REPORT TO COUNCIL
SUBJECT
Title
Action Authorizing the City Manager to Negotiate and Execute an Agreement with Vendor(s) for the Purchase of High Voltage Circuit Breakers to be Funded by the Electric Utility Capital Fund
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
In November 2019, Silicon Valley Power (SVP) management met to discuss the strategic priorities for SVP and identified that the City would experience significant electric load growth requiring SVP to develop a capital improvement strategy. Staff determined the need of developing both near-term and long-term strategies to accommodate approved growth and develop the necessary infrastructure plan options.
On October 13, 2020, the City Council authorized the City Manager to execute master service agreements with several engineering consultant firms to support SVP in system expansion, general consulting services, and plan implementation services (RTC # 20-854).
On April 6, 2021, staff presented a comprehensive review of upcoming load growth and capital projects to the City Council as part of the SVP Quarterly Report. The presentation concluded with the next steps, including the preparation of a system growth strategy to be presented at a future City Council meeting.
On September 28, 2021, the City Council accepted SVP’s Three-Year System Growth Plan Strategy (RTC # 21-871). This plan identified $300 million in proposed projects for both near-term and long-term capital improvement projects needed to support anticipated system growth and to replace end-of life equipment for system reliability.
On April 5, 2022, the City Council adopted Resolution # 22-9069 adding new and updated connection and load development fees for SVP (RTC # 22-449). Additionally, on April 19, 2022, the City Council adopted Resolution # 22-9081 adopting the City of Santa Clara 2022/23 Municipal Fee Schedule, which included new and updated connection fees and load development fees, effective July 1, 2022 (RTC # 22-99). These fees were further updated for fiscal year 2023/24 by adoption of Resolution 23-9221 on April 18, 2023. Such fees and their corresponding increases are intended to maintain fees at cost recovery levels necessary to support electric load growth.
On November 15, 2022 (RTC # 22-1172), the City Council accepted SVP’s System Expansion Plan for the California Independent System Operator’s Transmission Planning Process FY2023/24 (SVP System Expansion Plan California Independent System Operator (CAISO) TPP FY2023/24). The purpose of this process is to project SVP’s load growth over the next ten years and apply it to an electric system model to simulate load growth impacts on SVP’s electric system.
On May 9, 2023, the City Council adopted Resolution # 23-9223 regarding the City’s intent to issue tax-exempt electric system bonds for reimbursement of expenditures for certain capital improvement projects for SVP (RTC # 23-104), including load growth projects and associated equipment and material purchases.
On July 18, 2023, staff presented an update on these key near-term projects necessary for system growth to the City Council as part of the SVP Quarterly Update (RTC # 23-757). At the same meeting, the City Council approved amendments to several master service agreements including increases to cumulative maximum compensation (RTC # 23-737).
A critical element of the necessary load growth noted in these City Council actions is the need to purchase long lead items to support the system expansion projects. On October 10, 2023, the City Council authorized the purchase of up to 12 high voltage transformers from HD Hyundai Electric America Corporation with a total not-to-exceed amount of $81,392,908 (RTC # 23-122). This report now seeks authorization for the purchase of high voltage circuit breakers to be installed at the following locations:
• Northern Receiving Station (NRS) located on Stars and Stripes Drive.
• Kifer Receiving Station (KRS) located on Lafayette Street.
• Scott Receiving Station (SRS) located on Space Park Drive.
• Juliette Substation (JUL) located on Juliette Lane.
• Esperanca Receiving Station (ESP) located on Bill Walsh Way.
DISCUSSION
Pursuant to Section 2.105.140(d) of the Santa Clara City Code (City Code), a formal Request for Bids (RFB) was conducted with the award recommendation based on the lowest responsive and responsible bidder.
On December 22, 2023, the City issued the RFB for the purchase of high voltage circuit breakers, which was published on the City’s e-procurement system. In addition, the City directly contacted several firms informing them of the RFB and directing them to the e-procurement system if interested. A total of 53 companies viewed the RFB, and two bids were received by the April 3, 2024, deadline from the firms listed below with the manufacturer they represent appearing in parentheses:
1. Isberg Nott (GE Grid Solutions, LLC)
2. Wesco (Siemens)
Staff evaluated and deemed both bids nonresponsive due to the bidders (1) submitting exceptions to City standard terms and conditions and (2) inability to meet the delivery requirements. As a result, the Purchasing Division Manager rejected all bids pursuant to Section 2.105.200 of the City Code and directed staff to negotiate with the bidders and other suppliers of high voltage circuit breakers in the open market. Section 2.105.200 authorizes this direct negotiation and specifically provides that “if all bids or proposals are rejected, the Purchasing Division Manager or designee may re-notice the solicitation or award without further complying with the provisions of this Chapter [Chapter 2.105 of the City Code] if readvertising is determined to be an idle act.” The Purchasing Division Manager determined that readvertising would be an idle act. To encourage more vendors to participate in the solicitation, staff reached out to multiple vendors and extended the bid deadline for a total of over fourteen (14) weeks. However, only the two above-mentioned bids were received by the extended deadline.
Staff is seeking authorization for the City Manager to negotiate and execute agreement(s) with the supplier(s) selected through direct negotiations. Approval of this recommendation will mitigate further potential disruptions and allow staff the flexibility to expedite the procurement process to secure the necessary equipment in order to meet established construction schedules. The requested authorization is subject to review and approval as to form by the City Attorney and the maximum compensation shall be $38,000,000 which includes the high voltage circuit breakers as defined in Table 1 and applicable sales tax.
Table 1: High Voltage Circuit Breakers
|
High Voltage Circuit Breakers |
Station(s) |
Qty |
|
123kV or 145kV*, 4000A, 63kA or 80kA*, 550kV or 650kV BIL*, SF6, dead tank, outdoor, free standing circuit breaker (operated at 60kV nominal voltage) |
SRS, KRS, NRS, ESP, JUL |
36 |
|
123kV or 145kV*, 4000A, 63kA or 80kA*, 550kV or 650kV BIL*, SF6, dead tank, outdoor, free standing circuit breaker (operated at 115kV nominal voltage) |
NRS, SRS, KRS |
36 |
|
245kV, 3000A, 63kA, 900kV or 1050kV BIL*, SF6, dead tank, outdoor, free standing circuit breaker (operated at 230kV nominal voltage) |
NRS |
6 |
* Pending negotiations with vendors.
Deliveries are expected to take place between March 2026 and March 2027. Payments will be based on the successful completion of key milestones, including a minimum of 10% of the contract value after final acceptance of the high voltage circuit breakers.
A five-year warranty period covering parts and labor will commence upon final acceptance of each unit.
Additional Quantities: As part of the expansion, SVP may need to purchase additional circuit breakers. If such purchases are necessary, they will be made pursuant to City Code Section 2.105.130, which states “at the discretion of the Purchasing Division Manager, additional quantities may be purchased after the initial award of a contract or purchase order for general services or products. If the purchase of additional quantities or services increases the maximum compensation that exceeds the City Manager’s signature authority set forth in this chapter, or an amount previously approved by the City Council, then City Council approval is required.”
ENVIRONMENTAL REVIEW
The actions being considered do not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(2) of Title 14 of the California Code of Regulations as the proposed actions solely involve the purchase of high voltage circuit breakers at NRS, KRS, and SRS.
FISCAL IMPACT
The amount to be paid to the Vendor(s) under the Agreement(s) is for an amount not-to-exceed $38,000,000 for the initial quantity of 78 units and an additional $5,700,000 for a 15% contingency of the total contract value. Appropriations are available in the Electric Utility Capital Fund for Esperanca substation, Juliette substation, and the three receiving station rebuild and replacement projects - SRS, KRS, and NRS. Debt financing is planned in the budget to fund SRS, KRS, and NRS. SVP is expected to seek City Council approval for the issuance of Debt Financing in 2024. If this structure is not approved, an alternative funding mechanism would need to be identified for this Agreement and the overall projects would be delayed.
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to negotiate and execute Agreement(s) with a Vendor or Vendors in accordance with Section 2.105.200 of the City Code for the purchase of High Voltage Circuit Breakers with a cumulative total not to exceed amount of $38,000,000 for an approximately three-year agreement term and a five-year warranty period, subject to the appropriation of funds and the review and approval as to form by the City Attorney;
2. Authorize the City Manager or designee to approve a fifteen percent (15%) contingency, or $5,700,000, above the amount set forth above for (a) design changes, (b) any unanticipated issues, or (c) for the purchase of additional High Voltage Circuit Breakers, subject to the appropriation of funds; and
3. Authorize the City Manager or designee to (a) take any actions as necessary to implement and administer the Agreement(s) and associated purchase orders, and (b) negotiate and execute amendments to the Agreement(s) for any issues that arise during design and fabrication of the High Voltage Circuit Breakers during the agreement period and associated purchase orders, subject to the cumulative total amounts set forth above and the review and approval as to form by the City Attorney.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jovan Grogan, City Manager