metropolitan council

Metropolitan CouncilEnvironmental Services

A Clean Water Agency

Presented to the Environment Committee

February 9, 2010

Reserve Capacity/SAC Task Force Update

Jason Willett, MCES Finance DirectorBryce Pickart, Assistant General Manager




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Task Force Progression

Background

Reserve Capacity Technical Methods

Reserve Capacity Method Financial Impacts

Other Financial Issues

SAC System & Alternatives

Recommendations

Contingency

Meeting #:

(12/1) (2/2) (4/6) (6/1) (8/3) (10/5) (12/7)




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Reserve Capacity Technical Methods

1. Flow (used through 2009)

2. Committed capacity (used for 2010 with planned 3-year phase-in)

3. Adjusted Flow (option)

4. Combination of #2 and #3 (option)

5. Growth Cost— Recommended by prior task force— Not considered a reserve capacity method and

would require statutory change




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Flow Method Definition: Average flow for preceding 5 years

Pros— Historical method— Simple to understand

Cons— Declining flow during dry period increases apparent

Reserve Capacity— Weak nexus to SAC charge concept (based on max.

day capacity demand, not used for non-residential users)




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Committed Capacity Method Definition: Committed Capacity based on SAC

units paid

Pros— Independent of precipitation’s and groundwater

level’s effect on flow— Direct nexus to SAC units paid (Committed Capacity

regardless of use)

Cons— Fails to recognize effects of water conservation (e.g.,

low flow plumbing fixtures) and community I/I reduction

— Difficult to explain treatment plant Reserve Capacity determination




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Definition: Used capacity determined using 10-year flow average and an adjustment for SAC paid in the last 10 years

Pros— Adjusts flow over longer period, reducing effect of

precipitation cycles and accounts for effects of water conservation and I/I reduction

— Relatively simple

Cons— Weak nexus to SAC committed capacity concept

Adjusted Flow Method




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Combination Method Definition: Adjusted flow plus committed

capacity for interceptors

Pros— Adjusts flow over longer period, reducing effect of

precipitation cycles and accounts for effects of water conservation and I/I reduction

— Maintains committed capacity concept for non-residential uses of interceptor system

Cons— More complex to explain than Adjusted Flow Method




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Financial Questions

What impact does Reserve Capacity methodology have on SAC rate and Municipal Wastewater Charges (MWC)?

What is impact on reserve fund and plan for continuing or future recession?

Implementation of changes (phase-in)?




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SAC Rate by Reserve Capacity Method—Slow Recovery

$2,000

$4,000

$6,000

$8,000

Flow $2,100 $4,600 $6,500 $6,500 $6,500 $6,500

Committed Capacity $2,100 $2,200 $2,300 $2,400 $2,500 $2,600

Adjusted Flow $2,100 $2,800 $5,600 $5,700 $5,700 $5,700

Combination $2,100 $2,300 $4,600 $4,700 $4,800 $4,900

Growth Cost * $2,100 $3,300 $5,200 $5,200 $5,200 $5,200

2010 2011 2012 2013 2014 2015

SAC units- 6,300/yr 2010-12, increasing 1,000/yr thereafter

* Not a reserve capacity method and so would require legislative change.




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Wastewater Charge per HH by Reserve Capacity Method—Slow Recovery

$200

$210

$220

$230

$240

$250

$260

$270

$280

Flow $202 $209 $212 $222 $230 $245

Committed Capacity $223 $231 $238 $249 $260 $278

Adjusted Flow $209 $216 $221 $230 $238 $254

Combination $212 $219 $225 $235 $243 $259

Growth Cost * $206 $216 $222 $235 $244 $261

2010 2011 2012 2013 2014 2015

`

* Not a reserve capacity method and so would require legislative change.




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Action Plan Defer growth projects and prioritize other

projects to reduce capital expenses and debt service

Reduce operating expenses

Raise rates (moderately)— SAC— Municipal Wastewater Charge (MWC)

Ask for legislation— Allow temporary shift of some debt service cost from

SAC to Wastewater Service Charges— If legislation is not enacted, fully implement

Committed Capacity method for Reserve Capacity determination

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