20200901Avista to Staff PR5 Attach C.docx

Note to File
5/13/2020
Thomas C Dempsey, Mgr. Thermal Operations & Maintenance
Coyote Springs 2 Transformer Replacement Project
The purpose of this note to file is to document the results of an updated financial analysis of the Coyote Springs 2 transformer replacement project that incorporates the latest cost and other pertinent data. In particular, this financial analysis incorporates the following information:
T3 Condition- The forensic analysis conducted by ABB to date has revealed severe damage that in our opinion would require an extensive rebuild return to service and more importantly, could be the result of a fundamental design flaw. Avista expects additional cost increases associated with further analysis of the problem.
T4 Condition- T4 is nearly identical to T3; it is therefore considered unlikely given the significant expense of swapping transformers in and out that we would consider it to be a sufficiently reliable spare in an Option I or Option II scenario.Options I & II eliminated from consideration
Engineering and project management costs have come in somewhat higher than originally anticipated by our consulting engineer (Black & Veatch)
At the direction of our consulting engineer we have had to incorporate a significantly more substantial fire wall than we had anticipated. This has increased the costs of all of the options.
The first step of this revised financial analysis was to conduct the analysis as if we had known the information in advance of choosing an option. In other words, this analysis did not consider any of the sunk costs of current construction activities, engineering services to date, executed purchase agreements, or Power Supply expense that would be associated with a switch to a different option at this stage of the replacement process. The revised financial analysis still concluded that Option V was the best financial option. Had this not been the case, Step 2 of the analysis would have been to evaluate stopping all work and proceeding with one of the other options. This step was not necessary because Option V was still found to be the best option and furthermore by adding the aforementioned sunk costs (>5MM) plus additional power supply expense that would be incurred the summer of 2021, clearly shows that Option V remains the best value for customers.
Options
Capital Cost $M / Plant Net Market Value $M
Options
Original Analysis
Revised Analysis
Option I- Rebuild T3; T4 Spare
6.2/209
Rejected
Option II- New 3Ph, T4 Spare
8/206.5
Rejected
Option III- New 3Ph, Repair T3
13.7/206.3
17.1/202.5
Option IV- Two new 3Ph
13.1/207.2
17.6/202.1
Option V- Single Phase
15.1/213.9
21.4/206.6
See 20200513 TCD Gall CS2_Tranformer_Analysis Check-in updated numbers.xlsm for additional detail.