Abstract
Utility providers face unique challenges to water and wastewater ownership and operation, from hiring staff with the right expertise, to managing technologies and acquiring financing. Water and wastewater utilities have historically been primarily owned and operated by local jurisdictions, or they've been fully privatized. While the traditional approach of public ownership provides utility agencies with full control of their system, it also increases their exposure to financial risks and responsibilities. In fully privatized systems, utilities must often relinquish local control. The City of Rialto (Rialto) has taken an innovative approach by forming a Public Private Partnership (P3) in which they can draw on the expertise, financing, and efficiencies of the private sector while maintaining their desired amount of authority and control over the operation and management of their assets, and in delivering projects through their Capital Improvement Plan (CIP). In this panel, Rialto and their partners, Table Rock Capital (Table Rock), Veolia North America (Veolia), and Arup US, Inc. (Arup) will discuss the formation of the P3 and the various opportunities, successes, and challenges that have ensued since its formation in 2012. Rialto Water Services (RWS) was formed through a partnership between the Rialto, Table Rock, and Veolia. Over a 30-year concession agreement (CA), the partnership aims to deliver much needed capital improvement projects, turn over management of the water systems to a company with a proven track-record (Veolia), and implement efficiency improvements without increased financial risk. Under the CA, Rialto retains full ownership of its water and wastewater systems, retains all water rights and supply, and possesses the rate-setting authority associated with the facilities. RWS provides financial backing, oversight, and concession services for the life of the agreement, while Veolia delivers all water and wastewater services, including billing and customer service and overseeing a $41M CIP to upgrade aging facilities. The long-planned upgrades to the infrastructure introduces cost and energy efficiencies for Rialto, and includes seismic retrofits, improved water supply and wastewater capacity, and brings hundreds of construction jobs to the local economy. Rialto owns its water and wastewater assets, providing service to over 100,000 people in Southern California's Inland Empire. The Rialto water system has six producing wells, 164.5 miles of water mains, and produces approximately 2.9 billion gallons of water per year. The Rialto wastewater system consists of approximately 263 miles of sanitary sewers that convey approximately seven million gallons of sewage per day to Rialto's Wastewater Treatment Plant (WWTP). Table Rock is a private equity firm that specializes in public-private infrastructure finance, is a leading voice on P3 policy and practice, and is an investor in the management of RWS, including sub-contracting to Veolia the operations and maintenance of the water and wastewater assets. Veolia is a global leader in water and wastewater services and technological solutions, and a major provider of comprehensive water and wastewater partnership services. Veolia has a long and successful history of operating utilities and municipal systems, as well as implementing efficiency improvements in water and wastewater systems. Arup is a global consulting engineering firm with deep experience in the planning, design, and management of water and wastewater infrastructure. Arup provided a range of professional services through the initial formation and financing of the P3, and has since remained closely involved over the course of the CA. Arup performs regular technical reviews of the systems' operations and maintenance, CIP implementation, and due diligence monitoring. The panel's discussion will cover: The formation and implementation of the P3. Major successes and lessons learned, including upgrades to the wastewater treatment plant, microgrid, and cogeneration plant. Past and future CIP projects and funding. The impacts the P3 has had on operations and asset management of the water and wastewater systems. The panels' collective experience with P3s of utility projects as it relates to stakeholder collaboration, procurement strategies, and more. Notable benefits and challenges of the P3 that will be discussed include: Flexibility of Staffing and Resources There is a periodic reset mechanism built in the CA, which provides flexibility for all parties to review the staffing levels and skills needed to operate the water and wastewater systems optimally. Predictability of Labor Expenses The CA includes a fixed fee to satisfy the desire of Rialto to have some predictability of labor expenses for budgeting purposes. The partners can monitor labor costs and provide early warning to Rialto to manage expectations of these costs. 'No Surprises' Clause The CA includes clauses to protect investors' desire to limit exposure and assure fair return on initial investment for capital improvements. Rialto agreed to bear the cost of regulatory changes, emergencies, unfunded mandates, to name a few. The partners were able to maintain a cooperative spirit with respect to these clauses, specifically in their response to the COVID-19 pandemic. Rate Increases vs Politics The CA has mandated rate increases built into the contract, which has run into challenges with politics, election cycles, and public opposition. The CA itself does not carry the same weight as other political issues and opinions. Following Prudent Industry Practices The CA binds the Concessionaire to run the utility following 'prudent industry practices.' This rule has been used as the basis to settle many negotiations over the years and is credited to the professionals involved among all the stakeholders and the depth of knowledge and experience available through Veolia.
This paper was presented at the WEF/AWWA Utility Management Conference, February 13-16, 2024.
Author(s)M. Matson1, R. Nordvik2, C. Venkatraman3, P. Lucchetti1
Author affiliation(s)Table Rock Capital 1; Arup 2; Veolia 3;
SourceProceedings of the Water Environment Federation
Document typeConference Paper
Print publication date Feb 2024
DOI10.2175/193864718825159243
Volume / Issue
Content sourceUtility Management Conference
Word count14