The members of the North Little Rock City Council Monday were informed by the chief executive officer for Central Arkansas Water that the utility is moving in the direction of reaching a joint use agreement with the city of Hot Springs to purchase more water storage capacity.
The council was provided a letter from CAW’s Graham Rich that the agreement would be between the utility and Hot Springs for water capacity within DeGray Lake.
Rich said the agreement will not impact North Little Rock rate payers.
“Because CAW is not currently selling and is not considering selling treated water or raw water to Hot Springs, the issue of wholesale water rates charged by CAW is completely separate from the sale of storage rights to DeGray Lake,” said Graham. “However, it is important to know that CAW staff will be discussing wholesale rate methodology within the Board of Commissioners of CAW at its November or December meeting.”
DeGray Lake and DeGray dam were authorized by Congress in the River and Harbor Act of 1950. In 1958, Congress adopted the Water Supply Act of 1958 which allowed 152 million gallons per day of the available water storage capacity within the lake for municipal and industrial water supply, Graham said.
In 2012, Hot Springs and the Ouachita River Water District (ORWD) both initiated conversations with the Army Corps of Engineers for water storage allocations in DeGray Lake that could have triggered CAW’s right of first refusal.
CAW had two options: do nothing and allow them to acquire the water storage rights or acquire all 120 million gallons per day, according to Rich.
“We immediately opened a dialogue with both parties and, at our request, Hot Springs withdrew its request to the Corps for the water storage rights.”
Rich said the first option was unacceptable to CAW’s staff because past payments could potentially have been forfeited.
“At best, CAW would have only recovered the actual interest expense ($154,426.20) and not the additional amounts paid by CAW under the Option Agreement with ORWD,” said Rich.
Rich said the second option had significant drawbacks.
Rich said the CAW staff believes a joint use agreement with Hot Springs is the best option to benefit CAW’s rate payers in both Little Rock and North Little Rock.
“(It) allows CAW to recover all of our past payment amounts plus interest at the rate of 2.742 percent, rather than nothing or a reduced amount,” according to Rich.
Rich said the joint use agreement also provides CAW with significant capital assets at no cost.
“This includes a permanent intake site at the optimal location on DeGray Lake and over five miles of a 50-foot wide easement for transmission pipelines,” according to Rich.
He added the intake site will reduce future costs because it will require less treatment and less pumping.
The agreement also allows CAW to immediately purchase 100 million gallons per day from DeGray Lake with minimal financial impact to the utility.
“This option adds only $88,000 a year to the CAW budget for the next nine years,” Rich said. “The additional 100 MGD will provide CAW a combined capacity of 220 MGD from Lakes Winona, Maumelle, and DeGray. This capacity is sufficient for a minimum of 190 years.”
The agreement also can be done with no rate increase to CAW customers, according to Rich.
“Based on staff’s extensive knowledge of water operations, my overall knowledge and understanding of long term water supply issues, and the benefits indicated above. CAW staff recommended approval of the joint use agreement.”