HomeMy WebLinkAbout2024-03-26; City Council; ; Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service CenterMeeting Date: March 26, 2024
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
Adopt a resolution extending the deadline for terminating negotiations to relocate SDG&E’s
North Coast Service Center beyond the City Council established March 31, 2024, deadline by
four months, to July 31, 2024, and directing staff to continue negotiations with SDG&E and NRG
on the Seaside option and to return to the City Council by July 31, 2024, or sooner, with an
agreement for the City Council’s consideration.
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. Staff are requesting additional time to
return to the City Council with a new agreement for its consideration.
Explanation & Analysis
Background
The City of Carlsbad has been negotiating with NRG Energy and the 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 Jan. 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.”
After staff, NRG and SDG&E had exhausted options to relocate the service center offsite – e.g.,
The Shoppes at Carlsbad site, the SDG&E-owned property known as Lot 11, and other sites –
on Nov. 15, 2022, the City Council directed staff to discontinue efforts to include Lot 11 in the
city’s negotiations with SDG&E and NRG and to pursue an option for constructing a new service
center on the eastern part of the existing site closer to the railroad tracks, referred to by the
March 26, 2024 Item #2 Page 1 of 7
CA Review CKM
parties as the Against the Tracks option. This option was expected to free up approximately
eight to ten acres on the western part of the existing site for transfer to the city. The City
Council also directed staff to return to the City Council for further direction on March 7, 2023,
or sooner.
However, as reported at the City Council meeting on March 7, 2023 (Exhibit 1), the negotiations
for the Against the Tracks option stalled because the cost of constructing the new service
center significantly exceeded the funding available from NRG and SDG&E under that option. At
that time, NRG was working on selecting a development partner for the future redevelopment
of the adjacent power plant property and anticipated the development partner would provide
solutions for resolving the funding gap.
To allow NRG time to complete its selection process and receive input from its development
partner, the City Council provided the parties an additional six months to explore options and
directed staff to return in September 2023, or sooner, with an update on continuing
negotiations. Meanwhile, the parties continued to meet regularly (holding about 18 meetings)
to try to resolve the funding gap and other ancillary matters.
Although NRG had not yet selected its development partner, NRG determined through the
selection process that its development partner would not be able to resolve the funding gap for
the Against the Tracks option.
Instead, on Aug. 31, 2023, NRG proposed a different option for reconfiguring the existing
service center site that would close the funding gap because it involves less new construction
and frees up less land (approximately five to six acres) for transfer to the city. The parties refer
to this option as the Seaside option.
At that time, the Seaside option was new and conceptual only, and NRG and SDG&E’s teams
were reviewing the proposal internally to determine its feasibility. Consequently, city staff
lacked sufficient information to present the new Seaside option to the City Council in
September for its consideration and direction. Over the ensuing three months NRG and SDG&E
determined that the Seaside option is feasible, and the two parties have solidified a plan to
eliminate any funding gap associated with this option.
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Seaside option
The Seaside option is similar to the Against the Tracks option in that it reconfigures the current
site to the east, away from Carlsbad Boulevard and the coastline, such that a new service center
administration building could be built on the eastern 13-acre portion of the 19-acre SDG&E
property, with SDG&E parking and materials staging areas relocated to an approximately eight-
acre portion of the NRG property. This option makes available for conveyance to the city
approximately six acres (five acres net) of the western portion of the SDG&E site.
The eastern one-acre of the six-acre property conveyed to the city would be used to provide
vehicle access to the city’s site, SDG&E’s remaining site, and the future NRG redevelopment site
from Cannon Road at its intersection with Los Robles Drive.
While the six acres is less than the eight to ten acres anticipated to become available to the city
under the Against the Tracks option, it will provide the city with options for future use of the six
acres, such as a location for a permanent Fire Station No. 7, ownership – as opposed to a lease
–and possible expansion of Cannon Park and an area to provide parking for Cannon Park and
beach visitors.
In addition to the approximately six acres (five acres net) proposed for conveyance to the City
and the possible options for future use of this property, the Seaside option, as currently
proposed, would provide for the following additional community benefits:
•The city will receive from SDG&E a 5.76-acre property on the north shore of the Agua
Hedionda Lagoon (the North Shore Bluff Parcel)
•SDG&E will cooperate with the city to develop a trail network in the Hub Park Lease area
on the south shore of the Agua Hedionda Lagoon, including allowing access on the
SDG&E-owned Lot 11 for a trailhead parking lot, access to the pedestrian tunnels
underneath Cannon Road, and access through Lot 11 to the Hub Park Lease area.
SDG&E will also share in the cost of developing this portion of the city trail system.
March 26, 2024 Item #2 Page 3 of 7
•The city will receive from NRG an irrevocable offer of dedication for the NRG-owned
Beach Bluff Property (approximately 10.8 acres on the west side of Carlsbad Boulevard),
the NRG-owned middle Agua Hedionda Lagoon basin (approximately 21 acres between
the railroad tracks and Interstate 5) and the inner basin (approximately 181.23 acres
east of I-5). The irrevocable offer of dedication will allow the city to take ownership of
the property at a future date, if so desired.
o The city currently has an irrevocable offer of dedication over the approximately
2.8 acre upper-bluff portion of the Beach Bluff Property. This new irrevocable
offer of dedication would cover the entire approximately 10.8 acres of the
property, or an additional approximately eight acres. The city also currently has a
lease agreement on the Agua Hedionda Lagoon inner basin and previously had a
lease agreement on the middle basin.
•The city will receive from SDG&E and NRG ownership to the Carlsbad Boulevard and
Cannon Road right-of-way fronting their respective properties.
Current City Council direction
At the Dec. 12, 2023, City Council meeting, the City Council voted to direct staff to continue
negotiations with SDG&E and NRG on the Seaside option and to return to the City Council by
March 31, 2024, or sooner, with an agreement for the City Council’s consideration. Acting on
that direction, city staff, SDG&E, and NRG have met eight times to negotiate the terms of an
agreement acceptable to all three parties that would implement the Seaside option. The parties
have also exchanged multiple drafts of a 100-plus page agreement detailing the terms.
While the three parties have negotiated solutions addressing many of the outstanding issues
and have made significant progress towards completing a draft agreement, the parties are not
yet in a position to present a draft agreement to the City Council for its consideration. City staff
anticipate that it will take four additional months to complete a draft agreement and that we
will be able to return to the City Council by July 31, 2024, or sooner, with a completed draft
agreement for the City Council’s consideration.
Recommendation
Staff recommend that the City Council extend the City Council established March 31, 2024,
termination deadline to July 31, 2024, and direct staff to continue negotiations with SDG&E and
NRG on the Seaside option and to return to the City Council by July 31, 2024, or sooner, with an
agreement for the City Council’s consideration.
If the parties are unable to reach agreement by July 31, 2024, then the negotiation efforts shall
be reassessed, and a decision made about whether to terminate them. If a decision is made to
terminate negotiations, then the city would receive $10 million from NRG, as identified in the
2014 settlement agreement.
Alternatively, the parties could agree at that time to extend the July 31, 2024, deadline or
pursue another plan.
Fiscal Analysis
There is no financial impact from this item. No additional funding is being requested.
March 26, 2024 Item #2 Page 4 of 7
Next Steps
Staff will continue negotiations with SDG&E and NRG and return with an agreement for the City
Council to consider by July 31, 2024, or sooner, as appropriate. Until the agreement is
completed, staff will continue to provide monthly progress updates to the City Council via
memorandums.
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.City Council resolution
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RESOLUTION NO. 2024-056
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, EXTENDING THE DEADLINE FOR TERMINATING NEGOTIATIONS
TO RELOCATE SDG&E'S NORTH COAST SERVICE CENTER BEYOND THE CITY
COUNCIL ESTABLISHED MARCH 31, 2024 DEADLINE BY FOUR MONTHS, TO
JULY 31, 2024, AND DIRECTING STAFF TO CONTINUE NEGOTIATIONS WITH
SDG&E AND NRG ON THE SEASIDE OPTION AND TO RETURN TO THE CITY
COUNCIL BY JULY 31, 2024, OR SOONER, WITH AN AGREEMENT FOR THE
CITY COUNCIL'S CONSIDERATION
WHEREAS, on Jan. 14, 2014, the City Council of the City of Carlsbad adopted Resolution 2014-
010 approving a Settlement Agreement between and among the City of Carlsbad, the Carlsbad
Municipal Water District (CMWD), Cabrillo Power I LLC and Carlsbad Energy Center LLC (collectively,
NRG), and San Diego Gas & Electric (SDG&E), related to the decommissioning and demolition of the
existing power plant known as Encina Power Station (EPS) and construction of a new plant known as
Carlsbad Energy Center (Settlement Agreement); and
WHEREAS, among other things, the Settlement Agreement anticipated the relocation of
SDG&E's North Coast Service Center (NCSC), which is currently located near the northeast corner of
Carlsbad Boulevard and Cannon Road (5.1]; and
WHEREAS, if relocated in accordance with the terms of the Settlement Agreement, NRG would
contribute $22.5 million to SDG&E for the relocation and reconstruction of a new service center (5.4],
the city would take title to certain properties totaling approximately 24.5 acres (5. 7] and the city and
NRG would work in good faith to consider a joint development strategy for the Encina Redevelopment
Site and the NCSC site [6.2(b)]; and
WHEREAS, negotiators for the city, SDG&E and NRG have met regularly to work on a identifying
an appropriate relocation site for NSCS; and
WHEREAS, staff provided updates and sought direction from the City Council regarding these
negotiations at City Council meetings on April 20, 2021, May 23, 2022, July 26, 2022, Oct. 11, 2022,
Nov. 15, 2022, March 7, 2023, and Dec. 12, 2023; and
WHEREAS, the parties have considered numerous options for relocation of NSCS and transfer
of property to the city; and
Exhibit 1
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