UTILITY COMMITTEE
The Utility Committee meeting was held on January 22, 2007 at 5:00 p.m. with Chairman Carey presiding. Members present were Mr. Ruane, Mr. Slavin (arrived at 5:15 p.m.), Mr. Cregar, and Mr. Snaman. Members of Council present were Mr. Hogan, Mr. Salters (arrived at 5:42 p.m.), and Council President Williams (arrived at 5:30 p.m.). Mayor Speed was also present.
AGENDA ADDITIONS/DELETIONS
Mr. Slavin moved for approval of the agenda, seconded by Mr. Snaman and unanimously carried.
Proposed Energy Conservation Plan for Dover
Mr. Ron Zink, Sierra Club, presented members with information regarding an environmental program sponsored by the City of Seattle and endorsed by City Governments throughout the United States. The goal of the program is to reduce greenhouse gases by 7% below 1990 levels by the year 2012. Mr. Zink advised members that he represents the 500 cities and 50 million people in this country whose city government has signed on to insisting that they begin looking at how they spend their utilities. Some of the common strategies are reviewing energy efficiencies and power reduction, green vehicle and transportation solutions, and renewable energy.
Mr. Zink indicated that the American Lung Association has given Delaware an F grade for quality of air. There are very high cancer, asthma, and infant mortality rates in Delaware which are related to the environment. A contributor to the harmful environment is the Indian River Power Plant, which is one of the worst in the country. He advised members that Sussex County is in the top 20% of polluted counties. Delaware residents that reside within 30 miles of a power plant are at five (5) times greater risk for heart disease and premature mortality.
Mr. Zink applauded Dover leaders for their willingness to address the problems. He stated that over 500 people have signed a petition requesting that Dover now take some vigorous steps as quickly as possible. Although there are substantial costs involved to address the issues, Mr. Zink stated that the statistics from other cities indicate that there has been a good rate of return for their expenses. In addition, he stated that there has been a reduction in the amount of carbon dioxide polluting the air. Mr. Zink indicated that there are many different means in which the pollutants can be eliminated.
Mr. Slavin requested that members be provided the complete details of the plan prior to further review. Concurring, Mr. Carey suggested that Mr. Zink meet with the City Clerk, Mrs. McDowell, to distribute detailed information regarding the plans and schedule a meeting for members to further consider this matter.
Noting that there is an item on tonight’s agenda (item #3) regarding Regulation 1146, which is a state mandate for emissions control requirements, Mr. Ruane invited Mr. Zink to attend, explaining that the City is currently in the process of taking action to address emissions at the McKee Run 3 Electric Generation Station.
Brown Water Financial Update/Water Quality Expense Report
During their meeting of January 8, 2007, Mrs. Duca, Assistant City Engineer, distributed and reviewed the Brown Water Financial Update/Water Quality Expense Report. The report represents a consolidation of expenses incurred during the past six (6) years related to water quality concerns and brown water issues. The committee tabled the issue in order to allow members the opportunity to analyze the material and present questions.
Mr. Ruane moved to remove the matter from the table, seconded by Mr. Slavin and unanimously carried.
Responding to Mr. Carey, Mrs. Duca confirmed that, to date, the City has expended $2,721,915.98 to address brown water issues, inclusive of flushing, engineering firms, capital projects, etc.
With regards to the labor expenses, which includes overtime and shift-differential pay, Mrs. Duca advised members that as staff begins to move into the unit directional flushing, the intent is to conduct the flushing operations during the day, which would result in most of the labor costs occurring during the regular working hours.
Mr. Ruane moved to recommend acceptance of the Brown Water Financial Update/Water Quality Expense Report (Attachment #1). The motion was seconded by Mr. Snaman and unanimously carried.
Discussion - Options to Address Regulation 1146 Emission Control Requirements at McKee Run 3 Electric Generation Station
Mr. DePrima, City Manager, advised members that staff met with PACE/NAES on January 8, 2007 on a series of subjects, one of which was how the City should move forward to address Regulation 1146, Emissions Control Requirements. He explained that this is a new Regulation enacted by the State of Delaware to comply with Federal Regulations to control NOx (nitrogen oxide) and SO2 (sulfur dioxide). He advised members that the Regulation also involves mercury control; however, the McKee Run Plant does not put out enough mercury to require attention.
Mr. DePrima reviewed the requirements of Regulation 1146 including the dates for which the emission reductions must first be met (by January 1, 2009, with further reductions by May 1, 2009 and more by January 1, 2012). He also reviewed the historic emissions performance for the McKee Run Plant. He advised members that the plant currently burns #6 oil, although it is not the primary source of fuel since natural gas has been used during the past couple of years. He reminded members that natural gas is not regulated by these requirements. Mr. DePrima reviewed the options for addressing Regulation 1146.
Mr. DePrima stated that in order to be able to burn #4 fuel oil, some of the operations of the plant would require retrofitting, in addition, #4 fuel oil is more expensive. Staff is currently reviewing the economic impact of such a change. The other options would consist of different forms of scrubbers that actually would reduce the amount of pollution emitted, assuming that #6 fuel oil would continue to be burned. The SCR on the back end option is more expensive, estimated at $12M to $15M. The SNCR would be less expensive, estimated at $3M to $4M; however, according to some preliminary testing, staff is not confident that the installation of these scrubbers would achieve the necessary reduction.
Mr. DePrima advised members that another option, which was not presented, would be to eliminate burning fuel oil altogether and operate it only as a natural gas plant. For each of the options, he stressed the importance of studying the costs, economics, and financing to determine which option is most beneficial. Staff is currently conducting this study and refining some of the associated costs. Once this has been completed, he indicated that staff will then begin running models under different scenarios in order to help determine which option would be most feasible.
Mr. DePrima reminded members to keep in mind that the McKee Run 3 Plant does not burn coal, and is not a base plant, it only operates as a shoulder plant, operating only a few thousand hours per year. Therefore, when considering one of the scrubbing alternatives, the City would need to consider if it is feasible to put such an expense into a plant that is not in operation all of the time, explaining that it would be a 24 hour/7 day a week solution for a plant that does not operate at that capacity, which is why staff is currently leaning towards the fuel switching option in order to meet the regulations.
Responding to Mr. Ruane, Mr. DePrima concurred that the decommissioning of the plant would be another option to consider if it is determined that none of the options are cost effective. The idea of converting to another source of fuel would not be an option since it could not be accomplished by 2009. What the City may be forced to do is, for an interim period, energy would have to be purchased off the grid. By doing this; however, he stated that there would be the chance that it would be purchased from a power plant that would be operating under less strict regulations than Delaware has passed, explaining that the regulations may be forcing the purchase of power from plants that would not even come close to these regulations.
Mr. Ruane questioned if a gas turbine, that would have the capacity that the current unit has and if it were comparable, would satisfy the capacity necessary. Responding, Mr. DePrima stated that, although it could meet the capacity obligation, it would not run very often. Further explaining, Mr. Lunt, Public Utilities Director, stated the heat rate for Unit 3 is better than the combustion turbine (CT). The problem with Unit 3 is that it takes 8 to 12 hours to bring up to speed to provide generation, whereas the CT can be on line in 30 minutes, sometimes in 10 minutes. Therefore, although Unit 3 would not run often, it would have to run more often than the CT. He explained that the heat rate is the conversion of fuel into energy and that a lower heat rate equates to more efficiency. Mr. Lunt explained that in some respects, Unit 3 is better than the CT when considering energy but less when it comes to responsiveness.
Mr. Ruane explained that his point is that the alternatives to be considered should be for both long-term and short-term options and requested that staff provide all options when this matter is presented for further consideration. As a reminder, he stated that Council previous directed staff to go forth and find replacements for these old units. Mr. Ruane also felt that if the State was assured that there was a definitive plan, as well as a commitment of monies for that purpose, they would provide a temporary variance until the new capacity is on line. He noted that the statement provided for Regulation 1146 includes providing a petition for relief from the regulation and a relief mechanism in a variance. Mr. Ruane requested that staff determine the meaning of this statement and if new capacity is possible, prices are comparable, and the time frame is such that the City could meet this regulation with that option, then it should be presented so that consideration is not just of retrofitting an old plant that still would not satisfying the Council’s mandate for new capacity. It was his opinion that there has not been sufficient information brought forth that indicates that this option would not be feasible.
Council President Williams questioned if staff would consider membership in a Cooperative. Responding, Mr. DePrima stated that this and the matter of obtaining additional capacity are options being reviewed by staff; however, he felt that they are not relevant to the issue regarding Regulation 1146. He explained that these are alternatives for new capacity required as a result of growth and not for meeting the requirements of Regulation 1146.
Council President Williams suggested that one of the difficulties is that until the requested information is received, members would not be able to truly consider all the options available.
Responding to Mr. Ruane, Mr. DePrima indicated that although staff is currently working on this project, he does not know when they will be prepared to bring this matter to members for their consideration.
Mr. Ruane moved to recommend that the City Manager instruct staff to have before this committee within one (1) month, the refining of the costs, results of the scenarios, and additional information on other options discussed by members. The motion was seconded by Mr. Cregar and unanimously carried.
PACE/NAES Monthly Report (December)
Mr. DePrima provided the PACE/NAES Monthly Report for December 2006. He reminded members that this report is being provided each month to provide members the opportunity to monitor what is being sold in electric and the revenues received, which will allow members to have a better understanding of any fluctuations and make improvements, if deemed necessary. It is not his intent to make a presentation of the report; however, he welcomed any questions.
Mr. Ruane noted that the executive summary references a budget and requested that members be provided the document referenced. In addition, he noted that the summary references a negative gross margin in the amount of $406,092 because the units ran out of merit order, and requested an explanation.
Responding, Mr. DePrima reiterated that, as explained during their meeting of January 8, 2007 with regards to the November 2006 Report, the plant was running out of merit in November in support of the 69kV project and that the same occurred during the month of December. He indicated that there were a few days that this also occurred during the month of January; therefore, this will also be reflected in the January 2007 Report. In response to Mr. Ruane’s question regarding the cost recovery for this expenditure, Mr. DePrima stated that unfortunately the costs are recovered through the rate payers.
Mr. Carey reminded members that, in the future, this type of expense will be included in the City’s budget. Mr. Lunt had previously explained that this item was included in the Duke Contract, which is why it was not included as an expense to the City in the Budget.
In order to better read the report, Council President Williams requested that, in the future, the figures in the columns be right justified rather than centered.
Mr. Snaman moved for adjournment, seconded by Mr. Slavin and unanimously carried.
Meeting Adjourned at 5:55 P.M.
Respectfully submitted,
Carleton E. Carey, Sr.
Chairman
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Attachments to Original Minutes and File Copy
Attachment #1 - Brown Water Financial Update/Water Quality Expense Report