Water utilities drowning in debt

October 18, 2013 | By Barbara Vergetis Lundin

The U.S. water infrastructure is caught in a recurring cycle of debt and rate increases even as its condition and resilience continues to deteriorate, according to a new study released by the Columbia University Water Center in conjunction with Veolia Environment and Growing Blue.

Why Water Rates Keep Rising. Credit: PRNewsFoto/Growing Blue

From 2000-2010, on average, utility debt increased by 33 percent while water rates increased by 23 percent. Notably, debt and rates have increased by more than 100 percent at approximately one third of the nation's utilities surveyed by the American Water Works Association (AWWA).

Escalating debt and rising rates is not limited to just poorly managed utilities, but includes many well-run utilities where water managers are operating in an old framework that needs to be re-examined for the 21st Century.

"Achieving sustainability in our water systems requires a transparent understanding of the factors that influence rates," said Upmanu Lall, director of the Columbia Water Center. "In the last 30 years, federal funding for water infrastructure has almost dried up and it will be difficult for many utilities to raise rates high enough to pay down existing levels of debt. But although debt is increasing, the age of our water infrastructure continues to pose a challenge. We need to rethink what the water utility of the future should look like and how we will pay for water services and stimulate sustainable use."

Increased debt impacts rates, but it does not seem to have resulted in an overall improvement in the nation's infrastructure. The American Society of Civil Engineers grades the nation's drinking water infrastructure a "D," requiring more than $1 trillion in investment over the coming decades to replace old pipes.

Rates will likely go up in the short term; however, while some factors such as altered precipitation levels are largely out of the control of utilities, there are areas that could be better controlled in order to stem rising rates and build a buffer to deal with unexpected and uncontrollable events, according to the report.

"The historical analysis of water rates provided in this report helps identify the strains faced by water managers around the nation and demonstrates the real challenges we face in the coming years," said Lall. "To secure our nation's water future, our water infrastructure must meet our current realities and challenges. When we establish systems to sustainably match our water usage with growth, then we will truly be 'growing blue.'"

For more:
- see this report

http://www.fierceenergy.com/story/water-utilities-drowning-debt/2013-10-18