March 1, 2019
The questions presented in the FAQ are those asked by the ratepayers and members of the PLVC Utilities Committee. Answers have been provided by OWSI/PLA and, where appropriate, the State DOH, the WUTC, and HDR Engineers.
- Can you please provide a summary of the situation? The Washington State Department of Health (DOH) is requiring OWSI to initiate plans to add chlorine on a full-time basis to the water system. Adding chlorine full-time will cause the manganese-rich water to become discolored at the tap. The solution is filtering the water at the source before adding chlorine. The initial cost estimate of the filtration system is $2.2M. OWSI is in the process of applying for a low-interest loan from the DOH. Seventy percent of the cost will be passed on to each OWSI water customer in the form of a $10 surcharge in our bi-monthly bill. The surcharge will continue for a period of 20 years. OSWI will pay the remaining 30 percent of the costs.
- Can you please provide additional details? In 2018, the water system owned and managed by OWSI experienced two positive total coliform events. The cause of these events is most likely the manganese-rich water. Manganese adheres to the pipe walls giving bacteria an environment in which to grow. When the manganese sloughs off the pipe wall, the bacteria are exposed and enter the water system. Total coliform events are not considered a health risk but rather an indication that there is an issue in the water system that needs attention. When a total coliform event occurs, the DOH is notified. The coliform test is run again to confirm the results and, if positive, chlorine is added to the system until testing comes back negative. If the water system had experienced one more positive coliform event last year, the DOH would have mandated continuous system chlorination. Chlorination oxidizes the manganese in the water which causes water discoloration (turns it black). As a result, OWSI has agreed with the DOH regional engineer to enter into voluntary treatment scenario which gives OWSI more options with chlorination and manganese removal. HDR Engineers is working with OWSI on a long-term solution. They have prepared a report identifying filtration as the most viable, long-term and proven method of manganese removal.
- How will all customers be notified and kept up-to-date? An eBlast was sent by the PLVC on February 13th notifying customers of the Public meeting scheduled for March 5th; 3- 5 p.m. at the Beach Club. OWSI included a letter to all OWSI customers in the February billing. Additional eBlasts will be sent as necessary. The PLVC website will be the primary source for project updates.
- How long has the PLVC known about this situation? The first time this topic was presented by OWSI/PLA was at a meeting of the PLVC Utilities Committee in early January. Since that time, members of the Utilities Committee have been working with OWSI and PLA management staff to gather all the proposed project details before scheduling a community meeting on March 5th where interested parties can learn more and ask questions.
- When did OWSI/PLA first become aware that the manganese-rich water was a serious problem that has led up to the current situation? In 1999 there was pilot testing on well 14 for manganese treatment. OWSI delayed installation of treatment to keep costs down to customers as long as possible. Manganese treatment was included in the Water System Plan in 2015. That was a result of increasing maintenance flushing and a concern from customers affected that even with flushing they were still experiencing manganese discoloration.
- Is there anything OWSI could have done differently with increased maintenance or investment that would have alleviated the DOH requirement to chlorinate full-time? No. When the water quality issues began OWSI and HDR have been focused on investigation and finding a solution to the issues moving into the future.
- Why didn’t the PLVC require OWSI to correct the manganese issue before? The PLVC has no legal authority over OWSI/PLA nor any other of the utilities that serve Port Ludlow. The PLVC does not get involved in the every-day operations of the utilities that service Port Ludlow. The PLVC is an informal conduit between PLA and Port Ludlow residents.
- Can you please reference the RCW the DOH is using that requires OWSI to chlorinate full-time? Is this a new regulation? WAC 246-290-451(5) lists conditions requiring continuous disinfection of distribution system piping. This is an existing regulation.
- Are there any less-costly options that would fulfill the DOH requirements? Our consultant, HDR evaluated multiple options that had less costs. Unfortunately, all of the other options would have made the black water discoloration considerably worse and/or not satisfied DOH requirements for continuous chlorination.
- Manganese adheres to the pipe walls allowing a medium for bacteria to “hide” and cultivate. Should individual homeowners be concerned about their service line and piping on the customer side of the meter? Currently, homeowners who have not used their plumbing for at least six hours should flush their plumbing for 15 – 30 seconds so that any accumulated manganese is removed prior to doing laundry or running a dishwasher to minimize discoloring clothes or dishes, and to also flush prior to drinking or cooking with the water. The need to flush prior to laundry or washing dishes can be skipped once the filtration and chlorine system are operational, but homeowners should still consider flushing prior to drinking or cooking.
- North Bay wells have had a filtration system in place for many years. Will the proposed new filtration system allow for maintenance / improvements to the existing filtration system? The filtration in the North Bay has been scheduled for media replacement in 2019.
- When will the formal OWSI/PLA application to the WUTC be made? What is the process and timing of getting the proposed surcharge approved? When will the formal WUTC application be made? What is the process for ratepayers to provide comments before the WUTC Commissioners consider the application? Contact information will be provided in the notice to customers. The company must submit the surcharge filing to the Commission at least 30 days before it can go into effect. The company must also provide all affected customers 30 days’ notice before the effective date. The customer notice will provide customers instructions on how to file comments on the case by using the comment form on the Commission’s website, by email, or by US Mail.
- When is the project scheduled to start and when will it be operational? HDR Engineers are currently preparing design documents that will be sent out to bid. It is estimated that the project will take two years to complete.
- Where will the proposed filtration system be installed? The proposed filtration system will be by our Wells 14 and 16 near the intersection of Mount Wilder Street and Mount Constance Way.
- If this is a problem with the wells in South Bay, why do the ratepayers in North Bay have to pay the surcharge? Commission practice has been all plant and expenses are shared by all customers. This is commonly called ‘single tariff pricing’. This spreads the cost to more customers which in turn lowers the costs to all customers.
- Will water at the tap smell like chlorine? Yes, there will be a mild chlorine smell and / or taste. With proper dosing it should be minimal and most people will not detect the difference after a few days. The amount of chlorine added to the watersystem should not be an issue with irrigation system overspray concerns. A positive benefit is that OWSI customers will not have to clean their dishwashers, washing machines, and plumbing fixtures as often for black manganese build-up.
- The $2.2M is an initial cost estimate. What happens if the actual cost comes in at a different amount? If the actual cost is different than estimated, the surcharge will be adjusted which will require WUTC approval. As pointed out this is an estimate which may need to be adjusted for the surcharge and optional lump sum payment when the final costs are known. The company will need to determine if an adjustment is needed. If needed an adjustment would follow the same UTC process of review.
- The $2.2M estimate is to design, build, and begin to operate the filtration system. What are the expected long-term operational and maintenance costs? The estimated annual O&M costs are $151,600. As pointed out this is an estimate which may need to be adjusted when the final costs are known. The company may then determine if an adjustment to general rates for operating cost are needed. If needed an adjustment would follow the same UTC process of review.
- Will all OWSI customers will pay the surcharge? Each and every residential and commercial customer will pay the same surcharge amount. There currently are 1,674 OWSI customers. When a property is sold, the buyer will assume the remainder of the surcharge term. When new properties are built and connected to the OWSI water system, they will also begin to pay the surcharge amount.
- The Water System Plan prepared by HDR Engineers was approved by the WUTC in 2016. The Plan projected OWSI surplus net revenues annually from 2014 – 2020. In addition, OWSI experienced positive net revenues except one year from 2008 – 2012. Does OWSI/PLA have any reserve funds that could be used to offset the cost of the filtration system? If not, why? OWSI does not have any reserves at this time. Even if OWSI did have reserves, the process would be the same. We would file for a surcharge and look for ways to reduce the loan costs as we have done through the Washington State Revolving Loan Program.
- The proposed source of the $2.2M loan is from the State Department of Health. Has the loan been approved? If not, what is the expected timeframe? Yes, the loan has been approved however we do not know the amount or interest, etc.
- How was the 30/70 split between OWSI/PLA and the ratepayers determined? The UTC practice has been for companies to have investment in the plant. Plant items directly paid by customers is considered Contributions In Aid of Construction (CIAC) and not part of general rates. 70 percent customer funded and 30 percent company funded is a balance believed to foster investment.
- Since OWSI customers will be responsible for 70 percent of the loan repayment, in the spirit of transparency, can you please provide all loan details including the interest rate and the total amount of the debt service? At this time the cost of the water treatment project is an estimate. When the project is completed and the actual cost is available the surcharge will be adjusted.
- Will the OWSI accounting allowed under WUTC rules allow OWSI to earn a profit on this increase in investment as per WUTC normal rate increases when installation improvements/investments are paid for by the system owner? As pointed out in Q-22, plant funded by customers is not considered part of general rates and companies are not allowed to earn any return (profit) on this portion since it is not funded by the company.
- Will all the monies accrued from any approved surcharge be placed in a sequestered / dedicated bank account so monies can only be used to repay the loan amount? Who will monitor this? Under WAC 480-110-455 Water Company Funding Mechanism, (4) (a) funds must be held in a separate account by the company for the benefit of customers.
- OWSI will be responsible for 30 percent of the loan repayment. What is the source of these funds? Will it be lump sum, annual, quarterly, or monthly? Is there some level of guarantee that OWSI will fulfill its obligation to repay 30 percent of the loan amount? At this time OWSI is still waiting for the terms of the loan however would assume that if we defaulted it would be no different than any other loan.
- What happens if OWSI defaults on the loan? The terms of the loan will be available in April or May of 2019.
- What happens if the DOH does not approve the loan? The DOH loan has been approved.
- What happens if the WUTC denies the proposed surcharge? OWSI meets the requirements for a surcharge as explained in the WAC 480-110-455 .
(a) Surcharges are designed to fund three types of financing needs:
(i) Future water utility plant. This surcharge allows the company to collect money from current customers to fund a reserve in order to pay for future capital projects that are part of a long-range plan. The project must be approved by the Department of Health as a part of a long-range plan, or required by the Department of Health to assure compliance with federal or state drinking water regulations, or to perform construction or maintenance required by the Department of Ecology to secure safety to life and property under RCW 43.21A.064 (which is on the PLVC website).
- The 20-year loan repayment period extends beyond the current Port Ludlow Development Agreement. What happens if OWSI/PLA sells the water system to another company or the PUD before the loan is completely repaid? The WUTC believes this loan would be transferred to the new owner the same as any debt would be transferred to the new owner.
- It is understood that OWSI/PLA is a private company. However, can you please assure OSWI customers that all monies currently received from payment of water/sewer bills is only used for OWSI CIPs / O&M and not used for any other PLA business holdings? OWSI is following all applicable and GAAP rules.
- To what extent, if any, are expenses of PLA allocated to OWSI? The Annual Reports and any other UTC documents are available by a request for public records (RFPR) as appropriate.
- OWSI submits an Annual Report to the WUTC which makes it a public document under the Washington State Open Records Act. Can you please provide a website where the Reports can be located? The UTC does not maintain Annual Reports filed with the Commission on an open public website. The Annual Reports and any other UTC documents are available by a request for public records (RFPR) as appropriate.
- Can OWSI/PLA please make other project related documents available for review including but not limited to the Water System Plan, the HDR Report regarding treatment options, the DOH Loan Application, and the WUTC Surcharge Application? Can these documents be made available online on the PLVC website? The WUTC documents are available by a request for public records as appropriate. On March 6th a customer notification will be sent to each customer as required by the WUTC for filing for a rate change (surcharge). The Water System Plan is on the PLVC website.
- OWSI is requesting that the $10 surcharge amount start in the April 2019 billing. Why do the ratepayers have to start paying now for a benefit that they won’t start receiving until 2 – 3 years from now? If OWSI starts to collect the surcharge now, will any collected monies receive interest? In addition, will OWSI also start to contribute an equal amount as the ratepayers to a sequestered / dedicated bank account that will be only be used for the Manganese Filtration Project? See WAC 480-110-455. Funds received under a WUTC surcharge, while being held by the company, and any interest earned on those funds are considered Contributions In Aid of Construction. The funds provided from the surcharge will only fund 70% of the project. OWSI will fund the other 30% of project. OWSI funds will not be in a separate account. The requirement is for the surcharge only.
- How do OWSI’s current rates and surcharges compare to other local water/sewer utilities? The WUTC does not keep or compare rates and surcharges among water companies. OWSI did a review and has provided the table below of surrounding publicly owned water systems and their water rates for comparison.
- How do OWSI annual net revenues compare with other similarly-sized private water utilities? OWSI and the WUTC do not keep or compare rates and surcharges among water companies.