Budget for North Shore power project increased by nearly $500,000 due to ‘higher pricing than anticipated’
A city project to increase electrical load carrying capacity and assure reliable service in the North Shore service area had its budget increased by nearly $500,000 when it was found the scope of work was priced higher than anticipated.
The city approved Monday night issuing of the tender for the North Shore Re-conductor project in the amount of $714,246 to Martech Electrical Systems, $493,000 above what it was initially issued for.
Nelson Hydro general manager Alex Love said bids for the 2017 North Shore Re-conductor hydro project came in substantially over budget, largely due to an increase in the scope of work as well as higher pricing than anticipated. The overage could not be absorbed in the overall Nelson Hydro capital budget ($3,010,524).
The original budget was $355,000 with the new budget being $847,000, including the tendered work plus project supervision and contingency. Love said when the increase in scope was taken into account the project was approximately 17 per cent over budget.
“This is expected to be funded from current year operating cost savings and efficiencies coupled with higher hydro sales revenues than what was budgeted,” he said.
“As a result, staff anticipate that overall reserves will be in line with those budgeted.”
In all, the city will amend the its 2017-2021 Financial Plan to incorporate the increase in the capital cost of the project to $847,000.
The need to increase the budget included:
Pole replacement: $150,000
- There are 30 poles within this project zone that need replacing at an estimated cost of $150,000.
“We do have a pole replacement budget and program but that budget is already fully used for other known poles that need replacing. The pole replacement cost is consistent with the pricing we have been receiving for this replacement work,” Love noted in his report to council.
Cross arm replacement: $150,000
- BC Hydro has come out with a directive in its system that all cross arms older than 1998 vintage must be replaced for safety reasons.
“We feel it is prudent to stay aligned with industry practice on matters of safety. Unfortunately, almost all the cross arms in this project are older than 1998 resulting costs not foreseen when the project was planned,” said Love.
Project supervision: $50,000
- In some recent projects Nelson Hydro increased the amount of contractor supervision and found this to be very effective in managing change orders (which turn into extra costs).
Other costs: $143,000
- Now that material and contractor costs were known it totalled $143,000 more than Nelson Hydro’s business plan projection.
“The indication is that contractors are reasonably busy,” said Love. “Nelson Hydro does not anticipate that these costs would be lower if the project was postponed.”
The benefit of the new conductor with its increased load carrying capacity will help with assuring reliable service in the North Shore service area.
“It will also add redundancy to the overall system and allow the city to be fed from the North Shore in the event of a power outage on the south shore,” said Love.
As well, the 30 poles that will be replaced as part of this project will be a reduction in risk of structure failure.
The city also approved the acceleration of Nelson Hydro’s vegetation management program for 2017 to be better prepared for another potential heavy snow year.
The request will include an overall update of Nelson Hydro’s financial position, “which looks strong at this stage,” said Love.