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HomeMy WebLinkAbout01/18/2000, C8 - STENNER CANYON HYDROELECTRIC PLANT FEASIBILITY STUDYcouncil —16- Z.000 j acEnaa REpoRt CITY OF SAN LUIS 0 B I S P 0 FROM: John Moss, Utilities Directo Prepared By: Bob Hamill Water Supply Supervisor 3A - SUBJECT: STENNER CANYON HYDROELECTRIC PLANT FEASIBILITY STUDY CAO RECOMMENDATION 1. Approve contract with Henwood Energy Services, Inc. in the amount of $29,000 for a study of the Stenner Canyon Hydroelectric Plant and authorize the Mayor to execute the contract. 2. Appropriate an additional $9,000 from the Water Fund Working Capital for this study. DISCUSSION In June of 1998, the City was notified by the Federal Energy Regulatory Commission (FERC) that maintenance would be required to keep the Stenner Canyon hydrogenerator operational, or surrender of the FERC operating permit would be required. Since the original construction of the power generation facility, changes have occurred which impact the operation of the hydroplant. Staff presented a preliminary analysis of the benefits associated with continued operation of the hydroelectric plant to Council on February 16'h, 1999. Council directed staff to initiate a more thorough study of the operating benefits and associated costs necessary for safe, reliable operation. A Request for Proposals (RFP) for additional analysis of the facility was approved by the Council on October 5's, 1999, and proposals were received on November 160s, 1999. The following three proposers responded to the RFP, with associated proposal costs as indicated. Alden Research Laboratory, Inc. $126,643 Henwood Energy Services, Inc. $29,000 FSB Energy of Paso Robles $16,000 A review committee evaluated the proposals, interviewed two qualified consultants, and found Henwood Energy Services, Inc. (HESI) highly qualified to perform the evaluation. The original RFP budget was developed to identify the potential for re- activating the hydroplant with the known operational limitations identified by staff, however, during development of the RFP and proposal review and interview process, several credible concepts were presented which could provide the City additional savings opportunities. In order to identify these opportunities and provide the most complete analysis of the operation of the hydroplant, staff recommends C8 -1 Council Agenda Report — Stenner Canyon Hydroelectric Plant Page 2 including Phase 2 of the study to help define the maximum potential for ongoing operation of this facility. The proposed project phasing is as follows: • Phase 1 - Determine the physical and economic feasibility of operating the hydroelectric facility recognizing the recent physical and operational modifications affecting the hydroelectric generating capacity. • Phase 2 - Evaluate the potential for exchange and / or direct use of electrical power from Cal Poly, and the potential for use of power generated by the facility at the Water Treatment Plant. The feasibility study will determine the best strategy for the City relative to the overall operation of the hydroelectric plant, as well as potential savings relative to receiving electricity directly from Cal Poly. Cal Poly currently purchases power at transmission levels (150 KvA) and as such, receives a very good rate. If the City were able to purchase power from Cal Poly (or through their substation) for operation of the Water Treatment Plant and Booster Pump Station, significant additional savings may be possible. FISCAL IMPACT ♦ A total of $20,000 was approved as a part of the 1999 -00 budget to support the hydroelectric generator study (1999 -01 Financial Plan, Appendix B, page 73 -74). The HESI proposed budget for complete analysis of the facility is $29,000. The original budget did not include costs associated with analysis identified above in Phase 2. Funding is available in the Water Fund Working Capital to fund the additional $9,000 and retain.working capital at minimum policy levels. ALTERNATIVES ♦ Evaluate Task 1 only. This alternative would limit the analysis to a cost / benefits study of the hydroplant facility only. Opportunities for income or cost avoidance may exist that do not depend on operation of the hydro facility. Limiting the scope of the analysis may not identify the best long -term strategy for the City. Staff does not recommend this alternative. ♦ Abandon Facility. This alternative was the original staff recommendation to Council, however, as directed by Council, a thorough cost / benefit evaluation of the operation of the hydroplant could reveal long -term benefits for the City. Staff does not recommend this alternative. Attachments: 1. Agreement. 2. Scope of Work (see section 3 of Proposal attached, full Proposal in Council reading file). C8 -2 AGREEMENT THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this day of by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and Henwood Energy Services, Inc. (HESI), hereinafter referred to as Consultant. WITNESSETH: WHEREAS, the City of San Luis Obispo owns a hydroelectric generating facility located in Stenner Canyon, and; WHEREAS, the Federal Energy Regulatory Commission TERC) has required re- activation of the facility or surrender of the operating license, and; WHEREAS, the City Council has directed staff to initiate a more thorough study of the potential benefits for operation of the facility, and; WHEREAS, Consultant has offered to provide the proposed services as detailed in the Scope of Work for the " Stenner Canyon Hydroelectric Feasibility Study", Specification No. 90061. NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants hereinafter contained, the parties hereto agree as follows: 1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered, as first written above, until acceptance or completion of said services. 2. - INCORPORATION BY REFERENCE. The City's Request for Proposals for the Stenner Canyon Hydroelectric Feasibility Study and the Consultant's proposal dated November 15, 1999which are hereby incorporated in and made a part of this Agreement. , 3. CITY'S OBLIGATIONS. For providing consultant services as specified in this Agreement, City will pay and Consultant shall receive compensation in a-total sum not to exceed $29,000. 4. CONSULTANT'S OBLIGATIONS. For and in consideration of the payments and agreements herein before mentioned to be made and performed by City, Consultant agrees C8 -3 with City to provide consultant services as described in the Scope of Workattached hereto and incorporated into this Agreement. 5. AMENDMENTS. Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the Utilities Director of the City. 6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding, or representation be binding upon the parties hereto. 7. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City John Moss, Utilities Director City of San Luis Obispo 955 Morro Street San Luis Obispo, CA 93401 Consultant Noel Lerner, Project Manager Henwood Energy Services, Inc. 2710 Gateway Oaks Drive, Suite 300 North Sacramento, CA 95833 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Consultant do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. C8-4 ATTEST: City Clerk CITY OF SAN LUIS OBISPO, A Municipal Corporation Im Mayor Allen Settle APPROVED AS TO FORM: CONSULTANT ,-,4✓r. By: tto ey C8 -5 3. SCOPE OF WORK AND SCHEDULE PROPOSED SCOPE OF WORK Task I — Evaluate Feasibility of Re- Operating Hydroelectric Plant The objective of this task is to evaluate the technical and economic feasibility of re- activating the Stenner Canyon Hydroelectric Plant. Output from the plant could be sold to PG &E through a connection to their grid at the Hydroelectric Plant, sold to the California market via the California Power Exchange, delivered to the Stenner Canyon Water Treatment Plant via new transmission lines, or possibly sold to the University through a new interconnection from the Hydroelectric Plant to the University via the Water Treatment Plant. When the Hydroelectric Plant was previously operated, the Stenner Canyon Water Treatment Plant experienced problems with their treatment processes due to varying water supply flows and interruptions in power that were attributed to operation of the Hydroelectric Plant. If the Hydroelectric Plant is to be re- activated these problems must be addressed and overcome. The scope of work for Task I will include collecting information on the design of the existing facility needed for subsequent evaluations, assessing system hydraulics and controls so that impacts to the Water Treatment Plant are minimized when the Hydroelectric Plant is re- activated, developing new controls for operating the Hydroelectric Plant, and conducting a cost/benefit analysis. Task I -a Background Review. Existing operational information obtained from the City will be reviewed. This material includes as- builts, construction drawings, operation manuals, design specifications and other information on plant operations that may be available. A field survey will also be conducted to verify flow rates, elevations, equipment specifications and other critical operational considerations. Task I -b System Hydraulics and Controls. The system hydraulics and control valving will be evaluated to overcome the problems with Water Treatment Plant upsets experienced during the previous operation of the Hydroelectric Plant. The hydraulic evaluation will address available flows to the powerhouse, expected variability of water flow to the Water Treatment Plant, and operational impacts caused by backing water to the Cuesta Tunnel. The existing control valving will be evaluated to develop an automated alternative for controlling flow to the Water Treatment Plant so that the plant can be operated more efficiently and safely. Task I-c Control System Modifications. Modifications to the existing telemetry and control systems will be recommended to improve Hydroelectric Plant operating efficiency without compromising plant safety. An important consideration will also be limiting fluctuations in water supply to the Water Treatment Plant Q Henwood Energy Services, Inc. November 15, 1999 10 CS -6 and protecting electrical equipment from damage or interruptions caused by outages at the Hydroelectric Plant. The feasibility of installing surge protectors or backup power supplies for sensitive equipment at the Water Treatment Plant will also be evaluated. Task I -d System Performance. The feasibility of re- activating the Hydroelectric Plant will included assessing impacts on Water Treatment Plant operations, sale of power, and a cost/benefit analysis. Potential impacts to Water Treatment Plant operations will consider impacts on water supply, water quality, electrical power fluctuations, staffing requirements, increased maintenance requirements, and operator training. Electrical contracts currently available for power purchasing will be evaluated and annual potential revenues from the sale of power will be estimated. The cost/benefit analysis will and will consider annual costs for operations and maintenance utilizing current City labor categories and costs and historical operating costs. Task II — Evaluate Alternatives for Providing Power to Water Treatment Plant This task will investigate two alternatives for providing power to the Stenner Water Treatment Plant. One alternative is to obtain power directly from the University. The other alternative, using the information developed during Task I, is to use the Hydroelectric Plant as the primary source of power for the Water Treatment Plant. A description of the Task II subtasks follows. Task II -a University- SIMlied Power Option. We will review the University's power system and determine the improvements that would be necessary to route power from the University as alternative to the current Water Treatment Plant provider (PG &E). Of equal concern are the contractual issues will also have to be considered. These issues include limitations in power sales stipulated in the University's existing power contracts, PUC regulatory constraints on the resale of power, and limitations imposed by the current Water Treatment Plant power provider. It is our understanding that the University owns a portion of the Water Treatment Plant and presumably is responsible for the payment of a portion of the operating costs for the plant. One option that would be considered in this evaluation would be to have the University be responsible for providing electricity to the plant as part of their financial obligations. Depending on the University's existing contracts and governing documents, this may be an acceptable mechanism for allowing the University to provide power to the Water Treatment Plant. Another alternative that would considered would be to transmit power from the Hydroelectric Plant to the Water Treatment Plant via a new transmission line, and construct a new interconnection to the University's power system. This arrangement would allow the City to sell power to the University at a favorable rate and in return, the University would serve as a reliable backup for the Water Treatment Plant's electrical power supply system. © Henwood Energy Services, Inc. November 15, 1999 11 C8 -7 Task II -b Hydroelectric Plant Power Option Based on the information developed during Task I, the feasibility of using the Hydroelectric Plant as the primary source of power at the Water Treatment Plant will be evaluated. Task II -c Cost/Benefit Analysis. A cost/benefit analysis will be performed for the two alternative sources of electrical power - Stenner Canyon Hydroelectric Plant and the University. Task III - Submit Feasibility Report The evaluations performed for Tasks I and lI will be presented in a letter report summarizing the results of the feasibility study. In addition to discussions of the evaluations described above, the report will present recommendations on system upgrades, modifications in operations, and other issues that may arise as a result of the feasibility study or forthcoming change in the regulatory environment. A single draft copy of the feasibility report will be provided for review and comment prior to submittal of the final report. Six copies and one camera -ready copy of the final report will be provided. Task IV - Meetings Our proposed budget includes two meetings: one meeting at the beginning of the project to collect the background information from City and University, and a second meeting to present the study's findings at a public meeting. Task V - Strategic Partnership Agreement Scoping Document (optional) The framework for structuring a partnership agreement to operate the Hydroelectric Plant would be developed during this task. The engineering and economic data collected during Task I would be used to assess potential cost savings that could be realized by the City by entering into such an agreement. The scoping document would present recommendations on the terms of the agreement, advantages due to increased plant efficiency, the potential for enhanced revenues, and how risks to the City can be managed. Henwood Energy Services, Inc. November 15, 1999 12 C8-8 PROPOSED SCHEDULE The following schedule was developed to meet the project requirements identified in the City's Request for Proposal. Task Completion Time From Notice to Proceed Task I Review background information and field Two weeks survey Evaluate existing system hydraulics and Four weeks controls Identify system upgrades Five weeks Evaluate system performance including Six weeks potential impacts to Water Treatment Plant, power sale contract alternatives, and conduct costibenefit analysis Task II Evaluate the option of obtaining power from Four weeks California Polytechnic University Conduct cost/benefit analysis of providing Six weeks power to Water Treatment Plant from University Task III Submit draft Feasibility Report Eight weeks City review of draft Feasibility Report Ten weeks Submit final Feasibility Report Twelve weeks Task V (optional) Submit partnership agreement scoping Ten weeks document C Henwood Energy Services, Inc. November 15, 1999 13 CS -9 REVISION Underlined portion on this page has an addition (TERM jection). That is the only AGREEMENT eA ion to this Agreement. MEETING AGENDA DATE 1 ITEM 9 THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this day of , by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and Henwood Energy Services, Inc. (HESI), hereinafter referred to as Consultant. WITNESSETH: WHEREAS, the City of San Luis Obispo owns a hydroelectric generating facility located in Stenner Canyon, and; WHEREAS, the Federal Energy Regulatory Commission (FERC) has required re- activation of the facility or surrender of the operating license, and; WHEREAS, the City Council has directed staff to initiate a more thorough study of the potential benefits for operation of the facility, and; WHEREAS, Consultant has offered to provide the proposed services as detailed in the Scope of Work for the "Sterner Canyon Hydroelectric Feasibility Study ", SpecificationNo. 90061. NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants hereinafter contained, the parties hereto agree as follows: 1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered, as first written above, until acceptance or completion of said services. Consultant shall complete the work as outlined in the proposal within twenty weeks from execution of this Agreement. 2. INCORPORATION BY REFERENCE. The City's Request for Proposals for the Stenner Canyon Hydroelectric Feasibility Study and the Consultant's proposal dated November 15, 1999which are hereby incorporated in and made a part of this Agreement. E COUNCIL ❑ COD DIR MAO ❑ FIN DIR GYACAO ❑ FIRE CHIEF Ca ATTORNEY ❑ PW DIR u LERK/ORIG ❑ POLICE CHF ❑ MGMT TEAM ❑ REC DIR Qr v LBdTILDIR � W= µon O PIERS DIR /9/ 3. CITY'S OBLIGATIONS. For providing consultant services as specified in this Agreement; City will pay and Consultant shall receive compensation in a total sum not to exceed • $29,000. 4. CONSULTANT'S OBLIGATIONS. For and in consideration of the payments and agreements herein before mentioned to be made and performed by City, Consultant agrees with City to provide consultant services as described in the Scope of Work attached hereto and incorporated into this Agreement. 5. AMENDMENTS. Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the Utilities Director of the City.. 6. COMPLETE AGREEMENT. This written Agreement, including all writings . specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral • agreement, understanding, or representation be binding upon the parties hereto. 7. . NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City John Moss, Utilities Director City of San Luis Obispo 955 Morro Street San Luis Obispo, CA 93401 Consultant Noel Lerner, Project Manager Henwood Energy Services, Inc. 2710 Gateway Oaks Drive, Suite 300 North Sacramento, CA 95833 is 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Consultant do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: CITY OF SAN LUIS OBISPO, A Municipal Corporation By: City Clerk Mayor Allen Settle APPROVED AS TO FORM: CONSULTANT By: tt y