Kelowna, the vibrant hub of B.C.'s southern Okanogan interior, is a rapidly growing community that relies on water for everything from recreation to economic stability. The semi-arid Okanogan Valley is a water-short area and at some point in time, water will be a limiting factor on growth. Although the current population of Kelowna is approximately 95,000, the population of the central Okanogan is expected to double in the next 20 years.

Because the cost of supplying and treating that water is also expected to skyrocket, the City has recognized the need to act now to avoid a crisis in the future. With no immediate shortage of water, convincing the community to conserve has proven to be a challenge. With only minimal restrictions on watering in the peak summer months, most people have not been getting the message that water is a scarce resource.

The average water consumption for a Kelowna household every three months is 160 cubic meters, which is nearly double the amount used in Vernon, a nearby city, that has had water meters for the last two years. In order to combat the problem of water waste and the escalating cost of supply and treatment of water, the City began to develop a water conservation strategy aimed at reducing water consumption and wastewater.

By taking immediate action, the City expected to extend the useful life of the existing supply and waste treatment facilities and to delay the need for a large capital investment. The City of Kelowna adopted a water conservation plan which recommended the installation of water meters and billing for water consumption based on use rather than a flat rate. Universal metering of water service connections would allow for the reduction of total annual water use by approximately 20%.

Reduced water consumption would also remedy the City's large power bill which was in the order of $225,000 annually because of the high pumping costs associated with unrestrained water use. Given the potential for reducing annual water use by up to 30% through a demand-side management approach, the total operating cost saving over a 20-year time horizon would be at least $600,000.

Once Council committed to the metering program, the City began to explore new ways to finance the $4.25 million project. When a much hoped for government funding request was denied, staff started looking elsewhere for a viable solution.

The City of Kelowna decided to explore the possibility of entering into a public/private partnership whereby a private partner would invest the money upfront and regain it over time. The City invited the best and most creative proposals from the private sector for an agreement spanning 15 years.

This approach encouraged proponents to submit plans with the most innovative and least expensive way to achieve the objectives of the project, unlike the traditional design-tender-build process where ingenuity is limited because contractors must adhere to predetermined specifications.

After reviewing the relevant project management experience, expertise, and financial position of the various bidders, the City of Kelowna decided to embark on a $3.9 million public/private partnership with Schlumberger Industries; this called for the company to handle all facets of meter operations.

In addition to the supply and installation of 11,200 residential meters and 1,200 commercial meters, Schlumberger would perform ongoing maintenance to the metering system, reading services for water and electricity meters, a comprehensive public education program, and 15-year financing. As part of the contract, the City has the option of buying out the contract at the end of each five year period.

By engaging the company, the City felt that it would benefit from its knowledge and abilities for future improvements in the meter program.

The all inclusive costs offered in the winning proposal were lower than the other bidders and lower than the projected costs of the works done by City employees. The City also wanted to benefit from the use of Schlumberger's state-of-the-art technology throughout the term of the contract and the transfer of risk from the City to the private company. As the company would be responsible for the delivery of all elements of the proposal, responsibility was more clearly defined and direct than with the other proposals, allowing for greater flexibility in service provision.