PURPOSE

Staff recommends Council authorize the General Manager of Burbank Water and Power (�BWP�) to execute an Agreement Amendment (�Amendment�) with Puretec, Inc. (�Puretec�) that will incorporate the additional processed water needs of Magnolia.  This Amendment will extend the term of the Agreement from 2007 to 2010. While this Amendment will increase the minimum monthly cost from $17,920 to $43,550 per month, because of the increased usage of Magnolia, the price per gallon of processed water will decrease by more than 3 % for BWP, with a further reduction of more than 19 % taking effect in July 2007.

BACKGROUND

BWP began to use reclaim water for its processed water needs for the local power plants in FY 2002-2003. BWP was able to do this by using a technology used by some semiconductor manufacturers that allows the use of reclaim water to generate very pure water.  This measure has not only saved potable water but has also reduced the total cost of processed water from $34.00 per 1000 gallons to $12.32 per 1000 gallons.

This technology was made possible by Puretec, Inc.  Puretec developed this application and has perfected it over time.  Puretec is a water service company that provides specialized water for industrial applications.  They provide the on-site water treatment facilities, monitor, operate and maintain the facilities for a monthly fee. BWP entered into a five-year Agreement with Puretec in the summer of 2002 for the service to provide this processed water using reclaim water.

This water processing system will be extended to supply the processed water needs of Magnolia.  In order to handle the 115,000 gallons a day increase in capacity required for Magnolia, an amendment is required to the Puretec Agreement.  In addition, because Magnolia will be operated throughout the year, the additional equipment must be designed with sufficient backup so that it may operate throughout the year without a shut down for maintenance.  Under this Amendment, Puretec will provide the additional water treatment facilities to produce this processed water.  This Amendment will extend the Puretec Service Agreement five years, to April 2010.

The amended Agreement commences April 1, 2005. Puretec will install their equipment at the BWP site sufficient to provide over 6 million gallons per month. The Amendment increases the minimum water provided from 2 million gallons per month to 5.0 million gallons per month.  There will be sufficient processed water to provide all of the processed water needs for the site.

Magnolia, unlike the other local power plants, will be operated on a daily basis.  This will better utilize the water treatment facilities of Puretec and thus allow Puretec to reduce its price for this processed water.  As a result, the average price of water at the minimum production level will be reduced from $8.96 per 1000 gallons to $8.71 per 1000 gallons.  Further, water usage above the minimum production level (2 million gallons in the original Agreement, and 5.0 millions gallons in the Amendment) will be reduced from $4.96 per 1000 gallons to $2.94 per 1000 gallons. 

Another price reduction on July 1, 2007 reduces the base water costs to $7.21 per 1000 gallons. Water in excess of 5.0 million gallons will continue to be priced at the low rate of $2.94 per 1000 gallons.

ANALYSIS

Using reclaim water to produce demineralized water for boiler and combustion turbine applications is viewed favorably by many agencies.  It was one of the first such applications in the country.  This system was awarded COMBINED CYCLE JOURNAL�S 2004 Powerplant Award for �projects demonstrating technologies and management practices that have, or are destined to become, important for producing electricity efficiently, profitably, reliably, and in an environmentally sound manner.�

The processed water quality is ten times greater purity than what was provided under prior contracts  using potable water. This higher water quality leads to reduction in maintenance and catalyst costs in combustion turbines.  This process could, of course, use potable water, but it performs so well with reclaim water that there is no reason to use potable water if reclaim is available.

Magnolia is expected to use 80 gallons per minute when using evaporative cooling.  Evaporative cooling would be the highest rate of water use and such use could be required for several days throughout the summer. Under the terms of the Amendment, Puretec would provide an additional 75 gallons per minute of processed water. While the additional 75 gallons per minute is less than the expected maximum 80 gallons per minute required by Magnolia, the additional 5 gallons per minute of capacity can be supplied from the current processing capability of 75 gallons per minute that BWP currently uses for Olive and Lake when they are operating at maximum.  Additionally,  processed water will be stored in tanks on site for high use periods and then filled during low use periods.

The system is monitored 24 hours a day from the Puretec Inc. main facility. All operational and maintenance costs are the responsibility of Puretec Inc. Puretec Inc. will install additional equipment required to serve Magnolia on the BWP site adjacent to the current Puretec equipment.  BWP provides the reclaim water, electrical power, and space for Puretec equipment.

The duty factor of the combined system will be greater and will require additional maintenance.  Puretec�s costs for consumables such as water treatment chemicals, demineralizer resin and MF/ RO elements are expected to increase.  In addition, Puretec will incorporate into the new equipment bypass lines and additional capability so that system components may be maintained without shut down.  However, because the water usage will be greater since Magnolia will operate throughout the year, the cost per gallon of processed water will be less than BWP�s current cost.

To further enhance reliability, additional instrumentation will be added by Puretec. This includes chlorine and phosphate water analyzers, increased instrumentation and integration into the BWP distributive control system. An additional high volume demin package with automatic switching is included to further increase reliability.

All the power plants, Magnolia, Olive and Lake will pay the same cost for this water. Total processed water costs include the price of processed water from Puretec; the price of reclaim water; labor; and RO blowdown to sewer and electricity. Reclaim water price is $1.73 per 1000 gallons. All labor is by Puretec Inc. RO blow-down to sewer is $0.88 per 1000 gallons. Electrical price is approximately $1.00 per 1000 gallons. Total costs for processed water is $12.32 per 1000 gallons for the first 5.0 million gallons in a month and $11.15 per 1000 gallons for usage above that level.

Total historical cost before Puretec Inc. was approximately $34.00 per 1000 gallons from potable water. Comprising this processed water cost of $34.00 per 1000 gallons were prices of $32.00 for processing, $2.04 for potable water and labor at $0.25. Electrical costs were not metered, but the electrical use under the former system was relatively low.

This Amendment allows BWP to expand its use of reclaim water and reduce its cost of processed water for its local power plants.  It is the lowest cost and best performing option available.

FISCAL IMPACT

This Amendment will reduce BWP�s cost for processed water.  The authority for Magnolia to purchase this water is included in the current Magnolia budget.  There is no adverse impact upon BWP costs in this Amendment.

RECOMMENDATION

Staff recommends Council authorize the General Manager of Burbank Water and Power to execute the Amendment Agreement with Puretec, Inc. to provide demineralized water for local generation, including Magnolia.

If the Council concurs, the appropriate action is a motion to adopt the resolution entitled �A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING A FIRST ADDENDUM TO THE WATER SERVICE AGREEMENT BETWEEN J. HARRIS INDUSTRIAL WATER TREATMENT, INC., DBA PURETEC INDUSTRIAL WATER AND THE CITY OF BURBANK WATER AND POWER FOR PROCESSING RECLAIMED WATER FOR POWER PRODUCTION PURPOSES.

RED:FCF:WAS:jw:tw

Purtec Amendment � Council 12-07-04

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