Waukesha officials are analyzing a proposal for the city of Milwaukee to supply Lake Michigan water, but negotiations with Oak Creek are still continuing.
A Milwaukee supply could potentially save the city $1 million to $2 million per year in volume charges, although that figure does not include any service fees and Dan Duchniak, Waukesha Water Utility general manager, said there is more to consider than just cost.
For years Waukesha had agreed to negotiate exclusively with Oak Creek after signing a letter of intent in November 2012. The agreement expired at the end of November last year and an extension was approved in February setting a new deadline of May 31.
The city chose Oak Creek as a water source over Milwaukee and Racine as part of its effort to secure an exemption to the 2008 Great Lakes Compact, which bans diversions of water outside the Great Lakes basin.
Waukesha received approval last year, although with a smaller service area than it had originally sought and for a smaller volume of water. A reduced service area was among the conditions Milwaukee had originally put on selling Waukesha water.
Duchniak said Waukesha received Milwaukee’s proposal May 15 and waited until June to begin evaluating it. Ultimately, the city’s Common Council and the Waukesha Water Commission wanted the utility to take an in-depth look at the proposal and report back.
“We’re working on putting together that report,” Duchniak said, adding the utility will evaluate the technical components of the proposal; capital and operations costs; potential risks; and intangibles.
Jennifer Gonda, Milwaukee Water Works superintendent, said the city has had the authority to negotiate with Waukesha for its current water service area since 2012 and the Compact Council's decision to shrink the service area opened up the opportunity. She said the Mayor Tom Barrett's concern was that the diversion adhere to the terms of the Great Lakes compact and he feels it does.
"It's not like it's going to be huge boon, but we do have extra capacity and it's good for our system to be operating at high capacity," she said.
The city pumps out about 100 million gallons of water per day and has capacity for up to 360 million gallons. Waukesha's diversion is capped at an average of 8.2 million gallons per day.
Milwaukee would appear to have an advantage over Oak Creek when it comes to per gallon costs given the size of its operations alone. The city currently provides water to a number of other municipalities with rates ranging from $1.43 to $1.78 per 1,000 gallons.
Oak Creek provides water to Franklin and Caledonia for $3.12 per 1,000 gallons, but Mike Sullivan, Oak Creek Water & Sewer Utility general manager, said Waukesha’s price would be around $2.20 per 1,000 gallons after including the infrastructure improvements the utility would need to implement to serve Waukesha.
Assuming Waukesha’s rate from Milwaukee is somewhere within the range of the city’s current prices, the city could save $1.04 million to $1.91 million at its current 6.8 million gallon per day average. Those savings would jump to $1.26 million to $2.3 million if Waukesha ever reached its 8.2 million gallon per day cap.
“We’re a cost of service business,” Sullivan said, noting there isn’t much room for negotiation on the price.
But Duchniak pointed out it isn’t as simple as comparing Milwaukee and Oak Creek prices.
“There’s a lot more that goes into it,” he said.
Going with Milwaukee would require additional work on routing a pipeline to supply the water, which still has to be returned to the Root River under the terms of Waukesha’s Great Lakes diversion. It would also put the city on the hook for any engineering, financial and legal costs Oak Creek incurred from Nov. 30 to May 31 as part of the extension the two cities signed.
Then there are also considerations on how the two communities might work together moving forward.
Gonda said Milwaukee is able to offer a redundant water supply by having two water treatment plants along with a large staff and experience working with large wholesale customers.
“From our perspective, Waukesha is a huge customer in Oak Creek’s system,” Sullivan said. “Waukesha can have a lot more influence on how our system is run because they are such a large customer.”
He said the contract is currently in Waukesha’s hands and the two sides have been going back-and-forth ironing out specific language to avoid confusion in the future.
“We want to try to get this right the first time,” he said.
Duchniak said he’s hopeful the deal will be done soon along with the report on Milwaukee’s offer and a decision will be made by late summer or early fall.
One other part of Waukesha’s effort to get Lake Michigan water remains unresolved. The Great Lakes Compact Council earlier this year denied a request from Great Lakes and St. Lawrence Cities Initiative to reconsider the approval of Waukesha’s diversion. The Cities Initiative has until Aug. 2 to potentially appeal the decision. Former Racine Mayor John Dickert, who recently joined the Cities Initiative as executive director, declined to comment on the pending decision Thursday other than saying the organization was still considering its options.