HomeMy WebLinkAboutA001 - Council Action Form dated December 17, 2024ITEM #:23
DATE:12-17-24
DEPT:ELEC
SUBJECT:ELECTRIC POWER PLANT CT-1 COMBUSTION TURBINE RETURN TO
SERVICE REPAIRS - CHANGE ORDER NO. 2
COUNCIL ACTION FORM
BACKGROUND:
Among the Electric Utility's electric generation assets, the utility operates two combustion turbine units.
Each unit consists of a stationary jet engine that burns fuel oil and turns an attached generator to
produce electricity. Combustion Turbine 1 (CT-1) was put into service in 1972, while CT-2 was placed
into service in 2005. The units are used to meet electric capacity obligations of the utility, to respond to
periods of peak electric demand, and to provide backup power in outage events where other sources of
electricity may be limited.
On July 15, 2024, CT-1 experienced an unexpected event. Just after startup and being put on-line, the
unit tripped off-line and was not able to be restarted. Power Plant technicians and maintenance staff
worked to determine the cause of the trip. Unable to find an apparent cause, the Power Plant Manager
requested that a field technician from the Original Equipment Manufacturer (OEM), Wood Group Pratt
& Whitney (WGPW), come onsite and perform diagnostics.
Performing a borescope of the internals of the engine, damage was found on the blades in the high-
pressure section of the compressor, particularly the ninth stage of blades. Because of the damage found,
the engine portion of the unit needed to be removed and sent to a turbine repair shop for full
disassembly and inspection.
Staff sent a request for proposals to the only two firms that were known to be familiar with this engine
and able to perform work on it. These were the OEM (WGPW), and Sulzer Turbo Services. On August
6, 2024, City Council awarded a contract to Sulzer Turbo Services to inspect CT-1 engine in the amount
of $50,500.
At the time, staff explained the rationale for selecting Sulzer and noted: "Unless there is a compelling
reason not to, it is likely that Sulzer will be engaged to complete the repair work or related work
to return the unit to service, since: 1) the turbine will be in Sulzer's possession, 2) Sulzer will be
familiar with the unit after having disassembled and inspected it, and 3) Sulzer has an inventory
of identical engines that could be utilized if an "engine swap" is more economical. Therefore,
Council may be approached in the next several weeks for approval of a change order, which may
be for a significantly greater amount than the initial $50,500 contract. Because of this possibility,
staff's evaluation of the two potential vendors included an evaluation of the potential repair costs.
Staff is confident that pricing and performance by Sulzer would be in the utility's best interests.
Additionally, Sulzer is the only one of the two vendors that has identical engines on hand to be
utilized if an engine swap is necessary."
Change Order No. 1 in the amount of $5,500 $9 ,0 5 1 was approved by staff to add services and
personnel time to inspect the expander while Sulzer was onsite removing the engine.
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DIAGNOSIS AND NEXT STEPS:
Sulzer has completed the inspection and provided a findings report. It was determined that the failure
occurred in the 10th stage of the compressor section. The stage contained an originally designed disk
that holds the root of each blade, referred to in the industry as a “skinny 10.” A root of one of the blades
cracked while the unit was operating, causing the blade to become detached from the disk and impact
the stationary blades on both sides. Because the engine was spinning at full speed, the damage caused to
the rest of the engine was substantial. The engine requires a complete rebuild, with most parts
needing full replacement. Staff estimates the cost to perform such a rebuild to exceed $1.6
million; however, staff is not confident that the rebuilt engine would be free from unknown
defects that may arise in the future. Additionally, rebuilding this engine is likely to take 8-12
months to perform.
Because a majority of the engine parts have been so severely damaged, staff is recommending
purchasing a “used” but operable engine from Sulzer and then have that engine overhauled. The
used engine was purchased by Sulzer from another utility as operational, but must be overhauled
because of the previous number of hours that it operated before being taken out of service. The overhaul
will consist of the engine being fully disassembled and inspected, with any parts found out of tolerance
being replaced and all service bulletins and upgrades being performed. Included among this work would
be the removal of the "skinny 10" disk (if present) and replacement with a more substantial OEM-
approved upgrade. The overhauled engine will come with a warranty that assures its operation for 800
hours or for 12 months, whichever comes first.
CT-1 is very important to the utility as it is the only unit that is capable of a “black start.” This means if
the City is completely without power, this unit would be used to start up all other generation. It is also
the only unit that can operate both without natural gas and in the cold months, providing reliability in
the winter when natural gas supplies are scarce.
Additionally, the Electric utility is required to have available generating capacity to cover
historical peak load for each season, plus a reserve margin. Because the CT-1 unit experienced an
unplanned outage, the utility's available capacity has been diminished for the fall quarter. Failure
to have a replacement installed by January 14, 2025 will result in decreased capacity for the
winter quarter. When the utility's available capacity falls below MISO's requirements, the utility
is required to replace the missing capacity through a capacity auction, which can be
unpredictable and expose the utility to high costs.
The overhaul process for the replacement engine will take 4-6 months for Sulzer to perform. This
being the case, Sulzer has offered to lease the City a unit until the overhauled engine can be provided.
The lease would cost $208,650 for up to 6 months plus $750 per operating hour, inclusive of
shipping, installation, commissioning, and removal of the engine.
A summary of the proposed costs is provided below:
Work Performed Cost with Sales Tax
Replacement Engine:
Overhaul Engine $ 1,150,250 $ 1,150,785
Shipping Overhauled Engine 8,560
Field Services to Install Overhauled Engine 62,106
Subtotal Replacement Engine $ 1,220,916 $ 1,221,451
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Temporary Leased Engine:
Lease Temporary Engine $ 101,650
Shipping Lease Engine 17,120
Field Services to Install/Remove Lease Engine 89,880
Allowance for Hourly Operating Charges 75,000
Subtotal Temporary Leased Engine $ 283,650
TOTAL $ 1,504,566 $ 1,505,101
The table above includes an allowance of funding for the hourly operating fee charged by Sulzer. Staff
anticipates that the leased engine will need to be operated for approximately 100 hours during the term
of the lease. However, it cannot be known how frequently the unit will need to be operated. The number
of hours will be dependent upon weather, required environmental testing, transmission needs, and the
condition of the City's other generating units. If the number of hours is significantly higher, staff will
return to the City Council for a change order, as necessary. The Electric Utility will provide fuel and
any other required operating resources through the existing department operating budget.
Staff was recently made aware that Sulzer is not licensed to collect taxes in the state of Iowa. Therefore,
the City will pay applicable taxes directly to the State of Iowa. The change order being proposed for
City Council approval will include the sales tax for the original contract and Change Order No. 1, which
were previously approved. These taxes total $4,168.57.
Change Order No. 2 has been prepared to reflect the cost of the refurbished unit, the leased
engine (including an allowance for operation), and taxes for services previously contracted to
Sulzer. The Change Order is in the amount of $1,508,734.57 $1,509,269.57, bringing the total
contract amount to $1,564,734.57 $1,568,820.57.
FINANCING:
The costs to return CT-1 back to service, along with the temporary lease unit, will be expenses that
were not budgeted. The Electric Utility has an insurance deductible of $500,000. Insurance will cover
the costs of the overhauled replacement unit and installation, less the deductible. The costs for the
leased unit are not eligible for reimbursement. Therefore, the Utility's ultimate estimated cost is
$783,650, while insurance coverage is anticipated to pay for $781,084.57 $785,170.57.
The Utility must cover all the expenses while the project is ongoing, until an insurance reimbursement
can be obtained. Staff plans to pay for these expenses from the excess funds currently in the Ash Pond
Capital Improvement Project that is underway. The Ash Pond CIP account has an unencumbered
balance of $1,695,434 as a result of favorable bids for that project.
ALTERNATIVES:
1. Approve Change Order No. 2 to Sulzer Turbo Services of La Porte, Texas, in the amount of
$1,508,734.57 $1,509,269.57.
This action will approve the leasing of an engine from Sulzer and an allowance for
operating it during the 4-6 months of use. Additionally, Sulzer will rebuild a used engine
and furnish it to the Utility.
2. Approve Change Order No. 2 to Sulzer Turbo Services of La Porte, TX, in the amount of
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$1,225,084.57 $1,225,619.57.
This action would result in Sulzer rebuilding a used engine, but would not provide for a
leased engine to be operated while the rebuild takes place. This option may result in
significant costs to the Utility as a result of failing to meet the Utility's capacity obligations!
3. Refer this item to staff for further information.
It is important that the Council understand that delays in providing replacement capacity
may subject the Utility to increased penalties as a result of failing to meet the Utility's
capacity obligations into January 2025.
CITY MANAGER'S RECOMMENDED ACTION:
This work is necessary to return the City’s CT-1 combustion turbine engine to service. Electric staff
has determined Sulzer Turbo Services to be fully capable of performing the necessary repairs and
providing a temporary lease unit. Sulzer performed the inspection at its site and has staff experienced in
repairing the same model of gas turbine engines.
This generating unit provides needed capacity, provides quick energy production in an
emergency, and provides the City’s electric system the ability to “Black Start”. Failure to return
the unit to service in a timely manner will require the City to purchase replacement capacity
and/or explore the purchase and installation of a new generating unit.
Therefore, it is the recommendation of the City Manager that the City Council adopt Alternative No. 1,
as described above.
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