Memorandum. Project Administration Department. 324 East Pine Street Tarpon Springs FL (727)

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1 Project Administration Department 324 East Pine Street Tarpon Springs FL (727) Memorandum Date: March 19, 2019 To: Mayor, and Board of Commissioners Through: Mark LeCouris, City Manager From: Bob Robertson, Project Administration Department Director Subject: City Hall Generator Premier Power Service Agreement with Duke Energy Recommendation Approval for the City Manager to execute a Premier Power Service Agreement (PPSA) with Duke Energy is recommended. Through this agreement, the City will lease a backup generator for the City Hall complex. Summary As part of the City s post-irma action plan, continuity of services such as customer billing, vendor payments, payroll, cash receipts, finance, information technology, and general staffing needs at City Hall were identified as important needs. City auditors have recommended continuity of service as an important aspect to disaster recovery. The existing backup power generator located at City Hall is aging and is significantly undersized to meet the need to maintain recommended continuity of service. As such, as a temporary measure, augmentation of generator power using a trailer-mounted generator dedicated exclusively to the Information Technology Department has been and continues to be necessary at this time. City Staff have been working with Duke Energy staff to research and vet a program offered through Duke s Energy Services Program (see Attachment 1) through which the City can lease a full-size diesel electric generator from Duke Energy to supply emergency power to the full City Hall complex. The City Hall complex includes the following: City Hall Main Building: o IT Department (servers and air conditioning) o Building-wide air conditioning o Performing Arts Center (Auditorium)

2 City Clerk s Office The Old P.D. Annex (records storage building) Customer (Utility) Billing The Energy Services Program consists of two agreements that are summarized below. Agreement #1: Engineering Service Agreement (previous BOC item, Dec 2018) The Engineering Service Agreement that covered the engineering work required to install a generator and was approved by the Board of Commissioners in December Overview: The ESA is an agreement between the City and Duke Energy. Through this agreement, Duke has completed engineering analysis related to the future installation of a full-size generator at City Hall. Purpose: The analysis provided load analysis, site layout drawings, equipment specifications and lease pricing for the proposed generator system. Cost: A fee of $10,000 was included in this agreement to provide these engineering services. However, this fee will be waived if the City elects to proceed with the lease of a generator upon completion of the engineering work and execution of a Premier Power Service Agreement (PPSA) as described below. Schedule: This analysis has been completed. Agreement #2: Premier Power Service Agreement (this BOC item). The Premier Power Service Agreement (PPSA) covers the installation, operation, maintenance, and lease terms for the generator. An initial draft agreement was presented with this BOC item for reference only in December A final version, reviewed with the City Attorney and with Duke Energy, is attached and is presented herein for BOC approval (see Attachment 2). Overview: The Premier Power Service Agreement (PPSA) is an agreement between the City and Duke Energy for which City Staff is requesting approval. Through this agreement, Duke Energy will provide a full-size generator at City Hall. The PPSA is attached. Purpose: The agreement will cover installation, operations, maintenance, liability, and decommissioning stipulations related to the lease of a full-size generator to be installed at City Hall. Duke will provide significant electrical upgrades to the existing power system in accordance with current electrical code at the City Hall complex, including upgrading electrical panels, external wiring, and consolidating five meter services into a single meter. Cost: No up-front costs would be required to be paid by the City. Executing this agreement will waive the $10,000 fee currently due to Duke Energy for engineering services (Agreement #1 above). A monthly lease payment of $7,014 would be paid as part of the monthly power bill for City Hall. The monthly power bill for City Hall currently is paid by the General Fund (88%) and by the Water-Sewer fund (12%). This additional monthly payment will be paid at the same ratio, splitting the cost between the General Fund at 88% or $6,172 per month ($74,068 annually) and the Water-Sewer Fund at 12% or $842 per month ($10,100 annually).

3 The only costs above this fee to the City for the duration of the contract will be for fuel used to run the generator during emergencies. The initial fuel fill-up and fuel used for periodic testing of the generator is covered by Duke Energy. Contract Term: The initial contract term would be 10 years, renewable at the end of the term. The contract also includes a buy-out option for full ownership of the equipment. Schedule: The Duke team estimates that the new generator could be operational by late summer Common Questions: Why not just buy our own generator? Purchasing our own generator would still have required the necessary engineering analysis similar to what has now been completed by Duke Energy s engineering staff. An estimate for these services provided by an independent engineering firm is $48,000. The total price for a new generator and necessary electrical upgrades including installation is more than $900,000. That amount of money is not included in the City capital budget. When compared to the lease option and including capital and operating costs (such as maintenance, extended warranty, etc.), purchasing a generator would have a year payback compared to this lease option. Furthermore, all operation and maintenance will be the responsibility of Duke Energy, requiring almost no City Staff time to oversee operations, fuel management, and maintenance of the generator. The City also currently pays for fuel, service, labor, and replacement parts associated with maintaining the existing, aging generator. These costs, roughly $8,000 per year, would be eliminated by this new generator lease program. Additionally, the Utilities Division has installed a dedicated portable (trailer-mounted) generator at City Hall to provide power to the I.T. Department in emergency situations. It is set up at City Hall and remains connected to the electrical system at all times. The new leased generator would eliminate the need for this dedicated generator, freeing it to return to the fleet to provide backup power to drinking water supply wells and wastewater lift stations during emergencies and power outages. The cost for fuel and maintenance of this generator is approximately $6,000 to $9,300 per year, depending on maintenance requirements. When accounting for the avoided costs of the existing system, the net annual cost for the leased generator works out to be approximately $5,708 per month ($68,500 annually) on average. How will this system work if City Staff does not operate it? Because the generator will be placed before City Hall s power meter, the generator will essentially function as a remote power plant for Duke. So if regular network power fails from Duke, the generator will automatically switch over, providing a reliable power source to City Hall.

4 What happens after the 10-year term expires? City would have three options: (1) Renew the contract at new, negotiated terms and pricing, (2) purchase the generator at an agreed upon price, or (3) terminate the contract and have the equipment removed. Why 10 years? Why not shorter? Or longer? The maximum contract term allowed by City Charter is 10 years. Shorter term would result in a higher monthly lease. Monthly lease pricing is lower for longer-term contracts. Will this generator provide enough power to all of the City Hall buildings and offices? The new generator will be sized to provide power to the City Hall complex as described above. The proposed 250 kw generator has a 25-percent safety margin to account for current and future demands.

5 Attachment 1 Brochure from Duke Energy s Energy Services Program

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8 Attachment 2 Premier Power Service Agreement (PPSA) (BOC approval is requested for this item)

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