Reduction in U.S. Water Utility Revenue May Result in $32.7 Billion Economic Hit

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Revenue shortfalls at U.S. drinking water utilities from the coronavirus pandemic may reduce economic activity by $32.7 billion and cost 75,000 to 90,000 private sector jobs, according to a new analysis prepared by Raftelis for the American Water Works Association (AWWA) and the Association of Metropolitan Water Agencies (AMWA).

The report estimates drinking water utilities in the United States will see revenues from customer payments drop by nearly $14 billion. The impacts result from the elimination of water shutoffs for nonpayment, increased late payments due to high unemployment, reductions in nonresidential water demands and fewer new customers. 

“Water utilities are laser-focused on protecting public health to prevent the spread of COVID-19,” says AWWA CEO David LaFrance. “That means assuring safe water is always available for handvwashing and other purposes — especially to households that are struggling financially.

“AWWA is working with our elected leaders in U.S. Congress to assist both lower-income customers and water utilities facing significant financial hardships due to the pandemic,” he adds. “We urge Congress to support new investments in our critical water infrastructure to help put Americans back to work.”

The drop in revenue will require utilities to scale back projects by as much as $5 billion (annualized) to help manage cash flows due to the crisis. These reductions will have a cascading effect on economic activity in communities across the United States, according to AMWA CEO Diane VanDe Hei.

“The economic fallout of the COVID-19 pandemic is being felt by every community in the nation, and water systems are not immune from the impacts. This analysis makes clear that community water systems have been dealt a severe economic blow, and emergency federal assistance for water systems and their ratepayers must be a central component of future COVID-19 response legislation.” The anticipated financial impacts were estimated by obtaining recent and relevant data regarding observed or anticipated financial and operational water utility impacts, monetizing the impacts, and scaling up or aggregating available data to estimate the impacts on a national level.

Drinking water utilities may also experience additional future revenue losses estimated at approximately $1.6 billion in aggregate as a result of deferrals of planned water rate increases, bringing the total combined impact of the crisis on drinking water utilities to more than $15 billion. These deferrals will further exacerbate community economic impacts by reducing capital spending and will put the water sector further behind in addressing its capital infrastructure needs, according to AWWA and AMWA.

The financial impact of the COVID-19 crisis on drinking water and wastewater utilities combined is estimated to exceed $27 billion.

The report, titled Financial Impact of the COVID-19 Crisis on U.S. Drinking Water Utilities, was prepared with funding from the AWWA Water Industry Technical Action Fund. The fund, which is supported by organizational member dues, allows AWWA to provide analyses that help inform public policy decisions.


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