HomeMy WebLinkAboutReport to the Lpawa
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REpORT To THE LPA WA
Regarding Proposed Expansion
of
Southeast Water Purification Plant
and
Related Contract Issues
~~~ T, t\~
Robert T. Herrera
General Manager LP A W A
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EXECUTIVE SUMMARY
The City of Houston and its Consultant, Camp Dresser & McKey (CDM) have been '
evaluating the expansion of the Southeast Water Pmification Plant (SEWPP) for the past
several months. The Study has centered on the improvements necessary to increase firm
. capacity from 80 MGD to 120 MGD. The proposed expansion will primarily involve the
upgrade of existing plant structures and equipment Additionally, the repair and upgrade
of the existing facility at current capacity is also planned. Our current contract with
Houston allows the LP A W A to participate in any proposed plant expansion based on our
current percentage of ownership.
Along with the proposed expansio~ the City of Houston is proposing new con1racts for
the Co-Participants, with new contract features designed to simplify administration of the
Contract, as well as give the Co-Participants more voice in the operation of the Southeast
Water Purification Plant Finally, the new contract documents any revised ownership
percenf!lges of the Co-Participants.
With additional capacity available, the La Porte Area Water Authority Board will
determine ~ and to what degree, the Authority will participate. The. Authority has
contractual rights and prior "imbedded" costs associated with the planned upgrade.
Therefore, should the Authority not purchase all eligible capacity, the Board must set a
price for these rights, so other Co-Participants may purchase additional capacity. These
decisions will be based on projected water demands and the historical purchase price of
existing capacity.
Because the Authority recently purchased 3 MGD from Galvesto~ we are recommending
only minor participation in the upgrade (0.6 MGD Production Capacity and 1.97 MGD
Pumping Capacity). This leaves 3 MGD in Excess Capacity available for other co-
participants.
It is recommended that the Authority set the price of this Excess Capacity at $0.759735
per gallon, and authorize the General Manager to negotiate agreement(s) for the sale of 3
million gallons per day. Additionally, authorize the General Manager to negotiate a new
contract with Houston to purchase an additional 0.6-MGD of Production Capacity and an
additional 1.97 MGD of Pumping Capacity.
The following report addresses these issues in more detail and provides the basis for our
recommendations. .
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LA PORTE AREA WATER AUTHORITY
P~OPOSED SEWPP CONTRACT
INTRODUCTION
The City of Houston and its Consultant, Camp Dresser & McKey (CDM) have been
evaluating the expansion of the Southeast Water Pmification Plant (SEWPP) for the past
several months. The Study has centered on the improvements necessary to increase firm
capacity from 80 MGDto 120 MOD. The proposed expansion will primarily involve the
upgrade of existing plant structures and equipment Additionally, the repair and upgrade
of the existing facility at current capacity is also planned.
PROPOSED CONTRACT
In order to allocate capacity and costs to Participants, as well as revise language to
improve' the contract for all parties, a new contract is being developed to address these
issues. A proposed contract was presented to all Participants in September. After
review, the Participants met in La Porte on November 3, 1999 to discuss the issues
without the City of Houston present A list of changes and/or clarifications was
presented to Houston the following week. A subsequent meeting was held and Houston
agreed to most of the Participants' suggestions. The following is a list of major
differences between the existing and proposed Contract
1. Flow restriction devices change from allowed to mandatory. However, at the
suggestion of the Participants, these remoW:COntrolled devices would only be
activated if certain trigger conditions were met. The' Participants' Advisory
Committee will develop the triggers.
2. Excess Production and Pumping fees are eliminated from the Contract at the
request of the Participants.
3. O&M costs will be based on an annual budget, and with quarterly progress
reports. This will result in a fixed cost for one year.
4. Establishes a contingency fund of$l million maximum, and based on 2.5% of
annual budget. Paid through O&M. This fund would be used to make major
repairs and modifications. It would also earn. interest
5. The payment plan for the repair and upgrade includes up-front payment to be
held by Houston (mterest paid) or independent escrow fund that Houston
could draw. "Catch-up" will not be an option.
6. The delivety point varies with each contract. At the suggestion of the Participants,
Houston agreed to the Point of Measurement This is what is in current
LP A W A contract.
7. City of Houston indirect overhead would be fixed at 9% (historical) rather
than adjusted quarterly. Direct costs would be billed directly.
8, Houston would be defined as the "Managing Participant" instead of
''Managing Owner".
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9. Houston's role in managjng the allocation of water capacity from the
proposed upgrade is limited to ensuring that only water capacity available is
allocated, and acting as the "aCcountant" in terms of water capacity.
Participants will determine the value of all water capacity rights bought and
sold. This is discussed later in this Report.
10. Much discussion regarding the proposed Operating Advisory Committee.
Houston has agreed that Participants elect chairman. Additionally, any
contracts that Houston will be see!dng reimbursement from Participants will
include one or more representatives from the Advisory Committee as non-
voting observers. The representative(s) would report back to the full Advisory
Committee. ' .
The Contract, as revised, should be acceptable to the Authority. The timetable anticipates
signed contracts back to Houston by March 1, 2000.
COSTS
Costs associated with the new contract are found within four basic components, and are
summarized on Table 1.
Table 1 - Costs
DESCRIPTION
COST PER GALLON
UpgradelRepair Existing Facilities
Upgrade from 80 MGD to 120 MGD
Additional Pumping Capacity
$0.078247
Excess Capacity (proposed by Houston)
$0.319612
$0.128900
$0.566317
The first is the upgrade and repair of the existing facility to comply with current
regulations, as well as modernization of certain components, especially electronics.
Additionally, several improvements to the existing design that are not associated with the
proposed expansion are included in these costs. The current estimate for the
repairlupgrade is $0.078247 per gallon of capacity, or $563,378 for the 7.2 MOD owned
by the Authority. This cost is paid regardless of participation in the proposed expansion.
The second component is the cost of upgrading the plant from 80 MOD to 120 MOD.
These modifications are needed to establish a firm. capacity of 120 MGD. Only those
Participants that desire additional capacity will pay these costs. Additional Production
Capacity will cost an estimated $0.319612 per gallon.
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The third component cost, Additional Pumping Capacity, will be required to reestablish
the ratio of Production to Pumping Capacity to 125%. Additional Pumping capacity will
cost an esrim~ted $0.1289 per gallon.
The final cost component involves the purchase of capacity in excess. of current
percentage of ownership. Because the Authority owns 7.2 MGD, it is entitled to
'purchase 3.6 MGD of additional capacity. Should the Authority desire to purchase
capacity in excess of 3.6 MGD, a Rebate Cap~ity charge would be payable, in addition
to the Production Capacity costs outlined above. Th~ City of Houston estimates this cost
at $0.566317 per gallon.
It appears that the Authority will probably purchase less than its entitled share. The
proposed rebate per gallon would be paid directly from the purchaser to the Authority.
Houston's Consultant figured this cost as the average cost per gallon of the original buy-
in and the upgrade cost. However, the Authority recently purchased 3 MGD from the
City of Galveston at approximately $1.13 per gallon, and will be required to pay.an
additional $0.078247 per gallon to upgrade that capacity. Because the additional upgrade
costs ~ only paid by holders of existing production capacity, this cost must be added to
the original purchase price of $1.13 to determine the cost paid. This totals $1.208247 per
gallon for the total cost of the 3 million gallons purchased from Galveston.
To determine the actual value of the rebate per gallon, the cost to purchase additional
Production Capacity ($0.319612) and Pumping Capacity ($0.128900) is subtracted from
the total original cost of $1.208247, for a total proposed rebate of $0.759735 per gallon
(See Table 2).
TABLE 2. - REBATE CAPACITY
Original Cost per Gallon
Upgrade Existing Production
Total Original Costs
$1.13,
.078247
$1.208247
Less Production Expansion Cost Per Gallon
Less' Pumping Cost Per Gallon
($0.319612)
($0.128900)
$0.759735
Total Rebate Capacity Cost Per Gallon
A11y Participant that desires to purchase additional capacity in excess of its current
percentage of ownership must pay this cost to Participant(s) that have additional capacity
rights that it does not intend to exercise. Currently, the Cities of Pasadena and
Friendswood, as well as the Clear Lake City Water Authority, have indicated an interest
in up to 3 Million gallons of additional capacity needs in excess of their current
percentage of ownership.
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PROJECTED CAPACITY DEMANDS
The Consultant has indicated that the total demand for the new capacity is 43 MGD,but
only 40 MGD will be available. To date, three (3) Participants have expressed a desire to
obtain . an option on ,excess Authority capacity. Should the Authority have excess
capacity to sell, the price, as indicated by the new proposed Contract, is subject to
negotiation.
The La Porte Area Waier Authority currently owns 4.2 MGD, with an additional 3 MGD
available by August 2001. With a total capacity of 7.2 MGD, the Authority can meet its
average daily demand, with a 2% growth rate, through 2040, and peak daily dem~Jnd
through 2025. CUITeIlt demand (including groundwater usage) averages 3.6 MGD, with
peak day at 4.5 MGD (See Table 3).
TABLE3-LPAWA WATER DEMAND PROJECTIONS
FLOW TYPE
2000 2002 2010 2020 2025 2030 2040
Daily Average
3.302 3.447 4.025 4.907 5.417 5.981 7.291
Daily Peak
4.513 4.710 5.501 6.706 7.403 8.173 9.964
Purchase of the Authority's percentage share of the expansion would cost $2,711,630,
and would supply the Authority's average daily demand beyond 2050. However, the
additional capacity would also result in 50% increase in O&M, emergency repair, and
overhead costs that are allocated according to the percentage of ownership. These
additional costs would be paid for over 25 years before the additional capacity is needed.
With the transfer of the 3-MGD from Galveston to the Authority scheduled in August
2001, the need for additional capacity is approximately.6 MGD. This additional capacity
will ensure that the Authority can meet its peak daily demand without exceeding its
capacity. Additionally, the increased maintenance costs would only increase
approximately 7%, and the Authority would have capacity beyond 2030.
Original pumping capacity at the Plant totaled 225 MGD. The Expansion Study
performed by the Consultant indicated that the firm pumping capacity, defined as the
capacity after failure of the largest single pump, is 200 MGD, a reduction of 25 MGD.
There are no plans to upgrade the pumping facilities to increase this capacity.
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The Authority originally purchased 5.25 MOD of Pumping Capacity, or 2.33% of
Pumping Capacity, to provide for 125% of Production Capacity for peaking purposes.
Pumping Capacity purchased from Galveston totals 3.50 MGD, or 1.56% of Pumping
Capacity. Together with Galveston's share, the Authority owns 3.89% of the Plant's
original Pumping Capacity, or 8.75 MOD. With the reduction in Pumping Capacity from
225 to 200 MGD, the Authority's 3.89% share is reduced to 7.78 MOD.
In order to regain Pumping Capacity of 125% of Production Capacity, the Authority will
need to buy additional Pumping capacity, at an estimAted cost of $0.1289 per gallon.
Should the Authority not purchase any additional Production Capacity, it will need to
purchase 1.22 MOD of Pumping Capacity, at an estimated cost of $157,258. Should the
Authority purchase an additional .6 MGD of Production Capacity, it will need to
purchase 1.97 MOD of Pumping Capacity, at a cost of approximately $253,933 (fable 4).
Table 4 - Pumping Capacity Analysis
Total Pumping Capacity
Original.MOD New MOD Percentage
225 200 100
Original LP A W A
With Galveston
5.25 4.56 2.33
8.75 7.78 3.89
Pumping Capacity at 125% of Production Capacity
Production
7.2 MOD
7.8 MOD
Current
Pumping
7.78 MGD
7.78 MGD
Total Required
9.0 MGD :
9.75 MGD
Additional Required
1.22 MGD
1.97 MGD
RECOMMENDATION
It is recommended that the Authority purchase an additional O.6-MGD of Production
Capacity ($191,767), and an additional 1.97 MOD of Pumping Capacity ($253,933).
Additionally, upgrade costs for the existing facility for the Authority will total $563,378.
This results in a total estimated cost to the Authority of $1,009,078. This cost will be
offset by Rebate Costs due and.payable to the Authority for is remaining share of excess
capacity. Should the Authority sell its rem~ining share of 3 MGD for the suggest price of
$0.566317 per gallon, it would realize a net rebate of $689,873 (See Table 5). Should the
Authority sell its unused share for $0.759735 per gallon; it would realize a net rebate of
$1,270,127 (See Table 6).
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Table 5 - Costs with COH Cal~ Rebate
DESCRIPTION GALLONS COST/GAL TOTAL COST
Upgrade/R.epair Existing Facilities 7,200,000 $0.078247 $ 563,378
Upgrade from 80 MGD to 120 MGD 600,000 $0.319612 $ 191,767
Additional Pumping Capacity 1,970,000 $0.128900 $ 253,933
Excess Capacity 3,000,000 $0.566317 ($1.698.951)
Net Cost ($ 689,873)
Table 6- Costs with CLP Calculated Rebate
DESCRIPTION GALLONS COST/GAL TOTAL COST
UpgradelRepair Existing Facilities 7,200,000 $0.078247 $ 563,378
Upgrade from 80 MOD to 120 MGD 600,000 $0.319612 $ 191,767
Additional Pumping Capacity 1,970,000 $0.128900 $ 253,933
Excess Capacity 3,000,000 $0.759735 ($2.279.205
Net Cost ($1,270,127)
It is recommended that the Authority set the price of Excess Capacity at $0.759735, and
authorize the General Manager to negotiate firm option agreement(s) for the sale of 3
million gallons per day. Additionally, authorize the General Manager to negotiate a new
contract with Houston to purchase an additional O.6-MGD of Production Capacity and an
additional 1.97 MOD of Pumping Capacity.
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11/15/99 17:25 ~1 488 8844
CLC WATER A4
~ IE lC IE H/IE.~
NOY 1 6 119
CITY MANAGER'SU I 5C:.r
I OFFICE . ,
.A
f4I 002/002
CLEAR LAKE CITY WATER AUTH
900 Bay Area Boulevard · Houston, Texas nosa · 281/488-1164
· FAA 281/488.3400
November IS, 1999
Via Facsimile 281-471-7168
Mr. Robert Herrera, City Manager
City of La Porte
P.O. Box 1115
laPorte, Texas 77572-1115
."fE@m:UW~J
iW NOV 16 1999 ~'
PUSUC WORK~. I
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h:' Offer to Purchase Capac:ity from Southeast Wat~ Purification Plant
Dear Mr. Hemra:
Based on current representations from the City of Houston, the Clear Lake City Water
Authority will be unable to purchase the entire amowt of capacity it desires in the next expansion
increment of the South=st Water Purification Plmt. It is our understanding that the City of La
Porte/La Porte Water Authority has available to it an additional increment of some 3 MOD in
capacity. The Clear Lake City Water Authority would like: to purchase 1.S MGD of the La Porte
capacity.
At your soonest possible convenience. please let me know whether La Porte is interested in
selling the requestc<i amount of capacity to the Clear Lake City Water Authority and under what
terms and conditions such purchase and sale could be c::onsummated between the parties.
1 want to thank you in advance for you courtesy and consideration of this request.
Sincerely.
~j~tt~
Wilbert ]. K4oibcrt, General Manager
Clear Lake City Water Authority
ce: Via Facsimile 281-867-0892
Steve Gillette
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City ofFrien
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December 13, 1999
Mr. Robert Herrera, City Manager
City of La Porte
604 W. Fairmont Parkway
La Porte, TX 77571
,
Dear Bob:
Friendswood is interested in purchasing any additional water that may be available from your
city or entity.
Our interest is for two reasons. First, the city is growing at a considerable rate, and our needs for
the build out of our community are greater that the existing supply of surface water. Currently,
Friendswood has a capacity in the Southeast Water Purification Plant (SEWPP) of3 MGD. We
estimate the city will require 10 MGD of surface water for build out. It will be in the city's long-
term best interest to acquire as much capacity now as possible to meet the demands of growth.
Second, the Harris-Galveston Coastal Subsidence District has amended their Regulatory Plan.
Friendswood is in Area 2 of and will be required to utilize surface water on a ratio of 80:20
surface water to ground water beginning January 1, 2001, unless a certified Groundwater
Reduction Plan (GRP) is in place. One of the conditions of a certified GRP is that the city have
surface water capacity in place to meet those requirements.
It is imperative we have sufficient surface water capacities to meet the demands of growth and
the requirements of the Subsidence District. Our request to purchase surface water capacity from
you is critical. Please let us know if you have water to sell, the amount, and the cost as soon as
possible. We will be happy to meet with you at your convenience to further discuss the matter.
910 South Friendswood Drjve · Friendswood, Texas 77546-4856 · (713) 996-3200 . Fax (713) 482-3722
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Mr. Robert Herrera
Page Two
December 13, 1999
We look forward to your favorable reply to our request.
Sincerely,
~o/
Ronald E. Cox
City Manager
REC/tsm
Cc Mayor and Councilmembers
Director of Public Works
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