HomeMy WebLinkAboutStaff Report 2403-2755CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, May 06, 2024
Council Chambers & Hybrid
5:30 PM
Agenda Item
7.Approval and Authorization for the City Manager to Execute Purchase Orders with Pre-
Qualified Vendors for Electric Distribution Transformers for the Grid Modernization
Project (EL-24000) in an Annual Amount up to $4,000,000 through FY 2026, and
Increasing the Total Aggregate Not-to-Exceed Purchase Order Amount for FY 2022
through FY 2026 from $10,000,000 to $16,000,000, with all Purchases Subject to
Assigned Purchase Order and Availability of Funds; CEQA Status: Exempt under CEQA
Guidelines Sections 15302, 15303 and 15183.
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: May 6, 2024
Staff Report: 2403-2755
TITLE
Approval and Authorization for the City Manager to Execute Purchase Orders with Pre-Qualified
Vendors for Electric Distribution Transformers for the Grid Modernization Project (EL-24000) in
an Annual Amount up to $4,000,000 through FY 2026, and Increasing the Total Aggregate Not-
to-Exceed Purchase Order Amount for FY 2022 through FY 2026 from $10,000,000 to
$16,000,000, with all Purchases Subject to Assigned Purchase Order and Availability of Funds;
CEQA Status: Exempt under CEQA Guidelines Sections 15302, 15303 and 15183.
RECOMMENDATION
Staff recommends that Council:
1. Approve and authorize the City Manager or their designee to execute purchase orders
from prequalified vendors for the purchase of electric distribution transformers, as
recommended by the Utilities Department, for the Grid Modernization Project (EL-
24000), for a total of $4,000,000 annually, and
2. Increase the total aggregate not-to-exceed purchase order amount from $10,000,000 to
$16,000,000 over the five-year period for prequalified vendors; specifically increasing
the total collective not-to-exceed amount from $6,000,000 to $12,000,000 for the
remaining three years.
EXECUTIVE SUMMARY
The Utilities Department is recommending an increase to the authorized spending amount for
the purchase of electric distribution transformers from $2,000,000 to $4,000,000 per fiscal year
with any of the prequalified vendors, increasing the total not-to-exceed amount from
$10,000,000 to $16,000,000 over the remaining three-year pre-qualified vendor period from FY
2024 through FY 2026.
Due to supply chain shortage and extended lead times, the FY 2022 authorization enabled the
City to ramp up and meet the anticipated volume of transformers needed for the City’s electric
infrastructure from FY 2022 through FY 2026. As supply chain shortages persists, the updated
recommendation enables the City to place orders in advance for a significantly higher number of
transformers that need to replaced as part of Council’s Grid Modernization for Electrification
initiative. Funds for this project are included in the FY 2024 Adopted 5-year Capital Improvement
Plan.
BACKGROUND
The Utilities Department uses various types of electric distribution transformers (pole top, pad
mount, and submersible) to provide electric service to customers in Palo Alto. In order to qualify
to become a City supplier, manufacturers who supply transformers to the City must comply with
the City’s transformer specifications and industry standards. Staff issues a Request for
Qualifications (RFQ) nearly every five years to prequalify transformer suppliers as per City of Palo
Alto’s Policies and Procedures 1 – 44/ASD, “Prequalification of Contractors.” This ordering
process ensures that City of Palo Alto receives competitive pricing without compromising product
quality, and maintains the ability to continue providing reliable service to customers.
In November 2015, Council approved and authorized the City Manager to execute purchase
orders for electric distribution transformers up to $1,000,000 each year for five years1. Any
unspent funds are returned to the Electric Fund reserves at the end of each fiscal year.
In June 2022, Council approved and authorized the City Manager to execute purchase orders for
electric distribution transformers with prequalified vendors (Staff Report ID 143422 up to
$2,000,000 annually between FY 2022 – FY 2026, in a Total Not-to Exceed Amount of $10,000,000
over the 5 year period. At that time, staff needed to address a reduction of existing transformer
stock inventory resulting from an increase in service upgrades. It was anticipated that the need
to purchase more transformers would increase in the upcoming years as a result of new
initiatives, projects, and replacement of existing transformers.
In June 2023, Council’s FY 2024 Capital Budget included funds for the Grid Modernization for
Electrification Project (“Grid Mod Project”, EL-24000) to enhance grid resiliency and reliability of
the electric distribution system and to accelerate the City’s clean energy and decarbonization
goals. This project involves replacing the existing 1,400 single phase pole top transformers rated
less than 50kVA with a rating of 50kVA or larger to meet the new load forecast for electrification.
ANALYSIS
The City conducted an electrification study to evaluate the impacts of projected electrification
loads on Palo Alto’s distribution and substation transformers, primary/secondary distribution
circuits, and to propose upgrades needed to mitigate overloads. The Grid Mod Project requires
bringing online more transformers, replacing deteriorating wires and connectors, upgrading or
replacing poles, and providing battery storage and solar system support to the interconnected
1 City Council, November 30, 2015, https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2015/final-staff-report-id-6244_transformer-supplier-
prequalification-process-and-authorization.pdf
2 City Council, June 22, 2022: https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81904
grid. Specifically, the Project involves replacing the current 1,413 single phase pole top
transformers rated less than 50kVA. Additionally, 300 - 400 pad mount and underground
transformers will need to be replaced or added with 75kVA or larger to mitigate overloads.
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FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
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ENVIRONMENTAL REVIEW
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ATTACHMENTS: None
APPROVED BY:
3Environmental Impact Report https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12530