Water Utility Fees - Huge Increases On The Horizon?
When serving as Mayor of Philadelphia, Pennsylvania Governor Ed Rendell was surprised by a sudden need to replace a number of water supply pipes. Following a prolonged cold period, the Philadelphia temperature suddenly warmed to over 50 degrees, causing 58 water pipes to burst throughout the city. Rendell recalls that the city's water management team reported back that many of the pipes were installed in the 19th century and were not buried deep enough to avoid the stress caused by the rapid change in temperatures.
Aging infrastructure is a problem for many communities and public utilities. As communities grew over the years, demands on sewage systems and water providers all increased. Within the water utility industry, building more treatment plants and other big-ticket facilities made clear economic sense when communities were expanding. More customers meant more utility revenue. New facility construction was made possible by increased sales of water and sewer services.
As infrastructure assets reach the end of their service lives though, communities without an expanding revenue base struggle to find ways to pay for not for expansion but for infrastructure and facility replacement. Should a key piece of that infrastructure fail unexpectedly, smaller communities may have to absorb significant service rate increases.
Bob Hebert, columnist for the New York Times in a recent opinion, seemed to call for federal intervention to replace aging facilities in an opinion piece from February 15, 2010. ""Ignoring these problems imperils public safety, diminishes our economic competitiveness, is penny-wise and pound-foolish, and results in tremendous missed opportunities to create new jobs on a vast scale." Hebert seems to believe that the federal treasury should use the 'jobs' argument as justification for providing this funding. In the end, this probably only generates a false impression that Washington will be riding to the rescue of small utilities and water providers.
Utility managers are well acquainted with the need to replace treatment plants and delivery systems and they are trying to coax every last possible day of service out of existing facilities. Providing service with old equipment and facilities will only last so long. At some point, cities and water service providers will have to confront sometimes enormous replacement costs.
The best way to handle this problem according to Hebert, is to look for help from the national treasury. Budget hawks are sure to resist. With the current deficit and budget crises, resolving this conflict won't be easy and could certainly be expensive. Communities and water utilities - like Rendell's Philadelphia water department - will still have to come up with a way to pay for repair and replacement costs. Washington may not have the ability to help.
The American water utility industry is made up mostly of small providers serving fewer than 3,300 customers. These utilities must confront the high cost of infrastructure repair and replacement without outside help. And spreading a multi-million dollar cost for replacing a water treatment plant among only a few thousand customers can add a great deal to each customer's service rates.
The NYT's Hebert correctly points out that failing to replace these assets could have far-reaching consequences. Coming up with the money is -as always - the problem. And utilities and communities had better start planning now rather than wait for the next plant to fail or set of pipes to burst.
Aging infrastructure is a problem for many communities and public utilities. As communities grew over the years, demands on sewage systems and water providers all increased. Within the water utility industry, building more treatment plants and other big-ticket facilities made clear economic sense when communities were expanding. More customers meant more utility revenue. New facility construction was made possible by increased sales of water and sewer services.
As infrastructure assets reach the end of their service lives though, communities without an expanding revenue base struggle to find ways to pay for not for expansion but for infrastructure and facility replacement. Should a key piece of that infrastructure fail unexpectedly, smaller communities may have to absorb significant service rate increases.
Bob Hebert, columnist for the New York Times in a recent opinion, seemed to call for federal intervention to replace aging facilities in an opinion piece from February 15, 2010. ""Ignoring these problems imperils public safety, diminishes our economic competitiveness, is penny-wise and pound-foolish, and results in tremendous missed opportunities to create new jobs on a vast scale." Hebert seems to believe that the federal treasury should use the 'jobs' argument as justification for providing this funding. In the end, this probably only generates a false impression that Washington will be riding to the rescue of small utilities and water providers.
Utility managers are well acquainted with the need to replace treatment plants and delivery systems and they are trying to coax every last possible day of service out of existing facilities. Providing service with old equipment and facilities will only last so long. At some point, cities and water service providers will have to confront sometimes enormous replacement costs.
The best way to handle this problem according to Hebert, is to look for help from the national treasury. Budget hawks are sure to resist. With the current deficit and budget crises, resolving this conflict won't be easy and could certainly be expensive. Communities and water utilities - like Rendell's Philadelphia water department - will still have to come up with a way to pay for repair and replacement costs. Washington may not have the ability to help.
The American water utility industry is made up mostly of small providers serving fewer than 3,300 customers. These utilities must confront the high cost of infrastructure repair and replacement without outside help. And spreading a multi-million dollar cost for replacing a water treatment plant among only a few thousand customers can add a great deal to each customer's service rates.
The NYT's Hebert correctly points out that failing to replace these assets could have far-reaching consequences. Coming up with the money is -as always - the problem. And utilities and communities had better start planning now rather than wait for the next plant to fail or set of pipes to burst.
