SCHEDULED ITEM TO: FROM: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: JANUARY 28, 2013 SUBJECT: APPROVAL OF POWER SALES AGREEMENT ( PSA ) WITH SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY ( SCPPA ) FOR LONG TERM PURCHASE OF ENERGY, CAPACITY, AND ENVIRONMENTAL ATTRIBUTES SOURCED FROM SOLAR PROJECTS DEVELOPED BY SILVERADO POWER. RECOMMENDATION It is recommended that the Utility Board authorize approval of two Power Sales Agreements (PSA) with Southern California Public Power Authority (SCPPA) for long term purchase of energy, capacity, and environmental attributes from two solar projects as proposed for development by Silverado Power. BACKGROUND California Senate Bill X1-2 (SBX1-2), also known as the Renewable Portfolio Standard ( RPS ) requires all California's electric utilities to reach the 33% RPS, as measured by the percentage of their retail energy sales, by 2020. In general, the RPS framework consists of three (3) compliance periods as follows: Between January 1, 2011 and December 31, 2013, the utilities must procure renewable energy products equal to 20% of retail sales. By December 31, 2016, utilities must procure renewable energy products equal to 25% of retail sales, and by December 31, 2020, utilities must procure renewable energy products equal to 33% of retail sales and maintain that percentage in following years. In order to achieve its RPS targets, Azusa is actively pursuing opportunities to contract for requisite amounts of renewable portfolio standard compliance products, including renewable energy and unbundled Renewable Energy Credits (REC s). To identify, and potentially acquire, economically prudent, operationally feasible, and RPS compliant products, Staff seeks out RPS products both through SCPPA as well as on its own.
Page 2 SILVERADO PROJECT INTRODUCTION The Silverado Projects were offered in the SCPPA Request for Proposal in 2011 among over fifty (50) renewable projects. Staff conducted an in-depth due diligence review through the SCPPA RFP process along with other SCPPA member cities and concluded that the Silverado Projects have many superior characteristics and an attractive pricing structure when compared to other renewable projects submitted in response to the SCPPA RFP. The price was among the lowest for the technology offering on-peak energy profiles and the developer, Silverado Power, is reputable and experienced. Finally, Silverado projects will offer system and local capacity the increasingly desirable and thus pricey commodities. On November 15, 2012 the SCPPA Board of Directors voted to authorize execution of two Power Purchase Agreements (PPAs) with Silverado Power for renewable energy from two 20 MW photovoltaic facilities. Based on the SCPPA Board decision, the SCPPA Executive Director is authorized to execute the PPAs, provided that interested SCPPA members obtain their Boards /Councils approvals to enter into Power Sales Agreement (PSA) with SCPPA for the power to be purchased by SCPPA via the PPAs. What followed, the cities of Riverside and Pasadena have already gained their respective Councils approvals for procuring through SCPPA 50% (20 MW) and 32.5% (13 MW), respectively of the projects output. Azusa staff indicated interest in the remaining 17.5% (7 MW) of the projects output, subject to approval from this Board. By joint contracting (with Riverside and Pasadena) through SCPPA, Azusa would realize savings in joint resource procurement and reduced administrative costs in power scheduling and settlements while diversifying the operational risks across the two projects. PROJECT DESCRIPTION General: The Silverado Projects consist of two Solar Photovoltaic ( PV ) projects (Antelope Big Sky Ranch Project and Summer Solar Project). Each project is rated at 20 MW AC for a total of 40 MW and will be independently interconnected to the ISO controlled grids via Southern California Edison operated transmission facilities. Proposed Technology: Photovoltaic modules made with Polycrystalline solar panels delivering up to 14% efficiency. Because the developer controls relatively large size plots of land, less expensive fixed-array panel mounting will be employed, contributing to making the offer price to SCPPA competitive. Additionally, fixed mount technology offers better project reliability as there are no moving parts in the assembly and racking. Project Sites and interconnection: The projects will be built on two parcels of vacant, agriculturally-disturbed land in the City of Lancaster, in an area that has been zoned for the development of solar power. The 80-acre Antelope Big Sky parcel is on 80th Street West and will interconnect to SCE s 66kV Antelope-Lancaster line. The 67-acre Summer Solar parcel is on West Avenue H and will interconnect to SCE s 66kV Antelope-Rosamond line. Each parcel will accommodate 20 MW of capacity, to which Azusa will have a 17.5% interest in each.
Page 3 KEY COMMERCIAL TERMS The highlights of the proposed transaction are as follows: 1. Project Capacity: 40 MW consisting of two independently interconnected photovoltaic projects, 20 MW AC capacity each 2. Expected Capacity Factor: 28% 3. Pricing: Energy: $77.34/ MWh at Commercial Operations Date (COD) increasing by 1.5% annually for the term of the contract Capacity: $5.1/MWh (equiv.), increasing by 1.5% annually for the term of the contract 4. Expected annual Azusa energy off take about 17,000 MWH (on peak/super peak only) 5. Guaranteed Energy Production/Delivery: 80%, based on 28% facility Capacity Factor (under delivery triggers various remediation/makeup requirements and provisions) 6. COD: January 1, 2015 7. Term: 25 years 8. Facility Location: City of Lancaster, Los Angeles County, CA 9. Delivery Point(s): ISO PNode established at the 66kV bus side of the Antelope Substation, ISO South of Path 15 (SP15) operating region. 10. Silverado/Seller guarantees facilities and sourced energy compliance with RPS 11. Grounds for early termination by Buyers: A) Inability by Seller to secure construction permits by guaranteed date B) Inability by Seller to start construction by guaranteed date C) Seller missing the COD D) Facility available capacity falling below 50% of Contract Capacity for more than 18 months 12. Credit Support: A) Pre-Initial COD Security by Seller: $500,000 cash, letter of credit or parent guaranty B) Between Initial Synchronization and Final COD Security by Seller: $1,000,000 cash, letter of credit or parent guaranty C) Delivery Term Security by Seller: Equal to 6 months of revenue or a minimum of $1,500,000 cash, letter of credit or parent guaranty
Page 4 13. Milestones No. Expected Date Guaranteed Date 1 N/A N/A PPA Effective Date Milestone Description Daily Liquidated Damages per Day of Delay (not to run concurrently) Performance Security deposit at milestone achievement Project Development Security 2 complete 3/31/2013 Submits interconnection application. $4,000 3 complete 3/31/2013 Files a CEC Pre-Certification application. $4,000 4 complete 9/1/2013 Files CUP application. $4,000 5 complete 9/1/2013 Receives a completed System Impact Study or Phase I Interconnection Study. $4,000 6 complete 1/15/2014 Obtains Site Control. $4,000 7 complete 3/1/2014 Receives a completed interconnection Facility Study or Phase II Interconnection Study. $4,000 8 1/31/13 6/15/2014 Receives Conditional Use Permit or equivalent $4,000 9 3/31/13 6/15/2014 Files interconnection agreement with FERC or other jurisdictional entity as applicable. $4,000 10 complete 8/1/2014 Receives CEC Pre-Certification. $4,000 11* 3/15/2014 9/1/2014 Executes an Engineering, Procurement and Construction ( EPC ) contract. $4,000 12* 3/15/2014 9/1/2014 Executes financing documents $4,000 13* 4/15/2014 9/15/2014 Receive final Construction Permit(s). $4,000 14* 5/1/2014 10/1/2014 Begins construction of the Facility. $4,000 15* 9/15/2014 12/15/2014 Initial Synchronization Date. $4,000 16* 12/1/2014 12/31/2014 Commercial Operation Date $10,000 Between Initial Synchronization and Final COD Security, posted upon Initial Synchronization Delivery Term Security Upon COD 14. Equity Option: SCPPA has the Right of First Offer for any proposed sale of the facility and/or sale of the Project(s).
Page 5 CONTRACT EXECUTION There are four (4) agreements related to Azusa s participation in the project: Upon the Board s authorization, Azusa would execute two Power Sales Agreements (PSAs) with SCPPA, one for each 20 MW project. Upon the execution of PSAs by Azusa (and Riverside and Pasadena), SCPPA would execute two (2) Power Purchase Agreements (PPAs) agreements, one each with the Silverado Power s subsidiaries - Antelope Big Sky Ranch, LLC and Summer Solar, LLC. As stated above, the SCPPA Board has already voted to approve the PPAs and have SCPPA Executive Director execute the PSA agreements with Azusa, Riverside and Pasadena. FISCAL IMPACT The Silverado Projects will require no capital contribution. Azusa would only pay for actual energy and capacity received at the contract stipulated prices. The projected annual cost to Azusa, based on the anticipated project output, would be about $1.4 million during the first year, increasing 1.5% per annually for the remaining term of the contract (24 years). Assuming 3% discount (inflation) rate, the average price paid in today s dollars for the combined energy and capacity product during the term of the agreement would be about $69.50/MWH. Prepared by: Yarek Lehr, Assistant Director of Resource Management Attachments: Due to the length of the below documents, they are only being distributed electronically. However, hardcopies are available with the Utility Board Agenda posted for public review at the Library at 729 N. Dalton Ave., and at Azusa Light & Water 2 nd floor office at 729 N. Azusa Ave. 1. Antelope Big Sky Ranch Solar Project PSA 2. Antelope Big Sky Ranch Solar Project PPA (Appendix C to the above PSA) 3. Summer Solar Project PSA 4. Summer Solar Project PPA (Appendix C to the above PSA)