INTEROFFICE MEMORANDUM

Transcription

1 INTEROFFICE MEMORANDUM DATE: March 23, 2009 TO: Mayor and Council FROM: John D. Tensen, P.E., City Engineer SUBJECT: Geothermal Heating District Status Report for March 25, 2009 Work Session Information Only, No Action Required This memo is written to provide background information for our March 25, 2009 presentation to the Mayor and Council regarding the key issues the Boise City Geothermal system is currently facing. Historical Background The system began operation in 1983 with initial funding provided as part of a DOE demonstration project grant, private funding and City General Fund support. The idea and support for the system came as a result of the late 1970 s energy crisis. During this same timeframe, the State and VA Hospital also constructed systems. Immediately following completion of the system, natural gas deregulation was implemented. This caused natural gas rates to dramatically fall and made it difficult to convince building owners to switch to geothermal. Designed and constructed to serve nearly every building in the downtown core, the system had only 25 customers in the early years leading to a decision to set geothermal rates 30% less than natural gas rates as an incentive to prospective customers. Within the first years of service, it was discovered there was a corrosion problem with buried metal distribution system fittings. Emergency repairs and system shutdowns were common and system reliability was low. At one point, over 1 million dollars was borrowed from the Sewer Fund to repair and modify the system to address the problem. The system was developed under Public / Private Partnership. The private partners owned the wells with the expectation of recovering their investment through water sales. Due to the small number of initial customers, the water sales revenue was not sufficient to support repayment to the private partners and fund system operation. Another DOE grant which was originally intended to fund the extension to BSU was used to buy the partners out. As outlined below, expansion has also been hampered by concerns of a declining aquifer. Geothermal Aquifer Issues Water levels in the geothermal aquifer dropped immediately after the City, State, and Veterans Affairs (VA) systems came on line in the 1983 time frame. In the mid 1980 s, the Boise Warm Springs Water District made a claim of damage to their water right due to the drop in water levels. In 1988, the Idaho Department of Water 1

2 Resources declared a moratorium on any further geothermal development and put a cap on the four geothermal systems in operation, with the City capped at 200 million gallons per year (MGY). In 1999, after a decade of searching for funding and completion of a study to determine whether a re-injection well would address the dropping waters levels and completion of a study to determine an appropriate location of an injection well, the City used another DOE grant to drill an injection well. The injection well provided for approximately 85% of the used water to be re-injected. The injection well has proven to be highly successful. An immediate slow and steady recovery of aquifer water levels began with the initiation of injection (the State system always had a re-injection well and the VA system added one within a couple years of beginning operation). In 2003, based on the aquifer s positive response to the City re-injection well and completion of an aquifer study which concluded the City could expand to at least 310 MGY without adversely the other users of the aquifer, the City was able to negotiate an agreement to obtain an increase in the moratorium cap to 230 MGY. In 2005, the City completed a pipeline project which now provides for 100% re-injection. The aquifer has now essentially recovered to levels prior to the initiation of the City, VA and State operations. For the past 3 years, the City has been actively negotiating with the other regional aquifer users for further increases up to 310 MGY in the City moratorium cap. Increases would be subject to continued aquifer monitoring and annual reports by IDWR indicating no adverse affect to other users based upon previous years increased pumping. Boise State University (BSU) Geothermal Extension The geothermal system was originally designed and constructed to extend to BSU but progress halted when funds were used to buy out the private partner and concerns were raised about declines in the levels after the system came on line. With the aquifer problems apparently solved and rising natural gas prices, there has been renewed interest by the City and BSU to extend the system to BSU. Federal appropriation funding requests to the Idaho congressional delegation to extend the system to the campus have been made annually since DHUD grant funding of $170,500 was included in the FY2008 federal budget. These grant funds were released in March 2009 and are being used for preliminary planning for the BSU extension. On March 16 of this year, the City and BSU jointly announced approval of $2.1 million of DHUD and DOE FY2009 federal funding to construct Phase 1 of the extension to the BSU campus. It is anticipated that Phase 1 of the extension to BSU (see attached map) will have the design completed in 2009 with construction scheduled for completion in 2010 prior to the heating season. Phase 2 of the extension to BSU has been requested to the Idaho congressional delegation for Current Status System now serves 58 customers heating more than 3.8 million sq. ft. of building space. 2

3 Repairs to the system have been successful. The system has been operational over 99.5% of the time. The Geothermal System has a positive cash flow with revenues exceeding operational costs by over $400,000 per year. Excess funds have been used for system expansion, system repair, system looping and loan repayment. Current Sewer Fund loan balance is approximately $110,000. The aquifer has essentially recovered to levels prior to the City, VA and State beginning pumping operations. For the 2008/2009 heating season, we expect to pump approximately 193 MGY. With the addition of BSU Phase I and the interconnection to the State of Idaho, we are predicting pumping levels approaching our current 230 MGY cap. Geothermal Business Plan As a part of strategic planning, the geothermal business plan has been reviewed and updated to the current goals for service. A financial projection was developed for the geothermal fund based on the business plan. A graph of the predicted Geothermal Fund balance along with model assumptions will be provided at our meeting. After consulting with our existing geothermal customers, the financial projections have led staff and the Public Works Commission to conclude that it is time to disconnect the rates the City charges for geothermal service from the natural gas rates. Within the next few weeks, staff plans to bring forward an ordinance change which will eliminate our direct connection of natural gas rates to geothermal rates. A draft copy of this proposed ordinance is attached. H:\msoffice\Word\Geothermal\Geothermal Update to MC 09 Mar1 final.doc 3

4 Section USER SERVICE PROCEDURES A. Account Activation and Deactivation After a service connection has been completed and approved, any person desiring geothermal service shall notify the Public Works Department. The Public Works Department shall activate a service account for the user's connection and the Department of Public Works shall activate the user's meter. Any user desiring to discontinue geothermal service shall notify the Public Works Department and upon deactivation of the service account, the Department of Public Works shall deactivate the user's meter. B. Service Deposits: Prior to activation of a service account, the City may require a reasonable cash deposit to insure payment for the use of geothermal resources to be furnished by the City. The City Council, by resolution, may establish deposit amounts and guidelines for requiring such deposits. C. Determination of Service Fees: There is hereby established a system of periodic service fees and charges for the purpose of equitably imposing upon all users the costs and expenses of construction, operation, maintenance, repair and replacement of the geothermal system and facilities. The determination of periodic service fees and charges may be based upon business needs of the system and other considerations, including but not limited to: 1. Facility Replacement. The purpose of this consideration category is to accumulate a reserve for replacement within the service area of distribution and disposal facilities and works. Such reserve shall be based on the total historical costs and estimated life of the applicable facilities and equipment. One rate schedule for service fees in this category will be devised and shall be the basis for charges to all customers in the service area. 2. Construction, Operation and Maintenance. The purpose of this consideration category is to recover, equitably from users, the costs and expenses incurred by Boise City in constructing, operating and maintaining the geothermal distribution system. 3. Fixed Charge for Zero Use. The purpose of this consideration category is to apportion equitably among all users those fixed costs which continue to be incurred whether or not individual users utilize the system. Such costs include, but are not limited to, costs attributable to providing basic office staff for the administration of the geothermal system. Payment of these costs shall be made by all customers, including those with zero flow. 4. Prevailing Natural Gas Rates. The purpose of this consideration is to establish a goal that geothermal rates should result in an estimated savings of at least twenty percent (20%) from the prevailing prices users would have to pay for comparable natural gas service. City staff shall review service rates and make recommendations to Council whenever prevailing prices of similar natural gas service are changed. D. Review and Revision of Service Fees: The charges and fees hereinafter imposed shall be reviewed and revised periodically as required and the charges and fees provided by this Chapter are hereby levied and assessed against each lot, parcel or other property having any connection with the geothermal system.

5 E. Service Fees: The amount and rate of service fees shall be established by resolution of the City Council. Geothermal customers will be sent written notice of a proposed increase in geothermal service rates prior to Council consideration of the resolution. Any increase of geothermal service fees in excess of five percent (5%) shall require published notice and a public hearing. Such fees shall be based upon an estimated savings of thirty percent (30%) from the prevailing prices which residential, commercial or large volume users would have to pay for comparable natural gas service. The estimated savings of thirty percent (30%) is based upon the assumption that each user connected to the transmission pipeline will draw at least fifty degrees (50)F temperature out of the geothermal water. Such service fees shall be reviewed and revised by resolution of the City Council, to reflect changes in the prevailing prices of similar natural gas service. Any deviation from the above service fee rate shall be approved by the City Council. F. Billing of Service Charges: The Treasurer shall mail regular billing statements to each user, which shall include: 1. Account handling charges, if any; and 2. Rate charges showing the type of user, number of gallons of water drawn from the system and the total charges therefor. G. Estimated Bills: Boise City shall endeavor to have each user's meter read at regular intervals to determine the cost of the geothermal service. In the event Boise City's meter reader is unable to gain access to the premises to read the meter on his regular trip, Boise City may estimate the user's consumption for the current billing period based on known consumption for a prior period adjusted for variation in temperature on a degree day basis; subsequent readings will be adjusted for difference between estimated and actual. Estimated bills shall carry appropriate notice to that effect. (Ord. 4883, )

6 GEOTHERMAL SYSTEMS WITHIN BOISE CITY 13TH CITY SUPPLY WELLS SHENANDOAH HARRISON UNION SHAW MOUNTAIN SHENANDOAH LOCUST PIERCE FORT HAINES HAYS FRANKLIN 15TH JEFFERSON 8TH U 6TH 5TH 3RD STATE RESERVE MCKINLEY 16TH FAIRVIEW 14TH 12TH 10TH 9TH IDAHO MAIN 4TH BANNOCK 2ND 1ST ST AVENUE B LUKES WARM SPRINGS INTERSTATE 184 INTERSTATE 184 FRONT AMERICANA 11TH CAPITOL CITY INJECTION WELL MYRTLE PARK WALNUT RIVER SHORELINE JULIA DAVIS PARK BSU PARKCENTER MALLARD MORRISON CENTER PHASE 2 EXISTING PIPE SYSTEMS PHASE 1 UNIVERSITY ADMIN STUDENT UNION LINCOLN BEACON BSU FUTURE EXPANSION DIVISION HIGHLAND ± Boise City, SUPPLY AND COLLECTION BROADWAY State of Idaho, SUPPLY AND COLLECTION Veterans Administration, SUPPLY AND COLLECTION Boise Warm Springs Water District, SUPPLY LINE ONLY BOISE This drawing is to be used only for reference purposes; Boise city is not responsible for any Inaccuracies herein contained. This map is made in part from data prepared or compiled by Ada County. Ada County shall not be liable for Inaccuracies or misuse of this map or data. CM069802K BOISE