Request for Proposal RFP9668
Operation and Maintenance of LCRA’s Agricultural Operations & Canal Assets
Table of Contents
1.0Background and Purpose
2.0Current Operations
3.0Services Provided by Supplier
3.1Operation and Maintenance Agreement
3.2Lease Agreement
4.0Regulatory Requirements
5.0Use of LCRA Employees
6.0Expected Contract Term
7.0Pricing Structure
8.0Form of Response
Appendix A: Map of Operations
Appendix B: Description of Pumping Plants
Appendix C: Description of Dams
Appendix D: Description of Fleet Assets
Appendix E: O&M Agreement
Appendix F: Lease Agreement
Appendix G: LCRA Employees
1.0Background and Purpose
1.1LCRA Overview
The Lower Colorado River Authority (LCRA) is a conservation and reclamation district created by the Texas Legislature in 1934 pursuant to Article XVI, Section 59, of the Texas Constitution. Among other operations, LCRA manages water supplies and floods in the lower Colorado River basin.
LCRA manages water supplies for cities, agriculture and industries along a 600-mile stretch of the Texas Colorado River between San Saba and the Gulf Coast. LCRA regulates water discharges to manage floods and releases water for sale to municipal, agricultural and industrial users.
1.2Purpose
LCRA seeks proposals to outsource its retail operations and maintenance of its agricultural and firm water deliverycanal system assets within its Garwood, Gulf Coast, and Lakeside operations in Colorado, Wharton, and Matagorda counties (the “Canal System Assets”).
LCRA is soliciting two options for proposal: (i) a Lease of the Canal System Assets (“Lease Agreement”) or (ii) an Operation and Maintenance Agreement (“O&M Agreement”). Supplier may propose on either or bothof these options.
1.2.1The O&M Agreementwould be an agreement where LCRA continues to own the Canal System Assets and the rights and obligations to provide retail interruptible agriculturalservice and water transportation services to LCRA firm and interruptible customers at rates set by LCRA. The successful O&M Agreement respondent (the “Supplier”) would handle the day-to-day management, operation and maintenance of the Canal System Assets (including the canal system assets, equipment and inventory); billing and collection of amounts charged by, and owed to, LCRA from the retail interruptible agriculturaland firm customers; and other management services as described herein. LCRA would pay a fee monthly to the Supplier for its services.
1.2.2The Lease Agreement would be a lease of the Canal System Assets detailed in these documents. Under the Lease Agreement, the Supplier would be responsible for providing retail interruptible agricultural water service from the Canal System Assets, including entering into and managing retail interruptible agricultural water customer contracts, setting retail interruptible agricultural water rates, ensuring delivery of interruptible agricultural water to customers, and maintaining and operating the Canal System Assets. The Supplier would also contract with LCRA to divert and deliver water to LCRA firm customers, consistent with the terms of LCRA’s contractual obligations to such customers. LCRA (as “Lessor”) will retain ownership of the Canal System Assets and will lease these assets to the Lessee for a nominal fee. The services expected under the Lease Agreement would generally include setting interruptible retail rates, managing customer interfaces, operating and maintaining all Canal System Assets, handling emergency situations, and communicating effectively with LCRA. The Supplier’s sole sources of revenue under the Lease Agreement will be: (i) the revenue generated from retail interruptible agricultural water supply agreements entered into between the Supplier and the retail interruptible agricultural customers based on the rates established by the Supplier (which rates are subject to review by the PUCTexas Public Utility Commission (PUC)), and (ii) revenues paid by LCRA to the Supplier to transport water to LCRA’s firm customers using the Canal System Assets at rates agreed to between LCRA and the Supplier.
Under either agreement, LCRA will retain all rights in its sole discretion to manage and use its water rights in any manner consistent with governing law and LCRA’s legal obligations and to seek amendments to its water rights, including its Water Management Plan, and adopt amendments to its Water Conservation Plan(s) or Drought Contingency Plans from time to time.
The general geographical location of these operations can be found in Figure 1 below.
Figure 1: LCRA’s Lakeside, Garwood, and Gulf Coast Operations
LCRA is issuing this Request for Proposal (RFP) to any qualified Suppliers to manage,operate and maintain LCRA’s Canal System Assets. The ideal Supplier will demonstrate the following:
- the ability and commitment to provide consistent water delivery services;
- demonstrate that its management, operation and maintenance of LCRA’s Canal System Assets will reduce the overall costs to LCRA and the retail customers served by the systems, and not adversely affect LCRA’s firm or interruptible water rates for the supply of water from the Colorado River to the Canal System Assets;
- a demonstrated ability to meet applicable regulatory requirements; and
- the ability to invest in necessary maintenance and infrastructure projects required to maintain the Canal System Assets in good working order to provide water service to the retail customers.
1.3Instructions
Suppliers shall prepare their response in accordance with the milestone schedule below. The required proposal format and contents are described in the RFP Response Template that is included in the zip file as Attachment 1. Each proposal should be submitted via email to with a copy to by the proposal deadline. Please see Attachment 2,RFP 9668 Instructions, included in the zip file for further instructions.
Dates / MILESTONES3/27/2015 / RFP Issued
4/8/2015 / Deadline for Questions
Date 4/2/2015
Time: 10:00 AM
Location:
Garwood Office
7859 Hwy 71
Garwood, Texas 77442 / Pre-Proposal Meeting
The pre-proposal meeting is mandatory if you plan on submitting a proposal.
04/30/2015
3:00 PM / Proposal Deadline
09/2015 / Anticipated Award Date
2.0Current Operations
2.1Assets Overview
The Gulf Coast, Lakeside, and Garwood Canal System Assets contain 11 major pumping plants that supply water through a 1,100-mile network of canals. The facilities are capable of transporting water to over 88,000 acres to serve retail interruptible agricultural and industrial customers. A detailed map of the service area is included in Appendix A: Map of Operations.A high level overview of the physical assets by operation is presented in Table 1 below:
Table 1: Assets by OperationGulf Coast / Lakeside / Garwood
Acreage Capacity / 41,000 / 28,300 / 19,000
Acres in Service Area / 210,000 / 122,000 / 90,000
Miles of Main Canals / 370 / 275 / 175
Miles of Laterals / 200 / 100 / 100
Approximate Number of Control Gates / 1,020 / 1,300 / 1,080
River Pump Stations / 3 / 1 / 1
Relifit Stations (% acreage serviced by relift pumps) / 1 (Industrial
customer only) / 2 (100%) / 1 (28%)
Tertiary Pumps Stations (% acreage serviced by tertiary pumps) / 0 / 2 (3%) / 0
*Dams / 2 / 0 / 1
Diversion Units / Inch – 4000gpm / Box = 3000gpm / Inch – 1000gpm
* LCRA does not anticipate including the new off-channel reservoir that is under construction in the assets to be operated and/or leased.
Detailed information about each pump station and dam can be found in Appendix B: Description of Pumping Plants and Appendix C: Description of Dams respectively. LCRA will make fleet assets available for lease at a nominal sum to Supplier for use in supporting the Gulf Coast, Lakeside, and Garwood operations. The fleet assets are described in Appendix D: Description of Fleet Assets. Additional information and description of Assets is provided in Attachment 3.
2.2Water Customer Overview
This section describes the current customer base served by the Gulf Coast, Lakeside, and Garwood operations. The customer base will vary over time as agricultural water availability and requirements vary. It could also change if new industries into firm water contract with LCRA and locate along LCRA’s Canal Assets. Water supplies managed by LCRA are divided into "firm" and "interruptible" water. Generally, firm water is available even during a very severe drought. Cities, industries and power generatorsrely on firm water supplies. Firm water contracts are typically longer-term, ranging from 10-40 years. Interruptible water is mostly used for agriculture, only made available on a seasonal basis and is cut back or cut offduring severe droughts . Because of the ongoing drought, except for agricultural customers within the Garwood operation, no interruptible stored water has been supplied to customers within the Gulf Coast or Lakeside operations since 2011. A modest amount of downstream run-of-river water was supplied within the Gulf Coast operation on an interruptible basis in 2014.
Table 2: Current Customer Count by TypeInterruptible Customers / Firm Customers
Garwood / 40, Agricultural / 0
Lakeside / 38, Agricultural / 0
Gulf Coast / 52, Agricultural / 3, Industrial
2.2.1Interruptible Water
LCRA makes water available for agricultural purposes to interruptible retail agricultural customers within the Gulf Coast, Lakeside, and Garwood operations. Availability of interruptible water is determined by LCRA, in accordance with the terms and conditions of LCRA’s water rights, including any applicable agency orders or other regulatory or legal requirements, and the dates and limitations set forth in the LCRA’s Water Management Plan in effect on the commencement date and as thereafter amended, as well as LCRA’s agreement with Garwood Irrigation Company (the Garwood Purchase Agreement is available on LCRA’s website here)More information regarding LCRA’s Water Management Plan, which is amended from time to time, can be found on the LCRA.org website here.In addition, since 2012, determination of interruptible water availability for LCRA’s Gulf Coast and Lakeside operations, and Pierce Ranch, has been governed by emergency orders issued by the Texas Commission of Environmental Quality, the most recent of which can be found on TCEQ’s website here. (Note: LCRA also supplies interruptible water to Pierce Ranch, an independent system, on a wholesale basis pursuant to a long-term agreement, but LCRA does not own or operate any assets at Pierce Ranch that are subject to this solicitation.)
The LCRA Board regularly adopts revisions to its standard form interruptible agricultural irrigation water contracts and rates for interruptible agricultural water supply, typically on an annual basis for those operations when interruptible supply is available. LCRA will continue to do this under the O&M Agreement and anticipates that the Lessee under the Lease Agreement will assume a similar practice. Attachment 5 includes copies of LCRA’s most recent standard form contracts for interruptible agricultural water for 2015 first crop rice and 2014 standard forms for second crop and supplemental uses. LCRA’s contract rules for interruptible water are available on here. In recent years when interruptible stored water was cutoff, LCRA also offered contracts for delivery of privately-owned groundwater and run-of-river only interruptible water. Copies of the most recent standard form contracts for these services are also included under Attachment 5.
2.2.2Firm
LCRA currently has firm water contracts to supply water through the canals within the Gulf Coast operation for three industrial customers. LCRA may add additional firm customers at any time during the term of the proposed agreement. A component of the rate in these customer contracts includes costs to divert and transport water from the river through the canal system.
- Oxea Corporation- up to 3,222.33 AF/YR (from canal)
- Underground Services Markham- up to 8,900 AF/YR (from canal)
- STP Nuclear Operating Company (STPNOC) - STPNOC has a firm water contract with LCRA that allows it to seek delivery of water through the west side of the Gulf Coast canal system; however, it has never exercised that option and instead diverts downstream of LCRA’s Bay City dam. Pursuant to the contract, canal deliveries to STPNOC could include up to 102,000 acre-feet/year of run-of-river diversions and up to 40,000 acre-feet/year of other firm water backup supplied by LCRA. A copy of the contract with STPNOC is attached as Attachment 6
- Historical Water Volumes
Table below showshistorical water volumes pumped from the river for delivery to interruptible water customers, by agricultural operation, through LCRA’s canal system. Table 4 below show historical water volumes pumped from river for delivery to firm water customers through the canals within LCRA’s Gulf Coast Operation. These numbers do not reflect total amounts delivered to customers along the canals, which would be less due to canal system delivery losses that range anywhere from about 10-30% or more. Delivery losses in the canals vary considerably between Garwood, Gulf Coast, and Lakeside operations, and within each operation depending on the specific canal and conditions at the time of delivery.
As mentioned above, due to drought conditions in 2012, 2013, and 2014,the interruptible stored water supply to agricultural customers in Gulf Coast and Lakeside was curtailed in accordance with emergency orders of the Texas Commission on Environmental Quality (TCEQ) similar to the order presently in effect for 2015 and available here.
Table 3: Total Interruptible Water Pumped from the River for Delivery to LCRA’s Interruptible Customers (acre-feet) (from stored and run-of-river supply)2009 / 2010 / 2011 / 2012 / 2013 / 2014
Garwood / 100,150 / 88,895 / 117,677 / 85,478 / 90,474 / 82,114
Lakeside / 115,888 / 96,362 / 142,488 / 649 / 0 / 0
Gulf Coast / 197,610 / 150,647 / 170,633 / 11,812 / 10,696 / 0
Table 4: Firm Water Pumped from the River for Delivery via Canals to Firm Customers (acre-feet) (from stored and run-of-river supply)
2009 / 2010 / 2011 / 2012* / 2013* / 2014
Oxea / 2,955 / 2,263 / 5,538 / 3,270 / 2,711
Underground Services Markham / 1,546 / 5,660 / 3,255 / 6,566 / 7,457
South Texas Project / 0 / 0 / 0 / 0 / 0
2.2.4Seasonality of Operations
- The interruptible agricultural customers within the Garwood, Lakeside, and Gulf Coast operations require water between early/mid April and mid-October each year.
- Supplier will need to ensure the canal assets are maintained and prepared to receive and deliver water at start of season, with particular attention to years following curtailment. Supplier must be able to deliver interruptible water through canals by April 15 in each year interruptible water is available. Availability may not be known prior to March 1.
3.0Services Provided by Supplier
LCRA is looking to receive proposals from qualified operators that can either: (i) manage, operate and maintain the Canal System Assets or (ii) lease the Canal System Assets and not only manage, operate and maintain the Canal System Assets but also take over responsibility for entering into and administering retail agricultural interruptible contracts and fixing rates for such contracts.
3.1Operation and Maintenance Agreement
The Supplier will be responsible for the management, maintenance and operations of the Canal System Assets, subject to oversight and control by LCRA as the owner and service provider. In Attachment 5 LCRA has provided some standard contract forms that LCRA has recently used with the interruptible agricultural customers. LCRA’s contract rules for interruptible water are available on here. Proposed elements of an O&M services agreement are outlined in Appendix Eandsummarized below.
The Supplier will manage, operate and maintain the Canal System Assets to deliver water to its interruptible agricultural customers and to transport LCRA’s water to LCRA’s firm water customers. The general services required under the Operation and Maintenance Agreement option, described below, will also be included in the Lease Agreement.
3.1.1Maintenance Services
Supplier will maintain all equipment as detailed below. Equipment would include pumps, dams, canals, gates, vehicles, rolling equipment, and facilities (each Operation has a small retail business office).
3.1.1.1Must be maintained to the manufacturer’s recommended standards for each piece of equipment and in accordance with LCRA Preventative Maintenance (PM) Schedules.
3.1.1.2Inventory must be maintained at the higher of (i) the same level as exists on the Commencement Date or (ii) the level required to meet the service obligations of this agreement.
3.1.1.3Governance of Assets
Please see Attachment 7 for LCRA PM Schedules for all assets and Operation Contract Rules. While the Supplier is expected to maintain the canals system to the best of its ability, LCRA has provided this information to establish the minimum quality of care expected of Supplier.
3.1.1.3.1The Lakeside and Gulf Coast Canal System Assets have been maintained at a very minimal level since early 2012 due to curtailment of interruptible supplies, during which time significant vegetation growth has occurred in and around the canals and other Canal System Assets have been inactive. The Supplier should address in detail the cost and conditions under which Supplier could have these operations in service and ready to efficiently transport interruptible agricultural water, if and when it becomes available. Supplier must be able to deliver interruptible water through canals by mid-April in each year interruptible water is available. Availability may not be known prior to March 1. In addition, the Supplier should provide detailed information addressing proposed costs and conditions for ongoing canal maintenance.
3.1.1.3.2All decisions regarding maintenance and operation of the Canal System Assets will be supervised by, and coordinated with, LCRA.
3.1.2Operations Services
The Supplier will operate the Canal System Assets to deliver water to LCRA’s retail interruptible agricultural customers and to LCRA industrial customers.
3.2Lease Agreement
3.2.1LCRA will retain ownership of all Canal System Assets used to divert, pump and deliver water from the Colorado River to the individual customers, and will lease most of these assets to the Supplier for a nominal annual fee. The off-channel reservoir near Lane City that LCRA is currently constructing will be excluded from the lease, as well as the pumping facilities associated with the reservoir. LCRA will contract with Supplier to provide interruptible water to the diversion points associated with each operation, when available. The services expected under the Lease Agreement would include contracting with interruptible agricultural customers and setting interruptible agricultural retail rates, managing customer interfaces, managing,operating and maintaining all Canal System Assets, water delivery to LCRA firm water customers, handling emergency situations, and communicating effectively with LCRA and the customers. Proposed elements of a lease agreement are outlined in Appendix F.
Setting Interruptible AgriculturalRetail Rates