I am writing in response to Jim McCann’s letter regarding Irvington’s energy performance contract printed in the January edition of the River Journal.
McCann’s letter raises several concerns about the energy performance contract with Wendel Energy Services, the engineers for this project. I am compelled to respond to the letter in order to correct its many inaccuracies and misapplications of fact.
The goal of a performance contract is to identify and implement certain improvements that will yield energy or operational cost savings that will equal or exceed the cost to make those improvements. In the case of the contract with Wendel, which was approved by the Village Board in November 2008, the cost of all improvements, including financing costs, is $3,574,957, while the savings associated with these improvements is $3,967,497. Much of the savings is guaranteed by Wendel and will be measured and verified on an annual basis. A relatively small amount of savings are not guaranteed, but instead are stipulated between Wendel and the Village. In these cases, it was determined that the cost to measure and verify those particular savings on an annual basis would be inefficient and a waste of time and money. To say that the entire Wendel contract is not guaranteed, as Mr. McCann does in his letter, is inaccurate and misleading.
In order to accurately bill for water being used by our customers and to incorporate improved remote reading capabilities, the Village will be replacing the water meters of all customers in the next nine months. The total cost of replacement is $962,756, not $1,800,000 as indicated in Mr. McCann’s letter. We estimate the cost of replacement will be recovered in less than 6 years through more accurate measurement of water usage by our customers. In addition, there will be significant operational efficiencies created through the use of remote radio transmitting devices installed in the meters that will eliminate the need for our meter readers to canvass door-to-door each month. This will free up our Water Department personnel to perform important maintenance work on our aging infrastructure.
Mr. McCann suggests that water meters do not need to be replaced, stating that any resulting shortfall in revenue simply needs to be "picked up by the state-mandated annual accounting." The "annual accounting" that Mr. McCann refers to is actually an upward adjustment in the water rates being charged to all customers. That means that customers that have properly working newer meters will be unfairly subsidizing those with older, less accurate meters. Customers with non-functional meters will continue to be unaware of their actual water usage.
The decision to replace the water meters was based on the Village’s knowledge of their age and general condition. Wendel’s guarantee was derived from a statistically sound sample of ten water meters of varying ages, revealing that our customers’ meters are registering 10 percent less than actual water usage. These results are consistent with results in other communities where Wendel conducted meter replacement projects, as well as with data published by the American Water Works Association and others. In addition, the meter testing was done in accordance with a protocol and standards set forth by the American Water Works Association.
Besides the water meter replacement project, there are additional projects involving Village buildings and facilities totaling $1,610,728. Most of these projects have rapid payback periods, although some have considerably longer ones. In the latter cases, the projects were chosen based on the age of the asset in question, the condition of the asset, and safety and comfort considerations for our residents and employees.
Wendel was selected by the Village as a result of a competitive Request for Proposals process. Wendel has successfully completed numerous, far more complex projects throughout the state, including water meter replacement projects. In addition, their fee, which is a total of 24 percent, is broken into eight separate categories: Design and Specifications – 7 percent; Administration – 4 percent; Cost of Risk – 2 percent; Construction Management – 6 percent; Hazardous Waste Administration – 1 percent; Profit – 2 percent; Training -1 percent; and Measurement and Verification – 1 percent. The fee is not payable "upfront" as Mr. McCann states, but rather as services are rendered throughout the entire project.
The Board of Trustees has been working with Irvington Village staff on this project since December 2006. The contract was reviewed extensively by members of the Board of Trustees and the Village Attorney and was the subject of numerous public meetings. The Board and the Village staff are confident that this project will be completed successfully and will have a meaningful, positive impact on the Village’s operations.