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Costs of S02 controls at Drake plant continue to climb

May 7, 2016 Updated: May 8, 2016 at 8:42 am
Caption +
Fan housings for the NeuStream emissions control project lay next to the Martin Drake Power Plant Tuesday, March 26, 2013. Parts and materials for the project have been arriving at the plant for several months and Tuesday signified 60 percent completion of the project. Photo by Mark Reis, The Gazette

The cost of sulfur-dioxide emissions controls at the Martin Drake Power Plant has risen $1.6 million over the past four months, reaching about $180 million, or $69 million more than the original price tag.

But that number doesn't reflect some credits due, project manager Dan Higgins said Saturday.

As of April 1, $165 million had been spent on the unique NeuStream scrubber system, adopted in October 2011 as a $111.8 million project with a "lower cost" and "less operating and maintenance expenditures" than traditional technology.

The system was specially designed by the local Neumann Systems Group Inc. to fit the small footprint at the Drake plant, and it's been removing more than 97 percent of the SO2 emissions, reports Colorado Springs Utilities.

But cost increases haven't been stanched.

Asked Feb. 17 whether more increases could come on top of an $8.4 million rise over the previous year, Utilities' Dan Higgins predicted: "No. The construction is almost done. There are fewer unknowns. Our risks keep going down."

Higgins, now Utilities' chief water services officer but still overseeing the scrubbers project, told The Gazette one year ago that the $170 million cost then represented every contract, piece of material and work-hour it had taken and would take to install the scrubbing systems on Drake's two boilers by the end of 2016.

One year later, the cost is at nearly $180 million.

"Is there a ceiling, or can this just go on forever? It just seems astonishing to me that it can jump that high. There's no oversight, no ceiling," said environmental activist Nicole Rosa.

But the $1.6 million or so increase since January doesn't reflect credits due to the project, including about $500,000 in sales tax refunds because municipalities - and the city-owned Utilities - don't pay sales taxes, Higgins said.

Also, the project is due for a $1 million credit for equipment purchased to manufacture the scrubber system's jet boxes, which shoot water into the system, reducing SO2 emissions.

That machine-weld shop equipment now has been given back for all of Utilities to use.

Rosa has been routinely requesting documents this year under the Colorado Open Records Act to monitor the scrubber project's costs.

"This is a citizen-owned utility, and there's no transparency. We had to CORA all this information," she said. "Does the City Council read these reports, and do they have concerns? Why do we citizens have to CORA all these reports?"

The City Council also serves as the Utilities Board.

Said Board Chairman Andres Pico, "I've been tracking the overall project, yes. We've been receiving reporting on the overall project and engineering programs. A lot of the increase is in the engineering programs."

Pico said he was on vacation, however, and didn't have access to details.

Utilities Vice Chairman Tom Strand said, "I understand people being concerned about the price. I'm not on the (Utilities) budget committee. We're in up to our necks in this thing. I probably should delve into it more deeply."

But, Strand added, "There's got to be some kind of trust" with Utilities CEO and President Jerry Forte.

Don Knight, head of the Utilities Finance Committee, could not be reached for comment.

City Auditor Denny Nestor had recommended in April 2014 that the entire project, not only the Neumann portion, be put under a management plan that includes "budget, schedule, staffing plan, and clearly delineated responsibilities."

Higgins was just taking charge of the project then, and he turned to Sargent & Lundy's global management firm to oversee it.

He said in February that "escalation" of the money's value, time spent by Utilities staff, increased commodities costs and more use of Sargent & Lundy's finally had been figured into project costs, contributing to the $8.4 million project price increase then.

Also, three construction contracts were climbing: One from $14 million to $17.9 million, up 28 percent; another from $15 million to $18.6 million, about 22 percent; and one from $7.8 million to $8.3 million, up 6 percent.

But again, he expected that extra $8.4 million to be the last of the added costs.

Now the fourth contract, for project construction in Drake Unit 6, has increased about $250,000, Higgins said Saturday.

As work gets further along, the risks of more price hikes are reduced, he reiterated.

"I still feel like we're going to be awfully close to the estimate we've been putting out there," he said, and the $180 million current cost estimate probably represents the cap.

"While costs might be increasing at Drake in some places, Nixon costs are going down. In terms of the total program, we're going to be in line."

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