INITIATED BY: DEPARTMENT OF PUBLIC WORKS ~ (Oscar Delgado, Director of Public Works~- _, (Sharon Perlstein, Engineering Division, City Enginee.

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CITY COUNCIL UNFINISHED BUSINESS DECEMBER 5, 2016 SUBJECT: ACQUISITION OF STREET LIGHTS FROM SOUTHERN CALIFORNIA EDISON INITIATED BY: DEPARTMENT OF PUBLIC WORKS ~ (Oscar Delgado, Director of Public

1 CITY COUNCIL UNFINISHED BUSINESS DECEMBER 5, 2016 SUBJECT: ACQUISITION OF STREET LIGHTS FROM SOUTHERN CALIFORNIA EDISON INITIATED BY: DEPARTMENT OF PUBLIC WORKS ~ (Oscar Delgado, Director of Public Works~- _, (Sharon Perlstein, Engineering Division, City Enginee.':0 f STATEMENT ON THE SUBJECT: The City Council will consider approval of a Purchase and Sale Agreement with Southern California Edison for acquisition of a portion of the citywide street light system. RECOMMENDATIONS: 1) Approve a Purchase and Sale Agreement, including a Light Pole License Agreement, with Southern California Edison for acquisition of approximately 1,901 street lights in a not-to-exceed amount of $1,800,000. 2) Authorize the City Manager, or designee, to execute documents incident to the Agreement. BACKGROUND I ANALYSIS: Street lights within the City of West Hollywood are currently owned and operated by Southern California Edison (SCE). SCE is responsible for operation, maintenance, risk management, knock-down replacements, customer service, and energizing the street lights. The City pays a monthly tariff to SCE for the street lights citywide. The street lights are designated under SCE's LS-1 High-Pressure Sodium (HPS) tariff, which is for utility owned and maintained street lights. Currently, the City's annual payment to SCE for the street light system under the LS-1 HPS tariff is approximately $420,000. The majority of this cost, approximately 90%, is for the operation and maintenance component of the LS-1 tariff. The energy component is approximately 10% of the LS-1 tariff. Most of the street lights citywide are over 20 years old and have recurring maintenance issues. SCE does not operate a proactive program to periodically inspect street lights at night to ensure the system is operational. Instead they operate a reactive maintenance program, relying on customer calls reporting street light outages. To reduce community complaints to City Hall about street light outages, City staff occasionally work overtime to conduct nighttime surveys of the street lights, sending lists of outage locations to SCE. SCE's turn-around time on repair of reported outages is sporadic, taking weeks or months to correct a location. In 2013, SCE altered its long-standing corporate policy and established a Street Light Acquisition Program to allow local governments the opportunity to purchase SCEowned street lights (LS-1) within their jurisdictions. If the City elects to purchase street lights from SCE, the monthly tariff will change from the LS-1 tariff to the lower LS-2 tariff. The LS-2 tariff will cover SCE's cost to transmit the energy to the street lights and Page 1of6 AGENDA ITEM 4. D.

the cost of the energy. Ownership costs (i.e. operation, maintenance, risk management, knock down replacements, and customer service) will become the responsibility of the City.

2 the cost of the energy. Ownership costs (i.e. operation, maintenance, risk management, knock down replacements, and customer service) will become the responsibility of the City. Of the SCE owned street lights throughout the City, approximately 80% are available for purchase. SCE is only offering sale of street lights to the City which are located on "stand-alone" poles (the sole purpose of these poles is for the street light and no other wires are connected to that pole except to power the street light itself). Street lights currently owned and maintained by SCE that are mounted on wood power poles which are also used for distribution of electricity are "not available" for purchase from SCE. Attachment 1 is a map of the City showing the location of the street lights, "available" and "not available" for purchase from SCE. The street lights "not available" for purchase are located on wood power poles within alleys citywide and on some residential streets, mainly in the northwest portion of the City. SCE will only sell street lights to the City if all of the "available" street lights are purchased. The City cannot elect to purchase a portion of the "available" street lights. To purchase the street light system, the parties involved must follow procedures established by SCE and the California Public Utilities Commission (CPUC). Essentially, a detailed appraisal of the existing SCE-owned street light system is necessary to establish an equitable value using the Replacement-Cost-New-Less-Depreciation (RCNLD) method. Should the City decide to move forward with the street light acquisition, the ownership transfer must be processed and approved by the CPUC. In April 2014, the City submitted all necessary requests and a $10,000 payment to SCE to initiate the street lighting appraisal. SCE's inventory identified 1901 street lights as "available" for purchase, at a valuation price of $1,576,509. Separately, the City's consultant, Tanko Lighting, conducted an extensive field inventory of all street lights citywide. The Tanko Lighting inventory was more thorough compared to the SCE appraisal and identified approximately 187 more street light poles that likely would be deemed "available" for purchase from SCE. Based on Tanko Lighting's analysis, there would be 2088 street lights "available" for purchase, at a valuation price of approximately $1,720,000. For a number of months, Engineering Division staff and Tanko Lighting, had discussions back and forth with SCE, to get clarification of details related to the facility inventory, appraisal, and the draft acquisition agreement. At this point, it is not critical that there is a discrepancy between the SCE appraisal and the Tanko Lighting inventory. This is because after execution of the Purchase and Sale Agreement, SCE and the City will conduct a final detailed field inventory to reconfirm each and every "available" street light pole. The City will only pay for the specific street light poles based on this final detailed field inventory. Additionally, the City must pay property tax for acquisition of the street lights. Until the exact number of street lights is finalized, the final cost to be paid to SCE is not known. Therefore, the Purchase and Sale Agreement in Attachment 2 is based on the estimate of $1,576,509 plus an estimated property tax of $15,000. However, the project budget is for $1,800,000 to cover the contingency cost for additional street lights which will be added during the final detailed field inventory. Engineering Division staff with the assistance Tanko Lighting researched the feasibility Page 2 of6

of this acquisition and has concluded that the City ownership of the street light system would result in substantial savings in operations and energy costs, yield more responsive maintenance and

3 of this acquisition and has concluded that the City ownership of the street light system would result in substantial savings in operations and energy costs, yield more responsive maintenance and timely repairs, and allow for modernization of the street lights using the cost savings. Below is a table summarizing the estimated costs and savings associated with the City taking over ownership of the "available" street lights. This is just the savings based on the City transitioning from the LS-1 tariff rate to LS-2 tariff, and taking on the responsibility for the HPS lights' operation, maintenance, risk management, knock down replacements, and customer service. Project payback would be approximately 17 years: Acquisition Cost = I $1,800,000 I Current New New Monthly Total Monthly Monthly Maintenance Cost New Monthly Annual Edison Edison (City Contractor) Monthly Savings Savings Costs Costs HPS Cost (LS-1) HPS (LS-2) HPS $27,925 $14,135 $5,125 $19,260 $8,665 $103,980 Acquiring the street lights would allow the City to update the system with energyefficient Light Emitting Diode (LED) fixtures which have superior illumination compared to conventional HPS fixtures. In addition, LEDs have a 15-year lifespan compared to the 5 year life span for HPS, yielding significant savings in maintenance costs. As a result of conversion of the fixtures to LED, the City's street light tariff would change from LS-1 HPS to the lower LS-2 LED tariff, which translates to a savings of approximately $8 per month in utility charges for each street light. The utility charge savings would be leveraged to cover the capital cost of system conversion and modernizations. Below is a table summarizing the estimated costs and savings associated with the City taking over ownership of the "available" street lights and immediately converting the fixtures to energy efficient LEDs. Under this scenario, there are costs for converting the fixtures as well as savings in energy and maintenance. Project payback would be approximately 11 years: Acquisition Cost $1,800,000 LED Conversion Cost $750,000 Total Initial Costs= $2,550,000 Current New New Monthly Total Monthly Monthly Maintenance Cost New Monthly Annual Edison Edison (City Contractor) Monthly Savings Savings Costs Costs (LS-2) LED Cost (LS-1) HPS LED $27,925 $7,999 $2,045 $10,044 $17,881 $214,572 The Purchase and Sale Agreement specifies the street lights are sold as-is, and generally includes the pole, light and mast arm, wiring within the pole, and the base. The indemnification section of the Purchase and Sale Agreement requires the City to release SCE of liability for environmental hazards associated with any poles, including hazards associated with the time period prior to the City's acquisition and into the future. This was a major point of concern during the City Attorney and the City's insurance Page 3 of6

4 authority PARSACs' review of the draft Agreement. SCE has been adamant that they will not allow modification of this Agreement language. SCE was requested to research and disclose any claims or litigation involving its poles. SCE has disclosed that they are currently involved in a lawsuit involving its wood poles, having been sued under California Proposition 65 for failure to warn about the chemicals that it uses to treat its poles. San Diego Gas & Electric, as well as several smaller utilities, were sued in the same suit and a similar suit was filed against Pacific Gas & Electric. The lawsuit is ongoing. SCE has identified approximately 76 street lights with wood poles included in the "available" for acquisition inventory. If the City Council approves the Purchase and Sale Agreement, the acquisition of the 76 wood poles from SCE will pose an ongoing risk, as there could be future claims similar to SCE's current Proposition 65 litigation. PARSAC has said they will not represent the City for this liability. Therefore, any future environmental claims related to the SCE street light poles will be the City's sole responsibility. The 76 wood street light poles are fewer than 5% of the total number of street light poles "available" for acquisition. To reduce risk associated with ownership of wood street light poles, the City should replace them. Replacement of the wood street light poles would not absolve the City from potential liability, if any, from past environmental damage, which ordinarily would be SCE's to bear. The estimated construction cost to replace the 76 wood poles with poles fabricated from other materials (i.e. steel, concrete or fiberglass) is approximately $90,000. If the City Council approves the Purchase and Sale Agreement, the Engineering Division will submit a Capital Improvement Project during the City's FY budget process for replacement of the 76 wood street light poles upon their acquisition from SCE. The Purchase and Sale Agreement includes a Light Pole License Agreement (Exhibit F of the Agreement), which allows SCE to maintain an easement on the street lights for wireless communication devices. The communication devices are used for the collection and relay of data from SCE's meters and for the collection, relay, and communication to SCE distribution equipment. SCE will also have the ability to install additional attachments for these purposes at no charge and under certain terms. SCE has 20 existing attachments in place at this time. The attachments are typically a small box attached on the mast arm or on the top of the pole. Prior to installation of any future attachments, SCE will need to receive authorization from the City. If the City determines a proposed future attachment location may interfere with any municipal operations or equipment, SCE will be required to select a different pole location. The Light Pole License agreement has an initial term of 10 years, with automatic renewal of a 10 year term. The City can terminate the agreement during year 9 of the initial 10-year term. There is no cost to the City to terminate the Light Pole License Agreement during this period. SCE estimates transition of ownership for the "available" street lights may take up to 1 year. This timeline includes the following steps: City submits signed Agreement to SCE - December 31, SCE signs and submits to the CPUC for approval through advice filing - February 1, Six month approval estimate for CPUC process Page 4 of 6

CPUC approval - July 1, 2017. Transition work commences - October 1, 2017. Complete transition - mid December 2017.

5 CPUC approval - July 1, Transition work commences - October 1, Complete transition - mid December The payment to SCE for the acquisition of the street lights will be due at the time of completion of the transition, in mid-december Once SCE performs a true up on the inventory, they will prepare an invoice for City payment. If the City Council approves the Purchase and Sale Agreement, the City will need to utilize the upcoming year while SCE processes the transition to prepare for ownership of the infrastructure. The City needs to be ready to move quickly to commence a retrofit project soon after taking ownership. This is necessary to realize energy cost savings and reduce maintenance issues. The Engineering Division will process an RFP to select a qualified contractor that will be ready to hit-the-ground-running to retrofit the street light fixtures to LED and provide ongoing operation and maintenance services. Ownership of the street lights also provides an opportunity to take advantage of emerging technologies. The network of real estate the street lights provide enables their use for additional services that can benefit the community and can create opportunities to enhance services. For example the City of Los Angeles has begun to use street lights for electric vehicle charging stations while other communities use them for wireless nodes. The nodes are used for Smart Cities applications and position a city for developing a communication network. Examples include the ability to monitor street light operation/outages, citywide Wi-Fi system utilizing the street light infrastructure, emergency response features for Fire and Sheriff operations, and new technologies to facilitate further reductions in energy consumption. SCE representatives have informed the City Engineer that the utility company has no plans to fund implementation of a retrofit program to modernize any of street lights retained under its ownership. This is regarding all SCE owned street lights in southern California, not specific to the equipment within West Hollywood. For the 20% of the City where street lights are "not available" for City acquisition, the City could pay SCE to retrofit the existing fixtures with tariff LS-1 LED fixtures. The LED street lights would enhance the illumination conditions; however SCE would continue to retain responsibility for operation, maintenance, risk management, knock-down replacements, customer service, and energizing these street lights. The tariff for LS-1 LED is not significantly lower than the tariff the City is currently paying for LS-1 HPS. Therefore, the City would not recoup the expense for retrofit of these light fixtures from a savings on the different tariff. The Engineering Division and Tanke Lighting will investigate the costs, schedule, and other details for the City to initiate a project to address the street lights "not available" for acquisition, and will report back to the City Council in three months. In August 2016, SCE stopped allowing cities to initiate new requests for street light acquisition and set a deadline of December 31, 2016 for all local governments currently in the process to execute approval of the Purchase and Sale Agreement. SCE has no plan to reopen the Street Light Acquisition Program in the future. Therefore, if the City Council desires to acquire the "available" street lights, they must proceed with approval of the Purchase and Sale Agreement at this time. Page 5 of6

CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the Primary Strategic Goal(s) (PSG) and/or Ongoing Strategic Program(s) (OSP) of:.

In addition, this item is compliant with the following goal(s) of the West Hollywood General Plan: IRC-4: Reduce the total and per capita amount of energy used in the City.

6 CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the Primary Strategic Goal(s) (PSG) and/or Ongoing Strategic Program(s) (OSP) of:. PSG-3: Fiscal Sustainability. OSP-9: Upgrade Existing Buildings & Infrastructure. In addition, this item is compliant with the following goal(s) of the West Hollywood General Plan: IRC-4: Reduce the total and per capita amount of energy used in the City. IRC-11: Provide high quality, safe, well-maintained and sustainable facilities for City operations. EVALUATION PROCESSES: The scope of services for the City's consultant, Tanko Lighting, includes assistance during the CPUC approval process as well as SCE's determination of the final inventory of street lights to be sold. Tanko Lighting has successfully performed similar services for other cities and is able to closely monitor the CPUC and SCE's progress. ENVIRONMENTAL SUSTAINABILITY AND HEALTH: The advent of LED technology for street lighting applications has brought about both new opportunities and a new understanding of street lighting systems with the significant energy reduction provided by Light Emitting Diode (LED) technology and the advantages of their extremely long life which is roughly three times the life of current technology. They don't have filaments that can quickly burn out and they don't contain toxic chemicals unlike traditional high-pressure sodium lamps or mercury-vapor lamps. The conversion of the City's current street lighting infrastructure to LED technology would result in a net reduction of energy use of up to 60% which will also greatly minimize the City's carbon footprint and drastically reduce maintenance costs. COMMUNITY ENGAGEMENT: Not applicable. OFFICE OF PRIMARY RESPONSIBILITY: DEPARTMENT OF PUBLIC WORKS I CITY ENGINEERING DIVISION FISCAL IMPACT: None. The proposed expenditure for this item, $1,800,000 is budgeted for fiscal year FY in the City Lighting Fund account AMOUNT DESCRIPTION $1,800,000 Funding for this item is already.budgeted. ATTACHMENTS: Attachment 1 - City Map Showing Locations of Available Street Lights Attachment 2 - Purchase and Sale Agreement Page 6 of 6

Work Session. Agenda Item # 2. Meeting Date April 20, Daryl Braithwaite Public Works Director. Prepared By. Suzanne Ludlow City Manager

Work Session. Agenda Item # 2. Meeting Date April 20, Daryl Braithwaite Public Works Director. Prepared By. Suzanne Ludlow City Manager Agenda Item # 2 Work Session Meeting Date April 20, 2015 Prepared By Approved By Daryl Braithwaite Public Works Director Suzanne Ludlow City Manager Discussion Item Background Discussion of Options for