City Council Agenda Report
Meeting Date: February 4, 2025
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Senior Management Analyst
Subject
Change Order No. 21 to Amended and Restated Services Agreement with Siemens Energy Inc.
Recommendation
A. Find that approval of the proposed action is exempt from California Environmental Quality Act (CEQA) review, because it is a government fiscal activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a “project” as defined by CEQA Guidelines section 15378; to the extent the Purchase Contracts with Siemens Energy, Inc. provides for facility and equipment maintenance or repairs, such work is categorically exempt from CEQA review, in accordance with CEQA Guidelines section 15301, because the project consists of the maintenance, repair or minor alteration of existing structures, facilities, or equipment, and involves negligible or no expansion of an existing use; and B. Approve and authorize the City Administrator to execute Change Order No. 21 to the Amended and Restated Services Agreement with Siemens Energy, Inc. (Siemens Energy), in substantially the same form as submitted, to revise the Payment Schedule.
Background
On November 16, 2021, the City Council adopted Resolution No. 2021-41, approving a Purchase and Sale Agreement (PSA) with Bicent (California) Malburg LLC (Bicent) for the acquisition of the Malburg Generating Station (MGS). Under the PSA, the City is required to assume or otherwise comply with certain vendor contracts previously entered by Bicent. As such, the City was obligated to accept the existing Long Term Service Agreement (LTSA) between Bicent and Simens Energy, Inc. (Siemens Energy). On August 20, 2024, the City Council approved Change Order No. 20 to the Amended and Restated Services Agreement with Siemens Energy to revise the Projected Schedule Outage Plan, Payment Schedule, Cancellation Schedule, Upgrade Schedule, Dehumidifier Upgrade, Burner 26 Upgrade, Gearset Upgrade, Starter Motor Upgrade, amend the termination date of the agreement, and add a blanket Purchase Contracts schedule.
As assigned, the LTSA was designed for Siemens Energy to provide program parts, non-program parts, miscellaneous hardware, inspection hardware, generator parts, generator scheduled outages, steam turbine parts, steam turbine scheduled outages, scheduled outages services, and program management services for MGS's ongoing needs. LTSAs are among the most complex contracts encountered by combined cycle power plants.
Section 4.2 of Exhibit E “Payment Schedule; Taxes” to the LTSA, governs the mechanics of annual fee escalation and the escalation factor tied to the Gross Domestic Product Implicit Price Deflator (GDPIPD Index). Furthermore, Exhibit E, “Payment Schedule; Taxes,” addresses the situation when the GDPIPD Index is discontinued or modified, “Should the indices specified in the formula be discontinued, or should the basis of an index be modified, the Parties shall mutually agree on an appropriate correction factor or substitute index.” Parties have reached a mutual agreement; accordingly, the GDPIPD Index basis has been modified, and the Escalation Factor formula basis must be updated.
Siemens Energy recently provided Change Order No. 21 to the Amended and Restated Services Agreement deleting the taxes and revising the Escalation Factor to reflect Bureau of Economic Analysis (BEA) revisions to the GDPIPD index. Siemens Energy referenced the Quarter 4 data from the GDPIPD index in Change Order No. 20 rather than annual data. Additionally, with Change Order No. 21, Siemens Energy requests an example of the escalation procedure and an example of a re-baseline, similar to the example that was referenced in Change Order No. 17.
Therefore, Vernon Public Utilities is requesting to revise Section 4.2 of Exhibit E, “Payment Schedule; Taxes” to the LTSA agreement with Siemens Energy in accordance with Change Order No. 21.
Change Order No. 21 has been reviewed and approved as to form by the City Attorney’s Office.
Change Order No. 21 contains confidential and proprietary information and will be provided to the City Council under separate cover; it will not be included in the public Agenda Packet.
Fiscal Impact
The fiscal impact associated with Change Order No. 21 is estimated at $3,010,000 since the long-term service agreement payment is subject to the annual Escalation Factor and will be either increased or decreased by the Escalation Factor at the time of each invoice. Sufficient funds will be budgeted in the Electric Fund, Malburg Generation Station, Long-Term Plant Maintenance Account No. 055-050-586-529001 for FY 2025-26 and in subsequent years.
Attachments
None.