Item - 2019.IE8.4

The Infrastructure and Environment Committee recommends that:

1. City Council authorize the General Manager, Toronto Water, to negotiate, enter into and execute an amending agreement to the Energy Transfer Agreement between the City and Enwave dated January 18, 2002, as amended by the amending agreement dated August 20, 2007 and the second amending agreement dated September 1, 2010 (collectively, the "ETA"), to permit the installation and operation by Enwave of three additional heat exchangers, larger in size and different in type, to the Energy Transfer Loop (the "ETL") at the John Street Pumping Station (the "JSPS") as part of the Deep Lake Water Cooling ("DLWC") system on terms and conditions acceptable to the General Manager, Toronto Water, and in a form acceptable to the City Solicitor, subject to the following conditions:

a. that the three new heat exchangers, and any upgrades or appurtenances necessary to fully and effectively operate and incorporate them into the existing infrastructure or operating DLWC system (the "Works"), shall be at Enwave's sole expense;

b. without limiting Recommendation 1(a), that Enwave shall be solely responsible for the installation, commissioning, operation, maintenance, warranty and repair of the Works, at no cost to the City whatsoever;

c. that the Works shall meet the City's technical and operational requirements as determined by the General Manager, Toronto Water, in his sole discretion;

d. on the City (Toronto Water) obtaining an amendment to its Drinking Water Works Permit (DWWP), and any other necessary approval(s) from the Ministry of the Environment, Conservation and Parks (MECP), to permit the use and operation of the Works, all at Enwave's sole expense;

e. that Enwave assume full responsibility under the ETA for the maintenance cleaning of the 39 heat exchangers, including all costs, to which the ETA applies, or will apply upon this amendment, including those portions of the heat exchangers through which the City's water passes, until such time as the ETA may be further amended to reflect any DLWC expansion approved by City Council, and otherwise provides for and governs the maintenance responsibility to clean, and pay the cost of cleaning the heat exchangers; or it is determined by either Enwave or the City, upon written notice to the other, that the DLWC expansion is no longer viable; and,

f. if the DLWC expansion is determined to be no longer viable, Enwave and the City will negotiate in good faith a mutually acceptable maintenance cost arrangement for the future continued cleaning of all 39 heat exchangers and, if the parties fail to do so within six months from delivery of the written notice specified in Recommendation 1(e), Enwave shall, at its own expense, remove the three additional heat exchangers and the ETA will be further amended to revert maintenance cleaning responsibility and costs back to the City for the original remaining 36 heat exchangers. In this latter event, the General Manager, Toronto Water, is hereby authorized to negotiate, enter into and execute the necessary amending agreement to the ETA on terms and conditions acceptable to the General Manager, Toronto Water, and in a form acceptable to the City Solicitor.

This report requests authority for the General Manager, Toronto Water, to enter into negotiations with Enwave Energy Corporation (Enwave) to amend the Energy Transfer Agreement between the City and Enwave dated January 18, 2002, as previously amended (the "ETA"), and to execute the necessary amending agreement, to permit the installation and operation by Enwave at its expense of three additional heat exchangers to the Energy Transfer Loop (the "ETL") at the John Street Pumping Station (the "JSPS") as part of the Deep Lake Water Cooling ("DLWC") system. Enwave has approached Toronto Water with a proposal to add these additional heat exchangers to the ETL, which are larger in size and different in type, to the 36 heat exchangers (18 pairs) currently in use. In addition to requiring an amendment to the ETA, Enwave's proposal would also necessitate an amendment to the City's Drinking Water Works Permit (DWWP) which amendment would require approval from the Ministry of the Environment, Conservation and Parks (MECP).

Back in 2013, City Council authorized the General Manager, Toronto Water, to enter into without prejudice negotiations with Enwave regarding Enwave's then proposed expansion of the DLWC system, which negotiations are on-going. That large-scale DLWC expansion proposal, which has been modified over the years by Enwave, seeks to significantly increase the size of DLWC, based on a new raw water diversion system originating at Toronto Water’s Island Water Treatment Plant (WTP) and terminating at the JSPS. Should Enwave's expanded DLWC system eventually be realized and, ultimately, approved by City Council, it is contemplated that the three additional heat exchangers would eventually be disconnected from the ETL, rolled into the expansion and utilized as part of the expanded DLWC system infrastructure for raw water. Until such time as that occurs, Enwave is prepared to assume full responsibility under the ETA for the maintenance cleaning of all 39 heat exchangers, including all costs. However, in the intervening period, if it is subsequently determined by either Enwave or Toronto Water that an expansion of the DLWC system is no longer viable, it is proposed that Enwave and the City will negotiate in good faith a mutually acceptable maintenance cost arrangement for the future continued cleaning of all 39 heat exchangers. If the parties cannot do so within six months, Enwave will, at its own expense, remove the three additional heat exchangers and the ETA will be further amended to revert maintenance cleaning responsibility and costs back to the City for the original remaining 36 heat exchangers. This report also seeks authority for the General Manager, Toronto Water, to enter into and to execute that amending agreement, if necessary.

Enwave has represented to Toronto Water staff that the addition of these new heat exchangers would provide it with sustained cooling capacity and overall operational efficiencies without in any way adversely impacting the City's water supply, Toronto Water's operations and plant capacity, flows, or the DLWC system design as contemplated by the ETA. In exchange, because Enwave would assume responsibility for the maintenance cleaning of all 39 heat exchangers, including all costs, the City would receive the benefit of a reduction in Toronto Water's annual operating expenditures. In addition, due to the operation of the additional heat exchangers, it is expected that the City would receive a minor increase in the Energy Transfer Fee (ETF) revenue paid by Enwave to the City under the ETA.