Palo Alto City Council
January 16, 2024

Substation Improvement Agreement
Hanover Substation (Tesla)
January 16, 2024 www.cityofpaloalto.org
1 Agenda
• Background
• Project Summary
• Project Schedule
• Project Funding
• Contract Documents
1 Tesla Advanced Compute Center in Palo Alto, California • AI and High-Performance Compute Center
• Global Engineering and AI Headquarters
• Former HP Headquarters at 1501 Page Mill Road
Background
CPAU Hanover Substation
3350 Hanover Street
Palo Alto, California 94304
1501 Page Mill Road,
Palo Alto, CA 94304
1 Project Summary
Design and build the following at Hanover Substation :
• Grading and structural site improvements
• Install (2) 60 kV circuit breakers
• Install (1) 60 kV bus tie breaker
• Install (2) 50 MVA 60kV/12kV transformers
• Install (1) 12kV power distribution center
• Install (2) 12kV feeders (to Tesla)
• Install bus switches, buswork, wiring, and feeder outlets to Tesla’s onsite switchgear
• Test and commission all equipment and components
1 Hanover Substation Upgrade Project Schedule
• Assumes a 40-hour work week
• Key milestones
 City Council Approval – January 16, 2024
 Construction Begins – January 29, 2024
 PDC Delivery – April 8, 2024
 Project Completion (Estimated) – September 17, 2024
Project Schedule

1 A Public/Private partnership to help in expediting the construction of needed facilities Tesla requested additional distribution capacity at their Palo Alto facility The date requested by Tesla for delivery of the new facilities was unachievable given the current City processes Tesla agreed to pay all of the cost related to expediting fees (approx. $3 Million) Total project cost - $24,000,000 (included construction costs $15,000,000) • Initial Project Funding
 Tesla providing all initial costs for design and construction of the project. • City’s Reimbursement to Tesla
 City will reimburse 50% of the substation construction costs up to a maximum cap of $12,000,000 at acceptance of the substation project.
• Tesla Costs
 Construction of 12kV feeders to serve Tesla.
• City’s Costs
 12kV feeder extension from existing transformers to the new transformers.

Project Funding Summary
Description City
Cost
Tesla
Cost
Total
Major Equipment & Design $4.5M $4.5M $9M
Construction (Bulk material and labor) $5.5M $5.5M $11M Expediting Fees & Feeder Scope - $3M $3M
Tesla Cost Savings (Deferred feeder
scope & 40-hour work schedule)
- ($1.7M) ($1.7M)
Total Base Project Cost $10M $11.3M $21.3M
Additional contingency for contaminated
soil removal (RCS-2)
$2M $2M $4M
Estimated Worst-case Project Cost - - $25.3M
City’s Contractual Limit $12M - -
Tesla Approved Budget - - $21.3M
1 Summary - The City and Tesla have entered into an Improvement Agreement in which the Parties will jointly design, construct, install and fund improvements to increase the electrical capacity at the Hanover Substation to support Tesla’s new electrical demand load at 1501 Page Mill Road, Palo Alto, California 94304. The Agreement consists of the following contract documents:
• Substation Improvement Agreement
 Establishes terms for the Public-Private Partnership. • Encroachment Permit
 Allows Tesla to perform work at the Hanover Substation Site. • Capacity Reservation Agreement
 City reserves 11,200 kVA (9,000 kW demand) of electric capacity for Tesla.  Tesla pays a monthly Capacity Reservation Fee.
 Tesla receives a Monthly Capacity Usage Credit to compensate them for their contribution of general use assets based on the amount of electricity used each month.

Contract Documents
1 Request
• Staff requests Council’s approval of a Substation Improvement Agreement With Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Allocate $15,000,000 to the Hanover Substation Upgrade Project (EL- 24001).