HomeMy WebLinkAboutItem AAGENDA STAFF REPORT
DATE: October 24, 2016
TO: Honorable Mayor and City Council
THRU: Jill R. Ingram, City Manager
FROM: Jim Basham, Interim Director of Public Works
SUBJECT: ENERGY EFFICIENCY CLIMATEC PROGRAM
SUMMARY
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Staff is requesting that this item be continued to the November 14, 2016 City
Council meeting to allow Climatec to present other energy savings options and a
cost saving analysis.
BACKGROUND
At the July 25, 2016 City Council Meeting, staff provided an update to the 2014
Energy Efficiency Project (Project). Staff presented background information to
the Project which included construction items that were completed such as the
Project financial analysis, justification for not moving forward in purchasing
Edison owned street lights, and an alternative energy saving program. After
discussions with the City Council, staff received direction to not move forward
with the purchase of Edison owned street lights and thereby leaving a balance of
$612,000 in the Financing Agreement (Loan) with Municipal Finance
Corporation.
Pursuant to the City Council Resolution No. 6456 and beginning with Section
4217.10 of the California Government Code, any additional alternative Energy
Efficiency Program must follow the below findings:
A. The installment of the Energy Conservation Equipment will improve the
energy efficiency at City facilities. It is in the best interests of the City to
enter into the Installment Agreement and the Lease.
B. The anticipated cost to the City for electrical energy and conservation
services for the Energy Conservation Equipment is less than the
anticipated marginal cost to the City of energy that would have been
consumed by the City in the absence of the acquisition and installation of
the Energy Conservation Equipment.
Agenda Item A
C. The difference, if any, between the fair rental value for the property subject
to the Lease and the agreed rent is anticipated to be offset by below -
market energy purchases or other benefits provided under the Installment
Agreement.
D. The repayment of the Financing and the cost of design, construction, and
operation of the Energy Conservation Equipment, as required by the
Installment Agreement and the Lease are projected to be available from
funding that otherwise would have been used for purchase of electrical,
thermal, or other energy required by City in the absence of the Energy
Conservation Equipment.
To comply with Resolution No. 6456 findings and Government Code Section
4217, the City can only spend funds on improvements that are equal to the
energy saved over the life of the equipment. For example, the cost to replace a
HVAC unit with anew high energy efficient unit is $100,000. The $100,000 must
equal the energy saved over the life of the equipment. A typical HVAC unit's life
span is 11 years. If you divide $100,000 by 11 years the City must save $9,090
annually. Replacing a low efficient HVAC unit with a high energy efficiency unit
would have annual saving of approximately $1,000, not nearly as close to the
$9,090 as required.
The 2014 Energy Efficiency Project complied with adopted Resolution 6456 and
Government Code Section 4217 because, at the time, it included the purchase of
Edison owned street lights. In purchasing Edison lights, the City was allowed to
replace the HVAC units and the other scope of work items in the Project because
the overall Projects cost is less than the energy savings. Now that the purchase
of Edison owned street lights has been removed, the City is left with two options
to comply with Resolution No. 6456 and Government Code Section 4217.
Option 1
Restructure the Loan to lower the balance to match the energy savings
and not continue forward with any other additional energy savings
projects. This will allow the City to prepay the restructured Loan. Climatec
will calculate the energy savings for the items installed.
Option 2
Climatec will present other energy savings projects to offset the Loan to
comply with Resolution No. 6456 and Government Code Section 4217.
In preparation for the November 14, 2016 City Council meeting, Climatec is
currently evaluating these options and potential projects Citywide, discussing
financial options with Municipal Finance Corporation and creating the M &V
(Measurement and Verification) report. This report will calculate the total energy
savings with the current projects in place.
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SUBMITTED BY:
Jim Ba`Wrn
Interim Director of Public Works
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NOTED AND APPROVED:
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