City Hopes To Save Money Through Energy Reduction

In an effort to reduce energy costs, Millbrae city leaders on Tuesday unanimously approved drafting a contract with a private company to analyze the city’s energy consumption and possibly cut it back.

After a full energy audit, Siemens Corporation, a worldwide engineering company, will suggest energy-saving equipment and strategies, such as efficient street lighting, heating and cooling systems and solar panels on city buildings. 

The potential agreement is different than most city contracts because it does not allow other companies to bid on the project. Therefore, under state law, the city must conduct a public hearing before it can enter into a legally binding contract with Siemens. That hearing is scheduled for September.

The project costs will range between $800,000 to a few million dollars, depending on the city’s finances and willingness to pursue some or all of the proposed work. Councilman Paul Seto wants the city to place a cap of around $1 million on the project.

“We don’t have to fund anything up front,” said Director of Public Works Ron Popp. “We use the energy savings to pay for the financing of that construction.”

The city would benefit from the energy reductions after it pays back Siemens for the loan with the energy savings, which could be as long as 20 years, according to Thompson.

For example, if Siemens financed a solar project for city hall that costs $1 million and reduced the city’s electric bills by $50,000 per year, the city would then use the savings to repay Siemens over a span of about 20 years. Only then would it reap the benefits of the solar panels.

If Millbrae does not implement any of Siemens’ ideas, and reneges on the contract, it must pay the company $25,000 for the energy audit. The city must also pay back the audit money if it does not execute the project under the conditions detailed in the letter of intent, which are still undetermined as City Attorney Joan Cassman has yet to draft the agreement.

If the city hires Siemens for the work, it will not pay it the $25,000 fee.

“The only condition that [the city] would pay the $25,000 is if the project is cost-neutral and we guaranteed you savings, and for whatever reason you chose not to move forward,” Siemens representative Jessie Thompson said.

In a cost-neutral project, the costs will never be higher than the revenue generated. 

City council repeatedly asked Thompson whether Siemens would waive the $25,000 fee if the city picked only certain projects, rather than implement all of them.

But, Thompson avoided directly answering the council’s concerns.

“The cost-neutral on the project is going to be determined by the number of facility-improving measures we take and the length of time it requires to pay it back,” he said.

Therefore, it’s unclear whether choosing only specific energy improvement would guarantee a cost-neutral project.

As an alternative to a no-bid contract, the city could issue a request for proposal among several companies to develop energy-saving solutions. But, it would need to hire an outside consulting firm, costing about $30,000, as city staff does not have the resources nor the expertise to implement the RFP, according to Popp.