PURPOSE

Staff requests that the City Council adopt the proposed Resolution which will enable the General Manager of Burbank Water and Power to execute long term agreements with the Southern California Public Power Authority (SCPPA) for 2,230kW (2.23MW) of renewable energy from the Ameresco Chiquita Energy Project.  The Ameresco Chiquita Energy Project is a landfill energy project located in the Chiquita Canyon Landfill in Valencia, California, near Highway 126, west of Interstate 5.  The project is similar to the 550kW Burbank Landfill Generation Project but larger, supporting 13,400 kW.  The project is expected to be complete and providing energy to Burbank by January 2005.   

BACKGROUND

This is the first renewable project to be recommended for approval to meet the goal of the recently passed Renewables Portfolio Standard (RPS) for Burbank.  This project has been developed by a private party who has made arrangements with SCPPA member municipal utilities for the purchase of the power generated from this project.  Those municipal utilities include Anaheim (4.47MW), Burbank (2.23MW), Glendale (4.47MW), and Pasadena (2.23MW).    

Ameresco is a significant developer of landfill generation technology.  They have recently completed a multi-million dollar landfill gas project for BMW�s manufacturing facility in South Carolina.  This facility is located at a nearby landfill and generates nearly 25% of the electrical needs for BWM plant.  Ameresco has an excellent record in successfully developing landfill gas projects.

The Ameresco Project which generates energy from landfill gas meets the RPS criteria for renewable resources.  Staff proposes that Burbank acquire 2.23 MW of the 13.4 MW project which is expected to result in approximately 16,000 MWh annually of energy and represents about 1.5% of current annual sales.  Burbank�s current retail energy portfolio includes less than 0.5 % from renewable sources so the proposed addition of Ameresco would increase Burbank�s renewable energy portfolio to about 2.0% of retail sales.

Under the terms of this purchase BWP would purchase only the energy that Ameresco is able to deliver from this Project.  The rate will be a fixed rate over the 20 year term of the agreement.

PROJECT SELECTION PROCESS

In February 2002, SCPPA issued a request for proposals (RFP) for renewable energy projects on behalf of its members, including Burbank. A total of 44 proposals for various types of renewable energy projects including wind, solar, geothermal, biomass, and landfill gas were received. The proposals were reviewed by the SCPPA Resource Planning Committee, which recommended retaining 20 proposals for further consideration. Since that time, SCPPA has received a number of additional proposals that have been considered, including the proposed Ameresco Landfill Gas Project.

This Project was selected by SCPPA due to competitive fixed-cost pricing, appropriate size that matches member interest, project technical feasibility (proven technology, multi-unit reliability, transmission availability, and the low risk of a volumetric contract that has no associated fixed charges. Burbank will only pay for that energy actually received from the Project. Additionally, the location is such that it will have added benefits to local air quality by destroying green house gases emitted from the Chiquita Canyon Landfill in Valencia, California.

POWER PURCHASE AGREEMENT SUMMARY

Source:                13.4 MW Landfill Gas electric generating facility located at the Chiquita Canyon Landfill in Valencia,

                              California, and developed, owned and operated by Ameresco Chiquita Energy LLC (�Ameresco�)

In-service date:    January 2005

Quantity:              Actual metered output Burbank�s share of 2.23 MW at 95% capacity factor corresponds to approximately

                             16,000 MWh per year

Delivery:              Delivered unit contingent firm to high side of step up transformers that interconnect with the Southern

                             California Edison electric grid for re-delivery into the California ISO at SP-15

Term:                  20 years

Price:                   Fixed price of $54.0/MWh for energy produced, with no escalation over the term, plus costs associated with

                             the Scheduling Agreement and transmission. The price will be reduced by 30% of any energy production tax

                             credits received by Ameresco for Project output.

SCPPA will purchase the entire output of this facility and then resell this output to participating SCPPA members - The Cities of Anaheim, Burbank, Glendale, and Pasadena.

Due to uncertainties in the actual Project cost and feasibility prior to completion of detailed design, Ameresco has retained the right to terminate its contract with SCPPA prior to Project financing and the commencement of construction. As well, SCPPA has the right to terminate the Agreement if Ameresco does not finish construction by June 30, 2005.  Should either of these events occur, Burbank�s Contracts with SCPPA (if executed) would likewise be terminated without incurring any costs.

PROJECT SCHEDULING AGREEMENT

SCPPA will be responsible for scheduling the Project output into the California ISO system to the various project participants in the SP-15 zone located in Southern California. SCPPA will contract these responsibilities to one of its members or a third party because SCPPA does not currently maintain the required staff and infrastructure. 

SCPPA, with Project participants� input, is currently in negotiations with a third party vendor for scheduling and settlement services for the energy produced by the Project.  Responsibilities under the agreement, in addition to providing daily and hourly scheduling, include monthly reporting, outage reporting to CAISO as well as to the participants, tagging and checking out, resolving disputes with the CAISO, and monitoring and implementing future CAISO market design changes.  The initial term of the proposed contract will be eighteen months with an early exit option for the participants.  The charge for this service is a fixed monthly fee, which will cost about $1.00/MWh.

As well, it is anticipated that Burbank will use a displacement arrangement with Pasadena to get energy to Burbank.  This would involve leaving an equivalent amount of energy from Pasadena�s share of the Magnolia Power Project (MPP) here in Burbank for BWP and having Pasadena take a commensurate quantity in SP-15.  This arrangement would allow both parties to avoid needless transmission charges and associated transmission losses.

PROJECT ECONOMICS

Energy produced by the Project will be sold to SCPPA at a fixed price of $54.0/MWh or 5.40�/kWh, without escalation over the 20 year term of the contract. This price will be reduced by 30% of any production tax credits received by Ameresco as a result of future Federal legislation. In addition to this energy charge, SCPPA will incur transmission, scheduling, and ISO settlement charges and fees that will be paid for by the participating members in proportion to their share of the Project. These fees, which are typical for any generation project connected to the ISO grid, are expected to add about another $1.50/MWh.

The total price for the energy from this project will be $55.5/MWh.

Although this price is somewhat higher than current market prices, the fact that it is a fixed price will contribute to BWP�s rate stability objectives and it will not significantly increase near-term purchased power costs versus alternative short-term market supplies.

With 2.23 MW Project share, BWP�s annual cost for the expected average output of 16,600 MWh (approx. 95% capacity factor) is $909,000. Based on current market forecasts for electrical energy and natural gas provided by Henwood Energy Services, Inc., BWP had R.W. Beck determine the out-of-market cost of the Ameresco contract.  Based on Beck�s analysis, Ameresco is expected to be about $300,000 to $450,000 higher than non-renewable local market energy sources. This is commonly known as the �premium� paid for the renewable resource.

RATE IMPACT

Assuming a 2.23 MW Project share, this renewable resource power purchase agreement is expected to cost $300,000 to $450,000 per year more than generic non-renewable market purchases. This extra cost is expected to be covered by a subsidy from BWP�s Public Benefit Funds expenditure requirement.  Consequently, this proposed long term purchase is not expected to have any material impact on rates.

RECOMMENDATION

It is recommended that the City Council approve the subject Resolution authorizing the General Manager of BWP to enter into a long term purchased power agreement and necessary scheduling and displacement agreements for up to a 2.23 MW share of the Ameresco Landfill Gas Project.

RD:FF:ff:gm

Ameresco landfill � council memo 2-10-04.doc

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