Resolution No. 2011-070RESOLUTION NO. 2011-70
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
SECOND AMENDMENT TO THE POWER PURCHASE TOLLING
AGREEMENT BY AND BETWEEN THE CITY OF VERNON AND
BICENT (CALIFORNIA) MALBURG LLC
WHEREAS, the City of Vernon (the "City") is a municipal
corporation and a chartered city of the State of California organized
and existing under its Charter and the Constitution of the State of
California; and
WHEREAS, on December 17, 2007, the City Council of the City
of Vernon adopted Resolution No. 9510 approving an Amended and Restated
Purchase and Sale Agreement and other related documents including, but
not limited to, the Power Purchase Tolling Agreement, the Ground Lease
and other related documents with Bicent (California) Power LLC
("Bicent"), for the sale of the Malburg Generating Station and its
entitlement to energy from the Hoover Uprating Project; and
WHEREAS, on December 31, 2009, the City Council of the City
of Vernon approved the First Amendment to the Power Purchase Tolling
Agreement; and
WHEREAS, by memo dated April 13, 2011, the Director of Light
& Power has recommended that the City enter into a Second Amendment to
the Power Purchase Tolling Agreement (the "Amendment") with Bicent.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
approves the Amendment with Bicent, in substantially the same form as
the copy which is attached hereto as Exhibit A, and authorizes the
City Administrator, or his designee, to negotiate final modifications
to the Amendment.
SECTION.3: The City Council of the City of Vernon hereby
authorizes the Mayor or Mayor Pro-Tem to execute said Amendment for,
and on behalf of, the City of Vernon and the City Clerk, or Deputy
City Clerk, is hereby authorized to attest thereto.
SECTION 4: The City Council of the City of Vernon hereby
authorizes the City Administrator, or his designee, to take whatever
actions are deemed necessary or desirable for the purpose of
implementing and carrying out the purposes of this Resolution and the
transactions herein approved or authorized.
SECTION 5: The City Council of the City of. Vernon hereby
directs the City Clerk, or the City Clerk's designee, to send a fully
executed Amendment to Bicent.
SECTION 6: The City Clerk of the City of Vernon shall
certify to the passage, approval and adoption of this resolution, and
the City Clerk of the City of Vernon shall cause this resolution and
the City Clerk's certification to be entered in the File of
Resolutions of the Council of this City.
APPROVED AND ADOPTED this 3rd day of May, 2011.
W±4 p- -zff-.
Name: Hilario Gonzales
Title: Mayor
AT T ST:
Willard t. WVagiYchi(_,kity Clerk
2
A
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution
No. 2011-70, was duly passed, approved and adopted by the City Council
of the City of Vernon at a regular meeting of the City Council duly
held on Tuesday, May 3, 2011, and thereafter was duly signed by the
Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this day of May, 2011, at Vernon, California.
Willard Y ma i, City Clerk
(SEAL)
- 3 -
EXHIBIT A
Execution Copy
PRIVILEGED AND CONFIDENTL4L
SECOND AMENDMENT TO
POWER PURCHASE TOLLING AGREEMENT
This SECOND AMENDMENT TO POWER PURCHASE TOLLING
AGREEMENT (this "Amendment") is entered into as of May 3, 2011, by and between Bicent
(California) Malburg LLC, a Delaware limited liability company ("Seller"), and the City of
Vernon, a municipal corporation and chartered city duly organized and existing under and by
virtue of the Constitution and laws of the State of California that is also a publicly -owned electric
utility as defined in Section 9604 of the California Public Utilities Code ("Buyer"). Each of
Seller and Buyer are referred to herein individually as a "Party" and collectively as the "Parties."
Capitalized terms used herein and not otherwise defined have the meaning set forth in Amended
PPTA (as defined below).
RECITALS
A. On April 10, 2008, Bicent acquired Buyer's interest in the combined cycle natural
gas -fired generating facility known as the Malburg Generating Station, located at
2715 East 501h Street, Vernon, California, 90058 (the "Facility"), pursuant to that
certain Amended and Restated Purchase and Sale Agreement, dated as of December
13, 2007, by and between Bicent (California) Power LLC, a Delaware limited
liability company, and the City (as it has been or may be amended, the "PSA").
B. Concurrently, the Parties entered into that certain power purchase tolling agreement
(the "PPTA"), pursuant to which Seller agreed to sell and deliver exclusively to
Buyer, and Buyer agreed to purchase and receive, on a tolling basis, Contract
Capacity, Contract Energy, Ancillary Services, and Resource Adequacy Benefits
from the Facility under the terms and conditions set forth in the PPTA.
C. On December 31, 2009, the Parties amended the PPTA pursuant to that certain first
amendment to power purchase tolling agreement (the "First Amendment", and the
PPTA, as so amended, the "Amended PPTA") to resolve certain disputes that arose
between the Parties under the PPTA and PSA.
D. The Parties deem it to be in their respective best interests to enter into this
Amendment to address certain issues that have arisen during the course of their
performance under the Amended PPTA.
NOW, THEREFORE, in consideration of the respective covenants and promises
contained herein and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1. AMENDMENTS AND AGREEMENTS
A. DEFINITIONAL MODIFICATIONS
1.1 Amendments to Section 1.1 of the Amended PPTA. Section 1.1 of the Amended
PPTA is hereby amended by adding the following defined terms in the appropriate alphabetical
location in Section 1.1 of the Amended PPTA:
"Energy Payment" has the meaning set forth in Section 4.2.
"Minimum Dispatch Level identified in Appendix A" means 95 MWs for Energy
payment calculation purposes. However, Buyer shall be able to deliver a Dispatch Notice
as low as 80 MWs in a 2xl configuration for energy dispatch purposes consistent with
Section 11.4.2 hereof.
"OEM Recommendations" means original equipment manufacturers recommendations.
1.2 Amendment to Section 4.2 of the Amended PPTA. Section 4.2 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 4.2 Energy Payment. The "Energy Payment" for any period
shall mean: (i) if the Facility is dispatched at or above the Minimum Dispatch
Level identified on Appendix A (i.e., 95 MWs) to this Agreement, for each MWh
of Contract Energy delivered to the Energy Delivery Point pursuant to a Dispatch
Notice during such period, the Fixed Energy Price for such period plus the Heat
Rate Payment/Bonus for such period, or (ii) if the Facility is dispatched at less
than the Minimum Dispatch Level identified on Appendix A to this Agreement
(as low as 80 MWs in 2xl non duct fired configuration), or zero (consistent with
Section 11.4.2), for each hour (or part thereof) so dispatched, the Minimum
Dispatch Level identified on Appendix A (i.e., 95 . MWs) to this Agreement
multiplied by the Fixed. Energy Price for such period plus the Heat Rate
Payment/Bonus for such period, in each case, where:"
1.3 Amendment to Section 5.1 of the Amended PPTA. Section 5.1 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 5.1 Failure to Deliver Contract Energy. If during any calendar
month Seller fails to deliver the Contract Energy (or to the extent Seller's
Availability Notices are less than the Available Capacity) after taking into
account Scheduled Outages and any other failure to deliver Contract Energy
Second Amendment to Power Purchase Tolling Agreement
2
otherwise excused under the terms of this Agreement or by Buyer's failure to
perform, then Seller shall pay Buyer, on the date payment would otherwise be due
in respect of the month in which the failure occurred, an amount equal to the
positive difference, if any, obtained by subtracting the Energy Payment from the
Average Energy Replacement Price; multiplied by the MWh of Contract Energy
not delivered in such month; provided, however that no more than four (4) hours
shall be attributed to any failure to deliver Contract Energy, per event; and
provided further, that during any period that Seller delivers Ancillary Services to
Buyer at Buyer's request that reduce the Facility's ability to provide the full
amount of Contract Energy, Seller shall be excused from delivering that portion
of the Contract Energy that Seller was not able to deliver as a result of its delivery
of such Ancillary Services. Notwithstanding the foregoing, Seller shall not be
required to make such payment to Buyer if the Threshold Capacity of the Facility
in such calendar month is greater than or equal to 95% of the Adjusted- Contract
Capacity for such month. The invoice for such amount shall include a written
statement explaining in reasonable detail the calculation of such amount."
1.4 Amendment to Sections 5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA. Sections
5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA are hereby amended by deleting the term
"97%" wherever it may appear and inserting the term "95%" in lieu thereof.
1.5 Amendment to Section 11.3 of the Amended PPTA. Section 11.3 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.3 Dispatch Notice Updates. Buyer shall have the right to
update its Dispatch Notice, on a real-time basis, to dispatch the Facility in the
Real Time Market, consistent with the CAISO Tariff, Operating Limitations,
OEM- Recommendations and Good Utility Practice and subject to the terms and
conditions of this Agreement."
1.6 Amendment to Section 11.4 of the Amended PPTA. Section 11.4 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.4 Operating Limitations.
Section 11.4.1 Except as otherwise set forth in Section 11.4.2,below,
if Buyer submits a Dispatch Notice that does not conform with the Operating
Limitations or the Availability Notice, then Seller shall notify Buyer of the non-
conformity and Buyer will modify its Dispatch Notice to conform to the
applicable Operating Limitation and Availability Notice. Until such time as
Buyer submits a modified Dispatch Notice, Seller shall deliver the Contract
Energy in accordance with the Operating Limitations, OEM Recommendations
and the Availability Notice. Any charges, costs or penalties incurred until such
Second Amendment to Power Purchase Tolling Agreement
3
time as Buyer submits a modified Dispatch Notice shall be the responsibility of
Buyer.
Section 11.4.2 If Buyer submits a Dispatch Notice for a megawatt
output of less than the Minimum Dispatch Level (as set forth on Appendix A) but
no less than 80MWs, or zero, then Seller shall use its reasonable best efforts,
subject to Permit Limitations, Good Utility Practice, OEM Recommendations and
the Availability Notice, to deliver the Contract Energy in accordance with such
Dispatch Notice; provided, however, that each combustion turbine shall be limited
to no more than eighteen (18), start-ups per Contract Year in association with
Buyer requested zero dispatches and shall otherwise remain subject to the
Operating Limitations. Any charges, costs or penalties incurred as a result of any
Dispatch Notice for less than the Minimum Dispatch Level identified on
Appendix A to this Agreement shall be the responsibility of Buyer."
ARTICLE 2. MISCELLANEOUS
2.1 Reference to Agreement. Any and all other agreements, documents or
instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant
to the terms of the Amended PPTA are hereby amended so that any reference to the Amended
PPTA, whether direct or indirect, shall mean a reference to the Amended PPTA as further
amended by this Amendment.
2.2 Governing Law. THIS AMENDMENT AND THE RIGHTS AND DUTIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED,
ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT
TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS
AMENDMENT.
2.3 Dispute Resolution. The Parties affirm that, except for disputes addressed in
Section 13.1.1.3,, any and all disputes, claims or controversies arising out of, relating to,
concerning or pertaining to the terms of this Amendment, or to either Party's performance or
failure of performance under this Amendment shall be subject to the dispute resolution
provisions of Article XIX of the Amended PPTA.
2.4 Counterparts. This Amendment may be executed and delivered by the Parties in
any number of counterparts, with copies by electronic transmission acceptable, each of which
when so executed and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
2.5 Full Force and Effect; Construction. Each Party confirms that the Amended
PPTA is in full force and effect and remains a binding obligation of the Parties. To the extent
Second Amendment to Power Purchase Tolling Agreement
4
that this Amendment conflicts in anyway with the Amended PPTA, the Amended PPTA shall be
deemed modified hereby.
2.6 No Obligation for Other Amendments. This Amendment is intended to be a part
of, and will serve as a valid, written amendment to, the Amended PPTA as required by Section
20.9 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Amended PPTA, all of which are ratified
and affirmed in all respects and shall continue in full force and effect, and this Amendment will
not operate as an extension or waiver by the Parties of any other condition, covenant, obligation,
right, power or privilege under the Amended PPTA. This Amendment (including its exhibits and
appendices) constitutes the entire agreement between the Parties relating to the subject matter of
this Amendment, and shall not be considered to create a course of dealing, an admission of
liability or to -otherwise obligate either Party to execute similar amendments or grant any waivers
under the same or similar circumstances in the future.
[This space intentionally left blank] -
Second Amendment to Power Purchase Tolling greement
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the
Amended PPTA as of the date first above written.
THE CITY:
CITY OF VERNON
By:
Hilario Gonzales
Mayor
APPROVED AS TO FORM:
CITY OF VERNON
Michael B. Montgomery
Special Counsel
BICENT:
BICENT (CALIFORNIA) POWER LLC
By:
Name:
Title:
BICENT MALBURG:
BICENT (CALIFORNIA) MALBURG LLC
IM
Name:
Title:
ATTEST:
CITY OF VERNON
I0
Willard G. Yamaguchi
City Clerk
Second Amendment to Power Purchase Tolling Agreement
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OFFICE OF THE CITY CLERK
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811
May 5, 2011
Beowulf Energy LLC
Attn: Paul Prager
575 Broadway, 3rd Floor
New York, NY 10012
Re: Bicent (California) Malburg LLC Second Amendment to the Power Purchase Tolling
Agreement
Dear Mr. Prager:
Transmitted herewith are two partially executed originals of the above -referenced amendment
approved by City Council on May 3, 2011, through Resolution No. 2011-70.
Please ensure that a fully executed original agreement is returned to the attention of the
undersigned.
If you have any questions regarding this matter, please call Carlos Fandino, at (323) 583-8811
ext. 834.
Very ly yours,
IL ARD G.
City Clerk/Interit
WGY:dj
Enclosures
c: Carlos Fandino
Resolution No. 2011-70
Agreement No. 11-053
Excfusively Industriaf
Execution Copy
PRIVILEGED AND CONFIDENTIAL
SECOND AMENDMENT TO
POWER PURCHASE TOLLING AGREEMENT
This SECOND AMENDMENT TO POWER PURCHASE TOLLING
AGREEMENT (this "Amendment") is .entered into as of May 3, 2011, by and between Bicent
(California) Malburg LLC, a Delaware limited liability company ("Seller"), and the City of
Vernon, a municipal corporation and chartered city duly organized and existing under and by
virtue of the Constitution and laws of the State of California that is also a publicly -owned electric
utility as defined in Section 9604 of the California Public Utilities Code (`Buyer'). Each of
Seller and Buyer are referred to herein individually as a "Party" and collectively as the "Parties."
Capitalized terms used herein and not otherwise defined have the meaning set forth in Amended
PPTA (as defined below).
RECITALS
A. On April 10, 2008, Bicent acquired Buyer's interest in the combined cycle natural
gas -fired generating facility known as the Malburg Generating Station, located at
2715 East 50th Street, Vernon, California, 90058 (the "Facility"), pursuant to that
certain Amended and Restated Purchase and Sale Agreement, dated as of December
13, 2007, by and between Bicent (California) Power LLC, a Delaware limited
liability company, and the City (as it has been or may be amended, the "PSA").
B. Concurrently, the Parties entered into that certain power purchase tolling agreement
(the "PPTA"), pursuant to which Seller agreed to sell and deliver exclusively to
Buyer, and Buyer agreed to purchase and receive, on a tolling basis, Contract
Capacity, Contract Energy, Ancillary Services, and Resource Adequacy Benefits
from the Facility under the terms and conditions set forth in the PPTA.
C. On December 31, 2009, the Parties amended the PPTA pursuant to that certain first
amendment to power purchase tolling agreement (the "First Amendment", and the
PPTA, as so amended, the "Amended PPTA") to resolve certain disputes that arose
between the Parties under the PPTA and PSA.
D. The Parties deem it to be in their respective best interests to enter into this
Amendment to address certain issues that have arisen during the course of their
performance under the Amended PPTA.
NOW, THEREFORE, in consideration of the respective covenants and promises
contained herein and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1. AMENDMENTS AND AGREEMENTS
A. DEFINITIONAL MODIFICATIONS
1.1 Amendments to Section 1.1 of the Amended PPTA. Section 1.1 of the Amended
PPTA is hereby amended by adding the following defined terms in the appropriate alphabetical
location in Section 1.1 of the Amended PPTA:
"Energy Payment" has the meaning set forth in Section 4.2.
"Minimum Dispatch Level identified in Appendix A" means 95 MWs for Energy
payment calculation purposes. However, Buyer shall be able to deliver a Dispatch Notice
as low as 80 MWs in a 2xl configuration for energy dispatch purposes consistent with
Section 11.4.2 hereof.
"OEM Recommendations" means original equipment manufacturers recommendations.
1.2 Amendment to Section 4.2 of the Amended PPTA. Section 4.2 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 4.2 Energy Payment. The "Energy Payment" for any period
shall mean: (i) if the Facility is dispatched at or above the Minimum Dispatch
Level identified on Appendix A (i.e., 95 MWs) to this Agreement, for each MWh
of Contract Energy delivered to the Energy Delivery Point pursuant to a Dispatch
Notice during such period, the Fixed Energy Price for such period plus the Heat
Rate Payment/Bonus for such period, or (ii) if the Facility is dispatched at less
than the Minimum Dispatch Level identified on Appendix A to this Agreement
(as low as 80 MWs in 2xl non duct fired configuration), or zero (consistent with
Section 11.4.2), for each hour (or part thereof) so dispatched., the Minimum
Dispatch Level identified on Appendix A (i.e., 95 MWs) to this Agreement
multiplied by the Fixed Energy Price for such period plus the Heat Rate
Payment/Bonus for such period, in each case, where:"
1.3 Amendment to Section 5.1 of the Amended PPTA. Section 5.1 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 5.1 Failure to Deliver Contract EngM. If during any calendar
month Seller fails to deliver the Contract Energy (or to the extent Seller's
Availability Notices are less than the Available Capacity) after taking into
account Scheduled Outages and any other failure to deliver Contract Energy
Second Amendment to Power Purchase Tolling Agreement
otherwise excused under the terms of this Agreement or by Buyer's failure to
perform, then Seller shall pay Buyer, on the date payment would otherwise be due
in respect of the month in which the failure occurred, an amount equal to the
positive difference, if any, obtained by subtracting the Energy Payment from the
Average Energy Replacement Price, multiplied by the MWh of Contract Energy
not delivered in such month; provided, however that no more than four (4) hours
shall be attributed to any failure to deliver Contract Energy, per event; and
provided further, that during any period that Seller delivers Ancillary Services to
Buyer at. Buyer's request that reduce the Facility's ability to provide the full
amount of Contract Energy, Seller shall be excused from delivering that .portion
of the Contract Energy that Seller was not able to deliver as a result of its delivery
of such Ancillary Services. Notwithstanding the foregoing, Seller shall not be
required to make such payment to Buyer if the Threshold Capacity of the Facility
in such calendar month is greater than or equal to 95% of the Adjusted Contract
Capacity for such month. The invoice for such amount shall include a written
statement explaining in reasonable detail the calculation of such amount."
1.4 Amendment to Sections 5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA. Sections
5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA are hereby amended by deleting the term
"97%" wherever it may appear and inserting the term "95%" in lieu thereof.
1.5 Amendment to Section 11.3 of the Amended PPTA. Section 11.3 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.3 Dispatch Notice Updates. Buyer shall have the right to
update its Dispatch Notice, on a real-time basis, to dispatch the Facility in the
Real Time Market, consistent with the CAISO Tariff, Operating Limitations,
OEM Recommendations and Good Utility Practice and subject to the terms and
conditions of this Agreement."
1.6 Amendment to Section 11.4 of the Amended PPTA. Section 11.4 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.4 Operating Limitations.
Section 11.4.1 Except as otherwise set forth in Section 11.4.2 below,
if Buyer submits a Dispatch Notice that does not conform with the Operating
Limitations or the Availability Notice, then Seller shall notify Buyer of the non-
conformity and Buyer will modify its Dispatch Notice to conform to the
applicable Operating Limitation and Availability Notice. Until such time as
Buyer submits a modified Dispatch Notice, Seller shall deliver the Contract
Energy in accordance with the Operating Limitations, OEM Recommendations
and the Availability Notice. Any charges, costs or penalties incurred until such
Second Amendment to Power Purchase Tolling Agreement
3 -
time as Buyer submits a modified Dispatch Notice shall be the responsibility of
Buyer.
Section 11.4.2 If Buyer submits a Dispatch Notice for a megawatt
output of less than the Minimum Dispatch Level (as set forth on Appendix A) but
no less than 80MWs, or zero, then Seller shall use its reasonable best efforts,
subject to Permit Limitations, Good Utility Practice, OEM Recommendations and
the Availability Notice, to deliver the Contract Energy in accordance with such
Dispatch Notice; provided, however, that each combustion turbine shall be limited
to no more than eighteen (18) start-ups per Contract Year in association with
Buyer requested zero dispatches and shall otherwise remain subject to the
Operating Limitations. Any charges, costs or penalties incurred as a result of any
Dispatch Notice for less than the Minimum Dispatch Level identified on
Appendix A to this Agreement shall be the responsibility of Buyer."
ARTICLE 2. MISCELLANEOUS
2.1 Reference to Agreement. Any and all other agreements, documents or
instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant
to the terms of the Amended PPTA are hereby amended so that any reference to the Amended
PPTA, whether direct or indirect, shall mean a reference to the Amended PPTA as further
amended by this Amendment.
2.2 Governing Law. THIS AMENDMENT AND THE RIGHTS AND DUTIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED,
ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT
TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS
AMENDMENT.
2.3 Dispute Resolution. The Parties affirm that, except for disputes addressed in
Section 13.1.1.3, any and all disputes, claims or controversies arising out of, relating to,
concerning or pertaining to the terms of this Amendment, or to either Party's performance or
failure of performance under this Amendment shall be subject to the dispute resolution
provisions of Article XIX of the Amended PPTA.
2.4 Counterparts. This Amendment may be executed and delivered by the Parties in
any number of counterparts, with copies by electronic transmission acceptable, each of which
when so executed and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
2.5 Full Force and Effect; Construction. Each Party confirms that the Amended
PPTA is in full force and effect and remains a binding obligation of the Parties. To the extent
Second Amendment to Power Purchase Tolling Agreement
4
that this Amendment conflicts in any way with the Amended PPTA, the Amended PPTA shall be
deemed modified hereby.
2.6 No Obligation for Other Amendments. This Amendment is intended to be a part
of, and will serve as a valid, written amendment to, the Amended PPTA as required by Section
20.9 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Amended PPTA; all of which are ratified
and affirmed in all respects and shall continue in full force and effect, and this Amendment will
not operate as an extension or waiver by the Parties of any other condition, covenant, obligation,
right, power or privilege under the Amended PPTA. This Amendment (including its exhibits and
appendices) constitutes the entire agreement between the Parties relating to the subject matter of
this Amendment, and shall not be considered to create a course of dealing, an admission of
liability or to otherwise obligate either Party to execute similar amendments or grant any waivers
under the same or similar circumstances in the future.
[This space intentionally left blank]
Second Amendment to Power Purchase Tolling greement
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the
Amended PPTA as of the date first above written. .
THE CITY:
ATTEST:
CITY OF VERNON CITY OF VERNON
By: -2z - 244-6..-' By
Hilario Gonzales
Mayor
APPROVED AS TO FORM:
CITY OF VERNON
By:
Michael B. Montgomery
Special Counsel
BICENT:
BICENT (CALIFORNIA) POWER LLC
By: —
Name:
Title:
BICENT MALBURG:
BICENT (CALIFORNIA) MALBURG LLC
By: —
Name:
Title:
Second Amendment to Power Purchase Tolling Agreement
BICENT (CALIFORNIA) POWER LLC
RECEIVE
JUN 0 7 2011
ITYCLERWS OFFICE
City of Vernon RISK MANAGEMENT DEPT
Office of the City Clerk
Attn: Willard G. Yamaguchi
City Clerk/Interim City Attorney
4305 Santa Fe Avenue
Vernon, CA 90059
Tel: (323) 583-8811
Via Federal Express
Re: Bicent (California) Malburg LLC Second Amendment to Power Purchase Tolling Agreement
June 6, 2011
Dear Mr. Yamaguchi,
Attached for your records please find one (1) fully executed original of the above -referenced
amendment to the Power Purchase Tolling Agreement for the Malburg Generating Station,
approved by the lenders pursuant to Bicent (California) Power's project financing documents
effective June 3, 2011. If you have any questions regarding this matter, please do not hesitate to
contact the undersigned at the phone number set forth below.
T a tFleischm;ann
ds,
Ste
General Counsel
Enclosure
575 Broadway, 3=d floor Phone: (212) 343-8353
New York, NY 10012 Fax: (212) 343-9949
Execution Conv
PRIVILEGED AND CONFIDENTL4L
SECOND AMENDMENT TO
POWER PURCHASE TOLLING AGREEMENT
This SECOND AMENDMENT TO POWER PURCHASE TOLLING
AGREEMENT (this "Amendment") is entered into as of June 3, 2011, by and between Bicent
(California) Malburg LLC, a Delaware limited liability company ("Seller"), and the City of
Vernon, a municipal corporation and chartered city duly organized and existing under and by
virtue of the Constitution and laws of the State of California that is also a publicly -owned electric
utility as defined in Section 9604 of the California Public Utilities Code ("Buyer"). Each of
Seller and Buyer are referred to herein individually as a "Party" and collectively as the "Parties."
Capitalized terms used herein and not otherwise defined have the meaning set forth in Amended
PPTA (as defined below).
RP.CiTAT.0
A. On April 10, 2008, Bicent acquired Buyer's interest in the combined cycle natural
gas -fired generating facility known as the Malburg Generating Station, located at
2715 East 50th Street, Vernon, California, 90058 (the "Facility"), pursuant to that
certain Amended and Restated Purchase and Sale Agreement, dated as of December
13, 2007, by and between Bicent (California) Power LLC, a Delaware limited
liability company, and the City (as it has been or may be amended, the "PSA" ).
B. Concurrently, the Parties entered into that certain power purchase tolling agreement
(the "PPTA"), pursuant to which Seller agreed to sell and deliver exclusively to
Buyer, and Buyer agreed to purchase and receive, on a tolling basis, Contract
Capacity, Contract Energy, Ancillary Services, and Resource Adequacy Benefits
from the Facility under the terms and conditions set forth in the PPTA.
C. On December 31, 2009, the Parties amended the PPTA pursuant to that certain first
amendment to power purchase tolling agreement (the "First Amendment", and the
PPTA, as so amended, the "Amended PPTA") to resolve certain disputes that arose
between the Parties under the PPTA and PSA.
D. The Parties deem it to be in their respective best interests to enter into this
Amendment to address certain issues that have arisen during the course of their
performance under the Amended PPTA.
NOW, THEREFORE, in consideration of the respective covenants and promises
contained herein and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1. AMENDMENTS AND AGREEMENTS
A. DEFINITIONAL MODIFICATIONS
1.1 Amendments to Section 1.1 of the Amended PPTA. Section 1.1 of the Amended
PPTA is hereby amended by adding the following defined terms in the appropriate alphabetical
location in Section 1.1 of the Amended PPTA:
"Energ�Payment" has the meaning set forth in Section 4.2.
"Minimum Dispatch Level identified in Appendix A" means 95 MWs for Energy
payment calculation purposes. However, Buyer shall be able to deliver a Dispatch Notice
as low as 80 MWs in a 2xl configuration for energy dispatch purposes consistent with
Section 11.4.2 hereof.
"OEM Recommendations" means original equipment manufacturers recommendations.
1.2 Amendment to Section 4.2 of the Amended PPTA. Section 4.2 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 4.2 Energy Pa its. The "Energy Payment" for any period
shall mean: (i) if the Facility is dispatched at or above the Minimum Dispatch
Level identified on Appendix A (i.e., 95 MWs) to this Agreement, for each MWh
of Contract Energy delivered to the Energy Delivery Point pursuant to a Dispatch
Notice during such period, the Fixed Energy Price for such period plus the Heat
Rate Payment/Bonus for such period, or (ii) if the Facility is dispatched at less
than the Minimum Dispatch Level identified on Appendix A to this Agreement
(as low as 80 MWs in 2x1 non duct fired configuration), or zero (consistent with
Section 11.4.2), for each hour (or part thereof) so dispatched, the Minimum
Dispatch Level identified on Appendix A (i.e., 95 MWs) to this Agreement
multiplied by the Fixed Energy Price for such period plus the Heat Rate
Payment/Bonus for such period, in each case, where:"
1.3 Amendment to Section 5.1 of the Amended PPTA. Section 5.1 of the Amended PPTA
is hereby amended and restated in its entirety as follows:
"Section 5.1 Failure to Deliver Contract Energy. If during any calendar
month Seller fails to deliver the Contract Energy (or to the extent Seller's
Availability Notices are less than the Available Capacity) after taking into
account Scheduled Outages and any other failure to deliver Contract Energy
Second Amendment to Power Purchase Tolline Agreement
FA
otherwise excused under the terms of this Agreement or by Buyer's failure to
perform, then Seller shall pay Buyer, on the date payment would otherwise be due
in respect of the month in which the failure occurred, an amount equal to the
positive difference, if any, obtained by subtracting the Energy Payment from the
Average Energy Replacement Price, multiplied by the MWh of Contract Energy
not delivered in such month; provided, however that no more than four (4) hours
shall be attributed to any failure to deliver Contract Energy, per event; and
provided further, that during any period that Seller delivers Ancillary Services to
Buyer at Buyer's request that reduce the Facility's ability to provide the full
amount of Contract Energy, Seller shall be excused from delivering that portion
of the Contract Energy that Seller was not able to deliver as a result of its delivery
of such Ancillary Services. Notwithstanding the foregoing, Seller shall not be
required to make such payment to Buyer if the Threshold Capacity of the Facility
in such calendar month is greater than or equal to 95% of the Adjusted Contract
Capacity for such month. The invoice for such amount shall include a written
statement explaining in reasonable detail the calculation of such amount."
1.4 Amendment to Sections 5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA. Sections
5.3, 5.3.1, 5.3.2 and 5.3.3 of the Amended PPTA are hereby amended by deleting the term
"97%" wherever it may appear and inserting the term "95%" in lieu thereof.
1.5 Amendment to Section 11.3 of the Amended PPTA. Section 11.3 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.3 Dispatch Notice Updates. Buyer shall have the right to
update its Dispatch Notice, on a real-time basis, to dispatch the Facility in the
Real Time Market, consistent with the CAISO Tariff, Operating Limitations,
OEM Recommendations and Good Utility Practice and subject to the terms and
conditions of this Agreement."
1.6 Amendment to Section 11.4 of the Amended PPTA. Section 11.4 of the Amended
PPTA is hereby amended and restated in its entirety as follows:
"Section 11.4 Operating Limitations.
Section 11.4.1 Except as otherwise set forth in Section 11.4.2 below,
if Buyer submits a Dispatch Notice that does not conform with the Operating
Limitations or the Availability Notice, then Seller shall notify Buyer of the non-
conformity and Buyer will modify its Dispatch Notice to conform to the
applicable Operating Limitation and Availability Notice. Until such time as
Buyer submits a modified Dispatch Notice, Seller shall deliver the Contract
Energy in accordance with the Operating Limitations, OEM Recommendations
and the Availability Notice. Any charges, costs or penalties incurred until such
Second Amendment to Power Purchase Tolling Agreement
time as Buyer submits a modified Dispatch Notice shall be the responsibility of
Buyer.
Section 11.4.2 If Buyer submits a Dispatch Notice for a megawatt
output of less than the Minimum Dispatch Level (as set forth on Appendix A) but
no less than 80MWs, or zero, then Seller shall use its reasonable best efforts,
subject to Permit Limitations, Good Utility Practice, OEM Recommendations and
the Availability Notice, to deliver the Contract Energy in accordance with such
Dispatch Notice; provided, however, that each combustion turbine shall be limited
to no more than eighteen (18) start-ups per Contract Year in association with
Buyer requested zero dispatches and shall otherwise remain subject to the
Operating Limitations. Any charges, costs or penalties incurred as a result of any
Dispatch Notice for less than the Minimum Dispatch Level identified on
Appendix A to this Agreement shall be the responsibility of Buyer."
ARTICLE 2. MISCELLANEOUS
2.1 Reference to Agreement. Any and all other agreements, documents or
instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant
to the terms of the Amended PPTA are hereby amended so that any reference to the Amended
PPTA, whether direct or indirect, shall mean a reference to the Amended PPTA as further
amended by this Amendment.
2.2 Governing. THIS AMENDMENT AND THE RIGHTS AND DUTIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED,
ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT
TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS
AMENDMENT.
2.3 Dispute Resolution. The Parties affirm that, except for disputes addressed in
Section 13.1.1.3, any and all disputes, claims or controversies arising out of, relating to,
concerning or pertaining to the terms of this Amendment, or to either Party's performance or
failure of performance under this Amendment shall be subject to the dispute resolution
provisions of Article XIX of the Amended PPTA.
2.4 Counterparts. This Amendment may be executed and delivered by the Parties in
any number of counterparts, with copies by electronic transmission acceptable, each of which
when so executed and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
2.5 Full Force and Effect, Construction. Each Party confirms that the Amended
PPTA is in full force and effect and remains a binding obligation of the Parties. To the extent
Second Amendment to Power Purchase Tolling Ajzreement
4
that this Amendment conflicts in any way with the Amended PPTA, the Amended PPTA shall be
deemed modified hereby.
2.6 No Obligation for Other Amendments. This Amendment is intended to be a part
of; and will serve as a valid, written amendment to, the Amended PPTA as required by Section
20.9 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Amended PPTA, all of which are ratified
and affirmed in all respects and shall continue in full force and effect, and this Amendment will
not operate as an extension or waiver by the Parties of any other condition, covenant, obligation,
right, power or privilege under the Amended PPTA: This Amendment (including its exhibits and
appendices) constitutes the entire agreement between the Parties relating to the subject matter of
this Amendment, and shall not be considered to create a course of dealing, an admission of
liability or to otherwise obligate either Party to execute similar amendments or grant any waivers
under the same or similar circumstances in the future.
[This space intentionally left blank]
Second Amendment to Power Purchase Tolling Agreement
5
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the
Amended PPTA as of the date first above written.
THE CITY:
ATTEST:
CITY OF VERNON CITY OF VERNON
By: A�'",�� By:
Hilario Gonzales
Mayor
APPROVED AS TO FORM:
CITY OF VERNON
B y. _�—
Michael B. Montgomeer
Special Counsel
BICENT:
BICENT (CALIFORNIA) POWER LLC
By: —
Name:
Title:
BICENT MALBURG:
BICENT (CALIFORNIA) MALBURG LLC
By: —
Name:
Title:
Second Amendment to Power Purchase Tolling Agreement
6
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the
Amended PPTA as of the date first above written.
THE CITY:
ATTEST:
CITY OF VERNON CITY OF VERNON
Name:
Title:
BICENT:
BICENT (CALIFORNIA) POWER LLC
By:
Name: 6ristopher L. Ryan
Title: Chief Financial Officer
BICENT MALBURG:
BICENT (CALIFORNIA) MALBURG LLC
By:
Name: Christopher L. Ryan
Title: Chief Financial Officer
Name:
City Clerk
Second Amendment to Power Purchase Tolling Agreement
Page 1 of 2
Juarez, Debbie
From:
Muro, Evangelina
Sent:
Tuesday, May 03, 2011 2:23 PM
To:
Juarez, Debbie
Cc: Yamaguchi, Willard; Hunter, Audra; Fandino, Carlos
Subject: RE; Malburg PPTA Amendment
Debbie,
Per Carlos please send the agreements to Paul Prager via Fed Ex.
Thank you.
From: Fandino, Carlos
Sent: Wednesday, April 27, 2011 2:30 PM
To: Muro, Evangelina; Hunter, Audra
Cc: Yamaguchi, Willard; Juarez, Debbie
Subject: RE: Malburg PPTA Amendment
Please mail to:
Beowu.lf Energy I. LC
Attention Paul Prager
575 Broadway 3,d floor
New York, NY 1.0012
1-212-3438353
From: Muro, Evangelina
Sent: Wednesday, April 27, 2011 1:42 PM
To: Hunter, Audra
Cc: Fandino, Carlos; Yamaguchi, Willard; Juarez, Debbie
Subject: RE: Malburg PPTA Amendment
Audra,
You indicated that Paul Prager would not sign the PPTA until after the City has signed. Please
note we will ask the Mayor to sign the PPTA after the approval on Tuesday.
Should the PPTA be given to you to get Bicent's signature or would you prefer Debbie send
them (please provide the mailing address and to whom they should be addressed to)?
Thanks.
From: Muro, Evangelina
Sent: Monday, April 25, 2011 10:53 AM
To: Fandino, Carlos
Cc: Hunter, Audra --- - -
Subject: RE: Malburg PPTA Amendment
I have made the necessary changes to the signature page. Please note this is the format to use for all
agreements.
5/4/2011
Page 2 of 2
I also changed the effective date to May 3, 2011 (highlighted on the first page).
Thanks.
From: Fandino, Carlos
Sent: Monday, April 25, 2011 10:43 AM
To: Hunter, Audra; Muro, Evangelina
Subject: FW: Malburg PPTA Amendment
From: Fandino, Carlos
Sent: Monday, April 25, 2011 9:39 AM
To: Alemu, Abraham
Subject: FW: Malburg PPTA Amendment
5/4/2011
M
•R 2 : 2011:�.
CITY CLERK'S OFFICE STAFF REPORT
LIGHT & POWER
DATE: April 28, 2011
TO: Honorable Mayor and City Council
FROM: Carlos R. Fandino, Jr., Director of Light &Power
RECEIVED
APR 2 8 2011
CITY ADMINISTRATION
M w/
RE: Second Amendment to Power Purchase Tolling Agreement
with Bicent
RECOMMENDATION
It is recommended that the City Council approve the attached draft of the Second
Amendment to the Power Purchase Tolling Agreement (PPTA) with Bicent in
substantially the same form as submitted herewith, and authorize the City Administrator
to negotiate final changes to the amendment.
It is requested this item be considered at the May 3, 2011 Light & Power City Council
meeting.
The City Administrator concurs with the recommendations contained in this staff report.
CRF:ah
Attachment
C: Mark Whitworth, City Administrator
DO:
Attachments
CITY CLERK'S OFFICE
11`►YY�It yyC�7 i�Ioli5C�7t7:\►1DIUM
DATE: April 22, 2013
TO: Carlos Fandino, Director of Light & Power
FROM: Deborah Juarez, Records Management Assistant
RE: Letter Agreement with Bicent (California) Malburg LLC — Form of Bid
Guarantee for Air Resource Board Cap -and -Trade Auction Participation
(Greenhouse Gas "GHG" Allowances) Relating to the Power Purchase Tolling
Agreement "PPTA"
Transmitted herewith is a copy of the accepted original fully executed letter agreement from
Bicent, which was approved by City Council minute order on April 16, 2013.
Thank you.
Attachment
c: Resolution No.2011-70
Agreement No. 11-053
BICENT (CALIFORNIA) MALBURG LLC
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attn: Carlos Fandino, Director of Light & Power Department
Via Federal Express
Re: Power Purchase Tolling Agreement, by and between Bicent (California) Malburg LLC as seller
and the City of Vernon as purchaser, dated as of April 10, 2008 (as amended, the "PPTA'�
February 26, 2013
Dear Mr. Fandino,
Reference is made to Section 18.3 of the above -referenced PPTA which provides that, subject to
the terms and conditions set forth therein, the City of Vernon ("COV') shall reimburse Bicent CA
Malburg LLC ("Bicent") for newly -imposed taxes, charges or fees (which shall include the costs of any
carbon, greenhouse gas or similar emissions credits) for greenhouse gas attributable to energy supplied to
COV from the Malburg Generating Station ("MGS").
Beginning with calendar year 2013, MGS is required to acquire and surrender to the California
Air Resources Board one greenhouse gas allowance for each metric ton of CO2 emitted (as modified
from time to time, the "New GHG Allowance Rules"). COV has suggested to Bicent that COV transfer
sufficient allowances from COV's Compliance Instrument Tracking System Service (CITSS) account to
the Bicent CITSS account (the "GHG Allowances Transfer"), from where Bicent would surrender these
allowances to the California Air Resources Board as required to comply with the New GHG Allowance
Rules.
Until Bicent provides written notice to COV to the contrary, Bicent accepts the GHG
Allowances Transfer and confirms that, as long as COV performs a sufficient GHG Allowances
Transfer, COV is in compliance with COV's obligations under Section 18.3 of the PPTA with respect to
the New GHG Allowance Rules.
Sincerely,
BICENT (CAI,i;FORNIA.) MALBURG LLC
0
Name: Christopher L. Ryan
Title: Chief Financial Officer
cc:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attn: Nicholas George Rodriguez, Esq., City Attorney
103 N. Washington Street Phone: (410) 770-9500
Easton, MD 21601 Fax: (410) 770-9705
e0 /% t", 511i10/r3 1 /- 05 3
Juarez, Debbie '"BUJ :14- gtyl "�-zio
From: Figueroa, Diana
Sent: Thursday, April 11, 2013 11:24 AM
To: Muro, Eva
Cc: Fandino, Carlos; Barcia, Ana; Juarez, Debbie; Alemu, Abraham
Subject: Bicent and COV Letter of Agreement
Hi Eva,
After speaking with Abraham, and in accordance with Nick's recommendation, it is my understanding that the Letter of
Agreement received by Bicent dated February 26,2013 with their signature is all that is needed (along with Council
approval) to proceed with the newly negotiated procedure between Bicent and the COV. Nick was included in
discussions regarding the proper documentation for this agreement, and ultimately, he was satisfied with the "letter"
approach.
I do have an original copy of the letter of which I will submit to Debbie shortly.
Please let me know if you have any additional questions or need anything else.
Thanks,
Diana Figueroa
Secretary to the Director of Light & Power
City of Vernon
323.583.8811 X570
dfigueroa@ci.vernon.ca.us
�/Y �� Vy1&13
Recelvp®
APR 1 1 2013
ClTyCLERK'SOFFICE
STAFF REPORT
DEPARTMENT OF LIGHT & POWER
DATE: April 16, 2013
TO: Honorable Mayor and City Council
FROM: Carlos R. Fandino, Jr., Director of Light & Power
RECEIVED
APR 10 2013
CITY ADMINISTRATION
RE: Approval of Bicent Agreement, Form of Bid Guarantee for Air Resource Board
Cap -and -Trade Auction Participation
Recommendation
It is recommended that the City Council:
1. Find that the proposed form of bid guarantee is exempt under the California Environmental Quality
Act (CEQA) in accordance with Section 15061(b)(3), the general rule that CEQA only applies to
projects that may have an effect on the environment.
2. Approve the letter agreement between the City and Bicent that allows the City to purchase and
transfer sufficient allowances to Bicent in lieu of the City's obligation under Section 18.3 of the
PPTA.
3. Approve a letter of credit in the amount of $10 million dollars to be used as a bid guarantee for
participation in the ARB cap -and -trade auction.
Background
In 2006, the California Legislature passed and Governor Schwarzenegger signed AB 32, the Global
Warming Solutions Act of 2006. AB 32 converted the 2020 greenhouse gas emissions reduction goal into
law. The bill directed the California Air Resources Board (ARB or Board) to prepare a scoping plan to
identify how to best reach the 2020 limit. The reduction measures to meet the 2020 target were adopted
prior to the start of 2011. By the year 2020, the legislation requires California to reduce greenhouse gas
emissions to the level of that measured in 1990.
Assembly Bill 32 Requirements Include:
• Identify the statewide level of greenhouse gas emissions in 1990 to serve as the emissions limit to
be achieved by 2020. In December 2007, the ARB Board approved the 2020 emission limit of 427
million metric tons of carbon dioxide equivalent (MMTCO2E) of greenhouse gases.
Adopt a regulation requiring the mandatory reporting of greenhouse gas emissions. In
December 2007, the ARB Board adopted a regulation requiring the largest industrial sources to verify
and report their greenhouse gas emissions. The mandatory reporting requirement (MRR) requires
facilities, fuel, and carbon dioxide (CO2) suppliers —as well as electric power entities —to report their
annual GHG emissions from 2009 and every year thereafter. The reporting regulation serves as a
foundation to determine greenhouse gas emissions and track future changes in emission levels. As a
retail provider of electricity and a supplier of natural gas, the City is subject to mandatory reporting of
GHG. In addition to requiring GHG reporting, AB32 authorizes the ARB to adopt a schedule of fees
to be paid by sources of GHG emissions to support the administrative costs of implementing AB32.
As a supplier of natural gas and retail provider of electricity, the City is subject to the Cost of
Implementation Regulation and is responsible for payment of fees, determined by the ARB and
provided in yearly invoices.
Adopt a regulation that establishes a system of market -based annual aggregate emission limits
for sources or categories of sources that emit greenhouse gas emissions, applicable from
January 1, 2012, to December 31, 2020. On October 2011, the Board adopted the Cap -and -
Trade Regulation. The Cap -and Trade Regulation is discussed in detail below:
o The AB 32 scoping plan identified the cap -and -trade program as one of the strategies
California will employ to reduce the greenhouse gas (GHG) emissions that cause climate
change. This program is intended to help California to reduce GHG emissions to 1990 levels
by the year 2020, and ultimately achieve an 80% reduction from 1990 levels by 2050. Under
cap -and -trade, an overall limit on GHG emissions from capped sectors is established.
Facilities subject to the cap will be able to trade permits (allowances) to emit GHGs.
o The program started on January 1, 2012, with an enforceable compliance obligation
beginning with the 2013 GHG emissions. The cap -and -trade program covers major GHG-
emitting sources, such as electricity generation (including imports), and large stationary
sources (e.g., refineries, cement production facilities, oil and gas production facilities, glass
manufacturing facilities, and food processing plants) that emit more than 25,000 MTCO2e
per year. The program will expand in 2015 to include fuel distributors (natural gas and
propane fuel providers and transportation fuel providers). This will address emissions from
transportation fuels, and from combustion of other fossil fuels not directly covered at large
sources in the program's initial phase. The program includes an enforceable emissions cap
that will decline over time. The State will distribute allowances, which are tradable permits,
equal to the emissions allowed under the cap. Sources under the cap will need to surrender
allowances and offsets equal to their emissions at the end of each compliance period. The
cap -and -trade program established a system that distributes free allowances to electrical
distribution utilities that must be monetized and used for the protection of electricity
ratepayers. The regulation requires distribution utilities to sell these allowances in auctions
conducted by CARB.
o The Basic Components of the Cap -and -Trade Program are an Allowance and an Offset
Credit. An allowance is a tradable permit to emit one metric ton of a carbon dioxide
equivalent greenhouse gas emission. The total number of allowances provided by ARB each
year will be equivalent to the annual allowance budget specified in the Regulation. Each
allowance will have a unique serial number. An offset credit is equivalent to a GHG
reduction or GHG removal enhancement of one metric ton of CO2e. ARB offset credits,
along with allowances, are frequently referred to as compliance instruments, since they are
used by entities to comply with the program. A covered entity may only meet up to 8 percent
of its compliance obligation using ARB offset credits.
The Cap -and -Trade Program has three compliance periods. The years 2013 and 2014
are known as the first compliance period, and the years 2015-2017 are known as the second
compliance period. The third compliance period is from 2018-2020. At the end of each
individual compliance period, all facilities will be required to turn in compliance instruments,
including allowances and a limited number of ARB offset credits, equivalent to their total
GHG emissions throughout the compliance period. Each facility's compliance obligation
will be determined by the quantity of reported and verified GHGs emissions. ARB will
directly allocate a proportion of allowances to qualified facilities subject to the program.
Each facility will be responsible for acquiring the remaining allowances or limited number of
offset credits to comply with the program. Qualified facilities are in the industrial sector,
which include: Crude Petroleum and Natural Gas Extraction, Natural Gas Liquid Extraction,
Potash, Soda, and Borate Mineral Mining, paper mills, Paperboard Mills, Petroleum
Refineries, Flat Glass and Container Glass manufacturing, Cement Manufacturing, Iron and
Steel Mills, Turbine and Turbine Generator Set Units Manufacturing.
ARB will hold four quarterly auctions per year at which time GHG allowances will be
sold. The auction administrator will publish a public auction notice 60 days prior to each
auction. Information in the auction notice will include, among other pertinent information,
how to submit a bid guarantee, to whom the bid guarantee is submitted, and instructions for
information needed to return the bid guarantee to bidders. The Regulation requires the
amount of the bid guarantee to be greater than, or equal to, the maximum value of the bids
submitted.
Malburg Generating Station Compliance Requirement
As an energy generating plant, MGS is required to surrender compliance instruments (GHG allowances
and/or offsets) that are determined by the quantity of reported and verified GHGs emissions from the
power plant. Further, MGS is subject to the Cost of Implementation Regulation and is responsible for
payment of ARB program administration fees. The compliance instruments can be purchased through the
ARB auction process, or from the secondary market.
Pursuant to Section 18.3 of the Power Purchase and Tolling Agreement between the City and Bicent, the
City is required to reimburse Bicent for newly -imposed taxes, charges or fees (which shall include the
costs of any carbon, Greenhouse Gas or similar emissions credits) for Greenhouse Gas attributable to
energy supplied to the City from the Generating Units. Bicent and City Staff agreed, both from cost and
effort standpoints, that the City purchase and transfer sufficient allowances to Bicent in lieu of the City's
obligation under Section 18.3 of the PPTA. The letter agreement between the parties is attached. As
previously noted, staff is seeking Council approval of the letter agreement.
ARB Auction Bid Guarantee Requirement
The City plans to purchase greenhouse gas allowances and off -set credits sufficient to cover the
compliance requirement for MGS and for un-specified (non-renewable) energy imports by the City from
outside of California.
In order to participate in the ARB cap -and -trade auction, participants are required to submit a bid
guarantee greater than, or equal to, the maximum value of the bids submitted in advance of the auction.
Staff estimates participation in up to four auctions per Calendar Year. The bid guarantee could be in the
form of cash, letter of credit (LOC), or bond.
Staff has determined that LOC is a preferred form of bid guarantee. The value of the LOC needed for
each auction will vary depending on the quantity of allowances and the estimated cost of the allowances
the City plans to purchase at that time. It is expected that future allowance prices will increase from
present levels.
Staff is seeking approval for an LOC in the amount of $10 million dollars in an effort to streamline and
optimize the flexibility to procure credits in a timely manner. The LOC will grant the resource planning
team an opportunity to spend wisely, without limitations of administrative timing and funds.
Fiscal Impact
The issuing bank will charge a nominal administrative fee for each letter of credit issued. These fees will
be built into budget projections. Despite the incurrence of such fees, Staff has determined that using a
letter of credit as a bid guarantee is preferred in -lieu of a cash deposit for each auction.
Attachments
Cc: Abraham Alemu
BICENT (CALIFORNIA) MALBURG LLC
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attn: Carlos Fandino, Director of Light & Power Department
Via Federal Express
Re: Power Purchase Tolling Agreement, by and between Bicent (California) Malburg LLC as seller
and the City of Vernon as purchaser, dated as of April 10, 2008 (as amended, the "PPTA'�
February 26, 2013
Dear Mr. Fandino,
Reference is trade to Section 18.3 of the above-refetenced PPTA which provides that, subject to
the terms and conditions set forth therein, the City of Vernon ("COV'� shall reimburse Bicent CA
Malburg LLC ("Bicent") for newly -imposed taxes, charges or fees (which shall include the costs of any
carbon, greenhouse gas or similar emissions credits) for greenhouse gas attributable to energy supplied to
COV from the Malburg Generating Station ("MGS').
Beginning with calendar year 2013, MGS is required to acquire and surrender to the California
Air Resources Board one greenhouse gas allowance for each metric ton of CO2 emitted (as modified
from time to time, the "New GHG Allowance Rules"). COV has suggested to Bicent that COV transfer
sufficient allowances from COV's Compliance Instrument Tracking System Service (CITSS) account to
the Bicent CITSS account (the "GHG Allowances Transfet"), from where Bicent would surrender these
allowances to the California Air Resources Board as required to comply with the New GHG Allowance
Rules.
Until Bicent provides written notice to COV to the contrary, Bicent accepts the GHG
Allowances Transfer and confirms that, as long as COV performs a sufficient GHG Allowances
Transfer, COV is in compliance with COV's obligations under Section 18.3 of the PPTA with respect to
the New GHG Allowance Rules.
Sincerely,
BICL,NT (��ORNI ) MALBURG LLC
By:
Name: ehristopher L. Ryan
Title: Chief Financial Officer
cc:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attn: Nicholas George Rodriguez, Esq., City Attorney
103 N. Washington Street Phone: (410) 770-9500
Easton, bID 21601 Fax: (410) 770-9705
726
Regular City Council Meeting Minutes
April 16, 2013
10. Approval of Bicent Agreement, Form of Bid Guarantee for
Air Resource Board Cap -and Trade Auction Participation.
Recommendation:
(1) Find that the proposed form of bid guarantee is exempt
under the California Environmental Quality Act
("CEQA") in accordance with Section 15061 (b)(3), the
general rule that. CEQA only applies to projects that
may have an effect on the environment; and
(2) Approve the letter agreement between the City and
Bicent that allows the City to purchase and transfer
sufficient allowances to Bicent in lieu of the City's
obligation under Section 18.3 of the Power Purchase
Tolling Agreement ("PPTA"); and
(3) Approve a letter of credit in the amount of.$10
million to be used as a bid guarantee for the
participation in the Air Resource Board cap -and trade
auction.
Director of Light & Power Department Carlos Fandino reported
that in 2006, AB26, the Global Warming Solution Act, was
enacted; AB32 converted it into law. By the year 2020,
legislation requires California to reduce greenhouse gas
emissions to the levels measured'in 1990.
The proposed agreement request two items; 1) approval of the,
letter agreement with Bicent, current owners of the Malburg
Generating Station, and 2) approve the letter of credit.
Fandino explained that the letter of credit is needed to
participate in the Air Resource Board cap -and trade auction; $10
million is requested in order to maximize the allowance at the
most opportune time.
The City will be participating in four auctions per year.
Fandino noted that for everything that is purchased, the City
will receive credit towards greenhouse gas reduction. Fandino
reminded all that the pass -through cost to customers is the
difference between the renewable energy and "brown energy.
Credits will help reduce the difference between the two, and
thus reduce the cost passed onto the customers. Projected
exposure for the year is estimated between $300-400 thousand.
It was moved by Martinez and seconded by Ybarra_to approve the
Bicent Agreement, Form of Bid Guarantee for Air Resource Board
cap -and trade auction participation. Motion carried, 5-0.
ORDINANCES
1. A Resolution of Intention and Ordinance to approve an
amendment to the contract between the Board of
Administration of the California Public Employees'
Retirement System ("Ca1PERS") and the City Council City of
Vernon:
a. Resolution No. 2013-47 - A Resolution of the City
Council of the City of Vernon Declaring its
Intention to approve an Amendment to the Contract
between the Board of Administration of the
California Public Employees' Retirement System and
the City Council of the City of Vernon.
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