COUNCIL AGENDA: 5/13/2025
FILE: 25-509
ITEM: 2.7
TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Nora Frimann,
City Attorney
SUBJECT: CALPINE UNDERBILLING
SETTLEMENT
DATE: May 1, 2025
RECOMMENDATION
E
xecute the attached settlement agreement with Calpine Energy Solutions, LLC, acknowledged and agreed to by Calpine Community Energy, LLC, for the latter to credit the City in the amount of $900,000 spread over the first 36 months of the term of a new Services Agreement with Calpine Community Energy, LLC in equal monthly credits of $25,000, with a payment of any remaining credit balance due upon the earlier termination or expiration of the same.
OUTCOME
T
he City will be discounted a total of $900,000 over 36 equal monthly credits of $25,000 applied to the new Services Agreement that staff are seeking approval to negotiate and execute.
BACKGROUND
C
alpine Energy Solutions, LLC, (Calpine) and the City entered into a Professional Services Agreement for Data Management and Customer Call Center Services on February 27, 2018, that as amended, will expire on May 29, 2025 (the “Services Agreement”). Under the California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) programs, low-income customers receive discounted rates and are automatically enrolled in the SJ Cares program which gives those San José Clean Energy (SJCE) customers eligible for CARE and/or FERA an additional 10% discount off SJCE’s TotalGreen Rate. Calpine is responsible for removing customers from the SJ Cares program within 90 days of being notified by PG&E that they are no longer enrolled in CARE/FERA. In performing the Services Agreement, Calpine failed to remove approximately 13,000 SJCE customers from the discounted rate as they became unenrolled from the programs starting in July of 2021. In September of 2024, ED staff were alerted to the discrepancy and requested an accounting from Calpine.
HONORABLE MAYOR AND CITY COUNCIL
May 1, 2025
Subject: CALPINE UNDERBILLING SETTLEMENT
ED staff have calculated the number of impacted customers to be 13,585, with an estimated financial impact of $1,086,000. Calpine has produced an accounting claiming that the number of impacted customers is 12,769, with the financial impact to SJCE being $1,043,453.22. The discrepancy (789 customers) appears to be comprised of those customers calculated to be in Calpine’s under 90-day billing bucket.
On August 8, 2017, staff released a Request for Proposals (RFP) for SJCE’s Data Management and Customer Call Center Services. The RFP outlined service including data management, customer information system, call center operation, billing and coordination with Pacific Gas and Electric. Six firms responded and Calpine scored the highest. On February 27, 2018, City Council approved a two-year Services Agreement with Calpine, with options for two additional one-year terms. The Services Agreement with Calpine was extended through several amendments and now is set to expire on May 29
th, 2025.
The Energy Department desires continue services that were provided by Calpine by leveraging a cooperative agreement, which would allow SJCE to capitalize on the competitive pricing secured by the cooperative agreement without needing to commit to a long contract term.
On June 28, 2024, Peninsula Clean Energy (PCE) and Silicon Valley Clean Energy (SVCE) issued a joint competitive RFPs for data management services, receiving three responses. Both PCE and SVCE subsequently executed new multi-year agreements with Calpine’s affiliate, Calpine Community Energy, LLC (Calpine CE).
Pursuant to Section 4.12.225.B.3 of the Municipal Code, staff will recommend leveraging the results of the PCE and SVCE’s solicitation to enter into a New Services Agreement with Calpine CE for billing operations, data management, and customer support services. Staff have engaged with Calpine CE to discuss specific requirements for data management, billing and customer support services and have confirmed Calpine CE can meet the City’s requirements.
ANALYSIS
Pursuant to the Services Agreement, Calpine’s limited liability is capped at the direct damages. Calpine proposed to re-bill the impacted customers, and after considering the vulnerability of these customers and the reputational impact, SJCE declined to have Calpine do so. Calpine has agreed that Calpine CE would apply a $900,000 billing credit over 36 equal monthly payments of $25,000, with any uncredited remaining balance due upon the earlier termination or expiration of a new services agreement.
Approving the settlement agreement in conjunction with a later recommended New Services Agreement would allow Calpine to continue providing SJCE data management and customer call Center Services, including support of customer billing and data management functions, data exchange with PG&E, customer call center support,
HONORABLE MAYOR AND CITY COUNCIL
May 1, 2025
Subject: CALPINE UNDERBILLING SETTLEMENT
payment, and settlement processing, without interruption and at discounted rate than otherwise would be available to the City.
PUBLIC OUTREACH/INTEREST
This memorandum and the Settlement Agreement have been posted on the City’s website for the May 13, 2025, agenda.
COST SUMMARY/IMPLICATIONS
The credit will reduce the City’s obligations by $900,000, which will be credited back to the San Jose Clean Energy’s Designated Fund.
CEQA
Not a Project (File No. PP17-003), Agreements/Contracts (New or Amended) resulting in no physical changes to the environment.
By: /s/ Nora Frimann
NORA FRIMANN
City Attorney
cc: Jennifer Maguire, City Manager
For questions, please contact NORA FRIMANN, City Attorney, at (408) 535-1900.