1. Pathways to Lasting Solutions The Reuse Rate Dilemma John Gallagher, PE Principal Consultant August 10, 2006 2006 Water Reuse Workshop

2. Pathways to Lasting Solutions The Reuse Rate Dilemma… Cost per gallon of reuse water may be greater than potable water

3. Pathways to Lasting Solutions Let's Work on this Dilemma Financial What's Ahead? Survey of Reuse Rates Economics

4. Pathways to Lasting Solutions Financial Analysis – Do I have enough $$ to pay for costs?

5. Pathways to Lasting Solutions Reuse Water Used (kGal) Net Reuse Water Costs divided by LESS: REDUCTION IN WATER RELATED COSTS Capital Costs Capital Costs O&M Water Related Costs Water Resources and Treatment Capital Costs Capital Costs Water Reuse $Rate per kGal Development of Reuse Rates O&M

6. Pathways to Lasting Solutions Financial Analysis Capital cost$4,050,000 O&M 604,500 Total reuse costs$4,654,500 Reuse water sales (1,000 gals)1,576,600 Reuse rate (per 1,000 gals)$2.95 Potable water rate$2.05 Reuse rate/potable water rate144% 2007

7. Pathways to Lasting Solutions Economic Analysis – Do Benefits Offset Costs?  Reduced water utility cost  Peak demand reduction  Deferral of water facility investment  Reduced water resources cost

8. Pathways to Lasting Solutions Benefits of Reuse Reduction in WTP capacity costs$ 940,000 Reduction in water resource costs 1,110,000 Total cost reduction$2,050,000 2007

9. Pathways to Lasting Solutions Economic Analysis Capital cost$4,050,000 O&M 604,500 Total reuse costs4,654,500 Reduction in WTP capacity940,000 Reduction in water resource costs 1,110,000 Total reduction2,050,000 Net reuse costs$2,604,500 Reuse water sales (1,000 gals)1,576,600 Reuse rate (per 1,000 gals)$1.65 Potable water rate (per 1,000 gals)$2.05 Reuse rate/potable water rate 80% 2007

10. Pathways to Lasting Solutions What Are Utilities Doing? UtilityReuse Rate/Potable Water Rate LVVWD – Existing68% City of Flagstaff, AZ75% of commercial use Marin Municipal Water District, CA56% Mesa Consolidated Water District, CA90% Glendale, CA75% Irvine Ranch Water District, CA60% Burbank Water and Power, CA85% Long Beach, CA70% El Paso, TX80% Tucson Water, AZ92% of commercial rate El Paso Water Utility, TX60% - 80%

11. Pathways to Lasting Solutions Evaluating Pricing Levels and Structures to Support Reclaimed Water Systems What's Ahead... WateReuse Foundation Study

12. Pathways to Lasting Solutions Evaluating Pricing Levels and Structures to Support Reclaimed Water Systems What's Ahead... Study is just underway WateReuse Foundation Study

13. Pathways to Lasting Solutions Study Participants  Aurora, CO  Charlotte County, FL  Dallas Water Utilities, TX  El Paso, TX  Folsom, CA  Irvine Ranch, CA  Las Vegas Valley Water District, NV  Pompano Beach, FL  Reno, NV  San Elijo Joint Powers Authority, CA  Sydney, Australia Utilities Consultants  Red Oak Consulting  Stratus Consulting

14. Pathways to Lasting Solutions Interactive Process Study Process Reuse Planning Guidebook Interactive Planning Software Reviews & Interactive Sessions with Participants Simulation And Evaluation Simulation And Evaluation Approach Development Of Analytical Approach Development Of Analytical Approach Economic Framework Financial Dynamics “Real-world” pricing alternatives Stranded cost analysis Capacity benefit analysis Rate Structure alternatives Subsidy determination Critical Evaluation Critical Evaluation Literature Review Literature Review Final Decisions

15. Pathways to Lasting Solutions Discussion Items  Your reuse rates  Policy considerations  Lesson learned

16. Pathways to Lasting Solutions Questions and Discussion John Gallagher Red Oak Consulting, A Division of Malcolm Pirnie, Inc (303) 369-3535 jgallagher@pirnie.com