You would think that in tough economic times fleet managers would view refurbishing as a way to reduce operating costs — carefully going through units, replacing worn parts, maybe setting equipment on a new chassis and restoring the unit to near-new condition. This is a timely subject as many fleet managers are making plans to attend the annual Electric Utility Fleet Managers Conference (EUFMC) in Williamsburg, Virginia, this month. To find out how fleet managers feel about refurbishing, Transmission & Distribution World asked several EUFMC officers and participants, “Are you replacing or refurbishing equipment?”

We contacted seven fleet managers who remained consistent about one thing: refurbishing isn't as popular as it used to be. They gave a list of reasons why they replace vehicles and equipment based on predetermined optimal retirement schedules.

Refurbishing Costs More Than You Think

Few will argue that the initial cash outlay for refurbishing costs less than the sticker price of a new aerial lift truck or a digger derrick. However, refurbishing also means taking a unit out of service and sending it back to the manufacturer or a vendor who goes through the unit and hopefully returns the unit for another five or six years of productive service. This was a popular concept in the 1980s and 1990s. However, when you factor in today's costs associated with refurbishing — rental fees for loaner units, parts and labor, and lost hours from having a unit out of productive service — you can end up in the red.

Chet Snyder, manager of Fleet Division Transportation Services at Southern California Edison (SCE), says, “The average cost to rent a replacement unit, like a Terex 6000 boom on a three-axle truck, is about $3000 per month and a man lift will run you $1900 to $2800 a month. Taking equipment out of service to refurbish it doesn't add up.”

Managers also point out that most utilities used to have backup vehicles that could be used when units were out of service for refurbishing. These spare fleets has disappeared in recent years as utilities strive to reduce inventories and overhead.

Parts and Labor

Another deterrent to refurbishing is parts availability. Fleet managers report that one of the problems encountered in large refurbishing programs was finding replacement parts. For SCE, parts became increasingly difficult to find. Often, once the part was located, it was cost prohibitive. Snyder points out, “When you keep refurbishing the truck, you end up with a rebuilt chassis that is 20 to 25 years old with a 7-year-old boom, which is going to need repair parts.” Other sources talked about the fear that older equipment may become obsolete, “Units have no trade-in value and no one wants to buy them.”

“Labor costs for working on equipment are expensive today,” says Wes Keller, manager of transportation at PPL (formerly Pennsylvania Power & Light). “By the time you add up parts and the cost to rebuild, it turns out to be about the same as buying a new unit. We found that the extended life of the vehicle doesn't offset what you have invested in an older unit.” Keith Moyle, director of fleet services at Wisconsin Public Service, agrees. “We do very little refurbishing of equipment because of the high cost of labor and materials.”

New Technologies

Keeping fleets up-to-date with the latest technologies is one of the biggest drivers for purchasing versus refurbishing. Moyle says, “We purchase new equipment on a regular basis, which keeps our fleet updated with the latest technology. Today's equipment can be cost-justified because of increased crew productivity compared to older equipment in the field.” SCE's Snyder agrees, “The trucks we are buying are incredible! There are fewer moving parts, so you're not replacing cables, chains, sprockets and gears.”

Many managers talk about the improvements in controls and switches. “Equipment used to be hydraulic or air-operated with single function levers,” explains Snyder. “The units we are buying have multifunctional ‘joy sticks’ that allow the operator to position booms and lift devices with more precision.” Regarding switches, Snyder says, “Electronic over hydraulic controls make equipment more reliable. Hoses would deteriorate or get brittle and break; boom-kill systems would shut down, leaving a man stranded up in a bucket. Today's equipment just lasts longer.”

Bigger is Better

Another reason fleet managers are replacing units with new equipment rather than refurbishing is to address the growing demand for larger equipment. Mike Allison, Duke Energy's fleet strategic planning manager, says, “Our user needs are changing. The work our crews are doing today requires aerial devices with larger material-handling capabilities and a longer, higher reach.” Managers report that their systems are larger — taller structures, heavier transformers and bigger poles. So when it comes time to retire equipment, the trend is toward increasing the size of aerial lifts, digger derricks and other field equipment.

The Leasing Formula

Today, many companies opt to lease equipment rather than purchase, which takes refurbishing out of the picture. Snyder says, “We lease everything. We are better off leveling off our purchase plan and taking advantage of trade-ins and just-in-time delivery.” Duke Energy also is involved in an attractive lease arrangement where the manufacturer guarantees residuals or takes back the unit at the end of the lease. Duke's Allison says, “We used to do major refurbishing of our digger derricks and aerial devices, but the declining value of refurbished assets didn't cost-justify it.”

Paint over Grease

Several seasoned managers spoke candidly about the bad experiences they had with refurbishing in the 1980s and 1990s. “We got into it big time,” says Duquesne's Kinross. “The problem was some manufacturers would put a new chassis under the boom, slap a coat of paint on it — sometimes right over the grease — and send it back without doing anything to the boom.”

A study in 2003 conducted by PPL underscores the trend toward less refurbishing and investing instead in new equipment. Wes Keller says, “Our performance data shows that new units with established life cycles and retirements, driven by cost, condition and age, produce the lowest operating costs.” Keller, who manages more than 3400 units at PPL, says, “We stopped renovating about 10 years ago. The overall price tag when you factor in higher labor costs, obsolescence and the downtime during renovation doesn't justify it.”

Time to Retire

Duquesne Light Co.'s Ken Kinross, fleet administrator, says, “Two things trigger taking a unit out of service: The body starts deteriorating, which can cost a fortune, or the frame begins to rusts out.” Kinross explains, “Utility companies like to specify a reinforced frame when they are buying trucks, which is where the rust builds up.” This year, Duquesne is looking for equipment that will last up to 20 years. To address body and frame deterioration, it is specifying single-section frames and stainless-steel bodies. These specs sound more expensive but the extended life payback is worth it.

Selective Refurbishing

Everyone does some refurbishing. Duke's Allison says, “Occasionally, we do have some unique, high-cost units where we will install remanufactured engines and transmissions to extend the usable life. But even in those cases, we have not chosen to perform a complete rebuild.” Dan Crossman, resource manager of Operations Support Power Delivery for NCRO Conectiv, says, “We look at refurbishing for specialized vehicles and equipment, such as pullers and tensioners, reel trailers and larger aerial devices like 80-, 90-, 100-plus-ft units, and specialized pressure digger derricks.”

Crossman advises that if you are going to refurbish equipment, “It is extremely important to standardize on equipment models and vendors. That way, you can develop a strong relationship with the vendor who gets to know your equipment, and you can rely on him [the vendor] to have a clearer understanding of your expectations for quality and product support.”

Another scenario where managers might consider a partial refurbishing is for trouble trucks with aerial devices dedicated to rural territories that run 40,000 and 50,000 miles per year. For those units, they might remount the aerial device on a new chassis at five- and six-year intervals.

REAs and Municipalities

From a distributor's perspective, the refurbishing business remains strong. Chris Pittard, vice president of Map Enterprises in North Carolina, says, “I find municipalities, electric cooperatives and smaller electric companies doing more refurbishing in comparison to the larger IOUs.” He continues, “REAs will bring in worn-out field trucks, rebuild or refurbish the aerial equipment and remount them on a new chassis.”

According to Pittard, utilities typically ask two questions when they are thinking about refurbishing:

• Does the replacement unit have features or capabilities that will significantly increase crew production? In some cases, the design hasn't changed significantly, so why buy a new unit?

• Is full production for an additional five or more years restored by refurbishing a unit? If not, then the payback probably isn't there.

Conclusion

With many fleet managers being told to watch their operating expenses, refurbishing should be a good way to extend the life of equipment, softening the impact on the bottom line. But the consensus among these fleet managers is that refurbishing costs too much when you factor in all out-of-service charges. Most are buying or leasing new equipment on a scheduled retirement program, which eliminates the refurbishing question. But the most compelling reason fleet managers are shying away from refurbishing is the improved productivity available on today's new equipment and the demand from the field for increased capabilities and capacity.

Acknowledgments

T&D World would like to thank Kevin Dinan, administrative fleet manager for American Electric Power and current president of EUFMC, who contributed to this article by introducing us to the following EUFMC officers and attendees: Mike Allison, Duke Energy; Dan Crossman, NCRO Conectiv; Kevin Dinan, American Electric Power; Wes Keller, PPL; Ken Kinross, Duquesne Light Co.; Keith Moyle, Wisconsin Public Service Corp.; Chris Pittard, Map Enterprises Inc.; and Chet Snyder, Southern California Edison.