Dear Utilities Board Chair [Andy] Pico and Co-Chair [Tom] Strand:So we talked this morning to CSU's project manager on the pollution control equipment Dan Higgins about it.
I am writing to inquire about the formal process for decision-making by the Utilities Board and Colorado Springs Utilities. It recently came to the attention of some concerned citizens through the open records process, that we learned about yet another cost increase for the Neumann Systems scrubber project. Pursuant to the attached document titled, "Martin Drake Scrubber Project, December 2015 Monthly Construction Report", on page 20 it is stated that the forecasted cost for completion of the SO2 scrubber project is now increased to $178,393,229. which is an approximate $8.4 million increase since Utilities last publicly stated in 2015 that the final forecasted costs for the system would be $170M.
This increased amount is also in contrast to the commercial project inception in 2011, when the sole source request for funding for this project was listed at $80 million. (As you recall, this sole source bid was submitted by former Utilities Executive George Luke, whom as I understand, is now an executive at Neumann Systems Group. I have also attached the sole source proposal for your reference.) There are also other interesting points in the Construction Report you might want to review, such as on pages 7 and 8, that the entire project was to be completed last August, and on page 10 an updated statement that the Unit 7 was to be operating in January (I don't believe it is yet?).
This presents a few issues and questions that I am hoping that you two, as leaders of the Utilities Board, could shed some light upon.
First, why were you not immediately informed of this cost increase by Utilities Management, and why did concerned members of the public learn about this before the Utilities Board?
Second, is it not protocol that Utilities Board would be required to give approval for such a significant cost overrun, particularly since just this latest increase represents over 10% increase from the original project cost of $80M, and almost 5% from the latest $170M forecast which in itself was already in excess of 200% over the original project budget?
Third and finally, besides longing for an explanation for the obvious conflict of interest that exists by the former Utilities' employee (George Luke) being the original requestor of the $80M for the scrubber project (without Utility Board approval) now being a recipient of those ratepayer funds for his employment compensation, can you please point to the written municipal regulation that permits Utilities to one-time and/or continuously exceed project budgets such as in the present case without Utilities Board approval? Relatedly, where it is stated in municipal code or charter that relatively much smaller expenditures and decisions affecting Utilities' budget, such as the 2015 budget decision to cut $1.9 million that had already been slated for DSM/energy efficiency investments, do require rigorous discussion and/or vote by the Board? (I'm sure you are aware, DSM investments have the effect of reducing the amount of energy generation needed by Utilities, in turn lower pollution, lower customer rates, etc.).
In particular, Chairman Pico, since you have held position with the Utilities Board longer than your Co-Chair, perhaps you are better suited to explain why, for example, the intense focus and presentations took place, and then majority vote resulted for the DSM investment cut of less than $2M at the end of 2014 — yet no public discussion accompanying a single vote for the original $80M investment for Neumann, nor any of the 223% project cost increases for the Neumann Systems SO2 scrubber project has occurred?
I would specifically like to request that the answers to these questions be presented to the public at this month's regular Utilities Board meeting, as I'm sure you can agree that ratepayers and the public have a right to this information, directly impacting their rates and the quality of the energy portfolio generated by their municipal utility. I look forward to your response.
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