City Council - Regular Meeting

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Heat. Heat. [music] Right. [music] [music] [bell] Okay. Good evening and welcome back to a regular meeting of the Burbank City Council on Tuesday, January 27th, 2026. Today's study session item is a discussion of a resolution approving a clean energy purchase contract for prepaid renewable energy. I welcome Joe Lillio, chief financial officer with Burbank Water and Power to please present the report. Welcome, Mr. Lulio.

Thank you. Good evening, Mayor Takahashi, Vice Mayor Mullins, city council members. So tonight we'll be discussing an opportunity for Burbank to save money on existing uh power purchase agreements or PPAs. Uh this opportunity is a clean energy taxexempt bond prepayment program run through Southern California Public Power Authority or Scappa which we are part of. Uh Burbank will be partnering with the cities of Pasadena, Colton and Vernon Utilities on this opportunity. the bond size has to be a minimum of 500 million and our portion does not meet that and that's why we're partnering with um these other cities through Scappa. So, this item did go before Burbank Water Power Board on January 8th and it was unanimously um supported by the board. Uh and quick background, in 2024, Scappa worked with Anaheim Public Utilities on an inaugural prepaid clean energy transaction. Uh that prepayment bond saved Anaheim $3.5 million uh annually. And so that that program went through Scappa and Burbank uh uh recognized that and brought before the Scappa finance committee um the opportunity to discuss why don't we look at this uh and other Scappa members to join a similar opportunity so we can potentially save some dollars on our PPA contracts. Uh Burbank has also used this structure before back in 2007 with natural gas. So, we've had a prepaid bond uh deal issued back in 2007 that saved approximately $800,000 per year uh since that issuance. Uh savings in the market place uh are dependent upon when the actual bonds are issued. Uh but uh based on today's marketplace, uh we we will be saving

about 1.3 million per year on our PPA contracts. And again, these are contracts that already exist that we're already paying. Okay. So, this opportunity does not change Burbank's risk profile and it does not change the nature of the green energy that Burbank is receiving. So, these are the uh four contracts PPAs that we would be including um in the prepaid bond uh deal. Desert Desert Harvest 2 solar, Copper Mountain Solar, Wild Rose Geothermal, and Tuli Hydro. And again, these are all existing contracts that we are currently paying for right now. Um, so I would like to turn it over to Michael Burwanganger. He's the managing director for PFM financial adviserss. He's also Scappa's municipal adviser. We also have here uh Victor Shu uh from the law firm of Norton Rose Fulbright and he is um Scappa's bond council. Welcome.

Uh, good evening. Thank you, Joe. Uh, good evening, mayor, council members. Um, I'm clicking through. Okay. So, um, I'm going to walk you through a little bit of how this works. Um, so, as Joe said, uh, you are a tax exempt entity. You already borrow money for various purposes for capital. Um so uh we're using the same allowances that allow you to do that for the uh prepayment related to the energy existing under your already existing power purchase agreements. Um we will be issuing scap will be issuing on your behalf tax exempt municipal bonds to do so. Um what will happen is this will result in a discounted energy rate again on already negotiated power purchase agreements. They've come through this uh body before. uh you already have an existing fixed price on those. All we're seeking to do is lower the price on those existing contracts. So what will happen is starting on that left sort of arrow box is that Burbank on those four PPAs that Joe identified will be assigning energy rights on a limited basis to Scappa. Scappa will be issuing clean energy bonds on behalf of Burbank and the other three participants in the transaction. uh Burbank will then repurchase the same energy at discounted rates and obviously your customers will realize the benefits of those savings. Um making my slide just a little bit more busy. Uh want to talk about um you know drilling down a little bit more of what's going on here. So at the top we have what's going on today. So you have existing power purchase agreements with various electric suppliers. What's going on in those arrangements is that you are receiving energy and as you receive that energy, you make a payment for that energy. You do not pay these suppliers unless you receive the energy. You are

protected in that way. What will happen when we do the prepaid structure through Scappa? As I mentioned, you will be assigning in your existing PPAs into Scappa. Scapa is assigning them into a counterparty. The counterparty will deliver the same energy back to Scappa and back to you. What's Burbank's obligation? Your obligation now instead of interfacing with the electric suppliers that you contract with today directly, you're interfacing with Scappa for the same energy. Scappa delivers to you energy, you will make a payment for that energy. If they fail because the project failed, you will not make payment for that energy. you'll be in the same spot as you are today. The difference is on the dollar side is that you will be paying less hopefully about 10% less about a million dollars less on those purchases. On the Scappa side of things, Scappa will be facilitating this through issuing nonreourse tax exempt bonds. Why do I say that? You're in other Scappa projects where you're obligated for your share financially. you have to make payments on to Scappa which essentially will directly support bonds. This does not work like this. This works like your existing gas prepaid deal where you have no obligation on the bonds. Your pledge is not to the bond holders directly. That's Scappa's pledge through the monies they're receiving, but you're not directly tied in. Your obligation is the same as it is today, except you're paying less. If you receive power, you pay for the power. If you don't receive power, you make no payments. Um, can't talk about this without talking about risks and benefits. I think we spent some time on the benefit side. So, let's talk about the risk side of the equation from our perspective. Your key risk is you're going to do this and if the transaction terminates, you will you will lose your savings. Um, so if you've come to realize or rely on

that million dollars every year for budgetary purposes, you will no longer have that. um issues with respect to the bonds or scapas issues to go deal with. What will happen is that as sort of articulated through here uh second sort of row there you've assigned these contracts into Scappa. If this does not work out those assignments will terminate. You will go back to where you were under your existing contracts facing the suppliers directly, paying the suppliers directly. Um needless to say that we've been at this for I think coming on a year. So, we've had rigorous legal negotiations, financial negotiations. Um, we believe that this is well structured to protect you. You're not doing you're not the first one to do this. Anaheim has come before as well as several others of your peers. Um, you know, in the future when there's a reset on the bond side of things, if uh the discount that we're expecting and we're enjoying for the initial period dips, you have protections to terminate the transaction if something happens and it falls below guaranteed minimums. Um, the framework here that we're putting in place also suits well for where the utility is going, future renewable contracting. So, as you continue to expand your portfolio with additional uh RPS compliant PPAs, you would have the opportunity to continue to either support this transaction with those and save money on those PPAs or put them into a future transaction if you so chose. With that, I think we're taking questions.

Great. Thank you for your presentation. Now, we will do council questions. Any questions from council? Vice Mayor, thank you. Not Hi, thank you for the presentation. Um, not necessarily a question, but I do want to confirm um there is no risk or obligation to the city associated with the prepaid for um the renewable energy and our new wave um working with Scappa on this. Right. As far as the bond issuance, yes, that's correct. Yeah, Scappa is issuing the bonds, not not Burbank.

Okay. So, what I I just want to confirm that we heard this correctly that our obligation and the risk um is still as current what we're doing right now. Correct. The current uh PPA contract. So, if for some reason we wanted to walk away um we would just walk away and then it'd be the status quo. Um I don't see why we would um you know because it's potential savings real and again you know about $1.3 million per year.

Yeah. I I think it's just knowing that we're doing something different and working with CAPA sometime um there is a concern from the public saying well what happens what if there is a risk is there you know do we lose the money what happens if but I I'm glad to hear that um we receive the energy they get the check basically so if they don't if we don't get the energy they don't received the check. Correct. Thank you. And that's and that and that is exactly what you're doing today. So instead of four different counterparties, now you have one. Okay. Thank you,

Madame Mayor. Um if I could ask because I there was um a question when council vice mayor Mullins asked her questions about the renewable energy credits. Um and uh can I ask the question, does this affect at all the renewable energy credits and how they get assigned? No. No. So we're still uh 60% by 2030 and uh the state's requirement RPS school is 100% by 2045. Burmeck has chosen uh to be a little bit more aggressive 100% by 2040. So that that does not change at at all though.

Uh yes, council member. I just want to thank you all for looking at creative ways that are very low risk to help us save some money which uh essentially passes down back to our rate payers. It helps us make sure the rates are not exuberant for them as we move forward which is really important at this time. So thank you for that. I don't have any questions and I will step away to pump now. I'll see you all at six.

All right. Thank you. Uh Council Member Rosati, any questions? You're good. Okay. I just have one uh quick question. Oh, maybe two. Um so what would will be the on the ground rate increase or decrease? What would be the effect on the ground of the rates for the for the buyers?

Um so um council did approve two years of rate adjustments. Uh the first one just uh went through effective January 1st of 2026. The second one um is January 1st, 2027. So this this would have the potential of reducing future rate adjustments. Um wouldn't know that until we you know actually do a study. We have to do a cost of service study. But this 1.3 million per year that's accumulative right you know over a 10-year period you're talking you know 13 million or more um plus the um funds that are retained in our reserves and then you're investing that. So, it's a whole compound effect and it it will definitely have uh an impact, a positive impact on rate adjustments moving forward, but I can't give you a solid number now till we actually do a cost of service study.

Great. Thank you. So, it sounds like unfortunately our rates still will be going up in the years to come, but that they will be going up less because of this. That is correct. Yes. Okay. Well, thank you for looking for ways, as the council member pointed out, looking for ways to reduce the increases in the future that we know are coming and to find ways to both reduce that increase and continue our renewable portfolio. So, thank you so much for the presentation and for taking time to explain this complicated process to us and to the community and for all you do for trying to keep our rates low. Thank you. It's it's a it's a team effort, so I want to thank the whole team. Yeah. Great. Thank you.

Okay. So being that the study session is now over, we will we have another half an hour till the council member council member meeting starts. So we'll take a half hour break and be back at 6 o'clock.