Eastern Municipal Water District
California

Action/Info Item
3843

Conduct Public Hearing, Approve and Authorize Agreements and Adopt Proposed Resolution for the Phase 3 Solar Renewable Energy Initiative, and Additional Appropriation in the Amount of $9,026,900

Information

Department:EngineeringSponsors:
Category:Action/Info ItemMeeting Workflows:Board O&E Committee Workflow

Background

In accordance with the District’s strategic initiative for net energy independence, the District’s renewable energy consultant, TerraVerde Energy (TerraVerde), has worked with staff to identify new or expanded solar generation opportunities at five locations (Project) as shown on Exhibit A.  These include the expansion of solar generation under Southern California Edison’s (SCE’s) Net Energy Metering (NEM) 2.0 program at four of the District’s existing 1-megawatt installations at Regional Water Reclamation Facilities (RWRFs – Moreno Valley, Perris Valley, San Jacinto Valley and Sun City/Desalter Complex); as well as the potential for one 5-megawatt project under SCE’s Renewable Energy Self-Generation Bill Credit Transfer (RES-BCT) tariff, that would be located on District property adjacent to the San Jacinto Valley RWRF.  Combined, the Projects provide the District with approximately 16 megawatts of additional solar power generation, with anticipated net savings of approximately $40 million through the 25-year Power Purchase Agreement (PPA) term.

 

Power Purchase Agreement (PPA)

 

California Government Code section 4217.10 et seq. allows public agencies to enter into energy services agreements for the purchase of energy from solar systems installed on the District’s property with the greatest flexibility in structuring agreements whereby economic benefits may be maximized.  In July 2018, the District issued a Request for Proposals (RFP) and conducted a selection process to obtain proposals for the purchase of energy from solar systems installed on District property. California Government Code section 4217.10 et seq. allows the District to select the proposal that is deemed to be in the District’s best interest and best value.

 

Through the RFP process, including additional due diligence, reference checks, and negotiations, REC Solar of San Luis Obispo, California, is recommended as the selected PPA provider to design, install, operate, maintain, and retain ownership of the solar facilities at various District sites via site-specific PPAs and site lease agreements (Exhibits B-F). The PPAs consist of specific terms, conditions, guarantees, and technical specifications, which outline the responsibilities and legal requirements of each party. Each PPA provides a fixed price per kWh for renewable energy that is less than the cost of electricity purchased from the District’s electric utility provider, SCE. However, the overall PPA rate is subject to minor adjustments for the investment tax credit value and SCE interconnection costs upon completion of construction after actual Project costs are realized.  It is anticipated that these adjustments will be minor and non-substantive to the final fixed rate.  The PPAs have 25-year contract terms, and include options for the District to purchase the solar facility assets during the term of the agreement at a discounted value.

 

Prior to approving the PPAs, the District’s Board of Directors must fulfill two requirements under California Government Code section 4217.10, et seq.:

 

1.      Make the following findings:

 

a.      That the anticipated cost to the District for electrical energy provided by the Project under the PPA will be less than the anticipated marginal cost of electrical energy that would have been consumed by the District in the absence of the Project under the PPA; and

 

b.      That the difference, if any, between the fair rental value for the real property subject to the facility ground lease and the agreed rent, is anticipated to be offset by below-market energy purchases or other benefits provided under the PPA.

 

2.      Hold a public hearing to consider approval of the PPA, for which a public notice must be given at least two weeks prior to the public hearing.  The notice of the public hearing was posted on March 15, 2019.

 

Based on the 25-year cash flow savings projection for each project prepared by TerraVerde (included in draft Board Resolution, Exhibit G), there is sufficient basis for the above findings.

 

As part of the PPA, property leases and related access easements are necessary between the District and PPA provider.  The property leases will be limited to the footprint (fence line) of each solar array with easements prepared for appropriate access generally from the main entrance of each RWRF. The PPA provider will be responsible for all applicable property taxes, fees, and permits associated with the installation of the solar facilities on the District’s property.

 

Civil/Site Work

 

In preparation to receive the solar facilities, extensive civil/site work must be performed to prepare elevated equipment pads at each of the five Project sites. On November 14, 2018, the District received bids from qualified contractors for associated civil/ site improvements under Specification No. 1345. As shown on the attached Revised Final Bid Summary (Exhibit H), Sukut Construction, LLC. (Sukut), of Santa Ana, California, submitted the lowest of five bids received, with a total bid of $7,378,000. This bid was reviewed and found to be responsive with the contract documents. The engineer’s estimate for this Project was $12,991,610. Sukut has previously performed similar work for the District in a satisfactory manner.

 

The Phase 3 Solar Renewable Energy Initiative will be implemented in two stages that will run concurrently:  Stage 1 – Civil/Site Improvements and Stage 2 - Solar System Design/Build and Installation.  By advancing both activities simultaneously, the District will maximize the best value for the Project by:

 

·         Providing for optimal construction scheduling to best meet milestones associated with the PPA provider’s access to Federal Investment Tax Credits that facilitate subsidized PPA rates; and

 

·         Maximizing the energy cost benefits of Time-of-Use period grandfathering eligibility for each project site provided by an agreement with SCE.

 

General Implementation

 

The initial Project implementation cost is estimated at $10,649,600, per the attached Project Cost Estimate (Exhibit I).  At this time, staff recommends additional appropriation in the amount of $9,026,900 to fund Project expenses and associated engineering labor costs through Project completion subject to reimbursement from the PPAs via the Cost reimbursement agreement up to $10,094,001.  A portion of the subject request for additional appropriation will be utilized to fund various professional services agreements during the Project construction.

 

Staff requested and negotiated technical support services from TerraVerde of Larkspur, California, in the amount not-to-exceed $282,300 (Exhibit J).  TerraVerde’s services include the following key tasks:

 

·         Project meetings, site visits, and administration

·         Review of design/build design milestone submittals

·         Review of submittals, design clarifications, and potential change orders

·         Compliance with Power Purchase Agreement and Ancillary Agreements

·         SCE Coordination and SCE Interconnection Process and Agreements

·         Coordination with Specialty Electrical Inspector

·         Testing, start-up, and commissioning services

 

Staff also requested and received a proposal from Carollo Engineers (Carollo), of Riverside, California, in an amount not-to-exceed $139,900 (Exhibit K). Carollo will provide specialty electrical inspection services for the solar interconnections. Carollo was previously selected and included on the District's annual contract list for design services, has extensive experience working in all of the District’s RWRFs, and they provided inspection services as well as supported the implementation of the solar phase 1 and phase 2 facilities.

 

In addition, staff requested and received a proposal from Kleinfelder, of Riverside, California, in an amount not-to-exceed $162,700 (Exhibit L).  Kleinfelder will provide geotechnical testing and observation services during construction for the civil/site workKleinfelder was previously selected and included on the District's annual contract list for geotechnical services, has extensive experience working on the various District facilities, and they are the geotechnical firm of record during the design phase of the civil/site improvements.

Financial/Strat Plan/Enviro

FINANCIAL IMPACT:

The subject Project efforts will be funded through the District’s Operations Research/Development Fund- Special Projects, subject to partial reimbursement as part of the Power Purchase Agreements via the Cost Reimbursement Agreement up to $10,094,001.

 

STRATEGIC PLANNING GOAL/OBJECTIVE:

Energy Independence: Plan and cost-effectively implement local renewable energy projects with sufficient generation to meet the District’s entire net energy demands while minimizing the District’s carbon footprint.

 

ENVIRONMENTAL IMPACT:

This project is subject to the California Environmental Quality Act (CEQA) and an Environmental Impact Report (EIR) was prepared in conformance with California Code of Regulations Title 14, Chapter 3, Article 7, Section 15080, et seq.  The Final EIR was certified and adopted by the Board on February 20, 2019.

Recommendation

Approve and authorize the following:

 

  1. Holding a public hearing to consider approval of the Power Purchase Agreements for the Phase 3 Solar Renewable Energy Initiative;

 

  1. Adopt a Resolution making the required findings and authorizing and approving the Power Purchase Agreements with REC Solar, and authorizing the execution and delivery of ancillary agreements, documents, and actions required in connection therewith;

 

  1. Execution by the General Manager, or his designee, of the Power Purchase Agreements and related agreements, subject to non-substantive changes, with REC Solar;

 

  1. Execution by the General Manager, or his designee, to approve and authorize the required property leases and easements subject to non-substantive changes;

 

  1. Execution by the General Manager, or his designee, of the District’s standard form of contract with the lowest responsive bidder, Sukut Construction, LLC, in the amount of $7,378,000 for civil/site work;

 

  1. Execution by the General Manager, or his designee, of the District’s standard form of agreement amendment with TerraVerde Energy for technical support services during design/build and construction in the amount of $282,300;

 

  1. Execution by the General Manager, or his designee, of the District’s standard form of agreement with Carollo Engineers for specialty electrical services during construction in the amount of $139,900;

 

  1. Execution by the General Manager, or his designee, of the District’s standard form of agreement with Kleinfelder for geotechnical testing and observation services during construction in the amount of $162,700;

 

  1. Administrative award and execution by the General Manager, or his designee, of the District’s standard form of contracts and agreements for implementation of the Project; and

 

  1. Additional appropriation in the amount of $9,026,900 which brings the total estimated initial Project implementation cost to $10,649,600.

 

Meeting History

Mar 28, 2019 3:30 PM  Board Operations and Engineering Committee Regular Meeting
draft Draft
RESULT:RECOMMENDED FOR APPROVAL
Apr 3, 2019 9:00 AM  Board of Directors Regular Meeting
draft Draft
RESULT:APPROVED [3 TO 0]
MOVER:Randy A. Record, Board Member
SECONDER:Stephen J. Corona, Board Member
YES:Philip E. Paule, Stephen J. Corona, Randy A. Record
ABSENT:Ronald W. Sullivan, David J. Slawson