Tag Archives: PWSA

Summary: The Pittsburgh Water and Sewer Authority (PWSA) was placed by the state Legislature under the oversight of the state Public Utility Commission (PUC) in 2017.  The PUC was tasked with making sure the PWSA brought its operating procedures up to its guidelines and with forcing the agency to craft a long-term plan to replace/upgrade its aging infrastructure.  The first five-year plan has been released and this Brief looks at some of its details.

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2017 was a momentous year for the PWSA.  After a couple of water system issues spotlighted a frail and aging system that would be very costly to repair, the state Legislature placed the PWSA under the regulatory oversight of the state PUC (see Policy Briefs Vol. 17, Nos. 14, 29 and 49).  Act 65 of 2017 compels the PWSA to do two things: 1) bring its operating system into compliance with the rules and regulations of the PUC, and 2) put together a long-term infrastructure improvement plan for the replacing/upgrading of its systems, both water and sewer conveyance.

PWSA’s plan, covering the first five years, 2018 to 2023, was submitted to the PUC in September 2018 and is now being reviewed by the PUC.  News reports note that after obtaining public input, the PUC has until November 2019 to accept outright, accept pending the PUC’s recommended changes or reject the plan.

The proposed plan spells out the details of the two systems’ infrastructure components.  The water system is very old and much of it is well past its expected life span with an estimated average age of over 80 years.  Forty percent of the system was installed prior to 1920 and 86 percent was built prior to 1970.  It is comprised of over 1,000 miles of water lines of which 964 miles are water mains.

While the entire system has not yet been adequately cataloged and updated, the PWSA says it is using a Geographic Information System that is constantly being updated to get a more accurate picture of the system’s health. However, given the extreme age of much of the system, estimates of needed immediate and near-term replacements are just that. It is almost impossible to know with certainty where potentially calamitous breaks might occur.

The water system contains two treatment plants (one rapid sand and one microfiltration), eight distribution pump stations, four reservoirs (three covered, one not), 10 distribution storage tanks/reservoirs, two finished water pumps, one raw water pump on the Allegheny River, 24,900 valves and 7,450 public fire hydrants.

While the PWSA does not treat sewage—the Allegheny County Sanitary Authority (ALCOSAN) does—it does have a conveyance system to ALCOSAN that needs to be looked at as well. There are 1,213 miles of sanitary, storm and combined sewer lines in the system.  The system also has four wastewater pump stations, 30,000 inlets, 29,000 manhole covers, 185 storm sewer outfalls and 38 combined sewer overflow outfalls.  Approximately 77 percent of the sewer system is combined with storm water, which by federal consent decree, must be separated. There are 24 neighboring municipalities that convey wastewater through PWSA lines for which they do not provide a cost share to PWSA.

Obviously, the system is immense and will take many years and billions of dollars to fix it in its entirety.  The proposed five-year plan covering 2018 through 2023 will be the first of several such plans. Recall that a similar comprehensive plan by an engineering firm from 2012 proposed a 40-year time frame recommending eight five-year plans, for overhauling the entire system.

According to the five-year capital improvement plan submitted to the PUC, the top priorities are “the Aspinwall Water Treatment Plant, replacement or rehabilitation of the two major (treated) or finished water pumping stations, upgrades to storage facilities; replacement of critical transmission lines; continuation of the lead service line replacement program; and acceleration of the small diameter water main replacement program with an overall five-year budget of approximately $775 million.”  Small diameter pipes (8 inches or smaller) are scheduled to be replaced in one percent of the system (720 miles) in the next five years.  The lead service line replacement program has been well underway, replacing more than 2,700 lines from 2016 to 2018 and plans to be finished by 2026. It has been under a Pennsylvania Department of Environmental Protection order to do so since 2016.

As was mentioned in a state Auditor General’s report from 2017, the city had an agreement with PWSA to provide bulk water to city properties (600 million gallons per year) and that many city properties were not metered.  As part of this plan, the PWSA will also be installing meters at approximately 200-400 sites that are currently unmetered along with another 500 properties that pay a flat rate but do not have a meter.  The cost of this part of the program will be billed to these customers and is expected to take five years to complete.  The PWSA does not provide an estimated cost per meter.

This five-year plan also includes wastewater system renewal priorities that have a budget of $155 million over the five years.  The total budget for the three project areas comes to $930 million.

In sum, this plan calls for spending a very large amount of money.  And it represents only the first five years of repairs and replacements.  As was noted in an earlier Policy Brief (Vol.17, No. 14), the PWSA carries a large amount of debt.  In 2015 the amount of net total bonds and loans stood at $763 million before increasing to $866 million at the end of 2017 (2017 audited financial statement).  The net position of the PWSA at the end of 2017 was negative $43.8 million—up from 2015’s negative $35.7 million but better than 2014’s negative $59.1 million net position. And this figure depends on what can only be an estimated value of the system’s infrastructure.

In the plan, the PWSA states that “current planned improvements will be funded through both current rates and rate increases, as well as through revenue bonds, a capital line of credit, pay-as-you-go funding, and PennVest low interest loans.”  It will also explore federal funding through the Water Infrastructure Finance and Innovation Act of 2014, which offers low fixed-interest rates and flexible terms.  It will also look to potential private-public partnerships where possible—and if allowed by the mayor and council who have been unalterably opposed to privatization.

In September 2018 it was reported the PWSA petitioned the PUC to increase rates across its customer base, including 17 percent on residential customers and 10 percent on educational and health care organizations. In 2018 the PWSA’s budget show receipts from water totaled $109.7 million.  With an estimated composite average rate hike of 13.5 percent, those receipts should climb another $14.8 million. If approved the new rates will take effect in April 2019 and remain through 2020.  It will likely be the first of a several rate increases for PWSA customers in the coming years.

And, of course, the plan’s estimates of costs are just the direct monetary cost of the replacement and repair to be borne by the PWSA. There will be other huge costs, some non-monetary, imposed on the citizenry as streets are closed during work on the water lines. Add to that the lost revenue and output of businesses whose patrons and employees cannot get to them.  Nor do the PWSA’s costs include the serious inconvenience of water service being cut off to communities for extended periods.

According to the plan, in 2014 through 2017 annual capital spending was under $40 million per year. Spending increased to $70 million in 2018 and is projected to balloon to $330 million by 2021 before dropping a bit to $265 million in 2023—in all $1.35 billion over five years.

But this is the price that has to be paid because of years of failing to address the problem of antiquated system components. Bear in mind, too, that PWSA funds were misused by past administrations to shore up city budgets rather than investing in needed repairs.

Still this plan, though too long in coming and purposely delayed, is the first step of many to insure a properly functioning reliable water and sewer system for Pittsburgh.

Summary: The Pennsylvania Public Utility Commission (PUC) officially begins its oversight of the Pittsburgh Water and Sewer Authority (PWSA) on April 1^st. This will be a monumental task. The PUC has moved quickly to get its arms around that task by approving a tentative implementation order specifying how it will carry out its duties and provides deadlines the PWSA must meet to accomplish the mandates specified by the Legislature.

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On Dec. 21, 2017, Governor Wolf signed Act 65 of 2017 into law. The statute amends the Pennsylvania Public Utility Code to give the PUC regulatory jurisdiction over the PWSA with regard to the provision of utility water, wastewater and storm water service. The law also establishes regulatory deadlines for the PWSA. The law went into effect immediately upon the governor signing the legislation. Section 3202 of the amending legislation provides a date certain on which PWSA will become subject to commission jurisdiction: Sunday, April 1, 2018.

A December 2017 Allegheny Institute Policy Brief (Vol. 17, No. 47) summarized the myriad  issues and problems facing the PWSA. An auditor general report concluded that, “the City [Pittsburgh] has over-extended authority regarding the PWSA,” and the PWSA was never intended to be a truly independent organization. Indeed, the city has maintained ownership and leases the infrastructure and equipment to the PWSA. In part, the PWSA was used to help the city with its financial problems.

Then, too, the PWSA has piled up enormous debts that reached $750 million by the end of 2016. The massive debt has crippled the authority’s ability to spend on needed infrastructure replacement. Replacement is now estimated to cost upwards of $5 billion.

It was these and other serious and unaddressed problems that prompted the Legislature to pass with overwhelming majorities the bill giving the PUC a major role in fixing the problems at the PWSA. On January 18^th , the PUC approved a Tentative Implementation Order (TIO) in which it lays out how it intends to proceed with its regulation of the PWSA under the requirements spelled out in the law.

Under its regulatory authority regarding rate-setting, the TIO states, “This section provides that PWSA prior tariff rates and terms will have the force and effect of law as of April 1, 2018.  That Prior Tariff will continue in effect until modifications are approved by the Commission.”  Moreover, the TIO says “In practical terms, beginning Monday, April 2, 2018, the Commission will entertain informal and formal complaints from PWSA customers as it would any other regulated utility.  For PWSA, this will mark the end of its current Exoneration Hearing Board as an adjudicative body.”

The PUC expects the PWSA to submit a tariff filing by July 2, 2018.  The PUC also would prefer the PWSA to utilize  a method similar to the Philadelphia Gas Works’ cash flow ratemaking method as it is likely “most appropriate for PWSA to gauge compliance with its bond covenants.”  In addition, the PWSA will within 180 days—by Sept. 28, 2018—file a “compliance plan with the commission which shall include provisions to bring an authority’s existing information technology, accounting, billing, collection and other operating systems and procedures into compliance with the requirements applicable to jurisdictional water and wastewater utilities.”

A still larger part of the Legislature’s charge to the PUC, as it assumes regulatory control over the PWSA, is to see to it that the PWSA “develop and file its proposed compliance plan, including a long-term infrastructure improvement plan (LTIIP). This plan will also be submitted by Sept. 28, 2018. According to the TIO, the “LTIIP should include any metrics that PWSA uses to track and evaluate the effectiveness of infrastructure improvements, e.g., lost or unaccounted for water, main breaks or non-revenue water.  PWSA should also provide detail on how the programs and property eligible for LTIIP consideration were determined and targeted, e.g., a risk-based approach, age, material type, lost or unaccounted for water, non-revenue water, regulatory directive or audit findings.”

The TIO explains that it will require the PWSA to include a schedule for eligible property repair and replacement by class and category for each year for the duration of the LTIIP. To carry out this effort the PWSA will “project its annual capital expenses including detailed estimates of expenses by category to ensure that the LTIIP is cost effective.”

In more detail the TIO lays out what it expects to see in in the PWSA’s LTIIP in terms of achieving cost effectiveness:

i. the competitive bidding process or other means of choosing contractors;

ii. how contractors are evaluated in terms of work quality, safety and cost effectiveness;

iii. how much LTIIP work will be performed by contractors and/or competitively bid and the process for determining what projects are done by contractors;

iv.how materials are economically procured and vendors are chosen;

v. the salvage and scrapping process/program

The LTIIP will also show how PWSA will accelerate the replacement of aging infrastructure and how repair, improvement or replacement will maintain safe and reliable service.

In addition to the LTIIP, the PUC will request that PWSA provide it with an Annual Asset Optimization Plan (AAOP).  “The AAOP includes associated expenditure information for completed LTIIP work for the reporting year and the projected year.  AAOP data is broken out by individual projects completed in the reporting year.”

Obviously, a major overhaul of the PWSA’s infrastructure will be very expensive and revenues must increase to cover those expenses. The PUC addresses this by allowing the PWSA to “petition the commission for the establishment of a distribution system improvement charge (DSIC).”

The PUC says in the TIO that it understands that PWSA does not currently collect a DSIC surcharge.  If PWSA wishes to reinstate its DSIC after April 1, 2018, the law will require PWSA to petition for approval of a DSIC that is fully compliant with statutory requirements.  In order to recover costs through a DSIC, the PWSA must first submit a LTIIP.

In sum, the PUC, following the requirements set out in the recently amended utilities law, will within the next year or so put the PWSA on a course of better day-to-day management and a long term plan of overhauling its old and rapidly deteriorating distribution systems. Further, it has the authority to grant the PWSA permission to levy a distribution system improvement charge on water and sewer bills to pay for the costly repairs and replacements.

The inability and or the unwillingness of the city to manage its water and sewer system effectively and keep it in good shape have forced the Legislature to take the drastic step of placing a municipal authority under the regulatory control of the PUC and has given the PUC specific mandates as to steps that must be taken to fix the problems at the PWSA.

This process will be painful for customers of the PWSA. But years of neglect and misuse of the PWSA by city officials has made the actions taken by the Legislature necessary.  Now the city’s elected officials can blame the PUC and Harrisburg when the inevitable detours and serious inconveniences due to construction get underway and higher water bills start arriving in mailboxes. Will the electorate and customers accept the blame-shifting?

Summary: The plight of the Pittsburgh Water and Sewer Authority has caught the attention of the Pennsylvania Legislature.  The State House has unanimously passed a bill which would place the PWSA under the oversight of the state Public Utility Commission.  The bill would require the PWSA to bring their operating system under PUC compliance and put together a long-term plan to address long-standing infrastructure issues.

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A Policy Brief (Volume 17, Number 14) from April outlined the troubles of the Pittsburgh Water and Sewer Authority (PWSA), specifically its aging infrastructure and the trouble they have with high debt levels which may preclude them from seeking help from a private operator as proposed by the Mayor.  That Brief also noted an engineering report from 2012, commissioned by the PWSA, which had inventoried the entire system and gave recommendations on how to begin to a replacement program at a cost of $2.51 billion (in 2011 dollars).  Other recent estimates put the replacement at four to five billion dollars. The Brief noted that the engineering report recommendations have largely been ignored by the PWSA at its own peril.

It turns out that the State House has also paid attention to the issues of the PWSA and has unanimously passed HB 1490 that has now been sent to the Senate. This bill places the PWSA under the oversight of the Pennsylvania Public Utility Commission (PUC).  HB 1490 adds a new chapter (Chapter 32) to Title 66 of the Pennsylvania Consolidated Statutes (Public Utilities) giving the PUC some limited power over the PWSA.

Chapter 32 will compel the PWSA to do two things:  1) bring their operating system into compliance with the rules and regulations of the PUC, and 2) put together a long-term infrastructure improvement plan for the replacing/upgrading of their distribution system.

The first point is fairly self-explanatory.  The bill states that the PWSA would have 180 days from the effective date of passage to file a compliance plan which would “…bring an authority’s existing information technology, accounting, billing, collection and other operating systems and procedures into compliance with the requirements applicable to jurisdictional water and wastewater utilities…”  This is a great first step as the City Controller recommended in an audit from earlier this year that the PWSA needs to improve their asset management capabilities so they will know what assets need repair and to prioritize them.

The second point is perhaps the most important—putting together a long-term plan to fix the aging system.

In the same section that orders the PWSA to put together a compliance plan for their management system (3204b), comes another directive to “…include a long-term improvement plan in accordance with subchapter B of Chapter 13….”  Title 66, Chapter 13, subchapter B (§ 1352a) outlines what the long-term improvement plan needs to include:  a general description of what needs to be repaired, where it is located, and an initial schedule of the planned repairs or replacements.  Furthermore the subsection requires projected annual expenditures to implement the plan and how the repair/replacement will ensure and maintain safe, reliable, and reasonable service.  If the PUC deems the plan to be insufficient, it can order a new or revised plan.

Section 1353 would allow the PWSA to implement a service charge to pay for the repairs/replacements.  “…[A] utility may petition the commission, or the commission, after notice and hearing, may approve the establishment of a distribution system improvement charge to provide for the timely recovery of the reasonable and prudent costs incurred to repair, improve or replace eligible property….”

To do so, the PWSA would have to submit information about the base rate charged to customers called the “initial tariff” which the PUC will consider when setting/allowing the distribution system improvement charge.  The PWSA would then have to justify the improvement charge by demonstrating that it is in the public interest and will help finance the long-term plan.  The PWSA would be allowed to update the charge quarterly as appropriate.  It would also have to let customers know the about the charge and if adjustments have been made through their bills.

If the PWSA is granted a distribution system charge to pass along to customers, it will have to file an annual asset optimization plan (§1356).  This will require the PWSA to file an annual plan that must include a description of all eligible property that had been improved or replaced within the previous year as well as a description of work to be done over the next year.  This requirement should hold the PWSA’s feet to the fire and compel them to get the necessary repairs/upgrades done.

Of course a distribution system charge will not sit well with PWSA customers, or even the City’s elected officials.  Past administrations and councils have been reluctant to raise water rates on city customers, a major reason the water department was spun off to its own authority. Thus, placing the PWSA under PUC oversight and direction should go a long way to push the authority to do what everyone knows must be done but that heretofore has been the proverbial can being kicked down the road.  With HB 1490 requirements, local politicians can blame Harrisburg for higher rates.

PUC oversight will come with a price.  HB 1490 subsection 3207b allows the PUC to “…impose an assessment on an authority based on the authority’s proportional share of the commission’s expenses relating to the commission’s utility group…on an annual basis….”  Considering that the PWSA currently operates with thin margins and may not be able to absorb this cost internally, this may be another addition to customers’ bills.

However, the PWSA will retain most of its autonomy and nothing in the proposed bill will prevent an audit by the City Controller.

The problem with aging infrastructure has been known for quite some time but the urgency to take the necessary steps is just now getting the attention it deserves. At a cost of over $2.5 billion (or more) upgrading the PWSA’s water and sewage conveyance systems is going to be very difficult to accomplish. Decades of neglect are finally being addressed seriously by the Legislature.  It is unfortunate that local political games playing have forced the State Legislature to take action to prevent major water and sewer system disasters.