Why No Look At District Energy System In Core Review
Wednesday, November 7, 2012 @ 3:45 AM
It would seem that the thrust of any Core Review into how a company, City or Province operates, should examine every single item for cost and efficiency. That should be the theme, but we in the city of Prince George are about to come away with a Core review that has taken a selected position on items.
Many of those hot button issues such as the District Energy system , purchase of more downtown land, purchasing air when there was more than sufficient supply of land did not reach the Core review, or the very least did not get an airing before the public.
An Audit of the books as KPMG knows full well does not leave any stone unturned. It this instance it does.
A couple of days ago I raised the matter of why we had spent $ 4 million dollars in the purchase of air and land when the Council knew full well that we had an overabundant supply of land in the downtown.
$ 4 million will go a long way to fixing our crumbling roads , sewer and water and if the purpose of the Core Review was to look at how the city is spending money it could have very well started there, but it didn’t, why?
The second issue that did not see the light of day was the District Energy System. If you examine what the City, (which is you and I) is paying per GJ to heat the city buildings, a Core Review should have said “hold It, let’s turn off the system at least until such time as it is cost efficient". Whether the people who conducted the review are aware of that fact I cannot say. But you surely can say that members of council should know just what that extra cost is to the public, and they should be concerned. To this date however not a peep.
At 12.50 per GJ for heat, which is what it is costing the taxpayers today, the city could save about $165,000 dollars, because under the old rate the city was paying $7.69 a GJ and there is a hell difference in the two figures.
If you look at your own home heating bill you will see that you are paying about $7.69 a GJ for you home heating gas and you can bet your last dollar that the city would be paying far less on a large bulk buy.
Mayor Shari Green said during her campaign that she would seek savings of up to 10% in every department of city hall. It was a noble thought. The problem however is that unless you are prepared as a Mayor and Council to say, so sorry residents we made a boob we shouldn’t have developed the District Energy System quite yet and now that we have it we can save some money and maybe some face by shutting it down until such time as it becomes economically feasible.
Instead of looking around to see what we can sell to throw at our ever growing debt, we needed to look at areas we could cut in order to save that money. Strangely the low hanging fruit never got touched.
I’m Meisner and that’s one man’s opinion.
Comments
While I agree that the district energy system is nothing but a boondoggle I can fully understand it’s exclusion from the review. It’s not a core service.
With Lakeland closed I have to wonder if the cost is even an issue now?
Probably without even realizing it and looking at the wrong things again, you’ve hit on the very point. Council isn’t interested in re-examining old decisions of theirs. This was a core SERVICES review, focused on looking at how the City provides services to the taxpayers.
Ben, you and Peter seem to suffer from the same exasperating focus on the past. I think that is a waste of energy, because these are sunk costs now. It’s over. If you’ve learned something from it, great, use that as you move forward, but belabouring past decisions just comes off as petty and unproductive, because the time to do something about that is past. If you’re concerned about the operational efficacy of running the system, then make some inquires and make your concerns known directly.
“The fewer the facts, the stronger the opinions.”
Sine Nomine,
Ben was looking at ‘operating costs’, not ‘sunk costs’. It costs $12.50 per GJ to operate the District Energy System. It costs $7.69 per GJ to heat the buildings the old way.
Posted by: Icicle on November 7 2012 6:21 AM
Sine Nomine,
Ben was looking at ‘operating costs’, not ‘sunk costs’. It costs $12.50 per GJ to operate the District Energy System. It costs $7.69 per GJ to heat the buildings the old way.
——————
But it’s still not a core service. We’re not paying $350,000 to point out the stupid moves council has made in the past. :)
Agreed! What is done is done or is it possible to go back to heating the old way?
Posted by: Sine Nomine on November 7 2012 5:51 AM “…If you’ve learned something from it, great, use that as you move forward,…”
This touches on the very reason why I am so frustrated with what the council is doing. I don’t feel that they have learned anything. They just won’t admit that some of the past decisions were mistakes. If I felt they learned from any of the overspending issues, I might be more accepting of moving on from them.
“Mistakes are always forgivable, if one has the courage to admit them.”
Bruce Lee
Sure it’s possible to heat the old way. We’re just building a new RCMP station. Why is it going on the District Energy system?
Since when is heating buildings the City owns not a core service?
Lots of good points here. The District Energy System has been one of the biggest wastes of taxpayer money we’ve seen in a long time, yet nobody in power seems to want to come out and admit that.
People were asking these kinds of questions before the project got going, and yet it was pushed through anyway.
The DES was sold as a clean green system that would help the airshed. Clearly no longer the case now that the fuel to feed it is being trucked in from Isle Pierre.
If the fact that the price of gas is now less than half of what it was when the system was being planned the economic benefits also fall to the wayside. The only thing that should prevent from mothballing it until it becomes viable under the above considerations would be any contractual obligations to Lakeland and costs associated to terminating or suspending contract.
Off topic but interesting article in the Globe this morning
http://www.theglobeandmail.com/news/british-columbia/minister-shared-e-mails-about-skeena-mill-allegations-with-insider/article5032413/
“This touches on the very reason why I am so frustrated with what the council is doing. I don’t feel that they have learned anything.”
Councils will never learn anything. They are always a fractured group of varying opinions who’s simple make-up changes every 2 years with retirements, re-elections and election defeats. There may be single smart voices on council but collectively the voice is nothing but a whimper. Policitics is about getting there and staying there. WE really need a politician of old who rallies the cause, makes a great speech, has a broader vision for what’s important and does what he/she says. This town is a great place to live in spite of council. Not becasue of it.
Its more than just the cost of Natural Gas to run this system.
Other parts of the rationale for the system was the reduction of green house gas into the atmosphere. As an example the City claimed that by burning the wood waste at Lakeland as opposed to trucking it to the pulpmills to be burned would amount to 300 less truckloads per year, and a reduction of 70 Tonnes of particulates into the air. When I advised them that in fact the pulp mills would just source the 300 truckloads from another area, they seemed to be surprised. So in effect there would be no reduction.
With the tragic fire at Lakeland, and the closing of the planer, we now have the reverse. Lakeland and the City are now trucking hog fuel from Isle Pierre through Prince George to Lakeland to keep this operation going. So for sure there is no reduction in particulates, and probably an icrease. Certainly more people would be effected because the trucks go right through the City.
Another issue is how does this sytem now operate. Orginally it worked in conjuction with the fuel that Lakeland burned to generate power to run their sawmill and planer. Now that they are shut down, is the system only generating enough hot water to supply the City?? If so, then what are the effects of the **economys of scale** that is lost. How much additional pollution is going into the air?? Who knows??
This whole system needs to be looked into, with the view of determining if in fact it is still a viable operation. Especially if a decision is made not to rebuild the mill.
“Since when is heating buildings the City owns not a core service? “
It’s not even a service; core or otherwise. Now if they were using the system to heat everyone’s houses you could call it a service.
Thank you Ben Miesner for pointing out yet an other very improtant oversight that this idiot CORE REVIEW service (inservice) has purpotrated on the citizens of our citizens. If I were a young person wanting to build a home for my new family I would be most interested in the kind of heat, the cost and availability of it. There is nothing wrong with holding councils feet to the fire over their past mistakes. The problem is how do we get mayor and council to consult with the tax payers on such expensive issues as a new mode of heating. IMO it’s just too damed expensive right now.
“It’s not even a service; core or otherwise. Now if they were using the system to heat everyone’s houses you could call it a service.”
The service is providing RCMP security, providing a pool, providing a Civic centre, providing an art gallery, providing a city hal for adminiatration of the entire city operation, providing an ice arena, providing a fire hall …. who knows what else is hooked up to it.
The service goes beyond the people,it goe to facilities to house the people and spaces to serve the public.
Therefore that includes the cost of buying those facilities, operating those facilities, and on going physical maintenance and even eventual replacement.
Thus, when procuring such facilities, any organization that operates such facilities ideally should be at least attempting to look at life cycle costing, something we used to do 40 plus years ago, but seems to be a little understood process.
Perhaps that is one of the main reason why we are running into these financial problems, people simply do not understand proper decision making for such “purchases”.
So, I a not sure what kind of a worldyou live in axman. It sure is only part of the world you need to live in so that you do not find yourself without a shirt eventually.
Maybe you work for the City?
One of the services most people purchase for themselves is transportation … some sort of a vehicle …..
In fact, for people these days, transportation from a to b is a core service.
A prudent purchaser will not only look at the purchase price, but also the gas mileage, maintenance costs, resale value. In other words, if one owns a car for say 5 years, one should be looking at how much that car will cost over the 5 year period.
In fact, it is about time that car dealers/manufacturers provide a “standard” operation sticker which show such a cost projection.
Hey axman …. how much does buying computers cost the City?
Are computers a service?
It most certainly is, in my world.
There are internal services and there are external services.
One cannot provide external services if an operation does not also hve internal services which support the primary service.
In fact, looking at such internal services is the key to determining the cost of external services.
If you were a business, and could not recover office overhead, you would shortly go bankrupt.
Hey, isn’t that where we could go with this City ….. go bankrupt?
Just think, if you are not recovering your internal costs within your business ….. the way to save money is to cut services to your customers …. LOL …..
and increase your office overhead to a larger precentage …… and then cut some more services to your customer ……
Smart …. very smart …. hey, maybe I got that wrong, you do not work for the City, you actually work for KPMG …..
;-)
Let’s clear up the mystery. The energy system at Lakeland mills was installed about 1983 so nothing new there. It does not generate power but was installed to provide heat to the dry kilns for drying lumber and as well heating the sawmill and planermill. The city’s portion consists of a stack gas economizer to recover heat that would have normally gone to atmosphere. A tube and shell heat exchanger transfers heat from thermal oil to the water being used by the city for building heat. Lakeland as part of the deal received a electrostatic precipitator to help remove the particulate that would have normally been released to the atmosphere.
There is also a big new fancy building downtown with natural gas fired boilers to backup or supplement the heat requirements.
Is this whole project cost effective. Certainly not. It will never have a payback and will continue to cost the taxpayer of PG far more money than stand alone building heating systems. There is probably more heat being released into the ground surrounding the buried pipes than being extracted for building heat.
Hey Gus I have a bone to pick. Seems that my information source is different then yours. I checked the site that you gave and it appears there is much irrelevent information that I dont even understand as figures appear to be in Norwegian currency.
The site I got my info from is the Vancouver Observer and they tell us that Norwgeians are debt free. So check it out.
http://www.vancouverobserver.com/sustainability/2012/03/21/good-idea-canada-norways-oil-and-gas-revenues-have-provided-norwegians-550
Hope I havent distracted everyone with my little bone
Cheers
Hey Gus I have a bone to pick. Seems that my information source is different then yours. I checked the site that you gave and it appears there is much irrelevent information that I dont even understand as figures appear to be in Norwegian currency.
The site I got my info from is the Vancouver Observer and they tell us that Norwgeians are debt free. So check it out.
http://www.vancouverobserver.com/sustainability/2012/03/21/good-idea-canada-norways-oil-and-gas-revenues-have-provided-norwegians-550
Hope I havent distracted everyone with my little bone
Cheers
I’m still not seeing this as a service. By your logic, KPMG should have looked at the cities BC Hydro bill.
This is a review of the core services; ie those services that are available to everyone. Things like recreational facilities, garbage pickup, snow removal, etc. etc.
What you guys are looking for is someone to stand up and say to the city, “This energy system was a colossal blunder.” You can substitute any number of the other mega projects for “energy system”. This is unfortunately well outside the scope of this review.
Maybe we should petition council to finance a review of every idiotic idea they’ve ever had. Would that make you feel better?
Anything our taxdollars are being spent on should have been part of the review. Pretty simple really.
“By your logic, KPMG should have looked at the cities BC Hydro bill.”
Sure why not? How much taxpayer money is wasted due to stupid people not turning off their lights etc?
Posted by: axman on November 7 2012 11:15 AM
“Maybe we should petition council to finance a review of every idiotic idea they’ve ever had. Would that make you feel better?”
YES!
Now I get it, one goes out and buys a 70 inch TV for 3 grand. Now one is short of money because of this grand purchase, problem. Ah how to solve this problem by not looking at what caused the problem in the first place, just take the money (food) out of the babies mouth. Problem solved.
Hey how is that electric golf cart working out? Is that toy in the core review?
“Anything our taxdollars are being spent on should have been part of the review. Pretty simple really.”
Unfortunately such a review would cost a lot more than the $350,000 we paid for this one.
I don’t thing that the mayor and council had any idea as to what they wanted from this review when they first approved it. “Let’s tell everybody who’s interested that we have $350,000 available for a review! How much will it cost us?” seems to have been the extent of their thinking.
Seems to be a colossal waste of money to spend on just one aspect of the city’s overall scope. I guess we weren’t told that it would only look at a few services the city provides.
I honestly thought it would be a complete overview. Must have missed the title Core Services or didn’t realise what that meant.
I think that when KPMG is hired to ask the General Public for input into the Core Review, and people suggest that they look into the Citys Energy System, it then becomes part of the Core Review. I suspect that they would give it no credence, however it can and should be a part of the discussion.
The DES is a Capital Project, and the City borrowed money for its portion of the project. Borrowing money for Capital projects certainly should be part of the Core Review.
The Energy System Total cost was $14,141,000.00 (supposedly).
This money came as follows
Municipal Rural Infrastructure Fund Grant (MRIF) $5,334,000.00
Green Municipal Fund (GMF) Grant, $800,000.00
Commuinity Works Fund (CWF) Gas Tax Grant $4,366,000.00
Borrowing $3,641,000.00 (plus interest) over 20 years.
The City stated that this project would help them meet thier greenhouse gas emission requirements. However because their methods to arrive at this conclusion were flawed, this is in fact a misrepresentation of facts. Once you add in the problems that they are now facing with the closure of Lakeland Mills, and the significant drop in the price of natural gas, we now have a **FAILED PROJECT**.
Aside from the fact that had the City not gone down this road in the first place, and the fact that the grant money could have probably been used in other areas, and the fact that we wouldnt have borrowed the money for the Cities portion, we still need to re visit this project with a view to determine if there are any greenhouse gas emission improvements (which I doubt) and whether in fact there would be a new revenue stream for the City. (which I doubt). Its only then that we can make a decision on whether to stop the program. (Kill the White elephant)
We have to quit running programs that are costing us money for no other reason than the refusal of those who originated the idea in the first place being unable to admit they made a huge mistake.
When will we get it right? We keep waiting for the next municipal election most of us are aware that Brian should be our next mayor but I doubt that he would even want the job after what our current crew has done to the cities finances. I love this city but only time will tell. Similarly Adrian is in the same kind of fix when he takes over on May 13th it will be tough going after Christy Clark and her friends have had their way with the BC economy now that is sad.
There is no science proving effect of greenhouse gas, co2, on climate if any at all.
There is no science proving effect of greenhouse gas, co2, on climate if any at all.
So what? There is no proof of the existence of God either. How much does the spend on the belief that he does exist? How much does the world spend fighting wars because they believe their deity is the only real one?
The belief in the effect of greenhouse gases has a much better grounding in provable conditions.
Perhaps we could build some churches for believers …… and then churches for those who protest that belief. We could call those people protestants …..
Al Gore could become St. Al the Baptist
;-)
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