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[Federal Register: February 19, 2010 (Volume 75, Number 33)]
[Proposed Rules]               
[Page 7411-7412]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe10-19]                         

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DELAWARE RIVER BASIN COMMISSION

18 CFR Part 410

 
Schedule of Water Charges

AGENCY: Delaware River Basin Commission.

ACTION: Notice of proposed rulemaking and public hearing.

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SUMMARY: The Delaware River Basin Commission will hold a public hearing 
to receive comments on proposed amendments to the Administrative 
Manual--Part III--Basin Regulations--Water Supply Charges to revise the 
schedule of water charges.

DATES: The Commission will hold a public hearing on Tuesday, April 13, 
2010, beginning at 1:30 p.m. The hearing will continue until the later 
of 3:30 p.m. or such time as all those who wish to testify have been 
afforded an opportunity to do so. Written comments will be accepted 
until 5 p.m. on Friday, April 16, 2010.

ADDRESSES: The hearing will take place in the Goddard Room at the 
Commission's office building, located at 25 State Police Drive, West 
Trenton, New Jersey. Driving directions are available on the 
Commission's Web site--http://www.drbc.net. Please do not rely on 
Internet mapping services as they may not provide accurate directions 
to the DRBC.
    Written comments may be submitted at the hearing and may also be 
sent as follows: via e-mail to Paula.Schmitt@drbc.state.nj.us; 
otherwise, to the attention of the Commission Secretary, DRBC, either 
by fax to (609) 883-9522; U.S. Mail to P.O. Box 7360, West Trenton, NJ 
08628-0360; or delivery service to 25 State Police Drive, West Trenton, 
NJ 08628-0360. Regardless of the method of submission, written comments 
should include the name, affiliation (if any) and address of the 
commenter and the subject line ``Schedule of Water Charges.''

FOR FURTHER INFORMATION, CONTACT: Please contact Paula Schmitt at 609-
477-7224 or Katharine O'Hara at 609-477-7205 with questions about the 
public hearing.

SUPPLEMENTARY INFORMATION: Background. In response to the need to fund 
certain water supply storage facility projects, the Commission between 
1964 and 1974 established a system of water supply charges pursuant to 
section 3.7 of the Delaware River Basin Compact. In December of 1964, 
it adopted Resolution 64-16A, ``A Resolution to establish policy 
concerning water supply in federal projects authorized in the 
Comprehensive Plan.'' This resolution established a revenue stream to 
repay the obligations the Commission eventually assumed to purchase 
capacity at the federal government's Beltzville and Blue Marsh water 
storage facilities. The resolution specifically provided that the debt 
for DRBC's share of storage in these facilities would be repaid through 
the sale of water (or other products and services) and through an 
apportionment of the costs to the states benefiting from those 
projects. See Resolution No. 64-16A, adopted December 29, 1964 (adding 
to the Comprehensive Plan a ``Section IX--Water Supply Policy'', par. 
3.a. and b. of which establish the described debt repayment 
mechanisms).
    The Commission subsequently adopted Resolution No. 71-4, ``A 
Resolution to amend and supplement the Comprehensive Plan by the 
addition of a new article on policy for water supply charges.'' This 
resolution established a schedule of rates for basin water withdrawals 
and provided that the ``charges for water supplied will include all 
costs associated with making basin water supply available and 
maintaining its continued availability in adequate quantity and quality 
over time.'' Res. No. 71-4, adopted April 7, 1971, par. A.2. Resolution 
No. 71-4 requires the Commission to collect sufficient annual revenue 
to meet all annual project costs, ``including debt service, operation, 
maintenance, replacement, reserves, and associated administrative 
costs.'' Res. No. 71-4, par. A.2.b. The Commission recognized that the 
waters of the basin formed a ``unitary system'' and thus applied the 
charges to water withdrawals made throughout the basin, including up-
stream of Commission facilities. See Res. No. 71-4, preamble. The 
unitary system is sometimes referred to as the ``pooled water'' theory. 
See, for example, Delaware River Basin Commission v. Bucks County Water 
& Sewer Authority, 641 F. 2d 1087, 1094 (3rd Cir. 1982) (citing Borough 
of Morrisville v. Delaware River Basin Comm'n, 399 F.Supp. 469, 471 
(E.D. Pa. 1975), aff'd per curiam, 532 F.2d 745 (3d Cir. 1976)). 
Resolution No. 71-4 imposed charges only on withdrawals from surface 
waters of the basin. In accordance with Section 15.1(b) of the Compact, 
it limited charges to the amounts of water withdrawn in excess of those 
``that could lawfully have been made without charge on the effective 
date of the Compact.'' Compact Sec.  15.1(b).
    The Commission has historically placed the revenues generated 
through the sale of water in an account called the ``Water Supply 
Storage Facilities Fund'' (``Storage Fund''). The Storage Fund holds 
funds dedicated to pay the costs of project construction, operation, 
maintenance, and replacement, as well as associated administrative 
costs. See Res. No. 71-4, par. A.2. The estimated balance in the 
Storage Fund as of June 30, 2009 was $12.1M. A snapshot of the Storage 
Fund at the close of fiscal year ending July 31, 2009 shows the 
following: The Storage Fund received approximately $2.6M in water sale 
revenue. It disbursed or incurred approximately $2.2M in expenses, 
consisting of approximately $483K in interest paid to the U.S. 
Treasury, $423K in asset depreciation, $310K for operations and 
maintenance of the Blue Marsh and Beltzville projects, $86K for 
contractual services from the U.S. Geological Survey for operation and 
maintenance of stream gauges, and $933K associated with Commission 
administration. The fund lost $153K on investments (the sole Storage 
Fund investment loss in 35 years). The approximately $204K difference 
between the annual costs and revenue is retained in the Storage Fund as 
a reserve against the future costs of expected significant repair to 
the facilities.
    Historically, the Commission has not charged its full 
administrative cost against the Storage Fund. Periodic reviews of the 
charges have shown that the costs involved in Commission activities 
properly chargeable to the Storage Fund have exceeded the amounts 
actually charged for many years. To the extent that the Storage Fund 
has not been charged its full allocable costs, contributions by the 
signatory parties of the Delaware River Basin Compact (the states of 
Delaware, New Jersey, New York, Pennsylvania and the federal 
government) have made up the difference. In extremely challenging 
economic times, however, the signatories find themselves less capable 
of assuming this burden. In fiscal year 2010, an adjustment was made to 
better align charges to the Storage Fund with actual costs. Even absent 
this adjustment, the trend evident since 2008 is that retained Storage 
Fund earnings have leveled off.

[[Page 7412]]

Recent plant closures in the basin are expected to result in reductions 
of approximately $500K annually (about 20 percent) in water sale 
revenues, while the costs of reservoir maintenance and operations, 
contractual services and administration continue to rise.
    DRBC's Current Schedule of Water Charges. Resolution No. 71-4 
provided that water rates would consist of ``the weighted-average unit 
cost of all water stored by or on behalf of the Commission'' and 
specified that the unit cost of all water would be determined ``by 
dividing all of the commission's annual project cost by the net yield 
of the water supply in federal reservoirs authorized in the 
commission's Comprehensive Plan.'' Res. No. 71-4, par. A.2.a. Also see 
Res. No. 78-14, preamble.
    In accordance with this formula, the current schedule of water 
charges was established by Resolution No. 78-14 in October of 1978, 
based on the unit cost of water stored by the Commission in the 
Beltzville and Blue Marsh reservoirs. It was codified at section 5.3.1 
of the Commission's Administrative Manual--Part III--Basin 
Regulations--Water Supply Charges (hereinafter, ``WSC''). Section 5.3.1 
provides that the Commission ``will from time to time, after public 
notice and hearing, make, amend and revise a schedule of water 
charges'' and that until changed, the charges for water shall be $.06 
per thousand gallons for consumptive use ($60 per million gallons) and 
six-tenths of a mill per thousand gallons ($.60 per million gallons) 
for non-consumptive use. WSC Sec.  5.3.1. These rates which have remain 
unchanged for more than 30 years, lag far behind the rates charged for 
raw (untreated) water by the Commission's sister agency the Susquehanna 
River Basin Commission (SRBC) and by the New Jersey Water Supply 
Authority (NJWSA) for raw water from its Raritan System.
    The consumptive use rate established by SRBC in May of 1992, 
effective January 1, 1993, was $140 per million gallons, nearly two-
and-a-half times the current rate charged by DRBC. In June of 2008, 
SRBC approved a two-step increase to $210 per million gallons effective 
January 1, 2009, and $280 per million gallons (more than four-and-a-
half times DRBC's current rate) effective January 1, 2010. NJWSA 
charged $216 per million gallons as of July 1, 2010 and will charge 
$220 per million gallons (more than three-and-a-half times DRBC's 
current rate) as of July 1, 2011, for raw water from its Raritan 
System. DRBC's proposed 2010 and 2011 rates for consumptively used 
water remain well below those of its counterparts.
    Proposed Rate Increase. Resolution No. 71-4 provided that 
``[c]osts, rates and charges will be recomputed * * * as often as 
necessary to reflect relevant changes in any cost components associated 
with sustaining specific base flows.'' Res. No. 71-4, par. A.2.a. At 
this time, in order to maintain net income to the Storage Fund and 
ensure financial stability to address future operating and maintenance 
costs, the Commission is proposing its first water charging rate 
increase in 32 years. Because many people find the expression of the 
rates confusing, the Commission also is proposing that the new rates be 
established per million gallons rather than per thousand.
    In light of the difficult economic climate, the rate change is 
proposed in two stages. The proposed rates, calculated using the 
formula established by Resolution No. 71-4 and set forth above, are as 
follows: The consumptive use rate is proposed to be increased from $60 
to $90 per million gallons effective on January 1, 2010, and from $90 
to $120 per million gallons effective on January 1, 2011. The non-
consumptive use rate is proposed to be increased from $.60 to $.90 per 
million gallons effective on January 1, 2010, and from $.90 to $1.20 
per million gallons effective on January 1, 2011.
    Even with the proposed increases, Delaware Basin water will remain 
inexpensive when compared to raw water in neighboring jurisdictions. 
Notably, the proposed 2012 rate of $120 per million gallons for raw 
water consumptively used in the Delaware Basin is less than half the 
rate of $280 currently in effect in the Susquehanna Basin and only a 
little more than half the rate of $216 currently charged by the NJWSA 
for its Raritan System water, which rate will increase to $220 
effective January 1, 2011. The Commission's proposed 2012 rate is below 
the current (2010) rate of $60 per million if adjusted for inflation, 
which would be approximately $200 per million gallons.
    No Change to Exempt Uses. No change to the list of uses exempt from 
charges, as set forth at WSC Sec.  5.3.3 is proposed. The following 
categories of uses are currently exempt from water charges: Non-
consumptive uses of less than 1,000 gallons a day and less than 100,000 
gallons during any quarter (Sec.  5.3.3 A.); ballast water used for 
shipping purposes (Sec.  5.3.3 B.); water taken, withdrawn or diverted 
from streams tributary to the River Master's gauging station at 
Montague, New Jersey (Sec.  5.3.3 C.); and water taken, diverted or 
withdrawn below the mouth of the Cohansey River and such proportion of 
water withdrawn above that point and below the mouth of the Schuylkill 
River as the Executive Director may determine would have no discernable 
effect upon the maintenance of the salt front below the mouth of the 
Schuylkill River (Sec.  5.3.3 D.).

Pamela M. Bush,
Commission Secretary.
[FR Doc. 2010-3219 Filed 2-18-10; 8:45 am]
BILLING CODE 6360-01-P
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