The URL can be used to link to this page

Home My WebLink About2023-03-07; City Council; ; Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service CenterCA Review CKM Meeting Date: March 7, 2023 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, 442-339-2891 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 This report provides the City Council with an update on the ongoing negotiations between the city, NRG Energy and San Diego Gas & Electric over relocating SDG&E’s North Coast Service Center as part of a previous settlement agreement. Explanation & Analysis The City of Carlsbad has been negotiating with NRG Energy and San Diego Gas & Electric Company to relocate SDG&E’s 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.” The City Council last received a status update on the negotiations on Nov. 15, 2022. At that meeting, the City Council directed staff to discontinue efforts to include Lot 11 in the city’s negotiations with SDG&E and NRG, and to return to the City Council for further direction on March 7, 2023, or sooner. Since that meeting, the parties have continued to regularly meet to explore the remaining location option for building a new service center. With the elimination of the Lot 11 relocation site alternative, all subsequent negotiating efforts have focused on the option of reconfiguring the current site so that a new service center could be reoriented and built on the eastern portion of the SDG&E property and a portion of the NRG property, adjacent to the railroad tracks and away from the western end of the SDG&E property. This would make approximately March 7, 2023 Item #10 Page 1 of 4 10 acres of the western portion of the SDG&E property available for a potential transfer to the City of Carlsbad. Over the past several months, all parties have worked diligently to resolve numerous issues and progress towards agreement on the current site alternative. Both SDG&E and NRG have invested significant time, personnel, financial resources and outside professional assistance in an attempt to address the issues. Despite the efforts and the negotiations between the parties, there is still a significant gap between the current funding contributions proposed by SDG&E and NRG and the estimated construction cost of the new service center. One possible opportunity for resolving the funding gap issue has been identified. NRG is in the process of selecting a development partner in its efforts to plan for and redevelop its power plant property. It is anticipated that NRG’s selected development partner will be able to provide additional input and solutions for resolving the current funding gap. All parties are hopeful that with an additional six months to explore additional solutions, the funding gap issue can be resolved. Staff are recommending that the City Council direct staff to continue the negotiations with SDG&E and NRG for an additional six months to explore and identify a solution to the current funding gap. Staff will return to the City Council in September 2023, or sooner, with an update on the continuing negotiations. Because the negotiations have been ongoing for some time, staff are also recommending identifying a date for terminating these efforts. Staff recommend that if the parties are unable to close the funding gap and reach agreement by March 31, 2024, that the negotiation efforts be reassessed and a decision made about whether to terminate. If a decision is made to terminate negotiations, then the City of Carlsbad would receive $10 million from NRG, as identified in the settlement agreement. Alternatively, the parties could agree at that time to extend the March 31, 2024, deadline or pursue another plan. Meanwhile, SDG&E has verbally committed to continue working with the city on making SDG&E-owned land available for publicly accessible trails, parks and open space. Representatives from SDG&E and NRG will attend the City Council meeting to present information on these issues to the City Council. Fiscal Analysis There is no financial impact from this item. No additional funding is being requested. March 7, 2023 Item #10 Page 2 of 4 Options Staff provide the following options for the City Council’s consideration: 1. Direct staff to continue negotiations with SDG&E and NRG for an additional six months to explore additional solutions to the current funding gap and to return to the City Council in September 2023, or sooner, with an update on the continuing negotiations. If the parties are unable to close the funding gap and reach agreement by March 31, 2024, then the negotiation efforts shall be reassessed, and a decision made about whether to terminate. If a decision is made to terminate negotiations, then the City of Carlsbad would receive $10 million from NRG, as identified in the settlement agreement. Pros: • Provides for six additional months to identify a possible solution to the current funding gap • Provides NRG the time necessary to select a development partner in its efforts to plan for and redevelop the power plant property and it is anticipated that its selected development partner will be able to provide additional input and solutions for resolving the current funding gap Cons: • None identified 2. Direct staff to terminate negotiations with SDG&E and NRG. Pros: • The City of Carlsbad would receive $10 million from NRG, as identified in the settlement agreement Cons: • The City of Carlsbad would not receive the other land transfer benefits identified in the settlement agreement Staff recommend that the City Council direct staff to pursue Option 1. Next Steps Upon receiving City Council direction, staff will continue negotiations with the other parties and return to City Council with a status update and for further direction in September 2023 or sooner, as appropriate. 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. Exhibits 1. Nov. 15, 2022, City Council staff report, with exhibits (on file in the Office of the City Clerk) March 7, 2023 Item #10 Page 3 of 4 Exhibit 1 Nov. 15, 2022, City Council staff report, with exhibits (on file in the Office of the City Clerk) March 7, 2023 Item #10 Page 4 of 4