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Savings & Incentives NOTICE OF PUBLIC MEETING CITY OF ALBANY OUR MISSION IS CITY COUNCIL WORK SESSION "Providing quality public services Municipal Court Room for a better Albany community. " 333 Broadalbin St reet SW OUR VISION IS Monday, March 6, 2 017 "A vital and diversified community Ji!Jj<inii 4:00 p.m. that promotes a high quality of life, ·------7·· great neighborhoods, balanced economic growth, and quality public AGENDA services." Rules of Conduct for Public Meetings 1. No person shall be disorderly, abusive, or disruptive of the orderly conduct of the meeting. 2. Persons shall not testify without first receiving recognition from the presiding officer and stating their full name and residence address. 3. No person shall present irrelevant, immaterial, or repetitious testimony or evidence. 4. There shall be no audience demonstrations such as applause, 4:00 p.m. CALL TO ORDER cheering, display of signs, or other conduct disruptive of the meeting. 4:00 p.m. ROLL CALL 4:05 p.m. BUSINESS FROM THE PUBLIC 4: 10 p.m. HYDRO POWER COST/BENEFIT COMPARISON - Mark Yeager [Pages 2-5]. Action Requested: Information, discussion, direction. 4:50 p.m. UPDATE ON STRATEGIC ENERGY MANAGEMENT PROJECT-Jorge Salinas [Pages 6-33] Action Requested: Information, discussion. 5:10 p.m. INTERGOVERNMENTAL AGREEMENT WITH LINN COUNTY -Jorge Salinas [Pages 34-35] Action Requested: Discussion, direction. 5:25 p.m. BRANDIS PROPERTY/GAPS- Wes Hare [Verbal]. Action Requested: Information, discussion, direction. 5:45 p.m. BUSINESS FROM THE COUNCIL 5:55 p.m. CITY MANAGER REPORT 6:00 p.m. ADJOURNMENT City ofAlbany Website: www.cityof(zlbanv.net The location ofthe meeting/hearing is accessible to the disabled. Ifyou have a disability that requires accommodation, advanced notice is requested by notifying the City Manager's Office at 541-917-7508, 541-704-2307, or 541-917-7519. TO: Albany City Council VIA: Wes Hare, City Manager '\":< c7\/Jjcihii Jeff Blaine, P.E., Public Works Engineering and Community Development Directorqy ------71• Chris Bailey, Public Works Operations Director /"" FROM: Mark A. Yeager, P .E., CWRE, Utility Services Manage@ DATE: March 1, 2017, for the March 6, 2017, City Council Work Session SUBJECT: Hydropower Program Status RELATES TO STRATEGIC PLAN THEME: • Effective Government Action Requested: Staff is seeking Council authorization to research, identify, and propose options for reducing or eliminating the regulatory burden associated with hydropower operations, to determine whether continued operation of the hydropower project (Project) is sustainable. Discussion: Background The City of Albany purchased its current water system from Pacific Power and Light in 1984. The purchased property included the Santiam-Albany Canal (Canal) and, as part of the Vine Street Treatment Plant, a 1 megawatt (MW) hydropower system. At the time of purchase, the Canal and system had been in operation for nearly a century and were not under Federal Energy Regulatory Commission (FERC) jurisdiction. In the early 1990s, following a petition from third parties, a determination was made that the Canal is a "Water of the United States," and, therefore, a federal license would be required for continued operation of the Project. The City appealed the determination to FERC with the assistance of Senator Mark Hatfield's office, but was unsuccessful. In light of that determination, the City ceased power generation in 1991, evaluated the costs and benefits of pursuing a license and new generation facilities, and began the process of developing studies and license application materials. The City's cost studies at the time showed that the Project would not initially be a net revenue generator. However, the City determined that benefits could be provided to the community by generating revenue to help offset costs, by helping fund otherwise-required improvements such as fish screens on the Canal and maintaining valuable water rights associated with the hydropower system. Given that the FERC operating license would be valid for 50 years, pursuing a federal license for continued operation seemed appropriate. FERC issued a Minor Power Project license in 1998, and the Project definition included the hydropower generation facilities located at the Vine Street Treatment Plant as well as the entire 18 miles of the Canal and all its associated diversion and conveyance facilities. In addition to installing new power generation equipment, Albany invested in capital improvement projects at the diversion dam and intake facilities to rehabilitate and upgrade them and comply with regulatory requirements, many of which were not related to having a FERC license. Albany commissioned the new 500 kilowatt (KW) hydropower project in 2008. 2 City Council Page 2 March 1, 2017 for the March 6, 2017 Work Session Revenue History The average annual revenue from power generation over the last five (5) years is just over $84,000 per year. The highest annual revenue in that time was $141,000 and the lowest annual revenue was $50,100. A number of variables affect the ability to generate power. The power license stipulates the conditions under which water can be diverted from the South Santiam River for power generation. If there is insufficient flow in the River, water cannot be diverted to generate power. In addition, there must be sufficient head available at the turbine, and if the Calapooia River is experiencing high water levels, the turbine cannot be operated. There are also circumstances when the generator and associated equipment experience a mechanical breakdown that causes shutdown of the generator. Unplanned events in the Canal, such as a partial bank failure, or planned Canal maintenance work that is time sensitive, may result in reduced flows that also impact power production. Staff has made a concerted effort to maximize power production days over the last few years in an effort to maximize revenues. Despite this effort, during months of sufficient flow in the Santiam River, the generator only produced power approximately 68 percent of the time during the last five (5) years. Expenses Since FERC's issuance of the Project license, the regulatory landscape has changed considerably. In addition to complying with the provisions of the license articles, Albany has faced new and expanding regulatory initiatives related to environmental protection, dam safety, emergency management, and recreational studies, primarily associated with the Canal and its appurtenances. Expenses related to operation of the hydropower facilities and the Project can be broken down into four (4) major categories: • Engineering and Operations staff time dedicated to working with FERC staff, responding to requests for information, preparing and filing annual reports related to the license, hiring consultants to complete required studies, facilitating annual dam safety inspections, updating the Emergency Action Plan (EAP), etc. ($135,000 per year). • Direct expenses related FERC-required studies including Potential Failure Mode Analysis (PFMA), inundation mapping, geotechnical analyses, etc. ($45,000, 3-year average). • Direct annual costs associated with operation and maintenance of the hydropower equipment (turbine, generator, bar screen, gates, penstock, etc.), and daily and weekly requirements for operating and maintaining the Canal, which is part of the Project, to meet specific FERC requirements ($104,000 per year, 3-year average). · • Impacts on otherwise-needed capital maintenance and repair projects on the Canal that are burdened by delays due to FERC review time, excessive standards for design and construction that drive up facility costs (such as planning for 500-year flood events and 2,500-year earthquake recurrence), and required reviews for any construction near the Canal (even if the proposed project has nothing to do with the Canal, e.g., Lebanon new water supply line crossing). 3 City Council Page 3 March 1, 201 7 for the March 6, 2017 Work Session Excluding any cost impacts associated with capital projects, annual expenses are over three (3) times annual revenues. It is clear that, without substantive change, this Project is no longer sustainable. The table below summarizes these expenses for the last several years. Avera e Annual Estimate Engineering and 0 erations $135,000 Direct Project Expenses $ 45,000 $1 Annual cost impact varies Capital Projects Impacts depending on number and type of projects. Reporting requirements and compliance with the FERC License Articles involve significant, but manageable, time and effort. FERC requirements related to dam safety and Canal management, however, have become increasingly onerous, and a small facility like Albany's cannot generate sufficient revenue to offset the ever-increasing costs of regulatory review, required studies, and capital project expenses to meet design standards. In addition to the FERC mandates issued after the City received its Project license, staff turnover at FERC has resulted in multiple new directives based on the newly assigned person's priorities. This has created both known and unknown future costs to Albany's water customers that will not be offset with increased power revenue. Albany staff has met with FERC engineers in Portland on multiple occasions to discuss the volume and scope of these initiatives, with limited success. The City recognizes its stewardship responsibilities regarding environmental and drinking water protection, dam safety, and emergency planning. However, the scope and scale of regulatory studies, evaluations, and reports FERC
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