Survey: Top Water Utility Concerns

Black & Veatch’s recent “2012 Strategic Directions in the U.S. Water Utility Industry” report reveals top challenges and provides recommendations for moving forward in the water and wastewater industry.

The inaugural report combines results of a survey of U.S. utility leaders conducted earlier this year with expanded analyses and insights by Black & Veatch water industry experts. It is the water industry’s version of the company’s “Strategic Directions in the U.S. Electric Utility Industry” report, now in its sixth year of publication.

The report identifies three key, intertwined mega-issues that face the public water utility industry: financial challenges, sustainability and asset management.

FINANCIAL CHALLENGES ABOUND

Issues that drive investment or cost are front and center among water utility leaders. Aging water and sewer infrastructure is the most pressing concern. Leaks and other inefficiencies caused by crumbling infrastructure lead to higher operating costs and loss of precious resources. New regulatory standards and changes to traditional funding streams also weigh heavily on the minds of utility managers.

Regulatory compliance is by far the strongest driver for ongoing infrastructure investments. Cost containment ranked second.

Most of the respondents – more than 85 percent – believe the average person has little to no understanding of the gap between rates paid and the cost of providing reliable water service. At the same time, nearly half of the utility officials feel that customers probably are willing to pay the higher rates needed to address infrastructure needs.

SUSTAINABILITY RANKS HIGH

Utilities understand the importance of sustainability in making decisions for future investments; they seek to balance economic, social and environmental considerations when developing solutions. Nearly all survey respondents believe sustainability is important to their business.

Sustainability is also increasingly viewed as a driver for investment and positive returns, as opposed to strictly an environmental concept. Nearly 60 percent of respondents consider it a strategic focus for their utilities. They said the water-energy nexus is also very important. Energy can account for up to 30 percent of a utility’s operating budget and more than 85 percent of water utility greenhouse gas emissions. Improving energy efficiency is the top sustainability issue among survey respondents, and more than three-fourths have already taken steps to reduce energy consumption.

WATER IS FINITE

Water is a finite resource, and all water is part of the same closed cycle. Integrated management of all water resources is essential for effective resource management. More than 90 percent of respondents expect some level of system growth in the future, and they reported that they will have to do more with existing resources.

Respondents said resource recovery provides an opportunity to better manage water and energy use. Reusing water for industry, agriculture or aquifer recharge can conserve water and also lower energy costs. Where conditions are favorable, recovering biosolids to create renewable energy can further reduce energy use.

 

Most utilities’ water rates are based on consumption. To encourage conservation without further eroding utilities’ financial positions, rate structures must be modified to reflect the true cost and value of delivered water. Customers can expect to begin paying more for water, but more education is essential to enhance public understanding and acceptance.

ASSET MANAGEMENT CAN HELP

Asset management practices represent a proven methodology for utilities to extend asset life and reduce life cycle costs. Asset management programs can help meet the challenges of aging infrastructure and shrinking revenue.

With utilities concerned about aging infrastructure, access to capital and the need to do more with less, effective asset management practices enable utilities to extend asset life and reduce life cycle costs. Asset management is an integrated planning program that maximizes the efficiency of all utility resources. Widely used in the UK and Australia, asset management practices have demonstrated positive results.

While two-thirds of respondents stated that asset management assessment or improvement programs were in place or ongoing to some degree, the majority of respondents whose utilities serve populations of less than 50,000 stated they have no such programs in place.

FUNDING IS NEEDED

Perhaps the most significant – although not surprising – finding is that only about a fourth of the respondents believe that funding will be sufficient for their capital infrastructure projects. Although privately managed infrastructure funds could help close the gap between needs and access to capital, more than half of the respondents indicated that public-private partnerships have not been considered or adopted.

Both Cindy Wallis-Lage, President of Black & Veatch’s global water business, and John Chevrette, President of the company’s management consulting division, believe that utilities will have to tap into new sources of funding going forward.

“Utility leaders are continuously challenged to make the most of limited budgets – a situation truer today than just five years ago,” observed Wallis-Lage. “The vast majority of survey respondents doubt the sufficiency of their future funding using traditional means to manage and maintain their systems.”

“Overcoming today’s challenges requires a significant change in how utilities develop and implement strategic and capital plans,” said Chevrette. “And consumers must better understand that water and wastewater services must be paid for in an equitable and responsible manner.”

SUBJECT MATTER EXPERTS

CINDY WALLIS-LAGE: Wallis-LageCL@bv.com
JOHN CHEVRETTE: ChevretteJM@bv.com

This article has been republished with permission by Black & Veatch. To view the original article, visit Black & Veatch’s Solutions Magazine.

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About Linda Saiger Bond, Black & Veatch

Topics: Black & Veatch, Water Infrastructure/Treatment.

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