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HomeMy WebLinkAboutCity of Noorvik Heat Recovery Project Sales Agreement - Apr 2016 - REF Grant 7060941RECOVERED HEAT SALES AGREEMENT BETWEEN Alaska Rural Utility Collaborative and Alaska Village Electric Cooperative, Inc. WHEREAS the Provider, Alaska Village Electric Cooperative, Inc. (AVEC), a non- profit electric cooperative membership corporation whose address is 4831 Eagle Street, Anchorage, Alaska 99503, owns, operates, and maintains an electric power plant in Noorvik, Alaska; and WHEREAS the Purchaser, the Alaska Rural Utility Collaborative, whose address is 3600 Ambassador Drive, Suite 301, Anchorage, Alaska 99508, operates and maintains the Water Treatment Plant in Noorvik, Alaska; and WHEREAS, heat generated by the Provider's power plant during production of electric power can be recovered and used to reduce Purchaser's heating fuel consumption and boiler exhaust emissions at Purchaser's Heated Facilities; and WHEREAS, the Provider and the Purchaser wish to enter into an agreement for the sale and purchase of Recovered Heat; and WHEREAS, the Purchaser understands and acknowledges that Recovered Heat is Supplemental Heat which is intended solely to reduce Purchaser's heating fuel consumption and it is the responsibility of the Purchaser to operate and maintain a Primary Heat source at the Purchaser's facilities in a fully functioning manner at all times; Now, therefore, the parties agree as follows Section 1. Definitions As used in this Agreement, the following terms shall have the following meanings: a) "Agreement" shall mean this Heat Sales Agreement b) "BTU" shall mean British thermal unit, a standard unit for measurement of thermal energy (heat). c) "Delivery Point" shall mean the point in the System where ownership and operations and maintenance responsibilities transfers from Provider to Purchaser as described herein. The Provider shall own, operate, and maintain all equipment up to the connection to the Purchaser's heat Heat Sales Agreement — Alaska Rural Utility Collaborative Page 1 exchanger located in the Provider's power plant. The Purchaser shall own, operate, and maintain all equipment up to and beyond the Provider's connection point on the Purchaser's heat exchanger located in the Provider's power plant. d) "Effective Date" shall mean the date that this Agreement is executed by both parties. e) "Interruptible Basis" shall mean that the Recovered Heat will be provided only when available and may be reduced or stopped at the option of the Provider with little or no notice. f) "Operational Date" shall mean the date on which Recovered Heat is first delivered. g) "Primary Heat" shall mean the normal heating system (boiler, furnace, pumps, piping, appurtenances, etc.) and associated fuel supply for the Purchaser's Heated Facilities which is capable of meeting the full heating demand of the facilities. h) "Provider" shall mean Alaska Village Electric Cooperative, Inc. i) "Provider's System" shall mean that portion of the System in Provider's Power Plant up to and including the Delivery Point. j) "Purchaser" shall mean the Alaska Rural Utility Collaborative. k) "Purchaser's Heated Facilities" shall mean all Purchaser facilities that receive Recovered Heat. 1) "Purchaser's System" shall mean the System from the Delivery Point to the Purchaser Heating System. m) "Recovered Heat" shall mean heat recovered from Provider's power plant and provided to the Purchaser. n) "Supplemental Heat" shall mean an interruptible heat source that may not be capable of meeting the full heating demand of the facilities and is only intended to reduce heating fuel consumption when available. o) "System" shall mean the equipment and piping put into place to recover, transport, and deliver heat from the Provider's power plant to the Purchaser's Heated Facilities. Heat Sales Agreement — Alaska Rural Utility Collaborative Page 2 Section 2. Term a) General. This Agreement shall remain in effect for five 5 years from the Effective Date. The Agreement shall be automatically renewed for an additional five 5 years if the Purchaser continues to accept Recovered Heat after the initial five years. Subsequently, this Agreement will continue to be renewed for additional five 5 year terms unless either party provides written notice at least ninety (90) days prior to the expiration of the current five 5 year term of its intention to end the Agreement. b) Early Termination. Notwithstanding the foregoing, this Agreement may be terminated early due to the following reasons: i) The Operational Date has not occurred within twenty-four (24) months of the Effective Date. ii) Material failure of either party in performing or fulfilling its obligations under this Agreement at which time this Agreement may be terminated at the option of the other party. iii) The contract between the City of Noorvik and ARUC is terminated. c) Relocation of Power Plant. If Provider's power plant is relocated, the cost of making any necessary modifications to the Provider's System to continue to provide Recovered Heat to Purchaser shall be the sole responsibility of Provider. If, in Provider's judgment, the anticipated cost of such modifications is not expected to be recovered within a reasonable time period, Provider retains the right to terminate this Agreement. d) Abandonment of Purchaser's Heated Facilities. If all of the Purchaser Heated Facilities are abandoned and no longer heated, then this Agreement shall terminate. The Purchaser will be required to remove the Purchaser's System from the Provider's property and facilities within one year, unless Provider agrees that some or all of the Purchaser's System can remain. Section 3. Construction of System a) The Purchaser, or the Purchaser's authorized agent, will be authorized upon reasonable notice to enter upon, over and under the Provider's premises, including Provider's Facilities, to construct, reconstruct, maintain, inspect, repair, operate, improve, and update the Recovered Heat System; provided, however, that Purchaser must coordinate such entry onto Provider's premises with Provider to ensure the safety and integrity of Provider's power plant. Heat Sales Agreement — Alaska Rural Utility Collaborative Page 3 b) The System may consist of piping, heat exchangers, pumps, valves and appurtenances necessary to recover, transport, and deliver heat from the Provider's power plant to the Purchaser's Heated Facilities. c) The construction schedule of the new System will be agreed upon after review and approval of project drawings by Provider and Purchaser. All construction within the Provider's facility shall be coordinated with the Provider. Section 4. Operations a) Supply of Recovered Heat. Beginning on the Operational Date Provider will supply Recovered Heat to Purchaser under the terms and conditions of this Agreement. It is agreed to and understood by both parties that Recovered Heat will be supplied to Purchaser's Heated Facilities on an Interruptible Basis and that Recovered Heat is Supplemental Heat. b) Purchaser Facilities Primary Heat. Purchaser shall be solely responsible at all times to operate and maintain in a fully functioning manner the Purchaser facilities' Primary Heat System and to maintain an adequate fuel supply to meet the full heating demand of Purchaser's Heated Facilities. c) Pumping Energy. The main circulating pump shall be located at the Purchaser's Facility and the Purchaser shall furnish the electric power to operate the main pump at no cost to the Provider. Secondary circulating pump(s), installed in the Purchaser's Heated Facilities, are part of the Purchaser's System and the Purchaser shall furnish the electric power to operate the secondary pump(s) at no cost to the Provider. Section 5. System Maintenance a) Responsibility. Purchaser shall be responsible for maintaining that portion of the System on the Purchaser's side of the Delivery Point and the Provider shall be responsible for maintaining that portion of the System on the Provider's side of the Delivery Point_ All maintenance of the system inside Provider's facility shall be coordinated with the Provider to ensure the safety and integrity of Provider's power plant. b) Failure to Maintain. If the Purchaser fails to properly maintain the System in a fully functioning and environmentally safe manner, the Provider shall have the right to take corrective actions and recover its costs from the Purchaser. Except in the case where a failure to maintain may imminently threaten life or property, the Provider shall give reasonable notice in writing to the Purchaser of its intention to take Heat Sales Agreement —Alaska Rural Utility Collaborative Page 4 corrective action under this paragraph, including an estimate of recoverable costs. Section 6. Payment Obligations a) Commencement. Purchaser's payment obligation described in this section to Provider shall start on the first day of the second month after the Operational Date and remain in effect through the term of this Agreement. b) Billinq. No separate invoice will be issued by Provider. Billing will be provided on the Purchaser's monthly electric bill. Purchaser shall pay such bill each month no later than the 251" of each month. c) Payment Past Due. All amounts not paid by the date due shall accrue interest at the rate of one percent (1.0%) per month. In addition, in the event Purchaser fails to pay any amount due to Provider, Provider reserves the right to discontinue the supply of Recovered Heat. Provider will notify Purchaser in writing if the supply of Recovered Heat is being discontinued for nonpayment and, if within thirty (30) days after receipt of notification, Purchaser fails to pay the balance due, supply of Recovered Heat may be discontinued without further notice. Amount. The amount owed for the month shall be computed using the following formula. The heat recovery study provided by Alaska Native Tribal Health Consortium (ANTHC) dated September 20, 2012, reports that 21,300 gallons of heating fuel was used by the Water Treatment Plant. It is anticipated that the Provider will be able to supply 18,600 gallons of equivalent heat to the Purchaser per year. ii. Since Purchaser will be providing all maintenance and will be paying for all operating costs, Provider will sell the Recovered Heat to the Purchaser at a rate of 30% of the Provider's average delivered cost of fuel for the prior year. iii. In an attempt to simplify the payment process, Provider and Purchaser agree to divide the payment for the equivalent of 18,600 gallons of Recovered Heat in equal installments over a twelve (12) month period. iv. The payment due each month shall be determined by the following formula: Payment = 30% of the Provider's average delivered fuel cost for the prior year. Heat Sales Agreement — Alaska Rural Utility collaborative Page 5 Examples: $3.40 (2015 average per gallon delivered fuel cost) X 0.30 (30%) = $1.02 per gallon. $1.02 per gallon X 18,600 = $18,972 annual amount. $18,972 1 12 = $1581.00 monthly payment for the Water Treatment Plant. v. If the Recovered Heat is insufficient and requires the use of the boilers in the Water Treatment Plant and/or store, the Provider and Purchaser will work together to resolve the issue and adjust the billing to reflect the actual Recovered Heat supplied. vi. If by mutual agreement, recordings from a BTU meter or by data from a Heat Recovery monitoring system finds that the estimated amount of Recovered Heat to be to be more than 20% inaccurate, the amount can be adjusted once annually by the Provider. The Provider shall issue written notice to the Purchaser 30 days before the adjustment. The water treatment plant boiler has an overall efficiency of 75% and delivers 100,000 BTU of heat for every gallon of #1 diesel fuel consumed. This value will be used for calculating any fuel offset. Section 7. Right to Sell Additional Recovered Heat a) General. Provider retains the right to sell additional Recovered Heat to other entities. b) No Significant Effect. If the sale of additional Recovered Heat will not significantly reduce the amount of Recovered Heat available under this Agreement (less than 20% reduction), the Provider shall issue written notice to the Purchaser of the intent to sell additional Recovered Heat prior to commencing delivery of additional Recovered Heat. c) Significant Effect. If the sale of additional Recovered Heat will significantly reduce the amount of Recovered Heat available under this Agreement (greater than 20% reduction), the Provider shall issue written notice to the Purchaser of the intent to sell additional Recovered Heat a minimum of 6 months prior to commencing delivery of additional Recovered Heat. Section 8. Insurance and Indemnification a) Indemnification. Each party shall indemnify, defend, and hold the other party harmless from any liability, action, claim, suit, loss, property damage, or personal injury of any kind resulting from or arising out of any act of commission or omission by the party, its agents, employees, or customers, or arising from or connected with the exercise of the rights and privileges granted by this Agreement, except as provided in subsection c below. Heal Sales Agreement — Alaska Rural Utility collaborative Page 6 b) Insurance. Each party shall be responsible for obtaining its own insurance for its facilities and indemnity obligations. c) No Liability for Certain Damages. Notwithstanding any other provision in this Agreement: (i) Provider will not be liable for any damage or loss to persons or property arising out of the operation of the System unless the damage or loss was caused by Provider's sole and exclusive negligence, and (ii) Provider will not be liable for any damage or loss caused by failure to provide Recovered Heat to Purchaser. Section 9. Miscellaneous a) Resolution of Disputes. The parties agree to arbitrate all disputes arising out of or relating to this Agreement. If the parties cannot agree on an arbitrator, the Presiding Judge of the Third Judicial District, State of Alaska, shall appoint an arbitrator. Venue for the arbitration will be in Anchorage, Alaska. The parties expressly waive any claim to sovereign immunity and agree that the decision of the arbitrator shall be binding on them and non -appealable. b) Waiver. The failure of either party to enforce or insist upon compliance with any terms or conditions in this Agreement shall not constitute a general waiver or relinquishment of any such terms or conditions, but 'the same shall be and remain at all times in full force and effect. c) Revenues: The Provider will apply the revenues from the System as follows: i. to fund a reserve for periodic maintenance and renewal of the Provider's System; then ii. to refund any matching funds or contributions advanced to them from the Provider's general fund for the Recovered Heat System construction; and then iii. to refund improvements made by the Provider to improve the availability of Recovered Heat; and then iv. to offset fuel costs for the service area served by the local Provider's generation plant, thereby reducing the fuel charge per kilowatt-hour for all electricity supplied in that service area. Heat Sales Agreement — Alaska Rural Utility Collaborative Page 7 IN WITNESS WHEREOF, the parties have caused this document to be executed on the dates indicated below. Alaska Rural Utility Collaborative Signed -� ARUC Manager Dated / 2��r •�� STATE OF ALASKA ) )ss THIRD JUDICIAL DISTRICT ) The foregoing Heat Sales Agreement was acknowledged before me this day of I 1 20 Imo, by i (-, n 41 ►il Notary Public in and for the State of Alaska My commission expires: MYCOM ISSIonE Expires Alaska Village Electric Coo rative, Inc Signed V4�YA "(�,A Meera Kohler, CEO Dated Z-O I L2 STATE OF ALASKA } )ss THIRD JUDICIAL DISTRICT ) The foregoing Heat Sales Agreement was acknowledged before me this day of Avo io�j �'.•.....• •�ol� ayOtt Pores, 20/�, by -� Notary Public In and for the State of Alaska My commission expires Heat Sales Agreement — Alaska Rural Utility Collaborative Page 8 AV,arllb