1 STAFF REPORT
______
________________________________________________________________ DATE
: May 21, 2024
TO: J
ustin Hess, City Manager
FR
OM: Joseph Lillio, Interim General Manager, Burbank Water and Power VIA: Mandip Kaur Samra, Assistant General Manager, Power Supply BY: Anthony D’Aquila, Power Resources Manager
SUBJ
ECT: Approval of an Agreement for Purchase of Renewable Energy Certificates with 3 Degrees Group, Inc. for 10 Years and Finding CEQA Exemption for Existing Facilities that are not Delivering Energy to Burbank. ______________________________________________________________________
RECOMMENDATION
Approve and authorize the Interim General Manager of Burbank Water and Power (BWP), as designee of the City Manager, to enter a renewable energy certificate purchase agreement with 3 Degrees Group, Inc. (3D), for the purchase of renewable energy credits (REC) for 10 years and find CEQA exemption for existing facilities that are not delivering energy to Burbank.
BACKGRO
UND
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 rules 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 and 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 3D Contract will help BWP meet the RPS, long- term, and PCC 3 requirements described in detail below.
DIS
CUSSION
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 outlined 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 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 pre- date the RPS program, they do not fall into a PCC 1, PCC 2, or PCC 3 category but count towards RPS. They are subtracted from the RPS requirement prior to calculating the remaining obligation for PCC 1, PCC 2, and PCC 3.
• 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 resource 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)
BWP needs to procure additional RPS and PCC contracts, and as soon as 2025, BWP will need to secure additional long- term contracts to meet the requirements set by law.
The 3D Contract meets the RPS, PCC 3, and the long- term requirements. The CEC 3 allows BWP to carry over any excess RECs to count towards compliance for future years for up to 36 months following production.
The 3D Contract will deliver 35,000 PCC 3 RECs annually over a 10-year term for a total of 350,000 RECs. The term starts on the date of contract execution and ends 10 years from that date. The contract price per PCC 3 REC is $9.20 for a total contract price of about $3.22 million for the 10 years. In addition, the resources assigned to the 3D Contract have already been pre-certified as a PCC 3 by the CEC. If the RPS regulations materially change after the contract’s execution and results in the product’s ineligibility as a PCC 3 REC, 3D must provide a replacement renewable energy product.
This contract meets RPS compliance in two ways. It meets the PCC 3 standards, moreover, it will count towards the 65% minimum long- term requirements. Penalties for non-compliance would exceed $160 million by 2030, for which BWP is actively negotiating additional contracts to avoid.
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. BWP is 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 year due to supply chain issues and labor constraints. The 3D Contract includes 35,000 PCC 3 RECs for each generation period from 2024 through 2033 at a price of $9.20/PCC 3 REC. The Project will add approximately 3-3.5% RPS (depending on load) to our portfolio without significant supply chain constraints.
ENVIRONMENTAL REVIEW
The 3D Contract helps Burbank meet the state mandate of 60% renewable resources by 2030. The PCC 3 RECs purchased do not involve the construction of a new project, as they would be procured from existing facilities. Hence, they would qualify under an existing facility exemption CEQA (14 CCR § 15301) . Additionally, given t hat the procurement of the PCC 3 RECs will be from renewable sources that are less polluting than conventional power, and that no tangible energy purchases are involved, this activity is covered by the “common sense” exemption CEQA (14 CCR § 15061(b)(3)) since there is no possibility that the activity in question may have a significant negative effect on the environment. As a result, the activity is not be subject to CEQA.
FISCAL IMPACT
The total cost of this contract for 10 years is estimated to be $3.22 million. 3D has agreed to pay all broker fees. This contract is included in the BWP budget starting in fiscal year 2024/2025.
CONCLUSION
To continue to meet the RPS requirement, staff recommends Council authorize the Interim General Manager of BWP, as designee of the City Manager , to enter a contract with 3D for the purchase of renewable energy credits at a cost of approximately $3.22 4 million over 10 years and find CEQA exemption for existing facilities that are not delivering energy to Burbank.
ATTACHMENTS
Attachment 1 – Agreement for Purchase and Sale of Renewable Energy Certificates