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Cities Could Reap $1B in Effluent Deal with Utilities

Phoenix Business Journal - by Patrick O'Grady 
Treated wastewater used at Palo Verde is the subject of a new agreement between cities and utilities.  A new agreement for selling treated wastewater could net five area cities as much as $1 billion over the next 40 years and provide a constant stream of water for Palo Verde Nuclear Generating Station. The deal between Phoenix, Scottsdale, Glendale, Tempe and Mesa, which supply the treated effluent, and Arizona Public Service Co. and Salt River Project updates terms and costs in an existing agreement, while giving the cities a bigger chunk of both revenue and water available for recharge.

For the cities, it means money to offset the costs of upgrades and increasing residential bills, said David Cavazos, Phoenix city manager.

“That’s $1 billion less that we would have to charge ratepayers,” he said.

For APS and SRP, it means Palo Verde will have a constant source of water through 2050, an important need for the largest nuclear power plant in the nation and the first not built on a major body of water.

“This really establishes us in operation for the next 40 years,” said Randy Edington, executive vice president and chief nuclear officer for APS.

The agreement, several years in the making, must be approved by all five city councils, with Phoenix the first expected to hear the plan at its Thursday meeting.

The existing agreement was created in 1973 to deal with effluent created by the 91st Avenue Wastewater Treatment Plant that would supply Palo Verde.

That was 10 years before Palo Verde became operational. In past 20 years APS, which operates the plant, has become more in tune with the amount of water needed to run Palo Verde. At the same time, changes in state and federal water laws have shifted the status of effluent from a worthless product to a valuable commodity for cities.

Under terms of the pending deal, Palo Verde will pay $30 million in advance for water, spread out in payments of $7.5 million for the next four years. In addition, it will pay a base price of $53 per acre-foot up to the 80,000 acre-feet it is allotted.

The price of effluent will increase 10.5 percent per year through 2025, up to about $300 an acre-foot. An acre-foot is the equivalent to the amount of water needed cover one acre of land with one foot of water, or 325,851 gallons, the amount a family of four uses annually.

For the remainder of the contract, the price will be based on how much effluent is used and the consumer price index for water and utility power.

The utilities see the move as one that assures Palo Verde of water, said Glen Reeves, SRP’s manager of power generation.

“We feel that the price is fair,” he said. “We don’t think we’re overpaying, and we think the cities are getting a fair deal.”

The cities also will be getting about 25,000 acre-feet of treated wastewater annually, which all went to Palo Verde in the original deal.

For a city such as Glendale, the deal represents about $600,000 for the next four years, said Roger Bailey, the city’s utilities director. “It’s a fantastic deal,” he said. “We get to sell a product to Palo Verde that needs it and we can offset the costs of what the city needs to pay for growth.”

It also would allow the city to gain credits to potentially pump more from aquifers, Bailey said.

Scottsdale, which has about a 10 percent stake in the 91st Avenue plant, also is looking at uses for the treated wastewater, primarily to replace drinking water now used for such things as irrigation, said Annie DeChance, public outreach coordinator for the city’s Water Resources Department.

“The more effluent there is, the more likelihood that drinking water is freed up for the right purposes,” she said.

The 91st Avenue plant was built in 1958 to treat about 5 million gallons of wastewater per day. It’s been expanded through the years to its current configuration. If approved, the new deal between the cities and the utilities would boost its capacity to 200 million gallons per day.