Expert Engineer Stamhuis' Peer Review of MWP Options

Who knew there had in fact already been a Peer Review of the 2012 Master Water Plan?
Apart from the engineers at the Regional District, that is.

Yup.

Coldstream's Chief Administrative Officer, Michael Stamhuis wrote a letter to the Regional District on April 15th, 2013 providing his comments on the plan's Options.  Prior to moving to the District of Coldstream, Mike Stamhuis was the head of the North Okanagan Water Authority (NOWA).
And he is a Professional Engineer.

At that time, for whatever reason, only one politician received a copy of the letter.
Today, (one and a half years later), all members of the SAC committee should receive a copy.

Here in its entirety is the letter.

"(on District of Coldstream letterhead), File No:  0470-30-12
Date:  April 15, 2013 
Regional District of North Okanagan
9848 Aberdeen Road
Coldstream, B.C.  V1B 2K9
Attention:  Dale McTaggart, P.Eng., General Manager, Engineering

Dear Mr. McTaggart:

Re:  Master Water Plan -- Review of Options

I have reviewed the spreadsheets for the various options and also considered the non-quantifiable attributes of the various options and provide my feedback as follows:

Part A - Net Present Value Analysis

I believe that work done to date on the Net Present Value (NPV) comparisons is the correct approach.  I also believe that the setting of the inflation and discount rates at 2% and 5% is very reasonable and am quite comfortable with these numbers.  I do have some comments on the numbers for the various options, however.  Some comments are based on my understanding of the workings of the various options and my assumptions may be different from the consultants' as the information provided on the assumptions leading to the various numbers is a bit sparse.  My comments are as follows:

Option 3 -- Complete Separation -- Two Treatment Plants -- I believe that the Operation and Maintenance costs for the Mission Hill Treatment Plant have been incorrectly stated in that an incremental cost has been attributed for the years 2012 to 2022 inclusive.  Under the formula where only the incremented costs or savings are evaluated, these costs should be zero.  This reduces the NPV by approximately $13 million to $156 million.

Option 5 -- Complete Separation -- Duteau Treatment Only -- This option has valued the operating cost of the Mission Hill Pump Station and the Grey Road Pump Station at $302,000 each.  These would be needed only during irrigation season when Duteau Creek's capacity is exceeded.  In a wet summer they might hardly be needed at all.  While there is no information regarding the consultants' assumptions, I believe this figure is excessive.  If these estimates are halved the NPV of this option would be reduced to $156 million.

Option 6 -- Complete Separation -- Okanagan Lake Source with Filtration Deferral -- This option has overvalued the Operations and Maintenance cost of the intake by not crediting the savings of mothballing the Kal Lake Intake.  This would reduce the option's NPV to approximately $142 million.  If filtration deferral cold be achieved for the life of the analysis the NPV of this option would be $108 million -- substantially the most cost effective.  It could be argued that this achievement may be more likely if we retained the Kal Lake intake.  In this scenario the NPV of this option would be about $118 million.  (highlighting:  blog author)

Option 8 -- Complete System Separation -- Duteau Creek Treatment with Mission Hill Filtration Deferral -- This option has not been tabulated correctly.  The numbers listed are almost identical to Option 5 which sizes the Duteau Plant so that deferral is not required.  Instead, Option 8 should show the Duteau Plant sized to 30 MLD.  This results in a net NPV credit of $3.9 million in capital costs and $30.9 million in Operation and Maintenance costs.  Offsetting this would be an increase in NPV of $4.8 million as the net cost impact at Mission Hill should be zero.  (It should be assumed that the current UV treatment and disinfection would remain.)  The result of these amendments would be a NPV of $136.6 million.

Option 9 -- Partial Separation -- Duteau Plant Only -- To compare "apples to apples" the size of the Duteau Plant should be sized at 170 MLD as listed in the narrative.  This would reduce the Capital and Operation and Maintenance NPV costs by about $5 million.  In addition, the Operation and Maintenance costs for the two pumping stations (Grey Road and Mission Hill) should be lower, perhaps by 50% or $5.5 million NPV (see discussion re Option 5 above).  Further, the addition of a Duteau Main upgrade at 3.6 million NPV has not been substantiated in that this option does not appear to be sufficiently unique to warrant this provision on its own.  Considering the above adjustments, the NPV for this option should be about $117.9 million.  This could be the most economic of the options that do not consider filtration deferral.

Part B -- Non-Cost Considerations

The discussion paper lists eight evaluation factors which seem to cover the various issues pretty well. However, there will be some overlap in some of the factors, especially between "Emergency Preparedness" and "Reliability and Availability of Supply".  In addition, the factors have been weighed very similarly (i.e. range 10 - 15%) and I believe that there are major differences in how they should be weighted.

The discussions around each option, its weighting factor and the ratings of the options tend to be general in nature.  I believe that they need to be very specific and need to directly consider the different characteristics of each option.  For example, the fundamental differences between no separation versus partial separation and full separation need to be borne in mind.  Also requiring consideration is the redundancy of one versus two treatment plants and the size of those plants.

A discussion of the various factors and suggested weighting is as follows:

1.  System Operational Ease and Flexibility -- 20%

The size and number of plants are a consideration in that smaller plants would be more straightforward as fluctuations in demand would be less.  Larger plants may provide more redundancy and flexibility.  Full separation would provide more complications in having two sets of pipes to deal with in rural areas.  However, this would be offset by having more consistent flows in the domestic pipes.  A single plant may be easier to operate but provide less flexibility.  Rating of the options under this factor may be difficult as the benefits of one attribute may be offset by complications of another attribute within the same option.

2.  Governance and Administration -- 40%

The consequences of our selection of the preferred option could have huge implications on the Governance and Administration of the utility.  Two examinations of thew impact of water devolution done in 2008 indicated that the water rate impacts would be such that they would render large variances in Net Present Value as trivial by comparison.  For example, full separation would permit the option of a separate sub-regionally governed agricultural distribution utility which would have a substantial rate impact on the different jurisdictions in a devolved utility.

Independent of devolution, a separated distribution system provides many administrative benefits in that it simplifies decision making around farm classifications, sale of non-potable water, new allocations, and use designation.  In addition, there could be economic benefits with expanded use of non-potable water.

3.  Emergency Preparedness -- 3%

While emergency preparedness is important, the overall state of preparedness is very good regardless of option selection.  While two plants would provide more flexibility in an emergency, they would also result in an increase in the probability of an emergency in the event of a plant malfunction.

4.  Finished Water Quality -- 5%

The weighting for this should be fairly small in that all options will be designed to deliver high quality water meeting or exceeding IHA standards.  It could be argued that full separation would allow for better finished water quality due to less fluctuation in demands for treatment plants, as well as in domestic distribution pipes.  This likely would reduce ultimate THM (trihalomethane:  blog author) generation in the domestic system.  If two plants and two sources are used for domestic water, some variations in water characteristics would occur which would frustrate customers in areas where the sources change back and forth.  A single plant would provide a consistent quality and / or could allow for blending of two sources.

5.  Reliability and Availability of Supply -- 15%

In this option two treatment plants and two sources would provide more reliability by redundancy.  Larger plants would provide a higher level of redundancy than smaller plants.

6.  Ease of Implementation -- 5%

The end result of the overall system operation is far more important than the implementation period.  However, some considerationm shold be given.  I believe that one plant will be easier to construct than two and that a non-separated system will be easier than a partially or a fully separated system to implement.

7.  Future Expansion -- 10%

At some point it will be necessary to consider new sources as demands continue to grow.  A separated system will be more more amenable to expansion as new sources can be incorporated directly into the non-potable system without new treatment or routing through existing treatment plants (requiring commensurate expansion of the plants).

8.  Environmental Impacts -- 2%

The overall variations in environmental impact should be fairly small between the options.  I believe that a separated system will have environmental benefits in that there would be less chlorine used and flushed, as well as less chemical and power use for smaller plants.  One type of plant may have fewer residual impacts than another.  The more widespread use of non-potable water in a separated system would also provide environmental benefits.


Once we agree on relative weightings of the various factors we should then apply them to the various options.  However, this exercise could be simplified by reducing some of the options first.  I believe that we can reduce the nine options proposed back to five options by eliminating four options that do not appear to have sufficient "legs" to warrant more detailed investigation.  These are as follows:  (highlighting:  blog author)

     1.  Options #6 and #8 -- These options could have NPV's of approximately $118 million each, making them the most economic.  However, these NPV's rely on success of long term filtration deferral.  As such, the difference in the NPV is, in my opinion, too small to offset the risk of need for addition of filtration over the planning period, especially considering that the NPV of any of the above options has a realistic variability of plus or minus 10%.

     2.  Options #4 and #7 -- These options have NPV's higher than the others and do not appear to have sufficient attributes that will make them more attractive than other options left on the table.


The remaining options should be left for consideration by evaluating their non-cost attributes.  Options #1, #2 and #9 all have similar NPV's.  Options #3 and #5 may prove comparable based on their non-cost considerations.  As the NPV's of options #3 and #5 are very similar, neither should be ruled out at this time.
Yours truly,
Michael A. Stamhuis, P.Eng.
Chief Administrative Officer"

Just a reminder...

"Now that's a Peer Review," says Kia, stating "all the warts and smiles in the same document, unlike what GVW provides SAC members."

Remember that GVW wrote assumptions for the water consultants (or why so many Plan edits????)
Assumptions that tie SAC members hands with the same rope. 


Note:  Michael A. Stamhuis is referred to in the North Okanagan's water history as "the architect of the 2002 Master Water Plan" (revised in 2004, and then scrapped in favour of the 2012 Master Water Plan).

Note:  RDNO Technical Memoranda 1 through 10 are here.