Metropolitan Council Environmental Services A Clean Water Agency Presented to the Environment Committee February 9, 2010 Reserve Capacity/SAC Task Force Update Jason Willett, MCES Finance Director Bryce Pickart, Assistant General Manager

Task Force Progression Background Reserve Capacity Technical Methods Reserve Capacity Method Financial Impacts Other Financial Issues SAC System & Alternatives Recommendations Contingency Meeting #: (12/1) (2/2) (4/6) (6/1) (8/3) (10/5) (12/7)

3 Reserve Capacity Technical Methods 1.Flow (used through 2009) 2.Committed capacity (used for 2010 with planned 3-year phase-in) 3.Adjusted Flow (option) 4.Combination of #2 and #3 (option) 5.Growth Cost — Recommended by prior task force — Not considered a reserve capacity method and would require statutory change

4 Flow Method Definition: Average flow for preceding 5 years Pros — Historical method — Simple to understand Cons — Declining flow during dry period increases apparent Reserve Capacity — Weak nexus to SAC charge concept (based on max. day capacity demand, not used for non-residential users)

5 Committed Capacity Method Definition: Committed Capacity based on SAC units paid Pros — Independent of precipitation’s and groundwater level’s effect on flow — Direct nexus to SAC units paid (Committed Capacity regardless of use) Cons — Fails to recognize effects of water conservation (e.g., low flow plumbing fixtures) and community I/I reduction — Difficult to explain treatment plant Reserve Capacity determination

6 Definition: Used capacity determined using 10- year flow average and an adjustment for SAC paid in the last 10 years Pros — Adjusts flow over longer period, reducing effect of precipitation cycles and accounts for effects of water conservation and I/I reduction — Relatively simple Cons — Weak nexus to SAC committed capacity concept Adjusted Flow Method

7 Combination Method Definition: Adjusted flow plus committed capacity for interceptors Pros — Adjusts flow over longer period, reducing effect of precipitation cycles and accounts for effects of water conservation and I/I reduction — Maintains committed capacity concept for non- residential uses of interceptor system Cons — More complex to explain than Adjusted Flow Method

8 Financial Questions What impact does Reserve Capacity methodology have on SAC rate and Municipal Wastewater Charges (MWC)? What is impact on reserve fund and plan for continuing or future recession? Implementation of changes (phase-in)?

9 SAC Rate by Reserve Capacity Method—Slow Recovery SAC units- 6,300/yr , increasing 1,000/yr thereafter * Not a reserve capacity method and so would require legislative change.

10 Wastewater Charge per HH by Reserve Capacity Method—Slow Recovery * Not a reserve capacity method and so would require legislative change.

11 Action Plan Defer growth projects and prioritize other projects to reduce capital expenses and debt service Reduce operating expenses Raise rates (moderately) — SAC — Municipal Wastewater Charge (MWC) Ask for legislation — Allow temporary shift of some debt service cost from SAC to Wastewater Service Charges — If legislation is not enacted, fully implement Committed Capacity method for Reserve Capacity determination