The price of water in the USA has risen by 41% since 2010. The economics of water – particularly the cost of treatment, pumping, new infrastructure, as well as the retail price for consumers – has gained renewed prominence as states face historic drought and water managers seek to rein in water consumption.
Interestingly, sewer prices have climbed higher than water prices, especially in Atlanta and Seattle, where the rates are going towards new treatment facilities.
However, the conservation message is finally beginning to reach communities, with many major cities showing a significant drop in water usage over the last couple of years.
The new reality facing water utilities is how to make enough of a profit to finance its operating costs and to keep small amounts of water for basic needs affordable.
Circle of Blue reports:
“Ward of Fitch Ratings says he sees experimentation taking place as utilities are forced to confront the water-wise practices of the modern urbanite. But because utilities are inherently conservative institutions, those experiments are in increments, he says, not great leaps. Prices are primarily based on the cost to treat and deliver water. Though drought is reducing water availability across the West, few utilities include the scarcity of water in the price that residents pay.
The most daring of the 30 utilities in Circle of Blue’s survey, and an example of where the entire industry is headed, is Austin Water. After a revenue shock in 2010, Austin Water had to be bold. That year, the utility lost $US 53 million in revenue compared to its budget forecast, Anders said. A rainy summer meant that Austinites did not water their lawns as often and the utility did not sell enough of its product — water — to make budget…
The upheaval caused by changing patterns of water use are an opportunity for utilities to reevaluate long-term plans, argues Jan Beecher, director of the Institute of Public Utilities at Michigan State University. Are new supply projects necessary? Do managers need to worry about budgeting for expanded drinking water treatment capacity? Should rate structures be rebuilt?
“The whole idea of conservation and efficiency is to avoid variable costs in the short term and fixed costs in the long term,” Beecher explained.”
It will be interesting to observe how the rising price of water begins to affect the way water assets are managed and whether or not the extra revenue will begin to help with much-needed repairs and upgrades throughout the USA.
Heather Himmelberger also recently posted here on Inframanage.com on some of the potential impacts of California’s water use reduction program.
Infrastructure asset management planning practice addresses these issues in analysis in the Future Demand and Funding sections of asset management plans.
In the Future Demand section, water demand and the necessity of new supply projects can be analyzed.
In the Financial Summary and Funding section, the required expenditure developed in the lifecycle management section can be matched against available revenue.
The long-term sustainability and adequacy of tariff rates and structures can be analyzed in this section.
PHOTO CREDIT: Karl Hipolito via permission