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AgendaLake Huron Primary Water Supply System

Joint Board of Management

The 3rd Meeting of the Lake Huron Primary Water Supply SystemJune 6, 2019, 2:00 PMCommittee Room #5

Pages

1. Call to Order

1.1 Disclosures of Pecuniary Interest

2. Adoption of Minutes

2.1 Minutes of the 2nd Meeting held on Thursday, March 7, 2019 3

3. Consent Items

3.1 Kelly Scherr, Chief Administrative Officer - Quarterly Compliance Report(1st Quarter 2019: January-March)

11

3.2 Kelly Scherr, Chief Administrative Officer - Environmental ManagementSystem and Quality Management System

15

3.3 Kelly Scherr, Chief Administrative Officer - Water System Operation -Contract Status Update

31

3.4 Kelly Scherr, Chief Administrative Officer - Quarterly Operating FinancialStatus Report

34

4. Items for Discussion

4.1 Kelly Scherr, Chief Administrative Officer - Huron-Elgin-London ProjectClean Water - Program Completion

37

4.2 Kelly Scherr, Chief Administrative Officer - Ministry of the Environment,Conservation and Parks Inspection Report

45

4.3 Kelly Scherr, Chief Administrative Officer - Uninterruptable Power SupplySystem Replacement

48

4.4 Kelly Scherr, Chief Administrative Officer - 2018 Audited FinancialStatement

51

5. Deferred Matters/Additional Business

6. Upcoming Meeting Dates

October 3, 2019

December 5, 2019

7. Adjournment

2

1

Lake Huron Primary Water Supply System

Report

2nd Meeting of the Lake Huron Water Supply System Board of Management March 7, 2019 Attendance: Meeting held on Thursday, March 7, 2019 at the London City

Hall, commencing at 1:30 PM PRESENT: C. Burghardt-Jesson (Chair), A. DeViet, D. Faubert, J. Fergusson, A. Hemming, S. Hillier, S. Lehman, J. Vanderheyden, M. van Holst, P. van Meerbergen, P. Walden and J. Wilcox and J. Bunn (Committee Secretary) ALSO PRESENT: T. Bender (OCWA), D. Gibson, A. Henry, R. Libier (OCWA), E. McLeod (RWS) and B. Tully (OCWA)

1. Call to Order

1.1 Disclosures of Pecuniary Interest

That it BE NOTED that no pecuniary interests were disclosed.

2. Adoption of Minutes

2.1 Minutes of the 1st Meeting held on Thursday, January 31, 2019

DEVIET AND HILLIER

That the minutes of the 1st meeting of the Lake Huron Primary Water Supply System Board of Management, held on January 31, 2019, BE NOTED AND FILED. CARRIED

Motion Passed

3. Consent Items

3.1 Quarterly Compliance Report (4th Quarter 2018: October - December)

VAN HOLST AND LEHMAN

That, on the recommendation of the Chief Administrative Officer, the report dated March 7, 2019, with respect to the general, regulatory and contractual obligations of the Lake Huron Primary Water Supply System, for October to December 2018, BE RECEIVED. CARRIED

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2

Motion Passed

3.2 Environmental Management System and Quality Management System


That, on the recommendation of the Chief Administrative Officer, the report dated March 7, 2019, with respect to the Environmental Management System and Quality Management System, BE RECEIVED. CARRIED

Motion Passed

3.3 Capital Status Report


That, on the recommendation of the Chief Administrative Officer, the following actions be taken with respect to Lake Huron Primary Water Supply System capital projects:

a) projects LH1222 Low Lift Pump Refurbishment, LH1235 PAC System Assessment, LH1238 Roof Replacement, LH1241 Review of Inactivation Control Strategy, LH1375 Low Lift Screen Repairs, LH1379 Low Lift Surge Valves, LH1383 Server Room Fire Suppression, LH1389 Flow Control Strategy and Storage Study, BE CLOSED, with the surplus funds, in the approximate amount of $334,298.00, released to the Board’s Reserve Funds;

b) project LH1902 Residue Management Facility BE CLOSED; it being noted that the corresponding projected debenture issuance related to this project will be reduced accordingly and surplus funds (if any) released to the Board’s Reserve Funds; and,

c) the report dated March 7, 2019, with respect to the above-noted capital projects, BE RECEIVED. CARRIED

Motion Passed

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3

4. Items for Discussion

4.1 London Hydro Occupancy Agreement Renewal

FERGUSSON AND VANDERHEYDEN

That, on the recommendation of the Chief Administrative Officer, the following actions be taken with respect to the London Hydro Occupancy Agreement Renewal:

a) the London Hydro Occupancy Renewal Agreement, as appended to the report dated March 7, 2019, BE APPROVED for the term of April 1, 2019 to March 31, 2024; and,

b) the Board Chair and the Chief Administrative Officer BE AUTHORIZED to execute the above-noted renewal Agreement. CARRIED

Motion Passed

4.2 LH1260 Flash Mixer Upgrade - Award

VAN MEERBERGEN AND HEMMING

That, on the recommendation of the Chief Administrative Officer, the following actions be taken with respect to the Lake Huron Primary Water Supply System LH1260 Flash Mixer Upgrade Award:

a) the proposal from Jacobs, in the amount of $104,599.00, including contingency and excluding HST, BE ACCEPTED; it being noted that Jacobs submitted a proposal which meets the Request for Proposal requirements and evaluated as having the best value;

b) the Board Chair and the Chief Administrative Officer BE AUTHORIZED to execute a consulting services Agreement with Jacobs for the completion of project LH1260 Flash Mixer Upgrade and related engineering work for the Lake Huron Primary Water Supply System coagulation system; and,

c) the report dated March 7, 2019, with respect to the above-noted matter, BE RECEIVED. CARRIED

Motion Passed

5

4

5. Deferred Matters/Additional Business

5.1 (ADDED) Investigation of Possible Pipe Repairs

HILLER AND FAUBERT

That the attached presentation from A. Henry, Director, Regional Water Supply, with respect to the investigation of possible pipe repairs in 2019, BE RECEIVED. CARRIED

Motion Passed

6. Next Meeting Date

June 6, 2019

7. Adjournment

The meeting adjourned at 2:25 PM.

6

2019-03-07

1

Investigation of Possible Pipe Repairs

2019 - Two locations discovered with issues

H. Clarke Property, South Huron

• Leaking pipe gasket near chamber #13A• Pipeline twinned in this area; repairs

undertaken while continued supply to municipalities

• Previous complaints of wet areas thought related to private water service or field tile

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2019-03-07

2



Chamber #13AExterior wall face

Leaking pipe joint (gasket failure)

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2019-03-07

3

Pipe #4-81, Corbet Line

• Detected accelerating deterioration rate; 17 wire breaks in the last 9 months. Adjoining pipe #4-80 showing similar deterioration

• Pipeline twinned in this area; repairs undertaken while continued supply to municipalities

• Property owned by ABCA

#4-80#4-81


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2019-03-07

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Report No.: LH-2019-03-01

Report Page: 1 of 4

Meeting Date: June 6, 2019

File No.:

To: Chair and Members Lake Huron Primary Water Supply System Board of Management

From: Kelly Scherr, P.Eng., MBA, FEC Chief Administrative Officer

Subject: Quarterly Compliance Report (1st Quarter 2019: January - March)

RECOMMENDATION

That the Quarterly Compliance report with respect to the general, regulatory and contractual obligations of the Lake Huron Primary Water Supply System BE RECEIVED for the information of the Board of Management; it being noted that there were no Adverse Water Quality Incidents or adverse laboratory results in the 1st quarter of 2019.

EXECUTIVE SUMMARY

Since the previous report to the Board, there were no new or proposed regulatory changes that may have a significant impact on the Lake Huron Primary Water Supply System (LHPWSS). The Water Quality Quarterly Report for the period of January 1 –March 31, 2019 was posted on the water system’s website at https://huronelginwater.ca/wp-content/uploads/2019/04/2019-Q1-Huron-Final.pdf There were no Adverse Water Quality Incidents (AWQI) reported by the operating authority or adverse laboratory results reported by the third-party accredited laboratory during this quarter.

BACKGROUND

Pursuant to Board of Management resolution, this Compliance Report is prepared on a quarterly basis to report on general, regulatory and contractual compliance issues relating to the regional water system. For clarity, the content of this report is presented in two basic areas, namely regulatory and contractual, and does not intend to portray an order of importance or sensitivity nor a complete list of all applicable regulatory and contractual obligations.

REGULATORY ISSUES

Recent Regulatory Changes: At the time of drafting this report there were new regulatory changes for this reporting period, however without significant impact on the LHPWSS.

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Regulation Decision: Environmental Emergency (E2) Regulations, 2019 under the

Canadian Environmental Protection Act, 1999 Environment and Climate Change Canada (ECCC) has finalized the new Environmental Emergency (E2) Regulations which will repeal and replace the current E2 Regulations, effective August 24, 2019. The Regulations require those who own or have the charge, management or control of a listed substance to submit a notification to ECCC, and, if they meet certain threshold quantities, prepare and periodically test an E2 plan. The final regulations add 33 new substances to the list of regulated substances. They clarify and strengthen requirements for emergency planning and public notification before, during and after an environmental emergency. The regulations introduce obligations to report periodically on facilities, substances, and E2 plans, as well as to activate the E2 plan in the case of an emergency.

Impacts to the LHPWSS: Currently, the only substance in the E2 Regulations which is applicable to the LHPWSS is chlorine gas. Chlorine gas remains on the regulated list of substances, and the LHPWSS has already addressed the requirements for this substance. Diesel fuel has now been added to the list of regulated substances. However, there is an exclusion for diesel fuel that is used to generate power at the facility where it is located, provided quantity limits are not exceeded. The diesel fuel on site at the LHPWSS is used for emergency back-up power generation, and the quantity on site does not meet the threshold requirements of the regulation. Therefore, the LHPWSS will not be required to prepare E2 Plans for diesel fuel. In 2016, when changes to the regulations were first proposed, one of the new substances proposed to be added to the regulated list of substances was sodium hydroxide (ie. caustic soda) which the LHPWSS has on site. In their regulation decision, ECCC decided not to add certain corrosive substances to the regulations, including sodium hydroxide solution. ECCC determined that certain substances are more appropriately managed by a variety of existing controls, such as health and safety legislation. As a result of this change, the LHPWSS is not required to prepare an E2 Plan for sodium hydroxide. Notwithstanding, under the system’s ISO14001 Environmental Management System (EMS), procedures related to the delivery, handling and emergency spill response for sodium hydroxide are already in place.

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New Environmental Bill of Rights (EBR) Registry Postings: At the time of drafting this report, there were no new postings on the EBR that may have a significant impact on the LHPWSS. Quarterly Water Quality Reports: The Water Quality Quarterly Report for the period of January 1 – March 31, 2019 was completed by the operating authority, and is posted on the Water Systems’ website at https://huronelginwater.ca/wp-content/uploads/2019/04/2019-Q1-Huron-Final.pdf Note: In order to better comply with the Accessibility for Ontarians with Disabilities Act, 2005, the detailed tables of water quality test results which were previously appended to this Report have been removed. The full list of test results of drinking water quality parameters is posted on the water system’s website and available in print at the Board’s Administration Office in London upon request. In addition, the detailed water quality information is also published within the water system’s Annual Report required by O.Reg. 170/03 under the Safe Drinking Water Act.

Adverse Water Quality Incidents (AWQIs): There were no AWQI reported by the operating authority or adverse laboratory results reported by the third-party accredited laboratory during this quarter.

O.Reg. 170/03, Section 11 “Annual Reports”: Under the Drinking Water Systems Regulation (O.Reg. 170/03), an Annual Report for the LHPWSS is required to be prepared by February 28th of each year. The report summarized water quality and maintenance information for the 2018 calendar year. This report was completed by Ontario Clean Water Agency (OCWA), the contracted operating authority for the LHPWSS. Although the report is no longer required to be submitted to the Ministry of the Environment, Conservation and Parks (MECP), the LHPWSS is required to provide copies of the report to drinking water systems that obtain water from this system. The Annual Report was forwarded to the member municipalities on February 20, 2019. The Annual Report has also been posted on the Water Systems’ website at https://huronelginwater.ca/wp-content/uploads/2019/02/2018_HURON_Annual_Report_Final.pdf for public information. O.Reg. 170/03, Section 22 “Summary Reports for Municipalities”: Under the Drinking Water Systems Regulation (O.Reg. 170/03) a summary report is required by March 31st of each year which:

Lists the requirements of the Act, the regulations, the system’s approval and any order that the system failed to meet at any time during the period covered by the report, and the duration of the failure. For each failure referred to, a description of the measures that were taken to correct the failure is required.

In order to allow the system’s owner to “assess the capability of the system to meet existing and planned uses of the system”, provide a summary of the quantities and flow rates of the water supplied, including monthly average and maximum daily flows and daily instantaneous peak flow rates, with a comparison to the systems rated capacity.

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This report was also completed by OCWA. The Summary Report was forwarded to the member municipalities of the LHPWSS as required on March 21, 2019. The report has been posted on the Water Systems’ website at https://huronelginwater.ca/wp-content/uploads/2019/03/2018-LHPWSS-Compliance-Report-FINAL.pdf for public information. All Summary Reports are available for viewing at the Lake Huron Water Treatment Plant and at the Board’s Administration Office in London. Copies of all reports are available to the public upon request and free of charge as required by O.Reg. 170/03. Compliance Inspections: The Ministry of the Environment, Conservation and Parks (MECP) conducted an unannounced physical inspection of the LHPWSS on December 5, 2018. The final inspection report was issued by the MECP on March 8, 2019. The final inspection report is the subject of a separate report to the Board.

CONTRACTUAL ISSUES

ARTICLE 3, “Operation and Maintenance of the Facilities – General”: Board staff informally meets with OCWA on a monthly basis to discuss operations and maintenance related issues, and formally on a quarterly basis to review contractual performance. The 2019 first quarter Contract Report was received from OCWA on April 30, 2019 and is scheduled to be discussed at the quarterly administration meeting between Board staff and OCWA on May 24, 2019. Copies of the monthly Operations and Maintenance Reports, or quarterly Contract Reports are available at the Board’s Administration Office in London upon request.

This report was written by Erin McLeod, Quality Assurance and Compliance Manager.

Submitted by:

Recommended by:

Andrew Henry, P. Eng. Director, Regional Water Supply

Kelly Scherr, P.Eng., MBA, FEC Chief Administrative Officer

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Subject: Environmental Management System and Quality Management System

RECOMMENDATION

That the following report with respect to the Environmental Management System and Quality Management System for the Lake Huron Primary Water Supply System BE RECEIVED for information.

BACKGROUND

Environmental Management System (EMS) The Lake Huron Primary Water Supply System (LHPWSS) has an Environmental Management System (EMS) which has been registered to the ISO 14001 standard since 2003. The LHPWSS underwent a three-year registration audit in November 2017 and was recommended for registration to the ISO14001:2015 standard for a three-year period (ending in 2020). The continued utilization and registration of the EMS to the ISO 14001 standard is a requirement of the Service Agreement with Ontario Clean Water Agency (OCWA), the contracted Operating Authority for the LHPWSS. Quality Management System (QMS) In 2006, the Drinking Water Quality Management Standard (DWQMS) was integrated with the existing EMS and the combined EMS/QMS is maintained by the contracted Operating Authority. The Safe Drinking Water Act (SDWA) and the water system’s Municipal Drinking Water Licence (MDWL) require that an accredited Operating Authority be in operational charge of the drinking water system. In order to become accredited, the Operating Authority must utilize and maintain an Operational Plan that meets the requirements of the DWQMS and must undergo an external accreditation audit every three years. OCWA received full scope DWQMS re-accreditation in October 2016 and is currently accredited for the three-year period ending in 2019.

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DISCUSSION

Management Review The documented EMS/QMS and its performance requires Management Review by Top Management a minimum of once every calendar year to ensure that the management team of the Board and the Operating Authority stay informed of environmental and quality related issues. Items discussed at the Management Review meetings include, but are not limited to, water quality test results, environmental and quality performance, legislative changes, identified non-conformances, corrective and preventive actions, staff suggestions, changing circumstances and business strategies, and resource requirements. Corrective and preventive actions include not only those to address non-conformance issues and opportunities for improvement identified as part of internal and external audits, but also non-compliance issues identified by the Ministry of the Environment, Conservation and Parks (MECP), suggestions from staff, and opportunities for improvement identified during the Management Review process. In order to carry out more effective Management Review meetings, the Board’s administration has opted to conduct shorter meetings at more frequent intervals. Although each required Management Review input may not be covered at every meeting, over the course of the year all required inputs are reviewed at least once. Management Review meetings are held in a combined format for both the LHPWSS and the Elgin Area Primary Water Supply System (EAPWSS). A Management Review meeting was held on April 3, 2019. The meeting minutes are attached to this report as Appendix A for the information of the Board. Internal Audits Pursuant to the international ISO 14001 EMS standard and the provincial DWQMS standard, periodic “internal” audits are performed by the Board’s administration to ensure continued compliance with legislated, contractual, and other requirements, as well as conformance with the ISO 14001 EMS standard and DWQMS standard. Internal audits also ensure that the ongoing operation of the LHPWSS conforms to the EMS and QMS as implemented. As required by the standards, internal audits are performed a minimum of once every calendar year. A QMS Internal Audit was conducted on May 2-3, 2019 and the pending audit report will be discussed at the next Management Review meeting scheduled for June 17, 2019. The audit report summary will be included in a future report to the Board. External Audits Annual surveillance audits (third-party external audits) are conducted for both the EMS and QMS, with a recertification audit taking place every third year. The external registrar for both the EMS and QMS is currently SAI Global. External audits review all aspects of the EMS or

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QMS, including the internal audits, subsequent management reviews, and corrective action processes.

There were no external audits conducted during this reporting period.

Corrective and Preventive Actions For an EMS and QMS to be effective on an on-going basis, an organization must have a systematic method for identifying actual and potential non-conformities, making corrections and taking corrective and preventive actions, preferably preventing problems before they occur. The Internal Audit process and Management Review are the two main drivers for identifying potential problems and opportunities for improvement for the LHPWSS and implementing corrective actions. Preventive actions may originate from identified opportunities for improvement as part of an audit, but also staff suggestions and discussions with management. It is important to note that action items should not be construed as compliance failures, but rather an action to be undertaken which will improve the LHPWSS’s overall performance. Action items are the result of the “PLAN-DO-CHECK-ACT” continual improvement process. The identification of action items is a critical component of continual improvement and an essential element of management systems. The identification of action items should be seen as a positive element, as this drives continual improvement. A key concept of PLAN-DO-CHECK-ACT is that it does not require nor expect 100% conformance but promotes an environment of continual improvement by identifying shortfalls, implementing corrective and preventive measures, and setting objectives and targets for improvement. Figure 1 outlines the general process.

Figure 1: Plan-Do-Check-Act improvement process

Continual Improvement

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Since the last report to the Board, the following summarizes new action items that have been added to the EMS/QMS action item tracking system:

Four (4) new action items were added as a result of the environmental compliance internal audit conducted January 29, 2019.

One (1) new action item was added as the result of a corrective and preventive action form completed by staff.

Two (2) new proactive action items were added as a result of the April 3, 2019 Management Review meeting.

As of May 2, 2019, there are currently 20 open action items in the system. Action items are prioritized and addressed using a risk-based approach, and deadlines established given reasonable timeframes and resources that are available. Board staff are pleased with the performance of the corrective and preventive action process and have no concerns with the number of open action items.

All outstanding action items in the system are driven by continual improvement. All open action items are currently either proactive or relate to opportunities for improvement. None of the open action items relate to regulatory issues (i.e. non-compliances), management system non-conformances, or water quality issues.

CONCLUSION

The Internal Audits and frequent Management Review meetings continue to effectively identify system deficiencies. The EMS and QMS for the LHPWSS continue to be suitable, adequate and effective. Activities by OCWA continue to address the need for change, and the management systems are being revised and refined as required.

This report was prepared by Erin McLeod, Quality Assurance & Compliance Manager with the assistance of Arlene Tanashi, Compliance Coordinator.

Submitted by:

Recommended by:



Attachments: Appendix A – Management Review Meeting Minutes (April 3, 2019)

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APPENDIX A: MANAGEMENT REVIEW MEETING MINUTES (APRIL 3, 2019)

Lake Huron & Elgin Area Primary Water Supply Systems EMS/QMS Management Review

Date April 03, 2019 Time 1:30 pm – 4:00 pm Location Regional Water Supply Boardroom Attendees Andrew Henry (RWS), Erin McLeod (RWS), Blair Tully (OCWA), Denny

Rodrigues (OCWA), Simon Flanagan (OCWA), Greg Henderson (OCWA), Arlene Tanashi (RWS)

Regrets C.C.

N.B.: Management Review meetings are held in a combined format for both the Lake Huron Primary Water Supply System (LHPWSS) and the Elgin Area Primary Water Supply System (EAPWSS).

------Meeting Notes------ 1. Review and approval of previous meeting minutes – December 11, 2018

The minutes are posted to SharePoint. The minutes were approved.

2. EAPWSS - Ministry of the Environment, Conservation and Parks (MECP) Inspection – November 13, 2018 The inspection report was issued January 31, 2019. The report was based on an announced focused physical inspection of the system. The inspection rating was 100.00%. There were zero (0) non-compliances identified in the inspection report. There were zero (0) Best Management Practices (Recommendations) identified.

3. LHPWSS - Ministry of the Environment, Conservation and Parks (MECP) Inspection – December 5, 2018 The inspection report was issued March 7, 2019. The report was based on an unannounced detailed physical inspection of the system. The inspection rating was 100.00%.

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There were zero (0) non-compliances identified in the inspection report. There were zero (0) Best Management Practices (Recommendations) identified.

4. EAPWSS - Environmental Compliance Internal Audit (January 24, 2019) The purpose of the audit was to verify compliance with select environmental legislation and other compliance obligations at the EAPWSS. A summary of the audit findings was circulated. Zero (0) non-conformances (NC) and zero (0) Opportunities for Improvement (OFI) were noted. The positives noted in the audit summary were highlighted for Top Management.

5. LHPWSS – Environmental Compliance Internal Audit (January 29, 2019) The purpose of the audit was to verify compliance with select environmental legislation and other compliance obligations at the LHPWSS. A summary of the audit findings was circulated. Zero (0) non-conformances (NC), two (2) Opportunities for Improvement (OFI) and two (2) Recommendations were noted. Discussion ensued and suggested additions and changes to action items and deadlines will be incorporated into the CAF tracking spreadsheet. The positives noted in the audit summary were highlighted for Top Management.

6. LHPWSS – Middlesex County Fire Safety Inspection (February 22, 2019) Komoka-Mt. Brydges Pumping Station (KB1) and McGillivray Pumping Station were inspected. There were zero (0) violations found. A copy of the Fire Safety Inspection Report has been uploaded to the Compliance Library in SharePoint.

7. Incidents of Adverse Drinking Water Tests (LH & EA) Adverse Water Quality Incidents (AWQI) were last discussed at Management Review in May 2018. There have been zero (0) AWQIs for LHPWSS. There was one (1) AWQI for EAPWSS. The EAPWSS AWQI was reviewed and discussed. The AWQI reported involved bacteriological analysis of a sample dated January 4, 2019. The root cause analysis determined that the sample was mislabelled as treated water when in fact it was a raw water sample (operator error). A Corrective Action Form was completed for the incident documenting root cause analysis and appropriate information for corrective action. The AWQI will be included in the next Quarterly Compliance Report to the Board (1st Quarter 2019: January – March).

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8. Deviations from Critical Control Point Limits and Response Actions – 2018 Summary (LH & EA) Handouts Provided: WaterTrax Alert Action Reports were generated for each drinking water system from January 1, 2018 to December 31, 2018. This provided a summary of all WaterTrax alerts received in 2018. LHPWSS: Total of 16 alerts received. The alerts were reviewed. Discussion ensued. No changes are required to the alert settings at this time. Operators have continued to provide detailed comments to the alerts to explain deviations. EAPWSS: Total of 138 alerts received. This represents an increase from last year, however the Senior Operations Manager is aware and will be conducting a comprehensive review. The details of the alerts were reviewed. Discussion ensued. Operators have continued to provide detailed comments to the alerts to explain deviations. Action Item (EA): Complete a review and validate WaterTrax Alert Settings and provide recommendations for updates, if required. Simon Flanagan. Deadline: December 31, 2019.

9. Results from Board Meetings – January 31, 2019 and March 7, 2019 January 31, 2019 LHPWSS Board Meeting Letter from ECCC regarding chlorinated effluent discharges: There was a question from the Board regarding other potential contaminants that could be discharged to lake. Staff responded that any spills, whether accidentally or as part of our operations (e.g. RMF), could impact air/land/water and would be an issue. We minimize our risk to the extent possible. There was general discussion on the coordination with the U.S. Great Lakes partners. Quarterly Compliance Report: There was general discussion about Ontario’s Open for Business Action Plan and how this might impact the drinking water system. Any industry has potential for risk. The Boards will work with municipalities as required. The drinking water industry (e.g. OWWA, OMWA) has expressed their caution. General discussion on representation at the local level. EMS/QMS Report: The Dec. 11, 2018 management review meeting minutes included the Lake Erie Harmful Algal Bloom seasonal assessment. Staff provided clarification on the definition of severity as being a combination of size as well as toxicity. The compliance obligations update noted that Health Canada is introducing a guideline for barium in drinking water. There was a question from the Board asking whether there is an increasing trend for barium, and whether it is now more prevalent in the environment. [Noted at management review: Staff trended this after the meeting, there is no increasing trend for barium for either EAPWSS or LHPWSS.]

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January 31, 2019 EAPWSS Board Meeting Letter from ECCC regarding chlorinated effluent discharges: Same comments as above. Quarterly Compliance Report: The report was received for information. EMS/QMS Report: The report contained a summary of the findings for the EMS External Audit conducted by SAI Global on October 11-12, 2018. The Board requested clarification on the three OFIs noted in the audit report. Staff provided explanation on the findings and noted the continual improvement process. [Noted at management review: For future presentation of external audit results, we will more clearly distinguish each OFI, so they do not inadvertently appear to be related items.] March 7, 2019 LHPWSS Board Meeting The Quarterly Compliance Report and EMS/QMS Reports were received for information. March 7, 2019 EAPWSS Board Meeting The Quarterly Compliance Report was received for information. EMS/QMS Report: Overall the Board was pleased with the audit results (zero non-compliances) and noted that we are going above and beyond to ensure we meet environmental requirements. There were some questions regarding the Environmental Compliance Audit and the reference to “areas of concern”. It was explained that this is terminology is from the environmental compliance software and the Board can think of it as an “area of focus” for the audit. [Noted at management review: Use different wording in future environmental compliance reports.] MECP Inspection Report: The 100% rating was noted by the Board and congratulations to staff on great work.

10. Compliance Obligations Update

Title Information Notice: Approval of the amended assessment reports and source protection plans for the Ausable Bayfield source protection area and the Maitland Valley source protection area

Source EBR Posting (MECP) Date Posted/ Notice Received

February 5, 2019

Comments Due N/A

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Summary MECP has approved amendments to the assessment reports and source protection plans. The amendments update wellhead protection areas around 6 municipal wells, and revise risk management policies for consistency and to assist with implementation. Minor changes to the risk management plan policies align with timelines in neighbouring areas and allow flexibility for which municipal applications require approval by a risk management official.

Notes No impacts to the LHPWSS. The amendments relate to wellhead protection areas.

Title Environmental Emergency (E2) Regulations, 2019 Source Environment and Climate Change Canada (ECCC) Date Posted/ Notice Received

March 6, 2019

Comments Due N/A Summary The regulations have been finalized and come into force on August

24, 2019. Until then the previous regulations are in force. The final regulation adds 33 substances to the list of regulated substances. If specific quantity and/or container capacity thresholds are met or exceeded, there are requirements for notification to ECCC and information submission, and the preparation and exercising of E2 plans.

Notes In 2016 when the regulations were first proposed, 49 new substances were proposed to be added to the list, including sodium hydroxide. ECCC has decided not to add certain corrosive substances to Schedule 1, including sodium hydroxide solution. As a result of this change, the LHPWSS and EAPWSS will not be required to prepare E2 Plans for sodium hydroxide. Diesel fuel has been added to the list. However, there is an exclusion for diesel fuel that is used to fuel a heating appliance or to generate power at the facility where it is located, provided quantity limits are not exceeded. The LHPWSS and EAPWSS will not be required to prepare E2 Plans for diesel fuel.

Title Guideline Technical Document - Lead Source Health Canada Date Posted/ Notice Received

March 11, 2019

Comments Due N/A

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Summary Health Canada updated its drinking water guideline to reduce the maximum acceptable concentration (MAC) for lead at the tap from 0.01mg/L (10ug/L) to 0.005mg/L (5ug/L).

Health Canada offered the following explanation for application of the new guideline: “The MAC for lead is established based on feasibility rather than only health protection. This is because lead is introduced in drinking water in the distribution and plumbing systems, after the treated water leaves the treatment plant. As current science cannot identify a level under which lead is no longer associated with adverse health effects, lead concentrations in drinking water should be kept as low as reasonably achievable (ALARA).”

Notes Title Study Report: Market Characterization & Conservation

Potential for Ontario’s Drinking Water & Wastewater Treatment Plants

Source Independent Electricity System Operator (IESO) Date Posted/ Notice Received

March 1, 2019

Comments Due N/A Summary Water and wastewater treatment represent the largest energy use

for most municipal governments, so the IESO commissioned a report that advises how these costs can be reduced. The report presents municipal leaders and water treatment facility operators with options and recommendations to reduce energy use, including operational and systemic changes, shifting energy use from peak to off-peak times and better use of existing energy saving opportunities.

Notes Noted for information, as an updated 5 year Energy Conservation and Demand Management Plan, as required under O.Reg. 507/18, is due on July 1, 2019.

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Title Consultation – Cadmium in Drinking Water Source Health Canada Date Posted/ Notice Received

March 19, 2019

Comments Due May 21, 2019 Summary The intent is to update the current drinking water guideline and

guideline technical document, which was last updated in 1986. This new document takes into consideration newer scientific studies and assessments, updated data and information. The document proposes to reaffirm a maximum acceptable concentration (MAC) of 0.005 mg/L (5 µg/L) for cadmium in drinking water.

Notes In Ontario, the MAC for cadmium is also 0.005 mg/L. In the last 5 years (2014-2019): Elgin WTP Treated water – max. value 0.000037 mg/L; Huron WTP Treated Water – max. value 0.000006 mg/L;

Title Consultation: Review of Total Coliforms in Drinking Water Source Health Canada Date Posted/ Notice Received

March 19, 2019

Comments Due May 21, 2019 Summary The current guideline was published in 2012. It establishes a MAC

for total coliforms in water leaving the treatment plant of none detectable per 100 mL. The guideline also states that total coliforms should be monitored in the distribution system because they are used to indicate changes in water quality. Detection of total coliforms from consecutive samples from the same site or from more than 10% of the samples collected in a given sampling period should be investigated (Health Canada, 2012).

Health Canada reviewed the scientific literature related to total coliforms in 2017. Based on this review, a full update of this guideline technical document is not required at this time, as science continues to support the MAC established in 2012.

Notes In Ontario, the MAC for total coliforms is none detectable. This applies to both treated water and distribution samples.

Title Consultation: Guidance on Natural Organic Matter in Drinking

Water Source Health Canada Date Posted/ Notice Received

March 19, 2019

Comments Due May 21, 2019

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Summary Information on natural organic matter (NOM) in drinking water has been assessed with the intent of establishing a guidance document. NOM is an extremely complex mixture of organic compounds and is found in all groundwater and surface waters. Although NOM has no direct impact on health, it affects the efficacy of drinking water treatment processes and consequently the safety of drinking water. NOM may also affect consumer satisfaction because it can contribute to undesirable colour, tastes and odours in drinking water.

Health Canada completed its review of NOM in drinking water and the impact that it can have on drinking water treatment processes. This guidance document reviews and assesses risks associated with the impact of NOM on drinking water treatment processes and the safety of drinking water.

Notes Although the numerous organic compounds that contribute to NOM cannot be measured directly, there are a number of surrogates that can be used to provide an indication of the NOM concentration. For research purposes, the EAPWSS and LHPWSS collect data on dissolved organic carbon (DOC), total organic carbon (TOC), UV absorbance, and colour.

11. QMS Operational Plan Currency, Content and Updates (LH & EA) OCWA provided an update on the status of documents included in the Operational Plan. The Emergency Standard Operating Procedures (ESOPs/HSOPs) are 90% complete but there is an outstanding administrative component to ensure that revisions are properly uploaded into SharePoint. Going forward, operational staff will continue reviewing and updating the operational Standard Operating Procedures (SOPs) to better reflect current practice. The 2019/2020 focus will also include the Operations and Maintenance Manuals.

12. Communications from Interested Parties

a) LHPWSS: Water Quality Data Inquiry – South Huron (Feb 15, 2019): A consumer requested water quality data from the municipality, and this was referred to the LHPWSS. The consumer had requested data for some parameters in addition to those which are included in the Quarterly Water Quality

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reports posted to the website. This information was provided. OCWA has since modified the quarterly reporting template to add those additional parameters of interest. No further action.

b) LHPWSS: Consumer Request – Flow Data (March 4, 2019): An inquiry from a resident/consumer of Lambton Shores was received. It related to how much flow/volume was going from the LHPWSS to Lambton Shores distribution system. The monthly flow/volume from the revenue meter readings was provided to the satisfaction of the consumer. No further action.

c) EAPWSS: Hawk Cliff Raptor Banding Station – 2018 Newsletter: The Hawk Cliff Banding Station is a volunteer organization and landowners allow the use of their property to conduct their banding programs. The 2018 Annual Newsletter was received in March 2019 and included a thank you to the EAPWSS and staff for extending their generosity in hosting the banders.

d) LHPWSS & EAPWSS – Residuals Inquiry – A Board member requested information as to the amount of residuals that were being trucked to landfill/disposal site from each Residuals Management Facility (RMF). The information was provided. Action Item (LH): Monthly reporting of RMF residuals being removed for disposal to be included in the Monthly Operations and Maintenance report (truckloads/month). Greg Henderson. Deadline: April 30, 2019. e) EAPWSS – Consumer Feedback – There have been no specific QMS related communications in the past year.

13. Continual Improvement/Suggestions from Staff

Staff suggested that chemical tracking be consistently instituted for the LHPWSS pumping stations. Currently the consumption of sodium hypochlorite is tracked for the Exeter-Hensall Pumping Station, but chlorine gas is not tracked at Komoka Mount Brydges Pumping Station (KMBPS). Action Item (LH): OCWA will investigate whether chlorine gas consumption is able to be tracked at KMBPS. Concurrently review the need to re-chlorinate at this location. Denny Rodrigues and Greg Henderson. Deadline: September 30, 2019. There was general discussion about secondary disinfection requirements by member municipalities. Currently, South Huron receives a boosted level of chlorine from the primary system to ensure adequate maintenance of chlorine residual throughout their distribution system. The primary systems can assist with short terms needs, but this is not a long-term solution. Distribution systems should have their own means to provide the required residual chlorine.

14. Notification to Spills Action Centre (SAC) - EAPWSS

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As part of ongoing continual improvement of the EMS/QMS, personnel are proactively engaged and appropriately reporting incidents related to environmental and quality issues. On December 31, 2018 the surge tank overflowed at the EAPWSS Water Treatment Plant. The details of this incident were discussed. A Corrective Action Form (CAF) was completed documenting appropriate information for corrective action. Action items will be added to the tracking spreadsheet.

15. Environmental Performance (LH & EA)

EAPWSS – Energy Savings Measure. New garage doors were installed at the main plant and low lift. The sealing system minimizes air infiltration and thermal transference. OCWA has observed that since installation of the new doors the unit heaters do not run as often in the garages.

EAPWSS – Filter Backwash Volumes. An analysis and comparison of data was

presented for each of the four filters. The trendlines show that the average volume of backwash water used before and after filter rebuilding was reduced significantly (almost 50% on average). Trending also indicates a levelling off of the volume used. Another year or two of trending will confirm this. Energy savings are realized due to shorter backwash pump run times and shorter air scour blower run times. Also, of note as a result of this reduced water usage, is that a reduced volume of water is now going to RMF for treatment. This results in a savings in energy as well. Action Item (EA): Total volume of each filter per year to be tracked. Erin McLeod. Deadline: September 30, 2019.

LHPWSS WTP – Natural Gas Trend – A graphical summary of the Water

Treatment Plant Natural Gas Consumption was provided. This summary showed that since 2011-12 consumption has continued to increase. OCWA provided a summary explanation of reasons to explain the continued increases. In addition, opportunities were suggested for consideration for reduction of natural gas usage.

EAPWSS WTP – Natural Gas Trend – A graphical summary of the Water

Treatment Plant Natural Gas Consumption was provided. This summary showed that since 2011-12 consumption at the Water Treatment Plant has achieved steady state. However, usage overall has increased due to the Residuals Management Facility (RMF) start up in 2016. Tracking will continue based on the

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sub metering in place. OCWA is looking at optimizing air exchanges for the RMF.

16. Status of Action Items (LH & EA)

Action item summaries were provided. LHPWSS: 17 incomplete of which 14 are overdue EAPWSS: 13 incomplete of which 9 are overdue As of March 28, 2019, both systems have an overall action item completion of 97% (includes all action items 2012-2018). This is the best % completion seen for the action items. All outstanding action items in the system are driven by continual improvement and are either proactive or relate to opportunities for improvement. None of the open action items relate to regulatory issues, management system non-conformances, or water quality issues.

17. Status of Action Items Identified Between Management Reviews (LH & EA) A Management of Change meeting was conducted April 3, 2019. At the next Management Review meeting in June 2019, a summary for each system will be provided. Action items will be discussed, and deadlines finalized at that time. A summary of Corrective Action Forms (CAFs) completed during the period July 2018 – March 2019 was provided to Top Management for awareness. As part of Continual Improvement, all CAFs are now being added to the Corrective Action Tracking spreadsheet to ensure action items are tracked and verification of effectiveness occurs.

18. Upcoming Internal Audit Schedule The EMS/QMS Internal Audit schedule has been set and updated for the first half of 2019. The next EAPWSS QMS Internal Audit will be April 25-26, 2019 (confirmed post-meeting). The next LHPWSS QMS Internal Audit will be May 2-3, 2019.

19. New Business At the EAPWSS, a capital project is underway to install an additional chlorine analyzer at the Low Lift to monitor the Plant Drain effluent in addition to the regulatory chlorine analyzer located at the RMF. Total Chlorine Residual (TCR) will be compared from the two monitoring points. Pending the results of the monitoring, the EAPWSS may approach the MECP regarding proposed changes to the Municipal Drinking Water Licence.

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Discussion took place regarding the EAPWSS decommissioning of Pipeline A on April 15, 2019. Management of Change has been completed. Greg Henderson announced that Alison McCann is the Operations & Compliance Team Lead at LHPWSS effective April 29, 2019. Next Meeting: Monday, June 17, 2019.

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Subject: Water System Operation - Contract Status Update

RECOMMENDATION

That this report with respect to the status of the contract with the Ontario Clean Water Agency as the contracted operating authority BE RECEIVED for the information of the Lake Huron Primary Water Supply System Board of Management.

PREVIOUS AND RELATED REPORTS

June 7, 2018 Water System Operation – Contract Status Update

June 8, 2017 Operations and Maintenance Services Agreement – Negotiation of Term Extension

December 1, 2016 Operations and Maintenance Services Agreement – Negotiation of Term Extension


March 3, 2016 Operating and Maintenance Services Agreement – Contract Term


October 2, 2014 Water System Operation – Contract Status Update

January 19, 2012 Water System Operation – Contract Award (Concurrent Meeting)

BACKGROUND

On January 19, 2012 the Board of Management for the Lake Huron Primary Water Supply System (LHPWSS), concurrently and jointly with the Board of Management for the Elgin Area Primary Water Supply System (EAPWSS), awarded the contract for the management, operation and maintenance of the drinking water systems to the Ontario Clean Water Agency (OCWA). OCWA began operating the LHPWSS on July 1, 2012. The contract with OCWA was for a five year term, with a five year optional extension. On June 8, 2017 the Board Chair and Chief Administrative Officer (CAO) were authorized by the Board to execute the Operations and Maintenance Service Amending Agreement with OCWA to extend the term of the agreement for the additional five-year period. The Amending Agreement for the second five-year term took effect on July 1, 2017 and the term ends on

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December 31, 2022. The Amending Agreement allows for one additional five-year extension at the option of the Board.

DISCUSSION

The service agreement with OCWA contains a significant number of deliverables. This report does not attempt to cover the status of all deliverables, rather it provides an overview of some of the more notable items. General Contract Deliverables Under the service agreement, OCWA is required to provide several regular reports to Board staff, including:

Monthly Operations and Maintenance Report Quarterly Contract Report Quarterly Water Quality Report Quarterly Financial Report Quarterly Health & Safety Activities Report

Board staff and OCWA currently meet monthly to review the day-to-day management, operations and maintenance activities for the water supply system. The Board’s CAO, Director, and the senior management of OCWA also meet quarterly to discuss any financial, contractual compliance and administrative-level issues. All of the above noted reports and related meeting minutes are available from the Regional Water Supply office in London upon request. Employee Retention Incentive Under the service agreement, OCWA is entitled to receive an annual employee retention incentive payment if all critical staff positions that were filled, and staff turnover for these positions was no more than two persons during the calendar year. This incentive was included in the service agreement in order to ensure adequate numbers of critical staff were available and incent minimal turnover, which was a significant issue with the previous contracted operating authority. In 2018, OCWA achieved these requirements for the LHPWSS and received the $30,000 employee retention incentive payment. Incentive Payment At the end of each contract year, OCWA is entitled to receive a performance incentive payment of up to $100,000, subject to any deductions outlined in the service agreement. Deductions could result from a number of specified issues, such as providing deficient or late reports, failure to meet emergency response requirements, failure to deal with complaints, failure to meet water quality performance criteria, etc.

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In 2018, there was one deduction to the incentive payment for not meeting all water quality performance criteria within the service agreement. Specifically, on two separate dates the individual filter performance did not meet the stringent potable water performance criteria outlined in the service agreement, despite having met the Provincial performance standards. As a result, $15,000 was deducted from the incentive payment. It is important to note that all regulatory water quality requirements were met in 2018. The performance incentive payment is intended to promote performance superior to minimum regulatory standards and industry best practices. In total, OCWA received an $85,000 incentive payment for the operation of the LHPWSS. Service Fee Adjustment The service agreement identifies projected annual treated water volumes throughout the contract term, upon which the annual service fee is based. At the end of each contract year, if the actual volume is greater than 105% or less than 95% of the projected volume, an adjustment is made to the service fee (either a credit or additional cost). In 2018, the actual volume for the LHPWSS was 95.22% of the projected contract volume. This was within the accepted range therefore no adjustments to the service fee were required.

CONCLUSION

Board staff will continue to work closely with the operating authority to monitor performance, and ensure deliverables under the service agreement. Any contractual issues are discussed at the quarterly operations meetings between OCWA and Board staff. Information for this report was provided by Erin McLeod, Quality Assurance & Compliance Manager.

Submitted by:

Recommended by:



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Subject: Quarterly Operating Financial Status Report

RECOMMENDATION

That this report regarding the Quarterly Operating Financial Status of the Lake Huron Water Supply System BE RECEIVED by the Board of Management for information.

BACKGROUND

At the request of the Board of Management, a Financial Status Report is provided on a quarterly basis for information. The financial status provides a high-level overview of incurred expenditures and revenues on a cash-flow basis and is compared to the approved operating budget of the water supply system. All expenditures and revenues provided in this Financial Status Report are unaudited and may include accrued expenses and/or revenues from a previous fiscal year.

A high-level summary of incurred expenses and revenues for the water supply system is attached to this report as Appendix A. The summary provided in this report corresponds with the Revenue and Expenditure Summary within the 2019 Budget Report presented and approved at the October 4, 2018 meeting of the Board. The reported expenditures and revenues may be subject to adjustments prior to year-end and the creation of the audited financial statements.

DISCUSSION

For the information and reference of the Board, the following highlights of the attached summary provides a brief explanation of notable deviations from the approved budget and/or clarifications of the financial summary:

Accumulated revenue is non-linear and directly proportional to water demands within the distribution systems of the member municipalities. The lowest monthly volumes (and corresponding revenue) typically occur in February, while the highest monthly volumes typically occur in July and August.

Operating Costs reflect the total direct cost of the contracted operation of the water treatment and transmission system, as well as the cost of electricity.

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Variations in operating costs are largely attributed to actual versus anticipated energy costs throughout the year, and any adjustments to the service fee paid to the contracted operating authority at the end of the fiscal year.

Administration and Other Expenses include (but not limited to) salaries and wages for Board staff, office lease and overhead operating expenses, insurance, IT and network communications, and incurred administrative support services including charges issued by the City of London in providing support services to the Board.

Contributions to the Reserve Funds occur at the end of the fiscal year

Submitted by:

Recommended by:



Attachments: Appendix A – Operating Financial Status Summary

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APPENDIX A: OPERATING FINANCIAL STATUS SUMMARY

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Subject: Huron-Elgin-London-Project Clean Water – Program Completion

RECOMMENDATION

That this report regarding the completion of the Huron-Elgin-London Project Clean Water initiative BE RECEIVED by the Board of Management for information.


December 1, 2016 HELP Contribution Amending Agreement – Canada

December 3, 2015 HELP Interest Allocation

June 12, 2014 HELP Contribution Amending Agreements

June 3, 2010 HELP Clean Water – Contribution Agreement Bonding

October 1, 2009 HELP Clean Water Update – October 2009 (Execution of the Contribution Agreements with Ontario and Canada)

BACKGROUND

The Lake Huron Primary Water Supply System, in partnership with the City of London and the Elgin Area Primary Water Supply System, entered into a Contribution Agreement with the Government of Canada in June 2009 and with the Government of Ontario in March 2010 for the Huron-Elgin-London Project Clean Water (HELP Clean Water) initiative. Each of Canada and Ontario contributed nearly $50 million to nine regionally significant water-related projects which comprise the HELP Clean Water initiative. The contributions from Canada and Ontario are part of the Building Canada Fund program.

The Lake Huron Primary Water Supply System, in partnership with the City of London and the Elgin Area Primary Water Supply System, entered into a Contribution Amending Agreement with the governments of Canada and Ontario in June 2014, which revised the scope of the project. The two wind generator project components, and the landfill gas project components were removed from the HELP Clean Water initiative. In addition, the Acoustic Fibre Optic Monitoring System on the Lake Huron transmission pipeline, the Filtration System

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Replacement at the Elgin water treatment plant were added, and additional scope was added related to London’s Southeast Reservoir and Pump Station project component.

The Lake Huron Primary Water Supply System, in partnership with the City of London and the Elgin Area Primary Water Supply System, entered into a Contribution Amending Agreement with the governments of Canada and Ontario in January 2017, which extend the completion date of the HELP Clean Water to March 31,2020 and the Final Claim Date of January 31, 2019.

DISCUSSION

Huron-Elgin-London-Project Clean Water The Huron-Elgin-London-Project Clean Water was a funding initiative created in partnership between the two regional water systems and the City of London to seek significant funding from the senior governments for regionally significant water-related projects. Over the course of the ten-year program, eight individual capital projects were completed in the total amount of nearly $167.5 million of which nearly $100 million was provided by senior government funding.

The HELP Clean Water initiative was seen to be ground-breaking in nature as it did not solicit funding through the normal municipal funding channels. Rather than funding from the senior governments which were specifically earmarked for municipal infrastructure projects, where a municipality could apply to fund one capital project, the HELP Clean Water initiative targeted the Major Infrastructure Component of the Building Canada Fund which focused on larger, strategic infrastructure projects that are of national or regional in significance.

While the regional water systems are not eligible to apply for most municipally-focused funding programs, targeting the Building Canada Fund was found to be of momentous benefit for the entire region.

Contribution Agreements The Contribution Agreements with each of Canada and Ontario stipulate that before the final payment of claims can be completed and the release of any monies withheld by the senior government, the Recipient (the partnership between the Lake Huron Water Supply system, the Elgin Area Water Supply System, and the City of London) must complete and issue a Notice of Completion. In addition, a Final Project Report must be issued to Canada which provides specific project information and a summary of details of the program.

The Declaration of Completion was issued to Canada on October 31, 2018 and is attached to this report as Appendix B for the Board’s information and reference.

The Declaration of Completion was issued to Ontario on October 31, 2018 and is attached to this report as Appendix B for the Board’s information and reference.

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The Final Project Report was issued to each of Canada and Ontario on March 29, 2019. The final report was more than 46MB in size and nearly 850 pages in total length.

Payment of Final Claims Board Staff are currently in the process of reviewing the final reconciliation of claims made and payments received from Canada, and arranging for the final payment and release of withheld funds. A summary of the claims and payments to date, by project component of the HELP Clean Water initiative, is provided in Appendix C of this report for the information and reference of the Board.

All payments have been received by Ontario.

Submitted by:

Recommended by:



Attachments:

Appendix A: Notice of Completion – Canada Appendix B: Notice of Completion – Ontario Appendix C: Summary of Claims and Payments

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APPENDIX A: NOTICE OF COMPLETION – CANADA

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APPENDIX B: NOTICE OF COMPLETION – ONTARIO

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APPENDIX C: SUMMARY OF CLAIMS AND PAYMENTS

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Subject: Ministry of the Environment, Conservation and Parks Inspection Report

RECOMMENDATION

That this report with respect to the Ministry of the Environment, Conservation and Parks (MECP) annual inspection BE RECEIVED for the information of the Board of Management.


Ministry of the Environment and Climate Change Inspection Report – March 1, 2018

Ministry of the Environment and Climate Change Inspection Report – December 1, 2016

Ministry of the Environment and Climate Change Inspection Report – December 3, 2015

Ministry of the Environment Inspection Report – January 22, 2015

Ministry of the Environment Inspection Report – December 5, 2013

Ministry of the Environment Inspection Report – October 4, 2012

Ministry of the Environment Inspection Report – March 1, 2012

Ministry of the Environment Inspection Report – June 9, 2011



BACKGROUND

The MECP conducts an inspection of the Lake Huron Primary Water Supply System (LHPWSS) annual. The objective of the inspection is to determine the compliance of the drinking water system with specified requirements under the Safe Drinking Water Act, associated regulations, and MECP issued licences and permits. An inspection report is issued which outlines any non-compliances as well as recommended best management practices for the water system’s consideration.

Violations identified within an inspection report, if any, have been evaluated by the MECP based on the potential risk to consumers. Any identified violations are monitored for compliance with the minimum standards for drinking water in Ontario as set forth under the Safe Drinking Water Act and associated regulations. Where risk is deemed to be high and/or

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compliance is an ongoing concern, violations are forwarded to the Ministry’s Investigation and Enforcement Branch by the MECP Inspector.

DISCUSSION

Inspection Findings The MECP conducted an unannounced “detailed” inspection of the LHPWSS on December 5, 2018. The final inspection report was issued by the MECP on March 8, 2019. The inspection covered the period from September 1, 2017 through October 31, 2018. The final inspection report issued by the MECP contained an inspection rating of 100.00% for the inspection period. There were no non-compliances or recommended best management practices identified by the Ministry Inspector. No action is required by either the operating authority or owner. Due to the length of the Ministry’s final inspection report, this Board report contains a summary only for the general information of the Board. Copies of the complete inspection report as issued by the MECP are available to the Board, the benefiting municipalities, and the public at the Regional Water Supply office in London upon request. A copy of the full report is also posted on the Regional Water System’s website at: https://huronelginwater.ca/lhpawss-drinking-water-final-inspection-report-1-i510e-2018-2019/ Risk Rating The MECP applies a risk rating methodology to establish an annual inspection rating. Any non-compliance identified in the inspection report is evaluated based on the potential to compromise the delivery of safe drinking water to the public. For example, a “failure to document” may have a relatively low risk, whereas a “failure to disinfect” would have a relatively high risk. The primary goal of this type of assessment is to encourage ongoing improvement and to establish a way to measure improvement, which is weighted by the severity of the risk. A low inspection rating does not necessarily mean that drinking water is unsafe, but rather it is an indication of the degree to which there is room for improvement with respect to a drinking water system’s operation.

This methodology of risk assessment and rating has been used consistently by the MECP since the 2008-2009 inspection period, and therefore can serve as a comparative measure both provincially and specifically to the LHPWSS since that time. The methodology utilized for annual inspections is reviewed by the MECP every three years. If changes occur in the application of the methodology and risk ratings, ratings from one three-year period may be slightly inconsistent with another.

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The following table outlines the inspection rating for the LHPWSS since 2008:

Inspection Year

Final Inspection

Rating

# of Non-compliances

Type of Inspection

Operating Authority

2008-2009 90.16% 5 Detailed American Water 2009-2010 82.90% 10 Detailed American Water 2010-2011 92.27% 7 Detailed American Water 2011-2012 85.19% 5 Focused American Water 2012-2013 97.35% 2 Focused American Water 2013-2014 87.91% 4 Focused OCWA 2014-2015 94.48% 4 Detailed OCWA 2015-2016 100.00% 1 1 Focused OCWA 2016-2017 100.00% 0 Focused OCWA 2017-2018 90.71% 2 Focused OCWA 2018-2019 100.00% 0 Detailed OCWA

1 The non-compliance identified was outside of the scope of the focused inspection, therefore it did not contribute to a lowered inspection rating. Correspondence and Communications Prior to issuing the final inspection report, the MECP issued a draft copy to the owner and operating authority, providing the opportunity to comment or request clarification on the findings. Comments submitted by OCWA and Board staff related to minor administrative items only, as there were no non-compliances or recommended best practices identified.

CONCLUSION

The MECP inspection report has indicated that all requirements of applicable legislation for the LHPWSS were met for this inspection period. Board staff will continue to discuss any inspection findings with the MECP Regional Office to ensure that inspection findings are consistent, appropriate and relevant to the LHPWSS.

This report was written by Erin McLeod, Quality Assurance & Compliance Manager.

Submitted by:

Recommended by:



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Subject: Uninterruptable Power Supply System Replacement

RECOMMENDATION

That the following actions be taken with regard to Lake Huron Primary Water Supply System Uninterruptable Power Supply (UPS) System Replacement Project:

a) That the Board of Management AUTHORIZE the creation of a capital project to replace the existing Uninterruptable Power Supply system with an approved budget of $200,000, it being noted that the Asset Replacement Reserve fund will be utilized for the source of funding; and,

b) That the Board of Management RECEIVE this report for information.

BACKGROUND

The Uninterruptable Power Supply (UPS) system at the water treatment plant is used to supply clean electrical power to plant instrumentation, Programmable Logic Controllers (PLC), computers, and other critical equipment throughout the facility. It is a system that is used to mitigate risk to critical equipment and to ensure operational continuity during the time between the onset of a power outage and the time it takes for emergency generators to start and provide backup emergency power. Without a UPS, all computer and essential electronic systems required to ensure regulatory compliance would go offline during a power failure, would fail to retain their previous settings, and would take an unacceptable amount of time tor restart.

The existing UPS system is over 20 years old, parts are difficult to obtain, and the system is no longer supported by the manufacturer.

In March 2019, the Board’s contracted Operating Authority, the Ontario Clean Water Agency (OCWA) reported that there was a major failure of the plant-wide UPS, and they had to source generic parts to undertake a temporary repair. If a critical part of the UPS system fails and a generic part is not otherwise available, the emergency replacement of the entire system would be necessary and likely require the rental of a temporary unit until a replacement can be secured. The 600V unit that is currently at the plant does not have standard stock items in the manufacturers’ parts’ storage inventory.

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DISCUSSION

Replacement outline The current system will need to be replaced in its entirety. The existing system utilizes a single 32 kilowatt 600 volt UPS connected to four 600v-to-208v transformers and electrical distribution panels strategically located throughout the facility. The proposed unit will be 60 kilowatt with an internal 600v-to-208v transformer connected to new larger emergency distribution panels.

The new system will also be configurable to the plant’s SCADA system allowing for integrated control and operation of the plant’s systems and improved monitoring of the plant-wide UPS.

The proposed system is sufficiently sized with spare capacity to add additional regulatory monitoring equipment within the facility, including some recently added instrumentation which currently run on individual UPS.

PROJECT FINANCIAL STATUS:

Requested Budget $ 200,000

Projected Costs

UPS Cost $90,000 Installation, new wire, new panels 70,000 Contingency 25,000 Taxes and Fees 15,000

Total Projected Costs $ 200,000

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CONCLUSION

Installing a modern UPS integrated to the plant’s SCADA system will ensure that the critical plant instrumentation and computerized systems will operate seamlessly during power failures.

This report was written by John Walker, Operations Manager.

Submitted by:

Recommended by:



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Subject: 2018 Audited Financial Statement

RECOMMENDATION

That the Board of Management for the Lake Huron Primary Water Supply System RECEIVE AND ACCEPT the 2018 Audited Financial Statement for the Lake Huron Primary Water Supply System.

DISCUSSION

On an annual basis, the finances and financial statements for the Lake Huron Primary Water Supply System are audited by a financial auditor acquired in partnership with the City of London in its capacity as Administering Municipality for the water system. The draft audited financial statements have been provided to the benefiting municipalities, as well as the reconciled volumes supplied to each municipality, to allow the municipalities to complete their respective financial audits and statements.

Submitted by:

Recommended by:



Attachments: 2018 Audited Financial Statement, Lake Huron Primary Water Supply System

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Financial Statements of LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEM December 31, 2018

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Lake Huron Area Primary Water Supply System

Opinion

We have audited the financial statements of Lake Huron Area Primary Water Supply System (the “Entity”), which comprise:

the statement of financial position as at December 31, 2018

the statement of operations for the year then ended

the statement of changes in net financial assets for the year then ended

the statement of cash flows for the year then ended

and notes to the financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as at December 31, 2018, and its results of operations, its changes in net financial assets and its consolidated cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

54

See accompanying notes to financial statements

LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEMStatement of Financial PositionDecember 31, 2018, with comparative information for 2017

2018 2017

Financial assets Due from the Corporation of the City of London (note 3) 29,833,381$ 23,505,532$ Trade and other receivables 1,908,629 627,445 Total financial assets 31,742,010 24,132,977

Financial liabilities Accounts payable and accrued liabilities 1,912,744 2,260,810 Deferred revenue (note 4) - 674,777 Accrued interest on long-term debt 49,253 54,196 Long-term debt (note 5) 8,065,505 9,254,783 Total financial liabilities 10,027,502 12,244,566

Net financial assets 21,714,508 11,888,411

Non-financial assets Tangible capital assets (note 6) 153,032,700 157,682,748 Prepaid expenses 202,510 206,664 Total non-financial assets 153,235,210 157,889,412

Accumulated surplus (note 7) 174,949,718$ 169,777,823$

Commitments (note 9)Contingent liabilities (note 10)

55


LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEMStatement of OperationsYear ended December 31, 2018, with comparative information for 2017

Budget 2018 2017

Revenues User charges 19,922,523$ 22,549,736$ 21,583,674$ Investment income 15,000 506,101 297,350 Transfer payments: Provincial - 674,777 36,300 Federal - 1,077,471 35,845 Other 5,000 27,349 5,314 Total revenues 19,942,523 24,835,434 21,958,483

Expenses Salaries, wages and benefits 816,803 691,444 520,346 Materials and supplies 11,113,505 10,731,894 10,396,226 Contracted services 126,000 352,983 441,603 Rents and financial expenses 55,750 72,300 47,174 Interest on long-term debt (note 5) 181,624 181,625 195,819 Amortization of tangible capital assets (note 6) - 7,425,041 7,064,735 Administrative charges to the Corporation of the City of London 208,252 208,252 203,173 Total expenses 12,501,934 19,663,539 18,869,076

Annual surplus 7,440,589 5,171,895 3,089,407

Accumulated surplus, beginning of year (note 7) 169,777,823 169,777,823 166,688,416

Accumulated surplus, end of year (note 7) 177,218,412$ 174,949,718$ 169,777,823$

56


LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEMStatement of Change in Net Financial Assets Year ended December 31, 2018, with comparative information for 2017

Budget 2018 2017

Annual surplus 7,440,589$ 5,171,895$ 3,089,407$

Acquisition of tangible capital assets (2,625,000) (2,774,993) (6,352,470) Amortization of tangible capital assets - 7,425,041 7,064,735

4,815,589 9,821,943 3,801,672

Change in prepaid expenses - 4,154 (43,368)

Change in net financial assets 4,815,589 9,826,097 3,758,304

Net financial assets, beginning of year 11,888,411 11,888,411 8,130,107

Net financial assets, end of year 16,704,000$ 21,714,508$ 11,888,411$

57


LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEMStatement of Cash FlowsYear ended December 31, 2018, with comparative information for 2017

2018 2017

Cash provided by:

Operating activities: Annual surplus 5,171,895$ 3,089,407$ Items not involving cash: Amortization of tangible capital assets 7,425,041 7,064,735 Amortization of debenture discount 8,200 8,066 Changes in non-cash assets and liabilities: Due from the Corporation of the City of London (6,327,849) (2,804,625) Prepaid expenses 4,154 (43,368) Trade and other receivables (1,281,184) 425,719 Accounts payable and accrued liabilities (348,066) (613,967) Deferred revenue (674,777) (36,300) Accrued interest on long-term debt (4,943) (1,688) Net change in cash from operating activities 3,972,471 7,087,979

Capital activities: Purchase of tangible capital assets (2,774,993) (6,352,470) Cash used in capital activities (2,774,993) (6,352,470)

Financing activities: Proceeds from issuance of long term debt - 404,232

Long-term debt repayments (1,197,478) (1,139,741) Cash used in financing activities (1,197,478) (735,509)

Net change in cash flows -$ -$

58

LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEM Notes to Financial Statements Year ended December 31, 2018 1. Nature of reporting entity

The final transfer order for Lake Huron Area Primary Water Supply System (the “Entity) was effective September 15, 2000, transferring assets along with any other real property to The Corporation of the City of London (the “Corporation”) in trust to act as the Administering Municipality on behalf of the participating municipalities. Under the transfer order, the works, properties and all assets, liabilities, rights and obligations of the system are conveyed, assigned and transferred to the Corporation as Trustee. Each of the benefitting municipalities, for so long as the municipality is serviced by the works has an undivided beneficial ownership interest in the works as tenant in common with all other municipalities jointly. The proportion that each municipality’s interest bears to the total of all municipalities’ interests shall be in the same ratio that the quantity of water supplied from the works to the municipalities at any time and from time to time bears to the total quantity of water supplied to all municipalities at such time. At present, the benefitting municipalities are The City of London, the Municipalities of Bluewater, South Huron, Lambton Shores, North Middlesex, Lucan-Biddulph, Middlesex Centre and Strathroy-Caradoc. The transfer order established a joint board of management to govern the management of the water supply system. The joint board of management is comprised of eleven members appointed by the respective councils of participating municipalities. The Board composition is as follows:

Municipality Members Votes The City of London 4 17 Bluewater 1 1 South Huron 1 1 Lucan-Biddulph 1 1 Lambton Shores 1 1 North Middlesex 1 3 Middlesex Centre 1 1 Strathroy-Caradoc 1 3

2. Significant accounting policies

The financial statements of the Entity are prepared by management, in accordance with Canadian generally accepted accounting principles as defined in the CPA Canada Public Sector Handbook – Accounting. Significant accounting policies are as follows. (a) Accrual accounting

Sources of financing and expenses are reported on the accrual basis of accounting.

(b) Non-financial assets

Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the ordinary course of operations.

59

LAKE HURON AREA PRIMARY WATER SUPPLY SYSTEM Notes to Financial Statements (continued) Year ended December 31, 2018

2. Significant accounting policies (continued)

(b) Non-financial assets (continued)

i) Tangible capital assets Tangible capital assets are recorded at cost which includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets, excluding land, are amortized on a straight line basis over their estimated useful lives as follows:

Asset Useful Life - Years

Buildings and building improvements 15 – 40 Vehicles 5 – 15 Machinery and equipment 7 – 20 Water infrastructure Computers

10 – 60 3

Annual amortization is charged in the year of acquisition and in the year of disposal using the half year rule. Assets under construction are not amortized until the asset is available for productive use.

ii) Interest capitalization

The interest costs associated with the acquisition or construction of a tangible capital asset are not capitalized.

(c) Revenue recognition

The Entity recognizes revenue when water is drawn by each customer, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.

(d) Government transfers Government transfer payments to the Corporation are recognized in the financial statements in the year in which the payment is authorized and the events giving rise to the transfer occur, performance criteria are met, and a reasonable estimate of the amount can be made. Funding that is stipulated to be used for specific purposes is only recognized as revenue in the fiscal year that the related expenses are incurred or services performed. If funding is received for which the related expenses have not yet been incurred or services performed, these amounts are recorded as a liability at year end.

(e) Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Significant items subject to such estimates and assumptions include the valuation allowances for receivables and useful lives assigned to tangible capital assets.

Actual results could differ from those estimates. 60


2. Significant accounting policies (continued)

(f) Budget figures

Budget figures have been provided for comparison purposes. Given differences between the budgeting model and generally accepted accounting principles established by the Public Sector Accounting Board (“PSAB”), certain budgeted amounts have been reclassified to reflect the presentation adopted under PSAB.

(g) Liability for contaminated sites

Under PS 3260, liability for contaminated sites are defined as the result of contamination being introduced in air, soil, water or sediment of a chemical, organic, or radioactive material or live organism that exceeds an environmental standard. This Standard relates to sites that are not in productive use and sites in productive use where an unexpected event resulted in contamination.

(h) Related Party Disclosures

The Entity adopted Public Sector Accounting Board Standard PS 2200 Related Party Transactions effective for fiscal periods beginning on or after April 1, 2017. The standard defines related party and provides disclosure requirements. Disclosure is only required when the transactions or events between related parties occur at a value different from what would have been recorded if they were not related and the transactions could have a material financial impact on the financial statements. The standard also requires disclosure of related party transactions that have occurred where no amounts have been recognized. The Entity adopted this standard on a prospective basis and there were no adjustments as a result of the adoption of this standard.

(i) Inter-entity Transactions

The Entity adopted Public Sector Accounting Board standard PS 3420 Inter-entity Transactions effective for fiscal periods beginning on or after April 1, 2017. The standard specifies how to account for transactions between public sector entities within the government reporting entity. Transactions undertaken on similar terms and conditions to those adopted if the entities were dealing at arm’s length are recorded at the exchange amount. Transfers of an asset or liability at nominal or no consideration is recorded by the provider at the carrying amount and the recipient has the choice of using either the carrying amount or fair value. Cost allocations are reported using the exchange amount and revenues and expenses are reported on a gross basis. Unallocated costs for the provision of goods or services may be recorded by the recipient at the carrying amount or fair value unless otherwise dictated by policy, accountability structure or budget practice. All other transactions are measured at the carrying amount. The Entity adopted this standard on a prospective basis and there were no adjustments as a result of the adoption of this standard.

61


3. Due from the Corporation of the City of London

As the Administering Municipality, the Corporation manages the daily operations of the Entity. The Corporation maintains a separate general ledger on behalf of the Entity. All funds are paid and received through the Corporation’s bank account and are held for use by the Entity.

4. Deferred revenue

2018 2017 Provincial HELP Funding $ - $ 674,777

5. Long-term debt

(a) Long-term debt is stated as follows:

2018 2017 Long-term debt assumed by The Corporation of

the City of London, as administering municipality, on behalf of the Lake Huron Area Primary Water Supply System, with semi-annual interest payments:

(a) at rates ranging from 2.30% to 3.20%, maturing September 2022.

$ 752,225

$ 928,950

(b) at rates ranging from 2.40% to 3.80%, maturing September 2023.

798,930

946,560

(c) at rates ranging from 0.90% to 2.25%, maturing March 2025.

(d) at rates ranging from 1.15% to 2.85%, maturing March 2027.

6,194,298

369,285

7,029,775

406,931

Total long-term debt 8,114,738 9,312,216 Less: Unamortized debenture discount (49,233) (57,433) Net long-term debt $ 8,065,505 $ 9,254,783

(b) The long-term debt repayment schedule is as follows:

2019 $ 1,218,241 2020 1,239,448 2021 1,261,262 2022 2023

1,283,326 1,106,232

2024 & beyond 2,006,229

(c) Total charges for the year for long-term debt which are reported on the Statement of

Operations are as follows:

2018 2017 Interest $ 173,425 $ 187,753 Amortization of debenture discount 8,200 8,066 $ 181,625 $ 195,819

62


6. Tangible capital assets

Cost

Balance at December 31,

2017

Additions

Disposals


2018 Land

$ 1,843,513

$ -

$ -

$ 1,843,513

Buildings and building improvements 55,080,808 477,163 4,623 55,553,348 Machinery and equipment 41,662,313 1,672,689 63,928 43,271,074 Vehicles 32,425 - - 32,425 Water infrastructure 117,668,542 368,120 - 118,036,662 Computers - 85,620 - 85,620 Assets under construction 196,290 281,359 109,958 367,691 Total $ 216,483,891 $ 2,884,951 $ 178,509 $ 219,190,333

Accumulated Amortization


2017

Amortization

expense

Disposals


2018 Land

$ -

$ -

$ -

$ -

Buildings and building improvements 13,732,784 2,183,528 4,623 15,911,689 Machinery and equipment 18,007,098 3,016,748 63,928 20,959,918 Vehicles 21,723 1,646 - 23,369 Water infrastructure 27,039,538 2,208,810 - 29,248,348 Computers - 14,309 - 14,309 Assets under construction - - - - Total $ 58,801,143 $ 7,425,041 $ 68,551 $ 66,157,633

Net book value December 31,

2017

Net book value December 31,

2018 Land

$ 1,843,513

$ 1,843,513

Buildings and building improvements 41,348,024 39,641,659 Machinery and equipment 23,655,215 22,311,156 Vehicles 10,702 9,056 Water infrastructure 90,629,004 88,788,314 Computers - 71,311 Assets under construction 196,290 367,691 Total $ 157,682,748 $ 153,032,700

63


6. Tangible capital assets (continued)

(a) Assets under construction

Assets under construction with a net book value of $367,691 (2017 - $196,290) have not been amortized. Amortization of these assets will commence when the asset is available for productive use.

(b) Tangible capital assets disclosed at nominal values

Where an estimate of fair value could not be made, the tangible capital asset was recognized at a nominal value. Land is the only category where nominal values were assigned.

(c) Write-down of tangible capital assets

There were no write-downs in tangible capital assets during the year (2017 – nil). 7. Accumulated surplus

Accumulated surplus consists of individual fund surplus and reserve funds as follows: 2018 2017 Surplus: Invested in tangible capital assets $142,376,307 $143,711,823 Total surplus 142,376,307 143,711,823 Reserve funds set aside for specific purpose by the Board:

Infrastructure renewal - water operations $ 32,573,411 $ 26,066,000 Total reserve funds 32,573,411 26,066,000 $174,949,718 $169,777,823

8. Financial instruments

(a) The carrying values of due from the Corporation of the City of London, trade and other

receivables and accounts payable and accrued liabilities approximate their fair values due to the relatively short periods to maturity of the instruments.

The fair value of long-term debt approximates its carrying value as interest rates are similar to current market rates of interest available to the Entity.

(b) Financial risks

The Entity is not exposed to any significant interest, foreign currency or credit risks arising from its financial instruments.

64


9. Commitments

Derivatives

The Entity has the following derivative:

• Contract with one block negotiated May 5, 2017, with a daily electricity purchase of 24 megawatt hours. Covering the period of November 1, 2018 to August 31, 2021, remaining contract cost at December 31, 2018 is $689,832 (2017 - $219,938 under contract expired October 31, 2018).

This derivative contract was purchased to ensure price certainty for 26% of the Entity’s electricity needs over the term of the contract. The value of the contract is not reflected as an asset or liability in these financial statements.

10. Contingent liabilities

There are certain claims pending against the Entity as at December 31, 2018. The final outcome of these claims cannot be determined at this time, however management believes that settlement of these matters will not materially exceed amounts recorded in these financial statements.

11. Budget Data

Budget data presented in these consolidated financial statements are based upon 2018 operating budget approved by the joint board of management. Adjustments to budgeted values were required to provide comparative budget values based on the full accrual basis of accounting. The chart below reconciles the approved budget with the budget figures as presented in these financial statements.

Budget Revenues User charges $ 19,922,523 Municipal Revenues - Other 20,000 Total revenues 19,942,523 Expenses Personnel Costs 748,803 Administrative Expenses 86,100 Financial Expenses - Other 269,500 Financial Expenses - Interest and Discount on LTD 181,624 Financial Expenses - Debt Principal Repayments 1,197,478 Financial Expenses - Transfers to Reserves and Reserve Funds 6,243,111 Purchased Services 568,750 Materials and Supplies 10,403,655 Furniture and Equipment 35,250 Other Expenses 208,252 Recovered Expenses - Total expenses 19,942,523 Net surplus (deficit) as per Budget $ - PSAB Reporting Requirements: Transfers to Reserves and Reserve Funds $ 6,243,111 Debt principal repayments 1,197,478 Net PSAB Budget surplus as per Financial Statements $ 7,440,589 65

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