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Home My WebLink AboutC21530 and C21650 Spot Municipal Utility CITY OF PALM DESERT COMMUNITY SERVICES DEPARTMENT STAFF REPORT REQUEST: A. RATIFICATION OF THE CITY MANAGER'S APPROVAL OF A CONTRACT WITH EES CONSULTING FOR A SPOT UTILITY FEASIBILITY STUDY AND CONTRACT NEGOTIATION ASSISTANCE IN THE AMOUNT OF$38,000. B. RATIFICATION OF THE CITY MANAGER'S APPROVAL OF A CONTRACT WITH ENCO UTILITY SERVICES FOR DESIGN SERVICES AND FILING OF AN INTERCONNECTION AGREEMENT WITH SOUTHERN CALIFORNIA EDISON IN THE AMOUNT OF $27,000. C. UPDATE ON ACTIVITIES TAKEN AND PROPOSED TASKS REGARDING A PALM DESERT "SPOT" MUNICIPAL ELECTRIC UTILITY. SUBMITTED BY: Robert Kohn, Director of Special Programs DATE: September 11, 2003 CONTENTS: Contract C21530 with EES Consulting Contract C21650 with Enco Utility Services Map of Proposed "Spot" Municipal Electric Utility Estimated Time Line to Set up and Construct Initial Utility Infrastructure Recommendation: A. By Minute Motion, ratify the City Manager's approval of Contract No. C21530, in the amount of $38,000, with EES Consulting for completion of a Feasibility Study for a Spot Municipal Electric Utility and contract negotiation services; B. By Minute Motion, ratify the City Manager's approval of Contract No. C21650, in the amount of $27,000, with Enco Utility Services for design and filing of electric interconnection application. C. Concur that the City Manager shall pursue development and construction of a Palm Desert "Spot" Municipal Utility to serve the north undeveloped area of the City. G:\CityClrk\Gail Santee\wpdocs\StaffReportEESEnco.wpd STAFF REPORT September 11, 2003 EES/ENCO Page 2 Executive Summary: During the Council meeting of May 22, 2003,the City Council adopted Ordinance No. 1048 authorizing the City Manager or his designee to take all necessary steps to create and establish a municipally-owned utility. The Ordinance also authorizes the City Manager or his designee to take all necessary steps to provide for the maintenance and operation of the municipal utility. Providing services to the entire City by taking over the private utility operations has been discussed and the recent option for Community Choice Aggregation (AB117) have been considered. However, the focus has been on development and operation of a spot municipal electric utility in the north, undeveloped (Greenfield) part of the City. City staff have been reviewing various proposals relating to municipal electric services in Palm Desert. The City has received proposals for various services including feasibility studies for Community Choice Aggregation and the "Spot" or"Greenfield" municipal utility concept. In an effort to confirm the results contained in the preferred proposal for engineering, design, construction, and operation, the City Manager has hired EES Consulting to do an independent analysis of the feasibility in owning and operating a spot utility. In addition, EES (as the experts) have been asked to review, comment, and participate in discussions with proposals received from potential service providers. This action seeks the City Council's ratification of the City Manager's approval. Discussion: As part of the overall review and investigation of developing, owning, and operating a municipal utility, the City Manager is moving forward with a serious look into the "Spot" or Greenfield Municipal Electric Utility. Proposals for feasibility studies were received from three companies including Navigant Consulting ($65,000), Ralph Hitchcock ($25,000 to $50,000), and EES Consulting ($38,000). Enco Utility Services is not a consulting firm and does not perform feasibility studies. They engineer, design,construct, and operate small utilities. Enco Utility Services has submitted a proposal to engineer, design, and file for interconnection agreements for a spot utility on behalf of the City for $27,000. G:\CityClrk\Gail Santee\wpdocs\StaffReportEESEnco.wpd STAFF REPORT September 11, 2003 EES/ENCO Page 3 EES Consulting was chosen because they have more experience and knowledge about the electric industry. In an effort to confirm the results contained in the financial model received from Enco for engineering, design, construction, and operation,the City Manager has hired EES Consulting to do an independent analysis or feasibility study showing the pros and cons of owning and operating a spot electric utility. EES have also been asked to review, comment, and participate in discussions with proposals received from potential service providers to operate the utility. Timing has been critical in efforts to preserve the City's rights and opportunities to form a municipal utility. Major developments in the undeveloped area of Palm Desert are moving forward. The City's intentions to serve their electric needs required swift actions in regards to system design and the filing of interconnection applications. To recap what actions have been taken by the City Manager, please review the following: • City staff have reviewed proposals in relation to owning and operating a municipal electric utility. • Enco Utility Services submitted a proposal to design, build, and operate a municipal utility for Palm Desert. The proposal included a financial model indicating that the City could successfully and economically operate a "Spot" Municipal Electric Utility encompassing the undeveloped area in the north part of the City. Enco also proposed to engineer, design, and file interconnection applications on behalf of the City with Southern California Edison (SEC)for$27,000. The application and$5,000 fee have been filed with SCE. • To verify the financial model and projections contained in the Enco Proposal, EES Consulting was hired to review the financial model at a cost of $5,000. EES was then hired to complete a feasibility study for the Palm Desert"Spot" Municipal Utility at a cost of $38,000. The preliminary findings of the feasibility study indicate that the Palm Desert "Spot" Municipal Electric Utility makes economic sense. A final report (Feasibility Study) from EES is due by mid-September. • The $38,000 contract with EES Consulting also includes costs to negotiate an agreement to operate and maintain the Palm Desert "Spot" Municipal Utility. Enco Utility Services has submitted a proposal to operate and maintain the proposed electric utility. City staff and EES have had discussions with Enco regarding their O/M proposal. Enco is currently under contract with the City of Moreno Valley to develop a similar but larger municipal utility. Enco currently operates or participates in several other "Spot" utilities. City staff has visited two Encho utility operations, including one in Phoenix, Arizona, and one in Bakersfield, California. • The City of Palm Desert joined the California Municipal Utilities Association and has obtained information from them regarding utilities. • City staff has visited the power generating facility in the City of Colton and spoke with their utility staff regarding the operation of their utility. G:\CityClrk\Gail Santee\wpdocs\StaffReportEESEnco.wpd STAFF REPORT September 11, 2003 EES/ENCO Page 4 • To date, the City has expended approximately$10,000 and encumbered $75,000. $120,000 was budgeted in account #110-4132-411-3090 for research and development of a Palm Desert "Spot" Municipal Electric Utility. An additional appropriation may be necessary. In order to meet the demands and deadlines of two major developments (Desert Gateway Development/Nobel Development) within the north undeveloped area additional (immediate) action is needed. Although the interconnection fee has been paid and the application filed with SCE, the actual interconnection structure needs to be built. In addition, the backbone of the system within the development needs to be inspected and approved as it is installed by the developer. To continue City efforts to develop a "Spot" Municipal Electric Utility and provide electric services to these developments, the City Manager will need to hire a company to coordinate the construction and inspection of the system as it is being installed. A typical interconnection costs approximately$100,000. It is our understanding that the developer will need to extend the 12kV line several hundred feet north of Gerald Ford Drive to reach the Gateway Development point of interconnection. This could significantly increase the interconnection cost for the developer. In consultation with Enco, City staff believes the interconnection construction can begin prior to the application being approved by SCE. Negotiations for a long-term operations and maintenance agreement would continue as the interconnection application and construction are progressing. Submitted by: kfilre"417%--> ROBERT P. KOHN SHEILA R. GILL AN DIRECTOR, SPECIAL PROGRAMS ASSISTANT CITY MANA R, COMMUNITY SERVICES CARLOS ORTE PA L GIBSON CITY MANAGER FINANCE DIRECTOR ..L`1'Y COUNCIL CTION: APPROVED DENIED RECEIVED OTHER MEETING DATE cf-11--03 AYES: QJ if - Ju.C6A f( i k1 . 7LC'c !, l enso NOES: la ,' f G:\CityClrk\Gail Santee\wpdocs\StaffReportEESEnco.wpd ABSENT: AIO ABSTAIN: n10 VERIFIED BY: 1eIK _ Original on File *itnity Clerk's Office • EES Consulting August 13, 2003 TO: Bob Kohn FROM: Gary Saleba CLIENT: City of Palm Desert SUBJECT: Proposed Addendum to City of Palm Desert/EES Consulting Services Agreement Introduction We have been retained by the City of Palm Desert (City) to assist in evaluating the technical and financial feasibility of operating a new City electric utility. This new utility would service future residential and commercial customers. EES Consulting's first task under this retainer was to critique a new utility feasibility study performed by ENCO. This critique has been completed, and presented to ENCO and the City. At our August 5th meeting at City Hall, additional tasks were requested of EES Consulting by the City. The purpose of this memo is to describe EES Consulting's understanding of these additional tasks, summarize what work product will be developed for the City in conjunction with these tasks, and estimate a budget and schedule for these tasks. Proposed Tasks and Scope of Work The City has requested two new tasks of EES Consulting. The first task is to develop an independent feasibility and operational study of the City operating a new electric utility to service new customers. This "Greenfield municipalization" study will forecast over a 20-year period the cost to the City of constructing the necessary infrastructure to provide electrical service in the designated areas, providing O&M services to these customers and procuring all necessary power-supply related requirements. A forecast of the City utility rates will be developed and compared to a forecast of comparable SCE retail rates. From these two rate forecasts, an opinion 570 Kirkland Way,Suite 200 Kirkland,Washington 98033 Telephone: 425 889-2700 Facsimile:425 889-2725 A registered professional engineering corporation with offices in the Kirkland,WA; Portland.OR;Indio,CA and Calgary.AB • MEMORANDUM Sob Kohn August 13, 2003 Page 2 will be rendered as to whether the formation of a new greenfield municipal utility would be in the public interest. EES Consulting will develop a financial feasibility model to perform these two rate forecasts which will be the property of the City for subsequent model updates by City staff. The second task requested of EES Consulting by the City is to assist in negotiating a longer-term service agreement with ENCO. As part of this task, EES Consulting will develop an initial set of negotiating deal points, assist the City staff in finalizing these deal points and negotiating a memo of understanding based upon these deal points. We believe this level of detail on the business relationship between the City and ENCO is sufficient to provide City policy makers with adequate information to gauge the efficacy of proceeding with a greenfield municipal utility. If an actual contract is needed, additional work from EES Consulting will likely be required and an attorney knowledgeable in utility matters will be needed. Proposed Budget and Timeline Regarding timeline, it is our understanding the City needs to have the feasibility study completed and to the City staff for internal review by August 29t. Assuming support from City staff in obtaining/verifying key input assumptions (i.e., rate of development, size of development, location of development, etc.), EES Consulting can commit to completing the draft feasibility study in this relatively short time period. This commitment is also contingent on a timely notice to proceed with these new tasks from the City. Regarding EES Consulting's assistance in contract negotiations with ENCO, we have committed to having draft deal points available for City review by August 15th and participating in the first negotiating session with ENCO on August 19`h. These dates are still firm commitments to EES Consulting. Regarding budget for these additional tasks, we propose to use the same administrative procedures and billing rates for these additional tasks as those in our initial agreement dated June 23, 2003. The estimated budget amounts are as follows: MEMORANDUM 3ob Kohn August 13, 2003 Page 3 Description Estimated Estimated Task# of Task Person-Hours Labor Budget 1 Feasibility Study 180 $27,000 2 Negotiations with ENCO 50 8,000 Subtotal 230 $35,000 Estimated Expenses @10% 3,000 Total Estimated Budget for Additional Tasks $38.000 Summary and Conclusions We hope the scope, timeline and budget noted above are in keeping with your requests. If we have not properly described your requested tasks, please feel free to call me directly and we can further clarify the City's desires. If we have adequately described the City's requests, please have Carlos sign below and return a copy of this adde ndum to me for our records. Thanks for this additional opportunity to assist the City and we look forward to completing these next tasks for the City. Approved PP by: Approved PP by: EES Consulting City of Palm Desert Gary Saleba, President Carlos Orte ity Manager , 07/24/2003 15:35 17142836089 EUS ANAHEIM:CC PAGE 02 e 2/ g) ENCO Utility Services 8141 E Kaiser Blvd, Suite 212 Anaheim, CA 92629 Work Order Authorization Date; 7-14-03 Project Number; 0527 Work Anthorfzation*0527-01-01 Project Name: City of Palm Desert electric distribution interconnection and developer interface Project Location: City of Palm Desert EUS Contact: Mike Powers (714)283-6082—Cell (949) 887-1561 Description and Unmated cost of WorK: Description Estimated Cost 1 Prepare application for interconnection of the City's distribution system with $5,500 Southern California Edison'a(SCE) 12KV system to serve Noble and Company's Gateway Project and surrounding area.Moot with Noblo and Company on behalf of the City regarding design criteria and construction coordination 2 Negotiate Interconnection Agreements with SCE on behalf of the city. Interface S7,500 with SCE representatives as required. Estimated Total S13,000 Note:Time required for meetings with developers and SCE can not be specifically identified in advance.Change orders to the estimated coat may be required. Completion Schedule: Interconnection application within l5 working days of approval by Palm Desert- Meetings with SCE and developers as required. Ap ro ed by Palm Desert: Accepted and Agreed by EUS: �f (Signature) ^ (Signature) �q9 rho .r vi 9ca — J Q Na+#5 , (Print Name) (Print Name) 7 Ifdm. f0,r OS CAr—`7 ' ,EcL (Title) (Title) XL/ /7 /2 a3 (Date) (Date) 40570065.2 St hi 10/90'd 111-1 VLS00VE091 N21310 A113 1a3S30 111Yd-e01i ss19:01 Eo-21-1nr Received Jul-24-03 03i20pm From-1714283S089 To-PALM DESERT CITY CLE Page 02 City of Palm Desert Electric UtilityTask List and Timeline Status 8/11/03 • Design&Construction Management Task Prior 8/8 8/22 9/5 9/19 10/3 10/17 10/31 11/14 11/28 12/12 12/26 1/9 1/23 2/6 2/20 3/5 3/19 4/2 4/16 4/30 Status 1 Residential Distribution Design Proceedures TT 2 Material&Equipment Specifications TT TT 3 Master Plan TT TT 4 Feed Source Designs --nr_-__ - 5 Right-Of-Way/Easement Policies&Ordinance TT "r i 6 Undergorund Construction Standards(draft) -TT Z-1- 7 Vehicle And Tool Specifications TT TT ` 8 Construction and Work Methods Manual TT --1-�- 9 Safety and Health Proceedures -1 TT -rT 10 Undergorund Electrical Service Requirements TT "r`f Utility Operations and Maintenance Task Prior 8/8 8/22 9/5 9/19 10/3 10/17 10/31 11/14 11/28 12/12 12/26 1/9 1/23 2/6 2/20 3/5 3/19 . 4/2 4/16 4/30 Status 1 System Operation and Maintenance Standards TT 2 Facility Inspection Program TT 3 Field Trouble Order Process and Dispatch -r1- -r--- 4 Meter Order and Meter Setting Procedures TT -HT' 5 Customer Billing&Remittance Procedures TT TT 6 All Tariff Schedules Established in the Billing System TT TT 7 Chart of Accounts Programmed into the Billing System -f- -7-1-- 8 Credit&Collections Policies 1-r -T T 9 Customer Telephone Center Procedures -rT- -T-1" 10 Meter Reading and Field Services Procedures T-r` 11 Establishment of Customer Service Toll Free Telephone Number T-' -r-r- 12 Establishment of Monthly Utility Revenue&Transaction Reports TT -T--- PD Timeline 081103 Page 2 of 2 Map of ProposedUtility- . , __ ''r‘ 4 F DINAH SHORE DR 6 rm i m J w Q ).. 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