Pasadena Water and Power

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

BudgetCity CouncilJuly 29, 2013

Pasadena Water and Power

Background

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• 2009 Energy IRP recommended replacement of existing Broadway 3 with equivalent size combined cycle unit by 2015

o Need dependable local generation to back up/supplement single line of import

o B3 can’t be depended on for too long …47 years old, spare parts problems

Pasadena Water and Power

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)

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Pasadena Water and Power

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

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Pasadena Water and Power

Bidders Evaluation

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BIDDERS EVALUATED SCORE

GAS TURBINE MFGR.

   GE Packaged Power, Inc., Houston, TX

82.75 GE

Abeinsa, Inc., Chesterfield, MO 80.25 Rolls-RoyceAbeinsa, Inc., Chesterfield, MO 79.25 GEQuanta, Inc., Greenwood Village, CO

79 GE

Lauren, Inc., Abilene, TX 78 Rolls-RoyceESI, Farmington, CT 68 Rolls-Royce

Pasadena Water and Power

Fiscal Impact

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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.

Total Expenditure in FY2014 FY 2014 FY 2015 &

FY 2016Total

ExpenditureBase Contract Amount $40,370,000 $20,472,000 $60,842,000Contingency (2.2% of the firm bid) $1,328,000 $1,328,000

Total $40,370,000

$21,800,000 $62,170,000

Pasadena Water and Power

Repowering Project Budget

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• 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

Pasadena Water and Power

Reasons for Budget Change

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Scope of Work PreviousEstimate

CurrentEstimate

Difference($)

Explanation

Power Island Equipment

Equipment Subtotal $ 39,482,381 $ 48,303,504 $ 8,821,123 Increased Scope, noise control, flexibility, emissions compliance

Delivery $ 2,104,000 $ 2,525,388 $ 421,388 Commensurate with equipment scope

Taxes $ 3,553,414 $ 4,347,315 $ 793,901 Commensurate with equipment scope

Maintenance Contract, Spare Parts, Options $ - $ 5,206,655 $ 5,206,655 Newer design, efficiency enhancements, lessons learned

10% Contingency $ - $ 5,358,248 $ 5,358,248 Material escalation, scope, foreign exchange, overseas shipment

Power Island Equipment $ 45,139,795 $ 65,741,110 $ 20,601,315

Balance of the Plant Equipment - Engineering and construction      

Design, Construction, Permitting $ 51,000,000 $ 51,000,000 $ - Various increases and decreases, but no net change

Contingency (14% / 20%) $ 7,020,000 $ 9,424,958 $ 2,404,958 Increased uncertainty & risk - Glenarm site, escalation, delays

Project and Construction Management $ - $ 3,325,800 $ 3,325,800 Added project controls measures to assure cost/schedule/budget

Engineering & Construction $ 58,020,000 $ 63,750,758 $ 5,730,758    Air Permit Fee

Proposed AQMD 1304.1 Fee $ - $ 1,500,000 $ 1,500,000 AQMD revised PR1304.1 on 7/25/13 to make it effective for permits issued after 9/6/2013- proposed date for rule adoption by their Board

     Glenarm Building - control room and offices

Control room and other offices $ 12,000,000 $ - $ (12,000,000) Removed from project due to expense

Modular Building for control room/offices $ - $ 830,183 $ 830,183 Alternative to Glenarm Building

Glenarm Building - control room and offices $ 12,000,000 $ 830,183 $ (11,169,817)

Total Repowering Project $ 115,159,795 $ 131,822,051 $ 16,662,256

Pasadena Water and Power

Energy Cost Comparison- Fossil fuel

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Major Assumptions:A.Variable costs for market and owned/contracted plants assumed to escalate at 5% annuallyB.Natural gas price in FY 2014 $4.39/mmBtu and escalation @5% annuallyC.Major assumptions for GT5 cost:1.Debt service = $8 million/year2.Capacity factor = 20%3.Depreciation = 30 years

Resource Name/TypeProjected Energy Price by Calendar Year

($/MWh)2014 2015 2016 2020 2025

2012 Market Forecast (brown power) 43.99 46.19 48.50 58.95 75.23

IPP (coal) 59.72 61.81 63.98 73.41 31.01

Magnolia Power Project (MPP) 57.74 60.62 63.66 77.37 98.75

GT5 (estimated)Not in

operation 101.62 105.18 121.27 146.35

Pasadena Water and Power

Recommended Actions1. 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;

2. 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;

3. 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

4. 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.

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Pasadena Water and Power

Back Up Slides

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Pasadena Water and Power

Appendix – Price Comparison

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Resource Name/Type Contract Execution

Contract Energy Price1 by Calendar Year ($/MWh)

2014 2015 2016 2017 2020 2025

Proposed Alpine II 2013 - - $81.50 $81.50 $85.22 $91.81

Silverado Solar 2012 - $77.34 $78.50 $79.68 $83.32 $89.76

WM Biomethane 2011 $94.92 $94.92 $94.92 $94.92 $94.92 -

Sequent Biomethane 2011 $94.92 $94.92 $94.92 $94.92 $94.92 -

EDF Biomethane 2011 $98.00 $98.00 $98.00 $98.00 $98.00 -

Milford Wind 2009 $70.94 $72.19 $73.45 $74.74 $78.73 $85.86

Ormat Geothermal Phase 2 2008 $82.01 $83.24 $84.49 $85.76 $89.67 $96.60

Chiquita Canyon LFG 2006 $65.25 $65.25 $65.25 $65.25 $65.25 $65.25

Ormat Geothermal Phase 1 2005 $64.77 $65.74 $66.73 $67.73 $70.83 $76.30

Iberdrola Renewables 2003 $53.50 $53.50 $53.50 $53.50 $53.50 -

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

Pasadena Water and Power

Fiscal Impact – Cont.

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• 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.