Most of us probably don’t believe in such superstitious notions, but it’s beginning to look like the Lassen Municipal Utility District’s $6 million dollar phase shifting transformer at the Skedaddle Substation might be a little snake bit.
Back in October, LMUD General Manager Nick Dominguez wrote Wells Griffith, Undersecretary of Energy, seeking relief from a $3.3-million-dollar (50 percent) tariff imposed by the Trump administration as the transformer, built in Brazil, just missed an Aug. 6 “exemption threshold” when it arrived at the U.S. border due to “a short delay in port operations in Brazil.”
According to Dominguez’s letter, “The financial impact of this tariff on LMUD would be substantial, approximately $3.3 million, or more than 10 percent of our annual operating budget. As a not-for-profit public agency, all costs are borne directly by the local ratepayers we serve. This unforeseen expense would have an immediate effect on affordability for rural residents and could jeopardize the timely completion of the critical infrastructure project.”
And LMUD revealed even more bad news at its Dec. 30 meeting — the transformer was damaged during transport to the Skedaddle Substation site.
“I do have something to report on that’s a little unfortunate,” Electric Operations Manager Cort Cortez told the board. “The phase shifting transformer was in transit on rails. We don’t know exactly what happened, but when it arrived in Sparks, Nevada, the transit team that was supposed to take it from Sparks, Nevada, to Skedaddle noticed there was a little exterior damage to the unit … They continued the delivery to the site.”
He said LMUD notified Siemens, the contractor that built the transformer, that the publicly owned utility district “would not officially accept delivery of it.” He said the Siemens team has done a complete internal and external assessment of the unit, but they still have more testing to do.
“That’s where I’m going to leave it because we have not received a final report from Siemens, so I really know nothing,” Cortez said,
Due to the holiday, Cortez said Siemens had not completed its testing of the transformer, and once that was done, “we’ll have our engineering team review it make sure everything is good, and then we’ll have a better way to address the board and move forward, but right now, it’s all unknown.”
General Counsel Eugene Chittock said he and the staff met all the timelines in the contract to reject the transformer without further assurances.
“So we did the proper notice to Siemens,” Chittock said. “Staff documented it well. It was put together in a way that gave us our best argument to not accept it. Now we’re in a position where we’re going to have to evaluate their evaluation to make sure we’re purchasing a new transformer, phase shifter, because there is enough visible damage for a lay person to go, ‘wait a minute, that’s not what we purchased.’ So, we’re in the process. I think we’ll be in a better position the next few weeks to make that determination. Obviously, it’s millions of dollars, so we’re going to have to get in a position where we have the best argument if we’re not happy with it. Either renegotiate the deal or reject it entirely. That’s down the road, but we’ve set ourselves up for the contract exactly how we should and where our best position to have our strongest argument is, if it’s not to our satisfaction.”
Chittock said he’s reviewed similar legal cases and he’s in a “pretty good position to understand what we need to do next.”
Director Jess Urionaguena asked about LMUD’s liability since the transformer obviously was damaged in transit.
Dominguez said LMUD only had 48 hours to reject the transformer once it landed on the pad at the substation.
“The contract is really clear that liability shifts once it’s delivered to the pad,” Dominguez said, “so that’s why we provided that notice … We had to pull the trigger pretty quick to preserve our rights under the contract and say we reject it, what the value is. We can always accept it later, but at this point, we’re rejecting it until you can provide assurances … ”
“And per the contract, we are required to allow them to do whatever they can to provide assurances that it’s what we purchased,” Chittock said. “I can tell you looking at the pictures from a lay perspective, there’s some damage there … We spent a lot of time fretting over, making sure we complied 100 percent with the contract, and I think we have to date.”
The worst case scenario? They sue us, Chittock said.
Source: Lassen News
