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Water & Sewer Costs are Skyrocketing; Here’s What You Can Do About It

April 12, 2012
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Across the U.S., water rates rose by an average of 27 percent over the past five years. In New Jersey, rates jumped 20 percent, and wastewater surcharges in some areas are forcing business to move or simply shut down. In Sacramento, Calif., rates jumped 15 percent from 2010 to 2011 alone, and over the next three years will continue to increase by 10 percent annually. Atlanta water rates have doubled in the past decade. The story is the same in Milwaukee, Indianapolis, Chicago, New York City and other cities across the country.

The cost of repairing and expanding U.S. drinking water infra¬structure will top $1 trillion over the next 25 years and $1.7 trillion over 40 years, according to a recent American Water Works Association (AWWA) report. Annual water infrastructure spend¬ing will grow from $13 billion today to almost $30 billion by the 2040s. This expense likely will be met primarily through higher water bills and local fees.

Important regional differences exist. Growth is driving capital investment in the South and West, whereas replacement of older pipes and systems are driving investment in the Northeast and Midwest. Many municipalities have switched to inclining block rate structures to encourage water conservation.

How will your organization stem the tide of rising prices?

U.S. Energy Services, a leading energy-management services company, helps its clients address climbing water costs. Why did an energy-management firm start focusing on water and waste¬water? Industrial companies are now being required by their international customers to report their annual “water footprint” along with their “carbon footprint.” A client said it best: “You help me with my energy, but energy is this big [holding his hands about a foot apart] and utilities are this big [arms spread wide].”

Our initial approach is to focus on cost management. Conser¬vation is important, and water conservation experts are consulted as needed. But the first step is to ensure consuming entities are charged fairly and correctly for their water usage and wastewater discharge. A key step is to identify the pricing or rate structures and better understand what drives total cost, by means of a three-step process.

Three-step Analytical Process

As part of a three-step analytical process, step one — as with so much in today’s world — starts with information, and infor¬mation starts with data. Begin with the basic data provided on the local utility invoices, including usage, cost, rate and meter. Gathering at least one year’s worth of the basic data, if not two or more years of historical information, for each facility and for each service account, is ideal.

It is important to enter all of this information into a database where it can be analyzed and shared. For companies and orga¬nizations with multiple sites, this is critical, as it allows for bench¬marking facilities against one another. Once the data is captured, reports and queries can be used to identify stronger and weaker performers, focusing on usage and cost per facility, per square foot and per production unit, as well as sales volume and other benchmarks. Lessons can be shared amongst facilities and legiti¬mate operational causes for differences recognized.

Step two in the process involves reviewing the operations at each facility. The goal is to determine the following;

• What are the water sources? City or well?

• What processes and equipment use the water, and how?

• Is any water consumed or evaporated?

• Where and how is water discharged?

Once it is understood how water is used and discharged, it’s time to proceed to step three: getting a handle on local rate struc¬tures and how the utility charges for water usage and wastewater discharge, and therefore how your water usage and discharge affects price.

Much can be learned by analyzing the rate structures. What are the fixed price components? What drives those fixed charges? Can anything be done to reduce them? What is the usage rate structure – declining block, inclining block or flat rate? What does that mean and how do you respond? Does the wastewater charge have its own fixed cost components as well as usage-based components? Is the wastewater rate structure similar to the water rate structure or is it the opposite (e.g., inclining versus declining or flat blocks)?

Typically, wastewater rates are higher than water rates, al¬though the reverse is true in some areas, especially areas prone to drought and where water is scarce. Wastewater rates for industrial and commercial entities are often driven by the results of monitoring or testing of the discharge stream. Is that monitor¬ing and testing continuous or periodic? If periodic, do operations vary and how might that affect results on days when those tests are performed?

Significant regional differences exist in costs and rates charged by local water and wastewater utilities. Fixed monthly charges and minimum monthly charges are typically determined by the size of the meter. The meter is sized for the maximum expected water flow. Is it appropriate for your facility and current operation? Sometimes the charges, fixed and variable, vary based upon the type of industrial facility involved.

Many jurisdictions charge significantly higher rates for service to customers outside their political boundaries — any¬where from double to triple the rates for jurisdictional customers. According to a North Carolina study, the average price premium was more than 70 percent for facilities located outside the political boundary of the water or wastewater utility.

Cost Savings Opportunities

How does this analyti¬cal process play out in the real world? One example is from a food processing client. It had grown over the years, adding cooling towers, juice- and drink-bottling operations, as well as a water-bottling operation. It was receiving no wastewater credits for all of the water not being discharged to the wastewater system. In aggregate, these credits are worth more than $150,000 per year.

Yes, water and wastewater costs are rising. Conservation is important and will become more critical in the future as new water and wastewater systems are added and old systems are replaced, and as water continues to become a scarce resource. However, the starting point is to focus on cost management.

Start by gathering and managing data and turning it into actionable information. Benchmark like facilities against one another and identify and share “best practices.” Assess your operations — know how, where and why water is expended and identify how much of that water is discharged to the waste¬water stream versus consumed within the facility. Analyze and understand the utility rate structures and make certain billing is under the optimal rate tariff available. A strong cost management program is the first step in evaluating a facility’s water usage; it is a key step that must be taken before focusing on conservation efforts.

This article originally appeared in the April 2012 issue of Water/Waste Processing.

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