Covid water utility economics

It’s generally understood that the coronavirus can’t get into the water that we drink. But it can get into the finances of the utilities that get the water to us.

 ITEM: The paying customers for more than half of all piped water — colleges, offices, restaurants and factories –– have cut back or shut down, thereby reducing water consumption and associated water revenues.

ITEM: Laid-off residential consumers across the country have gone delinquent on their water bills, magnifying the revenue problem.

ITEM: The homebuilding industry has softened, meaning few new connection fees from new homes.

ITEM: Capital spending and badly-needed repairs to leaking pipes have been deferred.

In recent months trade groups for the nation’s thousands of water utilities have been studying the impact of the pandemic on their operations.

 Their findings illustrate that the supply of safe drinking water has many parts, and that a disruption such as a pandemic can have ripple effects. For example: tens of thousands of private sector construction workers don’t get hired when repairs to pipes and capital spending get deferred.

 The American Water Works Association and the Association of Metropolitan Water Agencies, among others, have turned up some pandemic impacts that are common to all businesses: absenteeism, for example, and the difficulty (and costs) of getting ahold of personal protective equipment.

But some other impacts are unique to water operations themselves – for example, disruptions to the supply of purifying chemicals that are essential to providing safe water. And distraction from another public health crisis that’s associated with the millions of lead water pipes in the United States that need replacement.

 The overall economic effect on an industry that’s overwhelmingly government-run and typically not a money-maker in the first place is significant: nearly $14 billion nationally from lost revenues and added costs.

The situation has led to calls for coronavirus relief funding from Congress. Water utilities were left out of the first financial assistance bills that sent trillions of dollars around the country, and there are real questions whether Washington is open to adding new money for utilities. Here’s a report on the subject from Circle of Blue, an authoritative blog.

Meanwhile, financial pressures worsen. Drinking water is an essential commodity even when there isn’t a public health crisis going on.

Hence, providers of drinking water are delivering water to delinquent customers (the average residential bill is $70 per month), they’re restoring service to other customers who were previously shut off for non-payment and they’ve put off planned rate increases. Here’s a snapshot from National Governors Association.

The picture is one of a financial crisis rendered more dire by the fact that this blog posting so far has been about only one part of the water sector; there’s another segment – wastewater and sewage treatment – that’s also experiencing financial strain.

With the coronavirus situation still without promise of improving, don’t expect a brighter picture for water utilities anytime soon. And be prepared to pay for all this down the line. A handful of states have already asked utilities to keep track of spending during these times to support future applications for surcharges to recover those costs.

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