Resilience Planning Will Help Increase Awareness for Properly Valuing Water

For years, those working in the water industry have realized a truth that is now reaching a broader audience – water is woefully underpriced.

There is a renewed focus on the price of water infrastructure, prompted in part, by declining consumption, according to Ann Bui, Managing Director for water services in Black & Veatch’s management consulting business. As efficient water appliances have become more prevalent, consumption per capita has decreased. Conservation efforts in areas where water scarcity is a major concern have further pushed the decline.

“This trend of declining per capita consumption does not appear to be ending soon, and utilities are now grappling with how to educate consumers about the fixed costs of convenience,” Bui said.

These services – often taken for granted – include having safe drinking water available 24 hour a day with adequate pressure, as well as good fire protection.

“Many of these services go unnoticed until they are needed, while customers question rate increases,” Bui said.

The financial burden of water delivery has been transferred squarely to utilities and their customers, coinciding with the continued decline in water consumption, increases in extreme weather events and a combination of aging infrastructure and declining federal and state grants or subsidies.

“This confluence of forces is setting the stage for what could be a comprehensive rethinking of the price of water and its value to the community,” Bui said.

Doing More with Less

Aging water and sewer infrastructure are a perennial concern to water utilities. Respondents to the 2016 Black & Veatch Strategic Directions: U.S. Water Industry report also say that two of the top three industry issues revolve around managing costs. In essence, water utilities are recognizing that they must manage to do more with less because customers have become more vocal about rate pressure.

“Rate increases alone are often not a solution, as implementing an increase can sometimes be problematic,” Bui said. “Over the past few years, the issue of affordability has received increased scrutiny, and water utilities are seeking to address challenging social issues around this matter.”

For example, she said, in many parts of the country, water accounts stay with the property. Delinquent account balances may be assessed against new property owners who did not incur the charges in the first place. This gives rise to complex legal and organizational questions.

Another challenge for water utilities related to the value of water is the increasing frequency of extreme weather events.

“From a sustainability perspective, water utilities have a responsibility to anticipate and manage crises before they happen,” Bui said. “Changes in climate and weather patterns are highlighting the effects of why ‘kicking the can down the road’ approaches to addressing infrastructure and maintenance needs do not work.”

A Wake-up Call for Resilience Planning

Natural disasters, or the events in Flint, Michigan, should serve as wake-up calls to water providers that resilience requires long-term infrastructure, resources, financial planning, utility leadership and customer engagement, she said.

“The best way to save for that ‘proverbial rainy day’ is to put aside a little every month. To accomplish this, however, means that the unit cost of water must go up to cover operational, maintenance and capital costs – many of which are fixed in nature.”

Proactive maintenance and long-range planning will enable water utilities to maintain and build resilient systems. Bui said this means extending costs over a 20-year or longer timeframe instead of the traditional five-year approach.

“Those utilities that proactively engage in long-term planning will get closer to achieving parity between increasing the price of water, educating customers with regard to what they are ‘getting for their money’ and guaranteeing their own revenue streams.”