WPUI – Water System Management and Decision Making: Is it Time for Change?

Water System Management and Decision-Making: Is It Time For Change?

NOTES FROM THE PROGRAM

The following conversation is about drinking water utilities, and specifically not about waste wateroperations.

-How do we culturally think of the value of water? (do we need information on the value of treated water?)

-Is it a right to have clean and affordable water? We must consider our willingness to pay for this.

-Do we need to treat all our water? Is there value in considering separate systems for supplying drinking water and water that does not need the level of treatment our drinking water currently receives?

-Should we perhaps take more steps to manage source protection? Need to treat where the pollution lands and increase efforts to protect the source water and keep it where it lands. Protecting the source water may lead to cost savings.

Panel of Wisconsin Utilities-

What are the challenges for enhancing cooperation in Wisconsin? Does Wisconsin’s regulatory framework discourage cooperation? This session will explore the challenges and approaches for specific utilities in Wisconsin and will highlight the benefits and drawback of various approaches.

Equity Issues: There is a capacity/quality component—each of which has different costs and occur in different communities.

Where does the water come from? Landlocked communities, using ground water, have different challenges than communities that use surface water. Debatably, ground water may be cleaner to start with, but requires pumping, surface water may not require as much pumping but may require more purification. Why should community A, with easy access to clean ground water, have to pay the same as say a community that has surface water that requires a lot of chemicals and processing.

The public perception is, why am I paying the same rates for services, say purificationthat we don’t need? What if Community A has peak resource needs necessitating storagethat Community B does not have and/or thus need. If both are metered communities, Community B may find itself paying for water costs associated with time of use in order to help fund the storage required by Community A. With a partner, you must balance system for overall efficiencies.

However, is it possible that pooling resources are essential as areeconomies of scale? Would cooperation or regional planning help to make municipals more likely to:

  • Obtain safe drinking water loan funds,
  • better sharing/communications,
  • explore cooperative system storage efforts

We need to consider- “What kind of a community do we want to be? Do we want to grow, attract business, and provide confidence in our drinking water?”

How do you divide up power in a consolidated organization, each community gets one vote, no matter the size?

Is there a problem in Wisconsin that needs to be solved? We need to evaluate the effect of:

  • Decreasing sales
  • Increasing environmental requirements
  • Water grabs by large industries or large industries abandoning their municipal water company for deep wells
  • Infrastructure requirements
  • Annexation issues
  • Obligation to serve if you start to supply water in a wet year but then find that a draught has put you in a bind for delivery.
  • Payment in Lieu of Taxes to the local community vs. state taxes if privately owned
  • Ability to attract capital or other financial resources
  • Community identity on cooperation
  • Watershed laws and regional planning
  • Do we need to do research to stay competitive and up to date
  • Asset management’s value and meters roles
  • Water reuse
  • Geo-mapping for planning is available by DNR/PSCW for planning issues, but it does not show community boundaries by well.

Is Cooperation happening already?

Cooperation is happening, consolidation- perhaps not so much?

  • Is autonomy of elected officials a factor in moving forward with consolidation or cooperation? We are already cooperating on numerous levels
  • Info sharing is happening between communities
  • Emergency response/resource sharing network in place
  • Training and licensing
  • Operations seem to make sense- operation is done via contract management some like this, some don’t

Investor owned perspective

  • There a number of models for public/private partnerships that might match the problem. There are many models already at work in the field that run from full out management, to outsourcing contracting for specific services. In some cases the business model might include working with other communities with similar needs/resources, or contracting directly with someone else. Examples are:
  • Operation and Maintenance Contracts
  • Long-term leasing arrangements
  • Joint Power (water) agencies
  • However, need to explore how we can work within state structures that may prohibit or enhance the move to IOU type models(IOUs pay a gross receipts tax to the State, municipal utilities pay a PILOT to the City or Village).

Public Enterprise

Water is an emotional issue- we are “fired up about water”.

We can easily value water delivery – we don’t price externalities or social costs. Water is not a true commodity in that sense.

Political/historical barriers between communities have an effect on cooperation.

Communities have problems giving up their control—communities formed around some common goal that may not be shared in the next community over.

Understanding diverse needs and drivers between communities is key.

Need to start thinking in the long term vs. immediate term.

Manitowoc and Central Brown County Water Authority have an 8-year partnership/working relationship.

Panel- Responding to the Day and Wisconsin Response (you will see some repetitiveness in this section)

Must consider customer involvement- more communication to consumers and how to do this going forward. The public and community leadership might want to think about what they want to achieve in the long term, not the immediate issue.

Change is inevitable, butare the changes relevant to WI?

Sustainability is a goal- if we are shooting for this;should we be looking at:

  • full cost pricing:
  • We already have simplified rate cases with quick turn-around and full cost pricing is the current practice at the commission.
  • But rate increases to address a problem that might materialize does not seem prudent.
  • Wise asset management.
  • Public awareness of the true costs of water.
  • Regulatory “certainty”.

If change is inevitable, can we be prepared by monitoring for triggers?

  • First, what is needed is to identify common goals and identified in such a fashion to keep it non-political for as long as possible.
  • Does the community know the cost of tap water? The community has been spoiled by expecting inexpensive on- demand water, they need to know what it takes to get water to the tap and thus to be part of the goal setting.
  • Do we really have an aging system that needs major overhaul?
  • Things are good in WI – regionalization would not make things better

But what of the utilities who ARE struggling—who has responsibility for them? How can we help the utilities who don’t know that they are facing big issues going forward.

  • What happens when the DNR says no drinking without boiling- then what does the commission need to do – bailout?
  • Companies have failed on health issues
  • Management issues
  • And in this case a system goes bankrupt
  • Match the reg. effort to the size of the system
  • Customers IN small systems may go back to private wells if their rates get too high, and if there is sufficient groundwater.
  • Is it the case that by changing the system to regionalization, small systems would benefit?
  • Should the PSCW have more teeth to force financial solutions to problems?
  • Triggers that suggest that a community may need some changes:
  • Late annual reports, for instance.
  • New construction – is this really needed. YES
  • Coming regulations that will challenge utilities in the future

There is a divergent opinion of what regional cooperation is vs. regionalism – what does this mean for meeting the needs of local communities who have very different needs and values?

  • Where is the value in cooperation? Operations seems like a likely candidate or outsourcing select services where local talent is insufficient to meet the need?
  • In Wisconsin capacity is not the problem, distribution is. Does this suggest the need for a water transmission company and if so who controls it?
  • Need to revisit obligation to serve if we have a transmission company—it is different than say an oil pipeline system. If one year you have excess capacity and the next year you don’t, are you obliged to continue to serve the new customer from the previous year?
  • Desire by local communities for growth. Some may not want growth; others may want all the water they can get to add a new industry or housing etc. What does their 10-20 year regional plan suggest for water?
  • What role does annexation play in the plan?
  • Regional planning could be valuable in setting future water system direction.

Is more cooperation is needed:

  • Communities form for a reason- is this a naturally built in barrier?
  • Cooperation is needed when it is needed.
  • This is a long and short run problem on multiple levels—financial, physical and financial resource availability, public expectations and local business/industrial expectations.

-Cooperation in some form is going on at the business, quotidian level

-What do we mean exactly by cooperation? From public water supply is a different issue than just a utility responsibility. How do we prioritize spending?

-Not just a utility issue, but a state issue.

Privatization-is this coming on a large scale?

  • Not likely- there has to be a referendum to sell a municipally owned water utility to a private company
  • the PSC has to approve the price of the municipal
  • triggers acquisition clause
  • Need to have consistent and predictable regulatory process (PSC, DNR). Some perception that there are unpredictable decisions coming out of PSC – we need a more predictable system – some wholesale companies have decided it was not a good move due to reg. changes.
  • But skeptical that this will proceed as small systems will not give up control

Key Considerations moving forward

-Need to identify common goals

-Keeping negotiations non-political for as long as possible is critical

-Annexation question and rapid city growth plays a huge role

-Shock of rate increases after long periods of no increase

-Spoiled by low cost of water (is this largely a perception issue?)-- *Weneed communicate to the public, more effectively how we get water from the source to the tap.

-Should our cooperative framework be overall models or individual models of cooperation on a case basis?

-Water quality/access is a driver of costs

-Can we consider contracting ops, outsourcing select services rather than privatization of water systems?

-For water investments there is a need to consider accelerated depreciation options– 70 years is too long. But, there is a concern about who pays for what from a generational standpoint

-Is there really a need in Wisconsin for a change?

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