city of salinas and deepwater desal llc and california water service company agreement

7/29/2019 City of Salinas and DeepWater Desal LLC and California Water Service Company Agreement

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REPORT TO THECITY COUNCILCity ofSalinas, California

DATE: February 26, 2013FROM: Ray E. Corpuz, Jr., City ManagerBY: Jim Pia, Assistant City ManagerSUBJECT: AGREEMENT AMONG THE CITY OF SALINAS,

DEEPWATER DESAL LLC, AND CALIFORNIAWATER SERVICE COMPANY

RECOMMENDATION:

Agenda Item Number

It is recommended that the City Council approve a resolution authorizing the City Manager to sign theattached Agreement between the City of Salinas, DeepWater Desai LLC (DWDS) and CaliforniaWater Service Company (CWS) with regard to a wholesale power purchase agreement.DISCUSSION:Following a proposal by DeepWater Desai LLC to build a desalination facility in Moss Landing, theCity Council on December 18, 2012 approved an agreement between the City of Salinas and DWDSto explore the purchase of water and wholesale power. The DWDS proposal called for building adesalination facility in Moss Landing in an effort to supply potable water to water agencies and waterutilities operating in Monterey and Santa Cruz Counties. It is anticipated that this project could serveboth Salinas and the Monterey Peninsula. Additionally, DWDS and the City wanted to work togetherto explore the establishment of a wholesale power purchase agreement with a wholesale powergenerator located in Moss Landing. This could allow for the City's purchase of power and resale ofsuch power for businesses operating within Salinas and Monterey County.Since the initial Agreement, follow-up discussions have taken place between the original parties,DWDS and the City, as well as California Water Service Company. The purpose of the currentlyproposed agreement is that all three parties desire to establish a wholesale power purchase agreementwith a wholesale power generator from which the City would purchase power and would resell suchpower to DWDS and selected other coastal dependent businesses operating within Monterey Countyproximate to the Central Coast Regional Water Project.As described in the attached Agreement, approvals of any power purchase agreement by any and allappropriate federal, state, and local authorities to the extent required by law, shall be obtained. Theterm of the Agreement is for a period offive (5) years, however, it can be terminated earlier by eitherparty for any reason or for no reason whatsoever and without further obligation to the other party.Such termination shall take effect immediately upon the date of termination.

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ISSUE:

Shall the City Council approve a resolution authorizing the City Manager to sign the attachedAgreement between the City of Salinas, Deep Water Desai LLC (DWDS) and California Water ServiceCompany (CWS) with regard to a wholesale power purchase agreement?FISCAL IMPACT:

There is no direct fiscal impact to the City by entering into this Agreement. The Agreement does notobligate the City, DWDS or CWS to enter into any particular project agreement, water purchaseagreement or power purchase agreement. To the extent there becomes a potential for fiscal impact tothe City, such additional actions will be brought back to the City Council for review and considerationbefore the expenditure of funds.

TIME CONSIDERATION:DeepWater De sal LLC, California Water Service Company and the City of Salinas would like to enterinto this Agreement so that further considerations relating to a wholesale power purchase agreementcan move forward.ALTERNATIVES/IMPLICATIONS:1. Not adopt the resolution and provide staff direction on how to proceed.CONCLUSION:

Staff recommends that the City Council approve a resolution authorizing the City Manager to sign theattached Agreement between the City of Salinas, DeepWater Desai LLC (DWDS) and CaliforniaWater Service Company (CWS) with regard to a wholesale power purchase agreement.

Distribution:City CouncilCity ManagerCity AttorneyDepartment Directors

Back Up Pages:ResolutionAgreementCentral Coast Regional Water Project Fact Sheet

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RESOLUTION NO.__ N.C.S.}A RESOLUTION AITHORIZING THE CITY MANAGER TO SIGN AN AGREEMENT AMONG THE CITY OF

SALINAS; DEEP WATER DESAL, LLC; AND CALIFORNIA WATER SERVICE COMPANY WITH REGARD TO AWHOLESALE POWER PURCHASE AGREEMENT

WHEREAS, Deep Water Desai, LLC is proposing to build a desalination facility at Moss Landing tosupply potable water to water agencies and to water utilities operating in Monterey County and SantaCruz County and wishes to plan fo r any potential future demand fo r desalinated water by the City ofSalinas; and

WHEREAS, on December 18, 2012, the City of Salinas and Deep Water Desai, LLC (Deep WaterDesai) entered into an Agreement to Explore the Purchase of Water and a Wholesale Power; andWHEREAS, since December 18, 2012, the City and Deep Water Desai have explored the

establishment of a wholesale power purchase agreement and the potential for supplying electric powerto support the power needs of existing and potential businesses, including those within the city ofSalinas; and

WHEREAS, the City and Deep Water Desai, along with California Water Service Company (CalWater) desire to continue exploring the establishment of a Power Purchase Agreement which wouldenable the City to acquire an electric power source, transmission services, ancillary services, anddistribution services or facilities to support the power needs of existing and potential businesses.

NOW THEREFORE BE IT RESOLVED BY THE COUNCIL OF SALINAS that the City Manager of Salinasis hereby authorized and directed fo r and on behalf of the City of Salinas to enter into an agreementamong the City of Salinas; Deep Water Desai, LLC; and California Water Service Company with regard toa wholesale power purchase agreement.

PASSED AND ADOPTED this 261h day of February 2013, by the following vote:AYES:NOES:ABSENT:ABSTAIN:

Joe Gunter, Mayor

Liz Soto, Deputy City Clerk


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AGREEMENT AMONG THE CITY OFSALINAS, DEEPWATER DESAL LLC, AND CALIFORNIAWATER SERVICECOMPANY WITH REGARD TO A WHOLESALE POWER PURCHASE AGREEMENT

This Agreement with regard to a Wholesale Power Purchase Agreement is entered into this_ d a y ofFebruary 2013, by and among the City of Salinas, a California charter city andmunicipal corporation hereinafter referred to as "the City," Deep Water Desai, LLC, a Californialimited liability company hereinafter referred to as "DWDS," and California Water ServiceCompany, a California corporation hereinafter referred to as "CWS", all ofwhich may sometimescollectively be referred to herein as "the Parties" or individually as "a Party".

RECITALSWHEREAS, the City and its residents are currently served by two municipal waterpurveyors, both ofwhich are authorized by the California Public Utilities Commission to act aswater utilities within the City: California Water Service Company and Alisal Water Corporation dbaAlco Water; andWHEREAS, DWDS is proposing to build a desalination facility at Moss Landing to supplypotable water to water agencies and water utilities operating in Monterey and Santa Cruz counties,and wishes to plan for any potential future demand for desalinated water by the City of Salinas; andWHEREAS, in the event DWDS or some other entity or organization builds a desalinationfacility ("Desai Facility") and is able to produce potable drinking water, or purer water of thequality needed to attract high technology industry to the City, such new source of water maybecome available to the City for conveyance to and use by water customers, including thoseresiding within the City of Salinas; andWHEREAS, on December 18,2012, the City and DWDS entered into an Agreement toExplore the Purchase of Water and a Wholesale Power Purchase Agreement and pursuant to saidagreement have explored the establishment of a wholesale power purchase agreement.NOW, THEREFORE, the City, DWDS and CWS agree as follows:

TERMS1. Purpose. It is the intent and the purpose of this Agreement (Agreement) to set forththe intention of the Parties to establish a wholesale power purchase agreement with a wholesalepower generator from which the City would purchase power and would resell such power to DWDS

and selected other coastal dependent businesses operating within Monterey County proximate to theDesai Facility but outside the City, hereinafter collectively referred to as Water Project.

2. Further Considerations as to Power Purchase. Subject to the preconditions of thisAgreement, including without limitation thereto, sections 2, 3 and 4 hereof, the Parties intend toestablish a wholesale power purchase agreement as follows:

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City and DWDS to cooperate in the City's acquisition of an electric powersource, transmission services, ancillary services and distribution services or


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facilities suitable to the Water Project, hereinafter collectively referred to asWater Project Power. City would purchase electric power and would resell Water Project Power to

Water Project. Water Project would purchase Water Project Power from City. Water Project would pay City an amount equal to all ofthe City's costs ofprocuring and delivering Water Project Power plus a reasonable fee. Approvals of any power purchase agreement by any and all appropriate federal,state, and local authorities to the extent required by law, shall be obtained. All provisions shall comply with all laws and regulations applicable to Cityand/or DWDS.

3. Limitation of Effect of Agreement. This Agreement shall not obligate the City,DWDS or CWS to enter into any particular project agreement, water purchase agreement or powerpurchase agreement, or to enter into a project agreement, a water purchase agreement or a powerpurchase agreement on any particular terms or conditions. By executing this Agreement, neither theCity nor DWDS nor CWS are committing themselves to or agreeing to participate in any DesaiFacility or to purchase or to supply any water or power produced by a Desai Facility. Execution ofthis Agreement by the City and by DWDS and by CWS is merely an agreement to collaborativelyconsider in good faith the objectives described in this Agreement and to conduct a period of furtherreview and consideration of the objectives described in this Agreement, reserving for subsequentaction the final discretion and approval regarding any project agreement or approval and allproceedings and decisions in connection therewith. Any agreement or approval resulting fromnegotiations pursuant to this Agreement shall become effective only if and after such agreement hasbeen considered and approved by the City and by DWDS and by CWS in their sole discretion.

It is also the intent of the Parties that this Agreement not constitute a "project" for purposesof the California Environmental Quality Act ("CEQA"), and that any future actions or agreementsbetween the Parties as may be described herein be subject to all requirements of law, includingCEQA.

4. Term. This Agreement shall commence as of the date first written above and shallcontinue in full force and effect for a period of five (5) years unless terminated earlier by eitherParty or by the mutual determination of the Parties or unless extended by mutual written agreementof the Parties. Either Party may terminate this Agreement for any reason or for no reasonwhatsoever and without further obligation to the other Parties with respect to the subject matter ofthis Agreement by providing written notice of such termination to the other Parties. Suchtermination shall take effect immediately upon the date of termination set forth in such notice. ThisAgreement may only be renewed upon the mutual written consent of the Parties.

5. Defense and Indemnification. DWDS shall defend and indemnify the City and itsofficers, employees and agents from and against any and all claims, liabilities, damages or costs of- 2-

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any type, including attorney's fees and court costs, arising out of the execution of this Agreement,but not arising out of the independent actions of the City implementing this Agreement (such as thefees paid to consultants hired by the City to assist the City in its analysis of the objectives of thisAgreement or the staff costs incurred by the City with respect to the objectives of this Agreement).

6. Amendments. This Agreement may only be amended by the mutual writtenagreement of the Parties.7. Waivers. No waiver of any provision of this Agreement will be valid unless it is inwriting and signed by the Parties. Waiver by any Party at any time of any breach of this Agreementcannot be deemed a waiver of or consent to a breach of the same or any other provision of thisAgreement. If a Party's action requires the consent or approval of the other Party, the consent orthe approval on any one occasion cannot be deemed a consent or approval of that action on any lateroccasion or consent or approval of any other action.8. Governing Law; Jurisdiction. This Agreement will be governed by the laws of theState of California and jurisdiction of any disputes hereunder shall be had in Monterey County, or in

the appropriate federal court or state or federal agency with jurisdiction over the matter. In theevent of any litigation brought with respect to this Agreement, the prevailing party in such actionshall be entitled to attorney fees and costs as may be awarded by the court. The City's attorneyfees, if awarded, shall be calculated at the market rate.

9. Notices. Any notices or other communications to be sent by one Party to the otherunder this Agreement shall be in writing and shall be given by personal delivery to the personsdesignated below, with copies delivered as indicated, or by U.S. Mail, return receipt requested, withcopies mailed as indicated:

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I f to City:City Manager City of Salinas200 Lincoln A venueSalinas, California 93901With a copy to:City Attorney City of Salinas200 Lincoln AvenueSalinas, California 93901I f to DWDS:Deep Water Desai LLCBrent R. Constanz, Managing Member7532 Sandholt Road, Suite 6Moss Landing, California 95039

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I f to CWS:California Water Service CompanyFrancis S. FerraroVice President, Regulatory Matters and Corporate Relations1720 North First StreetSan Jose, California 95112

IN WITNESS WHEREOF, the undersigned as authorized representatives of the City of Salinas, ofDeep Water Desai LLC, and of California Water Service Company have entered into thisAgreement as of the date first written above.CITY OF SALINAS

Ray E. Corpuz Jr., City Manager

APPROVED AS TO FORM:

Vanessa W. Vallarta, City AttorneyByChristopher A. Callihan, Assistant City AttorneyATTEST:

Patricia Barajas, City ClerkDeepWater Desai LLC

By: Brent R. ConstanzIts: Managing Member and Chief Executive OfficerCalifornia Water Service Company

By: Francis S. FerraroIt's: Vice President, Regulatory Matters and Corporate Relations

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DeepWaterDesai

A True Regional Project

Central Coast Regional WaterProject Fact Sheet

The Central Coast Regional Water Project in Moss Landing is intended to serve the MontereyBay Region with a new supply of potable water. A cloud service center is being co-located withthe desalination plant to take advantage of energy efficient, low carbon footprint, cold watercooling, electrical power, internet connectivity, and centralized location between Silicon Valleyand Southern California to address north-south internet latency needs. In addition to Santa CruzCounty and portions of Monterey County not served by regulated water utilities, the plannedproject could serve both Salinas and the Monterey Peninsula. The planning, construction, andoperations of the desalination plant and cloud services center at Moss Landing will create bothimmediate high paying jobs, and also permanent high quality jobs. In addition to the jobs at theMoss Landing co-location site, the project will need an assembly facility in Salinas and bringhigh quality data-storage hardware manufacturing jobs to the City of Salinas. Utilizing theSalinas Valley Enterprise Zone, the Salinas based manufacturing facility will supply the MossLanding project and other domestic projects in addition to exporting components internationally.The project benefits from existing infrastructure at the Moss Landing Power Plant. Replacementof an existing pipeline into the deep Monterey Submarine Canyon for feedwater intake willprovide cold low turbidity feed water. Oceanographic studies show deepwater intake from thepipeline location will minimize entrainment and impingement of larvae. Co-location of the feedwater intake line with the Moss Landing Cloud Services Center will allow the cold seawater tobe warmed through hardware cooling, lowering the amount of energy needed for desalination,will utilize the industrial-zoned site, use the existing discharge lines, and also allow access topower directly from the power plant. This combined operation will provide highly energyefficient data storage as well as desalination and have a relatively low carbon footprint, a key inattracting large data storage providers. The low turbidity water from the deep intake alsorequires little prefiltration, saving on pre-treatment capital costs, maintenance, and operatingcosts, further lowering the cost of the desalinated water.What Differentiates the Central Coast Regional Water Project?

> Co-location of Desalination Plant and Cloud Services Center facilitates bulk powerpurchase clout and new high quality water supply to attract large Cloud Servicescompanies to Salinas, providing high quality jobs in both cloud service operationsand manufacturing.

> Source water for desalination and cooling supplied from the Monterey SubmarineCanyon 1.1 miles offMoss Landing, reducing entrainment and impingement of sealife, and providing consistent proven cold low turbidity water. Oceanographic andwater quality studies started in 2010.

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> Existing Power Plant site infrastructure with intake pipeline and wet well, energyefficient data storage cooling and desalination, direct power supply, as well as outfallpipelines for brine dilution and disposal.

> Establishes Salinas and Monterey County as a leading technology center forexpansion from Silicon Valley

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city of salinas and deepwater desal llc and california water service company agreement

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