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HomeMy WebLinkAbout2022-10-11; City Council; ; Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service CenterCA Review CKM Meeting Date: Oct. 11, 2022 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Gary Barberio, Deputy City Manager, Community Services gary.barberio@carlsbadca.gov, 442-339-2822 Cindie K. McMahon, City Attorney attorney@carlsbadca.gov, 442-339-5986 Subject: Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service Center District: 2 Recommended Action Receive status update and provide direction on negotiations to relocate SDG&E’s North Coast Service Center. Executive Summary On July 26, 2022, the City Council received a status update on the negotiations between Brookfield Properties, NRG Energy, and San Diego Gas and Electric to relocate the SDG&E North Coast Service Center from its current location near the northeast corner of Carlsbad Boulevard and Cannon Road as anticipated in the “Settlement Agreement dated as of January 14, 2014 Between and Among The City of Carlsbad, Carlsbad Municipal Water District, Cabrillo Power I LLC, Carlsbad Energy Center LLC, and San Diego Gas and Electric Company.” At that meeting, SDG&E informed the City Council that the city-owned parking lot at The Shoppes location was not an acceptable relocation site, but that SDG&E was committed to making another SDG&E site work. The City Council instructed staff to continue efforts to negotiate an appropriate relocation site and return on Oct. 11, 2022, with a progress report, term sheet and identification of a suitable relocation site with an emphasis on the Lot 11 site owned by SDG&E. The parties have continued to negotiate and have determined that the Lot 11 site is also not a feasible relocation site, primarily because of cost, environmental and timing concerns. The parties are now looking at various options for reconfiguring the service center on its current site to free up property that could be transferred to the city. Although the parties do not have a specific proposal to present for the City Council’s consideration at this meeting, discussions of these options have been encouraging and the city’s negotiation team hopes that Oct. 11, 2022 Item #8 Page 1 of 4 it will be able to return to update the City Council with more details on these discussions by the end of the year. Discussion As part of the settlement agreement, SDG&E offered to relocate its service center so that the city could take ownership of the existing service center property along with two other SDG&E properties, essentially allowing the return of the property from industrial to other more appropriate coastal uses. In the settlement agreement, the transfer was made possible by having NRG pay the costs of the relocation, with the signed agreement committing NRG to paying $22.5 million for the relocation, thereby saving SDG&E ratepayers money. Since the July 26, 2022, City Council meeting, city staff have participated in over five joint meetings as well as other smaller group meetings with the parties to the settlement agreement to explore options for a relocation site for the service center. Although the parties have not been able to identify a relocation site that meets all of the parties’ needs, significant progress has been made in the settlement discussions. Recently, SDG&E has led discussions regarding alternative configurations of the service center on the current site, including options that would give the city control over a portion of the site. There are many variables to consider in determining a reconfiguration of the site that would meet all of the parties’ needs. The city’s negotiation team is hopeful that with additional time to explore the reconfiguration options and discuss the different variables, the parties should be able to decide upon an acceptable alternative and return to the City Council on Dec. 13, 2022, with a progress report, term sheet and identification of a suitable relocation site. Staff are also seeking direction from the City Council on discontinuing efforts to include the site known as Lot 11, on the north side of Cannon Road at Armada Drive, in the negotiations based on its infeasibility as a suitable site for relocation of the service center. If the parties are unable to reach agreement on relocation or reconfiguration of the service center, the city will not take title to the properties identified in the settlement agreement. In that event, as noted in the attached April 2022 staff report, the city would receive $10 million from NRG and SDG&E would forego the $22.5 million expense of relocating the Service Center. Fiscal Analysis No additional funding is being requested. Next Steps Upon receiving City Council direction, staff will continue negotiations with the other parties and return to City Council for further direction on Dec. 13, 2022. Environmental Evaluation This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under California Public Resources Code Section 21065 in that it has no potential to cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment. Oct. 11, 2022 Item #8 Page 2 of 4 Public Notification This item was noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to scheduled meeting date. Exhibits 1. July 26, 2022, City Council Staff Report, with exhibits (on file in the Office of the City Clerk) Oct. 11, 2022 Item #8 Page 3 of 4 Exhibit 1 July 26, 2022, City Council Staff Report (on file in the Office of the City Clerk) Oct. 11, 2022 Item #8 Page 4 of 4 Gary Barberio, Deputy City Manager, Community Services Cindie K. McMahon, City Attorney Oct. 11, 2022 Status of Negotiations to Relocate SDG&E Service Center { City of Carlsbad SETTLEMENT AGREEMENT •Settlement Agreement approved by City Council on Jan. 14, 2014 •Between and among: City of Carlsbad, NRG and SDG&E ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad SDG&E NORTH COAST SERVICE CENTER •City and SDG&E work together to find “mutually acceptable” relocation site –subject to SDG&E specs and cost neutrality •NRG to fund up to $22.5 million •If successful: –city takes ownership of SDG&E parcels –city and NRG work on joint development strategy •If not successful: –NRG pays city $10 million ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad Qrwn,er NRG I I SDG&.E 1 -A qua No, Shore P'arcel 2-Fishing Beach 3-Hubbs Site -4 -Bluff A.re a 5-South P'ow er Pl ant 6 -SDG&E Service Center 7 -Cannon Park PAST ACTION •City Council received status update on July 26, 2022 •Instructed staff to continue to negotiate an appropriate relocation site with emphasis on Lot 11 •Directed staff to return on Oct. 11, 2022 with progress report ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad UPDATE ON NEGOTIATIONS •SDG&E has determined that Lot 11 is not a feasible site due to •Cost •Environmental Concerns •Timing Concerns ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad Carfsb.r,rd DesaJin-atian Plant Proposed Carlsbad_ Energy Genter Project NRG Properly Endna Pov.<er Station SDG&E Subst;aion & -Swrtch Yards SDG&E Norlfl Co.ast .--... SeNice Cenler C.armOl'l" Park RECONFIGURATION OF CURRENT SITE •Parties are looking at various options to reconfigure current site –Relocate North Coast Service Center on SDG&E & NRG property –free up portion of SDG&E property that would be transferred to city ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad OPTION TO TERMINATE NEGOTIATIONS •If the parties are unable to reach agreement on relocation or reconfiguration of the service center –city will not take title to the properties identified in the settlement agreement –city would receive $10 million from NRG –SDG&E would forego the $22.5 million expense of relocating the Service Center. ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad RECOMMENDATION •Provide direction to discontinue efforts to include Lot 11 in the negotiations •Provide direction to negotiation team to continue discussions regarding reconfiguration of current site –Staff will return on Dec. 13, 2022 with a progress report, term sheet and identification of suitable relocation site ITEM 8: NORTH COAST SERVICE CENTER NEGOTIATIONS { City of Carlsbad