HomeMy WebLinkAboutStaff Report 9480
City of Palo Alto (ID # 9480)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 9/4/2018
City of Palo Alto Page 1
Summary Title: Natural Gas Capital Improvement Plan
Title: Prioritization Criteria and Planning for Palo Alto's Natural Gas Utility's
Capital Improvement Plan
From: City Manager
Lead Department: Utilities
Executive Summary
In the May 15, 2018 budget hearing meeting, the Finance Committee requested staff to return
to the Finance Committee in Fiscal Year 2019 to discuss Capital Improvement Plan (CIP)
prioritization criteria for the Gas Utility. The purpose is to provide information on the City of
Palo Alto Utilities’ (CPAU) natural gas five-year Capital Improvement Program (CIP), specifically
prioritization and planning for the gas main replacement program, and to solicit feedback from
the Finance Committee regarding future planning for the five-year gas CIPs.
Discussion
The Gas Utility’s five-year CIP program consists of the following:
The Gas Main Replacement Program - which covers the Gas Utility replacement of
aging gas mains ranked to have the highest threat scores within the system.
Customer Connections - which covers the cost when the Gas Utility installs new
services or upgrades existing services at a customer’s request in response to
development or redevelopment. The Gas Utility charges a fee to these customers to
cover the cost of these projects.
Ongoing Projects - which covers the cost of routine meter, regulator, and service
replacement; minor projects to improve reliability or increase capacity; and other
general improvements.
Tools and Equipment - which covers the cost of capitalized equipment, such as
directional boring, tapping and stopping equipment, and emergency equipment.
This equipment is required to safely interrupt the flow of gas without performing a
large scale shutdown of service to customers.
One-time Projects -, which covers occasional large projects that do not fall into any
other categories, (i.e. Gas ABS/Tenite Replacement Project (GS-18000).)
City of Palo Alto Page 2
The Gas Main Replacement (GMR) Program is in the final stages of completing a major
milestone with the replacement of gas mains made from Acrylonitrile-Butadiene-Styrene (ABS)
plastic. The program to replace ABS and other low-performing materials within the gas system
started in the 1990s. With the replacement of all ABS mains with Polyethylene (PE) plastic near
completion, the material most at risk for failure is the remaining Polyvinyl chloride (PVC) plastic
and steel (wrapped, with cathodic protection). The next focus of the GMR program will be the
replacement of all PVC mains with PE mains. CPAU installed PVC pipes from the early 1970s to
mid-1980s. Some of the City’s PVC pipe is approaching 50 years of service, and according to
industry data, PVC pipes have a much higher leakage rate than PE mains after 20 years of
service due to potential disbondment of fittings and joints. Since FY 2014, the total annual
number of gas leaks have declined significantly, between 50% - 70%, from approximately 150
leaks to 70 leaks. This is due to the City’s gas ABS replacement program. Continuing the
natural gas PVC pipeline replacement program significantly reduces the probability of failure
and risks associated with the natural gas pipeline. Without this program, staff expects the
number of annual leaks would likely increase, since 17% of the existing gas mains are PVC.
The FY2019 - FY2023 CIP budget for the gas main replacement program takes into account the
recent rise in construction costs. The GMR program represents approximately 75% of the total
natural gas five-year CIP budget. Several factors are contributing to the increase in
construction costs, and include economic recovery in the Bay Area, a greater focus on
infrastructure improvement by many municipal agencies, and the higher demand for utility
contractors within these fields. CPAU has seen the replacement cost per linear foot increase by
50% to 100% over the last couple of years. The Gas Utility posted the most recent project for
competitive bid (the Upgrade Downtown Project) which resulted in very few contractor bids
and an eventual contract price that was much higher than estimated. Council approved an
additional $6.7 million in FY 2018 related to the natural gas capital portion of this project (CMR
8517). Staff has begun to include the higher construction cost in future projects in order to
provide more accurate cost estimate, rate projections, as well as ensure the overall integrity of
the gas system. Currently, CPAU plans to replace as many aging mains as possible within its
approved budget. However, if this trend of higher construction cost continues, the Gas Utility
will consider reducing the main replacement rate or requesting for larger CIP budgets and as a
result, increasing rates.
It should be noted that staff recently discovered that the Fiscal Year 2019 Adopted Capital
Budget inadvertently double-counted the Gas Fund budget for GS-03009 (Systems Extensions -
Unreimbursed). Staff will recommend correcting this error as part of the FY 2019 Mid -Year
Review by reducing the FY 2019 budget for GS-03009 in the amount of $210,590 and return the
funds to reserves.
Commission Review
The Utilities Advisory Commission reviewed the presentation in their meeting packet at the
August 1, 2018 meeting. However, there was no formal discussion or Q&A due t o meeting time
constraint.
City of Palo Alto Page 3
Attachments:
Attachment A: Natural Gas CIP_Presentation
1
NATURAL GAS CIP
PLANNING
August 1, 2018
Attachment A
2
CPAU NATURAL GAS SYSTEM
•Four PG&E/City of Palo Alto (CPAU)
city gate stations
•3 distribute gas to the City at a
delivery pressure of 25
•1 dedicated to VA Hospital at a
delivery pressure of 40
•386 miles of natural gas pipeline
•210 miles of distribution main
•176 miles of service pipe
•17,500 natural gas service pipelines
•24,000 natural gas meters
MATERIAL
MILES OF
MAINS IN
SYSTEM
NUMBER OF
SERVICES IN
SYSTEM
MILES OF SERVICES
IN SYSTEM
(AVG 53'/SERVICE)
STEEL 63.231 1820 18.269
COPPER 0 1 0.010
PLASTIC PVC 36.110 716 7.187
PLASTIC PE 110.380 13988 140.410
PLASTIC ABS 0.380 102 1.024
PLASTIC
OTHER 0.017 65 0.652
OTHER 0 851 8.542
TOTAL 210.118 17,543 176.095
3
•Federal Department of Transportation
•PHMSA –Pipeline and Hazardous Materials Safety Administration
•Five regions that cover the United States: Western, Central, Eastern,
Southern and Southwest
•Responsible for regulating and ensuring the safe and secure movement
of hazardous materials
•Establish national policy, set and enforce standards, educate and
conduct research to prevent incidents
•151 inspection and enforcement employees; 90 of which are pipeline
inspectors
REGULATORY OVERSIGHT
4
PIPELINE INTEGRITY PLAN
•In August 2011 distribution operators were required to develop and
implement a Gas Distribution Integrity Management Plan (DIMP)
•Distribution Integrity Management Plan elements:
•Knowledge of the system
•Identifying threats of the system
•Evaluate and rank risks
•Implement measures to reduce risks
•Measure performance
•CPAU uses American Public Gas Association’s tool, “SHRIMP”,to create
the City ’s custom DIMP plan
•SHRIMP: Simple, Handy, Risk-Based, Integrity Management Plan
5
CPAU INTEGRITY MANAGEMENT PLAN
SHRIMP
Gas Leak Data
-Yearly leak data
-Historical leak data
System Knowledge
-30+yrs of individual
operations staff
-City engineering staff
DIMP Plan
Gas System Configuration
-System material
-System pipe diameter
-System components
6
•DIMP –Distribution Integrity Management Plan risk assessment
•#1 –Material, Weld or Joint Failure; PVC
•#2 –Excavation Damage; by Third Party
•#3 –Excavation Damage; by Crew or Contractors
•#4 –Material, Weld or Joint Failure; Acrylonitrile Butadiene
Styrene (ABS)/Tenite
•#5 –Corrosion, External Corrosion
•#6 –Other Threats, Legacy Crossbores
•#7 –Natural Forces
CPAU INTEGRITY MANAGEMENT PLAN
7
NATIONWIDE PVC FAILURES SINCE 1970
•Plastic Pipe Database
Committee, with 119 operators
•PVC failure/leaks increase after
20+ years of service life
•CPAU has prioritized the
replacement of PVC pipes in its
system based on this industry
data and experience
Report: April 27, 2017
8
CPAU REPORTED LEAKS
Total Reported Leaks by Category (6 year)
2012 2013 2014 2015 2016 2017
Corrosion 11 11 14 6 12 5
Natural Force 3 5 1 1 5 3
Excavation 47 54 52 42 35 19
Other Outside Force 0 2 0 2 2 2
Pipe, Weld, Joint 16 47 34 19 9 9
Equipment 8 3 7 1 5 5
Incorrect Operation 0 0 0 0 0 0
Other Cause 10 32 39 12 8 1
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017
Corrosion
Natural Force
Excavation
Other Outside Force
Pipe, Weld, Joint
Equipment
Incorrect Operation
Other Cause
9
CPAU PVC RISK ASSESSMENT
•In 2015 CPAU commissioned a PVC and PE gas piping study.
•Assessed risk of vintage PVC, vintage PE and modern PE by analyzing
extracted segments of pipe from the system.
•Concluded PVC material presented a greater risk to the system than
PE material.
•Compared to PE pipe, PVC has a 4 times greater risk of failure when
used on distribution mains and a 3 times greater risk of failure on
services.
•Three scenarios: 5-, 10-, and 15-year replacement programs,
indicating a small benefit to accelerating from the 15-year program.
10
GAS CIP BUDGETING
•Natural gas CIP master plan
FY2019-FY2023
•Average about 18,000 linear feet
of main replacement per year
•Locate replacement economically
•Replacement includes distribution
main and services
•Estimating a total of $6.5M in
pipeline main and service
replacement per year
11
GAS CIP BUDGETING
•Estimated $325 per linear
foot in FY20
•Annual labor and material
cost increase of 3%
•Replacement cost varies due
to replacement size and
project site conditions.
•13 year replacement strategy
for PVC main
Total PVC Footage
Remaining
Main Replacement
Footage
$/ft of Replacement +
3%Annual Increase Total-13 years
190,872 18,250 325.00$ 5,931,250.00$
172,622 17,703 334.75$ 5,925,911.88$
154,920 17,171 344.79$ 5,920,578.55$
137,748 16,656 355.14$ 5,915,250.03$
121,092 16,157 365.79$ 5,909,926.31$
104,935 15,672 376.76$ 5,904,607.37$
89,263 15,202 388.07$ 5,899,293.23$
74,062 14,746 399.71$ 5,893,983.86$
59,316 14,303 411.70$ 5,888,679.28$
45,013 13,874 424.05$ 5,883,379.47$
31,138 13,458 436.77$ 5,878,084.43$
17,680 13,054 449.88$ 5,872,794.15$
4,626 12,663 463.37$ 5,867,508.64$
12
ABS/TENITE REPLACEMENT PROJECT
•Replace 160 ABS/Tenite natural gas services
•ABS/Tenite pipe form rapid crack
propagation
•Remove the remaining known ABS/Tenite
service pipe from the natural gas system
•Construction replacement cost average at
$5,000 per new natural gas service.
13
ADOPTED GAS CIP FY 2019 -2023
CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
GS-12001 -Gas Main Replacement -Project 22 $ 800,000 $ -$ -$ -$ -
GS-13001 -Gas Main Replacement -Project 23 $ 550,000 $ 6,500,000 $ -$ -$ -
GS-14003 -Gas Main Replacement -Project 24 $ -$ 804,525 $ 6,500,000 $ -$ -
GS-15000 -Gas Main Replacement -Project 25 $ -$ -$ 650,000 $ 6,500,000 $ -
GS-16000 -Gas Main Replacement -Project 26 $ -$ -$ -$ 650,000 $ 6,500,000
GS-20000 -Gas Main Replacement -Project 27 $ -$ -$ -$ -$ 856,180
GS-03009 -System Extensions -Unreimbursed *$ 421,180 $ 433,816 $ 446,830 $ 460,234 $ 474,042
GS-18000 -Gas ABS/Tenite Replacement Project $ 1,500,000 $ -$ -$ -$ -
GS-14004 -Gas Distribution System Model $ 20,000 $ 20,000 $ 20,000 $ -$ -
GS-11002 -Gas Distribution System Improvements $ 246,036 $ 253,417 $ 261,020 $ 268,851 $ 276,916
GS-13002 -Gas Equipment and Tools $ 350,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
GS-80019 -Gas Meters and Regulators $ 376,652 $ 387,952 $ 399,591 $ 411,579 $ 423,926
GS-80017 -Gas System, Customer Connections $ 1,303,315 $ 1,342,415 $ 1,382,688 $ 1,424,169 $ 1,466,894
Total Expenses $ 5,567,183 $ 9,842,125 $ 9,760,129 $ 9,814,833 $ 10,097,958
GS-80017 -Gas System, Customer Connections $ (1,078,935)$ (1,111,303)$ (1,144,642)$ (1,178,981)$ (1,200,000)
Total Revenues $ (1,078,935)$ (1,111,303)$ (1,144,642)$ (1,178,981)$ (1,200,000)
Grand Total $ 4,488,248 $ 8,730,822 $ 8,615,487 $ 8,635,852 $ 8,897,958
Note: * GS-03009 (System Extensions -Unreimbursed) -FY2019 mid-year adjustment to reduce budget in half due to double-counting
14
GAS CIP BUDGETING
Committee/Public Discussion and
Feedback to Staff
15
GAS CIP BUDGETING
Backup Slides
16
HISTORICAL GAS CIP FY 2012 -2018
Project Description FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Gas Main Replacements 3,155,239 3,389,034 7,955,055 6,019,882 1,119,184 425,932 1,100,737
Gas System Improvements 951,749 622,258 265,169 421,614 323,205 257,476 179,167
Gas Meters, Equipment and
Tools 391,924 49,707 322,171 60,750 91,276 -127,968
Gas Customer Connections 605,635 932,035 904,684 1,005,525 1,252,556 1,155,768 936,441
Revenue -Customer
Connections (612,121)(731,191)(643,754)(747,954)(964,858)(955,081)(1,102,979)
Grand Total 4,492,426 4,261,843 8,803,325 6,759,817 1,821,363 884,095 1,241,334
17
Increasing Construction Costs –Labor & Materials
Ye ar Project Fe et Contract $/LFT
P/P %
Increase
% Increase as of
2010/11/12
2011 GMR 18/19A 38,563 4,042,637$ 105$
2012 GMR 19/20/21 68,811 12,110,846$176$ 68%
2018 GMR 22 14,272 5,127,395$ 359$ 104%243%
2012 WMR 23 /24 19,463 4,220,699$ 217$
2015 WMR 25 11,872 4,008,210$ 338$ 56%
2017 WMR 26 12,626 4,987,424$ 395$ 17%82%
2012 SSR 22/23 33,497 3,987,034$ 119$
2015 SSR 24/25/26 42,398 6,732,482$ 159$ 33%
2016 SSR 27 15,752 3,078,198$ 195$ 23%64%
2010 O/H to U/G Conve rsion 45 10,662 2,280,000$ 214$
2015 O/H to U/G Conve rsion 47 5,625 1,940,000$ 345$ 61%
2018 O/H to U/G Conve rsion 46 2,800 1,475,000$ 527$ 53%146%