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Cornell Asks PSC to Deny UWNY Surcharge for Desal Expenditures

New City, NY  (February 24, 2014) – Rockland County Legislator Harriet Cornell has requested the Public Service Commission (PSC) reject the request by UWNY to charge its rate payers a Long-
Term Water Supply Surcharge to recoup the $56.8 million the utility reports to have spent on the development of their proposal for a Hudson River desalination plant.

 

In a letter sent to the secretary of the PSC on February 21, Cornell points out that to date, UWNY has not released a budget or any detail on the proposed capital costs for the plant.  “Only two pages of the 775 page Draft Environmental Impact Statement (DEIS) were devoted to the topic of project costs,” said Cornell, “and that inclusion was mostly an explanation of the water rate approval process.  There are no specifics on a vague statement by UWNY that the project will cost between $139.2 to $198.3 million.” 

 

Cornell points to one of the conclusions contained in a report prepared by ECONorthwest, a well-respected economic, financial and planning firm.   “Their report states that the exclusion of basic cost details results in a DEIS that lacks credibility as a source of information for decision makers and stakeholders,” said Cornell.  “As a result questions arise about the pre-development cost; how do these costs relate to their budget? Did they manage to stay within their budget? If not, what is the explanation for cost overruns?”

 

“There are too many unanswered questions, resulting in a lack of transparency that obstructs the public’s basic right and need for information; the PSC should reject the request by UWNY that $56.8 million of surcharge expenses be paid for by ratepayers,” said Cornell.

 

 

 

Full text of letter sent to PSC Secretary Kathleen Burgess follows:

 


 

 

 

 

Re:       United Water New York Rate (UWNY) Case 13-W-0246

 

Dear Secretary Burgess:

 

I am writing to express my opposition to the request by UWNY to charge rate payers for the $56.8 million that UWNY had spent as of July, 2013 on their proposed desalination project.

 

UWNY has not to date provided a budget nor essentially any detail on the proposed capital costs for the desalination plant.  The only source of cost information is the DEIS which devoted a scant two pages to the topic in a document well over 775 pages.    Most of the DEIS discussion of cost is an explanation of the water rate approval process. In terms of specific development costs for design and construction of the plant, there are none.  The DEIS simply states it will cost between $139.2 to $198.3 million.  The $50 million or 35% spread is explained: “The final cost of the Project depends on final design and permits and site plan approvals.” 

 

It is incredible that the standard cost categories for a capital project are not shown:  architecture and engineering costs, land acquisition, approvals, geotechnical testing, legal fees, interest, construction, overhead and profit, and contingency.  The report by economic consultants ECONorthwest corroborates this when they state in their review of UWNY’s projected costs that the DEIS lacks “transparency and documentation regarding the data, assumptions, and analytical methods used to generate the cost results. By excluding such basic details, the authors of the cost sections of the DEIS report results that lack credibility as a source of information for decision makers and stakeholders.”

 

When the DEIS was released in January 2012, the pilot project was operational but those specific costs are not listed separately in that document.  We learned from the Joint Proposal in the 2010 Rate Case (No. 09-W-9731) that UWNY spent $16 million for the pilot project.  The DEIS is silent on whether those costs are included in the figures for the design and construction of the plant.

 

An applicant who is seeking any but the smallest grant from a governmental agency has to submit a budget in accordance with that agency’s budget requirements.  When an applicant is seeking a loan or grant for a capital project, there is typically more detail required and standard expenses that must be projected.  Look at the level of detail required by any funding application for the EFC or the Governor’s CFA process.  Without this specificity, funders cannot make defensible decisions.

 

This surcharge request raises several questions:  first, where is the proposed budget for a project estimated to cost between $139 and $180 million?  Secondly, how do the costs that UWNY states they have already incurred for such project relate to their budget?  And finally, has UWNY managed to control their costs as stated in their budget and if not, what is their explanation for cost overruns? 

 

One must assume that UWNY has submitted a budget with such detail to the PSC in order for your analysts to review and evaluate the reasonableness of their expenditures; otherwise your staff can only review costs against a generic standard like Means Construction Costs.  The public, however, has never been privy to such information; therefore we can only ask that you reject their request that $56.8 million of surcharge expenses to be paid for by rate payers.

 

Very truly yours,

Harriet D. Cornell

Chair -Environmental Committee

Rockland County Legislature


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Charles Clewsow February 27, 2014 at 10:21 AM
Mike, please approach this with an open mind. Our own Rockland County Dept of Public Health says we need the water and here is what REDC's Mike Ditullo says. http://www.redc.org/new/images/photos/Community_View_Rockland_needs_Haverstraw_Water_Project.pdf Please read and let me know where you disagree. Thanks
Charles Clewsow February 27, 2014 at 10:31 AM
....Jan Deganschien of the Rockland Business Association supports Desal and he explains why here. ................. http://m.youtube.com/watch?feature=plcp&v=R0RzSRXhdz0 Do you disagree with Jan, Mike? If so, where do you disagree?
Charles Clewsow February 27, 2014 at 10:51 AM
Mike, one of the cornerstones of the recent election has been to increase Economic Development in the County. We will fail in our objectives if we don't. Many have fought hard and long to get to this point where we have a new motivated and smart County Executive. It will all be for naught if we fail with Economic Development. All our well respected business including Ditullo, Hector May, Jan Deganschein realize we cannot achieve our Economic Development goals without an additional supply of water, supported by the PSC and the DEC. All studies point to the need for additional water supply. It is only some of these politicians who disagree but Mike look at the way this County and Town has been run by these very same politicians? Are we to trust Cornell, Schoenberger Fried, St Lawrence, Vanderhoef, Gromack etc etc or do we trust our business leaders and United Water, the PSC and DEC who have NEVER failed to deliver safe clean water to our homes. I ask you Mike....who has the better record? Who should we support? Who do you support?
Mike Hirsch February 27, 2014 at 03:46 PM
Charles, I watched the videos. They really didn't tell me much. While I like and generally agree with Jan and Al, I don't in this case. I think the PSC is in bed with United Water and don't trust their studies. Some jobs will be created, but all of us will have to pay for them. Let's just agree to disagree on this one.
Charles Clewsow February 27, 2014 at 04:23 PM
OK Mike, but if the PSC was in bed with UW, Desal would have already been approved. It just is not the case.

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