Key questions to ask about capacity, costs, ownership, and long-term flexibility before signing a contract
With a wholesale water or wastewater agreement, developers secure treatment capacity without having to own and operate a plant themselves. Developers need to understand more than the capacity a provider can deliver. Timing, costs, operational responsibilities, and long-term ownership arrangements all affect the project’s success. Here are eight areas worth evaluating before signing an agreement.
What the Treatment Provider Is Committing to Deliver
The first question is what the provider is committing to deliver and when. The agreement should define how much water or wastewater treatment capacity will be provided, when the system is expected to be operational, and what service and treatment standards it will meet.
Timing is particularly important for developers. Even after a plant is installed, testing, permitting, or other requirements may prevent it from immediately serving the development. Delays affect construction schedules, occupancy dates, and the development timeline.
Account for Phased Growth and Future Capacity
Developers must also confirm that the provider’s commitments align with the project’s expected growth and demand. A developer might want to start with a smaller amount of treatment capacity while retaining the flexibility to add capacity in phases as the development expands and new homes are completed. The agreement must clearly define the initial requirements and the capacity needed at full buildout, as well as development milestones that will trigger expansion. It must clarify how future capacity will be planned, scheduled, and funded. AUC Group’s wholesale delivery model allows developers to bring additional capacity online as the project grows rather than investing immediately in the full capacity needed at buildout.
Clarify Who Owns What
The agreement should establish who owns the treatment plant and related infrastructure, as well as who is responsible for maintaining and replacing those assets. AUC offers flexible delivery options, including a Lease Plant Program, wholesale delivery, and direct purchase/ownership models. Wholesale delivery differs from traditional ownership in that developers purchase water or wastewater treatment capacity as a service, rather than directly owning and operating the treatment plant.
Ownership questions extend beyond the plant. Developers must establish who owns and maintains the infrastructure connecting the development to the plant, where the provider’s responsibilities begin and end, and who is responsible for replacing major equipment. These distinctions can have significant implications for upfront costs and long-term maintenance obligations.
Define Operations, Maintenance, and Compliance Responsibilities
Once ownership has been clarified, developers must determine who is responsible for day-to-day plant operations, routine and major maintenance, and repairs. It is also important to clarify who is responsible for permit applications, monitoring, and ensuring that the plant continues to meet water and wastewater regulatory requirements.
The agreement must clearly outline who will address compliance issues or violations and who will bear the associated costs. Defining these obligations up front prevents confusion over who is responsible for keeping the system operating reliably and in compliance throughout the term of the agreement.
With AUC’s wholesale delivery option, the project engineer handles discharge permit applications, while AUC works closely with the engineering team to provide guidance on permitting requirements, anticipated discharge limits, and approval timelines. AUC also handles day-to-day plant operations and maintenance, including monitoring, sampling, and regulatory compliance.
Understand the Payment Structure
Developers need a clear understanding of what the upfront and ongoing costs will be for the water or wastewater treatment services provided, including connection or tap fees, service charges, and other costs of bringing the system online. The agreement must clearly explain how these charges are calculated, when they are due, and whether rates can be adjusted. It is important to understand how costs will change when the development expands.
Developers also must understand whether payments are based on reserved capacity, actual usage, or development milestones. This can make a substantial difference if construction or home sales move more slowly than anticipated. A payment structure that works well at full buildout can create unnecessary financial pressure during early phases.
Establish Performance and Service Expectations
The agreement should establish clear expectations for treatment quality, system reliability, monitoring, and reporting. Developers should also understand whether the provider offers performance guarantees, what happens when the system fails to meet agreed standards, and how quickly service issues must be addressed.
Developers should also ask what happens when the system cannot operate at its expected capacity. Equipment failures or treatment interruptions can affect the ability to connect additional homes or buildings, making response procedures and contingency planning particularly important. The agreement must establish how problems will be communicated, who is responsible for addressing them, and what measures are available to minimize disruptions.
Plan for the Long Term
Consider the long-term goals when signing a wholesale water or wastewater agreement. While having a third party own and operate the treatment plant might be the most practical solution while the development is underway, this might change once the project reaches full buildout. The developer might want to renew the agreement, purchase the treatment plant, or transfer ownership to another entity, such as a utility district. For example, a build-own-operate arrangement can be structured with an eventual transfer of ownership, sometimes referred to as build-own-operate-transfer. If a future purchase or transfer is a possibility, developers must understand how that process would work and whether terms are established at the outset.
Evaluate the Agreement Against the Development Plan
A wholesale water or wastewater agreement should support today’s infrastructure needs and align with the project’s timeline and goals, including the expected pace of development, financing strategy, and long-term ownership plans.
AUC Group works with developers to provide treatment solutions that account for project timelines, capacity requirements, and long-term infrastructure needs. Our approach can include phased capacity expansion and flexible delivery arrangements, helping developers secure the services they need as their communities grow. Contact AUC to discuss appropriate options for your development.
