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POWER PLAYS Part 2 Water and Power

July 30, 2014
Climate, energy, fracking, Greenhouse gas emissins, hydroelectric power, infrastructure, power, power demands, power-water nexus, Uncategorized
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Water limitations are a problem in many areas of the US and the world. Without water, the efficiency of power plants diminishes as the folks in Washington and California have found out when converting to air cooling their facilities. Losses can be 30% of output which makes that investment in upgrading to 40% efficiency, drop back to 30. Not a good investment, unless you have no option. In water limited places in the world, cooling water will limit the ability to use water-intensive coal, nuclear and oil facilities.

Nuclear power has been argued as a green option, but it is green only with respect to carbon production. Nuclear needs copious amount of water to cool the reactor. An while it remains an ongoing option, many are wary after the Japanese experience. There are 6 licenses in the US for nuclear facilities that expire by 2020, and 27 more by 2030. That means over a third of facilities are at their useful life. Creating second generation nuclear plants is a major, challenge at a financial and political level. For the most part China, Russia and India are leading the way with the US a distant 5th in proposed next generation reactors. We just don’t see a lot of nuclear reactors on the US horizon. Why? Renewable and gas.

The power generation picture has changed significantly in 10 years with respect to large increases in wind and gas. Renewables have increased from 2.4 to 6.5% of the market in 10 years (to 266 TWh). Wind has been the largest growth area (to 167 TWh) despite ongoing environmental issues associated with migratory birds, minimum wind speeds, and lobbying against wind projects (like Bill Koch did in Cape Cod) or the tax incentives used for renewables (like the Koch brothers continue to do along with Tea Party members in Texas). Wind energy costs have dropped by 40% in 10 years and today the majority of wind energy components are built in the US as opposed to overseas. The subsidies have made this possible by limited private capital risk. Nolan County, Texas alone produced more wind than the state of California, despite the ongoing lobbying against it in Texas. Texas has the largest “wind” reserves in the US and many in the public see the need to take advantage of the high wind areas like Texas ($25 billion to date, $13 billion proposed), the Rocky Mountains and coastal areas that do not conflict with migratory birds routes, landscape views or property rights issues. The Blackfeet Nation in Montana has long known that wind is a valuable resource on the reservation. Overall the state of Montana has the second largest wind potential behind Texas. But like Texas there is conflict – in Montana from the fracking industry. Note that the upper Rocky Mountains is where NextEra installs many of its wind fields. California has also gotten into the wind market with projects proposed in the Mojave Desert, although eagle conflicts impact those permits. However, uncertainty about the ongoing tax break , caused by inaction in the House, caused new wind projects to drop 92%, with a loss of 30,000 jobs in one year which creates questions about wind power expansion in the near future.

At the smaller level, combined heat and power (CHP) generation is located at 4200 commercial and industrial facilities today. States are interested. The demand is expected to rise to 40 GW by 2020. Solar markets are often local. Some communities provide incentives for residents to put panels on the roofs. Germany did this and now 25% of their power comes from these solar projects. 2% of houses in Arizona have solar on their roofs. In Hawaii, solar power is half the cost of generated power. However local solar has run into the same issue as wind power – this time the Koch brothers-funded American Legislative Exchange Council has encouraged local power utilities in 21 states to challenge laws that permit solar installations of houses as reducing profitability of power investments by those utilities. Others, like FPL still fund such installations creating and interesting conflict in the market.

Gas has replaced coal as the dominant source, both because of less greenhouse gases and because of much higher efficiency in source-power ratios. California, Texas, Florida and New York, among the four largest power demanding states, have seen natural gas use increase significantly in the past 20 years, virtually all at the expense of coal. Fracking has been the primary reason for the expansion of gas. High quality gas can be recovered from areas through horizontal drilling, but only 3-5% of the gas in the foundation is actually removed from the initial frack. Then the returns diminish to about 10-15% of initial withdrawal within 1-3 years, and refracking must occur to increase production. 100% of the gas is unlikely to ever be achievable. Still gas reserves are likely to be producers for some time, although industry experts expect the peak of current fracking technology in 2025, much sooner than some would hope. Despite there being over 2.4 million miles of gas pipelines in the US, the biggest issue with frack gas is pipeline absence in the big fields in Pennsylvania, Ohio and North Dakota. Refineries are starting to crop up in the Midwest and Pennsylvania to address the gas needs – which may reduce the need for longer pipelines and reduce loss (currently 6%).

Fracking is also a boon to the oil industry and the ability to recovery oil from tar sands in Alberta has increased the potential supply. Like gas, the problem is pipelines, but the lack of pipelines is a boon to the railroad industry, particularly in the Bakken Fields in North Dakota where abundant rail is available via BNSF (hence Warren Buffett bought it). Tank car demands are up to meet the 400,000 tank car loads of crude oil transported in 2013. Demands are expected to climb as new generation tank cars are built to minimize risks of hauling crude oil and coal tar sand products. Tight oil recovery is expected to rise through 2019, while a slow decrease is expected thereafter based on current technology. But note the lack of pipelines create a problem in getting the gas from North Dakota to useful markets. It is estimated that $1 billion per year in gas is flared in the Bakken fields alone. Pipelines and rail are needed, but both are controversial

The pipeline solution is varied and many. North American Oil and Gas Pipelines magazine sees a high investment in pipelines by 2020, with decreasing investments through 2035 as gas recovery drops. XL pipeline has dominated smaller pipeline projects designed to bring tar sands oil to refineries in Texas and Louisiana, but there are other spurs and different pipes are planned for different purposes. The obstacles are many – political, environmental, economic through a host of forces that either benefit directly from the pipelines or that benefit from not having the pipelines (think railroads). Of course a couple of recent rail accidents have created more controversy there, but rail is the current solution for many of these remote fields.

POWER PLAYS

July 26, 2014
Congress, Development loans, Economic Bubbles, economy, energy, Environment, hydroelectric power, infrastructure, Leadership, power, power demands, power-water nexus, Rural Utilities, utilities, Water Funding, water quality, water sewer management
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In this blog we are going to talk about trends in the power industry and how they may affect utilities.  One of the ongoing themes of this blog is that to be leaders in the field, we need to be cognizant of what others are doing and how those actions might affect utility operations.  Power is a big cost for utilities – often 10-15% of the total operations costs where a lot of pumping is involved. In most communities, the utility system is among the largest consumers of power, which is why many utilities have load control agreements in place – power companies can off-load power demands by having the utilities go to onsite generators.  Our community’s building account for 70% or more of local energy use.

The need for power is expanding, albeit at a lower rate that population growth in many communities.  This is because new building construction measures tend to insulate better and install more energy efficient equipment.  Power companies often will subsidize these improvements to reduce the need for more expensive plant expansions.  Where expansions are needed, purchase/transfer agreements or renewables are often a convenient answer.

But long-term we are seeing that the power industry is changing in other ways too.  Already we see a migration away from coal for power generation.  This was occurring before the new regulations were in place for carbon dioxide.  Certain utility companies like NextEra, the largest wind and solar power generator in the US, and the parent of Florida Power and Light, have reduced greenhouse gas emissions from their plants by converting to other sources like combined heat and power (CHP), and increasing efficiency.  The typical oil or coal power plant is 30-35% efficient, while the newer gas turbine systems are up to 45% efficient.  That makes a big difference in costs as well as emissions when gas emissions are half the coal and oil emissions.  NextEra is well placed for carbon trading, a concept some fight, but the US had been emission trading since the early 1990s, so carbon trading markets are already in place.  The only thing needed is the regulations to put them into play.  Buy that NextEra stock now and hope for carbon trading!

But NextEra is not the only likely winner under this carbon trading scenario.  ExxonMobile is big into gas, Exelon is big in the nuclear power industry, Siemens and General Electric, which make wind and gas turbines, are also likely to see growth.  All have poised themselves years ago as the impact of carbon dioxide becomes more apparent.  Most of the industry executives acknowledge climate issues and recognize that people will expect the industry to do its part (the Koch brothers aside).  Many power generators like ConEd and FPL are making changes as well, in advance of the regulatory requirements to do so.  They see it as good business.  They also see it as a means to make more power at a given facility (by increasing efficiency) while reducing water use.  Water use can be a limiting factor, so we will discuss that in a couple days…

 

 

Musings – on the role of finance

June 30, 2014
finance, funding, Revenues, Uncategorized
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Are finance and budget personnel gate-keepers or operations support staff?  The answer make a great difference to your operation.  Gate keepers slow the process by creating barriers to overcome (think Dilbert).  Support staff means they readily acquire the necessary resources to insure smooth operation (not Dilbert).  Which do you have?

Sea Level Rise Planning Part 2

June 26, 2014
Climate, communciations, economy, engineering, Environment, Flooding, infrastructure, innovation, Leadership, local government, management, planning, politics, Risk, Risk Management, sea level rise, stormwater, Uncategorized, utilities, water sewer management
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In the last blog we discussed 10 planning steps for sea level rises.  When planning 50-100 years other factors can come into play as well.  As a result, to allow flexibility in the analysis due to the range of increases within the different time periods, an approach that uses incremental increases of 1, 2, and 3 feet of SLR is suggested.  Hence infrastructure is built to meet milestones, not arbitrary dates lessening the potential for stranded assets.. The increments can work as threshold values in planning considerations in terms of allowing planners the ability to know ahead of time where the next set of vulnerable areas will be to allow a for proactive response approach that can be matched to the observed future sea levels.

But prior to developing infrastructure plans, the local community needs to define an acceptable level of service (LOS) for the community. A level service would indicate how often it is acceptable for flooding to occur in a community on an annual basis.  1% is 4 days per years and for a place like Miami Beach, this is nearly 2 ft NAVD88, well above the mean high tide.  The failure to establish an acceptable LOS is often the cause of failure or loss of confidence in a plan at a later point in time.  The effects of SLR of the level of service should be used to update the mapping to demonstrate how the level of service changes, so that a long-term LOS can be defined and used for near-term planning.

With the LOS known, the vulnerability assessment is developed using a GIS based map of topography and the groundwater levels associated with wet and dry season water levels.  LiDAR is a useful tool that may be available at very high resolution in coastal areas.  Topographic maps must be “ground-truthed” by tying it to local benchmarks and transportation plans.  USGS groundwater and NOAA tidal data from local monitoring stations to correlate with the groundwater information. Based on the results of these efforts, the GIS-based mapping will provide areas of likely flooding.

GIS map should be updated with layers of information for water mains, sewer mains, canals, catch basins, weirs and stormwater facilities.  Updating with critical infrastructure will provide a view of vulnerability of critical infrastructure that will be funded by the public sector. Ultimately policy makers will need more information to prioritize the needed improvements.  For example, a major goal may be to reduce Economic Vulnerability.  This means identifying where economic activity occurs and potential jobs.  At-risk populations, valuable property (tax base) and emergency response may be drivers, which means data from other sources should be added.

The next step is to analyze vulnerability spatially, by overlaying development priorities with expected climate change on GIS maps to identify hotspots where adaptation activities should be focused. This effort includes identification of the critical data gaps which, when filled, will enable more precise identification of at risk infrastructure and predictions of impacts on physical infrastructure and on communities. The final deliverable will include descriptions of the recommended concepts including schematics, cost estimates, and implementation plan.

So why go through all this.  Let’s go back to the beginning.  It has to do with community confidence in its leaders.  Resident look at whether their property will be protected.  Businesses look at long-term viability when making decisions about relocating enterprises.  The insurance industry, which has traditionally been focused on a one year vision of risk, is beginning to discuss long-term risks and not insuring property rebuild is risk-prone areas.  That will affect how bankers look at lending practices, which likely will decrease property values.  Hence it is in the community’s interests to develop a planning framework to adapt to sea level rise and protect vulnerable infrastructure through a long-term plan.  Plan or….

BOSTON

June 18, 2014
American Water Works Association, Boston, communciations, Education, engineering, innovation, Leadership, Uncategorized
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Last week I went to Boston for the American Water Works Association Annual Conference and Exposition.  It is a gathering of thousands of water industry professionals – from operators to university professors to engineers to manufacturers.  It is a good group of people and most know a number of people each year.  The industry is smaller than one things despite there being over 50,000 community water systems in the United States.  All are there to network, which allows them to discuss their issue, learn new ways to approach things, create new contacts and see new equipment and techniques.  Over 11,000 registered.  Good job to AWWA staff and the folks in New England that local hosts.

At the conference, one of many tasks, beyond meetings and education, was to do a class for public officials on what water and sewer utilities are, how they operate, how to deal with revenues and expenses and regulations.  The idea is to help local officials understand the complex utility issues which are often second fiddle to more “surficial” activities like parks, and economic development.   The officials get a certificate from AWWA for 12 hours of class time, but the fact that these folks come, spend the time, get involved and can then experience the rest of the program is to be commended.  I have been doing these public officials classes since my book came out in 2009.  The first two days are always based on the book, but the third day can vary depending on issues in the news and preferences form the public officials group within AWWA.  This year the focus was operations and revenues. The responses were positive, and the interaction was very good.  And I had a blast as well.

It had been 40 years since AWWA was in Boston for ACE.  I have been twice previously – once when I was 7 and we went to the aquarium and once to catch a baseball game at Fenway, while on a 5 game, 4 city, 3 day baseball trip.  Boston led off.  This time, I was able to spend a day looking at the City.  Thanks to my friend Chi Ho Sham who acted as chauffer and tour guide – I expect to repay the gesture whenever he can spend a couple days in S. Florida.  Boston as many of you know is the cradle of the American revolution, and visits to the old North Church, Paul Revere’s house, the USS Constitution, several cemeteries and Faneuil Hall.  Fascinating.  Another trip to come as there is much more to experience than a day.

The moral to the story is that conferences allow us to accomplish many things.  We meet new people, hear new things, and if we spend a little time, we can experience how others live or have lived.  The history is valuable to us personally.

BOOMS AND BUSTS IN RURAL AMERICA

June 5, 2014
communciations, Economic Bubbles, economy, energy, fracking, infrastructure, Leadership, local government, management, planning, politics, power, Rural Utilities, Uncategorized, underwriters, utilities
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In a prior blog we talked about the difference between urban and rural counties and the impact of the differences between incomes and how that would affect utilities.  Keep in mind that the 40 largest urban counties in the US contain nearly half the US population as do the 50 largest utilities.  So in a recent article in Governing, the focus was on the few counties where income was higher than average.  In fact, in looking at counties, within the top 20 in per capita income are 10 counties in North and South Dakota.  Interesting until you review why.  All are in areas where fracking is ongoing and corporate farming is prevelant.  It is no surprise that the fracking boom has created wealth in rural areas that have limited populations, limited regulations and state and local officials who are desperate to reduce unemployment and stimulate laggard economies.  We noted before that rural counties are often desperate for jobs, so they often ignore what could possibly go wrong when jobs and development are the only priorities for a community.  Governing used the example of Wells County, ND where the per capita income has doubled since 1997 and is 75% above the national average.  Yet the local governments are looking at which roads they will allow to go back to gravel.  How is this possible? 

The issue is not relegated to just Wells, ND.  Despite the fact that many rural communities in areas with intensive farming or fracking have grown 10-15% since 2007, local officials are finding it difficult to raise taxes to pay for infrastructure.  Roads are the most obvious and pressing issue because of the impact from fracking traffic.  As new wells are constructed, the frackers build new dirt roads and use the existing roadways.  Some believe the need to fix many of the roads is temporary so why bother, but it neglects the need to infrastructure improvements in general.  The same argument could be used for water and sewer infrastructure as well, but these wealthy rural communities do not want to increase governmental spending to improve any infrastructure, so the opportunity to address the community needs is being lost.  

What is more interesting is that the states where these rural counties exist, including the Dakotas, along with Montana, Wyoming, New Mexico, and most of the southeastern states are among the states that rely most heavily on federal funding.  So when incomes increase, the dependency remains.  These are the same states that tax residents the least, spend the least on education, have the poorest health care (and the fewest people signed up for the Affordable Care Act and few have state exchanges) and have the most people in poverty.  The dichotomy between reality and the political perception is interesting in these states, which leads one to wonder if the residents of these states like their situation and keep electing representatives that reflect this desire, or they have fallen victim to political interests that cause them to vote consistently against their better interests, or for the interests of a limited few that deny them access to the education, infrastructure, medical care and other benefits their urban and wealthier neighbors enjoy. 

That is a tough question but the bigger question is how to infrastructure agencies like utilities attempt to overcome either of these perceptions?  Neglecting infrastructure, education, medical and the like does not promote local economies, does not create jobs and more likely causes the migration of the best and brightest young people out of the community in search of better prospects, which further imperils their rural situation.  Keep in mind that most cities are relatively permanent, but fracking, like mining, oil and timber before them, have been booms and busts.  The situation if far more dire after the boomtown than it was before.  After all, what could possibly go wrong when 50,000 miners, or frackers, descend upon a community of 1,500 people?  They will consume all the resources, then leave.  Locally those well paying jobs are imported due to the lack of skills and education, and then they leave with the bust.  This has played out many times in the past.  It is not sustainable.  We need to learn from the past – when the boom hits, make the investments you need in infrastructure, education, medicine, etc. so that the future is better after the bust. 

Hog Wild – TMDLs Affecting You?

May 29, 2014
Environment, Monitoring Water, politics, TMDLs, Uncategorized, water quality, water supplies
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So I am reading an article in OneEarth, which is a publication of one of the environmental groups.  The pretext is the issues with the movement of hog farm operations into Iowa and the problems it is causing.  They note that the state has cut the regulatory enforcement budget and the number of inspectors while more incidents of contaminated water are found.  The contamination threatens the raw water supply of  downstream water utilities which must do more treatment and monitoring.  Sorry, I had to giggle because I have heard this story before. 

Going back about decade many will recall the “pfiesteria hysteria” as it was called in North Carolina.  The issue was that the Department of Environmental Management had found fish kills where the fish had these weird sores on their bodies, and then a number of people were diagnosed as being infected with the same condition, some of whom died.  The cause was this pfiesteria, which is a flesh-eating organism that enters the nervous system.  Crazy is one of the side effects but it mostly leads to death.  DEM determined that the organism thrived in waters with significant loading from nutrients that they could trace to…..  wait for it…. hog farms!! 

That was not the first time hog farms were implicated in water quality issues, but due to the significant, political influence of the industry, the transgressions were largely ignored due to a lack of enforcement personnel.  Actually when I was in North Carolina we had a hog farm upstream of our wastewater plant.  Periodically the DEM would test the waters downstream of our plant and find bacteria counts to high and they would want to tag us for the violation.  But we never had any indication of violations at our plant (which we tested daily and reported).  You can’t “make” nutrients appear out of thin air – they come from somewhere.  We told DEM that it was a hog farm that periodically dumped the manure pit n the river when it got full.  No treatment was going on.  Then hog farms exploded in North Carolina which led the pfiesteria event.  Finally the State decided enough was enough and imposed a lot of regulations on hog farms which magically …. moved to Iowa where there are no regulations in place.  I guess there is nothing like a good crisis that kills a few people to get past the political influence of the lobbyists (unless you are the NRA).

But here’s the problem for Iowa, which is what North Carolina found.  The regulations actually are in place.  The Clean Water Act prohibits the contribution of pollutants that will impair the quality of water bodies.  Clearly hog farm effluent clearly falls into this category, but the historical focus of the Clean water Act has been on wastewater treatment plants, and lately stormwater, but not agriculture, which is largely exempted in many, rural states.  Yet agriculture is and has always been a major contributor to water quality degradation in watershed for two reasons.  First they disturb the earth by plowing and planting, so rainfall leads to runoff of material (silt) into streams.  With that runoff is herbicides, pesticides, fertilizer (nutrients), and of course in animal husbandry or CAFO operations, bacteria and other pathogens.  Do not forget that the two most significant examples of water quality impacts on water utilities, Milwaukee and Walkerton, were both agricultural runoff problems.

Agricultural runoff impacts the downstream users which are typically developed areas which use the streams for water supply.  So agricultural practices move land based contaminants to the utility intake, which means more treatment cost to customers.  Sometimes these contaminants are a significant health risk.  It took a significant incident for North Carolina to act. The question is what will it take for Iowa to act, and once they do where do the hog farms go next? 

What needs to happen is that the hog farms develop the treatment systems needed to clean up their act.  It would be great for them to pay the cost but history says they won’t.  So maybe the political leadership needs to participate in that solution to maintain the employment base, and maybe utilities and other source water protection agencies, and there are many of them like the US Water Endowment, can help as well.  Politicians want jobs, while ratepayers do not want to pay all the costs.  A collaborative solution seems reasonable, so we will see what Iowa comes up with.  

Economic Challenges or Challenges to Economics?

May 26, 2014
Congress, debt funding, economy, Education, finance, funding, infrastructure, innovation, Leadership, local government, management, planning, politics, Reserve Funding, reserves, Revenues, Surpluses, sustainability, Tax cuts, Uncategorized, utilities, Water Funding, water sewer management
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As you are aware, I have several hobbies and interest, and economics is one of them.  Economics has theorists from many different viewpoints, and the commonality among them is that there is no “school of thought” that explains everything.  So new schools get developed to explain the current events, or old ones that were discredits are resuscitated, but unfortunately we too often neglect the past, or at least the examples of the past.  Too often the obvious gets ignored.  For example, we cave money because we know there will be ups and downs.  Individual do it, so why don’t governments?  We know that we will pay for a product we need.  Demand drives the price.  If more people want it, the price goes up.  Been that way for…. ever maybe?  So in my recent reading I came across several musing that keep getting talked about by political pundits, but may be they are not what they appear to be.  So let’s take a look at a couple of these that might just affect us….

 

Is supply side economics is a myth developed by corporate economists to argue for lower taxes.  The concept is to give tax breaks to encourage manufacturers and businesses to produce more product which will reduce costs.  You know this is patently false.  Try selling your reclaimed water at a discount (or give it away) when it is raining.  Demand drives the economy, not supply.  Every economics student learns this in economics 101.  The supply side economics school developed as a means to explain stagflation in the 1970s. The idea what to give tax cuts to those who invested, so they would invest more to make new products, which would trickle down to the rest of us.  Still doesn’t work.  Why?  What they ignored was that the US industrial sector had saturated the US economy with goods and could not grow without new sectors to sell to.  Hence the push on Nixon to open up China to foreign trade and investment.  But opening foreign markets was great, except they could not afford our products.  So we had to make the products there, increase local wages so they could buy the products, and still shipped products back at a cheaper cost that to build them in America.  The idea is not new – recall Henry Ford set up the assembly line to cuts costs to allow him to increase wages so his workers could buy his cars.  The obvious question is when we saturate China, then what?  Africa?  Then what?  The economy cannot grow faster than the increase in population.  So why does supply side economics keep getting traction?  Did we mention those tax cuts….

 

To the big fashion in Germany and the EU is austerity.  Austerity is an economic idea that never seems to die despite very limited success and many, many failures.  It sounds great – cut costs and balance the budget while cutting revenues (income).  Ok, so let’s see how that works in your household – you quit your middle class job and take a minimum wage job.  You cut your expenses.  Except you can’t sell your house without a loss (and you do not have the cash to make up the difference) and you need your car to get to your new job.  But austerity says that if you eat rice, beans, cereal and Ramen noodles, you will soon be far better off than you are now.  No one will suffer.   Do you believe it?  Do you wonder why the Greeks and Irish are not doing so well today and why people are restless?  They used to devalue their currency, but the Euro prevents this.  They do not have away out.  Meanwhile Iceland devalued currency, let the banks fail, took over the bank assets, and are doing much better.  Austerity was not the option…. Just saying…  And who suffers the most?  Not the high income folks.

 

Tax cuts stimulate the economy.  Sounds great.  But, from 1944 to 1963, the income tax rate on the highest earning bracket in 1960 was 90% over $200,000.  Yes 90%!   The economy was great.  The middle class was born.  House ownerships jumped.  Education was up.  The economy in the 1970s stagnated after we cut tax rates.  We cut the income tax rate in the 1980s, but raised other taxes, and things improved, but then declined.  The economy improved after the Bush tax hike in 1991. It did not improve after the Bush tax cuts in 2001.  Interesting in their book Presimetrics, Mike Kimel and Mike Kanell noted that higher taxes seem to correlate with a better economy.  Is it because investors can’t sell stock so easily when they made a profit so corporations can count of investments longer?  Or is it that the increase in revenues allows the federal government to invest in more research and development that further stimulates the economy?  Did we mention the tax cuts favor the wealthy?

 

The moral of the story is that utility managers cannot ignore the economic realities around them.  We cannot be trapped by the musings of people who have hidden agendas, which means that our understanding of the way things are must extend beyond the utility itself.  The economy, economics, monetary policy, tax policy, demographics and change are areas that utility managers need to be current on.  Engineers and managers often understand these issues easily (most are mathematical) but we tend to focus only in out areas.  We need to become educated.  Recall the earlier blog where I noted the city manager who realized later that the reason elected officials tended to bad alternatives was they were being lobbied to approve the poorer options because their clients could make money from it.  You know many ideas that will be lobbied to elected officials and business people in the future.  You need to become educated on these ideas and how they affect your utility.  You know that rates that are too low will not increase revenues.  You know you need to expand sales when possible, perhaps serving new areas, and making the investments for same.  You know that not spending money will only increase the risk of failure in the system.  You know that not increasing pay will disenfranchise employees.  Prepare for these assaults so you can lead your utility down the proper path. 

Sea Level Rise, SE Florida Style

May 6, 2014
Climate, economy, engineering, Flooding, funding, infrastructure, planning, politics, sea level rise, sustainability, Uncategorized, utilities, water sewer management, water supplies
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There has been significant discussion about the potential impacts of climate change on the world:  more intense rainfall events, more severe thunderstorms and tropical cyclones, droughts, loss of glacial ice and storage, increased demand for crop irrigation.  However for much of the State of Florida, and for much of the coastal United States east of the Rio Grande River, the climate issue that is most likely to create significant risk to health and economic activity is sea-level rise.  Data gathered by NOAA from multiple sites indicates that sea level rise is occurring, and has been for over 100 years. About 8 inches since 1930.

The impact of climate change on Florida is two-fold – Florida often is water-supply limited as topography limits the ability to store excess precipitation for water use during the dry periods and sea level rise will exacerbate local flooding.  The highly engineered stormwater drainage system of canals and control structures has effectively enabled management of water tables and saltwater intrusion by gravity. The advent of sea-level rise will present new challenges, because the water table is currently maintained at the highest possible levels to counter saltwater intrusion, while limiting flood risk in southeast Florida’s low-lying terrain and providing for water supplies.  As sea level rises, the water will not flow by gravity, which disrupts that balance struck between flood risk and water supply availability in the canal system.

Occasional flooding is not new to Florida, but the increasing frequency we currently experience is related to sea level rise, not just along the coast, but for large expanses of developed property inland due to topography and groundwater levels.  As a result, the challenge for water managers in the state, especially in southeast Florida, is to control the groundwater table, because control of the water table is essential to prevent flooding of the low terrain.

The issue is not lost on local governments in south Florida nor on the educational institutions in the area.  Florida Universities are studying the impacts to the region to identify ways in which we can mitigate, respond to and adapt to these changes. My university, Florida Atlantic University, is located in this vulnerable part of the State has been proactive in partnership with the Four County Compact in addressing these issues and we have now joined with other Universities in the State to form the Florida Climate Institute, a consortium working with state and federal agencies to address the multiple challenges and opportunities facing this State. FAU in particular, has been proactive in developing tools to evaluate risk and identify adaptation strategies to protect local and regional infrastructure and property. 

Our efforts have included using high resolution NOAA data to map topography at the +/- 6 inch level, combined that topography with mapping of infrastructure and groundwater, to identify vulnerable areas throughout Broward, Miami-Dade and Monroe Counties, as well as initiated projects in Palm Beach County and other coastal regions throughout the state.  By identifying vulnerability based on sea level changes, the timing and tools for adaptation can be designed and funded to insure a “no-regrets” strategy that neither accelerates nor delays infrastructure beyond its need. 

While we have all heard the discussion of an estimated two to three feet if sea level rise is anticipated by 2100; sea level rise is a slow, albeit permanent change to our environment.  The slow part allows us to make informed decisions about adaptation strategies that may prove useful in the long term as well as the short term.  Of prime importance is the need to plan for these needs 50 or more years out so that we do not increase our exposure to risk.  Keeping development out of low lying areas, redeveloping pumping and piping systems with change in mind and reserving areas where major efforts will need to be undertaken, is important to the public interest and will affect private business, tourism and homeowners.  Sea level rise is already a problem for many low lying areas such as Miami Beach, Fort Lauderdale, Hollywood, and other coastal communities. It will be an incremental problem creeping up on us for the rest of the century and beyond.

The lowest lying areas are the roadways, which are also the location of electrical, water, sewer, phone and drainage infrastructure.  Fortunately given the current Federally funded special imagery and NOAA data systems we are able to predict pretty accurately where flooding will occur.  Linking that information with detailed projections of sea level rise impacts we can  map vulnerable areas and build adaptive measures into every action and plan we undertake.  But the impacts are not only on the coast. Sea level affects ground water table levels and with our intense rainfall areas far inland can be flooded, even subject to long term inundation.  Water levels are rising and will continue to rise as groundwater rises concurrently with sea level. Add the impact summer rains and dealing with water becomes a major priority. Figures 1 and 2 outline the roadway network degradation at present, 1, 2, and 3 ft of sea level rise.  The figures demonstrate that a major, underestimated amount of property is vulnerable on the western edge of the developed areas because the elevations are decreasing as one moves west from I95. 

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While time will impact our environment, there are three options to address the change:

 

  • Protect infrastructure from the impacts of climate change
  • Adapt to the changes, and
  • In the worst case retreat from the change.

 Retreat does not need to be considered in the short or medium term.  South Florida has developed in the last 100 years and there will be well over 100 years of life left.  As a result, the best option is adaptation.  Adaptation takes different forms depending on location.  I have developed a toolbox of options that can be applied to address these adaptation demands, resulting in an approach that will need a more managed integrated water system, more operations and inevitably more dollars.  For example we can install more coastal salinity structures, raise road beds, abandon some local roads, increase storm water pumping, add storm water retention etc. to address many of the problems.  The technology is available today.

Much of the actual needs are local, but the problem is regional and requires a concerted effort of federal, state and local agencies and the private sector to address the scales of the problem.  A community can address the local problems, but the regional canals, barriers, etc., are beyond the scope of individual agencies.  Collaboration and discussion are needed. 

The needs will be large – in the tens of billions.  But there are two things in south Florida’s favor – time and money.  The expenditures are over many, many years.  Most important in the near term need is the early planning and identification of critical components of infrastructure and policy needs and timing for same.  That is what FAU does best.  At risk are nearly 6 million of Floridians their economy and lifestyle, $3.7 trillion in property (2012) in south east Florida alone and a $260 billion annual economy.  All of these are expected to continue to increase assuming the appropriate plans are made to adapt to the changing sea level.  Protection of the area for the next 100-150 years is achievable as long as we have the science, the understanding and the will to do it.  Plan now, and over the rest of this century starting now we can raise those billions of dollars needed.

 

Why Bad Ideas Won’t Die

April 11, 2014
contractors, engineering, funding, innovation, Leadership, local government, management, planning, politics
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Once upon a time, many years ago there was a young city manager in a backwood town in the south. He had been told he was a bright young man, and had done well in city manager school. He was full of ideas on how to serve the public to make things better for the community and the people in the community, realizing you can’t get rich being a city manager. Getting rich was not his issue – he wanted to help people and thought he could bring his education and ideas to bear on the many problems city’s face. He was also very entrepreneurial – he tried to organize the city to operate like the business that it was by trying to make operations more efficient, providing training to employees that basically never had any, developing mechanisms to track work performed, and updating infrastructure (piping, curbs, sewers, treatment plants). He spent 60-80 hours a week, including countless nights each week at his job, no doubt underpaid. For the most part, the employees bought into his ideas because, well, he never asked them to do something he wouldn’t do, and often would go into the field to work with them on important projects to show them what was needed or what he expected. The staff became well trained and efficient. So far, so good.

Over time he noticed a few interesting trends, but because he was young, he did not have a point of reference to understand them all. One he noticed was that the elected officials always asked for multiple alternatives. But when he presented more than one, he found that the worst option, the one most difficult to implement, or the one that would create added problems, always seemed to be the one chosen. Bad options were like a magnet for these elected officials. So he became more reluctant to present more than one option because doing so made his job much more difficult and, well the point of presenting options that have issues seems counterproductive to good government. Of course that created some friction.

Ok now that you are done laughing hysterically at this young man, keep in mind the story is true and happened less than 30 years ago, so this is not ancient history. It took a few years after frustration and stress took their toll and this young man moved on in his career. City management was just too stressful. It took a few more years to understand that answer to the options riddle – the bad options were chosen because some was lobbying the elected officials for that bad option. Why? Because those lobbying always knew someone who could benefit from the need to “fix” the problem created by that option. So the idealist meets the reality – kind of deflating. He moved on from there.

So how does that affect utilities? Think about your budgets, and especially your capital budgets. Figure out what you NEED to do your job, and then figure out if you have a budget strategy to get it. Do you pad your budget to insure the budget office doesn’t arbitrarily cut your request, because “that’s what they do?” Do your elected officials delay capital projects because it is an election year and they do not want to raise rates? Does the city manager remove the new hires because he needs more money to be diverted to the general fund? Sound familiar? Welcome to the game this young man found so many years ago. 30 years and things definitely have not improved. When you run a business, you know what you need to do the job. You should be able to ask for what you need, and get it without a lot of conflict. Your budget and finance directors should be SUPPORT positions, not gatekeepers. Their job is to find money to pay for operations. You should set the need, and they find the funds, but it doesn’t work that way does it?

The budget battle is a huge expense for every community, and one that largely provides no real benefit but detracts from productivity. None of the game playing helps the utility or the ratepayers, just like the bad options don’t help the community at large either. Yet it is funny that over time, city managers have moved away from people with technical backgrounds in public works and public administration toward people with business experience. The argument is that we need to run the city more like a business, so this should be a good fit. But it is not in part because there is a lack of understanding of the underlying public works services. Public works is a service, not a business. As a result, we see far too much political expediency as opposed to benefits to the payors.

From a business perspective, creating a series of enterprise funds like water, sewer, storm water, roads, and parks is a step in the right direction, but only if those separate enterprises (think companies) can stand on their own. For example, it is completely inappropriate to use your utility to fund the general fund. Borrow from it, yes; some purchased services, yes; huge subsidies, no. When large amounts of funding are diverted, it means that both the general fund and the utility suffer (and for the moment let’s ignore the legal issue if the utility rate base is not the same as the city tax base). Business rarely diverts large revenue streams from other enterprises to keep them afloat for long, so why in government, do business people pursue this path? In the business world, if the general fund was such a loser, we’d cut it loose, or spin it off and make it stand on its own. Ok we can’t really cut the general fund loose (police and fire are in there and we love them), but making is stand on its own is what finance, budget and city managers should be pushing elected officials to do. That would make set up a system of full-cost operations, which will allow residents to understand the true cost of their services, which is completely appropriate. Subsidizing services at the expense of public health is not a good long-term policy is it? . And while you are at if general fund, where are those surpluses we ran to allow us to reduce borrowing for capital projects?