1 STAFF REPORT
___
___________________________________________________________________ DAT
E: December 5, 2023
T
O: Justin Hess, City Manager
F
ROM: Dawn Roth Lindell, General Manager, Burbank Water and Power VIA: Mandip Kaur Samra, Assistant General Manager, Power Supply BY: Anthony D’Aquila, Power Resources Manager
S
UBJECT: Approval of a Power Purchase Agreement with Tule Hydro , LLC for the Purchase of Renewable Energy for 15 years and Finding CEQA Exemption for Existing Facilities
_____________________________________________________________________________
RECOMMENDATION
Approve and authorize the General Manager of Burbank Water and Power (BWP), as designee of the City Manager, to enter a power purchase agreement with Tule Hydro , LLC (THL) (Attachment 1) and to execute other documents as necessary to implement the contract and finding that it is exempt under the California Environmental Quality Act (CEQA) for existing facilities.
BACKG
ROUND
Senate Bill (SB) 100 requires load -serving entities, such as BWP, to meet 60% of the retail energy needs with renewable energy by 2030. On December 14, 2021, Council adopted version 3 of the “BWP Renewable Portfolio Standard (RPS) Procurement Plan and Enforcement Program,” which lays out the RPS r ules and requirements and how BWP will comply. This document identifies the requirements for compliance with the RPS program in California. Specifically, BWP not only needs to meet the 60% RPS requirement and interim compliance period targets, but it also needs to meet the portfolio content category (PCC) requirements, as well as the long- term requirement which requires that 65% of all renewable contracts used to meet the RPS are at least 10 years or longer in duration. This THL Contract helps BWP meet the RPS, long-term, and PCC 1 requirements, described in detail below.
DI
SCUSSION
The RPS is the amount of eligible renewable energy as a percentage of retail sales that BWP will use to meet the compliance period obligations, with interim targets as outline d in the California Public Utilities Code (PUC). In addition to the compliance period, each renewable contract is classified into a specific PCC. There are four of these categories ,
WATER AND
POWER
2 which represent the type of renewable energy credit (REC) generated from the resource.
The requirement for each PCC is listed below:
• PCC 0 - Grandfathered Contracts: These are renewable contracts for California Energy Commission (CEC) certified renewable energy signed before June 1, 2010.
Since these contracts p re-date the RPS program, they do not fall into a PCC1, PCC2, or PCC3 category but count towards RPS. They are subtracted from the RPS requirement prior to calculating the remaining obligation for PCC1, PCC2 , and PCC3.
• PCC 1 - Directly Scheduled (Bundled): A REC associated with a CEC- certified renewable resource and the energy from the same resource, bundled and procured together, and delivered as produced without any substitute energy.
Electricity products must be generated by an eligible renewable energy r esource that has its first point of interconnection within the metered boundaries of a California balancing authority area, or electricity products must be generated by an eligible renewable energy resource that has its first point of interconnection outside the metered boundaries of a California balancing authority however scheduled into a California balancing authority without substituting electricity from another source. • PCC 2 – Firmed and Shaped: A REC associated with the energy from a CEC- certified renewable resource that was generated in the past and is bundled together with the energy from a different resource.
• PCC 3 - Unbundled RECs: A REC associated with the energy produced from a CEC-certified renewable energy resource that was generated in the past and does not include energy as part of the procurement or delivery.
The specific details for the PCC limitations and requirements and the RPS percentage are listed below.
Burbank Water and Power
California Energy Commission RPS Procurement Requirements by Calendar Year
California RPS
Mandatory
Procurement
Requirement
Compliance
Period 4
Compliance
Period 5
Compliance
Period 6
Compliance Period
7+
1/1/2021-
12/31/2024
1/1/2025-
12/31/2027
1/1/2028-
12/31/2030
3 calendar year
blocks
44% RPS
by
12/31/2024
52% by
12/31/2027
60% RPS by
12/31/2030
60% RPS
PCC 1 Minimum ≥ 75% of Net Procurement Requirement
PCC 2 Maximum ≤ 25% of Net Procurement Requirement
PCC 3 Maximum ≤ 10% of Net Procurement Requirement
LTR At least 65% of all RPS contracts must be long -term in duration (at least 10 years in duration)
Starting in 2024, BWP will need to procure additional RPS and PCC 1 contracts, and starting in 2026, BWP will need to secure additional long- term contracts to meet the 3 requirements s et by law. The THL C ontract meets the RPS, PCC 1 , and long-term requirements. The CEC allows us to carry over any excess renewables to count towards compliance for future years for up to 36 months following production.
The THL C ontract delivers the energy to the California Independent System Operator.
Though the energy is not delivered to Burbank due to transmission limitations, the regulations only require that renewable energy is delivered to California. The resources under the THL C ontract will be delivered to a California balancing authority without substituting electricity from another source, which meets the PCC 1 requirements listed above. In addition, the resources assigned to the THL C ontract have already been pre- certified as a PCC 1 by the CEC.
The Tule River Hydroelectric Project (Project), a 6.4 MW run of the river electric generator in Tulare County, California, has been owned by Pacific Gas and Electric Company (PG&E) since 1914. On February 24, 2022, PG&E sought authority from the California Public Utilities Commission (CPUC) for the sale of the Project to THL. The CPUC approved the sale by PG&E to THL on November 3, 2022, and th e escrow on the sale closed on May 25, 2023. The Project is expected to deliver approximately 330,000 MWh of energy and PCC 1 RECs over the course of the 15- year contract. The term will commence no later than September 1, 2025, the guaranteed commercial operation date.
The total project cost is estimated at $24 million for 15 years ($1.32 to $1.86 million per year). Burbank is the only participant in the P roject and will take 100% of the output ; however, due to its run of the river nature, production will v ary as precipitation changes annually. The P roject is undergoing repairs, and if it is certified for more than 6.4 MW following the completion of this work, BWP will benefit from the additional energy because we are contracting for the Project's full capacity.
Ideally, BWP would like to secure both RECs and energy that can be directly delivered to the Burbank load. However, supply chain issues and transmission limitations have led BWP to find creative solutions. With the constrained timing, we must secure RPS, PCC 1, and long-term contracts for our compliance needs by 2024. This contract bridges the gap with RPS compliance for a short time and assists us with RPS, PCC 1, and long-term requirements while we work on securing additional renewable resources. P enalties for non-compliance would exceed $160 million by 2030, and BWP is actively negotiating additional contracts to avoid such penalties.
Concurrently, BWP is working with the Southern California Public Power Authority (SCPPA), a joint power authority, to team up with other Southern California utilities to secure renewable resources. We are actively negotiating several contracts through SCPPA, which will deliver energy and RECs post-2026. However, many of these contracts have increased in price over the last ten months due to supply chain issues and labor constraints. The THL Contract includes an initial price with a 2.5% annual escalator for 15 years. The Project will add approximately 3- 5% RPS (depending on load) to our portfolio without significant supply chain constraints.
4 On November 2, 2023, the BWP Board unanimously voted to recommend that the Council approve the General Manager of Burbank Water and Power, as designee of the City Manager, to enter a contract with THL for the purchase of renewable energy at a total cost of approximately $24 million over 15 years and to execute other documents as necessary to implement the contract.
ENVIRONMENTAL REVIEW
The THL Contract helps the city meet the state mandate of 60% renewable resources by 2030.
With respect to the California Environmental Quality Act (CEQA), the CPUC has already determined pursuant to Decision 22- 11-002, issued on November 3, 2022, that the sale of the Project from PG&E to THL was exempt from CEQA under a categorical exemption for the “operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use…including “[e]xisting facilities of both investor and publicly -owned utilities used to provide electric power.” (14 Cal. Code Regs. Section 15301 (b)). This is an existing energy resources facility and we do not expect that the physical layout or generation from the facility will materially change. BWP is taking the energy from this resource and not adding an additional environmental impact to the area since it is an existing facility. The same analysis would apply in connection with the execution of the THL Contract.
FISCAL IMPACT
The total cost of this contract for 15 years is estimated to be $24 million. This contract has been included in the BWP budget starting in fiscal year 2024-2025.
CONCLUSION
To continue to meet the RPS requirement, staff recommends that the Council authorize the General Manager of BWP, as designee of the City Manager, to enter a contract with THL for the purchase of renewable energy at a cost of approximately $24 million over 15 years and to execute other documents as necessary to implement the contract.
ATTACHMENTS
Attachment 1 – Renewable Power Purchase Agreement