Asset Management at Harmony Creek Water Pollution Control Plant: A Detailed Approach to a High-Level Analysis

The Harmony Creek Water Pollution Control Plant (WPCP) is an activated sludge facility with a rated capacity of 68 100 m3/d which services the Courtice Urban area and the City of Oshawa in the Regional Municipality of Durham (the Region), located east of the City of Toronto, Ontario, Canada. The WPCP consists of 2 plants – Plant 1 constructed in 1952 and Plant 2 constructed in 1972.With the recent commissioning of the new Courtice WPCP, Plant 1 became redundant and was abandoned. This facility is expected to be decommissioned shortly. Plant 2 will require efficient and timely maintenance attention to ensure long-term operational viability.The purpose of this project was two-fold: to conduct a condition assessment of the significant assets in the facility and to provide a valuation of the facility from the ‘bottom up’ rather than from the ‘top down’.The project consisted of the following phases: taking inventory of all the assets of Plant 2, completing a condition assessment of each asset, assigning a present value to each asset, estimating annual maintenance costs as well as estimating future rehabilitation and replacement costs, and developing estimated cash flow projections on an annual basis over a 25-year time horizon. The work was conducted in 2007.The predominant practice in asset management studies has been to conduct a high-level assessment of major process areas, valuating the assets based on rules-of-thumb. By contrast, the approach adopted in this project was a relatively detailed valuation of each piece of equipment/structure based on its initial installation cost and/or its estimated present replacement cost.These cost estimates were totaled to estimate the aggregate value of the facility and to estimate the annual maintenance costs as well as future rehabilitation and replacement costs.Prior to conducting the condition assessment at the WPCP, an inventory of key assets was developed through site visits and discussions with the operating staff at the facility. Each key asset was broken down to the component and sub-component level and assigned an alpha-numeric coding system compatible with the existing computerized maintenance management system (CMMS).The evaluation of the assets was limited to visual inspection of components, process equipment, and building and site works for the purpose of identifying their conditions and existing deficiencies. In addition, the maintenance records on file at the WPCP were reviewed and operator input sought to assist with the asset evaluation process.Each asset was evaluated for soundness, functionality, maintenance costs and age and assigned a grade to reflect the overall condition of the asset based on a consistent rating system.The criticality of each asset was assessed based on the following criteria: impact on the environment, impact on health and safety, impact on treatment process and magnitude of remedial costs. In evaluating the criticality of each asset, each criterion was weighted equally.The expected life spans used in this study were: 20 years for equipment and 60 years for structural assets. However, it was found that many of the equipment assets at the Harmony Creek WPCP had exceeded the normal expected life spans while continuing to operate satisfactorily with normal maintenance attention. Therefore, these assets were given a reasonable extended life span based on their current condition ratings. The modified life expectancies were then used to schedule the rehabilitation and replacement of each of these assets.To provide a starting point for the valuation of the assets, the approximate cost of the asset at the time of installation/construction was determined. In the absence of original cost information, present-day equipment costs were used to estimate original costs through the application of appropriate ENR indices.The book value of each asset as of 2007 was calculated based on the straight-line depreciation of the asset over its normal expected life span (20 years for equipment assets and 60 years for structural assets). On this basis, the book value of each asset was assumed to be zero at the end of its normal expected life span.In the absence of documented operating and maintenance costs, the estimates of annual maintenance costs were based on 1.5% of the replacement cost of the equipment asset. Maintenance costs of the structural/building and general site components were included in the annual operating and maintenance cost estimates at particular intervals when repairs were anticipated to be required.Rehabilitation of an asset was defined as a major overhaul and/or rebuilding of the asset and was assumed to cost 50% of the replacement cost of the asset in 2007 dollars. An algorithm was developed for estimating the rehabilitation date of the asset based on its age.The replacement cost of each asset was estimated by obtaining budget pricing from equipment suppliers and adding 100% to the cost of supply to arrive at an estimate of the installed cost. For structural/building assets, 25% was added to the construction cost estimate for the asset to cover the costs of excavation, backfilling and other associated costs.The estimated maintenance, rehabilitation and replacement costs were then used to develop a cash flow projection on an annual basis over a 25-year time horizon for Plant 2 of the Harmony Creek WPCP.The developed asset evaluation method has provided the Region with an efficient tool to track and anticipate forthcoming maintenance, rehabilitation, and replacement costs. This approach not only gives the Region a high-level valuation of assets but also a breakdown to the component and subcomponent levels.The systematic approach developed in this project can be adopted at other facilities, if a detailed asset valuation and future investment profile is required and can be easily adapted to various time horizons for cash flow projections.