HomeMy WebLinkAbout11 Amendment to the Tree Trimming ContractTRUCKEE DONNER
Public Utility District
MEETING DATE: September 2, 2020
TO: Board of Directors
AGENDA ITEM #11
FROM: Joe Horvath, Electric Utility Director/Assistant GM
SUBJECT: Reallocation of electricity purchasing funds
APPROVED BY
Joe Horvath, Electric Utility Director/Assistant General Manager
RECOMMENDATION:
Authorize the General Manager to execute an amendment, and all necessary
Documents, for an additional $500,000 funding for the Tree Trimming Contract with
Wright Tree Service. This revision will increase the contract amount for FY20 from
$1,000,000 to an amount not to exceed $1,500,000; and
2. Transfer an additional $552,133 to electric capital reserves.
BACKGROUND:
At the end of the first half of FY20, the District had only spent $5,724,370 of the anticipated
power purchase Budget. This is the mainly the result of lower than expected power
purchase costs due to market conditions in the UAMPS portfolio. Two areas of need were
identified to put these funds to beneficial use: vegetation management and electric capital
reserves.
The District has a responsibility to maintain vegetation to protect the safety and integrity of
electric facilities. The District's Vegetation Management Program is an important part of the
District's goal of delivering safe, reliable and cost-effective electric service to customers. It
is also a critical component of the District's Wildfire Mitigation Plan (WMP) which was
revised and approved by the Board earlier this year.
There are approximately 135 miles of overhead electric distribution facilities in the District's
service territory, typically located along street and road rights -of -way. The District performs
vegetation management operations annually to systematically clear vegetation from all
overhead electric facilities in conformance to State and Federal requirements on a five-year
cycle. New laws and regulations due to catastrophic wildfires in California have required
an increasing amount of vegetation management.
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The Board awarded a contract for tree trimming services at the regularly scheduled
meeting on December 4, 2019 to Wright Tree Service, Inc. in the amount of $1,000,000 for
FY20, with an option to extend the contract for up to two additional years.
There has been a steady increase over the last few years in the amount of funds the
District has spent on vegetation management. A budget summary for the last 5 years in
shown in the following table and chart:
FiscalTbar
Budget$1,000,000
2015
$250,000
$800,000
2016
$260,000
$600,000
2017
$390,000
$400,000
2018
$567,000
$200,000
2019
$700,000
$0
2020
$1,000,000
2015 2016 2017 2018 2019 2020
âť‘Budget
There are 3 principal reasons why the District is spending more each year on vegetation
management: wildfire in California; increasing regulation; and SB 247. Wildfires have
devastated large portions of the State in recent years. A robust and timely approach to
vegetation management operations is a key component of any utility's Wildfire Mitigation
Plan. Many Investor Owned Utilities (IOU's) have done a less than adequate job over the
years with performing vegetation management operations in their respective service
territories with catastrophic results. California IOU's have ramped up vegetation
management operations in response to the threat of wildfire. This increased demand for
tree trimmers has put upward pressure on costs for these services for all electric utilities,
including Publically Owned Utilities (POU's) like the District.
In addition, there have also been several important changes in State regulations requiring
larger clearances resulting in significantly more tree trimming. California General Order 95
(G.O. 95) clearance requirements were significantly revised in December, 2017 in
response to wildfires. The State has increased the minimum clearance requirement as
found in G.O. 95 at time of trimming from 6.5 feet to 12 feet, a very significant change.
The increase to State mandated trimming requirements has resulted in a subsequent
increase in the amount of labor necessary to perform trimming operations on a given
section of overhead facilities, almost doubling the cost by this one change alone.
Lastly, SB 247 was signed into law by Governor Newsom on October 2, 2019. SB 247
requires that line clearance tree trimmers (tree trimmers who have been trained to operate
near energized electric systems) are paid wages comparable to an Apprentice Electric
Lineman. SB 247 increased wages for California tree trimmers by about 50 percent. The
law technically only applies to IOU's paying wages for tree trimming services. However,
POU's (including the District) discovered that recent bids solicited for tree trimming services
reflected this same overall increase to wages due to market forces, despite being a law
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that was designed to only apply to IOU's. Staff anticipated some increases to tree trimming
costs for FY20, but the full increase to wages applying to POU's from SB 247 was not
anticipated when the District approved the vegetation management budget for FY20.
The combined effect of wildfire issues, State regulations, and SB 247 have necessitated a
corresponding need to increase the contract limit for tree trimming operations. Even with
the latest budget increase to $1,000,000, the District has expended about 70 percent of the
FY20 budget year to date on tree trimming operations. With no increase, staff expects to
exhaust the existing budget by October, 2020. Staff estimates a total contract amount of
$1,500,000 will be required this year, and in future years, to maintain trimming operations
on a five year cycle.
The District continues to invest in system reliability and safety with the Vegetation
Management Program. The District is working with our customers to educate and inform
them in a timely manner. Staff continues to evaluate the new requirements and potential
impacts to the Vegetation Management Program and budget. Staff is also evaluating
potential cost savings measures including having a second contract for vegetation
management services that do not require line clearance tree trimmers. The combined
effect of 2 contracts would be to lower the future overall cost of trimming on a per mile
basis.
Per District Code, the purpose of the capital reserve fund is to permit projects to be
initiated and funded prior to arrangement of long-term debt or other financing. With the
proposed transfer, the Electric Capital Reserve Fund will be fully funded in accordance with
District goals.
This item is in support of the following objectives and goals identified by the District.
1.05.020 Objectives:
4. Provide reliable and high quality electric supply and distribution system to meet
current and future needs.
5. Manage the District in an environmentally sound manner.
1.05.030 Goals
4.5. Provide effective and efficient maintenance and replacement programs.
5.5. Minimize negative impact of District operations on the environment.
FISCAL IMPACT:
The Board approved Electric Department Operating Budget for FY20 included $1,000,000
for tree trimming services in Budget line items 1.6.583.512/513/514. As of July 31, 2020
the District has spent about $680,000 and staff projects to completely expend the tree
trimming budget by October, 2020. The proposed contract increase in the amount of
$500,000 will be funded by the Electric Department's General Fund. Sufficient funds exist
in the Electric Department's General Fund with the current balance being about $9,500,000
as of August 19, 2020.
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The Electric Department is currently pacing favorable in both revenue and expenses year-
to-date, under -running to Budget in expenses in excess of $800,000 and over -running in
revenues in excess of $1,000,000. The majority of savings in expenses is in purchased
power costs due to favorable generation conditions and market powers costs. The
favorable revenues are driven primarily by residential energy usage favorable year-to-date
to Budget. These combine for $1,400,000 to $1,800,000 favorable forecast annual results,
based on expenditures at Budget level. Accordingly, there appears sufficient favorable
results in the Electric Department Operating Budget to accommodate an increase over
Budget of $500,000 in tree trimming services expenditures, and move $552,133 to the
Electric Capital Reserves. There will be sufficient budgeted funds to complete the year in
these cost centers.
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