REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Negotiate and Execute Agreements with ProEnergy Services, LLC and GE Vernova International LLC for Gas Turbine Engine Field and Depot Services for Silicon Valley Power, for Additional Compensation Not-to-Exceed $20 Million, for a Total Combined Maximum Compensation Not-to-Exceed $50 Million, Inclusive of $30 Million Previously Authorized by the City Council
Report
BACKGROUND
Silicon Valley Power (SVP), the City of Santa Clara’s electric utility, owns and operates two gas turbine generation units at the Donald Von Raesfeld (DVR) Power Plant that are critical to system reliability, grid support, and emergency generation. To maintain operational readiness, the power plant requires ongoing gas turbine field and depot services, including inspections, maintenance, repairs, technical support, and replacement parts.
On April 6, 2021 (RTC 21-228), the City Council authorized the City Manager to negotiate and execute master service agreements with General Electric Packaged Power, LLC (GE Packaged Power) and TransCanada Turbines Inc. (TCT) for gas turbine field and depot services for a five-year term with an aggregate maximum compensation of $30 million.
On May 28, 2021, the City executed an agreement with TCT for turbine maintenance and repair services effective through April 5, 2027, with four additional renewal options through April 5, 2031. The City did not execute the agreement with GE Packaged Power because the agreement terms could not be finalized. Approximately $9 million remains available under the existing City Council authorization for TCT; nevertheless, recent turbine repair events highlight the need for additional qualified contractors to improve access to critical turbine components, increase service availability, and enhance operational reliability.
Staff determined that it is in the City’s best interest to re-solicit these services to establish agreements with additional qualified contractors to support SVP operations and maintain the reliability of the DVR Power Plant during both planned maintenance activities and unexpected outage events.
DISCUSSION
Pursuant to Section 2.105.140(c) of the Santa Clara City Code (City Code), a formal Request for Proposal (RFP) was conducted, and an award was made based on “best value.” The RFP for gas turbine field and depot services was published on the City’s e-procurement system. A total of 34 companies viewed the RFP and two proposals were received by the submittal deadline from the following firms:
• GE Vernova International LLC (GE Vernova)
• ProEnergy Services, LLC (ProEnergy Services)
The proposals were independently evaluated by a three-member evaluation panel against the criteria and weights published in the RFP, including experience, technical capability, and cost. Following the completion of the evaluation process, the panel recommended award of master agreements to GE Vernova and ProEnergy Services. Both firms demonstrated strong technical qualifications, relevant gas turbine service experience, and the ability to support SVP’s operations.
Staff is seeking City Council authorization to enter into agreements with GE Vernova and ProEnergy Services for gas turbine engine field and depot services, each with a not-to-exceed compensation of $10 million. Both agreements include an initial five-year term with renewal options extending through September 30, 2036.
Assuming negotiations are successful, SVP will have access to three qualified contractors for gas turbine engine field and depot services.
Staff is proposing that the City Council’s prior authorization of $30 million is increased by $20 million, resulting in a total combined maximum compensation of $50 million. This would provide approximately $29 million in remaining capacity over the next five years, including approximately $9 million remaining under the existing agreement with TCT. SVP’s annual expenditure for these services is approximately $6 million. Staff will return to the City Council at a later date if additional authorization is required. Table 1 below summarizes the existing and proposed agreement authorization and estimated remaining capacity.
Table 1: Summary of Gas Turbine Agreements and Authorization Amounts
|
Agreement |
Maximum Compensation |
Estimated Remaining Capacity |
|
TransCanada Turbines (Existing Agreement) |
$30,000,000 |
$9,000,000 |
|
ProEnergy (Proposed Agreement) |
$10,000,000 |
$10,000,000 |
|
GE Vernova (Proposed Agreement) |
$10,000,000 |
$10,000,000 |
|
Total Combined Maximum Compensation |
$50,000,000 |
$29,000,000 |
The amounts listed in Table 1 are planning level estimates. Actual work assignments and expenditure among the agreements are not predetermined and will depend on contractor availability, responsiveness, technical expertise, and pricing at the time services are required. In addition, expenditures can vary substantially from year to year depending on operational and maintenance needs. Accordingly, the proposed combined maximum compensation may be reallocated among the agreements as needed to ensure sufficient capacity is available when critical maintenance or emergency repair services are needed.
Work will be assigned through a secondary selection process based on contractor availability, experience, terms, and cost. In emergency situations, SVP may select the contractor able to mobilize most quickly to reduce outage duration, minimize operational risk, and maintain generation availability during periods of high demand.
Rates established in the agreements are fixed for the initial two-year term. Thereafter, contractors may request annual rate adjustments, subject to City approval and supported by documentation acceptable to the City.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the actions being considered are exempt from the California Environmental Quality Act (“CEQA”) pursuant to section 15301 of Title 14 of the California Code of Regulations as the services involve operation, maintenance, and repair of existing facilities and mechanical equipment.
FISCAL IMPACT
Funds for these contracts are available in the Electric Utility Operating Fund budget for FY 2026/27. Funds for future years will be requested through the normal budget process.
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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Determine that the proposed actions are exempt from CEQA pursuant to Section 15301 (Existing Facilities) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager or designee to negotiate and execute an agreement with ProEnergy Services, LLC to perform gas turbine engine field and depot services, for an initial term beginning on or around September 1, 2026, and ending on September 30, 2031, with up to five one-year options to extend the term through September 30, 2036, for a total maximum compensation not to exceed $10,000,000, subject to the appropriation of funds and the review and approval as to form by the City Attorney;
3. Authorize the City Manager or designee to negotiate and execute an agreement with GE Vernova International LLC to perform gas turbine engine field and depot services, for an initial term beginning on or around September 1, 2026, and ending on September 30, 2031, with up to five one-year options to extend the term through September 30, 2036, for a total maximum compensation not to exceed $10,000,000, subject to the appropriation of funds and the review and approval as to form by the City Attorney; and
4. Authorize the City Manager or designee to take any actions necessary to implement and administer the agreements, including negotiating and executing future amendments to: (a) exercise the option years; (b) implement rate adjustments on the terms provided in the agreements; (c) reallocate compensation between the agreements with TransCanada Turbines Inc., ProEnergy Services, LLC and GE Vernova International LLC, provided that the total combined maximum compensation for all agreements does not exceed $50,000,000 (inclusive of the 2021 City Council authorization of $30,000,000); and (d) make de minimis changes, subject to the appropriation of funds 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 Grogan, City Manager
ATTACHMENTS
1. Proposed Agreement with GE Vernova International LLC (under negotiation)
2. Proposed Agreement with ProEnergy Services, LLC (under negotiation)
3. Executed Agreement with TransCanada Turbines Inc.
4. Executed Amendment No. 1 to Agreement with TransCanada Turbines Inc.