Water / Sewer Issues

September 2010

 

Intro:

          Last year we used the residential water/sewer bill to explain the components that go into the bill and the various drivers of cost and therefore the rates.  We also discussed the impact of the Clean Water Act mandates on rates.

          This year we will provide an update on rates, status of planned capital projects and review future capital projects and their potential impact on rates. First we will review the current rates.

 

Current Residential Rates:

                                                                   FY2010                          FY2011

Customer charge -                                                 $15.31/bill                       unchanged

Water usage charge -                                    $5.24/1000 gallons                 “

Water quality protection surcharge -              $0.292/1000 gallons               “

 

Above water rates approved by PUC on docket 4025, effective July 1, 2009.

 

Sewer charge -                                   $6.80/1000gallons            $10.19/1000gallons

CSO fixed charge - <1” water meter             $104/year                        $190/year

 

Above sewer rates approved by City Council, June 2010, effective July1, 2010.  The rates proposed at the beginning of the 2011 budget cycle were $10.37/1000 gallons and $331/year.  The Council voted to approve a one-time shift of $1.5 million from the Parking Fund to the Water Pollution Control Fund to cover part of the cost of the contract for the Program Manager (CH2M Hill).

 

Background on water rates:

          -  The Public Utilities Commission (PUC) establishes rates for retail customers (Newport & Middletown) and for wholesale customers (Portsmouth and the Navy).

          -  The water usage rates cover operation and maintenance (O&M) of the clean water system (Lawton Treatment plant & Station 1 Water Treatment Plant, the 9 water reservoirs, transmission & distribution system, metering & billing, Water Division administration and the Water Division’s capital and debt service expenses).

          -  When the cost of providing water increases, the City prepares an application for a rate increase and files it with the PUC where it becomes a Docket on the PUC agenda. The Division of the PUC intervenes and represents the ratepayers.  The wholesale customers (Portsmouth and the Navy) also file motion and are granted intervener status. There is an evidentiary period where parties exchange data requests regarding the application.  If a settlement is reached with the interveners, the settlement is presented to the PUC at a hearing. If a settlement is not reached the PUC holds a quasi-judicial hearing.  Based on the pre-filed testimony, data requests and evidence presented, the PUC sets the new rates.

          -  A contract to be the City Advisor for the water treatment plant improvements was awarded to Camp, Dresser, and McKee (CDM). The City Advisor will provide professional services to the City that are needed to fully develop the strategy for the delivery of the system improvements and to manage and oversee on behalf of the City the procurement, design and construction of these facilities.

          -  A Cost of Service analysis, directed by the PUC, is in progress.  Another summer of daily reads from a selected number of water accounts is being collected to be used in the analysis. This process aims to be revenue neutral (i.e. the total cost of service will not change, just the allocation of those costs). The results of this analysis will be implemented in the next Docket.

          -  A major issue for setting new water rates is that water consumption is going down, thus the City has to cover its costs while its revenue from the current rates is decreasing.  The Water Division has reduced expenses to adjust for this decline in revenue, but many of these reductions, such as not filling open positions, are not sustainable in the long term. The Water Division’s Docket 4025 projected sales of 1.9 billion gallons for the 2010 fiscal year, but actual water sales for FY2010 were1.7 billion gallons.  Another issue is that approximately 86% of the Water Division’s operating costs are fixed, but only about 23% of the revenue is fixed. This leaves little room for finding savings in operating costs, while dealing with variable income.

 

2010 Water system improvements:

          -  The Water Distribution Improvement Project includes 39 work sites and began in February 2010. This project is part of the Water Division’s ongoing infrastructure replacement program to provide high quality drinking water to the customers. Approximately 3 miles of predominately undersized and/or antiquated water mains are being replaced. This project is ongoing.

          - On July 21, 2010, Fuss & O’Neill presented a workshop on The Easton’s Pond Dam Repairs and Improvements Project.  Two approaches for the embankment improvements are being considered: (1) vegetated articulating concrete or (2) bare riprap. The City is currently seeking permits (from RIDEM Water Quality Certification Program, RI Coastal Resources Management Council, Army Corps of Engineers and RIDEM Office of Dam Safety) for both approaches. Construction is estimated to begin in March of 2011 with an estimated cost of $6 million.  The cost of debt service for this project is already included in the current water rates (Docket 4025).

          -   Rhode Island Department of Health (RIDOH) mandated construction of a new water treatment plant at Lawton Valley to assure compliance with Drinking Water regulations. The City has consent agreements with RIDOH and RIDEM to have the new Lawton Valley facility on line by December 31, 2014.   Camp, Dresser, and McKee (CDM) will serve as advisor to the City during the design-build process for the new Lawton Valley plant and improvements to the Station 1 plant (Bliss Mine Road). On April 5, 2010 a workshop was given to provide an update on improvements to water treatment facilities by CDM. There has been a significant increase in new drinking water regulations since the late 1980’s and more are in the works, including regulation of THM’s (trihalomethanes). The plan is to replace the Lawton Valley Water Treatment Plant with a new plant that can meet these coming regulatory changes. The Station 1 WTP will be upgraded to regain the original capacity of maximum day design of 9 mgd (currently limited to 6 mgd). Between March 2009 and February 2010, several treatment options to remove organics were evaluated. Advanced treatment is needed to meet current and future regulations and advanced treatment (ie.nanofiltration or post carbon contactors) provides the best option. Advanced Water Treatment (AWT) can allow for “split” treatment to be utilized. In split treatment a portion (55 – 65%) of the water processed to remove organics by AWT, can then be blended with the conventionally treated water. Further pilot testing of nanofiltration and post carbon contactors was conducted between May 2010 and August 2010 to optimize design parameters and reduce costs. The plan is to issue an RFP for bids in the 4th quarter of this year.

 

Residential Sewer Rates:

          Each year the City Council sets the new sewer rates that become effective July 1.  A large number of the capital projects are to improve the City’s aging sewer system to prevent the infiltration of rain water and thus minimize Combined Sewer Outflows (CSO). In order to keep the rate increase at a reasonable level, the City Council authorized a one-time transfer of $1.5 million from the Parking Fund to the Water Fund (both are enterprise funds).

 

CSO Background:

          -  When it rains, Combined Sewer Outflows (CSO’s) often occur.  In 2009 there were 26 discharges at the Wellington Ave. facility and 24 discharges at the Washington Ave. facility.

          -  Infiltration of rainwater into the sanitary sewer system is part of the problem.  The City has installed 35 flow meters in the sewer system to assist in identifying sources of extraneous water flow into the system. The data from these meters is being collected and analyzed.

          -  The City of Newport has over 90 miles of sanitary sewer pipes, many of which have been in operation for over 100 years.    

          -  Separation of the storm water system and the sanitary sewer system is an ongoing project. Prior to the 1970’s many of these pipes were designed as combined sewers – collecting both sanitary sewage as well as storm water.

          -  In March 2010, the City contracted with CH2M Hill to serve as Program Manager to assist the City in negotiations with the EPA and the RIDEM with the development of a Corrective Action Plan for the City’s CSO Control Program.

          -  Currently the City is negotiating the terms of a consent agreement addressing the corrective actions and implementation schedule with the EPA and the RIDEM to eliminate CSO’s. The Department of Justice has intervened in the case.  There also is a lawsuit by the National Environmental Law center. At a workshop on June 2, 2010, a draft Corrective Acton Plan (CAP) was presented. The key date is November 2012, at which time the System Master Plan will be submitted to EPA and RIDEM. The negotiations are to extend the time to remediate the CSO problem.

          -   The Long Wharf Force Main emergency repair project was completed in 2009.

 

CSO Control Program 2010:

          - The High Priority Sewer Replacement Project started on February 1, 2010.  There are 19 work locations located in the Wellington capture area listed and 7,000 linear feet of sewer pipe are involved.  The cost of the project is $1.75 million.  Currently work is on hold, because soil contaminated with higher than acceptable levels of arsenic was found at Connection Street. The City is in discussions with the contractor as to who is responsible for the cost of the clean up. Prior to the discovery of arsenic, the project was on schedule.

          -  The Catch Basin Separation – Area 6 Project began on March 1, 2010.  There are 13 work locations listed. This project is substantially complete.

          - The Railroad Interceptor Sanitary Sewer Line Improvement Project began on March 8, 2010. It covers 2,500 feet of line and 12 manholes that need to be rebuilt.  The contract was amended in May of this year to a total of $350,676, because 1,200 feet of the line was in such bad shape that a different process needed be used (Cured in Place Pipe) to repair the pipe. This Project is substantially complete.

          -  A contract for the Wellington Avenue Sewer Interceptor Replacement Project ($1.33 million) was approved by City Council on August 11, 2010. Construction is scheduled to begin in 4th quarter 2010.

          -  The design phase of the Thames Street Sewer Interceptor Project has been completed and the information presented at a public workshop on May 26, 2010.  This project is in the bid process and scheduled for completion in 2011.

          -  Construction has begun on the UV treatment plant. It will cost approximately $5 million, with the City share being $2 million. Estimated annual costs, including debt service, will run less that $150,000.

 

Future Capital Projects to be Authorized:     

          -  Thames Street Sewer Interceptor Project             -        $9.85 million

 

          -  Plant 1 Water Treatment Improvements and

                   New Lawton Valley Water Treatment Plant    -        $83 - 87 million

 

          -  Ongoing replacement/rehab of approximately

                   2 miles of sewer line per year                        -        $5.5 - 7.5 million