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In the arid western United States, water supply is a major limitation to economic growth. To address this growing challenge, one Western city utility, constructed a $650 million water reuse, treatment and delivery system that would provide the City with water supply during times of drought. However, the City realized that the assets would be underutilized during non-drought times. To make the project more economically viable, the City sought a regional solution to combine its water supplies with those of another local utility and use the new system to deliver water to that utility’s southern suburbs. In order to do so, the City would have to create a business model that would restrict delivery to an interruptible basis and develop a rate study and fee for the deliveries.
Regionalization Study
Location: Denver, Colorado, United States
Region: Americas
Service Offering: Management Consulting
Market Sector: Water & Wastewater
Status: Complete
MWH management consultants developed the pricing mechanisms for the regional business model. Based on standard cost-of-service methods, the pricing model provides both utilities with a full accounting of the operating and capital costs for the water supply, treatment, and delivery infrastructure. It integrates differences in capacity surpluses and constraints, firm versus interruptible demand, and multiple ownership of the facilities into a single rate for each of the customers. The model’s built-in reporting outputs provide a simple pricing report that the city utility can use as an exhibit for the delivery agreement or for presentation needs.
- Provided a transparent pricing model for use during negotiations with southern suburbs
- Allowed customers to quickly understand every cost component embedded into the proposed rate
- Provided a high-degree of transparency, accuracy and detail to allow suburban customers to complete their evaluation of the proposed water delivery agreement faster
- Completed the delivery agreement with the southern suburbs allowing the city utility to receive annual revenue of approximately $12 million from assets that would otherwise be idle in non-drought periods
- Reduced cost burden on the City’s retail customers and allowed lower retail rates than would have been possible without the agreement
- Developed a win-win relationship that provides water supply for generations to the southern suburbs while securing the City’s financial future
Our address
- Address:
- Denver, Colorado, United States
- GPS:
- 39.7392358, -104.99013417819