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DISTRICT HEAT PROJECT August 22, 2012. Key Points Project is within budget Ongoing operation is viable Citys risks are addressed Project goals are met.

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Presentation on theme: "DISTRICT HEAT PROJECT August 22, 2012. Key Points Project is within budget Ongoing operation is viable Citys risks are addressed Project goals are met."— Presentation transcript:

1 DISTRICT HEAT PROJECT August 22, 2012

2 Key Points Project is within budget Ongoing operation is viable Citys risks are addressed Project goals are met

3 Recommended Action Authorize City Manager to proceed with project Notify the State and DOE of this decision Continue signing up customers Issue bids in September for receipt in October Review bids in November, consider project adjustments. Award contract. Consider options for use of available funds, possible additional assistance for connections. Begin construction in spring of 2013 Provide Thermal Energy to Customers on 10/1/13

4 Presentation Overall Project Description and Funding Summary Project Costs Customer Commitments City/School heating costs Financing Package Citys Risk System Management, City Goals and Master Plan, Assumptions and Projections, City Votes Recommended Action

5 Project Goals Reduce emissions Replace oil with regional fuel source Stabilize heating costs for city/school Economic development opportunity for downtown Citys project costs within current expenses

6 Project Summary State Central Heating Plant – 40.2 MMBTU capacity City Distribution System – 9.71 MMBTU (24%) of state plant, ability to purchase up to 16.3 MMBTU Both Public and Private Customers Primarily Wood Chips for winter fuel (Oct – April) Summer Hot Water through system boilers

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8 Overall Funding Summary Federal Department of Energy$8.00 million State of Vermont Capital Funds$7.00 million State of Vermont In Kind$1.20 million City of Montpelier 2011 Bond$2.00 million CEDF Grant$1.00 million CEDF Loan, 1%, deferred payment$0.75 million Forest Service Grant (new)$0.248 million Village Green Grant (new)$0.10 million TOTAL $ million

9 Funding Allocation State Funds for heat plant$8.200 million DOE Grant to state for heat plant$3.249 million DOE Grant to state for city capacity$2.558 million City/CEDF funds to state for capacity$1.077 million DOE Grant to city for dist. system$2.193 million City/CEDF funds for dist. system$2.673 million Other grant funds for dist. system$0.348 million Total for Central Heating Plant $ million Total for Distribution System $5.214 million

10 Overall City Funding Status TOTAL Distribution System $ $5,214,419 Spent/Committed to date $899,651 Available Balance for Project $4,314,768 Revised Project Cost Estimate $3,732,351 Project Balance $582,417 (17.71%) Contingencies (included in estimate) $393,739 ( 11.97%) Combined cushion $976,156 ( 29.68%) May only need $1.45 M Bond instead of $2.0 M

11 Annual System Budget (2014) 2011 Bond $2.0 M$169,191 (highest) $1.45 M = $122,663 Contract with State $68, Bond Payment $20,376 (highest) Operations $10,228 CEDF Loan Interest $7,500 Total Must Pay Obligations $275,327 (w/ $2 M Bond) $228,799 (w/$1.45 M Bond) Cash Reserve (5% of rev.) $12,992 Operating/Admin 10 customers $46,026 ($65,348 max) TOTAL $334,345 With $1.45 M Bond $287,817

12 Customer Commitments using 2014 Capacity Rates City Complex (City Hall, Fire, Police)$46,009 Union Elementary School$77,350 Vermont Mutual $151,830 prorated$30,366 GSA $40,656 County (Court House, Sheriff)$14,738 Everett (52, 46 & 27 State St)$26,934 Nedde (City Center)$26,257 NECI/Nick (118 Main St)$12,949 Jacobs (22 Elm/Jailhouse Common) $8,165 Beard (15 E. State St) $6,776 TOTAL $290,200

13 Customer Base 10 Customers involve 15 Connections Initial System design = 34 Connections Commitments for 44% of connections Additional connections create additional financial stability.

14 10 Cust. $3.73 M Project. $1.45 M Bond

15 City/School Fuel at $2.99/gallon City & UES use 60,600 gallons per year of oil Combined DH capacity fee = $123,359 Combined DH energy fee = $58,063 Total Combined DH cost = $181,422 $181,422/60,600 gallons = $2.99 per gallon

16 Comparison to Oil

17 Financing for Customer Connections Partnership with VT Economic Dev. Authority (VEDA) Village Green grant pays 10% of cost VEDA finances remaining 90% at 4% over 5-7 years Effective rate = 0% for 5 years, 1% for 7 years City will include repayment on DH bill

18 City Risk for not proceeding Cost of Oil in future starting at $3.00/gallon

19 Citys Risks for Proceeding Project Costs running over Under budget, sufficient contingency, current bid climate, project sectioning options Stuck with Annual Operating Cost Full $2.0 M Bond. Minimal Customers – GSA, County, VM, Everett.

20 Bad Case Scenario Must Pay Obligations$275,327 City/School Energy Fees $58,063 TOTAL MUST PAY$333,390 Income (4 customers) $112,694 Net For City to Pay$220,696 Less City/School Capacity $123,359 Less City/School Energy $58,063 TOTAL – City paying$181,422 Net Added DH Costs for City $39,274

21 City Risk Comparison City/School Oil prices $3.00/gallon for 60,600 gallons = $181,422 $3.31/gallon for 60,600 gallons = $200,586 $3.50/gallon for 60,600 gallons = $212, Bond payment = $20,376 City Costs with no DH = $201,798 to $232,476 Net Cost under Bad DH = $220,696

22 Other Considerations Operating costs and responsibilities are manageable Consistent with City Council 2012 Goals Consistent with Citys 2010 Master Plan Citys analysis reasonable as to method and assumptions and the substance of the agreements to be reasonable in light of normal energy purchase and sale agreements Public votes on this project: 2003 Bond $250,0001, % 2009 Re-use of the 03 bond1, % 2010 Charter amendments2, % 2011 Bond $2,000, %

23 Recommended Council Action Authorize City Manager to proceed with project Notify the State and DOE of this decision Continue signing up customers Issue bids in September for receipt in October Review bids in November, consider project adjustments. Award contract. Consider options for use of available funds, possible additional assistance for connections. Begin construction in spring of 2013 Provide Thermal Energy to Customers on 10/1/13


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