City Council Agenda Report
Meeting Date: February 17, 2026
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Principal Management Analyst Subject
Clean Energy Savings Plan for Renewable Energy and Supporting Agreements Recommendation
A. Find that the proposed action is a purely administrative and financial transaction that would not cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment, and therefore is not a “project” as defined in Section 21065 of the California Environmental Quality Act (CEQA) Guidelines and such activity is not subject to CEQA under Section 15060(c)(2) and (c)(3) and Section 15378; B. Adopt Resolution No. 2026-006 approving and authorizing the City Administrator to execute those interrelated agreements (Prepay Agreements) to which the City is a party, in substantially the same form as submitted, with such changes as the City Administrator deems necessary or advisable in furtherance of the purposes of this resolution, for participation in a clean energy savings renewable energy transaction that will create a discount for the City of Vernon (City) in its purchase of certain renewable energy including:
1. A Limited Assignment Agreement (Antelope DSR—Vernon) (the Antelope DSR LAA) among Antelope DSR 1, LLC (Antelope DSR), the Southern California Public Power Authority (SCPPA) and J. Aron & Company (J. Aron), providing for SCPPA to assign certain of its rights and obligations to receive and pay for renewable energy and associated resources under the Power Purchase Agreement, dated as of July 16, 2015 (the Antelope DSR PPA), between Antelope DSR and SCPPA, which rights and obligations relate to the Power Sales Agreement, dated as of July 16, 2015, between SCPPA and the City;
2. A Limited Assignment Agreement (Astoria—Vernon) (the Astoria LAA) among Re Astoria 2 Solar LLC (Astoria), SCPPA and J. Aron, providing for SCPPA to assign certain of its rights and obligations to receive and pay for renewable energy and associated resources under the Power Purchase and Sale Agreement, dated as of July 23, 2014 (the Astoria PPA), among Astoria, SCPPA, Power and Water Resources Pooling Authority, City of Lodi, City of Corona, City of Moreno Valley and City of Rancho Cucamonga, which rights and obligations relate to the Power Sales Agreement, dated as of July 23, 2014, between SCPPA and the City;
3. A Limited Assignment Agreement (Daggett—Vernon) (the Daggett Solar LAA) among Daggett Solar Power 2 LLC (Daggett Solar), SCPPA and J. Aron, providing for SCPPA to assign certain of its rights and obligations to receive and pay for renewable energy and associated resources under the Power Purchase Agreement, dated as of June 24, 2022 (the Daggett Solar PPA), between Daggett Solar and SCPPA, which rights and obligations relate to the Power Sales Agreement, dated as of June 24, 2022, between SCPPA and the City;
4. A Limited Assignment Agreement (Desert Harvest—Vernon) (the Desert Harvest LAA) among Desert Harvest II LLC (Desert Harvest), SCPPA and J. Aron, providing for SCPPA to assign certain of its rights and obligations to receive and pay for renewable energy and associated resources under the Power Purchase Agreement, dated as of December 21, 2017 (Desert Harvest PPA), between Desert Harvest and SCPPA, which rights and obligations relate to the Power Sales Agreement, dated as of December 21, 2017, between SCPPA and the City;
5. A Limited Assignment Agreement (BP Energy—Vernon/SCPPA) (the BP Energy— Vernon/SCPPA LAA) between the City and SCPPA, assigning to SCPPA certain of the City’s rights and obligations to receive and pay for renewable energy credits under the City’s Confirmation Letter outlining the general terms and conditions of the agreement between the City and BP Energy Company (BP Energy), whose terms are subject to the WSPP Agreement dated October 21, 2024, as amended from time to time (collectively, the BP Energy PPA);
6. A Limited Assignment Agreement (BP Energy—SCPPA/J. Aron) (the BP Energy—SCPPA/J.
Aron LAA) and together with the BP Energy—Vernon/SCPPA LAA, the BP Energy LAA), among SCPPA, J. Aron, and the City, assigning to J. Aron certain of SCPPA’s rights and obligations to receive and pay for renewable energy credits under the BP Energy PPA;
7. A Clean Energy Purchase Contract (CEPC) with SCPPA by which SCPPA will sell to VPU at discounted prices the prepaid renewable energy and associated resources generated by the assigned Antelope DSR PPA, Astoria PPA, Daggett Solar PPA, Desert Harvest PPA, BP Energy PPA (together, the PPAs) for a term of up to 30 years;
8. A Custodial Agreement with J. Aron and U.S. Bank Trust Company, National Association, or selected financial institution as selected by J. Aron, as custodian, for a term equal to the CEPC’s term, to establish bank accounts for and administer payments to Antelope DSR, Astoria, Daggett Solar, Desert Harvest and BP Energy in satisfaction of performance under their respective PPAs;
9. A Project Coordination and Governance Agreement with SCPPA and the three other participating SCPPA members (Burbank, Colton, and Pasadena) by which SCPPA will administer this project and allocate administrative direct costs associated with the transaction to all SCPPA project participants, including Vernon Public Utilities;
10. A Letter Agreement with SCPPA for a term equal to the terms of the Antelope DSR LAA, the Astoria LAA, the Daggett Solar LAA, the Desert Harvest LAA, and the BP Energy LAA (together, the “LAAs”), providing that the parties may terminate the LAAs only upon certain specified events, such as termination or suspension of performance under the assigned PPAs or suspension or termination of performance under the Clean Energy Purchase Contract; and C. Approve and authorize the City Administrator to (a) execute and deliver the Prepay Agreements in substantially the forms presented to City Council, with such changes as the City Administrator deems necessary or advisable in furtherance of the purposes of this resolution; (b) execute and deliver any related documents, such as amendments of any of the Prepay Agreements or any agreements necessary to carry out the transactions contemplated by the Prepay Agreements; and (c) take such actions as are necessary or advisable to implement and administer the Prepay Agreements.
Background
Vernon Public Utilities (VPU) continues to progress toward meeting the goal of sourcing 100% carbon-free resources by 2045, while increasing renewable power supplies in a cost-effective manner. VPU proposes to assign existing resources to SCPPA for the purpose of leveraging our tax-exempt status to achieve cost savings of approximately $2.0 million per year. SCPPA is a twelve-member Joint Powers Authority (JPA) comprised of publicly owned utilities and has previously undertaken a similar financing for renewable power resources.
To achieve the anticipated savings, SCPPA proposes to issue Clean Energy Project Revenue Bonds as the tax-exempt financing mechanism, which is allowed by the Internal Revenue Service (IRS). In this prepaid structure, VPU will assign renewable energy products to SCPPA, and SCPPA will assign renewable energy products (including such products assigned by VPU as well as renewable energy products under its own direct PPAs) to J. Aron. VPU will agree to buy back the renewable energy products from SCPPA through a Clean Energy Purchase Contract (CEPC) at a discounted price per megawatt-hour (MWh) from the prices in the existing PPAs. In order to secure the supplies of renewable energy to be sold to VPU and the other Project Participants (Burbank, Colton, and Pasadena) under their respective CEPCs, SCPPA will issue the Clean Energy Project Revenue Bonds to finance a one-time prepayment to an affiliate of J. Aron.
It is important to point out that risk mitigation terms have been fully reviewed through the City Attorney’s Office, VPU’s outside law firm, which has extensive experience in these transactions, VPU staff, SCPPA’s external advisors and legal counsel, and incorporated into the prepay energy transaction to protect VPU’s customers. If an adverse event occurs, such as a counterparty’s bankruptcy, the existing PPAs and all their respective terms would revert to VPU.
In assessing risk mitigation, it is also important to contrast this clean energy savings plan with the City’s 2006 Gas Prepay transaction.
2006 Gas Prepay Transaction:
1. The 2006 transaction was unique and is not comparable to the proposed transaction.
2. Vernon sold bonds backed by the electric utility to buy long-term gas.
3. Vernon then sold the power plant, where the long-term gas purchased by Vernon was intended to be consumed, leaving Vernon without the ability to make a qualified use of the gas as required by IRS regulations.
4. Gas was purchased at a long-term fixed price; however, the price was subject to market prices and a discount after the power plant was sold and there was a new municipal counterparty that purchased the gas.
5. Vernon was still obligated to pay for the bonds.
2026 Clean Energy Savings Plan for Renewable Energy Through SCPPA:
1. Vernon is not selling any debt and is not pledging its electric utility revenues.
2. Vernon is taking existing power purchase agreement obligations and putting them into this structure.
3. No new power is being procured, and existing contracts have already been approved by City Council.
4. Vernon will save money on these existing commitments.
5. Vernon only pays for the power received and receives a discount for the savings.
Five separate renewable power purchase agreements (Antelope DSR 1, Astoria 2, Daggett Solar Power 2, Desert Harvest II, and BP Energy) have been evaluated and are identified as ideal candidates for savings through tax-exempt bond financing.
Renewable
Project
Renewable
Type
Estimated
Prepayment
Amount
Average Annual
Prepaid Cash
Flows
Estimated Average
Annual Savings
@ 10%
Antelope DSR I Solar $42.32
million $2.8 million $0.28 million
Astoria 2 Solar $64.61
million $4.3 million $0.43 million
Daggett Solar
Daggett Storage
Solar
Battery
$64.35
$21.90
million
$4.3 million
$1.1 million
$0.43 million
$0.11 million
Desert Harvest II Solar $34.94
million $2.4 million $0.24 million
BP Energy RECs $79.06
million $5.3 million $0.53 million
Total $307.18
million $20.2 million $2.02 million
On July 16, 2015, SCPPA entered into a power purchase agreement with Antelope DSR 1, LLC for 50 MW solar photovoltaic generating capacity from the Antelope DSR 1 Solar Facility. The facility is located in the Antelope Valley, Los Angeles County, California, and commercial operation occurred on December 16, 2016, for a term of 20 years.
On July 23, 2014, SCPPA entered into a power purchase agreement with Recurrent Energy for solar energy from the Astoria 2 Solar Project. SCPPA is entitled to 35 MW of solar photovoltaic (PV) generating capacity from commercial operation to December 31, 2021, and 45 MW of generating capacity from January 1, 2022, until the expected expiration date of December 31, 2036. The commercial operation date was December 2016. The facility is located in Tehachapi, Kern County, California. The City is currently contracted to purchase 66.6667% of the output.
The Daggett Solar plus Battery Energy Storage System (BESS) project is a 65 MW solar with a 33 MW 4-hour Lithium-Ion BESS. The commercial operation date was December 12, 2023. The project, located in the City of Daggett, San Bernardino County, California, is part of an approximately 482 MW solar PV facility. The project, developed by the Clearway Energy Group, is owned by Daggett Solar Power 2 LLC. On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The commercial operation date was December 12, 2023. The power purchase agreement expires on December 31, 2044.
On December 17, 2020, SCPPA executed a power purchase agreement with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management land in Desert Center (Riverside County), California. The agreement serves the cities of Anaheim, Burbank, and Vernon. VPU is entitled to 17.14 percent of the Project’s output or about 12 MW. This power purchase agreement, which expires at the end of 2045, only provides Renewable Energy Credits (RECs). RECs demonstrate that electricity was generated from an eligible renewable energy resource and are purchased or sold by eligible entities.
On September 16, 2025, City Council approved the purchase of RECs from BP Energy through a long-term contract, adhering to the general terms and conditions of the WSPP Agreement.
Approving a 10-year Confirmation Letter for the purchase of Portfolio Content Category Product 1 (PCC1, Bucket 1) Energy with BP Energy is beneficial to the City and serves the best interests of its customers since the agreement helps the City meet its renewable energy requirements without committing to a traditional 20 plus year power purchase agreement on a renewable project, with terms and conditions governed by the Western States Power Pool (WSPP) Agreement. This agreement, approved by the Federal Energy Regulatory Commission, provides a standardized contract for utilities managing the purchase and sale of wholesale electricity, including RECs. The WSPP Agreement standardizes the terms and conditions for power purchasing, selling, and trading among its members.
Under this proposed SCPPA transaction, SCPPA would assign certain rights and obligations to receive and pay for renewable energy and associated resources under the PPAs to J. Aron.
SCPPA would then issue tax-exempt bonds to finance a one-time prepayment to secure a 30- year supply of renewable energy from an affiliate of J. Aron. The expected source of such energy will be the power purchase agreements assigned by SCPPA to J. Aron, including the PPAs related to Vernon. SCPPA would then sell the energy back to VPU at a reduced cost. SCPPA can leverage its JPA status to issue bonds. Additionally, VPU will benefit by collaborating with other public utilities to leverage this type of savings and achieve transaction sizes that make this economically viable for SCPPA members and their customers.
Other supporting agreements are necessary to complete this transaction. The Custodial Agreement will solely be a clearinghouse for payments and disbursements, similar to a trustee.
The custodian, U.S. Bank Trust Company, National Association, or another financial institution selected by J. Aron, will ensure that all payments received and disbursements are correct and comply with the requirements of the respective PPAs. The Project Coordination and Governance Agreement with SCPPA will establish the terms and cost allocations to administer the project with VPU and other SCPPA project participants. The Letter Agreement with SCPPA limits the parties’ ability to terminate the LAAs to specified events.
This clean energy financing structure has been authorized by governing boards for several other tax-exempt power agencies in California. These agencies have issued prepay renewable energy bonds to achieve savings of 10% to 12% on the originally contracted renewable power prices.
Anaheim Public Utilities realized approximately $5.0 million in annual savings as a result of its 2024 transaction. Additionally, by entering into this transaction with Burbank, Colton, and Pasadena, the City can achieve higher savings together and allocate costs among the four participating utilities. VPU staff have reviewed similar financing structures to ensure that risks are appropriately mitigated. Moreover, we began the detailed review and discussion of this transaction in January 2025. The entire VPU and SCPPA teams have been meeting weekly on this transaction and related documents. Savings from tax-exempt financing will enable VPU to continue mitigating its renewable energy costs and ensure our rates remain competitive with investor-owned utilities and other publicly owned utilities in the surrounding area.
The proposed agreements have been reviewed and approved as to form by the City Attorney’s Office and VPU outside counsel.
Fiscal Impact
The estimated annual savings is $2 million. Savings will be used to offset expenses in the Electric Fund, Resource Management, Renewable Energy Credit, Account Number 055-050-590- 520154 for the current fiscal year and subsequent years.
Attachments
1. Resolution No. 2026-006