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Home My WebLink About09452 As Amended May 13, 2019 ORDINANCE NO. 9452 AN ORDINANCE APPROVING AN AMENDMENT TO AN AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION, AND EES CONSULTING INC., A WASHINGTON CORPORATION AND AUTHORIZING THE MAYOR TO EXECUTE SAID AMENDMENT BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Amendment to the Agreement for Professional Services with an effective date of June 1, 2019, between the City of Pueblo, a Colorado municipal corporation and EES Consulting, Inc. a Washington Corporation, a copy of which is attached hereto (”Amendment”) having been approved as to form by the City Attorney, is hereby approved. The Mayor is authorized to execute and deliver the Amendment in the name of the City and the Acting City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 2. The officers and staff of the City are authorized and directed to perform all acts consistent with this Ordinance and the attached Amendment to effectuate the policies and procedures described herein. SECTION 3. This Ordinance shall become effective on the date of final action by the Mayor and City Council. Action by City Council: Introduced and initial adoption of Ordinance by City Council on April 22, 2019 . Final adoption of Ordinance by City Council on May 13, 2019 . President of City Council Action by the Mayor: ☒ Approved on May 20, 2019 . Disapproved on based on the following objections: ☐ Mayor Action by City Council After Disapproval by the Mayor: ☐ Council did not act to override the Mayor's veto. ☐ Ordinance re-adopted on a vote of , on ☐ Council action on __________________failed to override the Mayor’s veto. President of City Council ATTEST Acting City Clerk City Clerk’s Office Item # R-1 Background Paper for Proposed Ordinance COUNCIL MEETING DATE: May 13, 2019 TO: Council President Dennis E. Flores and Members of City Council VIA: Brenda Armijo, Acting City Clerk FROM: Mayor Nicholas A. Gradisar SUBJECT: AN ORDINANCE APPROVING AN AMENDMENT TO AN AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION, AND EES CONSULTING INC., A WASHINGTON CORPORATION AND AUTHORIZING THE MAYOR TO EXECUTE SAID AMENDMENT SUMMARY: Attached is an Ordinance approving an Amendment to an Agreement for Professional Services with EES Consulting, Inc. (“Consultant”) to perform a Phase 2 feasibility study to evaluate the technical requirements necessary for the City of Pueblo to create a municipal electric utility enterprise. PREVIOUS COUNCIL ACTION: On September 25, 2017, by Resolution No. 13790, the City Council declared the City of Pueblo’s intent to terminate its Franchise Agreement with Black Hills on August 11, 2020, and to create a municipal electric utility enterprise, if a due diligence feasibility study showed that municipalization was an economically viable option. On November 13, 2017 by Resolution No. 13820, the City Council created the Electric Utility Commission (“EUC”) whose mission is to advise the Mayor and Council whether the City, operating as a Municipal Electric Utility Enterprise, could successfully provide electric utility service beginning on August 11, 2020. On August 13, 2018, by Resolution No. 14032, the City Council approved an Agreement with Consultant to perform a first phase (“Phase 1”) feasibility study to evaluate the legal, technical and financial requirements necessary for the City to assume control of the electrical utility services currently provided by Black Hills Energy (“BHE”) within the City’s boundaries. BACKGROUND: The Phase 1 study provided and overview of the municipalization process and concluded that it was financially feasible for the City, operating a municipal electric utility enterprise, to furnish electric utility service to the City’s residents. The EUC has recommended to the Mayor and City Council that the City hire the Consultant to perform a second phase (“Phase 2”) study regarding the technical feasibility of forming a municipal electric utility enterprise. The Phase 2 study will provide a more detailed technical and economic analysis of the municipalization process. FINANCIAL IMPLICATIONS: The Mayor has requested that BHE voluntarily provide the Consultant with the following information: Original Cost Less Depreciation for BHE Facilities Service Area Generation Transmission Distribution General/Common Within City Boundaries Within Pueblo County Boundaries All BHE Facilities in Colorado TOTAL If BHE voluntarily proves the information to the Consultant, the cost to the City for a Phase 2 study will be $150,000. If BHE fails to cooperate, the City will be required to pay the Consultant an additional $50,000 (for a total cost of $200,000) to independently obtain the requested information. BOARD/COMMISSION RECOMMENDATION: The EUC recommends approval of this Ordinance. ALTERNATIVES: If City Council does not approve this Ordinance, Consultant will not be engaged to conduct a Phase 2 feasibility study exploring the City’s electricity provider options other than an investor owned utility. RECOMMENDATION: City Staff recommends approval of this Ordinance. Attachments : Proposed Ordinance; proposed Amendment to Agreement for Professional Services AMENDMENT TO AGREEMENT FOR PROFESSIONAL SERVICES This Amendment to Agreement for Professional Services (this "Amendment") is executed to be effective as of June 1,2019,by and between EES Consulting, Inc.,a Washington corporation ("Consultant") and the City of Pueblo, Colorado, a Colorado municipal corporation, ("Client"). WHEREAS, Consultant and Client entered into that certain Agreement for Professional Services dated August 13, 2018 ("Agreement"). Capitalized terms not otherwise defined in this Amendment shall have the meanings assigned to them in the Agreement. WHEREAS, pursuant to the Agreement, Consultant performed a first phase ("Phase 1") feasibility study to evaluate the legal,technical and financial requirements necessary for the Client to assume control of the electrical utility services currently provided by Black Hills Energy ("BHE") within the Client's boundaries; and WHEREAS, Client now wishes Consultant to perform a second phase ("Phase 2") study regarding the technical feasibility of forming a municipal electric utility enterprise; and WHEREAS, Consultant and Client desire to ratify the Agreement except as modified pursuant to the provisions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises set forth herein and other good and valuable consideration, Consultant and Client hereby agree to the following: AGREEMENT 1. Scope of Work. Schedule 1 attached to the Agreement is hereby replaced by Schedule A attached hereto. 2. Project Budget. Schedule 2 attached to the Agreement is hereby replaced by Schedule B attached hereto. 3. Schedule for Phase 2 Work. Consultant agrees complete Task A in approximately 8 weeks after the effective date of this Amendment. 4. Fees for Services. Section 3 (a) of the Agreement is hereby amended to read as follows: (a) Client will pay to Consultant as full compensation for all services required to be performed by Consultant under this Amendment, the not-to-exceed amount of U.S. $200,000.00, which is comprised of the proposed labor budget (computed as set forth in Schedule B) and any project-related out-of-pocket expenses as set forth in Schedule B. 1 f 5. Term and Termination. Section 5 (a)of the Agreement is hereby amended to read as follows: (a) Term. The term of this Amendment begins on the Effective Date and ends on December 31,2019,unless sooner terminated in accordance with the Agreement. City reserves the right to extend the term of this Amendment as needed with written acceptance of both parties. 6. Ratification. Except as expressly stated herein,the Agreement shall remain in full force and effect. If there is any conflict between the Agreement and the terms of this Amendment, the terms of this Amendment shall control. 7. Counterparts. This Amendment may be executed in one or more counterparts,each of which shall be deemed an original and all of which shall constitute one and the same document with the same effect as if all parties had signed the same original. Furthermore, the undersigned agree that transmission of this Amendment by telecopy or via e-mail in a PDF format shall be deemed transmission of the original Amendment for all purposes. IN WITNESS WHEREOF, the parties to this Amendment to Agreement for Professional Services have set forth their hand,to be effective as of the Effective Date. CLIENT: CITY OF PUEBLO,COLORADO a Colorado municipal corporation By: -744464/ ‹ Name: Nicholas A. Gradisar Title: Mayor / ATTESTED Blt _f k end/4f. 1riA446, Acting City Clerk `l CONSULTANT: EES Consulting,Inc. a Washington corporation By: vs-9 s Name: Gary . Saleba Title: President/CEO 2 SCHEDULE A Scope of Work for Phase 2 Phase 2 Technical Analysis (Task A) The Phase 1 report reviewed at a high level the economics of Client forming a municipal electric utility enterprise. While the Phase 1 economic results are well within the prescribed accuracy of a preliminary feasibility study, Client requests a more detailed economic analysis. To accomplish the Phase 2 economic analysis, Consultant agrees to perform the following Phase 2 technical scope of work. This technical work will be performed by EES and Vanir. ➢ Update service area definitions and type of BHE assets. The Phase 1 Study looked at three different Black Hills Electric (BHE) acquisition boundaries. In Phase 2, the Consultant agrees to look at the possible service areas of BHE assets within the City's boundaries, BHE assets within the Pueblo County's boundaries and all BHE assets within the State. Across these three service areas, the Consultant will value the BHE generation, transmission, distribution and general/common assets separately. This functionality will be provided for each of the three potential service areas. In this regard, the Consultant will provide valuations by functional category for each of the three service areas. > Confirm customer usage date. In Phase 1,the Consultant estimated customer usage data from available City water utility records and BHE official filings. In Phase 2,the Consultant will further pursue these two sources plus confirm assumptions via field verification. ➢ RFI for power supply costs. Power supply costs are the largest expense in a municipal utility's budget. In Phase 1, the Consultant gathered these costs from discussions with neighboring electric utilities and from wholesale power costs from relevant market hubs. In Phase 2, the Consultant will issue a Request for Information (RFI) which will solicit actual indicative wholesale power pricing for a new municipal electric utility enterprise. ➢ Update stranded cost estimates. With the additional information noted above from the Consultant's analysis, the Consultant will perform a more detailed estimate of any stranded cost payments per directives from the Colorado Public Utilities Commission (CPUC) and/or the Federal Energy Regulatory Commission (FERC) in conjunction with Phase 2 Counsel for the City. > Update fair market value calculations. Based upon this additional Phase 2 research, an updated fair market value for the BHE assets in the three potential service areas by asset function will be calculated. The "income method" will be included in this update along with original cost less depreciation, reconstruction cost less depreciation and comparable sales methodologies. If BHE provides the information as noted in the Figure 2 of Schedule B, the Consultant's budget will be less. Any separation costs will be estimated under this task as well. 3 SCHEDULE B Estimated Budget The Consultant bills on a time and materials basis. The Consultant's hourly rates are as follows: ,11.:22:1"-Y1. ,APAF, 3111 a G.Saleba $225.00 M.Walenciak $195.00 G.Tabone $195.00 S.Andersen $190.00 A. Nyquist $185.00 � { a i�p &fi '" A,v%.:` t ti " �,. �, a ;fir "¢a?a �&�,: syms q"c^,}M �� ,> ` .u,m ?�¢ fi � � f.""##;#', H.Choy $180.00 C. Humann $195.00 J.Visnic $175.00 D.Shomers $150.00 Based upon the aforementioned scope of work and hourly rates, the estimated budget for Task A is as follows: Task A—Technical Analysis The estimated budget for Task A is $200,000. If BHE will provide the information contained in Figure 2, a $50,000 credit to the Task A budget is agreed to. •, .:11!6 *''i .,t, . , pry, .. ,..:A a air r," s 5 t ca+.,i".gm Service Area Generation Transmission Distribution General/Common Within City Boundaries Within Pueblo County Boundaries All BHE Facilities in Colorado TOTAL Out-of-Pocket Expenses Few out-of-pocket travel expenses are anticipated in conjunction with this Project but if incurred, the Consultant will bill the City for these out-of-pocket expenses at their cost to the Consultant and in addition to the aforementioned labor budgets. 4 Budget Summary In summary,the proposed Phase 2 budget is as follows: 414 =r4ti,,q Labor Budget Task Low High Task A—Technical Analysis $150,000 $200,000 Total Labor Budget $150,000 $200,000 5