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Home My WebLink About5a. Generator Upgrades4ROSEMOUNT CITY COUNCIL Utility Commission Meeting- July 8, 2013 EXECUTIVE SUMMARY AGENDA ITEM: Generator Upgrades AGENDA SECTION: Old Business PREPARED BY: Andrew J. Brotzler, PE, Director of AGENDA NO. Public Works / City Engineer ATTACHMENTS: Memo from April 8, 2013 Utility APPROVED BY: Commission Meeting RECOMMENDED ACTION: Motion to Authorize the Expenditure of Funds from the Water Utility Fund to Complete Generator Upgrades and /or Purchase New Generators —or — Motion to Authorize Withdrawal from the Xcel Energy Electric Rate Savings program ISSUE As discussed at the March and April Utility Commission meetings, City staff has been researching the impacts of the new EPA rule for Reciprocating Internal Combustion Engines National Emission Standards for Hazardous Air Pollutants (RICE NESHAP). The RICE NESHAP rule requires implementation of new maintenance and reporting practices for certain non - emergency stationary engines. The city operates three generators that currently fall under the regulation of this new rule. Staff is requesting guidance from the Utility Commission to determine further course of action. BACKGROUND At the April 8, 2013 Utility Commission meeting, staff presented two options for discussion (see attached memo). In an effort to make an informed decision about which option to pursue, the Utility Commission requested that staff provide answers to the following questions: 1. What is the typical lifespan of an emergency generator? A generator used primarily for emergency power has a lifespan of 30 -35 years. Generators that have more frequent or heavier use have a lifespan closer to 20 years. Our current generators have 11 years of use (Well 9), 7 years of use (Well 12) and 9.5 years of use (portable). 2. What is the current value (trade value) of the affected generators? Based on estimates provided by Ziegler Power Systems, the trade value of the portable generator with trailer is appro_Yimately $10,000. There is no trade value for the two stationary generators at Wells 9 and 12. GAUTILITY COMMISSION= Information\20130708 UC Generator Upgrades.dou 3. What is the cost of a new, compliant generator? Based on estimates provided by Ziegler Power Systems, the estimated costs are: Portable generator with trailer ell 7) $104,775 rice reflects a $10,000 trade -in) Stationary generator (Well 9) $107,400 Stationary generator ell 12) $160,000 Note: Staff also requested quotes from Cummins NPower. Cummins declined to provide quotes, citing that they do not sell compliant generators and the net cost to retrofit a new generator would be 50 -75% more than the estimates provided by Ziegler. 4. What is the deadline for notifying Xcel Energy of our desire to withdraw from the Electric Rate Savings (ERS) program? Xcel Energy requires a six -month written cancellation notice to withdraw from the ERS program. The City would need to provide notice to Xcel Energy by November 1, 2013 in order to avoid cancellation penalties from Xcel Energy and be off the program by May 3, 2014 when the new RICE NESHAP compliance rules take effect. SUMMARY Staff is requesting Commission authorization to pursue one of the following options: • Utilize Water Utility funds to pay for necessary generator upgrades and /or purchase new generators in order to remain on the Xcel Energy ERS program • Withdraw from the Xcel Energy ERS program and maintain the generators as they are 14 6 Rosr_.MouNr CITY COUNCIL Utility Commission Meeting: April 8, 20.1 AGENDA ITEM: Generator Upgrades EXECUTIVE SUMMARY PREPARED BY: Andrew J. Brotzler, PE, Director of Public Works I City Engineer ATTACHMENTS: None AGENDA SECTION: Old Business AGENDA NO. APPROVED BY: RECOMMENDED ACTION: Motion to Authorize the Expenditure of Funds from the Water Utility Fund to Complete Generator Upgrades -- or — Motion to Authorize Withdrawal from the Xcel Energy Electric Rate Savings program ISSUE As discussed at the Karch 11 Utility Commission meeting, City staff has been researching the impacts of the new EPA rule for Reciprocating Internal Combustion Engines National Emission Standards for Hazardous Air Pollutants (RICE NESHAP). The RICE NESHAP rule requires implementation of new maintenance and reporting practices for certain non -eme bency stationary engines. Ilan- of these engines will also require retrofit with catalytic emission control. The city open. tes three generators that currently fall under the regulation of this new rule and may need to be upgraded in the near future. Staff has researched this issue and developed two options for Utility Commission consideration.' BACKGROUND Option 1 Wells 7, 9 and 12 are currently enrolled in the Xcel Energy Electric Rate Savings (ERS) peak demand program. Stationary generators at Wells 9 and 12 and a portable generator at Well 7 are used to facilitate participation in this program. Byparticipating in the ERS program and switching to standby power during periods of peak electrical demand, we receive substantially lower usage rates from Xcel Ene%y, providing a savings of approximately $13,720 annually. To continue in the ERS program, components on these three generators would need to be upgraded to be NESHAP compliant by 111ay 2014. The estimated cost of these upgrades is provided in Table 1. GAUTILITY COMMISSIMUC Information\20130408 UC Generator Upgrades.docx Table 1 Description Asset Estimated Cost Well 7 — portable 8059 $30,000 Well 9 — stationary 0053 $45,000 Well 12 — stationary 0060 $45,000 Total Estimated Cost $120,000 In addition to the upgrade costs, there would be an additional cost of approximately $15,000 every three years to have the equipment inspected to ensure it remains NESHAP compliant. There would also be ongoing costs for continuous temperature monitoring, monthly pressure drop monitoring, submitting semiannual reports, and the administrative cost associated with coordinating this extra monitoring. Over the next 10 years, the cost to maintain NESHAP compliance and remain on the Xcel Energy ERS program is estimated to be $165,000 to $185,000. Option 2 Xcel Energy allows agencies to withdraw from the ERS program with a six -month written cancellation notice. By withdrawing from this program, the city would pay nearly $14,000 in increased electricity charges annually, but would not be subject to the NESHAP regulations since the generators would then be considered strictly emergency engines. In addition to the increased electricity, rates, the city may incur a cancellation penalty from Xcel Energy if any of the three generators exceeds 50 hours of use before our termination date (sir months after notice). Based on historical usage, it is unlikely that any of the generators would exceed this 50 hour threshold. In the unlikely event we exceed the 50 hour threshold, the possible penalty- charges are outlined in Table 2: Table 2 Description Estimated Penalty Well 7 $4,000 Well 9 $4,000 Well 12 $5,600 Total Possible Penalty $13,600 Over the next 10 years, the cost to withdraw from the Xcel Energy ERS program is estimated to be $140,000 in increased electricity cha bes. No equipment upgrades would be necessary if we Rithdmw from the ERS program E Other Generators The city operates several other stationary generators that are not impacted by the RICE NESHAP rule at this time because they are considered strictly emergency engines. A summary of these units is provided in Table 3: Table 3 Description Asset Reason Public %X "orks 0052 Natural Gas City Hall 0054 Natural Gas Fire Station 1 0058 Natural Gas Fire Station 2 0061 Natural Gas Well 14 0062 Meets Standards Mechanics Shop 0063 Meets Standards SUMMARY Staff is requesting Cornmission authorization to pursue one of the following options: • Utilize Water Utility funds to pay for necessary generator upgrades and remain on the Xcel Ene by ERS program • Withdraw from the Xcel Energy ERS program and maintain the generators as they are 'Information gathered from the following resources: • Environmental Protection Agency Laces & Regulations (cccvcv.epa.gov /lac�5regs) • Environmental Protection Agency RICE NESHAP fact page (cc cvcv.epa.gov /ttn/ anti / rice/tjcepg .htm l) • Reza Bagherian (EPA Region 5 NESHAP specialist) • Paul Kaeding (Barr Engineering) • Steve Wrllaert (Xcel Energy) • Joseph Hanley (Collins E lectrical) • Mark Reuter (Ziegler Power Systems) • Joshua Quilling (Cummins NPower) 3