1 STAFF REPORT
DAT
E: June 10, 2025
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O: Justin Hess, City Manager
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ROM: Mandip Kaur Samra, General Manager, Burbank Water and Power VIA: Erik Olsen, Interim Assistant General Manager, Power Supply BY: Anthony D’Aquila, Power Resources Manager
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UBJECT: A pproval of a Power Sales Agreement with the Southern California Public Power Authority for the Purchase of Renewable Energy for 30 Y ears (Milford Solar Phase II)
RECOMMENDATION
Approve the General Manager of Burbank Water and Power ( BWP), as designee of the City Manager, to enter a Power Sales Agreement (PSA) with the Southern California Public Power Authority (SCPPA) to purchase 13.3% (40 megawatts (MW) out of 300MW) of the Milford Solar Phase II (MS2) project at a total cost of approximately $112 million over 30 years and authorize the General Manager to execute other documents as necessary to implement the PSA.
BACKGROUND
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, the City Council (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. Attachment 1 identifies the requirements for compliance with the RPS program in California, including the 60% renewable and 65% long-term requirement (LTR).
DISCUSSION
The MS2 project was selected through a competitive process through SCPPA’s Renewable Energy Request for Proposals. The following agreements are tied to this project:
WATER AND
POWER
2 1) Power Purchase Agreement (Attachment 2) between the developer of the project, Milford Solar Phase II, LLC (“Milford LLC”), and SCPPA (“PPA”) pursuant to which Milford LLC will sell 300 MW to SCPPA.
2) Option Agreement (Attachment 3) between Milford LLC and SCPPA pursuant to which SCPPA will have an option in the future to purchase the MS2 project. 3) Set of bilateral Power Sales Agreements between SCPPA and each of the participants (individually, BWP, Glendale Water and Power (GWP), and Los Angeles Department of Water and Power (LADWP).
B
urbank’s rights and obligations to the project are through the PSA , including the purchase of power, voting rights , and other payment obligations. Burbank’s PSA (Attachment 4) is the document that BWP is recommending Council authorize for execution. Separately, LADWP and GWP have or will be seeking approval from their respective City councils for approval of their own PSAs.
T
he MS2 project delivers the energy using existing transmission resources. The renewable energy under the PSA will be delivered to a California balancing authority without substituting electricity from another source, which meets the Portfolio Content Category (PCC) 1 and LTR mandates. BWP’s share of the project is expected to generate nearly 2.9 million MWh of energy and Renewable Energy Credits (RECs) (approximately 99,000 MWh annually).
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he Option Agreement includes options to purchase MS2 from the developer at the 10th and 15th anniversaries and then every five years thereafter . Both parties in the Option Agreement would have to come to an agreement on a Fair Market Value for the facility , either through joint negotiations or the use of independent appraisers. If the decision to exercise the option is unanimous among the three SCPPA participating members , the ownership share percentages would equal the project participant shares . Should the purchase option be approved by a majority vote, all participants will be obligated to move forward with the purchase and to execute all necessary documentation in connection therewith. Even though the non-supporting voter would be required to move forward with the purchase, the entity may be able to negotiate a fair alternative to the purchase that would allow them to continue to the end of the term and then be released from any further obligation.
The PP
A between SCPPA and Milford LLC wa s executed as of January 30, 2025. T he PPA can still be terminated if BWP, GWP, and LADWP have not executed their respective PSAs by the end of September 2025. The possibility for a price change and/or termination still exists if either LADWP or SCPPA (with respect to any projects in which LADWP has 50% or more interest) fail to maintain a long -term debt credit rating at or above an Investment-Grade Credit Rating prior to the start of construction. A dditionally, since the change in the Federal a dministration and potential changes to the economics of the 3 project are not entirely within the control of the developer, new force majeure events (i.e. a reduction or termination of the I nflation Reduction Act , delays resulting from force majeure events, etc.) have been included in the agreement. These types of provisions have not typically been in long-term agreements that BWP has engaged in and they add some risk that the project may not reach completion or that the costs may increase.
However, the contract contains numerous protections for the project participants which include, but are not limited to, developmental milestone securities, operational guarantees, and financial damages for under/over production.
T
he target Commercial Operations Date (COD) for this project is 12/31/2026, and the Guaranteed COD (GCOD), the date after which the developer will be open to performance damages, is 12/31/2027. With this GCOD, the project would help with RPS starting in 2028 and contribute to the 60% RPS and 65% LTR mandate for 2030. If MS2 can achieve the target COD, the RECs generated in 2027 would have a significant impact on the Compliance Period 5 (CP5) RPS compliance obligation.
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upply chain issues, lack of projects, and lack of transmission still present challenges for BWP to meet the RPS obligations for CP5. As penalties for non-compliance could exceed $160 million by 2030 , BWP is actively pursuing additional contracts to avoid such penalties and is continually working with SCPPA to partner with other Southern California utilities. Many proposed contracts, however, have increased in price over the last twelve months due to supply chain issues, labor, and transmission constraints.
ENVIRONMENTAL REVIEW
The MS2 contract helps Burbank meet the state mandate of 60% renewable resources by 2030 and the zero-carbon goal by 2040.
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he MS2 project is located in Beaver County, Utah and portions of the MS2 project are located on Federal property. The Beaver County Planning and Zoning Commission has issued a “Final Environmental Assessment Report for the Milford Solar Phase II Project” which determined that the project would result in less -than-significant impacts, and part of their determination was based on a finding of no significant impact under an Environmental Impact Statement pursuant to the National Environmental Policy Act (NEPA) issued by the Bureau of Land Management on May 28, 2020 with respect to the portions of the project on Federal lands.
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s such, approval of the PSA is exempt from the California Environmental Quality Act (CEQA) under Section 15277 (Projects Located Outside of California) of the State CEQA Guidelines as the underlying MS2 project is located out of state and subject to an environmental impact review under NEPA or a comparable state law. Staff is authorized to file a notice of exemption with the appropriate authorities. 4 FISCAL IMPACT
The total cost of this contract is estimated to be $112 million over the life of the contract.
This is approximately $3.8 million annually and will be included in the BWP budget starting in Fiscal Year 2027-2028, expensed to the account number that will be created for the MS2 project. If this contract is not executed, BWP will incur additional cost s for higher- priced contracts currently being proposed, delays in delivery due to COD being further out, and potential exposure to penalties.
CONCLUSION
To continue to meet the RPS requirement, staff requests that Council authorize the General Manager of BWP, as designee of the City Manager, to enter the PSA with SCPPA for the purchase of 13.3% of MS 2 at a cost of approximately $ 112 million over 30 years and to execute other documents as necessary to implement the PSA.
ATTACHMENTS
Attachment 1 – California Energy Commission Renewable Portfolio Standard Requirements and Products Summary
Attachment 2 – Power Purchase Agreement between the Southern California Public Power Authority and Milford
Attachment 3 – Option Agreement between Milford and the Southern California Public Power Authority
Attachment 4 – Power Sales Agreement between the Southern California Public Power Authority and the City of Burbank