PHOENIX, AZ, April 1, 2010 -- Five Valley cities, Arizona Public Service and Salt River Project announced today a preliminary agreement of a 40-year comprehensive water contract to provide cooling water essential to power production at Palo Verde Nuclear Generating Station, the nation's largest energy producer. The agreement also provides revenue for the maintenance and technological enhancement of a key wastewater treatment plant with the capacity to treat more than 200 million gallons of raw sewage every day. The agreement now goes before the city councils of Glendale, Mesa, Phoenix, Scottsdale and Tempe for final approval.
The water agreement provides up to an annual allotment of 26 billion gallons of treated effluent to Palo Verde. Because of its desert location, Palo Verde is the only nuclear power plant in the world that uses treated effluent. The treated effluent is piped from the 91st Avenue Wastewater Treatment Plant in Phoenix to Palo Verde, where it is further treated and recycled to meet the nuclear energy plant's cooling needs.
"In terms of regional cooperation and positive economic and quality of life impacts, the new water agreement can be compared to other significant Valley-wide projects, including the Valley's freeways, light-rail transit system and regional fire-service agreements," said David Cavazos, Phoenix City Manager and lead negotiator for the Sub-Regional Operating Group (SROG) cities.
The treated effluent will be purchased according to a negotiated fee structure from SROG, comprised of the cities of Glendale, Mesa, Phoenix, Scottsdale and Tempe. The effluent is initially priced at approximately $58 per acre foot, which will be adjusted annually to approximately $300 per acre foot in 2026. Thereafter, the price adjustments will be tied to a basket of three water- and power-related indices that are part of the Consumer Price Index. Additionally, the contract contains a $30 million up-front payment, which will be paid beginning in 2010 in four annual installments of $7.5 million. SROG is responsible for the ownership and operation of the 91st Avenue Wastewater Treatment Plant, which delivers treated effluent to Palo Verde. The City of Phoenix oversees the wastewater plant's daily operations.
"Palo Verde provides substantial environmental benefits since it does not emit any greenhouse gases and because it makes the most efficient use of our limited water resources. It is also an important economic driver for Arizona and the entire Southwest," said APS Executive Vice President and Chief Nuclear Officer Randy Edington. "This agreement allows all that to continue for the next generation and beyond. From our standpoint, we remain committed to the safe and high-level performance of Palo Verde for the long-term and we appreciate all of the entities that made this agreement a reality."
The water agreement ensures:
• Cooling water for a reliable source of power for Arizona
• Fair rates for treated effluent
• The creation of much-needed revenue and jobs for each SROG member city
• Highly productive use of treated effluent, a resource that grows as the population expands
• Generation of revenue for the maintenance and technological upgrading of the 91st Avenue Wastewater Treatment Plant
"Treated effluent is becoming a valuable resource not just in the arid Southwest, but across the country," said Ben Grumbles, the Director of the Arizona Department of Environmental Quality, who previously served as the U.S. EPA's senior official on water issues in the Bush Administration.
Grumbles was recently named by Governor Brewer to co-chair a Blue Ribbon Panel on Water Sustainability. "Among the issues that the panel will look at is the need to recognize the symbiotic relationship of water and energy," Grumbles said. "This agreement drives that point home."
The agreement was negotiated over several years and replaces the original water pact signed in 1973. Water deliveries under terms of that agreement began in 1985 when Unit 1 at Palo Verde began operations. It was scheduled to expire in 2027.
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