CONTACTS 

SUBJECTS
Gold Hill Horseshoe Upgrade
Sierra Contract
Pre-Contract Payment Approval
Schedule, Relocation, Qualify GO 131-D exemption
Cost Estimate
Cost & Schedule Impacts

0808 -    ..
0809 - Summary/Objective
0810 -
081001 - Followed up work at ref SDS 8 line 83 and request for analysis of this
081002 - matter, ref SDS 5 line 302 relative to EM from Buck at ref DRP 3 line
081003 - 10 and Glenn's comments at ref DRP 2 line 16.  It also applies con-
081004 - siderations at ref SDS 6 line 169.
081005 -
081006 - It appears there is no reason to seek to finish the work prior to
081007 - 960101, except for possible PR with City of Folsom.  Doing so may cost
081008 - $200K, and may be unsuccessful.  Therefore, City should be notified
081009 - that completion will be delayed by GO 131-D.  Notify Sierra of extra
081010 - administration and management costs to comply with GO 131-D, rather
081011 - than obtain an exemption for relocation work.
081012 -
081013 -    [This analysis was submitted to PG&E at ref SDS 10 line 58.]
081014 -
081015 -
0811 -
0812 -
0813 - Analysis
0814 -
081401 - Schedule
081402 -
081403 - The current schedule dated 940920 reflects accelerated activity dura-
081404 - tions for the Relocation work, ref SDS 8 line 110, and indicates
081405 - completion will be in February 1996.  Performing the Relocaiton work
081406 - with normal activity durations rather than accelerating to obtain GO
081407 - 131-D exemption, will extend completion of Relocation into the 1996
081408 - time frame.  The order of magnitude could be approximately one year,
081409 - ref SDS 1 line 232.
081410 -
081411 -     Compliance with GO 131-D could extend the project well beyond a
081412 -     year if significant opposition arises requiring extended hearings
081413 -     and mitigation, ref SDS 1 line 292, which are not expected at this
081414 -     time.
081415 -
081416 -     The chance of this occurring on this project seems minimal, since
081417 -     the relocation is being performed at a location already devoted to
081418 -     the intended use.  Thus, for the same reasons reconductoring is
081419 -     not subject to GO 131-D, it is not clear why adding to an existing
081420 -     use should have any greater impacts, except for EMF issues.
081421 -
081422 -
081423 - Sierra does not need the power until 1997, ref SDS 1 line 252, so such
081424 - delay does not impact contract commitments (unless unknown GO 131-D
081425 - impacts arise, per ref SDS 1 line 292).
081426 -
081427 -
081428 -     Expedite to Meet 1997 Delivery
081429 -
081430 -     It is not clear from the record if Buck's 941115 EM received at
081431 -     ref SDS 6 line 167, seeks $100K budget approval to begin GO 131-D
081432 -     in order to meet Sierra's requirement for service by 1997?  Until
081433 -     now, it was assumed that there was ample time to meet the 1997
081434 -     delivery date and also perform GO 131-D after contracts are signed
081435 -     in Feb or Mar 1995.
081436 -
081437 -     The language in the 941115 EM indicates an intent to meet the
081438 -     current project schedule, ref DRP 3 line 10, which was prepared in
081439 -     September, 1994, to show what needed to be done in order to qual-
081440 -     ify for GO 131-D exemption by completing the Relocation work by
081441 -     951231.  PG&E's cost to obtain a GO 131-D exemption was indicated
081442 -     to be $5K at the 941102 Progress meeting. Now, however, it appears
081443 -     this objective is less achieveable.
081444 -
081445 -     SMUD Contract Delayed PG&E
081446 -
081447 -     It appears that PG&E's 940920 schedule was prepared in order to
081448 -     qualify for GO 131-D exemption based on contracts being signed by
081449 -     October 1994.  SMUD's delay in agreeing on reasonable terms has
081450 -     pushed out the start date of PG&E's work, so that it is now not
081451 -     possible to finish the relocation work in time to obtain the GO
081452 -     131-D exemption, ref SDS 3 line 235 citing Pam's EM ref DRP 1 line
081453 -     24 received at ref SDS 2 line 58.
081454 -
081455 -     [Bill and I will address this in updating the schedule on Monday,
081456 -     941121, which will include consolidating GO 131-D and other "Land'
081457 -     activities, per our discussion yesterday, ref SDS 8 line 103.]
081458 -
081459 -
081460 -
081461 - Cost Balances
081462 -
081463 - It appears that at best the cost to accelerate performance of the
081464 - contract in order to qualify for GO 131-D exemption for the reloca-
081465 - tion work, will be greater than or equal to the cost of compliance. If
081466 - Sierra agreed to pay for acceleration, this would at most reduce the
081467 - schedule by 1.5 months (ref SDS 8 line 138), but that appears to have
081468 - only a slight chance of successfully completing the work prior to
081469 - 960101, ref SDS 8 line 158.
081470 -
081471 - If Randy is correct that the risk of remedial improvements is the same
081472 - whether a GO 131-D exemption is obtained or not, ref SDS 8 line 208,
081473 - then such cost does not enter into the calculus for this issue.
081474 -
081475 -
081476 -     Management Expense
081477 -
081478 -     Delaying a project of this kind by a year could be expected to
081479 -     increase management and administration of the contract.  If there
081480 -     were say 12 additional progress meetings at a cost of $8K, that
081481 -     would be $96K.  With normal cost and schedule updates and associ-
081482 -     ated project management dialog, perhaps an outside cost of $150K
081483 -     may result from such time extension.  While PG&E always endeavors
081484 -     to avoid unnecessary cost (e.g., full project meetings would not
081485 -     be needed every month) experience shows delay costs money.  How-
081486 -     ever, in this case delay might actually reduce costs.
081487 -
081488 -     This conclusion is drawn from the fact that the reconductoring
081489 -     work will be performed during 1996 in order to conform with
081490 -     Sierra's need for power in 1997. By extending the relocation work
081491 -     into 1996, as well, there may be less need for full project
081492 -     meetings in 1995.  PG&E management and administration efforts can
081493 -     be focused in a single year when both portions of the work are
081494 -     underway concurrently.
081495 -
081496 -     Even though there may be a net savings by extending the relocation
081497 -     work into 1996 with normal activity durations, for estimating
081498 -     purposes, this analysis makes the conservative assumption that an
081499 -     extra cost of PG&E's management to Sierra will be $50K.  The delay
081500 -     to administer the GO 131-D process will not be cost free; a $50K
081501 -     budget seems to be at the minimum range of expected impacts.
081502 -
081503 -
081504 -     Labor Escalation
081505 -
081506 -     If the construction occurs a year later, direct labor could
081507 -     increase due to escalation in union agreements and/or other
081508 -     scheduled pay rate increases.  This is a $1.2M job for relocation,
081509 -     ref SDS 4 line 119.  Labor expenses might be $300K, so escalation
081510 -     at 7% could be about $20K.
081511 -
081512 -
081513 -     Mitigation
081514 -
081515 -     If remedial work is ordered as a result of GO 131-D permitting
081516 -     process, the cost could be from $20 - $300K, assuming it must have
081517 -     some relationship to cost of the project which is placed at $1.2,
081518 -     ref SDS 4 line 119.
081519 -
081520 -     The likelihood that mitigation will be required seems remote,
081521 -     since the relocation will occur between two existing pole lines.
081522 -     This means the impact on the environment may be unchanged, unless
081523 -     a calculation could be made that something like EMF is increased
081524 -     as a result of additional circuits.
081525 -
081526 -     If the chance of mitigation is 1%, then the cost might be assessed
081527 -     at less than $10K.
081528 -
081529 -
081530 - $60K Savings - Complete by 951231
081531 - ---------------------------------
081532 - Thus, delaying completion for a year could increase PG&E's costs by
081533 - $50K for management expense, $20K for labor escalation, $10K for
081534 - mitigation and $75K for the cost of the GO 131-D process; say a total
081535 - of $160K.  It appears that to accelerate the schedule 1.5 months will
081536 - cost about $100K.  So nominally it appears there could be a savings of
081537 - $60K from completing the relocation by 951231.
081538 -
081539 -
081540 - $200K Risk to Save $60K
081541 - ------------------------
081542 - This $60K savings is reduced by the risk of error inherent in acceler-
081543 - ated performance.  When people hurry, mistakes increase.  Mistakes in
081544 - design and construction hurrying to save $60K could exceed $200K.
081545 -
081546 -
081547 - Financial Considerations Argue
081548 - for Normal Completion in 1996
081549 - ------------------------------
081550 - Since it appears the chances of actually completing before 960101 are
081551 - slim (see above "Cost Balances" and ref SDS 8 line 158) and since try-
081552 - ing to do so embodies additional risk of $200K to correct contingent
081553 - mistakes, plus the loss of credibility with the CPUC, the imposition
081554 - of fines, or both, if the target is not met, then the financial in-
081555 - centive to undertake the effort is actually negative. In other words
081556 - it will likely cost much more to attempt to qualify for GO 131-D
081557 - exemption than it will to accept normal progress for the work involved
081558 - which means completion in 1996, and incurring the costs to comply with
081559 - GO 131-D (provided compliance does not incur extended hearings and
081560 - significant mitigation which seem unlikely for the reasons given
081561 - above).
081562 -
081563 -
081564 - Public Relations
081565 -
081566 - Ed Bedwell's concern about commitments to the City of Folsom to com-
081567 - plete the relocation prior to 951231, ref SDS 1 line 232, seem bal-
081568 - anced on the scales of public relations with an equal concern voiced
081569 - by Glenn West that if PG&E obtains a GO 131-D exemption on the grounds
081570 - that it will complete the work by 951231, and fails to do so (which
081571 - seems likely at this time) then fines and/or loss of credibility with
081572 - the CPUC would result, ref SDS 6 line 260.
081573 -
081574 - Of course PG&E can opt for a 3rd course of undertaking GO 131-D and
081575 - still attempting to accelerate in order to satisfy public relations
081576 - with the City of Folsom and/or others.
081577 -
081578 - Since GO 131-D is a new requirement aimed at enhancing community
081579 - participation in public improvements, it seems the City of Folsom
081580 - would likely understand that its impact could not have been fully
081581 - assessed at the time discussions occurred on the expected completion
081582 - date for the relocation.  Indeed, even today activity durations for
081583 - this effort are entirely speculative.  PG&E intends to keep its
081584 - commitment to the City to complete the work as expeditiously as
081585 - possible, including satisfying the requirements of GO 131-D.  If the
081586 - City feels GO 131-D requirements are too onerous, it can join with
081587 - PG&E and others to seek sensible implementation procedures, or to
081588 - dispense with the requirements all together.
081589 -
081590 -     Notify City of GO 131-D Impacts
081591 -
081592 -     Therefore it seems likely that this concern can be addressed by
081593 -     direct dialog with the City by Ed and/or by writing a letter
081594 -     setting out the efforts made to complete the work as quickly as
081595 -     possible under all of the circumstances affecting the project.
081596 -
081597 -
081598 - Conclusion
081599 -
081600 - PG&E should revise the schedule to reflect normal activity durations.
081601 - GO 131-D should be performed based on not obtaining an exemption for
081602 - the relocation work.  Sierra should be notified it may incur addi-
081603 - tional cost of compliance with GO 131-D.  City of Folsom should be
081604 - notified that GO 131-D may extend completion of the relocation into
081605 - 1996.
081606 -
081607 -
081608 -
081609 -