HomeMy WebLinkAboutStaff Report 226-10
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 3, 2010 CMR: 226:10
REPORT TYPE: ACTION
SUBJECT: Utilities Advisory Commission Recommendation to City Council to
Adopt Two Resolutions: (1) Approving A Power Purchase Agreement
with Ameresco San Joaquin LLC for the Acquisition of Up to 52,000
Megawatt-hours per Year of Energy Either Over Fifteen Years at a
Cost Not To Exceed $88.7 Million, or Over Twenty Years at a Cost Not
to Exceed $122.4 Million, and (2) Approving A Power Purchase
Agreement with Ameresco Crazy Horse LLC for the Acquisition of Up
to 52,000 Megawatt-hours per Year of Energy Either Over Fifteen
Years at a Cost Not to Exceed $80.7 Million, or Over Twenty Years at a
Cost Not to Exceed $111.3 Million; Finance Committee
Recommendation to Direct Staff to Re-examine the Alternative Energy
Program Policies and Goals
RECOMMENDATION
1. The Finance Committee recommends that the Council request staff to:
A. Return to the Finance Committee before making any further recommendations on
the acquisition of any new renewable energy resources with a re-examination of
the policies and goals that are being used in the alternate energy program,
including the energy efficiency plans and the electric acquisition policies and
plans;
B. In its review, staff should staff provide information on the flexibility of the 33%
target date with the option of aligning it to the State mandated goals; and
C. Return to the Finance Committee with a credit rating of Ameresco when its final
quarter financial results for 2009 are available.
2. Additionally, staff and the Utilities Advisory Commission recommend that the Council:
CMR: 226:10 Page 1 of 7
A. Adopt a resolution approving a Power Purchase Agreement (PPA) with Ameresco
San Joaquin LLC, a Delaware limited liability company, for the acquisition of up
. to 52,000 MWh per year of energy either:
I) Over fifteen years at a cost not to exceed $88.7 million, including, if required,
a payment of up to $1.425 million for electric transmission interconnection
costs; or
2) Over twenty years at a cost not to exceed $122.4 million, including, if
required, a payment of up to $1.425 million for electric transmission
interconnection costs; and
B. Adopt a resolution approving a PPA with Ameresco Crazy Horse LLC, a
Delaware limited liability company, for the acquisition of up to 52,000 MWh per
year of cnergy either:
I) Over fifteen years at a cost not to exceed $80.7 million, including, if required,
a payment of up to $1.425 million for electric transmission interconnection
costs; or
2) Over twenty years at a cost not to exceed $111.3 million, including, if
required, a payment of up to $1.425 million for electric transmission
jnterconnection costs; and
C. Waive the application of the investment-grade credit rating requirement of
Section 2.30.340( d) of the Palo Alto Municipal Code, which applies to energy
companies that do business with the City, as the Ameresco companies are not
rated by credit agencies.
BACKGROUND
At the March 16,2010 meeting of the Council Finance Committee, staff recommended approval
of four PPAs for renewable energy (landfill gas to electricity) that would have increased the
renewable energy fraction of the electric utility resource portfolio from 21% to 33% by 2015.
The Finance Committee did not support the recommendation and outlined several concerns,
including staff's fuilure to return to the Finance Committee vvith an evaluation of the long-term
plans and policies for acquisition of renewable energy and energy efficiency before presenting
contracts to meet the cUtrent policy goals, the lack of review by the lIAC of the proposed
contracts, the creditworthiness of Ameresco as a counterparty, and the risk inherent in locking in
prices for 20 years, during which time technological advances could lead to a reduction in prices
for renewable energy. The draft minutes of that meeting are provided as Attachment 1.
Staff negotiated additional pricing and term options tbat addressed some of the issues raised by
the Finance Committee and held a special meeting of the Uilities Advisory Commission (UAC)
on March 31,2010 to consider renegotiated PPAs for terms of 12, 15, and 20 years for two of the
originally proposed four projects. Staffs recommendation was for the DAC to recommend that
the Council approve PPAs with two projects at the San Joaquin and Crazy Horse landills for 15-
year terms. Thc DAC recommended approval of the recommended PPAs relating to both the
San Joaquin and the Crazy Horse projects for terms of 15 or 20 years, with a preference for 20-
year terms. The draft minutes from the LAC's March 31, 2010 meeting are provided as
Attachment K.
CMR: 226:10 Page 2 of7
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On April 6, the Finance Committee considered the revised recommendation for Council approval
of two PP As relating to both the San Joaquin and the Crazy Horse projects for terms of 15 or 20
years. The Finance Committee did not develop a recommendation for Council consideration
regarding the two PP As at that meeting. The staff report prepared for that meeting (Attachment
A) contains a thorough discussion of the issues that were raised by the Finance Committee on
March 16, the responses from staff and the UAC, a summary of the UAC's discussion and
recommendation, and descriptions ofthc proposed PPAs.
COMMITTEE REVIEW AND RECOMMENDATIONS
March 16,2010 Finance Committee Meeting
Staff presented its recommendation to the Finance Committee, namely, to recommend that the
Council adopt resolutions relating to the approval and execution of four PPAs with four
Ameresco LLCs for renewable energy from projects that convert landfill gas to energy (CMR:
166:10). The City'S Energy Risk Manager also presented his perspective on the risks facing the
City if the proposed PP As were executed.
The Finance Committee did not support the recommendation for several reasons, including the
• The Finance Committee reviewed the last proposed renewable energy PPA in July 2009,
which was also with Ameresco, and recommended that that staff return with a review of
policy and plans related to the acquisition of renewable energy and energy efficiency.
Council approved that recommendation in August 2009 (CMR: 342:09). Staff has not yet
returned to the Finance Committee in response to this direction.
• The prices were locked in for the 20-year terms of the proposed PPAs. The Finance
Committee expressed concern that technology advancements, especially given the recent
focus on green tech and Federal stimulus funding, would result in lower cost renewable
energy in the future, leaving these contracts higher priced than the alternatives and keeping
Palo Alto' 5 costs and rates high.
• Another concern is that executing all four PP As would tie up all remaining renewable energy
needs at the same time at similar prices, suggesting that a smaller amount would be less
risky. In addition, if the generators for all projects were built to their maximum sizes, the
RPS would be above the 33% goaL
• All four proposed PP As were with Ameresco, with which the City has already executed five
PP As for landfill gas-to-energy projects. The "concentration risk" of having nine contracts
with LLCs of the same parent company would result in Ameresco comprising 64% of the
City's renewable energy portfolio and 21 % of the entire electric energy supplies, the second
largest energy supplier behind the Western Area Power Administration. In addition, the
Finance Committee asked for information on Palo Alto's share of Amel'esco's total
renewable business.
• The financial strength, or "credit risk", of the Ameresco holding company was questioned, as
it is a rapidly growing company with high debt levels. Staff was asked to return with updated
financial information for Ameresco when audited financial information for 2009 becomes
available.
CMR: 226:10 Page 3 of7
The Finance Committee voted unanimously (3-0) to request staff return to the Finance
Committee with a reexamination of the policies and goals used for the Alternative Energy
Program including the energy efficiency plans and electricity acquisition plans originally made
by the Council, that staff provide information on the flexibility of the 33% target date with the
option of aligning it to the State mandated goals, and that staff present Ameresco's updated
financial information when it becomes available. The minutes from the Finance Committee's
March 16, 2010 meeting are provided as Attachment J.
April 6, 2010 Finance Committee Meeting
Staff provided a presentation on the propoi;led renegotiated PPAs ",ith Ameresco for the Finance
Committee at its meeting on April 6, 2010.
Two UAc commissioners were present at the meeting to represent the. UAC's discussions and
one was asked why the UAC reeommended approval of the PPAs v.ith 20-year terms instead of
the staff's recommendation for PPAs with I5-year terms. UAC Commissioner Eglash explained
that there was a split vote on this issue, but that the majority of the UAC voted for 20-year terms
since the last 5 years of a 20-year contract contained the most attractive pricing. Commissioner
Eglash further explained that, of the 2 commissioners voting for the PPAs with the I5-year
terms, one did so out of deference to the FilJRnce Committee's concerns, and the other did so
based on a belief that that the IS-year term was less risky.
Council Member Scharff expresscd concerns about the impacts of political or regulatory changes
that could either delay or cancel efforts to increase the statewide RPS goal from the current 20%
by 2010 to 33% by 2020. He said that such a "roll back" could lower the price of green power.
The environmental attributes of Landfill Gas to Energy (LFGTE) facilities was discussed with
concern expressed that a Sierra Club task force took a stand against LFGTE projects unless
certain conditions are met even though the National Resources Defense Council, the U.S.
Environmental Protection Agency, and the California Energy Commission support the
technology.
Council Member Espinosa pointed out that staff has still not returned with a long-term policies
and plans for the acquisition of energy efficiency and renewable energy and noted that this made
the decision more difficult. However, he was satisfied that the other issues raised at the March
16 Finance Committee were adequately addressed.
Council Member Klein stated that the City has entered into long-term contracts in the past and
that no one ean predict the price of energy for the term of the contracts, but that he has heard
from experts that energy prices are unlikely to be lower in lO to 20 years.
The Finance Committee did not agree on a recommendation to the Council on the proposed
PPAs. On a motion to recommend Council approve one of the PPAs for a IS-year term, the vote
was 2-2 with Council Members Schmid and Scharff voting yes and Council Members Espinosa
and Klein voting no. On amotion to recommend Council approve both PPAs for a IS-year term,
the vote was 2-2 with Council Members Espinosa and Klein voting yes and Council Members
CMR: 226:]0 Page 4 of7
Sclunid and Scharff voting no. The minutes from the Finance Committee's April 6, 2010
meeting are provided as Attachment L.
RESOURCE IMPACT
Fifteen-Year PPA Terms
The cost of renewable energy supplies under the two agreement~ is expected to be up to $106
million over the 15-year terms of the PPAs if both projects are built at the expected size,
including the maximum prepayment cost of $1.425 million for each project for interconnection
equipment. The annual expected cost is up to $6.2 million in the fIrst ycar of operation with the
cost escalating 1.5% per year over the IS-year terms of the PPAs. Approval of the two PPAs
would result in a retail rate impact estimated at up to 0.23 ¢IkWh, beginning no earlier than 2013
and Palo Alto would meet 28% of its energy needs ",ith renewable energy by 2013.
If both plants are built to their maximum sizes, the cost could be up to $169.4 million over 15
years, including the maximum prepayment cost of $1.425 million for each project for
intereonnection equipment. The annual cost for both PPAs would bc up to $10.0 million in the
first ycar, escalating at 1.5% per year over the IS-year teml of the PPAs. In this case, the retail
rate impact would be up to 0.45 ¢/kWh in 2013 and Palo Alto would meet 32% of its energy
needs with renewaNe energy by 201 3
Twenty-Year PP A TemlS
The cost of renewable energy supplies under the two agreements is expected to be up to $146.1
million over 20-year terms of the PPAs if both projects are built at the expected size, including
the maximum prepayment cost of $1.425 million for each project for interconnection equipment.
The annual expected cost is up to $6.2 million in the first year of operation with the cost
escalating 1.5% per year over 20-year terms. Approval of the two PPAs would result in a retail
Jate impact estimated at up to 0.23 ¢/kWh, beginning no earlier than 2013.
If both plants are built to their maximum si7~s, the cost could be up to $233.7 million over 20
years, including the maximum prepayment cost of $1.425 million for each project for
interconnection equipment. The annual cost for both PPAs would be up to $10.0 million in the
first year, escalating at 1.5% per year over the 20-year term of the PPAs. In this case, the retail
rate impact would be up to 0.45 ¢IkWh.
For both th.e 15-and the 20-year terms, uncertainties remain about plant sizing, the cost of
interconnection equipment to the electric grid, and the requirement for and cost of emissions
controls equipment. These uncertainties are expected to be resolved in about a year.
POLICY IMPLICATIONS
Adoption of the resolutions allows the City to participate in the agreements to purchase
renewable energy and thereby is consistent v,ith the Council's Top Five Priority of
Environmental Protection. Participating in the agreement is also consistent with the following
City policies and guidelines:
L The Council-approved Climate Protection Plan, adopted December 3, 2007, containing
Utilities Goal 2: Reduce carbon intensity of energy supply provided by Utilities;
CMR: 226:10 Page 5 of7
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2.
3.
4.
5.
6.
7.
8.
9.
The Council-approved Utilities Strategic Plan ''vith regard to employing balanced
environmental solutions;
The energy risk management policies;
The rate impact limits and the renewable portfolio targets in Long-term Electric
Acquisition Plan (LEAP) Guideline #6;
The portfolio diversification goals in LEAP Guideline #3;
The City's Sustainability Policy Statement, adopted April 2, 2001 (CMR 175:01) and
revised June 18, 2007 (CMR 260:07);
The Green Government Pledge, adopted July 19, 1999 (CMR 284:99);
The US Mayors' Climate Protection Agreement; and
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.
10. Resolution of the City of Palo Alto Recognizing the Potential hnpacts of Climate Change
on Palo Alto and the Externality Costs Associated with the Burning of Fossil Fuels and
Acknowledging the Importance ,,{Ime Cost Pricing, adopted December 7,2009
ENVIRONMENTAL REVIEW
Execution of these agreements 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 pennits on
projects to be developed.
ATTACHMENTS
A: CMR: 198:10 Utilities Advisory Commission Recommendation to Adopt A Resolution
Approving A Power Purchase Agreement with Ameresco San Joaquin LLC for the
Acquisition of Up to 52,000 Megawatt-hours per Year of Energy Either Over Fifteen Years
at a Cost Not To Exceed $88.7 Million, or Over Twenty Years at a Cost Not to Exceed
$122.4 Million, and to Adopt A Resolution Approving A Power Purchase Agrcement with
Ameresco Crazy Horse LLC for the Acquisition of Up to 52,000 Megawatt-hours per Year of
Energy Either Over Fifteen Years at a Cost Not To Exceed $80.7 Million, or Over Twenty
Years at a Cost Not to Exceed $111.3 Million (without attachments)
B: Resolution approving Renewable Energy Power Purchase Agreement for a tenn of 15 Years
between Palo Alto and Ameresco San Joaquin LLC
C: Renewable Energy Power Purchase Agreement for a tenn of 15 Years between PaIo Alto and
Ameresco San Joaquin LLC
D: Resolution approving Renewable Energy Power Purchase Agreement for a tenn of IS Years
between Palo Alto and Ameresco Crazy Horse LLC
E: Renewable Energy Power Purchase Agrecment for a term of 15 Years between Palo Alto and
Ameresco Crazy Horse LLC
F: Resolution approving Renewable Energy Power Purchase Agreement for a term of 20 Years
between Palo Alto and Ameresco San Joaquin LLC
CMR: 226:10 Page6of7
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1 G: Renewable Energy Power PurchaseAgreement forB tenn of20 Years between Palo Alto and .
Ameresco San Joaquin LLC ...
H: R£$olution approving Renewable Energy Power Purchase Agreement for a tenn of 20 Years
between PruoAlto and Amereseo Crazy Horse LLC
I: Renewable Energy Power Purchase Agreement for a tenn of20 Years between Palo Alto lind
Amereseo Crazy Horse LLC .
J: Excerpted draft 1lIiD.lltes from the M8rch 16, 2010 Finance Committee meeting
K: Draft minutes from the Marcb 31, 2010 UACmeeting
L: Excerpted draft minutes from the April 6, 2010 Finance Committee meeting
PREPARED BY:
REVIEWED BY:
TOMKABA~
Senior Resource aiigl!llltor
JANE RATCHYEW
Assistant Director, R"e~lrce Management
KARL VAN ORSDOL;Vt'
Eoorgy Risk Manager
DEPARTMENT APPROVAL:
Director ofUtilities
CITY MANAGER APPROVAL:
CMR: 226:10 Page 7 of7
ATTACHMENT A
TO: HONORABLE CITY COUNCIL
ATTN: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: APRIL 6,2010 CMR: 198:10
SUBJECT: Utilities Advisory Commission Recommendation to Adopt A Resolution
Approving A Power Purchase Agreement with Ameresco San Joaquin
LLC for the Acquisition of Up to 52,000 Megawatt-hours per Year of
Euergy Either Over Fifteen Years at a Cost Not To Exceed S88.7
Million, or Over Twenty Years at a Cost Not to Exceed $122.4 Million,
and to Adopt A Resolution Approving A Power Purchase Agreement
with Amel'ellco Crazy IIone LLC fur the Allquill~1l lie Up to 5.1,000
Megawattchours per Year of Energy Either Over Fifteen Years at a
Cost Not To Exceed $80.7 Million, or Over Twenty Years at a Cost Not
to Exceed $111.3 Million
RECOMMENDATION
Staff and the Utilities Advisory Committee recommend that the Council:
1. Adopt a resolution approving a Power Purchase Agreement (PPA) with Ameresco San
Joaquin LLC, a Delaware limited liability company, for the acquisition of up to 52,000
MWh per year of energy either:
a. Over fifteen years ata cost not to exceed $88.7 million, including, if required, a
payment of up to $1.425 million for electric transmission interconnection costs; or
b. Over twenty years at a cost not to exceed $122.4 million, including, if required, a
payment of up to $1.425 million for electric transmission interconnection costs;
and
2. Adopt a resolution approving a PP A with Ameresco Crazy Horse LLC, a Delaware
limited liability company, for the acquisition of up to 52,000 MWh per year of energy
either:
a. Over fifteen years at a cost not to exceed $80.7 million, including, if required, a
payment of up to $1.425 million for electric transmission interconnection costs; or
b. Over twenty years at a cost not to exceed $111.3 million, including, if required, a
payment of up to $1.425 million for electric transmission interconnection costs;
and
3. Waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do
business with the City, as the Ameresco companies are not rated by credit agencies.
CMR: 198:10 Page lof32
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REPORT SUMMARY
At the March 16, 2010 meeting of the Council Finance Committee, staff recommended approval
of four PP As for renewable energy (landfill gas to electricity) that would have increased the
renewable energy fraction of the electric utility resource portfolio from 21% to 33% by 2015. In
addition, staff conveyed Ameresco'g request that the City expeditiously consider the PPAs, as
Ameresco needs to have signed PP As in order to qualifY for Federal stimulus funds.
The Finance Committee outlined several concerns with the recommendation, including staff's
failure to return to the Finance Committee with an evaluation of the long-term plans and policies
for acquisition of renewable energy and energy efficiency before presenting contracts to meet the
current policy goals, the lack of review by the UAC of the proposed contracts, the
creditworthiness of Ameresco as a counterparty, and the risk inherent in locking in prices for 20
years, during which time technological advances could lead to a reduction in prices for
renewable energy.
Staff informed Ameresco of the Finance Committee's comments to the originally negotiated
contracts and negotiated additional pricing and term options that addressed some of the issues
raised by the Finance COIlJlIlittee. The .A.mere~co e!ltities recoofirmea that there is a :illm:t
'timeline to act on the contracts before they commit their projects to others. Therefore, staff has
revised its proposals, eliminated the highest priced project, negotiated price reductions, and
negotiated PP As with terms of 12, 15 and 20 years. With the rejection of the highest-priced
project, Ameresco removed one of the three remaining projects for consideration by Palo Alto,
leaving two contracts for the City's consideration. In addition, Ameresco has expressed a strong
preference for execution of a PP A for the San Joaquin project. Therefore, the City can execute a
PPA relating to only the San Joaquin project, execute PP As relating to both the San Joaquin and
the Crazy Horse projects, or decline to execute PP As relating to the projects.
Staff recommends approval of either IS-year or 20-year term PPAs for both the San Joaquin and
Crazy Horse projects. Approval of these contracts, expected to cost in the aggregate up to
$169.4 million over 15 years, is expected to increase the amount of the electric portfolio derived
from renewable power by about 6.4% from about 22% to about 28%. This action would bring
the City closer to meeting the Council-approved goal to supply 33% of the City's elcctric needs
with renewable energy resources, yet leave room for additional renewable energy resources to be
sought from other renewable energy projects in the future.
Renewable Portfolio Standard Goals
In 2002, the Council adopted a renewable resource portfolio standard with the objective of
meeting 20 percent of the City's electrical load with new renewable resources by 2015, while
ensuring the retail rate impact does not exceed O.5¢/kWh on average, amounting to a premium of
approximately 5 percent of the average retail rate (CMR;398;02). This goal was established as
an update to the objectives and guidelines of the Long-term Electric Acquisition Plan (LEAP),
the policy guidance for management of the electric resource portfolio.
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, 30 percent by
CMR: 198;10 Page 2 of32
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2012 and 33 percent by 2015. The new target was to be achieved while maintaining the retail
rate impact measure ofO.5¢/kWh (CMR:158:07).
The relevant portion of the applicable LEAP Guideline 6 (Renewable Energy Supply) reads, as
follows:
Reduce electric portfolio dependence on fossil fuels by meeting at least
80% of City's long term energy needs from non-fossil and non-nuclear
supply.
A. Renewable Portfolio Standard: In addition to the voluntary program, the
City shall invest in new renewable resources to meet the City's
sustainability goals while ensuring that the retail rate impact does not
exceed 0.5 ¢IkWh on average.
B. Pursue a target level of new renewable purchases of20% of the expected
portfolio load by 2008 and move to a 30% target by 2012 and 33% by
2015. The contracts for investment in renewable resources shall not
exceed 30 years in term.
Consistent with state standards, staff uses California's definition of qualifying renewable
resources, which are defined as electric generating resources powered by energy sources limited
to wind, solar, biomass, landfill gas, geothermal, small (less than 30 MW) hydroelectric, ocean
wave, tidal and thermal energy, digester gas, municipal solid waste and fuel cells using
renewable fuels. In addition, the "new" in the RPS goal is interpreted as requiring RPS resources
to have an initial commercial operation dates after October 1, 2002, the date when the first RPS
goal was adopted by Council.
To conform to LEAP Guideline 6A -ensuring that the acquisition of new renewable resources
does not raise retail rates by more than 0.5 ¢IkWh on average -a rate impact calculation is made
at the time of commitment of each resource based on the total cost of the resource as compared
to the wholesale market price of non-renewable energy at the time that the contract is executed.
The impacts on rates of each resource are added together to determine if the rcsource being
added would drive the cmnulative retail rate impact above the 0.5 ¢/kWh upper limit. The limit
is converted into an annual premimn "budget" for qualifying renewables. For example, for
2009, the annual premium is calculated by multiplying the annual energy sales (1,000,000
MWhlyear) by the premium (0.5 ¢IkWh, or $5/M\Vh) to get $5.0 million/year.
Current Status of Renewable Resources in Electric Portfolio
Five Power Purchase Agreements (PPAs) for output as generated fromnew renewable resources
have been executed and energy is currently flowing to Palo Alto. An additional two PPAs have
been executed for resources that are under construction. The resources for all seven existing
PPAs are shown in Table 1 below.
CMR: 198:10 Page 3 of32
a e -XIS In£ enewa e T bilE' f R bl E C t ct S ner£y on ra
Date Contract Actuaior Annual
Supplier Technology Executed Estimated Energy
Online Date (GWh)
High Winds I Iberdrola Wind Nov. 2004 Dec. 2004 I 51.8
Shiloh
,
Iberdrola Wind Oct. 2005 June 2006 74.4
Santa Cruz
,
Ameresco Landfill Gas Nov. 2004 Feb. 2006 11.2
HalfMoon Bay Ameresco Landfill Gas Jan. 2005 Apr. 2009 40.8
Keller Canyon Ameresco Landfill Gas Aug. 2005 Aug. 2009 11.8
Subtotal-Operating 190.0
Butte County Ameresco Landfill Gas Nov. 2008 Sep.2011 16.5
Johnson Canyon Ameresco Landfill Gas Aug. 2009 Oct. 2011 11.2
Subtotal-Under Construction 27.7
Total-All Executed Contracts 217.7
Together, when all of the committed facilities reach commercial operating status, these resources
will provide about 21 % of Palo Alto's total energy supply needs as shown in Table 1 and Figure
Figure 1-Palo Alto's Renewable Resources
400,-~~~~~~~~~~~~~~~~~~~~~~~~--~~~-··········,
350
JOO .
250
RPSGoal:
30% (2012)
III
RPS Goal:
33% (2015)
III
21 Short-term
Renewables
DlJohnson
Canyon LFG
I1'l Butte County
LFG
RPSGoal:
20% (2008)
II
22% 22% 21% 21% • Keller Canyon
150
100
50
o
0% OOk
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Calendar Year
CMR: 198:10
LFG
o HaW Moon Bay
LFG
III Santa Cruz
LFG
• Shiloh Wind
I!IHigh Winds
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Note that the volumes in Figure I are actual deliveries through 2009 and estimated deliveries
after 2009. Energy deliveries from the wind energy contracts were lower than expected in 2009
due to a transmission line outage.
"Green Premium" Calculation
For each resource the levelized 1 cost impact ($!year) is calculated based on the energy cost plus
transmission charges, minus any system or local capacity value provided, and minus the
wholesale market price quote for similar shaped market (non-renewable energy or "brown
power") power plus transmission charges. The brown market value at the time of commitment to
the PP A or project is used as the baseline market from wbich the green premium for the PP A or
project is calculated. This methodology freezes the green premium for each project so that it
does not rise or fall with future fluctuations in the energy markets.
Table 2 below shows the amount of the green premium that has been used up ",ith the existing
seven PPAs. As shown, the earlier contracts that were executed in 2004 and 2005 were priced
very near the brovm energy market price. The last two contracts were priced significantly higher
than the brovm energy market price.
a e -T bl 2 G reen P remlUm or xIstm2 enewa ~ E" R bl E e nergy C ontracts
Date Annual Levelized Adjusted *IG Green
I reen Premium Contract Energy Project Cost Brown .P' ! remmm ($1000!yr Executed (GWh) (SlMWh) Market Cost ($lMWh)
'$/MWh) • )
• High Winds
Nov. 5l.8 57.60 55.0 2.56 132 2004
· Shiloh Wind Oct. 2005 74.4 62.95 69.5 (6.50) (484)
i Santa Cruz LFG Nov. 1l.2 62.32 59.3 2.97 33 2004
HalfMoon Bay Jan. 2005 ! 40.8 58.97 67.5 (8.55) (349) LFG
Keller Canyon LFG Aug. 11.8 70.88 83.9 (13.00) (154) 2005
• Butte COlmty LFG
Nov. 16.5 98.66 78.6 22.11 365 2008
• Johnson Canyon Aug. 11.2 98.66 67.3 56.35 633
i LFG 2009
Total-All Committed 217.7 176 Contracts
1 Levelizing is a process of taking nominal cash flows, discounting them to present value, summing the present
values, and amortizing the present value into [equal size repeating = how about "unifonn periodic" or "unifonn
monthly"?] payments like a mortgage. The discounting and the amortizing are both perfonned with the user's
discount rate or time value of money.
~--~----------------------------------------~----~.-CMR: 198:10 Page 5 of32
* Brown Market Costs are levelized across the project's contract period, and adjusted for
the comparison project's delivery shape, local and system capacity value, transmission
costs and losses,
Note that the Brown Market Cost does not include any future cost for emissions allowances.
These costs could be imposed starting in 2014. The cost for these allowances is highly uncertain
at this point. As part of the Climate Protection Plan (CPP) approved by the Council in December
2007, a greenhouse gas (GHG) adder of $20 per metric ton, escalating by 5% per year, is to be
incorporated in utility purchasing decisions. The relevant section of the CPP related to this
direction reads, as follows:
"Utilities will employ a $20/metric ton GHG adder in purchasing evaluation,
increasing by 5% per year starting in 2008. The adder will be applied to purchases
that are not mandated or otherwise undertaken to meet other policy directives, and
shall be utilized until allowance allocations, cap and trade, or other regulations are
implemented that internalize the cost of GHG in utility operations. The proposed
adder reflects the financial risk of future emissions regulation, not an estimate of
environmental costs."
The impact of the $20/ton GHG adder would be to add about $1O/MWh onto the levelized brown
energy market prices shown in the Tahle 2.
Council Action in August 2009
In July 2009, when staff requested that the Finance Committee recommend that the Council
approve the PPA with Ameresco Johnson Canyon landfill (CMR: 305:09), the Finance
Committee discussed the rising cost of renewable energy and 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.
In August 2009, the Council agreed with the FinanceCommittee's recommendation and directed
staff to work with the UAC to re-evaluate the policies and plans related to the acquisition of
renewable energy and energy efficiency and report back to the Finance Committee (CMR:
342:09). .
Following this directive, in November 2009, staff discussed with the UAC the plan to calculate
the energy efficiency potential, which is the first step in completing the update to the ten-year
Electric Energy Efficiency (EE) Plan. The UAC agreed with staff's recommendation to value
energy efficiency at least as highly as renewable energy. Staff presented the UAC with the draft
2010 10-year Electric EE Plan for its review in February 2010 and with the final 2010 EE Plan in
March 2010 for recommendation. The plan is now scheduled for Finance Committee review on
April 6, 2010 and Council action in early May 2010. The plan is required to be filed with the
California Energy Commission in May 2010.
Staff is performing an internal evaluation of the gas and electric portfolio management plans. In
August 2010, the UAC is scheduled to review potential changes to the objectives and guidelines
of the Long-term Electric Acquisition Plan (LEAP) and the objectives and guidelines of the Gas
CMR: 198:10 Page 6 of32
Utility Long-tenn Plan (GULP). The current LEAP guidelines include direction related to the
pursuit of renewable energy supplies and the eval uation and funding of energy efficiency. Staff
would then take recommendations from the UAC on these plans and their underlying policies to
the Finance Committee and Council.
2010 Ten-Year Electric Energy Efficiency (Em Plan
In March 2010, the UAC unanimously recommended Council approve the proposed 2010 Ten
Year Electric EE Plan. The 2010 EE Plan doubles the energy savings goals in the 2007 EE Plan.
Figure 2 below shows the actual electric load since 1990 and the load forecast until 2020 without
additional EE, with the 2007 EE Plan goals and with the 2010 EE Plan goals. The load forecast
includes the expected increased load due to the construction of the Stanford Hospital expansion
project.
~
~
:::i
~
""C
I!!
0
...J
Qi
::> c: c: «
Figure 2 -Electric Consumption Forecast and Planned Energy Efficiency
Historic and Projected Annual Electric Loads
II ilpact of Erler 9y Efficiellcy PI 091 allis 011 Load For ecast
1,400,000
· ,
1,200,000
1,000,000
· , · ,
: · , · ,
.../ ~ , , , , , , -' , -: .. -... -.. --_ ... t---: a ....,.-t k--:;j ",,,,,,,,,,-k.1. =+1 :
-----~~ ....
800,000 --Historic load + Forecast with 2010 EE plan goals
-.. -Forecast with 2007 EE Plan goals
600,000 "",. ;".
-+ -Forecast with no additional EE r' "". ~'"
400,000 ""
200,000
1990 1995 2000 2005 2010 2015 202C
The citywide electric load in 2020 is expected to be about 1,087 GWhlyear with no additional
energy efficiency. Assuming that the goals in the 2007 EE Plan are achieved, the 2020 load
would be about 1,041 GWhlyear. If the goals in the proposed 2010 EE Plan are achieved, the
2020 load would be about 1,001 GWhlyear, a load reduction of about 86 GWhlyear.
CMR: 198:10 Page 7 of32
Given this load forecast, meeting a 33% RPS goal in 2020 would require about 359 GWhlyear
with no additional energy efficiency. If the goals in the proposed 2010 EE Plan are achieved, a
33% RPS goal in 2020 would require about 330 GWh/year. Therefore, meeting the 2010 EE
Plan goals would reduce by 29 GWh/year the amount of renewable energy required to meet a
33% RPS goal in 2020. In addition, meeting the 2010 EE Plan goals reduces the amount of other
(non-renewable) power purchases by 57 GWhlyear.
The Market for Renewable Resources in California and the West
With the arrival of RPS goals for investor owned utilities (IOUs) and the likelihood of still
higher RPS goals as a result of new state and federal legislation, the developers of renewable
power have turned even more bullish on the pricing prospects of their products. Legislation
under consideration that establishes higher RPS targets, carbon taxes, or carbon cap-and-trade
mechanisms drives the pricing bullishness of renewable energy project developers.
In the meantime, the California Public Utilities Commission's (CPUC) "Market Price Referent"
(MPR) calculation has impacted renewable energy prices. The MPR is published by the CPUC
annually and consists of prices above which renewable projects proposed to IOUs would face
additional CPUC scrutiny. Therefore, the MPR appears to act as a renewable energy price floor
fer Palo AIte, as proposers !mew they ean get at least.tfie MPH: if they oifer the projeet tel tfie
IOUs. For 20-year base load power contracts with delivery starting in 2013 the current levelized
MPR is $109/MWh, and for 15-year contracts, the current levelized MPR is S1021MWh. The
MPR is calculated as the cost of buying and operating a combined cycle gas fired power plant in
California as well as buying carbon dioxide (C02) offsets for its emissions.
It is not surprising that many suppliers have an interest in waiting for higher demand stemming
from legislative requirements since many believe that future prices for renewable power will be
higher and don't want to commit now to current prices. Staff has experience with some
proposers which are unable or unwilling to follow through on proposed prices after the City has
received responses to requests for proposals. Developers have also negotiated with one potential
buyer and then, using that experience, switched to a second buyer for final commitment.
Palo Alto's Current Efforts to Acquire New Renewable Energy Resources
Palo Alto continues to pursue renewable resources to meet its RPS goal through four venues:
J. Projects brought to the Northern California Power Agency (NCPA) general membership,
such as the Western GeoPower project;
2. Projects considered as enhancements to the existing Calaveras hydroelectric project;
3. Projects submitted to the NCP A Green Power Project (NGPP) via its RFPs and
unsolicited proposals, as well as development opportunities where NGPP would develop
renewable energy such as a landfill gas fired generator; and
4. Palo Alto's RFPs, including the latest one, which drew 43 project proposals.
The status of efforts in the four venues is described below:
1. NCP A general membership projects:
In February 2008, the Council approved a PPA with Western GeoPower Incorporated (WGI)
through an NCPA Third Phase Agreement for the purchase of up to 5 average megawatts of
CMR: 198:10 Page 8 of32
energy at a price cap of $98/megawatt-hour (CMR 141:08). The third phase agreement was
executed on May 28, 2008 by NCPA. The financial crisis of 2008 undermined project financing
and WGI informed NCPA that the contract price must increase to $117 IMWh for the project to
be viable. The project may be pursued by a new developer or by NCP A. If the project is
revived, Palo Alto may be able to subscribe to up to 52 GWh of energy from the project.
NCP A is exploring additional projects at this time and staff is engaged in the evaluation of any
projects that may surface from this venue.
2. Calaveras hydroelectric project enhancements:
NCPA is considering pursuing the 300 kW McKays Point microturbine project, which could
provide 0.4 GWh/year to Palo Alto, and the Beaver Creek penstock turbine project on two pipes
to divert water from the currently operating simple energy dissipation valves and into small
turbines for renewable electrical power production, which could provide Palo Alto 1.1
GWh/year. Other enhancements to the Calaveras project appear less attractive at this time. Palo
Alto's share of these projects would be approximately 1.5 GWh/year and may materialize by
2020.
3. NCPA Creel! Pewel' pj'ejeet (NGPP):
NCPA continues to negotiate and work toward contracts with several proposers, but no PPA has
yet been executed in the five years NGPP has sought renewable energy. NGPP has the weakness
of a variety ofNCP A member appetites occasionally resulting in some, but not enough, members
interested in a project at a certain price. In other cases proposers got close to executing
agreements before choosing other, more accommodating, buyers. Also just as with Palo Alto's
RFP process, some projects and companies do not follow through after proposing and do not
result in a contract at the offered price.
Currently, there are several NGPP projects under negotiation. They are summarized in Table 3
below.
Additional NGPP development opportunity projects not yet subscribed by members include
several solar projects, a wind project and a project to clean dairy manure methane to pipeline
quality gas are being evaluated for further consideration and negotiation of PP As.
4. Palo Alto's Requests for Proposals (RFPs):
After an inability to secure a PP A after negotiations with two proposers from the 2007 RFP, Palo
Alto issued an RFP in March 2009 that resulted in 16 project proposals being submitted. Of the
CMR: 198:10 Page 9 of32
16 proposals submitted, there were three wind proposals, two biomass proposals (including
landfill gas projects), two geothermal projects, eight solar projects, and one small hydro project.
One of the projects solicited from this RFP resulted in a PPA that Council approved in August
2009 with the Ameresco Johnson Canyon landfill.
The City issued its fifth RFP for electric power supplies from renewable resources in October
2009. Forty-two project proposals were received by the RFP closing date of November 10,
2009. Staff evaluated the proposals on the basis of quality and completeness of proposal,
bidders' qualifications and financial stability, project viability, compatibility with City's existing
portfolio, and total cost of proposal and value to City. The four highest ranked proposals were
with Ameresco for landfill gas-to-energy projects. Other proposals were more expensive than
those from Ameresco or were not realistic.
Ameresco is interested in starting construction on all four projects by the end of 2010 to qualify
for Federal stimulus funds. Ameresco has stated that its positive experience in executing five
renewable PPAs with Palo Alto since 2004, encouraged it to propose these projects to Palo Alto
in hopes of negotiating contracts in time to meet construction deadlines. Ameresco has cited that
this is the reason for its relatively low-priced proposals to Palo Alto.
The proposals received are shown in Figure 3 below, a scatter plot showing the proposals' green
premium, in $/MWh over brown power, and the expected output from the projects in GWh/year.
CMR: 198:10 Page 10 of32
Figure 3 -Fall 2009 Renewable RFP Results: Green Premium Versus Project Size
$140 ,-------~----------------------~----------------------------__,
$120
:2 $100
1
E
" 's $80 ........ .
e
"-
~
• ••
•
• •
<.'l $60 Anie, .. co Averi.. . .•
• '.
$40
•
• •
•
••
•
•
•
Ameresco
\.irazy .Morse ':~vena
Combined • Ameresco Crilzy Hors~ • Ameresco San Joaquin • Ameresco Forward
•
•
. ...... .
• .......•
•
•
• •
$20 +-------~------_+------~~------~------~------~------~------~
o 10 20 30 40 50 60 70 80
Project Size (GWh/year)
Each proposal received is shown in Figure 2 by project size and green premium. The proposals
with the lowest prices were three Ameresco landfill gas projects: Forward, San Joaquin, and
Crazy Horse. A combined PPA with Ameresco's Crazy Horse and Avenal landfill gas projects
was also a relatively low cost proposal. Table 4 below summarizes the proposals received.
CMR: 198:10 Page 11 of32
The projects (other than the Arneresco projects that were considered) are included in Table 5
below.
Green premium too costs
Landfill Gas 35 119 47 Yes interconnection and emissions
controls would be
SolarPV 36 123 47 No Green premium too
to be
Landfill Gas 11 120 50 No Green premium too high
Landfill Gas 11 135 59 Yes Green premium too high
Green premium too high;
Wind 77 106 76 No Transmission challenges; Wind is
Solar PV 75 146 95 No Green premium too high
RPS Progress by Other Agencies
Figure 4 below shows the fraction of California-eligible renewable resources NCP A member
agencies, Sacramento Municipal Utilities Commission (SMUD), Southern California Edison
(SCE), and PG&E have achieved in 2008 and 2009.
CMR: 198:10 Page 120f32
Figure 4-Renewables, expressed as a fraction of annual retail sales, for NCP A Members
RPS Status in 2008 and 2009
70% T
________________ ~C~al~iro~r~ni~a~~~R~e~new~a~b~le~s ______________________ -,
60%+--------------------------------------------------
40%+-~~~~~~~~~~~~~~~~~~~~~~~---
30%+-·········~~~ -~~~~~~~~~~~~~~~--
20%+·--~~·········~~~~~~~~~~~=__=~
10% +---
0%
Finance Committee's Direction
On March 16,2010, staff presented its recommendation to the Finance Committee, namely, to
recommend that the Council adopt resolutions relating to the approval and execution of four
PPAs with four Ameresco LLCs for renewable energy from projects that convert landfill gas to
energy with Ameresco (CMR: 166:10).
The Finance Committee did not support the recommendation for several reasons, including the
following:
• The Finance Committee reviewed the last proposed renewable energy PPA in July 2009,
which was also with Ameresco, and requested that staff return with a review of policy and
plans related to the acquisition of renewable energy and energy efficiency. Staff has not yet
returned to the Finance Committee in response to this direction.
• The term for the proposed PPAs was 20 years and the pricing terms would lock-in pricing for
the 20-year terms of the PPAs. The Finance Committee expressed concern that technology
advancements, especially given the recent focus on green tech and Federal stimulus funding,
would result in lower cost renewables in the future, leaving these contracts higher priced than
the alternatives and keeping Palo Alto's costs and rates high. Another concern is that
executing all four PP As would tie up all remaining renewable energy needs at the same time
at similar prices, while a smaller amount would be less risky.
CMR: 198:10 Page 13 of32 .
• All four proposed PP As were with Ameresco, with which the City has already executed five
PPAs for landfill gas-to-energy projects. The "concentration risk" of having nine contracts
with the same company would result in Ameresco comprising 64% of the City's renewable
energy portfolio and 21 % of the entire electric energy supplies, the second largest energy
supplier behind the Western Area Power Administration. In addition, the Finance Committee
asked for information on Palo Alto's share of Ameresco' s total renewable business.
• The financial strength, or "credit risk", of the Ameresco holding company was questioned, as
it is a rapidly growing company with high debt levels. Staff was asked to return with updated
financial information for Ameresco when audited financial information for 2009 becomes
available (expected in about two months).
DISCUSSION
The concerns expressed by the Finance Committee were considered by staff. Staff has modified
its proposal and now requests the UAC's review and recommendation on staffs latest
recommendation .. Staff also provides additional information responsive, in part, to some of the
Concerns raised by the Finance Committee. In the interest of time, and because of the temporal
nature of Ameresco's proposal to sell green power to Palo Alto, staff recommends a reduced
purchase commitment.
Staff's response to the concerns raised by the Finance Committee on March 16,2010 follows.
Review of Energy Acquisition Policies and Plans
The Council's August 2009 direction was to "work with the Utilities Advisory Commission and
then report back to the Finance Committee with a re-examination of the policies and goals that
are being used in the alternate energy program, including the energy efficiency plans and the
electric acquisition policies and plans" (CMR: 3452:09). Staff interpreted that direction as a
requirement to take policies and plans relating to the acquisition of renewable energy and energy
efficiency back to the UAC and the Finance Committee, and has incorporated that direction in its
plans and schedules.
At the UAC's November 2009 meeting, staff presented a proposal for the evaluation of energy
efficiency to be used in the update to the ten-year Electric Energy Efficiency (EE) Plan. At that
time, the UAC agreed with staff's recommendation to use the price of renewable energy as the
avoided cost to evaluate energy efficiency measures. This would ensure that staff was valuing
energy efficiency at least as highly as renewable energy. In February 2010, staff presented the
UAC with the draft 2010 10-year Electric EE Plan for its review. At that meeting, the UAC
generally agreed with staff on the goals and costs of the new EE Plan. At its March 9, 2010
meeting, the UAC voted unanimously to recommend that the Council approve the proposed 2010
lO-year Electric Plan. The Plan is now scheduled for the Finance Committee's review on
April 6, 2010 and the Council will be requires to take action in May 2010. A Hnal adopted Plan
must be t1led with the California Energy Commission in May 2010.
Staff has scheduled a review of the energy acquisition plans for the gas and electric utilities with
the UAC in August 2010. At that time, the UAC will review potential changes to the objectives
and guidelines of the Long-term Electric Acquisition Plan (LEAP) and the objectives and
guidelines of the Gas Utility Long-term Plan (GULP). The current LEAP guidelines include
CMR: 198:10 Page 14 of32
direction related to the pursuit of renewable energy supplies and the evaluation and funding of
energy efficiency. Staff would then take the recommendations of the UAC on these plans and
their underlying policies to the Finance Committee and the Council for approval.
Time Sensitivity of Proposed PP As
After the March 16, 2010 Finance Committee meeting, staff contacted Ameresco to ascertain
whether Ameresco would hold open the offers contained in the PP As until such time as the
Finance Committee can review the plans and policies related to the acquisition of renewable
energy and energy efficiency. Ameresco responded that they intend to execute PP As sooner than
the time afforded for that review and that, if Palo Alto needed more time, Ameresco would prefer
to commence negotiations with other counterparties for the four projects in question. Ameresco
and other utilities both have indicated that the offers and expressions of interest have started.
Technology Risk and Risk of Locking in Prices for 20 Years
Following the March 16 Finance Committee meeting, staff negotiated different contract terms
with Ameresco in addition to the originally proposed 20-year terms. Ameresco has provided
prices for the PPAs for terms of 12, 15 and 20 years. Ameresco declined to offer a PPA with a
10-year term.
Staff reconsidered the advisability of its original recommendation to execute all four PP As at the
same time. Staffhas revised the recommendation and now proposes to execute two PPAs and to
reduce the terms for those PPAs. Descriptions of the pricing and terms for the revised PPAs are
provided bclow under the "New Proposal" section below.
Concentration Risk with Ameresco
. Even with the revised proposed PP As, Ameresco would still provide a substantial fraction of
Palo Alto's energy supplies. The City has already executed five PPAs with Ameresco entities
for landfill gas-to-energy (LFGTE) projects, three of which are operational and delivering
energy. If the two proposed PPAs are executed, it would have seven PPAs with Ameresco for
LFGTE projects. Table 6 below provides a summary of the energy supplies for 2015 in an
average hydrologic year. Ameresco currently provides about 8.8% of the City's total needs and,
if the two proposed PPAs are executed, would provide about 15% of the City's total needs.
Ameresco currently operates thirtecn LFGTE plants, including four in California. Of the four
operating plants in California, Palo Alto has PPAs with three (Santa Cruz, Half Moon Bay, and
Keller Canyon). For these three projects, Palo Alto and Alameda sharc the output eqUally.
CMR: 198:10 Page 15 of32
Ameresco has an additional three LFGTE plants under construction, including one in California.
Ameresco also has four LFGTE plants that are in the design and permitting stage, including two
in California with which Palo Alto has PPAs (Butte County and Johnson Canyon). These plants
are expected to be in commercial operation in 2011. In summary, Palo Alto has already
committed to five of Ameresco's seven LFGTE plants in California that are operating, under
construction, or in the planning/permitting stages. This information is summarized in Table 7
below.
Operating
Ameresco also has four other biogas and biomass to electric plants operating (including three
cogeneration plants) and a ll11wber of other JalldfiJJ gas c-OJJectjOll systems and pipelines to
boilers that directly burn the gas.
Ameresco's Credit Risk
Ameresco is a relatively small company and does not have a credit rating by Moody's Investor
Services or Standard and Poor's. The City's Energy Risk Manager provided a presentation on
the eredit status of Ameresco to the Finanee Committee at its Mareh 16, 2010 meeting.
Ameresco's 2007 and 2008 audited financial reports were analyzed to determine an estimated
defuult frequency (EDF) rate that raised concerns about the likelihood of Ameresco defaulting on
its obligations to deliver the energy agreed to in a PP A.
However, the City has several layers of protection against such a default:
l. First, all the existing and proposed PP As with Ameresco are Limited Liability
Corporations (LLCs) as the project lenders require each project to stand alone to protect
any potential problem projects from harming another. The project lenders require that all
of the physical plant assets, contract~, and equity contribution by Ameresco reside within
each project entity. Therefore, a default by another project should not precipitate a
default by either the San Joaquin or the Crazy Horse LLC's.
2. Second, the PP As require that Palo Alto pay only for the energy that is actually delivcred.
If Ameresco doesn't deliver the energy, then Palo Alto does not pay. The result of this
would be that Palo Alto would need to purchase replacement energy. If Palo Alto wanted
to replace the energy needed with renewable energy, it could take time to find
replacement renewable energy and the prices could be higher than the contracted price.
3. Third, if Ameresco defaults due to nonperformance (it is not delivering the energy
produced by the projects), the project lenders have the right to step in and assume control
of the power plants from Ameresco. Thus, the project lenders have an incentive to make
C.MR: 198:10 Page 160f32
sure that the projects perfonn (and the City gets its energy) so that the City pays for the
power delivered and the debt can eventually be paid off. The projeet lenders must honor
the PPA terms and conditions with Palo Alto.
4. Fourth, under the PPAs, if both Ameresco and its project lenders fail to meet certain
perfonnance standards, then the City has the right to step in and assume operation of the
power plant if the City feels it is worthwhile to do so. However, if lower cost renewable
resources were available in the market, Palo Alto would most likely acquire them rather
than step in to operate the Ameresco plant.
These four protections are important in minimizing the risk to the City. However, staff
recognizes the concern that every Ameresco LLC entity that the City has contracted with is
solely controlled by Ameresco, Inc. Ameresco, Inc. and each of the LLCs are one and the same
entity. If Amereseo, Inc. should fail in some endeavor wholly unrelated to any of thc LLCs with
whom the City may contract, the real probability cxists that such a failure will directly affect
each and every LLC with the City of Palo Alto, precisely because Ameresco, Inc. is the sole
member of each LLC.
Dnde! these conditions, the p:tactiealtisk with Amelesco as a eounterpllrty is that Palo Alte dt'les
not receive the energy promised under the PPAs and it must find alternate replaeement energy.
This would just return Palo Alto to the position it is in todliy -needing to shop for renewable
energy to meet its goals.
New Proposal
After receiving the feedback from the Finance Committee on March 16,2010, staff conducted
further negotiations with Amereseo and reeonsidered Amereseo's updated proposals.
The highest priced PPA originally proposed was for the Avenal Landfill project, the smallest
project of the four. As Ameresco did not offer to lower the price for that project, staff declined
further consideration of this project due to the cost. Amereseo stated that, if A venal was dropped
by Palo Alto, it would remove the Forward Landfill project from further consideration by Palo
Alto as Ameresco plans to bundle those two projects together for consideration by other buyers.
The two remaining projects -the San Joaquin and Crazy Horse projects -are discussed below
with the options available to the City.
Ameresco has also stipulated that Palo Alto can choose to execute (a) the San Joaquin project's
PPA or (b) both the San Joaquin aod Crazy Horse projects'PPAs. Ameresco is not offering the
option to execute only the Crazy Horse project's PP A. Of course, choosing not to execute both
PP As is also an option.
San Joaquin Landfill
The San Joaquin Landfill project is expected to be a 4.3 megawatt (MW) project at the San
Joaquin Landfill operated by San Joaquin County in Linden, California. The landfill has been in
operation since 1966 and the County boasts a 60% waste diversion rate toward recycling and
eomposting. Ameresco has site development rights and a gas purchase agreement in place with
the County. The 4.3 MW plant is expected to produce 32 GWh/year. The plant may be sized up
CMR: 198:10 Page 17 of 32
to 6.2 MW, a size that could produce a maximum output of 52 GWhlycar. The plant may
provide local capacity bcncfits, but the project was evaluated as if it would not have this value
since it may not be realized.
The original proposal for the San Joaquin Landfill project was for a 20-year PPA with first-year
pricing of $93.33/MWh (9.333 ¢/kWh) escalating at 1.5% pcr ycar. If emissions controls are
required on the San Joaquin project, the City would pay a cost proportionate "rate adder." If
emission controls are required, the rate adder is $0.601MWh plus $0.55/MWh for each $100,000
of verified emission controls expense that Ameresco incurs. The first-year rate adder is capped
at $1 0.0 1 IMWh and would escalate at 1.5% per year. This formula allows the City to benefit if
the cost of emissions controls equipment is less than the maximum cost anticipated. However, if
the cost of emissions controls equipment is greater than the maximum cost anticipated in the
formula, Ameresco can request that Palo Alto pay the additional cost. If Palo Alto does not
agree to pay that cost, then Ameresco can cancel the contract at that time.
In addition, a prepayment for the interconnection charges would be required at a cost of 1.5 times
the cost above $300,000 up to a maximum prepayment amount of $1.425 million. If the
interconnection costs are above $1.25 million, Ameresco has the right to terminate the
agreement. At the same time Palo Alto and Amcresco could negotiate additional: leimbursement
to reestablish the mutual attractiveness of the contract. ]ne price structure in the original
proposal is as shown in Table 8 below.
Table 8 -Original Proposal
Year Prices and ra;Y-l'lne'aa
Ameresco provided revised pricing for San Joaquin Landfill PPAs of20-and IS-year terms. The
new pricing is $21MWh lower than the original pricing. Pricing for a I5-year PPA is the same as
for a 20-year PP A. The rate adder for emissions controls, if required, would be the same as in
the original proposal. The revised pricing is summarized in Table 9 below for the San Joaquin
Landfill PPAs of 20-and IS-year terms.
CMR: 198:10 Page 18 of32
Table 9 -Revised Proposal
~~!!!!.Landfill First-Year Prices for 15-and :lII_v .... ,.
Ameresco also provided pricing for a 12-year PPA and declined to offer a lO-year term. The
pricing for the 12-year PPA is substantially higher ($11.08IMWH higher) than for the 15-or 20-
year terms. PriGiRg is sllmmari:!:ed ill Table 10 beio''>lfur iL San JoaqIJill Lalldfill ppA with a ]2·
year term.
Table 10 -Revised Proposal
Jo:aqllin Landfill First-Year Prices for u-vellr
Due to the increased prices for a I2-year PPA, staff does not recommend that option. For both a
20-year and a IS-year PPA, it is cheaper to prepay for the interconnection costs than pay a higher
energy price for IS or 20 years. If the City makes a prepayment for the interconnection costs and
Ameresco doesn't complete the plant, Amcrcsco must repay the City the money that it prepaid.
Staff recommends the Council approves a IS-year or a 20-year term PP A with the San Joaquin
Landfill project and commit to prepaying the costs of the interconnection equipment if they are
higher than $300,000 up to a maximlnn prepayment amount of $1.425 million. Theftrst-year
CMR: 198:10 Page 190f32
price for the recommended PP A for the San Joaquin project is, therefore, $91.33IMWh plus any
required rate adder if emissions controls equipment is required.
Crazy Horse Landfill
The Crazy Horse Landfill projeet is a 4.3 MW project at the Crazy Horse Canyon Landfill
operated by the Salinas Valley Solid Waste Authority (SVSWA) in Salinas, California.
Ameresco has site development rights and has negotiated a gas purchase agreement with the
SVSW A. Ameresco does not expect emission controls equipment will be required at the Crazy
Horse project, so there is no rate adder included. The 4.3 MW Crazy Horse Landfill plant is
expeeted to produee 32 GWh/ year. The plant size could range from 1.6 MW to 6.2 MW. If
sized at the maximum 6.2 MW, the maximum output that the plant could generate is 52
GWh/year. The plant would not provide local capacity benefits.
The original proposal for the Crazy Horse Landfill project was for a 20-year PPA with pricing
dependent upon the cost of interconnection and whether or not the City also committed to the
Avenal Landfill project as shown in Table 11 below. Rates would escalate at 1.5% per year.
Ameresco provided revised pricing for Crazy Horse Landfill PPAs of 20-and 15-year terms as
shown in Table 6 below. The new pricing is $41MWh lower than the original pricing. Pricing
for a 15-year PPA is the same as for a 20-year PPA. The revised prieing and tenn proposals are
summarized in Table 12 below for Crazy Horse Landfill PPAs of20-and 15-year terms.
Table 12 -Revised Proposal
r<_ •• ~. Horse Landfill First-Year Priees for 15-and :.l:u·,vellr
CMR: 198:10 Page 20 of32
Ameresco also provided pricing for a 12-year PPA for the Crazy Horse project, but declined to
offer a 10-year term. The pricing for the 12-year PPA is higher ($7IMWH higher) than for the
15-or 20-year terms. Pricing is summarized in Table 13 below fora Crazy Horse Landfill PPA
with a 12 -year term.
Table 13 -Revised Proposal
Due to the inereased prices for a 12-year PPA, staff does not recommend that option. For both a
2() y .. ar ana a 1 $ )'ilar 1>RA, it is ~aper iG pl'epay fur the imerc=:tioo Cg~t~ than pay a bigher
energy price for 15 or 20 years. As with the San Joaquin PP A, if the City makes a prepayment
for the interconnection costs and Ameresco doesn't complete the plant, Ameresco must repay the
City the money that it prepaid.
Staff recommends the Council approves a IS-year or a 20-ycar term PPA with the Crazy Horse
Landfill project and commit to prepaying the costs of the interconnection equipment if they are
higher than $300,000 up to a maximum prcpayment amount of $1.425 million. The first-year
price for the recommended PPA for the Crazy Horse project is, therefore, $92.0S/MWh. Note
that if the City wishes to execute a PPA for the Crazy Horse project, it must also commit to the
San Joaquin project. Staff recommends approval of PP As relating to both the Crazy Horse and
the San Joaquin projects.
Summary of the Two PPAs Still Under Consideration
Table 14 below summarizes the information provided above for the two projects for the most
likely size of the project and assuming a "capacity factor" of 85%, which is about the capacity
factor that the existing Ameresco projects have achieved. Capacity factor is the ratio of the
annual energy produced divided by the maximum energy that could be produced running the
plant at full rated capacity every hour of the year. The costs shown in Table 9 assume that the
interconnection cost is $1.25 million and that the highcst anticipated cost for emissions control
equipment is required for San Joaquin. The table shows the first-year cost, the full-term cost,
and the annual renewable premium for each PP A, for terms of 12, IS, and 20 years, and for
whether the interconnection costs are paid in advance or embedded in the energy pricing.
CMR: 198:10 Page 21 of32
San
Joaquin
Crazy
Horse
San
Joaquin
Crazy
Table 14 -Summary of the Options for the Two Projects
32
32
32
Staff recommends IS-year or 20-year term PPAs for both the San Joaquin and the Crazy Horse
projects with a prepayment for interconnection equipment costs, if required.
Execution of the two proposed PPAs would add about 6.4% of the City's total electric supply
needs from new renewable energy sources. As existing renewable energy PPAs will account for
about 21.8% of the City's total electric needs when all plants are operational, these new PP As
will result in an RPS of about 28% in 2013, when the projects are expected to begin generating
energy, assuming expected capacity factors of 85%. With a capacity factor of 95%, plant output
would incrcase to 72 GWhlyear, with a resulting RPS of29% in 2013.
Table 15 below summarizes the information for the proposed PPAs for the landfill gas-to-energy
renewable energy projects if the likely plant size were installed for both a IS-year and a 20-year
term.
CMR: 198:10 Page 22 of 32
Table 15 -Summary of the Two Proposed PPAs
Table 15 shows that the aggregate cost of the grecn premiums for the two proposed PP As is
expected to be about $2.3 million/year starting in 2013, when the projects are expected to be in
commercial operation. The green cost premiums for the two PP As result in a retail rate impact
of about 0.23¢IkWh. The existing rene\\.'able energy PPAs together have required a cost
premium over brown power of about 0.0 18¢/kWh so the total renewable premium including the
existing and the proposed new PPAs results in a retail rate impact of about 0.25¢IkWh to raise
the R.T)8 fr6ffi 22% to aaol:lt 28% of the eleetl'ie load. MewIWeI', it must be netee that tBe pr1Ges
and renewable premiums shown here assume the highest price under the contracts (emissions
controls equipment are required and PO&E's interconnection costs are high), but assumes the
expected generator plant size and energy production. Therefore, the actual premium is expected
to be below the stated retail rate impact.
Table 16 below summarizes the information for the proposed PPAs if the maximum plant size
for each is installed. As these plant sizes are possible, though unlikely, these costs are used for
the maximum not-to-exceed amounts in the PPAs for both a IS-year and a20-year term.
Table 16 -Summary ofthe Two Proposed PPAs
M!!~!'!!! Plant ~I!&
Table 16 shows that the maximum aggregate cost of the green premiums for the two proposed
PPAs is expected to be about $3.7 million/year starting in 2013, if both projects are sized at their
maximum sizes and if the plants operate 95% of the time. The green cost premiums for the two
PPAs for the maximum sized plants result in a retail rate impact of about 0.37¢IkWh. The
existing renewable energy PPAs together have required a cost premium over brown power of
about 0.018¢IkWh, so the total maximum renewable premium, including the existing and the
CMR: 198:10 Page 23 of32
proposed new PP As at maximum plant sizing, would result in a retail rate impact of about
0.38¢/kWh. Thiswould raise the RPS from 22% to about 32 % of the electric load.
Integration v.ith the 10-year Electric Energy Efficiency Pian
The citywide electric load in 2015 and in 2020 is expected to be about 1,008 GWhlyear and
1,001 GVv11lyear, respectively, assuming that the energy efficiency goals in the 2010 EE Plan are
achieved. Given this load forecast, meeting a 33% RPS goal in 2020 would require about 330
GWhlyear.
Existing renewable resources provide about 218 GWhlyear of energy, or an RPS of about 21.8%
in 2020. If the two proposed PPAs were executed, the projects are expected to provide an
additional 64 GWhlyear of renewable energy, increasing the RPS to about 28.2% in 2020. If
both projects were built to their maximum sizes, they would provide about 104 GWhlyear of
renewable energy, resulting in an RPS of about 32.2% in 2020.
Palo Alto's Renewable Resource Portfolio with the Recommended PPAs
With the recommended PPAs related to the San Joaquin and Crazy Horse land fill projects, Palo
Alto's renewable resources are expected to inerease to 28.2% in 2020. Figure 5 below illustrates
tire ieirewable ICSOtllccS ill the pOltfolio jneltld:i:ng the t.,'O recommended PPAs with 15 yef!!'
terms.
CMR: 198:10 Page 24 of32
Figure S -Palo Alto's Renewable Resources with Recommended IS-Year PPAs
400,-----------------------~~~···········----------------_,
350
300
250
...
~ ~ 200
150
50
o
2005
RPSGoal:
33%(2q1~)
RPSGoal:
20% (2008)
RPS Goal:
30% (2012)
lilt
•...........
2010
•
2015
I!I San Joaquin+Crazy Horse lFG
Ii:lShort-term Renewables
!iJJohnson Canyon lFG
&lI Butte County lFG
• Keller Canyon lFG
....................... ..... .. ... 1 0 Half Moon Bay lFG
2020 2025
III Santa Cruz lFG
• Shiloh Wind
IiiIHighWinds
2030 2035
Figure 6 below illustrates the renewable resources in the portfolio including the two
recommended PP As with 20-year terms.
CMR: 198:10 Page 25 of32
Figure 6 -Palo Altn's Renewable Resources with Recommended 20-Year PPAs
400~------------------~------~==========~
350
300
250
.... <-~ 200
(!)
150
100
50
o
2005
RPSGoal:
. ··33"N12015)
RPSGoal: III .
30% (2012)
RPSGoal:
20% (2008)
III
2010
III
2015 2020 2025
iii San Joaquin + Crazy Horse LFG
!:I Short-term Renewable.
t!i Johnson Canyon LFG
III Butte County LFG
III Keller Canyon LFG
Cl Ha~ Moon Bay LFG
II Santa Cruz LFG
III Shiloh Wind
Winds
2030 2035
As shovm in Figures 5 and 6, the tenns for the existing resources expire at varying times over the
next 25 years so that new resources will need to be found to continue to meet the RPS goals in
the future.
Table 17 below shows a summary of the infonnation for the current and the proposed PP As
including the levelized price, adjusted brov.'ll market cost, and green premium. For the proposed
projects, the expected size of the project is used.
CMR: 198:10 Page 26 of32
Table 17 -Summary of Current and Proposed Renewable Energy Supplies
Delivery
Begins
With 20-Year Terms
Pro.leet Price
123.61 $
Total Committed Green
Premium:
~~=P.=~~~
281.7 Total Green Premium with
Two New Projects:
How Green are Landfill-Gas-to-Energy (LFOTE) Projects?
Concerns have been raised with respect to the "greenness" of LFOTE projects. One concern that
remains is what will be the greenhouse gas (OHO) emission trade-off between burning landfill
methane to generate electricity and burning natural gas to generate electricity. Another concern
is that there could be an incentive to place recyclable and compostable materials in a landfill to
provide future methane fuel for electricity generation rather than diverting those materials for
reuse.
Regarding the OHO emissions issue, a landfill gas (LFO) fired engine generator set emits the
same amount of C02 that a landfill gas flare would emit in order to bum the LFO. Therefore,
the engine generator set emits no additional C02. LFO-fired generation has no net C02
emissions compared to flaring. A LFO-fired engine can have higher nitrogen oxide (NOx)
emissions than a flare and that is the reason for possible requirement for emissions controls
explained in the description of the projects' PPAs. However, NOx is not listed as a OHO.
To comply with regulations the landfills must combust the LFO in either a flare or an engine.
The C02 emissions from a 4.3 MW landfill, the expected size for the San Joaquin and Crazy
Horse landfills, can be calculated using numbers from the U.S. Department of Energy. If the
CMR: 198:10 Page27of32
LFG was combusted in an engine, the LFGTE generator would emit 31,000 tons per year of C02
and generate about 32,000 GWhlyear of electricity. If the LFG was combusted in a flare, the
flare would emit 31,000 tons per year of C02, the same as when used in an engine, but produces
no energy. To generate the same amount of baseload energy (32,000 GWhlyear), an average
generator would emit about 1.3 pounds of C02 per kWh, or 21,000 tons per year.
Thus, the LFGTE would emit 31,000 tons of C02 per year on site and the flare would emit a
total of 52,000 tons of C02 per year -31,000 tons on site and 21,000 tons off-site for the same
energy produetion. The 31,000 tons of coi are unavoidable onee the waste is in the landfill.
The 21,000 tons of fossil fuel related C02 emissions from other generators are avoided if the
landfill gas is combusted in an engine instead of a flare.
The second concern is that LFGTE projects support landfilling of organic matter (e.g., paper,
cardboard, yard trimmings/landscape debris, and food scraps) in order to create methane, which
can be used to generate electricity. AB939 requires that certain pereentages of municipal solid
waste sha\l be recycled; paper, cardboard, wood, and other similar items are easy to recycle and
to document, so most landfills do so.
In additiun, the San Joaquin and Ctazy HOIse landfills are not nell\' landfills. The Crazy Herse
Landfill opened in 1935 and closed in May 2009 with a volume of 2 million cubic yards. It has
no space remaining and no longer accepts waste. The San Joaquin Landfill opened in 1966 and
now has about 10 million cubic yards with space for 89 million cubic yards remaining and an
estimated closure date of2059. The San Joaquin County Public Works department operates it
while maintaining a 60% diversion rate away from the landfill. This 60% diversion rate is better
than the 50% diversion rate required by the Integrated Waste Management Act (AB 939)
measured by thc pre-and post-2007 teehniques. Staff of the San Joaquin County Public Works
Department, indicated that the construction and operation of the LFGTE project at their site will
not impact their plans to continue diverting waste away from the landfill with recycling and
composting programs. Similarly the staff of the Salinas Valley Solid Waste Authority said the
construction and operation of the LFGTE project at their now closed Crazy Horse landfill will
not impact their plans to continue diverting waste away from the landfill with recycling and
composting programs.
COMMISSION REVIEW AND RECOMMENDATIONS
Staff provided a presentation on the proposed PPAs with Arneresco for the UAC at its special
meeting on March 31, 2010.
The UAC expressed a desire to address the questions and concerns that were raised by the
Finance Committee on March 16, 2010. Chair Melton organized the discussion to get the sense
of the UAC on each of the issues so that the UAC could clearly provide its advice to the Finance
Comruittee. Issues include whether or not the UAC should first review the renewables
procurement plans before making a comruitment to a new renewable energy supplier, whether or
not it is prudent to do more business with Arneresco, the appropriate term of the contracts, the
political risk that the rules ehange in the future with respect to renewable power mandates, and
whether landfill-gas-to-energy (LFGTE) plants should be considered "green" and renewable
energy sources.
CMR: 198:10 Page 28 of32
Chair Melton stated that, until the Council changed the goal to achieve a 33% RPS, staff and the
UAC should follow that mandate. He stated that staff is scheduled to review these long-term
policies and plans in Augnst 2010 with the UAC. During that review, he expects that the UAC
",ill discuss whether to lower the RPS goal or to lengthen the time to achieve the goal (from
2015 to 2020, for example). The rest of the commissioners agreed with Melton's assessment.
On the issue of whether it is prudent for the City to do more business with Ameresco, the
consensus of the UAC was that this was not an issue. Commissioners agreed that the City would
be a customer of Ameresco, and not an investor in Ameresco. The proposed PPAs do not require
paying for the energy up front and the City is not part of financing the project. The U AC also
believed that there is little concern of having Ameresco as a counterparty since (1), if Ameresco
fails to deliver, the City can ultimately take over operation of the project or buy power from
another supplier and (2) the City has a five year track record with Ameresco where Ameresco
consistently performed to the City's satisfaction. Commissioners also noted that when the City
solicited the market for suppliers, the other proposals were even more cxpensive. Chair Melton
summarized this sentiment by stating that the UAC does not see any undue risk with doing
business with Ameresco.
The UAC discussed the environmental attributes of LFGTE plants and whether they should be
viewed as renewable resources. After discussion, the UAC reached consensus that LFGTE
plants are green resources and are designated so under California rules. Commissioners agreed
that it is far better environmentally to use landfill gas to generate electricity than to flare it and
noted that these projects are sited on old landfills. Commissioners added that LFGTE has the
advantage over some other renewable sources because it is baseloaded power.
Regarding whether or not to prepay for the interconnection equipment costs, the UAC
unanimously supported staff's recommendation to save money over the terms of the contracts by
prepaying these costs rather than pay higher rates for the contract terms. The UAC concluded
that the risk of prepayment were outweighed by the expected benefits.
On the issue of the proper term for the contracts, the UAC agreed with staff that the 12-year
contract prices were not attractive and discussed the 15-and 20-year term options. All
commissioners agreed that they would support either a IS-year term or a 20-year term, but they
each had a preference for one over the other. Three Commissioners expressed a preference for a
20-year term over a IS-year term while two Commissioners expressed a preference for a IS-year
term over a 20-year term. However, the UAC was unanimous in supporting approval of
contracts for the projects of either term, rather than not approving the contracts at all. One
Commissioner stated that he only stated his preference for a IS-year term over a 20-year term out
of deference for the concerns expressed by the Finance Committee. The Commissioners all
agreed that committing to the contracts would not put the City at undue risk of prices for
renewable energy falling due to changes in the market, the political or economic environment, or
because of new and cheaper technologies appearing in the future. Commissioners stated that the
proposed PP As were reasonably priced and would add diversity to the electric portfolio that is
currently heavy with exposure to brown market power prices, and to hydrologic conditions,
which is and will be affected by droughts.
CMR: 198:10 Page 29 of32
The commission voted unanimously (5 to 0) to recommend that Council:
1. Adopt a resolution approving a Power Purchase Agreement (PPA) with Ameresco
San Joaquin LLC, a Delaware limited liability company, for the acquisition of up to
52,000 MWh per year of energy over fifteen years at a cost not to exceed $88.7
million, or over twenty years at a cost not to exceed XXX, including, if required, a
payment of up to $1.425 million for electric transmission interconnection costs;
2. Adopt a resolution approving a PPA with Ameresco Crazy Horse LLC, a Delaware
limited liability company, for the acquisition of up to 52,000 MWh per year of energy
over fifteen years at a cost not to exceed $80.7 million, or over twenty years at a cost
not to exceed YYY, including, if required, a payment of up to $1.425 million for
electric transmission interconnection costs; and
3. Waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that
do business with the City, as the Ameresco companies are not rated by credit
agencies.
The UAC requested that staff provide the corresponding dollar figures for XXX and YYY to
represent the appropriate not to exceed costs of the proposed PP As for 20-year terms since they
were not available at the time of the UAC meeting. The UAC also wanted its vote to reflect the
preference of the commission, by a 3 to 2 vote, for 20-year terms to IS-year terms for the PPAs.
The notes from the UAC meeting are provided as Attachment J.
RESOURCE IMPACT
Fifteen-YearPPA Terms
The cost of renewable energy supplies under the two agreements is expected to be up to $106
million over the IS-year terms of the PPAs if both projects are built at the expected size,
including the maximum prepayment cost of $1.425 million for each project for interconnection
equipment. The annual expected cost is up to $6.2 million in the first year of operation with the
cost escalating 1.5% per year over the IS-year terms of the PPAs. Approval of the two PPAs
would result in a retail rate impact estimated at up to 0.23 ¢IkWh, beginning no earlier than
2013.
If both plants are built to their maximum sizes, the cost could be up to $169.4 million over 15
years, including the maximum prepayment cost of $1.425 million for each project for
interconnection equipment. The annual cost for both PPAs would be up to $10.0 million in the
first year, escalating at 1.5% per year over the IS-year term of the PPAs. In this case, the retail
rate impact would be up to 0.45 ¢IkWh.
Twenty-Year PPA Terms
The cost of renewable energy supplies under the two agreements is expected to be up to $$146.1
million over 20-year terms of the PPAs if both projects are built at the expected size, including
the maximum prepayment cost of $1.425 million for each project for interconnection equipment.
The annual expected cost is up to $6.2 million in the first year of operation with the cost
CMR: 198:10 Page 300f32
escalating 1.5% per year over 20-year terms. Approval of the two PPAs would result in aretail
rate impact estimated at up to 0.23 ¢/kWh, beginning no earlier than 2013.
If both plants are built to their maximum sizes, the cost could be up to $$233.7 million over 20
years, including the maximum prepayment cost of $1.425 million for each project for
interconnection equipment. The annual cost fur both PPAs would be up to $10.0 million in the
first year, escalating at 1.5% per year over the 20-year term of the PPAs. In this case, the retail
rate impact would be up to 0.45 ¢/k Wh.
For both the 15-and the 20-year terms, uncertainties remain about plant sizing, the cost of
interconnection equipment to the electric grid, and the requirement for and cost of emissions
controls equipment. These uncertainties are expected to be resolved in about a year and have
been presented, along with their maximum impacts, in this memorandum.
POLICY IMPLICATIONS
Adoption of the resolutions allows the City to participate in the agreements to purchase
renewable energy and thereby is eonsistent with the Couneil's Top Five Priority of
Environmental Protection. Participating in the agreement is also consistent with the following
City policieS and guidelines.
1. The Council-apprcved 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 III 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. POLICYN-48: Encourage the appropriate use of alternative energy technologies.
ENVlROI\"MENTAL REVIEW
Execution of thcsc agreements 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: 198:10 Page 31 of32
ATTACHMENTS
A: CMR: 166: I 0 -Adoption of Four Resolutions Approving Four Power Purchase Agreements
with Ameresco Forward LLC, Ameresco San Joaquin LLC, Ameresco Avenal LLC, and
Ameresco Cmzy Horse LLC for the Acquisition in the Aggregate of Up to 166,000
Megawatt-hours per Year of Energy Over Twenty Years at an Estimated Cost Not to Exceed
$388.5 Million (without attachments)
B: Resolution approving Renewable Energy Power Purchase Agreement for a term of 15 Years
between Palo Alto and Ameresco San Joaquin LLC
C: Renewable Energy Power Purchase Agreement for a term of 15 Years between Palo Alto and
Ameresco San Joaquin LLC
D: Resolution approving Renewable Energy Power Purchase Agreement for a term of 15 Years
between Palo Alto and Ameresco Crazy Horse LLC
E: Renewable Energy Power Purchase Agreement for a term of 15 Years between Palo Alto and
Ameresco Crazy Horse LLC
F: Resolution approving Renewable Energy Power Purchase Agreement for a term of 20 Years
between Palo Alto and Ameresco San Joaquin LLC
G: Renewable Energy Power Purchase Agreement for a term of20 Years between Palo Alto and
Ameresco San Joaquin LLC
H. Resolution approving Renewable Emagy Power Purchase AgteemelIl fin a tern! of 2e 't"eatS
between Palo Alto and Ameresco Crazy Horse LLC
I: Renewable Energy Power Purchase Agreement for a term of 20 Years between Palo Alto and
Ameresco Crazy Horse LLC
J: Draft Minutes from the March 31, 2010 UAC meeting
K: Presentation provided to the UAC at its March 31, 2010 meeting
PREPARED BY: TOM KABAT
Senior Resource Originator
REVIEWED BY: JANE RATCHYE
Assistant Director, Resource Management
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 198:10
KARL VAN ORSDOL
Energy Risk Manager
VALERIE O. FONG
Director of Utilities
JAMES KEENE
City Manager
Page 32 of32
ATTACHMENT B
Not Yet Approved
Resolution =-:------,=-:-_
Resolution of the Council of the City of Palo Alto Approving
a Power Purchase Agreement (Landfill Gas Power) with
Ameresco San Joaquin LLC for the Acquisition
of Up to 52,000 Megawatt-hours per Year of Energy over
Fifteen Years
WHEREAS, the City of Palo Alto (the "City"), a municipal utility and a
chartered city is a member of the Northern California Power Agency ("NCPA");
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 target
levels of new renewable resource energy purchases equal to thirty percent (30%) and
thirty-three percent (33%) 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 San Joaquin LLC ("Ameresco") proposed its project in
response to the City's Request for Proposals 134307 ("RFP") in November 2009, and it
was deemed competitive with other RFP respondents;
WHEREAS, the execution of this power purchase agreement with Ameresco is
anticipated to enable the City to meet a three-percent portion of its goal of sourcing 33%
of its energy needs from renewable electric energy;
WHEREAS, the City is allocated a 100 percent share of the power from the
initial project, amounting up to 6.2 megawatts of plant net output;
WHEREAS, the power purchase agreement allows Ameresco to sell the City
additional output, if developed, from engine heat recovery, at the contract price;
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE, as follows:
SECTION 1. The Council hereby approves the City's execution of the long
term Power Purchase Agreement (Landfill Gas Power) made between Ameresco San
Joaquin LLC, as Seller, and the City of Palo Alto, as Buyer. The delivery term of the
agreement is fifteen (15) years, commencing upon the Commercial Operation Date of
100308 jb 0073322 I
Not Yet Approved
the planned electric generation facility. Quantity is a 100 percent share of the plant's net
output. Spending authority under the agreement is not to exceed one eighty eight
million seven hundred thousand dollars ($88,700,000). The City Manager is hereby
authorized to sign the agreement with Ameresco San Joaquin LLC and the City Manager
or his designee is authorized to sign any confirmations executed in connection with the
agreement on behalf of the City.
SECTION 2. With respect to the Council's award of the Power Purchase
Agreement referred to in Section 1 above, the Council hereby waives the
creditworthiness requirements of Palo Alto Municipal Code section 2.30.340(c) as it
may apply to Ameresco San Joaquin LLC.
SECTION 3. 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. The County of San Joaquin will be the lead
agency for the purposes of compliance with the requirements of the California
Environmental Quality Act
IN I RODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
100308 jb 0073322 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENTC
POWERPL~CHASEAGREEMENT
This Power Purchase Agreement is entered into this __ day of ___ --'
2010 (the "Effective Date") by and between the City of Palo Alto, a California
chartered municipal corporation and Ameresco San Joaquin 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 Foothill Sanitary Landfill (the
"Landfill") located at 6484 N. Waverly Road, Linden, California, on a site
leased from San Joaquin County, 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 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, the Output of the
Plant, on the terms and conditions and at the prices set forth in this Agreement.
5. Seller may determine to incorporate heat recovery equipment to produce
additional electrical output to be included and sold as Energy in accordance
with the tenns of this Agreement.
6. Seller may determine to expand the Plant in the future depending on the
availability of Landfill Gas and other factors in accordance with the tenns of
this Agreement.
7. Buyer will have a right of first refusal to purchase 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, the Parties agree, as follows.
~
~
1
1 ,
j
1
I
1
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 A:v'ailable I WtlfS
Base Hours
Where:
SANrRA .... 90103 (2K)
A = Availability Threshold
Available Hours = the number of hours during the prior twenty-four (24)
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
this instance, Initial Capacity shall not include any capacity of
the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to
produce additional Energy (to the extent such equipment for
recovering waste heat is or is not installed by Seller» 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 (in this
instance, Initial Capacity shall not include any capacity of the
Plant from equipment for recovering waste heat from the prime
mover engines of the Plant to utilize that waste heat to produce
additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller» the Plant is capable of
delivering in such hour.
Base Hours = the number of hours during the same twenty-four (24)
months period referred to in Available Hours; provided that, to
the. extent that the Plant is partially or wholly incapable or
2
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) month
period 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
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
t\v€lnty fuill (24) month p€lriod.
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 (in this instance, Plant
shall not include equipment for recovering waste heat from the prime mover
engines of the Plant for purposes of utilizing such waste heat to produce
additional Energy to the extent such equipment is not then installed by Seller)
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 Confirmation Notice: As defined in Appendix G.
1.7 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.
1.8 Effective Date: As defined in the first paragraph of this Agreement.
3
SANFRAN90103 (2K)
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.
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: (I) 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 (CR4) and other greenhouse gases (GRGs) that have
been determined by the United Nations Intergovernmental Panel on Climate
Change to eontrihute to the actual or potential threat of akering 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 (I) 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
4
SANFRAN 90103 (2K)
Expansion Plant(s) for compliance with local, state, or federal operating
and/or air qllality permits.
1.11 Environmental Attribute Reporting Rights: All rights to report ownership
of the Environmental Attributes to any person or entity, under Section l605(b)
ofthe Energy Policy Act of 1992 or otherwise.
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 ofthe Plant from its Initial Capacity, or any
other electricity generating facility owned or controlled by Seller or its
affiliate(s) leeated at the Landfill and fueled by Landfill Gas. Eaeh sueh
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 Fixed Increase For Emission Controls: As defined in Appendix G.
1.17 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
5
. SANFRAN 90103 (2K)
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
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 1.17 (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.
1.18 Governmental Authority: Any federal, state or local 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.
1.19 Increase For Emission Controls: As defined in Appendix G.
1.20 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 2.0 MW and not more than
6.6 MW (gross nameplate), and not less than 1.6 MW and not more than 6.2
MW (net at the Point ofInterconnection) and as further specified (and possibly
increased from the installed gross capacity (which may increase the net at the
Point of Interconnection) of the Plant on the Commercial Operation Date)
pursuant to Section 4.3( c).
6 SANFRAN 901().1. (lK)
1.21 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.22 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.
1.23 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.
1.24 ISO: The California Independent System Operator Corporation, or its
ftmetional sueeeSSOf.
1.25 kWh: kilowatt-hour.
1.26 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.27 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.28 LDC: Pacific Gas and Electric Company, a California corporation.
1.29 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.
1.30 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.
1.31 LFG Agreement: As defmed in Section 4.2(d).
7
SANFRAN 90103 (2K)
1.32 Monthly LD Amount: The product of 0) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity (in this instance, Initial Capacity
shall not include any capacity of the Plant from equipment for recovering
waste heat from the prime mover engines of the Plant to utilize that waste heat
to produce additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller» specified under Section 4.3(c) (net
at the Point ofInterconnection).
1.33 MW: Megawatt.
1.34 MWh: Megawatt hour.
1.35 NCPA: The Northern California Power Agency, a Jomt action agency
organized and existing under the laws of the State of California.
1.36 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.
1.37 Output: All actual capacity of the Initial Capacity and associated Energy, as
well as the following, as associated with the Initial Capacity andlor associated
Energy: Environmental Attributes; ancillary services; contributions towards
resource adequacy or reserve requirements (if any) and any other reliability or
power attributes.
1.38 Parties: Buyer and Seller, and their respective successors and permitted
assignees.
1.39 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.40 Percentage Share: One Hundred percent (100%).
1.41 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 (in this
8
SANFRAN 90103 (2K)
instance, Plant shall not include the equipment for recovering waste heat from
the prime mover engines of the Plant for purposes of utilizing such waste heat
to produce additional Energy to the extent such equipment is or is not installed
by Seller).
1.42 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.
1.43 Plant: The generation facility described in Recital 1 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. At any time during the Term, Seller may, in Seller's sole
discretion, construct andlor install and own equipment for recovering waste
fleet from the prime mO'ief engiaes of the Plant f& purposes of utilizing such
waste heat to produce additional Output (Seller makes no written or oral
representation or warranty, either express or implied, regarding the current or
future existence of any such additional Output), provided that such equipment
for recovering waste heat shall be become part of the Plant (including, after
installation of such equipment, part of the definition of Plant) and shall not be
considered an Expansion Plant.
1.44 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.
1.45 Price: As defined in Section 2.3 and Appendix G.
1.46 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
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 andlor 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
9
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, but Production Incentives shall include
Section 29 Credits and Section 45 Credits.
1.47 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 aGhieve 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.
1.48 Reimbursement Amount: As defined in Section 4.1 (h).
1.49 Required Emission Controls: means any equipment and/or devices that need
to be installed, in Seller's sole discretion, to treat engine emissions at the Plant
to meet Requirements of Law and/or requirements of law applicable to Seller
and/or the Plant (including, without limitation, any pennit, any air pennit in
connection with the Plant, and any approvals in connection with the
construction and/or operation of the Plant). Required Emission Controls shall
include, without limitation, any (i) Selective Catalytic Reduction equipment or
any such other commercially used equipment at such time for nitrogen oxides
(NOx) emission reduction, (ii) Oxidizing Catalysts or any such other
commercially used equipment at such time for carbon monoxide (CO)
reduction, and/or (iii) a Continuous Emission Monitor or any such other
commercially used equipment at such time that perfonns a similar function.
10
SANFRAN 90103 (lK)
1.50 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.
1.51 San Joaquin County: The County of San Joaquin, a political subdivision of
the State of California with principal offices at 44 N. San Joaquin Street, Suite
627 Stockton, California 95202
1.52 Section 29 Credits: Those tax credits available under Section 29 of Subtitle
A, Chap. lA, Part IV ofthe Internal Revenue Code of 1986, as amended, as of
the Effective Date.
1.53 Seetion 45 Credits: Tfifise tax eredits a"v'aila-ble under Seetifin 45 fif Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended, or
any other similar federal, state 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.
1.54 Seller: Ameresco San Joaquin LLC, a Delaware limited liability company,
and any successor or permitted assignee.
1.55 Seller's Interconnection Costs: As defined in Section 4.1(h).
1.56 Site: The real property in Linden, California on which the Plant is to be built
and located, as more particularly described in Appendix A.
1.57 ' Site Control: The point at which Seller satisfies one or more ofthe 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.
1.58 Term: The period of time during which the Agreement is in effect.
11
SANFRAN 90103 (2K)
1.59 Test Energy: Energy generated by the Plant and delivered to the Point of
Interconnection prior to the Commercial Operation Date.
1.60 Variable Increase For Emission Controls: As defined in Appendix G.
1.61 WREGIS: Western Renewable Energy Generation Information System, or its
successor; provided that the successor is capable of performing substantially
similar functions and is acceptable to both Parties.
1.62 WREGIS Certificates: The meaning set forth in WREGIS Operating Rules.
1.63 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 fifteenth (15 th
)
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, Buyer's
Percentage Share of the Output produced during the Term pursuant to the
terms of this Agreement. Prior to the Commercial Operation Date, Buyer shaH
purchase and accept from Seller at the Point of Interconnection and pay for,
Buyer's Percentage Share of the Output relating to Test Energy pursuant to the
12
SANFRAN 90103 (2K)
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, 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
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) Seller shall use commercially reasonable efforts to use WREGIS to
authenticate the transfer of "WREGIS Certificates" from Seller to Buyer in
accordance with WREGIS reporting protocols and the terms 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
13
SANFRAN 90103 (lK)
each calendar month, Seller shall document the production and transfer of
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, paying the WREGIS
Certificates' 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 document or otherwise
verify that transfer of RECs or other Environmental Attributes if Seller's
WREGIS costs exceed $2,500 in any calendar year. The $2,500 amount shall
be escalated at a rate of 1.5% annually, commencing on the first day of the
January following the Commercial Operation Date and continuing every
subsequent anniversary thereafter.
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 the Price, as
determined in Appendix G, per MWh of Energy delivered or tendered to Buyer
14
SANFRAN 90103 (2K)
at the Point of Interconnection. 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 c
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 4.30) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (100%) 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 4.30). 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
ProGuetion Ineentives; provided that Buyer shall not be required to ineur
additional costs or accept any diminution in value of its rights under this
Agreement or ofthe 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
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
15
SANFRAN 90103 (2K)
negotiation of a definitive power purchase agreement incorporating the tenns
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 tenns of this Agreement
shall apply.
(b) If Buyer does not accept Seller's offer to purchase Buyer's 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 ofthe Expansion
Plant Output to any third party at a price and on other tenns 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
rnultiple iaEiepenaent buyers, Seller shall .amity Bayer in vlriting of the tmns
and conditions of such offers and Buyer shall again have the right of first
refusal consistent with the tenns 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
Outputto a third party, Seller shall promptly certify, in writing, to Buyer that
the tenns 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
tenns 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 tenns 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 detennined by Buyer in
its reasonable discretion. If Seller sells or 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.
SANFRAN 90103 (2K)
16
2.6 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
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
or the lli'flansioa Plant without the eoasem of Seller to the desiga 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 upon at least ten (10) days' prior
written notice 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 ofthe ISO, the LDC or any
17
SANFRAN 90103 (2K)
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 NCP A, while adhering to both ISO
and NCP A communications protocols. Seller shall provide a copy of each
Certificate of Compliance, if any, issued by the ISO.
Buyer and NCPA 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
equipment does not interfere with the Seller's metering equipment. Seller
shall permit Buyer or Buyer's representative assess to its Plant for the pYrpose
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 ofthe 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 tenth (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) (if such
attestation is required). Stich 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 Seller or 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 alleged error. If the amount invoiced was too low, Buyer
shall, upon receiving verification of the error and supporting documentation
18
SANFRAN 90\03 (2K)
from 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 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 twentieth
(20 th) day of the month or the tenth (loth) 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. Payments made after the due date shall be eonsidered 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 payment
records relating to 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
19
SANFRAN 90103 (2K)
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
ofthe 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
vi-hieh are required by ffil.Y RequiremeRts of LEPN or GovemmeRtal Authority as
prerequisites to engaging in the activities required of Seller by the Agreement
and to meeting SeHer'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 III amounts and with
coverages as set forth in Appendix C.
(f) 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 ofthe Term, provide Buyer and NCPA 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
20
SANFRAN 90103 (2K)
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 it is a scheduled or
unscheduled Outage, Seller shall notify Buyer and NCPA, 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 (a one hundred
percent (100%) Outage) and is due to a 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 Seller
commences 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 ofthe current version ofNCPA's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
(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 ofthe Commercial Operation Date (the "Seller's
Interconnection Costs"); provided, however, if the Seller's Interconnection
Costs are, in Seller's reasonable discretion estimated to exceed, and/or do
exceed, one million two hundred fifty thousand dollars ($1,250,000.00), then
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 and such termination shall not be effective if Buyer, by written
notice to Seller within fourteen (14) days following such notice from Seller,
agrees to adjust the Price payable under Section 2.3 of this Agreement (and
Appendix G hereto) and/or agrees to reimburse Seller more than the maximum
Reimbursement Amount (as defined below), and within forty-five (45) days
thereafter agrees with Seller in writing (each in their sole discretion) to an
amendment of this Agreement revising the Price payable under Section 2.3 of
this Agreement (and Appendix G hereto) and/or revising the Reimbursement
Amount. 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
21
SANFRAN 90103 (2K)
the Term 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. If Seller's
Interconnection Costs are above three hundred thousand dollars
($300,000.00), then Buyer shall reimburse (and pay) Seller, on a dollar for
dollar basis, an amount equal to the product of (a) the amount (in dollars)
equal to the difference between Seller's Interconnection Costs and three
hundred thousand dollars ($300,000.00), times (b) 1.5 (the product thereof
being the "Reimbursement Amount"); provided, however, the maximum
R~imburseHl:eflt f.mount that Buyer shall be obligated to reimbarse (pay) to
Seller shall be one million four hundred twenty-five thousand dollars
($1,425,000.00). Notwithstanding anything to the contrary in the immediately
previous sentence, Seller may terminate this Agreement without liability of
either Party to the other Party if Seller's Interconnection Costs (calculated
without taking into consideration any Reimbursement Amount) are estimated
to exceed andlor do exceed one million two hundred fifty thousand dollars
($1,250,000.00) as provided above in this Section 4.1(h). Buyer shall pay
Seller the Reimbursement Amount within thirty (30) days after the Buyer
receives an invoice from Seller for such Reimbursement Amount (Seller may
send one invoice to Buyer for the entire Reimbursement Amount or Seller may
send multiple invoices to Buyer which total the entire Reimbursement
Amount). Seller shall not invoice Buyer for any of Seller's Interconnection
Costs until Seller's Interconnection Costs have exceeded three hundred
thousand dollars ($300,000.00) and Seller shall provide Buyer with evidence
of Seller's Interconnection Costs such as the Interconnection Agreement
andlor invoices. 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. If this Agreement is terminated before the expiration of the Term
(before the 15 th anniversary of the Commercial Operation Date) by either Party
22
SAm'RAN 90 I 03 (2K)
and there is no Event of Default by Buyer (no Event of Default by Buyer at the
time of the election to terminate (by either Party) through the effective date of
the termination), then, to the extent Buyer has paid Seller any Reimbursement
Amount prior to the effective date of such termination of this Agreement,
Seller shall refund to Buyer a proportion of any such Reimbursement Amount
paid by Buyer to Seller within thirty (30) days after the effective date of such
termination of this Agreement as set forth in the following sentence in this
paragraph. The proportion of the Reimbursement Amount that Seller shall
refund to Buyer per the immediately previous sentence shall be an amount
equal to the sum of the Reimbursement Amount (to the extent previously paid
by Buyer to Seller) multiplied by a fraction, whose numerator is equal to the
number of years and full months remaining in the Term, expressed in months,
at the effective date of termination and whose denominator is equal to the full
Term of the Agreement, expressed in months (or 180 months).
(i) Negotiate and enter into a Participating Generator Agreement and a
Meter Service Agreement for ISO Metered Entities with the ISO, the load
control area operator for the LDC System that is interconnected with the Plant.
Buyer shall pay for or reimburse Seller for Buyer's 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 Sections 3.1 and
4.1 (h) of this Agreement. Seller shall cooperate with Buyer to minimize any
such costs as are to be reimbursed by Buyer.
(j) 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.
(k) Maintain an Availability Threshold of at least 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 (and Appendix G) 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.
23
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 neeessary or desirable in the ordinary eourse of its business; and (ii)
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Within ninety (90) days after the Effective Date, 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
San Joaquin County, 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) within 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
Party to the other Party, 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
within seven (7) days of receipt of a written request by Buyer.
24
SANFRAN 90103 (2K)
(e) Seller shall provide to Buyer such other infonnation regarding the
pennitting, 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
aeeOff!anee '.vitli Generally Aeeepted AeeOIDlting Prineiples ("GA,AP")
consistently applied, 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 fonn of Appendix F, prepared in
accordance with GAAP consistently applied for Seller and for Seller's ultimate
corporate parent. Such fmancial 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
(a) The Parties agree that time is ofthe essence and that certain milestones
(individually, a "Milestone" and, collectively, the "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 ofthe Milestones by the dates set forth below.
(b) The following events are all ofthe Milestones:
25
(i) By the date ninety (90) days following the Effective Date, Seller
shall have signed an LPG Agreement with San Joaquin County
and have obtained Site Control.
(ii) By the date twenty-six (26) months following the date that Buyer
approves the LPG 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 futereonneetion Agrnerrumt,
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, Seller shall provide to Buyer monthly
progress reports concerning the progress towards completion of the
Milestones. In addition, within five (5) 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 confrrmation 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
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 1.20); provided,
however, Seller may (in Seller's sole discretion) increase the Initial Capacity
of the Plant at any time during the Term by adding equipment for recovering
waste heat from the prime mover engines of the Plant for purposes of utilizing
such waste heat to produce additional Energy. If Seller decides to increase the
Initial Capacity of the Plant during the Term (after Seller has originally
SANFRAN90IOO (2K) 26
specified the Initial Capacity of the Plant), then Seller shall provide Buyer
with written notice of the date of such increase, the amount of such increase,
and the entire capacity of the Plant (as increased) as of such date. The new
increased capacity of the Plant shall then become the Initial Capacity of the
Plant from the date set forth in Seller's written notice until the end of the Term
(the Initial Capacity of the Plant (as increased) shall be not less than 2.0 MW
and not more than 6.6 MW (gross nameplate), and not less than 1.6 MW and
not more than 6.2 MW (net at the Point of Interconnection). Seller makes no
written or oral representation or warranty, either express or implied, regarding
whether or not Seller will add equipment for recovering waste heat from the
prime mover engines of the Plant and/or utilize that waste heat to produce
additional Energy.
(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 a Force
Majeure f>;ent, Seller shall so notify Buyer, in vlriting, as soon a8 is
reasonably practicable. 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 Majeure 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 fbrth in Section 4.3(b)(i).
27
SANFRA~ 9{)J 03 (210
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 (10) 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 (10) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone, and Buyer must give Seller sixty (60) days' prior written
notice to terminate this Agreement, during which period if Seller cures such
defect and 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 eveffi that Seller fails to meet the Milestone set forth in Sectioo
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 Milestone date until the
Milestone is met. Such funds will be used towards any liquidated damages as
set forth in Section 7.4(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, SeHer will pay to Buyer, within thirty (30) days of the termination
notice, an amount equal to the LD Amount as liquidated damages. Seller's
escrow option, Buyer's option toterminate, and liquidated damages shall be
Buyer's sole remedies 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.
28
SANFRAN 00 I OJ (iK)
0) 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 ofthe air permit (from the air
pollution control district that has jurisdiction over construction and operation
of the Plant), 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 Party 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 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
follo',ying sueh ootiee fr.em Seller, agrees (i) to pay Seller 'liith the first inveiee
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 the price
payable under Section 2.3 (and Appendix G) of this Agreement and within
thirty (30) days thereafter agrees with Seller (each in their sole discretion), in
writing, 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 tenninate this Agreement as provided in this Section
4.30). In the event that Seller exercises such tennination 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 4.30) shall survive
termination of this Agreement under this Section 4.30) for a period of five (5)
years from the effective date of such termination.
ARTICLE V
BUYER'S OBLIGATIONS
5.1 Delivery and Transmission
29 SANFRAN 9(llOJ (2K)
Except for Seller's obligations pursuant to Sections 3.1 and 4.I(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
or for any transmission-owning or operating entity). NCP A, 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 . . ..
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 NCPA as Scheduling Coordinator for the Plant. IfNCPA ceases to be
the Scheduling Coordinator for the Plant and Buyer is unable, within fourteen
(14) business days of notice from Seller, to appoint a replacement Scheduling
Coordinator, Seller shall have the right to appoint a replacement Scheduling
Coordinator on Buyer's behalf, and Buyer shall enter into all reasonable and
appropriate agreements with such replacement Scheduling Coordinator at its
own cost.
30
SAh'FRAN 90:03 (ZK)
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 San Joaquin County associated with the
Site or the Landfill.
5.3 Notification of Transmission Outages
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
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
31 SM"FRAN 90103 {2K)
i
1
6.3
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 fail ure 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.
Notice
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
flatffl'e, eause, date of commencement thereof and the antieipatad aMant 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
DEFAULTIREMEDIESrrERMINA TION
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.I(b) or (c) of this Agreement) and fails to cure such breach within
thirty (30) days after the receipt of written notification of breach by Seller or
SANFRAN 9(1103 (ZK)
32
~
J
1
J
J
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 the receipt of 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
(1) The following shall each constitute an "Event of Default" by 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(1)(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 the receipt of 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 t4e 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.
33
SANPRAN 90\03 (2K)
(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 any of Sections 7.2(1)(a), (d) or (e)
above shall constitute an Event of Default if Seller cures the event, failure or
circumstance within (30) days after the receipt of 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
(a) In the event the defaulting Party fails to cure the Event of Default within
the period fOr curative action tinder Sections 7.1 or 7.2, as awlieable, 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 4.30), 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.
7.4 Damages
SANFRAN 90}01 (2K)
34
(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
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.
Exeept as set furth ill Seetioo 4.1(k) and except to the ~(tefit 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 provided for above,
Buyer may terminate this Agreement upon thirty (30) days' prior 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 receipt 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.
SA'hl"RA"S 9010] (2K)
35
(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.
7.5 Indemnification
Seller and Buyer agree to defend, indemnifY, and hold each other, and their
respective officers, direetm'8, employees and agellts, harmless from flflti 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 indenmifYing Party. This indenmification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indenmitees but the indenmifYing Party's liability to pay Damages to the
indenmified Party shall be reduced in proportion to the percentage by which
the indenmitees' negligent or intentional acts, errors or omissions caused the
Damages. Neither Party shall be indenmified 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.
Buyer shall defend, indenmifY 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.
7.6 Buyer's Right to Operate
SANFRAN 90}O3 (2K) 36
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 Lender(s) is 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. Bttyer shall indem:t"lity and hold Seller httrmless ffem any liability to
third parties arising out of Buyer's failure to operate the Plant using Prudent
Utility Practice. Upon Buyer's satisfaction that Seller has the ability to operate
the Plant in accordance with this Agreement, Seller shall resume operational
control.
Should 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 [mance, Buyer shall have the following options: (1)
terminate this Agreement without liability of one Party to the other Party; (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 Party.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
31
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the Effective Date:
(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 Effective Date, (a) the Plant shall on the Commercial Operation
Date be It "qtHtlifYing small POV>"ef I'feciuetien faeility" as that term is
defined in Section 3(17)(C) of the Federal Power Act, and will 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 "qualifYing
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
tenns against Seller, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
38 SANFRAN 90103 (2K)
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 Effective Date:
(i) Buyer is a ehattered eity and ffiuftieipal eorporation, duly organized and
validly existing, and has the lawful 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 '{alidly 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
39
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Buyer, threatt:ned 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
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
stt ingent standard permissible under applieable IfFvV. ,Ad ttl the PEtrties, 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. I o/Snohomish County, Nos. 06-1457,128
S.Ct. 2733 (2008), and consistent with the order of the Supreme Court inNRG Power
Marketing, LLC, et ai., v. Maine Public Utilities Commission et ai., No. 08-674, 130 .
S.Ct. 693 (2010) ("NRG Order"). As to all other persons it is intended that the same
standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.
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
subcontractors, Seller shall remain responsible for all of 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
40
SANFRAN 90lOJ (2I<:)
of its obligations under this Agreement. Any purported assignment of this
Agreement in the absence of the required consent, except as provided in
Section 10.2, shall be void.
10.2 Financing
Notwithstanding Section 10.1, Seller may, without the consent of Buyer,
assign, transfer or hypothecate 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 Seller shall remain fully liable for all of its obligations . . .
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:
41
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 328-3631
on behalf of Buyer;
with a copy to:
City of Palo Alto
250 Hamilton Avenue, Eighth Floor
Palo Alto, CA 94301
Attentioo: Senior Assistan:t City Attemey / Utilities
Telecopier: (650) 329-2646
and to:
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:
SM"'FRAN 9010-'1 (2K)
Ameresco San Joaquin LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: General Counsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
with a copy to:
Ameresco San Joaquin LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attefttion: 8eftiof Viee Presidem, Reftewable 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
43
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 Party under any provision of the
Agreement shall constitute the dedication of that Party's system or any portion
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 ameruiment, additioo to Of modifioation 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
44
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.
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 performance 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 determine, require, specifY
or take similar action \l\iith respect W matters, such dete!"miflfltiefl, 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 information disclosed by Seller, including, without limitation, all
engineering documents, designs, specifications and financial information, 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 information regarding this Agreement confidential. Buyer shall disclose
such information 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 San Joaquin County or its
SANI'RA."" 90103 (:lK)
45
representatives, NCPA or its representatives, or to Lender(s) or potential
Lender(s) or its/their representatives; provided that prior to such disclosure,
the recipient shall agree, in writing, to keep the material confidential under
terms no less stringent than as set forth in this Section 10.13. Buyer also shall
be permitted to disclose this Agreement and related information to the City
Council of Palo Alto for the express purpose of obtaining approval to execute
this Agreement; provided that in connection 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 in this Agreement shall
restrict any Party from using or disclosing confidential information in any
manner it chooses, which confidential information (i) is or becomes generally
available to the pub lie othel' tfllm as a result ef a diselesure direetly 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, administrative 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.
46 SANFRAN90J03 (2K)
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.
10.16 Financing
Notwithstanding anything to the contrary in this Agreement, Seller may
terminate this Agreement at its sole discretion without liability of either Party
to the other Party if Seller is unable to obtain financing, on terms satisfactory
to Seller, for the (i) construction of the Plant, (ii) operations and/or
maintenance of the Plant, and/or (iii) working capital or other ordinary
business requirements for the Plant.
{signature page jOUowsJ
SANFRAN 90103 (2K)
47
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the Effective Date.
AMERESCO SAN JOAQUIN LLC i THE CITY OF PALO ALTO
By Ameresco, Inc., Its sole member APPROVAL AS TO FOR,\1:
By: By: !
Name: Michael T. Bairns Name: Grant Kolling
Title: Senior Vice President Title: Senior Assistant City Attorney
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
.
Bv: .
Name: Lalo Perez By:
Title: Administrative Services Director Name: Valerie O. Fong
Date: Title: Utilities Director
Date:
CITY OF PALO ALTO
Bv:
Name: James Keene
Title: City Manager
Date:
48
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , -' before me, the undersigned notary
public, personally appeared , as the __ ..... of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco San Joaquin
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 San
Joaquin LLC, a Delaware limited liability company.
Mr" . yomm1 SSJQD expIres
Notary Public
49
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer the final Site Drawings prior to the Commercial
Operation Date.
50
SAm"RAN 9010.1 (ZK)
APPENDIXB
FORM OF ATTESTATION
Ameresco San Joaquin LLC
Environmental Attribute Attestation and Bill of Sale
Arnereseo San Joaquin LLC ("Amereseo"J hereby sells, transfers and delivers to
("Customer")
~~~-;~~~~~~~~~~ ............ ~~~
Environmental Attributes and Environmental Attribute Reporting Rights associated with the generation of
the indicated energy for delivery to the grid (as such term(sJ are defmed in the
.,-__ -:-___ -:-c:-_-,_:-c(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: -:---:-c:---
(for facility that has added renewable capacity, show operational date and lI1110unt of new capacity)
As applicable: CEC Reg, no, _ Energy Admin, ID no, _~ Q,F, ID no,_
MWhrs generated
in the lI1110unt of one Environmental Attribute or its equivalent for each meb'llWatt hour generated; and Ameresco
further attests, warrants and represents as follows:
i) to the best ofits knowledge, the information provided herein is true and correct;
il) its sale to Customer is its one and only sale of the Envirorunental Attributes and associated
Envirorunental Attribute Reporting Rights referenced herein;
Ui) the Facility generated and delivered to the grid the energy in the lI1110unt indicated as undifferentiated
energy; and
[check one:]
_ iv) Ameresco owns the Facility,
_ iv) to the best of Ameresco's knowledge, each of the Envirorunental Attributes and Envirorunental
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 Amereseo to Customer all of Amereseo's right, title and interest in
and to the Envirorunental Attributes and Envirorunental Attribute Reporting Rights associated with the generation
of the energy for delivery to the grid,
Contact Pernon: _______ tel: 1-508-661-2200; fax: 1-508-661-2201
WITNESS MY HAND,
AMERESCOSANJOAQ~LLC
By: Ameresco, Inc" irs sole member
By
Its
Date:
8-1
51
SA.~FRAN9010:l (2K)
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.
2.
3.
SA1\FRAN 90103 (2K)
Workers' Compensation!Employer's Liability. Seller shall
maintain Workers' Compensation Insurance and Employer's
Liability Insurance which comply with Requirements of Law
applicable to Seller.
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 uninsuredlunderinsured motorist protection endorsements.
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 ofliability 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, unless prohibited by law.
52
APPENDIXD
SCHEDULING PROTOCOLS
1. Prior to three (3) business days before the end of a month, Seller is to
provide to NCP A 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
Sunday/Holiday.
2. No later than 1400 hrs. each Thursday, Seller shall provide a forecast of
loads and/or generation for the following week to the extent it is
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 0800 hrs. two (2) days before the active
scheduling day.
a. Example: For power that is scheduled for generation or delivery on
Thursday, March 25,2010, changes must be submitted to NCPA by
no later than 0800 hrs. on Tuesday, March 23, 2010.
4. Hourly modifications to active schedules. Unless otherwise mutually
agreed, Seller may make changes to active schedules by providing such
changes to NCPA with a minimum of four (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 1500 hrs. (for the period from 1401 hrs. to 1500 hrs.),
changes must be submitted to NCP A no later than 1100 hrs.
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.
53
SANFRAN 9Ot03 (2K)
7. All notices and schedules are to be submitted to NCPA by phone, fax or
email to the following persons: ChiefDispatcherlScheduler.
8. In the absence of forecasts and schedules as noted above, NCP A will
utilize the most current information provided by SeHer in the development
and submission of schedules.
54
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June __ , __
Hour Ended: T.'. -' (
I
2
~
4
5
6
7
ll.
9
...... ~~-~ .... . 1} ..... .-......
11
15 ... -~. .-~.~.--..... -~~-
1Ii
17 .... _. .... _ . .. -
IR ...... -.... --~-----. -----------_ . -
lQ
20
21
27
?'l
24
Expected Daily Temperatures, F
Low
High
Contact
Information:
Scheduling
Coordinator:
Facility:
CITY:
SANFRAN 9GW3 (2K)
APPENDIXE
PERFORMANCE TEST
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 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:
I) 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 (in this instance, Initial Capacity shall not include
any capacity of the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to produce additional
Energy (to the extent such equipment for recovering waste heat is or is not
installed by Seller» 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 LPG Agreement.
SANFRAN 91)100 (2K) 56
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 fHlm membel
Debit issuance costs, net
Total other assets
LIABILITY AND MEMBER'S EQillTY
Current liabilities:
Current portion oflong-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 (2K) 57
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:
Selling, general and administrative
Operating ineeme (less)
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 itlvestiug 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 none ash transactions:
Accrued purchases of project assets
S.<\..~-'\N 9OHJ3 (lK)
APPENDIXG
Buyer shall pay Seller $91.33 per MWh of Energy delivered or tendered to Buyer at the Point of
Interconnection, provided, however, if any Required Emission Controls are installed, prior to the
later of the (i) Commercial Operation Date, and (ii) date that is sixty (60) days after the completion
of stack tests that Seller is required to perform (in connection with the Plant) by Requirements of
Law and/or any permit, then the price Buyer shall pay Seller per MWh of Energy delivered or
tendered to Buyer at the Point ofInterconnection shall be $9133 per MWh plus (a) $0.60 per MWh
of Energy delivered or tcndercd to Buyer at the Point ofInterconnection (the "Fixed Increase For
Emission Controls"), plus (b) $0.0000055 per MWh of Energy delivered or tendered to Buyer at the
Point of Interconnection for each $1.00 of Seller's costs and/or expenses associated with the design,
engineering, equipment, installation and commissioning of any and all Required Emission Controls
(the "Variable Increase For Emission Controls" and collectively with the Fixed Increase For
Emission Controls, the "Increase For Emission Controls"). The Increase For Emission Controls
shall not exceed a maximum of$) 0.01 per MWb. The entire price that Buyer shall pay Seller per
MWh of Energy delivered or tendered to Buyer at the Point of Interconnection ($91.33 per MWh
plus any Increase For Emission Controls) shall be escalated at a rate of 1.5% (of the then-current
price) annually on the anniversary of(]) 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. Prior to the later of the (i) Commercial Operation Date,
and (ii) a date that occurs sixty (60) days after the completion of stack tests, that Seller is required to
perfonn (in connection with the Plant) by Requirements of Law and/or any permit, Seller may
terminate this Agreement without liability of either Party to the other Party, if Seller's costs and/or
expenses associated with the design, engineering, equipment, installation and commissioning of the
Required Emission Controls are estimated to exceed (and/or do exceed) one million eight hundred
twenty thousand dollars ($1,820,000.00), and Seller first communicates such information to Buyer
and Seller thereafter provides notice of termination to Buyer, in writing; provided, however, that
Seller's notice of termination shall not become effective if Buyer, by written notice to Seller within
fourteen (14) days fonowing the receipt of Seller's written notice of termination, agrees to
subsequently adjust the Price payable under Section 2.3 of this Agreement (and this Appendix G)
and/or agrees to reimburse Seller a mutually agreed amount based upon the amount by wbich the
costs and/or expenses associated with the design, engineering, equipment, installation and
commissioning of the Required Emission Controls exceed one million eight hundred twenty
thousand dollars ($1,820,000.00) and, within forty-five (45) days following Seller's receipt of
Buyer's notice regarding its interest in a Price adjustment and/or reimbursement arrangement, the
Parties, in writing, execute an amendment of this Agreement (in each Party's sole discretion),
revising the Price payable under Section 2.3 of this Agreement (and tbis Appendix G) and/or
agreeing to a reimbursement amount from Buyer to Seller.
Buyer shall pay Seller $91.33 per MWh of Test Energy delivered or tendered to Buyer at the Point
ofInterconneetion; provided, however, that the amount due and/or paid to Seller for Test Energy
shall be adjusted (it can only be adjnsted up) after the Seller provides Buyer with the Confmnation
Notice as further set forth below.
SANFRAN 90103 (2K)
To, among other things, confirm the price (as set forth in Section 2.3 of the Agreement and this
Appendix G) to be paid from Buyer to Seller in dollars per MWh of Energy delivered or tendered to
Buyer at the Point ofInterconnection, Seller will provide Buyer with a written notice setting forth
fifteen annual price rates (in dollars per MWh of Energy delivered or tendered to Buyer at the Point
of Interconnection) for the portion of the Term on and after the Commercial Operation Date (as each
such annual price rate shall be escalated as set forth in the penultimate sentence of the first
paragraph in this Appendix G), starting with the first annual price rate whicb will be $91.33 per
MWh of Energy delivered or tendered to Buyer at the Point of Interconnection, plus, to the extent
applicable, the Increase For Emission Controls (such notice being referred to as the "Confirmation
Notice"). The Confirmation Notice shall be (a) provided to Buyer on or prior to the later of the (i)
date ten (10) days after the Commercial Operation Date, and (ii) date that is seventy (70) days after
the completion of stack tests that Seller is required to perform (in connection with the Plant) by
Requirements of Law and/or any permit; and (b) substantially in the form attached hereto in
Appendix G-l (with items in brackets modified and blank spaces filled-in as applicable). If Seller
does not provide the Confirmation Notice to Buyer until after the Commercial Operation Date, then
the price Buyer shall pay Seller (the price in dollars per MWh of Energy delivered or tendered to
Buyer at the Point of Interconnection) after the Commercial Operation Date shall be $91.33 per
MWh (which shall be paid in accordance with the terms of the Agreement) until the date of the
Confirmation Notice to Buyer (at which point such price may increase); provided, however, that
after the date of the Confirmation Notice, Seller shall, within sixty (60) days following such date,
send a statement to Buyer setting forth any additional amount owed from Buyer to Seller under this
Agreement for the time period (during the Term) prior to the date of the Confirmation Notice if the
price (in dol1ars per MWh of Energy delivered or tendered to Buyer at the Point of Interconnection)
as set forth in the Confirmation Notice is more than $91.33 per MWh duting the first year following
(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 amount due from Buyer to Seller putsuant to such statement shall be the difference of (a) the
product of the total price (in dol1ars per MWh) for such first year (as set forth in the Confirmation
Notice) times the total MWhs of Energy (including Test Energy) delivered or tendered to Buyer at
the Point of Interconnection prior to the date of the Confirmation Notice, minus (b) the product of
$91.33 times the total MWhs of Energy (including Test Energy) delivered or tendered to Buyer at
the Point of Interconnection prior to the date of the Confirmation Notice (nothing in this sentence
shall impact Buyer's obligation to also pay Seller $91.33 per MWh of Energy delivered or tendered
to Buyer at the Point of Interconnection prior to the date of the Confirmation Noticc (the payment
from Buyer to Seller of the amount set forth in the statement is additional»). Buyer shall pay the
amount set forth in such statement to Sellcr within thirty (30) days of Buyer's receipt of the
statement. On and after thc date of Confirmation Notice, Buyer shall pay Seller the applicable
annual price rate, as set forth in the Confirmation Notice, per MWh of Energy delivered or tendered
to Buyer at the Point of Interconnection. Seller's failute to send Buyer a Confirmation Notice shall
neither be an Evcnt of Default by Scller nor shall it be cause for Buyer not to pay for Encrgy
delivered or tendered to Buyer at the Point of Interconnection.
SANFRAN 90103 {2K}
[DATE]
[VIA ____ -----']
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
APPENDIX G-l
[Letterhead]
Re: Power Purchase Agreement -Confirmation Notice
Dear City Clerk:
Reference is made to the Power Purchase Agreement (the "Power Purchase Agreement"), dated as
of [ ~, 2010, between the City of Palo Alto ("Buyer") and Ameresco San Joaquin
LLC ("Seller"). Unless otherwise defmed herein, capitalized terms used herein shall have the
meanings given to such terms in the Power Purchase Agreement.
In accordance with the terms of Section 2.3 and Appendix G ofthe Power Purchase Agreement,
Seller hereby gives notice (the Confirmation Notice as defined in Appendix G of the Power
Purchase Agreement) to Buyer that Seller [has/has not] installed Required Emission Controls [at a
cost (including, without limitation, costs and/or expenses associated with the design, engineering,
equipment, installation and commissioning of any and all Required Emission Controls) of
[$ ]]. Therefore, in accordance with the terms of Section 2.3 and Appendix G of the
Power Purchase Agreement, the price Buyer shall pay Seller in dollars per MWh of Energy
delivered or tendered to Buyer at the Point of Interconnection from the Commercial Operation Date
until [the first anniversary of (i) the first day of the first full month following the Commercial
Operation or (ii) if the Commercial Operation Date falls on the first day of the month, the
Commercial Operation Date (Year 1 as set forth in the chart below)] and for each year thereafter
[(the final year (15) being a partial year if the Commercial Operation Date does not fallon the first
day of the month)] through the remainder of the Term shall be as follows in the chart below:
Year
SANFRAN 90103 (lK)
Price in dollars per MWh
of Energy delivered or
tendered to Buyer at the
Point of Interconnection
I
2
3
4
5
6
7
8
9
10
11
12
13
14
I 15
Sincerely,
Ameresco San Joaquin LLC
[By: Ameresco, Inc., its sole member]
Name:
. Title:
Enclosures
,
[this column is to be
filled-in 1
i
i
cc: City of Palo Alto, 250 Hamilton Avenue, Eighth Floor, Palo Alto, CA 94301, Attention:
Senior Assistant City Attorney I Utilities (with enclosures and sent via ____ --'
City of Palo Alto, 250 Hamilton Avenue, Third Floor, Palo Alto, CA 94301, Attention:
Director of Utilities (with enclosures and sent via )
Northern California Power Agency, 651 Commerce Drive, Roseville, CA 95678, Attention:
Power Contracts Administrator (with enclosures and sent via ____ --'
ATTACHMENTD
Not Yet Approved
Resolution No.
Resolution of the Council of the City of Palo Alto Approving a
Power Purchase Agreement (Landfill Gas Power) with
Ameresco Crazy Horse LLC for the Acquisition of Up to
52,000 Megawatt-hours per Year of Energy over Fifteen Years
WHEREAS, the City of Palo Alto (the "City"), a municipal utility and a
chartered city is a member of the Northern California Power Agency ("NCPA");
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 target
levels of new renewable resource energy purchases equal to thirty percent (30%) and
thirty-three percent (33%) of the City's expected energy load by 2012 and 2015,
respectively;
WHEREAS, the.clty IS mterested m purchasmg 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, Arneresco Crazy Horse LLC ("Arneresco") proposed its project in
response to the City's Request for Proposals 134307 ("RFP") in November 2009, and it
was deemed competitive with other RFP respondents;
WHEREAS, the execution of this power purchase agreement with Arneresco (the
"Crazy Horse PPA") is anticipated to enable the City to meet a three-percent portion of
its goal of sourcing 33% of its energy needs from renewable electric energy;
WHEREAS, the City is allocated a 100 percent share of the power from the
initial project, amounting to 6.2 megawatts of plant net output;
WHEREAS, the Crazy Horse PP A allows Arneresco to sell the City additional
output, if developed, from engine heat recovery, at the contract price; and
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOL YE, as follows:
SECTION 1. The Council hereby approves the City's execution ofthe long-term
Power Purchase Agreement (Landfill Gas Power), made between Ameresco Crazy
Horse LLC, as Seller, and the City of Palo Alto, as Buyer. The delivery term of the
Power Purchase Agreement is fifteen (15) years, commencing upon the Commercial
Operation Date of the planned electric generation facility. Quantity is a 100 percent
100302jb 0073327 1
Not Yet Approved
share of the plant's net output. Spending authority under the Power Purchase
Agreement is not to exceed eighty million seven hundred thousand dollars
($80,700,000). The City Manager is hereby authorized to sign the Power Purchase
Agreement with Ameresco Crazy Horse LLC, and the City Manager or his designee is
authorized to sign any confirmations executed in connection with the Power Purchase
Agreement on behalf of the City.
SECTION 2. With respect to the Council's approval and award of the Power
Purchase Agreement referred to in Section 1 above, the Council hereby waives the
creditworthiness requirements of Palo Alto Municipal Code section 2.30.340(c), as it
may apply to Ameresco Crazy Horse LLC.
SECTION 3. 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. The Salinas Valley Solid Waste Authority will be
the lead agency for the purposes of compliance with the requirements of the California
Environmental Quality Act
INTRODUCED AND
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
IOO302jbOO73327 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENT E
POWER PURCHASE AGREEMENT
This Power Purchase Agreement is entered into this __ day of ---c---c:-:--:-'
2010 (the "Effective Date") by and between the City of Palo Alto, a California
chartered municipal corporation and Ameresco Crazy Horse 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 Crazy Horse Canyon Landfill
(the "Landfill") located at 350 Crazy Horse Canyon Road, Salinas, California,
on a site leased from Salinas Valley Solid Waste Authority, 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 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, the Output of the
Plant, on the terms and conditions and at the prices set forth in this Agreement.
5. Seller may determine to incorporate heat recovery equipment to produce
additional electrical output to be included and sold as Energy in accordance
with the terms of this Agreement.
6. 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.
7. Buyer will have a right of first refusal to purchase 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, the Parties agree, as follows.
SA.~"FRAN 9010) (1-&)
I
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I
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:
SANFRAN 90 I 03 (2K)
A = Availability Threshold
Available Hours = the number of hours during the prior twenty-four (24)
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
this instance, Initial Capacity shall not include any capacity of
the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to
produce additional Energy (to the extent such equipment for
recovering waste heat is or is not installed by Seller)) 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 (in this
instance, Initial Capacity shall not include any capacity of the
Plant from equipment for recovering waste heat from the prime
mover engines of the Plant to utilize that waste heat to produce
additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller)) the Plant is capable of
delivering in such hour.
Base Hours = the number of hours during the same twenty-four (24)
months period referred to in Available Hours; provided that, to
2
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) month
period 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
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
l\vailability ThFesheld shall be ealeulated eR a rellrng basis using the previeus
twenty-four (24) month period.
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 (in this instance, Plant
shall not include equipment for recovering waste heat from the prime mover
engines of the Plant for purposes of utilizing such waste heat to produce
additional Energy to the extent such equipment is not then installed by Seller)
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 Effective Date: As defined in the first paragraph of this Agreement.
SANFRAN 90un (2K)
3
1.8 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.
1.9 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 (Sax), 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
elimate by trapping heat in the atnwsphere; 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 Plant(s) for compliance with local, state, or federal operating
and/or air quality permits.
4
SA1\FRAN 00103 (2K)
1.10 Environmental Attribute 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.
1.11 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 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.
1.14 FERC: Federal Energy Regulatory Commission and its successor
organization, if any.
1.15 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
5
SANFRAN 90103 (2K)
,
j
.J
I
I
i
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
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 1.15 (other . . . . . ,
failures or delays by the LDC or the ISO in entering into all agreements with
Seller contemplated by this Agreement.
1.16 Governmental Authority: Any federal, state or local 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 governmen~
including, without limitation, any corporation or other entity owned or
controlled by any of the foregoing.
1.17 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 2.0 MW and not more than
6.6 MW (gross nameplate), and not less than 1.6 MW and not more than 6.2
MW (net at the Point of Interconnection) and as further specified (and possibly
increased from the installed gross capacity (which may increase the net at the
Point of Interconnection) of the Plant on the Commercial Operation Date)
pursuant to Section 4.3(c).
1.18 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.19 Interconnection Agreement: The agreement between Seller and LDC
pursuant to which Seller and LDC set forth the terms and conditions for
6 SANFRAN 90WJ (2K)
Interconnection of the Plant to the LDC System, as amended from time to
time.
1.20 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.
1.21 ISO: The California Independent System Operator Corporation, or its
functional successor.
1.22 kWh: kilowatt-hour.
1.23 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.24 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.25 LDC: Pacific Gas and Electric Company, a California corporation.
1.26 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 rehiforcements or
additions required to interconnect LDC's facilities with the Plant.
1.27 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.
1.28 LFG Agreement: As defined in Section 4.2(d).
1.29 Monthly LD Amount: The product of (i) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity (in this instance, Initial Capacity
shall not include any capacity of the Plant from equipment for recovering
waste heat from the prime mover engines of the Plant to utilize that waste heat
to produce additional Energy (to the extent such equipment for recovering
SANFRAN 9fltO} (2K)
7
waste heat is or is not installed by Seller)) specified under Section 4.3(c) (net
at the Point of Interconnection).
1.30 MW: Megawatt.
1.31 MWb: Megawatt hour.
1.32 NCPA: The Northern California Power Agency, a JOillt action agency
organized and existing under the laws of the State of California.
1.33 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 Intercounection, whether planned or unplanned.
1.34 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.
1.35 Parties: Buyer and Seller, and their respective successors and permitted
assignees.
1.36 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.37 Percentage Sbare: One Hundred percent (100%).
1.38 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 (in this
instance, Plant shall not include the equipment for recovering waste heat from
the prime mover engines of the Plant for purposes of utilizing such waste heat
to produce additional Energy to the extent such equipment is or is not installed
by Seller).
8
SAJ.i'FRAN 9010J {2K)
1.39 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.
1.40 Plant: The generation facility described in Recital 1 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. At any time during the Term, Seller may, in Seller's sole
discretion, construct and/or install and own equipment for recovering waste
heat from the prime mover engines of the Plant for purposes of utilizing such
waste heat to produce additional Output (Seller makes no written or oral
representation or warranty, either express or implied, regarding the current or
future existence of any such additional Output), provided that such equipment
for recovering waste heat shall be become part of the Plant (including, after
i:nsta:llatioll of stich equipment, part of the definition of Plant) and shall not be
considered an Expansion Plant.
1.41 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.
1.42 Price: As defined in Section 2.3.
1.43 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
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, but Production Incentives shall include
Section 29 Credits and Section 45 Credits.
9
1.44 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, . .
methods, selections of equipment or acts.
1.45 Reimbursement Amount: As defined in Section 4.1 (h).
1.46 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.
1.47 Salinas Valley Solid Waste Authority: Salinas Valley Solid Waste Authority,
a joint powers authority under the laws of the State of California with principal
offices at 128 Sun Street, #101, Salinas, California 93901.
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 Effective Date.
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 federal, state or local tax credits, deductions, payments or
benefits arising from the purchase of Landfill Gas or the generation and sale of
SANf<RAN 9OIOJ (2K)
10
electricity using Landfill Gas as a fuel, not including any Environmental
Attributes.
1.50 Seller: Ameresco Crazy Horse LLC, a Delaware limited liability company,
and any successor or permitted assignee.
1.51 Seller's Interconnection Costs: As defined in Section 4.1(h).
1.52 Site: The real property in Salinas, California on which the Plant is to be built
and located, as more particularly described in Appendix A.
1.53 Site Control: The point at which Seller satisfies one or more of the following
conditions: (l) 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, 01
(3) any other form of site control acceptable to Buyer in its reasonable
discretion.
1.54 Term: The period of time during which the Agreement is in effect.
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 the 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.
11
ARTlCLEll
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 fifteenth (lSth)
ruiniversary 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, Buyer's
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,
Buyer's Percentage Share ofthe 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, 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
SA'-.... 'FRi\N 90103 (2Ki 12
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
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) Seller shall use commercially reasonable efforts to use WREGIS to
authenticate the transfer of "WREGIS Certificates" from Seller to Buyer in
accordance with WREGIS reporting protocols and the tenns 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 infonnation 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
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 fonn of attestation shall be
substantially in the fonn as set forth in Appendix B.
Seller shall be responsible for the WREGIS expenses associated with
registering the Plant, maintaining its account, paying the WREGIS
Certificates' 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 document or otherwise
13 SANFRAN 901(l3 (2K)
verify that transfer of RECs or other Environmental Attributes if Seller's
WREGIS costs exceed $2,500 in any calendar year. The $2,500 amount shall
be escalated at a rate of 1.5% annually, commencing on the first day of the
January following the Commercial Operation Date and continuing every
subsequent anniversary thereafter.
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 $92.08 per
MWh 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)
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 4.30) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (100%) 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 4.3{j). 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
14
SANFRAN 9(jl03 (2K)
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 8t1eh a determ:inatioo is made, Seller shttll 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
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 Buyer's 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 any third party 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
SANFRAN 9i1lOJ (2K)
15
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, Seller 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
flOm a later Expansion Plant tmder 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 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 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
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
16
SANFRAN 90103 (2K)
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, manltained and operated, at SeHer'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 upon at least ten (10) days' prior
written notice 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 NCP A, while adhering to both ISO
and NCP A communications protocols. Seller shall provide a copy of each
Certificate of Compliance, if any, issued by the ISO.
Buyer and NCPA 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
equipment does not interfere with the Seller's metering equipment. Seller
11
SAl>o'FRAN 90lO3 (1:K)
1
4
j ,
"
3.2
shall pennit 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 perfonn its duties as scheduling coordinator
and comply with the requirements of the ISO tariff.
Billing
Seller shall read the meter at the end of each calendar month ofthe Tenn, and
provide to Buyer on or before the tenth (10th) day of the following month an
invoice based upon the meter data for Energy delivered in such calendar .. ..
attestation is required). 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 Seller or Buyer detennine 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 alleged error. If the amount invoiced was too low, Buyer
shall, upon receiving verification of the error and supporting documentation
from 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 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 twentieth
(20th) day of the month or the tenth (loth) 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
SANIiRAN9010:; OK}
18
legal holiday. 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 payment
records relating to this Agreement for a minimum of two (2) years, and shall
peImit the other Party, ttpon rea50nable notice, to in5peet and andit stteh
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
19
SANFRA.~ 9:'110] (2K}
which are required by any Requirements of Law or Governmental Authority as
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 ofthe 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.
(f) Operate and maintain in a manner consistent with Prudent Utility
Pr2tet:ice the facilities it vAll 6Wf't and ethef'vvfSe eoeperate 'tVith LDG in the
physical interconnection of the Plant to the LDC System in accordance with
the Interconnection Agreement.
(g) By October 1st of each year of the Term, provide Buyer and NCPA 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 it is a scheduled or
unscheduled Outage, Seller shall notify Buyer and NCPA, 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 (a one hundred
percent (100%) Outage) and is due to a failure of the Plant rather than the
transmission and distribution system beyond the Point of Interconnection,
Seller shall give Buyer and NCPA at least four (4) hours notice before Seller
commences 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 ofNCPA's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
20
SANFRAN 90lO3 (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 (the "Seller's
Interconnection Costs"); provided, however, if the Seller's Interconnection
Costs are, in Seller's reasonable discretion estimated to exceed, and/or do
exceed, one million two hundred fifty thousand dollars ($1,250,000.00), then
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 and such termination shall not be effective if Buyer, by written
notice to Seller within fourteen (14) days following such notice from Seller,
agees to adjust the Priee payable under Section 2.3 of this Agreetnefl:t 8fl.dIor
agrees to reimburse Seller more than the maximum Reimbursement Amount
(as defined below), and within forty-five (45) days thereafter agrees with
Seller in writing (each in their sole discretion) to an amendment of this
Agreement revising the Price payable under Section 2.3 of this Agreement
andlor revising the Reimbursement Amount. 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 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. If Seller's Interconnection Costs are above three hundred thousand
dollars ($300,000.00), then Buyer shall reimburse (and pay) Seller, on a dollar
for dollar basis, an amount equal to the product of (a) the amount (in dollars)
equal to the difference between Seller's Interconnection Costs and three
hundred thousand dollars ($300,000.00), times (b) 1.5 (the product thereof
being the "Reimbursement Amount"); provided, however, the maximum
Reimbursement Amount that Buyer shall be obligated to reimburse (pay) to
SANFRAN 90103 (2K) 21
Seller shall be one million four hundred twenty-five thousand dollars
($1,425,000.00). Notwithstanding anything to the contrary in the immediately
previous sentence, Seller may terminate this Agreement without liability of
either Party to the other Party if Seller's Interconnection Costs (calculated
without taking into consideration any Reimbursement Amount) are estimated
to exceed and/or do exceed one million two hundred fifty thousand dollars
($1,250,000.00) as provided above in this Section 4.1(h). Buyer shall pay
Seller the Reimbursement Amount within thirty (30) days after the Buyer
receives an invoice from Seller for such Reimbursement Amount (Seller may
send one invoice to Buyer for the entire Reimbursement Amount or Seller may
send multiple invoices to Buyer which total the entire Reimbursement
Amount). Seller shall not invoice Buyer for any of Seller's Interconnection
Costs until Seller's Interconnection Costs have exceeded three hundred
thousand dollars ($300,000.00) and Seller shall provide Buyer with evidence
of Seller's Interconnection Costs such as the Interconnection Agreement
andlO! invoiees. Upon eotnpl:etion of an Expansion Plant v;rhieh 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. If this Agreement is terminated before the expiration of the Term
(before the 15 th anniversary of the Commercial Operation Date) by either Party
and there is no Event of Default by Buyer (no Event of Default by Buyer at the
time of the election to terminate (by either Party) through the effective date of
the termination), then, to the extent Buyer has paid Seller any Reimbursement
Amount prior to the effective date of such termination of this Agreement,
Seller shall refund to Buyer a proportion of any such Reimbursement Amount
paid by Buyer to Seller within thirty (30) days after the effective date of such
termination of this Agreement as set forth in the following sentence in this
paragraph. The proportion of the Reimbursement Amount that Seller shall
refund to Buyer per the immediately previous sentence shall be an amount
equal to the sum of the Reimbursement Amount (to the extent previously paid
by Buyer to Seller) multiplied by a fraction, whose numerator is equal to the
number of years and full months remaining in the Term, expressed in months,
at the effective date of termination and whose denominator is equal to the full
Term of the Agreement, expressed in months (or 180 months).
22
SANFRA. .... 9;)103 (ZK)
(i) Negotiate and enter into a Participating Generator Agreement and a
Meter Service Agreement for ISO Metered Entities with the ISO, the load
control area operator for the LDC System that is interconnected with the Plant.
Buyer shall pay for or reimburse Seller for Buyer's 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 Sections 3.1 and
4.1 (h) of this Agreement. 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.
(k) Maintain an Availability Threshold of at least seventy percent (70%).
Should Selle! fail to ma:intain stteh an kv'a:ilability Thresheld, the Pflee
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)
SA..,\'FRAN 9Q1UJ (2K) 23
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Within ninety (90) days after the Effective Date, 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
Salinas Valley Solid Waste Authority, 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) within 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 Party to the other Party, 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 mlder 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 within seven (7) days of receipt 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.
(f) 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
24
SANFRAN 90103 (2K)
accordance with Generally Accepted Accounting Principles ("GAAP")
consistently applied, no later than four (4) months after the end of such
accounting year of such entity. Seller shall also provide, on a quarterly basis,
j 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
(a) The Parties agree that time is of the essence and that certain milestones
(individually, a "Mile stene" and, eelleetively, the "Milestenes") fer 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 the Milestones by the dates set forth below.
(b) The following events are all of the Milestones:
SANFRAN 90103 (2K)
(i) By the date ninety (90) days following the Effective Date, Seller
shall have signed an LFG Agreement with Salinas Valley Solid
Waste Authority and have obtained Site Control.
(ii) By the date one hundred fifty (150) days following the date of the
LFG Agreement between Seller and Salinas Valley Solid Waste
Authority (the date Qf the LFG Agreement shall be the date the
LFG Agreement is made and entered into and fully executed),
Seller shall have completed to Seller's satisfaction a review of the
Site and the results of such review shall be satisfactory to Seller
(including, without limitation, a Phase I environmental site
assessment, a Phase II environmental site assessment and/or any
other environmental assessment/study), if Seller decides, in
Seller's sole discretion (at Seller's cost), to do such review of the
Site.
(iii) By the date twenty-six (26) months following the later of the (1)
date that Buyer approves the LFG Agreement, and (2) date one
hundred fifty (150) days following the date of the LFG
25
Agreement between Seller and Salinas Valley Solid Waste
Authority (the date of the LFG Agreement shall be the date the
LFG Agreement is made and entered into and fully executed),
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.
(iv) By the date one (1) month following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(iii), 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.
(v) By the date twelve (12) months following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(iii), and (b) entering into an Interconnection Agreement,
Seiler sha:ll have commenced comtrtleti6n of the Plant.
(vi) 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, Seller shall provide to Buyer monthly
progress reports concerning the progress towards completion of the
Milestones. In addition, within five (5) business days of the completion of
each Milestone, Seller shall provide a certification to Buyer along with any
supporting documentation (if applicable), 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 ofthe system
impact and facility cost studies from the LDC, but in no event later than the
date set forth in Section 4.3(b)(iii), Seller shall specify the Initial Capacity of
the Plant (which shall be subject to the limits contained in Section 1.17);
provided, however, Seller may (in Seller's sole discretion) increase the Initial
Capacity of the Plant at any time during the Term by adding equipment for
recovering waste heat from the prime mover engines of the Plant for purposes
of utilizing such waste heat to produce additional Energy. If Seller decides to
increase the Initial Capacity of the Plant during the Term (after Seller has
originally specified the Initial Capacity of the Plant), then Seller shall provide
26
Buyer with written notice of the date of such increase, the amount of such
increase, and the entire capacity of the Plant (as increased) as of such date.
The new increased capacity of the Plant shall then become the Initial Capacity
of the Plant from the date set forth in Seller's written notice until the end of the
Term (the Initial Capacity of the Plant (as increased) shall be not less than 2.0
MW and not more than 6.6 MW (gross nameplate), and not less than 1.6 MW
and not more than 6.2 MW (net at the Point of Interconnection). Seller makes
no written or oral representation or warranty, either express or implied,
regarding whether or not Seller will add equipment for recovering waste heat
from the prime mover engines of the Plant and/or utilize that waste heat to
produce additional Energy.
(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 a Force
Majeure Event, Seller shall so notifY Buyer, in writing, as soon as is
reasonably practicable. 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)(iv), (v), or (vi), 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 Majeure Events for any or all of the Milestones exceed
six (6) months.
(f) In the event that Seller fails to meet the Milestones set forth in Section
4.3(b)(i) or (ii) 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) or (ii).
(g) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(iii) for any reason, Buyer may terminate this Agreement, without
27
SANFRA."'l90103 (2K)
liability of either Party to the other, within ten (10) 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)(iii) prior to Buyer giving
"'Titten notice of termination, this Agreement shall remain in full force and
effect. If Buyer does not terminate this Agreement ",ithin ten (10) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone, and Buyer must give Seller sixty (60) days' prior written
notice to terminate this Agreement, during which period if Seller cures such
defect and 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 )(iii).
(h) In the event that Seller fuils to meet the Milestone set forth in Section
4.3(b)(v) within six (6) months after the relevant Milestone date for any reason
(O! up to tI~elve (12) months if also dehryed by Ii Foree :M:ajetlTe Evel:1t), 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 Milestone date until the Milestone is
met. Such funds will be used towards any liquidated damages as set forth in
Section 7.4(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)(v) 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. Seller's
escrow option, Buyer's option to terminate, and liquidated damages shall be
Buyer's sole remedies for any failure of Seller to meet the Milestones set forth
in Section 4.3(b)(iv) or (v).
(i) Seller covenants that it will diligently pursue all Milestones including
the Commercial Operation Date, which Seller envisions will occur within
thirty-five (35) months following the execution ofthis Agreement.
G) In the event that any of the approvals described in Section 4.3(b)(iii) are
not obtained by the date specified in Section 4.3(b )(iii) for satisfaction of the
28 SANFRAN 90103 (2K)
relevant Milestone or are obtained on a basis not reasonably satisfactory to
Seller, including without limitation, in the case of the air pennit (from the air
pollution control district that has jurisdiction over construction and operation
of the Plant), 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 tenninate this
Agreement without liability of either Party to the other Party by giving notice
to Buyer, in writing, of such tennination; 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 satisfactory to Seller is received, in writing, or (b)
the date specified in Section 4.3(b)(iii) for satisfaction of the relevant
Milestone; further provided, that such notice and such tennination shall not be
effective if Buyer, by written notice to Seller within fourteen (14) days
following such notice from Selier, agrees (i) to pay Seller with the first invoice
following the Commercial Operation Date the reasonable all-in cost (including
leasonable btoker fees, if any) to ptnchase aU stleh offsets stlffieient to operate
the Plant at full Initial Capacity (less reasonably projected scheduled Outages
for maintenance) for the tenn of this Agreement, and Oi) to adjust the price
payable under Section 2.3 of this Agreement and within thirty (30) days
thereafter agrees with Seller (each in their sole discretion), in writing, 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 4.30). In the event that
Seller exercises such tennination 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 confonn to the provisions of
Section 2.5. The provisions of this Section 4.30) shall survive tennination of
this Agreement under this Section 4.30) for a period of five (5) years from the
effective date of such tennination.
(k) In the event that Seller has not completed to Seller's satisfaction a
review of the Site or the results of such review are not satisfactory to Seller as
contemplated in Section 4.3 (b)(ii), Seller may tenninate this Agreement
without liability of either Party to the other Party by giving notice to Buyer, in
writing, of such termination, provided that such notice must be given no later
than one hundred sixty-four (164) days following the date of the LFG
Agreement between Seller and Salinas Valley Solid Waste Authority (the date
of the LFG Agreement shall be the date the LFG Agreement is made and
29
entered into and fully executed).
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 ltansitiwi charges, applicable conltol area SeI vice chaIges,
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
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
30 SANFRAN9:)lOJ (1K)
penalties associated with such Outage or ISO tariff obligation. Buyer may
replace NCPA as Scheduling Coordinator for the Plant. If NCPA ceases to be
the Scheduling Coordinator for the Plant and Buyer is unable, within fourteen
(14) business days of notice from Seller, to appoint a replacement Scheduling
Coordinator, Seller shall have the right to appoint a replacement Scheduling
Coordinator on Buyer's 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 tmlOi em taxes paid by Sellet 01 Salinas Valley Solid Waste Autft()flty
associated with the Site or the Landfill.
5.3 Notification of Transmission Outages
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
SANFRAN 90103 (2K)
31
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 difiiculty.
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 FOlce Majerue E~ent shall not excuse any Party from its obligatitm3 to make
payment of amounts due hereunder.
6.3 Notice
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.
32 SANFRAN 001;):3 (ZK)
ARTICLE VII
DEFAULTIREMEDIESITERMINATION
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 the receipt of 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 aftel the leCeipt of writte1l1mtice that such pa,ment is dtle.
(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 ofthe initiation by
Buyer of a voluntary proceeding under the bankruptcy or insolvency laws.
7.2 Events of Default by Seller
(1) The following shall each constitute an "Event of Default" by 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(1)(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 the receipt of 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 ofa voluntary proceeding under the bankruptcy or insolvency laws.
SANFJI.AN 9010) (lK) 33
(d) SeHer 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)(vi), 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 any of Sections 7.2(1)(a), (d) or (e).
above shall constitute an Event of Default if Seller cures the event, failure or
circumstance within (30) days after the receipt of 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
(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 ofthe 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 4.30), 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
SANFRAN 90103 (lK)
34
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.
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 73(a), shall limit the right of a non-defaulting Party to
tights mtd temediesavailable at law, inclttding, btrt not limited to, elaims fur
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
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 43(b)(vi), as such
deadline may be extended as a result of a Force Majeure Event in accordance
with Section 43( 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
35
to achieve Commercial Operation, or if for any reason Seller fails to pay, or
discontinues paying, the monthly liquidated damages provided for above,
Buyer may terminate this Agreement upon thirty (30) days' prior 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 receipt 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)(vi) 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 imptaciieable or extremely diffiettlt to fix Buyer' s aetual
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.
7.5 Indemnification
Seller ana Buyer agree to defend, indemnif'y, 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 indemnif'ying Party. This indemnification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indemnitees but the indemnif'ying 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
36
SMr'JlAN 90103 (lK)
not be construed to relieve any insurer of its obligation to pay claims
consistent with the provisions of a valid insurance policy.
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.
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;
plo~ided t:lmt Buyer shall not be permitted to step-in ami take eontrol so long
as Seller or any Lender(s) is 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 that Seller has the ability to operate
the Plant in accordance with this Agreement, Seller shall resume operational
control.
Should 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 Party; (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
37
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 Party.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the Effective Date:
0) Seller is duly OI ganized and validly existulg 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 Effective Date, (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 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 "qualifying
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;
38
SANFRAN 90103 (2K)
(iii) The execution, delivery and performance of this Agreement by Seller
will not contlict 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, whieh iHdiviclually 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 Buver Representations and Warranties
Buyer represents and warrants to Seller that as of the Effective Date:
(i) Buyer is a chartered city and municipal corporation, duly organized and
validly existing, and has the lawful 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 contlict 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;
39 SA.~ 9OIOJ (ZK)
(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
pet fOHn its obligations WIdet this Ag:t eement.
ARTICLE IX
NO CHANGE TO RATES, TERMS OR CONDITIONS
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, Nos. 06-1457,128
S.Ct. 2733 (2008), and consistent with the order of the Supreme Court in NRG Power
Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-674, 130
S.Ct. 693 (2010) ('~G Order"). As to all other persons it is intended that the same
standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.
ARTICLE X
MISCELLANEOUS
10.1 Assignment
40
SANFRAN 90103 (1K)
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
subcontractors, Seller shall remain responsible for all of 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 assigmnent of this
Agreement in the absence of the required consent, except as provided in
Section 10.2, shall be void.
10.2 Financing
Notwithstanding Section 10.1, SeHer may, withottt the eonsent of Buyer,
assign, transfer or hypothecate its rights under this Agreement to Lenders as
collateral security in connection with any fmancing 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 assigmnent,
Seller's obligations under this Agreement shall continue in their entirety in full
force and effect and 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 tinancing or refinancing for the Plant. Any assigmnent
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 fmancing from Lenders.
10.3 Notices
41
SANFRAN 9OlOJ {1K)
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:
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 328-3631
on behalf of Buyer;
with a copy to:
City of Palo Alto
250 Hamilton A venue, Eighth Floor
Palo Alto, CA 94301
Attention: Senior Assistant City Attorney / Utilities
Telecopier: (650) 329-2646
and to:
SA.'iFRAN 9OIOJ (ZK)
City of Palo Alto
250 Hamilton A venue, Third Floor
Palo Alto, CA 94301
Attention: Director of Utilities .
Telecopier: (650) 321-0651
42
and to:
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Attention: Power Contracts Administrator
Telecopier: (916) 781-4255
and to:
Ameresco Crazy Horse LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention. General Connsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
with a copy to:
Ameresco Crazy Horse LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: Senior 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.
43
SANFRAN 90103 (2K)
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.
16.6 No Dedication
No undertaking by one Party to the other Party under any provision of the
Agreement shall constitute the dedication of that Party's system or any portion
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 andlor the laws of the United
States, as applicable.
44
SM.'FR1\N9(10) ('2K)
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 B OJ e1 sha:l:l 110t hall e allY tight, po W e1 01 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.
10.11 Good Faith and Fair Dealing; Reasonableness
The Parties agree to act reasonably and in accordance with the principles of
good faith and fuir dealing in the performance 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 determine, require, specify
or take similar action with respect to matters, such determination, requirement,
specification or similar action shall be reasonable.
45
SA.'fl!RAN 90100 (:/K)
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 information disclosed by Seller, including, without limitation, all
engineering documents, designs, specifications and financial information, shall
be kept confidential and shall not be disclosed to any third party except as
plO'vided in this Section 10.13. Boyer acblOwledges Seller's reqtlest to hold
all information regarding this Agreement confidential. Buyer shall disclose
such information 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 Salinas Valley Solid Waste
Authority or its representatives, NCPA or its representatives, or to Lender(s) or
potential Lender(s) or its/their representatives; provided that prior to such
disclosure, the recipient shall agree, in writing, to keep the material
confidential under terms no less stringent than as set forth in this Section
10.13. Buyer also shall be permitted to disclose this Agreement and related
information to the City Council of Palo Alto for the express purpose of
obtaining approval to execute this Agreement; provided that in connection
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 in this
Agreement shall restrict any Party from using or disclosing confidential
information in any manner it chooses, which confidential information (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
46 SAJI<"FRAN90103 (2K)
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, administrative 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 Cuupel atiull
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.
10.16 Financing
Notwithstanding anything to the contrary in this Agreement, Seller may
terminate this Agreement at its sole discretion without liability of either Party
to the other Party if Seller is unable to obtain financing, on terms satisfactory
to Seller, for the (i) construction of the Plant, (ii) operations and/or
maintenance of the Plant, and/or (iii) working capital or other ordinary
business requirements for the Plant.
(signature pageJollows]
47
SANFRAN90IOJ(2K)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the Effective Date.
AMERESCO CRAZY HORSE 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: Senior Vice President Title: Senior Assistant City Attorney
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
By:,
Name: Lalo Perez By:.
Title: Administrative Services Director Name: Valerie O. Fong
Date: Title: Utilities Director
Date:
CITY OF PALO ALTO
Name: James Keene .. ,
Date:
4S
SANFR.AN 90103 (2K)
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , __ , before me, the undersigned notary
public, personally appeared , as the of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco Crazy Horse
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 Crazy
Horse LLC, a Delaware limited liability company.
My Commission expires
Notary Public
49
SANFRAN 90t03 (2K)
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer the final Site Drawings prior to the Commercial
Operation Date.
50
SANFRAN 90100 OK)
APPENDIXB
FORM OF ATTESTATION
Ameresco Crazy Horse LLC
Environmental Attribute Attestation and Bill of Sale
Ameresco Crazy Horse LLC ("Ameresco") hereby seils, transfers and delivers to
_~ .... __ .... ("Customer")
the Environmeatel Attributes and Environmental Attribute Reporting Rights associated with the generation of
the indicated energy for delivery to the grid (as sucb term(s) are defined in the
;-c--:-----=--.................... (identity contract) (the "Contract') dated __ , 20_
between Ameresen 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 operadonal date and amount of new capacity)
As applicable: CEC Reg. no. Energy Admin. ID no. __ Q.F. fD no._
MWhrs generated
20
in the amount of one Environmental Attribute or its equivalent for each megawatt hour generated; and Amereseo
further attests, warrants and represents as follows:
i) to tbe best of its knowledge, tbe 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 tbe Facility.
_ Iv) to the best of Ameresco's knowledge, eacb of the Environmental Attributes and Environmental
Attribute Reporting Rights associated with the generation of the indicated energy for delivery to tbe
grid have been generated and sold by the Facility.
This serves as a bill of sale, tran.~ferring from Ameresco to Customer all of Ameresco's right, title and interest in
and to the Environmental Attributes and Environmental Attribute Reporting Rights a.'ISOciated with the generation
of the energy for delivery to the grid .
Contact Person: .......... _____ ~ ...... tel: 1-508-661-2200; filx: 1-508-661-2201
WITNESS MY HAND,
AMERESCO CRAZY HORSE LLC
By: Ameresco, Inc., its sole member
By
Its
Date:
B-1
51
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' CompensationJEmployer's Liabilitv. 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, unless prohibited by law.
52
SM"FR.A-~ 90103 (2K)
APPENDIXD
SCHEDULING PROTOCOLS
1. Prior to three (3) business days 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 1400 hrs. each Thursday, Seller shall provide a forecast of
loads and/or generation for the following week to the extent it is
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 NCPA prior to 0800 hrs. two (2) days before the active
scheduling day.
a. Example: For power that is scheduled for generation or delivery on
Thursday, March 25,2010, changes must be submitted to NCPA by
no later than 0800 hrs. on Tuesday, March 23,2010.
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 four (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 1500 hrs. (for the period from 1401 hrs. to 1500 hrs.),
changes must be submitted to NCPA no later than 1100 hrs.
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.
53
7. All notices and schedules are to be submitted to NCPA by phone, fax or
email to the following persons: Chief DispatcherlScheduler.
8. In the absence of forecasts and schedules as noted above, NCP A will
utilize the most current information provided by Seller in the development
and submission of schedules.
54
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June __ , __
Hour Ended: Expected Capability
1
2
i
<I
5
h
7
R
Q
10
11 l' I n
I ----
14-
I 15
...... _--...... -~-
..... -. ..... -.
11>
17
I 18
I 1Q
'0
?1
I I 22
i Tl
?.d
Expected Daily Temperatures, F
Low
High
Contact
Information:
Scheduling
Coordinator:
Facility:
CI1Y:
SANFRAN 90103 (2K)
APPENDIXE
PERFORMANCE TEST
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 ofthe Landfill and Plant and associated
facilities, systems and equipment. Seller shall supply a written copy of the
performance test results to Buyer within five (5) business days following the
conclusion ofthe 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 (in this instance, Initial Capacity shall not include
any capacity of the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to produce additional
Energy (to the extent such equipment for recovering waste heat is or is not
installed by Seller)) 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 90103 (2K) 56
APPENDIXF
SELLER'S SAMPLE QUARTERLY FINANCIAL STATEMENT
Balance Sheets
December 31, 2006 and 2007
ASSETS
Current assets:
Cash and casn equivalents
Restricted casn
Accounts receivable
Prepaid and other current assets
Total current assets
Otller 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
57
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:
Selling, general and administrative
Operatmg 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
SA.~"f9010J.(2K)
ATTACHMENT F
Not Yet Approved
Resolution No. :---:--
Resolution of the Council of the City of Palo Alto
Approving a Power Purchase Agreement (Landfill Gas
Power) with Ameresco San Joaquin LLC for the Acquisition
of Up to 52,000 Megawatt-hours per Year of Energy over
Twenty Years
\\1HEREAS, the City of Palo Alto (the "City"), a municipal utility and a
chartered city is a member of the Northern California Power Agency ("NCPA");
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 target
levels of new renewable resource energy purchases equal to thirty percent (30%) and
thirty-three percent (33%) 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 San Joaquin LLC ("Ameresco") proposed its project in
response to the City's Request for Proposals 134307 ("RFP") in November 2009, and it
was deemed competitive with other RFP respondents;
WHEREAS, the execution of this power purchase agreement with Ameresco is
anticipated to enable the City to meet a three-percent portion of its goal of sourcing 33%
of its energy needs from renewable electric energy;
WHEREAS, the City is allocated a 100 percent share of the power from the
initial project, amounting up to 6.2 megawaUs of plant net output;
WHEREAS, the power purchase agreement allows Ameresco to sell the City
additional output, if developed, from engine heat recovery, at the contract price;
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE, as follows:
SECTION 1. The Council hereby approves the City's execution of the long
term Power Purchase Agreement (Landfill Gas Power) made between Ameresco San
Joaquin LLC, as Seller, and the City of Palo Alto, as Buyer. The delivery term of the
agreement is twenty (20) years, commencing upon the Commercial Operation Date of
the planned electric generation facility. Quantity is a 100 percent share of the plant's net
100308 jb OG73322 1
Not Yet Approved
output. Spending authority under the agreement is not to exceed one hundred twenty
two million four hundred thousand dollars ($122,400,000). The City Manager is hereby
authorized to sign the agreement with Ameresco San Joaquin LLC and the City Manager
or his designee is authorized to sign any confirmations executed in connection with the
agreement on behalf of the City.
SECTION 2. With respect to the Council's award of the Power Purchase
Agreement referred to in Section 1 above, the Council hereby waives the
.creditworthiness requirements of Palo Alto Municipal Code section 2.30.340(c) as it
may apply to Ameresco San Joaquin LLC.
SECTION 3. 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. The County of San Joaquin will be the lead
agency for the purposes of compliance with the requirements of the California
Environmental Quality Act
INTRODIJCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
100308 jb 0073322 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENT G
POWER PURCHASE AGREEMENT
This Power Purchase Agreement is entered into this __ day of ___ _
2010 (the "Effective Date") by and between the City of Palo Alto, a California
chartered municipal corporation and Ameresco San Joaquin 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 Foothill Sanitary Landfill (the
"Landfill") located at 6484 N. Waverly Road, Linden, California, on a site
leased from San Joaquin County, 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 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, the Output of the
Plant, on the terms and conditions and at the prices set forth in this Agreement.
5. Seller may determine to incorporate heat recovery equipment to produce
additional electrical output to be included and sold as Energy in accordance
with the terms of this Agreement.
6. 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.
7. Buyer will have a right of first refusal to purchase 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, the Parties agree, as follows.
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:
SANFRAN 90103 (2K)
A = Availability Threshold
Available Hours = the number of hours during the prior twenty-four (24)
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
this instance, Initial Capacity shall not include any capacity of
the Plant from equipment for recovering waste heat .from the
prime mover engines of the Plant to utilize that waste heat to
produce additional Energy (to the extent such equipment for
recovering waste heat is or is not installed by Seller)) 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 (in this
instance, Initial Capacity shall not include any capacity of the
Plant from equipment for recovering waste heat from the prime
mover engines of the Plant to utilize that waste heat to produce
additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller)) the Plant is capable of
delivering in such hour.
Base Hours = the number of hours during the same twenty-four (24)
months period referred to in Available Hours; provided that, to
the extent that the Plant is partially or wholly incapable or
2
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) month
period 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
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
twellty-foUl (24) month pe:riod.
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 (in this instance, Plant
shall not include equipment for recovering waste heat from the prime mover
engines of the Plant for purposes of utilizing such waste heat to produce
additional Energy to the extent such equipment is not then installed by Seller)
. 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 Confirmation Notice: As defined in Appendix G.
1.7 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.
1.8 Effective Date: As defined in the first paragraph of this Agreement.
3 SA.WRAN 90103 (2K)
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.
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
4
SANFRAN 90101 (2K)
Expansion Plant(s) for compliance with local, state, or federal operating
and/or air quality permits.
1.11 Environmental Attribute 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.
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 ovmed or controlled by Seller or its
affiliate(s) located at the Landfill mm fueled by Lmtdfill Gas. Each sueh
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 Fixed Increase For Emission Controls: As defined in Appendix G.
1.17 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
SANFItAN 90\{}:) (2K)
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
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 ill prevents 8uye:r nom 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 1.17 (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.
1.18 Governmental Authority: Any federal, state or local 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.
1.19 Increase For Emission Controls: As defined in Appendix G.
1.20 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 2.0 MW and not more than
6.6 MW (gross nameplate), and not less than 1.6 MW and not more than 6.2
MW (net at the Point of Interconnection) and as further specified (and possibly
increased from the installed gross capacity (which may increase the net at the
Point of Interconnection) of the Plant on the Commercial Operation Date)
pursuant to Section 4.3( c).
SANFRAN 90103 (lK)
6
1.21 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.22 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.
1.23 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.
1.24 ISO: The California Independent System Operator Corporation, or its
functional successor.
1.25 kWh: kilowatt-hour.
1.26 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.27 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.28 LDC: Pacific Gas and Electric Company, a California corporation.
1.29 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.
1.30 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.
1.31 LFG Agreement: As defined in Section 4.2( d).
7
SANFRAN 90103 (2K)
1.32 Monthly LD Amount: The product of (i) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity (in this instance, Initial Capacity
shall not include any capacity of the Plant from equipment for recovering
waste heat from the prime mover engines of the Plant to utilize that waste heat
to produce additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller» specified under Section 4.3(c) (net
at the Point of Interconnection).
1.33 MW: Megawatt.
1.34 MWh: Megawatt hour.
1.35 NePA: The Northern California Power Agency, a joint action agency
organized and existing under the laws of the State of California.
1.36 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.
1.37 Output: All actual capacity of the Initial Capacity and associated Energy, as
wel1 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.
1.38 Parties: Buyer and Seller, and their respective successors and permitted
assignees.
1.39 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.40 Percentage Share: One Hundred percent (100%).
1.41 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 (in this
instance, Plant shall not include the equipment for recovering waste heat from
the prime mover engines of the Plant for purposes of utilizing such waste heat
to produce additional Energy to the extent such equipment is or is not installed
by Seller).
1.42 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.
1.43 Plant: The generation facility described in Recital 1 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. At any time during the Term, Seller may, in Seller's sole
discretion, construct andlor install and own equipment for recovering waste
heat tiffin the prime movet engines of the Plant fUI putposes of utilizing such
waste heat to produce additional Output (Seller makes no written· or oral
. representation or warranty, either express or implied, regarding the current or
. future existence of any such additional Output), provided that such equipment
for recovering waste heat shall be become part of the Plant (including, after
installation of such equipment, part of the definition of Plant) and shall not be
considered an Expansion Plant.
1.44 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.
1.45 Price: As defined in Section 2.3 and Appendix G.
1.46 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
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 andlor distribution of Landfill Gas andlor 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
9
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, but Production Incentives shall include
Section 29 Credits and Section 45 Credits.
1.47 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 ill could have been expected to achieve the desired resttlt
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.
1.48 Reimbursement Amount: As defined in Section 4. 1 (h).
1.49 Required Emission Controls: means any equipment and/or devices that need
to be installed, in Seller's sole discretion, to treat engine emissions at the Plant
to meet Requirements of Law andlor requirements of law applicable to Seller
andlor the Plant (including, without limitation, any permit, any air permit in
connection with the Plant, and any approvals in connection with the
construction andlor operation of the Plant). Required Emission Controls shall
include, without limitation, any (i) Selective Catalytic Reduction equipment or
any such other commercially used equipment at such time for nitrogen oxides
(NOx) emission reduction, (ii) Oxidizing Catalysts or any such other
commercially used equipment at such time for carbon monoxide (CO)
reduction, andlor (iii) a Continuous Emission Monitor or any such other
commercially used equipment at such time that performs a similar function.
SAJ..'FRAN9010l (2K)
10
1.50 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.
1.51 San Joaquin County: The County of San Joaquin, a political subdivision of
the State of California with principal offices at 44 N. San Joaquin Street, Suite
627 Stockton, California 95202
1.52 Section 29 Credits: Those tax credits available under Section 29 of Subtitle
A, Chap. lA, Part IV ofthe Internal Revenue Code of 1986, as amended, as of
the Effective Date.
1.53 Section 45 Credits: 'Those tax credits available mrder Section 45 of Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended, or
any other similar federal, state 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.
1.54 Seller: Ameresco San Joaquin LLC, a Delaware limited liability company,
and any successor or permitted assignee.
1.55 Seller's Interconnection Costs: As defined in Section 4.1(h).
1.56 Site: The real property in Linden, California on which the Plant is to be built
and located, as more particularly described in Appendix A.
1.57 Site Control: The point at which Seller satisfies one or more of the following
conditions: (I) 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.
1.58 Term: The period oftime during which the Agreement is in effect.
II
SANFRAN 90 I 03 (lK)
1.59 Test Energy: Energy generated by the Plant and delivered to the Point of
Interconnection prior to the Commercial Operation Date.
1.60 Variable Increase For Emission Controls: As defined in Appendix G.
1.61 WREGIS: Western Renewable Energy Generation Information System, or its
successor; provided that the successor is capable of performing substantially
similar functions and is acceptable to both Parties.
1.62 WREGIS Certificates: The meaning set forthin WREGIS Operating Rules.
1.63 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, Buyer's
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,
Buyer's Percentage Share of the Output relating to Test Energy pursuant to the
12
SANF'RAN9:Jll}] (ZK)
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, 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 ofthe 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
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) Seller shall use commercially reasonable efforts to use WREGIS to
authenticate the transfer of "WREGIS Certificates" from Seller to Buyer in
accordance with WREGIS reporting protocols and the terms 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
SANFRAN9(llUJ (2lC)
13
each calendar month, Seller shall document the production and transfer of
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, paying the WREGIS
Certificates' 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 document or otherwise
verifY that transfer of RECs or other Environmental Attributes if Seller's
WREGIS costs exceed $2,500 in any calendar year. The $2,500 amount shall
be escalated at a rate of 1.5% annually, commencing on the first day of the
January following the Commercial Operation Date and continuing every
subsequent anniversary thereafter.
For the purposes ofthis 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 the Price, as
determined in Appendix G, per MWh of Energy delivered or tendered to Buyer
14
SANFRIL'1 90103 (2K)
at the Point of Interconnection. 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 andlor 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 4.30) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (100%) 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 4.30). Buyer shall not claim Production Incentives. Buyer
agrees to cooperate with Seller andlor the owner of the Landfill as may be
necessary to allow maximization of the value of, and realization of, all
PlOductiOH Incentives, provided that Buyet shall not be required to ineur
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 andlor 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
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
15
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 Buyer's 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 any third party 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 btryel5, SeHer shall !loti£, Buyer in vniting of the tefffls
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, Seller 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 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.
16 SANFRA. ... 90103 (2K)
2.6 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
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
ill the Expansiwi Plant without the consent of SeHer to the design arn:l plsa 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 upon at least ten (10) days' prior
written notice 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
SANFRAN90JO:) (2K)
17
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 NCP A, while adhering to both ISO
and NCP A communications protocols. Seller shall provide a copy of each
Certificate of Compliance, if any, issued by the ISO.
Buyer and NCPA 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
equipment does not interfere with the Seller's metering equipment. Seller
shall permit Btryer 01 Btryer's lepresentative access to its PIMtt fur the pttt'pose
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 tenth (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) (if such
attestation is required). 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 Seller or 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 alleged error. If the amount invoiced was too low, Buyer
shall, upon receiving verification of the error and supporting documentation
18
from 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 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 twentieth
(20th) day of the month or the tenth (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. Payments made after the due elttte shall be eonsidered late aad
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 payment
records relating to 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
SANURAN 90103 (2K}
19
During the Tenn, Seller hereby agrees to perfonn the following affinnative
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" infonnation 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 Pennits, certificates or other authorizations
I'Vhich are requited by any Reqmremeltts of La 1'1 or CO"\l'emmentai Authority as
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
tenns 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, Pennits 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.
(t) 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 1st of each year of the Tenn, 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
SA.'NFRAN 90103 (2K)
20
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 it is 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 (a one hundred
percent (100%) Outage) and is due to a failure of the Plant rather than the
transmission and distribution system beyond the Point of Interconnection,
Seller shall give Buyer and NCPA at least four (4) hours notice before Seller
conunences 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 ofNCPA's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
(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 Conunercial Operation
Date in compliance with the Interconnection Agreement and associated rules
and requirements in place as of the Conunercial Operation Date (the "Seller's
Interconnection Costs"); provided, however, if the Seller's Interconnection
Costs are, in Seller's reasonable discretion estimated to exceed, and/or do
exceed, one million two hundred fifty thousand dollars ($1,250,000.00), then
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 and such termination shall not be effective if Buyer, by written
notice to Seller within fourteen (14) days following such notice from Seller,
agrees to adjust the Price payable under Section 2.3 of this Agreement (and
Appendix G hereto) and/or agrees to reimburse Seller more than the maximum
Reimbursement Amount (as defmed below), and within forty-five (45) days
thereafter agrees with Seller in writing (each in their sole discretion) to an
amendment of this Agreement revising the Price payable under Section 2.3 of
this Agreement (and Appendix G hereto) andlor revising the Reimbursement
Amount. 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
21
SANFRAN 9010J (2K)
the Tenn 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. If Seller's
Interconnection Costs are above three hundred thousand dollars
($300,000.00), then Buyer shall reimburse (and pay) Seller, on a dollar for
dollar basis, an amount equal to the product of (a) the amount (in dollars)
equal to the difference between Seller's Interconnection Costs and three
hundred thousand dollars ($300,000.00), times (b) 1.5 (the product thereof
being the "Reimbursement Amount"); provided, however, the maximum
Reimbursement Amol1nt that Bu,er· shall be obligated to reimburse (pay) to
Seller shall be one million four hundred twenty-five thousand dollars
($1,425,000.00). Notwithstanding anything to the contrary in the immediately
previous sentence, Seller may tenninate this Agreement without liability of
either Party to the other Party if Seller's Interconnection Costs (calculated
without taking into consideration any Reimbursement Amount) are estimated
to exceed and/or do exceed one million two hundred fifty thousand dollars
($1,250,000.00) as provided above in this Section 4.l(h). Buyer shall pay
Seller the Reimbursement Amount within thirty (30) days after the Buyer
receives an invoice from Seller for such Reimbursement Amount (Seller may
send one invoice to Buyer for the entire Reimbursement Amount or Seller may
send multiple invoices to Buyer which total the entire Reimbursement
Amount). Seller shall not invoice Buyer for any of Seller's Interconnection
Costs until Seller's Interconnection Costs have exceeded three hundred
thousand dollars ($300,000.00) and Seller shall provide Buyer with evidence
of Seller's Interconnection Costs such as the Interconnection Agreement
andlor invoices. 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. If this Agreement is tenninated before the expiration of the Tenn
(before the 20th anniversary of the Commercial Operation Date) by either Party
SANYRAN90103 (2K) 22
and there is no Event of Default by Buyer (no Event of Default by Buyer at the
time of the election to terminate (by either Party) through the effective date of
the termination), then, to the extent Buyer has paid Seller any Reimbursement
Amount prior to the effective date of such termination of this Agreement,
Seller shall refund to Buyer a proportion of any such Reimbursement Amount
paid by Buyer to Seller within thirty (30) days after the effective date of such
termination of this Agreement as set forth in the following sentence in this
paragraph. The proportion of the Reimbursement Amount that Seller shall
refund to Buyer per the immediately previous sentence shall be an amount
equal to the sum of the Reimbursement Amount (to the extent previously paid
by Buyer to Seller) multiplied by a fraction, whose numerator is equal to the
number of years and full months remaining in the Term, expressed in months,
at the effective date of termination and whose denominator is equal to the full
Term of the Agreement, expressed in months (or 240 months).
(i) Negotiate and enter into a Patticipating Generator Agreement !me a
Meter Service Agreement for ISO Metered Entities with the ISO, the load
control area operator for the LDC System that is interconnected with the Plant.
Buyer shall pay for or reimburse Seller for Buyer's 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 Sections 3.1 and
4.1 (h) of this Agreement. 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.
(k) Maintain an Availability Threshold of at least 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 (and Appendix G) 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.
23
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 desitable in the ordinary eotlrrse 6f its business; ana (ii)
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Within ninety (90) days after the Effective Date, 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
San Joaquin County, 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) within 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
Party to the other Party, 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
within seven (7) days of receipt of a written request by Buyer.
24 SAJI."FRAN 9(10) {2K)
(e) Seller shall provide to Buyer such other infonnation regarding the
pennitting, 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
aecordance with Generally Aceepted Acc6tlftiing P1:meiples ("Gl\AP")
consistently applied, 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 fonn 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
(a) The Parties agree that time is of the essence and that certain milestones
(individually, a "Milestone" and, collectively, the "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 the Milestones by the dates set forth below.
(b) The following events are all of the Milestones:
SANFRAN WIG] {2Kl
25
(i) By the date ninety (90) days following the Effective Date, Seller
shall have signed an LFG Agreement with San Joaquin County
and have obtained Site Control.
(ii) By the date twenty-six (26) 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 iftto S:I:l: Ifttereonneetion ,A~eeffient,
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, Seller shall provide to Buyer monthly
progress reports concerning the progress towards completion of the
Milestones. In addition, within five (5) 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
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 1.20); provided,
however, Seller may (in Seller's sole discretion) increase the Initial Capacity
of the Plant at any time during the Term by adding equipment for recovering
waste heat from the prime mover engines of the Plant for purposes of utilizing
such waste heat to produce additional Energy. If Seller decides to increase the
Initial Capacity of the Plant during the Term (after Seller has originally
26
SANI:'RAN9010J (2K)
specified the Initial Capacity of the Plant), then Seller shall provide Buyer
with written notice of the date of such increase, the amount of such increase,
and the entire capacity of the Plant (as increased) as of such date. The new
increased capacity of the Plant shall then become the Initial Capacity of the
Plant from the date set forth in Seller's written notice until the end of the Term
(the Initial Capacity of the Plant (as increased) shall be not less than 2.0 MW
and not more than 6.6 MW (gross nameplate), and not less than 1.6 MW and
not more than 6.2 MW (net at the Point ofInterconnection). Seller makes no
written or oral representation or warranty, either express or implied, regarding
whether or not Seller will add equipment for recovering waste heat from the
prime mover engines of the Plant and/or utilize that waste heat to produce
additional Energy.
(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 a Force
Majeme Event, Seller shall 36 notif)' Buyer, in VfI'itillg, as SOOR as is
reasonably practicable. 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 Majeure 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).
SA},llRA.~ 90101 (2K)
27
(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 (10) 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 Xii) 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 (10) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone, and Buyer must give Seller sixty (60) days' prior written
notice to terminate this Agreement, during which period if Seller cures such
defect and 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).
(It) hI the elient that Seller fails to meet the Mile5tone 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 ifalso 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 Milestone date until the
Milestone is met. Such funds will be used towards any liquidated damages as
set forth in Section 7.4(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. Seller's
escrow option, Buyer's option to terminate, and liquidated damages shall be
Buyer's sole remedies 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.
28
SANFRAN roWJ (2K)
G) 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 (from the air
pollution control district that has jurisdiction over construction and operation
of the Plant), 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 Party 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 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 sneh notice f10m SeHer, agrees (i) to pay Seller with the first tft"toiee
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 the price
payable under Section 2.3 (and Appendix G) of this Agreement and within
thirty (30) days thereafter agrees with Seller (each in their sole discretion), in
. writing, 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
4.3(j). 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 4.3(j) shall survive
termination of this Agreement under this Section 4.3(j) for a period of five (5)
years from the effective date of such termination.
ARTICLE V
BUYER'S OBLIGATIONS
5.1 Delivery and Transmission
SANFRAN 90W3 {l£(} 29
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
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 coordinatot shall be limited to th6se dttties as are speeifieally
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 NCPA as Scheduling Coordinator for the Plant. If NCPA ceases to be
the Scheduling Coordinator for the Plant and Buyer is unable, within fourteen
(14) business days of notice from Seller, to appoint a replacement Scheduling
Coordinator, Seller shall have the right to appoint a replacement Scheduling
Coordinator on Buyer's behalf, and Buyer shall enter into all reasonable and
appropriate agreements with such replacement Scheduling Coordinator at its
own cost.
30
SAt.'FRAN 90103 (ZK)
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 San Joaquin County associated with the
Site or the Landfill.
5.3 Notification of Transmission Outages
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
Btryel.
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
31
SANFRA.."'l90103 (2K)
from perfonning 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 nonperfonning Party shall be prompt and diligent in
attempting to remove the cause of its failure to perfonn, 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
In the event of any delay or nonperfonnance 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, eause, date of e6lmneneement thereof and the anticipated elctent of any
delay or interruption in perfonnance.
6.4 Termination Due To Force Majeure Event
Subject to Section 4.3(e), if a Party is prevented from perfonning 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
DEFAULTIREMEDIESITERMINA TION
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 the receipt of written notification of breach by Seller or
32
SANFRAN90101(2K)
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 the receipt of 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
(1) The following shall each constitute an "Event of Default" by 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(1)(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 the receipt of 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.
33
SANFRAc~ 90103 (2K)
(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 any of Sections 7.2(1 )(a), (d) or (e)
above shall constitute an Event of Default if Seller cures the event, failure or
circumstance within (30) days after the receipt of 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
(a) In the event the defaulting Party fails to cure the Event of Default within
the petiod fro cwative actiolll1llder Sections 7.1 or 7.2, as ftJ'l'lieable, the fl:6n
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 4.30), 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.
7.4 Damages
34
SANFR.A..,{ 901 OJ (2K)
(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
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 exeept 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 sct 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 provided for above,
Buyer may terminate this Agreement upon thirty (30) days' prior 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 receipt 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.
SANFRA. '{ 9010) (2K) 35
(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.
7.5 Indemnification
Seller and Buyer agree to defend, indemnifY, and hold each other, and their
respecti"e officers, directors, employees and agents, hannless frem 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.
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.
7.6 Buyer's Right to Operate
SANFRAN 90103 (2K)
36
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 Lender(s) is 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. Bttyet sha:ll indemftify and hold Seller harmless tfeffi any liability to
third parties arising out of Buyer's failure to operate the Plant using Prudent
Utility Practice. Upon Buyer's satisfaction that Seller has the ability to operate
the Plant in accordance with this Agreement, Seller shall resume operational
control.
Should 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 Party; (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 Party.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
37
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the Effective Date:
(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 Effective Date, (a) the Plant shall on the Commercial Operation
Date be a "qualif:)'ifig :small power produetioft faeility" as that term is
defined in Section 3(17)(C) of the Federal Power Act, and will 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) wi$ respect to this Agreement
is required from FERC. In the event that the Plant is not a "qualifYing
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
38
SANFRAN 901 OJ (2K)
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 Effective Date:
(i)
(ii)
(iii)
(iv)
S~1<lFRAN 90103 (2K)
Buyer is a chartered city and 1nl::Inicipal e61'p6ratf6ft, duly Ol'ganized and
validly existing, and has the lawful 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;
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;
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;
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
39
(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
The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition ofthis Agreement at FERC shall be the most
stringent stanchud permissible willet 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, Nos. 06-1457,128
S.Ct. 2733 (2008), and consistent with the order of the Supreme Court in NRG Power
Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-674, 130
S.Ct. 693 (201 0) ("NRG Order"). As to all other persons it is intended that the same
standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.
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
subcontractors, Seller shall remain responsible for all of 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
SANFRAN 9OlO:} (2K) 40
of its obligations under this Agreement. Any purported assignment of this
Agreement in the absence of the required consent, except as provided in
Section 10.2, shall be void.
10.2 Financing
Notwithstanding Section 10.1, Seller may, without the consent of Buyer,
assign, transfer or hypothecate 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 Seller shall remain fully liable for all of its obligations
under OI Ielating to this Agreement. Each such collateral assignmertt Md 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 refmancing 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:
41
SANnA."" 90103 (2K)
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 328-3631
on behalf of Buyer;
with a copy to:
City of Palo Alto
250 Hamilton Avenue, Eighth Floor
Palo Alto, CA 94301
Attention. Senior Assistant City Attorriey / Utilities
Telecopier: (650) 329-2646
and to:
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:
42
Ameresco San Joaquin LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: General Counsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
with a copy to:
Ameresco San Joaquin LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention. Senior Viee President, Rene'vva-hle 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,
defmitive 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
43
SA.~90IQ3(ZK}
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 Party under any provision of the
Agreement shall constitute the dedication of that Party's system or any portion
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
wIitten under standings. 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 ofthe 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 andlor 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
44
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.
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 similru action with lespect to matters, such determination, 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 San Joaquin County or its
45
representatives, NCPA or its representatives, or to Lender(s) or potential
Lender(s) or its/their representatives; provided that prior to such disclosure,
the recipient shall agree, in writing, to keep the material confidential under
terms no less stringent than as set forth in this Section 10.13. Buyer also shall
be permitted to disclose this Agreement and related information to the City
Council of Palo Alto for the express purpose of obtaining approval to execute
this Agreement; provided that in connection 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 in this Agreement shall
restrict any Party from using or disclosing confidential information in any
manner it chooses, which confidential information (i) is or becomes generally
available to the public utilet than as a le5ttlt of a diseloStll'e directly 6t'
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, administrative 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.
SA.NF:Rfu....-9010) (ZK) 46
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.
10.16 Financing
Notwithstanding anything to the contrary in this Agreement, Seller may
terminate this Agreement at its sole discretion without liability of either Party
to the other Party if Seller is unable to obtain financing, on terms satisfactory
to Seller, for the (i) construction of the Plant, (ii) operations and/or
maintenance of the Plant, and/or (iii) working capital or other ordinary
business requirements for the Plant.
[signature page/allows}
47 SANFR.A.N 90103 (2K)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the Effective Date.
AMERESCO SAc'" JOAQUL'i LLC
By Ameresco, Inc., its sole member
By: ____________ _
Name: David J. Corrsin
Title: Executive Vice President
Date: ______________ _
I CITY OF PALO ALTO
By:_
Name: Lalo Perez
Title: Administrative Services Director
Date:
CITY OF PALO ALTO
Bv:
Name: James Keene
Title: City Manager
Date:
SA-NFRAN9(10) (2K)
THE CITY OF PALO ALTO
APPROVAL AS TO FORM:
Grant Kolling
Senior Assistant City Attorney
CITY OF PALO ALTO
By:
Name: Valerie O. Fong
Title: Utilities Director
Date:
48
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , __ , before me, the undersigned notary
public, personally appeared , as the of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco San Joaquin
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 San
Joaquin LLC, a Delaware limited liability company.
My Commjssjon expires
Notary Public
49
SANFRAN901O:i (lK)
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer the [mal Site Drawings prior to the Commercial
Operation Date.
50
SANFRAN90lOJ (2K)
APPENDIXB
FORM OF ATTESTATION
Ameresco San Joaquin LLC
Environmental Attribute Attestation and Bill of Sale
Ameresco San Joaquin LLC ("Ameresco") hereby seUs, transrers and delivers to
--c-;--cc;;---=----;---:;-c---::---::--;--::-;-;-:-("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 defined in the
;-----,------,--,,--------,----,"7 (identifY contract) (the "Contract') deted ,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 :fucility that has added renewable capacity, show operational date and amount of new capacity)
As applicable: CEC Reg, no, _ Energy Admin, ID no, Q.F. ill no._
______ 20_
20
______ 20
MWhrs generated
in the amount of one Environmental Attribute or its equivalent for each megawatt hour generated; and Amereseo
further attests, warrants and represents as foUows:
i) to the best of its knowledge, the information provided herein is true and correct;
il) 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 indicate<l as undifferentiated
energy; and
[check one:]
_ iv) Amereseo owns the Facility.
_ iv) to the best of Ameresco's knowledge, each of the Environmental Artributes 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, lraru!ferring 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
CuutactPcrson; _______ tel; 1-508-661-2200; fux; 1-508-661-2201
WITNESS MY HAND,
SANFRAN 90103 (lK)
~\1ERESCO SAN JOAQUIN LLC
By: Ameresco, lnc., its sole member
By
Its
Date:
B-1
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 uninsuredlunderinsured 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 ofliability 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, unless prohibited by law.
52
APPENDIXD
SCHEDULING PROTOCOLS
1. Prior to three (3) business days 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 1400 hrs. each Thursday, Seller shall provide ~ forecast of
loads and/or generation for the following week to the extent it is
different from the monthly forecast in Paragraph 1. Weekly forecasts
will be hourly kW values for each hour of the week.
3. Daily IIIudificatiulls to forecasts. Unless odie! wise mutnmI, agteed,
Seller may make changes to the weekly forecast by providing such
changes to NCPA prior to 0800 hrs. two (2) days before the active
scheduling day.
a. Example: For power that is scheduled for generation or delivery on
Thursday, March 25, 2010, changes must be submitted to NCP A by
no later than 0800 hrs. on Tuesday, March 23, 2010.
4. Hourly modifications to active schedules. Unless otherwise mutually
agreed, Seller may make changes to active schedules by providing such
changes to NCPA with a minimum of four (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 1500 hrs. (for the period from 1401 hrs. to 1500 hrs.),
changes must be submitted to NCPA no later than 1100 hrs.
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.
53
SANFRAN90lOJ (lK)
7. All notices and schedules are to be submitted to NCPA by phone, fax or
email to the following persons: Chief DispatcherlScheduler.
8. In the absence of forecasts and schedules as noted above, NCP A will
utilize the most current information provided by Seller in the development
and submission of schedules.
54
SANFRA.'190103 {2K}
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June __ , __
Hour Ended: Expected Capability .
1
2
.~ ___ -,3L......_ ............... _
4
5
1------.......... 6.~---------t-
7
R I-----............... --~--------_+--------~ ............... -...... --~
1--____ ............... ~9:--__ _
1--_____ --'.11"-0 ________ 1--.. __ ...... ----------.............. -
11
12
---------~ ............... -
lh
17
lR I----............ ----~.~---------+-------............... _ ...... ------j
19
2Q ... ________ I--~ .......... ___________ .............. ~ _ __j 'I 22
'3
'4
Expected Daily Temperatures, F
Contact
Information:
Scheduling
Coordinator:
Facility:
CITY:
SANfR.Al',f 90103 (2K)
Low
High
APPENDIXE
PERFORMANCE TEST
Seller shall coordinate and schedule, with Buyer, a perfonnance test after
completion of all equipment startup and commissioning activities. This
perfonnance test may be perfonned before completing punch list items. Buyer
shall be pennitted to witness the perfonnance 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 perfonnance 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
perfonnance test results to Buyer within five (5) business days following the
conclusion of the test.
The perfonnance 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 perfonnance test shall
be perfonned 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 (in this instance, Initial Capacity shall not include
any capacity of the Plant from equipment for recovering waste heat from the
prime mover engines ofthe Plant to utilize that waste heat to produce additional
Energy (to the extent such equipment for recovering waste heat is or is not
installed by Seller)) designated in this Agreement. All power measurements shall
be based on a power factor of 0.90.
2) Compliance: The perfonnance test shall also demonstrate the ability ofthe
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.
SAtv"FRAN90103 (2K) 56
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
Dae [rem memeer
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
SANFRAN9010] (2K) 57
Statements of Operations
Years Ended December 31, 2006 and 2007
Revenues:
Electricity Sales
Costs of revenue:
Operation and maintenance
Depreciation ofproject assets
Gross profit (loss)
Operating expenses:
Selling, general and administrative
OJ'Jefatiag iaeeme (less)
Interest and other financing costs
Income (loss) before tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
SANFRAN 90 I 03 (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 HUllt 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)
APPENDIXG
Buyer shall pay Seller $91.3 3 per MWh of Energy delivered or tendered to Buyer at the Point of
Interconnection, provided, however, if any Required Emission Controls are installed, prior to the
later of the (i) Commercial Operation Date, and (ii) date that is sixty (60) days after the completion
of stack tests that Seller is required to perform (in connection with the Plant) by Requirements of
Law and/or any permit, then the price Buyer shall pay Seller per MWh of Energy delivered or
tendered to Buyer at the Point of Interconnection shall be $91.33 per MWh plus (a) $0.60 per MWh
of Energy delivered or tendered to Buyer at the Point of Interconnection (the "Fixed Increase For
Emission Controls"), plus (b) $0.0000055 per MWh of Energy delivered or tendered to Buyer at the
Point of Interconnection for each $1.00 of Seller's costs and/or expenses associated with the design,
engineering, equipment, installation and commissioning of any and all Required Emission Controls
(the "Variable Increase For Emission Controls" and collectively with the Fixed Increase For
Emission Controls, the "Increase For Emission Controls"). The Increase For Emission Controls
shall not exceed a maximum of $1 0.0 1 per M\llh. The entire price that Buyer shall pay Seller per
MWh of Energy delivered or tendered to Buyer at the Point of Interconnection ($91.3 3 per MWh
plus any Increase For Emission Controls) shall be escalated at a rate of 1.5% (of the then-current
price) annually on the anniversary of (j) 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. Prior to the later of the (i) Commercial Operation Date,
and (ii) a date that occurs sixty (60) days after the completion of stack tests, that Seller is required to
perform (in connection with the Plant) by Requirements of Law and/or any permit, Seller may
terminate this Agreement ",ithout liability of either Party to the other Party, if Seller's costs and/or
expenses associated with the design, engineering, equipment, installation and commissioning of the
Required Emission Controls are estimated to exceed (and/or do exceed) one million eight hundred
twenty thousand dollars ($1,820,000.00), and SeHer first communicates such information to Buyer
and Seller thereafter provides notice of termination to Buyer, in writing; provided, however, that
Seller's notice of termination shall not become effective if Buyer, by written notice to Seller Mthin
fourteen (14) days following the receipt of Seller's written notice of termination, agrees to
subsequently adjust the Price payable under Section 2.3 of this Agreement (and this Appendix G)
and/or agrees to reimburse Seller a mutually agreed amount based upon the amount by which the
costs and/or expenses associated with the design, engineering, equipment, installation and
commissioning of the Required Emission Controls exceed one million eight hundred twenty
thousand dollars ($1,820,000.00) and, within forty-five (45) days following Seller's receipt of
Buyer's notice regarding its interest in a Price adjustment andlor reimbursement arrangement, the
Parties, in writing, execute an amendment of this Agreement (in each Party's sole discretion),
revising the Price payable under Section 2.3 of this Agreement (and this Appendix G) andlor
agreeing to a reimbursement amount from Buyer to Seller.
Buyer shall pay Seller $91.33 per MWh of Test Energy delivered or tendered to Buyer at the Point
of Interconnection; provided, however, that the amount due andlor paid to Seller for Test Energy
shall be adjusted (it can only be adjusted up) after the Seller pmvides Buyer Mth the Confirmation
Notice as further set forth below.
SANFRAN 9(:1103 (2K)
To, among other things, confirm the price (as set forth in Section 2.3 of the Agreement and this
Appendix G) to be paid from Buyer to Seller in dollars per MWh of Energy delivered or tendered to
Buyer at the Point ofInterconnection, SeIler will provide Buyer with a written notice setting forth
twenty annual price rates (in doIlars per MWh of Energy delivered or tendered to Buyer at the Point
of Interconnection) for the portion of the Term on and after the Commercial Operation Date (as each
such annual price rate shall be escalated as set forth in thc penultimate sentence of thc first
paragraph in this Appendix G), starting with the first annual price rate which will be $91.33 per
MWh of Energy delivered or tendered to Buyer at the Point ofInterconnection, plus, to the extent
applicable, the Increase For Emission Controls (such notice being referred to as the "Confirmation
Notice"). The Confirmation Notice shall be (a) provided to Buyer on or prior to the later of the (i)
date ten (10) days after the Commercial Operation Date, and (ii) date that is seventy (70) days after
the completion of stack tests that Seller is required to perform (in connection with the Plant) by
Requirements of Law andlor any permit; and (b) substantially in the form attached hereto in
Appendix G-I (with items in brackets modified and blank spaces filled-in as applicable). If Seller
does not provide the Confirmation Notice to Buyer until after the Commercial Operation Date, then
the price Buyer shall pay Seller (the price in dollars per MWh of Energy delivered or tendered to
Buyer at the Point of Interconnection) after the Commercial Operation Date shall be $91.33 per
MWh (which shall he paid in accordance with the terms of the Agreement) until the date ofthe
Confrrmation Notice to Buyer (at which point such price may increase); provided, however, that
after the date of the Confrrmation Notice, Seller shall, within sixty (60) days following such date,
send a statement to Buyer setting forth any additional amount owed from Buyer to Seller under this
Agreement for the time period (during the Term) prior to the date of the Confirmation Notice ifthe
price (in dollars per MWh of Energy delivered or tendered to Buyer at the Point ofInterconnection)
as set forth in the Confirmation Notice is more than $91.33 per MWh during the first year following
(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 araount due from Buyer to Seller pursuant to such statement shall be the difference of (a) the
product of the total price (in dollars per MWh) for such first year (as set forth in the Confirmation
Notice) times the total MWhs of Energy (including Test Energy) delivered or tendered to Buyer at
the Point ofInterconnection prior to the date of the Confmnation Notice, minus (b) the product of
$91.33 times the total MWhs of Energy (including Test Energy) delivered or tendered to Buyer at
the Point of Interconnection prior to the date of the Confirmation Notice (nothing in this sentence
shall impact Buyer's obligation to also pay Seller $91.33 per MWh of Energy delivered or tendered
to Buyer at the Point of Interconnection prior to the date of the Confirmation Notice (the payment
from Buyer to Seller of the amount set forth in the statement is additional». Buyer shall pay the
araount set forth in such statement to Seller within thirty (30) days of Buyer's reeeipt of the
statement. On and after the date of Confirmation Notice, Buyer shall pay Seller the applicable
annual price rate, as set forth in the Confirmation Notice, per MWh of Energy delivered or tendered
to Buyer at the Point ofInterconneetion. Seller's failure to send Buyer a Confrrmation Notice shall
neither be an Event of Default by Seller nor shall it be cause for Buyer not to pay for Energy
delivered or tendered to Buyer at the Point of Interconnection.
SANFRAN 9<llOJ (lK)
[DATE]
[VIA ____ ---'
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
APPENDIX G-l
[Letterhead]
Re: Power Purchase Agreement -Confirmation Notice
Dear City Clerk:
Reference is made to the Power Purchase Agreement (the "Power Purchase Agreement"), dated as
of ~, 2010, between the City of Palo Alto ("Buyer") and Ameresco San Joaquin
LLC ("Seller"). Unless otherwise defined herein, capitalized terms used herein shall have the
meanings given to such terms in the Power Purchase Agreement.
In accordance with the terms of Section 2.3 and Appendix G of the Power Purchase Agreement,
Seller hereby gives notice (the Confirmation Notice as defined in Appendix G of the Power
Purchase Agreement) to Buyer that Seller [has/has not] installed Required Emission Controls [at a
cost (including, without limitation, costs andlor expenses associated with the design, engineering,
equipment, installation and commissioning of any and all Required Emission Controls) of
[$ ]]. Therefore, in accordance with the terms of Section 2.3 and Appendix G of the
Power Purchase Agreement, the price Buyer shall pay Seller in dollars per MWh of Energy
delivered or tendered to Buyer at the Point of Interconnection from the Commercial Operation Date
until [the first anniversary of(i) the first day of the first full month following the Commercial
Operation or (ii) if the Commercial Operation Date falls on the first day of the month, the
Commercial Operation Date (Year 1 as set forth in the chart below)] and for eaeh year thereafter
[(the final year (20) being a partial year if the Commereial Operation Date does not full on the first
day ofthe month)] through the remainder of the Term shall be as follows in the chart below:
Year
SANFRAN oot OJ (2K)
Price in dollars per MWh
of Energy delivered or
tendered to Buyer at the
Point of Interconnection
1 [this column is to be
filled-inl
2
3
: 4
5
6
7
8
9
10
11
12
13
14
15
16
18
19
I 20
Sincerely,
Ameresco San Joaquin LLC
[By: Ameresco, Inc., its sole member]
By:::-o-________ _
Name:
Title:
Enclosures
ec: City of Palo Alto, 250 Hamilton Avenue, Eighth Floor, Palo Alto, CA 94301, Attention:
Senior Assistant City Attorney / Utilities (with enclosures and sent via _.. )
City of Palo Alto, 250 Hamilton Avenue, Third Floor, Palo Alto, CA 94301, Attention:
Director of Utilities (with enclosures and sent via )
Northern California Power Agency, 651 Commerce Drive, Roseville, CA 95678, Attention:
Power Contracts Administrator (with enclosures and sent via )
SANFRAN 90103 (lK)
ATTACHMENT H
Not Yet Approved
Resolution No. --::-:
Resolution of the Council of the City of Palo Alto Approving a
Power Purchase Agreement (Landfill Gas Power) with
Ameresco Crazy Horse LLC for the Acquisition of Up to
52,000 Megawatt-hours per Year of Energy over Twenty Years
WHEREAS, the City of Palo Alto (the "City"), a municipal utility and a
chartered city is a member of the Northern California Power Agency ("NCPA");
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 target
levels of new renewable resource energy purchases equal to thirty percent (30%) and
thirty-three percent (33%) 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 electnc 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 Crazy Horse LLC ("Ameresco") proposed its project in
response to the City'S Request for Proposals 134307 ("RFP") in November 2009, and it
was deemed competitive with other RFP respondents;
\VHEREAS, the execution of this power purchase agreement with Ameresco (the
"Crazy Horse PP A") is anticipated to enable the City to meet a three-percent portion of
its goal of sourcing 33% of its energy needs from renewable electric energy;
WHEREAS, the City is allocated a 100 percent share of the power from the
initial project, amounting to 6.2 megawatts of plant net output;
WHEREAS, the Crazy Horse PPA allows Ameresco to sell the City additional
output, if developed, from engine heat recovery, at the contract price; and
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE, as follows:
SECTION 1. The Council hereby approves the City's execution of the long-term
Power Purchase Agreement (Landfill Gas Power), made between Ameresco Crazy
Horse LLC, as Seller, and the City of Palo Alto, as Buyer. The delivery term of the
Power Purchase Agreement is twenty (20) years, commencing upon the Commercial
Operation Date of the planned electric generation facility. Quantity is a 100 percent
share of the plant's net output. Spending authority under the Power Purchase
100302jb 0073321 1
Not Yet Approved
Agreement is not to exceed one hundred eleven million three hundred thousand dollars
($111,300,000). The City Manager is hereby authorized to sign the Power Purchase
Agreement with Ameresco Crazy Horse LLC, and the City Manager or his designee is
authorized to sign any confirmations executed in connection with the Power Purchase
Agreement on behalf of the City.
SECTION 2. With respect to the Council's approval and award of the Power
Purchase Agreement referred to in Section 1 above, the Council hereby waives the
creditworthiness requirements of Palo Alto Municipal Code section 2.30.340(c), as it
may apply to Ameresco Crazy Horse LLC.
SECTION 3. 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. The Salinas Valley Solid Waste Authority will be
the lead agency for the purposes of compliance with the requirements of the California
Environmental Quality Act
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
100302jb 0073327 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
1
1
ATTACHMENT I
POWER PURCHASE AGREEMENT
This Power Purchase Agreement is entered into this __ day of ---:,---:-:--:--:-'
2010 (the "Effective Date") by and between the City of Palo Alto, a California
chartered municipal corporation and Ameresco Crazy Horse LLC, a Delaware
limited liability company.
RECITALS
1. Seller intends to develop, fmance, build, own and operate a Landfill Gas
electric generating facility to be located at the Crazy Horse Canyon Landfill
(the "Landfill") located at 350 Crazy Horse Canyon Road, Salinas, California,
on a site leased from Salinas Valley Solid Waste Authority, 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 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, the Output of the
Plant, on the terms and conditions and at the prices set forth in this Agreement.
5. Seller may determine to incorporate heat recovery equipment to produce
additional electrical output to be included and sold as Energy in accordance
with the terms of this Agreement.
6. 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.
7. Buyer will have a right of first refusal to purchase 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, the Parties agree, as follows.
SANFR.AN 90133 (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:
SANFRA."r{ 90103 (2K)
A = Availability Threshold
Available Hours = the number of hours during the prior twenty-four (24)
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
this instance, Initial Capacity shall not include any capacity of
the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to
produce additional Energy (to the extent such equipment for
recovering waste heat is or is not installed by Seller)) 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 (in this
instaoce, Initial Capacity shall not include any capacity of the
Plant from equipment for recovering waste heat from the prime
mover engines of the Plant to utilize that waste heat to produce
additional Energy (to the extent such equipment for recovering
waste heat is or is not installed by Seller)) the Plant is capable of
delivering in such hour.
Base Hours = the number of hours during the same twenty-four (24)
months period referred to in Available Hours; provided that, to
2
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) month
period 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
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
1~.vailability Threshold shall be ealeulated on a rolling basis using the pFO'lious
twenty-four (24) month period.
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 (in this instance, Plant
shall not include equipment for recovering waste heat from the prime mover
engines of the Plant for purposes of utilizing such waste heat to produce
additional Energy to the extent such equipment is not then installed by Seller)
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 Effective Date: As defined in the first paragraph ofthis Agreement.
3
SA.).jJlRAN 90103 (2K)
1.8 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.
1.9 Environmental Attributes: Any and all credits, benefits, emlSSlOns
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
elimate by tfappmg 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 fmancial 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 ofthe 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 Plant(s) for compliance with local, state, or federal operating
and/or air quality permits.
4
SANFRAN 90103 (lK)
1.10 Environmental Attribute 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.
1.11 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.
1.12 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
"Exl'aftsit'lf'l: Plant."
1.13 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.
1.14 FERC: Federal Energy Regulatory Commission and its successor
organization, if any.
1.15 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
SA~901{)3(2K}
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 frrm transmission or similar
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 1.15 (other
than as deseribed in (iii) abo'<'e), Ed) failure or delay in gnmt (:)f Permits, (:)1' (e)
failures or delays by the LDC or the ISO in entering into all agreements with
Seller contemplated by this Agreement.
1.16 Governmental Authority: Any federal, state or local 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.
1.17 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 2.0 MW and not more than
6.6 MW (gross nameplate), and not less than 1.6 MW and not more than 6.2
MW (net at the Point oflnterconnection) and as further specified (and possibly
increased from the installed gross capacity (which may increase the net at the
Point of Interconnection) of the Plant on the Commercial Operation Date)
pursuant to Section 4.3(c).
1.18 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.19 Interconnection Agreement: The agreement between Seller and LDC
pursuant to which Seller and LDC set forth the terms and conditions for
SANFRAN 90 I 03 (ZK) 6
Interconnection of the Plant to the LDC System, as amended from time to
time.
1.20 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.
1.21 ISO: The California Independent System Operator Corporation, or its
functional successor.
1.22 kWh: kilowatt-hour.
1.23 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.24 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.25 LDC: Pacific Gas and Electric Company, a California corporation.
1.26 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.
1.27 Lender(s): Any Person(s) providing money or extending credit (including any
capital lease) to Seller for (i) the construction of the Plant, (li) 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.
1.28 LFG Agreement: As defined in Section 4.2( d).
1.29 Monthly LD Amount: The product of (i) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity (in this instance, Initial Capacity
shall not include any capacity of the Plant from equipment for recovering
waste heat from the prime mover engines of the Plant to utilize that waste heat
to produce additional Energy (to the extent such equipment for recovering
7
SA.NFRAN 90103 (2K)
waste heat is or is not installed by Seller)) specified under Section 4.3(c) (net
at the Point ofInterconnection).
1.30 MW: Megawatt.
1.31 MWh: Megawatt hour.
1.32 NCPA: The Northern California Power Agency, a joint action agency
organized and existing under the laws of the State of California.
1.33 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 ofInterconnection, whether planned or unplanned.
1.34 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.
1.35 Parties: Buyer and Seller, and their respective successors and permitted
assIgnees.
1.36 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.37 Percentage Share: One Hundred percent (100%).
1.38 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 (in this
instance, Plant shall not include the equipment for recovering waste heat from
the prime mover engines of the Plant for purposes of utilizing such waste heat
to produce additional Energy to the extent such equipment is or is not installed
by Seller).
8
SANFRAN 90103 (2K)
1
I
1.39 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.
1.40 Plant: The generation facility described in Recital 1 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. At any time during the Term, Seller may, in Seller's sole
discretion, construct and/or install and own equipment for recovering waste
heat from the prime mover engines of the Plant for purposes of utilizing such
waste heat to produce additional Output (Seller makes no written or oral
representation or warranty, either express or implied, regarding the current or
future existence of any such additional Output), provided that such equipment
for recovering waste heat shall be become part of the Plant (including, after
installfttfoo of sueh equipment, part of the definitioo of Plant) and shall not be
considered an Expansion Plant.
1.41 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.
1.42 Price: As defined in Section 2.3.
1.43 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
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 fucentive 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, but Production Incentives shall include
Section 29 Credits and Section 45 Credits.
SANFRAN9QlOJ (ZK)
9
1.44 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,
seleotioll of equipment or aet, bl:lt mtfler are a range of aeet1f)table praetiees,
methods, selections of equipment or acts.
1.45 Reimbursement Amount: As defined in Section 4. 1 (h).
1.46 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.
1.47 Salinas Valley Solid Waste Authority: Salinas Valley Solid Waste Authority,
a joint powers authority under the laws of the State of California with principal
offices at 128 Sun Street, #101, Salinas, California 93901.
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 Effective Date.
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 federal, state or local tax credits, deductions, payments or
benefits arising from the purchase of Landfill Gas or the generation and sale of
10
SANFRAN 90103 (2K)
electricity using Landfill Gas as a fuel, not including any Environmental
Attributes.
1.50 Seller: Ameresco Crazy Horse LLC, a Delaware limited liability company,
and any successor or permitted assignee.
1.51 Seller's Interconnection Costs: As defined in Section 4.1 (h).
1.52 Site: The real property in Salinas, California on which the Plant is to be built
and located, as more particularly described in Appendix A.
1.53 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
aceordanee .. lith this f..greemeftt; (2) Seller has a fee oViflership of the Site; or
(3) any other form of site control acceptable to Buyer in its reasonable
discretion.
1.54 Term: The period of time during which the Agreement is in effect.
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 the 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.
11
SANFRAN 90103 (2K)
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 dehver at the Pomt of InterconnectIon, and Buyer shaII purchase,
accept from Seller at the Point of Interconnection and pay for, Buyer's
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,
Buyer's Percentage Share of the 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, and Buyer may claim credit for, Buyer's Percentage Share ofthe 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
12
SANFRM' 90103 (2K)
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
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) Seller shall use conunetcially reasonable efforts to use WREGIS to
authenticate the transfer of "WREGIS Certificates" from Seller to Buyer in
accordance with WREGIS reporting protocols and the terms 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
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, paying the WREGIS
Certificates' 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 document or otherwise
13
SANFRAN 90103 (21<:)
verify that transfer of RECs or other Environmental Attributes if Seller's
WREGIS costs exceed $2,500 in any calendar year. The $2,500 amount shall
be escalated at a rate of 1.5% annually, commencing on the first day of the
January following the Commercial Operation Date and continuing every
subsequent anniversary thereafter.
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 $92.08 per
MWh of Energy delivered or tendered to Buyer at the Point ofInterconnection,
which price shall be escalated at a rate of 1.5% (of the then-current price)
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 4.30) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (100%) 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 4.30). 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
14
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, fmance, construct and/or operate an Expansion Plant. Each
time such a detemlination is made, Sellei' shall flOtity Buyer of Sueft
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
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 Buyer's 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 any third party 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
15
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, Seller 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 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 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
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
16
SANFRAN 9OHl) (2K)
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, {)vmed, maintained and eperated, at Seller' s s{)le eftst 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 upon at least ten (10) days' prior
written notice 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 NCP A, while adhering to both ISO
and NCP A communications protocols. Seller shall provide a copy of each
Certificate of Compliance, if any, issued by the ISO.
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
equipment does not interfere with the Seller's metering equipment. Seller
17
SANFRAN 9010) (2K)
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 tenth (10th) day of the following month an
invoice based upon the meter data for Energy delivered in such calendar
HKlnth and tho OOrFosponeing attestatiofl pl:lfSl:laat to 8eotiofl 2.2(0) (if such
attestation is required). 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 Seller or 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 alleged error. If the amount invoiced was too low, Buyer
shall, upon receiving verification of the error and supporting documentation
from 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 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 twentieth
(20th) day of the month or the tenth (1oth) 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
18
legal holiday. 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 payment
records relating to this Agreement for a minimum of two (2) years, and shall
pennit the other Party, upon reasonable notiee, to inspeet and audit sueh
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
ofthe 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
19
SANFRAN 90103 (2K)
i
!
i
which are required by any Requirements of Law or Govermnental Authority as
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.
(t) Operate and maintain in a marmer consistent with Prudent Utility
Praetice the faeilities it vrill ovm and otlieI'\vise eoopemte 'v'lith LDC ill the
physical interconnection of the Plant to the LDC System in accordance with
the Interconnection Agreement.
(g) By October 15t 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 1 st and September 30th during
the Term. In connection with any Outage, whether it is a scheduled or
unscheduled Outage, Seller shall notifY Buyer and NCPA, 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 (a one hundred
percent (100%) Outage) and is due to a 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 Seller
commences 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 ofNCPA's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
20
SANFPM;9010J (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 (the "Seller's
Interconnection Costs"); provided, however, if the Seller's Interconnection
Costs are, in Seller's reasonable discretion estimated to exceed, andlor do
exceed, one million two hundred fifty thousand dollars ($1,250,000.00), then
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 and such termination shall not be effective if Buyer, by written
notice to Seller within fourteen (14) days following such notice from Seller,
agrees to adjust the Priee payable under 8eetion 2.3 of this Agreemettt andkr
agrees to reimburse Seller more than the maximum Reimbursement Amount
(as defined below), and within forty-five (45) days thereafter agrees with
Seller in writing (each in their sole discretion) to an amendment of this
Agreement revising the Price payable under Section 2.3 of this Agreement
andlor revising the Reimbursement Amount. 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 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. If Seller's Interconnection Costs are above three hundred thousand
dollars ($300,000.00), then Buyer shall reimburse (and pay) Seller, on a dollar
for dollar basis, an amount equal to the product of (a) the amount (in dollars)
equal to the difference between Seller's Interconnection Costs and three
hundred thousand dollars ($300,000.00), times (b) 1.5 (the product thereof
being the "Reimbursement Amount"); provided, however, the maximum
Reimbursement Amount that Buyer shall be obligated to reimburse (pay) to
21
SANFRAN901O:J (2K)
Seller shall be one million four hundred twenty-five thousand dollars
($1,425,000.00). Notwithstanding anything to the contrary in the immediately
previous sentence, Seller may terminate this Agreement without liability of
either Party to the other Party if Seller's Interconnection 'Costs (calculated
without taking into consideration any Reimbursement Amount) are estimated
to exceed and/or do exceed one million two hundred fifty thousand dollars
($1,250,000.00) as provided above in this Section 4.l(h). Buyer shall pay
Seller the Reimbursement Amount within thirty (30) days after the Buyer
receives an invoice from Seller for such Reimbursement Amount (Seller may
send one invoice to Buyer for the entire Reimbursement Amount or Seller may
send multiple invoices to Buyer which total the entire Reimbursement
Amount). Seller shall not invoice Buyer for any of Seller's Interconnection
Costs until Seller's Interconnection Costs have exceeded three hundred
thousand dollars ($300,000.00) and Seller shall provide Buyer with evidence
of Seller's Interconnection Costs such as the Interconnection Agreement
and/er invoices. Upon completion of an EJqla-tlsion Plant ',vhieh. 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. If this Agreement is terminated before the expiration of the Term
(before the 20th anniversary of the Commercial Operation Date) by either Party
and there is no Event of Default by Buyer (no Event of Default by Buyer at the
time of the election to terminate (by either Party) through the effective date of
the termination), then, to the extent Buyer has paid Seller any Reimbursement
Amount prior to the effective date of such termination of this Agreement,
Seller sh"ll refund to Buyer a proportion of any such Reimbursement Amount
paid by Buyer to Seller within thirty (30) days after the effective date of such
termination of this Agreement as set forth in the following sentence in this
paragraph. The proportion of the Reimbursement Amount that Seller shall
refund to Buyer per the immediately previous sentence shall be an amount
equal to the sum of the Reimbursement Amount (to the extent previously paid
by Buyer to Seller) multiplied by a fraction, whose numerator is equal to the
number of years and full months remaining in the Term, expressed in months,
at the effective date of termination and whose denominator is equal to the full
Term of the Agreement, expressed in months (or 240 months).
22
(i) Negotiate and enter into a Participating Generator Agreement and a
Meter Service Agreement for ISO Metered Entities with the ISO, the load
control area operator for the LDC System that is interconnected with the Plant.
Buyer shall pay for or reimburse Seller for Buyer's 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 Sections 3.1 and
4.1(h) of this Agreement. 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.
(k) Maintain an Availability Threshold of at least seventy percent (70%).
Should Seller full to maintain sueh an l\:vailability 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)
23
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Within ninety (90) days after the Effective Date, 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
Salinas Valley Solid Waste Authority, 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) within the time allowed, or (ii) Seller fulfills
such obligations but Buyer in its reasonable discretion does not approve ofthe
terms of the LFG Agreement, then Buyer may, as its sole remedy and without
liability of one Party to the other Party, terminate this Agreement by written
notice given no later than sixty (60) days after Seller has fulfilled, or failed to
fulfill, as the ease 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 within seven (7) days of receipt 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
24
SANPRA."l90103 (lK)
accordance with Generally Accepted Accounting Principles ("GAAP")
consistently applied, 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
(a) The Parties agree that time is of the essence and that certain milestones
(individually, a "Milestone" and, celleeth'ely, the "Milestefl:es") fur the
development, fmancing 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 the Milestones by the dates set forth below.
(b)
SANFRAN 90100 (2K)
The following events are all ofthe Milestones:
(i) By the date ninety (90) days following the Effective Date, Seller
shall have signed an LFG Agreement with Salinas Valley Solid
Waste Authority and have obtained Site Control.
(ii) By the date one hundred fifty (I 50) days following the date of the
LFG Agreement between Seller and Salinas Valley Solid Waste
Authority (the date of the LFG Agreement shall be the date the
LFG Agreement is made and entered into and fully executed),
Seller shall have completed to Seller's satisfaction a review of the
Site and the results of such review shall be satisfactory to Seller
(including, without limitation, a Phase I environmental site
assessment, a Phase II environmental site assessment and/or any
other environmental assessment/study), if Seller decides, in
Seller's sole discretion (at Seller's cost), to do such review of the
Site.
(iii) By the date twenty-six (26) months following the later of the (1)
date that Buyer approves the LFG Agreement, and (2) date one
hundred fifty (150) days following the date of the LFG
25
Agreement between Seller and Salinas Valley Solid Waste
Authority (the date of the LFG Agreement shall be the date the
LFG Agreement is made and entered into and fully executed),
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.
(iv) By the date one (1) month following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b)(iii), 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.
(v) By the date twelve (12) months following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(iii), and (b) entering into an Interconnection Agreement,
Seller shall have eemmeneed eenstruetien sftae Plant.
(vi) 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, Seller shall provide to Buyer monthly
progress reports concerning the progress towards completion of the
Milestones. In addition, within five (5) business days of the completion of
each Milestone, Seller shall provide a certification to Buyer along with any
supporting documentation (if applicable), 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 facility cost studies from the LDC, but in no event later than the
date set forth in Section 4.3(b )(iii), Seller shall specify the Initial Capacity of
the Plant (which shall be subject to the limits contained in Section 1.17);
provided, however, Seller may (in Seller's sole discretion) increase the Initial
Capacity of the Plant at any time during the Term by adding equipment for
recovering waste heat from the prime mover engines of the Plant for purposes
of utilizing such waste heat to produce additional Energy. If Seller decides to
increase the Initial Capacity of the Plant during the Term (after Seller has
originally specified the Initial Capacity of the Plant), then Seller shall provide
SANFRAN 90l0]' (2K) 26
I
1
Buyer with written notice of the date of such increase, the amount of such
increase, and the entire capacity of the Plant (as increased) as of such date.
The new increased capacity of the Plant shall then become the Initial Capacity
of the Plant from the date set forth in Seller's written notice until the end of the
Term (the Initial Capacity of the Plant (as increased) shall be not less than 2.0
MW and not more than 6.6 MW (gross nameplate), and not less than 1.6 MW
and not more than 6.2 MW (net at the Point of Interconnection). Seller makes
no written or oral representation or warranty, either express or implied,
regarding whether or not Seller will add equipment for recovering waste heat
from the prime mover engines of the Plant and/or utilize that waste heat to
produce additional Energy.
(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 a Force
Majeure Event, Seller shall so notify Buyer, in writing, as soon as is . . .
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)(iv), (v), or (vi), 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 Majeure Events for any or all of the Milestones exceed
six (6) months.
(f) In the event that Seller fails to meet the Milestones set forth in Section
4.3(b)(i) or (ii) 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) or (ii).
(g) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(iii) for any reason, Buyer may terminate this Agreement, without
27 SANFRA."; 90103 (2K)
liability of either Party to the other, within ten (10) 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 )(iii) 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 (10) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone, and Buyer must give Seller sixty (60) days' prior written
notice to terminate this Agreement, during which period if Seller cures such
defect and 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)(iii).
(h) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(v) within six (6) months after the relevant Milestone date for any reason
(or up to twelve (12) months if also delayed by a Foree Maj eure ET,'eftt), 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 Milestone date until the Milestone is
met. Such funds will be used towards any liquidated damages as set forth in
Section 7.4(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 fmal 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)(v) 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. Seller's
escrow option, Buyer's option to terminate, and liquidated damages shall be
Buyer's sole remedies for any failure of Seller to meet the Milestones set forth
in Section 4.3(b)(iv) or (v).
(i) Seller covenants that it will diligently pursue all Milestones including
the Commercial Operation Date, which Seller envisions will occur within
thirty-five (35) months following the execution of this Agreement.
G) In the event that any of the approvals described in Section 4.3(b)(iii) are
not obtained by the date specified in Section 4.3(b )(iii) for satisfaction of the
28
SANFRAN 90103 (ZK)
relevant Milestone or are obtained on a basis not reasonably satisfactory to
Seller, including without limitation, in the case of the air permit (from the air
pollution control district that has jurisdiction over construction and operation
of the Plant), 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 Party 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 satisfactory to Seller is received, in writing, or (b)
the date specified in Section 4.3(b )(iii) 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 . . ,
the Plant at full Initial Capacity (less reasonably projected scheduled Outages
for maintenance) for the term of this Agreement, and (ii) to adjust the price
payable under Section 2.3 of this Agreement and within thirty (30) days
thereafter agrees with Seller (each in their sole discretion), in writing, to an
amendment ofthis Agreement revising such price. Failure to provide notice of
termination by the date specified above shall constitute a waiver ofthe right to
terminate this Agreement as provided in this Section 4.3(j). 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 4.3(j) shall survive termination of
this Agreement under this Section 4.3(j) for a period of five (5) years from the
effective date of such termination.
(k) In the event that Seller has not completed to Seller's satisfaction a
review of the Site or the results of such review are not satisfactory to Seller as
contemplated in Section 4.3 (b)(ii), Seller may terminate this Agreement
. without liability of either Party to the other Party by giving notice to Buyer, in
writing, of such termination, provided that such notice must be given no later
than one hundred sixty-four (164) days following the date of the LFG
Agreement between Seller and Salinas Valley Solid Waste Authority (the date
of the LFG Agreement shall be the date the LFG Agreement is made and
29
SAhrR..o\N 9(10) (ZK)
entered into and fully executed).
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,
eompetition tl'Mlllitiol'l: ehttrges, applieable control area seMi ice ellilrges,
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
or for any transmission-owning or operating entity). NCP A, 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 NCPA 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
30 SANFRA.1Il90103 (2K)
penalties associated with such Outage or ISO tariff obligation. Buyer may
replace NCPA as Scheduling Coordinator for the Plant. If NCPA ceases to be
the Scheduling Coordinator for the Plant and Buyer is unable, within fourteen
(14) business days of notice from Seller, to appoint a replacement Scheduling
Coordinator, Seller shall have the right to appoint a replacement Scheduling
Coordinator on Buyer's 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 W3iffl/"e1'l'l tw{es paid ay Seller er Salinas Valley Selid Waste l'\utherity
associated with the Site or the Landfill.
5.3 Notification of Transmission Outages
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
SANFRAN !lOIOJ (ik) 31
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 Ferce Majeure Event shall net excuse ffil:)' Party from its obligati6fts te make
payment of amounts due hereunder.
6.3 Notice
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.
32
ARTICLE VII
DEFAULTIREMEDIESITERMINATION
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 the receipt of 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) clays after the reeeipt of vffltten notiee that sueh payment is dtJe.
(c) The initiation of an involuntary proceeding against Buyer under the
bankruptcy or insolvency laws, which involuntary proceeding remains
unrusmissed 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
(1) The following shall each constitute an "Event of Default" by 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(I)(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 the receipt of 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.
JJ SANFRAN 90103 (2K)
(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 fust 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)(vi), 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 any of Sections 7.2(1)(a), (d) or (e)
above shall constitute an Event of Default if Seller cures the event, failure or
circumstance within (30) days after the receipt of 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
(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 ofthe 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 4.30), 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
34 SA."rI;RAN 9(10) (lK)
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.
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
fights Md remedies available at la'll, ineludiftg, but not limited to, elaims fur
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
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.I(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)(vi), 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
35 SANFRAN 9OlOJ (2K)
to achieve Commercial Operation, or if for any reason Seller fails to pay, or
discontinues paying, the monthly liquidated damages provided for above,
Buyer may terminate this Agreement upon thirty (30) days' prior 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 receipt 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)(vi) 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 impraetieable or extremely diffieult to fix Buyer's aetual
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.
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
36
SANFRAN 9010) (2K)
not be construed to relieve any insurer of its obligation to pay claims
consistent with the provisions of a valid insurance policy.
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.
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 eontrol so long
as Seller or any Lender(s) is 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 that Seller has the ability to operate
the Plant in accordance with this Agreement, Seller shall resume operational
control.
Should 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: (I)
terminate this Agreement without liability of one Party to the other Party; (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
37
SANFRAN 90 I 03 (lK)
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 Party.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the Effective Date:
(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 Effective Date, (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 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 "qualifying
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 ofthis
Agreement;
38
SANFRAN 90103 (2K)
(iii) The execution, delivery and perfonnance 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
tenns 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
eqtlity befuFe any Ge>femmema-l Al:Itherity, which individually OF 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 Effective Date:
(i)
(ii)
(iii)
SANFRAN 9DIIJJ (:lK)
Buyer is a chartered city and municipal corporation, duly organized and
validly existing, and has the lawful 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;
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;
The execution, delivery and perfonnance 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;
39
(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 obligatiofls HfltieF this l\geemeflt.
ARTICLE IX
NO CHANGE TO RATES, TERMS OR CONDITIONS
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 of Snohomish County, Nos. 06-1457,128
S.Ct. 2733 (2008), and consistent with the order of the Supreme Court in NRG Power
Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-674, 130
S.Ct. 693 (2010) ("NRG Order"). As to all other persons it is intended that the same
standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.
ARTICLE X
MISCELLANEOUS
10.1 Assignment
40
SANFRA"l: 90103 (2K)
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
subcontractors, Seller shall remain responsible for all of 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 III
Section 10.2, shall be void.
10.2 Financing
Netwitfl3'l:anding 8eetiefl 10.1, Seller may, without the eonseffi of B~'er,
assign, transfer or hypothecate 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 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
41
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:
City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 328-3631
on behalf of Buyer;
with a copy to:
City of Palo Alto
250 Hamilton Avenue, Eighth Floor
Palo Alto, CA 94301
Attention: Senior Assistant City Attorney / Utilities
Telecopier: (650) 329-2646
and to:
SANFRAN 90103 (2K)
City of Palo Alto
250 Hamilton Avenue, Third Floor
Palo Alto, CA 94301
Attention: Director of Utilities
Telecopier: (650) 321-0651
42
and to:
Northern California Power Agency
65] Commerce Drive
Roseville, CA 95678
Attention: Power Contracts Administrator
Telecopier: (916) 781-4255
and to:
Ameresco Crazy Horse LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: General Counsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
with a copy to:
Ameresco Crazy Horse LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: Senior 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
SA.'H'RAN 90100 (ZK) 43
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 ofthe 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.
19.6 N6 Dedieati6D
No undertaking by one Party to the other Party under any provision of the
Agreement shall constitute the dedication of that Party's system or any portion
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.
44
SANFRAN 90 I 0) (2K)
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 ana Buyer shall Rot have any right, pO'.ver or autharity te efl:tef iflffl 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.
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 performance 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 determine, require, specify
or take similar action with respect to matters, such determination, requirement,
specification or similar action shall be reasonable.
45
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 information disclosed by Seller, including, without limitation, all
engineering documents, designs, specifications and financial information, shall
be kept confidential and shall not be disclosed to any third party except as
provided in this Section 10.13. Buyer aelrno-v:ledges Seller's request to hold
all information regarding this Agreement confidential. Buyer shall disclose
such information 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 Salinas Valley Solid Waste
Authority or its representatives, NCPA or its representatives, or to Lender(s) or
potential Lender(s) or its/their representatives; provided that prior to such
disclosure, the recipient shall agree, in writing, to keep the material
confidential under terms no less stringent than as set forth in this Section
10.13. Buyer also shall be permitted to disclose this Agreement and related
information to the City Council of Palo Alto for the express purpose of
obtaining approval to execute this Agreement; provided that in connection
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 in this
Agreement shall restrict any Party from using or disclosing confidential
information in any manner it chooses, which confidential information (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
46
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, administrative 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 Connterparts
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.
10.16 Financing
Notwithstanding anything to the contrary in this Agreement, Seller may
terminate this Agreement at its sole discretion without liability of either Party
to the other Party if Seller is unable to obtain financing, on terms satisfactory
to Seller, for the (i) construction of the Plant, (ii) operations and/or
maintenance of the Plant, and/or (iii) working capital or other ordinary
business requirements for the Plant.
{signature page follows/
47
SANFRAN 90103 (2K)
,
I
i
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the Effective Date.
AMERESCO CRAZY HORSE LLC THE CITY OF PALO ALTO
By Ameresco, Inc., its sole member APPROVAL AS TO FORM:
By: By:
Name: David J. Corrsin Name: Grant Kolling
Title: Executive Vice President Title: Senior Assistant City Attorney
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
tly:
Name: Lalo Perez By:
Title: Administrative Services Director Name: Valerie O. Fong
Date: Title: Utilities Director
Date:
CITY OF PALO ALTO
By:
Name: James Keene
Title: City Manager
Date:
48
SANFRAN 90103 (lK)
COMMONWEALTH OF MASSACHUSETIS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , -' before me, the undersigned notary
public, personally appeared , as the of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco Crazy Horse
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 Crazy
Horse LLC, a Delaware limited liability company.
My Commission expires
Notary Public
49
SANFRAN 90103 (2K}
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer the fmal Site Drawings prior to the Commercial
Operation Date.
SANFRA.~9{Hl}3 (2K) 50
APPENDIXB
FORM OF ATTESTATION
Ameresco Crazy Horse LLC
Environmental Attribute Attestation and Bill of Sale
Ameresco Crazy Horse LLC ("Ameresco") hereby sells, transfers and delivers to
_~-;-;CC-::-:---:;:-_-::---;:77-:--("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 defined in the
_-:-___ -:--::-__ :--:-:-(identity 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: Foel Type:
CapacitY (MW):_ Operational Date: .. ~~ ... :~ __
(for filcility that has added renewable capacity, show operational date and amount of neW capacity)
As applicable: CEC Reg. no. "._ Energy Admin. ID no. __ Q.F. ID no. ~
MWhrs generated
20
_____ ~20_
in the amount of one Environmental Attribute or its equivalent for each megawatt hour generated; and Ameresco
fin1her attests, warrants and represents as follows:
i) to Ibe best of its knowledge, the infurmation 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 Ibe grid the energy in the amount indicated as undifferentiated
energy; and
[check one: 1
_ iv) Amereseo owns the Facility.
_ Iv) to the best of Amereseo's knowledge, eaeh of the Environmental Attributes and Environmental
Attribute Reporting Rights associated with the generation of Ibe 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 HAl\'IJ,
SANFRA.!' 9010J(2K}
AMERESCO CRAZY HORSE ILC
By: Ameresoo, Inc., its sole member
By
Its
Date:
B-1
51
1
I
j
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 Llabillty. Seller shatl maIntam AutomobIle Ltablhty
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 uninsuredlunderinsured 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
maintimance of the Plant. Such policy shall be written with a
limit ofliability 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, unless prohibited by law.
52
SANFRAN 9010J (2K)
j
j
, ,
1.
2.
3.
APPENDIXD
SCHEDULING PROTOCOLS
Prior to three (3) business days before the end of a month, Seller is to
provide to NCP A 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
SundayIHoliday.
No later than 1400 hrs. each Thursday, Seller shall provide a forecast of
loads and/or generation for the following week to the extent it is
different from the monthly forecast in Paragraph I. Weekly forecasts
will be hourly kW values for each hour of the week.
Daily modificatiwls to forecasts. Unless otherwise mutually agreed,
Seller may make changes to the weekly forecast by providing such
changes to NCP A prior to 0800 hrs. two (2) days before the active
scheduling day.
a. Example: For power that is scheduled for generation or delivery on
Thursday, March 25,2010, changes must be submitted to NCPA by
no later than 0800 hrs. on Tuesday, March 23, 2010.
4. Hourly modifications to active schedules. Unless otherwise mutually
agreed, Seller may make changes to active schedules by providing such
changes to NCPA with a minimum of four (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 1500 hrs. (for the period from 1401 hrs. to 1500 hrs.),
changes must be submitted to NCPA no later than 1100 hrs.
5. NCP A 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.
53
SANFRAN 90103 (2K)
7. All notices and. schedules are to be submitted to NCPA by phone, fax or
email to the following persons: Chief DispatcherlScheduler.
8. In the absence of forecasts and schedules as noted above, NCP A will
utilize the most current information provided by Seller in the development
and submission of schedules.
54
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June -' __
Hour Ended:
1
2
1
:1
~ ...... s
fi i
~ ........................................................... 7______ I
r--------'O~r--------------------+----
,
,
10
11
I?
13
1 <;
Hi
17
1&
1<}
?fI
21
1--...... 22
23
24
Expected Daily Temperatures, F
Contact
Information:
Scheduling
Coordinator:
Facility:
CITY:
SA1'ffRAN 9{)1C3 (2K)
Low
High
,
I
i
,
Expected Capability
,
,
APPENDIXE
PERFORMANCE TEST.
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 Buyer within five (5) business days following the
conclusion of the test.
The perfQrmance 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 (in this instance, Initial Capacity shall not include
any capacity of the Plant from equipment for recovering waste heat from the
prime mover engines of the Plant to utilize that waste heat to produce additional
Energy (to the extent such equipment for recovering waste heat is or is not
installed by Seller» 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.
SANFRAN9{lIO) (2K) 56
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 otber current assets
Total current assets
Otber assets:
Project assets, net
Due f= member
Debit issuance costs, net
Total otber assets
LIABILITY AND MEMBER'S EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Total current liabilities
Long-tenn liabilities:
Long-term debt, less current portion
Deferred tax liabilities
Total long-term liabilities
Member's equity
SANFl1AN9(10) (2K) 57
1
f
I ,
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:
Selling, general and administrative
Interest and other financing costs
Income (loss) before tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
Statements of Cash Flows
Years Ended December 3 I, 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 fie" s fr em ill> estmg aeti. ities.
Accounts payable relating to construction activity
Accrued expenses relating to construction activity
Purchase of proj ect assets
Net cash used in investing activities
Cash flows from fmancing 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 90 I 03 (2K)
FINANCE. COMMITTEE
ATTACHMENtt
Regular Meeting
Tuesday, March 16, 2010
ChaIrperson Schmid called the meeth1g to order at 7:02 p.m. In the Council
Conference Room, 250 Hamilton Avenue, Palo Alto/ CalifornIa.
Present: Schmid (Chalr)/ Espinosa, Klein, Scharff
Absent: Klein
3. Adoption of Four Resolutions Approving Four Power Purchase Agreements
with Ameresco Forward LLC, Ameresco San Joaquin LLC, Ameresco Avenal
LLC< and Ameresco Crazy Horse LLC for the Acquisition in the Aggregate of Up
to 166,000 megawatt-hours per Year of Energy Over Twenty Years at an
Estimated Cost Not to Exceed $388.5 Million.
Sr. Resource Originator Tom Kabat spoke regarding the Renewable Portfolio
Standard. He said that Council adopted the Long-term Electric Acquisition Plan
guidelines to meet 33% of electric load with renewables by 2015 while keeping
the rate impact of no more than .5 cents per kilowatt-hour. Palo Alto issued a
fifth RFP for renewable energy in fall 2009 from which 42 proposals evaluated.
Palo Alto also participates in the NCPA Green Power Project which has several
projects that are still in negotiation such as a 7 megawatt Solar, .7 megawatt
Landfill, and 5 megawatt Wind. There were also NCPA New Projects available
to all members incl4ding 7 megawatt geothermal geysers from Ram Power
Incorporated.
Mr. Kabat spoke regarding the progress that had been made toward renewable
energy portfolio targets, which included wind. He said that many of the
projects being discussed would not start until 2013, so there was a possibility
the City would not meet the 30% in 2012 goal. He said the renewable power
costs remain high, particularly in California because of outside forces including
State legislative efforts, a 33% RPS executive order, and federal stimulus
programs. He said the City has contracts signed for about 217 gigawatt hours
or about 21 % of the electric use. The contract totals were about $352 million
over the life of the contracts. He said that the Finance Committee
recommended approval of the last renewable contract (Johnson Canyon) on
July 21, 2009. Per Councils direction Staff worked with the Utilities Advisory
Commission (UAC) on a re-examination of the policies being used. The UAC
agreed with the approach and Staff proceeded to identify cost-effective energy
efficiency by comparing its cost to the cost of renewable power, not just to the
lower cost of brown or market power. The UAC approved the final energy
efficiency plan on March 9, 2010. He said Ameresco claims that missing the
April 5, 2010 deadline would jeopardize the pricing as they must start
construction by the end of 2010 to received Federal stimulus funds. He offered
some background on the proposed 2010 Energy Efficiency Plan saying that the
Council adopted a resource loading order whicll required energy efficiency to
have top priority. The 2007 plan included cumulative energy efficient savings of
3.5% by 2016. The 2010 plan is based on Council Direction and used the
renewable energy market price referent to calculate the saved energy costs.
The proposed 2010 plan has a goal to reduce energy use by 7.2% by 2020, or
double the goal in the 2007 plan. Doubling the energy efficiency savings was
expected to reduce 2020 load by an additional 37 Gigawatt relieving the need
for 12 GWH of additional renewables to meet the 33% target.
Council l"1ernber Scharff asked why it wouldn't all be counted toward
renewables.
Mr. Kabat said that energy efficiency was not counted as a renewable resource.
It was designed to meet the one third requirement of electricity going out by
renewables.
Council Member Scharff asked if it met with state law.
Utilities Director Val Fong said that Staff anticipated that within the year the
State will require 33% to be met by 2020. She said the current law was 20%
by 2010.
Council Member Scharff asked if that has been met by Palo Alto.
Mr. Kabat said it was close. The 2008 goal was missed.
Kabat said that of all the proposals received from the fifth RFP, which was
issued in fall 2009, four of Ameresco's proposals ranked better than all the
other 38 based on the selection criteria. Price and value was a predominant
criteria. Reliability and environmental attributes were also some of the qualities
being evaluated. The City negotiating team included Utilities Staff, the Energy
Risk Manager and City Attorneys. The information was taken to the Utilities
Risk Oversight and Coordinating Committee in the winter of 2009 and they
approved it. He discussed a chart that demonstrated where the Ameresco
proposals fell in relation to organizations proposals. He said that landfills
naturally emit methane that must, by law, be burned off. Landfill gas power
plants burn the methane in engines that spin generators making renewable
electricity. The Power Purchase Agreements allow the City to purchase and pay
for only the delivered output. He said that between the four projects there was
an expected project size of between 1.4 and 4.6 megawatts. He said Ameresco
did provide a range to cover variables. The start price for the Forward project
was 9.9 cents per Kilowatt hour. By contrast the Avenal start price was
between 10.1 and 12.3 depending on emission controls requirements as
determined by the local air pollution district. He said the prices were attractive
compared to other prices in the market, once delivery costs, pass-through
expenses and local capacity values were considered. He also discussed how
renewable prices have increased substantially due to legislative efforts to
increase RPS requirements and efforts to favor California renewables over
others. The Market Price Reference (MPR) was a benchmark price for
determining the level of scrutiny the proposals by investor-owned utilities would
have to go through. The current MPR was $1.9 cents per Kilowatt hour for 20
year contracts starting in 2013. He discussed the buyers and sellers markets of
recent years.
Council Member Scharff asked if the current market was brown power.
Mr. Kabat said that was the current nominal market looking a couple of years
into the future for brown power.
Council Member Scharff clarified that they could buy brown power for 4 to 5
cents per kilowatt-hour at night and less during the day. He also asked if Palo
Alto currently purchased carbon offsets.
Mr. Kabat said the City used 4% as the current time value of money. He said
that factor was used in the calculation to levelize the rates.
Utilities Director Valerie Fong said the appearance was that the current market
was lower but that was just the current price. 20 years would bring it back up
to the levelized price.
Mr. Kabat said that it reflected the current recession.
Council Member Scharff stated that the levelized rate of brown power was 6.5
cents per kilowatt-hour. He asked what the levelized Ameresco rates would be.
Mr. Kabat said it would be about $0.11 to $0.14 per kilowatt-hour.
Council Member Scharff confirmed that it would be about double.
Council Member Espinosa said the UAC notes would have been helpful.
Ms. Fong said they don't normally bring contracts before the UAC.
Council Member Espinosa said there were three pOints where the UAC had
discussions.
Ms. Fong said that Staff will bring them additional considerations in the energy
efficiency evaluations which will have the UAC comments.
Council Member Espinosa asked for Staff's opinions about the green renewable
portfolio and the projections of those cost projections.
Ms. Fong said that Staff was committed to the renewable portfolio. She didn't
know if back in 2004 the market was the same.
Council Member Espinosa asked if Staff had looked at the comparisons.
Ms. Fong said they looked at what was in the portfolio.
Mr. Kabat said they had some wind but it wasn't too valuable. The only RFPs
they received were from out of state and had high transportation costs. RFPs
don't call for specific types of renewables. They only request renewables that
fit in the criteria.
Ms. Fong said there were many different technologies available. More
intermittent technologies such as wind and solar were less attractive.
Mr. Kabat said these resources were seasonal, which creates holes in the
portfolio during certain seasons.
Chair Schmid said that back in November the Staff interpreted the Councils
recommendation as they needed to evaluate the cost effectiveness. The
Council motion was to reexamine the goals used in the alternate energy
program. He said that instead of getting an acquisition policy, they were
presenting a $388,000,000 proposal. He said there were going to look into
whether paying those premium process was a good use of resource. He asked
when that discussion will take place.
Ms. Fong said it wasn't Staff trying to circumvent that request. Staff had a
fleeting opportunity before them; they had a 33% goal to reach. She said they
were trying to meet that goal. The plan incorporates some externalities that
Council wanted to see so they could have energy be more economic.
Chair Schmid said it was an important question since now they were talking
about $5 million a year versus $500,000 per year in subsidies.
Ms. Fong said the discussion will be formerly brought on April 5.
Chair Schmid asked if they could look at Ameresco at that time.
Ms. Fong said they could and the price would be higher and might not be
available.
Assistant Director of Utilities Jane Ratchye added thatO.5 cent per kilowatt-hour
limit was taken into consideration with this project.
Chair Schmid said the Council Motion was to examine the 0.5 cent limit and the
33% goal.
Council Member Scharff asked about the maximum renewable cost premium
per year. He said the numbers seemed off.
Ms. Ratchye said there were four contracts.
Council Member Scharff understood. He said it's $5 million a year premium
over brown power.
Ms. Ratchye said that if all the maximums were added and they were at the
highest side of the interconnection. The more likely case would be
Council Member Scharff said he was confused about the double price.
Ms. Ratchye said the rate impact was on the quoted rate of 12cents per
kilowatt-hour.
Chair Schmid said one of the issues when this was first brought up was a
misunderstanding around the .5 cent limit. One of the goals was to have
clarification about the formula.
Council Member Scharff asked if it was under the .5 cent limit.
Ms. Ratchye said it was expected to be under. But it could be over if all the
projects came in at the extreme highest price they could. Staff assumed they
operate 95% of the time. The reason the highest numbers were included was
because approval for the highest possible amount was needed.
Council Member Scharff said that every time the rates go up, the Utilities User
Tax went up. He asked if that was included in the 10%.
Ms. Ratchye said that was on the retail rate.
Council Member Scharff asked if that waS why the information wasn't included.
Ms. Fong said that was a surcharge on top after all of the revenues were
considered.
Council Member Scharff argued that the practical effect was that the price
would go up.
Ms. Ratchye said that if the revenue goes up it would be a half cent increase.
Chair Schmid asked if that would take the rates over the .5.
Ms. Ratchye said the .5 limit was on the electric retail rate.
Ms. Fong said they don't include the Utilities User Tax in the rates because it
was a surcharge.
Chair Schmid said the formula had to be within those boundaries.
Ms. Fong said that Staff was being consistent with prior methodology.
Chair Schmid asked if it was consistent with Council Directive.
Ms. Fong said it was consistent according to the way Staff had always
interpreted the directive.
Ms. Ratchye reiterated that those were retail rates. The additional Utilities User
Tax on the bills would not be included in those rates.
Chair Schmid argued that the formula was based on the gap.
Ms. Ratchye said to get $5 million was based on about 1000 gigawatt hours per
year at a half cent kilowatt hour. That matched how much the City could now
spend on the more expensive green power.
Chair Schmid said the actual gap includes the Utilities User Tax, as it was put
into the rate sheet so it was a cost.
Administrative Services Director Lalo Perez said that while it was not a part of
the calculations it did drive up the expense. The Council might consider
directing Staff to make it part of the formula.
Chair Schmid said it was difficult for them to not have the formula.
Mr. Perez said Staff would try to have that information for the next meeting.
Council Member Scharff clarified that Staff thought the technology risk was
acceptable in order to meet the goals.
Ms. Fong said it was reliable and commercially available.
Council Member Scharff said that by technology risk he meant what Staff
identified as historically 1900-1970 prices dropped. New technology always
does that. If green technology was the next big innovation, the costs would
drop. Locking the City into a 20 year contract was a huge technology risk. He
said that at some pOint having lower electricity rates will no longer make sense
and the residents of Palo Alto would question having our own utilities.
Mr. Perez said that should be taken under consideration.
Mr. Kabat said that all four projects used gas fired engines to generate
electricity from landfill gas. Ameresco had a right to sell additional bottoming
cycle output to Palo Alto priced at the then applicable contract rate. Palo Alto
had a first right of refusal to purchase expansion plant output at the same price
Ameresco could negotiate for selling to another buyer. Ameresco had a proven
track record and a short schedule. The base load power was a good match to
Palo Alto's needs. The Forward project was in Manteca, the price was 9.9 cents
per kilowatt hour, increasing at 1.5% per year. The expected plant output was
38 gigawatts or 3.8% of the City's forecasted load. The San Joaquin Landfill
was located in Linden. The expected output was 36 gigawatts or 3.6% of the
City's forecasted load. The cost depended on whether emission control
equipment was required and the actual cost of interconnection with PG&E. The
Avenal Landfill was located in Avenal. The Expected output was 12 gigawatts
or 1.2% of the City's forecasted load. The cost also depended on whether
emission control equipment was required and the actual cost of interconnection
with PG&E. With this smaller project Staff was not recommending a prepay
process. The Crazy Horse Landfill was located in Salinas. The expected output
was 36 gigawatt hours or 3.6% of the City's forecasted load. The cost also
depended on whether emission control equipment was required and the actual
cost of interconnection wIth PG&E. He discussed the amount of green premium
consumed. The total annual green premium of all the projects would be just
l:Jnder $5 million at a half cent retail rate level.
Council Member Scharff asked why the City could not pay them directly to save
that money.
Mr. Kabat said that was a legal question, he said it comes down to Palo Alto not
being a party to the interconnection contract between PG&E and Ameresco. He
said the prepayment would reduce rates and provide a 20 year delivery period
on the contract. He discussed each project with the different payment options.
Prepayment was recommended for all projects except Avenal due to the lower
volume of energy. He said the action requested by Staff was for the Finance
Committee to recommend that Council adopt a resolution approving the
proposed power purchase agreements. Additionally, Staff requested that
Council waive the application of the investment grade credit rating requirement
in the Municipal Code.
Bruce Hodge, 3481 Janice Way spoke regarding his endorsement of the
proposed power purchase agreements. He said that the low escalation rate
made the contracts favorable and that the renewable base-load power was a
valuable characteristic.
John Hackmann spoke as a bidding client against the project. He said that
raising utilities rates in these difficult times was inappropriate. He said that
Staff was rushing into the contracts for fear of losing the deal.
ML Perez explained that his department did an independent credit risk analysis.
Energy Risk IVlanager Karl Van Orsdol spoke regarding the key risks of these
projects. He said the key issues were counter party concentration, credit
condition of Ameresco, up-front payment of interconnection charges, and the
market risk of a 20 year fixed price. He said that Ameresco had a strong
history of project completion, they had the lowest prices offered, each project
was in an isolated LLC, Palo Alto would only have to pay for power delivered,
Palo Alto had take over rights in case of default, Ameresco would have to invest
significantly before power could be generated. The cons were that there was a
high concentration in one renewable energy provider, renewable power costs
would be higller than wholesale power, and the 20 year fixed price. He also
discussed the pros and cons of the prepay on the interconnect. He said tllat
the pros were that the risk was limited in amount and time horizon, it had net
present value of between $289,000 and $2.8 million per project, Ameresco
would have invested over 50% of the total project cost in site development,
and the risk of default represented about 2% per year during project
development. The cons were that the expected risk equaled $146,000 per
recommended project when cash flow and default rates were factored in, the
maximum risk was $1.425 million times two projects for $2.85 million, the risk
after payment calculated as negative cash flow per year times default rate. He
discussed the estimated 12-month forward electric supplier concentrations
compared between providers, Ameresco, in that scenario would be about
8.89%. He said that with the new contracts Ameresco would go from providing
9% to 21 % of the total supply going to 64% renewable. Ameresco would be
the second largest supplier after Western. He addressed Ameresco's credit. He
said they were rapidly growing and had $4 billion worth of projects. He said
they provide power for a BMW plant and for Boeing. He said this aggressive
growth has put a stress on their bottom line. He said that long term debt had
doubled since 2005, and that the cost of sales were up 50%. He also stated
that these stresses were expected given their business model. He said the
credit quality probabilities were based on a snapshot of the organizations
current financial situation and a database of over 2 million firm histories. The
expected default rate of a company in Ameresco's position had deteriorated.
The highest rated companies have about a .1% rate, and it went down to a
35% default rate. The final expected default can be determined when their
audited financial reports come out in about two months. He reiterated that
increasing stress had been placed on Ameresco because of the long term debt.
Because of the business cycle and the economy predictions, it does appear
they've gone through the worse part of their stress growth. He said their
default rate would be expected to drop by the end of the year. He discussed
the risks of the upfront payment. He said that upfront payments were cost
effective for the San Joaquin and Crazy Horse landfills with an expected payout
in five to eight years. There would be minimal risk of Ameresco abandoning the
project because they would invest a greater sum of money than Palo Alto.
Based on the credit and project history, the expected risk was $146,000 per
project until the cash flow payment turns positive. He discussed the fixed price
market risk, or the technology risk. He said that as it stands, Palo Alto's
portfolio compared to a brown portfolio would be negative. He said that if they
replaced all their power with Ameresco it would cost $3 million more. He said a
larger concern would be if the prices fall. He said there was no transparent
forward price index. He said that the primary risk in the first 10 years would be
if renewable prices stay high due to demand within the state creating a credit
exposure for the then below market prices. He said that regulatory efforts to
increase renewable demand'would push prices higher in the long term. Landfill
generation remains one of the most cost-effective approaches to renewable
energy.
Council Member Scharff asked if the rate adders were included in the cost
estimates.
Ms. RG!tchye said all the numbers included the highest maximum cost.
Council Member Scharff asked if they would meet the 33% if they went through
with this plan, meeting Councils goals.
Ms. Fong said they would meet the Councils directives.
Council Member Scharff asked for confirmation that they would have their
portfolio set.
Ms. Fong said it would be for the renewable portion.
Council Member Scharff said the irony was not lost on him that they were
calling a landfill renewable. Hydro was renewable, but landfills were not.
Ms. Fong said they would purchase renewable of any sort if they were
competitive in cost with brown energy.
Council Member Scharff agreed, but added that the costs were not going to be
competitive with brown and that the whole impetus for approving the contracts
was that the opportunity was fleeting.
Ms. Fong said geothermal wouldn't be new renewable, it would be old. She
said there was old and new renewables. She said she had concerns with the
concept of the portfolio being set. But, in terms of meeting Councils goals of
33%, they would accomplish that with the Ameresco contracts.
Council Member Espinosa asked for clarification on the cost differentials and the
timing with going back to the UAC for an examination of policies. The
Committee decided that was a conversation that needed to take place. He
asked what Staff had found.
Ms. Fong said they hadn't had that discussion yet.
Mr. Perez said there was a window of opportunity with Ameresco and if Council
were to not accept it Staff would go back out to the market after the discussion.
Council Member Espinosa said that the price points wouldn't necessarily cllange
by waiting to have that conversation.
Ms. Fong said that Ameresco would probably walk away and sell to someone
else.
Chair Schmid asked how much of Ameresco's revenue would come from Palo
Alto if they agreed to the contracts.
Mr. Van Orsdol said they have $4 billion worth of on-going projects. Palo Alto's
projects total $300 million. He said that BMW and Boeing probably provide a
larger fraction of their income.
Chair Schmid asked if they were all held in separate companies.
Mr. Van Orsdol said he believed they were though he wasn't sure of the
ownership structure of the BIVlW operation.
Chair Schmid said there had been a sharp deterioration in their balance sheet
due to the general economy with more information coming in two months. He
asked if that was expected to change with the additional information.
Mr. Van Orsdol said it would be four quarters of data, and it would be audited
results. He said it was difficult in the middle of the fiscal year to determine
exactly where they stand. He said he would expect their risk to be slightly
higher than last year.
Chair Schmid asked about waiting the two months to get those audited reports.
Mr. Van Orsdol said that 1.1 % would be almost double the rate of any other
account.
Council Member Scharff asked if they typically do business with organizations
that have a B-credit rating.
Mr. Van Orsdol said Palo Alto did not do business with any wholesale parties
that had less that a BBB rating.
Council Member Scharff asked if Ameresco were rated if Palo Alto would have a
policy against doing business with them.
Mr. Van Orsdol said they asked Council to wave the rating requirement in part
due to the make up of the industry.
Council Member Scharff asked if the City had a policy against doing business
with a company that would have the rating Ameresco would have if they were
rated.
Mr. Van Orsdol said the policy was that they can not do business with them
without a Council waiver.
Council Member Espinosa said the 20 year time line and the technology risk
were concerning to him. He wanted to hear more about the negotiation that
took place around the time line.
Mr. Kabat said that Staff didn't consider the 20 year time line concerning and
did not push Ameresco to change it.
Ms. Fong said there were other contacts that were 20 to 25 years and they
seem reasonable. Typically a commitment from the buyer was required so the
provider can finance it. The 20 year contract was standard in the industry.
Council Member Espinosa said that changes that have happened in the industry
recently and short term future changes could indicate hardships with long term
contracts. Twenty years from now it was likely to be a very different industry.
Mr. Kabat said he had not reviewed fundamental shifts in the market. They
were trying to meet Councils goal. They saw and opportunity to meet it and
they presented it.
Mr. Van Orsdol said they tend to overestimate technologies impact in the short
term and underestimate it in the long term. He thought this was a classic
example of that. He agreed that in the last half of the 20 year contract, there
would be vast changes in the industry.
Ms. Fong said she was skeptical that the money the government was investing
in green technology would result in drastic changes in the 20 year time frame.
Council Member Espinosa agreed with the skepticism short term. He said that
over a 20 year time line though, was still concerning.
MOTION: Council Member Scharff moved, seconded by Chair Schmid, to
request Staff return to the Finance Committee with a reexamination of the
policies and goals used for the Alternative Energy Program including the energy
efficiency plans and electricity acquisition plans originally made by the Council,
that Staff provide information on the flexibility of the 33 % target date with the
option of aligning it to the State mandated goals, and that Staff present the
credit rating when it becomes available.
Council Member Scharff said that he understood the fleeting opportunity of the
project and noted his appreciation that Staff brought it to the Committee. He
said he had concerns about the technology changes in the last half of the
contract in the rapidly changing industry. He also was concerned about having
almost all of the renewables with one company, especially since that company
had the equivalent of a B-rating.
Chair Schmid asked for clarification on Council Members Scharff's motion
regarding what Staff will return to the Committee. return with Ameresco
proposal following receiving certain information.
Council Member Scharff said that Staff should return to the Committee with
Ameresco's proposal, assuming there would be one, following the receipt of
certain information as discussed. In addition, the motion included moving the
target date of 33% back to 2020 to align with the pending state goals.
Chair Schmid said that he seconded the motion because it was important to
discuss the alternative energy program. He said "it was paired with the
Ameresco contracts and can be done in conjunctions. Risk issues raised were
important to take into consideration. He said it would be useful to have the
audited statements from Ameresco prior to making the decision.
Council Member Espinosa thanked Staff for working to meet Councils request.
He also noted that it may cost more if they wait as the motion suggested. He
said that regardless, making those decisions without the proper analysis makes
him uncomfortable.
MOTION PASSED 3-0
Mr. Kabat asked if there had been a price that the Committee would have
approved.
Chair Schmid said the pricing at the absolute limit was a concern, but the risk
was a larger concern.
Council Member Espinosa said the issue wasn't completely the cost. Tllere was
a broad range of concerns. He said the motion wasn't a direct response to their
proposal but rather a response to a bigger concern.
4. Discussion for Future Meeting Schedules and Agendas
Administrative Services Director Lalo Perez said that April 6, 2010 was the next
scheduled Finance Committee meeting. He said that it was already a full
agenda as the City Ilad some mandated timelines to manage. He said the
CDBD discussion, the funding of non-profits, the Stanford fiscal impact, the
early packet distribution l and a master study by the Fire Department on EMS.
Chair Schmio asked if that was associated with the budget.
Mr. Perez wasn't sure if it would be completed in time for budget in May. He
said they will also discuss requirements for the storm drain fees and the rate
increase proposal for the landfill projects. He said the meeting on April 20th
would have the approval of the Auditors Quarterly report, the electricity
efficiency plan, and an audit of the fleet utilization. .
Council Member Scharff asked if the fleet utilization item would be an action
item.
Mr. Perez said it would be. The auditor would have 15-20 recommendations for
the Finance Committee to consider.
Council Member Scharff asked if they approve the recommendations as a whole
or just some of them.
Mr. Perez said they could change some of them and Staff could agree or
disagree with ~hose changes.
Chair Schmid said it was an opportunity to work in depth prior to taking the
audit to the Council. He asked if there was a schedule for May yet.
Mr. Perez said it was stili tentative.
ADJOURNMENT: Meeting adjourned at 10:27 p.m.
DRAFT
UTILITIES ADVISO~Y COMMISSION
MINUTES OF MARCH 31, 2010
CALL TO ORDER
ATTACHMENT K
-;;-~-. Chair Melton called to order at 7:06 p.m. the special meeting of the Utilities Advisory Commission (UAC).
Present: Commissioners Ameri, Eglash, Foster, and Keller
Absent: Vice Chair Waldfogel, Commissioner Berry and Council Liaison Yeh
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
AGENDA REVIEW
REPORTS FROM COMMISSION MEETINGS/EVENTS
UTILITIES DIRECTOR REPORT
UNFINISHED BUSINESS
NEW BUSINESS
ITEM 1: ACTION ITEM: Renewable Energy Contract with Ameresco San Joaquin LLC and Ameresco
Crazy Horse LLC
Tom Kabat, Utilities Senior Resource Originator made a presentation to the Commission outlining several
background areas including Palo Alto's Renewable Portfolio Standard (RPS) and its history, progress
toward meeting the Renewable Portfolio Standard (RPS) goals, Council and Finance Committee direction
to staff on Energy Efficiency (EE) and renewables, integration of EE and renewables and a description of .
two Power Purchase Agreements (PPAs) negotiated variants from the set presented to Finance Committee
on March 16,2010.
Kabat said that Palo Alto's RPS target is to have 33% renewables by the year 2015 with a retail rate impact
of 11, cent per kilowatt-hour (kWh) or less. Current contracts are expected to supply 21 % renewables by
2015.
The 11, cent per kWh rate impact limit equals $5 Million dollars per year that could not be exceeded by the
acquisition of renewable resources. Current contracts have consumed only $176,000 of the $5M allowance
Utilities Advisory Commission Minutes Approved on: Page 1 of 10
due to their relatively low premiums over the cost of brown power. The multiple venue search for
renewables was described noting that NCPA efforts have not yet produced any renewable projects despite
continued effort. However, several NCPA renewable project efforts that are still ongoing may result in
contract opportunities in the coming months including solar, wind and landfill gas, amounting to less than
3% of Palo Alto's energy needs. A geothermal project may be revived and could provide a chance to
subscribe to about 6% of our energy needs but at a yel unknown price. A chart of other utilities' progress
toward acquiring eligible renewables in 2008 and 2009 showed Palo Alto in the middle of the pack at about
20% while PG&E lagged at 15%. This was significant since PG&E's effort to meet their targets would
require more than 150 times Palo Alto's volume of renewables based on PG&E's greater catch-up distance
and 100 times larger size.
Commissioner Eglash asked whether the green premium is recalculated over time as the price of brown
power rises? Kabat replied "No." Eglash noted that if brown power prices continue to rise, the green
premium can go to zero over time. Staff acknowledged that to be the case and explained that the
"economic scoring" of the renewables contracts is based on a premium determined at the time the
agreement is presented to Council and does not reflect the rise and/or fall of the value over time.
Kabat described Palo Alto's renewables pursuit process and stated that Palo Alto issued its 5th Request For
Proposals (RFP) for renewable reSQurces in Fall 2009 and developed a scoring weight system including
price and value, project viability, project environmental attributes and counterparty credit-wcrthiness. A 5
member team scored the 42 proposals on the criteria and the most attractive ones tuned out to be four from
Ameresco that met the full volume staff was seeking. Other projects having less attractive scores could not
be pursued under the City's purchasing procedures. Negotiations commenced with Ameresco leading to
four 20-year term landfill gas to energy (LFGTE) power purchase agreements (PPAs).
Staff recommended Finance Committee recommend Council approve the four PPAs on March 16, 2010.
The Finance Committee declined to recommend Council approval and instead directed staff to return at a
future date to reexamine renewables policies and EE policies. Kabat mentioned the Committee's concerns
with contract duration subjecting the City to technology risk that disruptive new green technologies could
depress the market for green resources particularly after 10 years and that filling to the target in one move
would not diversify our efforts across time.
Kabat also mentioned that the Finance Committee had expressed concerns when approving the last
renewable PPA in July 2009 that the renewables were very expensive compared to energy efficiency and
brown power and that perhaps staff was not relying enough on EE programs. Kabat read the August 3,
2009 Council Direction to staff: "To work with the Utilities Advisory Commission (UAC) and report back to
the Finance Committee with a re-examination of the policies and goals that are being used in the altemate
energy program, including the energy efficiency plans and the electric acquisition policies and plans."
Kabat explained staff's follow-up efforts including getting UAC approval for an EE plan that compared EE
measures to the cost of green power resources leading to a doubling of EE goals and a significant increase
in EE budget. The EE plan will be presented to the Committee for consideration on April 6, 2010. The
doubled goals would reduce loads by another 37 GWh by 2020 reducing the need to procure 1/3 of that, or
12 GWh of renewables. Forecasted electric loads are essentially flat by the doubled EE effort. Staff used
this reduced load forecast to analyze the need for additional renewables.
During Kabat's discussion on the 10-year Energy Efficiency (EE) proposed plan, Chair Melton reminded the
Commission that the new plan, recommended by the UAC on March 91h for Council approval, doubles the.
Utilities Advisory Commission Minutes Approved on: Page 2 of 10
goals and incorporates green premiums in the evaluation of EE, Chair Melton also noted that under the
proposed 10-year EE plan, energy efficiency is sufficient to capture load growth through 2020.
Kabat explained Ameresco's stated need to complete contracting efforts with Palo Alto by April 19 so
Ameresco could still have time to move on to complete contracts with backup parties if Palo Alto declines
the PPAs, all focused on starting construction by the end of 2010 to qualify for stimulus funding, Kabat
also mentioned staffs plan to update the Long-term Energy Acquisition Plan (LEAP) guidelines, including a
discussion of Ihe RPS goals, timing and allowable budget. Following UAC review, the LEAP update would
then be considered by Finance Committee and the Council.
The March 16, 2010 proposal to the Finance Committee was presented as well as the Committee's
reaction stating concerns including: 1) staff had not yet completed the direction from the August 2009 to
return to committee with review of policies and plans for acquiring renewable and energy effiCiency
resources, 2) technology risk of locking in prices for 20 years, 3) too much concentration with Ameresco in
the portfolio, and 4) Ameresco's creditworthiness.
Given the timing situation and Ameresco's willingness to continue negotiations, staff sought changes
responsive to the concerns raised by the Committee, Namely, eliminating two of the projects, reducing the
prices on the remaining two and negotiating terms of 20 years, 15 years and 12 years, These changes
leave more room to buy other renewable supplies at potentially lower costs in the near to mid term future.
Kabat stated tihm the City currently has contracts with Ameresco to provide 8.8% of City energy already
and is proposing 2 new contracts that are expected to add 6,2% more. Conversely, Palo Alto is already
contracted witih S of Ameresco's 20 power projects, 3 of them sharing output with Alameda Municipal
Power.
Kabat stated out that the possibility of an Ameresco default is mitigated in several ways; by the free
standing Limited Liability Corporations (LLCs), by the PPA structure only requiring Palo Alto to pay for
energy after delivery, by the highly motivated lender'S who would step in to run the projects if Ameresco
fails and by tihe City having operational rights to step in if Ameresco or the lender fail to operate. Mr. Kabat
pointed out that the last step is one we would only want to do if the contract was still attractive compared to
the market.
Kabat presented staffs new renegotiated and pared down proposal, recommending approval of San
Joaquin and Crazy Horse PPAs for 1S-year temns at prices $2 and $4/MWh, respectively, lower than before
and to prepay the interconnection charge toward the end of construction. Kabat described Ihe 1S-year
option as being responsive to the risk of green energy price declines but vulnerable 10 brown energy price
increases exceeding 2% per year and vulnerable to green energy price premiums nol reducing. He
described the 12-year proposals as being significantly higher priced than the 15 year option.
Comparisons of the rates in the prepay and rate table versions of the interconnection cost pass through
revealed that the prepay option has an internal rate of return of about 9% per year for the 15-year PPAs
and about 11 %/year for the 20-year PPAs making prepayment the attraclive alternative compared to the
City's 4%/year investment portfolio, Kabat explained that tihere was a provision in the PPAs that would
allow Palo Alto to gel its money back if the projects were not built.
Commissioner Eglash asked how the money would be returned, especially if the company was in
bankruptcy. Eglash suggested that we would stand in line with other creditors in that case. Kabat agreed
that this likely to be the case.
Utilities Advisory Commission Minutes Approved on: Page 3 of 10
Commissioner Eglash asked whether analysis was done on the interconnection cost impact on the project
costs. Utilities Assistant Director Jane Ratchye explained that for a 15 year contract, paying the
interconnection costs upfront provides a 9% IRR. Commissioner Keller asked what assumed capacity
factor was used. Ratchye replied that an 85% was assumed.
Chair MeHon raised the concern that PG&E's control of interconnection cost could result in PG&E
increasing interconnection costs for the projects so as to cause Ameresco to cancel its contract with Palo
Alto. Were that to occur, PG&E could then step in and take over the project to achieve its own renewable
goals. Commissioner Eglash noted that PG&E could not be so blatantly self-serving without facing legal
consequences. Foster noted that the worst case scenario, complete failure of the project, would simply
have Palo Alto shopping for new supplies onoe again. Keller asked whether there was a possibility for
Ameresco to reduoe its prioe on the Avenal project (the smallest but most expensive project proposed by
Ameresco). Kabat indicated that the Avenal pricing was as low as it could be to still qualify for financing.
Commissioner Keller asked how far the electric interconnection to the grid would be for the projects and
asked whether there was a rule of thumb dollar per mile figure to help detemnine the exposure to
interconnection costs. Kabat replied that the project developer was in a better position to determine the
most efficient interconnection scheme and most economic costs.
Commissioner Eglash asked whether the project premiums included amortization of prepayment for the
interconnection costs. Kabat answered in the affimnative.
Commissioner Ameri asked likelihood of emissions controls for San Joaquin. Kabat responded that he
evaluated different soenarios but did not assign a probability.
Kabat showed graphs of nominal energy prioes from the past and quoted into the next six years and
escalated at 2% per ye(ir after that. Also on those plots were carbon adders that would. be charged
according to proposed federal climate legislation and according to CPUC estimates. Also shown were the
Market Price Referent (MPR) calculated by the CPUC and the prioe ranges for the proposed San Joaquin
and Crazy Horse PPAs. The graphs showed that while the PPA rates were forecast to stay above the
brown market rates, carbon emission fees could drive the cost of brown power above the rates in the PPAs
in the outer years, especially if brown power escalates at more than 2% per year.
Foster asked who provided the numbers for the price forecasts. Kabat replied that marketer quotes were
obtained for the first five years, then the numbers were escalated by 2% per year, a conservative estimate.
A thirty year view of the stacked bar renewable resource plot revealed many buying opportunities for
renewables both to meet the 33% target the first time and to replace the PPAs that start expiring in 2021,
2028, and 2029.
Several slides looked at several opinions of the "greenness" of Landfill Gas to Energy (LFGTE) power
plants. The U.S. Environmental Protection Agency (the agency that administers the title 5 air permits for
landfills and for LFGTEs strongly supports LFGTE. The Natural Resources Defense Council supports
LFGTEs. The Sierra Club opposes LFGTEs unless the landfill is strictly managed to divert all organic
wastes away and uses best management practices to minimize methane generation. The national Sierra
Club supports the adoption of regulations to minimize methane emissions from landfills. Kabat explained
that the two existing old landfill are EPA New Source Performance Standard compliant and will be even
more stringently regulated by the California Air Resources Board new rules to reduce methane emissions
from landfills.
Utilities Advisory Commission Minutes Approved on: Page 4 of 10
In conclusion, Kabat stated that staff recommended UAC recommendation of 15 year PPAs for San
Joaquin and Crazy Horse LFGTE projects and the waiving of the investment grade credit rating
requirement of the Municipal Code for these PPAs.
Joe Saccio, Deputy Director for Administrative Services, explained that he would be presenting the credit
and risk issues in the absence of the Energy Risk Manager, Karl Van Orsdol. Saccio said that the
presentation is almost the same as the one that Van Orsdol made to the Finance Committee on March 16,
2010. Saccio enumerated four key issues: 1) counterparty concentration (whether Palo Alto's renewable
plans rely too much on Amersco?); 2) credit condition of Ameresco (whether Ameresco's financials provide
sufficient assurance of long-term delivery?); 3) whether up-front payment of interconnection charges poses
undue risk; and 4) whether 12, 15, or 20 year fixed-price contracting poses undue market risk.
Saccio provided an overall summary of the positives and negatives of the proposed PPAs. The positives
include Ameresco's strong history of project completion and performance, the proposals were the lowest
priced proposals offered, each PPA is with a separate LLC, the city only pays for power deliveries, the
company will invest significantly in project before power is generated, and a default by the LLC results in a
lender take-over of the project. The negatives include high concentration with one supplier, the fact that
renelNabte pllWer costs more than brown power, long-term contracts at fixed prices are at risk of falling
prices in the future, and political risk that the mandates for renewable power will change in the future.
Commissioner Eglash asked how we know if any of the LLCs is operating at a loss. Saccio said that Van
Orsdollooks at the company's financial information, but he didn't know if Van Orsdollooks at each LLC or
only at the parent company.
Saccio stated that Ameresco currently accounts for 42% of the City's renewable supplies and 9% of the
CHy's total supplies. With the proposed PPAs, Ameresco would account for 56% of the renewable supplies
and 16% of the total supplies (assuming a 95% capacity factor) and be the second largest supplier after the
Western Area Power Administration.
Regarding Ameresco's credit, Saccio explained that Ameresco has grown rapidly over the last 4 years and
has $4 billion of projects under contract now. This growth has stressed Ameresco'sfinances as debt has
doubled since 2005 and the cost of sales has increased by 50%. Based on the company's financial
information, the expected default frequency for Ameresco increased in 2008 from 2007 and increased in
the first three quarters of 2009. However, stresses on Ameresco are easing. Saccio also noted that if
Ameresco defaulted, the project lenders could continue the project.
Saccio discussed the risks and benefits of prepaying the interconnection costs. If the City paid upfront for
the interconnection, but the project was not completed or the project stopped deliveries after a short period
of lime, then the City could lose the prepayment amount. However, Saccio stated that this risk was low
since Ameresco would have invested over 50% of the project cost before the interconnection payment is
made. He also noted that the prepayment would save money over using the price tables if the deliveries
continued over the 12· , 15-, or 20-year contract terms.
Saccio explained that there is some risk that the costs of renewable power will fall and the PPAs will lock in
the cost to Palo Alto at above the market cost of renewable power in the future. New technology could
reduce renewable energy costs in the future. In addition, it is difficult to compare renewable power prices
as there is no transparent forward price curve for renewable power except for the Market Price Referent
that the CPUC calculates annually. Although there is currently a high demand for renewable energy,
Utilities Advisory Commission Minutes Approved on: Page 5 of 10
political changes and economic or rate pressures could weaken the mandates and reduce demand, which
could lead to lower prices for renewable power.
In conclusion, Saccio stated that the PPAs appear to be at or below renewable energy market prices for the
medium term. In the long-term, new technologies could reduce the cost of renewable energy, but carbon
management issues could have an upward effect on prices.
ORAL COMMUNICATIONS ON THE AGENDA ITEM:
David Coale from Palo Alto Cool Cities Team with Sierra Club complimented staff on the presentation and
noted his disappointment with the earlier Finance Committee's reccmmendations. Coale further encourage
the Commission to take a greater perspective on rates versus greenhouse gas emissions and pointed out
that customers in Palo Alto pay far less for electricity than the average PG&E customer for far lesser
greenhouse gas emissions. He stated that we would be misguided to think rates should not go higher and
that the City has an obligation to reduce greenhouse gas emissions when Palo Alto has lower rates and the
ability to pay more. Coale also spoke in support of landfill gas to energy projects because it is baseload
renewable energy. He cautioned that landfill operators must be careful with leakage since methane is
twenty times more lethal than carbon dioxide and noted that it was good to see the amount of work staff
had done in researching the matter.
Bruce Hodge, also with PA Cool Cities Team expressed his support of 33% renewables by 2015 goal. He
stated that it is time to get ahead of the game particularly when competing with PG&E. He mentioned his
attendance at the earlier Finance Committee meeting where he spoke in favor of staffs proposal which he
thought made good sense. He noted his disappointment with a pared back proposal, stated his support of
staff's recommendation, and said he would like to know next steps to hit the 33% goal. He expressed his
opinion that it is not in the Finance Committee's purview to re-write the City Council recommendations on
the renewable portfolio standard and urged the Commission to approve the contracts or even go further.
Herb Borock mentioned an email sent to the UAC at 1:00 this afternoon reiterating his opinion that the
issue being discussed wa.s not in the Commission's and was contrary to action of the Finance Committee.
He noted the discussion at the Finance Committee regarding the Commission's review of the Ameresco
contracts where Fong said that contracts are not brought to the Commission because they are operational
in nature and therefore not under the purview of the Commission. Borock gave an overview of the Finance
Committee's motion. Borock also argued that the Market Price Referent is not a floor. Rather the price for
power is determined by supply and demand, and that as technological advances occur, prices goes down.
He argued that contrary to what Commissioner Eglash said, Borock did not agree that the City should lock
in high priced green power now in anticipation of higher brown prices. Borock also stated that per City
policy, the City cannot contract with Ameresco because its credit rating is too low. Borack opined that staff
is only focused on the 33% goal and that staff is not looking at the future power market. Borock said that
the contracts were being rushed through the approval process. Borock also likened the current process to
the Cuban missile crisis noting that there are two conflicting messages and staff has chosen to ignore one
(the normal approval process) in order to achieve the other (the 33% goal).
Chair Melton began the Commission's deliberations by suggesting that the Commission consider the
Questions raised by the Finance Committee. He first reminded the Commission that governing Council
adopted policy is to achieve 33% Renewable Portfolio Standard (RPS) by 2015, and that a change in that
policy was not part of the meeting agenda, however, should the Council direct the Commission to
reconsider the policy, it would do so at the appropriate time. Melton listed three items for discussion and
Eglash added two more as follows:
Utilities Advisory CommiSSion Minutes Approved on: Page 6 of 10
• Concentration of purchases with Ameresco and Ameresco's credit rating;
• 15-year versus 20-year conlraclterms;
• Political risk;
• Environmental attributes of landfill gas to energy projects;
• The role of energy efficiency.
Chair Mellon noted the Commission's review of the 10-year EE Plan in March, and Commissioner Eglash
added his observation that EE does not obviate need to purchase renewables if Ihe City wants to meet
RPS.
Chair Mellen noted that it would be important for the Commission to have a recommendation on whether it
believes that landfill gas to energy (LFGTE) is a technology that is renewable in the same sense as solar,
wind or other technologies available for renew ables, and whether it would advise the Council to approve
more LFGTE purchases.
Commissioner Foster explained that he had spent some time looking into the issue. He noted first that it is
clear that under applicable California policy, LFGTE is renewable (similar to solar, wind). He also
mentioned that at least one Palo Alto resident expressed concerns about building new landfills just to build
LF6TE, hOWSVSI, flO1l1 his pelspective, the ig5~e was resol'y'ed reF him besed OR the staff repel'!. F~Ftl'ler,
he mentioned that he had contacted Ralph Cavanagh at NRDC who provided the following response: "We
agree that landfill gas is an environmentally preferred fuel source for electric generation; NRDC should not
be cited in opposition to such a contract." Foster noted that if landfill gas is not collected but seeps into the
atmosphere, its far worse than turning it into electriCity.
Commissioner Foster asked staff who has responsibility for regulated landfills. Kabat replied that the
Environmental Protection Agency is responsible for Title 5 landfills and the California Air Resources Board
is also responsible in California. Foster confirmed that both the Federal and State governments are
involved in the regulations and not the City of Palo Alto. Foster noted that he is comfortable with the
consideration of landfills as a renewable source for energy.
Commissioner Eglash remarked thai one can view the issue very simply as landfills already produce
biomass and we are all much better off creating electricity from it rather than simply flaring it. He noted tihat
even the Sierra Club's opposition is based on avoiding encouraging future landfills. Commissioner Keller
indicated agreement with prior comments and added that the landfill is a good source of baseload energy
with a tried and true technology.
Chair Melton mentioned that he had been asked how much C02 goes into atmosphere when methane is
burned to create electricity and noted that the answer was included in the staff report. He summarized it by
noting that flaring methane and using natural gas to produce the same amount of electricity puts more
greenhouse gases into the atmosphere than creating LFGTE energy.
Chair Melton introduced the topic of Ameresco as counterparty and asked the Commission to consider its
level of concern about Ameresco as a counterpary.
Commissioner Foster stated his belief that the issue is fairly minor in this instance, noting that it would be
very different if the City was prepaying for the energy or financing construction of plant, neiiher of which
applies. He further noted that in the event of default by Ameresco, the City would purchase any shortfall
from the market (although it might be brown power), and in any event, under the proposed contracts, the
UVlIties Advisory Commission Minutes Approved on: Page 7 of 10
City only pays for what is delivered. Laslly, he noted that each Ameresco project is a separate entity and
each must achieve financing, so the odds are low that Ameresco will default, but even if it does" the lights
don't go out.
Commissioner Eglash stated that the City is a customer of Ameresco, and not an investor in the company,
and that it has six years of history with Ameresoa where the City is already purchasing power. He
described the relationship as a mutually beneficial relationship.
Commissioner Ameri spoke in agreement noting that the City is not investing, that Ameresco has an
established track reoard and that it has been performing, Commissioner Keller also spoke in agreement
noting that failure to approve a deal with Ameresoa forces the City to deal with an entity with which it has no
track reoard and may have other unknown risks,
Chair Melton asked that the minutes reflect that the Commission does not find there is undue risk in signing
additional oantracts with Ameresco given the nature of the contracts and the safeguards built into them.
Chair Melion then raised the matter of the term (length) of the oantracts and asked the Commission to
oansider the risks associated with enher shorter or longer terms. The commissioners agreed that the 12-
year terms were not attractive beca! lse the prices were too high,
Commissioner Eglash asked wihether the contracts can be executed with enher 15-or 20·year terms at the
same price and staff responded affirmatively, Commissioner Keller noted her preference for the 2O-year
term because it was impossible to guess how much up or down prices might go in the future, the price is
attractive now, and there is a need, Melton agreed that the prices are attractive, however, he noted a
significant amount of the "green premium" is consumed by these oantracts. Ratchye explained that the 0.5
centslkWh cap could be accommodated if more power was available, up to the 33% amount, at the same
prices as the proposed oantracts, however, she conceded that the availability of oamparably priced power
was an uncertainty into the future.
Commissioner Ameri noted that the common expectetion is that the longer contract should result in a lower
the price and asked wihy the prices for the 20-year contract are not less expensive than those for the 15-
year contract. He noted that since there is no price benefit from the extra 5 years of commitment he would
be inclined to stay with the 15-year oantract.
Commissioner Foster indicated that it was his preference to support the 20-year term, however, in an effort
to address concerns raised by the Finance Committee over the length of the contract, and to provide the
Finance Committee with something they could recommend to the Council, he would consider the 15-year
term.
Commissioner Keller pointed out that PG&E is also in the market trying to get renewables, and given
transmission limitations, and the limitations on wind and geothermal project developments, it makes sense
to lock in a longer term.
Commissioner Eglash stated that he has no doubt that brown power prices will continue to rise because
fossil fuels are finite resources and, if one considers a booming economy in a few years, a forecast of 1 %
to 2% annual increases in brown power might be low. He suggested that at some point, increases in prices
for brown power may outpace infiation. He also stated that he had no doubt that further investment and
technology advances, will result in cheaper renewables (solar for instance), although he was less clear that
wind or LFGTE would get cheaper since they are more mature technologies, but also stated that the price
Utilities Advisory Commission Minutes Approved on: Page 8 of 10
of green power is not going to get below the price of brown power. Green power is a "substitution"
technology that takes the 'place of brown power, so as brown power prices increase, even as there are
technological advances, there's a floor for green energy set at the price of brown power plus a greenhouse
gas adder plus another small adder for the green premium, so there will always be a positive green
premium relative to brown. Eglash concluded that from a pricing trend point of view, he would have no
problem recommending a longer contract. He noted that these contracts represent a small part of the
renewable portfolio going forward, that there will be more contracts to sign if the City chooses to meet the
RPS, and that over time, more contracts will expire and more will be needed to maintain the RPS.
Chair Melton noted that legislative actions in both Sacramento and Washington are unknowns, but agreed
that it is unlikely that green power will ever sell for less than brown power. Commissioner Foster stated that
the UAC was trying to make sure it is serving the Palo Alto ratepayer as well as possible, and with that in
mind he made the following three points: (1) the most cost effective way to meet the 33% by 2015 goal is
through these contracts; (2) he opined that down the road, the City will be glad it entered into these
agreements; and (3) since the City is largely dependent on hydro power and brown power, the LFGTE
power provides good portfolio diversification that is not dependent on the fossil fuel market or on hydrologic
conditions.
Commissioner Ameri asked whether a change in regulation Ihat affects costs encountered by the company
(Ameresco) would be passed through to Palo Alto. Kabat replied that the proposed PPAs contain only one
continuing automatic pass-through charge, which is the interconnection costs and the costs of emissions
controls equipment for the San Joaquin landfill project. Fong noted that changes in regulation would be a
market-wide change.
Chair Melton summarized the sense and votes of the commission as follows:
1. The Commission does not support the 12-year contract term.
2. The Commission does support either the 15-or 20-year PPA terms with three commissioners
(Melton, Eglash, Keller) preferring and recommending the 20-year term PPAs and two
Commissioners (Ameri, Foster) preferring and recommending the 15-year term PPAs.
Additionally, Foster wanted the minutes to reflect that, while he voted for the 15-year term, he
did it in deference to the Finance Committee's position, he would support the 20-year term.
Ratchye noted a necessary change to staff's recommendation in the staff report as follows: "change 'for
the acquisition of up to 52,000 MWh per year of energy over fifteen years at an estimated cost not to
exceed ... " to 'for the acquisition of up to 52,000 MWh per year of energy over fifteen years at cost not to
exceed ... " for both Item 1 (San Joaquin) and Item 2 (Crazy Horse) contracts.
ACTION:
Commissioner Foster made a motion recommending that the Utilities Advisory Commission (UAC)
recommends that the Council:
1. Adopt a resolution approving a Power Purchase Agreement (PPA) with Ameresco San Joaquin
LLC, a Delaware limited liability company, for the acquisition of up to 52,000 MWh per year of
energy over fifteen years at a cost not to exceed $88.7 million or over twenty years at a cost not to
exceed XXX, including, if required, a payment of up to $1.425 million for electric transmission
interconnection costs;
2. Adopt a resolution approving a PPA with Ameresco Crazy Horse LLC, a Delaware limited liability
company, for the acquisition of up to 52,000 MWh per year of energy over fifteen years at a cost
Advisory Commission Minutes Approved 011: Page 9 of 10
not to exceed $80.7 million or over twenty years at a cost not to exceed YYV, including, if required,
a payment of up to $1.425 million for electric transmission interconnection costs; and
3. Waive the application of the investment-grade credit rating requirement of Section 2.30.340(d) of
the Palo Alto Municipal Code, which applies to energy companies that do business with the City, as
the Ameresco companies are not rated by credit agencies.
The UAC requested that staff provide the XXX and YYY numbers to represent the appropriate not to
exceed costs of the proposed PPAs for 20-year terms since they were not available at the time of the UAC
meeting.
The Commission voted unanimously to support the motion.
Commissioner Eglash thanked staff for the research and presentations. He then noted that the
Commission must respect two conflicting issues: the need for lowest possible rates and care for the
environment. He acknowledged Melton's earlier reminder that the City has an adopted RPS, and that even
if it did not have its own RPS, it would be forced to comply with an RPS at some point. Therefore, as
Commissioners, all are focused on trying to balance low rates and the environment, and do so as they
sonsider IQRglerrn contracts, pr:olectio~s sIIch contracts afford against Mute increases and portfolio
diversity, etc. Failure to execute the current contracts would likely force in higher cost contracts in the
future. Keller, Foster and Melton all spoke in favor of recommending the contracts.
ACTION:
Chair Melton moved to designate Commissioners Foster and Eglash to represent the UAC at the Finance
Committee on April 6, 2010 when this item is scheduled to be considered. Keller seconded the motion.
The Commission voted unanimously to approve the motion.
_IN_FO_RMATIONAL REPORT~S __________________ _
None.
COMMISSIONER COMMENTS
Commissioner Foster reported that he attended a community meeting organized by Bruce Hodge to
discuss the electric portfolio and how to include additional resources to make it carbon neutral. Foster
thanked attendees and thanked Bruce Hodge for organizing the event. Foster stated that he expected
these issues to eventually be discussed by the UAC. He also stated that there was good representation of
CPAU staff at the meeting.
Meeting adjourned at 10:17p.m.
Respectfully submitted,
Marites Ward
City of Palo Alto Utilities
Utilities Advisory Commission Minutes Approved on: Page 10 of 10
i ,
EXCERPTED DRAFT MINUTES OF FINANCE COMMIlTEE
Regular Meeting of April 6, 2010
ATTACHMENTL
Chair Schmid called the meeting to order at 7: 10 p.m. in the Council Chambers,
250 Hamilton Avenue, Palo Alto, California.
Present: Schmid (Chair), Espinosa, Klein, Scharff
Absent: None
7. Utilities Advisory Commission Recommendation to Adopt A Resolution Approving
A Power Purchase Agreement with Ameresco San Joaquin LLC for the Acquisition
of Up to 52,000 Megawatt-hours per Year of Energy Either Over Fifteen Years at
a Cost Not To Exceed $88.7 Million, or Over Twenty Years at a Cost Not to
Exceed $122.4 Million, and to Adopt A Resolution Approving A Power Purchase
Agreement with Ameresco Crazy Horse LLC for the Acquisition of Up to 52,000
Megawatt-hours per Year of Energy Either Over Fifteen Years at a Cost Not To
Exceed $80.7 Million, or Over Twenty Years at a Cost Not to Exceed $111.3
Million
Senior ResoUrce Onglnator, TOm Kabat, reviewed the tlistor y of tile I ellewable
energy power purchase agreement (PPA) proposals, their costs and merits, various
organizations' stands on landfill gas power and requested Committee
recommendation of two PPAs.
Kabat reviewed the Finance Committee's prior consideration on March 16 of four
PPAs capable of meeting the City's 33% Renewable Portfolio Standard (RPS) target
within the Y2 cent rate impact limit allowance. At that meeting the Committee did
not make a recommendation about any of the four PPAs proposed. Instead, the
Committee requested staff complete the Council's August 2009 direction to return
to Committee with a review of policies and plans for acquiring renewable and
energy efficiency resources. Kabat reviewed the Committee concerns expressed by
the Committee on March 16: lack of a new review of the renewable energy and
energy efficiency procurement policies and goals, future low cost renewable energy
technology making a current commitment at fixed prices regrettable; too much
concentration with Ameresco in the portfolio; and Ameresco's creditworthiness.
Kabat stated that staff conducted further negotiations with Ameresco. The results
of the negotiations were that: two of the four originally considered PPAs were
removed from further consideration, Ameresco decided to offer 12-, 15-and 20-
year terms for the PPAs, the price was reduced for the San Joaquin PPA by $2/MWh
and for the Crazy Horse PPA by $4/MWh, and Ameresco requiring the City to
execute the San Joaquin PPA only or the San Joaquin PPA and the Crazy Horse PPA
together (but not only the Crazy Horse PPA). Ameresco was unable to make 10
year terms work for its financing requirements and the 12-year term options were
significantly higher priced than the 15-or 20-year term options.
Kabat stated that the Utilities Advisory CommiSSion (UAC) held a special meeting on
March 31 to consider the two proposed PPAs. The UAC recommended approval of
1
both PPAs with either 15 or 20 year terms, with a preference for 20-year terms,
with prepayment of the PG&E interconnection costs. The UAC found that the
proposal is in line with existing Council policy of pursuing an RPS of 33% by 2015
and that a review of the current policy is scheduled in August 2010. The UAC was
comfortable doing more business with Ameresco and noted that credit concerns are
minor from a customer basis compared to being a lender or investor in a company.
The UAC concluded that Landfill Gas to Energy (LFGTE) projects are green and
renewable resources. The UAC found that prepaying the interconnection cost is
preferable to paying higher rates for the term of the PPAs.
Mr. Kabat shared staff perspective on credit risk for these PPAs: Lenders require
the individual projects to be held by separate Limited Liability Corporation (LLC)
entitles to protect each one from any problems of the parent company's other LLCs;
and Palo Alto only pays for power if It Is delivered and then we only pay after Its
delivery. If Ameresco defaults on its delivery obiigation, the lender can step in to
make the contract work and if the lender does not, Palo Alto can step in to operate
the plant to make the contract work. Kabat mentioned that this gives the City the
option to not operate the plant or to take advantage of other opportunities.
Kabat showed a graph of hlstonc electric wholesale prices, for ecasted DbIOWII"
power prices along with two greenhouse gas (GHG) cost adders under consideration
by state and federal policy makers. Also shown was the California Public Utilities
Commission's (CPUC's) 2009 Market Price Referent. These cost curves were
compared to the range of prices for the San Joaquin and Crazy Horse projects.
Given the assumptions for future cost of brown power and renewables, both
projects have reasonable costs, especially in the later years of a 20-year term.
A summary table of the two PPAs showed that the projects are expected to increase
Palo Alto's RPS from 22% to 28% with a total rate impact of 0.25 cent/kWh. If the
two new projects end up with larger than expected generators that run
exceptionally well, the PPAs would result in an RPS of 32% with oniy a 0.39 cent
per kWh total RPS rate impact. The size of the machines, the cost of the
interconnection equipment and the cost, if any, for additional emissions control
equipment is expected to be determined in 2011, or within a year from the
operational date for the projects. Kabat provided a table summarizing the seven
committed renewable PPAs and the two new PPAs and showing the details of RPS
volume achieved and rate impact noted above.
Kabat displayed a graph showing the energy delivered and expected to be delivered
from the committed and proposed PPAs from 2005 through 2035 compared to RPS
goals. Combined with prior commitments, the two PPAs reach an RPS of 28%, or
5% short of the 33% goal. The graph also showed that the expiration of existing
long-term PPAs will require new renewables to meet the goal or maintain the same
level of renewables in the portfolio.
Kabat noted that landfills naturally emit landfill gas (LFG), or methane (from the
decomposition of carbon based materials), that must be combusted to reduce its
greenhouse gas impact and destroy other pollutants. LFGTE power plants perform
2
j
1 ,
that combustion in large engines recovering the energy to spin generators making
eligible renewable electricity. The Crazy Horse landfill, operated by Salinas Valley
Solid Waste Authority, closed in 2009 after more than seven decades of operation
and is currently being sealed. It is complying with federal Environmental Protection
Agency (EPA) New Source Performance Standards (NSPS) that limit the LFG
allowed to escape, require LFG collection system operation and has been flaring gas
that exceeds the needs of its old generator since 1998. It will also be complying
with new California Air Resources Board (CARB) AB32 greenhouse gas (GHG)
compliance regulations that are even more stringent than NSPS. The San Joaquin
(Foothill) landfill operated by San Joaquin County, has been open 44 years since
1966 and is scheduled to close in 2059. It has an NSPS compliant collection system
installed in 2006 and currently flares the LFG. It will also be complying with new
California Air Resources Board (CARB) AB32 GHG compliance regulations that are
even more stringent than NSPS.
Kabat presented the positions of several organizations regarding the "greenness",
of renewable resource qualities of LFG-powered generation. The US EPA's stance is
that LFGTE projects reduce pollution and reduce GHG emissions from the electric
grid, and that they do not conflict with waste diversion programs. The Natural
Resources Defense CounCil's pnorltles are to first reduce matel ial flows to lalldfills
with recyCling programs and other diversion programs, then to collect and burn LFG
and increase typical collection system efficiencies at capturing LFG. A Sierra Club
task force has developed a policy opposing the establishment of new LFGTE
projects except at facilities which complete the process of diverting all organic
materials from the waste stream going to the landfill, extract gas from permanently
covered cells and adopt best management practices to minimize methane
generation. The task force supports regulations to minimize emiSSions and
supports regulations to divert organic materials from the waste stream for landfills.
Kabat pointed out that California's new AB32 related stricter landfill emission
standards, and AB 939 Integrated Waste Management Act waste diversion
requirements apply to the landfills in question and work toward addressing the task
force's concerns.
Kabat concluded by recommending, along with the UAC, Council approval of both
PPM with terms of either 15 or 20 years and waiver of the application of the
Municipal Code's investment grade credit rating requirement for these two
agreements.
Utilities Director Valerie Fong introduced Energy Risk Manager Karl Van Orsdol for
his presentation on the risk aspects of the proposed Ameresco contracts. Van
Orsdol noted that since he had given a presentation to the Finance committee two
weeks ago, he would focus on issues and questions raised at that meeting and at
the UAC meeting the previous week.
Van Orsdol apologized for the UAC Risk Management Presentation not being
included in the report that went to the Finance Committee. He noted that most of
the UAC presentation was contained in the March 16 presentation to the Finance
Committee.
3
Van Orsdol noted that he would review 4 key issues with regard to Ameresco.
These are
1. Counterparty Concentration. Do the City's renewable plans rely too much on
Ameresco?
2. Credit Condition of Ameresco. Do Ameresco's financials provide sufficient
assurance of long-term delivery?
3. Do up-front payments of interconnection charges pose undue risk?
4. Does 15 Dr 20 year fixed-price contracting pose undue market risk?
In summarizing the pro's and con's of committing to these contracts, Van Orsdol
noted that Ameresco has a strong history of project completion and performance,
the company offered the City the lowest priced renewable power of the 42 RFP
responses, that each Project "isolated" in an LLC to prevent cross-default, that the
City only pays for power delivered, that if Ameresco defaults, lender will take over
project and continue delivering power unless costs exceed discounted future
revenue stream.
Van Orsdol also discussed the risks associated with the contracts including high
concentration In one renewable energy provider, that renewable power cost liigliel
than wholesale power, that in either a 15 or 20 year fixed price contract, Palo Alto
bears technology, and corresponding market price, risk, that an Ameresco default
would impact current and proposed projects, and that political and regulatory risk
could lower the price of renewable energy in the future.
Van Orsdol then summarized the pros and cons of the option of prepaying the
interconnection costs, noting that there is an excellent return on investment in
reduced power costs with low default probability.
In discussing counterparty concentration risk, Van Orsdol noted that Ameresco
currently accounts for 42% of renewable energy supply and 9% of total supply, and
that with the addition of these two contracts, Ameresco will account for 56% of
renewable energy supply and 16% of total supply. Overall, there are 8 suppliers
with a reasonably balanced portfolio between these suppliers. Van Orsc;lol did note
that this overall supply balance is not risk based, and the City's exposure to some
counterparties, such as Ameresco, is higher than others.
With regard to credit issues with Ameresco, Van Orsdol noted that Ameresco has
grown rapidly in the last 4 years with revenue up over 60% from 2005, assets up
250% in the same period, that retained earnings have doubled and that total
projects under contract with Ameresco total $4 billion. This growth has led to
additional financial stress on Ameresco, including a doubling of the long term debt
since 2005 and a 50% increase in the cost of .sales. Van Orsdol added that this
stress was to be expected given Ameresco's business model of taking on debt
financed projects and earning back revenues after the project began operating.
As a result of these stresses, Ameresco's estimated default frequency (EDF), or the
probability of defaulting, has gone up from 0.39% in 2007 to 1.15% in 2008 to
4
1.38% in the first 3 quarters of 2009. Van Orsdol noted that only one of Palo Alto's
ongoing projects has been operational for a sufficient duration of time to assess
credit quality: the Santa Cruz landfill project. For Santa Cruz, the EOF is calculated
at a level on par with the credit status of the parent company, Ameresco Inc., at
4.7%.
Van Orsdol noted that while an Ameresco Inc. default is disruptive, it does not
necessarily result in termination of deliveries at the price in the PPAs. There are
four outcomes of an Ameresco Inc. default, depending on the future market price of
renewable power at the time of default and the lender's costs, including finance and
operating costs, over revenue at that time.
If the lenders costs over revenue were high, one of two outcomes would occur: 1) if
future market prices were low, the lender would terminate the project and Palo Alto
could take over the project and could reissue an RFP to buy replacement renewable
supplies at lower prices; or 2) if future market prices were high, the lender would
terminate and Palo Alto would bear the risk of having to find new supplies at higher
rates. On the other hand, if lender costs were relatively low, the lender would
continue to sell power to Palo Alto at the contracted price and the City would pay
that priCe, which could be higHer ttlafl mat Ret prices. If the Futul e ,IIa, ket plice
was high, the City would continue to receive the power at then below market rates.
Because of the role of lenders in the event of a default, the City's risk management
program also needs to look at lender credit ratings. Van Orsdol noted that
Ameresco has used Bayerishe Landesbank to fund Santa Cruz and Ox Mountain
projects and the TO Bank for the Keller Canyon project. The Bayerishe Landesbank
is having severe financial issues, and is only creditworthy because of the underlying
support of the State of Bavaria in southern Germany. TD Bank, on.the other hand,
is among the strongest of North American Banks. Van Orsdol also said that in
informal conversations. with Ameresco, that the funders of these new projects would
have a credit profile that is closer to TO Bank.
Van Orsdol summarized the upfront payment to cover the interconnection
eqUipment costs and noted that there was relatively low risk and with significant
positive net present value for the investment. He did note that if Ameresco Inc.
defaulted, the City would likely lose some or all of its investment in the
interconnection equipment.
Van Orsdol then turned to the fixed-price market risk, the risk that prices in the
future could move downward due to technology development, economic slowdown,
or regulatory changes. Van Orsdol noted that staff was doing additional research
on the issue, in part because of its importance, and in part because it was of
interest to both the Finance Committee and the UAC. Van Orsdol said that the
City's current 12-month exposure to Ameresco was $2.9 million and so market risk
was a critical issue for understanding the risks associated with these contracts.
Van Orsdol said that while many technologies are offered to generate renewable
power, landfill generation remains one of the more cost-effective technologies. He
5
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I
did note that political changes and economic risks could weaken regulatory
pressures, which could, in turn, soften prices for renewable supplies. Van Orsdol
presented a graph which compared costs of different generation technologies and
noted that the levelized costs of the Ameresco contracts was below that of almost
all renewable generation resources.
Van Orsdol also said that in order to further assess market risk, staff engaged
Energy and Environmental Economics Inc, a firm which serves as a consultant to
the CPUC on the financial impacts of energy regulation. Palo Alto staff developed
three scenarios for this analysis: 1) 33% RPS as a 'Business as Usual" case; 2) a
33% RPS with a "technology breakthrough"; and 3) a 20% RPS regulatory pull
back case. Van Orsdol also noted that even if the RPS is lowered to 20%, an
additional 19,000 to 26,000 gigawatt-hours (GWh) of new renewable generation
will be required in California to meet that goal. If the goal remains at 33% RPS in
2020, an additional 51,000 to 64,000 GWh of renewable generation will be required
within the State. In either case, significant additional renewable energy generation
will be required.
Van Orsdol then summarized the preliminary results for the three scenarios. In
Scenario 1, the marginal cost of power would rise to $306jl"WI1 witll sola, tI,e, ",al
being the marginal resource. In Scenario 2, the marginal cost of power would
increase to $182/Mwh and the marginal resource would be distributed solar
photovoltaic (PV) power. In Scenario 3, a regulatory pullback to 20% RPS would
lead to an average price increase of 7% with wind at $91/MWh being the marginal
resource.
In comparing the three scenarios, Van Orsdol noted that the results suggest that
the City's financial risks to signing a long-term fixed-priced contact with Ameresco
were greater with regard to the reduction in the RPS standards than to new
technology dramatically lowering the cost of renewable power, at least for the
duration of the contracts. Van Orsdol noted that California gubernatorial candidates
have spoken about lowering the RPS standards or delaying implementation of AB
32.
Van Orsdol then summarized the findings of his presentation. He noted that
concentration risk, was a concern, but a risk which could be managed though
additional renewable diversification. On Ameresco's credit rating, Van Orsdol noted
that continuing the close monitoring of Ameresco's financial condition and that of
the project lenders would help in spotting troubling developments. Also if
Ameresco stopped delivering, the City would not be required to pay. On the
prepayment risk, Van Orsdol repeated that the risks were very low and that the
prepayment was a prudent investment. On market risk, Van Orsdol said that in the
long term, technology could reduce renewable power below the contracted price,
but that appeared unlikely to occur during the contract tenure. However, political
risk through a regulatory pullback did pose a significant risk, especially In the
economic downturn continued and would be affected by the gubernatorial election
as well as national elections over the next 5 years.
6
Council Member Klein asked UAC Commissioner Steve Eglash why the UAC
recommended 20-year contract terms over 15-year contract terms. Commissioner
Eglash explained that the proposed contract pricing included a small rate of inflation
so the later years of the contract contained the more attractive pricing leading to
the UAC's recommendation on the longer term. Commissioner Eglash noted that
prices for power could be lower in 15 years, and if one wanted to bet on the lower
prices in 15 years, then the choice would be the 15-year term of contracts.
Commissioner Eglash further explained that, of the 2 commissioners voting for the
shorter 15-year contract terms, one did so out of deference to the Finance
Committee's concern over technology risk, and the other did so based on a belief
that that the 15-year term was less risky.
Council Member Scharff asked whether brown power prices were based on natural
gas fired generation, and asked for the underlying assumptions in spikes in power
that occurred in the past. Staff responded that the brown market prices reflect
"non-differentiated" market power, where the generation behind the market power
is not identified, and that spikes in electricity prices are typically driven by supply
and demand. By example, staff explained that an electric price spike observed in
April 2008 was driven by a steel pipe shortage which'limited the amount of natural
gas getting into the market, thus limiting the amount of IIatUi ai-gas gelle. ated
electricity into the market. Staff also explained that the price quotes are 5-year
quotes obtained from marketers based which are subsequently escalated at 2% per
year to 2022.
Council Member Scharff expressed concerns about the regulatory environment and
the impacts of regulatory changes (such as a "roll back" of the mandate to achieve
a certain level of renewables generation in the electric portfolio) on the price of
green power.
Council Member Scharff mentioned his understanding that natural gas is a cleaner
burning fuel (emitting only C02) than methane which is 20 times worse than
natural gas. He referenced a Natural Resources Defense council position that
landfill methane releases are accompanied by dioxins and heavy metals. Staff
acknowledged the political uncertainties and the impact such uncertainties could
have on the price of green power, and also explained that burning methane, either
through flaring or generating electricity reduces the amount of dioxins and heavy
metals released into the environment. As between flaring and generating
electriCity, it Is better to use the methane usefully by generating electriCity.
Chair Schmid asked whether reliance on landfill gas to generate electricity increases
the level of greenhouse gas emissions as indicated in a Sierra Club task force
report. James Bier, Senior Project Developer with Ameresco, responded that he is
a scientist who has been in the landfill business for 30 years and that he assessed
that the Sierra Club task force report is flawed and that he was aware of a soon-to
be-released report from Columbia University that would refute the findings in the
Sierra Club task force report.
7
David Coale, member of the Green Ribbon Task Force, said that from his
perspective, the environmental concerns have been addressed, and further that
green power would always cost more than brown power. He cautioned that PG&E's
efforts to increase its renewable portfolio standard to 33% would leave little green
power for other entities, such as Palo Alto. He suggested that Palo Alto's low
electric rates could sustain the increases stemming from the purchase of more
expensive green power, and stated his support of the recommendation to enter into
the two contracts.
John Hackman recommended that the Finance Committee not approve staff's
recommendation to enter into the contracts because they posed a huge risk to the
city, they were speculative, the risk due to the unrated nature of the company
(Ameresco) should be borne by private parties and not the City, and because there
are simply too many unknowns.
Council Member Espinosa noted staff had adequately addressed most of the
concerns raised by the Finance Committee at its March 16, 2010 meeting in its
review of staff's earlier recommendation to approve four contracts with Ameresco.
However, staff has yet to return with a full review of the policies and plans for
acqUiring renewable generation and energy effiCiency resources. Coullcil Meilibel
Espinosa acknowledged that such work needed to be completed, and while the lack
of the plans made the decision more difficult on the two proposed contracts,
because the other concerns were addressed, he was better positioned to make a
recommendation on the contracts at this juncture.
MOTION: Vice Mayor Espinosa moved,. seconded by Council Member Klein to
recommend to the City Council to:
1. Adopt a resolution approving a Power Purchase Agreement (PPA) with
Ameresco San Joaquin LLC, a Delaware limited liability company, for the acquisition
of up to 52,000 MWh per year of energy over fifteen years at a cost not to exceed
$88.7 million, including, if required, a payment of up to $1.425 million for electric
transmission interconnection costs;
2. Adopt a resolution approving a PPA with Ameresco Crazy Horse LLC, a
Delaware limited liability company, for the acquisition of up to 52,000 MWh per
year of energy over fifteen years at a cost not to exceed $80.7 million, including, if
required, a payment of up to $1.425 million for electric transmission
interconnection costs; and
3. Waive the application of the investment-grade credit rating requirement of
Section 2.30.340(d) of the Palo Alto Municipal Code, which applies to energy
companies that do bUSiness with the City, as the Ameresco companies are not rated
by credit agencies.
Utilities Advisory Commissioner Steve Eglash stated that there will be little doubt,
over time, that these purchases will be the right thing for ratepayers. He observed
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that energy commodities, unlike many other commodities and technologies, have
consistently increased in price over time and suggested that one could consider
what has happened to the price of gasoline for automobiles over our lifetimes.
Commissioner Eglash noted that the supplies for gas and oil have Indeed increased
precisely because developers are betting on prices continuing to go up. The
proposed contracts are not merely investments, but would allow the city to lock in
prices that will prove more attractive as time goes on.
Council Member Klein remarked that historically, Palo Alto has managed to choose
wisely when it has locked into long-term contracts. He pOinted out that the City,
back in the 1960s, had a choice to partner with PG&E on the Diablo Canyon nuclear
power facility, but it chose instead to lock into a long-term agreement with the
Western Area Power Administration for hydroelectric power. Past council members
deserve credit for locking into an extremely attractive long-term contract for hydro
power. Council Member Klein noted that we cannot currently know whether the
subject contracts will turn out to be as attractive as the hydro contracts. Klein
stated that, in the context of the overall size of the energy market, Palo Alto is not
a big player, that the criticism of gas from landfills are not to be dismissed since
there is no such thing as completely clean power (whether because of the
transmission lines required to transmit the power or the drilling required to leLlieve
natural gas), and that there is no such thing as a "local" market for energy
anymore. Council Member Klein said that he had attended two lectures within the
past 6 weeks at which Secretary Steve Chu was a speaker, and based on what he
heard, we should not expect to see lower prices in the next 10 to 20 years. Council
Member Klein indicated that he viewed the two contracts as good transactions and
that his preference would be to recommend 20 year terms, not 15 year terms
because of the additional profit inherent in the pricing proposal in the last 5 years.
Chair Schmid suggested that given the changing times, it is appropriate to take a
fresh look at what our key assumptions should be, the tradeoffs that might exist,
and our goals in light of the changes we are seeing.
SUBSTITUTE MOTION: Council Member Schmid moved, seconded by Council
Member xxxx to recommend to Council to approve the Crazy Horse contract only.
SUBSTITUTE MOTION FAILED FOR LACK OF A SECOND
SUBSTITUTE MOTION: Council Member Scharff moved, seconded by Council
Member xxxx to recommend to Council not to approve either contract.
SUBSTITUTE MOTION FAILED FOR LACK OF A SECOND
SUBSTITUTE MOTION TO CALL THE QUESTION: Vice Mayor Espinosa moved,
seconded by Council Member Klein to call the question.
SUBSTITUTE MOTION TO CALL THE QUESTION FAILED: 2-2 Scharff, Schmid
no
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SUBSTITUTE MOTION: Council Member Scharff moved, seconded by Council
Member Schmid recommend to Council to approve the San Joaquin Contract for a
term of 15 years.
SUBSTITUTE MOTION FAILED: 2-2 Espinosa, Klein no
MOTION FAILED: 2-2 Scharff, Schmid no
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