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IN Ai tk PUBLIC UTILITIES RIVERSIDE PUBLIC UTILITIES BOARD OF PUBLIC UTILITIES Board Memorandum DATE: DECEMBER 12, 2014 ITEM NO: 14 SUBJECT: ENERGY DELIVERY REPLACEMENT VEHICLE LEASES WITH ALTEC CAPITAL SERVICES, L.L.C. ISSUES: The issue for Board of Public Utilities consideration is approval of nine lease agreements with Altec Capital Services, L.L.C.. These will replace Energy Delivery vehicles that are approaching the end of their service life. RECOMMENDATION: That the Board Approve nine lease agreements with Altec Capital Services, L.L.C. for the lease of nine Energy Delivery vehicles in an amount not -to- exceed $3,500,000 over the seven year term for Fiscal Years 20/5/2016 through 2021/2022. BACKGROUND: The Energy Delivery Electric Field division has eight existing alternative fuel work trucks leased from Altec Capital Services, L.L.C. ( "Altec ") that are approaching the end of their service life and lease period. The leases will expire in October, 2015. The Energy Delivery Electric Operations division has one existing diesel bucket truck that has reached the end of its useful service life and needs to be replaced to support construction and maintenance operations. The Electric Field and Operations divisions use these vehicles in the daily construction, operation and maintenance of the electric system. Vehicles need to be in safe and reliable operating condition, and also compliant with state and local air emissions regulations. Eight of the nine are heavy trucks that require compressed natural gas alternative fuel engines. Vehicles at the end of their economic life need to be replaced in a timely manner to ensure operating efficiency and employee productivity. Prior to 2007, Riverside Public Utilities (RPU) purchased work trucks outright. However, given the number of vehicles, air quality regulations and maintenance considerations, leasing has proven to be more cost - effective than outright purchase. Most of RPU's heavy work trucks must be ordered approximately one year ahead of delivery to allow for construction of the vehicles. Leasing vehicles offers certain benefits over outright purchase including: level cash - outflow over the useful life of the asset; avoidance of large capital outlay a year ahead of vehicle delivery and more efficient maintenance scheduling. Leased vehicles are maintained by Altec Leasing during off -hours insuring vehicle availability during normal business hours and enhancing operating efficiency. Although RPU will not own the vehicles at the end of the 7 -year lease period, leasing provides for timely replacement of vehicles, and avoids lost productivity due to break downs common to old vehicles. In addition, stringent rules on vehicle emissions will likely remain in the future. Leasing provides a programmed replacement schedule, with level cost, affording RPU the opportunity to take advantage of new and improved alternative fuel technologies and remain in compliance with air quality regulations.