Magnolia Power Project Planning Agreement

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The proposed plant will be constructed at the existing Magnolia Power Station that is owned and operated by the City of Burbank Water and Power. Burbank already operates and maintains existing gas-fired combustion turbine units and gas- fired steam units on this 16 -acre site. Most of the auxiliary facilities for the Project are already in place with the existing facilities. I It is expected that the California Energy Commission will review the application under the new "fast track" regulations and certify the Project by December 2001. The Project construction can start in 2002 and the Project can be placed in service as early as 2003-2004. Prior to construction, staff will bring an additional Project agreement to the City for approval. The estimated capital cost for ten megawatts base load is $9.3 million, which includes the cost of the study. The most influential cost is that of natural gas which is expected to be $5 to $10 per million BTU. Assuming a heat rate of 7000 BTU per kWh, the total cost of generation for the Project at the bus -bar in Burbank is in the range of $49 to $85 per MWH, compared to the existing Pasadena contract, which is in the range of $58 to $115 per MWH, depending on the ultimate cost of gas. If the City decides to go forward with this project, the debt service payment will be approximately $70,000 per month with an assumed 6.5% interest rate for twenty years. ALTERNATIVES Staff has been reviewing various power generation projects including those in -city and out -of -city. Staff has also been working to diversify the portfolio. The Utility may have options for participation in other projects based on availability. FINANCIAL IMPACT The planning and pre -construction cost for the City's share of (10) ten MW will be $198,593 and $561,070 respectively. These costs need to be paid through December 2001. The first installment payment starting April 2001 will include the City's share of approximately $56,000 of $1.354M invested so far on this project by the city of Burbank. The Planning Agreement provides that Participants will be reimbursed the pre -construction costs that have been paid if the Project moves into the construction phase. If the Project does not move forward into construction, then the Participants would have assets that could presumably be sold at or near the costs that were incurred. The source of funds for the study phase will be available if an increase in appropriations is made in Account Number 520- 8000-8022-3890-0107-000 in the amount of $450,000 to be funded in the current fiscal year from the retained earnings. ENVIRONMENTAL IMPACT All the cost of permits, control of NOx, CO emissions, and credits or offsets will be incorporated into the project. LEGAL REVIEW RECOMMENDATION Staff recommends approval of the Planning Agreement for the Magnolia Power Project. Staff is requesting authority for an increase in the Utility's interest to ten (10) MW based on availability and the City's other power generation options. Staff also requests an increase in appropriations in Account Number 520-8000-8022-3890-0107-000 in the amount of $450,000 to be funded in the current fiscal year from the retained earnings. Attachment: Magnolia Power Project Planning Agreement Report prepared by Nitin Modi, Electrical Engineering Manager Page 2 of 2 (w/Attachment)