The Value of Water

Texas Panhandle-High Plans Water Conservation SymposiumFebruary 12, 2014 Amarillo, Texas

Mary Ann DickinsonPresident and CEO

US is the Best Deal of All

Average American uses 100 gallons/day/person The American household spends, on average, only

$523/year on water and wastewater charges, in contrast to an average of $707/year on carbonated soft drinks and other beverages

US has the lowest burden for water/wastewater bills as a percentage of household income, compared to other developed countries

http://water.epa.gov/infrastructure/sustain/Water-and-Wastewater-Pricing-Introduction

EPA Report

Every sector of the U.S. economy influenced by water

But reliable information on the economic importance of water is scarce

The relationships between Energy/Water/Food accounts for more than 94% of off-stream water use nationwide.

http://water.epa.gov/action/importanceofwater

Elements of Water Value

Quantity – The total volume of water the source can supply

Time – When water will be supplied Space – The location at which water

will be supplied Reliability – The likelihood that the

supply will not be interrupted Quality – The extent that water is

free of contaminants and suitable for the intended use

Value Difficult to Measure

Public supply and domestic self-supply: $1 to $4,500/AF

Agriculture: $12 to $4,500/AF Manufacturing: $14 to $1,600/AF Electric power generation: $12 to

$87/AF Hydropower: $1 to $157/AF Mining and energy resource

extraction: $40 to $2,700/AF Value to the economy

Residential Water Sales (National Association of Water Companies)

0

50

100

150

200

250

300

350

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Trends in consumer prices (CPI) for utilities [1978 to 2009]

Garbage

Cable/sat. television

Water and sewer

Fuel oil

Natural gas

Local phone

ALL ITEMS (CPI)

Postage

Electricity

Internet (1997=100)

Wireless (1997=100)

Interstate phone

Beecher IPU-MSU

U.S. Water and Waste Water Tariffs

13.7%

5.1%

12.3%

6.5%

8.8%

7.2% 7.0%

12.3%13.0%

3.5%

10.1%

7.9%

12.1%

7.8%

15.1% 14.2% 15.0%

4.7%4.5% 4.9% 4.6%

7.1%

10.9%

-0.9%

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

1998 2000 2002 2004 2006 2008 2010 2012

Survey Year (all assumed to be Jan. 1, except 2008-2012, which is July 1)

% R

ate

Cha

nge

Water Wastewater CPISource: Raftelis

The Drivers

Reduced demand from efficient fixture replacement under the plumbing and appliance codes

Reduced demand from active conservation programs

Reduced demand from the recession: industrial shift layoffs, home foreclosures

Reduced peak demand because of weather Need to maintain/renovate infrastructure Inflation Rise in fixed costs

Outdoor water use is lower Water suppliers then complain about not selling

enough water to meet fixed costs The costs avoided by the utility from conservation

get forgotten in the drive to sell excess capacity Consumers expect the water bill to go down not

up when supplies are available We need properly designed rate structures to

stabilize systems

And in Wet Years?

The Political RealityWe don’t like to revise our rates It is politically unpopular, so rates are

changed as little as possible The inevitable inflationary increase is

postponed until it is a crisis, much less increases in other costs

Conservation is often blamed for financial challenges – even when there are no active conservation programs in place!

This sends the wrong message to consumers

And Conservation?Conservation is still part of the solution It is a long-term cost reducer to the utility Revenue loss is often due to other drivers Every gallon saved is water that does not have

to be pumped, treated and delivered Conservation is an investment and short-term

effects must be planned for Reduced utility costs generally mean reduced

customer rates in the long-term due to avoided infrastructure

Yes, Systems Are Still Growing

2006 EPA Study showed that 52.6% of community water system capital improvement expenditures were for expansion, not just repair and replacement

Conservation programs help reduce expansion costs and stretch supplies

Long-term planning is critically important

Efficiency Saves Consumers $

0

5

1 0

1 5

20

25

20 00 201 0 2020 20 30 20 40

YEAR

PEA

K D

EMA

ND

/CA

PAC

ITY

(mgd

)

Existing Capacity

Required Capacity Before Conservation

DELAY

DOWN SIZIN G

Ba se l in eD e m a n d A f t e r Co n se r v a t io n

Model Navigation Worksheet

What’s Next at AWE?

AWE is developing solutions to assist water suppliers to set water rates that help: Provide clean drinking water at rates that are

fair and affordable for customers today and in the future

Support long-term financial sustainability of water systems and utilities

Stretch and protect water supplies to fuel growing, urbanizing and industrializing communities

Westminster’s Story Citizens complained about being

asked to conserve when rates would just go up anyway

Westminster reviewed marginal costs for future infrastructure if conservation had not been done

Since 1980 conservation has saved residents and businesses 80% in tap fees and 91% in rates compared to what they would have been without conservation

Report posted on AWE web site at www.a4we.org

http://www.nytimes.com/2014/02/09/us/texans‐answer‐call‐to‐save‐water‐only‐to‐face‐higher‐rates.html

Our Consumers are Often Clueless

They are not aware of how much water they actually use (and their ignorance is worse without meters)

They complain about the cost of tap water when they are willing to pay a thousand times more for the same litre in a plastic bottle

They have no idea how the system is run and the nature of the system costs

Engaging the Customer Educate them about the magnitude of their own

water use Make them stewardship partners in the water

resources of their communities Involve them in utility discussions to create a

basis for support for the final decision Put community leaders on Advisory committees

so that they participate and review the costs and strategies

Develop support for efficiency programs like NRW through a better understanding of data

One Option Water budget-based rates are found to be the most

equitable rate structures The revenue requirement based on the budgets,

not the actual consumption This means predictable, low bills for customers that

conserve Customers exceeding their budget pay more, with

the penalty revenue used to fund conservation programs

Because the water utility is made whole by collecting its needed revenue on the budget baselines, it does not lose money when customers conserve