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HomeMy WebLinkAboutMinutes - City Council - 2000-12-12 - Special Meeting I I I 281 Special Meeting. Redding City Council Redding Power Plant 17120 Clear Creek Road Redding" CA 96001 December 12; 2000 11 :00 a.m. The Special Meeting ofthe City Council was called to order by Mayor McGeorge with the following Council Members present: Cibula, Kight, Pohlmeyer and Stegall. Also present were City Manager Warren, Assistant City Manager Perry, Deputy City Manager Starman, City Attorney Wingate, Electric Utility Director Feider, Electric Utility Resource Planner Watros, Power Operations Manager Ryan, Distribution Systems Manager Russell, Resources Manager Nichols, Customer and Energy Services Manager Keener, Power Production Supervisor Heckenberg, Electric Utilities Resource Planner Arthur, Financial Manager Graves, City Clerk Strohmayer, and Executive Secretary Chilton. Resolution Authorizing construction of a combustion turbine generator. heat recovery steam generator. and ancillary facilities at the Redding Power Plant: and entering into contracts with ALSTOM, RFP 3368 (E-120-150-675 and B-050-020) City Manager Warren provided a brief overview of the proposed combustion turbine generator addition at the Redding Power Plant. Mr. Warren eluded to the changing electric energy market place and staffs efforts to insulate the public in future years from the unstable market. Mr. Warren gave a history of the City of Redding's electric utility, which was formed in 1921 to ensure stable electric rates and to provide an independent source of electric power to its citizens. Through subsequent City Councils' foresight and wise decisions in investing in transmission lines, infrastructure, and a multitude of energy source contracts, he said Redding enjoys a strong and reliable electric utility today. As a result, the surcharge will likely be retired two years ahead of schedule in the 2002 time frame. In looking ahead to the year 2006, he cautioned that Redding will not have the power resources to serve its citizens, therefore, it is imperative that the City tackle this problem today. Mr. Warren indicated that in comparing the option of developing another power generator with purchasing power in the market place, staff 4etermined that due to the unstable market conditions, it would be more prudent and cost-effective to develop a power generator. He pointed out that the City could spend the estimated $40 million project cost either on generation or purchasing in the market place. Staff is confident that continued investment in generation and infrastructure will insulate and protect the citizens from the vulnerability of the sporadic market place, and provide energy service at the least cost. Mr. Warren explained that the proposed state-of-the-art gas turbine generator is the most environmentally friendly that money can buy. He added that the City also proposes to invest in high performance emission control equipment to ensure the output generator, causes the least damage to the environment. Mr. Warren concluded that the City is not only concerned with providing reliable and affordable electric service to its citizens, but it is just as important that this service be delivered in a manner that will have the least effect on the environment. Electric Utility Director Feider introduced his staff, and provided an overhead presentation relative to the project. . 12/12/00 282 . Mr. Feider explained that the City is predicting a shortfall of energy by the year 2005 and believes it prudent to be prepared. The City recently entered into a contract with Enron to provide approximately 20% of the energy needed to run the City. The contract with Enron was a valuable addition to the energy portfolio the City is building, and the new turbine engine will round out the portfolio to a more secure level. By the year 2006 with the current contracts in place, the City will only be able to provide 75% of the energy needs of the community, but any shortfall will be eliminated with the addition of the ALSTOM turbine engine. Mr. Feider presented a series of charts I and graphs depicting comparisons and benchmarks that the City must meet. Mr. Feider pointed out that there are many positive attributes such as competitive pricing, operational flexibility, local control and enhanced reliability that will tie into the current system, and the new ALSTOM turbine engine project will provide local jobs for construction and operation and will also place the City in a position to sell power to other agencies. ' It is the recommendation of the Electric Utility Director that the City Council 1 ) adopt a resolution authorizing construction of a new combustion turbine generator; 2) enter into a Public Works Contract with ALSTOM; 3) authorize the City Manager to approve project construction change orders for up to 4% of the contract price; 4) enter into a 15 year lease agreement for air emissions equipment; 5) authorize the Mayor to sign on behalf of the City Council; and 6) authorize a full-time project manager. Council Member Cibula inquired about the ALSTOM unit's life expectancy as well as the remaining useful life of the current system. Mr. Ryan responded that analyses indicated a 20-30 year life expectancy for the ALSTOM unit, and the current system is expected to last approximately 28 years. He explained that the older equipment was built to heavy industrial standards and can withstand repeated repairs. Mr. Nichols added that staff is proposing a merger of the two units, pointing out that the older unit has only been operational for two years. Mr. Feider interjected that the current system may go to 55% capacity, but with the addition of the ALSTOM system, the City would be able to accommodate not only its needs, but have enough extra to sell into the wholesale market. I Council Member Stegall asked if staff is predicting any situation within the next 3-5 years where the City will have excess power and no one to purchase it. Mr. Feider indicated that it was not likely, adding that the existing equipment does not have to be used at capacity, it is basically available for peeking periods and back up. Mayor McGeorge asked if the City was committed to a minimum purchase with the current contracts. Mr. Feider responded that each of the contracts would have different requirements. Council Member Cibula asked what effect expanded storage at Shasta Dam would have on the proposed City expansion project. Mr. Feider indicated that any additional power from a Shasta Dam expansion would likely be used to pump water into off-steam storage. Mr. Feider also stated that the City is currently looking at a 1 O-year plan for power projects, but he was reluctant to speculate beyond the 10-year period. Mr. Feider explained that the project would be paid as construction progressed, however, if funds are not sufficient to accomplish this, a short-term loan would be secured. ALSTOM will be paid $13 I million at the start ofthe project and the City would receive a $13 million letter of credit to protect its interests until the generator is delivered on-site. Substantial progress payments will not begin until such time as the equipment is on-site. Council Member Cibula opined that it appeared as if the City were in the supply business rather than just meeting the needs of the residents. 12/12/00 I I I 283 Mr. Feider stated the City has been in the marketing mode with 20% surplus and if the City drops below need, it will be at the mercy of market prices. Mr. Feider added that the City still plans to perform energy management, and will continue to put energy efficiency rebates into place. He indicated that his primary concern is the reliability of the power. He also believed this would be a good economic development marketing tool. Regarding the Project Manager position, Council Member Cibula related that perhaps hiring someone on staff would be prudent, and he preferred the savings proposal over outsourcing this job. Council Member Cibula also questioned the lease versus purchase of the emission control equipment. Mr. Feider responded that the emission control equipment (SCONOx) technology was excellent, and the proposed lease agreement would more efficiently handle repair when necessary. Mr. Ryan advised that the SCONOx equipment will bring the emission levels within acceptable levels without paying additional for repairs, and put the burden for maintaining the catalytic materials on the vendor. Council Member Cibula asked if the $650,000 included parts. Mr. Ryan stated it does not, but the equipment comes with a two-year warranty for parts. In response to Council Member Cibula, Mr. Ryan advised that the company (GoLine) performing the repairs is located in Tennessee. The monitoring equipment has the capability to run a systems check every 6 minutes and will notify staff well in advance if a problem exists. SCONOx can transmit data over a transmission line and some on-line diagnosis and repairs can be accomplished from Tennessee. In response to Council Member Stegall, Mr. Feider explained that the 4% reserve included in the contract will be used for unforseen costs. Relative to environmental issues, Mr. Warren stated that the City would be going through an environmental clearance process for the next few months before on-site construction would commence. Mr. Wingate added that all environmental safeguards built into the project will meet or exceed environmental standards required by air quality. He said this was a primary consideration in selecting SCONOx. Mayor McGeorge invited comments or questions from the audience. Mr. Richard Johnson inquired as to the number of units, similar. to ALSTOM's, in place and /- ( operational worldwide. Mr. Feider responded that the ALSTOM equipment represents the cutting edge in technology, and the Redding unit will be the ninth. Mr. Ryan assured Council that ALSTOM would not receive full payment until project completion, and they must meet all emission standards and guarantees. He clarified that the $40,000,000 will cover the project, and the $650,000 is for the SCONOx catalyst. Mr. Johnson asked if the City is not able to sell excess energy, what effect will that have on City utility rates. Mr. Feider stated the City has been very conservative on estimates of production and sales, and did not believe the City is risking a utility charge increase. A member of the audience asked why the City did not consider purchasing a plant such as Wheelabrator or some other existing plant. Mr. Feider replied that staff continually monitors wood waste, and does not feel there would be a sufficient amount to sustain a plant, especially with the continued decline in timber harvest. Mayor McGeorge complimented the Electric Utility Staff on a job well done and well presented. Council Member Stegall also complimented staff, adding that the City is very fortunate to have such a dedicated electric utility department working for its' citizens. 12/12/00 284 MOTION: Made by Council Member Kight, seconded by Council Member Pohlmeyer adopting Resolution No. 2000-200, a resolution of the City Council of the City of Redding authorizing construction of a combustion turbine generator and heat recovery steam generator system and ancillary facilities at the Redding Power Plant by; 1) entering into contracts with ALSTOM for the purchase and construction of a 43-MW, combustion turbine generator and heat recovery steam generator (HRSG) system, and ancillary facilities for a fixed price of$32.2 million, with construction to be completed by summer 2002; 2) authorizing the City Manager to approve project construction I change orders for item I work as required, up to 4% of the contract; 3) entering into a IS-year lease agreement with ALSTOM for the catalyst, and maintenance oversight, in the amount of $650,000 per year to guarantee steady state performance of the SCONOx system to meet air quality permit requirements, and replace catalyst as needed for the term of the agreement; 4) authorizing the Mayor to (a) sign the Public Works Contract with ALSTOM, the Catalyst Lease Agreement with ALSTOM; and (b) facilitating documents for a backup line of credit in the event the project cannot be fully funded with REU's retained earnings; and 5) authorizing a full-time project manager position at a salary level not to exceed $10,000 per month for the duration of the project and to sunset no later than 180 days after project goes into commercial service. V oting was as follows: Ayes: Council Members - Cibula, Kight, Pohlmeyer, Stegall and McGeorge Noes: Council Members - None Absent: Council Members - None Abstain: Council Members - None Resolution No. 2000-200 is on file in the office of the City Clerk. ADJOURNMENT There being no further business, at the hour of I :03 p.m., Mayor McGeorge declared the meeting adjourned. APPROVED I #~~ I Mayor L. eor ATTEST I 12/12/00