Response to Port City Daily article, “Financial report: H2GO plant could contribute

to rate increase for county’s remaining customers”

Steve Hosmer

Hi Johanna,

Your Monday article is specifically about the county and their water challenges.

It is comprehensive and I can only imagine the time required to distill out the essential information and
understand its relationship to everything else you already know.

As always, I am grateful to you and to the Port City daily for your tireless and diligent reporting and
analysis.

For me, in reading your article, it felt like the county is trying to villainize H2GO (and Leland) and to
somehow blame H2GO (and Leland) for forcing the county to double their wholesale and retail rate
increases.

Yet the county fails to provide the analysis that proves that to be true.

Your article says that H2GO will,

“provide filtered water” to its customers.

There is, of course, much more to that story.

Finished Water Differences

· County Manager Ann Hardy, in a presentation to the County Commissioners last spring, claimed
that county water would be the same high quality as H2GO water.

· The two waters simply cannot and will not be the same.

· Testing has proved that there will always be some small amounts of residual industrial
contaminants in the water supplied by the county while the aquifer sourced water will not have any
industrial contaminants.

System Differences
· H2GO reverse osmosis will primarily remove salt since the aquifer water source has no
industrial contaminants to begin with.

· The Brunswick County reverse osmosis will have to remove over a thousand different industrial
contaminants from the Cape Fear River water in order to make that water potable.

Planning Differences

· Former H2GO commissioners began planning for this aquifer based solution to protect
customers from river water contamination 7 years ago, successfully managing both the system
development and the costs.

· The county didn’t start planning to remove river water contaminants with some form of special
filtration until just 2 years ago.

Cost Projection Differences

· H2GO system costs have remained close to or at projected costs.

· County system component costs have risen more substantially above projected costs.

Regionalization Conflicts

· According to your article, “Brunswick County publicly asked local utilities to consider
regionalization”.

· In that request, Brunswick County really means that Brunswick County should be the only
regional supplier processing water in this area.

· But “H2GO – Brunswick Regional Water and Sewer” is also a regional supplier.

· H2GO serves multiple municipalities in addition to some unincorporated locations in Brunswick

County and H2GO now plans to establish a water source independent from the County.

Brunswick County is asking H2GO customers to sacrifice for the sake of the county.

And just what does the county ask 10,000 H2GO customer/owners to sacrifice in order to be part of
what could possibly be considered a county bail out?
· The county wants H2GO to abandon 10 million dollars of H2GO assets already purchased for
the aquifer-RO project and already paid for by utility customer/owners.

· The county wants H2GO to cancel contracts already in place and to pay the penalties for
cancelling those contracts with customer/owner money.

· The county wants to deny over 20,000 county residents the ability to drink water completely free
of industrial contaminants.

· The county wants H2GO customer/owners to accept a previously projected 42% wholesale price
which will cost each customer an estimated additional $100 per year in price increases (The aquifer
based solution planned for H2GO will not require any price increase.) If H2GO and Leland remained
wholesale customers of the County, there is no guarantee that the rate increase would not ultimately
reach 89% which would represent a 2 million dollar (or almost 100%) wholesale price increase which
would cost each H2GO customer an estimated additional $200 per year.

· The county’s projected rate increase will cost H2GO customers an additional million dollars per
year to purchase water from the county. If the county went ahead with the 89% wholesale rate
increase, that number would be close to 2 million

From a strictly financial standpoint, this County request could be looked at one of two ways or both:

1. The 40,000 water accounts of Brunswick County are looking for a partial bail out from the
10,000 customers of H2GO.

2. Brunswick County wants 10,000 H2GO customers to subsidize the rates for 40,000 customers of
Brunswick County by paying much higher rates so that Brunswick County customers can pay lower
rates.

In my view, Brunswick County and the media need to stop portraying H2GO (and now possibly Leland
if an in-development inter-local agreement is signed) as the bad guys.

H2GO has carefully planned long-term for the physical and financial health of its customers and this
request by the county asks H2GO customer/owners to forgo the benefits of that planning and the
money already expended towards the solution.

What factors contribute to the higher projected County price increases

· Brunswick County admits lack of information about the actual financial impact to county water
customers of H2GO and Leland developing an alternate water supply.

· The county stated, “the exact contribution of the H2GO-Leland loss had not been specifically
accounted for in the recent Raftelis study.”
· Is the county saying that a respected firm like Raftelis “can not” or simply “has not yet”
calculated that contribution.

Other factors probably contributing to the higher projected price increases include

· unanticipated increases in Water Treatment Plant costs over previous projections (The new
Wastewater Treatment Plant is a good example.)

· increase engineering costs

· increases in projected debt service costs

If customers are unhappy with projected county water rate increases, what should they do?

· Shouldn’t unhappy Brunswick County customers take their water rate increases up with their
county commissioners?

· The County Commissioners are the people that are actually responsible for county costs and for
advanced planning for the future needs of county citizens and county water customers.

· Shouldn’t the county commissioners accept responsibility for these projected price increases
without trying to get 10,000 H2GO customer accounts to subsidize 40,000 County water accounts and
8 other wholesale customers?

Want to know who is REALLY, ACTUALLY responsible for these price increases?

If it is easier to lay blame than to accept responsibility, then let’s remember and blame the true culprits:
the organizations that have allowed us to get into this mess in the first place:

· the polluters that dump contaminants into our river and our air

· the DEQ for failing to adequately protect us from these polluters

· the EPA for failing to adequately regulated emerging contaminants

· the industry lobbyists for helping our politicians turn a blind eye to emerging contaminants

· the politicians for their lack of diligence in protecting their constituents

THESE organizations and individuals bear the source responsibility for much of the County price
increases.
The emerging contaminants in the river by themselves made the County reverse osmosis unit necessary.
That reverse osmosis unit contributes over 1/3 of the current upgrade costs the county is facing.