HomeMy WebLinkAboutMemo - Read Before Packet - 09/24/2024 - Memorandum from Brian Tholl and Leland Keller re June 25, 2024 Staff Report for Riverside Community Solar ProjectUtilities Customer Connections
222 Laporte Ave.
PO Box 580, Fort Collins, CO 80522
CC: Cyril Vidergar, Sr Assistant City Attorney, Travis Storin, Chief Financial Officer
WORK SESSION MEMORANDUM
Date: 09/20/2024
To: Mayor and City Councilmembers
Through: Kelly DiMartino, City Manager
Gretchen Stanford, Utilities Deputy Director
From: Brian Tholl, Energy Services Manager
Leland Keller, Senior Energy Services Engineer
Subject: 6/25/2024 Staff Report for Riverside Community Solar Project
BOTTOM LINE
The purpose of this memo is to address questions from the Council Work Session held
on June 25, 2024, and to provide more background on the City’s acquisition of the
Riverside Community Solar Project.
All Councilmembers were present and in person during the work session.
DISCUSSION SUMMARY
Staff presented a summary of the August 2023 inverter failure which has caused the
array to stop producing electricity. Council raised additional questions related to the site
and requested more background on the following:
• Acquisition of Riverside Solar assets
• Benefits of City acquisition
• Bill credits and Operations & Maintenance fund
• City Financial obligation to panel owners
• Community solar business models
• Strategic funding plan
Acquisition of Riverside Solar assets
The City acquired the Riverside Project and Community Solar Program from Clean
Energy Collective (CEC) in 2020. At the time, Council supported Resolution 2020-055
authorizing the acquisition of the Project.
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Several factors led to the City staff choosing to pursue this action in 2020 .
First, the implementation of the Time of Day (TOD) electricity rate in October 2018 had
a direct impact to the bill credits provided to panel owners and the administrative
requirements for customer payments. CEC objected to applying the TOD rate structure
to the Riverside Project, even though the City had provided CEC with advanced notice
of the planned rate structure change. Additionally, the City’s agreement with CEC
recognized that rates would change during the life of the project. This information about
rate changes was available at the time of contracting and their signing of customer
subscription agreements.
CEC’s administrative software could not support the monthly bill credit calculation and
online representation of value to participants with a seasonally varying two-tier credit
rate structure. This shifted the burden of calculating monthly credits from CEC to a
manual process performed by Utilities staff.
After months of negotiations with CEC seeking a resolution, acquisition of the Project
emerged as the most expedient way to both resolve the dispute with CEC and reduce
interruption of generation and credit calculation for panel owners.
Finally, during negotiations regarding the proposed Project transfer from CEC to the
City, CEC revealed facts about imminent bankruptcy filings. This affected the nature of
the transaction and provided motivation to accelerate the closing timeframe.
Benefits of City Acquisition
In addition to resolving the dispute with CEC, Utilities recognizes several other benefits
from the acquisition of the Project:
• Improved customer service was achieved because of simplifying the relationship
between participants and Utilities.
• Streamlined site maintenance.
• Elimination of manual tasks by automating and simplifying monthly bill crediting.
• Better alignment with the Platte River Power Supply Agreement:
o According to the all-requirements Platte River Power Supply Agreement,
the City was required to pay the Value of Solar tariff rate for solar energy
purchased from CEC for Project energy delivered under the joint power
purchase agreement between the three parties. By assuming ownership of
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the Project, Project energy production is not subject to this tariff. At the
time of the acquisition, Utilities quantified roughly a $0.02/kWh produced
premium due to PRPA for all third party owned solar generation, resulting
in an approximate $20,000 annual Utility benefit for assuming ownership
of Project assets.
• Risk mitigation:
o Acquisition resulted in mitigated risks, such as avoiding interruptions to
Project operations and potential liquidation of its assets during the CEC
and affiliated companies’ bankruptcies in 2020.
o Had the City not acquired the Project, it would have been bound by
operating agreements with CEC which would have constrained the City’s
ability to respond in the best interests of our customers through CEC
bankruptcies and unknown final asset ownership.
o The City and Project participants could have faced a void of program
support for an unknown period of time that would certainly have delayed
repair operations in response to the inverter failure.
Bill Credits and Operations & Maintenance Fund
Similar to how Utilities purchases wholesale electricity from PRPA, Utilities also
purchases excess generation from locally generated solar power that flows into the
distribution grid. Utilities annually submits a budget offer for Community Renewable
Purchased Power (Offer 7.1 for 2025 / 2026 Budget).
Utilities purchases electricity from local generating resources including:
• Commercial and residential net metered customers, totaling over 32 MW (DC)
• Local Solar Power Purchase Program (SP3) systems, totaling 4.8 MW (DC)
• Riverside Project, total of approximately 0.5 MW (DC).
The City is responsible for distributing bill credits to Riverside participating panel owners
and managing an operations and maintenance fund (O&M Fund) to support the ongoing
operations of the Project. Per the participating customer agreement, each month, 9.4%
of the total bill credits go into an O&M fund managed by Utilities. This contribution
amount is set in the Program Rules and is subject to change as needed. In other words,
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Riverside participating owners contribute a portion of their monthly energy credits to the
operations and maintenance required at the site.
Table 1. Representative energy credit payments from annual Project budget:
Total energy budget value O&M fund contribution Customer credits
$67,765.00 $6,356.36 $61,408.64
Summary of City financial obligation to panel owners
The Program Rules & Obligations with participating owners include the following:
1. The Riverside Community Solar Program Rules outline that bill credits are
only provided for energy delivered to the grid. Section 6 of the Rules
discusses O&M Services and funding. It clarifies that if output of the array
is interrupted, no compensation is due to participants for those
interruptions or any variations in solar output (sec. 6(a)ii). Furthermore, the
O&M Fee is subject to change at the Utility’s sole discretion for the
purpose of maintaining an adequate balance in the O&M Fund to provide
for operation, maintenance of the array and site, and decommissioning of
the array at end of life.
• The Program Rules indicate that any costs of operating and maintaining the
Project that exceed the amount collected in O&M Fees will be the obligation of
Owners to pay (sec. 6(c)). If the expense to repair, replace or decommission the
Project exceeds funds available in the O&M Fund and/or from any casualty
insurance proceeds, (Utilities) reserves the right to seek additional funds from
Owners to cover such expenses, or to suspend or permanently cease offering
the Program (sec. 6(d)).
• Neither CEC nor the City provided any guarantee to prospective panel owners for
any return on the financial expense to purchase their panels.
Replacement Funding Solution - 2050 Tax:
• The electricity produced at Riverside not only benefits participating solar owners,
but importantly, this local solar generation benefits the broader community in our
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pursuit of 100% renewable electricity. Funding the repair using the 2050 tax
aligns with the ballot language in advancing the community toward 100%
renewable electricity. Repowering Riverside using 2050 tax funds reaffirmed the
City’s commitment to advancing the Our Climate Future goals, represented a
timely funding solution for accelerating the repowering and has maintained
relationships with participating solar owners.
Community Solar business model
For many community members, installing and maintaining residential rooftop solar on
their own property is not feasible. It is for this accessibility reason, along with a strong
desire to contribute to our climate initiatives, that community solar programs have
garnered significant interest in Fort Collins. Through multi-year engagement efforts,
Utilities was able to identify enough interest in community solar prior to the pursuit of the
Riverside Project. It should be noted that even today, we continue to gain feedback from
the community of significant interest in growing community solar and have a waiting list
of interested individuals if that growth occurs.
3rd Party Ownership & Management Benefits:
2. Establishing the Program and constructing the physical Project presented
many challenges outside of the normal scope of operations for the Fort
Collins distribution focused electric utility. A common approach is to
leverage a 3rd party owner and operator for solar assets.
• The 3rd party chosen, CEC, promised the necessary solutions for our Utility:
addressing the complexity of participant recruiting, sales, enrollment, program
management and customer support, including a web -based platform delivering
valuable information about operations and credit calculation for the participants.
• Additionally, this model allowed customers the opportunity to take the 30%
Federal tax credit on the modules they purchased, while diversifying the
operational risks of individual shares.
Once Utilities acquired the Project from CEC, staff generated new Program Rules and
an Enrollment and Continuing Participation Agreement to replace the governing
documents of the expired CEC Program. These documents were written to align closely
with the original CEC document language and the operating expectations under which
our customers purchased Project interests. However, updates were made that also
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incorporated the necessary adjustments for the City Charter and other differences from
the private corporate entity governance model.
Strategic Funding plan
Staff recognizes the fundamental differences in a private corporate entity managing the
Project compared to a model where a local government and utility are now managing
the project. Staff will be developing a clear plan to guide decision-making on the City-
owned assets at Riverside. This is a unique situation in which the City now owns assets
and systems established by a former private corporate partner. Staff can develop
financial models to support replenishing the O&M Fund to cover either decommissioning
or repowering options that will be contemplated when the existing Program Agreement
terminates in 2040, referred to as the Initial Useful Life of the Array. We will gather input
from the Riverside Owners Advisory Committee and staff will refine proposals for
revising the O&M withholding schedule to ensure the solvency of the O&M Fund.
NEXT STEPS
Staff are focused on redesigning and repowering the Project in partnership with the
Service Provider. Staff will also be meeting with the Riverside Community Solar
Advisory Committee to provide schedule updates, present the details of the design
developed in Phase 1, and discuss any concerns brought by Committee members. Staff
also commits to regularly providing updates to participating owners through regular
website and email updates.
Staff will provide a memo to Council upon conclusion of the work to replace the failed
inverter.
FOLLOW-UP ITEMS
Staff will provide a memo to Council in 2025 outlining the policy solutions to long-term
asset management in the Community Solar Program.
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