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Economics of water service evolving

 

Posted 3/15/16 (Tue)

Economics of water service evolving

By Cecile Wehrman
A regional water supply system now serving the northwestern corner of North Dakota has gone through such a fast evolution, Jaret Wirtz isn’t surprised if people are a little confused about where their water is coming from and who is providing it.
Increasingly, however, the question uppermost in many minds is how much future water delivery is going to cost in towns like Ray, Tioga and Crosby.
Wirtz, executive director of the Western Area Water Supply Authority (WAWSA) calls “historic” the pace at which his agency has grown over the past five years -- from zero to service encompassing nearly 70,000 people.
“This has never been done before, to serve that many people in that amount of time,” said Wirtz. 
WAWSA was founded in response to a booming oil economy, but now that the pace of growth has slowed -- so, too, must WAWSA adapt to the changing revenue available.
Toward that end, WAWSA sent agreements this month to towns like Crosby and Tioga, asking them to sign a memorandum about the suspension of payments intended to make up for WAWSA taking over once lucrative industrial water sales. For Tioga, those payments have represented about $1 million a year.
Likewise, water districts like R&T Water of Ray have had to re-evaluate the costs associated with water delivery to the towns. A recent study showed Wildrose was receiving water for less than  it costs R&T to treat and deliver it.
Richard Liesener, a member of both the WAWSA and R&T boards, said he’s not surprised people lump all of this activity under one title -- WAWSA -- or if they express concern about the direction water costs are heading.
Wildrose
Liesener attended the city meeting in Wildrose last week to outline for city officials and the public why a substantial change in the cost of water delivery is necessary there.
R&T had already cut a deal to build a pipeline to Wildrose and provide water for the town at least a year before anyone had put the letters W-A-W-S-A together. A pipeline from Ray to Wildrose began construction in 2010.
Sitting on an aquifer at Ray, R&T, by this time, was already supplying water to Tioga and was also working on expanding service to Stanley.
To understand the basis for the Wildrose increase, said Liesener, you first have to understand what other towns have been paying and the difference in costs between delivery to cities and delivery to rural areas.
The cost of water delivery to Wildrose, said Liesener, is more in line with what R&T expects new rural consumers will be paying in the future -- a cost that necessarily is higher due to lower volume and greater distance.
Between base rates (in Tioga and Ray) and volume of usage, as of 2014, Ray was paying about $4.60 per thousand gallons; Tioga was paying $4.06 per thousand gallons; and Stanley, about $4.37 per thousand gallons.
Meanwhile, Wildrose was receiving water for $3.25 per thousand gallons with no base rate.
According to Liesener, the cost associated with treating the water alone is $3.31, but it still has to be delivered the roughly 20 miles to Wildrose and there are also costs associated with maintaining and repairing the pipeline.
“It wasn’t fair to the other cities that Wildrose was paying $3.25,” said Liesener.
Two increases, bringing Wildrose rates to $5.30 per thousand gallons, went into effect earlier this year. The first 10 cents of the raise was an increase all towns in the system received.
Liesener said such a big increase was bound to be a little painful in Wildrose.
“It’s like a Band-Aid. Do you pull it off slow or do you just rip it off?” he asked.
Though there was discussion of raising the Wildrose rate more slowly, in the end, the R&T board couldn’t justify losing money on the water it was shipping down the pipeline. “It no longer made sense,” said Liesener.
Wildrose Mayor Jess Homer said he understands why the action was taken, but he and other members of the town board were concerned about the potential for more big increases down the line.
“We just wanted to make sure this wasn’t a pattern,” said Homer.
Still climbing?
Based on the realities Liesener shared, said Homer, “Common sense dictated prices would have to go up.”
But how much more might they rise? 
Even though domestic water sales are intended to cover $20 million of the next $80 million in expansion costs on the WAWSA system, that’s spread over the five entities that make up the membership -- R&T, City of Williston, Williams Rural Water, McKenzie County Rural Water and Burke-Divide-Williams Water Supply.
“We haven’t raised rates because of that debt load yet,” said Liesener.
Jaret Wirtz said his agency is to member groups like R&T Water Service, BDW and Williams Rural Water as the Western Area Power Administration is to local electric co-ops like Burke-Divide Electric and Mountrail-Williams Electric. WAWSA and WAPA are in the transmission business, while the member agencies are in the service business.
It will be up to each of the member entities to determine how they will cover their share of future debt payments -- either through increases in base payments, increases in volumetric rates, or from cash reserves.
Because the debt is spread system-wide, Wirtz and Liesener  believe the impact will not be substantial -- and a growing number of rural water users will also share the cost -- but whatever the rates, consumers need to understand who is making the decisions.
“WAWSA is made up of these members,” said Liesener. “It’s not some rogue group.”
“The members are the ones right from your home town,” said Wirtz, with each of the member entities having representation on the board. “It’s the members raising the rates to themselves.”
Bottom line, said Homer, along with a fair price, is the need for a quality product.
“It’s much better water. It’s very good water. We’re very happy with it,” said Homer.
In reality, the cost of water may impact users much less than how the loss of industrial water sales in-lieu-of-payments hurts the budgets of cities that have counted on that revenue for their general fund. 
(Next week: Some towns find the loss of industrial sales base payments difficult to swallow, but say they wouldn’t be selling a lot of water right now anyway.)