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Penticton council shocked by $750,000 bill from FortisBC
The ink is hardly dry on the City of Penticton’s 2014 budget, but city council is already wrestling with a nearly $1 million addition.
On Jan. 7, FortisBC informed the city it would be tacking an additional $750,000 on to the price tag for a major upgrade to the Westminster Avenue substation, which had been expected to cost about $6.5 million. The price may now go as high as $7.21 million.
“I am flabbergasted and I kind of feel like I am getting screwed with my pants on in this situation,” said Coun. Wes Hopkin, questioning why the city was only informed of the markup in January.
“I am concerned about this and about when this particular cost came up.
“I just look at the way this relationship has developed and this lack of trust.”
Preliminary planning with FortisBC has been going on for two years, Hopkin pointed out, and the estimate was received in June, an agreement was drafted and a deposit of $1.9 million issued in October.
City council gave staff the go-ahead on Dec. 2 to commence final negotiations with FortisBC based on a $4.97 million estimate provided by FortisBC in July 2013, allowing for cost overruns up to 30 per cent.
The project is planned for 2015, and the city has been putting money aside, $3 million in both the 2013 and 2014 budgets.
“The estimate that was provided was solely the estimate for FortisBC to construct the works. The commercial agreement had still not been negotiated to surround that work,” said Dennis Swanson, director of regulatory affairs with FortisBC.
Swanson explained the markup, which FortisBC refers to as “commercial compensation,” was common practice and necessary for two reasons.
It both shows that the company is not trying to undercut local contractors and is exercising its primary responsibility to focus on projects that are of benefit to its customers.
“I find it odd that if this is so typical and you do it so commonly, why was it done so poorly and we are just hearing about it now. It’s almost a million, we are not talking peanuts here,” said Coun. Katie Robinson, adding that the last minute addition was not acceptable for an agreement two to three years in the making.
“Regardless of what happens with market conditions, we are simply saying there is a $750,000 benefit we can assure our customers of. At the same time we are not competing in the industry in terms of trying to undercut them, and take work away from other vendors in the field,” said Paul Chernikhowsky, director of engineering services for FortisBC.
While the city doesn’t own the equipment in the substation, it is paying for the upgrades to the station operated by FortisBC.
The city, said director of operations Mitch Moroziuk, doesn’t have staff capable of overseeing the upgrade.
“We don’t operate substations, design substations or work in them,” said Moroziuk. “There would be other contractors that would have the ability to do this work, and as FortisBC has indicated, they would most likely go out to tender to select those contractors.”