HomeMy WebLinkAbout#13 Certificate for Prepaid Energy Contract AGENDA ITEM #13
Public Utility District m
MEETING DATE: June 5, 2024
TO: Board of Directors
FROM: Jared Carpenter, Electric Utility Director
SUBJECT: Consideration to Adopt Resolution 2024-11 Approving a Qualified
Use Certificate for Prepaid Energy Contract.
APPROVED BY:
Z_
Brian C. Wright, General Manager
RECOMMENDATION:
Adopt Resolution No. 2024-11 Authorizing a Tax Certificate and Agreement for UAMP's
Red Mesa Tapaha Solar, and Related Matters
BACKGROUND:
As a member agency of the Utah Associated Municipal Power Systems (UAMPS) the
District has been a participant in the Red Mesa Tapaha Solar (Red Mesa) project since
its inception and its output of power in March 2023. Red Mesa is a 72-megawatt solar
photovoltaic facility in southeastern Utah. The facility began operating in March 2023.
ANALYSIS AND BODY:
The Internal Revenue Code and US Treasury Regulations ("Tax Code and
Regulations") contain special provisions that allow tax-exempt bonds to be issued to
finance prepayments for natural gas and electricity. The prepay transactions are
structured to convert the difference between the issuer's lower (tax-exempt) cost of
funds and the prepaid energy supplier's higher (taxable) cost of funds into a discounted
price for prepaid energy. The initial discount is expected to be at least 8.0% and will be
determined before closing. The amount of the discount will be reset periodically over
the term of the prepay (every five to ten years) when the bonds are refinanced. UAMPS
will assign existing gas or electricity purchase agreements to the prepay transaction,
and the discount will be applied to the contract prices under these agreements. The Tax
Code and Regulations require that UAMPS members use the prepaid (discounted) gas
or electricity (including electricity generated using prepaid natural gas as fuel) to serve
retail customers in their municipal utility service areas. This is referred to as the
"Qualifying Use" requirement. The date of closing has not yet been determined, but will
likely take place in Q2 2024. The term of the transaction is thirty years.
As a participating member of the Red Mesa project, staff recommend approval and
authorization to execute the Qualified Tax Certificate.
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Authorization of the Qualified Tax Certificate and Agreement requires Board of
Directors approval through resolution (Attachment 1).
GOALS AND OBJECTIVES:
District Code 1 .05.020 Objectives:
6. Manage the District in an effective, efficient and fiscally responsible manner.
District Code 1 .05.030 Goals:
1. Manage for Financial Stability and Resiliency
FISCAL IMPACT:
The District purchases a large share of its power procurement portfolio by using power
projects available through our membership with UAMPS. The relative portion of energy
procurement from Red Mesa varies due to the intermittency of solar generation. The
District's FY24 Purchased Power Cost Budget forecast for the Red Mesa project
represents approximately 5% of the District's energy procurements ($0.822M). While
the benefits of the projected 8.0% reduction in electricity production costs will be carried
through to the participating UAMPS members, it is still early to predict the net reduction
in energy costs for the District at this time.
ATTACHMENTS:
1. r2024-11 UAMPS Red Mesa TQualified Use Certificate
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sUCKEE ►
Public Utility District
Resolution No. 2024-11
Resolution of the Board of Directors of the Truckee
Donner Public Utilities District Authorizing a Tax
Certificate and Agreement for DAMPS' Red Mesa
Tapaha Solar Project, and Related Matters
June 5, 2024
A RESOLUTION AUTHORIZING A TAX CERTIFICATE AND AGREEMENT FOR
UAMPS' FIRM POWER SUPPLY PROJECT; AND RELATED MATTERS
WHEREAS, Truckee Donner Public Utility District, California (the "Participant") is a
member of Utah Associated Municipal Power Systems ("UAMPS") and has
previously entered into the Master Firm Power Supply Agreement with UAMPS
that enables the parties to enter into firm transactions for the purchase and sale
of electricity from specified power supply resources;
WHEREAS, pursuant to the Master Firm Power Supply Agreement (a) UAMPS has
entered into the Amended and Restated Solar Power Purchase Agreement (as
such agreement may be amended and restated from time to time, the "Red Mesa
PPA") with NTUA Generation—Utah, LLC and (b) the Participant has elected to
participate in the Red Mesa PPA pursuant to the Red Mesa Tapaha Solar Firm
Power Supply Agreement Amended and Restated Transaction Schedule (such
Transaction Schedule and the Master Firm Power Supply Agreement are referred
to collectively herein as the "Firm PSA") between the Participant and UAMPS;*
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WHEREAS, the Participant understands that in order to provide a discounted price
for a portion of the electricity sold to the Participant under the Firm PSA (such
portion is referred to herein as the "Prepaid Portion"), UAMPS will participate in a
prepayment transaction being undertaken by Southeast Energy Authority, a
Cooperative District ("SEA") by (a) assigning its rights to a portion of the electricity
to be delivered under the Red Mesa PPA to the commodity supplier under the
prepayment transaction and (b) entering into a Commodity Supply Contract (the
"Supply Contract") with SEA under which it will purchase the assigned electricity
from SEA at a price that reflects a discount from the contract price under the Red
Mesa PPA, and the savings from such discount will be applied by UAMPS for the
benefit of the Participant and the other Participants in the Red Mesa PPA;
WHEREAS, the Participant has been advised that SEA will issue bonds to finance a
prepayment for the electricity that it sells to UAMPS under the Supply Contract
(the "Prepay Bonds") with the intention that the interest on the Prepay Bonds will
qualify for tax exemption under Section 103 of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, the Participant acknowledges that its use of the Prepaid Portion of the
electricity it purchases under the Firm PSA will be subject to certain restrictions
that are necessary to establish and maintain the tax-exempt status of interest on
the Prepay Bonds, and desires to adopt this resolution to authorize a Tax
Certificate and Agreement that sets forth the Participant's agreement to comply
with such restrictions;
* Capitalized terms used and not otherwise defined herein have the meanings assigned
to them in the Firm PSA and the Tax Certificate and Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF TRUCKEE
DONNER PUBLIC UTILITY DISTRICT, CALIFORNIA, AS FOLLOWS:
Section 1. Approval of Tax Certificate and Agreement. The Tax Certificate
and Agreement, in substantially the form attached hereto as Exhibit A, is
hereby authorized, and approved.
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Section 2. Authorized Officers; Final Changes and Dating. The Participant's
Representative and Alternate Representative to UAMPS (the "Authorized
Officers") are each hereby authorized to execute and deliver the Tax
Certificate and Agreement and to deliver the same to UAMPS on behalf of
the Participant. Each of the Authorized Officers is hereby delegated
authority to approve such changes to the Tax Certificate and Agreement as
are necessary to complete the form thereof, together with any minor or
non-substantive changes, and his or her execution of the Tax Certificate
and Agreement shall be conclusive evidence of such approval. The
Authorized Officers shall deliver an executed and undated copy of the Tax
Certificate and Agreement on or prior to the date requested by UAMPS,
and UAMPS is hereby be authorized to deliver the Tax Certificate and
Agreement, dated the issue date of the Prepay Bonds, to SEA on behalf of
the Participant.
Section 3. Other Actions With Respect to the Tax Certificate and
Agreement. The Authorized Officers shall take all action necessary or
reasonably required to carry out and give effect to the Tax Certificate and
Agreement including adjusting the priority of the Participant's resources
within the UAMPS Power Pool to ensure the Qualified Use of the electricity
from the Participant's Entitlement Share in the Project.
Section 4. Severability. If any section, paragraph, clause, or provision of this
resolution shall for any reason be held to be invalid or unenforceable, the
invalidity or unenforceability of such section, paragraph, clause, or
provision shall not affect any of the remaining provisions of this resolution.
Section S. Effective Date. This resolution shall be effective immediately
upon its approval and adoption.
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ADOPTED AND APPROVED by the Governing Body of Truckee Donner Public
Utility District, California, this day,
TRUCKEE DONNER PUBLIC UTILITY DISTRICT, CALIFORNIA
By _
Board President
[SEAL]
ATTEST:
General Manager (Clerk)
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EXHIBIT A
[TAX CERTIFICATE AND AGREEMENT]
A - 1
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TAX CERTIFICATE AND AGREEMENT
This Tax Certificate and Agreement is executed in connection with the Commodity Supply
Contract (the "Supply Contract") between Southeast Energy Authority, a Cooperative District
("SEA") and Utah Associated Municipal Power Systems ("UAMPS").
WHEREAS, (the "Participant") is a member of UAMPS and has entered into the
Master Firm Power Supply Agreement dated as of , and [describe Red Mesa, Steel
Solar 1A and Steel Solar 113 transaction schedules as applicable] (the "Firm PSA") 'with UAMPS
pursuant to which the Participant has an Entitlement Share (as defined in the Firm PSA) in the
energy, environmental attributes and other benefits received by UAMPS under the [describe
Red Mesa, Steel Solar 1A and Steel Solar 1B PPAs as applicable] (the "PPA")Z;
WHEREAS, the Participant understands that in order to provide a discounted price for a portion
of the electricity sold to the Participant under the Firm PSA (such portion is referred to below as
the "Prepaid Portion"), UAMPS will participate in a prepayment transaction being undertaken
by SEA by (a) assigning its rights to a portion of the electricity to be delivered under the PPA to
the commodity supplier under the prepayment transaction and (b) entering into the Supply
Contract under which it will purchase the assigned electricity from SEA at a discounted price for
sale to the Participant under the Firm PSA;
WHEREAS, the Participant further understands that SEA will issue bonds to finance a
prepayment for the electricity that it sells to UAMPS under the Supply Contract (the "Prepay
Bonds") with the intention that the interest on the Prepay Bonds will qualify for tax exemption
under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS,the Participant acknowledges that its use of the Prepaid Portion of the electricity it
purchases under the Firm PSA is subject to certain restrictions that are necessary to establish
and maintain the tax-exempt status of interest on the Prepay Bonds;
ACCORDINGLY, AND IN FURTHERANCE OF THE FOREGOING,THE PARTICIPANT HEREBY
CERTIFIES AND AGREES AS FOLLOWS:
1. The Participant is a political subdivision of the State of , 3 and owns and operates
a municipal utility system that provides electricity service to retail customers located in an
established service area (the "System").
1 For Participants in more than one transaction schedule, the term "Firm PSA"will apply separately to
each transaction schedule.
2 For Participants in more than one transaction schedule, the term "PPA"will apply separately to each
Power Purchase Agreement.
3 Utah for all Participants, except California for TDPUD and Nevada for Fallon.
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2. The Participant will (a) use all of the Prepaid Portion of the electricity it acquires under the
Firm PSA in a Qualified Use (as defined below), (b) not take any action (or make any allocation)
that is inconsistent with the Qualified Use of the Prepaid Portion of such electricity, (c) not take
or omit to take any action with respect to the Prepaid Portion of such electricity, its Entitlement
Share or its System which could adversely affect the tax-exempt or tax-advantaged status of
interest on the Prepay Bonds or any refunding bonds issued by SEA, (d) take, and pay the costs
of, such remedial actions as may be necessary to maintain the tax-exempt or tax-advantaged
status of interest on the Prepay Bonds or any refunding bonds in the event of its failure to use
such electricity in a Qualified Use, and (e) act in accordance with such reasonable written
instructions as may be provided by SEA (through UAMPS) from time to time in order to
maintain the tax exempt or tax-advantaged status of the Prepay Bonds.
3. "Qualified Use" means the sale of electricity to retail customers located within the
"electricity service area" of a municipal utility pursuant to generally applicable and uniformly
applied rate schedules or tariffs; provided that: (a) "Qualified Use" shall not include any sale of
electricity that gives rise to "private business use" or a "private loan" within the meaning of
Section 141 of the Code; and (b) "Qualified Use" shall include such additional uses of electricity
as may be approved by SEA (through UAMPS) with a favorable opinion of bond counsel. For
purposes of this definition: (i) "electricity service area" has the meaning assigned to such term
in U.S. Treasury Regulation Section 1.148-1(e)(2)(iii); and (ii) a "municipal utility" is a state or
local government unit that owns and operates an electric distribution utility.
4. In each of the five calendar years preceding 2024, the amount of electricity sold to retail
customers in the Participant's electricity service area has equaled or exceeded the amount of
the Prepaid Portion of the electricity attributable to its Entitlement Share under the Firm PSA
(excluding the amount of electricity that the Participant was obligated to take under a long
term agreement that was either (i) purchased pursuant to a long term prepaid agreement using
the proceeds of tax-exempt or tax-advantaged obligations, or (ii) generated from gas that a
person is obligated to take under a long term agreement that was purchased pursuant to a long
term prepaid agreement using the proceeds of tax-exempt or tax-advantaged obligations), and
it anticipates this to be the case in 2024.
5. The Participant expects to make the required payments under the Firm PSA solely from the
current revenues of the System.
Dated: 12024.
[NAME OF PARTICIPANT]
By:
[Name]
[Title]
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