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Public Water Utilities, Loath to Raise Rates, Must Deal with Aging Pipes, Pumps

Officials pass the cost along to coming generations, industry expert says, and others warn of total breakdown

water infrastructure

Water industry leaders warned that customers in New Jersey and nearby states face the prospect of higher bills to pay for the repair of aging infrastructure that has been neglected for years by local leaders who lacked the political courage to raise rates.

Many smaller municipally owned water utilities have been starved of the funds they need to maintain facilities like pipes and pumps because they are controlled by local politicians who fear being punished by voters if they raise water charges, officials said at an industry conference in Wilmington, DE, on Thursday.

Some local authorities have hidden the true cost of water from consumers by using revenue from property taxes to pay part of the bill for repair and renewal. But a more common response to decaying infrastructure is simply to do nothing and pass the inevitable repairs on to future generations, one industry expert said.

“The most common form is generational transfer,” said Thomas Amidon, principal water resources specialist at Kleinfelder, a consulting company with offices in Princeton. “We are taking money from our children and grandchildren to pay for repairs that we should have made along the way.”

Other experts said failure to invest in infrastructure, including by some privately owned water utilities, is endangering public supplies.

Dennis Doll, president of the Iselin-based Middlesex Water Company, told the annual meeting of the American Water Resources Association for the Mid-Atlantic that failure to maintain water infrastructure is raising the risk of a breakdown in some systems.

A typical scenario, Doll said in a keynote speech to the conference, would be that of a municipal water system that uses 70-year-old equipment to serve about 3,000 customers, who pay relatively low rates but are affected by periodic breakdowns in service. Such a system, he said, might lose 25 percent of its water because of leaks from old pipes.

The system’s manager may seek more funding from the township but the urgency of the repairs is not readily understood by the town council, and the mayor is loath to raise water rates because he is seeking reelection, Doll said. Even if the mayor’s rival recognizes the need for higher water charges, he or she will not be taken seriously by the council because they think such claims are being made just to score political points, he said.

Under that scenario, the mayor is re-elected, and the water utility continues with its existing level of service but without the needed investment, he said. As a result of the lack of investment, some systems are at increasing risk of being unable to serve their customers, Doll said.

“The risk is increasing every day that in the long term, the utility will be unlikely to meet basic services.”

To pay for the needed repairs, the industry as a whole should adopt “full-cost pricing” in which the cost of sustainably providing water is fully reflected in a customer’s bill, Doll said. He also called for a standard industry-wide approach to valuing water-utility assets, equal treatment by regulators who may be less rigorous with publicly owned utilities, and equal access to finance for both sectors.

Other possible solutions would include a long-term lease to a private operator or outright sale to the private sector. But Doll, whose company is investor-owned, noted that that privatization of the 85 percent of water utilities that are publicly owned nationwide is opposed by some critics on ideological grounds.

He singled out the environmental group Food & Water Watch for its criticism of water-industry privatization, calling its position “disingenuous, misguided and ideological.” He said the group’s campaign against the sale of public water utilities was characterized by “half truths and in some cases, outright lies.”

Darcey Rakestraw, a spokeswoman for Food & Water Watch, said the organization believes that water supplies should be locally controlled, and should not be subject to a profit motive. “We’ve seen a lot of failures in water privatization, and it has clearly ruffled the industry’s feathers,” she said.

According to Food & Water Watch, large privately owned water companies charge ratepayers 59 percent more than those in the public sector.

Jim Walsh, New Jersey director for Food & Water Watch, cited New Brunswick’s decision last September to regain public control over its water utility, about a year after entering a contract with New Jersey American Water. Walsh said the transfer of local water to a private company had cost ratepayers about $1 million.

Daniel J. Van Abs, a Rutgers University professor who is widely quoted on water issues, said many publicly owned systems in New Jersey and elsewhere have been constrained by low rates.

“There is no doubt -- and it isn’t just small systems -- that many of the water-supply systems that are owned by government entities have been constrained by an unwillingness to raise rates to levels that are really needed to maintain the infrastructure,” Van Abs said in an interview on the sidelines of the conference.

Public and private water suppliers have traditionally focused on the quality of water rather than how it is delivered, and that has contributed to the current state of neglect, he said. (Van Abs is a columnist for NJ Spotlight.)

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