With summer approaching, Canby Utilitys Dan Murphy sits down for Q&A
Canby Utility General Manager Dan Murphy was hired by the utility's board of directors in June 2015, bringing his experience and knowledge to Canby having managed three other utilities over a 30-year career. Murphy was president and chief executive officer of Newberry Electric in South Carolina for 12 years prior to moving to Oregon.
Murphy holds a Bachelor of Science in business from the University of West Florida and a Master of Business Administration from Troy University in Alabama. In 2009, South Carolina Governor Mark Sanford honored Murphy as the South Carolina Ambassador for Economic Development for his work and contributions to bring industry and new jobs to Newberry County, South Carolina.
Murphy sat down with the Canby Herald to talk about the challenges of running a customer-owned utility in this day and age of massive corporate conglomerates, such as Portland General Electric (PGE), as well as the difficulties of managing aging infrastructure for both water and electricity.
Canby Herald (CH): What are the most daunting challenges Canby Utility (CU) faces in both the near and long term?
Dan Murphy (DM): Possibly the one most significant challenge that is a reality, not a misperception, is the fact that our water distribution lines are getting old and are developing significant leaks. CU has identified and listed areas of the water system that need significant main-line replacements to avoid large line ruptures that are likely to occur if replacement of the deteriorated main lines are not dug up and replaced. One good example is the large water main rupture that occurred in early December 2016 at the Clackamas County Event Center. There are other such main lines that need to be replaced to avoid other such ruptures. These projects are costly and puts stress on water rates when investment in line maintenance must be ramped up.
CH: Canby continues to grow with the latest U.S. Census Bureau population estimating nearly 18,000 residents inside the city limits. What are the current plans for dealing with this anticipated growth as it relates to providing water?
DM: The limitations associated
with the old, space-constricted 1970s-era water treatment plant give rise to concerns as to meeting future growth in demand for water here in Canby. Growth of our city will eventually make it necessary to add source water capacity and water treatment capacity. The question is when will we cross that threshold to where we must have a new water treatment plant?
CU's water master plan projected that the need for more water … will come in the year 2030. Our water engineering consultant, Murray, Smith & Associates, conducted a review of the water master plan and compared current growth data to the data used in 2010 to forecast future water demand. Murray, Smith & Associates determined that the forecast was not currently accurate and pushed out the timeframe for the need for a new water treatment plant and/or additional water supply to the year 2040. For growth between now and 2040, CU has sufficient excess capacity to handle the expected growth of our community. CU will closely monitor and update the demand forecast and scheduled projects to make sure that the capacity is ready when growth dictates.
CH: There have been many discussions on Facebook about CU's ability to supply water from the Molalla River. People seem to think the river is drying up.
DM: One-hundred percent of Canby Utility's source water comes from the Molalla River. Drought conditions in the Pacific Northwest over the past decade have caused the river to run noticeably low in summers. Some areas of California, Oregon and Washington have seen water levels both above ground and below ground drop to points where water supply has become an issue.
It is a concern for CU that a false perception has developed among some residents in Canby that the Molalla River is "drying up," and water capacity is in doubt here in Canby. That is not true. CU has confirmed that water levels have never dropped low enough to place in doubt the availability of water from the Molalla River. At the lowest levels experienced, Canby has had ample water available to produce full capacity equal to the limits of CU's water treatment plant. Water available to CU still exceeds the maximum treatment capacity of our water treatment plant.
CH: Canby's water treatment plant was constructed in the 1970s, as you mentioned. Why is there not a push to build a new plant in the near future?
DM: Canby's water treatment plant, when it was constructed in the early 1970s, was state-of-the-art at that time, but the water treatment plant is very limited by space constraints — very little space and no extra room on the lot — and cannot be expanded to include new technologies. The water treatment plant is fully functional and produces safe, potable drinking water, and regular testing confirms the water output meets or exceeds all federal and state quality standards. However, the water treatment plant is not capable of removing harmless organic compounds, specifically Geosmin and Methylisborneal (MIB) that have been detected periodically, especially during hot summers when algae can proliferate. These harmless organic compounds are what cause the water to have an earthy taste and odor. Studies conducted on this problem have revealed that to retrofit the old, 70s-era water treatment plant with systems that can remove these compounds would cost millions and increase maintenance costs. Also, effectiveness in removing those taste and odor compounds is not a certainty.
CH: CU doesn't produce its own power; it purchases electricity from the Bonneville Power Administration (BPA), which is then transmitted by PGE. What are the advantages and disadvantages to this operating system?
DM: Canby Utility is a preference power customer of BPA and we have federal statutory rights to a share of the federal hydro-power generation that comes off the Columbia River generating system. BPA's power supply is among the very lowest-cost energy supply in the U.S., maybe even the lowest in the nation. As a result, Canby Utility is able to provide electric bills to its customer that are 30 to 40 percent lower than PGE, which serves the rural areas around Canby.
BPA's low cost of power is largely due to the hydro-electric generating plants owned by the federal government having been built many decades ago. These original generating units, and the majority of the backbone BPA transmission grid, were built way back in the late 1930s and 40s. In contrast, newly-constructed power plants, whether solar, gas, coal, nuclear or wind, yield power that is far more costly due to today's high construction costs. So, any of this new generation that is blended into BPA's so-called cheap hydro power supply causes average costs to rise.
Over the past decade, the previous presidential administration and the EPA sought to eradicate coal as fuel for power generation and was somewhat successful, forcing the shutdown of some very old, largely-depreciated coal-fired plants. These were old plants that generated very economical power. This capacity had to be replaced with costly, newly-constructed power plants that the EPA approved as clean technology. But the unfortunate result on families, on the rate-payers who starting in 2008 struggled through the worst recession since The Great Depression, was upward-spiraling electric bills. The economic effects on coal country in Tennessee, West Virginia and Kentucky have been devastating.
The EPA's Clean Power Plan has established very aggressive requirements to acquire and deliver to (customer's) electric bills very costly, new generation (power) that is "green." This requirement is also falling onto BPA, requiring BPA to purchase and factor into its average costs some green power to its supply, and this requirement ignores the fact that BPA already is 100 percent green from its hydro-generation. Blending in high-cost green energy into BPA's hydro-generation causes power costs to rise, and those increases are passed onto Canby residents on their electric bills.
Also a concern, BPA is having to invest very heavily in the transmission grid to get it expanded to meet federal requirements, and they are increasing the rates charged to the preference customers, like Canby Utility, to generate the revenue needed to fund the needed capital improvements and transmission grid expansion plan. So, in recent years, we have been seeing double-digit power supply rate increases that we have had to pass on to Canby residents. Double-digit rate increases are very tough to take, so these rising power costs are a significant concern for CU.
CH: Tell me a bit about the electric system upgrade in 2013. What does it mean for the average CU customer?
DM: Canby Utility's electric system completed a significant system upgrade in 2013 with expansion of Canby Utility's two aging substations — the Knights Bridge Substation and the Westcott Substation. This was an investment of approximately $4.5 million to rebuild these substations, and to provide additional capacity and expansion capability to meet future demand projections. Going forward CU must rely on industrial and economic development efforts to provide growth in kilowatt sales and generate additional electric sales revenue to cover this significant increase in plant overhead, and to avoid rate increases to cover the increased costs of the system upgrades.
CH: But that upgrade didn't deal with the elephant in the room, so to speak — aging underground electric cables that will need to be replaced sooner than later.
DM: In the past several years, CU has begun to experience what the electric utility industry has experienced nationwide — the failure of first-generation underground electric conductors. CU has an electric distribution system that largely consists of underground lines; 75 percent of CU's electric system is buried underground. The original underground electric conductor, or in layman's terms the underground electric cable, was designed with a thick, rubber coating and was direct-buried as prescribed in the ground. This first-generation underground wire was boasted by wire manufacturers to have a life-span of more than 50 years. It has not lived up to these claims.
Advantages in having underground electric lines include fewer outages and fewer un-attractive overhead lines and utility poles along city streets. Disadvantages in having an underground electric system is that when outages occur, it is much more involved to make repairs and typically takes longer to pinpoint line faults, make repairs, and restore service.
CU has identified sections of the underground system that has the old, first-generation electric conductor buried underground. Cable replacement has begun in several areas around Canby. Areas around the Willamette Valley Country Club have been identified by multiple cable failures and have seen activities for cable replacements. Often, the project requires CU to disturb yards and bore, dig and trench to lay the new underground cable. Understandably these activities often stress homeowners that take great pride in their flower beds and lawns, which must be disturbed in most cases for the cable replacement projects to be completed. We appreciate the patience and understanding of Canby's families as we have to trench and dig in their yards to complete these projects. And we have a significant amount of these projects in the planning stage.