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HomeMy WebLinkAbout~Master - Special Meeting of the Ames City Council 03/11/2013MINUTES OF THE SPECIAL MEETING OF THE AMES CITY COUNCIL AND SPECIAL JOINT MEETING OF THE AMES CITY COUNCIL AND ELECTRIC UTILITY OPERATIONS REVIEW AND ADVISORY BOARD SPECIAL MEETING OF THE AMES CITY COUNCIL AMES, IOWA MARCH 11, 2013 The Ames City Council met in special session at 7:00 p.m. on the 11 day of March, 2013, in theth City Council Chambers in City Hall, 515 Clark Avenue, pursuant to law with Mayor Pro Tem Matthew Goodman presiding and the following Council Members present: Davis, Orazem, Szopinski, and Wacha. Mayor Campbell and Member Larson were absent. Ex officio member Baker was also absent. MOTION APPROVING OUTDOOR SERVICE AREA EXTENSION FOR DUBLIN BAY, 320 SOUTH 16 STREET: Moved by Davis, and seconded by Orazem to approve the outdoorTH service area extension. Vote on Motion: 5-0. Motion carried unanimously. RESOLUTION ADOPTING REVISED RENTAL HOUSING FEES: Moved by Davis, and seconded by Wacha to adopt the revised rental housing fees. Roll Call Vote: 5-0. Resolution declared adopted unanimously, signed by the Mayor, and hereby made a po rtion of these M inutes. RESOLUTION APPROVING CONTRACT AND BOND FOR CYRIDE BUS FACILITY EXPANSION: Moved by Davis, and seconded by Orazem to approve the contract and bond for the CyRide bus facility expansion. Roll Call Vote: 5-0. Resolution declared adopted unanimously, signed by the M ayor, and hereby made a po rtion of these M inutes. ADJOURNMENT: The meeting adjourned at 7:01 p.m. SPECIAL JOINT MEETING OF THE AMES CITY COUNCIL AND ELECTRIC UTILITY OPERATIONS REVIEW AND ADVISORY BOARD (EUORAB) City Manager Steve Schainker said the decisions regarding the two topics this evening will be very important as they will chart the course of the electric utility and disposing of refuse in Ames and Story County for many years. He said the information will be plenty, and the alternatives could be controversial, so no decisions will be made this evening; rather, more meetings and further discussion will take place over the next few months so the Council is comfortable with the decisions. Mr. Schainker said what will be challenging is, there is no easy or clear path for combining the two utilities, so working together to come up with the best course of action in the coming year will be very important. He told the Council that the electric utility will have to describe its future in the next couple months, but there is time to proceed cautiously. PRESENTATION OF GASIFICATION FINANCIAL ANALYSIS REPORT FROM HDR: Public Works Director John Joiner introduced Lori Calub, Financial Modeler and Karl Fryklind, Principal Engineer for the project. Mr. Joiner said in 2011 conversion technologies were presented, and through that process gasification was identified as the most feasible technology. He said HDR’s study will determine costs for different configurations of gasification equipment that would be compatible with any option that could be selected as a result of the Energy 2 Resource Options Study. Mr. Fryklind noted that municipal solid waste (MSW) has been converted to refuse derived fuel (RDF) at the Resource Recovery Plant since 1975. He also described gasification as a new and emerging technology that involves a partial combustion process with a limited amount of oxygen that produces a synthetic gas. He said several scenarios are being looked at using syngas. He said parameters being used for the scenarios include the facility size, which will accommodate 300 tons per day, and the RDF to gasification would be 85% of MSW converted into syngas, and the remaining 15% would remain as residue or char. He said of the 85%, 65% would be syngas energy, as some of the energy is lost during the conversion process in the heat. Mr. Fryklind described the mass burn option as the MSW being burned and converted to electricity through a conventional steam turbine cycle. He said there would be 28% ash residue with this option. Mr. Fryklind reviewed the six scenarios: •Scenario 1: Syngas being used as a supplemental fuel into each of the City’s existing coal-fired boilers •Scenario 2: Syngas being used as a supplemental fuel into each of the City’s existing boilers, which would be converted to natural gas •Scenario 3: Syngas being used in a new combustion turbine generator set connected to the electrical distribution grid •Scenario 4: Syngas being combusted in a dedicated internal combustion generator set connected to the electrical distribution grid (conditioning would include cooling, acid gas removal, and particulate control) •Scenario 5: Syngas being combusted in a dedicated package boiler generator set connected to the electrical distribution grid (will not require any conditioning) •Scenario 6a: Retire the Resource Recovery Plant and construct a mass burn to energy facility that would generate electricity using raw MSW •Scenario 6b: Retire the Resource Recovery Plant and construct a mass burn to energy facility that would generate electricity using shredded MSW. Ms. Calub reviewed the system expenses and the system revenues. She said operations and maintenance cost assumptions were developed for each scenario. She said all scenarios have common cost components, but the gasification systems will involve the purchase of RDF and operation and maintenance of RDF storage bins, and that the mass burn options would involve different costs. She reviewed more details on costs and revenues for each scenario. Mr. Schainker said with the debt service alone, the least expensive options are scenarios one and two, at about $3.9 million. He said the current total budget for Resource Recovery is about $3.7 million. He said these scenarios also have capital investments of over $33 million, and with that new debt, it has to be determined how to pay for it. He said if it was paid for with per capita (subsidy paid on property taxes from citizens in the county), which is currently about $9.10, that would need to be increased to $44.63 or $43.72 depending on the option. He said if the tipping fee was used to pay for the increase, that fee would need to go from $54 to $105 or $107. He said the City of Ames desires to be innovative, but there is no other plant that is using MSW and gasification that can be looked at for comparison. 3 Council Member Orazem asked if these costs involve any changes that would need to be made to the electric utility. Mr. Fryklind said these costs are independent of any other changes the electric utility would need to make. Management Analyst Brian Phillips said the cost to convert the boilers to accept syngas would be included in the capital expense. Mr. Fryklind clarified in scenario two that the conversion from a coal-fired plant to natural gas is not included but cost to modify the burners to accept syngas is included in the costs. Discussion continued on the scenarios, costs, and financing options. Mr. Joiner said it is important that the two studies being discussed tonight are running parallel as the options are laid out. OVERVIEW AND PRELIMINARY DISCUSSION OF ENERGY RESOURCE OPTIONS STUDY FROM BLACK AND VEATCH: Electric Services Director Don Kom introduced Bob Slettehaugh and Natalie Rolph of Black and Veatch. He said they will be looking at the Electric side of this question, and said the study was needed because of three different categories of information: Environmental Protection Agency’s (EPA) several rules and proposed rules; natural gas being more abundant with a lower cost, and now the fuel of choice of the EPA; and other energy options available including the Midwest Independent System Operator (MISO) market, buying into a unit, and solar or wind. Mr. Kom said a Request For Proposals was put together to look at the rules of EPA and identify possible solutions to meet the rules with existing or new generation, consider impacts of MSW that is processed into RDF and co-fired with coal, then cost out the options and economically model the options using forecasted costs looking out to 2037, then make a final recommendation that will include consideration of the City’s values. Mr. Kom said a recommendation was not desired from Black and Veatch, but rather a report with all costs associated with each option so staff and Council can study the options. Mr. Trower said there are two big rules before them: the Cross State Air Pollution Rule (CSAPR) and the Mercury and Air Toxics Standard (MATS). Mr. Trower further explained that 2 xCSAPR will regulate sulfur dioxide (SO ) and nitrogen oxides (NO ) but has temporarily been vacated, and that MATS imposes emission limitations on mercury, acid gases and other hazardous air pollutants emitted from coal fired steam units. He said that by April, 2015 the City of Ames must comply with these rules. Mr. Trower told the Council that they looked at many alternatives for units 7 and 8, and ended up with 16 options. Mr. Trower reviewed the process so far, and said Black and Veatch was chosen because the firm is good at both studying the options and making determinations, and was the only entity with a very sophisticated computer model that can predict year by year what can be done and what commitments should be made. Black and Veatch further analyzed five of the 16 options. Bob Slettehaugh of Black and Veatch reviewed the approach to the study. He also reviewed the study workflow and how the complete list of possibilities was funneled down. He told the 2Council that Black and Veatch studied units 7 an 8 and their emissions from 2003 to 2010. SO xwould need reduced by 13 - 34% and NO would need reduced by 60-70%. He said control technology could be added, allowances could be purchased, or the City could change how much the units are operated to stay within the annual limit. Mr. Slettehaugh described the qualitative screening and ranking of the different options, and said that some were eliminated based on the gap analysis. 4 Mr. Slettehaugh reviewed the key findings. He said in general, updating Unit 8 will be more cost effective that changing Unit 7. Mr. Kom said RDF can continue to be burned if coal is burned and also if natural gas is burned, but it is believed that less RDF can be burned on gas since the heat intensity of a coal fire is hotter and RDF is consumed more efficiently. Discussion ensued on the process of burning RDF. xMr. Slettehaugh said to control NO , Low Nox Burner (LNB) and Over Fire Air (OFA) would be cost effective methods. He said Powder Activated Carbon (PAC) also known as Activated Carbon Injection (ACI), and Dry Sorbent Injection (DSI) are cost effective ways to reduce MATS. Other systems were described, and discussion ensued on how these methods could be utilized. Mr. Trower noted that the Power Plant is confined to a certain physical area, so re- routing would be very difficult. Mr. Orazem asked when a decision would have to be made if the City of Ames wanted to participate in the gas line that ISU is participating in. Mr. Kom said contracts will be signed by April 1 so to participate in that contract is not likely. He said a new gas line is what is being looked at, which would come from Story City. Discussion continued regarding the options to participate in a new gas line. Mr. Trower said there is 2.25 years left in the coal delivery contract, and there would be a penalty. Mr. Kom said staff will come to Council again in the near future to make a recommendation to Council for how to handle RDF and the Electric needs of the community. Mr. Davis asked what the time frame would be if the decision is made to convert to gas. Mr. Kom said a couple years from a Power Plant standpoint, but the process is extensive. Mr. Slettehaugh said as soon as possible would mean about a 30 month schedule for converting to gas. Another option is to delay changes until 2020 to see how legislation comes out. Mr. Schainker asked what the interim step is. He said the City could continue operating on coal, and would need MISO in the near term. Mr. Slettehaugh reviewed the options. Discussion ensued regarding the options. The Council recessed at 9:12 p.m. and reconvened at 9:17 p.m. Natalie Rolph told the Council that the goals of the Energy Resource Options Study include identifying the City’s least-cost environmental compliance plan and estimating the impact of the continued RDF use. She said the approach by Black and Veatch involved characterizing the assumptions about the marketplace, identifying the key compliance options and the system constraints, using an optimum generation expansion model to test combinations of compliance and growth options finding least-cost plans, and checking the robustness of selected plans. She said the system in total must be looked at. Ms. Rolph said through the year 2037 the utility will need another 34 megawatts. She told the Council that Black and Veatch started their own forecasting services about 5 years ago . She said internally they have national models of the national power sector by about 100 different markets, and that they are able to forecast gas prices, electric prices, and allowance markets. She showed a graph showing the natural gas price forecast. She said City of Ames prices are slightly higher than general market prices, and winter prices run approximately 20% higher than summer 2prices. She also reviewed the coal and RDF price forecast. Mr. Orazem asked about CO as an option. Ms. Rolph said it is extremely expensive, and the last measure you would go to. 5 Council Member Szopinski asked about alternative energy sources and how they would fit into 2the scenarios in part. Ms. Rolph said to get to 2050 with 80 % CO reduction will take a lot of 2wind, solar, demand side management, etc. Discussion ensued. Mr. Trower said the CO tax is being looked at, but if there is not that tax, it could change the order of the options. The other assumptions and constraints were reviewed including insurance, cost of debt, carrying charges, transmission assumptions, minimum load levels, and equipment retirement costs. Discussion ensued regarding the prices of the options. Mr. Kom told the Council that $30.5 million is already in the CIP. Mr. Kom said less RDF is burned in unit 7 than 8, and Ms. Rolph added that there are many costs associated with retiring a unit. Further discussion ensued regarding costs of the options. Mr. Schainker said page 8 of the staff report shows the capital costs associated with the options. He said it isn’t an option to do nothing. Ms. Rolph reviewed forecast comparative revenue requirements. She said if no RDF is burned, a lot more energy would be purchased from the marketplace. Mr. Trower said prior to 2008, the City’s production price was lower on average than the market price. Now, the City’s production price is above the average purchase power price. He said Black and Veatch is forecasting that Ames’ price will remain above the average purchase power price. Mr. Goodman asked about wind. Ms. Rolph said whatever is done with units 7 and 8 is separate from wind. Ms. Szopinski asked about the increase in Ames’ price and asked how the study can help. Mr. Trower said during the market price constraint in the summer, the City wants to be generating because it’s much more expensive to buy off the market. Ms. Rolph said EPA would not even allow Units 7 and 8 to operate as is without modifications. Mr. Slettehaugh said we have to have the capacity, and want to get the cheapest capacity we can. Discussion ensued regarding MidAmerican Energy. Mr. Trower said Ames could do a bilateral agreement with MidAmerican Energy with no ownership or buy off the MISO market. Ms. Rolph said that the option without RDF and converting both units 7 and 8 to natural gas is the least cost option. Mr. Davis asked about the difference in prices for the options where RDF is still burned. She said the difference in prices are gas prices and buying from the market. Mr. Kom said that staff will be reviewing and analyzing the effects of a newly proposed EPA rule, which would make it necessary to be in compliance at all times, even during shut down, start up, and repair of the units. He said this proposed rule will likely result in at least one more option. He said a finalized report will be presented to City Council in a couple weeks, and staff will make a recommendation on a preferred option to EUORAB and City Council. Mr. Trower said our situation doesn’t lend itself to a building block approach, rather a distinct path must be chosen. He said it would be prudent for staff and Council to recommend and approve the right path. Mr. Goodman asked about the Council’s policy of 15% being renewable energy. Mr. Kom said the wind that we have today provides that 15%. Mr. Wacha asked if the study included costs or revenue from a recycling program if it is decided to move away from RDF. Mr. Trower said that is not included in the study. Mr. Schainker said that study was done some years ago. Mr. Orazem asked if the accounting for alternative energy generated accounts for other efforts. Mr. Kom said we are not gaining any credits for the demand side management program. He also said that together with the Resource Recovery Plant, Electric has requested that RDF be recognized, but at this time it is not being counted. 6 COMMENTS: Mr. Orazem said both reports were very well done. Ms. Szopinski also thanked staff for the reports. ADJOURNMENT: The meeting adjourned at 10:30 p.m. _________________________________ _________________________________ Diane R. Voss, City Clerk Ann H. Campbell, Mayor ___________________________________ Erin Thompson, Recording Secretary