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Home My WebLink About2025-09-09; Municipal Water District; 03; Power Purchase Agreement with the Clean Energy Alliance for the Maerkle Reservoir HydrogeneratorCA Review TL Meeting Date: Sept. 9, 2025 To: President and Board Members From: Geoff Patnoe, Executive Manager Staff Contact: Dave Padilla, Assistant General Manager dave.padilla@carlsbadca.gov, 442-339-2356 Subject: Power Purchase Agreement with the Clean Energy Alliance for the Maerkle Reservoir Hydrogenerator Districts: All Recommended Action Adopt a resolution approving a power purchase agreement with the Clean Energy Alliance for the Maerkle Reservoir Hydrogenerator and authorizing the Carlsbad Municipal Water District Board of Directors’ President to sign it. Executive Summary The Carlsbad Municipal Water District has been operating a 149 kilowatt hydroelectric turbine generator, or hydrogenerator, at the Maerkle Reservoir site at 5300 Sunny Creek Road since 2015. This generator is connected to San Diego Gas & Electric’s electrical distribution system and subject to an agreement with the Clean Energy Alliance to receive energy credits from the energy produced at the site. Those credits are applied to the other CMWD meters, reducing the district’s costs. To increase the financial benefit of the hydrogenerator, staff identified that the CMWD could transition from the existing agreement for the Renewable Energy Self-Generation Bill Credit Transfer Program to a power purchase agreement. This agreement will monetize not only the electricity generated but the renewable energy credits for this emission-free, sustainable source of electricity. The Clean Energy Alliance Board of Directors approved the agreement on July 31, 2025. The CMWD Code does not expressly authorize the Executive Manager to execute power purchase agreements, so staff are requesting CMWD Board approval of the agreement with the Clean Energy Alliance (CEA) and authorization for the CMWD Board President to sign it. Sept. 9, 2025 Item #3 Page 1 of 47 Docusign Envelope ID: 632CAD73-DF58-478C-9D10-607ECF4FE996 Explanation & Analysis The hydrogenator at the Maerkle Reservoir uses the force of potable water moving through a conduit to spin the rotator shaft of a generator, converting this mechanical energy into clean, renewable energy and offsetting electrical usage at other CMWD locations. The CMWD Board authorized the Executive Manager or designee to execute agreements with the Clean Energy Alliance, SDG&E, Western Renewable Energy Generation Information System and the California Energy Commission to transfer renewable energy generation credits produced by the CMWD to the Clean Energy Alliance on Jan. 11, 2022. (Resolution No. 1666) That action was associated with the City of Carlsbad’s transition from SDG&E to the Clean Energy Alliance for its electricity. Since that resolution, the CMWD entered into an agreement with the alliance under the Renewable Energy Self-Generation Bill Credit Transfer Program and removed SDG&E standby charges from the bill for CMWD’s hydrogenerator.1 Staff have since determined that the CMWD could transition from the existing agreement for the Renewable Energy Self-Generation Bill Credit Transfer Program to a power purchase agreement to increase the financial benefit of the hydrogenator. As noted above, this will monetize not only the electricity generated but the renewable energy credits for this emission- free, sustainable source of electricity. Summary of power purchase agreement • The agreement’s term is five years, at which time a new price may be negotiated. (The term is limited to five years due to the volatility in pricing for renewable energy credits.) • Other CMWD meters will no longer be credited against energy produced by the hydrogenator. • The agreement estimates 420 megawatt hours of electricity production per year. That’s equivalent to serving approximately 40 residential customers annually. There is no penalty for under or over production. Staff do not recommend selling renewable energy credits to an entity other than the Clean Energy Alliance because the renewable energy credits are more valuable when bundled with electricity, and the alliance is the electricity provider for the CMWD and all city accounts. While staff have been approached by commodity traders interested in purchasing the potential renewable energy credits, there is more revenue in selling the electricity directly to the alliance, so the electric power and the renewable energy credits are combined in one purchase. Fiscal Analysis The payments under the power purchase agreement would consolidate the value of the electricity and of the renewable energy credits and provide a modest net benefit to the CMWD, which would be used in the same manner as other operating revenue. Power purchase agreement pricing is considered market-sensitive pricing data, so the exact figures cannot be publicly disclosed. Given the small size of the hydrogenerator and that most of the CMWD’s revenue comes from water rates, the financial benefit of the Power Purchase Agreement to the CMWD is under 1% of annual operating revenues. 1 SDGE standby charges are fees for customers who have their own on-site electricity generation, like a generator, but still rely on SDG&E's infrastructure as backup power. Sept. 9, 2025 Item #3 Page 2 of 47 Docusign Envelope ID: 632CAD73-DF58-478C-9D10-607ECF4FE996 Next Steps If the power purchase agreement is approved and authorized by the CMWD Board, the President will sign the agreement, and staff will implement it. Environmental Evaluation The proposed action is not a “project” as defined by the California Environmental Quality Act, or CEQA, Section 21065 and CEQA Guidelines Section 15378(a) and does not require environmental review under CEQA Guidelines Section 15060(c)(2) because the action is limited to the execution of a power purchase agreement for an existing facility. The action has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Exhibit 1. CMWD Board resolution Sept. 9, 2025 Item #3 Page 3 of 47 Docusign Envelope ID: 632CAD73-DF58-478C-9D10-607ECF4FE996 Exhibit 1 RESOLUTION NO. 1779 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING A POWER PURCHASE AGREEMENT WITH THE CLEAN ENERGY ALLIANCE FOR THE MAERKLE RESERVOIR HYDROGENERATOR AND AUTHORIZING THE CARLSBAD MUNICIPAL WATER DISTRICT BOARD OF DIRECTORS’ PRESIDENT TO SIGN IT WHEREAS, the Carlsbad Municipal Water District, or CMWD has been operating a hydroelectric turbine generator, or hydrogenerator, at the Maerkle Reservoir site since 2015; and WHEREAS, the CMWD is currently party to an agreement with the Clean Energy Alliance, or CEA, under the Renewable Energy Self-Generation Bill Credit Transfer Program; and WHEREAS, staff have identified that to increase the financial benefit of the hydrogenator, the CMWD could transition to a Power Purchase Agreement; and WHEREAS, on July 31, 2025, the CEA Board of Directors signed the Power Purchase Agreement in Attachment A. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California, as follows: 1.That the above recitations are true and correct. 2.That the CMWD Board has determined that the proposed action is not a “project” as defined by the California Environmental Quality Act, or CEQA, Section 21065 and CEQA Guidelines Section 15378(a) and does not require environmental review under CEQA Guidelines Section 15060(c)(2) because the action is limited to the execution of a power purchase agreement for an existing facility. The action has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. 3.That the CMWD Board approves and authorizes the Board President to sign the Power Purchase Agreement with the CEA for the Maerkle Reservoir Hydrogenerator in Attachment A. Sept. 9, 2025 Item #3 Page 4 of 47 Docusign Envelope ID: 632CAD73-DF58-478C-9D10-607ECF4FE996 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad and the City Council of the City of Carlsbad, California on the 9th day of September, 2025, by the following vote, to wit: AYES: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin. NAYS: None. ABSTAIN: None. ABSENT: None. _______________________________________ KEITH BLACKBURN, President _______________________________________ SHERRY FREISINGER, Secretary (SEAL) Sept. 9, 2025 Item #3 Page 5 of 47 Docusign Envelope ID: 632CAD73-DF58-478C-9D10-607ECF4FE996