Energy Services Acquisition Program: Standing Committee on Procedure and House Affairs—February 27, 2020

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Commitment on Energy Services Acquisition Program

In line with the mandate, on June 4, 2019, the Government of Canada announced that it is entering into a contract with a public—private partner (P3) for the modernization of the district energy system in the National Capital Region (NCR).

Key messages on energy services acquisition program

Current status of Energy Services Acquisition Program

The public—private partnership contract with Innovate Energy was finalized in May 2019. On April 1, 2020, it will take over operation and maintenance of the existing system and deliver a modernized system by the end of October 2025. Innovate Energy will operate and maintain the modernized district energy system until October 2055.

Background of Energy Services Acquisition Program

In the NCR, 80 buildings, including the Parliament buildings, are on the district energy system that connects to central plants using over 14 kilometers of underground piping to provide heating by steam and cooling by chilled water. This system was built between 50 and 100 years ago. The infrastructure is reaching the end of its service life and it uses outdated technology that is inefficient and expensive to maintain.

The department supports reaching goals laid out in the Federal Sustainable Development Strategy. The department’s national carbon neutral portfolio plan prioritizes reducing greenhouse gas emissions and improving the energy performance of its assets. Modernizing the outdated district energy system is a key part of this plan.

The Energy Services Acquisition Program (ESAP) includes the energy services modernization project, which will modernize the district energy system in the NCR. The project will involve the conversion of the system to use low—temperature hot water for heating and to electric chillers for cooling. The investment in modern technology will result in an estimated cost avoidance of more than $500 million over the next 35 years.

Budget 2016 provided the funding required to complete the project. It will be delivered as a public—private partnership with Innovate Energy to replace the current infrastructure and to operate and maintain the system over a 35year period. The department will retain ownership of all these assets throughout the term of the contract.

Modernization will increase safety, efficiency, reliability and environmental performance, resulting in a reduction of operating costs and an estimated reduction in greenhouse gas emissions of approximately 33%. Future activities will move towards “deeper greening” by replacing natural gas with carbon neutral fuels for baseload operation, a move that has the potential to reduce total emissions by 90% by 2030.

In addition to the modernization of the plants, the ESAP is undertaking the conversion of all connected user buildings from either high-pressure steam or high-temperature hot water heating to technology that can accept low-temperature hot water through the user building conversion plan. The ESAP is responsible for delivering building conversions through various delivery mechanisms; however, the conversion of connected user buildings is not part of the public—private partnership contract. The expected completion date of all building conversions is the end of September 2024. This will ensure all buildings are ready for connection to the modernized district energy system.

Questions and answers on Energy Services Acquisition Program

In this section

Question 1

When was funding for ESAP announced?

Answer 1

In budget 2016, the government announced it would invest up to $2.1 billion towards repairs and retrofits to its wide range of properties and buildings, as well as the greening of government operations. Examples included funding to improve military housing, upgrade border infrastructure, modernize the generation of energy for marine communication and traffic services, and reduce the carbon footprint and energy consumption of federal buildings in the NCR, known as the ESAP.

Question 2

What is the purpose of the ESAP?

Answer 2

The Government of Canada is transforming how it heats 80 buildings and cools 67 buildings in the NCR through the ESAP. This transformation will help us reduce greenhouse gas emissions and further green our own operations.

We have signed a contract with a public—private partner (P3), Innovate Energy, to design, build and finance the modernization, to be complete in 2025, and to operate and maintain the system from 2020 to 2055. The Government of Canda will retain the ownership of all of the heating and cooling assets.

Question 3

What are the details of the public-private partnership included in the program?

Answer 3

We are not privatizing the heating and cooling plants or the distribution network, otherwise known as the district energy system. In fact we are retaining these assets. We are outsourcing the modernization, operation and maintenance of the system. Presently, 2 out of the 5 Public Services and Procurement Canada (PSPC) plants are already operated by private sector operators—Tunney’s Pasture and the National Printing Bureau. A sixth plant, servicing an RCMP campus, is also operated by the private sector but it is scheduled to be decommissioned.

The private sector operator will be subject to our health and safety regulations and standards once they take over operations. In addition, the contract will include provisions to hold the private sector operator accountable to performance standards.

We will be retaining control of the process including monitoring of all of our assets. As a result, physical security will not be impacted. Furthermore, the private partner will be subject to the same security requirements and will need to obtain proper security clearances.

Question 4

How many jobs will it affect by privatizing the maintenance of the system?

Answer 4

There are approximately 35 heating plant operators in the 3 plants currently operated by PSPC: Cliff, Confederation Heights, and the National Research Council Plant on Sussex Drive. The union for employees in the heating and cooling plants was consulted before the release of the request for proposals in 2017. More than half of these employees are eligible to retire and the Government of Canada will support all employees through their transition to new roles emerging within the service management areas.

Question 5

What is the impact on these employees and what information have they received?

Answer 5

PSPC met with every Central Heating and Cooling Plant (CHCP) employee individually to discuss career aspirations in the fall of 2018. Human resources are currently conducting an analysis to seek potential opportunities where CHCP staff can transfer their competencies into a new job. The next step will be to provide job shadowing opportunities to all employees interested for future employment opportunities after the P3 partner takes over operations of the final 4 CHCPs (2 are currently operated by the private sector).

Question 6

The union has asked that the Work Force Admustment Committee begin holding regular meetings. Has this process been initiated?

Answer 6

Utilities Management Services (UMS), the group that includes the plant employees, and their local and national unions, has been engaged in the ongoing planning of the project since 2009.

A Joint Workforce Management Committee was established in May 2019 and will continue to meet until at least March 2020, when the system operation is formally handed over to the private sector operator.

Question 7

How do you respond to the union’s allegations that this new system will be more dangerous to operate?

Answer 7

All modern district energy systems use low temperature hot water. This technology is being used in the modern buildings worldwide including in downtown Ottawa. The low temperature hot water that will be used after modernization is much safer than steam. The modernized system will operate at 70 to 90° celsius and at a far lower pressure. Unlike steam, which is a compressed gas, hot water can spill but does not explode, and a breach in the new system can be quickly isolated and repaired.

Question 8

Unions have also claimed that moving to this new system would greatly complicate routine repairs or upgrades and require dumping out millions of gallons of water that are chemically treated (to prevent corrosion) into the Ottawa River. How do you respond to these concerns?

Answer 8

The modernized system will use new equipment and modern monitoring technology which will make routine repairs much easier. The new system will have isolation valves that allow for faster repairs.

Water from the modernized system will not be released into the Ottawa River. Drainage of the system will be limited to less than 3,000 litres (800 gallons) of treated water, which will be released into the City of Ottawa’s sewage system at levels well within legal limits and consistent with industry practice. This will make the new system less costly to maintain and environmentally less risky than the current steam system.

Question 9

What savings are expected as a result of this program (maintenance privatization, as well as the heating costs)? How much are emissions expected to be reduced?

Answer 9

The ESAP is targeting a reduction of 33% in greenhouse gas emissions, which would bring residual greenhouse gas emissions to approximately 43 kilotons per year. We are anticipating the savings to be approximately $500 million over the project life when compared to the current operation.

Question 10

What are the next steps in the procurement process?

Answer 10

On June 4, 2019 the government announced the partnership with Innovate Energy for the design and construction of the new system, to be completed by 2025, as well as additional funding for ongoing maintenance and operation. The contract is valued at $1.1 billion.

In June 2019, the department’s ESAP signed an agreement with Innovate Energy for the modernization of the district energy system in the NCR. The public private partnership will design, build, operate and maintain the district energy system, with construction to be completed in 2025.

The department retains the assets and is responsible for preparing each building for connection to the system, a program referred to as the user building conversion plan. After construction completion, Innovate Engergy is contracted to operate and maintain the district energy system until 2055.

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