Kelowna Water Integration - Phase 1

Kelowna Integrated Water Phase 1 is an $86-million, multi-year project that includes the separation of agricultural and domestic systems in Southeast Kelowna and delivery of a sustainable water supply for agriculture in the South Mission.  

The project will bring clean drinking water to almost 2000 households and meet Interior Heath’s 2025 clean drinking water mandate in South East Kelowna almost 10 years earlier than originally planned.

The project is expected to take 3 years to complete and the first phase of the City’s vision to see a city-wide integrated water system through the 2017 Kelowna Integrated Water Supply plan.

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The project includes:

  • major upgrades to the City’s core south-end water infrastructure including the two main pump stations, expansion of reservoir capacity and large diameter transmission main;
  • a new separated water system to serve existing South East Kelowna Irrigation District (SEKID) domestic customers with year-round clean water that includes water distribution main, two new pumping stations and expanded reservoir storage.

Check out a Map of the Phase One Areas

How is the project funded?

This project was made possible due to an unprecedented senior government grant of $43.9M in March 2017. The balance of the project costs will be paid for by both the City of Kelowna and SEKID. Portions and costs for the project are allocated based on percentage of benefit received.

In early 2018, construction cost increases and increased demand requirements saw the project budget rise to $86M (from $63.5M). The City’s portion of the project shortfall is $6M and will be funded through utility reserves. 

Financing for South Kelowna ratepayers

SEKID’s portion of the project shortfall is $15.3M. On May 14, City Council approved a budget amendment to provide City financing to SEKID ratepayers.

SEKID will start repayment of this financing through a project fee of $32/month to all domestic ratepayers, starting July 2018. In 2021, when South East Kelowna ratepayers will move to lower City Domestic water fees and rates, the project re-payment will increase to approximately $40/month until the shortfall cost is recovered. 

In an effort to reduce the impact on SEKID ratepayers, the City altered project scope and deferred some long-range components to reduce the financial impact to SEKID ratepayers.

Read the details about the projects costs, funding model and typical domestic cost comparison in this newsletter to SEKID ratepayers or browse the display panels from the open house held Thursday, May 17, 2018.

Frequently asked questions

Why have costs increased?

This project budget increase is partly a result of updated water demand requirements in some areas of Southeast Kelowna as well as the volume of infrastructure projects currently being built across the province. $51.4M of SEKID's $58.2 M budget is dedicated specifically to building the new drinking water distribution system; separation of agriculture and domestic was always part of the plan.

What about the plan to build wells - can we go back to that?

The source of water is a small proportion of the overall project cost. The majority of the cost, 88 %, is building the new domestic water distribution system in Southeast Kelowna – which was always part of the plan.

The SEKID project is the Provinces’ approved solution to drinking water quality through the 2017 Value planning study of the 2012 Kelowna integrated water supply plan.  This was a requirement of senior government funding.  The plan will provide all Southeast Kelowna residents clean drinking water 10 years earlier than originally planned though a fully integrated connection to the City’s Water Utility.

How are cost proportioned for this project? Why doesn’t the City just “pay for it”?

Costs are attributed to either the City or SEKID based on the percentage of benefit received (by SEKID and/or City ratepayers). Ratepayers are expected to pay the costs required to bring their system up to the level of the city’s service. Once integrated into one utility, all future benefit and costs will be spread over the entire utility.

The City of Kelowna has done all possible – including re-scoping the project­ and financing –  to reduce cost and risk to both SEKID and current City ratepayers.

What happens if we don’t take advantage of the $43.9M grant?

Despite project cost increases, 80% of $43.9M grant is applied directly to SEKID portions of the project costs and pay for more than 60% of SEKID overall costs.  

Interior Health has required that all domestic drinking water systems meet Canadian Drinking Water Quality standards by 2025. Based on today’s construction costs, demand and rates, SEKID ratepayers would pay an estimated $1,900 annually for 20-years to meet this standard without the grant.

Why does SEKID have to dissolve?

Integration with the City utility is a requirement by the Province to access the $43.9M in grant funding.

Why didn’t you tell us about the project cost increase sooner?

Due to confidential negotiations with the project contractor, the City was unable to disclose details about the project costs until the project was awarded on April 27. 

We appreciate that this has been frustrating for ratepayers and that there are many questions. Please consider attending the open house, signing up for email updates or visiting the city’s website for more information. City staff will be available regularly to assist you with any concerns you may have.

Why is the design/build process used for this project?

As a condition of the $43.9M grant, the project has a tight timeline. Design/build processes help condense project length as design and construction can occur concurrently. Additionally, design/build is used for significant, complex projects to control market driven costs and reduce the risk of budget escalation over the length of the project.

Does removal of the KLO Road transmission main affect service delivery of clean water to South East Kelowna?

No, but it does impact resiliency. The water delivery model has been modified and all the drinking water will now come solely from the south Crawford area. The KLO Road trunk and associated increased capacity in Adams and Hayes reservoirs were originally planned to add redundancy for the system and help meet future demand – an important principle in the Kelowna Integrated Water Supply Plan.

The KLO Road transmission main will need to be completed in the future, but is deferred to help save some immediate costs.  

What’s the status of the remaining 2017 Kelowna Integrated Water Supply Plan?

Phase 1 of the 2017 Kelowna Integrated Water Supply Plan has been the focus of City staff for over four years now.  There is a significant amount of work left to do to ensure the project is successful and the integration goes smoothly. 

However, the City is working on an area-wide water plan with multiple stakeholders. The Plan is looking at water holistically throughout the entire Kelowna Water Basin.  The City will also be doing additional modelling and detailed planning on the 2017 Plan to prepare for another senior government grant application.

The City will re-engage with the Province and other Irrigation Districts to determine if there is interest in working together on the above initiatives.

Agriculture Water

Agriculture is an important part of our community. The integration of SEKID and SOMID starts a new era that will see the City utility operating and delivering irrigation water to support agriculture.

The City is currently reviewing agriculture irrigation rate design based on public consultation this past winter. During the SEKID transition and beyond, further engagement with the agricultural community is needed around the long term delivery and security of irrigation water.

As a first step, City staff have proposed an Advisory Committee to advise City staff on agricultural water matters in South East Kelowna. In the short term, Council will also consider maintaining rates and allocations set by SEKID until 2021.

What are the benefits of the Phase 1 project for Agriculture?

The Phase 1 project provides new advantages for irrigation water users. Once the new domestic system is in place, the existing distribution system will become a dedicated supply of minimally-treated water for irrigation and some fire protection.

This model of separated systems supports agriculture interests by reclaiming the capacity used by previous domestic customers, and spreads cost of ongoing maintenance and future infrastructure of this aging system over the entire City utility. For resiliency, the domestic water supply could also be used in an emergency or water shortage.

How will the City work with agriculture?

The City of Kelowna recognizes the need and importance of a vibrant agricultural industry. During the SEKID transition and beyond, a number of actions are being considered to support Agriculture and ensure a strong transition of the irrigation system.

On May 14 Council approved:

  • maintaining agricultural rates and allocations for water set by SEKID until 2021.
  • developing a transition advisory committee on agricultural water matters in South East Kelowna.
  • Committing to an inclusive engagement process with the agricultural industry around the delivery and security of irrigation water.

The City and SEKID have been working over the past year on a transition plan that welcomes all SEKID employees to continue their employment with the City of Kelowna.  This will ensure continuity of service and valuable knowledge transfer. 

What about Agricultural/Irrigation rates?

A new Agricultural rate structure is currently being determined based on feedback from the Agricultural community this past winter. A proposed rate structure is expected to be presented to Council in 2019.

In the meantime, existing SEKID rates and allocations for both domestic and agricultural rates will remain in place until new rates are adopted for 2021.