COUNCIL WORKSHOP
A Council Workshop was held on December 1, 2008 at 7:30 p.m. with Council President Hogan presiding. Council members present were Mr. Leary, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mrs. Williams, Mr. Salters, and Mr. Ruane.
Civilian members of the Utility Committee, Major Kosior and Mr. Snaman, were also present. Council staff members present were Mr. DePrima, Mrs. Mitchell, Mrs. McDowell and Mayor Carey.
AGENDA ADDITIONS/DELETIONS
Mr. Slavin moved for approval of the agenda, seconded by Mr. McGiffin and unanimously carried.
STATUS REPORT FROM THE 2030 ENERGY COMMITTEE
Council President Hogan noted that members would be provided a Presentation of the 2030 Energy Plan Committee Status Report (Exhibit #1) in three (3) segments and that a question/answer period would be provided at the conclusion of each segment.
Providing a brief history, Mr. Ruane advised members that the City began providing street lighting in 1900 and began producing and selling electricity in 1902, profiting $1,941 the first year. He stated that the City began a new phase of providing electricity when it entered into the Duke Contract. He feels that the results of the 2030 Energy Committee will be the beginning of another phase for the City to provide electricity.
Mr. Ruane noted that the 2030 Energy Committee was established to identify and pursue options for long-term reliable, cost competitive, and environmentally prudent electricity for the citizens of Dover. He introduced the members of the 2030 Energy Committee, as follows:
City of Dover Representatives
Councilman Eugene B. Ruane (Chairman of the Utility Committee)
Councilwoman Beverly C. Williams
Mayor Carleton E. Carey, Sr.
Mr. Anthony DePrima, City Manager
Mr. Ronald Lunt, Public Utilities Director
Mrs. Donna Mitchell, Controller/Treasurer
Outside Representation
Mr. Frederick James, Executive Vice-President with PACE
Mr. Francis Hodsoll, Director of Industrial and Asset Strategies with PACE
Mr. Keith Mills, Project Manager with PACE
Mr. Vincent Scire, Plant Manager (NAES Corporation)
Mr. Pat McCullor, Executive Director of DEMEC
How Dover Provides Electric Service
Mr. Lunt reviewed pages 3-9 of the Presentation: “Dover... Electric Service Provider” (See Exhibit #1). He stated that although the City’s current power plant only operates 2% of the time, there are two (2) markets the City buys for: 1) energy or delivery of KWH; and 2) capacity, which is 175 megawatts (name plate and current output ratings the City’s plants can provide). Mr. Lunt stated that the City’s load is approximately 171 megawatts and that PJM requires reserves, which would total 195-198 megawatts. As a result, the plants enable the City to provide generation, should it be necessary, such as during peak times (energy needed on very hot days due to use of A/C units). In addition, and more importantly, he stated that should the entire PJM grid go down, the City has enough generation capacity to provide electricity to the citizens within an approximate eight (8) hour period.
Responding to Mrs. Williams, Mr. Lunt explained that since the City’s plants are not very efficient, the City purchases energy through the PJM market.
Securing Dover’s Energy Future
Mr. Hodsoll reviewed pages 11-26 of the Presentation: “Securing Dover’s Energy Future” (See Exhibit #1). Taking into consideration the City’s energy and capacity deficits; the unprecedented volatility in energy, capacity and compliance markets; concerns regarding the reliability of imported supply; and concerns regarding the existing and new environmental compliance markets, the 2030 Energy Committee concluded that there was a need to look for options that would provide for long-term secure sources of energy. As a result, he stated that an RFP process was designed to allow for flexibility while maintaining efficiency. Mr. Hodsoll reviewed the proposals received and options offered, which had been analyzed by the members of the 2030 Energy Committee.
Since the City currently utilizes market capacity and energy, he noted that the proposal offering market capacity and energy was immediately eliminated from any further review. The remaining proposals were reviewed based on their economic pros and cons, and risks, as well as their strengths and weaknesses. In reviewing the tables on pages 21-23 of the presentation, Mr. Hodsoll stated that the green circles represent a benefit to the City, the red circles represent a cost to the City, and others are a mixture. He noted that in determining the levelized cost, only the electrons were considered - the committee did not include the environmental compliance market issues.
After consideration, Mr. Hodsoll indicated that the 2030 Energy Committee felt that the Combined Cycle is a viable option for the City and noted that one of the recommendations is to move forward with these options (Out of State and Garrison Tract). He advised members that the Solar Panels option, as it relates to economics, remains questionable and explained the fluctuation as well as the risk mitigation that may be involved. He stated that the caution for performance risk for the Solar Panel option is due to the lack of history. Referring to the Wind Turbine option, Mr. Hodsoll explained that there is not enough wind resource in Delaware to support wind power.
The committee recommended that the City eliminate the peaking and wind turbine options and conduct additional analysis on both the Combined Cycle and Solar Panels options with a report back to City Council prior to moving forward on the next phase. Mr. Hodsoll explained the next steps involved for finalizing Phase II, which included the desire to conduct a second order economic analysis; an EPC market assessment; solar market assessment; and to develop a final recommendation. The next step would be to begin contract negotiations with developers.
Mr. David Delones questioned why there was no trash to steam component to the combined plant, similar to Baltimore. Responding, Mr. Hodsoll stated that the market did not propose the option. It was his understanding that, according to Delaware laws, incineration is prohibited.
Referring to the Garrison Tract, Mr. Brook Freeman questioned if it would be affected by any coastal land act issues. Responding, Mr. DePrima indicated that the property is located outside of the coastal zone areas.
In response to Mr. McGlumphy regarding the costs, Mr. Hodsoll stated that if the City entered into a long-term purchase power agreement, the electricity would be paid for as it is used and the cost would be based on the cost for building the plant and the fuel component of the energy which could be hedged forward so that the City could fix the cost forward in the fuel markets. For clarification, Mr. Hodsoll explained that the proposal for the Combined Cycle at the Garrison Tract indicates that the developer would be willing to be financially responsible for building the plant and would request that the City to be an investor. He stated that the developer is willing to construct a merchant plant which would be subject to the ups and downs of the energy market. It is their belief that they can recoup the costs of the plant because energy will be high enough to support the economics of the plant. He stated that the developer may even be interested in building the plant without the City making any type of commitment.
Mr. McGlumphy explained that his concern is with regards to any costs that may be passed on to the City’s customers. Mr. Hodsoll advised members that the reason the developer has a desire to build a plant at the Garrison Tract is because they are observing several existing capacities being retired on the peninsula. Therefore, more and more energy will be transmitted to the peninsula which has a cost involved. Another reason is due to a natural gas plant becoming attractive if the cost of carbon increases because coal fired energy will become expensive.
Responding to Mrs. Williams, Mr. Hodsoll advised members that the developer has also indicated a willingness to allow the City to buy equity in the plant.
In response to Mr. Salters, Mr. Hodsoll stated that the City could own part of the plant immediately, which would have a cost associated. Most likely, the City’s equity stake would be financed through bonds and, although the interest costs associated with the bonds would be passed on to the rate payer, it does not necessarily indicate that the rates would increase due to its relationship to the market.
Mr. Ruane assured members that no decision has been made and that Council is being given the opportunity to indicate their concurrence to move forward with the recommendations as outlined on page 23.
Responding to Mr. Leary, Mr. Hodsoll advised members that all financial information has been excluded from the report; however, he assured members that it has been evaluated and a thorough financial analysis has been conducted. Before taking a position regarding the issue, Mr. Leary stated his need to have the opportunity to review the financial data.
Mr. Ruane explained that the 2030 Energy Committee recognized the proprietary information contained in the proposals and had indicated that the information would remain confidential at this time. He also stated that the committee felt it would be premature to present financial information until further analysis has been conducted on the information provided. Should members of Council wish to review the preliminary financial data contained in the proposals, an executive session would be required to maintain confidentiality of the information.
Concurring, Mr. Hodsoll further explained that there are signed confidentiality agreements with each of the developers.
Mr. DePrima clarified that the committee’s status report to members of Council at this time is only to make them aware of the direction the committee is taking in this matter.
Mr. Bill Neaton, City of Dover Economic Development Office, questioned how many jobs would be created as a result of the various options. Responding, Mr. Hodsoll stated that the Combined Cycle at Garrison Tract would provide 300 positions during the development. Unfortunately, he stated that he does not have the number of positions that would be provided for the Solar Plant; however, he stated that he would obtain and provide the information to Mr. Neaton. With reference to a Combined Cycle Plant, Mr. Scire indicated that there would be approximately 25 full-time positions that would be provided to operate and maintain the plant.
At the request of Mrs. Williams, Mr. Scire explained that a Combined Cycle Plant has both gas and steam turbines and that the steam turbines would be using water from the City for both cooling and thermal cycles, which would represent a source of revenue for the City. Mr. DePrima advised members that an analysis on water sales for a Combined Cycle Plant was conducted, which indicated over $1M in generated income.
Managing Today’s Energy Challenges
Mr. DePrima reviewed pages 28-29 of the Presentation: “Managing Today’s Energy Challenges” (See Exhibit #1). He explained how the City is promoting conservation and renewables, noting that the City has secured the services of the Energy Depot to support rate payers’ conservation and energy efficiency. He advised members that this is an online service that can be accessed through the City’s website (www.cityofdover.com), which provides a process to determine how residents can conserve energy in their own home.
Mr. DePrima stated that the City participates in the Delaware Energy Assistance Program and that any rate payers wishing to know more about this program can contact the City of Dover for assistance.
Mr. DePrima assured members that the City is cognizant of renewables, encouraging conservation, and providing education and assistance to the public. Responding to Mr. Ruane, Mr. DePrima confirmed that the City is signatory to the US Conference of Mayor’s Climate Protection Agreement and Protocol and, as a result, has been actively instituting policies and procedures. He stated that all departments throughout the City have been challenged to develop ways of reducing carbon.
Mr. Ruane announced that the Utility Committee will be exploring other aspects of the plan in which to benchmark the greenhouse gases and measure the activities of the City, as well as explore, under the new administration, what grants may be available to assist the City with these reductions.
Mr. David Delones indicated his pride in the community and City for their efforts to conserve energy and encouraged members to move forward in reviewing the options. He relayed his concerns regarding the power outages and economic situation, which began with an energy source (Enron). It was his opinion that the City needs to be ahead of the world and independent in its energy.
Council President Hogan relayed appreciation to the presenters for an excellent presentation.
Mrs. Williams moved for adjournment, seconded by Mr. Leary and unanimously carried.
Meeting Adjourned at 8:57 P.M.
TRACI A. McDOWELL
CITY CLERK
All orders, ordinances, and resolutions adopted by City Council during their Workshop Meeting of December 1, 2008, are hereby approved.
CARLETON E. CAREY, SR.
MAYOR
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Exhibits (Attached to original and file copy)
Exhibit #1 - 2030 Energy Plan Committee Status Report