20200901Avista to Staff PR5 Attach D.docx

4CS2 Single Phase Transformer
ER 4206
Project: 61005097, 61005098, 61005099
INTEROFFICE MEMORANDUM
To: Andy Vickers, Jacob Reidt, Thomas Dempsey, Mike Mecham, Jason Thackston
From: Kara Heatherly
Subject: CS2 Budget Analysis and Realignment
Date: April 20, 2020
This memorandum is intended to reflect the current understanding of the scope of services and planned expenditures for the CS2 Single Phase Transformer.
In December 2019, through the approval of the CS2 Single Phase Transformer Business Case, the Steering Committee elected to replace T4 with four (4) new single-phase transformers (three (3) to be immediately operational and one spare). The anticipated budget for this alternative was derived from Black and Veatch’s cost estimate and augmented with projections for activities not included to produce a total anticipated budget of $15.1M. This budget breakdown is as follows:
Project Activity
BudgetEngineering (B&V)
$621,000
Construction Activities (installation, foundations, steel supports, HVAC)
$2,366,038
Transformer (Siemens)
$8,152,060
IsoPhase Bus (TBD)
$1,480,846
Consulting oversight, Transformer (VPF)
$200,000
AvistaExpenses: Internal Project Management and Design, CM, AFUDC and Cap Overheads
$1,771,133
Contingency (3%)
$500,000
TOTAL
$15.1M
Year
2020 Budget
2020
$7,000,000
2021
$4,000,000
2022
$1,600,00
TOTAL
$12.6M
When the 2020 5-year CPG was establishedCS2 Single Phase Transformer was allocated 12.6 Million dollars to be expended over a 3-year period.
Recentdevelopments have informed our cost projections and, in some cases, impacted our existing commitments.
Expediting civil work to 2020 outageas to not expose power grid to higher risk in 2021. Doing the project in a single year would have required an eight (8) month outage from March 2021 to September 2021. The phased approach we chose allows us to avoid critical high power cost months and also reduce the risk of having to provide temporary storage -and thus multiple handling- for the single phase units. Additionally, the phased approach allows us to further reduce potential downtime by taking concrete pad curing off of the critical path.
Transformer layout reconfiguration. After awarding the contract to Siemens Austria, they recommended some design changes over what they had originally proposed that they felt would increase safety margins and decrease the potential for electrical faults. Avista agreed with their proposal but the configuration change required an additional engineering iteration to accommodate the design change.
Project Activity
Original Business Case Estimate
Current Estimate
Anticipated VarianceEngineering (B&V)
$621,000
$1,235,995
$614,995■ ■
Construction Activities (installation, foundations, steel supports, HVAC) and Electrical Work
$2,366,038
$4,800,000
$2,433,962■■
Early Civil Works Package (McMillen)
----
$2,700,000
----
Anticipated 2021 GCCM Contract
----
$2,100,000
----
Transformer (Siemens)
$8,152,060
$8,347,597
$195,537■
IsoPhase Bus (TBD)
$1,480,846
$1,674,000
$193,154 ■
Consulting oversight, Transformer (VPF)
$200,000
$337,000
$137,000■■
Avista Expenses: Internal Project Management and Design, CM, AFUDC and Cap Overheads
$1,771,133
$2,500,000
$728,867■
CM and Inspection Services
----
$253,000
$253,000 ■
PGE Staff Support Services
----
$100,000
$100,000■
Contingency (3% to 5%)
$500,000
$1,000,000
$500,000■
ADD: Firewall Fabrication and Installation
----
$1,168,700
$1,168,700 ■ ■
TOTAL
$15.1M
$21.4M
$6.3M
Enhanced accuracy of information based on standard design progression, contracted scopes of work, and improved budgeting protocols. In addition, maintaining design, fabrication, and construction schedules within the environment created by the global pandemic of COVID-19 has increased process and oversight expense.
Year
2020 5-Year CPG
Anticipated Cash Flow
Anticipated Variance
2020
$7,000,000
$9,900,000
$2,900,000
2021
$4,000,000
$11,500,000
$7,500,000
2022
$1,600,000
----
($1,600,000)
TOTAL
$8.8M
Applying the new budget projections to the currently approved CPG budget, we are forecasting the following variances:
As is standard in cost-benefit considerations, we weigh these changes against the risk they are designed to mitigate. The risk exposure of the original 2021 outage is high. The risk comparison of our current phased outage schedule against the originally proposed single-year outageis presented below:
Alternative 1
(phased outage)
Risk Exposure: MODERATE
Alternative 2
(single-year outage)
Risk Exposure: HIGH
2020 Outage
2020 Outage
Duration
April 20 – June 1 (2 months)
Cost
April (half)
$549,786.83
May
$630,259
June (half)
$329,230
2021 Outage
2021 Outage
Duration
March 1 – June 30 (4 months)
March 1 – Oct. 30 (8 Months)
Cost
March
$3,434,986
$3,434,986
April
$1,384,036
$1,384,036
May
$1,008,244
$1,008,244
June
$1,051,236
$1,051,236
July
----
$6,062,671
August
----
$7,459,616
September
----
$6,407,563
October
----
$3,862,019
TOTAL COST
$8,388,679
$30,671,272
SAVINGS
$22,282,592
While it has been a process to gain the full understanding of the cost to maintain grid reliability, the data still continues to demonstrate that the benefits far outweigh the risks. In the next couple of months, the Coyote management team will be procuring the few remaining project components and thus solidifying the remaining budget projections. It is our intention to have this work completed by July and prior to the 2020 5-year CPG process (for 2021-2025) as to provide further cost assurance to Avista leadership at that time.
2020 Budget Impacts
Item
Original Business Case Estimate
Current Estimate
Anticipated Variance
2020 Construction
$1,300,000
$2,700,000
$1,400,000
CM 2021
$0
$250,000
$250,000
Design Services
$500,000
$1,250,000
$750,000
Firewall
$0
$450,000
$450,000
Transformer Configuration
$0
$56,000
$56,000
TOTAL
$2.9M