03-04-11 BPU RPT 07 - Laserfiche WebLink

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W A t € R RIVERSIDE PUBLIC UTILITIES Board Memorandum PUBLIC UTILITIES BOARD OF PUBLIC UTILITIES DATE: March 4, 2011 ITEM NO: 7 SUBJECT: TERMINATION OF AMENDED AND RESTATED SHOSHONE RENAISSANCE LLC GEOTHERMAL POWER PURCHASE AGREEMENT I ISSUE: That the Board of Public Utilities consider approval to terminate the Amended and Restated Unit Contingent Power Purchase Agreement i with Shoshone Renaissance LLC ("PPA"). RECOMMENDATIONS. That the Board of Public Utilities: 1. Approve termination of the PPA following a failure by Shoshone Renaissance LLC to achieve a performance milestone specified in the PPA; and 2. Authorize staff to provide written notice to Shoshone Renaissance LLC of Riverside's intent to terminate the PPA for failure to achieve a performance milestone. BACKGROUND: In 2008, Riverside entered into two power purchase agreements with Shoshone Renaissance LLC ("Shoshone"). Together, the agreements would have provided 96 MW of cost-effective baseload renewable power from geothermal resources to be constructed in Utah. Power deliveries under the first agreement were due to begin in May 2010, with deliveries under the second agreement beginning in May 2012. Since execution of these agreements; however, economic conditions have resulted in unprecedented challenges to renewable energy developers, such as Shoshone, and caused uncertainty about renewable resource projects under development. In November 2010, the parties agreed to terminate the second agreement and modify the first agreement to establish, among other things, milestone dates by which specific project activities must be completed. Failure to meet a milestone date would allow Riverside the option to begin the termination process. Staff has closely monitored Shoshone's efforts to construct the project and offered its assistance whenever feasible. Nevertheless, insufficient progress has been made toward project development and the first milestone date of February 15, 2011 has passed without Shoshone submitting the required project interconnection request to Rocky Mountain Power, the proposed transmission service provider. Also, it appears unlikely that Shoshone will achieve the next milestone date of March 31, 2011 —the date by which commencement of geothermal drilling activities must occur. Given the unlikelihood of project development by Shoshone, and Shoshone's failure to achieve the February 15 milestone date, staff recommends that Riverside provide notice of its intent to terminate the remaining agreement effective March 31, 2011. As provided in the agreement, Shoshone may present documentation or other evidence prior to the proposed date of termination and request that Riverside reconsider its decision. Nevertheless, termination of the agreement following Shoshone's failure to achieve a specified milestone is at Riverside's sole discretion.