Water utilities in the United States provide the safest, most reliable as well as the most economical service in the world. Their challenges today have evolved from a number of vectors:
Encroaching regional drought
Increased weather severity
Decreased raw water quality
Where once water utilities enjoyed a more stable long-term operational and financial view, they are now seeking ways to sustain performance and quality for their customers at an affordable rate.
Utilities are capital intensive and require consistent funding to execute on organic growth and infrastructure upgrades. They typically generate these funds from operations which can partially meet their capital requirements. These funds, however, are mostly used for dividends. They rely on external financing sources to meet their capital needs.
Today interest rates are low and the Fed seems averse for rate hikes this year. However access to capital markets has been on a steady decline. Funding source issues will likely grow more acute when the Fed tightening cycle initiates.
With the scarcity of funds hovering and the need for capital improvement growing, the water industry is focused on several areas which they have determined will keep our water service:
New water conservation strategies to preserve what we have already
Updating and enhancement of aging infrastructure
Development of alternative water supplies
Migration from investor-owned to large private water companies
As ideas become executed to preserve our supply and quality, the one overarching feature is going to be a rise in consumer costs. Water utilities must have the capital resources to cover their costs. Recommendations for fee changes cover the gamut from reducing agriculture water subsidies to water rates by tier levels to surcharges and blanket rate hikes.
Utilities can help their customers with education and awareness campaigns. Consumers can monitor their own usage and make changes to reduce consumption. We are all in this together.
MuniApp LLC’smanagement team has been in outsourcing partnerships with municipalities since 1996, providing customer service, meter reading and field services. Check out our mobile application for water utilities and their customers: http://www.muniapp.net/#!overview/clay