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SAC Task Force Update on Reserve Capacity Methodology Presented to the Environment Committee

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This report, presented by Jason Willett and Bryce Pickart on February 9, 2010, details the progress and recommendations of the SAC Task Force regarding reserve capacity methodologies for the Metropolitan Council Environmental Services. Key topics include various methods for calculating reserve capacity, their financial impacts, and recommendations for managing municipal wastewater charges. The task force emphasizes the need for legislative changes to improve the SAC rate structure and reduce the financial burden on municipalities amid fluctuating growth and recovery rates.

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SAC Task Force Update on Reserve Capacity Methodology Presented to the Environment Committee

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  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

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