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12/09/1998 - Packet FILE COPY INTERGOVERNMENTAL WATER BOARD MEETING Serving Tigard, King City, Durham and Unincorporated Area AGENDA Wednesday, December 9, 1998 5:30 p.m. 1. Call to Order 2. Roll Call and Introductions 3. Long Term Water Supply Update - Ed Wegner 4. Visitors Comments 5. Non Agenda Items 6. Set Next Meeting Date 7. Adjournment Executive Session: The Intergovernmental Water Board may go into Executive Session under the provisions of ORS 192.660 (1) (d), (e), & (h) to discuss labor relations, real property transactions, and current and pending litigation issues. All discussions within this session are confidential; therefore nothing from this meeting may be disclosed by those present. Representatives of the news media are allowed to attend this session, but must not disclose any information discussed during this session. * A light dinner will be served 5:00 p.m. kathy\iwb\12-9.agn WHAT ENRON WANTS (From Water Utilities) • To plug into customers by sending them a bill every month. • Lots of customers to support a national (two-way) call center. • Control of the paradigm shift. 4 To force development of water commodity markets with highly sophisticated pricing and risk management. 4 To cause regional integration of water utility functions (transmission+ treatment+source allows redispatch). 4 To do what banks are doing to their customers now. + To gain advantage in the application of emerging technologies (real time metering, unbundled bills, small scale system support). • Access to big capital purchases/projects with assured cash flows and the high likelihood of appreciation. • Hostile buy-out opportunities. c:\msoffice\winword\water\wants Power Plant Acquisitions: Management Wo r rce kfo I I from the BWersa I F lVe I f How to survive in a seller's market. By Christopher S.Miller, Ph.D. D ESTING POWER PLANTS TODAY MAY LOOK VERY all or some of the following conditions: much like a seller's market.Buyers may ■ Buyer must recognize the union as the authorized bar- believe they lack the necessary leverage gaining agent; to take an aggressive position on work- ■ Buyer must adopt the collective bargaining agreement force transition. for the existing term,which may have been recently In fact,to secure union support, extended in anticipation of the sale; and thereby restrict buyer flexibility, ■ Buyer must provide equivalent"or otherwise duplicate several recent plant sales have imposed existing pension and welfare benefit plans,providing full 26 Public Utilities Fortnightly • December 1998 I�, credit for service,vesting and eligibility purposes;and upon change.To do so,however,will ■ Buyer must offer comparable employment to all require a comprehensive labor relations current plant employees,including those on long- strategy. term disability. Such conditions have been imposed in part or whole in Due Diligence: the Commonwealth Edison State Line sale,the Central Assessing Labor Practices Maine Power sale,the Boston Edison sale and the New The phrase"due diligence"is a favorite England Electric System sale. They also have been required buzz word in today's electric utility indus- of bidders by Montana Power Company and New York try,where mergers and acquisitions have State Electric and Gas,to name just a few made it second nature to business devel- In practice,it appears that the seller can nearly always opment professionals to investigate reduce the critical labor-related issues to just a few and prospective partners.The notion of due render them immune to buyer influence.Operating non- diligence might not often occur in the con- union is almost never an option for the buyer,since the seller text of workforce management issues in typically has gained workforce and community support by power plant acquisition.The flawed requiring a union-friendly transaction.Moreover,the buyer's premise here is that simply because influence over the how and extent of workforce reduction has staffing,compensation,and labor agree- often been constrained by the seller's promises to its employ- ments have succeeded in the past,they will ees and bidding restrictions.Similarly,the buyer's ability to continue to work.Of course,nothing could implement immediate change is restricted by the existence of be further from the truth. long-term collective bargaining agreements,which at the Each buyer must assess key practices in very least establish a baseline of future expectations. human resources and labor relations.For Nevertheless,many of the assets now for sale are rela- example,will the labor agreements drafted tively old.Often they are poorly maintained,in need of for a single bargaining unit within a verti- repowering or retrofitting.Their value lies in how they can cally integrated utility still make sense for a be operated—not how they are operated now.Buyers must company that only generates electricity? not lose sight of that in pricing a potential acquisition or in Will employment agreements now prove pushing sellers on the process of workforce transition. necessary(though never used before)to In fact,the buyer probably wants to operate differently minimize turnover among key managers from the seller,often with greater workforce flexibility, during the transition period?If staffing is lower per-hour costs,and a more competitive labor cost tailored to baseload operation,can sub- k structure.More than likely,the buyer envisions different contracting accommodate peaking needs? objectives,such as: Notwithstanding such questions,what (1)Staffing for baseload operation,using overtime and r contractors for peaks and outages; (2)High reliability and availability,but as a low-cost provider; (3)Greater sensitivity to customers,without being overly solicitous or compromising. t The buyer also may hold certain key cultural values, such as a willingness to adjust labor strategy to local politi- cal or business environments.By contrast,the seller may want nothing more than a minimum of grief from the union,the employees,local politicians and the media Qst yne;: Prospective buyers will find that they can influence labor matters—before and during the bidding process,and during the closing of a power generation acquisition.They should approach each acquisition with a well-defined sense of what they need to succeed,and not hesitate to insist Public Litilities Fortnightly • December 1998 27 5 Power Plant continued legal or contractual obstacles might stand in the way? Accordingly,due diligence for power plant acquisition should consider at a minimum(1)the buyer's successor- ship status,(2)the total compensation package for the plant's workforce,recognizing the importance of workforce productivity,and(3)strategies for restructuring the union organization. SUCCESSORSHIP STATUS.Today many companies looking to u sell power generation assets are requiring successful bid- x ders to accept labor agreements and unionized workforces • in their entirety.While the seller often has powerful and a rational political and financial reasons for such mandated I �4 successorship,this approach may not help meet the poten- y predeces tial buyer's long-term operating objectives. As a general rule,employers enjoy substantial flexibility to restructure businesses and transfer capital unhampered lr7e4 emp by rights and benefits mandated by collective bargaining i N agreements.However,to protect those rights and benefits, r as well as their representational status,unions have gener- ally,but not exclusively,relied upon federal labor law and I!� the doctrine of successorship to force new employers to recognize CBAs or otherwise bargain with employees.The I' doctrine of successorship determines whether or which obligations of a predecessor unionized employer will be imposed upon a successor purchaser or employer.(See Sidebar,"Dealing With Successorship.'� Several states have passed their own"successorship' statutes,requiring sellers and buyers to enforce and recognize Dealliiqn�gW�ith�Succes�sorshipMust buyer accept seller's labor agreements? ULE; a u 1' 7( ONS 1 al.. i ec tion ete er i rs u on t lNI11AL' LEl((IBL a a o t'. em con itt m ni fera fain o a " ', u io t res ccesso., o` i a o i o s �;an n e n • �' t , o . F taa reser _ 28 Public Utilities Fortnightly • December 1998 i successorship clauses in CBAs.These states include Delaware, Interestingly,the Maine electric utility Pennsylvania,and Rhode Island.While the state provisions restructuring legislation augments the were in effect prior to the recent sell-off of power generation employee severance and protection con- assets,in Commonwealth Edisods sale of the Kincaid cept with a successorship provision, Station,the International Brotherhood of Electrical Workers requiring generation asset purchasers to attempted through the federal courts to use the Illinois suc- recognize the union and adopt the collec- censorship statute to force the buyer to adopt the existing tive bargaining agreement"to the extent �. CBA between Commonwealth Edison and Local 15 of the permitted by federal law." (Sec.35-A IBEW However,the federal district court,relying on a prior M.R.S.A.§3216.)In light of the Com Ed decision applying the Minnesota successorship statute,found decision,federal law likely would preempt the Illinois statute to be preempted by federal labor law,and the Maine successorship provision. thereby unconstitutional and unenforceable.See Cmwkh Ed. In addition,at least six states had Co.a IBEW,961 ESupp.1169(N.D.RL 1997). enacted or were considering legislation to j Rather than become mired in the successorship issue,a allow utilities to recover employee-related number of states addressing deregulation have chosen to transition costs,such as severance.These focus their legislative efforts on softening the impact of states include Arizona,California, restructuring on electric utility employees.At least six states Mississippi,Missouri,Pennsylvania,and have laws specifically requiring action by the existing utility Virginia.The statutes can facilitate the j to mitigate the effects of restructuring by providing sever- buyer's willingness to take on employee ante,early retirement packages and retraining of employees. costs by allowing the seller to reduce the These states include Connecticut,Illinois,Maine, acquisition price. Massachusetts,New Jersey,and Nevada.At least four other COMPENSATION,PRODUCTIVITY.Does a states were considering such legislation as of fall 1998,includ- power generation facility now exist in a ing Michigan,Newyork,Ohio,and Pennsylvania.Several different labor and job market than a seller utilities were attempting to extend the coverage of such power delivery function?Can stand-alone s. legislation to buyers by instituting bid conditions on the business units continue to afford defined- buyer,extending severance and early retirement require- benefit plans,or will defined-contribution ments beyond the closing date of the sale. plans prove a competitive necessity? 4 iz ,f i VOD CE DVI s t r i a o . o a VIM I o o tto o, a ,o z 2 ' ,r . _ o_ � � li `�' �� 2$21 8��6t�� 989 �<�• max, 0S osO a _ a oIn o ellen OVDAVE0 Saw 3 0 od' e';,�� Burns"In�l recur az�Z�s4, 94 9 Public Utilities Fortnightly • December 1998 29 - -- ------ - Power Plant continued What about pay structure?Should unacceptable.And where the business unit employs a future income gains come primarily baseload staffing philosophy,any restrictions on the use from general increases,or through of non-union staff or contractors should be unaccept- incentive pay?Can the new organization able.Seniority should be eliminated as a controlling continue to justify premium or non- factor in assigning call-out work,scheduling emergency statutory overtime pay? work,scheduling relief overtime or making promotion Since the market pricing of energy ser- decisions.Union and non-union employees should vices will be somewhat volatile,labor adhere to comparable work rules and staffing policies. agreements that burden employers with UNION REORGANIZATION.The acquisition process offers mag- payments for fixed benefits will be non- nificent opportunities for in reinventing the union-manage- competitive on customer pricing.Plant ment relationship.While deregulation offers leverage to the owners can meet performance standards buyer,ignoring union interests also poses risk.The balance to through outsourcing or targeted contract- be drawn depends on each buyer's needs. ing.However,a stand-alone power pro- For the union to be a meaningful contributor to the ducer cannot spread labor costs across a employer's success(thereby defining the unions ultimate fully integrated transmission and distribu- success),it must align itself with the changing structure of tion company.The buyer must link com- the business.For example,to have boiler turbine operators pensation with growth of income. belong to the same local as linemen for a power generation At the same time,for a unionized company would not likely support the buyer's business facility,labor contracts and work prac- strategy.Notwithstanding union cooperation,the buyer tices may impede productivity.Any might decide that the role of certain traditional union posi- restrictions on scheduling of work and tions—such as boiler turbine operators—have expanded. training,assignment of work,overtime to the point where it no longer makes sense for them to distribution,and performance evalua- belong to the bargaining unit.A union may not welcome tions should be viewed as presumptively the use of devices such as a unit clarification petition filed j with the National Labor Relations Board to remove a whole job classification from ` union control.However,such institutional Labor RelationS: A sacrifices may be appropriate to better Baseline - preserve the integrity and value of the remaining unionized workforce. OR11THERV ON ON- (OH OK . R Pushing the Seller: a o , o a . Pre-Closing Strategies s Beyond due diligence,a prospective buyer should exercise as much influence as possi- bleon a seller prior to acquisition to mini- mize the length of any CBA beyond the re, pe dosing,and minimize commitments to the e _ o n o c re an o union on future staffing levels,wages or h` benefits.The buyer should prevail upon the '^ " i` seller to accomplish as much of any N A IV,ION NG planned workforce reduction as possible prior to the dosing,yet retain the core of the skilled workforce.The buyer would not 1Uent<a �n o a g e0 often want the seller to make attractive uests 1111 ct i require 2 is ¢e 1 offers of continued employment in other e p`ry��lo,,5qyee . �on�equireme0ts n ase Nagrreeinent. parts of the seller's business.Very few,if any, buyers can afford a major talent drain from 30 Public Utilities fortnightly - December 1998 Y an experienced generation facility workforce. tatives.While the buyer may not have While having in place a long-term CBA may provide the opportunity to renegotiate the CBA needed stability,the locked-in labor cost and work rule until several years after closing,the structure may diminish the value of the assets. Also,a opportunity to set expectations is never buyer forced to"blow up"an entrenched union deal for better than during the bid and closing j competitive reasons will likely find it more difficult to process—when anxious eyes and ears quickly establish a cooperative union-management are focused on the buyer. relationship. At some point in the acquisition !{ process,a buyer is going to bump into the "usual suspects"of workforce transition 01998 The Moms Companies,W. issues:wages,medical benefits,retire- ment savings,and leave accrual. In general,the buyer should not ' attempt to duplicate the seller's benefit plans.The buyer often does not have a \' - fiull appreciation for the seller's medical plans to globally adopt them and,in any r event,the buyer may be in no position to offer the same range of benefit choices.A buyer will often want to stick with the benefits scheme it knows best.That is particularly true in the pension and sav- ings arena,where attempting to take on a seller's existing qualified pension and \l>' 401(k)plans can create costly liability and logistical nightmares. (See T.A. Jorgensen,"Handling Employee Benefits in Mergers and Acquisitions,"Employee Benefits In Corporate Transactions, pp.1-36 1994.) > s Where the buyer does not accept trans- \ fer of the seller's 401(k)plan and trust, With winter almost • should stop € both buyer and seller must work out the fiddling around and call Williams about their E fund rollover and loan issues created by "• energy •" the"same desk rule,which can limit tran- sition to a new employer's savings plan. (See K N.Brown,`Separation from Service a and the Same Desk Rule.Distributions This will be music to your ears.Williams can give you the from Section 401(k)Plans,"Journal of same fair energy price year after year after year.Ten years,to be Pension Planning er Compliance, 23-34, exact And well throw in our famous reliability for free.Bravo! g P PP Fall,1995.) Where a buyer is expected to be a ��/I successor employer,it should consider that WiVY. niienergy- ' labor negotiation as beginning with its first bid documents and media com- munications,plus any preliminary dis- cussions with seller's management and www•wilkales.com/enera local regulatory or legislative represen- I soamuianns ii Public Utilities Fortnightly • December 1998 31 t� Power Plant continued Communications: with union leadership.This forbearance enhances buyer Controlling the Agenda flexibility after the bid approval.It minimizes the risk of The buyer will want to control the com- misstep or misstatement. munications process with several different Nevertheless,a buyer may conclude that its leverage is audience categories:(1)union leadership, greatest during the period before closing,when union (2)regulators or government officials,and uncertainty remains.Here the buyer should orchestrate the (3)mid-level managers and supervisory negotiation process to preempt communications coming employees of the seller. from the seller's local management or labor relations group. Until the prospective buyer has received When at all possible,a buyer does not want the seller to the bid and more firmly understands the speak to the union or employees on the buyer's behalf. likely terms and conditions of the sale,the Control over communications can also avoid embarrass- buyer should resist any formal contacts ment or conflict with local or state legislators and regulators. Here,the buyer should respond to any concerns of govern- ment officials about the transition process.The buyer should Manager, not necessarily rely on the seller's relationship with such offi- Federal Regulatory Affairs cials.Providing regulators and legislators with even a broad perspective of the buyer's intentions allows those officials to Allegheny Power,a competitive,low-cost utility respond confidently to union and employee concerns. providing electric and other energy services to parts Another broad audience category is first-line supervisors of PA,OH,WV,MD,and VA,is seeking candidates for Manager,Federal Regulatory Affairs. and mid-level management,which may be retained by the This position,which reports to the Vice President, buyer.To the extent these individuals are not informed first External Affairs,is responsible for developing and and best,they can appear to have meaningless and ineffective maintaining relationships with federal regulatory roles in the restructured environment. Their lack of credibil- agencies to ensure that the company has the oppor- tunity to participate in and has its viewpoints con- ity and institutional respect among the workforce can sidered in important regulatory matters. threaten general support(even generate sabotage)of buyer The Manager,Federal Regulatory Affairs will goals and decisions.Most importantly,it is the management work out of Allegheny Power's Washington,D.C. group to which most employees will look to for confirmation Office. Candidates must have an undergraduate degree in and clarification of acquisition communications. Business Administration,Political Science,or relat- The goals and objectives for your communications plan ed filed,excellent verbal and written communica- should not be a mystery: tion skills,and 3 to 5 years'experience in the feder- ■ Establish the buyer as the source of credible information; al regulatory area. We are a team-based environment and offer com- ■ Establish middle and first-line management as"insiders" petitive rewards including medical/dental,life insur- regarding the acquisition; ance,paid vacations and holidays,and 401K. ■ Recognize employee dignity;build employee loyalty To learn more about Allegheny Power,visit our web page at www.aUeghenypower.com and trust; Mail resume and salary requirements by Dec. 15, ■ Emphasize the importance of the union and the 1998 to: employees to facilitate the acquisition—not merely to salvage jobs. Allegheny Power The communication methods—whether they be bul- Human Resources-MFRA 10435 Downsville Pike letins,presentations,management talks—should be seen as Hagerstown MD 21740-1766 the regular and expected sources of restructuring informa- OR tion.Resist diffusion of media outlets.Instead,prepare both e-mail to: the union and its employees as articulate and willing resumes@alleghenypower.com spokespersons—to customers,media,and regulators,and Resume will be retained for 3 months. all on your behalf. O 4 Allegheny Power Attorney Christopher Miller is a partner in the Atlanta office of Equal Opportunity/Affirmative Action Employer Troutman Sanders and is a member of the law firm's labor and employment practice group. 32 Public Utilities fortnightly • December 1998 REGIONAL WATER PROVIDERS CONSORTIUM BOARD REGIONAL TRANSMISSION STRATEGY MEMORANDUM November 1998 Introduction and Purpose The Regional Water Providers Consortium is interested in exploring regional water transmission options as part of its on-going planning process. There have been some significant water supply/transmission system planning and construction efforts within the region since the completion of the Phase H Regional Water Supply Study in 1996. These recent efforts provide the framework with which to further explore regional transmission options. The Consortium has requested that a Regional Transmission Strategy Work Plan be developed to help identify "information gaps" and define specific areas of evaluation that would lead to next-step analyses to assist the region's water providers in making crucial water supply, transmission and storage decisions over the next few years. There are both technical and institutional issues which need to be defined and evaluated for this effort. The first step in developing the Work Plan is preparation of this Technical Memorandum (TM) which summarizes recent transmission system planning, construction and operations in the region. This TM also introduces topics for consideration and discussion at a proposed Transmission System Workshop to be held on November 12, 1998. The information in this TM will aid in the development of the Work Plan. For the purposes of this TM, a transmission pipeline is generally defined as one that delivers water from a source of supply to a large "terminal"reservoir or"turnout" where it is then distributed to consumers via distribution pipelines. Each major supply system in the region operates under these general guidelines, although there are some variances. For the purposes of this TM, a transmission pipeline is generally defined as having a diameter of 36-inches or greater. Major Sources of Supply within the Region Major supply sources are considered those which can deliver greater than 10 to 15 mgd on a peak day basis. The region's major existing water supply sources include: • Bull Run (205 mgd existing transmission capacity) • Columbia South Shore Well Field (90 mgd existing transmission capacity) • Joint Water Commission Water Treatment Plant (60 mgd existing transmission capacity) • Clackamas River supplies from 4 providers (74.5 mgd existing treatment capacity) The Bull Run supply is conveyed by gravity from Headworks to the 50 MG Powell Butte Reservoir via three transmission pipelines ranging in diameter from 44-inches to 66-inches. The Columbia South Shore Well Field has a maximum pumping capacity of 90 mgd and pumped Regional Water Providers Consortium Board pale I Regional Transmission Strategy Memorandum water is conveyed to the Powell Butte Reservoir via a 60-inch diameter pipeline. The Well Field has historically been used only as an emergency and peaking supply. The Joint Water Commission treats water withdrawn from the Tualatin River (including stored releases from Barney Reservoir and Hagg Lake), pumps it to the 20 MG Fernhill Reservoir. Then, water flows by gravity to Hillsboro, Beaverton, Forest Grove and the Tualatin Valley Water District. Clackamas River Water(30 mgd), South Fork Water Board (20 mgd),Lake Oswego (16 mgd) and North Clackamas County Water Commission (8.5 mgd) each have separate intakes and water treatment plants on the lower Clackamas River. Each facility has its own pumping, treatment, storage and transmission systems for delivery to its customers. Each of the existing supplies has the capability of being expanded in the future should the need arise. Other possible major supply sources, not currently being used in the region but suggested for future consideration in the 1996 Regional Water Supply Plan, include: • Columbia River • Aquifer Storage and Recovery (ASR) • Willamette River An intake, treatment plant, pumps and transmission pipeline could be constructed for the Columbia River near Troutdale to deliver water to parts of the region. Preliminary studies recommended that this supply deliver its water south to Powell Butte Reservoir for service to potential consumers. ASR systems have been studied in various sites around the region. ASR would be used as a peaking source during the summer months to supplement existing supplies. The two major potential ASR systems would be located in the Powell Valley area(Bull Run water would be the source for injection/extraction) and in the Cooper/Bull Mountain area(two potential sources could serve this system for injection/extraction including JWC and Bull Run). An intake, treatment plant, pumps and transmission pipeline could be constructed for the Willamette River near or in Wilsonville to deliver water to parts of the region. Preliminary studies recommend that this supply deliver its water north to Tigard's existing 10 MG reservoir to serve potential customers along the transmission pipeline corridor. Historical Long-Range Transmission System Planning Regional Water Supply Plan -Phase 1 Phase 1 of the Regional Water Supply Plan was completed in 1992 and included a Water System Demand Study, a Water Source Options Study and a Conservation Study as well as the Tri- County Pipeline (TCP) System Conceptual Study. The study developed a preliminary Facilities Plan for a regional pipeline, storage and pumping system which would integrate the region's sources to achieve a reliable and cost effective regional water supply. In addition to providing water throughout the region, the TCP would be able to transmit a secondary water source during Regional Water Providers Consortium Board page 2 Regional Transmission Strategy Memorandum unplanned or planned events such as shutdown of one of the region's water treatment plants, loss of a supply source, or outage of a major transmission system component. This system would increase the reliability of all interconnected systems from east to west, north to south. The TCP included implementation of terminal reservoirs at Powell Butte (existing and new) and at Cooper Mountain on the east and west sides, respectively, each with similar overflow elevations (530 feet). Various "demand centers" were established at locations between the two terminal reservoirs to establish a planned transmission pipeline corridor. These planned demand centers included: • Powell Butte (input from Bull Run and Columbia River sources) • Damascus/Boring • Milwaukie • Clackamas (input from Clackamas River sources) • Canby • Tualatin (input from Willamette River source) • Tigard • Cooper Mountain The TCP did not consider the Joint Water Commission supply from the Tualatin/Trask Rivers as a source providing input to the Cooper Mountain reservoir. Rather, the TCP assumed that future major supply sources included Bull Run, Columbia River, Clackamas River and Willamette River. The Columbia South Shore Well Field was not considered as a source either. Three major pumping stations (PS) were also assumed for the TCP including those at Powell Butte, Clackamas and Cooper Mountain. The Powell Butte PS would supply water from the existing Powell Butte reservoir at 530 feet overflow elevation to a new Powell Butte reservoir at 610 feet overflow elevation. The Clackamas PS would supply water from CRW's Mather Road reservoir at 292 feet overflow elevation to the proposed Cooper Mountain reservoir at approximate overflow elevation 535 feet. The third PS was proposed to supply emergency water from the proposed Cooper Mountain reservoir to the Powell Butte reservoir. Other pumping stations which would supply water into the system from existing and proposed new sources were not analyzed. Regional Water Supply Plan -Phase 2 The Phase 2 Regional Water Supply Plan (RWSP), completed in 1996, built upon the information developed during Phase 1 and explored in more detail selected source options including the Columbia River, Willamette River, and ASR as well as expansions of existing systems including Bull Run, Clackamas River and Tualatin River/Trask River(JWC source) as discussed previously in this memo. Regional transmission and storage options were also evaluated as part of the Phase 2 RWSP. The evaluation included the identification and evaluation of representative reservoir locations, transmission corridors, the development of project cost estimates and the development of tabulated cost and capacity data for use in the Integrated Resource Plan (IRP) model. Regional Water Providers Consortium Board PaKt.2. Regional Transmission Strategy Memorandum Terminal storage facilities were considered in various parts of the region in anticipation of ultimately connecting the major sources of supply to a transmission network which would increase reliability and redundancy of supplies. Three major terminal reservoir sites were considered including Powell Butte (expansion of existing 50 MG capacity), Forsythe Road in northern Clackamas County, and Cooper Mountain in eastern Washington County. Based on the location of storage and supplies, nine transmission corridors were evaluated under criteria that included headlosses, alignment topography, distance between terminal points, geology and environmental considerations. The transmission corridors identified and evaluated included the following: • Lusted Hill/Powell Butte • Columbia River/Powell Butte • Powell Butte/Clackamas • Powell Butte/Beaverton • Clackamas/Tualatin • Clackamas/Forsythe Road • Willamette River/Tualatin • Tualatin/Beaverton • Cooper Mountain/Beaverton Cost estimates were developed which included allowances for alignments through urbanized areas, areas requiring rock excavation, specialty construction considerations, surface restoration, interties and isolation valving. The tabulated cost and capacity data also included provisions for facilities required for connections to local terminal facilities. Recent Transmission System Planning and Implementation Efforts Many water providers throughout the region have been planning and implementing transmission system improvements to continue to meet the demands of existing and potential new customers. The following sections briefly discuss the major efforts conducted to date. Figure 1 indicates both the existing and planned transmission system elements for the entire region. The planned elements are further divided into two sub-elements depending on the level of analysis which has transpired. Figure 2 indicates the approximate elevations of major storage reservoirs within the region, both existing and planned, to assist in the understanding of existing and future transmission system operations. Joint Water Commission System The Cities of Hillsboro, Beaverton and Forest Grove along with the Tualatin Valley Water District (TVWD) own and operate the Joint Water Commission (JWC) supply system. This system includes Barney Reservoir(located in the coast range), storage in Hagg Lake (Scoggins Reservoir), an intake and raw water pumping station on the Tualatin River near Forest Grove, a water treatment plant (WTP) and high service pumping station (located near the intake), a 20 MG reservoir along Fernhill Ridge with an overflow elevation of 520 feet, and an extensive transmission pipeline system which delivers water to each participant. Regional Water Providers Consortium Board Page Regional Transmission Strategy Memorandum JWC will complete Phase 1 of a large transmission system expansion project by the end of 1998 to increase the delivery capacity to Hillsboro, Beaverton and TVWD. The WTP was recently expanded to increase treatment capacity to approximately 70 mgd. The Phase 1 transmission pipeline project provides for a maximum delivery capacity of 60 mgd from the WTP (6 mgd to Forest Grove and 54 mgd to the other participants). Phase 2 of the transmission system expansion project will expand the delivery capacity to approximately 120 mgd from the WTP site. Figure 1 indicates the main features of the JWC supply and transmission system. The Phase 1 transmission system improvements are shown as well as the options for Phase 2 improvements. Phase 1 included a connection to the existing 45-inch transmission pipeline east of Fernhill Reservoir, approximately 20,000 feet of 42-inch and 72-inch diameter pipe running north through Hillsboro to Evergreen Road, and another 26,000 feet of 66-inch diameter pipe running east along Evergreen Road to Cornelius Pass Road at the TVWD service area. TVWD is currently planning to install a 42-inch or 45-inch diameter pipeline from Cornelius Pass Road to its 10 MG Springville reservoir. The capital costs to construct the Phase 1 pipeline were approximately$14 million. Current planning indicates the Phase 2 project (72-inch diameter pipeline) may be completed by the year 2005 with a capital cost of$18 to $23 million depending on the pipeline alignment. Cost estimates are not currently available for the planned TVWD transmission pipeline from Cornelius Pass Road to the 10 MG reservoir. Willamette River Supply Planning The Cities of Tigard, Wilsonville, Sherwood and Tualatin along with TVWD are preparing preliminary plans to develop the Willamette River as one of the long-range supply options for these communities. The Willamette River Supply System would include an intake and raw water pumping station, a water treatment plant (WTP), a high service pumping station and a finished water transmission pipeline. The WTP, pumping stations and the initial length of the transmission pipeline would be located on property within the City of Wilsonville adjacent to the river. The transmission pipeline route would run north from the WTP through Wilsonville and Tualatin and terminate within the City of Tigard at its existing 36-inch diameter pipeline to supply water to Tigard's 10 MG reservoir with an overflow elevation of 470 feet. The facilities are being planned to provide for an ultimate delivery capacity of 120 mgd which equates to the current water rights held by the participants. The planned delivery capacity of the initial phase of the transmission pipeline ranges from 60 to 70 mgd depending on the desired capacity of each participant. The desired initial pipeline capacity would serve the participants' water supply needs for the next 50 years. The pipeline diameter would range in size from 60-inch to 63-inch in Wilsonville down to 48-inch in Tigard. Figure 1 indicates the preliminary alignment of the proposed transmission pipeline. This proposed alignment was recently determined to be the optimal and most-economical after a review of various alignment options. Tigard's 10 MG reservoir is proposed to serve as the terminal reservoir for the supply system and would control the hydraulics of the transmission system. Each of the other participant's systems has a lower hydraulic grade line (HGL) than Tigard's HGL. Regional Water Providers Consortium Board pa c c j Regional Transmiss:.;n Strategy Memorandum The preliminary capital cost estimate for the transmission pipeline system from Wilsonville to Tigard is approximately $40 million including construction costs and a 35% multiplier for contingencies, engineering, administration and legal. Powell Butte Master Plan The Portland Water Bureau recently completed a Master Plan of its Powell Butte reservoir site to allow future water facilities to be constructed if necessary. Currently, the site has a 50 MG terminal reservoir(overflow elevation = 530 feet) which serves as the main delivery point for the Bull Run supply via Conduits 2, 3 and 4. Water from this reservoir is then distributed to Portland and non-City customers via additional pipelines including the Washington County Supply Line (WCSL) which delivers water to west-side customers. Potential future water facilities which were included in the Master Plan are: • Three additional 50 MG reservoirs with overflow elevation = 530 feet • One 20 MG reservoir with an overflow elevation = 600 feet • A water treatment plant (WTP) with an ultimate capacity of 500 mgd • A large-diameter conduit(s) (approx. 84-inch) to deliver water to the reservoir complex • A regional transmission pipeline (approx. 66-inch diameter) to serve users to the south (Southern Intertie) with connections to both the 530 foot and 600 foot reservoirs The planned 20 MG reservoir with a 600-foot overflow elevation, which would have to be filled by pumping during portions of the year, would be used as a regional facility and would serve multiple purposes including: • Provide gravity service to certain areas around the Butte which currently can't be served by gravity • Provide the ability to increase the delivery capacity through the existing Washington County Supply Line (WCSL)by increasing the driving head • Provide the ability to supply potential future users to the south and southwest of Powell Butte, including the Clackamas Basin, as part of a Regional Transmission System. The Southern Intertie pipeline would be capable of delivering 50 to 100 mgd depending on the size of the pipeline and the hydraulics No formal planning has been conducted to identify possible routes for the Southern Intertie pipeline other than what was performed during TCPCS, but two preliminary alignments are shown in Figure 1. One possible route would be from Powell Butte directly to the south. The other possible route would head southeast from Powell Butte along Foster Road towards Damascus. Conduit 5 from Bull Run Supply The Portland Water Bureau has been planning for the addition of a new transmission pipeline(s) from the Bull Run Headworks area to increase the capacity and reliability of the Bull Run supply. Currently, the existing three conduits (Conduit 2 =44-inch/52-inch, Conduit 3 = 50- inch/58-inch and Conduit 4 = 52-inch/66-inch) have a combined maximum delivery capacity of Regional Water Providers Consortium Board page 6 Regional Transmission Strategy Memorandum r 205 mgd to the Powell Butte 50 MG reservoir. The planned new transmission pipeline is being referred to as Conduit 5. The distance between the Headworks and Powell Butte Reservoir is approximately 21 miles and the approximate HGL at Headworks is 745 feet. Preliminary planning for the new conduit has the delivery capacity between 120 mgd and 250 mgd depending on the selected pipeline diameter. The total delivery capacity from Headworks will then depend on the selected pipeline diameter and whether Conduit 2 (the oldest of the existing conduits) is replaced or remains in service. Pipeline diameters between 84-inch and 120-inch are being considered. If the Bureau decides to install the 120-inch diameter pipeline as Conduit 5 initially, then there may be no need to construct another conduit (Conduit 6) in the future. The Bureau has a preliminary right-of- way for Conduit 5 which parallels the existing conduit route to some degree. The new pipeline could be constructed in segments depending on the timing and need for increased transmission capacity from Headworks. One scenario which has been considered is to construct the portion of new Conduit 5 from Powell Butte Reservoir east to Gresham which would initially increase the maximum delivery capacity to approximately 250 mgd. Figure 1 indicates the existing conduit alignments as well as the planned future Conduit 5 routing. The preliminary project cost for a new 84-inch diameter pipeline from Headworks to Powell Butte is approximately $158 million. Washington County Supply Line The existing Washington County Supply Pipeline delivers Bull Run water from Powell Butte Reservoir(overflow elevation = 530 feet) under the Willamette River to westside customers including TVWD and the City of Tualatin. The pipeline ranges in size from 84-inch to 36-inch and has a maximum delivery capacity of approximately 60 mgd. The WSCL crosses the Willamette River just north of the Sellwood Bridge with the terminus of a 60-inch diameter pipeline near the intersection of SW Beaverton/Hillsdale Highway and SW Oleson Road. From this intersection, a 54-inch diameter supply main extends west to the TVWD and a 48-inch diameter main extends south to serve the Metzger area of TVWD. From SW 80`h Ave. and SW Florence Lane, a 36-inch diameter supply main continues south to the City of Tualatin. Figure 1 indicates this alignment. Recently, studies have been conducted to evaluate options for increasing the delivery capacity of the WCSL, specifically to serve the Cities of Tigard and Wilsonville. The Washington County Supply Line System analysis found that, under maximum daily flow conditions, the Supply Line System is constrained by a topographical high point near the intersection of SW Capitol Hwy and Beaverton Hillsdale Hwy and the need to maintain an adequate hydraulic grade line at the City of Tualatin's supply connection south of the Tualatin River. The analysis found that total Supply Line System capacity is significantly reduced when flow rates through the 48-inch and 36-inch diameter sections of the system are increased beyond those anticipated as part of the original Supply Line System design. Based on an estimated system capacity of approximately 60 mgd, the capacity of the southern leg is approximately 17.1 mgd. The analysis included an evaluation of pumping options which found that, while increasing the capacity through the southern leg, hydraulic constraints would significantly restrict this option. Regional Water Providers Consortium Board page 7 Regional Transmission Strategy Memorandum The City of Tigard is presently evaluating a connection from the Supply Line to the City's existing 10 MG Reservoir. Preliminary results from this analysis indicate that 5 to 10 mgd can be supplied to Tigard through this connection depending on the number of users connected to the WCSL and the demand required from each user. The City is also further evaluating a pumped connection to the Supply Line. Both of these alternatives are intended to secure the City's short- term water supply needs. The proposed transmission main connection could potentially serve as part of a longer-term water supply facility. Following the completion of the Supply Line System analysis, a short-term water supply connection between the City of Tualatin and the City of Wilsonville was evaluated. The Cities have adjacent facilities near Frobase Road and a potential connection between Tualatin's highest service zone and Wilsonville's distribution system was evaluated. The analysis indicated that significant system improvements to the City of Tualatin's distribution system are required to supply the City of Wilsonville up to 2 mgd. The estimated project cost of these improvements approached approximately$3.2 million dollars. Clackamas River Water Transmission System Expansion CRW is currently planning to increase the transmission system capacity to deliver in excess of 40 mgd from its WTP and High Service Pumping Station. Currently, the WTP and HSPS capacity is limited to approximately 30 mgd. Approximately one mile of 48-inch diameter pipeline will be connected to the HSPS discharge piping to increase the water supply available to CRW's wholesale and retail customers. The transmission system improvements should be completed by the end of 1999. The WTP capacity, including the intake and PS from the Clackamas River, would presumably then be expanded to the 40 mgd capacity. Clackamas County Interties Four major sources of supply now exist in the northern Clackamas County basin including: • Clackamas River Water(CRW)WTP (30 mgd) serving CRW-North and Gladstone • South Fork Water Board (SFWB) WTP (20 mgd) serving Oregon City, West Linn and CRW- South City of Lake Oswego WTP(16 mgd) 0 North Clackamas County Water Commission (NCCWC) Slow-Sand Filter Plant (8.5 mgd) serving Oak Lodge Water District, Mt. Scott Water District and Damascus Water District Various smaller interties currently exist between these agencies and also with the City of Portland. Recently, CRW, SFWB and NCCWC have been planning an intertie pipeline between their 3 sources of supply such that water can be transferred between any of these providers for increased source and system reliability. The pipeline would be 30-inch or 36-inch diameter capable of delivering in the range of 15 to 20 mgd. Two routing options for this intertie pipeline have been identified as described below (shown in Figure 1): Regional Water Providers Consortium Board nag Regional Transmission Strategy Memorandum • From the NCCWC Slow-Sand Filter Plant across Clackamas River Drive, up the hill and then connecting to the SFWB transmission pipeline downstream of the WTP, or • Connect to City of Gladstone's 27-inch diameter transmission pipeline, across the 82"°Street footbridge, and connect to SFWB's transmission pipeline downstream of the WTP Clackamas Supply Pipeline to Wilsonville As part of its recent Water Supply Study, the City of Wilsonville investigated numerous long- term supply options including the Willamette River, the City of Portland (Bull Run and South Shore Well Field) and the Clackamas River via SFWB and/or CRW. The Willamette River and Portland supply options are discussed above. There appears to be surplus water available from the Clackamas River providers to serve Wilsonville's demands for the next 20 years or so. To deliver this water to Wilsonville, treated water would have to be pumped via a 36-inch diameter transmission pipeline (sized to deliver 20 mgd) that would parallel I-205 starting in the West Linn area and then deliver water to Wilsonville's reservoirs either from the east along Stafford Road or from the north paralleling I-5. The estimated capital cost to construct the pumping station and 36-inch pipeline was approximately$20 million. Regional Transmission Strategy Issues This section discusses several key issues related to regional water supply. These issues focus on the "gap" between existing facilities and operations and regional water needs. Questions are presented for discussion, in order to better define regional storage and transmission system objectives. ISSUE 1. Major regional storage reservoirs, as envisioned by the RWSP, are not being developed. The concept of major regional reservoirs is to provide operational flexibility for existing or proposed regional water sources and to provide emergency regional storage. Powell Butte, with 50 mg of storage, is the model for these reservoirs. The Forsythe Road reservoir in unincorporated Clackamas County was envisioned as a large storage reservoir for the Clackamas River source. There is no regional storage reservoir planned for the 4 providers currently using this source. A pipeline intertie between the three Clackamas River treatment plants on the east side (CRW, SFWB and NCCWC) is planned to increase source and system reliability for the Clackamas supply. The Cooper Mountain site in unincorporated Washington County west of Beaverton was envisioned as the regional reservoir site for Washington County. The Cooper Mountain site was hydraulically positioned to serve the major demand centers in Washington County, at an overflow elevation between 515' and 530'. As currently planned, major storage for the Willamette supply would be provided by the City of Tigard's 10 mg reservoir, at elevation 470', for the first increment of supply. Regional Water Providers Consortium Board Regional Transmission Strategy Memorandum Areas of significant anticipated growth in water demand include Damascus and Pleasant Valley on the east side, and Wilsonville and Tigard on the west side. Questions: • Can existing and planned storage adequately serve Washington County without the Cooper Mountain reservoir? • Is the Forsythe Road reservoir needed? • Are regional pumping facilities needed to provide emergency supply? • Who should install and operate these pumping facilities? • Are revised demand forecasts needed? ISSUE 2. Potential Powell Butte —Clackamas intertie This transmission corridor connects regional storage at Powell Butte with the Clackamas supply. An alignment for this option was developed as part of the RWSP, and includes service to Damascus, Mount Scott, Milwaukie, CRW and SFWB. The RWSP corridor travels south from Powell Butte on SE Foster, west on Sunnyside Road and west on Hwy 212/224. Questions: • Is the conceptual corridor for this pipeline still appropriate? • Should this pipeline alignment include a tie-in with planned Portland Water Bureau Conduit 5, which approaches the Powell Butte Reservoir from the west, along Hwy 26? • Is the high-elevation Forsythe Road reservoir needed under this scenario, or would the pipeline provide direct connections to local transmission mains? • The largest long-term supply deficit has been projected by the RWSP to be in the Damascus area. What sources will serve this area? How does this affect the transmission corridor discussed here? • What is the necessary timing for this pipeline? • What should the design capacity be? • What are the pipeline size and pumping implications in order for the Clackamas providers to supply water to Portland? Who should install and operate these pump stations? • Is any advantage gained by delivering water from elevation 600' on Powell Butte, instead of from the existing 530' reservoir(s) to the Clackamas area? • Should the planned Clackamas WTP intertie pipeline be oversized now to facilitate moving more water through this area in the future? ISSUE 3. Potential Clackamas -Washington County Transmission Pipeline Two potential corridors have been evaluated in the RWSP for a possible connection between the Clackamas area and eastern Washington County. Both routes connect near Durham. One alignment crosses the Willamette River at West Linn, then angles north along the west bank of the Willamette to Lake Oswego, travelling west through Lake Oswego. This alignment was recommended in the RWSP. A second potential corridor crosses the Willamette River in the Regional Water Providers Consortium Board Page 10 Regional Transmission Strategy Memorandum general vicinity of Oregon City/West Linn, parallels the I-205 freeway and crosses the Tualatin River at Stafford Road. Questions: • What is the best alignment for this pipeline? Potential routes include RWSP options, plus a more southern route which could serve Canby, Sherwood, Tualatin, Wilsonville and possibly Tigard. • What is the appropriate size of this pipeline? Should it be oversized to allow for future City of Portland supply to Washington County via the Powell Butte—Clackamas connection? • Is service from the other direction (i.e. Washington County to Clackamas) a possibility? If so, what pipeline capacity is needed? What pumping facilities are required? ISSUE 4. Major water providers use different residual disinfection processes. Systems using chloramines for residual disinfection include the City of Portland and the planned Willamette supply. Systems using free chlorine for residual maintenance include the Joint Water Commission and the Clackamas River providers. The JWC is currently evaluating the use of chloramines for residual maintenance. Questions: • Are there water quality issues associated with blending of treated waters? • Should all water providers use the same secondary disinfectant for ease of regional operation? • Are there other real or perceived water quality concerns that could affect regional transfers (i.e. organic chemical contamination)? Regional Water Providers Consortium Board pad>e I I Regional Transmission Strategy Memorandum Banks t,.. o wer -EV North v North Ploine .. y� } r - A \ v✓ t/„Y y'Tc of-` Y r m is >G �f _ho'ug-o_l S WTEETIN TAUXY TROISR CAP: 10c42 NA 66" ��gsr ' f -_` y y� OOl1I/IA Foreat ; Hillsboro CITY PORIlAND Grove " .,,.... _ ..pA� ' t .. � h^— I•--_._. a"' .____— Fatrvlew ..-Troutdale CAP, �� • CorrallueIIc9s , 1 I _ - _+ -----'---- -- I • p Portland -I CITY:Or pwmAM- ---+ _ a: •U•` moi.. " 42 B.. 36 _ R ve. W � Ti: w CAP:20W Beaverton ` ^ CITY Or F 7°' 32,.>-w r �I' cJ .. Gresham - • .rw H � 50" WTP I 1 c� 520 FEET 4 60 CITY ONn 6 �^- r _-- 54"_. Wrp L� 3fi CAP: 1.7 MC' J S MTP GE:644 FEET 0 ICITY bF PORTLAFD _ cAv:eo Mc 44^ eO p ,r 24^ CITY OF SEAWATON CAP: 15 NC it?07 OE:410 FEET R �,.. 36'. aESERvoIa � \{ T COOPER H ..:" MOUNTAINLJ 1 I, , - RESERVOIR w: J 36 SITE • r Gaston tv - .. CITY OF TIGAR0 j CAP. E 4 0 FEET 36' Lake Oeweyo 4 � +, � .::. �._ _.._. CLApCAMAS RIVER wATERI •,_...._. Tigard X f: l M FEET "• R ceP: Io Mo __..� � -- I King �•� M WTP1.. .� i - 2 CRY ' l J LAKE _ i ce•' Sandy ._. rs. o-� - - - r' GO - - n vt wm W p 1L �. y. I . �I N` WTP eerrn Tylatin. I i Gladstone WTP dock o=..,� \: Sherwood} -w:. r'' . �`• 1�MI T P F�gt T r • `t'. 'F CITY OF,WEST LINN �r RSER V •. CAP:2F!WIR 43 MO - ' '� SINE OE:440 FEET R west tl� 44" sOOO 6000 1 - i sk. :, O R r , '`\�� 0E: 4e0 FEET ICIT1�'.`. s f� GIP: las NO _ iu LEGEND N11.onvRl.' ", Newberg EXISTING PIPING ';, wRwSS ���I� u wrn --- C` ,.. TPS PLANNED FUTURE PIPING � _ ? Estacado CONCEPTUAL FUTURE PIPING EXISTING WATER 41 Y � . E TREATMENT PLANT WTP wTP cANerwrP Canby PLANNED WATER _ - TREATMENT PLANT WTP Barlow c: Figure 1 NOVEMBER 1998 RIVER WATER INTAKE COMPONENTS OF REGIONAL RESERVOIR d TRANSMISSION SYSTEM I r PLANNED RESERVOIR r REGIONAL WATER PROVIDERS CONSORTIUM o PUMP STATION C H 2 MH I LLIYIONTIOOM M WATWN © Portlond. Oregon i' r " • s PWB LUSTED .......... HILL. . SURGE _ TANKS 650 DAMASCUS OE=685'+>-WD OE = 662' 650 e ... ...._.__.._ _._..... _... m ........_....._ _..__ _.. o ...__... _......... ___.._..... ............................ a 600 �. _...... . 600 FUTURE PWB...._ POWELL BUTTE OE = 600' 550 ................._.. _ ...... 550 ... ......... . .. PQW . L...9ULTE.._..... ...... .......FUTURE'JWC WB 2oMG 20MG L...._. .....L._.... 5OO MG(FERN HILL) (FERN HILL) SOO •.� _.; J _. F�1TURM FUTURE �. .....C9. T. .... ._...__.. ........ .. MT SCOTT 1, • FORSYTHE RD ......... GR.ESHAM........_. .....-OE'=5fl0 /- -- MG OFtEG.ON_CILY = RES 4 __. OE 500' L.OE c..500•..+I- ....... MTN VIEW .. ........___ ... �MG � .... 1. ...- _ ....__.._ _�.... .5 q� _ OE TIGARD... ........................ 45010 Mc z _. 0 TVWD z Q SPRINGVILLE O LU OE - 435' J Q w > 400 _ _ _ w J 15 MG _ PWB RES 5 & I 4OO W DE 410.., TUALATIN....... . NOMGOD WItStE 60-MG G O - 1' .. QE...=..400 a ................ 350 _ VALLEYVIEW 350 IOMG OE - 354' o 0 LAKE OSWEGC o OE = 320' 300 > 300 E __. CRW MATHER -10 MG _ OE = 292' ........... a 250 250 Figure 2 NOVEMBER 1998 LL RELATIVE ELEVATIONS OF THE REGION'S MAJOR RESERVOIRS ; REGIONAL WATER PROVIDERS CONSORTIUM 0 z C H 2 M HILL (a MONTGOMERY WATSON 0 P—L-d.0,.g0�-I — American Water Works Navigates Acquisition Course Utility Benefits From New Federal Rules to Buy and Fix Ailing Systems By ALLaxrra SULLIVAN But Mr.Barr is in for an uphill battle.In Staff RepOri2r Of THE WALL STREET JOURNAL Smppth",Sa�l�n1�1Q�`American:Water Works the past few years, companies outside the American Water Works Co., facing a industry have figured out that water can be' changing industry churned by new regula- Saies Net lncom6 Stock PB11tOrp13nC8 big business. American Water is pushing tions and consolidation,is steering toward !n btltions' 1n mlltions Monthly data hard to grow so it can get big enough to the swiftest current. $1. . $15tl. S40 duke it out with U.S. electric utilities that The Voorhees,N.J.,water utility which are getting into the business, as well as serves 1.9 million customers in 22 states, with two giant French water companies— has soaked up 19 small utilities so far this 8' 100Vivendi and Suez Lyonnaise des Eaux, year and is in negotiations on 22 other a both of which are beginning to dabble in deals. In comparison, the company made s£y the U.S. market. These companies, which, nine acquisitions last year. {t4 z4, already have a huge presence outside the Just as large companies deliver the U.S.,are mostly involved in contract work: nation's electric, natural-gas and tele y, and have eagerly been seeking opportuni phone services, American Water sees an ties to run systems both large and small all industrywide restructuring where large 0 0 10 over the U.S. 1994 9S 98 A7 98 1994 "95 '98" 1994 '95 '96 '97 '98 companies handle the nation's drinking United Water Services LLC, a joint ' ' SoarCes:cvmparryrepats,gaseUrra Analystsestimates water supply. venture of Suez and United Water Re The catalyst behind the restructuring is sources Inc. of Harrington Park, N.J_ new federal water-quality rules that are lating water quality in 1974 and a flurry of only afford to lay enough water lines to recently won the contract to run Atlanta's forcing municipalities to upgrade anti- tougher laws continue to pass. Two more serve about two-thirds of them. water system. Suez also owns a 29%stake quated and decaying systems. The likely regulations have just been tightened on The board said no — it had to be in the United Water parent. Vivendi owns winners will be companies with the money standards for monitoring surface water everyone or no one. "The talks never got about 16% of the soon-to-be-merged Con and muscle to scoop up and repair ailing and byproducts of the disinfection process; hostile, but both sides held to their posi- sumers Water Co., Portland, Maine, and water systems. Already, big electric utili- those changes carry an estimated industry tions," Mr. Johnston said. The break- Philadelphia Suburban Corp. of Bryn, ties and foreign concerns are making their cost of$975 million. through•finally came when Mr. Johnston Mawr,Pa. moves into the U.S.water industry. The biggest acquisition in the works for and the board joined forces to persuade the HSBC Securities water analyst Debra "The water industry is at a cross- American Water Works is a $700 million state to grant a low-interest loan to cover Coy says Houston-based Enron Corp.,how, roads, said Janice Beecher, an industry agreement to buy family-owned National $2.2 million in construction costs the utility ever., promises to be one of American, and government consultant based in India- Enterprises Inc. of St. Louis. That deal is would have to bear. American Water Water Work's most aggressive competitors' napolis. "And, consolidation in which a expected to close by mid-1999.But most of bought the system for$193,000. in the mergers-and-acquisition arena much smaller number of large companies the acquisitions are smaller ones found by The costs continue with maintenance "We're not interested in contract service.' eventually dominates the business is nec- scouts such as Chuck Johnston. and environmental expenses. At least 10 work;we want to own and control assets,"; essary and inevitable." service trucks whiz around Monmouth says Rebecca Mark, president of giant Push for Acquisitions Scouting for Systems County, N.J., checking American Water Enron's newly hatched water business. American Water Chief Executive Mr.Johnston, one of 10 American Wa- Works 1,200 miles of pipeline for leaks.The But,Mr.Barr says the interlopers don't; James Barr says he has been pushing for ter Works scouts, sometimes puts 1,200 technicians put listening devices like steth- have the know-how of companies that have acquisitions for most of the 1990s while still miles a week on his car as he drives oscopes on fire hydrants to listen for a been delivering water to consumers for, chief financial officer. But he has really through the backwaters of Pennsylvania in telling hiss. When rain squalls hit certain decades. "It takes a high degree of due put the pressure on since he took over as search of water systems that might be up water-system'areas, technicians from the diligence,"he says. CEO less than a year ago. for grabs.With about 2,800 water systems company's Swimming River plant in Tin- Nonetheless, Mr. Barr is hedging his "We're going to grow by 5% to 7% in the state,he is constantly meeting with ton Falls,N.J., take their boats into tribu- bet. Even though he is committed to the. annually,"said Mr.Barr,57 years old,who town officials to pitch them on the idea of taries and test for water quality. growth-through-acquisitions strategy, hey started with the company as a records selling off their water works. Analysts, so far, give American Water did set up a joint venture with Anglian. clerk at the age of 20. All those miles are paying off. So far Works and Mr.Barr good grades.Andrew Water PLC, a British utility, to provide, There should be plenty of opportunities this year, Mr. Johnston has managed to Levi, analyst for Credit Suisse First Bos- services to water companies. for growth.The Environmental Protection snap up six systems and he expects to ton,says American Water Works has done Mr. Barr also stresses acquisitions be: Agency predicts it will take $138.5 billion complete two more deals before year end. the best job among water utilities at made in many geographical regions in the. during the next 20 years to update and Each potential acquisition has its own increasing earnings rapidly through acqui- U.S. to balance weather risk, the biggest maintain the nation's 55,000 water sys- set of issues. For nearly three years, Mr. sition. "Mr.Barr has been very successful unknown for water utilities. While the tems, almost all of which will need fixing Johnston talked to a board representing at using 'a roll-up strategy' in which he company has losses on West Coast opera',' up within those two decades.That number 300 homeowners served by a water plant on targets water systems that are adjacent to tions last summer because of unusually, doesn't include the cost of updating to meet the outskirts of Clarion borough, a rural each other,"Mr. Levi says.Timothy Win- wet weather caused by El Nino, a North- new regulations, an amount experts can town in Pennsylvania plagued by contami- ter, A.G. Edwards & Sons analyst, adds: east dry spell helped prop up earnings. "I: only guess at. nated well water. Mr.Johnston wanted to "Management is smart;its focus on trying just love dry, hot summers," Mr. Barr The federal government started regu- hook up the homes,but the company could to grow has been successful." said. i fi,i•'i o �•., •HE W1-_...1�,�,uA.-`1 ---" : ,d�• {; 1.1.1 �r k, yK !•w•1� '1,, ,1,,t `f '• .fit♦ r Y,.i. vw 5 f yy1 t I '1 ,Tr ?w��. (: ,A}. rpa+s q n.• 'I �'14'! •, �,; ,y •,; ] Gt,$�,�.,�'�; �'i7:n.rRR�C,�.ih:�l U11,�,r y� �' '�<,'S *'j'�4 �,+t c'T•''r'�.5� ;f�A"rf•. ?:t ©.1998 Dow Jonea F�';:Com/,�l 7nc. :X11!'Its t!" ele ' :•'. ' - :-dr, .. . .>w;pxc5.e •Fh•arto,. w- ,ro4.,•r w..v+.c ' � - � S t`�: r e G, ,�.-yi CMt •, -(t{" t ,t:ir k.. .rt,.r�.t t'''�':Sd!'�itr,r .... vowVOL:, NO 1 XXX h92 7{ 'PublrA .LV'y#S d.PR'{`R�t`1r 3 t. y n �'�ir"'d�� y) "ia .,� 7� '+'d' ,,,. WEIFW ,F A{7 f t�:tl hSt ''v} .A rD Ll kr9� 1;9 t ' t .. i•�. MOi,, r Ili ' ;�'�! ,� •i, 4 11 E,; � d A rF1�,..iiY\G►�F'L So f Si 1 1 ;•i ..lti r.k4:<iIl 3 : , .::,, l>i•.l i•n ...1",!l�,d:��'7i<'"'Fl za's Choice f A French Province' r stir r What is attracting companies to,the wa F, Water BUS1r1eSS IS HOt r..ter,marketis,theprospectofaaonglease ot�;; ;, a monopoly.,IPut'simply,' the business in '• As More Cities:Decide' volves plugging the eaks,'fixing%the me J} ters, Improving the:billing. systerri; and r,, i s .then watching the`regWar flowrof},iter j ; TO Tap Privite 6tor I turn into a steady cash flow the next 20,} ; � i t••to 25 years.•'" �•' " ` Until recently, the water industry:Xu Global COmpetltOrS AWalt .I 'dominated by�Suez;Lyonnaise'and Vivendi Both companies had 11.1 a'powerful home Bulgarian Capital's Call i i•base thanks to France's longstanding Sys ' 1 , tem of leaving it'to'eadhimaicipality,to E Fors Competitive .: BIC1S i find a water-supply operator;')'Since Britain ' �; ;i' privatized its water companies:inthe 1980s; a handful of companies1,Alige;'led';by-:;' Thames Water, have also started compet::, The Infrastructure Frontier' ' ing in international tenders t c i 1F Now,some big U.S companies;want a' l By CHARLES FLEMwa•ti .' {:Piece.of.the action. The most prominent'' ;:;h'new entrant i5'Enron; based''icrHouston,`i Staff Reporter Of THE WALL STREET JOURNAL which'in-JWy spent$2.2 bi11lon'to bac uire= � SOFIA,Bulgaria—Josef Schneider is dig- ?s%Wessex.`Water' PLC:of Britain `Enron;i j. ging trenches for the.next battle in the , t world's water wars.As giant utilities from: n,40 Chairman and Chtef. Executive ;Officer.<: , ,f;Kenneth.Lay predictsJhat:water"soonwiltr f the U.S.and Western Europe line up to bid'' . `be as important'to`;Enron as its corernat 1.4 ,.for Sofia'smultimillion-dollar water-delive ,'i t concession,the Austrian engineer has been n( ,ural•gas and'electricity businesses rrl psi,' , Already;Enron is vying for water priva t' .; tearing up the Bulgarian capital's streets to tizatlons'llidglo'de's".3 ro;;;Berlin,.:and•:. 1 determine how bad its water system is. Panama;1,,ppsing,a serious Ahreat to ,thea E Its bad.For one thing;there are no re- `'French'r' Bnron is:ttie,great'unknownlfor, i liable maps, so he often can't find pipes. us,"'says'Daniel Calile, chairman of Genal,- Thespipes he.can•find leak like sieves.: ;! erale des'Eaux Vivendt's water division I Pipes like these lose 60%of their water," "The electrical utilities are invading the says Mr.Schneider,who is helping the city .market, ands?they.`lhave the cash. We're„ i prepare to privatize its water system. small players compared to them." For*the cityandats inhabitants, leaky' ; ., •, .,,,,,,, r;k;: i.i :. ;pipes mean brown•water and money down In,Their'Face ;•the drain.'But for;-potential bidders=in- "We're going to pe in.the}r,face;'says, `eluding+•such heavyweights as Bechtel ;Rebecca Mark;chalmian and CEO of En-' t' Group Inc''of,the'U,S. and France's Suez ; ron's new water:division...Ms..Mark, 44's Lyonnaise des Eaux,and•Vivendi'SA—the 'years old,'won a formidable'reputation In i chance to fix,thoseleaks'and collect water. ;?�,.• the international"energy.market, where bills.,-means;money'in the bank.-Another. �; she developed about .billion worth of E S ,glant Enron Corps,has emerged as a projects for Enron.The industry is watch- !:'newplayer.$,,the f old;,aggressively.court• � � ,f ,Ing closely to see if Ms.Mark can make a Ing,similar:business , . similiar splash in water. . After telephones,power-and gas;water Electric utility GPU Inc:;Morristown; .` is.the•next`utility:to be shaken up by inter- ' ` i N.S.,harbors similar ambitions.It is look- national, ook- ; national,competition'"Already worth $300 , Ing to expand internationally in both water billion a'year,byEnron's,estimate,a slew x," and natural gas. GPU,CEO Fred Hafer of new waterrsu 1 ,:and waste-water treat.! says his company's new strategy Is to focus PP Y ' on"the regulated business of poles,pipes • , ;; Y menfcgntracts is about to hit the market a � . . A`,Political'$usiness k ; and conduits"..world-wide ' ' i' ,j Meanwhile,,the.French aren't-sitting• ; W, Meanwhile,the'iast Infrastructure fron by.'Suez'Lyonnalse,with the.Atlanta con-' Mier fors'private`investors;' says. Johan : tr ; �. Bastin;head of the.,munici al and environ i 1 act in hand;`announced'las,-,corporate that I it P !s:'teaming with some U.S. corporate in -mental.,Infrastructure;;team at•the�Euro. estors to create a vehicle-to compete in ;"pe an,Bankifor,Re onstructlon and'Devel Fqm!n,t opment irk Londdh,�,bich'isiadvising Sofia{, d Vivendjin. American hathconsiders a{ ,`� 1 ; *�omits water. 3 thi ' gs g,W auction set for later.., s' ear `' .0j; y ,,�' Y � eachhead in the U.S.,marltet;,recently ac , And•perhapa�itrialspi$Tthe,most;p6IIti ed'a'$125�million-a- ear'contract.to� ' l71 Ysenslt�ve,r 1ltjterris,aYv ,P,Qliu Y , ci anage Puert ly. i;business,'tbega si��o�rl�ale dt so lit=as 4 `the r, , s such as Sofia,this co n'' p gQ jVt a ectt♦pay�lit�je f � orYPgj ngpfo lt;t.4safd Bi11 A1eXand ,Please Turn to Page AIO,Column 3 ' ' chlej executive.Ofy' Fldshrut111tytiThame ? i Water,.PLC:speaktngk�(»�at�r�Fence�� y+r . Washington`last,'tmth,�,�:k,. , Birthright or not,;leaky:pipes need fix- Ing.An Ahat requires:eft investments. Jul So, llke Sofia, budget-conscious :cities:' . around the:world}are=putting their water; '' ' ara.rr• systems up'for auction In,Europe;,Be'rlin J.Brussels,Bucharest'and,Prague are gear'. L Ing up to privatize;all or:part of theirsys terns.In Brazil,the,state`of Riode Janeiro i, 1,has put'its system;up for bid.,InJthe;U,S, Atlanta recently'award' d:a'20year-con'': r tract:valued at$400 million to a consortium;• led by Suez Lyonnaise.".""' i Y A French Province: ' What is attracting'companies to the wa ' c•ter market•Is,theprospectofalongle'aseon'° i;a monopoly..`Put'simply, the business in . volves plugging the leaks;.fixing'the.me tens, Improving the,;billing:system,".and i, then watching the regular'flow'of water; I: !;turn into a steady cash flow for the next 20 ' I to 25 years.: + '' Until recently, the'water industry was dominated by Suez Lyonnaise and'Vivendi.. Both companies had;.Wilt a.powerful home base thanks to France's;longstanding sys tem of leaving it to`each',municipality to . find a water-supply operator.-Since Britain' privatized its water companies in the 1980s, a handful of companies';there;';led-;by Thames Water, have:also]started compet= rs Ing in international tende .' Businesses CompeteVigorouslyfor Water Continued From First Page at its city hall to express interest. "We there is an economic struggle between the 15%internal rate of return over the dura- holds the promise of a better deal:Atlanta, can't afford not to look at it,"says Thierry state and the municipalities over who has the tion of a contract. But taking on'a crum- ter I i fe: