H2GO commissioner questions 'savings' achieved by $30 million plant

H2GO commissioner questions 'savings' achieved by $30 million plant
(Source: WECT)

LELAND, NC (WECT) - Many residents in the Leland community are upset that the H2GO water authority is proceeding with plans to build a $30 million water treatment plant. These residents are worried about the debt that will put on the small customer base of fewer than 10,000 households.

They also say some H2GO officials are skewing the numbers to make the proposed reverse osmosis plant look more financially desirable than it actually is.

Last week, H2GO Executive Director Bob Walker told us that once it's built, the water treatment plant would allow them to generate water for $1.37/1,000 gallons, as opposed to $2.74/1,000 gallons that H2GO is currently paying to buy it from the county.

But H2GO commissioners opposed to the reverse osmosis plant say the cost of building the plant negates the savings. Commissioner Jeff Gerken says in the first year the RO plant is fully operational, it would cost $1.40/1,000 gallons to generate water. If you add an additional $2.16/1,000 gallons for the cost of paying off the debt to build the plant, the total cost of water surges to $3.56, well over the wholesale cost from the county.

"Nothing I've seen so far convinces me that this is the right thing to do for our customers," Gerken said.

Further, Gerken said the financial analysis provided by Raftelis Financial Consultants relies on a growth rate of 3.7 percent.

Gerken explained the neighborhoods that are served by H2GO are largely built out, and that continued growth rate may be unrealistic. He said Raftelis representatives explained that if the growth rate dips to 2.1 percent or less, the equation changes, and not building the plant becomes the more cost effective path by their analysis.

Gerken and fellow Commissioner Trudy Trombley were overwhelmingly elected in November, after campaigning largely on their opposition to the reverse osmosis plant. They say that H2GO has been overcharging customers for years, helping the water authority put away millions in reserve so they will not need to borrow as much to build the water treatment plant, and masking its true cost.

"H2GO raised its rates in 2013 and 2014 and sent out a billing insert stating that the increase was necessary because, among other factors, the county had increased its rates," Gerken said. "But the minutes of meetings just prior to that rate increase show that the true reason for the rate increase was to pay for the reverse osmosis plant. The county had not, in fact, increased its rates. The billing insert made no mention of the reverse osmosis plant."

Gerken thinks the money H2GO now has sitting in the bank could be used for other purposes. He also says there is no guarantee that the $30 million cost estimate will hold, and it could turn out to be more expensive to build the plant than currently projected. Gerken also questions the use of expensive reverse osmosis technology when they have  a plentiful surface water supply from the Cape Fear River.

"The reverse osmosis process takes saltwater, or brackish water in this case, and takes the salt out by forcing the water under extremely high pressure through a membrane that rejects the ions that are in the water," Gerken explained. "The cost of operation is very high because the cost of electric power is high. Cape Fear Public Utility Authority estimates it's at least half again as expensive as treating water from the Cape Fear River."

"They are building a plant that is not needed. We can continue to get water from the Cape Fear River, and through Lower Cape Fear Water and Sewer Authority and through Brunswick County Utilities for as long as any of us will be alive," Gerken said.

Still, three of the five commissioners for the utility authority are pushing forward with plans, voting in June to build the controversial plant.

"We are not going to raise rates, we will not have to raise rates for the foreseeable future," Walker said about ongoing concerns about the cost, adding there is even the potential water rates could drop because of the cost savings. Walker says revenues generated by current water fees will be enough to cover the debt service on the plant while it is under construction, before it begins to generate water.

Walker says it will probably be at least a year before they break ground on the plant, as they have to go through the design and permitting process first. He estimates it will be online by 2019.

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