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How Come Cable is Valued more than Water?

July 13, 2012
Environment, finance, funding, infrastructure, management, water sewer management
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A question raised on the internet last week was whether our current delay in replacing infrastructure was simply delaying the costs for infrastructure to our children and grandchildren?  The amount of money we spend on infrastructure today, as a component of GNP, has decreased.  That should be troubling for a couple reasons.  Just as the economists will tell you that the economy cannot expand at a greater rate than the population grows, the investment to maintain the infrastructure needed to expand that economy should have some relationship to the growth rate.  If investments in what makes the economy go are half the rate they used to be, clearly our priorities are elsewhere which portends future expenses to catch up.  While it makes a good political sound-bite to cut costs, reduce government, cut funding to infrastructure programs, etc, the reality is that this is akin to the short term profit outlook on Wall Street – it does not plan adequately for the future.

So how does this help utilities?  Well, let’s think about your community’s priorities.  How many of you have compared your customer’s rates to those of cable television?  Or to typical telephone plans?  Rarely are the average costs for our customers, typically in the 5000 to 6000 gallons per month range, exceed the typical costs for a family cable or telephone plan.  And which one is needed to survive?  While the phones are needed for business, and cable is great to have (Game of Thrones is excellent if you have missed it) neither is needed to survive.  This is a missed opportunity for the utility industry.  It is one where we have been out-marketed, with the potential for huge costs to impact out kids and grandkids, just to maintain the current systems.  Many of our central city utility systems were started pre-WWII.  WPA was a 1930s program that constructed piping across the US.  Expansions occurred in the 1950s as people started migrating to the suburbs, and from the 1960s-today, but the reality is that many people reading this were not alive when the bulk of the piping in the US was constructed.  Which makes it “old!”

It is important that the utility industry convey to local officials the need for reinvestment in a system that runs well now, so that it will continue to provide good service.  We need to project the long-term program needs.  Asset management can help, but we need to plan, inform and market our product.  So who out there is doing any of this?  What input have you received and are you getting your needed rate increases?

Why aren’t We Paying the Cost for water and Sewer?

July 8, 2012
Environment, finance, funding, infrastructure, management, water sewer management
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It is budget season again which means the annual battle for water and sewer rates.  The costs for power and chemicals go up every year, and billions of dollars of deferred maintenance obligations exist.  So why is it that utilities find it so hard to get the revenues needed to update and operate?  The easy answer is politicians, but the issue is more complicated than that.

 

Much of the growth and expansion of the US and Canadian economies can be traced to the development of water, sewer, storm water and transportation infrastructure.  Without water, and associated wastewater disposal, the public health suffers, people get sick, and are less productive than if they are healthy (and you don’t need transportation then).  The lack of clean water is a major barrier to growth and development in many parts of the world.  So going back over 100 years, the federal government saw the benefit of improving drinking water quality.  Utilities responded, building filtration and disinfection facilities which were so successful that we are still reaping the benefits of those improvements.  Many central cities began expanding their systems as a means to provide service to surrounding communities.

Development of regulations relating to metals in water occurred in the 1940s, and developed through the 1962.  The Safe Drinking Water Act reaffirmed many of these standards, and of course added new ones as new constituents.  Over 90 percent of the US population has access to safe, potable drinking water on a 24/7 basis.

Unfortunately we do too good a job and have for 100 years.  People take safe water and sewer for granted.  Regulation or not, people assume it’s all good (the bottled water folks aside (see Peter Gleick’s new book).

 

The solution?  Marketing.  Local governments, their employees, their systems and their solutions are all kept under wraps.  No one actively markets the benefits of utilities?  Why not?  Why don’t we use our CCRs, monthly newsletters, meetings, and community involvement to market ourselves.  True most of us in the industry are not great marketers and we see so many other issues it is not a priority.  The private sector sees the benefits of marketing, but utilities often see the lack of active marketing in the attitudes of our elected officials, who do not often understand the value of the service.  IF people value your product they will pay for it.  The difficulty that many utilities have in getting rate increases to update and improve their inrastructure is an indication of failure to understand the value of the product.  That’s a marketing failure!  I once had an elected official tell me marketing was not something the public sector should do.  I asked why.  There was no answer, but he acknowledged it would help.  So we need to make marketing our efforts, and products.  So who’s got some great ideas out there to market?  Who has some great success stories we can all use?

BLOG 2 Unfunded Mandates or Stuff we should be doing anyway?

June 22, 2012
Environment, finance, funding, infrastructure, management, water sewer management
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In the prior blog, the theme of It’s All One Water was discussed.  Our industry has operated with the concept that potable water, wastewater, storm water, runoff, navigable waters, etc are distinct from one another and are somehow different, creating a silo effect. The silo effect obfuscates the current program of drawing water from rivers, streams and lakes, and discharging our wastes to those same rivers, streams and lakes, downstream of our withdrawal point of course.  Our local perceptions generally to not allow us to acknowledge that our uses affect other users, one reason that conflicts occur in water basins.  Instead the focus is “unfunded mandates” from political circles, whereby utilities are required to meet increasing standards for water, wastewater and storm water treatment.  Much of the regulatory focus is on utilities because they are perceived to have deep pockets due to the populations they serve.  If everyone pays a little, then it won’t hurt is much is the philosophy.  But the reality is that treatment of dilute source waters is often made more difficult as a result of upstream releases.  It is easier to treat water before it gets released.  The solution to pollution is apparently not dilution.  So who should treating these waters?

Perhaps the question is better framed a different way.  The concept in the legislation is to have polluters pay the cost for their pollutions, but reality is that the urban users pay the bulk of the costs.  Agriculture may create a downstream impact of nutrients, pesticides and herbicides, but controlling runoff is a difficult issue, especially if there are heavy rains just after application of chemicals.  It is unclear how you cool water for cooling without extensive energy costs, which would increase energy demands further.  And of course rainfall creates runoff as a contribution form the natural system (mostly in the form of turbidity).  There is nothing much that utilities can do to control these issues aside from acquiring large tracts of land to control the source.  But that does not solve the regulatory needs.

So the responsibility for public health falls on us.  As we evaluate regulations, we need to think about responsibility and cause (not costs).  The public health issues is much clearer with wastewater plants, where discharge of wastewater could impact both aquatic species and downstream water users.   In this case, there are no unfunded mandates – it is local responsibility to insure that the public health is protected near and farfield.

With water plants, well it all depends on the raw water.  So cleaner upstream water and less adverse users are better, but most utilities don’t fully control their source basins.  So then the key is whether the regulatory mandates meet the public health tests, which may depend on who you ask.  Ask this question to women with kids:  How much arsenic in your water is ok?  You rarely get any answer other than “none.”  Why?  The public health perception.  Cost is rarely the issue, but public health always is a concern.  The public expects their utility to do what is needed to clean up the water and places that responsibility on us.  Hence there are no real unfunded mandates, although that sounds great to deflect the need for rate increases to other agencies.

So then the question is whether all this discussion of unfounded mandates is an abdication of our public health responsibility.  The perception might be reality.  If your customers think that meeting regulations or treatment upgrades are being forced on you by others, does that create the question “Is the utility is really putting public health first?”  Does it beg the question  “why isn’t our utility already doing this?”  While every region will be different, how your customers may view your responsibilities is good question to ponder….

Thoughts?