SR-502-002-02
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GS:SS:EL:AH:a
Councll Meeting: November 23) 1982
-> t:J 2- - tOO Z -0 '"Z-
To:
Mayor and CIty Councll
Santa Monica) California
'V 'X'
From
City Staff
Approval
Flnance
Generatlng
Plant
MO'J 2 3 t982
to Negot 1 ate a ' Contract to Des 1 gn, NOV 3 0 1982
and Construct a Hydroelectrlc
Plant at the Clty'S Water Treatment
Subject:
Introductlon
In order to utilize the excess pressure from the Metropolltan
Water Dlstrlct1s supply of water to the Clty, staff is proposing
to develop a small hydroelectrIC generation faCIlity at the Clty'S
Water
Treatment
Plant.
ThlS summarizes the proposals and
recommends a fIrm to deSIgn) construct and flnance the proJect.
The Clty wlll recelve a percentage of the gross revenues generated
from thlS faclllty. There are no obllgatlons to the Clty other
than routlne maIntenance reqUIrements.
Background
In 1981 the Clty Councll approved a study to determlne the
feaslbility of constructing an electrical generatlon faclllty at
the City's Water Treatment Plant near Wilshlre Boulevard and Bundy
Avenue.
The study concluded that there was sufflclent pressure
and quantity of water to generate .15 megawatts of power (enough
for approximately 120 homes).
Deslgn and constructTon costs of the generating facilltles were
estimated to be approxlmately $500,000.
Slnce there was a
questlon whether public or private funds should be used, the Clty
engaged Peat, Marwlck) Mltchell and Company to determIne the
feasibIlIty of the Clty fundlng and buildlng the proJect. They
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Il-7 NO~ 3
NO'J 2 3 \982
o ,ge~
GS:SS:EL:AW'a
Council Meet1ng: November 23) 1982
Santa Mon1ca) Californ1a
concluded that cons1der1ng the r1sks 1nvolved) as well as tax
1ncentives
for
prlvate
fund1ng) that pr1vate funding was
preferable to C1ty 1nvestment in th1S fac1llty.
As
a
result
of
this, the City staff located potential
des1gnjbu1ld/construct groups to solic1t the1r 1nterest. The C1ty
advert1sed on July 12 and 13 1n construct1on Journals request1ng
proposals to bUlld and develop this generat10n fac1l1ty wlthout
r1sk to the Clty.
Two proposals were subm1tted 1n response to the notice lnv1t1ng
b1ds for the proJect, Wh1Ch 1S estlmated to have a useful life of
from 15-30 years.
Hydroelectrlc Constructors) Inc. (HEC) of
Monterey) Californ1a, subm1tted a proposal Wh1Ch has the following
features:
For a 27-year proposal:
Clty shares 1n gross revenues 1n varYlng amounts from
22% for flrst SlX years and lncreas1ng to 40% In later
years. (Approximately $11)600 to be recelved by the
City the first year.)
Facility becomes C1ty-owned ln 27 years.
Faclllty to be deslgned by Boyle Englneering Corporatlon)
Newport Beach.
Present worth of Clty revenues (based on estimates of
power to be sold).
at end of 15 years
at end of 20 years
at end of 27 years
For a 22-year proposal:
$161,500
$213,201
$287,000
City shares in gross revenues ln varying amounts from
22% for first 6 years and 1ncreasing to 30% in the
later years. (Approximately $12)765 to be received
by the Clty the first year.)
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GS:SS:EL:AW:a
Coune1l Meet1ng: November 23, 1982
Santa r~on1ca, Californ1a
FaC1l1ty becomes C1ty-owned 1n 22 years.
Des1gn the same as above.
Present worth of C1ty revenues 1S as follows:
at end of 15 years
at end of 20 years
at end of 22 years
$157,650
$207,133
$225,085
ER&A of 1820 14th Street 1n Santa Mon1ca subm1tted a proposal w1th
two options conta1n1ng the follow1ng features:
Plan A
Based on avo1ded cost (the value of the sav1ngs of the amount
of eleetric1ty billed wh1eh would be the amount generated)
of electr1e1ty to the C1ty.
C1ty receives 15% d1scount 1n cost of eleetr1city
for amount Wh1Ch is generated by the proposed
fa c i 11 ty .
A one-t1me lump sum payment of $5,000 to the City.
FaC1l1ty becomes City-owned 1n 15 years.
FaC1l1ty to be designed by ER&A staff and
1ts consultants.
Present worth of City revenues (or sav1ngs)
at end of 15 years
at end of 20 years
at end of 22 years
at end of 27 years
$.144,000*
$252,000*
$305,811*
$428,000*
Plan B
Shared revenue from power sales.
C1ty reee1ves 10% of gross revenues (approximately
$5,800 the f1rst year to be received by C1ty).
Facility to be des1gned and bU1lt as 1n Plan A.
* based on same amount of electr1city to be generated as 1n
HEC proposal and cons1der1ng payment to the City for
custod1al ma1ntenance.
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GS:SS:EL:AW:a
Council Meet1ng: November 23, 1982
Santa Mon1ca, Cal1forn1a
Present worth of C1ty revenueS:
at end of 15 years
at end of 20 years
at end of 27 years
$112,000*
$219,000*
$395,000*
Both f1rms plan to sell the electric1ty to the Southern Cal1fornia
Ed1son Co. after Iwheel1ng" 1t through Los Angeles Department of
Water & Power llnes, Slnce DWP will not pay as much as w1ll SCE
for the power.
As 1nd1cated 1n the present worth analysis at the end of 15 years,
the revenue streams are qUlte close and w1th the except10n of
ER&A1s Plan A, the 20-year analys1s is also qUlte close. Zero
buy-back (provlslons to turn over the fac1lity to the C1ty at no
cost) is avallable at the end of 15 years in the ER&A proposal,
but HEC requ1res a mlnimum perlod of 22 years before the zero
buy-back
proV1Slon takes effect.
Consequently any analysis
comparlng the present worth for any time per10d less than 22 years
must take lnto account the Clty's cost to buy back the equipment.
ThlS would reduce the present worth of HECls proposal, and
subsequently reduce the revenue to the City.
The same gross
revenue stream (as estimated by HEC) was used in the present worth
analysls for evaluatlng both proposals.
Both
firms
W 1 11
provide
a complete deslgn, flnance and
constructlon package subject to approval by the utillty companles,
Federal Energy Regulatory Commission and the citles of Los Angeles
and Santa Monica.
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GS:SS:EL:AW"a
Councll Meetlng: November 23, 1982
Santa Monica, Callfornla
Staff wlll be 1nvolved wlth custod1al ma1ntenance under elther
plan w1th the f1rm to do all major malntenance.
Both of the f1rms which have made proposals have llmited
experlence
i n
deslgn1ng
and
bUlldlng small hydroelectrlc
facilities.
ER&A prov1ded assistance to the Modesto Irrlgatlon
D1strict by specifying and ass1sting 1n the purchase of a
generator. The Modesto Irr1gatlon D1str1ct deslgned the plant and
did all C1V1l and electr1cal eng1neering work.
ER&A has been
lnvolved in prepar1ng stud1es for other small hydroelectric
facilities.
HEC has more experlence than ER&A 10 that HEC has completely
designed and bU11t three hydroelectr1c generatlon facilit1es. The
staff has V1slted the project Wh1Ch has been completed by HEC for
the Hemet Irrlgatlon D1str1ct and has found that project to be
entlrely satlsfactory.
The staff engaged consult1ng engineers Perl1ter & Ingalsbe of
Glendale, California, to 1nvestlgate and make recommendations
regardlng Wh1Ch of the flrms is best qualifled since the projected
present worth of revenues is quite similar 1n elther plan.
Perllter & Ingalsbe have v1sited the sltes and talked w1th the
agenc1es. personnel at the project locations which have been
completed by each of these flrms making proposals. They have
recommended HEC as the more experlenced flrm.
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GS:SS:EL:AW a
Councll f4eetlng; November 23, 1982
Santa Monlca, Callforn1a
Recommendatlon
Staff recommends that the Clty Manager be authorlzed to negotlate
a contract w1th HEC and to develop, des1gn, flnance and construct
a hydroelectr1c plant at the Clty Water Treatment Plant site.
Prepared by
Stan Scholl. 01 rector of General SerVl ces
Ed Lash, Enterprlses Manager
Arden Wallum, Admlnlstratlve Water Engineer
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