AGENDA CAPTION:
Title
Consider approval of Resolution 2026-130R, approving a Change in Service to the agreement with Texas Electric Cooperatives for a price adjustment in materials and freight charges and for tariff fees passed through to the City of San Marcos associated with the Hilltop Substation Transformer to increase the overall contracted amount by $218,369.55 resulting in a total amount not-to-exceed $1,900,716.55; authorizing the City Manager, or her designee, to execute the Change in Service on behalf of the city; and declaring an effective date.
Body
Meeting date: August 18, 2026
Department: SMTX Utilities
Amount & Source of Funding
Funds Required: $ 218,369.55
Account or Project Number (C = CIP funds): C821 -ELECTRIC
Funds Available: Yes
Account Name: Hilltop T1 Transformer Replacement
Fiscal Note:
Prior Council Action: Resolution No. 2024-23R approving the purchase of a 18/20/30 MVA Substation Transformer for Hilltop Substation from Texas Electric Cooperatives in the amount of $1,645,556.00.
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Background Information:
In Fiscal Year (FY) 2021, San Marcos Utilities completed an Electrical Master Plan (EMP) to evaluate the existing electrical grid, assess future customer growth, and identify the capacity needed to support that growth. The EMP was intended to guide proactive planning and recommend improvements to ensure reliable service for the expanding San Marcos community.
The EMP identified several system upgrades, including a critical need for increased electrical capacity and improved backup options for Downtown San Marcos. To address this, Electric Utilities developed a project to upgrade the Hilltop Substation by installing a new 18/20/30 MVA transformer and three additional breakers. This equipment was intended for purchased in FY 2024 in preparation for construction scheduled for FY 2027. The added capacity would support customer growth and provide essential backup for existing electrical circuits thereby strengthening downtown electrical service and helping to prevent outages in that area.
On December 7, 2023, five bids were received for Solicitation 224-009, Hilltop Substation Transformer. Texas Electric Cooperatives of Georgetown, Texas submitted the most responsive bid, offering the best value to the City at $1,645,556.00. The bid met all technical requirements, aligned with the budgeted asset, and provided cost savings by further standardizing the City’s transformer fleet. City Council approved Resolution 2024-23R on February 20, 2024, authorizing Contract 224-009 for the purchase of the 18/20/30 MVA Substation Transformer.
Authorization for Change in Service (ACIS) No. 1 was issued on July 29, 2024, to include bond and spare parts costs intended for the original contract amount resulting in a revised contract amount of $1,682,347.00.
In early July 2026, Texas Electric Cooperatives submitted an invoice to the City for $167,441.55 in federal import duties and customs tariffs related to the Hilltop Transformer. Their accounting department received notice of these charges on June 30, 2026, from the original vendor, GE-Prolec Transformers, Inc. The tariff fees were passed through to the City as a direct vendor-imposed cost.
Additionally, a price adjustment of $124,509.00 is required because of price escalation in materials used in the transformer such as copper, plate steel, and oil and increases in freight charges. As the transformer order was placed in 2024 with an anticipated delivery lead time of nearly two years, neither the City nor the vendor could reasonably have foreseen the subsequent economic conditions or the implementation of the tariff.
Contract 224-009 has a remaining balance of $73,581.00. An additional $218,369.55 is required to fully cover the price adjustment of $124,509.00 and tariff invoice of $167,441.55, increasing the contract’s not-to-exceed amount to $1,900,716.55.
Council Committee, Board/Commission Action:
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Recommendation:
Staff recommends approval of the Change in Service in the amount of $218,369.55, resulting in a total not to exceed contract amount of $1,900,716.55.