1. Metropolitan Council Environmental Services Reserve Capacity/SAC Task Force Update Presented to the Environment Committee February 9, 2010 Jason Willett, MCES Finance DirectorBryce Pickart, Assistant General Manager A Clean Water Agency

2. Task Force Progression (12/1) (2/2) (4/6) (6/1) (8/3) (10/5) (12/7) Meeting #: 1 2 3 4 5 6 7  Background   Reserve Capacity Technical Methods   Reserve Capacity Method Financial Impacts   Other Financial Issues   SAC System & Alternatives   Recommendations  Contingency

3. Reserve Capacity Technical Methods • Flow (used through 2009) • Committed capacity (used for 2010 with planned 3-year phase-in) • Adjusted Flow (option) • Combination of #2 and #3 (option) • Growth Cost • Recommended by prior task force • Not considered a reserve capacity method and would require statutory change

4. 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)

5. 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

6. Adjusted Flow Method • 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

7. 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

8. 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)?

9. SAC Rate by Reserve Capacity Method—Slow Recovery SAC units- 6,300/yr 2010-12, increasing 1,000/yr thereafter * Not a reserve capacity method and so would require legislative change.

10. Wastewater Charge per HH by Reserve Capacity Method—Slow Recovery * Not a reserve capacity method and so would require legislative change.

11. 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