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HomeMy WebLinkAbout11/12/2002, BUS 4 - IMPLEMENTATION OF ENERGY CONSERVATION MEASURES AT SELECTED CITY FACILITIES. council ma�o 11 j acEnc)a REpoRt 1-14vs 14 C I T Y OF SAN LU IS O B I S P O FROM: John Moss, Utilities Director Prepared By: Ron Munds,Utilities Conservation Coordinator SUBJECT: IMPLEMENTATION OF ENERGY CONSERVATION MEASURES AT SELECTED CITY FACILITIES. CAO RECOMMENDATION 1. Approve: a. The Scope of Work proposed by Kinetics Energy Services, Incorporated (Kinetics) for the energy conservation measures to be implemented at selected City facilities (Attachment 2, Exhibit A).. b. The contract with Kinetics in the amount of'$2,832,892.00 for the preliminary design, design, construction and construction management of the energy conservation projects and authorize the Mayor to execute the contract (Attachment 2). c. The Support Services and Guaranteed Savings Agreement with Kinetics and authorize the CAO to execute the agreement upon completion of the installation agreement and acceptance by the City(Attachment 3). 2. Adopt findings necessary to proceed with a "design and build" contract and contract execution. 3. Authorize the Finance Director to work with the City's financial adviser, Fieldman, Rolapp and Associates, to secure lease/purchase financing for the energy projects, term not to exceed 10 years. 4. Appropriate $2,832,900 for these projects, to be funded via lease/purchase financing and rebates, from the Sewer Fund ($2,309,300), Water Fund ($145,100) and Capital Outlay Fund ($378,500). REPORT IN BRIEF In response to the energy crisis of 2000 the Council directed staff to review opportunities for the City to conserve additional energy and implement distributed generation projects at key City facilities. To accomplish this, staff used a process for contracting with energy service companies (ESCo's) established by the State Department of General Services (DGS). After a lengthy proposal and review process Staff recommended and Council approved the use of Kinetics, an ESCo, for the development and implementation of energy conservation and' distributed generation projects for the City. Kinetics has completed their preliminary engineering work for a number of projects (at their sole expense to date) and approval of the CAO recommendation will move those projects forward Council Agenda Report—Energy Services Proposal Page 2 into design and construction.. The proposed projects will cost the City$2,832,892.00 and will be financed through lease purchase financing to be secured by the City's Finance Director. The guaranteed annual savings from the proposed projects is estimated to be no less than $347,587. Debt service based on 10 year lease purchase financing is estimated at $311,618 per year, yielding the City net savings of nearly $36,000 per year. A Support Services and Guaranteed Savings Agreement is required for the first three years following implementation with an annual cost of$7,452. An executive summary of the proposed energy conservation measures (ECMs) is described in Attachment 1. DISCUSSION Background At the July 17, 2001 City Council meeting, the Council discussed the City's role in regards to energy conservation and efficiency. One of the recommendations, which was approved by the Council, was to evaluate the feasibility of implementing distributed generation projects on City facilities with the assistance of a consultant if deemed necessary. After researching the options available to the City, staff determined the State Department of General Services (DGS) procurement program for Energy Services Company's (ESCo's) assistance to be the least complicated, lowest risk and most cost effective alternative available. At the September 18, 2001 City Council meeting, the Council approved using DGS's procurement program. To date, the City has been following DGS's four step process to utilize the pool of qualified ESCo's. The steps are: Step 1: ESCo Ordering Form Step 2 Preliminary Conservation Assessment Step 3: Conservation Audit Agreement Step 4: Conservation Service Agreement As part of Step 1, DGS supplied the City a list of qualified ESCo's, of which four were selected based on their experience with distributed generation projects. The selected companies submitted Preliminary Conservation Assessments based on site inspections of the facilities that staff identified as potential locations to implement energy conservation measures (ECMs). The initial facilities identified were: 1. Swim Center 2. Water Reclamation Facility 3. Water Treatment Plant,Hydro-electric Facility 4. Utilities Department Administration Office The first three facilities were chosen because of the large amount of energy they consume. The Utilities Department Administration Office was chosen for its potential to use photovoltaic technology. Based on the content and approach taken by each company, staff selected Kinetics Energy Services to proceed to the Conservation Audit Agreement phase. 4-a Council Agenda Report—Energy Services Proposal Page 3 As part of this phase, the City expanded the scope of work to include the.Recreation Center, which was about to undergo a remodel, and the parking structures' interior lighting. Kinetics performed a more detailed analysis of all the facilities and submitted a report identifying the ECMs, program costs and payback periods, financing options, completion period,monitoring and verification plans and guaranteed cost avoidance. At this point, staff reviewed the projects and requested a revised proposal placing projects that had a payback of years or less in a tier of preferred projects and having the remaining projects placed in a second tier. Also at this point, certain ECMs, such as analyzing the hydro-electric facility at the Water Treatment Plant, were deferred (and will be included in the Water Treatment Facility Master Plan now underway) and certain components of the Recreation Center project were eliminated as those same improvements were already being included in the remodel project. After reviewing the refined proposal and consulting with the City Attorney regarding contracting procedures for a project such as this, it was determined a third party review would be prudent to ensure that the proposal is fair and reasonable, and that the assumptions and conclusions reached by Kinetics are accurate. Again working with DGS to locate a qualified fine to review the proposal, the City contracted with Bechard Long & Associates (BLA) to evaluate the report. The results of the review and responses to BLA's comments by Kinetics are provided in Attachment 3. In a nutshell, BLA concluded that the analysis of the projects and subsequent cost and payback periods contained in the proposal were accurate and reasonable. Energy Measures Evaluation As mentioned previously, through the evaluation process,the list of ECMs were refined based on amount of energy that would be saved, cost and payback period. The.tier one projects that are being recommended to move forward are as follows: Project Project Cost Project Cost $ Energy Payback after incentives Savings/Year ears Pool Cogeneration $349,295 $274,295 $44;988 6 Rec Center Controls $29,211 $29,211 $2,883 10 Water Treatment $1459082 $142,382 $16,670 9 Plant Power Quality Water Reclamation $2,309,304 $2,103,304 $283,046 7 Facility Cogeneration Totals 1 $298327892 1 $2,5499192 $347 587 7.3 A detailed discussion of the scope of each proposed ECM can be found in the Kinetics proposal (Attachment 2, Exhibit A). As indicated in the table of projects, improvements at the Water Reclamation Facility make up a significant portion of the total project cost and have the greatest energy and monetary savings per year. 4--3 1 Council Agenda Report—Energy Services Proposal Page 4 The tier two projects, which the Council could consider for implementation, but are not recommended by staff because of the long payback periods, are as follows: Tier 2 Projects Project Project Cost Project Cost $ Energy Payback (after incentives) Savings/Year (Years) Utilities Admin $116,232 $66,232 $3,177 21 Photovoltaics Rec Center $116,232 $66,232 $2,950 22 Photovoltaics Parking Structures $105,609 $105,609 $2,509 42 Lighting Totals $338,073 $2389073 $89636 28.3 Though the payback period for these projects is significantly higher than the tier one projects, the Council could choose to proceed with any of these projects based on reasons beyond financial payback. It is staff's experience that projects with a payback period of greater than 10 years, are generally not cost effective as the systems age, technology improves and market conditions will change significantly over a 10 year span. Contracting Issues The type of agreement that staff is proposing entering into with Kinetics is a departure from the City's usual contracting procedures which are defined in the City's Charter in Article IX, Section 901. In a typical scenario, the City would identify a project and solicit proposals for the design of that project, then award a construction contract to the lowest responsible bidder. Early on, staff realized they did not have knowledge or expertise to evaluate or design the energy conservation measures or distributed generation opportunities available to the City. This is why staff recommended and the Council approved using the DGS procurement process. The contracting procedures for this process, as outlined previously in the report,has DGS compiling a list of qualified ESCo's. The participating agency then solicits competitive proposals from the list to perform a preliminary assessment of potential ECMs. Based on the content of the proposals, the agency then selects an ESCo to complete an Energy Audit Agreement which is essentially the preliminary design of the project to determine the feasibility and cost effectiveness of the recommended ECMs The final step, which is where the City is at now, is contracting for the final design of the project and overseeing the actual construction of the approved project. In return for using the services of the ESCo throughout the process, they guarantee the energy savings and the subsequent dollars saved, and are responsible for correcting or adjusting monetarily for any wrong assumptions that result in not achieving those savings. The end result is that the monetary savings are to pay for the cost of the project(s) over the payback period of the ECMs. The proposed contract with Kinetics is structured so that the Utilities Director can 4- 4 Council Agenda Report—Energy Services Proposal Page 5 terminate the agreement after the design phase if there are any changes in cost and/or feasibility of the project. Staff is requesting that the Council make the following findings in order to facilitate the award of the energy services contract to Kinetics: Findings: 1. That the spirit of the Charter was met by the initial competitive process in choosing the most qualified ESCo. 2. That this type of project was not contemplated by the Charter and is unique in that the actual energy savings guaranteed by Kinetics are used to offset the cost of the project. 3. Use of a purely competitive process was not practical given the uniqueness of the recommended projects. The purpose of the competitive bidding process is being assured by the guaranteed savings Kinetics has committed to. 4. That the third party review determined that the proposal from Kinetics is reasonable based on industry standards. One final note, in recognition of the value of energy conservation programs and services such as this, the State legislature adopted specific legislation (Government Code 4217) to authorize general law cities to contract with ESCo's through the DGS program. Support Services and Guaranteed Savings Agreement Another component of this energy services procurement process is the Guaranteed Savings agreement. In order to ensure the effectiveness of the energy conservation measures (ECMs) installed, Kinetics will provide monitoring and verification services for the selected facilities and equipment. Under the agreement, Kinetics will provide monitoring services and quarterly reporting of the actual energy savings received from each ECMs. Kinetics also provides under this agreement a performance guarantee, which based on the current assumptions and selected projects, guarantees the City will receive program savings and utility incentives in excess of $347,587 annually. The term of the Support Services and Guaranteed Savings Agreement is not to exceed 10 years, and can be no less than 3 years. The support services agreement will cost the City$621 per month or$7,452 per year. CONCURRENCES The Public Works Department concurs with the recommendations made in this report. FISCAL IMPACT As stated in the report, the energy savings from the recommended ECMs are to pay for the project costs over the payback period. The monitoring and verification plan of the ECMs ensures the projects will perform according to expectation, therefore yielding the monetary savings at today's energy costs to pay back the approved funding mechanism. Council Agenda Report—Energy Services Proposal Paget After researching funding options, the Finance Director is recommending that the projects be debt financed through a lease/purchase agreement. It was determined that this type of financing made the most sense in that it would not tie up working capital and meets the criteria for debt financing. Total Contract Cost–Breakdown by Phase Project Development& Design $5099420 Construction Management& Consulting $338,930 Construction $198779138 Bond, Permits, Contingencies $1079404 Total Project Cost 1 $298329892 Estimated Annual Savings $3479587 Estimated Annual Lease/Purchase Payment $3119618 Estimated net annual cost savings through $359968 payback period Anticipated Rebates $2839700 The agreement with Kinetics also includes an operating program expense for support,monitoring and verification services for a minimum period of three years. The cost of these services is $621.00 per month or $7,452 per year and the services will begin following completion of the projects in Summer 2003. Staff will include funding for the monitoring and verification services, which are a requirement of the performance guarantee, in the 2003-05 financial plan. The cost of these services will be more than offset by the projected savings and as stated previously are required by the performance guarantee provided by Kinetics. ALTERNATIVES The Council could direct staff to follow the standard contracting procedures as defined in the City Charter and go out to bid for the entire project or project phases. Because of the amount of time both staff and Kinetics has spent in developing the proposed project, the favorable results of the third party review and thoroughness in which Kinetics researched and developed the various ECMs, staff does not recommend this alternative. ATTACHMENTS Attachment 1-Proposed Services Executive Summary Attachment 2- Contract and Scope of Work Attachment 3- Support Services and Savings Guarantee Agreement Available in Council Office for Review Peer Review of Proposed Services by Berchard Long and Associates, Inc. 4� u Attachment 1 SKIN ET I CS .= o =+ CITY OF SAN LUIS OBISPO EXECUTIVE SUMMARY In recent years, the City of San Luis Obispo has successfully completed many energy retrofit. projects. As a result of these progressive efforts most of the 1n tier savings opportunities (lighting, EMS and HVAC retrofits) have been addressed. However, Staff believed there were .still opportunities at the water/wastewater plants and the swim complex. In 2001,the City solicited proposals from energy service companies (ESCo's) in an effort to address these areas. Through a competitive review process, City staff selected Kinetic Systems, Inc. (Kinetics) to perform a detailed engineering study and compile a proposal. Over the past six months Kinetics has analyzed City energy usage, performed detailed facility audits, interviewed staff, and reviewed plant operating requirements. The audited facilities were: Utilities Administration Center, Swimming Pool Complex, Recreation Center, Water Treatment Plant and associated pumping stations (WTP), Wastewater Treatment Plant (WWTP) and March & Palm Street Parking Structures. A listing of the energy conservation measures (ECM's) considered were: Building Envelope, Lighting, HVAC, Controls, Photovoltaic, Cogeneration, High Efficiency Motors, Power Quality and Variable Frequency Drives (VFD's). What follows are two spreadsheets that summarize the results of the in-depth audit. The first one entitled "Base Program Summary", lists the ECM's that Kinetics recommends due to their strong financial performance. Highlights of the base program include: ♦ $2.8 Million in Capital Improvements ♦ $284 Thousand in Utility Incentives • $35o Thousand in Annual Savings ♦ 7 Year Payback The second spreadsheet entitled "Optional ECM Summary", lists those ECM's that, although they do not have as strong a financial payback, may warrant further consideration by the City. Photovoltaics which produce "green" electric power from the sun are ECM options at two locations. PG&E is currently offering hefty incentives for the installation of photovoltaics. Another option listed here for consideration is the replacement of the lighting fixtures in two City-owned parking structures. These fixtures are currently in the City's budget to be replaced and could be included in this program. What follows are a company overview, program highlights and financial highlights. Kinetics wishes to thank the City for this opportunity and we look forward to becoming your long term energy and environmental partner. 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W m N N ` m y •O C7 OC V C7 L O O d O W 7 0 0 y W 0 1 O j O 0 W y O W A W a I.- CM auuo a mo: CA � r � Zr- a � u u 0 'O m z Attachment 1 SKI N ET I CS see :++ COMPANY OVERVIEW The Kinetics' team is uniquely qualified with core competencies in utility conservation and water services. Our performance track record nationwide, including many State of California Public Agencies, has positioned us as a premier supplier of utility conservation services. The following is a summary description of our company. Kinetic Systems, Inc. Kinetics is one of the top five largest mechanical contractors in the country, employing over 8,000 of the 'industry's top administrative and trades personnel. Headquartered in Santa Clara, CA Kinetics has been in business since 1973 with annual revenues exceeding.$1.2 billion. Kinetics has offices located throughout the State including construction and service branches in San Diego, Irvine and Union City,to name a few. Kinetics Energy Services Kinetics Energy Services (a focus group of Kinetics) is an established energy conservation partner for many State of California school districts and municipalities. In addition, Kinetics is a pre-qualified provider of energy services for the State of California's Department of General Services, Real Estate Division. Kinetics acts as general contractor managing all aspects of energy conservation installations, including: design, auditing, installation, guarantee, maintenance and operations. The Kinetics' team is proud of its capabilities and expertise in the energy services marketplace. Our capabilities include:. • HVAC modernization • Lighting services • Energy management • Water/wastewater plant retrofits • Solar energy installations • Thermal energy storage/cogeneration systems Our track record in California of exceeding customer expectations and savings results has earned Kinetics the reputation as a premier supplier of utility conservation services. Executive Summary z i'l D Attachment 1 SKI N ET I CS 714 o ++.+: PROGRAM HIGHLIGHTS Lighting Scope Water Treatment Plant and Wastewater Treatment Plant ■ Retrofit or replace existing Tie fluorescent lighting fixtures with high efficiency state-of- the-art T8 lamps and electronic ballast. ■ Replace incandescent lighting systems with compact fluorescent lamps. ■ Retrofit of exit signs to LED., Mechanical Scope Swimming Pool e Install two (2) 3okW Cogeneration systems to simultaneously provide electricity and hot water to the pool and complex. Wastewater Plant ■ Install eight (8) 3okW Cogeneration systems to simultaneously provide electric power and hot water to the treatment facility. This cogeneration will utilize the waste methane gas (currently flared)to produce electricity and hot water for plant operation. ■ Install a new high efficiency Aeration Blower system to replace existing for improved aeration control and energy efficiency. ■ Install new Power Factor Correction devices at various locations on the electrical distribution system to improve the power quality and reduce electric demand and consumption. These devices will also reduce operating temperatures of the motors and switchgear prolonging their useful life. ■ Install new Variable Frequency Drives (VFD's) for proper operation and efficiency of the cooling tower fans. Water Treatment Plant & Pump Stations ■ Install new Power Factor Correction devices at various locations on the electrical distribution system to improve the.power quality and reduce electric demand and consumption. These devices will also reduce operating temperatures of the motors and switchgear prolonging their useful life. Executive Summary 3 J tL I Attachment 1 E_=� K ::. .- Controls / EMS Scope Recreation Center ■ Expand the City 's existing energy management system (EMS) to provide direct digital control of the newly installed HVAC equipment. Support Services Scope All Locations ■ Supervise the complete turnkey installation of the above referenced work, including compliance with all State and local codes. Provide project closeout documentation, Warranty compliance and Staff training on all newly installed systems. ■ Facilitate all paperwork associated with potential utility incentive programs. ■ Provide energy information and reporting functions via a Web-based browser. ■ Provide measurement and verification (M&1) reports to verify energy savings on a quarterly basis and reconcile guaranteed savings annually for budget integrity. Executive Summary 4 - �a Attachment 1 KINETICS ++++ FINANCIAL HIGHLIGHTS Annual Energy Savings ....................................................................................$337.381 Annual Lighting Material Savings............................................................................$206 (Cost of lamps, bulbs, ballast, lenses, disposal and incineration.) Equipment Repair Savings.................................................................................$10,000 (Estimated repair cost mechanical equipment scheduled for replacement.) EstimatedUtility Incentives .............................................................................$283,700 Total First Year Project Savings..................................................I..............$631,287 CityInvestment.....................................................................................$2,832,892 Annual Support Services............................................................................$7,452 ADDITIONAL BENEFITS ❖ Reduces deferred maintenance (CIP) backlog by over$2.8M. ❖ Guaranteed savings, performance and accountability ❖ Installation completed with minimum facility disruption ❖ improved plant operation and safety Executiye Summary 54 ,13 Attachment 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 KINETICS SYSTEMS,INC.,hereinafter referred to as Contractor. WITNESSETH: WHEREAS, the City wants to implement energy conservation measures in City facilities to lessen its dependence on conventional energy sources. WHEREAS,the City recognizes the unique nature of contracting for energy management measures. WHEREAS, the City has utilized the procurement process for contracting for energy management services offered by the State of California's Department of General Services. WHEREAS, the City received four competitive proposals to provide energy management services to the City. WHEREAS, the selected Contractor is qualified to perform this type of service and has submitted a proposal to do so which has been accepted by City. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained,the parties hereto agree as follows: I. 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. CITY'S OBLIGATIONS. For providing services as specified in this Agreement, City will pay and Contractor shall receive therefore compensation in a total sum not to exceed $509,420 for the project development,preliminary design,project design and detailed engineering phase(Phase I). Upon completion of all or any portion of Phase I, the Utilities Director will have the sole discretion to make a determination, based on change in cost and/or feasibility of the project, whether to proceed to the construction phase (Phase II) for any component of the project. If the determinations is made to proceed, Contractor shall receive compensation for those components completed, total for all components not to exceed $2,323,472 for construction, and construction and project management services for Phase II,for a total project cost for both Phase I and II not to exceed$2,832,892. If a determination is made not to proceed with any component of the project,the City will pay for work completed as of the date the determination is made and there will be no further obligation on the part of either party. 4. CONTRACTOR'S OBLIGATIONS. For and in consideration of the payments and agreements hereinbefore mentioned to be made and performed by City, Contractor agrees with City to provide services as set forth in Exhibit A for Phase I and Phase II portions of the proposal, attached hereto and incorporated into this 4 - N Attachment 2 Agreement Page 2 Agreement. Contractor further agrees to the contract performance terms as set forth in Exhibit B attached hereto and incorporated into this Agreement. 5. AMENDMENTS. Any amendment to Phase I or Phase II of the project or, modification or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Administrative Officer 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 City Clerk City of San Luis Obispo 990 Palm Street San Luis Obispo,CA 93401 Contractor Kevin Ray Kinetics Systems,Inc. 7 Marconi Irvine,CA 92618 with a copy to: Kinetics Systems,Inc. Attn:Contracts Manager 33225 Western Avenue Union City,CA 94587 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Contractor 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. 9. GOVERNING LAW. The terms of this Agreement will be construed and enforced in accordance with the laws of the California,without regard to conflicts of law doctrine. c�.- IS Attachment 2 Agreement Page 3 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 APPROVED AS TO FORM: CONTRACTOR:KINETICS SYSTEMS,INC. L By: i om Attachment 2 E� K IN ET I CS Exhibit A Scope of Work ALL SITES Kinetics shall provide the City of San Luis Obispo with a complete turnkey modernization project, as identified in the following detailed site scopes. Kinetics is responsible for the design, engineering, permits,fees, approvals, project management, installation, startup, checkout, warranty, insurance and bonding specifically associated with the work to be performed. Kinetics is not responsible for any existing conditions in the equipment, systems, controls, comfort problems, balancing, etc. not specifically included in this agreement. All work will be completed by Kinetics or by subcontractors mutually agreed upon by both Kinetics and the City's representative. Kinetics will provide submittals and engineered drawings (where required), for the City's technical review, prior to initiating construction. All construction and associated cleanup shall be scheduled so as not to interfere with any ongoing activities. Warranty Schedule New Equipment Term Coverage Lamps i Year Parts Ballasts 5 Years Parts Reflectors io Years Parts EMS/ Controls i Year Parts & Labor Micro generation Units i Year Parts & Labor Micro generation Units 3 Years Maintenance Service_ Power Correction Devices i Year Parts & Labor VFD's i Year Parts& Labor HVAC i Year Parts& Labor WWTP Blower z Year Parts& Labor 1. Kinetics will coordinate and facilitate all warranty claims with the manufacturer for all newly installed equipment listed above. z. Kinetics will provide assurance of replacement parts availability throughout the term of this agreement. Scope of Work E-1 Attachment 2 K I N E T I C S Exhibit A ti •ii +'+�+ Scope of Installation Recreation Center EMS AND CONTROLS Install an energy management system (EMS) in the building to include direct digital control of the newly installed roof mounted package air conditioning units serving the recreation building. The controls shall include a digital controller, space temperature sensor with override and warm/cool adjustment and interconnection wiring for each package, split system air conditioning and furnace unit. Provide a modem for communication to the City's existing operator computer workstation. Provide one-year manufacturer warranties, commissioning and start-up on all newly installed equipment. Scope of Work E-z t 4 ^lq Attachment 2 C� K IN ET I CS Exhibit A .... • +++ ii• ... Scope of Installation Swim Center SWIMMING POOL CO-GENERATION Provide and install a complete co-generation system including associated gas piping, pool water supply and return piping. The co-generation system includes two 3okW Capstone type micro turbine generators with high pressure fuel kit, gas booster. pump, heat exchanger, ducting kit, transfer switch,electric wiring, concrete pad and underground work. Remove the existing solar hot water panels and aboveground piping. Provide three-year micro turbine service which includes scheduled maintenance visits, including required maintenance parts. Service also includes repair service calls and labor during regular business hours. Repair parts, and overtime labor charges are handled ona time and materials basis at our published rates. Scope of Work E-3 . 1 Attachment 2 F=:� K IN ET I CS Exhib t o Scope of Installation Wastewater Treatment Plant ELECTRICAL POWER QUALITY Provide and install power quality correction devices at various nodes, i.e. motors, motor control centers, etc., on the electrical distribution system to correct the electrical power factor to between .93 and .97 as measured at the service entrance section. Included in this scope of work are the engineering study, electrical work and up to 28 devices calculated to correct the load factors. MECHANICAL BLOWER Replace one of the existing Lamson aeration blowers with a like-size high efficiency Turblex model KA5 variable pitch vane blower. The unit installation shall be designed per the manufacturers guidelines and will include the following: Turblex blower, motor. and oil cooler assembly, new intake filter and silencer assembly, motorized discharge valve, discharge check valve assembly, complete instrumentation and controls, remote mounted control panel (to be located in the motor control building), engineering, complete. installation and system start-up. Provide one-year manufacturer warranties on all newly installed equipment. DIGESTER CO-GENERATION Provide and install a complete zoo kW co-generation system including associated methane gas piping, hot water supply and return piping. The co- generation system includes eight 3okW capstone type micro turbine. generators with sour gas scrubber, gas booster pump, heat exchangers, ducting kits, transfer switch, electric wiring and concrete pad. Provide and install a new 1,000 Mbtuh high efficiency boiler. Remove the existing 125 kW methane engine generator, switchgear, distribution piping, hot water boiler, gas regulator and controls. Provide three-year micro turbine service which includes scheduled maintenance visits, including maintenance parts. Service also includes repair service calls and labor during regular business hours. Repair parts and overtime labor charges are handled on a time and materials basis at our published rates. Scope of Work E-q Attachment 2 F=� K Exhibit ::. TOWER VFD'S Provide and install three 4o hp variable frequency drives for the discharge cooling tower fans. The drives shall be located in the motor control building where the fan motor starters are located. Provide controls to modulate the. fan speed based on the existing plant discharge temperature sensor. The existing tower circulation pumps, basin level controls and Flow control valves shall remain. The operation of the tower systems shall continue to be manually started. LIGHTING • See attached lighting summary Scope of Work E-5 4,c)A Attachment < < < z f Exhibit k — \ \ S § C-F U 2 ■ 0 — � UJ 0 a _ t _ _7 E 4) cc a \ / / CM § t \ e \ � ■ — 13 � O \ / / f o £ A 0 ■ @ K ® _jm k em 0 0 # � ¥ k U- . 2 g LU Cc \� CD j Lb a # ■ a= —= D CL § . ( a_ b J 8 2 k ■ � . k cc 10 ) { t m tM $ } } } k \ cc § § Attachment 2 Q� K IN ET I CS Exhibit A ::. +++ Scope of Installation Water Treatment Plant & Pump Stations ELECTRICAL Provide and install power quality correction devices at various nodes, i.e. motors, motor control centers, etc., on the electrical distribution system to correct the electrical power factor to between .93 and .97 as measured at the service entrance section at each of the three pump stations (Santa Margarita, Whale Rock and the main plant discharge. Included in this scope of work are the engineering study, electrical work and up to 25 devices calculated to correct the load factors. These devices shall not be required at the actual treatment plant location. LIGHTING • See attached lighting summary Scope of Work E-6 Attachment 2 Exhibit A VI m N N N N � N N M Vf N N N N QN N N N N y V N N i > W D7 tp tD N Q I� W LL9 t� n N Q W Q Q 1� N O O O Q O O O O W O O O W O O Y Q Q < O N n O Q C < O W N W O O $ S O � tOO � t00 O pO � o o O N ` ' O O N W W A � A r W to A LL9 w W IV o O N 1� Q R W f0 W f0 N N t0 N M W mm W Li'l Il'l 1l') O M SLI O Y') In O ^ M M O Q C7 M O O O) O O O M O O i C O C C O C C O O G O O O O G O W n n n W a N W W N W O O a p p 2i a a a a a a a O a a. m m m m E E Q, a n n a n n m n n m a n n n n m n n m mN N N N N C N N m J J J J J C J J C ri c 6 6 d ri ri 'h' d ri d c d d d m m m m m a� 'D 'mom m m m 0 !o c W W W W W cD W W W WW W m W C ` �- IM � f- r LL H LL V N N N N N U N N W N N N N N U N N U M M M M M M M J M M M M M M M O O LL LL LL LL LL LL LL -3 LL LL LL LL LL LL LL l'7 N CJ CY f7 N N Z N N N N f7 ' N N J C c c c c c ^ c c c c c c c c Q M N M M M Z3 M M M M M M M W m M M M M M > M M O � p M S OD O) Oa COD LL'> M � O M M O Q CD N O op Cp A � 3 � i N nl A � ^ � N C%i N J O U) O O O O p p pp pp O O O O O O O O N O OO O S (O ip W W O O W O O O Ca G O O L In W n to H1 n 49 I In .F S < Q eh C'f � M a7 ao iD a0 ep W [h O Y O O G O O O O C O O < r-: r N O („� G G C O O O C C C p m W m o o o o� o� -� may�2! F � � �� c- f m �9 c o ~9 c m - C LL p LL LL LL LL C LL LL .� LL p LL p LL O) LL Of � LL p c LL W LL W c LU m a E '�' E � EVE EBa E E xg :CE % E 9E z C E BQ � E E 88� J J J J J j J J m N J J J J �_ J 0� J J ej GS IL LL M 3 N 3 M Q3 M 3 M 3 N QQ; N Qs3 J N 3 N i N a�3{{ N QQ3 M QQ3 2 N 3 N Q3 C C_ fQ7 <M <l") Q <M r Q fh C"• N RCQ') CfQ7 <t7 QC7 3 iV iV iV iv F.l _� iv K X x x Co N c 7 O — — O m yC( Q E 0 - E m c $ _ E E € - - c E E E i4 m c �° m m m m - is � d g _gym � 92 m m � � m � � E � � a 0 w E g C p K ¢ ¢ ¢ Cr C w M m � ¢ ID E E E E E o z ¢ ¢ r U- - N �n r rn p - m - M a IOL - - W - W -M 3i A S Dig � i � A A m ¢ z ¢ 2 z ¢ ¢ ¢ ¢ ¢ s s z m at ¢ r '� Attachment 2 Exhibit A V / y N V 9 i M Y Ol y r (A O O Cm N N O O m e O O Ouj O JS[ C C O G C C O Q ZY Of m OI Q m Q N N N (OO (OD N N � O pOmp M � f7 O LL b i o W N 0 IL B a a a a c H 0 o Ow. � m m m d m m d n n n n n n n N N N N N N N N E E E E E E m i m m a !R m m m m m m CI W 0Q LL ti LL IML IML LL y �j L q _m ~ C J2 Q Q Q N M m M N 0 13 3 m Q Q N N r N O O O � N 0 0 AIcis v J! N fOV fOV t0 t00 N pm COO COD O C7 M M m m M M Q Q Q 0 QN r [1 N V Y O G' O O C G O O m CQ E r V m LL VV Q _ 0 c g 3 �W/. m .�a .�a Co va •�. 0 u. 0I tL O LL ey tL O !L 0) tL O a M LL !A O IX W E ' E E E �'c E �a =o z E X:525 M N M M N N • = J J J J J J J xcc m X X X X rn X Tr, N (V LV <V a = L K M cc _ ti Y Y � CL CD E � ` ¢ ¢ tr ¢ ¢ m tr ¢ O ¢ ¢ ¢ O' •� OI N N N N m N N � LL N N N a' Cr cc Q w 0: lY m r X a' C v Attachment 2 Exhibit A 5 a < 3 ;, ................... "D :a m r c ...- ..... .. E E c D Q L o a w LL I . QCL --------------------------- _ J VIL CL CL XX � ^ �. � 7 7 7 J N m w0. Z z 0 �° Ir w fA r ......... ................ ----------------............................... .................. W a "_ N N N CO N CO M M M M M M M M M M M M M M O O O O O O O O O O O O O O O O O O O O l� f� (O r r M r < t0 r ��-• n 4) r r to m t r N N M r r N r N r N r r r r M M r N - m N N 0 N00 r N N ." M � V' N r OD P N M M r r Z r C Z L �. i C L L 3 3 C % - FLL LL LL F LL LL LL LL LL LL LL 0 LL LL M M LL LL N N N N N CO M M M M M M M M M M M M M M a o 00 0 0 o a o 0 0 0 o a o 0 0 0 0 0 C� CO M M f0 t6 h M 0 M M� O M O M� N EQO O r W r N N N r N r r r N r r r N r r r m p m N r n CD Y 2 m E m r r r r N C C r r r r r C N m z c c t 0 0 0 0 0 2 0 0 U- 0 �c 0 0 F aai y LL 0 0 U- F- to N Q C O) w C 0 OO 0 C N .O. m U v o m L p c o m o o m m cc o LL O U > 2 n P m 0 ` m U 0 0 `0 m m � m = 03 0 ms w 0 c = U m 5 S i o 3 Q c c o m o ; r o o m o m N �a E m �, c L $ q a° -M0° a s n. a F a m a a o w m a` U ¢ w O 2 a 0 M o o ii o a 0 Attachment 2 Exhibit B Exhibit B CONTRACT PERFORMANCE TERMS 1. Business Tax. Contractor must have a valid City of San Luis Obispo business tax certificate prior to execution of the contract. Additional information regarding the City's business tax program may be obtained by calling(805) 781-7134. 2. Ability to Perform. Contractor warrants that it possesses, or has arranged through subcontracts, all capital and other equipment, labor, materials, and licenses necessary to carry out and complete the work hereunder in compliance with any and all federal, state, county, city, and special district laws,ordinances,and regulations. 3. Laws to be Observed. Contractor shall keep itself fully informed of and shall observe and comply with all applicable state and federal laws and county and City of San Luis Obispo ordinances,regulations and adopted codes during its performance of the work. 4. Payment of Taxes. The contract prices shall include full compensation for all taxes that Contractor is required to pay. 5. Permits and Licenses. Contractor shall procure all permits and licenses, pay all charges and fees, and give all notices necessary. 6. Safety Provisions. Contractor shall conform to the rules and regulations pertaining to safety established by OSHA and the California Division of Industrial Safety. 7. Public and Employee Safety. Whenever Contractor's operations create a condition hazardous to the public or City employees, it shall, at its expense and without cost to the City, furnish, erect and maintain such fences, temporary railings,barricades, lights, signs and other devices and take such other protective measures as are necessary to prevent accidents or damage or injury to the public and employees. 8. Preservation of City Property. Contractor shall provide and install suitable safeguards, approved by the City, to protect City property from injury or damage. If City property is injured or damaged as a result of Contractor's operations, it shall be replaced or restored at Contractor's expense. The facilities shall be replaced or restored to a condition as good as when the Contractor began work. 9. Immigration Act of 1986. Contractor warrants on behalf of itself and all sub-contractors engaged for the performance of this work that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of the work hereunder. 10. Contractor Non-Discrimination. In the performance of this work, Contractor agrees that it will not engage in, nor permit such sub-contractors as it may employ, to engage in discrimination in employment of persons because of age, race, color, sex, national origin or ancestry, sexual orientation,or religion of such persons. 11. Work Delays. Should Contractor be obstructed or delayed in the work required to be done hereunder by changes in the work or by any default, act, or omission of the City, or by strikes, fire, earthquake, or any other Act of God, or by the inability to obtain materials, equipment, or labor due to federal government restrictions arising out of defense or war programs,then the time Attachment 2 Exhibit B Exhibit B:Contract Performance Terms Page B-2 of completion will be extended for such periods as may be agreed upon by the City and the Contractor,but no less than the number of days of the delay. 12. Payment Terms. The City's payment terms are 30 days from the receipt of an original invoice and acceptance by the City of the services provided by Contractor (Net 30) for Phase I and lI components of the project. 13. Inspection. Contractor shall furnish City with every reasonable opportunity for City to ascertain that the services of Contractor are being performed in accordance with the requirements and intentions of this contract. All work done and all materials furnished, if any, shall be subject to the City's inspection and approval. The inspection of such work shall not relieve Contractor of any of its obligations to fulfill its contract requirements. 14. Audit. The City shall have the option of inspecting and/or auditing all records and other written materials used by Contractor in preparing its invoices to City as a condition precedent to any payment to Contractor. 15. Interests of Contractor. Contractor covenants that it presently has no interest, and shall not acquire any interest direct or indirect or otherwise,which would conflict in any manner or degree with the performance of the work hereunder. Contractor further covenants that, in the performance of this work,no sub-contractor or person having such an interest shall be employed. Contractor certifies that no one who has or will have any financial interest in performing this work is an officer or employee of the City. It is hereby expressly agreed that, in the performance of the work hereunder, Contractor shall at all times be deemed an independent contractor and not an agent or employee of the City. 16. Hold Harmless and Indemnification. Contractor agrees to defend, indemnify, protect and hold the City and its agents, officers and employees harmless from and against any and all claims asserted or liability established for damages or injuries to any person or tangible property, including bodgy injury to Contractor's employees, agents or officers to the extent caused by the acts or omissions of Contractor, and its agents, officers or employees, in performing the work or services herein, and all expenses of investigating and defending against same;provided, however, that Contractor's duty to indemnify and hold harmless shall not include any claims or liability arising from the established negligence or wilful misconduct of the City, its agents, officers or employees. 17. Year 2000 Compliance. The Contractor warrants that the goods or services provided to the City, including those provided through subcontractors, are "Year 2000 compliant." For the purpose of this contract, "Year 2000 compliant" means that goods or services provided to the City will continue to fully function, fault-free, before, at and after the Year 2000, without interruption or human intervention; and if applicable, any data outside of the date range 1990- 1999, including leap years, will be correctly processed in any level of computer hardware or software, including,but not limited to,microcode, firmware,application programs, files and data bases. This warranty supersedes all warranty disclaimers or limitations, and all limitations on liability,otherwise provided by the Contractor. Upon request by the City,the Contractor will provide the City with a description of its Year 2000 compliance strategy, or statement of why this is not relevant to contract performance. 4-' d o Attachment 2 Exhibit B Exhibit B:Contract Performance Terms Page B-3 18. Contract Assignment. Neither party shall assign, transfer, convey or otherwise dispose of the contract, or its right, title or interest, or its power to execute such a contract to any individual or business entity of any kind without the previous written consent of the other party. 19. Termination. If, during the term of the contract,the City determines that Contractor is not faithfully abiding by any term or condition contained herein, the City may notify Contractor in writing of such defect or failure to perform; which notice must give Contractor a 10 (ten) calendar day notice of time thereafter in which to perform said work or cure the deficiency. If Contractor has not performed the work or cured the deficiency within the ten days specified in the notice, such shall constitute a breach of the contract and the City may terminate the contract immediately by written notice to Contractor to said effect. Thereafter, neither party shall have any further duties,obligations,responsibilities or rights under the contract. In said event, Contractor shall be entitled to the reasonable value of its services performed from the beginning date in which the breach occurs up to the day it received the City's Notice of Termination, minus any offset from such payment representing the City's damages from such breach. "Reasonable value" includes fees or charges for goods or services as of the last milestone or task satisfactorily delivered or completed by Contractor as may be set forth in the Agreement payment schedule; compensation for any other work, services or goods performed or provided by Contractor shall be based solely on the City's assessment of the value of the work-in- progress in completing the overall workscope. The City reserves the right to delay any such payment until completion or confirmed abandonment of the project, as may be determined in the City's sole discretion, so as to permit a full and complete accounting of costs. In no event, however, shall Contractor be entitled to receive in excess of the compensation quoted in its proposal. Additionally, the City reserves the right to terminate the contract upon completion of Phase I or before as defined in Section 3 "City's Obligations"of the Agreement,if a determination is made by the Utilities Director not to proceed to Phase II of the project. 20. Ownership of Materials. All original drawings, plan documents and other materials prepared by or in possession of Contractor as part of the work or services under these specifications shall become the permanent property of the City, and shall be delivered to the City upon demand, however, Contractor may retain one (1) copy of such materials for archival purposes only. Contractor shall retain all common law, statutory and other reserved rights, including copyright, title, patent, service mark and trade secrets in those instruments of service finmished by them. Drawings, specifications, and other documents and electronic data are furnished for use solely with respect to this Agreement. City shall be permitted to retain copies, including reproducible copies, of the drawings, specifications, and other documents and electronic data furnished by Contractor for information and reference in connection with the work. 21. Release of Reports and Information. Except as provided in Section 20, any reports, information, data, or other material given to, prepared by or assembled by Contractor as part of the work or services under these specifications shall be the property of City, and shall not be made available to any individual or organization by Contractor without the prior written approval of the City. 4-2� I kttachment 2 Exhibit B Exhibit B:Contract Performance Terms Page B-4 22. Copies of Reports and Information. If the City requests additional copies of reports,drawings, specifications, or any other material in addition to what Contractor is required to furnish in limited quantities as part of the work or services under these specifications, Contractor shall provide such additional copies as are requested, and City shall compensate Contractor for the costs of duplicating of such copies at the Contractor's direct expense. 23. Required Deliverable Products. Contractor will provide: a. Five copies of a final report that addresses each element of the work scope for Phase I including: ■ Preliminary Design Report ■ Final Design and.Engineering Report ■ Plans, Specifications and construction documents Any documents or materials provided by Contractor will be reviewed by City staff and, where necessary, Contractor will respond to staff comments and make such changes as deemed appropriate. b. Complete and approved Special Provisions for construction in accordance with the City of San Luis Obispo's Public Works Department, Standard Specifications October 2000 edition, in conjunction with the State of California, Department of Transportation Standard Specifications dated July 1999, upon the decision of the Utilities Director to proceed to any segment of construction of Phase II projects. Contractor will coordinate with Public Works and Utilities Department staff during all facets of the construction to ensure facilities operations are not interrupted. C. Upon completion of the Phase Il of the project,contractor will prepare and submit record drawings for all construction. d. When computers have been used to produce materials submitted to the City as a part of the workscope, Contractor must provide the corresponding computer files to the City, compatible with the following programs whenever possible: • Word Processing Word • Spreadsheets Excel • Desktop Publishing Coreldraw,Pagemaker • Computer Aided Drafting(CAD) AutoCad Computer files must be on 31/2", high-density, write-protected diskettes, formatted for use on IBM-compatible systems. Each diskette must be clearly labeled and have a printed copy of the directory. 24. Attendance at Meetings and Hearings. As part of the workscope and included in the contract price is attendance by the Contractor at up to 2 public meetings to present and discuss its findings and recommendations. Contractor shall attend as many "working" meetings with staff as necessary in performing workscope tasks.. 25. Insurance. Contractor shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property that may arise from or in connection Attachment 2 Exhibit B Exhibit B:Contract Performance Terms Page B-5 with the performance of the work hereunder by Contractor, its agents,representatives, employees or sub-contractors. a. Minimum scope of insurance. Coverage shall be at least as broad as: • Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). • Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code 1 (any auto). • Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance. • Errors and Omissions Liability insurance as appropriate to Contractor's profession. b. Minimum limits of insurance. Contractor shall maintain limits no less than: • General Liability: $1,000,000 per occurrence for bodily injury and property damage. If Commercial General Liability or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. • Automobile Liability: $1,000,000 per accident for bodily injury and property damage. • Employer's Liability: $1,000,000 per accident for bodily injury or disease. • Errors and Omissions Liability: $1,000,000 per occurrence. C. Deductibles and self-insured retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or Contractor shall procure a bond guaranteeing payment of losses and related investigations,claim administration and defense expenses. d. Other insurance provisions. The general liability and automobile liability policies are to contain,or be endorsed to contain,the following provisions: • The City, its officers, officials, employees, agents and volunteers are to be covered as insureds as respects: liability arising out of activities performed by or on behalf of Contractor, products and completed operations of Contractor, premises owned, occupied or used by Contractor; or automobiles owned, leased, hired or borrowed by Contractor. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officers, official, employees, agents or volunteers. • For any claims related to this project, Contractor's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, agents and volunteers. Any insurance or self-insurance maintained by the City, its officers,officials, employees, agents or volunteers shall be excess of Contractor's insurance and shall not contribute with it. 4 - 54 Attachment 2 Exhibit B Exhibit B:Contract Performance Terms Page B-6 • Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City, its officers, officials, employees,agents or volunteers. • Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. • Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail,return receipt requested,has been given to the City. e. Acceptability of insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than ANU. f. Verification of coverage. Contractor shall furnish the City with a certificate of insurance showing maintenance of the required insurance coverage. Original endorsements effecting general liability and automobile liability coverage required by this clause must also be provided. The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements are to be received and approved by the City before work commences.. 26. Warranty. Contractor warrants to the City that materials and equipment furnished under the Agreement will be of good quality and new unless otherwise required or permitted by the contract documents, that the work will be free from defects not inherent in the quality required or permitted for a period of one year from the date of City's acceptance of the work. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. This warranty excludes remedy for damage or defect caused by abuse, modifications not executed by Contractor, improper or insufficient maintenance, or improper operation. Contractor disclaims all implied warranties, including merchantability and fitness for a particular purpose. City's sole and exclusive remedy under this provision is Contractor's prompt repair or replacement of the defective work 27. Conflicts. If any provision in this Exhibit B conflicts with any other provision in the Standard Specifications or other contract document,the terms contained in this Exhibit B shall prevail. 4 _ -� Attachment 3 KINETICS 9 Marconi PROPOSAI #AOUOAOOOIF-B Irvine, CA 92618 DATE October 22, 2002 CUSTOMER: City of San Luis Obispo 879 Morro Street San Luis Obispo, CA 93401 SERVICES PROVIDED AT: See Scope of Work, Exhibit A of Attachment 2 for a complete listing of facilities. SERVICES TO BE PERFORMED: Support Services and Savings Guarantee Agreement PRICE: $621.00 per month (SD( HUNDRED AND TWENTY-ONE DOLLARS AND NO CENTS) TERM: Services will begin upon completion of the Installation Agreement and acceptance by the City and continue for a term of not more than ten (10) years. Successful attainment of the annually guaranteed savings amount (100% or more) for a period of three (3) consecutive years shall satisfy all saving guarantee requirements of this agreement. This Support Services and Savings Guarantee Agreement and the Attachments listed below shall constitute the contract (the "Agreement") between the parties only upon signature in the spaces provided below for the City of San Luis Obispo ("City") and Kinetic Systems, Inc. ("Kinetics"). Only an individual duly authorized by Kinetics may change, waive, alter or modify this Agreement. Any change, waiver, alteration, or modification must be in writing and agreed to by the City. ATTACHMENT A Savings Summary ATTACHMENT B Occupancy/Historical Load Schedules ATTACHMENT C Measurement and Verification Plan Contractor: Customer: KINETIC SYSTEMS, INC. CITY OF SAN LUIS OBISPO By: By: Title: Title: Support Services and Savings Guarantee Agreement 1 4. 33 Attachment 3 F=� K Date: Date: Support Services and Savings Guarantee Agreement 2 4. Attachment 3 KINETICS s +.. GENERAL PROVISIONS 1. Signatories to this Agreement represent and warrant that they are empowered to bind each Party individually and jointly and that they are fully authorized representatives/officers of any corporate entity and/or political subdivision which is a party to this Agreement. 2. The waiver of any breach of this Agreement by any party hereto shall not constitute a waiver of any subsequent breach either of the same or of another provision of the Agreement. 3. All covenant, promises and provisions contained in this Agreement are severable, and in the event that such covenant, promise or provision is held or adjudicated invalid by a Court of competent jurisdiction, the remainder of this Amendment shall be operative and binding effect. 4. The terms and conditions hereof shall insure to the benefit of and be binding upon the heirs, personal representatives, and successors of the parties hereto and is non-assignable by any of the parties hereto unless specifically allowed in this Agreement. 5. This Agreement, and the rights and duties hereunder, shall be interpreted in accordance with the laws of the State of California. 6. This Agreement excludes any applicable State or local sales taxes. 7. Significant modification or customer-initiated termination of the provisions of this Agreement, prior to the end of the term of this Agreement will void any energy-saving guarantee. 8. This guarantee is proprietary property of Kinetics and is provided for the exclusive use of-CITY. This guarantee will become binding only after acceptance by The City and Kinetics, as evidenced by their signatures. This performance warranty is issued subject to the following exclusions: ■ Loss arising from physical damage to energy management or energy consuming equipment, whether sudden or gradual, including but not limited to fire, explosion, floods, earth movements, and acts of God. e Loss arising from mechanical breakdown or energy management or energy consuming equipment NOT connected to the energy management equipment installed in this project e Loss arising from intentional misuse or abuse of any energy managing or energy consuming equipment. e Loss arising from vandalism, sabotage, malicious mischief, labor slowdown or lockout. e Loss arising from change in any law, ordinance, statute or regulation by a legally constituted public authority occurring after the inception of this guarantee. ■ Loss arising from interruption of any utility service (including but not limited to electricity, gas, telecommunication, sewer, or water). ■ Loss arising from abandonment or non-use of the equipment in part or in its entirety. s Loss arising from failure to repair or maintain the equipment. Support Services and Savings Guarantee Agreement 3 Attachment 3 SKI N ET I CS SUPPORT SERVICES 1. Measurement&Verification A total of four (4) quarterly Measure and Verification reports per year will be providing to the City. The reports will be in executive style 2-3 pages per site. The reports will be customized after input from the City to determine style and format. Calendar of Repmo ing Deliverables ]an Feb Mar I A r I Mav ] I AugSep Qct I Nov Dec M&V M&V M&V Customer M&V Customer Review Review This report and service include a total of four (4) site visits over the three-year period. This service consists of two (2) visits during the first year and one (1) site visit each in years two and three. The first visit is for the initial site visit with City staff and the other three are for an in person presentation of the year-end and semi annual report. All other quarterly reports will be reviewed with Kinetics and City staff via teleconference. 2. Kinetics will coordinate and facilitate all warranty claims with the manufacturer for all newly installed mechanical equipment. 3. Kinetics will coordinate and facilitate all warranty claims with the manufacturer for all newly installed control devices. 4. Kinetics will coordinate and facilitate all warranty claims with the manufacturer for all newly installed lighting devices. 5. Kinetics will provide assurance of replacement parts availability for all newly installed equipment throughout the term of this agreement. 6. Kinetics will provide initial training of Staff in the proper operation of all newly installed equipment. 7. The City agrees to furnish safe, reasonable access to the buildings and covered equipment. If required, the City will remove any material, fixtures or walls, so adequate access can be gained to the equipment. 8. Liability for repairs, replacements, alterations, additions, adjustments, repairs by others, or unscheduled calls caused by negligence, abuse, misuse, or vandalism damage beyond Kinetics' control is not part of this Agreement. Support Services and Savings Guarantee Agreement 4 Attachment 3 SKI N ET I CS see PERFORMANCE GUARANTEE As part of this agreement, Kinetics hereby guarantees the energy and operational savings associated with the energy conservation measures (ECM's) identified in Attachment E of the Installation Agreement. The Performance Guarantee will begin upon completion of the installation of the EOM's as required by the Installation Agreement and continue for the term of this Agreement. During that time the City agrees to furnish Kinetics with copies of all related monthly utility bills (electric and gas) on a timely basis, not to exceed fourteen calendar days from receipt of same. Kinetics will compile the data and present an energy audit on a quarterly basis to the City. As a result of the Kinetics' program the City will realize energy savings, operational savings and may receive substantial utility incentives (all documented in Attachment "A" of this agreement). It is agreed that operational savings are fulfilled upon acceptance of this Agreement. The Performance Guarantee will be reconciled on an annual basis. During the tern of this Agreement, Kinetics guarantees that program savings and utility incentives will exceed $347,587 annually, subject to the following conditions: 1. Facility usage and operating schedules will be similar to the 2001 calendar year. Occupancy/historical load schedule data for 2001, as provided by City staff, are listed in Attachment"B". It is understood by the City that facility usage or operation outside of the parameters identified in Attachment"B"will affect annual energy savings. When this occurs, guaranteed savings may need to be adjusted by a mutually agreed upon amount to reflect the new parameters. 2. The customer agrees that savings which exceed the guaranteed amount in any one (1) year may be applied to previous or future years savings. 3. Kinetics will follow the International Performance Measurement and Verification Protocol (IPMVP)to verify the energy savings associated with the ECM's listed in Attachment E of the Installation Agreement. This protocol is recognized by the National Association of Energy Service Companies (NAESCO)as the standard guideline for how savings resulting from energy conservation projects should be measured. The IPMVP defines four brad options for measurement and verification of energy savings. The categories are as follows: Option A Largely stipulated parameters, instantaneous measurements may be incorporated. Option B Predominately end use measurement techniques, some stipulated parameters are allowable. Option C Utility Billing Analysis Option D Calibrated Building Simulation Analysis Support Services and Savings Guarantee Agreement 5 41-Y) ;i Attachment 3 SKI N ET I CS Each option is applicable to specific situations and often times, more than one option is possible. The table on the following page matches the ECM's with the IPMVP option to be employed. The Measurement and Verification Plan (Attachment T'J provides a detailed description of the proposed M&V protocol for each ECM. 4. Kinetics will monitor the energy audit process and will immediately implement necessary system enhancements, at Kinetics sole expense, if an individual quarterly audit indicates that an annual savings shortfall is likely to occur. In the event of a savings shortfall, Kinetics will reimburse the customer through crediting the service agreement and/or direct reimbursement. S. In the event utility rates increase or decrease, the savings will be adjusted at the same percentage of change. 6. The City agrees to inform Kinetics of any changes to facility operating conditions such as; adding equipment, changes to operating schedules or load conditions, adding buildings or increased square footage. Guaranteed savings will be adjusted by a mutually agreed upon amount to reflect the new conditions. This guarantee is proprietary property of Kinetics and is provided for the exclusive use of the City. This guarantee will become binding only after acceptance by the City and Kinetics. Support Services and Savings Guarantee Agreement 6 4 . 31 i Attachment 3 KINETICS +++ IPMVP OPTION TABLE Lighting EMS/Controls Energy Cogeneration Power Mechanical Retrofits Reporting Quality Retrofits Administration Included Office City Hall Included Fre Station Included #1 Police Included Department Recreation Option B Included Center Swimming Included Option B Pool Complex Wastewater Treatment Option A Included Option B Option C Option B Plant Santa Margarita Option C Pump Station. Whale Rock Option C Pump Station Water Treatment Option A Included Option C Plant Support Services and Savings Guarantee Agreement 7 4{ -31 Attachment 3 SKI N ET I CS ATTACHMENT A SAVINGS SUMMARY 1. ANNUAL ENERGY SAVINGS $337,381 2. LIGHTING OPERATIONAL SAVINGS $206 Annual cost, currently paid by the City, to replace lamps, ballast and bulbs in facilities scheduled to receive lighting retrofits as part of this program. Ongoing disposal costs for fluorescent lamps and ballasts will also be reduced or eliminated at these locations. 3. EQUIPMENT OPERATIONAL SAVINGS $10,000 Annual cost currently paid by the City, to repair the equipment and related control systems scheduled for replacement as part of this program. 4. ENERGY REBATES AND INCENTIVES $283,700 Anticipated energy conservation incentives paid to the city by PG&E and the State of California Energy Commission programs. Support Services and Savings Guarantee Agreement 8 (J� 4-` D Attaehment3 SKI NET I C S ATTACHMENT B OCCUPANCY/ HISTORICAL LOAD SCHEDULES The following tables include daily and hourly occupancy and load data, as provided by City staff, for the various facilities: City of San.Luis Obispo Building Usage Data 2001 Calendar Year Administration Office Days Occupied Occupied Hours Office M-F 7:00 a.m. -4:00 p.m. Marsh Street Parking Days Occupied Occupied Hours 7-Days 24 Hour Facility Palm Street Parking Days Occupied Occupied Hours Facility 7-Da 24-Hour Facili Swimming Pool Complex Days Occupied Occupied Hours Pump 7-Da 24- Hour Operation Boilers 7-Da 24-Hour Operation Wastewater Treatment Plant Operating Days Operating Hours Exterior Lighting 7-Das 24-Hour Facility Daily MGD Load Average See 2001 Flow&Load Data Water Treatment Plant Pump Station 1,Whale Rock&Santa Margarita Operating Das 20rating Hours Winter normal shift Water Treatment Plant 7 Das Summer Off-Peak Support Services and Savings Guarantee Agreement 9 4 -4I Attachment 3 F=:� K +++ Pumping Stations See 2001 Flow Data Support Services and Savings Guarantee Agreement 10 , `'f' Attachment 3 SKI N ET I CS ATTACHMENT C MEASUREMENT & VERIFICATION PLAN Lighting Retrofits (Option Al Waste Water Treatment Plant and Water Treatment Plant Lighting systems hours of operation are documented in Attachment "E" of the Installation Agreement. Upon acceptance of this Agreement, Kinetics will demonstrate and document pre- retrofit and post-retrofit conditions (amperage, voltage and foot-candle readings) in the presence of a City representative. Measurement and verification of the Energy Cost Savings (ECS) associated with the lighting retrofits will be done by the following formulas: Fixture Quantity x Watts Saved/Fixture x SkW/1000W x Hours of Operation x $/kWh = Energy Charge$'s Saved Fixture Quantity x Watts Saved/Fixture x 1kW/1000W x # of Months/Year x $/kW = Demand Charge$'s Saved The savings amount will be a calculated average amount agreed upon with the customer and applied on a monthly basis to the savings report. Support Services and Savings Guarantee Agreement 11 4-43 Attachment 3 KINETICS EMS / Controls (Option —All: Recreation Center Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of direct digital controls (DDC) to reduce runtime of the package air conditioning equipment will be an Option A. The savings will be from the following formula: ECS = (HR)(CL)(EC) Where as: HR = Hours of reduced runtime from controls, demonstrated with customer. CL = Full electric load of the package units during cooling and heating. EC = Cost of energy based upon current tariff from the local utility. The savings amount will be a calculated average amount agreed upon with the customer and applied on a monthly basis to the-savings report. Support Services and Savings Guarantee Agreement 12 L+ `(T Attachment 3 SKI N ET I CS see Power Factor Correction (Option —Cl: Water Treatment Center Main, Whale Rock & Santa Margarita Pumping Stations Wastewater Treatment Plant Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of power factor correction devices will be done by comparing the average Main Meter power factor during the base year with the average Main Meter power factor after the installation of the device. The baseline power factor will be taken from the last(12) months of historical utility bills supplied by Kinetics for the utility meter effected by the retrofit. The current power factor after the retrofit will be taken from a copy of the utility bill supplied by Kinetics. The power factor will be the only thing analyzed from the utility bill for this site. The Energy Cost Savings (ECS) associated with this retrofit is the following: ECS = (CPF-BPF)(EC) Where as: BPF = Average power factor obtained from utility bills over a (12) month time period prior to the Installation of the power factor correction devices. CPF= Current power factor obtained from the current utility bill after retrofit. EC= Cost associated with power factor correction, based upon current tariff from the utility This (EC)takes into account only the itemized line item for power correction on the utility billings. It does not take into account the additional cost savings associated with demand and consumption reduction that result from bringing the power factor closer to unity, which is accounted for elsewhere. Support Services and Savings Guarantee Agreement 13 l '`i ; Attachment 3 SKI NET I CS Onsite Generation (Option — B): Wastewater Treatment Center Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of onsite generation will be done by the following formula: ECS = (MO)(EC) Where as: MO = Measured output of onsite generation in electricity published information EC = Cost of energy based upon current tariff from the local utility Support Services and Savings Guarantee Agreement 14 /' `4 -q(.P Attachment 3 E=� K Aeration Blower Upgrade (Option — B): Wastewater Treatment Center Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of the upgraded blower will be done by installing kWh monitoring equipment. The monitoring will be installed prior to the energy retrofit to collect pre data of the operation of the existing blower. This monitored kWh consumption data will be averaged to determine the average load of the blower motor under the existing constant speed/flow operation. The savings associated with this retrofit will than be the following: ECS = [(PML)(H)—PE](EC) Where as: PML = Pre-motor load determined from pre data which is average to find average kW. H = Hours of blower system prior to retrofit, 24 hours per day per the contract. PE = Energy used by blower after retrofit from monitored kWh data EC = Cost of energy based upon current tariff from the local utility Support Services and Savings Guarantee Agreement 15 4- 41 Attachment 3 SKIN ET I CS see:. ... VFD's (ODtion — BZ Waste Water Treatment Center Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of the variable frequency drives will be done by installing kWh monitoring equipment on (1) of the (3) VFD's and then applying the saving results to the (2) remaining VFD's. The monitoring will be installed prior to the energy retrofit to collect pre data operation of the existing system running at constant speed. This monitored kWh consumption data will be averaged to determine the average load of the tower motor under the existing constant speed/flow operation. After the retrofit the system will be monitored for kWh usage and hours of operation. The monitored hours of operation will then be applied to the pre-retrofit monitored load to determine the energy usage for the base period. The savings associated with this retrofit will then be the following ECS = [(PML)(H)—PE](EC) Where as: PML = Pre-motor load determined from pre data which is average to find average kW. H = Hours of tower fan during current time period from monitored data. PE = Energy used by blower after retrofit from monitored kWh data EC = Cost of energy based upon current tariff from the local utility Support Services and Savings Guarantee Agreement 16 Attachment 3 SKIN ET I CS off:. +*+ 60 kW Cogeneration (Option — B): Swimming Complex Measurement and verification of the Energy Cost Savings (ECS) associated with the installation of the 60 kW cogeneration system will be done by monitoring the electrical and Btu output of the system. The monitored electrical output less any parasitic loads to operate will be divided by the total cost of cogeneration gas to determine the post installation unit cost of electricity. The. cogeneration utility bills required to calculate cost of gas will be supplied by the City. This calculated cost of generated electricity will be subtracted from the cost if this electricity had been purchased from the utility. The cost savings associated with the hot water produced from the cogeneration replacing the need for the boilers to operate will be calculated by multiplying the monitored Btu output used by the gain in efficiency from eliminating the combustion efficiency. This is the inverse of the existing boiler efficiency. This quantity is then multiplied by the current cost of gas that would have been paid if the cogeneration had not been installed. The savings associated with the electrical generation will then be the following ECS = [(NEG)(UC-CG)] Where as: NEG = Electricity generated less any parasitic loads for the gas compressor from monitored total electrical output data. UC = Unit cost of energy based upon current tariff from the local utility CG = Unit Cost of electricity generated, which is the total cost of cogeneration gas consumed divided by NEG from above. The savings associated with the hot water produced will be the following ECS = [(HW)(1/BE)(EC)] Where as: HW = Amount of hot water produced in Btu's from monitored data. BE = Efficiency of existing boiler, estimated as 80%. EC = Cost to produce Btu's if no cogeneration installed, based upon current tariff from the local utility. Support Services and Savings Guarantee Agreement 17 4 -49 RED FILE All, COUNCIL MEETING AGENDA COUNCIL MEMORANDUMDA 121°Z ITEM # November 8,2002 To: Mayor Settle and City Council Via: Ken Hampian, City Administrative Officer From: John E. Moss,Utilities Directg Subject: November 12, Agenda Item 4 — Implementation of.Energy Conservation Measures at Selected City Facilities A modification to the staff report and recommendation for the above mentioned agenda item has been made. The recommendation was modified to continue action on approval of the contract, the Support services agreement and the appropriation of funds for the project (see revised recommendation no. 4). This modification was required to allow staff to complete additional environmental review of the project recommendations. Additionally, a paragraph addressing the environmental review requirement has been added to report(page 5). Utilities staff had assumed the project would qualify for a categorical exemption under CEQA and upon further review with the Community Development Department it has been determined that additional review and information will be required by both CDD and the County Air Pollution Control District before proceeding with the project. This additional time may also be needed should Council decide to modify the scope of the services and energy conservation measures to be completed. I apologize for any inconvenience or confusion this may have caused. If you have any questions please call John Moss at x205. Attached: Revised staff report �14P`L1L CteS. COUNCIL d CDD DIR © FIN DIR AO C] FIRE CHIEF TT60 NEY C7 PW DIR RECEIVED cLEROMIG CJ POLICE CHF PT MEADS 6 A€g 61A i V2 NOV 0 8 2002 F5 6 HA 611RA � SLO CITY CLERK council Z�y a 14*5 [A] acEnaa Repom h.N..b. y C IT Y OF SAN LUIS O B 1 S P O FROM: John Moss, Utilities Director Prepared By: Ron Munds, Utilities Conservation Coordinator SUBJECT: IMPLEMENTATION OF ENERGY CONSERVATION MEASURES AT SELECTED CITY FACILITIES. CAO RECOMMENDATION 1. .Approve the Scope of Work proposed by Kinetics Energy Services, Incorporated (Kinetics) for the energy conservation measures to be implemented at selected City facilities (Attachment 2,Exhibit A). 2. Adopt findings necessary to proceed with a "design and build" contract and contract execution. 3. Authorize the Finance Director to work with the City's financial adviser, Fieldman, Rolapp and Associates, to secure lease/purchase financing for the energy projects, term not to exceed 10 years. 4. Continue action on the following items, which would return with and following an environmental determination for the project work (possibly as a consent item as early as j December 17);. a. The contract with Kinetics in the-amount of $2,832,892.00 for the preliminary design, design, construction and construction management of the energy conservation projects and authorize the Mayor to execute the contract (Attachment 2). 'b. The Support Services and Guaranteed.. Savings Agreement with Kinetics and authorize the CAO to execute the agreement upon completion of the installation agreement and acceptance by the City(Attachment 3). ' c. Appropriate $2,832,900 for these projects, to be funded via lease/purchase financing and rebates, from the Sewer Fund ($2,309,300),Water Fund ($145,100) and Capital Outlay fund($38;500):. REPORT IN BRIEF In response to the energy crisis of 2000 the Council directed staff to review opportunities for the City to conserve additional energy and implement distributed generation projects at key City facilities. To accomplish this, staff used a process for contracting with energy service companies (ESCo's) established by the State Department of General Services (DGS). After a lengthy proposal and review process Staff recommended and Council approved the use of Kinetics, an Council agenda Report—Energy Services Proposal Page 2 ESCo, for the development and implementation of energy conservation and distributed generation projects for the City. Kinetics has completed their preliminary engineering work for a number of projects (at their sole expense to date) and approval of the CAO recommendation will move those projects forward into design and construction. The proposed projects will cost the City$2,832,892.00 and will be financed through lease purchase financing to be secured by the City's Finance Director. The guaranteed annual savings from the proposed projects is estimated to be no less than $347,587. Debt service based on 10 year lease purchase financing is estimated at $311,618 per year, yielding the City net savings of nearly $36,000 per year. A Support Services and Guaranteed Savings Agreement is required for the first three years following implementation with an annual cost of$7,452. An executive summary of the proposed energy conservation measures (ECMs) is described in Attachment 1. DISCUSSION Background At the July 17, 2001 City Council meeting, the Council discussed the City's role in regards to energy conservation and efficiency. One of the recommendations, which was approved by the Council, was to evaluate the feasibility of implementing distributed generation projects on City facilities with the assistance of a consultant if deemed necessary. After researching the options available to the City, staff determined the State Department of General Services (DGS) procurement program for Energy Services Company's (ESCo's) assistance to be the least complicated, lowest risk and most cost effective alternative available. At the September 18, 2001 City Council meeting,the Council approved using DGS's procurement program. To date, the City has been following DGS's four step process to utilize the pool of qualified ESCo's. The steps are: Step 1: ESCo Ordering Form Step 2: Preliminary Conservation Assessment Step 3: Conservation Audit Agreement Step 4: Conservation Service Agreement As part of Step 1, DGS supplied the City a list of qualified ESCo's, of which four were selected based on their experience with distributed generation projects. The selected companies submitted Preliminary Conservation Assessments based on site inspections of the facilities that staff identified as potential locations to implement energy conservation measures (ECMs). The initial facilities identified were: 1. Swim Center 2. Water Reclamation Facility 3. Water Treatment Plant, Hydro-electric Facility 4. Utilities Department Administration Office Council Agenda Report—Energy Services Proposal Page 3 The first three facilities were chosen because of the large amount of energy they consume. The Utilities Department Administration Office was chosen for its potential to use photovoltaic technology. Based on the content and approach taken by each company, staff selected Kinetics Energy Services to proceed to the Conservation Audit Agreement phase. As part of this phase, the City expanded the scope of work to include the Recreation Center, which was about to undergo a remodel, and the parking structures' interior lighting. Kinetics performed a more detailed analysis of all the facilities and submitted a report identifying the ECMs, program costs and payback periods, financing options, completion period,monitoring and verification plans and guaranteed cost avoidance. At this point, staff reviewed the projects and requested a revised proposal placing projects that had a payback of ten years or less in a tier of preferred projects and having the remaining projects placed in a second tier. Also at this point, certain ECMs, such as analyzing the hydro-electric facility at the.Water Treatment Plant, were deferred (and will be included in the Water Treatment Facility Master Plan now underway) and certain components of the Recreation Center project were eliminated as those same improvements were already being included in the remodel project. After reviewing the refined proposal and consulting with the City Attorney regarding contracting procedures for a project such as this, it was determined a third party review would be prudent to ensure that the proposal is fair and reasonable, and that the assumptions and conclusions reached by Kinetics are accurate. Again working with DGS to locate a qualified firm to review the proposal, the City contracted with Bechard Long & Associates (BLA) to evaluate the report. The results of the review and responses to BLA's comments by Kinetics are provided in Attachment 3. In a nutshell, BLA concluded that the analysis of the projects and subsequent cost and payback periods contained in the proposal were accurate and reasonable. Energy Measures Evaluation As mentioned previously, through the evaluation process, the list of ECMs were refined based on amount of energy that would be saved, cost and payback period. The tier one projects that are being recommended to move forward are as follows: Tier I Projects Project Project Cost Project Cost $Energy Payback after incentives Savings/Year ears Pool Cogeneration $349,295 $274;295 $44,988 6 Rec Center Controls $29,211 $29,211 $2,883 10 Water Treatment $145,082 $142,382 $16,670 9 Plant Power Quality Water Reclamation $2,309,304 $27103,304 $283,046 7 Facility Cogeneration Totals $2,832,892 $225499192 $3479587 7.3 Council Agenda Report—Energy Services Proposal Page 4 A detailed discussion of the scope of each proposed ECM can be found in the Kinetics proposal (Attachment 2, Exhibit A). As indicated in the table of projects, improvements at the Water Reclamation Facility make up a significant portion of the total project cost and have the greatest energy and monetary savings per year. The tier two projects, which the Council could consider for implementation, but are not recommended by staff because of the long payback periods, areasfollows: Tier 2 Pro Jects —NOR Project Project Cost Project Cost $Energy Payback (after incentives) Savings/Year (Years) Utilities Admin $116,232 $66,232 $3;177 21 Photovoltaics Rec Center $116,232 $66,232 $2,950 22 Photovoltaics Parking Structures $105,609 $105,609 $2,509 42 Lighting Totals $3389073 $2389073 $89636 28.3 Though the payback period for these projects is significantly higher than the tier one projects, the Council could choose to proceed with any of these projects based on reasons beyond financial payback. It is staffs experience that projects with a payback period of greater than 10 years, are generally not cost effective as the systems age, technology improves and market conditions will change significantly over a 10 year span. Contracting Issues The type of agreement that staff is proposing entering into with Kinetics is a departure from the City's usual contracting procedures which are defined in the City's Charter in Article IX, Section 901. In atypical scenario,the City would identify a project and solicit proposals for the design of that project, then award a construction contract to the lowest responsible bidder. Early on, staff realized they did not have knowledge or expertise to evaluate or design the energy conservation measures or distributed generation opportunities available to the City. This is why staff recommended and the Council approved using the DGS procurement process. The contracting procedures for this process, as outlined previously in the report; has DGS compiling a list of qualified ESCo's. The participating agency then solicits competitive proposals from the list to perform a preliminary assessment of potential ECMs. Based on the content of the proposals, the agency then selects an ESCo to complete an Energy Audit Agreement which is essentially the preliminary design of the project to determine the feasibility and cost effectiveness of the recommended ECMs The final step, which is where the City is at now, is contracting for the final design of the project and overseeing the actual construction of the approved project. In Council Agenda Report—Energy Services Proposal Page 5 return for using the services of the ESCo throughout the process, they guarantee the energy savings and the subsequent dollars saved, and are responsible for correcting or adjusting monetarily for any wrong assumptions that result in not achieving those savings. The end result is that the monetary savings are to pay for the cost of the project(s) over the payback period of the ECMs. The proposed contract with Kinetics is structured so that the Utilities Director can tenninate the agreement after the design phase if there are any changes in cost and/or feasibility of the project. Staff is requesting that the Council make the following findings in order to facilitate the award of the energy services contract to Kinetics: Findings: 1. That the spirit of the Charter was met by the initial competitive process in choosing the most qualified ESCo. 2. That this type of project was not contemplated by the Charter and is unique in that the actual energy savings guaranteed by Kinetics are used to offset the cost of the project. 3. Use of a purely competitive process was not practical given the uniqueness of the recommended projects. The purpose of the competitive bidding process is being assured by the guaranteed savings Kinetics has committed to. 4. That the third party review determined that the proposal from Kinetics is reasonable based on industry standards. One final note, in recognition of the value of energy conservation programs and services such as this, the State legislature adopted specific legislation (Government Code 4217) to authorize general law cities to contract with ESCo's through the DGS program. Support Services and Guaranteed Savings Agreement Another component of this energy services procurement process is the Guaranteed Savings agreement. In order to ensure the effectiveness of the energy conservation measures (ECMs) installed, Kinetics will provide monitoring and verification services for the selected facilities and equipment. Under the agreement, Kinetics will provide monitoring services and quarterly reporting of the actual energy savings received from each ECMs. Kinetics also provides under this agreement a performance guarantee, which based on the current assumptions-and selected projects, guarantees the City will receive program savings and utility incentives in excess of $347,587 annually. The term of the Support Services and Guaranteed Savings Agreement is not to exceed 10 years, and can be no less than 3 years. The support services agreement will cost the City$621 per month or$7,452 per year. ;Environmental Review F � Following Council approval of the scope of services and ECM's to be completed, staff will,, complete the environmental review for the project with the Community Development !Department (CDD). Staff anticipates the projects will qualify for a categorical exemption, but pome additional analysis by CDD and the County Air Pollution Control District will Be necessary; Council Agenda Report—Energy Services Proposal Page 6 ibefore providing project approval. Those components of the recommendation which are' (recommended to be continued (recommendation 4.) will be brought back to Council following completion of the environmental review. Additionally, any modifications to the scope asf iiecommended by Council can also be addressed at that time. CONCURRENCES The Public Works Department concurs with the recommendations made in this report. FISCAL IMPACT As stated in the report, the energy savings from the recommended ECMs are to pay for the project costs over the payback period. The monitoring and verification plan of the ECMs ensures the projects will perform according to expectation, therefore yielding the monetary savings at today's energy costs to pay back the approved funding mechanism. After researching funding options, the Finance Director is recommending that the projects be debt financed through a lease/purchase agreement. It was determined that this type of financing made the most sense in that it would not tie up working capital and meets the criteria for debt financing. Total Contract Cost—Breakdown by Phase Project Development& Desi $5099420 Construction Management& Consulting $3389930 Construction $198771138 Bond, Permits, Contingencies $1079404 Total Project Cost $298329892 Estimated Annual Savings $3479587 Estimated Annual Lease/Purchase Payment $311,618 Estimated net annual cost savings through $359968 payback eriod Anticipated Rebates $2839700 The agreement with Kinetics also includes an operating program expense for support, monitoring and verification services for a minimum period of three years. The cost of these services is $621.00 per month or $7,452 per year and the services will begin following completion of the projects in Summer 2003. Staff will include funding for the monitoring and verification services, which are a requirement of the performance guarantee, in the 2003-05 financial plan. The cost of these services will be more than offset by the projected savings and as stated previously are required by the performance guarantee provided by Kinetics. ALTERNATIVES The Council could direct staff to follow the standard contracting procedures as defined in the City Charter and go out to bid for the entire project or project phases. Because of the amount of Council Agenda Report—Energy Services Proposal Page 7 time both staff and Kinetics has spent in developing the proposed project, the favorable results of the third party review and thoroughness in which Kinetics researched and developed the various ECMs, staff does not recommend this alternative. ATTACHMENTS Attachment 1- Proposed Services Executive Summary Attachment 2- Contract and Scope of Work Attachment 3- Support Services and Savings Guarantee Agreement Available in Council Office for Review Peer Review of Proposed Services by Berchard Long and Associates, Inc.