Council approves energy storage agreement; staff says resource-allocation savings likely outweigh lease cost

The Lompoc City Council voted to authorize a third-phase Energy Storage Service Agreement (ESSA) with Trolley Pass Project LLC, moving forward with a 20-year lease for battery storage that staff and the Northern California Power Agency (NCPA) say will improve the city's resource adequacy and reduce long-term procurement costs.

Staff presented a project-cost and benefits analysis prepared with NCPA. Utilities staff said the city's gross ESSA cost for the 20-year project life is approximately $8.3 million and that the projected resource-allocation savings across the project life were estimated in the consultant materials to be in the range of roughly $3.9 million to $6.5 million. A city staff member summarized the facility-cost column in the analysis: "Over the 20 year life of the lease, the net cost for the facility is estimated to be $26,000," the staff presentation said.

The city emphasized two revenue or savings streams: (1) day-night price arbitrage (charge on low-priced hours and discharge on high-priced hours) and (2) resource-allocation (RA) savings, which reduce costs tied to the city's obligation to demonstrate available capacity for peak demand months. NCPA staff explained the RA value was the largest anticipated financial benefit.

Council discussion focused on financial risk, operational assumptions and safety. Several council members asked about the scenario where low-cost charging opportunities disappear; staff replied that the project's value is not solely dependent on midday/overnight price spreads. "We own shares in solar resources... when prices are very high in the CAISO market, we sell it out," an NCPA/utility speaker explained.

Public commenters raised concerns about battery-storage safety, pointing to the Moss Landing battery fire that required evacuations elsewhere. Karen Hallenstein, a member of the public, urged caution: "Battery storage is not safe ... they have to have a 24-hour first response team there all the time to watch it," she said. Staff and NCPA legal counsel said the city would be a lessee and the facility owner/operator retains primary operational responsibility; the agreement includes indemnification language.

The motion to adopt Resolution 6769 (2025) authorizing the city manager to execute the ESSA was moved and seconded and passed in a recorded council vote. The staff report and NCPA analysis were provided as attachments and staff said they will return with project-scheduling and the operational contract details.

Council member concerns about the city's cash position and reserve levels were discussed during deliberations; council asked staff to clarify funding sources and reserve impacts in follow-up material. Several members emphasized that while the project has financial and operational risk, the potential RA savings are significant if market conditions align with NCPA modeling.