Opinion: We Just Can’t Afford the Price We’ll Pay for State’s Cheap Water

Daniel J. Van Abs | December 10, 2014 | Opinion
Aging infrastructure, consumer complacency, artificially low prices all combine to make the state’s water supply a problem just waiting to happen

Daniel J. Van Abs
A gallon of tap water in New Jersey usually costs well less than a penny, roughly $400 a year per household. People may see that price as either cheap or expensive. Either way, it is a price New Jersey can’t afford.

Water utilities face the same general rules whether owned by government or the private sector. They must provide sufficient water to their customers to meet normal and peak demands, and that water must meet drinking-water quality standards.

The problem is too that few water utilities keep up with the costs of repairing and replacing their assets, as discussed in three recent reports my research teams prepared for New Jersey Future. Water utility managers acknowledged this issue in nearly every interview. The NJ Clean Water Council (which advises the NJ Department of Environmental Protection), the American Society for Civil Engineers, and Facing the Future (funded by New Jersey philanthropic foundations) have raised similar concerns.

The problem results primarily from aging water pipelines. Many urban areas have pipelines that are over 100 years old, including some built in the 1800s. Even where those pipelines were built of very strong materials, they are now falling apart. Suburban pipelines built from 1950 to 1970 — what we could call the “boomer pipelines” — used less robust materials and are also aging out. We face two-to-three decades of pipeline replacement needs that greatly exceed recent efforts.

State regulations aren’t clear enough regarding maintenance and replacement of the many thousands of miles of pipelines bringing water from the source to the customers. If a pipeline breaks, the water utility certainly must fix it, and quickly. Unfortunately, all too often breaks are addressed as isolated issues. Water utilities may budget for these expensive emergency repairs, but too few budget enough to ensure that pipeline breaks don’t occur in the first place.

Professionals in the water field — from utilities to NJDEP to the U.S. Environmental Protection Agency — are well aware of these problems. We have a rough sense of the costs. The American Water Works Association estimated the need for $1 trillion (yes, that is a “t” as in $1,000 billion) in capital costs to restore our nation’s aging water utilities. Based on New Jersey’s share of the national population, our costs would be $28 billion (over $3,000 per person), but our systems are actually older than the national average and so our costs could be significantly higher.
Why have we let the situation get so bad? Some common reasons include:

  • Out of Sight, Out of Mind: Water-supply pipelines are underground. The public just doesn’t see them. Unlike broken bridges, roads, and powerline poles, we don’t see pipeline breaks until they flood a road. In our busy world, it is all too easy to ignore what we don’t see.
  • What Has Worked, Will Work: When we turn the tap or flush the toilet, water comes out. This modern miracle is so common as to be unremarkable. When the water doesn’t come out, we complain, but how often does that really happen to any one person? Each customer sees his or her service disruption as an isolated instance, not as one of literally thousands of breaks every year in New Jersey alone. Again, most people don’t take time to worry about their water service.
  • Inadequate Risk Information: Few (if any) water utilities have a comprehensive assessment of their pipeline systems. Without this knowledge, we can’t properly quantify problems or repair needs. Many public officials have resisted state regulations that would require better assessments, though NJDEP, the Board of Public Utilities, and other agencies are starting to make some real progress on this front. We do know enough to realize that we are in trouble.
  • Water Utility Managers Don’t Set the Rates: We can’t afford to have two or three sets of water pipelines down every street to allow competition. Water utilities can’t just set their prices as high as the market will bear, because there is no market; there is one seller with a service that everyone needs. For this reason, our laws require that municipal governing bodies, utility authority boards, or the Board of Public Utilities approve water prices. The professional staff can suggest, based on their expert knowledge of the system, but they often don’t get their way. Water utilities, especially government-owned systems, are pressured to minimize current water prices but not to control long-term expenses through proper maintenance.
  • Resistance to Costs We Can Control: Given our natural preferences, we would like to pay less for more. For most purchases, we have no control over prices the market gives us. Water prices are different, because they are regulated by public law. It should be no surprise that, given an opportunity to speak out, some people will routinely oppose price increases. While our laws should ensure that water prices aren’t too high, they say little about prices that are too low.
  • Affordability: Let’s face facts: While most households can afford higher water prices, there are those that truly can’t. We have statewide household-assistance programs for electricity costs, but not for water-supply costs. Unfortunately, keeping water prices low enough for poor households means that many other households are not contributing what they could, while the water systems fall apart. Affordability is important, but we can’t afford failing water utilities either.
  • These reasons all contribute to water prices that are lower than they should be. And don’t look to the federal or state government for free money. Those days are long gone, though some low-cost financing help is available. Most costs will be borne by the customers regardless of utility ownership.

    We need our political leadership to recognize these major risks, support much better assessments of system problems, ensure that water prices are adequate to address those needs, and help those households who truly face affordability issues. Otherwise, our water utilities will not be able to support a strong economy, sound environment, and quality communities. The longer we wait, the worse our problems and costs will be. Unfortunately, the future is here, and we aren’t doing enough.