TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Raul Saenz, Interim Public Works Director
Sanford Taylor, Information Technology Director
Sona Coffee, Environmental Programs Manager
SUBJECT:Title
Review Southern California Edison (SCE) Streetlight Valuation and Acquisition Process, and Discuss Option to Retrofit SCE-Owned Street Lights (Interim Public Works Director Saenz and Information Technology Director Taylor).
DISCUSS AND PROVIDE DIRECTION
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Recommended Action
RECOMMENDATION:
Staff recommends that City Council discuss and provide direction on the Southern California Edison (SCE) Streetlight Valuation and Acquisition Process, and discuss the option to retrofit the remaining SCE-Owned Street Lights.
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EXECUTIVE SUMMARY:
The City of Manhattan Beach has a very unique opportunity to purchase eligible streetlights from SCE. Obtaining ownership of these streetlights allows the City to convert the lamps to energy efficient LEDs, and explore communications and revenue generation possibilities. SCE will continue to maintain ownership over distribution streetlights that are ineligible for sale, but there is a program option to retrofit these lights as well.
To work through the streetlight purchase and retrofit process with SCE, staff recommends exploring three options:
1. Purchase eligible SCE-owned streetlights (approximately 800-900);
2. Retrofit eligible streetlights to LED technology; and
3. Participate in SCE’s Option-E financing to retrofit non-sellable SCE-owned streetlights to LEDs (approximately 900).
The report touches briefly on the revenue generation possibilities associated with purchasing the eligible streetlights, such as Wi-Fi, cameras, mobile service, traffic data, etc. These “smart pole” features are estimated to bring in an annual revenue of over $330,000.
The City has also made commitments to reduce its carbon footprint. Implementing these streetlight program options will result in an estimated annual carbon offset of 152 metric tons, which assists the City in meeting its greenhouse gas (GHG) emissions reduction goals.
FISCAL IMPLICATIONS:
There are three financial considerations associated with this report:
1. If the valuation and acquisition process is approved, City Council will be requested to make an appropriation from the Street Lighting and Landscape Fund to purchase the streetlights. As Council is aware, a General Fund transfer supplements the cost of the Fund’s current operations. For this capital purchase, a transfer from the Capital Improvements Fund is recommended. This amount could fall between an estimated $711,911 and $813,738, and will be finalized upon completion of the SCE valuation. After considering the change in utility rate, and maintenance costs, an expected cost savings of $55,000 per year is associated with this measure.
2. The LED retrofit has an approximate upfront cost of $381,189 (after available rebates), and is estimated to save approximately $42,000 per year due to reduced maintenance and electricity costs. Again, if City Council approves the LED retrofit, an appropriation from the Street Lighting and Landscape Fund and corresponding transfer from the Capital Improvement Fund is recommended.
3. There is a 20-year interest free on-bill financing program (Option E) offered by SCE to upgrade the streetlights that remain under SCE ownership, with no upfront cost to the City. SCE estimates that the City will pay $326.40 per streetlight each year for the LED retrofit. The LED conversion can be paid for upfront in one lump sum, with the estimated costs ranging from $400-$900 per streetlight. This cost would be included in the City’s monthly bills and therefore impact the General Fund transfer.
BACKGROUND:
There are nearly 1,900 streetlights in the City of Manhattan Beach, most of which utilize high pressure sodium (HPS) and are not energy efficient or easy to maintain. The City has an opportunity to purchase approximately 900 streetlights currently owned by Southern California Edison (SCE), and can retrofit these streetlights to energy efficient light-emitting diode (LED) technology in order to reduce energy consumption and maintenance needs. The City also has an opportunity to participate in the “Option-E” program, in which SCE will place an additional fee on the City’s utility bill for a 20-year period in order to retrofit the streetlights that remain under SCE ownership to energy efficient LEDs.
Sustainable Energy Options: Streetlight Purchase and Energy Audit
On June 23, 2015, City Council held a Study Session on the “Sustainable Energy Options for the City.” The potential to purchase eligible streetlights from SCE in order to retrofit them to LED technology and reduce electricity consumption and costs was discussed. The City Council approved exploration of this program, and submitted $10,000 to SCE to conduct the valuation of the City’s streetlights, and determine the cost of purchasing the eligible streetlights. The SCE Streetlight System Acquisition and Valuation Summary (Attachment 1) was received on June 7, 2016, which starts the 1-year timeframe to complete the acquisition process. The valuation estimates 811 streetlights eligible for purchase, at an estimated cost of $711,911.
Another option presented at the Study Session was a CIP project to conduct an energy audit of city facilities, including the City’s streetlights. The City engaged a consultant, Newcomb Anderson McCormick (NAM), to complete the energy audit and review the City’s streetlight valuation. On August 17, 2016 the consultant provided a review of the SCE valuation, retrofit of all streetlights to LEDs, enrollment in the Option-E program, and the potential to explore revenue generation possibilities to augment the purchase of the streetlights. The audit found that 927 streetlight may be eligible for purchase, estimating the purchase price to be $813,738. More details on NAM’s review can be found in Attachment 2 (NAM Street Lighting Energy Audit).
The difference in the number of streetlights eligible for sale will be reconciled if the City moves forward with the Sales Terms agreement with SCE.
Greenhouse Gas Reduction Goals
Converting the streetlights to LEDs aligns with the City’s Strategic Plan goal of Environmental Stewardship, and its commitment to reduce its greenhouse gas emissions. The City has a goal of reducing emissions 15% below 2005 levels by 2020, and is on track to meet this goal through existing energy efficiency measures, green building codes, and communitywide conservation measures. However, the State’s AB 32 Scoping Plan has also set a goal to reduce emissions 49% below 2005 levels by 2035, which would put the City on a path toward the State’s long-term goal to reduce emissions 80% below 1990 levels by 2050. The energy savings from converting the streetlights to LEDs is a measurable step in meeting these goals, and if the recommended options are implemented, would result in the equivalent CO2 savings from removing 32 cars off the roads annually.
Benefits of LEDs
The benefits of LEDs include improved visibility, energy savings, and longer life spans. LEDs have a life span of up to 50,000 hours (compared to 24,000 hours for HPS), resulting in maintenance savings from a reduced frequency of replacing burnt-out lamps. LED products are also eligible for SCE incentives, which can reduce the cost of the replacement project by 30%.
There has been some media coverage on the potentially adverse health effects from LED street lighting, including discomfort and glare, damage to the retina, and impacts on human circadian rhythmicity. In response, the American Medical Association and UC Davis’ California Lighting Technology Center conducted studies that conclude LEDs with cooler and dimmer features are preferable in residential areas, and that measures such as shielding will minimize glare and other impacts to human and environmental health. There are several resources available to the City to select the appropriate lighting choices for the community.
DISCUSSION:
The City has been involved in energy efficiency initiatives for the past two decades, and has made several local and global commitments towards reducing energy consumption and greenhouse gas emissions. The purchase and energy efficient retrofit of utility-owned streetlights provides another avenue for the City of Manhattan Beach to take a leadership role in reducing its carbon footprint, and meeting its climate protection goals. The streetlight purchase option also creates the opportunity for the City to explore revenue generation possibilities which could result in bringing much needed services to the community while also improving the streetlight infrastructure.
City Council is not being asked to allocate funds at this time, but is being asked to approve this approach in order to begin the streetlight purchase and retrofit process. If City Council is interested in participating in these programs, staff will work with SCE and process the appropriate agreements. A summary of expected costs is included above, and described in more detail below.
To work through the streetlight purchase and retrofit process with SCE, staff recommends exploring three options:
1. Purchase Eligible SCE-Owned Streetlights
In order to purchase the streetlights from Southern California Edison (SCE), the City requested a valuation of the streetlights eligible for purchase in July 2015. In June 2016, SCE provided an initial valuation amount of $711,911 to purchase 811 streetlights in the City. Upon receipt of this valuation, City staff and NAM staff reviewed the data on the current streetlights in the City, and it appears 927 streetlights may be eligible for purchase (instead of 811), which increases the purchase price to approximately $813,738. The map in Attachment 3 shows an estimation of the streetlights currently owned by the City, those that will remain under SCE ownership, and those that are eligible for purchase.
If City Council approves participation in this program, SCE will prepare a Sales Terms agreement for the City Manager’s authorization, and SCE will begin the acquisition process with the California Public Utilities Commission (CPUC). SCE will then provide a final valuation, accounting for the total number of streetlights eligible for purchase, and verifying the number of distribution poles and other streetlights that might remain under SCE ownership. The City can also choose to hire its own firm to verify this valuation. Once the valuation receives CPUC approval, the City will enter into the transition phase with SCE. SCE will invoice the City at the end of the transition phase, which is expected to take about four months.
At this stage, staff wants City Council to be aware that the final cost could fall between $711,911 and $813,738 in order to complete the streetlight purchase from SCE. Once the purchase is complete, the streetlights would switch from the higher “LS-1” rate to the “LS-2” rate which provides the City with an immediate cost savings of $87,558 each year due to the removal of SCE’s service and facilities charges for the streetlights. This savings amount will be reduced by the added maintenance costs ($32,482) the City will take on once the ownership of the streetlights is transferred from SCE. There will not be a change in the energy consumption at this stage, but an expected cost savings of $55,000 per year is associated with this ownership transfer and change in utility rate, resulting in an approximate 15 year payback on the investment.
City Council Direction Needed:
Staff seeks City Council approval to participate in the streetlight acquisition process with SCE. If approved, staff will work with SCE to prepare the necessary information for submittal to the CPUC to purchase the eligible streetlights. Staff will return to provide an update on the process, and ask for an appropriation of funds for the purchase of the streetlights if the valuation is approved.
2. Retrofit Eligible Streetlights to LED Technology
In addition to seeing a cost savings by converting the streetlights to a lower rate once they are purchased by the City, the overall goal is to retrofit these streetlights to LED technology in order to reduce energy consumption. The streetlight data shows that a potential 927 streetlights in the City may be eligible for purchase. This number may decrease once the SCE valuation is completed.
Once these streetlights are purchased, the City can then begin its own process to retrofit the lamps to LEDs. The LED retrofit would cost an approximate $380,000 upfront (after available rebates), and is estimated to save approximately $42,000 per year in reduced maintenance and electricity costs. In addition, retrofitting the eligible streetlights to LEDs will result in an annual CO2 emissions savings of 92 metric tons, assisting the City with meeting it carbon reduction goals. This measure has an estimated 11-year payback.
City Council Direction Needed:
Following the purchase of the streetlights, staff seeks City Council direction to begin the RFP process to retrofit the newly purchased streetlights to LED technology to reduce energy consumption and electricity-related costs.
3. Participate in SCE’s Option-E Financing to Retrofit Non-Sellable SCE-Owned Streetlights to LEDs
Lastly, City Council has an option to request SCE to retrofit the streetlights that remain under ownership of the utility to LEDs in order to reduce energy consumption, thereby reducing the electricity costs paid by the City. Retrofit of these remaining streetlights to LEDs will result in an estimated 60 metric ton reduction of CO2 emissions annually.
Known as “Option-E”, there is no up-front cost to the City, but an energy efficiency premium will be built into the tariff so the City pays for the initial cost of the fixtures over a 20-year period. After the 20-year, interest-free, repayment, the City receives all of the related cost-savings going forward, approximately $30,000 per year for the streetlights that remain under SCE ownership.
With the 20-year replacement option, SCE estimates that the City will pay $326.40 per lamp over the entire period, interest free. This rate is slightly lower than the market cost of retrofitting the lights to LEDs, and is also eligible for energy efficiency rebates.
If the City Council does not wish to participate in the 20-year payback option, the LED conversion can also be paid for upfront in one lump sum, but the cost to retrofit each streetlight is higher. A consultant will need to be engaged by SCE to go through that process, and according to SCE, the estimated costs could range from $400-$900 per streetlight depending on the wattage of the retrofit. This fee is higher than the market cost of retrofitting the lights to LEDs.
SCE will limit the number of Option E light replacement projects it undertakes during the 2016-2017 timeframe due to capital constraints. Local government customers that are interested in participating in Option E will be placed into a queue after signing the agreement for service. Some additional information on the Option E program is available in Attachment 1.
City Council Direction Needed:
Staff seeks City Council direction to participate in SCE’s Option-E program to retrofit the streetlights that are not eligible for purchase. If approved, staff will return with the program details and contract to start the SCE retrofit process under the Option-E program.
Additional Area of Consideration: Revenue Generation Potential
While not the focus of this staff report, there are several options for communications technology upgrades and revenue generation sources that become available once the streetlight infrastructure is owned by the City.
The City may be exploring the feasibility of a wireless mesh network or “smart pole” technologies as part of an upcoming Fiber Optics Master Plan. The smart poles are capable of improving communications and other features, such as cameras, mobile service (centralizing Micro Cell Technology used to enhance Cell coverage by the carriers), Wi-Fi, traffic data, lighting controls, utility metering, temperature and air quality sensors, gunshot detection, and power consumption. As an example, the City of Los Angeles generates approximately $1,200 for each smart pole feature installed on its streetlights.
The City’s energy consultant, NAM, identified an annual revenue generation potential of $333,720 by retrofitting an estimated 30% of the streetlights to smart poles. This percentage was estimated as the potential number of streetlights needed for a wireless mesh network in the city, but that number is subject to change based on an actual assessment of the City’s connectivity needs. The map in Attachment 3 provides a visual representation of where the streetlights eligible for purchase are located throughout the City, illustrating the potential infrastructure that could be utilized for the smart pole network.
The revenue generation potential from these smart poles can significantly reduce the overall cost of the streetlight acquisition and LED retrofit project, or be utilized to move forward with the smart pole installation, while serving the City’s needs and improving communications technology to the community. Please see section 4.3 of the attached Street Lighting Energy Audit report (Attachment 2) for more information on the revenue generation potential of purchasing the streetlights.
In addition, the City is currently reviewing 16 applications for new cellular facilities proposed to be located on utility poles or street lights within the coastal zone area. Staff will return to the City Council at a future date to discuss the potential aesthetic impacts of these proposed facilities.
POLICY ALTERNATIVES:
ALTERNATIVE #1:
Forego Participation in the SCE Streetlight Purchase Program
PROS:
The City would avoid the upfront cost of approximately $711,911 to $813,738 in
order to complete the streetlight purchase from SCE.
CONS:
The City would not obtain ownership of the eligible streetlights, and would not see the benefits of a reduced utility rate, potential revenue generation or any energy savings and carbon reductions from future conversion of the streetlights to LED technology.
ALTERNATIVE #2:
Participate in SCE’s Option-E Program on a Citywide Scale
PROS:
The City would avoid the upfront cost required to complete the streetlight purchase
from SCE. The City could instead work with SCE to retrofit all the streetlights, and
pay for the retrofit through the on-bill financing program over a 20-year period. The
City could opt to pay for the retrofit upfront, but will be paying a higher cost per
streetlight. The City would benefit from reduced energy consumption and carbon
reductions.
CONS:
The City would not obtain ownership of the eligible streetlights, and would not see
the benefits of potential revenue generation. The lights would remain under the
higher LS-1 utility rate, with SCE maintaining ownership and maintenance of the
lights.
While the City could choose to pay the premium to participate in the Option-E LED retrofit on a citywide scale (either upfront, or over a 20-year period), staff recommends following the three options outlined in the report above. These options maximize the benefits associated with the ownership and retrofit of the eligible streetlights. Staff does recommend that the City participate in the Option-E program to retrofit the streetlights remaining under SCE ownership to LED technology, so the City will benefit from reduced energy consumption and reduced utility billing.
PUBLIC OUTREACH/INTEREST:
City Council held a study session on June 23, 2015 to discuss energy efficient options with the community. Following the study session, the City Council approved participation in the SCE streetlight valuation process on July 7, 2015. The City Council also awarded a professional service contract to NAM to conduct an energy audit of City facilities on May 3, 2016.
ENVIRONMENTAL REVIEW
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
Attachment/Attachments:
1. Manhattan Beach SCE Streetlight System Acquisition and Valuation Summary
2. NAM Street Lighting Energy Audit
3. Map of SCE Streetlights Eligible for Purchase
4. PowerPoint Presentation