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Home My WebLink AboutItem A !F SEA( eF\ •AGENDA STAFF REPORT \C4(tiFortNsk/ DATE: November 14, 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 UPDATE SUMMARY To provide direction to staff on completion of the Energy Efficiency Study project with Climatec. BACKGROUND At the July 25, 2016 City Council meeting, staff provided an update to the 2014 Energy Efficiency Project (Project). Staff presented background information on the Project which included construction items that were completed and those that were not completed. Based on an updated Project financial analysis, staff recommended that there was insufficient financial justification for purchasing Edison-owned street lights in the City as had previously been proposed and thus, staff started to research an alternative energy savings program. After discussions with the City Council, staff received direction to not move forward with the purchase of Edison owned street lights. At the October 24, 2016 City Council meeting, staff provided two Project options. Option 1 was to restructure the Loan to lower the balance to match the energy savings and not continue forward with any other additional energy savings projects. The Loan is a Financing Agreement between the City of Seal Beach and Municipal Finance Corporation with an 11-year term at a rate of 3.40% for a total of $1 ,893,455.86, which includes a principal of $1,546,930.82 (Project Cost) and an interest of $346,524.95. Option 2 was for Climatec to present other energy savings projects to offset the Loan to comply with Resolution No. 6456 and Government Code Section 4217. The City Council Resolution No. 6456 adopted the following findings: A. The installment of the Energy Conservation Equipment will improve the energy efficiency at City facilities. It is in the best interest of the City to enter into the Installment Agreement and the Lease. Agenda Item A 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. 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 the City in the absence of the Energy Conservation Equipment. To comply with Resolution No. 6456 findings and Government Code Section 4217: o The total dollar amount projected to be used to repay the financing can be no more than the money that otherwise would have been used to purchase the energy if the proposed equipment was never purchased: and e All project costs must be paid through the reduction in anticipated utility costs over the life of the equipment financed through the program. The 2014 Energy Efficiency Project as approved complied with adopted Resolution 6456 and Government Code Section 4217 because, at the time, it included the purchase of Edison owned street lights. If the City purchased Edison lights, the City was allowed to replace the HVAC units and other scope of work items in the Project because the overall Project costs are less than the energy savings. However, as the City Council is aware, Edison's proposed costs and terms for the acquisition were unacceptable to the City and the uncertain ongoing maintenance cost ultimately made acquisition of the street lights infeasible. Because a balance remains out of the original loan program, staff has been working with Climatec to identify other energy savings projects. One project staff explored was Citywide water meter replacement with Automatic Meter Reading (AMR) or Advanced Metering Infrastructure (AMI). AMR uses a handheld device that automatically reads the meter to get a current reading, which is used to generate a bill. AMR systems can be walk-by, drive-by, or fixed network. The communication is one-way. The City currently has approximately 500 water meters with AMR technology. Conversely, AMI enables two-way communication over a fixed network between the City facilities with antennas and the metering endpoints. Meters can be read wirelessly and without any personnel. With an AMI system, the City can continuously monitor through hourly interval reads. With this data, it allows a water utility to find evidence of leaks. It may even prevent a small leak from becoming a much larger leak. Previously, the City researched the cost to implement AMI citywide and found the cost; to be extremely expensive. The estimated cost for design, construction and annual ongoing maintenance was estimated at over $3 million. Although the AMR and AMI systems might provide energy costs savings, staff does not recommend this City wide water meter replacement project because it would be extremely costly. Staff recommends that the City Council restructure the existing Loan to lower the outstanding 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. Per the Detailed Audit Report, the project cost would have been $1,551,333 which includes the Edison streets lights. Since the City did not purchase the Edison lights, there was a savings of $595,498 from the $1,551,333. This now leaves $955,835 as the current project expenditures, with interest not included. Climatec has calculated the total estimated utility reduction cost over the useful life of the equipment (15 years), without the purchase of the Edison lights, would be $816,000. To comply with Resolution No. 6456 findings and Government Code Section 4217, all project costs ($955,835) need to be paid through the reduction in anticipated utility costs ($816,000) over the life (15 Years) of the equipment. Stopping the energy efficiency work at this stage results in a difference of $139,835. This difference of $139,835 will not comply with Resolution No. 6456 findings and be financed under Government Code Section 4217. The City is required to remove $139,835 from the Loan and prepay it. In summary, staff asks the City Council to provide direction to staff to start the process of restructuring the existing energy efficiency program loan to lower the balance to match the estimated energy savings from the project improvements that have been concluded and direct staff to not continue forward with any other additional energy savings projects for the Climatec Energy Efficiency Program, including the proposed purchase of City street lights. If this is the direction from the City Council, staff will bring back an action item and resolution with the amended loan documents and a proposed budget amendment to finalize transaction for the City Council's consideration. SU: I ED B : NOTED AND APPROVED: ilk a e !: , tit.� J mlasham V E'. Ingram, City Mader Inte m Director of Public Works Attachments A. Energy Savings Cost Analysis Update • BEACH D O PDATE c,:pri-c,:.‘ir:f0:1Teq,c'a !-A:074,V.'n3Ir('-'. . \ , . \--1 City of Seal Beach $6Q000 - For the period of November 2014 -August 2016: -X Energy-Consumption Reduction: 325,589 kWh - $50,000 - - -' Cost Avoidance: $ 55,902 - o, $40,000 - - co N - T _ $30,000 - 5 r v - > E $20,000 - n V - $10,000 - - ' Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- 14 14 15 15 15 15 15 15 15 15 15 15 15 15 16 16 16 16 16 16 16 16 ANNUAL ANNUAL ANNUAL ANNUAL UTILITY SITE NAME ENERGY WATER UTILITY OPERATIONS REBATES& SAVINGS SAVINGS SAVINGS SAVINGS INCENTIVES (KWH) (KGAL) ($) ($) ($) CITY HALL 21,129 - $2,821 $266 $1,389 CITY YARD 8,133 - $1,507 $338 $389 MARINA COMMUNITY CENTER 12,460 - $2,051 $608 - NORTH SB COMMUNITY CENTER 11,062 - $1,773 $265 - POLICE HQ 79,665 - $9,232 $2,957 $771 SEAL BEACH LIFEGUARD/PIER 3,638 - $625 $82 - TENNIS CENTER 33,213 - $9,077 $1,179 - CITY WIDE IRRIGATION CONTROL - 1,734 $4,705 $0 - STREET LIGHT LS-2 RETROFIT 52,673 - $3,837 $0 $16,748 PROJECT TOTALS 221,973 1,734 $35,628 $5,695 $19,298 STREET LIGHT LS-1 RETROFIT 359,208 - $26,260 $0 $139,448 STREET LIGHT LS4 TO*S-2 - - $87,944 $0 - PROJECT TOTALS W/LS-1 SCOPE 581,180 1,734 $149,831 $5,695 $158,954 *The values presented.in this document are preliminary estimates of energy and cost savings;Climatec BTG reserves the right to adjust the savings according to IPMVP standards based on the findings of the comprehensive M&V report upon the conclusion of each savings guaranteed year. All savings were evaluated in accordance to the.International Performance Measurement and Verification Protocol (IPMVP EVO 10000-1:2010) Option A. In order to qualify for utility incentives,the Street Lights currently billed under LS-1 must be converted to LS-2. ALL INC�1i'UDED CONTENTS PRODUCEtTBY QLTItvIA7EC ARE AGREED TO BE PROPRIETARY CLI ATEC® AND GONFIDENTIABTAN,..DNQTITQBE SHHARE IMITH ANY NON DISTRICTjP,ERSoNNEL MERGING BUILDINGS&TECHNOLOGY