Auburn council pauses Schneider Electric construction notice to proceed after lengthy review of energy project and financing

The Auburn City Council voted April 28 to withhold approval of a construction-phase notice to proceed for a citywide energy-efficiency and solar package proposed by Schneider Electric and financed through Bank of America Public Capital Corp.

The vote followed a two-hour-plus public hearing in which Schneider Electric presented a turnkey package that combined LED lighting, HVAC replacements, wireless thermostats, EV chargers, rooftop and ground-mounted solar arrays and related roofing and electrical work, and city staff and the city’s finance adviser reviewed the proposed financing and long-term guarantees. Council members raised concerns about the project’s assumptions, the 20-year financing term and the city’s ability to meet debt-service risks if energy-cost savings fell short of projections.

The project as presented called for a Schneider Electric construction price in the range of about $10.56 million and an equipment lease-purchase financing package with a par not-to-exceed amount of $11.05 million and a fixed interest rate of 4.22% over a 20-year term. Schneider’s presentation included an annual guaranteed energy-savings figure of roughly $486,296 and a projected lifecycle savings figure of roughly $19.65 million; Schneider and staff said the package would likely be eligible for an investment tax credit (ITC) under the federal Inflation Reduction Act that could add an estimated $1.725 million to the city’s bottom line if the credit is claimed and realized.

Schneider Electric representatives said the proposal was structured to be “budget positive” and that their company would guarantee energy savings under an industry-standard performance assurance plan and a 20-year measurement-and-verification arrangement. Paige Spirk of Schneider Electric told the council, “This project cash flows positively without [the tax credit].” Schneider staff also described design updates since the November presentation, including changes to carport foundations at several sites because of rocky soils and relocated ground-mount arrays at the wastewater treatment plant.

Gretchen Johnson, the city’s finance director, and Christian Sprunger of NHA Advisors reviewed the financing mechanics. Sprunger summarized the loan structure and risk profile: the equipment lease is “an annual appropriations lease” that requires the city to budget each year for payments; the loan’s debt service is fixed unless the city prepays principal with proceeds such as the anticipated ITC. Sprunger added that the model assumes energy escalation of 7.5% per year for avoided-cost calculations and that prepaying principal with any ITC proceeds would materially lower annual debt service.

Council members repeatedly questioned that 7.5% escalation assumption, the timing and certainty of the ITC, inverter replacement timing and the adequacy of the operations-and-maintenance allowance. Councilwoman Dowden Calvillo pressed for a per-building, per-measure cost-effectiveness breakout and expressed concern that many of the savings depended on a set of interlocking assumptions. Councilmember Holmes said he supported pursuing energy efficiency but wanted alternative procurement and contingency options explored. Several councilmembers said the city’s recent change in near-term finances narrowed tolerance for large, long-term fixed obligations.

Public comment included written input and an on-site speaker who urged careful cost control and questioned Schneider’s high line-item pricing compared with local bids. Schneider and staff said grant funds already identified (approximately $88,000 from the Placer County Air Pollution Control District and roughly $337,000 in reimbursable transportation grant funds for EV charging) would be applied to specific scopes and that some solar sites (those grandfathered under the local NEM 2 program) have a completion deadline tied to favorable interconnection rates.

After discussion the council adopted a motion “not to move forward as proposed” with the construction notice to proceed and financing resolutions on the evening’s agenda and instructed staff to return with additional options and more granular cost-effectiveness analysis. Councilmember votes were recorded in favor of that motion and the mayor announced the motion’s passage.

Council members and staff emphasized they were not rejecting energy efficiency ideas broadly. Mayor Sandra Amara said the city needed to weigh the near-term budget and long-term obligations while preserving options: “We do have to decide now whether or not to move forward,” she said during the discussion. Staff agreed to return with a narrower set of procurement options, clearer per-facility financial breakouts and alternative approaches for delivering solar and efficiency measures, including examining battery storage and smaller, site-by-site solar projects.

Next steps identified by staff include: preparing a more detailed, line-item cost-effectiveness spreadsheet by facility and measure; evaluating alternate procurement pathways (separating lighting/HVAC/building controls from solar procurement); confirming inverter life assumptions and timing for replacements; and modeling lower energy-escalation scenarios. Staff also noted the city would retain the design and audit work already completed by Schneider Electric and would pursue grant opportunities where appropriate.

The council’s action stops the Schneider Electric construction notice to proceed and associated financing from moving to closing while preserving the city’s ability to pursue smaller or restructured energy projects in the near term.