HomeMy WebLinkAbout08. Review draft Position Paper to amend a professional agreement with Carollo Engineers for the Plant Energy Optimization Project, District Project 7320 Central San 80
BOARD O F DIRECTORS
POSITION PAPER D
Board Meeting Date: March 2, 2017
Subject: AUTHORIZE THE GENERAL MANAGER TO EXECUTE A
PROFESSIONAL ENGINEERING SERVICES AGREEMENT AMENDMENT
WITH CAROLLO ENGINEERS FOR DESIGN AND BIDDING SERVICES
FOR THE PLANT OPTIMIZATION PROJECT, DISTRICT PROJECT 7320
Submitted By: Initiating Dept.lDiv.:
Craig Mizutani, Senior Engineer Engineering and Technical
Services/Capital Projects
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
E. Lopez-Capital Projects Division Manager
JM. Petit- Director of Engineering and Technical Services
Roger S. Bailey
General Manager
ISSUE: Board of Directors' (Board) authorization is required for the General Manager to
execute amendments to any agreement above 15% of the original agreement amount.
BACKGROUND: On November 3, 2016, the Board authorized the General Manager to
revise Agreement No. 044520 with Carollo Engineers, Inc. to increase the cost ceiling from
$29,495 to $120,000 for design services under the Plant Energy,Optimization Project,
District Project 7320. The original agreement scope of work was to determine the feasibility
of adding a Carbon Monoxide (CO) Catalyst for the reduction of CO emissions from
Central San's gas turbine-driven cogeneration system. It was also recommended to add
evaporative cooling to the cogeneration system intake air to increase fuel efficiency. Both
improvements have a combined payback of three years or less and provide an increased
reliability in operating the system under the CO permit requirements. The agreement was
increased to $120,000 for the design phase of the project.
During the design work, staff determined that the existing reverse osmosis (RO) unit that
supplies pu rif ied water to the cogeneration unit NOx system now needs to be replaced as
part of this project. The design planned to use the existing RO system to supply high-
quality water to the new evaporative cooling system. The existing RO unit is over 20-years
old and has been operating at reduced capacity due to several recent membrane failures.
There is no redundancy for the existing RO unit. An inspection by the manufacturer's
representative for the RO unit revealed that the unit is almost obsolete. Although
membranes may still be available, newer technology is recommended for the unit that
increases membrane life by up to five times compared to the existing RO unit. In addition,
the proposed evaporative cooling system requires the use of the RO unit or an alternate
system for water due to an increase in water demand.
An additional $65,000 is requested to include the design of the new RO system in
coordination with the evaporative cooling system. The new RO system will include two
independent units to provide full redundancy and will meet the existing demand for NOx
Page 1 of 2
POSITION PAPER
Board Meeting Date. M arch 2, 2017
subject: AUTHORIZE THE GENERAL MANAGER TO EXECUTE A PROFESSIONAL
ENGINEERING SERVICES AGREEMENT AMENDMENT WITH CAROLLO
ENGINEERS FOR DESIGN AND BIDDING SERVICES FOR THE PLANT
OPTIMIZATION PROJECT, DISTRICT PROJECT 7320
control and the new demand for the evaporative cooling system. The additional design
services include project meetings, field investigations, bidding support, and additional
control system design associated with the new evaporative cooler and turbine
requirements. Including the RO unit replacement increases the reliability of operating the
cogeneration system and is energy efficient. The project economic analysis has been
updated with a new business case. The project now has apayback of approximately 3.4
years, as detailed in Attachment 1 , Updated Project Business Case Analysis.
This project aligns with Central San's Strategic Plan Goal 6, Strategy 4, to optimize energy
efficiency. The replacement of the RO unit meets Strategic Plan Goal 5, Strategies 1 and
2, manage assets optimally through their lifecycle and facilitate long-term capital renewal
and replacement.
ALTERNATIVES/CONSIDERATIONS: Continue to operate and repair the existing RO
unit at an increased frequency and not include its replacement in the project, which is not
recommended. The RO system is required to meet NOx emissions requirements of the
Cogeneration. The evaporative cooler also requires RO quality water. Replacing the
existing RO system with a new, larger system with built-in redundancy, that would
incorporate the design requirements of both the existing NOx system and the new
evaporative cooler, is the most cost-effective approach compared to operating two
independent systems (one existing and one new).
FINANCIAL IMPACTS: The current total project cost estimate is $1 ,115,000, which
includes design, bidding, construction, contingency, and construction management
services. This project is included in the Fiscal Year (FY) 2016-17 Capital Improvement
Budget on page 133 with a total project budget of $1 ,400,000. To date, the approved
budget is $718,000, and no additional funding is required at this time. Staff will present the
final project budget at time of award. The work is estimated to be completed in November
2017.
COMMITTEE RECOMMENDATION: The Engineering and Operations Committee
reviewed this subject at the meeting on February 22, 2017, and recommended approval of
the agreement amendment.
RECOMMENDED BOARD ACTION: Authorize the General Manager to execute a
professional engineering services agreement amendment with Carollo Engineers to
increase the cost ceiling from $120,000 to $185,000 to provide additional design and
bidding support for the Plant Energy Optimization Project, District Project 7320.
Attached SyMortinq Document.-
1. Updated Project Business Case Analysis
Page 2 of 2
ATTACHMENT 1
Updated Project Business Case Analysis
Date: 2/15/2017 Eve 1.9L
Project: TP Energy-Cogen Optimization
Prepared By: Chathu Abeyrathna JChecked By: Sarwan Wason
BUSINESS CASE ANALYSIS
Updated Project Costs
Do Nothing including new RD
units
Capitan Costs For 1st Year:
Planning/Design Costs $Q $2881000
Direct Equipment Costs $0 $300,000
Construction Costs $0 $275,000
CM Costs $0 $252,000
O&M Costs For 1st Year;
District Staff Time Cost $25,044 $32,500
Solar PM Additional Cost $0 $p
Chemical Costs $0 $0
Additional Steam Generation Costs $120,000 $0
RO Membrane Replacement Costs $61200 $0
PG&E Costs $600,000 $320,000
Natural Gas Costs $1,880,004 $1,944,000
OW Costs for Year 1 $2,631,000 $2,297,000
Capital Costs for Year 1 $0 $1,115,000
Net Present Value for 10 years $250179,000 $237482,000
'ot Recommended Recommended
Assumptions:
Discount Rate,f 4.00% Based upon CWMP Basis of Cost TM 3
O&M Cost Inflation Rate,% 2.60% Based on 2011-2015 Average CPI
Capital Costs Inflation Rate,% 2.50% Based on 2011-2015 Average ENR CCI
PG&E Cost Inflation Rate,%4 4.72% Based on 2012-2016 normalized PG&E
Average Total Rate($/KWh)
Cost of Natural Gas $51MMBTU
Increased Aux Boiler demand 16.8 million lbs of Aux boilers can produce 870 lbs of
steam 1 year stew m/M M BTU
Natural Gas Cost Inflation Rate,% 4.00%
_ {-0.42 }inflation from 2002-201.6
Lifecycle period,years 10 years
Run Cogen as-is producing—2.3MW and continue increased PG&E
Dv Nothing import.Use existing R(7 Unit.
Updated Project Costs including new RU units
Add CO Catalyst,Evaporative Cooler and replace RG unit for
reliability