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ADOPT A RESOLUTION TO AUTHORIZE CONTRACT AMENDMENT NO. 3 WITH KEMIRA WATER SOLUTIONS, INC. TO PURCHASE FERRIC AND FERROUS CHLORIDE FOR WASTEWATER TREATMENT
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to authorize contract Amendment No. 3 (Exhibit 1 to the Resolution) in the amount of $2,003,771 with Kemira Water Solutions, Inc. to accept the annual price adjustments and increase funding to purchase ferric chloride and ferrous chloride for wastewater treatment.
It is also recommended that the Council authorize the City Manager to take all necessary and appropriate actions to carry out the purpose and intent of this resolution.
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Summary
Ferric chloride and ferrous chloride are used in wastewater treatment at the Regional Wastewater Control Facility (RWCF) to control hydrogen sulfide gas production. Elevated hydrogen sulfide gas levels can be dangerous and are regulated under a permit with the San Joaquin Valley Air Pollution Control District.
On March 22, 2022, the City Council adopted Resolution 2022-03-22-1213, authorizing a five-year contract with Kemira Water Solutions, Inc. (Kemira) for $3,330,620 to purchase ferric chloride and ferrous chloride. Amendments No. 1 and No. 2 were approved administratively under the City Manager’s authority to accept price adjustments and revise the total contract amount to $3,455,620.
On April 19, 2023, Kemira requested a cost adjustment to decrease the unit cost for ferric chloride from $1,534.05 per dry ton to $1,491.00 per dry ton; and ferrous chloride from $1,375.35 per dry ton to $1,287.00 per dry ton, effective July 1, 2023. The RWCF Plant Modifications Project has changed the wastewater treatment process, which has increased the production of hydrogen sulfide. Operational data estimates a 65 percent increase in chemical usage is necessary to control the production of hydrogen sulfide.
If approved by the Council, Contract Amendment No. 3 will accept the unit cost reduction, increase the total funding to account for the increased use over the remaining contract period, and revise the contract price to $5,429,391 for the contract term.
DISCUSSION
Background
Various chemicals are used in wastewater treatment to induce changes that reduce hazardous conditions and remove specific impurities. These chemical and physical changes are necessary to meet regulatory requirements. Ferric chloride and ferrous chloride are chemicals used in the wastewater treatment process to control hydrogen sulfide gas production. Elevated hydrogen sulfide levels can be dangerous to operations staff and are regulated under a permit issued by the San Joaquin Valley Air Pollution Control District.
On March 22, 2022, the City Council adopted Resolution No. 2022-03-22-1213, authorizing a five-year contract with Kemira for $3,330,620 to purchase ferric chloride and ferrous chloride. The contract expires on December 31, 2026, and includes the ability to adjust pricing based on identified factors, such as cost changes for raw materials or transportation. Contract Amendment No. 1 was approved under the City Manager’s authority on October 20, 2022, to accept the unit cost adjustments, and increase compensation by $125,000. Amendment No. 1 also revised the contract total to $3,455,620, and its cost changes are summarized below:
|
|
FY 2021-2022 |
FY 2022-2023 |
|
Ferric chloride |
$1,117.12/dry ton |
$1,534.05/dry ton |
|
Ferrous chloride |
$1,224.32/dry ton |
$1,375.35/dry ton |
|
Total Contract |
$3,330,620.00 |
$3,455,620.00 |
The RWCF Plant Modifications Project has changed the treatment process, resulting in higher production of hydrogen sulfide production, and increased need to use ferric and ferrous chloride to control the production of hydrogen sulfide. Contract Amendment No. 2 was approved administratively on March 30, 2023, to advance $500,000 from the future year’s funding to the 2022-2023 fiscal year to pay for the additional chemicals required. Amendment No. 2 did not impact the total contract amount.
Present Situation
On April 19, 2023, Kemira requested a cost adjustment to decrease the cost for ferrous chloride and ferric chloride, effective July 1, 2023. The contracted unit cost of ferric chloride will decrease from $1,534.05 per dry ton to $1,491.00 per dry ton and ferrous chloride from $1,375.35 per dry ton to $1,287.00 per dry ton.
The new treatment processes at the RWCF have been operational for one year and provided enough data for staff to estimate the chemical necessary to control the production of hydrogen sulfide. The new treatment processes will require approximately 65 percent more chemical application in comparison with the previous year to keep hydrogen sulfide levels below the permitted limits. The proposed contract changes are summarized below:
|
|
FY 2022-2023 |
FY 2023-2024 |
|
Ferric chloride |
$1,534.05/dry ton |
$1,491.00/ dry ton |
|
Ferrous chloride |
$1,375.35/ dry ton |
$1,287.00/ dry ton |
|
Total Contract |
$3,455,620.00 |
$5,429,391.00 |
If approved by the Council, Contract Amendment No. 3 will accept the unit cost reduction, add $2,003,771 to fund the increased chemical usage, and revise the total contract amount to $5,429,391 for the remaining term.
FINANCIAL SUMMARY
There are sufficient funds for the proposed contract for the remainder of FY 2023-2024. Budgeting for future purchases will be from the same accounts in subsequent fiscal years and presented to Council for approval through the annual budget approval process.
This action has no impact on the General Fund or any other unrestricted funds.