March - April 2000 WIN Calls For Federal Infrastructure Assistance The nation's 54,000 drinking water systems and 16,000 wastewater systems face staggering infrastructure funding needs of nearly $1 trillion over the next 20 years and a shortfall of a half of a trillion dollars, according to Clean and Safe Water for the 21st Century - a report released on April 12 by the Water Infrastructure Network (WIN). To view the report, see e-briefs at www.amwa-water.org. Commenting on the needs that drinking water systems face, AMWA President Buddy Williams, Director of the Nashville Department of Water and Sewerage Services, noted that "many water treatment plants will need major refurbishment or replacement in the years to come if we expect to continue providing safe drinking water to our communities." To help find federal solutions to infrastructure needs, four Congressional leaders have established the Water Infrastructure Caucus. From left to right are caucus chairs Reps. Michael Bilirakis (R-Fla.), Sherrod Brown (D-Ohio), Sherwood Boehlert (R-N.Y.), and Robert Borski (D-Pa.). "Local governments and ratepayers must fund 90 percent of water infrastructure costs while grappling with competing needs to educate children, maintain roads and transportation systems, fight crime, and provide social services," says WIN. "Better solutions are needed." According to WIN, there are a number of possible solutions. These include grants, trust funds, loans, and incentives for private investment. "So, the question is not whether the federal government should take more responsibility for drinking water and wastewater improvements, but how." WIN is comprised of two dozen groups representing water agencies, local elected officials, state administrators, and engineering and equipment companies. Congressional, Agency Leaders Place Focus On EPA Oversight, Source Water Protection EPA is one of the few agencies that doesn't have to defend its budget, said Environment and Public Works Committee Chairman Robert C. Smith (R-N.H.) at AMWA's recent 2000 Legislative and Regulatory Conference. In his tenure as chairman of the Committee, Smith will put more emphasis on EPA oversight and promote the use of sound science in Agency rulemakings, he told AMWA members. Sen. Robert C. Smith EPA's Chuck Fox Rep. Sherwood Boehlert Rep. James Walsh Sen. Blanche Lincoln Smith also criticized the Agency for cutting funding for the Clean Water Act state revolving loan program by $600 million and for its proposed Total Maximum Daily Load (TMDL) rule. Calling it a mistake, Smith said the proposed rule was unenforceable and inflexible. Smith does not believe that EPA has the authority to regulate nonpoint sources of pollution. Chuck Fox, EPA's Assistant Administrator for Water, also spoke at the conference. His comments centered on reducing nonpoint source pollution, and he encouraged AMWA members to support the Agency's TMDL proposal. However, since Fox's appearance, he has pledged to Congressional leaders to remove certain controversial provisions, including language that would have protected drinking water sources better than current law does. Fox also noted that funding is up in EPA's Fiscal Year 2001 budget for several source water protection efforts, and he emphasized the need to better control animal feeding operations and find affordable technologies to help control this source of pollution. Other speakers included Rep. Sherwood Boehlert (R-N.Y.), who pledged to seek ways to reduce nonpoint source pollution and find ways to help water systems finance drinking water infrastructure needs; Rep. James Walsh (R-N.Y.), who has made drinking water research one of his top priorities as chair of the House Appropriations subcommittee with jurisdiction over EPA's budget; and Sen. Blanche Lincoln (D-Ark.), who echoed Smith's concerns about the proposed TMDL rule. AMWA Members Are Making Waves AMWA's Legislative and Regulatory Conference was the stage for Making Waves II, a session on innovative practices. Presentations made during the session will be compiled into a publication with the same title. One of the presenters was John Sullivan, Chief Engineer for the Boston Water and Sewer Commission. Sullivan focused on understanding the role that technology and information systems play in making competitive public utilities, and he recommended that his colleagues benchmark with other local utilities, such as gas and electric, to compare how they have integrated information technology and how it benefits services. The ownership, governance, and organizational structure of the Louisville Water Company was the topic of another Making Waves presentation. The utility is set up as an investor-owned company, but the City of Louisville is the sole stockholder. Under this unique "municipal corporation" structure, the city earns a return on equity and the utility functions as a business. Since it is municipally owned, the company does not pay taxes and can raise capitol using tax exempt bonds. Rates are set and approved by the seven-member Board of Water Works, on which the Mayor serves ex officio and the company president serves as the non-voting chairman. The company operates throughout the region (including several nearby counties) and has one rate structure (cost-of-service ratemaking is used). John Huber, President and CEO of the Louisville Water Company, told AMWA members, "The single most valuable attribute is the freedom to act and adapt to changing needs." John P. Sullivan, Jr. John Huber Doug MacDonald Diana Gale Douglas MacDonald, Executive Director of the Massachusetts Water Resources Authority (MWRA), discussed the need for public water systems to reach out to local public health officials to ensure their understanding and cooperation in the delivery of information to the public. The relationships built over time through communication and trust will be rewarded in the long run and particularly at very critical times, he said. After a very successful collaboration with health officials on lead and Cryptosporidium concerns, MWRA formally established its Health Advisory Group. The group provides guidance both on courses of action and on effective consumer messages. MWRA also has involved the group in disinfection issues and has enlisted members' participation in planning for a new $260 million treatment facility. Seattle Public Utilities Managing Director Diana Gale focused on how her agency manages its compliance with the Endangered Species Act. Seattle's vast watershed is home to many species, and the Act is administered by a handful of federal agencies. These realities make maneuvering through the complexities of the Act cumbersome and dangerous. Making Waves II will be published this spring. Need Funding For Your Watershed Project? Look Here Sixty-nine individual funding sources for watershed protection projects are detailed in the latest edition of EPA's Catalog of Federal Funding Sources for Watershed Protection. The catalog contains a one page fact sheet on each funding source complete with the types of projects funded, eligibility requirements, and contact information. Funding sources range from EPA's Wetlands Program Development Grants and Watershed Assistance Grants to the Department of Agriculture's Watershed Protection and Flood Prevention Program. The catalog also lists private, nonprofit sources for both financial and technical assistance, adding greatly to its usefulness as a resource. A short description of the private sources is given along with Internet links where available. For example, one source listed, the Council of Philanthropy, maintains a web site that lists grant announcements and also has a searchable database where users can find which funders have provided funding for projects similar to theirs in the past. The catalog can be found on the Internet at: www.epa.gov/owow/watershed. Minneapolis, St. Paul Take Different Approaches To A Common Objective Regulatory answers to problems often follow a one-size-fits-all approach. But utilities have argued that solutions tend to be site specific. Such is the case in St. Paul and Minneapolis, where two systems drawing from a common source of water are pursuing vastly different approaches to providing high quality water to their consumers, while educating and involving consumers in the process. With EPA considering a variety of regulatory scenarios for Stage 2 of the Microbial and Disinfection Byproduct Rules, the approaches being taken by AMWA members St. Paul and Minneapolis offer two viable alternatives. "Our future is in ultrafiltration," reported Adam Kramer, Director of the Minneapolis Water Works. The ultrafiltration approach was selected after an evaluation of risks, particularly those of Cryptosporidium, from their Upper Mississippi River source. The decision involved extensive citizen participation in evaluating both risks and options to meet future regulations. The approach also solves ongoing challenges of an aging plant infrastructure. "Our answer is watershed protection," said Bernie Bullert, General Manager of the St. Paul Water Utility. St. Paul draws on the same Upper Mississippi River but has the good fortune to do so through a series of reservoirs, each with its own watershed, Bullert told his colleagues. Adam Kramer Bernie Bullert The reservoir systems provide residence time, which both improves water quality prior to treatment and allows sufficient storage so that it is not necessary to pump from the river when it has water quality problems. This, combined with extensive watershed controls, allows greatly improved microbial and chemical water quality prior to treatment and produces high customer satisfaction. Is UV Ready For Prime Time? Recent discussions among members of the Federal Advisory Committee (FACA) negotiating the Stage-2 Microbial and Disinfection Byproducts Rules have focused on disinfection of Cryptosporidium in drinking water by ultraviolet radiation (UV). Although the technology is presently little used in the United States for drinking water, its use is increasing for wastewater disinfection. Because it is relatively inexpensive compared to other technologies for dealing with Cryptosporidium, many FACA members view it as a potential "silver bullet" as part of the Stage-2 answer. Dr. Dan Schmelling Dr. Dan Schmelling, EPA's expert on UV issues, briefed AMWA members on the pros and cons of UV, as shown on the accompanying table, at the 2000 Legislative and Regulatory Conference. He noted that UV is used in over 1,000 public water systems in the United States, but the systems tend to be small, noncommunity groundwater systems. UV use in Europe exceeds 1,500 drinking water plants, again with the majority being small, although sizes up to 80 MGD exist. Wastewater use in the U.S. includes more than 500 installations with sizes up to 225 MGD. According to Schmelling, the lack of large system experience with UV, combined with the present lack of effective monitoring devices, presents a significant problem with its use. Nevertheless, he believes that research and development over the next several years may address these deficiencies. It is likely that UV will be available for Stage-2, at least for small systems, since it was established as a small system compliance technology in the decade-old Surface Water Treatment Rule. Advantages of UV Disinfection No disinfection by-products Limited use of hazardous chemicals No taste or odor imparted Generally insensitive to temperature and pH Easy to install and maintain in small or remote locations Effective against bacteria, viruses and protozoa Economical alternative to chlorine and ozone Disadvantages of UV Disinfection No residual disinfectant Not an oxidant Lamp fouling Lamp failure and breakage Impacted by particles and absorbence Difficult to measure and monitor dose Lack of experience in surface water Frank Cushing Elizabeth Megginson Cynthia Dougherty Ephraim King Ken Rubin Speaking at AMWA's Legislative and Regulatory Conference were David Conover, Majority Staff Director of the Senate Environment and Public Works Committee (not pictured); Frank Cushing, Majority Staff Director of the House Appropriations Subcommittee on VA, HUD and Independent Agencies, which oversees EPA's budget; and House Resources Committee Majority Chief Counsel Elizabeth Megginson. Conover discussed increased oversight of EPA's water programs, and Megginson described H.R. 3160, a bill to reauthorize and reform the Endangered Species Act. Cushing addressed EPA spending issues. EPA Office of Ground Water and Drinking Water Director Cynthia Dougherty and Branch Chief Ephraim King updated AMWA members at the conference on the development of future drinking water rule. Ken Rubin, a partner with the law firm of Morgan, Lewis & Bockius, discussed a wide range of legal issues facing municipal water suppliers, including the Department of Justice's case against the Massachusetts Water Resources Authority and toxic tort suits against suppliers in California. Associations Gear Up For New Competitiveness, Business Services Workshops AMWA and the Association of Metropolitan Sewerage Agencies (AMSA) announced recently the availability of two workshop choices to think, get and stay competitive and to create high performance business services. Utilities can now sign up for an on-site customized Thinking, Getting and Staying Competitive Workshop. This new workshop is ideal for initiating competitiveness programs and reenergizing or refocusing existing ones. Based on participant comments and experience from previous workshops, this next generation is updated and improved to better serve publicly owned water and wastewater utilities. This workshop provides utilities with the tools to identify opportunities for change and to develop strategies to make competitiveness part of a utility's culture. What's more, instructors tailor the workshop based on organizational and financial information provided by the host utility. Creating High Performance Business Services is the newest workshop offered by AMWA and AMSA. The workshop recognizes that public utilities are facing major changes in how they operate and provide services. Adapting to change means being competitive, and Creating High Performance Business Services can significantly enhance the performance of business services by including them in a utility's competitiveness objectives. This workshop is a hands-on, utility-wide approach for improving the delivery of utility business services such as procurement, engineering, human resources, accounting and finance, information management, fleet management, and customer service. The workshop also demonstrates why providers of these services must work hand-in-hand with core O&M staff to build a high-performance, world-class organization. To maximize utility resources, AMWA and AMSA recommend neighboring utilities schedule a business services workshop jointly. To schedule one at your location or for more information, contact AMWA at (202) 331-2820 or visit AMWA's website at www.amwa-water.org. Who's Who in Investor-Owned Utilities Azurix (www.azurix.com) - Parent Enron seeking to unload Azurix. Recently closed its European offices and initiated third round of layoffs. Azurix owns Wessex Water (UK) and Philips Utilities Management, an O&M contractor. Expanded web-based marketing on its Water2Water.com site to offer water treatment equipment, services and chemicals in addition to its established purpose of trading water and water rights. American States Water Company (www.aswater.com) - Reportedly on the auction block. Recently agreed to acquire Chaparral City Water Company in Arizona for $31.2 million. Parent of Southern California Water Company, O&M service provider American States Utility Services, and a power company. American Water Works Company (www.amwater.com) - Recently formed American Water Services Inc. after paying $30 million to buy out Anglian Water's shares of O&M contractor American-Anglian. Undertook $2 billion in acquisitions last year. Primary focus is ownership of utilities, including San Jose Water Corp., Citizens Utilities, National Enterprises Inc., and several former United Water utilities. California Water Service Group (www.calwater.com) - Parent of Cal Water, Washington Water Service Co., and CWS Utility Services, its O&M division. The company also sells electricity. Approval from the California PUC for the $63.5 million purchase of neighboring water utility Dominquez Services Corp., expected in early April, was postponed until later in the second quarter. Indianapolis Water Company (www.iwcr.com) - Provides water to the City of Indianapolis. Parent company NiSource also owns electric and natural gas utilities. Seeking O&M contracts. Kelda Group (UK) (www.keldagroup.com) - Bought Aquarion Company (www.aquarion.com), the parent of BHC and Aquarion Management Services, its O&M division. Philadelphia Suburban Corp. (www.suburbanwater.com) - The third largest investor-owned drinking water company in U.S., Philadelphia Suburban is in the midst of an aggressive acquisition spree, focusing mainly on small systems. Recently agreed to purchase its first wastewater company. Acquired Consumers Water last year. Vivendi (FR) owns 18% of Philadelphia Suburban. Suez Lyonnaise des Eaux (FR) (FR) (www.suez-lyonnaise-eaux.com) - Announced it will acquire all remaining common shares of United Water (www.unitedwater.com), the second largest owner and operator in U.S, and an aggressive competitor of O&M contracts (the transaction values all issued common shares at $1.36 billion). Recently merged all water activities (Lyonnaise des Eaux, Nalco and Degremont). Thames Water (UK) (www.thames-water.com) - The largest owner and operator in the UK, Thames is acquiring New Jersey-based E'Town Corp. (www.etownwater.com) which owns Elizabethtown Water Co. and Mt. Holly Water Co. Signed strategic alliance with Operations Management International, Inc. (OMI) to pursue O&M business in the U.S. and Canada. Vivendi Water (FR) (www.vivendi.com) - Announced major alliance with Vodafone (UK) to focus on telecommunications. Likely to spin off water division this year, analysts predict. Is the parent of O&M contractor U.S. Filter (www.usfilter.com) and Culligan (home filters and bottled water). Owns 18 percent of Philadelphia Suburban. U.S. Filter absorbed Professional Service Group (PSG) in 1999 and is the leading producer of water treatment equipment. Vivendi recently spun off Massachusetts-based environmental engineering consulting firm Metcalf & Eddy, which was once a part of Aqua Alliance along with PSG. Privatization Notes United Water: We Need More Enforcement Speaking to a subgroup of EPA's Financial Advisory Board (EFAB) recently, a United Water officer recommended increased enforcement against public water agencies by EPA. "We need more of it," he said, because it encourages mayors to consider privatization. The comments by John Joyner, United Water's Vice President for Business Development for North America, were made in the context of the unexpectedly small market for privatization and O&M contracts that has developed. Joyner stated that the private water companies overestimated the success they would have in signing O&M contracts with municipal water suppliers. He also noted to EFAB that private companies did not anticipate the level of resistance to privatization that the market has witnessed. He said United Water was less successful than the company had planned because municipal utilities reacted quickly to seek operating improvements. "The anti-privatization sentiment is stronger than we anticipated," he said, "so there are not as many deals going forward." Joyner also noted that United Water was surprised by those engineering firms standing "shoulder-to-shoulder" with their public sector clients, and suggested that this was a conflict of interest. Mayors' Council Promotes Privatization; Private Companies Serve As Key Advisors In its 1999 Activities Report, the U.S. Conference of Mayors' Urban Water Council (USCM-UWC) cited progress in its efforts to increase competition and improve cost efficiencies in water and wastewater systems through public/private partnerships. Among its highlighted achievements, the UWC cited the inclusion of water and wastewater infrastructure public/private partnerships among the top ten issues of incoming USCM president, Mayor Wellington Webb of Denver. A major goal of the Mayors is to seek tax incentives to advance privatization. See the adjacent list of mayors who have joined the UWC. To help the Mayors reach their goal, several private sector interests, listed below, are serving as advisors. According to the UWC, the team of advisors does not include any municipal water agency executives. Urban Water Council U. S. Conference of Mayors Urban Water Council Advisors Co-chairs Patrick J. McManus, Lynn James H. Sills, Jr., Wilmington Members Clarence Anthony, South Bay Jose Aponte, Carolina Victor Ashe, Knoxville H. Richard Borer, Jr., West Haven Sam Kathryn Campana, Scottsdale Bill Campbell, Atlanta John DeStefano, New Haven Patricia Dowling, Lawrence Gene Eriquez, Danbury Carleton Finkbeiner, Toledo Frank Fry, Westminster Joseph P. Ganim, Bridgeport Jerry Johnson, North Chicago Scott King, Gary Glenn Lewis, Moore Angel Malave, Cidra Patrick McCrory, Charlotte James Mears, Franklin George Miller, Tucson Robert Minsky, Port St. Lucie Marc Morial, New Orleans Rita Mullins, Palatine Rick Mystrom, Anchorage Robert Nunes, Taunton Meyera E. Oberndorf, Va. Beach Donald Plusquellic, Akron Gary Podesto, Stockton M. Susan Savage, Tulsa Bill Souder, Hurst Thomas Suozzi, Glen Cove Bruce Tobey, Gloucester Michael Traficante, Cranston Don Trotter, Clarkesville Joan Wagnon,Topeka Wellington Webb, Denver American Water Works Co., Inc. Aqua Alliance, Inc. Camp Dresser & McKee CH2M Hill Hawkins Delafield & Wood HDR Engineering, Inc. Investor Owned Water Utilities Group Lehman Brothers Malcolm Pirnie, Inc. Ogden Water Company Piper & Marbury Poseidon Resources Corporation R.W. Beck and Associates Severn Trent Environmental Services, Inc. U.S. Filter Operating Services, Inc. U.S. Water L.L.C. United Water Verner, Liipfert, Bernhard, McPherson & Hand PC Wheelabrator Technologies Inc. BioGro Division Legislative Update Appropriations. AMWA's Mike Hooker, Executive Director of the Onondaga County Water Authority in New York testified on EPA's budget on April 12, asking for $1 billion for the drinking water loan fund, $100 million for clean-up of MTBE contaminated supplies, and $49 million for drinking water research. House and Senate bills are expected in May or June. MTBE. The Senate and House will likely act before the end of this session to pass legislation to phase out MTBE and clean up contaminated supplies. Legislation would probably fund development of treatment technology. Several bills have been introduced. Plumbing Standards. A bill proposing to eliminate water efficiency standards for plumbing fixtures was narrowly defeated April 12 by the House Subcommittee on Energy and Power. Infrastructure. The House of Representatives established the Water Infrastructure Caucus in April to seek ways to fund an infrastructure gap amounting to nearly $500 billion over the next 20 years. EPA proposed granting $825 million and $800 million to states for the drinking and clean water loan programs, respectively. Superfund. Reauthorization and reform of Superfund remains a high priority for House and Senate committee leaders. Two bills in the House are ready for a floor vote. WRDA. Public works committees in the House and Senate are gearing up to introduce legislation authorizing funding for water projects. Endangered Species Act. The chair of the House Resources Committee plans to win House passage of his bill to reauthorize and reform the Endangered Species Act. Among the provisions of the bill, H.R. 3160, is one that protects non-federal activities that address public health and safety. These include ongoing maintenance, routine operation, and emergency repair of existing infrastructure. Utility Takeovers. Late last year, the American Water Works Company persuaded Rep. Phil Crane (R-Ill.) to introduce a bill outlawing the use of tax-except financing to purchase water utilities through eminent domain. Crane's H.R. 3309 is aimed at deterring "unwarranted hostile takeovers of water utilities." The House has taken no action on it. Regulatory Update Radionuclides Rule. The Radionuclides Rule Notice of Data Availability (NODA) could appear in the Federal Register this month. The Safe Drinking Water Act mandates a November 2000 deadline for the final Radionuclides Rule. Filter Backwash Rule. The proposed Filter Backwash Rule was published in April. Comments are due to EPA by June 9. EPA's deadline for finalization is August 2000. Arsenic Rule. The proposed Arsenic Rule remains in the White House Office of Management and Budget (OMB) for review. It will likely be proposed in June. The rule must be finalized by January 2001, according to the Safe Drinking Water Act. Public Notification Rule. EPA published the final Public Notification Rule in April. The Public Notification Handbook is soon to follow. Ground Water Rule. Vice President Gore announced the proposal of the Ground Water Rule on April 17. It is not expected to significantly affect large ground water systems that currently disinfect. Stage 2 M/DBP Rules. The federal advisory committee negotiations on the Stage-2 DBP and microbial rules are continuing on a monthly basis through June. Committee members are weighing various regulatory scenarios.