The Halifax Water Experience - Interesting Anomaly Or the Future Revealed?

THE 2011 NATIONAL ENVIRONMENT, ENERGY AND RESOURCES LAW SUMMIT THE HALIFAX WATER EXPERIENCE - INTERESTING ANOMALY OR THE FUTURE REVEALED? John C. MacPherson, Q.C. McInnes Cooper PO Box 730 1300-1969 Upper Water Street HALIFAX NS B3J 2V1 INTRODUCTION The Halifax Regional Water Commission ("HRWC" or "Halifax Water"), is unique among Canadian utilities in that it provides water, wastewater and stormwater services within an integrated utility structure which is subject to regulatory oversight of all three services. The corporate and regulatory history which led to this structure provides useful insights into one model by which the challenges being faced by water utilities1 can be addressed. This paper will initially trace the history of the delivery of water in Halifax, which eventually led to the HRWC as it exists today, and will then discuss the development of regulatory oversight in regard to that structure. Finally, the paper will review recent regulatory proceedings involving HRWC which highlight some of the critical issues facing water utilities and will describe how those issues were addressed by the regulator in Nova Scotia. HISTORY OF HALIFAX WATER As one of Canada's oldest cities, Halifax has a long and colourful history associated with the supply of potable water to its citizens. The origin of the Halifax Water system was discussed in an early decision of the Board of Commissioners of Public Utilities ("Board") in 1946: "History and Description of Water System. The original water system of the City of Halifax was installed by the Halifax Water Company, which was incorporated by special act of the Legislature in the year 1844, with a capital of $15,000. The water supply was, at the outset, drawn from Chain Lakes situated about one and one-quarter miles from the head of the North West Arm. Chain Lakes were connected with Long Lake by an open canal, through which water was drawn from that lake. In July 1849, this was replaced by a buried conduit of wood. A dam was constructed at the south end of Long Lake by which the surface of the lake was raised 25 feet above its natural level. Dams were also erected at the east end of the Chain Lakes with waste weirs, later raised to the same elevation above tide water as the waste weir in the Long Lake dam, namely 206 feet. From Chain Lakes a 12" main was laid into the City to the intersection of Robie Street and Quinpool Road and the water was first turned on 2 in the year 1848, or 98 years ago." 1 In this paper, the terms "water utility" or "water utilities" will be used in reference to municipal utilities which supply potable water to its customers, regardless of whether they also provide wastewater and stormwater services. 2 In the Matter of the Application of The Public Service Commission for the determining by the Board of Commissioners of Public Utilities of the Valuation of the Property and Assets of the City of Halifax Water system used env11_macpherson_paper - 2 - It is interesting that the initial water utility was run as a private entity. The Halifax Water Company was provided its Charter of Incorporation by the provincial legislature on April 17, 1844, and subsequently, as noted, began the supply of water to the City of Halifax in the fall of 1848.3 The Halifax Water Company operated the water utility until 1861 when a series of catastrophic fires prompted the City to purchase the utility: "On January 12, 1861, another great fire destroyed most of George and Prince Streets, Bedford Row and Cheapside, and extended into Hollis Street. Twenty-two offices, four houses, twenty-two stores and the Halifax Library were damaged, but fortunately no lives were lost. The fire department and insurers were quick to point out a lack of wintertime water pressure. City Council could delay no longer. The City obtained the necessary provincial legislation in 1861 to purchase the Halifax Water Company. The first attempt to buy all the assets for $110,000 fell through. The Halifax Water Company then upped its selling price to $150,000. The City was successful this time. The Halifax Water Company ceased to exist. A three-man board of commissioners, headed by Alderman Bell, replaced the company directors. City Council hoped the board's establishment would get rid of the "corruption" of the old company, where a few became rich at the expense of the general public."4 Since that time, the supply of water to the citizens of Halifax has been provided by a "public" entity, although the nature of that entity has changed over time. From 1861 to 1894, the water utility was operated by the Board of Commissioners of Water Supply, a three man Board. In 1894, allegations of patronage and corruption caused the municipal government to transfer control of the water system to the City Works Department.5 This situation was to continue until 1944. During the early 1940s, there were numerous complaints in respect of the condition of the water system in Halifax. The dire situation of the Halifax Water utility was described in the following terms in a report delivered to the Canadian Section of the American Waterworks Association in 1945 by the then Manager of the Public Service Commission of Halifax: and useful in Furnishing, rendering or supplying water in the City of Halifax and Vicinity, February 1, 1946, Journals and Proceedings of the House of Assembly of the Province of Nova Scotia, 1947, Part II, Appendix 22, page 7. 3 "Downstream, an historical reflection of the Halifax water supply system", Halifax Regional Water Commission, (1995), pages 13-14. 4 Ibid at page 19. 5 Ibid at page 31. env11_macpherson_paper - 3 - "... The most striking example of conditions at the time was the Halifax Water Supply System. Operated by the City as one branch of the City Works Department, it was near the point of complete collapse. How true this statement is may be seen if we look at the reprint of a report delivered before the Canadian Section of the American Waterworks Association in 1945 by H.W.L. Doane, then Manager of Public Service Commission of Halifax: "In 1943 conditions were as follows: Much of the water system had just about lived its normal life and was due for replacement. The population had increased from 70,000 to 130,000 and there were more ships leaving Halifax than any other port in the world, except one in England.... The public relations of the water department were bad.... There were only eight men to operate the distribution system, repair leaks, attend fires and the like. Some of these men were so worn out and run down that their health was endangered. How they ever kept the system operating is a mystery. Out of some 13,000 customers' meters, nearly 7,000 were out of order so bills were merely estimated. In parts of the City, the water available for fire fighting was inadequate. At the First Baptist Church fire it would hardly fill a garden hose. At Crane Limited the pumpers sucked the mains dry. Both of these fires resulted in serious total losses. The fire underwriters were seriously considering a jump of possibly 30% in the fire insurance rates. The situation was brought to a head by the filing of a complaint by five residents of Spring Garden Road with the Board. As a result of the evidence brought forth in the enquiry into the complaint the Board ordered Engineering Service Company of Halifax to undertake a complete survey of the situation. The Company in conducting a survey actually ended by operating the service for over a year. During this time the Company made frequent reports to the Board, which co-operated by issuing orders on its authority, to have the recommendations of the Engineering Service Company implemented. In January 1945 the City, acting on the recommendations the Board appointed a commission, consisting of the mayor, an alderman, three citizens at large and a civil engineer as manager, to take over and operate the entire water system. The results were amazing. env11_macpherson_paper - 4 - In a single year the new Commission, known as the Public Service Commission, repaired some 15,000 leaks, collected $340,000 in back water rates, replaced nearly 7,000 meters and increased the supply of water for fire fighting, so that at one fire in 1945 there were twenty-four full streams of water in play. While the Board remained in the background during much of this work the constant supervision of the task was going on and the new Commission owed its origin to the initiative of the Board in forcing the entire situation to be investigated."6 As will be discuss subsequently in this paper, many water utilities in North America suffer an increasingly serious "infrastructure deficit". That deficit is especially acute in areas, such as the City of Halifax, which have some pipes in the ground exceeding a hundred years of age. The age of this infrastructure, coupled with increasing stringent regulations in regard to water quality and wastewater discharge, have combined to place water utilities in the position where they will be required to engage in extensive and expensive infrastructure renewal projects. In respect of the water utility, this "infrastructure deficit" was described as early as 1947 in a Board decision as follows: "Samples of some of the older pipe were submitted at the hearing. The original 12" pipe which was laid in 1848 from Chain Lakes and, later moved to Barrington and other streets, was found to be almost completely graphitized."7 In that same decision, the Board made the following comments: "As already pointed out, the Board, on investigation, found the situation most serious and under date of March 20th, 1943, an Order was issued by the Board appointing Engineering Service Company, Consulting Engineers of Halifax, to make a complete investigation of the system and report to the Board.

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