Testimony of George S. Hawkins, Esq., General Manager District of Columbia Water and Sewer Authority

Wednesday, May 11th at 6:30 P.M., Metropolitan Washington Council of Governments, 777 North Capital Street, NE

Good evening Chairman Walker, members of the board, staff and customers. My name is George Hawkins, and I have had the pleasure of serving as General Manager of the District of Columbia Water and Sewer Authority since last October. This is a role I approach with excitement and enthusiasm, but also with grave seriousness. Simply put, I am part of a team responsible for delivering a service to a group of people that numbers in the millions. And it is a service without which those millions of people cannot live.

It is also a service whose costs continue to rise. And this is what brings us all together today.

DC WASA's proposed operating budget for Fiscal Year 2011, which begins in October, is $408.1 million. This represents a $25-million increase over Fiscal Year 2010, fully half of which comes from increased costs in debt service to support our Capital Improvement Plan.

Our capital improvement plan calls for the spending of $3.8 billion over the next 10 years, primarily on projects covered under environmental and regulatory mandates. These projects include the Long-Term Control Plan, which will reduce by 96 percent the number of combined-sewer overflows into the Anacostia and Potomac Rivers and Rock Creek, and the Blue Plains Nitrogen Removal project to continue DC WASA's leadership in the cleanup of Chesapeake Bay Watershed. These two projects alone account for nearly one half of the spending projected over the next 10 years. We also plan to build a biosolids digester at Blue Plains that will turn waste into fuel, making DC WASA one of the largest generators of renewable electricity in the metropolitan area. This project will generate enough energy to power 26,000 homes.

Nearly $1 billion in capital spending over the next 10 years goes to our water and sewer infrastructure. This will allow us to replace our water and sewer mains — the average age of which is 76 years old — at a rate twice the national average. We've implemented this relatively aggressive schedule, which triples the current replacement speed. But it's important to note that this timetable will still take 100 years to replace the entire system — something that needs to be improved upon in order to ensure the system's integrity for current and future generations. Absent more federal investment in both wastewater and water infrastructure, DC WASA will largely rely on ratepayers and our wholesale customers to fund these projects. When I interact with customers, I tell them that living in a city with aging pipes underground is like inheriting your grandmother's car. It's great to have all of this infrastructure with no up-front expense, but things will go wrong — and they'll cost money to fix.

Simply put, the bill for our infrastructure has come due. Customers of water utilities across the United States are facing the same issue. And unlike other public bodies — the Washington Metropolitan Area Transit Authority, for example — we do not have the option of reducing service even for a minute to fill gaps in our budget.

This brings me to our difficult decision to propose a rate increase for FY 2011. If implemented, the average residential user's bill will go up less than nine dollars a month, based on the use of about 5,000 gallons of water a month. While we are sensitive to the needs of our customers in hard economic times and have two growing programs to provide aid to those who need it most, we all need to ask a key question: What is a fair price for a life-giving resource, a resource that is largely invisible unless a problem occurs?

Our proposed FY 2011 rates still leave the average water bill at a quarter of an electricity bill, a third of a cell phone bill, and half a cable bill. An interruption in these other services is generally inconvenient, but an interruption in water supply could be catastrophic.

When setting our rate schedule, we looked for innovative ideas and ways to cut costs. These included:

  • Restructuring of short-term financing for the Washington Aqueduct and capital equipment
  • Revised capital estimates and schedules based on major design milestones achieved, project delivery established and favorable bidding environment
  • Personnel merit cuts: no merit increases for most non-union employees
  • Utility cuts: locked in FY 2011 electric prices for budget control
  • Reduction in contractual services
  • Changed interest payment assumptions for new debt issuance in FY 2011

We also seek to lessen the blow to our low-income customers.

DC WASA has had a customer assistance program, or CAP, since 2001 that provides savings to eligible low-income customers. The Board, after in-depth deliberation, endorsed expansion of this program in FY 2009. While the program originally provided a discount to the first 4 Ccfs (or 2,992 gallons) of water used, this was expanded to include both water and sewer use. The current rate proposal includes yet another expansion that would save CAP customers an additional $2.52 per month on their bills by providing a discount on the DC PILOT and ROW fees up to the first 4 Ccfs of water use.

We have also proposed restructuring our impervious area charge for residential customers. There will now be a six-tier rate structure instead of a single Equivalent Residential Unit (or ERU). Using technology, we have measured the actual amount of impervious surface for the more than 104,000 residential properties we bill under this program. Fully 92 percent of residential customers will be billed for one ERU or less than one ERU — leaving the largest charges for the properties that actually have the largest impervious areas.

In addition to these program changes, we have proposed the following rate increases as shown on the screen:

  • Combined water and sewer rate of 77 cents per Ccf (or $1.03 for 1,000 gallons)
    • Including 59 cents per Ccf for water, and 18 cents per Ccf for sewer.
  • Customer metering fee increases starting at $1.85 for a 5/8" meter per month.
  • IAC increase from $2.20 to $3.45 for each ERU per month to cover the costs of the Long-Term Control Plan.
  • Payment In Lieu of Taxes (or PILOT) fee increase of 6 cents per Ccf.

The Board proposed these rates in February. It was then up to us to make the case to our customers.

For the first time in DC WASA history, we set out to have a public input process on the proposed rates that went well beyond the rates themselves. In six of the District's eight wards, we teamed up with the respective councilmembers to host town hall meetings that featured a rate presentation. But we also brought key personnel to talk about construction projects, water quality, infrastructure, customer service and jobs at the Authority. We allowed ample time for any kind of questions our customers had on their minds. On the whole, these meetings were fairly light in attendance. Those who came, however, were very well-informed about our operations and had questions or concerns that were both legitimate and answerable.

My view is that we should seek customer input aggressively and at all times. I preside over an agency that has the very serious and necessary task, because of events in the past, of rebuilding public confidence in both the enterprise itself and the service we provide. Every customer, regardless of whether he or she receives a bill, should feel that we're listening. This was the goal of our town hall meetings, and it's also the goal of our reinvigorated public affairs program. Our customers should understand what their bills are underwriting, and be confident in what they receive in return.

Chairman Walker, this concludes my prepared remarks. As always, I want to thank you for your careful attention to the financial underpinnings of the authority I run with your oversight. I look forward to answering any questions you may have.