28. Reasonableness Review-Job No. 5199-Plant F13-Recoat Interior and Exterior of Reservoir F13(L)
This project included recoating of the interior and exterior of Reservoir F13(L), constructing baffling inside the five million gallon reservoir and installing a rain gutter and down spout. The interior of the reservoir had not been recoated since it was built in 1982. The project was placed in service in 2007 at a recorded cost of $1,637,249.
28.1. Positions of Parties
DRA states that SGV did not seek competitive bids for this work and has not explained any steps it may have taken to mitigate costs. DRA's estimate is $100,000 for recoating and $300,000 for the baffling. The recoating estimate is based on SGV's estimate in the forecast phase of this proceeding of $100,000 to recoat the reservoir at Plant F20.
COF states SGV has not provided justification for the baffling or a detailed cost breakdown. COF states the project was not an emergency and could have been planned for and put out for bid. However, the project was not put out for competitive bid. COF recommends disallowing all but $400,000 of the cost as recommended by DRA.
FUSD states that since SGV did not get bids for recoating the interior of the reservoir, all costs above $500,000 should be excluded from ratebase.
SGV states the $100,000 estimated cost to recoat the F20 reservoir is for cleaning, priming and recoating. This would be a minimal recoating because the reservoir cannot be taken out of service long enough for the more extensive recoating until a second reservoir is constructed at the site.
SGV states that the F13 reservoir had not been recoated since 1982. The recoating involved removal of the original coal tar exterior coating. The removal of the original coating required special handling and disposal because it contained solvents and other petroleum products. SGV had the work preformed by the company that originally constructed the tank because the company was familiar with the tank's construction and was able to perform the work at the time it was needed.
SGV represents it was allowed by the California Department of Public Health to utilize less than half of the reservoir's capacity because it did not provide sufficient disinfection contact time.15 The baffling increases the disinfection contact time because it prevents water from flowing through the reservoir directly from the inlet to the outlet without sufficient mixing with the other water in the tank. Because of the baffling, SGV was able to restore use of more than 2.5 million gallons of storage.
28.2. Discussion
No party alleges the recoating, rain gutter or downspouts were unnecessary. The baffling resulted in restoration of the use of more than 2.5 million gallons of storage. Therefore, the work performed was needed. The question is whether the cost was reasonable.
The use of a competitive bidding process would tend to support the reasonableness of the resulting cost. However, SGV did not put the project out for bid.
The work was performed by a company that was familiar with the tank's construction and was able to perform the work at the time it was needed. This tends to support the qualifications of the contractor to perform the work.
A proposed project included in SGV's application is the recoating of the F20 reservoir. The F20 reservoir is the same size as the F13(L) reservoir. The estimated cost to recoat its exterior, with minimal surface preparation, is $100,000. The recoating was intended as a temporary measure until another reservoir can be built allowing the F20 reservoir to be taken out of service for a more thorough recoating. Although the F20 project was not included in the settlement, DRA's initial position in the forecast phase of this proceeding did not oppose the estimated cost. The recorded cost of recoating the exterior of the F13(L) reservoir is $125,000, exclusive of removal of the original coating. Since the recoating of the F13(L) reservoir is not intended as a temporary measure, the cost of recoating the F13(L) reservoir compares favorably with the forecasted cost of recoating the F20 reservoir, which DRA did not oppose. This favorable comparison supports the overall reasonableness of the estimated costs.
The work was needed, was performed by a qualified contractor and the costs were reasonable. Overall the project and its costs are reasonable.
15 Disinfection contact time is the amount of time necessary for the disinfectant added to the water to inactivate contaminants before the water reaches the customer.
