Agenda - 04-29-2004-2a - Laserfiche WebLink

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KEY GUIDING PRINCIPLES IN THE LETTER OF UNDERSTANDING BETWEEN OWASA AND THE UNIVERSITY FOR THE PLANNED WATER RECLAMATION AND REUSE SYSTEM In February 2004 OWASA and the University of North Carolina at Chapel Hill approved a Letter of Understanding that commits both parties to move forward with plans and final arrangements to develop, operate, maintain, and finance a new water reclamation and reuse system that will initially serve the University's main campus, The key guiding principles in the Letter of Understanding are: • The reclaimed water system will be financially self - supporting. No costs of the system will be recovered through potable (drinking) water rates or fees Consistent with the requirements of the Agreements of Sale and Purchase between OWASA, the Towns of Chapel Hill and Carrboro, and the University, the reclaimed water rates, fees, and charges will fully recover all of OWASA's costs associated with constructing, operating, maintaining, and managing the water reclamation and reuse system, In other words, reclaimed water rates will reflect the "cost-of- service" for the reclaimed water system, and the University will pay its full and fair share of the cost of reclaimed water service. • The University will commit to use reclaimed water rather than potable water in specified amounts and at specified facilities on the main campus. • OWASA will provide reclaimed water of acceptable quality and in the specified amounts needed at the targeted demand centers on the main campus. • The initial reclaimed water system will be designed and constructed to have excess capacity available to serve non - University customers where practical to do so in the future OWASA will have sole authority to approve extensions of and connections to the reclaimed water system. • OWASA will determine the rates, fees, and charges for reclaimed water service. • Both parties will work together to complete the planned system on or before July 1, 2007, SOME RELATED FINANCIAL ISSUES AND IMPLICATIONS OF WATER REUSE • By substituting reclaimed water for demands previously met with potable water, OWASA's drinking water sales volumes and revenues will initially decline. This is expected to require an offsetting increase in the drinking water rates charged to all water customers, including the University which is OWASA's largest customer. This kind of revenue effect will occur with any water conservation measure, It is also similar to the revenue experience of Orange County's solid waste management program — as recycling increases tip fee revenues decline. Based on a preliminary analysis, the initial projected effect on potable water revenues could be the equivalent of about an 8 to 9 percent increase above the current effective potable water rate, or a 3 to 4 percent increase in the combined monthly water and sewer bill for a typical residential customer, of OWASA That is about $1.80 more per month for the typical single family residential customer. The effect on potable water system revenues and rates will depend on several factors, including the reclaimed water and potable water demand levels, the portion of General and Administrative (overhead) expenses recovered through reclaimed water rates and fees, and the amount of Federal and State grant funds that may be received for the project. Although potable water rates will need to be increased as a result of water, reuse or other large -scale water conservation measures, those rate increases must be weighed against the many important benefits that reuse has to offer all OWASA customers and the environment. OWASA expects that future potable water rates would be lower than they would otherwise be without reuse, since several water supply and treatment capital improvements projects can be deferred or possibly deleted as a result of reuse. Nutrient discharges to Morgan Creek will also be lower than they would be without reuse