PRIVATIZATION/Indianapolis outsources O&M for waterworks
Last March, Indianapolis contracted with Palm Desert, Calif.-based USFilter Operating Services to manage all operations, maintenance and customer service for the city’s 143 mgd waterworks system. By privatizing operations and maintenance, the city can provide the area’s 780,000 residents with stable rates and improved water quality while maintaining local control of the system.
Indianapolis purchased the waterworks system last year for $522 million from Merrillville, Ind.-based NiSource. (Under the Public Utility Holding Company Act, the U.S. Securities and Exchange Commission required the company to sell its water assets as part of its merger with Herndon, Va.-based Columbia Energy Group.) After the purchase, the city began searching for an operator for the system.
City officials decided to privatize the system’s operations and maintenance for increased efficiency, says Steve Campbell, director of communications for the city. “[Indianapolis] is not in the business of running a water company,” he says. “We felt it would be best to leave the day-to-day operations to the experts. The city always had the intention of having a private company run [the utility] to combine efficiency with public ownership.”
Under the 20-year, $1.5 billion contract, the city will pay the company an annual base fee of about $37 million, with another $9 million if performance goals — such as improved drinking water quality and fast customer service — are met. In addition to operating and maintaining the system, the company will manage more than $400 million in capital improvements.
As part of the contract, the company will freeze water rates for residents over the next five years. After that time, the city plans to review water rates to ensure residents pay the lowest possible price.