The Denver Water & Aurora Water W.I.S.E PartnershipThe Price of Regional Partnership

Presenters:Jason Mumm

StepWise Utility Advisors

Co-Authors:Dave BennettDenver Water

Rick MarsicekAurora Water

2011 Joint Management ConferenceDenver, Colorado

Where is W.I.S.E.?Covers the Denver Metro Area

South Metro

AuroraDenver

Aurora Water Purification Facility

Foothills WTP

Metro WWTP

ECCV Northern Pipeline

ECCV Western Pipeline

PWP PipelineECCV Wells and WTP

Reuter-Hess Reservoir

Aurora Reservoir

PWP Wells

Potential WTPConduit 27

Aurora Pipeline

Highlands

$800 million in existing infrastructure

Expandable to 50,000 acre-feet of water delivery

Renewable supply for 14 purveyors in Southern Metro area

Drought supply for Denver and Aurora

Total population affected = 2 million

A Regional Network Connecting Demand to SupplyWhat is W.I.S.E.?

How it Works

Existing Supplies

Recaptured Water

Conventional Treatment

Recaptured Treatment

Binney WPFPrairie Waters Lines and Pumps

Existing Mountain Conveyance

AuroraSo. Metro & Denver Transmission

W.I.S.E. Regional Business Plan

Aurora Water

South Metro

Existing SuppliesDenver

Water

Recaptured Water

• Fully utilize water supplies and capacity to meet growing regional demands

Strengths

• Regional water sales to growing So. Metro area & drought reserve for Aurora and Denver

Opportunities

• Maximize recaptured water and the treatment & delivery capacity for wide distribution

• Minimize costs

Goal

SupplyDemand

Combining Strengths to Meet OpportunitiesWhy a Regional Partership?

Long-Term Growth

Short-Term

Growth

Past Growth

Reuse Supplies

Limited Supplies

Lack of Capital

Buildout Demand

Surplus Capacity

Existing Supplies

Declining Wells

Supply and DemandDenver and Aurora have supplies available, and Aurora has the capacity to treat and deliver it.

Pricing is a Business Requirement

W.I.S.E Partnership Business Needs

RETURN ON INVESTMENTSFacility owners need a reasonable return on invested capital

TRANSPARENCY FOR BUYERSBuyers need to have political and business assurance that prices are set appropriately

SUSTAINABLE PROCESSESPricing needs to be repeatable in future periods and provide consistent results

Challenges to Pricing & Business as UsualKey W.I.S.E. Pricing Issues

1

2

3

Multiple Facility OwnersAt least 3 owners each requiring a different rate of return on their investment in supply and delivery assets.

Interruptible DeliveriesSales to So. Metro customers are interruptible when “firm” customers take priority of supply and delivery.

Non-Integrated SystemTreatment and delivery components were not designed to work with each other, leaving capacity constraints and surpluses throughout

Each Owner Recovers Costs and Earns Specific ReturnPricing Solution: Multiple Owners

Owner ARecovers costs and X% return on their facilities

Owner CRecovers costs and Z% return on their facilities

Owner BRecovers costs and Y% return on their facilities

Pricing Recognizes Variability in Used CapacityPricing Solution: Non-Integrated System

Recaptured Water Intake12 MGD

Recaptured Water Pumping18 MGD

Recaptured WaterPiping50 MGD

Recaptured Water Treatment17 MGD

Conventional Treatment33 MGD

• Each facility has its own specific allocation of operating and capital costs

• Unit Costs are calculated for each facility based on specific usage and capacity demands

Interruptible Customers Only Pay for What’s Used and Useful

Pricing Solution: Interruptible Supply

Average-Day Usage – Costs Shared by All Customers

Used Max-Day Capacity – Costs Shared by Firm Customers Only

Unused Reserve Capacity – Costs Shared by Owners Only

Workable Solutions That Meet Business NeedsThe Results

BuyersReceive an Interruptible Rate for water at 40% discount to firm price

OwnersReceive firm supply & capacity when they need it and earn revenue the rest of the time