2022-10-11; City Council; ; Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service Center

CA Review CKM
Meeting Date: Oct. 11, 2022
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Gary Barberio, Deputy City Manager, Community Services [email protected], 442-339-2822
Cindie K. McMahon, City Attorney
[email protected], 442-339-5986
Subject: Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service Center
District: 2
Reco
mmended Action
Receive status update and provide direction on negotiations to relocate SDG&E’s North Coast Service Center.

Exec
utive Summary
On July 26, 2022, the City Council received a status update on the negotiations between Brookfield Properties, NRG Energy, and San Diego Gas and Electric to relocate the SDG&E North Coast Service Center from its current location near the northeast corner of Carlsbad Boulevard and Cannon Road as anticipated in the “Settlement Agreement dated as of January 14, 2014 Between and Among The City of Carlsbad, Carlsbad Municipal Water District, Cabrillo Power I LLC, Carlsbad Energy Center LLC, and San Diego Gas and Electric Company.” At that meeting, SDG&E informed the City Council that the city-owned parking lot at The Shoppes location was not an acceptable relocation site, but that SDG&E was committed to making another SDG&E site work. The City Council instructed staff to continue efforts to negotiate an appropriate relocation site and return on Oct. 11, 2022, with a progress report, term sheet and identification of a suitable relocation site with an emphasis on the Lot 11 site owned by SDG&E.

The parties have continued to negotiate and have determined that the Lot 11 site is also not a feasible relocation site, primarily because of cost, environmental and timing concerns.

The parties are now looking at various options for reconfiguring the service center on its current site to free up property that could be transferred to the city. Although the parties do not have a specific proposal to present for the City Council’s consideration at this meeting, discussions of these options have been encouraging and the city’s negotiation team hopes that Oct. 11, 2022
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it will be able to return to update the City Council with more details on these discussions by the end of the year.

Discussion
As part of the settlement agreement, SDG&E offered to relocate its service center so that the city could take ownership of the existing service center property along with two other SDG&E properties, essentially allowing the return of the property from industrial to other more appropriate coastal uses. In the settlement agreement, the transfer was made possible by having NRG pay the costs of the relocation, with the signed agreement committing NRG to paying $22.5 million for the relocation, thereby saving SDG&E ratepayers money.

Since the July 26, 2022, City Council meeting, city staff have participated in over five joint meetings as well as other smaller group meetings with the parties to the settlement agreement to explore options for a relocation site for the service center. Although the parties have not been able to identify a relocation site that meets all of the parties’ needs, significant progress has been made in the settlement discussions.

Recently, SDG&E has led discussions regarding alternative configurations of the service center on the current site, including options that would give the city control over a portion of the site.

There are many variables to consider in determining a reconfiguration of the site that would meet all of the parties’ needs. The city’s negotiation team is hopeful that with additional time to explore the reconfiguration options and discuss the different variables, the parties should be able to decide upon an acceptable alternative and return to the City Council on Dec. 13, 2022, with a progress report, term sheet and identification of a suitable relocation site.

Staff are also seeking direction from the City Council on discontinuing efforts to include the site known as Lot 11, on the north side of Cannon Road at Armada Drive, in the negotiations based on its infeasibility as a suitable site for relocation of the service center.

If the parties are unable to reach agreement on relocation or reconfiguration of the service center, the city will not take title to the properties identified in the settlement agreement. In that event, as noted in the attached April 2022 staff report, the city would receive $10 million from NRG and SDG&E would forego the $22.5 million expense of relocating the Service Center.

Fiscal An alysis
No additional funding is being requested.

Next Steps
Upon receiving City Council direction, staff will continue negotiations with the other parties and return to City Council for further direction on Dec. 13, 2022.

Environmental E valuation
This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under California Public Resources Code Section 21065 in that it has no potential to cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment.

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Public Notification
This item was noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to scheduled meeting date.

Exhibits

1. July 26, 2022, City Council Staff Report, with exhibits (o n file in the Office of the City Clerk ) Oct. 11, 2022
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Exhibit 1

July 26, 2022, City Council Staff Report
(on file in the Office of the City Clerk)

Oct. 11, 2022
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Gary Barberio, Deputy City Manager,
Community Services
Cindie K. McMahon, City Attorney
Oct. 11, 2022
Status of Negotiations to
Relocate SDG&E Service Center
{ City of
Carlsbad

SETTLEMENT AGREEMENT
• Settlement Agreement approved by City Council
on Jan. 14, 2014
• Between and among: City of Carlsbad, NRG and
SDG&E
ITEM 8: NORTH COAST SERVICE