City approves water contract extension for Y-12, ORNL, but DOE rates questioned

The Oak Ridge Water Treatment Plant is pictured on Pine Ridge above the Y-12 National Security Complex. (Photo by City of Oak Ridge)

Note: This story was last updated at 9 a.m. March 30.

The Oak Ridge City Council on Tuesday approved a one-year, $2.1 million contract extension for water supplied to Oak Ridge National Laboratory and Y-12 National Security Complex, but a few members questioned whether the U.S. Department of Energy is paying a fair rate.

The one-year extension is expected to give the city time to have a qualified third-party engineering firm study the city’s aging water plant on Pine Ridge above Y-12, consider what is needed, and develop options that could help Oak Ridge decide whether to renovate the 70-year-old facility—or build a new one at a new site.

City officials said bringing the existing plant up to code could cost $16 million or more. It was transferred to the city from DOE in 2000, more than 15 years ago. Officials declined to estimate how much it could cost to build a new one, although it’s also said to be in the multi-million-dollar range.

Among the challenges at the water plant now are a leak of 3,000 gallons per day. The city staff is not sure where the leak originates or whether the water that is leaking has already been treated, and so far they haven’t been able to stop the leak.

There is also some slope instability at the ridge top site that could affect access and erosion. That doesn’t make the plant unusable, but it could add to the cost of renovations, said Shira McWaters, the new Oak Ridge Public Works director.

In the meantime, city officials said the water plant, which is capable of 28 million gallons per day but operates in the range of 15-16 million gallons per day, has been modernized and updated, including in its control systems. They said the plant provides excellent water that meets water quality standards and exceeds standards. But they said some of the plant’s current problems could affect its long-term viability.

The $2.1 million fixed-rate water contract extension approved in a 4-2 vote during a special meeting on Tuesday is for up to 1,619,000,000 gallons of water at ORNL and Y-12 through March 31, 2017.

Two City Council members, Charlie Hensley and Trina Baughn, said DOE is taking advantage of the city.

Residents’ rates have more than doubled, while DOE is getting a rate cut, Baughn said.

“This is a fine example of how DOE takes advantage of our customers,” Baughn said. “Here we are ready to give them another break.”

Oak Ridge City Manager Mark Watson disagreed. City officials said DOE consumption has gone down, while city consumption has increased, largely because of water use at the East Tennessee Technology Park, the former K-25 site, after it came online in October 2014.

“DOE’s rate is going down because their consumption is going down,” Oak Ridge Finance Director Janice McGinnis said.

Hensley, who has been critical of the payments in lieu of taxes that DOE pays on its large tracts of land in Oak Ridge, said Oak Ridge residents are subsidizing the federal operation.

“This is another example of DOE taking advantage of the City of Oak Ridge,” he said during the water rate discussion Tuesday. “It’s an ongoing issue that’s existed for 50 years. I would like to see us push back on DOE every time.”

One of the issues raised was the rate paid per 1,000 gallons of water. City officials said DOE is paying about $1.68 per 1,000 gallons of water.

But Baughn said she calculated, based on her last residential bill, that she is paying $7.16 per 1,000 gallons of water, or more than four times as much as the DOE rate. How does she explain that to residents? Baughn asked.

Other Council members used numbers that estimated the city’s cost per 1,000 gallons somewhere between $4 and $6, although city staff members said they weren’t sure where those numbers came from.

Council member Chuck Hope said the contract goes down $177,000 from this year to next. (The annual rate drops from about $2.281 million this year to $2.103 million in the year starting April 1.) Hope said DOE ought to pay a higher fee per 1,000 gallons for water.

“If it costs $6 per 1,000 gallons, they should at least pay that,” Hope said.

Oak Ridge officials said a residential system is different than a large consumer system like DOE’s water system at ORNL and Y-12. There is a higher cost per unit in a residential system than in a large consumer system, Watson said. The large consumer system has large pipes moving water, while the residential system has small pipes with electricity-consuming pumps that move water up and down the hills of the city, Watson said.

Oak Ridge Finance Director Janice McGinnis said DOE doesn’t pay the costs of distribution, which includes pushing water through 225 miles of water lines in the city with the help of pumps. With many low-consuming households, there isn’t enough base to distribute the costs in the residential system, she said.

Still, the question of whether $1.68 per 1,000 gallons is a fair rate is a question that should be considered, Watson said. He said he understands some of the frustration.

Congressman Chuck Fleischmann, among others, has toured the water plant, Watson said. You don’t run modern nuclear facilities on the equivalent of a Model T engine, he said. Some money will have to be spent, although it’s not clear yet who will spend it, Watson said.

“In my personal opinion, it’s a DOE facility, and they should pay for the whole thing,” Hensley responded.

City officials said DOE is cutting water consumption. Some of the reductions cited by officials, including Jack Suggs, who served as interim Public Works director, include the lifting of a requirement that Y-12 pump water into East Fork Poplar Creek to help sustain the fish population. The lifting of that requirement by the Tennessee Department of Environment and Conservation ended a small profit for the city, officials said.

Some Council members and a few city staff members suggested that the contract extension approved Tuesday was the best option that the city had at this point. Not approving the fixed-rate contract, and billing DOE a monthly retail rate for water use at ORNL and Y-12, could result in DOE paying what it thinks it owes, rather than what the city thinks it owes, officials said. The dispute could end up in a costly court challenge—with less than $2.1 million paid to the city in the meantime, they said.

And turning the water plant back over to DOE would make the city the rate payer, and it would mean DOE would set water rates.

“None of us are happy,” Oak Ridge Mayor Warren Gooch said. But, he added, referring to the $2.1 million one-year fixed rate, “this amount is guaranteed.”

That sentiment was echoed to some extent by Council member Kelly Callison. He said the city will get paid $175,000 per month under the contract extension. Or, alternatively, Oak Ridge could “play chicken” with the federal government and end up in court, Callison said. But the city needs a “real world” settlement with DOE by the end of the year, he said.

Voting for the contract extension were Gooch, Hensley, Callison, and Council member Rick Chinn. Voting against it were Baughn and Hope. Mayor Pro Tem Ellen Smith was absent.

Chinn said he wouldn’t disagree with many of the statements at Tuesday’s meeting, but he didn’t think it was the place to negotiate. The negotiations should be behind closed doors with the negotiating parties, Chinn said, not by Council members “throwing darts” when the press is recording what they are saying.

Baughn disagreed, saying the discussion is the business of the public, and there are too many negotiations behind closed doors.

Watson said the city and DOE started negotiating in October and have had numerous meetings since then. The report from the consulting engineering firm is expected within the next six months. In the meantime, the $2.1 million contract extension will provide operations and maintenance funding for the period between April 1, 2016, and March 31, 2017, Watson said.

Also in the meantime, the city plans to work on “uncrossing” raw water lines that run behind the New Hope Center at Y-12 and eliminate a chlorine gas tank system at the water plant in favor of an additive system, apparently to reduce risk. The first project will be done at city expense, and the second will be done at DOE expense.

Oak Ridge has proposed that DOE fund $125,000 of a $250,000 line item for small maintenance expenses and routine maintenance.

Although ORNL and Y-12 are included in the contract extension, ETTP and the DOE Oak Ridge Office, located at the Joe L. Evins Federal Building in central Oak Ridge, are not. They are both on a retail rate.

Regarding percentages of consumption, McGinnis said DOE consumed 1.55 billion gallons of water in Calendar Year 2014 at ORNL and Y-12, or about 52.7 percent of water consumption. That dropped to 1.35 billion gallons of water, or roughly 47.5 percent of consumption, in CY 2015.

Meanwhile, city consumption increased from 1.39 billion gallons (47.34 percent) in CY 2014 to 1.49 billion gallons (52.51 percent) in CY 2015.

City officials said there are 6 percent water and sewer rate increases expected this year, although they haven’t been considered by the City Council yet.

You can find links to the special meeting agenda and additional information here.

More information will be added as it becomes available.

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