SR - AGR-6445 - PURCHASE AND SALE AGREEMENT OF SCE STREET LIGHTS1. SUBJECT
Purchase and Sale Agreement of Southern California Edison (SCE) owned street lights and No-
Fee Light Pole License Agreement for Wireless Attachments between the City of Orange (City)
and Southern California Edison on said street lights.
2. SUMMARY
City staff worked with SCE to analyze the potential purchase of SCE -owned street lights. SCE
provided the City a valuation for 4,359 SCE -owned street light poles for purchase. The total
valuation price is $1,458,876. Staff has performed financial analysis and recommends purchasing
the SCE -owned street lights. The recommended purchase would give the City more control of
energy costs and produce more energy savings by converting the lights to Light Emitting Diode
(LED).
3. RECOMMENDED ACTION
1) Approve the Purchase and Sale Agreement and No -Fee Light Pole License Agreement with
SCE.
2) Authorize the City Manager to execute the SCE incentive application, On Bill Financing
(OBF) application, OBF agreement, and other documents related to the application process
with SCE for retrofitting these street lights to LED.
4. FISCAL IMPACT
The cost to purchase LS -1 street lights is $1,458,876. Funding will be identified in the coming
FYI CIP budget but will likely be the General Fund Capital Fund. The proposed LED Retrofit
Project for the purchased street lights is estimated to be $1,480,114 with about $365,514 coming
from an SCE rebate, the remaining balance, approximately $1,114,600, will be financed by SCE's
OBF program.
5. STRATEGIC PLAN GOAL(S)
2d. Be fiscally healthy community — Effectively manage and develop City assets.
3e. Enhance and promote quality of life in the community — Develop and strengthen collaborative
partnerships to enhance and promote quality of life programs, projects and services.
4b. Provide outstanding public service — Provide facilities and services to meet customer
expectations.
6. GENERAL PLAN IMPLEMENTATION
Natural Resources Element Goal 2.0 Protect air, water and energy resources from pollution and
overuse.
Policy 2.9 — Promote City operations as a model for energy efficiency and green building.
Natural Resources Element Goal 3.0 Prepare for and adapt to the effects of climate change and
promote practices that decrease the City's contribution to climate change.
7. DISCUSSION and BACKGROUND
In early 2014, SCE, working with the California Public Utilities Commission (CPUC) developed
a process for cities to purchase SCE owned street lights. Orange took the opportunity in June 2014
by paying $10,000 (standard fee) to SCE to complete its valuation of the street lights system within
the City.
On December 21, 2015, SCE provided the City a valuation of approximately $1.46 million for
4,359 SCE owned street light poles (about $335 /pole). SCE has 5,699 poles within the City of
Orange, but 1,340 poles are not part of the proposed purchase because they are either located on
transmission lines or have third party resources attached at this time. SCE also informed the City
that it had one year to determine if it wanted to purchase the light poles.
The City solicited several consultants to assist the City in determining the benefits and costs of
such an acquisition. Tanko Streetlighting Inc. was selected as the firm most qualified to assist the
City in this process. City Staff and Tanko worked diligently to analyze the benefit and cost of
acquiring the system. The primary advantage in acquiring the 4,359 SCE owned street light poles
is the lower rate for City owned and operated street lights (LS -2 rate structure versus LS -1 rate
structure). The difference in rate is about 53 %. By converting the street lights to LEDs, the City
will see further energy savings. Another advantage is the ownership of the street lights will afford
the City the opportunity to use the street light facilities as infrastructure for future data network
opportunities. The disadvantage is the City will assume responsibility for the maintenance and
replacement of the poles.
Below is a summary of acquisition and retrofit cost and energy savings analysis over the next 20
year program:
N
Acquisition and LED Retrofit Cost Estimate:
Acquisition of Assets (4,359 street light poles) - $1,458,876
LED Streetlight Retrofit - $1,480,114
20 year Estimated Energy + Pole Replacement & Maint. Cost - $8,373,972
Total Cost for 20 years -$11,312,962
Enerev Savine:
20 Year Energy Savings
$12,280,986
SCE Energy Rebate
$ 365,514
Total Savings for 20 years
$12,646,500
Net Savings (20 years)
$1,333,538
The age of the SCE street lights system ranges from the 1950's to the present. The majority of the
poles were constructed in the 1960's (43 %). In spite of the age of the system, our investigation
determined that the poles are still in good condition. Therefore, a large pole replacement program
is not necessary. A 0.5% pole annual replacement program was determined to be appropriate for
replacement and 10 knockdowns for the additional system and utilized within our analysis.
Ultimately, the City should save approximately $1.33 million dollars over a 20 -year period
inclusive the purchase, maintenance, and retrofit costs.
If the City chooses to proceed with the purchase, and retrofit, staff proposes to utilize SCE 0% on-
bill financing to cover the retrofit cost. Therefore, the upfront cost to purchase would be only $1.46
million, which will likely be funded by general fund (Capital Fund). As such, the LED net retrofit
cost of $1.11 million ($1.48 million — $0.37 million) OBF will be paid off in 3 years. During this
3 years, there is no net change to our SCE bill. After 3 years, a net cash flow of about $142,000 /yr
will be received through energy savings for next 20 years.
SCE issued an update last year to all Cities that effective August 15 2015 any city that has not
submitted the $10,000 and appropriate paperwork will lose the option to acquire their street lights
from SCE. SCE is not planning to open the acquisition program again, so if Orange does not want
to proceed with the acquisition, there will likely not be another opportunity in the future for the
City to purchase SCE owned street lights. To date, the City of Lancaster has completed the
purchase and the City of Huntington Beach is pending CPUC approval. Over 60 other cities that
have submitted the $10,000 to SCE are in the process of doing financial evaluation/analyses.
Should the City Council approves the purchase agreement, staff from Public Works will work with
SCE to begin the purchase process. The sale of the SCE owned street lights will need to be
approved by CPUC which will take about 6 -9 months. After that, it will take another 6 months for
SCE to complete the transfer of the street lights. Following transfer, the LED retrofit and OBF will
take another 6 -9 months.
In conclusion, this program is an investment in our financial and operational future. The advantage
of city - ownership is we are able to convert the lights to LED, thereby significantly reducing our
energy costs. While the City will now be responsible to maintain the street lights, the anticipated
energy savings exceeds the maintenance and LED retrofit costs. Although the amount of net saving
is not large ($1.33 M over a 20 year period), staff believe the calculation is very conservative and
having control of the street lights could have other value down the road.
9]
8. ATTACHMENTS
• Purchase and Sale Agreement
• No -Fee Light Pole License Agreement for Wireless Attachments Between The City of
Orange and Southern California Edison
• SCE On -Bill Financing Application
• SCE Incentive Application
JD;ta;ly
NAPublic Works \ADMIN \LYoung \Council Items \COUNCIL\Jan - 2017 \1- 10 \LS -1 SCE Street Light Purchase Staff Report.docx
11
CITY COUNCIL MINUTES JANUARY 10, 2017
4. REPORTS FROM MAYOR SMITH
4.1 Appointment to the City of Orange Design Review Committee.
Mayor Smith announced that Megan Penn withdrew her application for the Design Review
Committee. No action was taken.
5. REPORTS FROM COUNCILMEMBERS
6. REPORTS FROM BOARDS, COMMITTEES, AND COMMISSIONS
7. ADMINISTRATIVE REPORTS
7.1 Purchase and Sale Agreement of Southern California Edison (SCE) owned street
lights, and No -Fee Light Pole License Agreement for Wireless Attachments between
the City of Orange (City) and Southern California Edison on said street lights.
(S4000.S.3.10)
City Engineer Frank Sun presented the staff report and answered Council's questions. A
map indicating the lights being acquired was distributed to Council.
MOTION — Nichols
SECOND — Whitaker
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
Moved to: Approve the Purchase and Sale Agreement, and No -Fee Light Pole License
Agreement with SCE; and authorize the City Manager to execute the SCE incentive
application, On Bill Financing (OBF) application, OBF agreement, and other documents
related to the application process with SCE for retrofitting these street lights to LED.
8. REPORTS FROM CITY MANAGER
City Manager Otto announced that the City's new website will be going live by the end of
January. Staff will provide Council with a presentation at a future meeting.
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