Board delays vote on 25-year Sunset Reservoir solar power purchase agreement after weeks of debate

The San Francisco Board of Supervisors on Tuesday voted 10–1 to continue for one week consideration of a 25-year power purchase agreement (PPA) and site lease ordinance that would allow Recurrent Energy to finance, build and operate a 5-megawatt photovoltaic system on the rooftop of the North Storage Basin Reservoir.

Supervisor Chu introduced the ordinance as a PUC-led, competitively bid proposal that would add roughly 5 megawatts of solar capacity to the city's portfolio under a 25-year contract. The Public Utilities Commission (PUC) and the vendor would bear up-front construction costs; the city would agree to purchase the electricity under long-term payments, with the arrangement structured so the private partner could claim a 30 percent federal investment tax credit.

The measure drew extended questioning and a series of amendments and clarifications requested by multiple supervisors. Supervisor Campos and others pressed the PUC and the vendor on several issues: the timing and public availability of the final PPA filing; a proposed waiver of the Board's annual appropriation authority for the contract payments; compliance with the city's Equal Benefits Ordinance (—B—) for the prime contractor and subcontractors; and the structure and cost of buyout options in years seven and 15.

Ed Harrington, general manager of the San Francisco Public Utilities Commission, told the Board that banks financing the vendor required a guarantee that payments would be made and that the PUC had negotiated language intended to assure lenders they would be repaid. Laura Spangen, PUC staff, said the prime contractor, Recurrent Energy, had represented that it complies with the city's domestic partner benefits requirements and had signed only one subcontract with Bass Electric; she said one other potential subcontractor, SunTek America, had applied for 12B certification and was awaiting final determination.

The Board's budget analyst advised against approving a waiver that would remove the Board's annual appropriation authority. The analyst said continued Board oversight of appropriations is a fundamental responsibility and recommended the waiver be deleted from the contract. Supervisors raised concern that, if the Board waived appropriation authority, it could have limited ability to influence contract compliance or to respond if the private partner failed to perform.

Supervisors also questioned buyout language that limits the city's option to purchase the system in year 7 and year 15. Board members said those limited buyout windows and the proposed valuation method ("higher of fair market value or other specified measure") could make future purchase uneconomic and might undercut the city's longer-term goals for community choice aggregation or municipal ownership.

Other details discussed included: an estimated year-15 buyout cost of about $28 million (as presented in committee), a projected production payment rate that remained fixed across the contract term in the version discussed ($0.235 per kilowatt-hour as stated in proceedings), a PUC-proposed covenant to budget annually to meet the maximum yearly payment, and a proposed $1.8 million annual reserve to be carried in the PUC fund balance (an amendment the Budget Committee intended to add to the ordinance record). Supervisors also noted the project included a workforce provision the PUC and vendor had negotiated'a commitment to direct 30 percent of construction jobs to residents of disadvantaged neighborhoods and an estimate of 71 total jobs.

Supervisor Chu moved to continue the item for one week to allow additional review of contract language and to permit the version filed today to be available to the public; the motion was seconded by Supervisor Alioto Pier and passed on roll call, 10 ayes and 1 no (Supervisor Campos). The Board then directed staff and the PUC to return with any agreed amendments or clarifications at the next regular meeting.

The item had been the subject of multiple prior hearings, including Budget and Finance Committee sessions and a LAFCO meeting. PUC staff and vendor representatives were present during the Board discussion and told supervisors they would work with Board members to address the outstanding issues during the continuance.

The continuance does not adopt the ordinance; the PPA and any associated site-lease agreement remain subject to further Board consideration and possible amendment next week.