Chapter 1 Water and Wastewater Systems

Introduction

Efficient and cost-effective water and wastewater systems are necessary and integral to economic development. The U.S. has numerous and diverse systems. Historically, there has been large public sector involvement in both water and wastewater systems. Until recently, a large percentage of the wastewater industry has been directly financed by federal government grants.

The role of the public sector is evolving in the context of budgetary constraints, contractual outsourcing, tough environmental laws, and recent (January 10, 1997) IRS rule changes. Most municipalities and districts are self-regulating with regard to rate-making. The 1996 California constitutional initiative, Proposition 218, may create a new wrinkle in how California sets water and wastewater rates (see discussion below).

There is a viable but relatively small investor-owned water industry in the U.S. The rates of this private sector industry are regulated by state public utility organizations. Eighty-five percent of U.S. drinking water and ninety-five percent of wastewater services are supplied by public sector entities. Most U.S. investor-owned water companies are relatively small. Even if the individual subsidiaries of larger conglomerates are included, only about 100 U.S. investor-owned water companies make revenues in excess of one million dollars. Tables 1-1 and 1-2 compare public and private water utilities in terms of (1) number and type, and (2) number of users of various type water facilities. Tables 1-3 and 1-4 express these key indicators in percentages.

Table 1-1. Number and Type of Water Facilities in the USA¹

Table 1-2. Number of People Using Various Types Water Facilities in the USA

Table 1-3. Percent Number and Type of Water Facilities in the USA

Table 1-4. Percent Number of People Using Various Type Water Facilities in the USA

Two major legislative initiatives which cover water on the federal level are:

• The 1974 Safe Drinking Water Act (SDWA), as amended, addresses the quality of water at the tap.

• The 1972 Clean Water Act (CWA), also known as the federal Water Pollution Control Act, as amended, addresses the release of pollutants to surface waters.

The 1996 Amendments to the Safe Drinking Water Act,² focuses on the most serious water contaminants, but its scope and funding are limited. Congress authorized a $7.6 billion program in theory³. However, Congress must appropriate these funds each year. The Centers for Disease Control (CDC) estimates that 900 people in the U.S. die from contaminated tap water and over 940,000 people fall ill each year. More than 600 water-borne disease outbreaks have been reported to the EPA since 1971. A September 3, 1996 article in the Hearst Newspapers noted that the lack of a nationwide monitoring program suggests that this estimate could be “… just a fraction of the outbreaks that occur.” Furthermore, in the United States, according to a 1996 report by Environmental News Network Inc., “…nearly 40 percent of rivers and streams are too dangerous for fishing and swimming, let alone drinking.” The Hearst article, noted above, also states that a survey by Opinion Research Corporation found that “… a third of Americans believe their drinking water is not as safe as it should be.”

In 1996, Jane Kay wrote an article in the San Francisco Examiner headlined “Chemicals used to cleanse water can also cause problems.” The article explains that while chlorine does kill off microbes that spread cholera, typhoid fever, and other waterborne diseases, it can produce byproducts in a water treatment plant that cause cancer in laboratory animals. The U.S. Environmental Protection Agency (U.S. EPA) classifies three of these byproducts—chloroform, bromoform, and bromodichloromethane—as possible human carcinogens. Erik Olson, an analyst with the National Resources Council, Washington D.C., is quoted in the same article as saying: “Probably in 15 to 20 years most U.S. systems will catch up with Europe and use ozone to kill the resistant things like crytosporidium.” Tom Crubbs of U.S. EPA’s Standards Division countered that even ozone may produce carcinogens, i.e. bromate—adding that not all ozonation byproducts had been identified.

Vanessa Leiby, Executive Director of Association of the State Drinking Water Administrators, told a house panel in 1996: “America’s infrastructure is aging and in many cities has deteriorated to the point where providing a constant source of safe drinking water is a daily challenge.” U.S. EPA estimates that for the next twenty years annual water infrastructure needs are $11 billion (constant/$1992) annually, while only $1.4 billion is currently spent. The American Water Works Association puts this latter amount at $4.1 billion.

Between 1984 and 1992 major outbreaks of waterborne illnesses have occurred in a number of U.S. city water supplies. For example:

• 1984—Braun Station Texas.

• 1987—Carroliton, Georgia. Thousands fell ill due to a technical failure on the part of plant operators.

• 1989—Cabool, Missouri. 243 people were sick because the 50 year old distribution pipes were at fault allowing E. coli bacteria to enter the system.

• 1992—Medford, Oregon.

• 1993—Milwaukee, Wisconsin. 403,000 people were ill and there were dozens of deaths.

• 1993—New York and Washington D.C. advised their residents to boil tap water because it contained E. coli or fecal bacteria.

• 1994—Las Vegas, Nevada. Cryptosporidium managed to sicken 100 people and contribute to 19 deaths.

• 1995—On December 19, the San Francisco Health Commission voted unanimously to order the San Francisco Department of Public Health to “inform persons who are immunocompromised about the risks of drinking untreated San Francisco tap water,” and to take other measures to protect public health, due to cryptosporidium parasite in the water.

The Milwaukee incident, which took place in May of 1993, was caused by a tiny parasite called cryptosporidium. The incident was caused by reduced efficiency at one of the plant’s filter systems due to a change in the plant’s process of spiking the water with polyaluminum chloride. Over 403,000 people contracted diarrhea of varying severity. Eight thousand people are served by the system.

Another contaminant in the U.S. water system is lead. EPA testing in 1992 determined that 819 water systems serving 30,000,000 people have excessive levels of lead. Pollution can be generated from point (specific outlet sites) and non-point (rain run-off, etc.) sources.

Water Systems

The United States uses approximately 338 billion gallons of fresh water daily or 1,400 gallons per capita. This is the largest use of water by any industrialized country and many times that of developing countries. Water use may be broken down as follows:

• Tap water (public use) 10%

• Industry 11%

• Power generation cooling 38%

• Irrigation/Agriculture 41%

Most of the 10 percent of “public use” water requires disinfecting to meet standards set by the EPA under the 1986/96 amendments to the original Safe Drinking Water Act (SDWA) of 1974. Costs for treatment vary considerably, often depending on location.

Ground water supplied from deep aquifers may require little treatment (western cities). In other cities/locations, heavy treatment is required. The federal Safe Drinking Water Act requires public water suppliers to test for numerous chemicals and bacterial pollutants and to notify the public if these standards are violated. The federal requirements apply to any system serving 15 or more connections or 25 people. About 15 percent of Americans (40 million people), rely on private wells, springs, or cisterns for their water. These people, unlike users of public systems, must gauge water safety for themselves.

Economic development requires abundant water for residential, commercial, agricultural, industrial, and environmental purposes. Water is a limited resource. To ensure an adequate supply of clean water, there will be an increasing reliance on rates or market pricing. This anticipated trend will guarantee that scarce water resources are allocated effectively between many competing uses.

In the U.S., there are approximately 181,000 water systems (see Table 1-1). Using EPA classification, roughly 140,000 of these are considered small. The Safe Drinking Water Act (SDWA) and the Clean Water Act (CWA) have produced financially difficult situations for many of these systems. Full compliance with all state and federal regulations could produce additional industry financial hardships.

Water Delivery Systems

Water delivery—supply and distribution—generally consists of four key elements:

1. Source—Where the water comes from; namely, surface or groundwater sources. The water infrastructure includes facilities related to water development and watershed protection.

2. Storage—Storage facilities are required if there is to be a consistent quantity and quality of water over time and subject to varying demands. Infrastructure costs include site acquisition and development, construction, repair and improvements of reservoirs, standpipes, elevated tanks, etc.

3. Treatment—Treatment is necessary to maintain and/or improve water quality.

4. Transmission and distribution—The system designed to bring water from the initial source of supply to the storage and/or treatment facility and then to the end user. The infrastructure used here includes aqueducts, pipes, valves, pumping stations, meters, and hydrants.

Water System Classifications

Water delivery systems are divided into two classifications: (1) Community Water Systems (CWS) and (2) Non-Community Water Systems (NCWS). CWS are in general larger than NCWS. CWS are defined as those serving 25 or more persons and having at least 15 hook-ups. These systems serve fixed or residential populations for periods of sixty days or more each year. NCWS serve mainly transient or non-residential populations. Approximately 28.8 percent of the nation’s public water systems are community water systems, serving approximately 243 million people. Non-community water systems make up 72 percent of the total number of water systems and serve some 19.6 million people.

Ownership of Community Water Systems

In the U.S., approximately 45 percent of Community Water Systems (CWS) are classified as publicly owned and fall into the categories of: (1) local water districts or municipalities (43%), (2) federal government (2%), and (3) wholesalers (less than 1%). Nearly 27 percent of the U.S. CWS are classified as privately owned. The private sector ownership is divided into: (1) investor owned (12%), (2) home-ownership or subdivision (8%), (3) parent company (3%), (4) wholesalers (less than 1/10 of 1%), and (5) “other” (3%). A final category of CWS, classified as “ancillary,” accounts for nearly 29 percent of the total number of systems. These ancillary CWS serve 1.7 million people, who live in trailer parks and small developments. These systems are generally not subject to conventional utility regulation and hence are placed in this separate classification. Most, however, are privately owned.

Table 1-5 summarizes how the over 50,000 CWS are classified by (1) size—based on population base served, and (2) type of ownership.

Table 1-5. Water Systems Ownership Structure—National Totals (Number of Systems—USA)

Note: In addition to the expected ownership patterns between public and privately systems, there are 12,000 mobile home parks and nearly 5000 homeowner association/subdivisions.

Source: Summary of Operating and Financial Characteristics of Community Water Systems EPA Office of Drinking Water 1982. This table was recreated from the original 1994 study—using the ratio of 50,289/58,071 (facility change). Errors are in rounding and use of ratio to compute matrix elements.

Supply Sources—Community Water Systems (CWS)

Groundwater supplies account for approximately 79.8 percent of the nation’s primary supply sources of water for CWS, followed by surface water at 9.6 percent, with purchase water supplying 10.6 percent.⁴ Larger companies tend to rely more heavily on surface supplies, while smaller companies increasingly look to ground water for their primary source of water. The EPA notes that this reliance on ground water supplies by smaller companies has continued, while larger population areas have relied more and more upon purchase and surface water supplies.

Investor Owned Community Water Systems

In the U.S. there are over 6,700 investor owned CWS. The National Association of Water Companies (NAWC) identified those CWS with operating revenues in excess of one million dollars in 1995. These companies are shown in Table 1-6 by the following categories: name, affiliation, region, size, ratio of net plant operating revenues, operating revenues, number of customers, sales volume (MG), revenues, and number of employees. Table 1-6 also shows customer classifications, i.e. residential, commercial, industrial, wholesale, government authority, fire prevention, other, and total.

Table 1-6. U.S. Investor Owned Water Companies With Annual Revenues in Excess of One Million Dollars