Water Industry News
water customers face big repair bills
every cracked pipe buried below the surface, for each main choked by
mineral deposits and for every failure that spins into an emergency,
there is a message: the state’s water infrastructure is in dire need
of billions of dollars — possibly a trillion nationally — in the
next two decades.
And guess who’s going to foot the bill?
What now costs the average household about $40 a month will balloon to
$120 or more by some estimates, to rectify years of neglect.
“The bottom line is that there has been a desire to avoid dramatic
double-digit rate increases,” said Richard A. Michelfelder, a
’s business school in
and former head of the national utilities consulting firm Quantum.
Water companies — municipal, regional and investor-owned — have not
invested enough in infrastructure, partially due to pressure to keep
rates low, he said.
Water companies have spent hundreds of millions of dollars to fix its
infrastructure in the last decade, and water rates have climbed as a
result. Still, in what the American Water Works Association predicted is
the “replacement era,” it is a game of catch-up.
of our infrastructure in this industry is buried and most of it is
aging,” said Rick Howlett, executive director of the New
Jersey Water Association, a
trade group. “We’re certainly not replacing our infrastructure with
a pace that is
Much of the serpentine network of pipes, valves and pumps beneath the
surface has been around since the Great Depression or earlier. New
Jersey American Water, for instance, estimates that about 15 percent of
its approximate 9,000 miles of piping statewide will hit 100 years of
service by 2020. The borough of
, established in 1898, just recently made its first major overhaul to
its water system, swapping out century-old wooden piping for new water
“Infrastructure deteriorates every day,” said Dennis W. Doll,
Water Co., a utility that serves
Solomon, the former head of the state Board of Public Utilities, said at
November roundtable on water supply at
that he personally believes that water will be the “crisis of the 21st
century.” Water has in many ways been ignored, he said, and the
infrastructure’s age and vulnerability was exposed last year by
tropical storms Irene and Lee. He said those events showed that if you
do not upgrade infrastructure, do not make necessary investments or hold
off repairs, “disaster occurs.”
In these days of shrinking budgets and dwindling revenues, regional and
municipal authorities will often make cuts that can’t be seen.
“When it’s a tough budget year, it’s easier to ignore what’s
underground,” Doll said. “The unfortunate reality is that
maintenance often gets deferred.”
But even for profitable, investor-owned companies like Middlesex Water
Jersey American, there are limits to how much work can be done in a
certain time frame, business insiders say. They must strike a balance of
attracting capital and investing in infrastructure, or assets, while
keeping rates low. These companies are highly scrutinized by the BPU
each time they request a rate hike, and often get approved for less than
they apply for.
“It’s all about risk management,” Doll said. “Nobody has the
time, money or resources to fix everything that’s needed.”
The utilities have a wide berth when it comes to applying their
The BPU can order a regulated utility to fix equipment, but by and
large, unless a
complaint is filed with the board, “the company is responsible to
systems,” spokesman J. Gregory Reinert said.
To Reinert’s knowledge, no complaints were made about the bridge and
that collapsed June 29 at New Jersey American Water’s
The incident, which sent
into a state of emergency, is still being reviewed by the board. If an
investigation were conducted, it would be the result of a recommendation
by staff to the board. Freeholder Director John P. Curley has called for
a state investigation.
In 2007, 2008, 2010 and 2011, the Clean
Water Council of New Jersey, an
advisory board to the Department of Environmental Protection, held
annual conferences focusing on infrastructure management for water
utilities and offered
recommendations for action. Now, after years of prodding, the state has
acknowledged the need to address these subterranean threats.
The BPU is implementing a new program known as DSIC, short for
system improvement charge, essentially allowing regulated water
companies to levy a one-time fee to customers to pay for critical
rehabilitation and replacement
projects. DSIC is seen as a measure to reduce red tape between rate
hearings – they can take close to a year – and accelerate
much-needed fixes. The charge would need to be approved by the BPU and
would be capped at 5 percent, meaning the average monthly water bill of
$42 would increase by $2.40, according to the New Jersey Utilities
And the DEP is launching a pilot asset management program by the end of
year aimed at identifying vulnerabilities in water systems and ways to
fix them, said Fred Sickels, acting director of water supply and
geoscience. No systems have been targeted and the department did not
have any other specifics of the program available.
The latest report card for New Jersey, issued in 2007 by the American
Civil Engineers, gives a “C”
grade for its drinking water infrastructure, better than
the 2009 “D-” grade the society gave the nation’s drinking and
waste-water systems, but certainly leaving plenty of room for
improvement. Indeed, the society estimates that
would need to spend nearly $7 billion in water infrastructure upgrades
over the next 20 years.
Nationally, about $335 billion in upgrades are needed for that same
span, according to the federal Environmental Protection Agency. The
American Water Works Association estimates that more than $1 trillion is
needed between now and 2035, and that the costs could triple the size of
a typical household’s water bill.
According to a 2002 report from the Congressional Budget Office, current
funding is insufficient for the growing demand for water infrastructure,
yet water bills remain one of the lowest delivered to a home. The CBO
estimated that in the late
1990s water bills, including waste-water services, were 0.5 percent of
income; the office estimates that to rise to between 0.6 percent and 0.9
percent by 2019.
Water here in
costs about half a penny a gallon, according to New Jersey American
Water, the largest provider in the area. In the next 20 to 25 years,
that cost will gradually rise to between 3 cents and 5 cents a gallon,
by Michelfelder’s rough estimate.
At the November roundtable, Solomon frankly stated the pressing need not
for significant infrastructure investment but also for a shift in public
perception about the true cost of water.
“There’s going to be a day of reckoning,” he said, “and it’s
going to be relatively soon, and it’s going to be significant.”