Water Rates Likely to Rise

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Water Rates Likely to Rise
Words: 564 | Date: Sat, 8 May 2010

A recent report by the US Conference of Mayors predicts that total spending on water and wastewater systems may increase by as much as four times. As spending increases, water rates are likely to increase as well. Depending on how fast the nation's population expands, total spending on water facility infrastructure could increase many times.

Spending on utility infrastructure - particularly for replacement of aging plant and equipment - is something Utility Consultants across the country have prepared their clients to face. Now with the Conference of Mayor's report, it appears that the local utilities may have to face up to replacement of old facilities very soon.

The federal government has demanded more from local water providers over the years largely resulting from additional EPA requirements for clean water and water treatment standards. Local utilities have of course complied - mostly at their own expense - which has added additional cost burden to provider and their customer alike. This makes replacement of equipment and facilities much more difficult when older infrastructure reaches the end of practical use life.

Spending to replace equipment and facilities can mean significant water rate increases to customers. Most water utilities serve only a couple thousand customers, though, so passing any significant expenditure through to end users can significantly increase water usage rates.

To help utilities combat rising consumer rates the Congressional Budget Office recently released its own report on the water utility industry and issued recommendations for controlling costs and maintaining lower service fees. Included in the recommendations were: - Demand Management - including conservation and public education efforts - Productivity and Labor Management - making utility staff more efficient and productive - System Consolidation - reducing costs through processes also known as "regionalization" allowing utilities to share overhead costs across an expanded consumer base through consolidation of smaller utilities into single, larger and more efficient organizations. - Asset Management Planning - achieving cost savings by extending equipment life and lowering overhead costs. - Innovative Construction Contracting - applying new management methodologies to ensure efficient contracting of improvements using current DBO (Design-Build-Operate) processes.

These methodologies are not new. Utility Consultants have practiced and recommended them to clients for many years. The Conference of Mayors report though acknowledges that there are a significant number of water utilities in the US that need to replace major parts of the local infrastructure, regardless of how well their ongoing service is managed. And even with maintaining operating costs at an efficient level, the need to replace plant and facilities is significant and will make cost-mitigation efforts on behalf of water customers, that much more difficult.

As always, the battle-ground in the water utility area surrounds the issue of water use fees. Rates for local water service - especially for customers served by smaller utilities - are very closely related to the amount spent by the utility. Whether in the form of overhead costs or expenditures for plant replacement, these expenditures can directly impact fees customers pay for water service. The important element then in meeting the challenge of replacing old infrastructure is creating a "willingness to pay" environment. By planning and working with the user community so that there are few surprises at the customer level, utilities can meet both the service requirements and fee expectations expressed by the user community.
Jason Mumm is very respected in the Water Utility Consulting arena. Working with water and wastewater utility organiztions across the country for many years, Jason's firm - StepWise Advisors - provides assistance to organizations requiring help managing costs, assets and growth.

Article Source: Article Directory | Author Jason Mumm | Cheap WebHosting

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