PURPOSE

Staff seeks City Council approval to authorize the General Manager of Burbank Water and Power (BWP) to execute the attached Renewable Electric Energy Resource Project Development Agreement with Southern California Public Power Authority (SCPPA Development Agreement). Granting the authorization sought herein will allow the General Manager of BWP to participate with other members of the SCPPA, a Joint Powers Authority, for the purpose of investigating and performing due diligence on potential new renewable resource options.  The expenditure authority sought hereunder shall not exceed $600,000. The Burbank Water and Power Board has reviewed and approved the SCPPA Development Agreement at its meeting held on April 6, 2006 and the City Attorney�s office has reviewed and approved it as to form.

BACKGROUND

The City Council adopted a Renewable Portfolio Standard (RPS) in October 2003 that established an RPS target of 20% by 2017. 

Since 2003, BWP contracted through SCPPA for renewable energy from landfill gas from the Chiquita Landfill, located on Hwy 126 West of Santa Clarita.  The project is still under development and the developer of that project, Ameresco, Inc., is finalizing arrangements with the landfill owner and completing licensing with the SCAQMD in order for construction of the project to begin.  Energy deliveries are expected in 2007.

BWP�s renewable energy portfolio currently includes the following resources:

�        Micro-hydro facility at Valley Pumping Plant

�        Micro-turbines at Burbank�s landfill

�        Photovoltaic demonstration project over BWP parking lot

2005 REQUEST FOR RENEWABLE ENERGY PROPOSALS

To continue building the renewable energy portfolio, in 2005, BWP participated with SCPPA and nine other SCPPA member utilities in a joint Request for Proposals (�RFP�) for renewable energy projects from qualified renewable providers.  This RFP generated twelve (12) proposals, which were distilled down to short-list of nine potential projects.  BWP is working with SCPPA to evaluate these projects to determine the best fit for BWP.  BWP participates in a renewable project steering committee comprised of SCPPA and the other interested utilities. The steering committee directs project development activities pursuant to the RFP.  BWP has control over its participation level in each project and input to the development process through its participation in the steering committee and project negotiation sub-committees.

The respondents to the RFP have asked to keep many aspects of their proposals confidential during the negotiation and due diligence process. Appendix A provides a public summary of the proposals, including information not associated with any developer.

DEVELOPMENT AGREEMENT

To date, BWP has participated in the RFP process without expending any funds, however it will soon be necessary to engage outside experts to do studies and reports and perform due diligence prior to BWP recommending participation in any particular project. A Development Agreement among BWP, SCPPA, and the other interested utilities will provide the mechanism for SCPPA to hire expert professional services as needed to review the necessary aspects of each project and the associated power transmission and provide information appropriate to any later decision by BWP. 

The SCPPA Development Agreement will allocate any costs associated with the review and due diligence on potential renewable projects based on each participant�s pro-rata interest in each project.  No costs will be allocated to a SCPPA member unless they have expressed interest in the project.  For example, if a member desires to purchase 5MW of a renewable project with a total capacity of 100MW, the member would pay 5% of the costs associated with the review, due diligence and contract negotiation.  If a member should decide to withdraw from a project, at any point during the review and due diligence process, the member would only pay for costs committed to-date.  BWP would have control over the projects it participates in and have the right to not participate in any project or discontinue participation at any point during the development phase.

Some of the renewable projects are proposed to be owned and financed by SCPPA and others are proposed as long term power purchase agreements.  It is anticipated that more substantial due diligence, review and expert advice will be required to evaluate the ownership agreements than the power purchase agreements.  The types of services anticipated could include but are not limited to the following activities:

• Verification of historical wind patterns for a potential wind farm

• Confirmation of technical feasibility for proposed new renewable generation technologies

• Legal advice for Clean Renewable Energy Bonds (CREB) and financing

• Credit evaluation of renewable project provider

• Feasibility and costs of power transmission to support import of renewable energy

Since the total costs for due diligence, review and contract negotiation are not known at this time, the SCPPA Development Agreement establishes a cap for all projects of $5.4M. The Los Angeles Department of Water and Power (LADWP) will be the overall project manager as they have expressed the greatest percentage of interest in all projects. BWP is currently evaluating eight (8) options with varying percentages of interest in each project.  Additionally, BWP is evaluating one (1) power transmission option to support the import of renewable energy.  Based on the percentage of interest, the BWP cap for all projects would not exceed $600,000.  It is expected that actual costs will be less as BWP narrows its list of renewable options through the due diligence process.  If any amount above this level was necessary, an addendum to the SCPPA Development Agreement would be required and this addendum would be brought to the City Council for approval.  The individual contracts for professional services will be undertaken through SCPPA and SCPPA will bill BWP based on the agreed allocations to each member participant.

It is anticipated that due diligence and negotiations will take place over a one to two year timeframe and not all projects are expected to result in contract execution.  As well, it may in certain cases be necessary to act on short notice on some of the projects and not be possible to bring them back to the Board for consideration before going to Council for approval.

FISCAL IMPACT

The not to exceed costs of $600,000 associated with this SCPPA Development Agreement will be recovered in the Energy Cost Adjustment Charge component of Burbank�s electric energy rates.  In BWP�s proposed FY �06-�07 budget, $100,000 has been allotted for this effort with additional funds to be added in subsequent years, if necessary.       

RECOMMENDATION

Staff recommends the City Council authorize the General Manager of Burbank Water and Power to execute the attached Renewable Electric Energy Resource Project Development Agreement with Southern California Public Power Authority for the purpose of investigating and performing due diligence on potential new renewable resource options. 

If the Council concurs, the appropriate action would be a motion to adopt the Resolution entitled �A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING AND AUTHORIZING EXECUTION OF A RENEWABLE ELECTRIC ENERGY RESOURCE PROJECT DEVELOPMENT AGREEMENT BETWEEN THE CITY OF BURBANK AND THE SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY.�

RD:FF:BJ

Attachments 

COUNCIL STAFF RPT., SCPPA Renew Energy Dev Agrmt, 04-25-06

APPENDIX A

SUMMARY OF RENEWABLE ENERGY PROPOSALS

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