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BACKGROUND The City Council's current set of priorities include installation of a photovoltaic (PV) project on a City facility. To that end, staff has been exploring the potential of a PV project that provides the largest overall energy benefit within a reasonable cost. In April of this year, staff presented the City Council with a number of PV options and recommended that it pursue a PV system at the OSC. The specific energy target was to offset the cost of operating water Well #8 and a portion of power usage at the OSC maintenance buildings. The City Council adopted this recommendation and staff has completed the vendor selection process. As indicated at the April meeting, one of the primary decisions regarding a PV system involves determining whether the City should own the system outright or whether it should enter into a Purchase Power Agreement (PPA) whereby another entity would own the PV system installed at the OSC. Outright ownership requires a significant initial capital investment with larger energy cost savings over time while a PPA minimizes the initial investment but results in less energy cost savings. At the meeting staff indicated that both of these alternatives were acceptable and that the final decision would be based largely on the cost of acquiring the system. In general, staff estimated that the PV system would cost approximately $2.5 million and that if bids exceeded this amount, a PPA would be preferable. If bids were less then this amount, ownership would be preferable. As proposed by Cupertino Electric, the systems will be comprised of 1,568 solar panels located on the roofs of the OSC buildings. Cupertino Electric will be responsible for all installation including connection to the existing electrical system. The City will assume all system maintenance following an initial system warranty period. However the system installer is required to warranty the system for ten years under the CSI rebate system in California to cover all workmanship and defects during this period, the panel manufacturer also warrants the panel for twenty five years. Routine maintenance is generally minimal involving bi- annual cleaning of the solar panels. Cupertino Electric Inc., is local Bay Area firm headquartered in San Jose, CA. that has been in business for 54 years and is a well known electrical design and installation contractor. Cupertino Electric also has substantial experience installing solar systems such as the1.6MW system at Google's headquarters and PG &E's San Francisco Service Center, just to name a few. DISCUSSION As a result of the favorable bids received staff is recommending outright ownership of the system. This recommendation is based on the City's return on investment over the life of the system and the fact that ownership provides the City with the greatest flexibility in terms of assuring ongoing long term reliability and operations. The bid that was received from Cupertino Electric, Inc. for the project totals $1,678,000 which represents the design, purchase and installation for the combined system for Well 8 and the Operations Service Center. This bid is $855,000 less than the original estimate that was included in the Council report from April 2009. The main reason for the cost Page 2 of 3