Transcript Water Service and the Challenges Ahead - Maryland

Water Service and the
Challenges Ahead
Maryland-DC Utilities Association
Tom Curtis
Deputy Executive Director
American Water Works Association
Overview
• Water: There’s No Substitute
• Challenges
o The Need to Reinvest
o Declining Demand
o Affordability Issues
• How Do We Answer?
The Value of Water
Every 100 gallons of municipal supply =
$8.45 in the local economy…
Every $1 invested in water infrastructure
adds $6.35 to GDP…
The Value of Water
• Every new job in water and sewer
creates over 3.6 jobs in the national
economy…
• But the true value of water is…
• Beyond Measure!
Note: Utility free to add its
own logo to ads
Warning: Challenges Ahead
Facing the
“demographic
echo of the
build-up of
American
water systems
Crunch the numbers…
Key Findings
The needs are very large…
About $1 Trillion over next 25 years…
Household water bills will go up…
12 Year Change in Water Rates
0 to 37%
Source: USA TODAY analysis: Water costs gush higher, Water costs getting more expensive, A USA TODAY survey of 100 municipalities found
residential water bills in at least one in four places have doubled in the past 12 years: by Kevin McCoy, USA Today, September 29, 2012
3%
12 Year Change in Water Rates
38 to 70%
Source: USA TODAY analysis: Water costs gush higher, Water costs getting more expensive, A USA TODAY survey of 100 municipalities found
residential water bills in at least one in four places have doubled in the past 12 years: by Kevin McCoy, USA Today, September 29, 2012
5%
12 Year Change in Water Rates
71 to 89%
Source: USA TODAY analysis: Water costs gush higher, Water costs getting more expensive, A USA TODAY survey of 100 municipalities found
residential water bills in at least one in four places have doubled in the past 12 years: by Kevin McCoy, USA Today, September 29, 2012
6%
12 Year Change in Water Rates
90 to 129%
Source: USA TODAY analysis: Water costs gush higher, Water costs getting more expensive, A USA TODAY survey of 100 municipalities found
residential water bills in at least one in four places have doubled in the past 12 years: by Kevin McCoy, USA Today, September 29, 2012
8%
12 Year Change in Water Rates
130 to 233%
Source: USA TODAY analysis: Water costs gush higher, Water costs getting more expensive, A USA TODAY survey of 100 municipalities found
residential water bills in at least one in four places have doubled in the past 12 years: by Kevin McCoy, USA Today, September 29, 2012 12%
Water Demand is Going Down
Based on an analysis of six utilities ranging is size from 55,000 SFR accounts to 480,000 SFR accounts; The
trend line represents the average of the six utilities.
Unfortunately…
• Utility Costs:
• High Fixed / Low Variable (80/20)
• Utility Revenues
• Low Fixed / High Variable (90/10)
Water Sales and Revenues
Consumption Charge Solutions
140
Total Revenue equals Total costs based on
recalibrated New Normal Demand
Percent of Costs / Revenue
120
100
80
Shortfall without
recalibration
Costs and
Revenue at
100% of
Historic
Normal
60
40
New Normal
Demand
20
0
10
20
30
40
50
60
70
80
90
Percent of Historic Water Sales
Total Cost
Uncalibrated Revenue
Recalibrated Revenue
100
110
120
130
The Need to Recalibrate
Base Charge Solution
140
Total Revenue equals Total costs based on
recalibrated New Normal Demand
Percent of Costs / Revenue
120
100
80
Costs and
Revenue at
100% of
Historic
Normal
60
40
28%
New Normal
Demand
20
0
10
20
30
40
50
60
70
80
90
Percent of Historic Water Sales
Total Cost
Uncalibrated Revenue
Recalibrated Revenue
100
110
120
130
The Need to Recalibrate
The “New Normal” Demand
Solutions:
1. Consumption charge up 25%;
2. Base charge up 180%
140
Total Revenue equals Total costs based on
recalibrated New Normal Demand
Percent of Costs / Revenue
120
100
80
Costs and
Revenue at
100% of
Historic
Normal
60
40
28%
New Normal
Demand
20
0
10
20
30
40
50
60
70
80
90
Percent of Historic Water Sales
Total Cost
Uncalibrated Revenue
Recalibrated Revenue
100
110
120
130
So We Have…
Rising investment needs…
Declining water sales…
Possibly unbalanced rate structures…
But Wait, there’s More…
But Wait, there’s More…
Big Regulatory Issues
•
•
•
•
Advanced WW treatment
Storm water
Lead and Copper Rule
Implementing the Revised Total
Coliform Rule
• More coming in the near future…
Some May Not Make Sense
Examples
Municipal storm water controls in the face of
uncontrolled agricultural run off?
Drinking water standard for nitrosamines?
A Huge Question…
The Affordability of
Water Mandates
Can consumption-based bills can raise
the revenues some systems will need at
levels that are affordable to low income
customers?
The Affordability of
Water Mandates
Can consumption-based bills can raise
the revenues some systems will need at
levels that are affordable to low income
customers?
Is there a better alternative?
WIFIA:
WIFIA: Part of the Answer
WIFIA: Part of the Answer
- Low interest loans
- Very cost effective
- Highly leveraged
- Can be used to leverage other capital
- States and utilities can borrow
WIFIA
• The Senate has acted
• Action pending in the House
• Let’s get it passed!
Questions