The High Price of Keeping New Jersey’s Drinking Water Clean

Tom Johnson | November 29, 2011 | Energy & Environment
Upgrading the state's water infrastructure could cost $20 billion dollars over the next few decades

Credit: Bill Wolfe
BPU President Lee Solomon
For the most part, New Jerseyans hardly give a thought as to the cost of water when they turn on their faucets, fill their bathtubs, or wash their clothes.

That mindset surely will change with the rising cost of upgrading an aging water infrastructure that by some estimates will need investments of $20 billion over the next few decades to continue delivering safe drinking water to residents and businesses in the state.

“The last increment of cheap water is gone,’’ predicted Michael Sgro, vice president of New Jersey American, the state’s largest water company. Sgro was a panelist at a NJ Spotlight Roundtable on New Jersey’s Water Supply in the 21st Century held at Rider University yesterday.

While the state has spent a great deal of effort trying to ensure its energy system can continue to deliver reliable electric and gas service to its customers while reducing those costs, water has been something of neglected step-child in terms of necessary utility services, state officials have conceded.

“I believe water will be the crisis of the 21st century,’’ said New Jersey Board of Public Utilities (BPU) President Lee Solomon, whose agency recently proposed a rule aimed at encouraging water utilities overseen by the state to accelerate investments in upgrades to their systems.

Initially pushed by New Jersey American Water Company, the proposed rule allows a utility to pass along the cost of routine infrastructure improvements, such as water main replacements, so long as the projects do not cause customers’ bills to exceed a 5 percent cap of the utility’s revenue.

Solomon said the proposed rule would save ratepayers money in the long run by encouraging water systems to invest in upgrades sooner rather than later, a step that would prevent consumers from having to pay even more exorbitant costs to fix broken pipes and faulty lines.

“The reality is that it is an economic cost savings,’’ Solomon said. He also contended that it will provide ancillary benefits by spurring private investment in the state, which will spur economic growth and create new jobs. “We’re not going to be able to cut our way to prosperity,’’ the president said.

That is not going to occur without a cost, however.

“There’s going to be a day of reckoning and it’s going to be soon,’’ predicted Solomon. “And it’s going to be significant.’’

“The cost of water service, ladies and gentlemen, has no way to go but up,’’ agreed Dennis Ciemniecki, president of regulated business for United Water, which is a large purveyor of water, as well as one of the systems providing water supplies and wastewater treatment to municipal governments.

His company has filed a petition seeking to raise its rates to customers it serves by 25 percent, not an atypical rate increase sought by investor-owned utilities, but a boost usually trimmed down by the BPU in it s final decision.

Karen Alexander, president and chief executive officer of the New Jersey Utilities Association, a trade group representing investor-owned utilities, suggested people do not appreciate the cost of delivering safe drinking water to their homes.

Alexander noted that a homeowner recently complained to her about the high cost of his water bill, which ran about $48 a quarter. She asked the homeowner how much he paid for cable television and was told about $200 a month.

While the new mechanism proposed by the state to help recover infrastructure improvements will help forestall bigger problems in the future, it is not the cure-all for the problems plaguing delivering water to all of the residents and businesses of New Jersey, water executives said.

For one thing, it does not address the problems faced by the hundreds of smaller water systems serving small developments or bigger municipal-owned systems facing huge infrastructure improvements as well as mandates from the federal government to reduce contaminants in drinking water supplies.

In the past, the state has encouraged larger water systems to take over smaller systems that lack the financial resources to comply with those mandates. If consolidation is going to occur, some water executives suggested new incentives are needed to make it happen — given the improvements that need to be made in those systems.