A low-visibility item on tonight’s City Council agenda is approval of a contract for delivery of water to DOE. The main purpose of the contract is to determine how much DOE will pay the city for the water that is supplied to DOE facilities. Several years ago (before I joined City Council), DOE greatly reduced its water use, mostly at Y-12, which significantly reduced its payments to the city for water — leading to increases in the rates charged to other water users. The city couldn’t increase the rates it charged to DOE because they were set by a long-term contract, which has finally expired. The new contract is something that has been under negotiation for a long time, during which time the old contract (including its pricing scheme) was extended multiple times.
The contract is in the agenda package and Trina Baughn has questioned it on her blog. Another Council member asked for my take on the contract, particularly my assessment of Trina’s comments. Here’s my reply:
I’ve skimmed the water contract and conclude that it’s definitely complicated.
For potable water, the proposed new contract apportions the (calculated) “actual” cost of obtaining and treating water between DOE and the rest of the city based on the two entities’ proportions of annual usage. When I divide the annual payment of $2.075M for potable water by values at the two ends of the annual DOE usage range, which is 1.6B to 1.96B gallons (and convert the result to a 1000 gallons basis), it looks like DOE would pay less per 1000 gallons than they are paying now for potable water. (You should check my arithmetic, though!)
DOE also will pay for $463,750 annually for nonpotable water (which refers to untreated lake water that Y-12 has to buy in order to augment the flow of East Fork Poplar Creek). This document doesn’t seem to indicate how much nonpotable water DOE is currently paying for, so I don’t know how that compares to the current rates for nonpotable water. DOE is the only user of nonpotable water, and DOE’s nonpotable water needs are likely to decrease in the next couple of years, so it’s best not to charge by volume for nonpotable water. Hopefully, the amount budgeted in the contract covers the city’s entire costs for producing and delivering nonpotable water.
Additionally, the contract calls for DOE to contribute a percentage of the cost of capital projects for the river pumps and water treatment plant. I would ask the staff how much DOE’s capital contributions are expected to be in each of the next few years, and what DOE’s total cost per 1000 gallons of potable water would be, based on the range of usage amounts covered by the contract. The capital contributions may (or may not) compensate for lower per-gallon payments.
Another concern I would have with the capital part of this contract is whether it means that the city will have to get federal approval for every future project on the water plant.
Unfortunately for us citizens, DOE isn’t going to help the city pay for improvements to the city’s water distribution system. I believe that a lot of our capital costs for water are for distribution, including things like the new pump station at Robertsville, but also notably including water lines for areas like the Horizon Center and K-25, where (based on commitments made before my time on Council) infrastructure has been added to accommodate what were unrealistically optimistic expectations for economic development in the “west end”. Mark Watson thought that DOE ought to pay a share of the city’s distribution costs (consistent with the rest of us city water customers, whose payments help to subsidize distribution lines that don’t benefit us directly), but apparently DOE has refused to consider that.
Ellen
PS – The contract has price escalators for future years. Note that my comments are based only on the first-year price info.
