HomeMy WebLinkAboutStaff Report 4218
City of Palo Alto (ID # 4218)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 11/18/2013
City of Palo Alto Page 1
Council Priority: Environmental Sustainability
Summary Title: Ameresco San Joaquin LLC Contract Amendment
Title: Approval of Amendment No. 1 to the City's Power Purchase Agreement
with Ameresco San Joaquin, LLC to Extend the Landfill Gas Electric
Generating Facility's Commercial Operation Date to January 31, 2014
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that Council approve and authorize the City Manager or his designee to
execute the attached amendment (Attachment A) to the Power Purchase Agreement (PPA) with
Ameresco San Joaquin LLC (San Joaquin) to extend the landfill gas electric generating facility’s
Commercial Operation Date deadline to January 31, 2014.
Executive Summary
The City signed a 20-year PPA with San Joaquin for a landfill gas electric generating facility and
the project is almost ready to begin operating, but it is being held up by PG&E, which is delayed
in completing a backlog of projects to interconnect to the electric grid. When operational, the
San Joaquin project will provide about 3% of the City’s total electric needs and increase the
City’s percentage of renewable resources from 21% to 24% of its total needs.
The PPA with San Joaquin includes a milestone for the project to achieve its Commercial
Operation Date (COD) on November 23, 2013, but the PG&E backlog is causing the project to be
delayed beyond that date. San Joaquin, therefore, asked the City to extend the COD to January
31, 2014. Staff recommends that the City amend the PPA to accommodate this request.
City of Palo Alto Page 2
Background
In May 2010, Council approved the PPA with San Joaquin to obtain all of the electric output of a
landfill gas electric generating facility over a 20-year term (Resolution 9055, CMR 226:10).
When it begins operating, the plant, located at the Foothill Sanitary Landfill in San Joaquin
County, is expected to produce enough renewable electricity to satisfy approximately 3% of the
City’s total supply needs and help the City meet its RPS requirements.
The PPA listed several project development “milestones” and established deadlines for their
completion. The milestones included: obtaining site control, obtaining all necessary permits,
executing an interconnection agreement with the owner of the local transmission and
distribution system, Pacific Gas and Electric Company, (PG&E), obtaining construction financing,
starting construction, and achieving commercial operation. In the event that San Joaquin failed
to meet any of these development milestones, the PPA provided that Palo Alto could assess
liquidated damages against San Joaquin, and, in some instances, terminate the contract.
At the time the City executed the PPA in 2010, San Joaquin indicated that the plant expected to
achieve commercial operation in January 2013. The contractual deadline for achieving COD,
however, is tied to the date San Joaquin obtained construction financing for the project. Based
on the actual date of that occurrence, the contractual COD deadline is November 23, 2013.
In addition to meeting the above development milestones, the PPA also requires San Joaquin to
provide Palo Alto with monthly reports describing their progress towards meeting the various
development milestones. San Joaquin has substantially complied with that requirement.
Attachment B is an example of a recent monthly report.
Discussion
According to San Joaquin’s attestations in recent monthly progress reports, and as noted in a
letter to the City requesting this contract amendment (Attachment C), the facility is fully
permitted, San Joaquin has an executed small generator interconnection agreement (SGIA) with
PG&E, and construction of the facility was substantially complete as of July 2013. Since that
time, the only obstacle preventing San Joaquin from achieving commercial operation is PG&E’s
failure to complete the necessary transmission line work to connect the facility to a nearby
electrical substation.
When new renewable energy facilities are constructed, it is quite common for moderate to
extensive transmission system upgrade work to be required in order to connect these
sometimes remote projects to the grid. As more and more renewable energy facilities have
been built in recent years to meet the state’s aggressive RPS requirements, significant delays in
City of Palo Alto Page 3
interconnection upgrade work have become the norm. As the predominant owner of the
transmission system in northern and central California, PG&E is responsible for completing this
work for San Joaquin and many other projects.
PG&E’s obligations to complete this interconnection work are detailed in its SGIA with San
Joaquin (an agreement to which the City is not a party). The SGIA contains its own set of
milestones and associated deadlines, with the deadline for completing all interconnection work
necessary for the facility to achieve commercial operation being December 24, 2012. However,
PG&E’s backlog of interconnection construction projects has caused the schedule for the San
Joaquin interconnection work to be pushed back repeatedly, which in turn has caused the delay
in the project’s expected COD. According to San Joaquin’s project management staff, while San
Joaquin is frustrated with PG&E’s delays in meeting the SGIA milestones, San Joaquin feels,
based on its recent communications with PG&E, that PG&E is on track to complete the project’s
interconnection in the coming weeks. In reliance on this, and on reports from other parties
who have sought damages from PG&E in similar cases with limited success, San Joaquin has
opted not to pursue damages against PG&E for these delays at this point.
Section 7.4(c) of the PPA states that failure to achieve the COD deadline results in San Joaquin
becoming liable for liquidated damages of approximately $28,000 for each month the COD is
delayed beyond the contractual deadline. Staff recommends that Council approve an extension
of the Commercial Operation Date deadline to January 31, 2014 and waive its right to seek
liquidated damages, for several reasons. First, the delayed COD is principally due to PG&E’s
inability to complete the interconnection upgrade work in a timely manner, not San Joaquin’s
failure to diligently pursue completion of the contractually required milestones. Second, in
light of the 20-year agreement between San Joaquin and Palo Alto, and both parties’ interest in
the project achieving successful commercial operation as soon as possible, staff recommends
against taking action to compromise that partnership at this early stage. Lastly, staff feels
comfortable recommending that the Council rely on San Joaquin’s assurances that the delay
will not extend past January 31, 2014. Staff will continue to monitor the project’s progress
closely, and consult with Council if the project is further delayed.
Resource Impact
Approving the recommendation will result in the City forfeiting its right to collect up to about
$60,000 ($28,000 per month for slightly more than two months) in liquidated damages from
San Joaquin for failing to achieve commercial operation by the deadline set forth in Section
4.3(b)(v) of the PPA, in reliance on San Joaquin’s assurances that it can meet the January 31,
2014 deadline. Not approving the recommendation would enable the City to seek collection of
these damages.
City of Palo Alto Page 4
Policy Implications
This recommendation does not represent any change to existing City policies.
Environmental Review
Approval of the recommended action does not meet the definition of a project, pursuant to
Section 21065 of the California Environmental Quality Act (CEQA).
Attachments:
Attachment A: Resolution (PDF)
Attachment B: San Joaquin Monthly Progress Report - September 2013 (PDF)
Attachment C: Ameresco San Joaquin LLC Letter Requesting Contract Amendment
(PDF)
131106 dm 6051998 1
AMENDMENT NO. 1 TO POWER PURCHASE AGREEMENT
BETWEEN THE CITY OF PALO ALTO AND
AMERESCO SAN JOAQUIN, LLC
This Amendment No. 1 to the Power Purchase Agreement (“Agreement”) is
entered into on November 18, 2013, by and between the CITY OF PALO ALTO, a California
chartered municipal corporation of the State of California (“CITY” or “BUYER”), and Ameresco
San Joaquin LLC, a Delaware Limited Liability Company, located at 111 Speen Street, Suite 410,
Framingham, MA 01701 (“Ameresco” or “SELLER”).
R E C I T A L S
1. The Agreement was entered into between the parties for the sale of energy
to BUYER from SELLER’S Landfill Gas electric generating facility to be located at the Foothill
Sanitary Landfill; and
2. The parties wish to amend the Agreement to grant SELLER additional time to
achieve the Commercial Operation Date for the Landfill Gas electric generating facility.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this Amendment, the parties agree:
SECTION 1. Section 4.3(b)(v) is amended to read as follows:
“By January 31, 2014, Seller shall have achieved the Commercial Operation
Date.”
SECTION 2. Except as modified by this Amendment, all other provisions of the
Agreement, including any exhibits and subsequent amendments, shall remain in full force and
effect.
//
//
//
//
//
//
131106 dm 6051998 2
IN WITNESS WHEREOF, the parties have by their duly authorized representatives
executed this Amendment on the date first above written.
APPROVED AS TO FORM:
__________________________
Senior Deputy City Attorney
APPROVED:
__________________________
Director of Utilities
CITY OF PALO ALTO
____________________________
City Manager
Ameresco San Joaquin, LLC
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
San Joaquin Co. / Foothill LFGTE Project
Development Progress Summary
Through September 2013
Name: Telephone: Mobile: E-mail:
San Joaquin Co.
Desi Reno
Solid Waste Director
(209) 468-3066 (209) 351-0693 dreno@sjgov.org
Mike Carroll
Engineer
(209) 468-8504 (209) 601-1780 mcarroll@sjgov.org
City of Palo Alto
James Stack (650) 329-2314 (650) 209-0315 James.stack@CityofPaloAlto.org
Ameresco
Mike Bakas (MB)
Sr. VP Renewable Energy
(508) 661-2223 (617) 448-8059 mbakas@ameresco.com
James D. Bier (JB)
Senior Project Developer
(480) 275-8228 (209) 610-4318 jbier@ameresco/com
Carl von Saltza, P.E. (CVS)
Director of Eng.
207.842-6333 207.842-6300 cvonsaltza@ameresco.com
Dean Robinson (DR)
Project Engineer
(508) 598-4687 (763) 218-6038 drobinson@ameresco.com
Jim Koulovatos (JK)
704.916.3526 704.344.9473 jkoulovatos@ameresco.com
Task No. Task Description Responsibility /
Comments
1. Gas Purchase and Site Lease Agreement:
GPA & Site Lease Agreements w/ San Joaquin Co.: 3/16/2010
Amendment No. 1: (royalty clarification): executed 12/16/2010
Amendment No. 2: (royalty reduction): executed 9/27/2011
JB /MB
2. Power Purchase Agreement:
PPA w/ Palo Alto: executed 5/3/2010
JB/MB
3. Electrical Interconnect w/ PG&E:
Interconnect Application: submitted 5/27/2010
System Impact Study (SIS): completed on 9/3/2010
Palo Alto Rejection Letter for Interconnection Agreement draft:
11/29/11
Interconnection Agreement: Executed Feb 22, 2012
Deliverability Assessment CAISO Capacity Reports: Study to be
issued by PG&E
FERC review and approval: FERC approval received March 19, 2012
PG&E interconnection lines: timing to be determined
CVS/DR
Page 2
4. Air Permitting by San Joaquin Valley APCD:
Permit: Application to SJVAPCD: submitted 7/5/2010
Authority to Construct Permit: Issued 6/8/2011
Other Permits:
CEQA: completed by San Joaquin Co.
Planning Permit: issued by County 9/15/2011
Generation Building: issued by County 5/11/2012
Grading: issued by County 5/11/2012
Restroom Building: issued by County 5/11/2012
Foundations: issued by County 5/11/2012, revisions approved
11/27/2012
Electrical, Electrical Underground: 5/11/2012
Interconnect and Mechanical Building Permits: 5/11/2012
JB/DR
5. Financing:
Arranging of financing for construction of the plant: AMERESCO has
closed the financing of the facility
JK
6. Plant Design & Engineering Schedule:
Initial Plant Design: completed
Final Plant Design: completed
Equipment Procurement: engines ordered October 7, 2011; Siloxane
Pretreatment System ordered September 15, 2011, All major plant
equipment procurement complete
CVS/DR
7. Construction Schedule:
Commence Construction: Grading mobilization 9/17/2012
Construction Activities This Period: Final surfacing of the plant yard,
tie-in of LFG condensate piping to San Joaquin collection system.
Construction Activities Next Period: Tie-in of LFG bypass line to San
Joaquin County flare.
Complete Construction: Construction substantial completion July 2013.
Commissioning and Start-up: Completed August 2013. The
commission of the controls, electrical, and mechanical systems was
accomplished this period with AMERESCO in house Engineering along
with numerous vendor startup technicians. Electrical testing completed
by Hart High Voltage. AMERESCO along with technicians from
Western Energy successfully idled Engine 1 on August 29th and Engine
2 on August 30th.
CVS/TBD
8. Transmission Scheduling: No action required at this time, dependent on
PG&E’s transmission line activity scheduled for completion on September 30th.
NCPA
Page 3
9. Planned Operation: PG&E has completed the transmission line work into the
plant location. Work began in early August and was completed on schedule at
the end of September. The PG&E work at the substation is scheduled to be
completed on October 30th. The current schedule for PG&E to backfeed power
to our facility is October 28th. We continue to work closely with Verizon and
AT&T to provide required phone/internet/transfer trip communications to our
facility. PG&E’s completion of the transmission line work was critical to
Verizon beginning their work on the installation. We have not been able to get
a confirmation from PG&E that their power poles have been released for work
by Verizon. The original schedule for that release was October 5th.
CVS
10. Ribbon Cutting: T.B.D. JB