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Investment Grade Audit Report I I I I Chevron . I I I I I I I I I Chevron Energy Solutions Company A Division of Chevron U.S.A. Inc. 12980 Foster Drive, Suite 400 Overland Park, Kansas 66213 Tel 913-748-8800 Fax 913-748-8734 Energy Solutions I I I I I I I I I I I I I I I I I I I I Chevron === Investment Grade Audit City of Salina Salina, Kansas Prepared by Chevron Energy Solutions Company A Division of Chevron U.S.A. Inc. October 27,2008 DWCES 30614 Energy Solutions 1- I I I I I I I I I I I I I I I I I I I Section 1 Executive Summary Intro4uction A performance contract is an agreement between an energy services company (ESCO) and a facility owner, under which the ESCO designs, engineers and implements needed facility improvements and upgrades. The ESCO guarantees the owner that savings from those upgrades will occur over the course of the performance contract. The guaranteed savings from reduced utility bills and material savings are then used to pay back the initial capital investment in equipment and installation. Thus, the owner merely redirects existing budgeted dollars, which are currently being paid to their utility companies, back into their facilities in the form of capital improvements. Afterwards, the facility owner retains 100% of the savings to use at its discretion. In the State of Kansas, the Kansas Energy Office allows public entities to utilize the state's Facility Conservation Improvement Program (FCIP) to implement these projects. By utilizing this program, energy experts from the State have been involved in all project development and oversight and have performed a thorough review of the engineering and energy savings calculations to ensure that the City of Salina is receiving the best possible project. The Kansas Energy Office will maintain it's involvement in this project throughout construction and for the life of the project. From the onset of this Investment Grade Audit, it has been the intention of Chevron Energy Solutions to align this energy conservation and capital improvement project with the stated goals of the City's 2008 Shared Vision Statement and Strategic Plan. In that plan, the City calls for a well maintained city with the highest possible quality municipal services, the start of efforts to be an environmentally friendly "green" community, and making practical efforts to preserve natural resources. This Performance Contract with Chevron Energy Solutions contributes directly to all of these issues. This program directly conserves energy and water resources in City facilities to not only save energy dollars that can be reinvested, but to also having a positive environmental impact on the City's carbon footprint. In fact, the energy savings as a result of the recommended program equate to removing 74 cars from the road or planting 93 acres of trees each year. Knowing that water is increasingly becoming a scarce resource, this program also goes to great lengths to conserve water wherever possible. In addition to the energy and water reductions, this program provides capital improvements at the Police Station and the Health Department, to give City employees and citizens a better working and living environment, and provides an opportunity to make these improvements now instead oflittle by little over time on an emergency basis. The process of implementing a performance based guaranteed energy program, as practiced by Chevron Energy Solutions through the Facility Conservation Improvement Program includes the following four phases: Chevron ~ Energy Solutions 1-1 , - I 1--------- I I I I I I I I I I I I I I I I I I I Section 1 Executive Summary Phase I II III IV Descriotion Feasibility Energy Analysis Investment Grade Audit (IGA) Implementation Measurement and Verification This report documents Phase II of our process, the Investment Grade Audit. In developing this report, Chevron ES has worked on-site with the City of Salina personnel to address the concerns of the facilities and uncover areas for energy conservation opportunities. Beginning the first week in June 2008, Chevron ES staff visited the nine (9) City facilities included in the scope of the project to collect information. We examined every component and system that uses energy, including lighting, mechanical systems, building envelope systems, internal electrical systems, and miscellaneous "plug load" equipment. On following visits, a detailed survey of each lighting fixture and water fixture in the nine buildings was performed by specialized teams. Our data was collected by direct observation of equipment, site drawings, operating schedules and other relevant data. We also conducted interviews with City personnel to gain a better understanding of operational issues and their objectives for this program. After several months of analysis and subsequent site visits, Chevron Energy Solutions has been able to design a program that will maximize savings in order to address deferred maintenance issues while improving comfort and operational control. In addition to the physical surveys, Chevron Energy Solutions and the Kansas Energy Office held several meetings with City Administration to determine which capital improv~ent issues were most pressing and could be addressed through this program. Through these discussions, the much needed improvements at the Health Building and the Police Station were brought to light. Both of these buildings require significant facility improvements that the City has not been able to budget necessary funds for a comprehensive solution. This Performance Contracting program will allow the City to make the necessary changes and improvements to these buildings now to improve comfort, control and operational maintenance, instead of waiting for available funds from the City's capital budget. Through this team effort, Chevron Energy Solutions was able to identify savings opportunities that will improve the City's facilities and provide a reduction in maintenance costs. Through implementing an energy savings performance contract, the City of Salina will be able to pro actively solve facility needs through a proven mechanism ensuring a guaranteed fixed price and no additional taxpayer burden. This program solves problems now through money that was previously going to your utility companies and has a tremendous positive impact on the environment. Our program focused around the six general categories: . Lighting Conservation Measures . Mechanical Improvement Measures . Building Envelope Improvement Measures Chevron W Energy Solutions 1-2 II I I I I I I I I I I I I I I I I I I Section 1 Executive Summary . Equipment Control Conservation Measures . Water Conservation Measures . Utility Sourcing Alternatives Chevron Energy Solutions is pleased to present a customized energy savings improvement program for the City of Salina. Our meetings with Mr. Jason Gage, Mr. Steve Snyder, Mr. Byron Erickson and the rest of the City personnel outlined their goal to maximize potential energy savings and leverage excess savings. We would like to express our thanks to all of the staff members that provided assistance during our visits and telephone calls: Jason Gage, City Manager Steve Snyder, Director - Parks and Recreation Byron Erickson, Facilities Superintendent Jim Meyer, Bicentennial Center John Highkin, Smoky Hill Museum Michael Spicer, Salina Community Theatre Jack Rolfs, Director, IT Department Margaret Kay, Accounting Cindy Beneke, City of Salina Water Department Loralee Tibbetts, Health Department Additionally, we would like to recognize the Chevron Energy Solutions Team: John O'Herron, Business Development Manager Ron LaCombe, Senior Project Manager Randy Jameson, Project Manager Jacquelynn Morris, Lead Project Engineer Brandon Well, Energy Analyst Jason Patterson, Engineering Intern Steve Schulte, M&V Specialist Our objective is to provide a comprehensive list of energy conservation measures (ECMs) and energy related capital improvement measures (CIPs) to assist the City of Salina in tailoring a program that addresses immediate facility and operational needs as well as long-term infrastructure needs. Below is an outline of this Investment Grade Audit report: Section 1 Executive Summary includes a financial proforma of a comprehensive project scope, as well as a general overview of the recommended projects. Section 2 Energy Conservation Measures includes a narrative describing each ECM and CIP and a line-by-line list of potential costs and savings for each ECM. Chevron ~ Energy Solutions 1-3 !I I I I I I I I I I I I I :1 I I I I ,I II Section 1 Executive Summary Section 3 Historical Energy Consumption includes a summary of electric, natural gas, water and sewer consumption and cost history. Section 4 Operations and Maintenance includes details of the operations and maintenance savings and capital avoidance savings associated with implementation of the ECMs and CIPs, as well as some general O&M guidelines. Section 5 Data on Present Facilities summarizes the current types of mechanical, lighting, heating, ventilation and air-conditioning (HV AC), and control systems in the buildings. Section 6 Measurement and Verification, describes the recommended methods of savings verification employed by Chevron ES to assure that actual savings meet or exceed projected savings. Section 7 Environmental Impact, discusses the environmental benefits of the project, including reduction in emissions and removaVdisposal of PCB ballasts. Appendices include various supporting documentation as listed in the Table of Contents. Recommendations The recommended program includes comprehensive water and lighting conservation programs at all nine buildings, and controls projects, a building improvement project, and alternative sourcing of natural gas at selected buildings. At Fire Stations No. 1 and No.2, the golf clubhouse, the Health Department building, and the Salina Community Theatre the program includes installation of network programmable thermostats. Controls at the Smoky Hill Museum will receive some modification to reduce energy consumption at this building. The mechanical projects include replacement of five aging HV AC units at the Health Department. To address some significant comfort needs at the Police Department building, the feature project in the program is the replacement of the HV AC air handling units and control system. The program also includes replacement of a leaking skylight in the Health Department building and replacement with an insulated roof and ceiling. Utility cost savings will be realized with consolidation of gas meters at the golf clubhouse and bulk purchasing natural gas for the Bicentennial building, the Memorial Hall, and the Police building. Table 1-1 provides a summary of the projects in the recommended program. Detailed descriptions of each proposed measure, as well as the other measures that were evaluated, are provided in Section 2 - Energy Conservation Measures. This section also includes several projects initially considered but not recommended due to length of payback or other reasons. Chevron ES will work with the City to tailor a program that best meets the City objectives. Chevron . Energy Solutions 1-4 I I I I I I I I I I I I I I I I I I I Section 1 Executive Summary Table 1.1 Summary of Energy Conservation Measures for City of Salina =:. :: IiIeCtrIC e::, ::, = --- Totid Oper. .. Project Dollar Sewer UtUily 1ol8lnt. Totid SImple Cost Savings Savings Savings Savings Savings Savings Savings Savings Savings Savings Payback !1!nerav~lIlIoDlol~ III /I._l III ImcfI III lecft III III III III lY.......l Investment Grade Audit $12012 L. Liahtina Uaarades 11\ $230 886 1131 241 504 $18568 0.0 $0 0 $0 $18568 $4413 $22981 10.0 W . Domestic Water Uoorades 121 $149785 0 .1965 -$103 26.3 $298 1224 $7 688 $7,883 $819 $8 702 17.2 Cl - Networked Proarammable Thermastats $74 628 0 80 059 $4.212 468.5 $5 079 0 $0 $9291 -$2 945 $6 346 11.8 C2 - Centrals UDarades $4141 6 16173 $872 0.0 sO 0 sO $872 $I] $872 4.7 CIP4. Realace Salit-Svstem Units $172421 30 3410 $381 4.6 $44 0 $0 $425 $0 $425 405.7 CIPS - HVAC tmlllDVllments I Centrols UoaradE $643 304 .152 29474 $611 118.8 $1380 0 $0 $1991 $3 500 $5491 117.2 CIP6 - Remave Skvliaht $81 605 4 2252 $149 38.3 $366 0 $0 $515 $750 $1265 48.7 Ul - Centract Natural Gas (3) $4511 0 0 !GC 0.0 $12545 0 $0 $12545 $I] $12545 0.4 U2 . Cansalidate Gas Meters $4894 0 0 $0 0.0 $0 0 $0 $0 $294 $294 16.6 rrotat 1.lJml :I1U.lllI1 IU4.tilIU I 11_.:1 .,9.71:1 I~I S7.11l1l11 SlD.UllIII >>oU1 -'~1 Do' NOTES: (1) Lighting ECM pricing is based an fixed casts distributed over the projects at each building. Pricing may change W same buildings excluded in final program. (2) Water ECM pricing is based an fixed casts distributed aver the projects at each building. Pricing may change if some buildings excluded from in program. (3) ECM Ul procurement assistance services pricing is based an a fixed cast distributed among ail three buildings. Pricing may change W some buildings excluded from program. Financials The financial aspects of the project are presented in the following Table 1-2. Working in conjunction with the Rod Franz, the City Finance Director, a net present value of comparative scenarios is presented. A 3.0% annual inflation rate was used for electric and natural gas energy savings, a 9.0% inflation rate was used for water and sewer savings as determined from the future rates that have already been established, and 2.5% annual inflation rate was used to project materials savings. Materials savings only were shown for all operations and maintenance savings. No in-house City labor costs are included in the materials savings, although a reduction in labor expended will be recognized with the implementation of these ECMs. All projects in this report are comprehensive including engineering, construction, installation labor, and materials. The total implementation costs were determined in accordance with paragraph 5.1 of the Investment Grade Audit Agreement. A breakdown ofthese costs into the State Master Agreement categories follows in Table 1-3. Chevron ~ Energy Solutions 1-5 1- ---- , I I I I I I I I I I I I I I I I I I I I Section 1 Executive Summary Table 1-2 Financial Aspects of Performance Based Energy Program for City of Salina Salina, Kansas Program includes ECMs L 1-L6, C1, C2, W1-W5, U1, U2, CIP4, CIP5, CIP6 Implementation Cost CEA Fee Total SSCO Project Pee $1,346,175 $12,012 $1,358,181 FCIP fee (pa~able to the Kansas Energy Office) Total Cost of ProJect $29,582 $1,387,7.' 1 2 I 3 I 4 5 I 6 7 I 8 I 9 I 10 City of Salina Budaet Plans L2 CIP4. CIPS) ImDlementation of Recommended Proaram Operational Net Present Operational Present Total and Program Value of Net Total and Net Program Value of Net Capital Energy Maintenance Costs Program Energy Maintenance Costs Program Year Budaet Savinas Savinas {Savinas' Costs Savinas Savinas ISavinas' Costs 0 $0 $0 $4.000 $4.000 $4.000 ($26.045) ($2.616) $1,329.526 $1,329.526 1 $32.000 ($285) $3.967 $35,682 $34,475 ($54.114) ($3.331) ($57.445) ($55.502) 2 $442.263 ($1.312) $3.685 $444,636 $415,073 ($56.240) ($3.414 ) ($59.654) ($55.688) 3 $10.200 ($2.552) ($1.037) $6.611 $5.962 ($58,475) ($3.500) ($61.975) ($55.898) 4 $6,000 ($3,415) ($1.304) $1,281 $1.117 ($60.827) ($3.587) ($64.414) ($56.133) 5 $0 ($3.517) ($1,335) ($4.852) ($4.085) ($63.303) ($3.677) ($66.980) ($56.395) 6 $0 ($3.623) ($1.362) ($4.985) ($4.055) ($65.912) ($3.769) ($69.681 ) ($56.686) 7 $0 ($3.732) ($1.376) ($5.108) ($4.015) ($68,663) ($3.863) ($72,526) ($57,005) 8 $0 ($3.844) ($1.365) ($5.209) ($3.956) ($71.566) ($3,960) ($75.526) ($57.355) 9 $0 ($3,959) ($1.332) ($5.291 ) ($3.882) ($74,632) ($4,059) ($78.691 ) ($57,738) 10 $0 ($4.078) ($1,280) ($5.358) ($3.798) ($77,873) ($4,160) ($82.033) ($58,155) 11 $0 ($4,200) ($1.217) ($5,417) ($3,710) ($81.301 ) ($4,264) ($85.565) ($58.607) 12 $0 ($4,326) ($1.157) ($5,483) ($3.629) ($84,930) ($4.371 ) ($89.301 ) ($59,098) 13 $0 ($4,456) ($1,123) ($5.579) ($3.567) ($88.776) ($4.480) ($93.256) ($59,628) 14 $0 ($4,590) ($1,123) ($5.713) ($3.530) ($92.853) ($4,592) ($97,445) ($60,200) 15 $0 ($4,728) ($1,146) ($5.874) ($3.506) ($97,180) ($4,707) ($101,887) ($60.815) 16 $0 ($4,870) ($1,174) ($6.044) ($3,486) ($101,776) ($4,824) ($106.600) ($61,477) 17 $0 ($5.016) ($1,204) ($6,220) ($3.466) ($106,661 ) ($4.945) ($111,606) ($62.187) 18 $0 ($5.166) ($1,234) ($6,400) ($3,445) ($111.857) ($5.069) ($116.926) ($62.948) 19 $0 ($5321 ($1 2e5 ($e 586 - ($117388) 1$5 195 ($122 583 1$63 7e2 Totall"resent van II Coal IRV ngs): :5214.248 Notes By Column: (1) Years after implementing retrofit changes. (2) City budgeting requirement estimates to address planned or required projects. Projects include L2 (in four buildings) and partial of CIP4 and CIP5. (3) Electric and natural gas energy savings are escalated by 3.0% to account for inflation. (4) Operational and Maintenance Savings estimates are escalated at 2.5% to account for inflation. Operational and Maintenance Savings for existing Police HVAC replacement cease after year 2. (5) Net Program Costs (Savings) = (2) - (3) - (4). (6) Net Present Value based on an annual discount rate of 3.5% (7) Electric and natural gas energy savings are escalated by 3.0% to account for inflation. Water I sewer savings are escalated by 9.0% calculated from Resolution 08-6523. 50% of savings recognized for construction year. (8) Operational and Maintenance Savings are stipulated and escalated at 2.5% to account for inflation. 50% of lighting and water savings recognized for last portion of Construction Period. (9) Net Program Costs (Savings) = - (3) - (4). Year 0 includes Total Esco Project Fee of +$1,358.187. (10) Net Present Value based on an annual discount rate of 3.5% Chevron U Energy Solutions 1-6 I. I I I I I I I I I I I I I I I I I I , I I Section 1 Executive Summary The Recommended Program in Table 1-2 above will save $54,115 in utility costs and $7,164 in material and operational costs after the first year. City budget impact of implementation has a Present Value cost of $405,072 over 19 years. The Recommended Program with additional energy and utility cost savings measures has a Present Value cost of $214,248, leaving a residual net present savings of$190,824 with the implementation of the $1,358,187 R<<ommm~dProgrom~~prowmm~ Table 1-3 Required Kansas Energy Office Pricing Summary per State Master Agreement Subtotal Engineering Construction Total C 0 cri 'on P' Investment Grade Audit $12.012 Lighting Upgrades $161,685 $3.234 $164,918 $9.071 $4,948 $6.597 $6,597 $28,036 $230.886 Domestic Water Upgrades $104,892 $2,098 $106,989 $5,884 $3,210 $4,280 $4,280 $18,188 $149.785 Networked Programmable Thermostats $52,261 $1.045 $53,306 $2.932 $1,599 $2,132 $2,132 $9,062 $74.629 Controls Upgrades $2,900 $58 $2.958 $163 $89 $118 $118 $503 $4.141 Replace Split-System Units $120,743 $2,415 $123,158 $6,774 $3,695 $4,926 $4,926 $20,937 $172,421 HVAC Improvements I Controls Upgradt $450,493 $9,010 $459,503 $25,273 $13,785 $18,380 $18.380 $78,116 $643.304 Remove Skylight $43,141 $863 $44,004 $2,420 $1,320 $1,760 $1,760 $7,481 $61.605 Contract Natural Gas $3,780 $76 $3,856 $0 $0 $0 $0 $656 $4,511 Consolidate Gas Meters 427 $69 3496 192 $105 $140 $140 $594 $4894 . Construction Costs are valid for 90 days from October 1, 2008. Ener2V Savin2s Performance Contract Benefits to the City of Salina: The City of Salina will derive many benefits from the implementation of a comprehensive energy performance contract. Just a few of the benefits are listed below. . Improved Working Environment: New and improved HV AC systems and temperature controls will provide a more comfortable working environment for the City of Salina staff and visitors. Additionally, lighting will be upgraded throughout all facilities. New lighting systems are designed to meet the TIluminating Engineers Society (IES) standards. . Cost Control: Performance contracting provides a means to divert monies to facility improvements that would otherwise be spent on paying utility bills. Many of the items planned for replacement are well beyond their useful, functional life. Therefore, these are items that the City will need to replace in the near future. Through this performance contract, the City of Salina is able to pro actively make these improvements at one time, utilizing energy savings and very favorable interest rates to help fund the replacements and also lesson the burden on taxpayers. This program has a guaranteed fixed cost which also eliminates change orders from the construction. Chevron ~ Energy Solutions 1-7 I I I I I I I I I I I I I I I I I I I I I Section 1 Executive Summary . Energy Savings and Environmental Impact: The proposed energy conservation measures will reduce energy consumption and costs. The reduced energy consumption will result in less power plant consumption from the electric utility and much less natural gas usage as well. Other examples of positive environmental actions with some of the ECMs include removal of hazardous light ballasts. Implementation of the project will make a strong statement about the City's commitment to energy efficiency and environmental responsibility. . Reduced Maintenance: Several of the ECMs will significantly reduce maintenance costs and hours. No financial savings have been claimed for the City of Salina Facilities Department in-house labor savings. However, several of the projects will result in significant labor savings, freeing up the maintenance staff to address other items. Conclusion Chevron Energy Solutions recommends that the City of Salina move forward with a guaranteed energy savings performance contract. The evaluation shows that the resulting energy and materials savings will significantly reduce the cost of funding a wide range of projects that will benefit the City for years to come. The preparation of this report would not have been possible without the cooperation of City of Salina personnel. Chevron ES found the entire staff at the City of Salina extremely cooperative and supportive throughout the duration of the Investment Grade Audit. 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