FY 2012 Sanitary Sewer Rate ProjectionMasterpiece on the Mississippi
TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Budget Director
SUBJECT: Sanitary Sewer Rate Projection
March 8, 2011
INTRODUCTION
During a FY 2012 Budget Public Input Meeting, a City Council member asked if
the sanitary sewer rates would ever decrease after the construction of the Water
Pollution Control Plant Upgrade was completed.
DISCUSSION
The Water Pollution Control Plant Upgrade is estimated to be completed in the
fall of 2013. The average anticipated electrical demand at the renovated plant is
estimated to be 600 kW. The upgrade of the plant will allow for an estimated
savings of $240,000 in operating expense.
In addition, if the microturbines are installed at the plant and no additional food
waste or high- strength waste are brought into the plant, there would be electrical
production of 60% of the plant's usage over a typical year, which would be an
estimated operating savings of an additional $210,000.
If enough extra material were brought in to maximize the installed 600 kW
microturbine output (approximately 90% of the plant's usage), the additional
electrical savings would be $140,000.
To sell electricity to the utility in the future, electrical paralleling switchgear would
be required. The switchgear is not required to operate the microturbines for plant
electrical use and, therefore, was not included in the project cost opinion. If
enough extra material were brought into the plant to maximize the build -out of
1,000 kW output (estimated at 150% of the anticipated plant usage), the plant
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could generate enough electricity to run the entire plant and sell excess back to
the grid. Using $0.06 per KWH, this equates to an additional electrical savings of
$210,000.
There is also estimated net revenue of $350,000 from an energy rebate on the
plant upgrade expected in FY 2014.
In addition, sewer general obligation bonds will begin to be paid off in FY 2030,
the Water Meter Replacement SRF loan will be paid off in FY 2031, and the
Water Pollution Control Plant Upgrade SRF loan will be paid off in FY 2039.
Based on the upgrade of the Water Pollution Control Plant, microturbines
installed at the plant producing 60% of the electrical needs, and no inflation factor
computed into future sanitary sewer rates, the present value of the sanitary
sewer rate would be $21.30 per month in Fiscal Year 2040, which would be less
than the sanitary sewer rate of $36.19 per month in Fiscal Year 2015
(attachment I).
If an annual inflation factor of 3% is used beginning in FY 2016, the sanitary
sewer rate would be $37.34 per month in Fiscal Year 2040 as compared to
$36.19 in FY 2015 (attachment II).
If the Water Pollution Control Plant is built -out to generate 1,000 kW and enough
extra material were brought into the plant to produce 150% of anticipated plant
usage (975 kW), there would be additional revenue of $210,000 annually. This
best case scenario for sanitary sewer rates, not including an inflation factor,
would result in a steady decline in the sewer rate beginning in FY 2025 and
continuing through FY 2040. It is estimated that in FY 2040 the sanitary sewer
rate would be $16.22 per month, which would be less than the sanitary sewer
rate of $36.19 per month in Fiscal Year 2015 (attachment III).
Attachments
JML