Corps and Reclamation

Operations and Maintenance Webinar - Dec. 14, 2016

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• The Federal Columbia River Power System is one of the lowest cost generation systems in North America.

• Labor cost increases account for the largest portion of cost growth for operations and maintenance expenses.

• The Wage Grade and Trades and Crafts pay systems have increased much more than the General Schedule pay system.

Summary

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• The FCRPS is among the lowest cost hydropower fleets in EUCG. – The EUCG database contains nearly half of all North American hydro capacity.

– Mitigation costs, which include fish & wildlife, recreation, and cultural resources, are very high

relative to others in the industry.

Hydropower Benchmarking

*Data from EUCG, Inc. – All 16 North American hydro fleets shown – average fleet is ~ 22 plants and 4,500 MW

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Removing mitigation costs and focusing on operation, maintenance and administrative costs, show

the FCRPS to be one of the lowest-cost fleets in North America.

• This despite our capital re-investment being at one of the lowest rates in the industry for years.

Hydropower Benchmarking

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*Data from EUCG, Inc. – All 16 North American hydro fleets shown – average fleet is ~ 22 plants and 4,500 MW

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• In the ten years from fiscal year 2005 to FY 2014, Corps labor expenses rose 59 percent.

• Non-labor expenses rose 40 percent in that same period. Non-labor includes supplies, materials and contracts.

US Army Corps of Engineers

Hydropower and Joint Expense

Original Labor

New Labor

Original Non-Labor

New Non-Labor

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Corps Expenses 2005 to 2014

Original Labor New Labor Original Non-Labor New Non-Labor

1/3 Non-Labor

2/3 Labor

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Construction/contract services and materials have seen

the largest increase in costs, with materials more than

doubling in ten years.

USACE Non-Labor Costs

Construction & Contract Services,

9,583,855 Materials,

11,555,393

Trap & Haul, 484,758

All Else, 429,214

Non-Labor Cost Increases '05 to '14

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Non-Labor Costs Over Time in $

All Else

Construction &ContractServices

Materials

Trap & Haul

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• The total cost for power and joint labor has increased 62 percent in 11 years.

• Of that increase, inflation of wages for the positions that existed in FY 2005 is 54

percent.

• Additional labor hours account for the other 46 percent of the labor cost increase.

USACE Labor Costs

Original Labor cost

Original Wage Inflation

Cost of Additional Labor Hours

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Corps Labor Costs FY 2005 to 2015

See slide 10

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Wages for T&C and Wage Grade employees are determined by a wage survey of peers in the region.

• The wages have risen at twice the rate of GS employees and even more compared to average wages for all workers in the region.

Wage Inflation for the Pacific Northwest

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Annual Income

UPTO Weighted Average Annual Salary

Median Income Washington

Median Income Oregon

General Schedule RUS

31% increase

WA 2%

OR 14%

GS 15%

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• 35 percent of all labor costs go to GS employees.

– GS employees get pay increases with the rest of the federal work force by

executive mandate.

• 65 percent of all labor costs go to T&C or Wage Grade employees.

– T&C and WG employees in the region get increases through a survey of

wages for peers in the region.

• Wage rates for GS employees have increased 15 percent since

2005, before the recession, to 2014.

• Wages for T&C and WG have increased an average of 31 percent

in the same period, twice what GS employees received.

General Schedule vs Trades & Crafts and

Wage Grade Pay Systems for USACE

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Of the $53.9 million increase in labor costs, wage increases for existing employees accounts for $28.9 million.

• The remaining $25 million is due to additional labor resources.

USACE Labor Cost Increases ‘05 to ‘15

Added T&C Hours,

$9,436,569 , 18%

Existing T&C Wage Increase, $22,181,649 ,

41%

Added GS Hours,

$15,575,419 , 29%

Existing GS Wage Increase,

$6,706,584 , 12%

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

Cultural Resources

2% Dam Safety

3%

Environmental 21%

Joint O&M 31%

Power O&M 32%

Security 7%

All Else 4%

Additional Labor Resources by Program

• The funding required for additional labor resources added in the last ten years is 62 percent GS labor and 38 percent WG/T&C.

• This funding accounts for $25 million in annual costs. Below is the breakout of this $25 million by occupation and by program:

USACE Increases in Labor Hours

GS - All Else 0%

GS - Fish & Wildlife

11%

GS - Engineering & Construction

20%

GS - Plant Management

9% GS -

Administrative 5%

GS - Contracting 5%

GS - Safety & Security

8% TC - Mechanic 3%

TC - Operator 12%

TC - General Labor/

Maintenance 15%

TC - Electronics/ Controls

12%

Additional Labor Resources by Occupation

GS in REDS

T&C in BLUES*

*Not Shown: $1.8M reduction in Electrician expenses 11

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• In the nine years from FY 2008 to FY 2016, Reclamation labor expenses rose 63 percent.

• Of that total cost growth, additional labor resources from ‘09 to ‘15 account for 56 percent.

• Non-labor expenses account for 44 percent of that growth.

*This graph includes Base, Overtime, and other employees in BOR which charged to the Grand Coulee Base Program.

**The dashed line represents projected expenditures

BOR – Grand Coulee base hydropower

and joint expenses

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-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

2009 2014 2015 2016

Grand Coulee Base Expenditures FY 2009, 2014 to 2016

Original Labor

New Labor

Original Non-Labor

New Non-Labor

Wage Increase

27% Non-Labor

73% Labor

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Additional labor resources have increased due to needs identified in the 2012 independent staffing study and an increased emphasis in safety, WECC/NERC, environmental compliance and IT security.

*This graph includes base, overtime and other employees in BOR which charged to the Grand Coulee base program.

**The dashed line represents projected expenditures.

-

20,000,000

40,000,000

60,000,000

2009 2014 2015 2016

Grand Coulee Base Labor Expenditures FY 2009, 2014 to 2016

Original Labor

Additional Labor Resources

Original Overtime

Additional Overtime

Wage Increase

BOR – Grand Coulee base labor costs

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2009 2014 2015 2016

Original Labor $ 36,176,644 $ 36,176,644 $ 36,176,644 $ 36,176,644

Wage Increase $ - $ 6,348,889 $ 7,900,539 $ 8,615,236

Additional Labor Resources $ - $ 10,437,909 $ 10,058,592 $ 8,419,797

Original Overtime $ 1,892,609 $ 1,892,609 $ 1,892,609 $ 1,892,609

Additional Overtime $ - $ 4,626,236 $ 3,510,737 $ 2,872,636

Total Base Labor $38,071,262 $59,484,301 $59,541,136 $57,978,938

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Includes all funding sources – power and non-Power, capital and expense.

BOR – Grand Coulee increase in labor

resources

14

158

202

226 217

210

265 266

283

100

120

140

160

180

200

220

240

260

280

300

2009 2014 2015 2016

Emp

loye

es

Grand Coulee T&C and GS Employee Increase

GS TC

Engineer 12%

Mechanic 12%

Operator 1%

Security/Fire 2%

Electrician 25%

All Other 19%

Facility Ops 6%

Admin 13%

IT 5%

Safety/Enviro 3%

Grand Coulee FY09 to FY16 Additional Labor Personnel by Occupation

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• In FY 2016 at Grand Coulee: – 43 percent of all employees are GS employees and 57 percent are T&C or

WG.

– GS employees are 32 percent of labor costs and T&C or WG are 68 percent of labor costs.

• GS employees get pay increases with the rest of the federal work force.

• T&C and WG employees in the region get increases through a survey of wages.

• Wages for GS employees have increased 7.4 percent since 2009.

• Wages for T&C and WG have increased an average of 25 percent in the same period.

BOR – Grand Coulee General Schedule

and Trades and Crafts pay system

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Construction and contract services as well as materials costs have seen the largest increases.

• Includes base and non-routine costs.

BOR – Grand Coulee non-labor costs

16

Construction &

Contracts (BOC 25)

86%

Materials/ Supplies (BOC 26)

11%

All Other Non-Labor

3%

Grand Coulee Non-Labor Cost Increases from '09 to '16

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2009 2014 2015 2016

Grand Coulee Non-Labor Costs

Construction & Contracts (BOC 25) Materials/Supplies (BOC 26)

All Other Non-Labor

B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• Wage growth for Trades and Crafts employees has far

outpaced inflation, a significant driver for overall O&M

budget increases.

• Although some position types have been eliminated,

additional employees have been brought on to support

critical programs and new work as described in previous

IPR presentations.

• Construction and materials costs have seen significant

growth, particularly as Reclamation’s non-routine

program has ramped up.

Conclusions

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

• This information was made publicly available on Dec. 9,

2016, and contains information not sourced directly from

BPA financial statements.

Financial Disclosure

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