UTILITY COMMITTEE

The Utility Committee Meeting was held on February 28, 2011 at 5:01 p.m. with Chairman Ruane presiding. Members present were Mr. Bonar, Mr. McGiffin, and Major Kosior. Mr. Snaman was absent. Council President Hogan and Mayor Carey (departed at 5:28 p.m. and returned at 5:41 p.m.) were also present.

AGENDA ADDITIONS/DELETIONS

By unanimous consent, the agenda was approved, as presented.

Yard Waste Collection Program

Mr. Anthony DePrima, City Manager, advised members that staff developed the following goals in formulating a Yard Waste Collection Program: 1) compliance with the Delaware Solid Waste Authority (DSWA) ban on yard waste; 2)  avoid an increase in costs to the customers; and 3) the development of public education to lessen or eliminate yard waste.

Mr. Scott Koenig, Public Services Manager/Director of Public Works, reviewed the Yard Waste Separation Plan. He reminded members that on January 1, 2011, DSWA implemented a ban on yard waste at the Sandtown landfill and that, beginning July 1, 2011, the DSWA will start enforcing this ban. He noted that the ban was a condition of approval from the Department of Natural Resources and Environmental Control (DNREC) to continue to operate the landfill and that all waste haulers will be required to separate yard waste from the municipal solid waste stream.

In reviewing the New Rules, Mr. Koenig referred to Page 2 of the Yard Waste Separation Plan and advised members that a revision was made to the second sentence in Item #2, which should read “No metal containers will be allowed.” He explained that metal containers can be easily damaged. In addition, he stated that members of Council may receive complaints from residents regarding Item #5, which modifies the current collection schedule for bulk items.

Noting that bulk trash will be picked up every other week, Mr. McGiffin questioned if residents will be permitted to place large items, such as refrigerators, out for pick-up for an extended period of time. Responding, Mr. Koenig stated that this could create potential concerns for property maintenance staff. Mr. DePrima noted that, although the current bulk pick-up schedule provides for a weekly pick-up, residents are not permitted to place bulk items out until the day of the scheduled pick-up. However, he noted that many residents do not adhere to this requirement.

In response to Mr. Ruane, Mr. Koenig indicated that education sessions will be provided for the public, office and field staff, and homeowners associations.

Responding to Mr. McGiffin, Mr. Koenig estimated that a stick would be considered less than 2" in diameter, limbs are from 2" to 6", branches are 6" and above.

Although he supported recycling and maintaining a cleaner environment, Mr. Bonar relayed his concerns with legislators enacting laws that affect municipal-level operations without prior communication.

Responding to Mr. Ruane, Mr. DePrima assured members that the program will be advertised locally and billing inserts will be distributed to customers to inform them of the change.

Mr. McGiffin moved to recommend endorsement of the Yard Waste Separation Plan, as presented by staff, seconded by Mr. Bonar and unanimously carried.

Generation Revenue Forecast

Mr. Anthony DePrima, City Manager, introduced Mr. Holt Bradshaw, Pace Global, who reviewed a Presentation of Generation Revenue Forecast. He explained that the forecast includes a “real” analysis that should be kept updated. Mr. Bradshaw advised members that there is a good deal of value in the assets and that they should be maintained and improved upon in order to keep cash flow. It is the opinion of Pace Global that there is great potential for revenue.

Responding to Mr. Ruane, Mr. Vince Scire, Plant Manager, stated that, as an example of continued maintenance, air heater work for Unit #3 was included in the CIP, which is necessary if Unit #3 is expected to run for 15-20 years. With regards to unanticipated expenses, he stated that approximately six (6) projects have been added to the plan as a result of the Pace life extension analysis. Mr. Bradshaw stated that a $100,000 capital contingency charge for each unit was built in to allow for capital “surprises.”

With regards to materials and equipment used in the plants, Mr. Scire stated that replacement parts are sometimes extremely expensive; therefore, it can be beneficial to re-evaluate the situation and consider redesign.

In response to Mr. Bonar, Mr. DePrima reminded members that a plant evaluation was conducted a few years ago and that the analysis constitutes another evaluation. He noted that, in previous evaluations, it was assumed that the plants had a five (5) year life expectancy; however, in the new evaluations a 15-year life span is expected. In regards to the $100,000 contingency charge, he noted that the City has nearly $10M in its depreciation fund, which could be a resource for repairs if necessary. He assured members that thresholds are established to determine if repairs should be made or the equipment should be abandoned.

Mr. Ruane noted that the 2030 Energy Committee continues to discuss opportunities to attract alternative energy suppliers, such as encouraging a combined-cycle gas power plant at the Garrison Tract and buying purchased power energy agreements from this source. He questioned how this would correlate to the maintenance and continuation of the physical plant if energy needs can be addressed through such purchased power agreements and whether this possibility was factored into the analysis.

Responding, Mr. Holt stated that the capacity market has been willing to pay for units that are capable, available, reliable, and able to run when prices are very high or when there are reliability issues on the grid. He noted that, to date, the market has been willing to pay for this from the City and other suppliers.

Mr. Bonar questioned if theCity would be at a financial disadvantage if a new combined cycle unit or more modern unit becomes available and can be more readily put on line. Responding, Mr. DePrima stated that going forward with a plant at the Garrison Tract is not mutually exclusive of the idea of keeping the existing power plant running.

Mr. Bonar suggested that thought be given to placing a combined cycle unit at the Garrison Tract before a competitor moves forward with such a concept. Responding, Mr. DePrima stated that, based on the Committee’s recommendation, the City contracted with Macquarie Energy, LLC for two (2) years and that they are performing due diligence on making applications to PJM and other regulatory bodies to move forward on that plant.

Mr. Francis Hodsell, Pace Global, advised members that the capacity market is a three (3) year forward market. He noted that it is the opinion of Pace that the City’s assets are valuable within the structure of the capacity market and it is clear that this structure will be in place for a long period of time. Mr. Hodsell noted that if additional capacity enters the market, such as the Macquarie West Deptford Plant, this would not be seen as a risk to these assets and they could continue to generate significant cash flow for the City.

Mr. Ruane stated he anticipated that West Deptford would be brought forward to the Committee next month. Responding, Mr. Hodsell stated that he will be working with City staff on a time frame for the analysis.

Due to time constraints, Mr. Ruane requested that the remainder of the agenda items: 1) Power Plant FY 2012 Capital Investment Plan (CIP) Review; 2) 2012-2016 Utility Capital Investment Plan (CIP); and 3) PACE/NAES Monthly Report (December) be deferred until the next meeting.

Mr. McGiffin moved to defer the remainder of the agenda items until the next meeting, seconded by Mr. Bonar and unanimously carried.

By unanimous consent, the meeting adjourned at 5:51 p.m.

                                                                                    Respectfully submitted,

Eugene B. Ruane

Chairman

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