REPORT TO COUNCIL
SUBJECT
Title
Action to (1) Delegate Authority to the City Manager to Execute Amendment One to the System Maintenance Agreement with Elster Solutions, LLC for Energy Axis Management System and Negotiate and Execute Future Purchase Orders, Agreements, or Amendments for Future Equipment or Services, and (2) Ratify Previous Payments Exceeding Council Authorization
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara’s electric utility, Silicon Valley Power (SVP) operates an Advanced Metering Infrastructure (AMI) system to remotely collect energy usage data from customers citywide. At the core of the AMI system are digital meters (smart meters) that record energy usage and transmit the data back to SVP through a secure network for bill processing.
On December 7, 2010 (Agenda Item 6B-12), the City Council approved a Master Agreement with Elster Solutions, LLC (Elster) for the purchase and implementation of the Elster Energy Axis AMI System, including all necessary software, hardware, and professional services as a pilot project. The Master Agreement was amended four times to complete implementation of the AMI system. Under the Master Agreement, Elster provided a turnkey AMI solution consisting of the following key components:
• The EnergyAxis Management System - the head-end software for system control, meter data collection, and network management.
• A Tropos wireless wide area network - used for data transmission.
• The purchase and deployment of smart meters.
• Installation of all associated servers and network infrastructure
• A System License Agreement (SLA) which provided licenses for software, firmware, middleware, database, troubleshooting tools, and third-party applications embedded in the Energy Axis Management System.
• A System Maintenance Agreement (SMA) which covered ongoing annual support including help desk services, technical support, updates, and optional training and upgrade support.
The total implementation cost for the AMI system was $7,490,173.20. Following successful deployment of the AMI system, the Master Agreement was not renewed after its expiration on December 31, 2015. However, both the SMA and SLA remained in effect with automatic one-year renewals to support ongoing licensing, maintenance, and technical support services for the system.
DISCUSSION
Updated SMA Terms
Similar to many technology systems, the EnergyAxis Management System requires regular hardware and software updates. Staff has been working with Elster to revise the terms of the SMA, focusing primarily on fees and service levels for future support needs.
There are no changes proposed to the terms of the SLA executed in 2014. No additional payments have been made under the SLA beyond the initial one-time license fee, which was included in the total implementation cost noted above.
Authorization for Past SMA Payments
On June 17, 2014, the City Council authorized the City Manager to execute Amendment No. 4 to the Master Agreement with Elster, which updated the terms and benefits of both the SMA and SLA. While the SMA was included in the agreement, the City Council action did not expressly authorize the continuation of SMA payments beyond the expiration of the Master Agreement in 2015.
Following system deployment, the SMA remained in effect through automatic annual renewals, and SVP has continued to rely on the agreement for maintenance and support services. Although the SMA has been in place since 2014, no payments were required until 2017. Payments were not made every year, as the need for support services varied. The total amount paid under the SMA from 2015 through 2025 is $375,000. Staff is now seeking retroactive approval for these payments.
As part of a broader review of historical agreements, staff has been determining whether the expenditure authorities for those agreements have been exceeded. As agreements with payments exceeding the City Council authorization are identified, staff will bring forward any necessary ratification actions to address the overages and ensure transparency. For many of these, the issue has been historical interpretations of expenditure authority and limits. In addition, the City does not have an automated system to track cumulative contract expenditures, which makes it more difficult to manage. To improve the City’s ability to track cumulative expenditures and reduce the risk of oversight under the current manual process, the Purchasing Division is working to implement the Procurement Contracts module within the City’s financial management system, PeopleSoft. This project, which is expected to be completed in 2026, will automate and centralize contract management and enhance control over all contract-related activities throughout their term.
Future Equipment and Service Needs
In addition to ongoing SMA services, SVP expects to continue to rely on Elster for equipment and support services necessary to maintain and expand the AMI system as well as replace meters and install meters for new customers. These future needs include new meter purchases, replacement hardware, field support, upgrades, and related professional services.
At the time the City Council approved the original Master Agreement in 2010, SVP served approximately 49,000 meters. Today, SVP supports approximately 60,000 meters. All meter purchases since the original agreement have been made either under separate City Council actions or within authorized staff purchasing thresholds.
Looking ahead, SVP expects continued expansion and some component replacements due to aging equipment. To address these needs, staff recommends that the City Council authorize the City Manager to issue purchase orders and/or negotiate and execute agreements and amendments with Elster or its authorized dealers in an amount not to exceed $5,500,000 from July 1, 2025, through December 31, 2031. This amount will support anticipated SMA renewals, equipment purchases, and support services, as outlined Table 1 below.
Table 1 - Compensation Summary
|
Cost Element |
Amount |
|
Retroactive Authorization for Past SMA Payments (System Maintenance under the SMA from January 2017 through December 2025) |
$375,000 |
|
Subtotal for Retroactive Authorization |
$375,000 |
|
|
|
|
Future Equipment and Service Needs |
|
|
- Ongoing SMA Services (~$60,000 per year plus funds for potential rate increases) |
$500,000 |
|
- Purchase of meters/equipment (new installations, expansion, and replacement) |
$4,700,000 |
|
- Professional services (e.g., training, testing, upgrade support) |
$300,000 |
|
Subtotal for Future Equipment and Services |
$5,500,000 |
|
GRAND TOTAL AUTHORIZATION |
$5,875,000 |
ENVIRONMENTAL REVIEW
The actions being considered do not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulation in that it can be seen with certainty that there is no possibility that the proposed actions may have a significant effect on the environment.
FISCAL IMPACT
Sufficient funds for the SMA, equipment, and other services are available in the FY 2025/26 Electric Utility Fund and the Electric Utility Capital Fund. Funding in the capital fund is primarily in the New Business Estimate Project and in other capital projects based on project scope. Funding for future years will be included in the regular budget process.
COORDINATION
This report has been coordinated with the Finance Department and 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.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to execute Amendment No. 1 to the System Maintenance Agreement (SMA) with Elster Solutions, LLC (Elster);
2. Authorize the City Manager or designee to issue purchase orders and negotiate additional agreements or amendments to existing agreements with Elster Solutions, LLC or Elster’s authorized dealers for the procurement of meters, equipment, materials, training, field services, and other related services associated with the EnergyAxis Management System and meters, in a total aggregate amount not to exceed $5,500,000 for the period of July 1, 2025 through December 31, 2031, subject to budget appropriations and the review and approval as to form by the City Attorney;
3. Ratify annual payments made under the SMA in an amount of $375,000 for the period of January 2017 through December 2025; and
4. Authorize the City Manager or designee to take any actions necessary to implement and administer the SMA, purchase orders, and other related agreements, including negotiating and executing future amendment(s) to (1) add or delete services associated with the EnergyAxis or meters; (2) adjust future rates based on market conditions, and (3) make de minimis changes, all subject to budget appropriations and the review and approval as to form by the City Attorney.
Staff
Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Approval of an EnergyAxis Management System Contract - REPORT
2. EnergyAXIS Management System - System License Agreement (SLA)
3. EnergyAXIS Management System - System Maintenance Agreement (SMA)
4. Proposed Amendment One to System Maintenance Agreement