Tag Archives: Water Works

Confusion on the Water front

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Did the Water Works get its math right? It doesn’t look like it, but maybe I’m missing something.

Here is sentence and table from the Water Works feasibility report regarding selling more water to a larger piece of New Berlin.

Based on an average day demand of 3.5 MGD, estimated annual revenues to Milwaukee Water Works for the combined existing and proposed service area are summarized in the following table:

The report also says that the commodity charge is the result of 3.5 MGD multiplied by 365 days per year multiplied by the wholesale rate of $0.668 per 1,000 gallons.

I did the math and came up with water sales of $853,370. The Water Works table, though, shows a total of $895,854 for the water sold to the eastern third of New Berlin sold in 2008 and the amount projected for the middle third’s first full year. Why the $42,484 difference? It’s not explained.

Later in the report, Water Works also cites the $853,370 figure, but says that the entire amount will be realized only through sales to the middle-third section of New Berlin. That amount actually is what is expected from the entire New Berlin sales area.

From the report:

This method assumes that the anticipated additional revenue from water sold in the “middle third” of New Berlin would have reduced the 2007 rate increase by a proportionate amount. The revenue requirement identified by the Public Service Commission of Wisconsin for the Water Works’ 2007 rate case was $4.0 million. This method assumes that the additional estimated revenue of $855,370 from the “middle third” of New Berlin would have reduced the revenue requirement by 21% to $3.1 million. The calculation assumes that the 6% rate increase that satisfied the $4.0 million revenue requirement would have been reduced to 4.7%, saving the average residential customer $1.60 per year.

The daily average demaind for the entire New Berlin area proposed to receive Milwaukee water would be 3.6 million gallons to 3.9 million gallons. The Water Works uses 3.5 million gallons per day in its calculations, presumably to be conservative in its revenue estimates. By attributing all the revenue to the middle third area, Water Works could be overstating by 100% the economic benefit of the expansion to Milwaukee water customers. Instead of $1.60 annually for each residential account (no big whoop to begin with), the benefit of the expansion could be as little as 80 cents. 

Unless, of course, I’m totally missing something.

More water sales to New Berlin on tap

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New Berlin would pay Milwaukee $1.5 million for the right to buy Lake Michigan water and a much larger portion of New Berlin would get Milwaukee water than does now, under agreements to be considered by the Milwaukee Common Council.

About one-third of the suburb now receives Milwaukee water, and the proposed deal would add the middle third of New Berlin to the Water Works’ customer base. Click here and go to page 10 to see a map of the expanded service area.

“This area is outside the Great Lakes Basin but is within the MMSD service area; water is returned to Lake Michigan,” according to a Water Works feasibility study of the proposal.

The deal will provide economic benefits to Milwaukee water customers of an estimated $1.60 to $4.50 per residential account per year, the study said.

“Future water rate increases would proportionately increase the amount of the benefit,” the study said.

The maximum amount flowing to the suburb would increase from 4.8 million gallons per day to 6.3 million gallons per day. The proposed agreement also sets hefty charges of $10,000 to $30,000 per hour for excessive demand by New Berlin.

“This is intended to be an incentive to New Berlin to use various storage and well pumping combinations as well as emphasize their conservation efforts,” the Water Works study said.

The $1.5 million New Berlin payment to Milwaukee would go to the city’s general fund and would be in addition to regular water rates that go to the water utility, according to a resolution introduced by Aldermen Michael Murphy and Jim Bohl.

Under a proposed agreement between the two communities — a sort of side agreement to the actual water sales proposal — representatives from Milwaukee and New Berlin will meet once a year to talk about “opportunities to improve the availability of skilled workers in both communities and to improve the access of workers in each community to job opportunities.”

The two communities also promise not to “promote, encourage, offer economic incentives to, or otherwise solicit businesses to relocate from the City of Milwaukee to the City of New Berlin, or the City of New Berlin to the City of Milwaukee.”

Both the water sales agreement and the $1.5 million payment are scheduled to be considered by the Common Council’s Public Works Committee on July 29.