The Denver Water & Aurora Water W.I.S.E PartnershipThe Price of Regional Partnership
Presenters:Jason Mumm
StepWise Utility Advisors
Co-Authors:Dave BennettDenver Water
Rick MarsicekAurora Water
2011 Joint Management ConferenceDenver, Colorado
Where is W.I.S.E.?Covers the Denver Metro Area
South Metro
AuroraDenver
Aurora Water Purification Facility
Foothills WTP
Metro WWTP
ECCV Northern Pipeline
ECCV Western Pipeline
PWP PipelineECCV Wells and WTP
Reuter-Hess Reservoir
Aurora Reservoir
PWP Wells
Potential WTPConduit 27
Aurora Pipeline
Highlands
$800 million in existing infrastructure
Expandable to 50,000 acre-feet of water delivery
Renewable supply for 14 purveyors in Southern Metro area
Drought supply for Denver and Aurora
Total population affected = 2 million
A Regional Network Connecting Demand to SupplyWhat is W.I.S.E.?
How it Works
Existing Supplies
Recaptured Water
Conventional Treatment
Recaptured Treatment
Binney WPFPrairie Waters Lines and Pumps
Existing Mountain Conveyance
AuroraSo. Metro & Denver Transmission
W.I.S.E. Regional Business Plan
Aurora Water
South Metro
Existing SuppliesDenver
Water
Recaptured Water
• Fully utilize water supplies and capacity to meet growing regional demands
Strengths
• Regional water sales to growing So. Metro area & drought reserve for Aurora and Denver
Opportunities
• Maximize recaptured water and the treatment & delivery capacity for wide distribution
• Minimize costs
Goal
SupplyDemand
Combining Strengths to Meet OpportunitiesWhy a Regional Partership?
Long-Term Growth
Short-Term
Growth
Past Growth
Reuse Supplies
Limited Supplies
Lack of Capital
Buildout Demand
Surplus Capacity
Existing Supplies
Declining Wells
Supply and DemandDenver and Aurora have supplies available, and Aurora has the capacity to treat and deliver it.
Pricing is a Business Requirement
W.I.S.E Partnership Business Needs
RETURN ON INVESTMENTSFacility owners need a reasonable return on invested capital
TRANSPARENCY FOR BUYERSBuyers need to have political and business assurance that prices are set appropriately
SUSTAINABLE PROCESSESPricing needs to be repeatable in future periods and provide consistent results
Challenges to Pricing & Business as UsualKey W.I.S.E. Pricing Issues
1
2
3
Multiple Facility OwnersAt least 3 owners each requiring a different rate of return on their investment in supply and delivery assets.
Interruptible DeliveriesSales to So. Metro customers are interruptible when “firm” customers take priority of supply and delivery.
Non-Integrated SystemTreatment and delivery components were not designed to work with each other, leaving capacity constraints and surpluses throughout
Each Owner Recovers Costs and Earns Specific ReturnPricing Solution: Multiple Owners
Owner ARecovers costs and X% return on their facilities
Owner CRecovers costs and Z% return on their facilities
Owner BRecovers costs and Y% return on their facilities
Pricing Recognizes Variability in Used CapacityPricing Solution: Non-Integrated System
Recaptured Water Intake12 MGD
Recaptured Water Pumping18 MGD
Recaptured WaterPiping50 MGD
Recaptured Water Treatment17 MGD
Conventional Treatment33 MGD
• Each facility has its own specific allocation of operating and capital costs
• Unit Costs are calculated for each facility based on specific usage and capacity demands
Interruptible Customers Only Pay for What’s Used and Useful
Pricing Solution: Interruptible Supply
Average-Day Usage – Costs Shared by All Customers
Used Max-Day Capacity – Costs Shared by Firm Customers Only
Unused Reserve Capacity – Costs Shared by Owners Only
Workable Solutions That Meet Business NeedsThe Results
BuyersReceive an Interruptible Rate for water at 40% discount to firm price
OwnersReceive firm supply & capacity when they need it and earn revenue the rest of the time