Increasing the Efficiency of Street Lighting in the City of Sandy

Transcription

1 Increasing the Efficiency of Street Lighting in the City of Sandy Gregori Grisha Alpernas EMPA 2008 Cohort PA 510/512: Capstone Project Dr. Masami Nishishiba 7 June 2010

2 Alpernas 2 Acknowledgements This project was performed as a Capstone Project for the Executive MPA program in the Portland State University (PSU). The Author would like to express sincere gratitude to the following individuals who made this work possible: Dr. Masami Nishishiba (PSU), my academic advisor, for her support and guidance throughout the project and the whole EMPA program; PSU Executive Leadership Institute faculty and staff, and especially Drs. Marcus Ingle, Doug Morgan, Phillip Cooper, Henry Kass, and Craig Shinn for the invaluable learning experience throughout the EMPA program; Scott Lazenby, City Manager, and Mike Walker, Director of Public Works, City of Sandy (OR), for their support and cooperation; John Drake, student-intern, for his help in gathering data for research and analysis; Laurel Butman, Scott Fellman, Carolyn Heniges, Chris Larsen, Ann McLaughlin, Annie Neal, Maggie Skenderian, Michael Turnbull, and Joann Zimmer from the EMPA 2008 cohort for their constructive criticism of the survey questionnaire draft; and my friend Patti Paris-Simpson for her help navigating through English spelling and grammar and making sure that the content is readable and understandable by others.

3 Alpernas 3 Table of Contents INTRODUCTION...5 PROJECT BACKGROUND INFORMATION...8 THE PROBLEM OF ACCELERATING COSTS OF STREET LIGHTING...8 PROJECT CONTRIBUTION TO THE STREET LIGHTING BODY OF KNOWLEDGE...10 STRATEGIES FOR COST REDUCTION...11 PROJECT OBJECTIVES, RATIONALE, AND METHODS...14 PHASE I: OPTION A/B/C CONVERSION ANALYSIS...17 INVENTORY OF SANDY STREETLIGHTS AND OPTIONS CONVERSION PROCESSES...17 COST BENEFIT ANALYSIS...23 RECOMMENDATIONS...28 PHASE II: LED-BASED LIGHTS ANALYSIS...30 CHARACTERISTICS OF LED LIGHTS AND LED IMPLEMENTATION EXPERIENCE...31 COST-BENEFIT ANALYSIS OF CONVERSION TO LED...37 FEASIBILITY AND TARGETS FOR LED CONVERSION...41 LED RECOMMENDATIONS...44 PHASE III (A): SMART-LIGHTING SYSTEMS ANALYSIS...45 COST-BENEFIT ANALYSIS...47 LIGHT POLLUTION AND ITS IMPACT ON THE ENVIRONMENT...51 SAFETY ASPECTS OF THE DARK-OUT STRATEGY...54 FEASIBILITY AND CITIZENS ACCEPTANCE: SANDY RESIDENTS SURVEY...57 SMART-LIGHTING SYSTEMS RECOMMENDATIONS...66 PHASE III (B): SOLAR POWER STREET LIGHTING SYSTEMS...68 COST AND TECHNICAL CHARACTERISTICS OF SOLAR STREETLIGHTS...69 COST-BENEFIT ANALYSIS OF SOLAR SYSTEMS...71 FEASIBILITY OF SOLAR SYSTEMS AND THE IMPACT OF LOCAL CONDITIONS...74 SOLAR POWER STREET LIGHTING RECOMMENDATIONS...76 CONCLUSION AND FINAL RECOMMENDATIONS...77 EMPA AND THE CAPSTONE PROJECT REFLECTIONS...82 WORKS CITED...85 APPENDIX A: CITY OF SANDY STREETLIGHT INVENTORY...90 APPENDIX B: CITY OF SANDY METERED STREETLIGHTS DATA...91 APPENDIX C: SANDY RESIDENT QUESTIONNAIRE...92 APPENDIX D: SUMMARY RESULTS OF SANDY RESIDENT SURVEY...93

4 Alpernas 4 List of Figures FIGURE 1: CITY OF SANDY STREET LIGHTING COSTS...8 FIGURE 2: STREET LIGHTING COST COMPARISON...10 FIGURE 3: OPTION A TO B CONVERSION PAYBACK FOR DIFFERENT LIGHT TYPES...24 FIGURE 4: OPTION A TO B CONVERSION PAYBACK WITH VARIABLE DISCONTINUANCE COSTS...25 FIGURE 5: HOW LED LIGHTS WORK...32 FIGURE 6: BEFORE AND AFTER PICTURES FROM RALEIGH LED PILOT PROJECT...34 FIGURE 7: THE ARCHITECTURE OF STREET SMART-LIGHTING SYSTEM...45 FIGURE 8: ARTIFICIAL LIGHT DISTRACTS WILDLIFE...53 FIGURE 9: CURRENT STREET LIGHTING ASSESSMENT BY SANDY RESIDENTS...59 FIGURE 10: STREET LIGHTING IMPROVEMENT SUGGESTIONS BY SANDY RESIDENTS...59 FIGURE 11: DARK-OUT SUPPORT BY CURRENT STREET LIGHTING ASSESSMENT...60 FIGURE 12: LED AND DARK-OUT SUPPORT BY SANDY RESIDENTS...61 FIGURE 13: MALE VS. FEMALE DARK-OUT SUPPORT...62 FIGURE 14: DARK-OUT SUPPORT BY AGE...63 FIGURE 15: PARKING PATTERNS OF SANDY RESIDENTS...64 FIGURE 16: DARK-OUT SUPPORT IF PARKING ON STREETS OR IN COMMON AREAS...64 FIGURE 17: HOW OFTEN SANDY RESIDENTS ARE DRIVING OR WALKING AT 2:00-5:00 AM...65 FIGURE 18: TRADITIONAL (LEFT) AND CONTEMPORARY SOLAR LED STREETLIGHT DESIGN...69 FIGURE 19: SOLAR POWER MAP OF THE UNITED STATES...70 FIGURE 20: CITY OF SANDY SATELLITE VIEW (SOURCE: GOOGLE MAPS)...75 List of Tables TABLE 1: OPTION A AND B SERVICE RATES COMPARISON...12 TABLE 2: OPTION A LIGHTS REPLACEMENT EQUIVALENTS...19 TABLE 3: PUBLISHED AND CALCULATED RATE COMPARISON...21 TABLE 4: ESTIMATED BURN HOURS BASED ON MONTHLY KWH...22 TABLE 5: TOTAL OPTION A CONVERSION PAYBACK...26 TABLE 6: DEBT REPAYMENT CALCULATIONS...26 TABLE 7: HYPOTHETICAL COST SAVINGS FOR THE CURRENT STREETLIGHT INVENTORY...49 TABLE 8: COST SAVINGS IN THE METERED STREETLIGHTS SCENARIO...50 TABLE 9: ENERGY COSTS OF THE CURRENT STREETLIGHTS...72

5 Alpernas 5 INTRODUCTION Good street lighting contributes to the quality of life, by improving personal safety and perceived safety, and improving the appearance of the local environment (Andrews and Poulton 3). For this reason, citizens put high expectations on the local government agencies to provide appropriate street lighting. At the same time, the cost of street lighting for municipalities is growing due to rising energy costs, neighborhood expansion, and the increasing cost of maintenance and replacement of the older street lights. Combined with the downturn of the US economy, which significantly affected local government agencies budgets, it puts additional pressure on cities to look for creative ways to reduce the costs of street lighting. In addition to the financial pressure, municipalities are facing environmental issues related to street lighting. About 39 percent of the energy consumed in the U.S. is used to generate electricity. In 2007, electricity production consumed 36 percent of the fossil fuels used in the U.S. and generated 42 percent of fossil fuel-based CO2 emissions (Culver and Kitira 9). The increased awareness and recognition of the global warming phenomenon has shifted public opinion towards more sustainable and environmentally friendly approaches to business and government operations, thus putting additional political pressure on elected and appointed officials and local government administrators. Shifting to lower energy consumption streetlights and smart lighting systems, as well as alternative power sources for streetlights (such as solar power based lighting systems), can produce intangible benefits for local government agencies, even if they do not save any taxpayer dollars. Global warming and carbon dioxide emission, however important they might be to the taxpayers, present only part of the environmental concerns related to street lighting. More and more municipalities recognize the effect of excessive nighttime artificial lights (known as light

6 Alpernas 6 pollution) on the quality of life, health, and the wellbeing of citizens, as well as the negative impact of light pollution on wildlife: Many environmentalists, naturalists, and medical researchers consider light pollution to be one of the fastest growing and most pervasive forms of environmental pollution. And a growing body of scientific research suggests that light pollution can have lasting adverse effects on both human and wildlife health. (Chepesiuk A21-A22) The International Dark-Sky Association (IDA) is at the forefront of the fight against light pollution, and many local government agencies follow the IDA recommendations by adopting dark-sky ordinances and switching to streetlights that reduce light pollution. All these issues are universal, and different government organizations in the US and other countries are trying to address them within their local jurisdictions. This paper describes the research and assessment project, which was commissioned by the City of Sandy, Oregon, with the goal of evaluating different street lighting strategies that would allow achieving financial and non-financial benefits, such as reductions in street lighting costs, energy consumption, and light pollution. The paper starts with the project background information, a description of possible strategies that were identified for evaluation, project objectives, methodologies, and timeline. It reviews the existing body of knowledge, defines the rationale of the project, and discusses the value the project can bring to the City of Sandy and other organizations. It then provides the cost-benefit analysis of different street lighting options, which are available based on the Oregon Public Utility Commission (PUC) schedules and Portland General Electric (PGE) policies. Although the existing policies put severe restrictions on the city s ability to select the most cost-effective streetlight ownership and maintenance model, the analysis came

7 Alpernas 7 to certain conclusions and recommendations for possible cost saving approaches, which can be implemented independently or in conjunction with other strategies described later in the paper. The paper then analyzes two alternative strategies: replacing the current streetlights with more energy efficient types of lights, such as LED, and implementing a smart lighting system, which automates regulation of light burn hours and allows a shift to a reduced lighting schedule or a complete dark-out of some neighborhoods during early morning hours. These strategies were evaluated from financial and non-financial perspectives: potential reduction of the cost of street lighting or energy consumption, or both; possible impact on the dark sky environment and the light pollution; acceptance of different types of streetlights and light quality by citizens; livability of the neighborhoods with reduced lighting, as well as the actual and perceived security in the dark-out neighborhoods; and political implications of implementing environmentally friendly street lighting policies if such policies do not produce any financial gains, or even increase the costs. The analysis did not show any of these strategies to be feasible on their own from the standpoint of the combination of financial, political, and public relation outcomes; however, certain steps can be implemented in conjunction with each other and with the adjustment of the streetlight ownership options, which would produce a number of financial and political gains. The paper then analyzes the feasibility of implementing solar powered streetlights. While this option is attractive from the environmental perspective, the cost of such systems makes it an unrealistic option. Following this analysis, the paper concludes with the final recommendation on the combination of different street lighting strategies, approaches and specific steps that would produce the most financial and non-financial benefits for the City of Sandy.

8 Alpernas 8 PROJECT BACKGROUND INFORMATION THE PROBLEM OF ACCELERATING COSTS OF STREET LIGHTING The City of Sandy currently spends over $110,000 annually on street lighting, which consumes a significant portion of the local gas tax and reduces funds available for road maintenance and repairs. The street lighting costs were steadily growing due to rising energy costs, neighborhood expansion, and the increasing cost of maintenance and replacement of the older street lights. The street lighting costs 1 for the City of Sandy over the last 10 years are presented in Figure 1. Figure 1: City Of Sandy Street Lighting Costs Streetlights are a consistent and predictable off-peak energy load with relatively modest power rates. Oregon PUC tariffs set street lighting costs in three categories: Option A: the utility (PGE) owns and maintains the streetlight, and the city pays a monthly fee that includes rent, maintenance, and power; Option B: the city owns the light, and pays PGE for maintenance and power; Option C: the city owns and maintains the light, and only pays PGE for power. 1 Source: the Finance Department of the City of Sandy.

9 Alpernas 9 In recent years, the City of Sandy has required developers to install the streetlights and transfer their ownership to the city (Option B); however, PGE continues to own the lights in some of the older neighborhoods. The lights that PGE maintains can be directly wired to the utility s power cables. If the city maintains the lights under Option C, PGE requires the lights to be separately metered and fused; only a handful of Sandy streetlights fall into this category. Several years ago, following the lead of several other cities, the City of Sandy began the process of purchasing the Option A lights (at their remaining depreciated cost) from PGE; this would have provided ongoing net savings by avoiding the rental component of the tariff. This process was interrupted when PGE s parent company, Enron, declared bankruptcy and PGE put a freeze on the sale of assets. Since then, as we can see in Figure 1, the costs continued to go up and almost doubled over the last 4 years. In order to contain the costs and produce savings that could be invested in road maintenance and repairs, the City of Sandy needed to evaluate different strategies of reducing the streetlight costs: Continue conversion of streetlights from Option A to B, and possibly to C; Reduce power costs through more efficient lamps; Implement a smart-lighting system with better management of light levels, from a complete dark-out of neighborhoods at night to increased lighting in particular areas; Start using solar panels as a source of energy for streetlights. To review and evaluate these strategies and their impact on the city street fund, the City of Sandy decided to collaborate with the PSU Executive Leadership Institute (ELI) and to start a research and analysis project with the goal of identifying which strategies or combination of strategies would provide the biggest benefits to the city. The project was conducted as a Capstone project within the scope of the Executive MPA program.

10 Alpernas 10 PROJECT CONTRIBUTION TO THE STREET LIGHTING BODY OF KNOWLEDGE The City of Sandy is not unique in facing the issues related to street lighting costs and possible alternative solutions. Cities and counties in Australia (Andrews and Poulton, 1999), Canada (Owen, 2007), India ( CDM Implementation, 2005), UK (Fox, 2007), and other countries have been dealing with the exact same questions for the last several years, as did other municipalities in the US (Wagner, 2008). However, it is impossible to simply follow in exact footprint of other agencies and jurisdictions due to the significant variations in the specific conditions in each locality. Rapid technology advances are also a factor: the lighting technologies that were promoted in the 1999 study conducted for Sustainable Energy Authority in Australia were considered one of the main targets for replacement in later studies in India and UK. $180,000 12,000 $160,000 $140,000 10,000 $120,000 8,000 $100,000 $80,000 6,000 $60,000 4,000 $40,000 $20,000 2,000 $0 0 Sandy: Cost Population Other Cities: Figure 2: Street Lighting Cost Comparison Budgeted Cost Population

11 Alpernas 11 The project, therefore, not only addressed the immediate questions before the City of Sandy, but also contributed to the existing body of knowledge. From the practical perspective, the project allows the city to make educated decisions on street lighting strategies, as well as helps other local governments (especially in the Pacific NW due to similar environmental, legal, political, and market conditions) to make their decisions related to similar programs by providing the most recent analysis of financially viable alternatives. For example, several cities in Oregon with populations comparable to the City of Sandy spend on street lighting similar or even higher amounts, 2 as evident from the Figure 2; these cities can benefit from using the results of this capstone project as a starting point for their own analysis of alternative cost-saving options. Even cities with lower spending can benefit from this document in their analysis of LED technologies and smart lighting systems. STRATEGIES FOR COST REDUCTION The tariffs for streetlight maintenance and electrical power are regulated and established by the Oregon PUC. Therefore, there is no possibility to reduce costs by renegotiating better contracts with PGE or other utility companies and the financial benefits can only be realized through reduction in the consumption and costs of different individual components, namely the cost of energy, maintenance, and costs directly associated with ownership or rental of the streetlights. The first strategy, i.e. continued conversion of streetlights from Option A to B (and, possibly, C) is based on the differences in the established tariffs: Option A rates include the streetlight rental component, which could be avoided if the city owns the lights. Furthermore, if the city could provide streetlight maintenance for a lower cost than the service rate component of 2 Source: published budget documents and phone interviews with representatives of these cities. Data are provided as an indication of the general conditions and do not guarantee an accurate comparison due to differences in reporting by different jurisdictions and variance in the local conditions and requirements.

12 Alpernas 12 the tariffs, or contract out the streetlight maintenance through a competitive bidding process, the savings in ongoing costs could potentially pay for the one-time expenses of purchasing the lights and converting them to the city s ownership. Table 1 provides the comparison of the Option A and B service rates for standard types of streetlights. 3 Table 1: Option A and B Service Rates Comparison Monthly Rates Type of Light: High Pressure Sodium (HPS) only Watts Nominal Lumens Option A Option B Savings 100 9,500 $5.28 $2.80 $ ,000 $5.30 $2.81 $2.49 Cobrahead ,000 $5.72 $2.86 $ ,000 $5.77 $2.87 $ ,000 $5.79 $2.89 $2.90 Flood ,000 $6.04 $2.90 $ ,000 $6.06 $2.92 $3.14 Early American Post-Top 100 9,500 $5.68 $2.80 $ ,300 $5.90 $2.88 $3.02 Shoebox 100 9,500 $6.11 $2.90 $ ,000 $6.38 $2.93 $3.45 The feasibility and the effectiveness of this cost-saving strategy depend on: 1. The process for converting streetlights from Option A to B, and whether such conversion is possible, i.e. whether PGE is willing to resume selling assets. 2. The cost of capital to acquire the remaining Option A lights and adequacy of the monthly rate savings to produce a reasonable return on investment. 3. The process for converting streetlights from Option B to C and the costs associated with such conversion (e.g., individual meters and circuit breakers). 4. The ability of the city to provide streetlight maintenance for lower costs than the PGE rates, and adequacy of the savings to produce a reasonable return on investment. The analysis of these and other related issues is provided in the Option A/B/C Conversion Analysis section of the paper on page 17 et seq. 3 Source: Pope, 2009.

13 Alpernas 13 The other three strategies target reduction in energy consumption as a source of savings in operational expenses. Newer technologies, such as light-emitting diode (LED), are indeed reported to significantly reduce energy consumption in comparison to the more traditional highpressure sodium (HPS) lights (Cook, Shackelford, and Pang, 2008; Culver and Kitira, 2009; Henderson, 2009; Johnson et al., 2009; Kinzey and Myer, 2009). Moreover, LED lights are estimated to have longer service life and, therefore, lower overall cost of ownership (Narendran et al., 2007; Culver and Kitira, 2009). Smart lighting systems create energy savings by providing the ability to shorten light burn hours in targeted areas, up to completely dark neighborhoods. Finally, solar power based streetlights do not consume energy from the power grid thus eliminating the energy cost component of the street lighting expenses. However, implementation of any of these strategies is dependent upon several factors. First, the one-time initial investment in the new technologies or systems might be too high for the city to absorb, and the return on investment might not justify the initial expense. Moreover, to realize the return on investment in LED or smart lighting systems, the city depends on the utility company passing the savings to their customers, which is possible only if the existing rates are adjusted to reflect the lower energy consumption. Second, changes in street lighting patterns, color of the lights, and the light burn times might cause resistance of the constituents and, consequently, a political backlash. Finally, law enforcement and emergency services agencies might impose certain requirements, which may or may not be successfully satisfied by the alternative strategies. These and other related issues are discussed in details in the respective sections of the paper starting at page 30.

14 Alpernas 14 PROJECT OBJECTIVES, RATIONALE, AND METHODS The main objective of this capstone project was: To identify which strategy, or combination of strategies, will maximize the net annual savings to the city s street fund. Some of the strategies for cost savings are independent of each other: purchasing Option A lights would save rental costs, regardless of energy use. Conversely, the less efficient the lamps, the more money a smart lighting system saves, and if wasting energy at 4:00 AM costs the city very little, the financial benefit of using a smart lighting system would not be very high. In addition to the stated main objective, the City of Sandy is interested in assessing nonfinancial aspects of the identified strategies. Some estimates suggest that replacing five million streetlights in the US with energy efficient lights based on current technologies is the equivalent to removing 129,375 cars from the road or 183,975 acres of forest replenished (Hale, 2009). With increasing citizens awareness and acceptance of the sustainability as good business and management practices, certain strategies that demonstrate government s commitment to a green environment, pollution reduction, and smart usage of technology to reduce national dependence on foreign oil can be beneficial even if they do not produce any immediate financial advantages. Reduced street lighting also reduces light pollution, which is consistent with Sandy policies and Dark Sky ordinance, and smart lighting systems allow better management of lighting levels when required for special events or trouble spots. Therefore, an additional nonfinancial key objective was identified for the project: To assess whether there are potential benefits to these strategies that go beyond simple budget savings, and whether the city should pursue them if there are no cost savings, or even if they mean cost increases. To address both objectives, the project was divided into three major phases, which were aligned with the identified cost reduction strategies. Phase I included data collection and analysis

15 Alpernas 15 of the full inventory of Sandy streetlights and their associated costs. The following data were collected for the purposes of cost benefit analysis of the Option A/B/C conversion: inventory of Sandy streetlights; monthly rates for different types of streetlights under Options A and B, and the energy rates for street lighting; process for converting lights from Option A to B (and C as an option); and cost of converting lights from Option A to B (and C as an option), and cost of capital for purchasing the lights. Phase I concluded with the cost benefit analysis of the Option A/B/C conversion, which was presented to the City of Sandy management team on April 15. Phase II of the project addressed both the financial and non-financial key objectives. It analyzed available data on LED lights, including such characteristics as energy use, replacement cycle, and quality of light, as well as potential intangible benefits such as less light spillover and ability to vary lighting level. Data collection for this phase included cost of LED lights and of retrofitting existing fixtures; process of conversion to LED lights, criteria for selecting lights for LED conversion, and LED tariffs; and the information on the acceptance of LED lights by the public. Phase II of the project concluded with the analysis of feasibility and cost-effectiveness of full or partial conversion to LED. The analysis addressed the option of retaining status quo with regards to Option A/B/C, as well as the implementation of LED lights in conjunction with the Phase I recommendations. The LED conversion recommendations were reviewed with the management team of the City of Sandy in early May. Phase III of the project analyzed possible smart lighting options, their feasibility, possible financial gains and non-financial benefits (such as promoting a green environment and reducing light pollution), and the interplay of smart lighting systems with different options that were reviewed in the first two phases of the project; it also researched options for streetlight systems based on solar power. The cost-benefit analysis accounted not only for the smart lighting system

16 Alpernas 16 implementation, but also for the cost of retrofitting the individual lights with meters, which might be essential to realize the savings generated by the reduced light burn time. Smart light management systems were also evaluated from the environmental perspectives, i.e. the impact of reduced light burn hours on the green environment and light pollution. The following data related to the characteristics of smart lighting and alternative power systems were collected: feasibility of converting existing (or LED) lights; cost of such systems; cost of installing or retrofitting streetlights; energy and cost saving estimates; and ability to realize smart lighting savings for metered and unmetered lights. Additionally, to assess the level of acceptance of reduced lighting a survey of Sandy residents was conducted. While there might be less need for neighborhood street lighting after midnight or 2:00 AM, when most residents are sleeping (and those who drive typically have cars equipped with headlights), the issues of safety and perceived safety with or without streetlights become important factors that can have significant political ramifications. The survey did not intend to provide a scientific research results but rather to give some indication of how willing Sandy residents would be to endorse completely or partially dark neighborhoods. The smart lighting alternatives and recommendations were finalized and presented to the City of Sandy management team in early June. The project concluded with a presentation of different options and final recommendations to the Sandy City Council, which was scheduled for the session on June 21, 2010.

17 Alpernas 17 PHASE I: OPTION A/B/C CONVERSION ANALYSIS As noted above, one of the street lighting cost reduction strategies is to acquire the remaining PGE owned streetlights, i.e. to convert lights from Option A, which includes the streetlights rental component, to Option B when the city pays PGE only the maintenance and energy tariffs. The feasibility and cost-effectiveness of this strategy depend on the ability of the city to acquire the streetlights, the cost of capital of such acquisition, and the generated monthly savings due to the PUC rate difference between the Options A and B. Another element of this strategy is the conversion of Option B lights to Option C, which could generate savings if the city was able to provide maintenance for the streetlights (either using their own workforce, or by contracting it out) cheaper than the service component of the streetlight rate. It also could generate savings if the energy tariff for Option C lights was different or if the city could reduce the burn hours of the streetlights. All these factors were analyzed in Phase I of the project. INVENTORY OF SANDY STREETLIGHTS AND OPTIONS CONVERSION PROCESSES As of March 3, 2010, the City of Sandy had a total of 1080 streetlights on PGE inventory list, 4 with the vast majority of them, 879, owned by the City, i.e. being on Option B. Another six lights were on Option C: these lights were owned and maintained by the City, but were not metered and therefore were charged based on the same energy tariffs and estimated monthly power consumption as Option A and B lights. The remaining 195 lights were on Option A. The summary of the Sandy streetlights inventory is provided in the Appendix A. 4 This list does not include streetlights that are owned and maintained by the city, are mounted on the city owned poles, and are individually metered.

18 Alpernas 18 The initial evaluation of the Option A/B conversion strategy was based on the assumption that the City can resume purchasing of the remaining Option A streetlights from PGE at their residual value. Considering that all these lights are not new, and some of them are very old, this assumption led to an initial estimate that the one-time expense to purchase all 195 streetlights still owned by PGE would not be high. However, as explained by Kristin Cook, PGE outdoor lighting services supervisor, the option of purchasing Option A streetlights and converting them to Option B is not available: PGE made a business decision in about 2001, not to sell its streetlight assets any longer (qtd. in Xaybanha Information ). Cook further explained that there are two options for the City to convert lights from Option A to B: to purchase and install new lights when the current ones reach non-repairable status (aka end-of-life ), or to pay PGE discontinuance cost for all Option A lights and then replace them with newly purchased lights. In both of these options the one-time investment would be based on the cost of new replacement streetlights rather than on the residual value of the old lights. The matter is further complicated by the fact that some of the existing lights are not anymore offered and sold by PGE, and, therefore, comparable but different light fixtures would replace them. According to the Schedule 91, all mercury vapor (MV) lights are considered obsolete and not available for new installations under Options A and B will be replaced with the Customer s choice of Standard or Custom equipment (Pope 11). The City of Sandy streetlight inventory shows total of 92 MV lights of different types and power levels. The same is true for the high-pressure sodium (HPS) Town & Country (T&C) 70W lights. Overall, more than half of Option A lights are categorized as obsolete; replacement of these lights with the current standard ones would allow further standardization of the city streetlights and might produce significant savings: Schedule 91 published maintenance rates for obsolete lights are higher

19 Alpernas 19 than the rates for comparable standard lights. In turn, the standardization of the city streetlights would make self-service (i.e. conversion to Option C) more realistic. The light replacement equivalents 5 and their costs 6 are provided in Table 2. Table 2: Option A Lights Replacement Equivalents Current Fixture Description Count Replacement Fixture Description Repl. cost (each) Repl. cost (total) 175W MV COBRA 7,000 LUMEN W HPS COBRA 9,500 LUMEN $ $17, W MV COBRA 21,000 LUMEN 4 200W HPS COBRA 22,000 LUMEN $ $1, W MV COBRA 55,000 LUMEN 4 400W HPS COBRA 50,000 LUMEN $ $1, W HPS T&C 6,300 LUMEN W HPS T&C 9,500 LUMEN $ $3, W MV T&C 7,000 LUMEN W HPS T&C 9,500 LUMEN $ $9, W HPS COBRA 6,300 LUMEN 3 70W HPS COBRA 6,300 LUMEN $ $ W HPS COBRA 9,500 LUMEN W HPS COBRA 9,500 LUMEN $ $9, W HPS COBRA 16,000 LUMEN 5 150W HPS COBRA 16,000 LUMEN $ $1, W HPS COBRA 50,000 LUMEN W HPS COBRA 50,000 LUMEN $ $9, W HPS COBRA 22,000 LUMEN 5 200W HPS COBRA 22,000 LUMEN $ $1, W HPS T&C 9,500 LUMEN W HPS T&C 9,500 LUMEN $ $8, $64, No less complicated is the process of converting Option B lights to Option C. The existing PGE provisions for streetlights conversion from Option B to C specify that following a written request from the City (which must be submitted 180 days in advance) PGE will convert the entirety of the Customer s lighting service under Option B luminaire lighting rates to the equivalent Option C luminaires lighting rates (Pope 4). It further specifies that after such conversion customers cannot request any new streetlight installations under Option B, which means that going forward all the streetlights must be owned and maintained by the City. PGE lighting specialist Aroun Xaybanha clarified that each Option C circuit needs to have a separate disconnect point from PGE s circuit with a control box installed to separate the circuits. If you use a meter at the disconnect point, it would be a metered service vs. being an option C ( Few ). PGE representatives were not able to provide any estimates of the costs 5 Based on the analysis of the current standard and obsolete light types as defined in Schedule As provided by Cook (qtd. in Xaybanha Information ).

20 Alpernas 20 associated with the purchase and installation of the control boxes for circuit separation, as well as individual meters: these one-time expenses would include the cost of equipment that the City needs to purchase and the T&M charges for the work that an electrician needs to do. PGE does not sell such equipment and does not provide this type of services. Should the city decide to further investigate the conversion to Option C or metered services, the associated project will need to follow formal bid and procurement procedures for capital projects. Given that the total number of lights that are currently under Option B is close to 900, even a conservative estimate of several hundred dollars per streetlight would bring the project total cost to significantly more than $100,000. The main difference between the metered and Option C services is in how the energy charges are calculated and applied. The energy rates for the Option C lights are the same as for Options A and B and are specified in Schedule 91 as follows: sum of charges for transmission, distribution, and energy equals $ per kwh, which is multiplied by the monthly kwh consumption as defined for each streetlight type (Pope 7). Charges for the metered streetlights are based on the energy tariff of $ per kwh multiplied by actual energy consumption. However, relying just on the Schedule 91 defined rates and formula is misleading for several reasons. First, the actual charges imposed by PGE are different from the Schedule 91 rates; the deviation is hard to understand, hard to explain, and hard to correlate either in percentage or in absolute value. Table 3 provides a comparison of Schedule 91 calculated rates and the PGE published rates 7 for all the streetlight types that the City of Sandy has under Options A, B, and C; it is evident that the difference in rates varies from $0.14 to $1.88 and from 3.6% to more than 5%. As the accounting specialists from the PGE outdoor lighting services 7 These are the actual rates that PGE charges the City of Sandy; the rates were provided by PGE in conjunction with the inventory of Sandy streetlights (see Appendix A).

21 Alpernas 21 admitted in their internal communication, It is near impossible to balance a billing amount that actually shows on a customer's billing (Fenton). There are additional fees and adjustments from at least eight different fee schedules, with some of them calculated based on power consumption and others based on total amount of charges. The lack of transparency of these adjustments and fees warrants careful review and periodic audit to ensure that all the charges are appropriate and that no double billing happens when the same adjustments applied to both individual line items and total amounts of the bill. Table 3: Published and Calculated Rate Comparison PGE Sched 91 Sched 91 Sched 91 Difference published monthly service calculated from Percent Option Fixture Description rate kwh charge rate published difference A 175W MV COBRA 7,000 LUMEN $ $5.37 $11.34 ($0.46) -3.86% A 400W MV COBRA 21,000 LUMEN $ $5.48 $18.79 ($0.83) -4.25% A 1000W MV COBRA 55,000 LUMEN $ $6.28 $40.13 ($1.88) -4.46% A 70W HPS TOWN & COUNTRY 6,300 LUMEN $ $5.17 $7.89 ($0.30) -3.72% A 175W MV TOWN & COUNTRY 7,000 LUMEN $ $5.50 $11.47 ($0.46) -3.82% A 70W HPS COBRA 6,300 LUMEN $ $5.19 $7.91 ($0.30) -3.71% A 100W HPS COBRA 9,500 LUMEN $ $5.28 $9.17 ($0.34) -3.55% A 150W HPS COBRA 16,000 LUMEN $ $5.30 $10.91 ($0.45) -3.94% A 400W HPS COBRA 50,000 LUMEN $ $5.79 $20.54 ($0.90) -4.18% A 200W HPS COBRA 22,000 LUMEN $ $5.72 $12.87 ($0.53) -3.95% A 100W HPS TOWN & COUNTRY 9,500 LUMEN $ $5.68 $9.57 ($0.36) -3.60% B 175W MV COBRA 7,000 LUMEN $ $2.70 $8.67 ($0.38) -4.15% B 70W HPS TOWN & COUNTRY 6,300 LUMEN $ $2.81 $5.53 ($0.23) -4.07% B 175W MV TOWN & COUNTRY 7,000 LUMEN $ $2.72 $8.69 ($0.38) -4.14% B 70W HPS COBRA 6,300 LUMEN $ $2.80 $5.52 ($0.22) -3.91% B 100W HPS COBRA 9,500 LUMEN $ $2.80 $6.69 ($0.27) -3.85% B 150W HPS COBRA 16,000 LUMEN $ $2.81 $8.42 ($0.37) -4.18% B 250W HPS COBRA 27,500 LUMEN $ $2.87 $12.10 ($0.56) -4.40% B 400W HPS COBRA 50,000 LUMEN $ $2.89 $17.64 ($0.81) -4.36% B 200W HPS FLOOD 22,000 LUMEN $ $2.90 $10.05 ($0.45) -4.28% B 200W HPS COBRA 22,000 LUMEN $ $2.86 $10.01 ($0.45) -4.29% B 100W HPS TOWN & COUNTRY 9,500 LUMEN $ $2.80 $6.69 ($0.27) -3.85% B 100W HPS RECT BOX 9,500 LUMEN $ $2.90 $6.79 ($0.27) -3.79% B 150W HPS RECT BOX 16,000 LUMEN $ $2.93 $8.54 ($0.37) -4.13% B 100W HPS TECHTRA 9,500 LUMEN $ $3.85 $7.74 ($0.30) -3.70% C 70W HPS COBRA 6,300 LUMEN $ $0.00 $2.72 ($0.14) -5.05% The other reason why reliance on the Schedule 91 would be misleading, especially for the Option C and metered services comparison, is the inconsistency of the estimated monthly energy consumption. The monthly kwh values for the lights with the same type of lamp and the same wattage is the same regardless of the type of fixture (see Table 4), which leads to a

22 Alpernas 22 conclusion that a reverse calculation of estimated daily burn hours based on light wattage and total energy consumption should be valid. Even though such calculation would not produce the exact burn time due to some power being consumed by other elements of the light fixture, we could expect that the resulting burn time would be the same regardless of the type of streetlight. Using the formula DBH = DPC / LP, where DBH is daily burn hours, DPC is daily power consumption in Watts for the given light, and LP is the light power in Watts, we can calculate the estimated average daily burn hours for each light type (subject to equal adjustment for power loss as explained above). The results of such calculations are provided in the Table 4. Table 4: Estimated Burn Hours Based on Monthly kwh Fixture Description Power (W) Sched 091 Monthly kwh Daily burn hours 70W HPS TOWN & COUNTRY 6,300 LUMEN W HPS COBRA 6,300 LUMEN W HPS COBRA 9,500 LUMEN W HPS TOWN & COUNTRY 9,500 LUMEN W HPS RECT BOX 9,500 LUMEN W HPS TECHTRA 9,500 LUMEN W HPS COBRA 16,000 LUMEN W HPS RECT BOX 16,000 LUMEN W MV COBRA 7,000 LUMEN W MV TOWN & COUNTRY 7,000 LUMEN W HPS COBRA 22,000 LUMEN W HPS FLOOD 22,000 LUMEN W HPS COBRA 27,500 LUMEN W MV COBRA 21,000 LUMEN W HPS COBRA 50,000 LUMEN W MV COBRA 55,000 LUMEN Average: It is evident from the burn hours reverse calculation that the Schedule 91 estimates of the monthly kwh consumption of different light types is not consistent and should be carefully evaluated when comparing metered lights to Option C. For example, if the average actual burn time were hours per day, the actual power consumption of 200W HPS lights or any MV lights would be higher than the Schedule 91 estimates, while for other lights it would be lower.

23 Alpernas 23 Metered HPS 100W lights would produce the biggest energy savings equivalent to extra 46 minutes burn time comparing to unmetered lights, while unmetered HPS 200W lights would provide extra 23 free minutes in comparison to the metered lights. Currently the city has five streetlights on metered services, all of them HPS 250W. The average 8 monthly kwh per light is 107, which is higher than the Schedule 91, and the reverse calculation suggests actual average daily burn hours, which is 38 minutes more than the Schedule 91 values. The next sub-section of the paper describes the cost benefit analysis that was conducted based on all these data. COST BENEFIT ANALYSIS As described earlier in the paper, there are two possibilities to convert streetlights from Option A to Option B: purchase the new lights as a replacement of the current ones when they reach nonrepairable status (aka end-of-life replacement ), or discontinue current Option A lights (which would involve discontinuance fees payable to PGE) and install new ones as Option B. Different light types have different replacement costs (see Table 2) and different savings from the lower rates for Option B comparing to A (see Table 1); consequently, the total time to generate full return on investment, i.e. the payback period, is also different depending on the type of the fixture, type of lamp and the wattage. The discontinuance fees depend on a variety of factors associated with each individual streetlight; however, during the project PGE was unable to provide the exact data on these fees: At this time, we can only give you a range of cost for discontinuance, which would be between $ per fixture (Xaybanha, Few ). To provide a general estimate of how the discontinuance fees would affect the duration of the payback for 8 Calculated on annual data basis, see Appendix B.

24 Alpernas 24 different lights, the return on investment calculations assumed an average of $200 per fixture. Figure 3 provides the comparison of payback periods for different fixtures for both the end-oflife replacement and the discontinuance of the current Option A lights and their replacement with equivalent standards streetlights owned by the city (i.e. Option B) W MV COBRA 400W MV COBRA 1000W MV COBRA 70W HPS TOWN & COUNTRY 175W MV TOWN & COUNTRY 70W HPS COBRA 100W HPS COBRA 150W HPS COBRA 400W HPS COBRA 200W HPS COBRA 100W HPS TOWN & COUNTRY End-of-Life Replacement Payback (years) Discontinuance Fee Payback (years) Figure 3: Option A to B Conversion Payback for Different Light Types The return on investment calculation shows significant variance between different light types both in the replacement payback periods and the additional time to repay discontinuance fees. While it shows high cost effectiveness of the Option A to B conversion of the mercuryvapor lights, the payback period of the 70W Town & Country HPS lights reaches 25 years even for the end-of-life replacement. The reason for such a variance lays in the fact that all MV lights are considered obsolete and the monthly charges for these lights are very high; replacing these lights with the current standard HPS streetlights becomes very cost-effective. On the other hand,

25 Alpernas 25 the 70W T&C HPS lights would be replaced with the newer 100W lights with the higher light output (9,500 vs. 6,300 Lumen) but also a higher energy consumption, which increases the monthly rate. As noted above, the actual discontinuance costs were not available and the average of $200 per light was used for ROI calculations. Figure 4 illustrates how the payback period can be affected if the discontinuance costs were proportional to the replacement costs of different fixture types. These assumptions only increase the variance of payback periods and costeffectiveness of converting different light types from Option A to B W MV COBRA 400W MV COBRA 1000W MV COBRA 70W HPS TOWN & COUNTRY 175W MV TOWN & COUNTRY 70W HPS COBRA 100W HPS COBRA 150W HPS COBRA 400W HPS COBRA 200W HPS COBRA 100W HPS TOWN & COUNTRY End-of-Life Replacement Payback (years) Discontinuance Fee Payback (years) Figure 4: Option A to B Conversion Payback with Variable Discontinuance Costs The results of cost benefit analysis presented in Figure 3 and Figure 4 can serve as guidance for making Option A to B conversion for individual lights or light types. However, if the city was to convert all the lights from Option A to B, the total amount of one-time investment

26 Alpernas 26 to cover all the replacement costs is $64,790 (see Table 2). Assuming the average of $200 discontinuance cost per light, the total cost of the project to convert all 195 Option A lights would be $103,790. Table 5 presents the cost benefit analysis of the total conversion of all Option A lights in one project, with the assumption that the required capital is available in the budget without raising debt. In this case the payback time would be close to 11 years. Table 5: Total Option A Conversion Payback Fixture Description Count Total Discont. Cost Total Cost to Replace Option A Rate Replace ment Rate Total Monthly Savings Conversion Payback (years) 175W MV COBRA 59 $11, $17, $11.80 $6.96 $ W MV COBRA 4 $ $1, $19.62 $10.46 $ W MV COBRA 4 $ $1, $42.01 $18.45 $ W HPS TOWN & COUNTRY 10 $2, $3, $8.19 $6.96 $ W MV TOWN & COUNTRY 25 $5, $9, $11.93 $6.96 $ W HPS COBRA 3 $ $ $8.21 $5.74 $ W HPS COBRA 30 $6, $9, $9.51 $6.96 $ W HPS COBRA 5 $1, $1, $11.36 $8.79 $ W HPS COBRA 26 $5, $9, $21.44 $18.45 $ W HPS COBRA 5 $1, $1, $13.40 $10.46 $ W HPS TOWN & COUNTRY 24 $4, $8, $9.93 $6.96 $ Total: 195 $39, $64, $ However, if the required funds for a capital investment to convert all 195 Option A lights are not available in the city's budget, the city might need to issue debt for the capital acquisition. Assuming that the city would use generated savings to repay the debt, the total payback for the project would be between 13 and 15.5 years, depending on the city's ability to borrow with a favorable interest rate. Table 6 provides the debt repayment calculations. Table 6: Debt Repayment Calculations Annual Savings: $9,762 $9,762 $9,762 Principal: $103,790 $103,790 $103,790 Payment: $9,759 $9,826 $9,781 Yield: 3% 4% 5% Term (years): As noted earlier in the paper, conversion of Option B lights to Option C requires each circuit to have a control box to serve as disconnect point from PGE s circuit, which entails both

27 Alpernas 27 the equipment costs and the T&M charges for electrician to perform the work. At the time of the project, it was not possible to calculate the return on investment for such a conversion due to a variety of factors and cost components, estimates for which were not available from PGE: Because PGE is not typically involved with the installation of disconnects, as this a customer responsibility, there is no way for us to estimate the cost for the circuit breakers or meters. We don t purchase these disconnects, therefore do not know the cost of these, nor do we know what the labor would be to install these. Each circuit would have to be analyzed individually, and estimated on a case by case basis. (Xaybanha, Few ) Given that the City of Sandy has almost 900 lights under Option B, the case by case analysis and estimates would be costly and time consuming. Additionally, the current Option A lights should be considered for such a conversion, which makes the overall estimates even more difficult. Based on the Schedule 91 defined service rates for different types of fixtures, the estimated total annual service charges for all 879 Option B lights is approximately $30,000. If all the Option A lights were converted to B and included in the project of converting all streetlights to Option C, the total savings from such conversion would be approximately $3,000 per month. To make such a conversion cost effective these savings need to cover all the ongoing costs of light maintenance by the city and provide enough savings to recover the one time investment in purchasing and installing the individual circuit breakers. In 2002, while evaluating different options of the streetlight conversion for the City of Sandy, the City Manager Scott Lazenby estimated that savings generated by converting the lights to Option C might not be significant: We would need to contract with a firm for maintenance, so there might not be much net savings, but we might get a quicker response to outages. Even

28 Alpernas 28 though the amount of monthly savings in current estimates is significantly higher than in 2002, the increased number of streetlights and the impact of inflation and rising cost of labor over the last 8 years suggest that such assessment still holds true. Even if some net savings were to be generated from switching to Option C, the payback time for the circuit disconnect equipment and labor might be extremely long and might not justify the investment. For example, with a conservative estimate of one hour electrician labor to install the individual circuit breakers per light, the labor cost of $75/hour, and the $25 purchase cost for individual breakers, the total onetime cost of preparing all Option B lights for conversion to Option C would be $87,900. Even if the city could contract out the streetlight maintenance for the cost of 10% lower than the service rates set by Schedule 91, the total payback period would be close to 30 years. It is important to note, however, that the provided example is a hypothetical estimate that is not based on a real assessment of the cost of materials and labor, and on the possible savings from contracting out the streetlight maintenance to a third party. RECOMMENDATIONS Based on the cost benefit analysis, the following recommendations were presented to the City of Sandy: 1.1. Consider immediate discontinuance and replacement of all 92 Option A MV lights with the equivalent standard HPS streetlights under Option B. The estimated total cost 9 of this conversion would be less than $50,000 (see Table 5) with annual savings of approximately $6,500 and the total payback period of less than 8 years if the city can finance the expense from the current budget without raising debt. 9 Assuming the average discontinuance fee of $200 per light.