future expansions at the
project at a 15% discount to the then current MPR for alternative generation. This arrangement
means that Palo Alto is committed to buy from Ameresco the output from any future expansions
at the project at a rate of 85% of the then current MPR for alternative generation, up to a
maximum price of $150 per MWh. A risk of this arrangement is that the future MPR is not
known and could be very high relative to the then current market prices for renewable power.
Staff does not believe the risk is high and anticipates a continued seller's market for renewable
electricity. In addition, the risk is mitigated in the PPA by the maximum price of $150 per
MWh. This discount recognizes Palo Alto's assistance in bringing the initial project to fruition.
Just like the initial plant, if the expansions do not deliver power to Palo Alto, the City will not
have to pay for their output. The expansions could result in Palo Alto receiving up to 7 MW of
the expansions (5 additional 1.4 MW expansions over the 20 year term of the PPA). A new PPA
would be developed for each of the expansions and each one would require Council approval.
CMR: 305:09 Page 2 of4
If Ameresco cannot, or chooses not to, sell the output of the expansions for 85% of the MPR,
Palo Alto is not committed to take, nor to pay for, the output from the expansions. However,
Palo Alto has the right of first refusal on a price for which Ameresco is willing to sell the output
of the expansions. This means that if Ameresco offers the output to another party at a particular
price, Palo Alto can choose to take the output at the offered price.
The City has previously executed 4 contracts with Ameresco, and the completion of the Johnson
Canyon contract would increase Ameresco's share of delivery of renewable energy to 9l.6
gigawatt hours per year, about 9% of the City's electric needs or about 37% of the City's RPS
committed contract volume to date. Ameresco' s share of renewable generation purchases by the
City is relatively high, but the risks to the City are mitigated by a number of factors including the
City's step-in rights to operate the plant in the event of default, the absence of a cross-default
provision, which isolates each contract from default of one of the other contracts, and
Ameresco's record of performance with the City.
Ameresco is a relatively small company that does not have a credit rating by Moody's Investor
Services or Standard and Poor's. Ameresco is a rapidly growing company and as such does face
some of the stresses inherent in rapid growth. These stresses have led to an increase in the
estimated default frequency (EDF) from 0.4% to l.1 % based on staff analysis of the 2007 and
2008 audited financial reports. Despite this increase in risk, Ameresco does demonstrate
continued financial strength in several areas given its size and growth, and when compared with
many other renewable energy companies.
Since energy deliveries will be tied to a specific generator at a specific location, in contrast to
market contracts whose deliveries are often backed by the financial strength or collateral of
companies rather than a physical asset, staff recommends that the Council waive the investment-
grade credit requirement for public agency contracts required under Section 2.20.340 (d) of the
Palo Alto Municipal Code. This conforms to Council action on prior renewable resource
contracts with similar characteristics (CMR: 461 :04). This waiver is intended to benefit only
small but sound companies that do not have credit ratings. Palo Alto has had a positive
experience to date with Ameresco in regards to its four existing landfill gas-to-energy
agreements that provide a total of 9 MW. The agreement between Palo Alto and Ameresco
(Attachment B) was reviewed by Utilities staff, the City Attorney's office, and the Energy Risk
Manager to determine that the combination of value, price, terms, creditworthiness of provider,
and credit assurances warrant Palo Alto's participation .
. RESOURCE IMPACT
The cost of renewable supplies under the agreement is expected to be about $90 million over 20
years if the expansions are all completed. The annual expected cost is $1.2 million in the first
year with the cost escalating 1.5% per year over the 20-year term of the PPA. The initial plant
and PPA is expected to have a total 20-year cost of about $28 million. The additional $62
million in total future costs assumes that expansions are built about every 4 years and that the
MPR escalates at about 1.5% per year. However, each of these expansions would require
separate PP As to be approved by Council prior to execution.
Staff does not expect this PPA to push the portfolio beyond the 0.5¢/kWh limit RPS guideline
adopted by Council. The PPA costs about $500,000 per year more than the cost of non-
renewable power, adding about 0.05¢/kWh, or about 10% of the allowed guideline limit adopted
by Council.
CMR: 305:09 Page 3 of4
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in the agreement to purchase renewable
energy and thereby is consistent with the Council's Top Four Priority of Environmental
Protection. Participating in the agreement is also consistent with the following City policies and
guidelines:
1. The Council-approved Climate Protection Plan, adopted December 3, 2007, containing
Utilities Goal 2: Reduce carbon intensity of energy supply provided by Utilities;
2. The Council-approved Utilities Strategic Plan with regard to employing balanced
environmental solutions;
3. The energy risk management policies;
4. The rate impact limits and the renewable portfolio targets ill Long-term Electric
Acquisition Plan Guideline (LEAP) #6;
5. The portfolio diversification goals in LEAP Guideline #3;
6. The City's Sustainability Policy Statement, adopted April 2, 2001 (CMR 175:01) and
revised June 18, 2007 (CMR 260:07);
7. The Green Government Pledge, adopted July 19, 1999 (CMR 284:99);
8. The US Mayors' Climate Protection Agreement; and
9. The Comprehensive Plan, specifically:
a. GOAL N-9: A clean, efficient, competitively-priced energy supply that makes use of
cost-effective renewable resources.
b. POLICY N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing environmental and economic concerns.
c. POLICY N-48: Encourage the appropriate use of alternative energy technologies.
ENVIRONMENTAL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City intends to receive
output from projects that will constitute a project for the purposes of CEQA. Project developers
will be responsible for acquiring necessary environmental reviews and permits on projects to be
developed.
ATTACHMENTS
A: Resolution approving Renewable Energy Power Purchase Agreement between Palo Alto and
Ameresco
B: Renewable Energy Power Purchase Agreement between Palo Alto and Ameresco
PREPARED BY:
REVIEWED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 305:09
TOM KABAT
Senior Resource Originator
JANE RATCHYE
Assistant Director, Resource Management
VALERIE O. FONG
Director of Utilities
JAMES KEENE
City Manager
Page 4 of4
ATTACHMENT C
POWER PURCHASE AGREEMENT
This Power Purchase Agreement is entered into this __ day of ___ _
2009 by and between The City of Palo Alto, a California chartered municipal
corporation and Arneresco Johnson Canyon LLC, a Delaware limited liability
company.
RECITALS
1. Seller intends to develop, finance, build, own and operate a Landfill Gas
electric generating facility to be located at the Johnson Canyon Landfill (the
"Landfill") located at 31400 Johnson Canyon Road, Gonzales, California, on a
site leased from SVSWA, which owns the LandfilL
2. Buyer is engaged in the procurement and supply of electricity to residential
and commercial customers in the City of Palo Alto.
3. Buyer wishes to purchase a portion of the Output of the Plant and intends to
resell related Energy to its residential and commercial customers.
4. Buyer is willing to purchase, and Seller is willing to sell, a portion of the
Output of the Plant, on the terms and conditions and at the prices set forth in
this Agreement.
5. Seller may determine to expand the Plant in the future depending on the
availability of Landfill Gas and other factors in accordance with the terms of
this Agreement.
6. Buyer will have a right of first refusal to purchase Expansion Plant Output,
such right to be exercisable as provided in this Agreement.
7. In addition, Seller will have a right to sell, and Buyer must, if Seller exercises
such right, purchase, the Expansion Plant Output, such right to be exercisable
as provided in this Agreement.
NOW THEREFORE, in consideration of these premises and the mutual
promises set forth below, Seller and Buyer agree as follows.
SANFRAN 90103 (2K)
AGREEMENT
ARTICLE I -DEFINITIONS
Initially capitalized terms, whenever used in this Agreement, have the meanings set
forth below unless otherwise herein defined. The term "including," when used in
this Agreement, shall mean to include "without limitation."
1.1 Agreement: This Power Purchase Agreement, including all appendices, as it
may be amended from time to time.
1.2 Availability Threshold: The mechanical availability of the Plant calculated
as of the end of each calendar month during the Term as a percentage in
accordance with the following:
A 100 x Available Hours
Base Hours
Where:
A Availability Threshold
Available Hours = the number of hours during the twenty-four (24) prior
months in which the Plant is capable of delivering Energy to the
Point of Interconnection; provided that, to the extent that the
Plant is not capable of delivering all of the net Initial Capacity in
any hour, the Available Hours with respect to such hour shall be
reduced pro rata to reflect the fraction of the net Initial Capacity
the Plant is capable of delivering in such hour.
Base Hours = the number of hours during the twenty-four (24) prior
months; provided that, to the extent that the Plant is partially or
wholly incapable or otherwise unable to deliver Energy in any
hour as a result of a Force Majeure Event or because of fuel
unavailability in any hour due to no fault or negligence of Seller,
that hour (or if the Plant's capacity is only partially constrained,
the pro rata portion of that hour) shall be excluded from the Base
Hours.
There shall be no Availability Threshold during the first twelve (12) months
following the Commercial Operation Date. Starting with the thirteenth (13th)
month after the Commercial Operation Date and continuing through the
twenty-fourth (24th) month, the above formula will be used to determine the
2
SANFRAN 90103 (2K)
Availability Threshold with the exception that both Available Hours and Base
Hours will be calculated starting with the first hour of operation on the
Commercial Operation Date and including all relevant hours thereafter to the
end of the month relevant. Starting with the twenty-fifth (25th) month, the
Availability Threshold shall be calculated on a rolling basis using the previous
twenty-four (24) months.
1.3 Buyer: The City of Palo Alto, a California chartered municipal corporation,
and any successor or permitted assignee.
1.4 Commercial Operation: The condition of the Plant whereupon it (a) is
certified by Seller to be complete in accordance with manufacturers'
recommendations except for punch list items, and (b) has passed the
performance test set forth in Appendix E while synchronized with the LDC
System or ISO transmission grid.
1.5 Commercial Operation Date: The date upon which Commercial Operation
first occurs.
1.6 Contractual Obligations: As to Seller, any material agreement, instrument or
undertaking to which Seller is a party or by which it or any of its property is
bound.
1. 7 EA Agency: Any local, state or federal entity, or any other Person, that has
responsibility for or jurisdiction over a program involving transferability of
Environmental Attributes, including the Clean Air Markets Division of the
United States Environmental Protection Agency, the California Resources,
Conservation and Development Commission, the California Public Utilities
Commission, and any successor agency thereto.
1.8 Emergency: Any condition or situation which (i) endangers life or property or
(ii) affects Buyer's physical ability to maintain safe, adequate, and continuous
electric power and energy to Buyer's customers.
1.9 Energy: The electricity generated by the Plant and delivered to Buyer by the
Seller, pursuant to this Agreement, respectively, at the Point of
Interconnection, as expressed in units of kilowatt-hours (kWh) or megawatt-
hours (MWh), including Test Energy.
3 SANFRAN 90103 (2K)
1.10 Environmental Attributes: Any and all credits, benefits, emISSIOns
reductions, offsets, and allowances, howsoever entitled, attributable to the
generation from the Plant or Expansion Plant(s), as the case may be, and its
displacement of conventional energy generation. Environmental Attributes
include but are not limited to: (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 (C02), methane (CH4) and other greenhouse gases (GHGs) that have
been determined by the United Nations Intergovernmental Panel on Climate
Change 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. 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 without limitation 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 kWh basis and one Green Tag represents the Environmental
Attributes associated with one (1) MWh of energy. Environmental Attributes
do not include (i) any energy, capacity, reliability or other power attributes
from the Plant or Expansion Plant(s), (ii) production tax credits associated
with the construction or operation of the Plant, Expansion Plant(s), Landfill, or
any other associated contract or right, and other financial incentives in the
form of credits, reductions, or allowances associated with the Plant, Expansion
Plant(s), Landfill, or any other associated contract or right, 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 Seller or the owner of the Landfill for the destruction
of particular pre-existing pollutants or the promotion of local environmental
benefits, or (iv) emission reduction credits encumbered or used by the Plant or
Expansion Plante s) for compliance with local, state, or federal operating
and/or air quality permits.
1.11 Environmental Attributes Reporting Rights: All rights to report ownership
of the Environmental Attributes to any person or entity, under Section 1605(b)
of the Energy Policy Act of 1992 or otherwise.
4
SANFRAN90I03 (2K)
1.12 Environmental Law: Any federal, state and local laws including statutes,
regulations, rulings, orders, administrative interpretations and other
governmental restrictions and requirements relating to the discharge of air
pollutants, water pollutants or process waste water or otherwise relating to the
environment or hazardous substances, as amended from time to time.
1.13 Expansion Plant: Any expansion of the Plant from its Initial Capacity, or any
other electricity generating facility owned or controlled by Seller or its
affiliate(s) located at the Landfill and fueled by Landfill Gas. Each such
expansion of the Plant or additional facility shall be deemed to be an
"Expansion Plant."
1.14 Expansion Plant Output: All capacity, energy, associated Environmental
Attributes, ancillary services, contributions towards resource adequacy or
reserve requirements (if any) and any other reliability or power attributes
produced by Seller at any Expansion Plant.
1.15 FERC: Federal Energy Regulatory Commission and its successor
organization, if any.
1.16 Force Majeure Event: Any act or event that delays or prevents a Party from
timely performing obligations under this Agreement or from complying with
conditions required under this Agreement to the extent that such act or event is
reasonably unforeseeable and beyond the reasonable control of and without the
fault or negligence of the Party relying thereon as justification for such delay,
nonperformance, or noncompliance. Force Majeure Events typically include:
(i) acts of God or the elements, extreme or severe weather conditions,
explosion, fire, epidemic, landslide, mudslide, sabotage, lightning, earthquake,
flood or similar cataclysmic event, acts of public enemy, war, blockade, civil
insurrection, riot, civil disturbance or strike or other labor difficulty caused or .
suffered by a Party; (ii) any restraint or restriction imposed by law or by rule,
regulation or other acts or omissions of governmental authorities, whether
federal, state or local which by exercise of due diligence and in compliance
with applicable law a Party could not reasonably have been expected to avoid
and to the extent which, by exercise of due diligence and in compliance with
applicable law, has been unable to overcome (so long as the affected Party has
not applied for or assisted such act by a governmental authority); and (iii)
electric transmission interruptions or curtailments (not including any such
event that results from a failure by Buyer to obtain firm transmission or similar
5 SANFRAN 90103 (2K)
rights, or otherwise to make congestion-related payments); provided that the
term "Force Majeure Event" does not include (a) economic conditions that
render a Party's performance of this Agreement at the Price unprofitable or
otherwise uneconomic (including Buyer's ability to buy Energy or
Environmental Attributes at a lower price, or Seller's ability to sell Energy or
Environmental Attributes at a higher price, than the Price), (b) a governmental
act by Buyer that delays or prevents Buyer from timely performing its
obligations under this Agreement, (c) a Plant Outage, including as a result of a
failure or shortage of landfill gas, except, in any case, if caused by an event or
circumstance that meets the requirements set forth in this Section 1.19 (other
than as described in (iii) above), (d) failure or delay in grant of Permits, or (e)
failures or delays by the LDC or the ISO in entering into all agreements with
Seller contemplated by this Agreement.
1.17 Governmental Authority: Any federal or state government, or political
subdivision thereof, including, without limitation, any municipality, township
or county, or any entity or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any corporation or other entity owned or
controlled by any of the foregoing.
1.18 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 1.0 MW and not more than
2.8 MW (gross nameplate), and not less than 0.8 MW and not more than 2.38
MW (net at the Point of Interconnection) and as further specified pursuant to
Section 4.3( c).
1.19 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.20 Interconnection Agreement: The agreement between Seller and LDC
pursuant to which Seller and LDC set forth the terms and conditions for
Interconnection of the Plant to the LDC System, as amended from time to
time.
1.21 Interconnection Facilities: All the facilities installed for the purpose of
interconnecting the Plant to the LDC System, including, but not limited to,
transformers and associated equipment, relay and switching equipment and
safety equipment.
6
SANFRAN 90103 (2K)
1.22 ISO: The California Independent System Operator Corporation, or its
functional successor.
1.23 kWh: kilowatt-hour.
1.24 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.25 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.26 LDC: Pacific Gas and Electric Company, a California corporation.
1.27 LDC System: The electric power generation, transmission, substation and
distribution facilities owned, operated and/or maintained by LDC, which shall
include, without limitation, after construction and installation, the circuit
reinforcements, extensions, and associated terminal facility reinforcements or
additions required to interconnect LDC's facilities with the Plant.
1.28 Lender(s): Any Person(s) providing money or extending credit (including any
capital lease) to Seller for (i) the construction of the Plant, (ii) the term or
permanent financing of the Plant, or (iii) working capital or other ordinary
business requirements for the Plant. "Lender(s)" shall not include trade
creditors of Seller.
1.29 LFG Agreement: As defined in Section 4.2( d).
1.30 Monthly LD Amount: The product of (i) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity specified under Section 4.3( c)
(net at the Point of Interconnection).
1.31 MPR: The Market Price Referent established, from time to time, by the
California Public Utility Commission ("CPUC"). For purposes of this
Agreement, the Market Price Referent for electricity will be based on the
prices determined by the CPUC for a Baseload facility represented in
dollarslkwh for a duration equal to the remaining term for purchasing the
Expansion Plant Output.
1.32 MW: Megawatt.
7 SANFRAN 90103 (2K)
1.33 MWh: Megawatt hour.
1.34 NCPA: As defined in Section 5.1.
1.35 Outage: A physical state in which all or a portion of the Plant is unavailable
to provide Energy to the Point of Interconnection, or in which any portion of
the LDC System is unavailable to receive Energy, to the extent that the
unavailability affects the LDC System's ability to accept delivery of Energy at
the Point of Interconnection, whether planned or unplanned.
1.36 Output: All actual capacity of the Initial Capacity and associated Energy, as
well as the following, as associated with the Initial Capacity and/or associated
Energy: Environmental Attributes; ancillary services; contributions towards
resource adequacy or reserve requirements (if any) and any other reliability or
power attributes.
1.37 Parties: Buyer and Seller, and their respective successors and permitted
assIgnees.
1.38 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.39 Percentage Share: One Hundred percent (100%).
1.40 Permits: All material federal, state or local authorizations, certificates,
permits, licenses and approvals required by any Governmental Authority for
the construction, ownership, operation and maintenance of the Plant.
1.41 Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity.
1.42 Plant: The generation facilities described in the Recitals to be constructed
and owned by Seller and located on the Site for the generation and delivery of
electricity, including the step-up transformer, revenue quality meter and all
other facilities up to the Point of Interconnection, but not including any
Expansion Plant.
8 SANFRAN 90103 (2K)
1.43 Point of Interconnection: The point on the electrical system where the Plant
is physically interconnected with the LDC System, which is anticipated to be
at the high side of Seller's step-up transformers at the Plant.
1.44 Price: As defined in Section 2.3.
1.45 Production Incentives: Any and all tax credits, deductions, allowances and
exemptions applicable to federal, state and local taxes and any other payment,
credit, deduction, benefit, grant or monetary incentive provided by any federal,
state or local governmental authority or any Person, and all air emission
credits, reductions or offsets, whether now in effect or arising in the future, in
each case arising from the activities contemplated by this Agreement,
including the extraction, sale, purchase, processing and/or distribution of
Landfill Gas and! or the generation and sale of electricity using Landfill Gas as
a fuel, including "Renewable Energy Production Incentive Payments" from the
U.S. Department of Energy, emission credits, reductions, offsets or any other
similar benefits arising from the generation, collection, production, purchase,
use, reduction, conversion, destruction or resale of Landfill Gas.
Notwithstanding the foregoing, ,Production Incentives shall not include
anything that qualifies as Output as defined herein (including any
Environmental Attributes), and shall include Section 29 Credits and Section 45
Credits.
1.46 Prudent Utility Practice: Those practices, methods and equipment, as
changed from time to time, that:
(i) when engaged in are commonly used in the United States of America in
prudent electrical engineering and operations to operate landfill gas
generation electric equipment and related electrical equipment lawfully
and with safety, reliability, efficiency and expedition; or
(ii) in the exercise of reasonable judgment considering the facts known,
when engaged in could have been expected to achieve the desired result
consistent with applicable law, safety, reliability, efficiency and
expedition.
Prudent Utility Practices are not limited to an optimum practice, method,
selection of equipment or act, but rather are a range of acceptable practices,
methods, selections of equipment or acts.
9 SANFRAN 90 !OJ (2K)
1.47 Requirements of Law: Collectively, any federal or state law, treaty,
franchise, rule, regulation, order, writ, judgment, injunction, decree, award or
determination of any arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon Seller or Buyer or any of their
property or to which Seller or Buyer or any of their respective properties are
subject.
1.48 Section 29 Credits: Those tax credits available under Section 29 of Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended as of
the date of this Agreement.
1.49 Section 45 Credits: Those tax credits available under Section 45 of Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended, or
any other similar state, federal or local tax credits, deductions, payments or
benefits arising from the purchase of Landfill Gas or the generation and sale of
electricity using Landfill Gas as a fuel, not including any Environmental
Attributes.
1.50 Seller: Ameresco Johnson Canyon LLC, a Delaware limited liability
company, and any successor or permitted assignee.
1.51 Site: The real property in Gonzales, California on which the Plant is to be
built and located, as more particularly described in Appendix A.
1.52 Site Control: The point at which Seller satisfies one or more of the following
conditions: (1) Seller is (a) the lessee under a lease, or (b) the grantee under
an exclusive easement, with the owner (or its subsidiary) of the Landfill that
allows Seller to construct and operate the Plant at the Site during the Term in
accordance with this Agreement; (2) Seller has a fee ownership of the Site; or
(3) any other form of site control acceptable to Buyer in its reasonable
discretion.
1.53 SVSW A: Salinas Valley Solid Waste Authority, a joint powers authority under
the laws of the State of Cali fomi a with principal offices at 128 Sun Street, #101,
Salinas, California 93901.
1.54 Term: The period of time during which the Agreement is in effect.
10
SANFRAN 90!O3 (2K)
1.55 Test Energy: Energy generated by the Plant and delivered to the Point of
Interconnection prior to the Commercial Operation Date.
1.56 WREGIS: Western Renewable Energy Generation Information System, or its
successor; provided that said successor is capable of performing substantially
similar functions and is acceptable to both Parties.
1.57 WREGIS Certificates: The meaning set forth in WREGIS Operating Rules.
1.58 WREGIS Operating Rules: The rules describing the operations of the
Western Renewable Energy Generation Information System, as published by
WREGIS and as may be amended from time to time.
ARTICLE II
TERM, PURCHASE AND SALE
2.1 Term
This Agreement shall be effective upon execution by authorized
representatives of both Parties and, unless earlier terminated pursuant to an
express provision of this Agreement, shall continue until the twentieth (20th)
anniversary of the Commercial Operation Date.
2.2 Purchase and Sale of the Output
(a) In accordance with the terms and conditions hereof, commencing on the
Commercial Operation Date and continuing throughout the Term, Seller shall
sell and deliver at the Point of Interconnection, and Buyer shall purchase,
accept from Seller at the Point of Interconnection and pay for, its Percentage
Share of the Output produced during the Term pursuant to the terms of this
Agreement. Prior to the Commercial Operation Date, Buyer shall purchase
and accept from Seller at the Point of Interconnection and pay for, the
Percentage Share of Output relating to Test Energy pursuant to the terms of
this Agreement. All Test Energy shall be scheduled in accordance with the
procedures set forth in Appendix D. Seller shall not sell to any other party,
11
SAJ'lFRAN 90103 (2K)
and Buyer may claim credit for, Buyer's Percentage Share of the Output as
may be available from time to time.
(b) Throughout the Term, Seller shall sell and transfer to Buyer, and Buyer
shall purchase and receive from Seller, all right, title and interest in and to the
Environmental Attributes associated with Buyer's Percentage Share of the
Output, if any, whether now existing or subsequently generated or acquired
(other than by direct purchase from a third party) by Seller, or that hereafter
come into existence, during the Term, as a component of the Output purchased
by Buyer from Seller hereunder. Seller agrees to transfer and make such
Environmental Attributes available to Buyer immediately to the fullest extent
allowed by applicable law upon Seller's production or acquisition of the
Environmental Attributes. If Seller receives any tradable Environmental
Attributes based on the greenhouse gas reduction benefits or other emission
offsets attributed to its fuel usage, it shall be entitled to retain sufficient
Environmental Attributes to ensure that there are zero net emissions associated
with the production of electricity from such facility. Seller shall not assign,
transfer, convey, encumber, sell or otherwise dispose of all or any portion of
the Buyer's Percentage Share of the Environmental Attributes to any Person
other than Buyer. Seller makes no written or oral representation or warranty,
either express or implied, regarding the current or future existence of any
Environmental Attributes.
( c) Use of WREGIS to Evidence Transfer of WREGIS Certificates.
Seller shall use commercially reasonable efforts to use WREGIS to evidence
the transfer of or "WREGIS Certificates" from Seller to Buyer in accordance
with WREGIS reporting protocols and the terns of this Agreement. Seller
shall use commercially reasonable efforts to register the Plant with WREGIS.
After the Plant is registered with WREGIS, Seller agrees to use commercially
reasonable efforts to transfer WREGIS Certificates to Buyer using the Forward
Certificate Transfer method, as described in WREGIS Operating Rules and as
designated by Buyer. Buyer shall be responsible for providing required
information and taking any action that may be necessary for the registration of
the Plant and for transfer of WREGIS Certificates to Buyer's WREGIS
account.
Except as the Parties may otherwise agree in writing, in the event that
WREGIS is not in operation, or WREGIS does not track Seller's transfer of
WREGIS Certificates to Buyer, or its designees, on or before the 30th day of
each calendar month, Seller shall document the production and transfer of
12
SANFRAN 90 lOJ (2K)
Environmental Attributes under this Agreement by delivering to Buyer an
attestation for the Environmental Attributes produced by the Plant, in whole
MWh, in the preceding calendar quarter. The form of attestation shall be
substantially in the form as set forth in Appendix B.
Seller shall be responsible for the WREGIS expenses associated with
registering the Plant, maintaining its account, WREGIS Certificate issuance
fees, and transferring WREGIS Certificates to Buyer. Buyer shall be
responsible for the WREGIS expenses associated with maintaining its account
and subsequent transferring or retiring of WREGIS Certificates. Seller shall,
as instructed by Buyer and at Buyer's cost, dispute data with WREGIS.
Notwithstanding anything herein to the contrary, if Seller's cost (including
labor billed at standard external rates) associated with WREGIS in connection
with this Agreement or compliance with this Section 2.2 exceeds $2,500 in
any calendar year, Buyer shall reimburse Seller for the amount in excess of
$2,500; provided, however, Buyer may designate an alternate accounting
system( s), at no cost to Seller, to evidence that transfer of RECs or other
Environmental Attributes if Seller's WREGIS costs exceed $2,500 in any
calendar year. Buyer shall defend, indemnify and hold Seller and its officers,
directors, employees and agents harmless from and against all claims,
demands, losses, liabilities and expenses (including reasonable attorneys fees)
arising out of or connected with the interaction with third parties in connection
with WREGIS or any alternate accounting system(s) designated by Buyer.
For the purposes of this Section 2.2, "commercially reasonable efforts" shall
exclude (i) making any changes to the Plant or any Expansion Plant or the
method of operation thereof and (ii) expenditure of any funds other than
nominal filing fees.
(d) During the Term, Seller shall not report to any person or entity that the
Environmental Attributes granted hereunder to Buyer belong to anyone other
than Buyer, and Buyer may report under any program that such Environmental
Attributes purchased hereunder belong to it.
2.3 Price
Subject to the provisions of Section 4. 1 (k), Buyer shall pay Seller $0.109 per
kWh of Energy delivered or tendered to Buyer at the Point of Interconnection,
which price shall be escalated at a rate of 1.5% (of the then-current price)
13 SANFRAN 90103 (2K)
annually on the anniversary of (i) the first day of the first full month following
the Commercial Operation Date or (ii) if the Commercial Operation Date falls
on the first day of the month, the Commercial Operation Date. The Price shall
be the total compensation owed by Buyer for Output delivered or tendered to
Buyer hereunder.
2.4 Tax Credits
Buyer agrees and acknowledges that all Production Incentives shall be owned
by Seller and/or the owner of the Landfill; provided, that to the extent Buyer
pays in full for emission offsets and otherwise makes any additional payments
pursuant to Section 4.3G) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (1000/0) of the net economic value (net of
reasonable transaction fees) realized by Seller from the Section 45 Credits
until Seller has reimbursed Buyer for all such payments made by Buyer
pursuant to Section 4.3G). Buyer shall not claim Production Incentives. Buyer
agrees to cooperate with Seller and/or the owner of the Landfill as may be
necessary to allow maximization of the value of, and realization of, all
Production Incentives; provided that Buyer shall not be required to incur
additional costs or accept any diminution in value of its rights under this
Agreement or of the Output purchased hereunder. In addition, Buyer shall not
take any action (except as otherwise permitted under this Agreement), that
would in any way reduce or eliminate the availability to Seller or the owner of
the Landfill of any Production Incentive, including without limitation the
Section 29 Credits, and Buyer shall forego any credits or benefits available to it
(other than Environmental Attributes) to the extent necessary to allow Seller and
the owner of the Landfill to obtain the full benefit of the Production Incentives,
but in no event shall Buyer be required to forego receipt of Energy.
2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output
(a) Seller may in its sole discretion determine, from time to time, during the
Term to develop, finance, construct and/or operate an Expansion Plant. Each
time such a determination is made, Seller shall notify Buyer of such
determination and shall offer in writing to sell the Percentage Share of the
Expansion Plant Output to Buyer. The offer shall include the price to be paid
by Buyer for the Percentage Share of the Expansion Plant Output, the term of
the proposed power purchase agreement and the other principal terms and
conditions of the proposed sale. If Buyer wishes to accept such offer to
14
SANFRAN 90103 (2K)
purchase all (but not less than all) of such Percentage Share of the Expansion
Plant Output, Buyer shall so notify Seller within sixty (60) days of its receipt
of such offer. Buyer and Seller shall promptly thereafter enter into good faith
negotiation of a definitive power purchase agreement incorporating the terms
of such offer. Until such an Expansion Plant power purchase agreement is
executed, the Seller's proposal, accepted by Buyer (including any
modifications agreed upon in writing by both parties), shall control all
dealings between the Parties relating to the Expansion Plant. Should any issue
arise that is not covered by such documentation, the terms of this Agreement
shall apply.
(b) If Buyer does not accept Seller's offer to purchase its Percentage Share
of the Expansion Plant Output within sixty (60) days of receipt of Seller's
offer, Seller shall be free to offer to sell that portion of the Expansion Plant
Output to one or more third parties at a price and on other terms and
conditions which, taken as a whole, are at least as favorable to Seller as the
price and other terms and conditions set forth in Seller's offer to Buyer. If
Seller offers to break up Buyer's Percentage Share of the Expansion Plant
Output to sell to multiple independent buyers, Seller shall notify Buyer in
writing of the terms and conditions of such offers and Buyer shall again have
the right of first refusal consistent with the terms set forth above for each of
the lesser amounts being offered to the third parties. If Buyer does not
purchase its Percentage Share of the Expansion Plant Output and Seller sells
such Expansion Plant Output to a third party, it shall promptly certify in
writing to Buyer that the terms and conditions of sale of such Expansion Plant
Output to such third party, taken as a whole, are at least as favorable to Seller
as the price and other terms and conditions set forth in Seller's offer to Buyer,
and Seller shall provide the relevant contract and any other supporting
documentation for such certification. Upon the sale of such Expansion Plant
Output in compliance with this Agreement, Buyer shall have no further rights
to be offered or to purchase such Expansion Plant Output. Buyer's refusal of
its Percentage Share of the Expansion Plant Output from one Expansion Plant
shall not affect Buyer's right to purchase its Percentage Share of the
Expansion Plant Output from a later Expansion Plant under the terms of this
Agreement. Seller shall not sell or provide Buyer's Percentage Share of the
Expansion Plant Output to any third party unless it can do so without
compromising in any material way its ability to provide Buyer's Percentage
Share of the Output to Buyer hereunder. The materiality of any such impact
shall be determined by Buyer in its reasonable discretion. If Seller sells or
15 SANFRAN 90103 (2K)
provides Expansion Plant Output to any third party, Seller shall not employ
Landfill Gas to fuel such Expansion Plant in any hour unless the Landfill Gas
flow requirements of the Initial Capacity have been, and shall continue to be,
met.
2.6 Seller's RiJ::::ht to Sell Expansion Plant Output to Buyer
Seller may in its sole discretion determine, from time to time, during the Term
to develop, finance, construct and/or operate one or more Expansion Plants.
Each time such a determination is made, if the aggregate capacity of such
Expansion Plant and all Previous Expansion Plants with respect to which
Seller has exercised its rights under this Section 2.6 does not exceed 7.0 MW,
then Seller shall have the right, at its sole discretion, to (i) notifY Buyer of such
determination and (ii) require Buyer to Purchase the Percentage Share of the
Expansion Plant Output at a price equal to the lesser of (a) eighty-five percent
(85%) of the MPR price at the time of such notification from Seller to Buyer
and (b) $ 1501MWh. The term of the power purchase agreement for the
purchase of the Expansion Plant Output will be as specified in such
notification, but shall not exceed the term remaining on the LFG Agreement
(including any extension thereof if Seller has the rights to such under the LFG
Agreement). All other terms and conditions, unless otherwise agreed to by the
Parties, each in their sole discretion, shall be the same as this Agreement. If
Seller gives Buyer such notification, then Buyer shall execute the power
purchase agreement for the Expansion Plant Output, as detailed above, within
one hundred and twenty (120) days from such notification by Seller to Buyer.
2.7 Option to Install Emission Controls
Buyer may at its option, exercised from time to time, install emission controls
on the Plant in connection with the Initial Capacity and on any Expansion
Plant from which Buyer purchases Expansion Plant Output (so long as Buyer
purchase all such Expansion Plant Output) beyond those then required to meet
the Requirements of Law applicable to Seller or the Plant; provided that (a)
Buyer shall (i) bear all costs and financial, regulatory and operational risks
thereof, including without limitation the capital cost thereof and any increase
in operation or maintenance expenses, and (ii) shall keep Seller whole in all
respects, including for decreases in Output and other adverse effects on the
Initial Capacity and the Expansion Plant and its performance, increases in
operations and maintenance costs and failures of such emission controls to
16 SA.,'lFRAN 90103 (2K)
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
or the Expansion Plant without the consent of Seller to the design and plan for
implementation of such changes, such approval not to be unreasonably
withheld.
ARTICLE III
METERING AND BILLING
3.1 Metering Requirements
The transfer of Energy from Seller to Buyer shall be measured by revenue
quality metering equipment at the Point of Interconnection. Such metering
equipment, including any equipment required for communicating meter data
(e.g., a dedicated data line) to Buyer or the ISO, shall be selected, provided,
installed, owned, maintained and operated, at Seller's sole cost and expense,
by Seller or its designee in accordance with applicable ISO rules. Seller shall
exercise reasonable care in the maintenance and operation of any such
metering equipment, and shall test and verify the accuracy of each meter at
least annually. Seller shall inform Buyer in advance of the time and date of
these tests, and shall permit Buyer to be present at such tests and to receive the
results of such tests. Subject to Buyer paying for its Percentage Share of the
cost of any update or upgrade to such metering equipment pursuant to a new
requirement of the ISO, the LDC or any other Governmental Authority
adopted following the Commercial Operation Date, each of Seller's meters
shall be accurate to the metering specifications then in effect for ISO meter
accuracy. Seller shall further install and maintain all equipment and data
circuits necessary to transmit all monitored real time supervisory control and
data acquisition ("SCADA") system data and real time data from the ISO
meter to the ISO and the Northern California Power Agency ("NCP A"), while
adhering to both ISO and NCP A communications protocols. Seller shall
provide a copy of each Certificate of Compliance issued by ISO, if any.
Buyer and NCP A shall be provided access to all monitored SCADA points to
be used at their discretion in real time monitoring. Buyer may further, at its
sole cost and expense, install and maintain check meters and all associated
measuring equipment necessary to permit an accurate determination of the
quantities of Energy delivered under this Agreement provided that said
17 SANFRAN 90!O3 (2K)
equipment does not interfere with the Seller's metering equipment. Seller
shall permit Buyer or Buyer's representative access to its Plant for the purpose
of installing and maintaining such check meters. Seller shall submit to the
ISO, or allow the ISO to retrieve, any meter data required by the ISO related to
the Plant output in accordance with the ISO's settlement and billing protocol
and meter data tariffs. Buyer shall have reasonable access to relevant meters
and associated facilities, as well as real time access to all meter data, as is
necessary for Buyer or its agent to perform its duties as scheduling coordinator
and comply with the requirements of the ISO tariff.
3.2 Billing
Seller shall read the meter at the end of each calendar month of the Term, and
provide to Buyer on or before the 10th day of the following month an invoice
based upon the meter data for Energy delivered in such calendar month and the
corresponding attestation pursuant to Section 2.2( c). Such invoice may be
transmitted electronically via e-mail to[*AcctsPayable@ncpa.com ], or to any
other email address designated in writing by Buyer, with a copy to follow via
United States Mail to the notice address designated below. Should either the
Seller or the Buyer determine at a later date, but in no event later than two (2)
years after the original invoice date, that the invoice amount was incorrect, that
Party shall promptly notify the other Party of the error. If the amount invoiced
was too low, Buyer shall, upon receiving verification of the error and
supporting documentation from the Seller, pay any undisputed portion of the
difference within thirty (30) days of receipt of verification. If the amount
invoiced was too high, Seller shall, upon receiving verification of the error and
supporting documentation from the Buyer, pay any undisputed portion of the
difference within thirty (30) days of receipt of verification. Any such amount
shall be subject to the interest rate as designated in Section 3.3 running from
the original due date of payment.
3.3 Payment
For Energy delivered to Buyer pursuant this Agreement, Buyer or its agent
shall pay Seller by electronic transfer of funds by the later of the 20th day of
the month or the 10th business day after the invoice is received in accordance
with Section 3.2. If such due date falls on a weekend or legal holiday, such
due date shall be the next day which is not a weekend or legal holiday.
18 SA."IFRAN 90103 (2K)
Payments made after the due date shall be considered late and shall bear
interest on the unpaid balance at an annual rate equal to two percent (2%) plus
the average daily prime rate as determined from the "Money Rates" section of
the West Coast Edition of The Wall Street Journal for the days of the late
payment period multiplied by the number of days elapsed from and including
the day after the due date, to and including the payment date. Interest shall be
computed on the basis of a 365-day year. In the event this index is
discontinued or its basis is substantially modified, the Parties shall agree on a
substitute equivalent index. Should Buyer in good faith dispute the amount of
an invoice, Buyer or its agent may withhold such disputed amounts until the
dispute is resolved by arbitration or other permissible method. Such disputed
amounts shall bear interest at the interest rate described above. Failure of
Buyer or its agent to withhold any amount is not a waiver of Buyer's right to
challenge such amount. Both Parties shall maintain all records relating to the
other Party or this Agreement for a minimum of two (2) years, and shall permit
the other Party, upon reasonable notice, to inspect and audit such records as
the requesting Party deems reasonably necessary to protect its rights.
ARTICLE IV
SELLER'S OBLIGATIONS
During the Term, Seller hereby agrees to perform the following affirmative
obligations:
4.1 Development, Finance, Construction and Operation of the Plant
Seller shall:
(a) Develop, finance and construct the Plant.
(b) Provide Buyer access to a "real time" Plant monitoring system (which,
at a minimum, shall provide "real time" information regarding the net output
of the Plant) that is anticipated to be internet-based and include alarms.
( c) Seek, obtain, maintain, comply with and, as necessary, renew and
modifY from time to time, all Permits, certificates or other authorizations
which are required by any Requirements of Law or Governmental Authority as
19
SANFRAN 90103 (2K)
prerequisites to engaging in the activities required of Seller by the Agreement
and to meeting Seller's obligation to operate the Plant consistently with the
terms of the Agreement.
(d) Operate, maintain, and repair the Plant in accordance with this
Agreement, all Requirements of Law applicable to Seller or the Plant,
Contractual Obligations, Permits and in accordance with Prudent Utility
Practice, including with respect to efforts to maintain availability of the Initial
Capacity.
(e) Obtain and maintain the policies of insurance in amounts and with
coverages as set forth in Appendix C.
(1) Operate and maintain in a manner consistent with Prudent Utility
Practice the facilities it will own and otherwise cooperate with LDC in the
physical interconnection of the Plant to the LDC System in accordance with
the Interconnection Agreement.
(g) By October 1 st of each year of the Term, provide Buyer and NCP A with
an annual projection of scheduled Outages for the following calendar year.
Should Seller make any changes to such projection, it will notify Buyer and
NCPA of such changes at least fourteen (14) days in advance of any newly
scheduled or rescheduled Outage. If Buyer requests a change to the scheduled
date of any Outage (including to a date set forth in a change notice from
Seller), Seller shall consider such request in good faith and notify Buyer of its
decision within seven (7) days. In no instance will Seller schedule Outages of
more than twenty-four (24) hours between June 1st and September 30th during
the Term. In connection with any Outage, whether a scheduled or unscheduled
Outage, Seller shall notify Buyer and NCP A, as soon as practicable, of the
percentage of Plant expected to be out of service and how long the Outage is
expected to last. If the Outage is total and is due to failure of the Plant rather
than the transmission and distribution system beyond the Point of
Interconnection, Seller shall give Buyer and NCP A at least four (4) hours
notice before re-energizing the Plant. In addition, Seller will comply with
NCPA's reasonable scheduling protocols, as they may be changed from time
to time. A copy of the current version of NCP A's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
20 SA..1IIFRAN 90!O3 (2K)
(h) Negotiate and enter into an Interconnection Agreement with LDC to
enable Buyer to transmit Energy received at the Point of Interconnection
through the ISO-controlled grid. Seller shall be responsible for and pay all
initial non-recurring costs and charges arising under the Interconnection
Agreement (even if not actually incurred) prior to the Commercial Operation
Date in compliance with the Interconnection Agreement and associated rules
and requirements in place as of the Commercial Operation Date. All other out-
of-pocket costs and charges related to interconnection other than these initial
non-recurring costs and charges will be reimbursed, on a pro rata, energy
basis, by the purchasers of energy from the Plant. During the Term of this
Agreement prior to any Expansion Plant becoming available for commercial
service, Buyer will reimburse Seller for its Percentage Share of such other out-
of-pocket costs and charges under the Interconnection Agreement paid or
required to be paid by Seller to LDC or its successor; provided, however,
Buyer shall be responsible for its Percentage Share of such other out-of-pocket
costs and charges under the Interconnection Agreement only to the extent
Buyer has approved in writing, in the sole discretion of Buyer, the
Interconnection Agreement, including any amendments (which shall not
include changes in relevant tariffs) from time to time. Upon completion of an
Expansion Plant which uses the Interconnection Facilities, such other out-of-
pocket costs and charges shall be prorated, on a Percentage Share of energy
basis, and Buyer's share would be based on its Percentage Share of Energy
compared to the energy of the Expansion Plant delivered to the Point of
Interconnection. Seller shall cooperate with Buyer to minimize any such costs
as are to be reimbursed by Buyer.
(i) Negotiate and enter into a Participating Generator Agreement and a
Meter Service Agreement for ISO Metered Entities with the ISO, who is the
load control area operator for the LDC System to which the Plant is
interconnected. Buyer shall pay for or reimburse Seller for its Percentage
Share of any such costs or charges associated with these agreements, except to
the extent such cost or charge is required to be paid by Seller under this
Agreement in Sections 3.1 and 4.1 (h). Seller shall cooperate with Buyer to
minimize any such costs as are to be reimbursed by Buyer.
G) Coordinate all Plant start-ups and shut-downs, in whole or in part, with
Buyer in accordance with ISO scheduling protocols and the reasonable
protocols established by Buyer that are not inconsistent with the ISO tariff and
ISO procedures.
21 SANFRAN 90103 (2K)
(k) Maintain an Availability Threshold of seventy percent (70%). Should
Seller fail to maintain such an Availability Threshold, the Price applicable to
Output sold and purchased during each month during which the Availability
Threshold is below seventy percent (70%) shall be seven and one-half percent
(7.5%) below the Price that would otherwise be in effect pursuant to Section
2.3 until the Availability Threshold is increased to at least seventy percent
(70%). Except as otherwise expressly stated in Sections 6.4 and 7.6, the
foregoing shall be Buyer's sole remedy for any shortfall of or failure to
produce Output or failure to maintain any particular Availability Threshold.
4.2 General Obligations
(a) Seller shall obtain in its own name and at its own expense any and all
pollution or environmental credits or offsets necessary to operate the Plant in
compliance with the Environmental Laws.
(b) Seller shall keep complete and accurate operating and other records and
all other data for the purposes of proper administration of the Agreement,
including such records as may be required by any Governmental Authority or
Prudent Utility Practice.
(c) Seller shall continue to (i) preserve, renew and keep in full force and
effect its organizational existence and good standing, and take all reasonable
action to maintain all applicable Permits, rights, privileges, licenses and
franchises necessary or desirable in the ordinary course of its business; and (ii)
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Prior to the date ninety (90) days following the date of this Agreement,
Seller shall make available for review by Buyer, and its representatives, at
Seller's attorney's offices in San Francisco, California, a fully executed copy
of its contract with SVSW A, including all exhibits, attachments, and other
supporting documents thereto, for the purchase of Landfill Gas (the "LFG
Agreement"). Such contract may be redacted to remove pricing information.
If (i) Seller does not fulfill its obligations under the first two sentences of this
Section 4.2( d) in the time allowed, or (ii) Seller fulfills such obligations but
Buyer in its reasonable discretion does not approve of the terms of the LFG
Agreement, then Buyer may, as its sole remedy and without liability of one
22 Sk"fFRAN 90103 (2K)
party to the other, terminate this Agreement by written notice given no later
than sixty (60) days after Seller has fulfilled, or failed to fulfill, as the case
may be, such obligations under such first two sentences. Other than increasing
the amount of fuel purchased thereunder, Seller shall not allow such contract
to be amended or otherwise modified, nor shall it waive or fail to enforce any
of its rights thereunder, without Buyer's prior written approval, whose
approval shall not be unreasonably withheld. Seller shall make the LFG
Agreement available to Buyer for review during normal business hours at
Seller's attorney's offices in San Francisco, California throughout the term of
this Agreement within seven (7) days of a written request by Buyer.
(e) Seller shall provide to Buyer such other information regarding the
permitting, engineering, construction or operations of the Plant as Buyer may
from time to time reasonably request, subject to licensing or other restrictions
of Seller or a third party with respect to confidentiality, disclosure or use.
(t) Seller shall enter into any agreements with the ISO required by the ISO
for generators delivering power into the ISO-controlled grid. Except for such
costs and charges as are expressly identified in this Agreement as Seller's
costs, Buyer shall reimburse Seller for all costs and charges under such
agreements. Seller shall cooperate with Buyer to minimize any such costs as
are to be reimbursed by Buyer.
(g) Seller shall provide Buyer with a copy of its ultimate corporate parent's
audited financial statements as at the end of its accounting year prepared in
accordance with GAAP, no later than four (4) months after the end of such
accounting year of such entity. Seller shall also provide, on a quarterly basis,
an unaudited financial statement in the form of Appendix F, prepared in
accordance with GAAP consistently applied for Seller and for Seller's ultimate
corporate parent. Such financial statements shall be certified by an officer of
Seller as fairly presenting the financial condition of the Seller subject only to
what would typically be included in year-end audit adjustments and footnotes.
If, from time to time, an audited year-end financial statement is prepared for
Seller, Seller shall provide it to Buyer no later than four (4) months after the
end of Seller's accounting year.
4.3 Construction Milestones
23 SANFRAN 90103 (2K)
( a) The Parties agree that time is of the essence and that certain milestones
("Milestones") for the development, financing and construction of the Plant
must be achieved in a timely fashion or Buyer shall suffer damages. Seller
shall provide Buyer with documentation satisfactory to Buyer, in Buyer's
reasonable discretion, to support the achievement of Milestones by the dates
set forth below.
(b) The following events are all of the Milestones:
(i) By the date ninety (90) days following the date of this Agreement,
Seller shall have signed an LFG Agreement with SVSWA and
have obtained Site Control.
(ii) By the date twenty (20) months following the date that Buyer
approves the LFG Agreement, Seller shall (a) have obtained all
Permits necessary, in final form, to commence construction of the
Plant and (b) have entered into an Interconnection Agreement.
(iii) By the date one (1) month following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(ii), and (b) entering into an Interconnection Agreement,
Seller shall have arranged financing for construction of the Plant
or otherwise made funds available to commence and complete
construction.
(iv) By the date twelve (12) months following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(ii), and (b) entering into an Interconnection Agreement,
Seller shall have commenced construction of the Plant.
(v) By the date eighteen (18) months following the arrangement of
financing or availability of funds for construction, Seller shall
have achieved the Commercial Operation Date.
(c) Starting on the effective date of this Agreement, Seller shall provide to
Buyer monthly progress reports concerning the progress towards completion
of the Milestones. In addition, within five business days of the completion of
each Milestone, Seller shall provide a certification to Buyer along with any
supporting documentation, demonstrating the satisfaction of the Milestone.
Seller shall provide to Buyer additional information concerning Seller's
progress towards, or confirmation of, achievement of the Milestones, as Buyer
may reasonably request from time to time. Within seven (7) days of the later
of (i) obtaining the authority to construct for the Plant from the applicable air
quality management district or (ii) Seller's receipt of the system impact and
24
SANFRAN 90!OJ (2K) ,
facility cost studies from the LDC, but in no event later than the date set forth
in Section 4.3(b )(ii), Seller shall specify the Initial Capacity of the Plant
(which shall be subject to the limits contained in Section 1.18).
(d) Upon becoming aware that it will, or is reasonably likely to, fail to
achieve a Milestone by the required date, for any reason including Force
Majeure Event, Seller shall so notify Buyer in writing as soon as is reasonably
practical. Such notice shall explain the cause of the delay, provide an updated
date for achievement of the Milestone(s) and describe Seller's plan for meeting
the Milestone. Seller's notice will also explain any impact such delay mayor
will have on any other Milestone, and measures to be taken to mitigate such
impact.
(e) In the event that a Force Majeure Event causes any delay to the
achievement of the Milestones set forth in Sections 4.3(b)(iii), (iv), or (v), such
Milestone's deadline may be extended, together with any Force Majeure Event
extensions for other Milestones, for a period not to exceed six (6) months. The
extension of the deadline for any Milestone shall extend the deadline for all
subsequent Milestones, provided that in no event shall the combined
extensions for Force M~jeure Events for any or all of the Milestones exceed
six (6) months.
(f) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b )(i) for any reason, Buyer may terminate this Agreement, without liability
of either Party to the other, by giving notice to Seller in writing of such
termination at any time prior to Seller curing its failure. Such option to
terminate shall be Buyer's sole remedy for any failure to meet the Milestone
set forth in Section 4.3(b )(i).
(g) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(ii) for any reason, Buyer may terminate this Agreement, without
liability of either Party to the other, within ten (l0) business days after the
Milestone date by giving notice to Seller in writing of such termination. If
Seller meets the Milestone set forth in Section 4.3(b )(ii) prior to Buyer giving
written notice of termination, this Agreement shall remain in full force and
effect. If Buyer does not terminate this Agreement within ten (l0) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone and Buyer must give Seller sixty (60) days notice to
terminate this Agreement, during which period if Seller cures such defect and
25 SANFRAN 90103 (2K)
achieves the relevant Milestone, such termination shall be void and this
Agreement shall remain in full force and effect. Such option to terminate shall
be Buyer's sole remedy for any failure to meet the Milestone set forth in
Section 4.3(b )(ii).
(h) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(iv) within six (6) months after the relevant Milestone date for any
reason (or up to twelve (12) months if also delayed by a Force Majeure Event),
Seller may deposit an amount, per month, equal to the Monthly LD Amount
into a segregated escrow account reasonably acceptable to Buyer by the first
day of such month, for every month after such date until the Milestone is met.
Such funds will be used towards any liquidated damages as set forth in Section
7 A( c), and shall be held in escrow until such time that liquidated damages, if
any, become payable to Buyer. Should the amount in the escrow account
exceed the final amount of liquidated damages, such excess funds shall be
returned to Seller. Should Seller (i) at any time fail to make such monthly
deposits or (ii) fail to satisfY the Milestone set forth in Section 4.3(b )(iv) for
more than twelve (12) months, Buyer may terminate this Agreement upon
written notice to Seller of such termination. Upon such termination, Seller
will pay to Buyer, within thirty (30) days of the termination notice, an amount
equal to the LD Amount as liquidated damages. Such Seller escrow option,
Buyer option to terminate, and liquidated damages shall be Buyer's sole
remedy for any failure of Seller to meet the Milestones set forth in Section
4.3(b )(iii) or (iv).
(i) Seller covenants that it will diligently pursue all Milestones including
the Commercial Operation Date, which Seller envisions will occur within
thirty (30) months following the execution of this Agreement.
U) In the event that any of the approvals described in Section 4.3(b )(ii) are
not obtained by the date specified in Section 4.3(b )(ii) for satisfaction of the
relevant Milestone or are obtained on a basis not reasonably satisfactory to
Seller, including without limitation, in the case of the air permit, approval of
construction and operation of the Plant on a basis not consistent with internal
combustion engines without emission controls, pollution or environmental
credits or offsets, Seller may terminate this Agreement without liability of
either Party to the other by giving notice to Buyer in writing of such
termination; provided that such notice must be given no later than fourteen
(14) days following the earlier of (a) the date on which a given approval not
26 SANFRAN 90 I 03 (2K)
satisfactory to Seller is received in writing or (b) the date specified in Section
4.3(b )(ii) for satisfaction of the relevant Milestone; further provided, that such
notice and such termination shall not be effective if Buyer, by written notice to
Seller within fourteen (14) days following such notice from Seller, agrees (i) to
pay Seller with the first invoice following the Commercial Operation Date the
reasonable all-in cost (including reasonable broker fees, if any) to purchase all
such offsets sufficient to operate the Plant at full Initial Capacity (less
reasonably projected scheduled Outages for maintenance) for the term of this
Agreement, and (ii) to adjust equitably the price payable under Section 2.3 of
this Agreement and within thirty (30) days thereafter agrees with Seller in
writing (each in their sole discretion) to an amendment of this Agreement
revising such price. Failure to provide notice of termination by the date
specified above shall constitute a waiver of the right to terminate this
Agreement as provided in this Section 4.3U). In the event that Seller exercises
such termination right, Buyer shall have a right of first refusal to purchase the
output of any electricity generating facility owned or controlled by Seller or its
affiliate(s) located at the Landfill and fueled by Landfill Gas. Such right of
first refusal shall conform to the provisions of Section 2.5. The provisions of
this Section 4.3U) shall survive termination of this Agreement under this
Section 4.3U) for a period of five (5) years from such termination.
ARTICLE V
BUYER'S OBLIGATIONS
5.1 Delivery and Transmission
Except for Seller's obligations pursuant to Sections 3.1 and 4.1(h), Buyer shall
be solely responsible for paying its Percentage Share of costs and charges
associated with the receipt of Energy, under this Agreement, at the Point of
Interconnection and for the transmission and delivery of the Energy from the
Point of Interconnection to any other point downstream of the Point of
Interconnection (including, without limitation, transmission costs and charges,
competition transition charges, applicable control area service charges,
transmission congestion charges, inadvertent energy flows, any other ISO
charges related to the transmission of such Energy by the ISO 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
27
SANFRAN 90 10J (2K)
or for any transmission-owning or operating entity). NCPA, acting on behalf
of Buyer, shall be scheduling coordinator for the transmission of Energy from
the Plant in accordance with applicable ISO rules. Buyer's duties as
scheduling coordinator shall be limited to those duties as are specifically
required of scheduling coordinators in the ISO tariff and the ISO protocols.
Commercial arrangements for such transmission and delivery services will be
coordinated and settled by NCP A directly with the ISO or other third parties.
At the option of Buyer, the Plant may be included within NCPA's metered
sub-system in connection with the scheduling of power over the ISO grid and
related functions; provided that such inclusion shall have no adverse effect on
Plant operations or Seller (or any such effect shall be fully mitigated by
Buyer). Seller will do all things reasonably needed to allow Buyer to comply
with any obligations, and minimize any potential liability, under the ISO tariff;
provided, that if such actions require any actions beyond the giving of notice
provided by Buyer, then Buyer shall reimburse its Percentage Share of all out-
of-pocket costs and charges of such actions. If and to the extent that Seller
fails to comply with the notice provision in Section 4.1 (g) concerning Outages
or with its obligations as outlined in the previous sentence, Seller shall be
wholly responsible for all imbalances, deviations, or any other ISO charges or
penalties associated with such Outage or ISO tariff obligation. Buyer may
replace NCP A as Scheduling Coordinator for the Plant. If NCP A ceases to be
Scheduling Coordinator for the Plant and Buyer is unable, upon fourteen days
notice from Seller, to appoint a replacement Scheduling Coordinator, Seller
shall have the right to appoint a replacement Scheduling Coordinator on its
behalf, and Buyer shall enter into all reasonable and appropriate agreements
with such replacement Scheduling Coordinator at its own cost.
5.2 Taxes
Buyer shall pay and be fully responsible for any sales, use, gross receipts,
utility or other taxes, assessments or fees, if any, incurred or imposed on the
sale or transfer of Energy from Seller to Buyer under this Agreement. Buyer
shall not be responsible for any taxes measured on the net income of Seller or
ad valorem taxes paid by Seller or SVSW A associated with the Site or the
Landfill.
5.3 Notification of Transmission Outages
28
SANFRAN 90103 (2K)
Buyer will exercise reasonable efforts to provide Seller with as much advance
notice as practicable of any Outage on the LDC System or other transmission
or delivery facilities which may adversely affect the delivery of Energy to
Buyer.
ARTICLE VI
FORCE MAJEURE
6.1 Force Majeure Events
It is understood that at times unavoidable delays or interruptions in delivery or
performance may result from Force Majeure Events. The performance of each
Party under this Agreement may be subject to interruptions or reductions due
to a Force Majeure Event. Both Parties shall in good faith use such effort as is
reasonable under all the circumstances known to that Party affected by the
Force Majeure Event at the time to remove or remedy the cause(s) and mitigate
the inability to perform. However, the obligation to use such reasonable
efforts shall not be interpreted to require resolution of labor disputes by
acceding to demands of the opposition when such course is inadvisable in the
discretion of the Party having such difficulty.
6.2 Remedial Action
Subject to the limitation on extensions of Milestones set forth in Section
4.3( e), a Party shall not be liable to the other Party if the Party is prevented
from performing its obligations hereunder due to a Force Majeure Event. The
Party rendered unable to fulfill an obligation by reason of a Force Majeure
Event 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
said cause has been removed. Notwithstanding the foregoing, the existence of
a Force Majeure Event shall not excuse any Party from its obligations to make
payment of amounts due hereunder.
6.3 Notice
29 SANFRAN 90103 (2K)
In the event of any delay or nonperformance resulting from a Force Majeure
Event, the Party suffering the Force Majeure Event 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.
6.4 Termination Due To Force Majeure Event
Subject to Section 4.3( e), if a Party is prevented from performing its material
obligations under this Agreement for a period of twelve (12) consecutive
months or longer, the unaffected Party may terminate this Agreement, without
liability of either Party to the other, upon thirty (30) days written notice at any
time during the Force Majeure Event.
ARTICLE VII
DEFAULTIREMEDIES/TERMINATION
7.1 Events of Default by Buyer
The following shall each constitute an "Event of Default" by Buyer:
(a) Buyer breaches any material obligation (other than one covered by
Section 7.1 (b) or (c) of this Agreement) and fails to cure such breach within
thirty (30) days after written notification of breach by Seller or such longer
period as may be necessary to cure such breach as long as Buyer is exercising
diligent efforts to cure such default.
(b) Buyer fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
(c) The initiation of an involuntary proceeding against Buyer under the
bankruptcy or insolvency laws, which involuntary proceeding remains
undismissed for sixty (60) consecutive days, or in the event of the initiation by
Buyer of a voluntary proceeding under the bankruptcy or insolvency laws.
7.2 Events of Default by Seller
30
SANFRAN 90103 (2K)
(1) The following shall each constitute an "Event of Default" by the Seller
if Seller does not cure within the time set forth in clause (2), below:
(a) Seller breaches any material obligation (other than ones covered by
Sections 7.2(b), (c), (d), (e) or (f) of this Agreement or for which a remedy is
specified).
(b) Seller fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
( c) The initiation of an involuntary proceeding against Seller under the
bankruptcy or insolvency laws, which involuntary proceeding remains
undismissed for sixty (60) consecutive days, or in the event of the initiation by
Seller of a voluntary proceeding under the bankruptcy or insolvency laws.
(d) Seller sells or transfers Buyer's share of the Output (or any individual
component thereof) or Expansion Plant Output (or any individual component
thereof) or the right to Buyer's share of the Output (or any individual
component thereof) or Expansion Plant Output (or any individual component
thereof), to the extent that such Expansion Plant Output is purchased by Buyer,
to any Person other than Buyer.
(e) Seller fails to comply with the terms of Buyer's right of first refusal as
described in Section 2.5 of this Agreement.
(f) Subject to Section 7.4( c), Seller fails, for any reason other than an
unauthorized act or omission by Buyer, to achieve the Commercial Operation
Date by the applicable Milestone deadline as set forth in Section 4.3(b)(v), as
such deadline may be extended as a result of a Force Majeure Event in
accordance with Section 4.3(e).
(2) Time for Cure. Nothing described in Section 7.2(1)(a) above shall
constitute an Event of Default if Seller cures the event, failure or circumstance
within (30) days after written notification by Buyer or such longer period as
may be necessary to cure as long as Seller is exercising diligent efforts to cure.
7.3 Termination for Default
31 SA'IFRAA 90103 (2K)
(a) In the event the defaulting Party fails to cure the Event of Default within
the period for curative action under Sections 7.1 or 7.2, as applicable, the non-
defaulting Party may terminate the Agreement by notifying the defaulting
Party in writing of (i) the decision to terminate and (ii) the effective date of the
termination.
(b) Upon termination of the Agreement by Buyer pursuant to Section 7.3(a)
due to an Event of Default by Seller, (i) Buyer shall have no future or further
obligation to purchase the Output of the Plant or to make any payment
whatsoever under this Agreement, except for payments for obligations arising
or accruing prior to the effective date of termination, and (ii) Seller shall, if
Buyer has paid in full for emission offsets pursuant to Section 4.3U), either (A)
reimburse Buyer pro rata for any unused such offsets paid for by Buyer or (B)
transfer to Buyer title to any unused such offsets paid for by Buyer. Upon
termination of the Agreement by Seller pursuant to Section 7.3(a) due to an
Event of Default by Buyer, Seller shall have no future or further obligation to
deliver the Output of the Plant to Buyer or to satisfy any other obligation of
this Agreement, except for payments or other obligations arising or accruing
prior to the effective date of termination. After the effective date of
termination, the Agreement shall not be construed to provide any residual
value to either Party or any successor or any other Person, for rights to, use of
or benefits from the Plant to any Person.
( c) Intentionally Omitted.
7.4 Damages
(a) For all claims, causes of action and damages the Parties shall be entitled
to the recovery of actual damages allowed by law unless otherwise limited by
the Agreement. Neither the enumeration of Events of Default in Sections 7.1
and 7.2, nor the termination of this Agreement by a non-defaulting Party
pursuant to Section 7.3(a), shall limit the right of a non-defaulting Party to
rights and remedies available at law, including, but not limited to, claims for
breach of contract or failure to perform by the other Party and for direct
damages incurred by the non-defaulting Party as a result of the termination of
this Agreement.
(b) Except as otherwise specifically and expressly provided in the
Agreement, neither Party shall be liable to the other Party under this
32
SANFRAN 90103 (2K)
Agreement for any indirect, special or consequential damages, including but
not limited to loss of use, loss of revenues, loss of profit, interest charges, cost
of capital or claims of its customers or members to which service is made.
Except as set forth in Section 4.1 (k) and except to the extent Seller violates its
undertaking not to provide or sell rights to part or all of the Output to a party
other than Buyer, Seller shall not be liable to Buyer for failure to provide any
specific amount of Output hereunder.
(c) In the event that Seller fails to meet the Commercial Operation Date by
the applicable Milestone deadline as set forth in Section 4.3(b )(v), as such
deadline may be extended as a result of a Force Majeure Event in accordance
with Section 4.3(e), Seller shall be liable for liquidated damages in the amount,
per month, equal to the Monthly LD Amount for each full month (with parts of
a month pro rated) that Seller is late in satisfying the Milestone. So long as
Seller is paying such liquidated damages on a monthly basis, up to twelve (12)
months, Buyer shall not be permitted to terminate this Agreement. If after
twelve (12) months following the relevant Milestone deadline Seller has failed
to achieve Commercial Operation, or if for any reason Seller fails to pay, or
discontinues paying, the monthly liquidated damages provide for above, Buyer
may terminate this Agreement by written notice to Seller. This twelve (12)
month period shall not be extended as a result of a Force Majeure Event.
Upon such termination, Seller shall pay Buyer, within thirty (30) days of the
termination notice, a lump sum equal to the LD Amount. No other damages or
remedy shall be available to Buyer on the basis of such failure to meet the
Milestone set forth in Section 4.3(b )(v) or termination of this Agreement based
on failure to achieve Commercial Operation within twelve (12) months of that
Milestone deadline.
(d) The Parties agree that the liquidated damages set forth in Sections
4.3(h) and 7.4(c) are reasonable and represent a fair and genuine estimate of
the damages Buyer will suffer upon the failure of Seller to achieve
Commercial Operation by the agreed upon date(s). The Parties acknowledge
that it would be impracticable or extremely difficult to fix Buyer's actual
damages, and therefore have deemed the liquidated damages set forth above to
be the amount of damage sustained by Buyer upon such a failure. The Parties
further agree that payment of such amount shall be as liquidated damages and
not as a penalty, and is therefore not subject to avoidance under California
Civil Code section 1671.
33
SANFRAN 90103 (2K)
7.5 Indemnification
Seller and Buyer agree to defend, indemnifY, and hold each other, and their
respective officers, directors, employees and agents, harmless from and against
all claims, demands, losses, liabilities, and expenses (including reasonable
attorneys' fees) (collectively "Damages") for personal injury or death to
persons and damage to each other's physical property or facilities or the
property of any other Person to the extent arising out of, resulting from, or
caused by the negligent or intentional and wrongful acts, errors, or omissions
of the indemnifYing Party. This indemnification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indemnitees but the indemnifYing Party's liability to pay Damages to the
indemnified Party shall be reduced in proportion to the percentage by which
the indemnitees' negligent or intentional acts, errors or omissions caused the
Damages. Neither Party shall be indemnified for its Damages resulting from
its sole negligence or willful misconduct. These indemnity provisions shall
not be construed to relieve any insurer of its obligation to pay claims
consistent with the provisions of a valid insurance policy.
7.6 Buyer's Right to Operate
If Seller (i) fails to maintain the Availability Threshold for a period of nine (9)
months in any twelve (12) month period, or (ii) fails to generate Energy for
sixty (60) consecutive days, then Buyer or its designee may, but shall not be
obligated to, step-in and assume operational control from Seller of the Plant;
provided that Buyer shall not be permitted to step-in and take control so long
as Seller or any of Seller's Lenders are using commercially reasonable efforts
to remedy the failures described in (i) or (ii) above. Buyer, its employees,
contractors and designees shall have the unrestricted right to enter the Plant to
the extent necessary to operate the Plant. Upon the exercise of this right,
Buyer or its designee shall at all times operate the Plant using Prudent Utility
Practice and shall comply, to the extent commercially practicable, with the
terms of this Agreement. Notwithstanding the foregoing, Seller shall not be
excused from any obligation or remedy available to Buyer as a result of
Buyer's operation of, or election not to operate, the Plant. Buyer shall pay
Seller the applicable rate for Output provided hereunder, less any costs
incurred by Buyer to operate the Plant. Buyer shall indemnifY and hold Seller
harmless from any liability to third parties arising out of Buyer's failure to
operate the Plant using Prudent Utility Practice. Upon Buyer's satisfaction
34
SANFRJI,,'" 90103 (2K)
that Seller has the ability to operate the Plant III accordance with this
Agreement, Seller shall resume operational control.
Should Seller's Lender(s) refuse to finance the Plant, or materially condition
such financing, solely as a result of this Section' 7.6, and Seller gives Buyer
written notice of such refusal to finance, Buyer shall have the following
options: (1) terminate this Agreement without liability of one Party to the
other; (2) renegotiate this Section 7.6 with Seller and Lender(s) in a manner
mutually acceptable; (3) delete this Section 7.6 in its entirety (which deletion
will not require Seller's additional consent); or (4) arrange for financing for
the Plant under materially equivalent terms and conditions as the Lender(s)
were prepared to provide but for this Section 7.6. If Buyer fails to elect and
complete one of these options within sixty (60) days of written notice from
Seller, Seller shall have the right to terminate this Agreement without liability
of one party to the other.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the date of execution of this
Agreement:
(i) Seller IS duly organized and validly existing as a limited liability
company under the laws of Delaware, and has the lawful power to
engage in the business it presently conducts and contemplates
conducting in this Agreement and Seller is duly qualified in each
jurisdiction wherein the nature of the business transacted by it makes
such qualification necessary;
(ii) Seller has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder; all such actions
have been duly authorized by all necessary proceedings on its part. As
of the date of execution hereof, (a) the Plant shall on the Commercial
Operation Date be a "qualifying small power production facility" as that
term is defined in Section 3(17)(C) of the Federal Power Act, and will
35 SANFRAN 90103 (2K)
possess all of the exemptions from regulation provided in 18 CFR
Sections 292.601(c) and 292.602; and (b) this Agreement is not required
to be filed with FERC and no approval (except with respect to
"qualifYing small power production facility" status) with respect to this
Agreement is required from FERC. In the event that the Plant is not a
IIqualifYing small power production facility" on the Commercial
Operation Date or any date thereafter, Seller shall make appropriate
filings under the Federal Power Act within sixty (60) days so as to
comply with applicable law, subject at all times to the provisions of
Article IX of this Agreement;
(iii) The execution, delivery and performance of this Agreement by Seller
will not conflict with its governing documents, any applicable laws, or
any covenant, agreement, understanding, decree or order to which Seller
is a party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Seller and, as of the date first set forth herein, constitutes a legal, valid
and binding obligation of Seller, enforceable in accordance with its
terms against Seller, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally or by general
principles of equity; and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Seller, threatened in writing against Seller, at law or in
equity before any Governmental Authority, which individually or in the
aggregate are reasonably likely to have a materially adverse effect on
the business, properties or assets or the condition, financial or otherwise,
of Seller, or to result in any impairment of Seller's ability to perform its
obligations under this Agreement.
8.2 Buyer Representations and Warranties
Buyer represents and warrants to Seller that as of the date of execution of this
Agreement:
(i) Buyer is The City of Palo Alto, a chartered city and municipal
corporation, duly organized and validly existing, and has the lawful
36 SANJ1RA,'1 90103 (2K)
power to engage in the business it presently conducts and contemplates
conducting in this Agreement and Buyer is duly qualified in each
jurisdiction wherein the nature of the business transacted by it makes
such qualification necessary;
(ii) Buyer has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder and all such actions
have been duly authorized by all necessary proceedings on its part;
(iii) The execution, delivery and performance of this Agreement by Buyer
will not conflict with its governing documents, any applicable laws or
any covenant, agreement, understanding, decree or order to which Buyer
is a party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Buyer and, as of the first date set forth herein, constitutes a legal, valid
and binding obligation of Buyer, enforceable in accordance with its
terms against Buyer, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally or by general
principles of equity; and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Buyer, threatened in writing against Buyer, at law or
in equity before any Governmental Authority, which individually or in
the aggregate are reasonably likely to have a materially adverse effect
on the business, properties or assets or the condition, financial or
otherwise, of Buyer, or to result in any impairment of Buyer's ability to
perform its obligations under this Agreement.
ARTICLE IX
NO CHANGE TO RATES, TERMS OR CONDITIONS
37 SANFRAN 90103 (2K)
The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most
stringent standard permissible under applicable law. As to the Parties, it is
understood that the standard is the "Mobile-Sierra public interest" standard of
review, as stated by the United States Supreme Court in Morgan Stanley Capital
Group Inc. v. Public Utility District No.1 o/Snohomish County, 554 U.S.
(2008). As to all other persons it is intended that the same standard, as may be made
applicable to other than the Parties, apply, as stated by FERC in Modesto Irrigation
District, Docket No. EL03-159-004, 125 FERC,-r 61,174, para. 15 (Order Denying
Rehearing, November 14, 2008).
ARTICLE X
MISCELLANEOUS
10.1 Assignment
The rights and obligations of this Agreement may not be assigned by either
Party without the prior written consent of the other Party, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing,
Seller may use subcontractors without Buyer's consent to comply with the
terms of this Agreement provided that notwithstanding the use of said
subcontractors, Seller shall remain responsible for all its obligations under this
Agreement. Buyer may furthermore use any agent it so designates for
scheduling and billing purposes, so long as Buyer remains responsible for all
of its obligations under this Agreement. Any purported assignment of this
Agreement in the absence of the required consent, except as provided in 10.2,
shall be void.
10.2 Financing
Notwithstanding Section 10.1, Seller may, without the consent of Buyer,
collaterally assign its rights under this Agreement to Lenders as collateral
security in connection with any financing of the purchase or operation of the
Plant, provided that such Lender( s) or its designee agree( s) in writing that
upon assuming any of Seller's prospective rights under this Agreement, such
Lender also shall be bound by all of Seller's prospective obligations under this
Agreement. Notwithstanding any such assignment, Seller's obligations under
this Agreement shall continue in their entirety in full force and effect and
38 SANFRAN 90!O3 (2K)
Seller shall remain fully liable for all of its obligations under or relating to this
Agreement. Each such collateral assignment and any purchaser or transferee
shall be subject to Buyer's rights and defenses hereunder and under applicable
law. Seller shall provide prior written notice to Buyer at least seven (7) days
prior to any such collateral assignment.
In order to facilitate the obtaining of financing of the Plant, Buyer shall
execute, upon request, a commercially reasonable consent to assignment, with
respect to a collateral assignment hereof to Lenders in connection with the
documentation of the financing or refinancing for the Plant. Any assignment
in violation of this Agreement shall be void, ab initio. Buyer shall consider in
good faith any amendments to this Agreement proposed by Seller which relate
to financing of the Plant or other amendments requested by Seller in order to
receive or maintain financing from Lenders.
10.3 Notices
Any notice, demand, request, or communication required or authorized by this
Agreement shall be delivered either by hand, facsimile, overnight courier or
mailed by certified mail, return receipt requested with postage prepaid, to:
The City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 329-2646
on behalf of Buyer;
with a copy to:
SANFRAN 90103 (2K)
The City of Palo Alto
250 Hamilton Avenue, Eighth Floor
Palo Alto, CA 94301
Attention: Senior Assistant City Attorney / Utilities
Telecopier: (650) 329-2646
39
and to:
The City of Palo Alto
250 Hamilton Avenue, Third Floor
Palo Alto, CA 94301
Attention: Director of Utilities
Telecopier: (650) 321-0651
and to:
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Attention: Power Contracts Administrator
Telecopier: (916) 781-4255
and to:
SANFRAN 90103 (2K)
Ameresco Johnson Canyon LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: General Counsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
40
with a copy to:
Ameresco Johnson Canyon LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: Vice President, Renewable Energy
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
on behalf of Seller.
The designation and titles of the person to be notified or the address of
such person may be changed at any time by written notice delivered in the
manner set forth in this Section 10.3. Any such notice, demand, request, or
communication shall be deemed received (i) if delivered by hand by a Party or
sent by facsimile or (ii) upon receipt by the receiving Party if sent by courier
or U.S. mail.
10.4 Captions
All titles, subject headings, section titles and similar items are provided for the
purpose of reference and convenience and are not intended to be inclusive,
definitive or to affect the meaning of the contents or scope of the Agreement.
10.5 No Third Party Beneficiary
No provision of the Agreement is intended to, nor shall it in any way, inure to
the benefit of any customer, property owner or any other third party, so as to
constitute any such Person a third-party beneficiary under the Agreement, or of
anyone or more of the terms hereof, or otherwise give rise to any cause of
action in any Person not a Party hereto.
10.6 No Dedication
No undertaking by one Party to the other under any prOVISIon of the
Agreement shall constitute the dedication of that Party's system or any portion
41 SANFRAN 90103 (2K)
thereof to the other Party or to the public or affect Seller as an independent
entity and not a public utility.
10.7 Entire Agreement; Integration
This Agreement, together with all Appendices attached hereto, constitutes the
entire agreement between the Parties and supersedes any and all prior oral or
written understandings. No amendment, addition to or modification of any
provision hereof shall be binding upon the Parties, and neither Party shall be
deemed to have waived any provision or any remedy available to it, unless
such amendment, addition, modification or waiver is in writing and signed by
a duly authorized officer or representative of the Parties.
10.8 Applicable Law
The Agreement is made in the State of California and shall be interpreted and
governed by the laws of the State of California and/or the laws of the United
States, as applicable.
10.9 Venue
The Parties hereby submit to the exclusive jurisdiction of the federal courts for
the Northern District of the State of California; provided, however, that if such
federal courts sitting in the Northern District of the State of California refuse
jurisdiction, the Parties agree to the exclusive jurisdiction of the state courts
sitting in the County of San Francisco, State of California.
10.10 Nature of Relationship
The duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. The Agreement shall not be interpreted or
construed to create an association, joint venture, fiduciary relationship or
partnership between Seller and Buyer or to impose any partnership obligation
or liability or any trust or agency obligation or relationship upon either Party.
Seller and Buyer shall not have any right, power or authority to enter into any
agreement or undertaking for, or act on behalf of, or act as or be an agent or
representative of or otherwise bind the other Party.
42
SANFRAN 90103 (2K)
10.11 Good Faith and Fair Dealing; Reasonableness
The Parties agree to act reasonably and in accordance with the principles of
good faith and fair dealing in the perfonnance of this Agreement. Unless
expressly provided otherwise in this Agreement, (i) wherever the Agreement
requires the consent, approval or similar action by a Party, such consent,
approval or similar action shall not be unreasonably withheld or delayed, and
(ii) wherever the Agreement gives a Party a right to detennine, require, specify
or take similar action with respect to matters, such detennination, requirement,
specification or similar action shall be reasonable.
10.12 Severability
Should any provision of the Agreement be or become void, illegal or
unenforceable, the validity or enforceability of the other provisions of the
Agreement shall not be affected and shall continue in full force and effect. The
Parties will, however, use their best endeavors to agree on the replacement of
the void, illegal, or unenforceable provision(s) with legally acceptable clauses
which correspond as closely as possible to the sense and purpose of the
affected provision.
10.13 Confidentiality
All infonnation disclosed by Seller, including without limitation all
engineering documents, designs, specifications and financial infonnation, shall
be kept confidential and shall not be disclosed to any third party except as
provided in this Section 10.13. Buyer acknowledges Seller's request to hold
all infonnation regarding this Agreement confidential. Buyer shall disclose
such infonnation to third parties only to the extent required by California law
(including, without limitation, the California Constitution, the California
Public Records Act and the Brown Act). Notwithstanding the foregoing,
either Party may disclose this Agreement to SVSW A or its representatives, the
Northern California Power Agency or its representatives, or to Lenders or
potential Lenders or their representatives; provided that prior to such
disclosure, the recipient shall agree in writing to keep the material confidential
under tenns no less stringent than as set forth in this Section 10.13. Buyer also
shall be pennitted to disclose this Agreement and related infonnation to the
City Council of Palo Alto and/or the City Council for the express purpose of
obtaining approval to execute this Agreement; provided that in connection
43
SANFRAN 90103 (2K)
with such disclosure Buyer shall only disclose such information to the extent
required by California law (including, without limitation, the California
Constitution, the California Public Records Act and the Brown Act). Each
Party shall be bound by its obligations of confidentiality hereunder for a period
of two (2) years from expiration or any earlier termination of this Agreement.
Notwithstanding anything to the contrary in this Section 10.13, nothing shall
restrict any Party from using or disclosing confidential information in any
manner it chooses which (i) is or becomes generally available to the public
other than as a result of a disclosure directly or indirectly by the disclosing
Party or its representative; (ii) was within the using or disclosing Party's
possession prior to it being furnished hereunder, provided that such
information is not subject to another confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, any other party
with respect to such information; (iii) is rightfully obtained by a Party from
third parties authorized to make such disclosure without restriction; or (iv) is
legally required to be disclosed by judicial or other governmental action as
determined by such Party's attorney acting in good faith (including, but not
limited to, the California Constitution, the California Public Records Act and
the Brown Act), provided that prompt notice of said judicial or other
governmental action shall have been given to the non-disclosing Party and that
the non-disclosing Party shall, at its sole cost and expense, be afforded the
opportunity (consistent with the legal obligations of the disclosing Party) to
exhaust all reasonable legal remedies to maintain the confidential information
in confidence.
10.14 Cooperation
The Parties agree to reasonably cooperate with each other in the
implementation and performance of the Agreement. Such duty to cooperate
shall not require either Party to act in a manner inconsistent with its rights
under the Agreement.
10.15 Counterparts
This Agreement may be executed in two or more counterparts and by different
Parties on separate counterparts, all of which shall be considered one and the
same agreement and each of, which shall be deemed an original.
{signature page follows}
44
SANFRAN 9O!O3 (2K)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the day and year first above written.
AMERESCO JOHNSON CANYON LLC THE CITY OF PALO ALTO
By Ameresco, Inc., its sole member APPROVAL AS TO FORM:
By: By:
Name: Michael T. Bakas Name: Grant Kolling
Title: Vice President Title: Senior Assistant City Attorney
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
APPROVAL BY ADMINISTRATIVE SERVICES APPROVAL BY UTILITIES DIRECTOR
DIRECTOR
By: By:
Name: Lalo Perez Name: Valerie o. Fong
Title: Administrative Services Director Title: Utilities Director
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
APPROVAL BY CITY MANAGER APPROVAL BY MAYOR:
By: By:
Name: James Keene Name: Peter Drekmeier
Title: City Manager Title: Mayor
Date: Date:
45
SANFRAN 90103 (2K)
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , 2008, before me, the undersigned notary
public, personally appeared , as the of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco Johnson
Canyon LLC, a Delaware limited liability company, proved to me through
satisfactory evidence of identification, which was , to be the
person whose name is signed on the preceding document, and acknowledged to me
that he signed the preceding document voluntarily for its stated purpose as
_________ of Ameresco, Inc., a Delaware corporation, the sole member
of Ameresco Johnson Canyon LLC, a Delaware limited liability company.
My Commission expires _______ ---'-
Notary Public
46
SANFRAN 90 I 03 (2K)
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer final Site Drawings prior to the Commercial
Operation Date.
47
SANFRAN 90103 (2K)
APPENDIXB
FORM OF ATTESTATION
Ameresco Johnson Canyon LLC
Environmental Attribute Attestation and Bill of Sale
Ameresco Johnson Canyon LLC ("Ameresco") hereby sells, transfers and delivers to
("Customer")
-------~---~~---~-~-~-~~~---the Environmental Attributes and Environmental Attribute Reporting Rights associated with the generation of
the indicated energy for delivery to the grid (as such term( s) are defmed in the
_____________ (identifY contract) (the "Contract') dated 20
between Ameresco and Customer) arising from the generation for delivery to the grid of the energy by the
Facility described below:
Facility name and location: Fuel Type:
Capacity (MW):_ Operational Date: ____ _
(for facility that has added renewable capacity, show operational date and amount of new capacity)
As applicable: CEC Reg. no. _ Energy Admin. m no. Q.F. m no. _
MWhrs generated
20 -------______ 20
20 -------
in the amount of one Environmental Attribute or its equivalent for each megawatt hour generated; and Ameresco
further attests, warrants and represents as follows:
i) to the best of its knowledge, the information provided herein is true and correct;
ii) its sale to Customer is its one and only sale of the Environmental Attributes and associated
Environmental Attribute Reporting Rights referenced herein;
iii) the Facility generated and delivered to the grid the energy in the amount indicated as undifferentiated
energy; and
[check one:]
iv) Ameresco owns the Facility.
iv) to the best of Ameresco's knowledge, each of the Environmental Attributes and Environmental
Attribute Reporting Rights associated with the generation of the indicated energy for delivery to the
grid have been generated and sold by the Facility.
This serves as a bill of sale, transferring from Ameresco to Customer all of Ameresco's right, title and interest in
and to the Environmental Attributes and Environmental Attribute Reporting Rights associated with the generation
of the energy for delivery to the grid.
Contact Person: _______ tel: 1-508-661-2200; fax: 1-508-661-2201
WITNESS MY HAND,
SANFRAN 90103 (2K)
AMERESCO JOHNSON CANYON LLC
By: Ameresco, Inc., its sale member
By
Its
Date:
8-1
48
APPENDIXC
INSURANCE COVERAGES
At its own expense, Seller shall secure and maintain during the Term the
following insurance with the coverage amounts indicated for occurrences
during and arising out of Seller's performance of this Agreement. Such
insurance shall be placed with responsible and reputable insurance companies
in compliance with Requirements of Law applicable to Seller.
1. Workers' CompensationlEmployer's Liability. Seller shall
maintain Workers' Compensation Insurance and Employer's
Liability Insurance which comply with Requirements of Law
applicable to Seller.
2. Automobile Liability. Seller shall maintain Automobile Liability
Insurance in compliance with Requirements of Law applicable to
Seller, including coverage for owned, non-owned and hired
automobiles for both bodily injury (including death) and property
damage, including automobile liability contractual endorsement
and uninsured/underinsured motorist protection endorsements.
3. Third Party Liability. Seller shall maintain third party liability
insurance in compliance with Requirements of Law applicable to
Seller on a project-specific basis covering against legal
responsibility to others as a result of bodily injury, property
damage and personal injury arising from the operation and
maintenance of the Plant. Such policy shall be written with a
limit of liability not less than $10,000,000 and a deductible not to
exceed $10,000. Such liability may be in any combination of
primary and excess/umbrella. Coverage shall include, but not be
limited to, premises/operations, explosion, collapse, underground
hazards, broad form property damage and personal injury
liability. Such coverage shall not contain exclusions for punitive
or exemplary damages.
49 SANFRAN 90103 (2K)
APPENDIXD
SCHEDULING PROTOCOLS
1. Prior to three (3) workdays before the end of a month, Seller is to
provide to NCPA and Buyer a monthly forecast of loads and/or
generation for the following month. At a minimum, monthly forecasts
will be hourly kilowatt (kW) values by weekday, Saturday, and
SundaylHoliday.
2. No later than 14:00 each Thursday, Seller 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.
3. Daily modifications to forecasts. Unless otherwise mutually agreed,
Seller may make changes to the Weekly forecast by providing such
changes to NCP A 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.
4. Hourly modifications to active schedules. Unless otherwise mutually
agreed, Seller may make changes to active schedules by providing such
changes to NCP A 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.
5. NCPA is to be notified of all planned or forced generation outages.
6. At Seller's request, NCPA will modify generation and load schedules for
unforeseen circumstances in accordance with the above scheduling
timeline constraints and NCP A Schedule Coordination Agreement.
50
SANFRAN 90103 (2K)
7. All notices and schedules are to be submitted to NCP A by phone, fax or
email to the following persons: ChiefDispatcherlScheduler.
8. 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.
51 SANFRAN 90103 (2K)
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June __ ,2008
Hour Ended: Expected Capability
............. -
1
2
1
4
5
ti
7 g
9
10
] ]
12
11
14
15
16 !
17
L.........-......... If(
19
')0
71 n i
71
24
Expected Daily Temperatures, F
Low
High
Contact
Information:
Scheduling
Coordinator:
Facility:
CITY:
SANFRAN 90103 (2K)
APPENDIXE
PERFORMANCE TEST
The Seller shall coordinate and schedule, with Buyer, a Performance Test after
completion of all equipment startup and commissioning activities. This
performance test may be performed before completing punch list items. Buyer
shall be permitted to witness the Performance Test, including access to and copies
of control room logs, control system display screens, and instrumentation data for
a reasonable period of time before, during and after the Performance Test, and may
also concurrently conduct a site inspection of the Landfill and Plant and associated
facilities, systems and equipment. Seller shall supply a written copy of the
Performance Test results to both Buyer within five (5) business days following the
conclusion of the test.
The Performance Test shall continue for one hundred twenty (120) consecutive
hours (the "Test Period") to demonstrate the following:
1) Net Generator Output: The power output for each generator shall be recorded
for the Test Period to verify the net initial capacities. This Performance Test shall
be performed for all engine/generators simultaneously and will be considered
successful if the average net output for the Test Period is equal to eighty percent
(80%) of the net Initial Capacity designated in this Agreement. All power
measurements shall be based on a power factor of 0.90.
2) Compliance: The Performance Test shall also demonstrate the ability of the
Plant to comply with all material safety, system reliability, environmental, and
other requirements of its permits, this Agreement, any interconnection agreements,
and the LFG Agreement.
SANFRAN 90!O3 (2K) 53
APPENDIXF
SELLER'S SAMPLE QUARTERLY FINANCIAL STATEMENT
Balance Sheets
December 31,2006 and 2007
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Prepaid and other current assets
Total current assets
Other assets:
Project assets, net
Due from member
Debit issuance costs, net
Total other assets
LIABILITY AND MEMBER'S EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion
Deferred tax liabilities
Total long-term liabilities
Member's equity
SANFRAN 90103 (2KJ 54
Statements of Operations
Years Ended December 31, 2006 and 2007
Revenues:
Electricity Sales
Costs of revenue:
Operation and maintenance
Depreciation of project assets
Gross profit (loss)
Operating expenses:
Seiling, general and administrative
Operating income (loss)
Interest and other financing costs
Income (loss) before tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
SANFRAN 90103 (2K)
Statements of Cash Flows
Years Ended December 31,2006 and 2007
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred issuance costs
Deferred taxes
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable
Prepaid expenses
Accounts payable
Due to (from) member
Net cash provided by operating activities
Cash flows from investing activities:
Accounts payable relating to construction activity
Accrued expenses relating to construction activity
Purchase of project assets
Net cash used in investing activities
Cash flows from financing activities:
Increase in restricted cash
Capital contributions
Distributions to member
Proceeds from debt issuance
Debt issuance costs
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
Income taxes
Supplemental disclosure of noncash transactions:
Accrued purchases of project assets
SANFRAN 90103 (2K)
ATTACHMENT D
DRAFT -Excerpted Minutes from July 21, 2009 Finance Committee Meeting
3: Adoption of a Resolution Approving the Ameresco Johnson Canyon Landfill Gas
Renewable Energy Power Purchase Agreement for the Acquisition of Up to Two Average
Megawatts of Energy Over Twenty Years at an Estimated Cost Not to Exceed $30 Million
Utilities Senior Resource Originator Torn Kabat provided a presentation about Palo Alto's
locally adopted Renewable Portfolios Standard (RPS) and the Arneresco Johnson Canyon Power
Purchase Agreement (PP A) under consideration. The presentation included:
• Background on the locally adopted RPS target of 33% renewables by 2015 within a Y2
cent per kWh retail rate impact limit
• Calculation of an allowable $5,000,000/year green resource cost premium (112 cent times
annual sales of I billion kWh).
• Progress to date on acquiring resources to ultimately meet the 33% renewable resource
target by 2015.
• Recently rising cost premiums paid for renewable resources implicit in both historic and
current proposals.
• State regulatory and legislative developments driving up the cost of renewables and the
State calculation of a benchmark Market Price Referent that forms a renewable proposal
price clustering point.
• Details of the proposed Johnson Canyon landfill gas power plant and the associated PPA
to sell power to Palo Alto.
• Details of future project expansion opportunities and obligations if Ameresco is able to
price expansion output at 85% of the Market Price Referent with the price capped at 15
cents per kWh.
• Beyond the Johnson Canyon proposal, Palo Alto is still pursing renewables to meet about
12% of its load by 2015. (About 10 times as much as the Johnson Canyon initial output.)
Kabat pointed out that the proposal carne through the City'S 2009 Request for Proposal process
and is among 6 currently being negotiated by a team of staff from Utilities, ASD, and the City
Attorneys office. Kabat noted that the proposed PP A was with Ameresco, with which Palo Alto
has 4 other contracts for renewable energy from landfill energy projects.
Staff also provided a table showing each committed renewable resource and how much of the $5
million per year allowed green premium is consumed for each. The table showed the Johnson
Canyon project will cost about $636,000 per year more than an equivalent amount and shape of
regular "brown" market power, consuming $636,000 of the $5,000,000 per year allowed green
premlUm.
Council Member Schmid pointed out that the Johnson Canyon proposal and others currently
available to us are priced at about two times the current brown energy price, and that it might be
a good time to look at the divergence of the two markets and the use of the Y2 cent premium.
Chair Burt suggested that staff produce more metrics for Council to consider when developing
policies. Metrics may include:
• QualifYing Renewable Portfolio Percentage (like our 18% current amount)
• Qualifying renewables plus our large hydroelectric resources, which provide 50% of the
energy used in an average hydro year. (18% + 50% =68%)
• Add in customers' voluntary PaloAltoGreen percent ofload (68% + 6% 74%)
He suggested we may need a tool to help people understand how one neighbor getting the regular
Palo Alto power may be getting 68% non carbon power while another neighbor subscribing to
PaloAltoGreen product may be getting 68% non carbon electricity plus renewable attributes
covering all 100% of their electric consumption.
Burt remarked that reducing energy usage also helps meet the RPS goals by reducing load. He
suggested looking at how much a 10% load reduction would help to meet the 33% goal. He
pointed out that a more aggressive energy efficiency strategy could reduce customer bills if
efficiency cost less than renewables on a per kWh basis.
Utilities Director Valerie Fong said staff will bring this type of policy comparison to the UAC
for discussion.
Council Member Morton complimented staff on laddering in a good mix of renewable resources
over the years with a mix of prices that are influenced by the markets surrounding us.
MOTION: Council Member Morton moved seconded by Council Member Burt to recommend
that Council adopt a resolution approving the Power Purchase Agreement (PP A) with Ameresco
10hnson Canyon LLC, a Delaware limited liability company. Additionally, for this agreement,
to recommend the Council waive the application of the investment-grade credit rating
requirement of Section 2.30.340( d) of the Palo Alto Municipal Code to this transaction.
MOTION PASSED 3-0
MOTION: Council Member Schmid moved, seconded by Chair Burt, to direct Staff to work
with the UAC and then report back to the Finance Committee with a re-examination of the goals
and the matrix that are being used in the alternate energy program as a second agendized item
when the UAC discusses the Power Purchase Agreement with Ameresco 10hnson Canyon, LLC
with the CounciL
MOTION PASSED: 3-0