Law on Drinking Water Infrastructure Requires Upgrades of Leaking Systems

Measure mostly targets smaller, publicly owned utilities that may have to scramble to find the money to implement asset-management plans, cybersecurity

water pipe leak
A new state law on drinking water infrastructure lays the groundwork for the renewal of some leaky networks of pipes and pumps, typically operated by small, publicly owned utilities. But it leaves unanswered questions about how upgrades will be paid for, and how the new requirements will be enforced, industry observers said.

The Water Quality Accountability Act requires operators of all water systems to implement asset-management plans to inspect, maintain, repair, and renew drinking water systems to comply with water industry standards nationwide.

The law (S-2834) also directs operators to develop cybersecurity programs that ensure computer-controlled water systems are not vulnerable to hackers seeking to interfere with operations or steal customer data. And it sets new standards for water hydrants to ensure that they are in good working order.

Infrastructure at 100+ years

The measure, which became law on July 21, is a legislative response to the failure by some sections of the industry to repair creaking infrastructure that is more than 100 years old in some cities, and is severely overdue for replacement and renewal.

Advocates like Jersey Water Works, a collaborative of more than 300 member organizations, say it will cost operators and their customers more to fix the problem the longer they put it off. The organization estimates that leaking pipes lose 130 million gallons of treated drinking water every day.

The law’s requirements are already met by big investor-owned utilities like New Jersey American Water and Middlesex Water Company that have the financial muscle to invest in ongoing renewal programs.

So the measure is aimed mostly at small publicly owned systems that have a big deficit in maintenance and have been unable or unwilling to pay for needed upgrades for many years.

Possibly paying more for water

The smaller systems may be able to pay for upgrades by borrowing from the federally funded Environmental Infrastructure Trust Fund, or from the State Revolving Fund, but they may also have to rely on their customers, who can expect to see an increase in their water rates, observers said.

“They can either raise their rates or get funding — the money has to come from somewhere,” said Mike Furrey, owner of Agra Environmental and Laboratory Services, which contracts with about 150 smaller water systems serving 200 to 2,000 customers across New Jersey.

Many small water systems will be heavily impacted by the law because they may not have the resources or the technical expertise to comply with it, he said.

But some local systems are already in compliance, such as the Borough of Sussex, a community of about 2,100 people in Sussex County, which raised rates in 2015 to help pay a $1.2 million bill for upgrading a water-treatment plant, Furrey said.

In Mount Laurel, the Municipal Utilities Authority complies with the asset-management requirements, and most of those on hydrants, said Pam Carolan, executive director. The publicly owned system, with about 18,000 customers, will have to submit more documentation than in the past but otherwise meets the requirements.

Already practicing asset management

Big, investor-owned utilities like New Jersey American Water already follow asset-management practices because of ongoing investment and maintenance.

Asset-management plans are a common industry practice, and are required in some other states but have not been required in New Jersey until now.

Rob MacLean, president of New Jersey American Water, said the company invests about $1 million a day in the infrastructure that serves about 2.7 million people in 190 communities across the state.

As a utility regulated by the Board of Public Utilities, the company has been meeting many of the new law’s requirements for “decades,” MacLean said.

But that’s not necessarily the case for smaller public operators, which are lagging badly on upgrading their systems, he said.

‘A ticking time bomb’

“There is a very large pent-up demand to catch up on infrastructure renewal,” he said. “If you have no plan, it’s like a ticking time bomb. At some point it’s going to catch up with you, and you’re going to be in real trouble. Pay a little bit now as you go or pay a huge amount later.”

MacLean warned that customers of the local systems may well end up footing the bill for the overdue system upgrades.

“A lot of them are going to have to figure out how to work their way through this, and it’s not free,” he said. “They may need to take on more people, they may need to hire contractors to help them with cybersecurity; that’s not something that your typical small utility would have expertise in. Oftentimes, we may have to do a rate increase to cover those costs.”

MacLean said it’s not clear how seriously utilities will take the law, and what level of enforcement exists. “DEP is going to have to wrestle with that,” he said.

Dennis Doll, chief executive of Middlesex Water Company, called the law a “good start” to setting consistent standards across all utility models, and said customers would benefit from the resulting upgrades.

Chris Daggett, president of the Geraldine R. Dodge Foundation, and co-chair of the Jersey Water Works Finance Committee, acknowledged that fixing water infrastructure comes with a high price tag — which gets higher the longer the work is deferred.

Even applying for the funds is a “daunting bureaucratic task” that may deter smaller utilities, Daggett said, but noted that Jersey Water Works can help navigate those channels.

“Once you make the improvements, you can build the ongoing costs into your annual budget,” he said.

Despite reservations about enforcement and funding, advocates welcomed the law as an important step toward improving drinking water infrastructure. “This bill is a giant step forward for drinking water utilities, and the same approach should be phased in over time for wastewater utilities as well,” said Chris Sturm, Managing Director for Policy and Water at New Jersey Future, which advocated for the bill.

For local officials who are reluctant to raise rates, the law creates an opportunity to make the case to a tax-averse public, Sturm said.

“There is a real opportunity here for utilities to communicate more clearly the condition of their pipe systems, which enables them to build a case for investment,” she said. “Everybody wants reliable, healthy drinking water, and they don’t want to see it wasted through leaky pipes.”