Drinking Water Standards New Zealand Cost Benefit Analysis - Engineering Input

Transcription

1 Report Drinking Water Standards New Zealand Cost Benefit Analysis - Engineering Input Prepared for Ministry of Health (Client) By CH2M Beca Limited 20 May 2010 CH2M Beca 2009 (unless CH2M Beca has expressly agreed otherwise with the Client in writing). This report has been prepared by CH2M Beca on the specific instructions of our Client. It is solely for our Client s use for the purpose for which it is intended in accordance with the agreed scope of work. Any use or reliance by any person contrary to the above, to which CH2M Beca has not given its prior written consent, is at that person's own risk.

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3 Table of Contents 1 Introduction Purpose and Background Structure of Report Background to the Standards Existing infrastructure Cost Model Development Source Water Classification Assessed Existing Treatment Processes Assumed Upgraded Treatment Processes Exclusions Reference Costing Data Cost Model Capital Cost Summaries Cost Model Operating Cost Summaries Large Population WTPs Large WTP Cost for Option 2 - Bacterial Compliance Only Case Studies Approach Identification of Suitable Case Studies Communities of ,000 Population Communities of 501-5,000 Population Communities of Population Communities of Population Summary of Case Studies Clutha District Council Concerns Summary of Cost Estimates Capital Cost Operating Costs Sensitivity Analysis Water Use in New Zealand Water Use Overseas Summary of Sensitivity Analysis Chemical Compliance Commentary on Chemical MAVs Cost Summary Household Water Treatment Systems Introduction Compliance Issues Treatment Components CH2M Beca // 20 May 2010 // Page ii

4 8.4 Advantages and Disadvantages of a Household Treatment System Point-of-Entry Systems Point-of-Use Systems Cost Estimates Class 2 Water Carriers Introduction Survey Outcome of survey Cost assessment Conclusion...82 Appendices Appendix A - Source and Treatment Matrix Appendix B - Large WTPs Appendix C - Source and Treatment Matrix for Bacteria Only Compliance Appendix D - Chemical MAV Compliance CH2M Beca // 20 May 2010 // Page iii

5 Executive Summary To support the implementation of the Health (Drinking Water) Amendment Act 2007, the Ministry of Health (MoH) is undertaking a review that includes a quantitative cost benefit analysis (CBA) of compliance with the Drinking-water Standards for New Zealand 2005 (revised 2008) (DWSNZ). The CBA will assist the MoH in developing its drinking water policies further, and will be used in the review of the Capital Assistance Programme. The following is a summary of the DWSNZ Cost Benefit Analysis Engineering Input. It provides an outline of the key assumptions and summarises the costs associated with compliance with DWSNZ. The engineering input for the CBA included analysing a total of 667 water treatment plants (WTPs) that were deemed non-compliant with the bacterial and/or protozoal requirements of DWSNZ. A breakdown of the treatment plant numbers and the population served is given in Table ES1. Table ES1 - Total Number of and Total Population Affected by Non-Compliant WTPs Population Category Number of Non-Compliant WTPs Population Affected by Non- Compliant WTPs Large (>10,001 population) ,531 Medium (5,001-10,000) ,107 Minor (501-5,000) ,480 Small ( ) ,666 Neighbourhood (<101) ,153 Total ,937 For all population categories two forms of compliance with DWSNZ were considered. The first assumed that compliance with both the bacterial and protozoal requirements of the Standards would be required. The second assumed that only compliance with the bacterial requirements would be required. For non-compliant WTPs in the large population category, a telephone survey was conducted with the council asset managers to determine expected costs to comply with DWSNZ. For non-compliant WTPs in the medium through to neighbourhood population categories, a cost model was developed. The cost model considered, based on the data available from the WINZ database, the quality of the source water and the population served for each treatment plant. These factors were used as the basis for determining an assumed existing treatment system and what upgrades would consequently be required for compliance. This enabled estimates of probable capital and operating costs to comply with DWSNZ to be determined. Twelve case study WTPs were selected from the medium to neighbourhood population categories and used to test the reasonableness of the assumptions and costs derived from the cost model and to provide a basis for cost model adjustments if deemed to be required. In terms of chemical non-compliance, the number of WTPs with transgressions above the Chemical Maximum Acceptable Value (MAV) was determined, and the cost model used to derive an estimate of probable additional cost to achieve chemical compliance. CH2M Beca // 20 May 2010 // Page 1

6 The engineering cost estimates only include costs which are strictly necessary for compliance. Costs that are deemed to be related to asset maintenance or replacement have been excluded. The cost model assumes that the existing treatment plant capacities are adequate and therefore makes no provision for capacity increases. Infrastructure such as raw water storage, treated water reservoirs and the degree of plant redundancy may provide more consistent raw water quality, or provide a greater degree of security of supply, but have been excluded from the cost estimates as they are not strictly required for compliance with the Standards. Across all population categories the overall estimate of probable cost to comply with the both the bacterial and protozoal requirements of the Standards is $337 million ± $86 million with an annual operating cost of $12.6 million. These costs are broken down by population category in Table ES2 below. Table ES2- Estimates of Probable Capital Costs for Bacterial and Protozoal Compliance Population Category Number of Plants Total Cost (inclusive of Population served margins and fees) ($million) Large 22 $ ,531 Medium 29 $ ,107 Minor 192 $ ,480 Small 236 $ ,666 Neighbourhood 188 $ ,153 TOTAL 667 $ ,937 Across all population categories the estimate of probable cost to comply with only the bacterial requirements of the Standards is $76 million ± $23 million with an annual operating cost estimated at $5.0 million. These costs are broken down by population category in Table ES3. Table ES3 Estimates of Probable Capital Costs for Bacteria Only Compliance Population Category Number of Plants Total Cost (inclusive of margins and fees) ($million) Population served Large 14 $ ,963 Medium 12 $8.4 45,396 Minor 81 $ ,883 Small 123 $ ,248 Neighbourhood 161 $13.7 8,547 TOTAL 391 $ ,037 Includes 18% for Preliminary & General, 12% engineering fees and 18% contingency. These capital cost estimates are likely to fall in the accuracy range of + 30% and have been rounded to the nearest $100,000 2 The capital cost estimate to upgrade Large WTPs for Compliance Option 2 is actually $4,000. CH2M Beca // 20 May 2010 // Page 2

7 The estimate of probable cost to comply with the Chemical MAV limits is $5.2 million. A sensitivity analysis was carried out and identified that significant capital cost savings could be made if the peak design demands were reduced. Peak design demands, based on typical New Zealand unmetered demands, of 1,200 L/person/day were used. These savings, which are in the order of 25% ($78 million) for a 60% reduction in peak demand (i.e. to 500 L/person/day) would have to be offset against the cost of implementing new legislation or initiatives aimed at water conservation and efficiency. Cost estimates for point-of-entry and point-of-use systems were derived for both the small and neighbourhood population categories and compared with centralised treatment. Point-of-use is not recommended as it carries an inherently high risk of inadvertent consumption of untreated water. Point-of-entry system were comparable in cost with centralised treatment for the small population category but were shown to be cost competitive for neighbourhood sized supplies especially in combination with some centralised pre-treatment. The annual operating costs however are significantly higher. The additional cost for water carriers to deliver Class 1 water was estimated at $36,000 per trader per year and at a total cost of $1.6 million per year. To put the costs presented in this report into context, the country s drinking water infrastructure was valued at about $11 billion in Local authorities operational expenditure for the years has been estimated at an average of $605 million/year. The average annual capital expenditure for was estimated at $390 million (Auditor General s Report 2010). Drinking water infrastructure is primarily made up of the following components: water treatment plants (WTPs), reticulation and reservoirs. This CBA has primarily focused on the WTPs. CH2M Beca // 20 May 2010 // Page 3

8 1 Introduction 1.1 Purpose and Background In implementing the Health (Drinking Water) Amendment Act 2007, the Ministry of Health (MoH) is undertaking a review that includes a rigorous, quantitative cost benefit analysis (CBA) of compliance with the Drinking-water Standards for New Zealand 2005 (revised 2008) (DWSNZ). The CBA will assist the MoH in developing its drinking water policies, and will be used in the review of the Capital Assistance Programme. This report summarises the DWSNZ Cost Benefit Analysis Engineering Input. It provides an outline of the key assumption, the methodology used to derive the costs, and the cost estimates. The engineering input to the CBA has focused on the following activities: i. Extraction from the WINZ database of the number of non-compliant WTPs for E.coli, protozoa and P2 determinands and subsequent grouping by population category, non-compliance type and source water quality. ii. Assessment of the likely existing treatment processes for each WTP grouping iii. Assessment of the least cost upgrade requirement for each WTP grouping based on bacterial compliance and for combined bacterial and protozoal compliance. iv. Development of cost curves or lump sum costs for a number of different unit treatment processes which are then used to determine aggregate upgrade costs for each WTP grouping v. A telephone survey of all water authorities with non-compliant WTPs that fall within the large population category. vi. A series of detailed case studies for 12 WTPs within the medium, minor, small and neighbourhood population categories to validate the cost model output and to highlight the range of issues faced when looking at compliance on a case by case basis vii. A review of the number of WTPs and/or distribution zones that have had P2 transgressions which exceed the chemical MAV limits and the costs associated with treatment viii. A review of point of use/point of entry costs for small or neighbourhood communities ix. A review of the costs associated with ensuring all tanker water for human consumption meets Class 1 requirements. The reference year for the study has been taken as 2007/08. This is because the data obtained from the ESR annual surveys for that year have been validated and can be reviewed independently on the Drinking Water NZ website. 1.2 Structure of Report Section 2 of the report describes the cost model development, the core assumptions and design basis and the cost model output as applied to the medium, minor, small and neighbourhood population categories for both capital and operating costs. CH2M Beca // 20 May 2010 // Page 4

9 Section 3 presents the capital and operating costs for large WTPs as determined via the telephone survey. Section 4 provides a detailed discussion of the case studies. Comparisons are made between the costs for upgrading given by the water suppliers and Beca s assessment of what is required strictly for compliance. A further comparison with the cost model is given and is used to validate the core assumptions of the cost model. Section 5 summarises all the capital and operating costs associated with bacterial and protozoal compliance for all population categories and includes adjustments to the cost model output based on the findings of the case studies. Section 6 provides details and results from a sensitivity analysis of the assumed per capita demands. Section 7 presents capital and operating costs associated with chemical MAV compliance. Sections 8 & 9 while not strictly relating to compliance with the Standards provide further supporting information that may feed into policy discussions and development. Section 10 presents the conclusions of the engineering input to the CBA. 1.3 Background to the Standards The Drinking-Water Standards for New Zealand 1984 (Board of Health) were the first specifically New Zealand drinking water standards (but based on the World Health Organization Guidelines). These had a focus on bacteria by requiring testing for faecal or total coliforms, and for treated water turbidity to be less than 1 NTU for most of the time. With the emergence of the health risks posed by the protozoa Giardia and then Cryptosporidium in the late 1980s, the Department of Health responded by incorporating some interim treatment requirements for Giardia in the 1993 Water Supply Grading. With the promulgation of the revised Drinking-Water Standards for New Zealand in 1995, the focus on the level of treatment changed markedly and protozoal compliance became the main driver of treatment upgrades. Significant research developments in the late 1990s allowed for the recognition of ultraviolet disinfection (UV) as a treatment technology for protozoa in the 2005 Standards, which for many suppliers offered a more cost-effective compliance option. The focus of this report is compliance with the 2005 (revised 2008) Standards. It should be noted that compliance with the Standards is not strictly mandatory. However compliance with the Drinking Water Act is. There is a subtle difference between the two as described below. The Health (Drinking Water) Amendment Act 2007 (the Act) took effect from 1 July Prior to this, local authorities had more discretion in the quality of the water they supplied to their residents and communities. While the Act does not require compliance with the DWSNZ, it does require reticulated drinking water suppliers to take all practicable steps to comply. Taking steps to implement an approved public health risk management plan is considered sufficient to comply with the "all practicable steps" duty. A public health risk management plan is essentially a quality assurance program for providing water. Compliance with the Act is staggered over several years, depending on the size of population served by the drinking water supply 3. 3 Auditor Generals Report 2010: Local authorities: Planning to meet the forecast demand for drinking water CH2M Beca // 20 May 2010 // Page 5

10 For the avoidance of doubt, we also note that the Act only required the implementation of those provisions of the supplier s public health risk management plan relating to the drinking water standards. 1.4 Existing infrastructure To put the costs presented in this report into context, the country s drinking water infrastructure was valued at about $11 billion in Local authorities operational expenditure for the years has been estimated at an average of $605 million/year. The average annual capital expenditure for was estimated at $390 million (Auditor General s Report 2010). Drinking water infrastructure is primarily made up of the following components: water treatment plants (WTPs), reticulation and reservoirs. This CBA has primarily focused on the WTPs. CH2M Beca // 20 May 2010 // Page 6

11 2 Cost Model Development 2.1 Source Water Classification The following summarises the data sources and the decisions relating to how the data has been manipulated, and forms an important part of the design basis Data Source All of the compliance data has been sourced from the WINZ database, which is held and managed by ESR on behalf of MoH. The reference year for the study is 2007/ Self Supplies A self supplier is defined in the Health (Drinking Water) Amendment Act 2007, Section 69G, as: a person who owns a drinking-water supply that is exclusively used to supply water to a) 1 property that is also owned by that person; or b) 1 or more buildings that are also owned by that person Self supplies are excluded from the CBA study as they do not come under the requirements of the DWSNZ, rather that they are covered by the Building Act, therefore self supplies have not been analysed further in this study. Some examples of typical self supplies are schools, marae and hospitals that are located beyond the area supplied by a drinking-water supply Relationship between Supplies, Zones, Water Treatment Plants and Population Figure 2.1 schematically represents the relationship between source, treatment, zone and supply for three supplies (A, B and C). Supplies are often referred to as communities. Source 1 WTP 1 Zone 1 Supply A Source 2 WTP 2 Zone 2 Supply B Source 3 Zone 3 Source 4 Source 5 WTP 3 Zone 4 Supply C Source 6 Zone 5 Figure 2.1 Source, treatment and zone diagram CH2M Beca // 20 May 2010 // Page 7

12 Multiple water sources may serve a single water treatment plant. One or more water treatment plant (WTP) may serve a distribution zone (zone). Likewise a WTP may serve more than one zone. A supply is then made up of multiple zones which may in turn receive water from multiple treatment plants. Protozoa compliance is based at the WTP level whereas E.coli compliance is based at both the zone and WTP level. Within WINZ a water treatment plant population is based on the aggregate population of all the zones served by that WTP. Although the costs of compliance will relate primarily to upgrading a given WTP, the benefit will relate to the population served. In many cases several WTPs may serve a single supply population and there can be discrepancies between the sum of the WTP design populations and the actual population of the supply; i.e. two or more water treatment plants may be sized to serve a population giving 100% redundancy. In addition some supplies will have primary and secondary WTPs for security of supply purposes. This can lead to inaccuracies in determining the population benefiting from the upgrade. The WINZ data has been reviewed to identify where population overlaps occur and adjustments made to the cost matrix populations to enable the benefits to be more accurately assigned. The population served by each WTP has been used as a proxy for the design capacity of the WTP Bacterial and Protozoa Compliance Status The WINZ compliance data required further breakdown by bacterial and protozoa compliance status. Protozoa Compliance Protozoa compliance is straight forward as a WTP is deemed to be either compliant or not, based on the type and quality of the source water and whether it has met the specific requirements of DWSNZ for the installed treatment processes. The log removal requirement for protozoa compliance is defined for varying water sources by the DWSNZ and verified by the Drinking Water Assessor. Different treatment processes have assigned log removal credits so it is a relatively simple matter of adding the log credits to determine whether a plant is capable of meeting the overall log reduction requirements. E.coli Compliance E.coli compliance is less straight forward and required significant manipulation of the WINZ data. Where non-compliance is due to Inadequate monitoring, not enough samples, inadequate scheduling or not a recognised laboratory, these are classified as administrative failures or technical non-compliances and the cost is limited to carrying out the correct bacterial monitoring for the size of supply. In the cost model we have allowed a nominal sum for increased/improved monitoring which is reported in the operating costs. Where there is a FAC 4 transgression it is assumed that the correct treatment is in place and that the transgression could be resolved through operational measures. Hence these are categorised it as a technical non-compliance requiring some upgrade to instrumentation and monitoring. 4 Free Available Chlorine CH2M Beca // 20 May 2010 // Page 8

13 Where non-compliance is due to an E.coli transgression this is a clear non-compliance. From the dataset there were 207 WTPs that did not monitor E.coli at all and of those 87% belong to either the Small or Neighbourhood population categories. Discussions with ESR indicate that in some cases not monitoring may be related to the knowledge that they do not comply, but for many small and neighbourhood WTPs it may be due to lack of organisation and/or funding. Where a WTP is not monitored at all, we have assumed the worse case; i.e. that the WTP is non-compliant for E.coli. One exception to this is with the Waipaoa WTP serving the Gisborne population (30,600). In that case it is not monitored all the time because the plant is a secondary supply and typically only operates for one to two weeks per year. This was picked up in the Large WTP telephone survey. From the dataset there were 19 neighbourhood supplies that were exempt from E. coli monitoring. Discussion with ESR indicates that exempt plants tend to either be self supplies or to supply less than 3 buildings and have short reticulation distances. The water supplier is still required to undertake zone monitoring for E. coli compliance. These plants have been treated based on their zone compliance (which in all cases was non-compliant for E. coli). Table 2.1 breaks down the total number of non-compliant treatment plants by bacterial and protozoal non-compliance and population category. Table 2.2 gives a similar breakdown but on the basis of the total population served. Population Category Table 2.1 Non-compliance by Type and Population Category (Number of WTPs) Non-compliant for Bacteria Non-compliant for Protozoa Non-compliant for both Bacteria and Protozoa Total Non- Compliant Large Medium Minor Small Neighbourhood TOTAL CH2M Beca // 20 May 2010 // Page 9

14 Table 2.2 Non-compliance by Type and Population Category (Population) Population Category Non-compliant for Bacteria Non-compliant for Protozoa Non-compliant for both Bacteria and Protozoa Total Non- Compliant Large , , ,531 Medium 0 78,711 45, ,107 Minor , , ,480 Small ,418 30,048 59,666 Neighbourhood 170 1,606 8,377 10,153 TOTAL , , ,937 Note that E.coli compliance can be further broken down in terms of actual non-compliance or technical non-compliance as discussed above Source Water Categorisation The type and quality of the source water was required for the WTPs (as opposed to the zones or supplies). Some of the sources are formally graded through collaboration by the water supplier and Drinking Water Assessor (DWA), with gradings being registered on the WINZ database. However many of the sources have not been formally graded. A consistent categorisation convention was required for the CBA to enable us to allocate the required log reductions for compliance. After consultation with ESR the following convention was agreed: Where relevant data does exist for the source (from Source Grading questions Q12 6, Q13 7 and Annual Survey): 0 can only be a Secure Groundwater 1 is not secure but Q13 shows Source has low risk of contamination 2 is not 0 or 1 above and (all from Q12) the catchment is Protected AND the catchment is Stable or Fairly consistent AND Human pollution is Very unlikely or Not likely AND Animal pollution is Very unlikely or Not likely AND 5 There is one WTP in the large population category that is only compliant for protozoa, however because the secondary supply for this community is non-compliant for both bacteria and protozoa, the population has been counted in the Compliant for Neither Bacteria nor Protozoa column. There will be other examples of this situation throughout all population categories. 6 Question 12 of the Public Health Grading of Community Drinking-Water Supplies Questionnaire applies to all surface waters and non-secure groundwaters. It is not applicable to secure groundwaters. The information is used in the drinking-water supply grading to determine the risk of contamination if water treatment is below standard. 7 Question 13 of the Public Health Grading of Community Drinking-Water Supplies Questionnaire applies to all surface waters and non-secure groundwaters. The information is used in the drinking-water supply grading to determine the risk of contamination for supplies receiving little or no treatment. CH2M Beca // 20 May 2010 // Page 10

15 Chemical pollution is Very unlikely or Possible/not likely 3 is not 0, 1 or 2 above (but is graded and so do have data regarding source quality). Where relevant data did not exist for the Source: G = a groundwater-type source R = a rainwater-type source. S = a surface water-type source The ESR 0 to 3 codings were applied to all source types as a descriptor of quality (i.e. the likelihood that the source is contaminated) but only where source quality was known (i.e. the source was graded). Type 0 can only be groundwaters, many Type 1s will be groundwaters (non-secure) but it is possible for a surface water to meet the requirements of low risk as defined in the grading process. To be low risk the source is required to be of a higher quality/lower risk to that described as Type 2. Type 3s will almost all be surface waters and these have known contamination from humans and/or animals and/or chemicals. Where the source has been graded, then a Type of (for example) 2 represents the same quality water whether it comes from a groundwater, surface water or rainwater source. All ungraded sources were categorised into one of three types (Ground, Rain or Surface) and ranked in that order of diminishing quality. Source water qualities were ranked in order of best to worst as shown in Table 2.1. Table ESR water quality ranking ESR Category Quality ranking 0 Best 1 High quality 2 Medium Ground (G) Rain (R) Surface (S) 3 Worst Where a WTP received water from multiple sources, the sources were listed in order of graded and ungraded sources. For example: TP00207 has three sources with qualities of 3,3,G. Two of the sources are known to be contaminated and the quality of the other is unknown but it is a groundwater-type and thus is likely to be of better quality than a surface source of unknown quality. TP00334 has four sources with quality of 0,1,1,2. That is, one is secure groundwater, two are high quality but not secure groundwaters and one is a medium quality source. This highlights that the quality of water entering a treatment plant can be complicated where there are multiple sources of varying or unknown quality. To simplify this in the cost benefit analysis (CBA), where there are multiple sources, the WTP treatment requirements have been determined according to the lowest quality source, for example TP00207 (as described above) would be based on Type 3 and TP00334 would be based on Type 2. CH2M Beca // 20 May 2010 // Page 11

16 2.1.6 Source Water Categorisation Design Basis In order to determine the compliance costs, the source water categories as defined above need to be allocated a log reduction requirement. Table 2.3 shows the log reduction assumption for each type of source water to meet the DWSNZ requirements. Table Source Water Log Reduction Requirement Log reduction requirement No log reduction High quality water (3 log) Low quality water (4 log) Very low water quality (5 log) Equivalent ESR graded sources All sources of Type 0 ie Secure groundwater All sources categorised 1, 2, G & R, + 60% of S 80% of Type 3 sources, 30% of S 20% of Type 3 sources, 10% of S For each population category the number of non-compliant WTPs has been broken down by log reduction requirement. This is summarised in the design assumption and treatment matrix Flow and Population Design Basis Following consultation with MoH the design flow for each population category has had the following principles applied: Large WTPs (population >10,000) design flow based on capacity advised by the water supplier. In the absence of actual design capacity a figure of 700 litres/person/day was used. For WTPs serving populations <10,000 a higher per capita water usage rate of 1200 litres/person/day was used. For each population category the WTP design flow was based on the per capita flow times the mean population for that category (based on population data received from ESR). Table 2.5 gives the population design basis: Table Population Design Basis Population category Population band Design population Design Flow (m³/d) Number of Non- Compliant WTPs Medium Minor Small Neighbourhood < Total 645 A copy of the design assumption and treatment matrix is attached in Appendix A. It should be noted that the populations associated with the WTPs are based on the population registered in WINZ for the reference year ie 2007/2008. In some cases the population listed on the Drinking Water NZ website differs from that used in the study. This difference is because the population may have changed during the 2008/09 annual survey. For the purposes of the CBA all costs are related to the 2007/2008 population. CH2M Beca // 20 May 2010 // Page 12

17 Rather than use the midpoint population of the population categories, which can cover a large range, the mean population has been used as the design population. For all population categories, the mean population was below the midpoint population. 2.2 Assessed Existing Treatment Processes In order to determine the costs of complying with the DWSNZ we have had to assess what level of treatment a community actually has in place. Drawing on our experience of water treatment plants throughout New Zealand we have undertaken an assessment that assumes: water suppliers typically have treatment systems in place that are matched to the source water the degree of non-compliance for each treatment plant as reported in the WINZ database provides an indication of the shortcomings of each plant the treatment plant assets have been appropriately maintained. For each population category and source water type we have developed a matrix that incorporates our assessment of a generic treatment process that is suitable for that water quality and is consistent with the type of non-compliance. In reality there will be significant variation from the processes selected as other factors such as process reliability, operability issues, availability of funds, the prevailing treatment trends of the time can all affect what treatment process a community or local authority has chosen to implement. Nevertheless we consider that the assumptions are reasonable based on our knowledge of WTPs around New Zealand. 2.3 Assumed Upgraded Treatment Processes Based on the population category, source water type and the assumed existing treatment processes we were able to assume what treatment processes would be suitable to upgrade the plant to achieve compliance for E.coli, or E. coli and protozoa combined. Using our experience of designing upgrades of WTPs to meet the DWSNZ over the last 15 years we were able to select appropriate treatment processes. These were reality checked against the fundamental question of what is the least cost treatment process required to achieve compliance? This question does not address the other questions a community may face when choosing how to upgrade their treatment system, such as: which treatment process will give the greatest reliability of achieving compliance which treatment process gives the greatest flexibility of operation or can cope best with fluctuations in raw water quality which is the easiest or most robust to operate which process provides the best match to the Water Authority s level of operator training and/or supervision. Membrane treatment systems are gaining in popularity as they are seen as a robust technology that can reliably achieve compliance, especially as the Standards have developed over the last 15 years. Membranes normally cost more than conventional systems yet a community may choose them due to the perceived (and in many cases, actual) advantages of security of compliance, reliability and operability. We have not allowed for any membrane systems in the assumed upgrade as they have not been considered to be the least cost process for achieving compliance. We would note that these costs are coming closer together and it is anticipated in the short to medium term that membrane systems will be competitive with conventional systems, however for the purposes of the CBA they have been excluded. The assumed existing treatment processes and upgrade processes are shown in the design assumption and treatment matrix in Appendix A. CH2M Beca // 20 May 2010 // Page 13

18 2.4 Exclusions The CBA excludes any costs which are deemed to be related to asset maintenance or replacement. The cost model assumes that the existing treatment plant capacities are adequate and therefore makes no provision for capacity increases. Infrastructure such as raw water storage, treated water reservoirs and the degree of plant redundancy may enable a WTP to have a more consistent raw water quality, or provide a greater degree of security of supply but are not strictly required for compliance with the Standards. In some cases implementing such infrastructure could be part of a supplier s PHRMP, but unless it relates to DWSNZ is not required for the all practicable steps test. These items have therefore been excluded from the CBA as the costs are not directly attributable to complying with the Standards. 2.5 Reference Costing Data Methodology Reference costing information has been collated from previous Beca projects conducted primarily over the last 10 years for over 30 water treatment plants. The reference costs range in accuracy from preliminary design estimates, to detailed design estimates and tendered costs. The plants ranged in size from 0.02 MLD to 45 ML/day. The costs for individual unit treatment processes were separated and percentage add-ons, for example Preliminary & General (P&G), design and contingency removed so that costs could be compared on a consistent basis. Where appropriate the costs were escalated to 2009 values 8. Log-log graphs of WTP capacity versus treatment unit capital costs have been used to determine cost equations for each of the unit processes. These equations have then be used to scale the costs up or down based on the WTP design capacity. As a rule the costs included mechanical and electrical installation. For less scalable items, lump sum values were generated. Many assumptions were made in generating the cost model and are summarised in the Table 2.6: Unit process/upgrade UV Table Cost Model Assumptions Key Assumptions Wide scatter in costs represents wide scatter in treatment requirements (i.e., water quality, UV transmissivity (UVT), log reduction requirement) refer discussion following this table For medium & minor population category assume duty/standby UV units For small and neighbourhood population category assume duty UV unit only Cost curve were generated based on provision of Duty/Standby units. For duty only assume half the cost from the cost curve New building space required for all UV installations Either new or upgrade to telemetry required Assumed turbidity instrument and UVT sensor Cost curve or Lump Sum Cost curve 8 Based on 3% inflation per year. CH2M Beca // 20 May 2010 // Page 14

19 Unit process/upgrade New conventional filters Upgraded conventional filters Cartridge filtration New sedimentation Improvements to sedimentation Additional building space to accommodate UV, coagulation and flocculation, or new chlorination New Coagulation and flocculation Improvements to coagulation and flocculation Chemical delivery facilities New chlorination facilities Key Assumptions Assumed outside, so no building space required. New media, floors, backwash automation, new tanks, pumps and filter to waste Two-stage filtration Cost curve or Lump Sum Cost curve Cost curve Based on the 2001 Includes an allowance for housing cost curve 9, with the cost coefficient escalated to 2009 value and margins and fees removed. Assumed outside, so no building space required. Actuated sludge bleed valve Upgrade clarifier inlet nozzles $10,000 Based on footprint required for associated population category and a $/m 2 rate. Assumes flocculant make up tank, mixer and dosing equipment Duty/Standby dosing pumps for flocculation and coagulation Duty/Duty transfer pumps for flocculant and coagulant New pipework, Variable Speed Drives Generally assumes installation of baffles, static mixers and better dosing control (feed-forward scanning UV absorbance) Assumes new bunded delivery area that is suitable for medium and minor categories Delivery transfer pump only for minor category Lifting beam and single holding tank for minor category Two holding tanks for medium category Small and neighbourhood: no lifting or holding requirements due to small delivery volumes. Cost curve Lump sum Lump sum Cost curve Lump sum Lump sum Based on the 2001 cost curve 10, with the cost coefficient escalated to 2009 value. 9 Drinking Water Compliance Assessment, Beca Report Prepared for MoH March Drinking Water Compliance Assessment, Beca Report Prepared for MoH March 2001 CH2M Beca // 20 May 2010 // Page 15

20 Unit process/upgrade New filter to waste facilities New and upgraded telemetry Feed-forward scanning UV absorbance controls package (applied to both new and improved coagulation and flocculation) New instrumentation such as UVT, turbidity Remedial work to well heads Key Assumptions Due to insufficient reference sites we applied a power function to one site of known cost and size Overall difference in cost between new and upgraded telemetry minor. Same price used for both For medium and minor sized plants it is applied to 50% of plants where new or upgraded coagulation and flocculation is required and the source water quality is less than secure (0 log reduction) For small and neighbourhood sized plants, it is applied to 50% of plants where new or upgraded coagulation and flocculation is required and the source water quality is requires more than a 3 log removal for protozoa. UVT meters allowed for within the UV cost. Turbidity meters allowed for when UV or coagulation added or improved Price based on population category Cost curve or Lump Sum Cost curve Lump sum Lump sum Lump Sum Lump Sum Some of the cost curves showed greater scalability than others. For example the new sedimentation cost curve showed excellent scalability as seen by both a high power value and R 2 value whereas the UV cost curve showed significant scatter. This scatter can be explained by the fact that UV sizing is not just a function of flow. The number of UV lamps is also dictated by the water quality (i.e., UV transmissivity) and the log reduction required. For example a decrease in UVT of just 10% can result in a decreased hydraulic capacity of more than 50% resulting in significantly more lamps to achieve the same dose at the same design flow. However the cost equation is being applied to a large number of WTPs which do in fact have wide ranging water quality and log reduction requirements, so in fact we consider that the net result will be a reasonable representation of reality. Some upgrade items are non scalable in which case a lump sum value was applied. A typical example of this is coagulation and flocculation control. Current trends are to use a feed-forward scanning UV absorbance system, rather than the traditional streaming current monitor, for this function. The cost of this item is approximately $75,000 regardless of WTP size. Consequently costs for implementing coagulation and flocculation for small or neighbourhood supplies can seem disproportionately large. For WTPs with less variable raw water quality, a feed forward scanning UV absorbance control package would not be justifiable. Accordingly it is assumed that only half the plants in the medium and minor population category where the upgrade includes new or upgraded coagulation and flocculation will require this level of control. For small and neighbourhood plants, it is assumed that only 50% of plants that require new or upgraded coagulation and flocculation and have a source water quality that requires 4 log protozoa removal or higher will require this level of control. Once the overall upgrade capital cost has been determined a consistent percentage for P&G, design and contingency has been added to each upgrade option. P&G is not a profit margin, rather it covers the contractor s onsite and offsite overheads, and includes amongst others; Site establishment including site offices, provision of temporary services (water, electricity etc) and site access CH2M Beca // 20 May 2010 // Page 16

21 General attendance upon the works by the contractor Care and security of the works Provision of plant, tools, scaffolding, cranage, environmental protection measures and testing Management, supervisions and administration of the works. Based on recent construction contracts we have assumed a rate of 18% for P&G, 12% for design and construction management and due to the variability and accuracy of the cost data we have assumed a further 18% contingency. These percentage add-ons (herein referred to as margins and fees ) are a very real and significant cost in any construction project and do need to be considered. P&G and contingency can vary between 15% and 20%, we have therefore used 18% as a midpoint. Design and construction management fee costs of 12% are based on the ACENZ/IPENZ Fee Guidelines for Consulting Engineering Services and are less likely to fluctuate than P&G or contingency Bacterial Compliance versus Bacterial + Protozoal Compliance Two options for compliance with DWSNZ have been considered. Option 1 - Full compliance with the Standards, in other words compliance with both the bacterial and protozoal requirements, is assumed to be the default option in terms of compliance. Option 2 - Compliance with only the bacterial requirements of the Standards is required is considered separately, and is included for the sake of policy option development. Compliance with only the bacterial requirements of DWSNZ would provide a lower cost option than making full compliance (bacterial and protozoal) mandatory. Tables 2.7 outlines the differences in the number of WTPs and population affected by the two compliance options. 11 Based on Category HH with a Design Fee of 10% and Construction Monitoring fee of 2%. CH2M Beca // 20 May 2010 // Page 17

22 Table 2.7 Number of Non-Compliant WTPs and Population Served by Population Category for Options 1 and 2 Population Category Option 1 (Bacteria and Protozoa Compliance Required) Number of WTPs Population Served Option 2 (Bacteria Compliance Only Required) Number of WTPs Population Served Large , ,963 Medium , ,396 Minor , ,883 Small , ,248 Neighbourhood , ,547 TOTAL , ,037 In order to determine the cost to comply with only the bacterial requirements of the Standards, for each source water category the assumed upgraded treatment process was modified to reflect the altered compliance requirements. The assumed treatment processes for bacterial only compliance is presented in Appendix C. 2.6 Cost Model Capital Cost Summaries Table 2.9 summarises the total cost (based on the cost model) to upgrade all of the non-compliant WTPs for each population category (excluding the large WTP category which covered in Section 3). Estimates of probable cost for capital expenditure are provided in Table 2.8 (Option 1 - bacteria and protozoa compliance) and Table 2.9 (Option 2 - bacteria only compliance). These capital cost estimates are likely to fall in the accuracy range of + 30%. Note that the costs presented in Tables 2.8 and 2.9 were changed based on corroboration with the Case Studies. The Case Studies are used to confirm that the outputs from the cost model are reasonable. The final costs, including any alterations made from the analysis of the Case Studies, are presented in Section 5. Table 2.8 Estimates of Probable Capital Costs for Neighbourhood, Small, Minor and Medium Population Categories for Compliance Option 1 Population Category Number of Plants Total Capital Costs Total Cost (inclusive of margins and fees)* Population served Medium 29 $25,100,000 $39,200, ,107 Minor 192 $87,300,000 $136,100, ,480 Small 236 $43,300,000 $67,600,000 59,666 Neighbourhood 188 $20,500,000 $31,900,000 10,153 TOTAL 645 $176,200,000 $274,800, ,406 CH2M Beca // 20 May 2010 // Page 18

23 Table Estimates of Probable Capital Costs for Neighbourhood, Small, Minor and Medium Population Categories for Compliance Option 2 Population Category Number of Plants Total Capital Costs Total Cost (inclusive of margins and fees)* Population served Medium 12 $5,400,000 $8,400,000 45,396 Minor 81 $19,900,000 $31,000, ,883 Small 123 $10,700,000 $16,700,000 30,248 Neighbourhood 161 $8,800,000 $13,700,000 8,547 TOTAL 377 $44,800,000 $69,800, ,074 *Includes 18% P&G, 12% fees and supervision and 18% contingency Factors Influencing Cost The likely accuracy range of ±30% relates to the inherent uncertainties when estimating the probable cost for capital works. It should be noted that the cost model itself is based on the mean population for each population category. While this introduces some inaccuracy in the estimate of probable cost per plant, as individual WTPs may serve a significantly higher or lower population than the mean for that category, this has been mitigated as much as possible by the use of the mean population in each population category. Construction costs for water projects can also be affected by many other external factors such as currency exchange and whether the construction industry as a whole is booming or not. Over the last 10 years we have seen both a booming economy and a recession and swings in NZ currency value both of which have had significant impact on tendered costs. The following is a summary of factors which may have significant impact on out-turn costs. Proportion of plant that is imported and therefore subject to currency exchange fluctuation. For WTPs it would be reasonable to assume 30 40% of the total cost is on imported materials/equipment and etc. In the past 10 years the New Zealand dollar has ranged between 0.34 and against the US dollar resulting in significant potential swings in cost of imported goods. Contractor s appetite for the work. During the recent construction industry boom it was noticeably harder to attract multiple tenders from construction companies for utility type projects. In addition the tendered prices tended to be higher. More recently tendered prices have come down reflecting more of an appetite for the work during the recession. Location of project remote areas tend to attract fewer tenders and have higher costs. This is largely to cover more expensive mobilisation and the costs of bringing contractors into the area to do the work; i.e., insufficient local skills or number of workers to carry out the work. The CBA is based on a design per capita consumption of 1,200 L/person/day for the medium, minor, small and neighbourhood population categories. Reducing this flow can have a significant impact on cost as it can: 12 Ref: New Zealand Reserve Bank Website: NZ Dollar and TWI for CH2M Beca // 20 May 2010 // Page 19

24 Extend the existing plant s life before a capacity upgrade is required New processes required for compliance will be smaller and hence lower cost. Section 6 explores the sensitivity of cost to per capita consumption in more detail. 2.7 Cost Model Operating Cost Summaries Operating costs have been generated based on Beca reference projects. Upgrades that involve improvements to existing equipment are assumed to incur no additional operating costs. We have assumed that all plants have trained operators. Some new processes require little operator attention (e.g. UV disinfection) whereas others such as coagulation/sedimentation/filtration and cartridge filters require more day to day attention or maintenance. Except for UV additional electricity costs associated with an upgrade are considered to be negligible (e.g. additional power required for extra headloss, wastewater treatment). Calibration of equipment is assumed to be included within existing operator time. The Table 2.10 summarises the basis used for the operating costs. Table Operating Cost Basis Item UV E.coli monitoring New Coagulation New conventional filters Chlorination Cartridge Filters Utilisation Factor Basis Consumables (lamps, ballast and sensor) depend on size of UV unit and flow through plant. Electricity cost based on flow through plant. Only applied to E.coli technical non-compliances. Annual cost of E. coli sampling included based on the frequency of sampling required under DWSNZ for associated population category and water source. Chemical costs. Operator time assumed to be included under other processes. Operator time. Chemicals. Consumables (replacement filters) and operator time. Whilst capital costs are largely related to peak flows, operating costs relate more to average flows. An utilisation factor has been used to convert the design flow (peak flow) to an annual average flow. For the design flow of 1200 L/person/day an utilisation rate of 50% is assumed i.e. the average flow over a year is 600 L/person/day. The two largest contributors to overall operating costs were consumables and operator time. UV and membranes incur high consumable costs. Membranes, conventional and cartridge filters had a significant requirement for operator time for all population sizes. Other operating costs such as E. coli monitoring and some chemicals proved to be fairly small. Estimates of operating cost are provided in Table 2.11 (Option 1 - bacteria and protozoa compliance) and Table 2.12 (Option 2 - bacteria only compliance). CH2M Beca // 20 May 2010 // Page 20