Dedicated to the World s Most Important Resource AWWA State of the WATER INDUSTRY. Report

Transcription

1 Dedicated to the World s Most Important Resource 2014 AWWA State of the WATER INDUSTRY Report

2 2014 AWWA State of the WATER INDUSTRY Report CONTENTS EXECUTIVE SUMMARY...3 PART 1 PURPOSE AND METHODOLOGY...4 Purpose...4 Methodology...4 PART 2 - STATE OF THE WATER INDUSTRY...7 Background...7 Health of the Water Industry...9 PART 3 ISSUES...12 Comparison of 2013 and 2014 Issue Rankings...12 Utility and Non-Utility Issue Rankings...13 System Stewardship...14 Water Resources...17 Value of Water (Resources / Systems and Services)...20 Regulations...22 Workforce...23 PART 4 CONCLUSIONS...24 Then as Now...24 Moving Forward...25 REFERENCES...26 APPENDIX A 2014 State of the Water Industry Survey...27 APPENDIX B 2014 SOTWI Survey Response Rate by Location...29 Established in 1881, the American Water Works Association is the largest nonprofit, scientific, and educational association dedicated to managing and treating water, the world s most important resource. With approximately 50,000 members, AWWA provides solutions to improve public health, protect the environment, strengthen the economy, and enhance our quality of life. Dedicated to the World s Most Important Resource American Water Works Association

3 EXECUTIVE SUMMARY The American Water Works Association (AWWA) has been formally tracking issues and trends in the water industry since 2004 through the State of the Water Industry (SOTWI) study. The Association continues to conduct this annual survey in order to: Identify and track significant challenges facing the water industry Provide data and analyses to support water professionals as they develop and communicate strategies to address current issues Discover and highlight potential problems or concerns on the water industry s horizon Inform decision makers and the public of the challenges faced by the industry Twice in September 2013, s were randomly sent to a general list of AWWA members and contacts inviting participation in the 2014 SOTWI survey. A total of 1,739 respondents completed a majority of the survey. Because the amount of self-selection bias is unknown, no estimates of error have been calculated. Some of the major findings of this study are: The current health of the industry as rated by all respondents was 4.6 on a scale of 1 to 7, up slightly from the 2013 score of 4.5. By this measure, the water sector has been resilient in the face of many large-scale political, financial, environmental, and technological changes over the last ten years. The top five water industry issues identified for 2014 are: 1. State of water and sewer infrastructure 2. Long-term water supply availability 3. Financing for capital improvements 4. Public understanding of the value of water resources 5. Public understanding of the value of water systems and services Addressing water and sewer infrastructure needs, the most important water industry issue, could easily top $2 trillion over the next 25 years in the United States. Eight percent of respondents felt that water and wastewater utilities are not at all able to cover the full cost of providing service, and that nearly doubled to fifteen percent when looking to the future. Ten percent of utility employees felt that their utilities were currently not at all able to cover the full cost of providing service, and that figure is expected to increase to 14 percent in the future. Respondents clearly expressed that full-cost pricing is currently a challenge and one that will only become more difficult moving forward. Close to half (46%) of utility employees reported that their utilities access to capital was as good or better than at any Full-cost pricing is currently a challenge and one that will only become more difficult moving forward. time in the last five years while only 17 percent reported that their utilities access to capital was as bad or worse than at any time in the last five years. Eighty-three percent of utility personnel indicated their utilities are at least moderately prepared to respond technically to their infrastructure issues but only sixty-nine percent responded that they are at least moderately prepared to respond financially to their infrastructure needs. Ten percent of utility employees felt their utilities will be challenged to meet anticipated long-term water supply needs while approximately sixty percent indicated that their utilities are very or fully prepared. Approximately two-thirds of utility employees reported that their utilities have a drought management or water shortage contingency plan and another seven percent responded that a plan was in development. Forty percent of respondents think the water industry is moderately prepared to address climate change; twelve percent think the industry is not at all prepared while only two percent think it is fully prepared. Forty-two percent of respondents indicated groundwater management and overuse was critically important. Due to potentially diminishing levels of recharge and varying regulatory requirements for groundwater use, groundwater issues are expected only to grow in significance in future years. The vast majority of utility personnel (70%) responded that their utilities are not considering direct potable reuse to augment existing drinking water supplies; however, 12 percent responded that their utilities are exploring direct potable reuse American Water Works Association 3

4 Public understanding of the value of water resources was this year s #4 most important issue, with 48 percent of respondents rating it as critically important, while public understanding of the value of water systems was identified as the #5 most important issue, with 44 percent of respondents rating it as critically important. Respondents felt that nonresidential customers and public officials had the best understanding of both water resources and water systems and services. In contrast, 70 percent of respondents felt the general public has a poor or very poor understanding of water systems and services, and almost 59 percent felt the general public has a poor or very poor understanding of water resources. Similarly, 65 percent of respondents felt residential customers have a poor or very poor understanding of water systems and services, while 56 felt the general public has a poor or very poor understanding of water resources. The top three current regulatory concerns in order are (1) pollutant discharges, (2) disinfection by-products, and (3) combined sewer overflows. The top three future regulatory concerns in order are (1) pharmaceuticals and hormones, (2) security and preparedness (cyber, physical, and emergency response), and (3) disinfection by-products. Only one percent of 2014 SOTWI respondents indicated that the water industry was fully prepared to address issues Seventy percent of respondents felt the general public has a poor or very poor understanding of water systems and services. related to talent attraction and retention in the next five years while 15 percent thought the industry not at all prepared and 35 percent thought it was only slightly prepared. Similarly, only one percent of respondents felt that the water industry was fully prepared to cope with any expected retirements in the next five years while twelve percent thought the industry not at all prepared and 30 percent thought it was only slightly prepared. Many of the challenges highlighted in this report have engaged water professionals for years, yet there is a growing urgency to address our persistent infrastructure, water resource, and communication issues. To do so, the water industry must work collectively to develop sound and sustainable solutions and to then disseminate and implement them at the local and regional levels where water-related decisions are mostly made. Public input and proactive community involvement are essential to the success of this process. The 2014 SOTWI report provides specific guidance on where the industry feels investments are most needed and where action would be most beneficial. AWWA provides a forum for innovation and leadership in the water industry by not only identifying and tracking important water issues but by focusing the efforts and contributions of its dedicated volunteers and members to develop information and guidance to protect the world s most important resource: water. PART 1 PURPOSE AND METHODOLOGY Purpose The American Water Works Association supports the water industry by providing solutions to effectively manage the world s most important resource: water. AWWA developed the State of the Water Industry survey and report in 2004 to: Identify and track significant challenges facing the water industry Provide data and analyses to support water professionals as they develop and communicate strategies to address current issues Discover and highlight potential problems or concerns on the water industry s horizon Inform decision makers and the public of the challenges faced by the industry AWWA s annual SOTWI survey encourages reflection on the water industry s current and future challenges and priorities, allowing participants to serve as a voice for their colleagues. This industry-wide self-assessment provides information to support many of the water community s common values including safeguarding public health, ensuring customer satisfaction, and protecting the environment; Figure 1 highlights responsibilities that serve these values. Methodology The SOTWI survey population includes all water industry professionals, i.e., those with an understanding and appreciation of the issues facing the water industry. Given the broad and ever-changing nature of the water industry it is difficult to completely define this population adequately. However, the SOTWI classifies participants based on their current careers using the following categories: Drinking Water Utility Wastewater Utility Combined Water/Wastewater Utility (may include other services too) Water Wholesaler Reuse/Reclamation Utility Stormwater Utility Consultant/Consulting Firm American Water Works Association

5 Manufacturer of Products Manufacturer Representative Distributor Technical Services Company Financial Industry (ratings agency, investor/fund rep., etc.) Government/Regulatory Agency University/Educational Institution Laboratory Nonprofit Organization Retired Other Figure 1. Water industry values SAFEGUARD PUBLIC HEALTH Safe drinking water Fire protection Water pollution control ENSURE CUSTOMER SATISFACTION Adequate and reliable supply Appropriate water quality Appropriate prices (toward financial sustainability) PROTECT THE ENVIRONMENT Adequate and reliable supply Appropriate water quality Efficient use of supplies for minimum impacts (toward environmental sustainability) Throughout the SOTWI study, AWWA made deliberate efforts to anticipate and minimize errors due to coverage, sampling, nonresponse, and measurement. Coverage errors can result when members of the survey population have an unknown nonzero chance of being included in the sample. Sampling errors can result if data is collected from only a subset instead of all members of the sampling frame. A sampling frame is the list from which a sample is to be drawn in order to represent the survey population. The 2014 SOTWI sample frame consisted of a general list of AWWA members and contacts. Because the bulk of AWWA members reside in North America, the survey primarily reflects water industry concerns in the United States, Canada, and Mexico. A survey sample consists of all units of a population that are drawn from the sample frame for inclusion in the survey. Figure 2. Number of respondents for the 2014 SOTWI survey by career category Drinking Water Utility Wastewater Utility Combined Water/Wastewater Utility Water Wholesaler Reuse/Reclamation Utility Stormwater Utility Consultant/Consulting Firm Manufacturer of Products Manufacturer Representative Distributor Nonprofit Organization Technical Services Company Financial Industry Government/Regulatory Agency University/Educational Institution Laboratory Retired Other 2014 American Water Works Association 5

6 Figure 3. Number of respondents for the 2014 SOTWI survey by age Younger than % 0 to 5,000 5,001 to 10,000 10,001 to 25,000 25,001 to 50,000 8% 28% 11% and older Prefer not to answer 8.4% 13% 0.9% 28.3% 50,001 to 100, ,001 to 150,000 Over 150, % 12.2% Figure 4. Summary of 2014 SOTWI respondents working for a utility by the size of the population their utility serves (n= 798) 14% In order to minimize coverage errors, the sample for the 2014 SOTWI Survey was distributed with the goal to provide uniform response from states and provinces. Individuals from the categories in the following list were randomly selected from AWWA s full contact list using a generic randomize function, and the survey was sent to them via . To avoid bias, AWWA membership was not considered, meaning the survey was sent to members and nonmembers alike. 17% 18.6% 1. All North American utilities (water, wastewater, combined, etc.) 2. All North American service providers 3. All North American partner agencies and institutions 4. All Canadian individuals 5. All Mexican individuals 9% The water sector resiliency is relatively good, at least from the perspective of water industry professionals. 6. All international members 7. US individuals as by state with the goal of producing uniform response rate by state population On Sept. 6, 2013, invitations were sent to 36,452 random addresses based on the above criteria. On Sept. 27, 2013, a follow-up was sent to this same group as well as to 55,728 additional contacts, again with the intention of creating a uniform response rate base from states and provinces. While 554 respondents replied to the original message, 1,206 respondents replied to the second invitation. After removing wholly incomplete responses (i.e., surveys submitted with no responses at all), the total number of respondents completing a majority of the 2014 SOTWI survey was 1,739. See Appendix A for the full 2014 SOTWI survey and Appendix B for a summary of the location specific response rates. The data have not been weighted to reflect the demographic composition of any target population. Because the response rate was relatively low and the amount of self-selection bias is unknown, no estimates of error have been calculated. Figure 2 shows the total number of respondents based on their designated current career. Approximately 53 percent of respondents (922) indicated they worked for a utility, while 47 percent (817) were not directly employed by a utility. The top 5 total responses by career type are as follows: 1. Combined Water/Wastewater Utility: 26% (458) 2. Drinking Water Utility: 23% (397) 3. Consultant/Consulting Firm: 17% (300) 4. Government/Regulatory Agency: 9% (159) 5. Manufacturer of Products: 6% (112) Figure 3 shows the age distribution of the 2014 SOTWI survey respondents. The largest response was from the age range (30%) while the smallest was the age range <25 (1%). The age distribution was relatively skewed to those who have likely been water industry professionals for a longer period of time with less participation from those just beginning or near to the end of their careers. Figure 4 provides an overview of the populations served by the utility-career participants, of which there were 798 total responses. The largest group of utility respondents served populations greater than 150,000 (28%) while the smallest were those serving populations in the range of 100,001 to 150,000 (8%). Eighty-eight percent of the utility personnel who responded worked for public utilities, while 12 percent worked for private utilities American Water Works Association

7 PART 2 - STATE OF THE WATER INDUSTRY Background The results of the 2014 SOTWI survey are better understood against the backdrop of the water landscape in North America. As the report is published, the populations of the Canada, Mexico, and the United States continue to grow as shown in Figure 5, although the growth rate has been leveling off in recent years. Canadian population growth has been relatively consistent over the last 30 years, typically ranging from percent (Statistics Canada, 2013). From the period of 2009 to 2012, the annual estimated population growth rate for the United States has decreased from percent (World Bank, 2013). Similarly, the annual estimated population growth rate for Canada has decreased from percent while the estimated population growth of Mexico has decreased from percent. Projections of the annual population change for the United States by the U.S. Census Bureau for 2015 are 0.77 percent in 2015 and decrease incrementally thereafter based on estimates of births, deaths, and immigration (USCB, 2013). For a view of the current North American population density, see Figure 6. Table 1 provides estimates of overall water use in North America as total per capita water withdrawals and water withdrawals by use (municipal, industrial, and agricultural). The global ranking of each country is provided for each category of use, where a higher rank indicates higher use. The U.S. Environmental Protection Agency (USEPA) provides drinking water system information through the Safe Drinking Water Information System. Table 2 provides the current number of U.S. systems based on the size of the service population. USEPA tracks the number of operational wastewater treatment facilities every four years through its Clean Watersheds Needs Survey (CWNS). The latest data available is shown in Table 3, a summary of the number of wastewater treatment facilities by flow. Statistics Canada provides Canadian system information through its Human Activity and the Environment data tracking efforts. Table 4 provides a summary of drinking and wastewater plants in Canada for public facilities serving communities of 300 or more people. This summary does not include federal systems or facilities administered by Indian and Northern Affairs Canada AWWA State of the Water Industry Report Figure 5. Populations (in millions) over time in North America (created from Google Public Data, 2013) Population (Millions of People) United States Mexico Canada Figure 6. North American Population Density (Britannica Kids, 2013) Documentation of the number of Mexican water and wastewater systems was not available at the time this report was written American Water Works Association 7

8 Table 1. Water use in North America (FAO, 2013) Country Total water withdrawal per capita Municipal water withdrawal Industrial water withdrawal (gal/ inhab/ day) Global Rank gal/yr Global Rank gal/yr Global Rank gal/yr Agricultural water withdrawal Canada 1, Mexico United States of America 1, Global Rank Table 2. U.S. drinking water system summary (USEPA, 2012) System Service Population Very Small <=500 Small 501 3,300 Medium 3,301 10,000 Large 10, ,000 Very Large >100,000 Total Number of Systems 127,896 19,180 5,176 3, ,539 % Total Systems 82% 12% 3% 2% 0.3% 100% Service Population 14,336,173 25,181,127 30,048, ,185, ,623, ,375,275 % Total Population 4.5% 7.9% 9.4% 34% 44% 100% Table 3. U.S. wastewater system summary (USEPA, 2008) 1 Existing flow range (MGD) Number of Facilities Total existing flow (MGD) Present design capacity (MGD) to , to ,863 2,150 3, to ,690 8,538 13, to ,847 17,267 Table 5. Health of the water industry by career category (scale: 1 to 7); present (2014) and 5 years from now (2019) Career Category # of Respondents Reuse/Reclamation Utility Retired Laboratory Drinking Water Utility and greater 38 8,553 10,344 Combined Water/Wastewater Utility Other Total 14,780 32,345 44,868 1 Alaska, North Dakota, Rhode Island, American Samoa, and the Virgin Islands did not participate in the CWNS 2008; 2 Other Flow data for these facilities were unavailable Table 4. Canadian drinking water and wastewater system summary (Statistics Canada, 2009) Population Served Number of Drinking water plants Number of Sewage treatment plants 300 to to 5,000 1,226 1,272 5,001 to 50, More than 50, Total 2,018 2,113 Water Wholesaler Government/Regulatory Agency Consultant/Consulting Firm Technical Services Company Manufacturer of Products University/Educational Institution Nonprofit Organization Wastewater Utility Other Distributor Manufacturer Representative Stormwater Utility Financial Industry American Water Works Association

9 Table 6. Health of the Water Industry by age category (scale: 1 to 7); present (2014) and 5 years from now (2019) Age Range Health of the Water Industry As has been done since the SOTWI survey s inception, the 2014 survey asked participants for their opinion of the current and future health of the water industry by responding to the following questions using a scale of 1 to 7: In your opinion, what is the current overall state of the water industry? # of Respondents Younger than and older Prefer not to answer Looking forward, how sound will the overall water industry be five years from now? Figure 7 shows the average scores to these two questions from 2004 to present. The current health of the industry as rated by all respondents was 4.6, up slightly from the 2013 score of 4.5. This is generally in line with the overall average scores obtained through the survey since its inception. In fact, it s striking how little the average score for the health of the water industry has changed considering the regular occurrence of significant global phenomena and local crises. This trend shows that water sector resiliency is relatively good, at least from the perspective of water industry professionals. Figures 8 and 9 show the health of the water industry as reported by those working in the United States and Canada, respectively. Both show minor improvement over last year, up to 4.6 from 4.5 for U.S. respondents and up to 4.7 from 4.5 for Canadian respondents. The United States also maintains its trend of a relatively pessimistic future outlook with an expected average health score of 4.4 in In contrast, Canadian participants continued their relatively optimistic outlook for the future with an average health score of 4.8 for Although the minimum error associated with these responses cannot be estimated, it s reasonable to report that there is little difference in the water industry health scores over the last several years. The average scores for the health of the water industry on a scale of 1 to 7 for the present year (2014) and five years from now (2019) are provided in Table 5 for each career category. Few categories of respondents indicated they thought Figure 7. Health of the Water Industry All Respondents (rating scale: 1 to 7) 5.6 Current 5.4 In 5 Years Figure 8. Health of the Water Industry U.S. Respondents (rating scale: 1 to 7) Current In 5 Years Figure 9. Health of the Water Industry Canadian Respondents (rating scale: 1 to 7) Current 5.4 In 5 Years American Water Works Association 9

10 the health of the industry would be better in five years, with most indicating a slight decrease in the health of the industry in the future. The career categories returning the lowest industry health score were Financial Industry and Stormwater Utility, both currently (4.0) and in 2019 (3.5). In contrast, Reuse/Reclamation Utility is the career category returning the highest current and future industry health scores (5.0). The number of responses for these career categories is smaller than others, meaning coverage, sampling, and/or nonresponse may be reasons for differences with the overall averages. The average scores for the water industry s health on a scale of 1 to 7 for the present year (2014) and five years from now (2019) are broken out by respondent age in Table 6. There is Table 7. Health of the water industry by location (scale: 1 to 7); present (2014) and 5 years from now (2019) Location # of Respondents Location # of Respondents NE PR ID Alberta WY AK NC Manitoba MN NY Ontario British Columbia TN WA UT MI ME IL SC HI MD Other** LA DE KY WI IN NJ SD MO NH FL OK Saskatchewan NV AL GA Quebec OR AR OH MA TX WV Atlantic Canada DC ND MT VA Mexico IA* MS PA* CT CA NM KS RI CO Yukon Territories AZ VT *IA and PA have the same average scores as those for all participants as shown in Figure 7 **Other refers to respondents from outside of North America American Water Works Association

11 little difference in these scores, with young professionals (i.e., those in the categories Younger than 25 and ) indicating a slightly more optimistic outlook for the future. But again, the somewhat low number of responses may have led to errors from coverage, sampling, and/or nonresponse. Finally, Table 7 presents the average scores for the health of the water industry on a scale of 1 to 7 for the present year (2014) and five years from now (2019) based on the region where participants work most often. Iowa and Pennsylvania returned the same average scores as all participants (2014 = 4.6, 2019 = 4.5 as shown in Figure 7), so those with higher scores could be considered more optimistic while those with lower scores could be considered more pessimistic. Table 8. Issues facing the water industry as ranked by all 2014 SOTWI respondents (scale: 1 to 5) Rank Category Average Score Critically Important # of Respondents 1 State of water and sewer infrastructure % Long-term water supply availability % Financing for capital improvements % Public understanding of the value of water resources % Public understanding of the value of water systems and services % Groundwater management and overuse % Watershed protection % Drought or periodic water shortages % Emergency preparedness % Cost recovery % Acceptance of rate increases % Talent attraction and retention % Compliance with current regulations % Compliance with future regulations % Water conservation/efficiency % Water loss control % Aging workforce/anticipated retirements % Certification and training % Energy use and costs % Expanding water reuse/reclamation % Improving customer, constituent, and community relationships % Cyber-security issues % Wastewater resource recovery % Climate risk and resiliency % Physical security issues % Stormwater management and costs % Affordability for low-income households % Fracking/oil and gas activities % Price and supply of chemicals % Workforce diversity % American Water Works Association 11

12 PART 3 ISSUES To determine the issues that currently impact the water industry, respondents were asked to rate the importance of several challenges on a scale of 1 (unimportant) to 5 (critically important). These issues, as ranked by all respondents of the 2014 SOTWI survey are shown in Table 8. In addition to the average scores, the percentage of respondents who scored the issue as critically important (i.e., 5 on the scale of 1 to 5) is also presented in Table 8. Comparison of 2013 and 2014 Issue Rankings Table 9 provides a comparison of the issues as identified through the 2013 and 2014 SOTWI surveys. The state of water and sewer infrastructure was the #1 issue in both years, but there is a shift with water resource issues rising in importance in the 2014 survey. For example, although there was a wording change from last year, the current #2 issue, namely long-term water supply availability, was previously ranked #4, and the number of respondents who ranked it as critically important increased almost 20 percent from 2013 to The lack of public understanding of the value of water was the #2 issue in 2013 with 57 percent rating it as critically important, but in 2014 its importance appears to have diminished somewhat. This issue was split into two categories to better identify what was meant by value of water. More specifically, respondents rated both value of water resources and water systems and services. Even with this change, the average importance scored the same (4.3 out of 5); however, the number of respondents who ranked these issues as critically important decreased from 57 percent in 2013 to 48 percent for water resources and 44 percent for water systems and services in Financing for projects, defined as capital costs and availability in 2013 versus financing for capital improvements in 2014, was the #3 issue in both years. Many of the other issues in the top 10 changed slightly from last year to this. The #5 issue from the 2013 SOTWI survey aging workforce/talent attraction and retention was also split into two categories to better understand the nature of the problem. In 2014, talent attraction and retention was the #12 ranked Table 9. Comparison of the top 15 issues from the 2014 and 2013 SOTWI surveys (scale: 1 to 5) Rank Issue Avg. Score Critically Important Rank Issue Avg. Score Critically Important 1 State of water and sewer infrastructure % 1 State of water and sewer infrastructure % 2 Long-term water supply availability % 2 Lack of public understanding of the value of water % 3 Financing for capital improvements % 3 Capital costs and availability % 4 Public understanding of the value of water resources % 4 Water supply and scarcity % 5 Public understanding of the value of water systems and services % 5 Aging workforce/ talent attraction and retention % 6 Groundwater management and overuse % 6 Drought % 7 Watershed protection % 7 Customer, constituent, and community relationships % 8 Drought or periodic water shortages % 8 Cost recovery % 9 Emergency preparedness % 9 Regulation and government oversight % 10 Cost recovery % 10 Emergency preparedness % 11 Acceptance of rate increases % 11 Energy demand/use/costs % 12 Talent attraction and retention % 12 Climate risk and resiliency % 13 Compliance with current regulations % 13 Security % 14 Compliance with future regulations % 14 Declining water demands % 15 Water conservation / efficiency % 15 Privatization and out-sourcing % American Water Works Association

13 issue with 29 percent rating it as critically important while aging workforce/anticipated retirements was ranked the #17 issue, also with 29 percent rating it as critically important. It doesn t appear that these issues decreased in importance, rather that other issues were considered more important, with several of these highly rated issues new to the SOTWI survey. These issues include groundwater management, ranked as the #6 issue with 41 percent rating it as critically important; watershed protection, ranked as the #7 issue with 40 percent rating it as critically important; and acceptance of rate increases, ranked as the #11 issue with 30 percent rating it as critically important. For the remainder of the changes in the issue rankings from 2013 to 2014, it s not immediately clear if these were the result of changing the format of the survey, an increase in participation, or changes in the perceptions of the overall water industry. Utility and Non-Utility Issue Rankings Table 10 shows the issues impacting the water industry as ranked by utility and non-utility employees and subsets within each of these two categories. There were 861 utility employee respondents and non-utility employee respondents. Utility Employees Wastewater Utility Combined Water/Wastewater Utility Water Wholesaler Reuse/Reclamation Utility Stormwater Utility Non-Utility Employees Consultant/Consulting Firm Manufacturer of Products Manufacturer Representative Distributor Technical Services Company Financial Industry (ratings agency, investor/fund rep., etc.) Government/Regulatory Agency University/Educational Institution Laboratory Nonprofit Organization Retired There is close alignment on the first nine issues and their ranking, where differences are only by a single position. Cost recovery, talent attraction and retention, and acceptance of rate Table 10. Issues facing the water industry as ranked by utility and non-utility respondents (scale: 1 to 5) Utility Employees Non-Utility Employees Rank Category Avg. Score Critically Important Rank Category Avg. Score Critically Important 1 State of water and sewer infrastructure % 1 Long-term water supply availability % 2 Long-term water supply availability % 2 State of water and sewer infrastructure % 3 Financing for capital improvements % 3 Financing for capital improvements % 4 Public understanding of the value of water resources 5 Public understanding of the value of water systems and services % 4 Public understanding of the value of water resources % 5 Public understanding of the value of water systems and services % % 6 Watershed protection % 6 Groundwater management and overuse % 7 Groundwater management and overuse % 7 Watershed protection % 8 Emergency preparedness % 8 Drought or periodic water shortages % 9 Drought or periodic water shortages % 9 Emergency preparedness % 10 Cost recovery % 10 Water conservation / efficiency % 11 Talent attraction and retention % 11 Water loss control % 12 Acceptance of rate increases % 12 Cost recovery % 13 Compliance with current regulations % 13 Acceptance of rate increases % 14 Compliance with future regulations % 14 Talent attraction and retention % 15 Aging workforce/anticipated retirements % 15 Expanding water reuse/reclamation % 2014 American Water Works Association 13

14 Figure 10. Respondent perceptions of the importance of State of Water and Sewer Infrastructure (n=1,665) Unimportant Slightly Important Important 63.3% Very Important Critically Important 0.2% 0.4% 4.5% 31.6% increases were ranked in the top 15 issues by both groups with similar scores and percentages rating these as critically important. Of their top 15 issues, only two were different between these two groups: utility employees ranked compliance with current regulations #13 and compliance with future regulations #14, while non-utility employees left these out and ranked water conservation/efficiency #10 and expanding water reuse/reclamation #15. System Stewardship As shown in Table 10, issues related to water system stewardship were rated most important by the water industry. This includes the state of water and sewer infrastructure (#1 issue, see Figure 10), financing for capital improvements (#3 issue), cost recovery (#10 issue), and acceptance of rate increases (#11 issue). These issues continue to be significant because water and sewer systems built and financed by previous generations are approaching or have exceeded their useful lives. Because of previous budgeting approaches that may have included inadequate revenues to fully cover costs, some municipal utilities have deferred necessary maintenance, and even those systems that have acted as good stewards by planning for the renewal or replacement of their assets can find it difficult to secure reasonable funding for capital projects or to win public support for these efforts. As shown in Figure 10, 95 percent of respondents considered the state of water and sewer infrastructure to be very important or critically important. Other AWWA studies illuminate these concerns further. AWWA s 2012 report Buried No Longer: Confronting America s Water Infrastructure Challenge found that restoring existing potable water pipe networks as they reach the end of their useful lives and expanding them to serve a growing population could cost more than $1 trillion over the next 25 years. In addition, an analysis of three sets of data from the 2008, 2010, and 2012 AWWA/RFC Water and Wastewater Rate Surveys (AWWA/RFC ) was used to develop cost estimates for capital improvement projects (CIP) in the United States, including system restoration and expansion costs. Drinking water systems included in these data sets covered approximately 42 percent of the U.S. population, while wastewater system data covered 32 percent of the U.S. population. Using the CIP projections provided directly by water and wastewater utilities, the average expected CIP spending (in 2013 dollars) was approximately $84/person for water systems and $104/person for wastewater systems. Extrapolating these results to the entire U.S. population served by publicly supplied water, the estimated annual CIP costs for water systems was approximately $23 billion, while for wastewater systems it was $28 billion. Assuming an inflation rate of 2.5 percent, the 25-year total CIP estimates (ending in 2039) was estimated at approximately $846 billion for water systems and $1.05 trillion for wastewater systems. Accounting for error in these estimates, the total amount spent on capital improvement projects for water and wastewater systems in the United States could easily top $2 trillion over the next 25 years. These are only rough estimates, but the projection for water systems is in line with USEPA s projected total 20-year capital improvement need of $384 billion, a figure that is artificially low because it excludes several types of capital improvement projects and growth needs (USEPA, 2013). The water system projected need of $850 billion is in line with the $1 trillion estimate of AWWA s Buried No Longer report. USEPA s 2008 wastewater CIP survey estimated that $298 billion was needed to address sewer and stormwater issues over the next 20 years (USEPA, 2010). The challenges of system stewardship are obviously significant and made more so if negatively impacted by climate change. However, there is a silver lining for water system managers: as they act as good stewards of their water and wastewater infrastructure, they can also evaluate and improve the strategies and policies used to meet the needs of their communities. Water and wastewater utilities should strive to be self-sustaining enterprises that are adequately financed with rates and charges based on sound accounting, engineering, financial, and economic principles. Revenues from service charges, user rates, and capital charges (e.g., impact fees and system development charges) should be sufficient to enable utilities to provide for the full cost of service including: Annual operation and maintenance expenses Capital costs (e.g., debt service and other capital outlays) Adequate working capital and required reserves Full-cost pricing, i.e., charging rates and fees that reflect the full cost of providing water, must include renewal or replacement costs of treatment, storage, distribution, and collection systems. Some utilities have previously kept their rates low by minimizing or ignoring these costs, but as the useful life of their systems draws near, current managers and the communities they serve are forced to address these costs, often through painful and unexpected rate increases. Issues related to equity and affordability must be considered as rates are adjusted, and the reality is that each system has its own unique challenges that are not independent of political influence American Water Works Association

15 Figure 11. Responses (as % of total) from all participants regarding their opinion of whether water and wastewater utilities can cover the full cost of providing service, including infrastructure renewal/replacement and expansion needs, through customer rates and fees currently and in the future (n = 1,475) Respondents (%) Not at all able Slightly able Moderately able Very able Current Future Fully able State and federal assistance to address water and wastewater infrastructure needs is uncertain at best. Currently in the United States, the federal government provides (revolving) funds at the state level for drinking water and wastewater systems to address infrastructure needs, with an emphasis on assisting small and disadvantaged communities. An additional approach has been proposed through the creation of a Water Infrastructure Finance and Innovation Authority (WIFIA), which would make low-interest federal loans available for large water and wastewater infrastructure projects. At the time this report was published, it remained to be seen whether this program would be implemented any time soon. To understand the current state of utility full-cost pricing, all 2014 SOTWI study participants were asked In general, how able are water and wastewater utilities to currently cover the full cost of providing service, including infrastructure renewal/ replacement and expansion needs, through customer rates and fees? To anticipate how things may change in the future, participants were also asked the following question: Given the future infrastructure needs for system renewal/replacement and expansion, how able will water and wastewater utilities be to meet the full cost of providing service through customer rates and fees? The responses to these questions are shown in Figure 11. As shown, 8 percent of respondents felt that water and wastewater utilities are not at all able to cover the full cost of providing service, and that nearly doubled to 15 percent when looking to the future. Only 4 percent of respondents felt that utilities are currently able to cover the full cost of providing service and Figure 12. Responses (as % of total) from utility personnel regarding their opinion of whether the utility they work for can cover the full cost of providing service, including infrastructure renewal/replacement and expansion needs, through customer rates and fees currently and in the future (n = 768) Respondents (%) Not at all able Slightly able Moderately able Very able Current Future Fully able only 3 percent believed they would in the future. In general, respondents clearly feel that full-cost pricing is a challenge that will increase in difficulty moving forward. Full-cost pricing is in many ways a very local issue. Utility personnel were therefore also asked Is your utility currently able to cover the full cost of providing service(s), including infrastructure renewal/replacement and expansion needs, through customer rates and fees? They were also asked Given your utility s future infrastructure needs for renewal/replacement and expansion, do you think your utility will be able to meet the full cost of providing service(s) through customer rates and fees? Responses are provided in Figure 12. The results from utility employees is somewhat better for their own utility than their perception of all utilities (Figure 11), but the results are still not encouraging. Combining those who are not at all able and those that are slightly able, 28 percent of utilities are currently struggling to implement full-cost pricing, and 34 percent think they will struggle to cover the full cost of service in the future. Strikingly, 10 percent of respondents felt that their utility was currently not at all able to cover the full cost of providing service, and that figure increases to 14 percent when looking to the future. Only 18 percent felt that their utility was currently fully able to cover the cost of providing service through rates and fees, a percentage expected to decrease by 4 percent in the future. These results clearly demonstrate the gap between the financial needs for water and wastewater systems and the means to pay for these services through rates and fees. In order to understand if the water industry s current infrastructure challenge is more technical or financial, utility personnel were asked Based on your utility s current and future infrastructure renewal/replacement needs, how would you rate your utility s technical preparation to address them? They were 2014 American Water Works Association 15

16 Figure 13. Responses from utility employees regarding their opinion of their utility s technical and financial preparation to address current and future infrastructure renewal/replacement needs (n = 772) Respondents (%) Figure 14. Respondent perceptions of the importance of Financing capital improvements (n=1,660) Unimportant Slightly Important Important 53.4% 34% Not at all prepared Technical Financial Slightly prepared Very Important Critically Important Worse than any time in the past 5 years As bad as any time in the past 5 years Similar to most of the past 5 years As good as any time in the past 5 years Better than any time in the past 5 years 12% Moderately prepared Very prepared 0.2% 0.9% 9.6% 8% 36% Fully prepared 10% 35.8% Figure 15. Responses (as % of total) from utility personnel regarding their opinion of their utility s access to capital (n = 710) also asked Based on your utility s current and future infrastructure renewal/replacement needs, how would you rate your utility s financial preparation to address them? The responses of those who could make such assessments are summarized in Figure 13. Only 17 percent of utility personnel responded that their utilities were slightly or not at all technically prepared to address their utilities R&R needs. On the other hand, 31 percent of responded that their utilities were slightly or not at all financially prepared to address their utilities R&R needs. Read another way, 83 percent of utilities indicated they are at least moderately prepared to respond technically to their infrastructure issues while only 69 percent of utilities responded that they are at least moderately prepared to respond financially. Capital improvement financing was identified by all participants as the #3 issue in the 2014 survey with 53 percent indicating this issue was critically important, and less than one percent thought it unimportant (Figure 14). Altogether, 99 percent of respondents consider financing capital improvements to be at least an important issue facing the water industry. To explore the current water and wastewater financing environment, utility personnel were asked If you can make an assessment, how would you rate your utility s current access to capital for financing infrastructure renewal/replacement projects? Close to half (46%) reported that their utility s access to capital was as good or better than at any time in the last five years while only 17 percent reported that their utility s access to capital was as bad or worse than at any time in the last five years (Figure 15). Along with securing affordable financing for water and wastewater infrastructure projects, many systems will be facing the challenge of implementing higher rates for customers. A breakdown of the importance of accepting rate increases is shown in Figure 16. Only 6 percent of respondents indicated that rate increase acceptance was relatively unimportant (unimportant or slightly important). In contrast, 94 percent of participants responded that rate increase acceptance was at least important with 70 percent considering it very important or critically important. Declining residential water demand resulting from increased conservation practices, more efficient appliances, and public education further complicates the balance between needs and costs. This phenomenon has been observed by many utilities for two decades but is accelerating for some systems. In areas where customer growth is slow or nonexistent, declining water use decreases operating revenue and impacts how costs are recovered through rates and charges. Perhaps most importantly, utilities are faced with the challenge of explaining why rates may go up even as their community conserves water. Managers and decision makers, as well as the communities they serve, face the challenge of optimizing water and wastewater American Water Works Association

17 infrastructure investments, balancing upgrades to their systems to maintain service life goals while trying to anticipate new technologies that may be forthcoming. Systems designed for past water quality and water availability conditions need to be designed for future conditions, which include greater uncertainty. Many previous infrastructure projects received external subsidies that likely will not be available in the current political environment. Because of the long-term nature of the necessary investments that will be made in the coming years, a forward-looking and holistic approach to system stewardship is needed. Water Resources Respondents rated several issues related to water resources highly important in the 2014 SOTWI survey, including long-term water supply availability (#2 issue, see Figure 17), groundwater management and overuse (#6 issue), watershed protection (#7 issue), and drought or periodic water shortages (#8 issue). The importance of long-term water is evidenced by the fact the 64 percent of the survey respondents indicated it was critically important and less than one percent rated it as unimportant. The challenge of water supply results because oftentimes abundant water resources are not found in areas of large and growing populations, and in some cases these areas may also be most susceptible to potentially negative climate change impacts. Some areas are reaching the limits of their current supply options and are seeking additional water wherever it can be found, e.g., conservation, desalination, and reuse. Utility personnel were asked the question, How prepared do you think your utility will be to meet its long-term water supply needs? The results (Figure 18) show that 10 percent of utilities will be challenged (i.e., not at all or only slightly prepared) to meet anticipated long-term water supply needs while 59 percent indicated that their utilities are very or fully prepared. On the other side of the water balance equation is a growing interest in the story behind water demands. As we enter the era of big data, many utilities have the opportunity to explore the water-use patterns of their customer classes. Utility personnel were asked the question Is your utility using datamining techniques to understand customer use patterns? Their responses are shown in Figure 19. A small but significant portion responded that their utility is currently using data mining (19%) while 9 percent responded they had data-mining techniques in development but not yet implemented; together, this means that well over a quarter of utility respondents (28%) will employ data-mining techniques to understand customer-use patterns in the near future. Near-term water supply needs are dramatically impacted by drought, and following several dry years, many areas in North America may again face drought conditions in This is likely why drought or periodic water shortages was the #8 most important issue as identified by the 2014 SOTWI survey. Figure 16. Respondent perceptions of the importance of Acceptance of rate increases (n=1,658) Unimportant Slightly Important Important 30.2% Unimportant Slightly Important Important 64.1% Very Important Critically Important 40.1% 0.7% 4.7% Figure 17. Respondent perceptions of the importance of Long-term water supply (n=1,646) Not at all prepared Slightly prepared Moderately prepared 41% 18% Very Important Critically Important 0.2% 1.4% 9.4% Very prepared Fully prepared 2% 8% 24.3% 25.0% Figure 18. Responses from utility employees regarding their opinion of how prepared their utility is to meet its long-term water supply needs (n = 764) 31% Figure 19. Responses from utility employees regarding if their utility was using data mining techniques to understand customer use patterns (n = 783) Yes Don t know No Not applicable In development but not implemented 9% 21% 4% 47% 19% 2014 American Water Works Association 17

18 Figure 20. Respondent perceptions of the importance of drought or periodic water shortages (n=1,642) Figure 24. Respondent perceptions of the importance of groundwater management and overuse (n=1,641) Unimportant Slightly Important Important 38% Very Important Critically Important 1% 5% 17% Unimportant Slightly Important Important 42% Very Important Critically Important 0% 3% 16% 39% 39% Figure 21. Responses from utility personnel regarding if their utility has a drought management or water shortage contingency plan (n = 787) Yes No 15% Figure 22. Responses from all SOWTI survey participants regarding how prepared they think the water sector is to address any impacts associated with potential climate variability (n = 1,459) Not at all prepared Slightly prepared Moderately prepared 40% 8% Very prepared Fully prepared 2% 12% 38% Figure 23. Responses from utility employees regarding if their utility includes potential impacts from climate variability in its risk management or planning processes (n = 791) Yes No 7% 16% Don t know Not applicable In development but not implemented 8% 5% In development but not implemented Don t know 17% 42% 65% 25% Figure 20 shows the breakdown of opinions for those who could make an assessment, with 78 percent indicating drought or periodic water shortages was at least very important and 39 percent ranking it as critically important. Water supply planning scenarios can include droughts of up to five years, but just one year of drought is enough for a community to recognize the many areas and activities affected by water scarcity especially if the community is unprepared. Planning for drought and responding to drought are very different challenges, and experience goes a long way toward informing future responses to water scarcity. Utility personnel were asked the following question: Does your utility have a drought management or water shortage contingency plan? Responses are shown in Figure 21. Sixty-five percent of utility respondents indicated their utilities have a drought management or water shortage contingency plan and another 7 percent responded that a plan was in development. Even though drought can affect even water-rich areas, 15 percent of utility personnel responded that their utilities do not have and are not developing drought management or water shortage contingency plans. Future droughts and water shortages may be exacerbated by climate change. Furthermore, climate change effects can be magnified by extreme sequential swings, e.g., water quality changes brought about by drought (where impacts can develop) followed by flooding (where those impacts are realized). As global climate models are downscaled to provide relevant predictions at the regional or local level, it becomes apparent that changes in the global climate have the potential to significantly affect water supplies for many utilities. The water industry is faced with separate paradigms for climate change mitigation and adaption, the latter of which may be easier to address at the local scale. Potential outcomes of climate change include increasing temperatures, changing precipitation patterns (frequency, duration, and intensity), changing patterns of extreme weather events, and rising sea levels. Taken together or separately, these phenomena can result in the following challenges for the water industry: Degraded water quality and subsequent treatment challenges Reduced snowpack and groundwater recharge American Water Works Association

19 Table 11. Utility issues related to oil and gas activities including fracking Issue # of Respondents Potential for groundwater contamination 65 Potential for surface water contamination 53 Water quantity / use issues (such as timing) 41 Induced seismic activity 25 No issues at this time 600 Don t know 75 Figure 25. Respondent perceptions of the importance of Watershed protection (n=1,643) Unimportant Slightly Important Important 40.4% Very Important Critically Important 0.2% 2.8% 40.4% 16.2% Stormwater management challenges Coastal flooding from increased sea level and/or storm surges Saltwater intrusion into coastal aquifers Increased frequency, duration, and extent of floods, droughts, and wildfires Loss of wetlands and coastal ecosystems Increased risk to infrastructure All 2014 SOTWI survey participants were asked the following question: Overall, how prepared do you think the water sector is to address any impacts associated with potential climate variability? As shown in in Figure 22, the greatest number of respondents (40%) thought the water industry is moderately prepared to address climate change, 12 percent thought the industry is not at all prepared, while only 2 percent thought the water industry is fully prepared. Water managers need an expanded information base to better understand the cascading consequences of potential climate change outcomes. They must make informed decisions under uncertain conditions to reduce vulnerabilities. The development of contingency and energy management plans can address a wide range of climate scenarios, and such comprehensive planning efforts can lead to recommendations on water supply scenarios and related pricing strategies (WUCA, 2010). However, managers also need better approaches that incorporate downscaled global climate model results into regional and local water utility planning. Utility personnel were asked Does your utility include potential impacts from climate variability in your risk management or planning processes? Responses are shown in Figure 23. The majority of utility personnel (42%) responded that their utilities do not include potential impacts from climate variability in their risk management or planning processes. However, 41 percent responded that they do now (25%) or will soon (16%) incorporate climate change in their planning processes. Responses to near-term drought and long-term climate change can impact groundwater supplies. Groundwater management Water managers must make informed decisions under uncertain conditions to reduce vulnerabilities to climate change. and overuse was identified as the #6 most important issue in the 2014 SOTWI survey as shown in Figure 24. Forty-two percent of respondents indicated it was critically important while nobody indicated it was unimportant. Due to potentially diminishing levels of recharge and varying regulatory requirements for groundwater use, groundwater issues are expected only to grow in significance in future years. Groundwater protection can also be impacted by oil and gas activities, especially those associated with hydraulic fracturing (fracking). Utility personnel were asked Is your utility currently facing any issues related to oil and gas activities including fracking? Based on their responses, as shown in Table 11, groundwater contamination was the #1 issue related to oil and gas activities, including fracking. The vast majority of respondents reported their utilities had no issues at this time, but several did report concerns with groundwater and surface water contamination in their areas as well as issues with the quantity and timing of oil and gas water demands. Preventing source water contamination is a continuous challenge and a necessary requirement for delivering safe water and protecting public health. Watershed protection was identified as the #7 most important issue in the 2014 SOTWI survey, and as shown in Figure 25, 40 percent of respondents indicated watershed protection was critically important while less than one percent ranked it as unimportant. Ninety-six percent rated source water protection as at least an important issue. As water infrastructure is renewed or replaced, mutually beneficial opportunities may arise to introduce environment-enhancing solutions. In conjunction with traditionally engineered solutions, the use of green infrastructure, e.g., systems that employ natural hydrologic features, can potentially provide additional environmental and community advantages, especially in the area of stormwater mitigation. Utility personnel were asked Does your utility or the stormwater manager in your utility s service area utilize green infrastructure to address stormwater compliance issues? Responses 2014 American Water Works Association 19

20 Figure 26. Responses from utility employees regarding if their utility or the stormwater manager in their utility s service area utilize green infrastructure to address stormwater compliance issues (n = 785) Yes No In development but not implemented Don t know 8% Figure 27. Responses from utility employees regarding g if their utility or the stormwater manager in their utility s service area recovered urban stormwater for nonpotable or potable reuse (n = 787) Yes No In development but not implemented Don t know 3% 23% 12% 39% 75% 10% Figure 28. Responses from utility employees regarding if their utility is considering direct potable reuse to augment existing drinking water supplies (n = 787); no respondents indicated this was in development but not implemented Yes No In development but not implemented Don t know Not applicable 0% 12% 6% 70% 12% 30% are shown in Figure 26. Thirty-eight percent of utility personnel responded that their utilities or the stormwater managers in their utilities service area do not use green infrastructure to address stormwater compliance issues. However, an identical 38 percent responded that they were moving in this direction, with 30 percent replying there was already green stormwater infrastructure in place and 8 percent responding it was in development. Utility personnel were also asked Does your utility or the stormwater manager in your utility s service area recover urban stormwater for nonpotable or potable reuse? Responses are shown in Figure 27. Only 10 percent of utility personnel responded that their utilities or the stormwater managers in their utilities service area recover urban stormwater for nonpotable or potable reuse, with 3 percent replying that plans were in development but not yet implemented. The vast majority (75%) replied that their utility or the stormwater manager in their utility s service area does not recover urban stormwater for nonpotable or potable reuse. As water supplies become more strained and water-scarce areas look to respond to further development or shortages from droughts, direct potable use of treated wastewater may become a feasible option provided it can gain public acceptance. Utility personnel were asked Is your utility considering direct potable reuse to augment existing drinking water supplies? Responses are shown in Figure 28. The vast majority of utility personnel (70%) responded that their utilities are not considering direct potable reuse to augment existing drinking water supplies; however, 12 percent responded that their utilities are considering direct potable reuse. No utility employee in the 2014 SOTWI survey responded that his or her utility was developing plans for direct potable use, although a handful of examples of this are already occurring in North America. Value of Water The water industry has been acting collectively to inform the public of the value of water services for decades. However, while the concepts of safeguarding public health, ensuring customer satisfaction, and protecting the environment are popular, the public frequently does not support the required levels of funding to support safe and reliable water service. Effectively communicating infrastructure challenges to customers and key decision makers is vital, yet the industry has historically struggled in this area. The lack of public understanding of the value of water was the #2 issue identified in last year s SOTWI survey. To better understand the challenges in addressing this issue, the 2014 SOTWI survey looked at the value of water in two parts: (1) water resources and (2) water systems and services. Public understanding of the value of water resources was this year s #4 most important issue with 48 percent of respondents rating it as critically important (Figure 29). Public understanding of the value of water systems and services American Water Works Association