Streamline - Summer 2015 - (Page 25)

A Successful Business Model for Waterworks BY ANTHONY HESS, SUSTAINABILITY COORDINATOR, VDH-OFFICE OF DRINKING WATER IN 1959, A small town in Virginia received a government grant to build a water treatment plant and install waterlines to serve all of the residents in town. They are proud that their water rates are the lowest in the area. These rates are sufficient to pay for their operations and the waterworks has remained in compliance with the Virginia Department of Health's (VDH) regulatory requirements. Lately, they have had a run of bad luck. They have to repair more waterline breaks every year. These repairs are expensive. They include not only the cost of parts and equipment, but also the extra cost of overtime wages for their staff. Then the longest cold stretch in many years occurs, resulting in enough leakage to drain their storage tanks. The Health Department issues a notice that the town's customers have to boil their water before drinking. Their small quiet town is on the evening news for weeks as they try to locate and repair enough leaks so that the storage tanks will once again remain full. Mr. Dan Althouse is the operator and manager for High Knob Utilities, Inc. (HKUI), a public waterworks in Warren County, Virginia. Mr. Althouse was facing increasing system problems caused by an aging infrastructure, and he realized that the utility needed to implement a better business model to address them. When he assumed operation of this waterworks, they were buying water from the nearby town of Front Royal, and hauling it in a plastic tank on the back of a dump truck to supplement production from the wells. This water would soon exit the tank through the same leaky water pipes that caused it to empty in the first place. He knew that the first order of business was to repair leaks to save water, as "water is money." Needless to say, customers were extremely unhappy, and the system's water woes were even profiled in an article in The Washington Post. As the next step, Mr. Althouse completed a cost/benefit analysis that compared the cost of replacing ageing water lines to the cost of continuing with "business as usual." The analysis put a very bright spotlight on the high cost of overtime and labor involved in repairing emergency water line breaks. After reviewing Mr. Althouse's analysis, the HKUI Board gave the green light for him to develop a plan to replace the oldest sections of the system. HKUI turned to the VDH Drinking Water State Revolving Fund (DWSRF) program for funds to commission a Preliminary Engineering Report. This report became the foundation of an engineering plan that not only documented the existing system but laid out a plan for bringing the system up to operational standards. With an engineering plan in hand and the Board's approval, an application was made to the DWSRF for a subsidized low interest rate loan to replace the leakiest sections of pipe in the distribution system, and to add more storage in critical areas of the system. Water rates had to be raised significantly to cover the additional cost of the associated debt payment, but customers were willing to pay to obtain dependable water service. The project eventually took four years, but resulted in returning HKUI to a normal state of operations. With the project complete and with the leakage crisis averted, HKUI went back to the "pay as you go" business model. However, the completed upgrade project replaced only 38% of the infrastructure, meaning that nearly two-thirds of the remaining system would need to be replaced in the near future. HKUI was covering the cost of their operations and debt service, but not setting aside sufficient money needed for replacing piping and 25

Table of Contents for the Digital Edition of Streamline - Summer 2015

From the President: A Disinfection Byproducts Odyssey
From the Executive Director: It’s Over
Importance of Professional Relationships in the Water and Wastewater Industry
Spring Cleaning … All Year Long
Region Meetings: the Next Big Thing
Preventing Heat-Related Illnesses
Virginia Source Water
USDA Rural Development
A Successful Model for Waterworks
Professional Licensing Update: News You Can Use
NRWA Recap
Tank Team Tackles Water Distribution
VRWA 2015 Conference Highlights
Town of Lovettsville Wins the ‘Great Water Taste Contest’
Throwing My Loop: Helpers in Our Path
Wastewater Crossword
VRWA Booster Club
e-Learning Benefits
Membership Application
Do You Know What Your VRWA Benefits Are?
VRWA Mailbag
New Members
Board of Directors
VRWA Committees
Index to Advertisers/

Streamline - Summer 2015