Dominated by Small Systems
by Frank Mangravite, Ph.D.
(reprinted, with permission, from Public Works Financing)
|In 1980, Sewer District #7 of Carmel, N.Y., contracted with Mid Hudson
Pollution Control, now owned by Severn Trent Environmental Services, to provide the labor
to operate its system. This was the first New York State operations contract. Private
firms today operate over 266 water and wastewater systems in New York. The majority of
these are small-less than 0.33 mgd.
Before American Anglian Environmental Services' 10-year contract in 1997 to manage operation of the City of Buffalo's 160-mgd water system, the last new contract to operate a municipal water or wastewater system greater than 10 mgd was in 1992 when OBG Operations started operating Utica's newly constructed 32-mgd water filtration plant, which requires 7-9 employees.
This survey includes the known operating contracts for the following firms:
Figure 9 gives the distribution of contract-operated water and wastewater systems in New York as a function of the design flow of the system. There are at least 200 systems that are less than 0.33 mgd. These 200 small systems have the following characteristics:
A similar analysis for New Jersey and Connecticut yields market penetrations of 8.9% and 8.0%, respectively. New Jersey has 26 privatized plants over 1 mgd and 291 communities of 5,000 or greater. Connecticut has 12 plants over 1 mgd and 137 communities of 5,000 or more.
One flaw in the above market penetration analysis is that a community typically has more than one utility system. In New Jersey, there are about 431 wastewater plants, 613 water systems and 291 communities over 5,000 population. This gives a ratio of 3.6 plants per community. Assuming the same ratio for the other two states yields the following market penetrations for communities over 5,000 persons:
The estimated aggregate design flows of the contract-operated water/wastewater systems in each of the three states is:
Both New Jersey numbers exclude the 80-mgd Newark water filtration plant, which reverted to public operation this year. The first includes known contracts for only treatment plant O&M, including those for drinking water wells. The second includes the flows of projects that are only for the operation of collection systems and or distribution systems. New Jersey has a significant number of contracts for the operation of collection and distribution systems alone.
The wastewater portion of design flows in New York and New Jersey are each strongly influenced by a single large water treatment facility, Buffalo's 160-mgd plant and Jersey City's 80-mgd plant. Subtracting these design flows changes the percentage of contract-operated flow from wastewater plants to 64% for New York and 61% for New Jersey. All of Connecticut's projects are for wastewater with the exception of New London, which is for both water and wastewater.
The average projects size can be calculated by dividing the aggregate plant design flows by the number of plants or projects. For the three states, they are:
These average flows show that market penetration has proceeded quite differently in each state. In Connecticut, many of the larger cities have embraced the concept of private contracting. There appear to be few or no small systems under contract, however.
In New York, larger cities, with the exception of Buffalo, have not been able or
willing to contract out utility operations. On the other hand, there are several small
O&M firms and two national firms-Severn Trent and Ogden Yorkshire-that have acquired
local operators that serve a large number of small water and wastewater systems.
Market penetration in New Jersey has been effective for both large and small systems.
The New York water/wastewater privatization market. It is estimated to be between $40 million and $80 million. The majority of the New York contracts for the smaller systems operated by Severn Trent and Ogden Yorkshire, are for labor only. Operating costs for electricity, sludge, chemicals, etc. are paid by the owner. However, there are exceptions to this rule where the operating firm may pay for certain non-labor operating costs and not others.