Public Hearing for Industrial Pretreatment Incentive Program (IPIP)

Transcription

1 Public Hearing for Industrial Pretreatment Incentive Program (IPIP) Jason Willett, Director, MCES Finance & Energy Dan Schueller, Rate Analyst IPIP Public Hearing 11/18/14

2 Today s Agenda 1. Introduction 2. Background and Program Description - Jason Willett 3. Examples - Dan Schueller 4. Public Comments

3 MCES Roles Wastewater treatment 8 treatment plants with108 communities served 600 miles of pipes Approx. 372 million gallons/day wastewater capacity Inflow/Infiltration Program Comprehensive planning/collaboration Water supply planning Water quality monitoring Industrial pollution prevention Storm water Received multiple Platinum awards from the National Association of Clean Water Agencies (NACWA) for an outstanding water discharge compliance record. Metropolitan Wastewater Plant, St. Paul

4 Proposed Program Rationale A public/private partnership that could be a win-win-win for Council ($), Industry ($) and the environment: Council: Delays need for facility expansion Avoids some operating costs Industry Reduces or eliminates strength charges paid to Council Returns on investment Environment Reduces energy at wastewater plants Possibly increases energy recovery at industries

5 Pretreatment Incentive Concept Existing Industry Incentive for Pre-treatment Avoid MCES strength charges (for strength > domestic wastewater) Proposed Industry incentives for Pre-treatment Low cost public financing (General Obligation & AAA credit) Annual discount (up to 30% of annual lease payments depending on strength concentration reductions)

6 Process Highlights Council to solicit proposals from industries Industry applications Pay application fee, provide small proposal bond & commitment letter Proposed technology cost and results (TSS & COD concentrations) Letter of support from host community Indicate willingness to sign standard agreement; identify exceptions Identify % of waste/wastewater otherwise to MCES

7 Process Highlights (continued) Council to: - review application: financial assurance, technical, legal - determine simplified public & private benefits - determine Maximum Annual Discount - rank proposals if necessary to meet budget limits - to offer design partnership Industry to design facility Council to review design Service contract executed by both parties Council to secure financing Industry to build pretreatment facility - Council due diligence inspection - Industry to operate pretreatment facilities Council to measure results; bill payments according to results.

8 List of Requirements for Applicant Hold an MCES industrial discharge permit Be connected to regional wastewater system Have paid strength charges in each of past 2 years Own the site where equipment will be installed Certify pretreatment technology is for strength reduction Note percent of waste expected to come from outside the Region Provide information on energy recovery or conservation component Commit to proceed and include a proposal bond Be willing to sign contract with standard terms; ask for changes

9 Standard Agreement includes: Industry to: Pay a lease payment that is % of the debt service cost, with Annual Discount contingent on success Assume all financial responsibility for operations, feedstock and products, and for ownership when term ends Comply with Council Underutilized Business Goal Provide indemnification and insurance to Council specs Assign renewable clean energy credits and utility rebates Take ownership after ten years

10 Standard Agreement includes: Industry to: Provide financial assurances: All lease payments due if operation terminated MCES permit remedies apply (if payments are late) Use of special assessment against property (if bankrupt) Financial guarantee executed (if payments not made) Insurance procured and Met Council indemnified (against contractor claims)

11 Calculation Examples 1. Maximum Annual Discount Determination 2. Adjusted Annual Discount* * Adjusted for success during operations

12 Example Computation of Annual Discount Key Assumptions (for Industry XYZ): 10 year cash flow Capital cost of pre-processing equipment $9.0M Interest rate 3.5% Inflation rate 3.0% Annual strength charges paid to MCES $1.0M Reduction in concentration assumed 100% Annual O&M $.1M Wastewater discharged to: Blue Lake Plant One-time MCES capital costs avoided $13M in year 6 Xcel energy rebate given in year 1 $.2M

13 Example (continued) Simplified cash flow for Industry XYZ ($ in thousands): Year: Avg. Lease Payment (70%) O&M S.C. revenue reduction 1,000 1,030 1,061 1,093 1,125 1,231 Annual Cash Flow Total Cash Flow 2,749 NPV at 3% 2,209

14 Example (continued) Cash flow for Ratepayers ($ in thousands): Year: avg. Debt Service (30%) Energy savings* Avoided capital cost 13,000 Lost S.C. revenue -1,000-1,030-1,061-1,093-1,125-1,159-1,249 Annual Cash Flow ,006-1,046 Total Cash Flow 3,334 NPV at 3% 2,614 Maximum annual disc. 30% * Includes $.2M Xcel energy rebate in year 1

15 Example (continued) In this example, the net present value of cash flows for Ratepayers exceeds that for Industry XYZ, so the full 30% Annual Discount is given. If this calculation resulted in the net present value for Industry XYZ to exceed Ratepayers, the Maximum Annual Discount for the award would be reduced to the point where the net present values are equal.

16 Success of Strength Reduction At the end of each calendar year the facility is in operation, the Annual Discount will be adjusted based on the success of concentration reductions. The Discount Reduction will be proportionally linear: Reduction in excess strength Discount 100% 30% 80% 24% 60% 18% 50% 15% 20% 6% 0% 0%

17 Example of Adjusted Annual Discount Base Concentration Measurement (prior 2 years): Average Flow (thousand gallons) 146, , ,000 Excess pounds of TSS (thousand pounds) 2,100 1,950 2,025 Excess pounds of COD (thousand pounds) 8,735 7,900 8,318 TSS concentration (excess pounds per gallon) COD concentration (excess pounds per gallon) Weighted average concentration* * The concentration of TSS is given twice the weight of COD.

18 Example continued Concentration measurement for first full year of operations: First Year of Operations Flow (thousand gallons) 120,000 Excess pounds of TSS (thousand pounds) 650 Excess pounds of COD (thousand pounds) 3,000 TSS concentration (excess pounds per gallon) COD concentration (excess pounds per gallon) Weighted average concentration Percent reduction from base concentration 60.0% Annual discount given in Year 1 (60% of 30% max.) 18%

19 Preliminary Schedule November 2014 IPIP public hearing December 2014 Environment Committee review January 2015 Council approval of program February 2015 RFPs May 31, 2015 Application/proposals due July 31, 2015 Offer(s) to proceed are made Remainder of 2015 Contracts signed and financing secured URL with additional information (this powerpoint,flowchart of process, draft contract, application form): allwords#tab_data_publications

20 Questions? Public Input. URL with additional information (flowchart of process, draft contract, application form): =allwords#tab_data_publications