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City Council July 29, 2013

Authorization to Enter Into a Contract with GE Packaged Power, Inc. to Design, Furnish and Deliver the Power Island Equipment for the Glenarm Repowering Project, and an Amendment to the FY2014 Adopted CIP Budget. City Council July 29, 2013. Background.

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City Council July 29, 2013

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  1. Authorization to Enter Into a Contract with GE Packaged Power, Inc. to Design, Furnish and Deliver the Power Island Equipment for the Glenarm Repowering Project, and an Amendment to the FY2014 Adopted CIP Budget City Council July 29, 2013

  2. Background • 2009 Energy IRP recommended replacement of existing Broadway 3 with equivalent size combined cycle unit by 2015 • Need dependable local generation to back up/supplement single line of import • B3 can’t be depended on for too long …47 years old, spare parts problems

  3. Glenarm Repowering Project - GT5 • Two key contracts • Power Island Equipment (PIE) • 15 major power generating equipment including design, furnishing & delivery (gas turbine, steam generator, steam turbine, transformers, gas compressors, etc.) • Balance of Plant (BOP) • Design and construction (expected to awarded in 1Qtr/2014)

  4. Power Island Equipment • RFP issued on June 28, 2012 • Six proposals received (GE and Rolls Royce GTs) • GE scored highest by Staff & Consultant (POWER Engineers) • Evaluation criteria included: • “Evaluated cost” = net present value of capital cost, and 30-year lifetime plant consumable resource costs: natural gas, water and ammonia • Demonstrated expertise and experience in performing similar work • Bidder conformance with City’s contract terms

  5. Bidders Evaluation

  6. Fiscal Impact It is anticipated that $40.37MM of the total cost will be spent during fiscal year 2014, and that the remaining costs will be spent over the next two fiscal years.

  7. Repowering Project Budget • Initial budget = $115.16 million (2009) • Revised budget = $131.82 million • Estimated debt service/year = $7.5 to 8 million • Estimated rate impact on average customer (500 and1000 KWH/month usage) = $3 to $7/month

  8. Reasons for Budget Change

  9. Energy Cost Comparison- Fossil fuel • Major Assumptions: • Variable costs for market and owned/contracted plants assumed to escalate at 5% annually • Natural gas price in FY 2014 $4.39/mmBtu and escalation @5% annually • Major assumptions for GT5 cost: • Debt service = $8 million/year • Capacity factor = 20% • Depreciation = 30 years

  10. Recommended Actions • Find that the proposed contract to design, furnish and deliver the Power Island Equipment (“PIE”), as part of the Glenarm Repowering Project, was subject to adequate environmental review as part of the Glenarm Repowering Project Final Environmental Impact Report Findings adopted by City Council on April 8, 2013; • Find that the proposed contract with GE Packaged Power, Inc. (“GE”) is exempt from competitive bidding pursuant to City Charter Section 1002 (f), contracts for professional or unique services, and that there are no changed circumstances or new information that would trigger further environmental review; • Authorize the City Manager to enter into a contract with GE to design, furnish and deliver the Power Island Equipment for the Glenarm Repowering Project in an amount not to exceed $62,170,000, conditional upon receipt of South Coast Air Quality Management District (“SCAQMD”) permit to construct; and • Amend the Fiscal Year 2014 Adopted Capital Improvement Budget by appropriating $25.0 million from the unappropriated Power Fund balance to the Power Fund Capital Improvement Budget Number 3194-Local Generation Repowering Project Phase II.

  11. Back Up Slides

  12. Appendix – Price Comparison Renewable Energy Contracts Price Comparison [1] Contract prices exclude costs of transmission, losses, and integration fees

  13. Fiscal Impact – Cont. • Fiscal Impact: • The cost of the Power Island Equipment Contract will be $62.170 million. Following approval of the recommendation to authorize an additional $25.0 million in appropriations, there will be sufficient appropriations in the Power Capital Project Fund 411, Capital Improvement Program #3194 – Local Generation Repowering Project – Phase II. • Funding for this action will be addressed by the use revenue bonds which will be issued later this year. Pending the issuance of the revenue bonds, funds from the unreserved Power Fund account will be used to pay for project costs based on the reimbursement resolution that was approved by the City Council for this project in January 2013. The Power Fund will be made whole upon the issuance of the revenue bonds.

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