Nanaimo is replacing its 100-year-old open reservoir with an enclosed water storage facility and power generation system.
Construction of the first phase of the $11.2 million project - $7.8 million will come from the federal Gas Tax Fund, administered by the Union of British Columbia Municipalities, with the balance covered by city water reserve funds - will start in August with laying of a new pipeline and clearing trees at the build site.
The reservoir will be built in the south west corner of Colliery Dam Park next to the Nanaimo Parkway and Nanaimo Lakes Road.
Phase two of the project includes construction of the new reservoir and energy recovery facility to be completed in the spring of 2014.
Bill Sims, city water resources manager, said it is still too early to tell what will happen with the old reservoir and the land it is located on once the project is complete and the facility is decommissioned.
"It's actually still under study and still under thought," Sims said.
The hydroelectric generation plant included in the project will generate enough electricity to power up to 70 homes. The electricity generated will will be sold to B.C. Hydro to offset pumping costs to operate the city water system and might even produce a surplus of power offering further cost recovery for the city.
"It's sort of an ideal location, because if you look at the existing reservoir, you can see the water jetting out and that kind of gives you an idea of the pressure that we've got behind and the amount of water we fill that reservoir with - and those are the two elements you need, pressure and flow," Sims said.
Construction of new 14 million litre reservoir, which will supply 30 per cent of Nanaimo's drinking water, will start in January and will start receiving water from the new South Fork Water Treatment Plant in 2015.