A paper recently released by Ceres, “Assessing Water System Revenue Risk: Consideration for Market Analysis,” discusses an issue many water systems across the nation are facing: a decrease in water demand by customers. 

A joint effort with the Environmental Finance Center at the University of North Carolina, the paper outlines data compiled over the last two years from utilities in Colorado, Texas and North Carolina that are experiencing changing water use patterns. 

The paper cites the Orange Water and Sewer Authority (OWASA) in North Carolina, which we profiled in the March 2012 issue of Water System Operator. 

“The utility sold as much water in 2012 as it did in 1991, despite seeing accounts grow from 13,000 to 21,000 during the same time period,” the paper says. “One contributing factor to the loss of sales can be tied to the major droughts North Carolina has experienced over the past 10 years and the resulting long-term impact mandatory usage restrictions and long-term education campaigns have had consumer use patterns.” 

So first water system operators are urged to educate customers on water conservation, and now it seems that conserving water could hurt long-term revenue streams. 

We’ve published many articles on what utilities and water treatment facilities are doing to educate customers on water conservation, but at what cost? According to the paper, increased customer efficiency is causing a decrease in water usage, ultimately reducing revenue, which plants and utilities rely on for financing infrastructure upgrades and rehabilitation. 

In addition to this staggering information, we also recently reported in a blog that the U.S. EPA estimates $384 billion in improvements are needed for the nation’s drinking water infrastructure through 2030 for systems to continue providing safe drinking water to 297 million Americans. 

Conservation programs, energy- and water-saving appliances mandated by the federal government and the price of water have changed drastically since these fixed costs were put in place, so there are discrepancies that fall on water systems to handle. 

“At the heart of the issue is the inherent mismatch between the largely fixed cost structure of drinking water service providers and the highly variable revenues they receive, which depend largely on the amount of water their customers use,” the paper says. 

And you all know how customers react to changes in water rates — usually with a bad attitude because they only see the number on the bill rather than the failing infrastructure. 

The paper does note that there’s “no single demand trend for water” as the drinking water market in the U.S. is continually fluctuating based on a variety of factors.   

With reports of water rate hikes up to 60 percent being seen in some local communities across the country, this is definitely not something to gloss over or postpone for five to 10 years when failing infrastructure is uncontrollable. 

So what are water plants and municipalities supposed to do to combat the growing struggle between conserving water and making profits? Post a comment below with your suggestions. 

http://www.ceres.org/resources/reports/assessing-water-system-revenue-risk-considerations-for-market-analysts/view