The 26th Annual 5 Cities Plus conference that took place in Cincinnati last week brought together leaders of some of the largest wastewater and stormwater utilities in the region. Cincinnati’s Metropolitan Sewer District and its outgoing executive director, Tony Parrott, hosted this year’s conference at the Hilton Netherland Plaza. Parrott, SD1 executive director David Rager, and other regional and national utility leaders sat down with the Northern Kentucky Tribune to talk about the state of the industry.
In part one of this two-part series, industry leaders talk about the costs and challenges associated with the individual consent decrees entered into between the utilities and the U.S. Environmental Protection Agency. Part two, which will be published Wednesday, focuses on some of the innovative solutions and changes to business models within the industry that are designed to help address those challenges.
By Mark Hansel
NKyTribune managing editor
The Federal Water Pollution Control Act Amendments of 1972 and, subsequently, the Clean Water Act of 1977 and the Water Quality Act of 1987, established safety and cleanliness compliance standards for utilities. How utilities would pay to adhere to those standards, however, was not addressed.
The unfunded mandate ultimately led to consent decree agreements that have created funding challenges and helped fuel rate increases at utility companies throughout the country.
The 5 Cities Plus Conference provides an annual opportunity for industry executives in the Midwest to share best practices and solutions that have helped establish compliance strategies.
Parrott and Rager were joined by counterparts from utilities in Indianapolis, Louisville and St. Louis in sharing some of those insights.
Also participating were Radhika Fox, director of the Washington D.C.-based Value of Water Coalition, Adam Krantz, CEO of the National Association of Clean Water Agencies and Jeff Eger, former head of SD1 and current stormwater business class director with HDR Inc.
“Now, 50 years after the passage of the Clean Water Act, which is the governing statute under which these folks operate, they actually know a heck of a lot more than the folks sitting in Washington do,” NACWA CEO Adam Krantz
Krantz praised the members of the group for their efforts to date, and said it is time for state and federal environmental leaders and the U.S. Congress to look at the utility heads as co-regulators in the effort to clean up the nation’s water.
“The one thing I would like to make very clear is that these are amazing public stewards,” Krantz said. “Now, 50 years after the passage of the Clean Water Act, which is the governing statute under which these folks operate, they actually know a heck of a lot more than the folks sitting in Washington do. They are doing amazing innovative things to meet the increasingly stringent requirements of the Clean Water Act.”
One of the biggest challenges facing the utilities is the costs associated with the consent decrees they entered into with the U.S Environmental Protection Agency to achieve compliance with the Clean Water Act.
The five utilities participating in the discussion are obligated to commit about $15 billion collectively just to meet the terms of their individual agreements. That is separate from operating costs, and infrastructure upgrades and improvements that are not part of the consent decrees.
In Northern Kentucky, for example, SD1 faces challenges with aging infrastructure in the river cities, sewer capacity issues in growth communities in Boone and Kenton Counties and a reluctance by its board to support rate increases.
Rager
Rager estimates it will cost about $2 billion for SD1 to fulfill its obligation and accommodate the 300,000 customers served by the utility.
“That doesn’t include what we need to do just in the repair and replacement of aging infrastructure,” Rager said. “Some of the sewers we have in the Covington area were put in during the Civil War and they have to be maintained.”
SD1 has been much-maligned in the court of public opinion for its rates and fee schedule and roundly criticized by members of its board. The plight of the Northern Kentucky utility, however, is similar to its counterparts throughout the Midwest.
Brian Bingham, chief of operations for Louisville and Jefferson County Metropolitan Sewer District, said his department spent about $1 billion building and expanding wastewater plants before entering into a consent decree agreement in 2005.
The utility built 1,000 miles of sewer, and removed 44,000 septic tanks and put them on sewer service.
“We have had an amended consent decree that did not change the cost,” Bingham said. “The overall capital cost is about $850 million and the reason it is not in the billions is we set the work up with our previous activities. We went with some very cost effective-solutions as we were going through it.”
Louisville MSD has had a flat operating budget of about $116 million a year for the last four years. It has had rate increases to keep up with capital projects, but it has not increased operations and maintenance spending during the period.
Citizens Water acquired the wastewater utility and water utility from the City of Indianapolis in 2011. Jamie Dillard, director of wastewater operations for Citizens Water, said Indianapolis entered into its consent decree, which must be completed by 2025, in 2006.
“Our primary project is to build a large tunnel, which would be about 20 feet in diameter, and 25 miles long,” Dillard said. “It is expected to hold about 250 million gallons of wastewater overflow.”
The utility expects to spend about $1.7 billion on the control plant itself and about $1.3 billion on infrastructure improvements over the same period.
Parrott
Parrott, who will leave MSD next month to take a similar role in Louisville, said the consent decree program in Cincinnati is being done in two phases, the first of which is almost completed and will cost about $1.2 billion over 10 years.
“We are getting ready to do the affordability analysis for Phase II which is projected to be another $2 billion through 2030, so collectively that’s 3.2 billion for the consent decree program,” Parrott said. “As part of our affordability analysis we have plugged in another $51 million a year for normal asset management of the system. So, $3.2 billion, plus another $1.5 billion for asset management amounts to a robust capital program of more than $4.5 billion through 2030.”
Most of the problems in Cincinnati are in the inner core of the community with combined sewer overflow remediation, so affordability and rate increases are a major concern for the utility going forward.
St. Louis had been working on a consent decree for several years before signing it in 2012 at an estimated cost of $4.7 billion.
“We have the fourth-largest amount of sewer of any city in the country and that is really driving the extra cost of our program,” said Brian Hoelscher, executive director of the Metropolitan St. Louis Sewer District. “We are about 15 percent of the way though it right now…we’ve got an interim target date of 2023 that we are expected to make. We knew we were going to come close to bumping up against some affordability issues in 2023, so we are considering what to do to make sure we maintain affordability in our service area.”
Fox, who worked as director of policy and government affairs for the San Francisco Public Utilities Commission prior to joining the Value of Water Coalition, said the improvements made by the utilities is commendable. She said the cost of wastewater and stormwater treatment, compared to other services, is moderate.
“One of the biggest public health achievements that we have made as a nation is putting in these wastewater systems and the progress we have made in the last 50 years is phenomenal” Fox said. “In (SD1)’s district it’s (approximately) $50 a month to take the water and make sure it’s clean and returned to the river; in Cincinnati it’s $70. Most people are paying $120 for their cell phone bill or their cable bill, so, it comes down to what we value, what we are willing to pay for and what’s essential.”
