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Home My WebLink About15.C.1. Relocation of Existing Power Lines on Project No. 2003-4 , IS. c. J . CITY OF SHAKOPEE Memorandum TO: Mayor & City Council Mark McNeill, City Administrator FROM: Bruce Loney, Public Works Director SUBJECT: Relocation of Existing Power Lines on the Valley View Road Improvement, Project No. 2003-4 DATE: August 19,2003 INTRODUCTION: Associated with the Valley View Road Improvement Project, from the east plat line of Pheasant Run 6th Addition to the east plat of Greenfield is the relocation of existing overhead power lines with this project. This agenda item is for City Council to consider whether or not the Council wants the existing overhead power lines to be placed underground or to be relocated overhead on this project. BACKGROUND: With the Valley View Road Improvement Project, the existing overhead power lines will be need to be relocated with the construction of Valley View Road to a 44 foot wide roadway, sidewalk and trail. It is proposed that the electric lines would be relocated north of the bituminous trail on the north side of Valley View Road. Per the City's Right-of-Way Management Ordinance, if an existing overhead power line installation is relocated more than 300 feet, the City has the discretion to require the existing overhead power line to be placed underground or to remain overhead. Previously, with the Valley View Road Project west of the Greenfield Addition, City Council did decide to allow the existing power line to be relocated and remain overhead. Per Shakopee Public Utilities Commission's (SPUC) staff, it is estimated to relocate the existing overhead power line installation will cost approximately $12,000.00, and to place the power lines underground would cost $55,000.00. SPUC is currently considering funding mechanisms and policies to pay for the undergrounding of existing overhead power lines, if required by the City. These policies were discussed at SPUC's meeting on July 21,2003 and by motion a report was approved. This report on financing undergrounding of existing lines is attached. With this item, City Council should consider a motion to either allow the existing overhead power lines to be relocated and remain overhead or to require the existing overhead power lines to be placed underground. Per the report on relocation of electric facilities prepare by a SPUC consultant, the options for SPUC to recover the additional costs of undergrounding facilities are as follows: . Continue to recover the costs through standard retail rates. . Invoice the City and recover the costs by a direct payment from the City as a project cost. . Recover the costs through a special retail rate added over a short period of time. A future meeting may be in order for the Council and SPUC to discuss the funding options. It seems Options # 1 and 3 are the best options, since adding the cost to projects may be difficult to assess and will add to assessments amounts that could be contested in court. The issue for Council at this time is to discuss whether or not to underground the existing overhead lines on Valley View Road. The funding option discussion can occur at a later meeting. The Valley View Road Project may be awarded on August 19,2003, and a discussion on undergrounding or relocating the existing overhead lines should be done soon in order to proceed with the construction work. ALTERNATIVES: 1. Approve a motion determining that the existing overhead power lines along Valley View Road can be relocated. 2. Approve a motion determining that the existing overhead power lines along Valley View Road should be relocated and placed underground. 3. Table for additional information. RECOMMENDATION: Staff would recommend that City Council would discuss the issue and provide comments to SPUC, if consensus is obtained, on the City's policy for funding for undergrounding of existing overhead power lines and on whether to underground the existing overhead lines or relocate the existing lines overhead. ACTION REQUESTED: 1. Discuss the undergrounding of existing overhead power lines issue on Valley View Road and provide comments, if so desired, to SPUc. 2. Approve a motion determining on whether the existing power line along Valley View Road along the Greenfield development to be relocated, should remain an overhead line or be placed underground. ~~ Bruce Loney Public Works . rector BUpmp POWERLINES July 15, 2003 Mr. Joe Adams Planning and Engineering Manager Shakopee Public Utilities 1030 E. Fourth Ave. Shakopee,~ 55379 Subject: Relocation of Electric Facilities - Preliminary Report Dear Mr. Adams: R. W. Beck was retained by Shakopee Public Utilities (SPU) to examine issues related to costs incurred by SPU for relocating electric facilities due to road widenings necessary to accommodate growth. This letter describes the results of the analysis we undertook related to this issue. Background The City of Shakopee and its surrounding area are experiencing significant growth. This growth results in work performed to widen and otherwise improve area roadways. These road improvements often times necessitate the relocation of electric distribution facilities. At the time of relocation, existing overhead electric facilities are sometimes replaced by new underground electric facilities. Overhead electric facilities may be installed as underground facilities when they are relocated for reasons of higher reliability and visual aesthetics. It is not uncommon for cities to request relocated facilities be placed underground to improve city aesthetics. For the City of Shakopee, the existing City ordinance 1 allows the City to require electric facilities relocated due to road widenings to be placed underground if one or more ofthe purposes set forth in the ordinance are met. These purposes include: . The fostering of safe travel over City right-of-way . The fostering of non-travel related safety around homes and buildings where overhead feeds are connected and . The fostering of orderly development of the City Current Policy SPU does not currently have a policy regarding contributions from other entities to help defray the cost to SPU of relocating electric facilities due to road widenings or installing them underground. SPU fully funds electric facility relocations and the costs are paid by all SPU ratepayers. This approach is typical for most utilities when relocations are required and the 1 City Ordinance No. 570 approved August 15,2000. 01-00256-10101-01011 070013 I 3292 P:\Shakopee\undergound policy\07l503 Itr.doc ~ Mr. Joe Adams Planning and Engineering Manager July 15, 2003 Page 2 relocated overhead facilities remain as overhead facilities. However, increased desire by cities and by some utilities to have as many facilities as possible underground has increased costs associated with relocations. This is due to the fact that typical costs for putting electric facilities underground is more expensive than comparable overhead facilities. Recently, the SPU Commission updated the connect fee paid by new customers to fund the difference in cost between overhead and underground facilities needed to serve such customers. The connect fee, however, does not cover the costs associated with installing facilities underground to accommodate road widenings. Discussion Road construction or relocation often requires that existing electrical facilities be moved to accommodate the road work. This circumstance is often viewed by cities to be an opportune time to convert existing overhead facilities to underground. To provide an example of the policies pursued by other utilities, we have reviewed the current policy of Xcel Energy relative to this issue. In the case of Xcel, if the existing overhead Xcel facilities are located on a public right-of-way, Xcel pays the cost to move them, provided the relocated facilities remain overhead. However, if the city government requests the lines be placed underground, the increased cost associated with placing the lines underground is charged to the city. In cases where a city requests a line to be placed underground absent a concurrent road widening, Xcel calculates the charge using a formula approved by the Minnesota Public Utilities Commission ("MPUC") that takes into account the original cost of the overhead facilities, depreciation on such facilities, the cost of moving the overhead facilities and the cost of equivalent underground facilities. In a January, 1999 report to the MPUC regarding undergrounding electric facilities2 Xcel states that: "In many cases, City governments have decided to have specific lines placed underground at the point of new construction or relocation by a road move. In these situations, NSP coordinates closely with the community, working to ensure that the conversion costs are paid for by the community as opposed to all other customers." The Xcel report goes on to state that "For local governments interested in pursuing conversion, NSP works with the community to recover the incremental conversion costs. NSP recovers the higher on-going costs through the monthly service charge paid by the individual customers." Based on discussions with Xcel personnel, the additional costs for underground facilities can be collected either through a direct payment by the city to Xcel or can be recovered by a monthly service charge or fee per kWh on the bills of retail electric customers located in that city. Xcel reports it has used both methods for recent projects. 2 ''Northern States Power Company Report on Undergrounding Electric Distribution Facilities January, 1999" 01-00256-10101-01011070013 13292 P:\Shakopee\undergoundpolicy\0715031tr.doc , , Mr. Joe Adams Planning and Engineering Manager July 15, 2003 Page 3 The table below summarizes four alternative scenarios that may arise in a relocation of existing overhead facilities. In all cases the existing line is assumed to be overhead. The relocated line may be overhead or underground and the electric current carrying capacity of the line mayor may not be upgraded at the time of the relocation. Relocated Line (Existing OH Facility) Alternative Scenarios Comment No Line Upgrade Line Upgrade Overhead Overhead Current Utility Baseline Underground Underground New Utility Reality The current utility baseline has been the longtime standard operating procedure for most utilities: existing overhead facilities are relocated as overhead lines. Depending on system requirements and plans, the opportunity to upgrade the facilities may be accomplished as part of the relocation. However, this upgrade was always done at the discretion of the utility. If an existing overhead facility is moved due to road construction and no upgrade of the line is otherwise required, many of the existing materials (e.g., poles and wire) can be reused. Based on an actual relocation of an existing 2/3 mile of overhead line in Shakopee along Valley View Road, east of Marschall Road for a total cost of $18,070, it costs approximately $27,100 per mile to relocate an existing overhead line as overhead with no upgrade of the line. However, sometimes when a line is relocated to accommodate a road widening, the line will also be upgraded to accommodate the same growth that is forcing the road work. Upgrading the line at the time of relocation, but staying overhead, would approach the cost of new overhead facilities which was estimated to be $38,855 per mile in our April 17 letter. As discussed above, it is often requested or required that relocated facilities be placed underground. If no upgrade is required, the incremental cost of converting to underground can be substantial. As reported in our April 17 letter, new underground facilities in Shakopee cost approximately $114,050 per mile. This cost will generally be the same with or without a line upgrade. Per mile costs for the four instances shown in the table above are summarized below. 01-00256-10101-01011070013 I 3292 P:\Shakopee\undergound policy\071503 Itr.doc " Mr. Joe Adams Planning and Engineering Manager July 15, 2003 Page 4 Relocated Line (Existing OH Facility) (Typical Costs per Mile) Relocated Line No Line Upgrade Line Upgrade Overhead $27,100 $38,855 Underground $114,050 $114,050 Based on typical SPU costs as summarized in the above table, it costs approximately $87,000 per_mile more to place a relocated overhead line underground when no upgrade is necessary. When the relocated line also has to be upgraded, the additional cost for underground lines is estimated to be $75,000 per mile. Currently these extra costs to place relocated lines underground is recouped via standard SPU electric rates. Although the additional cost of underground lines for new customers was included in the development of a new customer connect fee as described in our April 17, 2003 letter, such additional underground costs related only to new circuits and did not include relocation costs associated with road widenings which do not involve upgrading existing circuits. Thus it is appropriate for the additional costs associated with road widenings and relocated circuits whose capacity is not upgraded to be recovered via a separate charge as described below. When a line is upgraded as part of a relocation, new customer growth is generally driving the upgrade. In such case, the incremental cost of converting to underground facilities ($75,000 per mile) would be similar to the cost differential between new overhead and underground main line feeders discussed in our April 17 letter. In this case, implementation of an underground connection fee (which would be paid by the new customers causing the growth), as discussed in the April 17 letter, would contribute funds to this conversion process. In this case the costs are recovered by the customer connect fee and no additional cost recovery mechanism is needed. It should be noted that the above costs for overhead, underground and upgraded circuits are typical costs only. Costs for construction can vary widely depending on various items such as the subsurface conditions and peripheral construction activity. For example, when County Road 16 (Eagle Creek Boulevard) from County Road 17 (Marschall Road) to County Road 83 (Canterbury Road) was widened in 1995, the overhead circuit along County Road 16 was relocated and partially upgraded as an overhead circuit. The average cost was $103,000 per mile. This cost was significantly higher than the $27,100 to $38,855 cost per mile for typical construction as shown in the above table due to close-to-the-surface bedrock and the inclusion of secondary work in the project. The cost for placing the facilities underground would, however, have been considerably higher. 01-00256-10101-0101 ! 070013 I 3292 P:\Shakopee\undergound policy\071503 Itr.doc , " Mr. Joe Adams Planning and Engineering Manager July 15,2003 Page 5 Recommendation Relative to road widenings we propose that SPU pay for the cost of moving any existing overhead lines in road rights-of-way and recover such costs from its retail customers through its standard retail rates, provided the relocated facilities are installed overhead. When the circuit capacity is required to be upgraded due to system load growth and the facilities are installed underground, the additional cost of placing the circuit underground is recovered by customer connect fees. When there is no need for the circuit capacity to be upgraded, SPU has several options to recover the additional costs of putting the facilities underground: . Continue to recover the costs through standard retail rates . Invoice the City and recover the costs by a direct payment from the City as a project cost . Recover the costs through a special retail rate adder over a short period of time We propose that SPU either bill the City directly or recover such additional costs from its retail customers via a special retail rate adder. The additional cost of placing facilities underground would be estimated by SPU staff using the best available data and information. If the additional costs are recovered via a special retail rate adder, we propose they be recovered by a per kWh charge applied to all customers. If desired, this charge can be shown as a separate line item on the monthly bill of each customer. If a special retail rate adder is used, we further suggest that the SPU Commission establish a per kWh adder based upon a levelized cost recovery approach. This would help avoid changing the recovery level significantly from year to year depending on the specific projects that mayor may not be undertaken during such year. Under this approach, the amounts recovered by the special adder would be monitored and over time the adder would be adjusted up or down depending on actual costs incurred for road widening projects. Attachment 1 provides an estimate of such a levelized kWh adder based on expected costs associated with road widenings and total kWh consumption of all retail customers over the 5- year Capital Improvement Plan for 2003 - 2007. As shown on Attachment 1, the special adder to cover the cost of installing overhead lines underground due to road widenings is estimated to be $0.0002 per kWh. For a typical residential customer with monthly consumption of750 kWh, this represents a charge of 15 cents per month. 01-00256-10101-01011070013 I 3292 P:\Shakopee\undergound policy\071503 Itr.doc .. Mr. Joe Adams Planning and Engineering Manager July 15,2003 Page 6 Thank you for the opportunity to have provided assistance to SPU relative to this issue. Please let us know if you would like additional analysis concerning this matter. Sincerely, R. W. BECK, INC. David A. Berg, P.E. Principal and Senior Director c. Kevin Favero 01-00256-10101-01011070013 I 3292 P:\Shakopee\undergound policy\071503 Itr.doc , ' >.. , . . Attachment 1 Projected Road Widenings in Shakopee Capital Improvement Plan 2003 - 2007 Project Length in Miles Circuit Project Description 2003 2004 2005 2006 2007 5- Year Total SH-08 4th Ave. (Marschall Rd - Viking Steel Rd) 0.38 SH-10 4th Ave. (Viking Steel Rd - Shenandoah) 0.63 S8-31 Valley View Road (Williams St - CR 83) 1.25 SH-09 Fuller St. (1st Ave. - Levee Dr.) 0.10 SH-10 Viking Steel Road north of 4th Ave. 0.25 SH-07 Adams St (3rd Ave - 6th Ave) 0.30 SS-31 CR 79 (11th Ave - 17th Ave.) 0.75 Total 2.35 0.55 0.00 0.00 0.75 Estimated cost differential per mile between overhead and underground construction $87,000 $87,000 $87,000 $87,000 $87,000 Total Annual Cost Differential $204,450 $47,850 $0 $0 $65,250 $317,550 Average Annual Cost Differential over 5 years $63,510 $63,510 $63,510 $63,510 $63,510 $317,550 Estimated Retail Consumption (kWh X 1,000) 306,950 321,074 336,757 353,669 370,584 1,689,034 Est. Average Annual Consumption (kWh X 1,000) 337,807 337,807 337,807 337,807 337,807 1,689,034 Est. Average Charge per kWh for Recovery $0.0002 $0.0002 $0.0002 $0.0002 $0.0002 $0.0002 Est. Average Residential Consumption (kWh/month) 750 750 750 750 750 750 Est. Average Residential Charge per Month $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 Est. Amount Recovered from All Customers $61,390 $64,215 $67,351 $70,734 $74,117 $337,807 Attachment 1.x1s 8/12/03 i .- ", 1 1