Benicia may move closer Tuesday to getting its aging water meters replaced as the City Council considers staff suggestions for seeking bids from three companies that have met requirements for the work.

Public Works Director Graham Wadsworth said the city asked for qualifications from 10 firms that could replace the old residential and commercial meters and install remote-read equipment that would link the meters to the city’s utility software and let customers see their water use and billing information.

Of the five companies that responded, the number was narrowed to three by employees, Wadsworth wrote in his report.
Those companies are Siemens, Johnson Controls and Ferguson Waterworks, he wrote.

Once the contractor is chosen, the project would be handled in phases, the first that would begin with replacing the oldest of the meters inside Benicia.

“Having water meters that read correctly will increase water fund revenue,” Wadsworth wrote.
He explained that the project would be self-funded for a 20-year term. “The request for proposals requires the consultants to analyze how soon the new revenue will pay for the water meters,” he wrote.

The meters would address a situation raised by the 2014-15 Solano County Grand Jury that pointed out last May that Benicia treats 25 percent more water than it sells.

Wadsworth wrote that some of the water may be lost through leaks in the city’s distribution system, but that much more of the “loss” can be blamed on inaccurate meters.

“Sixty percent of the water meters in the city are over 20 years old, while the typical replacement schedule by most agencies is 15 years,” he wrote.

“As water meters get older, they read less flow and eventually stop reading the amount of flow going through the water meter,” he wrote. “Since 90 percent of water enterprise fund expenses are fixed, people with older meters will be paying their proportionate share of these costs after their water meters are replaced.”

He wrote that replacing all water meters would be fairer to all customers. “When customers know their true water usage, they are more likely to conserve water,” he wrote.

A consultant, Vivian Housen, told city employees that among 10 other agencies she researched, most use a two-step request procedure, one for qualifications and one for a proposal process, in hiring a company to replace water meters using an advanced metering infrastructure (AMI) system. She told the employees one agency recovered the cost of the new metering system within two years.

Employees will draft a request for proposals for a two-phase approach that first replaces the oldest meters next year. The second phase would replace the remaining meters, Wadsworth wrote.

In addition, proposals would need to have a financing plan for the meter replacement and the installation of the automated meter infrastructure remote read system.

The Council also will hear a report by Finance Director Karin Schnaider on the water surcharge imposed by the Council Oct.15, 2014, to cover additional costs of dealing with the severe California drought.

“The water fund drought surcharge is anticipated to generate $2.3 million in revenue to cover the costs related to the drought and conservation efforts,” she wrote in her report. “Valero and the metered customers are predicted to share this cost equally.”
However, a true-up at the end of the drought will determine the actual ratio, which Schnaider wrote would be applied to actual drought-related costs.

Valero’s drought surcharged is being collected in 12 equal portions starting last November and continuing through October.
Metered customers drought surcharge was applied to the volume charge component of their utility bills, she wrote.

“The drought surcharge is anticipated to be temporary and will only be in effect until the city recovers the drought-related costs and water supply conditions have stabilized,” she wrote.

“These drought-related costs include additional water purchases, added utility expenses to pump water, expenses related to promoting conservation, water saving projects throughout the city and lost revenue due to a 20 percent overall reduction in consumption,” she wrote.
Among those costs was the purchase of 4,000 acre-feet of water at a cost of $827,486 that should keep Benicians in good supply through February 2016, as well as additional energy costs and conservation promotion and projects.

Benicians have been conserving, which is in keeping with state and city directives, but it also means less revenue for the city, Schnaider wrote. In fact, revenues are lower than expected as residents and business owners cut back on consumption at better-than-expected rates.
“The longer the drought, the longer customers are asked to conserve; therefore, the large the loss in revenue. This in turn effects the amount of revenue needed to be collected to mitigate this loss,” Schnaider wrote.

Since Nov. 30, 2014, Valero has been making fixed payments of $99,084 a month, and by this October, the company’s payments will be equal to half of the original drought costs, or $1,189,008. At that point, no further payments are scheduled, she wrote.

The refinery began employing water conservation measures in 2000, she wrote. As residents and other businesses have reduced consumption starting last year, the historic water use of 45 percent Valero and 55 percent metered customers continues to change.

At the end of the drought, the ratio between Valero’s use of untreated water and the metered customers’ use of treated water also will be calculated, she wrote.

Revenue from metered customers is about $520,000, or 44 percent of the drought surcharge costs, as of June 30.

“At the current rate of consumption, it will take another 9 to 12 months to reach the full $1.2 million for the shared drought costs,” Schnaider wrote. As more metered customers conserve and move out of the top billing tiers, it will take longer to collect the drought surcharge amounts from them, she wrote, explaining that nearly all have been shifted out of the top tier.

Once the drought is considered ended, the revenue will be reconciled with actual costs, and the revenue sharing between Valero and metered customers will reflect actual consumption.

She wrote that employees will update the information again this November.

Benicia is undergoing a citywide rate study, and Schnaider wrote that the municipality will need to determine if the changes in water consumption and corresponding revenues are likely to continue.

“If customer conservation is the new normal, the city’s rates will need to be restructured so that sufficient revenues are generated to meet ongoing operations, even after the drought ends,” she wrote.