Holiday City Village Council Hears Presentation On Substation Project

HCVC - TK 002By: Timothy Kays
THE VILLAGE REPORTER

Members of the Holiday City Village Council convened in regular session on the evening of June 18 at the Village Hall.

Leading off the meeting was the subject of electricity distribution, a hot topic since the power failure of a few weeks back that had Menards and a considerable amount of the community in either brownout or blackout conditions. Factor in the projected growth of area businesses, and the need for a better distribution system has been one of the dominant topics of discussion for Council. On this evening, they took some of the early steps required in order to prevent the failures from the recent past from recurring, as well as accommodate expansion, by building a village-owned, 20 megawatt (MW) electrical substation.

Don Gruenemeyer and Aaron Teders of the engineering firm of Sawvel and Associates, Inc. of Findlay were on hand to present a lengthy and highly detailed PowerPoint presentation that went through the situation at hand, and carried it through into the not too distant future to show changing needs. Those needs were then matched to the proposed project with a four-part plan that looks ahead to the year 2025.

In the first part of the plan, Mr. Gruenemeyer explained that the projected peak demand of 5.2 megawatts for 2015 is dangerously close to the current maximum capacity of current suppliers Toledo Edison (3 MW) and Montpelier (4 MW). “Why does that matter,” Mr. Gruenemeyer posed. “It matters because if you start adding more customers, and exceed those two numbers, you start having physical problems. With Menards, which is supplied by the Toledo Edison substation, you are already approaching that 3 MW capacity.”

With proposed expansions of Menards and 20/20 Custom Molded Plastics looming on the horizon, the current 7 MW maximum capacity would make the need for more energy a definitive need instead of an option. Holiday City is quickly becoming an industrial and distribution hub, but without the electricity resources for further growth, a precious commodity in today’s highly competitive business environment, that business expansion would be stunted, costing the village a huge loss in increased employment numbers, and tarnishing its hard-earned stellar reputation in business development.

The second part of the plan looked at the financial feasibility of the construction of an electrical distribution substation. The approach called for a review of current revenues and revenue requirements, the estimation of power supply costs, and an evaluation of funding plans for the construction of the substation. Guidelines suggested included an annual margin greater than zero, and a debt service coverage ratio of 1.1 times the debt service expense, a financial test required to secure funding for the project. Another suggestion is to have a fund balance of approximately $600,000, which includes eight months of non-power supply operating costs, two years of capital improvement costs, and a substantial emergency fund. With $1.2 million set aside for the project, and no current debt load, the financial guidelines, as set forth, were all considered met.

The projected operating results out to the year 2025 were evaluated, beginning with the projected sales. It is here that projected growth and demand became apparent as the projection for 2017 to 2025 showed sales of 35,255,000 kilowatt hours, a 17.393 percent increase over the 29,123,000 kilowatt hour forecast for 2015 and 2016. Contrast these figures to the 24,000,000 kilowatt hour usage figure from 2013, and the growth of the village was made clear through the increased demand for power.

Factoring in projected power supply costs, capital improvements, and a three percent per annum increase in operational, maintenance, administrative and general expenses, the financing needs began to become clearer, using recommended issuance of 30 year/5 percent bonds to cover the project.

The cost estimations for the actual construction of the substation were based upon 2013 figures provided by the GPD Group. The $2,158,500 price tag included the following items…

(2) 69 Kilovolt circuit breakers – $40,000 each
(2) 10 MW transformers – $400,000 each
(2) 69 Kilovolt circuit switchers – $60,000 each
(2) 15 Kilovolt outdoor breakers – $25,000 each
Relay and control panel – $120,000
(6) Voltage regulators – $10,000 each
Structure – $120,000
Construction costs – $900,000

Subtotal – $2,190,000

(15 percent) Contingency and engineering costs – $328,500

Estimated total – $2,518,500

Those figures, adjusted by a two percent per annum escalation rate to accommodate estimated 2016 inflation, brought the total to $2,672,652. The addition of $212,242 for feeder construction, $150,000 for land acquisition, and $100,000 for transmission interconnections, brought the total estimated cost to $3,134,894. Mr. Gruenemeyer noted that the costs of the transformers could be substantially reduced by using refurbished units. He explained that the rebuilt units would be just as good as new, and carry the same warranties as new.

The third part of the plan presented by Mr. Gruenemeyer dealt with financial options of which three were presented. The second scenario, where the project was 100 percent financed through bonds, was the only one of the three that did not show an operational loss at some point between 2020 and 2025. The third scenario, which calls for the village to contribute $700,000 to the funding, provides a $47,000 savings in operational costs over the first option, but the 2025 margins dip below zero, and like the first option, calls for rate increases beginning in 2020.

The final part of the presentation dealt with the timeline for the project. According to Mr. Gruenemeyer, from the first phase of design and land acquisition, to the final phase of startup, a safe estimation of time would be 18 months.

Moving into the business portion of the agenda, Council addressed Resolution R-2015-6 referencing Then and Now Purchase Order 28-2015. Under suspended rules of reading, Council approved that measure, as well as Resolution R-2015-7, approving the 1.6 mill rate from the County Budget Commission.

Under suspended rules of reading, Council approved Resolution R-2015-8, authorizing the purchase of two lots and buildings totaling around 9.5 acres from ADESA Ohio, LLC for the sum of $300,000. The properties, located on Selwyn Drive, are those of the old auto auction, with the largest of the two targeted as the future site of the new substation. Negotiations with ADESA referencing the properties are ongoing.

Items from the report of Village Administrator Gary Baker included a report of a quote of $3,002 received from Stewart Rosendaul of S R Telephone Service for a new phone system for the village offices. Mr. Baker also said that he has met with 20/20 referencing their expansion plans, and the need for improved drainage. Mr. Baker contacted Dennis Miller from the Maumee Valley Planning Organization, who have agreed to cover half of the approximately $31,000 costs for two new drainage pipes.

Council was divided over approving the issue, with the vote favoring by a count of three yes, two abstaining and one no.

Finally, Mr. Baker reported that Menards has invoiced the village $91,000 for lost production during the recent power failure. It was determined that as the village is not the owner of the substation feeding Menards, nor the provider of the current passing through the same, that no liability can be attached to the village. It was also noted that Menards has emergency generators for backup in the event of a situation such as the aforementioned event.

Timothy Kays can be reached at
tim@thevillagereporter.com

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