Accounting for the Social Benefits of Recycled Water

Workshop 3: CPUC Recycled Water Order Instituting Rulemaking (R. 10-11-014)

Eric Rosenblum, PEEnvirospectives, Inc.

January 19, 2012

Guidelines for Preparing Economic Analysis for Water Recycling Projects

Prepared for theState Water Resources Control Board

By theEconomic Analysis Task Force for Water Recycling in California

Technical Authors:Sachi De Souza

Josué Medellín-Azuara*Nathan Burley

Jay R. LundRichard E. Howitt

UNIVERSITY OF CALIFORNIA, DAVISCENTER FOR WATERSHED SCIENCES

APRIL 2011

http://www.swrcb.ca.gov/water_issues/programs/grants_loans/water_recycling/docs/econ_tskfrce/eagd.pdf

Economic vs Financial Analysis

ECONOMIC ANALYSIS FINANCIAL ANALYSIS

• Do project benefits exceed its costs for California?

• Purpose – compare alternatives based on benefits and costs

• Broader perspective, numerous points-of-view

• Will project make money? Is it affordable?

• Purpose – determine project’s financial feasibility

• Cash flow and debt payments• Water and wastewater rates • Narrower perspective, project

proponent only

5Guidelines for Preparing Economic Analysis for Water Recycling Projects, Economic Analysis Task Force for Water Recycling in California (State Water Resources Control Board, 2011)

Direct Benefits and Costs

Direct Benefits• Additional Water Supply• Reliability• Local Control• Avoided Cost of Other

Projects• Diversion of Effluent

Discharge• Regulatory Certainty

Indirect Benefits• Environmental Changes• Recreation• Nutrient Value• Property Values• Resilience• Greenhouse Gas

Reduction/Energy Conservation

• Integrated Resource Management

Based on Guidelines for Preparing Economic Analysis for Water Recycling Projects, Economic Analysis Task Force for Water Recycling in California (State Water Resources Control Board, 2011)

Economic Analysis – Identify Benefits and Costs

• Environment– Restoration– Downstream habitat– Source water protection– Air quality (GHGs)

• Recreation• GW balance/protection

7

from Presentation on Guidelines for Preparing Economic Analysis for Water Recycling Projects, Economic Analysis Task Force for Water Recycling in California (State Water Resources Control Board, 2011)

Financial Analysis

8

Identify and Estimate Costs

Develop Capital Financing Mechanisms

Design Revenue Scheme

Allocate Financial CostsPurpose A

User

Purpose B

User

User

User

Bonds

Loans

SCRB Approach from Economic Analysis

from presetnation on Guidelines for Preparing Economic Analysis for Water Recycling Projects, Economic Analysis Task Force for Water Recycling in California (State Water Resources Control Board, 2011)

Water Reuse: Expanding the Nation's Water Supply Through

Reuse of Municipal Wastewater

Committee on the Assessment of Water Reuse as an Approachfor Meeting Future Water Supply Needs

COMMITTEE ON THE ASSESSMENT OF WATER REUSE AS AN APPROACH TOMEETING FUTURE WATER SUPPLY NEEDS

RHODES R. TRUSSELL, Chair, Trussell Technologies, Pasadena, CaliforniaHENRY A. ANDERSON, Wisconsin Division of Public Health, Madison, Wisconsin

EDMUND G. ARCHULETA, El Paso Water Utilities PSB, El Paso, TexasJAMES CROOK, Environmental Engineering Consultant, Norwell, Massachusetts

JÖRG E. DREWES, Colorado School of Mines, Golden, ColoradoDENISE D. FORT, University of New Mexico, Albuquerque, New Mexico

CHARLES N. HAAS, Drexel University, Philadelphia, PennsylvaniaBRENT M. HADDAD, University of California, Santa Cruz, California

DUANE B. HUGGETT, University of North Texas, Denton, TexasSUNNY JIANG, University of California, Irvine, California

DAVID L. SEDLAK, University of California, Berkeley, CaliforniaSHANE A. SNYDER, University of Arizona, Tucson, Arizona

MARGARET H. WHITTAKER, ToxServices LLC, Washington, D.C.DALE WHITTINGTON, University of North Carolina, Chapel Hill, North Carolina

NRC StaffSTEPHANIE E. JOHNSON, Study Director, Water Science and Technology BoardSARAH E. BRENNAN, Program Assistant, Water Science and Technology Board

http://www.nap.edu/catalog.php?record_id=13303

A New Paradigm for Water Supply

“As the world enters the 21st century, the human community finds itself searching for new paradigms for water supply and management in light of expanding populations, sprawling development, climate change, and the limits of existing conventional supplies.”

Water Reuse: Expanding the Nation's Water Supply Through Reuse of Municipal Wastewater

National Academy of Science, 2012

Financial v. Economic Costs

Financial costs involve how much the utility has to pay to construct and operate the project, including interest costs.

Economic costs account for all of the costs to whomever they may accrue. These include the financial costs of carrying out the project, as well as costs that take the form of impositions on or losses to anyone who is affected by the project.

Water Reuse: Expanding the Nation's Water Supply Through Reuse of Municipal Wastewater

National Academy of Science, 2012

Nonmonetized Benefits Description

Improved reliability Wastewater reuse provides a reliable, local supply of water during regional shortages. By diversifying a utility’s water supply portfolio, acommunity is better able to meet the needs of its water users and the environment in both wet and dry periods and under other stresses.

Enhanced reputation for environmental stewardship

By embracing water reuse, communities can gain positive recognition for their environmental stewardship.

Enhanced regional economic vitality By meeting increased water demands with new sources, communities may enhance local economic growth.

Enhanced self-sufficiency By reducing dependence on water imports and providing a local water supply, water reuse can increase a community’s self-sufficiency.

Increased water for theenvironment

If some existing surface or groundwater supplies are replaced by water reuse, more water can be made available to meetenvironmental needs (e.g., instream flows for environmental restoration, reducing withdrawals of overtapped aquifers).

Improved surface water quality By diverting discharge of nutrient-laden waters from sensitive surface waters or estuaries to landscape or agricultural irrigation, the net discharge of nutrients to surface water can be reduced. Irrigation with reclaimed water may also reduce the need for additional fertilizers.

Possible Nonmonetized Costs and Benefits of Reuse

Table 9.3, Water Reuse: Expanding the Nation's Water Supply Through Reuse of Municipal Wastewater National Academy of Science, 2012

Nonmonetized Costs Description

Effects on the overall carbonfootprint of water supplies

Unless offset by low-carbon energy sources, some water reuseapproaches may increase the overall carbon footprint of a watersupply compared to existing supplies.

Public health effects Poor cross-connection control or inadequate protections against equipment failures could expose the public to pathogens causing acute gastrointestinal illness or low levels of hazardous chemicals.

Public perception of reducedquality

Public concern over the perceived lower quality of the drinking water supply could lead to increased stress among some individuals and increased expenditures on bottled water.

Effects on downstream flows If reclaimed water is used for irrigation or other consumptive uses, water reuse will reduce downstream flows, with potential adverse ecological effects (such as in surface water or estuarine ecosystems) and reduced supply to downstream water users. Where “return flow credits” are offered, as in the Colorado River, water reuse can reduce these credits.

Water quality impacts If reclaimed water irrigation rates exceed the capacity for the plants to take up the nutrients, groundwater and surface water can become nutrient-enriched, which can lead to human health effects and environmental impacts, such as eutrophication and algal blooms. Multiple cycles of nonconsumptive water reusecan increase the salinity and contaminant load in the water unless treatment is designed to remove it.

Effects on soils and plants Excess salinity can be detrimental to plant growth and high levels of sodium can adversely impact soil structure.

Possible Nonmonetized Costs and Benefits of Reuse

Table 9.3, Water Reuse: Expanding the Nation's Water Supply Through Reuse of Municipal Wastewater National Academy of Science, 2012

Types of Water Reuse Projects that Maximize Benefits, Minimize Costs

• Nonpotable reuse by large water customers– Industrial reuse– Collocation of industries

• Decentralized treatment and reuse– Design of subdivisions, neighborhoods to

maximize local reuse• Indirect potable reuse• Potable water reuse

Questions

For consumer advocates and environmentally concerned parties, please discuss your concerns with the cost, pricing, customer classes, regional markets, and other arenas, circumscribing the wholesale and retail sale of recycled water to and by IOU water customers.