Detroit Water and Sewerage Department GLWA Update OCTOBER 23, 2014

Transcription

1 Detroit Water and Sewerage Department GLWA Update OCTOBER 23, 2014

2 GLWA MEDIATION PROCESS Initial Authority discussions failed Based on monetizing DWSD assets / revenues to benefit of City of Detroit General Fund creditors April 2014 Judge Cox resumes DWSD mediation Agreement that lease payment will stay in the system for City of Detroit local system or Detroit share of common costs Finance Working Group determination of feasibility of $50 million control premium in form of lease payment Subject to reaffirmation in forthcoming transition process and lease negotiation Memorandum of Understanding / Articles of Incorporation drafted for execution by Principals of counties and City of Detroit Affirmation by respective local government governing boards Multi-track implementation planning process pending 2

3 GLWA GOVERNANCE 1 Voting Board Member 1 Voting Board Member 2 Voting Board Members 1 Voting Board Member 1* Voting Board Member Board appointed to 4-year terms serving at will Minimum education and experience requirements; compensation determined by Board Supermajority (5/6) voting requirements for: Appointment of General Manager Approval of rates and rate-setting protocols Issuance of debt Annual approval of a rolling 5-Year CIP Adoption of a procurement policy Approval of a lease of the Systems Removal of any Board member for cause. 3

4 MEMORANDUM OF UNDERSTANDING OUTLINE Governance Lease Key Financial Terms O&M of Detroit and Other Local Systems Capital Improvements Treatment of Existing Contracts Evaluation and Transitional/Transactional Costs Management of the System for Benefit of Customers Termination of Authority or Withdrawal from Membership Conditions Precedent to Transfer Statement Regarding State Commitments 4

5 Veolia Validation INITIAL LEASE FEASIBILITY EVALUATION ESTIMATED BENEFITS / SAVINGS OF GLWA CREATION* POA Pension/OPEB restructure financing $20-25M / year cash flow reduction Restricted asset earnings Outstanding debt refinancing Prospective capital financing Enhanced DWSD Optimization** $2.5-5M / year revenue increase $15-20M / year debt service reduction $2.5-5M / year debt service reduction $10-20M / year O&M expense reduction * To be reaffirmed through pending lease negotiation ** Includes potential reductions in energy/utility costs, contracted services and variable costs of non-revenue water; excludes capital cost savings $50-75M / year in benefits / savings 5

6 BOTTOM LINE General consensus on findings and recommendations Significant savings opportunities in both O&M and capital Significant opportunities to reduce risks and improve service levels Detailed, many technical, recommendations for improvements No huge surprises Validation in many respects of DWSD s direction. In process / planned DWSD initiatives reflect aspects of most recommendations Veolia recommendations to go faster, further and in several cases, alter course Selected differences in view points largely reflective of public vs. private perspectives Management responses to supplement the final reports will provide context, address concerns, and identify policy differences reflecting, in part, public vs. private perspectives 6

7 FINANCIAL PERFORMANCE POTENTIAL DWSD Forecasted* DWSD Wholesale O&M Veolia Forecasted GLWA O&M FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Millions of Dollars $232.3 $237.4 $230.7 $233.8 $232.6 $224.4 $201.5 $192.3 $194.4 $191.2 Savings $7.9 $35.8 $38.5 $39.3 $41.4 * DWSD forecasts do include conservative savings estimates on selected optimization initiatives. 7

8 Detroit Water and Sewerage Department Peer Review Overview OCTOBER 23, 2014 Interim Update to Wholesale Customers

9 OVERVIEW Priority Opportunities & Financial Impact Peer review background Early findings & opportunities Plan moving forward 9

10 FINANCIAL PERFORMANCE POTENTIAL DWSD Forecasted* DWSD Wholesale O&M Veolia Forecasted GLWA O&M FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Millions of Dollars $232.3 $237.4 $230.7 $233.8 $232.6 $224.4 $201.5 $192.3 $194.4 $191.2 Savings $7.9 $35.8 $38.5 $39.3 $41.4 * DWSD forecasts do include conservative savings estimates on selected optimization initiatives. 10

11 FINANCIAL PERFORMANCE POTENTIAL Revenues at 4% Increase Projected DWSD O&M Per Official Statements FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Veolia Initiatives Staffing WTP Optimization WWTP Optimization Maintenance Management Underground Assets Energy Management Support Functions Total O&M Savings Net O&M Expense 11

12 STUDY SCOPE Report 1 Initial Scope GLWA as the service provider to both the City of Detroit and the suburban communities Confirm savings to offset control premium payments Look at the entire operation Go further faster! Report 2 Amended Scope Separation of services between the City of Detroit retail and the GLWA regional assets 12

13 KEY PERSONNEL VEOLIA DWSD Mark Sanderson Vice President Denny Tulenson Vice President Carol Symes Technical Manager Manshi Low PMO Manager Dan Rainey Chief Information Officer Cheryl Porter Chief Operating Officer Veolia 50+ Subject Matter Experts on-site hours documents Project Oversight DWSD Project Managers Project Oversight Committee Representatives from each Incorporating Municipality Meetings with key stakeholders State of Michigan representative review 13

14 PEER REVIEW PROJECT SCHEDULE: 8 WEEKS Activity Kickoff Workshop Week #2 Week #3 Week #4 Week #5 Week #6 Week #7 Report Aug Sep Oct /19/14 Executive Management Team, WTP, CIP, Safety Asset Management, Industrial Waste Control Various (1) Various (2) Various (3) Labs, Customer Service Draft Report 10/17/14 10/1/

15 INFORMATION SHARING Report is in draft form targeted publication revised to end of November Until final, most of the draft report content is subject to the gag order issued by Judge Cox on all matters involving the mediation Some information now on preliminary finding & opportunities by Veolia More information later with publication of final reports 15

16 ACRONYMS AMP - Asset Management Program CIP Capital Improvement Program CAPEX Capital Expenditure DWSD Detroit Water and Sewerage Department GLWA Great Lakes Water Authority LIMS Laboratory Information Management System OPEX Operating Expenses Oracle WAM Work and Asset Management (software) PM Project Management RCM Reliability Centered Maintenance SCADA Supervisory Control and Data Acquisition SPO Sewage Plant Operator IT Information Technology WTP Water Treatment Plant WWTP Wastewater Treatment Plant 16

17 FINDINGS & OPPORTUNITIES Investing in People Investing in Assets Focus on Wastewater Improving Financial Management Right-sizing Capacity Implementing Operational Enhancements Validates feasibility of DWSD expense reductions in analysis of lease payment feasibility Prioritizing Capital Investments 17

18 FINDINGS & OPPORTUNITIES INVESTING IN PEOPLE Employee retention approach to leverage existing talent & knowledge* 300 eligible for retirement in the next 5 years Communicate the future vision of GLWA Needs assessment of current personnel* Develop a skills training program* Bring in technical support to supplement skills* Recruit additional people to fill critical gaps* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 18

19 FINDINGS & OPPORTUNITIES INVESTING IN ASSETS Centralize maintenance function at each plant* Develop & implement a maintenance strategy* Complete an asset condition assessment* Complete an asset criticality assessment* Implement a RCM approach Assess the Oracle WAM implementation Conduct implementation training on Asset Management Program* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 19

20 FINDINGS & OPPORTUNITIES FOCUS ON WASTEWATER Review the current operations strategy Designate a single point of contact for daily operations at the WWTP Commit to an AMP approach* Review the CIP to ensure priorities are focused on projects to improve asset condition* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 20

21 Table 3.C-3 WASTEWATER POTENTIAL OPTIMIZATION OPPORTUNITIES Operations Area Opportunities CAPEX Required A Improve decision-making through SCADA and data management -- Plant Operations B - Evaluate opportunities to serve potential new customers -- C - Automate ferric chloride dosage $0.2M D - Optimize and automate aeration process $1.1M-$3.1M E - Optimize and automate chlorination-dechlorination process $1.3M A Reduce polymer dosage for dewatering units -- B Increase dewatering units solids capture -- Biosolids Laboratory C Eliminate water addition on conveyor belt to reduce natural gas demand for incinerators D Lower wet tonnage of cake solids for lime stabilization and hauling/landfill disposal $2.2M A Restructure the laboratories -- B Install Laboratory Information Management System (LIMS) Ind. Waste A Streamline data digitalization and recordkeeping -- Total $4.8M-$6.8M 21

22 Table 3.C-8 BUILD UP OF COST ESTIMATES Initiatives Aeration Process Improvement Ideas Re-institute automatic control of oxygen supply system Optimize pure oxygen mixing CAPEX Required $0.1M $1.0 - $3.0M Assess use of two instead of three decks $0M Optimize use of intermediate lift stations with aeration deck operation Total $0M $1.1M - $3.1M 22

23 Table 3.C-14 BUILD UP OF COST ESTIMATES Potential Strategies Biosolids Ideas CAPEX Required Reduce polymer dosage for dewatering units $0M Increase dewatering units solids capture $0M Eliminate water addition on conveyor belt to reduce natural gas demand for incinerators Lower wet tonnage of cake solids for lime stabilization and hauling for disposal to landfill Total $2.2M $0M $2.2M 23

24 FINDINGS & OPPORTUNITIES IMPROVING FINANCIAL MANAGEMENT Overhaul the financial work flow to provide management with better tools* Bolster rate making staff capacity to reduce financial risks Introduce new audit & tracking tools* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 24

25 FINDINGS & OPPORTUNITIES RIGHT-SIZING CAPACITY Right-size the operation to reduce capital and O&M costs; decision in months* Focus on water treatment production capacity* Assess future customer base outside the current service area DWSD WTP Production Capacities and Water Demands: Table 3.B-4 Treatment Plant Production Capacity Current Average Demand Capacity Utilization Lake Huron % Northeast % Springwells % Water Works Park % Southwest % Total 1, % - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 25

26 FINDINGS & OPPORTUNITIES OPERATIONAL ENHANCEMENTS Implement more automation at the plants* Initiate capital upgrades to SCADA systems* Train more personnel on the SCADA systems* Make data driven decisions* Implement cost-saving initiatives by optimizing processes Implement a LIMS* Restructure laboratory activities* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 26

27 WATER TREATMENT PLANT IDEAS Chemical improvement ideas (Table 3.B-6) Relocate fluoride feed to reduce loss Explore use of alternate coagulant feed Optimize chlorine feed Minimize phosphoric acid feed Minimize ozone feed Potential Alternative Coagulant Dosages (Table 3.B-7) Treatment Plant Current Alum Dosage (mg/l) Reduced Coagulant Dosage (mg/l) Lake Huron Northeast Springwells Water Works Park Southwest

28 FINDINGS & OPPORTUNITIES PRIORITIZING CAPITAL INVESTMENTS Stabilize the Capital Planning Group* Revamp the design-phase process in the CIP implementation* Leverage GIS data on the distribution and collection systems* Integrate CIP and AMP processes* Implement PM software* - *Green text indicates management representation that aspects of Veolia recommendations are ongoing DWSD initiatives; Veolia recommendations go further, faster and may reflect differences in approach - 28

29 FINDINGS & OPPORTUNITIES BEST MANAGEMENT PRACTICES Human Resources Procurement Underground Assets Energy Management Customer Service IT and Data Management Health and Safety Security Communications and Public Affairs 29

30 FINDINGS & RECOMMENDATIONS MANAGEMENT RESPONSES General consensus on findings and recommendations In process / planned DWSD initiatives reflect aspects of most recommendations Veolia recommendations to go faster, further and in several cases, alter course Management responses to provide context, address concerns, and identify policy differences reflecting, in part, public vs. private perspectives: EXAMPLE: CORROSION CONTROL, LEAD AND PHOSPHORUS REMOVAL DECISIONS Potential Optimizations in Orthophosphate Dosing: Table 3.B-10 Treatment Plant Current Orthophosphate Dosage (mg/l) Reduced Orthophosphate Dosage (mg/l) Lake Huron Northeast Springwells Water Works Park Southwest

31 MOVING FORWARD Target Dates: Report 1 (Original Scope) complete by mid-november Report 2 (Amended) complete by end of November Findings and Recommendations: Provide menu of options Some will be implemented, some will not Reports will provide a resource for GLWA and the City of Detroit 31

32 IN CLOSING REMEMBER THE BOTTOM LINE Significant savings opportunities in both O&M and capital Significant opportunities to reduce risks and improve service levels Validation in many respects of DWSD s direction Noteworthy differences in approach and priorities in some areas Selected differences in view points largely reflective of public vs. private perspectives Detailed, many technical, recommendations for improvements No huge surprises 32