Detroit’s water department says it has to jack up the price of potable water because the consumer base is shrinking while the cost of producing water is mostly fixed.
Yes, the customer population is shrinking, but the truth is that the Detroit Water & Sewerage Department (DWSD) has had too much water production capacity for years. Ratepayers have been carrying the cost unnecessarily.
The following is quoted from the analysis of Veolia in its Peer Review Report to DWSD in December 2014 (p.14) -- note that the overcapacity issue is anticipated to fall on DWSD’s post bankruptcy successor, the Great Lakes Water Authority (GLWA):
5. Right-Sizing Capacity
Reduce the long-term expense of operating and maintaining capacity surplus to requirements
GLWA’s significant water production over-capacity should be right-sized in order to reduce both capital investment requirements and operations costs. The necessary analysis could be done to reach a revised capacity decision in the next 12 to 18 months and Veolia recognizes that work is already underway in this regard. It is critical, however, to increase the speed and urgency of executing this particular initiative.
Indeed, existing discussions about closing one water treatment plant have been ongoing for many years. With almost twice the capacity of water treatment required, Veolia considers it both reasonable and responsible to execute this plan unless an alternative method of utilizing the excess capacity is identified. One such option includes selling it to other communities.
It is beyond the scope of this report to calculate the net detailed savings that would result from these approaches; however, the benefits would be significant in terms of both operational and capital savings, freeing up resources for other important initiatives.
Veolia recommends expeditiously determining if there is a reasonable possibility of selling water to other communities, while at the same time evaluating which of the plants to consider shutting down.
As I wrote this past February, closing at least one of DWSD’s five water plants should be a condition precedent to finalizing a regional water deal.
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