It costs money to make the infrastructure investments needed to ensure people have clean, safe and healthy water. So, it makes sense that water rates are increasing — both for municipally run systems and for those run by water companies — as necessary investments from upgrading treatment plants to replacing aging water mains are made.
As rates increase to support clean drinking water, there are significant, valid concerns around water affordability. One driver of rates are wholesale water costs. For example, the cost of Lake Michigan water purchased from the City of Chicago, which water companies pass through in rates without any markup, has more than doubled over the past decade.
Another driver of water rates are necessary investments made to protect water quality. Low rates due to lack of investment are hardly a badge of honor if the water being delivered is unsafe. In Illinois, water companies haven’t experienced any EPA drinking water enforcement actions over the past five years while municipal utilities have accrued a dozen such actions due to repeated violations.
Concerns about affordability have led some municipalities to delay necessary investments for years or even decades. Deferring necessary investment keeps rates low but the resulting failing water systems deliver unsafe water and put public health in jeopardy.
There are currently more than 52,000 water systems in the United States, and more than half of these systems serve fewer than 500 people. These small systems struggle with shrinking budgets, a lack of technical and managerial expertise, and aging infrastructure. Supporting and incentivizing partnerships or regional consolidations among water systems can bring operational efficiencies, access to capital for infrastructure upgrades, much needed technical expertise to the system, increased rates of compliance with complex state and federal regulations and improved customer satisfaction.
A state law passed recently with overwhelming support helps struggling water systems gain access to much needed infrastructure investments and, in turn, provide more reliable and higher quality water services. Ransom is a great example of a village in Illinois that’s benefited from water company expertise and investment. Unable to address a serious problem with radium in the town’s drinking water, the village transferred its water system to a water company. The company invested $2 million to connect Ransom’s customers to its existing water distribution system. As a result, residents and businesses regained access to safe drinking water and customers’ bills declined by 15% on average due to operational efficiencies.
Instead of waiting around for a pot of federal money — which is unlikely to arrive — water companies are putting their capital to work to ensure their systems are safe and reliable. The 10 largest water companies in the U.S. cumulatively spend nearly $3.7 billion annually on maintaining and improving their water infrastructure for the benefit of their customers.
In Illinois, water companies operate under the watchful eye of the Illinois Commerce Commission, which is responsible for ensuring water rates in the state reflect the true cost of providing safe and reliable water service. Water companies regularly open their books to the public and justify all spending and investments through a fully transparent rate case proceeding. Municipal utilities are not subject to this layer of scrutiny from state regulators.
Professional water companies also advocate for meaningful changes in the way the EPA and states enforce the Safe Drinking Water Act to ensure people have only safe drinking water. As we speak, there are more than 1,250 water systems in serious violation of the SDWA. Left unexamined and unchecked, these systems are unable to ensure safe and reliable water service.
The COVID-19 pandemic has made it crystal clear that we need to be open to solutions — public, private and hybrid — that will ensure clean drinking water for all.
Robert F Powelson is president and CEO of the National Association of Water Companies and a former member of the Federal Energy Regulatory Commission, a former commissioner on the Pennsylvania Public Utility Commission and past president of the National Association of Regulatory Utility Commissioners.
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